HollyFrontier Corporation (HFC) Q1 2021 Results Conference Call May 5, 2021 8:30 AM ET Â Company Participants Mike Jennings - President and CEO Rich Voliva - EVP and CFO Tim Go - EVP and COO Tom Creery - President, Refining and Marketing Bruce Lerner - President, HollyFrontier Lubricants and Specialties Craig Biery - VP, IR Conference Call Participants Manav Gupta - Credit Suisse Matthew Blair - Tudor Pickering Holt Theresa Chen - Barclays Ryan Todd - Simmons Energy Paul Cheng - Scotiabank Phil Gresh - JP M ...

HollyFrontier Corporation (HFC) Q4 2020 Results Conference Call February 24, 2021 8:30 AM ET Company Participants Mike Jennings - President and CEO Rich Voliva - EVP and CFO Tim Go - EVP and COO Tom Creery - President, Refining and Marketing Bruce Lerner - President, HollyFrontier Lubricants and Specialties Craig Biery - VP, IR Conference Call Participants Manav Gupta - Credit Suisse Ryan Todd - Simmons Energy Paul Cheng - Scotiabank Phil Gresh - JP Morgan Theresa Chen - Barclays Matthew Blair - Tudor, Pick ...

Financial Data and Key Metrics Changes - The company reported a net loss attributable to shareholders of $2 million or $0.01 per diluted share, with a net loss of $67 million or negative $0.41 per diluted share when excluding special items, compared to adjusted net income of $278 million or $1.68 per diluted share for the same period in 2019 [8][9] - Adjusted EBITDA for the period was $66 million, a decrease of $457 million compared to the third quarter of 2019 [9] - Cash flow from operations was $82 million, which included $25 million of turnaround spending and $53 million of working capital gains [17] Business Line Data and Key Metrics Changes - The Refining segment reported adjusted EBITDA of negative $54 million compared to $425 million for the third quarter of 2019, with a consolidated refinery gross margin of $4.93 per produced barrel, a 71% decrease compared to the prior period [9] - The Lubricants & Specialties Products business reported EBITDA of $61 million compared to $38 million in the third quarter of 2019, with Rack Forward EBITDA at $79 million, representing a 19% EBITDA margin [11] - Holly Energy Partners reported EBITDA of $55 million for the third quarter compared to $123 million in the same period last year, which included a $36 million goodwill impairment charge [13] Market Data and Key Metrics Changes - Third quarter crude throughput was approximately 391,000 barrels per day, exceeding guidance of 340,000 to 370,000 [10] - Demand for base oils increased to fourth quarter 2019 levels, while supply was limited due to various factors, driving higher margins and utilization at facilities [12] - The company noted incremental improvement in demand for transportation and terminal services, particularly in the Salt Lake area [14] Company Strategy and Development Direction - The company is focused on renewable projects, which are on time and on budget, and is confident that demand for transportation fuels will return [15] - The company has reduced its full-year 2020 consolidated capital budget to $475 million to $550 million from $525 million to $625 million [21] - The company aims to create competitive advantages within its asset portfolio and is looking to add the most competitive assets as opportunities arise [54] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term market for products despite current challenges due to the COVID-19 pandemic [7] - The refining outlook remains challenged, but the company is encouraged by the performance of its lubricants and midstream businesses [15] - Management highlighted the importance of maintaining an investment-grade rating while balancing cash returns and financing needs [50][76] Other Important Information - The company declared and paid a dividend of $0.35 per share totaling $57 million during the third quarter [19] - Total liquidity stood at approximately $2.9 billion, comprised of a standalone cash balance of $1.5 billion and an undrawn $1.35 billion unsecured credit facility [19] Q&A Session Summary Question: Cost reduction opportunities in refining and lubricant demand trends - Management discussed ongoing efforts to reduce unit costs in refining and noted strong demand trends in lubricants, with expectations for continued performance into the fourth quarter [24][31] Question: Capital expenditures and working capital outlook - Management confirmed a reduction in capital expenditure guidance for 2020 and indicated a neutral to slightly positive outlook for working capital in the fourth quarter [36][37] Question: Renewable diesel production and feedstock strategies - Management explained the strategy for renewable diesel production and the flexibility in feedstock sourcing to optimize returns [42][46] Question: Dividend policy and stock buyback considerations - Management emphasized the importance of dividends as a cash return to shareholders while also recognizing opportunities in equity [49][50] Question: Refining capacity and market dynamics - Management provided insights on refining capacity, market dynamics, and the impact of COVID-19 on demand and pricing [51][60] Question: Demand outlook and rating agency conversations - Management discussed demand trends across different regions and provided updates on conversations with rating agencies regarding credit ratings [72][76]

Financial Data and Key Metrics Changes - The company reported a net loss attributable to shareholders of $177 million, or a loss of $1.09 per diluted share, reflecting special items that decreased net income by $136 million [8] - Adjusted EBITDA for the period was $100 million, a decrease of $547 million compared to the second quarter of 2019 [9] - Cash flow from operations was $119 million in the second quarter, which included turnaround spending of $11 million and $38 million of working capital costs [30] Business Line Data and Key Metrics Changes - The Refining segment posted adjusted EBITDA of $25 million, compared to $556 million for the second quarter of 2019, with a consolidated refining gross margin of $8.44 per produced barrel, a 57% decrease year-over-year [10] - The Lubricants and Specialty Products business reported adjusted EBITDA of $15 million compared to $29 million in the second quarter of 2019, with Rack Forward adjusted EBITDA at $23 million, representing a 7% EBITDA margin [11] - Holly Energy Partners reported EBITDA of $113 million for the second quarter compared to $89 million in the same period last year [14] Market Data and Key Metrics Changes - The average laid-in crude cost was under WTI by $1.72 in the Mid-Con, $2.46 in the Southwest, and $1.39 in the Rockies [24] - Gasoline and diesel cracks traded at under $10, with gasoline inventories at 8.2 million barrels, 2.4 million barrels lower than at the end of the first quarter [25] - Distillate demand remained steady throughout the quarter, with expectations for a perk up in inventory as the harvest season approaches [40] Company Strategy and Development Direction - The company announced plans to expand its renewables business through the construction of a pretreatment unit at the Navajo Refinery and conversion of the Cheyenne Refinery to a renewable diesel plant, with a capacity to produce over 200 million gallons of renewable diesel per year [15][16] - The focus remains on maintaining a disciplined approach to capital allocation while enhancing profitability and environmental footprint through investments in renewables [17] - The company is evaluating additional ways to reduce the cost structure in each of its businesses to preserve its strong balance sheet and liquidity position [33] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges posed by the COVID-19 pandemic but emphasized the company's financial strength and operational reliability [6][17] - There is little visibility on the timing or extent of recovery in the near term, but management expects a strong recovery for all products in the long run [23] - The company plans to adjust refinery production levels with market demand, expecting to run between 340,000 and 370,000 barrels per day of crude oil in the third quarter [23] Other Important Information - The company declared and paid a dividend of $0.35 per share, totaling $57 million, and did not repurchase any shares in the second quarter [32] - Total liquidity stood at over $2.2 billion, with a debt-to-cap ratio of 16% and a net debt-to-cap ratio of 2% [31] - The company implemented a restructuring program focused on corporate-shared services, expecting to save approximately $30 million per year in ongoing cash expenses [33] Q&A Session Summary Question: CapEx and Capital Raise Plans - Management expects to spend between $450 million and $500 million in the renewables segment for 2021, with options open for capital raising, primarily through debt markets [35] Question: Demand Trends in Operating Regions - Demand has improved, particularly in the Southwest, with gasoline demand expected to rise as stay-at-home orders are lifted [38][39] Question: Rack Back Market Strength - Improved demand in automotive and industrial sectors contributed to a material improvement in rack back results [45] Question: Impairment Related to Lubricants - The impairment related to the Lubricants side was about $205 million, attributed to COVID-19 impacts and the higher book value of recent acquisitions [48] Question: Renewable Diesel Project Management - The company has a disciplined stage-gate process for project management and expects to execute the Cheyenne project well within time and budget [53] Question: Renewable Diesel Supply and Demand Dynamics - The company sees robust demand for renewable diesel, with sufficient market opportunities despite recent competitor announcements [64] Question: Operating Cost Improvement Opportunities - Management believes there are opportunities to improve reliability and reduce operating costs, particularly in the Rockies region [68]

HollyFrontier Corporation. (HFC) Q4 2019 Results Earnings Conference Call February 20, 2020 8:30 AM ET Company Participants Craig Biery - Director, Investor Relations Michael Jennings - President and Chief Executive Officer Richard Voliva - Executive Vice President and Chief Financial Officer Thomas Creery - President, Refining and Marketing. Conference Call Participants Brad Heffern - RBC Capital Markets Manav Gupta - Credit Suisse Roger Read - Wells Fargo Paul Cheng - Scotiabank Teresa Chan - Barclays Nei ...

Financial Data and Key Metrics Changes - The company reported third quarter net income attributable to shareholders of $262 million or $1.58 per diluted share, down from adjusted net income of $351 million or $1.98 per diluted share for the same period last year [7] - Adjusted EBITDA for the period was $523 million, a decrease of $90 million compared to the third quarter of 2018, primarily due to lower product margins and weaker laid-in crude advantage [8] - Consolidated refinery gross margin was $17.23 per produced barrel, an 11% decrease from $19.41 for the same period last year [9] Business Line Data and Key Metrics Changes - The refining and marketing segment reported adjusted EBITDA of $425 million compared to $507 million for the third quarter of last year [8] - The lubricant and specialty products business reported EBITDA of $38 million compared to $42 million in the prior year, despite improvements in the base oil market [10] - Holly Energy Partners reported adjusted EBITDA of $90 million for the third quarter, an increase from $87 million in the same period last year, driven by strong third-party volumes [12] Market Data and Key Metrics Changes - Gasoline inventories in the Magellan system started the quarter at 7.1 million barrels and ended at 6.6 million barrels, with current inventories slightly lower at 6.2 million barrels [21] - Group three diesel inventories dropped by 800,000 barrels over the quarter to finish at 7.6 million barrels [21] - Crude differentials widened across the heavy barrel and narrowed on the sour slates during the third quarter, with WCS at Hardisty averaging $12.24 per barrel [23] Company Strategy and Development Direction - The company is focused on completing maintenance work in its Cheyenne, El Dorado, and Woods Cross facilities, expecting to return to normal operations later in the quarter [14] - The outlook for 2020 remains positive, with expectations that IMO implementation will provide uplift to diesel margins and further discounts to heavy crude barrels [15] - The company aims to continue growing in inland markets and is open to opportunities that can bring additional value beyond cash [38][39] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in the strength of product margins across the refining system and anticipates a strong finish to the year [14] - The company noted that macroeconomic issues, particularly from the trade war, are impacting sales in the lubricants segment [34] - Management is optimistic about the base oil market improving over the next two years, expecting cracks to move positively [46] Other Important Information - The company returned approximately $260 million of cash to shareholders through dividends and share repurchases [13] - As of September 30, the company had a cash balance of $982 million, above its target of $500 million, and total liquidity exceeding $2.3 billion [31] - The company increased its capital spending guidance for the full year of 2019, now expecting to spend between $550 and $590 million [33] Q&A Session Summary Question: Challenges in lubricants and 2019 guidance - Management noted macro issues from the trade war impacting sales, particularly on high-end finished products, and indicated that achieving 2019 guidance may be a stretch but is possible [34][36] Question: WCS differentials and capacity to run Canadian barrels - Management confirmed that differentials have widened and attributed some of it to IMO 2020, with capacity to run between 60,000 to 100,000 barrels a day depending on market conditions [42][44] Question: Working capital and cash balances - Management indicated that working capital was neutral in Q3 due to inventory build ahead of maintenance, expecting to release that inventory in Q4 [50][51] Question: Capital allocation and dividend considerations - Management emphasized a balanced approach to capital allocation, prioritizing balance sheet protection, dividends, growth capital, and share repurchases [53][55] Question: Strategic review of MLP and market conditions - Management expressed frustration with HEP's unit price performance but noted that HEP remains healthy operationally and commercially [62][65]

Financial Data and Key Metrics Changes - The company reported second quarter net income attributable to shareholders of $197 million, or $1.15 per diluted share, with adjusted net income of $372 million, or $2.18 per diluted share, compared to $259 million, or $1.45 per diluted share for the same period last year [6][7] - Adjusted EBITDA for the period was $647 million, an increase of $162 million compared to the second quarter of 2018, driven by strong gasoline and diesel margins [7] - Cash flow from operations was $753 million, producing free cash flow of $696 million [26][27] Business Line Data and Key Metrics Changes - The Refining and Marketing segment reported adjusted EBITDA of $556 million, up from $385 million in the second quarter of 2018, with a consolidated refinery gross margin of $19.64 per produced barrel, a 19% increase from $16.57 [8] - The Lubricants and Specialty Products business reported adjusted EBITDA of $29 million despite weakness in the base oil market, while Rack Forward adjusted EBITDA was $64 million with a margin of 13% of sales [9] - Holly Energy Partners reported EBITDA of $89 million for the second quarter, compared to $82 million in the same period last year, with a 10% increase in pipeline volumes year-over-year [10] Market Data and Key Metrics Changes - Gasoline inventories in the Magellan system decreased from 7.7 million barrels to 6.9 million barrels during the quarter, while Group III diesel inventories rose by 1.1 million barrels to finish at 8.1 million barrels [18][19] - Crude differentials for WCS at Hardisty averaged $11.13, slightly below first quarter levels, with apportionment on the Enbridge system remaining high at 40% [21] - Midland differentials averaged $2.13 under WTI, with expectations for the differential to narrow as additional pipeline capacity comes online [24] Company Strategy and Development Direction - The company plans to focus on improving reliability across its refining system and successfully integrating Sonneborn to strengthen its earnings profile [11] - The company anticipates an elevated cash balance through the third quarter ahead of planned maintenance at its El Dorado and Cheyenne Refineries [31] - The company continues to expect $25 million to $30 million of Sonneborn integration costs, with some stretching into 2020 [33] Management's Comments on Operating Environment and Future Outlook - Management noted that the refineries are well positioned for strong operational and financial performance in the third quarter, with no major planned downtime until September [11] - The effective tax rate was slightly elevated to 29% due to a goodwill asset impairment, with expectations for the full year effective tax rate to land at 25% to 27% [33] Other Important Information - The company returned $246 million of cash to shareholders through dividends and share repurchases, representing a cash yield of 10% over the past 12 months [27][28] - The total cash balance at the end of the second quarter stood at $915 million, above the target cash balance of $500 million, with total liquidity exceeding $2.3 billion [29] Q&A Session Summary - No specific questions or answers were provided in the transcript, as the call concluded with an operator's closing statement [34][35]

Financial Data and Key Metrics Changes - The company reported a net income attributable to shareholders of $253 million or $1.47 per diluted share, with adjusted net income of $93 million or $0.54 per diluted share, down from $137 million or $0.77 per diluted share in the same period last year [7] - Adjusted EBITDA for the period was $282 million, a decrease of $34 million compared to the first quarter of 2018, primarily due to maintenance in the Refining and Marketing segment and weaker base oil margins [8] - Cash flow from operations was $217 million, including turnaround spending of $79 million, with total capital expenditures of $53 million for the quarter [24] Business Line Data and Key Metrics Changes - The Lubricants and Specialty Products business reported adjusted EBITDA of $20 million despite challenging market conditions [8] - Rack Forward adjusted EBITDA was $53 million for the quarter, with an adjusted EBITDA margin of 12% of sales [9] - Holly Energy Partners reported EBITDA of $94 million for the first quarter, compared to $88 million in the same period last year, with overall pipeline volumes increasing by 5% year-over-year [10] Market Data and Key Metrics Changes - Gasoline inventories in the Magellan system decreased from 8.9 million barrels at the start of the year to 7.7 million barrels at the end of the quarter, with current inventories at 6.7 million barrels, below the 5-year average [16] - First quarter consolidated refinery gross margin was $12.74 per produced barrel sold, representing a 1% decrease compared to $12.83 in the first quarter of 2018 [22] - Midland differentials averaged $2.57 in the first quarter, currently trading at $4.16 below Cushing due to delays in new pipeline capacity [21] Company Strategy and Development Direction - The company aims to improve reliability and reduce costs across its refining system, with a focus on strong financial performance heading into the summer driving season [11] - The integration of Sonneborn is progressing well, with run rate synergies of $7 million achieved and expectations of long-term synergies of $20 million per year [9] - The company is cautious about acquisitions, focusing on value-oriented opportunities rather than growth for growth's sake, particularly in the midstream and refining spaces [46][80] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for the remainder of the year as product fundamentals improve and gasoline and distillate inventories remain low [15] - The company anticipates a rebound in the base oil market, expecting demand growth to absorb supply additions over the next few years [38] - Management does not foresee any material differences in operational capabilities post-turnaround, with plans to optimize for maximum diesel production as market conditions dictate [74] Other Important Information - The company returned $135 million to shareholders through dividends and share repurchases during the quarter [11] - Total liquidity stood at over $1.8 billion, with a cash balance of $496 million, aligning with the target cash balance of $500 million [25] - The company expects to spend between $470 million and $510 million for standalone capital and turnarounds in 2019 [28] Q&A Session Summary Question: What was the working capital impact during the quarter? - Working capital in the quarter was about a $64 million benefit, with capital expenditures expected to be back-end loaded due to a heavy turnaround schedule in the fourth quarter [29] Question: Any updates on small refinery exemptions? - Management indicated that the lack of announcement regarding small refinery exemptions is a matter of timing, expecting them to continue being granted [30] Question: What is the outlook for the base oil market? - The base oil market remains cyclically weak, but management believes it is bottoming out in the first half of 2019, with expectations for gradual improvement [38] Question: How does the company view the current crude differentials? - The widening of differentials is primarily driven by pipeline start-up delays, with three major pipelines expected to come online later in the year [40] Question: What is the company's strategy regarding cash balances and potential acquisitions? - The company aims to maintain a minimum cash balance of $500 million, with excess cash being considered for share repurchases or acquisition opportunities as they arise [44] Question: How does the IMO 2020 regulation impact the company's margins? - Management does not expect a major impact on base oil margins from IMO 2020, but anticipates increased demand for diesel fuel [72]

Financial Data and Key Metrics Changes - For Q4 2018, net income attributable to shareholders was $142 million or $0.81 per diluted share, with adjusted net income of $394 million or $2.25 per diluted share, compared to $125 million or $0.70 per diluted share in Q4 2017 [7] - Adjusted EBITDA for the period was $641 million, an increase of $307 million compared to Q4 2017, primarily due to favorable crude discounts [8] - Cash flow from operations was $425 million, including turnaround spending of $103 million, with total cash balance at $1.2 billion as of December 31, 2018 [26][27] Business Line Data and Key Metrics Changes - The lubricants and specialty product business reported an EBITDA loss of $4 million, impacted by weak base oil markets and a turnaround at the Mississauga plant [8] - Rack Forward EBITDA was $49 million with a 12% EBITDA margin, while full-year Rack Forward EBITDA was $213 million with a 13% EBITDA margin [9][10] - Holly Energy Partners reported EBITDA of $90 million for Q4, down from $125 million in the same period last year due to lower unit volumes and unplanned maintenance [11] Market Data and Key Metrics Changes - In the Rockies, crude throughput was 406,000 barrels per day, slightly below guidance, primarily due to unplanned maintenance [13] - Gasoline inventories in the Magellan system ended the quarter at 8.8 million barrels, approximately 3.2 million barrels higher than September 30 levels [19] - Fourth quarter consolidated gross margin was $22.17 per produced barrel sold, a 77% increase over the $12.54 recorded in Q4 2017 [24] Company Strategy and Development Direction - The company remains committed to returning excess cash to shareholders, having returned $597 million through dividends and share repurchases in 2018 [12][28] - The acquisition of Sonneborn is expected to strengthen the Rack Forward business and enhance operational efficiency [10][45] - The company plans to review its dividend policy in light of stable cash flow streams from new acquisitions [36][37] Management's Comments on Operating Environment and Future Outlook - Management indicated that 2018 was a cyclical low for base oil markets, with expectations for improvement in 2019 due to the absence of planned maintenance [33][34] - The company anticipates running between 400,000 and 410,000 barrels per day of crude oil for Q1 2019, with scheduled turnarounds impacting throughput [17] - Management expressed confidence in the synergies and EBITDA run rate from the Sonneborn acquisition, despite it being early post-acquisition [45] Other Important Information - The company expects capital expenditures for 2019 to be between $470 million and $510 million, with a tax rate of 23% to 25% [30] - The company has a modest debt-to-cap ratio of 14% and total liquidity exceeding $2 billion [27][29] Q&A Session Summary Question: Insights on Rack Back business and cyclical low - Management explained that 2018 was a cyclical low due to macro and micro factors, with expectations for recovery in 2019 [32][34] Question: Dividend growth potential - Management indicated a desire to review the dividend policy in the coming months, considering stable cash flow from new acquisitions [36][37] Question: Impact of turnaround on lubricants - Management noted that higher margin products were not produced for half the quarter due to the turnaround, significantly impacting performance [41] Question: Guidance on throughput - Management clarified that the throughput guidance was impacted primarily by the Tulsa turnaround, not economic run cuts [42] Question: Confidence in Sonneborn acquisition - Management expressed confidence in the initial guidance for Sonneborn's EBITDA run rate and synergies [45] Question: Heavy sour crude runs in Mid-Con - Management attributed the drop in heavy sour crude runs to the El Dorado turnaround, which limited refinery operations [46] Question: Capital spending guidance - Management indicated that 2019 is a high turnaround year, with expected capital spending for Sonneborn being modest [50] Question: OpEx trends and initiatives - Management acknowledged high OpEx in refining and emphasized the need for reliability improvements to reduce costs [75] Question: M&A strategy - Management confirmed ongoing interest in M&A opportunities, particularly in the Rack Forward business, while noting the rarity of refinery acquisitions [77]