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Hollyfrontier 2017 Analyst Day – Hollyfrontier Corporation

Hollyfrontier Corporation · Dec 7, 2017 · 64 slides

Investor presentation from the Shale Experts oil & gas presentation and slide database. Every page is imaged and its text indexed for search across operators, plays, basins and time.

Slides

  1. Hollyfrontier 2017 Analyst Day – Hollyfrontier Corporation – slide 1
    HOLLYFRONTIER 2017 ANALYST DAY December 7, 2017
  2. Hollyfrontier 2017 Analyst Day – Hollyfrontier Corporation – slide 2
    WELCOME Craig Biery Director, Investor Relations
  3. Hollyfrontier 2017 Analyst Day – Hollyfrontier Corporation – slide 3
    Agenda OPENING REMARKS George Damiris REFINING Jim Stump Tom Creery HOLLY ENERGY PARTNERS George Damiris BREAK LUBRICANTS & SPECIALTY PRODUCTS Mark Plake Tony Weatherill FINANCIALS & VALUATION Rich Voliva Q&A 4
  4. Hollyfrontier 2017 Analyst Day – Hollyfrontier Corporation – slide 4
    OPENING REMARKS George Damiris Chief Executive Officer
  5. Hollyfrontier 2017 Analyst Day – Hollyfrontier Corporation – slide 5
    Mission & Values OUR MISSION IS to be the premier North American petroleum refining, lubricants and logistics company as measured by superior financial performance and sustainable, profitable growth. WE SEEK TO ACCOMPLISH THIS BY WE PUT…
  6. Hollyfrontier 2017 Analyst Day – Hollyfrontier Corporation – slide 6
    Executive Summary Positioned for Value Creation Across all Segments REFINING MIDSTREAM SPECIALTY LUBRICANTS Inland merchant refiner Operate Crude and Product Pipelines, Integrated specialty lubricants loading racks, terminals and…
  7. Hollyfrontier 2017 Analyst Day – Hollyfrontier Corporation – slide 7
    HollyFrontier Asset Footprint 8
  8. Hollyfrontier 2017 Analyst Day – Hollyfrontier Corporation – slide 8
    Strategy Safe & Reliable Operations Value Creation Through Growth Financial Strength & Discipline 9
  9. Hollyfrontier 2017 Analyst Day – Hollyfrontier Corporation – slide 9
    R E F I N I N G : O P E R AT I O N S Jim Stump Senior Vice President, Refining
  10. Hollyfrontier 2017 Analyst Day – Hollyfrontier Corporation – slide 10
    Health & Safety Top Priority HollyFrontier Recordable Incident Rates Tier 1 Process Safety Incident Rate vs Count Total Recordable Incident Rate1 Tier 1 Incident Rate2 Tier 1 Incident Count 1.5 0.4 20 0.3 15 1.0 0.2 10…
  11. Hollyfrontier 2017 Analyst Day – Hollyfrontier Corporation – slide 11
    15% Increase in Capacity Since 2015 Mid-Con Southwest Rockies CRUDE CHARGE CAPACITY CRUDE CHARGE CAPACITY CRUDE CHARGE CAPACITY Barrels Per Day Barrels Per Day Barrels Per Day 350,000 120,000 100,000 115,000 95,000 300,000 300,000…
  12. Hollyfrontier 2017 Analyst Day – Hollyfrontier Corporation – slide 12
    Refinery Operations Annual Crude Charge Rate 450,000 470,000 BPD Consolidated Crude Charge Opex Per Throughput Barrel /throughput BBL Barrels Per Day 6.16 6.25 5.95 450,000 5.75 5.50 Target 5.25 5.39 5.40 5.30 425,000 4.75…
  13. Hollyfrontier 2017 Analyst Day – Hollyfrontier Corporation – slide 13
    REFINING:COMMERCIAL Tom Creery Senior Vice President, Commercial
  14. Hollyfrontier 2017 Analyst Day – Hollyfrontier Corporation – slide 14
    Refining Segment Earnings Power HFC Consolidated 3-2-1 Index Mid-Cycle Refining EBITDA 1.0B 1.2B /Barrel 25 Gulf Coast 3-2-1 Crack 10.00 Brent/TI Spread 4.00 21.22 Product Transportation to HFC 20.06 3.00 Markets 20 HFC Index…
  15. Hollyfrontier 2017 Analyst Day – Hollyfrontier Corporation – slide 15
    Maximizing Feedstock Flexibility Optimized transportation - Increased ability to move crude between refineries - Improved internal synergies of intermediates Increased purchasing power 16
  16. Hollyfrontier 2017 Analyst Day – Hollyfrontier Corporation – slide 16
    Maximizing Value in the Marketplace Maximizing Premium Gasoline Production Upgrading more VTBs into Flux Volumes Premium Gasoline Production Flux Production % of Gasoline Production Barrels per day 18% 5,500 16% 4,500 14% 12%…
  17. Hollyfrontier 2017 Analyst Day – Hollyfrontier Corporation – slide 17
    H O L LY E N E R G Y PA R T N E R S George Damiris Chief Executive Officer
  18. Hollyfrontier 2017 Analyst Day – Hollyfrontier Corporation – slide 18
    Business Profile Operate a system of petroleum product and Consistent Distribution Growth Despite crude pipelines, storage tanks, distribution Crude Price Volatility terminals and loading rack facilities located near Distribution /LP…
  19. Hollyfrontier 2017 Analyst Day – Hollyfrontier Corporation – slide 19
    Ownership Structure IDR Simplification Provides Lower Cost of Capital for HEP HOLLYFRONTIER CORPORATION (HFC) 100% Interest GENERAL PARTNER (GP) HOLLY LOGISTIC SERVICES, L.L.C PUBLIC Non-economic GP Interest 59.6mm HEP…
  20. Hollyfrontier 2017 Analyst Day – Hollyfrontier Corporation – slide 20
    HEP Historical Growth Committed to Continuing Track Record of Increasing Distribution Holly Tulsa 50% JV with Acquired Holly Corporation dropdown of Crude gathering Plains for remaining and Frontier Oil Holly intermediate loading…
  21. Hollyfrontier 2017 Analyst Day – Hollyfrontier Corporation – slide 21
    HEP Avenues for Growth ORGANIC ACQUISITIONS DROPDOWNS FROM HFC Leverage HEPs existing Pursue logistics assets in HEPs Partnering with HFC to build footprint, specifically in current geographic region and/or acquire new assets /…
  22. Hollyfrontier 2017 Analyst Day – Hollyfrontier Corporation – slide 22
    BREAK
  23. Hollyfrontier 2017 Analyst Day – Hollyfrontier Corporation – slide 23
    HF LUBRICANTS & S P E C I A LT Y P R O D U C T S Mark Plake President
  24. Hollyfrontier 2017 Analyst Day – Hollyfrontier Corporation – slide 24
    HF Lubricants & Specialty Products The Worlds Machinery is Driving Towards Greater Efficiency, Reliability and Longevity Advanced lubricants are a crucial requirement in the drive HF LSP is a to develop more reliable, efficient and…
  25. Hollyfrontier 2017 Analyst Day – Hollyfrontier Corporation – slide 25
    Key Highlights INTEGRATED LUBRICANTS Integrated across the lubricants value chain from base oil production to PRODUCER finished lubricants INDUSTRY LEADING PRODUCT Strong track record of researching, developing and producing world-…
  26. Hollyfrontier 2017 Analyst Day – Hollyfrontier Corporation – slide 26
    Global Lubricants Footprint Our Lubricants are sold to Customers in 80+ Countries World-Wide 27
  27. Hollyfrontier 2017 Analyst Day – Hollyfrontier Corporation – slide 27
    HollyFrontier Lubricants & Specialty Products Rack Backward Introduction RACK BACK RACK FORWARD Sales Customer Order Fulfillment Marketing Finished Lubricants Value Opportunity R&D & Greases Waxes Distribution Blending…
  28. Hollyfrontier 2017 Analyst Day – Hollyfrontier Corporation – slide 28
    Base Oil Qualities Base Oil is the foundation of all lubricants 80% of a lubricant is made up of Base Oil Impurities hinder the performance of the final lubricant, not allowing the additives to work at their best Additives are…
  29. Hollyfrontier 2017 Analyst Day – Hollyfrontier Corporation – slide 29
    How We Make Base Oils Feedstock Refining Process Base Oil Product TULSA Solvent Extraction (LEU) Group I Vacuum Gas Oil Solvent Dewaxing (MEK) (VGO) MISSISSAUGA High Pressure Hydrotreating (HTU) Group II Vacuum Gas Oil Solvent…
  30. Hollyfrontier 2017 Analyst Day – Hollyfrontier Corporation – slide 30
    Group III Base Oil Opportunity Western Hemisphere Group III Base Oil: Production Capacity vs Demand Increasing Demand for Higher 3% CAGR Demand Growth (2016-2026) Performance Finished KBD Lubricants & Specialty 25 Products Higher…
  31. Hollyfrontier 2017 Analyst Day – Hollyfrontier Corporation – slide 31
    FINISHED LUBRICANTS & S P E C I A LT Y P R O D U C T S Tony Weatherill Managing Director of Marketing, Research and Development
  32. Hollyfrontier 2017 Analyst Day – Hollyfrontier Corporation – slide 32
    HollyFrontier Lubricants & Specialty Products Rack Forward Introduction RACK BACK RACK FORWARD Sales Customer Order Fulfillment Marketing Finished Lubricants Value Opportunity R&D & Greases Waxes Distribution Blending…
  33. Hollyfrontier 2017 Analyst Day – Hollyfrontier Corporation – slide 33
    How We Make Finished Lubricants & Specialty Products Blend Base Oils with Finished Products Base Oil Additive Technology Points of Difference Group I Better wear protection: Longer engine and equipment Group II Control Chemical…
  34. Hollyfrontier 2017 Analyst Day – Hollyfrontier Corporation – slide 34
    Strategic Geographic Areas Our Lubricants are sold to Customers in 80+ Countries World-Wide The Petro-Canada brand is highly China is one of the largest and fastest growing recognized and instills confidence finished lubricants markets…
  35. Hollyfrontier 2017 Analyst Day – Hollyfrontier Corporation – slide 35
    Strong Suite of Differentiated Products Our Key Products Base Oils White Oils Specialty Products Wax Finished Lubricants PURITY line of Group II PURETOL white mineral SUNSPRAY ULTRA-FINE PUREWAX water DURON heavy-duty and Group II+…
  36. Hollyfrontier 2017 Analyst Day – Hollyfrontier Corporation – slide 36
    Providing Solutions Across Diverse Industries Gas Plants, Pipelines Automotive Food & Beverage Industrial & Power Generation Automotive Gear Fluid Food Grade Industrial Gear Oils Natural Gas Engine Oils Lubricants Automatic…
  37. Hollyfrontier 2017 Analyst Day – Hollyfrontier Corporation – slide 37
    DURONTM Industry Leading Heavy Duty Engine Oil Ultimate Protection Without Compromise DURON is specially formulated using DURON is engineered to succeed in extreme off our leading-edge lubricant technology and on road conditions to…
  38. Hollyfrontier 2017 Analyst Day – Hollyfrontier Corporation – slide 38
    Passenger Car Motor Oil (PCMO) New PCMO standards Creates Opportunity for HF LSP Industry demand for high performance, PCMO Grade Typical base Oil Formulation low viscosity grade PCMO is being Synthetic 0W-16 III/III+ accelerated by:…
  39. Hollyfrontier 2017 Analyst Day – Hollyfrontier Corporation – slide 39
    Opportunity Across the Value Chain Upgrade Existing Base Oils into Finished Products Converting one barrel of Base Oil sales into Finished Product sales results in a margin uplift of 50/bbl Consolidated Margin Value /bbl Product…
  40. Hollyfrontier 2017 Analyst Day – Hollyfrontier Corporation – slide 40
    FINANCIALS & VA L U AT I O N Rich Voliva Chief Financial Officer
  41. Hollyfrontier 2017 Analyst Day – Hollyfrontier Corporation – slide 41
    New Segment Reporting HF HF REFINING LUBRICANTS & HOLLY CORPORATE, ENERGY & SPECIALTY OTHER & CONSOLIDATED MARKETING PRODUCTS (HEP) ELIMINATIONS (HF R&M) (HF LSP) Rack Back Rack Forward SG&A allocated to each segment…
  42. Hollyfrontier 2017 Analyst Day – Hollyfrontier Corporation – slide 42
    Rack Forward EBITDA Margin Stability 2018 Rack Forward EBITDA Margin1 Guidance2 EBITDA ( in millions) EBITDA Margin % 80 20% EBITDA 17% 175 200MM 16% 16% 16% EBITDA Margin 60 14% 15% 10-15% 13% 12% 10% 9% 9% 40 9% 10% 69 58 58…
  43. Hollyfrontier 2017 Analyst Day – Hollyfrontier Corporation – slide 43
    Rack Forward versus Public Lubricant Peers Peers Trade at 9x 13x Multiple Average Range of Quarterly 2018E EBITDA Margin EBITDA Margins: EV / EBITDA 1Q15 3Q17 1Q15 3Q17 Valvoline (VVV) 24% 11 37% 11.9 x Newmarket (NEU) 19% 16…
  44. Hollyfrontier 2017 Analyst Day – Hollyfrontier Corporation – slide 44
    HF Lubricants & Specialty Products Mid-Cycle EBITDA Rack Forward EBITDA ( in millions) 190 EBITDA Margin 10-15% Annual SG&A 125 - 135MM Target Multiple 10x Annual DD&A 30 - 35MM Upside with Organic Growth and M&A Enterprise…
  45. Hollyfrontier 2017 Analyst Day – Hollyfrontier Corporation – slide 45
    HF Refining & Marketing Mid-Cycle EBITDA HF Refining & Marketing EBITDA ( in millions) 1,100 460 KBPD 17 Consolidated 3-2-1 Index Target Multiple 6x 75% capture 4-year historical average Annual Opex/bbl of 5.50 Enterprise Value…
  46. Hollyfrontier 2017 Analyst Day – Hollyfrontier Corporation – slide 46
    Holly Energy Partners HEPs Value to HFC HEP Target Price 35.00 35 HEP target price 12 month consensus HEP LP Units Owned 59.6 HFCs ownership of 59.6mm LP units (millions) Annual SG&A 12 - 15MM HFC's Ownership Value 2,087…
  47. Hollyfrontier 2017 Analyst Day – Hollyfrontier Corporation – slide 47
    Total Sum-of-the-Parts Valuation HFC Consolidated SOTP Valuation (US millions) HF Refining & Marketing EBITDA (Mid-Cycle) 1,100 Target Multiple 6x Enterprise Value 6,600 Share Count1 (millions) 176.6 Lubricants HF Refining &…
  48. Hollyfrontier 2017 Analyst Day – Hollyfrontier Corporation – slide 48
    Summary REFINING MIDSTREAM SPECIALTY LUBRICANTS 450 470 KBPD crude rate HFC owns 59.6 million HEP units Rack Forward business generates 175 - 200 million of annual 1.0 1.2 billion mid-cycle IDR simplification transaction lowers…
  49. Hollyfrontier 2017 Analyst Day – Hollyfrontier Corporation – slide 49
    APPENDIX
  50. Hollyfrontier 2017 Analyst Day – Hollyfrontier Corporation – slide 50
    2018 Guidance Refining & Marketing - 5.50 Opex/bbl - Turnaround Schedule - Tulsa 1Q18 - El Dorado 4Q18 - Capex 375 425 million HF LSP - 175 200 mm Rack Forward EBITDA - Mississauga Turnaround - 4Q18 - Capex 60 80 million…
  51. Hollyfrontier 2017 Analyst Day – Hollyfrontier Corporation – slide 51
    HollyFrontier Capital Structure and Credit Profile HFC Consolidated Capital Structure HFC Standalone Capital Structure As of September 30, 2017 (US millions) As of September 30, 2017 (US millions) Cash and Short Term Marketable…
  52. Hollyfrontier 2017 Analyst Day – Hollyfrontier Corporation – slide 52
    Optimize Capital Structure Investment Grade Rating Peer Group Debt Metrics 9/30/17 - Moodys Baa3 Debt Ratio % - S&P BBB- 50% - Fitch BBB- 624 million cash as of 9/30/17 40% 1 billion outstanding debt as of 9/30/17 - excludes…
  53. Hollyfrontier 2017 Analyst Day – Hollyfrontier Corporation – slide 53
    Our Business Plan Update Business Improvement Plan Progress Annual EBITDA in MMs 2015 Analyst Day Target1 Full Year 2017E Acheived1 Refining Operations 245 107 Reliability 90 10 Cost 105 58 Turnaround 50 39 Optimization 90 220…
  54. Hollyfrontier 2017 Analyst Day – Hollyfrontier Corporation – slide 54
    Combined HF LSP Rack Backward & Rack Forward 2017 Lubricants & ( In Thousands) Rack Back Rack Forward Eliminations Specialty Products (1) Q3 2017 Sales 166,851 369,822 (123,599) 413,074 Cost of products sold 127,371 265,069…
  55. Hollyfrontier 2017 Analyst Day – Hollyfrontier Corporation – slide 55
    Combined HF LSP Rack Backward & Rack Forward 2016 Lubricants & ( In Thousands) Rack Back Rack Forward Eliminations Specialty Products(1) Q4 2016 Sales 150,885 339,765 (105,885) 384,765 Cost of products sold 120,809 234,151 (105,885)…
  56. Hollyfrontier 2017 Analyst Day – Hollyfrontier Corporation – slide 56
    Combined HF LSP Rack Backward & Rack Forward 2015 Lubricants & ( in Thousands) Rack Back Rack Forward Eliminations Specialty Products(1) Q4 2015 Sales 135,561 337,120 (99,363) 373,318 Cost of products sold 120,018 246,599 (99,363)…
  57. Hollyfrontier 2017 Analyst Day – Hollyfrontier Corporation – slide 57
    Combined Segment Reporting YTD 2017 Corporate, Other Consolidated ( in Thousands) HF R&M HF LSP(1) HEP & Eliminations Total Q3 2017 Sales and other operating revenues 3,374,122 413,074 110,364 (178,313) 3,719,247 Cost of products…
  58. Hollyfrontier 2017 Analyst Day – Hollyfrontier Corporation – slide 58
    Combined Segment Reporting 2016 Corporate, Other Consolidated ( in Thousands) HF R&M HF LSP(1) HEP & Eliminations Total Q4 2016 Sales and other operating revenues 2,898,018 384,765 112,526 (168,161) 3,227,148 Cost of products sold…
  59. Hollyfrontier 2017 Analyst Day – Hollyfrontier Corporation – slide 59
    Combined Segment Reporting 2015 Corporate, Other Consolidated ( in Thousands) HF R&M HF LSP(1) HEP & Eliminations Total Q4 2015 Sales and other operating revenues 2,894,664 373,318 97,251 (154,425) 3,210,808 Cost of products sold…
  60. Hollyfrontier 2017 Analyst Day – Hollyfrontier Corporation – slide 60
    Speaker Biographies George Damiris Richard Voliva CEO, PRESIDENT CFO, EXECUTIVE VICE PRESIDENT Mr. Damiris has served as Chief Executive Officer and President since Mr. Voliva has served as Executive Vice President and Chief…
  61. Hollyfrontier 2017 Analyst Day – Hollyfrontier Corporation – slide 61
    Speaker Biographies Mark Plake Tony Weatherill PRESIDENT, PETRO-CANADA LUBRICANTS INC MANAGING DIRECTOR OF MARKETING, RESEARCH AND DEVELOPMENT Mr. Plake became President of Petro-Canada Lubricants Inc. at the time Mr. Weatherill…
  62. Hollyfrontier 2017 Analyst Day – Hollyfrontier Corporation – slide 62
    Definitions BPD: the number of barrels per calendar day of crude oil or petroleum products. FCC: Fluid catalytic cracking, means a refinery process that breaks down large complex hydrocarbon molecules into smaller more useful ones using…
  63. Hollyfrontier 2017 Analyst Day – Hollyfrontier Corporation – slide 63
    Definitions Non GAAP measurements: We report certain financial measures that are not prescribed Reforming: The process of converting gasoline type molecules into aromatic, higher or authorized by U. S. generally accepted accounting…
  64. Hollyfrontier 2017 Analyst Day – Hollyfrontier Corporation – slide 64
    HollyFrontier Corporation (NYSE: HFC) 2828 N. Harwood, Suite 1300 Dallas, Texas 75201 (214) 954-6510 www.hollyfrontier.com Craig Biery Director, Investor Relations investorshollyfrontier.com 214-954-6510 Jared Harding Investor…

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