HF Sinclair(DINO) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For Q1 2025, HF Sinclair reported a net loss attributable to shareholders of $4 million or negative $0.02 per diluted share, with an adjusted net loss of $50 million or negative $0.27 per diluted share compared to adjusted net income of $142 million or $0.71 per diluted share for Q1 2024 [12][13] - Adjusted EBITDA for Q1 2025 was $201 million, down from $399 million in Q1 2024 [13] - Net cash used for operations totaled $89 million, including $105 million of turnaround spend, with capital expenditures of $86 million for the quarter [16] Business Line Data and Key Metrics Changes - The Marketing segment achieved a record EBITDA of $27 million, up from $15 million in Q1 2024, driven by improved execution and high grading the portfolio [10][15] - The Lubricants and Specialties segment reported EBITDA of $85 million, slightly down from $87 million in Q1 2024, with a focus on high-margin specialty products [10][15] - The Midstream segment generated a record adjusted EBITDA of $119 million, an increase from $110 million in Q1 2024, benefiting from higher pipeline revenues [10][15] - The Refining segment reported an adjusted EBITDA of negative $8 million, down from $29 million in Q1 2024, primarily due to lower gross margins and refined product sales volumes [13][15] Market Data and Key Metrics Changes - Total sales volumes in the Renewables segment were 44 million gallons for Q1 2025, down from 61 million gallons in Q1 2024, impacted by lower sales volumes and the absence of benefits from the producer's tax credit [14] - The average oil charge was 606,000 barrels per day for Q1 2025, slightly up from 605,000 barrels per day in Q1 2024 [14] Company Strategy and Development Direction - The company remains focused on commercial and operational excellence, turnaround execution, and capital discipline, with a strategic priority to capture value across all business segments [7][11] - HF Sinclair plans to spend approximately $775 million in sustaining capital for 2025, down $25 million from 2024, and expects to invest $100 million in growth capital across its business segments [19] Management Comments on Operating Environment and Future Outlook - Management expressed optimism about the recent strength of refining margins as the summer driving season approaches, indicating a focus on executing strategic priorities [11] - The company aims to maintain a breakeven to slightly positive position in the renewable diesel business despite regulatory uncertainties, with expectations for improved conditions in the future [36][42] Other Important Information - The Board of Directors declared a regular quarterly dividend of $0.50 per share, payable on June 3, 2025 [11] - As of March 31, 2025, HF Sinclair had a cash balance of $547 million and $2.7 billion of debt outstanding, with a debt-to-cap ratio of 23% [16][17] Q&A Session Summary Question: What is driving the growth in the midstream business and the outlook for continued growth? - Management highlighted increased focus on products and crude pipelines, indicating that the midstream business is not fully optimized yet and presents growth opportunities [22][23] Question: What is the confidence level of earnings in the lubricants business? - Management noted that the lubricants business is performing well, with a focus on high-growth end users and a strong product mix contributing to stability [25][26] Question: Can you discuss demand across markets and the impact on product sales? - Management indicated that demand is relatively flat, with distillate demand up due to colder weather and regulatory impacts, affecting sales patterns positively [32][33] Question: How did the regulatory changes impact the renewable diesel business? - Management stated that no tax credits were recognized in Q1 due to regulatory uncertainty, but they believe clarity will help improve the business moving forward [35][36] Question: What is the strategy regarding turnaround operations and cash management? - Management confirmed that Q1 was a heavier turnaround quarter, with expectations for better cash flow in the future, allowing for potential shareholder returns [64][67] Question: How are tariffs affecting the lubricants business? - Management emphasized efforts to tariff-proof the lubricants business, ensuring compliance with USMCA and closely monitoring costs [71][74]