Q2 2023 HF Sinclair Corporation Holly Energy Partners LP Earnings Call
Please note this conference is being recorded.
It is now my pleasure to turn the floor over to Craig Biery, Vice President Investor Relations Craig you may begin.
Thank you Andre good morning, everyone and welcome to HFF Sinclair Corporation in Holly Energy Partners second quarter 2023 earnings call. This morning, we issued a press release announcing results for the quarter ending June 32023, if you would like a copy of the press releases you may find them on our website at Hff's Sinclair Dot com and Holly energy Dot 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.
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 releases 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 go.
Good morning today, we reported second quarter 2023, net income attributable to HFC shareholders of $508 million.
$2 52.
Per diluted share.
These results reflect special items that collectively increased net income by $4 million.
These items adjusted net income for the second quarter was $504 million.
Or $2 60 per diluted share compared to adjusted net income of $1 3 billion or $5 59 per diluted share for the same period in 2022.
Adjusted EBITDA for the second quarter was $868 million.
53% decrease compared to the second quarter of 2022.
In our refining segment second quarter 2023, EBITDA was strong at $703 million.
Compared to $1 7 billion in the same period last year.
This decrease was primarily driven by lower refining margins in both the west and mid continent regions and lower refined product sales volumes due to higher maintenance activity.
Operating expenses of $427 million in the second quarter of 2023 improved versus the $469 million recorded in the same period last year as we benefited from lower natural gas costs.
We continue to focus on controllable operating expenses as well as streamlining and optimizing our operations.
Crude oil charge averaged 540 554000 barrels per day in the second quarter of 2023 compared to 627000 barrels per day in the second quarter of 2022 due to higher maintenance activity during the period.
I am pleased to report that the two turnarounds at our Navajo and Parker refineries in the period were completed on time and on budget and we continue to make progress on our long term reliability improvement initiatives.
In our renewable segment, we reported EBITDA of $23 million for the second quarter of 2023 compared to negative $63 million for the second quarter of 2022.
Excluding the lower of cost or market inventory valuation adjustment. This segment reported adjusted EBITDA of negative $11 million for the second quarter of 2023 compared to negative $28 million.
For the second quarter of 2022.
Total sales volumes were 50 million gallons for the second quarter of 2023 as compared to 26 million gallons for the second quarter of 2022.
Utilization rates were impacted this quarter by two hydrogen plant turnaround at Navajo and Barco, which are co located with two of our renewable diesel plants.
We continue to improve the performance of this business with a target of achieving normalized run rates by the end of 2023, which will allow us to optimize advantaged feedstock.
Pretreatment unit and improve the profitability of this business.
Our marketing segment reported EBITDA of $25 million for the second quarter of 2023 compared to $24 million in the second quarter of 2022.
Total branded fuel sales volumes were a quarterly record of 364 million gallons compared to 335 million gallons in the same period last year.
Gross margin per gallon was also a quarterly record at nine in the second quarter as we saw strong demand for branded fuels across our regions.
We added nine new branded sites in the second quarter, and we continue to expect to grow our branded sites by 5% or more per year.
Our lubricants and specialty products segment.
<unk> EBITDA of $72 million for the second quarter of 2023.
Compared to EBITDA of $156 million for the second quarter of 2022.
This decrease was largely driven by a lower FIFO benefit from consumption of lower priced feedstock inventory for the second quarter of 2023 of zero point $5 million as compared to $71 million benefit in the second quarter of 2022.
We continue to look for ways to optimize the lubricants business and we remain focused on sales mix optimization of our base oils and finished products.
<unk> reported EBITDA of $82 million in the second quarter of 2023 compared to $80 million in the same period of last year.
This increase was mainly driven by strong transportation and storage volumes in the Rockies region.
At this time, we do not have an update regarding the proposed by end of HCP as we are still in discussions.
We do not intend to disclose developments with respect to the proposed transaction unless and until Hff's Sinclair and AGP.
Entered into a definitive agreement to effect the proposed transaction for this reason, we will not be able to discuss any specifics during Q&A.
During the second quarter, we announced and paid a regular quarterly dividend of <unk> 45 per share to stockholders totaling $87 3 million.
Subsequent to quarter end, we announced earlier this week that we repurchased eight 2 million shares for an aggregate price of $411 million from <unk> company.
This puts our year to date total cash return, including dividends and share repurchases at over $834 million.
On a trailing 12 month basis, we've returned over $2 billion in cash to shareholders as of August 2023.
Overall, we are very pleased with our strong second quarter results.
With the majority of the planned turnaround behind US we believe our diversified portfolio is well positioned to capture margins available to us the remainder of the year.
All of our long term commitment to returning excess cash to shareholders has not changed and we continue to target a payout ratio of 50% of net income to shareholders, while maintaining an investment grade rating.
We remain focused on the reliability.
Integration of our asset base to further strengthen the earnings portfolio and free cash flow generation of HFC.
With that let me turn the call over to Ed.
Thank you, Tim and good morning, everyone.
Begin by reviewing Hff's <unk> financial highlights net cash flows provided by operations for the second quarter of 2023 totaled $490 million, which included $183 million of turnaround spend in the quarter HFC.
<unk> stand alone capital expenditures totaled $72 million for the second quarter of 2023 as.
As of June 30, 23, Hs Sinclair Standalone liquidity stood at approximately $3 3 billion.
Comprised of a cash balance of $1 6 billion, along with our Undrawn $1 65 billion unsecured credit facility.
As of June 30, 'twenty, three we have $1 7 billion of stand alone debt outstanding with a debt to cap ratio of 15% and net debt to cap ratio of 1%.
GP distributions received by Hff's incurred during the second quarter of 2023 totaled $21 million.
Sinclair owns 59 6 million ATP limited partner units, which following the acquisition of Sinclair Transportation represents 47% of Hep's Outstanding LP units at a market value of approximately $1 $2 billion as of last night's close.
Let's go through some guidance items.
With respect to capital spending for full year 2023, we have lowered our total capital guidance range from $940 million to $1. One 5 billion to a new range of $900 million to $1 $6 billion.
We now expect to spend between $250 million to $270 million in refining <unk>.
5% to $30 million in renewables.
$35 million to $45 million in lubricants and specialty products.
<unk> to $30 million in marketing.
$40 million to $60 million in corporate.
And $500 million to $585 million for turnaround on catalysts.
At <unk>, we expect to spend between $25 million to $30 million in maintenance and $5 million to $10 million in expansion and joint venture investments.
For the third quarter of 2023, we expect to run between 585000.
To 615000 barrels per day of crude oil in our refining segment and we have planned turnaround scheduled with our Casper and Tulsa refineries during the period.
Let me turn the call over to John Harrison.
For an update on HCP.
John Thanks Adnan.
<unk> posted another solid quarter of earnings driven primarily by strong crude and product volumes in the Rockies region.
<unk> second quarter 2023, net income attributable to Holly energy partners was $50 million compared to $57 million in the second quarter of 2022.
Year over year decrease was primarily attributable to higher net interest expense.
<unk> second quarter 2023, adjusted EBITDA was $103 million.
Compared to a $104 million in the same period last year.
A reconciliation table, reflecting these adjustments can be found in Hep's press release.
HCP generated distributable cash flow of $73 million, and we announced a second quarter distribution of <unk> 35 per LP unit, which is payable on August 11th to unitholders of record as of July 31 2023.
Capital expenditures during the second quarter were approximately $9 million, including $6 million in maintenance 2 million of Reimbursable and $1 million of expansion Capex. We ended the second quarter was approximately $600 million in total liquidity comprised of cash plus availability under our $1 2 billion revolving credit facility.
We are now ready to turn the call over to Andre for any questions.
Yes.
Thank you the floor is now open for questions. At this time, if you have questions or comments. Please press star one on your Touchtone phone.
We ask that you. Please 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 star one key.
We will take our first question from Manav Gupta at UBS.
Good morning, guys.
We are consistently seeing an improvement in your capture rates both regions, which is very impressive. Despite the time around help us understand some of the things you have been doing to attain this improvement in capture which you've been seeing over the last six to nine months.
Thanks for your question. This is Tim let me ask Steve to comment on capture rates here.
Thanks for the question I think it's a combination of everything its really around optimization, making sure that we're taking the right decisions to put the right molecule in the right market.
From a margin perspective, we've had a bit of support we look to optimize our laid in crude structure and take advantage of some of the different or differentials that we've seen and then from an operations perspective, it's about running for getting the getting the molecules produced and getting them out and to the right markets to get the capture where.
We want it to be so.
So it's kind of a combination of everything.
Perfect I have a quick follow up you have a west coast asset.
Ken run heavy crude I wanted to understand a little bit what would be a mix be a tailwind for your overall clues crude slate as it relates to the Puget sound refinery.
Yes again this is Steve as far as <unk> is concerned we think when it comes on it will tighten the differential in the short term.
But a few uncertainties include the ability of the Doc to handle the capacity to get it off over the water and then timing of production in terms of outrunning. The capacity. So we think somewhere in the next three to five years.
It could be when a constraint occurs again, a differentiator will widen.
But as it relates to Puget sound that would be a benefit right if that crude lines up on the west coast.
Yes, we believe that's the case.
Yes, we think that'll be helpful. Manav. This is Tim because it will also put some pressure on aaas crude as well as <unk>.
As they compete for brother refinery runs on the West Coast.
Because our Puget sound refinery can arise both crews and because of the 100% E&S can go 100%.
We believe it gives us an advantage to be able to arb those crudes post <unk> startup.
Thank you for the detailed response and congrats on a very strong quarter.
Thanks for that.
We will take our next question from Neil Mehta at Goldman Sachs.
Hey, good morning team and congrats on a good quarter here I wanted to kick off on return of capital a lot of moving pieces.
Around share repurchases and the agreement with <unk>. So maybe you could spend some time walking the investment community with.
What's been announced here over the last couple of weeks as it relates to <unk> and then talk about your capacity to continue to return capital to shareholders.
Great I'll ask Neil to.
To start off and then I can come in at the end.
They're similar.
Thanks for the question good morning, well first of all.
Our business continues to.
Operator.
And above expectation of generating.
Robust cash flows with that.
Our commitment to returning capital to our shareholders remains.
I already on our focus and as you can see year to date, we've repurchased with this latest announcement.
$14 1 million shares.
With respect to capital returned to shareholders, we've said that our <unk>.
Target is 50% payout ratio, we have consistently exceed.
We exceeded that and our target remains to be at or above that.
With respect to the family.
We can't speak for the family.
We have a constructive relationship.
See there you've all noticed the 13D disclosures, where they have indicated their intent to continue to.
Transact directly with us and we're very much opened and keen on continuing to.
To repurchase shares with the HCP transaction.
Being under discussion.
We.
I have been in <unk>.
<unk> locked out of the market, but we continue to look for those windows and this most of it.
Recent transaction is indicative of our desire and commitment to continue with our shareholder return strategy and we expect to be on that trajectory.
At the end of the year.
Yes.
I'll just throw in a few more comments Neil.
We've set out in the past.
A few conference calls that we can't speak for the family.
So the family decided to speak for themselves and that's why they put the <unk> out there that they wanted people to understand that.
They intend to transact directly with the company going forward.
And then they also intend to maintain at least one board seat.
For the foreseeable future, so I think that.
Provide some clarity.
In terms of what their intentions are.
And they wanted to make sure that was clear.
To the rest of this.
Public we said all along that in the middle of these discussions our window to buy back shares was going to be.
Very restricted.
During the HIV during these discussions but as mentioned we want to reiterate our commitment to shareholder returns we found an opportunity.
Between the two parties and we took advantage of it and.
And executed and so we will continue to look for more opportunities.
As the year progresses.
Yes.
Okay. Thanks, Tim.
The follow up is it was very heavy first half of the year from a turnaround perspective and a lot has been made that as you kind of.
Look through the back half, maybe you can remind us again of the maintenance schedule and how we should think about the volume trajectory to the balance sheet.
Yes, I think this is Valerie we have two turnarounds in the back half of the year Casper, Our Casper facility and then Tulsa.
Towards the back half of September and into the fourth quarter. So those are.
Impacts are lifted and accounted for in our current guidance.
And the rest said the year is a clean clean year, we don't expect any additional outages yes.
Yes, Neil I'll, just chime in Val and her team have done a fantastic job of executing the heavy turnaround period that we had in the first half of the year.
We knew all along that it was going to be a heavy load.
We are happy to report as we mentioned earlier that.
This year.
Thanks, Tim Thanks, Tom.
We'll go next to Paul Cheng of Scotia Bank.
Okay.
Okay.
On the <unk>.
Refining reliability.
City improvement long time, I think you have said in the past.
Maybe five to six year process and you are about two to three year.
Into that.
And we've been really happy turn along that we are seeing we are still having another two or three years or that your team with me in the next maybe 12 to 18 months will be largely complete and when you compete on this Paul Stetzel initial.
All set.
The more sustainable.
We buy it.
Sustainable with 80 watts.
Yes.
Paul Curt throughput per year.
We could be looking for.
And also what kind of cost structure under that circumstance would be.
Yes.
Hey, Paul this is Tim.
You're right. We are very pleased with how the turnarounds, which we were pleased with how our capture is.
<unk> is performing as was talked about earlier on this call.
But this is a long process right and we've told all as we've said all along is really measured by turnaround cycles not by years and so.
We've been working over the last two or three years.
To improve our turnaround execution and to improve our turnaround performance.
This year.
We just talked about that we hopefully we'll get to mixer.
Mid cycle kind of condition, but I'd say at this point now would you 640000 barrels a day is our is our first journey.
Hey, Tim get that the crew or that your total food put that you are <unk>.
That's great.
That's cool and then that that what kind of unique.
Unique cause we'd be talking.
Okay.
What kind of unit costs are we talking about so.
<unk> something.
On the on the natural gas, probably say some waiting to 323 50.
So you can give us some idea that the two regions.
Sorry, what is your <unk> unique cause ones that you complete this way <unk> improvement.
Yeah, Yeah, as we as in three reliability, our costs will continue to come down a large and can only have any AD operating organization as large as ours.
Is tied to how well you execute and how reliable your facilities are so as we directionally improve there are costs will continue to decrease our our estimation is was directionally it'll be down and we're thinking somewhere between six and 650.
Overtime.
Yeah, while you're starting to see some of the benefits of some of the integration work and some of the reliability work already.
Operating costs this quarter.
Are down.
Which is.
Which is an encouragement, but obviously we have more work to do.
Alright, thank you.
Our next question comes from Ryan taught at Piper Sandler.
Great I was wondering if you could.
If you could provide a little more color in terms of where you are and normalizing already operation.
Sequentially improved but.
Can you walk us through the pathway, where you think you are in terms of throughput utilization.
And kind of normalizing that up to a full run right.
Yeah. Good morning. This is happening is with respect to utilization and where we are.
Our our goal has not changed what we have indicated is that we're looking to achieve.
Chief what we'd call normalized run rates, which was between 75 and 80% by the end of this year.
You could recall, we have the turnaround with two of our co located facilities.
Which impacted utilization rates, but on the flip side, but also gave us an opportunity to look under the hood, so to speak and make improvements to our.
Equipment.
One of the.
One of the some of the positive things that you're already seeing as the decreasing opex.
Per gallon, which declined to 29% quarter over quarter. Another thing is the.
Improvements that we've made two catalysts so our focus has been processed.
Optimization as well as yield improvement and Cheyenne has been a great example of that so.
So and the other day.
Again, our goal is not change the.
And and we remained remain committed.
Maybe I'll just add onto that I think I think we are excited about what we're seeing any underlying capability of this business.
As I mentioned, we did show both yield improvement reduced cost. We also ran well at Cheyenne with 99% yield and 89% utilization, which we believe is a good sign and our ability to run a productive levels and choose to run the economic barrels.
We see fit.
See I excited about where we are and look for normalized towards the end of the year.
Great Perfect and then maybe any.
Any update just in terms of what you are seeing in in the loop business in the backdrop, they're both from.
As we had in areas, where part way through the third quarter here in terms of what you're seeing on Canada, Iraq back in Iraq for dynamics there.
As well as maybe your continued thought process.
In terms of the kind of the the longterm suitability of of that business within the portfolio.
Sure. This is atmos just with a high level is with respect to the performance of the business. What we're seeing is continuously strong performance.
We have volumes of softening up a little bit primarily on recessionary fears.
Round.
Specialties market, but.
On the flip side one of the positives are.
Ability to.
To hold up margins and.
<unk> to improve.
Product mix.
The.
Strong performance of the business and on X Pfeifle basis, where we are here to date compared to last year were actually $12 million better.
On an apples to apples basis, and and so our goal is to continue to shift more of those base volumes base oils volumes into finished and specialty and I want to remind you again at the end of the day, we don't look at our businesses wreck back in the rack forward, we look at it in a holistic basis.
And I will turn it over to Matt to natural wish to provide some more color. Yeah. Thanks for the question is match race here.
Specifically over the past quarter in particular teams to a tremendous job continuing to focus on streamlining our supply chain and manufacturing.
Of certain products and end users. We've also been working to get better visibility to our costs through implementation.
Do digital tools that we're bringing on board that will help with inventory management and planning. So that's in process and that will actually be seen in the second half of the year. So when you're looking into that quarter three quarters more benefits. Those those are some of the pieces that were putting together and we've been looking at the right mix of products, we're really fortunate.
To have a good balance of products that are in when I call sustainable markets, where we can really be distinctive in our value proposition solutions to the marketplace.
We're we're very satisfied and excited about the opportunities that some of the the regional focus team has taken in particular in the us in these markets.
Proven to be very good so.
Despite these headwinds some of the softer volumes of the markets have experienced in general we're doing really well to manage our margins cleanup and make sure that our own housekeeping are in order.
Look for the right targets, the right customers and partners to grow in the future.
Okay.
Okay.
Okay.
Okay.
Andre are you still there.
Okay.
Yes, I'm still here can you hear me.
We can now.
Move on to the next question 100, Okay, we're going to get into a single minute T D. Cowan.
Hey mornings. Thanks for taking my questions. The first one I wanted to ask was kind of on the niche markets.
You serve I think both of the Rockies and southwest saw some margin strengthen into cue and I was hoping you could talk about what what drove that and and if you are seeing that continue into three Q, particularly given some regional outages seemed to be reaching their conclusion and I have a follow up next.
Yes, Jason Hey, this is Steve I'll take that one.
Those markets that we serve as you know.
There's not a ton of liquidity and some of those markets and so supply and.
Demand balances can move pretty quickly I think what we saw as the strength of the crack in those markets associated with low inventories.
In the peak of the driving season really allowed us to take advantage of that when you think further out and we see some of the back half of the year some of the the cracks coming off and diesel normalizing two more fundamental position.
But again in our markets, we think we have a competitive advantage to take it.
Take those.
Those cracks and drive under the bottom line and we'd like to do that to the rest of the year.
Yeah, and Jason This is Tim I've, just chime in to say we've.
We've always said, especially since the Sinclair.
Combination that the strength of our portfolio.
Finding is.
The deep.
Markets that we serve.
Which provide both growing demographics that are supporting demand.
Advantage crude and of course product premiums over the Gulf Coast and what you are seeing play out. This year I think is very indicative of why we think we have a real competitive advantage of our portfolio.
Got it and my follow up is on M&A and refining it it seems like there's a number of assets coming to the market that are available for purchase and diagnose obviously demonstrated a desire to consolidate the refunding space over the past couple of years. So.
Was wondering if we could just get your updated thoughts on how are you viewing refining M&A are there any specific regions that you'd be more interested in other any types of assets.
Or do you feel like the size of your refining portfolio is in a good place right now thanks.
Yeah, Jason Thanks for the question.
We believe in liquid transportation fuels, we would not have done the transfer transaction with Peter cetera.
We required.
Having said that we've just gone through a very.
Successful grossberg.
20, we added a renewable diesel business 2021, we acquired Puget Sound 2022, we acquired the Sinclair assets and of course of 2023, we're working on the potential discussions with HCP. So there is.
We've had a run of <unk>.
Successful growth and hopefully will continue as we as we continue discussions with AGP, but right now as I mentioned.
On the last call our focus is on.
The same priorities that we've talked about when I first got into the job we need to focus on EHS some reliability theirs.
A lot of opportunity there in fact, I would like to say to our to our folks. We think there is a hidden refinery there in the sense of improving our operations in capturing throughput and more opportunity and the assets that we have as opposed to go into anything and organic and then the second thing is we're focused on integrating and optimizing the assets that we have.
And that's what Steve was talking about earlier in terms of what you've seen and capture and what that was talking about in terms of what you are seeing in lower opex.
We believe that our focus right now is focusing relief and just try to improve those assets that we currently have so we're not really in the market looking at anything right now Jason.
It's probably not the right time, and the market time anyway with us with the market being above mid cycle and thats that suits us just fine because we have plenty of work to do organically.
Great. Thanks for the answers.
Our next question comes from Roger read at Wells Fargo.
Okay.
Hey, Thanks, good morning.
Good morning, Roger.
Oh, I'm, sorry, I missed part of this week kind of a crazy morning going on here with the earnings front, but I just wanted to come back if we could to the lube side of the business in terms of operations.
How is that shaking out seasonally third quarter is usually pretty good in this but you know we've seen so many moves here in base oil prices and.
Supply chain issues that have hit so I was just curious are we finally entering a normal period with this or are we still in kind of a <unk>.
Jumbled period.
Yeah, Hey, Roger Smatch release here. Thanks for the question what we're looking forward to is seeing.
More of a normalized supply chain I think we've as as an industry the lubricants and speciality his business over the past couple of years as you probably know have faced a lot of upheaval with additives in.
Broken supply chains around the globe really impact in the business and it's also been the start and stop coming out of the Covid Hangover and I think right now.
There are some tested.
Anticipation that we're going to see some.
Green shoots here with regards to demand.
We're also hearing of and and again just very briefly that there are some other supply issues and reliability issues in the market.
When it comes to <unk>.
We're not certain that how big an impact that's going to have on the whole of the business, but certainly we're in a really good position to fill that wages as needed.
When we look at it.
It's very evident that cracks of have shrunk and we've seen crudes rollup some increases over the past weeks and months and we're we're looking at and again, we're going to be.
Considering and anticipating.
And both base oils, and perhaps even finished products north.
In order to manage those those recovery of increased cost that.
Businesses.
Soft and we've been able to manage through that with the housekeeping we've been focused on over the past quarter or two yeah.
And Roger I'll, just China and to reinforce what matters.
<unk>.
We've now demonstrated above Midcycle performance for the last two and a half years and that's.
That's a tribute to the team that's a tribute to all the integration and synergy.
Work that they've been doing.
All this time, you've seen the cracks starting to compress I mean, this has been happening now for probably three or four quarters and yet our business continues to perform and I think that's.
A sign of the structural improvements that madness team at this.
But on the renewable diesel operations.
Mmm, a real tightening on the feedstock side. So I'm just curious I mean definitely better results for you on a sequential basis, but as you're looking at <unk>.
Feedstock options here in the second half of the year can you kind of walk us through how the P. T U is running and then.
Your your choices for feedstock as you are kind of navigating.
The different cost of those.
Yes. This is <unk>.
I'll take that thank you hit it head on we see some some tightening in terms of the overall margins structure in the back half of the year.
Partially due to feedstock, but also the the RVO standard of what that's done and then the ELC GFS.
Supply.
And laying that into some of the other.
And one follow up on that your hydrogen production is that doing what you had anticipated across the.
R D facilities.
Yeah, so as far as the hydrogen consumption and production you know with the co located plans we had.
Both of them down this quarter due to turnaround, which did impact of hydrogen availability to go run and unfortunately that within.
But that's really just.
A planned circumstance of the maintenance activities that were needed to.
I needed to be handled but overall, we feel comfortable with our hydro availability to go run these plants generate the products.
That we choose to put in the markets that we choose and this is <unk> only added again as we mentioned earlier one of the benefits of the Colocated turnarounds is.
Particularly as it relates to a reformer unit is.
Turnaround ends up improving the reformer reliability, and therefore, the availability and supply of hydrogen and.
And we have a number of other ongoing improvement efforts.
And the hydrogen plans.
Both of <unk> as well as Cheyenne so.
Great. Thank you.
Okay.
I think that's all that's on par scotiabank.
Thank you two questions <unk> I want to go back into hockey.
And that you're talking about the hydrogen availability in order for you to one closer to say then they can take it happened <unk> hi, kitchen, what's the bottom there and I believed team had mentioned that you guys are working to.
Pennsylvania <unk>.
Two 2024, so can you give us an update way out on that to have sufficient hydrogen on the site.
Be able to one day I'll be at a much higher weight and say the 70, 580%.
You have to make the.
<unk> decision between wondering day.
The diesel.
Then we finally, what would that be.
So and also that I think you guys have changed to a cat.
Can you give us an idea that dependent on dining in terms of the deal and also that what's the situation that you avoid taking that for you too.
To change to catch up with I think <unk> been doing about six months I'll be going to see any of that much longer duration.
Yeah. Paul This is Sam let me, let me take a shot at some of a short term questions and then I'll ask valid comment on some of the long term longer term efforts were talking about.
We believe that with these turnarounds that we just completed.
In the second quarter and with some of the short term hydrogen optimization steps that valley. Our team has been able to implement that we will be able to hit it run normalised run rates.
Here in the second half of the year and when we say Normalised run rates were talking 75% to 80% utilization fine you kind of mentioned that number before we do think we can get to that level.
With the current facilities. We have now is on a long term basis, we are continuing to.
Look at ways to Debottleneck and expand our hydrogen production I can let Val talk a little bit about that in a few minutes.
I just wanted to make it clear that we do think we have a path forward here in the second half of the year to hit this phone lines run Rena.
Yeah. This is valerie telling the hydrogen and as you mentioned.
Let's take the code located science, we have reformers that we just went through turnaround time, we've made significant improvements and those assets in add reliability is expected and what we're seeing today is improving.
Additionally, or hydrogen generation complex, we have several <unk>.
Take place in the back half of the year and we anticipate that that will.
Can you <unk>.
<unk> I'm in treatment, well directionally add add to give us.
More hydrogen capacity as we go through the year and then we're looking at what's next and.
And in our Cheyenne facility or interval in duration as we've learned how to operate these units is improving.
They each.
So.
What is the current expectation for.
K with between you have to change the <unk>.
And generally and.
And we're not gonna disclose candidates the exact numbers, but.
Mmk.
So the plans <unk>.
At a nurse that you had fun.
Then mix some pretty significant investment, we shouldn't assume that I'll be operation.
It's on my Hydro General <unk> next year could be doing much better than 70 580 per cent.
I think that's what we're that's our target Paul to get to me by the end of this year and next.
Next year of course, we're going to be implemented some additional improvements steps in.
It's too early to give you any type of guidance are targets for next year, but I think what we're saying is by the end of this year, we should be at that level.
Okay.
<unk> one of your competitors.
<unk> with the improve.
Ketchup way in <unk>.
<unk> you too substantial we wham off the commercial operation.
One doing that when you're looking at the Dino.
Think that you have to Hawaii commercial culture and organisation in person ma'am.
Yeah.
That's a good that's a good question.
We know there's a lot of them.
In fact, several competitors out there who we're talking about.
They are commercial.
Capabilities.
I think we've got a similar focus.
Here at Dino to try to look at that I think some of our competitors are talking about trading.
As well as part of that commercial capability, we're not looking at trading as part of our commercial capability at least not at this point.
We have.
The right.
Resources to probably get into that but I will ask Steve to comment because one of the things is you know Steve has.
And brought him to do is basically help us look.
Get a commercial capability an improvement.
Yes, the <unk> I think.
And so this is early days still but but after being here for three months and I think that will reflect on you asked about commercial culture and capability I think we have a high degree of talent and capable commercial people to really have a lot of expertise in this arena, both optimization planning refining across the assets and into the markets that.
We want to go play.
And I think that's really kind of the next frontier that we go take on and we see a lot of value. There I think we're just kind of at the beginning of unlocking the true integrated value of this company that has been put together with these assets over the past few years.
That's that's how we're approaching those two priorities.
Alright, thank you.
And that does conclude the question and answer session I will turn the floor back over to Tim go for any closing remarks.
Thank you Roger.
Our second are strong second quarter results are a testament to the strength of our business and the hard work of our employees to execute our strategies and deliver these results. We believe our refining marketing and lubricants businesses are all performing above our mid cycle estimates.
And with the majority of our plan turnaround work behind US. We believe we are well positioned to capture the margins available to us for the remainder of the year.
Our priorities remain the same to improve our base EHS and reliability to integrate optimize our new portfolio of assets and three to return excess cash to our shareholders.
Thank you for joining our call have a great day.
Thank you. This does conclude today's teleconference. Please disconnect your lines at this time and have a wonderful day.
Yeah.
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And.
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