HF Sinclair(US:DINO)2020-08-06 17:57Financial 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]