Hawaii SAF And US Energy Security Will Drive Long-Term Resilience

Key Takeaways

• Expansion into renewable fuels and integrated logistics is set to enhance revenue growth, operational margins, and resilience against market volatility.
  
• Strong operational execution and disciplined capital allocation position the company for sustained earnings and free cash flow growth with improved margin stability.
  
• Shifting energy trends, operational inefficiencies, regional concentration, elevated debt, and rising regulatory pressures collectively threaten long-term profitability and flexibility.

Catalysts

Operates as an energy company in the United States.

• The company is nearing completion of its Hawaii SAF (Sustainable Aviation Fuel) project, scheduled for start-up in the second half of the year, and has visibility to serve both on-island and Asia-Pacific airline demand, tapping into the rising global need for low-carbon fuels. This diversification into renewable fuels is positioned to raise revenue growth and expand long-term margins given the premium pricing potential and structural advantages over peers.
  
• Structural shifts toward increased U.S. energy security and regional supply chain resilience are enhancing the strategic value of Par Pacific’s U.S.-based refining and logistics assets, given the persistent tightness from limited new refinery construction. This is likely to support robust utilization rates and firmer crack spreads, underpinning margin improvements and stable earnings growth.
  
• The successful completion of major refinery turnarounds in Montana and Wyoming ahead of schedule means the company enters the coming years with higher reliability, reduced downtime, and minimal major maintenance planned for the next four to five years. This operational consistency should drive higher throughput and revenue while supporting lower operating costs and improved net margins.
  
• The company continues to optimize its logistics and retail integration, leveraging its controlled pipelines, terminals, and retail network to capture regional supply/demand dislocations and exert greater control over feedstock costs and product distribution. This integration is expected to bolster net margins, boost earnings quality, and provide resilience to market volatility.
  
• Par Pacific’s aggressive share repurchase activity and focus on capital allocation, supported by strong liquidity and declining capital expenditures, indicate a significant inflection in free cash flow and earnings per share growth, especially as business segment diversity and a stronger earnings base compound the effects moving forward.

Par Pacific Holdings Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Par Pacific Holdings compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Par Pacific Holdings's revenue will decrease by 1.6% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from -0.8% today to 5.1% in 3 years time.
• The bullish analysts expect earnings to reach $376.3 million (and earnings per share of $7.05) by about July 2028, up from $-60.0 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 5.2x on those 2028 earnings, up from -27.7x today. This future PE is lower than the current PE for the US Oil and Gas industry at 12.3x.
• Analysts expect the number of shares outstanding to decline by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.71%, as per the Simply Wall St company report.

Par Pacific Holdings Future Earnings Per Share Growth

Risks

• Long-term acceleration of the energy transition and deep decarbonization targets will steadily reduce global demand for fossil fuels, which directly threatens Par Pacific’s long-term revenue growth as a refiner and marketer of petroleum products.
  
• Par Pacific’s operations are highly concentrated in Hawaii, the Pacific, and select Rocky Mountain and Northwest markets, creating exposure to regional economic shocks and competitive pressures that could lead to significant revenue and earnings volatility.
  
• The company’s refining assets face persistent competitive disadvantages due to older, less-efficient infrastructure, resulting in structurally lower net margins and increasing risk of underinvestment that may hinder Par Pacific’s ability to compete over time.
  
• Elevated debt levels from recent acquisitions and capital projects raise concerns over increased interest expense and limited balance sheet flexibility, potentially constraining future earnings and long-term capital allocation.
  
• Heightening regulatory, environmental, and investor ESG pressures, including the risk of stricter emissions standards and rising compliance costs, are likely to increase operating expenses, erode profitability, and further impact net income as the energy sector continues to shift away from fossil fuels.

Valuation

• The assumed bullish price target for Par Pacific Holdings is $38.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Par Pacific Holdings's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $38.0, and the most bearish reporting a price target of just $19.0.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $7.4 billion, earnings will come to $376.3 million, and it would be trading on a PE ratio of 5.2x, assuming you use a discount rate of 7.7%.
• Given the current share price of $32.25, the bullish analyst price target of $38.0 is 15.1% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.