Welcome to HF Sinclair Corporation's first quarter 2025 conference call and webcast. Hosting the call today is Tim Goh, Chief Executive Officer of HF Sinclair. He is joined by Atanas Atanasov, Chief Financial Officer, Steve Ledbetter, AVP of Commercial, Valerie Pompa, AVP of Operations, and Matt Joyce, SVP of Lubricants and Specialties. At this time, all participants have been placed in a listen-only mode and the floor will be open for your questions following the presentation. If you would like to ask a question at this time, please press star 1 on your touchstone phone. If at any point your question has been answered, you may remove yourself from the queue by pressing the pound key. If you should require operator assistance please press star zero we ask that you please limit yourself to one question and one follow-up additionally we ask that you pick up your handset to allow optimal sound quality please note that this conference is being recorded it is now my pleasure to turn the floor over to craig berry vice president investor relations craig you may begin Thank you, Kate.

Good morning, everyone, and welcome to H.F. Sinclair Corporation's first quarter 2025 earnings call. This morning, we issued a press release announcing results for the quarter ending March 31, 2025. If you would like a copy of the earnings press release, you may find it on our website at hfsinclair.com. Before we proceed with remarks, please note the Safe Harbor Disclosure Statement in today's press release. In summary, it says The 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 security laws. 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 re-reading of the transcript. And with that, I'll turn the call over to Tim.

Good morning, everyone. For the first quarter, we delivered strong results in our marketing, midstream, and lubricants and specialties businesses, and saw encouraging sequential improvement in refining. I am proud of our employees and their ability to navigate the extreme volatility and uncertainty around tariffs, producers' tax credits, and other market headwinds. We remain focused on the things in our control, such as commercial and operational excellence, turnaround execution, and capital discipline. Now let me cover our segment highlights. In refining for the first quarter, we delivered sequential quarter improvements in capture and operating expenses, despite a tough economic environment across the period. We began the planned turnaround work at our Tulsa refinery, which was completed on schedule and on budget, and is now operating at planned rates. In renewables for the first quarter, we focused on lowering total operating expenses and optimizing low CI feedstocks to help mitigate the economic impacts surrounding the uncertainty of the producer's tax credit. At this time, we have not taken any credit for PTC in our financials. We estimate that we would have been close to break even EBITDA for the quarter with the inclusion of PTC. Our marketing segment delivered a record quarter of $27 million in EBITDA and achieved our highest quarterly adjusted gross margin of $0.12 per gallon. We also grew our branded supplied stores by a net of 37 sites and have a backlog of over 170 additional supplied branded sites signed and targeted to bring online by ERAN. In lubricants and specialties we reported another strong quarter of 85 million dollars in EBITDA supported by our product mix optimization efforts focused on sales of high margin specialty and finished products. we are in the process of completing the planned turnaround work at our mississauga facility and expect to be back to planned operations within the week in our midstream business we delivered a record quarter generating 119 million dollars in adjusted ebitda as we benefited from higher pipeline revenues in the period today we announced our board of directors declared a regular quarterly dividend of 50 cents per share payable on June 3rd, 2025 to holders of record on May 15th, 2025. Looking forward, we are encouraged by the recent strength of refining margins as we head into the summer driving season and are focused on the execution of our strategic priorities to capture value across all of our business segments. With that, let me turn the call over that.

Thank you, Tim, and good morning, everyone. Let's begin by reviewing HF Sinclair's financial highlights. Today, we reported first quarter net loss attributable to HF Sinclair shareholders of $4 million, or negative $0.02 per diluted share. These results reflect special items that collectively decrease net loss by $46 million. Excluding these items, adjusted net loss for the first quarter was 50 million or negative 27 cents for diluted share compared to adjusted net income of 142 million or 71 cents for diluted share for the same period in 2024 adjusted EBITDA for the first quarter was 201 million compared to 399 million in the first quarter of 2024 in our refining segments first quarter adjusted EBITDA was negative 8 million compared to 209 million in the first quarter of 2024. This decrease was principally driven by lower adjusted refinery gross margins in both the west and midcon regions and lower refined product sales volumes. Prudhoe charge averaged 606,000 barrels per day for the first quarter compared to 605,000 barrels per day for the first quarter of 2024. In our renewable segment we reported adjusted EBITDA of negative 17 million for the first quarter compared to negative 18 million for the first quarter of 2024. Our first quarter 2025 results were impacted by lower sales volumes and the absence of benefits from the producer's tax credit. Total sales volumes were 44 million gallons for the first quarter of 2025 compared to 61 million gallons for the first quarter of 2024. Our marketing segment reported EBITDA of $27 million for the first quarter compared to $15 million for the first quarter of 2024. This increase was primarily driven by improved execution of our business and high grading the portfolio in the first quarter of 2025. Our lubricants and specialty segment reported EBITDA of $85 million for the first quarter compared to EBITDA of $87 million for the first quarter of 2024. Our midstream segment reported adjusted EBITDA of $119 million in the first quarter compared to $110 million in the first quarter of last year. This increase was primarily driven by higher pipeline revenues in the first quarter of 2025. Net cash used for operations totaled $89 million in the first quarter, which included $105 million of turnaround spent. HF Sinclair's capital expenditure totaled $86 million for the first quarter of 2025. As of March 31st, 2025, HF Sinclair's cash balance was $547 million. As of March 31st, we have $2.7 billion of debt outstanding with a debt-to-cap ratio of 23% and net debt-to-cap ratio of 18%. During the quarter, we executed a successful refinancing transaction. HF Sinclair issued an aggregate principal amount of $1.4 billion of senior notes consisting of $650 million of 5.75% senior notes due 2031 and $750 million of six and a quarter senior notes due 2035. We used net proceeds from the notes to repay all $350 million in outstanding borrowings under the HEP credit facility and to fund approximately $850 million in tenders and redemptions of our 2026 senior notes and $150 million in tenders of our 2027 senior notes. This extended our debt maturity profile while lowering our weighted average interest expense. On April 3rd, 2025, we entered into a new $2 billion HF Sinclair credit facility and terminated the existing HF Sinclair and HEP credit facilities. As of April 30th, 2025, our new five-year credit facility was undrawn. Let's go through some guidance items. With respect to capital spending for full year 2025, we still expect to spend approximately $775 million in sustaining capital, including turnaround and catalysts. This is down $25 million from 2024 and includes a non-refining lubricants and specialties turnaround in the first quarter of 2025, in the first half of 2025. In addition, we expect to spend $100 million in growth capital investments across our business segments. For the second quarter of 2025, we expect to run between 600 and 630,000 barrels per day of crude oil in our refining segment, which reflects the ongoing plant turnaround at our Tulsa refinery and the plant turnaround at our Parco refinery during the period. We're now ready to take some questions from the audience and I'll turn it over to the operator.

The floor is now open for questions. At this time, if you have questions or comments, please press star 1 on your touchstone phone. We ask that you please limit to one question and one follow-up if you had additional questions we welcome you to rejoin the queue if at any if at any point your question has been answered you may remove yourself from the queue by pressing the pound key thank you our first question is coming from man of gupta with ubs please go ahead uh good morning guys a very strong result considering the macro I actually just wanted to start on the midstream side.

I think you moved some assets from the midstream HEP into refining, and yet what we are seeing is probably one of the strongest midstream quarters that you have delivered, close to almost $120 million in EBITDA. So help us understand what's driving the growth in the midstream business and your outlook for continuing to grow this business as we move ahead.

Hey, Manav, this is Steve. We're very excited about the midstream business, and we think that it's really not fully optimized yet. What drove the performance in Q1 was predominantly increased focus on our products and crude pipelines and the revenue generation from our tariff situation there. We believe that this is both an opportunity to grow the integrated value as well as a third-party situation. So it's a focus area and helps us, what we like to say, unlock the integrated value chain between refining, midstream, and marketing moving forward.

Yeah, and then this is Tim. I would just chime in and say, you know, we've said all along that we believed that bringing in the HEP business completely into our portfolio was the right thing to do. it was going to break down you know some some internal hurdles and allow us to optimize the business and as steve and his team are doing they're uh they're finding those opportunities and that's showing up in the bottom line perfect my quick follow-up here is lubes also very resilient um help us understand the volatility in this business looks like it's earnings are a lot more stable uh than the refining so in the near term given what we're seeing in the macro

your confidence level of earnings in your loops business and again uh i think you had identified and said you know we're looking to grow this business also so if you could help us understand that also sure manav hey it's matt joyce here you know manav we've talked about it on the past uh several earnings calls, we continue to execute our strategy really well.

We're doubling down on our growth in the U.S. We have selected end uses that we believe have higher growth rates, businesses that tend to depend on us, and where we have great solutions that can win. You know, we're outperforming the markets in mining, food grade lubricants, thermal management, pharmaceutical and personal care, just to kind of give you a sense of those high value markets. those have the ability to weather a lot of these storms and to be continuous and consistent performing markets and we'll go through those to be a steady performance on the lube side we also enjoyed a really good mix of products this past quarter we had a little bit lower base oil sales so you saw that forward integration strategy that we've talked about getting more of our base oils placed and finished in specialty applications you're seeing that pay dividends here in these results?

Yeah, as far as, Manav, your second question around bolt-on opportunities, I mean, what we're looking for, obviously what Matt has talked about, is our primary focus on organic growth. But clearly there are some opportunities that are out there that would allow us to continue or accelerate that growth strategy. Nothing large, but it's small that would fit nicely within our portfolio, and we're continuing to look at those. There's obviously nothing to talk about today.

Thank you, sir.

Your next question comes from the line of Fry and Todd with Piper Sandler. Please go Thanks.

Maybe on the refining side, can you talk about what you're seeing in terms of demand across your markets? Product sales were down across your network, I think year on year.

I'm just curious, is that a reflection of demand or something else, and maybe more more broadly what are you seeing across your markets yeah ryan this is steve just across our markets we're seeing demand relatively flat we like to say for gas and and distillate what we saw in the first quarter was was positive the impact on our sales was mainly driven by turnaround aspects the distillate demand being up we think is generated predominantly by a colder winter in pad one, as well as reduced RD and BD product associated with the new 45Z regulation. That drove about 100,000 barrels a day off the market, which was supplemented by petroleum demand. So we're pretty excited about the demand patterns and what we're seeing and how it's showing up in the cracks moving into the driving season, particularly across our regions.

That's great. And then maybe on the renewable diesel side, can you walk through – I know first quarter was a very noisy quarter with kind of the shift in regulatory regime. Can you walk through the impacts of how that impacted your business? How are you managing fee stock optimization, whether you were able to book any credits during the first quarter, and if you think you'll be able to book any during the second quarter or maybe any possible tailwinds as we look forward here?

Yeah, so we did not recognize any tax credit for PTC in the first quarter, just given the uncertainty of the regulation. As you know, there was changing regulations throughout the quarter, and that caused us to run very carefully and run at reduced rates. Had we been able to recognize any of the tax credit But under the current proposed regulations, we would have been close to break even for EBITDA from our operations within the quarter. You know, we think at very least something is going to have to give here in terms of RVO and RIN credits to go, you know, dislocate more than the traditional BOHO spread. you're starting to see some of that support. Clarity is really going to help, but I was very proud of the team to be able to navigate the uncertainty and get to a EBITDA break even if we had recognized PTC. Longer term, we think some of this regulation is actually good for an overall tighter supply and demand balance, and we position ourselves to go capture that tailwind through the efforts that we've made over the past nine to 12 months.

Yeah, and Ryan, this is Tim. What I would just say is, you know, So all along, we've said that our goal is to have our renewable diesel business be break even to slightly positive in these bottom-of-market conditions, and with the PTC coming on at a reduced credit rate than the BTC was previously, I think the team has stepped up very nicely to continue to improve the foundation of the business to where they are, as we mentioned on the prepared remarks, still running at a basically break-even pace, even with the lower PTC credits that we'll hopefully eventually be able to book.

Great.

Your next question comes from the line of Doug Leggett with Wolf Research. Please go ahead.

Good morning, team. This is actually Carlos on for Doug. I think that it's, and we as a team think that it's valid to recognize, first of all, That was a very solid operational quarter and an extremely tough tape. But that being said, we'd like to take the prior question a step further and ask you guys, at what point do you consider mouth-balling R&D facilities versus running the risk of negative cash and also acknowledging that the outlook for rents is unclear?

Yeah, it's a good question. We ask ourselves that all the time and have our conversations at the boardroom as well on those kind of questions. We believe we have competitive advantage over the majority of the industry and you see some of that happening even during this first quarter. A lot of biodiesel plants have shut down, even some renewable diesel plants have shut down just as you mentioned so as long as we and the reason we keep talking about we can be break either slightly positive in these bottom of cycle conditions is we believe that as long as we can do that and we'll manage the cash as a result of that but as long as we can do that on a on a day in and day out basis that we believe we can continue to improve the business and be ready for when the RIN prices and LCFS prices recover and come back to what we believe is more of a long-term level. So we think right now we're at bottom of the cycle conditions, but the conditions will improve and our businesses will be profitable at that point.

Appreciate the answer, Tim. As a follow-up, we'd like to ask about LPG and your overall midstream business because I think we've all grown accustomed to have and experienced volatility on the oil and refining market as a whole, but LPG has been certainly a topic of the day lately with the ongoing talks with Terry. So, wondering if you can perhaps walk us through if there's any potential opportunity for you, given the dislocation in the market and the uncertainty around that, or if you think that there's anything noteworthy for investors to know regarding that specific Yeah, this is Steve.

I'll take that one. You know, we don't have a concentration in in our midstream space around lpg it's not just part of our core business we don't know that that's an area we go invest in over integrating and more concentration of getting crude and light products molecules on our system and taking full advantage of that having said that you know we always look at multiple opportunities and if there was something that was very accretive to the enterprise we would put it in our funnel and evaluate it at that at that time but at this point we don't have a lot of exposure or not using that as one of our growth platforms in the midstream space associated with lpgs thank you team appreciate it your next

question comes from the line of joe lids with morgan stanley please go ahead hey good morning tim and team thanks for taking my questions uh so i'm going to start on on refining we've had a couple strong weekly demand numbers for gasoline and inventories are pretty tight particularly on the west coast i know you've talked about the project that expands your ability to make car gasoline at Puget Sound. Is that online? And then could you also just talk to your leverage to the West Coast market, given the unplanned downtime recently, as well as the announced closure of two refineries upcoming?

Hey, Joe. I'll take that one, Steve. I'll answer the question in the order I think they were asked, and that was the project that we had mentioned around our ability to potentially get more involved in the CARB gas project. Those tanks will be coming online soon. Now, we will be staging them over the next couple of months to be able to make a decision whether we move unfinished products into the California market or we swell the volume pool and move gasoline there. But we're almost at the point where we'll have those ready for use in our portfolio. And given the headwinds that we see with the announced recent announcements as well as current unplanned events, we think that is a benefit not only to getting into California, but also tightening up the market in the Pacific Northwest relative to the overall pad five tightness. You know, we took advantage this quarter of moving more molecules and playing the arv between what was getting short and stronger demand and margin picture in Las Vegas. And we think that that is part of the advantage of our footprint, both in the midstream and our production throughout the Rockies. You know, we like to say we can move barrels out of the group into the front range and from the Rockies all the way up to the Pacific Northwest and down into southern Pad 5. We think that all bodes well for us moving forward, not only this year, but as it continues to play out over the next two years with the announced shuttering of various facilities. Yeah, and Joe, this is Tim.

I would just point out that the West Coast wasn't the only region that we saw strength in demand. I mean, the MidCon, the group itself, was strong. We entered the first quarter at pretty much highs on inventories, and we exited the first quarter at pretty much lows in the group. And I think that just bodes to the strength of the capacity that was offline during turnarounds and is really the – Great.

Thanks for that. And my follow-up is on marketing segment, which had a really strong quarter, particularly for 1Q, which is typically a weaker period seasonally. Can you talk to some of the drivers during the quarter, the repeatability of it, and then any change to the $75 million to $80 million annual EBITDA run rate that you've talked about in the past on that?

Yeah, this is Steve. We're very excited about the marketing business and the performance that we had in the first quarter record EBITDA, and that was largely driven by optimizing our underlying business. We're starting to see the results of high grading our portfolio, making sure that our brand standard is applied to the new sites that we're bringing on. And to be honest, calling some of the portfolio that doesn't make sense. But then also I would tell you getting the full value of the brand where we haven't done that in the past. And so strategically making moves and growing in the right markets is all playing out. And our underlying execution of our business is starting to yield results. As we look forward, we think that our run rate is still between $75 million and $85 million annually, and we see upward progression as we continue to go build out our network moving forward.

Yeah, and Joe, I would just say, you know, we haven't changed our guidance in terms of run rates, but obviously the first quarter results are very positive. We do think they're going to be sustainable, and so we'll update you guys as we continue to play that out. But we don't think there was an anomaly, if that's what you're asking, or any type of special items in the first quarter for marketing. The additional stores, I mean, we're up over 100 stores year over year versus where we were in the first quarter of last year. All that is driving the growth that you're seeing. We've talked about how the branded put for our barrels is our key strategy that we were focused on coming out of the Sinclair acquisition. And now you're really starting to see the results starting to play out on the bottom line. We still think there's a lot of opportunity to go. And we're driving towards that in terms of what you're going to see more stores. you're going to see higher volumes, and then you're going to see higher EBITDA coming out of our marketing segment.

That's great. Sounds like you all have a solid dimension in that segment. Thank you all for the time. I appreciate it.

Your next question comes from the line of Jason Gabelman with TD Cohen. Please go ahead.

Yeah. Hey, good morning. Thanks for taking my questions. The first one I wanted to ask is just the outlook for turnarounds on the year and wondering kind of what the cadence quarter to quarter. 1Q, you add some activity. 2Q, it seems like you have a bit more. Wondering if 2Q is kind of the peak turnaround quarter for the year, and then how that kind of informs your cash management strategy and potentially the ability and desire to buy back shares as they've weakened a bit here.

So, I'll take the first part. This is Valerie. Our turnaround performance continues to be a highlight for us. First quarter is the heavier quarter with our lubricants, Tulsa, and Parco turnarounds. We have one turnaround remaining for the year that will fall in the third quarter, and that's really the end of our annual or season for the year.

We directionally expect our turnarounds as we anticipate that those are going to continue to level out um as we move into 26 27 and beyond jason i'll take the your second question with respect to how this informs uh our our cash uh cash management strategy and uh and buybacks uh obviously this quarter with it with the turnarounds uh was a net cash draw for us uh As we progress into the balance of the year with a line of sight of better cracks, we believe that any excess cash flow that we generate, we should be able to return to our shareholders. And just to remind everyone, just with our dividend, our run rate now is 6%. So our strategy is to return any of that excess cash to our shareholders.

And Jason, this is Tim. Let me just add one more thing. You know, during Atnis' prepared remarks, he mentioned that our turnaround guidance is still unchanged for this year, and that's because our turnaround execution continues to go as planned. But Valerie mentioned that we have a lubes turnaround this year, which is what kept our overall turnaround spend at these levels. Next year, we won't have that additional lubes plant in our turnaround schedule. And as we talked about in the past, we are starting to get past the peak in terms of our catch-up capital required for turnarounds. And we are anticipating that the turnaround workload starting next year and the years after that will be significantly lower than what you've seen over the last couple of years in turnarounds.

Got it. That's a great color. Thanks. And then my follow-up is just on tariffs and the trade war as it relates to the lubes business. I'm a bit less familiar on the dynamics, so I was hoping you could just talk about if there's any tailwinds or headwinds from some of the trade limitations and tariffs that are being put in place as it relates to your lubricants business?

Yeah, thanks for the question. This is Matt Joyce. With regards specifically to the lubes piece on tariffs, we've been working to tariff-proof the business. And our business is largely 95-plus percent USMCA compliant with the materials that we bring in and out of the country, and we've been evaluating some of the production of our finished products and specialties and looking at ensuring that they're in the best supply chain locations to provide a solution to our customer bases. And as far as specific bond costs from either additive companies or other suppliers, we're monitoring that cost of goods very closely and taking any required action in the marketplace as a pass-through should we require it.

All right, great. Thanks for the answers.

Yeah, and Jason, just to make it clear, you know, we do have a facility up in Canada, and as Matt talked about, the team has done a great job of managing through the different tariff regulations. Most of our products actually do qualify for USMCA. We've done a great job of mapping that so that we can avoid that.

I will now turn the call back to Tim for closing remarks.

Thank you, Kate. Before we close, I want to emphasize that our first quarter performance represented improved financials quarter over quarter overall, and especially our refining, midstream, marketing, and lubes and specialty segments. Delivering these stronger results, despite all the challenging market conditions and headwinds we faced, is a proof point that our strategy is working. In addition, these results demonstrate the earnings power of our diversified portfolio. Looking ahead, our priorities remain the same to, one, improve our reliability, two, integrate and optimize our portfolio of assets, and three, return excess cash to shareholders. Thank you for joining our call and have a great day.

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