Hf Sinclair Corporation · NYSE:DINO
Hf Sinclair — HollyFrontier — Non-Deal Roadshow (November 2016)
36 slides from Hf Sinclair's roadshow presentation, Nov 17, 2016
Slide 1: JP Morgan Roadshow November 2016
JP Morgan Roadshow November 2016 Title Blue: 23,55,94 Orange: 230,175,109 Grey: 127,127,127 Light Blue: 114,164,183 Brown: 148,126,103
Slide 2: HollyFrontier Disclosure Statement
2 HOLLYFRONTIER 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 necessar
Slide 3: Executive Summary
EXECUTIVE SUMMARY | Diversification into higher value more stable cash flow Lubricants and Midstream businesses •Inland Merchant Refiner •5 Refineries in the Mid Continent, Southwest and Rockies •457,000 barrels per day of Refining Capacity •12.2 Nelson Complexity •Fleet Wide Crude Discount to WTI •
Slide 4: HollyFrontier Pro Forma Footprint
4 1) Third party Owned and Operated About Petro-Canada Lubricants Inc. • 15,600 BPD Lubricant Production Capacity • 6 sales offices • 4 warehouses • 21 third party-operated terminals worldwide • Export over 60% of production to more than 80 countries HFC Lube Production PCLI Warehouse PCLI Terminal¹
Slide 5: HollyFrontier Investment Highlights
HOLLYFRONTIER INVESTMENT HIGHLIGHTS • 37% HEP ownership, including 2% GP interest and 35% of LP Units • Full Year 2016 HEP cash distributions to HFC of more than $100 million¹ SPECIALTY LUBRICANTS • Maintain investment grade rating • Target conservative balance sheet and strong liquidity CAPITAL STR
Slide 6: HollyFrontier Footprint: Proximity to North American Crude Production
Five inland refinery locations with 457,000 barrels per day of crude capacity All 5 HFC Refineries Sit Close to North American Crude Production HOLLYFRONTIER FOOTPRINT | Proximity to North American Crude Production and Attractive Niche Product Markets 6
Slide 7: Proximity to North American Crude Production: Laid in Crude Advantage
• Beneficiary of inland coastal crude discount across entire refining system • 100% of HFC’s purchased crude barrels are “WTI” price based • Refinery location and configuration enables a fleet-wide crude slate discounted to WTI • Approximately 100,000 barrels per day Canadian, primarily Heavy sour c
Slide 8: High Value Premium Product Markets: Premium Product Pricing vs. Gulf Coast
1) Gulf Coast: CBOB Unleaded 84 Octane Spot Price, Group 3: Unleaded 84 Octane Spot Price, Chicago: Unleaded CBOB 84 Octane Spot Price, Denver: CBOB 81.5 Octane Rack Price, Phoenix: CBG 84 Octane Rack Price, SLC: CBOB 81.5 Octane Rack Price, Las Vegas: CBOB 84 Octane Rack Price. Source: GlobalView 2
Slide 9: Refinery Operations
1) YTD through September 30, 2016 Refinery Operations: Reliability: Target first quartile operational reliability, 2016 Baseline target assuming annualized FY EBITDA Turnaround: Completing on time and on budget, 2016 Lost Profit Opportunity component based on annualized FY EBITDA Optimization: Putti
Slide 10: Petro-Canada Lubricants Acquisition Details
• Global sales organization with locations in Canada, the US, Europe and China • Extensive Brand Portfolio • Perpetual and exclusive license for use of the Petro- Canada trademark in Lubricants • Brands include: PURITY, Puretol, Krystol, Duron, Supreme, Hydrex, Sentron, Turboflo, Vultrex, Enduratex,
Slide 11: Petro-Canada Lubricants: Strategic Rationale
11 High Value Products and Stable Cash Flows • Specialty Lubricants margins are significantly higher and more stable than fuels margins • Differentiated lubricants product portfolio • The only North American premium margin Group III base oil producer • Strong brand portfolio Diversification and Scal
Slide 12: Petro-Canada Lubricants product and sales mix
A ve ra ge Categor y W TI G ro ss M argi n p er Barre l (U S $ /B B L) 12 Asia Pacific 1% Europe 21% Canada 37% United States 39% Rest of World 2% White Oils 14% Specialty Products 13% Base Oils 41% Finished Lubricants 32% Finished Lubricants • High margin finished lubricants products blended from t
Slide 13: Petro-Canada Lubricants: Integrated Lubricants Producer
13 Hydrotreating Unit (HTU) Catalytic Dewaxing Unit (CDW) B le n d ing a n d P a ckag in g R&D and Product Development G lob a l D is tr ib u ti on Base Oil Production Blending and Packaging Global Distribution Base Oil White Oils Finished Lubricants Specialty Products V a cu u m G a s O il H y d ro
Slide 14: HollyFrontier Specialty Lubricants: Historic Realized Lubricant Margins vs Fuel Margins
14 Specialty Lubricants margins are significantly higher and more stable than fuels margins Tulsa Plant increased production of heavier viscosity lubricants and brightstock • Heavy viscosity lubricants enjoy significant premium to lighter grades • Brightstock remains high value niche product given l
Slide 15: Petro-Canada Lubricants: Synergy and Optimization Opportunity
PETRO-CANADA LUBRICANTS | Synergy and Optimization Opportunity Expect US$20MM+ EBITDA in potential synergies by 2018¹ • Tulsa product integration and product upgrade opportunity • Sales and distribution synergy opportunity for Tulsa Products • Transportation cost savings Additional Optimization Oppo
Slide 16: Petro-Canada Lubricants: Historical Financials
16 PETRO-CANADA LUBRICANTS | Historical Financials PCLI Historical EBITDA (US$MM)¹ $0 $50 $100 $150 $200 $250 $300 2011 2012 2013 2014 2015 Annualized 2016¹ $ M M Average Annual Sustaining Capex 1) PCLI Reported EBITDA through 6/30/16 annualized
Slide 17: Petro-Canada Lubricants: Production Capacity versus Demand Fundamentals
17 PETRO-CANADA LUBRICANTS | Production Capacity versus Demand Fundamentals Positive Western Hemisphere Group III Base Oil Supply / Demand Balance • Shift to premium-grade engine motor oils driving Group III global base oil demand growth • Western Hemisphere Group III demand projected to be 4% CAGR
Slide 18: Petro-Canada Lubricants: Accretive Transaction
HFC EBITDA - 2017 Consensus¹ $ 1,037 $ 1,037 $ 1,037 Expected Petro-Canada EBITDA Range $ 100 $ 150 $ 200 Total EBITDA $ 1,137 $ 1,187 $ 1,237 EBITDA Accretion 10% 14% 19% HFC Net Income - 2017 Consensus $ 344 $ 344 $ 344 Shares Outstanding 177 177 177 HFC EPS -2017 Consensus $ 1.95 $ 1.95 $ 1.95 Ex
Slide 19: Lubricants Diversification and Scale
19 Sales Volume by Product (BPD ‘000) Normalized Refining EBITDA Split (US $MM)¹ 228 228 171 172 13 28 26 32 HFC Standalone Pro Forma Other Lubricants Distillate Gasoline Lubricants as a % of Sales Volume 3% 6% Lubricants as a % of Refining EBITDA 10% 22% $900 $900 $100 ˜$250 HFC Standalone Pro Form
Slide 20: Holly Energy Partners: Ownership Structure
1) Data as of 10/3/16 IDR: incentive distribution rights. HOLLY ENERGY PARTNERS | Ownership Structure 20
Slide 21: Holly Energy Partners overview
Operate a system of petroleum product and crude pipelines, storage tanks, distribution terminals and loading rack facilities located near HFC’s refining assets in high growth markets • Revenues are 100% fee-based with limited commodity risk • Major refiner customers have entered into long-term contr
Slide 22: Holly Energy Partners: Growth Drivers
Dropdown Context • HEP generally has right of first refusal on all logistics assets HFC builds or acquires • As HFC grows, HEP is positioned to benefit by partnering with HFC to build and/or acquire new assets • Target high tax basis assets with durable cash flow characteristics that also add to HFC
Slide 23: Holly Energy Partners: Woods Cross Expansion Drop Down
HEP purchased the newly constructed crude unit, catalytic cracking unit, and polymerization units at HFC’s Woods Cross refinery for a total cash consideration of $278.0 MM • Crude Unit has the capacity to process 15 kb/d of crude into intermediates and blending components • Catalytic Cracking unit h
Slide 24: Holly Energy Partners: Target 8% Annual Distribution Growth Rate
(1) Investments already made (2) Prospective growth investments that will require board and/or committee approvals (3) Assumes a -3% to +3% range in PPI Finished Goods Index (4) Potential upside to 2017 from expected HFC dropdowns $400 TO $450 MILLION IN COMPLETED AND FUTURE PLANNED INVESTMENTS COUL
Slide 25: Holly Energy Partners: Cash Distribution Growth Since Inception
1) CAGR=Compound Annual Growth Rate. Graphs represent distributions to GP and LP units for the periods in which they apply $0 $25 $50 $75 $100 $125 $150 $175 $200 $35 $44 $49 $54 $68 $86 $99 $126 $144 $158 $173 Total HEP Distributions (GP and LP) $0.0 $10.0 $20.0 $30.0 $40.0 $50.0 $0.9 $2.0 $3.4 $4.
Slide 26: Disciplined Approach to Capital Allocation
SUSTAINING CAPITAL: • Maintenance capex: $100 - $125 million in annual maintenance • Environmental and Sustaining: $100 - $125 million annual spending currently focused on Tier 3 gasoline and MSAT 2 standards • Turnaround spending: $100 - $150 million annual average turnaround spending • PCLI Capex:
Slide 27: HollyFrontier Pro Forma Capital Structure and Credit Profile
9/30/2016 PCLI Financing Cash and Short Term Marketable Securities $ 471 $ 471 Cash Proceeds from Woods Cross Dropdown1 $ 278 $ 278 PCLI Cash Financing $ (350) $ 749 $ 399 HFC Long Term Debt HFC Senior Unsecured Term Loan due 2019 $ 350 HFC 5.875% Senior Notes due 2026 $ 250 $ 250 HFC New Senior Not
Slide 28: Strong Track Record of Cash Returns
Since the July 2011 merger HFC has returned approximately $4 billion, or approximately $22.50 per share to shareholders • Strong track record in returning excess cash to shareholders • Committed to maintaining competitive cash yield versus peers • Share repurchase program funded by Free Cash Flow ge
Slide 29: Five-Year Average ROCE and Net Income per Barrel vs Peers
0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0% 20.0% WNR HFC MPC PSX TSO DK VLO PBF ALJA vg A nnu al R et u rn on C ap it al E m p lo ye d 5-Year Average ROCE1 $- $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 $7.00 HFC WNR PSX MPC VLO DK TSO PBF ALJ A ve ra ge N e t In co m e /B B L 5-Year Average Net
Slide 30: HollyFrontier Corporation contact details
HollyFrontier Corporation (NYSE: HFC) 2828 N. Harwood, Suite 1300 Dallas, Texas 75201 (214) 954-6510 www.hollyfrontier.com 30 Julia Heidenreich | VP, Investor Relations Craig Biery | Manager, Investor Relations investors@hollyfrontier.com 214-954-6510
Slide 31: Appendix
Appendix ah O§«<K_
Slide 32: Cash yield and net income per barrel calculations
1) HollyFrontier Corporation debt excludes HEP debt. All amounts are based on publicly-available financial statements, which we have assumed to be accurate. *Net Income/BBL and ROCE calculation is Ex-LOCM in 2014 & 2015 for HFC, WNR, DK , TSO, PSX, MPC, VLO, DK & PBF. HFC ($MM) 2011 2012 2013 2014 2
Slide 33: Non-GAAP measurements
Non GAAP measurements: We report certain financial measures that are not prescribed or authorized by U. S. generally accepted accounting principles ("GAAP"). We discuss management's reasons for reporting these non-GAAP measures below. Although management evaluates and presents these non-GAAP measure
Slide 34: HollyFrontier Index
Please see p. 35 for disclaimer and www.HollyFrontier.com/investor-relations for most current version. 34 HOLLYFRONTIER INDEX
Slide 35: Industry data disclaimer
The data on p. 34 is for informational purposes only and is not reflective or intended to be an indicator of HollyFrontier's past or future financial results. This data is general industry information and does not reflect prices paid or received by HFC. The data was compiled from publicly available
Slide 36: HollyFrontier
HOLLYFRONTIER.