HF Sinclair Corp Q2 FY2023 Earnings Call

Welcome to HF Sinclair Corporation and Holly Energy Partners Second Quarter 2023 Conference Call and Webcast. Hosting the call today is Tim Go, Chief Executive Officer of HF Sinclair. He is joined by Atanas Atanasov, Chief Financial Officer; Steve Ledbetter, VP of Commercial; Valerie Pompa, EVP of Operations; and Matt Joyce, SVP of Lubricants and Specialties, along with John Harrison, Chief Financial Officer of Holly Energy Partners. At this time, all participants are in listen-only mode, and the floor will be open for your questions following the presentation. Please note, this conference is being recorded. It is now my pleasure to turn the floor over to Craig Biery, Vice President, Investor Relations. Craig, you may begin.

Thank you, everyone, and welcome to HF Sinclair Corporation and Holly Energy Partners second quarter 2023 earnings call. This morning, we issued a press release announcing results for the quarter ending June 30, 2023. If you would like a copy of the press releases, you may find them on our website. Before we proceed with remarks, please note the Safe Harbor disclosure statement in today's press release. Such statements made regarding management expectations, judgments, or predictions are forward-looking statements intended to be covered under the Safe Harbor provisions of federal securities laws. There are many factors that could cause results to differ from expectations, including those noted in our SEC filings. The call may also include discussion of non-GAAP measures. Please see the earnings press releases 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. With that, I'll turn the call over to Tim Go.

Good morning. Today, we reported second quarter 2023 net income attributable to HF Sinclair's shareholders of $508 million or $2.62 per diluted share. These results reflect special items that collectively increased net income by $4 million. Excluding these items, adjusted net income for the second quarter was $504 million or $2.60 per diluted share compared to adjusted net income of $1.3 billion or $5.59 per diluted share for the same period in 2022. Adjusted EBITDA for the second quarter was $868 million, a 53% decrease compared to the second quarter of 2022. In our refining segment, second quarter 2023 EBITDA was strong at $703 million compared to $1.7 billion in the same period last year. This decrease was primarily driven by lower refining margins in both the West and Mid-Continent regions and lower refined product sales volumes due to higher maintenance activity. Operating expenses of $427 million in the second quarter of 2023 improved versus the $469 million recorded in the same period last year as we benefited from lower natural gas costs. We continue to focus on controllable operating expenses as well as streamlining and optimizing our operations. Crude oil charge averaged 54,000 barrels per day in the second quarter of 2023 compared to 627,000 barrels per day in the second quarter of 2022 due to higher maintenance activity during the period. I'm pleased to report that the two turnarounds at our Navajo and Parker refineries in the period were completed on time and on budget, and we continue to make progress on our long-term reliability improvement initiatives. In our Renewables segment, we reported EBITDA of $23 million for the second quarter of 2023 compared to negative $63 million for the second quarter of 2022. Excluding the lower of cost to market inventory valuation adjustment, the segment reported adjusted EBITDA of negative $11 million for the second quarter of 2023 compared to negative $28 million for the second quarter of 2022. Total sales volumes were 50 million gallons for the second quarter of 2023 as compared to 26 million gallons for the second quarter of 2022. Utilization rates were impacted this quarter by two hydrogen plant turnarounds at Navajo and Parker, which are co-located with two of our renewable diesel plants. We continue to improve the performance of this business with a target of achieving normalized run rates by the end of 2023, which will allow us to optimize advantaged feedstock from our pretreatment unit and improve the profitability of this business. Our Marketing segment reported EBITDA of $25 million for the second quarter of 2023 compared to $24 million in the second quarter of 2022. Total branded fuel sales volumes were a quarterly record of 364 million gallons compared to 335 million gallons in the same period last year. Gross margin per gallon was also a quarterly record at $0.09 in the second quarter as we saw strong demand for branded fuels across our regions. We added nine new branded sites in the second quarter, and we continue to expect to grow our branded sites by 5% or more per year. Our Lubricants and Specialty Products segment reported EBITDA of $72 million for the second quarter of 2023 compared to EBITDA of $156 million for the second quarter of 2022. This decrease was largely driven by a lower FIFO benefit from consumption of lower-priced feedstock inventory for the second quarter of 2023 of $0.5 million as compared to the $71 million benefit in the second quarter of 2022. We continue to look for ways to optimize the lubricants business, and we remain focused on sales mix optimization of our base oils and finished products. HEP reported EBITDA of $82 million in the second quarter of 2023 compared to $80 million in the same period last year. This increase was mainly driven by strong transportation and storage volumes in the Rockies region. At this time, we do not have an update regarding the proposed buy-in of HEP as we are currently in discussions. We do not intend to disclose developments with respect to the proposed transaction unless and until HF Sinclair and AGP have entered into a definitive agreement to effect the proposed transaction. For this reason, we will not be able to discuss any specifics during the Q&A. During the second quarter, we announced and paid a regular quarterly dividend of $0.45 per share to stockholders totaling $87.3 million. Subsequent to the quarter end, we announced earlier this week that we repurchased 8.2 million shares for an aggregate price of $411 million from REH Company. This puts our year-to-date total cash return, including dividends and share repurchases, at over $834 million. On a trailing twelve-month basis, we've returned over $2 billion in cash to shareholders as of August 2, 2023. Overall, we are very pleased with our strong second quarter results. With the majority of the planned turnaround behind us, we believe our diversified portfolio is well-positioned to capture margins available to us for the remainder of the year. Our long-term commitment to returning excess cash to shareholders has not changed, and we continue to target a payout ratio of 50% of net income to shareholders while maintaining an investment-grade rating. We remain focused on the reliability and integration of our asset base to further strengthen the earnings portfolio and free cash flow generation of HF Sinclair. With that, let me turn the call over to Atanas.

Thank you, Tim, and good morning, everyone. Let's begin by reviewing HF Sinclair's financial highlights. Net cash flows provided by operations for the second quarter of 2023 totaled $490 million, which included $183 million of turnaround spend in the quarter. HF Sinclair's stand-alone capital expenditures totaled $72 million for the second quarter of 2023. As of June 30, 2023, HF Sinclair’s stand-alone liquidity stood at approximately $3.3 billion, comprised of a cash balance of $1.6 billion, along with our undrawn $1.65 billion unsecured credit facility. As of June 30, 2023, we have $1.7 billion of stand-alone debt outstanding with a debt-to-cap ratio of 15% and net debt-to-cap ratio of 1%. HEP distributions received by HFC during the second quarter of 2023 totaled $21 million. HF Sinclair owns 59.6 million HEP limited partner units, which following the acquisition of Sinclair transportation represents 47% of HEP's outstanding LP units at a market value of approximately $1.2 billion as of last night's close. Let's go through some guidance items. With respect to capital spending for full year 2023, we have lowered our total capital guidance range from $940 million to $1.15 billion to a new range of $900 million to $1.06 billion. We now expect to spend between $250 million to $270 million in refining, $25 million to $30 million in renewables, $35 million to $45 million in lubricants and specialty products, $20 million to $30 million in marketing and $60 million in corporate, and $500 million to $585 million for turnaround and catalyst. At HEP, we expect to spend between $25 million to $30 million in maintenance and $5 million to $10 million in expansion and joint venture investments. For the third quarter of 2023, we expect to run between 585,000 to 615,000 barrels per day of crude oil in our refining segment, and we have planned turnarounds scheduled at our Casper and Tulsa refineries during the period.

Thanks, Atanas. HEP posted another solid quarter of earnings, driven primarily by strong crude and product volumes in the Rockies region. HEP's second quarter 2023 net income attributable to Holly Energy Partners was $50 million compared to $57 million in the second quarter of 2022. The year-over-year decrease was primarily attributable to higher net interest expense. HEP's second quarter 2023 adjusted EBITDA was $103 million compared to $104 million in the same period last year. The reconciliation table reflecting these adjustments can be found in HEP's press release. HEP generated distributable cash flow of $73 million, and we announced a second quarter distribution of $0.35 per LP unit, which is payable on August 11 to unitholders of record as of July 31, 2023. Capital expenditures during the second quarter were approximately $9 million, including $6 million in maintenance, $2 million of reimbursable, and $1 million of expansion CapEx. We ended the second quarter with approximately $600 million in total liquidity, comprised of cash plus availability under our $1.2 billion revolving credit facility. We are now ready to turn the call over to Andre for any questions.

Thank you. The floor is now open for questions. We'll take our first question from Manav Gupta at UBS.

We are consistently seeing an improvement in your capture rates, both regions, which is very impressive despite the turnarounds. Help us understand some of the things you have been doing to attain this improvement in capture, which we are seeing over the last 6 to 9 months.

Thanks, Manav for your question. Let me ask Steve to comment on capture rates too.

Manav, thanks for the question. I think it's a combination of everything. It's really around optimization, making sure that we're making the right decisions to put the right molecule in the right market. From a margin perspective, we've had a bit of support. We look to optimize our laid-in crude structure and take advantage of some of the differentials that we’ve seen. From an operations perspective, it's about running full, getting the molecules produced and getting them out to the right markets to achieve the capture where we want it to be. So it's kind of a combination of everything.

Perfect. I have a quick follow-up. You have a West Coast asset. It can run heavy crude. I want to understand a little bit what TMX will be a tailwind for your overall crude slate as it relates to the Puget Sound refinery?

Yes. Again, this is Steve. As far as the TMX is concerned, we think when it comes on, it will tighten the differential in the short term, but a few uncertainties include the ability of the dock to handle the capacity to get it off over the water and then the timing of production, in terms of outrunning the capacity. So we think somewhere in the next 3 to 5 years could be when a constraint occurs again; the differentials will widen.

But as it relates to Puget Sound, that would be a benefit, right, if that crude lands on the West Coast?

Yes, we believe that's the case.

We think that will be helpful, Manav. This is Tim. Because it will also put some pressure on ANS crude as well, as they compete for other runs on the West Coast because our fusion refinery can run both crudes and it can operate 100% ANS or 100% heavy crude. We believe it gives us an advantage to be able to run those crudes post TMX startup.

Thank you for the detail and congrats on a very strong quarter.

We'll take our next question from Neil Mehta at Goldman Sachs.

Congrats on a good quarter here. I want to kick off on return of capital, a lot of moving pieces around share repurchases and the agreement with RH. So maybe you could spend some time walking the investment community through what's been announced here over the last couple of weeks as it relates to RH and then talk about your capacity to continue to return capital to shareholders.

Great. I'll ask, Atanas to start off, and then I can come in at the end and share some more insights.

Neil, thanks for the question. Well, first of all, our business continues to operate at and above expectation and is generating robust cash flows. With that, our commitment to returning capital to our shareholders remains a priority and focus. As you can see year-to-date, we've repurchased, with this latest announcement, 13.1 million shares. With respect to capital return to shareholders, we've said that our target is a 50% payout ratio. We have consistently exceeded that, and our target remains to be at or above that. With respect to the family, we can speak for the family, but we have a constructive relationship. You can see there, you've all noticed the 13D disclosures where they've indicated their intent to continue to transact directly with us, and we're very much open and keen on continuing to repurchase shares. With the HEP transaction being under discussion, we have been at times locked out of the market, but we continue to look for those windows, and this most recent transaction is indicative of our desire and commitment to continue with our shareholder return strategy. We expect to be on that trajectory through the end of the year.

Yes. And I'll just throw in a few more comments, Neil. We've said in the past a few conference calls that we can't speak for the family. So the family decided to speak for themselves, and that's why they put the 13D out there. They wanted people to understand that they intend to transact directly with the company going forward. And then they also intend to maintain at least one board seat for the foreseeable future. So I think that provides some clarity in terms of what their intentions are, and they wanted to ensure that was clear to the rest of the public. We said all along that in the middle of these HEP discussions, our window to buy back shares was going to be very restricted during these discussions. But as Atanas mentioned, we want to reiterate our commitment to shareholder returns. We found an opportunity between the two parties, and we took advantage of it and executed. We'll continue to look for more opportunities as the year progresses.

The follow-up was it was a very heavy first half of the year from a turnaround perspective, and a lot has been made of that. As you look through the back half, maybe you can remind us again of the maintenance schedule and how we should think about the volume trajectory through the balance of the year?

This is Valerie. We have two turnarounds in the back half of the year at our Casper facility and then at Tulsa towards the back half of September and into the fourth quarter. Those impacts are listed and accounted for in our crude guidance. Outside of those planned turnarounds, we anticipate the rest of the year will be a clean year with no additional outages.

Yes, Neil. I'll just chime in. Valerie and her team have done a fantastic job of executing the heavy turnaround period that we had in the first half of the year. We knew all along that it was going to be a heavy load. We're happy to report, as we mentioned earlier, that overall, the turnarounds were completed on schedule and on budget. In fact, that's the reason Atanas mentioned the lowering of capital guidance for the rest of the year is because of the way those turnarounds have been executed this year.

We'll go next to Paul Cheng at Scotiabank.

On the refining reliability improvement long term, I think you've said in the past it's a 5- to 6-year process, and you are about 2 to 3 into that. With the turnaround that we are seeing, are we still expecting another 2 or 3 years? Or do you think within the next maybe 12 to 18 months, you will be largely complete? Once you complete this process, what is the more sustainable rebound in terms of reliability, and what is the target throughput per year that we could be looking for? Also, what kind of cost structure under those circumstances will be?

Paul, this is Tim. You're right. We are very pleased with how the turnarounds went. We're pleased with how our capture is performing, as discussed earlier on this call. But this is a long process, right? And we've told all along, it's really measured by turnaround cycles, not by years. We've been working over the last 2 or 3 years to improve our turnaround execution and the performance this year just continues that effort. We talk in terms of turnaround cycles. So with a little bit more color, let me ask Valerie to elaborate.

Yes. Our focus on our turnarounds has been strongly aimed at reducing operating risk and improving our utility reliability. The more resilient we can make our utilities and infrastructure, and remove aging equipment, the better our reliability will look. We've taken a big step with these activities this year. We'll continue to develop our turnaround strategies in the coming years to support sustained reliability improvements year over year.

And Paul, one last thing. You asked for our target throughput. In our mid-cycle roll-up, we stated 640,000 barrels a day as our expected basis. Of course, we hope that as we continue to implement the strategies Valerie mentioned, we may achieve above mid-cycle conditions. But for now, I would use 640,000 barrels a day as a starting point.

And what kind of unit cost will we be talking about?

I'll let Valerie address the unit costs.

I assume natural gas prices are somewhere in the $3 to $3.50 range. So if you could provide some insight on the target unit costs once you complete the reliability improvement.

Yes. As we improve reliability, our costs will continue to come down. A significant part of any organization like ours relates to how well we execute and how reliably our facilities operate. So as we improve in that regard, our costs will decrease. We believe directionally it will head down, and we're estimating somewhere between $6 and $6.50 over time.

You're starting to see some benefits from some of the integration work and reliability work already with operating costs this quarter down, which is encouraging, but obviously, we have more work to do.

Our next question comes from Ryan Todd at Piper Sandler.

Great. I was wondering if you could provide a little more color in terms of where you are on normalizing R&D operations. I mean it's sequentially improved, but can you walk us through kind of the pathway where you think you are in terms of throughput utilization and normalizing that up to a full run rate?

This is Atanas. With respect to utilization and where we are, our goal has not changed. We are looking to achieve what we call normalized run rates, which is between 75% and 80% by the end of this year. As you may recall, we had the turnarounds of two of our co-located facilities, which impacted utilization rates. But conversely, that also gave us an opportunity to look under the hood and make improvements to our equipment. One of the positive achievements you're already seeing is the decreasing OpEx per gallon, which declined 29% quarter-over-quarter. Additionally, the improvements we've made to catalysts have been significant. Our focus has been on process optimization, yield improvement, and Cheyenne has been a great example of those efforts. Our goal has not changed, and we remain committed to this target.

Yes, I'll just add to that. I think we are excited about what we're seeing in the underlying capability of this business. As Atanas mentioned, we have demonstrated both yield improvement and reduced costs. We also ran well at Cheyenne with 99% yield and 89% utilization, which we believe is a good sign of our ability to run at productive levels and choose to run the economic profiles that we see fit. So we're excited about our current performance and expect to normalize by the year's end.

Great. Perfect. And then maybe any update just in terms of what you're seeing in the lubes business and the backdrop there, both as we're partway through the third quarter, in terms of what you're seeing on rack-back and rack-forward dynamics, as well as your continued thought process regarding the long-term suitability of that business within the portfolio?

Sure. This is Atanas. At a high level, with respect to business performance, we are seeing consistently strong performance. However, volumes have softened a little due to recessionary fears around our specialty market. On the flip side, one of the positives is our ability to maintain margins and continue to improve our product mix, resulting in strong business performance. Year-to-date, excluding FIFO, we are $12 million better on an apples-to-apples basis compared to last year. Our ongoing goal is to shift more of our base oil volumes into finished and specialty. I want to remind you again, we look at our businesses holistically.

Yes. Thanks for the question. It's Matt Joyce here. More specifically, over the past quarter, our team has done a tremendous job focusing on streamlining our supply chain and manufacturing certain products for end users. We are also working to achieve better visibility into our costs through the implementation of new digital tools for inventory management and planning. These tools will start to show benefits in the second half of the year. In quarter three and quarter four, we aim to achieve operational efficiencies through the right mix of products. We are fortunate to have a balanced portfolio of products in sustainable markets, allowing us to maintain our value proposition to the marketplace. Despite headwinds, we are effectively managing our margins and ensuring our operations are in order as we target the right customers to grow with in the future.

Yes, I’m still here. Can you hear me?

We can now.

Let's move on to the next question.

Okay. We're going to go to Jason Gabelman at TD Cowen.

The first one I wanted to ask was about the niche markets that you serve. I believe both the Rockies and Southwest saw some margin strength in the second quarter. I was hoping you could talk about what drove that and if you're seeing that continue into the third quarter, particularly given that some regional outages seem to be reaching their conclusion? I have a follow-up.

Yes Jason, this is Steve. I'll take that one. Those markets that we serve, as you know, there isn't a ton of liquidity, and so supply and demand balances can move pretty quickly. I think what we saw is the strength of the crack in those markets associated with low inventories in the peak of the driving season, which allowed us to take advantage of that. Looking further out, we see some cracks coming off, and diesel normalizing to a more fundamental position in the back half of the year. However, we believe we have a competitive advantage to take those cracks and drive them to the bottom line, and we will aim to do that through the rest of the year.

Yes. And Jason, this is Tim. I'd just chime in to say, we've always stated, especially since the Sinclair combination, that the strength of our portfolio in refining is the markets we serve. These provide both growing demographics and desirable crude, along with product premiums over the Gulf Coast. Everything you're witnessing this year is indicative of why we believe we have a competitive advantage in our portfolio.

Got it. And my follow-up is on M&A and refining. It seems like there are several assets available for purchase. DINO has demonstrated a desire to consolidate the refining space in the past couple of years. I was wondering if you could share your updated thoughts on how you're viewing refining M&A. Are there any specific regions you're more interested in or types of assets? Do you feel that your refining portfolio size is in a good place right now?

Yes, thanks for the question. We believe in liquid transportation fuels, we would not have done a transaction with the PME refinery or with Sinclair if we did not believe there were years, not decades left for the right refining assets, which we believe we've acquired. Having said that, we've just gone through a very successful growth period. In 2022, we acquired the Puget Sound asset, and of course, in 2023, we are working on potential discussions with HEP. We've had a robust run of successful growth, and hopefully, we can continue this trend. Right now, as I mentioned on the last call, our focus is on the same priorities we've established since I started my role. We need to concentrate on EHS and reliability. There is a lot of room for improvement in those areas. I would encourage our teams to focus on operational enhancements and throughput capture instead of pursuing any inorganic opportunities at this moment. The current market conditions might not be advantageous for acquisitions, which suits us just fine because we have plenty of work to do organically.

Our next question comes from Roger Read at Wells Fargo.

Thanks. Good morning. I’m sorry for missing part of this. We've had a hectic morning with earnings. I just wanted to circle back to the lubricating oil side of the business regarding operations. How is that shaping up? Seasonally, the third quarter is usually strong, but we've seen numerous fluctuations in base oil prices and supply chain issues hitting the sector. Are we finally entering a normal period, or are we still in a complex environment?

Yes Roger, it's Matt Joyce here. Thanks for the question. We are looking forward to a bit more normalized supply chain. The lubricants and specialties industry has faced considerable upheaval with additives and brokered supply chains impacting operations. We've also been navigating the aftermath of COVID-related disruptions. Currently, there is cautious optimism for some recovery in demand. That said, we are observing potential supply issues around base oils that might impact the business. However, we are in a good position to address those needs. It’s indisputable that base oil cracks have shrunk, and we’ve seen crude costs rise over recent weeks and months. We anticipate increases in both base oils and finished products as we adjust to recovering cost inputs in this business. Overall, we expect above mid-cycle performance but will monitor the demand landscape closely, as it has softened despite our diligent attempts to manage margins and streamline operations over the past quarters.

Yes. And Roger, I’ll echo what Matt has said. We've now proven above mid-cycle performance consistently for the past 2.5 years, which reflects the team's efforts and the integration work they are implementing. Despite shrinking cracks, our business continues to thrive, demonstrating structural improvements made by Matt and his team.

That's comforting to hear. I apologize if this question has already been addressed, but regarding the renewable diesel operations, we’ve seen competitors starting to tighten feedstock availability. While your results have sequentially improved, could you discuss your feedstock options as we approach the second half of the year, and how the PTU is performing in relation to this?

Yes, this is Steve. You hit the nail on the head. We are witnessing some tightening in the overall margin structure in the back half of the year, influenced by feedstock availability. Additionally, the RVO standard and LCFS supply on the market are affecting margins. We are in the process of optimizing our feedstock usage. We are running a good portion of soy, but we are also exploring low CI feedstocks to take advantage of margin improvements in the latter half of the year. The PTU is performing excellently, and we see it as a competitive edge for integrating our operations.

And one follow-up on that. Is your hydrogen production meeting your expectations across the RD facilities?

Yes. As far as hydrogen consumption and production goes, both of our hydrogen plants were down this quarter due to scheduled turnarounds, which did impact our hydrogen availability. Unfortunately, that affected our margins in the earlier months of this quarter. However, this was part of our planned maintenance activities that needed to be done. Overall, we are confident in our hydrogen supply to operate these plants efficiently and generate the products we decide to bring to market.

And this is Atanas. I also want to add that one of the benefits of the co-located turnarounds is that, particularly with our reformer unit, executing those turnarounds has improved reliability and supply of hydrogen, which has been critical for our operations.

We'll take a follow-up from Paul Cheng at Scotiabank.

Two questions, please. First, regarding hydrogen availability, Tim had mentioned that to run closer to capacity, hydrogen was a bottleneck. You indicated that you were working to improve that availability, potentially through 2024. Could you give us an update on where we are on that?

Yes. Paul, this is Tim. Let me address some of the short-term questions and then ask Valerie to provide some insights on the longer-term plans. We believe that with the turnarounds we've just completed in the second quarter and some short-term hydrogen optimization efforts by Valerie and her team, we can achieve normalized run rates here in the second half of the year. When we refer to normalized run rates, we mean 75% to 80% utilization, as you previously mentioned. We believe we can reach that level using our current facilities. In the long term, we are continually exploring ways to expand hydrogen production capability. I’ll have Valerie provide further detail.

On the hydrogen front, as mentioned, we have made significant improvements in our co-located sites and reliability is improving. Moreover, our hydrogen generation complex is undergoing several low-capital operational enhancements that will begin to take effect in the second half of the year, ultimately helping to boost hydrogen capacity. We are also assessing future developments to maintain and improve this capability.

So it sounds like, within the investments made, we shouldn't assume the LD operation will suffer from hydrogen availability at the end of this year, potentially above 75%, 80%?

I believe that is our target for by the end of this year, Paul. Next year, as we've identified, we will have implemented additional improvements. It’s early to provide guidance for next year's expectations, but certainly, by the end of this year, we should be close to that utilization target.

Tim, one of your competitors has improved their profitability due to substantial commercial operations. Do you feel that you have the right commercial culture, organization, and personnel for operational excellence?

Paul, it’s a great question. We know several competitors are talking about their commercial capabilities. We have a similar approach here at HF Sinclair to enhance that. While our peers may be discussing trading, we are not pursuing that avenue at this moment. I’ll allow Steve to elaborate because one of his primary roles has been to assess and improve our overall commercial capability.

Yes. This is early days for me, but after being here for a few months, I can say that we have a group of highly skilled and capable commercial personnel, gathered with considerable expertise in optimization and refining across our assets and target markets. We aim to maximize value through enhanced digital tools that will enable us to improve operational integration. This represents an exciting opportunity for us to unlock the full value of HF Sinclair as we've assembled these assets over the years.

Yes. Firstly, our priority has been focused on improving our base EHS and reliability, with the next priority being integrating and optimizing our new portfolio of assets in commercial.

And that does conclude the question-and-answer session. I will turn the floor back over to Tim Go for any closing remarks.

Thank you, everyone. Our strong second quarter results are a testament to the strength of our business and the hard work of our employees to execute our strategies and deliver these results. We believe our refining, marketing, and lubricants businesses are all performing above our mid-cycle estimates. With the majority of our planned turnaround work behind us, we believe we are well-positioned to capture the margins available to us for the remainder of the year. Our priorities remain the same: to improve our base EHS and reliability; to integrate and optimize our new portfolio of assets; and to return excess cash to our shareholders. Thank you for joining our call. Have a great day.

Thank you. This does conclude today's teleconference. Please disconnect your lines at this time, and have a wonderful day.