Welcome to the HF Sinclair Corporation and Holly Energy Partners first quarter 2022 conference call and webcast. Hosting the call today is Mike Jennings, Chief Executive Officer of HF Sinclair and Holly Energy Partners. He is joined by Rich Voliva, Executive Vice President and Chief Financial Officer of HF Sinclair and President of Holly Energy Partners. Tim Go, President and Chief Operating Officer of HF Sinclair, and Tom Creery, President, HF Sinclair Renewables. At this time, all participants have been placed in a listen-only mode, and the floor will be open for your questions following the presentation. If you would like to ask a question at that time, please press star one on your touch-tone phone. If at any point your question has been answered, you may remove yourself from the queue by pressing star one again. If you should require operator assistance, please press star zero. We ask that you please limit yourself to one question and one follow-up. Additionally, we ask that you pick up your handset to allow optimal sound quality. Please note that this conference is being recorded. It is now my pleasure to turn the floor over to Craig Biery, Vice President, Investor Relations. Craig, you may begin. Thank you, Chantelle. Good morning, everyone, and welcome to HF Sinclair Corporation and Holly Energy Partners' first quarter 2022 earnings call. This morning, we issued press releases announcing results for the quarter ending March 31, 2022. If you would like a copy of the press releases, you may find them on our website at hfsinclair.com and hollyenergy.com. Before we proceed with remarks, please note the safe harbor disclosure statement in today's press releases. In summary, it says statements made regarding management expectations, judgments, or predictions are forward-looking statements. These statements are intended to be covered under the safe harbor provisions of federal security laws. There are many factors that could cause results to differ from expectations, including those noted in our SEC filings. The call also may include discussion of non-GAAP measures. Please see the earnings press releases for reconciliations to GAAP financial measures. Please note any time-sensitive information provided on today's call may no longer be accurate at the time of any webcast replay or rereading of the transcript. With that, I'll turn the call over to Mike. Great. Thank you, Craig. Good morning, everyone. The first quarter of 2022 was transformational as we closed on the acquisition of the Sinclair companies, marking the new HF Sinclair, and we made our first sales of renewable diesel from Cheyenne. Our combined integrated platform delivered strong financial results led by the performance of our refining and lubricant segments. We reported first quarter net income attributable to HF Sinclair shareholders of $160 million or $0.90 per diluted share. These results reflect special items that collectively decreased net income by $16 million. Excluding the items, adjusted net income for the quarter was $176 million or $0.99 per diluted share compared to net loss of $85 million or -$0.53 per diluted share for the same period in 2021. Adjusted EBITDA for the current quarter was $377 million, an increase of $329 million compared to the first quarter of 2021. With the closing of the acquisitions of the Puget Sound Refinery and Sinclair and our renewables business approaching full operation, we're pleased to announce the first milestone in our capital allocation plan. The HF Sinclair Board of Directors has declared the reinstatement of the regular quarterly dividend at an increased rate of $0.40 per share. This announcement reflects our commitment to our capital allocation strategy of returning $1 billion in excess cash to shareholders over the next 12 months, with the long-term target of returning 50% of our net income to shareholders through dividends and buybacks. The refining segment reported EBITDA of $208 million compared to $134 million for the first quarter of 2021, and adjusted EBITDA of $208 million compared to an adjusted loss of $65 million. This increase was driven by higher sales volumes from the Puget Sound and Sinclair acquisitions, as well as the impact of stronger product demand and gross margins. Consolidated refinery gross margin was $12.69 per produced barrel, a 59% increase compared to the same period last year. First quarter crude throughput averaged 525,000 barrels per day. The renewables segment reported adjusted EBITDA of -$25 million, and total sales volumes were approximately 5 million gallons for the first quarter of 2022. The Cheyenne renewable diesel unit was mechanically complete in the fourth quarter of 2021 and fully operational in the first quarter of 2022. The Pre-Treatment Unit, PTU, at our Artesia, New Mexico facility was completed and fully operational in the first quarter of 2022, and the Artesia RDU is expected to be complete in the second quarter of 2022. Also, effective with the Sinclair acquisition that closed March 14, the renewables segment includes the Sinclair RDU. We will continue to ramp up production and optimize these assets with the expectation of modest positive earnings in the second quarter. The marketing segment EBITDA was $6 million, and total branded fuel sales volumes were 85 million gallons, representing a $0.07 margin per gallon for the first quarter of 2022. We believe the addition of the branded marketing business provides a consistent sales channel with margin uplift for produced fuels, and we remain focused on growing this segment in our existing geographies. Within our Lubricants and Specialty Products segment for the first quarter of 2022, we reported EBITDA of $145 million compared to $87 million in the same period last year. This increase was driven by strong finished product demand and pricing initiatives that outpaced rising feedstock and energy costs. HEP reported EBITDA of $73 million for the first quarter of 2022 compared to $96 million in the first quarter of 2021. The decrease is mainly attributable to a $25 million gain on sales-type lease accounting that was recorded in the first quarter of 2021. Looking forward, as we head into summer driving season, refining fundamentals are very favorable due to strong gasoline and diesel demand, coupled with low product inventories. Together with our new employees, we remain focused on executing our strategy, which includes the successful integration of our new assets, the realization of $100 million in synergies over the next two years, ramping up production in our renewables segment, and returning excess cash to shareholders. With that, let me turn the call over to Rich. Thank you, Mike. Let's begin by reviewing HF Sinclair's financial highlights. As previously mentioned, the first quarter included a few unusual items. Pre-tax earnings were negatively impacted by acquisition integration costs of $25 million and decommissioning charges of $1 million related to the Cheyenne Refinery conversion to renewable diesel production, which were partially offset by a lower of cost or market valuation gain of $8.6 million. A table of these items can be found in our press release. Net cash provided by operations totaled $461 million, which included $45 million of turnaround spending and $214 million of cash sourced from working capital. HF Sinclair's standalone capital expenditures total $144 million for the first quarter. As of March 31st, HF Sinclair's total liquidity stood at approximately $1.9 billion, comprised of a standalone cash balance of $592 million, along with our undrawn $1.35 billion unsecured credit facility. At March 31, we had $1.75 billion of standalone debt outstanding with a debt-to-cap ratio of 18% and a net debt-to-cap ratio of 12%. In April, we upsized our revolving credit facility due in 2026 to $1.65 billion from the previous $1.35 billion in order to provide additional liquidity for our increased operational scale. HEP distributions received by HF Sinclair during the first quarter totaled $21 million. HF Sinclair owns 59.6 million HEP limited partner units, which, following the acquisition of Sinclair Transportation, represents 47% of HEP's outstanding LP units at a market value of approximately $1.1 billion as of last Friday's close. Turning to some guidance items. With the completion of the Sinclair acquisition, we have updated our expected capital guidance for 2022. We now expect to spend between $240-$260 million in refining, between $250-$320 million in renewables, $45-$60 million at lubricants and specialties, $15-$25 million in marketing, $90-$110 million at corporate, and $110-$150 million for turnaround and catalysts. At HEP, we expect to spend between $55 million and $75 million in total capital. At this time, we are suspending construction of the Sinclair pretreatment unit until 2023, pending a review of project economics as well as other potential alternatives. For the Cheyenne RDU and Artesia RDU and PTU projects, we remain on budget for our total capital spend of $800 million-$900 million. With respect to tax, we still anticipate recovering $83 million in cash tax benefit in 2022 from the lost carryback potential under the CARES Act. With the closing of the Sinclair acquisition going forward, the HF Sinclair corporate tax rate is expected to be approximately 19%-21%. For the second quarter of 2022, we expect to run between 615 and 645 thousand barrels per day of crude oil in our refining segment. This guidance reflects the strong underlying demand trends in our markets, the impact on product margins from the global reaction to Russia's invasion of Ukraine, and a full quarter of contribution of the Sinclair and Casper refineries. As Mike mentioned, we remain fully committed to our capital allocation strategy of returning $1 billion to shareholders over the next 12 months. In addition to the reinstated quarterly dividend of $0.40 per share, we intend to resume share repurchase of common stock under our existing $1 billion repurchase program in calendar 2022. Turning to HEP. On March fourteenth, we completed the acquisition of Sinclair Transportation Company. Upon close and consistent with HEP's business profile, we contracted the Sinclair Transportation assets with 15-year fee-based minimum volume commitment contracts representing approximately 75% of expected revenue. Our EBITDA guidance related to Sinclair Transportation assets remains unchanged at $70-$80 million annually. HEP delivered another strong quarter of operational and financial performance. Overall volumes continued to improve, representing an 11% increase quarter-over-quarter and a 26% increase year-over-year. These increases are mainly attributed to strong volumes in the Rockies region and contribution from the Cushing Connect pipeline and terminal. Additionally, we announced a $0.35 per LP unit quarterly cash distribution to be paid on May thirteenth to unit holders of record as of May second. For the balance of 2022, we expect to hold the quarterly distribution constant at 35 cents per LP unit or $1.40 on an annualized basis. Turning to financial highlights. The first quarter net income attributable to HEP was $49.6 million compared to $64.4 million in the first quarter of 2021. For comparison, excluding a $25 million gain on sales-type leases and an $11 million goodwill charge in the first quarter of 2021, net income was $50.8 million. For Q1 2022, adjusted EBITDA was $85.3 million compared to $88 million in the same period last year. A reconciliation table reflecting these adjustments can be found in our press release. HEP generated distributable cash flow of $64.5 million, with a quarterly distribution coverage ratio of approximately 1.5 times, which is reflective of the higher outstanding LP unit count as a result of the Sinclair acquisition. During the quarter, total capital expenditures were approximately $29 million, including $20 million in turnaround expenses related to our Woods Cross refinery processing units, approximately $6 million in maintenance capital, and approximately $2 million in expansion capital. Full year 2022, we expect to spend between $55 million and $75 million in total CapEx, comprised of $30 million-$40 million of turnaround capital, $20 million-$25 million of maintenance capital, and $5 million-$10 million of expansion capital in joint venture investments, which is inclusive of CapEx related to the recently acquired Sinclair Transportation assets. In April, we issued $400 million of senior notes due in 2027 and applied the full net proceeds to partially repay outstanding borrowings under our credit facility. We remain committed to our capital allocation strategy of funding all capital expenditures and distributions with an operating cash flow and maintaining distributable cash flow coverage of 1.3 times or greater, with the goal of reducing leverage to 3-3.5 times. With that, Chantelle, we're ready to take questions. The floor is now open for questions. At this time, if you have a question or comment, please press star one on your touch-tone phone. We ask that you please limit to one question and one follow-up. If you have additional questions, we welcome you to rejoin the queue. If at any point your question has been answered, you may remove yourself from the queue by pressing star one again. Thank you. Our first question comes from Manav Gupta with Credit Suisse. Your line is open. First, thank you, Mike and Rich, for keeping your word. You said you will restart the dividend in one year, and you did. Thank you for that. My quick question here is, 1Q saw a very strong rebound in your refining earnings, but 1Q still had some lingering issues from 4Q. You are not really running all out even in 1Q. Now we look at 2Q, you have Puget Sound running, you have Sinclair assets running. Looks like most of the stuff is up and running. When you look at 2Q cracks and relative runs and no downtime unplanned in 2Q, should we expect a materially stronger 2Q given where the cracks are and that the fact that most of the planned and unplanned downtime is behind you? Yeah. Manav, this is Tim Go. I'll take a shot at that. We are very constructive on our second quarter outlook. As you mentioned, we've got a full quarter of Sinclair contributions to look forward to in the second quarter. We have some maintenance activities that will occur in April and May, but overall, no major turnarounds. As you see on the throughput guidance that Rich mentioned, we've got over 100,000 barrels a day more throughput that we expect to see in the second quarter versus the first quarter. We see in the overall industry, Manav, pre-pandemic demand and post-pandemic supply. I mean, when you look at the rationalization that has taken place in the refining supply capacity and you look at the impact of the Russia-Ukraine conflict, you definitely see an impact on supply in our markets, which is leading to the constructive market that we see in the second quarter. Perfect. My quick follow-up here is a very strong quarter again from Lubes. If you could talk a little what drove that. The bigger question here is, at one point you wanted to grow the Lubes business. Now you have got a lot of other growth avenues. And sometimes what happens is, if the business is not growing in a firm, it kind of becomes a little bit of a divestiture candidate. And the reason I'm asking is, like, if you think about it, a $100 million a quarter business, in the past you have said 10x multiple. Even with some tax leakage, like you could get a 30 3% of your market cap in cash flow in pure cash if you do decide to divest this business. Theoretically, you could be doing like an MPC kind of a Speedway transaction here. Just trying to understand, this was a business you wanted to grow. Now you have a lot more avenues. Is this still very core to you? If the right price is there, would you be even open to looking at divesting your lubes business? I'll leave it there. Thank you so much. Yeah, Manav, thanks for your question. Obviously, with the earnings power of lubricants and the apparent sustainability of that, it's a very attractive business, certainly for our owners. We still feel like there's some meat on the bone in terms of opportunities to improve that business, grow its finished lubricants, cut or proportion at the expense of base oil sales. So we think the wind's in our sails here. You know, we obviously look at all of our assets in terms of their worth to our shareholders versus their worth to somebody else. Our present intention is to try to grow this business and realize the opportunity inherent in it. Thank you so much, guys. Yeah. Our next question comes from Phil Gresh with JP Morgan. Your line is open. Yes. Hi, good morning. First question, just on the buyback plans. You talked about obviously starting those back up later this year. Was just wondering if there are any particular goalposts you're looking for to decide, you know, specific timing around that or if there's anything that would preclude you from considering that here in 2Q, given the strength of fundamentals and where your cash balances stand today. Hey, Phil, it's Rich. No. Look, I think the real time guidance we would give you is we expect to return $1 billion of cash to shareholders over the course of the next 12 months. We will look at, to your point, how cash is growing and what the opportunity is and deploy accordingly. Again, we'd reiterate the point, $1 billion of cash over the next 12 months. Just on the cash, Rich, you talked about $214 million from working capital in the first quarter. On the last earnings call, you talked about certain factors that were gonna drive positive working capital in the first half. You also had the Sinclair close, which I believe is supposed to have a working capital benefit. Can you just update us on where you stand other than the cash tax piece? Absolutely. So we picked up about $214 million of working capital through the first quarter. To your point, Phil, Sinclair contributed about $90 million at close of that number. Our last quarter's earnings, I quoted about an expectation of $150-$200 million of working capital recovery through the year. I still think that's correct for the base business or the legacy business, excluding. We've got probably another $50-$100 million to go here, and that would include our expectation of reducing inventory of the legacy Sinclair assets. Got it. Just, you know, my one fundamental question on RD. As we look at the second quarter here, your guidance that you expect to be modestly positive on EBITDA, is there a way we can think about the production, say, target for the second quarter and just ultimately where you think the OpEx per gallon is gonna go given all the start-up costs we saw in the first quarter? Thanks. Yeah, Phil, this is Tom Creery. That's a good question. You know, we think probably even for the next this quarter and maybe even a little bit further, it's gonna be pretty messy in terms of EBITDA and production. You know, first of all, what we have to do is fill operating tanks. We're still doing some optimization across. There's a lot of things going on at this point in time, so it's gonna be a little up and down. You know, you saw some numbers in the first quarter, and there was a lot of costs and not a lot of revenues, as you can well imagine. You know, so that's impacting it, and we're gonna see some of that carry over for the short term. I will point you out that we do, on our indication or published indicator margin, we're now providing you with a renewable diesel index, and this is sort of akin to what, you know, a refining crack spread is. What we do is we publish a number on a quarterly basis, you know, based on, you know, current market prices for CBOT, ULSD, LCFS, you know, RINs, BTC, and transportation. Like I say, it's like a 3-2-1. If you wanna talk to Craig afterwards, he can give you more of the detail and the formulation of this. We thought it would help you guys look a little further in the future to see what's gonna happen on the renewable business. Okay. Thank you. Our next question comes from Roger Read with Wells Fargo Securities. Your line is open. Yeah. Thanks. Good morning. Congratulations on the quarter and getting all these transactions done. Thanks Roger. The question I have, and Rich is gonna come at you again on the cash returns question. The $1 billion over the next 12 months, what is the outlook you have, you know, kind of mid-cycle or something along those lines to support that versus, as Manav, I think, was trying to get at, things look pretty good right now. How should we think about, you know, the pace of that share repo, and what would be the difference between the environment we're looking at today and the environment that sets that $1 billion sort of baseline expectation? Roger, I'd point you back to what we talked about previously for mid-cycle earnings for the new company. We think of it as a $2.5 billion EBITDA business and about $1.5 billion of free cash flow. In that environment, we can easily support that $1 billion of return. To your point, currently, obviously, crack spreads are far better in a mid-cycle environment. It's always impossible to predict what they're gonna look like over the next 12 months, but we feel very comfortable with our ability to return that cash over the next 12 months. Again, I'd reiterate the $1 billion over 12 months. With the run rate where we're at, that's gonna be about $350 million in dividends with the balance in share repo. Roger, I'm gonna add to that and just say that that $1 billion was poured in more of a mid-cycle environment when we announced the combination with Sinclair. We're well ahead of that today, but we are gonna walk before we run, and we're gonna start executing to this plan before we raise the bar. No, I think that's totally fair. I just wanted to understand kind of the, you know, the ground rules here of the situation. Second part, obviously progress here on renewable diesel in terms of things turning on, but profitability, I think as y'all have been very clear, was, you know, gonna be a secondary factor to making sure the units are running. Can you give us kind of just a quick recap of how the two units have turned on or the pieces that have turned on so far and your, let's call it the actual versus expectations that you've had for the PTU and the RDU units? Sure. Roger, this is Tom again. We'll start with Cheyenne. Currently, Cheyenne's running really well, running a mix of both SVO and tallow. We're up at 6,000 barrels a day of processing capacity today, which was our nameplate capacity. It's on spec. It looks real good. We've had somewhat very stable. We've had a few glitches, but they've been short-term glitches. On the RDU at Cheyenne, it's looking really good there. On the PTU side, as you recall, we had two trains, each of which is 6,500 barrels a day. One's clean and one's dirty. We've got both of those trains, not currently, but over the course of the past two or three weeks, we've had one of those trains at any given time running at capacity at the 6,500 barrels a day and making on-spec product. You know, basically now we've turned it back a little bit in throughput, and that's just dependent upon our ability to put finished RDU back into the marketplace and into Cheyenne as well as Rawlins given, you know, some past obligations for buying RBD in the marketplace. We're filling in the holes with our own product now. We're not gonna be going forward a huge buyer of RBD per se. That was the whole intention behind the pretreatment unit, is to give us more feedstock flexibility, and it's working out pretty well, or I'd say very well, given the short time that we've had both the units up and Sinclair units in hand. That was thorough. Thank you. Our next question comes from Neil Mehta with Goldman Sachs. Your line is open. Good morning, team. Congrats, you're on a good quarter. The first question I had was around mid-cycle refining EBITDA. You guys have put out illustrative mid-cycle earnings at $1.35 billion, but that was predicated on a $10 Gulf Coast crack, and certainly, the forwards are above that. I'd be curious on how your views of refining EBITDA are evolving. Then as we move into the second quarter, given all the backwardation in the curve, how we should think about things like capture rate. I think in your illustrative example, if I remember, you used 70%. Any thoughts on the market and how your view of mid-cycle has evolved? Neal, this is Tim. I can take the capture comment here and then maybe open up to the group on mid-cycle perspectives. From a capture rate, certainly backwardation is gonna hurt us on a capture going forward. Anytime we have dropping commodity prices, it's always gonna impact the ability for us to capture what is being quoted as the index market. We're pleased to say in the first quarter, our capture rates improved. A little bit lower ethanol costs helped us. A stronger jet crack helped us as well. Of course, just the overall strength in the gasoline and distillate markets improved. We do see that improving in the second quarter as we have, first of all, no turnaround as we had in the first quarter with Woods Cross, and then less maintenance and unplanned downtime as we did in the first quarter as well. We do expect to see some improved capture rates, even despite the steeper backwardation that we're seeing in the second quarter. As far as mid-cycle EBITDA, I'll open it up to the group to kind of comment on that. Break out the crystal balls, ladies and gentlemen. Neil, I think there are a couple of very important things going on, and these are well documented in both the press and the sell side. The lack of refined product, finished product, and intermediates coming out of Russia has created a shortage for sure, and that's reflected in the distillate cracks. How long that persists, I don't see any signs of it ending soon or well. I think that the draw on U.S. refining capacity is gonna be very strong. Beyond that, as you well know, 1 million barrels of distillation capacity has exited the system since pre-pandemic. Now we're at sort of 1% of capacity and 1.5% of supply. That's 2.5% of world consumption. It's a big number. I think that we can expect, assuming the economies stay reasonably strong, that commodity prices and particularly prices of our products are gonna be relatively high. Unknowns around China demand and COVID zero and things like that, there's obviously quite a lot of uncertainty out there. For our planning deck, our purpose is to try to run very strong, keep our markets and customers supplied, with an expectation that the margins are gonna be pretty good for the foreseeable future. That's great perspective. The follow-up is just around CapEx. It sounds like CapEx might have moved higher relative to previous guide, but maybe I misheard that. Just could you go through the moving pieces again and anything we should keep in mind as we think about the balance of the year? Hey, Neal, it's Rich. Yes, CapEx went up, which was entirely reflective of the Sinclair acquisition. We've increased capital about $200 million to account for those assets. We did re-bucket a little bit, you'll notice. Now there's obviously a marketing segment that's broken out. Additionally, we've broken out corporate capital, which historically we had allocated across the businesses. The buckets are a little bit different, but at a high level, you got about a $200 million increase due to Sinclair. That's perfect. Thanks, guys. Thank you. Our next question comes from Doug Leggate with Bank of America. Your line is open. Hi. Good morning, guys. This is Kalei in for Doug. Thanks for taking the question. My first question is a follow-up to Neal's mid-cycle question. Wondering if the guide rails that you used to estimate that mid-cycle crack have improved. What I'm thinking about are the shutdowns in U.S. refining capacity and what looks like a higher structural international natural gas cost that your peers will have to incur and ultimately pass down to their consumers. I'm wondering if you can address just the guide rails on the mid-cycle and whether that's improved. Well, yeah, I mean, what we definitely think the market has structurally improved, when you look at the U.S. competitive advantage on natural gas, when you look at the million barrels, as Mike said, of capacity that has come out of the United States refining capacity here in the last couple of years. I don't know if I would necessarily say mid-cycle. The definition of mid-cycle has changed as much as we are in an above mid-cycle part of this cycle right now. We continue to see strength in demand, particularly jet has improved here over the last quarter. We're seeing a definite shortage in supply relative to that demand right now. As we continue to grow, as the market continues to rebalance, we think we're just in that upper part of the normal refining cycle right now, and we're gonna take full advantage of it. Beyond that. I appreciate that. You know, the natural gas element, if that proves to be durable and part of the fundamentals, it's gonna roll through. The margin has to accommodate the cost of the inputs, and that's, you know, higher now, by, you know, you pick it, but probably up to $1 a barrel, versus not too long ago. Thank you for that. My next question is for you, Mike. Wondering if you can talk to your cash return target of $1 billion and clarify if the non-dividend portion will be 100% buybacks, noting that in your past, the special dividend was an important part of your value proposition. Maybe you can just talk to the change in philosophy. Yeah. Kalei, I don't use the words all or never, always or never. You know, 100% buybacks, that's a strong element. What I would tell you is that through our Sinclair transaction, we took on a large new shareholder, in the form of the Holding family, formerly 50-year owners of Sinclair. There's some expectation that there will be some selling in the future. To date, their posture is one of not being sellers, but we wanna be able to offset those sales insofar as they come. You know, I would say with that as context, we will probably be favoring share repurchase to a large degree. To date, no open market activity on the part of our new owners, and their near-term expectation is that there won't be any. Directionally favored toward share repurchase. We keep all options on the table, but I think share repurchase will be the biggie. Great. I appreciate it, you guys. Thank you. Our next question comes from Theresa Chen with Barclays. Your line is open. Good morning. Thank you for taking my questions. First, I wanted to touch on the concept of changing product flows globally and domestically as global product inventories remain tight and the Gulf Coast seems to be the marginal supplier of product internationally, especially as the Russian diesels come off market. Potentially in over you know a long period of compressing the arb to the MidCon and increasing utilization from MidCon assets, providing a tailwind for your assets there. On the flip side, you do have both Enterprise and Magellan having announced projects to pipe Houston-based refined products all the way to Colorado and as well into West Texas and into New Mexico. Potentially compressing some of the premium niche margins that you've experienced historically in that segment. I was just wondering if you could help me and think about, you know, net-net, what this means for the macro backdrop on a structural basis as I believe some of those projects can come online as early as mid-next year. Yeah, Theresa, this is Tim. Let me take a shot at that. You know, we just talked about how the U.S. refining industry is advantaged versus the rest of the world in terms of cost structure. We believe that that's gonna result in more exports from the U.S. into the rest of the world as you talk about global trade flows. It feels like the natural home for the barrels that are being produced on the coasts are to be exported to these other parts of the world where they can supply that at lower cost. We have watched these pipeline announcements obviously with interest. When we look at the typical Gulf Coast diffs into these different regions, we look at the seasonality of those diffs. We look at the low volumes in those markets in terms of demand. We look at the long-term shipping commitments that are required. It's just hard for us to see the economics of all that play out. It's just not obvious to us that those will go forward, but obviously, we'll watch that with interest. Thank you. Also wanted to get your take on why you decided to defer the PTU. What have you observed in the market that's led to this change, and how much CapEx have you invested to date on that, and under what circumstances would you return to complete it? Yeah, Theresa, this is Tom. As Rich said, you know, when we acquired Sinclair, you know, we took a look at the PTU, and we thought it might be a good idea to take a pause on this, look at the project economics, look at our alternative options, given the current market as well as our future outlook. Our main goal here is to come up with a cohesive operation that allows us to optimize across the system. As you can well imagine, we've got, you know, numerous, you know, RDU plants, and we're gonna have numerous PTU plants, and we wanna make sure that we allocate capital in the smartest way possible going forward so that we can be responsive to market conditions and maximize profitability. In terms of spend so far, I'm gonna pass it over to Rich. I think he's got a better update on the numbers than I do. Sure. Theresa, we've got about $40 million or so of capital in the revised budget associated with the PTU, and that's really bringing it to pause here. As Tom mentioned, right, we're gonna take a look at all of our alternatives in an integrated system to see what the best decision is going forward. Yeah, that's a really important point. The addition of Sinclair gives us additional scale and additional ability to optimize. We obviously have a large PTU that we've built in Artesia. It's very productive. Whether it might make more sense to add on there to the exclusion of the Rawlins PTU otherwise get the most efficient capital deployment in this market. That's really one of the reasons we're taking a step back is just to ensure that we're getting the best bargain that we can. Thank you. Your next question comes from Connor Lynagh with Morgan Stanley. Your line is open. Yeah, thanks. Wanted to go back to the lubes business. Obviously a great quarter there. I think your expectation had been that you were going to see some compression in rack back with expansion in rack forward. It seems like you saw the latter but not the former. Just curious if you could give some color in what's happening in the market there and the relevant sustainability of those dynamics. Yeah, this is Tim. Let me make a couple comments on that. We definitely saw base oil supply catch up to demand early in the first quarter. You saw that in our posted base oil cracks, VGO cracks that we put out in our index. We did see some weakening as a result of base oil cracks, especially in the Group I and Group II area. At the end of the first quarter, those base oil cracks strengthened again in light of the Russia-Ukraine conflict. Obviously, that had a big impact on VGO balances and overall base oil availability globally. The dip in base oil cracks just gave our finished lubes business the opportunity to catch up, and that's why you see the finished lubes business do well. At the same time, just as a reminder, our Group I base oils are primarily specialty oils and process oils that were able to be a little stickier than what you saw in the posted Group I, Group II index. We were able to in the first quarter, we had an excellent quarter by having rack back and rack forward contributions kind of hitting at the same time. It's more than just the market impacts, though. I just wanna kind of point out, if you look back at our lubes and specialty business, we had a record year last year in terms of EBITDA, and of course, this first quarter was a record as well. On the back of higher throughput, lower costs, higher margins, all of that contributed here in the first quarter to the results that you see. All of that despite what you hear about supply chain disruptions, especially in the additive world. COVID, of course, still impacting mobility and the extreme price volatility and being able to try to keep up with that. A real shout-out to our lubes and specialties employees for being able to manage through all those challenges and still deliver the results they did in the first quarter. Appreciate it. If you could give us any steer directionally, whether you think about it on a full year basis or just sequentially in the second quarter here? You know, is this first quarter even a high watermark? If so, by how much? You know, just broadly speaking, what should we expect for the business for the rest of the year? Connor, I think, yeah, like it was obviously a very favorable quarter. Depending on what we see with the Russia-Ukraine conflict, the base oil markets now look very constructive, and I think our view is that it's more positive now on them than it was earlier this year. On the rack forward side, right, obviously prices have bounced back up, so we'll probably see a little bit of margin compression here in the second quarter. We've been very successful holding price and keeping price up with base oil. We're optimistic in general this year. We're expecting a very good year. Thanks very much. Our next question comes from Matthew Blair with TPH. Your line is open. Hey. Good morning. Congrats on the strong result. I wanted to ask about the renewables efforts. You know, now that you have the Cheyenne RDU up, could you talk about your geographical end markets? Do you have a California LCFS pathway? If so, are you railing all that product to California now, or are you sending any to Canada or the Gulf Coast? Yeah, Matthew, it's Tom. I'll answer that. Like everybody else, when you start up a plant, you don't get a pathway automatically, so we're on a contingency basis with CARB. Right now, you know, a lot of our product is destined towards California. As you could well imagine, it is the biggest market. That's not to say that we're not looking at other markets. Canada is looking more and more attractive. In fact, at some points in time it's offering a better net back than is California. That's even without understanding completely or getting all the information as what the Canadian CFS equivalent program is gonna look like. We're starting to see more products move out of the United States towards Canada. What we'll do is we'll chase the best market that gives us the best net back wherever it may be, and that's including Portland or, you know, Oregon, California, potentially offshore or even Canada. We're looking at anything and everything to maximize our returns. Have you been given any indication on how long that California pathway might take to come through? We have to get three months of data into them, and then they come back to us with their number. Typically it's lower than the provisional number that they give us. It's just the way that you have to do business in that market, so. Got it. Then, on the refining side, could you talk about opportunities to send barrels to Las Vegas? Was that something you were able to capitalize on in Q1? Has that persisted in Q2? You know, just looking at the spreads between Las Vegas gasoline and Rockies gasoline, it looks like that might've been an opportunity for you in Q1. Yeah, this is Tim. The Las Vegas market has been pretty strong here in the first quarter. A lot of that as a result of some of the outages in California, where some of the barrels would typically overflow into Las Vegas. Because of some shortages there, the Las Vegas market became more short. We have the ability to ship barrels from the Rockies into Las Vegas area, which we did. In addition, with the Sinclair molecules in our portfolio now, it gives us the ability to really optimize where we put those barrels. Usually maximizing here in the Salt Lake City area and then spilling over into Las Vegas as opportunity allows. Great. Thank you. Once again, if you do have a question, you may press star one on your touch-tone phone at this time. Our next question comes from Ryan Todd with Piper Sandler. Your line is open. Good. Thanks. Maybe just a follow-up on some of the operational commentary earlier. I know the Puget Sound Refinery had, you know, from the time you took over, had a couple early bobbles in the fourth quarter and early into the first quarter. How is the Puget Sound Refinery running now? Any comments on the outlook from here? I know you haven't had a lot of time yet with the Sinclair assets. You know, any thoughts with the assets under your belt, in terms of what you're seeing and opportunities out there in the Western Rockies? There's no doubt we had a rough start with Puget Sound back in the fourth quarter and spilled over into the first quarter. We're very pleased with how Puget Sound has rebounded. A very strong March that contributed significantly to our bottom line. Our long-term view of Puget Sound hasn't changed. We believe it's a very competitive asset with strong talent and with strong ability to take advantage of the market. We saw that in March. We're seeing that in the second quarter as well. We do have some planned maintenance activities that are going on, not quite the same as a turnaround, but planned maintenance that will continue to provide Puget Sound the ability to capture the full margins for the rest of the summer. Sinclair on the other hand came out of the gate strong. We've been very excited to have Sinclair. We really only had them for 18 days in the second quarter. They made sizable contributions to our bottom line, and we're very pleased to have them. We think there's just a tremendous opportunity to continue to optimize across the Rockies region. We have Woods Cross Refinery as well as the two Sinclair refineries that allow us to move barrels as we talked about earlier. Into various parts of the country where the demands are asking for the barrels the most. That's one of the things you'll see. You know, we talk about MidCon geography a lot. Because we have access to the West Coast, because we have access to even PADD 1, it allows us to take some of these barrels that we have in the MidCon and move them to the areas where the ARB opportunities are opening up. We saw that in Las Vegas a little bit in the first quarter. We're seeing that a little bit in PADD 1 now, where some of the PADD 2 barrels are starting to move that way and creating good structural cracks here in the MidCon, where just a quarter ago, everyone was worried that the MidCon margins were gonna be down for good. We've certainly rebounded significantly from there because of that logistics opportunity to move barrels to where it needs it. Great. Thank you. Maybe to follow up on renewable diesel. I know in the startup process there, you talked about some of that. As you think of the feedstock you've been running through, the PTU and the learning curve that you're getting up to, both in terms of running that and logistics in terms of accessing feedstock, what are you seeing in the feedstock markets? I believe that you had originally contracted feeds for this year for maybe fully contracted for one of the units and partially for another. Are you looking to increase feedstock contracts for some of those? Are you having any issues? Are you seeing the markets as tight or has it been easy to get all the feedstock that you've needed? Any comment just in general in terms of what you're seeing on feedstock dynamics as you look over the rest of the year? Sure. Ryan. Right now I'll just make the statement that we've had zero problems with buying feedstock in the market. We just haven't run into any problems. You're correct in that we've got a fair amount of volume secured through the year 2023, which puts us in a pretty good position right now. As we move forward, what we're trying to do is optimize, you know, and looking at buying in advance to more of a spot basis. As you can tell, the times are pretty volatile right now. Differentials are wide. Flat price on ag products, like everything else, is going up. So, you know, having said that, you know, we're looking at the best net back that we can possibly get and looking at various factors such as price, incentive values, yield. We do have an LP or a feedstock optimization model that we run to pick out the best ones, the best feedstocks as we move forward. We think we're in a pretty good position as it comes to feedstocks. There's lots of options, and that includes looking further upstream at crush plant facilities and things like that. We're not excluding anything at this point in time. We're keeping our options open, and that's part of this optimization process that we're looking at moving forward, which encompasses the PTU at Rawlins. Great. Thank you. Our next question comes from Jason Gabelman with Cowen. Your line is open. Hey, thanks for taking my questions. I wanted to first ask on some line items that you could hopefully guide to now that Sinclair, the Sinclair acquisition has closed. Can you give some indication on refining OpEx per barrel, either at a corporate level or within the Sinclair assets? What depreciation and SG&A goes to moving forward per quarter? And then on the renewable diesel, any guidance on if you expect to run your assets at 100% rates, or is it lower in line with what your PTU capacity is relative to the entire portfolio? And then I have a follow-up. Thanks. Jason Gabelman, there are a lot of questions there. What I would probably tell you is, you know, if you go back and look at some of the long-term views that we put out there, long-term perspective we have on Puget Sound and Sinclair, you can go back and look at OpEx contributions and D&A as well. What I would also probably refer you to is why don't you take that offline with Craig Biery, and you guys can work through those details as needed. Okay. Well, let me ask you this way. Yeah. Sorry. No, I was just gonna talk to the renewable section, but just saying that, you know, we still got one unit to bring on, and that's the RDU at Artesia, which is gonna make a big impact on our ability to run off feedstocks. You know, right now, we will be running towards maximum wherever we can, wherever it's economic, and that's using, you know, volumes that have been committed to, as well as PTU volumes, and then having to buy in the marketplace to fill in any holes. Unless economic conditions dictate that we shouldn't run, we will be running as much through the RDU segment as we potentially can. Got it. Then my second question is on the Rockies refining region, which is very strong right now. As I think about moving forward, there's gonna be another refinery returning to market, I believe, early next year. There's been discussion of another product pipeline to import product into that region. If you just discuss how you think about the product premiums you're receiving in that market, how you expect those to evolve over time, and what's embedded in your mid-cycle EBITDA. Thanks. Jason, let me, it's Rich. Let me take a crack at that. I think Tim mentioned earlier that we have a hard time seeing the logic to some of these pipeline projects. We would continue to expect that these regions, the Rockies in particular, right, will be very seasonally strong. But again, emphasis on the seasonal. I think this is all folded into the mid-cycle guidance we've given, so no changes or exceptions in our expectations there in terms of capture or regional basis. All right. Thanks for the answers. Our next question comes from Paul Cheng with Scotiabank. Your line is open. Hey, guys. Good morning. Hello, Paul. Good morning. I have to apologize first because I want to talk about the mid-cycle margin. In your illustrative example that you use a 70% capture rate. But if we look back over the past five quarters, it's roughly about 50% is your capture rate. We understand the prioritization curve probably hurt you, but that probably only cost you maybe 2% or so on the capture rate. So on a going forward basis, do you still believe 70% is the right capture rate that we should use or that you think that you could ultimately settle back down into that level? If you think so, what kind of improvement are you expecting that will drive that? That's the first question. Hey, Paul, it's Rich. Yeah, I think we still believe the 70% number is accurate. I think the operational problems we had the last six months impacted our capture an order of magnitude larger than the number you're quoting. I think as long as we run the plant study in the kind of markets we're looking at, 70% is appropriate. Okay. I mean, I think that is a great platform that you guys now have, that I want to see, is there any plan how you want to expand, your geographic reach, in that business and maybe making it, substantially larger than where you are? Or that you're going to stick with, where your refinery is operating? What's the game plan in that business, and how that you can further integrate, and talking perhaps that also during the wintertime, what kind of benefit operationally that and financially you should expect? Because, I mean, in your operating region during the wintertime, it tends to be long supply and so, that typically causing some problem for the region. With your own outlet, I would imagine that will have a lot of operational benefit for you and maybe financially also. Can you maybe help us understand a little bit better? Yeah, Paul, thanks for teeing that up for me. I appreciate it. You're absolutely right. When you go to bed at night with confidence that you've sold most of your product the following day through your own branded outlets, it's an easier marketing regime, right? And more consistent. That's the important point. We wanna be in the market every day, reliably, supplying these branded stations and our unbranded customers. Our intention is to work within our supply footprint, effectively converting existing sales to branded sales by branding more stations. That's gonna happen, you know, 1, 5, 10 at a time, as these things often do. We think it's a very productive channel. We're super excited about the brand itself and its possibilities. In terms of having that channel to market, we think it provides some more consistency to our marketing and to our margin structure. That works real well, as you suggest, in the wintertime, summertime. I think it's just all about consistency. Will you expand beyond the existing market region, or you're going to stick to the current market region? It's certainly a nationally appealing brand, Paul, but the best economics are with our own molecules as a starting point. Insofar as we get saturated there, we'll take it further. All right. Thank you. Our next question comes from Matthew Blair with TPH. Your line is open. Hey. Thanks for taking the follow-up. I just wanted to confirm with the Sinclair marketing as well as the RD startup, are you now net long RINs? Matthew, on a run rate basis, once we're up and run rate, we'll be about balanced. As Tom alluded to, right, we've still got the Artesia RDU to ramp up here in the second quarter. As we sit here today, we're still a little short, but we've got line of sight to be in balance here within the year. Great. Thank you. There are no further questions at this time. I'll turn the call back over to Mike Jennings for closing remarks. Thanks Chantelle. Thank you all for participating with us today. I'll close with just a couple thoughts. The first is that I believe we've assembled a really strategic group of assets and team members, and that we're quite prepared to meet the market opportunity that sits in front of us. We believe that because of the supply shortfalls from Russia and Europe, our production capacity will be in really high demand through the medium term, and then that should be financially very productive. Our operations and integration activities are going well, and I appreciate the teamwork and the progress that I see in just a couple months or less than that, in fact, in what is in many respects a new venture and a great new opportunity for HF Sinclair. Finally, while our day-to-day focus is always on safe execution, we're in business to serve our customers and owners, and our focus on cash generation and capital returns to our shareholders is intense, and it's engineered to reward the capital that they've entrusted us to manage. Thank you again for joining us on the call, and we look forward to speaking to you soon. Thank you. This does conclude today's teleconference. Please disconnect your lines at this time, and have a wonderful day.