HF Sinclair(DINO) - 2020 Q3 - Earnings Call Transcript

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]