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HF Sinclair Corporation Reports Quarterly Results and Announces Increased Regular Cash Dividend

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  • Reported net income attributable to HF Sinclair stockholders of $160.0 million, or $0.90 per diluted share, and adjusted net income of $175.6 million, or $0.99 per diluted share, for the first quarter

  • Reported EBITDA of $359.8 million and Adjusted EBITDA of $376.7 million for the first quarter

  • Announced reinstatement and increase of regular quarterly dividend to $0.40 per share

  • Closed the acquisition of the Sinclair companies and established new parent company, HF Sinclair Corporation

  • Commenced production of renewable diesel at the Cheyenne, Wyoming renewable diesel facility and commenced operations at the Artesia, New Mexico pre-treatment unit

DALLAS, May 09, 2022--(BUSINESS WIRE)--HF Sinclair Corporation (NYSE:DINO) ("HF Sinclair" or the "Company") today reported first quarter net income attributable to HF Sinclair stockholders of $160.0 million, or $0.90 per diluted share, for the quarter ended March 31, 2022, compared to $148.2 million, or $0.90 per diluted share, for the quarter ended March 31, 2021.

The first quarter results reflect special items that collectively decreased net income by a total of $15.7 million. On a pre-tax basis, these items include acquisition integration costs of $25.0 million and decommissioning charges of $1.0 million related to the Cheyenne Refinery conversion to renewable diesel production, partially offset by a reduction in cost of goods sold by $8.6 million from lower of cost or market valuation. Excluding these items, net income for the current quarter was $175.6 million ($0.99 per diluted share) compared to net loss of $(85.3) million ($(0.53) per diluted share) for the first quarter of 2021, which excludes certain items that collectively increased net income by $233.5 million.

The HF Sinclair Board of Directors has declared the reinstatement of the regular quarterly dividend at an increased rate of $0.40 per share, compared to the first quarter 2021 dividend of $0.35 per share. The dividend is payable on June 2, 2022 to holders of record of common stock on May 23, 2022.

HF Sinclair’s CEO, Michael Jennings, commented, "The first quarter was transformational as we closed on the acquisition of the Sinclair companies, marking the new HF Sinclair, and made our first sales of renewable diesel from Cheyenne. Our combined, integrated platform delivered strong financial results led by the performance of our refining and lubricants segments. With the closing of the acquisitions of the Puget Sound refinery and Sinclair and our Renewables business approaching full operation, we are pleased to announce the first milestone in our capital return plan, an increased regular dividend of $0.40 per share. As we head into summer driving season, refining fundamentals are very favorable due to strong gasoline and diesel demand, coupled with low product inventories. We remain fully committed to our capital allocation strategy of returning $1 billion in cash to shareholders over the next twelve months."

Refining segment income before interest and income taxes was $113.1 million for the first quarter of 2022 compared to $45.7 million in the first quarter of 2021. The segment reported EBITDA of $207.7 million for the first quarter of 2022 compared to $133.8 million for the first quarter of 2021. This increase was driven by higher sales volumes from the Puget Sound refinery and Sinclair acquisitions as well as the impact of stronger product demand on gross margins. Consolidated refinery gross margin was $12.69 per produced barrel, a 59% increase compared to $8.00 for the first quarter of 2021 and crude oil charge averaged 525,080 barrels per day ("BPD") for the current quarter compared to 348,170 BPD for the first quarter of 2021.

Renewables segment loss before interest and income taxes was $(22.1) million for the first quarter of 2022 compared to $(13.2) million in the first quarter of 2021. The segment reported EBITDA of $(16.3) million for the first quarter of 2022 compared to $(12.8) million in the first quarter of 2021. Total sales volumes were 5 million gallons for the first quarter of 2022. The Cheyenne renewable diesel unit ("RDU") was mechanically complete in the fourth quarter of 2021 and fully operational in the first quarter of 2022, the pre-treatment unit ("PTU") at our Artesia, New Mexico facility was completed and fully operational in the first quarter of 2022 and the Artesia RDU is expected to be completed in the second quarter of 2022. Also, effective with the Sinclair acquisition that closed March 14, 2022, the Renewables segment includes the Sinclair RDU.

Marketing segment income before interest and income taxes was $5.3 million and reported EBITDA was $5.8 million for the first quarter of 2022. Total branded fuel sales volumes were 85 million gallons for the first quarter of 2022.

Lubricants and Specialty Products segment income before interest and income taxes was $124.7 million for the first quarter of 2022 compared to $67.0 million in the first quarter of 2021. The segment reported EBITDA of $145.3 million for the first quarter of 2022 compared to $87.1 million in the first quarter of 2021. This increase was driven by strong finished product demand and pricing initiatives that outpaced rising feedstock and energy costs.

Holly Energy Partners, L.P. ("HEP") reported EBITDA of $72.8 million for the first quarter of 2022 compared to $96.2 million in the first quarter of 2021.

For the first quarter of 2022, net cash provided by operations totaled $461.0 million. At March 31, 2022, the Company's cash and cash equivalents totaled $592.3 million, a $357.8 million increase over cash and cash equivalents of $234.4 million at December 31, 2021. Additionally, the Company's consolidated debt was $3,374.7 million. The Company’s debt, exclusive of HEP debt, which is nonrecourse to HF Sinclair, was $1,740.3 million at March 31, 2022.

The Company has scheduled a webcast conference call for today, May 9, 2022, at 8:30 AM Eastern Time to discuss first quarter financial results. This webcast may be accessed at https://events.q4inc.com/attendee/607702822. An audio archive of this webcast will be available using the above noted link through May 23, 2022.

HF Sinclair Corporation, headquartered in Dallas, Texas, is an independent energy company that produces and markets high-value light products such as gasoline, diesel fuel, jet fuel, renewable diesel and other specialty products. HF Sinclair owns and operates refineries located in Kansas, Oklahoma, New Mexico, Wyoming, Washington and Utah and markets its refined products principally in the Southwest U.S., the Rocky Mountains extending into the Pacific Northwest and in other neighboring Plains states. HF Sinclair supplies high-quality fuels to more than 1,300 Sinclair branded stations and licenses the use of the Sinclair brand at more than 300 additional locations throughout the country. In addition, subsidiaries of HF Sinclair produce and market base oils and other specialized lubricants in the U.S., Canada and the Netherlands, and export products to more than 80 countries. Through its subsidiaries, HF Sinclair produces renewable diesel at two of its facilities in Wyoming. HF Sinclair also owns a 47% limited partner interest and a non-economic general partner interest in Holly Energy Partners, L.P., a master limited partnership that provides petroleum product and crude oil transportation, terminalling, storage and throughput services to the petroleum industry, including HF Sinclair subsidiaries.

The following is a "safe harbor" statement under the Private Securities Litigation Reform Act of 1995: The statements in this press release relating to matters that are not historical facts are "forward-looking statements" based on management’s beliefs and assumptions using currently available information and expectations as of the date hereof, are not guarantees of future performance and involve certain risks and uncertainties, including those contained in our filings with the Securities and Exchange Commission (the "SEC"). Forward-looking statements use words such as "anticipate," "project," "will," "expect," "plan," "goal," "forecast," "strategy," "intend," "should," "would," "could," "believe," "may," and similar expressions and statements regarding our plans and objectives for future operations. Although we believe that the expectations reflected in these forward-looking statements are reasonable, we cannot assure you that our expectations will prove correct. Therefore, actual outcomes and results could materially differ from what is expressed, implied or forecast in such statements. Any differences could be caused by a number of factors, including, but not limited to, the Company’s and HEP’s ability to successfully integrate the Sinclair Oil Corporation (now known as Sinclair Oil LLC, "Sinclair Oil") and Sinclair Transportation Company LLC ("STC") businesses acquired from REH Company (formerly known as The Sinclair Companies) (collectively, the "Sinclair Transactions") with their existing operations and fully realize the expected synergies of the Sinclair Transactions or on the expected timeline; the Company's ability to successfully integrate the operation of the Puget Sound refinery with its existing operations; the demand for and supply of crude oil and refined products, including uncertainty regarding the effects of the continuing coronavirus ("COVID-19") pandemic on future demand and increasing societal expectations that companies address climate change; risks and uncertainties with respect to the actions of actual or potential competitive suppliers and transporters of refined petroleum products or lubricant and specialty products in the Company’s markets; the spread between market prices for refined products and market prices for crude oil; the possibility of constraints on the transportation of refined products or lubricant and specialty products; the possibility of inefficiencies, curtailments or shutdowns in refinery operations or pipelines, whether due to infection in the workforce or in response to reductions in demand; the effects of current and/or future governmental and environmental regulations and policies, including the effects of current and/or future restrictions on various commercial and economic activities in response to the COVID-19 pandemic; the availability and cost of financing to the Company; the effectiveness of the Company’s capital investments and marketing strategies; the Company’s and HEP’s efficiency in carrying out and consummating construction projects, including the Company's ability to complete announced capital projects, such as the construction of the Artesia renewable diesel unit and pretreatment unit, on time and within capital guidance; the Company's and HEP’s ability to timely obtain or maintain permits, including those necessary for operations or capital projects; the ability of the Company to acquire refined or lubricant product operations or pipeline and terminal operations on acceptable terms and to integrate any existing or future acquired operations; the possibility of terrorist or cyberattacks and the consequences of any such attacks; uncertainty regarding the effects and duration of global hostilities and any associated military campaigns which may disrupt crude oil supplies and markets for the Company's refined products and create instability in the financial markets that could restrict the Company's ability to raise capital; general economic conditions, including uncertainty regarding the timing, pace and extent of an economic recovery in the United States; a prolonged economic slowdown due to the COVID-19 pandemic which could result in an impairment of goodwill and/or long-lived asset impairments; and other financial, operational and legal risks and uncertainties detailed from time to time in the Company’s and HEP’s SEC filings. The forward-looking statements speak only as of the date made and, other than as required by law, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

RESULTS OF OPERATIONS

Financial Data (all information in this release is unaudited)

Three Months Ended
March 31,

Change from 2021

2022

2021

Change

Percent

(In thousands, except per share data)

Sales and other revenues

$

7,458,750

$

3,504,293

$

3,954,457

113

%

Operating costs and expenses:

Cost of products sold:

Cost of products sold (exclusive of lower of cost or market inventory valuation adjustment)

6,502,012

2,960,305

3,541,707

120

Lower of cost or market inventory valuation adjustment

(8,551

)

(200,037

)

191,486

(96

)

6,493,461

2,760,268

3,733,193

135

Operating expenses (exclusive of depreciation and amortization)

477,434

399,909

77,525

19

Selling, general and administrative expenses

110,422

81,975

28,447

35

Depreciation and amortization

144,601

124,079

20,522

17

Total operating costs and expenses

7,225,918

3,366,231

3,859,687

115

Income from operations

232,832

138,062

94,770

69

Other income (expense):

Earnings of equity method investments

3,626

1,763

1,863

106

Interest income

997

1,031

(34

)

(3

)

Interest expense

(34,859

)

(38,386

)

3,527

(9

)

Gain on tariff settlement

51,500

(51,500

)

(100

)

Gain (loss) on foreign currency transactions

139

(1,317

)

1,456

(111

)

Gain on sale of assets and other

3,895

1,890

2,005

106

(26,202

)

16,481

(42,683

)

(259

)

Income before income taxes

206,630

154,543

52,087

34

Income tax expense (benefit)

21,329

(28,307

)

49,636

(175

)

Net income

185,301

182,850

2,451

1

Less net income attributable to noncontrolling interest

25,327

34,633

(9,306

)

(27

)

Net income attributable to HF Sinclair stockholders

$

159,974

$

148,217

$

11,757

8

%

Earnings per share attributable to HF Sinclair stockholders:

Basic

$

0.90

$

0.90

$

%

Diluted

$

0.90

$

0.90

$

%

Cash dividends declared per common share

$

$

0.35

$

(0.35

)

(100

) %

Average number of common shares outstanding:

Basic

175,081

162,479

12,602

8

%

Diluted

175,081

162,479

12,602

8

%

EBITDA

$

359,766

$

281,344

$

78,422

28

%

Adjusted EBITDA

$

376,707

$

47,308

$

329,399

696

%

Balance Sheet Data

March 31,

December 31,

2022

2021

(In thousands)

Cash and cash equivalents

$

592,278

$

234,444

Working capital

$

2,627,703

$

1,696,990

Total assets

$

17,733,097

$

12,916,613

Long-term debt

$

3,374,701

$

3,072,737

Total equity

$

8,876,977

$

6,294,465

Segment Information

Effective the first quarter of 2022, we revised our reportable segments to align with certain changes in how our chief operating decision maker manages and allocates resources to our businesses. Accordingly, we created two new reportable segments, Renewables and Marketing. Our operations are now organized into five reportable segments, Refining, Renewables, Marketing, Lubricants and Specialty Products and HEP. Our operations that are not included in one of these five reportable segments are included in Corporate and Other. Intersegment transactions are eliminated in our consolidated financial statements and are included in Eliminations. Corporate and Other and Eliminations are aggregated and presented under the Corporate, Other and Eliminations column.

As a result of the Sinclair Transactions that closed on March 14, 2022, the operations of the acquired Sinclair businesses are reported in the Refining, Renewables, Marketing and HEP segments.

The Refining segment represents the operations of our El Dorado, Tulsa, Navajo and Woods Cross refineries and HollyFrontier Asphalt Company LLC ("HFC Asphalt"). Also, effective with our acquisition that closed November 1, 2021, the Refining segment includes our Puget Sound refinery, and effective with our acquisition that closed March 14, 2022, includes our Sinclair and Casper refineries. Refining activities involve the purchase and refining of crude oil and wholesale marketing of refined products, such as gasoline, diesel fuel and jet fuel. These petroleum products are primarily marketed in the Mid-Continent, Southwest and Rocky Mountains extending into the Pacific Northwest geographic regions of the United States. HFC Asphalt operates various asphalt terminals in Arizona, New Mexico and Oklahoma.

The Renewables segment represents the operations of the Cheyenne RDU, which was mechanically complete in the fourth quarter of 2021 and fully operational in the first quarter of 2022, the PTU at our Artesia, New Mexico facility, which was completed and fully operational in the first quarter of 2022 and the Artesia RDU, which is expected to be completed in the second quarter of 2022. Also, effective with our acquisition that closed March 14, 2022, the Renewables segment includes the Sinclair RDU. During the construction phase of our RDUs and PTU, operating expense and capital expenditures were reported in the Corporate and Other segment, and this financial information has been retrospectively adjusted to reflect our current segment presentation.

The Marketing segment includes branded fuel sales through more than 300 distributors to more than 1,300 branded sites in the United States and licensing fees for the use of the Sinclair brand at more than 300 additional locations throughout the country.

The Lubricants and Specialty Products segment involves Petro-Canada Lubricants, Inc.’s ("PCLI") production operations, located in Mississauga, Ontario, that includes lubricant products such as base oils, white oils, specialty products and finished lubricants, and the operations of our Petro-Canada Lubricants business that includes the marketing of products to both retail and wholesale outlets through a global sales network with locations in Canada, the United States, Europe and China. Additionally, the Lubricants and Specialty Products segment includes specialty lubricant products produced at our Tulsa refineries that are marketed throughout North America and are distributed in Central and South America and the operations of Red Giant Oil Company LLC, one of the largest suppliers of locomotive engine oil in North America. Also, the Lubricants and Specialty Products segment includes Sonneborn, a producer of specialty hydrocarbon chemicals such as white oils, petrolatums and waxes with manufacturing facilities in the United States and Europe.

The HEP segment includes all of the operations of HEP, which owns and operates logistics and refinery assets consisting of petroleum product and crude oil pipelines, terminals, tankage, loading rack facilities and refinery processing units in the Mid-Continent, Southwest and Rocky Mountains geographic regions of the United States. The HEP segment also includes 50% ownership interests in each of the Osage Pipeline, the Cheyenne Pipeline and Cushing Connect, a 25.06% ownership interest in the Saddle Butte Pipeline and a 49.995% ownership interest in Pioneer Pipeline. Revenues from the HEP segment are earned through transactions with unaffiliated parties for pipeline transportation, rental and terminalling operations as well as revenues relating to pipeline transportation services provided for our refining operations. Due to certain basis differences, our reported amounts for the HEP segment may not agree to amounts reported in HEP’s periodic public filings.

Refining

Renewables

Marketing

Lubricants
and Specialty
Products

HEP

Corporate,
Other and
Eliminations

Consolidated
Total

(In thousands)

Three Months Ended March 31, 2022

Sales and other revenues:

Revenues from external customers

$

6,371,894

$

28,313

$

277,041

$

753,558

$

27,944

$

$

7,458,750

Intersegment revenues

134,273

19,054

1,451

92,254

(247,032

)

$

6,506,167

$

47,367

$

277,041

$

755,009

$

120,198

$

(247,032

)

$

7,458,750

Cost of products sold (exclusive of lower of cost or market inventory)

$

5,909,610

$

44,271

$

271,131

$

504,577

$

$

(227,577

)

$

6,502,012

Lower of cost or market inventory valuation adjustment

$

$

(8,551

)

$

$

$

$

$

(8,551

)

Operating expenses

$

354,972

$

27,096

$

$

66,001

$

42,624

$

(13,259

)

$

477,434

Selling, general and administrative expenses

$

33,882

$

872

$

140

$

41,749

$

4,312

$

29,467

$

110,422

Depreciation and amortization

$

94,681

$

5,800

$

501

$

20,594

$

21,586

$

1,439

$

144,601

Income (loss) from operations

$

113,022

$

(22,121

)

$

5,269

$

122,088

$

51,676

$

(37,102

)

$

232,832

Income (loss) before interest and income taxes

$

113,051

$

(22,102

)

$

5,269

$

124,701

$

55,403

$

(35,830

)

$