HF Sinclair(DINO) - 2019 Q2 - Earnings Call Transcript

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]