Executive Summary / Key Takeaways

• CVR Energy (NYSE:CVI) delivered a robust third quarter 2025, significantly boosted by a $488 million benefit from the long-awaited small refinery exemptions (SREs) granted by the EPA for its Wynnewood refinery, substantially reducing its RFS obligation.
• The company is strategically pivoting its Wynnewood renewable diesel unit (RDU) back to hydrocarbon processing in December 2025 due to unfavorable economics in the renewables business, recognizing accelerated depreciation in Q3 and Q4 2025.
• The Petroleum segment demonstrated strong operational performance and improved margins in Q3 2025, driven by favorable crack spreads and higher throughput, with no major turnarounds planned for 2025-2026.
• CVR Energy is prioritizing debt reduction, having prepaid $90 million on its term loan, and aims to restore its balance sheet to target leverage levels, which is a key factor for potential dividend reinstatement.
• The Nitrogen Fertilizer segment continues to provide a stable foundation, benefiting from tight global supplies and strong pricing, with ongoing investments in reliability and feedstock flexibility.

A Diversified Energy Player Adapts to Market Realities

CVR Energy, Inc. operates as a diversified holding company with core businesses in petroleum refining and marketing, renewable fuels, and nitrogen fertilizer manufacturing. Founded in 1906, the company has a long history of adapting to the dynamic energy landscape, primarily serving the Mid-Continent region of the United States. Its strategic footprint, particularly its two refineries in Kansas and Oklahoma and fertilizer facilities, positions it uniquely within the industry. The company's overarching strategy centers on operational excellence, maximizing market capture, and maintaining financial discipline, all while navigating complex regulatory environments and volatile commodity markets.

The company's operational strength is underpinned by its refining assets. The Coffeyville Refinery in Kansas and the Wynnewood Refinery in Oklahoma are key to its Petroleum segment. A significant technological differentiator for the Coffeyville facility is its coking capability, allowing it to process heavier, more complex crude oils. This provides a degree of feedstock flexibility and can enhance margins when heavy crude differentials are favorable. Furthermore, CVR Energy is actively investing in enhancing its refining capabilities. The Wynnewood refinery is undergoing a $136 million project to replace its hydrofluoric acid catalyst alkylation unit with a fixed bed catalyst system, expected to be operational in late 2027. This upgrade is projected to expand the alkylation unit by approximately 2,500 barrels per day (bpd), increase premium gasoline production, and eliminate hydrofluoric acid inventory on-site, contributing to both environmental safety and product value.

In addition to these upgrades, CVR Energy is implementing distillate yield improvement projects at both refineries. The Wynnewood project, with a lowered capital requirement of $3 million, aims to modify vacuum towers to increase distillate production by up to approximately 2,400 bpd. A similar first phase at Coffeyville could increase distillate by up to 1,300 bpd, with a potential second phase adding another 2,600 bpd. These initiatives are designed to optimize product mix and enhance profitability. The company also commenced jet fuel production and sales from its Coffeyville Refinery in the third quarter of 2025, with a potential to ramp up to 9,000 bpd. This strategic shift is significant as jet fuel production is not subject to Renewable Volume Obligations (RVOs), potentially reducing annual RIN exposure by as much as 22 million RINs per year and offering an estimated margin uplift of $5 to $7 per barrel on new jet fuel sales.

Competitive Positioning in a Dynamic Market

CVR Energy operates in highly competitive sectors. In petroleum refining, it competes with larger, more diversified players like Valero Energy Corporation (VLO) and Marathon Petroleum Corporation (MPC). While CVR Energy's regional focus in the Mid-Continent provides stability in its local markets, it also presents a vulnerability due to concentration in the Group 3 market. Larger competitors benefit from greater scale, broader geographic reach, and often more extensive distribution networks, which can lead to lower operating costs and greater resilience to regional market fluctuations. However, CVR Energy's integrated logistics and coking capabilities offer a qualitative advantage in processing specific crude types and optimizing its supply chain within its operating footprint. The company's strategic move to increase jet fuel production and explore new pipeline connections to PADD 4 and 5 aims to diversify its product off-take and mitigate its Mid-Con concentration.

In the nitrogen fertilizer segment, CVR Energy, through its interest in CVR Partners (UAN), competes with industry giants like CF Industries Holdings, Inc. (CF). CVR Partners' Coffeyville Fertilizer Facility utilizes a pet coke gasification process, a technological differentiator that can offer feedstock flexibility compared to natural gas-based producers. This provides a unique cost structure and can be advantageous depending on the relative prices of pet coke and natural gas. While CF Industries benefits from its specialized focus and larger scale in the agricultural market, CVR Energy's integrated approach, linking its refining operations to fertilizer production, could offer cost synergies and a unique value proposition. The company is actively exploring natural gas as an optional feedstock for its Coffeyville fertilizer facility, which would further enhance its competitive flexibility.

Financial Performance: A Quarter of Transformation

The third quarter of 2025 marked a significant turnaround for CVR Energy, driven by a pivotal regulatory decision. The company reported consolidated net income of $401 million and EBITDA of $625 million for the quarter. These results include a substantial $488 million benefit from the U.S. Environmental Protection Agency's (EPA) decision in August 2025 to grant full or partial small refinery exemptions (SREs) to Wynnewood Refining Company for compliance periods spanning 2019 through 2024. This decision effectively reduced CVR Energy's outstanding RFS obligation by over 80%, providing a much-needed boost to its balance sheet and profitability.

The Petroleum Segment was the primary beneficiary of these developments. Its operating income surged to $518 million in Q3 2025, a dramatic improvement from an operating loss of $119 million in Q3 2024. Net sales for the segment increased to $1,739 million from $1,648 million in the prior-year quarter. This strong performance was also fueled by increases in gasoline and distillate crack spreads and higher throughput volumes, with the company achieving a crude processing utilization of 97% and light product yield of 97%. The refining margin for Q3 2025 reached $708 million, or $35.65 per throughput barrel, a significant increase from $44 million ($2.53 per barrel) in Q3 2024. For the nine months ended September 30, 2025, the segment's operating income was $224 million, a substantial improvement from $9 million in the same period of 2024.

In contrast, the Renewables Segment faced considerable headwinds. It reported an operating loss and net loss of $51 million each for Q3 2025, compared to an operating income of $3 million in Q3 2024. The segment's net sales remained flat at $99 million for the quarter. The gross margin turned negative at approximately $0.01 per gallon, down from a positive $1.09 per gallon in the prior year. This decline was primarily attributed to the expiration of the Blenders' Tax Credit (BTC) at the end of 2024 and a significant increase in soybean oil prices. The company did not recognize any Production Tax Credit (PTC) benefits due to pending IRS regulations, further impacting profitability.

The Nitrogen Fertilizer Segment continued to provide a stable and growing contribution. Its operating income rose to $51 million in Q3 2025 from $11 million in Q3 2024, with net sales increasing to $164 million from $125 million. For the nine months ended September 30, 2025, operating income was $132 million, up from $65 million in the prior-year period. This growth was primarily driven by higher UAN and ammonia sales prices, supported by tight global supplies and strong demand from the agricultural sector. Ammonia utilization for the quarter was 95%.

Strategic Re-Alignment: The Renewables Pivot

The challenging economics in the Renewables segment led to a significant strategic decision in the third quarter of 2025. CVR Energy resolved to revert its renewable diesel unit (RDU) at the Wynnewood Refinery back to hydrocarbon processing service during the next scheduled catalyst change in December 2025. This pivot is a direct response to the "unfavorable economics of the renewables business" and aims to "optimize feedstock and relieve certain logistical constraints within the refining business." Management explicitly stated that the renewable diesel business "relies heavily on government mandates and subsidies to be profitable, and the government does not currently seem to be interested in supporting the renewable business it created."

This decision resulted in $31 million of accelerated depreciation in Q3 2025 related to certain Renewables segment assets, with an additional $62 million anticipated in Q4 2025. While the company will retain the option to switch back to renewable diesel service if future incentives make it profitable, the immediate focus is on leveraging the assets for hydrocarbon processing, where management sees "more opportunities to create value." This strategic shift underscores CVR Energy's pragmatic approach to capital allocation and its unwillingness to sustain unprofitable ventures solely based on uncertain government support.

Outlook and Risks

Looking ahead, CVR Energy expresses cautious optimism for the refining sector. Management anticipates improved market conditions in 2025 compared to 2024, driven by a better supply-demand balance, ongoing heavy spring maintenance, and announced refinery closures in the U.S. and Europe, totaling approximately 400,000 to 500,000 bpd of capacity. This supply rationalization, coupled with stable refined product demand and potential pro-growth policies, is expected to be supportive of crack spreads. The company has no additional turnarounds planned for its Petroleum segment in 2025 or 2026, which should allow for consistent operational performance.

However, risks persist. The volatility and costs associated with the Renewable Fuel Standard (RFS) remain a significant concern. While the recent SRE grants provided substantial relief, the company continues to accrue Wynnewood's 2025 RFS obligation at 100% of the required amount, estimating it at approximately 120 million RINs by year-end, pending a waiver decision. Geopolitical tensions, particularly the Russia-Ukraine war and Middle East conflicts, continue to pose risks to commodity prices and market stability. The company is also involved in several legal proceedings, including challenges to SRE denials, a guaranty dispute with Exxon Mobil (XOM), a Wynnewood fire claim, and an ammonia release lawsuit, the outcomes of which could materially impact its financial position.

From a liquidity perspective, CVR Energy ended Q3 2025 with approximately $1 billion in total liquidity. The company's primary focus is on debt reduction, having prepaid $90 million on its term loan in Q2 and Q3 2025. Management aims to return to a target leverage ratio of approximately two to two and a half times mid-cycle EBITDA. The Board evaluates dividend payments quarterly, and while a dividend was not declared for Q3 2025, sustained market strength and progress on debt reduction are key factors for its potential reinstatement.

For Q4 2025, the Petroleum segment expects throughput of 200,000-215,000 bpd, direct operating expenses of $105-$115 million, and capital spending of $20-$25 million. The Nitrogen Fertilizer segment anticipates an ammonia utilization rate of 80%-85% (due to a planned turnaround), direct operating expenses of $58-$63 million, and capital spending of $30-$35 million, with turnaround expenses of $15-$20 million. The Renewables segment projects throughput of 10-15 million gallons (due to catalyst change), direct operating expenses of $8-$10 million, and capital spending of $1-$3 million. Total consolidated capital spending for full-year 2025 is estimated at $180-$200 million, with capitalized turnaround spending at $190 million.

Conclusion

CVR Energy stands at a pivotal juncture, having successfully clarified a significant regulatory overhang with the EPA's SRE grants, which has substantially de-risked its balance sheet. The strategic decision to revert the Wynnewood RDU to hydrocarbon processing demonstrates a disciplined approach to capital allocation, prioritizing profitability over uncertain government incentives in the renewables space. This pivot, coupled with ongoing investments in refining efficiency, distillate yield improvements, and new jet fuel production, positions the Petroleum segment for continued strength in an improving market.

The Nitrogen Fertilizer segment provides a robust and stable earnings stream, supported by favorable market fundamentals and strategic initiatives aimed at enhancing reliability and feedstock flexibility. While the company remains exposed to commodity price volatility and regulatory complexities, its clear focus on debt reduction and a return to targeted leverage ratios signals a commitment to long-term financial health and potential future shareholder returns. Investors should monitor the company's progress on debt reduction, the ongoing RFS compliance for 2025, and the execution of its refining optimization projects as key indicators of its ability to unlock further value.