HF Sinclair Corporation (DINO) Earnings

Management highlights

### Organizational Leadership Changes - Steve Ledbetter appointed President and Chief Operating Officer, responsible for overseeing all operations and commercial organizations, with a mandate to improve safety and reliability, enhance cost efficiency, and unlock value across HF Sinclair's integrated platform. Multiple internal promotions have been made to support this work. - Valeria Pompa moves to President of Growth, Technology and Transformation, leading organic improvement of existing operating assets, implementing new technology to improve plant and commercial performance, and overseeing retirement of the Mississauga refining assets and development of the Go West midstream initiative. ### Strategic Announcements - HF Sinclair announced plans to pursue a capital markets separation of its Lubricants and Specialties segment into a standalone independent public company. Management expects both the core refining business and the independent lubricants business will benefit from greater strategic focus, operational agility, and aligned capital deployment. - The company will retire the base oil refining assets at Mississauga, due to the asset's location, small size, and high required capital to compete with lower-cost new global base oil capacity. Post-retirement, the lubricants segment will secure base oil supply via new long-term commercial agreements with two global premier base oil manufacturers, complemented by ongoing base oil production from the company's Tulsa refinery. The independent lubricants business will operate a capital-light model designed to generate more consistent free cash flow while leveraging its existing global brands and distribution channels. - HF Sinclair remains committed to returning excess free cash flow to shareholders, and is evaluating prudent reinvestment opportunities to enhance existing assets, with final allocation decisions pending upcoming board review. ### Operational Highlights - Refining: Q2 2026 crude throughput averaged 640,000 barrels per day, which exceeded management's guidance range, reflecting improved operational reliability and integrated optimization across the asset portfolio. A planned turnaround at the El Dorado refinery is scheduled to begin in September 2026. - Marketing: Added 63 new branded sites in Q2 2026, with over 100 additional sites in the pipeline to launch over the next 6-12 months. The segment remains on track to grow branded site count by ~10% annually, and achieved year-over-year branded volume growth. The Green Trail Fuels joint venture integration is progressing well and is expected to accelerate brand growth. - Renewable Fuels: Delivered another quarter of strong financial performance supported by favorable macro conditions. A planned turnaround at the Cheyenne facility is scheduled for Q3 2026. - Midstream / Capital Projects: The multi-phase Go West initiative to expand logistics capacity to move Rockies production to Western U.S. (PADD 4 and PADD 5) is progressing; Phase 1 will add 35,000 barrels per day of capacity, targeted online in 2029. The El Dorado vacuum furnace upgrade project remains on track for completion during the fall 2026 turnaround, and will enable processing of an additional 10,000 barrels per day of heavy crude while improving reliability and product yields. - Shareholder Returns: Returned $265 million to shareholders in Q2 2026, split between $89 million in regular dividends and $179 million in share repurchases. Cumulative cash returned to shareholders since the March 2022 Sinclair acquisition totals ~$5.2 billion.

Guidance

- Full year 2026 capital spending guidance is maintained at its prior level, though management notes it is subject to change as projects under evaluation progress. - Q3 2026 refining crude throughput is expected to be between 590,000 to 620,000 barrels per day, reflecting the scheduled September 2026 El Dorado turnaround. Management expects another strong Q3 2026 for refining performance outside of the planned downtime. - Management expects tight global refining market conditions to persist into 2027, and potentially through 2028, due to 5-7 million barrels per day of global refining capacity taken offline by ongoing geopolitical conflicts with no near-term resolution. 20% of global base oil capacity is currently offline, supporting favorable conditions for HF Sinclair's lubricants business. - The lubricant segment targets mid-cycle adjusted EBITDA of $300 million to $350 million on a trailing 12-month basis as an independent standalone business. - The Go West initiative remains on track to reach a final investment decision (FID) for Phase 1 by the end of 2026; management will release detailed economic guidance at that time.

Segment performance

1. Refining: Second quarter 2026 adjusted EBITDA was $1 billion, up from $476 million in Q2 2025. This represents 66.7% of total company adjusted EBITDA. Crude oil charge averaged 640,000 barrels per day, up from 616,000 barrels per day year-over-year. The increase was driven by strong refining margins and volumes from tight supply, steady demand, and favorable crack spreads. 2. Marketing: Q2 2026 adjusted EBITDA was $28 million, up from $25 million in Q2 2025. This represents 1.9% of total company adjusted EBITDA. Total branded fuel sales volumes hit 387 million gallons, up from 337 million gallons year-over-year. 3. Midstream: Q2 2026 adjusted EBITDA was $112 million, flat year-over-year. This represents 7.5% of total company adjusted EBITDA. 4. Renewable: Excluding special inventory and impairment charges, Q2 2026 adjusted EBITDA was $123 million, up from a $2 million adjusted loss in Q2 2025. This represents 8.2% of total company adjusted EBITDA. Total sales volumes were 60 million gallons, up from 55 million gallons year-over-year, with growth driven by higher renewable fuel prices, increased producer tax credit benefits, and higher volumes. 5. Lubricants and Specialties: Q2 2026 adjusted EBITDA was $207 million, up from $55 million in Q2 2025. This represents 13.8% of total company adjusted EBITDA. The increase was driven by higher sales volumes and product prices, plus a $46 million FIFO benefit compared to a $20 million FIFO charge year-over-year. Total company Q2 2026 adjusted EBITDA was $1.5 billion, up from $665 million in Q2 2025.

Risks & headwinds

- Ongoing geopolitical conflicts in Ukraine and the Middle East have taken large amounts of global refining and base oil capacity offline, with no clear near-term resolution, creating persistent market volatility. - A key wild card for global product markets is China's current crude purchasing and product export policy: if China reverses its current pause on large-scale crude purchases and product exports, increased global product supply could tighten crack spreads and reduce refining profitability. Singapore crack spreads are identified as an early indicator of this shift. - SRE (Small Refinery Exemption) applications for multiple HF Sinclair facilities are still pending with U.S. EPA, with a September 1 compliance deadline approaching. If no relief is granted imminently, the company will be unable to leverage exemptions to offset RIN compliance costs, and the overall U.S. RIN bank is projected to move to a balanced or negative position by year-end, which could drive sharp RIN price increases that increase compliance costs for the industry. - While current market conditions are favorable, management notes that the long-term duration of current tight market conditions is uncertain, as offline capacity could be restored if geopolitical conflicts are resolved. The company plans to maintain capital discipline amid the current favorable environment, prioritizing high-return reinvestment and shareholder returns.

Analyst Q&A

• Q: How do current strong gasoline crack spreads impact HF Sinclair, specifically across its Mid-Continent and West regions, for both gasoline and diesel margins? /

  A: Global geopolitical disruptions have primarily impacted distillate markets, but gasoline supply is also tight. Both the Mid-Continent and West Coast regions are seeing tighter supply and supportive cracks, with both gasoline and diesel margins faring better in HF Sinclair's regions than the broader market. There is some temporary softness in West Coast diesel, but overall global product inventories are at very low levels that will take a long time to replenish, supporting the ongoing tight market structure.

• Q: Why separate the lubricants business via a public spin now rather than an outright sale, and what is the expected value creation? /

  A: An outright sale would give up value to third-party buyers and trigger a large tax bill that provides no benefit to HF Sinclair shareholders. A tax-efficient capital markets separation preserves all value creation for current shareholders. Separately, the lubricants business is a more stable, less volatile business than refining, so it typically trades at a higher EBITDA multiple, which is currently discounted under the current consolidated structure. Spinning it out unlocks this higher valuation for shareholders. Management is open to a sale if a third party offers an attractive premium, but that is not the primary goal of the process.

• Q: What is the status of the Go West initiative, and how does it compete with other proposed pipeline projects serving Western U.S. markets? /

  A: Go West Phase 1 (35,000 barrels per day) is still advancing toward a final investment decision by the end of 2026, with ongoing work to finalize economics and execution plans. The full project could eventually reach 140,000 to 150,000 barrels per day total capacity. HF Sinclair will fill a large portion of the capacity with its own volumes, and will also seek third-party shippers, with no public split disclosed yet. Go West is not competitive with other projects like Western Gateway; the PADD 5 (California) market has a large structural supply deficit after two recent refinery closures and tight regulatory constraints that limit new in-state production, so all new infrastructure projects to bring supply into the region are complementary.

• Q: With current strong cash generation, will HF Sinclair hold excess net cash or prioritize share buybacks and M&A? /

  A: Management does not plan to hold idle cash on the balance sheet. The company is currently evaluating multiple large accretive projects that will deliver strong returns to shareholders, and will announce details when final decisions are made. If no sufficiently attractive reinvestment opportunities are approved, management will lean into additional share repurchases. The company remains on track to hit its 50% payout ratio target for 2026, and M&A will focus on small tuck-in opportunities in marketing and midstream that deliver high double-digit returns, rather than large transformational acquisitions.

• Q: Is there any flexibility to delay the Mississauga base oil refinery shutdown given current strong base oil margins? /

  A: While management is mindful of current favorable market conditions, the Mississauga asset has permanent structural disadvantages: it is a small, high-cost asset located in a residential area with major logistics constraints, and would require substantial capital investment to compete with new lower-cost base oil capacity coming online globally. There is no fixed hard shutdown date, and the plant will be gradually brought to a safe state over the coming months, but the retirement decision is final.