HF Sinclair (DINO) Q2 2026 earnings call transcript

It is now my pleasure to turn the floor over to Craig Beerry, Vice President, Investor Relations. Craig, you may begin.

Thank you, Kelsey. Good morning, everyone, and welcome to HF Sinclair Corporation Second Quarter 2026 earnings call. This morning, we issued a press release announcing results for the quarter ending June 30th, 2026. If you would like a copy of the earnings press release, you may find it on our website at hftsandclair. com. Before we proceed with remarks, please note the Safe Harbor Disclosure Statement in today's press release.

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 FCC filings. The call also may include discussion of non-GAP measures. Please see the earnings press release for reconciliation to GAP financial measures.

For any forward-looking non-GAP measures, the company is enabled to provide a reconciliation without unreasonable effort due to the unpredictability and uncertainty of certain items. Also, 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. And with that, I'll turn the call over to Franklin.

Okay, thank you, Craig. Let me start by thanking the 5,000-plus employees at HS and Player for delivering a really good quarter. The teams at the plants and across our businesses did an excellent job of being safe, compliant, and reliable throughout the quarter. As we know, our markets expect us to keep them supplied with the fuels and duplicates necessary to complete their own vital task of life and business and the dyno team perform well. We'll get to the numbers in a moment or two, but let me discuss a few other matters first.

You're aware of the announcement earlier this month in which we provided information about adjustments to our senior leadership responsibilities. They were made in order to align certain responsibilities to direct the direct long-term goals of the company. Steve Ledbetter was appointed our president and chief operating officer. With this change, Steve will be responsible for overseeing the company's operations and commercial organizations following proving safety and reliability, enhancing cost efficiency, and unlocking value across our integrated platform.

We have made several internal promotions in both the commercial and operating teams to work with Steve as he leads these efforts to continue the excellent performance we've been experiencing. Val Pompa, who's done an excellent job leading and improving our operations for the last few years, will take on the responsibility of working on the growth and organic improvement of our operating assets.

She will have both information and operating technology as part of her mandate as well as applying new technologies to our existing operations in order to improve performance. We believe that there are technological improvements that can be brought to our assets, that can advance the effectiveness of our performance in our plants and within our financial framework and commercial operations.

Val is uniquely qualified, is uniquely qualified, sees and technical executives. She has both vast experiences and thorough understanding of refining processes as well as will be key in leading this effort. She will also have executive oversight of both the retirement of the Mississauga Refining Assets and the build out of our Go West initiative, both very important to the future of the company.

We certainly know that we're first out among the refiners so we'd be remiss in not making a comment on the macro environment for the refining complex. There's been much written probably by even some of those on this call, up to you on this call, analyzing the changes in our market as a result of both the war in Ukraine and the Middle East.

I'll not repeat what's been said. What we know is there's about five to seven million barrels of refining capacity offline from where we started five months ago. The conflicts continue with no clear resolution, seemingly, nearly either. And now we see witness to damage of other infrastructure assets, which would be necessary for the repairs to the damage refining assets in order to restore their operability.

We certainly have no crystal ball as to when the kinetic advance and either conflict and with certainty. Therefore, we expect to have tighter refining markets as well into 2027. There is a bit of a wild card in the mix, however, China withdrew from buying crude and typical size at the beginning of the meetings conflict. The reduced consumption has led to stabilized prices and crude and China has also suspended exporting products.

If they reverse the decisions, products exported from China will certainly impact the product's market. But an area in the coal mine to watch would be the Singapore crack spreads that they tend to react first with China increasing exports. Otherwise, we see markets being constructed from the next several quarters, potentially, in the 2028. These events have had similar, if not more, dire effects on the lube's base oil markets as as much as 20% of the world's base oil supply for lubes being offline, which brings me to our lube's distance.

It has been an important and meaningful contributor to the successes and clear. But today, we announced plans to pursue a separation of the segment through the capital markets, creating a new independent public company. We believe these two companies will benefit from enhanced strategic focus and operational agility, greater alignment of capital deployment within each specific growth priorities, increased ability to pursue strategic transactions independently without competing for resources within a broader portfolio, distinct and compelling investment profiles aligned with different investor bases and dedicated leadership teams and government structures with continued focus on driving performance. We intend that the separation will be a tax-efficient for H. O. Sinclair and our stockholders, and will be executed over the next 12 to 18 months.

Our announcement provides three important messages. First, that the base oil refining assets and Mississauga will be retired. The team there is not an excellent and outstanding job operating the assets throughout the years, but a combination of location size and scope of the assets have reached a point that their long-term economic contributions to the business causes us to make this very difficult decision to retire the assets.

Second, with the retirement, our finished product business will mean base oil to continue the successful efforts in their market. The business will continue to deliver base oil solutions through new strategic commercial agreements with two premier global base oil manufacturers complimented by continued access to products from our Tulsa refinery.

Finally, as a potential separate organization under Matt Joyce's leadership, an independent business, an independent lose business will operate in a capital-like business model for greater financial flexibility and stronger and more consistent free cash flow, while leveraging its core strength and technology globally recognize brands and extensive channels in the market.

We are early in the separation process and will provide additional information as appropriate. Finally, it would be natural to ask about our company's plans for use of excess cash. We are mindful of our past indications for delivering a portion of free cash back to our stockholders and will endeavor to continue to do so. We also have efforts going on where we see opportunities to enhance our existing assets.

In other words, we already have things in progress. We would be discussing this with our board in our upcoming board meeting as the board reaches decisions and the actions are to become actionable. We will continue to share that information with our ownership community.

I'm going to go off script here. Let's face it. Last fall, when all the refining complex were putting their plans together, we had no clue that a war was going to go on the Middle East. We've got excess capital now, and we've got to be prudent and diligent in looking at how we spend this excess capital. Nobody had a plan for what we're looking at right now, and we've got to make sure that we look at it. The growth initiatives is exactly that. We're going to look at the specifics within our organization and see where we can add values over the future, and she's got that skill set and knowledge to be able to lead the team to do that while Steve runs the day-to-day operations.

That's the fundamental drivers behind our changes there. I'll now turn it over to Steve for additional comments.

Thank you, Franklin. Thank you all for joining us. I'll now cover our business highlights. During the second quarter, we delivered strong financial results across each of our business segments, underpinned by solid operational and commercial execution. In refining, our crude oil charge average approximately 640,000 barrels per day, which exceeded our guidance range and reflects our progress towards improving operational excellence and optimization across our business.

This enabled us to take advantage of the favorable market conditions as we operated well. We have a plan turned around scheduled at El Dorado, which commences in September. In our marketing segment, we added 63 branded sites in the second quarter, with more than 100 sites in the branding pipeline that are expected to come online over the next six to 12 months.

We were pleased with our progress here as we continue to see year-over-year volume increases in our branded channel. We still expect to grow the number of branded sites by approximately 10% annually. In our renewable segment, we reported another quarter of strong financial performance, with $123 million in adjusted EBITDAH, supported by favorable market conditions and discipline execution of our business strategy.

We believe the macroeconomic backdrop will remain favorable throughout the year and are encouraged with the recent performance of this business. We have a plan turned around scheduled to begin in the third quarter at our Cheyenne facility.

From a strategic perspective, we continue to progress the evaluation and development of our multi-phase initiative to leverage our strong logistics network and production advantage in the Rockies region to support increasing demand across Western markets. We expect that the first phase would increase capacity by approximately 35,000 barrels per day to move supply from Rockies production into Nevada and is targeted to be online in 2029.

We are also moving forward with the El Dorado Vacuum Furnace Project, which is expected to enhance operational reliability and improve product yields while enabling processing of up to an additional 10,000 barrels per day of heavy crude within our feedstock slate. The project remains on track for completion during the fall turnaround. We are also encouraged by the integration and early performance of our green trail fuels JB and marketing.

And we continue to believe this will be in a creative edition and accelerator of our brand position. Further, we are evaluating several technology investments to advance the competitiveness of our business. We continue to see opportunities for future investment across our portfolio. And as we evaluate these opportunities, we're okay with carrying excess cash on our balance sheet while final investment decisions are made.

During the quarter, we return $265 million in cash to shareholders consisting of 89 million in regular dividends and 179 million in share repurchases. Since the Sinclair acquisition in March 2022, we've returned approximately 5.2 billion in cash to shareholders and have reduced our share count by over 68 million shares. Today, we also announced that our Board of Directors declared a regular quarterly dividend of 52 and a half cents per share and increased to 5% over our previous dividend of 50 cents per share.

As we look our head, our strategy remains focused on enhancing safety, reliability, and efficiency across all of our business segments, while unlocking more from our integrated value chain, including growing our marketing and midstream segments. With refining fundamentals expected to remain supportive through the fall, we're confident that our diversified asset base will continue to generate strong cash flows.

With that, let me turn the call over to the VAC.

Thank you, Steve, and good morning, everyone. Let's begin by reviewing KHS in clear financial highlights. Today, we reported second-quarter net income attributable to H. F. Sinclair shareholders of 892 million or $4.93 per diluted share. These results reflect special items that collectively decrease net income by 68 million. Excluding these items, adjusted net income for the second quarter was 960 million of $5.31 per diluted share. Compared to the adjusted net income of 322 million or $1.70 per diluted share for the same period in 2025.

Adjusted EBITDA for the second quarter was 1.5 billion compared to 665 million in the second quarter of 2025. In our refining segment, second quarter adjusted EBITDA was a billion dollars compared to 476 million in the second quarter of 2025. This increase was principally driven by strong refining margins and volumes in the mid-con and best regions as a result of steady demand, tight supply and favorable crack spread.

Crude oil charge averaged 640,000 barrels per day for the second quarter compared to 616,000 barrels per day for the second quarter of 2025.

Our marketing segment reported EBITDA of 28 million for the second quarter compared to 25 million for the second quarter of 2025. Total branded fuel sales volumes were 387 million gallons for the second quarter of 2026 compared to 337 million gallons for the second quarter of 2025. Our midstream segment reported adjusted EBITDA of 112 million both in the second quarter of 2026 and the same period of last year.

In our renewable segment, excluding the lower of costs for market inventory valuation adjustment charge of 30 million and asset impairment of 47 million we reported adjusted EBITDA of 123 million for the second quarter compared to a loss of 2 million for the second quarter of 2025. This increase was transferred driven by increased rent price, higher producers tax credit benefits and increased volumes compared to the second quarter of 2025.

Total sales volumes were 60 million gallons for the second quarter of 2026 as compared to 55 million gallons for the second quarter of 2025. Our lubricant and specialty segment reported adjusted EBITDA of 207 million for the second quarter compared to 55 million for the second quarter of 2025. The increase was primarily driven by higher sales volumes and product prices in the second quarter of 2026 compared to the second quarter of 2025.

During the second quarter of 2026, we recognized a 5 foot benefit of 46 million compared to a 5 foot charge of 20 million in the second quarter of 2025.

Net cash provided by operations totaled 1.5 billion in the second quarter, which include 56 million of turnaround spend, HF Sinclair's capital expenditures totaled 118 million for the second quarter. As of June 30, 2026, HF Sinclair's total liquidity stood at approximately 4.26 billion, which includes a cash balance of approximately 2.26 billion and our unroned 2 billion unsecured credit facility.

As of June 30, 2026, we had 2.8 billion debt outstanding with a debt to cap ratio of 21% and net debt to cap ratio of 4%. Let's go through some guidance items. With respect to capital spending for full year 2026, there is no change to our capital guidance at this time, but it is subject to change as we continue to progress certain projects under evaluation.

For the third quarter of 2026, we expect to run between 590 to 620,000 barrels of crude oil in our refining segments, which reflects the plan to run at El Dorado in the period. We are now ready to take questions from the audience. Operator.

Thanks, Manav, this is Steve. Yeah, it's mainly been a distillate story from a global geopolitical scenario, both in the Middle East, heavy distillate producers and now Russia that used to export quite a bit in distillate. Now it's even importing some. But yes, the overall flows in terms of gasoline have been tight and there's some export capability that's happening out of both regions in the Gulf and the west coast, or to the west coast from the Gulf.

In the overall market environment on cracks, we're seeing tighter cracks, particularly in the mid-con and gas, as you see more things move south. And so less barrels are getting up into the mid-con and so that that structure's tightening up. But we've seen in the quarter, the demand picture looked relatively healthy for not only the US, but our regions. And I think our regions have fared a little bit better, both in gas and diesel in both regions.

Now on the west, we have a little bit of softness and diesel, but we think that that is factored into more of the bio and already coming online with the incentive structure that has been generated there. But overall, our markets look pretty strong and we think that the tightness is furthering, is further because our inventories on a US and a regional basis have been below the five-year average. So as Franklin mentioned earlier, we see that it starts from a global perspective and stocks are very low and it's gonna take a while to replenish those.

And that just comes back into the US market with the overall market structure. And the export values are attributing to lower supply that is on the market naturally that creates a tighter structure with supportive crack environment.

We've never indicated we were looking for an external CEO. So I dissuade you of thinking about that. Secondly, senior management on both sides are very bought into this. And remember, I guess if you think about it, the board owns the business and all we're doing is separating it so that they can both flourish. We have a good senior team at the lubes business that under Matt's leadership, and that will develop and build out as we get closer to the time of whatever transaction we decide to go with because there's a lot of work to be done deciding what's best for our stockholders. But we're not losing something. We're just splitting it among the stockholders to where value is being created and let them run independently.

But note the team is aligned in this, the board is aligned in this, and we see this is the best direction for the lubes business.

I'll turn over some of the synergy to go back in a second. Yes, they're always, whenever you stand up a public company, there's always from public cost that we will be identified, separate company audit, some additional fees that are adjusted with that. But they're usually more than offset by having kind of the spotlight on the business.

Let's take a step back. The refining business dominates our franchises. It currently exists. And because the volatility of the franchise that we have that all refining assets have, all franchises have, you tend to have a discounted value on multiples of Yvesda. Lubes is a more stabilized business and it's in different markets than refining assets. And typically, they would run the lubricant's business with a higher multiple.

And so we would expect to step up and value as we take it out the door. In terms of gearing, we haven't reached that point. We're not going to over lever this thing going out. We want to make sure it has the flexibility. And look at our own balance sheet. We're not what I would call an over-levered company.

And so we were not going to treat them any different than we would be treating ourselves. In terms of estimates of what guidance we have in there, if any.

I think that's right, Franklin. There will be additional costs associated with separating lubricants and specialities of an independent public company. We're kind of really in the separation planning process and will provide estimated costs as time progresses.

And if I can just jump in, Matt, one of the things that this is Matt Joyce, we've typically looked at trailing 12 months as our rough estimate and guidance for 300 to 350 on an even a basis. We're looking to execute that business in a way that we can continue to deliver those types of performance results on a go-forward basis, but with a capital right structure in mind.

Yeah, sure. So this is Matt Joyce. The way that we're looking at it is we've gone out and sourced a competitive offer from these global premier base oil manufacturers for both our own internal supply, but as well as distribution agreements, where we are going to represent their wills in the market so that we will have and continue to have that full suite of products with our continued production out of Tulsa for our group ones and our specialities. And then we'll also have group two and group three to offer to the marketplace third-party basis.

But as a distribution partnership, we'll then use those same sources for our own internal consumption. So as such, we expect that the L&S business on a go-forward basis is really going to lean into a three-cash flow improvement on the financial profile. And what I can say today is that exiting the base oil production is also expected to materially lower our capital intensity as well as networking capital. So we can continue to provide you updates as and when the process progresses, but suffice it to say, we're pretty comfortable with where the financial position of the business on a go-forward basis is going to be.

Yeah, Neil, this is Steve. I'm going to talk a little bit on Go-S. It is a very strategic project for us that we announced several quarters ago. The project continues to advance in terms of determining the right economic balance and the execution capability. We're still advancing towards taking FID on phase one this year. But ultimately, we do see that the reason we're doing this is the tightness in pad five. It's continuing to get short.

And we have advantages logistically in terms of production in the Rockies and our integrated midstream assets where we can unlock more of that and supply the needed fuels that are growing in terms of an imbalance out of pad five. We think that this is just phase one, as we talked about. It's a multi-phase approach that will continue to evaluate as we get past these initial phase, which brings up to approximately 35,000 west in Nevada.

Longer term, we think we can hit larger markets out on the west, including California. But we're not guiding on economics at this point. And when we get into the phase of taking FID that the board will opine on, we'll come to the market with guidance and estimates at that point.

Let's take them in order. Number one, we have implied and indicated and actually acted on about a 50% distribution of capital back to our stockholders since spring of 22. Steve mentioned that's $5.2 billion in a franchise that's currently valued at about $15 or $16 billion. So we've been dedicated to that. We will continue that in emphasis as we go forward.

Secondly, all my comments with respect to management and how the leadership's shifting around. A lot of refining assets across the country, not just ours, but across the country. To some degree, have been a little under-invested in technology, and we're going to look at that real hard to make sure we have some of the technological advances to make sure we stay. If you've heard our mantra of safe, compliant, reliable, make sure we are standing up when others might have problems that we're the ones that folks can count on. In terms of M&A, I wouldn't go broad with this. We're not going to go on a shopping spree or anything. I don't read anything to that.

But marketing has a lot of opportunities where they can do some things. Midstream has what I'll call tough-in opportunities within fields to where pipes can be laid as opposed to putting them in trucks. We're going to look at a lot of that because eating crawfish sometimes will feed you up just as much as eating a big steak.

And so, it's going to be smaller things where we're going to put money to work. And I think you'll see the benefits because the paybacks on those things, the returns, are in that mid-20% and you can't do that on big deals. You got to do it. It's work, but you can get it done.

Sure. That's easy. You're doing the same thing, but you're giving up value. If you go to a sale process, somebody's trying to, you know, either overlap or maximize something for their own benefit, and we're taking that benefit to our own stockholders. And so, and then you add on the effect that it's, you know, doing a sale, which means the United States government probably ends up with, you know, I don't know, two to four hundred million dollars of tax payments that gets no value to any of our stockholders. So we save that by doing a tax-efficient transaction, and we basically capture the gains that a third party may want to have. Now, could a strategic come in and look at some synergies and all like that, possibly?

But, you know, that's trying to mind read what's in the heads of some strategics in a lot of times. It's a waste of effort to do that. We think this is, you know, if obviously we're commercial, if somebody wanted to pay a big number for lubes, I can't say that would be out of the question, but that's not our intent.

That is not what we're looking at. I mean, it is looking at having a business that can be valued properly in the public markets and capture that value for our stockholders through one of these distributions.

Sure. Yeah. So what went well, I think what we've begun to do is really work in terms of leveraging our underlying reliability and operational improvements and then optimizing our kit. So to the extent that we have limitations, whether it be finishing in the premium products or we have excess intermediates, we've been able to optimize moving those molecules to different locations. And to be honest, it's looking more at our kit like an integrated kit.

We're instead of stand alone, fence line balance. We're finding ways to move products and take advantage of markets or fill gaps. While some of our fleet gets healthy on certain areas, run in 640 in this quarter. As you mentioned, that is something that we aspire to do, where the market is there and certainly the market was there.

And doing that while we had already talked about last quarter, having a few unplanned maintenance elements at El Dorado, I think we were able to demonstrate our flexibility and capability to do that. We still have a ways to go and part of what we've talked about in terms of the organizational structure and change is really to look at if not only growth, but optimizing inside of the integrated value chain that we think there's more to gain there.

This is Steve. I'll try to break that down a little bit. So the first part was on pad five multiple phases. We've said the first phase is right at 35,000 in terms of unlocking Rocky's production move less. The full phase, whether we go to a mid phase or a final phase, it gets upwards to up to 140 to 150,000 barrels per day.

We think that given our proximity, both are integrated, our own midstream position as well as our logistics proximity in Rocky's production, we will be able to fill a large portion of that. On larger phases, we will have the ability to connect some of our own production, but we think we would offer a compelling value proposition to move barrels out of the new into pad five. So not going to come on exactly how much is owned equity production versus third party. We'll commercialize that and do course, but we think we'll have the ability to go do that.

And then as you asked about competing projects, we've said that the Western Gateway project is not a competitive project. When you look at the total balance structure in pad five and you think about it from an pad five in California for quite a bit of product. You've had two major refineries that have shuttered. We think the regulatory environment in California continues to be difficult to operate in, and therefore you're going to need more supplies. So we don't think these projects are necessarily competitive. We think they are complementary to each other, but we clearly wanted to advance our project given our footprint and make sure that whatever the opportunities are to go into pad Western pad four and pad five that we're the ones to take advantage of that, which is why we announced and why we're advancing the project to move to FID by into this year.

Well, you guys probably know as well as we do. We are daily on the phone with Washington and various constituents. We have put in our 2025 petitions for Tulsa, our T. J. Parco Casper was cross. They are in pending status. There are a few historical petitions for 23 and 24 that we're waiting on. You'll note that the DC court has recent rules in our favor on the EPA's decision to exclude Parco eligibility for 24, and we're expecting relief and results soon. We were hearing weeks not months, we're hearing days not weeks. We need to get an answer, as you know, the compliance deadline is September 1. And as those SREs are delayed to us, it has an impact in terms of how we can leverage those to offset a material burden.

As far as the overall rim bank goes, which I think is part of this question, something is going to have to be done. At the end of the day, the rim bank is projected to go negative or only into a slightly balanced position by the end of the year. And if there's not some level of relief legislatively, I fear that it is a race to the top in terms of pricing.

And so we through our advocacy networks and our trade organization associations, we are engaged in the conversation, but we expect to get relief from the SREs imminently. We just need it to happen soon.

That is not how Doug. I would not characterize it as a windfall. It's just the rebalancing of the market based on an external ad. You know, that windfall makes me shudder because I don't know. Let me pick up on nothing.

No. In that case, it's windfall. Well, it's just rebalancing. It's profits from someone else that came our way that would have been on elsewhere.

But the semantics aside, we don't know what's going to happen with those refining assets. We do know what we do know is that if you look back in history to the 70s, the fuels market is not as impactful on the overall economy. And so the dire comments made by certain members of the executives of the international oil companies have not, you know, the end of June came and went and we didn't fall off a cliff.

The fact is that we do need liquid fuels around the world. The free market forces are balancing that out where, yes, we are having greater crack spreads now, but it's a function of what's going to happen to those refineries that are offline. And it's just going to take them for a while. And so we'll benefit from that for a while.

And we're going to have to make sure that we put this, we're going to have to take advantage of the opportunity is what I would say. The opportunity gives us a chance to reinvest into an industry that had underinvested for a while based on economic issues. We're going to reinvest where we're more efficient and hopefully more profitable for a longer period of time.

You look at Sinclair and since the merger through the end of June, I'm looking at Craig here. I think our annualized rate of return has been 20% of since 2022. We're working real hard to use what assets we have. And I don't want to be argumentative with you at all. That was not my intent and I apologize for that. But we're given something to deal with and we're going to deal with it. And in terms of taking advantage of the opportunity to make this company and franchise better and making a great opportunity for our stockholders.

Okay. It would not be our intent. No. That's a, that's a, you run this gets into asset allocation, which is really right in the heart of where our board and our senior management team should focus their efforts. And it goes into how do we allocate assets doing the loose transaction and cash on a balance sheet with, with no particular place to go is not a very smart thing for any management or board to do. And so would we lean into buying more shares? Sure. If we don't see opportunities to have reasonable returns on that, of course, but we're, we're not here to just, you know, roll around in a room full of cash just for the benefit of having the cash on the balance sheet.

That is not our case. So you've got comments.

So as we talked about the structure, my role and vows role, we saw our ability to go defend and take offense of the markets. And so we've been evaluating several major projects. We are set up. The business is now set up to go execute upon those with, you know, efficiency and make sure that we can allocate those dollars. So while to franken's comments, having cash sitting on a balance sheet with nowhere to go, we are evaluating a number of large projects that we think would be accretive to the business and return very good value to the shareholders that we're just not ready to talk.

We're not ready to go live with that. And so, but, but you have to look at the legacy of this company that we have been good managers of the capital given to the company. And we hope to continue to be. And also add that we're tracking well against our target of 50% pay out ratio so far during the year. So we're close to 40% and we still have six more months to go.

Okay. No, thank you for the questions.

Thanks for the question. This is Matt. Just looking at the second quarter performance, we had an exceptional quarter. We saw that driven by higher volumes and we took multiple pricing actions throughout the quarter. We did and we're able to get through pricing in base wells that allow for us to have some margin expansion. And of course you saw that we had some favorable FIFO impacts. We had a bit of a tailwind behind us. We've exhausted quite a lot of that inventory and that's worked its way through. So we are going to see in the third quarter, we will see some more higher cost inventories that we'll be managing through. And the team is doing an exceptional job of going out and getting those costs recovered as we progress.

What we've also seen is that the demand for our finished lubricants business has also been really stable. And as well as our special specialties business. So we've had a good performance there. It's important though we have been watching very carefully cost discipline. And when we look for the future, we have to go out and get as much as we can from the markets.

And in particular, the base oil markets that are in that short supply. So we talked about the 20%. Those are primarily group three base wells that are offline at this stage. And our team have done a nice job of sourcing our feedstocks, both from the Gulf Coast as well as from overseas to continue to maintain our production in our Mississauga facility at a at a rateable event. And so that we're able to provide our customers with the products that they require.

So we do see that this is going to be a near term opportunity for us. And it's a benefit that we're taking advantage of in the market today. But with the separation and what we're looking at for the business, we are looking at this business for the longer term. And the strategic rationale behind that is that the loops and specialties business can create even more value through a focused capital light specialty products model. And the access to the sources of base wells that we have been able to negotiate is a much better position for us than the ownership of these refining assets. And we're excited about having that distinct strategy capital allocation that's really truly ours and some exciting jumping off points for growth in the portfolio of products that we offer to the market.

Yeah, thanks Steve. I'll take that one capture was again, I think a positive. We've talked about what we've been doing in terms of our underlying ability to get more value out of the molecule through extending value chains and our heavy level value chain and our retail asphalt, producing more jet, the jet flexibility projects that we put into Puget that came online in Q4 and really getting the molecules in the right space.

Our light product yield improved. It was mainly a both in discolate. We had 11,000 barrels a day more year over year in discolate. That was a good thing given the pricing environment. And we also were able to generate more premium in the quarter. So extending the value chain, getting our crude slate flexibility in place across all of the facilities that can run different crude slates and have access to different crews that's been a focus of ours. We also ran well. When you're running and you're finishing the product, you're able to sell the higher value products into the market and not have to downgrade things. And against us to the point you made, our leading crude was our largest drag inside the quarter and that was associated with the massive volatility and what was happening on a geopolitical stage.

And steep backwardation only to flatten out and more steep backwardation only to flatten out. You had some regional crews that were priced out wide. Fortunately, the crack environment covered that. It continues to be the game of taking waste out of the value chain and getting more value for all the molecules and higher grading the product and taking advantage of feedstock through the kit.

Those themes won't change. And as we look into Q3, we see another strong quarter for us. We do have to turn around at El Dorado that commences in September. But aside from that, you know, I think we're looking at another strong quarter is we continue to advance our reliability and our optimization initiatives.

Hey, Jason, it's it's not here. Yeah, I just want to pardon me, take a minute. Just to clarify what we are actually putting out as far as guidance, we're going to we're going to limit what we guide on at this point in time. What I can say is that our trailing 12 months in a in a traditional year would be anywhere between 300 and 350 and we anticipate the new LMS organization and that independent business will deliver something in that range. And here's how with the with the way that we have built the relationships with the two premier suppliers.

We are now going and and the continued operation of our Tulsa refinery and our group one supply as well as our specialty business. We will effectively have everything in cat as far as our business is concerned and what we anticipate will be our margins, but they will be based on a capital light model. So we will be supplied, supplied materials from those suppliers external suppliers on a long term basis that will provide us ample base wells for our own requirements for our branded business. That being the petro Canada brand the Sinclair brand the red giant well brand son of Lauren, etc. For both finished and specialties as well as having a distribution agreement, which will also afford us a new revenue stream that would serve as a rack forward type view to our business similar to the relationship we enjoy today with the Tulsa refinery.

So in doing so, we have we believe remained intact with our traditional what would be more traditional run rates on EBITDA, but we aren't going to guide any further than that at this point in time.

Yeah. Let's let this frankly I'll take that one. We don't have a line in the sand on exactly the date we're going to go to a safe state basis. So we're we're not unmindful where the market is, but not being unmindful of the market today. We also recognize that there are a number of base oil suppliers who are increasing capacity around the world with a lower cost environment than what we have at Mississauga. So those those assets will be coming on over the course of a period of time. And we ended make the hard decision. We're in a basically a residential area outside of Toronto and the St. Lawrence Waterway, which is not the prom place where you would put a refining asset to begin with.

And it's a small asset where we take substantial capital to kind of compete with some of these projects that are going on around the world, creating a lower cost base oil products. And so it was a difficult decision to mean that the team there running those at running their finding assets is outstanding. They've been doing a great job for a number of years, but we've got logistic issues that we're going to have to confront in the future. We felt like this was the right time because we believe that there will be certainty on supply of base oils from other places around the world coming on and gives us the opportunity to take this time to gracely get to a safe state over the next few months.

And so yes, we're very mindful of that. It went into the calculus of the decisions that we were doing, but I appreciate the question.

Thank you so much. Before we end the call, I'd like to take a moment to share that Eric nature, our general counsel, and a frequent and solid participant on these calls who is also here today has expressed his desire to retire effective at the end of the month. I want to express our gratitude and appreciation for Eric's contributions to the company during his tenure at H. S. and Claire. For those of you who know Eric, you're aware that he had a long and successful career VP ending his career there when he retired as their general counsel.

Eric joined us after the merger between Holly Frontier and Sinclair has provided season leadership to the company in its legal function and as the company came together and matured. We wish Eric good and great times as he moves back moves forward back into retirement and announcement on Eric's successor will be forthcoming soon. We just want to express our appreciation and thank you all for joining our call today.