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Inventory Financing Agreements | 12 Months Ended
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Dec. 31, 2017
Other Commitments [Abstract] |
Inventory Financing Agreements | Note 10—Inventory Financing Agreements Supply and Offtake Agreements On June 1, 2015, we entered into several agreements with J. Aron to support the operations of our Hawaii refinery (the “Supply and Offtake Agreements”). On May 8, 2017, we and J. Aron amended the Supply and Offtake Agreements and extended the term through May 31, 2021 with a one-year extension option upon mutual agreement of the parties. As part of this amendment, J. Aron may enter into agreements with third parties whereby J. Aron will remit payments to these third parties for refinery procurement contracts for which we will become immediately obligated to reimburse J. Aron. As of December 31, 2017, we had no obligations due to J. Aron under this letter of credit agreement. On December 21, 2017, in connection with the issuance of the 7.75% Senior Secured Notes, we amended and restated the Supply and Offtake Agreements to update the terms of the collateral as noted below. During the term of the Supply and Offtake Agreements, we and J. Aron will identify mutually acceptable contracts for the purchase of crude oil from third parties. Per the Supply and Offtake Agreements, J. Aron will provide up to 94 thousand barrels per day of crude oil to our Hawaii refinery. Additionally, we agreed to sell and J. Aron agreed to buy, at market prices, refined products produced at our Hawaii refinery. We will then repurchase the refined products from J. Aron prior to selling the refined products to our retail operations or to third parties. The agreements also provide for the lease of crude oil and certain refined product storage facilities to J. Aron. Following expiration or termination of the Supply and Offtake Agreements, we are obligated to purchase the crude oil and refined product inventories then owned by J. Aron and located at the leased storage facilities at then-current market prices. In connection with the December 21, 2017 amendment and restatement of the Supply and Offtake Agreements, certain collateral (including the mortgage liens on the real property and improvements comprising the Hawaii refinery and on all equipment used to operate the Hawaii refinery, the equity interests in Par Hawaii Refining, LLC ("PHR") held by Par Petroleum, LLC, and certain other items of personal property) was released, and Par Petroleum, LLC issued an unsecured guaranty in favor of J. Aron pursuant to which Par Petroleum, LLC guarantees the payment and performance of certain liabilities of PHR under the Supply and Offtake Agreements. Though title to the crude oil and certain refined product inventories resides with J. Aron, the Supply and Offtake Agreements are accounted for similar to a product financing arrangement; therefore, the crude oil and refined products inventories will continue to be included on our consolidated balance sheets until processed and sold to a third party. Each reporting period, we record a liability in an amount equal to the amount we expect to pay to repurchase the inventory held by J. Aron based on current market prices. For the years ended December 31, 2017, 2016, and 2015, we incurred approximately $13.7 million, $7.8 million, and $6.9 million in handling fees related to the Supply and Offtake Agreements, respectively, which are included in Cost of revenues (excluding depreciation) on our consolidated statements of operations. For the years ended December 31, 2017, 2016, and 2015, Interest expense and financing costs, net on our consolidated statements of operations includes approximately $2.3 million, $3.2 million, and $1.5 million of expenses related to the Supply and Offtake Agreements, respectively. The Supply and Offtake Agreements also include a deferred payment arrangement (“Deferred Payment Arrangement”) whereby we can defer payments owed under the agreements up to the lesser of $125 million or 85% of the eligible accounts receivable and inventory. Upon execution of the Supply and Offtake Agreements, we paid J. Aron a deferral arrangement fee of $1.3 million. The deferred amounts under the Deferred Payment Arrangement will bear interest at a rate equal to three-month LIBOR plus 3.75% per annum. We also agreed to pay a deferred payment availability fee equal to 0.75% of the unused capacity under the Deferred Payment Arrangement. Amounts outstanding under the Deferred Payment Arrangement are included in Obligations under inventory financing agreements on our consolidated balance sheets. Changes in the amount outstanding under the Deferred Payment Arrangement are included within Cash flows from financing activities on the consolidated statements of cash flows. As of December 31, 2017, the capacity of the Deferred Payment Arrangement was $83.1 million and we had $41.1 million outstanding. Under the Supply and Offtake Agreements, we pay or receive certain fees from J. Aron based on changes in market prices over time. In September 2015, we entered into an agreement to fix this market fee for the period from October 1, 2015 through November 30, 2016 whereby J. Aron agreed to pay us a total of $18 million to be settled in fourteen equal monthly payments. In February 2016, we fixed the market fee for the remainder of the term of the Supply and Offtake Agreements for an additional $14.6 million to be settled in eighteen equal monthly payments. In 2017, we fixed the market fee for the period from June 1, 2018 through May 2021 for an additional aggregate $2.2 million. The receivable from J. Aron was recorded as a reduction to our Obligations under inventory financing agreements pursuant to our Master Netting Agreement. As of December 31, 2017, the receivable was $7.1 million. The agreements also provide us with the ability to economically hedge price risk on our inventories and crude oil purchases. Please read Note 12—Derivatives for further information. Supply and Exchange Agreements On September 25, 2013, we entered into several agreements with Barclays for the purpose of managing our working capital and the crude oil and refined product inventory at the Hawaii refinery (the “Supply and Exchange Agreements”). Effective July 31, 2014, we supplemented the Supply and Exchange Agreements by entering into the Refined Product Supply Master Confirmation, pursuant to which Barclays provided refined product supply and intermediation arrangements to us. For the year ended December 31, 2015, we incurred approximately $6.9 million in handling fees related to the Supply and Exchange Agreements, which are included in Cost of revenues (excluding depreciation) on our consolidated statements of operations. For the year ended December 31, 2015, Interest expense and financing costs, net on our consolidated statements of operations includes approximately $2.3 million of expenses related to the Supply and Exchange Agreements. Upon execution of the Supply and Offtake Agreements, we terminated the Supply and Exchange Agreements with Barclays, subject to certain obligations to reimburse Barclays for third-party claims. We recognized a loss of $17.4 million on the termination of the agreement which consisted of a loss of $13.3 million for the cash settlement value of the liability which had previously been measured assuming settlement with inventory on hand and a loss of $5.6 million for the acceleration of deferred financing costs. These losses were partially offset by a $1.5 million exit fee received from Barclays. The net loss of $17.4 million related to the termination of the Supply and Exchange Agreements is included in Loss on termination of financing agreements on our consolidated statements of operations for the year ended December 31, 2015. The cash paid to settle the obligation is included in Payments for termination of supply and exchange agreements in our consolidated statements of cash flows for the year ended December 31, 2015.

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