HF Sinclair Aktie

Welcome to HF Sinclair Corporation's First Quarter 2026 Conference Call and Webcast. Hosting the call today is Franklin Myers, who is serving as Chief Executive Officer of HF Sinclair. He is joined by Vivek Garg, acting Chief Financial Officer; Steve Ledbetter, EVP of Commercial; Valerie Pompa, EVP of Operations; and Matt Joyce, SVP of Lubricants and Specialties. [Operator Instructions] 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.

Thank you, Matt. Good morning, everyone, and welcome to HF Sinclair Corporation's first quarter 2026 earnings call. This morning, we issued a press release announcing results for the quarter ending March 31, 2026. If you would like a copy of the earnings press release, you may find it on our website at hfsinclair.com. Before we proceed with remarks, please note the safe harbor disclosure statement in today's press release. In summary, the 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. Please see the earnings press release for reconciliations to GAAP financial measures. For any forward-looking non-GAAP measures, the company is unable to provide a reconciliation without unreasonable effort due to the unpredictability and uncertainty of certain items. 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 Franklin.

Okay. Thank you, Craig. Let me add my welcome to all those on this call to HF Sinclair's first quarter earnings in 2026. First, let me express my gratitude to over 5,000 employees of the company for making the first quarter a good one. As most of you know, first quarter for HF Sinclair can sometimes be challenging due to weather, due to softness in the economic conditions in our markets. And typically, we have turnaround activities with some of our assets. This quarter, our operations ran safely in compliance and reliably, which you'll hear more about in a minute. This reflects the continuing improvement in our operation and is a testament to the focus on excellence by our employees. So thank you, employees of HF Sinclair.

During the first quarter, our CEO and CFO, both took leaves of absence as previously described in our annual report on Form 10-K. The Board has the task of addressing the future leadership of the company, and we'll do so with diligence and care. In the meantime, I will continue to serve as CEO and President until decisions in that regard are made. In reference to the ongoing Board process, we will not address those events in that process today. The current executive leadership team and the other employees of the companies are committed to continuing the successful performance of the company, and it is performing at a very high level. Please keep in mind that much of the strategy of the company began in 2021 and '22 with the acquisition of our Puget Sound refinery and the merger with Sinclair. My presence as CEO is to help maintain the focus and commitment to the strategy as set by the Board.

I'll remind you that I've been Chairman through that entire time since 1990, and this is an ongoing process that we're pursuing with diligence. Our employees continue to work daily with the desire to operate at a high level to improve our company for the benefit of all constituencies. But before moving on to the reports of the others, we have to acknowledge the military conflict in the Middle East. Our thoughts and prayers go out to members of our Armed Forces involved and those innocent individuals caught up in harm's way. We continue to hope for a peaceful resolution. The conflict though has created substantial and material disruption to the crude oil and the necessary -- for crude oil and other necessary products for the advancement of markets around the world. This disruption creates volatility in the markets we serve. The company remains focused on addressing any challenges we have to serve our customers.

And in that regard, we remain very nimble as we see events occur because we see volatility in the markets that we've got to address on a constant basis, and it's one that's not without challenge within our industry or our company. But I believe our team is up to the challenge. And I think that we will see and continue to see as others have stress in the world as a result of this, and we've got to just address it to make sure we do our part to try to resolve that stress. With that, I'll turn it over to Steve to take us through some of the commercial issues.

Thank you, Franklin, and thank you all for joining our call. During the first quarter, we delivered strong results across each of our business segments, supported by safe and reliable operations and good commercial optimization. With our continued operational focus, we recorded an excellent safety quarter with no Tier 1 process safety events despite the heavy turnaround load and harsh winter weather season. We are pleased with these results and remain committed to progressing our operational initiatives. Now let me cover our business highlights. In refining, we completed 2 turnarounds at our Puget Sound and Woods Cross refineries. Despite the heavy turnaround and harsh winter weather we faced, we were pleased with our reliability performance, running crude charge at the upper end of our guided runs coming in at 613,000 barrels per day.

We do not have any planned turnaround scheduled until the El Dorado turnaround commences towards the back end of the third quarter. We are encouraged by the refining margin strength in our regions and believe that we are well positioned to capture the current market conditions as we head into summer driving season. Our focus remains on our strategic initiatives and improving throughput, capture and operating expenses. In our marketing segment, we're making great progress with the integration of our previously announced Green Trail Fuels JV. We believe this joint venture will allow us to accelerate growth of the Sinclair brand and expand our footprint, while growing the earnings of this business with exposure to other high-value adjacent revenue streams. We added 25 branded sites in the quarter with more than 100 sites with contracts signed and expected to come online over the next 6 to 12 months.

We still expect to grow our number of branded sites by approximately 10% annually. In our Renewables segment, we were very pleased with our team's ability to optimize our business, both commercially and operationally in order to capture the favorable market conditions in the period and deliver strong financial performance. Strong delivery of our feedstock strategy, molecule high-grading and operational excellence have set our business up well to capture favorable market conditions. And we remain optimistic that the LCFS, D4 RINs and producers tax credits will continue to support the renewable diesel margins. In our Lubricants segment, we have experienced unprecedented cost inflation across our product portfolio both in magnitude and the rate at which it occurred. In response, the team moved quickly to implement multiple pricing actions aimed at recovering these higher costs in an efficient and disciplined manner.

We've seen early progress from these initiatives and fully expect to continue pursuing additional price recovery actions throughout the second quarter as elevated cost pressures persist. Despite the volatility in the broader global supply environment, our supply chain currently remains secure, and we have been able to source the necessary feedstocks to supply our customers at historical rates. During the quarter, we returned $167 million in cash to shareholders, consisting of $91 million in regular dividends and $76 million in share repurchases. Since the Sinclair acquisition in March 2022, we have returned over $4.9 billion in cash to shareholders and have reduced our share count by over 66 million shares. Today, we also announced that our Board of Directors declared a regular quarterly dividend of $0.50 per share, payable on June 2, 2026, to holders of record on May 11, 2026.

On the strategic front, we continue to advance the evaluation and planning of our multiphase project to leverage our advantaged logistics and production positions in the Rockies to meet the growing needs of Western markets. At the end of our Q4 Puget Sound turnaround, we successfully brought on another project enabling flexibility to swing approximately 7,000 barrels per day between diesel and jet, depending on the market environment. And this is paying off given the current market conditions. We continue to advance the El Dorado vacuum furnace project to provide improved reliability and yield while allowing up to an incremental 10,000 barrels per day of heavy crude into the mix. This project is expected to come online as part of the fall turnaround. In closing, our strategic priorities have not changed. We will continue to work towards improved safety, reliability and cost efficiencies in refining and renewables and unlocking our integrated value chain while growing our Marketing, Midstream and Lubricant segments.

We expect the current favorable market environment to continue into the summer driving season, and we believe our diversified portfolio of assets is well positioned to generate strong cash flows. With that, let me turn the call over to Vivek.

Thank you, Steve. Good morning, everyone. I'm Vivek Garg, acting Chief Financial Officer, and I'm pleased to be on the call with you today. Let's begin by reviewing HF Sinclair's financial highlights. Today, we reported first quarter net income attributable to HF Sinclair shareholders of $648 million or $3.56 per diluted share. These results reflect special items that collectively increased net income by $521 million. Excluding these items, adjusted net income for the first quarter was $127 million, or $0.69 per diluted share compared to adjusted net loss of $50 million or a negative $0.27 per diluted share for the same period in 2025. Adjusted EBITDA for the first quarter was $426 million compared to $201 million in the first quarter of 2025. In our Refining segment, excluding the lower of cost or market inventory valuation adjustment benefit of $604 million, first quarter adjusted EBITDA was $55 million compared to negative $8 million in the first quarter of 2025.

This increase was principally driven by higher adjusted refinery gross margins in the West region and increased refined product sales volume, which were partially offset by lower adjusted refinery gross margins in the Mid-Con. Small refinery RINs waiver granted by the EPA in the fourth quarter of 2025, increased adjusted refinery gross margin by $21 million in the first quarter of 2026. Crude oil charge averaged 613,000 barrels per day for the first quarter compared to 606,000 barrels per day for the first quarter of 2025. In our Renewables segment, excluding the lower of cost or market inventory valuation adjustment benefit of $68 million, we reported adjusted EBITDA of $133 million for the first quarter compared to negative $17 million for the first quarter of 2025.

This increase was principally driven by increased sales volume and higher adjusted renewable gross margins in the first quarter of 2026 as a result of the narrowing of BOHO spread, higher RINs prices and the recognition of significantly more producers tax credit benefits compared to the first quarter of 2025. First quarter results included prior year production -- producers tax credit benefits of $49 million that were recognized following the February 2026 proposed ruling by the United States Department of Treasury and IRS. Total sales volumes were 52 million gallons for the first quarter of 2026 as compared to 44 million gallons for the first quarter of 2025. Our Marketing segment reported EBITDA of $28 million for the first quarter compared to $27 million for the first quarter of 2025.

Total branded fuel sales volume were 325 million gallons for the first quarter of 2026 compared to 294 million gallons for the first quarter of 2025. Our Lubricants and Specialty segment reported adjusted EBITDA of $103 million for the first quarter compared to adjusted EBITDA of $85 million for the first quarter of 2025. The increase was primarily driven by a large FIFO benefit in the first quarter of 2026 as compared to the first quarter of 2025, partially offset by the dislocation between rising feedstock costs and product sales price increases. During the first quarter of 2026, we recognized a FIFO benefit of $53 million compared to $8 million in the first quarter of 2025. Our Midstream segment reported adjusted EBITDA of $111 million in the first quarter compared to $119 million in the same period of last year.

This decrease was primarily driven by marginally higher operating costs resulting from a fuel contamination incident at one of our product terminals in Colorado in the first quarter of 2026. Net cash provided by operations totaled $457 million in the first quarter, which included $119 million of turnaround spend. HF Sinclair's capital expenditures totaled $102 million for the first quarter. As of March 31, 2026, HF Sinclair's total liquidity stood at approximately $3.15 billion, which includes a cash balance of approximately $1.15 billion and our undrawn $2 billion unsecured credit facility. As of March 31, we had $2.8 billion debt outstanding with a debt-to-cap ratio of 22% and net debt to cap ratio of 13%. Now let's go through some guidance items. With respect to capital spending for full year of '26, there has been no change.

For the second quarter of 2026, we expect to run between 600,000 to 630,000 barrels per day of crude oil in our Refining segment. which reflects planned maintenance activities at Parco and Navajo and unplanned maintenance at El Dorado in the period. We are now ready to take questions from the audience. Matt, if you could switch over, please.

The floor is now open for questions. [Operator Instructions] Your first question is from Matthew Blair with TPH.

Thank you, and good morning, everyone. Your renewables results were quite strong, even excluding the PTC benefit that rolled through. Could you talk about some of the drivers in Q1 that helped push up profitability? And then for the second quarter, what do you think is a good target for utilization? And would you expect even stronger margins, just given that some of the indicators have really moved up in the second quarter?

Matt, this is Steve. I'll take that one. We were quite pleased with the performance of our RD business. as we've been on this journey to make this business come into profitability, we've said we needed in poor market conditions to get us to breakeven or slightly positive. We achieved that coming out of 2025. And now the market has turned in our favor. I will tell you, though, that it's not all market driven as we've taken a very hard line and look at our feedstock strategy, and that's getting much closer direct to sources near our facilities and making sure that we're prompt and hedging without anything out into the future. So from a feedstock strategy, that's working very well. I would tell you the market placement strategy we've had is working where we're finding other markets to take products too and not be completely dependent on the California market. So we're finding ways to leverage our integrated value chain, both in the Pacific Northwest as well as putting product up into Canada.

And then the last one is really OpEx discipline. And that is ensuring that we've taken structural cost out. We have more of that to do, and we're seeing the results there and optimizing our catalyst to ensure that it performs on the longer runs, and we're getting the yields out of it. All of that combined with the overall market favorability, as you know, changed in 2026 to where we are structurally more balanced with domestic feedstock and domestic demand. I would say other helps to that is that just the distillate macro, in general, has found increased value in both the regular ULSD and CARB market. So we're pleased with what we're doing. There's more to do there. And I think your second question was around our utilization in Q2. We're not going to guide specifics, but we do believe that we will optimize particular co-located kits to the best value, and we see that being north of 70% utilization, net of all of the planned events that we have. So we're pretty excited about what our renewables business looks like now as well as for the rest of the year.

Sounds good. And then could you also address the lubricants market going forward? Are you seeing global supply reductions as a result of the Iran war and it looks like some of the pricing indicators have started to move up. And maybe you could just talk a little bit about your ability to capture potentially higher margins in lubricants going forward.

Yes. It's Matt Joyce. I'll take that one. We are seeing a really great market move right now as we have experienced this rapid and cost increase throughout the back end of the first quarter. We do see that being a protracted movement into the second and third quarter. And based on our locations where we produce and how we source our raw materials, we have been able to secure all of the needed raw material supply for the balance of the year. We're able to be supplying our customers at the rates that they're requesting of us and we have seen some growing demand that we anticipate will be with us through the second and third quarters at least of the year as this crisis, it prolongs itself and until the straits open up. But we feel that we're in a really good position to take advantage of those. We've also implemented multiple pricing actions to offset those higher raw material costs and work to capture that on the bottom line. So we'll look to see that come into place later this year as well.

Your next question comes from the line of Manav Gupta with UBS.

My question is specifically for Steve. Look, Steve, you have been working very hard for some time at DINO, bringing about change and we see that in the midstream results, we see that in the lubes results. I'm just trying to understand with this management shakeup, has anything changed from your end? Is the strategy the same you're following? And how are you going about building those 2 businesses as you were before the management shakeup took place?

Thanks, Manav. We're not going to comment necessarily on management change, but I think your point is a good one, and that is to reinforce the fact that the executive team that was here to build the strategy is still here and is executing diligently upon that. That includes making sure that we're improving and focusing on our reliability and our safety performance as well as leveraging the integrated value chain and growing those various segments. So you specifically asked about midstream, we feel, is a key lynchpin to unlock that integrated value chain. We're building more value and molecules on our kit to supply our refineries as well as take products to our regions.

We've talked about our multiphase project to really unlock our Go West strategy, and we think that's just the tip of the spear here. I'll maybe ask Matt to talk a little bit about what we're doing from a lubes perspective specifically.

Yes. Manav, as you know, we've continued to high grade the molecules that we have on hand. We're moving into more specialized finished lubricants and specialties applications. We continue to execute on our plan of tucking in those opportunities for acquisition like you've seen with Industrial Oils Unlimited over the past several months. And we're going to look for those opportunities going forward and continue to refine the business and be that value-added supplier to our customers that deliver something that's distinct and sticky as far as the value proposition is concerned.

And Manav, let me add one thing. This is Franklin. Part of the reason I'm here is to give the executive team the confidence to continue with the plan and making sure that they have the tools and the resources to continue with the actions that Steve and Matt mentioned. There is no let up on the focus of what we're trying to do here.

Perfect. My quick follow-up is a little bit on the refining macro. You saw some of the global majors report today morning and with not such good earnings on international assets and then guiding down volumes on international assets. And that's a function of crude availability. Now when we come to somebody like a DINO, I'm assuming you're not fighting those issues that crude availability is not an issue for you. So you can run hard into the second and the third quarter.

And if you could talk a little bit also about your strategic asset Puget Sound because a lot of shortages are happening in California, how can you use that asset to supply to the market in California? Because, look, your pipeline or the competitor pipelines will take time. But in the near term, you can get to California through Puget Sound. So if you could talk about some of those dynamics?

Okay. Thanks, Manav. From a global perspective, and a crude supply element. We don't face those challenges. As you know, the U.S. refinery complex is probably the most advantaged globally with the most secure crude supply outlets, and we're connected to multiple hubs and run various different grades of crude from Canada to the North Slope to many different types of domestic like sweet crudes at Cushing, and we gather and buy our own crude in the Southwest and use that both at our Artesia refinery and move some of that up into the Mid-Con to run at our El Dorado refinery. So from a crude supply perspective, some of the challenges that our competitors are facing, we do not face just from a supply. Now does it impact the overall price of the crude as it looks to compete at different markets, it certainly does.

We've been successful in ensuring that we have a proper approach to buying that crude and that the cracks are supportive to whatever inflationary pressures are associated with the global dynamic. So we don't feel concerned about that relatively speaking to some of the other global issues and are in a good spot to go take advantage of our position. As far as Puget goes, as you mentioned, the West Coast has -- and PADD 5 particularly has been considerably tight. It's getting tighter. We talked about our project to go get there. And as you mentioned, it's a few years out. But you've seen imports reduce as Asian producers have had to curtail runs, and so that just continues to tighten the market. Our approach to get to California, we put in a flexibility project last year that allows us to produce and swell the gasoline pool to either make CARB or sell high-valued unfinished components, which, to this point, has been more profitable.

So we're moving alkylate out of Puget into the gasoline pool in California. It's just one element. Further, as I mentioned in my prepared remarks, we put a project into swing diesel to jet depending on the market environment, and that's paying off greatly, not only to the West Coast, but also into markets in Latin America. So we see the West Coast as a real good opportunity. It's tightened up and we look forward to taking further advantage of that as we develop some of these projects.

And Manav, part of your question was you said run the assets hard. I want to make sure that you understand that we're going to run reliably and not push our assets. That's more important to us to make sure we're up as opposed to trying to unduly stress our assets to increase volumes.

No. My point was are you running them close to -- some of your peers globally are being first to run assets at 40% and 50% because of crude availability. That was my question.

Yes. That is not the case.

Your next question comes from the line of Neil Mehta with Goldman Sachs.

I just want to build on Manav's question around crude and specifically around 2 grades. Frankie, I had seen enormous volatility here. And so just how are you guys thinking about the setup for that spread in particular. And then WCS, the outlook as we think about the second quarter, but also the balance of the year. And then Franklin, I had a management question for you as a follow-up.

All right. So this is Steve. I'll take the first one. Franklin will take the hard one. Okay. So TI, what we've seen is, yes, the spread is widening given the geopolitical elements. Q1, we saw quite a bit higher than $5, and we think that, that will probably continue to be the case, but the curve on TI basically remains very steeply backward dated as things change through this geopolitical event, that curve moves, and so it flattens out. But we are in a position to take -- not have an issue as far as the spread goes from a Brent-TI. I think the backwardation is something that is -- that we're watching very closely. As you know, we pay a role in steep backwardation, and that will impact our lay-in crude, but we're managing that carefully to go get into the right markets to ensure we can get the margin coverage for that increased cost.

You asked about WCS. I think WCS has been a bit wider. Some of the pipes coming out of Canada have shown some apportionment and I think ultimately, egress will become a problem. I think some of that is also competing with the Venezuelan crude that is now on the market, and that will keep some of the width there, but we see that from Q1 to Q2, we're looking at a $14-ish spread. And remember, we have connected with pipe space right out of Hardisty all the way into our assets in the Mid-Con, and we take advantage of that. But it will depend on what happens longer term as you've seen probably as recently as last night, the presidential permit signed.

So there are multiple projects being contemplated to bring additional crude out of Canada either for domestic use or export. And so as that happens, that could force some pressure on the differentials longer term. But there's a lot of time between now and then many things can happen on what project goes or what doesn't. But we're evaluating all of them. And I think we're in a really good position to go take advantage of our heavy oil value chain at multiple sites.

That's really clear.

You have a question for me.

Yes, sir. So my follow-up is just on just how you're thinking about the process by which identifying the permanent CEO and CFO. I know there's sensitivity around this and I don't want to litigate the past, but just how is the Board approaching this? What are the characteristics you're looking for over a long-term leader? Are you looking internally, are you looking external? And just anything you can provide the market would be great.

I appreciate your question. We're not going to get into that. We do have a process ongoing. When we're in a position to share that, we will. Let me just make a comment quickly on our Board. We have a very experienced, very high functioning board that I have been in communication with them regularly about this very question and so when we've got something, we'll tell you.

In the meantime, let me assure you, and some of you don't know my background, I spent 21 years in the C-suite at 2 different S&P 500 companies at all different levels. I'm not a paper CEO with this group. They know I'm here every day, making sure it's going forward. So I don't know that, that reassures you, but the strategy we put in, we're executing on, and there's no let up. And the process will go forward and we will find an excellent leader for this company in due course and we're not going to dawdle on it. We are looking at it very seriously.

Your next question comes from the line of Joe Laetsch with Morgan Stanley.

So I wanted to go back to the macro and just given where product prices are today, can you talk a bit about the demand trends that you're seeing within your system? Are you seeing any signs of demand destruction on gasoline or diesel. And then maybe stepping back more broadly, how are you viewing the balances today from both the supply and demand perspective in the Mid-Con and the Rockies.

All right. I'll take that one, Joe, this is Steve. As far as demand goes, what we saw in the U.S. just for the quarter, U.S. demand was down and gas around 2%, but distillate was up around 4% in our regions that we operate in that more favorable gas was slightly up and diesel was also up. I'll tell you that given the prices, one thing that we're watching, I think you're intimating is price elasticity. And so if you look at through our service centers, we're down year-over-year same-store sales around 2%, but that's against the backdrop that you'll see in some of the consultants' reports in OPIS down about 4.5%.

So our portfolio high grading is working, and we're outperforming that. We have started to see some cuts in terms of travel, particularly as jet continues to price up. As you know, the global dimension is heavy distillate supply shortage. So they were low, both diesel and jet and they're getting lower.

And most of the disruption in the Middle East, they're very much heavy distillate producers. So on the backdrop, that paints a favorable margin picture, but it also creates some concern on what permanent demand disruption may actually happen. So we're watching that very closely. It's still a bit too early to tell, but we are seeing some slight consumer softness as we head into the driving season as people are going to go make those decisions, and we'll just see how that plays out. But I do believe a prompt resolution is going to be more beneficial for the global energy complex than a lingering one.

As far as it goes with regards to the Mid-Con, as you know, in Q1 we had winter storm burn, which somewhat put a pin in the demand bubble and created a massive supply glut. And so prices were quite low, which led to us rationalizing crude runs and economic sparing in the Mid-Con as it got towards the latter half or latter part of March and what we're seeing in Q2, that inventory picture is really tightening up. And I think U.S. exports of clean product hit a record. So there's products moving into the Gulf to go back supply where they can't get the supply and their current inventory stocks are very low.

So Rockies is a little bit of a different story. It's relatively balanced to tight. I will tell you that we have a light planned maintenance schedule across the complex in the U.S. between Q2 and Q3. So any minor disruption will further create a whipsaw in terms of total product supply and demand imbalances. So it's a pretty tight situation but we look forward to the strength of the Mid-Con and the Rockies in our regions for the balance of the year.

Steve, that's helpful. And then following up on your comments on marketing. That segment continues to string together some pretty nice quarters. Could you just talk about some of the outperformance during 1Q and how you see the segment shaping up for the rest of the year here?

Yes. Our marketing businesses, as we've talked about, one of the untapped values of the Sinclair acquisition has been really leveraging that brand and the strength. And we had another good quarter in Q1, $28 million plus of the EBITDA we brought on another new set of sites. But this is -- the value associated with that brand is by getting the full share of what the brand should command. We're growing volume. We saw our volume grow year-over-year 10% plus, which is good. We're seeing that. We've talked about high grading the portfolio. We're beating the same-store sales versus what the market has.

So we're taking the portfolio approach of getting to the right areas and maybe pulling some of the assets and maybe don't fit with our overall brand premise moving forward. And there's growth in our licensed businesses. DINO has a significant pull on it and we've yet to go fully develop that. Our Green Trails JV is just the first step of where we think that's truly going to accelerate our growth in the brand. But also the adjacencies of the higher-valued revenue streams we're excited about.

So it's really just blocking and tackling and being very purposeful about where we're strategically placing our bets, and we see more upside as we move forward. And our business is becoming a material business to the company.

And everybody loves the green dinosaur. It's a great brand. You need to join.

Your next question comes from the line of Phillip Jungwirth with BMO.

I did want to ask about the Bridger pipeline expansion, which you referenced earlier with the approval news yesterday. So this goes right down to Guernsey, assuming this gets built, how, if at all would you expect this to change feedstock sourcing for your refineries or impact crude diffs. And separately, just anything to note on market impact from the Double H conversion from crude to NGLs follows a similar route?

Yes, I'll talk a little bit about the Bridger pipeline. Of course, bringing more crude in the Guernsey will allow some more flexibility into the hub. Whether it goes or not or the level, and we don't know. And so we're not going to speculate on that necessarily, but one thing that we've been focused on in terms of our crude slate flexibility is widening the crude basket, which allows us to go take advantage of dislocated crudes when they present themselves. And as you know, we're connected to the hub that connects both all to our -- some of our Rockies kit as well down to the Mid-Con. And so to the extent that we see market opportunity, we'll evaluate whether we participate or not, we think we're in a good position because of the flexibility that we put into place to widen our crude basket as well as our connectivity. And your other question was on -- sorry, could you repeat that one?

Double H conversion from crude to NGLs.

Yes. I don't know that it has a relevant impact on our specific crude supply set. Does it do something to the overall market differentials. We'll just have to see when we contemplate some of these other projects coming online, I don't think it's a material impact to us either way.

Okay. Great. And then you did repurchase some shares in the quarter. Just how are you thinking about capital returns going forward until you have more permanent leadership in place? And should we just stick with the historical framework? And just how tactical do you plan to be, just given the strength in the equities here in the second quarter?

Yes, that's a good question. Thank you. I'll take that. This is Vivek. So in terms of our share repurchases, we'll continue to execute on our capital allocation strategy. We'll opportunistically repurchase shares under our 2024 share repurchase program. We don't typically guide on the pace or the amount of buybacks. But as we've always shared with everyone that we'll continue to execute on our capital allocation strategy, which is driven by free cash flow, capital returns and balanced capital allocation.

Your next question comes from the line of Doug Leggate with Wolfe Research.

Two things, guys, if you don't mind. First of all, SREs, there's -- the new RVO is, I think, here to be confirmed here in the next several weeks. Just want to get your perspective as to given where RINs are currently, what that might mean for you guys, if there's some way to quantify that and expectations of duration, at least through the Trump administration, if that's possible. And then my follow-up is really on product swings. I think in your backyard, gasoline has started to get -- the whole slate appears to be getting better. Jet fuel has obviously been extraordinary. What kind of flex do you have to move towards where the advantaged products might be today? And what does that look like for you guys in terms of incremental yield.

Doug, this is Steve. I'll take that one. So from an SRE perspective, as you mentioned, the RVO being finalized. What is our viewpoint. I mean you've seen the RIN and the RVO run to unprecedented records this year. We believe that the RVO is becoming an extreme burden. It's now projected to be $50 billion a year or an equivalent of $0.30 per gallon. Don't know that the latest RVO is helpful to energy cost for either the industry or the consumer. And so what that valuation really looks like for us, we're not going to guide, we believe in the SRE and the SRE was contemplated as part of the original RFS for a reason. And that's to help the smaller refineries who are disproportionately advantaged here. And we believe in that program.

We're not going to speculate. We have petitions out currently for 5 of our refineries that we think qualify under the contemplated plan. We're not going to talk about value necessarily, but we do believe that it could be a material relief to the burden that we're facing. How long this thing goes and the duration, there's considerable fight going on associated with the validity, legitimacy, the frame and the shape of the program moving forward, but we're actively involved and our interest will be measured and our interest will be part of the discussion on the solution moving forward. So that's generally our thinking on the RVO, but again, the SRE piece is something we believe in and we will continue to advance and go after that under the current framework of the program.

As far as product swings go, yes, I think you're right. We mentioned the PSR project to be able to move and swing between distillate and jet and both of those products are quite good. So the difference between jet and market versus distillate on the West Coast, those are -- somewhat a parity has been very, very strong. We have the ability to swing anywhere from 10% between gas and distillate across the entire fleet. And we're in a max distillate mode now. Having said that, we also believe that our value chain will allow us to run heavier oil and take care of our retail asphalt business, which enhances our overall margin production. And then we're going and trying to ensure that we're at the top end of those yield curves and running as much premium as we can. So we have the ability to go flex right now at a max distillate mode, but we're watching it and watching it very carefully.

Your next question comes from the line of Jason Gabelman with TD Cowen.

Franklin, you mentioned running your refineries responsibly, which is prudent given the margin environment. In the past, DINO has talked about unlocking additional capacity within the system that would be worth an additional refinery in terms of size. Is that still an aspiration for the company? Or is the 600,000 barrel a day to 630,000 range kind of the upper end of where you expect to run?

We have had recent and active conversations of reinvestment into some of our assets to try to increase the throughput over time, not immediately. And so it is something where -- let's think about the sustainability of DINO. We have to look at these assets and understand what our markets demand today, but what they will demand in the future. And as we look at that, and we have free cash flow, some goes back to the shareholders, but some will need to be reinvested not just for maintenance but for improving the complexity of our assets. And so yes, the Board will take that up. In fact, it's an item we're going to take up here as we look at the long-term planning. Now I don't want to be held to a volume on where we get to that's going to depend on the -- a lot of planning and -- but if there is opportunity, we believe, to increase.

Yes, maybe just a follow-on to that. From an overall value, we launched a few business improvement programs. We've said our key imperatives are to improve reliability and our HSS performance. We're seeing that quarter-over-quarter. So we're starting to see the green shoots as well as unlocking the value of the integrated value chain and we're starting to see that. So some of the projects that we've invested in, we talked about the PSR project, we talked about the vac tower project at El Dorado. Both of those are going to improve our yield as well as capture in terms of generating more value for the same throughput that we're putting through our kits. So crude flexibility, all of those things that we've talked about in the past in terms of optimization, we believe there's value to be had there, and we're seeing some benefits start to show up as a result.

Great. My follow-up is just on M&A or A&D, I should say. The Renewable segment certainly had a strong quarter. The margin environment is more constructive. You've seen peers sell down stakes of their renewable diesel businesses. Is that something that you could see doing in the future? And then, I guess, more broadly, just M&A comments on the refining landscape would be welcomed as well.

Sure. Let me handle that one. Number one, as a management team, and as a Board, we're charged with looking at the allocation of capital to the assets that we have and trying to determine which ones pay back the best and lean into those and the ones that are more mature, take cash flow and lean into opportunities. And then see opportunistically, you've seen in our past, and thank you for this, it gives you a good segue into what I was going to say to wrap up.

Going back in time, when we did the acquisitions of PSR and Sinclair. We subsequently did the acquisition -- the reacquisition of our midstream business. They're collectively working together as Steve has talked about the entire value chain. When doing that, if you think about what the company has done and read our report card, we've distributed $4.9 billion, and our market cap today is $12 billion. So think about the ratio of that in 4 years.

And in addition to that, our share price has gone from 30 to 60 something. So you look at a rate of return on a company compared to most any other investments you have, not in our complex, but broadly in the mid-cap space or the energy space. We compare favorably with what we've given back. And what's happened is we've leaned into marketing, which Steve has indicated as we've been growing and it adds to the value proposition of what we've had. We've waited out on the renewable space for the weak players to die during weak markets. And that's what you do in a capitalistic market. You let the weak ones die and you let the strong ones survive. We're not going to be knee-jerk just because we had one good quarter and say let's go run and do something. We've waited through the hard times. Let's go harvest these good times.

In midstream, we felt like we needed opportunity to manage midstream more tighter. We've talked about some initiatives. There are some others going on. We're going to look at that. We've done acquisitions in both marketing and in lubes, we're going to lean into where we see opportunity and value with our free cash flow. And we see bright days ahead for the Sinclair franchise. When I say love the green dinosaur, it's an affinity brand that people can come to really enjoy and it's one that our employees are proud to wear on their shirts and uniforms every day. And so thank you for this question, given me a chance to talk about the successes of our company and how we're going to move forward in the future with this. Craig, do we have anything else?

I think that concludes our call for today.

Thank you all for being part of our call.

This concludes today's call. Thank you for attending. You may now disconnect.

Welcome to HF Sinclair Corporation's Fourth Quarter 2025 Conference Call and Webcast. Hosting the call today is Franklin Myers, who is acting as temporary Chief Executive Officer of HF Sinclair. He is joined by Atmos Atanasov, Chief Financial Officer; Steve Ledbetter, EVP of Commercial, Valerie Pompa, EVP of Operations; and Matt Joyce, SVP of Lubricants and Specialties. [Operator Instructions].

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.

Thank you, Julianne. Good morning, everyone, and welcome to HF Sinclair Corporation's Fourth Quarter 2025 Earnings Call. This morning, we issued a press release announcing results for the quarter ending December 31, 2025. If you'd like a copy of the earnings press release, you may find one on our website at hfsinclair.com.

Before we proceed with remarks, please note the safe harbor disclosure statement in today's press release. In summary, it says statements made regarding management expectations, judgments or frictions are forward-looking statements. These statements are intended to be covered under the safe harbor provisions of federal security laws. There are many factors that could cause results to differ from expectations, including those noted in our SEC filings.

The call also may include discussion of non-GAAP measures. Please see the earnings press release for reconciliations to GAAP financial measures. For any forward-looking non-GAAP measures, the company is unable to provide a reconciliation without unreasonable effort due to the unpredictability and uncertainty of certain items. 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.

I will now turn the call over to Franklin.

Thank you, Craig. And thank you for being part of the fourth quarter earnings call. As you've seen in the release this morning, Mr. Tim Go, the company's Chief Executive Officer and President and a member of the Board has requested a voluntary leave of absence from his duties. The Board has accepted Tim's request and electing me, Chief Executive Officer and President of the company on a temporary basis.

Also, the company released this morning and announced that the Audit Committee of the Board is assessing certain matters relating to the company's disclosure processes. We are working to complete this review as soon as possible. I want to emphasize that our review relates to our disclosure processes and not to the numbers we released this morning. We are comfortable with the financial statements and disclosures we released and have no expectation that they will change. At this point, our audit is not yet complete pending completion of this review. Once we have worked through these issues, we will move forward to filing our 10-K. At present, we fully expect to make a timely filing of the 10-K.

Given these preliminary remarks, I'll turn it over to Steve and Atanas for their remarks and on the results. After the presentation, we'll be happy to take questions. I want to note though and emphasize that this is an earnings call and our results -- and our results for Q4 and the full year '25. We will not be in a position to address any questions relating to the disclosure process review or on the company's leadership.

Let me turn it over to Steve.

Thank you, Franklin. This morning, we reported solid full year 2025 adjusted EBITDA of $2.3 billion and fourth quarter adjusted EBITDA of $564 million. Our fourth quarter results reflect seasonal weakness in our refining business. Our fuel margins were strongest in the first half of the quarter when our throughput was the lowest, but the margins weakened significantly at the end of the quarter, especially in our core markets in the Rockies, Mid-Con and the Southwest. This, along with the Puget Sound refinery turnaround and the unplanned Artesia refinery event negatively impacted refining earnings for the fourth quarter. Despite the headwinds in refining, the positive contributions from our midstream lubricants and marketing segments highlight the strength of our diversified portfolio.

In the fourth quarter, we returned $230 million through dividends and share repurchases, demonstrating our commitment to returning excess cash to shareholders. During the quarter, we received small refinery RINs waivers from the EPA which increased adjusted refining gross margin by $313 million. This includes $43 million of small refinery RINs waivers granted by the EPA in the third quarter but recognized in the fourth quarter. I will now go through our full year highlights and provide an update on some of our strategic initiatives. And after that, I will turn it over to Atanas to go through our detailed fourth quarter results.

For the full year 2025, I'm pleased to report that our financial and operational results demonstrate significant progress we are making on our 3 key priorities: reliability, integration and shareholder return. For example, in refining, for 2025, we successfully completed major turnarounds at our Tulsa, Parco and Puget Sound refineries, we also made improvements on our operational performance, setting annual records for throughput of 652,000 barrels per day and operating expense per throughput barrel of $7.67. Our overall refining operating costs were down by $87 million year-over-year, highlighting our improvements in both cost control and reliability.

On the organic front, we are progressing a value furnace project at our El Dorado refinery that will improve plant reliability, upgrade yield through gas oil recovery and importantly, increased our heavy crude processing capability by approximately 10,000 barrels per day. The estimated capital cost of the project is approximately $55 million, of which $37 million has already been spent in 2025 with an expected annual EBITDA uplift of between $25 million and $30 million. The project is expected to be completed during the fourth quarter, El Dorado turnaround of this year.

Our Marketing segment delivered record annual EBITDA of $103 million in 2025, a 37% increase over the prior record. We also grew our supplied branded footprint by a net of 117 sites demonstrating our commitment to grow the DINO brand and provide a long-term outlet with margin uplift for refining barrels. Going forward, we expect to grow our number of branded sites by approximately 10% annually. And today, HF Sinclair is pleased to announce the formation of Green Trail Fuels LLC, a new joint venture with UPOP Holdings for which we will hold a 50% nonoperating economic interest. This joint venture will include more than 30 retail sites across Colorado and New Mexico. As part of this partnership, HF Sinclair will supply fuel from its proximate regional refineries strengthening the company's branded marketing footprint in the Rockies and the Southwest. This joint venture represents a strategic step forward for our marketing segment and allows us to accelerate growth of the Sinclair brand at an expedited pace and capture synergies across our integrated asset base.

In Lubricants and Specialties in 2025, we delivered annual EBITDA of $261 million, reflecting lower sales volumes and the turnaround at our Mississauga facility. Our finished and specialty business continued to deliver strong results, offset by weakness in Group II and Group III base our margins. Looking ahead, we are well underway in integrating our recently acquired industrial oils unlimited business, which provides strong regional manufacturing capabilities to further our lubricants and specialties reach into the United States markets and its proximity to our Tulsa refinery also provide synergy opportunities from its base oil production. We continue to look for additional bolt-on opportunities that will allow us to grow our finished and specialties business.

In our Midstream business, we delivered record annual adjusted EBITDA of $459 million. In October, we announced the evaluation of a multiphase plan to expand our midstream refine products pipeline network to address growing supply needs in the Western U.S. And we believe our geographic reach and infrastructure provide an advantaged position to quickly and efficiently deliver refined products where market needs are most acute. We are targeting the final investment decision for Phase 1 by middle of this year.

During 2025, we returned over $724 million to shareholders through share repurchases and dividends. Since the Sinclair acquisition in March 2022, we have returned over $4.7 billion in cash to shareholders and have reduced our share count by over 64 million shares which represents all of the shares we issued for Sinclair and 79% of the shares we issued for both Sinclair and the HEP transaction. We remain committed to our long-term cash return strategy and long-term payout ratio while maintaining a strong balance sheet and an investment-grade credit rating.

Today, we announced that our Board of Directors declared a regular quarterly dividend of $0.50 per share payable on March 12, 2026, to holders of record on March 2, 2026. Looking forward, we are bullish on margins in refining in 2026 and we remain focused on safe and reliable operations continued growth in our midstream lubricants and marketing segments and returning excess cash to shareholders.

I will now ask Atanas to take it from here.

Thank you, Steve, and good morning, everyone. Let's begin by reviewing HF Sinclair's financial highlights. Today, we reported fourth quarter net loss attributable to HF Sinclair's shareholders of $28 million or negative $0.16 per diluted share. These results reflect special items that collectively decreased net income by $249 million. Excluding these items, adjusted net income for the fourth quarter was $221 million or $1.20 per diluted share compared to adjusted net loss of $191 million or negative $1.02 per diluted share for the same period in 2024.

Adjusted EBITDA for the fourth quarter was $564 million compared to $28 million in the fourth quarter of 2024. In our refining segment, excluding the lower cost or market inventory valuation adjustment charge of $313 million and certain other adjustments, fourth quarter adjusted EBITDA was $403 million, compared to negative $169 million in the fourth quarter of 2024. This increase was principally driven by higher adjusted refinery gross margins in both the West and Mid-Con regions partially offset by the Puget Sound refinery planned turnaround at the unplanned Artesia refinery event.

As Steve mentioned, small refinery RINs waivers granted by the EPA in the fourth quarter of 2025 increased adjusted refinery gross margins by $313 million, which includes $43 million of benefits related to the small refinery RINs waivers received in the third quarter, but recognized in the fourth quarter of 2025. Crude oil charge averaged 556,000 barrels per day for the fourth quarter compared to 562,000 barrels per day for the fourth quarter of 2024.

In our Renewables segment, excluding the lower cost to market inventory valuation adjustment charge of $7 million, we reported adjusted EBITDA of negative $6 million for the fourth quarter compared to negative $9 million for the fourth quarter of 2024. In the fourth quarter of 2025, we recognized incrementally more in value from the producer's tax credit. Total sales volumes were 57 million gallons in the fourth quarter of 2025 as compared to 62 million gallons for the fourth quarter of 2024.

Our Marketing segment reported EBITDA of $22 million in the fourth quarter compared to $21 million in the fourth quarter of 2024. This increase was primarily driven by higher margins and high grading our mix of stores throughout 2025. Total branded sales fuel volumes were 337 million gallons for the fourth quarter of 2025 and compared to 333 million gallons for the fourth quarter of 2024.

Our Lubricants and Specialties segment reported adjusted EBITDA of $43 million for the fourth quarter compared to adjusted EBITDA of $70 million for the fourth quarter of 2024. This decrease was primarily driven by lower finished and specialty products sales volumes lower base oil margins and higher operating costs. Our Midstream segment reported adjusted EBITDA of $114 million in the fourth quarter compared to $114 million in the same period of last year.

Net cash provided by operations totaled $8 million in the fourth quarter, which included $122 million of turnaround spend. Interest Sinclair's capital expenditures totaled $131 million in the fourth quarter. As of December 31, 2025, HF Sinclair's total liquidity stood at approximately $3 billion, which includes a cash balance of $978 million and our undrawn $2 billion unsecured credit facility. As of December 31, we have $2.8 billion debt outstanding with a debt-to-cap ratio of 23% and net debt-to-cap ratio of 15%.

Let's go through some guidance items. With respect to capital spending for full year 2026, we expect to spend approximately $650 million in sustaining capital, including turnaround and catalyst. This is down $125 million from 2025 due to the completion of the maintenance cycle of our assets, and we expect our sustaining capital to continue to trend below the high catch-up maintenance levels in the past years. In addition, we expect to spend $125 million in growth capital investments across our segments. For the first quarter of 2026, we expect to run between 585,000 and 650,000 barrels per day of crude oil in our refining segment, which reflects the planned turnaround at our Puget Sound and Woods Cross refineries.

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

[Operator Instructions]. Our first question comes from Neil Mehta from Goldman Sachs.

Franklin, I recognize you're limited in terms of what you can say here, but the stock is down a lot in the pre-market. So I think -- I do think the story could benefit from some color. Anything you can share about the management change and the audit to provide a little bit more color because I think a number of folks are confused this morning. And is there any relationship between these 2 items?

Neil, I appreciate the question, but you have to understand the circumstances that we're in. We have no further comment today. Personally, I view this as a buying opportunity. If and when we have additional information, we'll give you updates as we are able to do so. But thank you for your question. Thank you for letting us clear that up.

All right. My follow-up is just on small refinery exemptions in the quarter, they were pretty significant. Just any color in terms of the path of converting that over to cash and perspectives on the 2026 outlook for SREs.

Yes. We -- Neil, thank you for the question. We intend to continue to participate in this program and appreciate the EPA is now following a formulaic approach. We can't comment on any further benefit from SREs. However, we did better during this quarter and this year and is a significant way both in terms of EBITDA and cash.

Our next question comes from Ryan Todd from Piper Sandler.

Maybe first one on the refinery side. I mean the headline refinery results were strong, but if we exclude the SRE tailwind, I mean you had strong throughput, you had good OpEx, but the gross margin contribution look a little lower without the SRE. Can you maybe talk about what some of the headwinds might have been on the quarter that would have led to lower capture across the regions? And maybe if you can disclose any -- on a regional breakdown what the gross margins would have looked like without the SRE?

Ryan, this is Steve. I'll take that. Look, when you think about the quarter, the crack environment was very strong in the first half of the quarter. but then it took a precipitous fall beginning in the second half, really November, coming off around 15%. And then December dropped another 48% to 50%. So from a timing perspective, that was what the market looked like in our regions. And our planned and unplanned maintenance happened in the first half of the quarter when the margins were much stronger. And so finally, following our maintenance events, we needed to liquidate inventory positions, and that happened in a lower market environment.

But I would also like to say that we're very bullish in refining outcomes, and we believe in the underlying business performance improvement plans that we have underway. And I think that's been demonstrated by capture improvement year-over-year and the underlying reliability trends contributing to lower OpEx and increased full year throughput.

And then maybe separately, congratulations on the marketing JV that you announced. Can you provide some color on what you see as potentially the tangible benefits in the partnership, what the platform may allow you to do in terms of driving into some growth on the regional elsewhere?

Yes. We are very excited to be able to announce that. I think it's truly a new avenue to really accelerate the growth and unlock the full potential of the Sinclair brand, which we think is still an untapped resource for our company. What this allows us to do is to go accelerate the branded put. It gives us exposure to what we believe is attractive margins in the rack to retail and even the back court.

And then finally, it allows us to go capture synergies with our integrated asset base in both refining and midstream. And this is a template that I think we can use in other places. We look to go really accelerate the growth of the DINO brand in our core markets. And this is the first one where we are signaling that we're serious about this, and we see this as a significant platform for growth.

Our next question comes from Paul Cheng from Scotiabank.

Refinery, can you maybe clarify that with the management change, is that the company will conduct a strategic review on the operation or that to looking at different answer whether they fit into the long-term portfolio or that is business as usual and none of the strategy and anything that would be changed. And because I know you're not going to comment on Tim Go, the reason behind. But can you clarify that when they say is a [ 1-3 ] leap of absent, is that means that he will come back at some point or that this is a permanent, in other words, that you guys will be looking for a permanent replacement of the CEO? That's the first question.

Okay. Paul, I heard 2 questions there, and I'll answer both of them. The first question on the strategic review. It's business as usual within the company, and we'll keep going forward on the plans that we have.

In terms of your question with respect to Tim and the other matters, we have no further comments today. And I just want you to turn your follow-up question back to the earnings call, please. But if and as we have additional information, we will alert the public in the appropriate way. And so I think you may have a follow-up.

Okay. The follow-up question is on the SRE impact on the margin for the quarter. Is that just because that -- it depends on where you received though, do you have a breakdown by region? What is the SRE impact?

Paul, this is Steve. Why don't we take that one offline and I'd offer Craig Biery on a follow-up call to show the breakdowns to you.

Next question comes from Theresa Chen from Barclays.

Steve, a follow-up on your comments about the bullishness on the outlook for the refining business. I'd be curious how you see the path of economic recovery, how that will go for the Mid-Con region particularly in light of the weakness in Group III readjusted crack spreads and still elevated utilization rates across the region. How do you think of have to more sustainable profitability environment from here?

Yes, it's a good question. Thanks, Theresa. Of course, we look at things on a longer cycle basis. And as we look across the cycle, we see that tightness will turn and be constructive, including in the Mid-Con. We think what we see right now is directly associated with winter storm Fern, really taking the demand bubble and popping it and high inventories and now converting into the RBP, but we think that, that is temporary and normalizes out over the year.

And then on the back of that, and that's really on gas, but we believe that diesel continues to remain very strong. and jet appears to be durable. So it's a bit of a timing issue. Mid-Con will be a little softer earlier in the year, but we feel like that will normalize as we step into driving season.

That's helpful. And on the green trail fuels JV, any color or details on the CapEx net to DINO and the build multiples associated with the incremental retail sites. Do you have any quantitative color at all on how we should think about the contribution of investment to earnings on a go-forward basis?

Yes. Thanks, Theresa. This is Atanas. We're not going to comment on the exact investment. However, I would say that we're funding this JV through a very efficient use of capital, which ultimately results in a very attractive multiple to the corporation to the point that it's competing with any of our other projects.

What it also does any of our other marketing projects, the incremental benefit there is not only the branded food that you have on the wholesale side, but also our access for very accretive rapid retail economics. So this is efficiently funded by the corporation and results in a relatively low multiple to us.

Our next question comes from Doug Leggate from Wolfe Research.

I'm going to avoid the main topic. It seems obviously we're going to have to wait on your review there. But I do have a couple of questions -- around the small refinery exemptions and cash flow, if I may. And I guess it's part A and B perhaps, but can you just confirm that the SRE benefit you took was cumulative and if so, over what period and how that reads through to how we should think about the ongoing benefit going forward? That's my first question.

And my second question is, can you offer any color on the underlying free cash flow excluding the SREs. So I don't know what the cash flow impact was this quarter from the SREs and we also don't know what's the working capital move was. So can you give us a breakdown of how you -- what you see as the underlying cash flow and free cash flow excluding working capital and any contribution from SREs please?

Yes. Thank you for your question, Doug. So for the total year, the cash flow impact of the SRE was just under $300 million -- a little over $280 million. So obviously, it represents a significant amount of our free cash flow in the fourth quarter. However, I would remind you that we had a lot of capital outlays in the fourth quarter. So you have to focus on total free cash flow for the full year, which was very robust. Just almost $900 million, just under $870 million.

Now when you look at -- on an ongoing basis, we're not going to provide any guidance because that's really out of our hands, and we -- we appreciate the BAs formulaic approach, but we're going to limit our comments to our actuals. So $313 million in total EBITDA impact for the fourth quarter, $485 million for full year and significant cash flow contribution just under $300 million for the fourth quarter.

So can you -- the working -- so can you just -- can you focus, please, on the fourth quarter? The SRE after-tax contribution and the working capital move. I'm just trying to get an underlying cash flow number ex those 2 issues.

So when you look at our total working capital -- the working capital movement for the fourth quarter, and again, once we -- you'll be able to analyze this later, but this total working capital was a headwind. And there's really 2 items when you exclude SREs. Number one, when you build inventory, that was a headwind. And number two, is declining price environment, albeit headwinds. So those are the 2 main drivers that you see that were impacting our net working capital for the year. But again, for the quarter, but then for the full year, like I said, our total cash flow from operations and free cash flow was pretty robust as evidenced by our return of capital to shareholders.

Our next question comes from Joe Laetsch from Morgan Stanley.

I just wanted to ask on lubricants. It was a bit weaker than we had expected in the fourth quarter. I know there's some seasonality to that business. But could you just unpack some of the drivers of the fourth quarter results? And as part of that, how do you see this segment progressing throughout the year?

Thanks, Joe. It's Matt Joyce here. You nailed it. Seasonality was, of course, a big driver for us Fourth quarter always tends to be time of the year where our customers are -- taking and managing inventory, and we saw a similar trend. This was no exception. But the other part of this was we also encountered some higher operational expenditures in the quarter.

Energy costs and feedstock costs and feedstock quality, in particular, in our Mississauga facility impacted our overall performance of base oil production as well as the margins that we could achieve. And when you look at that, we also got caught out with some pretty poor weather in the Mississauga area when we rely heavily on that Seaway, same worn Seaway for our supply chain. And so that also impacted some of our reduction in our costs throughout the quarter.

From the finished and specialty side of it, I'd alluded to it in earlier quarters on the specialty side, where we had seen some of our slowdown in our process oils that go into the rubber entire industry based on new cars and being built at a slower rate. That's still the case. We saw a little bit of a slowdown. That was tracking a little bit lower than what we'd like to have seen, and that was a continuing trend at about 10% lower than what we had anticipated. But our finished business remained pretty healthy, and we've put on some new volumes and new business at very nice margins. So in balance, when we look at it, quarter 4 was generally driven by base oil production, costs and operational expenditures as well as the pricing we were able to achieve in the quarter. Looking forward, we see steady demand for our products. We'll obviously be watching out for any impacts or continuing impacts on the slowdown in our specialty side. and base wells will be the one that we're working to solve in the future.

Matt, that's helpful. And then on the midstream side, could you just give us an update on where we are with the Westward expansion pipeline project? In other several phases under evaluation. I think Phase one is started by midyear.

Yes. So we are progressing both the midstream and refining aspects through our project delivery framework. And as we talked about earlier, we think that this project is really complementary to whatever other projects may become come to fruition. And we're working through not only the economic assessment, but also to make sure we can execute appropriately in with accurate cost assessments, which get us to the point of taking FID. We believe very strongly in this project, and we think that this will be very accretive to the entire value chain under HF Sinclair. So stay tuned, more to come, likely midyear.

Our next question comes from Manav Gupta from UBS.

I wanted to go back, and it seems from your earlier comments that you were relatively bullish on refining margins. And I'm just trying to understand that the cracks that you're bullish on or you see widening differentials, I think Brent has a little wider WCS is a little wider. If you could talk about your relatively more bullish on refining.

This is Steve. I think we talk about our belief on constructive margin environment and being bullish for a number of different areas. One, when you think about the global supply-demand balance looking versus '25. We see it to be short, 100,000 to 200,000 barrels a day demand net of additional capacity. And then when you look at the U.S., we think that there's still tightness in the market we've seen the demand for diesel will be very strong as well as jet.

And then some of the underlying things that you already mentioned, the Venezuelan announcement had a shock in terms of the the system in terms of the differentials, and we saw that immediately pop, but we think that that's probably another $1 to $1.50, which is very good for us. As you know, we can run up to 100,000 barrels a day of heavy crude, and that results in anywhere from $30 million to $35 million.

And then the other piece really there is what's happening to the pressure of WTS versus the TI. And that, we think is structural as those barrels have to compete to get soft, and we're taking advantage of that now, and we see that strong in Q1 and onward. So it's really a combination of everything. We don't see there's a lot of additional capacity.

And then one other point is our exposure to PADD V is an enviable position with what is happening there. That market is getting tighter with 2 announced refinery closures. And we think we've got regional efficiencies to get there and take advantage of that, both in the Pacific Northwest as well as in the Southern PADD V. So all in all, for DINO, we think our refining structure looks pretty bullish through 2026.

Perfect. My quick follow-up, and I understand the limitations here. The #1 question we are getting is and the perils are being drawn a little bit to ADM. Is this an internal inquiry? Or at this point, there is involvement of SEC or apartment of Justice. Again, I'm asking because a number of people have asked us, is this something similar to ADM? Or is this something internal?

We can't comment on it right now. And I can tell you that -- and again, I'll refer you back to the press release that we'll give you information that's material as it and when it comes available. I will emphasize, though, the Audit Committee and the Board are fully comfortable with the disclosures that we've made today and the financial statements, both with respect to the results of operation and financial condition of the company. If we weren't comfortable, we wouldn't be having this call. I want to provide you with that assurance.

Our next question comes from Phillip Jungwirth from BMO.

Coming back to SREs, can you level set us just on where you sit now for Woods Cross, Parco, Casper, Tulsa and Artesia? Not looking for guidance, but just what's been submitted or resubmitted and what are we still waiting on decisions from?

Yes, Phil, this is Steve. We have submitted positions for all of those and already submitted petitions for 2025 and we're waiting for the EPA to deliberate on granting the awards. We've done everything that we can at this point to make sure that we are not the constrain of the bottleneck, and we anticipate hearing something in short order.

Okay. Great. And then the company has talked about being in the fifth inning of its refining reliability, integration, operating cost improvement journey. Just wondering if you still think that's the case today. How do you see the progression trending this year? And then is there the ambition or ability to do more on the commercial side, too, just in order to improve capture rate.

This is Valerie Pompa. The strategies we've been talking about for the last few years. continue to be reflected in our OpEx per barrel. We're continuing to -- ahead of headwinds on natural gas. We've managed to improve the underlying base business and our controllable costs and still take $87 million out this year, and we anticipate and expect that we're going to continue those strategies to -- towards our [ 725 ] goal that we've put out there over the last few years.

Yes. And maybe from a commercial perspective, of course, there's always opportunity to do more, which are why we're doing some of the things that we've already announced, including announcing the multiphase project of our midstream assets, which really takes advantage of the integrated nature of our business. The joint venture that we just announced, that also the same thing of taking advantage of our integrated footprint. We talked about the El Dorado project where we're making investments that we think are accretive. That one is an important one in terms of life product yield as well as running more heavy and taking advantage of our retail asphalt business, so that heavy oil value chain. And we've made progress both in the jet value chain as well as the premium value chain and taking middle pieces out that don't add value to us or we have efficiencies to go make that work.

And then the final piece is our laid-in crude structure. We've taken a very aggressive approach in making sure that we can qualify more in different crudes that allow us to take advantage of differentials or dislocations at different times, and we're starting to see that show up in our late include underlying numbers. And I'd just point back to our year-over-year capture improvement of 6% ex SRE and 9% ex SRE in the RVO. So not done yet, not calling this victory, but what we're seeing in terms of the trajectory are encouraging, and we're going to continue to aggressively go pursue that.

Our next question comes from Matthew Blair from TPH.

Can you talk about how your R&D business is trending so far in the first quarter, just given this increase in D4 RIN prices, do you think the EBITDA margins above $0.25 a gallon is realistic so far for Q1? And also, have you been increasing your operating rates of your RD facilities?

Yes. So maybe I'll take that one just at a high level. we've worked extremely hard in our renewable diesel business to get to the point of it being at or around breakeven and terrible market conditions in preparation for what we expected to come, which was what we're seeing in the underlying market. You're seeing the boho spread work. You're seeing the RIN values jump, and we have forward view that, that business is more constructive than it was. Finalization of RVO is going to help, I think, 45 finalization was also a big help.

And then we've done some make improvements to our base business. Really, we talked about it in feedstock strategy, and that's really getting closer to where the feedstock is produced and taking a middle part out of that value chain and then high grading our molecules, getting into different markets, we're now finding homes in attractive markets in Canada and the Pacific Northwest differently than just California.

And then I think we've made great strides in the underlying operational efficiency in terms of operating costs as well as catalyst change. So yes, we see the economic incentives to go run higher, and we will do that and are doing that.

Now having said that, we did have an end-of-life catalyst change at Artesia that has been now completed. So that was done in January. So it's a long way of saying we're finally seeing some benefit for our current setup and the structure in the market is telling us that we are encouraged about the outcomes financially. I'm not going to comment on the $0.25 per gallon EBITDA at this point, but we do see is more constructive than we probably ever have since we stepped into this business.

Sounds good. And then there's also a proposal in Utah to reduce taxes on retail gasoline, but then implement a new tax directly on refineries in the state. Could you talk about where you stand on this proposal and the implications if it passes?

Yes. So we're actively working with the various legislatures up in that region. The issue is wanting to make sure that security of supply is there and bringing down overall fuel costs not going to comment necessarily on that proposal. What we don't believe taxing is the way forward, and we're in active conversations around that. In fact, part of our whole project to move more barrels west is potentially part of the solution. And we're talking on how we can get support to accelerate getting that delivered and solve the need, which is underlying what this proposal is trying to accomplish.

Our next question comes from Jason Gabelman from TD Cowen.

I wanted to ask a question about the RVO in the crack, and it's kind of a few dollars a barrel approaching $9 a barrel. And I think historically, you haven't really captured any of that, but I wonder, following the Sinclair acquisition, the expansion of the marketing business if that's changed at all, if you're blending capabilities on the ethanol side enable you to capture any of that RIN that's in the crack?

Jason, yes, we watch this pretty closely. Now I would tell you that in an oversupplied market, you are less able to go pass that through to the customers and how you're getting rid of the product and you eat more of that. as we have gone and moved more into an integrated view on our blending capabilities and our branded put, we do see some benefit for that. But it is a headwind. And the RVO as it climbs continues to be something that we look at as a headwind. And I think as we evolve here and things tighten up, we'll begin to see more of this play out to where -- it does show up in the crack. But for now, it's kind of a wait and see and we're trying to make sure that we can pass as much of that as long. But in an oversupplied market, that becomes more and more difficult to do.

Okay. And my follow-up is just on Future Town because I was a bit surprised, I think, to see another turnaround announced in 1Q just given the turnaround you recently had. So can you just talk about if there's anything specifically going on with the asset, did you find something during the work in 4Q that resulted in you accelerating work for -- into 1Q? Or is it just kind of normal turnaround cycles and a bit of bunching up?

Yes, this is Valerie. It's just our normal cycle. We split the turnaround units for capability and capacity of the site. Historically, the turnaround success and assuring that we could execute well. So we've rightsized the turnarounds, which the units we take together. And so this is just a normal cycle. We didn't -- the turnaround in the fall was executed successfully -- to a lot of our objectives. This will -- this around -- the coker and a reformer we'll close all of those Northside units up this year.

We have no further questions. This does conclude today's teleconference. Please disconnect your lines at this time, and have a wonderful day.

Welcome to HF Sinclair Corporation's Third Quarter 2025 Conference Call and Webcast. Hosting the call today is Tim Go, Chief Executive Officer of HF Sinclair. He is joined by Atanas Atanasov, Chief Financial Officer; Steve Ledbetter, VP of Commercial; Valeria Pompa, EVP of Operations; and Matt Joyce, SVP of Lubricants and Specialties. [Operator Instructions] 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 now begin.

Thank you, Ellie. Good morning, everyone, and welcome to HF Sinclair Corporation's Third Quarter 2025 Earnings Call. This morning, we issued a press release announcing results for the quarter ending September 30, 2025. If you would like a copy of the earnings press release, you may find it on our website at hfsinclair.com. Before we proceed with remarks, please note the safe harbor disclosure statement in today's press release. In summary, such statements made regarding management expectations, judgments, or prediction are forward-looking statements.

These statements are intended to be covered under the safe harbor provisions of federal security laws. There are many factors that could cause results to differ from expectations, including those noted in our SEC filings. The call also may include discussion of non-GAAP measures. Please see the earnings press release for reconciliations to GAAP financial measures. Also, please -- any time-sensitive information provided on today's call may no longer be accurate at the time of any webcast replay or reading of the transcript.

And with that, I'll turn the call over to Tim Go.

Good morning, everyone, and thank you for joining our call. I am pleased to report that HF Sinclair's strong third quarter results are underpinned by the measurable improvement in our operating and commercial performance, including the sequential increases in refining throughput and capture, continued reductions in operating costs. During the quarter, we returned $254 million in cash to shareholders and today announced a $0.50 quarterly dividend. .

We are pleased with the progress we have made on our key priorities and believe our year-to-date performance reflects the value of this strategic focus. Now let me cover our business highlights. In refining, we delivered another quarter of sequential improvements in throughput, capture and operating expenses per barrel. Gross margin per barrel benefited from strong cracks in our regions, along with small refinery exemptions granted by the EPA. The SRE benefit in the third quarter was comprised of $115 million in lower cost of goods and $56 million in higher revenue from the commercial optimization of our RINs position.

We achieved a record low operating expense of $7.12 per throughput barrel, crossing over our near-term goal of $7.25 per barrel. Throughput was our second highest quarter on record, and we are on pace to establish many new annual records for the full year. Our Marketing segment delivered record EBITDA in the quarter of $29 million and realized an adjusted gross margin of $0.11 per gallon. We are very pleased with the growth we have achieved in our marketing segment, and we continue to unlock the value of the Sinclair branded stores, providing a consistent sales channel with margin uplift for our produced fuels.

We have added 146 branded sites through third quarter '25 with more than 130 sites with contracts signed and expected to come online over the next 6 to 12 months. During the quarter, we returned $254 million in cash to shareholders, consisting of $160 million in share repurchases and $94 million in regular dividends. Since the Sinclair acquisition in March of 2022, we have returned over $4.5 billion in cash to shareholders and have reduced our share count by over 61 million -- years.

As of September 30, 2025, we still have approximately $589 million remaining on our share repurchase authorization, and we remain committed to returning excess cash to shareholders while maintaining our investment-grade balance sheet. Also today, we announced that our Board of Directors declared a regular quarterly dividend of $0.50 per share, payable on December 5, 2025, to holders of record on November 19, 2025. Now I will cover some strategic updates. We believe we are well positioned to supply the growing needs on the West Coast.

As I mentioned earlier, we recently completed a CARB project at our PSR refinery, which gave us the capability to produce more CARB gasoline or components that we can ship to the California market. In addition to that, we are announcing a jet project at our PSR refinery this quarter that will give us the flexibility to produce more jet -- diesel to supply the West Coast depending on what the market is calling for. This project will be complete and in service following the turnaround this quarter.

Finally, yesterday, we announced we are evaluating a multi-phased expansion of our midstream refined products footprint across PADD 4 and PADD 5. This initiative is designed to address the increasing supply and demand imbalances in key western markets, particularly in Nevada and multiple markets in California, resulting from announced refinery closures on the West Coast. HF Sinclair believes its geographic footprint and current infrastructure provide an advantaged position to quickly and efficiently deliver refined products where the market needs are strongest.

Subject to board and regulatory approvals, the proposed multi-phased expansion projects under review are projected to enable incremental supply of up to 150,000 barrels a day of product into various West Coast markets. The first phase would increase capacity by a projected 35,000 barrels per day to move supply from our Rockies production into Nevada and is targeted to be online in 2028. This initial phase would include expanding the Pioneer pipeline, a jointly owned pipeline with Phillips 66 from Sinclair Wyoming to Salt Lake City, Utah and debottlenecking our wholly owned UNEV pipeline from Salt Lake City, Utah to Las Vegas, Nevada.

These projects reflect HF Sinclair's strategic focus on asset integration and value chain optimization of our finding midstream and marketing businesses and are examples of how we can leverage our competitive advantages and geographic footprint to support our efforts to deliver accretive long-term growth well into the future. In closing, we remain committed to advancing our strategic priorities and believe our focus on liability, integration and optimization will drive future growth across our businesses. Looking ahead, we are constructive on the fundamentals of each of our businesses, and in particular, believe the support of refining backdrop positions us well as we head into 2026.

With that, let me turn the call over to Atanas.

Thank you, Tim, and good morning, everyone. Let's begin by reviewing HF Sinclair's financial highlights. Today, we reported third quarter net income attributable to HF Sinclair shareholders of $403 million or $2.15 per diluted share. These results reflect special items that collectively decreased net income by $56 million. Excluding these items, adjusted net income for the third quarter was $459 million or $2.44 per diluted share compared to adjusted net income of $96 million or $0.51 per diluted share for the same period in 2024.

Adjusted EBITDA for the third quarter was $870 million compared to $316 million in the third quarter of 2024. In our refining segment, third quarter adjusted EBITDA was $661 million, compared to $110 million in the third quarter of 2024. This increase was principally driven by higher adjusted refinery gross margins in both the West and Mid-Con regions which included small refinery RINs waivers granted by the EPA. Crude oil charge averaged 639,000 barrels per day for the third quarter, our second highest quarter, primarily driven by our continued reliability efforts.

Crude oil charge averaged 607,000 barrels per quarter of 2024. In our Renewables segment, excluding the lower cost or market inventory valuation adjustment charge of $20 million, we reported adjusted EBITDA of negative $13 million for the third quarter compared to $1 million for the third quarter of 2024. During the quarter, we recognized incrementally more in value from the producer's tax credit, and we expect to capture additional incremental value in the fourth quarter of 2025.

Total sales volumes were 57 million gallons for the third quarter of 2025 compared to 69 million gallons for the third quarter of 2024. Our Marketing segment reported EBITDA of $29 million for the third quarter compared to $22 million for the third quarter of 2024. This increase was primarily driven by higher margins and high grading our mix of stores in the third quarter of 2025. Our Lubricants and Specialties segment bounced back from the heavy turnaround workload in 2Q and reported EBITDA of $78 million for the third quarter compared to EBITDA of $76 million for the third quarter of 2024. This increase was primarily driven by improved mix and FIFO benefit, partially offset by an increase in operating expenses.

Our Midstream segment reported EBITDA of $114 million in the third quarter compared to $111 million of adjusted EBITDA in the same period of last year. This increase was primarily driven by lower operating expenses as we continue to integrate our midstream and refining businesses partially offset by lower -- in the third quarter of 2025. Net cash provided by operations totaled $809 million in the third quarter, which included $31 million of turnaround spend. HF Sinclair capital expenditures totaled $121 million for the third quarter of 2025.

During the quarter, HF Sinclair issued $500 million of senior notes at 5.5% due 2032 in order to redeem our remaining 5.875% notes due 2026 and 6.375% notes due 2027. This allowed us to lengthen our maturities and reduce our weighted average cost of debt. As of September 30, 2025, HF Sinclair's cash balance was approximately $1.5 billion and we had $2 billion of debt outstanding with a debt-to-cap ratio of 23% and net debt-to-cap ratio of 11%.

Let's go through some guidance items. With respect to capital spending for full year 2025, we still expect to spend approximately $775 million in sustaining capital, including turnaround on catalysts. In addition, we expect to spend $100 million in growth capital investments across our business segments. For the fourth quarter of 2025, we expect to run between 550,000 and 590,000 barrels per day of crude oil in our Refining segment, which reflects the planned turnaround at our Puget Sound Refinery.

We are now ready to take questions from the audience.

[Operator Instructions] Your first question is from the line of Manav Gupta of UBS.

Congrats on a very strong brand and a big jump in buybacks. I just wanted to start on this multi-phased expansion on what you're looking to target at PADD 4 and PADD 5. There are some other projects which are also trying to do something similar. And of course, you have a very strong refining footprint. So I'm trying to understand what's your competitive edge here? Why do you feel your project would be at an advantage compared to some of the other projects that are also looking to move products somewhere in the similar direction. So if you could talk a little bit about that.

Thanks for the question, and let me ask Steve to jump in right away. .

Yes, we're -- to make this announcement. We believe that we're in a pretty strategic advantage place both from a production and having infrastructure already in the town that can be debottlenecked or expanded to bring product into a growing short in PADD 5 with the announced refinery closures in California. We think we can produce the product and deliver it at a competitive rate to compete with what is going to be a short and even compete with the growing imports.

Whether or not it is the sole project or complementary to the other ones, we felt it was important to come to the market and be clear that we are looking to evaluate this and expand it, and we think we'll be successful doing that.

Yes. And Manav, this is Tim. I'll just chime in on what Steve said. We really do think this is complementary to the other 2 pipelines that were announced. The other 2, we're talking about really barrels from the Mid-Con and from the Gulf Coast, really going in the south area towards the Phoenix area. We're really talking Rockies barrels going on the northern side into Nevada. And so we believe that a different type of project, we think it's mostly with our equity barrels as opposed to open season third-party barrels. And as Steve mentioned, we're utilizing a lot of our existing infrastructure with -- that we think will be quicker and have a lower cost to implement.

Perfect. So on refining, strong quarter improvement in further capture. Just wanted to understand your near-term or medium-term outlook for refining margins, we are seeing tremendous resilience in margins and some global capacity -- as Russia and other places. So how do you see the refining macro playing out for the next 3 to 6 months, particularly in the 2 regions you are actively involved in.

Yes, Manav, we are very excited and pretty bullish on what the current market looks like. As you mentioned, it starts at a global macro basis. And today, I think year-over-year, we're net about 800,000 barrels a day short. When you look at the capacity closures as well as being outpaced by demand when it comes into the U.S., supply is up, mainly in jet and diesel with gas being down, but demand of distillate is really supportive and part of that is justified by some lower RD production that is not online as a result of what's happened with the regulatory framework. In our region, specifically, gas demand has been up lightly and diesel demand has been up. And we see particularly the distillate make in jet and diesel being very supportive through the end of the fourth quarter and into first quarter. So we're in max diesel mode, and that's part of the reason why our capture has continued to be improved and some of the projects that were mentioned earlier further enable us to flexibly move between the right products to meet the market demands that we see happening. So yes, we're pretty encouraged by the overall market structure for the next 6 months or so.

Yes. And Manav, just taking a step back from more of a macro standpoint. We do think that in 2026, demand growth continues to outpace supply growth. Our numbers still show that true as what we saw here in '25, especially in distillate, we see distillate continuing to be short and why you're seeing, for example, in our West area, distillate demand at 5-year highs. Overall, we think the market is underestimating the impact of the Russia outages. We think those are significant and will take time to come back online. We think the market is underestimating the demand impacts that lower gasoline prices are having on increasing demand, and we think that's positive for refining. And then we think the market is not fully appreciating the low product inventories that we continue to operate at as a result of trying to keep up with demand.

People like to talk about high utilization. I think the low product inventories is a sign that despite the high utilization, we're still as a global balance, trying to keep up with global demand.

The next question comes from the line of Ryan Todd of Piper Sandler.

Okay. Maybe one starting out on small refinery exemptions. So just, I guess, a point of clarification on the quarter so you had -- there was a $115 million benefit and a -- was it a $56 million benefit? Are those incremental to each other? Or how do we think about clarifying that? And then maybe at the higher level, I mean, can you talk about your view on the process from here given the guidance invited by the EPA earlier, how does how does this compare versus the process historically? And does this change your confidence on the ability to capture exemptions going forward?

Yes, Ryan, this is Tim. Let me take a shot at it. So yes, the third quarter impact that we -- that I mentioned in my prepared remarks, $115 million that are -- you can say are basically directly a result of the granting of the SREs by the EPA. That impacts cost of sales and roughly translates to, call it, $0.47 at EPS. The $56 million is additive to that. It goes into cost of revenue. And what I consider that is more of an indirect benefit of basically buying and selling RINs in the marketplace based on our wins position at the time.

So this is more or -- associated with our RINs position and what we think our RINs positions will need to be in -- We don't disclose kind of what our strategy is or what we do. But in the third quarter, we had $56 million associated with that which translates to about $0.23 on an EPS basis.

First -- second of all, let me just say, we appreciate the White House and the EPA taking actions to recognize the small refinery space hardship and granting the SREs under the RFS program. As you know, there was a large backlog for many years at this administration that took action on. Following discussions with the DOE and the EPA, we actually believe that the SREs that we submitted could be more. And so we added new and supplemental information and submitted or resubmitted applications for 5 refineries in our portfolio for the 2023 and 2024 years. So that's Woods Cross, Parco, Casper, Tulsa and Artesia.

So going forward, we believe we have 5 small refineries that were exited from the RFS in the past, and we believe qualify for SREs going forward. And while we can't quantify future outcomes or probabilities, we do believe we have considerable upside on a future run rate basis.

Tim. Maybe a shift on refining margin capture. On the surface, it seems like you've gone from a number of -- the industry went from a number of slight headwinds in the third quarter to what might be modest tailwinds in the fourth quarter, whether it's in slightly widening crude differentials, lower backwardation, addition of butane blending, et cetera. your month into the quarter, any thoughts on how you see the various trends in the market potentially by being -- margin capture in the quarter?

This is Steve, I'll take that one. I think -- we don't see a ton of help in terms of light to heavy differential widening. We do see some step-up in Q4. And as we've always talked about, that we see towards the end of '26 the differentials coming back into play. And we were very backwardated in the quarter not to be flattening out. So the role, which is very impactful for us, seems to be in a better position. And then I think ultimately, we have a good make and mix of our distillate components over gasoline. And so as the jet and the diesel cracks remain strong relative to some of the macro elements that we've talked about, low inventories, an uptick on a colder winter, some of the geopolitical concerns that we have internationally. Those all look good for us into the fourth quarter, and we look to go sell the gasoline pool with our butane blending that we have in the pipe. So overall, Q4 looks for us to be more bullish than maybe we've seen in the past, and we look to take advantage of that, have a good strong -- for Q4.

And Ryan, this is Tim. What I would just say is we're pleased with the progress rundown capture, all the things Steve talks about, we're on pace for jet production, premium, all the product mix opportunities that he's talked about in the past. And that's despite the headwinds that we're seeing on not just roll but on crude diffs in general. And so with the outlook that we have that crude diff should widen, WCS/WTI in particular, next year, we do think there is some upside to continued improvement in capture. .

Question comes from the line of Doug Leggate of Wolfe Research.

I'm sorry to be up on this SRE issue. But just to be clear, so I'm curious, why didn't you break out the $115 million and the $56 million as nonrecurring. I'm assuming they were in your realized margins? Or can you explain where they show up in the numbers?

Yes. This is Atanas. So the $115 million, which is the bulk of the impact shows in our -- is a benefit to our cost of sales. And the reason that's the case is because we had taken that expense in the past. So the company incurred those expenses, recognized them in our previous EBITDA, lowered our EBITDA, and so we appropriately have captured those in our current EBITDA as an offset to that. The remaining $56 million is revenue and it results from optimizing our RINs strategy. So that's somewhat different than the reimbursement of what I call prior expenses and therefore, that $115 million goes into our cost of sales as credit.

And Doug, this is Tim. What I would just say is we don't view this as a onetime event. We view this as we will be assuming the SREs continue to be in the RFS legislation that we will be entitled to this. And as I mentioned in my earlier remarks, even more of an impact than what we've seen today. So we don't think it's a one-time event. .

No, I completely understand and completely agree with that. I guess, sorry, Tim, maybe I'm being thick as a rock here, but can you just clarify, is this a single quarter -- back? Or is this a cumulative recovery of the SREs for all prior years?

Yes. This is cumulative based on the base exemptions that we were granted. .

But taken in the third quarter.

Correct?

Yes. And I would just say that -- Doug, the $115 million, which we talked about in terms of cost of sales is the cumulative impact of the SREs that are being granted. The $56 million is just related to specific actions that we're taking in the trading market in the third quarter that attributed to revenue and which we consider -- we don't talk about buying and selling of crude or crude inventory positions or our product inventory positions quarter-by-quarter. And we think that $56 million for SREs fits into that same category or for RINs -- were just normal course of buying and selling of RINs in the course of the quarter based on our overall annual strategy. So that's how we view that. That's why we break it out the 2 separately. .

Okay. That's really helpful. So the $0.47 is a bit that's nonrecurring then basically, if you want to call it that.

You can call it that, depending on what your view of future SREs are. The $0.23 associated with the $56 million of revenue, we just think is ordinary course of business. .

Great stuff. I'm sorry to have labored that. My follow-up is hopefully a quick one. Your capital spending run rate looks light relative to your full year guide. I guess can you just reiterate for us what do you see as your sustaining capital for the total business including turnaround?

Yes. First of all, Doug, to the first part of your question, this is just timing of CapEx spend. So we still stand by the guidance that we indicated in our prepared remarks. With respect on a sustaining basis, on a go-forward basis, we see probably about $100 million of benefit on a go-forward basis relative to what we have said so far. But we will give more specifics later in the year.

Doug, we're not ready to give guidance yet. We'll do that in December like we normally do. But just like we said on previous calls, we believe that we have now passed our catch-up maintenance period in our overall turnaround process. Even in -- we think we peaked in 2024, 2025 from a refining standpoint is actually lower on overall CapEx. But it's kind of masked a little bit because we had a larger loops turnaround, if you remember earlier this year.

So we do think looking forward into 2026 that we'll see that substantial reduction in overall CapEx. We've talked about that before in terms of order of magnitude. Atanas has kind of giving you a ballpark, and then we'll come out with further guidance when we put the final numbers out in December.

Your next question comes from the line of Philip Jungwirth of BMO.

Can you talk about how you look to finance these pipeline expansion projects. Any difference between the first phase? And if you ultimately go through with the other phases. And we normally think of these as 5, 6x build multiple projects. Is that at least within the ballpark of what you're thinking of?

Yes. Philip, Steve. We always like to say, let's understand the project and the economics of the project and then figure out how we finance it. And we think we have multiple ways to do that, whether that's due to liquidity on our balance sheet. We have some joint venture partner options and some extensions of that. But we're not in a position to talk about how we're going to put the capital to work to make these things happen. If and when we get to FID, which we are not at FID, again, this is evaluating a multiphase expansion to go get to those Western markets.

Yes. And Philip, this is Tim. While we need to make those decisions when the time is appropriate, we do think that the overall cost is significantly lower than the cost that at least are rumored or circulated to be on those other 2 lines. .

Okay. Great. And then could you touch on specifically the Medicine Bow pipeline review just because this currently serves the Denver market, which is a good market for you. What will be the rationale for the reversal, recognizing this isn't in the first phase of projects you're evaluating?

Yes. So as you know, there's an expansion that is coming to the Denver market to be online in Q3 '26. And that pulls barrels out of the Mid-Con. We supply some of that. We also supply some of that from the Rockies. And so that goes down our Medicine Bow pipeline, mainly that 35,000 a day that gets into the Denver market is going to be less valued once the expansion comes on bringing more barrels into Denver, which is why we are planning to go make the first phase happen, which is up to 35,000 barrels a day to move those barrels that were getting into Denver West into higher-graded markets.

So depending on what happens, the timing, as we mentioned, we believe Phase 1 could come on in 2028. But that's really just to manage the overall value of that market. I think there's going to be a bit more overside later in the year. So that addresses that first situation. Longer term, in the various phases of the project, to move up to 150,000 barrels a day, we would reverse Med Bow and potentially expand it to go get more product out of a lot of -- production in our Mid-Con to move those barrels into PADD 5, both Nevada and eventually into California.

Yes. And Philip, today, Medicine Bow is primarily moving equity barrels of ours, and we anticipate that continuing even through -- past the expansion. .

Your next question comes from the line Paul Cheng of Scotiabank.

I think you sort of answered that question, but in the first phase of your proposed midstream expansion or upgrade over there, the 35,000 barrel per day, should we assume that it's all going to come from your equity barrel. And so that from that standpoint, the first phase at least, is going to be a goal because you don't need other people or that do I get it wrong? .

No, Paul, I think the question was the first phase, all equity barrels. I would say a good portion of that would be equity barrels. Again, we will follow all the requirements that are laid out from the Interstate Commerce Act and the Federal Energy Regulatory Commission to make freight available for all. But a good portion of those barrels from origin point to destination point would be equity barrels.

Yes. I guess my point is that should we assume that the Phase 1 with -- was the open season outcome is the goal because then you will be sufficient of an anchor shipper that you actually don't need other people.

Yes. I think that is a fair assumption. Again, we have not taken FID. We anticipate an FID decision by midyear 2026, and we do believe that we have enough equity production given the dynamics that I just mentioned to go support this project.

Right. And that what kind of [ tenet ] that we should assume? .

Sorry, can you repeat the question there, Paul.

What kind of tariffs that we should assume.

So again, we're not commenting on tariff structure at this point. Once we get closer to taking FID, we'll come back to the market with more definitive set of potential guidance items and economics.

Yes. But we do think, Paul -- we haven't calculated tariff yet, as you know, but we do think that the overall cost and timing of what we're proposing can be quicker and more efficient than what others have announced just because of the existing infrastructure we have. And then on the equity barrel comment, the Pioneer pipeline, as we talked about, is a joint venture between us and Phillips 66. And so while we can't wait for them, we would expect them to probably have some equity barrels to put on the line as well.

Okay. And second question maybe is that you can share with us that how is the lubricant market looks and also that -- I know that you guys have continued to look for the bolt-on acquisition over there. How is that market condition also looks? .

Paul, it's Matt Joyce. The market is continuing to perform at a pretty healthy rate. You've seen our quarterly performance, we returned to our historic run rate, and we were really pleased with that. And the teams continue to execute on our strategy of forward integrating our base stocks into finished and specialty products, and you're seeing the benefit of a diverse portfolio that we serve with our customer base today.

Looking forward, we're just continue to manage and watch any sort of tariff upheaval that we may have. We've seen some -- in forestry in Canada. But -- but on the long of it, we're pretty confident that fourth quarter will be around our traditional run rates.

How about on the M&A market?

With regards to the -- Yes, we don't have anything to speak about today, but we continue to explore options and opportunities that are interesting to us and help us build on our portfolio and build out our competencies and in particular, in the U.S. markets, where we're looking to continue to grow at a nice pace.

Yes. Paul, I would just say, overall, we've talked about our lube strategy. We want to grow our finished business. We want to reduce our base oil length and we want to rerate this business to a higher trading multiple based on the specialty business. We think what Matt and his team are doing is executing that strategy. We think there are opportunities to do some inorganic bolt-ons that will help us accelerate that strategy. And we think, as we've talked about, we've been a consolidator in this space in the past, and we think there's opportunities for us to continue that opportunity.

And Tim, I don't know if you can comment on that. But one of the major integrated oil company, they've been trying to sell their lubricant business and that the median rumor is that there have been some difficulty to get the price they want. Does this signal the valuation multiple on that business has changed. Previously, we all generally assume 10 to 12x EBITDA. Have you seen in the marketplace that, that valuation has changed.

Paul, we obviously can't comment on specifics because we don't know what's going on. I think you're probably referencing the Castrol process that has been in the news. All I can say is that we are quite different to our business than the Castrol business. Castrol is a much more global business focused primarily around passenger cars, where our business is much more North American based and focused on the industrial side of the business.

So I don't think I can comment on any of the other kind of speculations around the process they're going through, Paul. But what I can tell you is that we believe our business, again, with our strategy is a strong industrial base business and that we can continue to grow it and increase its trading multiple by growing the finished side of the business and reducing the base oil length.

Your next question comes from the line of Matthew Blair of TPH.

Could I circle back to the comment that you resubmitted SRE applications for, I think it was 5 refineries. Parco, Tulsa and Artesia are all well above 75 a day. So could you talk about how these refineries will be eligible? And I guess going forward, would you plan to run these refineries that have much lower utilization to be below 75 a day?

Yes, Matthew, let me just clarify on that. The Parco refinery as you know, is actually -- can run higher than the 75,000 barrels a day, but it's close. And so yes, I think we would take that into consideration each year as we think about overall margins and overall product demand, and we'd factor that into our decision in terms of whether to run above a certain amount or not. .

The Tulsa and the Artesia refineries, as you know, are actually 2 separate refineries that are -- that we tend to report as one but are actually 2 physically separate refineries. And there are other refineries, as you may know, that received small refinery exemptions separate in a similar fashion. And so that's what we're talking about on those 2 refineries.

Okay. Okay. Because you're right, because Tulsa was a combination of I think it was like a Sunoco and some other plants. Okay. That's helpful. And then I think it's interesting you're making investments in the Puget Sound Refinery at the same time that there's a lot of proposals for more product headed to PADD 5. Could you talk about where Puget Sound would stand on the cost curve in terms of getting product into California. And I guess what gives you confidence that these are going to be good long-term investment.

Yes, Matt, this is Steve. We've been watching the market dynamics in PADD 5 play out for quite a while. There's a good amount of jet that is imported today into California and PADD 5. And one of our advantages of the Puget Sound Refinery is our dock capability and access. So these projects are intended to provide flexibility to meet the demands of whatever is happening in the marketplace, including making carb gas or the unfinished components that go into carb gas and have been successful in improving that, and you're seeing that in our capture on the West. That's partially attributable to that.

And then moving the next project to be able to swing barrels from diesel to jet. We believe that, that jet short will continue and growth will continue of that overall transport fuel stream. And so that gives us the availability to either place barrels in the local Puget Sound market or export them, getting them into California, but also in the other markets that we found success into Lat Am, et cetera. So this is really about product flexibility, which gives a competitive advantage as the market dynamic plays out. And we're seeing the signs, and we're putting the capital to work, small capital to work. to go make investments that are very accretive for us in the long run.

Yes. And Matthew, this is Tim. I'll just emphasize a couple of things that Steve said. These are small projects. They fit within the guidance that we've been talking about in terms of our growth capital that we guide to each year. And so we're not talking significant -- the CapEx required. And it's really about flexibility, as Steve mentioned. This gives us the flexibility.

For example, the jet project that I mentioned, it gives us the flexibility to make jet or diesel, depending on what the market is calling for and depending on whether the -- to California is open or not, right? So we -- it's going to give us flexibility to take more advantage of the different dynamics and the different arbs that are open at the time. The CARB gasoline project is the same way just gives us the flexibility to take advantage of that. And quite honestly, this pipeline project that we're talking about. It's really all about flexibility. It's going to give us the ability to move barrels from the Rockies over to Nevada or not, just depending on what the market looks like.

Your next question comes from the line of Neil Mehta of Goldman Sachs.

One tactical question, one strategic. Just tactically, the Q4 guide, the $550 million to $590 million of accretive charges. It's lower than it's been in a while. And I think you cited the turnaround of Puget Sound was. Anything else that we should be thinking about there? Or is there some conservatism there? .

Neil, this is Steve. The guidance reflects our planned turnaround at a large refinery Puget Sound design, as you know, that started very late in September. But in addition, we were -- we pushed out a few small maintenance elements into a lower margin environment in Q4 to take advantage of the market in the higher-margin environment in Q3. So the combination of those 2 get us to this $550 million to $590 million accretive guidance, nothing more to it than that.

Okay. And any early thoughts on '26 turnarounds as we think about next year?

This is Valeria. So our turnaround guidance will be coming out generally, as I said before, we are through the peak and -- we've continued to level out our turnaround costs and our turnaround events for the next year. Guidance will be coming out soon. I would expect lower, anticipate lower cost and fewer turnarounds.

Perfect. And the follow-up, Tim, just on return of capital, a very nice number this quarter. You've talked about in '26 and beyond, you want to get to dividends plus buybacks being 50% or higher of net income. So just talk about how you're thinking about return of capital levels on the go forward?

Neil, this is Atanas. Thanks for your question. With respect to our payout ratio, really, that 50%, we look at it as a minimum payout ratio, which we've exceeded consistently over the years, including this year. And our priority remains to -- shareholder return of capital remains a priority for us. And what does that translate into. Any excess cash flow that we generate over above our nondiscretionary spend, which is our dividend, our commitments to safety and reliability, highly accretive organic growth, anything over and above that, our target is to return to the shareholders.

Yes. And Neil, I'll just chime in with what Atanas said. We evaluate inorganic opportunities to grow. We evaluate these organic growth projects that we just talked about against our other options of returning cash to shareholders and look and choose to see what is the best decision for the business long term. So we're factoring all that in as we -- as we do our capital allocation strategy. I will just point to our historical practice of returning cash to shareholders.

And if you look back over the last 3 or 4 years, we've been 16% in '22, 12% cash returns in '23, 16% cash returns in '24, and we're 11% here in the third quarter or 7% year-to-date in 2025. And so I think our track record of returning cash to shareholders is strong.

Next question comes from the line of Jason Gabelman of TD Cowen.

I'm going to pick up on that last question. And I understand kind of framework about returning cash to shareholders. But if I look year-to-date, it does seem like cash is built approaching $1 billion and debt has remained, I guess, somewhat stable. So it seems like you -- there's been some buildup of excess cash. So should we expect a catch-up where more of that excess cash is returned or are you looking at stockpile cash for another reason? Or is there something else going on there?

Thanks for your question. We're not looking to stockpile cash. And if you look at the increase in our cash balance, really, a lot of the build occurred in the third quarter, which is a very strong quarter. Our goal is to return our excess cash to shareholders. We don't guide with respect to timing, but expect more to come in terms of capital returns.

Okay. And then my other question is on the -- topic, which I know has been hit a few times, but I just wanted to ask a couple of clarifying questions. First, can you break out the margin benefit to each one of your regions? So we get a picture of what the underlying margin was for the quarter, excluding the SRE benefit. And then to be clear, do you have how excess RINs on the balance sheet that you can sell back into the market? Or does that kind of $50 million or so that you mentioned get you into a place that you'd want to be to manage your RIN exposure moving forward?

Yes. Jason, this is Tim. I appreciate both of those questions that you're asking. But we don't provide that level of detail for either of those questions. So a breakdown across the regions or by plant. We've just never done that in the past and we don't believe we -- it's in our best interest to do that going forward. And then we've never talked about our RINs position, whether we're in long or in short. And just from the very beginning, and while we talked about it whether to disclose that or not, we decided it's still in our best interest not to disclose that. .

I'd now like to hand the call back to Tim Go for final remarks.

Thank you, Ellie. Before we close, I want to point out that our business is much different from just a few years ago, not just in acquired assets like with the Puget Sound Refinery, Sinclair, HEP, but it's all different in culture and performance. Refining throughput, capture, operating costs and CapEx are all trending in the right direction. Our nonrefining segments continue to shine, including our lubricants and specialties business, marketing and midstream businesses.

All of these are proof points that our strategy is working and enabling us to generate free cash and deliver strong shareholder returns. Looking ahead, we are constructive on the fundamentals of each of our businesses, including our renewable diesel business. And as always, our priorities remain the same: to: one, improve our reliability; two, integrate and optimize our portfolio of assets; and three, return excess cash to our shareholders.

Thank you for joining our call. Have a great day.

This does conclude today's capital conference. Please disconnect your lines at this time, and have a wonderful day.

Welcome to HF Sinclair Corporation's Second Quarter 2025 Conference Call and Webcast. Hosting the call today is Tim Go, Chief Executive Officer of HF Sinclair. He is joined by Atanas Atanasov, Chief Financial Officer; Steve Ledbetter, EVP of Commercial, Valerie Pompa, Operations; and Matt Joyce, SVP of Lubricants and Specialties. [Operator Instructions] And 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 now go ahead, please.

Thank you, Ellie. Good morning, everyone, and welcome to HF Sinclair Corporation's Second Quarter 2025 Earnings Call. This morning, we issued a press release announcing results for the quarter ending June 30, 2025. If you would like a copy of the earnings press release, you may find it on our website at hfsinclair.com.

Before we proceed with remarks, please note the safe harbor disclosure statement in today's press release. In summary, such statements made regarding management expectations, judgments or predictions are forward-looking statements. These statements are intended to be covered under the safe harbor provisions of federal security laws. There are many factors that could cause results to differ from expectations, including those noted in our SEC filings. The call also may include discussion of non-GAAP measures. Please see the earnings press release for reconciliations to GAAP financial measures. Also, please note any time-sensitive information provided on today's call may no longer be accurate at the time of any webcast replay or rereading of the transcript.

And with that, I'll turn the call over to Tim.

Good morning, everyone, and thank you for joining our call. During the second quarter of 2025, we made strong progress against our strategic priorities to improve reliability, optimization and integration. And I'm pleased to report we delivered sequential improvements over the last 3 quarters in our 3 key metrics: refining throughput, capture and lower operating costs, allowing us to return $145 million to stockholders through dividends and share repurchases in the current period.

Looking forward, we remain focused on advancing these priorities further and with the majority of our turnarounds behind us in 2025, we believe we are well positioned to continue to execute our strategy and return excess cash to our shareholders.

Now let me cover our segment highlights. In Refining, for the second quarter, we successfully completed the scheduled turnaround activities at our Tulsa and Parco refineries. We also delivered sequential quarter improvements in capture and crude throughput despite heavy maintenance, weaker crude differentials and a rising RIN price environment.

In addition, we achieved operating expense per throughput barrel of $7.32, showing significant progress again towards our near-term goal of $7.25 per barrel. Looking ahead, we have 1 remaining turnaround at our Puget Sound refinery scheduled to begin at the end of the third quarter.

In Renewables, we continue to deliver near breakeven EBITDA results in this tough economic environment as we continue to maximize our low CI feedstock mix while controlling our operating expenses. These results are indicative of how much we've improved our renewable diesel business, especially in light of the significant loss of BGC year-over-year.

In the second quarter, we began to partially recognize some benefits from the producers tax credit and expect to capture additional incremental PTC value in the third quarter. Our Marketing segment delivered $25 million in EBITDA and achieved an adjusted gross margin of $0.10 per gallon delivered by optimizing our business since the Sinclair acquisition.

We also grew our branded supplied stores by a net of 55 sites during the quarter and up a net 155 stores over the past 12 months, both records for a quarter and for a trailing 12-month period, and we have over 80 additional supplied branded sites signed and targeted to bring online over the next 6 to 12 months.

In Lubricants & Specialties, we reported $55 million in EBITDA, which includes a significant $20 million in FIFO headwinds due to falling feedstock prices. During the period, sales volumes and product mix were impacted by our Mississauga turnaround. However, we continue to execute on our strategy, afford integrating our base oils into both finished and specialty businesses, most notably launching a Sinclair lubricants product offering in the United States.

In our Midstream business, we delivered $112 million of adjusted EBITDA as we benefited from higher pipeline revenues and lower operating costs from our focused integration efforts since the HEP [ buyout ]. During the quarter, we returned $145 million in cash to shareholders, consisting of $50 million in share repurchases and $95 million in regular dividends.

Since the Sinclair acquisition in March 2022, we have returned over $4.2 billion in cash to shareholders and have reduced our share count by over 58 million shares. As of June 30, 2025, we had approximately $750 million remaining on our share repurchase authorization, and we remain committed to returning excess cash to shareholders while maintaining our investment-grade balance sheet.

Also today, we announced that our Board of Directors declared a regular quarterly dividend of $0.50 per share, payable on September 4, 2025, to holders of record on August 21, 2025. Looking forward, we are encouraged by the continued strength in refining margins across our system, particularly in distillates. We believe our overall strategy is working and delivering visible organic growth to our bottom line, both in refining and our nonrefining segments, and we remain committed to executing our strategic priorities in order to continue to return cash to our shareholders.

With that, let me turn the call over to Atanas.

Thank you, Tim, and good morning, everyone. Let's begin by reviewing HF Sinclair's financial highlights. Today, we reported second quarter net income attributable to HF Sinclair shareholders of $208 million, or $1.10 per diluted share. These results reflect special items that collectively decreased net income by $114 million. Excluding these items, adjusted net income for the second quarter was $322 million, or $1.70 per diluted share compared to adjusted net income of $150 million, or $0.78 per diluted share for the same period in 2024.

Adjusted EBITDA for the second quarter was $665 million compared to $406 million in the second quarter of 2024. In our Refining segment, second quarter adjusted EBITDA was $476 million compared to $187 million in the second quarter of 2024. This increase was principally driven by higher adjusted refinery gross margins in both the West and Mid-Con regions, partially offset by lower refined product sales volumes. Oil charge averaged 616,000 barrels per day for the second quarter compared to 635,000 barrels per day for the second quarter of 2024. This decrease was primarily a result of turnaround activities at our Tulsa and Parco refineries during the second quarter of 2025.

In our Renewables segment, we reported adjusted EBITDA of negative $2 million in the second quarter, excluding the lower cost to market inventory valuation adjustment benefit of [indiscernible] million compared to $2 million of adjusted EBITDA for the second quarter of 2024. Our second quarter 2025 results were impacted by lower sales volumes and margins.

During the quarter, we recognized a partial benefit from the producer's tax credit. Total sales volumes were 55 million gallons for the second quarter of 2025 compared to 64 million gallons for the second quarter of 2024. Our Marketing segment reported EBITDA of $25 million for the second quarter compared to $15 million for the second quarter of 2024. This increase was primarily driven by higher margins and migrating our mix of stores in the second quarter of 2025. Our Lubricants and Specialties segment reported EBITDA of $55 million for the second quarter compared to EBITDA of $97 million for the second quarter of 2024. This decrease was primarily driven by lower base oil margins in addition to lower sales volumes as a result of turnaround activities at our Mississauga facility.

During the second quarter of 2025, we recognized a FIFO charge of $20 million in the quarter versus a FIFO charge of $14 million in the same period last year. Our Midstream segment reported adjusted EBITDA of $112 million in the second quarter compared to $110 million in the same period of last year. This increase was primarily driven by higher pipeline revenues and lower operating expenses, partially offset by lower volumes in the second quarter of 2025.

Net cash provided by operations totaled $587 million in the second quarter, which included $179 million of turnaround spend. HF Sinclair capital expenditures totaled $111 million for the second quarter of 2025. As of June 30, 2025, HF Sinclair's cash balance was $874 million. As of June 30, we had $2.7 billion of debt outstanding with a debt-to-cap ratio of 22% and a net debt-to-cap ratio of 15%.

Let's go through some guidance items. With respect to capital spending for full year 2025, we still expect to spend approximately $775 million in sustaining capital, including turnaround and catalysts. This is down $25 million from 2024 and included a nonrefining Lubricants and Specialties turnaround in the first half of 2025. In addition, we expect to spend $100 million in growth capital investments across our business segments.

For the third quarter of 2025, we expect to run between 615,000 and 645,000 barrels per day of crude oil in our Refining segment, which reflects the planned turnaround at our Puget Sound refinery. We're now ready to take questions from the audience.

[Operator Instructions]

Our first question comes from the line of Manav Gupta of UBS.

Very strong performance in Refining. Captures across both refining systems very strong. Just trying to understand, is this a function of something which happened during the quarter? Or is it also somewhere -- I mean, you took over, Tim, you had this policy that you want the most competitive refining system in the business. Is this also a function of you're kind of getting there where now your capture rates are matching some of the best in the business. So if you could help us understand the very strong capture rates in both regions.

Manav, this is Steve Ledbetter. Thanks for the question. And we are quite proud of the performance and capture sequentially, as Tim mentioned, quarter-over-quarter for the past 3 quarters. Despite what we saw in terms of headwinds as far as heavy diffs narrowing A&S getting more expensive as well as the backwardation in the role, we continued to improve our overall [indiscernible] crude performance, and that is really improving by creating flexibility of our crude slate and improving the mode of transportation of how we get that crude into our systems and on our integrated midstream assets. So it helps both ways.

I think larger than that, we ran very well. We produced and finished the products that we wanted. Our distillate production was up quarter-over-quarter over 10,000 barrels a day. We're continuing to focus on premium. And I think we're looking down the road and around the bend, and we're putting barrels in the markets that we see are coming short and taking advantage of those arbs. We're just getting better at this and making substantial different changes in how we take more nimble and accurate decisions, and we see that continuing as we move forward.

My follow-up quick here is, look, there were some buybacks in the quarter, margins are stronger. If things stay where they are, should we expect you to probably increase the pace of buybacks, but also there are a number of bolt-on opportunities out there in terms of both lubes and marketing. So how should we think about shareholder returns versus smaller bolt-on opportunities, which historically, you have done very well in acquiring stuff? And how should we think about the balance between those 2 for the cash that you're generating?

Thanks, Manav. This is Atanas. It's a great question. We reiterate our strong commitment to our shareholder returns, as you could see in this past quarter, we're looking at 8%, 9%. If margins continue to be where they are, we anticipate to continue to execute on that priority. History is a good indicator of how we've done. We've delivered historically double-digit returns, and we remain committed to that with respect to how do we balance between organic growth versus capital returns organic, we believe we can achieve both successfully given the cash flow generations in the business. And as we look at capital -- as we look at returns on organic projects, those are highly accretive at 20-plus percent IRRs and multiples of around 4x. So we believe we can achieve both and reward our shareholders with that success.

Your next question comes from the line of Ryan Todd of Piper Sandler.

Great. Maybe question for you on renewable diesel. How much if any of the [ 45D ] credits were you able to accrue in the quarter? And how should we think about that pace changing going forward? And then maybe more broadly on the R&D side, can margins continue to struggle despite some positive steps on the regulatory front? Can you maybe talk about what we need to see change for a more constructive macro backdrop there?

Yes, Ryan, this is Steve. So we were able to begin recognizing PTC in the second quarter, not fully. In the third quarter, we've worked through a number of appropriate contractual arrangements that will allow us to begin recognizing even more of that. We're not commenting on the exact number, but we've worked through the complexity and difficulty of this legislation and think we have a path forward to where we can capture the most value possible out of the PTC.

When you think about the overall structure of the proposed legislation the impacts from [ 45Z ] and as well as RVO, like everyone else, we've been negatively impacted by the PTC versus the prior BTC framework, but we believe that this structure is supportive to our business relatively speaking.

We're 100% domestic feedstock driven for our production, which gives us more qualified value both for LCFS as well as the RIN value. The ILO provision eliminations is helpful to us as we do run some where it's advantaged in our certain markets. The CarbLCFS amendment has now been passed. So we should see that step up moving forward. And then this large increase in the D4 RVO should be supportive to the entire renewable market structure as a whole. However, we do think that the RIN and the LCF values are going to have to do further work to cover that structural gap between PTC and BTC, but we like our position as this is currently structured.

Yes. And Ryan, this is Tim. I'll just echo what Steve went through here. Our strategy has always been to keep this renewable diesel business breakeven a slight positive in these, what we consider to be trough and bottom-of-cycle conditions. And you can see we've done a good job of that over the last year or 2. And just waiting for really the market structure to improve.

I do think, as you pointed out, that the market structure will improve as we look forward. You saw the card group roll out their LCFS tanking. And while the credit bank is still in excess, it is starting to shrink, and we expect the LCF prices to continue to grow in the price as the bank continues to whittle down. You saw the RBO proposed numbers come out. Those numbers are very high, and we think the RIN prices have to go up as a result of those RVO numbers, if those RVO numbers are finalized as they were proposed.

So we do think the market structure itself of the renewable diesel business. We will continue to improve, and we think we're positioned well to take advantage of it. And then the last thing I'll just mention, Steve and Atanas both mentioned this in their remarks, but we only partially recognized PTC so far. We do think we're positioning our contracts and doing the work to be able to recognize more of PTC in the third quarter, and we think that will also help our renewable piece of business going forward.

Great. Maybe 1 follow-up on the refinery on the overall, but certainly the refining side. But I think if you look at operational performance and the capital number, in the quarter despite some turnaround activity there, it seems like

[Audio Gap]

next 5-year cycle around turnarounds. We have continued to improve our turnaround structure, how we execute in the field and bringing in more and more technology to drive consistent performance. So what you're seeing is the work and the strategy that we've put in place, continuing to pay dividends in our reliability. And I think we're going to see that into the future.

Yes. And Ryan, this is Tim. We've said this before, maybe on the last call, I can't remember. But we think we're in the, call it, the fifth inning of our operational excellence journey having been through this first turnaround cycle that Val just mentioned. And you really are starting to see some of the inflection in the results that we're seeing reliability much improved. You're seeing that capture much improved. We're seeing that as we continue to optimize and integrate these businesses, it's no coincidence that it's been a couple of years now since the Puget Sound, the Sinclair and the HEP acquisitions and the fruits of those labors are really starting to show up in the results now.

You're seeing it in OpEx per barrel as we continue to show that improvement going forward, now getting close to our near-term target. And that's both a numerator and a denominator impact that you're seeing in that OpEx per barrel number. And then lastly, as you point out, our CapEx is starting to show that as well. We had a heavy turnaround in the second quarter as we showed, but as we look into next year, and we talked about this earlier, we do think that our maintenance capital takes a significant step change down. And you'll start to see that again in our CapEx guidance when we issue that at the end of the year. But all of those proof points that our strategy that we've been preaching on and have been talking about for the last year or 2 is really working and starting to deliver bottom line results.

Our next question comes from the line of Phillip Jungwirth of BMO.

In Lubricants, beyond the planned turnaround and the FIFO headwind, can you talk about the margin trajectory for this business in the quarter? How much of that weakness was April driven? And how are things -- how are you seeing things shape up so far in the third quarter?

Phil, this is Matt Joyce. Thanks for the question. Yes, I think if we look at the overall performance, you're absolutely right, FIFO headwinds and our planned turnaround at Mississauga, which was safely completed but we did come into some weather and found some work there that caused us to just take a little bit longer to get back to where we want it to be versus our scheduled plan. But the culmination of that, along with base oil margins, there was a big turnaround quarter for the industry. But what we saw is that group 2s and Group 3s continue to be a bit long, and we foresee that continuing to be the case into quarter 3, which has put some pressure on our base oils along the way. And if you look at the results with that a little bit less volume and the product mix, that has a lower profit margin profile, it culminated in the results we saw for the L&S business for the quarter.

Yes. And so I would just chime in. It's Tim. A few years ago, base oil tightness, a major turnaround, FIFO headwinds that would have created some significant fluctuations in our quarterly results. And again, the work that Matt and his team have done to really smooth that out to stabilize the business. You see the fluctuations in the market just don't have nearly the same fluctuations that you see in our results now because of the integration work that the Lubes business has been able to do.

Okay. Great. And then I know you don't have direct exposure to California, but wondering if you had any thoughts on the proposed Senate Bill 237 more so on the Energy Commission and CARB engaging with Western states on a more uniform gasoline spec. Maybe this doesn't have any traction, but just wondering if you had any thoughts on potential market impact and how it [indiscernible] basis.

Yes. This is Steve. I think it's an interesting one, the proposals that are out there, there's a lot of rumors, and I know that there's been some things to get to a regional spec. I don't know that, that is going to be successful. And ultimately, if it is extended out from California as the base, I don't think it's going to be good for supply. And so ultimately, I don't know that, that's where it will land. Regardless of that, I think our capability to go make the various grades and get into Southern PADD 5 are extended both from our Navajo refining complex as well as our Rockies complex, and we have the ability to flex and take advantage of whatever the spec change may be at the time. But my personal opinion is I don't know that, that is going to land in a regional spec that is more stringent than what the current specs of the various regions are.

Yes. And Phil, I'll just chime in too. We continue to watch all the activities and all the changes that are occurring in California, for sure. But our strategy, as we've talked about before, is to continue to directly supply more carb and more carb components through our Puget Sound refinery, which we are taking advantage of the project that we talked about over the last call to be able to supply even more barrels to that region.

And then two, to indirectly supply the neighboring states, whether it be Nevada, whether it be Arizona through our existing infrastructure and through our existing refineries in the West. And as you can see from our results, our West region is performing very well, taking advantage of some of the opportunities that are presented there.

And if you look at demand in general, our -- the West diesel demand, quite honestly, is above 5-year highs right now. And that's because of some of the dynamics we just talked about, and of course, renewable diesel production being down. And with that higher petroleum diesel demand that we're seeing in the West, we're able to take full advantage of that.

Question comes from the line of Joe Laetsch of Morgan Stanley.

So I wanted to start with the refining macro and your views on supply demand here. Margins improved in the second quarter and remained supported in July. How are you viewing the balances today from both a supply demand perspective in the Mid-Con and Rockies?

Yes, Joe, this is Steve. I think from a macro perspective, we would say the supply is more balanced than it was. If you look at the supply same period versus last year, it's actually down due to utilization. But overall, in terms of the balance and the demand aspects, we look at gas as relatively flat and our distillate demand as being up, and that's partially driven by some of the things Tim mentioned with lower RD and bio production and lower imported as well as the export economics on distillate. And so that looks like that's a good story longer term as well as we're about to jump into the harvest season and then step right into heating oil season. So longer kind of through the year, we see that diesel is going to be strong. We're very bullish on that. And gas will be trying to get to the end of the driving season and then tail off. but we're roughly net balance in our regions given current [indiscernible] and current demand patterns.

Yes. And Joe, I'll just chime in. This is Tim, that that macro view has improved over the course of this year. There was a lot of concern earlier in the year that capacity growth would outshine demand growth. And really what we've seen play out over the years, that's not happening. That demand growth is still ahead of, if not just breakeven with capacity growth, and that's favorable to refining perspectives and outlook. And I would just say that if you look longer term, the policies of this new administration are also strengthening the outlook for the refining industry. The CRA bill that basically are eliminated or reversed the ban on internal combustion engines in California, the Big Beautiful Bill that is taken away some of the artificial incentives for some of the EV vehicles.

And at least in my opinion, that's really creating more of a global landscape that's more favorable to our refining industry as well. So the factors that Steve just mentioned, I think, have supported from just overall policy as well.

Tim, that's helpful. And then on the crude side, there are several moving pieces between OPEC unwinds, Venezuela barrels coming back to the market, Canada wildfires and Mexico oil production. Could you just talk to what you're seeing from a light-heavy crude differential and availability standpoint currently as well as expectations going forward? .

Yes, sure. Our view obviously, we -- the differentials are quite a bit more narrow than we've experienced in the past, and that stemmed kind of mid last year for TMX coming online and those barrels supporting a stronger or a narrow differential finding homes in abroad. What we're seeing in terms of the forward curve, we're still looking in Q3 around a $9 to $10 differential, but with further strengthening out in Q4 around $13. And then I think longer term, in the next -- sometime in 2026, we're seeing a potential dip widening. We haven't really seen the OPEC expansion do much in terms of support or widening those differentials yet. We think that longer term, it will, coupled with the production out running egress in Canada. But we found and have been nimble in our ability to go get more and different crudes into our kit because we're connected in many hubs. And I think that's 1 of the underlying reasons we mentioned earlier about our improved crude, specifically in the Mid-Con with our ability to touch those different barrels. But yes, looking forward, it looks like we'll get some help in Q4, but not to the level that we've seen in the past couple of years before the TMX expansion.

Next question comes from the line of Neil Mehta of Goldman Sachs.

Would just love updated perspective on M&A on the refining landscape, I think we all saw the Reuters reporting with speculative around Benicia, but just your your perspective on the bar, how high it is, is it for you to do M&A? You've done really good deals over the last 5 to 6 years. So do you think you have the license of the market to go out more bolt-on, let's transformative or bolt-on type of assets? .

Yes. As you know, we do not comment on market rumors and those are market rumors in terms of what you saw in the past week or so. And I've already told you kind of what our focus is in our strategy is on the West and how we want to benefit and capture the opportunities that are out there. But in terms of M&A, we have done well in the past on M&A. We typically work countercyclically and look for value in terms of refining inorganic opportunities. That hasn't changed, and we will continue to look for those opportunities on a value perspective.

I would just say today, that bid-ask spread is still very, very wide. And you don't see a lot of refining deals happening over the last few years, and I think that's a result of that, that we're finding bid-ask spread. So we'll continue to be open to those opportunities, but it has to be, as you pointed out, at the right value at the right time and be the right asset.

And at this point, we haven't found anything that we think will actually improve our portfolio at the right price and at the right time. I will tell you that we do think there are better inorganic opportunities to bolt-on in both our Marketing and our Lubes businesses right now. And so that's what we're continuing to look at. We do think that the opportunity is there. We're not looking for anything huge or transformational. We're looking for things that will bolt on and help us accelerate the organic strategy of growth that we've already got going, both at Marketing and in Lubes.

And as we've talked about before, we're very pleased with the progress that we're making in both of those businesses. And to the extent that there is something out there that could help us accelerate that progress, we do think there's opportunities out there that we'll continue to look at.

Okay. That's really helpful, Tim. And then I just want to follow up on your comments around return of capital. I think the buyback was a little bit higher than most of us expected. In the quarter, the stock is still trading even after the bounce here below book value. Balance sheet is in pretty good shape. Is it fair to assume that you can kind of keep this run rate up at the forward curve? And could there even be upside? .

Neil, this is Atanas. Thanks for the follow-up question. Our goal is, again, to continue to meet and exceed expectations with respect to capital returns. We've got strong cash flow generation this quarter. As you can see, we were not looking to hoard cash. So we're returning it back to you, the shareholders.

Yes. And Neil, as mentioned earlier in the call, we've got a history of returning cash to our shareholders. And I think that's what we can point to is is our history and our focus and our commitment to do that will continue. I think I said this in my prepared remarks, but if you think about it, and in terms of the [ 60 million ] of shares that we issued when we bought Sinclair, we have now bought back in 98% of those [ 60 million ] shares. And then if you add back the shares that we issued as part of HEP, we have bought back a total of 72% of those total shares that we issued back then. So that's clearly 1 of our ways to add shareholder value and get cash back to our shareholders as to buy back those shares, and we continue to be committed to doing that with our excess cash.

Next question comes from the line of Theresa Chen of Barclays.

I have a follow-up question on the indirect exposure to PADD 5. Setting Puget aside for a minute. Just given the visible capacity reduction in California, from your Navajo facility in terms of the refined product placement, how much and how far West can you take that barrel? Is it largely to Phoenix? And then from SLC, how space can you actually utilize on your unit pipeline? Can you regularly use there since there are shippers on that line, your neighboring SLC refiners, I imagine. Just wanted to understand how much can this realistically the needle on capture in the West segment as these California facilities close over the next 12 months.

Theresa, this is Steve. I think you've hit on exactly 1 of our key -- what we believe is 1 of our key strategic advantages. From our Navajo complex, we can take a good portion of our light products make there into the Phoenix market. That's as far as it goes out of the Navajo refinery. But out of the Rockies complex, not only from our Salt Lake City, which cross refinery, but the other Wyoming refineries, we can take and optimize kind of upgrade barrels right through the valley, up north and then south into Las Vegas. And we have ample space in terms of going and leveraging that integrated asset of [indiscernible], which we think provides a differentiation for us. And as you rightly call out, that continues to be a hunting ground that we look to go capture moving forward and all the market fundamentals and dynamics point to us being in a leading space there. So we look forward to capturing that as it continues to play out.

And Theresa, I would just say that pipeline that Steve mentioned, we have spare capacity on that today, but we also have opportunities to debottleneck that fairly simply and fairly straightforward when that time comes. So we believe there's still plenty of opportunity there. And yes, we think it can be meaningfully impactful to our West capture.

Understood. And on the comment on inorganic opportunities in the marketing and LSP segment, just curious how fragmented are the markets in your areas of specific interest either by product or by region, how much realistic run rate do you have on this inorganic strategy?

Yes. So we look to focus our branded put growth in the areas where we have logistics parity and can produce and get it on our midstream assets. That's where we have significant advantages. So you can imagine Pacific Northwest, you can imagine Southern PADD 5 in Vegas in the Rockies. When you think about fragmented market, there's larger players that are coming in, but there's still a lot to do in terms of 10 to 15 site chains that are looking to go simplify or have an exit route and our brand brings something very strong in those markets. The brand recognition and awareness right through the Rockies into PADD V is quite strong, and it's something that is yet untapped. So the fragmentation is an aspect, but there's not been enough consolidation to take some of those opportunities off the table, and we look to go take advantage of some of that in our core markets.

And I would just say, Theresa, that the DINO brand has really been taking off here. You can see that in our organic growth results, both the record number of new stores we've added in the second quarter as well as over the last rolling 12 months. And so we're very pleased with the organic pace of growth that we've got going on. But as Steve mentioned, we do think there's even more opportunities to accelerate that through some inorganic opportunities, which we'll continue to look at along the way. You also asked about Lube, so I'll ask Matt to comment on that.

Yes. Theresa, it's Matt here. We have over 300 lubricant marketers and manufacturers in the United States. And those brands often have -- those businesses have often have a heritage and a long history of great product solutions and offerings that could be very complementary to our business. And so we mentioned it earlier, we're really focused on looking at those opportunities when they become known to us and then whether or not they can help us accelerate our growth into these higher value established markets or some new adjacencies that we don't participate in today. And in all cases, we're looking to use those to further develop our capabilities and competencies, whether that be through technology or supply chain in different markets that allow for us to get better reach to our customers and to serve the markets where we believe that we can win.

Yes. And Theresa, we do think the Lubes and Specialties industry is fairly fragmented still. We have been a consolidator in that industry when we put Petro-Canada, Sonneborn and Red Giant together. And we do think there are more opportunities to do that. Our strategy overall in Lubes is to continue to grow that finished lubes put to soak up our excess base oils and to basically drive a multiple expansion in our Lubes business as we continue to integrate that base oil and finished lubes business.

[indiscernible] comes from the line of Doug Leggate of Wolfe Research.

I apologize a little later on. You managed to clash with our cousins over in London. So Tim, I wonder if I could ask 2 related questions related to the Renewables business. Frankly, you actually missed our Refining number, but you really not kicked our a** on the Renewable EBITDA this quarter. And I'm trying to understand how much of that is repeatable and put differently, can you offer any kind of thoughts on what the sustainable EBITDA of the Renewable Diesel business could be assuming the user tax credit is continues.

The second part of my question is related to SREs because obviously, you guys are exposed to that. And my understanding is that the comment period is due on the 8th of August. But if SREs are granted, that's presumably negative for RINs, which is presumably negative for renewable diesel. So I'm wondering if you can reconcile those 2 things how you see the sustainable operating income or EBITDA for renewable diesel and what your stance is on SREs.

Yes, Doug, thanks for the question. And I know today was a busy day. So thank you, guys, for running around and participating in all these calls. I'm disappointed. We missed your refining number, but we'll do better next time.

Yes, you're going to on renewable diesel is my point.

No, no, I'll just give you a hard time, Doug, and we're very pleased with our refining results. And -- but we do know there's always -- we have more room for improvement, and we do have our sights to continue to improve in our Refining business. And we think next quarter will be -- will show even that more improvement as we continue this journey. So it's a fair observation to make do on that.

One -- we're very pleased with kind of like we start our positioning on renewals. We think with RINs pricing, LCFS pricing that

[Audio Gap]

Once again, if we don't have any further questions, I'd now like to hand back over to Tim for any closing remarks.

[Technical Difficulty]

Ladies and gentlemen, please be on standby. We are currently experiencing a bit of a technical issue. Again, please be on standby. We will be back shortly. Thank you.

Go ahead, Ellie.

And there are no further questions, we will now turn the call back over to Tim for any closing remarks.

Thank you, Ellie, and we apologize for the drop there. But before we close, I want to give a shout out to all of our employees who rolled up their sleeves and put on their rally caps this quarter to deliver these strong results, refining throughput, capture and operating costs are all trending in the right direction, thanks to their hard work and dedication. And our nonrefining segments continue to shine with our marketing and midstream businesses on pace for another record performance this year. All of these are indicators that our strategy is working.

Looking ahead, we are constructive on the fundamentals of each of our businesses, including Refining. And as always, our priorities remain the same, to improve our reliability; two, integrate and optimize our portfolio of assets; and three, return excess cash to our shareholders. Thank you for joining our call, and have a great day.

This does conclude today's teleconference. Please disconnect your lines at this time. Have a wonderful day.