HF Sinclair (DINO) 24 Feb 232022 Q4 Earnings call transcript

Company Profile

Participants

Craig Biery	VP, IR
Mike Jennings	CEO
Atanas Atanasov	CFO
Tim Go	President, COO
John Harrison	VP, Finance, Strategy & Treasurer
Doug Leggate	Bank of America
John Royall	JP Morgan
Matthew Blair	TPH
Neil Mehta	Goldman Sachs
Paul Cheng	Scotiabank
Ryan Todd	Piper Sandler
Theresa Chen	Barclays
Doug Irwin	Citi

Call transcript

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Operator

Welcome to HF Sinclair Corporation and Holly Energy Partners Fourth Quarter 2022 Conference Call and Webcast.

Hosting the call today is Mike Jennings, Chief Executive Officer of HF Sinclair and Holly Energy Partners. He is joined by Tim Go, President and Chief Operating Officer of HF Sinclair; Atanas Atanasov, Chief Financial Officer of HF Sinclair; and John Harrison, Chief Financial Officer of Holly Energy Partners. [Operator Instructions]. Please note that this conference is being recorded.

pleasure President the of my Craig over now Vice Biery, Investor is to floor turn to It Relations. Craig, you may begin.

Craig Biery

Good Holly quarter quarter ending Thank Sinclair press release morning, Rob. morning, XX, for welcome a and you, the results to we Corporation issued and earnings XXXX. Energy XXXX fourth December announcing Partners call. This everyone, HF

If may hollyenergy.com. our on hfsinclair.com and find you website would like a copy of them the press release, you at

noted are press forward-looking laws. our the harbor we There In proceed intended safe SEC cause expectations, under please factors remarks, securities says many those statement made summary, federal releases. Before statements could that of today's statements from note in the it to disclosure judgments are in differ covered safe or statements. results filings. harbor be with to provisions including regarding expectations, management predictions These are

please for provided any longer press The at of GAAP webcast financial include the call also the the rereading be may replay Also, transcript. earnings any of non-GAAP see may of reconciliations time no to today's Please call note measures. time-sensitive releases accurate discussion or measures. on information

that, I'll call over turn to Mike Jennings. the with And

Mike Jennings

everyone. $XX to million. Good share. $XXX by Today, fourth Craig. income reflect reported special attributable results These morning, Thanks, or $X.XX net decreased collectively HF income net quarter of shareholders diluted Sinclair we million per items that

increase or $XXX $X.XX Adjusted $X.XX fourth the to million share fourth approximately for adjusted items, $XX for per in quarter diluted income $XXX for billion, per was the period of $X.X XXXX. share net compared million to fourth same diluted Excluding negative an quarter loss the adjusted of the compared a the million or XXXX. of EBITDA net was

margins fourth of and in same last the refining year-over-year In quarter the acquired refined $XX driven both due in to Mid-Con regions XX% million This Sound million was of increase the sales the the a Sinclair to and Refinery businesses. by and year. increase period higher primarily in acquisition West EBITDA our $XXX was compared segment, Refining products Puget

winter day the the quarter for December, in quarter experienced barrels in day of oil barrels fourth per XXX,XXX compared 'XX. Despite we charge to per storm fourth averaged XXX,XXX impacts the crude

XXXX, throughput XXXX, for Despite annual fuels. crude on Refining our our year transportation segment focus achieved per allowed XXX,XXX of tight billion. we to day full demand continued customer barrels For supply us of meet for records EBITDA in environment charge operational safely $X.X the increase to excellence and

negative million quarter In our by million Renewables of $X volumes EBITDA fourth and for total the of segment, XX unplanned sales we adjusted reported driven downtime. gallons,

source to our run to We rates expect our feedstocks remain ability at second market constructive half on and and XXXX. RIN renewable on normalized renewables achieve our continue to diesel plants. of facilities We DX the in increase the for throughput advantaged

Marketing per Our branded reported were quarter, $XX volumes segment margin. $X.XX the a gallon of XXX total and fuel gallons, EBITDA representing million million fourth for sales

by XX of XX sites and the of business the to brand since progress continue from expanding Sinclair our DINO We branded fourth of the branded grew 'XX. in as acquisition the by during March number quarter make

inventory XXXX. from Lubricants consumption quarter driven XXXX. quarter fourth of the of higher-priced the in EBITDA $XX $XX and EBITDA Specialty fourth largely to quarter fourth FIFO impact million million reported the by Products compared of of for decrease for of This feedstock was

HEP across finished of transportation of from coupled our of was primarily in record last which with of March quarter driven our 'XX, by to above in XXXX, to due the full Sinclair performed million oils $XXX lubricants $XX million million acquired year. reported the demand compared for the assets, and EBITDA volumes reporting products. increase base contributions well mid-cycle in EBITDA period adjusted were For annual integrated same fourth system. year strong This guidance, $XXX

ahead million cash and since returned the the end quarter. shareholders during our acquisition over dividends returning of closing a And $XXX of we our cash to XXXX initial $X target XX, fourth $X.X in share first XX%. is represents which returned on billion, the of repurchases by through have shareholders March of full This to of XXXX, We the billion return of well 'XX. year quarter Sinclair the

our our cash As repurchase of $XXX remaining fully committed million we balance remain and a rating. have investment-grade XXXX, ratio, and sheet and while strong payout share maintaining return on December XX, strategy an credit authorization to

regular dividend shareholders. reflects our our of our share acquired and on declared commitment cash per Board cash of This constructive payable $X.XX from to holders returning XX, We excess Directors on XXXX. increase March to on record recently outlook quarterly assets our to March also that generation increase XX.X% Board's to our today X, a announced XXXX,

focus new growth and remains our to we've capital our believe with drive to We shareholders. asset on operating business while and strong to as scale optimize fully our foundation ahead, created diverse Looking more a reliably, integrated executing strategy returns integration a increased safely downward base. and on

Atanas. So let turn with me that, the call to

Atanas Atanasov

Thank everyone. good and you, Mike, morning,

reviewing financial highlights. HF Sinclair's by begin Let's

capital by cash million for the in expenditures quarter. totaled HF the totaled included million, quarter. provided turnaround Sinclair's Net operations $XX $XXX fourth $XX of which spend stand-alone million

stand-alone stood of with along facility. our credit December a billion, approximately of cash HF of billion Sinclair's $X.X XXXX, $X.X liquidity total $X.XX at billion, balance undrawn XX, unsecured comprised As

$XX close. which HEP stand-alone As of of Limited ratio a represents outstanding, XX% billion the at of net a received of million. during of $X.X units of and XX, $X.X debt-to-cap by December debt-to-cap Transportation, LP night's HF outstanding quarter following approximately market HF with Sinclair the HEP ratio distributions value X%. billion had debt at of Sinclair last million we Partner HEP's totaled XX% acquisition Sinclair units, owns fourth XX.X

$XX million $XX million Lubricants to million through Specialty Renewables, items. capital XXXX, spend in Refining, go $XX in to Products, At to full expect some million $XX in $XX venture million and Marketing, million spend in $XXX Turnarounds respect and to million expect and joint in $XX between to Let's million to Corporate, investments. $XX to to between for guidance $XX million $XXX and we year million spending we million With $XX $XXX to in $XXX million $XX million expansion HEP, maintenance million and to $X to $XX million for in million Catalysts.

For Puget the the first and XXX,XXX crude at we planned of run to segment, El our have Refining and we expect between Dorado Wood and quarter refineries of barrels scheduled Cross period. XXXX, day our Sound turnaround per in oil XXX,XXX in

on for Let me now John to HEP. over the update turn an call

John Harrison

by integrated the system. HEP's year across XXXX interest period attributable strong by quarter million costs. our increase $XX.X to Thanks, last to record volumes can quarter to found to the Atanas. earnings and HEP's XXXX these The reflecting partially assets, be related HEP's and of reconciliation release. report I'm fourth higher expense table EBITDA driven Partners press pleased full $XXX.X quarter income in to operating the to XXXX. million Energy was $XX.X offset fourth Sinclair attributable in year. fourth year-over-year compared fourth was A adjustments adjusted transportation $XX.X same in net million primarily HEP's million compared was quarter earnings Holly

we a million, investments including and during and joint approximately investments, expansion $X.XX CapEx, maintenance for unit, HEP $XX.X Capital per distributable coverage million $XX quarter million, in quarter joint expenditures million ratio and generated the were LP distribution flow venture $X CapEx. a $XX X.Xx. distribution announced resulting of cash in of fourth venture of of and million $X reimbursable

XXXX, $XX to total CapEx million. of we For expect $XX million

of the and on good made our progress we trailing ended X.Xx. to debt forma ratio EBITDA reducing XXXX, ratio year adjusted leverage a pro During with XX-month

expect strategy. to target return capital We consistent ratio leverage our will at of our unitholders previously with we incremental cash allocation which X.Xx in reach mid-XXXX, time announced evaluate to

ready call questions. turn operator for over now to are the We the to any

Operator

[Operator Barclays. Instructions] the And comes question from Chen Theresa first of your from line today

Theresa Chen

retirement. Congratulations round again, to for Mike, of X

refining marketing and and the rate the that at rolling have their of markets other you've that phase in for view do Sinclair Sinclair now achieved and we anticipating? What channels synergies downstream synergies run $XXX further aspects your integration integration are following effort? the How of you acquisition be some the stages -- to legacy terms and brand umbrella you of HFC should out million of time. under assets So

Tim Go

Tim Go. Theresa, this is

with take the portfolio, take gate. of our We're achieve that million pleased very were see $XXX able at right assets. we importantly, definitely just advantage stab a refining the to the opportunities here. out me continue quickly, We the that marketing for to first but more integration larger of Let to more synergies so us of

our any was to recall, you one to HollyFrontier Sinclair integration core as get exposure wholesale branded that merger we to merchant be past. was, currently of our in the refining markets real objectives have of that That able in didn't the

refining lot more those opportunities. the P&W outlets year in help X to are Southwest. in his said our which our stores of fully fourth additional We interests Mike that output Sinclair, We're branded the for interests areas, the had a really the that's year. lot owned us since seeing XX of out we've We're with We've quarter. a in basically think seeing comments, done will chain. a We're well. think the of in XX there again, beginning. the to lot -- bring really just value we integrate the couple branded and prepared in stores we quarters

there's to I a give processes are and after number, not we're lot more seeing We're can lot to point our to but a a that are you opportunity, you opportunity there. this going ready we procurement, a assets our see also of We within of improve reliability, just opportunities it. lot tell operating combining we out at

Theresa Chen

Congratulations on role. the new

improving Coast further half? the course, the us Can refining. account, over near-term downtime do this what the taking quarter's see details happened to on you Turning that the medium in And you results? have first term, West into of sense long capture on a the you give or of term this

Tim Go

Yes, Tim. Theresa, this is

we as yield but lower West. about barrels higher that the Let prices fourth that heavy natural X% unplanned was And West, occurred the quarter than and across typically due primarily less that to gas run, a again. the Basically, me day as again, take about crude impacts some impacted in the portfolio, and diesel the were XX,XXX also in primarily planned both West. maintenance well that

planned refinery. refineries. and at we maintenance refinery. maintenance hydrotreater maintenance Parco at had our basis, our distillate planned had planned had planned Dorado distillate had planned the Sound maintenance on coker at PSR then We our So refinery, at Puget we El hydrotreater our We coker

lower those runs the as to heavy the crude well contributed of All as distillate yields. lower

our In addition, some both at at unplanned Navajo our hydrogen and refinery. refinery Parco outages, we had and planned

that's Coast productivity. what drove really, So lower the West

for looking we our gas, on gotten saw associated natural for Hub as well into In of Salt Lake some as addition, gross the January West and with Coast. in MMBtu high The the the looking OpEx basis capture had gas above P&W even at about some you're in very if prices $XX City at to carrying frame. you're to if though, natural over and price that the December $XX time refinery up Henry the really baseline margin

and explain the really So less those crude, natural weaker West we less X distillate had. prices higher factors, heavy that gas yield results

Operator

next line Scotiabank. Cheng comes Paul of Your from from question the

Paul Cheng

First, say, half surprised guess plan, that little one that and the I it's help. you to reach congratulations normal is bit have the how you, second promotion. quarter. the to the until in take quarter, a actually first the will questions Thank retirement for Mike, it -- both the at and given year the the this when Mike runway in you're two second start you're Mike that or all Tim up noise in looking other saying one Tim, the of I here. for is all

why from will that into normalized LCFS think -- I have that give you one have also And people And the the that. maybe have now? operation? whether what certified already understanding that so for of learned move we can would on the a a now by of you thought far us you So So better way? you by lot will that's

much EBITDA, the year, to If XX for on last cycle. $XX you about referring months than million time million of did the marketing. only operations, The second look normalized were I at better question $XX acquisition, you of a the year about at in is

still is much as So that been the or is than business just actually year an you year, would assuming? had baseline last exceptional and that better what XX%

Mike Jennings

is will split Tim I'll to questions. -- with the we candidly, and planned, performance renewables but fix performance pretty going not And yes, disappointing, it's Paul. up. operational it I we're renewables date put to what this this Thanks, resilient we're thing. and the start to and

There of things. So what's are in front a of number us?

to units In that renewable as That the getting performance, you more Paul, be getting more just run XX,XXX which and catalyst low. quarter. is up utilization well a and the towards diesel XX% fourth optimization to a number process process yields in barrels consistently. First, the is too industry, ran needs We day, know, XX%.

terms of going the of these expense units catalyst naphtha of on renewable processes availability the yield but higher So and in very diesel got underlying the there. yield, and are reliability performance things hydrogen and dependent, importantly, two as the at we've getting

First to a number production. competition at optimize across we've improve And got they present. of And distillate these but as or conventional is working base reliability are, also hydrogen with to of high internally that's petroleum we're use refineries. hydrogen needing things a that, margins as

feeds need we plants. So hydrogen longer availability high-purity that the these the term, to increase of

there. not were Nameplate-wise, we at to that we're and they perform expect capacity, found

and improve the gross initiatives working have longer-term refinery we So hydrogen. improve the that optimization of within availability some to

there's get And considerably higher is yields in operational that current and to do here lot achieved months to we've that, not toward pathway So but plants. these in these a profitability. throughputs to the yet X no,

Tim Go

seen merger. Paul, the second for I'll objectives our take again, on marketing very that reason is, question side. been HollyFrontier on that the as far one we've Tim. for on Sinclair and focused core Again, we've This integration pleased of again, we're as the is marketing. with the results This your

a that being fairly mid-cycle case if right inventories our think particular, asked areas point. probably bit in from because million more demand in, we to get $XX in year You've But not low we a little at the and and Rockies, inventories brand that's ready low operate especially high are demand, above which change environment. we operating with you I high, able would than tell mid-cycle we the during country in across our our And mid-cycle, maybe would the being a say that now. have I'd we're type we're premium what to this

year continue to we in wholesale branded we a in that growth that X% our a of market last the to growth rate in though, More think to saw XX% rate year-over-year. we stores And importantly, number going our -- have. see we're X%

we're range. end fact, the that towards hoping In be it upper will of in XXXX,

growth that in from our So we do standpoint, number. be in think our there'll mid-cycle

Paul Cheng

Mike, the about can LCFS. achieved on the Have I circle back certification you that?

Mike Jennings

the get Artesia Paul, provisional facility, certification. we we're first expect we'll permanent quarter still the that and with in operating for the

Operator

of Piper next Your question Sandler. Ryan from comes line from Todd the

Ryan Todd

Tim one, first of Maybe on promotion. shareholders. all, the Great. I'd -- retirement return say a to maybe, guess, cash couple I on congratulations, Mike and and

shareholders, excess look forward? this to of that expect about impressive a sheet? guidance, think million to building can how On additional talk us to you versus And is may return kind cash should about you're a can the forward? obviously in cash about for going there balance aggressive in while? you type that of to bookend quarter rate the general, continue rate we be How thinking Or on well how $XXX run you and earlier how going run your really be which of

Atanas Atanasov

is Atanas, for question. thank and your This you

indicated in And to we we Mike fully out, remain As committed remarks, very strategy. XXXX as our XX% healthy. a is pointed prepared capital for return his return

doing. we have With owing of up And nice far, for return respect terms year we cracks. a to XXXX, been to be committed capital what shaping fully XXXX so remain is to in

but and terms you to we're going payout we exceed both the in dividend. not pace, previously, we're that look respect to not to target with can So the about we to shy of obviously we that talked XX% -- buybacks when have guide don't in ratio pace, say

Mike Jennings

on $X.X starting privilege began we a represent the from does which And that with and excess balance sheet, billion position some year itself Ryan, also cash. the of we're

Ryan Todd

you that on on cash level we -- the the there there appropriate to is kind Is balance cash expect going carry sheet that balance sheet, a forward? on of an of should

Atanas Atanasov

We and we take release we as range immediate Yes. the our fast we've and the pretty [indiscernible] checks looking return, And Previously, at very obviously, our million, around needs. our year. indicated number. in through the our includes And $XXX a talked on hard early we'll not that's got some we've about again, shareholder to remarks, but year, into capital robust press account as of at large balance. cash But cash balance. focused progress in write look which

Ryan Todd

follow-up of the issues, type a a talk question running? sales can issues. the you've been about -- year maybe renewable challenges what kind Or diesel and on a on earlier terms of of as And you you're you on acquisition renewable bit Have mix expected? And business. little the what have Great. of of the Outside operational appreciate in about maybe market? clarity of the placing the operational Outside feedstock from into nearly there? any feed diesel learned you I on acquisition, feedstock product product operations seen the

Mike Jennings

Yes.

we're the learned for So but So more profitably, are issues, respect outside -- I'd to involved tell California that there marketplace we older in in okay? what see are and about with. a optimistic become we we've I product And you lot. ability of think other and this many that some wiser markets operational of place we've

current placing And just the certainly, LCFS doors to these that barrels with the price, opens otherwise. low

So understood. than we the more initially opportunity to much barrels place

structure. of big periods of cost a us, relative the being to side, found for think strategy We further right pushing terms in the on probably a backward of issues. little I market given we the excess in operational forward that is market and profitability. the a spot And feedstock remainder inventory volumes up our the piece that, really more scars Beyond into maybe picking conservative worn that's in

different on little that strategy a probably So front.

of And that the our we anticipated We're and is that. we operating a like get it units, can't heavily than PTU. of dependent put the is unit can feeds us. we are the are but going the The higher on about, to to that's off more is strategic the the present right important of disclose, great. to is downstream PTU plants, can't at a but in respect PTU a reliability working changer it's on ability new done, strategically for fix yields having coming good. be But The lower if really gem. but bit game and to feedstocks that what same I something we'll say the CI really a venture it's With

So prices The gets structure profitability. has overall market recently, RIN softened overall, bridges the have diesel terms as in I'd and price down oils the of and kind gap. that come into say, the well, of ag well that

So if or you will, us. improved new for there operations, happen is we the second-generation structure feel The will like hydrogen the margin availability optimization feedstocks. or structure, and market through greater

Operator

next America. Bank question Doug comes of from the from Your Leggate of line

Doug Leggate

see me taking each coffee caught I time short got You recently, there, again. only I and other make just we to Mike, apologize. guess a you're off

to my question, So looking congratulations if of And you seeing I first kind Tim, forward that here. both what guys. really of to may. to do is you're going

you what The to or be strategy in a were of -- questions. B the A a as forward, look portfolio, high something it integrated to vertically different? part that we then is, the a you my it continuity -- a part of at part really part seems. least never at me lubricants guess of to bought part Just should X a Mike, seems as maybe will and we expect level, And there's A this, I

tough this the of always this assets. position -- the in I one, legacy relative, potential you the And let's Sinclair and forward of in company going seems That's kind one. HollyFrontier does at number could two is be reliability as of portfolio but when acquired the a the How number looking kind peers. thing guess, stand-alone is to And was same it Achilles happening now say, heel business your the monetization?

that What there. can somewhat portfolio assurances to you these to on you I'll give can the the going work are the reliabilities endemic it actually that market leave or structurally And forward? business those not

Mike Jennings

who I Doug. portfolio. businesses questions, you. But it. been no in going on commitment while mini the are lubricants of Those take the to optimizing for there's I bought is clarity, wasn't of once would businesses, Thank lack bulk the them to say, one Tim those growing the and

lubricants nice of contributor steady been was And a losing recall, COVID, EBITDA. during company. the to a while $XX They've refining specialties were money month out you million kicking as a

that business has well stewardship. has under improved significantly performed been Tim's So and

the business. pitch So to you Tim, I'll to what is really future vision and because about going you're this it your with do

Tim Go

thanks, up for XX Well, job done opportunity that excited am ahead. company about setting the good and success, years I starting combination mean really of challenge with this has the some such -- with Mike XX, Mike. ago. of the up the the a the I occurred HollyFrontier it we and well addition with really addition Sinclair people and us. assets, some as And to really capability as future bright to Sound now nice then a nice it, Puget ahead are set

So very I'm excited about that.

the I go some can shareholder, has forward, are to won't as things and clearly which demonstrated to few the and in Mike the which commitment tell years. that's here and long-term return demonstrated, last again, change our Mike we there cash shown really you focus that has growth, on

really Things been the an on area X behind, coming excellence. at been up And that the up. more That been operations that here, has years, been competition. nail over that trying point progress, guess, we've catch more the of more I've head. the We on we've I safety, from to last focus we hit reliability, really you of, need a want least

next And going more I focus to the set trying trying skill on my a leverage little that, think take level. bit, to that's experience my to and to us

that's almost I mandate some fact, In made progress. from we've think my good Board. But the think I

and how prepared you the just the assets on because crude added Sinclair annual we and in we some And the Puget records of remarks terms additional assets. not I not terms that's will diesel that also in just Mike in but so throughput, tell of Sound production. in set about of talked gasoline

Woods Cross crude and individual and plants, records XXXX. plants, records production records, Dorado, El distillate individual throughput Tulsa, those most Our gasoline in of production set legacy

sign that heading that's I And a we're in the right direction. think

to We safety, excellence. it's down kind operations to be that have of long see that along. the as go us we're up standpoint, it underlying right, But the capability chart the that things an And we of gives journey say as we're direction. performance kind confidence as heading up to I'd in higher continuing reliability right doing like and a rise, right to and deliver and we to and from going the

in from got and think I new capability I assets, new almost still the that the in terms going into feel we lot -- forward integration Southwest. area, of a haven't a of with of standpoint, a and tapped going got more people optimize, see optimization like Sound we've of of an area kid fully the a at west whole that Rockies Puget lot we've trying Christmas, opportunities, we're and to in to lot new particular,

go costs, better more lower our I what is higher for rates utilization, synergy fertile going think there, we've to real earlier, more opportunities and grounds, opportunities capture mentioned after. which we're as

the I'm year. over pleased point, is with X business. that We've Doug, Lubes our say the hard Specialty record has performed to then And very how And last improve up pleased years. profitability of to are really set that the working last last and we been business a yes, we

that on row earnings, in we're third set improve. the In pleased fact, Lubes Specialties and it's a and record see to a year that we've

strategic improvement. more doors can margin that. there's with operations yes, we there, look in and value. another But focus more there we're our may and business think improving And maximize open. that I'd the business. focused on short term, still on our opportunities better That's lubes shareholder to we're the excellence out at after midterm, performance, be in testament consider to that, I'd more opportunities. that more say, going to With say, But we for

Operator

comes question Royall line the from next JPMorgan. of John from Your

John Royall

might anything or guidance year, in heavy how think about early your the more first maybe the we pretty the throughput and with like year. timing-wise? as throughout a maintenance maintenance any half heavy full guide, year second granular of guidance out versus looks in in maintenance called You half year But progress XQ terms just refining

Tim Go

put XXX,XXX quarter. John, Yes, XXX,XXX We of day the guidance the Tim. in first is to this a out barrels

that think as storm That in winter of mentioned I well the Atanas first as turnaround prepared impacts a effects is in lingering the quarter. the combination remarks.

That, utilization and run. on the into than be we through the if low back utilization the look that into we first a lower sorry, the of mid believe what course, quarter -- you is we'll second quarter type at as I'm do XX% normally get We range turnarounds.

throughout is clearly here some still the quarter. turnaround and the crude utilization front-end the on We'll have year, on the but impact in rate impact weighted more first work

the So if low what of of you the we back in terms to year. normal in really -- in think about rest XXs that's produce utilization, typically those

John Royall

drivers there how that SPR just you Can talk It's the then given and view your And release wondering you think in Brent-WTI, on your even with the about XXXX? can exposure there. remained progress relatively ending. wide

Tim Go

just a impact I rates in Yes. one freight biggest taking the rates, There's think be is course, right the seems freight that TI dirty the drivers, globally. to high the of of But Brent lot spread. now

more Russia-Ukraine shipping on keeping what that rates the freight basically that the is And pressure think Brent the Brent TI the rates now, determined by seeing, you're shipping that TI wide. we've we're with play always of TI the has into even higher out seeing created said conflict rates. world. spread And rest I of spread

the see. spread We're WCS/WTI also happy that we pretty continue with to

year But since of still to are it's fairly $XX quarter, the Now feels good off up us. the here that WCS/WTI or in pretty bullish it discount and so $XX then. the fourth the $XX, in a come we rest that jumped spread for

been production-wise Slope, North we've associated we and that has just in out Puget We going continue few A&S is higher our And that to Brent Sound That over that's to point our think of impact advantage the discount the last the seen then last big Refinery. think crude a coming thing with has I'll A&S at that's pricing out location. the a months. P&W here to

Operator

Company. Neil the Sachs Your next of line from question Mehta comes & from Goldman

Neil Mehta

intentions. to and on can Mike, on is of monetizing position, some both return even But the you don't things take over congrats, the they've question. the And and capital Tim, been nice of the Sinclair as know a been family I you've if stock, last I notwithstanding. of one follow-up Congrats, down comment December in have you. the their that's a year position to been

views wall So can whether your from be capacity you the your continue any them? mitigate to on over to outflows just and

Mike Jennings

So for individuals. are as the We, Neil, question. to thanks close you know, the very

family one We member have their two representatives, speak of our we on frequently. Board, and

interesting was which notwithstanding, an trade. December yes, So

to as to expect they of position. from liquidate shares continue some buy We them their

I think don't buying zero sell it our but that we're will, have in want discount synergistic and a to relationship, that, shareholders. been intention benefits down stretch, an you market. quantities us, they And to has chunky fairly at And to to any do liquidity. some by as they

we still they're So assuming that, would willing. to expect do more of

Neil Mehta

markets, a the Okay. That's love days. Mike. And little sense the but up about these influence in how terms talked data. the then lot are we about channels your helpful, the hard gasoline crude of terms wholesale bit retail the of you and There's the way it of a way make And to weekly demand? in markets. noise It's think what the set does But of both on own EIA summer? seeing in you diesel perspective seems -- are channels that through your and into product

Tim Go

just interesting in we're What product confusing tell side, The it week. Neil, is can on the data to It's Tim. you is seeing our see EIA how out. demand plays Yes, I is markets. strong every this

XX% the And up Rockies. so of we're peaks It's would the X% versus Southwest the about XXXX. were. on and side, say for versus XXXX XXXX, I but seeing demand down our in the gas maybe that's That's Mid-Con, example, what

side, diesel operate XX% seeing than where jet in demand, we been what maybe very has period, operated in saw higher the peak most guess, XX% the the XXXX seeing XXXX. been -- On of areas in of which which that lagging, about COVID through the we're has at And the we're we we that I on side, in. at

going So plays that to think we this demand climb. continue to continue to that jet as is out, year

do, pull back that with rest some that in another really that year and refining. global for these situation up we're of the shaping people terms the most We also as strong up, China there'll think, be for products, demand of more opening

And a more here talk that. I that is been for of refining the you of add the really the have rest tell advantages, that can industry. to something you I about really there's anything year. And if to excited what our about factors regional at we're drivers But macro lot look that don't and is

the we've we P&W, especially if that the look at the macro you you our asset presence our step-up Coast talking been think Rockies, look about. above a if the If advantage at that you drivers the and in and position at look on gives West even Southwest, our in regional us

transportation Our those up continues fuels growing, demographics. so demographics that for overall still to in go demand areas are just with

the a PADX in the We've about, on and excited that got West lot travel there's those advantaged of access And local especially summer of lot each that when and we've markets these the there's we're really in crudes locations. talked course, Coast of at to a product activity we've Southwest. in and going months got the strong of earlier about

our and on So reports, EIA think the Neil, nice bullish that despite We we're have areas shaping still up are a year. to pretty our that markets this year.

Operator

the question Matthew Your Blair line TPH. next of comes from from

Matthew Blair

oil your role, Was impact demand levels the could in though side? even in retirement. down? through on What indicators I hoping turnarounds Or was and And then you Tim, improve the the on weaker base like lubricants Back walk production in Mike on was to new Rack moving due QX. Why parts demand FIFO the the EBITDA move the was Congrats, the the on that a quarter? low. market? and more matching just your or that maintenance seemed due to current to like little the volume did

Tim Go

is Tim. this Matt, Yes,

very demand say, we Specialties for just me results that softer did fourth we've the lower Let the our again, business. seasonal of typically pleased in We see fourth combination see That's in a just and with the volumes been quarter. some Lubes quarter.

continued slowing been about We've prices drop the talked they prices for play quarter. in more also to we in importantly, rationalization That of those now. lot orders. of But for dropping, customers profit low But just rationalizing opportunity our to have many saw down, SKU as some were we areas. a before quarters their waiting put out fourth

or think to areas that margin that gallons we the low higher are that focusing favor shed -- margin. barrels are We in on trying of purposefully are

you'll really lower streamline out we that's And as That's play see year. and the continue the you volumes, you'll what business we profitability. higher a as our fourth gross purpose. focus going you'll for in see is So on quarter see pointed on out, but continue as to and think per which margin well to gallon,

mention, about $X.X I'll $X thing headwinds had the was It impacts. We quarter. in million fourth headwind. other The FIFO a million,

business the half that get to believe XX of back for Seasonally, numbers. first kind bit that So continue year We'll the see so feel run a little want to underlying of headwinds we a of better if will still the the strength. can But always show on you rate quarter. in lubes. kind -- for to the add you first the is

what finally, here run you is quarter, that Back think would will And in fourth is seeing out strength million margins. really the rate the you then Group XXXX. of Rack here I business, continue the we $XXX as pointed that we're in on as out, roughly we X the The play tell

fairly oil So true, margins robust. X it base X stayed X. have your down coming comment about to is Group actually specifically but Group overall margins and applies Group

quarter, our well. quarter through take the second business. the published in our first at think to we in as Rack Bank that a that and see $XXX barrel probably still, least advantage of about You full will indexes, that continue here We continue

Matthew Blair

spot. then, going WCS And bright Mountain given I relative think WCS your What's mentioned have Sounds good. been expansion? that this pipeline spreads on spreads, you forward Tim, outlook Trans especially a

Tim Go

lot a speculation happen Yes. of There's on Trans up. what Mountain starts will when

as which some the still it will planning the going, in Of impacts quarter course, thing this is year. But are the to further possibility date the be we happen. of of line that will There spread, slip that the There it in fill course. for to fourth in has they try past. published tighten barrels as a to start start could that line some is put

seasonal to the there when We spring spread spring activity activities in also in up maintenance tend full tightening the that WCS/WTI in come see into Canada.

see the $XX to of hold couple from we're And in to So we $XX for call the right would of quarters. $XX, area dip kind that $XX surprised spread to come dip to WCS the, the it, not here expect now. this off next that at we're

Operator

the question Gabelman from Jason of Cowen. comes line Your from next

question on line from the next move we'll from the of Doug And Irwin to Citi.

Doug Irwin

Just the one on have side. midstream

Just being covered wondering increase, could specifically, maintain just the Xx the I around how potential of you on if flexibility target at capital strategy distribution also to leverage expand balancing the of kind thinking and being able about you're of And almost bit guess, allocation a going HEP. versus that forward? achieve kind your

John Harrison

is Doug. John Thanks, Sure. This Harrison.

Our really here. capital allocation remains same strategy the

least basis. we've progress mid-XXXX. a and kept we've leverage in ratio to In of X.Xx the pleased leverage, with we're of have hit leverage. really at that expect report We to pro So short-term flat, X.Xx do maintain the there. X.Xx, we that reduced forma made that target coverage distribution term, X.X on to that Happy to And we're while with at X.Xx. plan the longer we've a we in

going communicate terms say, return of quarters, return to cash cash us. fair as is for And of we'll incremental next approach the we what to couple of top So shareholders. our leverage incremental we're to mind target do in over

Doug Irwin

to guess Could the some talk of little I that then in end you your this the about range Got a takes the for and maybe low outlook, ‘XX half of of you’re squarely acquisition. towards ability already kind of of higher it. just I the HEP after puts outlined kind maybe and Sinclair pro the bit you mean, year? kind forma the on And of range push

A –John Harrison

Sure.

are in that the – already. of we’re we middle range So

we’re of obviously, And assets. the Sinclair pleased So that transportation really that. includes, with only ¾

for So really of is our we also, inflation And our revenue applicable adders also have HEP. have some contracts there. we to that at room to HEP all

So here. the for HEP can be piece of business definitely, a inflation tailwind the

Operator

some time. Biery no Craig to now remarks. for over there And turn further back call are I closing this questions at final will the

Mike Jennings

the a Rob. the This year. a previous established Thanks, a integrated obviously Sound our HF company couple of the want that acquisition acquisition to company, and Sinclair, been Sinclair XXXX done Puget for Mike Jennings. up points. with we as was completed is in I integrated wrap had as ourselves downstream pivotal year and just further just

and And to own in well full our same our at changes the generating serve returns and really customers income to dramatic Really our needs tremendous and shareholders. operating of the business. time,

We that commitment million, within on key realizing our done completing cash these acquisitions would importantly, owners, well. it executed done start-ups initial renewable this proving up frankly, really points, and So which to our billion integrated, getting executed and we of some our returning early. over $XXX get included to diesel $X.X get have

terms the of that's out continuing equation and improving of accelerator Moving cash to for fundamentally within the investment and on reliability think in well, called a this our optimize priorities and that obviously, get company. sector important they portfolio. Tim returns foot our forward, it part shareholders. include this this maintaining has We I to

to congratulate note job. going little Tim and Tim, finish and and the our now passion important leader come key to and talent future. I'm our him of for pleasure a CEO for to a Board retain strong attract President for his find ability on great to process had and appointment the up succession I with of for to HF and develop I've on multiyear knowledge This culminates publicly admire the working company's company planning for Sinclair. almost the an of a improve tremendous our of to and the announced roles X want for desire years optimize our his and to with have part business, operations, right

together job Tim sentimentality, we're believe of and on rest fortunate team really owners. have the past and to the I that simply And committed get this done stepped down this will love great this at it working because while our regret I some I people the So our for with board that to the engaged. in be are they success, who great with company get and will industry

So thanks lot. a

Operator

Please conclude this at your you. time, day. today's a lines disconnect wonderful Thank have This does and teleconference.

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