Q1 2024 HF Sinclair Corp Earnings Call

Welcome to the H F. Sinclair Corporation's first quarter 2020 for a conference call and webcast hosting the call today is Tim go Chief Executive Officer of H at Sinclair, He's joined by Adam <unk> Chief Financial Officer.

Operator: Welcome to the HF Sinclair Corporation's first quarter 2024 conference call and webinar. Hosting the call today is Tim Go, Chief Executive Officer of HF Sinclair. He is joined by Atanas Atanasov, Chief Financial Officer; Steve Ledbetter, EVP of Commercial; Valerie Pompa, EVP of Operations; and Matt Joyce, SVP of Lubricants and Specialties.

Steve Ledbetter EVP of commercial Bell.

Valerie Pompa EVP of operations and Matt Choice SBB I Hope you do break out and specialties.

Operator: At this time, all participants have been placed in a listen-only mode, and the floor will be open for your questions following the presentation. If you would like to ask a question during this 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 star 1 again. If you should require operator assistance, please press star zero.

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

If you would like to ask a question during that time. Please press star one on your thoughts going forward.

If at any point. Your question has been answered you may remove yourself from the queue by pressing the star one again.

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Please note that this conference is being recorded.

Operator: We ask that you please limit yourself to one question and one follow-up. Additionally, we ask that you pick up your handset to allow optimal sound quality. Please note that this conference is being recorded. It is now my pleasure to turn the floor over to Craig Biery, Vice President, Investor Relations. Craig, you may begin.

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

Craig Biery: Thank you, Kathleen. Good morning, everyone, and welcome to HF Sinclair Corporation's first quarter 2024 earnings call. This morning, we issued a press release announcing results for the quarter ending March 31st, 2024. If you would like a copy of the earnings press release, you may find one on our website at hfsinclair.com.

Craig Biery: Thank you Kathleen and good morning, everyone and welcome to Hff's Sinclair Corporation's first quarter 2024 earnings call. This morning, we issued a press release announcing results for the quarter ending March 31, 2024, if you would like a copy of the earnings press release, you may find one on our website at Hs Sinclair Dot Com before we proceed with remarks. Please note the safe Harbor.

Craig Biery: 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 securities laws. There are many factors that could cause results to differ from expectations, including those noted in our SEC filings. The call also may include discussion of non-GAAP measures.

<unk> statement in today's press release.

Craig Biery: In summary, it says statements made regarding management expectations judgments or predictions are forward looking statements. These.

Craig Biery: These statements are intended to be covered under the safe Harbor provisions of federal security laws. There are many factors that could cause results to differ from expectations, including those noted in our SEC filings. The call. Also may include discussion of non-GAAP measures. Please see the earnings press release for reconciliations to GAAP financial measures.

Craig Biery: 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.

Craig Biery: 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.

Timothy Go: Good morning, everyone. We are pleased to report our first quarter 2024 results with you today. We continue to advance our corporate strategy focused on improving reliability, optimizing and integrating our portfolio, and generating strong cash flows to support our cash return strategy. During the quarter, our business maintained safe and reliable operations, representing another quarter of successful turnaround and maintenance execution. We also returned $269 million in cash to shareholders during the quarter and today announced a new $1 billion share repurchase authorization, demonstrating our commitment to shareholder return. Now, let me cover our segment highlights before turning over to Adam.

Tim: Good morning, everyone.

Tim: We are pleased to report our first quarter 2024 results with you today.

Tim: We continue to advance our corporate strategy.

Tim: Based on improving reliability, optimizing and integrating our portfolio and generating strong cash flows to support our cash return strategy.

Tim: During the quarter, our business maintain safe and reliable operations, representing another quarter of successful turnaround and maintenance execution.

Tim: We also returned $269 million in cash to shareholders during the quarter and today announced a new $1 billion share repurchase authorization, demonstrating our commitment to shareholder returns.

Tim: Now, let me cover our segment highlights before turning over to Atlas.

Atlas: And refining for the first quarter of 2024, we generated solid financials, despite experiencing seasonal seasonal demand weakness for transportation fuels.

Timothy Go: In refining for the first quarter of 2024, we generated solid financials, despite experiencing seasonal seasonal demand weakness for transportation fuels. We continue to focus on the operations excellence of our assets, resulting in improved reliability during the winter months and successful execution of our plan B. The scheduled turnaround at our Puget Sound Refinery in the first quarter, which continued into April, was completed on time and on budget.

Atlas: We continue to focus on the operational excellence of our assets, resulting in improved reliability during the winter months.

Atlas: Successful execution of our planned maintenance.

Atlas: The scheduled turnaround at our Puget sound refinery in the first quarter that continued into April was completed on time and on budget.

Steven C. Ledbetter: On the commercial side, we optimized our crude slate in order to capture the favorable differentials for heavy Canadian and thin crude oil. The year-over-year improvements in our throughput rates, increased heavy sour crude oil runs, and lower op-ex per barrel illustrate the progress we've made towards our reliability and optimization priorities, and renewables for the first quarter of 2024. Weakened RINs and LCFS credit prices resulted in a 16% decline in our renewable diesel indicator compared with the fourth quarter of 2023.

Atlas: On the commercial side, we optimized our crude slate in order to capture the favorable differentials for heavy Canadian.

Atlas: And syncrude crude oil.

Atlas: The year over year improvements in our throughput rates increased heavy sour crude oil runs and lower opex per barrel illustrate the progress we've made towards our reliability and optimization priorities.

Atlas: In renewables for the first quarter of 2024.

Atlas: Weakened rems and <unk> credit prices resulted in a 16% decline in our renewable diesel indicator compared with the fourth quarter of 2023.

Timothy Go: Despite the economic headwinds in the quarter, we continue to focus on feedstock optimization by increasing low-CI feedstocks and reducing our high-cost feedstock inventory. In addition, we continue to improve our renewable diesel operations by improving reliability and decreasing operating costs. In the marketing segment, in the first quarter of 2024, we saw strong value in our Sinclair branded sites, as the marketing business continued to provide a consistent sales channel with margin uplift for our branded fuel.

Atlas: Despite the economic headwinds in the quarter, we continue to focus on feedstock optimization by increasing low Ci feedstocks and reducing our high cost feedstock inventory.

Atlas: In addition, we continue to improve our renewable diesel operations by improving reliability and decreasing operating costs.

Atlas: And the marketing segment in the first quarter of 2024, we saw strong value in our Sinclair branded sites as the marketing business continued to provide a consistent sales channel with margin uplift for our branded fuels.

Atlas: We continue to target, 5% or more annual growth in the number of branded sites and are encouraged by what we're seeing in our store growth pipeline for 2024.

Timothy Go: We continue to target 5% or more annual growth in the number of branded sites and are encouraged by what we are seeing in our store growth pipeline for 2020. In lubricants and specialties, our focus on sales mix optimization across our finished products portfolio resulted in another strong quarter, despite weakened base oil prices in the period. Our integrated business model continues to deliver stable margins in a volatile market, resulting in a consistently strong EBITDA run rate over the past three years. In midstream, we are pleased with the progress of integrating the HEP assets into our consolidated portfolio and will continue to look for opportunities to optimize our logistics business.

Atlas: In lubricants specialties, our focus on the sales mix optimization across our finished products portfolio resulted in another strong quarter, despite weaker base oil prices in the period.

Atlas: Our integrated business model continues to deliver stable margins in a volatile market.

Atlas: <unk> consistently strong EBITDA run rate over the past three years.

Atlas: In midstream we are pleased with the progress of integrating the <unk> assets into our consolidated portfolio and we'll continue to look for opportunities to optimize our logistics business.

Atlas: In the first quarter, we returned $269 million to shareholders through share repurchases and dividends.

Timothy Go: In the first quarter, we returned $269 million to shareholders through share repurchases and dividends. As of April 30, 2024, we have repurchased an additional $296 million from REH Co. in the second quarter, reducing our share count by over 7.9 million shares year-to-date. Since March 2022, we have repurchased over 53 million shares, or roughly 89% of the shares issued for our Sinclair transaction. This morning, we announced a new $1 billion share repurchase authorization. This replaces our previous $1 billion authorization, of which approximately $214 million remained.

Atlas: As of April 32024, we have repurchased an additional $296 million from <unk> in the second quarter, reducing our share count by over seven 9 million shares year to date.

Atlas: Since March 2022, we have repurchased over 53 million shares or roughly 89% of the shares issued for our Sinclair transaction.

Atlas: This morning, we announced a new $1 billion share repurchase authorization, replacing our previous $1 billion authorization of which approximately $214 million remained demonstrating our commitment to our long term cash return strategy and long term payout ratio, while maintaining a strong balance sheet.

Timothy Go: Demonstrating our commitment to our long-term cash return strategy and long-term payout ratio while maintaining a strong balance sheet and investment grade rating. Today, we also announce that our Board of Directors... declared a regular quarterly dividend of $0.50 per share payable on June 5, 2024 to holders of record on May 22, 2024. Looking forward, as we head into the summer driving season, we expect a favorable market environment, and combined with further progress against our corporate priorities, we believe we are well positioned to generate strong earnings and cash flow. With that, let me turn the call over to Atanas.

Atlas: An investment grade rating.

Atlas: Today, We also announced that our board of directors declared a regular quarterly dividend of <unk> 50 per share payable on June five 2024 to holders of record on May 20.

Atlas: 2024.

Atlas: Looking forward as we head into the summer driving season, we expect a favorable market environment and combined with further progress against our corporate priorities. We believe we are well positioned to generate strong earnings and cash flow.

Atlas: With that let me turn the call over to Alice. Thank you, Tim and good morning, everyone. Let's begin by reviewing Hff's Sinclair is financial highlights today, we reported first quarter net income attributable to HFC clear shareholders of $315 million.

Atanas H. Atanasov: over to Atanas. Thank you, Tim, and good morning, everyone.

Atanas H. Atanasov: Let's begin by reviewing HF Sinclair's financial highlights. Today, we reported first quarter net income attributable to HF Sinclair shareholders of $315 million, for $1.57 per diluted share. These results reflect special items that collectively increase net income by $172 million.

Alice: Our $1 57 per diluted share.

Alice: These results reflect special items that collectively increased net income by $172 million.

Atanas H. Atanasov: Excluding these items, adjusted net income for the first quarter was $142 million, or $0.71 per diluted share, compared to adjusted net income of $394 million, or $2 per diluted share, for the same period in 2023. Adjusted EBITDA for the first quarter was $399 million, compared to $705 million in the first quarter of 2023. In our refining segment, first quarter adjusted EBITDA was $209 million compared to $537 million of refining segment EBITDA for the first quarter of 2023.

Alice: Excluding these items adjusted net income for the first quarter was 142 million or <unk> 71 per diluted share compared to adjusted net income of $394 million or $2 per diluted share for the same period in 2023 adjust.

Alice: Adjusted EBITDA for the first quarter was $399 million compared to $705 million in the first quarter of 'twenty three.

Alice: In our refining segment first quarter, adjusted EBITDA was 209 million compared to $537 million of refining segment EBITDA for the first quarter of 2023.

Atanas H. Atanasov: This decrease was primarily driven by lower refinery gross margins in both the West and Mid-Con regions as a result of seasonal demand weakness for transportation fuels, partially offset by high refined product sales volumes. Crude oil charge averaged 605,000 barrels per day for the first quarter compared to 499,000 barrels per day for the first quarter of 2023.

Alice: This decrease was primarily driven by lower refinery gross margins in both the west and mid Con regions. As a result of seasonal demand weakness for transportation fuels, partially offset by higher refined product sales volumes crude.

Alice: Crude oil charge averaged 605000 barrels per day for the first quarter compared to 499000 barrels per day for the first quarter of 2023.

Atanas H. Atanasov: This increase was primarily a result of decreased turnaround activities and improved reliability at our refineries compared to the same period last year. In our renewable segment, we reported adjusted EBITDA of negative $19 million for the first quarter compared to $3 million for the first quarter of 2023, principally due to weakened rents and LCFS credit prices in the first quarter of 2024. Total sales volumes of 61 million gallons for the first quarter as compared to 46 million gallons for the first quarter of 2023.

Alice: This increase was primarily a result of decreased turnaround activities and improved reliability at our refineries compared to this to the same period last year.

Alice: In our renewable segment, we reported adjusted EBITDA of negative $19 million for the first quarter compared to $3 million for the first quarter of 2023, principally due to weakened Rencen L. CFS credit prices in the first quarter of 2024.

Alice: Total sales volumes was 61 million gallons for the first quarter as compared to 46 million gallons for the first quarter of 2023.

Atanas H. Atanasov: Our marketing segment reported EBITDA of $16 million for the first quarter compared to $6 million for the first quarter of 2023, driven primarily by stronger branded wholesale margins. Total branded fuel sales volumes were 321 million gallons for the first quarter, as compared to 328 million gallons for the first quarter of 23. Our lubricants and specialty segment reported EBITDA of $87 million for the first quarter compared to EBITDA of $98 million for the first quarter of 2023. This decrease was largely driven by lower base oil prices in the first quarter of 2024.

Alice: Our marketing segment reported EBITDA of $16 million for the first quarter compared to $6 million for the first quarter of 'twenty, three driven primarily by stronger branded wholesale margins.

Alice: <unk> branded fuel sales volumes were 321 million gallons for the first quarter as compared to 328 million gallons for the first quarter of 'twenty three.

Alice: Our lubricants and specialty segment reported EBITDA of $87 million for the first quarter.

Alice: Third through EBITDA of $98 million for the first quarter of 'twenty three.

Alice: This decrease was largely driven by lower base oil prices in the first quarter of 'twenty four.

Operator: Our midstream segment reported EBITDA of $111 million in the first quarter compared to $93 million in the same period last year, primarily due to high revenues from tariff increases in the first quarter of 2004. Net cash provided by operations totaled $317 million, which included $70 million of turnaround spend in the quarter. HF Sinclair's capital expenditures totaled $89 million for the first quarter. As of March 31st, 2024, HF Sinclair's total liquidity stood at approximately $3.7 billion, which included a cash balance of $1.2 billion, our undrawn $1.65 billion in secured credit facility, and $806 million availability on the AGP credit facility.

Alice: Our midstream segment reported EBITDA of $111 million in the first quarter compared to 93 million in the same period last year, primarily due to higher revenues from tariff increases in the first quarter of 'twenty four.

Alice: Net cash provided by operations totaled $317 million, which included $70 million of turnaround spend in the quarter.

Alice: Hff's Sinclair capital expenditures totaled $89 million for the first quarter.

Alice: As of March 31, 2020 for Hs Sinclair has total liquidity stood at approximately $3 7 billion, which includes cash balance of $1 2 billion.

Alice: Our undrawn $1 65 billion unsecured credit facility and $806 million availability on the AGP credit facility.

Operator: During the quarter, we reduced our net, our net, our debt by approximately $62 million by paying down a portion of the debt outstanding under the HEP revolver. As of March 31st, we had $2.7 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. With respect to capital spending for full year 24, we still expect to spend approximately $800 million in sustaining capital, including turnaround on catalysts.

Alice: During the quarter, we reduced our net our net our debt by approximately $62 million by paying down a portion of the debt outstanding under the revolver.

Alice: The revolver.

Alice: As of March 31, we had $2 7 billion of debt outstanding with a debt to cap ratio of 21% and net debt to cap ratio of 11%.

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

Operator: In addition, we expect to spend $75 million in growth capital investments across our business segments. For the second quarter of 2024, we expect to run between 620 and 650,000 barrels of crude oil per day in our refining segment, which reflects planned turnarounds at our Puget Sound and Parkville refineries during the period and improve reliability and operations across our fleet. Operator.

Alice: With respect to capital spending for full year 'twenty four we still expect to spend approximately $800 million in sustaining capital, including turnaround on catalysts. In addition, we expect to spend $75 million and growth capital investments across our business segments.

Alice: For the second quarter of 2024, we expect to run between 620 and 650000 barrels per day of crude oil in our refining segment, which reflects planned turnarounds are fugit sound on parcel refineries during the period and improved reliability and operations across our fleet.

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

Speaker Change: Operator.

Speaker Change: The floor is now open for questions. At this time, if you have any questions or comments. Please press star one on your Dutch Don Foley, We ask that you. Please limit to one question and one follow up if you have additional question. We welcome you to rejoin the queue.

Operator: The floor is now open for questions. At this time, if you have any questions or comments, please press star 1 on your touchtone phone. We ask that you please limit yourself to one question and one follow-up. If you have additional questions, we welcome you to rejoin the queue. If at any point your question has been answered, you may remove yourself from the queue by pressing star 1 again. Your first question comes from the line of Neil Mehta of Goldman Sachs. Please go ahead.

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

Alice: Yes.

Alice: Your first question comes from the line of Neil Mehta of Goldman Sachs. Please go ahead.

Timothy Go: Yeah, good morning, team. I had a couple non-refining questions, actually. The first one was on lubricants. Really, good quarter for the lubes business. I would love your perspective on whether you think this represents a new normal. And then, Tim, I think you've talked about the potential monetization of this business, but maybe more as a 2025 event. Just any latest thinking around that as well.

Alice: Yes.

Neil Singhvi Mehta: Tim I had a couple of non refining questions actually.

Neil Singhvi Mehta: The first one was on lubricants really good quarter at at the loops business I would just love your perspective on it.

Neil Singhvi Mehta: Whether that you think this represents.

Neil Singhvi Mehta: A new normal and then Tim.

Neil Singhvi Mehta: Tim and I think you've talked about the potential monetization of this business, but maybe more at the 2025 event, just any latest thinking around that as well.

Alice: Yes.

Timothy Go: Yeah, good morning, Neil. Thanks for the question. So let me start and then I'll ask Matt to provide some more color on the loops business because we are very pleased and happy with how it's performing. It's a good example of our improved capability that we have to execute and deliver value to our shareholders. Our LUVS team has done a great job integrating and optimizing our lubricants business over the past three years.

Speaker Change: Yes, good morning, Neal. Thanks for the question. So let me start and then I'll ask Matt to provide some more color on the lubes business because we are very.

Matt Joyce: Pleased and happy with how it's performing.

Matt Joyce: It's a good example, our lubes business of our improved capability that we have to execute and deliver value to our shareholders.

Matt Joyce: Our <unk> team has done a great job integrating and optimizing our lubricants business over the past three years.

Timothy Go: And as you can see, it's delivering strong financial results, regardless of the base oil cracks, which, by the way, are near the bottom of the cycle levels that we saw back in 2019. But, as I've stated previously, optimizing this asset portfolio and continued simplification of our lubricants business is a strategic priority. We believe in the significant value of our lubricants business, and we review and evaluate all of our assets on an ongoing basis with an eye to maximizing shareholder value.

Matt: As you can see it's delivering strong financial results rigor.

Matt: Regardless of the base oil cracks, which by the way are near a bottom of cycle levels that we saw back in 2019.

Matt: But as I've stated previously optimizing this asset portfolio and continued simplification of our lubricants business is a strategic priority, we believe and the significant value of our lubricants business and we review and evaluate all of our assets on an ongoing basis with an eye for maximizing shareholder value.

Timothy Go: Neil, at this time, we don't have any announcements or updates to provide. What I would like to do, though, is ask Matt to give a little bit more color on how our LOOMS business is able to perform despite the macro market environment.

Matt: Neil at this time, we don't have any announcements or updates to provide what I would like to do though is ask Matt to give a little bit more color on how our lubes business is able to.

Matt: Performed despite the macro market environment, Thanks, Tim and good morning, Neal Thanks for the question.

Matt Joyce: Thanks, Tim. And good morning, Neal. Thanks for the question.

Matt: This is all about our continued focus on our execution of our strategy.

Matt: First and foremost, though it also begins with safety and it was a perfect safety quarter for US, which is always a catalyst for great performance in the business.

Matt: We've got some outstanding teammates who are working hard to stay safe execute well and improve this business every day, but really we're building on our strengths of development in house development integration of our of our base oils and finished lubricants business together and in our ability to recognize and respond to market needs.

Matt Joyce: This is all about a continued focus on our execution of our strategy. But first and foremost, though, it also begins with safety. And it was a perfect safety quarter for us, which is always a catalyst for great performance in the business. We've got some outstanding teammates who are working hard to stay safe, execute well, and improve this business every day. But really, we're building on our strengths in development, in-house development, integration of our base oils and our finished lubricants business together, and our ability to recognize and respond to market needs.

Matt Joyce: We're utilizing these assets that we have more effectively to execute on the strategy, and we're being operationally excellent in delivering that growth that we need to build the business for the future. Let me give you a couple examples specifically of some synergies that we captured this quarter that really enable that efficiency and growth. One in particular is our Joshua, Texas facility, which had historically been a Red Giant oil lubricants plant. We're now moving that into supporting the whole of our finished lubes portfolio, and over the past quarter, we've invested in a low-cost, quick-hit project that's enabled us to increase our capacity by nearly 50% over the course of the coming year.

Matt: Utilizing these assets that we have more effectively to execute on the strategy and we're being operationally excellent and delivering that growth that we need to build the business for the future. Let me give you a couple of examples specifically.

Matt: Some synergies that we captured this quarter that really enable that efficiency and growth.

Matt: One in particular is our Josh with Texas facility, which had historically been a red giant oil lubricants plant. We're now moving that into supporting the whole of our finished lubes portfolio and over the past quarter. We've invested in a low cost quick hit project. That's enabled us to increase our capacity by nearly 50% over the course of the.

Matt: On the coming year.

Matt Joyce: And this is significant given Joshua, Texas' strategic location to the markets where we are winning and we want to continue to grow and leverage our formulations and developments. On the process oil side of our business, I give the team a lot of credit. They found and discovered some market needs to better serve the tire industry, and we approved a capital-like investment in the fourth quarter of last year, and then we're instituting that, kicking it off in the first quarter this year at our Tulsa facility.

Matt: And this is significant given Josh with Texas strategic location to the markets, where we are winning and we're wanting to continue to grow and leverage our our formulations in development on the process oil side of our business I'd give the team a lot of credit.

Matt: Found.

Matt: And discovered some market needs to better serve the tire industry and we approved a capital light investment in the fourth quarter of last year, and then we're instituting that kicking it off in the first quarter. This year at our Tulsa facility and testing is underway with some large tire industry Oems and we've also found that we can use this.

Matt Joyce: And testing is underway with some large tire industry OEMs, and we've also found that we can use this technology to go into the construction material markets as well, and we're doing that. So this investment will enable new technology introduction for first sales to come through in the fourth quarter of this year, and then more in 2025. And then, you know, if I look at it, base oil integration, we've just had that as a common theme where we're leveraging that base oil integration.

Matt: Technology to go into the construction material markets as well and we're doing that so this investment will enable new technology introduction or for.

Matt: <unk> sales to come through in the fourth quarter of this year and then more in 2025.

Matt: And then if I.

Matt: If I look at it base oil integration.

Matt: Since had that as a common theme, where we're leveraging that base oil integration, we've introduced and developed a new base oil cut.

Matt Joyce: We've introduced and developed a new base oil cut in our Mississauga facility that's giving us a more advantageous total formulated cost to meet the needs of the PCMO markets in the U.S. and abroad, and that's satisfying General Motors' specifications. This is a big deal, both for our base oil business as well as for our own captive finished lubricants business. So you can tell there's a number of these pieces that add up together to drive operational excellence, and core regional growth, and hopefully, in the coming quarters, we'll be able to share a little bit more about the transformational work that we have underway.

Matt: And our Mississauga facility, that's giving us a more advantaged total formulated cost to meet the needs of.

Matt: The <unk> markets in the U S and abroad and that satisfying General Motors specifications. This is a big deal both for our base oil business as well as for our own captive finished lubricants business. So as you can tell there is a number of these pieces that add up together.

Matt: Drive operational excellence core regional growth and hopefully in the next coming quarters, we'll be able to share a little bit more about the transformational work that we have underway.

Timothy Go: So, Neil, that was probably more detail and more examples than you probably were expecting, but we do want you and others to know that, you know, our Lube's business is performing well, and it's not by accident. This is not something that has just happened. We've demonstrated over the last three plus years that the earnings power of our Luberkins business has been increased, and it's running in the $300 to $350 million range right now, despite the... Base Oil Indicator being at a near bottom of the cycle condition.

Matt: So Neil that was probably more detailed and more examples then probably you were expecting but we do want you and others to know that our lubes business is performing well and it's not by accident. This is not.

Matt: This is not something that has just happened.

Matt: We've demonstrated over the last three plus years.

Matt: The earnings power of our lubricants business has been increased and it's running in the $300 million to $350 million range right now.

Matt: Despite the.

Matt: Sure.

Matt: Base oil indicators being at near bottom of cycle conditions.

Neil Singhvi Mehta: Yeah, no, that showed up this quarter, so thank you Tim and team for that. On the other side of performance, probably renewable diesel. It's another tough quarter here, and I just would love your thoughts on the path to profitability. And Tim, where are you? You've been very frank about not being happy with the performance from a profitability perspective at this point, so where do you think we are in terms of the transformation of that business?

Matt: Yes.

Matt: That showed up this quarter. So thank you Tim and team for that but on the other side of performance probably renewable diesel there was another tough quarter here.

Matt: And just sort of love your thought on the path to profitability.

Matt: And Tim.

Tim: Are you <unk> been very Frank about not being happy with the performance from a profitability perspective at this point, so where do you think we are in terms of the transformation of that business.

Timothy Go: Yeah, we are not happy with the results, Neil, as you point out. We are pleased with the progress that we're making, though, and I'll let Steve talk about some of the initiatives that we've got going on.

Tim: Yes, we are not happy with the results.

Tim: Neil as you point out we are pleased with the progress that we're making now and I'll, let Steve talk about some of them.

Steven C. Ledbetter: Some of the initiatives that we've got going on.

Steven C. Ledbetter: Hey Neal, this is Steve Ledbetter. As Tim mentioned, challenging Q1 financial performance. You know, some of the things we're focusing on in terms of improving our low feedstock, low CI feedstock across the fleet were more than masked by difficult macro margin pressures. You know, the feedstock lag really is an issue, and we saw that aggressively take place in Q1. We do have some operational improvements that we're seeing, and we're very happy with. You know, we had zero downtime related to hydrogen issues. February and March were good performance months.

Steven C. Ledbetter: Hey, Neil This is Steve Linda as Tim mentioned, the challenging Q1 financial performance.

Steven C. Ledbetter: One of the things, we're focusing on in terms of improving our low feedstock low Ci feedstocks across the fleet were more than masked by difficult macro margin pressures.

Steven C. Ledbetter: The feedstock lag really is an issue and we saw that aggressively take place in Q1, we do have some operational improvements that we're seeing and we're very happy with.

Tim: Zero downtime related to hydrogen issues February March were good good performance month.

Steven C. Ledbetter: Again, we're trying to run optimal economic utilization, but this is a story that really, in terms of driving profitability, is all about accelerating our low CI feedstock runs where we think we have some real opportunities to do that. A couple of big milestones, we're moving one of the trains at Artesia to full 100% low CI feedstock. We think that's going to be an advantage.

Tim: Again, we're trying to run economic optimal economic utilization, but this is a story that really in terms of driving the profitability is all about.

Tim: Accelerating our low Ci feedstocks runs, where we think we have some real opportunities to do that.

Tim: A couple of big milestones in removing one of the trains at our key just to full 100% low Ci feedstocks, we think thats going to be an advantage.

Steven C. Ledbetter: We're moving some small cap projects to allow some logistical synergies and truck unloading on some of the low CI feedstock. We're continuously driving our pathways and then placing our barrels into the most favorable markets. I am happy to note that we injected our first delivery to the previously announced Rio Tinto mine in RD this month, and our feedstock inventories have gotten quite low on purpose given the accelerated backwardation in the market, which allows us to buy prompt barrels and minimize this exposure on a very steep backward market.

Tim: Moving some small cap projects to allow some logistical synergies and truck unloading on some of the low Ci feedstocks, we're continuously driving our pathways and then placing our barrels under the most favorable markets happy to note that we injected our first delivery to the previously announced Rio Tinto mine of <unk>.

Tim: <unk> this month.

Tim: And our feedstock inventories have gotten quite low on purpose given the accelerated backwardation in the market, which that allows us to buy barrels and minimize this exposure on a very steep backward market. We will continue to drive our catalysts optimization and Opex efficiencies and then again, we will look to run at the optimal.

Steven C. Ledbetter: We'll continue to drive our catalyst optimization and OPEX efficiencies, and then again, we will look to run at the optimal economic rate to maximize our fleet profitability. We think these are the best things to focus on and give us the highest chance of success to deliver the most profitable outcome.

Tim: Economic rate and maximize.

Tim: Our fleet profitability and we think these are the best things to focus on and give us the highest chance of success to deliver the most profitable outcomes.

Timothy Go: Yeah, thanks, Steve. I will point out that in the first quarter, we were not hydrogen limited in our renewable diesel operations. And I think that's a big accomplishment for the team in terms of optimizing our operations. And look, you know, it's impossible to know what the mid-cycle conditions are going to be for renewable diesel right now with the RIMS and with the volatility of LCFS numbers there. But we are focused on the things that we can control. So utilization, advantage feedstocks, product netbacks, and lower operating costs. And at the current RIMS and LCFS levels, we believe our business can be breakeven to slightly positive, and that's what the team is working towards.

Speaker Change: Yes, Thanks, Steve.

Speaker Change: I will point out that in the first quarter, we were not hydrogen limited and our renewable diesel operation. So I think that's a big accomplishment for the team in terms of optimizing our operations and look Neil it's impossible to know what the mid.

Speaker Change: Mid cycle conditions are going to be for renewable diesel right now.

Speaker Change: With the Rams and what the CFS.

Speaker Change: Volatility there, but we are focused on the things that we can control so utilization advantage feedstocks product net backs lower operating costs.

Speaker Change: At the current <unk> and <unk> levels, we believe our business can be breakeven to slightly positive and that's what the team is working towards.

Speaker Change: Thanks, Tim Thanks, Steve.

Neil Singhvi Mehta: Thanks, Tim. Thanks, Steve.

Speaker Change: Your next question comes from the line of Ryan Todd of Piper Sandler. Please go ahead.

Operator: Your next question comes from the line of Ryan Todd of Piper Sandler. Please go ahead.

Speaker Change: Okay.

Ryan M. Todd: Great. Thanks.

Ryan M. Todd: Great, thanks. Maybe I will switch to the refining side and ask if you could maybe just, you know, provide updates on a couple of your markets, talk about what you're seeing in the Rockies market. It was, I think it was fairly weak during a good chunk of the first quarter but seems to be strengthening of late, and then maybe on the West Coast post Rodeo's closure, what you're seeing there in terms of the general market and Pat Fyfe.

Ryan M. Todd: Maybe I will switch to the refining side.

Speaker Change: Yes.

Ryan M. Todd: Ask if you could maybe just provide updates on a couple of your markets.

Ryan M. Todd: Talk about what Youre seeing in the Rockies market it was.

Speaker Change: I think it was it was fairly weak darrin a good chunk of the first quarter, but it seems to be strengthening of.

Speaker Change: Of late.

Speaker Change: And then maybe on the on the West Coast poster today I was close your what Youre seeing there in terms of general market dynamics and pad size.

Speaker Change: Yes, Brian This is Steve I'll take that one yes, as you mentioned the Rockies market started off a bit weaker in terms of.

Steven C. Ledbetter: This is Steve. I'll take that one. The crack environment. Demand also was impacted by some pretty significant weather events. As you saw towards the end of the quarter and positioning for the driving season, we started to see some support in terms of the crack environment. Our ability to move barrels into the group or to the front range allows us to be flexible and take advantage of that, and we continue to look to optimize across the value chain.

Steven C. Ledbetter: The crack environment demand also was impacted by some pretty significant weather events as you saw towards the end of the quarter and.

Steven C. Ledbetter: Positioning for driving season, we started to see some support in terms of the crack environment, our ability to go move barrels into the group or to the front range allows us to be flexible and take advantage of that and we continue to look to optimize across the value chain on the west Coast I think what you see in terms of the total distillate supplied picture with the R&D.

Steven C. Ledbetter: On the West Coast, I think what you see in terms of the total distillate supply picture with the RD volumes coming on, the distillate picture is challenged across the West Coast. Gasoline looks better, and we look to take advantage of our capabilities in the market in the Pacific Northwest to place local market barrels for gasoline but also look for distillate movement and export volume where we have the capability to go do that.

Steven C. Ledbetter: Volumes coming on.

Steven C. Ledbetter: The distillate picture is as challenged across the West coast.

Steven C. Ledbetter: Gasoline looked better and we look to take advantage of our capabilities in the market in the Pacific northwest to place local market barrels for gasoline, but also look for distillate movements and export volume, where we have capability to go do that so nothing structurally and we should see some seasonal demand things coming.

Steven C. Ledbetter: Nothing structurally, and we see some seasonal demand things coming off. We're seeing margin structure come back both in the Rockies and the group and in the Pacific Northwest, and we look to take advantage of that moving into Q2.

Steven C. Ledbetter: Off we're seeing margin structure come back both in the Rockies and the group and in the Pacific Northwest and we look to take advantage of that moving into Q2.

Timothy Go: Yeah, Ryan, and this is Tim. I'll just chime in. I don't know if it's as much of our Rockies and MidCon regions being weaker as opposed to just the Gulf Coast being so strong. You know, there was a lot of maintenance, both planned and unplanned, in the first quarter in the Gulf Coast that created some strength in that region. As you know, we don't have any assets on the Gulf Coast, so of course, our regions look weak in comparison to that.

Steven C. Ledbetter: Yes, Ryan this is Tim I'll just chime in.

Tim: I don't know if it's as much of our Rockies and mid con regions being weaker as opposed to just the Gulf coast being so strong.

Tim: There was a lot of maintenance both planned and unplanned in.

Tim: In the first quarter on the Gulf Coast that created.

Speaker Change: Some strength in that region as you know we don't have.

Speaker Change: Any assets in the Gulf Coast. So our of course, our regions look weak in comparison to that.

Timothy Go: When we look at the data and the historical trends, we see the same seasonal historical trends that we always see in our regions. We're not concerned, and, in fact, we are seeing demand pick up significantly right now. As planting season begins, diesel demand is picking up, and gasoline demand has been rising as a result of the RVP transition that just took place. And so we're pretty bullish. If you look at the April cracks that we just published... The last month's cracks were $5 above what we had realized in the first quarter, and that bodes well in terms of what we typically see seasonally and what we're expecting here for the second quarter.

Speaker Change: When we look at the data and the historical trends, we see the same seasonal historical trends that we always see in our regions. We are not concerned and in fact, we are seeing demand pick up significantly right now as planting season begins diesel demand is picking up gas.

Ryan M. Todd: Perfect. Thank you.

Speaker Change: Gasoline demand has been picking up as well.

Speaker Change: Result of the RVP transaction transition that just took place and so we're pretty bullish if you look at the April cracks that we just published.

Speaker Change: That.

Speaker Change: Last month's kratz for $5 above what we had realized in the first quarter and that bodes well in terms of what we typically see seasonally and what we're expecting for the second quarter.

Speaker Change: Okay perfect. Thank you and then maybe.

Speaker Change: Yeah.

Ryan M. Todd: And then maybe a follow-up on shareholder returns. I mean, really strong buyback in the first quarter. New authorization out there to continue.

Speaker Change: A follow up on on shareholder returns have been really strong buyback in the first quarter.

Speaker Change: New authorization out there to continue doing that can you maybe.

Ryan M. Todd: Can you maybe, you know, frame up how you're thinking about whether there are any other things competing for that excess cash flows you look at over the remainder of 2024, should we expect to see you continue to invest pretty heavily in the buyback? And then maybe any comments on the market got a little spooked earlier this year when some of the Sinclair family shares made it to the open market. How, how are you approaching, you know, how is your approach to continue to repurchase shares there? And how much potential overhang is left on the family side?

Speaker Change: Frame up how you're thinking about.

Speaker Change: Whether there are any other things competing for that excess cash flow as you look out over the remainder of 2024 should we expect to see you continue to lean in pretty heavily into the buyback and then maybe any comments on the Mark you've got a little spooked earlier this year when some of the Sinclair family shares made it through the open market.

Speaker Change:

Speaker Change: How are you approaching how is your approach to continuing to repurchase shares there.

Speaker Change: And how much potential overhang is left there.

Speaker Change: Family side.

Atanas H. Atanasov: Yeah, Ryan, thanks for your question. I'll ask Atanas to chime in.

Speaker Change: Yeah, Brian Thanks for your question, let me ask analysts to.

Speaker Change: China.

Atanas H. Atanasov: Ryan, good morning. With respect to your questions on capital returns, what we did in the first quarter clearly demonstrates our continued commitment to shareholder returns. As you have seen, we also repurchased an additional 296 million worth of shares in early April, which puts us at 565 million in total shareholder return through early April. To the extent that we are continuing to see an above mid-cycle environment, which we are, we'll continue to lean very heavily into share repurchases and continue to exceed our Payout ratio with respect to the family, as you saw early in the year. Obviously, we don't control how they sell shares in the market, but generally, you've seen one open transaction per year. We'll continue to buy shares back from them.

Ryan M. Todd: Ryan Good morning.

Speaker Change: With respect to your questions on capital returns, what we did in the first quarter.

Ryan M. Todd: Clearly demonstrates our continued commitment to shareholder returns.

Speaker Change: As you have seen we also repurchased an additional 296 million.

Ryan M. Todd: Worth of shares in early April, which puts us at $565 million.

Ryan M. Todd: And total shareholder return through early April.

Ryan M. Todd: To the extent that we.

Ryan M. Todd: We are continuing to see an above mid cycle.

Ryan M. Todd: Environment, which we are we will continue to lean very heavily into share repurchases.

Ryan M. Todd: <unk> continues to exceed our.

Ryan M. Todd: Payout ratio with respect to the family what you saw early in the year.

Ryan M. Todd: Obviously, we don't control how they sell shares in the market, but generally you've seen one.

Ryan M. Todd: Open transaction.

Ryan M. Todd: Per year we.

Ryan M. Todd: We will continue to buy.

Atanas H. Atanasov: That's our preferred method of buybacks. And with respect to Overhank, as you may have noticed, they're no longer our largest shareholder as of right now. And at 9%, currently, I think you'll probably see this continuing to go down. Now, they also indicated their intent of keeping one board seat, which would point to 5% or better, but we just don't view their current ownership as an Overhank as of right now. Yeah, and Ryan, this is Tim.

Ryan M. Todd: Buy shares back from them, that's our preferred.

Ryan M. Todd: Method of buybacks and with respect.

Ryan M. Todd: To overhang as you may have noticed they are no longer our largest shareholder.

Ryan M. Todd: As of right now and at 9%.

Ryan M. Todd: Currently I think youll see probably continuing to go down now they also indicated their intent of keeping one board seat, which.

Ryan M. Todd: 0.25% or better, but we just don't view the current ownership as a as an overhang as of right now.

Timothy Go: Yeah, and Ryan, this is Tim. I'll chime in too. You know, you mentioned the market got spooked a little bit, and we absolutely saw that. But I will point out, in addition to what Atanas just talked about, if you look at the open market purchases that we have made since the Sinclair transaction, we have actually bought more in the open market than REHCO has sold in the open market. And I think it's just important for people to put that into context, as well as the point that Atanas made that, with this latest transaction, they dropped to 9% and are no longer our largest shareholder.

Ryan M. Todd: Yes, Ryan this is Tim I'll chime into you.

Tim: You mentioned the market got spooked, a little bit and we.

Tim: We absolutely saw that but I will point out in addition to what <unk> has just talked about if you look at the open market purchases that we have made since the Sinclair transaction, we've actually bought more in the open market than <unk> has sold in the open market and I think it's just important for people to put that into context as well as.

Ryan M. Todd: <unk>.

Ryan M. Todd: Pointing at is made.

Ryan M. Todd: With this latest transaction that they dropped to 9%, but are no longer our largest <unk> largest shareholder.

Timothy Go: You know, our commitment to capital returns is clear, in addition to the share buybacks that Atanas mentioned. Remember, we raised the dividend in February by 11%. And, of course, our $1 billion reauthorization that we just announced this morning is just our commitment to continuing our shareholder return strategy.

Ryan M. Todd: Our commitment to capital returns is clear in addition to the share buybacks at Atmos mentioned remember we raised the dividend.

Ryan M. Todd: February by 11% and of course, our $1 billion reauthorization that we just announced this morning is just our commitment to.

Ryan M. Todd: Continuing our shareholder return strategy.

Speaker Change: Great. Thank you.

Speaker Change: Your next question comes from the line of Manav Gupta of UBS. Please go ahead.

Operator: Your next question comes from the line of Manav Gupta of UBS. Please go ahead.

Manav Gupta: Hi guys, my question here is more on the midstream side. HEP is, you know, now integrated, and I'm trying to understand is there, you know, what's the progress over there in terms of integration and also synergy upside, and then how do you look at this business? Is this business going to stay relatively flat, or will it grow through organic projects or probably grow through some bolt-on acquisitions? How should we look at your overall midstream portfolio going forward now that it's fully part of HF Sinclair?

Manav Gupta: Hey, guys. My question is more on the midstream side HCP is now integrated and I'm trying to understand is there whats the progress all of that in terms of integration and also synergy upside and then how do you look at this business as this business going to stay relatively flat or grow through organic projects are.

Ryan M. Todd: Probably grow through some bolt on acquisitions, how should we look at your overall midstream portfolio going to head now fully part of the Hs Cynthia.

Steven C. Ledbetter: Manav, hey, this is Steve. Thanks for the question. As of December, I'm now fortunate enough to be back in the midstream mix. As you know, that's my path. As far as the integration goes, we are pretty much complete with the integration. We have moved through the entire process of replacing and moving some of the refining processing units back to the refinery. We have some opportunities that we're beginning; we're just kind of at the infancy stage of looking where the synergies are.

Ryan M. Todd: Hey, Steve Thanks for the question.

Steven C. Ledbetter: December and now fortunate enough to beat back in the midstream mix as you know Thats my past.

Steven C. Ledbetter: As far as the integration goes we are pretty much complete with the integration.

Speaker Change: We have moved through the entire process.

Steven C. Ledbetter: Replacing and moving some of the refining processing units back to the refinery we have some opportunities that we're beginning we're just kind of on the kind of infancy stage of looking where the synergies are we're not looking to commit to a number at this point, but we do see some things where we can take the best practices of either side and make sure that.

Steven C. Ledbetter: We're not looking to commit to a number at this point, but we do see some things where we can take the best practices of either side and make sure that we're doing things consistently across the entire operating environment, both refining and midstream.

Steven C. Ledbetter: We're doing things consistently across the entire operating environment, both refining and midstream. So we think there's some real value there.

Steven C. Ledbetter: So we think there's some real value there, and we'll continue to drive that. I think as we look at this business, we see it as a very important integral business to our value chain, which was the reason that we thought it made sense for us to bring it back into the fold. And we're beginning to look at opportunities to unlock that. Where we have assets that are underutilized, where we can do more with them, or take advantage of helping get the molecule to the right markets at the right time. We see that as a real yet untapped opportunity, and we'll look to continue to drive that. But it's a critical piece of our business that we look to continue to drive.

Steven C. Ledbetter: We will continue to drive that.

Steven C. Ledbetter: As we look at this business, we see it as a very important integral business to our value chain, which was the reason that we thought it made sense for us to go bring it back into the fold and we're beginning to look at opportunities on how we unlock that where we have assets that are utilized where we can do more with them or take.

Steven C. Ledbetter: Vantage of helping get the molecule to the right markets at the right time, we see that as a real yet untapped opportunity and we will have to continue to drive that but it's a critical piece of our business that we look to continue to grow.

Manav Gupta: Perfect. My follow-up here is that, Tim, you have in the past said, you know, every company looks at it in different ways. And you said you would like to be one of the highest gross margin per barrel refiners out there in terms of giving them, I mean, that would make you like the higher, putting you towards the top end of the capture. And I'm just trying to understand where that process is going. How far are you in the process, and what more needs to be done to put you on top of that table?

Speaker Change: But my follow up here is that Tim you will have in the past that every company looks at a different means and you said you would like to leave one of the highest gross margin per barrel refined that are out there in terms of getting them I mean that would make you like the hyatt putting what are the top into the capture and then I'm just trying to understand where is that process going.

Speaker Change: How far are you think in the process and what more needs to be done to put you on top of that table.

Tim: Yes, Manav, we we believe that our.

Timothy Go: Yeah, Manav, we believe that our regional advantages in our portfolio give us significant competitive advantages, and we're looking to continue to exploit that. We've been working, as we talked about, reliability, number one; optimization, and integration, number two. Steve, do you want to talk about some of the things we're doing on the optimization and integration side?

Speaker Change: Regional advantages of our portfolio.

Speaker Change: Give us significant competitive advantages and we're looking to continue to exploit that we've been working as we talked about reliability number one optimization integration number two Steve you want to talk about some of the things we're doing on the optimization and integration side, yes, absolutely. So I'm looking to go take advantage of as we mentioned before the integrate.

Steven C. Ledbetter: Yeah, absolutely. So I'm looking to take advantage of, as we mentioned before, the integrated value chain, and that is getting the right cost of acquisition of feedstock, processing it the most efficient way, and having the right mix, and then getting into the right markets that make the most sense, leveraging our assets. So the things that we'll continue to take advantage of are some of our pipeline placements and the light to heavy differential that we see and enjoy, and our value chain on the heavy oil value chain with our assets, our default business, and upgrading that, but we see the value chain as more than just one element.

Steven C. Ledbetter: <unk> value chain and that is getting.

Steven C. Ledbetter: Getting the right cost.

Steven C. Ledbetter: Acquisition of feedstock processing at the most efficient way and having the right mix and then getting into the right market that make the most sense leveraging our assets. So the things that we will continue to take advantage over some of our pipeline placements and the light heavy differential.

Steven C. Ledbetter: That we see and enjoy in our value chain on the heavy oil value chain with our asphalt business and upgrading that but we see the value chain being more than just one element. So as an example, we're going to prioritize and capture increased demand on things like jet over diesel on balance increasing our premium sales we believe that.

Steven C. Ledbetter: So as an example, we're going to prioritize and capture increased demand for things like jets over diesel on balance, increasing our premium sales. And that's what we're going to continue to focus on, Manav. What I would just add to what Manav said.

Steven C. Ledbetter: We have an opportunity to really drive that and that allows us to integrate right through the wholesale marketing value chain.

Steven C. Ledbetter: And then again.

Steven C. Ledbetter: Our kits are very well placed to and connected to many different crude hubs and so we think optimizing our crude slate gives us flexibility there and all of these things and components really allow us to go truly optimize the right decision to put the best molecule in the best market and.

Steven C. Ledbetter: That's what we're going to continue to focus on.

Timothy Go: And, Manav, what I would just add to what Steve just said is, you know, we've talked about our $75 million of growth CapEx that we have put in the plans for this year. And I can tell you we continue to execute on those projects. These are small, quick-hit projects. A lot of them, like what Steve was just covering, are covered in this $75 million of growth CapEx. They improve yields. They lower production costs. We typically target around a 25% or higher IRR for these projects, and we expect those to continue to help us improve our gross margin.

Speaker Change: And Manav, what I would just add on to what Steve just said as you know.

Speaker Change: We.

Speaker Change: We've talked about our $75 million of growth Capex that.

Speaker Change: That we had put in the <unk>.

Steven C. Ledbetter: Plans for this year and I can tell you we continue to execute on those projects.

Steven C. Ledbetter: These are small quick hit projects a lot of them of what Steve was just covering are covered in this $75 million of growth.

Steven C. Ledbetter: Opex, they improved yields and lower op costs.

Steven C. Ledbetter: We target.

Steven C. Ledbetter: Typically around a 25% or higher our IRR for these projects and we expect those to continue to help us improve our gross margin per barrel.

Steven C. Ledbetter: Yes.

Speaker Change: Thank you.

Speaker Change: Okay.

Speaker Change: Your next question comes from the line of Paul Cheng of Scotiabank. Please go ahead.

Operator: Your next question comes from the line of Paul Cheng of Scotiabank. Please go ahead. Thank you. Hey guys, good morning.

Paul Cheng: Hey, guys good morning.

Paul Cheng: Hi, good morning.

Paul Cheng: Tim, with TMX going to ramp up very soon, or maybe start up, or should start up, how that will change your Pitcher Sound, Cruise Lay, or product yield, depending. I mean, right now, I think Pitcher Sound is running mostly ANS. So, do you think that it will have any impact on your physical barrel you're going to run and how your product yield is going to look, or is it really going to benefit from a defensive standpoint?

Paul Cheng: With GM makes it is going to ramp up.

Paul Cheng: Very soon or maybe start.

Paul Cheng: It should be something else.

Paul Cheng: How that will change your purchase.

Paul Cheng: Lee or product.

Paul Cheng: I mean, why now I think.

Paul Cheng: Yes.

Paul Cheng: Blending mostly E&S.

Paul Cheng: So do you think that it will have any impact on your visa co bad well you're going to run in your product yield is going to look like or that we need is going to be.

Paul Cheng: And the fifth thing from a.

Paul Cheng: Defense up standpoint.

Paul Cheng: Yes, Paul This is Tim TNX started up May one and we think it will have an impact both in Puget sound and in our mid con.

Timothy Go: Yeah, Paul, this is Tim. TMX started up May 1, and we think it will have an impact both at Puget Sound and in our MidCon. I'll ask Steve to comment on that.

Paul Cheng: Steve comment on that yes, so Paul.

Steven C. Ledbetter: Yeah, so, Paul... Thanks for the question. So, as far as running ANS, we have the capability to run a variety of crudes, with some heavy and some sour, and we typically get advantage crudes out of Canada, and we blend them up to an ANS-like crude spec. The ability for Puget to go take advantage of what's happening is really in the fact that we're connected via pipe, and we were successful placing and nominating pipe barrels on this first go-round, and our ability to take waterborne barrels in our dock capacity.

Steven C. Ledbetter: Thanks for the question so as far as running in US we have the capability to run a variety of crudes with some heavy in some sour and we typically get advantage crudes out of.

Steven C. Ledbetter: Canada, we blend them up to eight E&S light crude slate crude spec.

Steven C. Ledbetter: The ability for for Puget to go take advantage of what's happening is really in the and the fact that we're connected via pipe and we were successful at placing our nominating pipe barrels on this first go round and our and our ability to go take waterborne barrels and our capacity. We also believe that longer term.

Steven C. Ledbetter: We also believe that, longer term, as things continue to fill up on TMX and get out over the water, our proximity to the dock is an advantage because there will be more barrels looking for a home, and the location that we have and our ability on pipe, as well as the dock, gives us the ability to compete very well for those barrels. So for Puget Sound, we don't see a major impact, and we also believe that we're going to have the ability to compete, and then the market will clear the additional costs associated with that project.

Steven C. Ledbetter: Things continue to fill up on <unk> and get out over the water thats going to our proximity to the Doc is an advantage because there will be more barrels looking for a home and and the location that we have in our ability on pipe as well as the Doc gives us the ability to go compete.

Steven C. Ledbetter: Very well for those barrels so for Puget, We don't see a major impact and we also believe that we're going to have the ability to compete in the market will clear the additional costs associated with that project thinking about it from the larger footprint when we think about our parco.

Steven C. Ledbetter: Thinking about it from the larger footprint, when we think about our Parco and our other MidCon assets, we'll probably see a temporarily tighter differential, and we've already seen that coming out of the end of the quarter. But, as we mentioned before, we don't think that's long term. We think as production eclipses egress in one to two years, we think that those differentials will widen back out. And in the interim, as I mentioned earlier, we're connected to multiple trading hubs, and we will take advantage of the flexibility of the crude slate. So we've shown our ability to navigate these situations carefully, and we'll continue to do that with this one. But we don't see it as a major problem.

Steven C. Ledbetter: Our other mid con assets, we will probably see.

Steven C. Ledbetter: Temporarily tighter.

Steven C. Ledbetter: Tighter.

Steven C. Ledbetter: Differential and we've already seen that coming out of the end of the quarter.

Steven C. Ledbetter: But as we mentioned before we don't think Thats long term we think.

Steven C. Ledbetter: As production eclipses egress in one to two years that we think that those differentials will widen back out and in the interim as I mentioned earlier, we're connected to multiple trading hubs and we will take advantage of the flexibility of the crude slate. So we've shown our ability to navigate these situations carefully and we will continue to do that.

Steven C. Ledbetter: With us, but we don't see it as a major problem.

Timothy Go: Yeah, Paul, this is Tim. You know, as you know, and as others have commented this quarter, the WCS-WTI spread has narrowed, but some of that is associated with just normal spring maintenance that we see seasonally at this time. And of course, some of that's directly related to the line fill that took place ahead of the May 1st startup. But if you look further out, we believe, as Steve mentioned, that the WCS-WTI spread will widen, and we even see that in the strip now. I think others have a similar view and kind of stabilize and really arrange that. If you look at the last five years of averages, we'll be right in the middle of the five-year WCS-WTI spread.

Steven C. Ledbetter: Yes, Paul this is Tim.

Tim: As you know and as others have commented this quarter.

Tim: WCS <unk> spread has narrowed but some of that is associated with just normal spring maintenance that we see seasonally at this time and of course some of Thats directly related to the landfill that took place ahead of the may 1st startup.

Tim: You look further out we believe as Steve mentioned that the WCS <unk> spread will widened and we even see that in the strip now I think others have a similar view.

Tim: And kind of.

Tim: Stabilize and really a range that if you look at the last five years of averages will be right in the middle of the five year WCS WCS spread.

Paul Cheng: Thank you, Tim. But Steve, can I just go back to my question? I'm just curious if that means that you will be able to run more WCS and then mix it with other grades to make it more ANS-type, or if that's not really going to be the case. And if you do run more WCS with that impact on your product slay in Pitcher Sound, I think that really is what I'm trying to figure out.

Speaker Change: Thank you, Tim and Steve can I just go back into my question just curious Dan.

Speaker Change: That means that you will be able to run more southeast U S. And then mixed saved me about the grade to make it more ian as tight or that Doug.

Speaker Change: Going to be the case.

Speaker Change: And if you do it.

Speaker Change: One more WCS with that impact on your product slate and pitches I think that we think is what I'm trying to figure out.

Timothy Go: Yeah, Paul, let me try to take a shot at that. This is Tim.

Speaker Change: Paul Let me try to take a shot at that this is Tim.

Tim: Having more crude around our refinery in Washington is always a good thing and so.

Timothy Go: You know, having more crude around our refinery in Washington is always a good thing. And so having the TMX start and having more barrels available to us, both via the pipeline, as well as via the water, is going to be an advantage for Puget Sound. So Puget Sound was designed to run 100% ANS. And so what we do, as you may know, is we blend up the Canadian barrels, both the heavy and the thin and the MSW, to basically fit the ANS profile.

Tim: Having the <unk> startup and having more barrels available to us both via the pipeline as well as via the water is going to be an advantage for Puget sound.

Tim: The Puget Sound was designed to run 100% E&S and so what we do as you.

Tim: No as we blend up the Canadian barrels both the heavy and as soon as.

Tim: And.

Tim: MSW to basically.

Tim: Fit the E&S profile, and we can run 100% of that.

Timothy Go: And we can run 100% of that, you know, from the Canadian side. So the real advantage we have is because we have a unique configuration with both a cat unit and a coker in that refinery, we're able to basically pick and choose whatever the right crudes are at the right time of the month in order to optimize our crude slide at Puget Sound. So we view this as positive in terms of giving us flexibility and lowering our crude costs at Puget Sound.

Tim: From the Canadian side. So the real advantage. We have is because we have a unique configuration with both cat unit and a coker in that refinery, we're able to basically pick and choose whatever the right crudes are.

Tim: The month in order to optimize our crude slate at pizza sounds. So we view this as a positive in terms of giving us flexibility and lowering our crude costs at 2%.

Paul Cheng: Okay, thank you. And my second question is that, Tim, it's probably not a fair question because it wasn't under your watch when it was sanctioned. The RD project has been challenging, whether it's during the development, it was cost overrun and also delayed in terms of the startup. And after you start up that, also the economy has been challenging, and operations have been challenging. So as I look back, what lesson did the organization learn in terms of their future project FID or evaluation? I mean, what have we learned? and how that is changing your evaluation process going forward. Yeah, Paul.

Speaker Change: Okay. Thank you and my second question is then Tim its probably not a fair question, because I know Youll, Washington win <unk>.

Tim: The project has been challenging.

Tim: The development.

Speaker Change: Cassel from London.

Tim: And also that.

Tim: Being delayed in terms of the startup.

Tim: And often you startup that also with the economic has been challenging and operation has been challenging so if I look back one lesson.

Tim: Pat.

Tim: Organization.

Tim: In terms of the future.

Tim: Paul J D or devaluation, I mean, what happened with nine.

Tim: And how is that changing yawn.

Tim: Evaluation post stats going forward.

Timothy Go: Yeah, Paul, we, you know, we have been working on our renewable diesel business here for a couple years, as you pointed out, and I think there's lots of lessons learned and we talk about that amongst our management team, we talk about that amongst our board all the time, but, you know, the biggest change that has occurred has been the market dynamics around LCSS and the RINs, and we knew that was going to be out of our control, and we knew that was going to be something that was going to be subject to external interference, I guess I would say, and it may not be the right word. But we still thought it was the right thing to do.

Paul Cheng: Yes, Paul.

Paul Cheng: We have been working on our renewable diesel business here for.

Tim: A couple of years as you pointed out and I think theres lots of lessons learned and we talk about that amongst our management team, we talk about that amongst our board all the time.

Tim: But.

Tim: The biggest change that has occurred has been the market dynamics around L. CFS.

Tim: And we knew that was going to be out of our control and we knew that was going to be something that was going to be subject to external.

Tim: Interference I guess I would say and it may not be the right word.

Tim: But we still thought it was the right thing to do we still think it's the right thing to do going forward, we have not given up on our renewable diesel business I just want to make sure.

Timothy Go: We still think it's the right thing to do going forward. We have not given up on our renewable diesel business. I just want to make sure our investors know that. And we still believe that with the operational improvements that we've made, and as I mentioned, we were not limited by hydrogen in the first quarter. In fact, from an operations standpoint, we ran pretty smoothly.

Tim: Our investors know that but we still believe that.

Tim: With the operational improvements that we've made as I mentioned, we were not limited by hydrogen in the first quarter in fact from an operation standpoint, we ran pretty smoothly. We were limited by the economics around Rins and El CFS.

Timothy Go: We were limited by the economics around RINs and LCFS. When you look at the backwardation in the feedstock market, that was also one of the reasons that our results were lower in the first quarter than they were in the fourth quarter. So we know those things will turn around. It will be cyclical. And so our plan is to continue to get ourselves in a position so that, A, if conditions don't change, we'll be breakeven to slightly positive, and, B, when the market does change, and we do think that the LCFS and the RINs markets will improve. It may take a year or so to make that happen, but keep in mind the California Board of Supervisors has signaled that they are going to be tightening the LCFS credits.

Tim: When you look at the backwardation in.

Tim: In the feedstock market.

Tim: That was also one of the reasons that our results were lower in the first quarter in the fourth quarter.

Tim: We know those will turnaround will be cyclical and so our plan is to continue to get ourselves in a position. So that if conditions don't change will be breakeven to slightly positive and b when the market does change and we do think the.

Tim: L CFS in the Rins market will improve.

Tim: It may take a year or so to make that happen, but keep in mind, California Board has signaled that they are going to be tightening.

Tim: L. CFS credits you saw new.

Timothy Go: You know, New Mexico has announced its own LCFS program that will significantly benefit our renewable diesel plant that's located in New Mexico. And when you look at just the way the market is shaping up right now, we believe the biodiesel plants that are currently out in the market are competitively disadvantaged versus the renewable diesel plants that are out there. And so we think there'll be some additional attrition. You saw some of that announced already in the first quarter in the biodiesel world. And we think the renewable diesel market will recover and come back off its cyclical lows here. So lots of learnings, Paul, and we can talk about that sometime over a beer, but we do believe that we're going to be set up here for success as the market continues to improve.

Tim: <unk>.

Tim: Has announced their own LLC first program that will significantly benefit our renewable diesel plant. That's located in new Mexico and you look at the just the way the market is.

Tim: Shaping up right now we believe the biodiesel plants that are currently out in the market are competitively disadvantaged versus the renewable diesel plants that are out there and so we think there'll be some additional.

Tim: Attrition you saw some of that announced already here in the first quarter in the biodiesel World and we think the renewable diesel.

Tim: Market will.

Tim: We will recover and come back off its cyclical lows here so lots of lots of learnings Paul and we can we can talk about that some time over a beer.

Tim: But we do believe that we're going to be set up here for success as the market continues to improve.

Speaker Change: Alright, thank you.

Tim: Your next question comes from the line of Matthew Blair of BPH. Please go ahead.

Operator: Your next question comes from the line of Matthew Blair of TPH. Please go ahead.

Tim: Okay.

Matthew Robert Lovseth Blair: Thank you and good morning. I know it's a small segment, but your wholesale marketing business posted positive EBITDA in a pretty tough environment. It's actually up quarter over quarter. Could you talk about the things that are going right here?

Matthew Robert Lovseth Blair: Thank you and good morning, I know, it's a small segment, but your wholesale marketing business posted positive EBITDA in a pretty tough environment is actually up quarter over quarter could you talk about the things that are going right here.

Tim: Yes, Matt This is Steve. Thanks for the question. We are very excited about our marketing business and very excited about the performance in the quarter. Some of the improvement is associated with integration of bringing the full slate on quarter quarter 124 versus quarter, one 'twenty three but we are.

Steven C. Ledbetter: Yeah, Matt, this is Steve. Thanks for the question. We are very excited about our marketing business and very excited about the performance in the quarter. Some of the improvement is associated with integration and bringing the full slate on quarter 1.24 versus quarter 1.23. But we have taken some opportunities to improve the overall performance from a margin perspective. I think we're looking very strategically at how we're pricing in the market and making sure that we're capturing the value from the brand.

Steven C. Ledbetter: We've taken some opportunities to go improve the overall performance from a margin perspective, I think I think we're looking very very strategically at how were pricing in the market and making sure that we're capturing the value from the brand. We really believe that this is a tremendous value.

Steven C. Ledbetter: We really believe that this is tremendous value that is yet untapped as a strategic growth lever. And we're putting some things in place to make sure that we can fully explore that and get that value and drop it to the bottom line. We're creating a very clear picture of our retail network plan, and we're expanding our branding partnerships to really grow this. And we're allocating resources both to people and capital to make that happen.

Tim: As yet untapped as a strategic growth lever and we're putting some things in place to make sure that we can go fully.

Tim: Explore that and get that value and drop it to the bottom line, but creating very much.

Tim: Clear picture around our retail network plan.

Tim: We're expanding our branding partnerships to go really grow them and we're allocating resources, both people and capital to make that happen.

Steven C. Ledbetter: And from a revenue replacement perspective, as we go put new sites on, we're seeing between 60% and 150% more volume than the fleet average. So as we go continue to grow, which we look to do more and more, we're seeing that the overall margin structure and volume picture continues to improve. This is something we look to take advantage of as we continue to move forward.

Tim: And from a revenue replacement perspective, as we go put new sites on were seeing between 60 and 150% more volume than the fleet average. So as we go continue to grow with which we look to do more and more we're seeing that the overall margin structure and volume picture continues to improve this is something we look to take advantage of it.

Tim: To move forward.

Timothy Go: And Matt, I'll just chime in, you know, again, thanks for noticing the marketing segment. I think it's something that often gets overlooked, but it's absolutely part of our core strategy. So remember, refining, midstream, and marketing, those three segments together combine to be really our core value chain that we offer here at HF Sinclair. And you'll see, as it was brought up earlier in the call, our midstream performance is strong. You just mentioned that our marketing performance is strong.

Speaker Change: And Matt I'll, just chime in again.

Matt: Again, thanks for noticing the marketing segment I think it is.

Matt: Something that often gets overlooked but it's absolutely part of our core strategy. So remember refining midstream marketing those three segments together combined to be really our core value chain that we offer here at HFC unclear and Youll see it was brought up.

Matt: Earlier in the call.

Matt: Our midstream.

Matt: Performance is strong.

Matt: You just mentioned our marketing performance is strong and when you combine that with our refining business you get a better picture of what the earnings potential is of our core business. Some other of our peers kind of include marketing and their refining or they include midstream in the refining we break ours out, but you've got to be able to look at the three together.

Timothy Go: And when you combine that with our refining business, you get a better picture of what the earnings potential is of our core business. You know, some of our peers kind of include marketing in their refining, or they include midstream in their refining.

Matt: <unk> to understand really what what we're trying to offer to the market in terms of our portfolio.

Speaker Change: Sounds good and then I wanted to ask about the outlet market for diesel for your Puget Sound refinery I think there was a comment earlier that with the west coast has been impacted by increasing.

Matthew Robert Lovseth Blair: Sounds good. And then I want to ask about the outlet markets for diesel for your Puget Sound refinery. I think there was a comment earlier that the West Coast has been impacted by increasing RD penetration. Does this refinery typically send barrels of crude oil, diesel barrels, down to California? And if so, is that still happening, or do you have to look for new markets, you know, sending those barrels to Canada or Mexico or possibly Asia instead?

Speaker Change: Our deep penetration does this refinery typically send barrels diesel barrels down to California.

Speaker Change: And if so is that still occurring or do you have to look for new markets spending those barrels to Canada, or Mexico, or possibly Asia instead.

Speaker Change: Yes.

Steven C. Ledbetter: Yeah, Matt, this is Steve. I think I made that comment, so I'll follow up on it. You know, if we look at the diesel supply-demand balance on the West Coast with the RD penetration and growth, and we look to make sure that we have placement where we have local logistics, and we're going to do that, but there are also some opportunities to go move that into Latin America. As you know, moving barrels over the water with the Jones Act impact makes that more difficult into the United States and into California, but we see an opportunity, and we Yeah, and Matt, I would just point out that

Speaker Change: Steve I think I made the comments I'll follow up on it.

Speaker Change: As we look at the diesel supply demand balance on the west coast with the deep penetration and growth in <unk>.

Steven C. Ledbetter: We look to make sure that we have placement, where we have local logistics and where we're going to do that but there are also some opportunities to go move that in the Latin America as you know moving barrels over the water with the Jones Act impact makes that more difficult into the United States in California, but we see an opportunity and we think we compete well to Latin.

Steven C. Ledbetter: America barrels and Thats, where some of those things are some of our cargoes are going yes.

Timothy Go: Yeah, and Matt, I would just point out that when we brought the Puget Sound Refinery into our portfolio, we acknowledged at the time that diesel was probably going to get a little long given the fact that the renewable diesel push and the LCFS credits, but the Puget Sound Refinery was more of a gasoline-producing refinery than it was a diesel-producing refinery with the CAT unit that we had there. And it's playing out like we expected, and I think the Puget Sound Refinery is competitively advantaged.

Speaker Change: And Matt I would guess.

Speaker Change: Point out that when we when we brought the Puget sound refinery into our portfolio. We acknowledged at the time that diesel was probably going to get a little long given the fact that the renewable diesel push in the El CFS credits, but the Puget sound refinery was more of a gasoline producing refinery than it was a diesel <unk>.

Speaker Change: <unk> refinery with the Cat unit that we have there and it's playing out like we expected and I think the Puget sound refinery is competitively advantaged, it's able to make carb gasoline and so while we're not moving diesel to California, we are moving gasoline to California, and we think thats going to continue to take advantage of the arms that are opened.

Timothy Go: It's able to make carbureted gasoline. And so while we're not moving diesel to California, we are moving gasoline to California. And we think that's going to continue to take advantage of the ARBs that are opening up there. We also think with the recent conversions in California and the shortages of gasoline, that that's also a tailwind for our... Pat Four Markets, Phoenix, and Las Vegas, in particular, which we have access to through our Rockies refineries and our New Mexico refineries, which are also benefiting as we move gasoline barrels west to take advantage of that shortage.

Speaker Change: Up there. We also think with the recent conversions in California, and the shortages of gasoline that that's also a <unk>.

Speaker Change: Tailwind for our.

Speaker Change: Pat four markets Phoenix.

Speaker Change: And Las Vegas in particular, which we have access to through our Rockies refineries and our new Mexico refineries that are also benefiting as we move gasoline barrels west to take advantage of that shortage.

Speaker Change: Great. Thank you very much.

Speaker Change: Your next question comes from the line of Vanessa Chen of Barclays. Please go ahead.

Operator: Your next question comes from the line of Theresa Chen of Barclays. Please go ahead.

Theresa Chen: Good morning, Thank you for taking my questions.

Theresa Chen: Morning, thank you for taking my questions. First on the capture front, I wanted to follow up on the comment earlier about leaning more into your premium sales. Just given the octane spread that we're observing, can you give us a sense of how much octane enhancement or production capability you have in your system? And that you're within the backdrop of the overall gasoline margin outlook for the summer.

Theresa Chen: First on the capture front I wanted to follow up on a comment earlier about being warranty of premium sales just given the octane spread that we're observing can you give us a sense of how much.

Theresa Chen: And oxy octane enhancement of our production capability you have in your system.

Theresa Chen: And then with that backdrop, FTE overall gasoline margin outlook for the summer.

Steven C. Ledbetter: Hey Theresa, this is Steve. Good to speak with you again. Yeah, so on our premium, we believe that we are underrepresented in terms of the overall premium made in our markets. And so we also believe that our locations and our logistic advantages allow us to compete better. And all of that improvement, in terms of more premium percentage over and above subgrade, is an improvement to capture, and it's something that we're going to focus on. That's really from a competitive perspective.

Speaker Change: So this is Steve good to speak with you again.

Steven C. Ledbetter: Yes, so on the on our premium we believe that we are underrepresented in terms of the overall premium make in our markets and so we also believe that our locations and our logistic advantages allow us to go compete better and all of that improvement in terms of more premium percentage over and above subgrade is.

Steven C. Ledbetter: Improvement to capture and it's something that we're going to focus on that's really from a competitive perspective, and we see our ability to go compete against some of the other through our branded wholesale channel is really the place where the integrated value chain comes on and it's something that quite honestly, we need to focus more on and we will continue to do that here in the next the next few quarters.

Timothy Go: And we see our ability to compete against some of the others, through our branded wholesale channel, is really the place where the integrated value chain comes in. And it's something that, quite honestly, we need to focus more on, and we will continue to do that here into the next few quarters. Yeah, and Theresa, this is Tim. It is good to hear your voice and glad you're back on.

Steven C. Ledbetter: And Theresa this is Tim it is good to hear your.

Tim: Your voice and glad you're back on.

Tim: One of the side benefits I would say unintended consequences of our focus on hydrogen and making it available for our renewable diesel plants, both in artesia and in Parco is that we've been running our reformers better and our reformers that are making hydrogen are also making.

Timothy Go: You know, one of the side benefits, I would say, unintended consequences of our focus on hydrogen and making it available for our renewable diesel plants, both in Artesia and in Parco, is that we've been running our reformers better. And our reformers that are making hydrogen are also making octane. And that's what's giving us a little bit more octane than we've had in the past. And so that's been benefiting our fuel side as we continue to improve those operations.

Tim: Octane and that's what's giving us a little bit more octane than what we've had in the past and so that's been benefiting our fuel side as we continue to improve those operations as well.

Speaker Change: Thank you for that detailed answer and it's great to speak with all of you again as well on the.

Theresa Chen: Thank you for that detailed answer. And it'll be great to speak with all of you again as well.

Tim: Second question is related to the movement of product from the passport path, specifically and following up on your comments related to the tightness in gasoline in California over time.

Steven C. Ledbetter: Second question related to the movement of product from pad 4 to pad 5, specifically, following up on your comments related to the tightness and gasoline in California over time. Your UNIV pipeline system, are you seeing higher utilization of that? And if this is really going to be a structural move, is there a capability to expand that? Yeah, so I think as far as

Tim: <unk> pipeline system are you seeing higher utilization and that and if this is really going to be a structural move is their ability to expand that.

Speaker Change: Yes, so I think as far as movements go.

Steven C. Ledbetter: And we will look to take advantage of continuing to do that through the integrated value chain, both on our production runs as well as on our midstream assets. And then the other thing is, you know, Tim made a point earlier on being able to produce some carbohydrate gasoline, and we will continue to look to do that. That actually looks to be like something that is getting shorter as some of these refineries convert on the West Coast.

Steven C. Ledbetter: Yeah, so I think as far as movements go, you know, things are still balancing out in terms of where products are going to come from in terms of the new demand patterns. We see our footprint from a midstream perspective, very well positioned to carry our products out of the Salt Lake Valley into the market and compete well with products coming from the West Coast. And that's one advantage we see.

Tim: Things are still balancing out in terms of where products are going to come from in terms of the new demand patterns, we see our footprint from a midstream perspective, very well positioned to carry our products out of the Salt Lake valley into the market and compete well with products coming from the West Coast and that's one advantage, we see and we will.

Tim: Look to take advantage of continuing to do that through the integrated value chain.

Tim: Both on our production runs as well as as well as on our midstream assets and then the other thing is.

Tim: Tim made a point earlier on.

Tim: Being able to produce some carb gasoline and we will continue to look to do that that actually looks to be like something that is getting shorter as some of these refineries convert on the west coast. So we will try to fill some of those those gaps from our Puget refinery and then we will also try to take advantage of the market plays out of the Salt Lake Valley in the Rockies into though.

Steven C. Ledbetter: So we will try to fill some of those gaps from our Puget Refinery, and then we will also try to take advantage of the marketplace out of the Salt Lake Valley and the Rockies into those markets like Cedar City and Las Vegas.

Tim: Markets like Cedar Cedar City.

Tim: In Las Vegas.

Tim: Yes.

Speaker Change: Thank you.

Speaker Change: Your next question comes from the line of Jason Gere Bowman of TD Colin. Please go ahead.

Operator: Your next question comes from the line of Jason Gabelman of TD Collin. Please go ahead.

Jason Daniel Gabelman: Hey morning. Thanks for taking my questions. I wanted to ask about the updated mid-cycle refining EBITDA that you provided shortly after the last earnings call. You know, it included a higher OPEX per barrel, you know, and this is a decent amount of time after the acquisition. So, wondering if that was just a delayed update or something else going on there. And then you have, in the past, broken out the mid-cycle margin between the Gulf Coast crack, the TI Brent spread, and then the product transportation to HF Sinclair markets. And that mid-cycle margin moved higher on this update, so I was just wondering what drove that. Thanks.

Speaker Change: Hey, good morning, Thanks for taking my questions.

Speaker Change: Wanted to ask about the updated mid cycle refining EBITDA that you provided shortly after our last earnings call.

Tim: <unk>.

Tim: It included a higher opex per barrel.

Speaker Change: And this is a decent amount of time after.

Speaker Change: The acquisition so I'm wondering if that was just.

Tim: Delayed update or something else going on there and then you had in the past broken out the mid cycle margin between the Gulf Coast crack the Ti Brent spread and then the product transportation to HHS Sinclair markets and that mid cycle margin moved higher.

Tim: Here on this update so just wondering what drove that thanks.

Timothy Go: Yeah, Jason, thanks for the question. You know, on the last earnings call, we told you that we had now had a couple years under our belts of running these New Assets in our Portfolio, Puget Sound, and the Sinclair Assets in particular, and we told you we were going to take a look at what we've seen and what we've learned from doing that, and that's what we did when we updated our mid-cycle guidance.

Speaker Change: Yes, Jason Thanks for the question.

Speaker Change: At the last earnings call. We told you that we have now had a couple of years under our belt of running these new assets in our portfolio Puget sound and the Sinclair assets in particular, and we told you we were going to take a look at.

Speaker Change: What we've seen and what we've learned from doing that and Thats. What we did when we updated our mid cycle guidance, we did increase our operating costs.

Timothy Go: We did increase our operating costs because we do see higher than the $6 to $6.50 a barrel target that we still have long term, but we just don't think that's going to happen. And so we raised those operating costs to reflect more of what we're seeing on the West Portfolio. But at the same time, we're actually seeing higher earnings potential out of these assets as well. And so that's why we raised the gross margin per barrel in the mid-cycle estimates as well.

Tim: Because we do see and at least in the near term.

Tim: Some.

Tim: Higher than the $6 to $650 a barrel target that we still have long term, but we just don't think thats near term and so we raise those op costs to reflect more of what we're seeing on the west on the west portfolio, but at the same time, we're actually seeing higher earnings potential out of these.

Tim: Assets as well and so that's why we raised the gross margin per barrel.

Tim: And then in the mid cycle.

Tim: Estimates as well we believe in what we're seeing is that the gross margin that these assets are bringing in is higher than what we saw so net net the actual impact on our mid cycle estimate.

Timothy Go: What we believe and what we're seeing is that the gross margin that these assets are bringing in is higher than what we saw. So net-net, the actual impact on our mid-cycle estimate for refining was actually up $250 million to reflect both increased synergies as well as the increased earnings power that we see from Puget Sound and from the Sinclair Assets that more than offset the higher OP.

Tim: For refining was actually up $250 million.

Tim: To reflect both increased synergies as well as the increased earnings power that we see.

Tim: From the Puget sound and from the Sinclair assets that more than offset the higher opex.

Speaker Change: Okay got it to be clear the increase in the gross margin estimate was not a function of higher Gulf Coast Index.

Jason Daniel Gabelman: Okay, got it. To be clear, the increase in the gross margin estimate was not a function of higher Gulf Coast index assumptions. Is that fair?

Speaker Change: Assumptions does that is that fair.

Timothy Go: I think there's always a mix of all of that, Jason, but I think you can think about it as synergies, you can think about it as a competitive advantage that we think these assets have in those markets that are out there.

Speaker Change: I think there's always a mix of all of that Jason but I think you can think about it as synergies you can think about it as competitive advantage that we think these assets have.

Speaker Change: In those markets that are out there.

Jason Daniel Gabelman: Okay, great, thanks. And then my follow-up question is just a couple of clarifications I was hoping you could provide with the 1Q results. I'll just fire off a few of them. Has there been any FIFO impact on the lubricants business? Was there any working capital impact on cash flow? And then can you remind us how much Syncrude you run through your system and if that's in the West region or the MidCon region? Thanks.

Speaker Change: Okay, Great. Thanks, and then my follow up question is just a couple of clarifications I was hoping you could provide with the <unk> results.

Speaker Change: I'll just fire off a few of them.

Jason Bowman: So was there any FIFO impact in the lubricants business was there any working capital impact on cash flow and then can you remind us how much syncrude you run through your <unk>.

Jason Bowman: Yes.

Jason Bowman: And if that's in the west region or the mid Con region. Thanks.

Atanas H. Atanasov: Good morning. This is Atanas.

Speaker Change: Good morning, this is <unk>.

Speaker Change: So I'll take the first two with respect to the FIFO impact lubricants. It was minimal it was just a little over $1 billion. So.

Speaker Change: So practically.

Speaker Change: For this quarter and with respect to overall working capital.

Atanas H. Atanasov: I'll take the first two. With respect to the FIFO impact on lubricants, it was minimal. It was just a little over a million dollars, so practically none for this quarter. And with respect to overall working capital impact on cash flow, we saw a tailwind of approximately $70 million with respect to working capital this quarter, which makes sense because prices rose in Q1, and generally that's conducive to working capital. Yeah, you know, I'll answer on the send.

Speaker Change: The impact on cash flow, we saw a tailwind of approximately $70 million.

Speaker Change: <unk>.

Speaker Change: With respect to working capital this quarter.

Speaker Change: Which makes sense because prices rose in Q1 and generally thats.

Speaker Change: That's conducive to working capital.

Steven C. Ledbetter: Yeah, you know, I'll answer on this end, so not given a specific number, but it was significantly discounted early in the quarter, and as we mentioned, we looked to optimize our crude slate flexibility, and we ran a significant amount, both at Puget, El Dorado, and Parco, and it was a record for our runs for the quarter.

Speaker Change: Yeah I'll answer on this and so.

Speaker Change: Given a specific number but.

Speaker Change: Significantly discounted early in the in the quarter and as we mentioned, we look to optimize our crude slate flexibility, we ran a significant amount.

Speaker Change: Both acute at El Dorado and park and it was a record for our runs for the quarter.

Speaker Change: Okay. Thanks.

Speaker Change: Yeah.

Operator: There are no further questions at this time. I will turn the call back over to the team for any closing remarks.

Speaker Change: There are no further questions at this time I would like turn the call.

Speaker Change: Call back over to Tim for any closing remarks.

Speaker Change: Yes.

Tim: Thank you Kathleen.

Timothy Go: Thank you, Kathleen. Before we close, I wanted to welcome our new board member, Gene Johns, who was appointed in February. Gene is an accomplished business leader and brings strong executive and industry experience and expertise to us, and we are proud to have her on our board.

Tim: Before we close I wanted to welcome our New Board member Jeanne Johns who was appointed in February gene is an accomplished business leader and brings strong executive in his industry experience and expertise to us and we are proud to have her on our board.

Speaker Change: I know, we covered a lot of ground this morning, including our bullish outlook for second quarter, but going forward I want to remind you that our priorities remain the same we.

Timothy Go: I know we covered a lot of ground this morning, including our bullish outlook for the second quarter. But going forward, I want to remind you that our priorities remain the same. We are focused on executing our plan by one, improving our reliability, 2. Integrating and optimizing our new portfolio of assets, and 3. Returning excess cash to our shareholders. Thank you for joining our call, and have a great day.

Speaker Change: We are focused on executing our plan.

Speaker Change: One improving our reliability.

Speaker Change: <unk> integrating and optimizing our new portfolio of assets and three returning excess cash to our shareholders.

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

Speaker Change: This concludes today's conference. Please disconnect. Your line at this time and have a wonderful day.

Operator: This concludes today's conference; please disconnect your line at this time and have a wonderful day.

Speaker Change: Yeah.

Speaker Change: Thank you.

Speaker Change: Okay.

Speaker Change: Yeah.

Speaker Change: Okay.