Par Pacific (PARR)

Four Refineries, Four Different Benchmarks

Par Pacific does not report against a single crack spread, and that is the most useful thing about it. The company publishes a separate margin index for each of its four refineries, and the Hawaii one is built off a Singapore product crack rather than an American one, because a barrel made at Kapolei competes with Asian imports and not with Gulf Coast exports. Across FY2025 those four indices averaged $10.60 a barrel in Hawaii, $11.29 in Washington, $14.21 in Montana and $19.99 in Wyoming. One company, one year, and the best market was worth roughly twice the worst.

Feedstock throughput was 187.8 mb/d against 219,000 bpd of rated capacity across the four plants, so the system ran at about 86% of nameplate. Equity was worth roughly $2.8 billion in June 2026. Set that against Marathon's 2,989 mb/d nationwide system or Valero's 2,988 mb/d and the difference is not one of degree: on a base this small, a single planned maintenance shutdown moves the consolidated result. Montana's did in 2025, holding that refinery to 51.7 mb/d of its 63,000 bpd while Washington ran at 92% of its nameplate.

What the Refineries Actually Earned

Refining adjusted gross margin was $14.60 a barrel for FY2025, and a fifth of it came from the EPA rather than from refining. A small refinery exemption releases a plant below a size threshold from its obligation to blend renewable fuel, which removes the cost of buying the compliance credits it would otherwise have to surrender. Par's 2025 accounts booked exemptions covering the 2019 to 2024 compliance years all at once: $202.6 million, or $2.96 of that $14.60. Strip it out and the year earned $11.64 a barrel.

Both numbers are true and they answer different questions. The $14.60 is what the business banked. The $11.64 is what it can expect to bank again, because six years of relief recognised in a single year does not recur on any schedule, and an exemption is refused as easily as it is granted.

Production costs ran $6.92 a barrel across the system, leaving about $4.70 of the ex-exemption margin before depreciation, head office, interest and tax. The spread between plants is the point. Hawaii produces at $4.43 a barrel and Wyoming at $14.24, so the small Newcastle plant needs roughly three times the margin to cover its operating cost alone, which is why it ran at two-thirds of nameplate while the others ran in the eighties and nineties.

Adjusted EBITDA was $633.5 million: $519.2 million from refining, $126.3 million from logistics, $85.9 million from retail, less $98.0 million of unallocated corporate cost. The two non-refining legs are worth more attention than their size suggests. In 2024, a weak crack year, they earned $196.2 million between them against refining's $139.2 million, which is the closest thing this company has to ballast.

Capture, Against the Right Benchmark

Par publishes a throughput-weighted Combined Index, $12.40 a barrel for FY2025. Filed margin against it is 118%, or 94% once the exemption comes out, and the second figure is the one worth holding. The 85-110% capture band is built for exactly this comparison: a company's realised margin against the indicator that company constructed for itself.

It does not survive being pointed at a national 3-2-1 crack, and here it would be doubly wrong. Par's indices are already struck after landed crude differentials, delivery costs, yield loss and the full renewable obligation on gasoline and diesel. A Gulf Coast 3-2-1 is struck before all of that. Divide one by the other and you invent a margin nobody earns.

Valuation Framework

Cash was $164.1 million against $639.8 million of gross term debt at the end of 2025, so net term debt was $475.7 million. Add it to a $2.8 billion equity value and the enterprise is worth about $3.3 billion, which is 5.2 times FY2025 adjusted EBITDA. Take the exemption out of the earnings and the same enterprise value becomes 7.6 times, above the 5-7x band the mid-cycle framework works through. Deciding which of those two multiples is the real one is most of the valuation question.

The better route is to build it by plant. Each refinery has a published index and a published production cost, so a mid-cycle margin can be set for each site instead of borrowed from a Gulf Coast planning crack that prices none of them. Weight the four by throughput, deduct production cost and corporate overhead, then add logistics and retail, which are not crack-driven and should not be valued as though they were.

What to Watch in the Financials

Whether the exemption repeats. $202.6 million was 32% of FY2025 adjusted EBITDA. Its absence, not its presence, is the base case.

The gap between the four indices. They do not move together. Against 2024, the Washington index went from $4.13 to $11.29 while Montana barely shifted, $14.39 to $14.21. A refiner whose own four benchmarks can do that in one year is not screenable on a national crack.

Hawaii Renewables. Mitsubishi and ENEOS bought 36.5% of the Kapolei renewable fuels venture for $100 million, closing on 21 October 2025. The facility is sized at roughly 61 million gallons a year of renewable diesel, sustainable aviation fuel, naphtha and LPG, which is under 4,000 bpd against a 94,000 bpd refinery. It is an option on Hawaii's fuel policy, not a change in scale.

Per-plant utilisation. Consolidated throughput hides the variance. Washington at 92% of nameplate and Wyoming at 67% are different businesses inside one line.

The share count. Par bought back 6.5 million shares in 2025 at around $19 apiece and cut shares outstanding by 10%. On a small cap that is a faster route to per-share earnings than anything happening in the refineries.

Peer Context

HF Sinclair is the other inland name, at 652 mb/d of FY2025 throughput and $15.37 a barrel of adjusted gross margin, and it collected the same kind of windfall: $485 million of that margin, about $2 a barrel, came from small refinery exemptions. Par's were worth $2.96 a barrel on a much smaller base. Two of the six refiners in this set earned a material part of 2025 from a regulatory decision rather than from a crack spread, and both are the small, inland or isolated ones.

The coastal merchant systems ran at a different scale and on thinner margins: PBF at 832.9 mb/d and $7.72 a barrel, Valero at 2,988 mb/d and $12.29. Rank those four figures with care, because each filer defines its margin line slightly differently and the ordering flatters whoever draws it highest. What is not a definitional artefact is the map. Nobody else in the set runs a Pacific island refinery, a Pacific Northwest one and two Rockies plants on a $2.8 billion equity base.

Key Risks

Dependence on a political allocation. A third of FY2025 adjusted EBITDA came from exemptions covering six prior years. Any forecast anchored on the reported number is anchored on a one-off.

Isolation cuts both ways. Hawaii's dependence on waterborne crude and product creates freight and inventory exposure that Gulf Coast peers do not carry, and the same isolation is what keeps the market captive when it works.

Operating leverage on a small base. One planned maintenance shutdown at Montana was visible in the consolidated FY2025 throughput. There is no large fleet to absorb an outage.

Wyoming's cost position. $14.24 a barrel of production cost on 13.3 mb/d, against a $19.99 index, leaves very little between the plant and a cash loss when the Rockies crack narrows.

Regional regulation. Washington's Climate Commitment Act and Clean Fuel Standard already sit in the company's environmental liabilities, and state-level fuel policy can shift yield economics independently of any crack spread.