Par Pacific Holdings Inc (PARR) Q1 2021 Earnings Call Transcript

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Par Pacific Holdings Inc (PARR -0.18%)
Q1 2021 Earnings Call
May 7, 2021, 8:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day and welcome to the Par Pacific First Quarter 2021 Earnings Conference Call. All participants will be in a listen only mode. [Operator Instructions]

I would now like to turn the conference over to Ashimi Patel. Please go ahead.

Ashimi Patel -- Investor Relations

Thank you, Matt. Welcome to Par Pacific's first quarter earnings conference call. Joining me today are William pate president and chief executive officer well monthly on Chief Financial Officer and Joseph Israel, President and Chief Executive Officer of Par Petroleum.

Before we begin, I know that our comments today may include forward looking statements. Any forward looking statements are subject to change and are not guarantees of future performance or that they're subject to risks and uncertainties and actual results may differ materially from these forward looking statements.

Accordingly, investors should not place undue reliance on forward looking statements and we disclaim any obligation to update or revise them. I refer you to our investor presentation on our website and for filings with the SEC for non GAAP reconciliations and additional information.

I'll now turn the call over to our President and Chief Executive Officer, Bill Pate.

William Pate -- President and Chief Executive Officer

Thank you, Ashimi. Good morning to our conference call participants. Our first quarter results reflect the continuing demand suppression brought out by the global pandemic. However, we noted several positive developments in the United States during the first quarter, an increase in vaccination rates, improving mobility trends, growing employment, and increasing business openings. These factors indicate that our industry is at a key inflection point.

First Quarter adjusted EBITDA was a loss of 43 million and adjusted net loss was $1.55 per share. These results included a $47 million non cash prior period mark to market expense. In March, we were pleased to see substantial improvement in our refineries profitability. This was a welcome change in market conditions continue to improve early in the second quarter. Air travel to Hawaii increased significantly with the advent of spring break.

This growth boosted our logistic segment utilization and profitability. His neighbor Island demand approach normal passenger arrivals to the state are now approximately 65% of pre pandemic levels, primarily driven by increases in domestic travel from the US mainland. International arrivals continue to lag domestic trends due to lower vaccination rates in key nations like Japan. Despite the slow international tourists recovery in Hawaii, we can operate our refinery in the range of 85,000 barrels per day and easily place all, our refined product in local markets. on the mainland, product cracks have improved seasonally, as inventories have returned to normal levels and refined product demand recovers.

Cracks are improved over prior year even when adjusted for the record Rins prices. The Texas freeze knocked out a number of refining units and as a result, inventories are now at normal and even low levels in some paths. Wyoming has particularly benefited from the improving environment. We expect our retail segment to rebound from the weaker q1 performance as crude oil prices stabilize and traffic volumes increase. Our Northwest retail unit began rebranding to our proprietary norm convenience store brand this winter.

And we expect this initiative will boost segment profit in coming quarters. In Washington State several pieces of legislation have been passed to help reduce greenhouse gas emissions. These bills are signed by Governor Inslee they will enact cap and trade limitations on greenhouse gas emissions and low carbon fuel standard regulations similar to the California framework. We expect these regulations will have a significant impact on the industry.

Although, establishing the regulatory framework will take time, we're confident that our operations are well positioned for these new regulations, given our low scope, one greenhouse gas emissions, our newly completed renewables logistics system and our unique product yield. During the first quarter, we close to significant transaction to continue to increase our liquidity. We completed $116 million dollar sale leaseback of certain real estate properties, and an $87 million equity issuance, liquidity and net debt position are in the best shape since the closing of our Tacoma refinery acquisition in January 2019.

Our current liquidity of $287 million is substantially greater than liquidity levels at the end of 2019. When we face three major turnarounds, and unbeknownst to us a historic refining downturn or net deposition is also down to $462 million, more than $45 million below our net debt level at year end 2019. Overall, we anticipate in Crete improving profitability as the economy recovers for cracks in Singapore are in steep contango anticipating increasing demand.

Going forward, we expect much of the global demand growth to be distillate refined product demand softness is now largely concentrated in jet fuel. The largest domestic jet fuel markets like the United States and China are rapidly recovering to pre pandemic levels. Remaining demand recovery will largely revolve around international travel, as countries open their borders to other markets. While there's a limited global recovery under way, there are occasional setbacks like the current surge in India, volatility is high as the market attempts to identify recovery trends. Nonetheless, after the market is fully recovered, we expect a balanced market with high utilization as a result of the refinery closures during the pandemic.

At this time, I'll turn it over to Joseph to discuss our operations in more detail.

Joseph Israel -- President and Chief Executive Officer of Par Petroleum, LLC

Thank you, Bill. In the first quarter, our system demonstrated safe and reliable operations, along with a smooth execution of our planned turnaround in Washington. No additional major maintenance is planned for the rest of the year for our entire system. Man recovery supported margins improvement in all three markets, which has accelerated with typical seasonal trends, mostly for our Wyoming and Washington refineries, of course, structure and contractual repositioning.

Mainly you know why we continue to support the low margins capture a Wyoming three to one index in the first quarter was $20.97 per barrel. And when we finally throughput averaged approximately 15,000 barrels per day. Oh, you realize the adjusted gross margin in the quarter was $2.35 per barrel, including an approximately $8.50 per barrel of prior period, multiple market expense or production costs with a slightly elevated ignore love in 10 cents per barrel, due to timing. But they've mentioned in the past, we are expecting to average close to $6.50 per barrel on annual basis.

So far in the second quarter of a Wyoming three to one index has averaged over $28 per barrel. And we are well positioned to supply the strong demand as we transition to the gasoline season in the Rocky Mountains. Our second quarter throughput target is in the 17,000 to 18,000 barrels per day range. In Washington, we executed our plan 20 days oil oil turnaround on time and on budget. First Quarter Pacific Northwest five to two on index was $11.46 per barrel, on an annual basis. And are we finally throughput, including the turnaround impact averaged approximately 32,000 barrels per day. Oh, realize the adjusted gross margin was a negative $1.33 per barrel, including an estimated negative London and 30 cents per barrel of turnaround impact.

And then, approximately $3.38 per barrel period, mark-to-market the previous prior affiliate marketing expense, production costs were $4.36 per barrel in the quarter. So far in the second quarter, I'll look 50 to one-index is average close to $15 per barrel. And our plan throughput is approximately 39,000 barrels per day. You know why? Singapore, 312 index in the first quarter to $3.80 per barrel on brand basis. And I realized because differential averaged $1.02 per barrel premium to Brent.

Our throughput average approximately 81,000 barrels per day and our realized adjusted gross margin was a negative 46 cents per barrel, including an approximately $3.57 per barrel of prior period. Multiple market expense production costs are $3.97 per barrel, including approximately $0.40 per barrel of non recurring maintenance and transition costs from ours, a fresh wave of COVID. In Asia, the manual recovery is slow down in Singapore 312 index has averaged approximately $3.65 per barrel so far in the second quarter.

However, tourism and activity surgeon why, mainly from the U.S. Mainland is triggering higher demand for our border. Our estimated school differential is $1.92 per barrel premium from Brent, and our second quarter throughput target is in the 82 to 85,000 barrels per day range. Finally, theme is focused on the bottlenecking opportunities to support crude flexibility as we increase utilization and get closer to our 94,000 barrels per day nameplate capacity. In summary, we are excited to put down the capacities behind and maximize our asset utilization as we transition back to positive profitability, territory.

And with that, I'll turn the call over to Bill to to review consolidated result

Will Monteleone -- Chief Financial Officer

Thank you, Joseph. First quarter adjusted EBITDA and adjusted earnings were a loss of 43,000,080, 4 million, or $1.55 per fully diluted share. Focusing on accounting items first, finding results include a $47 million prior period mark to market expense related to the 2019 and 2020, Renewable Fuel Standard compliance years. In addition, we are finding results benefited from a $7 million first in first out benefit in a rising price environment. Impacting our gap results, with a $64 million gain related to the sale of certain Hawaii retail real estate, as well as approximately 1.5 million in debt extinguishment costs related to redeeming property level financing.

Shifting to segment results, retail segment adjusted EBITDA contribution was $8 million, compared to $16 million in the fourth quarter of 2020. Reduction was largely driven by margin compression in a rising price environment, while volumes remained below pre pandemic levels. The month of March showed a material improvement over the early part of the quarter, but margin stabilizing and volumes beginning to grow compared to recent months. Same store sales fuel volumes were down roughly 13% while merchandise sales were up approximately 3% compared to the first quarter of 2020 logistic segment adjusted Eva contribution with $16 million, up $7 million from the fourth quarter of 2014.

The improvement was driven by a full quarter of Hawaii neighbor Island demand growth as well as increased Wyoming sales post turnaround. Washington throughput was marginally impacted other turnaround activities during the quarter. Blind neighbor Island act increased throughout the quarter culminating in March. Looking forward, a full quarter of March level demand would bode well for the second quarter Hawaii contributions. Refining segment recorded segment adjusted EBITDA dollar loss of $55 million. The prior period non cash mark the market expense of $47 million was split $26 million in Hawaii $10 million in Washington, and $11 million in Wyoming.

Excluding the prior period mark the market expense or refining segment adjusted EBITDA would be a loss of $9 million. Notwithstanding a rapidly increasing price environment at squeeze to why refining gross margins on fuel oil. We continue to see improvements in our adjusted gross margins relative to our benchmark indices. Washington results were negatively impacted by compress margins on asphalt in a rising flat price environment as well as lower sales due to turnaround activities. Wyoming saw improvement throughout the quarter with volumes and margins expanding steadily.

Later on Laramie generated adjusted Eva tax of $54 million in net income of 40 million, the first quarter of 2021. The largest driver of this improved financial performance was gas price realizations of $6.83 related to favorable market positioning during winter storm your first quarter cash consumed from operations was $31 million excluding the impact of rents and the third turn around expenditures net working capital the use of approximately $8 million. Capital expenditures were 8 million and accrued deferred turnaround expenditures were 6 million, totaling approximately 14 million.

Accrued cash interest equaled $16 million, our quarter and liquidity total of $287 million, made-up of 215 million in cash and 72 million in availability. This reflects the completion of the 100 and $16 million sale leaseback repayment of the $53 million in property level obligations in the issuance of $87 million in common stock. In addition, we have recently extended the agreement or one month and expect to enter into a multi year extension shortly.

With our liquidity on hand, we're well positioned to cash settle the upcoming convertible note if required, as well as consider other alternatives to reduce our funding costs. First Quarter total operating expense plus logistic segment Cost of Goods Sold increased approximately $4 million compared to the Q2 through Q4 2020 average. The increase was largely driven by increased RIN expense utility costs due to higher flat prices, insurance, and approximately one month of the least expense associated with sale leaseback transactions, partially offset by reduced logistics commitments and other cost savings initiatives.

This concludes our prepared remarks.

Questions and Answers:

Operator

Our first question will come from Phil Gresh with JPMorgan. Please go ahead.

Phil Gresh -- JPMorgan -- Analyst

Yes. Hi, good morning. My first question would be just how you commented a bit in the prepared remarks about how you see things trending here in the second quarter. You know, some of your peers have been willing to talk about April EBITDA performance, wasn't sure if you'd be willing to lean out there and share any information there and in particular, how things are going, why it looked like if you back out the mark to market effects. That is a pretty strong capture rate in the first quarter, so any color there?

Will Monteleone -- Chief Financial Officer

Sure, Phil. This is Bill. We're definitely seeing a pretty significant change in profitability, especially if you compare January in February, to March and on. But I think we started to see really increased runs at all of our refineries in March and by the end of March, really pushing the refineries and operational reliability then becomes the key factor to achieving nameplate. And so it's more a matter of market trends. And you can see that in all of our markets with our market indices. Cracks have been improving. And we believe we can improve our capture.

Overtime in Hawaii, it's largely related some of the contractual improvements but there are other factors as well. And obviously, by increasing throughput at every refiner, we also think we can get our operating costs down to a more manageable level. So I think we're at a point in the cycle where the profitability for a refining business will improve materially and you started to see the improvement from logistics in q1. I point out that improvement was really on the backs of increased throughput in sales in March. And so we expect to see additional improvements in logistics going forward. So overall, things look pretty good. Retail obviously, we did.

We had a rougher quarter. But keep in mind that was on the back of an almost a record quarter in q4. We also you know you're starting to see some of the impact of the sale leaseback because we close that at the end of February so that that will be a factor going forward. And then we started transitioning our Northwest retail stores to our own brand and that has some disruption. But I do think going forward as we transition to that brand and that actually allows us to change our supply relationship and improve our profitability. I think we're really well positioned in all of our units as we as we move forward as long as the market cooperates and we're starting to see that cooperation.

Phil Gresh -- JPMorgan -- Analyst

Okay, great. My second question would be a bit of a macro one, appreciate all the updated color and you've provided the slides are on sensitivities etc. If I look at the Singapore crack spread relative to the to us crash rates, they've all gotten the two us crash rates have gotten back to the five year average levels, but are closer to it, whereas Singapore has lagged. And I think you touched on some of the factors there. But you do think that Singapore crash can get back to normal levels just with a demand recovery? Or do you see supply factors in Asia, needing to come to bear to help out the market?

Will Monteleone -- Chief Financial Officer

Well, certainly there's been a significant increase in supply over the last year and a half. But keep in mind, there's also been a lot of rationalization. And even in the last 24 hours, shell accelerated the reduction in their Singapore refinery, you know, it's a 500,000 barrels a day refinery, they were supposed to ratchet it back to 300,000 barrels at the end of 2023.

They announced in the last 48 hours that they're going to do that at the end of July. So we are seeing supply change in the market. I'd also point out that when you look at the Singapore cracks, keep in mind, it does not include the impact of rent. And so a lot of the impact we're seeing in the local in the in the mainland U.S. market is driven by higher rents prices, and higher agricultural prices, which drive you know, ethanol and biofuels. In, you don't have that impact in the Singapore market.

And then the Singapore market, I think there's just more of an international factor there given international travel and relationship of nations and how locked down the countries are there. So I think that market will return to, you know, some kind of historical means. But we're going -- we're in for a lot more volatility everywhere, whether it's the U.S. or Asia, just given all of the changes that are affecting the industry. And let me add a common theme in all of our markets. Gasoline crack spreads, of course, are strong as consumers are on the road. But really, the wild card is jet fuel recovery. As we lost, you know three to 4 million barrels per day of demand in 2020. And we're having a hard time to recover the earth, especially with international flights and the challenge with jet fuel.

And this is a global challenge. It holds on the diesel crack spreads. Now, and even with a very healthy demand profile up to date, it's hard for the decent crack spreads to go up as long as a refineries to continue and put jet fuel into diesel adjust this point, I think what we typically track as a pretty good barometer of really that incentive is really just the budget regrade basically, the spread between jet fuel and Singapore diesel. And, again, we've seen that narrowing over the last, you know, two weeks. And again, I think that's a positive indicator for now the relative value of those two products. And ultimately, I think that's a pretty good barometer to watch with respect to ultimately when jet starts getting produced on purpose is what I'd say.

Phil Gresh -- JPMorgan -- Analyst

That'll make sense. Thanks a lot.

Operator

Next question will come from Neil Mehta with Goldman Sachs. Please Go Ahead.

Neil Mehta -- Goldman Sachs -- Analyst

Karlen for Neil thanks for taking the questions this morning. Want to start off on retail the quarter was a little lighter than normal there. And you touched on it a bit in the prepared remarks. But can you just walk through the moving pieces that impacted results in one cue and then talk a little about how those dynamics have evolved into to hear across both your market?

Will Monteleone -- Chief Financial Officer

Sure. Probably it's as well yeah, I think first on the volume side, you can see in the, in the first quarter our volumes, even a lag where we were in the fourth quarter. Now part of that is fewer days in the first quarter. But I think you also had just a little bit of a lull that occurred in our markets. And so and as I referenced, I think we view March as being materially different than probably January and February from a volumetric standpoint.

And then your bill referenced this, we are also in the process in the northwest of transitioning our brand, really during the early part of the quarter, and there's some disruption that occurs with that. And then the probably, you know additional impactful pieces the rapid increase in crude prices. Compressed margins, as we typically see, street prices are sticky and supply costs move faster. So in a rapidly rising price environment like we are in q1 we tend to see margin compression. Those are the biggest factors that impacted the compression on the retail side. And as Bill referenced, the stabilization of the crude flat prices, as well as the ongoing recovery in our markets is positive for a rebound on the retail segment.

William Pate -- President and Chief Executive Officer

Carly, this is Bill, I just had one other thing, which is, especially with respect to gasoline in Hawaii, it's really a, it's a product or it's consumed largely by the local population. So the employment trends are probably a bigger driver of gasoline consumption, particularly for our network, because we tend to be a whole focused. And so even as we see, passenger arrivals ramping up in the neighbor islands, that's not going to have the kind of impact on gasoline volumes that we'll see on jet. And what we really watch when we think about gasoline volumes, returning to normal, but really watching a return to employment, because that's what puts people back on the road. And that's probably going to lag and really depend on the international arrivals and a return to have the tourist population and the shopping population, if you will, in Honolulu.

Neil Mehta -- Goldman Sachs -- Analyst

That's helpful. Thank you. And then the follow-up is, is around real estate and appreciate you breaking out the mark to market impact there. We have the Supreme Court oral arguments in the last couple of weeks. So I'd love to get your read on the key takeaways from that process thus far. And ultimately, how do you see pars exposure to real estate obligations, so really the 2019 to 2021 compliance years?

Will Monteleone -- Chief Financial Officer

This has been one, I'll start and I'll it will kind of cover any of the granularity. But first of all, I -- you know, I think the small refineries council did a great job of explaining why the law permits small refiners to demonstrate hardship to seek an exemption at any time and so, as you know, this has been the EPA is established policy since the inception of the RFS back in 2007. And it's been that way under three different administrations two republican and one democratic administration, and only in the last few months in the wake of the 10th circuit opinion, has the EPA change that stance? We certainly expect the Supreme Court to reverse the 10th circuit. And I think when that happens, the EPA will grant us our waivers for 2019 and 2020, we can cover how we account for that. But, you know, I think that that's why we have referenced the mark the market in a different way. And I think the factors that are driving pricing are somewhat related to this issue.

Unfortunately, RINs and this is this is probably unfortunate for a lot of administrative regulations; it's become more of a political instrument than a consistent policy. And the only thing worse than government regulation is government regulation, that's become a political football. Partly with respect to the accounting for the rents, as we reference the $47 million mark to market, our net liability, at the end of the first quarter, was roughly $126 million dollars, based on $1.38 average rent price.

And so I think one thing you should just keep in mind as well, as we look forward to managing this is, you know, ultimately, the Renewable Fuel Standard allows you to defer settlement for up to two consecutive compliance years. So what this would do is this would allow us to defer settlement of our 21 compliance here until the 2023 timeframe. I'd say based on our operations and commercial activities, we estimate our year end 2021 RINs, would be valued at approximately $100 million holding prices constant as of 331.

And I think with this asset available to support our prior period settlement obligations, we think our net cash requirement to the extent the court rules against us, would be substantially less than $125 million. And again, as Bill said, as the arguments recently occurred, I think we expect the Supreme Court to reverse the lower court's decision for the EPA to grant us the waivers for the 19 and 20 years.

Neil Mehta -- Goldman Sachs -- Analyst

Appreciate the color. Thanks.

Operator

Our next question will come from Matthew Blair with Tudor, Pickering, Holt. Please go ahead.

Matthew Blair -- Tudor, Pickering -- Analyst

Hey. Good morning, everyone. Joseph, I was a little surprised at the crude this guidance and why it looks like it's getting more expensive for you by about $0.90 per barrel in Q2 compared to Q1. Are there any particular croods that are moving against you here? And could you also talk about how tanker costs are trending for you?

Joseph Israel -- President and Chief Executive Officer of Par Petroleum, LLC

Good Morning. Matt, it's not a question of quality and different types of goods that we're running this quarter versus a prior quarter. Just remember the two three month lag that we have on our good pricing and the clue that we'll be running in the second quarter. All any of the positive, orderly Calgary around the world, and it's built in the price, you can see you can see it and the flat price, as well as the differentials.

That matters as well they, as Joseph referenced, the crude that we consume during the first quarter was largely procured or committed to during the late third or fourth quarter of 2020. So, reflecting probably more of the challenging market environment. And so, again, I think we're seeing the shape of the curve also shift from contango or backwardation. And then, so those are the major factors that drive the modest increase on the crude death side.

And on the freight side, I think it's been relatively stable. So again, I don't think anything that that you call out there so well.

Matthew Blair -- Tudor, Pickering -- Analyst

Thanks. And then Laramie put up you know, excellent. Even a numbers 54 million compared to about 12 million last year. But I guess through your accounting, that that doesn't affect pars, CPS, but I guess Could you just talk about the economic benefits are and is Laramie, what is what are we going to do with that the that extra cash generated? Does that go to debt reduction? Or, I guess, increased growth? Yeah, just overall stayed on there and it would be great.

Joseph Israel -- President and Chief Executive Officer of Par Petroleum, LLC

Matthew, you're correct. That doesn't impact our financial results. Ultimately, I believe Laramie is management's plans is to take incremental cash that was generated and use it to pay down debt. And again, I think Laramie is in a position where, you know, ultimately, its capital structures and improving, but this is still a very challenging backdrop for natural gas producer, notwithstanding the impressive quarter that they had. And so again, I think we're continuing to work with Laramie management and the other stakeholders there to ensure that we maximize our potential value of of our equity stake there over time.

Matthew Blair -- Tudor, Pickering -- Analyst

Great, thank you very much.

Operator

Our next question will come from Manav Gupta with Credit Suisse. Please go ahead.

Manav Gupta -- Credit Suisse -- Analyst

Hi, I just had a couple of quick accounting questions, I think your mark to market number on rains, you are indicating is 47 million. When we looked at your through your adjusted EBITDA calculations, and the number over there is rain loss in excess of net obligation at about 29 million, can you just help me reconcile those two numbers 47 versus 29.

William Pate -- President and Chief Executive Officer

So Manav this is Bill. So keep in mind, it's really two separate issues. And I think to understand the non gap adjustment, the first need to understand our gap accounting. And so again, our gap accounting today is our liability for rents are carried at market. So in a rising price environment, our liabilities increasing, our assets are carried at cost. So the asset value is not increasing.

And what that non-GAAP adjustment reflects is really in a rising price environment, US increasing the value of our rent assets to a market price. So again, it's not related to the $47 million. The $47 million reflects the fact that we have an open rent position for the 2019 and 2020 years in the price increase. And so, again, that's what the $47 million represents is really the balance sheet item related to our prior period open position.

Manav Gupta -- Credit Suisse -- Analyst

Okay, that's clear. And just what is the open position in terms of number of gallons? Not the dollar amount? What's the actual gallon? Open position at this point of time?

William Pate -- President and Chief Executive Officer

We're not going to share the volumes, but just the dollars is approximately $125 million.

Manav Gupta -- Credit Suisse -- Analyst

And you said that's 131? Okay. Thank you for taking my question. Thank you.

Operator

[Operator Instructions] Our next question will come from Jason Gilman with Please go ahead.

Unidentified Participant

Yeah. Hey, thanks for taking my question. I first wanted to ask on the equity raise that you did. Can you just talk about the logic behind it? I mean, it seems like liquidity seems to be in a pretty good position right now. So why do you decide to go ahead and issue more shares? And can you just elaborate on where you're going to potentially use those proceeds? And I have a follow-up. Thanks.

William Pate -- President and Chief Executive Officer

Sure, Jason. Thanks for the question. I think the principle process behind the equity raise was really trying to give us the tools that we need to avail ourselves of lowering our cost of senior debt funding. Again, if you look at our weighted average cost have debt capital today it's around eight and a half percent, which is substantially higher than I think most of our peers. And so again, I think what the capital raise avails us of this is ultimately the pathway toward reducing our cost of debt capital. So I think that's the principal thought process behind improving our liquidity and also, the path forward that we're evaluating. It also gives us additional, you know, flexibility in the way in which we can address the convertible note that matures.

Unidentified Participant

Are you able to pay down certain debt without much friction costs?

William Pate -- President and Chief Executive Officer

Yes, we do have pre-payable debt. And we do have that that can be called as per the indentures or credit agreements.

Unidentified Participant

Can you just let us know which one those are? We're not going to get into the specifics of which instruments we've used to pay down. But I think that reduction in lowering our funding costs is I think, one of our principal financial objectives this year. And then, my second question, just on the why margin, it does seem like the margin strengthened excluding the red mark to market impacts.

Are you seeing any benefit from these new commercial contracts that you mentioned, would be kicking in the first quarter? And can you give us any indication about those magnitude, the magnitude of that and if it was and of that sticky, and it's gong to continue into the future?

William Pate -- President and Chief Executive Officer

Sure. So data analysts as well, I think the best way to measure that is to look at our Singapore 312 index that we publish, subtract the crude differential that we provide and look at, you know, what we'll say is the available margin in the market. compare that against our adjusted gross margin per barrel. And I think what you'll see is in q1, a trend that really started in q4, but that ultimately, our capture our adjusted gross margin relative to those indices is improving. And that reflects the contractual improvements that we've been discussing over the last several quarters.

Unidentified Participant

Great. Thanks.

Operator

This concludes our question-and-answer session. I would like to turn the conference back over to William Pate for any closing remarks.

William Pate -- President and Chief Executive Officer

Thank you, Operator. We ended the first quarter with our refineries running at their highest level since the beginning of 2020. Product tracks are moving upward as the world returns to normal. We look forward to increasing profitability on the back of these trends as we enter the summer driving season. Have a good day.

Operator

[Operator Closing Remarks]

Duration: 40 minutes

Call participants:

Ashimi Patel -- Investor Relations

William Pate -- President and Chief Executive Officer

Joseph Israel -- President and Chief Executive Officer of Par Petroleum, LLC

Will Monteleone -- Chief Financial Officer

Phil Gresh -- JPMorgan -- Analyst

Neil Mehta -- Goldman Sachs -- Analyst

Matthew Blair -- Tudor, Pickering -- Analyst

Manav Gupta -- Credit Suisse -- Analyst

Unidentified Participant

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