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MarketScreener Homepage  >  Equities  >  Nyse  >  CVR Energy, Inc.    CVI

CVR ENERGY, INC.

(CVI)
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CVR ENERGY : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

11/03/2020 | 04:40pm EST
The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our Annual Report on Form 10-K for
the year ended December 31, 2019 filed with the SEC on February 20, 2020 (the
"2019 Form 10-K"), and the unaudited condensed consolidated financial statements
and related notes and with the statistical information and financial data
appearing in this Report. Results of operations for the three and nine months
ended September 30, 2020 and cash flows for the nine months ended September 30,
2020 are not necessarily indicative of results to be attained for any other
period. See "Important Information Regarding Forward-Looking Statements".

Company Overview


CVR Energy, Inc. ("CVR Energy," "CVR," "we," "us," "our," or the "Company") is a
diversified holding company primarily engaged in the petroleum refining and
nitrogen fertilizer manufacturing industries through our holdings in CVR
Refining and CVR Partners, respectively. CVR Refining is a refiner that does not
have crude oil exploration or production operations (an "independent petroleum
refiner") and is a marketer of high value transportation fuels. CVR Partners
produces nitrogen fertilizers in the form of ammonia and urea ammonium nitrate
("UAN"). Ammonia is a direct application fertilizer and is primarily used as a
building block for other nitrogen products for industrial applications and
finished fertilizer products. UAN is an aqueous solution of urea and ammonium
nitrate. At September 30, 2020, we owned the general partner and approximately
35% of the outstanding common units representing limited partner interests in
CVR Partners. As of September 30, 2020, Icahn Enterprises L.P. and its
affiliates ("IEP") owned approximately 71% of our outstanding common stock.

We operate under two business segments: petroleum and nitrogen fertilizer, which
are referred to in this document as our "Petroleum Segment" and our "Nitrogen
Fertilizer Segment," respectively.

Strategy and Goals

Mission and Core Values


Our Mission is to be a top tier North American petroleum refining and
nitrogen-based fertilizer company as measured by safe and reliable operations,
superior performance and profitable growth. The foundation of how we operate is
built on five core Values:

•Safety - We always put safety first. The protection of our employees, contractors and communities is paramount. We have an unwavering commitment to safety above all else. If it's not safe, then we don't do it.


•Environment - We care for our environment. Complying with all regulations and
minimizing any environmental impact from our operations is essential. We
understand our obligation to the environment and that it's our duty to protect
it.

•Integrity - We require high business ethics. We comply with the law and practice sound corporate governance. We only conduct business one way-the right way with integrity.


•Corporate Citizenship - We are proud members of the communities where we
operate. We are good neighbors and know that it's a privilege we can't take for
granted. We seek to make a positive economic and social impact through our
financial donations and the contributions of time, knowledge and talent of our
employees to the places where we live and work.

•Continuous Improvement - We believe in both individual and team success. We
foster accountability under a performance-driven culture that supports creative
thinking, teamwork, diversity and personal development so that employees can
realize their maximum potential. We use defined work practices for consistency,
efficiency and to create value across the organization.

Our core Values are driven by our people, inform the way we do business each and every day and enhance our ability to accomplish our mission and related strategic objectives.




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Strategic Objectives

We have outlined the following strategic objectives to drive the accomplishment of our mission:


Safety - We aim to achieve continuous improvement in all environmental, health
and safety areas through ensuring our people's commitment to environmental,
health and safety comes first, the refinement of existing policies, continuous
training, and enhanced monitoring procedures.

Reliability - Our goal is to achieve industry-leading utilization factors at our
facilities through safe and reliable operations. We are focusing on improvements
in day-to-day plant operations, identifying alternative sources for plant inputs
to reduce lost time due to third-party operational constraints, and optimizing
our commercial and marketing functions to maintain plant operations at their
highest level.

Market Capture - We continuously evaluate opportunities to improve the facilities' netbacks and reduce variable costs incurred in production to maximize our capture of market opportunities.

Financial Discipline - We strive to be as efficient as possible by maintaining low operating costs and a disciplined deployment of capital.

Achievements

During the first nine months of 2020, we successfully executed a number of achievements in support of our strategic objectives shown below through the date of this filing:

                                                       Safety            

Reliability Market Capture Financial Discipline Corporate: Increased liquidity and extended debt maturity with the January issuance of $1.0 billion of Senior Notes

                                                                            ü
due in 2025 and 2028, and the redemption of $0.5
billion CVR Refining Senior Notes due in 2022.
Operated our Petroleum and Nitrogen Fertilizer
Segments' facilities and corporate offices safely         ü                   ü                                                 ü
and reliably and maintained financial discipline
amid COVID-19 pandemic.
Reduced consolidated operating and SG&A expenses by
12% for the first nine months of 2020 as compared to                                                                            ü
the same period of 2019.

Petroleum Segment:

Safely completed the planned turnaround of the
Coffeyville Refinery in April 2020, limiting              ü                

ü

exposure to the volatile margin environment. Received Board approval for additional engineering, purchase of long-lead equipment, and initial permit

                         ü                          ü

filings on the Renewable Diesel Unit ("RDU") project at the Wynnewood Refinery. Reduced operating and SG&A expenses by 13% for the first nine months of 2020 as compared to the same

                                                    ü
period of 2019.

Nitrogen Fertilizer Segment:

Amended and extended the Nitrogen Fertilizer ABL                                                                                ü

during the third quarter of 2020. Generated first carbon offset credits related to N2O abatement and continued sequestration of CO2 for ü

                                                                     ü
enhanced crude oil recovery at the Coffeyville
Facility.
Maintained high asset reliability and a combined
utilization rate of 98% at both facilities during         ü                   ü                      ü

the third quarter of 2020. Reduced operating and SG&A expenses by 10% for the first nine months of 2020 as compared to the same

  ü                      ü
period of 2019.




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Industry Factors

General Business Environment

In March 2020, the World Health Organization categorized COVID-19 as a pandemic,
and the President of the United States declared the COVID-19 outbreak a national
emergency. The COVID-19 pandemic and actions taken by governments and others in
response thereto has and continues to negatively impact the worldwide economy,
financial markets, and the energy industry. The COVID-19 pandemic has also
resulted in significant business and operational disruptions, including business
closures, liquidity strains, destruction of non-essential demand, as well as
supply chain challenges, travel restrictions, stay-at-home orders, and
limitations on the availability of the workforce. As a result of these factors,
the regional demand for gasoline and diesel for the third quarter of 2020
declined 9% versus the third quarter of 2019. However, demand for the third
quarter of 2020 has recovered 7% versus the second quarter of 2020. Further,
there has been a significant decline in business and leisure travel due to the
pandemic, leading to a dramatic decline in air travel and corresponding jet fuel
demand. The airline industry continues to see minimal improvement in air miles
traveled which has forced jet fuel to shift into the distillate pool, resulting
in diesel crack spreads for the third quarter of 2020 54% below the 5-year
average and 60% below the same period of 2019. These markets are seeing a slow
recovery, and crude oil differentials are expected to remain weak until shale
oil production recovers. Continuing concerns surrounding the negative effects of
the COVID-19 pandemic on economic and business prospects across the world have
contributed to increased market and price volatility and have diminished
expectations for the global economy, and may precipitate a prolonged economic
slowdown and recession.

These declines were amplified late in the first quarter by market plays between
the world's largest oil producers. The simultaneous shocks to oil supply and
demand has resulted in a decline in the price of crude oil and led to a
significant decrease in the price of the refined petroleum products we produce
and sell. The Company believes it is experiencing the most challenging energy
environment since its formation. The general business environment in which the
Company operates and the uncertainty around the availability and prices of the
Company's feedstocks, primarily crude oil, and the demand for its products will
likely continue to remain volatile through the remainder of the year and beyond.
The decrease in the demand for refined petroleum products caused by the
artificial pausing of the U.S. economy has resulted in a significant decrease in
the price of the products we produce and sell, although demand and prices have
since slightly recovered as states begin reopening. The price of refined
products we sell and the feedstocks we purchase significantly impact our
revenues, income from operations, net income and cash flows. As a result, the
Company anticipates its future operating results and current and long-term
financial condition could be further negatively impacted.

Petroleum Segment


The earnings and cash flows of the Petroleum Segment are primarily affected by
the relationship between refined product prices and the prices for crude oil and
other feedstocks that are processed and blended into refined products. The cost
to acquire crude oil and other feedstocks and the price for which refined
products are ultimately sold depends on factors beyond the Petroleum Segment's
control, including the supply of, and demand for crude oil, as well as gasoline
and other refined products which, in turn, depend on, among other factors,
changes in domestic and foreign economies, driving habits, weather conditions,
domestic and foreign political affairs, production levels, the availability of
imports, the marketing of competitive fuels, and the extent of government
regulation. Because the Petroleum Segment applies first-in first-out accounting
to value its inventory, crude oil price movements may impact net income in the
short-term because of changes in the value of its unhedged inventory. The effect
of changes in crude oil prices on the Petroleum Segment results of operations is
partially influenced by the rate at which the process of refined products adjust
to reflect these changes.

The prices of crude oil and other feedstocks and refined products are also
affected by other factors, such as product pipeline capacity, system inventory,
local market conditions, and the operating levels of competing refineries. Crude
oil costs and the prices of refined products have historically been subject to
wide fluctuations. Widespread expansion or upgrades of competitors' facilities,
price volatility, international political and economic developments, and other
factors are likely to continue to play an important role in refining industry
economics. These factors can impact, among other things, the level of
inventories in the market, resulting in price volatility and a reduction in
product margins. Moreover, the refining industry typically experiences seasonal
fluctuations in demand for refined products, such as increases in the demand for
gasoline during the summer driving season and for volatile seasonal exports of
diesel from the United States Gulf Coast markets.

In addition to current market conditions, there are long-term factors that may
impact the demand for refined products. These factors include mandated renewable
fuels standards, proposed climate change laws and regulations, and increased
mileage standards for vehicles. The petroleum business is also subject to the
renewable fuel standard ("RFS") of the


                                                         September 30, 2020 | 27
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Environmental Protection Agency (the "EPA"), which, each year, requires blending
"renewable fuels" with transportation fuels or purchasing renewable
identification numbers ("RINs"), in lieu of blending, or otherwise be subject to
penalties. Our cost to comply with the RFS is dependent upon a variety of
factors, which include the availability of ethanol for blending at our
refineries and downstream terminals or RINs for purchase, the price at which
RINs can be purchased, transportation fuel production levels, and the mix of our
products, all of which can vary significantly from period to period. Due to
recent uncertainty resulting from the ruling of the U.S. Court of Appeals for
the 10th Circuit in January 2020 and recent broad rejections of waiver requests
by the EPA, our costs to comply with RFS have increased compared to 2019, as RIN
prices have increased significantly since the beginning of 2020. Based upon
recent market prices of RINs and current estimates related to the other variable
factors, our estimated cost to comply with the RFS is $110 to $115 million for
2020.

Market Conditions

NYMEX WTI crude oil is an industry wide benchmark that is utilized in the market
pricing of a barrel of crude oil. The pricing differences between other crudes
and WTI, known as differentials, show how the market for other crude oils such
as WCS, White Cliffs ("Condensate"), Brent Crude ("Brent"), and Midland WTI
("Midland") are trending. Due to the COVID-19 pandemic, actions taken by
governments and others in response thereto, refined product prices have
experienced extreme volatility. As a result of the current environment, refining
margins have been and could continue to be significantly reduced.

As a performance benchmark and a comparison with other industry participants, we
utilize NYMEX and Group 3 crack spreads. These crack spreads are a measure of
the difference between market prices for crude oil and refined products and are
a commonly used proxy within the industry to estimate or identify trends in
refining margins. Crack spreads can fluctuate significantly over time as a
result of market conditions and supply and demand balances. The NYMEX 2-1-1
crack spread is calculated using two barrels of WTI producing one barrel of
NYMEX RBOB Gasoline ("RBOB") and one barrel of NYMEX NY Harbor ULSD ("HO"). The
Group 3 2-1-1 crack spread is calculated using two barrels of WTI crude oil
producing one barrel of Group 3 sub-octane gasoline and one barrel of Group 3
ultra-low sulfur diesel.

Both NYMEX 2-1-1 and Group 3 2-2-1 crack spreads decreased during the nine
months ended September 30, 2020 compared to the nine months ended September 30,
2019. The NYMEX 2-1-1 crack spread averaged $12.37 per barrel during the nine
months ended September 30, 2020 compared to $20.42 per barrel in the nine months
ended September 30, 2019. The Group 3 2-1-1 crack spread averaged $9.75 per
barrel during the nine months ended September 30, 2020 compared to $18.76 per
barrel during the nine months ended September 30, 2019.

The tables below are presented, on a per barrel basis, by month through September 30, 2020:

                     [[Image Removed: cvi-20200930_g2.jpg]]



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                     [[Image Removed: cvi-20200930_g3.jpg]]

[[Image Removed: cvi-20200930_g4.jpg]][[Image Removed: cvi-20200930_g5.jpg]]

(1)The table below shows the change over time in NYMEX - WTI, as reflected in the graph above.

                         Average 2018            Average            Average 2019            Average            Average 2020             Average
(in $/bbl)                                    December 2018                              December 2019                              September 2020
WTI                    $       64.77$    48.98$       57.03$    61.06$       38.21$      39.63

(2)Information used within these charts was obtained from MarketView.

Nitrogen Fertilizer Segment


Within the Nitrogen Fertilizer Segment, earnings and cash flows from operations
are primarily affected by the relationship between nitrogen fertilizer product
prices, utilization, and operating costs and expenses, including petroleum coke
and natural gas feedstock costs.

The price at which nitrogen fertilizer products are ultimately sold depends on
numerous factors, including the global supply and demand for nitrogen fertilizer
products. Nitrogen fertilizer prices are also affected by local factors,
including local market conditions and the operating levels of competing
facilities. These factors can impact, among other things, the level of
inventories in the market, resulting in price volatility and a reduction in
product margins. Moreover, the industry typically experiences seasonal
fluctuations in demand for nitrogen fertilizer products.


                                                         September 30, 2020 | 29
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Goodwill and Long-Lived Assets


As of December 31, 2019, the Nitrogen Fertilizer Segment's Coffeyville, Kansas
facility (the "Coffeyville Facility") reporting unit had a goodwill balance of
$41 million for which the estimated fair value had been in excess of carrying
value based on our 2018 and 2019 assessments. As a result of lower expectations
for market conditions in the fertilizer industry, the market performance of CVR
Partners' common units, a qualitative analysis, and additional risks associated
with the business, the Company concluded a triggering event had occurred that
required an interim quantitative impairment assessment of goodwill for this
reporting unit as of June 30, 2020. The results of the impairment test indicated
that the carrying amount of the Coffeyville Facility reporting unit exceeded the
estimated fair value of the reporting unit, and a full impairment of the asset
was required. Significant assumptions inherent in the valuation methodologies
for goodwill include, but are not limited to, prospective financial information,
growth rates, discount rates, inflationary factors, and cost of capital. To
evaluate the sensitivity of the fair value calculations for the reporting unit,
the Company applied a hypothetical 1% favorable change in the weighted average
cost of capital, and separately, increased the revenue projections by 10%,
holding gross margins steady. The results of these sensitivity analyses
confirmed the need to record a full, non-cash impairment charge of $41 million
during the three months ended June 30, 2020.

With the adverse economic impacts discussed above and the uncertainty
surrounding the COVID-19 pandemic, there is a heightened risk that amounts
recognized, including other long-lived assets, may not be recoverable. While our
assessment in 2020 has not identified the existence of an impairment indicator
for the Nitrogen Fertilizer Segment's long-lived asset groups, we continue to
monitor the current environment, including the duration and breadth of the
impacts that the pandemic will have on demand for our fertilizer products, to
assess whether qualitative factors indicate a quantitative assessment is
required. If a quantitative test is performed, the extent to which the
recoverability of our long-lived assets could be impaired is unknown. Such
impairment could have a significant adverse impact on our results of operations;
however, an impairment would have no impact on our financial condition or
liquidity.

Market Conditions


While there is risk of shorter-term volatility given the inherent nature of the
commodity cycle and the impacts of the global COVID-19 pandemic, the Company
believes the long-term fundamentals for the U.S. nitrogen fertilizer industry
remain intact. The Nitrogen Fertilizer Segment views the anticipated combination
of (i) increasing global population, (ii) decreasing arable land per capita,
(iii) continued evolution to more protein-based diets in developing countries,
(iv) sustained use of corn as feedstock for the domestic production of ethanol,
and (v) positioning at the lower end of the global cost curve should provide a
solid foundation for nitrogen fertilizer producers in the U.S. over the longer
term.

While weather conditions in 2020 have exhibited normal patterns, excessive wet
conditions significantly impacted the timing of the planting season for corn and
soybeans in 2019, which were planted later than normal in the spring leading to
a late harvest of these crops in the fall of 2019. As a result, the ammonia
application season in the fall of 2019 was shortened creating a surplus of
ammonia inventory in the market during the winter of 2019 and into 2020. UAN
continues to be impacted by the imposition of import duties on UAN product by
the European Union (the "EU"), shifting UAN trade flows for product that had
previously been shipped to the EU. In 2020, natural gas prices across the world
declined significantly as compared to 2019; however, since the summer of 2020,
forward market prices indicate significantly higher prices for 2021 versus
historically low prices in 2020. Natural gas is the primary feedstock for
production of nitrogen fertilizers. As a result of these factors, the Nitrogen
Fertilizer Segment has seen a softening of prices related to these products.

Corn and soybean are two major crops planted by farmers in North America. Corn
crops result in the depletion of the amount of nitrogen and ammonia within the
soil in which it is grown, while soybeans are able to obtain their own nitrogen
through a process known as "N fixation" leaving certain amounts of nitrogen in
the soil. As such, upon harvesting of corn, these nutrients need to be
replenished after each growing cycle. Further, the relationship between the
total acres planted for both corn and soybean has a direct impact on the overall
demand for nitrogen products. Due to these factors, nitrogen fertilizer
consumers generally operate a balanced corn-soybean rotational planting cycle as
evident through the chart presented below for 2020 and 2019.

Ethanol is blended with gasoline to meet renewable fuel standard requirements
and for its octane value. Ethanol production has historically consumed
approximately 35% of the U.S. corn crop, so demand for corn generally rises and
falls with ethanol demand. There has been a decline in the ethanol market due to
decreased demand for transportation fuels as a result of the COVID-19 pandemic.
While there is uncertainty surrounding if and when gasoline demand will return
to normal levels, the


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impact on spring plant decisions resulting from the drop in ethanol demand has
yet to be seen, as evidenced through the charts below.
  [[Image Removed: cvi-20200930_g6.jpg]][[Image Removed: cvi-20200930_g7.jpg]]
The 2020 United States Department of Agriculture ("USDA") reports on corn and
soybean acres planted indicated farmers increased planted corn and soybean acres
by 1.4% and 9.2%, respectively, as compared to 2019. Since the summer of 2020,
adverse weather conditions in parts of the Midwest caused the USDA to lower
estimated crop yields, particularly for corn. Further, demand for soybeans and
corn and lower farmer inventories have led to a rally in crop prices for the
2020 harvest and significantly improved farmer economics. As a result, we
anticipate our customers will plan for a strong fall fertilizer application
season for ammonia and good demand for fertilizer and other crop inputs for the
spring of 2021. While higher natural gas prices will increase production costs,
we believe these higher costs will be offset by lower marginal product
production and higher prices for our products.

The tables below show relevant market indicators for the Nitrogen Fertilizer Segment by month through September 30, 2020:

[[Image Removed: cvi-20200930_g8.jpg]][[Image Removed: cvi-20200930_g9.jpg]]



(1)Information used within this chart was obtained from the U.S. Energy
Information Administration ("EIA").
(2)Information used within this chart was obtained from the USDA, National
Agricultural Statistics Services.
(3)Information used within these charts was obtained from various third-party
sources, including Green Markets (a Bloomberg Company), Pace Petroleum Coke
Quarterly, and the EIA, amongst others.



                                                         September 30, 2020 | 31
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Results of Operations

Consolidated

Our consolidated results of operations include certain other unallocated corporate activities and the elimination of intercompany transactions and therefore do not equal the sum of the operating results of the Petroleum Segment and Nitrogen Fertilizer Segment.

Consolidated Financial Highlights (Three and Nine Months Ended September 30, 2020 versus September 30, 2019)

[[Image Removed: cvi-20200930_g10.jpg]][[Image Removed: cvi-20200930_g11.jpg]]

[[Image Removed: cvi-20200930_g12.jpg]][[Image Removed: cvi-20200930_g13.jpg]]

(1)See "Non-GAAP Reconciliations" section below for reconciliations of the non-GAAP measures shown above.

Three and Nine Months Ended September 30, 2020 versus September 30, 2019 (Consolidated)


Overview - For the three and nine months ended September 30, 2020, the Company's
operating income decreased by $205 million and $717 million, respectively,
resulting in an operating loss of $46 million and $206 million, respectively, as
compared to the three and nine months ended September 30, 2019. For the three
months ended September 30, 2020, these decreases were driven primarily by a
decline in operating results of $212 million within the Petroleum Segment and
were partially offset by improved results of $5 million within the Nitrogen
Fertilizer Segment. For the nine months ended September 30, 2020, declines in
operating results of $653 million and $70 million within the Petroleum and
Nitrogen Fertilizer Segments, respectively, were the primary drivers of these
decreases. Refer to our discussion of each segment's results of operations below
for further information.



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Investment Income from Marketable Securities - During the first quarter of 2020,
we acquired a 14.9% ownership interest in Delek US Holdings, Inc. ("Delek")
(NYSE ticker symbol: DK). During the three and nine months ended September 30,
2020, we received $3 million and $7 million, respectively, in dividend income
related to the associated common shares owned. The Company recognized an
unrealized loss based on market pricing on September 30, 2020 of $68 million and
$20 million for the three and nine months ended September 30, 2020,
respectively.

Income Tax Expense - Income tax benefit for the three and nine months ended
September 30, 2020 was $31 million and $73 million, or 22.2% and 23.1% of loss
before income taxes, respectively, as compared to income tax expense for the
three and nine months ended September 30, 2019 of $34 million and $110 million,
or 25.0% and 24.8% of income before income taxes, respectively. The fluctuation
in income tax (benefit) expense was due primarily to changes in pretax income
between all periods presented. In addition, the change in the effective tax rate
was due primarily to the effects of the Nitrogen Fertilizer Segment's goodwill
impairment recorded during the the second quarter of 2020 and changes in pretax
earnings attributable to noncontrolling interests between all periods presented.

Petroleum Segment

The Petroleum Segment utilizes certain inputs within its refining operations. These inputs include crude oil, butanes, natural gasoline, ethanol, and bio-diesel (these are also known as "throughputs").

Refining Throughput and Production Data by Refinery

                                                          Three Months Ended                               Nine Months Ended
Throughput Data                                             September 30,                                    September 30,
(in bpd)                                            2020                      2019                   2020                      2019
Coffeyville
Regional crude                                      35,769                    41,150                 36,277                    44,238
WTI                                                 58,743                    80,717                 42,794                    74,325

Midland WTI                                              -                     1,436                      -                     4,959
Condensate                                          13,885                     2,378                  8,502                     3,588
Heavy Canadian                                          22                     4,555                  1,362                     5,199
Other crude oil                                      9,702                         -                  3,258                         -
Other feedstocks and blendstocks                     8,203                     8,455                  7,001                     8,608
Wynnewood
Regional crude                                      57,919                    61,345                 53,057                    52,750
WTI                                                      -                        13                      -                         4
WTL                                                  8,657                         -                  6,994                         -
Midland WTI                                              -                    11,313                  1,573                    12,406
Condensate                                           5,330                     7,435                  7,175                     7,408

Other feedstocks and blendstocks                     2,936                     3,203                  3,468                     3,579
Total throughput                                   201,168                   222,000                171,460                   217,064





                                                         September 30, 2020 | 33
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                                                         Three Months Ended                             Nine Months Ended
Production Data                                            September 30,                                  September 30,
(in bpd)                                            2020                    2019                   2020                    2019
Coffeyville
Gasoline                                                 68,572                 69,122                  53,241                 71,144
Distillate                                               49,407                 58,457                  38,976                 59,008
Other liquid products                                     5,246                  7,157                   4,328                  6,808
Solids                                                    3,382                  4,580                   2,836                  4,886
Wynnewood
Gasoline                                                 37,118                 42,464                  37,334                 38,673
Distillate                                               32,514                 36,555                  29,864                 32,003
Other liquid products                                     2,712                  1,756                   2,532                  3,064
Solids                                                       23                     33                      25                     31
Total production                                        198,975                220,124                 169,135                215,617

Light product yield (as % of crude
throughput) (1)                                         98.7  %                98.2  %                 99.0  %                98.0  %
Liquid volume yield (as % of total
throughput) (2)                                         97.2  %                97.1  %                 97.0  %                97.1  %
Distillate yield (as % of crude throughput)
(3)                                                     43.1  %                45.2  %                 42.8  %                44.4  %




(1)Total Gasoline and Distillate divided by total Regional crude, WTI, WTL, Midland WTI, Condensate, and Heavy Canadian throughput. (2)Total Gasoline, Distillate, and Other liquid products divided by total throughput. (3)Total Distillate divided by total Regional crude, WTI, WTL, Midland WTI, Condensate, and Heavy Canadian throughput.

Petroleum Segment Financial Highlights (Three and Nine Months Ended September 30, 2020 versus September 30, 2019)


Overview - For the three months ended September 30, 2020, the Petroleum
Segment's operating loss and net loss were $39 million and $33 million,
respectively, compared to operating income and net income of $173 million and
$170 million, respectively, for the three months ended September 30, 2019. For
the nine months ended September 30, 2020, the Petroleum Segment's operating loss
and net loss were $161 million and $156 million, respectively, compared to
operating income and net income of $492 million and $478 million, respectively,
for the nine months ended September 30, 2019. The declines during both periods
were primarily driven by lower sales volumes and unfavorable refining margins
when compared to the prior periods.

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[[Image Removed: cvi-20200930_g16.jpg]][[Image Removed: cvi-20200930_g17.jpg]]

(1)See "Non-GAAP Reconciliations" section below for reconciliations of the non-GAAP measures shown above.


Net Sales - For the three and nine months ended September 30, 2020, net sales
for the Petroleum Segment decreased by $608 million and $1,928 million,
respectively, when compared to the three and nine months ended September 30,
2019. These declines were primarily driven by lower sales volumes and prices as
a result of reduced demand and excess supply caused by the COVID-19 pandemic.
Further, during the second quarter of 2020, the refinery in Coffeyville, Kansas
(the "Coffeyville Refinery") came online after a full, planned turnaround, which
began in the first quarter of 2020. Utilization rates were reduced at both
refineries throughout the majority of the second quarter of 2020 given market
dynamics and remained below full capacity in the third quarter due to naphtha
processing constraints driven by tighter heavy crude oil differentials favoring
a very light crude slate.

 [[Image Removed: cvi-20200930_g18.jpg]][[Image Removed: cvi-20200930_g19.jpg]]


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(1)See "Non-GAAP Reconciliations" section below for reconciliations of the non-GAAP measures shown below.


Refining Margin - For the three months ended September 30, 2020, refining margin
was $101 million, or $5.47 per throughput barrel, as compared to $334 million,
or $16.34 per throughput barrel, for the three months ended September 30, 2019.
The decrease in refining margin of $233 million was due to reduced throughput
volumes of 20,832 bpd and lower crack spreads. Market volatility in crude oil
and refined product pricing continues due to the demand impacts of state-enacted
shut down measures, primarily in the second quarter of 2020, to address the
COVID-19 pandemic and high inventory levels for crude oil, gasoline, diesel, and
jet fuel. Market prices for crude oil partially recovered over the course of the
quarter resulting in a $16 million favorable inventory valuation impact during
the three months ended September 30, 2020 with an unfavorable inventory
valuation impact of $1 million during the same period of 2019. In addition, the
Company recognized RINs expense of $36 million, or $1.96 per throughput barrel,
and a benefit of $2 million, or $0.12 per throughput barrel, for the three
months ended September 30, 2020 and 2019, respectively, primarily related to
significantly higher RIN prices during the current quarter.

For the nine months ended September 30, 2020, refining margin was $271 million,
or $5.77 per throughput barrel, as compared to $959 million, or $16.18 per
throughput barrel, for the nine months ended September 30, 2019. The decrease in
refining margin of $688 million was in part due to a reduction in throughput
volumes of 45,604 bpd and lower crack spreads. Throughput volumes were impacted
in 2020 by the full, planned turnaround at the Coffeyville Refinery that took
place from late February 2020 to the middle of April 2020, reduced utilization
rates post startup and at the refinery in Wynnewood, Oklahoma (the "Wynnewood
Refinery") through the end of the second quarter, and continued lower rates at
the Coffeyville Refinery in the third quarter due to running a very light crude
slate. The decline in market pricing for crude oil, and the associated reduction
in selling prices experienced at the end of the first quarter of 2020 for
refined products, coupled with the demand destruction caused by the COVID-19
pandemic resulted in $74 million of unfavorable inventory impacts, or $1.57 per
total throughput barrel. This amount includes an unfavorable lower of cost or
net realizable value adjustment of $58 million, based on the difference between
the carrying value of inventories accounted for using the first-in-first-out
method and selling prices for our refined products experienced subsequent to
March 2020. No such loss was recognized in 2019. The 2020 inventory impact
includes a $16 million unfavorable impact from the crude oil price change during
the nine months ended September 30, 2020 compared to a $31 million favorable
impact for the nine months ended September 30, 2019.

In addition, the Company recognized RINs expense of $71 million, or $1.51 per
throughput barrel, and $31 million, or $0.52 per throughput barrel, for the nine
months ended September 30, 2020 and 2019, respectively, primarily related to
significantly higher RIN prices during the current period. Refining margins in
the third quarter of 2020 were also impacted negatively compared to 2019, yet
positively impacted in 2020 for the nine months ended period, due to changes in
derivative gains. There were derivative gains of $5 million and $70 million
recognized during the three and nine months ended September 30, 2020,
respectively, compared to derivative gains of $18 million and $38 million for
the same periods of 2019, respectively. Our derivative gains primarily reflect
gains from the sale of WCS barrels at Cushing, hedges of excess inventories,
crack spreads swaps, and hedges entered into during 2019 that fixed WCS to WTI
differentials for a portion of the WCS barrels we expect in 2020.


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(1)Exclusive of depreciation and amortization expense.


Direct Operating Expenses (Exclusive of Depreciation and Amortization) - For the
three months ended September 30, 2020, direct operating expenses on a total
throughput barrel basis decreased to $4.17 per barrel from $4.46 per barrel,
primarily due to lower throughput volumes coupled with reduced personnel costs
and lower costs incurred as part of our cost reduction efforts. For the nine
months ended September 30, 2020, direct operating expenses on a total throughput
barrel basis increased to $5.09 per barrel from $4.53 per barrel, largely due to
decreased throughput volumes primarily resulting from the Coffeyville Refinery
being in a full, planned turnaround beginning the last week of February 2020
extending into mid-April 2020 and both refineries running at reduced rates given
market dynamics. Direct operating expenses (exclusive of depreciation and
amortization) were $77 million and $91 million for the three months ended
September 30, 2020 and 2019, respectively. The change was primarily a result of
decreased personnel costs, repairs and maintenance, and other variable expenses
resulting from our cost reduction efforts. For the nine months ended September
30, 2020 and 2019, direct operating expenses (exclusive of depreciation and
amortization) were $239 million and $269 million, respectively. The decrease was
primarily due to lower natural gas and electricity usage due to the refineries
running at reduced rates, coupled with a decrease in personnel costs and repairs
and maintenance expense resulting from our cost reduction efforts.
 [[Image Removed: cvi-20200930_g24.jpg]][[Image Removed: cvi-20200930_g25.jpg]]
Selling, General, and Administrative Expenses, and Other - For the three and
nine months ended September 30, 2020, selling, general and administrative
expenses and other were $12 million and $43 million, respectively, compared to
$19 million and $46 million for the three and nine months ended September 30,
2019, respectively. The decrease for both periods was primarily a result of
decreased corporate allocations and personnel costs in the 2020 periods as
compared to the 2019 periods. Additionally, the nine months ended September 30,
2019 includes a $10 million gain on the sale of Cushing tank assets.



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Nitrogen Fertilizer Segment

Utilization and Production Volumes - The following tables summarize the ammonia
utilization at the Coffeyville Facility and East Dubuque, Illinois facility (the
"East Dubuque Facility"). Utilization is an important measure used by management
to assess operational output at each of the Nitrogen Fertilizer Segment's
facilities. Utilization is calculated as actual tons of ammonia produced divided
by capacity adjusted for planned maintenance and turnarounds.

The presentation of our utilization is on a two-year rolling average which takes
into account the impact of our planned and unplanned outages on any specific
period. We believe the two-year rolling average is a more useful presentation of
the long-term utilization performance of the Nitrogen Fertilizer Segment's
facilities.

Utilization is presented solely on ammonia production, rather than each nitrogen
product, as it provides a comparative baseline against industry peers and
eliminates the disparity of facility configurations for upgrade of ammonia into
other nitrogen products. With efforts primarily focused on ammonia upgrade
capabilities, we believe this measure provides a meaningful view of how well we
operate.

Gross tons produced for ammonia represent the total ammonia produced, including
ammonia produced that was upgraded into other fertilizer products. Net tons
available for sale represent the ammonia available for sale that was not
upgraded into other fertilizer products. The tables below presents all of these
Nitrogen Fertilizer Segment metrics for the three and nine months ended
September 30, 2020 and 2019:

Ammonia Utilization
                                               Two Years Ended September 30
                                                                            2020      2019
            Consolidated                                                    94  %     93  %
            Coffeyville Facility                                            95  %     95  %
            East Dubuque Facility                                           94  %     91  %



Production Volumes
                                        Three Months Ended            Nine Months Ended
                                          September 30,                 September 30,
(in thousands of tons)                2020              2019        2020              2019
Ammonia (gross produced)             215               196             631               586
Ammonia (net available for sale)      71                56             228               168
UAN                                  330               318             968               969



On a consolidated basis, the Nitrogen Fertilizer Segment's utilization increased
1% to 94% for the two years ended September 30, 2020 compared to the two years
ended September 30, 2019. The first quarter of 2019 ammonia storage capacity was
constrained at the East Dubuque Facility impacting comparability to 2020.

Sales and Pricing per Ton - Two of the Nitrogen Fertilizer Segment's key
operating metrics are total sales for ammonia and UAN along with the product
pricing per ton realized at the gate. Product pricing at the gate represents net
sales less freight revenue divided by product sales volume in tons and is shown
in order to provide a pricing measure comparable across the fertilizer industry.


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                                                       Three Months Ended                   Nine Months Ended
                                                         September 30,                        September 30,
                                                     2020               2019              2020              2019
Consolidated sales (thousand tons)
Ammonia                                                  54               33                218              179
UAN                                                     365              340                986              968

Consolidated product pricing at gate (dollars
per ton)
Ammonia                                          $      242$   337$     293$   416
UAN                                                     140              182                156              206



Feedstock - The Nitrogen Fertilizer Segment's Coffeyville Facility utilizes a
pet coke gasification process to produce nitrogen fertilizer, while the East
Dubuque Facility uses natural gas in its production of ammonia. The table below
presents these feedstocks for both facilities within the Nitrogen Fertilizer
Segment for the three and nine months ended September 30, 2020 and 2019:
                                                        Three Months Ended                     Nine Months Ended
                                                           September 30,                         September 30,
                                                       2020                2019              2020               2019

Petroleum coke used in production (thousand             129                 137                 393              404

tons)

Petroleum coke (dollars per ton)                 $    35.11$ 37.75$    36.77$ 36.68
Natural gas used in production (thousands of          2,136               1,700               6,408            5,210
MMBtu) (1)
Natural gas used in production (dollars per      $     2.10$  2.40$     2.15$  2.88
MMBtu) (1)
Natural gas cost of materials and other               2,026               1,294               6,660            5,487
(thousands of MMBtu) (1)
Natural gas cost of materials and other (dollars $     2.01$  2.46$     2.25$  3.22
per MMBtu) (1)




(1)The feedstock natural gas shown above does not include natural gas used for fuel. The cost of fuel natural gas is included in Direct operating expenses (exclusive of depreciation and amortization).

Nitrogen Fertilizer Segment Financial Highlights (Three and Nine Months Ended September 30, 2020 versus September 30, 2019)


Overview - For the three months ended September 30, 2020, the Nitrogen
Fertilizer Segment's operating and net loss were $3 million and $19 million, a
$5 million and $4 million improvement in operating and net loss, respectively,
compared to the three months ended September 30, 2019, driven by lower operating
and allocated costs that more than offset lower revenue for both ammonia and UAN
compared to the three months ended September 30, 2019. For the nine months ended
September 30, 2020, the Nitrogen Fertilizer Segment's operating and net loss
were $34 million and $81 million, a $70 million decrease in operating income and
$71 million increase in net loss, respectively, compared to the nine months
ended September 30, 2019. These changes were driven primarily by a softening
natural gas market and increased imports of UAN, as well as unfavorable ammonia
and UAN pricing seen during the second and third quarters of 2020. Additionally,
for the nine months ended September 30, 2020, a goodwill impairment of
$41 million was recognized.


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(1)See "Non-GAAP Reconciliations" section below for reconciliations of the non-GAAP measures shown above.


Net Sales - For the three months ended September 30, 2020, the Nitrogen
Fertilizer Segment's net sales decreased by $10 million to $79 million compared
to the three months ended September 30, 2019. This decrease was primarily due to
unfavorable pricing conditions which contributed $20 million in lower revenues,
partially offset by increased sales volumes contributing $12 million, as
compared to the three months ended September 30, 2019.

The following table demonstrates the impact of changes in sales volumes and pricing for the primary components of net sales, excluding urea products, freight, and other revenue, for the three months ended September 30, 2020 as compared to the three months ended September 30, 2019:

                                            Price         Volume
                       (in millions)      Variance       Variance
                       UAN               $     (15)$       5
                       Ammonia                  (5)             7



The decrease in UAN and ammonia sales pricing for the three months ended
September 30, 2020 as compared to the three months ended September 30, 2019 was
primarily attributable to competitive pricing pressures seen throughout the
domestic and international markets. For UAN, a softening natural gas market,
which is the typical feedstock for nitrogen plants, shifting trade flows in UAN
due to the imposition of import duties on UAN in the EU, and lower corn prices
due to decreased demand for corn for ethanol blending contributed to lower UAN
prices. For ammonia, lower natural gas and corn prices and reduced demand for
industrial uses of ammonia contributed to lower prices. The increase in both UAN
and ammonia sales volumes


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between the periods were a result of stronger customer fill demand for both
products at the beginning of the third quarter of 2020, which enabled shipments
throughout the quarter.

For the nine months ended September 30, 2020, the Nitrogen Fertilizer Segment's
net sales decreased by $58 million to $260 million compared to the nine months
ended September 30, 2019. This decrease was primarily due to unfavorable pricing
conditions which contributed $77 million in lower revenues, partially offset by
increased sales volumes contributing $20 million, as compared to the nine months
ended September 30, 2019.

The following table demonstrates the impact of changes in sales volumes and pricing for the primary components of net sales, excluding urea products, freight, and other revenue, for the nine months ended September 30, 2020 as compared to the nine months ended September 30, 2019:

                                            Price         Volume
                       (in millions)      Variance       Variance
                       UAN               $     (50)$       4
                       Ammonia                 (27)            16



The decrease in UAN and ammonia sales pricing for the nine months ended
September 30, 2020 as compared to the nine months ended September 30, 2019 was
primarily attributable to the competitive pricing pressures discussed above. For
UAN, the softening natural gas markets, shifting trade flows, and lower corn
prices seen during the second quarter of 2020 contributed to lower prices. For
ammonia, lower natural gas and corn prices and reduced demand for industrial
uses of ammonia contributed to lower prices. The increase in both UAN and
ammonia sales volumes between the periods were a result of strong customer fill
demand at the beginning of the third quarter of 2020, which enabled shipments
throughout the quarter, coupled with a stronger spring ammonia run than the same
period of 2019.

Cost of Materials and Other - For the three months ended September 30, 2020,
cost of materials and other was $22 million, consistent with the same period of
2019. For the nine months ended September 30, 2020, cost of materials and other
was $68 million from $71 million for the nine months ended September 30, 2019 as
a result of lower natural gas prices at the East Dubuque Facility and decreased
pet coke costs at the Coffeyville Facility.

Non-GAAP Measures


Our management uses certain non-GAAP performance measures to evaluate current
and past performance and prospects for the future to supplement our GAAP
financial information presented in accordance with U.S. GAAP. These non-GAAP
financial measures are important factors in assessing our operating results and
profitability and include the performance and liquidity measures defined below.

The following are non-GAAP measures presented for the period ended September 30, 2020:

EBITDA - Consolidated net income (loss) before (i) interest expense, net, (ii) income tax expense (benefit) and (iii) depreciation and amortization expense.

Petroleum EBITDA and Nitrogen Fertilizer EBITDA - Segment net income (loss) before segment (i) interest expense, net, (ii) income tax expense (benefit), and (iii) depreciation and amortization.

Refining Margin - The difference between our Petroleum Segment net sales and cost of materials and other.


Refining Margin adjusted for Inventory Valuation Impacts - Refining Margin
adjusted to exclude the impact of current period market price and volume
fluctuations on crude oil and refined product inventories recognized in prior
periods and lower of cost or market reserves, if applicable. We record our
commodity inventories on the first-in-first-out basis. As a result, significant
current period fluctuations in market prices and the volumes we hold in
inventory can have favorable or unfavorable impacts on our refining margins as
compared to similar metrics used by other publicly-traded companies in the
refining industry.

Refining Margin and Refining Margin adjusted for Inventory Valuation Impacts,
per Throughput Barrel - Refining Margin divided by the total throughput barrels
during the period, which is calculated as total throughput barrels per day times
the number of days in the period.


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Direct Operating Expenses per Throughput Barrel - Direct operating expenses for
our Petroleum Segment divided by the total throughput barrels during the period,
which is calculated as total throughput barrels per day times the number of days
in the period.

Free Cash Flow - Net cash provided by (used in) operating activities less capital expenditures and capitalized turnaround expenditures.


We present these measures because we believe they may help investors, analysts,
lenders and ratings agencies analyze our results of operations and liquidity in
conjunction with our U.S. GAAP results, including but not limited to our
operating performance as compared to other publicly-traded companies in the
refining industry, without regard to historical cost basis or financing methods
and our ability to incur and service debt and fund capital expenditures.
Non-GAAP measures have important limitations as analytical tools, because they
exclude some, but not all, items that affect net earnings and operating income.
These measures should not be considered substitutes for their most directly
comparable U.S. GAAP financial measures. See "Non-GAAP Reconciliations" included
herein for reconciliation of these amounts. Due to rounding, numbers presented
within this section may not add or equal to numbers or totals presented
elsewhere within this document.

Factors Affecting Comparability of Our Financial Results

Our historical results of operations for the periods presented may not be comparable with prior periods or to our results of operations in the future for the reasons discussed below.

Petroleum Segment


Coffeyville Refinery - Beginning in March 2020, the Coffeyville Refinery had a
planned, full facility turnaround lasting 57 days, which was completed in April
2020. During the three and nine months ended September 30, 2020, we capitalized
costs of $1 million and $154 million, respectively, related to this planned
turnaround.

Nitrogen Fertilizer Segment

Goodwill Impairment

As of June 30, 2020, a full, non-cash impairment charge of $41 million was recorded. Refer to Note 6 ("Goodwill") to Part I, Item 1 of this Report for further discussion.

Non-GAAP Reconciliations

Reconciliation of Net (Loss) Income to EBITDA

                                         Three Months Ended                 Nine Months Ended
                                            September 30,                     September 30,
   (in millions)                           2020             2019             2020            2019
   Net (loss) income               $      (108)$ 104$     (241)$ 334
   Add:
   Interest expense, net                    31                26              98               77
   Income tax (benefit) expense            (31)               34             (73)             110
   Depreciation and amortization            69                71             208              217
   EBITDA                          $       (39)$ 235$       (8)$ 738





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Reconciliation of Net Cash Provided By Operating Activities to Free Cash Flow

                                                    Three Months Ended                       Nine Months Ended
                                                       September 30,                           September 30,
                                                  2020               2019                  2020                 2019

Net cash provided by operating activities $ 111$ 269

         $       62$    653

Less:

Capital expenditures                                 (24)              (30)               (101)                   (85)
Capitalized turnaround expenditures                  (11)                -                (158)                   (24)
Free cash flow                                $       76$    239$     (197)$    544

Reconciliation of Petroleum Segment Net (Loss) Income to EBITDA

                                          Three Months Ended                 Nine Months Ended
                                             September 30,                     September 30,
   (in millions)                            2020             2019             2020            2019
   Petroleum net (loss) income      $      (33)$ 170$     (156)$ 478

Add:

   Interest (income) expense, net           (3)                 7              (2)              23

   Depreciation and amortization            51                 51             150              152
   Petroleum EBITDA                 $       15$ 228$       (8)$ 653

Reconciliation of Petroleum Segment Gross Profit to Refining Margin and Refining Margin Adjusted for Inventory Valuation Impact

                                                      Three Months Ended                       Nine Months Ended
                                                         September 30,                           September 30,
(in millions)                                       2020                 2019               2020               2019
Net sales                                     $     927$  1,535$    2,556$  4,484
Cost of materials and other                         826                  1,201               2,285             3,525
Direct operating expenses (exclusive of
depreciation and amortization)                       77                     91                 239               269

Depreciation and amortization                        51                     51                 150               152

Gross (loss) profit                                 (27)                   192                (118)              538
Add:
Direct operating expenses (exclusive of
depreciation and amortization)                       77                     91                 239               269

Depreciation and amortization                        51                     51                 150               152
Refining margin                                     101                    334                 271               959
Inventory valuation impact, (favorable)
unfavorable (1) (2)                                 (16)                     1                  74               (31)

Refining margin adjusted for inventory
valuation impact                              $      85$    335$      345$    928





(1)The Petroleum Segment's basis for determining inventory value under GAAP is
First-In, First-Out ("FIFO"). Changes in crude oil prices can cause fluctuations
in the inventory valuation of crude oil, work in process and finished goods,
thereby resulting in a favorable inventory valuation impact when crude oil
prices increase and an unfavorable inventory valuation impact when crude oil
prices decrease. The inventory valuation impact is calculated based upon
inventory values at the beginning of the accounting period and at the end of the
accounting period. In order to derive the inventory valuation impact per total
throughput barrel, we utilize the total dollar figures for the inventory
valuation impact and divide by the number of total throughput barrels for the
period.
(2)Includes an inventory valuation charge of $58 million recorded in the first
quarter of 2020, as inventories were reflected at the lower of cost or net
realizable value. No adjustment was necessary as of September 30, 2020, June 30,
2020, or December 31, 2019.



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Reconciliation of Petroleum Segment Total Throughput Barrels

                                                             Three Months Ended                                     Nine Months Ended
                                                               September 30,                                          September 30,
                                                     2020                         2019                      2020                         2019
Total throughput barrels per day                      201,168                      222,000                   171,460                      217,064
Days in the period                                         92                           92                       274                          273
Total throughput barrels                           18,507,431                   20,423,972                46,980,133                   59,258,366



Reconciliation of Petroleum Segment Refining Margin per Total Throughput Barrel

                                                      Three Months Ended                       Nine Months Ended
                                                        September 30,                            September 30,
(in millions, except per total throughput
barrel)                                             2020                2019                2020                2019
Refining margin                               $     101$    334$     271$    959
Divided by: total throughput barrels                 19                    20                 47                   59
Refining margin per total throughput barrel   $    5.47$  16.34$    5.77$  16.18

Reconciliation of Petroleum Segment Refining Margin Adjusted for Inventory Valuation Impact per Total Throughput Barrel


                                                      Three Months Ended                       Nine Months Ended
                                                        September 30,                            September 30,
(in millions, except per total throughput
barrel)                                             2020                2019                2020                2019
Refining margin adjusted for inventory
valuation impact                              $      85$    335$     345$    928
Divided by: total throughput barrels                 19                    20                 47                   59
Refining margin adjusted for inventory
valuation impact per total throughput barrel  $    4.61$  16.37$    7.34$  15.65



Reconciliation of Petroleum Segment Direct Operating Expenses per Total
Throughput Barrel

                                                        Three Months Ended                         Nine Months Ended
                                                          September 30,                              September 30,
(in millions, except per total throughput
barrel)                                               2020                 2019                 2020                 2019
Direct operating expenses (exclusive of
depreciation and amortization)                 $       77$     91$      239$    269
Divided by: total throughput barrels                   19                     20                  47                    59
Direct operating expenses per total throughput
barrel                                         $     4.17$   4.46$     5.09$   4.53

Reconciliation of Nitrogen Fertilizer Segment Net Loss to EBITDA

                                          Three Months Ended                 Nine Months Ended
                                             September 30,                     September 30,
   (in millions)                            2020             2019             2020            2019
   Nitrogen fertilizer net loss     $      (19)$ (23)$     (81)$ (10)
   Add:
   Interest expense, net                    16                 16             47                47

   Depreciation and amortization            18                 18             57                60
   Nitrogen Fertilizer EBITDA       $       15$  11$      23$  97





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Liquidity and Capital Resources

Our principal source of liquidity has historically been cash from operations.
Our principal uses of cash are for working capital, capital expenditures,
funding our debt service obligations, and paying dividends to our stockholders,
as further discussed below.

The effects of the COVID-19 pandemic have resulted in a significant and swift
reduction in U.S. economic activity. For our industry, these effects have
predominately resulted in significant changes in crude oil supply, decreases in
crude oil and refined product pricing due to dramatic reductions in demand for
crude oil and our refined products, primarily gasoline and jet fuel, all of
which have caused significant volatility and disruption of the commodity and
financial markets. This period of extreme economic disruption, low crude oil and
refined product prices, and reduced demand has and is likely to continue to have
an impact on our business, results of operations, and access to sources of
liquidity.

In view of the uncertainty of the depth and extent of the contraction in demand
due to the COVID-19 pandemic, combined with the weaker commodity price
environment, we remain focused on safe and reliable operations, cash
conservation, and protecting the balance sheet. As a result of these factors,
and in light of the uncertainty of the current environment as well as potential
future cash requirements of the Company, CVR Energy's board of directors (the
"Board") reduced the cash dividend declared for the first quarter of 2020 to
$0.40 per share and elected not to declare a cash dividend for the second or
third quarter of 2020. These decisions support the Company's continued focus on
financial discipline through a balanced approach of stockholder distributions
and strategic investments while providing additional flexibility to weather the
uncertain environment. The Board will continue to evaluate the economic
environment, the Company's cash needs, optimal uses of cash, and other
applicable factors, and may elect to make additional changes to the Company's
dividend in future periods. Additionally, in executing financial discipline, we
have announced the following proactive measures:

•The deferment of the majority of our growth capital spending, with the
exception of the RDU Project at the Wynnewood Refinery;
•A reduction in the amount of expected maintenance capital expenditures for the
remainder of 2020 to only include those projects which are a priority to support
continuing safe and reliable operations, or are required to support future
activities;
•A reduction in operational and general and administrative costs;
•For the Petroleum Segment, the deferment of the Wynnewood Refinery turnaround
from the spring of 2021 to the spring of 2022, resulting in the delay of
long-lead expenditures into 2021;
•For the Nitrogen Fertilizer Segment, the deferment of the Coffeyville Facility
turnaround from the fall of 2020 to the summer of 2021 and the East Dubuque
Facility turnaround from 2021 to 2022;
•Seeking certain tax benefits under the Coronavirus Aid, Relief, and Economic
Security Act (the "CARES Act") by deferring certain payroll taxes otherwise
required to be paid in 2020, increasing our business interest deduction, and
carrying back our net operating loss generated in 2020; and
•The amendment of the Nitrogen Fertilizer ABL extending its term to September
30, 2022, optimizing the borrowing capacity and fee structure, and revising
certain provisions to provide an improved credit facility for the Nitrogen
Fertilizer Segment.

When paired with the actions outlined above, we believe that our cash from
operations and existing cash and cash equivalents, along with borrowings, as
necessary, under CVR Refining's Amended and Restated ABL Credit Agreement (the
"Petroleum ABL") and CVR Partners' ABL Credit Agreement, formerly the AB Credit
Facility (the "Nitrogen Fertilizer ABL"), will be sufficient to satisfy
anticipated cash requirements associated with our existing operations for at
least the next 12 months. However, our future capital expenditures and other
cash requirements could be higher than we currently expect as a result of
various factors. Additionally, our ability to generate sufficient cash from our
operating activities and secure additional financing depends on our future
operational performance, which is subject to general economic, political,
financial, competitive, and other factors, some of which may be beyond our
control.

Depending on the needs of our business, contractual limitations and market
conditions, we may from time to time seek to issue equity securities, incur
additional debt, issue debt securities, or otherwise refinance our existing
debt. There can be no assurance that we will seek to do any of the foregoing or
that we will be able to do any of the foregoing on terms acceptable to us or at
all.


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The Company's January 2020 offering of $600 million in aggregate principal
amount of 5.25% Senior Unsecured Notes due 2025 (the "2025 Notes"), which mature
on February 15, 2025, and $400 million in aggregate principal amount of 5.75%
Senior Unsecured Notes due 2028 (the "2028 Notes"), which mature on February 15,
2028, along with the associated repayment of the CVR Refining Senior Notes due
2022 (the "2022 Notes"), and amendments to the Nitrogen Fertilizer ABL,
collectively represent a material change in the Company's liquidity position as
compared to our 2019 Form 10-K. See Note 9 ("Long-Term Debt and Finance Lease
Obligations") for further discussion. The Company, and its subsidiaries, were in
compliance with all covenants under their respective debt instruments as of
September 30, 2020.

Cash Balances and Other Liquidity

As of September 30, 2020, we had consolidated cash and cash equivalents of $672 million, $393 million available under the Petroleum ABL, and $25 million available under the Nitrogen Fertilizer ABL.

                                                               September 30,
(in millions)                                                       2020               December 31, 2019
CVR Partners:
9.25% Senior Secured Notes, due June 2023                     $         645          $              645

6.50% Senior Notes, due April 2021, net of current portion (1)

                                                                       -                           2
Unamortized discount and debt issuance costs                            (12)                        (15)
Total CVR Partners debt                                       $         633          $              632

CVR Refining:
6.50% Senior Notes, due November 2022 (2)                     $           -          $              500

Unamortized debt issuance cost                                            -                          (3)

Total CVR Refining debt                                       $           -          $              497

CVR Energy:
5.25% Senior Notes, due February 2025                         $         600          $                -
5.75% Senior Notes, due February 2028                                   400                           -
Unamortized debt issuance costs                                          (6)                          -
Total CVR Energy debt                                         $         994          $                -
Total long-term debt                                          $       1,627          $            1,129
Current portion of long-term debt (1)                                     2                           -
Total long-term debt, including current portion               $       1,629          $            1,129





(1)The 6.50% Notes, due April 2021, mature within 12 months, and, therefore, the
outstanding balance of $2 million has been classified as short-term debt as of
September 30, 2020. Amounts reported in Other current liabilities.
(2)On January 27, 2020, the Company redeemed all of the 2022 Notes for a
redemption price equal to 101.083%, plus accrued and unpaid interest, on the
redeemed notes.

CVR Partners

The Nitrogen Fertilizer Segment has a 9.25% Senior Secured Notes due 2023, 6.50%
Senior Notes due 2021, and the Nitrogen Fertilizer ABL, the proceeds of which
may be used to fund working capital, capital expenditures, and for other general
corporate purposes. The Nitrogen Fertilizer Segment amended and extended the
Nitrogen Fertilizer ABL in September 2020. Refer to Note 9 ("Long-Term Debt and
Finance Lease Obligations") to Part I, Item 1 of this Report for further
discussion.

CVR Refining


The Petroleum Segment has the Petroleum ABL, the proceeds of which may be used
to fund working capital, capital expenditures, and for other general corporate
purposes. The Company redeemed all of the 2022 Notes in January 2020. Refer to
Note 9 ("Long-Term Debt and Finance Lease Obligations") to Part I, Item 1 of
this Report for further discussion.



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CVR Energy

On January 27, 2020, CVR Energy issued the 2025 Notes and 2028 Notes. A portion
of the net proceeds from the 2025 Notes and 2028 Notes were used to fund the
redemption of the 2022 Notes. The remaining net proceeds will be used for
general corporate purposes, which may include funding (i) acquisitions, (ii)
capital projects, and/or (iii) share repurchases or other distributions to our
stockholders. Refer to Part II, Item 8 of our 2019 Form 10-K and Note 9
("Long-Term Debt and Finance Lease Obligations") of this Report for further
discussion of the issuance of these new notes and the redemption of the 2022
Notes.

Capital Spending

We divide capital spending needs into two categories: maintenance and growth.
Maintenance capital spending includes non-discretionary maintenance projects and
projects required to comply with environmental, health, and safety regulations.
Growth capital projects generally involve an expansion of existing capacity
and/or a reduction in direct operating expenses. We undertake growth capital
spending based on the expected return on incremental capital employed.

Our total capital expenditures for the nine months ended September 30, 2020, along with our estimated expenditures for 2020, by segment, are as follows:

                                          Nine Months Ended                                    2020 Estimate (1)
                                      September 30, 2020 Actual                 Maintenance          Growth             Total
(in millions)                      Maintenance     Growth     Total            Low       High     Low      High     Low      High
Petroleum Segment                $         66    $    14$   80$    73$  77$  13$  15$  86$  92
Nitrogen Fertilizer Segment                 9          4        13               13       15        5        6       18       21
Other (2)                                   3          -         3                2        3       15       19       17       22
Total                            $         78    $    18$   96$    88$  95$  33$  40$ 121$ 135





(1)Total 2020 estimated capital expenditures includes up to approximately $1
million of growth-related projects that will require additional approvals before
commencement.
(2)Includes total 2020 estimated RDU capital expenditures of between $15 and
$19 million.

We have reduced our 2020 estimated capital expenditures from the guidance
provided in the 2019 Form 10-K, as outlined in our discussion above. Our
estimated capital expenditures are subject to further change due to
unanticipated changes in the cost, scope, and completion time for capital
projects. For example, we may experience unexpected changes in labor or
equipment costs necessary to comply with government regulations or to complete
projects that sustain or improve the profitability of the refineries or nitrogen
fertilizer facilities. We may also accelerate or defer some capital expenditures
from time to time.

The Petroleum Segment completed a major scheduled turnaround at the Coffeyville
Refinery during the second quarter of 2020. Total capitalized expenditures in
2020, primarily relating to the Coffeyville Refinery turnaround, were
$154 million, of which $127 million, $26 million, and $1 million was capitalized
in the first, second, and third quarters of 2020, respectively. During the nine
months ended September 30, 2019, total amounts capitalized relating to
turnaround expenditures were $27 million, primarily relating to the Wynnewood
Refinery.

Dividends to CVR Energy Stockholders


Dividends, if any, including the payment, amount and timing thereof, are subject
to change at the discretion of the Board. There were no dividends declared or
paid by the Company during the three months ended September 30, 2020 related to
the second quarter of 2020. No dividends were declared for the third quarter of
2020.



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The following tables present dividends paid to the Company's stockholders,
including IEP, during 2020 and 2019 (amounts presented in the tables below may
not add to totals presented due to rounding).
                                                                                                    Dividends Paid (in millions)
     Related Period                   Date Paid              Dividend Per Share          Stockholders             IEP              Total
2019 - 4th Quarter                  March 9, 2020           $             0.80          $         23          $     57$      80
2020 - 1st Quarter                  May 26, 2020                          0.40                    12                28                 40

Total                                                       $             1.20          $         35          $     85$     121



                                                                                                       Dividends Paid (in millions)
     Related Period                    Date Paid                Dividend Per Share          Stockholders             IEP              Total
2018 - 4th Quarter                   March 11, 2019            $             0.75          $         22          $     53$      75
2019 - 1st Quarter                    May 13, 2019                           0.75                    22                53                 75
2019 - 2nd Quarter                  August 12, 2019                          0.75                    22                53                 75
2019 - 3rd Quarter                 November 11, 2019                         0.80                    23                57                 80
Total                                                          $             3.05          $         90          $    217$     307

Distributions to CVR Partners' Unitholders


Distributions, if any, including the payment, amount and timing thereof, are
subject to change at the discretion of the board of directors of its general
partner (the "UAN GP Board"). There were no distributions declared or paid by
CVR Partners during the nine months ended September 30, 2020 related to the
fourth quarter of 2019 or the first and second quarters of 2020, and no
distributions were declared for the third quarter of 2020.

The following table presents distributions paid by CVR Partners to its common unitholders, including amounts paid to CVR Energy, during 2019 (amounts presented in table below may not add to totals presented due to rounding).

                                                                                                      Distributions Paid (in thousands)
                                                                 Distribution Per              Public
     Related Period                    Date Paid                   Common Unit               Unitholders            CVR Energy             Total
2018 - 4th Quarter                   March 11, 2019            $            0.12          $            9          $         5          $       14
2019 - 1st Quarter                    May 13, 2019                          0.07                       5                    3                   8
2019 - 2nd Quarter                  August 12, 2019                         0.14                      10                    5                  16
2019 - 3rd Quarter                 November 11, 2019                        0.07                       5                    3                   8
Total                                                          $            0.40          $           30          $        16$       45





Capital Structure

On October 23, 2019, the Board authorized a stock repurchase program (the "Stock
Repurchase Program"). The Stock Repurchase Program would enable the Company to
repurchase up to $300 million of the Company's common stock. Repurchases under
the Stock Repurchase Program may be made from time-to-time through open market
transactions, block trades, privately negotiated transactions or otherwise in
accordance with applicable securities laws. The timing, price and amount of
repurchases (if any) will be made at the discretion of management and are
subject to market conditions as well as corporate, regulatory and other
considerations. While the Stock Repurchase Program currently has a duration of
four years, it does not obligate the Company to acquire any stock and may be
terminated by the Board at any time. As of September 30, 2020, the Company has
not repurchased any of the Company's common stock under the Stock Repurchase
Program.

On May 6, 2020, the UAN GP Board, on behalf of CVR Partners, authorized a unit
repurchase program (the "Unit Repurchase Program"). The Unit Repurchase Program
enables CVR Partners to repurchase up to $10 million of its common units. During
the three and nine months ended September 30, 2020, CVR Partners repurchased
1,403,784 and 2,294,002 common units, respectively, on the open market at a cost
of $1 million and $2 million, respectively, inclusive of transaction costs, or
an average price of $0.94 and $0.99 per common unit, respectively. At September
30, 2020, CVR Partners had


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$8 million in authority remaining under the Unit Repurchase Program. This Unit
Repurchase Program does not obligate CVR Partners to acquire any common units
and may be cancelled or terminated by the UAN GP Board at any time.

Recent Developments


As disclosed in CVR Partners' Form 8-K filed with the SEC on April 24, 2020, on
April 20, 2020, the average closing price of CVR Partners' common units had
fallen below $1.00 per unit over a 30 consecutive trading-day period, which is
the minimum average unit price for continued listing on the New York Stock
Exchange (the "NYSE") under Section 802.01C of the NYSE Listed Company Manual.
CVR Partners has until January 1, 2021 to regain compliance with this continued
listing standard. As of September 30, 2020, the average closing price of CVR
Partners' common units over the preceding consecutive 30 trading-day period
remained below $1.00 per common unit.

On November 2, 2020, CVR Partners announced that the UAN GP Board had approved a
1-for-10 reverse split of CVR Partners' common units to be effective at 5:00
p.m. Eastern Time on November 23, 2020, pursuant to which each ten common units
of CVR Partners would be converted into one common unit of the Partnership (the
"Reverse Unit Split"). In accordance with CVR Partners' Agreement of Limited
Partnership, as amended, following the Reverse Unit Split, any fractional units
of record holders will be rounded up or down, as applicable, to the nearest
whole common unit, with any fraction equal to or above 0.5 common units rounding
up to the next higher common unit. Following the Reverse Unit Split, the number
of CVR Partners common units outstanding would decrease from approximately 111
million common units to approximately 11 million common units, with
proportionate adjustments to the common units under CVR Partners' long-term
incentive plan and outstanding awards thereunder.

The UAN GP Board determined the 1-for-10 ratio to be appropriate to meet CVR
Partners' goals of improving the marketability of its common units, regaining
compliance with NYSE listing requirements, and reducing the risk of future
noncompliance with such listing requirements.

CVR Partners' common units are expected to begin trading on a split-adjusted
basis when markets open on November 24, 2020, under the symbol "UAN" and a new
CUSIP number.

Cash Flows

Free cash flow for the nine months ended September 30, 2020 was a use of cash of
$197 million as compared to a source of cash of $544 million for the nine months
ended September 30, 2019. The significant decline in free cash flow is due to a
decline in net income, an increase in capital expenditures, and an increase in
turnaround expenditures primarily associated with the Coffeyville Refinery
turnaround in the first half of 2020. The following table sets forth our
consolidated cash flows for the periods indicated below:
                                                       Nine Months Ended September 30,
(in millions)                                            2020                 2019       Change
Net cash provided by (used in):
Operating activities                         $       62$ 653$ (591)
Investing activities                               (396)                       (73)       (323)
Financing activities                                361                       (556)        917
Net increase in cash and cash equivalents    $       27$  24$    3



Operating Activities

The change in operating activities for the nine months ended September 30, 2020,
as compared to the nine months ended September 30, 2019, was primarily due to a
decline in net income, excluding non-cash items, of $500 million paired with
unfavorable changes in working capital of $92 million associated with the
decline in crude oil prices during 2020, partially offset by favorable changes
in non-current assets and liabilities of $1 million.



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Investing Activities

The change in net cash used in investing activities for the nine months ended
September 30, 2020, as compared to the nine months ended September 30, 2019 was
primarily due to the purchase of Delek common stock for $140 million in the
first quarter of 2020, an increase in turnaround expenditures of $134 million
relating to the Coffeyville Refinery turnaround in the first half of 2020, a
decrease in proceeds from the sale of assets of $35 million, and an increase in
capital expenditures of $16 million.

Financing Activities


The change in net cash provided by financing activities for the nine months
ended September 30, 2020, as compared to the net cash used in financing
activities for nine months ended September 30, 2019 was due to increased cash
inflows from the private offering of the 2025 Notes and 2028 Notes totaling $1.0
billion in January 2020, a decrease in CVR Energy's dividends and CVR Partners'
distributions during 2020 of $104 million and $25 million, respectively, along
with a decrease in cash outflows from the purchase of remaining CVR Refining's
units outstanding of $301 million during the nine months ended September 30,
2019 with no corresponding amounts paid in 2020. Cash provided by financing
activities is partially offset by payments of $500 million for the redemption of
the outstanding 2022 Notes in January 2020, $5 million in a call premium on the
January 2020 extinguishment of the CVR Refining senior notes, the repurchase of
CVR Partners' common units of $2 million, and an increase in other financing
activities of $6 million.

Off-Balance Sheet Arrangements

We do not have any "off-balance sheet arrangements" as such term is defined within the rules and regulations of the SEC.

© Edgar Online, source Glimpses

Stocks mentioned in the article
ChangeLast1st jan.
CVR ENERGY, INC. -0.64% 18.5 Delayed Quote.24.16%
CVR PARTNERS, LP -1.56% 17.01 Delayed Quote.6.18%
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