HF Sinclair Corporation

HF Sinclair. He is joined by Agnes Atenasov, Chief Financial Officer, Steve Ledbetter, EVP of Commercial, Valerie Pompa, EVP of Operations, and Matt Joyce, SVP of Lubricants and Specialties. At this time, all participants have been placed in a listen-only mode, and the floor will be open for your questions following the presentation. If you would like to ask a question during that time, please press star and then one on your touch phone keypad. If at any point your question has been answered, you may remove yourself from the queue by pressing the pound key. If you should require operator assistance, please press star zero. We ask that you limit your questions to one question and one follow-up. Additionally, we ask that you pick up your handset to allow optimal sound quality, and please note that this conference is being recorded. It is now my pleasure to turn the floor over to Craig Beery, Vice President, Investor Relations. Craig, you may now go ahead, please.

Thank you, Ellie. Good morning, everyone, and welcome to HF Sinclair Corporation's second quarter 2025 earnings call. This morning, we issued a press release announcing results for the quarter ending June 30, 2025. If you would like a copy of the earnings press release, you may find it on our website at hfsinclair.com. Before we proceed with remarks, please note the safe harbor disclosure statement in today's press release. In summary, it says statements made regarding management expectations, judgments, or predictions are forward-looking statements. These statements are intended to be covered under the safe harbor provisions of federal security laws. There are many factors that could cause results to differ from expectations, including those noted in our SEC filings. The call also may include discussion of non-GAAP measures. Please see the earnings press release for reconciliations to GAAP financial measures. Also, please note any time-sensitive information provided on today's call may no longer be accurate at the time of any webcast replay or rereading of the transcript. And with that, I'll turn the call over to Tim.

Good morning, everyone. Thank you for joining our call. During the second quarter of 2025, we made strong progress against our strategic priorities to improve reliability, optimization, and integration. And I'm pleased to report we delivered sequential improvements over the last three quarters in our three key metrics, refining throughput, capture, and lower operating costs, allowing us to return $145 million to stockholders through dividend and share repurchases in the current period. Looking forward, we remain focused on advancing these priorities further, and with the majority of our turnarounds behind us in 2025, we believe we are well positioned to continue to execute our strategy and return excess cash to our shareholders. Now let me cover our segment highlights. In refining for the second quarter, we successfully completed the scheduled turnaround activities at our Tulsa and Parco refineries. We also delivered sequential quarter improvements in capture and crude throughput Despite heavy maintenance, weaker crude differentials, and a rising RIN price environment. In addition, we achieved operating expense per throughput barrel of $7.32, showing significant progress again towards our near-term goal of $7.25 per barrel. Looking ahead, we have one remaining turnaround at our Puget Sound refinery scheduled to begin at the end of the third quarter. In renewable, We continue to deliver near break-even EBITDA results in this tough economic environment as we continue to maximize our low CI feedstock mix while controlling our operating expenses. These results are indicative of how much we've improved our renewable diesel business, especially in light of the significant loss of BTC year over year. In the second quarter, we began to partially recognize some benefits from the producer's tax credit and expect to capture additional incremental PTC value in the third quarter. Our marketing segment delivered $25 million in EBITDA and achieved an adjusted gross margin of 10 cents per gallon delivered by optimizing our business since the Sinclair acquisition. We also grew our branded supplied stores by a net of 55 sites during the quarter and up a net 155 stores over the past 12 months both records for a quarter and for a trailing 12 month period. And we have over 80 additional supplied branded sites signed and targeted to bring online over the next six to 12 months. In lubricants and specialties, we reported $55 million in EBITDA, which includes a significant $20 million in FIFO headwinds due to falling feedstock prices. During the period, Sales volumes and product mix were impacted by our Mississauga turnaround. However, we continue to execute on our strategy of forward integrating our base oils into both finished and specialty businesses, most notably launching a Sinclair Lubricants product offering in the United States. In our midstream business, we delivered $112 million in adjusted EBITDA as we benefited from higher pipeline revenues and lower operating costs. from our focused integration efforts since the HEP buy-in. During the quarter, we returned $145 million in cash to shareholders consisting of 50 million in share repurchases and $95 million in regular dividends. Since the Sinclair acquisition in March 2022, we have returned over $4.2 billion in cash to shareholders and have reduced our share count by over 58 million shares. As of June 30th, 2025, we had approximately $750 million remaining on our share repurchase authorization. We remain committed to returning excess cash to shareholders while maintaining our investment grade balance sheet. Also today, we announced that our board of directors declared a regular quarterly dividend of 50 cents per share payable on September 4th, 2025 to holders of record on August 21st, 2025. Looking forward, we are encouraged by the continued strength in refining margins across our system, particularly in distillates. We believe our overall strategy is working and delivering visible organic growth to our bottom line, both in refining and our non-refining segments. And we remain committed to executing our strategic priorities in order to continue to return cash to our shareholders. With that, let me turn the call over to Ed.

Thank you, Tim, and good morning, everyone. Let's begin by reviewing HF Sinclair's financial highlights. Today, we reported second quarter net income attributable to HF Sinclair shareholders of $208 million, or $1.10 per diluted share. These results reflect special items that collectively decreased net income by $114 million. Excluding these items, adjusted net income for the second quarter was $322 million, or $1.70 per diluted share compared to adjusted net income of 150 million or 78 cents per diluted share for the same period in 2024. Adjusted EBITDA for the second quarter was 665 million compared to 406 million in the second quarter of 2024. In our refining segment, second quarter adjusted EBITDA was 476 million compared to 187 million in the second quarter of 2024. This increase was principally driven by higher adjusted refinery gross margins in both the west and mid-cum regions, partially offset by lower refined product sales volumes. Food oil charge averaged 616,000 barrels per day for the second quarter compared to 635,000 barrels per day for the second quarter of 2024. This decrease was primarily a result of turnaround activities at our Tulsa and Parker refineries during the second quarter of 2025. In our renewable segment, we reported adjusted EBITDA of negative $2 million in the second quarter, excluding the lower cost of market inventory valuation adjustment benefit of $24 million compared to $2 million of adjusted EBITDA for the second quarter of 2024. Our second quarter 2025 results were impacted by lower sales volumes and margins. During the quarter, we recognized partial benefit from the producer's tax credit. Total sales volumes were 55 million gallons for the second quarter of 2025 compared to 64 million gallons for the second quarter of 2024. A marketing segment reported 25 million for the second quarter compared to 15 million for the second quarter of 2024. This increase was primarily driven by high margins and high grading our mix of stores in the second quarter of 2025. Our lubricants and specialty segment reported EBITDA of $55 million for the second quarter compared to EBITDA of $97 million for the second quarter of 2024. This decrease was primarily driven by lower base oil margins in addition to lower sales volumes as a result of turnaround activities at our Mississauga facility. During the second quarter of 2025, we recognized a FIFO charge of $20 million in the quarter versus a FIFO charge of $14 million in the same period last year. Our midstream segment reported adjusted EBITDA of $112 million in the second quarter compared to $110 million in the same period of last year. This increase was primarily driven by higher pipeline revenues and lower operating expenses, partially offset by lower volumes in the second quarter of 2025. Net cash provided by operations totaled $587 million in the second quarter, which included $179 million of turnaround spend. HF St. Clair capital expenditures totaled $111 million for the second quarter of 2025. As of June 30th, 2025, HF St. Clair's cash balance was $874 million. As of June 30th, we have $2.7 billion of debt outstanding with a debt-to-cap ratio of 22% or net debt-to-cap ratio of 15%. Let's go through some guidance items. With respect to capital spending for full year 2025, We still expect to spend approximately $775 million in sustaining capital, including turnaround and catalysts. This is down $25 million from 2024 and included a non-refining lubricants and specialties turnaround in the first half of 2025. In addition, we expect to spend $100 million in growth capital investments across our business segments. For the third quarter of 2025, we expect to run between 615 and 645,000 barrels per day of crude oil in our refining segment, which reflects the planned turnaround at our Puget Sound refinery. We're now ready to take questions from the audience.

We are now opening the floor for question and answer session. If you'd like to ask a question, please press star followed by one on your telephone keypad. We ask that you limit to one question and one follow-up. If you have additional questions, we welcome you to rejoin the queue. If at any point your question has been answered, you may remove yourself from the queue by pressing the pound key. Thank you. Our first question comes from the line of Manav Gupta of UBS. Your line is now open.

Hey, team. Very strong performance and refining. Captures across both refining systems very strong. Just trying to understand, is this a function of something which happened during the quarter? Or is it also somewhere, when you took over, Tim, you had this policy that you want the most competitive refining system in the business. Is this also a function of you kind of getting there where now your capture rates are matching some of the best in the business? So if you could help us understand the very strong capture rates in both regions.

Hey, Manav, this is Steve Ledbetter. Thanks for the question, and we are quite proud of the performance in capture. Sequentially, as Tim mentioned, quarter over quarter for the past three quarters. You know, despite what we saw in terms of headwinds as far as heavy diffs, narrowing, ANS getting more expensive, as well as the backwardation in the roll, we continued to improve our overall late and crude performance, and that is really improving by creating flexibility of our crude slate, and improving the mode of transportation, how we get that crude into our systems and on our integrated midstream assets. So it helps both ways. I think larger than that, we ran very well. We produced and finished the products that we wanted. Our distillate production was up quarter over quarter, over 10,000 barrels a day. We're continuing to focus on premium, and I think we're looking down the road and around the bend, and we're putting barrels in the markets that we see are coming short and taking advantage of those ARBs. We're just getting better at this and making substantial different changes in how we take more nimble and accurate decisions, and we see that continuing as we move forward.

My follow-up quick here is, look, there were some buybacks, and the quarter margins are stronger. If things stay where they are, should we expect you to probably increase the pace of buybacks? but also there are a number of bolt-on opportunities out there in terms of both lubes and marketing. So how should we think about shareholder returns versus smaller bolt-on opportunities, which historically you have done very well in acquiring stuff, and how should we think about the balance between those two for the cash that you are generating?

Thanks, Manav. This is Athan. That's a great question. We reiterate our strong commitment to our Shareholder returns, as you could see in this past quarter, we're looking at 8%, 9%. If margins continue to be where they are, we anticipate to continue to execute on that priority. History is a good indicator of how we've done. We've delivered historically double-digit returns, and we remain committed to that with respect to how do we balance between organic growth versus capital returns. Organic, we believe we can achieve both. given the cash flow generations in the business. And as we look at capital, as we look at returns on organic projects, those are highly accretive at 20 plus percent IRs and multiples of around four times. So we believe we can achieve both and reward our shareholders for that success.

Thank you so much and congrats on a very strong quarter. Thanks to us.

Your next question comes from the line of Ryan Todd of Piper Sandler. Your line is now open.

Great. Thanks. Maybe a question for you on renewable diesel. How much, if any, of the 45Z credits were you able to accrue in the quarter? And how should we think about that pace changing going forward and then maybe more broadly on the RD side? Can margins continue to struggle despite some positive steps on the regulatory front? Can you maybe talk about what we need to see change for a more constructive macro backdrop there?

Yeah, Ryan, this is Steve. So we were able to begin recognizing PTC in the second quarter, not fully. In the third quarter, we've worked through a number of – appropriate contractual arrangements that will allow us to begin recognizing even more of that. We're not coming in on the exact number, but we've worked through the complexity and difficulty of this legislation and think we have a path forward to where we can capture the most value possible out of the PTC. When you think about the overall structure of the proposed legislation, know the impacts from 45z and as well as rvo you know like everyone else we've been negatively impacted by the ptc versus the briar btc framework but we believe that this structure is supportive to our business relatively speaking you know we're 100 domestic feedstock driven for our production which gives us more qualified value both for lcfs as well as the rim value The ILUC provision eliminations is helpful to us as we do run some VEGIL where it's advantaged in our certain markets. You know, the CARB LCFS amendment's now been passed, so we should see that step up moving forward. And then this large increase in the D4 RBO should be supportive to the entire renewable market structure as a whole. However, we do think that the REN and the LCF values are going to have to do further work to cover that structural gap between PTC and BTC, but we like our position as this is currently structured. Yeah, and Ryan, this is Tim.

I'll just echo what Steve went through here. You know, our strategy has always been to keep this renewable diesel business at break even and slightly positive in these what we consider to be trough and bottom of cycle conditions. And you can see we've done a good job of that over the last year or two. And just waiting for really the market structure to improve. I do think, as you pointed out, that the market structure will improve as we look forward. You saw the CARB group roll out their LCFS tightening. And while the credit bank is still in excess, it is starting to shrink, and we expect the LCF prices to continue to grow in price as the bank continues to whittle down. You saw the RBO proposed numbers come out. Those numbers are very high, and we think the RINs prices have to go up as a result of of those RVO numbers, if those RVO numbers are finalized as they were proposed. So we do think the market structure itself of the renewable diesel business will continue to improve, and we think we're positioned well to take advantage of it. And then the last thing I'll just mention, Steve and Agnes both mentioned this in their remarks, but we only partially recognize PTC so far. We do think we're positioning our contracts and doing the work to be able to recognize more of the PPC in the third quarter. And we think that will also help our renewable business piece of business going forward.

Great. Thank you. Maybe one follow-up on the refiner on the overall, but certainly the refining side. I think if you look at operational performance and the capital number in the quarter, despite some turnaround activity there, it seems like Turnarounds, again, went very smoothly. Can you talk about how this fits into your efforts on operational improvement, where you think you are in the process of kind of getting refinery reliability operations, turnaround, et cetera, to where they need to be?

Yeah, this is Valerie Pompa. Once we complete the turnarounds this year, we'll have completed all of one cycle, if you will. of the assets in the last five years. So our turnaround performance, we will have, I'll say, caught up on our turnarounds coming out of COVID, coming out of the acquisition. So we believe that we're positioned well going into the next five-year cycle around turnarounds. We have continued to improve our turnaround structure, how we execute in the field, and bringing in more and more technology to drive consistent performance. What you're seeing is, you know, the work and the strategy that we've put in place, continuing to pay dividends in our reliability. And I think we're going to see that into the future.

Yeah. And Ryan, this is Tim. You know, we've said this before, maybe on the last call, I can't remember. But, you know, we think we're in the, call it the fifth inning of our operational excellence journey, having been through this first turnaround cycle that Dal just mentioned. And you really are starting to see some of the inflection and the results that we're seeing. Reliability, much improved. You're seeing that in throughput. Capture, much improved. You're seeing that as we continue to optimize and integrate these businesses. It's no coincidence that it's been a couple years now since the Puget Sound, the Sinclair, and the HEP acquisitions. And the fruits of those labors are really starting to show up in the results now. You're seeing it in OpEx per barrel as we continue to show that improvement going forward, now getting close to our near-term target. And that's both a numerator and a denominator impact that you're seeing in that OpEx per barrel number. And then lastly, as you point out, our CapEx is starting to show that as well. We had a heavy turnaround in the second quarter, as we showed. But as we look into next year, and we talked about this earlier, we do think that our maintenance capital takes a significant step change down. And you'll start to see that again in our CapEx guidance when we issue that at the end of the year. But all of those proof points that our strategy that we've been preaching on and have been talking about for the last year or two is really working and starting to deliver bottom line results. Great.

Thanks, Tim.

Our next question comes from the line of Philip Shonrith of FBMO. Your line is now open.

Thanks. Good morning. In lubricants, beyond the planned turnaround and the FIFO headwind, can you talk about the margin trajectory for this business in the quarter? how much of that weakness was April driven and how are you seeing things shape up so far in the third quarter?

Hey, Phil, this is Matt Joyce. Thanks for the question. Yeah, I think if we look at the overall performance, you're absolutely right. FIFO headlands and our planned turnaround at Mississauga, which was safely completed, but we did come into some weather and found some work there that causes just take a little bit longer to get back to where we wanted to be versus our scheduled plan. But the culmination of that, along with base oil margins, there was a big turnaround quarter for the industry. But what we saw is that group twos and group threes continue to be a bit long, and we foresee that continuing to be the case into quarter three, which has put some pressure on our base oils. along the way. And if you look at the results with that little bit less volume and the product mix that has a lower profit margin profile, it culminated in the results we saw for the L&S business for the quarter.

Yeah, and so I would just chime in. This is Tim. You know, a few years ago, you know, base oil tightness, a major turnaround, FIFO headwinds, that would have created some significant fluctuations in our quarterly results. And again, the work that Matt and his team have done to really smooth that out, stabilize the business, you see the fluctuations in the market just don't have nearly the same fluctuations that you see in our results now because of the integration work that the LUX business has been able to do.

Okay, great. And then I know you don't have direct exposure to California, but I was wondering if you had any thoughts on the proposed Senate Bill 237, more so on the Energy Commission and CARB engaging with Western states on a more uniform gasoline spec. Maybe this doesn't have any traction, but just wondering if you had any thoughts on potential market impact and how HF and Clara navigate this.

Yeah, this is Steve. I think it's an interesting one. The proposals that are out there, there's a lot of rumors, and I know that there's been some things to get to a regional spec. I don't know that that is going to be successful. And ultimately, if it is extended out from California as the base, I don't think it's going to be good for supply. And so ultimately, I don't know that that's where it will land. Regardless of that, I think our capability to go make the various grades and get into Southern Pad 5 are extended both from our Navajo refining complex as well as our Rockies complex. And we have the ability to flex and take advantage of whatever the spec change may be at the time. But my personal opinion is I don't know that that is going to land in a regional spec that is more stringent than what the current specs of the various regions are.

Yeah, and so I'll just chime in too. You know, we continue to watch all the activities and all the changes that are occurring in California for sure. But our strategy, as we've talked about before, is to continue to directly supply more carb and more carb components through our Puget Sound Refinery, which we are taking advantage of the project that we talked about over the last call to be able to supply even more barrels to that region. And then two, to indirectly supply the neighboring states, whether it be Nevada, whether it be Arizona, through our existing infrastructure and through our existing refineries in the West. And as you can see from our results, our West region is performing very well, taking advantage of some of the opportunities that are presented there. And if you look at demand in general, the West diesel demand, quite honestly, is above five-year highs right now. And that's because of some of the dynamics we just talked about and, of course, renewable diesel production being down. And with that higher petroleum diesel demand that we're seeing in the West, we're able to take full advantage of that.

Great. Thanks.

Question comes from the line of Joe Leach of Morgan Stanley. Your line is now open.

Hey, good morning, all. Thanks for taking my questions. So I wanted to start with the refining macro and your views on supply and demand here. Margin improved in the second quarter and remained supported in July. How are you viewing the balances today from both a supply and demand perspective in the MidCon and Rockies?

Yeah, Joe, this is Steve. I think from a macro perspective, we would say, you know, the supply is more balanced than it was. If you look at the supply, same period versus last year, it's actually down due to utilization. but overall in terms of the balance and the demand aspects we look at gas as relatively flat and our distillate demand as as being up and that's partially driven by some of the things tim mentioned with with lower rd and bio production and lower imported as well as the export economics on distillate and so that looks like that's a good story longer term as well as we're about to jump into the harvest season and then step right into a heating heating oil season. So longer kind of through the year, we see that the diesel is going to be strong. We're very bullish on that. And gas will be trying to get to the end of the driving season and then tail off. But we're roughly net balanced in our in our regions, given current utilization and current demand patterns.

Yeah. And Joe, I would just chime in. This is Tim that that that macro view has improved. over the course of this year. There was a lot of concern earlier in the year that capacity growth would outshine demand growth. And really what we've seen play out over this year is that that's not happening. That demand growth is still ahead of, if not just break even with capacity growth. And that's favorable to refining perspectives and outlook. And I would just say that if you look longer term, the policies of this new administration are also strengthening the outlook for the refining industry. The CRA bill that basically eliminated or reversed the ban on internal combustion engines in California, the big, beautiful bill that is taking away some of the artificial incentives for some of the EV vehicles, at least in my opinion. That's really creating more of a global landscape that's more favorable to our refining industry as well. So the factors that Steve just mentioned, I think, have support from just overall policy as well.

Thanks, Tim. Thanks, Steve. That's helpful. And then on the crude side, there's several moving pieces between OPEC unwinds, Venezuela barrels coming back to the market, Canada wildfires, and Mexico oil production. I could just talk to what you're seeing from a light heavy crude differential and availability standpoint currently as well as expectations going forward.

Yeah, sure. You know, our view Obviously, the differentials are quite a bit more narrow than we've experienced in the past, and that stemmed kind of mid-last year from TMX coming online and those barrels supporting a stronger or a narrow differential finding homes abroad. What we're seeing in terms of the forward curve, we're still looking in Q3 around a $9 to $10 differential, but we're further strengthening out in Q4 around $13. And then I think longer term in the next sometime in 2026, we're seeing a potential diff widening. We haven't really seen the OPEC expansion do much in terms of support or widening those differentials yet. We think that longer term it will, coupled with the production outrunning egress in Canada. But, you know, we found and have been nimble in our ability to go get more and different prudes into our kit because we're connected to many hubs, and I think that's one of the underlying reasons we mentioned earlier about our improved late and crude, specifically in mid-con with our ability to touch those different barrels. But, yeah, looking forward, it looks like we'll get some help in Q4, but not to the level that we've seen in the past couple of years before the TMX expansion.

Great. That's helpful. Thanks for taking my questions.

Question comes from the line of Neil Mehta of Goldman Sachs. Your line is now open.

Yeah, good morning, Tim. We'd just love your updated perspective on M&A, on the refining landscape. I think we all saw the Reuters reporting, which is speculative around Venetia, but just your Your perspective on the bar, how high is it for you to do M&A? You've done really good deals over the last five to six years. So do you think you have the license in the market to go out and do more bolt-ons, less transformative, but bolt-on type of assets?

Yeah, good morning, Neil. As you know, we do not comment on market rumors, and those are market rumors in terms of what you – which you saw in the past week or so. And I've already told you kind of what our focus is and our strategy is on the West and how we want to benefit and capture the opportunities that are out there. But in terms of M&A, you know, we have done well in the past on M&A. We typically work counter cyclically and look for value in terms of refining inorganic opportunities. That hasn't changed, and we will continue to look for those opportunities on a value perspective. I would just say today that bid-ask spread is still very, very wide, and you don't see a lot of refining deals happening over the last few years, and I think that's a result of that refining bid-ask spread. So we'll continue to be open to those opportunities, but it has to be, as you pointed out, at the right value at the right time and be the right asset. And at this point, we haven't found anything that we think will actually improve our portfolio at the right price and at the right time. I will tell you that we do think there are better inorganic opportunities to bolt on in both our marketing and our lubes businesses right now. And so that's what we're continuing to look at. We do think that the opportunity is there. We're not looking for anything huge or We're transformational. We're looking for things that will bolt on and help us accelerate the organic strategy of growth that we've already got going, both in marketing and in lubes. And as we've talked about before, we're very pleased with the progress that we're making in both of those businesses. And to the extent that there is something out there that can help us accelerate that progress, we do think there's opportunities out there that we'll continue to look at.

Okay, that's really helpful, Tim. And then I just wanted to follow up on your comments around return of capital. I think the buyback was a little bit higher than most of us expected in the quarter. The stock is still trading, even after the bounce here, below book value. Balance sheet's in pretty good shape. Is it fair to assume that you can kind of keep this run rate up at the forward curve? And could there even be upsides?

Neil, this is Atlas. Thanks for the follow-up question. Our goal is, again, to continue to meet and exceed expectations with respect to capital returns. We've got strong cash flow generation this quarter. As you can see, we're not looking to hoard cash. So we're returning it back to you, the shareholders.

Yeah, and Neil, you know, Agnes mentioned earlier in the call, you know, we've got a history of returning cash to our shareholders. And I think that's what we can point to is, is our history and our focus and our commitment to do that will continue. You know, I think I said this in my prepared remarks, but if you think about it, in terms of the 60 million of shares that we issued when we bought Sinclair, we have now bought back in 98% of those 60 million shares. And if you add back the shares that we issued as part of HEP, we have bought back a total of 72%. of those total shares that we issued back then. So that's clearly one of our ways to add shareholder value and to get cash back to our shareholders is to buy back those shares. And we continue to be committed to doing that with our excess cash. Okay, perfect.

Thank you, Tim.

Next question comes from the line Teresa Chen of Barclays. Your line is now open.

Good morning. I have a follow-up question on the indirect exposure to Pad 5, setting Puget aside for a minute. Just given the visible capacity reduction in California, from your Navajo facility, in terms of the refined product placement, how much and how far west can you take that barrel? Is it largely to Phoenix? And then from SLC, how much space can you actually utilize on your UNF pipeline? Can you regularly use there since there are shippers on that line, your neighboring SLC refiners, I imagine. Just wanted to understand how much can this realistically move the needle on capture in the west segment as these California facilities close over the next 12 months?

Hey, Teresa, this is Steve. I think you've hit on exactly one of our key what we believe is one of our key strategic advantages. From our Navajo complex, we can take a good portion of our light products, make there into the Phoenix market. That's as far as it goes out of the Navajo refinery. But out of the Rockies complex, not only from our Salt Lake City, Woods Cross refinery, but the other Wyoming refineries, we can take and optimize, kind of upgrade barrels right through the valley up north and then south into Las Vegas. And we have ample space in terms of going and leveraging that integrated asset of UNEV, which we think provides a differentiation for us. And as you rightly call out, that continues to be a hunting ground that we look to go capture moving forward. And all the market fundamentals and dynamics point to us being in a leading space there. So we'll look forward to capturing that as it continues to play out.

And Teresa, I would just say that, you know, pipeline that Steve mentioned, you know, we have spare capacity on that today, but we also have, you know, opportunities to de-bottleneck that fairly simply and fairly straightforward when that time comes. So we believe there's still plenty of opportunity there. And yes, we think it can be meaningfully impactful to our West Capture.

Understood. And on the comment on inorganic opportunities in the marketing and LSP segments, just curious how fragmented are the markets in your areas of specific interest, either by product or by region? How much realistic runway do you have on this inorganic strategy?

Yeah, so, you know, we look to focus our branded put growth in the areas where we have logistics parity and can produce and get it on our midstream assets. That's where we have significant advantages. So you can imagine Pacific Northwest, you can imagine Southern Fab Five in Vegas and the Rockies. When you think about fragmented markets, there's larger players that are coming in, but there's still a lot to do in terms of 10 to 15 site chains that are looking to go simplify or have an exit route, and our brand brings something very strong in those markets. The brand recognition and awareness right through the Rockies into Pad 5 is quite strong, and it's something that is yet untapped. So the fragmentation is an aspect, but there's not been enough consolidation to take some of those opportunities off the table, and we look to go take advantage of some of that in our core markets.

And I would just say, Teresa, that the Dyno brand has really been been taking off here. You can see that in our organic growth results, both the record number of new stores we've added in the second quarter, as well as over the last rolling 12 months. And so we're very pleased with the organic pace of growth that we've got going on. But as Steve mentioned, we do think there's even more opportunities to accelerate that through some inorganic opportunities, which we'll continue to look at along the way. You also asked about lube, so I'll ask Matt to comment on that.

Yeah, Teresa, it's Matt here. You know, we have over 300 lubricant marketers and manufacturers in the United States, and those brands often have, and those businesses have often had a heritage and a long history of great products, solutions, and offerings that could be very complementary to our our business. And so we mentioned it earlier, we're really focused on looking at those opportunities when they become known to us and then whether or not they can help us accelerate our growth into these higher value established markets or some new adjacencies that we don't participate in today. And in all cases, we're looking to use those to further develop our capabilities and competencies, whether that be through technology or supply chain. in different markets that allow for us to get better reach to our customers and to serve the markets where we believe that we can win.

Yeah, and Teresa, you know, we do think the loops and specialties industry is fairly fragmented still. We have been a consolidator in that industry when we put Petro-Canada, Sonoborn, and Red Giant together, and we do think there are more opportunities to do that. You know, our strategy overall in lubes is to continue to grow that finished lubes put, soak up our excess base oils, and to basically drive a multiple expansion in our lubes business as we continue to integrate that base oil and finished lubes business.

Thank you so much.

It comes from the line of Doug Lagasse of Wolf Research. Your line is now open.

Hey, guys. I apologize for being a little late on. You managed to clash with our cousins over in London, so thanks for taking my questions. Tim, I wonder if I could ask two related questions related to the renewables business. Frankly, you actually missed a refining number, but you really kicked our ass on the renewable diesel EBITDA this quarter. I'm trying to understand How much of that is repeatable and put differently? Can you offer any kind of thoughts on what the sustainable EBITDA or the renewable diesel business could be, assuming the user's tax credit continues? The second part of my question, if I can roll it in, is related to SREs, because obviously you guys are exposed to that. And my understanding is that the comment period is due on the 8th of August. But if SREs are granted, that's presumably negative for RINs, which is presumably negative for renewable diesel. So I'm wondering if you can reconcile those two things, how you see the sustainable operating income or EBITDA for renewable diesel and what your stance is on SREs. I'll leave it there. Thank you.

Yeah, Doug, thanks for the question. And I know today was a busy day. So thank you guys for running around and participating in all these calls. I'm disappointed we missed your refining number, but we'll do better next time. It's a great quote.

Yeah, it's a great quote, but there's a few others on renewable diesel is my point.

No, I'm just giving you a hard time, Doug, and we're very pleased with our refining results. But we do know there's always, we have more room for improvement, and we do have our sights to continue to improve in our refining business, and we think next quarter will show even that more improvement as we continue this journey. So it's a fair observation to make, Doug, on that. On renewables, we're very pleased with kind of, like we said, our positioning on renewables. We think with RIMS pricing, LCFS pricing, that Thank you.

If there are no further questions, we will now hand it I turn the floor back to Tim for any closing remarks. Once again, if we don't have any further questions, I'd now like to hand back over to Tim for any closing remarks. Ladies and gentlemen, please be on standby. Thank you. Ladies and gentlemen, please be on standby. We are currently experiencing a bit of a technical issue. Again, please be on standby. We will be back shortly. Thank you.