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Par Petroleum reports 2Q15 net income of US$11.7 million

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Hydrocarbon Engineering,

Par Petroleum Corporation has reported its second quarter 2015 results.

"Strong adjusted EBITDA in the second quarter was driven by favourable market conditions and solid performance across the board," said Joseph Israel, Par Petroleum's President and CEO. "Continued improvement of on island sales and feedstock flexibility have led to record high refinery throughput at 81 000 bpd, with optimised yields and cost structure of US$3.15/bbl. Throughout the quarter, we continued our efforts to optimise our operations and began successfully integrating Mid Pac. We remain focused on identifying additional integration synergies and on pursuing opportunities that could accelerate our growth."

During the second quarter, Par generated a net income of US$11.7 million, or US$0.31 per diluted share, compared to a net loss of US$24.7 million, or US$(0.81) per share for the same period last year. Par recorded an US$18.6 million tax benefit in 2Q15 for the release of a valuation allowance due to the Mid Pac Acquisition. The company also recorded a non-cash loss of US$19.2 million in the second quarter primarily related to the termination of the Supply and Exchange Agreement with Barclays Bank PLC that was previously announced in June 2015. Net income for 2Q15 also included an aggregate non-cash loss of US$6.2 million related to the contingent consideration under the company's purchase agreement with Tesoro and the revaluation of common stock warrants, compared to an aggregate gain of US$2.4 million for 2Q14. Excluding the impact of those four items, adjusted net income was US$17.1 million, or US$0.46 per diluted share for 2Q15. Adjusted EBITDA for the second quarter was US$30.8 million compared to an adjusted EBITDA loss of US$18.6 million in last year's second quarter.

Refinery gross margin increased 12% sequentially to US$58.7 million for 2Q15 and increased more than five times compared to US$10.4 million for the same period in 2014. For the quarter, improved Singapore and West Coast products markets generated a US$9.76/bbl 4-1-2-1 Mid Pacific crack spread, US$3.65/bbl more favourable than the 2Q14 average and US$0.67/bbl more favourable than 1Q15. Retail fuel sales volume including Mid Pac was 22.6 million gal in 2Q15. Year over year, fuel volume and merchandise sales are up 5% and 14% respectively, on same stores basis.

"We continue to benefit from strong market conditions thus far in the third quarter and we currently anticipate refinery throughput around 75 000 bpd for the third quarter," added Israel.

In 2Q15, net cash from operations totalled US$98.6 million and the company had net repayments of debt, including loan costs, of US$23.3 million. At 30 June 2015, Par's cash balance totalled US$78.2 million, long term debt totalled US$171.4 million and total liquidity was US$142.0 million compared to US$89.2 million in cash, US$136.6 million of long term debt, and US$190.5 million in total liquidity at 31 December 2014.

Supply and Offtake Agreement

As previously reported on 1 June 2015, Hawaii Independent Energy, LLC (HIE), Par's wholly owned subsidiary, entered into a Supply and Offtake Agreement with J. Aron & Company (J. Aron), the commodity trading arm of Goldman Sachs. The agreement provides for HIE to purchase from J. Aron mutually agreed crude oil cargos for use in its Hawaii refinery. J. Aron, in turn, will purchase the refined products HIE produces at market prices. HIE will repurchase the refined products from J. Aron and then sell the products to its customers. The term of the agreement will run through May 2018 with two one year extension options. The agreement also allows for deferral of payments to J. Aron of up to US$125 million or 85% of certain receivables and company owned inventory. Upon execution of the Supply and Offtake Agreement with J. Aron, HIE terminated its Supply and Exchange Agreements with Barclays, which resulted in the non-cash charges previously mentioned.

This arrangement with J. Aron resulted in approximately US$20 million in additional cash and liquidity given current market conditions. Added benefits of the agreement include reduction in crude acquisition costs and increased flexibility to manage market price fluctuations.

Adapted from press release by Rosalie Starling

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