HF Sinclair Corporation (NYSE:DINO) Q3 2023 Earnings Call Transcript

Operator: Your next question comes from the line of Doug Leggate from Bank of America.

Unidentified Analyst: This is Clay on for Doug. So thanks very much for taking the question. My first question is on the Sinclair synergies. A $100 million was expected at the time of the deal, but now that you have got a few quarters under your belt, I am wondering how that opportunity set has evolved?

Tim Go: We were very pleased to be able to just capture that $100 million pretty quickly. In fact, it exceeded our timing expectations in terms of the ability for us to capture that. We see, as we have talked about on previous calls, much, much more opportunity to continue to improve and optimize those assets. But we broadened it now to really look across the entire portfolio, to look at Puget Sound in the mix, to look at our legacy assets in the mix. That’s really, when I say our priorities are reliability across our portfolio and then integration and optimization across our portfolio, that’s really code for we are looking for more synergies, we are looking for more optimization across the entire asset. We haven’t gone out and said anything specific, like we did with the $100 million of synergies.

But know that we are working that hard. Steve and his group have already talked a little bit about that. And what we are hoping you guys will be able to see is the results of that come out and not just our throughput but also our capture for both the West and the Mid-Con regions.

Unidentified Analyst: I guess we will keep watching with interest, my next question is more housekeeping. So on the quarter itself, CapEx looked at a touch low, wondering if there is anything to highlight there? And working capital seems to be a touch high, while some of your other peers are reporting some tailwinds. So just wondering if you could address those two things.

Atanas Atanasov: With respect to our capital spending, we are very pleased with how our CapEx program has gone, and this is just a function of completing our turnarounds on time and on budget. There is always some contingency built into our budget plans and this is — we are just demonstrating our capital discipline that manifests and [indiscernible] variance. With respect to working capital, we saw some working capital tailwinds this quarter as we are coming out of these turnarounds and working out inventory. Rising prices also had a beneficial impact on our working capital. So with that in mind, you could see that tailwinds to our cash flow from operations.

Tim Go: Atanas mentioned in his prepared remarks, Clay, that we anticipate coming in on the low end of the CapEx range now. And so that is a result of, again, better execution and solid performance on our turnarounds.

Operator: Your next question comes from the line of Paul Cheng from Scotiabank.

Paul Cheng: I am trying to see that if you can help me to bridge the gap. I think the company is expecting that on the longer term basis that you will be able to improve your reliability so that a reasonable co-unit one on an annual basis may get to about 640, and at that time that you can see the unit cost go down to about 6 to 650. And if we look at in the third quarter, your unit cost in the Mid-Con is around 650 and your West is about 970. And you are running at 576,000 barrel per day, just by improving it to 640, that would [indiscernible] that by yourself doesn’t seem that you will get you down to your target unit cost. So what are the initiatives or the core side that we should expect in order for us to maybe bridge the gap to go down to that level? That’s the first question.

Tim Go: We believe reliability has two benefits, at least, as we continue to prioritize that. Not only does it get the denominator down, as you just kind of mentioned the math of higher throughput, we will get your OpEx per barrel down, but it also reduces your maintenance costs, which will be in the numerator, which will also get your OpEx down. Again, there is a lot of good effort going on in that area of reducing OpEx and improving reliability. And Val, do you have any color you want to provide on that?