Uncertainties and Certain Significant Accounting Estimates

3 Months Ended

Mar. 31, 2020

Risks and Uncertainties [Abstract]

UNCERTAINTIES AND CERTAIN SIGNIFICANT ACCOUNTING ESTIMATES

2.

UNCERTAINTIES AND CERTAIN SIGNIFICANT ACCOUNTING ESTIMATES

Overview

The outbreak of COVID-19 and its development into a pandemic in March 2020 and certain developments in the global oil markets have impacted and continue to impact our business. We are actively responding to these matters on our business. We have reduced the amount of crude oil processed at most of our refineries in response to the decreased demand for our products, we have temporarily idled various gasoline-making units at certain of our refineries to further limit gasoline production, and we have taken measures to reduce jet fuel production. Eight of our ethanol plants are temporarily idled, and we reduced the amount of ethanol produced at our remaining six ethanol plants to address the decreased demand for ethanol.

Many uncertainties remain with respect to COVID-19, including its resulting economic effects, and we are unable to predict the ultimate economic impacts from COVID-19 on our business and how quickly national economies can recover once the pandemic subsides. However, the adverse impacts of the economic effects from COVID-19 and uncertainty in the global oil markets on our business have been and will likely continue to be significant. As a result, we expect these matters may affect our estimates and assumptions on amounts reported in the financial statements and accompanying notes in the near term.

Impairment Analysis of Long-Lived Assets

Due to the adverse economic conditions discussed above, we reviewed our significant operating assets for the existence of impairment indicators. As a result of this review, we evaluated six ethanol plants for potential impairment as of March 31, 2020, assuming that we would operate these plants in the future and incorporating current price assumptions into our future estimated cash flows. Based on our analysis, we determined that

the carrying amount of each of these plants was recoverable, as the undiscounted future cash flows from each plant exceeded its respective carrying value. Nonetheless, we will continue to evaluate the economic conditions and their impact on our assumptions.

Impairment Analysis of Goodwill

We have $260 million of goodwill as of March 31, 2020. All of our goodwill is allocated to one reporting unit, the U.S. Gulf Coast refining region. Our annual test for the impairment of goodwill is performed on October 1 of each year. However, as discussed above, there were adverse changes in the capital and commodity markets that contributed to a significant decline in our common stock price. Despite the decline in our common stock price, we determined our goodwill was not impaired. Nonetheless, we will continue to evaluate the economic conditions and their impact on our assumptions.

Inventory Valuation

See Note 4 regarding our $2.5 billion LCM inventory valuation reserve and the estimates used to determine the market value of our inventories.