HollyFrontier Corporation

Welcome to Holly Frontier Corporation's third quarter 2020 conference call and webcast. Hosting the call today from Holly Frontier is Mike Jennings, President and Chief Executive Officer. He is joined by Rich Boliva, Executive Vice President and Chief Financial Officer, Tim Goh, Executive Vice President and Chief Operating Officer, Tom Creary, President of Refining and Marketing, and Bruce Lerner, President of Holly Frontier 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'd 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 the pound key. 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 Beery, Vice President, Investor Relations. Craig, you may begin.

Craig Beery Thank you, Rob. Good morning, everyone, and welcome to Holley Frontier Corporation's third quarter 2020 earnings call. This morning, we issued a press release announcing results for the quarter ending September 30, 2020. If you would like a copy of the press release, you may find one on our website at hollyfrontier.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 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 Mike Jennings. Thank you, Craig.

Good morning, everyone. We're pleased to report solid third quarter results in the face of the economic down cycle caused by the COVID-19 pandemic. We remain focused on the health and safety of our employees, and I'm pleased to report we've had both safe and reliable operations across our three operating businesses during the third quarter. As we work through this last quarter of 2020, I remain confident in both the long-term market for our products and the ability of our talented employees. Turning to our third quarter results, we reported a net loss attributable to Holly Frontier shareholders of $2 million, or one penny per diluted share. These results reflect special items that collectively increased net income by $65 million. Excluding these items, the net loss for the third quarter was $67 million, or negative 41 cents per diluted share. versus adjusted net income of $278 million or $1.68 per diluted share for the same period in 2019. Adjusted EBITDA for the period was $66 million, a decrease of $457 million compared to the third quarter of 2019. The refining segment reported adjusted EBITDA of negative $54 million compared to $425 million for the third quarter of 2019, and consolidated refinery gross margin was $4.93 per produced barrel, a 71% decrease compared to the prior period. This decrease was primarily due to continued weak demand for gasoline and distillates, coupled with compressed crude differentials. Third quarter crude throughput was approximately 391,000 barrels per day, above our guidance of 340,000 to 370,000 barrels. Our plants operated well, and we saw somewhat better product demand than expected in our markets, particularly in the Southwest and Rockies. In August, we ran the last barrel of crude oil at Cheyenne, and we began the conversion to renewable diesel. Our lubricants and specialty products business reported EBITDA of $61 million, compared to $38 million in the third quarter of 2019. Rack forward EBITDA was $79 million, representing a 19% EBITDA margin. The RAC Forward segment saw improvement in industrial and transportation-related end markets, which drove higher demand and unit margins during the third quarter of 2020. Sales volumes improved 24% compared to the second quarter and were down 7% versus the prior year. Within the racked-back portion, demand for base oils increased to fourth quarter 2019 levels, while supply was limited due to a number of factors, including plant closures, reduced run rates at base oil plants co-located with fuels refineries, and hurricane impacts on the U.S. Gulf Coast. This combination of factors drove higher margins and utilization at our facilities during the third quarter. In terms of maintenance, we successfully completed the planned turnaround on our white oils unit at Mississauga that began in late September, and we're back to running at full rates. Poly Energy Partners reported EBITDA of $55 million for the third quarter, compared to $123 million in the third quarter of last year. Reported EBITDA for the third quarter of 2020 included a $36 million goodwill impairment charge, and reported EBITDA for the third quarter of 2019 included a $35 million gain on sales-type leases, both of which eliminated in the consolidated company's financial results. At HEP, we have continued to see incremental improvement in demand for transportation and terminaling services during the third quarter of 2020, particularly in the assets around the Salt Lake area, and we expect this trend to continue through the fourth quarter of this year. Although the current refining outlook remains challenged, we're encouraged by the resilient financial performance from our lubricants and our midstream businesses in the third quarter. We're making progress on all three of our renewable projects, which currently remain on time and on budget. We're confident that demand for transportation fuels will return and will be well positioned for the next upcycle. And with that, let me turn the call to Rich.