HF Sinclair Corporation

Welcome to the HF Sinclair Corporation and Holley Energy Partners first quarter 2022 conference call and webcast. Hosting the call today is Mike Jennings, Chief Executive Officer of HF Sinclair and Holley Energy Partners. He is joined by Rich Vallabaugh, Executive Vice President and Chief Financial Officer of HF Sinclair and President of Holley Energy Partners. Tim Goh, President and Chief Operating Officer of HF Sinclair. and Tom Curry, President, HF Sinclair Renewables. At this time, all participants have been placed in a listen-only mode, and the floor will be open for your questions following the presentation. If you would like to ask a question at that time, please press star 1 on your touchtone phone. If at any point your question has been answered, you may remove yourself from the queue by pressing star 1 again. If you should require operator assistance, please press star 0, We ask that you please limit yourself to one question and one follow-up. Additionally, we ask that you pick up your handset to allow optimal sound quality. Please note that this conference is being recorded. It is now my pleasure to turn the floor over to Craig Berry, Vice President, Investor Relations. Craig, you may begin.

Thank you, Chantel. Good morning, everyone, and welcome to HF Sinclair Corporation and Holley Energy Partners' first quarter 2022 earnings call. This morning, we issued press releases announcing results for the quarter ending March 31, 2022. If you would like a copy of the press releases, you may find them on our websites at hfsinclair.com and hollyenergy.com. Before we proceed with remarks, please note the safe harbor disclosure statement in today's press releases. In summary, it says statements made regarding management expectations, judgments, or predictions are forward-looking statements. These statements are intended to be covered under the safe harbor provisions of federal security laws. There are many factors that could cause results to differ from expectations, including those noted in our SEC filing. The call also may include discussion of non-GAAP measures. Please see the earnings press releases for reconciliations to GAAP financial measures. And please note any time-sensitive information provided on today's call may no longer be accurate at the time of any webcast replay or rereading of the transcript. And with that, I'll turn the call over to Mike. Great. Thank you, Craig.

Good morning, everyone. The first quarter of 2022 was transformational as we closed on the acquisition of the Sinclair companies, marking the new HF Sinclair, and we 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 lubricant segments. We reported first quarter net income attributable to H.F. Sinclair shareholders of $160 million, or 90 cents per diluted share. These results reflect special items that collectively decreased net income by $16 million. Excluding the items, adjusted net income for the quarter was 176 million, or 99 cents per diluted share, compared to net loss of $85 million, or negative 53 cents per diluted share for the same period in 2021. Adjusted EBITDA for the current quarter was $377 million, an increase of $329 million compared to the first quarter of 2021. With the closing of the acquisitions of the Puget Sound Refinery and Sinclair and our renewables business approaching full operation, we're pleased to announce the first milestone in our capital allocation plan. The H.F. Sinclair Board of Directors has declared the reinstatement of the regular quarterly dividend at an increased rate of $0.40 per share. This announcement reflects our commitment to our capital allocation strategy of returning $1 billion in excess cash to shareholders over the next 12 months, with the long-term target of returning 50% of our net income to shareholders through dividends and buybacks. The refining segment reported EBITDA of $208 million compared to $134 million for the first quarter of 2021 and adjusted EBITDA of $208 million compared to an adjusted loss of $65 million. This increase was driven by higher sales volumes from the Puget Sound and Sinclair acquisitions, as well as the impact of stronger product demand and gross margins. Consolidated refinery gross margin was $12.69 per produced barrel, a 59% increase compared to the same period last year. First quarter proof throughput averaged 525,000 barrels per day. The renewable segment reported adjusted EBITDA of negative 25 million, and total sales volumes were approximately 5 million gallons for the first quarter of 2022. The Cheyenne Renewable Diesel Unit was mechanically complete in the fourth quarter of 21 and fully operational in the first quarter of 2022. The Free 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 complete in the second quarter of 2022. Also, effective with the Sinclair acquisition that closed March 14th, The renewable segment includes the Sinclair RDU. We will continue to ramp up production and optimize these assets with the expectation of modest positive earnings in the second quarter. The marketing segment EBITDA was $6 million and total branded fuel sales volumes were 85 million gallons, representing a seven cent margin per gallon for the first quarter of 2022. We believe the addition of the branded marketing business provides a consistent sales channel with margin uplift for produced fuels, and we remain focused on growing this segment in our existing geographies. Within our lubricants and specialty products segment, for the first quarter of 2022, we reported EBITDA of $145 million, compared to $87 million in the same period last year. This increase was driven by strong finished product demand and pricing initiatives that outpaced rising feedstock and energy costs. HEP reported an EBITDA of $73 million for the first quarter of 22 compared to $96 million in the first quarter of 2021. The decrease is mainly attributable to a $25 million gain on sales type lease accounting that was recorded in the first quarter of 21. Looking forward, as we head into summer driving season, refining fundamentals are very favorable due to strong gasoline and diesel demand, coupled with low product inventories. Together with our new employees, we remain focused on executing our strategy, which includes the successful integration of our new assets, the realization of $100 million in synergies over the next two years, ramping up production in our renewable segment, and returning excess cash to shareholders. So with that, let me turn the call over to Rich.