CVR Energy Inc. (NYSE:CVI) stock fell Tuesday after the refiner unveiled a $4.2 billion deal to acquire Marathon Petroleum Corporation (NYSE:MPC) assets and announced a $750 million stock offering, overshadowing stronger-than-expected third-quarter earnings.
The acquisition would nearly double CVR’s refining capacity, marking a major expansion of its petroleum business.
CVR reported adjusted earnings of $4.00 per share, beating the analyst estimate of $2.25.
Revenue surged 68.8% year over year to $3.281 billion, topping the $2.282 billion estimate.
Refining Business Fuels Earnings Growth
GAAP earnings rose to $5.67 per share from $3.72 a year earlier. Net income increased to $570 million from $374 million, while adjusted EBITDA climbed to $582 million from $180 million.
The Petroleum segment drove the gains, with revenue rising to $3.138 billion from $1.739 billion. Adjusted EBITDA jumped to $565 million from $120 million.
Total throughput increased to 227,637 barrels per day from 215,968 a year earlier. Crude utilization improved to 104.9% from 96.6%.
Adjusted refining margin climbed to $34.97 per throughput barrel from $12.87.
However, the Nitrogen Fertilizer segment posted an $11 million net loss, compared with a $43 million profit a year earlier.
EBITDA fell to $20 million from $71 million, reflecting a planned turnaround at the East Dubuque facility.
The company generated $655 million in operating cash flow and $593 million in free cash flow.
Results also benefited from a $253 million reduction in renewable fuel compliance liabilities following an EPA waiver.
CVR ended September with $1.278 billion in cash and $1.781 billion in debt and finance lease obligations.
The board declared a quarterly dividend of 10 cents per share, payable Nov. 23 to shareholders of record Nov. 16.
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CVR Energy Announces $4.2 Billion Marathon Deal
CVR agreed to acquire Marathon Petroleum’s St. Paul Park and Mandan refineries and related marketing operations for approximately $4.2 billion, plus net working capital.
The acquisition would boost crude throughput capacity to approximately 384,000 barrels per day from 207,000.
CVR expects about $70 million in annual cost savings and other synergies.
To support the transaction, CVR also announced a $750 million common-stock offering.
CVR is offering $500 million in shares, while Icahn Enterprises’ indirect subsidiary, IEP Energy Holding LLC, is selling another $250 million.
CVR will not receive proceeds from the selling stockholder’s shares.
The company plans to use its proceeds, alongside cash and other financing, to fund the acquisition, redeem its 5.750% senior notes due 2028 and cover related expenses.
Fourth-Quarter Outlook
CVR expects fourth-quarter petroleum throughput of 210,000 to 225,000 barrels per day and crude utilization of 95% to 100%. The company forecasts capital expenditures of $75 million to $95 million.
CVI Price Action: CVR Energy shares were trading down 8.15% at $51.36 at the time of publication on Tuesday, according to Benzinga Pro data.
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