And so we’re pretty bullish. If you look at the April cracks that we just published, the last month’s cracks were $5 above what we had realized in the first quarter. And that bodes well in terms of what we typically see seasonally and what we’re expecting here for the second quarter.
Ryan Todd: Perfect. Thank you. And then maybe a follow-up on shareholder returns. I mean, really strong buyback in the first quarter. New authorization out there to continue doing that. Can you maybe frame up how you’re thinking about whether there are any other things competing for that excess cash flows you look at over the remainder of 2024? Should we expect to see you continue to lean pretty heavily into the buyback? And then maybe any comments on — the market got a little spooked earlier this year when some of the Sinclair family shares made it to the open market. How are you approaching — how is your approach to continue to repurchase shares there and how much potential overhang is left there on the family side?
Tim Go: Yes, Ryan, thanks for your question. Let me ask Atanas to chime in.
Atanas Atanasov: Ryan, good morning. With respect to your questions on capital returns, what we did in the first quarter clearly demonstrates our continued commitment to shareholder returns. As you have seen, we also repurchased an additional $296 million worth of shares in early April, which puts us at $565 million in total shareholder return through early April. To the extent that we are continuing to see an above mid-cycle environment, which we are, we’ll continue to lean very heavily into share repurchases and continue to exceed our payout ratio. With respect to the family, what you saw early in the year, obviously, we don’t control how they sell shares in the market, but generally you’ve seen one open transaction per year.
We’ll continue to buy shares back from them. That’s our preferred method of buybacks. And with respect to overhang, as you may have noticed, they’re no longer our largest shareholder as of right now. And at 9%, currently, I think that you’ll see probably this continuing to go down. Now they also indicated their intent of keeping one board seat, which would point to 5% or better but we just don’t view their current ownership as an overhang as of right now.
Tim Go: Yes. And Ryan, this is Tim. I’ll chime in too. You mentioned the market got spooked a little bit, and we absolutely saw that. But I will point out, in addition to what Atanas just talked about, if you look at the open market purchases that we have made since the Sinclair transaction, we have actually bought more in the open market than REH Co. has sold in the open market. And I think it’s just important for people to put that into context as well as the point that Atanas made that, with this latest transaction that they dropped to 9% and are no longer our largest shareholder. Our commitment to capital returns is clear in addition to the share buybacks that Atanas mentioned. Remember, we raised the dividend in February by 11% and, of course, our $1 billion reauthorization that we just announced this morning is just our commitment to continuing our shareholder returns strategy.
Ryan Todd: Great. Thank you.
Operator: Your next question comes from the line of Manav Gupta of UBS. Please go ahead.
Manav Gupta: Hi guys, my question here is more on the midstream side. HEP is now integrated and I’m trying to understand is there — what’s the progress over there in terms of integration and also synergy upside? And then how do you look at this business? Is this business going to stay relatively flat or grow through organic projects or probably grow through some bolt on acquisitions? How should we look at your overall midstream portfolio going ahead, now that it’s fully part of HF Sinclair.
Steve Ledbetter: Manav, hey. This is Steve. Thanks for the question. As of December, I’m now fortunate enough to be back in the midstream mix. As you know, that’s my path. As far as the integration goes, we are pretty much complete with the integration. We have moved through the entire process of replacing and moving some of the refining processing units back to the refinery. We have some opportunities that we’re beginning, we’re just kind of on the infancy stage of looking where the synergies are. We’re not looking to commit to a number at this point, but we do see some things where we can take the best practices of either side and make sure that we’re doing things consistently across the entire operating environment, both refining and midstream.
So we think there’s some real value there, and we’ll continue to drive that. I think, as we look at this business, we see it as a very important integral business to our value chain, which was the reason that we thought it made sense for us to go bring it back into the fold. And we’re beginning to look at opportunities on how we unlock that. Where we have assets that are utilized, where we can do more with them or take advantage of helping get the molecule to the right markets at the right time, we see that as a real, yet untapped opportunity and we’ll have to continue to go drive that. But it’s a critical piece of our business that we look to continue to grow.
Manav Gupta: Perfect. My follow up here is that, Tim, you have in the past said, every company looks at it different ways. And you said you would like to be one of the highest gross margin per barrel refiner out there in terms of giving them — I mean, that would make you like the higher — putting you towards the top end of the capture. And I’m just trying to understand where is that process going? How far are you thinking in the process? And what more needs to be done to put you on top of that table?
Tim Go: Yes, Manav. We believe that our regional advantages of our portfolio give us significant competitive advantages, and we’re going to continue to exploit that. We’ve been working, as we talked about, reliability, number one, optimization, integration, number two. And Steve, you want to talk about some of the things we’re doing on the optimization and integration side?
Steve Ledbetter: Yes, absolutely. So I’m looking to go take advantage of, as we mentioned before, the integrated value chain. And that is getting the right cost of acquisition of feedstock, processing it the most efficient way and having the right mix, and then getting into the right markets that make the most sense, leveraging our assets. So the things that we’ll continue to take advantage of are some of our pipeline placements and the light to heavy differential that we see and enjoy, and our value chain on the heavy oil value chain with our asphalt business and upgrading that. But we see the value chain being more than just one element. So as an example, we’re going to prioritize and capture increased demand on things like jet over diesel on balance, increasing our premium sales, we believe that we have an opportunity to go really drive that and that allows us to integrate right through the wholesale marketing value chain.
And then, again, our kits are very well placed and connected to many different crude hubs. And so, we think optimizing our crude slate gives us flexibility there. And all of these things and components really allow us to go truly optimize the right decision to put the best molecule in the best market. And that’s what we’re going to continue to focus on.
Tim Go: And, Manav, what I would just add on to what Steve just said is, we’ve talked about our $75 million of growth CapEx that we have put in the plans for this year. And I can tell you we continue to execute on those projects. These are small, quick hit projects. A lot of them, of what Steve was just covering, are covered in this $75 million of growth CapEx. They improve yields, they lower op costs. We target typically around a 25% or higher IRR for these projects and we expect those to continue to help us improve our gross market per barrel.
Manav Gupta: Thank you.
Operator: Your next question comes from the line of Paul Cheng of Scotiabank. Please go ahead.
Paul Cheng: Thank you. Hey guys, good morning.
Tim Go: Good morning.
Paul Cheng: Tim, with TMX is going to ramp up very soon or maybe start up or should be starting up. How that will change your Puget Sound crude slate or product yield if any? I mean, right now, I think Puget Sound is running mostly ANS. So do you think that it will have any impact on your physical barrels you’re going to run and how your product yield is going to look like, or that it really is going to be benefiting from a defensive standpoint.
Tim Go: Yes, Paul, this is Tim. TMX started up May 1st. And we think it will have an impact both at Puget Sound and in our Mid-Con. I’ll ask Steve to comment on that.
Steve Ledbetter: Yes. So Paul, it’s Steve. Thanks for the question. So as far as running ANS, we have the capability to run a variety of crudes with some heavy and some sour. And we typically get advantage of crudes out of Canada and we blend them up to an ANS like crude spec. The ability for Puget to go take advantage of what’s happening is really in the fact that we’re connected via pipe and we were successful placing and nominating pipe barrels on this first go-round and our ability to go take water borne barrels in our dock capacity. We also believe that longer term, as things continue to fill up on TMX and get out over the water, that’s going to — our proximity to the dock is an advantage, because there will be more barrels looking for a home and the location that we have and our ability on pipe as well as the dock gives us the ability to go compete very well for those barrels.
So for Puget, we don’t see a major impact. And we also believe that we’re going to have the ability to compete. And then the market will clear the additional costs associated with that project. Thinking about it from the larger footprint, when we think about our Parco and our other Mid-Con assets, we’ll probably see a temporarily tighter differential and we’ve already seen that coming out of the end of the quarter. But as we mentioned before, we don’t think that’s long-term. We think as production eclipses egress in one to two years that we think that those differentials will widen back out. And in the interim, as I mentioned earlier, we’re connected to multiple trading hubs, and we will take advantage of the flexibility of the crude slate.
So we’ve shown our ability to navigate these situations carefully, and we’ll continue to do that with this one. But we don’t see it as a major problem.
Tim Go: Yes. And Paul, this is Tim. As you know and as others have commented this quarter, the WCS, WTI spread has narrowed. But some of that is associated with just normal spring maintenance that we see seasonally at this time. And of course, some of that’s directly related to the line fill that took place ahead of the May 1st startup. If you look further out, we believe, as Steve mentioned, that the WCS, WTI spread will widen. And we even see that in the strip now. I think others have a similar view and kind of stabilize and really arrange that if you look at the last five years of averages, we’ll be right in the middle of the five year WCS, WTI spread.
