Hf Sinclair Corporation · NYSE:DINO
Hf Sinclair — HollyFrontier — Wolfe Research Refining Conference (January 2018)
31 slides from Hf Sinclair's conference presentation, Jan 3, 2018
Slide 1: HollyFrontier Investor Presentation January 2018
HOLLYFRONTIER INVESTOR PRESENTATION January 2018
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
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 5 refineries in the Mid Continent, around HFC’s
Slide 4: HollyFrontier Asset Footprint
HollyFrontier Asset Footprint 4
Slide 5: Total Sum-of-the-Parts Valuation
Total Sum-of-the-Parts Valuation HFC Consolidated SOTP Valuation (US$ millions) HF Refining & Marketing EBITDA (Mid-Cycle) $1,100 Target Multiple 6x Enterprise Value $6,600 Share Count1 (millions) 176.6 Lubricants HF Refining & Marketing (per share) $37 16% HEP Target Price $35 HEP LP Units Owned 59
Slide 6: 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 7: Refinery Operations
Refinery Operations Annual Crude Charge Rate 450,000 – 470,000 BPD Consolidated Crude Charge Opex Per Throughput Barrel $/throughput BBL Barrels Per Day $6.16 $6.25 $5.95 450,000 $5.75 $5.50 Target $5.25 $5.39 $5.40 $5.30 425,000 $4.75 2013 2014 2015 2016 2017E Opex/throughput BBL Target from 2015 A
Slide 8: Proximity to North American Crude Production
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 Approxima
Slide 9: High Value Premium Product Markets
High Value Premium Product Markets Product Pricing vs. Gulf Coast Regional Gasoline Pricing vs Gulf Coast1 $/bbl $20 2012 2013 $15 2014 2015 $11.08 $6.54 $8.17 2016 $7.60 $10 Average $3.38 $5 $2.67 $- Group 3 vs GC Chicago vs GC Salt Lake vs GC Denver vs GC Phoenix vs GC Las Vegas vs GC Regional ULS
Slide 10: Refining Segment Earnings Power
Refining Segment Earnings Power HFC Consolidated 3-2-1 Index Mid-Cycle Refining EBITDA $/Barrel $1.0B – $1.2B $25 Gulf Coast 3-2-1 Crack $10.00 Brent/WTI Spread $4.00 $21.22 Product Transportation to HFC $20.06 $3.00 Markets $20 HFC Index $17.00 $17.93 $17.89 Capture Rate 75% Realized Gross Margin P
Slide 11: 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 Distribution $/LP Unit WTI Price HFC’s refining assets in hig
Slide 12: Ownership Structure
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 59% LP Interest $1.9B Value2 41.9mm HEP units1 41% LP Interest $1.4B Value
Slide 13: HEP Historical Growth
HEP Historical Growth Committed to Continuing Track Record of Increasing Distribution Holly Tulsa 50% JV with Acquired Holly Corporation dropdown of Crude gathering Plains for remaining and Frontier Oil Holly intermediate loading rack system Frontier interests in SLC / Corporation feedstock pipeline
Slide 14: HEP Avenues for Growth
HEP Avenues for Growth ORGANIC ACQUISITIONS DROPDOWNS FROM HFC Leverage HEP’s existing Pursue logistics assets in HEP’s Partnering with HFC to build footprint, specifically in current geographic region and/or acquire new assets / Permian Basin businesses Replace incumbent HFC service Contractual PPI
Slide 15: HF Lubricants & Specialty Products
HF Lubricants & Specialty Products The World’s Machinery is Driving Towards Greater Efficiency, Reliability and Longevity Advanced lubricants are a crucial requirement in the drive HF LSP is a to develop more reliable, efficient and environmentally leading producer compliant industrial machinery wor
Slide 16: Value Opportunity
HF LSP - Rack Back vs Rack Forward RACK BACK RACK FORWARD Sales Customer Order Fulfillment Marketing Finished Lubricants Value Opportunity R&D & Greases Waxes Distribution Blending White & Packaging Oils Feedstock & Production Specialty Products (Warehousing & Transportation) (Lubeplex) Base PCLI &
Slide 17: Rack Forward EBITDA Margin Stability
Rack Forward EBITDA Margin Stability 2018 Rack Forward – EBITDA Margin1 Guidance2 EBITDA ($ in millions) EBITDA Margin % 80 20% EBITDA 17% $175 – 200MM 16% 16% 16% EBITDA Margin 60 14% 15% 10-15% 13% 12% 10% 9% 9% 40 9% 10% 69 58 58 55 53 45 48 20 38 40 5% 29 30 0 0% 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q
Slide 18: HF Lubricants & Specialty Products
HF Lubricants & Specialty Products Mid-Cycle EBITDA Rack Forward EBITDA ($ in millions) $190 EBITDA Margin 10-15% Annual SG&A $125 - $135MM Target Multiple 10x Annual DD&A $30 - $35MM Upside with Organic Growth and M&A Enterprise Value ($ in millions) $1,900 Opportunities 10x multiple in-line with p
Slide 19: Group III Base Oil Opportunity
Group III Base Oil Opportunity Western Hemisphere Group III Base Oil: Production Capacity vs Demand¹ Increasing Demand for Higher ˜3% CAGR Demand Growth (2016-2026) Performance Finished KBD Lubricants & Specialty 25 Products Higher industry standards driving demand for lubricants formulated from Gro
Slide 20: 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 Margin Value $/bbl Product Sales 2016 Finished Lubricants Finished Lubricants & & Greases Greases 14%
Slide 21: New Segment Reporting
New Segment Reporting HF HF REFINING LUBRICANTS & HOLLY CORPORATE, ENERGY & SPECIALTY OTHER & CONSOLIDATED MARKETING PRODUCTS (HEP) ELIMINATIONS (HF R&M) (HF LSP) Rack Back Rack Forward SG&A allocated to each segment Rack Back includes transfer pricing based on Argus spot average for each base oil c
Slide 22: 2018 Guidance
2018 Guidance Refining & Marketing 2018E Capex - $5.50 Opex/bbl Segment Allocation - Turnaround Schedule - Tulsa – 1Q18 HEP - El Dorado – 4Q18 9% - Capex $375 – $425 million HF LSP HF LSP 14% - $175 – 200 mm Rack Forward EBITDA R&M - Mississauga Turnaround - 4Q18 77% - Capex $60 – $80 million HEP -
Slide 23: Appendix
APPENDIX
Slide 24: Strong Track Record of Cash Returns
Strong Track Record of Cash Returns Since the July 2011 merger HFC has returned approximately $4.3 billion, or approximately $24.50 per share to shareholders • Strong track record in returning excess cash to shareholders • Committed to maintaining competitive cash yield versus peers • Share repurcha
Slide 25: HollyFrontier Capital Structure
HollyFrontier Capital Structure HFC Consolidated Capital Structure HFC Standalone Capital Structure As of September 30, 2017 (US$ millions) As of September 30, 2017 (US$ millions) Cash and Short Term Marketable Securities $631 Cash and Short Term Marketable Securities $624 HOLLYFRONTIER CORPORATION
Slide 26: HollyFrontier Credit Profile
HollyFrontier Credit Profile Investment Grade Rating Peer Group Debt Metrics − 9/30/17 - S&P BBB- Debt Ratio % - Moody’s Baa3 50% - Fitch BBB- $624 million cash as of 9/30/17 40% $1 billion outstanding debt as of 9/30/17 - excludes non-recourse HEP debt 30% Total debt to capital ratio 17% as of 9/30
Slide 27: Our Business Plan Update
Our Business Plan Update Business Improvement Plan Progress Annual EBITDA in $ MM’s 2015 Analyst Day Target1 Full Year 2017E Acheived1 Refining Operations $245 $107 Reliability $90 $10 Cost $105 $58 Turnaround $50 $39 Optimization $90 $220 Planning $30 $113 Products $30 $64 Feedstock $30 $43 Capital
Slide 28: Definitions
Definitions BPD: the number of barrels per calendar day of crude oil or petroleum products. Lubricant : A solvent neutral paraffinic product used in commercial heavy duty engine CAGR: The compound annual growth rate is calculated by dividing the ending value by oils, passenger car oils and specialty
Slide 29: HollyFrontier Index
HollyFrontier Index Please see p. 30 for disclaimer and www.HollyFrontier.com/investor-relations for most current version. 29 29
Slide 30: 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 produ
Slide 31: HollyFrontier Corporation
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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