Welcome to HollyFrontier Corporation's Third Quarter 2021 conference call and webcast. Proceeding the call today from HollyFrontier is Mike Jennings, President and Chief Executive Officer. He's joined with Rich Voliva, Executive Vice President and Chief Financial Officer, Tim Go, Executive Vice President and Chief Operating Officer, Tom Creery, President Refining and Marketing, and Bruce Lerner, President HollyFrontier Lubricants and Specialties. At this time, all participants have been placed in a listen-only mode. End of floor will be open for your questions following the presentation.

And welcome to HollyFrontier Corporation's Third Quarter 2021 Earnings Call. This morning, we issued a press release announcing the results for the quarter ending September 30, 2021. If you would like a copy of the press release, you may find one on our website at hollyfrontier.com. Before we proceed with remarks, please note the Safe Harbor disclosure statement in today's press release. In summary, it says statements made regarding management expectations, judgments, or predictions are forward-looking statements. These statements are intended to be covered under the Safe Harbor provisions of Federal Securities Law. There are many factors that could cause results to differ from expectations, including those noted in our SEC filings. The call also may include discussion of non-GAAP measures. Please see the earnings press release for reconciliations to GAAP financial measures. Also, please note any time-sensitive information provided on today's call may no longer be accurate at the time of any webcast replay or rereading of the transcript. And with that, I'll turn the call over to Mike Jennings.

Thanks, Craig. Good morning, everyone. Today we reported third quarter net income attributable to HollyFrontier shareholders of $281 million or $1.71 per diluted share. These results reflect special items that collectively increased net income by $71 million. Excluding these items, adjusted net income for the third quarter was $210 million or $1.28 per diluted share versus an adjusted net loss of $67 million or a negative $0.41 per diluted share for the same period in 2020. Adjusted EBITDA for the period was $408 million, an increase of $342 million compared to the third quarter of 2020. The refining segment reported EBITDA of $295 million compared to a $39 million loss for the third quarter of 2020 and consolidated refinery gross margin was $14.87 cents per produced barrel, a 140% increase compared to the same period last year. This increase was primarily due to stronger product demand across the markets we serve. Third quarter crude throughput was approximately 416,000 barrels per day, above our guidance of 380,000 to 400,000. We recently completed planned turnaround work at our Tulsa Refinery, which was on time and on budget. At the beginning of October, we began a significant turnaround at the Navajo Refinery, which is scheduled to be completed in mid-November. Our lubricants specialty products segment reported EBITDA of $168 million for the third quarter versus $61 million reported in the same period last year. Excluding an $86 million gain on the sale of property at our Mississauga plant, adjusted EBITDA was $82 million. The rack back portion of this business continues to see outstanding margins and earnings driven by a combination of strong demand and limited global base oil supply due to a number of factors. In the rack forward portion, despite strong sales volumes and price increases, the continued rapid rise in base oil prices through the quarter compressed margins. Overall, we're encouraged by the consolidated earnings performance of the lubricants and specialties business this year, and we're optimistic that we'll see a solid finish to the year as demand for both base oils and finished products remains strong. Holly Energy Partners reported adjusted EBITDA of $83 million for the third quarter, compared to $86 million in the third quarter of last year. HEP delivered solid results in the quarter supported by record volumes on the Salt Lake City and Frontier pipelines in the Rockies region. During the quarter, we completed the Cushing Connect Pipeline project which will replace third-party providers as the primary source of crude supply for our Tulsa refinery. Now, I'd like to update on strategic business initiatives. Earlier this week, we closed on our previously announced acquisition of the Puget Sound Refinery for aggregate cash consideration of $613.6 million, which consisted of a base cash price of $350 million. Hydrocarbon inventory with an estimated closing value of $266.2 million, and other closing adjustments and accrued liabilities of $2.6 million. This purchase price represents an attractive acquisition multiple of 1.5 to 2 times EBITDA net of inventories based on the refinery's historical financial performance. The Puget Sound refinery has a strong record of financial and operational performance that we believe will complement our existing refining business. The refinery supplies transportation fuels into the premium Pacific Northwest region and sources advantaged Canadian crude, further enhancing and diversifying our refining asset base. We're committed to the continued safe and environmentally responsible operations of the facility and I'd really like to welcome Puget Sound's highly skilled workforce to the HollyFrontier family. In our renewable segment, I'm pleased to announce that we are progressing ahead of schedule on the Cheyenne Renewable Diesel Conversion Project. The 6,000 barrel per day renewable diesel unit is expected to be mechanically complete later this week, and we expect to run our first batch of feed by the end of the year. Given current economics between refined soybean oil and other feedstocks, we've prioritized completion of the pre-treatment unit located in the Artesia, New Mexico facility. And we now expect to complete the PTU in the first quarter of 2022, a full quarter ahead of schedule, allowing us to run a more favorable mix of feedstocks. The Artesia renewable diesel unit is now expected to be completed in the second quarter of 2022. We are still on budget and expect to spend a total of $800 million to $900 million for all three projects. In regard to our previously announced acquisition of assets from Sinclair, we still expect to close in mid-2022, subject to regulatory clearance and the satisfaction or waiver of all other closing conditions. We look forward to further diversifying our asset base with Sinclair branded marketing, renewable diesel, refining, and logistics businesses. Looking forward, we remain focused on executing these strategic initiatives which we believe will allow us to reward our shareholders through the capital return plans we previously announced in August. With that, let me turn the call over to Rich.

Thank you, Mike. As previously mentioned, the third quarter included a few unusual items. Pre-tax earnings were positively impacted by an $86 million gain on the sale of property at our Mississauga facility, partially offset by $4 million of pre-close acquisition integration costs, $7 million of charges related to the Cheyenne refinery conversion to renewable diesel production, and severance charges totaling approximately $200 thousand. A table of these items can be found in our earnings press release. Cash flow from operations was $249 million in the third quarter, which included $65 million of turnaround spending and a $94 million increase in working capital driven by the start of planned turnarounds at our Tulsa and Navajo refineries. HollyFrontier stand-alone capital expenditures totaled $196 million for the quarter. As of September 30, 2021, our total liquidity stood at approximately $2.8 billion comprised of a standalone cash balance of $1.5 billion along with our undrawn $1.35 billion unsecured credit facility. As of September 30, we have $1.75 billion of standalone debt, with a debt to cap ratio of 23% and a net debt to cap ratio of 4%. We anticipate recovering between $50 and $60 million in cash tax benefits in 2021 from the loss carryback under the CARES Act during the fourth quarter of this year. HEP distributions received by HollyFrontier during the third quarter totaled $21 million. HollyFrontier owns $59.6 million HEP limited partner units, representing 57% of LP units at a market value of approximately $1.1 billion as of last night's close. With respect to capital spending in 2021, we are decreasing our guidance specifically in the renewable segment based on updated project timelines and in the turnarounds and catalyst bucket, due to strong overall execution and some scope reduction at the Navajo turnaround. We now expect to spend between $550 to $600 million in renewables for the full year of 2021 versus our previous guidance of $625 to $675 million. In total, the renewables projects remain on budget, and we anticipate the remaining $175 to $225 million to be incurred in 2022. We still expect to spend between $190 to $200 million for capital at HollyFrontier refining and $40 to $50 million at HollyFrontier Lubricants and specialty products. We now expect to spend between $290 to $320 million for turnarounds and catalysts versus our previous guidance of $320 to $350 million. At HCP, we now expect to spend between $15 to $20 million for maintenance capital, $40 to $45 million for expansion capital, which includes our investments in the recently completed Cushing Connect Joint Venture, and $2 to $4 million in refining the processing unit turnarounds. Given record, base oil prices and more importantly the speed of their increase in 2021, we have updated our Rack Forward guidance to reflect short-term margin compression in the finished product side of our Lubricants and Specialties segment. We now expect to earn between $65 to $85 million in income from operations and $115 to $135 million of EBITDA. We expect Rack Back earnings to remain at these elevated levels in the fourth quarter based on the favorable supply and demand dynamics. With our refining segment for the fourth quarter of 2021, we expect to run between 450,000 and 470,000 barrel per day of crude oil, which includes expected volumes from the Puget Sound Refinery in November and December. And with that, we're ready to take questions.

Thank you. The floor is now open for questions. We ask that you please limit yourself to one question and one follow-up. If you have additional questions, we welcome you to rejoin the queue.

Hey, Rich and Mike. My first question for you is about six months ago, you gave us the Puget Sound acquisition. And at that time, the guidance was $150 million to $200 million. And I'm just trying to understand if anything has moved toward that guidance to change. And the reason I'm asking this question is, in the past, we have heard assets being acquired from major and a high guidance number being given. And when the results actually start coming in they're pretty disappointing. And that's why there's a facade sentiment on buying a West Coast asset from a major. So just trying to understand, has anything changed for your guidance on the Puget Sound acquisition?

Manav, we're sticking with our guidance. The biggest variable is probably RINs pricing. The market demand out there is recovering as you can probably see in the regional numbers. It's still probably at 10% below 2019 levels, but the trajectory is upward. As we've gotten the Navajo asset better we'd like it more. And we're sticking to our guidance.

And the second question since you mentioned RINs was, we had a release out there from Reuters, which put out some numbers which would actually be very supportive of D4 but not so supportive of D6. Now, as I understand, once your R&D facilities start, you would be long D4, you'd still be short D6, but maybe a little net short D6. But if there's a price spread difference between D4 to D6, so D4 premium goes up, you could still meet all your obligations. Can you just walk us through that maps one more time?

You are right, Manav. So yes, you are right. We will be long D4 RINs perspective of the renewable diesel facilities coming online. As Mike alluded to, Puget Sound brings a little more obligation to us. And then once the Sinclair transaction is closed, we will be long D4s, short D6, and basically balanced on an absolute number basis to your point, from our perspective, a higher D4 price versus D6 prices is beneficial.

Thank you so much for taking my questions.

Thanks, Manav.

Good. Thanks. So performance in the business falls in refining and we've just continued to exceed expectations since you announced the PSR acquisition earlier this year, including your cash flow of $250 million this quarter. It's a relatively constructive refining environment hold, how are you thinking about the dividend going forward? And what do you need to see to feel comfortable in restarting the dividend? And any thoughts on that timing.

Yeah, Ryan. Thanks for the question. You're right. The refining and lubricants environments are both constructive for us and our performance operationally in both is doing quite well. So looking forward, we're sticking to the capital plan that we laid out, the return of capital guidance that we laid out in August, which is return of the dividend after the 12 months hiatus, and repurchase as suggested in that guidance. So how it develops from there, how aggressively we lean into it as we go forward, we'll see. But we're very much sticking with the plan that we've laid out. And if anything, we're more constructive.

Thank you. As we consider your guidance on capital expenditures, it's helpful. Regarding the 2021 capital expenditures, the decrease in renewable diesel numbers is simply a matter of timing. Looking ahead to 2022, do you have any general insights on the updated maintenance capital given the various factors in your portfolio? What would be a good rule of thumb for maintenance capital in 2022, and what might the growth capital expenditures look like?

Good morning, Ryan. So to your point on renewables, yes, the overall projects are still within an $800 to $900 million range. So we'd expect that balance to flow into 2022. At a high level, capital spending and turnaround spending will decline in '22 versus '21. We expect to issue formal guidance in December. So we'll have some number for you in a few weeks.

Good morning. The first question. Appreciate the update on the renewable diesel side of things. Where are your latest thoughts on the feedstock mixture looking at at this point in time?

Yeah, Phil, this is Tom. We're still sticking to our guns on that one, for Cheyenne we're looking at a combination of soy and tallow and just to make it clear, we have secured feedstocks at this time for startup and we're in good shape. We haven't had any trouble buying feedstocks. And as the PTU comes up, we will look at buying additional feedstocks both being valued and low CI material. And we're doing analysis on an ongoing basis to find the feedstocks that have the best value for us; it's just not priced because it's more about value than anything else at this point in time.

Got it. And then just one question, when we read through your proxy filing, the guidance for the proforma EBITDA, the Company was a bit lower than the slide presentation you had given. So would that be just conservatism or anything we should be thinking about there, I guess how would you suggest we think about your proforma high mid-cycle versus what was stated?

Yeah, I felt Rich. So it's important to emphasize that was a point in time snapshot from July. And it was the best market views and frankly, the best forward curve we can come up with at the time. Clearly the market has performed better than that, and it does not affect our view of mid-cycle. Like we've had in July, largely based on wear-to-work markets.

Okay. So you'd suggest we stick with kind of a mid-cycle provided in slide breed initiative.

Absolutely. To prove that point further, obviously, our third quarter earnings in several segments were above mid-cycle already.

Right. Right. Okay. Thank you.

Hey guys. Good morning.

Hi, Paul.

Two questions, please, Mike and Rich. There's a number of transition happening in the midstream consolidating and some people use either selling down or that rolling it up. When we’re looking at HEP, is the granddaddy? And the MLP, at this form, does it really make sense for you to stay as an independent or that, from the corporation standpoint, what would be more advantageous and to simplify your corporate structure and just rolling it gain? And if you don't really need the control should you maybe take that chance just so you then consolidate. That's the first question. The second question is related to the Mid-Con is a really strong we saw. And is there anything unique in this quarter other than say Lynparza is down that leads to such a strong margin capture, as well as the overall footprint is so strong? What I want to see is, is the third quarter is a good baseline to use for the Mid-Con region going forward?

Okay, Paul, we are going to take that on. We're going to have a negative among us. Rich and I will address the question around ATP deconsolidation. I will start with just how integral those assets are to our business strategy. In terms of their ownership and their use as we connect our refining assets to supply sources and market. It's very strategic for us to own and operate those assets. The structure of ownership I'll ask Rich to speak with around deconsolidation or retention of the MLP.

Thanks, Mike. Paul, I think we demonstrated the value of HEP as a financial vehicle in the Sinclair transaction. We're going to do the right thing for the shareholder here, whether HEP is a financial vehicle has rolled up, consolidated, or whatever, this is essentially a corporate finance discussion to make any transaction like that, our equity would require an incredible amount of cash which we think is probably spoken for better by our shareholders. We'll continue to monitor the situation, respond to the market, and do the best thing for our shareholders.

The second question was whether there are any unique good guys lingering around.

Can I ask questions to this?

Absolutely.

Rich, when you mention picking a run-off cash and wanting to roll it up, what do you mean by that? If you look at PS6, they just paid out one, with both the share of PS6 and unit change reflecting HEP. So, we need no cash; they have a higher dividend outlook than you, obviously, since you haven't provided any dividends despite your gains. From that perspective, moving forward by rolling it up could actually enhance your cash flow.

So Paul, we've done the math, we keep the math live, for us, it would not improve our cash flow with diluted on a per-share basis. Honestly, look, we've got a very wide valuation difference between HollyFrontier and HEP that could easily change over time and changes discussion. Like you're headed down the right path here. The math from our perspective does not work currently for that kind of transaction, but we will continue to monitor it.

The other comment is that it would be a levering transaction. And to do so just in respective capital structure, HEP supports 3.5 times debt to EBITDA. While our target on the HFC side is considerably lower in order to maintain our investment-grade credit rating. So I think we have to look at both cash flow and the immediate cash impact of the transaction. And for us, it would be a levering transaction. Rich said that filings that capital is better returned to our shareholders than in a buyout of HEP.

We are very pleased with the Mid-Con performance this quarter. The three biggest factors are stronger gasoline margins due to increased demand, stronger base oil margins that you've been launching, and lower RIN impacts in the region. As for whether we should expect this level of performance in the future, we showed strong Mid-Con results in the second quarter as well. We've seen improvements in volumes, demand, and margins overall in the last six months. While we do anticipate some weaker demand in the winter, we've been taking full advantage of market opportunities and have also benefited from strong margins in the Rockies, moving some of our barrels in that direction. We hope to continue this trend in the coming years.

Thank you.

Our next question comes from Elisa Chen from Barclays. Your line is open.

Good morning. I wanted to ask about the boot business and the updated guidance. I'm curious if the changes are solely due to the time needed to adapt to the higher base oil costs or if they are expected to last for a stable period. What is your outlook on this?

Your assumption is correct. So base oil prices are ramping at a faster rate than we can apply price that has the price increases for that specific component. In this business, we have a fair proportion of finished lubricant clients that are contracted. And so there's some limiters on the timing, not that we can push the price through, but on the timing, and so you see a lag between the ability to raise the price on the finished side versus the instantaneous impact of the base oil markers increasing.

Got it. And on the renewable diesel side, Tom, I was hoping if you could go back to your comments about feedstocks and understand that you've had no trouble buying feedstocks for startup. At this point, can you just give us a sense of the execution around that on a go-forward basis? Are you going to be in the spot market perpetually is any of it bought forward or bought on a contracted basis? What are your expectations as unit start-up?

We are currently purchasing spot contracts, which typically last around 3 to 6 months. Most of our purchases can be classified as spot buying. However, we are exploring other opportunities, such as engaging in the economics of crush plants to enhance our position in the value chain. We have been in discussions with various partners to understand the market and identify potential roles for us moving forward. Additionally, we are also talking to producers of DCO as part of this exploration. We are still in the early stages of evaluating the markets, but it's definitely an area we are focusing on as we aim to become a regular off-taker.

Thank you.

Thanks, Theresa.

Yes. Thanks. Just trying to piece together the sort of phasing of the renewable diesel projects here. So as we think through the sort of mid-cycle targets that you guys have laid out there, is that a number that we should expect sort of hitting a run rate of in 2022? Do you take some more time to iron out kinks in operations, etc. how should we think about when that's a realizable earnings number?

That's going to be realizable in the second half of 2022 as we start the PTU line out Cheyenne and get the RDU in Artesia. It's going to take us some time and we're going to have to get into it. So, definitely over the second half of 2022, that would be our expectations.

Okay. That's helpful. Maybe just pivoting to Puget Sound. Just trying to piece together some of the comments you made just in terms of obviously, the market has improved. RINS are still a challenge. Net, you feel that asset is operating at or near the mid-cycle level that you've put out for that. How should we think about the near-term earnings contribution of that?

The short answer to that question is yes. You probably understand that there's seasonality, particularly in that geography. Throughput in the winter is lower. But in terms of the overall market structure and margin opportunity versus what we've put out, yeah, that we see it consistent with the guidance we've given.

Okay. So maybe a little bit lower in the near-term, but moving towards that in 2022.

Yeah.

All right. Thanks very much.

Hey, Connor, just to follow it up. Do you think, if you look at the proxy statement we put out in association with Sinclair, there are numbers for Puget Sound up through the first half of 2021. I'll probably give you some help there.

Yeah, thank you. Good morning.

Hi, Roger.

I just like to catch up on the lead business, maybe a little bit to understand the Rack Forward, Rack Back, and your supply of base oil relative to the amount of products you sell. In other words, are you 100% sourced, 80% sourced, or 120%, I'm just trying to understand the balance in this business as things transition from type base oil into, I don't know, I guess we'll call it a more normalized market hopefully in '22?

Our base oil production is fully sufficient to meet the demands of our finished lubricants business, including formulated products like railroad engine oil. We are also heavily integrated into our own feedstock supplies in Tulsa for our specialty area. However, we can source some feedstocks such as flaxes and other base oils externally for some of the former Sonneborn products in the specialty business. This is why we have a portion of the business that produces excess, which we sell as straight-based oil.

So, reasonable in Brazil as the base oil market normalizes, and the pricing catches up on the Rack forward side, the level of performance you're seeing now could slip a little bit but for the most part, ought to remain fairly strong?

Yes. We believe that's the case. There is some pricing interplay, with a bit of a left pocket, right pocket scenario. As the rack forward recognizes the full impact of the price increases and aligns with the clients, even if there is a slight decline in base orders, we offset that on the other side.

Thank you for that information. I have a question regarding the total capital expenditure guidance and the status of the renewable diesel projects. The range of 800 to 900 million seems quite broad at this stage of the projects. What are the remaining risk factors that could influence whether we land at the higher or lower end of that range?

Let me start by addressing this, and Tim can add anything I might overlook. We are currently facing two main issues: the ongoing supply chain challenges, which can arise unexpectedly, and the impact of COVID, which affects our ability to maintain our workforce on site and can influence both schedules and costs.

Yes, the only other thing that I would add, Roger, is that we're getting into winter here in the Northern hemisphere and that's going to have an impact. We've already seen it in our Cheyenne operations. They've had snow a couple of times, freezing rain, which impedes our ability to get workers out in the field. And we expect to see that as we go forward. That's our key issue as well. That's a big unknown at this point in time.

Thank you. I appreciate it. Thank you.

Okay.

Good morning, team. Nice quarter here. The first question I had was around refining specifically around crude differentials. We've seen Brent-TI trade pretty tight and we've seen some backwardation show back up in this market. Just your thoughts on the outlook for Cushing and navigating the crude differential environment?

We are definitely noticing tightness in Brent-TI in the short term due to factors like low cushion inventories, backwardation, and capitalized reversal. However, we still believe that the Brent-TI spread will settle around the $3 range in the long term. Examining our assets helps illustrate the impact of the Brent-TI spread. For example, El Dorado has 30% of its crude slate linked to WCS, and the widening WCS spread provides some offset and cushion for them. In contrast, the WCS spread has weakened significantly for the Permian and our Navajo Refinery, which is reflecting the market's discounting of high sour crudes. This situation is beneficial for our teaser refinery. Base oil margins remain strong, supporting the tiger spread and the Brent-WTI spread. Overall, we maintain a positive outlook for our assets that are primarily affected by the WTI-Brent spread.

Okay, and you think, Tim, $3 is the right number over the medium-term to anchor to based on transportation economics?

That's right, yeah.

Okay, that's helpful. Rich, could you share your thoughts on capital returns following the recent M&A? Specifically, what is your view on resuming capital returns and in what form, whether through buybacks or dividend payouts?

We have reiterated the guidance we provided when we announced the Sinclair acquisition. We anticipate resuming dividend payments in the first half of 2022. By the end of the first quarter of 2023, we expect to return a total of one billion dollars to our shareholders through dividends and share repurchases. Looking into early 2023 and beyond, our plan is to implement a 50% payout ratio of net income, encompassing both dividends and share repurchases.

Hey, good morning, guys. Standing in for Doug. Thanks for taking the question. Maybe first off, I'm interested in the marketing opportunities at Puget Sound. So my understanding is that Vancouver is advantaged over Seattle. So I'm wondering about your ability to sell there is a way to step up margin. And additionally, what the crude differentials look like for the Canadian mediums that you run up there, noting that WCS is widened out, but they're not exactly the same.

Yes, this is Tim, I'll address the question about Puget Sound. We can move products into Canada, and we are currently doing so. We will continue to explore these opportunities. Typically, these sales have smaller margins as we transport a significant amount to the West Coast. We can ship into Canada as well as California. As the CARB gasoline market improves, we also anticipate opportunities in that area. Regarding crude differentials, we still see that Canadian crude offers price advantages for us. We generally blend Canadian crude to match ANS-type quality when processing it at the Puget Sound Refinery. We believe there are ongoing opportunities to bring in that advantageous crude to Puget Sound.

Thank you. And Michael opens your foreign capital expenditures. Again. I think your guidance implies a big step-up in renewable expense for the first quarter of '22. So I'm just hoping that you could put it all together for us and the outflows for this quarter and next. Considering that, this will be the peak period for spend and Puget Sound disclosed.

So, as we said, we would expect to spend between $550 and $600 million for 2021 in renewables. That leaves about $150 million to $175 million to go in 2021. And then as guided for 2022, we'd expect this going between $175 and $225 million in renewables.

First half. Will be done in the first half. I don't have enough insight of quarterly split at this point.

Okay. That's perfect. Thanks, Rich.

Hey, good morning. Thanks for taking my questions. Are first wanted to ask on the Rockies, or I should say, the west region. Indicators have held up pretty well in as demand kind of normalize this year in refining environment that looks different with some assets gone. Can you just discuss if there's a step change in the supply demand balances in those west regions relative to wherever pre-COVID or if there were some transitory items benefiting in 3Q and seemingly as we move into 4Q? And second, I wanted to ask about the Sinclair acquisition, understanding, there's some sensitivities as you're going through the closing process. The Biden administration has been vocal on looking more closely at oil and gas mergers, and I'm wondering if that has resulted in a more in-depth process. I guess I could put it relative to when Holly and Frontier combined in 2011, just looking for general thoughts, if you could compare this process versus the outcome. Thanks.

Sure. I'll give you a little insight on questions, I'll ask Tim to speak to your first question. It won't surprise you that at this point we are deep into the regulatory process and frankly have very little to say about it. Other than we think the transaction is clearly designed to close. And we look forward to serving these customers. But as to how the FTC is seeing it and what questions they are asking, that's a little too intimate right now. So we'll pass on that piece and we're working hard at it. Tim.

Yes, Jason, regarding your question about the west refining region, we are very pleased with our execution not only in the third quarter but also in the second quarter. We observed stronger gasoline and diesel margins, along with lower RIN impacts that have positively affected our performance in the West. As you noted, we have reduced a significant amount of fixed costs by converting our Cheyenne Refinery into a renewable diesel project, which is enhancing our overall economics in the West as we continue to serve those markets with one less facility.

Your next question comes from Paul Cheng from Scotia Howard Weil. Your line is open.

Hey Mike, I'm curious about the number of key years you’ve been an independent refiner. Some smaller and larger companies have indicated that due to the energy transition, they have no plans to expand their refining capacity, either through organic investment or acquisitions. You might be among the exceptions. From your perspective, after completing the care process, do you believe you will have enough capacity, or after you analyze it, will you still see opportunities to further expand your refining footprint? How does this perspective differ from that of your peers?

Well, Paul, obviously, every Company has its own strategy and ours is not intentionally contrarian. But we actually do believe in petroleum fuels. And those are the fuels of today. And most consumers still use gasoline and diesel. And so our intention is to serve those customers reliably safely and then at a very reasonable cost. At the same time, we're not ignorant to energy transition, and we're doing things inside our Company around renewable fuels that the supply chain around feedstocks and potential opportunities around carbon capture. So I think we have a portfolio outlook that also includes specialties like lubricants, in our own integrated transportation network. What we're trying to be is a very competitive Company that generates high returns internally and ultimately with cash to return to our shareholders. It doesn't favor renewables relative to petroleum fuels. We believe in both. And what we want to do is to produce both really well in markets that reward us for that. I hope that describes the strategy from a very high level. Obviously, as time rolls forward, we'll look at individual opportunities. We don't believe in generic capacity acquisition for its own sake. But at the same time when we're able to add solid assets like that of Puget Sound Refinery that can really help our portfolio with operational capability and serve a premium market, we're going to do that. So yeah, that's what we're doing going forward right now. We've got a very full plate. Execution is our mantra. And we really need to focus on bringing these things that we've committed to across renewables, Puget Sound, and Sinclair are home to the benefit of our Company and our shareholders. And that's what we're working on doing.

And my second question is that from a high level, some of your peers, when they are looking at the energy transition, they also expand into maybe beyond or outside the traditional refining space. Including one of your peer getting into the investment, into the factory business and then maybe also doing the CCS. How HollyFrontier looking at those? I mean those over the next 5 years that the Company may be interested to branch out beyond your carbon business mix or that over the next 5 years you're going to speculate your permanent business mix?

Yeah. So Paul, our principal skills are in liquid fuels production and distribution. So that's what we're going to favor. We're going to try to reduce carbon intensity through time in our renewables efforts. And also look inside the fence line in terms of scope 1 and 2 emissions, and potentially invest in carbon capture and storage. Batteries that feels like a stretch for us. I like to never say never. But really, we're going to focus on those things that we can provide skill and advantage to. And I think I've called those out here. You bet.

There is no further question at this time. I would now like to turn the call over to Craig for closing remarks.

Thanks, everyone. We appreciate you taking the time to join us on today's call. If you have any follow-up questions, as always, reach out to Investor Relations. Otherwise, we look forward to sharing our fourth quarter results with you in February.

Thank you. This ends today's conference call. Please disconnect your line at this time and have a wonderful day.