dino-20240630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_________________________________________________________________

FORM 10-Q

_________________________________________________________________

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to ____________

Commission File Number 001-41325

_________________________________________________________________

HF SINCLAIR CORPORATION

(Exact name of registrant as specified in its charter)


Delaware						87-2092143
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)
2828 N. Harwood, Suite 1300
Dallas, Texas						75201
(Address of principal executive offices)						(Zip Code)

(214) 871-3555

(Registrant’s telephone number, including area code)

_________________________________________________________________

(Former name, former address and former fiscal year, if changed since last report)


Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock $0.01 par value	DINO	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

190,816,714 shares of Common Stock, par value $0.01 per share, were outstanding on July 29, 2024.

HF SINCLAIR CORPORATION

INDEX


			Page

Forward-Looking Statements			3

Definitions			5

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Consolidated Balance Sheets
June 30, 2024 (Unaudited) and December 31, 2023			6

Consolidated Statements of Income (Unaudited)
Three and Six Months Ended June 30, 2024 and 2023			7

Consolidated Statements of Comprehensive Income (Unaudited)
Three and Six Months Ended June 30, 2024 and 2023			8

Consolidated Statements of Cash Flows (Unaudited)
Three and Six Months Ended June 30, 2024 and 2023			9

Consolidated Statements of Equity (Unaudited)
Three and Six Months Ended June 30, 2024 and 2023			10

Notes to Consolidated Financial Statements (Unaudited)			12

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			34

Item 3. Quantitative and Qualitative Disclosures About Market Risk			51

Reconciliations to Amounts Reported Under Generally Accepted Accounting Principles			51

Item 4. Controls and Procedures			55

PART II. OTHER INFORMATION

Item 1. Legal Proceedings			56

Item 1A. Risk Factors			57

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			58

Item 5. Other Information			58

Item 6. Exhibits			59

Signatures			60

FORWARD-LOOKING STATEMENTS

References herein to HF Sinclair Corporation (“HF Sinclair”) include HF Sinclair and its consolidated subsidiaries. In this document, the words “we,” “our,” “ours” and “us” refer only to HF Sinclair and its consolidated subsidiaries or to HF Sinclair or an individual subsidiary and not to any other person, with certain exceptions. References herein to Holly Energy Partners, L.P. (“HEP”) with respect to time periods prior to completion of the merger of HEP with a wholly owned subsidiary of HF Sinclair on December 1, 2023 refer to HEP and its consolidated subsidiaries.

This Quarterly Report on Form 10-Q contains certain “forward-looking statements” within the meaning of the federal securities laws. All statements, other than statements of historical fact included in this Quarterly Report on Form 10-Q, including, but not limited to, those under “Results of Operations,” “Liquidity and Capital Resources” and “Risk Management” in Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and those in Part II, Item 1 “Legal Proceedings” are forward-looking statements. Forward-looking statements use words such as “anticipate,” “project,” “will,” “expect,” “plan,” “goal,” “forecast,” “strategy,” “intend,” “should,” “would,” “could,” “believe,” “may,” and similar expressions and statements regarding our plans and objectives for future operations. These statements are based on management’s beliefs and assumptions using currently available information and expectations as of the date hereof, are not guarantees of future performance and involve certain risks and uncertainties. All statements concerning our expectations for future results of operations are based on forecasts for our existing operations and do not include the potential impact of any future acquisitions. Although we believe that the expectations reflected in these forward-looking statements are reasonable, we cannot assure you that our expectations will prove to be correct. Therefore, actual outcomes and results could materially differ from what is expressed, implied or forecast in these statements. Any differences could be caused by a number of factors including, but not limited to:

•the demand for and supply of feedstocks, crude oil and refined products, including uncertainty regarding the increasing societal expectations that companies address climate change and greenhouse gas emissions;

•risks and uncertainties with respect to the actions of actual or potential competitive suppliers and transporters of refined petroleum products or lubricant and specialty products in our markets;

•the spread between market prices for refined products and market prices for crude oil;

•the possibility of constraints on the transportation of refined products or lubricant and specialty products;

•the possibility of inefficiencies, curtailments or shutdowns in refinery operations or pipelines, whether due to reductions in demand, accidents, unexpected leaks or spills, unscheduled shutdowns, infection in the workforce, weather events, global health events, civil unrest, expropriation of assets, and other economic, diplomatic, legislative, or political events or developments, terrorism, cyberattacks, vandalism or other catastrophes or disruptions affecting our operations, production facilities, machinery, pipelines and other logistics assets, equipment, or information systems, or any of the foregoing of our suppliers, customers, or third-party providers, and any potential asset impairments resulting from, or the failure to have adequate insurance coverage for or receive insurance recoveries from, such actions;

•the effects of current and/or future governmental and environmental regulations and policies, including compliance with existing, new and changing environmental, health and safety laws and regulations, related reporting requirements and pipeline integrity programs;

•the availability and cost of our financing;

•the effectiveness of our capital investments and marketing strategies;

•our efficiency in carrying out and consummating construction projects, including our ability to complete announced capital projects on time and within capital guidance;

•our ability to timely obtain or maintain permits, including those necessary for operations or capital projects;

•our ability to acquire complementary assets or businesses to our existing assets and businesses on acceptable terms and to integrate any existing or future acquired operations and realize the expected synergies of any such transaction on the expected timeline;

•the possibility of vandalism or other disruptive activity, or terrorist or cyberattacks, and the consequences of any such activities or attacks;

•uncertainty regarding the effects and duration of global hostilities, including shipping disruptions in the Red Sea, the Israel-Gaza conflict, the Russia-Ukraine war, and any associated military campaigns which may disrupt crude oil supplies and markets for our refined products and create instability in the financial markets that could restrict our ability to raise capital;

•general economic conditions, including economic slowdowns caused by a local or national recession or other adverse economic condition, such as periods of increased or prolonged inflation;

•limitations on our ability to make future dividend payments or effectuate share repurchases due to market conditions and corporate, tax, regulatory and other considerations; and

•other business, financial, operational and legal risks and uncertainties detailed from time to time in our Securities and Exchange Commission filings.

Cautionary statements identifying important factors that could cause actual results to differ materially from our expectations are set forth in this Quarterly Report on Form 10-Q, including without limitation the forward-looking statements that are referred to above. You should not put any undue reliance on any forward-looking statements. When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements set forth under the heading “Risk Factors” included in Item 1A in our Annual Report on Form 10-K for the year ended December 31, 2023, and the discussion in this Quarterly Report on Form 10-Q in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the headings “Outlook” and “Liquidity and Capital Resources.” All forward-looking statements included in this Quarterly Report on Form 10-Q and all subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. The forward-looking statements speak only as of the date made and, other than as required by law, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

DEFINITIONS

Within this report, the following terms have these specific meanings:

“Adjusted refinery gross margin” means the difference between average net sales price and average cost per barrel sold. This calculation does not include the associated lower of cost or market inventory valuation adjustment, operating expenses, or depreciation and amortization costs.

“BPD” means the number of barrels per calendar day of crude oil or petroleum products.

“BPSD” means the number of barrels per stream day (barrels of capacity in a 24 hour period) of crude oil or petroleum products.

“Base oil” is a lubricant grade oil initially produced from refining crude oil or through chemical synthesis that is used in producing lubricant products such as lubricating greases, motor oil and metal processing fluids.

“Black wax crude oil” is a low sulfur, low gravity crude oil produced in the Uintah Basin in Eastern Utah that has certain characteristics that require specific facilities to transport, store and refine into transportation fuels.

“LPG” means liquid petroleum gases.

“Lubricant” or “lube” means a solvent neutral paraffinic product used in commercial heavy duty engine oils, passenger car oils and specialty products for industrial applications such as heat transfer, metalworking, rubber and other general process oil.

“MMBTU” means one million British thermal units.

“Renewable diesel” means a diesel fuel derived from renewable feedstock such as vegetable oil or animal fats that is produced through various processes, most commonly through hydrotreating, reacting the feedstock with hydrogen under temperatures and pressure in the presence of a catalyst.

“RINs” means renewable identification numbers and refers to serial numbers assigned to credits generated from renewable fuel production under the Environmental Protection Agency’s Renewable Fuel Standard regulations, which require blending renewable fuels into the nation’s fuel supply. In lieu of blending, refiners may purchase these transferable credits in order to comply with the regulations.

“Sour crude oil” means crude oil containing quantities of sulfur greater than 0.4 percent by weight, while “sweet crude oil” means crude oil containing quantities of sulfur equal to or less than 0.4 percent by weight.

“White oil” is an extremely pure, highly-refined petroleum product that has a wide variety of applications ranging from pharmaceutical to cosmetic products.

“WTI” means West Texas Intermediate and is a grade of crude oil used as a common benchmark in oil pricing. WTI is a sweet crude oil and has a relatively low density.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

HF SINCLAIR CORPORATION

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)


	June 30, 2024		December 31, 2023

	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	866,274	$	1,353,747
Accounts receivable: Product and transportation	1,498,341		1,527,950
Crude oil resales	164,274		197,169
	1,662,615		1,725,119
Inventories: Crude oil and refined products	2,883,656		2,645,724
Materials, supplies and other	276,502		276,107
	3,160,158		2,921,831
Income taxes receivable	54,274		56,528
Prepayments and other	99,695		89,229
Total current assets	5,843,016		6,146,454

Properties, plants and equipment, at cost	10,686,564		10,533,432
Less: accumulated depreciation	(4,135,103)		(3,906,600)
	6,551,461		6,626,832
Operating lease right-of-use assets	370,822		348,006

Other assets: Turnaround costs	676,037		644,957
Goodwill	2,977,432		2,977,744
Intangibles and other	962,994		972,272
	4,616,463		4,594,973
Total assets	$	17,381,762	$	17,716,265

LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	2,172,130	$	2,205,759
Income taxes payable	16,291		8,772
Operating lease liabilities	88,933		106,973

Accrued liabilities	482,079		453,045
Total current liabilities	2,759,433		2,774,549

Long-term debt, net	2,635,719		2,739,083
Noncurrent operating lease liabilities	304,357		249,479
Deferred income taxes	1,301,423		1,297,130
Other long-term liabilities	423,716		418,726
Total liabilities	7,424,648		7,478,967

Commitments and Contingencies (see Note 13)

Equity:
HF Sinclair stockholders’ equity:
Preferred stock, $1.00 par value – 5,000,000 shares authorized; none issued	—		—
Common stock $0.01 par value – 320,000,000 shares authorized; 223,231,546 shares issued as of June 30, 2024 and December 31, 2023, respectively	2,232		2,232
Additional capital	5,996,600		5,993,661
Retained earnings	5,650,373		5,379,182
Accumulated other comprehensive loss	(27,313)		(11,784)
Common stock held in treasury, at cost – 32,416,171 and 23,235,599 shares as of June 30, 2024 and December 31, 2023, respectively	(1,731,960)		(1,194,201)
Total HF Sinclair stockholders’ equity	9,889,932		10,169,090
Noncontrolling interest	67,182		68,208
Total equity	9,957,114		10,237,298
Total liabilities and equity	$	17,381,762	$	17,716,265

See accompanying notes.

HF SINCLAIR CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(In thousands, except per share data)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023


Sales and other revenues	$	7,845,831	$	7,833,646	$	14,872,976	$	15,398,788
Operating costs and expenses:
Cost of sales (exclusive of depreciation and amortization):
Cost of materials and other (exclusive of lower of cost or market inventory valuation adjustment)	6,750,525		6,273,605		12,677,025		12,377,662
Lower of cost or market inventory valuation adjustment	(3,123)		(7,863)		(222,493)		39,734
Operating expenses (exclusive of depreciation and amortization)	591,317		546,800		1,198,429		1,186,183
	7,338,719		6,812,542		13,652,961		13,603,579
Selling, general and administrative expenses (exclusive of depreciation and amortization)	104,858		127,388		208,232		223,301
Depreciation and amortization	205,320		189,360		404,049		363,343

Total operating costs and expenses	7,648,897		7,129,290		14,265,242		14,190,223
Income from operations	196,934		704,356		607,734		1,208,565
Other income (expense):
Earnings of equity method investments	8,115		3,545		15,461		7,427
Interest income	18,495		17,591		40,674		37,526
Interest expense	(45,449)		(46,982)		(86,140)		(92,804)




Gain (loss) on foreign currency transactions	(369)		748		74		1,618
Gain (loss) on sale of assets and other	(264)		1,152		1,755		2,783
	(19,472)		(23,946)		(28,176)		(43,450)
Income before income taxes:	177,462		680,410		579,558		1,165,115
Income tax expense:
Current	28,166		100,429		98,871		184,824
Deferred	(4,184)		45,496		10,585		60,801
	23,982		145,925		109,456		245,625
Net income	153,480		534,485		470,102		919,490
Less: net income attributable to noncontrolling interest	1,692		26,824		3,650		58,563
Net income attributable to HF Sinclair stockholders	$	151,788	$	507,661	$	466,452	$	860,927
Earnings per share:
Basic	$	0.79	$	2.62	$	2.38	$	4.40
Diluted	$	0.79	$	2.62	$	2.38	$	4.40
Average number of common shares outstanding:
Basic	191,510		192,348		195,110		193,888
Diluted	191,510		192,348		195,110		193,888

See accompanying notes.

HF SINCLAIR CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(In thousands)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023

Net income	$	153,480	$	534,485	$	470,102	$	919,490
Other comprehensive income (loss):
Foreign currency translation adjustment	(5,241)		9,852		(17,847)		12,778
Hedging instruments:
Change in fair value of cash flow hedging instruments	(761)		—		(5,048)		270
Reclassification adjustments to net income on settlement of cash flow hedging instruments	305		(271)		4,592		(270)
Net unrealized loss on hedging instruments	(456)		(271)		(456)		—
Pension and other post-retirement benefit obligations:

Pension plans (gain) loss reclassified to net income	215		(45)		432		(90)

Post-retirement healthcare plans gain reclassified to net income	(935)		(918)		(1,857)		(1,836)
Retirement restoration plan loss reclassified to net income	4		3		10		6
Net change in pension and other post-retirement benefit obligations	(716)		(960)		(1,415)		(1,920)
Other comprehensive income (loss) before income taxes	(6,413)		8,621		(19,718)		10,858
Income tax expense (benefit)	(1,377)		1,777		(4,189)		2,224
Other comprehensive income (loss)	(5,036)		6,844		(15,529)		8,634
Total comprehensive income	148,444		541,329		454,573		928,124
Less: noncontrolling interest in comprehensive income	1,692		26,824		3,650		58,563
Comprehensive income attributable to HF Sinclair stockholders	$	146,752	$	514,505	$	450,923	$	869,561

See accompanying notes.

HF SINCLAIR CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)


	Six Months Ended June 30,
	2024		2023

Cash flows from operating activities:
Net income	$	470,102	$	919,490
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	404,049		363,343

Lower of cost or market inventory valuation adjustment	(222,493)		39,734
Earnings of equity method investments, inclusive of distributions	(1,863)		3,053


Gain on sale of assets	(834)		(504)
Deferred income taxes	10,585		60,801
Equity-based compensation expense	11,085		14,894
Change in fair value – derivative instruments	(10,222)		9,270
(Increase) decrease in current assets:
Accounts receivable	57,063		75,586
Inventories	(28,879)		(75,361)
Income taxes receivable	1,983		(57,850)
Prepayments and other	(10,668)		24,475
Increase (decrease) in current liabilities:
Accounts payable	(31,678)		(319,691)
Income taxes payable	7,548		(3,639)
Accrued liabilities	32,602		(17,498)
Turnaround expenditures	(169,270)		(347,145)
Other, net	23,706		(21,293)
Net cash provided by operating activities	542,816		667,665

Cash flows from investing activities:
Additions to properties, plants and equipment	(173,317)		(180,250)


Proceeds from sale of assets	1,180		1,682
Investment in Osage Pipe Line Company LLC	(5,000)		(3,000)
Distributions from equity method investments in excess of equity earnings	3,593		5,288
Net cash used for investing activities	(173,544)		(176,280)

Cash flows from financing activities:
Borrowings under credit agreements	—		55,000
Repayments under credit agreements	(105,500)		(117,000)



Purchase of treasury stock	(540,801)		(248,031)
Dividends	(195,261)		(175,271)
Distributions to noncontrolling interests	(4,676)		(51,285)

Payments on finance leases	(5,196)		(6,206)

Other, net	(310)		—
Net cash used for financing activities	(851,744)		(542,793)

Effect of exchange rate on cash flow	(5,001)		960

Cash and cash equivalents:
Decrease for the period	(487,473)		(50,448)
Beginning of period	1,353,747		1,665,066
End of period	$	866,274	$	1,614,618

Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest	$	(83,754)	$	(93,748)
Income taxes, net	$	(88,943)	$	(249,362)
Decrease in accrued and unpaid capital expenditures	$	(4,852)	$	(11,528)

See accompanying notes.

HF SINCLAIR CORPORATION

CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

(In thousands except per share data)


	Three Months Ended June 30, 2024
	Common Stock			Additional Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock			Non-controlling Interest		Total Equity
	Shares	Amount								Shares	Amount


Balance at March 31, 2024	223,231	$	2,232	$	5,991,464	$	5,594,493	$	(22,277)	26,077	$	(1,357,594)	$	67,771	$	10,276,089
Net income	—	—		—		151,788		—		—	—		1,692		153,480
Dividends ($0.50 declared per common share)	—	—		—		(95,908)		—		—	—		—		(95,908)
Other comprehensive loss, net of tax	—	—		—		—		(5,036)		—	—		—		(5,036)

Issuance of common shares under incentive compensation plans	—	—		(569)		—		—		(11)	569		—		—
Equity-based compensation	—	—		5,705		—		—		—	—		—		5,705
Purchase of treasury stock, inclusive of excise tax	—	—		—		—		—		6,350	(374,935)		—		(374,935)


Distributions to noncontrolling interest holders	—	—		—		—		—		—	—		(2,281)		(2,281)



Balance at June 30, 2024	223,231	$	2,232	$	5,996,600	$	5,650,373	$	(27,313)	32,416	$	(1,731,960)	$	67,182	$	9,957,114


	Three Months Ended June 30, 2023
	Common Stock			Additional Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock			Non-controlling Interest		Total Equity
	Shares	Amount								Shares	Amount


Balance at March 31, 2023	223,231	$	2,232	$	6,469,814	$	4,395,531	$	(20,223)	30,924	$	(1,576,689)	$	779,862	$	10,050,527
Net income	—	—		—		507,661		—		—	—		26,824		534,485
Dividends ($0.45 declared per common share)	—	—		—		(87,284)		—			—		—		(87,284)
Other comprehensive income, net of tax	—	—		—		—		6,844		—	—		—		6,844

Issuance of common shares under incentive compensation plans	—	—		(436)		—		—		(8)	436		—		—
Equity-based compensation	—	—		11,203		—		—		—	—		366		11,569
Purchase of treasury stock, inclusive of excise tax	—	—		—		—		—		2	(137)		—		(137)


Distributions to noncontrolling interest holders	—	—		—		—		—		—	—		(25,299)		(25,299)
Purchase of HEP units for equity grants	—	—		—		—		—		—	—		(1)		(1)



Balance at June 30, 2023	223,231	$	2,232	$	6,480,581	$	4,815,908	$	(13,379)	30,918	$	(1,576,390)	$	781,752	$	10,490,704

See accompanying notes.

HF SINCLAIR CORPORATION

CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

(In thousands except per share data)


	Six Months Ended June 30, 2024
	Common Stock			Additional Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock			Non-controlling Interest		Total Equity
	Shares	Amount								Shares	Amount


Balance at December 31, 2023	223,231	$	2,232	$	5,993,661	$	5,379,182	$	(11,784)	23,236	$	(1,194,201)	$	68,208	$	10,237,298
Net income	—	—		—		466,452		—		—	—		3,650		470,102
Dividends ($1.00 declared per common share)	—	—		—		(195,261)		—		—	—		—		(195,261)
Other comprehensive loss, net of tax	—	—		—		—		(15,529)		—	—		—		(15,529)

Issuance of common shares under incentive compensation plans	—	—		(8,146)		—		—		(159)	8,146		—		—
Equity-based compensation	—	—		11,085		—		—		—	—		—		11,085
Purchase of treasury stock, inclusive of excise tax	—	—		—		—		—		9,339	(545,905)		—		(545,905)


Distributions to noncontrolling interest holders	—	—		—		—		—		—	—		(4,676)		(4,676)



Balance at June 30, 2024	223,231	$	2,232	$	5,996,600	$	5,650,373	$	(27,313)	32,416	$	(1,731,960)	$	67,182	$	9,957,114


	Six Months Ended June 30, 2023
	Common Stock			Additional Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock			Non-controlling Interest		Total Equity
	Shares	Amount								Shares	Amount


Balance at December 31, 2022	223,231	$	2,232	$	6,468,775	$	4,130,252	$	(22,013)	26,152	$	(1,335,431)	$	773,757	$	10,017,572
Net income	—	—		—		860,927		—		—	—		58,563		919,490
Dividends ($0.90 declared per common share)	—	—		—		(175,271)		—		—	—		—		(175,271)
Other comprehensive income, net of tax	—	—		—		—		8,634		—	—		—		8,634

Issuance of common shares under incentive compensation plans	—	—		(2,370)		—		—		(46)	2,370		—		—
Equity-based compensation	—	—		14,176		—		—		—	—		718		14,894
Purchase of treasury stock, inclusive of excise tax	—	—		—		—		—		4,812	(243,329)		—		(243,329)


Distributions to noncontrolling interest holders	—	—		—		—		—		—	—		(51,285)		(51,285)
Purchase of HEP units for equity grants	—	—		—		—		—		—	—		(1)		(1)


Balance at June 30, 2023	223,231	$	2,232	$	6,480,581	$	4,815,908	$	(13,379)	30,918	$	(1,576,390)	$	781,752	$	10,490,704

See accompanying notes.

HF SINCLAIR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1:Description of Business and Presentation of Financial Statements

References herein to HF Sinclair, “we,” “our,” “ours,” and “us” refer only to HF Sinclair and its consolidated subsidiaries or to HF Sinclair or an individual subsidiary and not to any other person, with certain exceptions. References herein to Holly Energy Partners, L.P. (“HEP”) with respect to time periods prior to the closing of the HEP Merger Transaction (as defined below) on December 1, 2023 refer to HEP and its consolidated subsidiaries.

We are an independent energy company that produces and markets high-value light products such as gasoline, diesel fuel, jet fuel, renewable diesel and other specialty products. We own and operate refineries located in Kansas, Oklahoma, New Mexico, Wyoming, Washington and Utah. We provide petroleum product and crude oil transportation, terminalling, storage and throughput services to our refineries and the petroleum industry. We market our refined products principally in the Southwest United States, the Rocky Mountains extending into the Pacific Northwest and in other neighboring Plains states and we supply high-quality fuels to more than 1,500 branded stations and license the use of the Sinclair brand at more than 300 additional locations throughout the country. We produce renewable diesel at two of our facilities in Wyoming and our facility in New Mexico. In addition, our subsidiaries produce and market base oils and other specialized lubricants in the United States, Canada and the Netherlands, and export products to more than 80 countries.

On December 1, 2023, pursuant to the Agreement and Plan of Merger, dated as of August 15, 2023 (the “Merger Agreement”), by and among HEP, HF Sinclair, Navajo Pipeline Co., L.P., a Delaware limited partnership and an indirect wholly owned subsidiary of HF Sinclair (“HoldCo”), Holly Apple Holdings LLC, a Delaware limited liability company and a wholly owned subsidiary of HoldCo (“Merger Sub”), HEP Logistics Holdings, L.P., a Delaware limited partnership and the general partner of HEP (“HLH”), and Holly Logistic Services, L.L.C., a Delaware limited liability company and the general partner of HLH (the “General Partner”), Merger Sub merged with and into HEP, with HEP surviving as an indirect, wholly owned subsidiary of HF Sinclair (the “HEP Merger Transaction”).

Under the terms of the Merger Agreement, each outstanding common unit representing a limited partner interest in HEP (an “HEP common unit”), other than the HEP common units already owned by HF Sinclair and its subsidiaries, was converted into the right to receive 0.315 shares of HF Sinclair common stock and $4.00 in cash, without interest. The Merger Agreement consideration totaled $267.6 million in cash and resulted in the issuance of 21,072,326 shares of HF Sinclair common stock from treasury stock.

The HEP Merger Transaction was accounted for in accordance with Financial Accounting Standards Board Accounting Standards Codification (“ASC”) 810, “Consolidation.” Since we controlled HEP both before and after the HEP Merger Transaction, the changes in our ownership interest in HEP resulting from the HEP Merger Transaction were accounted for as an equity transaction, and no gain or loss was recognized in our consolidated statements of income. The tax effects of the HEP Merger Transaction were recorded as adjustments to deferred income taxes and additional capital consistent with ASC 740, “Income Taxes.”

For a description of our existing indebtedness, as well as associated changes in connection with the HEP Merger Transaction, see Note 9.

We have prepared these consolidated financial statements without audit. In management’s opinion, these consolidated financial statements include all normal recurring adjustments necessary for a fair presentation of our consolidated financial position as of June 30, 2024, the consolidated results of income, comprehensive income and statements of equity for the three and six months ended June 30, 2024 and 2023, and consolidated cash flows for the six months ended June 30, 2024 and 2023 in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”). Although certain notes and other information required by generally accepted accounting principles in the United States (“GAAP”) have been condensed or omitted, we believe that the disclosures in these consolidated financial statements are adequate to make the information presented not misleading. These consolidated financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2023, which were recast to reflect changes in our reportable segments as described in Note 14, and are included in Exhibit 99.1 to the Quarterly Report on Form 10-Q for the quarter ended March 31, 2024.

HF SINCLAIR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Accounts Receivable: Our accounts receivable primarily consist of amounts due from customers that are primarily from sales of refined products and renewable diesel. Credit is extended based on our evaluation of the customer’s financial condition, and in certain circumstances, collateral, such as letters of credit or guarantees, is required. We reserve for expected credit losses based on our historical loss experience as well as expected credit losses from current economic conditions and management’s expectations of future economic conditions. Credit losses are charged to the allowance for expected credit losses when an account is deemed uncollectible. Our allowance for expected credit losses was $3.0 million at June 30, 2024, and $3.2 million at December 31, 2023.

Inventories: Inventories related to our refining operations are stated at the lower of cost, using the last-in, first-out (“LIFO”) method for crude oil and unfinished and finished refined products, or market. Inventories related to our renewables business are stated at the lower of cost, using the LIFO method for feedstock and unfinished and finished renewables products, or market. In periods of rapidly declining prices, LIFO inventories may have to be written down to market value due to the higher costs assigned to LIFO layers in prior periods. In addition, the use of the LIFO inventory method may result in increases or decreases to cost of sales in years that inventory volumes decline as the result of charging cost of sales with LIFO inventory costs generated in prior periods. An actual valuation of inventory under the LIFO method is made at the end of each year based on the inventory levels at that time. Accordingly, interim LIFO calculations are based on management’s estimates of expected year-end inventory levels and are subject to the final year-end LIFO inventory valuation.

Inventories of our Petro-Canada Lubricants and Sonneborn businesses are stated at the lower of cost, using the first-in, first-out method, or net realizable value.

Inventories consisting of process chemicals, materials and maintenance supplies and RINs are stated at the lower of weighted average cost or net realizable value.

Leases: At inception, we determine if an arrangement is or contains a lease. Right-of-use (“ROU”) assets represent our right to use an underlying asset for the lease term and lease liabilities represent our payment obligation under the leasing arrangement. ROU assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. We use our estimated incremental borrowing rate (“IBR”) to determine the present value of lease payments as most of our leases do not contain an implicit rate. Our IBR represents the interest rate that we would pay to borrow, on a collateralized basis, an amount equal to the lease payments over a similar term in a similar economic environment. We use the implicit rate when readily determinable.

Operating leases are recorded in “Operating lease right-of-use assets” and current and noncurrent “Operating lease liabilities” on our consolidated balance sheets. Finance leases are included in “Properties, plants and equipment, at cost,” “Accrued liabilities” and “Other long-term liabilities” on our consolidated balance sheets.

Our lease term includes an option to extend the lease when it is reasonably certain that we will exercise that option. Leases with a term of 12 months or less are not recorded on our consolidated balance sheets. For certain equipment leases, we apply a portfolio approach for the operating lease ROU assets and liabilities. Also, as a lessee, we separate non-lease components that are identifiable and exclude them from the determination of net present value of lease payment obligations. In addition, as a lessor, we do not separate the non-lease (service) component in contracts in which the lease component is the dominant component. We treat these combined components as an operating lease. We bifurcate the consideration received for sales-type lease contracts between lease and service revenue, with the service component accounted for within the scope of ASC 606, “Revenue from Contracts with Customers.”

Our consolidated statements of income reflect the lease revenue we recognize from contracts with third parties in which we are the lessor. As the lessor, we classify customer contracts that contain leases into one of three categories: operating leases, direct finance leases, or sales-type leases. This classification is determined by evaluating key factors such as the lease term, the fair value of the underlying asset, and the residual value of the underlying assets.

Revenue Recognition: Revenues on refined products, branded fuel sales, renewable diesel, and excess crude oil sales are recognized when delivered (via pipeline, in-tank or rack), and the customer obtains control of such inventory, which is typically when title passes and the customer is billed. All revenues are reported inclusive of shipping and handling costs billed and exclusive of any taxes billed to customers. Shipping and handling costs incurred are reported in cost of materials and other.

HF SINCLAIR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Our Lubricants & Specialties business has sales agreements with marketers and distributors that provide certain rights of return or provisions for the repurchase of products previously sold to them. Under these agreements, revenues and cost of revenues are deferred until the products have been sold to end customers. Our Lubricants & Specialties business also has agreements that create an obligation to deliver products at a future date for which consideration has already been received and recorded as deferred revenue. This revenue is recognized when the products are delivered to the customer.

Our Midstream business recognizes revenues as products are shipped through its pipelines and terminals and as other services are rendered. Additionally, we have certain throughput agreements that specify minimum volume requirements, whereby we bill a customer for a minimum level of shipments in the event a customer ships below their contractual requirements. If there are no future performance obligations, we recognize these deficiency payments as revenue. In certain of these throughput agreements, a customer may later utilize such shortfall billings as credit towards future volume shipments in excess of its minimum levels within its respective contractual shortfall make-up period. Such amounts represent an obligation to perform future services, which may be initially deferred and later recognized as revenue based on estimated future shipping levels, including the likelihood of a customer’s ability to utilize such amounts prior to the end of the contractual shortfall make-up period. We recognize the service portion of these deficiency payments as revenue when we do not expect it will be required to satisfy these performance obligations in the future based on the pattern of rights exercised by the customer. Payment terms under our contracts with customers are consistent with industry norms and are typically payable within 30 days of the date of invoice.

Foreign Currency Translation: Assets and liabilities recorded in foreign currencies are translated into U.S. dollars using exchange rates in effect as of the balance sheet date. Revenue and expense accounts are translated using the weighted average exchange rates during the period presented. Foreign currency translation adjustments are recorded as a component of accumulated other comprehensive income.

We have intercompany notes that were issued to fund certain of our foreign businesses. Remeasurement adjustments resulting from the conversion of intercompany financing amounts to functional currencies are recorded as gains and losses as a component of other income (expense) in the consolidated statements of income. Such adjustments are not recorded in the Lubricants & Specialties segment operations, but in Corporate and Other. See Note 14 for additional information on our segments.

Income Taxes: Provisions for income taxes include deferred taxes resulting from temporary differences in income for financial and tax purposes, using the liability method of accounting for income taxes. The liability method requires the effect of tax rate changes on deferred income taxes to be reflected in the period in which the rate change was enacted. The liability method also requires that deferred tax assets be reduced by a valuation allowance unless it is more likely than not that the assets will be realized. We account for U.S. tax on global intangible low-taxed income in the period in which it is incurred.

Potential interest and penalties related to income tax matters are recognized in income tax expense. We believe we have the appropriate support for the income tax positions taken and to be taken on our income tax returns and that our accruals for tax liabilities are adequate for all open years based on an assessment of many factors, including past experience and interpretations of tax law applied to the facts of each matter.

For the six months ended June 30, 2024, we recorded income tax expense of $109.5 million compared to $245.6 million for the six months ended June 30, 2023. This decrease was principally due to lower pre-tax income during the six months ended June 30, 2024, compared to the same period of 2023. Our effective tax rates were 18.9% and 21.1% for the six months ended June 30, 2024 and 2023, respectively. The difference between the U.S. federal statutory rate and the effective tax rate for the six months ended June 30, 2024 is primarily due to the relationship between pre-tax results and non-taxable permanent differences. The difference in the U.S. federal statutory rate and the effective tax rate for the six months ended June 30, 2023 was primarily due to the impact of federal tax credits and the relationship between pre-tax results and the earnings attributable to the noncontrolling interest that is not included in income for tax purposes.

Inventory Repurchase Obligations: We periodically enter into same-party sell/buy transactions, whereby we sell certain refined product inventory and subsequently repurchase the inventory in order to facilitate delivery to certain locations. Such sell/buy transactions are accounted for as inventory repurchase obligations, under which proceeds received under the initial sale are recognized as an inventory repurchase obligation that is subsequently reversed when the inventory is repurchased. For the six months ended June 30, 2024 and 2023, we received proceeds of $13.1 million and $12.3 million, respectively, and subsequently repaid $13.6 million and $13.4 million, respectively, under these sell/buy transactions.

HF SINCLAIR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Accounting Pronouncements - Not Yet Adopted

In November 2023, Accounting Standards Update (“ASU”) 2023-07, “Improvements to Reportable Segment Disclosures” was issued. ASU 2023-07 requires, among other updates, enhanced disclosures about significant segment expenses that are regularly provided to the chief operating decision maker, as well as the aggregate amount of other segment items included in the reported measure of segment profit or loss. This aims to provide more decision-useful information to stakeholders by giving a clearer picture of the costs incurred by each reportable segment. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, and requires retrospective adoption. Early adoption is permitted. We are assessing the impact of this guidance on our disclosures.

In December 2023, ASU 2023-09, “Improvements to Income Tax Disclosures” was issued. ASU 2023-09 requires enhanced annual disclosures regarding the rate reconciliation and income taxes paid. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, and may be adopted on a prospective or retrospective basis. Early adoption is permitted. We are assessing the impact of this guidance on our disclosures.

NOTE 2:Cushing Connect Joint Venture

In 2019, HEP Cushing LLC (“HEP Cushing”), then a wholly owned subsidiary of HEP and now a wholly owned subsidiary of HF Sinclair, and Plains Marketing, L.P., a wholly owned subsidiary of Plains All American Pipeline, L.P. (“Plains”), formed a 50/50 joint venture, Cushing Connect Pipeline & Terminal LLC (“Cushing Connect”), for (i) the development, construction, ownership and operation of a new 160,000 barrel per day common carrier crude oil pipeline (the “Cushing Connect Pipeline”) that connects the Cushing, Oklahoma crude oil hub to our Tulsa refineries and (ii) the ownership and operation of 1.5 million barrels of crude oil storage in Cushing, Oklahoma (the “Cushing Connect Terminal” and together with Cushing Connect and the Cushing Connect Pipeline, the “Cushing Connect Joint Venture”). The Cushing Connect Terminal was fully in service beginning in April 2020, and the Cushing Connect Pipeline was placed in service during the third quarter of 2021. Long-term commercial agreements were entered into to support the Cushing Connect assets. Cushing Connect entered into a contract with an affiliate of HEP, now a subsidiary of HF Sinclair, to manage the operation of the Cushing Connect Pipeline and with an affiliate of Plains to manage the operation of the Cushing Connect Terminal. The total investment in Cushing Connect was generally shared proportionately among the partners. However, HEP was solely responsible for any Cushing Connect Pipeline construction costs that exceeded the budget by more than 10%. HEP’s share of the cost of the Cushing Connect Terminal contributed by Plains and Cushing Connect Pipeline construction costs was approximately $74.0 million.

Cushing Connect and its two subsidiaries, Cushing Connect Pipeline and Cushing Connect Terminal, are variable interest entities (“VIE”) as defined under GAAP. A VIE is a legal entity whose equity owners do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support or, as a group, the equity holders lack the power, through voting rights, to direct the activities that most significantly impact the entity’s financial performance, the obligation to absorb the entity’s expected losses or rights to expected residual returns. Cushing Connect and its two subsidiaries are VIEs because they did not originally have sufficient equity at risk to finance their activities without additional financial support. We are the primary beneficiary of two of these entities as HEP constructed and operates the Cushing Connect Pipeline, and we have more ability to direct the activities that most significantly impact the financial performance of Cushing Connect and Cushing Connect Pipeline. Therefore, we consolidate these two entities. We are not the primary beneficiary of Cushing Connect Terminal, which we account for using the equity method of accounting. Our maximum exposure to loss as a result of our involvement with Cushing Connect Terminal is not expected to be material due to the long-term terminalling agreements in place to support operations.

HF SINCLAIR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

With the exception of the assets of HEP Cushing, creditors of the Cushing Connect Joint Venture legal entities have no recourse to our assets. Any recourse to HEP Cushing would be limited to the extent of HEP Cushing’s assets, which other than its investment in the Cushing Connect Joint Venture, are not significant. Furthermore, our creditors have no recourse to the assets of the Cushing Connect Joint Venture legal entities. The most significant assets of Cushing Connect and Cushing Connect Pipeline that are available to settle only their obligations, along with their most significant liabilities for which their creditors do not have recourse to our general credit, were:


	June 30, 2024		December 31, 2023

	(In thousands)
Cash and cash equivalents	$	1,486	$	1,536
Properties, plants and equipment, at cost	$	102,977	$	102,936
Less: accumulated depreciation	$	(9,794)	$	(8,022)
Intangibles and other	$	30,856	$	32,473

NOTE 3:Revenues

Substantially all revenue-generating activities relate to sales of refined products, branded fuel, renewable diesel and excess crude oil inventories sold at market prices (variable consideration) under contracts with customers. Additionally, we have revenues attributable to our logistics services provided under petroleum product and crude oil pipeline transportation, processing, storage and terminalling agreements with third parties.

Disaggregated revenues were as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023

	(In thousands)
Revenues by type
Refined product revenues
Transportation fuels (1)	$	5,005,535	$	4,725,169	$	9,634,166	$	9,233,063
Specialty lubricant products (2)	644,163		635,375		1,258,384		1,315,237
Asphalt, fuel oil and other products (3)	568,960		572,520		1,052,276		1,012,859
Total refined product revenues	6,218,658		5,933,064		11,944,826		11,561,159
Excess crude oil revenues (4)	436,796		621,750		703,892		1,332,647
Renewable diesel revenues (5)	190,137		175,063		369,806		377,476
Transportation and logistics services	27,094		29,833		50,193		56,249
Marketing revenues (6)	942,362		1,040,933		1,718,169		1,978,318
Other revenues (7)	30,784		33,003		86,090		92,939
Total sales and other revenues	$	7,845,831	$	7,833,646	$	14,872,976	$	15,398,788

HF SINCLAIR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023

	(In thousands)
Refined product revenues by market
United States:
Mid-Continent	$	2,409,853	$	2,276,837	$	4,625,694	$	4,283,993
Southwest	1,082,895		890,586		2,058,597		1,723,288
Rocky Mountains	2,155,871		2,207,770		4,144,362		4,405,597
Northeast	212,722		233,695		432,069		497,599
Canada	288,276		254,952		544,048		505,676
Europe, Asia and Latin America	69,041		69,224		140,056		145,006
Total refined product revenues	$	6,218,658	$	5,933,064	$	11,944,826	$	11,561,159

(1)Transportation fuels revenues are attributable to our Refining segment’s wholesale marketing of gasoline, diesel and jet fuel.

(2)Specialty lubricant products consist of base oil, waxes, finished lubricants and other specialty fluids.

(3)Revenues from asphalt, fuel oil and other products include amounts attributable to our Refining and Lubricants & Specialties segments of $488.1 million and $80.9 million, respectively, for the three months ended June 30, 2024, $910.1 million and $142.1 million, respectively, for the six months ended June 30, 2024, $522.2 million and $50.3 million, respectively, for the three months ended June 30, 2023, and $909.0 million and $103.8 million, respectively, for the six months ended June 30, 2023.

(4)Excess crude oil revenues represent sales of purchased crude oil inventory that at times exceeds the supply needs of our refineries.

(5)Renewable diesel revenues are principally attributable to our Renewables segment.

(6)Marketing revenues consist primarily of branded gasoline and diesel fuel.

(7)Other revenues are principally attributable to our Refining segment.

Our consolidated balance sheets reflect contract liabilities related to unearned revenues attributable to future service obligations under our third-party transportation agreements and production agreements from our Sonneborn operations. The following table presents changes to our contract liabilities:


	Six Months Ended June 30,
		2024		2023

		(In thousands)
Balance at January 1		$	7,533	$	10,722
Increase		10,936		9,547
Recognized as revenue		(11,666)		(10,986)
Balance at June 30		$	6,803	$	9,283

As of June 30, 2024, we have long-term contracts with customers that specify minimum volumes of gasoline, diesel, lubricants and specialties to be sold ratably at market prices through 2034. Future prices are subject to market fluctuations and therefore, we have elected the exemption to exclude variable consideration under these contracts under ASC 606-10-50-14A. Aggregate minimum volumes expected to be sold (future performance obligations) under our long-term product sales contracts with customers are as follows:


Contractual Minimum	Remainder of 2024	2025	2026	Thereafter	Total

	(In thousands)
Refined product sales volumes (barrels)	16,254	26,553	18,852	46,690	108,349

HF SINCLAIR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Additionally, we have long-term contracts with third-party customers that specify minimum volumes of product to be transported through our pipelines and terminals that result in fixed-minimum annual revenues through 2033. Annual minimum revenues attributable to our third-party contracts as of June 30, 2024, are presented below:


Contractual Minimum	Remainder of 2024		2025		2026		Thereafter		Total

	(In thousands)
Midstream operations revenues	$	10,426	$	11,242	$	7,782	$	43,308	$	72,758

NOTE 4:Fair Value Measurements

Fair value measurements are derived using inputs (assumptions that market participants would use in pricing an asset or liability, including assumptions about risk). GAAP categorizes inputs used in fair value measurements into three broad levels as follows:

•(Level 1) Quoted prices in active markets for identical assets or liabilities.

•(Level 2) Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, similar assets and liabilities in markets that are not active or can be corroborated by observable market data.

•(Level 3) Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes valuation techniques that involve significant unobservable inputs.

The carrying amounts of derivative instruments and RINs credit obligations at June 30, 2024 and December 31, 2023 were as follows:


			Fair Value by Input Level
	Carrying Amount		Level 1		Level 2		Level 3

	(In thousands)
June 30, 2024
Assets:


Commodity forward contracts	$	574	$	—	$	574	$	—

Foreign currency forward contracts	3,261		—		3,261		—
Total assets	$	3,835	$	—	$	3,835	$	—

Liabilities:
NYMEX futures contracts	$	4,674	$	4,674	$	—	$	—

Commodity price swaps	1,495		—		1,495		—
Commodity forward contracts	738		—		738		—
Foreign currency forward contracts	51		—		51		—
RINs credit obligations (1)	22,745		—		22,745		—
Total liabilities	$	29,703	$	4,674	$	25,029	$	—

HF SINCLAIR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)





			Fair Value by Input Level
	Carrying Amount		Level 1		Level 2		Level 3

	(In thousands)
December 31, 2023
Assets:
NYMEX futures contracts	$	836	$	836	$	—	$	—
Commodity forward contracts	2,908		—		2,908		—


Total assets	$	3,744	$	836	$	2,908