HF Sinclair Corporation Reports Quarterly Results and Announces Regular Cash Dividend

• Reported net income attributable to HF Sinclair stockholders of $954.4 million, or $4.45 per diluted share, and adjusted net income of $982.9 million, or $4.58 per diluted share, for the third quarter
• Reported EBITDA of $1,463.2 million and Adjusted EBITDA of $1,500.3 million for the third quarter
• Returned $951.5 million to shareholders through dividends and share repurchases in the third quarter
• Announced a regular quarterly dividend of $0.40 per share

HF Sinclair Corporation (NYSE:DINO) ("HF Sinclair" or the "Company") today reported third quarter net income attributable to HF Sinclair stockholders of $954.4 million, or $4.45 per diluted share, for the quarter ended September 30, 2022, compared to $280.8 million, or $1.71 per diluted share, for the quarter ended September 30, 2021.

The third quarter results reflect special items that collectively decreased net income by a total of $28.5 million. On a pre-tax basis, these items include a lower of cost or market inventory valuation adjustment of $16.8 million, HF Sinclair's pro-rata share of HEP's share of Osage environmental remediation costs of $9.6 million and acquisition integration costs of $10.7 million. Excluding these items, adjusted net income for the third quarter of 2022 was $982.9 million ($4.58 per diluted share) compared to $209.9 million ($1.28 per diluted share) for the third quarter of 2021, which excludes certain items that collectively increased net income by $70.8 million.

HF Sinclair's CEO, Michael Jennings, commented, "HF Sinclair's solid third quarter results were driven by robust product margins and record throughputs in our refining segment. We returned over $951 million in cash to shareholders through share repurchases and dividends during the quarter, and another $152 million in the month of October. Since the closing of the Sinclair acquisition on March 14, 2022, we have returned over $1.1 billion, which is well ahead of our initial target of returning $1 billion to our shareholders by the end of the first quarter of 2023. With the announcement of our new $1 billion share repurchase authorization in September, we remain fully committed to our cash return strategy and long-term payout ratio."

Refining segment income before interest and income taxes was $1,344.1 million for the third quarter of 2022 compared to $217.4 million for the third quarter of 2021. The segment reported EBITDA of $1,446.7 million for the third quarter of 2022 compared to $295.3 million for the third quarter of 2021. This increase was primarily driven by higher refining margins in both the West and Mid-Continent regions, which resulted in higher refining segment earnings in the quarter. Consolidated refinery gross margin was $31.47 per produced barrel, a 112% increase compared to $14.87 for the third quarter of 2021, and crude oil charge averaged 645,780 barrels per day ("BPD") for the third quarter of 2022 compared to 416,430 BPD for the third quarter of 2021.

Renewables segment loss before interest and income taxes was $(49.3) million for the third quarter of 2022 compared to $(13.4) million for the third quarter of 2021. The segment reported EBITDA of $(31.1) million for the third quarter of 2022 compared to $(13.1) million for the third quarter of 2021. Excluding the lower of cost or market inventory valuation charge of $16.8 million, Adjusted EBITDA in the third quarter of 2022 was $(14.2) million. Total sales volumes were 52 million gallons for the third quarter of 2022. The Cheyenne renewable diesel unit ("RDU") was mechanically complete in the fourth quarter of 2021 and fully operational in the first quarter of 2022, the pre-treatment unit ("PTU") at our Artesia, New Mexico facility was completed and fully operational in the first quarter of 2022 and the Artesia RDU was completed and fully operational in the second quarter of 2022. Also, effective with the Sinclair acquisition that closed on March 14, 2022, the Renewables segment includes the Sinclair RDU.

Marketing segment income before interest and income taxes was $3.9 million and reported EBITDA was $10.2 million for the third quarter of 2022. Total branded fuel sales volumes were 362 million gallons for the third quarter of 2022.

Lubricants and Specialty Products segment loss before interest and income taxes was $(5.0) million for the third quarter of 2022 compared to income of $148.5 million in the third quarter of 2021. The segment reported EBITDA of $15.2 million for the third quarter of 2022 compared to $167.7 million in the third quarter of 2021. Excluding a gain on sale of real property of $86.0 million, Adjusted EBITDA in the third quarter of 2021 was $81.7 million. This decrease was largely driven by FIFO impact from consumption of higher priced feedstock inventory, resulting in lower margins.

Holly Energy Partners, L.P. ("HEP") reported EBITDA of $66.0 million for the third quarter of 2022 compared to $77.6 million for the third quarter of 2021 and Adjusted EBITDA of $110.1 million for the third quarter of 2022 compared to $83.3 million for the third quarter of 2021.

For the third quarter of 2022, net cash provided by operations totaled $872.8 million. At September 30, 2022, the Company's cash and cash equivalents totaled $1,447.4 million, a $254.9 million decrease over cash and cash equivalents of $1,702.3 million at June 30, 2022. During the third quarter of 2022, the Company announced and paid a regular dividend of $0.40 per share to shareholders totaling $85.3 million and spent $866.2 million on share repurchases. Additionally, the Company's consolidated debt was $3,334.2 million. The Company's debt, exclusive of HEP debt, which is nonrecourse to HF Sinclair, was $1,740.4 million at September 30, 2022.

HF Sinclair also announced today that its Board of Directors declared a regular quarterly dividend in the amount of $0.40 per share, payable on December 5, 2022 to holders of record of common stock on November 21, 2022.

Through September 30, 2022, HF Sinclair has achieved annualized run rate targeted synergies of over $100 million related to the Sinclair acquisition and over $100 million of working capital synergies. The Company achieved annual run rate synergies through a combination of commercial improvements, operating expense reductions and optimization of selling, general and administrative expenses.

The Company has scheduled a webcast conference call for today, November 7, 2022, at 8:30 AM Eastern Time to discuss third quarter financial results. This webcast may be accessed at https://events.q4inc.com/attendee/908108663. An audio archive of this webcast will be available using the above noted link through November 21, 2022.

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 1,300 Sinclair 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 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 effects of the continuing coronavirus ("COVID-19") pandemic on future demand and 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 infection in the workforce or in response to reductions in demand, accidents, unexpected leaks or spills, unscheduled shutdowns, weather 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 our 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 the effects of current and/or future restrictions on various commercial and economic activities in response to the COVID-19 pandemic and 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 uncertainty regarding the timing, pace and extent of an economic recovery in the United States; a prolonged economic slowdown due to the COVID-19 pandemic, inflation and labor costs which could result in an impairment of goodwill and/or long-lived asset impairments; 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)

Segment Information

Effective the first quarter of 2022, we revised our reportable segments to align with certain changes in how our chief operating decision maker manages and allocates resources to our businesses. Accordingly, we created two new reportable segments, Renewables and Marketing. Our operations are now organized into five reportable segments, Refining, Renewables, Marketing, Lubricants and Specialty Products and HEP. Our operations that are not included in one of these five reportable segments are included in Corporate and Other. Intersegment transactions are eliminated in our consolidated financial statements and are included in Eliminations. Corporate and Other and Eliminations are aggregated and presented under the Corporate, Other and Eliminations column.

As a result of the Sinclair Transactions that closed on March 14, 2022, the operations of the acquired Sinclair businesses are reported in the Refining, Renewables, Marketing and HEP segments.

The Refining segment represents the operations of our El Dorado, Tulsa, Navajo and Woods Cross refineries and HF Sinclair Asphalt Company LLC ("Asphalt"). Also, effective with our acquisition that closed on November 1, 2021, the Refining segment includes our Puget Sound refinery, and effective with our acquisition that closed on March 14, 2022, includes our Sinclair (also referred to as Parco) and Casper refineries. Refining activities involve the purchase and refining of crude oil and wholesale marketing of refined products, such as gasoline, diesel fuel and jet fuel. These petroleum products are primarily marketed in the Mid-Continent, Southwest and Rocky Mountains extending into the Pacific Northwest geographic regions of the United States. Asphalt operates various asphalt terminals in Arizona, New Mexico and Oklahoma.

The Renewables segment represents the operations of the Cheyenne RDU, which was mechanically complete in the fourth quarter of 2021 and fully operational in the first quarter of 2022, the PTU at our Artesia, New Mexico facility, which was completed and fully operational in the first quarter of 2022 and the Artesia RDU, which was completed and fully operational in the second quarter of 2022. Also, effective with our acquisition that closed on March 14, 2022, the Renewables segment includes the Sinclair RDU. During the construction phase of our RDUs and PTU, operating expense and capital expenditures were reported in the Corporate and Other segment, and this financial information has been retrospectively adjusted to reflect our current segment presentation.

Effective with our acquisition that closed on March 14, 2022, the Marketing segment includes branded fuel sales through more than 300 distributors to more than 1,300 branded sites in the United States and licensing fees for the use of the Sinclair brand at more than 300 additional locations throughout the country.

The Lubricants and Specialty Products segment represents Petro-Canada Lubricants Inc.'s ("PCLI") production operations, located in Mississauga, Ontario, that includes lubricant products such as base oils, white oils, specialty products and finished lubricants, and the operations of our Petro-Canada Lubricants business that includes the marketing of products to both retail and wholesale outlets through a global sales network with locations in Canada, the United States, Europe and China. Additionally, the Lubricants and Specialty Products segment includes specialty lubricant products produced at our Tulsa refineries that are marketed throughout North America and are distributed in Central and South America and the operations of Red Giant Oil Company LLC, one of the largest suppliers of locomotive engine oil in North America. Also, the Lubricants and Specialty Products segment includes Sonneborn, a producer of specialty hydrocarbon chemicals such as white oils, petrolatums and waxes with manufacturing facilities in the United States and Europe.

The HEP segment includes all of the operations of HEP, which owns and operates logistics and refinery assets consisting of petroleum product and crude oil pipelines, terminals, tankage, loading rack facilities and refinery processing units in the Mid-Continent, Southwest and Rocky Mountains geographic regions of the United States. The HEP segment also includes 50% ownership interests in each of the Osage Pipeline, the Cheyenne Pipeline and Cushing Connect, a 25.06% ownership interest in the Saddle Butte Pipeline and a 49.995% ownership interest in the Pioneer Pipeline. Revenues from the HEP segment are earned through transactions with unaffiliated parties for pipeline transportation, rental and terminalling operations as well as revenues relating to pipeline transportation services provided for our refining operations. Due to certain basis differences, our reported amounts for the HEP segment may not agree to amounts reported in HEP's periodic public filings.

Refining Segment Operating Data

The following tables set forth information, including non-GAAP (generally accepted accounting principles) performance measures about our refinery operations. Refinery gross and net operating margins do not include the non-cash effects of lower of cost or market inventory valuation adjustments and depreciation and amortization. Reconciliations to amounts reported under GAAP are provided under "Reconciliations to Amounts Reported Under Generally Accepted Accounting Principles" below.

The disaggregation of our refining geographic operating data is presented in two regions, Mid-Continent and West, to best reflect the economic drivers of our refining operations. The Mid-Continent region is comprised of the El Dorado and Tulsa refineries. The West region is comprised of the Puget Sound, Navajo, Woods Cross, Sinclair and Casper refineries. The Puget Sound refinery was acquired November 1, 2021, and thus is included for the period January 1, 2022 to September 30, 2022. In addition, the refinery operations of the Sinclair and Casper refineries are included for the period March 14, 2022 (the date of acquisition) through September 30, 2022.