HF Sinclair Corporation 2026 Q3 Earnings Call

Good morning, everyone, and welcome to HF Sinclair Corporation's third quarter 2026 earnings call. This morning, we issued a press release announcing results for the quarter ending September 30, 2026. If you would 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 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.

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. With that, I'll turn the call over to Franklin.

Thank you, Craig, and thank you for joining us on the HF Sinclair earnings call for the third quarter. As you have already seen from this morning's news release, the company has had a very good quarter. All segments of the business performed well, with all areas adding to our earnings and working hard to capture market gains in these unique circumstances. I want to say thank you to the over 5,000 employees of the company for their efforts in contributing to the success of the quarter. I would like to give a special shout-out to the team at our El Dorado Refinery who are wrapping up their turnaround in a safe and compliant manner, which sets the plant up for several years of operations to come. On the geopolitical front, nothing has really changed during the last 3 months.

Modest improvement has been made in the transit of crude through the Strait of Hormuz, but limitations on the refining complex in the Middle East still exist, and kinetic activity by the many parties still occur on most days. Likewise, the Ukraine-Russian conflict remains at a stalemate with very little, if any, improvement to the Russian refining complex. Finally, the Chinese continue to curtail the export of product to their historical customers. This is due to a combination of the need to replenish their strategic reserves and not being able to access discounted crude from Venezuela and Iran, which kept them competitive with U.S. sources. We continue to believe, as we have mentioned in our last call, that full recovery is unlikely to occur within the broader refining assets, and therefore their products, until sometime in 2028.

Our view continues to be that we must stay the course on how we operate our assets, as we should expect an extended time of experiencing shortage in the products and Lubes markets. The activity surrounding the previously announced spin-off of the company's Lubes business continues apace. Likewise, progress is occurring with the safe shutdown of the Mississauga refining assets. We are targeting a completion of the spin and the finalization of the shutdown in the middle of next year. We will keep the market updated as appropriate as we get closer in time. As I am sure you have also noted in a separate press release this morning, that we have determined exactly how long temporary actually is. Beginning January 1st, 2027, Steve Ledbetter will assume the role of CEO of the company.

Both the board and I are very excited for Steve and the company as we look forward to his tenure in leading the company. I will continue to play a role for the first couple of quarters of next year as I step back into an executive chair role to assure a smooth transition and lend oversight to the activities surrounding the spin of the Lubes business. With that, let me turn it over to Steve to take us through some of the results.

Thank you, Franklin, and thank you all for joining our call. I am excited to take on the role of CEO and President of HF Sinclair. Having worked across our businesses and closely with our employees over the past several years, I have tremendous confidence in our people, our assets, and our ability to execute. We have a strong foundation and a portfolio of high-quality, strategically positioned businesses. As we move forward, our objectives are clear: operate safely, compliantly, and reliably; drive commercial excellence; continue our competitiveness improvement both at the site level and through leveraging our value chain; invest selectively to further our competitive advantages; and maintain a disciplined approach to capital allocation. I would like to thank Franklin for his leadership and successful tenure as CEO in 2026, and I am honored and humbled to lead HF Sinclair into its next chapter. I will now cover our strategic highlights.

Third quarter results reflected the strength of our diversified portfolio as each business segment contributed meaningfully through solid operational performance and commercial execution.

From a strategic perspective, we continue to progress the previously announced multi-phase Western Expansion Project, which we have now named Westline Connect, and expect to reach final investment decision on the first phase in the first quarter of 2027. This phase would increase the capacity to move product supply from our Rockies production into Utah and Nevada by approximately 35,000 barrels per day, and is targeted to be online in 2029. We expect to fund the project with cash on hand and operating cash flows. At our El Dorado refinery, we are wrapping up the turnaround and our previously discussed vacuum furnace project. We expect the project to enhance reliability, improve product yields, enable us to process up to an additional 10,000 barrels per day of advantaged heavy crude. More broadly, we continue to advance growth, technology, and transformation initiatives designed to strengthen our competitiveness, improve safety, and reliability.

We continue to see compelling organic investment opportunities across the portfolio, and we are comfortable carrying a higher cash balance while we complete our evaluations and make final investment decisions. At the same time, we will continue to return cash to shareholders through share repurchases and our quarterly dividends while targeting a 50% payout ratio and preserving our disciplined capital allocation framework. During the quarter, we returned $572 million in cash to shareholders, consisting of $93 million in regular dividends and $479 million in share repurchases. Since the Sinclair acquisition in March 2022, we have returned approximately $5.7 billion in cash to shareholders and have reduced our share count by over 73 million shares. Today, we also announced that our board of directors declared a regular quarterly dividend of $0.525 per share.

As we look ahead, we believe the current environment presents attractive opportunities to further strengthen the competitive advantages of our portfolio and grow more ratable and stable cash flows through the cycle by optimizing our integrated value chain. We see accretive opportunities through growth investments in our marketing and midstream businesses, while also investing in our refining assets to reduce risk and improve operational reliability, safety, and yields. We have the unique opportunity to advance our competitive position and take advantage of the current market environment, and we are confident that our diversified asset base will continue to deliver strong results. With that, let me turn the call over to Vivek.

Thank you, Steve, 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 $2 billion, or $11.38 per diluted share. These results reflect special items that collectively decrease net income by $64 million. Excluding these items, adjusted net income for the third quarter was $2.1 billion, or $11.75 per diluted share, compared to adjusted net income of $459 million, or $2.44 per diluted share, for the same period in 2025. Adjusted EBITDA for the third quarter was $3 billion, compared to $870 million in the third quarter of 2025. In our refining segment, third-quarter adjusted EBITDA was $2.6 billion, compared to $661 million in the third quarter of 2025.