HF Sinclair execs say integration work running ahead of target

Aug. 8, 2022
The company’s net operating margin popped to more than $28/bbl in the second quarter.

The leaders of HF Sinclair Corp., Dallas, said Aug. 8 the integration of the former Holly Frontier and Sinclair Oil organizations is on pace to produce more than the $100 million in savings they had targeted in the first 2 years following the close of HollyFrontier’s acquisition of Sinclair in March.

HF Sinclair produced a net profit of more than $1.2 billion on revenues of nearly $11.2 billion in second-quarter 2022, the first period to fully reflect the combined HollyFrontier and Sinclair operations and which included nearly $50 million in one-time costs. The company’s refining division rang up an operating profit of nearly $1.6 billion – 93% of the company’s total – while the lubricants and specialty products group chipped in a record $135 million in operating income.

Crude charge for the quarter was a little more than 627,000 b/d, in line with the 615,000-645,000 b/d range executives forecast 3 months ago (OGJ Online, May 9, 2022). Like its peers, the company’s net operating margin soared, coming in at $28.49/produced bbl versus $5.98 in the prior-year period.

“We're constructive on the outlook for transportation fuels, supported by low product inventories and healthy global demand,” chief executive officer Michael Jennings told analysts on a conference call. “With all of our previously announced renewables program projects complete, we will continue to ramp up production of these assets as we expect to reach full production levels by the end of the third quarter.”

Chief financial officer Rich Voliva said the HF Sinclair team has trimmed its 2022 capital spending forecasts slightly to $785-950 million now that its main constituent parts have been working together for nearly 5 months. Those numbers now are as follows:

  • Refining: $225-250 million from a previous range of $240-260 million.
  • Renewables: $250-300 million, which lowers the top end of that range by $20 million.
  • Turnarounds and catalysts: $110-130 million, which also trims the previous range’s top end by $20 million.
  • Holly Energy Partners, the company’s 47%-owned transportation and storage master limited partnership: $50-75 million, which lifts the low end of the previous range by $15 million.
  • The combined total of $150-195 million for lubricants and specialties, marketing, and corporate spending hasn’t changed.

Asked about some of the drivers behind the ahead-of-schedule synergies from combining HollyFrontier and Sinclair, president and chief operating officer Tim Go pointed to logistics as “one pleasant surprise.” The company’s combined teams, Go added, have enabled its Woods Cross and Casper refineries (in Utah and Wyoming, respectively) to set monthly throughput rate records.

Wholesale branding also is proving to be a growth engine. With the Sinclair acquisition, they picked up a network of more than 1,300 Dino-branded retail sites. Since March, the company has added 20 locations and is working on another 50, Go said.

Shares of HF Sinclair (Ticker: DINO) were up about 1% in afternoon trading on Aug. 8. Over the past 6 months, they have climbed 30%, growing the company’s market capitalization to $10.6 billion.

About the Author

Geert De Lombaerde | Senior Editor

A native of Belgium, Geert De Lombaerde has more than two decades of business journalism experience and writes about markets and economic trends for Endeavor Business Media publications Healthcare InnovationIndustryWeek, FleetOwner, Oil & Gas Journal and T&D World. With a degree in journalism from the University of Missouri, he began his reporting career at the Business Courier in Cincinnati and later was managing editor and editor of the Nashville Business Journal. Most recently, he oversaw the online and print products of the Nashville Post and reported primarily on Middle Tennessee’s finance sector as well as many of its publicly traded companies.