HF Sinclair Corporation (NYSE:DINO) Q3 2022 Earnings Conference Call November 7, 2022 8:30 AM ET Company Participants Craig Biery - Vice President, Investor Relations Mike Jennings - Chief Executive Officer, HF Sinclair & Holly Energy Partners Atanas Atanasov - Chief Financial Officer, HF Sinclair Corporation John Harrison - Chief Financial Officer, Holly Energy Partners Tim Go - President & Chief Operating Officer of HF Sinclair Corporation Conference Call Participants Paul Cheng - Scotiabank Theresa Che ...

Financial Performance - The company reported a significant increase in revenue, with a year-over-year growth of 15% to $1.2 billion[13]. - Sales and other revenues for the three months ended September 30, 2022, were $10,599,002 thousand, a significant increase of 126% compared to $4,685,059 thousand in the same period of 2021[34]. - Net income attributable to HF Sinclair stockholders for the three months ended September 30, 2022, was $954,405 thousand, compared to $280,787 thousand for the same period in 2021, reflecting an increase of 239%[34]. - Net income for the nine months ended September 30, 2022, was $2,416,348, a significant increase from $680,358 in the same period of 2021, representing a growth of approximately 255%[37]. - For the nine months ended September 30, 2022, net income attributable to HF Sinclair stockholders was $2,335,641,000, up from $597,854,000 in the same period of 2021, indicating a growth of 290.5%[146]. Earnings and Margins - Basic earnings per share for the three months ended September 30, 2022, was $4.45, up from $1.71 in the same period of 2021, marking an increase of 160%[34]. - Future guidance indicates an expected EBITDA of $300 million for the next quarter, reflecting a 12% increase from the previous guidance[15]. - The average refinery gross margin improved to $10.50 per barrel, reflecting a 20% increase compared to the previous quarter[13]. Assets and Liabilities - Total assets increased to $18,226,285 thousand as of September 30, 2022, up from $12,916,613 thousand as of December 31, 2021, representing a growth of approximately 41%[30]. - Total current liabilities rose to $3,242,291 thousand as of September 30, 2022, compared to $2,065,464 thousand as of December 31, 2021, indicating a 57% increase[30]. - Long-term debt increased to $3,334,200 thousand as of September 30, 2022, from $3,072,737 thousand as of December 31, 2021, reflecting an increase of 9%[30]. - Total equity as of September 30, 2022, was $9,778,525 thousand, compared to $6,294,465 thousand as of December 31, 2021, indicating a growth of 55%[30]. Inventory and Operational Efficiency - The company reported a significant increase in inventories, which rose to $3,077,652 thousand as of September 30, 2022, from $1,879,131 thousand as of December 31, 2021, representing a growth of 64%[30]. - Capital investments in technology upgrades are estimated at $100 million, aimed at improving refinery efficiency by 5%[15]. - The company is facing potential risks from fluctuating crude oil prices, which could impact profit margins by up to 8%[13]. Strategic Initiatives and Acquisitions - A strategic acquisition of a regional competitor is projected to enhance operational synergies, potentially saving $30 million annually[13]. - HF Sinclair Corporation completed the acquisition of Sinclair Oil Corporation and Sinclair Transportation Company on March 14, 2022, resulting in the establishment of HF Sinclair as the new parent holding company[50]. - The acquisition expanded HF Sinclair's refining and renewables business, enhancing its scale and diversification[88]. Market Presence and Growth Projections - The company anticipates a 10% growth in refined product demand in the upcoming quarter, driven by economic recovery[15]. - The company plans to expand its market presence in the Southeast region, targeting a 15% market share by the end of the fiscal year[15]. - New product launches in the renewable diesel segment are expected to contribute an additional $50 million in revenue over the next year[13]. Cash Flow and Financing Activities - Cash flows from operating activities for the nine months ended September 30, 2022, amounted to $2,862,209, up from $739,494 in the prior year, indicating a growth of approximately 287%[39]. - The company reported a net cash provided by (used for) financing activities of $(975,478) for the nine months ended September 30, 2022, compared to $(184,169) in the prior year[39]. - The company entered into a $1.65 billion senior unsecured revolving credit facility maturing in April 2026, replacing a $1.35 billion facility[160]. Shareholder Returns and Dividends - The company declared dividends of $0.40 per common share, totaling $85,274 for the period[43]. - The Board declared a regular quarterly dividend of $0.40 per share, payable on December 5, 2022[202]. - The Board of Directors approved a $1.0 billion share repurchase program in November 2019, with $975.0 million repurchased as of September 30, 2022, including $500.0 million from REH Company[196]. Environmental and Legal Considerations - Environmental remediation expenses for the three months ended September 30, 2022, were $1.3 million, up from $0.5 million in the same period of 2021, reflecting a 160% increase[159]. - The company is involved in various litigation and legal proceedings, which are not expected to have a materially adverse effect on its financial condition[210].

Financial Data and Key Metrics Changes - The second quarter net income attributable to HF Sinclair shareholders was $1.221 billion or $5.43 per diluted share, reflecting a significant increase from adjusted net income of $144 million or $0.87 per diluted share in the same period of 2021 [7] - Adjusted EBITDA for the current quarter was $1.9 billion, an increase of more than $1.5 billion compared to the second quarter of 2021 [8] - Net cash provided by operations totaled $1.5 billion, with total liquidity standing at approximately $3.3 billion as of June 30, 2022 [14] Business Line Data and Key Metrics Changes - The refining segment is expected to run between 630 million and 650,000 barrels per day for the second quarter of 2022, with no major turnarounds scheduled for the remainder of the year [17] - HEP's second quarter 2022 adjusted EBITDA was $104.2 million, compared to $88.3 million in the same period last year, driven by earnings related to the recently acquired Sinclair transportation assets [18] Market Data and Key Metrics Changes - Diesel demand is at or above 2019 levels, while gasoline demand is approximately 5% below 2019 levels, indicating strong market performance [44] - The company added 20 retail sites in the second quarter and has more than 50 in progress, indicating growth in the marketing segment [56] Company Strategy and Development Direction - The company remains focused on the integration of recently acquired assets from Sinclair and aims to grow the marketing segment within existing geographies [11] - HF Sinclair is committed to returning $1 billion to shareholders no later than the first quarter of 2023 while maintaining a solid balance sheet and investment-grade rating [10] Management's Comments on Operating Environment and Future Outlook - Management is optimistic about the outlook for transportation fuels, supported by low product inventories and healthy global demand [11] - The company is excited about the opportunity to provide low carbon fuels through its renewable diesel production, with expectations to reach full production levels by the end of the third quarter of 2022 [12] Other Important Information - The Board of Directors declared a regular dividend of $0.40 per share payable on September 1, 2022 [9] - The company achieved annualized run rate synergies of over $90 million related to the Sinclair acquisition [9] Q&A Session Summary Question: Positive surprises from the Sinclair acquisition - Management noted pleasant surprises in synergies and logistics opportunities that have led to higher throughput rates at Woods Cross and Casper [22] Question: Dynamics driving strength in the Rack Forward business - The Rack Forward business has benefited from SKU rationalization and an upgrade in product mix, leading to improved results [26] Question: Criteria for increasing capital return - Management is comfortable achieving the $1 billion capital return target and will evaluate market conditions for potential increases [30] Question: Midstream strategy and HEP distribution growth - HEP is critical to HF Sinclair, and management plans to increase distributions, primarily through distribution increases rather than buybacks [37] Question: Current views on gasoline demand - Management observed strong demand in their regions, with gasoline demand close to 2019 levels and no significant demand destruction noted [45] Question: Renewable diesel margins and outlook - Renewable diesel margins were affected by low throughput and high feedstock costs, but management remains optimistic about future profitability due to investments in diverse feedstock [49] Question: Marketing profitability drivers - The marketing segment's profitability improved due to strength in branded businesses and higher gasoline prices [70]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _________________________________________________________________ FORM 10-Q _________________________________________________________________ (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to ____________ ...

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _________________________________________________________________ FORM 10-Q _________________________________________________________________ (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to ____________ ...

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