HF Sinclair Corporation (NYSE: DINO) (“HF Sinclair” or the “Company”) today reported second quarter net income attributable to HF Sinclair stockholders of $507.7 million, or $2.62 per diluted share, for the quarter ended June 30, 2023, compared to $1,221.3 million, or $5.43 per diluted share, for the quarter ended June 30, 2022. Excluding the adjustments shown in the accompanying earnings release table, adjusted net income attributable to HF Sinclair stockholders for the second quarter of 2023 was $503.8 million, or $2.60 per diluted share, compared to $1,258.5 million, or $5.59 per diluted share, for the second quarter of 2022, which excludes certain items that collectively decreased net income by $37.3 million.
HF Sinclair’s CEO, Tim Go, commented, “HF Sinclair’s strong second quarter results were driven by healthy product margins in our refining segment, coupled with solid performances from our lubricants, marketing and midstream businesses. With the majority of the planned turnaround work behind us, we believe our diversified portfolio is well positioned to capture the margins available to us for the remainder of the year. We remain focused on the reliability and integration of our asset base to further strengthen the earnings profile and free cash flow generation of HF Sinclair.”
Refining segment income before interest and income taxes was $589.8 million for the second quarter of 2023 compared to $1,558.1 million for the second quarter of 2022. The segment reported EBITDA of $702.6 million for the second quarter of 2023 compared to $1,660.9 million for the second quarter of 2022. Excluding the lower of cost or market inventory valuation charge of $26.8 million, Adjusted EBITDA in the second quarter of 2023 was $729.5 million. This decrease was principally driven by lower refining margins in both the West and Mid-Continent regions and lower refined product sales volumes, which resulted in lower refining segment earnings in the quarter. Consolidated refinery gross margin was $22.22 per produced barrel, a 39% decrease compared to $36.36 for the second quarter of 2022. Crude oil charge averaged 553,940 barrels per day (“BPD”) for the second quarter of 2023 compared to 627,310 BPD for the second quarter of 2022. This decrease was primarily a result of turnarounds at our Navajo, Parco and El Dorado refineries in the second quarter of 2023.
Renewables segment income before interest and income taxes was $4.4 million for the second quarter of 2023 compared to a loss of $(73.2) million for the second quarter of 2022. The segment reported EBITDA of $23.4 million for the second quarter of 2023 compared to $(62.8) million for the second quarter of 2022. Excluding the lower of cost or market inventory valuation adjustment, the segment reported Adjusted EBITDA of $(11.3) million for the second quarter of 2023 compared to $(28.3) million for the second quarter of 2022. Total sales volumes were 50 million gallons for the second quarter of 2023 as compared to 26 million gallons for the second quarter of 2022.
Marketing segment income before interest and income taxes was $18.6 million for the second quarter of 2023 compared to $19.5 million for the second quarter of 2022. The segment reported EBITDA of $24.6 million for the second quarter of 2023 compared to $23.9 million for the second quarter of 2022. Total branded fuel sales volumes were 364 million gallons for the second quarter of 2023 as compared to 335 million gallons for the second quarter of 2022.
Lubricants and Specialty Products segment income before interest and income taxes was $51.2 million for the second quarter of 2023 compared to $135.1 million in the second quarter of 2022. The segment reported EBITDA of $71.7 million for the second quarter of 2023 compared to $155.7 million in the second quarter of 2022. This decrease was largely driven by a lower FIFO benefit from consumption of lower priced feedstock inventory for the second quarter of 2023 of $0.5 million as compared to $71.0 million for the second quarter of 2022.
Holly Energy Partners, L.P. (“HEP”) reported EBITDA of $82.2 million for the second quarter of 2023 compared to $79.8 million for the second quarter of 2022 and Adjusted EBITDA of $102.2 million for the second quarter of 2023 compared to $104.2 million for the second quarter of 2022.
For the second quarter of 2023, net cash provided by operations totaled $490.0 million. At June 30, 2023, the Company's cash and cash equivalents totaled $1,614.6 million, a $249.7 million increase over cash and cash equivalents of $1,364.9 million at March 31, 2023. During the second quarter of 2023, the Company announced and paid a regular dividend of $0.45 per share to stockholders totaling $87.3 million. Additionally, the Company's consolidated debt was $3,196.0 million. The Company’s debt, exclusive of HEP debt, which is nonrecourse to HF Sinclair, was $1,700.6 million at June 30, 2023.
HF Sinclair also announced today that its Board of Directors declared a regular quarterly dividend in the amount of $0.45 per share, payable on September 6, 2023 to holders of record of common stock on August 17, 2023.
The Company has scheduled a webcast conference call for today, August 3, 2023, at 8:30 AM Eastern Time to discuss second quarter financial results. This webcast may be accessed at https://events.q4inc.com/attendee/369077342. An audio archive of this webcast will be available using the above noted link through August 17, 2023.
HF Sinclair Corporation, headquartered in Dallas, Texas, is an independent energy company that produces and markets high-value light products such as gasoline, diesel fuel, jet fuel, renewable diesel and other specialty products. HF Sinclair owns and operates refineries located in Kansas, Oklahoma, New Mexico, Wyoming, Washington and Utah and markets its refined products principally in the Southwest U.S., the Rocky Mountains extending into the Pacific Northwest and in other neighboring Plains states. HF Sinclair supplies high-quality fuels to more than 1,500 branded stations and licenses the use of the Sinclair brand at more than 300 additional locations throughout the country. In addition, subsidiaries of HF Sinclair produce and market base oils and other specialized lubricants in the U.S., Canada and the Netherlands, and export products to more than 80 countries. Through its subsidiaries, HF Sinclair produces renewable diesel at two of its facilities in Wyoming and also at its facility in Artesia, New Mexico. HF Sinclair also owns a 47% limited partner interest and a non-economic general partner interest in Holly Energy Partners, L.P., a master limited partnership that provides petroleum product and crude oil transportation, terminalling, storage and throughput services to the petroleum industry, including HF Sinclair subsidiaries.
The following is a “safe harbor” statement under the Private Securities Litigation Reform Act of 1995: The statements in this press release relating to matters that are not historical facts are “forward-looking statements” based on management’s beliefs and assumptions using currently available information and expectations as of the date hereof, are not guarantees of future performance and involve certain risks and uncertainties, including those contained in our filings with the Securities and Exchange Commission (the “SEC”). Forward-looking statements use words such as “anticipate,” “project,” “will,” “expect,” “plan,” “goal,” “forecast,” “strategy,” “intend,” “should,” “would,” “could,” “believe,” “may,” and similar expressions and statements regarding our plans and objectives for future operations. Although we believe that the expectations reflected in these forward-looking statements are reasonable, we cannot assure you that our expectations will prove correct. Therefore, actual outcomes and results could materially differ from what is expressed, implied or forecast in such statements. Any differences could be caused by a number of factors, including, but not limited to, the negotiation and execution, and the terms and conditions, of a definitive agreement relating to the Company's non-binding proposal to acquire all of the outstanding common units of HEP not owned by the Company or its affiliates (the “Proposed HEP Transaction”) and the ability of the Company or HEP to enter into or consummate such agreement; the risk that the Proposed HEP Transaction does not occur; negative effects from the pendency of the Proposed HEP Transaction; failure to obtain the required approvals for the Proposed HEP Transaction; the time required to consummate the Proposed HEP Transaction; the focus of management time and attention on the Proposed HEP Transaction and other disruptions arising from the Proposed HEP Transaction; limitations on the Company's ability to effectuate share repurchases due to market conditions and corporate, tax, regulatory and other considerations; the Company’s and HEP’s ability to successfully integrate the Sinclair Oil Corporation (now known as Sinclair Oil LLC) and Sinclair Transportation Company LLC businesses acquired from The Sinclair Companies (now known as REH Company) (collectively, the “Sinclair Transactions”) with their existing operations and fully realize the expected synergies of the Sinclair Transactions or on the expected timeline; the Company's ability to successfully integrate the operation of the Puget Sound refinery with its existing operations; the demand for and supply of crude oil and refined products, including uncertainty regarding the increasing societal expectations that companies address climate change; risks and uncertainties with respect to the actions of actual or potential competitive suppliers and transporters of refined petroleum products or lubricant and specialty products in the Company’s markets; the spread between market prices for refined products and market prices for crude oil; the possibility of constraints on the transportation of refined products or lubricant and specialty products; the possibility of inefficiencies, curtailments or shutdowns in refinery operations or pipelines, whether due to reductions in demand, accidents, unexpected leaks or spills, unscheduled shutdowns, infection in the workforce, weather events, global health events, civil unrest, expropriation of assets, and other economic, diplomatic, legislative, or political events or developments, terrorism, cyberattacks, or other catastrophes or disruptions affecting our operations, production facilities, machinery, pipelines and other logistics assets, equipment, or information systems, or any of the foregoing of the Company's suppliers, customers, or third-party providers, and any potential asset impairments resulting from, or the failure to have adequate insurance coverage for or receive insurance recoveries from, such actions; the effects of current and/or future governmental and environmental regulations and policies, including increases in interest rates; the availability and cost of financing to the Company; the effectiveness of the Company’s capital investments and marketing strategies; the Company’s and HEP’s efficiency in carrying out and consummating construction projects, including the Company's ability to complete announced capital projects on time and within capital guidance; the Company's and HEP’s ability to timely obtain or maintain permits, including those necessary for operations or capital projects; the ability of the Company to acquire refined or lubricant product operations or pipeline and terminal operations on acceptable terms and to integrate any existing or future acquired operations; the possibility of terrorist or cyberattacks and the consequences of any such attacks; uncertainty regarding the effects and duration of global hostilities, including the Russia-Ukraine war, and any associated military campaigns which may disrupt crude oil supplies and markets for the Company's refined products and create instability in the financial markets that could restrict the Company's ability to raise capital; general economic conditions, including economic slowdowns caused by a local or national recession or other adverse economic condition, such as periods of increased or prolonged inflation; and other financial, operational and legal risks and uncertainties detailed from time to time in the Company’s and HEP’s SEC filings. The forward-looking statements speak only as of the date made and, other than as required by law, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
RESULTS OF OPERATIONS
Financial Data (all information in this release is unaudited)
Three Months Ended
| Change from 2022 | |||||||||||||
2023 | 2022 | Change | Percent | |||||||||||
(In thousands, except per share data) | ||||||||||||||
Sales and other revenues | $ | 7,833,646 | $ | 11,162,160 | $ | (3,328,514 | ) | (30 | )% | |||||
Operating costs and expenses: | ||||||||||||||
Cost of products sold: | ||||||||||||||
Cost of products sold (exclusive of lower of cost or market inventory valuation adjustment) | 6,273,605 | 8,579,915 | (2,306,310 | ) | (27 | ) | ||||||||
Lower of cost or market inventory valuation adjustment | (7,863 | ) | 34,543 | (42,406 | ) | (123 | ) | |||||||
6,265,742 | 8,614,458 | (2,348,716 | ) | (27 | ) | |||||||||
Operating expenses (exclusive of depreciation and amortization) | 546,800 | 606,127 | (59,327 | ) | (10 | ) | ||||||||
Selling, general and administrative expenses (exclusive of depreciation and amortization) | 127,388 | 110,875 | 16,513 | 15 | ||||||||||
Depreciation and amortization | 189,360 | 164,044 | 25,316 | 15 | ||||||||||
Total operating costs and expenses | 7,129,290 | 9,495,504 | (2,366,214 | ) | (25 | ) | ||||||||
Income from operations | 704,356 | 1,666,656 | (962,300 | ) | (58 | ) | ||||||||
Other income (expense): | ||||||||||||||
Earnings of equity method investments | 3,545 | 5,447 | (1,902 | ) | (35 | ) | ||||||||
Interest income | 17,591 | 1,844 | 15,747 | 854 | ||||||||||
Interest expense | (46,982 | ) | (38,961 | ) | (8,021 | ) | 21 | |||||||
Gain (loss) on foreign currency transactions | 748 | (905 | ) | 1,653 | (183 | ) | ||||||||
Gain on sale of assets and other | 1,152 | 2,320 | (1,168 | ) | (50 | ) | ||||||||
(23,946 | ) | (30,255 | ) | 6,309 | (21 | ) | ||||||||
Income before income taxes | 680,410 | 1,636,401 | (955,991 | ) | (58 | ) | ||||||||
Income tax expense | 145,925 | 383,493 | (237,568 | ) | (62 | ) | ||||||||
Net income | 534,485 | 1,252,908 | (718,423 | ) | (57 | ) | ||||||||
Less net income attributable to noncontrolling interest | 26,824 | 31,646 | (4,822 | ) | (15 | ) | ||||||||
Net income attributable to HF Sinclair stockholders | $ | 507,661 | $ | 1,221,262 | $ | (713,601 | ) | (58 | )% | |||||
Earnings per share attributable to HF Sinclair stockholders: | ||||||||||||||
Basic | $ | 2.62 | $ | 5.43 | $ | (2.81 | ) | (52 | )% | |||||
Diluted | $ | 2.62 | $ | 5.43 | $ | (2.81 | ) | (52 | )% | |||||
Cash dividends declared per common share | $ | 0.45 | $ | 0.40 | $ | 0.05 | 13 | % | ||||||
Average number of common shares outstanding: | ||||||||||||||
Basic | 192,348 | 222,952 | (30,604 | ) | (14 | )% | ||||||||
Diluted | 192,348 | 222,952 | (30,604 | ) | (14 | )% | ||||||||
EBITDA | $ | 872,337 | $ | 1,805,916 | $ | (933,579 | ) | (52 | )% | |||||
Adjusted EBITDA | $ | 868,163 | $ | 1,853,008 | $ | (984,845 | ) | (53 | )% | |||||
Six Months Ended
| Change from 2022 | |||||||||||||
2023 | 2022 | Change | Percent | |||||||||||
(In thousands, except per share data) | ||||||||||||||
Sales and other revenues | $ | 15,398,788 | $ | 18,620,910 | $ | (3,222,122 | ) | (17 | )% | |||||
Operating costs and expenses: | ||||||||||||||
Cost of products sold: | ||||||||||||||
Cost of products sold (exclusive of lower of cost or market inventory valuation adjustment) | ||||||||||||||
