HF Sinclair Corp (DINO) FY 2024 MD&A

Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Item 7 contains “forward-looking” statements. See “Forward-Looking Statements” at the beginning of this Annual Report on Form 10-K. In this document, the words “we,” “our,” “ours” and “us” refer only to HF Sinclair and its consolidated subsidiaries or to HF Sinclair or an individual subsidiary and not to any other person with certain exceptions. References herein to HEP with respect to time periods prior to the closing of the HEP Merger Transaction on December 1, 2023 refers to HEP and its consolidated subsidiaries.

We use certain non-GAAP financial measures in our Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”). For a detailed description of each of the non-GAAP measures used in this MD&A, please refer to the discussion under Reconciliations to Amounts Reported Under GAAP. This item should be read in conjunction with our Consolidated Financial Statements and the notes thereto included in this annual report.

OVERVIEW

We are an independent energy company that produces and markets high-value light products such as gasoline, diesel fuel, jet fuel, renewable diesel and lubricants and specialty products. We own and operate refineries located in Kansas, Oklahoma, New Mexico, Wyoming, Washington and Utah. We provide petroleum product and crude oil transportation, terminalling, storage and throughput services to our refineries and the petroleum industry. We market our refined products principally in the Southwest United States, the Rocky Mountains extending into the Pacific Northwest and in other neighboring Plains states, and we supply high-quality fuels to more than 1,600 branded stations and license the use of the Sinclair brand at more than 300 additional locations throughout the country. We produce renewable diesel at two of our facilities in Wyoming and our facility in New Mexico. In addition, our subsidiaries produce and market base oils and other specialized lubricants in the United States, Canada and the Netherlands, and export products to more than 80 countries.

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Market Developments

For the year ended December 31, 2024, Net income attributable to HF Sinclair stockholders was $177 million compared to $1,590 million and $2,923 million for the years ended December 31, 2023, and 2022, respectively. Adjusted refinery gross margin per produced barrel sold in our Refining segment for 2024 decreased 50% over the year ended December 31, 2023.

In the Refining segment, we saw lower refining margins in the Mid-Continent and West regions in 2024, principally as a result of high global supply of transportation fuels across the industry that continued to weigh on product margins. Additionally, our results were impacted by the planned turnarounds at our Puget Sound, Parco and El Dorado refineries that were completed during 2024. For the first quarter of 2025, we expect to run between 580,000-620,000 barrels per day of crude oil, which reflects the planned turnaround at our Tulsa refinery.

In the Renewables segment, we saw increased sales volumes and feedstock optimization despite ongoing weakness in RINs and Low Carbon Fuel Standard (“LCFS”) prices in 2024. Our 2024 results were also impacted by the drawdown of higher priced inventory resulting in a $20 million increase to cost of sales. For the first quarter of 2025, we expect continued weakness in RINs and LCFS prices along with uncertainty around the Blender’s Tax Credit and implementation of the Producer’s Tax Credit legislation to impact renewable diesel margins.

In the Marketing segment, we saw strong value in the Sinclair branded sites during 2024 as the marketing business continued to provide a consistent sales channel with margin uplift for our produced fuels. We expect to grow the number of branded sites by approximately 10% annually.

In the Lubricants & Specialties segment, we saw strong performance (excluding first-in, first out (“FIFO”) impacts), driven by increased sales volumes, sales mix optimization and base oil integration across our portfolio during 2024.

In the Midstream segment, our results continued to benefit from increased volumes and higher tariffs and lower selling, general and administrative expenses in 2024.

We continue to adjust our operational plans to evolving market conditions. If implemented, the recently announced tariffs by the US Government on Canada, Mexico and China could impact the cost structure of feedstocks and other materials and supplies at our business units. The tariffs will also likely affect the costs of our products to our customers and our results of operations in the future. The extent to which our future results are affected by volatile regional and global economic conditions will depend on various factors and consequences beyond our control.

In August 2023, our Board of Directors authorized a $1.0 billion share repurchase program, and we continued to repurchase shares in the first and second quarter of 2024 under this program. On May 7, 2024, our Board of Directors authorized a new $1.0 billion share repurchase program (the “May 2024 Share Repurchase Program”). The timing and amount of share repurchases under the May 2024 Share Repurchase Program, including those from REH, will depend on market conditions and corporate, tax, regulatory and other relevant conditions. We repurchased 11,944,177 shares for $664 million for the year ended December 31, 2024, under open market and privately negotiated purchases. On February 20, 2025, our Board of Directors announced that it declared a regular quarterly dividend in the amount of $0.50 per share. The dividend is payable on March 20, 2025 to holders of record of common stock on March 6, 2025.

HEP Merger Transaction

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

Under the terms of the Merger Agreement, each outstanding common unit representing a limited partner interest in HEP (an “HEP common unit”), other than the HEP common units already owned by HF Sinclair and its subsidiaries, was converted into the right to receive 0.315 shares of HF Sinclair common stock and $4.00 in cash, without interest. The Merger Agreement consideration totaled $268 million in cash and resulted in the issuance of 21,072,326 shares of HF Sinclair common stock from treasury stock.

For a description of our existing indebtedness, as well as the changes thereto associated with the HEP Merger Transaction, see Note 14 “Debt” in the Notes to Consolidated Financial Statements.

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Sinclair Acquisition

On March 14, 2022, HollyFrontier Corporation (“HollyFrontier”) and HEP announced the establishment of HF Sinclair as the new parent holding company of HollyFrontier and HEP and their subsidiaries, and the completion of their respective acquisitions (the “Sinclair Transactions”) of Sinclair Oil Corporation (now known as Sinclair Oil LLC, “Sinclair Oil”) and Sinclair Transportation Company LLC (“STC”) from The Sinclair Companies (now known as REH Company).

HF Sinclair acquired REH Company’s refining, branded marketing, renewables, and midstream businesses. The branded marketing business supplies high-quality fuels to Sinclair branded stations and licenses the use of the Sinclair brand to additional locations throughout the United States. The renewables business includes the operation of a renewable diesel unit located in Sinclair, Wyoming. The refining business includes two Rocky Mountains-based refineries located in Casper, Wyoming and Sinclair, Wyoming. Under the terms of the Contribution Agreement as amended on March 14, 2022, HEP acquired STC, REH Company’s integrated crude and refined products pipelines and terminal assets, including approximately 1,200 miles of integrated crude and refined product pipeline supporting the Sinclair refineries and third parties, eight product terminals and two crude terminals with approximately 4.5 million barrels of operated storage. In addition, HEP acquired STC’s interests in three pipeline joint ventures for crude gathering and product offtake including: Saddle Butte Pipeline III, LLC (at the time of closing, 25.06% and currently, a 26.08% non-operated interest); Pioneer Investments Corp. (49.995% non-operated interest); and UNEV Pipeline, LLC (“UNEV”) (the 25% non-operated interest not already owned by HEP, resulting in UNEV becoming a wholly owned subsidiary of HEP).

Renewable Fuel Standard Regulations

Pursuant to the 2007 Energy Independence and Security Act, the EPA promulgated the Renewable Fuel Standard (“RFS”) regulations, which increased the volume of renewable fuels mandated to be blended into the nation’s fuel supply. The regulations, in part, require refiners to add annually increasing amounts of “renewable fuels” to their petroleum products or purchase credits, known as RINs, in lieu of such blending. Compliance with RFS regulations significantly increases our Cost of materials and other, with RINs costs totaling $446 million for the year ended December 31, 2024.

Under the RFS regulations, the EPA is required to set annual volume targets of renewable fuels that obligated parties, such as us, must blend into petroleum-based transportation fuels consumed in the United States. These volume requirements are used to determine an obligated party’s renewable volume obligation (“RVO”). The EPA released a final rule on June 3, 2022 that, among other things, reduced the volume targets for 2020 and established targets for 2021 and 2022. In 2020, we recognized the cost of the RVO using the 2020 volume targets set by the EPA at that time, and in 2021 and the three months ended March 31, 2022, we recognized the cost of the RVO using our estimates. As a result of the final rule released by the EPA on June 3, 2022 as noted above, we recognized a benefit of $72 million in the year ended December 31, 2022 related to the modification of the 2020 and 2021 volume targets. In June 2023, the EPA established the targets for 2023 through 2025, which increase RVOs in each of the concurrent years.

A more detailed discussion of our financial and operating results for the years ended December 31, 2024 to 2023 and December 31, 2023 to 2022 is presented in the following sections.

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RESULTS OF OPERATIONS

Financial Data

(1)Exclusive of Depreciation and amortization.

(2)Exclusive of Lower of cost or market inventory valuation adjustments.

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Other Financial Data

(1)Earnings before interest, taxes, depreciation and amortization, which we refer to as “EBITDA,” is calculated as Net income attributable to HF Sinclair stockholders plus (i) Income tax expense (benefit), (ii) Interest expense, net of Interest income and (iii) Depreciation and amortization. EBITDA is not a calculation provided for under GAAP; however, the amounts included in the EBITDA calculation are derived from amounts included on our consolidated financial statements. EBITDA should not be considered as an alternative to net income or operating income as an indication of our operating performance or as an alternative to operating cash flow as a measure of liquidity. EBITDA is not necessarily comparable to similarly titled measures of other companies. EBITDA is presented here because it is a financial indicator widely used by investors and analysts to measure performance. EBITDA is also used by our management for internal analysis and as a basis for financial covenants. EBITDA presented above is reconciled to net income under “Reconciliations to Amounts Reported Under Generally Accepted Accounting Principles” within Item 7 of Part II of this Annual Report on Form 10-K.

Supplemental Segment Operating Data

Our operations are organized into five reportable segments, Refining, Renewables, Marketing, Lubricants & Specialties and Midstream. See Note 20 “Segment Information” in the Notes to Consolidated Financial Statements for additional information on our reportable segments.

Refining Segment Operating Data

The disaggregation of our refining geographic operating data is presented in two regions, Mid-Continent and West, to best reflect the economic drivers of our refining operations. The Mid-Continent region is comprised of the El Dorado and Tulsa Refineries. The West region is comprised of the Puget Sound, Navajo, Woods Cross, Parco and Casper Refineries. In addition, the refinery operations of the Parco and Casper Refineries are included for the period March 14, 2022 (date of acquisition) through December 31, 2024. The following tables set forth information, including non-GAAP performance measures, about our consolidated refinery operations. Adjusted refinery gross margin per produced barrel sold is total Refining segment gross margin plus Lower of cost or market inventory valuation adjustments, Depreciation and amortization and Operating expenses, divided by sales volumes of produced refined products. This margin measure does not include the non-cash effects of Lower of cost or market inventory valuation adjustments, which relates to inventory held at the end of the period. Reconciliations to amounts reported under GAAP are provided under “Reconciliations to Amounts Reported Under Generally Accepted Accounting Principles” following Item 7 of Part II of this Annual Report on Form 10-K.

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(1)Crude charge represents the barrels per day of crude oil processed at our refineries.

(2)Refinery throughput represents the barrels per day of crude and other refinery feedstocks input to the crude units and other conversion units at our refineries.

(3)Represents barrels sold of refined products produced at our refineries (including Asphalt and intersegment sales) and does not include volumes of refined products purchased for resale or volumes of excess crude oil sold.

(4)Represents crude charge divided by total crude capacity (BPSD). Our consolidated crude capacity is 678,000 BPSD.

(5)Represents the average amount per produced barrel sold, which is a non-GAAP measure. Reconciliations to amounts reported under GAAP are provided under “Reconciliations to Amounts Reported Under Generally Accepted Accounting Principles” following Item 7 of Part II of this Annual Report on Form 10-K.

(6)Gross margin represents total Refining segment Sales and other revenues less Cost of materials and other, Lower of cost or market inventory valuation adjustments, Operating expenses and Depreciation and amortization, divided by sales volumes of produced refined products.

(7)Represents total Refining segment Operating expenses, exclusive of Depreciation and amortization, divided by sales volumes of produced refined products.

(8)Adjusted refinery gross margin is a non-GAAP measure. Reconciliations to amounts reported under GAAP are provided under “Reconciliations to Amounts Reported Under Generally Accepted Accounting Principles” in Item 7 of Part II of this Annual Report on Form 10-K.

(9)Adjusted refinery operating expenses is a non-GAAP measure. Reconciliations to amounts reported under GAAP are provided under “Reconciliations to Amounts Reported Under Generally Accepted Accounting Principles” in Item 7 of Part II of this Annual Report on Form 10-K.

(10)Represents total Refining segment operating expenses, exclusive of Depreciation and amortization, divided by Refinery throughput.

(11)Represents total Refining segment adjusted refinery operating expenses, exclusive of Depreciation and amortization, divided by Refinery throughput.

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Renewables Segment Operating Data

The following table sets forth information, including non-GAAP performance measures, about our renewables operations. Adjusted renewables gross margin per produced gallon sold is total Renewables segment gross margin plus Lower of cost or market inventory valuation adjustments, Depreciation and amortization and Operating expenses, divided by sales volumes of produced renewables products. This margin measure does not include the non-cash effects of Lower of cost or market inventory valuation adjustments, which relate to volumes in inventory at the end of the period. Reconciliations to amounts reported under GAAP are provided under “Reconciliations to Amounts Reported Under Generally Accepted Accounting Principles” following Item 7 of Part II of this Annual Report on Form 10-K.

(1)Represents the average amount per produced gallon sold, which is a non-GAAP measure. Reconciliations to amounts reported under GAAP are provided under “Reconciliations to Amounts Reported Under Generally Accepted Accounting Principles” following Item 7 of Part II of this Annual Report on Form 10-K.

(2)Gross margin represents total Renewables segment Sales and other revenues less Cost of materials and other, Lower of cost or market inventory valuation adjustments, Operating expenses and Depreciation and amortization, divided by sales volumes of produced renewables products.

(3)Adjusted renewables gross margin is a non-GAAP measure. Reconciliations to amounts reported under GAAP are provided under “Reconciliations to Amounts Reported Under Generally Accepted Accounting Principles” following Item 7 of Part II of this Annual Report on Form 10-K.

(4)Represents total Renewables segment Operating expenses, exclusive of Depreciation and amortization, divided by sales volumes of produced renewables products.

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Marketing Segment Operating Data

The following table sets forth information, including non-GAAP performance measures, about our marketing operations and includes our Sinclair branded fuel business. Adjusted marketing gross margin per gallon sold is total Marketing segment gross margin plus Depreciation and amortization, divided by sales volumes of marketing products. Reconciliations to amounts reported under GAAP are provided under “Reconciliations to Amounts Reported Under Generally Accepted Accounting Principles” following Item 7 of Part II of this Annual Report on Form 10-K.

(1)Includes certain non-Sinclair branded sites.

(2)Represents the average amount per gallon sold, which is a non-GAAP measure. Reconciliations to amounts reported under GAAP are provided under “Reconciliations to Amounts Reported Under Generally Accepted Accounting Principles” following Item 7 of Part II of this Annual Report on Form 10-K.

(3)Gross margin represents total Marketing segment Sales and other revenues less Cost of materials and other and Depreciation and amortization, divided by sales volumes of marketing products.

(4)Adjusted marketing gross margin is a non-GAAP measure. Reconciliations to amounts reported under GAAP are provided under “Reconciliations to Amounts Reported Under Generally Accepted Accounting Principles” following Item 7 of Part II of this Annual Report on Form 10-K.

Lubricants & Specialties Segment Operating Data

The following table sets forth information about our lubricants and specialties operations.

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Midstream Segment Operating Data

The following table sets forth information about our midstream operations.

(1) Certain volumetric non-financial information has been recast to conform to current year presentation.

Results of Operations - Year Ended December 31, 2024 Compared to Year Ended December 31, 2023

Summary

Net income attributable to HF Sinclair stockholders for the year ended December 31, 2024 was $177 million ($0.91 per basic and diluted share), a $1,413 million decrease compared to net income of $1,590 million ($8.29 per basic and diluted share) for the year ended December 31, 2023. The decrease in Net income attributable to HF Sinclair stockholders was principally driven by lower adjusted refinery gross margins, partially offset by higher refined product sales volumes. Lower of cost or market inventory valuation adjustments increased pre-tax earnings by $43 million for the year ended December 31, 2024 and decreased pre-tax earnings by $271 million for the year ended December 31, 2023. Adjusted refinery gross margins for the year ended December 31, 2024 decreased to $10.43 per produced barrel sold from $21.06 for the year ended December 31, 2023.

Sales and Other Revenues

Sales and other revenues decreased 11% from $31,964 million for the year ended December 31, 2023 to $28,580 million for the year ended December 31, 2024, principally due to decreased refined product sales prices and lower excess crude oil sales volumes as a result of fewer planned maintenance activities in 2024, partially offset by higher refined product sales volumes. Sales and other revenues included $644 million, $3,428 million, $2,700 million, and $107 million in unaffiliated revenues related to our Renewables, Marketing, Lubricants & Specialties, and Midstream segments, respectively, for the year ended December 31, 2024. Sales and other revenues included $781 million, $4,146 million, $2,762 million, and $118 million in unaffiliated revenues related to our Renewables, Marketing, Lubricants & Specialties, and Midstream segments, respectively, for the year ended December 31, 2023.

Cost of Materials and Other

Cost of materials and other, exclusive of Lower of cost or market inventory valuation adjustments, decreased 5% from $25,784 million for the year ended December 31, 2023 to $24,582 million for the year ended December 31, 2024, principally due to lower purchased refined product and excess crude oil sales volumes as a result of fewer planned maintenance activities in 2024, partially offset by higher refined product sales volumes. Within our Lubricants & Specialties segment, FIFO impact was a charge of $45 million and $13 million for the years ended December 31, 2024 and 2023, respectively.

During the year ended December 31, 2024, we recognized a lower of cost or market inventory valuation adjustment benefit of $43 million compared to a charge of $271 million for the year ended December 31, 2023, respectively.

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Adjusted Refinery Gross Margins

Adjusted refinery gross margin per barrel sold decreased 50% from $21.06 for the year ended December 31, 2023 compared to $10.43 for the year ended December 31, 2024. The decrease was due to lower average per barrel sold sales prices, partially offset by lower crude oil and feedstock prices. Adjusted refinery gross margin per barrel does not include the non-cash effects of Lower of cost or market inventory valuation adjustments or Depreciation and amortization. Reconciliations to amounts reported under GAAP are provided under “Reconciliations to Amounts Reported Under Generally Accepted Accounting Principles” following Item 7 of Part II of this Annual Report on Form 10-K.

Operating Expenses

Operating expenses increased 2% from $2,438 million for the year ended December 31, 2023 to $2,484 million for the year ended December 31, 2024, primarily due to a regulatory charge related to the 2025 Consent Decree, higher people costs and other miscellaneous costs, partially offset by lower natural gas costs.

Selling, General and Administrative Expenses

Selling, general and administrative expenses decreased 10% from $497 million for the year ended December 31, 2023 to $447 million for the year ended December 31, 2024, primarily due to a decrease in acquisition integration and regulatory costs, lower incentive compensation and other professional costs. We incurred $2 million and $39 million in acquisition integration and regulatory costs during the years ended December 31, 2024 and December 31, 2023, respectively.

Depreciation and Amortization Expenses

Depreciation and amortization increased 8% from $771 million for the year ended December 31, 2023 to $832 million for the year ended December 31, 2024. This increase was principally due to additional capitalized refinery turnaround costs and capitalized improvement projects as compared to the prior period.

Asset Impairments

For the year ended December 31, 2024, we recorded impairments totaling $17 million, which related to assets in our Midstream, Refining, and Lubricants & Specialties segments.

Earnings of Equity Method Investments

For the year ended December 31, 2024, we recorded net earnings of $32 million compared to net earnings of $17 million for the year ended December 31, 2023. This increase is primarily due to improved performance in our Pioneer Pipeline and Osage Pipeline investments.

Interest Income

Interest income was $75 million for the year ended December 31, 2024 compared to $94 million for the year ended December 31, 2023. The decrease in interest income was primarily due to the decrease in average cash balance.

Interest Expense

Interest expense was $165 million for the year ended December 31, 2024 compared to $191 million for the year ended December 31, 2023. This decrease was primarily due to a reduction in total debt outstanding as compared to the prior period.

Other income, net

Other income, net was $15 million for the year ended December 31, 2024 compared to $30 million for the year ended December 31, 2023. This decrease was primarily due to a $15 million gain from the settlement of a preservation of property claim related to winter storm Uri that was recognized during the year ended December 31, 2023.

Income Taxes

For the year ended December 31, 2024, we recorded income tax expense of $34 million compared to $442 million for the year ended December 31, 2023. This decrease was principally due to lower pre-tax income during the year ended December 31, 2024 compared to the year ended December 31, 2023. Our effective tax rates were 15.6% and 20.5% for the years ended December 31, 2024 and 2023, respectively. The difference between the effective tax rate and the statutory rate for the year ended December 31, 2024 is principally due to the relationship between pre-tax earnings and benefits attributable to nontaxable permanent differences, offset by an increase in state income taxes and unrecognized tax benefits. The difference between the U.S. federal statutory rate and the effective tax rate for the twelve months ended December 31, 2023 is primarily due to the relationship between pre-tax results and benefits attributable to non-taxable permanent differences and the earnings attributable to the noncontrolling interest that is not included in income for tax purposes.

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Results of Operations - Year Ended December 31, 2023 Compared to Year Ended December 31, 2022

Summary

Net income attributable to HF Sinclair stockholders for the year ended December 31, 2023 was $1,590 million ($8.29 per basic and diluted share), a $1,333 million decrease compared to net income of $2,923 million ($14.28 per basic and diluted share) for the year ended December 31, 2022. The decrease in Net income attributable to HF Sinclair stockholders was principally driven by lower adjusted refinery gross margins and lower refined product sales volumes. Lower of cost or market inventory valuation adjustments decreased pre-tax earnings by $271 million and $52 million for the years ended December 31, 2023 and 2022, respectively. Adjusted refinery gross margins for the year ended December 31, 2023 decreased to $21.06 per produced barrel sold from $26.43 for the year ended December 31, 2022.

Sales and Other Revenues

Sales and other revenues decreased 16% from $38,205 million for the year ended December 31, 2022 to $31,964 million for the year ended December 31, 2023, principally due to decreased refined product sales prices and lower refined product sales volumes. Sales and other revenues included $781 million, $4,146 million, $2,762 million and $118 million in unaffiliated revenues related to our Renewables, Marketing, Lubricants & Specialties, and Midstream segments, respectively, for the year ended December 31, 2023. Sales and other revenues included $654 million, $3,912 million, $3,150 million and $109 million in unaffiliated revenues related to our Renewables, Marketing, Lubricants & Specialties and Midstream segments, respectively, for the year ended December 31, 2022.

Cost of Materials and Other

Cost of materials and other, exclusive of Lower of cost or market inventory valuation adjustments, decreased 15% from $30,680 million for the year ended December 31, 2022 to $25,784 million for the year ended December 31, 2023, principally due to lower crude oil costs and lower refined product sales volumes. Within our Lubricants & Specialties segment, FIFO impact was a charge of $13 million for the year ended December 31, 2023 and a benefit of $78 million for the year ended December 31, 2022.

During the years ended December 31, 2023 and 2022, we recognized a Lower of cost or market inventory valuation adjustments charge of $271 million and $52 million, respectively.

Adjusted Refinery Gross Margins

Adjusted refinery gross refinery margin per barrel sold decreased 20% from $26.43 for the year ended December 31, 2022 to $21.06 for the year ended December 31, 2023. The decrease was due to lower average per barrel sold sales prices, partially offset by lower crude oil and feedstock prices. Adjusted refinery gross margin per barrel does not include the non-cash effects of Lower of cost or market inventory valuation adjustments or Depreciation and amortization. Reconciliations to amounts reported under GAAP are provided under “Reconciliations to Amounts Reported Under Generally Accepted Accounting Principles” following Item 7 of Part II of this Annual Report on Form 10-K.

Operating Expenses

Operating expenses increased 4% from $2,335 million for the year ended December 31, 2022 to $2,438 million for the year ended December 31, 2023, primarily due to increased maintenance activities and our acquisition of the Acquired Sinclair Businesses, partially offset by lower natural gas costs.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased 16% from $427 million for the year ended December 31, 2022 to $497 million for the year ended December 31, 2023, primarily due to higher costs related to information technology, other professional services and employee costs as compared to the prior period and our acquisition of the Acquired Sinclair Businesses, partially offset by a decrease in acquisition integration and regulatory costs. We incurred $39 million and $53 million in acquisition integration and regulatory costs during the years ended December 31, 2023 and 2022, respectively.

Depreciation and Amortization Expenses

Depreciation and amortization increased 17% from $657 million for the year ended December 31, 2022 to $771 million for the year ended December 31, 2023. This increase was principally due to depreciation and amortization attributable to capitalized turnaround costs, capitalized improvement projects and the Acquired Sinclair Businesses.

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Earnings (Loss) of Equity Method Investments

For the year ended December 31, 2023, we recorded net earnings of $17 million of equity method investments as compared to a net loss of $0.3 million for the year ended December 31, 2022. Net loss during the year ended December 31, 2022 was primarily due to HEP’s 50% share of incurred and estimated environmental remediation and recovery expenses, net of insurance proceeds received to date, for the Osage Pipeline. In July 2022, the Osage Pipeline, which carries crude oil from Cushing, Oklahoma to El Dorado, Kansas, suffered a release of crude oil. The pipeline resumed operations during the third quarter of 2022.

Interest Income

Interest income was $94 million for the year ended December 31, 2023 compared to $30 million for the year ended December 31, 2022. The increase in interest income was primarily due to the increase in the average cash balance and higher interest rates on cash investments.

Interest Expense

Interest expense was $191 million for the year ended December 31, 2023 compared to $176 million for the year ended December 31, 2022. This increase was primarily due to the April 2022 issuance of $400 million in aggregate principal amount of 6.375% senior notes maturing in April 2027 and higher market interest rates on HEP’s revolving credit facility during the year ended December 31, 2023.

Other income, net

Other income, net was $30 million for the year ended December 31, 2023 compared to $28 million for the year ended December 31, 2022. For the year ended December 31, 2023, we recorded a $15 million gain from the settlement of a preservation of property claim and during the year ended December 31, 2022, we recorded a gain of $15 million from a settlement of our business interruption claim, both related to winter storm Uri that occurred in the first quarter of 2021.

Income Taxes

For the year ended December 31, 2023, we recorded an income tax expense of $442 million compared to $895 million for the year ended December 31, 2022. This decrease was principally due to lower pre-tax income during the year ended December 31, 2023 compared to the year ended December 31, 2022. Our effective tax rates were 20.5% and 22.7% for the years ended December 31, 2023 and 2022, respectively. The difference between the U.S. federal statutory rate and the effective tax rate for the twelve months ended December 31, 2023, is primarily due to the relationship between pre-tax results, benefits attributable to non-taxable permanent differences and the earnings attributable to the noncontrolling interest that is not included in income for tax purposes. The difference between the U.S. federal statutory rate and the effective tax rate for the twelve months ended December 31, 2022 is primarily due to the relationship between pre-tax results and benefits attributable to non-taxable permanent differences, earnings attributable to the noncontrolling interest that is not included in income for tax purposes, and the decrease in the state tax rate applied to our deferred tax assets and liabilities as a result of the Sinclair Transactions.

LIQUIDITY AND CAPITAL RESOURCES

We have a disciplined capital allocation strategy of maintaining financial flexibility to execute our capital priorities and generate long-term value for our stockholders. Consistent with that strategy, we aim to self-fund development projects and make strategic investments focused on profitable growth, while reducing our debt and returning cash to stockholders through dividends and share repurchases.

Credit Agreements

We have a $1.65 billion senior unsecured revolving credit facility maturing in April 2026 (the “HF Sinclair Credit Agreement”). The HF Sinclair Credit Agreement may be used for revolving credit loans and letters of credit from time to time and is available to fund general corporate purposes. At December 31, 2024, we were in compliance with all covenants, had no outstanding borrowings and had outstanding letters of credit totaling a nominal amount under the HF Sinclair Credit Agreement.

Additionally, our wholly owned subsidiary, HEP, has a $1.2 billion senior secured revolving credit facility maturing in July 2025 (the “HEP Credit Agreement” and, together with the HF Sinclair Credit Agreement, the “Credit Agreements”). The HEP Credit Agreement is available to fund capital expenditures, investments, acquisitions, distribution payments, working capital and for general corporate purposes. It is also available to fund letters of credit up to a $50 million sub-limit and has an accordion feature that allows us to increase the commitments under the HEP Credit Agreement up to a maximum amount of $1.7 billion. At December 31, 2024, we were in compliance with all of its covenants, had outstanding borrowings of $350 million and no outstanding letters of credit under the HEP Credit Agreement.

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Indebtedness under the Credit Agreements bears interest, at our option, for borrowings in U.S. dollars at either (a) a base rate equal to the sum of (1) the highest of (i) the prime rate (as publicly announced from time to time by the applicable administrative agent), (ii) the Federal Funds Effective Rate (as defined in the HF Sinclair Credit Agreement and as defined as the “Federal Funds Rate” in the HEP Credit Agreement) plus 0.5%, and (iii) Spread Adjusted Term SOFR (as defined in the HF Sinclair Credit Agreement and as defined as “Adjusted Term SOFR” in the HEP Credit Agreement) for a one-month interest period plus 1%, plus (2) an applicable margin for base rate loans ranging from 0.25% to 1.125%, or (b) the sum of (1) Spread Adjusted Term SOFR (as defined in the HF Sinclair Credit Agreement and as defined as “Adjusted Term SOFR” in the HEP Credit Agreement) for the applicable interest period, plus (2) an applicable margin for term SOFR loans ranging from 1.25% to 2.125%. The HF Sinclair Credit Agreement allows for borrowings in Sterling and Euros with similar interest rates. In each case and each Credit Agreement, the applicable margin is based on HF Sinclair’s debt rating assigned by Standard & Poor’s Rating Services and Moody’s Investors Service, Inc. The weighted average interest rate in effect under the HEP Credit Agreement on our borrowings was 6.17% as of December 31, 2024.

HF Sinclair Senior Notes Exchange

On December 4, 2023, we completed our offers to exchange any and all outstanding HEP 5.000% senior notes maturing February 2028 (the “HEP 5.000% Senior Notes”) and HEP 6.375% senior notes maturing April 2027 (the “HEP 6.375% Senior Notes” and, together with the HEP 5.000% Senior Notes, the “HEP Senior Notes”) for HF Sinclair 5.000% senior notes maturing February 2028 (the “HF Sinclair 5.000% Senior Notes”) and HF Sinclair 6.375% senior notes maturing April 2027 (the “HF Sinclair 6.375% Senior Notes” and, together with the HF Sinclair 5.000% Senior Notes, the “Restricted HF Sinclair Senior Notes”) to be issued by HF Sinclair with registration rights and cash. In connection with the exchange offers, we amended the indenture governing the HEP Senior Notes to eliminate (i) substantially all of the restrictive covenants, (ii) certain of the events which may lead to an “Event of Default,” (iii) the SEC reporting covenant and (iv) the requirement of HEP to offer to purchase the HEP Senior Notes upon a change of control. The Restricted HF Sinclair Senior Notes were issued in exchange for the HEP Senior Notes pursuant to a private exchange offer exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”). This exchange was part of a broader corporate strategy, including the HEP Merger Transaction.

On May 10, 2024, HF Sinclair filed a registration statement, as amended, which was declared effective on August 5, 2024, to exchange the Restricted HF Sinclair Senior Notes for an equal principal amount of each respective series of the Restricted HF Sinclair Senior Notes (such notes offered in exchange, the “Registered HF Sinclair Senior Notes”). The Registered HF Sinclair Senior Notes are substantially identical to the Restricted HF Sinclair Senior Notes in all material respects except the Registered HF Sinclair Senior Notes are registered under the Securities Act and are not subject to restrictions on transfer or to any increase in annual interest rate for failure to comply with the Registration Rights Agreement, dated December 4, 2023, and do not have the registration rights applicable to the Restricted HF Sinclair Senior Notes. On September 5, 2024, HF Sinclair completed its offers to exchange the Restricted HF Sinclair Senior Notes for the Registered HF Sinclair Senior Notes.

The Registered HF Sinclair Senior Notes are unsecured and unsubordinated obligations of ours and rank equally with all our other existing and future unsecured and unsubordinated indebtedness. Each series of the Registered HF Sinclair Senior Notes has the same interest rate, interest payment dates, maturity date and redemption terms as the corresponding series of Restricted HF Sinclair Senior Notes.

2025 Senior Notes Offering, Tender Offer and Redemption

On January 23, 2025, HF Sinclair issued an aggregate principal amount of $1.4 billion of senior notes consisting of $650 million aggregate principal amount of 5.750% Senior Notes due 2031 (the “HF Sinclair 5.750% Senior Notes”) and $750 million aggregate principal amount of 6.250% Senior Notes due 2035 (the “HF Sinclair 6.250% Senior Notes,” together with the “HF Sinclair 5.750% Senior Notes”, the “New HFS Notes”) for net proceeds of approximately $1.38 billion, after deducting the underwriters’ discount and commissions and estimated offering expenses. The New HFS Notes are unsecured and unsubordinated obligations of ours and rank equally with all our other existing and future unsecured and unsubordinated indebtedness.

We used the net proceeds from the notes offering to repay $350 million in outstanding borrowings under the HEP Credit Agreement, to fund the concurrent Tender Offer (as defined below) and to fund the redemption of HollyFrontier’s 5.875% Senior Notes due 2026.

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On January 28, 2025, we completed a cash tender offer for $646 million in aggregate principal amount (the “Tender Offer”) as follows:

On February 18, 2025, we redeemed the remaining aggregate principal amount of HollyFrontier’s 5.875% Senior Notes due 2026 at a redemption cost of $156 million. The redemptions were funded with the net proceeds of the offering of New HFS Notes. We recognized an early extinguishment loss as a result of the Tender Offer and February 16, 2025 redemptions.

Additionally, we announced our intent to redeem $195 million aggregate principal amount of HF Sinclair 5.875% Senior Notes due 2026 which is expected to close on February 21, 2025. The final redemption cost will be determined at closing and will be funded with the net proceeds of the offering of New HFS Notes.

HF Sinclair Financing Arrangements

Certain of our wholly owned subsidiaries entered into financing arrangements whereby such subsidiaries sold a portion of their precious metals catalyst to a financial institution in exchange for cash and then financed the use of the precious metals catalyst for a term not to exceed one year. The volume of the precious metals catalyst and the interest rate are fixed over the term of each agreement, and the payments are recorded as Interest expense. Upon maturity of the financing arrangement, we must either satisfy the obligation at fair market value or refinance to extend the maturity.

HF Sinclair may, from time to time, issue letters of credit pursuant to uncommitted letters of credit facilities with its lenders. At December 31, 2024, there were no letters of credit outstanding under such facilities.

See Note 14 “Debt” in the Notes to Consolidated Financial Statements for additional information on our debt instruments.

Liquidity

We believe our current Cash and cash equivalents, along with future internally generated cash flow and funds available under our credit facilities, will provide sufficient resources to fund currently planned capital projects and our liquidity needs for the foreseeable future. We expect that, to the extent necessary, we can raise additional funds from time to time through equity or debt financings in the public and private capital markets. Further, we may from time to time seek to retire some or all of our outstanding debt agreements through cash purchases, and/or exchanges, open market purchases, privately negotiated transactions, tender offers or otherwise. Such transactions, if any, may be material and will depend on prevailing market conditions, our liquidity requirements and other factors. In addition, components of our long-term growth strategy include the optimization of existing units at our facilities and selective acquisition of complementary assets for our operations intended to increase earnings and cash flow. We also expect to use cash for payment of cash dividends, which are at the discretion of our Board of Directors, and for the repurchase of common stock under the May 2024 Share Repurchase Program.

Our liquidity was approximately $3.3 billion at December 31, 2024, consisting of Cash and cash equivalents of $800 million, an undrawn $1.65 billion credit facility under the HF Sinclair Credit Agreement and $850 million remaining availability under the HEP Credit Agreement.

We consider all highly liquid instruments with a maturity of three months or less at the time of purchase to be cash equivalents. These primarily consist of investments in conservative, highly rated instruments issued by financial institutions, government and corporate entities with strong credit standings and money market funds. Cash equivalents are stated at cost, which approximates market value.

On August 15, 2023, our Board of Directors approved a $1.0 billion share repurchase program (the “August 2023 Share Repurchase Program”), which replaced all existing share repurchase programs, including the $5 million remaining authorization under our preexisting share repurchase program dating from September 2022. The August 2023 Share Repurchase Program authorized us to repurchase common stock in the open market or through privately negotiated transactions. Privately negotiated repurchases from REH were also authorized under the August 2023 Share Repurchase Program, subject to REH’s interest in selling its shares and other limitations.

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On May 7, 2024, our Board of Directors approved the May 2024 Share Repurchase Program, which replaced all existing share repurchase programs, including the approximately $214 million remaining under the August 2023 Share Repurchase Program. The May 2024 Share Repurchase Program authorizes us to repurchase common stock in the open market or through privately negotiated transactions. Privately negotiated repurchases from REH are also authorized under the May 2024 Share Repurchase Program, subject to REH’s interest in selling its shares and other limitations. The timing and amount of share repurchases, including those from REH, will depend on market conditions and corporate, tax, regulatory and other relevant considerations. In addition, we are authorized by our Board of Directors to repurchase shares in an amount sufficient to offset shares issued under our compensation programs. The May 2024 Share Repurchase Program may be discontinued at any time by our Board of Directors.

During the year ended December 31, 2024, we made open market and privately negotiated purchases of 11,944,177 shares for $664 million under our share repurchase programs, of which 7,864,761 shares were repurchased for $456 million pursuant to privately negotiated repurchases from REH. As of December 31, 2024, we had remaining authorization to repurchase up to $799 million under the May 2024 Share Repurchase Program.

Cash Flows – Operating Activities

Year Ended December 31, 2024 Compared to Year Ended December 31, 2023

Net cash flows provided by operating activities were $1,110 million for the year ended December 31, 2024 compared to $2,297 million for the year ended December 31, 2023, a decrease of $1,187 million primarily driven by lower income from operations during the year ended December 31, 2024. Changes in working capital increased operating cash flows by $554 million and decreased operating cash flows by $120 million for the years ended December 31, 2024 and 2023, respectively. Additionally, for the year ended December 31, 2024, turnaround expenditures were $413 million compared to $556 million for the year ended December 31, 2023.

Cash Flows – Investing Activities and Planned Capital Expenditures

Year Ended December 31, 2024 Compared to Year Ended December 31, 2023

For the year ended December 31, 2024, our Net cash flows used for investing activities were $468 million. Cash expenditures for Properties, plants and equipment for the year ended December 31, 2024 were $470 million.

For the year ended December 31, 2023, our Net cash flows used for investing activities were $371 million. Cash expenditures for Properties, plants and equipment for the year ended December 31, 2023 were $385 million.

Each year our Board of Directors approves our annual capital budget which includes specific projects that management is authorized to undertake. When conditions warrant or as new opportunities arise, additional projects may be approved. The funds appropriated for a particular capital project may be expended over a period of several years, depending on the time required to complete the project. Therefore, our planned capital expenditures for a given year consist of expenditures appropriated in that year’s capital budget plus expenditures for projects appropriated in prior years which have not yet been completed. Refinery turnaround spending is amortized over the useful life of the turnaround.

The refining industry is capital intensive and requires on-going investments to sustain our refining operations. This includes replacement of, or rebuilding, refinery units and components that extend the useful life. We also invest in projects that improve operational reliability and profitability via enhancements that improve refinery processing capabilities as well as production yield and flexibility. Our capital expenditures also include projects related to renewable diesel, environmental, health and safety compliance and include initiatives as a result of federal and state mandates.

Our refinery operations and related emissions are highly regulated at both federal and state levels, and we invest in our facilities as needed to remain in compliance with these standards. Additionally, when faced with new emissions or fuels standards, we seek to execute projects that facilitate compliance and also improve the operating costs and/or yields of associated refining processes.

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Expected capital and turnaround cash spending for 2025 is as follows:

Cash Flows – Financing Activities

Year Ended December 31, 2024 Compared to Year Ended December 31, 2023

For the year ended December 31, 2024, our Net cash flows used for financing activities were $1,182 million. During the year ended December 31, 2024, we repurchased $672 million of our Common Stock, paid $386 million in Dividends, and had net repayments of $106 million under the HEP Credit Agreement.

For the year ended December 31, 2023, our Net cash flows used for financing activities were $2,244 million. During the year ended December 31, 2023, we repurchased $999 million of our Common Stock, paid $341 million in Dividends, paid $308 million upon the maturity of the HF Sinclair 2.625% Senior Notes and HollyFrontier 2.625% Senior Notes, paid $268 million as cash consideration in connection with the HEP Merger Transaction and had net repayments of $213 million under the HEP Credit Agreement.

Contractual Obligations and Commitments

The following table presents our long-term contractual obligations as of December 31, 2024 in total and by period due beginning in 2025.

(1)See Note 14 “Debt” in the Notes to Consolidated Financial Statements for a description of our outstanding debt.

(2)We have financing arrangements related to the sale and subsequent lease-back of certain of our precious metals.

(3)We have long-term supply agreements to secure certain quantities of crude oil, feedstock and other resources used in the production process at market prices. We have estimated future payments under these fixed-quantity agreements expiring between 2025 and 2031 using current market rates.

(4)Consists of contractual obligations under agreements with third parties for the transportation of crude oil, natural gas and feedstocks to our refineries and for terminal and storage services under contracts expiring between 2025 and 2038.

(5)Operating and finance lease obligations include options to extend terms that are reasonably certain of being exercised.

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities as of the date of the financial statements. Actual results may differ from these estimates under different assumptions or conditions. We consider the following policies to be the most critical to understanding the judgments that are involved and the uncertainties that could impact our results of operations, financial condition and cash flows. For additional information, see Note 1 “Description of Business and Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements. Certain critical accounting policies that materially affect the amounts recorded in our consolidated financial statements include assessing the possible impairment of certain Assets and Goodwill and assessing contingent liabilities for probable losses.

Goodwill and Long-lived Assets

As of December 31, 2024, our Goodwill balance was $3.0 billion, with goodwill assigned to our Refining, Renewables, Marketing, Lubricants & Specialties and Midstream segments. Goodwill represents the excess of the cost of an acquired entity over the fair value of the assets acquired and liabilities assumed. Goodwill is not subject to amortization and is tested annually or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Our goodwill impairment testing first entails either a quantitative assessment or an optional qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If we determine that based on the qualitative factors that it is more likely than not that the carrying value of the reporting unit is greater than its fair value, a quantitative test is performed in which we estimate the fair value of the related reporting unit. If the carrying amount of a reporting unit exceeds its fair value, the goodwill of that reporting unit is impaired, and we measure goodwill impairment as the excess of the carrying amount of reporting unit over the related fair value.

We performed our annual goodwill impairment testing quantitatively as of July 1, 2024 and determined there was no impairment of goodwill attributable to our reporting units. The estimated fair values of our reporting units were derived using a combination of income and market approaches. The income approach reflects expected future cash flows based on estimated forecasted production levels, selling prices, gross margins, operating costs and capital expenditures. Our market approaches include both the guideline public company and guideline transaction methods. Both methods utilize pricing multiples derived from historical market transactions and other market data of other like-kind assets. The fair values of the reporting units over their respective carrying values exceeded 10%. Increasing the discount rate by 1.0% or reducing the terminal cash flow growth rate by 1.0% would not have changed the results of our annual goodwill testing.

In performing our impairment test of goodwill, we developed cash flow forecasts for each of our reporting units. Significant judgment is involved in performing these fair value estimates since the results are based on forecasted financial information. The cash flow forecasts include significant assumptions such as planned utilization, end-user demand, selling prices, gross margins, operating costs and capital expenditures. Other key assumptions applied to these forecasts to determine the fair value of a reporting unit are the discount rate and terminal cash flow growth rate. The discount rate is intended to reflect the weighted average cost of capital for a market participant and the risks associated with the realization of the estimated future cash flows. Our fair value estimates are based on projected cash flows, which we believe to be reasonable.

We continually monitor and evaluate various factors for potential indicators of goodwill and asset impairments. A reasonable expectation exists that sustained deterioration in our operating results or overall economic conditions could lead to goodwill and/or asset impairments at some point in the future. Future impairment charges could be material to our results of operations and financial condition.

Contingencies

We are subject to proceedings, lawsuits and other claims related to environmental, labor, product and other matters. We are required to assess the likelihood of any adverse judgments or outcomes to these matters as well as potential ranges of probable losses. A determination of the amount of reserves required, if any, for these contingencies is made after careful analysis of each individual issue. The required reserves may change in the future due to new developments in each matter or changes in approach, such as a change in settlement strategy when dealing with these matters.

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RISK MANAGEMENT

We use certain strategies to reduce some commodity price and operational risks. We do not attempt to eliminate all market risk exposures when we believe that the exposure relating to such risk would not be significant to our future earnings, financial position, capital resources or liquidity or that the cost of eliminating the exposure would outweigh the benefit.

Commodity Price Risk Management

Our primary market risk is commodity price risk. We are exposed to market risks related to the volatility in crude oil and refined products, as well as volatility in the price of natural gas used in our refining operations. We periodically enter into derivative contracts in the form of commodity price swaps, collar contracts, forward purchase and sales and futures contracts to mitigate price exposure with respect to our inventory positions, natural gas purchases, sales prices of refined products and crude oil costs.

Foreign Currency Risk Management

We are exposed to market risk related to the volatility in foreign currency exchange rates. We periodically enter into derivative contracts in the form of foreign exchange forward contracts to mitigate the exposure associated with fluctuations on intercompany notes with our foreign subsidiaries that are not denominated in the U.S. dollar.

As of December 31, 2024, we have the following notional contract volumes related to all outstanding derivative contracts used to mitigate commodity price and foreign currency risk (all maturing in 2025):

(1)Represents an embedded derivative within our catalyst financing arrangements, which may be refinanced or require repayment under certain conditions. See Note 14 “Debt” in the Notes to Consolidated Financial Statements for additional information on these financing arrangements.

The following sensitivity analysis provides the hypothetical effects of market price fluctuations in commodity prices for our open commodity derivative contracts at December 31, 2024 and 2023:

Interest Rate Risk Management

The market risk inherent in our fixed-rate debt is the potential change arising from increases or decreases in interest rates as discussed below.

For the fixed rate HollyFrontier Corporation, HF Sinclair and HEP Senior Notes (each as defined in Note 14 “Debt” in the Notes to Consolidated Financial Statements), changes in interest rates will generally affect fair value of the debt, but not earnings or cash flows. The outstanding principal, estimated fair value and estimated change in fair value (assuming a hypothetical 10% change in the yield-to-maturity rates) for this debt as of December 31, 2024 is presented below:

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For the variable rate HEP Credit Agreement, changes in interest rates would affect cash flows, but not the fair value. At December 31, 2024, outstanding borrowings under the HEP Credit Agreement were $350 million. A hypothetical 10% change in interest rates applicable to the HEP Credit Agreement would not materially affect cash flows.

Our operations are subject to catastrophic losses, operational hazards and unforeseen interruptions, including but not limited to fire, explosion, releases or spills, cyberattacks, weather-related perils, vandalism, power failures, mechanical failures and other events beyond our control. We maintain various insurance coverages, including general liability, property damage, business interruption and cyber insurance, subject to certain deductibles and insurance policy terms and conditions. We are not fully insured against certain risks because such risks are not fully insurable, coverage is unavailable, or premium costs, in our judgment, do not justify such expenditures.

Financial information is reviewed on the counterparties in order to review and monitor their financial stability and assess their ongoing ability to honor their commitments under the derivative contracts. We have not experienced, nor do we expect to experience, any difficulty in the counterparties honoring their commitments.

We have a risk management oversight committee consisting of members from our senior management. This committee oversees our risk enterprise program, monitors our risk environment and provides direction for activities to mitigate identified risks that may adversely affect the achievement of our goals.

Reconciliations to Amounts Reported Under Generally Accepted Accounting Principles

Reconciliations of earnings before interest, taxes, depreciation and amortization (“EBITDA”) to amounts reported under generally accepted accounting principles in financial statements.

Earnings before interest, taxes, depreciation and amortization, which we refer to as EBITDA, is calculated as Net income attributable to HF Sinclair stockholders plus (i) Income tax expense (benefit), (ii) Interest expense, net of Interest income and (iii) Depreciation and amortization. EBITDA is not a calculation provided for under GAAP; however, the amounts included in the EBITDA calculation are derived from amounts included on our consolidated financial statements. EBITDA should not be considered as an alternative to Net income or Income from operations as an indication of our operating performance or as an alternative to operating cash flow as a measure of liquidity. EBITDA is not necessarily comparable to similarly titled measures of other companies. EBITDA is presented here because it is a widely used financial indicator used by investors and analysts to measure our operating performance. EBITDA is also used by our management for internal analysis and as a basis for financial covenants.

Set forth below is our calculation of EBITDA:

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Reconciliations of refinery operating information (non-GAAP performance measures) to amounts reported under generally accepted accounting principles in financial statements.

Adjusted refinery gross margin is a non-GAAP performance measure that is used by our management and others to compare our refining performance to that of other companies in our industry. We believe this margin measure is helpful to investors in evaluating our refining performance on a relative and absolute basis, including against publicly available crack spread data. Adjusted refinery gross margin per produced barrel sold is total Refining segment gross margin plus Lower of cost or market inventory valuation adjustments, Depreciation and amortization and Operating expenses, divided by sales volumes of produced refined products. This margin measure does not include the non-cash effects of Lower of cost or market inventory valuation adjustments, which relate to inventory held at the end of the period. Adjusted refinery gross margin is a non-GAAP performance measure and should not be considered in isolation or as a substitute for Refining segment gross margin. The GAAP measure most directly comparable to adjusted refinery gross margin is Refining segment gross margin. Other companies in our industry may not calculate these performance measures in the same manner. Due to rounding of reported numbers, some amounts may not calculate exactly.

Reconciliation of Refining segment gross margin to adjusted refinery gross margin to adjusted refinery gross margin per produced barrel sold and adjusted refinery gross margin, less operating expenses per produced barrel sold

(1) Exclusive of Depreciation and amortization.

(2) Regulatory charges represent a one-time penalty of $35 million related to the 2025 Consent Decree. Refer to Note 19 for further information.

(3) Represents barrels sold of refined products produced at our refineries (including Asphalt and intersegment sales) and does not include volumes of refined products purchased for resale or volumes of excess crude oil sold.

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Reconciliation of renewables operating information (non-GAAP performance measures) to amounts reported under generally accepted accounting principles in financial statements.

Adjusted renewables gross margin is a non-GAAP performance measure that is used by our management and others to compare our renewables performance to that of other companies in our industry. We believe this margin measure is helpful to investors in evaluating our renewables performance on a relative and absolute basis. Adjusted renewables gross margin per produced gallon sold is total Renewables segment gross margin plus Lower of cost or market inventory valuation adjustments, Depreciation and amortization and Operating expenses, divided by sales volumes of produced renewables products. This margin measure does not include the non-cash effects of Lower of cost or market inventory valuation adjustments, which relate to volumes in inventory at the end of the period. Adjusted renewables gross margin is not a calculation provided for under GAAP and should not be considered in isolation or as a substitute for Renewables segment gross margin. The GAAP measure most directly comparable to adjusted renewables gross margin is Renewables segment gross margin. Other companies in our industry may not calculate these performance measures in the same manner. Due to rounding of reported numbers, some amounts may not calculate exactly.

Reconciliation of Renewables segment gross margin to adjusted renewables gross margin to adjusted renewables gross margin per produced gallon sold and adjusted renewables gross margin, less operating expenses per produced gallon sold

(1) Exclusive of Depreciation and amortization.

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Reconciliation of marketing operating information (non-GAAP performance measures) to amounts reported under generally accepted accounting principles in financial statements.

Adjusted marketing gross margin is a non-GAAP performance measure that is used by our management and others to compare our marketing performance to that of other companies in our industry. We believe this margin measure is helpful to investors in evaluating our marketing performance on a relative and absolute basis. Adjusted marketing gross margin per gallon sold is total Marketing segment gross margin plus Depreciation and amortization, divided by sales volumes of marketing products. Adjusted marketing gross margin is not a calculation provided for under GAAP and should not be considered in isolation or as a substitute for Marketing segment gross margin. The GAAP measure most directly comparable to adjusted marketing gross margin is Marketing segment gross margin. Other companies in our industry may not calculate these performance measures in the same manner. Due to rounding of reported numbers, some amounts may not calculate exactly.

Reconciliation of Marketing segment gross margin to adjusted marketing gross margin to adjusted marketing gross margin per gallon sold

(1) Exclusive of Depreciation and amortization.