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DATE
Thursday, October 30, 2025 at 9:30 a.m. ET
CALL PARTICIPANTS
Chief Executive Officer — Timothy Go
Chief Financial Officer — Atanas Atanasov
EVP, Commercial — Steve Ledbetter
EVP, Operations — Valerie Pompa
SVP, Lubricants and Specialties — Matt Joyce
Vice President, Investor Relations — Craig Biery
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TAKEAWAYS
Net Income Attributable to Shareholders -- $303 million, or $2.15 per diluted share, with special items reducing net income by $56 million in Q3 2025.
Adjusted Net Income -- Adjusted net income was $459 million, or $2.44 per diluted share, up from $96 million, or $0.51 per diluted share, in Q3 2024.
Adjusted EBITDA -- $870 million in the third quarter, a significant increase from $316 million in the prior year.
Refining Segment Adjusted EBITDA -- Adjusted EBITDA in the refining segment was $661 million, up from $110 million in Q3 2024, driven primarily by increased refinery gross margins in the West and Mid-Con regions and the inclusion of small refinery RINs waivers.
Refining Throughput -- Crude oil charge averaged 639,000 barrels per day, achieving the second-highest quarter on record.
Refining Operating Expense -- Record low of $7.12 per throughput barrel, surpassing the near-term goal of $7.25 per barrel.
Small Refinery Exemptions (SREs) Benefit -- $115 million reflected in lower cost of goods and $56 million from commercial RINs optimization, both recognized in Q3 2025 results.
Marketing Segment EBITDA -- $29 million, compared to $22 million in the third quarter of 2024, with an adjusted gross margin of $0.11 per gallon.
Branded Sites Expansion -- 146 branded sites added year-to-date, with contracts signed for more than 130 additional sites expected to come online in the next 6-12 months.
Renewables Segment Adjusted EBITDA -- Negative $13 million adjusted EBITDA (excluding a $20 million inventory valuation adjustment), with total sales volumes of 57 million gallons, down from 69 million gallons in 2024.
Lubricants and Specialty Segment EBITDA -- EBITDA was $78 million, up from $76 million in Q3 2024, partly due to improved mix and FIFO benefit, partially offset by higher operating expenses.
Midstream Segment EBITDA -- EBITDA was $114 million, up from $111 million in Q3 2024, with lower operating expenses offsetting lower throughput volumes.
Operating Cash Flow -- $809 million, including $31 million of turnaround spend.
Capital Expenditures -- $121 million in capital expenditures, with full-year 2025 guidance reaffirmed at approximately $775 million in sustaining capital and $100 million in growth capital.
Balance Sheet -- Cash balance of $1.5 billion with $2.8 billion of debt outstanding; debt-to-capitalization ratio was 23%, and net debt-to-capitalization ratio was 11% as of September 30, 2025.
Shareholder Returns -- $254 million returned ($160 million in share repurchases; $94 million in dividends); share count reduced by over 61 million since the Sinclair acquisition in March 2022; $589 million remains authorized for share repurchases.
Dividend -- Quarterly dividend of $0.50 per share declared, payable December 5, 2025.
PSR Refinery CARB Project Completion -- Enables additional CARB gasoline or components for California markets.
Jet Project at PSR Refinery -- Announced, with completion and service expected after the planned turnaround this quarter; enhances flexibility to produce more jet fuel or diesel for the West Coast.
Proposed Midstream Expansion -- Multi-phase project across PADD IV and PADD V under review, with the first phase targeting an incremental supply of 35,000 barrels per day to Nevada by 2028 and a total expansion potential of 150,000 barrels per day, subject to Board and regulatory approvals.
Senior Notes Issuance -- $500 million of 5.5% notes due 2032 were issued to redeem higher-cost debt maturing in 2026 and 2027, extending maturities and reducing the weighted average cost of debt.
Refining Guidance -- Expected crude oil run rate of 550,000-590,000 barrels per day for 2025, reflecting the planned Puget Sound turnaround.
Return-of-Capital Framework -- Management reaffirmed a minimum targeted payout ratio of 50% of net income, with excess cash consistently returned to shareholders.
CapEx Guidance -- Management indicated a substantial reduction in overall capital expenditures is anticipated beginning in 2026, following the peak turnaround cadence.
SUMMARY
Management highlighted that cumulative SRE benefits of $115 million to cost of goods and $56 million from commercial RINs strategies were recognized in Q3 2025. The company reported sequential improvements in both refining throughput and operating expenses per barrel, achieving a record low operating expense per barrel and the second-highest throughput quarter on record. Expansion initiatives, including the PSR CARB project completion and a new jet project, align with the strategy to increase flexibility for West Coast fuels supply. The multi-phased midstream expansion under consideration would leverage existing infrastructure to address growing demand imbalances in key Western markets, with an initial phase focused on moving Rockies production into Nevada. Furthermore, the company issued new debt to refinance upcoming maturities, reducing the weighted average cost of debt.
Steve Ledbetter said, "We believe that we're in a pretty strategic advantage place both from a production and having infrastructure already in the ground that can be debottlenecked or expanded to bring a product into a growing short in PADD V with the announced refinery closures in California."
Matt Joyce noted, "We returned to a historic run rate and we were really pleased with that," in reference to the Lubricants and Specialty business recovery post-turnaround.
Timothy Go commented that further growth investments at the PSR refinery and pipeline expansions can be "quicker and more efficient. Than what others have announced just because of the existing infrastructure we have."
The company clarified that the $115 million SRE benefit was recognized cumulatively, while $56 million reflected routine RINs optimization in Q3 2025.
INDUSTRY GLOSSARY
CARB Gasoline: Gasoline formulated to meet specific California Air Resources Board emissions requirements, often commanding premium pricing due to strict standards and regional supply constraints.
RINs: Renewable Identification Numbers, tradable credits used to track compliance with the Environmental Protection Agency's Renewable Fuel Standard program.
SREs (Small Refinery Exemptions): Exemptions granted by the EPA allowing small refineries to avoid compliance with the Renewable Fuel Standard blending obligations under certain hardship criteria.
PADD: Petroleum Administration for Defense Districts, U.S. regional groupings used for reporting petroleum supply data (e.g., PADD IV and PADD V cover Rocky Mountains and West Coast, respectively).
FIFO Benefit: Positive impact on segment earnings from first-in, first-out inventory accounting as input costs and product prices shift.
Full Conference Call Transcript
Operator: Welcome to HF Sinclair Corporation's Third Quarter 2025 Conference Call and Webcast. Hosting the call today is Tim Go, Chief Executive Officer of HF Sinclair. He is joined by Atanas Atanasov, Chief Financial Officer; Steve Ledbetter, EVP of Commercial; Valerie Pompa, EVP of Operations; and Matt Joyce, SVP of Lubricants and Specialties. At this time, all participants have been placed on mute. Your questions will be taken following the presentation. Press the pound key if you should require operator assistance. Additionally, we ask that you pick up your handset to allow optimal sound quality. Please note that this conference is being recorded. It is now my pleasure to turn the floor over to Craig Biery, Vice President, Investor Relations.
Craig, you may now begin.
Craig Biery: Thank you, Ellie. Good morning, everyone. Welcome to HF Sinclair Corporation's third quarter 2025 earnings call. This morning, we issued a press release announcing results for the quarter ending September 30, 2025. If you would like a copy of the earnings press release, you may find it on our website at hfsynclair.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 SEC filings.
The call also may include discussion of non-GAAP measures. Please see the earnings press release for reconciliations to GAAP financial measures. Also, note any time-sensitive information provided on today's call may no longer be accurate at the time of any webcast replay or rereading of the transcript. With that, I'll turn the call over to Tim Go.
Timothy Go: Good morning, everyone, and thank you for joining our call. Our results are underpinned by the measurable improvement in our operating and commercial performance, including the sequential increases in refining throughput and capture, and continued reductions in operating costs. We returned $254 million in cash to shareholders and today announced a $0.50 quarterly dividend. We are pleased with the progress we have made on our key priorities and believe our year-to-date performance reflects the value of this strategic focus. Now let me cover our business highlights. In refining, we delivered another quarter of sequential improvements in throughput capture and operating expenses per barrel.
Gross margin per barrel benefited from strong cracks in our regions, along with small refinery exemptions granted by the EPA. The SRE benefit in the third quarter was comprised of $115 million in lower cost of goods and $56 million in higher revenue from the commercial optimization of our RINs position. We achieved a record low operating expense of $7.12 per throughput barrel, crossing over our near-term goal of $7.25 per barrel. Throughput was our second-highest quarter on record, and we are on pace to establish many new annual records for the full year. Our Marketing segment delivered record EBITDA in the quarter of $29 million and realized an adjusted gross margin of $0.11 per gallon.
We are very pleased with the growth we have achieved in our marketing segment, and we continue to unlock the value of the Sinclair branded stores, providing a consistent sales channel with margin uplift for our produced fuels. We have added 146 branded sites through the third quarter of 2025, with more than 130 sites with contracts signed and expected to come online over the next six to twelve months. During the quarter, we returned $254 million in cash to shareholders, consisting of $160 million in share repurchases and $94 million in regular dividends.
Since the Sinclair acquisition in March 2022, we have returned over $4.5 billion in cash to shareholders and have reduced our share count by over 61 million shares. As of September 30, 2025, we still have approximately $589 million remaining on our share repurchase authorization. We remain committed to returning excess cash to shareholders while maintaining our investment-grade balance sheet. Also today, we announced that our Board of Directors declared a regular quarterly dividend of $0.50 per share payable on December 5, 2025, to holders of record on November 19, 2025. Now I will cover some strategic updates.
We believe we are well-positioned to supply the growing needs on the West Coast. As I mentioned earlier, we recently completed the CARB project at our PSR refinery, which gave us the capability to produce more CARB gasoline or CARB components we can ship to the California market. We are announcing a jet project at our PSR refinery this quarter that will give us the flexibility to produce more jet from diesel to supply the West Coast, depending on what the market is calling for. This project will be complete and in service following the turnaround this quarter. Finally, yesterday, we announced we are evaluating a multiphased expansion of our midstream refined products footprint across PADD IV and PADD V.
This initiative is designed to address the increasing supply and demand imbalances in key Western markets, particularly Nevada, and multiple markets in California resulting from announced refinery closures on the West Coast. HF Sinclair believes its geographic footprint and current infrastructure provide an advantaged position to quickly and efficiently deliver refined products where the market needs are strongest. Subject to Board and regulatory approvals, the proposed multi-phased expansion projects under review are projected to enable incremental supply of up to 150,000 barrels a day of product into various West Coast markets.
The first phase would increase capacity by a projected 35,000 barrels per day to move supply from our Rockies production into Nevada and is targeted to be online in 2028. This initial phase would include expanding the Pioneer Pipeline, a jointly owned pipeline with Phillips 66, from Sinclair, Wyoming to Salt Lake City, Utah, and debottlenecking our wholly owned UNEV pipeline from Salt Lake City, Utah to Las Vegas, Nevada. These projects reflect HF Sinclair's strategic focus on asset integration and value chain optimization of our refining, midstream, and marketing businesses and are examples of how we can leverage our competitive advantages and geographic footprint to support our efforts to deliver accretive long-term growth well into the future.
In closing, we remain committed to advancing our strategic priorities and believe our focus on reliability, integration, and optimization will drive future growth across our businesses. Looking ahead, we are constructive on the fundamentals of each of our businesses and, in particular, believe the supportive refining backdrop positions us well as we head into 2026. With that, let me turn the call over to Atanas.
Atanas Atanasov: Thank you, Tim, and good morning, everyone. Let's begin by reviewing HF Sinclair's financial highlights. Today, we reported third-quarter net income attributable to HF Sinclair shareholders of $303 million or $2.15 per diluted share. These results reflect special items that collectively decreased net income by $56 million. Excluding these items, adjusted net income for the third quarter was $459 million or $2.44 per diluted share compared to adjusted net income of $96 million or $0.51 per diluted share for the same period in 2024. Adjusted EBITDA for the third quarter was $870 million compared to $316 million in 2024. In our refining segment, third-quarter adjusted EBITDA was $661 million compared to $110 million in 2024.
This increase was principally driven by higher adjusted refinery gross margins in both the West and Mid-Con regions, which included small refinery RINs waivers granted by the EPA. Crude oil charge averaged 639,000 barrels per day for the third quarter, our second-highest quarter, primarily driven by our continued reliability efforts. Crude oil charge averaged 607,000 barrels per day for 2024. In our renewables segment, excluding the lower cost or market inventory valuation adjustment charge of $20 million, we reported adjusted EBITDA of negative $13 million for the third quarter compared to $1 million for 2024.
During the quarter, we recognized incrementally more in value from the producer's tax credit, and we expect to capture additional incremental value in the fourth quarter of 2025. Total sales volumes were 57 million gallons for 2025, compared to 69 million gallons for 2024. Our marketing segment reported EBITDA of $29 million for the third quarter compared to $22 million for 2024. This increase was primarily driven by high margins and high grading our mix of stores in 2025. Our lubricants and specialty segment bounced back from the heavy turnaround workload in 2Q and reported EBITDA of $78 million for the third quarter compared to EBITDA of $76 million for 2024.
This increase was primarily driven by improved mix and FIFO benefit, partially offset by an increase in operating expenses. Our midstream segment reported EBITDA of $114 million in the third quarter compared to $111 million of adjusted EBITDA in the same period of last year. This increase was primarily driven by lower operating expenses, partially offset by lower throughput volumes in 2025. Net cash provided by operations totaled $809 million in the third quarter, which included $31 million of turnaround spend. HF Sinclair capital expenditures totaled $121 million for 2025. During the quarter, HF Sinclair issued $500 million of senior notes at 5.5%, due 2032, in order to redeem our remaining 5.875% notes due 2026 and 6.375% notes due 2027.
This allowed us to lengthen our maturities and reduce our weighted average cost of debt. As of September 30, 2025, HF Sinclair's cash balance was approximately $1.5 billion, and we have $2.8 billion of debt outstanding with a debt-to-cap ratio of 23% and a net debt-to-cap ratio of 11%. Let's go through some guidance items. With respect to capital spending for the full year 2025, we still expect to spend approximately $775 million in sustaining capital, including turnaround on catalysts. In addition, we expect to spend $100 million in growth capital investments across our business segments.
For 2025, we expect to run between 550,000 and 590,000 barrels per day of crude oil in our refining segment, which reflects the planned turnaround at our Puget Sound refinery. We are now ready to take questions from the audience.
Operator: The floor is now open for questions. At this time, if you have a question, please press the pound key. If at any point your question has been answered, you may remove yourself from the queue. Your first question comes from the line of Manav Gupta of UBS. Your line is now open.
Manav Gupta: Congrats on a very strong print and a big jump in buybacks. I just wanted to start on this multiphase expansion on what you're looking to target in PADD IV and PADD V. There are some other projects which are also trying to do something similar. And of course, you have a strong refining footprint. So I'm trying to understand what's your competitive edge here? Why do you feel your project would be at an advantage compared to some of these other projects that are also looking to move product somewhere in the similar direction? So if you could talk a little bit about that.
Timothy Go: Good morning, Manav. Thanks for the question. And let me ask Steve to jump in right away.
Steve Ledbetter: Hey, Manav. Yeah. We're excited to make this announcement. We believe that we're in a pretty strategic advantage place both from a production and having infrastructure already in the ground that can be debottlenecked or expanded to bring a product into a growing short in PADD V with the announced refinery closures in California. We think we can produce the product and deliver it at a competitive rate to compete with what is going to be a short and even compete with the growing imports.
Whether or not it is the sole project or complementary to the other ones, we felt it was important to come to the market and be clear that we are to evaluate this and expand it. And we think we'll be successful doing that.
Timothy Go: Yeah. And, Manav, this is Tim. I'll just chime in on what Steve said. We really do think this is complementary to the other two pipelines that were announced. The other two are talking about really barrels from the Mid-Con and from the Gulf Coast, really going in the South area towards the Phoenix area. We're really talking Rockies barrels going on the Northern side into Nevada. And so we believe this is a different type of project. We think it's mostly with our equity barrels as opposed to open season third-party barrels. And as Steve mentioned, we're utilizing a lot of our existing infrastructure with that we think will be quicker and have a lower cost to implement.
Manav Gupta: Perfect. On refining, strong quarter improvement in further capture. Just wanted to understand your near-term or medium-term outlook for refining margins. We are seeing tremendous resilience in margins and some global capacity outages, Russia and other places. So how do you see the refining macro playing out for the next three to six months, particularly in the two regions you are actively involved in? Thank you.
Steve Ledbetter: Yeah. Manav, we are very excited and pretty bullish on what the current market environment looks like. As you mentioned, it starts at a global macro basis. And today, I think year over year, we're net about 800,000 barrels a day short. When you look at the capacity closures as well as being outpaced by demand when it comes into the US, supply is up, mainly in jet and diesel with gas being down, but demand of distillate is really supportive and part of that is justified by some lower RD production that is not online as a result of what's happened with the regulatory framework.
In our region specifically, gas demand has been up slightly and diesel demand has been up. And we see particularly the distillate make in jet and diesel being very supportive through the end of the fourth quarter and in the first quarter. So we're in max diesel mode, and that's part of the reason why our capture has continued to be improved in some of the projects that were mentioned earlier. Further enable us to flexibly move between the right products to meet the market demands that we see happening. So, yeah, we're pretty encouraged by the overall market structure for the next six months or so.
Timothy Go: Yeah. And, Manav, just taking a step back from more of a macro standpoint, we do think that in 2026, demand growth continues to outpace supply growth. Our numbers still show that true as what we saw here in 2025, especially in distillate. We see distillate continuing to be short. And while you're seeing, for example, in our West area, distillate demand at five-year highs. Overall, we think the market is underestimating the impact of the Russia outages. We think those are significant and will take time to come back online. We think the market's underestimating the demand impacts of that lower gasoline prices are having on increasing demand. And we think that's a positive for refining.
And then we think the market is not fully appreciating the low product inventories. We continue to operate at. As a result of trying to keep, I think the low product inventories is a sign that despite the high utilization, we're still as a global balance, trying to keep up with global demand.
Manav Gupta: Perfect. I agree with everything you said on the refining macro. Thank you so much.
Operator: The next question comes from the line of Ryan Todd of Piper Sandler. Your line is now open.
Ryan Todd: Okay, thanks. Maybe one starting out on small refinery exemptions. So just I guess a point of clarification on the quarter. So you had there was a $115 million benefit and a $56 million benefit? Are those incremental to each other? Or, how do I think about the clarifying of that? And then maybe at a higher level, I mean, can you talk about your view on the process from here given the guidance provided by the EPA earlier? How does this compare versus the process historically? And does it change your confidence on the ability to capture exemptions going forward?
Timothy Go: Yeah. Ryan, this is Tim. Let me take a shot at it. So, yes. The third-quarter impact that I mentioned in my prepared remarks, $115 million that you can say are basically directly a result of the granting of the SREs by the EPA. That impacts cost of sales and roughly translates to call it $0.47 at EPS. The $56 million is additive to that. It goes into cost of revenue. And what I consider that is more of an indirect benefit of basically buying and selling RINs in the marketplace based on our RINs position at the time.
So this is more trading benefits associated with our RINs position and what we think our RINs positions will need to be in the future. We don't disclose kind of what our strategy is or what we do. But in the third quarter, we had $56 million associated with that, which translates to about $0.23 on an EPS basis. First and second of all, let me just say, we appreciate the White House and the EPA taking actions to recognize that small refineries face hardship and granting the SREs under the RFS program. As you know, there was a large backlog for many years that this administration took action on.
Following discussions with the DOE and the EPA, we actually believe that the SREs that we submitted could be more. And so we added new and supplemental information and submitted or resubmitted applications for five refineries in our portfolio for the 2023 and 2024 years. So that's Woods Cross, Parco, Casper, Tulsa, and Artesia. So going forward, we believe we have five small refineries that were exempted from the RFS in the past, and we believe qualify for SREs going forward. And while we can't quantify future outcomes or probabilities, we do believe we have considerable upside on a future run rate basis.
Ryan Todd: Great. Thank you, Tim. Maybe a shift on refining margin capture. On the surface, it seemed like, you know, you've gone from a number of the industry went from a number of slight headwinds in the third quarter to what might be modest tailwinds in the fourth quarter, whether it's in slightly widening crude differentials, lower crude backwardation, addition of butane blending, etcetera. A month into the quarter. Any thoughts on how you see various trends in the market, potentially driving margin capture in the quarter?
Steve Ledbetter: Yeah. This is Steve. I'll take that one. You know, I think we don't see a ton of help in terms of, like, the heavy differential widening. We do see some step up in Q4 and as we've always talked about that, we see towards the '26, differentials coming back into play. In a in a we were very backwardated in the quarter. That looks to be flattening out. So the role, which is very impactful for us, seems to be in a better position. And then I think, ultimately, you know, we have a good make and mix of our distillate components over gasoline.
And so as the jet and the diesel cracks remain strong relative to some of the macro elements that we've talked about. Low inventories, you know, an uptick on a colder winter. Of the geopolitical concerns that we have internationally. Those all look good for us into the fourth quarter, and we look to go swell the gasoline pool with our butane blending, that we have, in the pipe. So overall, Q4 looks for us to be more bullish than maybe we've seen in the past. And we'll look to take advantage of that, have a good strong loan for Q4.
Timothy Go: And Ryan, this is Tim. What I would just say is, you know, we're pleased with the progress we're making on capture. It's all the things Steve talks about. We're on pace for record jet production. Premium, all of them all the product mix, opportunities that he's talked about in the past. And that's despite the headwinds that we're seeing on not just roll, but on crude diffs in general. And so with the outlook that we have that crude diff should widen, WCS, WTI in particular, next year. We do think there's some upside to continued improvement and capture.
Ryan Todd: Great. Thank you.
Operator: The next question comes from the line of Doug Leggate of Wolfe Research. Your line is now open.
Doug Leggate: Hey guys. Hey Tim. Thank you for taking my question. I'm sorry to be up on this SRE issue. But just to be clear, So I'm curious why didn't you break out 115 and the 56 as nonrecurring I'm assuming they were in your realized margins. Can you explain where they show up in the numbers?
Atanas Atanasov: Yeah. Doug, hi. This is Atanas. So the 115, which is a bulk of the impact, shows in our is a benefit to our cost of sales. And the reason that's the case is because we had taken that expense in the past. So the company incurred those expenses. Recognized them in our previous EBITDA, lowered our EBITDA, and so we appropriately have captured those in our current EBITDA. As an offset to that. The remaining 56,000,000 is revenue. And it results from optimizing our lens strategy. So that's somewhat different than the reimbursement of what I call prior expenses. And therefore, you know, that $12.01 15 goes in our cost of sales as credit.
Timothy Go: And, Doug, this is Tim. What I would just say is, you know, we don't view this as a onetime event. We view this as we will be, you know, assuming the SREs continue be in the RFS legislation that we will be entitled to this. And as I mentioned in my earlier remarks, even more an impact than what we've seen today. So we don't think it's a one-time event.
Doug Leggate: No. I completely understand and completely agree with that. I guess, sorry, Tim. Maybe I'm being thick as a rock here, but can you just clarify, is this the single quarter impact? Or is this the cumulative recovery of the SREs for all prior years?
Atanas Atanasov: Yes. This is cumulative based on based on the exemptions that we were granted.
Doug Leggate: But taken in the third quarter?
Atanas Atanasov: That's correct. Yeah. And I would I would just say the 150,000,000 Doug, 115,000,000 which we talked about in terms of cost of sales, is the cumulative impact of the SREs that are being granted. The 56,000,000 is just related to specific actions that we're taking in the trading markets in the third quarter. That, attribute to revenue. Which we consider, you know, we don't talk about the buying and selling of crude or our crude inventory positions or our product inventory positions quarter by quarter. We think that $56,000,000 for SREs fits into that same category or for wins. We just normal course of buying and selling of RINs in the course of the quarter.
Based on our overall annual strategy. So that's how we view that. That's why we break it up to two separately.
Doug Leggate: Okay. That's really helpful. So the $0.47 is a bit that's nonrecurring then based if you want to call it
Timothy Go: You can call it that, depending on what your view of future SREs are. The $0.02 3 associated with the $56,000,000 of revenue we just think is ordinary course of business.
Doug Leggate: Great stuff. I'm sorry to have labored that. My follow-up is hopefully a quick one. Your capital spending, run rate looks light relative to your full year guide. I guess, you just reiterate for us what are you see as your sustaining capital for the total business including turnarounds?
Atanas Atanasov: Yeah. First of all, Doug, to the first part of your question, this is just the timing of CapEx spend. So we still stand by the guidance that we indicated in our prepared remarks. With respect on a sustaining basis, on go forward basis, we see probably about $100,000,000 of benefit on a go forward basis relative to what we have said so far, but we'll we'll we'll give more specifics you know, later in the year. Yeah. We're Doug, we're we're not ready to give guidance yet. We'll do that in December like we normally do.
Just like we said, on previous calls, we believe that we have now passed our catch up maintenance period in our overall turnaround process. Even in we think we peaked in 2024, 2025 from a refining standpoint. Is actually lower on overall CapEx. But it's kind of masked a little bit because we had a larger loops turnaround if you remember, earlier this year. So we do think looking forward into 2026, that we'll see that substantial reduction in overall CapEx. We've talked about that before in terms of order of magnitude, and this is kind of giving you a ballpark, and then we'll come out with further guidance when we put the final numbers out in December.
Doug Leggate: Really helpful, guys. Thanks very much and look forward to dinner in December. Thanks.
Operator: Your next question comes from the line of Phillip Jungwirth of BMO. Your line is now open.
Phillip Jungwirth: Thanks. Good morning. Can you talk about how you look to finance these pipeline expansion projects? Any difference between the first phase and if you ultimately through the other phases. And we normally think of these as like five, six times build multiple projects. Is that at least within the ballpark of what you're thinking of?
Steve Ledbetter: Yeah. Philip, Steve. You know, we always like to say let's understand the project and the economics of the project. And then figure out how we finance it. And we think we have multiple ways to do that, whether that's due to liquidity on our balance sheet We have some joint venture partner options and some extensions of that. But we're not in a position to talk about how we're going to go the capital to work to make these things happen. If and when we get to FID, which we are not at FID. Again, this is evaluating a multi phase, expansion to go get to those Western markets.
Timothy Go: Yeah. And, Philip, this is Tim. While we need to make those decisions, when the time is appropriate, do think that the overall cost is significantly lower than the cost that least are rumored or circulated to be on those other two lines.
Phillip Jungwirth: Okay. Great. And then could you touch on specifically the Medicine Bow pipeline review just because this currently serves the Denver market, which is a good market for you? What will be the rationale for the reversal recognizing this in the first phase? Projects you're evaluating?
Steve Ledbetter: Yeah. So as you know, there's an expansion that is coming to the Denver market to be online in Q3 twenty six. And, that pulls barrels out of the Mid Con. We supply some of that. We also supply some of that from the Rockies. And so that goes down our medicine bow pipeline mainly. That 35,000 a day that gets into the Denver market is going to be less valued once the expansion comes on bringing more barrels. Into Denver, and which is why we are planning to go make this first phase happen, is up to 35,000 barrels a day to move those barrels that we're getting into Denver West into higher, graded market.
So depending on what happens, you know, the timing of that we mentioned, we believe phase one could come on in 2028. But that's really just to manage the overall value of that market. I think there's going to be a bit more oversupplied, later in the year. So that addresses that first situation. Longer term, in the various phases of the project, to move, up to a 150,000 barrels a day, we would reverse Medbo and potentially expand it to go get more product out of a lot of equity production in our Mid Con to move those barrels into pad 5, both Nevada and eventually into California.
Timothy Go: Yeah. And, Philip, today, Medicine Bow is primarily moving equity barrels of ours. And we anticipate that continuing even through past the expansion.
Phillip Jungwirth: Got it. Makes sense. Thanks.
Operator: Your next question comes from the line of Paul Cheng of Scotiabank. Your line is now open.
Paul Cheng: Can you hold one second? Hi. So sorry, guys. Just one second. No problem, Paul. I'm sorry. That was trying to manage multiple call. That I think you sort of answered that question. But in the first phase of your proposed midstream expansion or up update upgrade over there, The 35,000 barrel per day, should we assume that it's all going to come from your equity barrel? And so that from that standpoint, the first phase at least is going to be a goal because you don't need other people to commit. Or that do I get it wrong?
Steve Ledbetter: No, Paul. I think I think the question was is the first phase all equity barrels. I would say a good portion of that would be equity barrels. Again, we will follow all the requirements that are laid out from the interstate commerce act and the federal energy regulatory commission to make fair available for all. But a good portion of those barrels from origin point to destination point would be equity barrels.
Paul Cheng: Yeah. I guess my point is that, should we assume that the phase one week got this was the open season outcome is a goal because that you will be sufficient of a anchor shipper that you actually don't need other people.
Steve Ledbetter: Yeah. I think I think that is a fair assumption. Again, we have not taken FID. We anticipate an FID decision, by mid year twenty six. And we do believe that we have enough equity production dynamics that I just mentioned to go support this project.
Paul Cheng: Right. And that what kind of candidate that we should assume?
Steve Ledbetter: Can you repeat the question there, Paul?
Paul Cheng: What kind of candidate that we should assume Derek. Oh, we're not proposed
Steve Ledbetter: Yeah. So, again, we're not commenting on tariff structure at this point. Once we get closer to taking FID, we'll come back to the market with more definitive set of potential guidance items and economics.
Timothy Go: Yeah. But we do think, Paul, that our that the you know, we haven't calculated tariff yet as you know, but we do think that the overall cost and timing of what we're proposing yeah, can be quicker and more efficient. Than what others have announced just because of the existing infrastructure we have And then on the on the equity barrel comment, the Pioneer Pipeline as we talked about is a joint venture between us and Phillips sixty six. And so while we can't speak for them, would expect them to probably have some equity barrels to put on the line as well.
Paul Cheng: Okay. And second question may maybe is that you can share with us that how's the lubricant market looks and also that from I know that you guys have continued to look for the bolt on acquisition over there. How's that market condition also looks?
Matt Joyce: Hey, Paul. It's Matt Joyce. The market is continuing to perform at a pretty healthy rate. You've seen our quarterly performance. We returned to a historic run rate and we were really pleased with that. And the team's continue to execute on our strategy of forward integrating our base stocks into finished and specialty products. And you're seeing the benefit of a diverse portfolio that we serve with our customer base. Today. Looking forward, we're just continue to manage and watch any sort of tariff upheaval that we may have. We've seen some slowdowns in forestry in Canada. But on the long of it, we're we're pretty confident that fourth quarter will be in and around our traditional run rates.
Paul Cheng: How about on the m and a market?
Matt Joyce: With regards to the M and come next. Yeah. We don't have anything to speak about today. But we continue to explore options and opportunities that are interesting to us. Help us build on our portfolio and build out our competencies and in particular, in The US markets where we're looking to continue to grow at a nice pace.
Paul Cheng: And just curious that Yeah. Sorry, team. Please.
Timothy Go: Yeah. Paul, I would just say, overall, we've talked about our loop strategy. We wanna grow our finished business. We wanna reduce our base oil length. And we wanna rerate this business to a higher trading multiple. Based on the specialty business. We think what Matt and his team are doing is executing that strategy. We think there are opportunities to do some inorganic bolt ons. Will help us accelerate that strategy. And we think, you know, as we've talked about, we've been a consolidator in this space in the past, and we think there's opportunities for us to continue that. That opportunity.
Paul Cheng: And, Tim, I don't know if you can comment on that. But one of the major integrated oil company they've been trying to sell their lubricant business and that the media rumor is that they have been some difficulty to get the price they want. But this signal, the valuation multiple on that business have changed in some previous we all generally assume 10 to 12 times EBITDA. Have you seen in the marketplace that the valuation has changed?
Timothy Go: Paul, we obviously can't comment on specifics because we don't know, well, what's going on. I think you're probably referencing the Castro, process that has been in the news. All I can say is that we are quite different, our business, than the Castro business. Castro is a much more global business focused primarily around passenger cars. Where our business is much more North American based. And focused on the industrial side of the business. So I don't I don't think I can comment on any of the other kind of speculations around the process they're going through Paul.
But what I can tell you is that we believe our business again, with our strategy, is a strong industrial based business. And that we can continue to grow it and increase its trading multiple. By, growing the finished side of the business and reducing the base oil.
Paul Cheng: Okay. We do. Thank you.
Operator: Your next question comes from the line of Matthew Blair of TPH. Your line is now open.
Matthew Blair: Hey, you and good morning everyone. Could I circle back to the comment that you resubmitted SRE applications for I think, was five refineries. You know, Parco, Tulsa, and Artesia are all well above 75 a day. So could you talk about how these refineries would be eligible? And I guess going forward, would you plan to run these refineries that at much lower utilization to be below 75 a day?
Timothy Go: Yeah, Matthew. Let me just clarify on that. The Paco refinery as you know, is actually can run higher than the 75,000 barrels a day. But it's but it's close. So, yes, I think we would take that into consideration each year. As we think about overall margins and overall product demand. We'd factor that into our decision in terms of whether to run know, above a certain amount or not. The Tulsa and the Artesia refineries, as you know, are actually two separate refineries. That are, that we tend to report as one. But are actually two physically separate refineries.
And there are other refineries as you may know, that received small refinery exemptions that operate in a similar fashion. So that's what we're talking about on those two refineries.
Matthew Blair: Ah, okay. Okay. Because you're right. Because Tulsa was a combination of like, it was, like, a Sonoco and some other plant. Okay. That's helpful. And then I think it's interesting you're making investments in the Puget Sound Refinery. It's Same Time That You Know, There's A Lot Of Proposals For More Product Headed To Pad 5. Could you talk about where Puget's found would stand on the cost curve in terms of getting products into California? And I guess what gives you confidence that these are gonna be good long term investments?
Steve Ledbetter: Yeah, Matt. This is Steve. As we've been watching the market dynamics in Pad 5 play out for quite a while, There's a good amount of jet that is imported today into California and Pad 5. And our one of our advantages of the Puget Sound Refinery is our dock capability and access. So these projects are intended to provide flexibility to meet the demands of whatever is happening in the marketplace, including making carb gas or the unfinished components that go into carb gas we've been successful in improving that. You're seeing that in our in our capture on the West. That's that's partially attributable to that.
And then moving this next project to be able to swing barrels from diesel to jet, We believe that jet short will continue and growth will continue of that overall transport fuel stream so that gives us the availability to either place barrels in the local Puget Sound market or export them, getting them into California. Also in the other markets that we found success into LatAm etcetera. So this is really about product flexibility, gives us a competitive advantage as the market dynamic plays out and we're seeing the signs and we're we're we're putting the capital to work, small capital to work. To go make these adjustments that are very accretive for us in the long run.
Timothy Go: Yeah. And, Matthew, this is Tim. I'd I'll just emphasize a couple things that Steve said. These are small projects. They fit within the guidance that we've been talking about in terms of our growth capital that we guide to each year. And so we're not talking significant you know, the CapEx required. And it's really about flexibility. As Steve mentioned. This gives us the flexibility example, the JEP project that I mentioned, it gives us the flexibility to make jet or diesel depending on what the market is calling for and depending on whether the arb to California is open or not. Right?
So we it's gonna give us flexibility to take more advantage of the different dynamics and the different arms that are open. At the time. The carb gasoline project's the same way. Just gives us the flexibility to take advantage of that. And quite honestly, this pipeline project that we're talking about, it's really all about flexibility. It's gonna give us the ability to move barrels from the Rockies over to Nevada or not, just depending on what the market looks like.
Matthew Blair: Great. Thank you.
Operator: Your next question comes from the line of Neil Mehta of Goldman Sachs. Your line is now open.
Neil Mehta: Yeah. Good morning, Tim. Good morning, team. One tactical question, one strategic. Just tactically, the Q4 guide, the 5.5 to $5.9 accrued charges, it's lower than it's been in a while. And I think you cited the turnaround at Puget Sound. Anything else that we should be thinking about there? Or is there some conservatism there?
Steve Ledbetter: Neil, this is Steve. The guidance reflects our planned turnaround at a large refinery in Puget Sound, as you know, that started very late September. But in addition, we were, we pushed out a few small maintenance to take advantage of the market in Elements into a lower margin environment in Q4. Know, the higher margin environment in Q3. So the combination of those two, get us to this five fifty to five ninety crew guidance. Nothing more to it than that.
Neil Mehta: K. And there any early thoughts on 26 turnarounds as we think about next year?
Valeria Pompa: This is Valerie. So our turnaround guidance will be coming out. Generally, as we said before, we are through the peak and continue we've continued to level out our turnaround cost and our turnaround events. So next year, guidance will be coming out soon. Would expect, lower anticipate lower cost and fewer turnarounds.
Neil Mehta: K. Perfect, Valerie. And the and the follow-up, Tim, just on return of capital, very nice number this quarter. You've talked about in '20 and beyond, you want to get to dividends plus buybacks being 50% or higher. Of net income. So just talk about how you're thinking about return of capital levels on the go forward?
Atanas Atanasov: This is Atanas. Thanks for your question. With respect to our payout ratio, really that 50%, look at it as a as a minimum payout ratio, which we've exceeded consistently over the years, including this year. And our priority remains to, you know, shareholder return of capital remains a priority for us. And what does that translate into? Any excess cash flow that we generate over above our non-discretionary spend, which is our dividend, our commitments to safety and reliability, highly accretive organic growth. Anything over and above that, our target is to return to the shareholders.
Timothy Go: Yeah. And, Neil, I'll just chime in. With what Anna said. You know, we evaluate inorganic opportunities to grow. We evaluate these organic growth projects that we just talked about. Against our other options of returning cash to shareholders. And look and choose to see what is the best decision for the business long term. So we're factoring all that in as we as we do our capital allocation strategy. But I will just point to our historical practice of returning cash to shareholders.
And if you look back over the last three or four years, we've been 16% in '22, 12% cash returns in '23, 16% cash returns in '24, and we're 11% here in the third quarter, 7% year to date. In 2025. And so I think our track record of returning cash to shareholders is strong.
Neil Mehta: Thanks, Tip. Thanks for having us.
Timothy Go: Thank you.
Operator: Your next question comes from the line of Jason Gabelman of TD Cowen. Your line is now open.
Jason Gabelman: Yeah. Hey. I'm pick up on that last question. And I understand, kind of framework about returning cash to shareholders. But if I look year to date it does seem like cash is built you know, approaching a billion dollars in debt has remained, I guess, somewhat stable. So it seems like you there's there's been a some build of excess cash. So should we expect a catch up where more of that excess cash is returned or are you looking to stockpile cash for another reason? Or is something else go going on there? Thanks.
Atanas Atanasov: This is Dennis. Thanks for thanks for your question. We were not looking to, we're not looking to stockpile cash. And if you look at our the increase in our cash balance, really, a lot of the build occurred in the third quarter, which is a very strong quarter. Our goal is to return our excess cash to shareholders. We don't guide with respect to timing. But you know, expect more to come in term in terms of capital returns.
Jason Gabelman: Okay. Then my other question is on the SRE topic, which I know has been hit a few times, but just wanted to ask a couple of clarifying questions. First, can you break out the margin benefit to each one of your regions so we get a picture of what the underlying margin was for the quarter. Excluding the SRE benefit. And then to be clear, do you have now excess RINs on the balance sheet that you can sell back into the market? Or does that kind of $50,000,000 or so that you mentioned get you into a place that you'd wanna be to manage your rent exposure moving forward?
Timothy Go: Yeah. Jason, this is Tim. I appreciate both of those questions that you're asking, but we don't provide that level of detail for either of those questions. So SRE breakdown, you know, across the regions or by plant. We've just never done that in the past and we don't don't believe we, it's in our best interest to do that going forward. And then we've never talked about our wins position whether we're RINs long or RINs short. And I'll just from the very beginning. And while we talked about it, know, whether to disclose that or not, we decided it's still, in our best interest not to disclose that.
Jason Gabelman: Okay. Understood. Thanks for the answers.
Operator: Thank you. I'd now like to hand the call back to Tim Go for final remarks.
Timothy Go: Thank you, Ellie. Before we close, I want to point out that our business is much different from just a few years ago. Not just in acquired assets, like with the Puget Sound refinery, Sinclair, HEP, but it's also different in culture and performance. Refining throughput, capture, operating costs and CapEx are all trending in the right direction. Our non-refining segments continue to shine including our lubricants and specialties business marketing and midstream businesses. All of these are proof points that our strategy is working and enabling us to generate free cash and deliver strong shareholder returns. Looking ahead, we are constructive on the fundamentals of each of our businesses, including our renewable diesel business.
And as always, our priorities remain the same, to one, improve our reliability two, integrate and optimize our portfolio of assets and three, return excess cash to our shareholders. Thank you for joining our call. Have a great day.
Operator: This does conclude today's teleconference. Please disconnect your lines at this time, and have a wonderful day.