HF Sinclair(US:DINO)2025-07-31 18:50PART I - FINANCIAL INFORMATION Financial Statements The company's Q2 2025 net income rose to $208 million, while H1 2025 net income fell to $204 million, with total assets at $16.84 billion Consolidated Financial Statements (Summary) Total assets grew to $16.84 billion, with Q2 2025 net income rising to $210 million while H1 2025 net income declined significantly Consolidated Balance Sheet Summary (in millions) | Balance Sheet Items | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $874 | $800 | | Total current assets | $5,173 | $5,014 | | Total assets | $16,843 | $16,643 | | Total current liabilities | $2,841 | $3,043 | | Long-term debt, net | $2,677 | $2,288 | | Total liabilities | $7,495 | $7,297 | | Total equity | $9,348 | $9,346 | Consolidated Income Statement Summary (in millions, except per share data) | Income Statement Items | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Sales and other revenues | $6,784 | $7,846 | $13,154 | $14,873 | | Income from operations | $275 | $197 | $356 | $609 | | Net income attributable to HF Sinclair stockholders | $208 | $152 | $204 | $466 | | Diluted EPS | $1.10 | $0.79 | $1.07 | $2.38 | Consolidated Cash Flow Summary (Six Months Ended June 30, in millions) | Cash Flow Items | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $498 | $541 | | Net cash used for investing activities | ($193) | ($173) | | Net cash used for financing activities | ($239) | ($851) | | Net change in cash | $74 | ($488) | Note 3: Revenues Q2 2025 revenues fell to $6.78 billion, driven by lower transportation fuel sales, with the U.S. Mid-Continent as the largest market Disaggregated Revenues by Type (in millions) | Revenue Type | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Transportation fuels | $5,344 | $6,102 | $10,305 | $11,657 | | Lubricants and specialty products | $583 | $644 | $1,180 | $1,258 | | Asphalt, fuel oil and other | $393 | $569 | $712 | $1,052 | | Excess crude oil revenues | $345 | $437 | $728 | $704 | | Total sales and other revenues | $6,784 | $7,846 | $13,154 | $14,873 | Refined Product Revenues by Market - Q2 2025 (in millions) | Market | Revenue | | :--- | :--- | | Mid-Continent | $2,221 | | Rocky Mountains | $1,370 | | Northwest | $1,290 | | Southwest | $919 | | Other | $520 | - The company has future performance obligations for minimum volumes under long-term contracts, including 84 million barrels of refined product sales through 2035 and $59 million in minimum midstream revenues through 203358 Note 11: Debt The company refinanced its debt, issuing $1.4 billion in new notes and entering a new $2.0 billion credit facility in early 2025 - On April 3, 2025, the company terminated its existing credit agreements and entered into a new $2.0 billion senior unsecured revolving credit facility maturing in 203085 - In January 2025, the company issued $1.4 billion of new senior notes and used a portion of the proceeds to tender for and redeem $647 million and $349 million of existing notes, respectively888991 Total Debt Summary (in millions) | Debt Component | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Senior Notes | $2,704 | $2,300 | | Total Credit Agreements | $0 | $350 | | Total debt at face value | $2,704 | $2,650 | | Unamortized discount and costs | ($27) | ($12) | | Total debt | $2,677 | $2,638 | Note 13: Stockholders' Equity A new $1.0 billion share repurchase program was initiated, with $50 million in shares repurchased in H1 2025 and a quarterly dividend declared - A new $1.0 billion share repurchase program was approved in May 2024, with $749 million remaining authorized for repurchases as of June 30, 2025112113 Share Repurchases (in millions, except share data) | Period | Number of Shares Repurchased | Cash Paid | | :--- | :--- | :--- | | Three Months Ended June 30, 2025 | 1,329,725 | $50 | | Six Months Ended June 30, 2025 | 1,329,725 | $50 | | Six Months Ended June 30, 2024 | 9,279,177 | $537 | - On July 31, 2025, the Board of Directors declared a regular quarterly dividend of $0.50 per share114 Note 15: Commitments and Contingencies The company settled a major environmental case for its Navajo refinery and received a favorable court ruling on RFS exemption petitions - On May 5, 2025, a consent decree was entered to resolve alleged Clean Air Act violations at the Artesia refinery, requiring a $34 million civil penalty and an estimated $137 million in injunctive relief129130 - On July 26, 2024, the D.C. Circuit Court vacated the EPA's denial of the company's small refinery exemption petitions for 2016, 2018, 2019, and 2020, finding the denial unlawful and remanding the petitions to the EPA124 Note 16: Segment Information The Refining segment drove Q2 2025 profitability with $166 million in operating income, while the Renewables segment reported a loss Segment Income (Loss) from Operations (in millions) | Segment | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Refining | $166 | $65 | $136 | $377 | | Renewables | ($4) | ($15) | ($43) | ($54) | | Marketing | $18 | $9 | $38 | $18 | | Lubricants & Specialties | $31 | $74 | $94 | $139 | | Midstream | $91 | $90 | $181 | $175 | | Total Income from Operations | $275 | $197 | $356 | $609 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes improved Q2 2025 results to refining margins and discusses liquidity, capital plans, and regulatory impacts Overview Q2 2025 net income rose to $208 million on better refining margins, while the company analyzes impacts of new tax credit legislation - Q2 2025 net income attributable to stockholders was $208 million, compared to $152 million in Q2 2024, while H1 2025 net income was $204 million, compared to $466 million in H1 2024150 - The Marketing segment added 55 net new branded sites during Q2 2025 and is expected to grow the number of sites by approximately 10% annually153 - The "One Big Beautiful Bill Act" (OBBBA) was signed into law on July 4, 2025, extending the Producer's Tax Credit (Section 45Z) through 2029158 - Compliance costs for the Renewable Fuel Standard (RFS) increased, with RINs costs totaling $180 million in Q2 2025, up from $108 million in Q2 2024159 Results of Operations Q2 2025 net income rose to $208 million on higher refinery margins, but H1 2025 income fell due to inventory valuation adjustments Financial Performance vs. Prior Year | Metric | Q2 2025 vs Q2 2024 | H1 2025 vs H1 2024 | | :--- | :--- | :--- | | Net Income Attributable to Stockholders | +$56M (+37%) | -$262M (-56%) | | Sales and other revenues | -$1,062M (-14%) | -$1,719M (-12%) | | Income from operations | +$78M (+40%) | -$253M (-42%) | - The increase in Q2 2025 net income was principally driven by higher adjusted refinery gross margins, which increased to $16.50 per produced barrel sold from $11.33 in Q2 2024189193 - Lower of cost or market inventory valuation adjustments decreased pre-tax earnings by $148 million in Q2 2025, compared to a $3 million increase in Q2 2024189192 - The decrease in H1 2025 net income was principally driven by a $31 million charge from inventory valuation adjustments, compared to a $223 million benefit in H1 2024200203 Segment Operating Data The Refining segment's adjusted gross margin rose to $16.50/bbl in Q2 2025, while the Renewables segment's margin decreased Refining Segment - Adjusted Gross Margin per Barrel | Region | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Mid-Continent | $15.52 | $8.39 | $11.61 | $9.41 | | West | $17.15 | $13.50 | $13.80 | $13.93 | | Consolidated | $16.50 | $11.33 | $12.91 | $11.99 | Renewables Segment - Adjusted Gross Margin per Gallon | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Adjusted renewables gross margin | $0.36 | $0.44 | $0.27 | $0.30 | Marketing Segment - Key Metrics | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Number of branded sites | 1,719 | 1,564 | 1,719 | 1,564 | | Adjusted marketing gross margin/gallon | $0.10 | $0.06 | $0.11 | $0.07 | Liquidity and Capital Resources The company maintains strong liquidity of $2.9 billion and plans $875 million in 2025 capital spending while returning cash to shareholders - Total liquidity was approximately $2.9 billion at June 30, 2025, consisting of $0.9 billion in cash and cash equivalents and $2.0 billion available under the HF Sinclair Credit Agreement222 Expected 2025 Cash Spending (in millions) | Category | Expected Spending | | :--- | :--- | | Refining Capital | $240 | | Renewables Capital | $5 | | Marketing Capital | $30 | | Lubricants & Specialties Capital | $40 | | Midstream Capital | $30 | | Corporate Capital | $20 | | Turnarounds and catalyst | $410 | | Total Sustaining | $775 | | Growth capital | $100 | | Total | $875 | - Net cash from operating activities was $498 million for H1 2025, a decrease from $541 million in H1 2024, primarily due to higher turnaround expenditures ($284 million vs. $169 million)225 - Financing activities in H1 2025 included $190 million in dividend payments, $50 million in stock repurchases, and net proceeds of $387 million from the issuance and redemption of senior notes232 Risk Management The company uses derivative instruments to manage commodity price and foreign currency risks, with a potential $6 million loss on a 10% price shift - The company's primary market risks are commodity price risk and foreign currency risk, which are managed periodically with derivative contracts240241 Outstanding Derivative Notional Volumes as of June 30, 2025 | Contract Description | Total Outstanding Notional | | :--- | :--- | | NYMEX futures (WTI) - short | 970,000 Barrels | | Forward crude oil contracts - long | 640,000 Barrels | | Forward crude oil contracts - short | 368,000 Barrels | | Foreign currency forward contracts | 522,000,000 Canadian dollar | | Forward commodity contracts (platinum) | 34,628 Troy ounces | - A hypothetical 10% increase in underlying commodity prices would result in a derivative fair value loss of $6 million as of June 30, 2025243 Quantitative and Qualitative Disclosures About Market Risk This section cross-references the 'Risk Management' discussion for details on the company's market risk exposures - This section refers to the "Risk Management" section under "Management's Discussion and Analysis of Financial Condition and Results of Operations" for disclosures about market risk258 Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal controls - The principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective as of June 30, 2025259 - No changes occurred during the quarter ended June 30, 2025, that have materially affected, or are reasonably likely to materially affect, the company's internal controls over financial reporting260 PART II - OTHER INFORMATION Legal Proceedings The company finalized a consent decree for the Navajo refinery and received a favorable court ruling on small refinery exemption petitions - A settlement was reached with the EPA, DOJ, and NMED regarding the Navajo refinery, where the company will pay a $34 million civil penalty and implement injunctive relief measures estimated to cost $137 million266267 - The company is engaged in discussions with regulators regarding compliance at its Puget Sound Refinery, but no penalties have been demanded, and the outcome is not yet predictable268270 - On July 26, 2024, the D.C. Circuit Court issued a favorable decision, vacating the EPA's denial of the company's small refinery exemption petitions and remanding them to the EPA for a new determination274 Risk Factors No material changes were reported to the risk factors disclosed in the company's 2024 Annual Report on Form 10-K - There have been no material changes in the company's risk factors from those disclosed in the Annual Report on Form 10-K for the year ended December 31, 2024277 Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 1.3 million shares for $50 million in Q2 2025, with $749 million remaining under its repurchase authorization Common Stock Repurchases in Q2 2025 | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 2025 | 0 | N/A | | May 2025 | 616,015 | $36.20 | | June 2025 | 713,710 | $38.81 | | Total | 1,329,725 | N/A | - As of June 30, 2025, the company had $749 million remaining under its $1.0 billion May 2024 Share Repurchase Program278 Other Information The company reported no other information for this item - None279 Exhibits This section lists exhibits filed with the Form 10-Q, including corporate documents and required certifications