Le Lézard
Classified in: Business, Covid-19 virus
Subjects: EARNINGS, Dividend, Conference Call, Webcast

HF Sinclair Corporation Reports Quarterly Results and Announces Regular Cash Dividend


HF Sinclair Corporation (NYSE: DINO) ("HF Sinclair" or the "Company") today reported second quarter net income attributable to HF Sinclair stockholders of $1,221.3 million, or $5.43 per diluted share, for the quarter ended June 30, 2022, compared to $168.9 million, or $1.03 per diluted share, for the quarter ended June 30, 2021.

The second quarter results reflect special items that collectively decreased net income by a total of $37.3 million. On a pre-tax basis, these items include a lower of cost or market inventory valuation adjustment of $34.5 million, acquisition integration costs of $12.5 million and decommissioning charges of $0.5 million related to the Cheyenne Refinery conversion to renewable diesel production. Excluding these items, adjusted net income for the second quarter of 2022 was $1,258.5 million ($5.59 per diluted share) compared to $143.8 million ($0.87 per diluted share) for the second quarter of 2021, which excludes certain items that collectively increased net income by $25.1 million.

HF Sinclair's CEO, Michael Jennings, commented, "HF Sinclair delivered strong financial results in the second quarter driven by robust performance in our refining, marketing, lubricants and midstream segments. Healthy free cash flow generation in the quarter allowed us to return cash to shareholders through dividends and share repurchases, further demonstrating the commitment to our capital return strategy. During the quarter, we also commenced start-up of the Artesia, New Mexico renewable diesel unit. With all of our previously announced renewables projects complete, we will continue to ramp up production of these assets as we expect to reach full production levels by the end of the third quarter. Looking forward, we remain focused on the integration of our newly acquired assets from Sinclair while maintaining safe and reliable operations."

Refining segment income before interest and income taxes was $1,558.1 million for the second quarter of 2022 compared to $250.1 million in the second quarter of 2021. The segment reported EBITDA of $1,660.9 million for the second quarter of 2022 compared to $330.0 million for the second quarter of 2021. This increase was driven by higher refining indicator margins in both the West and Mid-Continent regions, which resulted in higher refining segment earnings in the quarter. Consolidated refinery gross margin was $36.36 per produced barrel, a 211% increase compared to $11.71 for the second quarter of 2021, and crude oil charge averaged 627,310 barrels per day ("BPD") for the second quarter of 2022 compared to 416,350 BPD for the second quarter of 2021.

Renewables segment loss before interest and income taxes was $(73.2) million for the second quarter of 2022 compared to $(11.5) million in the second quarter of 2021. The segment reported EBITDA of $(62.8) million for the second quarter of 2022 compared to $(11.2) million in the second quarter of 2021. Excluding the lower of cost or market inventory valuation charge of $34.5 million, Adjusted EBITDA in the second quarter of 2022 was $(28.3) million. Total sales volumes were 26 million gallons for the second 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 was completed and fully operational in the second quarter of 2022. Also, effective with the Sinclair acquisition that closed on March 14, 2022, the Renewables segment includes the Sinclair RDU.

Marketing segment income before interest and income taxes was $19.5 million and reported EBITDA was $23.9 million for the second quarter of 2022. Total branded fuel sales volumes were 335 million gallons for the second quarter of 2022.

Lubricants and Specialty Products segment income before interest and income taxes was $135.1 million for the second quarter of 2022 compared to $60.1 million in the second quarter of 2021. The segment reported EBITDA of $155.7 million for the second quarter of 2022 compared to $79.2 million in the second quarter of 2021. This increase was driven by strong finished product demand in our Rack Forward businesses.

Holly Energy Partners, L.P. ("HEP") reported EBITDA of $79.8 million for the second quarter of 2022 compared to $88.1 million in the second quarter of 2021 and Adjusted EBITDA of $104.2 million for the second quarter of 2022 compared to $88.3 million in the second quarter of 2021.

For the second quarter of 2022, net cash provided by operations totaled $1,528.4 million. At June 30, 2022, the Company's cash and cash equivalents totaled $1,702.3 million, a $1,110.0 million increase over cash and cash equivalents of $592.3 million at March 31, 2022. During the second quarter of 2022, the Company announced and paid a regular dividend of $0.40 per share to shareholders totaling $90.2 million and spent $110.4 million in stock repurchases. Additionally, the Company's consolidated debt was $3,348.1 million. The Company's debt, exclusive of HEP debt, which is nonrecourse to HF Sinclair, was $1,739.6 million at June 30, 2022.

HF Sinclair also announced today that its Board of Directors declared a regular quarterly dividend in the amount of $0.40 per share, payable on September 1, 2022 to holders of record of common stock on August 18, 2022.

As of June 30, 2022, HF Sinclair has achieved annualized run rate synergies of over $90 million related to the Sinclair acquisition and over $100 million of working capital synergies. The Company is currently on pace to exceed its target of approximately $100 million in annual run rate synergies within two years of the acquisition close date through a combination of commercial improvements, operating expense reductions and optimization of selling, general and administrative expenses.

The Company has scheduled a webcast conference call for today, August 8, 2022, at 8:30 AM Eastern Time to discuss second quarter financial results. This webcast may be accessed at https://events.q4inc.com/attendee/167295545. An audio archive of this webcast will be available using the above noted link through August 22, 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 and also at its facility in Artesia, New Mexico. 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, accidents, unexpected leaks or spills, unscheduled shutdowns, weather events, civil unrest, expropriation of assets, and other economic, diplomatic, legislative, or political events or developments, terrorism, cyberattacks, or other catastrophes or disruptions affecting our operations, production facilities, machinery, pipelines and other logistics assets, equipment, or information systems, or any of the foregoing of our suppliers, customers, or third-party service providers; 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 and increases in interest rates; 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 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, inflation and labor costs 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
June 30,

 

Change from 2021

 

 

2022

 

 

 

2021

 

 

Change

 

Percent

 

(In thousands, except per share data)

Sales and other revenues

$

11,162,160

 

 

$

4,577,123

 

 

$

6,585,037

 

 

144

%

Operating costs and expenses:

 

 

 

 

 

 

 

Cost of products sold:

 

 

 

 

 

 

 

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

 

8,579,915

 

 

 

3,825,729

 

 

 

4,754,186

 

 

124

 

Lower of cost or market inventory valuation adjustment

 

34,543

 

 

 

(118,825

)

 

 

153,368

 

 

(129

)

 

 

8,614,458

 

 

 

3,706,904

 

 

 

4,907,554

 

 

132

 

Operating expenses (exclusive of depreciation and amortization)

 

606,127

 

 

 

334,191

 

 

 

271,936

 

 

81

 

Selling, general and administrative expenses (exclusive of depreciation and amortization)

 

110,875

 

 

 

77,754

 

 

 

33,121

 

 

43

 

Depreciation and amortization

 

164,044

 

 

 

124,042

 

 

 

40,002

 

 

32

 

Total operating costs and expenses

 

9,495,504

 

 

 

4,242,891

 

 

 

5,252,613

 

 

124

 

Income from operations

 

1,666,656

 

 

 

334,232

 

 

 

1,332,424

 

 

399

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

Earnings of equity method investments

 

5,447

 

 

 

3,423

 

 

 

2,024

 

 

59

 

Interest income

 

1,844

 

 

 

1,029

 

 

 

815

 

 

79

 

Interest expense

 

(38,961

)

 

 

(28,942

)

 

 

(10,019

)

 

35

 

Gain (loss) on foreign currency transactions

 

(905

)

 

 

583

 

 

 

(1,488

)

 

(255

)

Gain on sale of assets and other

 

2,320

 

 

 

7,927

 

 

 

(5,607

)

 

(71

)

 

 

(30,255

)

 

 

(15,980

)

 

 

(14,275

)

 

89

 

Income before income taxes

 

1,636,401

 

 

 

318,252

 

 

 

1,318,149

 

 

414

 

Income tax expense

 

383,493

 

 

 

123,485

 

 

 

260,008

 

 

211

 

Net income

 

1,252,908

 

 

 

194,767

 

 

 

1,058,141

 

 

543

 

Less net income attributable to noncontrolling interest

 

31,646

 

 

 

25,917

 

 

 

5,729

 

 

22

 

Net income attributable to HF Sinclair stockholders

$

1,221,262

 

 

$

168,850

 

 

$

1,052,412

 

 

623

%

 

 

 

 

 

 

 

 

Earnings per share attributable to HF Sinclair stockholders:

 

 

 

 

 

 

 

Basic

$

5.43

 

 

$

1.03

 

 

$

4.40

 

 

427

%

Diluted

$

5.43

 

 

$

1.03

 

 

$

4.40

 

 

427

%

Cash dividends declared per common share

$

0.40

 

 

$

?

 

 

$

0.40

 

 

100

%

Average number of common shares outstanding:

 

 

 

 

 

 

 

Basic

 

222,952

 

 

 

162,523

 

 

 

60,429

 

 

37

%

Diluted

 

222,952

 

 

 

162,523

 

 

 

60,429

 

 

37

%

 

 

 

 

 

 

 

 

EBITDA

$

1,805,916

 

 

$

444,290

 

 

$

1,361,626

 

 

306

%

Adjusted EBITDA

$

1,853,008

 

 

$

334,501

 

 

$

1,518,507

 

 

454

%

 

Six Months Ended
June 30,

 

Change from 2021

 

 

2022

 

 

 

2021

 

 

Change

 

Percent

 

(In thousands, except per share data)

Sales and other revenues

$

18,620,910

 

 

$

8,081,416

 

 

$

10,539,494

 

 

130

%

Operating costs and expenses:

 

 

 

 

 

 

 

Cost of products sold:

 

 

 

 

 

 

 

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

 

15,081,927

 

 

 

6,786,034

 

 

 

8,295,893

 

 

122

 

Lower of cost or market inventory valuation adjustment

 

25,992

 

 

 

(318,862

)

 

 

344,854

 

 

(108

)

 

 

15,107,919

 

 

 

6,467,172

 

 

 

8,640,747

 

 

134

 

Operating expenses (exclusive of depreciation and amortization)

 

1,083,561

 

 

 

734,100

 

 

 

349,461

 

 

48

 

Selling, general and administrative expenses (exclusive of depreciation and amortization)

 

221,297

 

 

 

159,729

 

 

 

61,568

 

 

39

 

Depreciation and amortization

 

308,645

 

 

 

248,121

 

 

 

60,524

 

 

24

 

Total operating costs and expenses

 

16,721,422

 

 

 

7,609,122

 

 

 

9,112,300

 

 

120

 

Income from operations

 

1,899,488

 

 

 

472,294

 

 

 

1,427,194

 

 

302

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

Earnings of equity method investments

 

9,073

 

 

 

5,186

 

 

 

3,887

 

 

75

 

Interest income

 

2,841

 

 

 

2,060

 

 

 

781

 

 

38

 

Interest expense

 

(73,820

)

 

 

(67,328

)

 

 

(6,492

)

 

10

 

Gain on tariff settlement

 

?

 

 

 

51,500

 

 

 

(51,500

)

 

(100

)

Loss on foreign currency transactions

 

(766

)

 

 

(734

)

 

 

(32

)

 

4

 

Gain on sale of assets and other

 

6,215

 

 

 

9,817

 

 

 

(3,602

)

 

(37

)

 

 

(56,457

)

 

 

501

 

 

 

(56,958

)

 

(11,369

)

Income before income taxes

 

1,843,031

 

 

 

472,795

 

 

 

1,370,236

 

 

290

 

Income tax expense

 

404,822

 

 

 

95,178

 

 

 

309,644

 

 

325

 

Net income

 

1,438,209

 

 

 

377,617

 

 

 

1,060,592

 

 

281

 

Less net income attributable to noncontrolling interest

 

56,973

 

 

 

60,550

 

 

 

(3,577

)

 

(6

)

Net income attributable to HollyFrontier stockholders

$

1,381,236

 

 

$

317,067

 

 

$

1,064,169

 

 

336

%

 

 

 

 

 

 

 

 

Earnings per share attributable to HollyFrontier stockholders:

 

 

 

 

 

 

 

Basic

$

6.86

 

 

$

1.92

 

 

$

4.94

 

 

257

%

Diluted

$

6.86

 

 

$

1.92

 

 

$

4.94

 

 

257

%

Cash dividends declared per common share

$

0.40

 

 

$

0.35

 

 

$

0.05

 

 

14

%

Average number of common shares outstanding:

 

 

 

 

 

 

 

Basic

 

199,149

 

 

 

162,501

 

 

 

36,648

 

 

23

%

Diluted

 

199,149

 

 

 

162,501

 

 

 

36,648

 

 

23

%

 

 

 

 

 

 

 

 

EBITDA

$

2,165,682

 

 

$

725,634

 

 

$

1,440,048

 

 

198

%

Adjusted EBITDA

$

2,229,715

 

 

$

381,809

 

 

$

1,847,906

 

 

484

%

Balance Sheet Data

 

 

June 30,

 

December 31,

 

2022

 

2021

 

(In thousands)

Cash and cash equivalents

$

1,702,286

 

$

234,444

Working capital

$

3,636,627

 

$

1,696,990

Total assets

$

19,177,854

 

$

12,916,613

Long-term debt

$

3,348,103

 

$

3,072,737

Total equity

$

9,874,910

 

$

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 on 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 was completed and fully operational in the second quarter of 2022. Also, effective with our acquisition that closed on 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.

Effective with our acquisition that closed on March 14, 2022, 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 represents 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 the 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 June 30, 2022

Sales and other revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues from external customers

 

$

8,839,662

 

$

115,939

 

 

$

1,336,302

 

$

845,024

 

$

25,233

 

$

?

 

 

$

11,162,160

Intersegment revenues

 

 

1,448,919

 

 

78,639

 

 

 

?

 

 

4,917

 

 

110,537

 

 

(1,643,012

)

 

 

?

 

 

$

10,288,581

 

$

194,578

 

 

$

1,336,302

 

$

849,941

 

$

135,770

 

$

(1,643,012

)

 

$

11,162,160

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

 

$

8,119,285

 

$

192,662

 

 

$

1,311,333

 

$

576,428

 

$

?

 

$

(1,619,793

)

 

$

8,579,915

Lower of cost or market inventory valuation adjustment

 

$

?

 

$

34,543

 

 

$

?

 

$

?

 

$

?

 

$

?

 

 

$

34,543

Operating expenses

 

$

469,304

 

$

29,273

 

 

$

?

 

$

74,470

 

$

53,899

 

$

(20,819

)

 

$

606,127

Selling, general and administrative expenses

 

$

39,123

 

$

1,001

 

 

$

1,049

 

$

43,555

 

$

4,683

 

$

21,464

 

 

$

110,875

Depreciation and amortization

 

$

102,780

 

$

10,371

 

 

$

4,418

 

$

20,605

 

$

26,371

 

$

(501

)

 

$

164,044

Income (loss) from operations

 

$

1,558,089

 

$

(73,272

)

 

$

19,502

 

$

134,883

 

$

50,817

 

$

(23,363

)

 

$

1,666,656

Income (loss) before interest and income taxes

 

$

1,558,120

 

$

(73,202

)

 

$

19,502

 

$

135,116

 

$

56,309

 

$

(22,327

)

 

$

1,673,518

Net income attributable to noncontrolling interest

 

$

?

 

$

?

 

 

$

?

 

$

?

 

$

1,929

 

$

29,717

 

 

$

31,646

Earnings of equity method investments

 

$

?

 

$

?

 

 

$

?

 

$

?

 

$

5,447

 

$

?

 

 

$

5,447

Capital expenditures

 

$

36,711

 

$

87,525

 

 

$

5,309

 

$

8,026

 

$

9,100

 

$

12,773

 

 

$

159,444

 

 

Refining

 

Renewables

 

Lubricants
and Specialty
Products

 

HEP

 

Corporate,
Other and
Eliminations

 

Consolidated
Total

 

 

(In thousands)

Three Months Ended June 30, 2021

 

 

 

 

 

 

 

 

 

 

Sales and other revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Revenues from external customers

 

$

3,887,273

 

 

$

?

 

 

$

662,755

 

$

27,092

 

$

3

 

 

$

4,577,123

 

Intersegment revenues

 

 

205,186

 

 

 

?

 

 

 

6,434

 

 

99,142

 

 

(310,762

)

 

 

?

 

 

 

$

4,092,459

 

 

$

?

 

 

$

669,189

 

$

126,234

 

$

(310,759

)

 

$

4,577,123

 

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

 

$

3,619,319

 

 

$

?

 

 

$

491,218

 

$

?

 

$

(284,808

)

 

$

3,825,729

 

Lower of cost or market inventory valuation adjustment

 

$

(118,825

)

 

$

?

 

 

$

?

 

$

?

 

$

?

 

 

$

(118,825

)

Operating expenses

 

$

231,422

 

 

$

11,231

 

 

$

61,310

 

$

42,068

 

$

(11,840

)

 

$

334,191

 

Selling, general and administrative expenses

 

$

30,136

 

 

$

?

 

 

$

37,583

 

$

2,846

 

$

7,189

 

 

$

77,754

 

Depreciation and amortization

 

$

79,938

 

 

$

316

 

 

$

19,152

 

$

22,275

 

$

2,361

 

 

$

124,042

 

Income (loss) from operations

 

$

250,469

 

 

$

(11,547

)

 

$

59,926

 

$

59,045

 

$

(23,661

)

 

$

334,232

 

Income (loss) before interest and income taxes

 

$

250,111

 

 

$

(11,547

)

 

$

60,093

 

$

67,911

 

$

(20,403

)

 

$

346,165

 

Net income attributable to noncontrolling interest

 

$

?

 

 

$

?

 

 

$

?

 

$

1,193

 

$

24,724

 

 

$

25,917

 

Earnings of equity method investments

 

$

?

 

 

$

?

 

 

$

?

 

$

3,423

 

$

?

 

 

$

3,423

 

Capital expenditures

 

$

33,150

 

 

$

113,747

 

 

$

5,614

 

$

24,498

 

$

5,871

 

 

$

182,880

 

 

 

Refining

 

Renewables

 

Marketing

 

Lubricants
and Specialty
Products

 

HEP

 

Corporate,
Other

and
Eliminations

 

Consolidated

Total

 

 

(In thousands)

Six Months Ended June 30, 2022

 

 

 

 

 

 

 

 

 

 

 

 

Sales and other revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues from external customers

 

$

15,211,556

 

 

144,252

 

 

 

1,613,343

 

$

1,598,582

 

$

53,177

 

$

?

 

 

$

18,620,910

Intersegment revenues

 

 

1,583,192

 

 

97,693

 

 

 

?

 

 

6,368

 

 

202,791

 

 

(1,890,044

)

 

 

?

 

 

$

16,794,748

 

 

241,945

 

 

 

1,613,343

 

$

1,604,950

 

$

255,968

 

$

(1,890,044

)

 

$

18,620,910

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

 

$

14,028,895

 

$

236,933

 

 

$

1,582,464

 

$

1,081,005

 

$

?

 

$

(1,847,370

)

 

$

15,081,927

Lower of cost or market inventory valuation adjustment

 

$

?

 

$

25,992

 

 

$

?

 

$

?

 

$

?

 

$

?

 

 

$

25,992

Operating expenses

 

$

824,276

 

$

56,369

 

 

$

?

 

$

140,471

 

$

96,523

 

$

(34,078

)

 

$

1,083,561

Selling, general and administrative expenses

 

$

73,005

 

$

1,873

 

 

$

1,189

 

$

85,304

 

$

8,995

 

$

50,931

 

 

$

221,297

Depreciation and amortization

 

$

197,461

 

$

16,171

 

 

$

4,919

 

$

41,199

 

$

47,957

 

$

938

 

 

$

308,645

Income (loss) from operations

 

$

1,671,111

 

$

(95,393

)

 

$

24,771

 

$

256,971

 

$

102,493

 

$

(60,465

)

 

$

1,899,488

Income (loss) before interest and income taxes

 

$

1,671,171

 

$

(95,304

)

 

$

24,771

 

$

259,817

 

$

111,712

 

$

(58,157

)

 

$

1,914,010

Net income attributable to noncontrolling interest

 

$

?

 

$

?

 

 

$

?

 

$

?

 

$

5,192

 

$

51,781

 

 

$

56,973

Earnings of equity method investments

 

$

?

 

$

?

 

 

$

?

 

$

?

 

$

9,073

 

$

?

 

 

$

9,073

Capital expenditures

 

$

66,631

 

$

186,294

 

 

$

5,309

 

$

14,395

 

$

23,246

 

$

21,865

 

 

$

317,740

 

 

Refining

 

Renewables

 

Lubricants
and Specialty
Products

 

HEP

 

Corporate,
Other

and
Eliminations

 

Consolidated

Total

 

 

(In thousands)

Six Months Ended June 30, 2021

Sales and other revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Revenues from external customers

 

$

6,844,306

 

 

$

?

 

 

$

1,184,753

 

$

52,350

 

$

7

 

 

$

8,081,416

 

Intersegment revenues

$

265,648

$

?

$

8,999

$

201,068

$

(475,715

)

 

$

?

 

$

7,109,954

 

 

$

?

 

 

$

1,193,752

 

$

253,418

 

$

(475,708

)

 

$

8,081,416

 

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

 

$

6,381,262

 

 

$

?

 

 

$

822,741

 

$

?

 

$

(417,969

)

 

$

6,786,034

 

Lower of cost or market inventory valuation adjustment

 

$

(318,353

)

 

$

?

 

 

$

?

 

$

?

 

$

(509

)

 

$

(318,862

)

Operating expenses

 

$

524,277

 

 

$

24,052

 

 

$

122,063

 

$

83,433

 

$

(19,725

)

 

$

734,100

 

Selling, general and administrative expenses

 

$

58,632

 

 

$

?

 

 

$

83,136

 

$

5,815

 

$

12,146

 

 

$

159,729

 

Depreciation and amortization

 

$

168,020

 

 

$

658

 

 

$

39,273

 

$

45,281

 

$

(5,111

)

 

$

248,121

 

Income (loss) from operations

 

$

296,116

 

 

$

(24,710

)

 

$

126,539

 

$

118,889

 

$

(44,540

)

 

$

472,294

 

Income (loss) before interest and income taxes

 

$

295,788

 

 

$

(24,710

)

 

$

127,078

 

$

154,669

 

$

(14,762

)

 

$

538,063

 

Net income attributable to noncontrolling interest

 

$

?

 

 

$

?

 

 

$

?

 

$

2,839

 

$

57,711

 

 

$

60,550

 

Earnings of equity method investments

 

$

?

 

 

 

?

 

 

$

?

 

$

5,186

 

$

?

 

 

$

5,186

 

Capital expenditures

 

$

73,511

 

 

$

183,969

 

 

$

9,701

 

$

57,716

 

$

7,944

 

 

$

332,841

 

Refining Segment Operating Data

The following tables set forth information, including non-GAAP (generally accepted accounting principles) performance measures about our refinery operations. Refinery gross and net operating margins do not include the non-cash effects of lower of cost or market inventory valuation adjustments and depreciation and amortization. Reconciliations to amounts reported under GAAP are provided under "Reconciliations to Amounts Reported Under Generally Accepted Accounting Principles" below.

The disaggregation of our refining geographic operating data is presented in two regions, Mid-Continent and West, to best reflect the economic drivers of our refining operations. The Mid-Continent region is comprised of the El Dorado and Tulsa refineries. The West region is comprised of the Puget Sound, Navajo, Woods Cross, Sinclair and Casper refineries. The Puget Sound refinery was acquired November 1, 2021, and thus is included for the period January 1, 2022 to June 30, 2022. In addition, the refinery operations of the Sinclair and Casper refineries are included for the period March 14, 2022 (the date of acquisition) through June 30, 2022.

 

 

Three Months Ended

June 30,

 

Six Months Ended

June 30,

 

 

 

2022

 

 

 

2021

 

 

2022 (8)

 

 

2021

 

Mid-Continent Region

 

 

 

 

 

 

Crude charge (BPD) (1)

 

 

277,930

 

 

 

278,380

 

 

 

284,030

 

 

 

247,500

 

Refinery throughput (BPD) (2)

 

 

292,570

 

 

 

293,050

 

 

 

298,950

 

 

 

257,030

 

Sales of produced refined products (BPD) (3)

 

 

279,170

 

 

 

287,680

 

 

 

279,710

 

 

 

249,400

 

Refinery utilization (4)

 

 

106.9

%

 

 

107.1

%

 

 

109.2

%

 

 

95.2

%

 

 

 

 

 

 

 

 

 

Average per produced barrel (5)

 

 

 

 

 

 

 

 

Refinery gross margin

 

$

32.53

 

 

$

10.82

 

 

$

20.96

 

 

$

8.99

 

Refinery operating expenses (6)

 

 

6.21

 

 

 

5.27

 

 

 

6.11

 

 

 

7.22

 

Net operating margin

 

$

26.32

 

 

$

5.55

 

 

$

14.85

 

 

$

1.77

 

 

 

 

 

 

 

 

 

 

Refinery operating expenses per throughput barrel (7)

 

$

5.92

 

 

$

5.18

 

 

$

5.72

 

 

$

6.89

 

 

 

 

 

 

 

 

 

 

Feedstocks:

 

 

 

 

 

 

 

 

Sweet crude oil

 

 

54

%

 

 

64

%

 

 

58

%

 

 

62

%

Sour crude oil

 

 

22

%

 

 

14

%

 

 

18

%

 

 

14

%

Heavy sour crude oil

 

 

19

%

 

 

17

%

 

 

19

%

 

 

19

%

Other feedstocks and blends

 

 

5

%

 

 

5

%

 

 

5

%

 

 

5

%

Total

 

 

100

%

 

 

100

%

 

 

100

%

 

 

100

%

 

 

 

 

 

 

 

 

 

Sales of produced refined products:

 

 

 

 

 

 

 

 

Gasolines

 

 

49

%

 

 

51

%

 

 

50

%

 

 

51

%

Diesel fuels

 

 

35

%

 

 

34

%

 

 

34

%

 

 

34

%

Jet fuels

 

 

5

%

 

 

4

%

 

 

6

%

 

 

5

%

Fuel oil

 

 

1

%

 

 

1

%

 

 

1

%

 

 

1

%

Asphalt

 

 

4

%

 

 

2

%

 

 

3

%

 

 

2

%

Base oils

 

 

4

%

 

 

4

%

 

 

4

%

 

 

4

%

LPG and other

 

 

2

%

 

 

4

%

 

 

2

%

 

 

3

%

Total

 

 

100

%

 

 

100

%

 

 

100

%

 

 

100

%

 

 

Three Months Ended

June 30,

 

Six Months Ended

June 30,

 

 

 

2022

 

 

 

2021

 

 

2022 (8)

 

 

2021

 

West Region

 

 

 

 

 

 

 

 

Crude charge (BPD) (1)

 

 

349,380

 

 

 

137,970

 

 

 

292,450

 

 

 

134,940

 

Refinery throughput (BPD) (2)

 

 

370,740

 

 

 

151,680

 

 

 

315,350

 

 

 

148,160

 

Sales of produced refined products (BPD) (3)

 

 

376,400

 

 

 

156,260

 

 

 

309,530

 

 

 

150,290

 

Refinery utilization (4)

 

 

83.6

%

 

 

95.2

%

 

 

77.6

%

 

 

93.1

%

 

 

 

 

 

 

 

 

 

Average per produced barrel (5)

 

 

 

 

 

 

 

 

Refinery gross margin

 

$

39.21

 

 

$

13.35

 

 

$

30.42

 

 

$

11.88

 

Refinery operating expenses (6)

 

 

9.10

 

 

 

6.57

 

 

 

9.19

 

 

 

7.29

 

Net operating margin

 

$

30.11

 

 

$

6.78

 

 

$

21.23

 

 

$

4.59

 

 

 

 

 

 

 

 

 

 

Refinery operating expenses per throughput barrel (7)

 

$

9.24

 

 

$

6.77

 

 

$

9.02

 

 

$

7.40

 

 

 

 

 

 

 

 

 

 

Feedstocks:

 

 

 

 

 

 

 

 

Sweet crude oil

 

 

33

%

 

 

22

%

 

 

29

%

 

 

23

%

Sour crude oil

 

 

46

%

 

 

59

%

 

 

50

%

 

 

59

%

Heavy sour crude oil

 

 

10

%

 

 

?

%

 

 

9

%

 

 

?

%

Black wax crude oil

 

 

5

%

 

 

10

%

 

 

5

%

 

 

9

%

Other feedstocks and blends

 

 

6

%

 

 

9

%

 

 

7

%

 

 

9

%

Total

 

 

100

%

 

 

100

%

 

 

100

%

 

 

100

%

 

 

 

 

 

 

 

 

 

Sales of produced refined products:

 

 

 

 

 

 

 

 

Gasolines

 

 

53

%

 

 

52

%

 

 

53

%

 

 

53

%

Diesel fuels

 

 

33

%

 

 

37

%

 

 

31

%

 

 

37

%

Jet fuels

 

 

5

%

 

 

?

%

 

 

5

%

 

 

?

%

Fuel oil

 

 

2

%

 

 

3

%

 

 

5

%

 

 

3

%

Asphalt

 

 

3

%

 

 

5

%

 

 

2

%

 

 

4

%

LPG and other

 

 

4

%

 

 

3

%

 

 

4

%

 

 

3

%

Total

 

 

100

%

 

 

100

%

 

 

100

%

 

 

100

%

Consolidated

 

 

 

 

 

 

 

 

Crude charge (BPD) (1)

 

 

627,310

 

 

 

416,350

 

 

 

576,480

 

 

 

382,440

 

Refinery throughput (BPD) (2)

 

 

663,310

 

 

 

444,730

 

 

 

614,300

 

 

 

405,190

 

Sales of produced refined products (BPD) (3)

 

 

655,570

 

 

 

443,940

 

 

 

589,240

 

 

 

399,690

 

Refinery utilization (4)

 

 

92.5

%

 

 

102.8

%

 

 

90.5

%

 

 

94.4

%

 

 

 

 

 

 

 

 

 

Average per produced barrel (5)

 

 

 

 

 

 

 

 

Refinery gross margin

 

$

36.36

 

 

$

11.71

 

 

$

25.93

 

 

$

10.07

 

Refinery operating expenses (6)

 

 

7.87

 

 

 

5.73

 

 

 

7.73

 

 

 

7.25

 

Net operating margin

 

$

28.49

 

 

$

5.98

 

 

$

18.20

 

 

$

2.82

 

 

 

 

 

 

 

 

 

 

Refinery operating expenses per throughput barrel (7)

 

$

7.77

 

 

$

5.72

 

 

$

8.25

 

 

$

7.07

 

 

 

 

 

 

 

 

 

 

Feedstocks:

 

 

 

 

 

 

 

 

Sweet crude oil

 

 

42

%

 

 

50

%

 

 

43

%

 

 

48

%

Sour crude oil

 

 

36

%

 

 

30

%

 

 

34

%

 

 

30

%

Heavy sour crude oil

 

 

14

%

 

 

11

%

 

 

14

%

 

 

12

%

Black wax crude oil

 

 

3

%

 

 

3

%

 

 

3

%

 

 

3

%

Other feedstocks and blends

 

 

5

%

 

 

6

%

 

 

6

%

 

 

7

%

Total

 

 

100

%

 

 

100

%

 

 

100

%

 

 

100

%

 

 

Three Months Ended

June 30,

 

Six Months Ended

June 30,

 

 

2022

 

2021

 

2022 (8)

 

2021

Consolidated

 

 

 

 

 

 

 

 

Sales of produced refined products:

 

 

 

 

 

 

 

 

Gasolines

 

51

%

 

51

%

 

51

%

 

52

%

Diesel fuels

 

34

%

 

35

%

 

32

%

 

35

%

Jet fuels

 

5

%

 

3

%

 

6

%

 

3

%

Fuel oil

 

2

%

 

1

%

 

3

%

 

1

%

Asphalt

 

3

%

 

3

%

 

3

%

 

3

%

Base oils

 

2

%

 

3

%

 

2

%

 

3

%

LPG and other

 

3

%

 

4

%

 

3

%

 

3

%

Total

 

100

%

 

100

%

 

100

%

 

100

%

(1)

 

Crude charge represents the barrels per day of crude oil processed at our refineries.

(2)

 

Refinery throughput represents the barrels per day of crude and other refinery feedstocks input to the crude units and other conversion units at our refineries.

(3)

 

Represents barrels sold of refined products produced at our refineries (including HFC Asphalt and inter-segment sales) and does not include volumes of refined products purchased for resale or volumes of excess crude oil sold.

(4)

 

Represents crude charge divided by total crude capacity (BPSD). As a result of our acquisition of the Puget Sound Refinery on November 1, 2021, and the Sinclair and Casper Refineries on March 14, 2022, our consolidated crude capacity increased from 405,000 BPSD at June 30, 2021 to 678,000 BPSD at June 30, 2022.

(5)

 

Represents average amount per produced barrel sold, which is a non-GAAP measure. Reconciliations to amounts reported under GAAP are provided under "Reconciliations to Amounts Reported Under Generally Accepted Accounting Principles" below.

(6)

 

Represents total Refining segment operating expenses, exclusive of depreciation and amortization, divided by sales volumes of refined products produced at our refineries.

(7)

 

Represents total Refining segment operating expenses, exclusive of depreciation and amortization, divided by refinery throughput.

(8)

 

We acquired the Sinclair and Casper Refineries on March 14, 2022. Refining operating data for the six months ended June 30, 2022 includes crude oil and feedstocks processed and refined products sold at our Sinclair and Casper Refineries for the period March 14, 2022 through June 30, 2022 only, averaged over the 181 days in the six months ended June 30, 2022.

Renewables Segment Operating Data

The following table sets forth information about our renewables operations.

 

 

Three Months Ended

June 30, 2022

 

Six Months Ended

June 30, 2022

Renewables

 

 

 

 

Sales volumes (in thousand gallons)

 

 

25,688

 

 

 

30,632

 

Average per produced gallon (1)

 

 

 

 

Renewables gross margin

 

$

0.07

 

 

$

0.16

 

Renewables operating expense (2)

 

 

1.14

 

 

 

1.84

 

Net operating margin

 

$

(1.07

)

 

$

(1.68

)

(1)

 

Represents average amount per produced gallons sold, which is a non-GAAP measure. Reconciliations to amounts reported under GAAP are provided under "Reconciliations to Amounts Reported Under Generally Accepted Accounting Principles" below.

(2)

 

Represents total Renewables segment operating expenses, exclusive of depreciation and amortization, divided by sales volumes of renewable diesel produced at our renewable diesel units.

Marketing Segment Operating Data

The following table sets forth information about our Marketing operations and includes our Sinclair business for the period March 14, 2022 (the date of acquisition) through June 30, 2022.

 

 

Three Months Ended

June 30, 2022

 

Six Months Ended

June 30, 2022

Marketing

 

 

 

 

Number of branded sites at period end

 

 

1,329

 

 

1,329

Sales volumes (in thousand gallons)

 

 

335,106

 

 

420,019

Margin per gallon of sales (1)

 

$

0.07

 

$

0.07

(1)

 

Represents average amount per gallon sold, which is a non-GAAP measure. Reconciliations to amounts reported under GAAP are provided under "Reconciliations to Amounts Reported Under Generally Accepted Accounting Principles" below.

Lubricants and Specialty Products Segment Operating Data

The following table sets forth information about our lubricants and specialty products operations.

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

2022

 

2021

 

2022

 

2021

Lubricants and Specialty Products

 

 

 

 

 

 

 

 

Throughput (BPD)

 

20,260

 

 

19,310

 

 

19,800

 

 

19,860

 

Sales of produced products (BPD)

 

34,000

 

 

36,670

 

 

34,510

 

 

34,630

 

 

 

 

 

 

 

 

 

 

Sales of produced products:

 

 

 

 

 

 

 

 

Finished products

 

53

%

 

51

%

 

52

%

 

52

%

Base oils

 

27

%

 

29

%

 

29

%

 

27

%

Other

 

20

%

 

20

%

 

19

%

 

21

%

Total

 

100

%

 

100

%

 

100

%

 

100

%

Supplemental financial data attributable to our Lubricants and Specialty Products segment is presented below:

 

 

Rack Back (1)

 

Rack Forward (2)

 

Eliminations (3)

 

Total Lubricants
and Specialty
Products

 

 

(In thousands)

Three months ended June 30, 2022

 

 

 

 

 

 

 

 

Sales and other revenues

 

$

358,628

 

$

754,442

 

$

(263,129

)

 

$

849,941

Cost of products sold

 

$

249,095

 

$

590,462

 

$

(263,129

)

 

$

576,428

Operating expenses

 

$

38,073

 

$

36,397

 

$

?

 

 

$

74,470

Selling, general and administrative expenses

 

$

5,636

 

$

37,919

 

$

?

 

 

$

43,555

Depreciation and amortization

 

$

7,712

 

$

12,893

 

$

?

 

 

$

20,605

Income from operations

 

$

58,112

 

$

76,771

 

$

?

 

 

$

134,883

Income before interest and income taxes

 

$

58,131

 

$

76,985

 

$

?

 

 

$

135,116

EBITDA

 

$

65,843

 

$

89,878

 

$

?

 

 

$

155,721

 

 

 

 

 

 

 

 

 

Three months ended June 30, 2021

 

 

 

 

 

 

 

 

Sales and other revenues

 

$

254,485

 

$

629,211

 

$

(214,507

)

 

$

669,189

Cost of products sold

 

$

163,280

 

$

542,445

 

$

(214,507

)

 

$

491,218

Operating expenses

 

$

29,106

 

$

32,204

 

$

?

 

 

$

61,310

Selling, general and administrative expenses

 

$

5,914

 

$

31,669

 

$

?

 

 

$

37,583

Depreciation and amortization

 

$

6,230

 

$

12,922

 

$

?

 

 

$

19,152

Income from operations

 

$

49,955

 

$

9,971

 

$

?

 

 

$

59,926

Income before interest and income taxes

 

$

49,955

 

$

10,138

 

$

?

 

 

$

60,093

EBITDA

 

$

56,185

 

$

23,060

 

$

?

 

 

$

79,245

 

 

Rack Back (1)

 

Rack Forward (2)

 

Eliminations (3)

 

Total Lubricants
and Specialty
Products

 

 

(In thousands)

Six months ended June 30, 2022

 

 

 

 

 

 

 

 

Sales and other revenues

 

$

637,214

 

$

1,442,389

 

$

(474,653

)

 

$

1,604,950

Cost of products sold

 

$

427,634

 

$

1,128,024

 

$

(474,653

)

 

$

1,081,005

Operating expenses

 

$

68,887

 

$

71,584

 

$

?

 

 

$

140,471

Selling, general and administrative expenses

 

$

11,843

 

$

73,461

 

$

?

 

 

$

85,304

Depreciation and amortization

 

$

15,269

 

$

25,930

 

$

?

 

 

$

41,199

Income from operations

 

$

113,581

 

$

143,390

 

$

?

 

 

$

256,971

Income before interest and income taxes

 

$

116,181

 

$

143,636

 

$

?

 

 

$

259,817

EBITDA

 

$

131,450

 

$

169,566

 

$

?

 

 

$

301,016

 

 

 

 

 

 

 

 

 

Six months ended June 30, 2021

 

 

 

 

 

 

 

 

Sales and other revenues

 

$

427,927

 

$

1,112,457

 

$

(346,632

)

 

$

1,193,752

Cost of products sold

 

$

295,812

 

$

873,561

 

$

(346,632

)

 

$

822,741

Operating expenses

 

$

57,727

 

$

64,336

 

$

?

 

 

$

122,063

Selling, general and administrative expenses

 

$

12,653

 

$

70,483

 

$

?

 

 

$

83,136

Depreciation and amortization

 

$

13,535

 

$

25,738

 

$

?

 

 

$

39,273

Income from operations

 

$

48,200

 

$

78,339

 

$

?

 

 

$

126,539

Income before interest and income taxes

 

$

48,200

 

$

78,878

 

$

?

 

 

$

127,078

EBITDA

 

$

61,735

 

$

104,616

 

$

?

 

 

$

166,351

(1)

 

Rack Back consists of the PCLI base oil production activities, by-product sales to third parties and intra-segment base oil sales to Rack Forward.

(2)

 

Rack Forward activities include the purchase of base oils from Rack Back and the blending, packaging, marketing and distribution and sales of finished lubricants and specialty products to third parties.

(3)

 

Intra-segment sales of Rack Back produced base oils to Rack Forward are eliminated under the "Eliminations" column.

Reconciliations to Amounts Reported Under Generally Accepted Accounting Principles

Reconciliations of earnings before interest, taxes, depreciation and amortization ("EBITDA") and EBITDA excluding special items ("Adjusted EBITDA") to amounts reported under generally accepted accounting principles ("GAAP") in financial statements.

Earnings before interest, taxes, depreciation and amortization, referred to as EBITDA, is calculated as net income attributable to HF Sinclair stockholders plus (i) interest expense, net of interest income, (ii) income tax provision and (iii) depreciation and amortization. Adjusted EBITDA is calculated as EBITDA plus or minus (i) lower of cost or market inventory valuation adjustments, (ii) severance costs, (iii) restructuring charges, (iv) Cheyenne refinery LIFO inventory liquidation costs, (v) decommissioning costs, (vi) acquisition integration and regulatory costs and (vii) gain on tariff settlement.

EBITDA and Adjusted EBITDA are not calculations provided for under accounting principles generally accepted in the United States; however, the amounts included in these calculations are derived from amounts included in our consolidated financial statements. EBITDA and Adjusted EBITDA should not be considered as alternatives to net income or operating income as an indication of our operating performance or as an alternative to operating cash flow as a measure of liquidity. EBITDA and Adjusted EBITDA are not necessarily comparable to similarly titled measures of other companies. These are presented here because they are widely used financial indicators used by investors and analysts to measure performance. EBITDA and Adjusted EBITDA are also used by our management for internal analysis and as a basis for financial covenants.

Set forth below is our calculation of EBITDA and Adjusted EBITDA.

 

 

Three Months Ended

June 30,

 

Six Months Ended

June 30,

 

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

 

 

(In thousands)

Net income attributable to HF Sinclair stockholders

 

$

1,221,262

 

 

$

168,850

 

 

$

1,381,236

 

 

$

317,067

 

Add interest expense

 

 

38,961

 

 

 

28,942

 

 

 

73,820

 

 

 

67,328

 

Subtract interest income

 

 

(1,844

)

 

 

(1,029

)

 

 

(2,841

)

 

 

(2,060

)

Add (subtract) income tax expense (benefit)

 

 

383,493

 

 

 

123,485

 

 

 

404,822

 

 

 

95,178

 

Add depreciation and amortization

 

 

164,044

 

 

 

124,042

 

 

 

308,645

 

 

 

248,121

 

EBITDA

 

$

1,805,916

 

 

$

444,290

 

 

$

2,165,682

 

 

$

725,634

 

Subtract lower of cost or market inventory valuation adjustment

 

 

34,543

 

 

 

(118,825

)

 

 

25,992

 

 

 

(318,862

)

Add severance costs

 

 

?

 

 

 

194

 

 

 

?

 

 

 

708

 

Add restructuring charges

 

 

?

 

 

 

?

 

 

 

?

 

 

 

7,813

 

Add Cheyenne refinery LIFO inventory liquidation costs

 

 

?

 

 

 

?

 

 

 

?

 

 

 

923

 

Add decommissioning costs

 

 

512

 

 

 

8,096

 

 

 

1,469

 

 

 

16,347

 

Add acquisition integration and regulatory costs

 

 

12,037

 

 

 

746

 

 

 

36,572

 

 

 

746

 

Subtract gain on tariff settlement

 

 

?

 

 

 

?

 

 

 

?

 

 

 

(51,500

)

Adjusted EBITDA

 

$

1,853,008

 

 

$

334,501

 

 

$

2,229,715

 

 

$

381,809

 

EBITDA and Adjusted EBITDA attributable to our Refining segment is presented below:

 

 

Three Months Ended

June 30,

 

Six Months Ended

June 30,

Refining Segment

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

 

(In thousands)

Income before interest and income taxes (1)

 

$

1,558,120

 

$

250,111

 

 

$

1,671,171

 

$

295,788

 

Add depreciation and amortization

 

 

102,780

 

 

79,938

 

 

 

197,461

 

 

168,020

 

EBITDA

 

 

1,660,900

 

 

330,049

 

 

 

1,868,632

 

 

463,808

 

Subtract lower of cost or market inventory valuation adjustment

 

 

?

 

 

(118,825

)

 

 

?

 

 

(318,353

)

Adjusted EBITDA

 

$

1,660,900

 

$

211,224

 

 

$

1,868,632

 

$

145,455

 

(1)

 

Income before interest and income taxes of our Refining segment represents income plus (i) interest expense, net of interest income and (ii) income tax provision.

EBITDA and Adjusted EBITDA attributable to our Renewables segment is set forth below:

 

 

Three Months Ended

June 30,

 

Six Months Ended

June 30,

Renewables Segment

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

 

 

(In thousands)

Loss before interest and income taxes (1)

 

$

(73,202

)

 

$

(11,547

)

 

$

(95,304

)

 

$

(24,710

)

Add depreciation and amortization

 

 

10,371

 

 

 

316

 

 

 

16,171

 

 

 

658

 

EBITDA

 

 

(62,831

)

 

 

(11,231

)

 

 

(79,133

)

 

 

(24,052

)

Subtract lower of cost or market inventory valuation adjustment

 

 

34,543

 

 

 

?

 

 

 

25,992

 

 

 

?

 

Adjusted EBITDA

 

$

(28,288

)

 

$

(11,231

)

 

$

(53,141

)

 

$

(24,052

)

(1)

 

Loss before interest and income taxes of our Renewables segment represents loss plus (i) interest expense, net of interest income and (ii) income tax provision.

EBITDA attributable to our Marketing segment is set forth below:

Marketing Segment

 

Three Months Ended

June 30, 2022

 

Six Months Ended

June 30, 2022

 

 

(In thousands)

Income before interest and income taxes (1)

 

$

19,502

 

$

24,771

Add depreciation and amortization

 

 

4,418

 

 

4,919

EBITDA

 

$

23,920

 

$

29,690

(1)

 

Income before interest and income taxes of our Marketing segment represents income plus (i) interest expense, net of interest income and (ii) income tax provision.

EBITDA and Adjusted EBITDA attributable to our Lubricants and Specialty Products segment is set forth below.

Lubricants and Specialty Products Segment

 

Rack Back

 

Rack Forward

 

Total Lubricants
and Specialty
Products

 

 

(In thousands)

Three months ended June 30, 2022

 

 

 

 

 

 

Income before interest and income taxes (1)

 

$

58,131

 

$

76,985

 

$

135,116

Add depreciation and amortization

 

 

7,712

 

 

12,893

 

 

20,605

EBITDA

 

$

65,843

 

$

89,878

 

$

155,721

 

 

 

 

 

 

 

Three months ended June 30, 2021

 

 

 

 

 

 

Income before interest and income taxes (1)

 

$

49,955

 

$

10,138

 

$

60,093

Add depreciation and amortization

 

 

6,230

 

 

12,922

 

 

19,152

EBITDA

 

 

56,185

 

 

23,060

 

 

79,245

Lubricants and Specialty Products Segment

 

Rack Back

 

Rack Forward

 

Total Lubricants
and Specialty
Products

 

 

(In thousands)

Six months ended June 30, 2022

 

 

 

 

 

 

Income before interest and income taxes (1)

 

$

116,181

 

$

143,636

 

$

259,817

Add depreciation and amortization

 

 

15,269

 

 

25,930

 

 

41,199

EBITDA

 

 

131,450

 

 

169,566

 

 

301,016

 

 

 

 

 

 

 

Six months ended June 30, 2021

 

 

 

 

 

 

Income before interest and income taxes (1)

 

$

48,200

 

$

78,878

 

$

127,078

Add depreciation and amortization

 

 

13,535

 

 

25,738

 

 

39,273

EBITDA

 

 

61,735

 

 

104,616

 

 

166,351

Add restructuring charges

 

 

1,079

 

 

6,734

 

 

7,813

Adjusted EBITDA

 

$

62,814

 

$

111,350

 

$

174,164

(1)

 

Income before interest and income taxes of our Lubricants and Specialty Products segment represents income plus (i) interest expense, net of interest income and (ii) income tax provision.

Reconciliations of refinery operating information (non-GAAP performance measures) to amounts reported under generally accepted accounting principles in financial statements.

Refinery gross margin and net operating margin are non-GAAP performance measures that are used by our management and others to compare our refining performance to that of other companies in our industry. We believe these margin measures are helpful to investors in evaluating our refining performance on a relative and absolute basis. Refinery gross margin per produced barrel sold is total Refining segment revenues less total Refining segment cost of products sold, exclusive of lower of cost or market inventory valuation adjustments, divided by sales volumes of produced refined products sold. Net operating margin per barrel sold is the difference between refinery gross margin and refinery operating expenses per produced barrel sold. These two margins do not include the non-cash effects of lower of cost or market inventory valuation adjustments and depreciation and amortization. Each of these component performance measures can be reconciled directly to our consolidated statements of income. Other companies in our industry may not calculate these performance measures in the same manner.

Below are reconciliations to our consolidated statements of income for refinery net operating and gross margin and operating expenses, in each case averaged per produced barrel sold. Due to rounding of reported numbers, some amounts may not calculate exactly.

Reconciliation of average Refining segment net operating margin per produced barrel sold to refinery gross margin to total sales and other revenues

 

 

Three Months Ended

June 30,

 

Six Months Ended

June 30,

 

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

 

 

(Dollars in thousands, except per barrel amounts)

Consolidated

 

 

 

 

 

 

 

 

Net operating margin per produced barrel sold

 

$

28.49

 

 

$

5.98

 

 

$

18.20

 

 

$

2.82

 

Add average refinery operating expenses per produced barrel sold

 

 

7.87

 

 

 

5.73

 

 

 

7.73

 

 

 

7.25

 

Refinery gross margin per produced barrel sold

 

 

36.36

 

 

 

11.71

 

 

 

25.93

 

 

 

10.07

 

Times produced barrels sold (BPD)

 

 

655,570

 

 

 

443,940

 

 

 

589,240

 

 

 

399,690

 

Times number of days in period

 

 

91

 

 

 

91

 

 

 

181

 

 

 

181

 

Refinery gross margin

 

 

2,169,124

 

 

 

473,067

 

 

 

2,765,498

 

 

 

728,503

 

Add rounding

 

 

172

 

 

 

73

 

 

 

355

 

 

 

189

 

Total Refining segment gross margin

 

 

2,169,296

 

 

 

473,140

 

 

 

2,765,853

 

 

 

728,692

 

Add Refining segment cost of products sold

 

 

8,119,285

 

 

 

3,619,319

 

 

 

14,028,895

 

 

 

6,381,262

 

Refining segment sales and other revenues

 

 

10,288,581

 

 

 

4,092,459

 

 

 

16,794,748

 

 

 

7,109,954

 

Add Renewables segment sales and other revenues

 

 

194,578

 

 

 

?

 

 

 

241,945

 

 

 

?

 

Add Marketing segment sales and other revenues

 

 

1,336,302

 

 

 

?

 

 

 

1,613,343

 

 

 

?

 

Add Lubricants and Specialty Products segment sales and other revenues

 

 

849,941

 

 

 

669,189

 

 

 

1,604,950

 

 

 

1,193,752

 

Add HEP segment sales and other revenues

 

 

135,770

 

 

 

126,234

 

 

 

255,968

 

 

 

253,418

 

Subtract corporate, other and eliminations

 

 

(1,643,012

)

 

 

(310,759

)

 

 

(1,890,044

)

 

 

(475,708

)

Sales and other revenues

 

$

11,162,160

 

 

$

4,577,123

 

 

$

18,620,910

 

 

$

8,081,416

 

Reconciliation of average Refining segment operating expenses per produced barrel sold to total operating expenses

 

 

Three Months Ended

June 30,

 

Six Months Ended

June 30,

 

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

 

 

(Dollars in thousands, except per barrel amounts)

Consolidated

 

 

 

 

 

 

 

 

Average operating expenses per produced barrel sold

 

$

7.87

 

 

$

5.73

 

 

$

7.73

 

 

$

7.25

 

Times produced barrels sold (BPD)

 

 

655,570

 

 

 

443,940

 

 

 

589,240

 

 

 

399,690

 

Times number of days in period

 

 

91

 

 

 

91

 

 

 

181

 

 

 

181

 

Refinery operating expenses

 

 

469,500

 

 

 

231,484

 

 

$

824,423

 

 

$

524,493

 

Subtract rounding

 

 

(196

)

 

 

(62

)

 

 

(147

)

 

 

(216

)

Total Refining segment operating expenses

 

 

469,304

 

 

 

231,422

 

 

 

824,276

 

 

 

524,277

 

Add Renewables segment operating expenses

 

 

29,273

 

 

 

11,231

 

 

 

56,369

 

 

 

24,052

 

Add Lubricants and Specialty Products segment operating expenses

 

 

74,470

 

 

 

61,310

 

 

 

140,471

 

 

 

122,063

 

Add HEP segment operating expenses

 

 

53,899

 

 

 

42,068

 

 

 

96,523

 

 

 

83,433

 

Subtract corporate, other and eliminations

 

 

(20,819

)

 

 

(11,840

)

 

 

(34,078

)

 

 

(19,725

)

Operating expenses (exclusive of depreciation and amortization)

 

$

606,127

 

 

$

334,191

 

 

$

1,083,561

 

 

$

734,100

 

Reconciliation of renewables operating information (non-GAAP performance measures) to amounts reported under generally accepted accounting principles in financial statements.

Renewables gross margin and net operating margin are non-GAAP performance measures that are used by our management and others to compare our renewables performance to that of other companies in our industry. We believe these margin measures are helpful to investors in evaluating our renewables performance on a relative and absolute basis. Renewables gross margin per produced gallon sold is total Renewables segment revenues less total Renewables segment cost of products sold, exclusive of lower of cost or market inventory valuation adjustments, divided by sales volumes of produced renewables products sold. Net operating margin per produced gallon sold is the difference between renewables gross margin and renewables operating expenses per produced gallon sold. These two margins do not include the non-cash effects of lower of cost or market inventory valuation adjustments and depreciation and amortization. Each of these component performance measures can be reconciled directly to our consolidated statements of income. Other companies in our industry may not calculate these performance measures in the same manner.

Reconciliation of renewables gross margin and operating expenses to gross margin per produced gallon sold and net operating margin per produced gallon sold

 

 

Three Months Ended

June 30, 2022

 

Six Months Ended

June 30, 2022

 

 

(In thousands, except for per gallon amounts)

Renewables segment sales and other revenues

 

$

194,578

 

 

$

241,945

 

Renewables segment cost of products sold

 

 

192,662

 

 

 

236,933

 

Lower of cost or market inventory adjustment

 

 

34,543

 

 

 

25,992

 

 

 

 

(32,627

)

 

 

(20,980

)

Subtract lower of cost or market inventory adjustment

 

 

34,543

 

 

 

25,992

 

Renewables gross margin

 

$

1,916

 

 

$

5,012

 

 

 

 

 

 

Renewables operating expense

 

$

29,273

 

 

$

56,369

 

Produced gallons sold (in thousand gallons)

 

 

25,688

 

 

 

30,632

 

 

 

 

 

 

Renewables gross margin per produced gallon sold

 

$

0.07

 

 

$

0.16

 

Less operating expense per produced gallon sold

 

 

1.14

 

 

 

1.84

 

Net operating margin per produced gallon sold

 

$

(1.07

)

 

$

(1.68

)

Reconciliation of Marketing operating information (non-GAAP performance measures) to amounts reported under generally accepted accounting principles in financial statements.

Marketing gross margin is a non-GAAP performance measure that is used by our management and others to compare our Marketing performance to that of other companies in our industry. We believe this margin measure is helpful to investors in evaluating our Marketing performance on a relative and absolute basis. Marketing gross margin per gallon sold is total Marketing segment revenues less total Marketing segment cost of products sold divided by sales volumes of Marketing products sold. This margin does not include the non-cash effects of depreciation and amortization. This component performance measure can be reconciled directly to our consolidated statements of income. Other companies in our industry may not calculate these performance measures in the same manner.

Reconciliation of Marketing gross margin to gross margin per gallon sold

 

 

Three Months Ended

June 30, 2022

 

Six Months Ended

June 30, 2022

 

 

(In thousands, except for per gallon amounts)

Marketing segment sales and other revenues

 

$

1,336,302

 

$

1,613,343

Marketing segment cost of products sold

 

 

1,311,333

 

 

1,582,464

Marketing gross margin

 

$

24,969

 

$

30,879

 

 

 

 

 

Sales volumes (in thousand gallons)

 

 

335,106

 

 

420,019

 

 

 

 

 

Marketing segment gross margin per gallon sold

 

$

0.07

 

$

0.07

Reconciliation of net income attributable to HF Sinclair stockholders to adjusted net income attributable to HF Sinclair stockholders

Adjusted net income attributable to HF Sinclair stockholders is a non-GAAP financial measure that excludes non-cash lower of cost or market inventory valuation adjustments, severance costs, restructuring charges, Cheyenne refinery LIFO inventory liquidation costs, decommissioning costs, acquisition integration and regulatory costs and gain on tariff settlement. We believe this measure is helpful to investors and others in evaluating our financial performance and to compare our results to that of other companies in our industry. Similarly titled performance measures of other companies may not be calculated in the same manner.

 

 

Three Months Ended

June 30,

 

Six Months Ended

June 30,

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

 

(In thousands, except per share amounts)

Consolidated

 

 

 

 

 

 

 

 

GAAP:

 

 

 

 

 

 

 

 

Income before income taxes

 

$

1,636,401

 

$

318,252

 

 

$

1,843,031

 

$

472,795

 

Income tax expense

 

 

383,493

 

 

123,485

 

 

 

404,822

 

 

95,178

 

Net income

 

 

1,252,908

 

 

194,767

 

 

 

1,438,209

 

 

377,617

 

Less net income attributable to noncontrolling interest

 

 

31,646

 

 

25,917

 

 

 

56,973

 

 

60,550

 

Net income attributable to HF Sinclair stockholders

 

 

1,221,262

 

 

168,850

 

 

 

1,381,236

 

 

317,067

 

 

 

 

 

 

 

 

 

 

Non-GAAP adjustments to arrive at adjusted results:

 

 

 

 

 

 

 

 

Lower of cost or market inventory valuation adjustment

 

 

34,543

 

 

(118,825

)

 

 

25,992

 

 

(318,862

)

Severance costs

 

 

?

 

 

194

 

 

 

?

 

 

708

 

Restructuring charges

 

 

?

 

 

?

 

 

 

?

 

 

7,813

 

Cheyenne refinery LIFO inventory liquidation costs

 

 

?

 

 

?

 

 

 

?

 

 

923

 

Decommissioning costs

 

 

512

 

 

8,096

 

 

 

1,469

 

 

16,347

 

Acquisition integration and regulatory costs

 

 

12,451

 

 

746

 

 

 

37,482

 

 

746

 

Gain on tariff settlement

 

 

?

 

 

?

 

 

 

?

 

 

(51,500

)

Total adjustments to income before income taxes

 

 

47,506

 

 

(109,043

)

 

 

64,943

 

 

(343,825

)

Adjustment to income tax expense (1)

 

 

9,832

 

 

(83,987

)

 

 

11,107

 

 

(84,512

)

Adjustment to net income attributable to noncontrolling interest

 

 

414

 

 

?

 

 

 

910

 

 

?

 

Total adjustments, net of tax

 

 

37,260

 

 

(25,056

)

 

 

52,926

 

 

(259,313

)

 

 

 

 

 

 

 

 

 

Adjusted results - Non-GAAP:

 

 

 

 

 

 

 

 

Adjusted income before income taxes

 

 

1,683,907

 

 

209,209

 

 

 

1,907,974

 

 

128,970

 

Adjusted income tax expense (2)

 

 

393,325

 

 

39,498

 

 

 

415,929

 

 

10,666

 

Adjusted net income

 

 

1,290,582

 

 

169,711

 

 

 

1,492,045

 

 

118,304

 

Less net income attributable to noncontrolling interest

 

 

32,060

 

 

25,917

 

 

 

57,883

 

 

60,550

 

Adjusted net income attributable to HF Sinclair stockholders

 

$

1,258,522

 

$

143,794

 

 

$

1,434,162

 

$

57,754

 

Adjusted earnings per share - diluted (3)

 

$

5.59

 

$

0.87

 

 

$

7.12

 

$

0.35

 

(1)

 

Represents adjustment to GAAP income tax expense to arrive at adjusted income tax expense (benefit), which is computed as follows:

 

 

Three Months Ended

June 30,

 

Six Months Ended

June 30,

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

 

(In thousands)

 

 

 

 

 

 

 

 

 

Non-GAAP income tax expense (2)

 

$

393,325

 

$

39,498

 

 

$

415,929

 

$

10,666

 

Add (subtract) GAAP income tax expense

 

 

383,493

 

 

123,485

 

 

 

404,822

 

 

95,178

 

Non-GAAP adjustment to income tax expense

 

$

9,832

 

$

(83,987

)

 

$

11,107

 

$

(84,512

)

(2)

 

Non-GAAP income tax expense is computed by (a) adjusting HF Sinclair's consolidated estimated Annual Effective Tax Rate ("AETR") for GAAP purposes for the effects of the above Non-GAAP adjustments (b) applying the resulting Adjusted Non-GAAP AETR to Non-GAAP adjusted income before income taxes and (c) adjusting for discrete tax items applicable to the period.

 

 

 

(3)

 

Adjusted earnings per share - diluted is calculated as adjusted net income attributable to HF Sinclair stockholders divided by the average number of shares of common stock outstanding assuming dilution, which is based on weighted-average diluted shares outstanding as that used in the GAAP diluted earnings per share calculation. Income allocated to participating securities, if applicable, in the adjusted earnings per share calculation is calculated the same way as that used in GAAP diluted earnings per share calculation.

Reconciliation of effective tax rate to adjusted effective tax rate

 

 

Three Months Ended

June 30,

 

Six Months Ended

June 30,

 

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

 

 

(Dollars in thousands)

GAAP:

 

 

 

 

 

 

 

 

Income before income taxes

 

$

1,636,401

 

 

$

318,252

 

 

$

1,843,031

 

 

$

472,795

 

Income tax expense

 

$

383,493

 

 

$

123,485

 

 

$

404,822

 

 

$

95,178

 

Effective tax rate for GAAP financial statements

 

 

23.4

%

 

 

38.8

%

 

 

22.0

%

 

 

20.1

%

Adjusted - Non-GAAP:

 

 

 

 

 

 

 

 

Effect of Non-GAAP adjustments

 

 

?

%

 

 

(19.9

)%

 

 

(0.2

)%

 

 

(11.8

)%

Effective tax rate for adjusted results

 

 

23.4

%

 

 

18.9

%

 

 

21.8

%

 

 

8.3

%

 


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