HOLLYFRONTIER CORPORATION 2015 Analyst Day September 2015
WELCOME Julia Heidenreich Vice President, Investor Relations
OUR MISSION OUR VALUES OUR MISSION IS to be the premier U.S. petroleum refining, HEALTH & SAFETY WE PUT HEALTH AND SAFETY FIRST pipeline and terminal company as measured by superior We conduct our business with primary emphasis on the…
Agenda Opening Remarks Mike Jennings, Chief Executive Officer Refinery Operations Jim Stump, Senior Vice President, Refining Michael McKee, Vice President, Refining Operations Refinery Operations Panel Tom Shetina, Vice President,…
OPENING REMARKS Mike Jennings Chief Executive Officer
HollyFrontier Corporation POSITIONED FOR SUCCESS AND VALUE CREATION Focused manufacturer of transportation Disciplined track record in business fuels and specialty products serving acquisitions and investments in capacity markets…
Unique Geographic Footprint Provides Distinct Competitive Advantage Pure play inland refining company with 443,000 barrels per day of crude capacity Proximity to North American crude production and attractive niche product markets…
The Foundation Live our values at work each day HEALTH & ENVIRONMENTAL CORPORATE HONESTY & CONTINUOUS SAFETY STEWARDSHIP CITIZENSHIP RESPECT IMPROVEMENT Build sustainable Attract, retain and Create an attractive competitive…
Differentiated Financial Performance 5-Year Average ROCE 5-Year Average Net Income Per Barrel 16.0% 6.00 14.0% 5.00 Avg Annual Return on Capital Employed 12.0% Average Net Income/BBL 4.00 10.0% 8.0% 3.00 6.0%…
Our Business Plan: Summary Impact GROW HFC SHARE PRICE BY 91% IN A MARKET NEUTRAL ENVIRONMENT WITHIN THREE YEARS, BY: Running our Creating Working Improving the Growing refineries at sustainable within a cost use of our outside the…
Our Business Plan A fundamentals-focused growth plan that addresses the following opportunities: Annual EBITDA in MMs Capitalized Value in s per sh Refining Operations 245 MM 9.30 Reliability 90 MM Cost 105 MM Turnaround 50 MM…
REFINERY OPERATIONS Jim Stump Senior Vice President, Refining
Refinery Operations Annual EBITDA opportunity of 245 MM EBITDA Refinery Reliability 90 MM Cost Reduction 105 MM Turnaround Execution 50 MM IMPROVED RELIABILITY REDUCTION IN IMPROVE AND REDUCTION IN LOST CONTROLLABLE TURNAROUND…
Safe Production Safe production is our goal Ownership and Accountability Aligned and engaged refinery and corporate organizations focusing on driving our culture of safe production Structured Process We have worked hard to develop…
Refinery Operations: Reliability Annual EBITDA opportunity of 90 MM* Improved reliability and reduction in lost opportunity Target first quartile operational reliability Target less than 4% lost opportunity of gross margin YTD 2015,…
Refinery Operations: Operating Cost Annual EBITDA opportunity of 105 MM Target 5.50 OPEX per throughput barrel 105 MM cost reduction, a 15% reduction in fixed operating expenses from 2014 levels 10% increase in throughput volumes vs…
Refinery Operations: Turnaround Execution Annual EBITDA opportunity of 50 MM Historical 50 MM annual lost profit opportunity associated with turnarounds 20 MM annual average turnaround cost overruns 30 MM annual lost profit…
REFINERY OPERATIONS PANEL Jim Stump Senior Vice President, Refining Michael McKee Vice President, Refining Operations Tom Shetina Vice President, Refining Integrity
Refinery Operations: Reliability Processes Increasing Opportunity Capture Annual EBITDA opportunity of 90 MM Controllable Lost Opportunity by Category Stationary Equipment % of Total (2012-Q2 2015) Enhanced inspection programs (Risk…
Refinery Operations: Reliability People Corporate Organization VP, Refining Integrity Started 2011 Stationary Rotating Maintenance & T/A Operating Equipment Equipment (plus Electrical) Practices Started December 2013 Started…
Refinery Operations: Expense Management Annual EBITDA opportunity of 105 MM Navajo Operating Expense Improvement Ownership and Accountability Opex per throughput barrel 7.00 Incorporated expense management in bonus plan 5.89…
Refinery Operations: Turnaround Execution Annual EBITDA opportunity of 50 MM Complete planned turnarounds on time and on budget With help from AP Networks and led by HFCs new corporate turnaround lead: Improve Turnaround Scope…
OPTIMIZATION George Damiris Chief Operating Officer
Optimization Annual EBITDA opportunity of 90 MM Little or no capital investment required Driven by commercial and planning groups recognizing market opportunities Increasing production of higher valued specialty SPECIALITY…
OPTIMIZATION PANEL Tom Creery Vice President, Crude Supply Mark Plake Vice President, Marketing Pat Gribbin Vice President, Specialty Products Fred Dunbar Senior Manager, Heavy Products Kent Bradbury Vice President, Refinery Planning
Optimization: Permian Crude Supply Developing increased supply and market flexibility Pipeline reversal between Navajo and Cushing increases optionality Allows higher quality Permian supply to El Dorado and Tulsa Optimizes supply…
Optimization: Transportation Fuels Increasing Mid Continent optionality Increased market access out of Tulsa St. Louis and Chicago markets through the Explorer connection Central Oklahoma and Texas through Minneapolis Wynnewood…
Optimization: What are Specialty Lubricant Products Unique portfolio and production flexibility contribute relatively stable margins High quality paraffinic, aromatic and wax products produced from consistent feedstock separated via…
Optimization: Lubes Opportunity Increasing production of higher value products Margins more than double the alternative lighter grades Increase heavier viscosity Increase production Creating new markets for aromatic oils and Bright…
Optimization: Heavy Products UPGRADING TO HIGHER PORT OF CATOOSA HOLLY ASPHALT VALUE & SPECIALTY PRODUCTS TERMINAL SYNERGIES Higher value Pitch sales Provides ability to sell Access to retail markets Special applications higher…
Optimization: Planning Mid Continent Integration Expected Mid Continent Integration Benefits Tulsa has excess crude capacity 35 El Dorado has spare downstream unit capacity Maximize profitability shipping intermediates 30 Gas Oil…
CAPITAL INVESTMENTS George Damiris Chief Operating Officer
Capital Investments Average annual EBITDA opportunity of 365 MM Investing to Drive Growth and Enhance Returns EBITDA Planned Growth Capital Investment Program 400 Large Capital Investments 165 MM Opportunity Capital Program 200 MM…
CAPITAL INVESTMENTS PANEL George Damiris Chief Operating Officer Mike Wright Vice President, Woods Cross Refinery Manager Tom Creery Vice President, Crude Supply Paige Kester Vice President, Corporate Development Ken Jinkerson Senior…
Capital Investments: Woods Cross Expansion MAJOR PROCESS UNITS CRUDE SLATE (KBPD) PRODUCTION (KBPD) Post Current Expansion Original Design Original Design Unit (KBD) (KBD) Crude Current Design Flexibility Current Design Flexibility…
Optimization: Woods Cross Crude Supply Woods Cross expansion crude supply will be available 10 KBPD excess Express Pipeline space Invested in supply flexibility Modifications made to expansion project Canadian alternatives Ability…
Capital Investments: Woods Cross Expansion 20 30 MM investment to increase crude flexibility CRUDE FARM CRUDE TOWER GAS OIL FLEXIBILITY FLEXIBILITY HYDROCRACKER Piping to allow Piping to allow Allows additional delivery of more…
Capital Investments: Woods Cross Expansion Average annual EBITDA opportunity of approximately 100 MM EBITDA Original Design Scope 80 MM Design Flexibility 20 MM Expected Mechanical 4Q 2015 Completion Expected Expansion Start up…
Capital Investments: Opportunity Capital 100 MM annual investment generating sustainable 50 MM average annual EBITDA Identify projects with: Over 30 opportunities identified Less than a 2 year payback period across our refining…
Capital Investments: Debottleneck Opportunities Various opportunities for Tulsa PDA Debottleneck debottlenecking across our crude distillation and downstream Increased Tulsa PDA capacity by 1,000 (BPD) conversion units exist…
Investing To Drive Growth And Enhance Returns Navajo Debottleneck Navajo Debottleneck Estimated Capex 35 MM 4,000 barrels per day (BPD) Crude Unit and 4,000 BPD Distillate Hydrotreater (DHT) debottleneck by fixing ancillary…
Investing To Drive Growth And Enhance Returns El Dorado Debottleneck El Dorado Debottleneck Estimated Capex 5 MM 6,000 barrels per day (BPD) Crude Unit Projected EBITDA* 20 MM debottleneck El Dorado could support 20,000 BPD of crude…
Capital Investments: Liquid Yield Opportunities Various opportunities for liquid yield Tulsa FCCU Liquid Yield Improvement improvement across our downstream conversion units exist throughout our refining system Tulsa FCCU…
Investing To Drive Growth And Enhance Returns Tulsa Naphtha Splitter Tulsa Naphtha Splitter Estimated Capex 30 MM Upgrade 2,000 barrels per day (BPD) Light Straight Run (LSR) to Gasoline Projected EBITDA* 17 MM Naphtha Splitter Tower…
Investing To Drive Growth And Enhance Returns El Dorado Coker Yield Improvement El Dorado Coker Yield Improvement Estimated Capex 55 MM 4% El Dorado Coker Volume Yield Improvement Projected EBITDA* 28 MM Addresses reliability, safety…
Our Business Plan Average Annual EBITDA Refinery Operations 245 MM Reliability 90 MM Cost 105 MM Turnaround 50 MM Optimization 90 MM Capital Investment 365 MM Large Capital 165 MM Opportunity Investments 200 MM Total…
BREAK
HOLLY ENERGY PARTNERS Bruce Shaw - President
Holly Energy Partners Operate a system of petroleum product Consistent Distribution Growth Despite Crude Price Volatility and crude pipelines, storage tanks, 0.60 160 distribution terminals and loading rack DPU facilities located near…
HEP Growth Drivers Organic DROPDOWN CONTEXT Southeastern New Mexico Gathering HEP generally has right of first refusal UNEV on all logistics assets HFC builds or acquires Internal initiatives As HFC grows, HEP is positioned to…
HEP Organic Growth Crude system expansion benefits both HEP and HFC Crude Gathering Volume Trend (BPD)* 140,000 120,000 100,000 Barrels Per Day (BPD) 80,000 60,000 40,000 20,000 - 2011 2012 2013 2014 2015…
HEP Operational Improvements HEP has identified a set of internal initiatives that we believe should produce approximately 14 million of annual incremental cashflow beginning in 2016-17 Internal Initiatives mm Maintenance Management…
El Dorado Naphtha Fractionation Dropdown HEP expected to purchase the newly HEP and HFC expected to enter into 15-year constructed naphtha fractionation and tolling agreements for each respective unit hydrogen generation units at…
Frontier Pipeline Interest Acquisition Asset Description 296 mile, 72K bpd capacity crude pipeline from Casper, WY to Frontier Station, UT At Frontier Station, connects to SLC Pipeline (PAA/HEP JV) Sources to Frontier: Express,…
HEP Growth: Financial Impact Target 8% annual distribution growth rate Estimated EBITDA Contribution vs 2014 (mm) 2015 2016 2017 SE NM Crude Expansion 5 5 5 UNEV Growth 4 14 15 Contractual Tariff Increases 6 8 14 Internal Initiatives…
HFC GP Cash Flows Total GP Cash Flows GP Value: 870 MM LP Value: 771 MM 50.0 8.70 per HFC Share 40.0 30.0 20.0 10.0 - 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015e HFC OWNERSHIP OF HEP CREATES VALUE FOR…
FINANCIAL ROLL UP Doug Aron - CFO
Strong Track Record of Cash Returns Since the July 2011 merger HFC has returned approximately 3.2 billion, or approximately 16.96 per share to shareholders Industry leader in returning excess cash Total Cash Yield* to shareholders…
Disciplined Approach to Capital Allocation SUSTAINING OPPORTUNITY RETURN EXCESS CASH CAPITAL CAPITAL TO SHAREHOLDERS Maintenance capex: 125 Focus on quick hit Committed to MM in annual sustaining opportunities, those maintaining best…
Optimize Capital Structure Debt to Capital* Investment Grade Rating Moodys Baa3 S&P BBB- 2015 -7.4% 626 million cash as of 6/30/15 2016 32 million outstanding debt as of -0.6% 6/30/15 excludes non-recourse HEP debt Total…
Our Business Plan Average Annual EBITDA Refinery Operations 245 MM Reliability 90 MM Cost 105 MM Turnaround 50 MM Optimization 90 MM Capital Investment 365 MM Large Capital 165 MM Opportunity Investments 200 MM Total…
Projected Consolidated Income Statement Business Improvement Plan Income Statement impact in a market neutral environment using 2014 crack spread and crude differential assumptions as a baseline Non-GAAP, (000s) 2014 2015E 2016E 2017E…
Projected Cash Flow Statement Business Improvement Plan Income Statement impact in a market neutral environment using 2014 crack spread and crude differential assumptions as a baseline Non-GAAP (000s) 2015E 2016E 2017E 2018E Beginning…
Summary Expected EPS Potential share Assuming a 10x Consolidated Net growth of greater repurchase of 3 multiple on EPS and Debt / Capitalization than 100% from billion retires a 2.5 B valuation remains 2014 levels more than 60 MM for…
Expected Share Value Growth 2014 2018 GP Value 15% GP Value 10% LP Value LP Value 9% 10% Refining Refining Value Value 75% 81% Assumptions HFC EBITDA increases and balance sheet management per Our Plan HEP GP…
Q&A
APPENDIX
Participant Biographies Mike Jennings: Chief Executive Officer George Damiris: Chief Operating Officer Mike Jennings has served as Chairman of the Board Mr. Damiris has served as Executive Vice President and of HollyFrontier (the…
Participant Biographies Fred Dunbar: Senior Manager, Julia Heidenreich: Vice President, Heavy Products Investor Relations Fred Dunbar began working at Holly in 2003. Prior to Julia Heidenreich joined HollyFrontier in January joining…
Participant Biographies Michael McKee: Vice President, Refining Mark Plake: Vice President, Marketing Operations Mark has led HollyFrontiers light products marketing team Mike McKee has served as VP, Refining Operations since the…
APPENDIX
Definitions Non GAAP measurements: We report certain financial measures that are not Enterprise Value: calculated as market capitalization plus minority interest, plus prescribed or authorized by U. S. generally accepted accounting…
Definitions Free Cash Flow: Calculated by taking operating cash flow and subtracting capital Crude oil distillation: The process of distilling vapor from liquid crudes, usually expenditures. by heating, and condensing the vapor slightly…
Definitions MSAT2: The control of hazardous air pollutants from mobile sources, a Sour Crude: Crude oil containing quantities of sulfur greater than 0.4 rule issued by the U.S. Environmental Protection Agency to reduce percent by weight,…
HollyFrontier Corporation (NYSE: HFC) Julia Heidenreich, VP, Investor Relations 2828 N. Harwood, Suite 1300 Craig Biery, Dallas, Texas 75201 Investor Relations (214) 954-6510 www.hollyfrontier.com investorshollyfrontier.com…
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