Company Reports

HF Sinclair's first-quarter adjusted earnings decreased to $142.3 million from $394.1 million a year ago but exceeded market expectations on lower refining earnings. The firm repurchased $169.6 million in shares during the quarter, in line with the fourth quarter. However, it announced a new $1 billion repurchase authorization, (about 9% of current market cap). Management was not specific on timing but indicated its commitment to return cash to shareholders by leaning into repurchases in the currently strong environment. Combined with a larger repurchase amount in April disclosed by management, we wouldn’t be surprised to see the bulk be used this year.

After the acquisition of Sinclair Oil, HollyFrontier, now HF Sinclair, is a fully integrated independent company composed of refining, marketing, renewables, specialty lubricants, and midstream businesses.

HF Sinclair's fourth-quarter adjusted earnings decreased to $164.6 million from $597.8 million a year ago but surpassed market expectations on lower refining earnings. The firm repurchased $165.7 million in shares during the quarter, a meaningful slowdown from $585.6 million during the third quarter. However, for the full year it returned $1.3 billion to shareholders including dividends, for an impressive payout ratio of 74%, well above its long-term target of 50%. It also has $591 million remaining on its current repurchase authorization, and last week it announced an increase in the quarterly dividend of $0.05 to $0.50 per share. With management expecting another above-midcycle year in 2024, it also expects another strong payout to shareholders.

After the acquisition of Sinclair Oil, HollyFrontier, now HF Sinclair, is a fully integrated independent company composed of refining, marketing, renewables, specialty lubricants, and midstream businesses.

HF Sinclair's third-quarter adjusted earnings decreased to $760.4 million from $982.9 million a year ago, exceeding market expectations, on lower refining earnings that more than offset earnings improvement in the other segments, particularly lubricants. The firm returned $669.2 million to shareholders, including $585.6 million in repurchases (nearly 6% of market cap), which began during the quarter.

After the acquisition of Sinclair Oil, HollyFrontier, now HF Sinclair, is a fully integrated independent company composed of refining, marketing, renewables, specialty lubricants, and midstream businesses.

HF Sinclair's second-quarter adjusted earnings decreased to $503.8 million from $1.3 billion a year ago as refining margins fell 39%. The firm returned $87.3 million to shareholders via the dividend but made no share buybacks, unlike many of its peers. Management provided no update on the proposed buyout of Holly Energy Partners.

After the acquisition of Sinclair Oil, HollyFrontier, now HF Sinclair, is a fully integrated independent company composed of refining, marketing, renewables, specialty lubricants, and midstream businesses.

HF Sinclair's first-quarter adjusted earnings increased to $394.1 million from $175.6 million a year ago, exceeding expectations. The increase was largely attributable to higher refining earnings but also improvement in the renewables segment, which offsets lower lubricant results.

After the acquisition of Sinclair Oil, HollyFrontier, now HF Sinclair, is a fully integrated independent company composed of refining, marketing, renewables, specialty lubricants, and midstream businesses.

HF Sinclair reported a large increase in fourth-quarter earnings from the year before, but fell short of market expectations on weaker-than-expected West Coast refining results and disappointing operational performance in the renewables segment. Adjusted income of $597.8 million in the fourth quarter improved from an adjusted loss of $17.6 million a year ago thanks to a strong refining market. Full-year 2022 adjusted earnings amounted to $3.0 billion compared with an adjusted income of $250.1 million the year before. On the back of this strong 2022 performance, HF Sinclair increased the dividend $0.05 to $0.45 per share. During the quarter it also repurchased $394.7 million in shares. For the full year, it returned $1.6 billion in dividends and buybacks, far exceeding its post-Sinclair acquisition target of $1 billion for 2022. While avoiding specific guidance on its repurchase pace, management continues to target a 50% payout ratio of adjusted net income. Our $63 fair value estimate and narrow moat rating are unchanged, leaving HF Sinclair the cheapest refiner in our coverage.

After the acquisition of Sinclair Oil, HollyFrontier, now HF Sinclair, is a fully integrated independent company composed of refining, marketing, renewables, specialty lubricants, and midstream businesses.

HF Sinclair exceeded market expectations, reporting adjusted earnings of $982.9 million in the third quarter compared with $209.9 million a year ago largely thanks to strong refining results. During the quarter it accelerated shareholder returns from the previous quarter, repurchasing $866.2 million in shares and paying $85.3 million in dividends ($0.40/share). This brings its total shareholder returns to $1.1 billion since the closing of the Sinclair acquisition in March, well ahead of its prior end of first-quarter 2023 target. In September it authorized another $1 billion of repurchases that will go toward fulfilling its targeted long-term payout ratio of 50%.

Second-quarter refining results produced a round of record profits after margins soared during the quarter. Although that will probably prove a peak as margins have since softened on concerns about weakening demand, they remain at relatively high levels, implying that strong, above-midcycle profits will continue. Refiners have been focused on reducing debt to prepandemic levels and have largely done so, thanks to the strong market. As such, we expect shareholder returns to increase in the second half of the year and stay robust into 2023 as the refining market remains strong.

After the acquisition of Sinclair Oil, HollyFrontier, now HF Sinclair, is a fully integrated independent company composed of refining, marketing, renewables, specialty lubricants, and midstream businesses.

HF Sinclair exceeded market expectations, reporting adjusted earnings of $1,258.5 million in the second quarter compared with $143.8 million a year ago largely thanks to strong refining results. After reinstating the dividend earlier than expected at a higher rate of $0.40 per share in the first quarter, it maintained that level for the second quarter. Including the dividend and $110.4 million in repurchases, it returned $200.6 million to shareholders during the quarter. Given its debt and cash balance targets have been achieved and market conditions remain favorable, we expect greater repurchase amounts in the third quarter as management works toward its $1 billion in shareholder returns by Q1 2023. Our fair value estimate and narrow moat rating are unchanged. HF is one of the cheaper refiners under our coverage.

HF Sinclair exceeded market expectations, reporting adjusted earnings of $175.6 million in the first quarter compared with an adjusted loss of $85.3 million a year ago. With the close of the Sinclair Oil acquisition and strong financial performance, management reinstated the dividend earlier than expected at a higher rate of $0.40 per share. The outlook for all refiners remains positive in the near term given strong demand despite higher prices and tight global refining markets due in part to sanctions on Russia. As such, we expect the guidance for $1 billion in shareholder returns in the next 12 months will actually be exceeded given that was made assuming midcycle conditions. Our fair value estimate and narrow moat rating are unchanged. HF Sinclair is one of the cheaper refiners under our coverage. With the dividend reinstituted and potential for stronger gasoline margins, it could start to close the gap with better-performing peers.

We have increased our fair value estimates for the independent refiners under our coverage. After our update, HF Sinclair trades at the largest discount at 0.92 price/fair value, followed by Phillips 66 (0.93), Marathon Petroleum (1.05), and then Valero (1.16). Shares have performed strongly, up an average of 30% year to date given strong demand and improved margins. U.S. refiners have been a beneficiary of the fallout from the Russian invasion of Ukraine as restrictions on Russian crude and product exports have resulted in tight global product inventories, particularly distillate. Also, higher global natural gas prices, a key input to the refining process, have improved U.S. refiners’ relative competitiveness even as domestic natural gas prices have soared to their highest level in almost 14 years. Operating cost is relative and we expect the U.S. to remain at the low end of the cost curve even as it shifts higher globally. Meanwhile, RIN prices have waned since the start of the year, relaxing a headwind of the last few years. Our moat ratings are unchanged.

After the acquisition of Sinclair Oil, HollyFrontier, now HF Sinclair, is a fully integrated independent company composed of refining, marketing, renewables, specialty lubricants, and midstream businesses.

HollyFrontier reported an adjusted loss of $17.6 million in the fourth quarter compared with an adjusted loss of $118.6 million a year ago. Despite negative performance in the fourth quarter, full-year adjusted earnings amounted to $250.1 million in 2021 compared with an adjusted loss of $139.9 million the year before. Adjusted earnings for the quarter exclude approximately $21.9 million related to decommissioning, integration, and other charges.