HF Sinclair(DINO) - 2022 Q2 - Earnings Call Transcript

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]