HF SINCLAIR CORP Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-Q)

This Item 2 contains "forward-looking" statements. See "Forward-Looking
Statements" at the beginning of Part I of this Quarterly Report on Form 10-Q. In
this document, the words "we," "our," "ours" and "us" refer only to HF Sinclair
Corporation ("HF Sinclair") and its consolidated subsidiaries or to HF Sinclair
or an individual subsidiary and not to any other person with certain exceptions.
Generally, the words "we," "our," "ours" and "us" include Holly Energy Partners,
L.P. ("HEP") and its subsidiaries as consolidated subsidiaries of HF Sinclair,
unless when used in disclosures of transactions or obligations between HEP and
HF Sinclair or its other subsidiaries. This document contains certain
disclosures of agreements that are specific to HEP and its consolidated
subsidiaries and do not necessarily represent obligations of HF Sinclair. When
used in descriptions of agreements and transactions, "HEP" refers to HEP and its
consolidated subsidiaries. References herein to HF Sinclair "we," "our," "ours,"
and "us" with respect to time periods prior to March 14, 2022 refer to
HollyFrontier Corporation ("HollyFrontier") and its consolidated subsidiaries
and do not include Hippo Holding LLC, the parent company of Sinclair Oil LLC,
Sinclair Transportation Company LLC or their respective consolidated
subsidiaries (collectively, the "Acquired Sinclair Businesses"). References
herein to HF Sinclair "we," "our," "ours," and "us" with respect to time periods
from and after March 14, 2022 include the operations of the Acquired Sinclair
Businesses. Unless otherwise specified, the financial statements included herein
include financial information for HF Sinclair, which for the time period from
March 14, 2022 to June 30, 2022 includes the combined business operations of
HollyFrontier and the Acquired Sinclair Businesses.


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 other
specialty products. We own and operate refineries located in El Dorado, Kansas
(the "El Dorado Refinery"); Tulsa, Oklahoma, which comprise two production
facilities, the Tulsa West and Tulsa East facilities (collectively, the "Tulsa
Refineries"); Anacortes, Washington (the "Puget Sound Refinery"); Artesia, New
Mexico, which operates in conjunction with crude oil distillation, vacuum
distillation and other facilities situated 65 miles away in Lovington, New
Mexico (collectively, the "Navajo Refinery"); Woods Cross, Utah (the "Woods
Cross Refinery"); Sinclair, Wyoming (the "Sinclair Refinery") and Casper,
Wyoming (the "Casper Refinery"). 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. We supply high-quality fuels
to more than 1,300 Sinclair branded stations and license the use of the Sinclair
brand at more than 300 additional locations throughout the country. 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. Through our subsidiaries, we produce renewable diesel at two
of our facilities in Wyoming and our facility in New Mexico. We also own a 47%
limited partner interest and a non-economic general partner interest in HEP, a
master limited partnership that provides petroleum product and crude oil
transportation, terminalling, storage and throughput services to the petroleum
industry, including HF Sinclair subsidiaries.

Market Developments
For the three months ended June 30, 2022, net income attributable to HF Sinclair
stockholders was $1,221.3 million compared to $168.9 million for the three
months ended June 30, 2021. For the six months ended June 30, 2022, net income
attributable to HF Sinclair stockholders was $1,381.2 million compared to $317.1
million for the six months ended June 30, 2021. Gross refining margin per
produced barrel sold in our Refining segment increased 211% for the three months
ended June 30, 2022 over the same period of 2021.

Our results for the second quarter and first six months of 2022 were favorably
impacted by continued strong global economic activity with global demand for
transportation fuels, lubricants and the transportation and terminal services
having returned to pre-pandemic levels. The rapid increases in crude oil prices
and market crack spreads during the second quarter were driven by both sustained
increases in demand and the global supply disruption related to actions taken in
response to both the COVID-19 pandemic and sanctions imposed on Russia for its
invasion of Ukraine. We continue to adjust our operational plans to the evolving
market conditions. The extent to which our future results are affected by the
COVID-19 pandemic or volatile regional and global economic conditions will
depend on various factors and consequences beyond our control.

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Sinclair Acquisition
On March 14, 2022 (the "Closing Date"), 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 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 and referred to herein as "Sinclair
HoldCo"). On the Closing Date, HF Sinclair completed its previously announced
acquisition of Sinclair Oil by effecting (a) a holding company merger with
HollyFrontier surviving such merger as a direct wholly owned subsidiary of HF
Sinclair (the "HFC Merger") and (b) immediately following the HFC Merger, a
contribution whereby Sinclair HoldCo contributed all of the equity interests of
Hippo Holding LLC, the parent company of Sinclair Oil (the "Target Company") to
HF Sinclair in exchange for 60,230,036 shares of HF Sinclair common stock,
resulting in the Target Company becoming a direct wholly owned subsidiary of HF
Sinclair (the "HFC Transactions"). At the effective time of the HFC Merger, all
of HollyFrontier's outstanding shares were automatically converted into
equivalent corresponding shares of HF Sinclair, and HF Sinclair became the
successor issuer to HollyFrontier pursuant to Rule 12g-3(a) under the Securities
and Exchange Act of 1934, as amended (the "Exchange Act"), and replaced
HollyFrontier as the public company trading on the New York Stock Exchange
("NYSE") under the symbol "DINO."

HF Sinclair acquired Sinclair HoldCo's refining, branded marketing, renewables,
and midstream businesses. The branded marketing business supplies high-quality
fuels to more than 1,300 Sinclair branded stations and licenses the use of the
Sinclair brand at more than 300 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, HEP acquired STC, Sinclair
HoldCo'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 (25.06% non-operated interest); Pioneer Pipeline (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). The addition of Sinclair Oil and STC to the HollyFrontier
business created a combined company with increased scale and ability to
diversify and is expected to drive growth through the expanded refining and
renewables business. In addition, the HFC Transactions added an integrated
branded wholesale distribution network to our business.

See Note 2 “Acquisitions” and Note 3 “Holly Energy Partners” in the notes to the consolidated financial statements for more information.

Puget Sound Refinery Acquisition
On May 4, 2021, HollyFrontier Puget Sound Refining LLC, a wholly owned
subsidiary of HollyFrontier, entered into a sale and purchase agreement with
Equilon Enterprises LLC d/b/a Shell Oil Products US ("Shell") to acquire Shell's
Puget Sound refinery and related assets, including the on-site cogeneration
facility and related logistics assets. The acquisition closed on November 1,
2021.

Renewable Fuel Standard Regulations
Pursuant to the 2007 Energy Independence and Security Act, the Environmental
Protection Agency ("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 renewable identification
numbers ("RINs"), in lieu of such blending. Compliance with RFS regulations
significantly increases our cost of products sold, with RINs costs totaling
$210.5 million and $406.8 million for the three and six months ended June 30,
2022, respectively. At June 30, 2022, our open RINs credit obligations were
$79.5 million. See Note 2 "Acquisitions" in the Notes to Consolidated Financial
Statements for additional information on RINs credit obligations assumed in the
Sinclair Transactions.

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 $72.0 million in the three and six months ended June 30,
2022 related to the modification of the 2020 and 2021 volume targets.

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OUTLOOK


Within our Refining segment, for the third quarter of 2022, we expect to run
between 630,000 - 650,000 barrels per day of crude oil. This guidance reflects
the strong underlying demand trends in our markets, the reduction of refined
product supply driven by the global reaction to Russia's invasion of Ukraine and
a full quarter's operating results from the Sinclair and Casper refineries.

Within our Lubricants and Specialty Products segment, for the third quarter of
2022, we expect continued strength in earnings in our Rack Forward business as
well as strong performance in our Rack Back business due to the reduction in
base oil supply from Russia.

Within our Renewables business, we completed construction of the Artesia
renewable diesel unit and commenced start up in the second quarter of 2022. The
Sinclair and Cheyenne renewable diesel units and the Artesia pre-treatment unit
are all on-line. For the third quarter of 2022, we will continue to ramp up
production across these assets as we expect to reach full production levels by
the end of the third quarter. We are suspending construction of the Sinclair
pre-treatment unit until 2023 pending a review of project economics and other
potential alternatives.

In the third quarter of 2022, HEP expects to hold the quarterly distribution
constant at $0.35 per unit, or $1.40 on an annualized basis. HEP remains
committed to its distribution strategy focused on funding all capital
expenditures and distributions within operating cash flow and maintaining
distributable cash flow coverage of 1.3x or greater with the goal of reducing
leverage to 3.0-3.5x.

Our Board of Directors declared a regular quarterly dividend in the amount of
$0.40 per share, payable on September 1, 2022 to holders of record of common
stock on August 18, 2022. In the second quarter of 2022, we resumed the
repurchase of our common stock under our existing $1.0 billion share repurchase
program and expect to remain active throughout the second half of 2022.

On March 27, 2020, the U.S. government passed the Coronavirus Aid, Relief, and
Economic Security Act (the "CARES Act"), an approximately $2 trillion stimulus
package that included various provisions intended to provide relief to
individuals and businesses in the form of tax changes, loans and grants, among
others. At this time, we have not sought relief in the form of loans or grants
from the CARES Act; however, we have benefited from certain tax deferrals in the
CARES Act and may benefit from other tax provisions if we meet the requirements
to do so. During the second quarter of 2022, we received $83 million in cash tax
benefit in 2022 from the net operating loss carryback provisions under the CARES
Act.

A more detailed discussion of our financial and operating results for the three and six months ended June 30, 2022 and 2021 is presented in the following sections.

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RESULTS OF OPERATIONS

Financial Data

                                                                   Three Months Ended
                                                                        June 30,                                 Change from 2021
                                                               2022                  2021                  Change                 Percent
                                                                                 (In thousands, except per share data)
Sales and other revenues                                  $ 11,162,160          $ 4,577,123          $      6,585,037                  144  %
Operating costs and expenses:
Cost of products sold (exclusive of depreciation
and amortization):
Cost of products sold (exclusive of lower of cost
or market inventory valuation adjustment)                    8,579,915            3,825,729                 4,754,186                  124
Lower of cost or market inventory valuation
adjustment                                                      34,543             (118,825)                  153,368                 (129)
                                                             8,614,458            3,706,904                 4,907,554                  132
Operating expenses (exclusive of depreciation and
amortization)                                                  606,127              334,191                   271,936                   81
Selling, general and administrative expenses
(exclusive of depreciation and amortization)                   110,875               77,754                    33,121                   43
Depreciation and amortization                                  164,044              124,042                    40,002                   32

Total operating costs and expenses                           9,495,504            4,242,891                 5,252,613                  124
Income from operations                                       1,666,656              334,232                 1,332,424                  399
Other income (expense):
Earnings of equity method investments                            5,447                3,423                     2,024                   59
Interest income                                                  1,844                1,029                       815                   79
Interest expense                                               (38,961)             (28,942)                  (10,019)                  35

Gain (loss) on foreign currency transactions                      (905)                 583                    (1,488)                (255)
Gain on sale of assets and other                                 2,320                7,927                    (5,607)                 (71)
                                                               (30,255)             (15,980)                  (14,275)                  89
Income before income taxes                                   1,636,401              318,252                 1,318,149                  414
Income tax expense                                             383,493              123,485                   260,008                  211
Net income                                                   1,252,908              194,767                 1,058,141                  543
Less net income attributable to noncontrolling
interest                                                        31,646               25,917                     5,729                   22

Net income attributable to HF Sinclair shareholders $1,221,262

     $   168,850          $      1,052,412                  623  %
Earnings per share attributable to HF Sinclair
stockholders:
Basic                                                     $       5.43          $      1.03          $           4.40                  427  %
Diluted                                                   $       5.43          $      1.03          $           4.40                  427  %
Cash dividends declared per common share                  $       0.40          $         -          $           0.40                  100  %
Average number of common shares outstanding:
Basic                                                          222,952              162,523                    60,429                   37  %
Diluted                                                        222,952              162,523                    60,429                   37  %



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                                                                    Six Months Ended
                                                                        June 30,                                  Change from 2021
                                                               2022                  2021                  Change                  Percent
                                                                                  (In thousands, except per share data)
Sales and other revenues                                  $ 18,620,910          $ 8,081,416                10,539,494                    130  %
Operating costs and expenses:
Cost of products sold (exclusive of depreciation
and amortization):
Cost of products sold (exclusive of lower of cost
or market inventory valuation adjustment)                   15,081,927            6,786,034                 8,295,893                    122
Lower of cost or market inventory valuation
adjustment                                                      25,992             (318,862)                  344,854                   (108)
                                                            15,107,919            6,467,172                 8,640,747                    134
Operating expenses (exclusive of depreciation and
amortization)                                                1,083,561              734,100                   349,461                     48
Selling, general and administrative expenses
(exclusive of depreciation and amortization)                   221,297              159,729                    61,568                     39
Depreciation and amortization                                  308,645              248,121                    60,524                     24

Total operating costs and expenses                          16,721,422            7,609,122                 9,112,300                    120
Income from operations                                       1,899,488              472,294                 1,427,194                    302

Other income (expense):
Earnings of equity method investments                            9,073                5,186                     3,887                     75
Interest income                                                  2,841                2,060                       781                     38
Interest expense                                               (73,820)             (67,328)                   (6,492)                    10

Gain on tariff settlement                                            -               51,500                   (51,500)                  (100)

Loss on foreign currency transactions                             (766)                (734)                      (32)                     4
Gain on sale of assets and other                                 6,215                9,817                    (3,602)                   (37)
                                                               (56,457)                 501                   (56,958)               (11,369)
Income before income taxes                                   1,843,031              472,795                 1,370,236                    290
Income tax expense                                             404,822               95,178                   309,644                    325
Net income                                                   1,438,209              377,617                 1,060,592                    281
Less net income attributable to noncontrolling
interest                                                        56,973               60,550                    (3,577)                    (6)

Net income attributable to HF Sinclair shareholders $1,381,236

     $   317,067          $      1,064,169                    336  %

Earnings (loss) per share attributable to HF
Sinclair stockholders:
Basic                                                     $       6.86          $      1.92          $           4.94                    257  %
Diluted                                                   $       6.86          $      1.92          $           4.94                    257  %
Cash dividends declared per common share                  $       0.40          $      0.35          $           0.05                     14  %
Average number of common shares outstanding:
Basic                                                          199,149              162,501                    36,648                     23  %
Diluted                                                        199,149              162,501                    36,648                     23  %




Balance Sheet Data

                                June 30, 2022      December 31, 2021
                                 (Unaudited)
                                           (In thousands)
Cash and cash equivalents      $   1,702,286      $          234,444
Working capital                $   3,636,627      $        1,696,990
Total assets                   $  19,177,854      $       12,916,613
Long-term debt                 $   3,348,103      $        3,072,737
Total equity                   $   9,874,910      $        6,294,465



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Other Financial Data

                                                       Three Months Ended June 30,                      Six Months Ended June 30,
                                                        2022                     2021                    2022                   2021
                                                                                     (In thousands)
Net cash provided by operating
activities                                     $     1,528,356               $  427,755          $    1,989,392             $  490,081
Net cash used for investing activities         $      (153,835)              $ (175,248)         $     (539,011)            $ (322,312)
Net cash provided by (used for)
financing activities                           $      (261,214)              $  (48,917)         $       20,172             $ (138,478)
Capital expenditures                           $       159,444               $  182,880          $      317,740             $  332,841
EBITDA (1)                                     $     1,805,916               $  444,290          $    2,165,682             $  725,634



(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) interest expense, net of interest income, (ii) income tax
provision, 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 in 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 widely used financial indicator 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" following Item 3 of Part I of this
Form 10-Q.

Segment Operating Data

Our operations are organized into five reportable segments, Refining, Renewable Energy, Marketing, Lubricants and Specialty Products, and HEP. See Note 15 “Segment Information” in the Notes to the Consolidated Financial Statements for additional information on our reportable segments.

Refine segment operational 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, Sinclair and Casper Refineries. The Puget Sound Refinery was acquired
November 1, 2021, and thus is included for the period January 1, 2022 to
June 30, 2022. In addition, the refinery operations of the Sinclair and Casper
Refineries are included for the period March 14, 2022 (date of acquisition)
through June 30, 2022. The following tables set forth information, including
non-GAAP performance measures, about our consolidated refinery operations. The
cost of products and refinery gross and net operating margins do not include the
non-cash effects of lower of cost or market inventory valuation adjustments and
depreciation and amortization. Reconciliations to amounts reported under GAAP
are provided under "Reconciliations to Amounts Reported Under Generally Accepted
Accounting Principles" following Item 3 of Part I of this Form 10-Q.

                                                    Three Months Ended June 30,                 Six Months Ended June 30,
                                                     2022                  2021                2022 (8)               2021
Mid-Continent Region
Crude charge (BPD) (1)                               277,930              278,380               284,030              247,500
Refinery throughput (BPD) (2)                        292,570              293,050               298,950              257,030
Sales of produced refined products (BPD)
(3)                                                  279,170              287,680               279,710              249,400
Refinery utilization (4)                               106.9   %            107.1  %              109.2   %             95.2  %

Average per produced barrel (5)
Refinery gross margin                          $       32.53           $    10.82          $      20.96           $     8.99
Refinery operating expenses (6)                         6.21                 5.27                  6.11                 7.22
Net operating margin                           $       26.32           $     5.55          $      14.85           $     1.77

Refinery operating expenses per
throughput barrel (7)                          $        5.92           $     5.18          $       5.72           $     6.89


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                                                           Three Months Ended June 30,                  Six Months Ended June 30,
                                                           2022                  2021                2022 (8)                2021
Mid-Continent Region
Feedstocks:
Sweet crude oil                                                 54  %                 64  %                 58  %                 62  %
Sour crude oil                                                  22  %                 14  %                 18  %                 14  %
Heavy sour crude oil                                            19  %                 17  %                 19  %                 19  %
Other feedstocks and blends                                      5  %                  5  %                  5  %                  5  %
Total                                                          100  %                100  %                100  %                100  %

Sales of produced refined products:
Gasolines                                                       49  %                 51  %                 50  %                 51  %
Diesel fuels                                                    35  %                 34  %                 34  %                 34  %
Jet fuels                                                        5  %                  4  %                  6  %                  5  %
Fuel oil                                                         1  %                  1  %                  1  %                  1  %
Asphalt                                                          4  %                  2  %                  3  %                  2  %
Base oils                                                        4  %                  4  %                  4  %                  4  %
LPG and other                                                    2  %                  4  %                  2  %                  3  %
Total                                                          100  %                100  %                100  %                100  %


West Region
Crude charge (BPD) (1)                            349,380             137,970             292,450             134,940
Refinery throughput (BPD) (2)                     370,740             151,680             315,350             148,160
Sales of produced refined products (BPD)
(3)                                               376,400             156,260             309,530             150,290
Refinery utilization (4)                             83.6  %             95.2  %             77.6  %             93.1  %

Average per produced barrel (5)
Refinery gross margin                          $    39.21          $    13.35          $    30.42          $    11.88
Refinery operating expenses (6)                      9.10                6.57                9.19                7.29
Net operating margin                           $    30.11          $     

6.78 $21.23 $4.59

Refinery operating expenses per
throughput barrel (7)                          $     9.24          $     6.77          $     9.02          $     7.40

Feedstocks:
Sweet crude oil                                        33  %               22  %               29  %               23  %
Sour crude oil                                         46  %               59  %               50  %               59  %
Heavy sour crude oil                                   10  %                -  %                9  %                -  %
Black wax crude oil                                     5  %               10  %                5  %                9  %
Other feedstocks and blends                             6  %                9  %                7  %                9  %
Total                                                 100  %              100  %              100  %              100  %

Sales of produced refined products:
Gasolines                                              53  %               52  %               53  %               53  %
Diesel fuels                                           33  %               37  %               31  %               37  %
Jet fuels                                               5  %                -  %                5  %                -  %
Fuel oil                                                2  %                3  %                5  %                3  %
Asphalt                                                 3  %                5  %                2  %                4  %
LPG and other                                           4  %                3  %                4  %                3  %
Total                                                 100  %              100  %              100  %              100  %


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Contents

                                                     Three Months Ended June 30,                 Six Months Ended June 30,
                                                      2022                  2021                2022 (8)               2021
Consolidated
Crude charge (BPD) (1)                                627,310              416,350               576,480              382,440
Refinery throughput (BPD) (2)                         663,310              444,730               614,300              405,190
Sales of produced refined products (BPD)
(3)                                                   655,570              443,940               589,240              399,690
Refinery utilization (4)                                 92.5   %            102.8  %               90.5   %             94.4  %

Average per produced barrel (5)
Refinery gross margin                           $       36.36           $    11.71          $      25.93           $    10.07
Refinery operating expenses (6)                          7.87                 5.73                  7.73                 7.25
Net operating margin                            $       28.49           $     5.98          $      18.20           $     2.82

Refinery operating expenses per
throughput barrel (7)                           $        7.77           $     5.72          $       8.25           $     7.07


Feedstocks:
Sweet crude oil                             42  %      50  %      43  %      48  %
Sour crude oil                              36  %      30  %      34  %      30  %
Heavy sour crude oil                        14  %      11  %      14  %      12  %
Black wax crude oil                          3  %       3  %       3  %       3  %
Other feedstocks and blends                  5  %       6  %       6  %       7  %
Total                                      100  %     100  %     100  %     100  %

Sales of produced refined products:
Gasolines                                   51  %      51  %      51  %      52  %
Diesel fuels                                34  %      35  %      32  %      35  %
Jet fuels                                    5  %       3  %       6  %       3  %
Fuel oil                                     2  %       1  %       3  %       1  %
Asphalt                                      3  %       3  %       3  %       3  %
Base oils                                    2  %       3  %       2  %       3  %
LPG and other                                3  %       4  %       3  %       3  %
Total                                      100  %     100  %     100  %     100  %



(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 HFC Asphalt and inter-segment 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). As a result
of our acquisition of the Puget Sound Refinery on November 1, 2021, and the
Sinclair and Casper Refineries on March 14, 2022, our consolidated crude
capacity increased from 405,000 BPSD at June 30, 2021 to 678,000 BPSD at
June 30, 2022.
(5)Represents 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 3 of Part I of this Form 10-Q.
(6)Represents total Refining segment operating expenses, exclusive of
depreciation and amortization, divided by sales volumes of refined products
produced at our refineries.
(7)Represents total Refining segment operating expenses, exclusive of
depreciation and amortization, divided by refinery throughput.
(8)We acquired the Sinclair and Casper Refineries on March 14, 2022. Refining
operating data for the six months ended June 30, 2022 includes crude oil and
feedstocks processed and refined products sold at our Sinclair and Casper
Refineries for the period March 14, 2022 through June 30, 2022 only, averaged
over the 181 days in the six months ended June 30, 2022.

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Renewables Operating Data

The following table provides information about our renewable energy operations and includes our Sinclair companies for the period March 14, 2022 (the date of acquisition) until June 30, 2022.

                                                                  Three Months Ended          Six Months Ended
                                                                    June 30, 2022               June 30, 2022
Renewables
Sales volumes (in thousand gallons)                                          25,688                    30,632
Average per produced gallon (1)
Renewables gross margin                                         $              0.07          $           0.16
Renewables operating expenses (2)                                              1.14                      1.84
Net operating margin                                            $             (1.07)         $          (1.68)


(1)Represents average quantity per gallon product 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 3 in Part I of this Form 10-Q. (2) Represents the total operating expenses of the renewable energy sector, excluding depreciation, divided by the sales volumes of renewable diesel produced in our renewable diesel units.

Marketing operating data

The following table presents information about our marketing operations and includes our Sinclair business for the period March 14, 2022 (the date of acquisition) until June 30, 2022.

                                                               Three Months Ended          Six Months Ended
                                                                  June 30, 2022              June 30, 2022
Marketing
Number of branded sites at period end                                      1,329                     1,329
Sales volumes (in thousand gallons)                                         335,106                   420,019
Margin per gallon of sales (1)                                $             0.07          $           0.07



(1)Represents average quantity 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 3 in Part I of this Form 10-Q.

Lubricants and Specialty Products Operational Data

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

                                                       Three Months Ended June 30,                       Six Months Ended June 30,
                                                       2022                    2021                    2022                     2021
Lubricants and Specialty Products
Throughput (BPD)                                         20,260                    19,310                19,800                   19,860
Sales of produced refined products (BPD)                 34,000                    36,670                34,510                   34,630

Sales of produced refined products:
Finished products                                            53  %                  51  %                    52  %                    52  %
Base oils                                                    27  %                  29  %                    29  %                    27  %
Other                                                        20  %                  20  %                    19  %                    21  %
Total                                                       100  %                 100  %                   100  %                   100  %



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Table of Contents Additional financial data attributable to our Lubricants and Specialty Products segment is presented below.

                                                                                                                     Total Lubricants
                                                                      Rack Forward                                     and Specialty
                                               Rack Back (1)              (2)               Eliminations (3)             Products
                                                                                  (In thousands)
Three months ended June 30, 2022
Sales and other revenues                     $      358,628          $   754,442          $        (263,129)         $      849,941
Cost of products sold                        $      249,095          $   590,462          $        (263,129)         $      576,428
Operating expenses                           $       38,073          $    36,397          $               -          $       74,470
Selling, general and administrative
expenses                                     $        5,636          $    37,919          $               -          $       43,555
Depreciation and amortization                $        7,712          $    12,893          $               -          $       20,605

Income from operations                       $       58,112          $    76,771          $               -          $      134,883

Three months ended June 30, 2021
Sales and other revenues                     $      254,485          $   629,211          $        (214,507)         $      669,189
Cost of products sold                        $      163,280          $   542,445          $        (214,507)         $      491,218
Operating expenses                           $       29,106          $    32,204          $               -          $       61,310
Selling, general and administrative
expenses                                     $        5,914          $    31,669          $               -          $       37,583
Depreciation and amortization                $        6,230          $    12,922          $               -          $       19,152

Income from operations                       $       49,955          $     9,971          $               -          $       59,926


Six months ended June 30, 2022
Sales and other revenues                     $  637,214          $ 

1,442,389 ($474,653) $1,604,950
Cost of goods sold

                        $  427,634          $ 

1,128,024 ($474,653) $1,081,005
Operating Expenses

                           $   68,887          $    71,584          $        -          $   140,471
Selling, general and administrative
expenses                                     $   11,843          $    73,461          $        -          $    85,304
Depreciation and amortization                $   15,269          $    25,930          $        -          $    41,199

Income from operations                       $  113,581          $   143,390          $        -          $   256,971

Six months ended June 30, 2021
Sales and other revenues                     $  427,927          $ 

1,112,457 ($346,632) $1,193,752
Cost of goods sold

                        $  295,812          $   873,561          $ (346,632)         $   822,741
Operating expenses                           $   57,727          $    64,336          $        -          $   122,063
Selling, general and administrative
expenses                                     $   12,653          $    70,483          $        -          $    83,136
Depreciation and amortization                $   13,535          $    25,738          $        -          $    39,273

Income from operations                       $   48,200          $    78,339          $        -          $   126,539


(1)Rack Back consists of our Petro-Canada Lubricants, Inc. ("PCLI") base oil
production activities, by-product sales to third parties and intra-segment base
oil sales to Rack Forward.
(2)Rack Forward activities include the purchase of base oils from Rack Back and
the blending, packaging, marketing and distribution and sales of finished
lubricants and specialty products to third parties.
(3)Intra-segment sales of Rack Back produced base oils to Rack Forward are
eliminated under the "Eliminations" column.


Results of operations – Quarters ended June 30, 2022 Compared to the three months ended June 30, 2021

Summary

Net income attributable to HF Sinclair stockholders for the three months ended
June 30, 2022 was $1,221.3 million ($5.43 per basic and diluted share), an
$1,052.4 million increase from a net income of $168.9 million ($1.03 per basic
and diluted share) for the three months ended June 30, 2021. The increase in net
income was principally driven by stronger product demand and higher sales prices
which resulted in an increase in refinery gross margins and higher refined
product sales volumes. Lower of cost or market inventory reserve adjustments
related to our renewables inventories decreased pre-tax earnings by $34.5
million for the three months ended June 30, 2022 and lower of cost or market
inventory adjustments related to our refining inventories increased pre-tax
earnings by $118.8 million for the three months ended June 30, 2021. Refinery
gross margins for the three months ended June 30, 2022 increased to $36.36 per
produced barrel sold from $11.71 for the three months ended June 30, 2021.

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Sales and Other Revenues
Sales and other revenues increased 144% from $4,577.1 million for the three
months ended June 30, 2021 to $11,162.2 million for the three months ended
June 30, 2022 principally due to the increase in sales prices and higher refined
product sales volumes, primarily due to the acquisition of the Puget Sound
Refinery and the Acquired Sinclair Businesses. Sales and other revenues included
$1,336.3 million, $845.0 million and $115.9 million in unaffiliated revenues
related to our Marketing, Lubricants and Specialty Products and Renewables
segments, respectively, for the three months ended June 30, 2022. Sales and
other revenues included $662.8 million in unaffiliated revenues related to our
Lubricants and Specialty Products segment for the three months ended June 30,
2021.

Cost of Products Sold
Total cost of products sold increased 132% from $3,706.9 million for the three
months ended June 30, 2021 to $8,614.5 million for the three months ended
June 30, 2022 principally due to higher crude oil costs and higher refined
product sales volumes, primarily due to the acquisition of the Puget Sound
Refinery and the Acquired Sinclair Businesses. During the second quarters of
2022 and 2021, we recognized a lower of cost or market inventory valuation
adjustment charge related to our renewables inventories of $34.5 million and a
benefit related to our refining inventories of $118.8 million, respectively.

Gross Refinery Margins
Gross refinery margin per produced barrel sold increased 211% from $11.71 for
the three months ended June 30, 2021 to $36.36 for the three months ended
June 30, 2022. The increase was due to the effects of an increase in the average
per barrel sold sales price during the current year quarter, partially offset by
increased crude oil and feedstock prices. Gross refinery margin per barrel does
not include the non-cash effects of lower of cost or market inventory valuation
adjustments or depreciation and amortization. See "Reconciliations to Amounts
Reported Under Generally Accepted Accounting Principles" following Item 3 of
Part I of this Form 10-Q for a reconciliation to the income statement of sale
prices of products sold and cost of products purchased.

Operating Expenses
Operating expenses, exclusive of depreciation and amortization, increased 81%
from $334.2 million for the three months ended June 30, 2021 to $606.1 million
for the three months ended June 30, 2022 primarily due to the acquisition of the
Puget Sound Refinery and the Acquired Sinclair Businesses.

Selling, General and Administrative Expenses
Selling, general and administrative expenses increased 43% from $77.8 million
for the three months ended June 30, 2021 to $110.9 million for the three months
ended June 30, 2022 primarily due to higher employee related expenses from
recent acquisitions and professional services and legal costs incurred in
connection with the Sinclair Transactions. See Note 2 "Acquisitions" in the
Notes to Consolidated Financial Statements for additional information on this
acquisition.

Depreciation and Amortization Expenses
Depreciation and amortization increased 32% from $124.0 million for the three
months ended June 30, 2021 to $164.0 million for the three months ended June 30,
2022. This increase was due principally to depreciation and amortization
attributable to the acquisition of the Puget Sound Refinery, the Acquired
Sinclair Businesses and newly capitalized projects related to our renewable
diesel units.

Debit interest The debit interest has been $39.0 million for the three months ended June 30, 2022
compared to $28.9 million for the three months ended June 30, 2021. This increase is mainly due to the April 2022 Show of $400 million the aggregate principal amount of the 6.375% HEP Senior Notes due in April 2027.

For the three months ended June 30, 2022 and 2021, interest expense attributable to our HEP segment was $20.4 million and $13.9 millionrespectively.

Gain (Loss) on Foreign Currency Transactions
Remeasurement adjustments resulting from the foreign currency conversion of the
intercompany financing notes payable by PCLI net of mark-to-market valuations on
foreign exchange forward contracts with banks which hedge the foreign currency
exposure on these intercompany notes was a net loss of $0.9 million and a net
gain of $0.6 million for the three months ended June 30, 2022 and 2021,
respectively. For the three months ended June 30, 2022 and 2021, gain (loss) on
foreign currency transactions included a gain of $13.0 million and a loss of
$6.1 million, respectively, on foreign exchange forward contracts (utilized as
an economic hedge).

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Income Taxes
For the three months ended June 30, 2022, we recorded an income tax expense of
$383.5 million compared to $123.5 million for the three months ended June 30,
2021. This increase was principally due to higher pre-tax income during the
three months ended June 30, 2022 compared to the same period of 2021. Our
effective tax rates were 23.4% and 38.8% for the three months ended June 30,
2022 and 2021, respectively. The decrease in the effective tax rate is
principally due to the relationship between the pre-tax results and the earnings
attributable to the noncontrolling interest that is not included in income for
tax purposes.


Results of operations – Half-year ended June 30, 2022 Compared to the half-year ended June 30, 2021

Summary

Net income attributable to HF Sinclair stockholders for the six months ended
June 30, 2022 was $1,381.2 million ($6.86 per basic and diluted share), a
$1,064.2 million increase compared to net income of $317.1 million ($1.92 per
basic and diluted share) for the six months ended June 30, 2021. The increase in
net income was principally driven by stronger product demand and higher sales
prices which resulted in an increase in refinery gross margins and higher
refined product sales volumes. Lower of cost or market inventory reserve
adjustments related to our renewables inventories decreased pre-tax earnings by
$26.0 million for the six months ended June 30, 2022 and lower of cost or market
inventory adjustment related to our refining inventories increased pre-tax
earnings by $318.9 million and for the six months ended June 30, 2021. Net
income for the six months ended June 30, 2021 was impacted by winter storm Uri,
which increased natural gas costs across our refining system. Refinery gross
margins for the six months ended June 30, 2022 increased to $25.93 per barrel
sold from $10.07 for the six months ended June 30, 2021.

Sales and Other Revenues
Sales and other revenues increased 130% from $8,081.4 million for the six months
ended June 30, 2021 to $18,620.9 million for the six months ended June 30, 2022
principally due to the increase in sales prices and higher refined product sales
volumes, in part due to the acquisition of the Puget Sound Refinery and the
Acquired Sinclair Businesses. Sales and other revenues included $1,613.3
million, $1,598.6 million and $144.3 million in unaffiliated revenues related to
our Marketing, Lubricants and Specialty Products and Renewables segments,
respectively, for the six months ended June 30, 2022. Sales and other revenues
included $1,184.8 million in unaffiliated revenues related to our Lubricants and
Specialty Products segment for the six months ended June 30, 2021.

Cost of Products Sold
Total cost of products sold increased 134% from $6,467.2 million for the six
months ended June 30, 2021 to $15,107.9 million for the six months ended
June 30, 2022 principally due to higher crude oil costs and higher refined
product sales volumes, in part due to the acquisition of the Puget Sound
Refinery and the Acquired Sinclair Businesses. During the six months ended
June 30, 2022 and 2021, we recognized a lower of cost or market inventory
valuation adjustment charge related to our renewables inventories of $26.0
million and a benefit related to our refining inventories of $318.9 million,
respectively.

Gross Refinery Margins
Gross refinery margin per barrel sold increased 157% from $10.07 for the six
months ended June 30, 2021 to $25.93 for the six months ended June 30, 2022
principally due to the increase in the average per barrel sold sales prices
during the current period, partially offset by the increase in crude oil and
feedstock prices. Gross refinery margin per barrel does not include the non-cash
effects of lower of cost or market inventory valuation adjustments or
depreciation and amortization. See "Reconciliations to Amounts Reported Under
Generally Accepted Accounting Principles" following Item 3 of Part I of this
Form 10-Q for a reconciliation to the income statement of sales prices of
products sold and cost of products purchased.

Operating Expenses
Operating expenses, exclusive of depreciation and amortization, increased 48%
from $734.1 million for the six months ended June 30, 2021 to $1,083.6 million
for the six months ended June 30, 2022 primarily due to the acquisition of the
Puget Sound Refinery and the Acquired Sinclair Businesses.

Selling, General and Administrative Expenses
Selling, general and administrative expenses increased 39% from $159.7 million
for the six months ended June 30, 2021 to $221.3 million for the six months
ended June 30, 2022 primarily due to higher employee related expenses from
recent acquisitions and professional services and legal costs incurred in
connection with the Sinclair Transactions. See Note 2 "Acquisitions" in the
Notes to Consolidated Financial Statements for additional information on these
acquisitions.

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Depreciation and Amortization Expenses
Depreciation and amortization increased 24% from $248.1 million for the six
months ended June 30, 2021 to $308.6 million for the six months ended June 30,
2022. This increase was due principally to depreciation and amortization
attributable to the acquisition of the Puget Sound Refinery, the Acquired
Sinclair Businesses and newly capitalized projects related to our renewable
diesel units.

Interest Expense
Interest expense was $73.8 million for the six months ended June 30, 2022
compared to $67.3 million for the six months ended June 30, 2021. This increase
was primarily due to the April 2022 issuance of $400 million in aggregate
principal amount of HEP's 6.375% senior notes maturing in April 2027.

For the six months ended June 30, 2022 and 2021, interest expense attributable to our HEP segment was $34.0 million and $27.2 millionrespectively.

Gain on Tariff Settlement
For the six months ended June 30, 2021, we recorded a gain of $51.5 million upon
the settlement of a tariff rate case. See Note 14 "Contingencies" in the Notes
to Consolidated Financial Statements for additional information on this case and
settlement.

Gain (Loss) on Foreign Currency Transactions
Remeasurement adjustments resulting from the foreign currency conversion of the
intercompany financing notes payable by PCLI net of mark-to-market valuations on
foreign exchange forward contracts with banks which hedge the foreign currency
exposure on these intercompany notes were net losses of $0.8 million and $0.7
million for the six months ended June 30, 2022 and 2021, respectively. For the
six months ended June 30, 2022 and 2021, losses on foreign currency transactions
included a net gain of $6.5 million and a loss of $12.8 million, respectively,
on foreign exchange forward contracts (utilized as an economic hedge).

Income Taxes
For the six months ended June 30, 2022, we recorded an income tax expense of
$404.8 million compared to $95.2 million for the six months ended June 30, 2021.
This increase was principally due to higher pre-tax income during the six months
ended June 30, 2022 compared to the same period of 2021. Our effective tax rates
were 22.0% and 20.1% for the six months ended June 30, 2022 and 2021,
respectively. The year-over-year increase in the effective tax rate is
principally due to the relationship between the pre-tax results and the earnings
attributable to the noncontrolling interest that is not included in income for
tax purposes.


CASH AND CAPITAL RESOURCES

HF Sinclair Credit Agreement
On April 27, 2022, after giving effect to the consummation of the exchange
offers and the issuance of the HF Sinclair Senior Notes (as defined below), HF
Sinclair entered into 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. The HF
Sinclair Credit Agreement replaced the $1.35 billion senior unsecured revolving
credit facility of HollyFrontier, which was terminated on April 27, 2022. At
June 30, 2022, HF Sinclair was in compliance with all covenants, had no
outstanding borrowings and had outstanding letters of credit totaling $2.3
million under the HF Sinclair Credit Agreement.

HollyFrontier Bond Exchange
On April 27, 2022, HF Sinclair completed its offers to exchange any and all
outstanding HollyFrontier 2.625% senior notes maturing October 2023 (the
"HollyFrontier 2.625% Senior Notes"), 5.875% senior notes maturing April 2026
(the "HollyFrontier 5.875% Senior Notes") and 4.500% senior notes maturing
October 2030 (the "HollyFrontier 4.500% Senior Notes") (and, collectively, the
"HollyFrontier Senior Notes") for 2.625% senior notes maturing October 2023 (the
"HF Sinclair 2.625% Senior Notes"), 5.875% senior notes maturing April 2026 (the
"HF Sinclair 5.875% Senior Notes") and 4.500% senior notes maturing October 2030
(the "HF Sinclair 4.500% Senior Notes") (and, collectively, the "HF Sinclair
Senior Notes") to be issued by HF Sinclair and cash. Additionally, HF Sinclair
solicited consents to adopt certain amendments to the indenture governing the
HollyFrontier Senior Notes.

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Following the settlement of the exchange offers and consent solicitations, the
aggregate principal amount of the HF Sinclair Senior Notes consisted of the
following:

Series title of HF Sinclair Senior Notes June 30, 2022

                                                    (In thousands)

2.625% HF Sinclair Senior Notes due 2023 $290,348
5.875% HF Sinclair Senior Notes due 2026 $797,100
4.500% HF Sinclair Senior Notes due 2030 $325,034



The 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 HF Sinclair Senior Notes has the
same interest rate (including interest rate adjustment provisions, as
applicable), interest payment dates, maturity date and redemption terms as the
corresponding series of HollyFrontier Senior Notes. The HF Sinclair Senior Notes
were issued in exchange for the HollyFrontier Senior Notes pursuant to a private
exchange offer exempt from registration under the Securities Act of 1933, as
amended.

In connection with the issuance of the HF Sinclair Senior Notes, HF Sinclair
agreed to use its commercially reasonable efforts to file (and have declared
effective) a registration statement with respect to a registered offer to
exchange the HF Sinclair Senior Notes for substantially identical registered
notes. HF Sinclair will be obligated to pay additional interest if it does not
complete the exchange offer on or prior to April 27, 2023, or if a shelf
registration statement with respect to the HF Sinclair Senior Notes (if required
to be filed) is not declared effective by the dates indicated in the
Registration Rights Agreement.

Following settlement of the exchange offers and consent solicitations, the aggregate principal amount of the HollyFrontier The senior notes that were not tendered and exchanged and that remain outstanding consisted of the following:

Series title of HollyFrontier Senior Notes June 30, 2022

                                                      (In thousands)

2.625% HollyFrontier Senior Notes due 2023 $59,652
5.875% HollyFrontier Senior Notes due 2026 $202,900
4.500% HollyFrontier Senior Notes due 2030 $74,966



In connection with the exchange offers and consent solicitations, HollyFrontier
amended the indenture governing the HollyFrontier 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)
with respect to the HollyFrontier 2.625% Senior Notes and the HollyFrontier
4.500% Senior Notes only, the offer to repurchase such senior notes upon certain
change of control triggering events.

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 and then leased back the precious metals catalyst in
exchange for cash. The volume of the precious metals catalyst and the lease rate
are fixed over the term of each lease, and the lease payments are recorded as
interest expense. The current leases mature in one year or less. Upon maturity,
we must either satisfy the obligation at fair market value or refinance to
extend the maturity.

HEP Credit Agreement
HEP has a $1.2 billion senior secured revolving credit facility maturing in July
2025 (the "HEP Credit Agreement") and is available to fund capital expenditures,
investments, acquisitions, distribution payments, working capital and for
general partnership purposes. It is also available to fund letters of credit up
to a $50 million sub-limit and has an accordion feature that allows HEP to
increase the commitments under the HEP Credit Agreement up to a maximum amount
of $1.7 billion. During the six months ended June 30, 2022, HEP had net
repayments of $119.0 million under the HEP Credit Agreement. At June 30, 2022,
HEP was in compliance with all of its covenants, had outstanding borrowings of
$721.0 million and no outstanding letters of credit under the HEP Credit
Agreement.

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HEP Senior Notes
On April 8, 2022, HEP closed a private placement of $400 million in aggregate
principal amount of 6.375% senior notes maturing April 2027 (the "HEP 6.375%
Senior Notes") at par for net proceeds of approximately $393 million, after
deducting the initial purchasers' discounts and commissions and estimated
offering expenses. The HEP 6.375% Senior Notes are unsecured and impose certain
restrictive covenants, including limitations on HEP's ability to incur
additional indebtedness, make investments, sell assets, incur certain liens, pay
distributions, enter into transactions with affiliates and enter into mergers.
The net proceeds from the offering of the HEP 6.375% Senior Notes were used to
partially repay outstanding borrowings under the HEP Credit Agreement.

See note 10 “Debt” of the notes to the consolidated financial statements for more 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. 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 refining 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 our share
repurchase program.

Our autonomous liquidity (excluding HEP) was around $3.34 billion at
June 30, 2022consisting of cash and cash equivalents of $1.69 billion and one not drawn $1.65 billion credit facility.

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.

In November 2019, our Board of Directors approved a $1.0 billion share
repurchase program, which replaced all existing share repurchase programs,
authorizing us to repurchase common stock in the open market or through
privately negotiated transactions. In June 2022, our Board of Directors
determined that privately negotiated repurchases from REH Company (formerly
known as The Sinclair Companies) are also authorized under the share repurchase
program, subject to REH Company's interest and other limitations. The timing and
amount of share repurchases, including those from REH Company, will depend on
market conditions and corporate, tax, regulatory and other relevant
considerations. This program may be discontinued at any time by our Board of
Directors. During the second quarter of 2022, we repurchased 2,730,000 shares of
common stock for $132.3 million in connection with our share repurchase program.
As of June 30, 2022, we had remaining authorization to repurchase up to $867.7
million under this stock repurchase program, of which we repurchased 2,965,642
shares for $132.9 million in July 2022. 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.

Cash Flow – Operating Activities

Six Months Ended June 30, 2022 Compared to Six Months Ended June 30, 2021
Net cash flows provided by operating activities were $1,989.4 million for the
six months ended June 30, 2022 compared to $490.1 million for the six months
ended June 30, 2021, an increase of $1,499.3 million. The increase in operating
cash flows was primarily due to the increase in gross refinery margins,
partially offset by higher operating expenses. In addition, we received
$83 million in cash tax benefit during the six months ended June 30, 2022 from
the net operating loss carryback provisions under the CARES Act.

Changes in working capital increased operating cash flows by $246.3 million and
$149.0 million for the six months ended June 30, 2022 and 2021, respectively.
The increase for the current period is partially due to $83 million in cash tax
benefit received during the six months ended June 30, 2022 from the net
operating loss carryback provisions under the CARES Act.

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Cash Flows - Investing Activities and Planned Capital Expenditures

Six Months Ended June 30, 2022 Compared to Six Months Ended June 30, 2021
For the six months ended June 30, 2022, our net cash flows used for investing
activities were $539.0 million. On March 14, 2022, we closed the Sinclair
Transactions and paid cash of $231.2 million. The remainder of the purchase
consideration was funded with the issuance of HF Sinclair common stock and HEP
common units. See Note 2 "Acquisitions" in the Notes to Consolidated Financial
Statements for additional information on the Sinclair Transactions. Cash
expenditures for properties, plants and equipment for the six months ended
June 30, 2022 were $317.7 million, which include HEP capital expenditures of
$23.2 million for the six months ended June 30, 2022.

For the six months ended June 30, 2021, our net cash flows used for investing
activities were $322.3 million. Cash expenditures for properties, plants and
equipment for the six months of ended June 30, 2021 were $332.8 million
primarily due to expenditures related to our renewable diesel units. Cash
expenditures for properties, plants and equipment include HEP capital
expenditures of $57.7 million for the six months ended June 30, 2021.

HF Sinclair Corporation
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.

HEP

Each year the Holly Logistic Services, L.L.C. board of directors approves HEP's
annual capital budget, which specifies capital projects that HEP management is
authorized to undertake. Additionally, at times when conditions warrant or as
new opportunities arise, special projects may be approved. The funds allocated
for a particular capital project may be expended over a period in excess of a
year, depending on the time required to complete the project. Therefore, HEP's
planned capital expenditures for a given year consist of expenditures approved
for capital projects included in its current year capital budget as well as, in
certain cases, expenditures approved for capital projects in capital budgets for
prior years. In addition, HEP may spend funds periodically to perform capital
upgrades or additions to its assets where a customer reimburses HEP for such
costs. The upgrades or additions would generally benefit the customer over the
remaining life of the related service agreements.

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Expected capital and turnaround cash spending for 2022 is as follows.

                                                    Expected Cash Spending 

Interval

                                                            (In millions)
   HF Sinclair Capital Expenditures
   Refining                                  $        225.0                    $ 250.0
   Renewables                                         250.0                      300.0
   Lubricants and Specialty Products                   45.0                       60.0
   Marketing                                           15.0                       25.0
   Corporate                                           90.0                      110.0
   Turnarounds and catalyst                           110.0                      130.0
   Total HollyFrontier                                735.0                      875.0

   HEP
   Maintenance                                         20.0                       30.0
   Expansion and joint venture investment               5.0                       10.0
   Refining unit turnarounds                           25.0                       35.0
   Total HEP                                           50.0                       75.0
   Total                                     $        785.0                    $ 950.0


Cash flow – Financing activities

Six Months Ended June 30, 2022 Compared to Six Months Ended June 30, 2021
For the six months ended June 30, 2022, our net cash flows provided by financing
activities were $20.2 million. During the six months ended June 30, 2022, we
repurchased $110.8 million of our common stock and paid $90.2 million in
dividends. During the six months ended June 30, 2022, HEP received $400.0
million in proceeds from the issuance of the HEP 6.375% Senior Notes, had net
repayments of $119.0 million under the HEP Credit Agreement and paid
distributions of $44.9 million to noncontrolling interests.

For the six months ended June 30, 2021, our net cash flows used for financing
activities were $138.5 million. During the six months ended June 30, 2021, we
paid $57.7 million in dividends and $7.9 million of deferred financing costs in
connection with the amendment of the HollyFrontier Credit Agreement in April
2021. During the six months ended June 30, 2021, HEP had net repayments of $43.5
million under the HEP Credit Agreement and paid $6.6 million of deferred
financing costs in connection with the amendment of the HEP Credit Agreement in
April 2021. In addition, HEP paid distributions of $38.2 million to
noncontrolling interests and received contributions from noncontrolling
interests of $17.6 million.

Contractual obligations and commitments

H. F. Sinclair Society

There have been no material changes in our long-term contractual obligations during the six months ended June 30, 2022 with the exception of certain contracts which have been supported in Sinclair transactions as noted below.

                                                                               Payments Due by Period
    Contractual Obligations and
            Commitments                       Total               2022             2023 & 2024           2025 & 2026          Thereafter
                                                                                   (In thousands)
Supply agreements (1)                      $ 319,990          $ 319,990          $          -          $          -          $        -
Transportation agreements (2)                437,092             21,355                85,418                85,418             244,901
Total                                      $ 757,082          $ 341,345          $     85,418          $     85,418          $  244,901



(1)We have long-term supply agreements to secure certain quantities of crude oil
used in the production process at market prices. We have estimated future
payments under these fixed-quantity agreements expiring in 2022 using current
market prices.
(2)Consists of contractual obligations under agreements with third parties for
the transportation of crude oil to our refineries under contracts expiring
between 2029 and 2034.

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HEP

In the six months ended June 30, 2022HEP had net repayments of $119.0 million resulting in $721.0 million of outstanding borrowings under the HEP credit agreement at June 30, 2022.

In April 2022HEP issued $400 million 6.375% Aggregate Principal Amount of Senior Notes Maturing April 2027.

There were no other material changes in HEP’s long-term contractual obligations during this period.

CRITICAL ACCOUNTING 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.

Our significant accounting policies are described in "Part II, Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations - Critical Accounting Estimates" in HollyFrontier's Annual Report on
Form 10-K for the year ended December 31, 2021. Certain critical accounting
policies that materially affect the amounts recorded in our consolidated
financial statements include the use of the last-in, first-out ("LIFO") method
of valuing certain inventories, assessing the possible impairment of certain
long-lived assets and goodwill, and assessing contingent liabilities for
probable losses.

Inventory Valuation: Inventories related to our refining operations are stated
at the lower of cost, using the LIFO method for crude oil and unfinished and
finished refined products, or market. In periods of rapidly declining prices,
LIFO inventories may have to be written down to market value due to the higher
costs assigned to LIFO layers in prior periods. In addition, the use of the LIFO
inventory method may result in increases or decreases to cost of sales in years
that inventory volumes decline as the result of charging cost of sales with LIFO
inventory costs generated in prior periods. An actual valuation of inventory
under the LIFO method is made at the end of each year based on the inventory
levels at that time. Accordingly, interim LIFO calculations are based on
management's estimates of expected year-end inventory levels and are subject to
the final year-end LIFO inventory valuation.

Our renewables inventories that are valued at the lower of LIFO cost or market
reflect a valuation reserve of $34.7 million and $8.7 million at June 30, 2022
and December 31, 2021, respectively. A new market reserve of $34.7 million as of
June 30, 2022 was based on market conditions and prices at that time. The effect
of the change in the lower of cost or market reserve was an increase to cost of
products sold totaling $34.5 million and $26.0 million for the three and six
months ended June 30, 2022, respectively.

Inventories consisting of process chemicals, materials and maintenance supplies
and RINs are stated at the lower of weighted-average cost or net realizable
value. Inventories of our Petro-Canada Lubricants and Sonneborn businesses are
stated at the lower of cost, using the first-in, first-out method, or net
realizable value.

To June 30, 2022the LIFO value of our refining inventories was equal to cost.

Valuation of Business Combinations
We recognize and measure the assets acquired and liabilities assumed in a
business combination based on their estimated fair values at the acquisition
date. Any excess or surplus of the purchase consideration when compared to the
fair value of the net tangible assets acquired, if any, is recorded as goodwill
or gain from a bargain purchase. The fair value of assets and liabilities as of
the acquisition date are often estimated using a combination of approaches,
including the income approach, which requires us to project future cash flows
and apply an appropriate discount rate; the cost approach, which requires
estimates of replacement costs and depreciation and obsolescence estimates; and
the market approach which uses market data and adjusts for entity-specific
differences. We use all available information to make these fair value
determinations and engage third-party consultants for valuation assistance. The
estimates used in determining fair values are based on assumptions believed to
be reasonable but which are inherently uncertain. Accordingly, actual results
may differ materially from the projected results used to determine fair value.

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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 in dealing with these matters.


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, 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.

From June 30, 2022we have the following notional contract volumes related to all outstanding derivative instruments used to mitigate commodity price and currency risk:

                                                                                           Notional Contract Volumes by Year of Maturity
Derivative Instrument                         Total Outstanding Notional                   2022                                      2023                              Unit of Measure

NYMEX futures (WTI) - short                           1,245,000                          1,245,000                                        -                          Barrels
Forward gasoline and diesel contracts
- long                                                  270,000                            270,000                                        -                          Barrels

Foreign currency forward contracts                  445,568,948                        226,327,761                              219,241,187                          U.S. dollar
Forward commodity contracts (platinum)
(1)                                                      38,723                              3,800                                   34,923                          Troy ounces



(1)Represents an embedded derivative within our catalyst financing arrangements,
which may be refinanced or require repayment under certain conditions. See Note
10 "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 movements on the commodities covered by our derivative contracts:

                                                                 Estimated 

Change in fair value in June

30,

Commodity-based Derivative Contracts                                   2022                    2021
                                                                            

(000s) Hypothetical 10% change in underlying commodity prices $12,948 $4,512



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.

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For the fixed rate HF Sinclair Senior Notes, HollyFrontier Senior Notes and HEP
Senior Notes, 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 June 30, 2022 is presented
below:

                                                                                    Estimated
                                                 Outstanding       Estimated        Change in
                                                  Principal       Fair Value       Fair Value
                                                                (In thousands)
HollyFrontier and HF Sinclair Senior Notes      $ 1,750,000      $ 1,717,195      $    35,470

HEP Senior Notes                                $   900,000      $   808,706      $    28,881



For the variable rate HEP Credit Agreement, changes in interest rates would
affect cash flows, but not the fair value. At June 30, 2022, outstanding
borrowings under the HEP Credit Agreement were $721.0 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.

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