Holly Energy Partners, L.P. (NYSE:HEP) Q3 2022 Earnings Call Transcript

Tim Go: Yeah. Ryan, this is Tim again. We are pleased with the capture rates that we have had, both in the Mid-Con, and of course, in the West. I will just point out we did have an Osage event that impacted our Mid-Con refineries in the third quarter. That’s probably the biggest factor or the capture rate in the third quarter. Of course, RVO obligations were up as well during the third quarter, which will impact our capture rate. On the other hand, we are pleased with the Sinclair synergies that we continue to capture. We have some Rockies art that we are able to capture as part of our Mid-Con El Dorado Refinery, and of course, higher WCS crude differentials are allowing us to capture more in the Mid-Con. So we are pretty optimistic about fourth quarter capture rates as well.

Ryan Todd: Great. Thanks. And then maybe a follow-up on an earlier question, I appreciate the color that you gave around the Renewable Diesel business, maybe just a point of clarity. Do you still have — have you worked your way through the expensive RBD feedstock, is that — will that remain an overhang at all during the fourth quarter and as you look into the environment over the next few quarters going forward, how do you think about the backdrop that you see in renewable diesel?

Mike Jennings: Yeah. Ryan, we are really working through what I would call historical and start-up issues. The underlying environment for this business right now is constructive and is consistent with the margins that we forecast in the past. We have a little bit of that work through in the fourth quarter. But as I said previously, we expect that the operating result will be substantially better than we experienced in the third quarter, largely due to throughput and due to the fact that we have got very little of this remaining higher cost feedstock to process.

Ryan Todd: Great. Thank you.

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

Kalei Akamine: Hey. Good morning, guys. This is Kalei on for Doug. So thanks for taking the question. So my first question is on the macro setup for 2023. Today, winter diesel is driving the margin complex and you are obviously biased to maximize those yields. But can you offer a view on how this transitions into summer, because theoretically, you wouldn’t need a price signal to swing back the other way back to gasoline. So if diesel remains robust, do we see gasoline catch up?

Tim Go: Yeah. Kalei, this is Tim. Yeah. Certainly, we are — all our refineries are in max dieselization mode today. I will tell you they have been in max dieselization mode for pretty much most of this year, even during the summer we saw stronger diesel cracks that incentivize us to continue to maximize diesel. So we anticipate that even as we transition from the winter back into the spring and the summer, this next year, that will continue to be in max diesel mode, that the gasoline incentives will then have to increase to incentivize people to start switching back to gasoline mode and we may see again some strength this next summer in both gasoline and diesel at the same time.