Hf Sinclair Corporation · NYSE:DINO
Hf Sinclair — HollyFrontier — Investor Presentation (February 2019)
32 slides from Hf Sinclair's investor presentation, Feb 27, 2019
Slide 1: HollyFrontier Investor Presentation February 2019
HOLLYFRONTIER INVESTOR PRESENTATION February 2019
Slide 2: Disclosure Statement
Disclosure Statement Statements made during the course of this presentation that are not historical facts are “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are inherently uncertain and necessarily involve risk
Slide 3: Executive Summary: Positioned for Value Creation Across all Segments
Executive Summary Positioned for Value Creation Across all Segments REFINING MIDSTREAM SPECIALTY LUBRICANTS . Inland merchant refiner . Operate Crude and Product Pipelines, . Integrated specialty lubricants . loading racks, terminals and tanks in and producer with 34,000 barrels per day of 5 refiner
Slide 4: HollyFrontier Asset Footprint
HollyFrontier Asset Footprint 4
Slide 5: 15% Increase in Refining Capacity Since 2015
15% Increase in Refining Capacity Since 2015 Mid-Con Southwest Rockies CRUDE CHARGE CAPACITY CRUDE CHARGE CAPACITY CRUDE CHARGE CAPACITY Barrels Per Day Barrels Per Day Barrels Per Day 350,000 120,000 100,000 115,000 95,000 300,000 300,000 110,000 90,000 260,000 83,000 100,000 250,000 100,000 80,000
Slide 6: Proximity to North American Crude Production Laid in Crude Advantage
Proximity to North American Crude Production Laid in Crude Advantage . Beneficiary of inland coastal crude discount across entire refining system 2018 Average Crude Slate . 100% of HFC’s purchased crude barrels are “WTI” price based 4% 6% . Refinery location and configuration enables a fleet-wide cr
Slide 7: High Value Premium Product Markets
High Value Premium Product Markets Product Pricing vs. Gulf Coast Regional Gasoline Pricing vs Gulf Coast1 $/bbl 2015 2016 2017 2018 Average $20 $15 $10.75 $11.42 $8.93 $10 $6.07 $5 $1.80 $2.17 $- Group 3 vs GC Chicago vs GC Denver vs GC Phoenix vs GC Salt Lake vs GC Las Vegas vs GC Regional ULSD Pr
Slide 8: IMO 2020 Benefits Wider Heavy Crude Differentials and Higher Distillate Crack Spreads
IMO 2020 Benefits Wider Heavy Crude Differentials and Higher Distillate Crack Spreads 1 . Effective January 1, 2020, the International 2018 Average Canadian Heavy Crude Exposure 3 Maritime Organization (IMO) will lower the % of Total Throughput 25% max sulfur content allowed in marine fuel from 3.5%
Slide 9: Refining Segment Earnings Power
Refining Segment Earnings Power HFC Consolidated 3-2-1 Index Mid-Cycle Refining EBITDA $1.0B – $1.2B $/Barrel $25 Gulf Coast 3-2-1 Crack $10.00 Brent/WTI Spread $4.00 Product Transportation to HFC $3.00 $20.06 $19.88 Markets $20 HFC Index $17.00 $18.41 Capture Rate 75% Realized Gross Margin Per Barr
Slide 10: Holly Energy Partners Business Profile
Holly Energy Partners Business Profile Operate a system of petroleum product and Consistent Distribution Growth Despite crude pipelines, storage tanks, distribution Crude Price Volatility terminals and loading rack facilities located near HFC’s refining assets in high growth markets Distribution $/L
Slide 11: Ownership Structure: IDR Simplification Provides Lower Cost of Capital for HEP
Ownership Structure IDR Simplification Provides Lower Cost of Capital for HEP HOLLYFRONTIER CORPORATION (HFC) 100% Interest GENERAL PARTNER (GP) HOLLY LOGISTIC SERVICES, L.L.C. PUBLIC Non-economic GP Interest 59.6mm HEP units1 57% LP Interest $1.7B Value2 45.8mm HEP units1 43% LP Interest $1.3B Valu
Slide 12: HEP Historical Growth
HEP Historical Growth Committed to Continuing Track Record of Increasing Distribution 50% JV with Acquired Holly Tulsa Holly Corporation Plains for remaining dropdown of and Frontier Oil Crude gathering Frontier interests in SLC / Holly intermediate loading rack Corporation system pipeline Frontier
Slide 13: HEP Avenues for Growth
HEP Avenues for Growth ORGANIC ACQUISITIONS DROPDOWNS FROM HFC . Leverage HEP’s existing . Pursue logistics assets in HEP’s . Partnering with HFC to build footprint, specifically in current geographic region and/or acquire new assets / Permian Basin businesses . Replace incumbent HFC service . Diese
Slide 14: HF Lubricants & Specialty Products
HF Lubricants & Specialty Products The World’s Machinery is Driving Towards Greater Efficiency, Reliability and Longevity Advanced lubricants are a crucial requirement in the drive HF LSP is a to develop more reliable, efficient and environmentally leading producer compliant industrial machinery wor
Slide 15: HF LSP - Rack Back vs Rack Forward
HF LSP - Rack Back vs Rack Forward RACK BACK RACK FORWARD Base Oil Blending Distribution R&D Marketing Sales Production & Packaging Finished Lubricants & Greases VGO/HCB Petrolatums Mississauga & Tulsa Base Oil Plants Sodium Sulfonates Waxes White Oils 3rd Party Base Oil Specialty Products Base Oil
Slide 16: Opportunity Across the Value Chain
Opportunity Across the Value Chain Upgrade Existing Base Oils into Finished Products Converting one barrel of Base Oil sales into Finished Product sales results in a margin uplift of ~$50/bbl HF LSP Pro Forma Margin Value $/bbl Product Slate by Volume Finished Lubricants & Greases Coproducts 19% Bas
Slide 17: Rack Forward EBITDA Margin Stability
Rack Forward EBITDA Margin Stability 2019 Rack Forward – EBITDA Margin1 2 Guidance EBITDA ($ in millions) EBITDA Margin % EBITDA 80 20% $275 – 300MM 17% 16% 16% 16% EBITDA Margin 14% 14% 11-16% 60 13% 15% 13% 13% 12% 12% 12% 10% 9% 40 9% 9% 10% 69 58 58 57 55 53 56 52 49 45 48 47 20 38 40 5% 29 30 0
Slide 18: Sonneborn Transaction Overview
Sonneborn Transaction Overview Financial Details • $660mm purchase price • $582mm purchase price net of approximately $78mm in working capital • Purchase was funded entirely with cash on hand • Immediately accretive to earnings and cash flow per share • Expect to capture ~$20mm in annual synergies •
Slide 19: Strategic Rationale: Downward Integration and Rack Forward Growth
Strategic Rationale Downward Integration and Rack Forward Growth Significantly increases Rack Forward earnings power • 100% of Sonneborn earnings attributable to Rack Forward segment • Brings incrementally higher value products with stable margins • Expands specialty products portfolio Strengthens s
Slide 20: Sonneborn Products
Sonneborn Products Tailor Made Solutions for Specialty Applications Application Product Group End Uses Examples Product Slate by Volume1 White Oils Personal care, Lotion, lipstick, cosmetics, pharma, water bottles, drilling toothpaste Natural Sodium Industrial Sulfonates Specialties 4% Petrolatums P
Slide 21: Sonneborn Historical Financials
Sonneborn Historical Financials Stable Cash Generation Average EBITDA Margin of 18% Since 2015 EBITDA ($ in millions) EBITDA Margin1 % 80 25% 70 20% 60 50 15% 40 10% 30 20 5% 10 0 0% 2015 2016 2017 2018 Sonneborn EBITDA Sonneborn EBITDA Margin HFLSP Rack Forward EBITDA Margin 1. EBITDA Margin calcul
Slide 22: Synergies & Growth Opportunities
Synergies & Growth Opportunities Synergies Enhance Competitive Position Synergy estimate of $20mm annually • Significant savings in SG&A costs SG&A $5mm • Optimization of North American production facilities in Tulsa, Mississauga and Petrolia • Logistics savings through transportation and $20mm+ ble
Slide 23: HF Lubricants & Specialty Products Pro Forma Valuation
HF Lubricants & Specialty Products Pro Forma Valuation Rack Forward EBITDA Mid-Cycle EBITDA $285 ($ in millions) . EBITDA Margin 11-16% . Annual SG&A $170 - $180MM Target Multiple 11x . Annual DD&A $70 - $80MM . Enterprise Value Upside with Organic Growth and M&A $3,135 ($ in millions) Opportunities
Slide 24: Appendix
A P P E N D I X
Slide 25: 2019 Guidance
2019 Guidance . Refining & Marketing 2019E Capex - $5.50 - $6.00 Opex/bbl Segment Allocation - Turnaround Schedule - Tulsa East – 1Q19 HEP 6% - Cheyenne – 4Q19 HF LSP R&M 8% 86% - El Dorado – 4Q19 - Capex $470 – $510 million . HF LSP - $275 – 300 million Rack Forward EBITDA - Capex $40 – $50 million
Slide 26: Strong Track Record of Cash Returns
Strong Track Record of Cash Returns Since the July 2011 merger HFC has returned approximately $5.0 billion, or approximately $29.05 per share1 to shareholders • Strong track record in returning excess cash to shareholders • Committed to maintaining competitive cash yield versus peers • Share repurch
Slide 27: HollyFrontier Capital Structure
HollyFrontier Capital Structure HFC Consolidated Capital Structure HFC Standalone Capital Structure As of December 31, 2018 (US$ millions) As of December 31, 2018 (US$ millions) Cash and Short Term Marketable Securities $1,155 Cash and Short Term Marketable Securities $1,152 HOLLYFRONTIER CORPORATIO
Slide 28: HollyFrontier Credit Profile
HollyFrontier Credit Profile . Investment Grade Rating Peer Group Debt Metrics − 12/31/18 - S&P BBB- Debt Ratio % - Moody’s Baa3 50% - Fitch BBB- . $1,152 million cash as of 40% 12/31/18 . $1 billion outstanding debt as of 12/31/18 30% - excludes non-recourse HEP debt . Total debt to capital ratio 1
Slide 29: Definitions
Definitions BPD: the number of barrels per calendar day of crude oil or petroleum products. Free Cash Flow: Calculated by taking operating cash flow and subtracting capital CAGR: The compound annual growth rate is calculated by dividing the ending value by expenditures. the beginning value, raise th
Slide 30: HollyFrontier Index
HollyFrontier Index Crude Charge 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18* 432,000 371,000 467,000 455,000 461,000 415,000 463,000 442,000 410-420K *Anticipated crude charge based on guidance given on 10/31/18 earnings call Refining Index WTI Based 321 1Q 2019 2Q 2019 3Q 2019 4Q 2019 Crack Jan F
Slide 31: HFC Index Disclosure
HFC Index Disclosure HFC's actual pricing and margins may differ from benchmark indicators due to many factors. For example: . Crude Slate differences – HFC runs a wide variety of crude oils across its refining system and crude slate may vary quarter to quarter. . Product Yield differences – HFC’s p
Slide 32: HollyFrontier Corporation Contact Information
HollyFrontier Corporation (NYSE: HFC) 2828 N. Harwood, Suite 1300 Dallas, Texas 75201 (214) 954-6510 www.hollyfrontier.com Craig Biery | Director, Investor Relations investors@hollyfrontier.com 214-954-6510 Jared Harding | Investor Relations investors@hollyfrontier.com 214-954-6510
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