Yahoo Finance HF Sinclair Corporation (NYSE:DINO) Q1 2024 Earnings Call Transcript
HF Sinclair Corporation (NYSE:DINO) Q1 2024 Earnings Call Transcript May 8, 2024
HF Sinclair Corporation beats earnings expectations. Reported EPS is $1.58, expectations were $0.55. HF Sinclair Corporation isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Welcome to the HF Sinclair Corporation's First Quarter 2024 Conference Call and Webcast. Hosting the call today is Tim Go, Chief Executive Officer of HF Sinclair. He's joined by Atanas Atanasov, Chief Financial Officer; Steve Ledbetter, EVP of Commercial; Valerie Pompa, EVP of Operations; and Matt Joyce, SVP of Lubricants and Specialties. 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. [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.
Craig Biery: Thank you, Kathleen. Good morning, everyone, and welcome to HF Sinclair Corporation's first quarter 2024 earnings call. This morning, we issued a press release announcing results for the quarter ending March 31st, 2024. If you would like a copy of the earnings press release, you may find one on our website at hfsinclair.com. 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 reconciliation 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.
Tim Go: Good morning, everyone. We are pleased to report our first quarter 2024 results with you today. We continue to advance our corporate strategy focused on improving reliability, optimizing and integrating our portfolio, and generating strong cash flow to support our cash return strategy. During the quarter, our business maintained safe and reliable operations, representing another quarter of successful turnaround and maintenance execution. We also returned $269 million in cash to shareholders during the quarter and today announced a new $1 billion share repurchase authorization, demonstrating our commitment to shareholder returns. Now, let me cover our segment highlights before turning over to Atanas. In refining for the first quarter of 2024, we generated solid financials despite experiencing seasonal demand weakness for transportation fuels.
We continue to focus on the operations excellence of our assets, resulting in improved reliability during the winter months, and successful execution of our planned maintenance. The scheduled turnaround at our Puget Sound refinery in the first quarter that continued into April was completed on time and on budget. On the commercial side, we optimized our crude slate in order to capture the favorable differentials for heavy Canadian and [thin] (ph) crude oil. The year-over-year improvements in our throughput rates, increased heavy sour crude oil runs, and lower OpEx per barrel illustrate the progress we've made towards our reliability and optimization priorities. In renewables for the first quarter of 2024, weakened RINs and LCFS credit prices resulted in a 16% decline in our renewable diesel indicator compared with the fourth quarter of 2023.
Despite the economic headwinds in the quarter, we continue to focus on feedstock optimization by increasing low CI feedstocks and reducing our high cost feedstock inventory. In addition, we continue to improve our renewable diesel operations by improving reliability and decreasing operating costs. In the marketing segment in the first quarter of 2024, we saw strong value in our Sinclair branded sites as the marketing business continued to provide a consistent sales channel with margin uplift for our branded fuels. We continue to target 5% or more annual growth in the number of branded sites and are encouraged by what we are seeing in our store growth pipeline for 2024. In lubricants and specialties, our focus on the sales mix optimization across our finished products portfolio resulted in another strong quarter, despite weakened base oil prices in the period.
Our integrated business model continues to deliver stable margins in a volatile market, resulting in a consistently strong EBITDA run rate over the past three years. In midstream, we are pleased with the progress of integrating the HEP assets into our consolidated portfolio, and will continue to look for opportunities to optimize our logistics business. In the first quarter, we returned $269 million to shareholders through share repurchases and dividends. As of April 30, 2024, we have repurchased an additional $296 million from REH Co. in the second quarter, reducing our share count by over 7.9 million shares year to date. Since March 2022, we have repurchased over 53 million shares, or roughly 89% of the shares issued for our Sinclair transaction.
This morning, we announced a new $1 billion share repurchase authorization, replacing our previous $1 billion authorization, of which, approximately $214 million remained, demonstrating our commitment to our long-term cash return strategy and long-term payout ratio, while maintaining a strong balance sheet and investment grade rating. Today we also announced that our board of directors declared a regular quarterly dividend of $0.50 per share payable on June 5th, 2024 to holders of record on May 22nd, 2024. Looking forward, as we head into the summer driving season, we expect a favorable market environment. And combined with further progress against our corporate priorities, we believe we are well positioned to generate strong earnings and cash flow.
With that, let me turn the call over to Atanas.
Atanas Atanasov: Thank you, Tim, and good morning, everyone. Let's begin by reviewing HF Sinclair's financial highlights. Today we reported first quarter net income attributable to HS Sinclair shareholders of $315 million or $1.57 per diluted share. These results reflect special items that collectively increase net income by $172 million. Excluding these items, adjusted net income for the first quarter was $142 million or $0.71 per diluted share compared to adjusted net income of $394 million or $2 per diluted share for the same period in 2023. Adjusted EBITDA for the first quarter was $399 million compared to $705 million in the first quarter of 2023. In our refining segment, first quarter adjusted EBITDA was $209 million compared to $537 million of refining segment EBITDA for the first quarter of 2023.
This decrease was primarily driven by lower refinery gross margins in both the West and Mid-Con regions as a result of seasonal demand weakness for transportation fuels, partially offset by high refined product sales volumes. Crude oil charge averaged 605,000 barrels per day for the first quarter compared to 499,000 barrels per day for the first quarter of 2023. This increase was primarily a result of decreased turnaround activities and improved reliability at our refineries compared to the same period last year. In our renewable segment, we reported adjusted EBITDA of negative $19 million for the first quarter compared to $3 million for the first quarter of 2023, principally due to weakened RINs and LCFS credit prices in the first quarter of 2024.
Total sales volumes were 61 million gallons for the first quarter, as compared to 46 million gallons for the first quarter of 2023. Our marketing segment reported EBITDA of $16 million for the first quarter compared to $6 million for the first quarter of 2023, driven primarily by stronger branded wholesale margins. Total branded fuel sales volumes were at 321 million gallons for the first quarter, as compared to 328 million gallons for the first quarter of 2023. Our Lubricants and specialty segments reported EBITDA of $87 million for the first quarter, compared to EBITDA of $98 million for the first quarter of 2023. This decrease was largely driven by lower base oil prices in the first quarter of 2024. Our midstream segment reported EBITDA of $111 million in the first quarter compared to $93 million in the same period last year, primarily due to high revenues of tariff increase in the first quarter of 2024.
Net cash provided by operations totaled $317 million, which included $70 million of turnaround spend in the quarter. HS Sinclair's capital expenditures totaled $89 million for the first quarter. As of March 31, 2024, HS Sinclair's total liquidity stood at approximately $3.7 billion, which includes cash balance of $1.2 billion, our undrawn $1.65 billion unsecured credit facility, and $806 million availability on the HEP credit facility. During the quarter, we reduced our debt by approximately $62 million by paying down a portion of the debt outstanding under the HEP revolver. As of March 31, we had $2.7 billion of debt outstanding with a debt to cap ratio of 21% and net debt to cap ratio of 11%. Let's go through some guidance items. With respect to capital spending for full year 2024, we still expect to spend approximately $800 million in sustaining capital, including turnaround and catalysts.
In addition, we expect to spend $75 million in growth capital investments across our business segments. For the second quarter of 2024, we expect to run between 620,000 and 650,000 barrels per day of crude oil in our refining segment, which reflects plant turnarounds at our Puget Sound and Parco refineries during the period and improve reliability in operations across our fleet. We're now ready to take questions from the audience. Operator?
See also
Wall Street Analysts See Upside Potential for 10 Stocks with Rising Price Targets and
Hidden Gems: Unveiling the 10 Stocks on Hedge Funds' Radar.
To continue reading the Q&A session, please click here.