Welcome to HF Sinclair Corporation's third quarter 2026 conference call and webcast. Hosting the call today is Franklin Myers, who is serving as Chief Executive Officer of HF Sinclair. He is joined by Steve Ledbetter, President and COO, Vivek Garg, Acting Chief Financial Officer, Valerie Pompa, President, Growth Technology and Transformation, and Matt Joyce, SVP of Lubricants and Specialties. At this time, all participants have been placed in a listen-only mode, and the floor will be open for your questions following the presentation. If you would like to ask a question at that time, please press star 1 on your touchtone phone. If at any point your question has been answered, you may remove yourself from the queue by pressing star 1 again. If you should require operator assistance, please press star 0. We ask that you please limit yourself to one question and one follow-up. Additionally, we ask that you pick up your handset to allow optimal sound quality. Please note that this conference is being recorded. It is now my pleasure to turn the floor over to Craig Biery, Vice President, Investor Relations. Craig, you may begin.

Thank you, Kelsey. Good morning, everyone, and welcome to HF Sinclair Corporation's third quarter 2026 earnings call. This morning we issued a press release announcing results for the quarter ending September 30th, 2026. If you would like a copy of the earnings press release, you may find one on our website at hfsinclair.com. Before we proceed with remarks, please note the safe harbor disclosure statement in today's press release. In summary, it says statements made regarding management expectations, judgments, or predictions are forward-looking statements. These statements are intended to be covered under the safe harbor provisions of federal security laws. There are many factors that could cause results to differ from expectations, including those noted in our SEC filings. The call also may include discussion of non-GAAP measures. Please see the earnings press release for reconciliations to GAAP financial measures. For any forward-looking non-GAAP measures, the company is unable to provide a reconciliation without unreasonable effort due to the unpredictability and uncertainty of certain items. Also, please note any time sensitive information provided on today's call may no longer be accurate at the time of any webcast replay or rereading of the transcript. And with that, I'll turn the call over to Franklin.

Thank you, Craig. And thank you for joining us on the HS Sinclair earnings call for the third quarter. As you've already seen from this morning's news release, the company's had a very good quarter. All segments of the business performed well with all areas adding to our earnings and working hard to capture market gains in these unique circumstances. I want to say thank you to the over 5,000 employees of the company for their efforts in contributing to the success of the quarter. I'd like to give a special shout out to the team at Eldorado Refinery who are wrapping up their turnaround in a safe and compliant manner, which sets the plan up for several years of operations to come. On a geopolitical front, nothing has really changed during the last three months. Modest improvement has been made in the transit of crew through the straightforward moves, but limitations on refining complex in the Middle East still exist. and kinetic activity by the many parties still occur on most days. Likewise, the Ukraine-Russian conflict remains at a stalemate with very little if any improvement to the Russian refining complex. Finally, the Chinese continue to curtail the export of product to their historical customers. This is due to a combination of the need to replenish their strategic reserves and not being able to access discounted crude from Venezuela and around, which kept them competitive with U.S. sources. We continue to believe as we've mentioned in our last call that full recovery is unlikely to occur within the broader refining assets and therefore their products until sometime in 2028. Our view continues to be that we must stay the course on how we operate our assets as we should expect an extended time of experiencing shortage in the products and lubes markets. The activities surrounding the previously announced spinoff of the company's lubes business continues apace. Likewise, progress is occurring with the safe shutdown of the Mississauga refining assets. We're targeting a completion of the spin and the finalization of the shutdown in the middle of next year. We will keep the market updated as appropriate as we get closer in time. As I'm sure you've also noted in a separate press release this morning that we've determined exactly how long temporary actually is. Beginning January 1st, 2027, Steve Ledbetter will assume the role of CEO of the company. Both the board and I are very excited for Steve and the company as we look forward to his tenure in leading the company. I will continue to play a role for the first couple of quarters of next year as I step back into an executive chair role to assure a smooth transition and lend oversight to the activities surrounding the spin of the Lewis business. With that, let me turn it over to Steve to take us through some of the results.

Thank you, Franklin, and thank you all for joining our call. I'm excited to take on the role of CEO and president of HF Sinclair. Having worked across our businesses and closely with our employees over the past several years, I have tremendous confidence in our people, our assets, and our ability to execute. We have a strong foundation and a portfolio of high quality, strategically positioned businesses. As we move forward, our objectives are clear. Operate safely, compliantly, and reliably. Drive commercial excellence, continue our competitiveness improvement, both at the site level and through leveraging our value chain. invest selectively to further our competitive advantages and maintain a disciplined approach to capital allocation. I would like to thank Franklin for his leadership and successful tenure as CEO in 2026, and I'm honored and humbled to lead HF Sinclair into its next chapter. I will now cover our strategic highlights. Third quarter results reflected the strength of our diversified portfolio as each business segment contributed meaningfully through solid operational performance and commercial execution. From a strategic perspective, we continue to progress the previously announced multi-phase western expansion project, which we have now named Westline Connect, and expect to reach final investment decision on the first phase in the first quarter of 2027. This phase would increase the capacity to move product supply from our Rockies production into Utah and Nevada by approximately 35,000 barrels per day and is targeted to be online in 2029. We expect to fund the project with cash on hand and operating cash flows. At our Eldorado Refinery, we are wrapping up the turnaround and our previously discussed vacuum furnace project. We expect the project to enhance reliability, improve product yields, enable us to process up to an additional 10,000 barrels per day of advantaged heavy crude. More broadly, we continue to advance growth, technology, and transformation initiatives designed to strengthen our competitiveness improve safety and reliability. We continue to see compelling organic investment opportunities across the portfolio, and we are comfortable carrying a higher cash balance while we complete our valuations and make final investment decisions. At the same time, we will continue to return cash to shareholders through share repurchases and our quarterly dividends, while targeting a 50% payout ratio and preserving our disciplined capital allocation framework. During the quarter, we returned $572 million in cash to shareholders consisting of $93 million in regular dividends and $479 million in share repurchases. Since the Sinclair acquisition in March 2022, we have returned approximately $5.7 billion in cash to shareholders and have reduced our share count by over 73 million shares. Today, we also announced that our Board of Directors declared a regular quarterly dividend of $0.525 per share. As we look ahead, we believe the current environment presents attractive opportunities to further strengthen the competitive advantages of our portfolio and grow more rateable and stable cash flows through the cycle by optimizing our integrated value chain. We see accretive opportunities through growth investments in our marketing and midstream businesses, while also investing in our refining assets to reduce risk and improve operational reliability, safety, and yield. We have the unique opportunity to advance our competitive position and take advantage of the current market environment, and we're confident that our diversified asset base will continue to deliver strong results. With that, let me turn the call over to Vivek.

Thank you, Steve, and good morning, everyone. Let's begin by reviewing HF Sinclair's financial highlights. Today we reported third quarter net income attributable to HF Sinclair shareholders of $2 billion, or $11.38 per diluted share. These results reflect special items that collectively decreased net income by $64 million. Excluding these items, adjusted net income for the third quarter was $2.1 billion or $11.75 per diluted share compared to adjusted net income of $459 million or $2.44 per diluted share for the same period in 2025. Adjusted EBITDA for the third quarter was $3 billion compared to $870 million in the third quarter of 2025. In our refining segment, third quarter adjusted EBITDA was $2.6 billion compared to $661 million in the third quarter of 2025. This increase was principally driven by the tight supply of transportation fuels across the markets, elevated crack spreads, and benefits from the small refinery RINS waivers granted by the EPA. Additionally, strong transportation fuel sales in the West region were offset by lower sales volumes in the MidCon Our marketing segment reported EBITDA of 39 million for the third quarter compared to 29 million for the third quarter of 2025. Total branded fuel sales volumes were 420 million gallons for the third quarter of 2026 compared to 360 million gallons for the third quarter of 2025. Our midstream segment reported EBITDA of 101 million in the third quarter compared to 114 million in the same period of last year. In our renewable segment, excluding the lower of cost or market inventory valuation adjustment benefit of 30 million, We reported adjusted EBITDA of $109 million for the third quarter compared to negative $13 million for the third quarter of 2025. Adjusted renewable gross margins increased as a result of improved rinse prices, higher producers tax credit benefits, and increased sales volumes compared to third quarter of 2025. Total sales volumes were 63 million gallons for the third quarter of 2026 as compared to 57 million gallons for the third quarter of 2025. The third quarter lubricants and specialties results reflect special items related to the decision to retire our Mississauga refinery with the transition expected to be substantially completed in the second half of 2027. During the period, we incurred one-time costs related to the Mississauga asset retirement, including the impairment charge for the abandonment of certain assets under construction of $27 million and severance charges totaling $28 million in addition to certain acquisition, integration, and regulatory costs of $1 million. Excluding these items, the segment reported adjusted EBITDA of $174 million for the third quarter compared to $78 million for the third quarter of 2025. The increase was primarily driven by sales mix optimization and strong product and base oil prices in the third quarter of 2026 compared to the third quarter of 2025. During the third quarter of 2026, we recognized a FIFO benefit of 22 million compared to FIFO benefit of 2 million during the third quarter of 2025. We also recorded incremental accelerated depreciation and amortization of 54 million related to the Mississauga asset retirement during the quarter. Net cash provided by operations totaled 1.8 billion in the third quarter, which included 114 million of turnaround spend. H.F. Sinclair's capital expenditure totaled $137 million for the third quarter. As of September 30th, 2026, H.F. Sinclair's total liquidity stood at approximately $5.3 billion, which includes a cash balance of approximately $3.3 billion and our undrawn $2 billion unsecured credit facility. As of September 30th, we had $2.8 billion debt outstanding with a debt to cap ratio of 19% and net debt to cap ratio of negative 4%. Let's go through some guidance items. With respect to capital spending for full year 2026, we have revised our capital guidance and now expect to spend approximately $725 million on sustaining capital and turnarounds and $150 million in growth capital. Included in growth capital is our expected spend in 2026 for investments in Western Gateway, Westline Connect and Marketing Joint Ventures. For the fourth quarter of 2026, we expect to run 560 to 600,000 barrels per day of crude oil in our refining segment, which reflects the planned turnaround at our Eldorado refinery in the period. We are now ready to take questions from the audience. Kelsey?

The floor is now open for questions. At this time, if you have questions or comments, please press star 1 on your touchtone phone. We ask that you please limit to one question and one follow-up. If you have additional questions, we welcome you to rejoin the queue. If at any point your question has been answered, you may remove yourself from the queue by pressing star 1 again. Please stand by while we compile the Q&A roster. Your first question comes from the line of Neil Mehta with Goldman Sachs and Company. Your line is open, Neil. Please go ahead.

Thanks so much, Franklin. It's been great working with you. And Steve, congratulations. And maybe that's the first question that's appropriate to go to you, Steve, is just talk about your vision as you step into this role. In your comments, you spent a lot of time talking about developing more ratable cash flows through growth investments in marketing and midstream. Is that an important part of what you think about this business needs to do in order to drive value on the go forward?

Thanks, Neil. Appreciate it. I'm looking forward to it. I think you're absolutely right. We believe that what makes us different is that we can continue to grow our rateable and stable cash flow businesses that improve consistency over the cycle. This margin environment we're enjoying currently will come back to normal, and we're going to take this opportunity to make sure that we are more stable and some of our investments will be focused both in midstream and marketing, which really unlocks the value of our integrated value chain. From a priorities perspective, nothing changes. Our priorities are going to be we must remain safe, compliant, reliable. We've got to continue to improve the baseline, be disciplined in our capital allocation focus, and then take advantage of our market concentration and integrated position. And, you know, it's an exciting time. We have a lot to work from. The people in this company and the culture are second to none, I believe, in our asset base and our market position. And then I think that we've continued to demonstrate our improvement in the underlying base. We won't take our eye off that ball while we continue to go grow and take different positions from an integrated value chain perspective. So very excited about the future and looking forward to getting after it.

Awesome. And then I just want to get your perspective on some of these crude grades, specifically on WCS, which has widened out quite a bit. What are you seeing that's driving this differential widening? How do you think about the medium term? So think about deferred differentials and how those could ultimately play out. And remind us again, what percentage of your crude charge is WCS right now?

Yeah, so I mean, WCS, we have the ability to run just north of heavy, total heavy, about 100,000 barrels. A good portion of that is WCS, so we're exposed to a lot of Canadian I think what you're seeing is some about what we've talked about playing out over the past couple of years, and that is production is outpacing egress. It's getting to that point, and so you're starting to see some of that pressure. I think most significant driver currently is what we're seeing in the freight and what's happening in the rest of the world. you know the the ship-to-ship transfers in the Gulf of Oman, different trade flows that's becoming very expensive and we believe there's something to do with quite a bit of crude on the water in tankers that are holding up the additional fleet from being able to make those flows. Additional impact into the Gulf Coast is the VIN crude that is coming on and so all of that ends up putting pressure on WCS and we've seen the differentials that you guys have seen Anywhere north of $25 up into $30. Now that will be, how long that lasts, we don't know, but that's beneficial for us and we think in the near term we'll take advantage of it. We think that moderates, but we do see that the differential stay wider than they have throughout the near term, at least through 2027. Thank you.

Your next question comes from the line of Manav Gupta with UBS. Your line is open, Manav. Please go ahead.

Congrats, Steve. We are 100% confident you will lead better, and I would like to congratulate you on that. My first question to you is a little bit on the refining macro. Very strong earnings from refining segment, even if you strip out one-time benefits of maybe $500 million to $600 million on SREs. The overall capture is improving. So if you could talk about the performance of the refining assets in the current environment and when do you actually expect some of these margins to start normalizing?

Yeah, thanks Manav. Again, very excited. Appreciate the tagline to lead better. That was quite whimsical and gave us all a chuckle here this morning. So I appreciate that. You know, from a refining macro, we don't know how long this is going to last. This is traditionally what we've seen since the geopolitical issues, particularly in the Middle East, has been mainly a distillate story. But the factors that continue to play out in terms of shortage of refining capacity, that's not coming back anytime soon. And depending on who you talk to, and I think that the picture is getting even more murky. I understand there was another impact last night. but there's roughly four million barrels a day of refining production offline split kind of two and a half in the Middle East another one and a half in Russia and all that creates a major constraint in terms of clean fuels on the market and the inventories are at all-time lows so as far as the market environment you know I see us enjoying the benefits and the most Thank you for joining us today. Our crude guidance, we just came in slightly above the midpoint, closer to the high end, and I think that's 100% associated with us operating better and looking at the opportunities in between the refineries and ensuring that we can take the shorts to other parts and use the integrated value chain a little better. We're placing barrels in better markets. We're high grading the molecules and we have better like product yield across the fleet and the combination of those things I think continue to demonstrate our improvement through year over year capture. You know, if you strip out SRE, our capture was right at 105% and so year over year that is a structural improvement and we've continued to see that quarter over quarter. So staying focused on commercial excellence and improving our reliability, we're seeing that start to play out in the outcomes and we'll continue to drive that journey forward as far as our base principle.

Thank you. Very clear. My quick follow-up is on shareholder returns. You have a clear formula. I think you were lagging a little in the first half, but the third quarter shows now you're in a big catch-up mode. So should we expect you will stick to the formula and allow the shareholders to participate in the upside and refining margin environment?

Thanks, Manav. Yes, our capital allocation strategy remains unchanged. We expect to end the year at our target payout ratio of 50%, and so that's what you should be expecting.

Thank you so much.

Your next question comes from the line of Teresa Chen with Barclays. Your line is open, Teresa. Please go ahead.

Good morning and congratulations to Steve as well. Wish you all the best and looking forward to working with you in this new role. Thanks. On the Westline Connect project, as we await FID in early 2027, what are the key gating factors between now and then and based on commercial work you've done over the past few months How are you thinking about the scope and timing of potential follow-on phases?

Yes. So, thanks, Teresa. You know, we've talked about our FID approach. One of the things that we're very careful about is making sure we not only do the right and we had previously discussed maybe taking FID in Q4. We have some options in terms of route, in terms of scope that may make a better outcome. And so, we're pushing that FID target Thank you all for joining us. but the entire commodity complex for our integrated assets.

Understood. And as we sit here at the end of October in 2026 and looking at 2027, when we think about 2027 spending, what are your early thoughts on potential size and magnitude of CapEx next year with Westline Connect approaching FID and other growth and many more opportunities across your portfolio. How much could CapEx step up next year?

Yes, so it's a bit early to guide on 2027. We just raised our guidance as Vivek spoke about in 26 and that was predominantly associated with modest turnaround and sustaining as well as the current portion of spend for our Go West initiatives and our growth and marketing. So we're not indicating, we still believe our turnaround and sustaining CapEx is range bound to the cycle. We will look to take opportunities to improve our risk profile and our small value creation elements within that, but we're still staying in that range. As we take FID, we will come back to the market with that incremental amount on other projects.

Thank you.

Your next question comes from the line of Doug Legat with Wolf Research. Your line is open, Doug. Please go ahead.

Thank you. Good morning, Steve. Congrats from us as well. It's great to see after all the improvements that have been made over the years, which is actually my first question, if you don't mind. Where do you think you are in terms of refinery? reliability optimization upgrading at this point. Have you done what you wanted to do or is there more to do and what's the capital implications? That's my first question.

Yeah, I mean, so, you know, we've made heavy investments over the past several years and taken some very good steps forward in terms of PSM risk reduction, personal risk reduction and reliability. Are you ever done investing in these things? I don't know that you ever are, and there's really a baseline set that you will continue to have to invest. That's what I mentioned earlier, this range bound of turnaround and sustaining capital. Having said that, we will look and take the current market environment and the opportunity in this cash build scenario to see where we could take a step forward, not only investments in the kit, but also investments in technology. where we see opportunities to go improve, seeing things sooner, fixing things sooner, and learning through AI technology that will give us a better footprint in terms of improvement and finding small and fixing small. So not guiding really any more on explicit projects, but we are going to be very diligent in terms of how we evaluate any additional capital spend. And where we find projects like the Eldorado Back Tower Furnace project is implemented, are being implemented and wrapping up now, to the extent that they meet our capital allocation framework and investment hurdles, we'll take those decisions at that time.

I appreciate that. My follow-up is, I expect it's for Vivek, but whoever you want to allocate this to. So you had about a $600 million SRE tailwind, it seems, this quarter. But I'd like to understand the mechanism as to how you realize that. What's the cash flow? Thank you. Thanks, Doug. I'll take this question. So we recognize the expense as we generate the obligation, as you would expect through the year. With the SRE granted towards the end of the quarter,

We essentially ended up reducing our expense or reversing our expense that we had already taken over the period. Now we're left with the incremental rents in our inventory and we have not monetized on any of those because we do have the flexibility to utilize a lot of those against our next year's compliance. And so while you see the benefit come through in earnings, you will actually not see any of that benefit come through cash flow statement.

Yeah, I would look at it as a deferred cash obligation in the future years as we think about it from monetizing and trading activity.

That's very helpful, guys. Thanks very much indeed.

Thanks, Doug.

Your next question comes from the line of Philip Youngworth with BMO. Your line is open, Philip. Please go ahead.

Yeah, thanks, and also wanted to extend my congratulations to Steve. I was hoping you could talk through the rationale for participating in Western Gateway as an equity partner and just the benefits to Dyno. Plus, you already have Westline, although I understand you don't view them as competing projects. And is the plan also to fund Western Gateway capital commitments through operating cash flow?

Yeah, so thanks for the congrats. And on Western Gateway, I think we've talked about this a little bit in terms of our Go West initiatives. The reality that we believe in our market view in the Midwest is that depending on what happens, we believe that there's something coming as far as E15. You see the demand and people moving out. Demand patterns are people moving west. And as part of that, You know, with our asset locations, it made a lot of sense to go participate in Western Gateway, not only because we believe the Southwest is a key important market and we're going to be connected to our Eldorado, Tulsa and Artesia Refinery. And then, you know, ultimately, when we take equity investment, we feel like growing, again, some of our rateable, stable cash flow businesses. That's a great way to do it. It somewhat backstops our placement. So that falls right in with our thesis from a strategy perspective. It's a project that we think makes a lot to the overall complex. And then, again, it does not, in our view, compete with Westline Connect when you think about what's happening in California with the recent refinery closures and the cost to operate in that geography. We think that's only going to continue. And so the combination of both of these projects should be and many more. Steve, as you step into the

I'm hoping to get your views on refining M&A in this environment versus the opportunity for higher growth CapEx across the business, plus M&A across other business lines such as midstream and marketing.

Yeah, I mean, so just to be clear, this may be a question because we are building a sizable amount of cash. When we're talking about growth and we structure the organization to go execute that growth well with Val Pompa taking the president of growth transformation technology, putting some strength and capability associated with doing projects right, the majority of our growth is going to be targeted at organic opportunities. While we're not active in material and organic, of course, we would look at things where it made sense and we're creative and fit our strategic approach and investment hurdles, but that's not the primary growth objective for us. and when we talk about M&A or growth in midstream and marketing, we've been happy with the performance of our joint venture that we entered into late last year. That continues to grow. We continue to find packages and put it in there, but growing and scaling JVs, having exposure to the rack to retail and the full suite of that integrated value delivery is something that we like. I would also like to point out that as we grow our marketing business, It's not just what we see in marketing. It high grades our entire commodity stack as we move our lowest valued barrels out of bulk and unbranded into that channel. So it improves refining capture and I failed to mention that was another element that we continue to see improving our year over year capture. In the midstream space, we would hesitate to look at anything that didn't have massive integrated value. So to the extent that we find something that can accelerate Your next question comes from the line of Matthew Blair with TPH. Your line is open, Matthew. Please go ahead.

Thanks and good morning and congrats Steve on the promotion. Thanks. Your renewable diesel results continue to impress in 2026. You're more profitable per gallon than some of your larger peers, even though you're still at less than 70% utilization. Could you talk about this transformation and did the Q3 results include any sort of one-off items? And then finally for Q4, Any early thoughts on renewable diesel capture in the fourth quarter? Do you think you would experience some feedstock lag benefits?

Yeah, thanks, Matt. You know, this is an area we've been pretty proud of. It was pretty hard sledding for a couple of years in this business, but the team has done an outstanding job in terms of three key things. One is in our feedstock strategy, and we believe that getting... really focused on direct versus brokers and location proximity has really helped us out. That's a significant amount. And then market placement. We're greater than 50% outside of California now. That has been an objective to make sure that we find markets that are not reliant on an area that is, to be honest, chock full with distillate product and renewable diesel. And so we're finding areas in the Pacific Northwest leveraging our integrated products value chain, as well as Canada in the new market. In New Mexico, we're seeing benefits already from. And in OpEx, we remain disciplined there and keeping it flat. And our performance in running these kits is improving. You mentioned we were below 70% utilization, but just to call out, when you take out the Cheyenne turnaround this past quarter, we were at 72% utilization. and last quarter when you take out the Parco outage, we were at 67%. We think our sweet spot because of the co-located facilities is north of 70%. We delivered that X, the Cheyenne turnaround and we see that moving forward as the target utilization given the macro and the backdrop. I couldn't be more proud of this team and I do believe that this is an area, a bright spot that has been a significant business turnaround for our company. and we see the future of it bright for Q4. We don't normally guide on capture, but we have plans to take advantage of the favorable market environment for next quarter or this quarter.

Sounds good. And then on the refining side, your OpEx moved up quarter over quarter in Q3. Could you talk about what drove that up? And I think at one point there was a target to hit $7.25 a barrel on refining OpEx. Is that a good target for 2027 or has that changed?

Yeah, I mean, so we had some one time OpEx events in the quarter and year to date, really driven by environmental accrual true ups when they become probable and estimable. And it was time to do that, given our performance versus employee benefit charges. And then we've seen some inflationary pressures, particularly in the CAT-CHEM space. We're running harder and producing more accolade, as an example, and sulfuric acid has gone has gone quite a bit higher. And then going after some maintenance items to improve risk and reliability performance where we have a window to do so. And that accounted for the majority of it. You know, the trajectory of our underlying programs to drive our competitiveness continue to mature. And we're seeing that as evidenced by our holistic delivery of crew charge and our associated reliability trends across the fleet. So we feel like we're being good stewards of cost. Now let me talk about the 725 target. We're committed to improving our competitiveness across the entire fleet, but we're focused on technology and capability to drive reliability. Ultimately, we want to improve not only cost, but total earnings. We want to be mindful that we don't prioritize the cost-only picture without contemplating the underlying operational safety and reliability performance. As you know, that's foundational to the profitability of our business. So not committing to the 725. If you look at the underlying trajectory minus the one-time elements, we still are demonstrating cost efficiency and competitiveness, and we'll continue to keep that as one of the focus areas.

Sounds good. Thanks for your comments.

Your next question comes from the line of John Royal with Piper Sandler. Your line is open, John. Please go ahead.

Hi, good morning. Thanks for taking my question and congrats to Steve. I was hoping first maybe you could talk through the process of separating LUVs and what are the near-term steps we can expect from here and any big pieces of progress we should expect from now to the next time we speak to you in January. Excuse me, to the next time we speak to you in January.

Hey, John. This is Matt Joyce and thanks for the question. yeah the separation is still on track for the second quarter of 27 or second half of 27 and we continue to make solid progress across all the separation work streams moving from our planning processes now into an execution stage and that includes the PLR the form 10 and getting some key leadership roles starting to get filled in we're also undertaking a lot of work and understanding the lift and shift required for our IT infrastructure and all the operating agreements that go along with that. So our focus is on being fully operational and ready as a standalone company by early quarter three and not simply completing the legal separation by that time.

Great. And then maybe if we could stick with lubes and just more of a question on the underlying business versus the spinoff. But I was hoping you could just speak to the strength that we saw in 3Q, 174 million of EBITDAs, the second really strong quarter in a row. Just anything on the strength there and what that market looks like today?

Yeah, the underlying business remains pretty healthy. Obviously, we've had some We've had tailwinds from FIFO in the third quarter, but the demand and the mix has been very good. We've been working really hard with the team to recover costs as a lot of our raw material increases hit the business and the team did a really terrific job getting out with pricing and portfolio management. and that was primarily driven as well there was a big piece of that that we enjoyed from the base oils market that did get a little bit tighter on both group twos and group threes but both in the finished and specialties side of the business we saw some pretty impressive performance and finished in particular has been tremendously successful in pricing discipline and some new business gains that we were able to take advantage of and we've secured those for longer-term contracted periods of time.

Thank you.

You bet.

The next question comes from the line of Jason Gabelman with TD Cohen. Your line is open, Jason. Please go ahead.

Hey, morning, and extending my congratulations to Steve. I wanted to stick on lubes and the reorganization process. I know last quarter there was some confusion because it sounds like you were going to be able to backfill the lost EBITDA from shutting down the Mississauga plant. So I was hoping you could provide more color on how you would be able to do that. And then also if you could kind of provide what the kind of rack forward business, what type of debt they're going to be able to take on post the spin. Thanks.

Thanks, Jason. It's Matt Joyce again. With regards to the earnings potential and what the business looks like on a go-forward basis, we're really not guiding all that much on that particular point at this time. But we are changing the supply model where we're not going to be manufacturing base oils any longer, but we're not walking away from the market. We expect that we're going to have a more flexible supply model, lower fixed cost, continued growth in both our finished and specialties business segments, and improved operating efficiencies to help offset some of the historical contribution that came from Mississauga. So that's really what we're looking to do. And I think we've given some indications as to what we expect with regards to historical 12-month trailing EBITDA that we would strive to secure and provide as our coming out into the marketplace as an independent company. With regards to the capital structure and how we view that as part of our standalone entity and the debt and so on and so forth, our objective is really to launch NUCO with a strong, flexible balance sheet that supports both the resilience of the business as well as our growth objectives. And we're looking to continue to entertain and consider businesses that are tuck-ins that make sense for us to put on and complement our business. But we're also looking to get that organic growth out of the business that we have in hand. The final capitalization levels are still being determined, but financial flexibility remains the priority. And we don't plan to load this up with debt.

And just to jump in here, Jason, you see the balance sheet of Sinclair just in general as we believe that having a very flexible, under levered company gives us optionality for opportunities in the future. That attitude is not going to change with lubes as it comes out the door. that they're going to have sufficient financial opportunities without too much debt on it. We haven't described or determined with finality as to how much debt that is at this point, but it's not going to be as you've seen with some spends that are loaded out and kicked out the door because this is a thriving business that has opportunity and they need to have the options to take advantage of that once they're independent.

That's great. I appreciate that color. and my follow-ups on the refining business and growth opportunities there. We've discussed the widening WCS diffs. I know you mentioned some of that's transitory, but some of it may be more structural in nature. Do you see an ability to invest in some of your plants to increase the amount of WCS you're able to run?

Yeah, Jason, thanks. That's exactly one of the benefits that The back tower furnace at El Dorado that's coming online as we wrap up this turnaround is directed at not only reliability but yield improvement. But it gives us the ability to run up to another 10,000 barrels a day of heavy crude and then we can take further advantage of that through our heavy oil value chain and our retail asphalt business. But we will continue to look at those elements because I do think structurally near term there's going to be some widening. What happens as trade flows normalize? You've seen a lot of pipelines being announced that will bring more egress online, and depending on production timing and egress capability, that could have some narrowing when that shapes up. But structurally, it's going to be an opportunity, and we will look to continue to go drive as much discounted heavy advantage crude through our complex as we can.

Great. Thanks for the answers. Thanks.

We have reached the end of the Q&A session. I will now turn the call back to Franklin Myers for closing remarks.

Thank you so much. And thank you all for joining our call this morning. I just want to express my personal appreciation to the executive leadership team and to the many employees of Sinclair who worked hard in making my temporary assignment here as CEO an exciting and meaningful part of my time here. Also, I want to thank you on the call for supporting our company. We have a great team here and we have a great company that's been developed over many years with a lot of opportunity going forward. The board has taken a deliberate approach at looking at inward at the team for the leadership to go forward because we believe that within this company, we have the talent to do that. Steve's elevation to CEO is setting up the company for a great leadership, but not only with Steve, but the entire team going forward. I look forward to many, many days of very good operations and results ahead of us. Thank you for supporting the company. Thank you for being on the call.

Thank you. This does conclude today's teleconference. Please disconnect your lines at this time and have a wonderful day.