HF Sinclair Corporation (NYSE:DINO) Q3 2023 Earnings Call Transcript

Steve Ledbetter: No, I think you’re right. I mean we’re peeling this apart to make sure that we can make it the most profitable business it can be. In our current configuration, we like to remind people that two of our facilities are co-located. And so hydrogen availability is a keen focus. But beyond that we’ve started to pull levers, as Atanas mentioned, in terms of advantaged low CI feedstock as part of that driving pathways are very important to get that full value and we’re hyper focused on that, catalyst optimization, OpEx levers in terms of waste and then really getting our molecules integrated across our value chain is another aspect that we see a lot of value coming forward. So we’ve demonstrated that in Q3 we can be profitable with not hitting our normalized run rate. We still see the path to getting there by the end of the year. And all of those focus areas we believe and expect to have a profitable Renewables business next year.

Tim Go: And Roger, I would just draw an analogy to the lubes business. We spent a lot of resources and a lot of effort to turn that business around, I think over the last two and half years. We have been at well above mid cycle performance for our lubes business. That same type of effort, that same type of focus is what we have got pouring into our renewable diesel business right now. And we believe that we will be successful in getting that business turned around and performing the way we want just like we have our lubes business performing the way we want right now.

Operator: Your next question comes from the line of Jason Gabelman from TD Cowen.

Jason Gabelman: I wanted to first hit on the CAT, the financial framework as you get close to the closing of the HEP transaction. It looks like on a consolidated basis, you are holding about $1 billion of of net debt. Is that the right number for the company to hold on a consolidated basis? And then how do you think about buybacks as you are able to get back into the market following the HEP deal close?

Atanas Atanasov: The way we think with respect to our capital structure and debt in particular is in terms of net leverage. And the net leverage target that we have publicly stated has been one time net leverage. As you can see, we are far below that right now and we are very pleased. Given where capital structure is today, our first and foremost priority is shareholder return, both in terms of buybacks and dividends and we will continue with that mindset. With respect to anything around the debt, I think we are very much — we are very pleased with where our debt is and shareholder return is our priority.

Jason Gabelman: And then my other question is just looking at the indicators that you posted for October. It seems like the premiums in the West relative to Mid-Con have come in after a pretty good run of pricing premiums. How much of that is seasonally driven? And is there any structural components as maybe there were a couple of assets, I guess, in the Rockies in particular offline for the better part of the past couple of years and now they’re back? If you could answer that, that would be great. And just one more, a clarification, I don’t actually think you provided the working capital number in terms of cash inflow. If you could provide that, that would be great. Thanks.

Atanas Atanasov: Let’s start with the last part as refresher. In terms of working capital, we saw a tailwind to the tune of $500 million for the third quarter.

Steve Ledbetter: And then just to answer the structure margin environment on the West Coast, we don’t see anything necessarily structurally other than a good portion of diesel, particularly RD coming to those markets. And therefore, we think there will be length of diesel and to be honest an opportunity in gas as well as jet. But we don’t think there is anything materially structural and we think that what you are seeing right now is seasonal normal patterns.