With a combined revenue of $21 trillion and $2.1 trillion in profits, the 2026 Fortune 500 is the definitive list of America's largest companies.

Fortune 500

Almost $20 trillion in revenue—and a record-breaking $1.87 trillion in profits. Introducing the 2025 Fortune 500, the definitive list of the biggest companies in America.

Energy sector dominated this year for the first time since 2008, with 28 companies featured on the list.

100 Fastest-Growing Companies

Industries included in the sector are mining, oil and gas exploration and services, pipelines, refining, and utilities.

Fortune Sector Leaders: Energy

The Fortune 500, in its 70th year in 2024, ranks the biggest U.S. companies by revenue.

The corporations on our annual list of the world’s largest companies delivered a record $41 trillion in aggregate revenues.

Fortune Global 500

The Fortune 500, in its 69th year in 2023, ranks the biggest U.S. companies by revenue.

Industrials came out on top this year, with 22 companies featured on the list.

This year’s Fortune 500 marks the 68th running of the list.

This year’s Fortune 500 marks the 67th running of the list.

Resulting from a merge of Holly Corporation and Frontier Oil in 2011, the petroleum refiner has operations in seven U.S. states.

This year's Fortune 500 marks the 66th running of the list.

F500-2020-184-HollyFrontier

This Dallas-based oil refiner produces gasoline, diesel, jet fuel, lubricants, and asphalt.

This year's Fortune 500 marks the 65th running of the list.

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This year's Fortune 500 marks the 61st running of the list. Wal-Mart claims the top spot again. See who made the list.

Wal-Mart stayed on top as its sales crept closer to half-a-trillion dollars. Apple moved into the top five. And UnitedHealth Group continued its steady climb. 

Shale rules! That’s the lesson of the latest edition of our annual list of public companies with the most stellar three-year profit, revenue, and stock growth. 

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Oil refining and pipeline players HollyFrontier and Sinclair Oil merged in 2022, creating the combined HF Sinclair. The Dallas-based corporation maintains the legacy Sinclair apatosaurus (brontosaurus) logo that dates back nearly 100 years and the “DINO” stock ticker, harkening back to the storied history of fossil fuels. HF Sinclair processes almost 700,000 barrels of crude oil a day, counting refineries in Washington, New Mexico, Wyoming, Kansas, Oklahoma, and Utah. HF Sinclair also has lubricants and specialty products facilities in Canada and the Netherlands, and has branched out with renewable diesel production at its Wyoming and New Mexico refineries.

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Q3 2024

HF Sinclair (DINO): Company Profile, Stock Price, News, Rankings

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HF Sinclair

hf sinclair

Welcome to H. F. Sinclair Corporation's Fourth Quarter twenty twenty four Conference Call and Webcast. Hosting the call today is Tim Goh, Chief Executive Officer of HF Sinclair. He is joined by Atanasov, Chief Financial Officer Steve Ledbetter, EVP of Commercial Valerie Pompa, EVP of Operations and Matt Joyce, SVP of Lubricants and Specialties.

At this time, all participants have been placed in a listen only mode and the floor will be open for your questions following the presentation. Please note that this conference is being recorded. And it is now my pleasure to turn the floor over to Craig Biery, Vice President, Investor Relations. Craig, you may begin.

Thank you, Christa. Good morning, everyone, and welcome to HF Sinclair Corporation's fourth quarter twenty twenty four earnings call. This morning, we issued a press release announcing results for the quarter ending 12/31/2024. If you would like a copy of the earnings press release, you may find it on our website at hsinchclair.com. Before we proceed with remarks, please note the Safe Harbor disclosure statement in today's press release.

In summary, it says statements made regarding management expectations, judgments or predictions are forward looking statements. These statements are intended to be covered under the safe harbor provisions of federal security laws. 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. Our full year 2024 financial and operational results highlight the strength and resiliency of our diversified portfolio, and 2024 was a good year to prove that out as we navigated challenging macroeconomic conditions in refining. Our results also demonstrate the success we are delivering on executing our three key strategic priorities. First, on improving reliability. Our heavy turnaround workload in 2024 was completed on schedule and on budget, leading to increased utilization and higher refinery throughputs year over year.

I am also pleased to report that we achieved our best ever results for personal safety in 2024, beating our old record by over 40% and positioning all of our assets to continue operating safely and reliably. Second, optimization and integration helped us achieve record EBITDA in both our marketing and midstream businesses. And our lubricants and specialties business generated another strong year of earnings. We also benefited from lower SG and A expenses year over year. Third, our commitment to shareholder returns.

We managed our portfolio of assets to generate strong cash flows through the cycle and are pleased to have returned over $1,000,000,000 to shareholders in 2024 through both dividends and share repurchases, all while maintaining a strong balance sheet and liquidity position. All of these examples are proof points that our strategy is working. Now let me cover our segment highlights. In refining, for 2024, our annual adjusted operating expenses were lowered to $7.98 per throughput barrel through lean efforts and improved reliability, a reduction of $0.37 per barrel year over year and setting us on the path towards achieving our target of $7.25 per throughput barrel. We set annual records for premium gasoline production at Woods Cross, jet production at Puget Sound and hydrogen production at Artesia, amongst other individual site records.

In renewables for 2024, we achieved significant milestones of reducing our annual operating expenses per gallon 24% year over year while increasing our utilization and sales volumes by 19% year over year through improved reliability and optimization efforts. Excluding the $20,000,000 end of year charge related to drawdown of higher cost inventory, our Renewables business would have achieved significant positive fourth quarter EBITDA. While the margin environment was challenging in 2024, we focused on the things we could control, such as increasing our low CI feedstock mix through our pretreatment unit, improving our hydrogen availability through our reliability efforts and leveraging our commercial strategy to strengthen the earnings power of the business. Our marketing segment for 2024 delivered record annual EBITDA of $75,000,000 a 23% increase over 2023. We also grew our supply branded footprint by a net of 87 sites during 2024, demonstrating our commitment to grow this business and increase the percentage of branded wholesale volumes across our refining system.

We continue to see strategic value in growing and integrating the Dyno brand into our portfolio as it provides a long term outlet with margin uplift for our refining barrels. Looking forward, we expect to grow our number of branded sites by 10% annually. In lubricants and specialties, we delivered another strong year of earnings with $330,000,000 of adjusted EBITDA, even with $45,000,000 of FIFO headwinds. Our results were driven by strong sales volumes, product mix optimization across our finished products portfolio and continued base oil integration. In our midstream business, we delivered record annual adjusted EBITDA of $447,000,000 up 14% year over year and record total volumes up 7% year over year, highlighting the value of simplifying our corporate structure and capturing synergies from the buy in of HEP.

Looking forward, we remain committed to growing this business and believe there is more low hanging fruit for integrating and optimizing our midstream and refining businesses. The strong performances of these three non refining segments demonstrate the strength and resiliency of our diversified portfolio. During 2024, we returned over $1,000,000,000 to shareholders through share repurchases and dividends. Since the Sinclair acquisition in March 2022, we have returned over $4,000,000,000 in cash to shareholders and have reduced our share count by over 57,000,000 shares, which represents 71% of the shares we issued for both the Sinclair and HEP transactions. As of 12/31/2024, we had approximately $800,000,000 outstanding on our share repurchase authorization, and we remain committed to our long term cash return strategy and long term payout ratio while maintaining a strong balance sheet and investment grade credit rating.

Today, we also announced that our Board of Directors declared a regular quarterly dividend of $0.5 per share payable on 03/20/2025, to holders of record on 03/06/2025. Looking forward, we remain focused on our strategies to improve reliability, optimize and integrate our portfolio and return capital to shareholders, which we believe will drive continued profitable growth and value creation for our shareholders. We are also encouraged by the recent uptick in our refining indicator margins and believe we are well positioned to capture the anticipated rebound and cracks during this driving season. With that, let me turn the call over to Ades.

Thank you, Tim, 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 shareholders of $214,000,000 or negative $1.14 per share. These results reflect special items that collectively decreased net income by $23,000,000 Excluding these items, adjusted net loss for the fourth quarter was $191,000,000 or negative $1.02 per diluted share compared to adjusted net income of $165,000,000 or $0.87 per diluted share for the same period in 2023. Adjusted EBITDA for the fourth quarter was $28,000,000 compared to $428,000,000 in the fourth quarter of twenty twenty three.

In our Refining segment, fourth quarter adjusted EBITDA was negative $169,000,000 compared to $276,000,000 in the fourth quarter of twenty twenty three. This decrease was principally driven by lower adjusted refinery gross margins in both the West And Mid Con regions as a result of high global supply of transportation fuels across the industry and lower refined product sales volumes. Crude oil charge averaged 562,000 barrels per day for the fourth quarter compared to 614,000 barrels per day in the fourth quarter of twenty twenty three. Crude charge declined in the fourth quarter of twenty twenty four, primarily as a result of the turnaround at our El Dorado refinery and weaker market conditions. In our Renewables segment, we reported adjusted EBITDA of negative $9,000,000 for the fourth quarter compared to negative 3 million dollars for the fourth quarter of twenty twenty three.

This decrease was principally due to the drawdown of high priced inventory resulting in a $20,000,000 increase to cost of sales in the fourth quarter of twenty twenty four. Total sales volumes were 62,000,000 gallons for the fourth quarter of twenty twenty four as compared to 63,000,000 gallons for the fourth quarter of twenty twenty three. Our marketing segment reported EBITDA of $21,000,000 for the fourth quarter compared to $9,000,000 for the fourth quarter of twenty twenty three. This increase was primarily driven by higher margins in the fourth quarter of twenty twenty four. Our lubricants and specialties segment reported adjusted EBITDA of $70,000,000 for the fourth quarter compared to adjusted EBITDA of $57,000,000 for the fourth quarter of twenty twenty three.

This increase was primarily driven by a decrease in FIFO charge from $30,000,000 in the fourth quarter of twenty twenty three to $2,000,000 in the fourth quarter of twenty twenty four. The FIFO charge in both periods were driven by the consumption of high priced feedstock inventory. Our midstream segment reported adjusted EBITDA of $114,000,000 in the fourth quarter compared to $110,000,000 in the fourth quarter of last year. This increase was primarily driven by higher revenues from higher tariffs in the fourth quarter of twenty twenty four. Net cash used by operations totaled $141,000,000 in the fourth quarter, which included $154,000,000 of turnaround spend.

H. F. Sinclair's capital expenditures totaled $173,000,000 for the fourth quarter. As of 12/31/2024, H. F.

Sinclair's total liquidity stood at approximately $3,300,000,000 which includes a cash balance of of our undrawn $1,650,000,000 unsecured credit facility and $850,000,000 availability on the HEP credit facility. As of December 31, we had $2,700,000,000 of debt outstanding with a debt to cap ratio of 22% or net debt to cap ratio of 15%. On 01/23/2025, HFCN Clear issued an aggregate principal amount of 1,400,000,000 of senior notes consisting of $650,000,000 of 5.75% senior notes due 02/1931 and $750,000,000 of 6.25% senior notes due 02/1935. We used net proceeds from the notes to repay all $350,000,000 in outstanding borrowings under the HEP credit facility and to fund approximately $850,000,000 in tenders and redemptions of our twenty twenty six senior notes and $150,000,000 in tenders of our 2027 senior notes. This extended our debt maturity profile while lowering our weighted average interest expense.

Let's go through some guidance items. With respect to capital spending for full year 2025, we expect to spend approximately $775,000,000 in sustaining capital, including turnaround and catalysts. This is down $25,000,000 from 2024 and includes a non refining and specialties lubricants and specialties turnaround in 2025. In addition, we expect to spend $100,000,000 in growth capital investments across our business segments. For the first quarter of twenty twenty five, we expect to run between 1,200,000 barrels per day of crude oil in our Refining segment, which reflects the planned turnaround at our Tulsa Refinery.

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

Thank Our first question comes from Manav Gupta with UBS. Please go ahead.

Good morning, guys. I'm just trying to understand, look, the West Coast market looks a lot tighter given all the unplanned downtime we are overseeing. So help us understand your leverage to the West Coast market, whether it's through Puget Sound or Unave or which other refineries that you have that can supply to markets which are linked to the West Coast crack?

Hey, Manav, this is Steve. Thanks for the question. Yes, we're watching the market on the West Coast as recent unplanned events and heavy turnaround season have started and the fundamentals are improving. We think that that helps the overall market balance for not only our Puget Sound refinery in the Pacific Northwest, but we like to say that we can touch the South Side of the Pad 5 from multiple points. We can come from the Salt Lake Valley down our integrated UNEP pipeline into Vegas and out of our Navajo Artesia Refinery up into Phoenix.

So we're seeing the benefit there and we look to take advantage of that as this unfolds.

And Manav, I would just say this is Tim Manav. I would just say, we've talked about how part of our overall strategy is to be able to move barrels west, to take advantage of what we perceive to be a gasoline shortage long term in that area. And so that strategy is paying out as we see this heavy turnaround season and some unplanned events going on right now.

Perfect. Quick follow-up. You when you did Sinclair deal, again, part of it was trying to grow the marketing business. Help us understand a little more what's going on over there. Is it going to be more organic or you're looking at some small bolt on opportunities and your plans to grow your marketing business?

Yes. Again, this is Steve. We see that that is still one of the largest yet untapped value elements of the Sinclair acquisition. We're making good progress. As Tim mentioned in the prepared remarks, we put on 87 net stores.

We have another signed 152 that we look to come on in the next first half of the year or through the third quarter. We believe that that branded put is an important sustainable aspect and we're seeing high demand for it. So accelerating that is important through our organic growth program. When we think about inorganic, there's nothing on the slate at this point. We'll look at things, but we really believe we can fill out our market predominantly through our organic growth in the wholesale marketing.

And again, again, we're starting to see the benefits of that and looking to grow that from between 510% year over year.

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

Thanks. Maybe if I could ask a couple on the Lubes business. First, in the last couple of quarters, it's been a little bit weaker generally below what you would expect as the mid cycle earnings power of the business. Can you maybe talk about how you view the backdrop like the macro backdrop for Lou's business going forward? And should we get back to that $350,000,000 run rate level in 2025?

Sure, Ryan. It's Matt Joyce here. If we look at it, the macro backdrop of the lubricants business in 2024, you saw similar to what we've experienced on the refining side, a lot of compression on the base oil markets, which still swing a fairly big part of the business in our portfolio. And the team has done pretty nicely to manage through that what we would consider a down cycle in the base oil market over the past couple of quarters. We've seen subdued, and actually we're now seeing that turn a bit, and we're encouraged by what we see going forward from that perspective.

We've also seen subdued demand just in general in our European businesses. That market has been slower than normal. And we've seen steady offtakes in North America and we're actually growing our positions in our businesses in The U. S, in particular, off of a very nice base that we've established over the past several years. So we see our business continuing to perform, and I think we'll see if you look at an excluding FIFO number, it's a 3.75% result.

So again, the underlying performance of this business is still very healthy and trending above mid cycle.

Yes. Ryan, this is Tim. I'll just chime in too. I mean, Matt said it, despite even the challenges and headwinds that all businesses face that Matt just described, if you factor in the $45,000,000 of FIFO impacts, we actually were at kind of an underlying business rate of $375,000,000 which would have been a record, for 2024. So we still believe that the business is strong.

Seasonally, fourth quarter is generally your weakest quarter and we're seeing first quarter pick back up again like we would expect.

Great. Thank you. And then, I know it's not your favorite thing to talk about, but there's obviously a high profile example of an activist investor involved with one of your peers with the debate over the best way to recognize value within the diversified business model? How do you think about the balance between driving value recognition for businesses within your mix through organic growth or improved profitability, particularly for something like lubes versus potential for external monetization?

Yes. Thanks, Ryan. Nothing has changed in our strategy around the lubes and specialties business. Our goal is to maximize shareholder value. I know that may not have come across as clear as it should have last quarter, but we are open to whether that's in our portfolio or in someone else's portfolio.

But we're going to our goal is to maximize the shareholder value. In the near term, we're focused on continuing to optimize this business to integrate it and grow it, mostly through organic means. But if there are some inorganic opportunities that come up, small bolt ons, as Matt mentioned last quarter, we would certainly be willing to entertain that. But our primary focus is to continue to maximize that shareholder value. And in the midterm, we will continue to evaluate those strategic options on how best to do that.

Your next question comes from the line of Paul Cheng with Scotiabank. Please go ahead.

Tim or maybe Steve, I want to go back into the first question on marketing. The EBITDA looked really good and you guys continue to add store. But if you look at the sales volume and we just do a very simple map and divide it by the number of store, your per share your per store sales quarter to quarter say year over year that dropped about 10%. Trying to understand that why that is the case and is it a concern that the incremental the store that you're getting in, it just seems like it's a lesser productive than your existing? That's the first question.

Thanks, Paul. Yes, on the marketing element looking at volume year over year, we like to talk about as high grading the portfolio. As we go put a new site on the ground, what we're seeing is the revenue replacement sites are performing better between 60120% once they come online and at a higher margin. But these things take a little time. So really this is a timing issue with some of pruning the tree and maybe we don't want to continue with some of these sites, but the sites that we are seeing really are performing much better and you're seeing it in our EBITDA.

So this is really just a timing issue and how things are shaking out in the actual financials.

Yes, Paul, this is Tim. What I would also add on to that is, you see the net increase in stores, which is 87 for the year. That really consists of something like 120 some odd new stores netted out with about 40 of the old stores that have been rolled off. And that's the high grading that Steve is referencing. And that's why you're seeing maybe you lose some volumes in some of those stores that are rolling off, but the high grading of the new business is by far driving the, the margin increase.

And you see that the gross margin per gallon difference that we're posting here in 2024.

Steve or Tim, do you have a same store sales type of figure that for those that has been in your portfolio more than a year that you can share so that at least that we can do some maybe apple to apple comparison?

Yes. So we do look at same store sales and those are trending about where we expect them to be. And timing is an important element. And so these things take between six months about to ramp up to full speed. And as you mentioned though that the stores that we've lapped year over year, we're seeing at parity or slightly up.

We continue to see growth in our region. So we think that gives us a positive indication that our strategy on moving more into our branded put is the right one to take with this business.

Okay. The second question is that Tim, I think when you look at your refining medium term cost target say $725 per barrel, Partly is that you think your utilization rate over time become better, more reliable and so you will be able to get the denominator higher, but that's not going to be sufficient. And I think you have said in the past that you probably need 100,000,000, one hundred and 50 million dollars in cost saving to really bridge the gap and get to there. Do you have any update you can share in terms of what initiatives that you guys are taking in pace and to able to achieve that cost reduction? And what is the time duration to achieve that?

Good morning. This is Valerie. As you know, we are aiming at the 7.25% target. We took a step this past year. Reliability remains, the number one thing we're working on.

So, and you're seeing that in, year over year production. In addition to that, we're fueling those improvements with turnaround in capital, which also go after operating costs through efficiency in the capital we're putting on the ground and eliminating high cost, maintenance assets. The other thing that is, in our strategy is digital, performance. So we're using several, digital, programs to drive predictive asset intelligence and optimize our, plants. These models are changing the way we work and we anticipate that those, we're starting to see those strategies play out in our maintenance costs and our operating costs overall this year and we expect that that's gonna continue to, serve as well.

Yeah. And Paul, this is Tim. I'll I'll just jump on to what Val talked about. You know, others are announcing cost reduction programs in terms of total dollars that they're trying to take out of the out of their portfolio. We announced our goal in terms of a $7.25 per barrel metric that Val just talked about because we think that addresses both the cost reduction program numerator as well as the improved reliability denominator that we're trying to achieve.

We think this is a better way to measure progress and so that you can kind of see our how we're doing against our bottom line. We know how much it cost we have to take out in order to get to that $7.25 at the numerator level. So this is more than just reliability. And we're pleased with the progress today. Maus talked about some of the things that we've done.

We achieved a record $7.98 this year as we talked about in our prepared remarks, and we believe that we have line of sight to get to that 7.25

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

Yes. Good morning, Tim and team. Just the first question is just your thoughts on return of capital. It's been a big part of the strategy over the last couple of years. Obviously, we're entering into a tougher we've entered into a tougher margin environment.

Just your perspective on when do you see line of sight to be able to resume a meaningful buyback?

Neal, thanks for your question. We first and foremost, I'd like to reiterate our commitment to our long term capital return, commitment of 50% to our shareholders. If you look at our history, we've far exceeded that. From where we stand today with a line of sight of improving margins for the balance of this year and looking at that diversified portfolio, we feel very comfortable with meeting that target, that minimum target of 50% and as cracks improve to in fact exceed it. I would again like to point to your attention that if you look at our non refining businesses, when you look at midstream of approximately four fifty, lubricants of this past year three thirty, marketing of 75, that provides us with significant dry powder certainly to meet our dividend commitments and then as cracks improve to continue to return cash to our shareholders.

And Neil, this is Tim as well. I'll just pile on in terms of what Annus was saying. It's interesting. I know some people are out there are talking about how their midstream businesses are strong and are able to, basically cover their dividend needs. We're in the same boat.

If you look at our the $450,000,000 of EBITDA that our midstream business is generating, the cash that comes with that is enough to pay off our dividend. And so really everything else that's coming out of marketing that Ann has talked about, that's coming out of lubes, that's coming out of refining is really allowing us to then, take advantage of additional ways to return value to shareholders through Novak's in other ways.

Yeah. That makes sense. So then it really comes back to the margin environment. And, the Mid Con is famously seasonal. It tends to be a little bit weaker as you work through the winter.

But just your perspective on are we seeing signs of improvement? How do you think about the setup into this summer? What's going on in the Mid Con? Is it a crude problem? Is it a product problem or just a seasonal problem?

Yes. This is Steve. I'll take that one. I think the Mid Con as you mentioned is very seasonal. What we've had for us particularly in the fourth quarter was it was our large turnaround and that was at El Dorado.

As far as what we're seeing in terms of structure in the Mid Con, I think what we'll see is the whole U. S. Balance a little bit in terms of supplydemand and then we will be able to take advantage of some of that improved crack as we drive into the or head into the driving season. And we're starting to see that already. We look across 2025 and we think that just on balance, we see that it's a pretty constructive view for margins across our regions.

We think the average will be at right at mid cycle. Demand is looking like it's going to be up. Growth continues in our regions. It's been a very cold winter. And then there's some supportive underlying economic fundamentals suggesting a rebound and strong distillate demand.

So overall, we look pretty we feel pretty good about our overall regions and the Mid Con as part of that.

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

Good morning. Back on the midstream topic and your potential low hanging fruit on optimizing and integrating your midstream and refining businesses to your earlier comments. Can you talk about the UNIF pipeline and what are the current commitments and utilization on that in light of the anticipated closure of a competing, a competitor refining facility in LA and the terminus point for that system, the proximity of Vegas to LA. Is that system expandable? Would you be able to seek additional commitments and source additional barrels to that market?

How do you see the path forward to pass by gasoline evolving from here?

Thanks Theresa. This is Steve. I'll take that one. Not going to get into specifics around capacity and utilization where it is. Although, we do believe we have some maneuverability on Unev and we think that the market structure is supporting potentially higher opportunity at the south end of that line, which as you know is Las Vegas.

It could be supplied from the West Coast. Given the tightness of what we're seeing near term and potentially longer term, we think that bodes well for us. And so, as Tim mentioned earlier, we believe moving barrels west out of the group up into the valley and heading north out of Salt Lake, taking advantage of the Salt Lake Valley and then moving down into Las Vegas as part of that integrated value chain that we're already seeing benefit for. And we'll look to go extract more value out of that as the market unfolds. And Theresa, this

is Tim. UNEV isn't the only way we can take advantage of those West Coast margins. As you know, we also can get to Phoenix through our Artesia Refinery and we just we still have more capacity to do that more if needed. And then of course the direct way, our Puget Sound Refinery can make carb gasoline and can make gasoline components, for that matter and can ship into the California area as needed. So there's three different ways that we can take advantage and that we're influenced through the West Coast issues that are going on right now.

Got it. And just to clarify, in terms of maximizing profitability across your system as this theme evolves, would that primarily be through higher utilization of either UNIF or Artesia to Phoenix system, without incremental CapEx? And, on the Puget side, can you just provide any color on how much or what percentage of the clean product yield or the gasoline component specifically can be delivered into California based on what PGA can make today?

So I think it's a two part question. We believe there's opportunity to unlock more value without significant capital. And that's about optimizing where our make is. We believe our regions are we're fortunate that we have the production in advantaged regions in close proximity to where some of this is happening. And so we can attract from a midstream perspective, we can attract more barrels from different modes of operation to uplift the midstream, but for our integrated value chain, we can do more there as well.

When it gets to the question around Puget, we have the ability to make significant high grade components and put those down into the California market. We look to see where we can make more carb gas in the future if that market plays out. Right now, we think we're finding opportunities to go put higher value components down into that market to help supply some of the short that exists there. And we'll look to continue to exploit that even further as we move along.

And Theresa, this is Tim. We talk about our growth capital, every year when we describe the pieces of capital that we reserve for growth. We have a small growth capital project at Puget Sound that will allow us to make even more carb gasoline and ship it. That comes online here in the next month or two. And so that's perfect timing in terms of what we're going to be able to do to, to try to take advantage of the market if warranted.

That's great to hear. And if I could just squeeze one more in. On the midstream $450,000,000 how much of that is paid by the Refining segment versus third party cash flow?

Yes. We're roughly an 80% integrated value type midstream business. We think there's opportunity and open space where we can further improve the earnings without impacting at all our integrated performance and value chain.

Your next question comes from the line of Roger Read with Wells Fargo. Please go ahead.

Yes. Good morning, everybody. I guess, I kind of addressed what I wanted to hit, which was what is your optionality to make more of the carb gasoline? And maybe specifically the project you're referring to in Anacortes. I mean, there's always the issue in California of what gets imported is unfinished versus finished.

Is part of what you're looking at here the ability to deliver the finished? And any indication of what your sort of capture potential is off of that versus an unfinished product into California?

Yes, Roger, this is Steve. I mean, it's a great question. What is the most valuable thing for us in the Pacific Northwest is flexibility and optionality. And today, right now, the high grade is on the components and bringing unfinished into California. But this project allows us to go decide whether or not there's a larger card make and a volume short that we put into California versus the components.

But it's going to depend on the supplydemand balance of the market at the time. And we will get our share of that capture in either one of those decisions, but what is best for Puget and the overall entity.

Okay. Appreciate that. And then, on the lube side of the business, I know you mentioned sort of a, I don't know, seasonal or cyclical downturn here on the lube oil side. As you look out at the sort of, let's call it the macro side of that supply and demand, what is the expectation for base oil markets? Is there any particular market that we need to pay attention to?

I'm thinking kind of here of China's been slow in terms of how it impacts crude oil consumption. Is this a tied to China, tied to chemicals being a little more loose? What do you think is the key item to pay attention to here for tightening up the loose market?

Yes. Hi. It's Matt Joyce here. Big question. From an overall macro demand perspective, you're spot on.

I mean, what we're seeing at this stage is that certain geographic areas that had taken a

past many years, namely Asia and more specifically around China. And then, of course, coupled with the European demands that are dampened and a little bit softer than had been traditionally there. Folks are looking at The U. S. Market and the North American market more generally as a favorable place to place base oils.

And so that I think is a contributing factor to the overall dampened margin environment that we've gone through in 2024. And I think that it will really be a matter of where and how we see China continuing to recover and then do those base oils make their way back to that marketplace and tighten things up. At this stage, that's really placed to the strategy that we've talked about with regards to being operationally excellent in our lubricants business, continuing to forward integrate our base oils into finished products and our specialties portfolio that allow for us to continue to have a favorable mix and improve our margins. So we're not as reliant on that business.

Yes. And Roger, we've talked about this before, but our strategy is to integrate, and grow our finished lubes business to the point that it soaks up all that excess base oil that we had produced in the past. We're basically trying to disconnect our business from that base oil crack business. And while we're not all the way complete yet, you'll see over the last three years when we report percent base oil sales as a percentage of our product mix for lubes that has been going down the last three years. Our strategy is working, that's continuing to play out.

And as you see the base oil markets cycle through, you'll see that our results have been able to stay strong through the cycle. And that's that disconnecting that we've been doing from a strategic standpoint.

HF Sinclair (DINO) Q4 2024 Earnings Call Transcript

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