Q3 2023 Holly Energy Partners LP and HF Sinclair Corp Earnings Call
Speaker 1: Welcome to FHF Sinclair Corporation and Holly Energy Partners, third quarter, 2023 conference call and web.
Welcome to S.
H F Sinclair Corporation, and Holly Holly Energy partners third quarter, 'twenty twenty-three conference call and webcast hosting the call today is Tim go Chief Executive Officer of eight F. H F. Sinclair. He is joined by autonomous I kind of Sars Chief financial.
Speaker 1: Hosting the call today is Tim Goh, Chief Executive Officer of FHF Sinclair. He is joined by a tenement, a tenement of Chief Financial Officer, Steve Leadbetter, EVP of Commercial, Valerie Pompea, EVP of Operations, and that Joyce SVP of Lubricants and Specialists.
Sure, Steve Ledbetter EVP of commercial Valerie Pompeii I E V P of operation and not Joyce SVP of lubricants and specialties, along with John Harrison Chief Financial Officer of Holly Energy partners.
Speaker 1: Along with John Harrison, Chief Financial Officer of Holi Energy Partners.
Speaker 1: 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 on your, star one on your touchstone phone. If at any time your questions have been answered, you may remove yourself from the queue by pressing star one again.
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Speaker 1: If you should require operator assistance, please press star zero.
Speaker 1: 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
Speaker 1: It is now my pleasure to turn the floor over to Craig Barry, Vice President and Investor Relations. Craig, you may be.
It is now my pleasure to check the floor over to Craig Biery.
<unk> Vice President Investor Relations, Craig you may begin.
Thank you Christina good morning, everyone and welcome to Hff's Sinclair Corporation, and Holly Energy Partners third quarter 2023 earnings call. This morning, we issued press releases announcing results for the quarter ending September 32023, if you would like a copy of the earnings press releases you may find them on our website at Hff's Sinclair Dot com and Holly energy Dot com.
Speaker 2: Thank you, Christa. Good morning, everyone, and welcome to HF Sinclair Corporation and Holly Energy Partners' third quarter 2023 earnings call. This morning we issued press releases announcing results for the quarter-ending September 30th, 2023. If you would like a copy of the earnings press releases, you may find them on our websites at hfsinclair.com and hollyenergy.com.
Speaker 2: Before we proceed with remarks, please note that the SAFE Harvard Disclosure Statement in today's press releases.
Before we proceed with remarks. Please note the safe Harbor disclosure statement in today's press releases and.
Speaker 2: In summary, it says, Statements made regarding management expectations, judgments, or predictions or forward-looking statements.
In summary, it says statements made regarding management expectations judgments or predictions are forward looking statements.
Speaker 2: These statements are intended to be covered under the safe harbor provisions of federal security laws. There are many factors that can cause results to differ from expectations, including those noted in our SEC filing.
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.
Speaker 2: 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.
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.
Speaker 2: Good morning. I am pleased to report strong third quarter results driven by solid execution of safe and reliable operations across our refining, lubricants, HEP, and marketing segments.
Good morning.
I am pleased to report strong third quarter results, driven by solid execution of safe and reliable operations across our refining lubricants AGP and.
And marketing segments.
Speaker 2: We continue to progress our strategic initiatives of integrating and optimizing our portfolio along with delivering strong cash return to shareholders.
We continue to progress our strategic initiatives of integrating and optimizing our portfolio along with delivering strong cash return to shareholders.
Speaker 2: Today, we reported third quarter 2023 net income attributable to HF Sinclair shareholders of $791 million or $4.23 per diluted share.
Today, we reported third quarter 2023, net income attributable to HFF Sinclair shareholders of $791 million or $4 23 per diluted share.
Speaker 2: These results reflect special items that could collectively increase net income by $31 million.
These results reflect special items that could luck collectively increased net income by $31 million.
Speaker 2: Excluding these items, adjusted net income for the third quarter was $760 million or $4.06 per deluded share. Compared to adjusted net income of $983 million or $4.58 per deluded share for the same period in 2022.
Excluding these items adjusted net income for the third quarter was $760 million or $4.06 per diluted share.
Compared to adjusted net income of $983 million.
$4.58 per diluted share for the same period in 2022.
Speaker 2: Adjusted even off of the third quarter was $1.2 billion, a 20% decrease compared to the third quarter of 2022.
Adjusted EBITDA for the third quarter was $1 2, billion% to 20%.
<unk> decreased compared to the third quarter of 2022.
Speaker 2: In our refining segment, third quarter, 2023 adjusted EBITDA contributed $1 billion compared to $1.4 billion in the same period last year. This decrease was primarily driven by lower refining margins in both the West and Midcon regions and lower refined product sales volumes due to higher maintenance activity.
In our refining segment third quarter 2023, adjusted EBITDA contributed $1 billion.
Compared to $1 $4 billion in the same periods last year.
This decrease was primarily driven by lower refining margins in both the west and mid con regions and lower refined product sales volumes due to higher maintenance activity.
Speaker 2: Operating expenses were $496 million in the third quarter of 2023 versus the $475 million recorded in the same period last year as lower natural gas costs were offset by higher maintenance costs.
Operating expenses were $496 million in the third quarter of 2023.
Versus the $475 million recorded in the same period last year as lower natural gas costs were offset by higher maintenance costs.
Speaker 2: Crude oil charge averaged 600 and 2,000 barrels per day in the third quarter of 2023, compared to 646,000 barrels per day in the third quarter of 2022. The decrease was primarily due to higher maintenance activity during the period.
Crude oil charge averaged 602000 barrels per day in the third quarter of 2023 compared to 646000 barrels per day in the third quarter of 2020 to.
The decrease was primarily due to higher maintenance activity during the period.
Speaker 2: I'm pleased to report that the turnaround in the third quarter at our CASPER refinery was completed on time and on budget and at Tulsa we are in the process of ramping up normal operations after the successful turnaround at that refinery.
I am pleased to report that the turnaround in the third quarter at our Casper refinery was completed on time and on budget and in Tulsa. We are in the process of ramping up normal operations. After the successful turnaround at that refinery.
Speaker 2: With all of our major turnarounds behind us for the year, we remain focused on executing our strategy to improve reliability and operating costs across our refining portfolio.
With all of our major turnarounds behind us for the year, we remain focused on executing our strategy to improve reliability and operating costs across our refining portfolio.
Speaker 2: In our renewable segment, we reported a just to EBITDA on a positive $5 million for the third quarter of 2023 compared to negative $14 million for the third quarter of 2022.
In our renewable segment, we reported adjusted EBITDA of positive $5 million for the third quarter of 2023 compared to negative $14 million for.
For the third quarter of 2022.
Speaker 2: Total sales volumes were 55 million gallons for the third quarter of 2023 as compared to 52 million gallons for the third quarter of 2022.
Total sales volumes were 55 million gallons for the third quarter of 2023.
Compared to 52 million gallons for the third quarter of 2022.
Speaker 2: We continue to make progress towards our target of achieving normalize run rates by the end of 2023 through improved reliability and feedstock optimization.
We continue to make progress towards our target of achieving normalized run rates by the end of 2023 through improved reliability and feedstock optimization.
Our marketing segment reported EBITDA of $21 million for the third quarter of 2023 compared to $10 million in the third quarter of 2022.
Speaker 2: Our marketing segment reported EBITDAV $21 million for the third quarter of 2023, compared to $10 million in the third quarter of 2022. And total branded fuel sales volumes set another quarterly record of $390 million.
Total branded fuel sales volumes set another quarterly record of 398 million gallons.
Speaker 2: Gross margin per gallon was 7 cents in the third quarter, supported by strong demand in our region.
Gross margin per gallon was <unk> in the third quarter supported by strong demand in our regions.
Speaker 2: During the quarter, we added 15 new branded sites and we expect to continue to grow our branded sites by 5% or more pre-use.
During the quarter, we added 15, new branded sites and we expect to continue to grow our branded sites by 5% or more per year.
Our lubricants and specialty products segment reported EBITDA of $118 million for the third quarter of 2023 compared to EBITDA of $15 million for the third quarter of 2022.
Speaker 2: Our lubricants and specialty product segment reported EBITDA $118 million for the third quarter of 2023 compared to EBITDA $15 million for the third quarter of 2022.
Speaker 2: This increase was largely driven by a $30 million five-fold benefit from consumption of lower price speed stock inventory for the third quarter of 2023, compared to a $44 million charge in the third quarter of 2022.
This increase was largely driven by a $30 million FIFO benefit from consumption of lower priced feedstock inventory for the third quarter of 2023 compared to $44 million charge in the third quarter of 2022.
Speaker 2: Despite weakening basal prices during the period, continued efforts to improve sales mix optimization across our finished product portfolio resulted in strong earnings contribution from our lubricant spits.
Despite weakening base oil prices during the period continued efforts to improve sales mix optimization across our finished products portfolio resulted in strong earnings contribution from our lubricants business.
<unk> reported EBITDA of $94 million in the second quarter of 2023 compared to $66 million in the same period of last year.
Speaker 2: HEP reported EBITDA of $94 million in the second quarter of 2023, compared to $66 million in the same period of last year.
Speaker 2: This increase was mainly driven by tariff increases that went into effect on July 1, 2023.
This increase was mainly driven by tariff increases that went into effect on July one 2023.
On August 15th 2023, we entered into a definitive merger agreement with HCP.
Speaker 2: On August 15th, 2023, we entered into a definitive merger agreement with HEP and we expect the proposed transaction to close in the fourth quarter of this year, subject to the satisfaction of closing conditions.
And we expect the proposed transaction to close in the fourth quarter of this year subject to the satisfaction of closing conditions.
Speaker 2: During the third quarter, we announced and paid a regular quarterly dividend of 45 cents per share to stockholders totaling $84 million.
During the third quarter, we announced and paid a regular quarterly dividend of <unk> 45 per share to stockholders totaling $84 million and spent $586 million on share repurchases.
Speaker 2: and spend $586 million on share repurchase.
Speaker 2: Year to date, as of September 30th, our total cash return, including dividends and share repurchases, is over $1.09 billion, and we have reduced our share count by 8%.
Year to date as of September 30, our total cash return, including dividends and share repurchases is over $1.09 billion and we have reduced our share count by 8%.
Speaker 2: In closing, our third quarter results highlight the diversification of our portfolio and quality of our assets. Our strong cash return during the period demonstrates our continued commitment to our long-term cash return strategy and long-term payout ratio while maintaining an investment grade rate.
In closing our third quarter results highlight the diversification of our portfolio and quality of our assets.
Our strong cash return during the period demonstrates our continued commitment to our long term cash return strategy and long term payout ratio, while maintaining an investment grade rating.
Looking forward, we remain focused on executing our strategy of safe and reliable operations as we continue to integrate and optimize our assets across our portfolio.
Speaker 2: Looking forward, we remain focused on executing our strategy of safe and reliable operations as we continue to integrate and optimize our assets across our portfolio. With that, let me-
With that let me turn the call over to Abbas. Thank.
Speaker 3: Thank you Tim and good morning everyone. Let's begin by reviewing H.S. and Claire's financial highlights. NetGas closed provided by operations for the third quarter of 2023, total of $1.4 billion, which included a 124 million that turn around spend in the quarter. H.S. and Claire's standalone capital expenditures totaled $75 million for the third quarter of 2023.
Thank you Tim and good morning, everyone, let's begin by reviewing Hs <unk> financial highlights.
Net cash flows provided by operations for the third quarter of 2023 totaled $1 4 billion.
Which included a $124 million of turnaround spend in the quarter.
Sinclair is standalone capital expenditures totaled $75 million for the third quarter of 2023.
Speaker 3: As of September 30th, 2023, H.S. Inclair stand alone liquidity through to the approximately $3.85 billion comprised of a cash balance of $2.2 billion along with our undrawn 1.65 billion unsecured credit facility. As of September 30th, 23, we have 1.7 billion of stand-alone debt outstanding with a debt to cap ratio of 15%.
As of September 32023, Sinclair Standalone liquidity stood at approximately $3 $85 billion comprised.
Comprised of a cash balance of $2 2 billion, along with our Undrawn $1 65 billion unsecured credit facility.
As of September 32003, we had $1 7 billion of stand alone debt outstanding with a debt to cap ratio of 15%.
Speaker 3: In October 2023, we repaid as maturity the 308 million aggregate principle amount of our 2.625 percent senior notes.
In October 2023, we repaid at maturity $308 million aggregate principal amount of our $2, 625% senior notes.
Speaker 3: HEP distributions received by HSN Claire during the third quarter of 23 total $21 million.
HCP distributions received by Hff's Sinclair during the third quarter of 'twenty three totaled $21 million.
Speaker 3: HFs in Claire owns 59.6 million HEP limited partner units which represents 47% of HEPs outstanding LP units at a market value of approximately $1.25 billion as of last night's close. Now let's go through some guidance items.
HFF Sinclair owns $59 6 million ETP limited partner units, which represents 47% of Hep's outstanding LP units at a market value of approximately $1 $5 billion as of last night's close now let's go through some guidance items.
Speaker 3: With respect to capital spending, last quarter we lowered our full year 2023 guidance range to $900 million to $1.6 billion on a
With respect to capital spending last quarter, we lowered our full year 2023 guidance range to $900 million to $1 60.
On a consolidated basis.
Speaker 3: With the majority of our plant maintenance activity behind us, we expect to end up at the lower end of our capital spend range for 2023.
With the majority of our plant maintenance activity behind US we expect to end up at the lower end of our capital.
And the range for 2023.
Speaker 3: For the fourth quarter of 2023, we expect to run between 590,000 to 620,000 barrels per day of crude oil in our refining segment, which reflects plant maintenance at our Tulsa refinery during the period.
For the fourth quarter of 2020, we expect to run between 590.
620000 barrels per day of crude oil in our refining segment, which reflects planned maintenance at our Tulsa refinery during the period.
Speaker 4: Let me now turn the call over to John for an update on the HEP. John . Thanks, Agnes. HEP's third quarter of 2023 net income attributable to Holley Energy Partners was $63 million, compared to $42 million in the third quarter of 2022. Each period reflected non-recurring expenses that decreased net income by $4 million and $20 million, respectively.
Let me now ill turn the call over to John for an update on the AGP John Thanks Adnan.
<unk> third quarter 2023, net income attributable to Holly energy partners was $63 million.
Compared to $42 million in the third quarter of 2022 each.
Each period reflected nonrecurring expenses and decreased net income by $4 million and $20 million respectively.
Speaker 4: Excluding these items, the year over your increase was primarily attributable to higher revenues associated with tariff increases that went into effect on July 1, 2023, which were partially offset by higher interest expense and higher GNA expenses during the third quarter of 2023.
Excluding these items the year over year increase was primarily attributable to higher revenues associated with tariff increases that went into effect on July one 2023, which were partially offset by higher interest expense and higher G&A expenses during the third quarter of 2023.
Speaker 4: ACP's third quarter 2023 adjusted EBITDA was $119 million compared to $110 million in the same period last year. The reconciliation table reflecting these adjustments can be found in ACP's press release.
Hep's third quarter of 2023, adjusted EBITDA was $119 million compared to $110 million in the same period last year.
Reconciliation table, reflecting these adjustments can be found in Hep's press release.
Speaker 4: for the third quarter, HEP generated distributed will cashflow of $78 million. And we announced a distribution of 35 cents per LP unit, which is payable on November 10, 2023, to unit holders of record as of October 30, 2023. Enter coins community protest a
For the third quarter <unk> generated distributable cash flow of $78 million, and we announced a distribution of <unk> 35 per LP unit, which is payable on November 10th 2023.
Holders of record as of October 30.
Hey.
Capital expenditures during the third quarter were approximately $9 million comprised.
Speaker 4: Capital expenditures during the third quarter were approximately $9 million, comprised of $6 million in maintenance.
Comprised of $6 million in maintenance 2 million of Reimbursable and $1 million of expansion Capex.
Speaker 4: 2 million of Reimbursable and 1 million of Expansion Catbacks.
Speaker 1: During the third quarter, we repaid $27 million of debt and ended the quarter with available liquidity of approximately $630 million. We are now ready to turn the call over to the operator for any questions. The floor is now open for questions. At this time, if you have questions or comments, please press star 1 on your touchtone phone.
During the third quarter, we repaid $27 million of debt and ended the quarter with available liquidity of approximately $630 million.
Now ready to turn the call over to the operator for any questions.
Yes.
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 yourself to one question and one follow up if you have additional questions. We welcome you to rejoin the queue.
Speaker 1: We ask that you please limit yourself to one question and one follow-up. If you have additional questions, we welcome you to rejoin the queue. If at any point your questions have been answered, you may remove yourself from the queue by pressing star one.
If at any point your questions have been answered you may remove yourself from the queue by pressing star one.
Speaker 1: Thank you. Our first question is coming from the Nev Zupka from UBS. Please go ahead.
Our first question is coming from Manav Gupta from UBS. Please go ahead.
Speaker 5: Good morning Tim. My question is more broader. In the past, you have mentioned that you have seven refineries, but there's a hidden refinery within your system and you can run 50 to 60,000 barrels higher. And we see one of our competitors do it where they shut two assets and the two put it higher. And please help us understand some of the progress that you are making in that direction. So you can uncover this hidden refinery within your refining system. Dist topped out plus its upper left, 180,000 barrels up, out of the??. Giarr 2013.
Good morning, Tim My question is more broader in the past you have mentioned that you have seven refineries, but there is a hidden refinery within your system and you can run $50 to 60000 barrels higher than we have seen limited competitors do it where they shut to assets and the throughput is higher.
Please help us understand some of the progress that we're making in that direction. So you can Angola. This he didn't refinery within your refining system.
Good morning, Manav This is Tim.
As you stated.
Speaker 2: as you stated, reliability.
Reliability and integration and commercial optimization are our main priorities right now and that is to try to unlock that hidden refinery as you mentioned, let me ask Valerie to talk a little bit about some of the reliability efforts that we have going on.
Speaker 2: and integration and commercial optimization are...
Speaker 6: main priorities right now, and that is to try to unlock that hidden refinery, as you mentioned. Let me ask Hilary to talk a little bit about some of the reliability efforts that we have going on. Thank you. Yeah, what we're doing is assessing the reliability of all of our assets, looking at capacity, and then stepping back and looking at equipment.
Yes, what we're doing is assessing the reliability of all of our asset so looking at capacity and then stepping back and looking at equipment.
Equipment.
Speaker 6: where we have completed a full assessment of all of our sites and then within that starting to work execution plan by site. Those will unlock availability within each of our individual assets.
Sure.
We have completed a full assessment of all of our sites and then within that starting to work execution plans by site.
Those will unlock.
Sure.
Availability within each of our individual assets.
Speaker 6: which is a process that's been around in industry for a really long time. We're coupling that with some innovation and some tools that will help us, you know, improve our availability.
Okay.
A process that has been around an industry for a really long time, we're coupling that with some innovation and some new tools that will help.
Improve our availability.
Speaker 2: I mean, all the other things that I'll mention in addition to what Val just talked about was on previous calls, we've talked about the importance of executing our turn-al- rounds.
But all of the other thing that I'll mention in addition to what they will just talked about on previous calls we've talked about the importance of executing our turnarounds.
<unk>.
Speaker 2: And with this year's heavy turnaround load, I know there was a lot of concern about whether we could execute our turnaround as well. Val and her team have really done a fantastic job this year executing those turnaround on schedule on budget and not only to...
And with this year's heavy turnaround load I know there was a lot of concern about whether we could execute our turnarounds well Val and her team have really done a fantastic job this year.
Executing those turnarounds on schedule on budget and not only does that help in the actual execution of the turnaround, but it helps us get to all of the planned work that we wanted to get done during the turnarounds to help us get.
Speaker 2: help in the actual execution of the turnaround, but it helps us get to all of the planned work that we wanted to get done during the turnaround to help us get that reliability improvement for the full cycle that's coming post the turnaround. And so that's kind of another benefit that we're getting from good, clean execution of the turnaround is we hope that will allow us to again demonstrate better reliability to the cycle.
That reliability improvement for.
Cycle, that's coming post the turnaround and so that's kind of another benefit that we're getting from good clean execution of the turnarounds as we hope that will allow us.
Again demonstrate better reliability through this cycle.
Well I will take my quick follow up here is on the <unk>, even adjusting for that inventory. It was a much stronger quarter. Your vision was to make this business more on the speciality side help us understand how those plans are progressing and also help us understand some of the reasons.
Speaker 5: Perfect. My quick follow up here is on the on the lube even adjusting for that inventory. It was a much stronger quarter. Your vision was to make this business more on the specialty side. Help us understand how those plans are progressing and also help us understand some of the reasons we You had such a strong quarter in 3Q in the lube space.
Such a strong quarter in <unk> and the lubes business.
Speaker 3: Yeah, let me ask Matt to comment on the strength of our loops business. Thanks, Matt Joyce here. And I think where the team's done a really nice job is getting after operational excellence and a focus on regional growth.
Yes, let me ask Matt to comment on the strength of our lubes business. Thanks, Manav match rates here and I think where the team has done a really nice job is getting after operational excellence and a focus on regional growth. We've been we've been working on mixing the mix of our of our business and really look.
Speaker 3: We've been working on mixing the mix of our business and really looking to see where and how we can focus on higher value products and better understand the markets we serve where we have stickier solutions that are enabling our customers to be successful and therefore allowing us to be a bit more successful.
To see where and how we can focus on higher value products and better understanding the markets. We serve where we have stickier solutions that are enabling our customers to be successful and therefore, allowing us to be a bit more successful and.
Speaker 7: And hats off to our Petro Canada team in the US in particular. They've done a nice job of expanding their footprint and getting into the US markets, which was part of our strategy. And that's gained a lot of nice traction and we're seeing some real positive signs of growth there from a regional perspective.
It's off to our Petro Canada team in the U S. In particular, they've done a nice job of expanding their footprint and getting into the U S markets, which was part of our strategy and Thats gained a lot of nice traction and we're seeing some.
A real positive signs of growth there from a regional perspective.
Speaker 2: Yeah, Manav, I would just say Matt and his team have done a really nice job of continuing to integrate.
Yes, Manav I would just say, Matt and his team have done a really nice job of continuing to integrate the base oil business with the finished lubes and specialties business. You can we've talked about this on past earnings calls, but you just continue to see the intercompany sales of base oils to those finished lubes.
Speaker 2: The basal business with the Finnish Loops and specialies business.
Speaker 2: You can, we've talked about this on past earnings calls, but you just continue to see the intercompany sales of base oils to those finished lewds, especially as businesses continue to increase, which is giving us more.
Especially as businesses continue to increase which is giving us more.
Speaker 2: resiliency more cushion for these falling base oil cracks that you're seeing in our reported HFS index. As those base oil cracks come down the more integrated we are gives us more insulation and allows us to continue to generate the strong margins that you're seeing so that's that's a structural improvement that Matt and his team are doing.
Resiliency more.
Cushing for these falling base oil cracks that you are seeing in our reported.
S index as those base oil cracks come down the more integrated we are gives us more installation. It allows us to continue to generate the strong margins that youre seeing so that's.
That is a structural improvement that Matt and his team are doing.
Speaker 5: Congrats on a great quarter and great to see renewable diesel generate positively beta. Thank you, guys.
Congrats on a great quarter and great to see the Newbuild user generated positive EBITDA. Thank you.
Thanks Manav.
Speaker 1: Your next question comes from the line of Ryan Todd from Piper Sandler. Please go ahead.
Your next question comes from the line of Ryan Todd from Piper Sandler. Please go ahead.
Okay. Thanks.
Speaker 8: Thanks. Maybe I'll follow up on Manav's shout out there for the R&D business. Congrats on the underlying margin improvement there.
Maybe ill.
I'll follow up on that.
Shout out there.
The R&D bonus congrats on the underlying margin improvement there.
Throughput in sales remain.
Speaker 8: throughput and sales remain relatively low utilization rates. Can you walk through where you are in the process of
Our relatively low utilization rate can you walk through where you are in the cloud the process.
Speaker 8: increasing utilization up to normalized levels, whether hydrogen sourcing is still a limiting factor, you know, how you're making progress on the process of extending time between catalyst turnarounds, improving product yield, etc. So maybe just a little more granularity on where you are in the process of getting that where you want it to be.
Increasing utilization up to normalized levels.
Whether hydrogen sourcing is still a limiting factor.
How are you.
We're making progress on the process of extending time between your catalyst turnaround is improving product yield et cetera. So maybe just.
A little more granularity on where you are in the process of getting that where you want it to be.
Yes, Brian.
Speaker 9: Yeah, Ryan, we're pleased to show that renewable diesel business profitable this quarter. We think we've turned a corner here. Let me ask Steve Ledbetter, our commercial lead, to talk about it. Hey, Ryan, thanks for the question. We're also encouraged, as you are, by a positive quarter. There's a few things that helped us deliver the positive quarter. The first was really looking at our feedstock and optimizing the low CI acquisition and putting that into our sites.
We're pleased to show that renewable diesel business profitable. This quarter, we think we've turned the corner here, let me ask Steve Ledbetter.
Commercial lead to talk about it hey, Brian. Thanks for the question. We're also encouraged as you are and by a positive quarter Theres a few things that helped us deliver the positive quarter. The first was really looking at our feedstock and optimizing the low Ci acquisition and putting that into our sites taking advantage of our <unk> unit, we had improved yield performance throughout the quarter.
Speaker 9: taking advantage of our pre-chapement unit. We had improved yield performance throughout the quarter and then to be on a selling out into the markets during the highest part of the margin.
<unk> and then to be honest selling out into the market during the highest part of the margin cycle over the quarter as well as taking some some opex leavers and pulling those those are all part of the path forward, we were somewhat limited by hydrogen availability.
Speaker 9: cycle of the quarter as well as taking some Some op-x levers and pulling those those are all part of the path forward And we were somewhat limited by hydrogen availability
Speaker 6: But we have just finished and coming out of a cat change that Artija and we took the opportunity to improve our hydrogen availability at our large SMR there at Artija. Let me hand it to Val on hydrogen availability and operational improvements. Yeah, as we've stayed before, we continue to invest in our hydrogen systems that all of our plants, particularly in Artija. We've just completed the SMR. We made upgrades in our turnaround in the CCR and we're starting to see the benefits from those in our renewable business as well as refining.
But we have just finished and coming out of a cat change at Artesia, and we took the opportunity to improve our hydrogen availability at our large <unk> artesian, let me, let me hand, it to bow on hydrogen availability and operational improvements.
As we stated before we continue to invest in our hydrogen systems at all of our plants, particularly in artesia.
<unk> completed the SMIC, we made upgrades in our turnaround and CCR and we're starting to see the benefits from those in our renewables business as well as refining.
Yes.
Speaker 8: Good thanks and maybe just, you know, should think it on the refining side to...
Great Thanks, and maybe.
Just shifting gears on the refining side too.
To the West coast.
Speaker 8: to the West Coast, you know, real strong margins and strong capture and profitability there in the court. Or can you talk about what you're seeing out there in terms of market dynamics? And if you look forward to this startup of TMX next year, how will that, if at all, impact your ability to source advantage crews at the Puget Sound Refine?
Margins will John Capstone profitability during the quarter can you talk about what youre seeing out there in terms of the market dynamics.
And as you look forward to the startup of <unk> next year, how will that if at all impact your ability to source.
As crude that the Puget sound refinery.
Okay.
Speaker 9: Yeah, this is, again, Steve, I think, you know, we enjoyed the cracks in the margin environment in Q3 on the West Coast.
Yes. This is Steve I think we enjoyed the cracks in the margin environment in in Q3 on the West Coast.
Speaker 9: We see some softness softness coming in particularly in gas, but it's normal and seasonal Through this next quarter and the first quarter But overall we think that there is going to be a length in diesel particularly with RD coming into the West coast But we think there will be a bit of short Structure on both gas and jet and we look to take advantage of that as far as TMX coming on
We see some softness softness coming in particularly.
Gas, but it's normal and seasonal.
Through this next quarter in the first quarter, but overall, we think that there is going to be a link and diesel, particularly with R&D coming into the west coast that we think there will be a bit of short structure on both gas and jet and we look to take advantage of that as far as <unk> coming on.
Speaker 9: You know, when that happens, we think it will compress some of the differentials, particularly when they call for line field temporarily. But as that line gets up and running reliably, we believe that it will put more barrels out on the water and actually give us a bit of an advantage for our refinery in the Pacific Northwest.
That happens we think it will compress some of the differentials, particularly when they call for line fill temporarily but as that line gets up and running reliably we believe that it will put more barrels out on the water and actually give us a bit of an advantage for our for our refinery in the Pacific Northwest.
Yes, and Ryan let me just follow up and say, we believe our refining portfolio.
Speaker 2: Yeah, and Ryan, let me just follow up and say, we believe our refining portfolio continues to be a strategic advantage and competitive advantage for us, just in terms of the markets we serve and the demographics that we serve in our markets.
<unk> strategic advantage and competitive advantage for us just in terms of the markets, we serve and the demographics that we're that we.
That we serve in our markets.
Speaker 2: The West Coast in particular, I would say, is a beneficiary of this integration effort that we've been focused on here over the last six to 12 months.
The West Coast in particular, I would say is a beneficiary of this integration effort that we've been focused on here over the last.
Six to 12 months, we have a with the Sinclair and the legacy Holly frontier assets in the West with the addition of Puget Sound, we really believe that that is underappreciated.
Speaker 2: We have a with the Sinclair and the legacy Holly frontier assets in the West.
Speaker 2: with the addition of putrid sound. We really believe that that is a underappreciated portfolio that we're continuing to unlock the potential of and you're gonna continue to see good results come out of the west.
Underappreciated portfolio that we're continuing to unlock the potential of and Youre going to continue to see good results come out of the west.
Great. Thanks, Tim.
Speaker 1: Your next question comes from the line of Doug Liggett from Bank of America. Please go ahead.
Your next question comes from the line of Doug Leggate from Bank of America. Please go ahead.
Speaker 2: Hey, good morning, guys. This is Kaleon for Doug. So thanks very much for taking the question. My first question is on the Sinclair Synergies. $100 million was expected at the time of the deal, but now that you've got a few quarters under your belt, I'm wondering how that opportunity set has evolved.
Hey, Good morning, guys. This is clay on for Doug. So thanks very much for taking the question.
My first question is on the Sinclair synergies.
$100 million was expected at the time the deal, but now that you've got a few quarters under your belt I'm wondering how that opportunities that have the ball.
Speaker 2: Yeah, Kalei, this is Tim. We were very pleased to be able to just capture that 100 million pretty quickly. In fact, it exceeded our timing expectations in terms of the ability for us to capture that. We see, as we've talked about on previous calls, much, much more opportunity to continue to...
Yes, <unk>. This is Tim we were very pleased to be able to just capture that $100 million pretty quickly in fact, it exceeded our timing expectations in terms of.
The ability for us to capture that we see as we've talked about on previous calls much much more opportunity to continue to.
Speaker 2: improve and optimize that.
Improve and optimize that.
Speaker 2: assets, but we've broadened it now to really look across the entire portfolio, to look at Puget Sound in the mix, to look at our legacy assets in the mix. That's really, when I say our priorities are reliability across our portfolio and then integration and optimization across our portfolio, that's really code for, we're looking for more synergies, we're looking for more optimization across the entire asset. We haven't gone out and...
Those assets, but we've broadened it now to really look across the entire portfolio to look at Puget sound in the mix to look at our legacy assets in the mix, that's really when I say, our priorities are and reliability across our portfolio and then integration and optimization across our portfolio.
Thats really code for we're looking for more synergies, we're looking for more optimization across the entire asset.
We haven't gone out and said anything specific like we did with the $100 million of synergies.
But know that we're working that hard Stephen and his group have already talked a little bit about that and what we're hoping you guys will be able to see as the results of that come out and not just our <unk>.
Throughput, but also our capture for all the for both the western and mid Con regions.
Thanks, Tim I guess, we will keep watching with interest. My next question is more housekeeping. So on the quarter itself Capex looked a touch low wondering if there is anything to highlight there and working capital seems to be a touch high well some of your other peers are reporting some tailwind. So just wondering if you could.
Speaker 10: Thanks, Tim. I guess we'll keep watching with interest. My next question is more housekeeping. So on the quarter itself, CapEx looked a touch low. Wondering if there's anything to highlight there. And working capital seems to be a touch high, while some of your other peers are reporting some tailwinds. So just wondering if you could address those two things.
Those two things.
Sure. This is atmos with respect to our capital spending we're very pleased with how our Capex program is gone and this is just a function of.
Speaker 3: Sure, this is Atnes. With respect to our capital spending, we're very pleased with how our CAPEX program has gone. And this is just a function of completing our turnarounds on time and on budget. There's always some contingency built into our budget plans. And this is, we're just demonstrating our capital discipline and the manifests and the positive variance. With respect to,
Completing our turnarounds on time and on budget. There is always some contingency built into our budget plans.
And this is.
We're just demonstrating our capital discipline manifests in a positive variance with respect to.
Speaker 3: Working capital, we saw some working capital, tailwinds. This quarter as we're coming out of these turnarounds and working out inventory, rising prices also had a beneficial impact on our working capital. So that in mind, you could see that tailwinds to our cash flow from operation.
Working capital, we saw some working capital tailwind.
This quarter as we're coming out of these turnarounds.
And working out inventory rising.
Rising prices also had a beneficial impact on our working capital so with that in mind, you could see the tail winds to our cash flow from operations.
Speaker 2: Yeah, Agnes mentioned in his prepared remarks, Kalei, that we anticipate coming in on the low end of the CapEx range now. And so that is a result of, again, better execution and solid performance on our turnarounds.
And as mentioned in his prepared remarks clay that.
We anticipate coming in on the low end of our Capex range now.
And so that is a result of again better execution and solid performance on our turnarounds.
Great. Thanks, guys.
Yes.
Speaker 11: Your next question comes from the line of Paul Chang from Scotia Bank. Please go ahead. Thank you. Good morning.
Your next question comes from the line of Paul Cheng from Scotiabank. Please go ahead.
Alright, Thank you good morning.
Good morning, Bob.
Speaker 12: I'm trying to see that if you can help me to purchase the gap. I think the company is expecting that on the longer-term basis that you will be able to improve your reliability so that a reasonable, cool unit one on an annual basis may get to about 640. And at that time that you can see the unique course, go down to about 6 to 615.
Turning to.
You bet.
Again, I think the companies.
I think that on a longer term basis that you will be able to improve.
Liabilities, so that a reasonable.
Coal unit one on the annual basis may get to about 60 40.
Han.
Upon that you can see the unit cost.
Go down to about 6% to 615.
Speaker 12: And if we look at in the third quarter, your unit course in the mid-con is around 650 and the west is about 970.
If we look at in the third quarter.
Your unit cost in the mid Con is around 650 and west is about 917.
Speaker 12: and you're wondering it 570 6000 ver per day just by improving it to 64
And youre lending at 576000 barrels a day.
Just by improving yet to six <unk>.
Speaker 12: that better with our ability that by yourself doesn't seem like we get you down to the target unit cost. So what are the initiatives or in the core size that we should expect in order for us to maybe bridge the gap to go down to that level? That's the first question.
That's what we thought that <unk> would get you down to deal with Tomcat unit cost so.
The initiatives on the cost side.
We should expect in order for us.
To maybe bridge the gap to go down to that level. That's the first question.
Speaker 2: The answer to it is, this is for misses, call me out, or when are you starting your full internet contents???, thisfal? 345 hope every memory in your mouth are realized and can only escape a memory of a 2018
Good question.
We believe reliability has.
Speaker 2: two benefits, at least, as we continue to prioritize that. Not only does it get the denominator down, as you just kind of mentioned, the math of higher throughput will get your op-ex per barrel down, but it also reduces your maintenance costs.
Two benefits at least as we continue to prioritize that not only does it get the denominator down as you just kind of mentioned the math of higher throughput will get your opex per barrel down but it also reduces your maintenance costs, which will be on the numerator, which will also get your opex down Theres a lot of good effort going on.
Speaker 6: which will be in the numerator, which will also get your OPEX down. Again, there's a lot of good effort going on in that area of reducing OPEX and improving reliability. And, Val, do you have any color you want to provide on that? Yeah, as we said earlier, you know, we are very focused on each asset putting forward reliability improvement plans. We're focused both on competitive spend, right dollars.
In that area of reducing opex and improving reliability and Dale do you have any color you want to provide on that yes. As we said earlier, we are very focused on each asset putting forward reliability and payment plans.
We're focused both on competitive spend right dollars to buy down operating risks to improve reliability and making sure. Our money is going in the right places and and printing reliability, which will ultimately get our utilization up we are more challenged in the west and those those facilities are.
Speaker 6: to buy down operating risk, to improve reliability, and making sure our money is going in the right places.
Speaker 6: and improving reliability, which will ultimately get our utilization up. We are more challenged in the West, and those facilities are a primary focus for our efforts, particularly Sinclair Assets.
Our primary focus for our efforts, particularly our Sinclair assets, allowing us with <unk> and <unk> are all working.
Speaker 6: Along with Whitzcross and PSR are all working, improved structure on cost. But again, our biggest opportunity is reliable assets.
Improved structure.
Cost.
But again, our biggest opportunity is reliable assets produce more barrels they are safer.
Speaker 6: produce more barrels, they're safer, and we get a better outcome in performance and execution.
And we get.
Better outcome and performance and execution.
Speaker 12: Why we just do you guys have a number that you can share with that the West unit course on the longer term basis that you are targeting?
Why do you guys have a number that you can share with that the west unit costs on the longer term basis that you are targeting that.
Bob we're not we're not ready to give out any specific numbers or guidance in that area, but we do believe there is.
Speaker 2: Paul, we're not ready to give out any specific numbers or guidance in that area, but we do believe there's plenty of opportunities in the West that we're going after.
Plenty of opportunities in the west that we're going after.
Speaker 12: Okay, second question is that as you about to close HEP and roll it back up.
Okay.
Second question with that and ask you about the Kohl's HCP and we'll get back up.
Speaker 12: One thing you have done that is that just this is as usual and that you simplify your copy structure or that that's going to see real actual operating benefit. Just want to see whether we should expect some improvement or that is just say reducing the copy structure capacity. Thank you.
Once that you have done that is it just business as usual and then do you seem to follow your capex structure all of that that's going to see real actual operating benefits.
Just wanted to think about whether we should expect some improvement or that is just reducing the.
The opex structure.
Capacity. Thank you.
Speaker 3: Paul, this is Atlas. Thank you for your question. Your observation is, is, is, is this correct? We, we're seeing opportunities for simplification and optimizing our portfolio. To give you just an example, what used to be at times complicated negotiation on contracts and our company contracts now is gonna be a simple, more simplified process, which would really help us focus on efficiencies and commercial opportunities. So the simplification part of that benefit is gonna be meaningful to us.
Yeah. Paul This is atmos. Thank you for your question.
Your observation is correct.
Is.
That's correct.
We're seeing opportunities with simplification and optimizing our portfolio to give you just an example, what used to be at times.
Complicated negotiation on contracts intercompany contracts now is going to be.
More simplified processes, which would really help us to focus on efficiencies and commercial opportunities. So the simplification.
Part of.
That benefit is going to be.
Meaningful to us.
Speaker 3: And with respect to the corporate structure, you will get your run-of-the-mill savings, you know, essentially running one public company as opposed to having two public companies. And on top of that, we also see some synergies with respect to the debt as the goal gets rolled up at the dyno level. So all good outcomes for us.
And with respect to the corporate structure, you will get your run of the mills.
Savings have essentially running one public company as opposed to having two public companies.
On top of that we also see some synergies.
With respect to the to the debt.
It gets rolled out but.
Dino level, so all good good outcomes for us.
Speaker 12: Hello, that is a number you can share in terms of the operating energy. Excluding, I mean, the data we can understand, but also in the financial lower interest, I mean, the real operating bandwidth that is a number you can share.
Hello.
Number you can share in terms of the operating synergies.
Excluding I mean that that we can understand but I also like the funding so.
Lower your interest I mean, we are painting benefit is that a number you can share.
Okay.
Speaker 3: We will be in better position to shed more light on that after the close of the transaction. Thank you.
We will be even better positioned to to shed more light on that after the close.
The transaction.
Alright, thank you.
Thank you.
Speaker 1: And your next question comes from the line of Matthew Blair from TPH. Please go ahead.
Your next question comes from the line of Matthew Blair from TBH. Please go ahead.
Speaker 8: Hey, good morning. Thanks for taking my questions. Do you have any early thoughts on refining capture in the fourth quarter? I think Q3 was around 60%. Seems like the fourth quarter would include some pretty considerable tailwinds from things like wider WCS discounts, butane blending, lower rinse, and then it looks like lower refinery maintenance.
Hey, good morning, Thanks for taking my questions do you have any early thoughts on refining capture in the fourth quarter. I think Q3 was around 60%. It seems like the fourth quarter would include some pretty considerable tailwind from things like wider WCS discounts butane blending.
Lower rim can then and then it looks like lower refinery maintenance.
Yes, Matt This is Steve and I always appreciate the questions that always have the thesis included.
Speaker 9: Yeah, Matt, this is Steve, and I always appreciate the questions that always have the thesis included, in terms of the answer, and that was one of those. So we do see also a cleaner quarter ahead in Q4. We do think that the DIFs
In terms of the answer and that was one of those so we do see also a cleaner quarter ahead in Q4, we do think that the deaths.
Speaker 9: WCS in particular TI diff will blow out and has already in the forward strip and we have minimal minimal planned maintenance We're finishing up the Tulsa Turn around
WCS in particular, Ti Dif will blow out and has already and the forward strip and we have minimal minimal planned maintenance, we're finishing up the Tulsa.
Turnaround.
Speaker 2: So, you know, supportive structure and margin in terms of just the let diesel and jet will be moving gas around them or in max diesel and jet mode for Q4. So we think we have some opportunities to have a cleaner quarter ahead, but we're not giving explicit guidance on what that number is, but we do see a good path ahead. Yeah, we've got some good tailwinds as you pension.
Supportive structure and margin in terms of.
Distillate diesel and jet will be moving gas around and were in Max.
Diesel and jet mode for Q4, so we think we have some opportunities to have a.
Cleaner quarter ahead, we're not giving explicit guidance on what that number is but we do see a.
Good path ahead.
We've got some good tailwind is as you've mentioned.
Speaker 2: Matt but seasonally the fourth quarter always tends to be a little lower on capture too just because Martins compress so that'll be the offset to some of the tailwinds that we're seeing
But seasonally the fourth quarter always tends to be a little lower on capture too just because margins compressed so that'll be the ops offset to some of the tailwind that we're seeing.
Speaker 13: Sounds good. And then I'm not sure if this has been addressed yet, but any thoughts on the potential for large scale refinery M&A from HSN Clare here?
It sounds good.
And then I'm not sure. If this has been addressed yet, but any thoughts on the potential for for large scale refinery M&A from.
HFC Sinclair here.
Speaker 2: No, that question hasn't been asked yet, Matt. What I would tell you is, you know, we're focused first on closing HEP. It's been a transaction that we've started earlier in the year and that we're laser focused on completing. As Atmus mentioned earlier, we believe that we will be able to close here before the end of the year.
Another question has been asked yet Matt.
What I would tell you is we're focused first on closing AGP thats been a transaction that we've started earlier in the year in that.
We're laser focused on on completing as Adena mentioned earlier, we believe that we will be able to close here before the end of the year.
Our priorities are internally focused we've talked about that before.
Speaker 2: Our priorities are internally focused. We've talked about that before. We're really looking to improve our internal reliability as well as our integration and optimization across our assets. So that's really where our main focus is. We don't think that the time right now is.
We're really looking to improve our internal reliability as well as our integration and optimization across our assets. So that's really where our main focus is we don't think that the time right now is.
Is right to be looking at large M&A.
Speaker 2: is right to be looking at large M&A, as you kind of described it, both from a market standpoint. You know, we like to look counter-cyclically. Right now, I think we're finding valuations are pretty high. But more importantly, from an internal perspective, we're really focused internally more than externally. Now, I know there's some assets on the table that are starting to be marketed. We'll take a look, just like everyone else is, but it's not a priority for us right now. I'm out.
You've kind of described it both from a market standpoint.
He'd like to look counter cyclically right.
I think we're finding valuations are pretty high.
But more importantly into.
Internal perspective, we're really focused internally more than externally now I know theres some assets on the table that are starting to be marketed we will we'll take a look just like everyone else is but it's not a priority for us right now.
Great. Thank you.
Speaker 1: Your next question comes from the line of Roger Reed from Wells Fargo Securities, please go ahead.
Your next question comes from the line of Roger read from Wells Fargo Securities. Please go ahead.
Thanks, Good morning.
Speaker 14: Thanks. Good morning. Just a couple of things to catch up on. One, your comments about refining reliability and getting that up. I'm just curious if you were to say, you know, over the last 12 to 24 months what your available uptime has been and then maybe what the target is for available time, you know, X turnarounds and all that as we think about, you know, a marker for where you've been and a marker for what you're.
Just a couple of things to catch up on your comments about refining reliability and getting that up I'm. Just curious if you were to say over.
Over the last 12 months to 24 months, what Youre available uptime has been and maybe what the target is for available uptime ex turnarounds in all of that as we think about.
Barker for where <unk> been in a marker for what Youre trying to go.
Yeah, Hi, Roger.
Speaker 15: Yeah, hi Roger. We don't provide a lot of
We don't provide a lot of the.
Speaker 2: internal measures that we use. We have a lot of internal measures that we're tracking both at the refinery level as well as at the regional levels.
Internal measures that we use we have a lot of internal measures that we're tracking both at the refinery level as well as at the regional levels.
Speaker 2: But we don't, we don't disclose that we are making progress, we're feeling good about the progress that we're making bells talked about that we are seeing progress I think one of the biggest ways.
But we don't we don't disclose that.
We are making progress we're feeling good about the progress that we're making <unk> talked about that we.
<unk> seen progress so I think one of the biggest ways.
Speaker 2: that we're seeing progress is in just the improved safety and environmental performance of our assets, which we always believe is a lead in indicator of how our
That we're seeing progress as in just the improved safety.
And environmental performance of our assets, which we always believe is a leading indicator of how our.
Speaker 2: Our reliability is doing as well in the rest of our business is doing. And I can tell you we're on pace to set another record safety year, both on the process safety standpoint and a personnel safety standpoint. So we feel good about the internal indicators. We're just not prepared to share any of those.
Our reliability is doing as well in the rest of our business is doing and I can tell you. We're on pace to set another record safety year, both on process safety standpoint, and a personnel safety standpoint, so we feel good about the internal indicators, we're just not prepared to share any of those Roger.
Okay, well, if not absolute numbers I mean, maybe.
Speaker 14: Okay, well, if not absolute numbers, I mean, maybe a basis point improvement, I mean, we're looking at.
Basis point improvement I mean, we're looking at.
Speaker 14: 200, 300, 500 something along those lines to try to take a little deep.
200, 300, 500, something along those lines, if I can dig a little deeper.
Okay.
Speaker 3: Yeah, Roger, this is Atmus. I would just encourage you to stay tuned, and you will see a graduated process, progress along those lines. And we're focused on improving reliability.
Yeah. Roger This is atmos I would just encourage you to stay tuned and you will see.
Graduated process Prague.
Progress along those lines.
Okay.
We're focused on improving reliability.
Speaker 16: Okay, switching gears slightly back to the renewable diesel business. So you went through with one of the earlier questions, you know, all the things that help. But I was just curious if you thought year over year, quarter to quarter, maybe how that broke down, you know, market factors relative to, you know, things you were able to do about changing the mix, keeping control of costs, stuff like that. So just what might have
Okay.
Switching gears slightly back to the renewable diesel business you went through with one of the earlier questions.
Does that help but just curious if you thought year over year quarter to quarter, maybe how that broke down market factors growler tier two.
Jamie you were able to do about changing the mix keeping control costs stuff like that.
What Mike.
Might've helped out on the lubes.
Speaker 3: on the questions of own renewables. Yes, Roger, this is Atlas. One of the first things that comes to mind is early on, as we were getting this business up and running was working off high-priced feedstock in a backward-aid market.
On the questions.
On renewables, yes, Roger this is atmos one of the.
One of the first thing that comes to mind is early on.
As we were getting this business up and running was.
Working off.
High priced feedstock in a backward dated market. So the team has done a lot of good progress with respect to.
Speaker 3: So the team has done a lot of good progress with respect to...
Speaker 3: managing inventory and ensuring that we're focusing on using low-ci feedstock. So that's number one.
Managing inventory and ensuring that we're focusing on using mostly yet.
Feedstock, so thats number one.
Speaker 3: Number two would be improvements around catalyst performance and optimization.
Number two.
Could be.
Improvements around catalyst.
Up.
Catalyst performance and optimization.
Number three.
Speaker 3: as a result of our turn-around and the technical focus on the team is improving hydrogen availability.
As a result of our turnarounds and the technical focus from the team is.
Improving hydrogen availability.
Speaker 9: And so those are the kind of the three things that come to mind and I could ask Steve or Val to add additional color. No, I think you're right. I mean, we're feeling this apart to make sure that we can make it the most profitable business. It can be in our current configuration. We like to remind people that two of our facilities are co-located and so hydrogen availability is a keen focus. But beyond that, we've started to pull levers, as Atnes mentioned, in terms of advanced low-CIP stock. As part of that, you know, driving pathways are very important to get that full value and with that hyper focus on that.
And so those are the kind of the three things that come to mind in good asked Steve but more value.
Add additional color I think you're right. We're feeling this apart to make sure that we can make the most profitable business that can be in our current configuration, we would like to remind people that two of our facilities are co located and so hydrogen availability is a keen focus but beyond that we've started to pull levers as adena mentioned in terms.
We have advantaged low Ci feedstocks.
As part of that driving pathways are very important to get that full value and with that hyper focus on that.
Speaker 9: Catalyst optimization, OPEX levers in terms of waste.
Catalyst optimization opex levers in terms of waste.
Speaker 9: And then really getting our molecules integrated across our value chain is another aspect that we see a lot of value coming forward. So, you know, we've demonstrated that in Q3 we can be profitable with not hitting our normalized run rate. We still see the path to getting there by the end of the year. And all of those focus areas we believe and expect to have a profitable renewables business next year.
And really getting our molecules integrated across our value chain is another aspect that we see a lot of value coming forward. So.
We've demonstrated that in Q3, we can be profitable with not hitting our normalized run rate, we still see the path to getting there by the end of the year and all of those focus areas, we believe and expect to have a profitable renewables business next year.
And Roger I would just.
Speaker 15: And Roger, I would just, I would just draw an analogy to the Lube's business.
I would just draw an analogy to the lubes business we spent.
Speaker 2: You know, we spent a lot of resources and a lot of effort to turn that business around. I think over the last.
Lot of resources and a lot of effort to turn that business around I think over the last.
Speaker 2: Two and a half years, we've been at well above mid-cycle, you know, performance for our lubes business. That same type of effort, that same type of focus is what we've got pouring into our renewable diesel business right now. And we believe that we will be successful in getting that business turned around and performing the way we want, just like we have our lubes business performing the way we want right now.
Two and a half years, we've been at well above mid cycle.
Performance for for our Lubes business that same type of FERC that same type of focus is what we've got pouring into our renewable diesel business right now and we believe that we will be successful in getting that business turned around and performing the way. We want just like we have our lubes business performing the way it was.
One right now.
Great. Thank you.
Yes.
Speaker 1: Your next question comes from the line of Jason Gabelman from TD Cowan. Please go ahead.
Your next question comes from the line of Jason <unk> from TD Cowen. Please go ahead.
Hey, good morning, Thanks for taking my questions.
Speaker 2: Hey, morning. Thanks for taking my questions. I wanted to first hit on the CAP, the financial framework, as you get close to the closing of the HEP transaction. It looks like on a consolidated basis.
I wanted to first hit on the caps five.
Financial framework as you get close to the closing of the <unk> transaction.
It looks like on a consolidated basis Youre holding about $1 billion of net debt.
Speaker 2: you're holding about a billion dollars of net debt. Is that the right number for the company to hold on a consolidated basis? And then how do you think about five acts as you're able to get back into the market following the HUP?
Is that the right number for the company to hold on a consolidated basis and then how do you think about buybacks as youre able to get back into the market.
Following the deal close.
Yes. Thank you for your question. This is Aetna is the way we were.
Speaker 3: Thank you for your question. This is Atlas. The way we think with respect to our capital structure and get in particular is in terms of net leverage. And the net leverage target that we have publicly stated has been one time a net leverage. As you can see we're far below that right now and we're very pleased.
Pink with respect to our capital structure and debt in particular is in terms of net leverage.
The net leverage target that we have publicly stated has been onetime net leverage as you can see we're far below that right now and we're very pleased.
Speaker 3: given where capital structures today are.
Given where capital structures today are first and foremost priority is shareholder return both in terms of buybacks and dividends.
Speaker 3: First and foremost priority is shareholder return, both in terms of buybacks and dividends.
Speaker 3: and we'll continue with that mindset. With respect to anything around the debt, I think we're very much, we're very pleased with where our debt is and shareholder return is our priority.
And we will continue with that mindset with respect to anything around the debt I think we're very much.
We're very pleased with where that is.
Shareholder return is our priority.
Speaker 2: I got it great. And then my other question is just...
Got it great.
And then my other question is just looking at the indicators that you've posted for October it seems like the premiums and the west relative to mid Con.
Speaker 2: looking at the indicators that you've posted for October . It seems like the premiums in the West, relative to Midcon, have come in.
Have come in.
Speaker 17: after a pretty good run of pricing premiums, how much of that is seasonally driven and is there any structural components?
After a pretty good run of pricing premiums how much of that is seasonally driven.
Is there any structural components as maybe there were a.
Speaker 17: maybe uh... there were a couple of assets i guess in the rockies in particular offline for the better part of the past couple years and now they're back
Couple of assets I guess in the Rockies in particular offline for the better part of the past couple of years and now they're back.
Speaker 17: If you could answer that, that'd be great. It just won more clarification. I don't actually think you provided the working capital.
If you could answer that that'd be great and just one more.
Clarification I don't actually think you provided the working capital.
Speaker 17: Number in terms of cash inflow if you could provide that that'd be great. Thanks.
Number in terms of cash and flow if you could provide that that'd be great. Thanks.
Speaker 3: Yeah, let's start with the last part, Susan DeFresher. This is Atmus. In terms of working capital, we saw a tailwind to the tune of $500 million for the third quarter.
Yes.
With the last part is the pressure. This is atmos in terms of working capital we saw a tailwind to the tune of 500 million for the third for the third quarter.
Speaker 15: Yeah, and then just to answer the structure, margin environment on the West Coast, we don't see anything necessarily structurally, other than a good portion of diesel, particularly RD coming to those markets, and therefore we think there'll be length of diesel and to be honest, an opportunity in gas, as well as jet. But we don't think there's anything materially structural, and we think that what you're seeing right now is seasonal normal patterns. Yeah, I would just jump in, Jason, we typically see seasonal...
Yes.
To answer the the structure margin environment on the West Coast, we don't see anything necessarily structurally other than a good portion of diesel, particularly R&D coming to those markets and therefore, we think there'll be linked.
Diesel and to be honest and opportunity in gas as well as jet, but we don't think theres anything materially structure. When we think that what youre seeing right now is seasonal normal normal patterns.
I would just jump in Jason we typically see seasonal weakness as.
Speaker 2: weakness as the tourism and the driving season kind of comes to a close. We're not seeing anything unusual at this point. What we are seeing is pretty strong jet premiums right now.
Tourism and the driving season.
When it comes to a close we're not seeing anything unusual at this point.
We are seeing pretty strong jet premiums right now and I would tell you for the third quarter, we had record jet production and record jet sales that helped boost capture in both the mid con and in the west regions and we're seeing that continue here in the fourth quarter. So.
Speaker 2: And I would tell you for the third quarter, we had record jet production and record jet sales.
Speaker 2: that health boosts capture in both the mid-con and in the West regions and we're seeing that continue here in the fourth quarter. So we will continue to look for those types of opportunities.
We'll continue to look for those types of opportunities to continue to.
Speaker 2: to continue to just optimize our portfolio.
Just to optimize our portfolio.
Yes.
Great. Thanks.
Speaker 1: Your next question comes from the line of Joe Leish from Morgan Stanley . Please go ahead.
Your next question comes from the line of Joe <unk> from Morgan Stanley. Please go ahead.
Thank you and good morning, and thanks for taking my questions.
Speaker 18: So I just had a follow up on RD. I was just hoping to get your outlook for RD.
So I just had a follow up on R&D I was just hoping to get your outlook for R&D Mark each year, just given the industry capacity coming online next year and we've seen rins follow up we've also seen some of the feedstock cost decline as well as an offset so just hoping to get your thoughts on the credit side as well as the feedstock side here. Please.
Speaker 18: Just given the industry capacity coming online next year, we've seen RINs fall.
Yes, I think I think you hit it right with the RVO release.
Speaker 9: Yeah, I think you hit it right, you know, with the RVO release and the view of additional capacity coming on.
The view of additional capacity coming on.
Speaker 9: There's been weakness in both RenValue and LCFS. We think that...
There has been weakness in both RIN value Enel CFS, we think that that will adjust some time, there's been some announcements of some of the larger production coming on some delays there and so <unk> seen some of that change the overall margin and pricing structure, but we think that's temporary.
Speaker 9: that will adjust. Sometime, there's been some announcements of some of the larger reduction coming on, some delays there, and so you've seen some of that change, the overall margin and pricing structure, but we think that's temporary. That has created a bit of reduction in terms of the feedstock pricing near-term, and we'll take advantage of that, but we think that will normal out, and ultimately we think that the RBO...
That has created a bit of reduction in terms of the feedstock.
Pricing near term and we will take advantage of that but we think that will normal out and ultimately we think that the RVO.
Speaker 9: will adjust. We don't know when, but we do think that when it does adjust, it will create additional support in terms of the rent value. And we continue to try to find other markets to take our products to, and we think that there are opportunities not only in terms of the markets that have LCFS, but we're also finding some opportunities where we can match proximity.
We will adjust.
We don't know when but we do think that when it does adjust it will create additional.
Support in terms of the RIN value and we continue to try to find other markets to take our products to and we think that there are opportunities not only in terms of.
The margins have CFS, but we're also finding some opportunities where we can match proximity to to our barrels and put them into those things into those.
Speaker 9: to our barrels and put them into those things and into those channels profitable. So longer term outlook, we're pretty comfortable with what we're doing and I'm mocking and I'm tapping the complete value chain in our arty business. And you solve...
Channels profitable so longer term outlook, we're pretty comfortable with what we're doing in our marking and on tapping the complete value chain and our Rd business.
And you saw.
Joe that.
Speaker 2: RD margins tightened here in the third quarter, and yet our gross margin and net margins actually increased. That's a testament to what the team is doing to try to improve our just our base business.
Rd margins tightened here in the third quarter and yet our gross margins and net margins actually increased.
That's a testament to what the team is doing to try to improve our just our base business.
Great. Thanks, Tim I appreciate it I'll leave it there thanks.
Yes.
Speaker 1: We have no further questions in the queue at this time. I will turn the call back over to Tim for closing remarks.
We have no further questions in the queue at this time I will turn the call back over to Tim for closing remarks.
Speaker 2: Thank you, Krista. Let me recap by saying that in the third quarter, we executed our turn-around on time and on budget. We delivered above-mic cycle profits in our refining segment, lubricants and specialty segment, and marketing segment, and we returned $669 million to our shareholders for a total of 1.2 billion of shareholder returns so far this year.
Thank you Christa, let me recap by saying that in the third quarter, we executed our turnarounds on time and on budget, we delivered above mid cycle profits in our refining segment lubricants and specialty segment and marketing segment.
And we returned $669 million to our shareholders for a total of $1 2 billion of shareholder returns so far this year.
Speaker 15: These strong results are a testament to the competitive advantages of our business portfolio and the hard work of our employees to execute our strategies and deliver on these results.
These strong results are a testament to the competitive advantages of our business portfolio and the hard work of our employees to execute our strategies and deliver on these results.
Speaker 2: Our priorities remain the same to improve our reliability number one, to integrate and optimize our new portfolio of assets number two, and to return next desk cash to our shareholders number three.
Our priorities remain the same to improve our reliability number one to integrate and optimize our new portfolio of assets number two and to return excess cash to our shareholders number three.
Speaker 2: Thank you for joining our call. Have a great day, and go Rangers.
Thank you for joining our call have a great day and go Rangers.
Speaker 1: Thank you. This does conclude today's teleconference. Please disconnect your lines at this time and have a wonderful day.
Thank you. This does conclude today's teleconference. Please disconnect your lines at this time and have a wonderful day.
Okay.
Yeah.
Yeah.