Q4 2023 HF Sinclair Corp Earnings Call

February 21, 2024

Okay.

Operator: Welcome to HF Sinclair Corporation's fourth quarter 2023 conference call and webcast. Hosting the call today is Tim Go, Chief Executive Officer of HF Sinclair. He is joined by Atanas Atanasov, Chief Financial Officer.

Speaker Change: Welcome to HFC class corporations fourth quarter, 2023 conference call and webcast.

Speaker Change: The call today is Jim <unk>, Chief Executive Officer of HFC class.

Speaker Change: He is joined by tenants and myself, Chief Financial Officer, Steve Ledbetter EVP of commercial.

Operator: Steve Ledbetter, EVP of Commercial; Valerie Pompa, EVP of Operations; and Matt Joyce, SVP of Lubricants and Specialities. At this time, all participants have been placed in a listen-only mode, and the floor will be open for your questions following the presentation. If you would like to ask a question at that time, please press star 1 on your touchtone phone. If at any point your question has been answered, you may remove yourself from the queue by pressing the pound key.

Speaker Change: By the way Pompa EVP of operations, and Matt Joyce SVP of lubricants and speciality.

Craig Biery: If you should require operator assistance, please press star zero. 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, this conference is being recorded. Craig Biery, Vice President, Investor Relations, you may begin.

Speaker Change: At this time, all participants have been placed in a listen only mode and the floor will be opened for your questions. Following the presentation.

Speaker Change: If you would like to ask a question at that time. Please press star one on your Touchtone phone.

Speaker Change: If at any point. Your question has been answered you may remove yourself from the queue by pressing the pound key.

Operator: If you should require operator assistance, please press star zero. 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, this conference is being recorded. Craig Biery, Vice President, Investor Relations, you may begin.

Speaker Change: If you should require operator assistance, please press star zero.

Craig Biery: Thank you, Gavin. Good morning, everyone, and welcome to H.F. Sinclair Corporation's fourth quarter 2023 earnings call. This morning, we issued a press release announcing results for the quarter ending December 31st, 2023. If you would like a copy of the earnings press release, you may find it on our website at hfsinclair.com. Before we proceed with remarks, please note the Safe Harbor Disclosure Statement in today's press release. In summary, it says statements made regarding management expectations, judgments, or predictions are forward-looking statements. These statements are intended to be covered under the Safe Harbor provisions of federal security laws.

Speaker Change: We ask that you please limit yourself to one question and one follow up.

Speaker Change: Additionally, we also you pick up your handset to allow optimal sound quality. Please.

Speaker Change: Please note this conference is being recorded.

Speaker Change: It is now my pleasure to turn the floor over to Craig Biery, Vice President Investor Relations, Greg you may begin.

Craig Biery: Thank you Kevin Good morning, everyone and welcome to Hff's Sinclair Corporation's fourth quarter 2023 earnings call. This morning, we issued a press release announcing results for the quarter ending December 31, 2023, if you would like a copy of the earnings press release, you may find it on our website at Hff's Sinclair Dot com.

Craig Biery: Before we proceed with remarks. Please note the safe Harbor disclosure statement in today's press release and summary statements made regarding management expectations judgments or predictions are forward looking statements. These statements are intended to be covered under the safe Harbor provisions of federal security laws. There are many factors that could cause results to differ from expectations, including those.

Timothy Go: There are many factors that could cause results to differ from expectations, including those noted in our SEC file. The call also may include discussion of non-GAAP measures. Please see the earnings press release for reconciliations to GAAP financial measures. Also, please note any time-sensitive information provided on today's call may no longer be accurate at the time of any webcast replay or rereading of the transcript. And with that, I'll turn the call over to Tim. Good morning, everyone.

Craig Biery: Noted in our SEC filings.

Craig Biery: The call also May include discussion of non-GAAP measures. Please see the earnings press release for reconciliations to GAAP financial measures also please note any time sensitive information provided on today's call may no longer be accurate at the time of any webcast replay or rereading of the transcript and with that I'll turn the call over to Tim.

Tim: Good morning, everyone. When I stepped into the CEO role CEO role last year I laid out three priorities.

Timothy Go: When I stepped into the CEO role last year, I laid out three priorities. One, to drive operational excellence, including improved reliability; to optimize and integrate our portfolio of new businesses; and, three, to generate strong cash flows to advance our cash return strategy. I'm very pleased to report the significant progress our team has executed against these goals during the year. First, in 2023, we delivered record-best process safety performance across our refining portfolio and successfully completed heavy maintenance turnarounds at all of our refineries during the year on schedule and on budget as we took another step toward improving reliability across our portfolio. Second, we closed the transaction to buy out our HEP business in the fourth quarter and furthered our efforts to integrate and optimize our asset base. In addition, we delivered growth in our marketing segment volumes and site count and delivered strong lubricants and specialties segment earnings despite the weakening of base oil cracks in 2023. Third, during the year, we also returned over $1.3 billion in cash to shareholders through share repurchases and dividends.

Timothy Go: When I stepped into the CEO role last year, I laid out three priorities. One, to drive operational excellence, including improved reliability, to optimize and integrate our portfolio of new businesses. And three, to generate strong cash flows to advance our cash return strategy. I'm very pleased to report the significant progress our team has made on these goals during the year.

Tim: To drive operational excellence, including improved reliability.

Tim: Two to optimize and integrate our portfolio of new businesses.

Tim: And three to generate strong cash flows to advance our cash return strategy.

Tim: I'm very pleased to report the significant progress our team has executed against these goals during the year.

Timothy Go: First, in 2023, we delivered record-best process safety performance across our refining portfolio and successfully completed heavy maintenance turnarounds at all of our refineries during the year on schedule and on budget as we took another step towards improving reliability across our portfolio. Second, we closed the transaction to buy out our HEP business in the fourth quarter and furthered our efforts to integrate and optimize our asset base. In addition, we delivered growth in our marketing segment volumes and site count and delivered strong lubricants and specialties segment earnings despite the weakening of base oil cracks in 2023. Third, during the year, we also returned over $1.3 billion in cash to shareholders through sharewood purchases and dividends.

Tim: First in 2023, we delivered record best process safety performance across our refining portfolio and successfully completed heavy maintenance turnarounds at all of our refineries during the year on schedule and on budget as.

Tim: We took another step towards improving reliability across our portfolio.

Tim: Second we closed the transaction to buy in our HIV business in the fourth quarter and furthered our efforts to integrate and optimize our asset base.

Tim: In addition, we delivered growth in our marketing segment volumes in site count and delivered strong lubricants and specialties segment earnings. Despite the weakening of base oil cracks in 2023.

Tim: Third during the year. We also returned over $1 3 billion in cash to shareholders through share repurchases and dividends.

Timothy Go: Delivering on our cash return commitment to shareholders, with good momentum across our big... We believe we are well positioned to continue creating compelling value for our shareholders in 2024. Now, let's turn to our segment highlight, refining, for the full year 2023. We set annual records at our Parco refinery in both heavy crude runs and total throughput. We also executed planned turnaround work at all of our refineries on schedule and on budget.

Timothy Go: Delivering on our cash return commitment to shareholders, with good momentum across our business, we believe we are well positioned to continue creating compelling value for our shareholders in 2024. Now let's turn to our segment highlight, refining for the full year 2023. We set annual records at our Parco refinery in both heavy crude runs and total throughput. We also executed planned turnaround work at all of our refineries on schedule and on budget.

Tim: Delivering on our cash return commitment to shareholders.

Tim: With good momentum across our businesses. We believe we are well positioned to continue creating compelling value for our shareholders in 2024.

Tim: Now, let's turn to our segment highlights.

Tim: And refining for the full year 2023.

Tim: Set annual records at our Parco refinery in both heavy crude runs and total throughput.

Tim: We also executed planned turnaround work at all of our refineries on schedule and on budget.

Timothy Go: Improved turnaround execution allowed us to do all the work on our equipment we intended and is essential to our strategy of driving reliability improvements in 2024 and throughout the turnaround cycle. In renewables, in the fourth quarter, we achieved our normalized run rate utilization for our renewables facilities and delivered record volumes at our pre-treatment unit in Artesia. We also received our new CI pathways, which we believe will benefit our margin capture opportunity going forward. For 2024, we plan to continue to optimize the operation of our renewables assets through improved reliability and improved commercial efforts. The marketing segment in 2023 delivered growth in gasoline and diesel branded sales volume, as well as branded site count compared to 2022, which includes our Sinclair branded wholesale business for the period after March 14, 2022. We are pleased with the value that the Taino brand brings to our portfolio.

Timothy Go: Improved turnaround execution allowed us to do all the work on our equipment we intended and is essential to our strategy of driving reliability improvements in 2024 and throughout the turnaround cycle. In renewables, in the fourth quarter, we achieved our normalized run rate utilization for our renewables facilities and delivered record volumes at our pretreatment unit in Artesia. We also received our new CI Pathways, which we believe will benefit our margin capture opportunity going forward. For 2024, we plan to continue to optimize the operation of our renewables assets through improved reliability and improved commercial efforts. The marketing segment in 2023 delivered growth in gasoline and diesel branded sales volume compared to 2022, which included our Sinclair branded wholesale business for the period after March 14, 2022.

Tim: Improved turnaround execution allowed us to do all the work on our equipment. We intended and is essentially it is essential to our strategy of driving reliability improvements in 2024 and throughout the turnaround side.

Tim: In renewables in the fourth quarter, we achieved our normalized run rate utilization for our renewables facilities and delivered record volumes at our pretreatment unit in Artesia.

Tim: We also received our new Ci pathways, which we believe will benefit our margin capture opportunity going forward.

Tim: For 2024, we plan to continue to optimize the operation of our renewables assets through improved reliability and improved commercial efforts.

Tim: The marketing segment in 2023 delivered growth in gasoline and diesel branded sales volumes as well as branded site count compared to 2022, which includes our Sinclair branded wholesale business for the period after March 14th 2022.

Timothy Go: And we remain focused on increasing the number of branded sites and sales volumes in 2024. In lubricants and specialties, despite lower base oil margins in 2023, we performed well above our mid-cycle guidance and reported annual EBITDA of $346 million. Our results in 2023 reflect our continued efforts to optimize the feedstock integration and sales mix across our finished products portfolio, and we look to build upon this strategy in 2024 to further enhance the value of our lubricants and specialties business. In midstream, we closed on the acquisition of Holley Energy Partners on December 1st, 2023, along with the associated exchange of the outstanding HCP bonds for new HF Sinclair bonds.

Tim: We are pleased with the value that the Dino brands brings to our portfolio.

Tim: And we remain focused on increasing the number of branded sites and sales volumes in 2024.

Tim: In lubricants and specialties, despite lower base oil margins in 2023.

Tim: We performed well above our mid cycle guidance.

Tim: Added annual EBITDA of $346 million.

Tim: Our results in 2023 reflect our continued efforts to optimize the feedstock integration and sales mix across our finished products portfolio and we look to build upon this strategy in 2024 to further enhance the value of our lubricants specialties business.

Tim: In midstream we closed on the acquisition of Holly Energy partners on December one 2023, along with the associated exchange of the outstanding HEB bonds for new HFF Sinclair bonds.

Timothy Go: This acquisition strengthens our business as we simplify our corporate structure and reduce costs as a combined company, further supporting the integration and optimization efforts across our assets. Going forward, our midstream operation will continue to be reported as a separate stand-alone segment in our financials. In the fourth quarter, we returned $248 million to shareholders through share repurchases and dividends. For the full year 2023, we will return over $1.3 billion in cash to shareholders, representing an annual cash return of 12% and a payout ratio of 74%. This does not include the additional $268 million in cash paid to HEP unit holders in the HEP transaction.

Timothy Go: This acquisition strengthens our business, as we simplify our corporate structure and reduce costs as a combined company, further supporting the integration and optimization efforts across our assets. Going forward, our midstream operation will continue to be reported as a separate stand-alone segment in our financials. In the fourth quarter, we returned $248 million to shareholders through share repurchases and dividends. For the full year 2023, we will return over $1.3 billion in cash to shareholders, representing an annual cash return of 12% and a payout ratio of 74%. This does not include the additional $268 million in cash paid to HEP unit holders in the HEP transaction.

Tim: This acquisition strengthens our business as we simplified our corporate structure and reduced costs as a combined company further supporting the integration and optimization efforts across our assets.

Tim: Going forward, our midstream operation will continue to be reported as a separate standalone segment in our financials.

Tim: In the fourth quarter, we returned $248 million to shareholders through share repurchases and dividends.

Tim: For the full year 2023, we returned over $1 3 billion in cash to shareholders, representing an annual cash return of 12% and payout ratio of 74%.

Tim: This does not include the additional $268 million in cash paid to <unk> unit holders in the <unk> transaction.

Timothy Go: Since the closing of the Sinclair Acquisition on March 14, 2022, we have returned approximately $3 billion in cash to shareholders, which represents 27 percent of our market cap as of December 31st, 2023. As of February 9th, 2024, we have $591 million remaining on our current share repurchase offers and authorization. And we remain fully committed to our long-term cash return strategy and long-term payout ratio while maintaining a strong balance sheet and investment-grade credit rating. We also announced on February 14th, 2024 that our Board of Directors declared a regular quarterly dividend of 50 cents per share of 50 cents per share of 50 cents per share of 50 cents per share of 50 cents per share of 50 cents per share of 50 cents per share of 50 cents per share of 50 cents per share of 50 cents per share of 50 cents per share of 50 cents per share of 50 cents per share of

Timothy Go: Since the closing of the Sinclair acquisition on March 14, 2022, we have returned approximately $3 billion in cash to shareholders, which represents 27% of our market cap as of December 31, 2023. As of February 9th, 2024, we have $591 million remaining on our current share repurchase authorization. And we remain fully committed to our long-term cash return strategy and long-term payout ratio while maintaining a strong balance sheet and investment-grade credit rating. We also announced on February 14, 2024, that our Board of Directors declared a regular quarterly dividend of 50 cents per share. An increase of five cents over the previous dividend payable on March 5th, 2024 to holders of record on February 27th, 2024.

Tim: Since the closing of the Sinclair acquisition on March 14th 2022.

Tim: We have returned approximately $3 billion in cash to shareholders, which represents 27% of our market cap as of December 31 2023.

Tim: As of February nine 2024, we have $591 million remaining on our current share repurchase authorization.

Tim: And we remain fully committed to our long term cash return strategy and long term payout ratio, while maintaining a strong balance sheet and investment grade credit rating.

Tim: We also announced on February 14, 2024 that our board of directors declared a regular quarterly dividend of <unk> 50 per share.

Tim: An increase of <unk> <unk> over the previous dividend payable on March 5th 2024 to holders of record on February 26 2024.

Timothy Go: 2024. The 11% dividend increase reflects our board's commitment to returning excess cash to shareholders. Looking ahead, we remain focused on further executing our corporate strategy to maximize shareholder value. We believe the strength and diversification of our new asset base, coupled with our disciplined approach to capital allocation, will position us well for success. With that, I will turn the call over to...

Timothy Go: The 11% dividend increase reflects our board's commitment to returning excess cash to shareholders. Looking ahead, we remain focused on further executing our corporate strategy to maximize shareholder value. We believe the strength and diversification of our new asset base, coupled with our disciplined approach to capital allocation, will position us well for success. With that, I will turn the call over to Tim. And good morning, everyone.

Tim: 11% dividend increase reflects our board's commitment to returning excess cash to shareholders.

Tim: Looking ahead, we remain focused on further executing our corporate strategy to maximize shareholder value.

Tim: We believe the strength and diversification of our new asset base, coupled with our disciplined approach to capital allocation will position us well for success.

With that let me turn the call over to Ed.

Atanas H. Atanasov: Thank you, Tim, and good morning, everyone. Let's begin by reviewing H. F. Sinclair's financial highlights. Today we reported a fourth quarter net loss attributable to H.S. Sinclair shareholders of $62 million, or negative 34 cents per diluted share. These results reflect special items that collectively decreased net income by $227 million.

Ed: Thank you Tim and good morning, everyone, let's begin by reviewing <unk> financial highlights today, we reported fourth quarter net loss attributable to HFC shareholders of $62 million or negative <unk> 34 per diluted share.

Atanas H. Atanasov: Let's begin by reviewing H. F. Sinclair's financial highlights. Today, we reported a fourth quarter net loss attributable to H.S. Sinclair shareholders of $62 million, or negative 34 cents per diluted share. These results reflect special items that collectively decrease net income by $227 million.

Ed: These results reflect special items that collectively decreased net income by $227 million exclude.

Atanas H. Atanasov: Excluding these items, adjusted net income for the fourth quarter was $165 million, or negative 87 cents per diluted share, compared to adjusted net income of $598 million, or $2.97 per diluted share, for the same period in 2022. Adjusted EBITDA for the fourth quarter was $428 million, compared to $1 billion in the fourth quarter of 2022. In our refining segment, fourth-quarter adjusted EBITDA was $278 million, which excludes the $221 million lower cost or market inventory valuation charge. This compares to $864 million of refining segment EBITDA for the fourth quarter of 2022. This decrease was primarily driven by lower refinery gross margins in both the West and MidCon regions, which resulted in lower refining segment earnings in the quarter.

Atanas H. Atanasov: Excluding these items, adjusted net income for the fourth quarter was $165 million, or negative $0.87 per diluted share compared to adjusted net income of $598 million, or $2.97 per diluted share for the same period in 2022. Adjusted EBITDA for the fourth quarter was $428 million, compared to $1 billion in the fourth quarter of 2022. In our refining segment, fourth-quarter adjusted EBITDA was $278 million, which excludes the $221 million lower cost or market inventory valuation charge. This compares to $864 million of refining segment EBITDA for the fourth quarter of 2022. This decrease was primarily driven by lower refinery gross margins in both the West and MidCon regions, which resulted in lower refining segment earnings in the quarter.

Ed: Excluding these items adjusted net income for the fourth quarter was 165 million or negative <unk> 87 per diluted share compared to adjusted net income of $598 million with $2 97 per diluted share for the same period in 2022.

Ed: Adjusted EBITDA for the fourth quarter was $428 million compared to $1 billion in the fourth quarter of 'twenty two.

Ed: In our refining segment fourth quarter, adjusted EBITDA was $278 million, which excludes the $221 million lower of cost or market inventory valuation charge.

Ed: This compares to $864 million of refining segment EBITDA for the fourth quarter of 'twenty two.

Ed: This decrease was primarily driven by lower refinery gross margins in both the west and mid Con regions, which resulted in lower refining segments earnings in the quarter.

Atanas H. Atanasov: Crude oil charge averaged 614,000 barrels per day for the 4th quarter, compared to 628,000 barrels per day for the 4th quarter of 22. In our renewables segment, we reported adjusted EBITDA of negative $3 million for the fourth quarter, compared to negative $7 million for the fourth quarter of 2022. Improved operations in the period were offset by weakening RINs and LCFS credit prices. Total sales volumes were 63 million gallons for the fourth quarter as compared to 54 million gallons for the fourth quarter of last year.

Atanas H. Atanasov: Crude oil charge averaged 614,000 barrels per day for the 4th quarter, compared to 628,000 barrels per day for the 4th quarter of 22. In our renewables segment, we reported adjusted EBITDA of negative $3 million for the fourth quarter compared to negative $7 million for the fourth quarter of 2022. Improved operations in the period were offset by weakening RINs and LCFS credit prices. Total sales volumes were 63 million gallons for the fourth quarter as compared to 54 million gallons for the fourth quarter of last year.

Ed: Crude oil charge averaged 614000 barrels per day for the fourth quarter compared to 628000 barrels per day for the fourth quarter of 'twenty two.

Ed: In our refined in our renewables segment, we reported adjusted EBITDA of negative $3 million for the fourth quarter compared to negative $7 million for the fourth quarter of 'twenty two.

Ed: Improved operations in the period were offset by a weakening of Rins and L. CFS credit prices.

Ed: <unk> sales volumes were 63 million gallons for the fourth quarter as compared to 54 million gallons for the fourth quarter of 'twenty two.

Atanas H. Atanasov: Our marketing segment reported EBITDA of $9 million for the fourth quarter, compared to $23 million for the fourth quarter of 2022. Total branded volume sales were 350 million gallons, representing $0.06 per gallon margin. Our lubricants and specialty segment reported EBITDA of $58 million for the fourth quarter compared to EBITDA of $67 million for the fourth quarter of 2022. This decrease was largely driven by a $30 million FIFO charge from consumption of high-priced feedstock inventory in the fourth quarter of 2023 compared to a $7 million FIFO charge in the fourth quarter of 2022. Our midstream segment reported EBITDA of $105 million in the fourth quarter, compared to $90 million in the same period of last year. This increase was driven by higher revenues from our pipelines, terminals, and loading racks. Net cash provided by operations totaled 231 million, which included 85 million of turnaround spend in the quarter. H.F. Sinclair's capital expenditures totaled $124 million for the fourth quarter.

Atanas H. Atanasov: Our marketing segment reported EBITDA of $9 million for the fourth quarter, compared to $23 million for the fourth quarter of 2022. Total branded volume sales were 350 million gallons, representing $0.06 per gallon margin. Our lubricants and specialty segments reported EBITDA of $58 million for the fourth quarter compared to EBITDA of $67 million for the fourth quarter of 2022. This decrease was largely driven by a $30 million FIFO charge from consumption of high-priced feedstock inventory in the fourth quarter of 2023 compared to a $7 million FIFO charge in the fourth quarter of 2022. Our midstream segment reported EBITDA of $105 million in the fourth quarter compared to $90 million in the same period of last year. This increase was driven by higher revenues from our pipelines, terminals, and loading racks. Net cash provided by operations totaled $231 million, which included $85 million of turnaround spend in the quarter. H.F. Sinclair's capital expenditures totaled $124 million for the fourth quarter.

Ed: Our marketing segment reported EBITDA of $9 million for the fourth quarter compared to $23 million for the fourth quarter of 'twenty two.

Ed: Total branded volume sales were 350 million gallons, representing <unk> <unk> per gallon margin.

Our lubricants and specialty segment reported EBITDA of 58 million for the fourth quarter compared to EBITDA of $67 million for the fourth quarter of 'twenty two.

Ed: This decrease was largely driven by a 30 million FIFO charge from consumption of high priced feedstock inventory in the fourth quarter of 2023 compared to a 7 million FIFO charge in the fourth quarter of 2022.

Ed: Our midstream segment reported EBITDA of $105 million in the fourth quarter compared to $90 million in the same period of last year.

Ed: This increase was driven by higher revenues from our pipelines terminals and loading racks.

Ed: Net cash provided by operations totaled $231 million, which includes $85 million of turnaround spend in the quarter.

Ed: <unk> capital expenditures totaled $124 million for the fourth quarter.

Ed: For the full year 2023, our total capital expenditures were $941 million, which.

Ed: Which includes a $556 million in turnarounds are.

Ed: Our full year capital spend came in under budget due to the improved execution of our planned maintenance activities.

Ed: As of December 31, 2023, Hs Sinclair has total liquidity stood at approximately $3 $7 billion, which includes a cash balance of $1 4 billion, our undrawn $1 65 billion unsecured credit facility and $744 million availability on the <unk>.

Atanas H. Atanasov: For the full year 2023, our total capital expenditures were $941 million, which included $556 million in turnarounds. Our full year capital expenditures came in under budget due to the improved execution of our plan maintenance activities. As of December 31, 2023, HS Sinclair's total liquidity stood at approximately $3.7 billion, which includes a cash balance of $1.4 billion, our undrawn $1.65 billion unsecured credit facility, and $744 million availability on the HEP credit facility. During the year, we reduced our debt by $520 million through the repayment of our 2.625% senior notes at maturity in October and by paying down a portion of our outstanding HEP revolver. As of December 31st, we have $2.8 billion of debt outstanding with a debt-to-cap ratio of 21% and a net debt-to-cap ratio of 11%.

Ed: Our credit facility.

Atanas H. Atanasov: During the year, we reduced our debt by $520 million through the repayment of our 2.625% senior notes at maturity in October and by paying down a portion of our outstanding HEP revolver. As of December 31st, we have $2.8 billion of debt outstanding with a debt-to-cap ratio of 21%, and a net debt-to-cap ratio of 11%. Let's go through some guidance items. (Inaudible) $5 million in renewable energy. $40 million in lubricants and specialties and $10 million in marketing.

Ed: During the year, we reduced our debt by $520 million through the repayment of our 265% senior notes at maturity in October and by paying down a portion of our outstanding revolver.

Ed: As of December 31, we had $2 8 billion of debt outstanding with a debt to cap ratio of 21% of net debt to cap ratio of 11%.

Speaker Change: Let's go through some guidance items.

Speaker Change: With respect to capital spending for full year 2024, we expect to spend $235 million in the refining.

Speaker Change: $5 million in renewables.

Speaker Change: $40 million in lubricants and specialties.

Speaker Change: $10 million in marketing.

Atanas H. Atanasov: $30 million in midstream, $65 million in corporate, and $415 million for turnarounds and catalysts. In addition, we expect to spend $75 million in growth capital investments across our business segments. For the first quarter of 2024, we expect to run between 585,000 and 615,000 barrels of crude oil per day in our refining segment. And we have a planned turnaround scheduled at our Puget Sound refinery during that period. We're now ready to take some questions from the audience. Operator.

Speaker Change: $30 million in midstream.

Speaker Change: $65 million in corporate.

Speaker Change: And $415 million for turnarounds and catalysts.

Speaker Change: In addition, we expect to spend $75 million and growth capital investments across our business segments.

Speaker Change: For the first quarter of 2024, we expect to run between 585 to 615000 barrels per day of crude oil in our refining segment and we have planned turnaround scheduled at our Puget sound refinery during the period.

Atanas H. Atanasov: Let's go through some guidance items. With respect to capital spending for full year 2024, we expect to spend $235 million on refining. $5 million on renewables. $40 million on lubricants and specialties. And $10 million on marketing.

Speaker Change: We're now ready to take some questions from the audience.

Speaker Change: Operator.

Operator: The floor is now open for questions. At this time, if you have questions or comments, please press star 1 on your touchtone phone. We ask that you please limit them to one question and one follow-up. (Inaudible) Thank you.

Speaker Change: The floor is now open for questions.

Speaker Change: At this time, if you have questions or comments. Please press star one on your Touchtone fine.

Speaker Change: We ask that you please limit to one question and one follow up.

Speaker Change: If you have additional questions. We welcome you to rejoin the queue.

Operator: $30 million in midstream, $65 million in corporate, and $415 million for turnarounds and catalysts. In addition, we expect to spend $75 million in growth capital investments across our business segments. For the first quarter of 2024, we expect to run between 585,000 and 615,000 barrels of crude oil per day in our refining segment. And we have a planned turnaround scheduled at our Puget Sound refinery during that period. We're now ready to take some questions from the audience. Operator.

Speaker Change: If at any point. Your question has been answered you may remove yourself from the queue by pressing the pound key.

Timothy Go: Our first question comes from the line of Neil Mehta of Goldman Sachs & Co. Your line is open. Yeah, thank you so much, team. One macro question and one micro question. I guess the macro question would be just your perspective on the mid-con setup as we go from here to the summer, obviously, very weak January, stronger February with some disruptions from your competitors. But I think we're getting a lot of investor questions about how you guys see the world as we go into the summer for both diesel and gasoline. Yeah, good morning, Neil. Let me ask Steve to comment a little bit on the MidCon outlook, and then I'll come back and provide a little bit more macro on top of that. Hey Niels, this is Steve.

Speaker Change: Thank you. Our first question comes from the line of Neil Mehta of Goldman Sachs. Your line is open.

Neil Mehta: Yes. Thank you so much team.

Neil Mehta: One macro question and one micro question I guess the macro question would be just your perspective on the midcon setup as we go from here to the summer obviously very weak January stronger February with some disruption from your competitors, but I think we're getting a lot of investor questions about how you guys see the world as we go into the summer.

Operator: The floor is now open for questions. At this time, if you have questions or comments, please press star 1 on your touchtone phone. We ask that you please limit your questions to one and one follow-up. If you have additional questions, we welcome you to rejoin the queue. If at any point your question has been answered, you may remove yourself from the queue by pressing the pound key.

Neil Mehta: For both diesel and gasoline in the mid Con.

Speaker Change: Yes, good morning, Neil.

Speaker Change: Let me ask Steve to comment a little bit on the mid con.

Speaker Change: Outlook, and then I'll come back and provide a little bit more macro on top of that.

Speaker Change: Hey, Neil this is Steve Thanks for the question and the Midcon as you articulated we did see.

Neil Singhvi Mehta: Thank you. Our first question comes from the line of Neil Mehta of Goldman Sachs & Co. Your line is open.

Steven C. Ledbetter: Thanks for the question. In the mid-con, as you articulated, we did see demand patterns fall off a little earlier in the quarter. We did see inventories rise to kind of the five-year range, and that stayed into Q1. It's starting to come back.

Steven C. Ledbetter: Demand patterns fall off a little earlier in the quarter.

Steven C. Ledbetter: We did see inventories rise to kind of the five year.

Timothy Go: Yeah, thank you so much, team. One macro question and one micro question. I guess the macro question would be just your perspective on the mid-con setup as we go from here to the summer, obviously, very weak January, stronger February with some disruptions from your competitors. But I think we're getting a lot of investor questions about how you guys see the world as we go into the summer for both diesel and gasoline. Good morning, Neil. Let me ask Steve to comment a little bit on the MidCon outlook, and then I'll come back and provide a little bit more macro on top of that. Hey Neal, this is Steve.

Steven C. Ledbetter: <unk> and that stayed into Q1, that's starting to come back we're seeing some support in the structure.

Steven C. Ledbetter: We're seeing some support for the structure view there, but we think this is cyclical and we see a supportive margin structure in the mid-con, particularly heading into the [inaudible]. And I'll just jump on top of that, Neal, you know, we do believe that MidCon seasonality is what we were seeing in the December-January time frame. We see it every year. In fact, I think we typically talk about it on this call because MidCon inventories typically grow during this time frame. Of course, since the BP widening downtime, inventories have drawn down significantly, and MidCon cracks have improved significantly. If you look at the more of a step-back macro perspective, Neal, we still believe we are in a supply-constrained market.

Steven C. Ledbetter: View, there, but we think this is cyclical and we see a supportive margin structure in the mid con, particularly heading into the driving season, we're starting to see that coming off the <unk>.

Steven C. Ledbetter: As we progressed through the quarter here in February.

Speaker Change: And I'll just jump on top of that Neal.

Neal: We do believe that mid con seasonality is while we were seeing in the December January timeframe, we see it every year in fact, I think we typically talk about it at this call because.

Neal: It kind of inventories typically grow during this timeframe and of course since the BP Whiting downtime.

Neal: Inventories have drawn significantly.

Neal: Cracks have improved significantly.

Steven C. Ledbetter: Thanks for the question. In the MidCon, as you articulated, we did see demand patterns fall off a little earlier in the quarter. We did see inventories rise to kind of the five-year range, and that stayed into Q1. It's starting to come back.

Neal: If you look at the more of a step back macro perspective, Neal we still believe we are in a supply constrained market.

Timothy Go: We believe that will continue through at least 2024. I mean, if you look at demand, we think demand overall is 5 to 6 percent above 2019 levels, whereas supply versus 2019 is significantly constrained, at least a million barrels a day, as you know. And the utilization requirement in order to make up for that additional demand is just higher than what this industry has been able to demonstrate in the past. And so we still think, you know, the BP enlargement issue is a good example of that. We still think that the expectations for industry utilization are higher than what the industry is able to produce. And so, as a result, we're going to remain in a supply-constrained environment through the rest of 2024. There's not a lot of incentive to put more capital into refining capacity, just given the current policies of this country. And so we still believe that liquid transportation fuels in general are bullish, and refining margins in particular are still very bullish, especially with our portfolio. Yeah, thanks.

Neal: We believe that will continue here through at least 2024.

Neal: If you look at.

Neal: Again demand, we think demand overall.

Neal: 2% to 6% above 2019 levels, whereas supply.

Neal: Versus 2019 is significantly constrained at least a million barrels a day as you know.

Steven C. Ledbetter: We're seeing some support for the structure view there, but we think this is cyclical, and we see a supportive margin structure in the MidCon, particularly heading into the driving season. We're starting to see that coming off as we progress through the quarter here in February. And I'll just jump on top of that, Neal. You know, we do believe that MidCon seasonality is what we were seeing in the December-January time frame. We see it every year.

Neal: And the utilization requirement in order to make up for that additional.

Neal: Demand is just higher than this industry has been able to demonstrate in the past and so we still think that BP Whiting issue is a good example of that we still think that the expectations on industry utilization are higher than what the industry is able to produce and so as a result, we're going to remain in the supply constrained environment through the rest of 2024.

Neal: Sure.

Neal: There's not a lot of incentive to put more capital into refining capacity just given the current policies of this country and so we still believe.

Timothy Go: In fact, I think we typically talk about it on this call because MidCon inventories typically grow during this time frame. Of course, since the BP winding downtime, inventories have drawn down significantly, and MidCon cracks have improved significantly. If you look at the more of a step-back macro perspective, Neal, we still believe we are in a supply-constrained market.

Neal: That liquid transportation fuels in general.

Neal: Is bullish.

Neal: Refining margins in particular, we're still very bullish, especially with our portfolio.

Neal: Yes.

Timothy Go: And then the follow-up is on renewable diesel. Tim, you and I have talked a lot about this business and getting it back, back to a path to profitability. You know, how do you see the trajectory from here? And how much, how many of the issues continue to be around hydrogen versus something which is more market driven?

Speaker Change: Thanks to you both and then the follow up is on renewable diesel Tim you and I've talked a lot about this.

Speaker Change: This business.

Adding it back back to a path to profitability, how do you see the trajectory from here and how much how many of the issues continue to be around hydrogen versus something.

Speaker Change: Which is more market driven.

Steven C. Ledbetter: And just in general, the path towards normalized profitability at our company. Let me ask Steve again to jump in, and then I can comment on top of that. Yeah, I think we're learning and doing better at this business overall. If you look at Q4, financial performance was challenged, but we did demonstrate good progress in facility utilization. We exceeded north of 70% across the quarter and in December hit a utilization of close to 85%. That includes a cap change at Artesia. We had some records at Artesia, Cheyenne, as well as the PTU, where we think that's an advantage for us in terms of taking the low CI feedstock and putting it into our value chain. We did have a negative earnings impact associated with working through some high-priced inventory, but we freed up a considerable amount of cash on the balance sheet.

Tim: In general the path towards normalized profitability at Rd.

Speaker Change: Yes, Neil let me, let me ask Dean again to jump in on the action.

Speaker Change: Kind of on top of that yes.

Dean: I think we're learning and doing better at this business overall, if you look at Q4.

Speaker Change: Financial performance was challenged but we did demonstrate.

Dean: Good progress in facility utilization, we eclipsed north of 70%.

Dean: Across the quarter and in December had a utilization of close to 85% that includes a turnaround or a cat change at Artesia, We had some records that at Artesia Cheyenne as well as the <unk>, where we think that's an advantage.

Dean: For us in terms of taking the low.

Dean: Feedstocks and putting them into our value chain.

Dean: We did have a negative earnings impact associated with working through some high priced inventory.

But freed up a considerable amount of cash on the balance sheet. So that's kind of a Q4 picture if I think about looking forward, we do see margin softness in 'twenty four.

Steven C. Ledbetter: So that's kind of the Q4 picture, if I think about looking forward. You know, we do see margin softness in 24. The RD supply is outpacing the mandates in the RFS and the LCFS programs.

Neil Singhvi Mehta: Thanks to you both. And then the follow-up question is on renewable diesel. Tim, you and I have talked a lot about this business and getting it back, back to a path to profitability. You know, how do you see the trajectory from here? And how much, how many of the issues continue to be around hydrogen versus something which is more market driven?

Dean: The Rd supply is outpacing the mandates in the RFS and the <unk> programs Theres. Some additional close to 90000 barrels a day of nameplate capacity coming on so all those things create a bit of a structural margin impact we have seen feedstock prices declined but at a slower pace.

Steven C. Ledbetter: There's some additional close to 90,000 barrels a day of nameplate capacity coming on, so all those things create a bit of a structural margin impact. We have seen feedstock prices decline, but at a slower pace than the incentive values that are supporting them. And we don't see anything structurally that the RVO and the CARB proposed changes will not impact into 2025.

Steven C. Ledbetter: Just in general, the path towards normalized profitability at our... Neil, let me ask Steve again to jump in, and then I can comment on top of that. Yeah, I think we're learning and doing better at this business overall. If you look at Q4, financial performance was challenged, but we did demonstrate good progress in facility utilization. We exceeded north of 70% across the quarter and in December hit a utilization of close to 85%.

Dean: And the incentive values that are supporting them.

Dean: And we don't see anything structurally that.

Dean: The RVO and the carb proposed changes will not impact into 2025. So we're laser focused on facility utilization that economic clip opex catalysts utilization and optimization and then putting our feedstock strategy to work driving low Ci feeds.

Timothy Go: So we're laser-focused on facility utilization at an economic clip, OPEX, catalyst utilization, and optimization, and then putting our feedstock strategy to work, driving low CI feeds, executing and getting our pathways approved, and then finding the most advantageous markets for our fuel. So we do see some structure softness in the forward run, but we feel like we're in a good place to take advantage of the market when it's there for us And Neil, I'll just say, we feel very good about the operating performance of our renewable diesel business in the fourth quarter, which achieved 71% utilization. The feedstock price lag that Steve mentioned went against us and obviously impacted our overall profitability, but we believe we've got a good platform to spring into 2024 with.

Steven C. Ledbetter: That includes a turnaround or a cap change at Artesia. We had some records at Artesia, Cheyenne, as well as the PTU where we think that's an advantage for us in terms of taking the low CI feedstock and putting it into our value chain. We did have a negative earnings impact associated with working through some high-priced inventory, but we freed up a considerable amount of cash on the

Dean: Executing and getting our pathway is approved and then finding the most advantaged markets for our fuel. So so we do see some some structure softness and the forward run, but we feel like we're in a good place to take advantage of the market when it's there for us.

Speaker Change: And Neil I'll, just say I mean, we feel very good about the operating performance of our renewable diesel business in the fourth quarter of $2, 71% utilization.

Steven C. Ledbetter: So that's kind of the Q4 picture. Looking forward, we do see margin softness in 24. However, RD supply is outpacing the mandates in the RFS and the LCFS programs.

Speaker Change: The feedstock price lagged and Steve mentioned went against us.

Speaker Change: And obviously impacted our overall profitability, but we believe we've got a good platform.

Speaker Change: Spring into 2024 with.

Timothy Go: You know, obviously, the LCFS and the RIMS prices being significantly lower than what our project basis was when we first launched our business. We do believe that, over time, for example, the LCFS is going to recover and it's going to show some improved project margins again, but things like, you know, you saw New Mexico just passed their own LCFS. We know that as other programs continue to jump into the LCFS world, that it's going to continue to tighten those LCFS credits and the RIMS credits as well. And so we believe that, for example, in the New Mexico case, our facilities are advantaged. We have our largest renewable diesel facility in New Mexico.

Speaker Change: You look at.

Speaker Change: Obviously, the <unk> and the rins prices being significantly lower than what our basis was when we first launched our business, we do believe that.

Speaker Change: Over time for example, the <unk> is going to recover and it's going to show some improved.

Speaker Change: Project margins again, but things like you saw the new Mexico, and just pass their own L. CFS, we know that as other programs continue to.

Speaker Change: Jumping to the <unk> world that is going to continue to tighten those lcs credits in the Rins credits as well and so we believe in for example in the New Mexico case that our facilities are advantaged, we have our largest renewable diesel facility in new Mexico, the transportation savings alone.

Paul Cheng: The transportation savings alone are going to be a significant boost to our improvements. And so we're feeling positive about our future as we get our operating performance under our belt. Thank you, Tim. Our next question comes from Paul Cheng of Scotiabank. Your line is open.

Speaker Change: That would be significant boost to our improvements and so.

Speaker Change: We're feeling positive about our future as we get our operating performance.

Speaker Change: Sure.

Speaker Change: Under our belt.

Speaker Change: Thanks, Tim.

Speaker Change: Okay.

Speaker Change: Our next question comes from Paul Cheng of Scotia Bank. Your line is open.

Paul Cheng: Hey guys. Hey guys. Good morning, um, maybe this is for Tim. You have a roll up HEP.

Paul Cheng: Hey, guys, Hey, guys good morning.

Paul Cheng: Okay.

Paul Cheng: Maybe this is for Tim.

Paul Cheng: <unk> Roe.

Paul Cheng: Can you give us some examples of that? How does it impact your operation? I mean, is there any synergy, or is it just simply that you are reducing some DNA because you don't have to file the regulatory data with the government as a separate entity? That's the first question, and maybe after that, then I can ask my second question. Okay, Paul, yeah, thanks for the question. I'll let Atanas provide a few comments on HEP, and then I'll mention a few things as well.

Speaker Change: Can you give us some example with that.

Speaker Change: Does it how does it impact your operations.

Timothy Go: You know, obviously, the LCFS and the RIMS prices being significantly lower than what our base was when we first launched our business. We do believe that, over time, for example, the LCFS is going to recover and it's going to show some improved project margins again, but things like, you know, you saw New Mexico just passed their own LCFS. We know that as other programs continue to jump into the LCFS world, that it's going to continue to tighten those LCFS credits and the RIMS credits as well. And so we believe, for example, in the New Mexico case, that our facilities are advantaged. We have our largest renewable diesel facility in New Mexico.

Speaker Change: Is there any synergy or Youre, just seeing for you Dan.

Speaker Change: You are reducing some G&A because you just don't have to file with the regulatory.

Speaker Change: Data to the government as a separate entity.

That's the first question.

Speaker Change: And maybe that that offset that then I ask my second question.

Speaker Change: Okay. Paul Thanks for the question I'll, let <unk> provide a few comments on HCP and then I'll mention a few things as well.

Atanas H. Atanasov: Yeah, Paul, thanks for your question. HEP has provided us with a number of benefits. When we look at, on the operational and commercial side, we've seen a meaningful opportunity for simplifying our business. Things like not having to negotiate inter-company contracts, for example, are something that's meaningfully helpful to us. Another point I would like to bring up is not having to worry about qualified versus non-qualified income because we don't have the MLP anymore. Integrating some of our back office functions actually does bring a benefit in efficiency when it comes to how we deal on the commercial side as well. So that's one thing. And the second thing is, just from a pure economic point of view, we've been extremely pleased with how things have gone, as you can see from the operating performance of the business in the fourth quarter. That just goes to vindicate our view that this transaction has provided meaningful cash flow accretion and, frankly, better EPS accretion than we had hoped in the beginning. Thank you.

Speaker Change: Yes, Paul Thanks for your question.

Speaker Change: HEB.

Speaker Change: <unk> provided them with a number of <unk>.

Speaker Change: Benefits when.

Speaker Change: When we look at.

Speaker Change: On the operational and commercial side, we've seen the <unk>.

Meaning full opportunity for simplifying our business things like.

Speaker Change: Having to negotiate intercompany contracts for example is something Thats.

Timothy Go: The transportation savings alone are going to be a significant boost to our improvements, and so we're feeling positive about our future as we get our operating performance under our belt. Thanks, Tim. Our next question comes from Paul Cheng, of Scotia Bank. Your line is open. Hey guys, good morning. Maybe this is for Tim. You have a roll-up HEP.

Speaker Change: Meaningfully helpful to us another point.

To bring up is not having to worry about qualified versus nonqualified income because we don't have the MLP.

Speaker Change: Anymore.

Integrating some of our.

Speaker Change: Back office functions actually it does bring a benefit and efficiency when it comes to how we deal on the commercial side as well. So that's one thing and the second thing is just on the pure from a pure economic point of view, we've been extremely pleased with how things have gone as you can see from the operating performance in the business in the fourth quarter.

Paul Cheng: Can you give us some examples of that? How does it impact your operation? I mean, is there any synergy, or is it just simply that you are reducing some DNA because you don't have to file the regulatory data with the government as a separate entity? That's the first question, and maybe after that, I'll ask my second question. Okay, Paul, yeah, thanks for the question. I'll let Atanas provide a few comments on H-E-P, and then I'll, I'll mention a few things as well. Yeah, Paul, thanks for your question.

Speaker Change: Just goes onto vindicated our view that this transaction has provided meaningful cash flow accretion and frankly, better EPS accretion than what we had hoped in the beginning.

Timothy Go: Yeah, Paul, and I would just add on top of what Atanas just mentioned, that we are very pleased with the HSB transaction. We do think it's turning out even better than what we saw in our planning economics. And that's really the basis for the dividend increase that we just announced last week. We believe that not only is it EPS accretive, but it's very much cash flow accretive.

Speaker Change: Yes, Paul and I would just say on top of what <unk> just mentioned.

But we are very pleased with the HMA transaction, we do think it's.

Paul Cheng: H-E-P has provided us with a number of benefits. When we look at it on the operational and commercial side, we've seen a meaningful opportunity for simplifying our business. Things like not having to negotiate intercompany contracts, for example, is something that's meaningfully helpful to us. Another point, you know, to bring up is not having to worry about qualified versus non-qualified income because we don't have the MLP anymore. Integrating some of our back office functions actually does bring benefits and efficiency when it comes to how we deal on the commercial side as well, so that's one thing.

Speaker Change: Turn it out even better than what we saw it in our planning economics, and Thats really a basis for that for the dividend increase that we just announced last week, we believe that.

Speaker Change: Not only is it.

Speaker Change: <unk> accretive, but it's much it's very much cash flow accretive we've seen maybe a little better than what we thought originally and we're passing that onto our shareholders through the dividend increase.

Atanas H. Atanasov: We've seen maybe a little better than what we thought originally, and we're passing that on to our shareholders through the dividend. Tina and Ella, is there a number you can share in terms of the operational synergy benefit to quantify it and how long you think you will be able to achieve it? Paul, no, we haven't put a number out there yet.

Speaker Change: Tim Yes that number you can share in terms of operation those seen with Japan.

Tim: To quantify it.

Tim: Long.

Atanas H. Atanasov: And the second thing is just from a pure economic point of view, we've been extremely pleased with how things have gone, as you can see from the operating performance of the business in the fourth quarter. That just goes to vindicate our view that this transaction has provided meaningful cash flow accretion and, frankly, better EPS accretion than we had hoped in the beginning. Yeah, Paul, and I would just say, on top of what Atanas just mentioned, we are very pleased with the HSP transaction. We do think it's turning out even better than what we saw in our planning economics. And that's really the basis for the dividend increase that we just announced last week. We believe that not only is it EPS accretive, but it's also very much cash flow accretive. We've seen maybe a little better than what we thought originally, and we're passing that on, Teema and Ella. Is there a number you can share in terms of the operational synergy benefit to quantify it and how long you think you will be able to achieve it? Paul, no, we haven't put a number out there yet.

Tim: Are you, saying you would be able to achieve.

Tim: No we haven't put a number on there when we first talked.

Atanas H. Atanasov: You know, when we first talked, we limited our discussions to some of the very obvious and very hard synergies associated with, you know, back office consolidations, two public companies into one. We are seeing synergies for sure out there, but we're not ready to talk about them there. Okay, the second question is about the longer term.

Tim: We limited our discussions with some of the very obvious and very hard constraint.

Tim: Synergies associated with.

Tim: Back office consolidation with two public companies into one.

Tim: We are seeing synergies for sure out there, but we're not ready to talk about it out there.

Speaker Change: Okay. The second question just on the longer term I know you are still in that journey.

Paul Cheng: I know you are still on the journey trying to get yourself up to the operating standard you want, and your utilization rate over time is going to be higher, and I think at that point, you're saying that your crew unit run could be at 640 on a sustainable basis, and you could have an operating cost of 660 per barrel. Can you help with that to maybe bridge the gap between where you are on your unit cost? [inaudible] On your mid-con, you are around $6.50. In your West, you are at about $9.50 to $10.

John: John to get.

John: Two the operating spend in your one annual utilization may over time, it's going to be higher.

John: Yes.

John: Paul you're saying that your crude unit one could be at $6 40 on a sustainable basis and you could be operating costs at $6 50 per barrel.

Timothy Go: You know, when we first talked, we limited our discussions to some of the very obvious and very hard synergies associated with, you know, back-office consolidation, two public companies into one. We are seeing synergies for sure out there, but we're not ready to talk about them there. Okay, the second question is about the longer term.

Speaker Change: Can you help us to maybe bridge the gap between where you are on your unit cost today.

Speaker Change: Your.

Speaker Change: On your corn, you are wrong and the six 6% in your west.

Speaker Change: 950 to $10.

Speaker Change: So average for the company.

Paul Cheng: So the average for the company is like $8.50 to $9. Even if we assume a higher throughput, and there's no associated costs with the higher throughput, we can't get close to the 6 to 650. So what are the stamps?

Speaker Change: 50.

Speaker Change: <unk> hundred 90 Bucks.

Speaker Change: Ethan we.

Speaker Change: Assuming a higher throughput and no associated costs with the higher throughput, we can get close to that 6% to $6 50, So what Sam.

Valerie Pompa: on an initiative that we shouldn't expect that would lead to that unique cause coming down that much. Yeah, Paul, we've taken a big step forward, as you've mentioned, in reliability. I think Val and her team have really done a great job in progressing that effort. We've talked earlier about the turnarounds and how that's setting us up for success. We believe reliability is the biggest knob we have to turn on operating costs and operating costs per barrel because it affects both the numerator and the denominator. I'll let Val talk about some more examples of things that we're working on to improve our op-ex per barrel. Sure.

Speaker Change: All the initiatives that.

Paul Cheng: on the initiative that we should expect that will lead to that unique cause come down that month. Yeah, Paul, we've taken big step forward, as you've mentioned, in reliability. I think Val and her team have really, really done a great job of progressing that effort.

Speaker Change: We shouldn't expect that would need to that unit costs come down that much.

Sam: Yes, Paul we've taken a big step forward as you've mentioned and reliability.

Sam: I think Val and her team have really.

Speaker Change: Really done a great jamba progressing that effort, we've talked earlier about the turnarounds.

Speaker Change: How that's setting us up for success, we believe reliability is the biggest knob, we have to turn.

Speaker Change: On an op cost on op costs at our cost per barrel because it affects both the numerator and denominator.

Speaker Change: I'll, let bill talk about some more examples of things that we're working on to improve our opex per barrel.

Valerie Pompa: So, as we've talked before, our focus is on, the gap that you mentioned is really about focusing on two things, reliability and efficient delivery of our work. And so we're working on both of those. And turnaround's a big step in reliability. As we get our turnaround work processes the right scope in every turnaround, our reliability improves, and not just the barrels.

Bill: So as we've talked before our focus is on so the gap that you mentioned is really about focusing on two things reliability and efficient delivery.

Bill: And so we're working both of those.

Bill: And.

Bill: Turnaround is a big test and reliability as we get our turnaround work processes, the right scope and every turnaround our reliability in periods and not just the barrel is when we're running more throughput we're spending fewer dollars.

Timothy Go: When we're running more throughput, we're spending fewer dollars. And so that's the main focus and the connection with reliability. And then, secondarily to that, is improvement of how we deliver the products, how we work, how we do work execution, whether it be maintenance, or what suppliers we use. So there are a lot of initiatives around our work execution strategies, leveraging technology, and then better workflow processes integrated accordingly. You know, Paul, what I would tell you is that when we put that 650 number out there, it was before we expanded our portfolio with both Futuresound and with the Sinclair assets, and before HAP for that. So now that we've got about a year under our belts, we are certainly looking at putting our long-term plans together and trying to put kind of a better outlook on what we think we're going to be able to accomplish here in the near term. Remember, these are long-term cycles. Reliability, as I mentioned, is measured in turnaround cycles, not in years. But we're not prepared to say anything different today, but probably we'll be in a position to do something later this year. We do!

Bill: And that's the that's the main focus in the connection with reliability and then secondarily to that is improvement as how we deliver the products. How we work how we do work execution, whether it be maintenance.

Bill: What suppliers, we use so there are a lot of initiatives around our work execution.

Bill: Strategies, leveraging technology, and then better workflow processes integrated across all of our businesses.

Speaker Change: Yes, Paul what I would tell you is when we put that six $6 50 number out there. It was it was before we expanded our portfolio.

Speaker Change: With both the Puget sound and with the Sinclair assets and.

Speaker Change: And before.

Speaker Change: For them.

Paul Cheng: So now that we've got about a year under our belt, we are certainly.

Paul Cheng: Looking at putting our long term plans together and trying to put kind of a better.

Paul Cheng: Outlook on what we think we're going to be able to accomplish here in the near term remember these are long term cycles reliability as I mentioned is measured in turnaround cycles not in years.

Paul Cheng: But we're not prepared to say anything different today, but.

Paul Cheng: Probably will be.

Paul Cheng: In a position to do something later this year.

Speaker Change: Okay. Thank you.

Douglas George Blyth Leggate: Your next question comes from Lionel Douglas of Bank of America. Your line is open. Thanks. Good morning, everyone.

Speaker Change: Your next question comes from the line of Douglas.

Douglas: Of Bank of America. Your line is open.

Douglas: Oh, Thanks, good morning, everyone. Thanks for taking my questions.

Steven C. Ledbetter: Thanks for taking my questions. Tim, there's a lot of, I'm going to follow Neal Mehta's example here, not one macro and one company specific, but my company specific is heavy oil runs or advantage crude runs, I guess is a way to put it. There's a lot of things changing, obviously, in Canada, TMX, supposedly, line fill. We'll see what happens to spreads as a consequence. But how are you, how are you thinking about the appropriate crude slate going forward for your business in light of what is potentially a very significant change in Canadian spreads for the first time in 20 years? Hey Doug, this is Steve. I'll take that one.

Douglas: Tim There was a lot of.

Douglas: Full of New methods example, youre enough one micro and one one company specific but my company.

Douglas: Any specific as heavy oil runs.

Douglas: Vantage crude runs I guess is the way to put it there was a lot of things changing obviously in Canada.

Douglas: Supposedly landfill.

Douglas: See what happens to spreads consequence, but how would you how are you thinking about the appropriate crude slate going forward for your business.

Douglas: Or what is potentially a very significant change in Canadian spreads.

Douglas: First time in 20 years.

Douglas: Hey, Doug This is Steve I'll take that one yes, we're watching the team X situation very closely as you know.

Steven C. Ledbetter: Yeah, we're watching the TMX situation very closely. As you know, we expect the announcement for full line film coming online sometime late Q1, more likely Q2. As we think about that, we clearly will run the most advantaged crude. Our heavy crude value chain has provided a significant advantage for us. We think that the dips will continue to remain wide through Q1 and then compress somewhat in Q2.

Steven C. Ledbetter: We expect the announced for full line fill and coming online sometime.

Steven C. Ledbetter: Late Q1, more likely Q2.

Speaker Change: As we think about that.

Speaker Change: Sure.

Speaker Change: We clearly will run the most advantaged crude or heavy crude value chain has provided a significant advantage for us.

Speaker Change: We think that the dips will continue to remain wide through Q1, and then compressed somewhat in Q2.

Steven C. Ledbetter: And when you think about... Our Puget Sound Refinery, we think that proximity to the dock is going to allow us to take advantage of the optimal crude slate with more barrels over the water. I'll remind you that we have the ability to take and run heavy and sour, and we have ample dock capacity, so we will look to optimize that as well. And then the flexibility of our kits; you know, we're connected to many hubs, and we have the flexibility of the kit to take multiple grades to optimize our value chain.

Speaker Change: And when you think about our.

Speaker Change: Our Puget sound refinery.

Speaker Change: We think that proximity to the dock is going to allow us to take advantage of the optimal crude slate with more barrels over the water I'll remind you that we have the ability to take and run heavy and sour and we have ample dock capacity. So we will look to optimize that as well.

Speaker Change: And then the flexibility of our kits.

Speaker Change: We're connected to many hubs and we have the flexibility of the kit to take multiple grades to optimize our value chain.

Timothy Go: But by default, we believe that the heavy oil value chain is a key element of our portfolio moving forward, and we'll continue to drive that to optimize the value chain. Doug, I would just say crude flexibility and optionality continue to be an advantage for us, not just at the Puget Sound Refinery but also at our El Dorado Refinery. With direct access to Cushing, we've got the ability to arb whatever the best crude site is for that refinery. From a bigger picture perspective, I just want to remind folks that Alberta crude production continues to increase, and I think even in November and December, they set annual crude production records or monthly crude production records during that time frame. Every month, every quarter that TMX delays is a month or quarter closer to when Canadian crude production will once again outpace TMX takeaway capacity.

Speaker Change: Default, we believe that the heavy oil value chain is a key element of our portfolio moving forward.

Speaker Change: And we will continue to drive that to.

Speaker Change: Optimize the value chain.

Speaker Change: Doug I would just say crude flexibility and optionality continues to be.

Speaker Change: An advantage for us not just in the Puget sound refinery, but also at our El Dorado refinery with access to direct access to Cushing, we've got the ability to.

Speaker Change: Or whatever the best crude slate is for that refinery.

Speaker Change: From a from a bigger picture perspective, I, just want to remind folks that the Alberta crude production continues to increase and I think even in November December they set an annual crude production records or monthly production records during that timeframe every month every quarter that <unk>.

Speaker Change: <unk> is a month or quarter closer until when the Canadian crude production will once again outpaced the Tms takeaway capacity. So we believe that period is going to be fairly short.

Atanas H. Atanasov: We believe that period is going to be fairly short, maybe two years, something in that time frame, when takeaway capacity will again be constrained, and we'll be back into this advantaged crude situation on the heavy crude. We think this is just a short-term position until Canadian crude production increases again. Great stuff. We're all watching to try and figure out what happened, so I appreciate you guys helping us navigate that. My housekeeping question, if you don't mind, is probably about Atanas.

Maybe two years something in that timeframe to when takeaway capacity will again be constrained and will be back into this advantaged crude situation on the heavy crude. So we think this is just a.

Speaker Change: Short term.

Speaker Change: Positioning until crude Canadian crude production increases again.

Speaker Change: Great stuff.

Speaker Change: We're all watching to try and figure out will happen. So I appreciate you guys, helping us navigate.

Speaker Change: My My housekeeping question, if you don't mind is probably to Thomas.

Atanas H. Atanasov: The change in cash in the quarter, obviously the buy-in of HEP, but I'm just wondering if you can walk us through any other issues because it looks like tax was light, interest was light, and you still had a big draw on cash. Any help you can give us there, and I'll leave it at that. Thank you.

Thomas: The change in cash in the quarter, obviously, the buy end of <unk> I'm. Just wondering if you can walk us through any other issues because it looks like tax was light interest was light.

Thomas: And you still have a big draw on cash any any any help you can give us there and I'll leave it at that thank you.

Thomas: Yes.

Atanas H. Atanasov: Yeah, when we look at the kind of the drawn cash, you know, the kind of the big, the big ticket items are, you know, the HEP buy-in, obviously, almost 270 million on that. We paid incrementally on the revolver, as well. Obviously, the stock buybacks that we did for the quarter and the dividend. On the tax side, we, from a cash perspective, benefited from the depreciation, the bonus depreciation that we got from closing the HEP transaction. That was substantial. And in terms of the rest of it, when you look at working capital, it was essentially flat once you took into account the payment of the HEP bonds, which is about $308 million.

Thomas: <unk>.

Speaker Change: When we look at.

Speaker Change: Kind of a draw on cash to kind of the big the big ticket items as the HEB by him obviously.

Speaker Change: $270 million of that.

Speaker Change: We paid incrementally on the revolver as well.

Speaker Change: Obviously, the stock buybacks that we did for the quarter and the dividends on the.

Speaker Change: On the tax side would be from a cash perspective.

Speaker Change: We benefited from the.

Speaker Change: The depreciation of the bonus depreciation that we got.

Speaker Change: For closing.

Speaker Change: Transaction that was.

Speaker Change: That was substantial.

Speaker Change: And in terms of the rest of it when you look at working capital was essentially flat year. Once once you took into account the payment of the AGP bonds, which is about $308 million.

Operator: And Doug, don't forget, we had some bonds mature in the quarter, $308 million that we paid down in bonds. And those are our bonds, Dyno bonds, not HEP bonds. Thank you for joining us. Thank you.

Speaker Change: And Doug don't forget we had some bonds bonds mature I'm, sorry mortar at $308 million that we pay down in bonds.

Doug: And those are bonds Dino bonds, not HCP bonds.

Speaker Change: To correct myself.

Doug: Yes, I think the bonus.

Douglas George Blyth Leggate: I think the bonus, the depreciation, and the help on the tax close the gap for us. So that's really helpful, guys. Thanks very much indeed.

Doug: Depreciation to help on the types of closes the gap for us. So that's really helpful guys. Thanks very much indeed.

Manav Gupta: Sure. Your next question comes to the line of Manav Gupta from UBF. Your line is open.

Thank you.

Doug: Your next question comes from the line of Manav Gupta from UBS. Your line is open.

Matt Joyce: Hi, I wanted to ask about the outlook for the lubes business as we go into 2024. And a quick clarification also, sometimes you report adjusted EBITDA; sometimes, for some segments, you don't. It looks like the reported EBITDA was 57 for the lubes, but there was a 30 million FIFO inventory chart, so the actual number was closer to 87. If you could clarify that.

Manav Gupta: I wanted to ask about the outlook for the Lubes business is he going to 2024 and a quick clarification also there sometimes your report adjusted EBITA, sometimes for some segments you don't it looks like the reported EBITDA was 57 for the yields but there was a 30 million people and mentally jobs. So the actual number was closer to 87, if you could.

Manav Gupta: Satisfy that.

Matt Joyce: Yeah, let me ask Matt. Matt, as you know, is our leader in our loose business. Let me have him comment first.

Speaker Change: Yes, let me ask Matt Matt as you know as our leader for others business.

Matt Joyce: I'll have him comment first.

Matt Joyce: Thanks, Manav. It's Matt here. Just speaking to the FIFO impact on the quarter, you know, base oils and feed costs shifted lower throughout the quarter. And as a result, we consumed older and more expensive inventory, which drove our FIFO number up to that $30 million range. We finished, excluding FIFO, you're absolutely right, it was actually a really robust quarter. But including FIFO, we saw that 58 range. It's 57.7, I think, was the final number.

Matt Joyce: It's Matt here just.

Matt Joyce: Speaking to the FIFO impact.

Matt Joyce: On the quarter basically also the feed costs shifted lower throughout the quarter and as a result, we had consumed older and more expensive inventory, which drove our FIFO number up to that $30 million range.

Speaker Change: We finished excluding FIFO youre, absolutely right. It was actually a really robust quarter.

Speaker Change: But including FIFO.

Speaker Change: We saw that that 58 range at 57, 7% I think was the final number but.

Matt Joyce: But when we look at what's driving it, the back half of the quarter, really, we saw a slowdown in offtake and demand across the portfolio. And that was really driven by many customers de-stocking in anticipation of falling prices and not replenishing their inventories. We've seen that hangover kind of come through to the first month of the first quarter of 24, but we're starting to see volumes come back now. So that was the primary driver there.

Speaker Change: When we look at what what's driving it the back half of the quarter really we saw slowdown in.

Speaker Change: Offtake of demand across the portfolio and that was really driven by many of the customers destocking in anticipation of falling prices and not replenishing their inventories we are seeing that hangover kind of come through to the first month.

Speaker Change: The first quarter of 'twenty, four but were starting to see volumes come back now.

Speaker Change: So that was that was the primary driver there of course some of our end use markets are still a bit sluggish in the European market is still in.

Timothy Go: Of course, some of our end-use markets are still a bit sluggish. The European market is still a bit of trying to find its feet with regard to the market environment that we provide over there. But despite all of that, the team did a tremendous job of really working to execute the strategy.

Speaker Change: <unk>.

Speaker Change: Trying to find its feet with regards to.

Speaker Change: The market environment that we provide over there, but despite all of that the team did a tremendous job of really working to execute the strategy.

Matt Joyce: We finished the year by placing more basal and captive product lines than we ever have. We also, I mentioned in prior quarterly earnings about digital tools that we've instituted that give us better transparency into our costs, and we're driving our product lines to a more profitable position as a result. And of course, we're continuing to do that operational housekeeping, and aside from reliability and quality and EHS, we're focused on gaining efficiencies by simplifying processes and pursuing complexity reduction. Put those together, and you've got a really healthy business that performed well throughout the quarter. So, Manav, that $30 million of FIFO impact is our accounting system, so we don't actually adjust out for that.

Speaker Change: We finished the year by placing more batesville and captive product lines than we ever have.

Speaker Change: We also I mentioned it in prior quarterly earnings about digital tools that we've instituted that give us better transparency to our costs, we're driving our product lines to a more profitable position as a result and of course, we're continuing to do that operational housekeeping.

Speaker Change: Aside from reliability.

Speaker Change: And quality and EHS, we're focused on gaining efficiencies by simplifying processes and getting after complexity reduction put those together and <unk> got a really healthy business that performed well throughout the quarter.

Speaker Change: So manav, yes.

Speaker Change: $30 million of FIFO impact it is our accounting system. So we don't actually adjust out for that our adjusted EBITDA is still in that $58 million range that we've talked about but we'd like to we'd like to help people understand what the FIFO impact is because that is a rapid more representative of how the underlying business is performing so we just want to add.

Timothy Go: Our adjusted EBITDA is still in that $58 million range that we talked about. But we like to help people understand what the FIFO impact is, because that is more representative of how the underlying business is performing. So, we just want to help people understand that. FIFO, in the end, evens out over time.

Speaker Change: Help people understand that FIFO in the end evens out over time, and so we believe we will get that back here.

Timothy Go: And so, we believe we'll get that back here, and as prices continue to increase here in 2024, they'll even out over time as well. We're very bullish on the business. We think 2024 will continue to be good years for us, despite baseball margins decreasing. We saw that phenomenon all last year, and yet Matt and his team have been able to deliver, you know, outsized results, and we don't expect anything different this year. The quick follow-up here, Tim, is you and the team have indicated that over a period of time, you would like to be the highest gross margin refiner. So, in a way, reporting the highest capture.

Speaker Change: As prices continue to increase our 2024 that will even out over time as well, we're very bullish on the business we think.

Speaker Change: We think 2024 will continue to be good years for us.

Speaker Change: Despite base oil margins decreasing and we saw that phenomenon last year and yet Matt and his team have been able to deliver.

Speaker Change: Outsized results and we don't expect anything different this year.

Speaker Change: Quick follow up here.

Speaker Change: And the team have indicated that OLED opinion of time, you would like to be the highest gross margin refiner. So in Jose.

Speaker Change: Reporting the highest capture you have made good progress so help us understand what more steps how youre looking to take whether it's commercial real reliability to help you get to your goal of being the number one gross margin refiner in the U S.

Matthew Robert Lovseth Blair: You have made good progress on it. Help us understand what more steps you are looking to take, whether it's commercial or reliability, to help you get to your goal of being the number one gross margin refiner in the U.S. Thanks, Manav. That absolutely is one of our goals, and we are well on the way to doing that. I'm pleased with some of the things that we've put into place. You know, we take advantage of not only our equipment but the markets that we're in. We believe our markets are advantaged, but things that we're doing to drive capture include pushing the distillate production and taking a stronger approach on jet. We're taking a path that increases..., premium production. We're going to take advantage of our latent crude advantages and penetrate that heavy oil value chain.

Speaker Change: Thanks, Manav that absolutely is one of our goals and we're well on our way to doing that pleased with some of the things that we've put in place we take advantage of not only our kit, but the markets that we're in we believe our markets are advantaged.

Speaker Change: But things that we're doing to drive capture include pushing the distillate production, taking a stronger approach on jet we're taking.

Speaker Change: Pass it increased.

Speaker Change: Premium production, we're going to take advantage of our laid in crude advantages.

And taking that heavy oil value chain in our mind.

Matthew Robert Lovseth Blair: And I'll remind you that our approach is not only in the acquisition cost of the light and heavy differential, but also what we do with some of the finishing products, and our asphalt business is performing well. We look to do those things across all of our value chains right across the business. So we'll continue to look to optimize and focus on where we can high-grade the molecule and take it to the markets that we see best fit in our advantaged geographies. Thank you. Your next question comes from Matthew Blair from TPH. Your line is open. Hey, good morning.

Speaker Change: Remind you that our approach is not only in the acquisition cost of the of the light and heavy differential but also what we do with some of the finishing products on our asphalt business is performing well, we look to do those things across all of our value chains right through the business. So we will continue to look to optimize and focus on where we can high grade the moly.

Speaker Change: You want to take it to the markets that we see best fit in.

Speaker Change: Our advantaged geographies.

Speaker Change: Thank you.

Speaker Change: Your next question comes from the line of Matthew Blair from Tpa, which Youre line is open.

Matthew Blair: Hey, good morning, I had a few questions about the impact that this plant turnaround at future talent might have on your Q1 results.

Timothy Go: I had a few questions about the impact of this planned turnaround at Puget Sound might have on your Q1 results. First, are you still running about 40% Syncrude at Puget Sound? And if so, second, do you think that you'll still be able to capture the benefits of these wider Syncrude diffs in Q1 given that the turnaround is on your downstream units like the FGC and the Allokey? Yeah Matt, this is Tim.

Matthew Blair: First are you still running about 40% syncrude.

Matthew Blair: Puget sound in and if so.

Do you think that youll still be able to capture the benefits of these wider syncrude gifts in Q1, given that the turnaround is on your downstream units like the FCC.

Matthew Blair: Okay.

Matthew Blair: Yes, Matt this is Tim.

Timothy Go: We run a lot of Canadian crude. It's not all syn crude. Some of it's heavy crude as well. And those are ipanaged crude barrels that we take in. We'll still be able to do quite a bit of that even during the Puget Sound turnaround. So we blend that to basically mimic an ANS barrel, and we believe that is still going to be available.

Tim: We run we run a lot of Canadian crude it's not all syncrude some of its heavy crude as well.

Tim: And we are and those are advantaged crude barrels that we take care of and we'll still be able to do quite a bit of that.

Tim: Even during the Puget sound turnaround, so we blend that to basically mimicking the <unk> barrel and Thats and that we believe is still going to be available and you brought up a good point, we talked a lot about heavy Canadian dips and how we were able to take advantage of that the same crude differential has really been very <unk>.

Atanas H. Atanasov: We talk a lot about heavy Canadian differentials and how we were able to take advantage of that. The syn crude differential has really been very strong, as you've pointed out, and we're able to take full advantage of that at Puget Sound. Sounds good.

Tim: Strong as you pointed out and we're able to take full advantage of that at peak.

Speaker Change: Sounds good and then could you talk about your outlook for your tax rate in 2024, I think your long term guidance is roughly 19% to 21% does that still hold and then is there anything changing on your deferred taxes.

Atanas H. Atanasov: And then could you talk about your outlook for your tax rate in 2024? I think your long-term guidance is roughly 19 to 21 percent. Does that still hold? And then is there anything changing on your deferred taxes, I guess maybe in regards to the bonus depreciation, given that HEP is now in the fold? Yes, this is Atanas.

Speaker Change: I guess, maybe in regards to the bonus depreciation given the HCP is now on the whole.

Speaker Change: Okay.

Yes. This is atlas with respect to our.

Atanas H. Atanasov: With respect to our, you know, tax rate, I'd dial in 21 to 22% as a plant tax rate. And with respect to deferred taxes, yes, the bonus depreciation does benefit deferred taxes. We've, you know, the largest impact was in the fourth quarter of 2023, but we'll have some impact on 2024 as well. Sounds good, thank you. Your next question comes from the line of John Royall from J.P. Morgan. Your line is open. Hi, good morning.

Speaker Change: Tax rate, 21% to 22% as planned tax rate with respect to deferred taxes, yes, the bonus depreciation does benefit deferred tax.

Speaker Change: The largest impact was in the fourth quarter of 2023, but we will have some impact on 2024 as well.

Speaker Change: Sounds good thank you.

Speaker Change: Your next question comes from the line of Joseph from Jpmorgan. Your line is open.

Speaker Change: Yeah.

Joseph: Hi, good morning, Thanks for taking my question.

John Macalister Royall: Thanks for taking my question. Can you speak to, you've spoken in the past on some incremental synergies that you think are out there after hitting your original target for Sinclair. Is there any update on those, and should we expect to see some progress there in 2024, or is that a longer-term initiative? John, thanks for your question. This is Atanas.

Joseph: Can you.

Joseph: Speak to you spoken in the past on some incremental synergies that you think are out there.

Joseph: After hitting your original target.

Joseph: Sinclair.

Joseph: Is there any update on those and should we expect to see some progress there in 2024 or is that a longer term initiative.

Atlas: John Thanks for your question. This is Atlas with respect to forgive me with respect to our synergies.

Atanas H. Atanasov: With respect to, forgive me, with respect to our synergies, we continue to optimize and integrate our portfolio, and we're capturing additional synergies. For example, in our lubricants, in Sinclair itself, through continual integration, both in terms of systems, and back offices that we've already realized and are continuing to capture, incremental value across the value chain. But we're also looking at synergies in our existing segments, such as lubricants, for example, where, to Matt's point, we're continuing to integrate our base oils portfolio in finished and specialties. Atanasov, Kaleinoheaokealaula Akamine, Atanasov, John Royall, Roger Read, Jason Gabelman, Kaleinoheaokealaul With respect to a specific number, we're not prepared to give one yet, but I'd say we'll probably be able to provide more clarity as we go further into 2024.

Atlas: We continue to optimize and integrate our portfolio and we're capturing additional synergies for example.

Atlas: Our lubricants.

Atlas: And sink in Sinclair itself through continual integration both in terms of systems back offices that we've already realized.

Continuing to capture.

Atlas: <unk> value across the value chain, but we're also looking at synergies and our existing.

Atlas: Segments, such as lubricants for example, where <unk> point, we're continuing to integrate our base oils portfolio and finished in specialties.

Atlas: Through some of the systems upgrades on the it side, we're able to automate them.

Atlas: Process seasoned optimize resources for example, procurement.

Atlas: A good example.

Atlas: As we said earlier beyond the synergies related to having two public companies streamlining processes and.

Atlas: Systems.

Atlas: And these are so these are the types of value enhancing synergies that we're continuing to go after this year with respect to a specific number we're not prepared to give one yet.

Speaker Change: But I'd say I'd say we.

Speaker Change: We'll probably be able to provide more clarity as we go further into 2024.

Timothy Go: And I would just add on top of that, John, that we had good capture in the west in the fourth quarter, and I think that continues to reflect some of the additional synergies and some of the additional improvements that we're able to find just quarter over quarter. And as you continue to watch that capture, I think you guys will continue to see that reflect the opportunities that we're finding in capturing. Great, thank you. And then the next one's for Atanas, I think.

Speaker Change: Yes, I would.

Speaker Change: Yes.

Speaker Change: Add on top of that John that we had good capture.

Speaker Change: In the west in the fourth quarter and I think that continues to reflect.

Speaker Change: Some of the additional synergies and some of the additional improvements that we're able to find just quarter over quarter and as you continue to watch that capture I.

Speaker Change: I think you guys will continue to see that reflecting the opportunities that we're finding in capturing.

Speaker Change: Great. Thank you and then the next ones I think for Adnan.

Adnan: Can you talk about returns to shareholders. This year should we think about.

Atanas H. Atanasov: Can you talk about returns to shareholders for this year? Should we think about just the 50% payout target, or is there any reason it could be more or less? And then, in terms of the form of the buyback, maybe you can also speak to sales from the Sinclairs versus open market purchases and your expectations there. Sure. Thank you for your question.

Adnan: Just the 50% payout target or any reason it could be more or less.

Adnan: And then in terms of the form of the buyback.

Adnan: Maybe you can also speak to sales from this inquirers versus open market purchases and your expectations there.

Speaker Change: Sure. Thank you for your question.

Atanas H. Atanasov: With respect to shareholder return expectations for 2024, first of all, again, as we always say, we want to reiterate that we're 100% committed to our capital return strategy to our shareholders. We have the 50% payout ratio, the long-term payout ratio, as our target, but our view is that 2024 is another above mid-cycle year, and to the extent that this dynamic prevails, we're not shy to exceed that. As you can see, last year, we had a 74% payout ratio, and we will remain consistent in our diligence to keep returning excess cash to our shareholders.

Speaker Change: In respect to.

Speaker Change: Shareholder return expectations for 2024 first of all.

Speaker Change: Again, as we always we want to reiterate that we're 100% committed to our capital return strategy to our shareholders we have the 50%.

Speaker Change: The payout ratio of long term payout ratio.

Speaker Change: As our target but.

Speaker Change: Our view is that 2024 is another above mid cycle year and to the extent that this dynamic prevails, we're not shy to exceed that as you can see last year, we're at 74% payout ratio and we will remain consistent in our diligence to keep returning.

Speaker Change: Excess cash to our shareholders with respect to.

Atanas H. Atanasov: With respect to the form of the buyback, again, returning cash to shareholders through buybacks and dividends is a top priority, and we're open to both market and REH co-purchases, and we have done both, and, as we've demonstrated, that dynamic will continue this year. Yeah, John, and I'll just add again the dividend increase that we announced last week, just continued commitment to our goal of shareholder returns and increasing shareholder returns. So that's contributing to that.

Speaker Change: The form of the <unk>.

Speaker Change: Buyback again, returning cash to shareholders through buyback and dividends as top priority and we're open to both market and <unk> purchases and we have done both.

Speaker Change: As we've demonstrated in that dynamic we will continue this year.

Speaker Change: Yes, John and I will just add again.

Speaker Change: The dividend increase that we announced last week.

Speaker Change: Continued commit.

Speaker Change: Commitment to our goal of shareholder returns and increasing shareholder returns so.

Speaker Change: So that's contributing to that look we said last year that we can't speak for the.

Timothy Go: Look, we said last year that we can't speak for the REHCO family that owns Sinclair, but they put out in their 13D that their preference would be to continue to sell shares directly to the company when they desired to do so. Our preference is to buy those shares directly from them. And so as long as that continues to be an opportunity for us in 2024, we're going to take full advantage of it on both sides to continue to do that. We do think, as I mentioned before, we're bullish on 2024. We think it's going to be above mid-cycle.

Speaker Change: For the <unk> family that own Sinclair.

Speaker Change: We've put out in their <unk> that their preference would be to continue to sell shares directly to the company when they have.

Speaker Change: To do so.

Speaker Change: Our preference is to buy those shares directly from them and so as long as that continues to be an opportunity for us in 2024, we're going to take full advantage of it on both sides to continue to do that we do think as I mentioned before we are bullish on 2024, and we think it's going to be above mid cycle.

Jo Lischitz: We think that the seasonality is starting to turn, as we talked about, not just on the mid-con, but we've seen inventories and cracks recovering in the Rockies as well. And that's consistent with what our overall view is and what the market is going to be. We think 2024 is going to be another good year for us and is going to allow us to return excess cash to our shareholders like we have in the last few years. Thank you. Your next question comes from the line of Jo Lischitz of Morgan Stanley. Your line is open.

Speaker Change: Think that the.

Speaker Change: Seasonality is starting to turn as we've talked about not just on the mid con, but we've seen inventories at cracks.

Speaker Change: Covering in the Rockies as well and we that's consistent with what our overall view is and what the market is going to be we think 'twenty 'twenty four is going to be another good year for us.

Speaker Change: And going to allow us to return excess cash to our shareholders on behalf of the last few years.

Speaker Change: Thank you.

Speaker Change: Yes.

Speaker Change: Your next question comes from the line of jealous.

Morgan Stanley: Morgan Stanley Your line is open.

Steven C. Ledbetter: Hey, good morning, and thanks for taking my questions. So I'd like to just go back to the macro first. I was hoping you could highlight what demand trends you're seeing within your system across both gasoline and diesel, and then any differences you're seeing in the West versus the mid-con would be great. Yeah, Joe, hi, this is Steve. I'll take that one.

Jealous: Hey, good morning, and thanks for taking my questions. So I'd like to just go back to the macro first I was hoping you could just highlight what demand trends youre seeing within your system Cross both gasoline and diesel and then any differences you are seeing.

Morgan Stanley: The west versus the mid con would be great.

Morgan Stanley: Yes, Joe Hi, This is Steve I'll take that one so in general.

Steven C. Ledbetter: So in general, you know, as we talked about earlier, I think demand was softer for both gas and diesel for Q4 versus the same quarter 2022, but also higher than pre-COVID levels in 2019. Specifically, the mid-con, you know, is a little bit more impacted negatively for the same quarter versus both gas and diesel versus the West. Overall, I think we're seeing that the demand picture is becoming more supportive. We think this is mainly seasonality, and we're seeing improvements both in inventories, demand, and in the associated margin structure looking forward to Q1. And as Tim already articulated, you know, structurally, we see it balanced and above mid-cycle for 2024. But we saw, Joe, in the midcon, I know a lot of people were watching that, you know, the very, very cold weather that came through, basically, in the early January timeframe, really, really took a bite out of demand, even, even further than seasonality would typically project.

Steven C. Ledbetter: As we talked about earlier I think demand was was softer in both gas and diesel for Q4 versus same quarter of 2022.

But also higher than pre COVID-19 levels in 2019.

Steven C. Ledbetter: Specifically on the mid Con is a little bit more impacted negatively for the same quarter versus both in gas and diesel versus the.

The west.

Steven C. Ledbetter: Overall, I think we're seeing that the demand picture is becoming more supportive. We think this is mainly seasonality and were seeing improvements both in inventory demand and then the associated margin structure looking forward into Q1 and as Tim already articulated.

Steven C. Ledbetter: Structurally we see a balanced and above mid cycle four.

2024.

Steven C. Ledbetter: We saw Joe in the <unk>.

Steven C. Ledbetter: <unk> I know a lot of people were watching that.

Steven C. Ledbetter: Very very cold weather that came through.

Steven C. Ledbetter: Basically in the early January timeframe, really really took a bite out of demand even even further than what seasonality would typically project and I think again I think over time, especially with the BP Whiting outage right now those inventories and those balances are being restored right now.

Timothy Go: And again, I think over time, especially with the BP widening outage right now, those inventories and those balances are, are being restored right. Great, thanks for that. And then I wanted to just hit on the throughput guidance. So I know you gave the first quarter guide, but I just want to get your thoughts on the path towards the 640,000 barrel per day target throughput and where we are in that right now. Thank you. Yeah, maybe I'll start and then Val can... chime in on our forward look.

Speaker Change: Great Thanks for that.

Speaker Change: I wanted to could you just hit on the throughput guidance I know you gave the first quarter guide, but I just want to get your thoughts on the path towards the 640000 barrel per day target throughput is where we are in that right now. Thank you.

Speaker Change: Yeah, maybe I'll start and then and then Volcan.

Speaker Change: Could chime in on a forward look you know our guidance that we gave was 585 to $2 15 and that includes the turnaround at Puget and then it reflects.

Steven C. Ledbetter: Our guidance that we gave was 585 to 615, and that includes the turnaround at Puget, and then it reflects slightly lower or actually quite a bit lower mid-con cracks earlier in the quarter, and that impacted our economic run. We're laser focused on positioning the fleet for a strong Q2 and into the driving season for the rest of the year. Yeah, and I'll just go back to our reliability focus. So we've focused over the last couple of years really on, we'll talk about Parco earlier. Our Parco facility achieved record crew runs this past quarter, and we're continuing to see improvements in their reliability and improvements at those facilities. Navajo, same, same story.

Speaker Change: Slightly lower are actually quite a bit lower mid contracts earlier in the quarter and that impacted our economic <unk>.

Speaker Change: Ron.

Speaker Change: Laser focused on positioning the fleet for a strong Q2 and into the driving season for the rest of the year.

Ron: Yeah, and I'll just go back to our reliability. So we focused over the last couple of years really on.

Ron: You talked earlier about Parco, our parco facility and seem to record crude runs. This this.

Ron: Past quarter, and we're continuing to see improvements in their reliability and improvement at those facilities.

Ron: Navajo same same story.

Valerie Pompa: And so, we're really, you know, the path to 640 is a reliable operation and a steady focus on stable runs over time and optimizing our turnaround intervals. That, that's going to yield a 640 cycle time. Great. Thank you all. I appreciate it. Your next question comes live from Jason Gabelman from TD Khan. Your line is open. Yeah, hey, morning.

Ron: We're really.

Ron: Path to 640 is a reliable operation and a steady focus on stable.

Ron: Brands.

Ron: Her time and optimizing our turnaround intervals.

Ron: That's going to yield the yield of 640.

Ron: Second time.

Speaker Change: Great. Thank you all I appreciate it.

Speaker Change: Your next question comes from the line of Jason <unk>.

Speaker Change: J D. Cohen your line is open.

Jason Cohen: Yeah, Hey, good morning, Thanks for taking my questions. The first one is on asset sales and in the past you've discussed.

Jason Daniel Gabelman: Thanks for taking my questions. Um, the first one is on asset sales. And in the past, you've discussed an interest in exploring selling the lubricants business as performance has kind of straightened out there. Can you just discuss where you are on that journey and maybe how the overall market for lubricants is for M&A at the current moment? Yeah, Jason, let me take a shot at that.

<unk> and exploring.

Jason Cohen: The lubricants business as performance has kind of straightened out there can you just discuss where you are on that journey and kind of.

Jason Cohen: Maybe how the overall market.

Jason Cohen: For lubricants is our M&A at the current moment.

Timothy Go: We're still very bullish on our loops business. In fact, you know, we've just put in the books a third year of really strong earnings from that business. And again, we think 2024 is shaping up to be another good year for us. We still believe that the business is undervalued.

Speaker Change: Yes, Jason let me take a shot at that we're still very bullish on our our lubes business in fact.

Speaker Change: We've just.

Put in the books, our third year of really strong earnings from that business and again, we think 2020 forward shaping.

Jason Cohen: Shaping up to be another good year for us.

Jason Cohen: We still believe that the business is undervalued.

Timothy Go: We believe that it has a higher multiple than what investors are giving us credit for. But as we put in these additional years of actuals on the books, we're hoping that the market will give us credit for that going forward. So nothing has changed there. The chemicals market, in general, as you're kind of alluding to, is at the lower part of its cycle. And so the market itself is not the best market right now from a chemical standpoint. And so what we've always said is, we're going to look at this, but it's not a short-term thing. It's really more of a midterm thing for the next two or three years. There's nothing changed there as well.

Jason Cohen: We believe that it has a higher multiple than what.

Jason Cohen: The investors are giving us credit for but as we put in these additional years of actuals in the books, we're hoping that the market will.

Jason Cohen: Give us credit for that going forward. So nothing has changed there.

The chemical market in general as you are.

Kind of alluding to is at the lower part of their cycle and so the market itself is not is not the best market right now from a chemical standpoint, and so what we've always said is we're going to look at this but it's not a short term thing it's really more of a mid term the next two or three years.

Jason Cohen: No nothing changed there as well.

Timothy Go: So it's still something that we're very interested in and looking at. But we want to give the market a chance to show that full value in our own stock price before we go out and do anything different. We also want to, as Matt talked about earlier, we've got a lot of opportunities to improve the. We still think there's a lot more meat on that bone, and we're continuing to drive forward structural improvements to our loops business as well. Jason, basically, nothing new to update, basically, but to say everything's still on course. I got it.

Jason Cohen: So it's still something that we're very interested in looking at but we want to give the market a chance to.

Jason Cohen: To show that full value in our own stock price before we go out.

Jason Cohen: And do anything different we also want to as Matt talked about earlier, we've got a lot of opportunities to improve the business. We still think there's a lot more meat on that loan and we're continuing to drive structural improvement to our lubes business as well so.

Jason Cohen: Jason and nothing new to update basically but to say everything is still on course.

Jason Daniel Gabelman: Thanks. And my follow-up is just on the Rockies. And I think there's another product pipeline expected to start up before the summer driving season. Is that correct?

Speaker Change: Got it thanks and my follow up is just on the on the Rockies and I think there is another product pipeline expected to start up.

Speaker Change: Before summer driving season is that correct and how do you view kind of that market in the summer and moving forward there were obviously a cut.

Steven C. Ledbetter: And how do you view kind of that market in the summer and moving forward? There were obviously a couple of very strong years for product pricing with less refinery capacity in that region, but you have some coming back. So just general thoughts on maybe where you expect that market to price relative to where it was prior to COVID. Thanks. Yeah, I'll take that one. This is Steve.

Speaker Change: A very strong years on product pricing.

Speaker Change: <unk>.

Speaker Change: Less refinery capacity in that region, but you'll have some coming back.

Speaker Change: Just general thoughts on may be.

Speaker Change: Where do you expect that market to price relative to where it was prior to COVID-19.

Speaker Change: Yes, I'll take that one this is Steve. So so we're watching that product pipeline startup I think youre, referring to the one that goes up into Grand Junction and I think the premise there associated with that as that market gets tight and it gets long very quickly based on refinery.

Steven C. Ledbetter: So we're watching that product pipeline startup, I think you're referring to the one that goes up into Grand Junction, and I think the premise there associated with that is that the market gets tight, and it gets long very quickly based on refinery supply issues or runs. And so I think they would be looking to take advantage of that. Our view in terms of the market, it's still an important market for us, and our capability to source logistically advantaged barrels into those markets is something that we're going to continue to look forward to and drive. I don't think we're going to give guidance on the pricing structure forward-looking because there are a lot of elements at play there, but we do see this as a strong opportunity for us, not only in our current footprint but also to continue to grow the Sinclair brand from a branded perspective in the Southwest.

Speaker Change: Supply issues or runs and so youre looking at I think they would be looking to take advantage of that our view in terms of the market. It's still an important market for us and our capability to go source logistically advantaged barrels into those markets.

Speaker Change: It's something that we're going to continue to look forward.

Speaker Change: And drive I don't think we're going to give guidance on the pricing structure.

Speaker Change: We're looking because theres a lot of elements at play there, but we do see this as an.

Speaker Change: As a strong opportunity for us not only in our current footprint, but also to continue to go grow the Sinclair brand from a branded perspective in the southwest.

Jason Daniel Gabelman: And Jason, I'll just remind you that, prior to COVID, there was a Gallup refinery up there that has shut down since. And this pipeline is really going to be just replacing some of the barrels that were already there prior to COVID. We think the tariff structure is pretty high for that area, and so we still think, regardless, we're going to have a competitive advantage to source barrels into that. Great, thanks for the answers!

Speaker Change: And Jason I will just remind you that there wasn't gallup refinery up there.

Speaker Change: Pre COVID-19 shutdown.

Speaker Change: Yes.

Speaker Change: This pipeline is really going to be just replacing some of the barrels that were already there pre COVID-19. We think that tariff structure is pretty high for that area and so we still think regardless, we're going to have a competitive advantage to source barrels into that region.

Speaker Change: Great. Thanks for the answers.

Operator: There are no further questions at this time, so I'd like to hand back to Tim for closing comments. Well, thank you, Gavin. I mentioned a lot of highlights in my opening remarks, and I want to give a shout out to all of our employees for delivering these outstanding results in 2023. These achievements are a testament to the competitive advantages of our new business portfolio and also the hard work and dedication of our employees to execute our strategies and deliver on these results. Our priorities remain the same for 2020: to improve our reliability, to integrate and optimize our new portfolio of assets, and to return excess cash to our shareholders.

There are no further questions at this time, so that time back to Tim for closing comments.

Tim: Well, thank you Kevin.

Tim: I mentioned a lot of highlights in my opening remarks, and I want to give a shout out to all of our employees for delivering these outstanding results in 2023.

Tim: These achievements are a testament to the competitive competitive advantages of our new business portfolio and also the hard work and dedication of our employees to execute our strategies and deliver on these results.

Tim: Our priorities remain the same for 2024 to improve our reliability to integrate and optimize our new portfolio of assets.

Tim: And to return excess cash to our shareholders.

Timothy Go: 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.

Speaker Change: Thank you for joining our call have a great day.

Speaker Change: Okay.

Speaker Change: Thank you. This does conclude today's teleconference. Please disconnect your lines at this time and have a wonderful day.

Speaker Change: Yeah.

Speaker Change: Okay.

Speaker Change: Yeah.

Q4 2023 HF Sinclair Corp Earnings Call

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