Executive Summary / Key Takeaways

• CVR Energy is a diversified energy holding company operating in petroleum refining, renewable fuels, and nitrogen fertilizer manufacturing, strategically positioned in the Mid-Continent U.S.
• Recent performance, particularly in Q1 2025, was significantly impacted by a major planned turnaround at the Coffeyville refinery, leading to a consolidated net loss, though operational improvements and cost controls partially mitigated the impact.
• The company is prioritizing balance sheet strength and liquidity following the turnaround, having taken steps to enhance cash reserves and temporarily suspending the dividend, with a focus on debt reduction to reach target leverage ratios.
• Technological differentiation, including pet coke gasification in fertilizers and ongoing upgrades in refining and renewables (pretreater, planned alkylation/distillate projects), offers potential cost advantages and operational flexibility, though the renewables segment faces significant uncertainty tied to government subsidy policy.
• While the refining market remains volatile, management is cautiously optimistic for improvement in 2025 due to expected supply rationalization, and the fertilizer segment is viewed as stable in a mid-cycle environment with strong demand outlook.

Setting the Scene: A Diversified Energy Footprint

CVR Energy, Inc. ($CVI) stands as a diversified holding company with a strategic presence across key segments of the North American energy and agricultural value chains: petroleum refining and marketing, renewable fuels, and nitrogen fertilizer manufacturing. Founded in 1906, the company has evolved its operational and reporting structure over time, notably establishing the Renewables Segment as a distinct reporting unit in 2024 to reflect its growing prominence. This multi-faceted approach positions CVI to capture value from distinct market dynamics, though it also exposes the company to varied cyclical and regulatory pressures.

Operating primarily in the Mid-Continent region of the United States, CVI's Petroleum Segment includes refineries in Coffeyville, Kansas, and Wynnewood, Oklahoma, alongside crude gathering and logistics assets. These facilities process crude oil and other feedstocks into transportation fuels like gasoline, diesel, and jet fuel. The Renewables Segment, centered at the Wynnewood Refinery, converts renewable feedstocks into renewable diesel. Through its significant interest in CVR Partners, LP, CVI's Nitrogen Fertilizer Segment produces ammonia and urea ammonium nitrate (UAN) using both pet coke gasification (Coffeyville) and natural gas (East Dubuque) feedstocks, serving agricultural and industrial customers.

The competitive landscape for CVI is characterized by larger, more integrated players in refining like Valero Energy (VLO), Marathon Petroleum (MPC), and Phillips 66 (PSX), and specialized competitors in fertilizers such as CF Industries (CF). While CVI's scale is smaller than refining majors, its strategic location and specific technological capabilities offer competitive nuances. For instance, CVI's pet coke gasification process at the Coffeyville fertilizer plant provides a differentiated feedstock advantage compared to natural gas-based producers like CF Industries, potentially offering cost efficiencies. In refining, while peers like VLO and MPC boast larger capacities and potentially lower operating costs per barrel due to scale and advanced automation, CVI is investing in upgrades like the planned alkylation unit replacement at Wynnewood and distillate yield improvements at both refineries to enhance efficiency and product capture. The Renewables segment faces intense competition and is heavily influenced by government policies, where larger players may have greater resources to navigate regulatory complexity and invest in emerging technologies like Sustainable Aviation Fuel (SAF).

A core aspect of CVI's operational strategy and potential competitive advantage lies in its technological investments. The Coffeyville fertilizer facility's pet coke gasification process is a key differentiator, allowing it to utilize a lower-cost feedstock compared to natural gas, which is subject to different price dynamics. In the Renewables segment, the recent commissioning of the renewable feedstock pretreater at Wynnewood is a notable technological step, enabling the processing of cheaper, untreated feedstocks. Management has indicated this pretreater is improving renewable diesel yield, reporting yields over 95% and contributing positively to economics. Planned projects, such as the replacement of the HF alkylation unit at Wynnewood with a fixed-bed catalyst system (estimated $136 million capital, operational Q2 2027), aim to expand capacity by approximately 2,500 bpd, increase premium gasoline production, and eliminate hazardous HF acid. Distillate yield improvement projects at both refineries, with phase one at Coffeyville completed in early 2025 potentially adding up to 1,500 bpd of diesel, target increased production of valuable middle distillates. Furthermore, the company is exploring the potential for natural gas feedstock optionality and hydrogen import at the Coffeyville fertilizer facility, aiming for dual feedstock flexibility and increased ammonia production capacity. These initiatives underscore a strategic focus on leveraging technology to enhance operational flexibility, reduce costs, improve product yields, and mitigate specific operational risks.

The broader industry environment presents a complex backdrop. Geopolitical events, shifts in global trade policy, and inflation continue to drive volatility in commodity prices and impact supply chains. The energy transition, including the growth of electric vehicles and evolving emissions standards, poses a long-term challenge to demand for traditional transportation fuels. Regulatory dynamics, particularly the administration and litigation surrounding the Renewable Fuel Standard (RFS) and the uncertainty around renewable fuel tax credits (like the PTC), introduce significant risk and impact profitability, especially in the Petroleum and Renewables segments. Conversely, strong agricultural fundamentals, supported by global food demand and biofuel mandates, underpin the outlook for the Nitrogen Fertilizer segment.

Performance Under Pressure: Navigating Operational Headwinds and Market Volatility

CVR Energy's recent financial performance reflects the impact of both challenging market conditions and significant operational events. For the first quarter of 2025, the company reported a consolidated net loss of $105 million and an operating loss of $131 million, a notable decline from net income of $90 million and operating income of $123 million in Q1 2024. Adjusted EBITDA for Q1 2025 was $24 million, down from $99 million in the prior-year period.

The primary driver of this performance was the Petroleum Segment, which posted an operating loss of $161 million in Q1 2025 compared to operating income of $118 million in Q1 2024. This was largely attributable to lower throughput volumes resulting from the major planned turnaround at the Coffeyville refinery, which began in January 2025 and was completed in late April 2025. Unplanned operational events in January, including damage to the Naphtha Hydrotreater during freezing weather, accelerated the turnaround timing and extended its duration by approximately four weeks, impacting throughput and increasing costs. Total Petroleum Segment throughput in Q1 2025 was approximately 120,377 bpd, significantly lower than the 195,792 bpd processed in Q1 2024.

Refining margin in the Petroleum Segment plummeted to $5 million ($0.42/bbl) in Q1 2025 from $290 million ($16.29/bbl) in Q1 2024. This sharp decrease was driven by a combination of factors: a decline in benchmark crack spreads (Group 3 2-1-1 averaged $17.65/bbl in Q1 2025 vs. $19.55/bbl in Q1 2024), unfavorable sales volume impacts from the turnaround, and a substantial increase in RFS-related expense, which included unfavorable RINs revaluation adjustments. Direct operating expenses per throughput barrel in the Petroleum Segment surged to $8.58 in Q1 2025 from $5.78 in Q1 2024, primarily due to the lower throughput base during the turnaround.

In contrast, the Renewables Segment showed improvement, moving from an operating loss of $10 million in Q1 2024 to an operating income of less than $1 million in Q1 2025. Adjusted EBITDA for the segment was $3 million in Q1 2025, up from -$5 million in Q1 2024. This was driven by higher production and sales volumes (14 million gallons processed in Q1 2025 vs. 6.88 million gallons in Q1 2024), increased biodiesel RIN prices, and reduced feedstock basis, partially offsetting the impact of the expired Blender's Tax Credit (BTC). The segment's margin improved to $1.13 per gallon in Q1 2025 from $0.65 per gallon in Q1 2024.

The Nitrogen Fertilizer Segment delivered a strong performance, with operating income increasing to $35 million in Q1 2025 from $20 million in Q1 2024, and Adjusted EBITDA rising to $53 million from $40 million. This was primarily due to higher UAN sales volumes (336 thousand tons in Q1 2025 vs. 284 thousand tons in Q1 2024) and higher ammonia pricing ($554/ton in Q1 2025 vs. $528/ton in Q1 2024), coupled with lower pet coke feedstock costs. Ammonia utilization was robust at 101% in Q1 2025, up from 90% in Q1 2024, reflecting reduced planned and unplanned downtime compared to the prior year.

Liquidity remains a key focus. Cash from operations was a use of $195 million in Q1 2025, compared to providing $177 million in Q1 2024, primarily due to the net loss and unfavorable working capital changes related to the Coffeyville turnaround. Total liquidity as of March 31, 2025, stood at approximately $1.1 billion, comprised of $695 million in cash and cash equivalents and $401 million in available borrowing capacity under credit facilities. This compares to $1.3 billion in liquidity at December 31, 2024. The company took proactive steps in late 2024 to enhance liquidity, including securing a $325 million term loan and selling its interest in the Midway Pipeline for approximately $90 million gross proceeds, specifically to manage through the turnaround and potential market weakness. Total consolidated capital expenditures (excluding turnaround) were $55 million in Q1 2025, while capitalized turnaround expenditures were $166 million.

Outlook and Strategic Positioning for Recovery

With the major Coffeyville refinery turnaround now complete as of late April 2025 (at a total cost of approximately $210 million), CVR Energy is focused on ramping the facility back to full rates over the second quarter. Management's guidance for Q2 2025 reflects this, estimating Petroleum Segment throughput between 160,000 and 180,000 bpd. Direct operating expenses for the segment are projected to be between $105 million and $115 million, with capital spending (excluding turnaround) between $35 million and $40 million. Importantly, no additional Petroleum Segment turnarounds are planned for the remainder of 2025 or 2026, positioning the company to fully benefit from market conditions.

The strategic priority post-turnaround is clear: strengthen the balance sheet and reduce debt. Management aims to restore leverage to a target of approximately 2 to 2.5 times mid-cycle EBITDA on a gross basis. The $325 million term loan is not intended to be a long-term part of the capital structure. The temporary suspension of the quarterly dividend, a difficult decision made in October 2024, remains in place to preserve cash and support this deleveraging effort, though management indicated the Board will continue to evaluate it quarterly, and a return is possible once the balance sheet is restored and market conditions show sustained strength.

In the Renewables Segment, the Q2 2025 throughput is estimated between 16 million and 20 million gallons, with direct operating expenses between $8 million and $10 million and capital spending between $2 million and $4 million. Management intends to continue operating the renewable diesel unit at optimized rates while awaiting clarity on the Production Tax Credit (PTC) and final IRS rules, as well as the future of the RFS. While the segment generated positive Adjusted EBITDA in Q1 2025 despite the expired BTC, profitability remains highly dependent on government credits. The company is pausing active pursuit of new renewable projects or partners until there is greater certainty and durability regarding government subsidies, though it remains open to opportunities where subsidy risk can be minimized, such as through off-take agreements for SAF conversion.

The Nitrogen Fertilizer Segment is expected to maintain strong operational performance, with Q2 2025 ammonia utilization estimated between 93% and 97% (factoring in some planned downtime at East Dubuque). Direct operating expenses (excluding inventory impacts) are projected between $57 million and $62 million, and capital spending between $18 million and $22 million. The segment benefits from favorable farmer economics driven by grain prices and strong demand heading into the spring planting season. Planned investments in reliability and potential feedstock flexibility projects at Coffeyville aim to enhance long-term operational and cost positioning.

For the full year 2025, total consolidated capital spending is estimated between $180 million and $210 million, with turnaround spending projected between $180 million and $200 million, reflecting the significant Coffeyville event. Management is cautiously optimistic about refining market conditions improving in 2025 relative to 2024, citing factors like heavy spring maintenance, announced refinery closures in the U.S. and Europe (totaling nearly 800,000 bpd expected shut in by end 2025), and low U.S. gasoline and diesel inventories relative to the five-year average. However, they note that current crack spreads remain below mid-cycle levels and are surprised they aren't higher given the supply/demand indicators and increased RIN prices. The evolving tariff environment and potential demand concerns are also factors to watch.

Risks and Challenges on the Horizon

Despite the strategic positioning and operational focus, CVR Energy faces significant risks that could impact its performance and investment thesis. Market volatility in crude oil, refined products, and feedstocks remains a primary concern, directly impacting refining margins and profitability. Geopolitical events and changes in global trade policies can exacerbate this volatility and affect supply chains.

A particularly acute risk is the regulatory environment, especially concerning the Renewable Fuel Standard (RFS). The cost of compliance with RFS obligations, primarily through the purchase of RINs, is substantial and volatile. CVI is actively engaged in litigation against the EPA, challenging the agency's denial of small refinery exemptions (SREs) and its administration of the RIN market, which management contends has led to manipulation and disproportionate economic harm. The outcome of these legal challenges, including a pending SCOTUS ruling on venue for SRE cases and ongoing suits in lower courts, is uncertain but could materially affect the company's financial position. Management has expressed frustration with the EPA's actions, stating the situation "remains incomprehensible" and that EPA has "broken the RFS."

The Renewables Segment's viability is heavily dependent on government subsidies and tax credits (RINs, LCFS, PTC). The expiration of the BTC and uncertainty surrounding the PTC create significant financial risk. Management has stated that without sufficient government support, renewable fuel production may not be profitable, and they are hesitant to invest further capital in new projects until there is clarity and durability in these policies.

Operational risks, including unplanned downtime, accidents, and the successful execution of turnarounds, can significantly impact production volumes and costs, as evidenced by the Wynnewood fire in 2024 and the extended Coffeyville turnaround in Q1 2025. While the Coffeyville turnaround is complete, future operational reliability is crucial.

Furthermore, the company's concentration in the Mid-Continent region exposes it to regional market dynamics and infrastructure constraints. While management views its refineries as competitive within the U.S. fleet, larger, more diversified competitors may have advantages in navigating regional disparities or leveraging integrated supply chains. The significant ownership stake by Icahn Enterprises (IEP) and its affiliates, while potentially signaling strategic initiatives, also introduces risks related to control and potential transactions.

Conclusion

CVR Energy is navigating a complex energy landscape, marked by volatile commodity markets, evolving regulations, and the ongoing energy transition. The first quarter of 2025 highlighted the impact of significant operational events, particularly the major turnaround at the Coffeyville refinery, on consolidated financial performance. However, with this critical maintenance now complete, the company is poised to return to full operational capacity in its Petroleum Segment, which is free of major planned turnarounds through 2026.

The core investment thesis for CVI rests on its diversified asset base, strategic location, and ongoing efforts to enhance operational efficiency and flexibility through technological upgrades in both refining and fertilizer operations. The Nitrogen Fertilizer Segment provides a relatively stable earnings stream in a mid-cycle market, while the Petroleum Segment offers leverage to potential improvements in refining margins driven by anticipated supply rationalization. The Renewables Segment, while facing significant uncertainty tied to government policy, represents a potential avenue for future growth if regulatory clarity emerges.

Management's focus on strengthening the balance sheet, reducing debt following the term loan issuance, and maintaining liquidity is a prudent strategy to weather potential near-term market weakness and position the company for future opportunities. The temporary suspension of the dividend underscores this commitment to financial discipline. While significant risks remain, particularly the unpredictable nature of RFS compliance costs and renewable fuel subsidies, CVI's operational improvements, strategic investments, and disciplined financial management provide a foundation for potential recovery and value creation as market conditions evolve. The successful execution of its strategic priorities, including debt reduction and capturing improved refining margins, will be key factors for investors to monitor.