HF Sinclair(DINO) - 2025 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported a second quarter net income attributable to shareholders of $208 million or $1.1 per diluted share, with adjusted net income of $322 million or $1.7 per diluted share compared to $150 million or $0.78 per diluted share in the same period in 2024 [13][14] - Adjusted EBITDA for the second quarter was $665 million compared to $406 million in 2024 [14][16] - The company returned $145 million in cash to shareholders, consisting of $50 million in share repurchases and $95 million in regular dividends [11][12] Business Segment Data and Key Metrics Changes - In the refining segment, adjusted EBITDA was $476 million compared to $187 million in 2024, driven by higher adjusted refinery gross margins [14][16] - The Renewables segment reported adjusted EBITDA of negative $2 million, impacted by lower sales volumes and margins, with total sales volumes of 55 million gallons compared to 64 million gallons in 2024 [15][16] - The Marketing segment delivered $25 million in EBITDA, up from $15 million in 2024, driven by higher margins [15][16] - The Lubricants and Specialty segment reported EBITDA of $55 million, down from $97 million in 2024, primarily due to lower base oil margins and sales volumes [16] - The Midstream segment reported adjusted EBITDA of $112 million, slightly up from $110 million in the same period last year [16] Market Data and Key Metrics Changes - The company achieved an operating expense per throughput barrel of $7.32, nearing its near-term goal of $7.25 per barrel [8] - The company noted that distillate production was up quarter over quarter by over 10,000 barrels a day [22] - The company expects to run between 606,000 and 645,000 barrels per day of crude oil in the refining segment for the remainder of 2025 [18] Company Strategy and Development Direction - The company is focused on improving reliability, optimization, and integration, with a commitment to return excess cash to shareholders [7][12] - The company plans to continue executing its strategy of organic growth while balancing shareholder returns and potential bolt-on acquisitions in the marketing and lubricants segments [26][67] - The company is optimistic about the fundamentals of its businesses, particularly in refining and non-refining segments [99] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the continued strength of refining margins, particularly in distillates, and noted improvements in operational performance [11][12][58] - The company anticipates capturing more value from the producers' tax credit in the third quarter, which is expected to benefit the Renewables segment [9][36] - Management highlighted that the market structure for renewable diesel is expected to improve, with tightening LCFS regulations and proposed RVO numbers supporting the market [35][36] Other Important Information - The company has approximately $750 million remaining on its share repurchase authorization and has returned over $4.2 billion in cash to shareholders since the Sinclair acquisition [11][12] - The Board of Directors declared a regular quarterly dividend of $0.50 per share, payable on September 4, 2025 [11] Q&A Session Summary Question: Understanding strong performance in refining and capture rates - Management attributed strong capture rates to improved crude performance and flexibility in crude slate management despite headwinds [21][22] Question: Balancing shareholder returns and bolt-on opportunities - Management reiterated commitment to shareholder returns while also pursuing organic growth and capital returns, indicating a balance can be achieved [25][26] Question: Renewable diesel credits and market structure - Management confirmed the ability to recognize PTC in the second quarter and expressed optimism about future recognition and market structure improvements [31][36] Question: Operational performance and turnaround improvements - Management noted that the completion of turnarounds positions the company well for future operational excellence and reliability improvements [38][40] Question: Margin trajectory in lubricants and market dynamics - Management discussed the impact of planned turnarounds and FIFO headwinds on margins, indicating ongoing challenges in the lubricants market [46][48] Question: M&A strategy and market opportunities - Management stated that while they are open to M&A opportunities, the focus remains on bolt-on acquisitions in marketing and lubricants, with a cautious approach to larger deals [66][67]