10-K: Gunvor and CVR Amend Crude Oil Supply Agreement, Extending Partnership Through 2026

Gunvor USA LLC and CVR Supply & Trading, LLC have amended and restated their crude oil supply agreement, extending their partnership through January 31, 2026, with potential for further one-year renewals.

Summary

• Gunvor USA LLC and CVR Supply & Trading, LLC have entered into an amended and restated crude oil supply agreement effective December 21, 2023.
• The agreement extends the partnership through January 31, 2026, with automatic one-year renewal options unless either party provides a 180-day termination notice.
• Gunvor will supply crude oil to CVR for processing at its refineries in Coffeyville, Kansas, and Wynnewood, Oklahoma.
• CVR will purchase crude oil from Gunvor, with title and risk of loss transferring at the delivery points.
• The agreement outlines the process for identifying supply arrangements, with CVR informing Gunvor of opportunities and Gunvor entering into third-party contracts.
• The purchase price for crude oil will be based on a floating price tied to the NYMEX WTI contract, adjusted for contract differentials.
• CVR is responsible for all costs associated with transportation and direct costs, and will reimburse Gunvor for these charges.
• The agreement includes provisions for handling crude oil gains and losses, quality assurance, and insurance requirements.
• Both parties have mutual representations, warranties, and covenants, and the agreement includes clauses for default, remedies, and indemnification.
• The agreement also addresses force majeure events, confidentiality, and compliance with applicable laws.

Sentiment

Score: 7

Explanation: The document outlines a standard commercial agreement with clear terms and conditions. The extension of the partnership is a positive sign, but there are no significant surprises or major changes that would warrant a higher or lower sentiment score.

Positives

• The agreement provides CVR with a reliable source of crude oil for its refineries.
• The floating price mechanism allows for adjustments based on market conditions.
• The agreement includes clear responsibilities for both parties, reducing potential disputes.
• The automatic renewal clause provides stability for the partnership.
• The agreement includes a mechanism for CVR to identify supply opportunities and for Gunvor to enter into third-party contracts.
• The agreement includes a clause for adequate assurance, allowing either party to request security for performance if reasonable grounds for insecurity exist.

Negatives

• CVR is responsible for all transportation and direct costs, which could be significant.
• The agreement includes a clause for adequate assurance, allowing either party to request security for performance if reasonable grounds for insecurity exist.
• The agreement includes a clause for adequate assurance, allowing either party to request security for performance if reasonable grounds for insecurity exist.

Risks

• The agreement is subject to market fluctuations in crude oil prices.
• There is a risk of potential disputes over crude oil quality and quantity.
• The agreement is subject to force majeure events that could disrupt supply.
• There is a risk of default by either party, which could lead to termination of the agreement.
• The agreement includes a clause for adequate assurance, allowing either party to request security for performance if reasonable grounds for insecurity exist.

Future Outlook

The agreement automatically renews for one-year terms unless either party provides a 180-day termination notice, indicating a potential long-term partnership.

Management Comments

• The Parties acknowledge and agree that a Crude Oil Pool may be comprised of more than one parcel and that such individual parcels shall be identified in a given Crude Oil Withdrawal for pricing purposes.
• It is the intent of the Parties that any applicable rolls of WTI Contracts shall be accounted for and invoiced separate from the calculation of the Transfer Price.
• The Parties agree that [***], the Party owed any amounts for WTI Price Rolls will invoice the other Party at the same time that invoicing for the True-Up occurs.

Industry Context

This agreement reflects the ongoing need for refineries to secure reliable crude oil supplies and the importance of strategic partnerships in the energy industry. It also highlights the use of market-based pricing mechanisms and risk management strategies in the oil and gas sector.

Comparison to Industry Standards

• The use of NYMEX WTI as a benchmark for pricing is a common practice in the oil industry, providing transparency and reducing price volatility.
• The inclusion of clauses for force majeure, indemnification, and dispute resolution is standard in commercial agreements of this nature.
• The agreement's focus on clear responsibilities for each party aligns with industry best practices for supply chain management.
• The agreement's focus on clear responsibilities for each party aligns with industry best practices for supply chain management.
• The agreement's focus on clear responsibilities for each party aligns with industry best practices for supply chain management.

Stakeholder Impact

• Shareholders of CVR may view the extended agreement as a positive sign of stability and continued operations.
• Employees of both Gunvor and CVR will continue to be involved in the execution of the agreement.
• Customers of CVR will continue to receive refined products made from the crude oil supplied under the agreement.
• Suppliers of Gunvor will continue to provide crude oil for the agreement.

Next Steps

• Gunvor will begin supplying crude oil to CVR under the terms of the amended agreement.
• CVR will continue to purchase crude oil from Gunvor for its refineries.
• Both parties will monitor market conditions and adjust their strategies as needed.
• The parties will continue to cooperate to identify and negotiate supply arrangements with Counterparties that are consistent with CVRs Monthly Crude Nominations.

Key Dates

Keywords

Crude Oil Supply Agreement, Gunvor USA LLC, CVR Supply & Trading, LLC, Refineries, WTI, NYMEX, Transportation Costs, Third-Party Contracts, Delivery Points, Force Majeure, Adequate Assurance