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EX-31.1 - EXHIBIT 31.1 - PAR PACIFIC HOLDINGS, INC.exhibit311q2015-wp.htm
EX-31.2 - EXHIBIT 31.2 - PAR PACIFIC HOLDINGS, INC.exhibit312q32015-cm.htm
EX-32.1 - EXHIBIT 32.1 - PAR PACIFIC HOLDINGS, INC.exhibit321q32015-wp.htm
EX-32.2 - EXHIBIT 32.2 - PAR PACIFIC HOLDINGS, INC.exhibit322q32015-cm.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
________________________________________________________________________________________________________________________
FORM 10-Q
________________________________________________________________________________________________________________________
(Mark One)
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2015
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from to

Commission File No. 001-36550
________________________________________________________________________________________________________________________
PAR PACIFIC HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
________________________________________________________________________________________________________________________
Delaware
84-1060803
(State or other jurisdiction of
(I.R.S. Employer
incorporation or organization)
Identification No.)
800 Gessner Road, Suite 875
 
Houston, Texas
77024
(Address of principal executive offices)
(Zip Code)
(281) 899-4800 
(Registrant’s telephone number, including area code)

PAR PETROLEUM CORPORATION
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ý    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. 
Large accelerated filer
¨
 
Accelerated filer
ý
 
 
 
 
 
Non-accelerated filer
¨
(Do not check if a smaller reporting company)
Smaller reporting company
¨


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  ¨    No  ý

Indicate by check mark whether the registrant has filed all document and reports required to be filed by Sections 12, 13 or 15 (d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.    Yes  ý    No  ¨

37,530,900 shares of common stock, $0.01 par value, were outstanding as of October 29, 2015.
 

PAR PACIFIC HOLDINGS, INC. AND SUBSIDIARIES
TABLE OF CONTENTS


The terms “Par,” “Company,” “we,” “our,” and “us” refer to Par Pacific Holdings, Inc. and its consolidated subsidiaries unless the context suggests otherwise.

 




PART I - FINANCIAL INFORMATION 
Item 1. Condensed Consolidated Financial Statements
PAR PACIFIC HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share and per share data)
 
September 30, 2015
 
December 31, 2014
ASSETS
 
 
 

Current assets
 
 
 

Cash and cash equivalents
$
101,841

 
$
89,210

Restricted cash
748

 
749

Trade accounts receivable
79,427

 
112,968

Inventories
231,969

 
243,853

Prepaid and other current assets
17,568

 
14,009

Total current assets
431,553

 
460,789

Property and equipment
 

 
 

Property, plant and equipment
216,193

 
123,323

Proved oil and gas properties, at cost, successful efforts method of accounting
1,122

 
1,122

Total property and equipment
217,315

 
124,445

Less accumulated depreciation, depletion and amortization
(21,031
)
 
(11,510
)
Property and equipment, net
196,284

 
112,935

Long-term assets
 

 
 

Investment in Laramie Energy Company
126,055

 
104,657

Intangible assets, net
35,589

 
7,506

Goodwill
41,977

 
20,786

Other long-term assets
17,841

 
34,334

Total assets
$
849,299

 
$
741,007

LIABILITIES AND STOCKHOLDERS’ EQUITY
 

 
 

Current liabilities
 

 
 

Current maturities of long-term debt
$
43,373

 
$
29,100

Obligations under inventory financing agreements
215,088

 
197,394

Accounts payable
22,252

 
33,064

Current portion of contingent consideration
18,826

 

Other accrued liabilities
58,502

 
51,248

Total current liabilities
358,041

 
310,806

Long-term liabilities
 

 
 

Long-term debt, net of current maturities and unamortized discount
126,252

 
107,510

Common stock warrants
7,164

 
12,123

Contingent consideration
8,984

 
9,131

Long-term capital lease obligations
1,234

 
1,295

Other liabilities
17,107

 
7,983

Total liabilities
518,782

 
448,848

Commitments and contingencies (Note 10)


 


Stockholders’ equity
 

 
 

Preferred stock, $0.01 par value: 3,000,000 shares authorized, none issued

 

Common stock, $0.01 par value; 500,000,000 shares authorized
at September 30, 2015 and December 31, 2014, 37,524,587 shares
and 37,068,886 shares issued at September 30, 2015 and
December 31, 2014, respectively
375

 
371

Additional paid-in capital
438,716

 
427,287

Accumulated deficit
(108,128
)
 
(135,053
)
Accumulated other comprehensive loss
(446
)
 
(446
)
Total stockholders’ equity
330,517

 
292,159

Total liabilities and stockholders’ equity
$
849,299

 
$
741,007

 
See accompanying notes to the unaudited condensed consolidated financial statements.

1


PAR PACIFIC HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts) 
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2015
 
2014
 
2015
 
2014
Revenues
 
 
 

 
 
 
 
Refining and distribution revenues
$
403,165

 
$
736,284

 
$
1,352,724

 
$
2,118,023

Retail revenues
81,434

 
62,929

 
209,091

 
174,179

Commodity marketing and logistics revenues
10,904

 
53,406

 
58,873

 
102,384

Natural gas and oil revenues

 
1,667

 
2,185

 
5,083

Total operating revenues
495,503

 
854,286

 
1,622,873

 
2,399,669

Operating expenses
 

 
 

 
 
 
 
Cost of revenues
405,153

 
830,438

 
1,387,690

 
2,322,788

Operating expense, excluding depreciation, depletion and amortization expense
38,047

 
42,729

 
102,798

 
109,897

Lease operating expense
1,575

 
1,204

 
4,614

 
3,963

Depreciation, depletion and amortization
4,596

 
3,918

 
12,852

 
10,269

Impairment expense
9,639

 

 
9,639

 

Loss on sale of assets, net

 
624

 

 
624

General and administrative expense
9,939

 
8,115

 
31,878

 
18,782

Acquisition and integration expense
280

 
3,856

 
1,811

 
9,126

Total operating expenses
469,229

 
890,884

 
1,551,282

 
2,475,449

Operating income (loss)
26,274

 
(36,598
)
 
71,591

 
(75,780
)
Other income (expense)
 

 
 

 
 
 
 
Interest expense and financing costs, net
(4,387
)
 
(7,076
)
 
(15,769
)
 
(13,980
)
Loss on termination of financing agreements

 

 
(19,229
)
 

Other income (expense), net
(45
)
 
(164
)
 
(199
)
 
(304
)
Change in value of common stock warrants
(1,023
)
 
2,401

 
(2,732
)
 
4,118

Change in value of contingent consideration
(4,255
)
 
996

 
(18,679
)
 
5,758

Equity earnings (losses) from Laramie Energy Company
(1,355
)
 
835

 
(6,131
)
 
1,374

Total other income (expense), net
(11,065
)
 
(3,008
)
 
(62,739
)
 
(3,034
)
Income (loss) before income taxes
15,209

 
(39,606
)
 
8,852

 
(78,814
)
Income tax benefit (expense)
(469
)
 
150

 
18,073

 
113

Net income (loss)
$
14,740

 
$
(39,456
)
 
$
26,925

 
$
(78,701
)
Earnings (loss) per share


 


 
 
 
 
Basic
$
0.39

 
$
(1.19
)
 
$
0.72

 
$
(2.51
)
Diluted
$
0.39

 
$
(1.19
)
 
$
0.72

 
$
(2.51
)
Weighted average number of shares outstanding
 

 
 

 
 
 
 
Basic
37,390

 
33,137

 
37,304

 
31,311

Diluted
37,400

 
33,137

 
37,331

 
31,311

 

See accompanying notes to the unaudited condensed consolidated financial statements.

2







PAR PACIFIC HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
 
Nine Months Ended September 30,
 
2015
 
2014
Cash flows from operating activities:
 

 
 

Net income (loss)
$
26,925

 
$
(78,701
)
Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities:
 

 
 

Depreciation, depletion, and amortization
12,852

 
10,269

Impairment expense
9,639

 

Loss on termination of financing agreements
19,229

 

Non-cash interest expense
10,885

 
10,632

Change in value of common stock warrants
2,732

 
(4,118
)
Change in value of contingent consideration
18,679

 
(5,758
)
Deferred taxes
(18,073
)
 
(191
)
Loss on sale of assets, net

 
624

Stock-based compensation
4,040

 
4,158

Unrealized loss (gain) on derivative contracts
4,786

 
(317
)
Equity (earnings) losses from Laramie Energy Company
6,131

 
(1,374
)
Net changes in operating assets and liabilities:
 

 
 

Trade accounts receivable
42,432

 
(20,696
)
Prepaid and other assets
(851
)
 
527

Inventories
19,382

 
(12,559
)
Obligations under inventory financing agreements
19,719

 
2,860

Accounts payable and other accrued liabilities
(34,161
)
 
17,965

Net cash provided by (used in) operating activities
144,346

 
(76,679
)
Cash flows from investing activities
 

 
 

Acquisition of Koko'oha Investments, LLC, net of cash acquired
(64,360
)
 
(10,000
)
Capital expenditures
(15,857
)
 
(6,726
)
Proceeds from sale of assets

 
595

Payment for working capital settlement on HIE acquisition

 
(582
)
Investment in Laramie Energy Company
(27,529
)
 
(12
)
Net cash used in investing activities
(107,746
)
 
(16,725
)
Cash flows from financing activities
 

 
 

Proceeds from sale of common stock
539

 
101,561

Proceeds from borrowings
90,900

 
289,391

Repayments of borrowings
(114,164
)
 
(232,255
)
Net repayments on deferred payment arrangement
(8,492
)
 

Payment of deferred loan costs
(5,941
)
 
(5,683
)
Purchase of common stock for retirement

 
(287
)
Proceeds from inventory financing agreements
271,000

 

Payments for termination of supply and exchange agreements
(257,811
)
 

Restricted cash released

 
52

Net cash provided by (used in) financing activities
(23,969
)
 
152,779

Net increase in cash and cash equivalents
12,631

 
59,375

Cash and cash equivalents at beginning of period
89,210

 
38,061

Cash and cash equivalents at end of period
$
101,841

 
$
97,436

Supplemental cash flow information
 

 
 

Cash received (paid) for:
 
 
 
Interest
$
(4,224
)
 
$
(3,348
)
Taxes
357

 
233

Non-cash investing and financing activities
 

 
 

Accrued capital expenditures
$
2,852

 
$
3,230

Value of warrants reclassified to equity

$
7,730

 
$

 See accompanying notes to the unaudited condensed consolidated financial statements.

3

PAR PACIFIC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
For the Interim Periods Ended September 30, 2015 and 2014



Note 1—Overview
Par Pacific Holdings, Inc. (formerly known as Par Petroleum Corporation) and its wholly owned subsidiaries ("Par" or the "Company") own interests in energy and infrastructure businesses. Currently, we operate in four segments: (i) refining and distribution, (ii) retail, (iii) natural gas and oil production, and (iv) commodity marketing and logistics.
Our refining and distribution segment consists of a refinery in Kapolei, Hawaii, refined products terminals, pipelines, a single-point mooring and trucking operations. The refinery produces ultra-low sulfur diesel, gasoline, jet fuel, marine fuel, and other associated refined products primarily for consumption in Hawaii.
Our retail segment consists of retail outlets which sell gasoline, diesel, and retail merchandise throughout Hawaii. Our retail network includes Tesoro and "76" branded retail sites, company-operated convenience stores, sites operated in cooperation with 7-Eleven and other sites operated by third parties.
Our natural gas and oil production segment consists primarily of our 32.4% equity investment in Piceance Energy, LLC ("Piceance Energy"), a joint venture entity focused on producing natural gas in Garfield and Mesa Counties, Colorado. In October 2015, Piceance Energy began doing business as Laramie Energy Company ("Laramie").
Our commodity marketing and logistics segment focuses on sourcing, marketing, transporting, and distributing crude oil and refined products. Our logistics capability consists of historical pipeline shipping status, a leased railcar fleet, and chartering tows and barges, with the capability of moving crude oil from landlocked locations in the Western U.S. and Canada to the refining hubs in the Midwest, Gulf Coast, and East Coast regions of the U.S.
Note 2—Summary of Significant Accounting Policies
Principles of Consolidation and Basis of Presentation 
The unaudited condensed consolidated financial statements include the accounts of Par. All intercompany balances and transactions have been eliminated in consolidation. Certain amounts from prior periods have been reclassified to conform to the current presentation. 
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities Exchange Act of 1934. Accordingly, they do not include all of the information and notes required by GAAP for complete consolidated financial statements. The unaudited condensed consolidated financial statements contained in this report include all material adjustments of a normal recurring nature that, in the opinion of management, are necessary for a fair presentation of the results for the interim periods. The results of operations for the interim periods presented are not necessarily indicative of the results that may be expected for the complete fiscal year, or for any other period. The condensed consolidated balance sheet as of December 31, 2014 was derived from our audited consolidated financial statements as of that date. These unaudited condensed consolidated financial statements should be read together with the consolidated financial statements and notes thereto included in our Current Report on Form 8-K filed on May 22, 2015.
Use of Estimates     
The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the related disclosures. Actual amounts could differ from these estimates. On an ongoing basis, we review our estimates based on currently available information. Changes in facts and circumstances may result in revised estimates. Significant estimates include the fair value of certain assets and liabilities, including those acquired in business combinations, natural gas and oil reserves, income taxes and the valuation allowances related to deferred tax assets, derivatives, asset retirement obligations, contingencies and litigation accruals.
Accounting Principles Not Yet Adopted
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU No. 2014-09”). The FASB’s objective was to provide a more robust framework to improve comparability of revenue recognition practices across entities by removing most industry and transaction-specific guidance, align GAAP with International Financial Reporting Standards, and provide more useful information to financial statement users. This authoritative guidance changes the way entities recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which it expects to be entitled in exchange for those goods or services. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606):

4

PAR PACIFIC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
For the Interim Periods Ended September 30, 2015 and 2014


Deferral of the Effective Date ("ASU No. 2015-14"), which defers the effective date of ASU 2015-09 by one year. ASU No. 2014-09 is now effective for interim and annual periods beginning after December 15, 2017 and early adoption is permitted for interim and annual periods beginning after December 15, 2016. ASU No. 2014-09 allows for either full retrospective adoption or modified retrospective adoption. We are in the process of determining the method of adoption and the impact this guidance will have on our financial condition, results of operations and cash flows.
In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements-Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”). ASU 2014-15 is intended to define management’s responsibility to evaluate whether there is substantial doubt about an organization’s ability to continue as a going concern and to provide related footnote disclosures. The amendments in this ASU are effective for interim and annual periods beginning after December 15, 2016 and early adoption is permitted. We do not expect the adoption of ASU 2014-15 to have a material impact on our financial condition, results of operations and cash flows.
In February 2015, the FASB issued ASU No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis ("ASU 2015-02"). ASU 2015-02 changes the consolidation analysis required under GAAP by eliminating the presumption that a general partner should consolidate a limited partnership and modifying the evaluation of whether limited partnerships are Variable Interest Entities or voting interest entities. Under the amended guidance, limited partners would be required to consolidate a partnership if the limited partner retains certain powers and obligations. The amendments in this ASU are effective for annual periods beginning after December 15, 2016, and interim periods beginning after December 15, 2017. ASU 2015-02 allows for either full retrospective adoption or modified retrospective adoption. Early adoption is permitted, but the guidance must be applied as of the beginning of the annual period containing the adoption date. We are in the process of determining the method of adoption and the impact this guidance will have on our financial condition, results of operations and cash flows.
In April 2015, the FASB issued ASU No. 2015-03, Interest- Imputation of Interest: Simplifying the Presentation of Debt Issuance Costs ("ASU 2015-03"). ASU 2015-03 changes the balance sheet classification of debt issuance costs. Under current GAAP, debt issuance costs are reported on the balance sheet as assets and amortized as interest expense. ASU 2015-03 requires that debt issuance costs be presented as a direct reduction from the carrying amount of the related debt liability, which is similar to the presentation of debt discounts or premiums. Debt issuance costs will continue to be amortized to interest expense using the effective interest method. In August 2015, the FASB issued ASU No. 2015-15, Interest- Imputation of Interest: Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements ("ASU 2015-15"). ASU 2015-15 clarifies that the guidance in ASU 2015-03 does not apply to debt issuance costs related to line-of-credit arrangements. Line-of-credit arrangements will continue to defer and present debt issuance costs as an asset and subsequently amortize the deferred debt costs ratably over the term of the arrangement. The amendments in this ASU are effective for annual and interim periods beginning after December 15, 2015. ASU 2015-03 should be adopted on a retrospective basis and early adoption is permitted. As of September 30, 2015 and December 31, 2014, we had $8.3 million and $13.2 million of debt issuance costs included in Other long-term assets on our unaudited condensed consolidated balance sheets, respectively.
In July 2015, the FASB issued ASU No. 2015-11, Simplifying the Measurement of Inventory ("ASU 2015-11"). ASU 2015-11 changes the inventory measurement principle for entities using the first-in, first out (FIFO) or average cost methods. For entities utilizing one of these methods, the inventory measurement principle will change from lower of cost or market to the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Subsequent measurement is unchanged for inventory measured using last-in, first-out or the retail inventory method. The amendments in this ASU are effective for annual and interim periods beginning after December 15, 2016. ASU 2015-11 should be adopted prospectively with earlier application permitted as of the beginning of an interim or annual reporting period. Our commodity inventories are currently stated at the lower of cost or market value using the FIFO accounting method. We value merchandise, spare parts, materials, and supplies at average cost. We are currently evaluating the provisions and assessing the impact, if any, this amendment may have on our financial condition and results of operations.
Accounting Principle Adopted    In September 2015, the FASB issued ASU No. 2015-16, Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments ("ASU 2015-16"). ASU 2015-16 requires that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. Under ASU 2015-16, the effect on earnings resulting from changes to the provisional amounts, calculated as if the accounting had been completed as of the acquisition date, must be recorded in the reporting period in which the adjustment amounts are determined rather than retrospectively. The amendments in this ASU are effective for annual and interim periods beginning after December 15, 2015. ASU 2015-16 should be adopted prospectively to adjustments to provisional amounts occurring after the effective date of the update and earlier application is permitted for financial statements that have not been issued. We adopted this ASU during the quarter ended September 30, 2015 and applied its amendments to the measurement period adjustments made during the three months ended September 30, 2015. Please read Note 4—Acquisition for further information.

5

PAR PACIFIC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
For the Interim Periods Ended September 30, 2015 and 2014


Note 3—Investment in Laramie Energy Company
We have a 32.4% ownership interest in Laramie, a joint venture entity focused on producing natural gas in Garfield and Mesa Counties, Colorado. Laramie has a $400 million revolving credit facility secured by a lien on its natural gas and oil properties and related assets with a borrowing base currently set at $110 million. As of September 30, 2015, the balance outstanding on the revolving credit facility was approximately $47.5 million. We are guarantors of Laramie's credit facility, with recourse limited to the pledge of our equity interest of our wholly-owned subsidiary, Par Piceance Energy Equity, LLC. Under the terms of its credit facility, Laramie is generally prohibited from making future cash distributions to its owners, including us.
On March 9, 2015, we amended the Limited Liability Company Agreement of Piceance Energy LLC ("LLC Agreement") and made a cash capital contribution of $13.8 million to Laramie. On May 29, 2015, we made an additional cash capital contribution of $13.8 million. As a result of our contributions to Laramie, our ownership interest increased from 33.34% to 34.0%.
On July 31, 2015, an unaffiliated third-party invested an aggregate of $19 million in Laramie in the form of cash and property.  As a result of this transaction, our ownership interest decreased from 34.0% to 32.4%.

The change in our equity investment in Laramie is as follows (in thousands):
 
Nine Months Ended 
 September 30, 2015
Beginning balance
$
104,657

Equity loss from Laramie
(6,743
)
Accretion of basis difference
612

Capital contributions
27,529

Ending balance
$
126,055


Summarized financial information for Laramie is as follows (in thousands): 
 
September 30, 2015
 
December 31, 2014
Current assets
$
10,976

 
$
13,168

Non-current assets
498,527

 
468,379

Current liabilities
23,280

 
17,103

Non-current liabilities
78,334

 
107,087

 
 
Three Months Ended 
 September 30, 2015
 
Three Months Ended 
 September 30, 2014
 
Nine Months Ended 
 September 30, 2015
 
Nine Months Ended 
 September 30, 2014
Natural gas and oil revenues
$
11,464

 
$
21,347

 
$
32,687

 
$
62,315

Income (loss) from operations
(6,201
)
 
870

 
(21,487
)
 
6,468

Net income (loss)
(4,717
)
 
2,111

 
(20,126
)
 
2,835

 The net loss for the three and nine months ended September 30, 2015 includes $7.5 million and $23.3 million of depreciation, depletion, and amortization ("DD&A") expense and $0.7 million and $5.1 million of unrealized losses on derivative instruments, respectively. The net income for the three and nine months ended September 30, 2014 includes $9.6 million and $24.9 million of DD&A and $2.6 million and $2.4 million of unrealized gains on derivative instruments, respectively.
As of September 30, 2015 and December 31, 2014, our equity in the underlying net assets of Laramie exceeded the carrying value of our investment by approximately $14.1 million and $14.7 million, respectively. This difference arose due to lack of control and marketability discounts. We attributed this difference to natural gas and oil properties and are amortizing the difference over 15 years based on the estimated proved reserves at the date Laramie was formed.

6

PAR PACIFIC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
For the Interim Periods Ended September 30, 2015 and 2014


Note 4—Acquisition
On June 2, 2014, we and our subsidiary entered into an agreement to acquire Koko’oha Investments, Inc. ("Koko'oha"), a Hawaii corporation, which owns 100% of the issued and outstanding membership interests in Mid Pac Petroleum, LLC, a Delaware limited liability company (“Mid Pac”). Mid Pac is the exclusive licensee of the “76” brand in the State of Hawaii and the owner/operator of several terminals and retail gasoline stations across Hawaii.
On April 1, 2015, we completed the acquisition of Mid Pac. Net cash consideration was $74.4 million, including the working capital settlement of $1 million paid in September 2015. The cash consideration includes advance deposits of $15.0 million, of which $10.0 million was paid in 2014, paid prior to closing. In connection with the acquisition, Mid Pac's pre-existing debt was fully repaid on the closing date for $45.3 million. The acquisition and debt repayment were funded with cash on hand and $55 million of borrowings under the Credit Agreement with the Bank of Hawaii ("Mid Pac Credit Agreement"). Please read Note 8—Debt for further discussion.
We accounted for the acquisition of Mid Pac as a business combination whereby the purchase price was allocated to the assets acquired and liabilities assumed based on their estimated fair values on the date of acquisition. Goodwill recognized in the transaction was attributable to opportunities expected to arise from combining our operations with Mid Pac's, and utilization of our net operating loss carryforwards, as well as other intangible assets that do not qualify for separate recognition. In addition, we recorded certain other identifiable intangible assets including trade names and customer relationships. These intangible assets will be amortized over their estimated useful lives on a straight line basis, which approximates their consumptive life. Please read Note 6—Goodwill and Intangible Assets for further discussion.
A summary of the preliminary estimated fair value of the assets acquired and liabilities assumed is as follows (in thousands): 
Cash
$
10,007

Accounts receivable
9,905

Inventories
5,375

Prepaid and other current assets
1,444

Property, plant and equipment
41,878

Land
34,800

Goodwill
28,181

Intangible assets
33,647

Other non-current assets
1,228

Accounts payable and other current liabilities
(11,331
)
Deferred tax liability
(18,290
)
Other non-current liabilities
(7,235
)
Total
$
129,609

We have recorded a preliminary estimate of the fair value of the assets acquired and liabilities assumed and expect to finalize the purchase price allocation during 2016. The primary areas of the purchase price allocation that are not yet finalized relate to income taxes and contingent liabilities.

During the three months ended September 30, 2015, the purchase price allocation was adjusted to record a decrease to goodwill of $1.1 million, an increase to property and equipment of $2.1 million, a decrease to accounts payable of $0.2 million, and a decrease to deferred tax liability of $0.4 million. These adjustments are primarily related to the working capital settlement and the valuation of certain storage tanks. The effect on earnings resulting from these changes to the purchase price allocation did not have a material impact on our results of operations for the three or nine months ended September 30, 2015.

The results of operations of Mid Pac were included in our results beginning April 1, 2015. For the three and nine month periods ended September 30, 2015, our results of operations included revenues of $49.9 million and $103.5 million and net income of $6.6 million and $9.4 million, respectively, related to Mid Pac. The following unaudited pro forma financial information presents our consolidated revenues and net income (loss) as if the Mid Pac acquisition had been completed on January 1, 2014 (in thousands):

7

PAR PACIFIC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
For the Interim Periods Ended September 30, 2015 and 2014


 
 
Three Months Ended 
 September 30, 2014
 
Nine Months Ended 
 September 30, 2015
 
Nine Months Ended 
 September 30, 2014
Revenues (1)
 
$
922,087

 
$
1,649,915

 
$
2,594,997

Net income (loss) (1)
 
(39,139
)
 
10,069

 
(60,400
)
_______________________________________________________
(1) The results of operations of Mid Pac for the three months ended September 30, 2015 are included in our condensed consolidated statement of operations for the entire period; therefore, the pro forma financial information for the three months ended September 30, 2015 is not presented in the table above.

Note 5—Inventories    

Inventories at September 30, 2015 consist of the following (in thousands):
 
Titled Inventory
 
Supply and Offtake Agreements (1)
 
Total
Crude oil and feedstocks
$
8,237

 
$
70,683

 
$
78,920

Refined products and blend stock
29,019

 
106,650

 
135,669

Warehouse stock and other
17,380

 

 
17,380

Total
$
54,636

 
$
177,333

 
$
231,969


Inventories at December 31, 2014 consist of the following (in thousands):
 
Titled Inventory
 
Supply and Exchange Agreements (1)
 
Total
Crude oil and feedstocks
$
17,924

 
$
62,594

 
$
80,518

Refined products and blend stock
29,998

 
118,375

 
148,373

Warehouse stock and other
14,962

 

 
14,962

Total
$
62,884

 
$
180,969

 
$
243,853

________________________________________________________
(1) Please read Note 7—Inventory Financing Agreements for further information.

The reserve for the lower of cost or market value of inventory was $2.9 million and $2.4 million as of September 30, 2015 and December 31, 2014, respectively.
Note 6—Goodwill and Intangible Assets
During the nine months ended September 30, 2015, the change in the carrying amount of goodwill was as follows (in thousands):

Balance at beginning of period
$
20,786

Acquisition of Koko'oha (1)
28,181

Impairment expense
(6,990
)
Balance at end of period
$
41,977

________________________________________________________ 
(1) Please read Note 4—Acquisition for further discussion.
At September 30, 2015, we conducted an interim goodwill impairment test of our Commodity Marketing and Logistics reporting unit due to (i) a reduction in the forecasted results of operations during our annual budgeting process; (ii) the decision to cancel the charter on the barges used to move crude oil from Canada to the U. S. gulf coast due to lower forecasted commodity prices and (iii) negative cash flows from the business during 2015. Upon completion of the goodwill impairment test, we determined the goodwill associated with the Commodity Marketing and Logistics reporting unit was fully impaired resulting in a charge of

8

PAR PACIFIC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
For the Interim Periods Ended September 30, 2015 and 2014


$7.0 million in our unaudited condensed consolidated statement of operations for the three and nine months ended September 30, 2015. In assessing the value of the reporting unit, we primarily used an income approach with a weighted-average discount rate of 15%.

Intangible assets consist of the following (in thousands): 
 
September 30, 2015
 
December 31, 2014
Intangible assets:
 

 
 

Supplier relationships
$

 
$
3,360

Railcar leases
3,249

 
3,249

Trade names and trademarks
6,267

 
4,689

Customer relationships
32,069

 

Total intangible assets
$
41,585

 
$
11,298

Accumulated amortization:
 

 
 

Supplier relationships
$

 
$
(516
)
Railcar leases
(1,787
)
 
(1,301
)
Trade name and trademarks
(3,146
)
 
(1,975
)
Customer relationships
(1,063
)
 

Total accumulated amortization
$
(5,996
)
 
$
(3,792
)
Net:
 

 
 

Supplier relationships
$

 
$
2,844

Railcar leases
1,462

 
1,948

Trade name and trademarks
3,121

 
2,714

Customer relationships
31,006

 

Total intangible assets, net
$
35,589

 
$
7,506

 
At September 30, 2015, we conducted an impairment test related to the intangible assets in our Commodity Marketing and Logistics reporting unit.  As of result of canceling the charter on the barges used to transport crude from Canada to the U. S. gulf coast in the commodity marketing and logistics business, we concluded that the supplier relationships intangible asset was fully impaired and recorded an impairment charge of $2.6 million in our unaudited condensed consolidated statements of operations for the three and nine months ended September 30, 2015.
    
Amortization expense was approximately $1.0 million and $2.8 million for the three and nine months ended September 30, 2015, respectively. Amortization expense was approximately $0.9 million and $1.8 million for the three and nine months ended September 30, 2014, respectively. Intangible assets acquired from Mid Pac have an average useful life of 13.6 years. Expected amortization expense for each of the next five years and thereafter is as follows (in thousands):
Year Ended
 
Amount
2015
 
$
1,266

2016
 
4,412

2017
 
3,307

2018
 
2,658

2019
 
2,658

Thereafter
 
21,288

Total
 
$
35,589


9

PAR PACIFIC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
For the Interim Periods Ended September 30, 2015 and 2014


Note 7—Inventory Financing Agreements
Supply and Offtake Agreements
On June 1, 2015, we entered into several agreements with J. Aron & Company ("J. Aron") to support the operations of our refinery (the "Supply and Offtake Agreements"). The Supply and Offtake Agreements have a term of three years with two one-year extension options upon mutual agreement of the parties.
 
During the term of the Supply and Offtake Agreements, we and J. Aron will identify mutually acceptable contracts for the purchase of crude oil from third parties. Per the Supply and Offtake Agreements, J. Aron will provide up to 94 thousand barrels per day of crude oil to our refinery. Additionally, we agreed to sell, and J. Aron agreed to buy, at market prices, refined products produced at our refinery. We will then repurchase the refined products from J. Aron prior to selling the refined products to our retail operations or third parties. The agreements also provide for the lease to J. Aron of crude oil and certain refined product storage facilities. Following expiration or termination of the agreements, we are obligated to purchase the crude oil and refined product inventories then owned by J. Aron and located at the leased storage facilities at then current market prices. Our obligations under the agreements are secured by a security interest on substantially all of the assets of Hawaii Independent Energy, LLC ("HIE"), a security interest on the equity interests held by our wholly-owned subsidiary, Hawaii Pacific Energy, LLC in HIE and a mortgage whereby HIE granted to J. Aron a lien on all real property and improvements owned by HIE, including our refinery.

While title to the crude oil and certain refined product inventories will reside with J. Aron, the Supply and Offtake Agreements will be accounted for as a product financing arrangement; therefore, the crude oil and refined products inventories will continue to be included on our consolidated balance sheet until processed and sold to a third party. Each reporting period, we record a liability in an amount equal to the amount we expect to pay to repurchase the inventory held by J. Aron based on current market prices.

For the three and nine months ended September 30, 2015, we incurred approximately $2.8 million and $4.0 million in handling fees related to the Supply and Offtake Agreements, respectively, which is included in Cost of revenues on our unaudited condensed consolidated statements of operations. For the three and nine months ended September 30, 2015, Interest expense and financing costs, net on our unaudited condensed consolidated statements of operations includes approximately $0.6 million and $0.9 million of expenses related to the Supply and Offtake Agreements, respectively.
The Supply and Offtake Agreements also include a deferred payment arrangement ("Deferred Payment Arrangement") whereby we can defer payments owed under the agreements up to the lesser of $125 million or 85% of the eligible accounts receivable and inventory. Upon execution of the Supply and Offtake Agreements, we paid J. Aron a deferral arrangement fee of $1.3 million. The deferred amounts under the deferred payment arrangement will bear interest at a rate equal to 90-day LIBOR plus 3.75% per annum. We also agreed to pay a deferred payment availability fee equal to 0.75% of the unused capacity under the deferred payment arrangement. Amounts outstanding under the Deferred Payment Arrangement are included in Obligations under inventory financing agreements on our unaudited condensed consolidated balance sheet. Changes in the amount outstanding under the Deferred Payment Arrangement are included within cash flows from financing activities on the unaudited consolidated statement of cash flows. As of September 30, 2015, the capacity of the Deferred Payment Arrangement was $55.8 million and we had $28.3 million outstanding.

Under the Supply and Offtake Agreements, we pay or receive certain fees from J. Aron based on changes in market prices over time. On September 1, 2015, we entered into an agreement ("Fee Agreement") to fix this market fee for the period from October 1, 2015 through November 30, 2016 whereby J. Aron agreed to pay us a total of $18 million to be settled in fourteen equal monthly payments. The receivable from J. Aron was recorded as a reduction to our Obligations under inventory financing agreements pursuant to our Master Netting Agreement. The $18 million receivable from J. Aron will be recognized in earnings throughout the term of the Fee Agreement.

The agreements also provide us with the ability to hedge price risk on our inventories and crude oil purchases. Please read Note 9—Fair Value Measurements for further information.

Supply and Exchange Agreements
HIE entered into several agreements with Barclays Bank PLC ("Barclays"), referred to collectively as the Supply and Exchange Agreements, on September 25, 2013 in connection with the acquisition of HIE for the purpose of managing its working capital and the crude oil and refined product inventory at the refinery. Effective July 31, 2014, HIE supplemented the Supply and Exchange Agreements by entering into the Refined Product Supply Master Confirmation, pursuant to which Barclays may provide refined product supply and intermediation arrangements to HIE.

10

PAR PACIFIC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
For the Interim Periods Ended September 30, 2015 and 2014


Pursuant to the Supply and Exchange Agreements, Barclays held title to all of the crude oil in the tanks at the refinery and to a majority of our refined product inventory in our tanks at the refinery. Barclays also prepaid us for certain inventory held at locations outside of our refinery. We held title to the inventory during the refining process. Barclays sold the crude oil to us as it was discharged out of the refinery's tanks. We exchanged refined product owned by Barclays stored in our tanks for equal volumes of refined product produced by our refinery when we executed third-party sales of refined product.

For the nine months ended September 30, 2015, we incurred approximately $6.9 million in handling fees related to the Supply and Exchange Agreements, which are included in Cost of revenues on our unaudited condensed consolidated statements of operations. We incurred no handling fees related to the Supply and Exchange Agreements during the three months ended September 30, 2015. For the three and nine months ended September 30, 2014, we incurred approximately $4.6 million and $12.0 million in handling fees related to the Supply and Exchange Agreements, respectively.

For the nine months ended September 30, 2015, Interest expense and financing costs, net on our unaudited condensed consolidated statements of operations includes approximately $2.3 million of expenses related to the Supply and Exchange Agreements. We incurred no interest expense related to the Supply and Exchange Agreements during the three months ended September 30, 2015. Interest expense and financing costs, net on our unaudited condensed consolidated statements of operations includes approximately $1.8 million and $4.9 million for the three and nine months ended September 30, 2014.
Upon execution of the Supply and Offtake Agreements, HIE terminated the Supply and Exchange Agreements with Barclays, subject to certain obligations to reimburse Barclays for third-party claims. We recognized a loss of $17.4 million on the termination of the agreement which consisted of a loss of $13.3 million for the cash settlement value of the liability which had previously been measured assuming settlement with inventory on hand and a loss of $5.6 million for the acceleration of deferred financing costs. These losses were partially offset by a $1.5 million exit fee received from Barclays. The net loss of $17.4 million related to the termination of the Supply and Exchange Agreements is included in Loss on termination of financing agreements on our unaudited condensed consolidated statements of operations for the nine months ended September 30, 2015. The cash paid to settle the obligation is included in Payments for termination of supply and exchange agreements in the Cash flows from financing activities section of our unaudited condensed statements of cash flows for the nine months ended September 30, 2015.

Note 8—Debt
The following table summarizes our outstanding debt (in thousands):
 
September 30, 2015
 
December 31, 2014
Term Loan
$
93,851

 
$
87,360

HIE Retail Credit Agreement
27,857

 
22,750

Texadian Uncommitted Credit Agreement

 
26,500

Mid Pac Credit Agreement
47,917

 

Total debt, net of unamortized debt discount
169,625

 
136,610

Less current maturities
(43,373
)
 
(29,100
)
Long-term debt, net of current maturities and unamortized discount
$
126,252

 
$
107,510


Annual maturities of our long-term debt for the next five years and thereafter are as follows (in thousands):
Year
 
Amount Due
2015
 
$
2,113

2016
 
47,540

2017
 
8,452

2018
 
63,217

2019
 
8,452

Thereafter
 
39,851

 
 
$
169,625


Additionally, as of September 30, 2015, we had approximately $5.7 million in letters of credit outstanding under the Texadian Uncommitted Credit Agreement.


11

PAR PACIFIC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
For the Interim Periods Ended September 30, 2015 and 2014


Our debt is subject to various affirmative and negative covenants. As of September 30, 2015, we were in compliance with all debt covenants.

Term Loan
Pursuant to the terms of our Delayed Draw Term Loan Agreement (the "Term Loan"), we were required to repay an advance of $35 million on March 31, 2015. On March 11, 2015, we entered into a Third Amendment to the Term Loan whereby we extended the repayment date of the advance to March 31, 2016. All other terms and conditions remain unchanged.
Certain lenders under the Term Loan are our stockholders. Please read Note 16—Related Party Transactions for more information.
Retail Credit Agreement
On May 15, 2015, HIE Retail entered into a Second Amendment to the Retail Credit Agreement ("Second Amendment") pursuant to which we terminated the retail revolver and extended the maturity date of the existing retail term loans in the aggregate principal amount of $22 million until March 31, 2022. In connection with the entry into the Second Amendment, the Retail Facility lenders made additional term loans to HIE Retail in the aggregate principal amount of $7.9 million. The New Term Loans were made on the same terms as the term loans previously made under the Retail Credit Agreement, as amended by the Second Amendment. The Second Amendment also provides that if a prepayment of the amounts outstanding under the Retail Credit Agreement occurs as a result of HIE Retail obtaining refinancing from any financial institution (including from less than all of the Retail Facility Lenders), HIE Retail shall pay a prepayment fee equal to 1% of the amount prepaid. Prior to the entry into the Second Amendment, there were no revolving loans outstanding and no letters of credit issued under the Retail Credit Agreement.

The Second Amendment includes a new covenant that requires HIE Retail to maintain cash on hand of not less than $3 million at all times. In addition, the Second Amendment modifies the financial covenant relating to HIE Retail’s maximum Leverage Ratio (as defined in the Retail Credit Agreement), which is measured on a quarterly basis commencing with the fiscal quarter ending June 30, 2015 and building up to a rolling four-quarter basis, as follows for the last day of each fiscal year:

Period (during and as of the last day of)
 
Maximum Leverage Ratio
2015 Fiscal Year
 
5.00 to 1.00
2016 Fiscal Year
 
4.75 to 1.00
2017 Fiscal Year
 
4.50 to 1.00
2018 Fiscal Year
 
4.25 to 1.00
2019 Fiscal Year, and at all times thereafter
 
4.00 to 1.00

Texadian Uncommitted Credit Agreement
On February 20, 2015, Texadian Energy, Inc. ("Texadian"), and its wholly-owned subsidiary Texadian Energy Canada Limited, amended and restated their uncommitted credit agreement. The amended agreement increased the uncommitted loans and letters of credit capacity to $200 million and extended the maturity date to February 2016.
Existing Debt Obligations of Koko'oha and Mid Pac
On April 1, 2015, in connection with the acquisition of Mid Pac, we repaid certain existing debt obligations of Koko'oha and Mid Pac for $45.3 million.
Mid Pac Credit Agreement
On April 1, 2015, Koko’oha and Mid Pac entered into the Mid Pac Credit Agreement in the form of a senior secured term loan in the amount of $50 million (“Mid Pac Term Loan”) and a senior secured revolving line of credit (“Mid Pac Revolving Credit Facility”) in the aggregate principal amount of up to $5 million. The lenders of the Mid Pac Credit Agreement advanced the full amount of the Mid Pac Term Loan and the Mid Pac Revolving Credit Facility at the closing. The proceeds of the loans were used to repay certain existing debt of Koko’oha and Mid Pac, pay a portion of the acquisition consideration and for general corporate purposes.
The Mid Pac Term Loan matures and is fully payable on April 1, 2022. Principal on the term loan will be repaid in 28 equal quarterly principal payments over the term. The revolving credit facility matures on April 1, 2018 and no more than five

12

PAR PACIFIC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
For the Interim Periods Ended September 30, 2015 and 2014


borrowings consisting of LIBOR loans may be outstanding at any time. Letters of credit issued under the revolving credit facility are not to expire beyond the maturity date of the revolving credit facility.
The Mid Pac Term Loan and advances under the Mid Pac Revolving Credit Facility will bear interest, at the Company's election, at a rate equal to (a) 30, 90 or 180 day LIBOR plus the applicable margin (as specified below), or (ii) the primary interest rate established from time to time by Bank of Hawaii plus a margin. For both LIBOR and primary interest rate loans, the margin is calculated based on the leverage ratio determined as of the last day of the immediately preceding quarter. Interest is payable at the end of the selected interest period, but no less frequently than quarterly.
The Mid Pac Term Loan applicable margin is as specified below:
Leverage Ratio
 
Applicable Margin for LIBOR Loans
 
Applicable Margin for Basis Rate Loans
 
 
(basis points)
 
(basis points)
< 3.00x
 
200
 
3.00x - 3.50x
 
225
 
25
> 3.50x
 
250
 
50
The Mid Pac Revolving Credit Facility applicable margin is as specified below:
Leverage Ratio
 
Applicable Margin for LIBOR Loans
 
Applicable Margin for Basis Rate Loans
 
 
(basis points)
 
(basis points)
< 3.00x
 
175
 
(25)
3.00x - 3.50x
 
200
 
> 3.50x
 
225
 
25
Mid Pac agreed to pay certain fees in connection with the Mid Pac Credit Agreement, including usage fees for trade letters of credit and commitment fees for standby letters of credit issued under the Mid Pac Revolving Credit Facility.
Pursuant to the Mid Pac Credit Agreement, Mid Pac is required to comply with various affirmative and negative covenants affecting its business and operations, including compliance with a minimum fixed charge coverage ratio of not less than 1.15 to 1.00, a minimum tangible net worth of $12.0 million, and a maximum leverage ratio determined as follows:
Period (during and as of last day of)
 
Maximum Leverage Ratio
September 30, 2015
 
5.25 to 1.00
December 31, 2015
 
5.00 to 1.00
2016 fiscal year
 
4.75 to 1.00
2017 fiscal year
 
4.25 to 1.00
2018 fiscal year
 
4.00 to 1.00
2019 fiscal year
 
3.50 to 1.00
2020 fiscal year, and at all times thereafter
 
3.25 to 1.00
ABL Facility

On September 25, 2013 and in connection with the acquisition of HIE, HIE and its subsidiary (“ABL Borrowers”) and Hawaii Pacific Energy entered into an asset-based senior secured revolving credit facility (“ABL Facility”) of up to $125 million, of which up to $50 million of availability under the ABL Facility was available for the issuances of letters of credit. Upon the execution of the Supply and Offtake Agreements, we repaid in full and terminated the ABL Facility and expensed $1.8 million of financing costs associated with the termination of the agreement. The expense of $1.8 million related to the termination of the ABL Facility is included within Loss on termination of financing agreements on our unaudited consolidated statements of operations for the nine months ended September 30, 2015.


13

PAR PACIFIC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
For the Interim Periods Ended September 30, 2015 and 2014


Guarantors
In connection with our shelf registration statement on Form S-3, which was filed with the SEC on June 1, 2015 and declared effective on June 23, 2015 (“Registration Statement”), we may sell non-convertible debt securities and other securities in one or more offerings with an aggregate initial offering price of up to $750 million. Any non-convertible debt securities issued under the Registration Statement may be fully and unconditionally guaranteed (except for customary release provisions), on a joint and several basis, by some or all of our subsidiaries, other than subsidiaries that are “minor” within the meaning of Rule 3-10 of Regulation S-X (the “Guarantor Subsidiaries”). The Company has no “independent assets or operations” within the meaning of Rule 3-10 of Regulation S-X, and certain of the Guarantor Subsidiaries may be subject to restrictions on their ability to distribute funds to the Company, whether by cash dividends, loans or advances.
Note 9—Fair Value Measurements
Assets and Liabilities Measured at Fair Value on a Recurring Basis 
Common stock warrants. As of September 30, 2015 and December 31, 2014, we had 345,135 and 749,148 common stock warrants outstanding, respectively. We estimate the fair value of our outstanding common stock warrants using a Monte Carlo simulation analysis, which is considered to be a Level 3 fair value measurement. Significant inputs used in the Monte Carlo simulation analysis include: 
 
September 30, 2015
 
December 31, 2014
Stock price
$20.83
 
$16.25
Weighted average exercise price
$0.10
 
$0.10
Term (years)
6.92
 
7.67
Risk-free rate
1.73%
 
2.01%
Expected volatility
50.0%
 
50.2%
The expected volatility is based on the 10-year historical volatilities of comparable public companies. Based on the Monte Carlo simulation analysis, the estimated fair value of the common stock warrants was $20.76 and $16.17 per warrant as of September 30, 2015 and December 31, 2014, respectively. Since the common stock warrants were in the money upon issuance, we do not believe that changes in the inputs to the Monte Carlo simulation analysis will have a significant impact on the value of the common stock warrants other than changes in the value of our common stock. Increases in the value of our common stock will increase the value of the common stock warrants. Likewise, a decrease in the value of our common stock will result in a decrease in the value of the common stock warrants.
Contingent consideration. The cash consideration for our acquisition of HIE may be increased pursuant to an earn out provision. The liability is remeasured at the end of each reporting period using a Monte Carlo simulation analysis. Significant inputs used in the valuation model include estimated future gross margin, annual gross margin volatility and a present value factor. We consider this to be a Level 3 fair value measurement. Please read Note 10—Commitments and Contingencies for further discussion.
Derivative instruments. We utilize crude oil commodity derivative contracts to manage our price exposure to our inventory positions, future purchases of crude oil, and future sales of refined products. The derivative contracts that we execute to manage our price risk include exchange traded futures, options and over-the-counter (“OTC”) swaps. Our futures, options, and OTC swaps are marked-to-market and changes in the fair value of these contracts are recognized within Cost of revenues on our unaudited consolidated statements of operations.
We have entered into forward purchase contracts for crude oil and forward sales contracts of refined products. We elect the normal purchases normal sales (“NPNS”) exception for all forward contracts that meet the definition of a derivative and are not expected to net settle. Any gains and losses with respect to these forward contracts designated as NPNS are not reflected in earnings until the delivery occurs. During 2014, we entered into certain physical forward crude oil contracts that did not qualify for or for which we did not elect the normal NPNS exception. Changes in the fair value of those contracts were recorded in earnings.
We classify financial assets and liabilities according to the fair value hierarchy. Financial assets and liabilities classified as level 1 instruments are valued using quoted prices in active markets for identical assets and liabilities. These include our exchange traded futures.  Level 2 instruments are valued using quoted prices for similar assets and liabilities in active markets, and inputs other than quoted prices, that are observable for the asset or liability. Our level 2 instruments include OTC swaps and options.  These commodity derivatives are valued using market quotations from independent price reporting agencies and commodity exchange price curves that are corroborated with market data. Level 3 instruments are valued using significant unobservable inputs

14

PAR PACIFIC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
For the Interim Periods Ended September 30, 2015 and 2014


that are not supported by sufficient market activity. We do not have commodity derivatives classified as level 3 at September 30, 2015 or December 31, 2014.
    

Financial Statement Impact 
Our assets and liabilities measured at fair value on a recurring basis as of September 30, 2015 and December 31, 2014 and their placement within our unaudited condensed consolidated balance sheets consist of the following (in thousands): 
 
Balance Sheet Location
 
September 30, 2015
 
December 31, 2014
 
 
 
Asset (Liability)
Common stock warrants
Common stock warrants
 
$
(7,164
)
 
$
(12,123
)
Contingent consideration
Contingent consideration
 
(27,810
)
 
(9,131
)
Commodity derivatives (1)
Prepaid and other current assets
 
2,151

 
1,015

Commodity derivatives (1)
Other accrued liabilities
 
(5,194
)
 

Commodity derivatives (1)
Other liabilities
 
(727
)
 
 
_________________________________________________________
(1) Does not include cash collateral of $10.8 million recorded in Prepaid and other current assets and $7.0 million in Other long-term assets as of September 30, 2015.

The following table summarizes the pre-tax gains (losses) recognized in Net income (loss) on our unaudited condensed consolidated statement of operations resulting from changes in assets and liabilities valued at fair value (in thousands): 
 
Income Statement Classification
 
Three Months Ended 
 September 30, 2015
 
Three Months Ended 
 September 30, 2014
 
Nine Months Ended 
 September 30, 2015
 
Nine Months Ended 
 September 30, 2014
Common stock warrants
Change in value of common stock warrants
 
$
(1,023
)
 
$
2,401

 
$
(2,732
)
 
$
4,118

Contingent consideration
Change in value of contingent consideration
 
(4,255
)
 
996

 
(18,679
)
 
5,758

Commodity derivatives
Cost of revenues
 
10,940

 
639

 
13,512

 
(693
)

We elect to offset fair value amounts recognized for derivative instruments executed with the same counterparty under a master netting agreement. Our consolidated unaudited balance sheets present derivative assets and liabilities on a net basis. Our cash margin that is required as collateral deposits cannot be offset against the fair value of open contracts except in the event of default. Fair value amounts by hierarchy level as of September 30, 2015 and December 31, 2014 are presented gross in the tables below (in thousands):
 
September 30, 2015
 
Level 1
 
Level 2
 
Level 3
 
Gross Fair Value
 
Effect of Counter-party Netting
 
Net Carrying Value on Balance Sheet
Assets
 
 
 
 
 
 
 
 
 
 
 
Commodity derivatives
$
243

 
$
20,884

 
$

 
$
21,127

 
$
(18,976
)
 
$
2,151

Total
$
243

 
$
20,884

 
$

 
$
21,127

 
$
(18,976
)
 
$
2,151

 
 
 
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
 
 
Common stock warrants
$

 
$

 
$
(7,164
)
 
$
(7,164
)
 
$

 
$
(7,164
)
Contingent consideration

 

 
(27,810
)
 
(27,810
)
 

 
(27,810
)
Commodity derivatives
(17
)
 
(24,880
)
 

 
(24,897
)
 
18,976

 
(5,921
)
Total
$
(17
)
 
$
(24,880
)
 
$
(34,974
)
 
$
(59,871
)
 
$
18,976

 
$
(40,895
)


15

PAR PACIFIC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
For the Interim Periods Ended September 30, 2015 and 2014


 
December 31, 2014
 
Level 1
 
Level 2
 
Level 3
 
Gross Fair Value
 
Effect of Counter-party Netting
 
Net Carrying Value on Balance Sheet
Assets


 
 
 
 
 
 
 
 
 
 
Commodity derivatives
$
1,015

 
$

 
$

 
$
1,015

 
$

 
$
1,015

Total
$
1,015

 
$

 
$

 
$
1,015

 
$

 
$
1,015

 
 
 
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
 
 
Common stock warrants
$

 
$

 
$
(12,123
)
 
$
(12,123
)
 
$

 
$
(12,123
)
Contingent consideration

 

 
(9,131
)
 
(9,131
)
 

 
(9,131
)
Total
$

 
$

 
$
(21,254
)
 
$
(21,254
)
 
$

 
$
(21,254
)

A roll forward of Level 3 financial instruments measured at fair value on a recurring basis is as follows (in thousands): 
 
Three Months Ended 
 September 30, 2015
 
Three Months Ended 
 September 30, 2014
 
Nine Months Ended 
 September 30, 2015
 
Nine Months Ended 
 September 30, 2014
Balance, at beginning of period
$
(37,387
)
 
$
(22,837
)
 
$
(21,254
)
 
$
(29,316
)
Settlements
7,691

 

 
7,691

 

Acquired

 

 

 

Total unrealized income (loss) included in earnings
(5,278
)
 
3,397

 
(21,411
)
 
9,876

Balance, at end of period
$
(34,974
)
 
$
(19,440
)
 
$
(34,974
)
 
$
(19,440
)

The carrying value and fair value of long-term debt and other financial instruments as of September 30, 2015 and December 31, 2014 are as follows (in thousands):
 
September 30, 2015
 
Carrying Value
 
Fair Value (1)
Term Loan
$
93,851

 
$
99,822

HIE Retail Credit Agreement (2)
27,857

 
27,857

Mid Pac Credit Agreement (2)
47,917

 
47,917

Common stock warrants
7,164

 
7,164

Contingent consideration
27,810

 
27,810

 
December 31, 2014
 
Carrying Value
 
Fair Value (1)
Term Loan
$
87,360

 
$
87,068

HIE Retail Credit Agreement (2)
22,750

 
22,750

Texadian Uncommitted Credit Agreement
26,500

 
26,500

Common stock warrants
12,123

 
12,123

Contingent consideration
9,131

 
9,131

_________________________________________________________ 
(1) The fair values of these instruments are considered Level 3 measurements in the fair value hierarchy.
(2) Fair value approximates carrying value due to the floating rate interest which approximates a current market rate.
 
We estimate the fair value of our long-term debt using a discounted cash flow analysis and an estimate of the current yield of 9.87% and 14.11% as of September 30, 2015 and December 31, 2014, respectively, by reference to market interest rates for term debt of comparable companies.

16

PAR PACIFIC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
For the Interim Periods Ended September 30, 2015 and 2014


The fair value of all non-derivative financial instruments included in current assets, including cash and cash equivalents, restricted cash and trade accounts receivable, and current liabilities, including accounts payable, approximate their carrying value due to their short-term nature. 
Note 10—Commitments and Contingencies
In the ordinary course of business, we are a party to various lawsuits and other contingent matters. We establish accruals for specific legal matters when we determine that the likelihood of an unfavorable outcome is probable and the loss is reasonably estimable. It is possible that an unfavorable outcome of one or more of these lawsuits or other contingencies could have a material impact on our liquidity, results of operations or financial condition.

Mid Pac Earnout and Indemnity Dispute
 
Pursuant to a Stock Purchase Agreement dated August 3, 2011 and amended October 25, 2011 (the “SPA”), Mid Pac purchased all the issued and outstanding stock of Inter Island Petroleum, Inc. (“Inter Island”) from Brian J. and Wendy Barbata (collectively, the “Barbatas”).  The SPA provides for an earnout payment to be made to the Barbatas in an amount equal to four times the amount by which the average of Inter Island’s earnings before interest, taxes, depreciation and amortization during the relevant earnout period exceeds $3.5 million. The earnout payment is capped at a maximum of $4.5 million. Mid Pac contends that there are no amounts owed to the Barbatas for the earnout period. By letter dated May 29, 2014, the Barbatas disputed Mid Pac’s computation of the earnout, without explanation of the amount they claim to be owed or refutation of Mid Pac’s analysis. Mid Pac intends to vigorously oppose any such claims.
 
Any claims by the Barbatas may be offset by Mid Pac’s claims for indemnification under the SPA.  By letters dated December 13, 2013 and April 25, 2014, Mid Pac has asserted indemnification claims against the Barbatas exceeding $1 million with respect to environmental losses arising from certain terminals operated by Inter Island and its subsidiaries. The Barbatas have disputed such claims.

Tesoro Earnout Dispute
 
The cash consideration for our acquisition of HIE is subject to increase pursuant to an earnout provision. For 2014, we contend that there are no amounts owed to Tesoro. Tesoro has disputed our calculation of the 2014 earnout amount and contends that approximately $1 million is owed. Pursuant to the Membership Interest Purchase Agreement dated June 17, 2013, the dispute will be submitted to a mutually acceptable independent accounting firm to be engaged by the parties, as arbiter, to determine the amount owed, if any.

Environmental Matters
Our petroleum refining operations and third-party oil and gas exploration and production operations in which we have a working interest are subject to extensive and periodically changing federal, state and local environmental laws and regulations governing air emissions, wastewater discharges, and solid and hazardous waste management activities. Many of these laws and regulations are becoming increasingly stringent, and the cost of compliance can be expected to increase over time. Our policy is to accrue environmental and clean-up related costs of a non-capital nature when it is probable that a liability has been incurred and the amount can be reasonably estimated. Such estimates may be subject to revision in the future as regulations and other conditions change.

Periodically, we receive communications from various federal, state, and local governmental authorities asserting violations of environmental laws and/or regulations. These governmental entities may also propose or assess fines or require corrective actions for these asserted violations. We intend to respond in a timely manner to all such communications and to take appropriate corrective action. We do not anticipate that any such matters currently asserted will have a material impact on our financial condition, results of operations, or cash flows.
Regulation of Greenhouse Gases. The United States Environmental Protection Agency (“EPA”) has begun regulating greenhouse gases ("GHG") under the Clean Air Act Amendments of 1990 (“Clean Air Act”). New construction or material expansions that meet certain GHG emissions thresholds will likely require that, among other things, a GHG permit be issued in accordance with the Clean Air Act regulations, and we will be required in connection with such permitting to undertake a technology review to determine appropriate controls to be implemented with the project in order to reduce GHG emissions.
Furthermore, the EPA is currently developing refinery-specific GHG regulations and performance standards that are expected to impose GHG emission limits and/or technology requirements. These control requirements may affect a wide range of

17

PAR PACIFIC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
For the Interim Periods Ended September 30, 2015 and 2014


refinery operations. Any such controls could result in material increased compliance costs, additional operating restrictions for our business, and an increase in cost of the products we produce, which could have a material adverse effect on our financial position, results of operations, and liquidity. 
On September 29, 2015, the EPA announced a final rule updating standards that control toxic air emissions from petroleum refineries, addressing, among other things, flaring operations, fenceline air quality monitoring and additional emission reductions from storage tanks and delayed coking units. Affected existing sources will be required to comply with the new requirements no later than 2018, with certain refiners required to comply earlier depending on the relevant provision and refinery construction date. We do not anticipate that compliance with this rule will have a material impact on our financial condition, results of operations, or cash flows.
In 2007, the State of Hawaii passed Act 234, which required that GHG emissions be rolled back on a statewide basis to 1990 levels by the year 2020. Although delayed, the Hawaii Department of Health has issued regulations that would require each major facility to reduce CO2 emissions by 16% by 2020 relative to a calendar year 2010 baseline (the first year in which GHG emissions were reported to the EPA under 40 CFR Part 98). Those rules are pending final approval by the Government of Hawaii. The refinery’s capacity to reduce fuel use and GHG emissions is limited. However, the state’s pending regulation allows, and the refinery should be able to demonstrate, that additional reductions are not cost-effective or necessary in light of the state’s current GHG inventory and future year projections. The pending regulation allows for “partnering” with other facilities (principally power plants) which have already dramatically reduced greenhouse emissions or are on schedule to reduce CO2 emissions in order to comply with the state’s Renewable Portfolio Standards.
Fuel Standards. In 2007, the U.S. Congress passed the Energy Independence and Security Act (“EISA”) which, among other things, set a target fuel economy standard of 35 miles per gallon for the combined fleet of cars and light trucks in the United States by model year 2020, and contained a second Renewable Fuel Standard (the “RFS2”). In August 2012, the EPA and National Highway Traffic Safety Administration jointly adopted regulations that establish an average industry fuel economy of 54.5 miles per gallon by model year 2025. The RFS2 requires an increasing amount of renewable fuel usage, up to 36 billion gallons by 2022. In the near term, the RFS2 will be satisfied primarily with fuel ethanol blended into gasoline. The RFS2 may present production and logistics challenges for both the renewable fuels and petroleum refining and marketing industries in that we may have to enter into arrangements with other parties or purchase credits from the EPA to meet our obligations to use advanced biofuels, including biomass-based diesel and cellulosic biofuel, with potentially uncertain supplies of these new fuels. 
In October 2010, the EPA issued a partial waiver decision under the Clean Air Act to allow for an increase in the amount of ethanol permitted to be blended into gasoline from 10% (“E10”) to 15% (“E15”) for 2007 and newer light duty motor vehicles. In January 2011, the EPA issued a second waiver for the use of E15 in vehicles model years 2001-2006. There are numerous issues, including state and federal regulatory issues, which need to be addressed before E15 can be marketed on a large scale for use in traditional gasoline engines. Since April 2006, the State of Hawaii has required that a minimum of 9.2% ethanol be blended into at least 85% of the gasoline pool, but the regulation also limited the amount of ethanol to no more than 10%. Effective January 1, 2016, however, this state mandate will terminate. Nevertheless, qualified Renewable Identification Numbers (“RINS”) will be required to fulfill the federal mandate for renewable fuels.
In March 2014, the EPA published a final Tier 3 gasoline standard that lowers the allowable sulfur level in gasoline to 10 ppm and also lowers the allowable benzene, aromatics and olefins content of gasoline. The effective date for the new standard, January 1, 2017, gives refiners nationwide little time to engineer, permit and implement substantial modifications; however, approved small volume refineries have until January 1, 2020 to meet the standard. In September 2015, our refinery was granted small volume refinery status by the EPA. Along with credit and trading options, potential capital upgrades for the refinery are being evaluated.
There will be compliance costs and uncertainties regarding how we will comply with the various requirements contained in the EISA and other fuel-related regulations. We may experience a decrease in demand for refined petroleum products due to an increase in combined fleet mileage or due to refined petroleum products being replaced by renewable fuels. 
Environmental Agreement
On September 25, 2013 (“Closing Date”), Hawaii Pacific Energy (a wholly-owned subsidiary of Par created for purposes of the HIE acquisition), Tesoro Corporation ("Tesoro") and HIE entered into an Environmental Agreement (“Environmental Agreement”), which allocated responsibility for known and contingent environmental liabilities related to the acquisition of HIE, including the Consent Decree as described below. 
Consent Decree. Tesoro is currently negotiating a consent decree with the EPA and the United States Department of Justice concerning alleged violations of the federal Clean Air Act related to the ownership and operation of multiple facilities

18

PAR PACIFIC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
For the Interim Periods Ended September 30, 2015 and 2014


owned or formerly owned by Tesoro and its affiliates (“Consent Decree”), including the Hawaii refinery. It is anticipated that the Consent Decree will be finalized sometime during 2015 and will require certain capital improvements to our refinery to reduce emissions of air pollutants. 
We estimate the cost of compliance with the final decree could be $20 million to $25 million. However, Tesoro is responsible under the Environmental Agreement for reimbursing HIE for all reasonable third-party capital expenditures incurred for the construction, installation and commissioning of such capital projects and for the payment of any fines or penalties imposed on HIE arising from the Consent Decree to the extent related to acts or omission of Tesoro or HIE prior to the Closing Date. Tesoro’s obligation to reimburse HIE for such fines and penalties is not subject to a monetary limitation; however, the obligation relating to fines and penalties terminates on the third anniversary of the Closing Date. 
Tank Replacements. Tesoro replaced, at its expense, the existing underground storage tanks at six retail locations. The tank replacements were completed at five of the stations during 2014. The sixth location was completed during the first quarter of 2015.    
Indemnification. In addition to its obligation to reimburse us for capital expenditures incurred pursuant to the Consent Decree, Tesoro agreed to indemnify us for claims and losses arising out of related breaches of Tesoro’s representations, warranties and covenants in the Environmental Agreement, certain defined “corrective actions” relating to pre-existing environmental conditions, third-party claims arising under environmental laws for personal injury or property damage arising out of or relating to releases of hazardous materials that occurred prior to the Closing Date, any fine, penalty or other cost assessed by a governmental authority in connection with violations of environmental laws by HIE prior to the Closing Date, certain groundwater remediation work, the replacement of underground storage tanks located at certain retail sites, fines or penalties imposed on HIE by the Consent Decree related to acts or omissions of Tesoro prior to the Closing Date and to claims and losses related to the Pearl City Superfund Site. 
Tesoro’s indemnification obligations are subject to certain limitations as set forth in the Environmental Agreement. These limitations include a deductible of $1 million and a cap of $15 million for certain of Tesoro’s indemnification obligations related to certain pre-existing conditions as well as certain restrictions regarding the time limits for submitting notice and supporting documentation for remediation actions.
Recovery Trusts
We emerged from the reorganization of Delta Petroleum on August 31, 2012 ("Emergence Date") when the plan of reorganization ("Plan") was consummated. On the Emergence Date, we formed the Delta Petroleum General Recovery Trust (“General Trust”). The General Trust was formed to pursue certain litigation against third parties, including preference actions, fraudulent transfer and conveyance actions, rights of setoff and other claims, or causes of action under the U.S. Bankruptcy Code, and other claims and potential claims that the Debtors hold against third parties.
We are the beneficiary of the General Trust, subject to the terms of the trust agreement and the Plan. Since the Emergence Date, the General Trust has filed various claims and causes of action against third parties before the Bankruptcy Court, which actions are ongoing. Upon liquidation of the various claims and causes of action held by the General Trust, the proceeds, less certain administrative reserves and expenses, will be transferred to us. It is unknown at this time what proceeds, if any, we will realize from the General Trust’s litigation efforts. 
The Plan provides that certain allowed general unsecured claims be paid with shares of our common stock. As of December 31, 2014, 27 claims totaling approximately $26.5 million remain to be resolved by the trustee for the General Trust and we have reserved approximately $1.1 million representing the estimated value of claims remaining to be settled which are deemed probable and estimable at period end. No claims were settled during the nine months ended September 30, 2015.
Note 11—Stockholders' Equity
Incentive Plan 
For the three and nine months ended September 30, 2015, we recognized compensation costs of approximately $1.0 million and $4.0 million, respectively, in General and administrative expenses on our unaudited condensed consolidated statements of operations related to restricted stock awards under the Company's 2012 Long-term Incentive Plan ("LTIP"). For the three and nine months ended September 30, 2014, we recognized compensation costs of approximately $2.6 million and $4.2 million, respectively, in General and administrative expenses within our unaudited consolidated statements of operations related to restricted stock awards under the LTIP. During the three and nine months ended September 30, 2015, we granted 28 thousand shares and 214 thousand shares of restricted stock, respectively, with fair values of approximately $511 thousand and $4.3 million, respectively.

19

PAR PACIFIC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
For the Interim Periods Ended September 30, 2015 and 2014


During the three and nine months ended September 30, 2015, we granted approximately 15 thousand stock options and 167 thousand stock options with a weighted-average exercise price of $19.69 and $18.88 and a fair value of approximately $115 thousand and $1.3 million, respectively. As of September 30, 2015, there was approximately $9.6 million of total unrecognized compensation costs related to restricted stock and stock option awards, which are expected to be recognized on a straight-line basis over a weighted-average period of 2.98 years.
In the fourth quarter of 2015, our board of directors authorized an increase in the number of shares issuable under the LTIP, subject to shareholder approval. Additionally, we issued an aggregate 1.05 million options to our new President and Chief Executive Officer, our Chairman and our Vice Chairman of our board of directors, each with an exercise price of $21.44. These option grants are also subject to shareholder approval.
Note 12—Benefit Plans
Other Post-retirement Benefits - Medical
We sponsor a post-retirement medical plan to provide health care coverage continuation from the date of retirement to age 65 for qualifying employees. Employees hired before 2006 are generally eligible to participate in the plan after five years of service and reaching the age of 55 and will pay 20% of the monthly insurance premium. Employees hired after 2006 are generally eligible to participate in the plan after five years of service and reaching the age of 55 and are required to pay 100% of the monthly insurance premium; however, after 10 years of service, they are only required to pay 50% of the monthly insurance premium.
The components of the net periodic benefit cost related to our defined benefit plan consist of the following (in thousands):
 
Three Months Ended September 30, 2015
 
Nine Months Ended September 30, 2015
Service cost
$
93

 
$
278

Interest cost
53

 
159

Amortization of prior service cost
2

 
6

Net periodic benefit cost
$
148

 
$
443



20

PAR PACIFIC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
For the Interim Periods Ended September 30, 2015 and 2014


Note 13—Income (Loss) per Share
Basic income (loss) per share is computed by dividing net income (loss) by the sum of the weighted-average number of common shares outstanding and the weighted-average number of shares issuable under the common stock warrants, representing 586,650 shares and 692,562 shares during the three and nine months ended September 30, 2015 and 801,088 shares during the three and nine months September 30, 2014, respectively. The common stock warrants are included in the calculation of basic income (loss) per share because they are issuable for minimal consideration. Unvested restricted stock is excluded from the basic weighted-average common stock outstanding computation as these shares are not considered earned until vested. The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share amounts):
 
Three Months Ended September 30, 2015
 
Three Months Ended September 30, 2014
 
Nine Months Ended September 30, 2015
 
Nine Months Ended September 30, 2014
Net income (loss)
$
14,740

 
$
(39,456
)
 
$
26,925

 
$
(78,701
)
Undistributed income allocated to participating securities (2)
228

 

 
217

 

Net income (loss) attributable to common stockholders
$
14,512

 
$
(39,456
)
 
$
26,708

 
$
(78,701
)
 
 
 
 
 
 
 
 
Basic weighted-average common stock shares outstanding
37,390

 
33,137

 
37,304

 
31,311

Add dilutive effects of common stock equivalents (1)
10

 

 
27

 

Diluted weighted-average common stock shares outstanding
37,400

 
33,137

 
37,331

 
31,311

 
 
 
 
 
 
 
 
Basic income (loss) per common share
$
0.39

 
$
(1.19
)
 
$
0.72

 
$
(2.51
)
Diluted income (loss) per common share 
$
0.39

 
$
(1.19
)
 
$
0.72

 
$
(2.51
)
________________________________________________________ 
(1)
Entities with a net loss are prohibited from including potential common shares in the computation of diluted per share amounts; therefore, we have utilized the basic shares outstanding to calculate both basic and diluted loss per share for the three and nine months ended September 30, 2014.
(2)
Participating securities include restricted stock that has been issued but is not yet vested.
For the three and nine months ended September 30, 2015, our weighted-average potentially dilutive securities excluded from the calculation of diluted shares outstanding consisted of 587 thousand and 303 thousand shares of unvested restricted stock and 10 thousand and 27 thousand stock options, respectively. For the three and nine months ended September 30, 2014, there were 609 thousand and 523 thousand potentially dilutive securities excluded from the calculation of diluted shares outstanding.
Note 14—Income Taxes
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future results of operations, and tax planning strategies in making this assessment. Based upon the level of historical taxable income, significant book losses during prior periods, and projections for future results of operations over the periods in which the deferred tax assets are deductible, among other factors, management continues to conclude that we did not meet the “more likely than not” requirement in order to recognize deferred tax assets and a valuation allowance has been recorded for the full amount of our net deferred tax assets at September 30, 2015. During the nine months ended September 30, 2015, we recorded a benefit for the release of $18.3 million of our valuation allowance as we expect to be able to utilize a portion of our net operating loss ("NOL") carryforwards to offset future taxable income of Mid Pac.
During the three and nine month periods ended September 30, 2015 and 2014, no adjustments were recognized for uncertain tax positions.

21

PAR PACIFIC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
For the Interim Periods Ended September 30, 2015 and 2014


Our net taxable income must be apportioned to various states based upon the income tax laws of the states in which we derive our revenue. Our NOL carryforwards will not always be available to offset taxable income apportioned to the various states. The states from which some of our revenues are derived are not the same states in which our NOLs were incurred; therefore we expect to incur state tax liabilities on the net income of our commodity marketing and logistics segment, our refining and distribution segment and our retail segment. Excluding the impact of releasing the valuation allowance, state tax expense was approximately $174 thousand and $217 thousand for the three and nine months ended September 30, 2015, respectively. State income tax benefit of approximately $150 thousand and $113 thousand was recognized for the three and nine months ended September 30, 2014, respectively.
We will continue to assess the realizability of our deferred tax assets based on consideration of actual and projected operating results and tax planning strategies. Should actual operating results continue to improve, the amount of the deferred tax asset considered more likely than not to be realizable could be increased.

22

PAR PACIFIC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
For the Interim Periods Ended September 30, 2015 and 2014


Note 15—Segment Information
During the first quarter of 2015, we changed our reportable segments to separate our retail operations from our refining operations due to a change in senior leadership, organizational structure, the acquisition of Mid Pac and to reflect how we currently make financial decisions and allocate resources. Beginning with the second quarter of 2015, the results of operations of Mid Pac are included in our Refining and Distribution and Retail segments. We previously reported results for the following three business segments: (i) Refining, Distribution and Marketing, (ii) Natural Gas and Oil Production and (iii) Commodity Marketing and Logistics. Effective in the first quarter of 2015, our reportable segments are: (i) Refining and Distribution, (ii) Retail, (iii) Natural Gas and Oil Production, and (iv) Commodity Marketing and Logistics. Corporate and Other includes administrative and other costs. During the fourth quarter of 2014, we changed the methodology used to allocate General and Administrative Expenses to our operating segments due to changes in our organizational structure. We have recast the segment information for the three and nine months ended September 30, 2014 below to conform to the current period presentation.

Summarized financial information concerning reportable segments consists of the following (in thousands):
Three months ended September 30, 2015
 
Refining and Distribution
 
Retail
 
Natural Gas and Oil Production
 
Commodity Marketing and Logistics
 
Corporate and Other
 
Total
Segment revenues
 
$
458,238

 
$
81,434

 
$

 
$
10,904

 
$

 
$
550,576

Intersegment elimination
 
(55,073
)
 

 

 

 

 
(55,073
)
Revenues
 
403,165

 
81,434

 

 
10,904

 

 
495,503

Cost of revenues
 
330,702

 
60,655

 

 
13,796

 

 
405,153

Operating expense, excluding DD&A
 
28,568

 
9,479

 

 

 

 
38,047

Lease operating expenses
 

 

 
1,575

 

 

 
1,575

Depreciation, depletion, and amortization
 
2,565

 
1,492

 
10

 
231

 
298

 
4,596

Impairment expense
 

 

 

 
9,639

 

 
9,639

General and administrative expense
 
4,544

 
953

 

 
701

 
3,741

 
9,939

Acquisition and integration costs
 
186

 

 

 

 
94

 
280

Operating income (loss)
 
36,600

 
8,855

 
(1,585
)
 
(13,463
)
 
(4,133
)
 
26,274

Interest expense and financing costs, net
 
 
 
 
 
 
 
 
 
 
 
(4,387
)
Other expense, net
 
 
 
 
 
 
 
 
 
 
 
(45
)
Change in value of common stock warrants
 
 
 
 
 
 
 
 
 
 
 
(1,023
)
Change in value of contingent consideration
 
 
 
 
 
 
 
 
 
 
 
(4,255
)
Equity loss from Laramie Energy Company
 
 
 
 
 
 
 
 
 
 
 
(1,355
)
Income before income taxes
 
 
 
 
 
 
 
 
 
 
 
15,209

Income tax expense
 
 
 
 
 
 
 
 
 
 
 
(469
)
Net income
 
 
 
 
 
 
 
 
 
 
 
$
14,740

 
 
 
 
 
 
 
 
 
 
 
 
 
Capital expenditures
 
$
3,705

 
$
213

 
$

 
$
10

 
$
2,056

 
$
5,984


23

PAR PACIFIC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
For the Interim Periods Ended September 30, 2015 and 2014


Three months ended September 30, 2014
 
Refining and Distribution
 
Retail
 
Natural Gas and Oil Production
 
Commodity Marketing and Logistics
 
Corporate and Other
 
Total
Segment revenues
 
$
774,367

 
$
62,929

 
$
1,667

 
$
53,406

 
$

 
$
892,369

Intersegment elimination
 
(38,083
)
 

 



 

 
(38,083
)
Revenues
 
736,284

 
62,929

 
1,667

 
53,406

 

 
854,286

Cost of revenues
 
725,876

 
51,945

 

 
52,617

 

 
830,438

Operating expense, excluding DD&A
 
35,884

 
6,845

 

 

 

 
42,729

Lease operating expense
 

 

 
1,204

 

 

 
1,204

Depreciation, depletion, and amortization
 
2,125

 
640

 
571

 
499

 
83

 
3,918

Loss on sale of assets, net
 

 

 
624

 

 

 
624

General and administrative expense
 
2,379

 
1,065

 
320

 
1,171

 
3,180

 
8,115

Acquisition and integration costs
 
98

 

 

 

 
3,758

 
3,856

Operating (loss) income
 
(30,078
)
 
2,434

 
(1,052
)
 
(881
)
 
(7,021
)
 
(36,598
)
Interest expense and financing costs, net
 
 
 
 
 
 
 
 
 
 
 
(7,076
)
Other expense, net
 
 
 
 
 
 
 
 
 
 
 
(164
)
Change in value of common stock warrants
 
 
 
 
 
 
 
 
 
 
 
2,401

Change in value of contingent consideration
 
 
 
 
 
 
 
 
 
 
 
996

Equity earnings from Laramie Energy Company
 
 
 
 
 
 
 
 
 
 
 
835

Loss before income taxes
 
 
 
 
 
 
 
 
 
 
 
(39,606
)
Income tax benefit
 
 
 
 
 
 
 
 
 
 
 
150

Net loss
 
 
 
 
 
 
 
 
 
 
 
$
(39,456
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Capital expenditures
 
$
3,816

 
$
49

 
$
4

 
$

 
$
178

 
$
4,047



24

PAR PACIFIC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
For the Interim Periods Ended September 30, 2015 and 2014


Nine months ended September 30, 2015
 
Refining and Distribution
 
Retail
 
Natural Gas and Oil Production
 
Commodity Marketing and Logistics
 
Corporate and Other
 
Total
Segment revenues
 
$
1,491,309

 
$
209,091

 
$
2,185

 
$
76,983

 
$

 
$
1,779,568

Intersegment elimination
 
(138,585
)
 

 

 
(18,110
)
 

 
(156,695
)
Revenues
 
1,352,724

 
209,091

 
2,185

 
58,873

 

 
1,622,873

Cost of revenues
 
1,169,287

 
158,383

 

 
60,020

 

 
1,387,690

Operating expense, excluding DD&A
 
77,637

 
25,161

 

 

 

 
102,798

Lease operating expenses
 

 

 
4,614

 

 

 
4,614

Depreciation, depletion, and amortization
 
7,723

 
3,675

 
33

 
689

 
732

 
12,852

Impairment expense
 

 

 

 
9,639

 

 
9,639

General and administrative expense
 
13,254

 
2,738

 
400

 
4,064

 
11,422

 
31,878

Acquisition and integration costs
 
186

 

 

 

 
1,625

 
1,811

Operating income (loss)
 
84,637

 
19,134

 
(2,862
)
 
(15,539
)
 
(13,779
)
 
71,591

Interest expense and financing costs, net
 
 
 
 
 
 
 
 
 
 
 
(15,769
)
Loss on termination of financing agreements
 
 
 
 
 
 
 
 
 
 
 
(19,229
)
Other expense, net
 
 
 
 
 
 
 
 
 
 
 
(199
)
Change in value of common stock warrants
 
 
 
 
 
 
 
 
 
 
 
(2,732
)
Change in value of contingent consideration
 
 
 
 
 
 
 
 
 
 
 
(18,679
)
Equity loss from Laramie Energy Company
 
 
 
 
 
 
 
 
 
 
 
(6,131
)
Income before income taxes
 
 
 
 
 
 
 
 
 
 
 
8,852

Income tax benefit
 
 
 
 
 
 
 
 
 
 
 
18,073

Net income
 
 
 
 
 
 
 
 
 
 
 
$
26,925

 
 
 
 
 
 
 
 
 
 
 
 
 
Capital expenditures
 
$
12,291

 
$
715

 
$

 
$
10

 
$
2,841

 
$
15,857


25

PAR PACIFIC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
For the Interim Periods Ended September 30, 2015 and 2014


Nine months ended September 30, 2014
 
Refining and Distribution
 
Retail
 
Natural Gas and Oil Production
 
Commodity Marketing and Logistics
 
Corporate and Other
 
Total
Segment revenues
 
$
2,227,193

 
$
174,179

 
$
5,083

 
$
102,384

 
$

 
$
2,508,839

Intersegment elimination
 
(109,170
)
 

 

 

 

 
(109,170
)
Revenues
 
2,118,023

 
174,179

 
5,083

 
102,384

 

 
2,399,669

Cost of revenues
 
2,078,038

 
147,351

 

 
97,399

 

 
2,322,788

Operating expense, excluding DD&A
 
91,013

 
18,884

 

 

 

 
109,897

Lease operating expense
 

 

 
3,963

 

 

 
3,963

Depreciation, depletion, and amortization
 
5,746

 
1,751

 
1,096

 
1,513

 
163

 
10,269

Loss on sale of assets, net
 

 

 
624

 

 

 
624

General and administrative expense
 
3,912

 
1,716

 
564

 
3,084

 
9,506

 
18,782

Acquisition and integration costs
 
4,126

 

 

 

 
5,000

 
9,126

Operating (loss) income
 
(64,812
)
 
4,477

 
(1,164
)
 
388

 
(14,669
)
 
(75,780
)
Interest expense and financing costs, net
 
 
 
 
 
 
 
 
 
 
 
(13,980
)
Other expense, net
 
 
 
 
 
 
 
 
 
 
 
(304
)
Change in value of common stock warrants
 
 
 
 
 
 
 
 
 
 
 
4,118

Change in value of contingent consideration
 
 
 
 
 
 
 
 
 
 
 
5,758

Equity loss from Laramie Energy Company
 
 
 
 
 
 
 
 
 
 
 
1,374

Loss before income taxes
 
 
 
 
 
 
 
 
 
 
 
(78,814
)
Income tax expense
 
 
 
 
 
 
 
 
 
 
 
113

Net loss
 
 
 
 
 
 
 
 
 
 
 
$
(78,701
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Capital expenditures
 
$
8,577

 
$
149

 
$
312

 
$
300

 
$
618

 
$
9,956


Note 16—Related Party Transactions
Term Loan
Certain of our stockholders, or affiliates of our stockholders, are the lenders under our Term Loan. In previous years, they received common stock warrants exercisable for shares of common stock in connection with the origination of the Term Loan. During the three months ended September 30, 2015, one of our stockholders and its affiliates exercised 404,013 warrants with a fair value of $7.7 million.
Equity Group Investments ("EGI") and Whitebox - Service Agreements
On September 17, 2013, we entered into letter agreements (“Services Agreements”) with Equity Group Investments (“EGI”), an affiliate of Zell Credit Opportunities Fund, LP ("ZCOF"), and Whitebox Advisors, LLC ("Whitebox"), each of which owns 10% or more of our common stock directly or through affiliates. Pursuant to the Services Agreements, EGI and Whitebox agreed to provide us with ongoing strategic, advisory and consulting services that may include (i) advice on financing structures and our relationship with lenders and bankers, (ii) advice regarding public and private offerings of debt and equity securities, (iii) advice regarding asset dispositions, acquisitions or other asset management strategies, (iv) advice regarding potential business acquisitions, dispositions or combinations involving us or our affiliates, or (v) such other advice directly related or ancillary to the above strategic, advisory and consulting services as may be reasonably requested by us. 
EGI and Whitebox will not receive a fee for the provision of the strategic, advisory or consulting services set forth in the Services Agreements, but may be periodically reimbursed by us, upon request, for (i) travel and out of pocket expenses, provided that in the event that such expenses exceed $50 thousand in the aggregate with respect to any single proposed matter, EGI or Whitebox, as applicable, will obtain our consent prior to incurring additional costs, and (ii) provided that we provide prior consent

26

PAR PACIFIC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
For the Interim Periods Ended September 30, 2015 and 2014


to their engagement with respect to any particular proposed matter, all reasonable fees and disbursements of counsel, accountants and other professionals incurred in connection with EGI’s or Whitebox’s, as applicable, services under the Services Agreements. In consideration of the services provided by EGI and Whitebox under the Services Agreements, we agreed to indemnify each of them for certain losses incurred by them relating to or arising out of the Services Agreements or the services provided thereunder.
The Services Agreements have a term of one year and will be automatically extended for successive one-year periods unless terminated by either party at least 60 days prior to any extension date. There were no significant costs incurred related to these agreements during the three and nine months ended September 30, 2015 and 2014.
In October 2015, management terminated its Services Agreement with Whitebox.
Note 17—Subsequent Events

In October 2015, management notified its employees that it plans to terminate the defined contribution pension plan and the post-retirement medical plan on December 31, 2015.  Pursuant to the terms of the 2015 Collective Bargaining Agreement between HIE and the United Steelworkers Union, Local 12-591, the union has the right to request that HIE participate in mediation regarding this decision. As of September 30, 2015, we have approximately $6 million accrued related to the post-retirement medical plan.




27


Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview    
We own interests in energy and infrastructure businesses and currently operate in the following four business segments:
refining and distribution;
retail;
natural gas and oil production; and
commodity marketing and logistics.
Effective in the first quarter of 2015, we changed our reportable segments to separate our retail operations from our prior refining, distribution and marketing segment due to a change in senior leadership, organizational structure, the acquisition of Mid Pac and to reflect how we currently make financial decisions and allocate resources. We previously reported results for the following three business segments: (i) Refining, Distribution and Marketing, (ii) Natural Gas and Oil Production and (iii) Commodity Marketing and Logistics. We have recast the segment information for the three and nine months ended September 30, 2014 to conform to the current period presentation.
Our refining and distribution segment consists of a refinery in Kapolei, Hawaii, refined products terminals, pipelines, a single-point mooring and trucking operations which produce and distribute refined products throughout the State of Hawaii and for export globally. Our retail segment consists of retail outlets which sell gasoline, diesel, and retail merchandise throughout Hawaii. Our natural gas and oil production segment consists primarily of our 32.4% ownership of Laramie, a joint venture entity focused on producing natural gas and natural gas liquids in Garfield and Mesa Counties, Colorado. Our commodity marketing and logistics segment focuses on sourcing, marketing, transporting, and distributing crude oil and refined products primarily within North America.
Par was created through the successful reorganization of Delta Petroleum Corporation in August 2012. The reorganization converted unsecured debt to equity and allowed us to preserve significant tax attributes.
Recent Events    
Inventory Financing Agreements
On June 1, 2015, we entered into several agreements with J. Aron & Company ("J. Aron") to support the operations of our refinery (the "Supply and Offtake Agreements"). The Supply and Offtake Agreements have a term of three years with two one-year extension options upon mutual agreement of the parties. The Supply and Offtake Agreements also include a deferred payment arrangement, whereby we can defer payments owed under the agreements up to the lesser of $125 million or 85% of the eligible accounts receivable and inventory. Please read Note 7—Inventory Financing Agreements for more information.
Upon execution of the Supply and Offtake Agreements, HIE terminated its Supply and Exchange Agreements with Barclays on June 1, 2015, subject to certain obligations to reimburse Barclays for third-party claims, and the HIE ABL Facility. During the nine months ended September 30, 2015, we recorded a loss of $19.2 million related to the termination of these financing agreements, which is included in Loss on termination of financing agreements on our unaudited condensed consolidated statements of operations. Please read Note 7—Inventory Financing Agreements for more information.

Mid Pac Acquisition and Mid Pac Credit Agreement
On June 2, 2014, we entered into an agreement and plan of merger with Koko’oha to indirectly acquire 100% of the outstanding membership interests of Mid Pac. On April 1, 2015, we completed the acquisition of Mid Pac for cash consideration of $74.4 million. In connection with the acquisition, Mid Pac's pre-existing debt was fully repaid on the closing date for $45.3 million. The acquisition and debt repayment were funded with cash on hand and $55 million of borrowings under the Mid Pac Credit Agreement. Beginning with the second quarter of 2015, the results of operations of Mid Pac are included in our Refining and Distribution and Retail segments. Please read Note 4—Acquisition for more information.
On April 1, 2015, Koko’oha and Mid Pac entered into the Mid Pac Credit Agreement in the form of a senior secured term loan in the amount of $50 million (“Mid Pac Term Loan”) and a senior secured revolving line of credit (“Mid Pac Revolving Credit Facility”) in the aggregate principal amount of up to $5 million. The lenders of the Mid Pac Credit Agreement advanced the full amount of the Mid Pac Term Loan and the Mid Pac Revolving Credit Facility at the closing. The proceeds of the loans were used to repay the existing debt of Koko’oha and Mid Pac, and pay a portion of the acquisition consideration and for general corporate purposes. Please read Note 8—Debt for more information.

28


Results of Operations
Overview
During the three months ended September 30, 2015, we delivered strong operational and financial results driven by solid execution and a falling crude price environment. Crack spreads during this period continue to be favorable to the three year average, with improvements in both finished product spreads and crude oil costs. Continued feedstock flexibility with strong refinery performance produced optimized product yields and a sales profile which resulted in higher margins. The successful integration of Mid Pac is reflected by the strong performance of our retail segment and we continue our efforts to optimize our operations.
Consolidated Summary of Financial Information
 
 
Three Months Ended 
 September 30, 2015
 
Three Months Ended 
 September 30, 2014
 
Increase (Decrease)
 
% Change
Gross Margin
 
 
 
 
 
 
 
Refining and distribution
$
72,463

 
$
10,408

 
$
62,055

 
596
 %
Retail
20,779

 
10,984

 
9,795

 
89
 %
Commodity marketing and logistics
(2,892
)
 
789

 
(3,681
)
 
(467
)%
Natural gas and oil

 
1,667

 
(1,667
)
 
(100
)%
Total gross margin
90,350

 
23,848

 
 
 
 
Operating expense, excluding depreciation, depletion, and amortization expense
39,622

 
43,933

 
(4,311
)
 
(10
)%
Depreciation, depletion, and amortization
4,596

 
3,918

 
678

 
17
 %
Impairment expense
9,639

 

 
9,639

 
100
 %
Loss on sale of assets, net

 
624

 
(624
)
 
(100
)%
General and administrative expense
9,939

 
8,115

 
1,824

 
22
 %
Acquisition and integration costs
280

 
3,856

 
(3,576
)
 
(93
)%
Total operating expenses
64,076

 
60,446

 
 
 


Operating income (loss)
26,274

 
(36,598
)
 
 
 


Other income (expense)
 
 
 
 
 
 


Interest expense and financing costs, net
(4,387
)
 
(7,076
)
 
2,689

 
(38
)%
Other income (expense), net
(45
)
 
(164
)
 
119

 
(73
)%
Change in value of common stock warrants
(1,023
)
 
2,401

 
(3,424
)
 
(143
)%
Change in value of contingent consideration
(4,255
)
 
996

 
(5,251
)
 
(527
)%
Equity earnings (losses) from Laramie Energy Company
(1,355
)
 
835

 
(2,190
)
 
(262
)%
Total other expense, net
(11,065
)
 
(3,008
)
 
 
 


Income (loss) before income taxes
15,209

 
(39,606
)
 
 
 


Income tax benefit (expense)
(469
)
 
150

 
(619
)
 
(413
)%
Net income (loss)
$
14,740

 
$
(39,456
)
 
 
 



29


 
Nine Months Ended September 30, 2015
 
Nine Months Ended September 30, 2014
 
Increase (Decrease)
 
% Change (1)
Gross Margin
 
 
 
 
 
 
 
Refining and distribution
$
183,437

 
$
39,985

 
$
143,452

 
359
 %
Retail
50,708

 
26,828

 
23,880

 
89
 %
Commodity marketing and logistics
(1,147
)
 
4,985

 
(6,132
)
 
(123
)%
Natural gas and oil
2,185

 
5,083

 
(2,898
)
 
(57
)%
Total gross margin
235,183

 
76,881

 
 
 
 
Operating expense, excluding depreciation, depletion, and amortization expense
107,412

 
113,860

 
(6,448
)
 
(6
)%
Depreciation, depletion, and amortization
12,852

 
10,269

 
2,583

 
25
 %
Impairment expense
9,639

 

 
9,639

 
100
 %
Loss on sale of assets, net

 
624

 
(624
)
 
(100
)%
General and administrative expense
31,878

 
18,782

 
13,096

 
70
 %
Acquisition and integration costs
1,811

 
9,126

 
(7,315
)
 
(80
)%
Total operating expenses
163,592

 
152,661

 
 
 
 
Operating income (loss)
71,591

 
(75,780
)
 
 
 
 
Other income (expense)
 
 
 
 
 
 
 
Interest expense and financing costs, net
(15,769
)
 
(13,980
)
 
(1,789
)
 
13
 %
Loss on termination of financing agreements
(19,229
)
 

 
(19,229
)
 
100
 %
Other income (expense), net
(199
)
 
(304
)
 
105

 
(35
)%
Change in value of common stock warrants
(2,732
)
 
4,118

 
(6,850
)
 
(166
)%
Change in value of contingent consideration
(18,679
)
 
5,758

 
(24,437
)
 
(424
)%
Equity earnings (losses) from Laramie Energy Company
(6,131
)
 
1,374

 
(7,505
)
 
(546
)%
Total other expense, net
(62,739
)
 
(3,034
)
 
 
 
 
Income (loss) before income taxes
8,852

 
(78,814
)
 
 
 
 
Income tax benefit
18,073

 
113

 
17,960

 
15,894
 %
Net income (loss)
$
26,925

 
$
(78,701
)
 
 
 
 
(1) NM - Not meaningful



30


Below is a summary of key operating statistics for the three and nine months ended September 30, 2015 and 2014:

    
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
Refining and Distribution Segment
 
 
 
 
 
 
 
Total Crude Oil Throughput (Mbpd)
73.5

 
68.5

 
76.3

 
68.7

Source of Crude Oil:
 
 
 
 
 
 
 
North America
31.9
%
 
28.2
%
 
46.7
%
 
47.9
%
Latin America
5.3
%
 
18.0
%
 
9.8
%
 
23.9
%
Africa
2.2
%
 
%
 
10.3
%
 
0.1
%
Asia
60.6
%
 
%
 
30.4
%
 
1.7
%
Middle East
%
 
53.8
%
 
2.8
%
 
26.4
%
Total
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
 
 
 
 
 
 
 
Yield (% of total throughput)


 
 
 
 
 
 
     Gasoline and gasoline blendstocks
25.3
%
 
24.2
%
 
25.9
%
 
24.4
%
     Distillate
45.4
%
 
42.5
%
 
44.3
%
 
39.4
%
     Fuel oils
21.1
%
 
25.4
%
 
22.1
%
 
30.5
%
     Other products
4.4
%
 
4.8
%
 
4.6
%
 
3.3
%
          Total yield
96.2
%
 
96.9
%
 
96.9
%
 
97.6
%
 
 
 
 
 
 
 
 
Refined product sales volume (Mbpd)
 
 
 
 
 
 
 
     On-island sales volume
57.2

 
56.5

 
59.8

 
53.1

     Exports sale volume
17.0

 
15.8

 
17.1

 
16.4

          Total refined product sales volume
74.2

 
72.3

 
76.9

 
69.5

 
 
 
 
 
 
 
 
4-1-2-1 Mid Pacific Crack Spread (1)
$7.93
 
$7.46
 
$8.93
 
$6.80
Mid Pacific Crude Oil Differential (2)
$(0.56)
 
$(0.85)
 
$(1.43)
 
$(0.63)
Gross refining margin per bbl ($/throughput bbl) (3)
$10.72
 
$1.65
 
$8.80
 
$2.13
Production costs before DD&A expense per barrel ($/throughput bbl) (4)
$4.18
 
$5.47
 
$3.80
 
$4.69
Net operating margin per bbl ($/throughput bbl) (5)
$6.54
 
$(3.82)
 
$5.00
 
$(2.56)
 
 
 
 
 
 
 
 
Retail Segment
 
 
 
 
 
 
 
Retail sales volumes (thousands of gallons)
23,247

 
13,087

 
58,034

 
36,687

________________________________________________________ 
(1)
The profitability of our Hawaii business is heavily influenced by crack spreads in both the Singapore and West Coast markets. These markets reflect the closest, liquid market alternatives to source refined products for Hawaii. We believe the Singapore 4-1-2-1 crack spread (or four barrels of Brent crude converted into one barrel of gasoline, two barrels of distillate (gasoil and jet fuel), and one barrel of fuel oil) best reflects a market indicator for our operations. However, a portion of our sales reference the West Coast market. Calculated using a ratio of 80% Singapore and 20% San Francisco indexes.
(2)
Weighted average differentials, excluding shipping costs, of a blend of crudes with an API of 31.98 and sulphur wt% of 0.65% that is indicative of our typical crude oil mix quality compared to Brent crude.
(3)
Management uses gross refining margin per barrel to evaluate performance and compare profitability to other companies in the industry. There are a variety of ways to calculate gross refining margin per barrel; different companies within the industry may calculate it in different ways. We calculate gross refining margin per barrel by dividing gross refining margin

31


(revenues less feedstocks, purchased refined products, refinery fuel burn, and transportation and distribution costs) by total refining throughput. 
(4)
Management uses production costs before DD&A expense per barrel to evaluate performance and compare efficiency to other companies in the industry. There are a variety of ways to calculate production cost before DD&A expense per barrel; different companies within the industry calculate it in different ways. We calculate production costs before DD&A expense per barrel by dividing all direct production costs by total refining throughput.
(5)
Calculated as gross refining margin less production costs before DD&A expense.
Non-GAAP Performance Measures
Management uses certain non-GAAP financial measures to evaluate our operating performance. These measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP, and our calculations thereof may not be comparable to similarly entitled measures reported by other companies.
Gross Margin
Gross margin is defined as revenues less cost of revenues. We believe gross margin is an important measure of operating performance and provides useful information to investors because it eliminates the impact of volatile market prices on revenues and demonstrates the earnings potential of the business before other fixed and variable costs. In order to assess our operating performance, we compare our gross margin to industry gross margin benchmarks.
Gross margin should not be considered an alternative to operating income (loss), net cash flows from operating activities, or any other measure of financial performance or liquidity presented in accordance with GAAP. Gross margin presented by other companies may not be comparable to our presentation since each company may define this term differently.

32


The following table presents a reconciliation of gross margin to the most directly comparable GAAP financial measure, operating income (loss), on a historical basis for the periods indicated (in thousands):
 
Three Months Ended September 30,
 
2015
 
2014
Gross Margin
 
 
 
Refining and distribution
$
72,463

 
$
10,408

Retail
20,779

 
10,984

Commodity marketing and logistics
(2,892
)
 
789

Natural gas and oil

 
1,667

Total gross margin
90,350

 
23,848

Operating expense, excluding depreciation, depletion, and amortization expense
38,047

 
42,729

Lease operating expense
1,575

 
1,204

Depreciation, depletion, and amortization
4,596

 
3,918

Impairment expense
9,639

 

Loss on sale of assets, net

 
624

General and administrative expense
9,939

 
8,115

Acquisition and integration costs
280

 
3,856

Total operating expenses
64,076

 
60,446

Operating income (loss)
$
26,274

 
$
(36,598
)
 
Nine Months Ended September 30,
 
2015
 
2014
Gross Margin
 
 
 
Refining and distribution
$
183,437

 
$
39,985

Retail
50,708

 
26,828

Commodity marketing and logistics
(1,147
)
 
4,985

Natural gas and oil
2,185

 
5,083

Total gross margin
235,183

 
76,881

Operating expense, excluding depreciation, depletion, and amortization expense
102,798

 
109,897

Lease operating expense
4,614

 
3,963

Depreciation, depletion, and amortization
12,852

 
10,269

Impairment expense
9,639

 

Loss on sale of assets, net

 
624

General and administrative expense
31,878

 
18,782

Acquisition and integration costs
1,811

 
9,126

Total operating expenses
163,592

 
152,661

Operating income (loss)
$
71,591

 
$
(75,780
)
Adjusted Net Income (Loss) and Adjusted EBITDA
Adjusted Net Income (Loss) is defined as net income (loss) excluding changes in the value of contingent consideration and common stock warrants, acquisition and integration expenses, lower of cost or market adjustments, our inventory valuation adjustment, unrealized (gains) losses on derivatives and gains (losses) on sales of assets. Adjusted EBITDA is Adjusted Net Income excluding interest, taxes, depreciation and amortization, and equity (earnings) losses from Laramie Energy Company. We believe Adjusted Net Income (Loss) and Adjusted EBITDA are useful supplemental financial measures to assess:

33


The financial performance of our assets without regard to financing methods, capital structure or historical cost basis;
The ability of our assets to generate cash to pay interest on our indebtedness; and
Our operating performance and return on invested capital as compared to other companies without regard to financing methods and capital structure.
Adjusted Net Income (Loss) and Adjusted EBITDA should not be considered in isolation or as a substitute for operating income (loss), net income (loss), cash flows provided by operating, investing and financing activities, or other income or cash flow statement data prepared in accordance with GAAP.
The following table presents a reconciliation of Adjusted Net Income (Loss) and Adjusted EBITDA to the most directly comparable GAAP financial measure, net income (loss), on a historical basis for the periods indicated (in thousands):
 
Three Months Ended September 30,
 
2015
 
2014
Adjusted EBITDA
$
34,342

 
$
(28,364
)
Income tax benefit (expense)
(174
)
 
150

Equity earnings (losses) from Laramie Energy Company
(1,355
)
 
835

Interest expense and financing costs, net
(4,387
)
 
(7,076
)
Depreciation, depletion and amortization
(4,596
)
 
(3,918
)
Adjusted Net Income (Loss)
23,830

 
(38,373
)
Impairment expense
(9,639
)
 

Change in value of contingent consideration
(4,255
)
 
996

Change in value of common stock warrants
(1,023
)
 
2,401

Release of valuation allowance due to Mid Pac Acquisition
(295
)
 

Acquisition and integration expense
(280
)
 
(3,856
)
Lower of cost or market adjustment
(2,628
)
 

Unrealized loss on derivatives
(4,360
)
 

Inventory valuation adjustment
13,390

 

Loss on sale of assets, net

 
(624
)
Net income (loss)
$
14,740

 
$
(39,456
)

34


 
Nine Months Ended September 30,
 
2015
 
2014
Adjusted EBITDA
$
87,583

 
$
(56,065
)
Income tax benefit (expense)
(217
)
 
113

Equity earnings (losses) from Laramie Energy Company
(6,131
)
 
1,374

Interest expense and financing costs, net
(15,769
)
 
(13,980
)
Depreciation, depletion and amortization
(12,852
)
 
(10,269
)
Adjusted Net Income (Loss)
52,614

 
(78,827
)
Impairment expense
(9,639
)
 

Change in value of contingent consideration
(18,679
)
 
5,758

Change in value of common stock warrants
(2,732
)
 
4,118

Loss on termination of financing agreements
(19,229
)
 

Release of valuation allowance due to Mid Pac Acquisition
18,290

 

Acquisition and integration expense
(1,811
)
 
(9,126
)
Lower of cost or market adjustment
(493
)
 

Unrealized loss on derivatives
(4,786
)
 

Inventory valuation adjustment
13,390

 

Loss on sale of assets, net

 
(624
)
Net income (loss)
$
26,925

 
$
(78,701
)

Discussion of Results of Operations
Three months ended September 30, 2015 compared to the three months ended September 30, 2014
Refining and Distribution Gross Margin. For the three months ended September 30, 2015, our refining and distribution gross margin was approximately $72.5 million, an increase of $62.1 million compared to $10.4 million for the three months ended September 30, 2014. The increase is primarily due to improved crack spreads and lower production costs resulting from lower crude oil prices. In addition, the third quarter of 2015 had higher sales volume and a higher percentage of sales of higher margin products, particularly jet fuel and gasoline, compared to the third quarter of 2014.
Retail Gross Margin. For the three months ended September 30, 2015, our retail gross margin was approximately $20.8 million,an increase of $9.8 million compared to $11.0 million for the three months ended September 30, 2014. The increase is primarily due to the acquisition of Mid Pac on April 1, 2015.
Commodity, Marketing and Logistics Gross Margin. For the three months ended September 30, 2015, our commodity, marketing, and logistics gross margin was a loss of $2.9 million, a decrease of $3.7 million when compared to $0.8 million for the three months ended September 30, 2014. The decrease is primarily lower margins available for moving crude oil from Canada to the U. S. gulf coast due to market conditions.
Natural Gas and Oil Gross Margin. For the three months ended September 30, 2015, our natural gas and oil gross margin was nil, a decrease of $1.7 million compared to $1.7 million for the three months ended September 30, 2014. The decrease is primarily due to shutting in operations at the Point Arguello Unit in offshore California during the third quarter of 2015.
Operating Expense. For the three months ended September 30, 2015, operating expense was approximately $39.6 million, a decrease of $4.3 million when compared to $43.9 million for the three months ended September 30, 2014. The decrease is primarily due to lower energy costs resulting from lower crude oil prices.
Depreciation, Depletion, and Amortization. For the three months ended September 30, 2015, DD&A expense was approximately $4.6 million, an increase of $0.7 million compared to $3.9 million for the three months ended September 30, 2014. The increase is primarily due to depreciation, depletion, and amortization of assets acquired as part of the Mid Pac acquisition on April 1, 2015.
    

35


Impairment expense. For the three months ended September 30, 2015, we recorded impairment charges of $7.0 million and $2.6 million related to goodwill and intangible assets in our Commodity Marketing and Logistics reporting unit, respectively. There was no impairment expense during the three months ended September 30, 2014.
Loss on sale of assets, net. For the three months ended September 30, 2014, loss on sale of assets, net was approximately $624 thousand. The 2014 loss was due to selling oilfield equipment within our natural gas and oil operations segment.
General and Administrative Expense. For the three months ended September 30, 2015, general and administrative expense was approximately $9.9 million, an increase of $1.8 million when compared to $8.1 million for the three months ended September 30, 2014. The increase is primarily due to an increase in compensation and consulting costs. The increase in compensation costs is due to building our back office support as we exited the Transition Services Agreement with Tesoro. Previously the costs incurred under the Transition Services Agreement were included in Acquisition and integration expense. In 2014, our consulting costs primarily related to acquisition and integration activities; however, in 2015, our consulting costs are included in general and administrative expense as they primarily relate to system modifications and process improvements related to the Supply and Offtake Agreements.
Acquisition and Integration Costs. For the three months ended September 30, 2015, acquisition and integration costs were approximately $0.3 million, a decrease of $3.6 million when compared to $3.9 million for the three months ended September 30, 2014. The decrease is primarily due to no costs related to the integration of HIE in the three months ended September 30, 2015 partially offset by costs incurred for the integration of Mid Pac.
Interest Expense and Financing Costs, Net. For the three months ended September 30, 2015, our interest expense and financing costs were approximately $4.4 million, a decrease of $2.7 million when compared to $7.1 million for the three months ended September 30, 2014. The decrease was due to approximately $1.8 million of financing costs associated with the termination of the Bridge Loan recorded during the three months ended September 30, 2014. In addition, we began paying cash for interest on the Term Loan during 2015 rather than paying interest in kind which reduced the interest rate on the Term Loan by two percent.
Change in Value of Common Stock Warrants. For the three months ended September 30, 2015, the change in value of common stock warrants resulted in a loss of approximately $1.0 million, a change of $3.4 million when compared to a gain of $2.4 million for the three months ended September 30, 2014. For the three months ended September 30, 2015, our stock price increased from $18.72 per share as of June 30, 2015 to $20.83 per share as of September 30, 2015 which resulted in an increase in the fair value of the common stock warrants. During the three months ended September 30, 2014, our stock price decreased from $20.25 as of June 30, 2014 to $16.85 at September 30, 2014.
Change in Value of Contingent Consideration. For the three months ended September 30, 2015, the change in value of our contingent consideration liability resulted in a loss of approximately $4.3 million, a change of $5.3 million when compared to a gain of $1.0 million for the three months ended September 30, 2014. The contingent consideration relates to the acquisition of HIE which occurred on September 25, 2013, and the change in value during the three months ended September 30, 2015 is due to an increase in our expected cash flows related to HIE during the contingency period and actual results.
Equity Losses From Laramie Energy Company. For the three months ended September 30, 2015, losses from Laramie were approximately $1.4 million, a change of $2.2 million compared to earnings of $835 thousand for the three months ended September 30, 2014. The loss is primarily due to lower sales prices for natural gas and condensate.
Income Taxes. For the three months ended September 30, 2015, we recorded an expense of $295 thousand due to an increase in the valuation allowance resulting from adjustments to the Mid Pac purchase price allocation. Excluding the impact of the increase in the valuation allowance related to the Mid Pac deferred tax liability, we recorded a state tax expense of $174 thousand, a slight increase when compared to $150 thousand of state tax benefit for the three months ended September 30, 2014. The federal tax benefit or expense related to normal operations is generally offset by changes in the valuation allowance related to our NOL carryforwards.
Adjusted EBITDA and Adjusted Net Income (Loss). For the three months ended September 30, 2015 Adjusted EBITDA was $34.3 million compared to a $28.4 million loss for the three months ended September 30, 2014. For the three months ended September 30, 2015, Adjusted Net Income (Loss) was $23.8 million when compared to a $38.4 million loss for the three months ended September 30, 2014. The change is primarily related to improved crack spreads and lower energy costs resulting from lower crude oil prices.

36


Nine months ended September 30, 2015 compared to the nine months ended September 30, 2014
Refining and Distribution Gross Margin. For the nine months ended September 30, 2015, our refining and distribution gross margin was approximately $183.4 million, an increase of $143.5 million compared to $40.0 million for the nine months ended September 30, 2014. The increase is primarily due to an increase in sales volumes of approximately 11 percent, primarily on island, due to successful marketing efforts throughout 2014, the impact of our supply agreement with Mid Pac effective January 1, 2015, which was terminated in connection with the closing of the acquisition on April 1, 2015, and lower production costs due to lower crude oil prices. In addition, the first nine months of 2015 had a higher percentage of sales of higher margin products, particularly jet fuel and gasoline, compared to the first nine of 2014.
Retail Gross Margin. For the nine months ended September 30, 2015, our retail gross margin was approximately $50.7 million, an increase of $23.9 million compared to $26.8 million for the nine months ended September 30, 2014. The increase is primarily due to the acquisition of Mid Pac on April 1, 2015 which contributed to higher sales volumes.
Commodity, Marketing and Logistics Gross Margin. For the nine months ended September 30, 2015, our commodity, marketing, and logistics gross margin was a loss of $1.1 million, a decrease of $6.1 million when compared to $5.0 million for the nine months ended September 30, 2014. The decrease is primarily due to lower rail car revenues, lower margins available for moving crude oil from Canada to the U. S. gulf coast due to market conditions and lower pipeline revenues due to the expiration of certain contracts.
Natural Gas and Oil Gross Margin. For the nine months ended September 30, 2015, our natural gas and oil gross margin was approximately $2.2 million, a decrease of $2.9 million when compared to $5.1 million for the nine months ended September 30, 2014. The decrease is primarily related to lower commodity prices as a result of market factors and shutting in of operations at the Point Arguello Unit in offshore California during the third quarter of 2015.
Operating Expense. For the nine months ended September 30, 2015, operating expense was approximately $107.4 million, a decrease of $6.4 million compared to $113.9 million for the nine months ended September 30, 2014.The decrease is primarily due to lower energy costs resulting from lower crude oil prices.
Depreciation, Depletion, and Amortization. For the nine months ended September 30, 2015, DD&A expense was approximately $12.9 million, an increase of $2.6 million compared to $10.3 million for the nine months ended September 30, 2014. The increase is primarily due to depreciation, depletion, and amortization of assets acquired as part of the Mid Pac acquisition on April 1, 2015.
Impairment expense. For the nine months ended September 30, 2015, we recorded impairment charges of $7.0 million and $2.6 million related to goodwill and intangible assets in our Commodity Marketing and Logistics reporting unit, respectively. There was no impairment expense during the nine months ended September 30, 2014.
Loss on sale of assets, net. For the nine months ended September 30, 2014, loss on sale of assets, net was approximately $624 thousand. The prior period loss is the result of selling oilfield equipment within our natural gas and oil operations segment.
General and Administrative Expense. For the nine months ended September 30, 2015, general and administrative expense was approximately $31.9 million, an increase of $13.1 million when compared to $18.8 million for the nine months ended September 30, 2014. The increase is primarily due to an increase in compensation and consulting costs. The increase in compensation costs is due to building our back office support as we exited the Transition Services Agreement with Tesoro. Previously the costs incurred under the Transition Services Agreement were included in Acquisition and integration expense. In 2014, our consulting costs primarily related to acquisition and integration activities; however, in 2015, our consulting costs are included in general and administrative expense as they primarily relate to system modifications and process improvements related to the Supply and Offtake Agreements.
Acquisition and Integration Costs. For the nine months ended September 30, 2015, acquisition and integration costs were approximately $1.8 million, a decrease of $7.3 million when compared to $9.1 million for the nine months ended September 30, 2014. The decrease is primarily due to no costs related to the integration of HIE in the nine months ended September 30, 2015 partially offset by costs incurred for the Mid Pac acquisition and integration.
Interest Expense and Financing Costs, Net. For the nine months ended September 30, 2015, our interest expense and financing costs were approximately $15.8 million, an increase of $1.8 million when compared to $14.0 million for the nine months ended September 30, 2014. The increase was due to a higher outstanding debt balance during the period.
Change in Value of Common Stock Warrants. For the nine months ended September 30, 2015, the change in value of common stock warrants resulted in a loss of approximately $2.7 million, a change of $6.9 million when compared to a gain of

37


$4.1 million for the nine months ended September 30, 2014. For the nine months ended September 30, 2015, our stock price increased from $16.25 per share as of December 31, 2014 to $20.83 per share as of September 30, 2015 which resulted in an increase in the fair value of the common stock warrants. During the nine months ended September 30, 2014, our stock price decreased from $22.30 per share on December 31, 2013 to $20.25 per share on September 30, 2014 which resulted in a decrease in the value of the common stock warrants.
Change in Value of Contingent Consideration. For the nine months ended September 30, 2015, the change in value of our contingent consideration liability resulted in a loss of approximately $18.7 million, a change of $24.4 million when compared to a gain of $5.8 million for the nine months ended September 30, 2014. The contingent consideration relates to the acquisition of HIE which occurred on September 25, 2013, and the change in value during the nine months ended September 30, 2015 is due to an increase in our expected cash flows related to HIE during the contingency period based on our actual results.
Loss on Termination of Financing Agreements. For the nine months ended September 30, 2015, our loss on the termination of financing agreements was approximately $19.2 million, which includes a loss of $17.4 million on the termination of the Barclays Supply and Exchange Agreement and a loss of $1.8 million on the termination of the HIE ABL.The loss of $17.4 million on the termination of the Supply and Exchange Agreement consists of a loss of $13.3 million for the cash settlement value of the liability and a loss of $5.6 million for the acceleration of deferred financing costs, partially offset by a $1.5 million exit fee received from Barclays. The loss on the termination of the HIE ABL consists of the accelerated amortization of deferred financing costs.
Equity Losses From Laramie Energy Company. For the nine months ended September 30, 2015, losses from Laramie were approximately $6.1 million, a change of $7.5 million compared to earnings of $1.4 million for the nine months ended September 30, 2014. The loss is primarily due to lower sales prices for natural gas and condensate.
Income Taxes. For the nine months ended September 30, 2015, we recorded a benefit for the release of $18.3 million of our valuation allowance as we expect to be able to utilize a portion of our net operating loss ("NOL") carryforwards to offset future taxable income of Mid Pac. Excluding the impact of releasing the valuation allowance related to the Mid Pac deferred tax liability, state tax expense was approximately $217 thousand, a slight increase when compared to $113 thousand of state tax benefit for the nine months ended September 30, 2014.
Adjusted EBITDA and Adjusted Net Income (Loss). For the nine months ended September 30, 2015 Adjusted EBITDA was $87.6 million compared to a $56.1 million loss for the three months ended September 30, 2014. For the nine months ended September 30, 2015, Adjusted Net Income (Loss) was $52.6 million compared to a $78.8 million loss for the nine months ended September 30, 2014 . The change is primarily related to improved crack spreads and lower energy costs resulting from lower crude oil prices.
Liquidity and Capital Resources
Our liquidity and capital requirements are primarily a function of our debt maturities and debt service requirements, fixed capacity payments and contractual obligations, capital expenditures and working capital needs. Examples of working capital needs include purchases and sales of commodities and associated margin and collateral requirements, facility maintenance costs and other costs such as payroll. Our primary sources of liquidity are cash flows from operations, cash on hand, amounts available under our credit agreements, and access to capital markets.
    The following table summarizes our liquidity position as of October 29, 2015 and September 30, 2015 (in thousands):
October 29, 2015
HIE
 
HIE Retail
 
Mid Pac
 
Texadian
 
Corporate and Other
 
Total
Cash and cash equivalents
$
60,379

 
$
10,408

 
$
12,558

 
$
13,832

 
$
3,308

 
$
100,485

Revolver availability

 

 

 
17,351

 

 
17,351

Mid Pac Revolver availability

 

 
5,000

 

 

 
5,000

Deferred Payment Arrangement availability
40,398

 

 

 

 

 
40,398

Total available liquidity
$
100,777

 
$
10,408

 
$
17,558

 
$
31,183

 
$
3,308

 
$
163,234

 

38


September 30, 2015
HIE
 
HIE Retail
 
Mid Pac
 
Texadian
 
Corporate and Other
 
Total
Cash and cash equivalents
$
63,725

 
$
8,693

 
$
11,441

 
$
12,173

 
$
5,809

 
$
101,841

Revolver availability

 

 

 
18,278

 

 
18,278

Mid Pac Revolver availability

 

 
5,000

 

 

 
5,000

Deferred Payment Arrangement availability
27,531

 

 

 

 

 
27,531

Total available liquidity
$
91,256

 
$
8,693

 
$
16,441

 
$
30,451

 
$
5,809

 
$
152,650


The change in our liquidity position from September 30, 2015 to October 29, 2015 was primarily attributable to operating results for the period and normal working capital changes.
As of September 30, 2015, we had access to the J. Aron Deferred Payment Arrangement, the Mid Pac Revolving Credit Facility, the Texadian Uncommitted Credit Agreement and cash on hand of $101.8 million. In addition, we have the Supply and Offtake Agreements with J. Aron, which are used to finance the majority of the inventory of our refinery. Generally, the primary uses of our capital resources have been in the operations of our refining and distribution segment, our retail segment, our commodity marketing and logistics segment, payments related to the acquisition of Mid Pac, cash capital contributions to Laramie and payments of operating expenses related to our natural gas and oil assets.
We believe our cash flows from operations and available capital resources will be sufficient to meet our current capital expenditures, working capital and debt service requirements for the next 12 months. Additionally, we may seek to raise additional debt or equity capital to fund any other significant changes to our business or to refinance existing debt. We cannot offer any assurances that such capital will be available in sufficient amounts or at an acceptable cost.
Cash Flows
The following table summarizes cash activities for the nine months ended September 30, 2015 and 2014 (in thousands):
 
Nine Months Ended September 30,
 
2015
 
2014
Net cash provided by (used in) operating activities
$
144,346

 
$
(76,679
)
Net cash used in investing activities
$
(107,746
)
 
$
(16,725
)
Net cash provided by (used in) financing activities
$
(23,969
)
 
$
152,779

Net cash provided by operating activities was approximately $144.3 million for the nine months ended September 30, 2015, which resulted from net income of approximately $26.9 million, non-cash charges to operations of approximately $70.9 million and net cash provided by changes in operating assets and liabilities of approximately $46.5 million. Net cash used in operating activities was approximately $76.7 million for the nine months ended September 30, 2014, which resulted from a net loss of approximately $78.7 million offset by non-cash charges to operations of approximately $13.9 million and net cash used for changes in operating assets and liabilities of approximately $11.9 million.
For the nine months ended September 30, 2015, net cash used in investing activities was approximately $107.7 million and primarily related to $64.4 million for the acquisition of Mid Pac, an investment in Laramie of $27.5 million and additions to property and equipment totaling approximately $15.9 million. Net cash used in investing activities was approximately $16.7 million for the nine months ended September 30, 2014 and was primarily related to the Mid Pac acquisition deposit of $10 million and additions to property and equipment of approximately $6.1 million.
Net cash used in financing activities for the nine months ended September 30, 2015 was approximately $24.0 million and consisted primarily of net repayments of borrowings and payments of loan costs of approximately $29.2 million, and net repayments of the deferred payment arrangement of $8.5 million. These repayments were partially offset by net cash proceeds of $13.2 million due to the change in the inventory financing agreements from the Barclays Supply and Exchange Agreement to the J. Aron Supply and Offtake Agreements. Net cash provided by financing activities for the nine months ended September 30, 2014 was approximately $152.8 million and consisted of $47.2 million in proceeds from the Supply and Exchange Agreements to fund a deposit with a crude oil supplier, $13.2 million borrowed under the Term Loan used to fund the Mid Pac acquisition deposit, and incremental borrowings under the ABL Facility and the Retail Revolver.

39


Capital Expenditures
Our capital expenditures excluding acquisitions for the nine months ended September 30, 2015 totaled approximately $15.9 million and were primarily related to our refinery and information technology systems. Our total capital expenditure budget for 2015 ranges from $45 to $50 million and primarily relates to projects to improve our refinery reliability and efficiency, upgrades to our information technology systems, and approximately $28 million for investments in Laramie. The investments in Laramie were made during the first half of 2015.
Additional capital may be required to maintain our interests at our Point Arguello Unit offshore California, but production is not economic in the current low-price environment and we are not able to estimate the amount of any potential capital requirement. We also continue to seek strategic investments in business opportunities, but the amount and timing of those investments are not predictable.
Commitments and Contingencies
Supply and Offtake Agreements
On June 1, 2015, we entered into several agreements with J. Aron & Company ("J. Aron") to support the operations of our refinery, (the "Supply and Offtake Agreements"). The Supply and Offtake Agreements have a term of three years and two one-year extension options at the mutual agreement of the parties. Please read Note 7—Inventory Financing Agreements for more information.

Consent Decree
Tesoro is currently negotiating a Consent Decree with the EPA and the United States Department of Justice concerning alleged violations of the federal Clean Air Act related to the ownership and operation of multiple facilities owned or formerly owned by Tesoro and its affiliates, including our refinery. It is anticipated that the Consent Decree will be finalized sometime during 2015 and will require certain capital improvements to our refinery to reduce emissions of air pollutants.
We estimate the cost of compliance with the final Consent Decree could be $20 million to $25 million. However, Tesoro is responsible under the Environmental Agreement for reimbursing HIE for all reasonable third-party capital expenditures incurred for the construction, installation, and commissioning of such capital projects and for the payment of any fines or penalties imposed on HIE arising from the Consent Decree to the extent related to acts or omission of Tesoro or HIE prior to the Closing Date. Tesoro’s obligation to reimburse HIE for such fines and penalties is not subject to a monetary limitation; however, the obligation relating to fines and penalties terminates on the third anniversary of the Closing Date. Please read Note 10—Commitments and Contingencies for more information.
Forward Looking Statements
Certain statements in this Quarterly Report on Form 10-Q may constitute “forward-looking” statements as defined in Section 27A of the Securities Act of 1933 (the "Securities Act"), Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”), the Private Securities Litigation Reform Act of 1995 (“PSLRA”), or in releases made by the SEC, all as may be amended from time to time. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors including, without limitation, our beliefs with regard to available capital resources, our beliefs regarding the likelihood or impact of any potential fines or penalties and of the fair value of certain assets, and our expectations with respect to laws and regulations, including environmental regulations and related compliance costs, and any fines or penalties related thereto; Tesoro's ability to finalize the Consent Decree; our expectations regarding anticipated capital improvements; anticipated results of the Mid Pac earn out and indemnity dispute; estimated costs of compliance with the final Tesoro Consent Decree; the estimated value of legal claims remaining to be settled against third parties; management’s assumptions about future events; our ability to raise additional debt or equity capital; our ability to make strategic investments in business opportunities; and the estimates, assumptions, and projections regarding future financial condition, results of operations, liquidity, and cost flows. These and other forward looking-statements

40


could cause the actual results, performance or achievements of Par and its subsidiaries to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. Statements that are not historical fact are forward-looking statements. Forward-looking statements can be identified by, among other things, the use of forward-looking language, such as the words “plan,” “believe,” “expect,” “anticipate,” “intend,” “estimate,” “project,” “may,” “will,” “would,” “could,” “should,” “seeks,” or “scheduled to,” or other similar words, or the negative of these terms or other variations of these terms or comparable language, or by discussion of strategy or intentions. These cautionary statements are being made pursuant to the Securities Act, the Exchange Act and the PSLRA with the intention of obtaining the benefits of the “safe harbor” provisions of such laws. 
The forward-looking statements contained in this Quarterly Report on Form 10-Q are largely based on our expectations, which reflect estimates and assumptions made by our management. These estimates and assumptions reflect our best judgment based on currently known market conditions and other factors. Although we believe such estimates and assumptions to be reasonable, they are inherently uncertain and involve a number of risks and uncertainties that are beyond our control, including those set out in our most recent Annual Report on Form 10-K under "Risk Factors."     
In addition, management’s assumptions about future events may prove to be inaccurate. All readers are cautioned that the forward-looking statements contained in this Quarterly Report on Form 10-Q are not guarantees of future performance, and we cannot assure any reader that such statements will be realized or that the forward-looking events and circumstances will occur. Actual results may differ materially from those anticipated or implied in the forward-looking statements due to factors described above and under Critical Accounting Policies and Risk Factors included in our most recent Annual Report on Form 10-K and under Risk Factors in this Quarterly Report on Form 10-Q. All forward-looking statements speak only as of the date they are made. We do not intend to update or revise any forward-looking statements as a result of new information, future events or otherwise. These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Commodity Price Risk

Our earnings, cash flow and liquidity are significantly affected by a variety of factors beyond our control, including the supply of, and demand for, crude oil, other feedstocks, refined products and natural gas. The supply of and demand for these commodities depend on, among other factors, changes in domestic and foreign economies, weather conditions, domestic and foreign political affairs, planned and unplanned downtime in refineries, pipelines and production facilities, production levels, the availability of imports, the marketing of competitive and alternative fuels, and the extent of government regulation. As a result, the prices of these commodities can be volatile. Our revenues fluctuate significantly with movements in industry refined product prices and our cost of revenues fluctuates significantly with movements in crude oil and feedstock prices. Assuming all other factors remain constant, a $1 per barrel change in average gross refining margins, based on our quarter-to-date throughput of 73.5 thousand barrels per day, would change annualized operating income by approximately $26.5 million. This analysis may differ from actual results.

In order to manage commodity price risks, we utilize exchange-traded futures, options, and OTC swaps to manage commodity price risks associated with:

the difference between the prices for which we sell our refined products and the prices we pay for crude oil and other feed stocks;
our refined products inventory outside of the Supply and Offtake Agreements;
our fuel requirements for our refinery;
our exposure to crude oil price volatility in our commodity marketing and logistics segment.

Our Supply and Offtake Agreements with J.Aron require us to hedge our exposure based on the time spread between the period between crude oil cargo pricing and the expected delivery month. We manage this exposure by entering into swaps with J.Aron. Please read Note 7—Inventory Financing Agreements for more information.

All of our futures and OTC swaps are executed to economically hedge our physical commodity purchases, sales, and inventory. Our open futures and OTC swaps expire at various dates through November 30, 2015. At September 30, 2015, these open commodity derivative contracts represent:

Futures sales of 20 thousand barrels that economically hedge our forecasted sales of refined products;
Purchased OTC Swaps of 357 thousand barrels and sold OTC Swaps of 357 thousand barrels (for different contract months) that economically hedge our refined products inventory; and
Futures sales of 225 thousand barrels that economically hedge our physical inventory for our marketing and logistics business.

Based on our net open positions at September 30, 2015, a $1 change in the price of crude oil, assuming all other factors remain constant, would change the fair value of our derivative instruments and cost of revenues by approximately $250 thousand.

Our predominant variable operating cost is the cost of fuel consumed in the refining process, which is included in Cost of revenues on our consolidated statement of operations. Assuming normal operating conditions, we consume approximately 75 thousand barrels a month of crude oil during the refining process. We have economically hedged our internally consumed fuel cost using costless collars. These options have a weighted average strike price ranging from a floor of $56.88 per barrel to a ceiling of $65.97 per barrel. We have economically hedged consumed fuel volumes of 52 thousand barrels per month through December 2016; 35 thousand barrels per month for the first quarter of 2017; and 25 thousand barrels per month for the remainder of 2017.

Compliance Program Price Risk

We are exposed to market risks related to the volatility in the price of RINs required to comply with the Renewable Fuel Standard. Our overall RINs obligation is based on a percentage of our domestic shipments of on-road fuels as established by the EPA. To the degree we are unable to blend the required amount of biofuels to satisfy our RINs obligation, we must purchase RINs on the open market. To mitigate the impact of this risk on our results of operations and cash flows we may purchase RINs when the price of these instruments is deemed favorable. Some of these contracts are derivative instruments, however, we elect the NPNS exception and do not record these contracts at their fair values.

Interest Rate Risk

As of September 30, 2015, $76 million of outstanding debt was subject to floating interest rates. We also have interest rate exposure in connection with our liability under the J. Aron Supply and Offtake Agreements, for which we pay a charge based on a 3-month LIBOR. An increase of 1% in the variable rate on our indebtedness, after considering the instruments subject to minimum interest rates, would result in an increase to our cost of revenues and interest expense of approximately $2.6 million per year and $0.9 million, respectively.

Credit Risk

We are subject to risk of losses resulting from nonpayment or nonperformance by our counterparties. We will
continue to closely monitor the creditworthiness of customers to whom we grant credit and establish credit limits in accordance with our credit policy.

Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures 
In connection with the preparation of this Quarterly Report on Form 10-Q, as of September 30, 2015, an evaluation was performed under the supervision and with the participation of the Company’s management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of September 30, 2015, these disclosure controls and procedures were effective and designed to ensure that the information required to be disclosed in our reports filed with the SEC is recorded, processed, summarized and reported on a timely basis and accumulated and communicated to management as appropriate to allow timely decisions regarding disclosure.
Changes in Internal Control over Financial Reporting
There were no changes during the quarter ended September 30, 2015 in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financing reporting.
PART II – OTHER INFORMATION
Item 1. Legal Proceedings

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From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of our business. Please read Note 10—Commitments and Contingencies to our unaudited condensed consolidated financial statements for more information.
Kawaihae Loading Rack
On October 9, 2014, Mid Pac received a notice from the United States Environmental Protection Agency (the "EPA") alleging that Mid Pac had violated the Clean Air Act at its terminal located in Kawaihae, Hawaii by "failing to equip its loading rack with pollution controls" and by "failing to limit emissions from its loading rack," and advising Mid Pac that the matter had been referred to the United States Department of Justice ("DOJ"). The DOJ has proposed civil penalties of approximately $700 thousand. Subsequently, Mid Pac and the DOJ entered into a tolling agreement to facilitate settlement discussions. Mid Pac disputes the EPA's allegations. On April 1, 2015, we acquired Mid Pac. Mid Pac, EPA and DOJ have tentatively agreed to resolve the fines and penalties for $200 thousand, which agreement is subject to final documentation.
Item 1A. Risk Factors
Except as set forth below, there have been no material changes from the risk factors included under Par I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.
If we are unable to obtain our crude oil supply without the benefit of our supply and offtake agreements with J. Aron, the capital required to finance our crude oil supply could negatively impact our liquidity.
All of the crude oil delivered at our refinery is subject to our supply and offtake agreements with J. Aron. If we are unable to obtain our crude oil supply outside these agreements, our exposure to crude oil pricing risks may increase as the number of days between when we pay for the crude oil and when the crude oil is delivered to us increases. Such increased exposure could negatively impact our liquidity position due to the increase in working capital used to acquire crude oil inventory for our refinery.
Our arrangement with J. Aron exposes us to J. Aron related credit and performance risk.
We have supply and offtake agreements with J. Aron, pursuant to which J. Aron will intermediate crude oil supplies and refined product inventories at our refinery. J. Aron will own all of the crude oil in our tanks and substantially all of our refined product inventories prior to our sale of the inventories. Upon termination of the supply and offtake agreements, which may be terminated by J. Aron as early as May 31, 2018, we are obligated to repurchase all crude oil and refined product inventories then owned by J. Aron and located at the specified storage facilities at then current market prices. Relying on J. Aron’s ability to honor its supply and offtake obligations exposes us to J. Aron’s credit and business risks. An adverse change in J. Aron’s business, results of operations, liquidity or financial condition could adversely affect its ability to perform its obligations, which could consequently have a material adverse effect on our business, results of operations or liquidity and, as a result, our business and operating results. In addition, we may be required to use substantial capital to repurchase crude oil and refined product inventories from J. Aron upon termination of the agreements, which could have a material adverse effect on our business, results of operations or financial condition.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Unregistered Sales of Equity Securities    
There were no sales of equity securities during the three and nine months ended September 30, 2015 that were not registered under the Securities Act of 1933, as amended.
Dividends
We have not paid dividends on our common stock, and we do not expect to do so in the foreseeable future. Our current debt agreements restrict the payment of dividends. In addition, as long as any obligations remain outstanding under the Term Loan, we are prohibited from paying dividends. 
Stock Repurchases    
The following table sets forth certain information with respect to repurchases of our common stock during the quarter ended September 30, 2015:

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Period
Total number of shares (or units) purchased (1)
 
Average price paid per share (or unit)
 
Total number of shares (or units) purchased as part of publicly announced plans or programs
 
Maximum number (or approximate dollar value) of shares (or units) that may yet be purchased under the plans or programs
July 1 - July 31, 2015
442

 
$
18.07

 

 

August 1 - August 31, 2015
164

 
18.10

 

 

September 1 - September 30, 2015
13,474

 
20.33

 

 

Total
14,080

 
$
20.23

 

 

________________________________________________
(1) All shares repurchased were surrendered by employees to pay taxes withheld upon the vesting of restricted stock awards.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Mine Safety Disclosure
Not applicable.
Item 5. Other Information
None.
Item 6. Exhibits

2.1
Third Amended Joint Chapter 11 Plan of Reorganization of Delta Petroleum Corporation and Its Debtor Affiliates dated August 13, 2012. Incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K filed on September 7, 2012.
 
 
2.2
Contribution Agreement, dated as of June 4, 2012, among Piceance Energy, LLC, Laramie Energy, LLC and the Company. Incorporated by reference to Exhibit 2.2 to the Company's Current Report on Form 8-K filed on June 8, 2012.
 
 
2.3
Purchase and Sale Agreement dated as of December 31, 2012, by and among the Company, SEACOR Energy Holdings Inc., SEACOR Holdings Inc., and Gateway Terminals LLC. Incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K filed on January 3, 2013.
 
 
2.4
Membership Interest Purchase Agreement dated as of June17, 2013, by and among Tesoro Corporation, Tesoro Hawaii, LLC and Hawaii Pacific Energy, LLC Incorporated by reference to Exhibit 2.4 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2013, filed on August 14, 2013.
 
 
2.5
Agreement and Plan of Merger dated as of June 2, 2014, by and among the Company, Bogey, Inc., Koko’oha Investments, Inc., and Bill D. Mills, in his capacity as the Shareholders’ Representative. Incorporated by reference to Exhibit 2.5 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2014, filed on August 11, 2014.
 
 
2.6
Amendment to Agreement and Plan of Merger dated as of September 9, 2014, by and among the Company, Bogey, Inc., Koko’oha Investments, Inc. and Bill D. Mills, in his capacity as the shareholders’ representative. Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on September 10, 2014.
 
 
2.7
Second Amendment to Agreement and Plan of Merger dated as of December 31, 2014, by and among Par Petroleum Corporation, Bogey, Inc., Koko'oha Investments, Inc. and Bill D. Mills, in his capacity as the shareholder's representative. Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on January 7, 2015.
 
 
2.8
Third Amendment to Agreement and Plan of Merger dated as of March 31, 2015, by and among the Company, Bogey, Inc., Koko’oha Investments, Inc. and Bill D. Mills, in his capacity as the shareholders’ representative. Incorporated by reference to Exhibit 2.4 to the Company’s Current Report on Form 8-K filed on April 2, 2015.
 
 
3.1
Restated Certificate of Incorporation of the Company dated October 20, 2015. Incorporated by reference to Exhibit 3.2 to the Company's Current Report on Form 8-K filed on October 20, 2015.
 
 
3.2
Second Amended and Restated Bylaws of the Company dated October 20, 2015. Incorporated by reference to Exhibit 3.3 to the Company's Current Report on Form 8-K filed on October 20, 2015.
 
 
4.1
Form of the Company's Common Stock Certificate. Incorporated by reference to Exhibit 4.1 to the Company's Annual Report on Form 10-K filed on March 31, 2014.
 
 
4.2
Stockholders Agreement dated April 10, 2015. Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on April 13, 2015.
 
 
4.3
Registration Rights Agreement effective as of August 31, 2012, by and among the Company, Zell Credit Opportunities Master Fund, L.P., Waterstone Capital Management, L.P., Pandora Select Partners, LP, Iam Mini-Fund 14 Limited, Whitebox Multi-Strategy Partners, LP, Whitebox Credit Arbitrage Partners, LP, HFR RVA Combined Master Trust, Whitebox Concentrated Convertible Arbitrage Partners, LP and Whitebox Asymmetric Partners, LP. Incorporated by reference to Exhibit 4.3 to the Company's Current Report on Form 8-K filed on September 7, 2012.
 
 
4.4
Registration Rights Agreement dated as of September 25, 2013, by and among the Company and the Purchasers party thereto. Incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed on September 27, 2013.
 
 
4.5
Warrant Issuance Agreement dated as of August 31, 2012, by and among the Company and WB Delta, Ltd., Waterstone Offshore ER Fund, Ltd., Prime Capital Master SPC, GOT WAT MAC Segregated Portfolio, Waterstone Market Neutral MAC51, Ltd., Waterstone Market Neutral Master Fund, Ltd., Waterstone MF Fund, Ltd., Nomura Waterstone Market Neutral Fund, ZCOF Par Petroleum Holdings, L.L.C. and Highbridge International, LLC. Incorporated by reference to Exhibit 4.4 to the Company's Current Report on Form 8-K filed on September 7, 2012.
 
 
4.6
Form of Common Stock Purchase Warrant dated as of June 4, 2012. Incorporated by reference to Exhibit 4.5 to the Company's Current Report on Form 8-K filed on September 7, 2012.
 
 
4.7
Par Petroleum Corporation 2012 Long Term Incentive Plan. Incorporated by reference to Exhibit 4.1 to the Company's Registration Statement on Form S-8 filed on December 21, 2012.
 
 
4.8
Form of Par Petroleum Corporation Shareholder Subscription Rights Certificate. Incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed on July 22, 2014.
 
 
10.1
Employment Offer Letter with William C. Pate dated October 12, 2015. Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed October 14, 2015.
 
 
10.2
Initial Award with William C. Pate dated October 12, 2015. Incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed October 14, 2015.
 
 
10.3
Amendment to Employment Offer Letter with Joseph Israel dated October 12, 2015. Incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed October 14, 2015.
 
 
31.1
Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *
 
 
31.2
Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *
 
 
32.1
Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350.*
 
 
32.2
Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350. *
 
 
101.INS
XBRL Instance Document.**
 
 
101.SCH
XBRL Taxonomy Extension Schema Documents.**
 
 
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document.**
 
 
101.LAB
XBRL Taxonomy Extension Label Linkbase Document.**
 
 
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document.**
 
 
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document.**
*     Filed herewith.

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**    These interactive data files are furnished and deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

44


SIGNATURES
Pursuant to the requirements of the Securities Exchange of Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. 
 
PAR PACIFIC HOLDINGS, INC.
(Registrant)
 
 
 
 
 
 
By:
/s/ William Pate
 
 
 
 
William Pate
 
 
 
 
President and Chief Executive Officer
 
 
 
 
 
 
 
 
By:
/s/ Christopher Micklas
 
 
 
 
Christopher Micklas
 
 
 
 
Chief Financial Officer
 
 

Date: November 5, 2015



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