HEP - Earnings call 1 2023 | Holly Energy Partners LP

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Operator

Welcome to HF Sinclair Corporation and Holly Energy Partners Fourth Quarter 2022 (sic) [ First Quarter 2023 ] Conference Call and Webcast. Hosting the call today is Tim Go, incoming Chief Executive Officer of HF Sinclair. He is joined by Atanas Atanasov, Chief Financial Officer; Steve Ledbetter, EVP of Commercial; Valerie Pompa, EVP of Operations; and Matt Joyce, SVP of Lubricants and Specialties; along with John Harrison, Chief Financial Officer of Holly Energy Partners. [Operator Instructions] Please note that this conference is being recorded.

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

Craig Biery

for Good Holly and XXXX Energy we announcing This Jack. XXXX. March Sinclair Earnings to Corporation morning, results releases press and Partners issued quarter morning, you, ending welcome XX, everyone, HF Call. the Thank First Quarter

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

releases. The judgments made from see remarks, expectations, harbor provided may financial statements. time-sensitive time replay call are disclosure of or predictions today's be safe are results press measures. of that on There rereading Before regarding forward-looking earnings include safe statement the statements measures. many harbor any laws. such expectations, the any we accurate call webcast could at cause In including reconciliations Please please non-GAAP discussion proceed differ These the Also, it those may note to noted to intended transcript. filings. or covered information releases of today's SEC with are to provisions also for press management note summary, under GAAP factors of securities longer in statements federal please in no the our be the

with And Tim turn over Go. call to I'll that, the

Timothy Go

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

same diluted Excluding the net the compared to $XXX adjusted $X.XX million for period of million in these quarter share share items, diluted net per or adjusted income for per $X $XXX first income XXXX. was or

supply to our increase XXXX. demand, same million was a margins $XXX This spreads. quarter first the compared regions of segment, EBITDA well steady million quarter approximately the of XXXX In and first both driven first period refining compared as as last increase result and of $XXX million quarter higher was the West favorable for year. $XXX million, tight crude primarily $XXX to EBITDA by was an the of Mid-Continent Refining in Adjusted

the XXX,XXX barrels of oil barrels XXXX ] due averaged in first quarter compared to time X we refinery day turnarounds charge the Crude quarter (sic) XXXX, heavy in and during I budget. Of XXX,XXX first in pleased of completed report period. quarter to maintenance the on the turnaround XXX,XXX all XXXX per conducted the am on first [ X we to successfully day of per

available While our equipment itself, accomplishment refinery many a this on downtimes. addressed also the that in during we was significant is reliability these issues of end-of-cycle

is drive improve cycles. maintenance during our Our turnaround execute reliability to operating strategies that built around these the we

In EBITDA for our gallons $X we sales the volume million XX XXXX. segment, of adjusted of first reported million of total quarter and renewables

expect the to renewables optimize feedstock normalized in to rates half and continue increase will run from our of at unit. facilities second pretreatment work utilization us XXXX, to advantaged our which We to achieve allow

Our representing reported marketing of margin first total fuel EBITDA gallons, volumes of per XXX million in branded quarter of the gallon million and a $X sales $X.XX segment XXXX.

in with the sites branded grow the provides X% sales marketing for consistent a value more margin by DINO strong see brand or to our channel fuels, to produced continue We per expect we our year. as and uplift business

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

base focus continue oils optimization pleased and We strong of of products. segment performance the Specialty finished to mix on our be our and with to and Products Lubricants sales continue

was interest revenues same higher expenses. period as as in our mainly the March to driven higher transportation $XX This EBITDA contributions increase XXXX, the acquired units, million by in XXXX of last quarter offset well million reported the first of from from were HEP by of Cross in assets, Woods compared year. Sinclair $XX partially process which of refinery

returned cash and we through $XXX to shareholders quarter. the during first repurchases share million Overall, in dividends

we of income As remain or of share investment-grade and $XXX rating. have million while committed balance sheet a of We March shareholders. our returning remaining our our XX, cash fully XXXX, return strategy authorization. repurchase our on to strong long-term maintaining more net credit XX% to

to believe owned for common by proposal subsidiary and unit Energy owned the related units morning, Holly corporate Holly and structure, to Please portfolio. press in further indirect supports the Sinclair acquire to release would our our a Sinclair, transaction that HEP all of specifics stock of an merger not already simplifies integration becoming result made the of HF This a the Partners nonbinding LP costs HF of to We transaction HF for optimization proposed proposal. refer separate Sinclair. this reduces pursuant

CEO to to to time I'd HF this I for like with of priorities as near-term company. forward, you share Looking the Sinclair, take the transition my make

First, utilization we we lower must our safety operations expenses. operating believe rates reliability which improving and means of and result This will the our advancing continue plants, excellence. in higher

our equipment. implementing system the earlier, necessary will our But us turnaround working over through guide is it and subject top priority, experts we to operations time mentioned this have we This through reliability our as the management our last many years, journey. are take few cycles improvements to recruited and to matter I excellence make

base. million as efficiencies opportunities have we Products capture and number we of integration of and acquisition of this continue our there is and We from transformative from roughly Second, believe synergies with into in the acquisitions, as run our those assets focus more acquisition, to realized $XXX and Lubricant margin more goal well across Sinclair of to a Specialty rate on the the our annual already portfolio asset we completed segment. capturing operating

maintaining Returning success. I sheet balance cash to shareholders positioning is am for free committed while and to long flow, value excess future earlier. an over the through on strategy to maximizing cash investment-grade continuing mentioned focused fundamental I and term return dividends the Third, cash I'm shareholder and share repurchases company our that

to me the Atanas. turn over call let that, With

Atanas Atanasov

Thank you, Tim, and morning, everyone. good

reviewing Let's Sinclair's cash totaled million in million XXXX highlights. financial million, spend quarter. the 'XX. of provided Sinclair the stand-alone for included for of begin $XXX quarter turnaround HF first Net expenditures first $XX the $XXX operations HF which flows of by quarter totaled capital by

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

with stand-alone of of As March 'XX, net ratio outstanding debt a ratio of with of X%. and XX, $X.X billion debt-to-cap debt-to-cap of ratio debt-to-cap had XX% we --

acquisition Sinclair of by first $XX approximately $XXX night's of Transportation million last close. the HEP XX% received during million of units, Sinclair LP units following 'XX of XX.X Sinclair distributions outstanding HEP owns HF which partner value totaled quarter million. the HEP's represents at as HF a of limited market

turnarounds go Products, Let's million investments. some Specialty $XX marketing, and joint guidance $XX and in capital $XXX between million and $XXX in and $XX to Refining, respect $XX expect million $XX $XX $XX million for spending million million to million in corporates million $XX XXXX, Lubricants spend $XXX million million million through and in in to spend $XX year to we expansion venture between to items. million for million $XXX $XX full $XX still million million and to to in expect maintenance With catalysts. in At to HEP, back we to to renewables,

during we segment, For we oil and period. of the day the in second XXXX, Navajo XXX,XXX Refining refineries crude XXX,XXX of quarter to our scheduled run our turnaround between have to expect at barrels Parco per and planned

And public lastly, mentioned, please units. refer our the as to issued release related for HEP to our we morning separate specifics acquire outstanding this to proposal Tim press

update unable to proposal currently on during are we're specifics And to negotiations call Q&A. to that, for the the let HEP. ongoing, John over me speak As with turn around an

John Harrison

million first quarter earnings, quarter and primarily the Holly Thanks, partially XXXX. Atanas. was generated refinery higher operations net last Woods $XX to volumes in strong of attributable refined well XXXX $XX income operating reliable the million was and related XXXX was by interest same and quarter and expense systems. HEP's product our earnings storage and solid HEP year-over-year compared as first quarter transportation Energy in our as safe million both transportation crude to assets to compared period supported The Partners units, higher from year. $XXX first Cross Sinclair million adjusted EBITDA to by increase HEP's to attributable offset in costs. processing the revenues first $XX

of release. quarter on distribution of flow press table May these record of announced a is adjustments distributable cash million, May which XX unit, and first $X.XX of found can HEP HEP's per as be reconciliation LP generated payable unitholders X. A we in to reflecting $XX

ended reimbursable comprised $X million revolving $X including $X expenditures the million the during approximately $X.X $X maintenance of million $X million facility. our million, under of $XXX of quarter We credit in $XXX quarter million liquidity, in and billion approximately were of and with availability cash expansion, Capital of million CapEx.

proposal For XXXX, while safe HF and the are from we reliable negotiate focused we Sinclair. operations on

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

Operator

Our with from [Operator question line comes first Securities. Read Fargo Instructions] Wells the Roger of

Roger Read

role lead here. Tim, to welcome the

Timothy Go

Thanks, it. Roger. Appreciate

Roger Read

units and determining starting value bit one back guess now? with to forth entities you stock -- the excuse us between of all combination little the things? go HEP give and And a for terms consolidation, X can or of instead I me, all for the the question So decision of proposed right of why a here in me, units the

Timothy Go

put night. it's optimization reduces being I and and level reduction, become portfolio. simplifies able will DINO's this Atanas because unlock about you and earlier, is Yes. believe opportunity transaction mentioned Roger, for strategy. we allocation it tell as LP proposed available we talk corporate for public last at further negotiation. it capital the debt is cash to out We're long-term structure, our and held It distributions supports -- an proposal But costs, not it that to cash what currently just our as this our provides integration can the of a also the just MLP

Roger Read

at the QX half challenges. before diesel the follow-up, about a rate a factors of issue -- was Okay. my in little road, just bump year. second talked helpful. And full then as were That's kind bit the least. this hydrogen the unrelated should as Obviously, of say What mentioned start-up run well of the you renewable to be

midyear today items where are you where and X do between curious get be solved? you'd to how expect onwards, I'm So those

Atanas Atanasov

Roger, thank Atanas. this is you,

an past, the in has of a been the our we've of the we're couple, reliability. about pleased talked On pleased I With to is we first quarter. in which with. renewables were respect all, that we're segment them First challenges the performance of -- think adjusted which EBITDA basis, with one some of positive,

has availability. The second hydrogen one been

in yields So of progress in And some improve made Cheyenne good first with respect for to our a very particularly which to operational continue quarter, assets. solution hydrogen challenges, we work we've our our -- on the longer-term helped problem. in

optimization long-term So for as priorities a are on hydrogen process important solution on X working as the us. well

to turnarounds achieve we're looking gives to continue your and facilities that turnarounds. in half we to respect progress, attention operational out that With addressing rate, at shape but of us to to would point quarter. would year are that both the With really which where also that we run on second looking Parco of really really these rates run quarter, have come made and fact with in after also the in co-located work run think opportunity steady better have issues the impact I we're respect second to normalized our rates. I the refineries, second Navajo, an to X But

Timothy Go

I'll Yes. chime in well. Roger, just And as

color. for progress. the not the We're business happy the yet, renewable with of Just we with but happy are results some

adjusted this And right positive quarter in EBITDA evidence so moving we're showing the that is direction.

mentioned, this we had quarter. Atanas turnarounds several As

infrastructure the of will rest few We continue utility is around that the have hydrogen improve and the these renewable infrastructure diesel here a quarter more second in to plants. the that

of contribute Atanas As we're the better just and to help it's expecting. how to well in as us run half, what deliver better, that the run our going mentioned, understanding rate second plants these

Roger Read

the ask obviously, one long-term Yes. Since there's the Fair hydrogen, solution. enough. clarification? just Could I a

run that does do rates, then? medium-term If higher short- a place at you to have to solution going in you're imply

Atanas Atanasov

medium-term we've I -- the really is good operation I continue the Well, hydrogen and optimize to and said, longer-term supplying But the is assets, hydrogen. the medium think short- we just supply. the term the progress seen It's like -- there. solution of solution

just the our to Another obviously thing sometimes is, around cracks, make as at look we decisions we economics, conventional optimization that's and part diesel equation. have of

Timothy Go

to we ready run Yes. We we -- hydrogen can long-term are second today, think worked. to talk supply to get of about in that . course, that are get issues work to process half, our we the short-term we're of solutions the our not that. but working to our have being then, to normalized in solutions rate And

Operator

comes Blair the next Our with from question line Matthew TPH. of

Matthew Blair

was more opportunity the elaborate I Tim, refinery you to operations. could on hoping improve

I You problems issues. the addressed X you're to some, fix examples turnarounds was, then about what think you the of that provide Could doing mentioned them? you're for talk cycle QX, it you end any and planned of finding and in

Timothy Go

Tim. Yes, Matt, I'd mentioned resource that capability opportunities to this is happy you've I've be to. got improve. before and

affect third to take it except like and is actually processes -- the the that's equipment do to for turnarounds. something say until And we've actually right? leg maintenance talking improve available systems not know with that got we equipment triangle during the in got You've the equipment ability improve. I to we But the usually we're about doesn't the strategies that those turnarounds, itself, to have it.

So of about to a want She to over it new more Valerie XX her let talk Val, on really turnaround? has team. have over we're me to our bit experience, Operations, our turn glad and of EVP you operating Pompa. little years

Valerie Pompa

Sure.

first quarter turnarounds. Our

back our our really hydrogen examples gained system spent hydrogen, on going projects, improving around we've hydrogen specifically, and are Navajo. reliability a of amount effort So Navajo to some at in significant improvement scope

during Tim And programs strategy or us strategy And gives equipment so reliability an goes aimed the our PM turnaround, opportunities PM our to for program that improvements. from that that equipment then reached a and it, to on has really just short-term specific And change getting where exchangers, availability meet that and our demand. our point be focused it utilization time to whether it's upgrade, higher upgrade. mentioned, up

Timothy Go

Yes.

during and Val over as been yield We driving a has turnarounds risk-reduction a large very at improvement over during implemented Matt, the projects XX turnaround. X I the great projects these think doing summary, job improvements.

as expecting we're So operations improved to run conditions start we here.

Matthew Blair

lubricant even 'XX? Sounds quarter-over-quarter, though good. there a about QX that index was talk you factors And better FIFO supported side, material profitability And the then on can in your impact the declined? lubricants

Atanas Atanasov

I'll take this Atanas. is This one.

So an our results. notable with couple But drivers. about million. was our still business, FIFO that to the FIFO pleased at we're in it with you there was profitability When even mind, $XX respect of impact, there's very of impact, the look a with really

product favorable of them One the is mix.

a oil higher in to end one third of value base The And ends strong -- our continue is finished III really second market. margins the uses. higher Group one that into really products go lot is strengthen the

accounts that So when really business. you for take mix in had the drivers. together, all the products really successful margins main are quarter X we've those and X that that But

Timothy Go

'XX. had record the FIFO is asked, $XX for sizable our we a a Matt, than of would year, million in, what you Yes. for a The have too. headwind an Last tailwind. quarterly first quarter basis. ex-FIFO actually which that higher And and been us we quarter. what me reported was chime on FIFO impact let mentioned was is This this number Without Atanas ex-FIFO that,

want something As on than closer team. business? in another to opportunity oil was color our has basis, that an to you have But gives lubricants And something do years XX new it of $XX other leadership base on been mentioned, We're provide you million million, would and industry. nearly to member to him. the the who Matt, it that. Matt me it lower in XX ex-FIFO -- really any lubes glad Joyce, introduce have range. the

Matt Joyce

higher successful. markets, that the intentional. calls, markets. enjoy many on Atanas off-highway, new That's what those well, mix in markets And in team we're us mentioned natural introduced and We've objectives earnings space, on That's the is has and it. meet value some And into sure. that products that further mining, well That targeted we're really has Tim. that's in are that, prior nice expansion after where was Thanks, to presence Matt, product by key been some we're Tim good finally, construction, something situated Atanas and to certain today. not that seen focused a you. design. into end-use markets, some geographic going mentioned We Yes, And Building stumbling results. of we've mentioned, positioned very into just gas. those really seeing

our value at in to purpose continue have proposition seeing we're range, customers possible. and this trend and to user And and that get that. higher-than-mid-cycle returns We there make value you're story the as result, and our really our a end about excited robust as as get to

Operator

Our from Scotiabank. Cheng comes with question next Paul

Paul Cheng

the saying improve take during that you Two and opportunity you're questions, since please. the you're turnaround going Tim, the to asset.

X the assume how expense be So the the is than be is, the usual? or the money going past, provide, X question the over company should has range the you you over lubricant case, together worth people that with like do not we have I can that's may the more turnaround X other next X for who looks or haul higher that long if said years? Sinclair. years, maybe HF a the And in second think next to And in

So criteria make view, the still view. if the you if what wondering be that that that's is decision? precondition And to or for the will

Timothy Go

Okay, Paul, your for questions. thanks

Val . the on me turnaround. Let comment ask to

Valeria Pompa

Yes.

several, turnaround spend by as -- really last And year those. spent of all turnaround implemented towards the optimized an year acquisitions. this turnaround. schedule. has been working We've know, ready for is we with we're you sites, -- came this our We So driven really new acquired refineries

a on run turnaround. So our really concerns all kind get year and we that the reliability -- bring those rate catch-up address in, that acquisitions us to this call of now I'll saw for

Atanas Atanasov

take this. Paul, let me

to with on The is second how... respect question lubricants

Paul Cheng

look the have do next you like may And over actually, several the range what a that, turnaround years? of expense Atanas, before

Timothy Go

that told turnaround we still and Casper next and year we've we the the that's turnarounds. the the and years. of Puget Parco the believe a was full the assets new Paul, portfolio. land running you No, year this spending Sound peak first Remember, case on X this year, had All

believe high a was right have kind -- word past the And this rate believe that million that. use, $XXX on range, kind and So total run the still to lower be million than of to in right a the level. guided expenses. right capital will in if the we that's watermark, $XXX guidance that's turnaround we of years We to future

Atanas Atanasov

back this business running we lubricants, very Paul, valuable the last very fully Obviously, your view the business. as and our the XX-plus We're of continue months. Yes. with to -- a questions that couple specialty to pleased over in on last as integrated the just years, especially to business portfolio. we operations lubricants

the you of better that this that a about, of determining someone boils is some business to asked preconditions all to And lead possibly valuation. owner down that could

We're Currently, it. given is more not And have undervalued we business It so believe believe still to at within credit this that on lot we there meat draws bone, portfolio. of that free is cash we and any speak. our a the vastly flow moment. still for -- the

there synergies We in in multiples are a That, lot Petrolia, have that markers further will the specialty Europe, in as lubricants that that there over And well double gained as of overall done years some of digit we you're good cases. be there are But believe of out assets could value significantly in looking the couple of is again, terms time. in some still business, are course, when over Mississauga. the more last at into valuation. accrete higher that the integrating Pennsylvania work

we perhaps leveraging more shrink And will when itself, testing But near of valuation type are the focusing we on moment, the the over for extracting so midterm, the in and synergies. the market. presents this test of those market. And term, compelling not from

Timothy Go

shareholders evidence our lubes deliver you And execution making what And and are improved me have Paul, specialties rightly to in the Yes. our show progress results. can and and asked our ability you we you the in rest we business. past, of to I point the that

we've reflect really as we've it, ways Atanas other and last and operated focused us see we in doesn't have continue to look it the shareholders to we the years, But we a as than delivered to our then on be, in portfolio. obviously value that to that it business that have the hope -- value in And continue the share the the holding shareholders. maximum way catalyst to made big shareholder that we made the at provides, to better involve the it for and mentioned. Over change would value X will give and value. We the really continue improve our give price things the could actually way

Operator

Goldman with Mehta Neil Sachs.

Neil Mehta

could than And to terms and of environment My first as repurchase you the And capital. question return we the repurchase Sinclair latest market. these to bilaterally margin thoughts thinking your family provide in the through the those just ability program open your is where share latest seeing in shares in a related come of lower were? from to opposed

Atanas Atanasov

thanks we're Neil, of all, on your for out to first return start our is that capital I'd return our of as business, both committed long-term Tim paid And return capital. we're indicated. as ratio, the and question. well to capital strategy as This with, a like Atanas.

HEP pace, strategy, there. and on committed really could committed we're our that ongoing, to don't still we pace, no while impact transaction guide to strategy, we While and is but with there's that this change remain

Timothy Go

Yes.

that our look of to. cash what and quarter, through You income our at Neil, we returned translates dividends net XX% XX% is buybacks. return and first share our

as similar do a don't done we But we purchases as over for is year and in mentioned, open We as the just family, term, that continue like Atanas pointed another done comment So on us. the we'll market. arise. and pace we've things are this opportunities out, long the on to believe amounts. to We've We buybacks you be direct feel going pace. good year strong with

Neil Mehta

call. of fair. a haven't lot macro time we That's on And spent talking about then this the refining

you seen, how of end of about you what maybe the your through can the and we've And share team some that it. perspective think make of do of margins do year. Tim, on volatility your the the progression just you So

Timothy Go

Russian -- volatility. we more But more expecting see from would demand Yes. impact always from We're a from of most lot the exports that the the embargoes. tell will we We were you that quarter, course that this then local believe the of the see demand still barrels, year rest the States. those as that's the coming increased in country the will of opens into we'll up soak true. obviously, China And first of up I China. China and less that and United thought We over higher

the some China first to definitely China expected quarter, But area. in And supply or peak. again, believe So we we to saw will -- that additional open will stay we will imports. it in now the continues demand as -- up,

We think in the about the we Rockies excited and especially summer normally demand West. see, that the in -- we're

didn't but You always demand, ask up. know question about specifically that comes I

in was So last diesel about quarter areas. of jet. year. of just XXX% quarter XXX% in Diesel and that's some demand year, X% first And versus strong, than last of higher what this to was been demand, higher the it Jet last surprise well. was continuing demand demand, I'll areas saw it's versus but And that mention, distillate still we year, the and our we really, as is think drive about last has higher year. of gasoline year the our was believe, first we

their look the economics, we're Europe and that that of a at to the European to world. are the cost closer of said $X terms expected is seeing We starting a capacity always run cuts margins. of in some to the advantage we're breakeven out the starting We've refining where there. and $X to over get see there's macro basis Asia as macro And curves kind that the still in U.S. you believe has marginal

the talked you the often then advantages in an in that. Rockies, to we're Phoenix and this has in that in East region. where Denver Southwest, we've even we West we seeing profitability example, quarter portfolio, this West higher drive see, believe overlooked, differentials the our than which or our Sinclair's And demand for at, but the look and you Coast advantage before, Gulf that about our Coast. in we product sorry, certainly continues in And with year what this saw HS region, especially -- When in the over demand think the is

Operator

next Our comes from question Royall, of the JPMorgan. line John

John Royall

first one refining. on in a just is my So follow-up turnarounds the

cadence. So I'm the in more interested quarterly

and higher, utilizations You've peak certainly kind throughputs mentioned mid-XXs additional I think but is guide for with XQ that maintenance the XQ of turnaround some would still be activity.

So can run any in following the you and And thoughts amount give XQ minimal utilization running half? rates second we a guys maintenance full? relatively expect of should on

Timothy Go

the turnaround complete, for turnarounds question. pleased one thanks We've to John, that and X the am up. Yes. started report at got have and PARCO. in Navajo I second quarter, Navajo at one we the is

that's everything So smoothly very well, on and and of middle is going turnaround, very gone on time there. Parco budget. The we're in the

to the at to the of we the XXs Parco, maintain the utilization. the couple able fall, but still a turnarounds going anticipate to run have level rest utilization rest the up that will more kind think carry of that be in We in do of we able after be low we're for start we to year. We year. So of through think

John Royall

XQ. of And breakeven helpful. basis I That's EBIT around then came most in know not it's Okay. an quarter big off but your the and coming on material in a segments, marketing right

drivers particular call you out that the So any weakness? would there of

Atanas Atanasov

of really you John, you is couple weakness, Atanas. a your point What our things. to question. in this as results, referred as for you noticed I'll Thank is

tightness the very you're feel some about and if over on business, President we've But this supply, margins. first between in a to dislocation seen a to seasonal turn Steve, to a Commercial. number new over of Executive temporary that there's why two, I'll as being that And more of and And branded you'd this we all, view result and seeing quarter. business. sometimes of Vice Phoenix, who the -- the is that's First margins. like in And call the could which the color. good $X.XX component where this year, pricing, add Ledbetter, time over in our results our squeeze in Denver Steve markets such unbranded

Steven Ledbetter

absolutely. we're for still as one the I I Sinclair Sinclair proposition join Yes, And Atanas. the the during that acquisition. We're operate. the a of see then full thanks looking in our family. the excited know, and And to the brand, HF about which, growing growth we we suggested, very branded the meet was West, markets, advantage wholesale We . think X% and the as you lot look John, branded the Thanks, in of to the to interestingly, where and well excited the that take strong is was we very question. will of and and made value the Southwest value between XX% those integrated forward to on markets business targets pace were we our interest chain marketing excited about something decision wholesale We compete in year-over-year. in business. things Rockies of about

Operator

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

Kaleinoheaokealaula Akamine

on A of ones quick This is me. Kalei for couple actually for Doug.

one on little on rate first the the a we So expected. bit than better It in West. capture came had

forward for can a bit to capture us help maybe get want that rate what understand going there. for good region. little you more is a And estimate detail Just

Timothy Go

turnarounds rate in us. Yes. But going is us that a rate us capture capture West, stronger on with We The capture Tim. with shortages also honestly, helped were Kalei, hurt also helped crude well. pleased Obviously, West. on we the standpoint. some Denver quite our that as with in this dips had the

continue So as especially comes to think for there through. we summer do room improve, the season for to is the

some able to the in We to going intermediate turnarounds, inventories we think first inventories we're with also think during be that -- those built quarter. draw second the down the and we quarter, associated

there'll be some we don't we're capture just quarter. guide there. look second actual the we think But itself. think capture you to improved Those rate into the as that So on are we going factors

Kaleinoheaokealaula Akamine

more And HEP is the nature. in know guys sheet. the My merger, I second you this I appreciate mechanical but negotiation, is can't guys that. about bit talk you balance requiring are on Post one HEP. a

the So wondering is target I'm forward. what leverage consolidated going

Atanas Atanasov

question. for Thanks Atanas. is This Yes. your

a like now, leverage. consolidate rating within because folks everyone the I it. of And agencies looking go-forward all, we look Sinclair remind one and basis, HEP around on of currently, First at that at we're as you as turn consolidated

Kaleinoheaokealaula Akamine

Sorry, that HEP? includes

Atanas Atanasov

Yes.

Operator

with next question Gupta UBS. Manav from Our comes

Manav Gupta

been acquired a time understand the quite and assets. First Help since were since upside positive acquired surprises have Sinclair. Puget or Sound you you particular us question, it's year what some these over so from

decided So acquire something which them. you when what in to you came better than expected

Timothy Go

November, Yes. reflect question celebrated of celebrated anniversary and And Sound few well. that a really obviously, just Manav, anniversary Sinclair X-year on. Puget then We it's weeks last X-year the we their had a as back good ago. to

ever So would. say very, we course, have that just than pleased we $XXX of really captured of we the we've, those with gone. thought synergies how about faster very I'll talked million

And so I be surprise. think that would a

that to We've reliability things back our backup stations ability think customer supply. keep other each help got like in up the of are have making [indiscernible]. refineries I to sure terms now able our improve to we

surprise. a pleasant been I think that's

synergies. refinery. We We Cross at the long of Parco Some Woods were examples were our refinery. some our short octane octane of at

So combine octane some we order pools to and our back to components higher-cost X were those out optimize in together operations able there.

was I a line had think crude -- -- Sinclair space of. it that was heavy crude HollyFrontier heavy on standpoint, extra short we

the barrels so day increase by, heavy one. were able call it, And to Parco refinery crude we day a into XX,XXX on

we another to with. deal was surprise that pleasant that had So

much one about don't asphalt. Parco Another we of makes a that lot talk asphalt components. is

businesses, based consuming for X that's basically very surprising think able into We Southwest, our in been of profitable I And have and production business. and the we very asphalt to an asphalt Parco business those us. all that's were the integrate asphalt

tell I lot opportunity So that found after of you I'll going we're we there's more you but opportunities. out Manav, there I think that those a believe and today, you, we some it. there's tell but wouldn't number we are away, plenty would a right things have for

portfolio just to the to for the look Mid-Con look through the in of process synergies the same of take thing that Sinclair look for Southwest, overall with of remits and we with of our do that margin expand Steve Sound, whole the look opportunities at at and terms that to capture projects. and is portfolio here kind to assets did Puget we the the with the just assets Commercial went have and EVP One that Sinclair to as we at improvement now actually try

Manav Gupta

helpful. we news but we are the And investors to question of No. we trying $XX, investors. trigger morning, for repeatedly super announced understand is I'm us a got very is why acquire your were This you. logic you the repeated have those just agreed, have trigger this because this the pull when transactions good question, a from HEP, not was This Since that stock and asking in you the question, that one pull and of to got lot why going today? that ask is

Atanas Atanasov

This lot one we is But to front office, on has almost achieve in integration the of $XXX million the synergies the obviously, taken primarily is -- on Atanas of time, mind back across integration. XXX% -- keep Sinclair being efforts, to thing and a resources, focused took our were tremendous I of again. And able that organization. office. effort the focus was which

was matter complete, And HEP. of we're that almost [indiscernible] it with to as our So this attention is integration priorities. more strategic pointing a

Timothy Go

that just started just And would I say with HEP. we negotiations again, Manav, ,

what time careful But we've to obviously, where got go, firmly good so we And is that's this . say. we going. to believe be and we're a

Operator

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

Ryan Todd

we follow-up Sorry, one HEP the before on it. question leave last

terms the there? are was favor. in shares think that out is of there enough of HEP works of the the benefits, long-running take any potential dilution accretion there I strategic cost savings, company position For in years, your a Or until math you enough outweigh case? wouldn't number to the the Is still

Atanas Atanasov

Atanas. is This Yes.

offer believe that, and consideration time, Tim create not negotiation. indicated obviously indicated we've of the Tim on the -- just made to specifics comment and I under transaction earlier, we're the as going the obviously, As it's under on indicated to us as well. also will remarks, his we'll value cash in as for flow a And over our it you point shareholders. that is we But

Timothy Go

just Yes. integrating my our We this. and simplifying, in priorities Ryan, X X why mention, that That's flow. HEP buying near-term the prepared out cash I of addresses would consistent: are remarks. priorities doing I business all in put we're believe

Ryan Todd

on just Perfect. one, the different side. maybe And then

could you of ahead dynamics start-up improve your Puget XXXX, economics how change As Trans that look Sound Does up the on or to all impact access the there in crude comments refinery? crudes the business? pipeline at Mountain at to access any or the additional Canadian

Timothy Go

will in production in of once some type TMX it that and exceed first spread first We're the But We extra the fill we of early to think Obviously, We a over diff because the tighter as line supply-demand. think kind Yes, today. that of Canada long years on, of that will before term, start-up. be X looking change that will will again at we're the as increase the same dynamics. we of tighten -- WCS, on they it now X do think pipe that quarter back think the WTF the stay later, the that, years capacity do sorry, capacity, WCS-WTI maybe goes the that, WTI, line right Ryan, does and into takeaway 'XX provides. fill the change in. line couple we'll and do takeaway that that's situation

in that ANS in XXX% Sound from can the one our keep we that crude Having run area do the that mind that. That of said are Puget can -- that, water. refinery refineries also few

ability volatility advantage over crudes us to couple years. these switch the gives take next we'll back of So we this see and extra no the doubt of that flexibility which Canadian between have ANS to

ANS, much portfolio. do we so as the more our we Canadian can. sense sense can bring in And But makes and optimize of future, to to and that make may try as it crude to bring as in share today, the it more in

Ryan Todd

I volumes down think up soften way as probably the do to of guess, those follow-up Canadian some may as California, make I ANS a market? you their mean that there.

Timothy Go

to put on likely Yes. are to head that ships will There's barrels maybe on the California, pressure no they're ANS go going going to doubt they're to going market. put and to crude Westridge, The arb play run the gives market, us of either in some the advantage East. can ANS between Far dynamics able to yes, again, that X. the that will But since and are we be which,

Operator

from question with is And Cowen. our Gabelman Jason next TD

Jason Gabelman

to kind want to that. back related on a go returns second. Two questions of I for shareholder

XQ. seats. hold buybacks you I continue X owns know that -- X thinking Sinclair to that about hold decent indication Or XX% then you Board they a are -- how would ownership And are think the cash to a Does in somewhat levels of Any about environment? guided need. still to they if chunk related differently? gives with hold First, that in still them ratio had that, previously family with and of you starting want the seats to payout that that those this on

Timothy Go

Thanks, Jason.

family. below to XX%, published on this board. But tell Obviously, their I is if to down seat is, don't when your one documents for in know we what speak me the can you count been the able on intent Board that drops be share their goes it. take or and on the has Let X the seats we speak first family. We for question the wouldn't their can't what

it to into just built deal. you question. talk so So Atanas to return capital And the know I'll that the over is about turn

Atanas Atanasov

Jason, Yes. we're return with out, endorse I we is our are capital our pace, our guide transaction strategy no obviously, ongoing. change XX%. with payout don't the the answer guess still this on periods short target And there on ratio of and but negotiation, go strategy to overall We with blacked XX%.

Jason Gabelman

refining then Okay. just And dynamics. follow-up, my on

separately, seen your driven noted Brent tighter going seen a in bit Rockies you forward? You region. product back you're to outlook Have remain price in And on impact here. premiums TI? that online that that? then you And We've come the a it of what's coming couple there? What's expect getting plants do

Timothy Go

tell unplanned in high planned levels. very that over and with We cracks right down I'll unplanned we've cracks the in high seeing strong they're now in that and I markets, has the seen last first has events, been there still Jason, have very online, I from back and there's in and the thing impact Yes. planned stronger But the And from point actually, the Phoenix come attractive lot both Denver. still they're quarter. plants went watching Phoenix example, as Gulf those cracks in for coming Phoenix. the mean, very area. than certainly seen premium regional very And you, strong occurring everyone of still cracks the several downtime while months, see cracks. Coast still we're out that I'll earlier. mentioned given And same a definitely

pleased So we're with very that.

us. Jason, to these summer, and for be We Southwest with even think attractive markets markets this plants Rockies very very, continue all running strong the that the will still and very

we latest has beginning TI, As you the the that the the West put margin margins see pressure Brent the Brent Obviously, very in OPEC indicators still being TI. of at we gross month, has On some here published cuts can the it come in. on see strong.

that TI basket dated saw now also in Brent. that they the you think about included the talk I being use is to

the on on spread that that on narrowing spread. think a little to long We that's of $X barrel Brent going term. based still freight is think be bit think impact I rates, But an $X has to TI still we a transportation.

there. change So no

Operator

question a with Paul Cheng follow-up Scotiabank. have we from And

Paul Cheng

give update can terms you of opportunity it? both unplanned? LCFS? share you first the quarter planned number you the loss due cost And about you a received -- that you us in guys do pathway and and for the an secondly, downtime, already Have the the in to Could where secondly, have

Timothy Go

the the can Paul, could second tell actual move validation your That I to depending we Those question. provisional the of the diesel X our thanks validation. from those outcome in at And renewable for be we you, follow-up plants. scheduled quarter. on visits, CIs LCFS CIs. have will of is all

that hopeful from -- occur, start and So in that we'll benefit from the benefits third will we'll that the quarter. seeing we're

improve. from tell turnaround to cost and why Paul, can basis, priority. opportunity our see have results. level improving that's impact we opportunities of reliability company's is we believe biggest we that an provide it's from this on Cap From a lot I don't standpoint, that #X we of But We a of our you an unplanned safety and assets the And guidance. can the don't

the we've processes got we've have the Again, to work news control focus can refining lubes the well. we've happening you those. progress business, then got to renewal over we on on determination is of the I it. as business that the point the side done And And to good and same that that. example see I'll as Pointing is well. an the we've say And also as happening diesel of how and got as that journey people, journey

Operator

I comments. time. would this at now questions Go over further to no to for final are back There like the Tim turn call

Timothy Go

to Jack. Thank just with wrap of want a you, up I couple points.

made our First, company. I the Mike has would that impact like Jennings on to recognize

Over at transform Sinclair the the new me into top dedication his a from has Oil for HF the employees renewable acquired X a led and Sound this and to Mike diesel and Company our refinery has legacy be forgotten. tone global Sinclair. will compassion set but a last us years, missed, be never company through has bought will leadership, Puget pandemic, he his built business personally. to scratch, His been mentor great the he the

this going excited I'm ahead. lead opportunity challenge the want to the for their forward. thank company about in Board I and me Second, to confidence

you creating business. our welcome won't time our thank to some for and we our the performance renewable very your our long-term to And the of our our that, and change, employees. our I'm commitment look Some cash to to shareholders, today. things new have this like operational pleased together, much of like shareholders; to need but growing value our business With additional to forward change, things communities to will team. return refineries improve leadership members our and diesel

Operator

conference thank you for concludes We This call. your participation. today's

now may You disconnect.

Holly Energy Partners (HEP) 4 May 232023 Q1 Earnings call transcript