Hf Sinclair Corporation · NYSE:DINO
Hf Sinclair — HollyFrontier — Simmons Energy Conference 2016
37 slides from Hf Sinclair's conference presentation, Mar 3, 2016
Slide 1: Investor Presentation
Investor Presentation March 2016
Slide 2: HollyFrontier Corporation Disclosure Statement
HollyFrontier Corporation 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 an
Slide 3: Our Mission, Our Values
OUR MISSION OUR VALUES OUR MISSION IS to be the premier U.S. petroleum HEALTH & SAFETY refining, pipeline and terminal company as measured WE PUT HEALTH AND SAFETY FIRST. by superior financial performance and sustainable, We conduct our business with primary emphasis on the health and safety of our
Slide 4: Footprint of HollyFrontier and Holly Energy Partners
FOOTPRINT OF HOLLYFRONTIER AND HOLLY ENERGY PARTNERS Collaboration with HEP Pure play inland refining company with 443,000 barrels provides strategic per day of crude capacity growth opportunities in Proximity to North American crude production and attractive niche product markets logistics and mark
Slide 5: Achievements and Objectives
ACHIEVEMENTS AND OBJECTIVES ACHIEVEMENTS OBJECTIVES • Geographically advantaged inland • Continuous operational improvement refining system created with 2011 HollyFrontier merger • Continued system integration • Enhanced operating procedures and • Large and small capital project practices implemente
Slide 6: HollyFrontier Investment Highlights
HOLLYFRONTIER INVESTMENT HIGHLIGHTS Safe and reliable operations OPERATIONS Continued system integration to drive profitability Internal investment to drive growth and enhance returns CAPITAL PROJECTS Liquid yield improvement and de-bottlenecking opportunities Maintain investment grade rating CAPITA
Slide 7: Operational Reliability
OPERATIONAL RELIABILITY Reliability Initiatives Refinery Utilization • Enhanced operating procedures and practices 100% • Risk-based inspection program implementation • Occupational and process safety management Maximum turnaround adjusted utilization rate teams • Operational integrity and training
Slide 8: Proximity to North American Crude Production
PROXIMITY TO NORTH AMERICAN CRUDE PRODUCTION • Refinery location and configuration enables a fleet-wide crude slate discounted to WTI • Highly flexible refining system allows feedstock optionality • Discounted feeds drive higher gross margins / barrel and ultimately, EBITDA Increased access to disco
Slide 9: HollyFrontier Business Plan
HOLLYFRONTIER BUSINESS PLAN A fundamentals-focused growth plan that addresses the following opportunities Running our refineries at the 75th percentile in Expected Annual Operational Availability EBITDA* ($MM) (2015-2018) Creating sustainable growth in gross margin Refinery Operations $245 and free
Slide 10: HollyFrontier Business Plan: Achievements Realized
HOLLYFRONTIER BUSINESS PLAN Achievements Realized by Segment Expected Reliability: 97% refinery availability, highest level % of Goal since merger and 40% improvement in lost profit Annual Realized* opportunity from 8% to 5% EBITDA* 2015 ($MM) Costs: Over $30 MM reduction in fixed operating costs ne
Slide 11: Refinery Operations
REFINERY OPERATIONS Annual EBITDA opportunity of $245 MM EBITDA Refinery Reliability $90 MM Cost Reduction $105 MM Turnaround Execution $50 MM IMPROVED RELIABILITY REDUCTION IN IMPROVE AND REDUCTION IN LOST CONTROLLABLE TURNAROUND OPPORTUNITY OPERATING EXPENSES EXECUTION • Achieve first quartile • 1
Slide 12: Optimization
OPTIMIZATION Annual EBITDA opportunity of $90 MM • Little or no capital investment required • Driven by commercial and planning groups recognizing market opportunities Crude Supply • Pipeline reversal between Navajo and Cushing increases optionality • HEP system allows us to preserve quality of Perm
Slide 13: Capital Investments
CAPITAL INVESTMENTS Annual EBITDA opportunity of $365 MM Investing to drive growth and enhance returns EBITDA Large Capital Investments $165 MM LARGE CAPITAL INVESTMENTS Opportunity Capital Program $200 MM Estimated $165 MM in annual EBITDA • El Dorado Naphtha Fractionator: Completed Q4 2015 Planned
Slide 14: Investing to Drive Growth: Woods Cross Expansion
INVESTING TO Woods Cross Expansion Expand crude capacity from 31,000 to DRIVE GROWTH 45,000 barrels per day AND ENHANCE • Includes relocation/revamp of FCC and polymerization units from Bloomfield, NM refinery RETURNS • Crude slate to include up to 25,000 BPD local Uinta Basin Black Wax or other reg
Slide 15: Tulsa and Cheyenne FCC Modernization
PROJECT Tulsa Refinery Modernization: FCC Tulsa FCC Modernization Revamp ESTIMATED CAPEX • FCC modernization underway: Upgrade existing $36 million FCC with improved feed nozzles, high efficiency catalyst stripper and riser termination device PROJECTED EBITDA GENERATION* • Expected increase in FCC c
Slide 16: Investing to Drive Growth: El Dorado Debottleneck
INVESTING TO El Dorado Debottleneck DRIVE GROWTH • 6,000 BPD crude unit debottleneck AND ENHANCE • El Dorado could support 20,000 BPD of crude RETURNS unit capacity to fill existing downstream units • 4,000 BPD achieved in August 2015 with no investment PROJECT El Dorado Debottleneck • Expect to ach
Slide 17: Investing to Drive Growth: Tulsa Naphtha Splitter
INVESTING TO Tulsa Naphtha Splitter • Upgrade 2,000 BPD Light Straight Run (LSR) to DRIVE GROWTH Gasoline AND ENHANCE • Naphtha Splitter Tower separates C7 molecules RETURNS from isomerization feedstock using them as reformer feedstock • Improves Isomerization catalyst performance by PROJECT removin
Slide 18: Disciplined Approach to Capital Allocation
DISCIPLINED APPROACH TO CAPITAL ALLOCATION SUSTAINING CAPITAL: GROWTH CAPITAL: RETURN EXCESS CASH TO SHAREHOLDERS: • Maintenance capex: • Focus on quick hit • Committed to $125 million in annual opportunities, those maintaining best in sustaining maintenance with a maximum class total cash yield app
Slide 19: Balance Sheet
BALANCE SHEET Total Debt to Capital* • Investment Grade Rating • Moody’s Baa3 ALJ • S&P BBB- WNR • $211 million cash as of 12/31/15 PBF • $31 million outstanding debt as MPC of 12/31/15 • excludes non-recourse HEP PSX debt TSO • Total debt to capital ratio 0.5% as VLO of 12/31/15 DK • Target 1x net
Slide 20: Strong Track Record of Cash Returns
STRONG TRACK RECORD OF CASH RETURNS Since the July 2011 merger HFC has returned approximately $3.7 billion, or approximately $20.72 per share to shareholders • Industry leader in returning excess cash to shareholders • Committed to maintaining competitive cash yield versus peers • Execution of $1 bi
Slide 21: Strong Financial Metrics vs Peers
STRONG FINANCIAL METRICS VS PEERS Net Income per Barrel of Crude Capacity HFC earnings per bbl strongest in peer sector (2010 – 2014) 12.00 10.00 8.00 5.52 5.05 4.34 6.00 4.43 2.39 2.28 4.00 1.85 2.00 0.18 0.15 0.00 -2.00 -4.00 -6.00 HFC* WNR* MPC PSX DK* VLO TSO* PBF ALJ 2010 2011 2012 2013 2014 *2
Slide 22: Best in Class Returns on Capital Employed
BEST IN CLASS RETURNS ON CAPITAL EMPLOYED Pro Forma HollyFrontier Returns on Invested Capital (Average 2010-2014) 18% 16% 15% 15% 15% 14% 13% 12% 11% 10% 9% 8% 8% 6% 4% 2% 2% 1% 0% HFC* MPC WNR* PSX DK* TSO* VLO PBF ALJ *2014 net income excludes lower of cost or market impacts for HFC, WNR, DK and T
Slide 23: Holly Energy Partners
HOLLY ENERGY PARTNERS HollyFrontier Corporation (HFC) 100% Interest Public 22.4mm HEP units, General Partner (GP) 37% LP Interest “Holly Logistic Services LLC” 36.3mm HEP units, 61% LP Interest 2% GP Interest + IDRs* Holly Energy Partners (HEP) * IDR: incentive distribution rights 23
Slide 24: Holly Energy Partners
HOLLY ENERGY PARTNERS Consistent Distribution Growth Despite Operate a system of petroleum product Crude Price Volatility $0.60 $160 and crude pipelines, storage tanks, DPU* distribution terminals and loading rack facilities located near HFC’s refining WTI $140 $0.50 assets in high growth markets $1
Slide 25: Holly Energy Partners: Growth Drivers
HOLLY ENERGY PARTNERS GROWTH DRIVERS Organic Dropdown Context • Southeastern New Mexico Gathering • HEP generally has right of first refusal on all logistics assets HFC builds or • UNEV acquires • Internal Initiatives • As HFC grows, HEP is positioned to • Contractual PPI/FERC Increases benefit by p
Slide 26: El Dorado Naphtha Fractionation Dropdown
El DORADO NAPHTHA FRACTIONATION DROPDOWN • HEP recently purchased the newly • HEP and HFC expected to enter into 15-year constructed naphtha fractionation and tolling agreements for each respective unit hydrogen generation units at HFC’s El Dorado refinery for a total cash • 2016 EBITDA from these t
Slide 27: Frontier Pipeline Interest Acquisition
FRONTIER PIPELINE INTEREST ACQUISITION Asset Description • 289 mile, 72K bpd capacity crude pipeline from Casper, WY to Frontier Station, UT • At Frontier Station, connects to SLC Pipeline (PAA/HEP JV) • Sources to Frontier: Express, Big Horn, local crude gathering • Ultimate customers: SLC refiners
Slide 28: Holly Energy Partners: Target 8% Annual Distribution Growth
HOLLY ENERGY PARTNERS TARGET 8% ANNUAL DISTRIBUTION GROWTH RATE Estimated EBITDA Contribution vs 2014 ($mm) 2016E 2017E4 UNEV Growth¹ 14 15 Internal Initiatives2 7 14 El Dorado Naphtha Dropdown¹ 7 7 Frontier Pipeline Interest1 6 7 El Dorado Crude Tanks1 4 4 WX Expansion Assets² 15 25 SE NM Crude Exp
Slide 29: HEP Growth: Cash Distribution Since Inception
HEP GROWTH: CASH DISTRIBUTION SINCE INCEPTION Total HEP Distributions (GP and LP) Total GP Distribution $200 $50.0 HFC received approximately $173 $44.0 $175 $90mm in cash distributions for FY2015** $158 $40.0 $150 $144 $36.5 $126 $125 $29.4 $30.0 $99 $100 $23.6 $86 $20.0 $17.5 $75 $68 $54 $49 $12.9
Slide 30: Value of HFC's LP & GP Interests in HEP
VALUE OF HFC’S LP & GP INTERESTS IN HEP Methodology: • GP values are equal to LP INTEREST*: quarterly GP cash flow on an annualized basis minus the HEP Unit Price $26.00 $28.00 $30.00 $5m GP giveback (as part of the HEP UNEV purchase HFC owns 22.4mm common units ($mm): $582 $627 $672 transaction) ti
Slide 31: HollyFrontier Corporation
HollyFrontier Corporation (NYSE: HFC) 2828 N. Harwood, Suite 1300 Dallas, Texas 75201 (214) 954-6510 www.hollyfrontier.com Julia Heidenreich, VP, Investor Relations Craig Biery, Investor Relations investors@hollyfrontier.com 214-954-6510 31
Slide 32: Appendix
APPENDIX 32
Slide 33: HollyFrontier Index
HOLLYFRONTIER INDEX Please see p. 35 for disclaimer and www.HollyFrontier.com/investor-relations for most current version. 33
Slide 34: Financial Metrics
FINANCIAL METRICS* Net Income/BBL Current Feb 24, 2015 crude capacity 2010 2011 2012 2013 2014 5 yr ave Cash Yield dividend NYSE Close HFC* 0.88 8.26 10.68 4.55 3.25 5.52 ALJ 5.6% $0.60 $10.72 WNR* -0.31 2.41 7.24 4.94 10.96 5.05 WNR 5.5% $1.52 $27.54 MPC 1.49 5.49 7.77 3.38 4.03 4.43 DK 4.3% $0.60
Slide 35: Definitions
DEFINITIONS 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-
Slide 36: HFC Index Disclosure
HFC INDEX DISCLOSURE The data on p. 33 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 fro
Slide 37: HollyFrontier
aF HOLLYFRONTIER.