HF Sinclair Earnings: Weakening Margins and Volumes Hit Earnings, but Renewable Segment Improves

HF Sinclair’s DINO 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.

The refining segment’s adjusted EBITDA fell to $729.5 million from $1.6 billion a year ago as realized refining margins during the quarter fell to $22.22 per barrel from $36.36 a year ago. Crude throughput also fell to 553.9 thousand barrels a day during the quarter from 627.3 mb/d last year because of a heavy turnaround schedule. Management said that while turnarounds harmed production in the second quarter, they are largely finished and will put the company in a strong position to capture available margins throughout the rest of the year.

Absent a material economic slowdown later in 2023, we continue to see a strong year for refining despite margin compression from last quarter. Like other refining management teams, HF Sinclair noted that end-product demand remains strong, suggesting that there is no economic weakness as of yet. Our fair value estimate and narrow moat rating are unchanged.

The renewable segment’s adjusted EBITDA improved to a loss of $11.3 million from a loss of $28.3 million a year ago as new projects began to ramp up production, increasing total volumes to 50 million gallons from 26 million a year ago.