What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-02-21 compared with 2023-02-28 · 429 added, 554 removed, 1276 unchanged (44% of the section changed)

6 unchanged sentences

Based on this assessment, management concludes that, as of December 31, 2023, the Company maintained effective internal control over financial reporting.

Management’s assessment of, and conclusion on, the effectiveness of internal control over financial reporting did not include the internal controls of the Acquired Sinclair Businesses, that were acquired on March 14, 2022, as we are in the process of integrating operations of the Acquired Sinclair Businesses, including internal controls over financial reporting.

The Acquired Sinclair Businesses represented approximately 17% of the Company's consolidated total assets and 26% of consolidated total revenues of the Company as of and for the year ended December 31, 2022.

The Company's independent registered public accounting firm has issued an attestation report on the effectiveness of the Company's internal control over financial reporting as of December 31, 2023.

5 unchanged sentences

In our opinion, HF Sinclair Corporation (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on the COSO criteria.

As indicated in the accompanying Management’s Report on its Assessment of the Company’s Internal Control Over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of the Acquired Sinclair Businesses, which is included in the 2022 consolidated financial statements of the Company and constituted approximately 17% of total assets as of December 31, 2022 and approximately 26% of revenues for the year then ended.

Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of the Acquired Sinclair Businesses.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income, cash flows, and equity for each of the three years in the period ended December 31, 2022, and the related notes of the Company and our report dated February 28, 2023 expressed an unqualified opinion thereon.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2023 and 2022, the related consolidated statements of income, comprehensive income, equity and cash flows for each of the three years in the period ended December 31, 2023, and the related notes and our report dated February 21, 2024 expressed an unqualified opinion thereon.

Basis for Opinion

21 unchanged sentences

Consolidated Balance Sheets at December 31, 2023 and 2022

Consolidated Statements of Operations for the years ended December 31, 2022, 2021 and 2020

Consolidated Statements of Income for the years ended December 31, 2023, 2022 and 2021

Consolidated Statements of Comprehensive Income for the years ended December 31, 2023, 2022 and 2021

5 unchanged sentences

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of HF Sinclair Corporation (the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income, cash flows, and equity for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the “consolidated financial statements”).

We have audited the accompanying consolidated balance sheets of HF Sinclair Corporation (the Company) as of December 31, 2023 and 2022, the related consolidated statements of income, comprehensive income, equity and cash flows for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with U.S.

16 unchanged sentences

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.

Valuation of Personal Property Assets in the Sinclair Acquisition

Description of the Matter During 2022, the Company completed its acquisition of the Acquired Sinclair Businesses for aggregate purchase consideration of $2,749.5 million, as disclosed in Note 2 to the consolidated financial statements.

The transaction was accounted for as a business combination.

Of the total assets acquired and liabilities assumed, the Company acquired $1,242.5 million of properties, plant, and equipment which was made up of real property and personal property.

Auditing management's accounting for the acquisition of the Acquired Sinclair Businesses was complex and highly judgmental due to the significant estimation required to determine the fair value of certain personal property.

In particular, the fair value estimates for the Acquired Sinclair Businesses’ personal property were sensitive to significant assumptions including replacement cost as adjusted for physical deterioration.

Valuation of Goodwill

Description of the Matter At December 31, 2023, the Company’s goodwill was $2,978 million, including goodwill assigned to the Refining, Renewables, Marketing, Lubricants & Specialties, and Midstream segments of $1,977 million, $159 million, $164 million, $246 million, and $432 million, respectively.

As described in Note 1 and Note 11 of the consolidated financial statements, goodwill is tested for impairment at least annually on July 1 at the reporting unit level or more frequently if events or changes in circumstances indicate the asset might be impaired.

Auditing management’s goodwill impairment testing was complex and highly judgmental for the Company’s El Dorado Refinery reporting unit due to the significant estimation required to determine the fair value of this reporting unit.

In particular, the fair value estimates were sensitive to significant assumptions, such as revenue, gross margins, and EBITDA, and discount rates which are affected by expectations about future market or economic conditions.

These assumptions have a significant effect on the fair value estimates.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of the Company's controls over the valuation of the personal property assets related to the acquisition.

For example, we tested controls over management’s review of the valuation models and the underlying assumptions used to develop estimated values of these assets.

To test the estimated fair value of the personal property, our audit procedures included, among others, evaluating the Company’s selection of the valuation methodology, evaluating the significant assumptions used by the Company and evaluating the completeness and accuracy of the underlying data supporting the significant assumptions and estimates.

We involved valuation specialists to assist with our evaluation of the methodologies used by the Company and significant assumptions included in the fair value estimates.

Specifically, our valuation specialists assisted by evaluating the valuation methodologies used, comparing key assumptions to current industry and market data, and developing an expected range of values based on significant inputs and assumptions to assess reasonableness of the Company’s estimates.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company's goodwill impairment testing process.

For example, we tested controls over management's review of the significant inputs and assumptions used in determining the reporting unit fair value.

To test the estimated fair value of the Company’s El Dorado Refinery reporting unit, we performed audit procedures with the support of a valuation specialist that included, among others, assessing the methodologies used and testing the significant assumptions discussed above and the underlying data used by the Company in its analysis.

We compared the significant assumptions used by management to relevant industry and economic trends, published forward prices, historical operating results and other relevant factors.

We performed sensitivity analyses on significant assumptions to evaluate the changes in the fair value of the reporting unit that would result from changes in the assumptions.

We also tested management’s reconciliation of the fair value of the reporting units to the market capitalization of the Company.

/s/ Ernst & Young LLP

6 unchanged sentences

Current assets:

Cash and cash equivalents (HEP:

$ 10,917 and $ 14,381 , respectively)

$ 1,665,066 $ 234,444

Cash and cash equivalents $ 1,353,747 $ 1,665,066

Accounts receivable:

Product and transportation (HEP:

$ 16,344 and $ 12,745 , respectively)

1,626,199 1,130,485

Product and transportation 1,527,950 1,626,199

Crude oil resales

2 unchanged sentences

Crude oil and refined products 2,645,724 2,853,425

Materials, supplies and other (HEP:

$ 1,246 and $ 1,070 , respectively)

361,103 242,997

Materials, supplies and other 276,107 361,103

2,921,831 3,214,528

Income taxes receivable 56,528 53,563

Prepayments and other (HEP:

$ 5,699 and $ 5,381 , respectively)

112,013 66,612

Prepayments and other 89,229 112,013

Total current assets 6,146,454 6,748,319

Properties, plants and equipment, at cost (HEP:

$ 2,173,248 and $ 2,037,527 , respectively)

10,146,652 8,448,207

Less accumulated depreciation (HEP:

$( 761,210 ) and $( 682,143 )), respectively)

( 3,457,747 ) ( 3,033,353 )

6,688,905 5,414,854

Operating lease right-of-use assets (HEP:

$ 66,382 and $ 69,134 , respectively)

Properties, plants and equipment, at cost 10,533,432 10,146,652

Less accumulated depreciation ( 3,906,600 ) ( 3,457,747 )

6,626,832 6,688,905

Operating lease right-of-use assets 348,006 351,068

Other assets:

Turnaround costs 644,957 376,158

Goodwill (HEP:

$ 431,985 and $ 312,873 , respectively)

2,978,315 2,293,044

Intangibles and other (HEP:

$ 360,768 and $ 214,436 , respectively)

982,718 652,685

Goodwill 2,977,744 2,978,315

Intangibles and other 972,272 982,718

4,594,973 4,337,191

2 unchanged sentences

Current liabilities:

Accounts payable (HEP:

$ 27,199 and $ 28,954 , respectively)

$ 2,334,107 $ 1,613,484

Accounts payable $ 2,205,759 $ 2,334,107

Income taxes payable 8,772 7,818

Operating lease liabilities (HEP $ 4,204 and $ 3,710 , respectively)

109,926 110,606

Operating lease liabilities 106,973 109,926

Current debt — 306,959

Accrued liabilities (HEP:

$ 39,110 and $ 18,479 , respectively)

486,719 316,218

Accrued liabilities 453,045 486,719

Total current liabilities 2,774,549 3,245,529

Long-term debt (HEP:

$ 1,556,334 and $ 1,333,049 , respectively)

2,948,513 3,072,737

Noncurrent operating lease liabilities (HEP $ 62,550 and $ 65,799 , respectively)

254,215 308,747

Deferred income taxes (HEP:

$ 374 and $ 396 , respectively)

1,262,165 837,401

Other long-term liabilities (HEP:

$ 55,373 and $ 43,033 , respectively)

397,489 337,799

Long-term debt 2,739,083 2,948,513

Noncurrent operating lease liabilities 249,479 254,215

Deferred income taxes 1,297,130 1,262,165

Other long-term liabilities 418,726 397,489

Commitments and contingencies (Note 19)

2 unchanged sentences

Common stock $ 0.01 par value – 320,000,000 shares authorized;

223,231,546 and 256,046,051 shares issued as of December 31, 2022 and December 31, 2021, respectively

223,231,546 shares issued as of December 31, 2023 and December 31, 2022

Additional capital 5,993,661 6,468,775

Retained earnings 5,379,182 4,130,252

Accumulated other comprehensive income (loss) ( 22,013 ) 2,671

Accumulated other comprehensive loss ( 11,784 ) ( 22,013 )

Common stock held in treasury, at cost - 23,235,599 and 26,152,344 shares as of December 31, 2023 and December 31, 2022, respectively

4 unchanged sentences

Total liabilities and equity $ 17,716,265 $ 18,125,483

Parenthetical amounts represent asset and liability balances attributable to Holly Energy Partners, L.P.

(“HEP”) as of December 31, 2022 and 2021.

HEP is a variable interest entity.

See accompanying notes.

HF SINCLAIR CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data)

12 unchanged sentences

Depreciation and amortization 770,573 656,787 503,539

Goodwill and long-lived asset impairments — — 545,293

Total operating costs and expenses 29,761,829 34,150,590 17,639,956

Income (loss) from operations 4,054,249 749,186 ( 733,743 )

Income from operations 2,202,566 4,054,249 749,186

Other income (expense):

4 unchanged sentences

Gain on tariff settlement — — 51,500

Gain on sales-type leases — — 33,834

Gain (loss) on early extinguishment of debt 604 — ( 25,915 )

Gain on early extinguishment of debt — 604 —

Gain (loss) on foreign currency transactions 2,530 ( 1,637 ) ( 2,938 )

1 unchanged sentence

( 50,059 ) ( 118,203 ) 37,966

Income (loss) before income taxes 3,936,046 787,152 ( 747,046 )

Income before income taxes 2,152,507 3,936,046 787,152

Income tax expense (benefit):

2 unchanged sentences

441,612 894,872 123,898

Net income (loss) 3,041,174 663,254 ( 514,899 )

Net income 1,710,895 3,041,174 663,254

Less net income attributable to noncontrolling interest 121,229 118,506 104,930

Net income (loss) attributable to HF Sinclair stockholders $ 2,922,668 $ 558,324 $ ( 601,448 )

Earnings (loss) per share:

Net income attributable to HF Sinclair stockholders $ 1,589,666 $ 2,922,668 $ 558,324

Earnings per share:

Basic $ 8.29 $ 14.28 $ 3.39

9 unchanged sentences

2023 2022 2021

Net income (loss) $ 3,041,174 $ 663,254 $ ( 514,899 )

Other comprehensive income (loss):

Net income $ 1,710,895 $ 3,041,174 $ 663,254

Other comprehensive income:

Foreign currency translation adjustment 13,161 ( 32,383 ) ( 13,336 )

2 unchanged sentences

( 3,236 ) ( 4,962 ) ( 17,548 )

Reclassification adjustments to net income (loss) on settlement of cash flow hedging instruments 5,288 17,579 2,604

Net unrealized gain (loss) on hedging instruments

326 31 ( 4,871 )

Reclassification adjustments to net income on settlement of cash flow hedging instruments 3,236 5,288 17,579

Net unrealized gain on hedging instruments — 326 31

Pension and other post-retirement benefit obligations:

Actuarial gain (loss) on pension plans 1,909 ( 3,836 ) 2,104

Pension plans gain reclassified to net income (loss) ( 208 ) ( 407 ) ( 422 )

Actuarial gain (loss) on post-retirement healthcare plans

7,885 1,133 ( 1,129 )

Post-retirement healthcare plans gain reclassified to net income (loss) ( 3,440 ) ( 3,328 ) ( 3,564 )

Pension plans (gain) loss reclassified to net income 1,378 ( 208 ) ( 407 )

Actuarial gain on post-retirement healthcare plans 761 7,885 1,133

Post-retirement healthcare plans gain reclassified to net income ( 3,859 ) ( 3,440 ) ( 3,328 )

Actuarial gain (loss) on retirement restoration plan ( 99 ) 349 2

Retirement restoration plan loss reclassified to net income (loss) 39 39 22

Retirement restoration plan loss reclassified to net income 11 39 39

Net change in pension and other post-retirement benefit obligations 101 789 ( 457 )

Other comprehensive loss before income taxes ( 31,268 ) ( 13,762 ) ( 2,106 )

Income tax benefit ( 6,584 ) ( 2,971 ) ( 794 )

Other comprehensive loss ( 24,684 ) ( 10,791 ) ( 1,312 )

Total comprehensive income (loss) 3,016,490 652,463 ( 516,211 )

Other comprehensive income (loss) before income taxes 13,262 ( 31,268 ) ( 13,762 )

Income tax expense (benefit) 3,033 ( 6,584 ) ( 2,971 )

Other comprehensive income (loss) 10,229 ( 24,684 ) ( 10,791 )

Total comprehensive income 1,721,124 3,016,490 652,463

Less noncontrolling interest in comprehensive income 121,229 118,506 104,930

Comprehensive income (loss) attributable to HF Sinclair stockholders $ 2,897,984 $ 547,533 $ ( 602,760 )

Comprehensive income attributable to HF Sinclair stockholders $ 1,599,895 $ 2,897,984 $ 547,533

See accompanying notes.

5 unchanged sentences

Cash flows from operating activities:

Net income (loss) $ 3,041,174 $ 663,254 $ ( 514,899 )

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Net income $ 1,710,895 $ 3,041,174 $ 663,254

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization 770,573 656,787 503,539

Goodwill and long-lived asset impairments — — 545,293

Lower of cost or market inventory valuation adjustment 270,419 52,412 ( 310,123 )

Earnings of equity method investments, inclusive of distributions 8,093 19,769 —

(Gain) loss on early extinguishment of debt ( 604 ) — 25,915

Gain on sales-type leases — — ( 33,834 )

Gain on early extinguishment of debt — ( 604 ) —

Gain on sale of assets ( 6,879 ) ( 2,118 ) ( 89,765 )

18 unchanged sentences

Acquisitions, net of cash acquired — ( 251,448 ) ( 624,332 )

Investment in equity company - HEP — — ( 2,438 )

Proceeds from sale of assets 17,361 3,344 106,357

5 unchanged sentences

Repayments under credit agreements ( 272,500 ) ( 682,000 ) ( 629,000 )

Proceeds from issuance of senior notes — — 748,925

Proceeds from issuance of senior notes – HEP — 400,000 —

Redemption of senior notes ( 307,827 ) ( 41,420 ) —

Redemption of senior notes - HEP — — ( 522,500 )

Purchase of treasury stock ( 999,282 ) ( 1,371,700 ) ( 7,058 )

3 unchanged sentences

Payments on finance leases ( 11,923 ) ( 11,713 ) ( 3,990 )

HEP Merger Transaction consideration ( 267,592 ) — —

Deferred financing costs ( 899 ) ( 9,273 ) ( 14,500 )

10 unchanged sentences

Income taxes, net $ ( 250,815 ) $ ( 816,379 ) $ 19,760

Increase (decrease) in accrued and unpaid capital expenditures $ ( 31,714 ) $ ( 15,319 ) $ 73,867

Decrease in accrued and unpaid capital expenditures $ ( 5,924 ) $ ( 31,714 ) $ ( 15,319 )

See accompanying notes.

6 unchanged sentences

Balance at December 31, 2020 256,046 $ 2,560 $ 4,207,672 $ 3,913,179 $ 13,462 93,632 $ ( 2,968,512 ) $ 553,842 $ 5,722,203

Net income (loss) — — — ( 601,448 ) — — — 86,549 ( 514,899 )

Net income — — — 558,324 — — — 104,930 663,254

Dividends ($ 0.35 declared per common share)

— — — ( 57,663 ) — — — — ( 57,663 )

Distributions to noncontrolling interest holders — — — — — — — ( 89,001 ) ( 89,001 )

Other comprehensive loss, net of tax — — — — ( 10,791 ) — — — ( 10,791 )

2 unchanged sentences

Purchase of treasury stock — — — — — 217 ( 7,058 ) — ( 7,058 )

Purchase of HEP units for restricted grants — — — — — — — ( 1,032 ) ( 1,032 )

Distributions to noncontrolling interests — — — — — — — ( 75,395 ) ( 75,395 )

Contributions from noncontrolling interests — — — — — — — 23,194 23,194

Purchase of HEP units for equity grants — — — — — — — ( 2,548 ) ( 2,548 )

Other — — — ( 4 ) — — — — ( 4 )

3 unchanged sentences

— — — ( 255,928 ) — — — — ( 255,928 )

Distributions to noncontrolling interest holders — — — — — — — ( 75,395 ) ( 75,395 )

Other comprehensive loss, net of tax — — — — ( 24,684 ) — — — ( 24,684 )

Issuance of common shares for HFC Transactions 60,230 602 2,148,406 — — — — — 2,149,008

Issuance of common shares under incentive compensation plans — — ( 42,962 ) — — ( 849 ) 42,962 — —

2 unchanged sentences

Purchase of treasury stock — — — — — 27,001 ( 1,378,390 ) — ( 1,378,390 )

Purchase of HEP units for restricted grants

— — — — — — — ( 2,548 ) ( 2,548 )

Contributions from noncontrolling interests — — — — — — — 23,194 23,194

— — — ( 4 ) — — — — ( 4 )

Retirement of treasury stock ( 93,045 ) ( 930 ) — ( 2,950,324 ) — ( 93,045 ) 2,951,254 — —

Distributions to noncontrolling interests — — — — — — — ( 96,192 ) ( 96,192 )

Purchase of HEP units for equity grants — — — — — — — ( 2,363 ) ( 2,363 )

Equity attributable to HEP common unit issuance, net of tax — — 95,047 — — — — 223,392 318,439

Acquisition of remaining UNEV interests — — 19,735 — — — — ( 78,010 ) ( 58,275 )

Balance at December 31, 2022 223,231 $ 2,232 $ 6,468,775 $ 4,130,252 $ ( 22,013 ) 26,152 $ ( 1,335,431 ) $ 773,757 $ 10,017,572

2 unchanged sentences

— — — ( 340,736 ) — — — — ( 340,736 )

Other comprehensive loss, net of tax — — — — ( 24,684 ) — — — ( 24,684 )

Issuance of common shares for HFC Transactions 60,230 602 2,148,406 — — — — — 2,149,008

Other comprehensive income, net of tax — — — — 10,229 — — — 10,229

HEP Merger Transaction — — ( 465,596 ) — — ( 21,072 ) 1,084,593 ( 725,079 ) ( 106,082 )

Issuance of common shares under incentive compensation plans — — ( 49,229 ) — — ( 957 ) 49,229 — —

1 unchanged sentence

— — 39,711 — — — — 1,424 41,135

Purchase of treasury stock — — — — — 27,001 ( 1,378,390 ) — ( 1,378,390 )

Retirement of treasury stock ( 93,045 ) ( 930 ) — ( 2,950,324 ) — ( 93,045 ) 2,951,254 — —

Purchase of treasury stock, inclusive of excise tax — — — — — 19,113 ( 992,592 ) — ( 992,592 )

Distributions to noncontrolling interest holders — — — — — — — ( 102,523 ) ( 102,523 )

Purchase of HEP units for restricted grants

— — — — — — — ( 2,363 ) ( 2,363 )

Equity attributable to HEP common unit issuance, net of tax — — 95,047 — — — — 223,392 318,439

Acquisition of remaining UNEV interests — — 19,735 — — — — ( 78,010 ) ( 58,275 )

Purchase of HEP units for equity grants — — — — — — — ( 600 ) ( 600 )

Balance at December 31, 2023 223,231 $ 2,232 $ 5,993,661 $ 5,379,182 $ ( 11,784 ) 23,236 $ ( 1,194,201 ) $ 68,208 $ 10,237,298

4 unchanged sentences

Description of Business:

On March 14, 2022 (the “Closing Date”), HollyFrontier Corporation (“HollyFrontier”) and Holly Energy Partners, L.P.

(“HEP”) announced the establishment of HF Sinclair Corporation, a Delaware corporation (“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 “REH Company”).

On the Closing Date, pursuant to that certain Business Combination Agreement, dated as of August 2, 2021 (as amended on March 14, 2022, the “Business Combination Agreement”), by and among HollyFrontier, HF Sinclair, Hippo Merger Sub, Inc., a wholly owned subsidiary of HF Sinclair (“Parent Merger Sub”), REH Company, and Hippo Holding LLC (now known as Sinclair Holding LLC), a wholly owned subsidiary of REH Company (the “Target Company”), HF Sinclair completed its previously announced acquisition of the Target Company by effecting (a) a holding company merger in accordance with Section 251(g) of the Delaware General Corporation Law whereby HollyFrontier merged with and into Parent Merger Sub, 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 REH Company contributed all of the equity interests of 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, HollyFrontier became a wholly owned subsidiary of HF Sinclair, and all of HollyFrontier’s outstanding shares were automatically converted into equivalent corresponding shares of HF Sinclair.

Pursuant to the HFC Merger, 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.” See Note 2 and Note 4 for additional information.

References herein to HF Sinclair “we,” “our,” “ours,” and “us” with respect to time periods prior to March 14, 2022 refer to HollyFrontier and its consolidated subsidiaries and do not include the Target Company, STC or their respective consolidated subsidiaries (collectively, the “Acquired Sinclair Businesses”).

References herein to HF Sinclair Corporation (“HF Sinclair”) include HF Sinclair and its consolidated subsidiaries.

In these financial statements, the words “we,” “our,” “ours” and “us” refer only to HF Sinclair and its consolidated subsidiaries or to HF Sinclair or an individual subsidiary and not to any other person, with certain exceptions.

References herein to 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 (now known as Sinclair 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 December 31, 2023 includes the combined business operations of HollyFrontier and the Acquired Sinclair Businesses.

Generally, the words “we,” “our,” “ours” and “us” include 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.

These financial statements contain 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 Holly Energy Partners, L.P.

(“HEP”) with respect to time periods prior to the closing of the HEP Merger Transaction (as defined below) on December 1, 2023 refer to HEP and its consolidated subsidiaries.

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 Kansas, Oklahoma, New Mexico, Wyoming, Washington and Utah and 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 1,500 branded stations and license the use of the Sinclair brand at more than 300 additional locations throughout the country.

We own and operate refineries located in Kansas, Oklahoma, New Mexico, Wyoming, Washington and Utah.

We provide petroleum product and crude oil transportation, terminalling, storage and throughput services to our refineries and the petroleum industry.

We market our refined products principally in the Southwest United States, the Rocky Mountains extending into the Pacific Northwest and in other neighboring Plains states and we supply high-quality fuels to more than 1,500 branded stations and license the use of the Sinclair brand at more than 300 additional locations throughout the country.

We produce renewable diesel at two of our facilities in Wyoming and our facility in New Mexico.

In addition, our subsidiaries produce and market base oils and other specialized lubricants in the United States, Canada and the Netherlands, and export products to more than 80 countries.

Through our subsidiaries, we produce renewable diesel at two of our facilities in Wyoming and our facility in New Mexico.

At December 31, 2022, we owned a 47 % limited partner interest and a non-economic general partner interest in HEP, a variable interest entity (“VIE”).

HEP owns and operates logistic assets consisting of petroleum product and crude oil pipelines, terminals, tankage, loading rack facilities and refinery processing units that principally support our refining and marketing operations in the Mid-Continent, Southwest and Rocky Mountains geographic regions of the United States.

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

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

The Merger Agreement consideration totaled $ 267.6 million in cash and resulted in the issuance of 21,072,326 shares of HF Sinclair common stock from treasury stock.

The HEP Merger Transaction was accounted for in accordance with Financial Accounting Standards Board ( “ FASB ” ) Accounting Standards Codification ( “ ASC ” ) 810, “ Consolidation.

” Since we controlled HEP both before and after the HEP Merger Transaction, the changes in our ownership interest in HEP resulting from the HEP Merger Transaction were accounted for as an equity transaction, and no gain or loss was recognized in our Consolidated Statements of Income.

The tax effects of the HEP Merger Transaction were recorded as adjustments to deferred income taxes and additional capital consistent with ASC 740, “ Income Taxes.

For a description of our existing indebtednes s, as well as changes thereto associ ated with the HEP Merger Transaction, see Note 13.

In connection with the HEP Merger Transaction, for the year ended December 31, 2023, we incurred $ 23.5 million in incremental direct acquisition and integration costs that principally relate to legal, advisory and other professional fees and are presented as selling, general and administrative expenses in our statements of income.

HF SINCLAIR CORPORATION

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On April 27, 2021, our wholly owned subsidiary, 7037619 Canada Inc., entered into a contract for sale of real property in Mississauga, Ontario for base consideration of $ 98.8 million, or CAD 125 million.

The transaction closed on September 15, 2021, and we recorded a gain on sale of assets totaling $ 86.0 million for the year ended December 31, 2021, which was recognized in “Gain on sale of assets and other” on our consolidated statements of operations.

During the first quarter of 2021, we initiated a restructuring within our Lubricants and Specialty Products segment.

As a result of this restructuring, we recorded $ 7.8 million in employee severance costs for the year ended December 31, 2021, which were recognized primarily as selling, general and administrative expenses in our Lubricants and Specialty Products segment.

During the first quarter of 2021, we initiated a restructuring within our Lubricants & Specialties segment.

In the third quarter of 2020, we permanently ceased petroleum refining operations at our Cheyenne, Wyoming refinery (the “Cheyenne Refinery”) and subsequently began converting certain assets at our Cheyenne Refinery to renewable diesel production.

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These charges were all recognized in operating expenses in our Corporate and Other segment.

During the second quarter of 2020, we recorded long-lived asset impairment charges o f $ 232.2 million related to our Cheyenne Refinery asset group.

Also, we recognized $ 24.7 million in decommissioning expense and $ 3.8 million in employee severance costs for the year ended December 31, 2020.

Additionally, we recorded a reserve of $ 9.0 million against our repair and maintenance supplies inventory.

These decommissioning, inventory reserve and severance costs were recognized in operating expenses, of which $ 24.8 million was recorded in our Refining segment and $ 12.7 million was recorded in our Corporate and Other segment.

During the second quarter of 2020, we also initiated and completed a corporate restructuring.

As a result of this restructuring, we recorded $ 3.7 million in employee severance costs, which were recognized primarily as operating expenses in our Refining segment and selling, general and administrative expenses in our Corporate and Other segment.

Principles of Consolidation:

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Variable Interest Entities:

HEP is a VIE as defined under U.S.

generally accepted accounting principles (“GAAP”).

A VIE is a legal entity whose equity owners do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support or, as a group, the equity holders lack the power, through voting rights, to direct the activities that most significantly impact the entity's financial performance, the obligation to absorb the entity's expected losses or rights to expected residual returns.

As the general partner of HEP, we have the sole ability to direct the activities of HEP that most significantly impact HEP's financial performance, and therefore as HEP's primary beneficiary, we consolidate HEP.

In 2019, HEP Cushing LLC (“HEP Cushing”), a wholly-owned subsidiary of HEP, and Plains Marketing, L.P., a wholly-owned subsidiary of Plains All American Pipeline, L.P.

(“Plains”), formed a 50/50 joint venture, Cushing Connect Pipeline & Terminal LLC.

Cushing Connect Pipeline & Terminal LLC and its two subsidiaries, Cushing Connect Pipeline and Cushing Connect Terminal, are each VIE’s because they do not have sufficient equity at risk to finance their activities without additional financial support.

HEP is the primary beneficiary of two of these entities as HEP constructed and operates the Cushing Connect Pipeline, and HEP has more ability to direct the activities that most significantly impact the financial performance of Cushing Connect Pipeline & Terminal LLC and Cushing Connect Pipeline.

Therefore, HEP consolidates these two entities.

HEP is not the primary beneficiary of Cushing Connect Terminal, which HEP accounts for using the equity method of accounting.

A variable interest entity ( “ VIE ” ) is a legal entity whose equity owners do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support or, as a group, the equity holders lack the power, through voting rights, to direct the activities that most significantly impact the entity's financial performance, the obligation to absorb the entity's expected losses or rights to expected residual returns.

See Note 4 for additional information.

Use of Estimates:

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.

The preparation of financial statements in accordance with U.S.

generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.

Actual results could differ from those estimates.

HF SINCLAIR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Cash Equivalents:

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In many cases, we enter into net settlement agreements relating to the buy / sell arrangements, which may mitigate credit risk.

HF SINCLAIR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Inventories related to our refining operations are stated at the lower of cost, using the last-in, first-out (“LIFO”) method for crude oil and unfinished and finished refined products, or market.

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Inventories of our Petro-Canada Lubricants and Sonneborn businesses are stated at the lower of cost, using the first-in, first-out (“FIFO”) method, or net realizable value.

Inventories consisting of process chemicals, materials and maintenance supplies and renewable identification numbers (“RINs”) are stated at the lower of weighted-average cost or net realizable value.

Inventories consisting of process chemicals, materials and maintenance supplies and RINs are stated at the lower of weighted-average cost or net realizable value.

At inception, we determine if an arrangement is or contains a lease.

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We use the implicit rate when readily determinable.

Operating leases are recorded in “Operating lease right-of-use assets” and current and noncurrent “Operating lease liabilities” on our consolidated balance sheet.

Finance leases are included in “Properties, plants and equipment, at cost” and “Accrued liabilities” and “Other long-term liabilities” on our consolidated balance sheet.

HF SINCLAIR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Operating leases are recorded in “Operating lease right-of-use assets” and current and noncurrent “Operating lease liabilities” on our consolidated balance sheets.

Finance leases are included in “Properties, plants and equipment, at cost” and “Accrued liabilities” and “Other long-term liabilities” on our consolidated balance sheets.

Our lease term includes an option to extend the lease when it is reasonably certain that we will exercise that option.

Leases with a term of 12 months or less are not recorded on our balance sheet.

Leases with a term of 12 months or less are not recorded on our balance sheets.

For certain equipment leases, we apply a portfolio approach for the operating lease ROU assets and liabilities.

Also, as a lessee, we separate non-lease components that are identifiable and exclude them from the determination of net present value of lease payment obligations.

In addition, HEP, as a lessor, does not separate the non-lease (service) component in contracts in which the lease component is the dominant component.

HEP treats these combined components as an operating lease.

In addition, as a lessor, we do not separate the non-lease (service) component in contracts in which the lease component is the dominant component.

We treat these combined components as an operating lease.

We bifurcate the consideration received for sales-type lease contracts between lease and service revenue, with the service component accounted for within the scope of ASC 606, “Revenue from Contracts with Customers”.

Derivative Instruments:

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Changes in the derivative instrument's fair value are recognized in earnings unless specific hedge accounting criteria are met.

Cash flows from all our derivative activity are reported in the operating section on our consolidated statement of cash flows.

Cash flows from all our derivative activity are reported in the operating section on our consolidated statements of cash flows.

See Note 14 for additional information.

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Depreciation is provided by the straight-line method over the estimated useful lives of the assets, primarily 15 to 32 years for refining, pipeline and terminal facilities, 10 to 40 years for buildings and improvements, 5 to 30 years for other fixed assets and 5 years for vehicles.

HF SINCLAIR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Asset Retirement Obligations:

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If the carrying amount of a reporting unit exceeds its fair value, the goodwill of that reporting unit is impaired, and we measure goodwill impairment as the excess of the carrying amount of the reporting unit over the related fair value.

The carrying amount of our intangible assets and goodwill may fluctuate from period to period due to the effects of foreign currency translation adjustments on goodwill and intangible assets assigned to our Lubricants and Specialty Products segment.

For purposes of long-lived asset impairment evaluation, we group our long-lived assets as follows:

(i) our refinery asset groups, which include certain HEP logistics assets, (ii) our renewables products asset groups (iii) our Lubricants and Specialty Products asset groups, (iv) our Marketing assets and (v) our HEP asset groups, which comprises HEP assets not included in our refinery asset groups.

(i) our refinery asset groups, which include certain logistics assets, (ii) our renewables products asset groups, (iii) our Lubricants & Specialties asset groups, (iv) our Marketing assets and (v) our Midstream asset groups, which is comprised of logistics assets not included in our refinery asset groups.

These asset groups represent the lowest level for which independent cash flows can be identified.

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The actual amount of impairment loss measured, if any, is equal to the amount by which the asset group’s carrying value exceeds its fair value.

See Note 11 for additional information regarding our goodwill and long-lived assets including impairment charges recorded during the year ended December 31, 2020.

See Note 11 for additional information regarding goodwill and intangible assets.

Equity Method Investments:

We account for investments in which we have a noncontrolling interest, yet have significant influence over the entity, using the equity method of accounting, whereby we record our pro-rata share of earnings of these companies and contributions to and distributions from the joint ventures as adjustments to our investment balance.

The following table summarizes our recorded investment compared to its share of underlying equity for each of its investee.

The differences are being amortized as adjustments to our pro-rata share of earnings in the joint ventures.

HF SINCLAIR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Balance at December 31, 2023

Underlying Equity Recorded Investment Balance Difference

(In thousands)

Equity Method Investments

The following table summarizes HEP's recorded investment compared to its share of underlying equity for each of its investee.

The differences are being amortized as adjustments to HEP's pro-rata share of earnings in the joint ventures.

Osage Pipe Line Company, LLC $ 1,144 $ 27,135 $ ( 25,991 )

Cheyenne Pipeline, LLC 30,508 41,985 ( 11,477 )

Cushing Connect Terminal Holdings LLC 48,135 32,474 15,661

Pioneer Investments Corp.

24,188 131,244 ( 107,056 )

Saddle Butte Pipeline III, LLC 66,436 33,107 33,329

Total $ 170,411 $ 265,945 $ ( 95,534 )

Balance at December 31, 2022

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Shipping and handling costs incurred are reported as cost of products sold.

Our lubricants and specialty products business has sales agreements with marketers and distributors that provide certain rights of return or provisions for the repurchase of products previously sold to them.

Our lubricants and specialties business has sales agreements with marketers and distributors that provide certain rights of return or provisions for the repurchase of products previously sold to them.

Under these agreements, revenues and cost of revenues are deferred until the products have been sold to end customers.

Our lubricants and specialty products business also has agreements that create an obligation to deliver products at a future date for which consideration has already been received and recorded as deferred revenue.

Our lubricants and specialties business also has agreements that create an obligation to deliver products at a future date for which consideration has already been received and recorded as deferred revenue.

This revenue is recognized when the products are delivered to the customer.

HEP recognizes revenues as products are shipped through its pipelines and terminals and as other services are rendered.

Additionally, HEP has certain throughput agreements that specify minimum volume requirements, whereby HEP bills a customer for a minimum level of shipments in the event a customer ships below their contractual requirements.

If there are no future performance obligations, HEP recognizes these deficiency payments as revenue.

Our midstream business recognizes revenues as products are shipped through its pipelines and terminals and as other services are rendered.

Additionally, we have certain throughput agreements that specify minimum volume requirements, whereby we bill a customer for a minimum level of shipments in the event a customer ships below their contractual requirements.

If there are no future performance obligations, we recognize these deficiency payments as revenue.

In certain of these throughput agreements, a customer may later utilize such shortfall billings as credit towards future volume shipments in excess of its minimum levels within its respective contractual shortfall make-up period.

Such amounts represent an obligation to perform future services, which may be initially deferred and later recognized as revenue based on estimated future shipping levels, including the likelihood of a customer’s ability to utilize such amounts prior to the end of the contractual shortfall make-up period.

HEP recognizes the service portion of these deficiency payments as revenue when HEP does not expect it will be required to satisfy these performance obligations in the future based on the pattern of rights exercised by the customer.

We recognize the service portion of these deficiency payments as revenue when we do not expect it will be required to satisfy these performance obligations in the future based on the pattern of rights exercised by the customer.

Payment terms under our contracts with customers are consistent with industry norms and are typically payable within 30 days of the date of invoice.

HF SINCLAIR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Cost Classifications:

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Selling, general and administrative expenses include compensation, professional services and other support costs.

HF SINCLAIR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Deferred Maintenance Costs:

Our refinery units require regular major maintenance and repairs which are commonly referred to as “turnarounds.” Catalysts used in certain refinery processes also require regular “change-outs.” The required frequency of the maintenance varies by unit and by catalyst, but generally is every two to five years .

Turnaround costs are deferred and amortized over the period until the next scheduled turnaround.

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We have intercompany notes that were issued to fund certain of our foreign businesses.

Remeasurement adjustments resulting from the conversion of such intercompany financing amounts to functional currencies are recorded as gains or losses as a component of other income (expense) on our consolidated statements of operations.

Such adjustments are not recorded to the Lubricants and Specialty Products segment operations, but to Corporate and Other.

Such adjustments are not recorded to the Lubricants & Specialties segment operations, but to Corporate and Other.

See Note 20 for additional information on our segments.

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We believe we have appropriate support for the income tax positions taken and to be taken on our income tax returns and that our accruals for tax liabilities are adequate for all open years based on an assessment of many factors, including past experience and interpretations of tax law applied to the facts of each matter.

HF SINCLAIR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Inventory Repurchase Obligations:

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Such sell / buy transactions are accounted for as inventory repurchase obligations under which proceeds received under the initial sell is recognized as inventory repurchase obligations that are subsequently reversed when the inventories are repurchased.

For the years ended December 31, 2022, 2021 and 2020, we received proceeds of $ 42.1 million, $ 43.5 million and $ 44.9 million and subsequently repaid $ 42.8 million, $ 45.4 million and $ 46.4 million, respectively, under these sell / buy transactions.

For the years ended December 31, 2023, 2022 and 2021, we received proceeds of $ 25.7 million, $ 42.1 million and $ 43.5 million, respectively, and subsequently repaid $ 27.4 million, $ 42.8 million and $ 45.4 million, respectively, under these sell / buy transactions.

Accounting Pronouncements - Recently Adopted

In October 2021, Accounting Standards Update (“ASU”) 2021-08, “Accounting for Contract Assets and Contract Liabilities from Contracts with Customers,” was issued requiring that an acquiring entity recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC 606, “Revenue from Contracts with Customers.” We adopted this standard effective January 1, 2023, but did not have a business combination under the scope of ASC 805, “Business Combinations” for the year ended December 31, 2023.

Accounting Pronouncements - Not Yet Adopted

In November 2023, ASU 2023-07, “Improvements to Reportable Segment Disclosures” was issued.

ASU 2023-07 requires, among other updates, enhanced disclosures about significant segment expenses that are regularly provided to the chief operating decision maker, as well as the aggregate amount of other segment items included in the reported measure of segment profit or loss.

This aims to provide more decision-useful information to stakeholders by giving a clearer picture of the costs incurred by each reportable segment.

ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, and requires retrospective adoption.

Early adoption is permitted.

We are assessing the impact of this guidance on our disclosures.

In December 2023, ASU 2023-09, “Improvements to Income Tax Disclosures” was issued.

ASU 2023-09 requires enhanced annual disclosures regarding the rate reconciliation and income taxes paid information.

ASU 2023-09 is effective for fiscal years beginning after December 15, 2024 and may be adopted on a prospective or retrospective basis.

Early adoption is permitted.

We are assessing the impact of this guidance on our disclosures.

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) and Sinclair Transportation Company LLC (“STC”) from The Sinclair Companies (now known as REH Company and referred to herein as “REH Company”).

On the Closing Date, pursuant to that certain Business Combination Agreement, dated as of August 2, 2021 (as amended on March 14, 2022, the “Business Combination Agreement”), by and among HollyFrontier, HF Sinclair, Hippo Merger Sub, Inc., a wholly owned subsidiary of HF Sinclair (“Parent Merger Sub”), REH Company, and Hippo Holding LLC (now known as Sinclair Holding LLC), a wholly owned subsidiary of REH Company (the “Target Company”), HF Sinclair completed its previously announced acquisition of the Target Company by effecting (a) a holding company merger in accordance with Section 251(g) of the Delaware General Corporation Law whereby HollyFrontier merged with and into Parent Merger Sub, 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 REH Company contributed all of the equity interests of the Target Company to HF Sinclair in exchange for shares of HF Sinclair, resulting in the Target Company becoming a direct wholly owned subsidiary of HF Sinclair (the “HFC Transactions”).

HF SINCLAIR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Accounting Pronouncements - Not Yet Adopted

In October 2021, Accounting Standards Update 2021-08, “Accounting for Contract Assets and Contract Liabilities from Contracts with Customers,” was issued requiring that an acquiring entity recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Accounting Standards Codification (“ASC”) 606, “Revenue from Contracts with Customers.” This standard is effective for fiscal years beginning after December 15, 2022, and early adoption is permitted.

We do not anticipate that the adoption of this standard will have an impact on our consolidated financial statements.

On March 14, 2022, pursuant to the Business Combination Agreement, HF Sinclair completed its acquisition of the Target Company by effecting (a) the HFC Merger and (b) immediately following the HFC Merger, a contribution whereby REH Company contributed all of the equity interests of the Target Company to HF Sinclair in exchange for shares of HF Sinclair, resulting in the Target Company becoming a direct wholly owned subsidiary of HF Sinclair.

In connection with the closing of the HFC Transactions, HF Sinclair issued 60,230,036 shares of HF Sinclair common stock, par value $ 0.01 per share, to REH Company, representing 27 % of the pro forma equity of HF Sinclair with a value of approximately $ 2,149 million based on HollyFrontier’s fully diluted shares of common stock outstanding and closing stock price on March 11, 2022.

Pursuant to the Business Combination Agreement, REH Company made a $ 77.5 million cash payment to HF Sinclair, inclusive of final working capital adjustments, which reduced the aggregate transaction value to approximately $ 2,072 million.

Of the 60,230,036 shares of HF Sinclair common stock, 2,570,000 shares are currently held in escrow to secure REH Company’s renewable identification numbers (“RINs”) credit obligations under Section 6.22 of the Business Combination Agreement.

Additionally, on the Closing Date, and immediately prior to the consummation of the HFC Transactions, HEP completed its acquisition of STC, REH Company’s integrated crude and refined products midstream business, and issued 21,000,000 common limited partner units and paid cash consideration of $ 329.0 million, inclusive of final working capital adjustments, to REH Company in exchange for all the outstanding equity interests of STC (the “HEP Transaction” and together with the HFC Transactions, the “Sinclair Transactions”).

Of these 21,000,000 common limited partner units, 5,290,000 units are currently held in escrow to secure REH Company’s RINs credit obligations to HF Sinclair under Section 6.22 of the Business Combination Agreement.

HF Sinclair, and not HEP, would be entitled to the HEP common units held in escrow in the event of REH Company’s breach of its RINs credit obligations under the Business Combination Agreement.

Of the 60,230,036 shares of HF Sinclair common stock, 2,570,000 shares were held in escrow to secure REH Company’s RINs credit obligations under Section 6.22 of the Business Combination Agreement.

As of December 31, 2023, REH Company had satisfied their RINs credit obligations to HF Sinclair and the corresponding shares were released from escrow in January 2024.

Additionally, on the Closing Date, and immediately prior to the consummation of the HFC Transactions, HEP completed its acquisition of STC, REH Company’s integrated crude and refined products midstream business, and issued 21,000,000 HEP common units and paid cash consideration of $ 329.0 million, inclusive of final working capital adjustments, to REH Company in exchange for all the outstanding equity interests of STC (the “HEP Transaction” and together with the HFC Transactions, the “Sinclair Transactions”).

Of these 21,000,000 HEP common units, 5,290,000 units were held in escrow and were released to REH Company in April 2023 upon their satisfaction of the corresponding RINs credit obligations to HF Sinclair under Section 6.22 of the Business Combination Agreement.

HollyFrontier’s (now HF Sinclair's) senior management team continues to operate the combined company.

Pursuant to that certain stockholders agreement (the “Stockholders Agreement”) by and among HF Sinclair, REH Company and the stockholders of REH Company (together with REH Company and each of their permitted transferees, the “REH Parties”), REH Company was granted the right to nominate, and has nominated, two directors to our Board of Directors at the Closing Date.

The REH Company stockholders also agreed to certain customary lock up, voting and standstill restrictions, as well as customary registration rights, for the HF Sinclair common stock issued to the stockholders of REH Company.

The REH Company stockholders also agreed to certain customary lock up (which expired in June 2023), voting and standstill restrictions, as well as customary registration rights, for the HF Sinclair common stock issued to the stockholders of REH Company.

HF Sinclair is headquartered in Dallas, Texas, with combined business offices in Salt Lake City, Utah.

HF SINCLAIR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Under the terms of the Business Combination Agreement, HF Sinclair acquired REH Company’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.

At the time of closing, the branded marketing business supplied high-quality fuels to more than 1,300 Sinclair branded stations and licensed 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 (as defined in Note 3), HEP acquired STC, REH Company’s integrated crude and refined products pipelines and terminal assets, including approximately 1,200 miles of integrated crude and refined product pipeline supporting the Sinclair refineries and third parties, eight product terminals and two crude terminals with approximately 4.5 million barrels of operated storage.

Under the terms of the Contribution Agreement, HEP acquired STC, REH Company’s integrated crude and refined products pipelines and terminal assets, including approximately 1,200 miles of integrated crude and refined product pipeline supporting the Sinclair refineries and third parties, eight product terminals and two crude terminals with approximately 4.5 million barrels of operated storage.

In addition, HEP acquired STC’s interests in three pipeline joint ventures for crude gathering and product offtake including:

Saddle Butte Pipeline III, LLC ( 25.06 % non-operated interest);

Saddle Butte Pipeline III, LLC (at the time of closing, a 25.06 %, and currently, a 25.12 % non-operated interest);

Pioneer Investments Corp.

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The Sinclair Transactions were accounted for as a business combination using the acquisition method of accounting, with the assets acquired and liabilities assumed at their respective acquisition date fair values at the effective date, with the excess consideration recorded as goodwill.

The following tables present the purchase consideration and preliminary purchase price allocation of the assets acquired and liabilities assumed on March 14, 2022:

HF SINCLAIR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following tables present the purchase consideration and final purchase price allocation of the assets acquired and liabilities assumed on March 14, 2022:

Purchase Consideration (in thousands except for per share amounts)

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Purchase consideration paid in HF Sinclair common stock 2,149,008

Shares of HEP common units issued to Sinclair 21,000

Shares of HEP common units issued to REH Company 21,000

Closing price per share of HEP common units (2)

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Cash consideration paid by HEP 328,955

Cash consideration received by HFC ( 77,507 )

Cash consideration received by HF Sinclair ( 77,507 )

Total cash consideration 251,448

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(2) Based on the HEP closing unit price on March 11, 2022.

HF SINCLAIR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands)

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Goodwill $ 685,934

The preliminary purchase price allocation resulted in the recognition of $ 685.9 million in goodwill, of which $ 119.1 million was related to HEP.

The goodwill recognized is primarily attributable to operating and administrative synergies and net deferred tax liabilities arising from the differences between the estimated fair values of assets and liabilities and the tax basis of these assets and liabilities.

The final purchase price allocation resulted in the recognition of $ 685.9 million in goodwill.

Our Refining, Renewables, Marketing and Midstream segments recognized $ 244.0 million, $ 159.0 million, $ 163.8 million and $ 119.1 million of goodwill, respectively.

The goodwill recognized was primarily attributable to operating and administrative synergies and net deferred tax liabilities arising from the differences between the estimated fair values of assets and liabilities and the tax basis of these assets and liabilities.

There are qualitative assumptions of long-term factors that this acquisition creates for our stockholders, including increased scale and diversification that is expected to drive growth through the expanded refining and renewables businesses and the addition of an integrated branded wholesale distribution network.

This goodwill is not deductible for income tax purposes.

This goodwill was not deductible for income tax purposes.

HF SINCLAIR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The fair value measurements for properties, plants and equipment were based on significant inputs that are not observable in the market and, therefore, represent Level 3 measurements.

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The fair value of equity method investments totaled $ 234.3 million and was based on a combination of valuation methods including discounted cash flows and the guideline public company method.

Accrued liabilities include $ 70.6 million of RINs credit obligations, including 2022 obligations through the Closing Date, which were valued based on market prices for RINs at the effective date, a Level 2 input.

Accrued liabilities included $ 70.6 million of RINs credit obligations, including 2022 obligations through the Closing Date, which were valued based on market prices for RINs at the effective date, a Level 2 input.

REH Company is financially responsible for satisfaction of RINs credit obligations for all periods prior to the closing.

This receivable totaled $ 68.4 million and was valued based on market prices for RINs at the effective date.

During the year ended December 31, 2023, we purchased RINs for an aggregate amount of $ 36.0 million, on behalf of REH Company from third parties at applicable market prices in connection with our provision of services to REH Company under the transition services agreement that we and REH Company entered into at the closing of the Sinclair Transactions.

We acted as an agent in these RINs transactions and did not recognize sales or cost of products sold as a result.

During the year ended December 31, 2023, we recognized sales of $ 21.2 million related to the sale of RINs to REH Company based on applicable market prices.

All other fair values discussed above were based on significant inputs that are not observable in the market and, therefore, represent Level 3 measurements.

HF SINCLAIR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The fair values of all other current receivable and payables were equivalent to their carrying values due to their short-term nature.

These fair value estimates are preliminary and, therefore, the final fair values of assets acquired and liabilities assumed and the resulting effect on our financial position may change once all needed information has become available and we finalize our valuations.

Our consolidated financial and operating results reflect the Acquired Sinclair Businesses operations beginning March 14, 2022.

Our results of operations included revenue and income from operations of $ 9,835.0 million and $ 865.1 million, respectively, for the period from March 14, 2022 through December 31, 2022 related to the Acquired Sinclair Businesses operations.

During the year ended December 31, 2022, we incurred $ 52.9 million in incremental direct acquisition and integration costs that principally relate to legal, advisory and other professional fees and are presented as selling, general and administrative expenses in our statements of operations.

The following unaudited pro forma combined condensed financial data for the years ended December 31, 2022 and 2021 was derived from our historical financial statements giving effect to the Sinclair Transactions as if they had occurred on January 1, 2021.

The below information reflects pro forma adjustments based on available information and certain assumptions that we believe are reasonable, including the depreciation of the fair-valued properties, plants and equipment acquired in the Sinclair Transactions and the estimated tax impacts of the pro forma adjustments.

Additionally, pro forma earnings include certain non-recurring charges, the substantial majority of which consist of transaction costs related to financial advisors, legal advisors and professional accounting services.

The pro forma results of operations do not include any cost savings or other synergies that may result from the Sinclair Transactions.

The pro forma combined condensed financial data has been included for comparative purposes only and is not necessarily indicative of the results that might have occurred had the Sinclair Transactions taken place on January 1, 2021 and is not intended to be a projection of future results.

Years Ended December 31,

(In thousands)

Sales and other revenues $ 39,210,338 $ 22,767,827

Net income attributable to HF Sinclair stockholders $ 2,853,686 $ 757,808

During the years ended December 31, 2023 and 2022, we incurred $ 15.8 million and $ 52.9 million, respectively, in incremental direct acquisition and integration costs that principally relate to legal, advisory and other professional fees and are presented as selling, general and administrative expenses in our consolidated statements of income.

Puget Sound Refinery

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This transaction was accounted for as a business combination, using the acquisition method, with the aggregate cash consideration allocated to the acquisition date fair value of assets and liabilities acquired.

In connection with the Puget Sound Acquisition, we incurred $ 12.2 million of acquisition and integration costs during the year ended December 31, 2021, which are included in selling, general and administrative expenses on the consolidated statement of operations.

Fair values of assets acquired and liabilities assumed were as follows:

inventories $ 299.3 million, properties, plants and equipment $ 394.2 million, other assets $ 10.4 million, accrued and other current liabilities $ 12.5 million and other long-term liabilities $ 67.1 million.

The fair value measurements for properties, plants and equipment were based on significant inputs that are not observable in the market and, therefore, represent Level 3 measurements.

HF SINCLAIR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The fair value of properties, plants and equipment was based on the combination of the cost and market approaches.

Key assumptions in the cost approach include determining the replacement cost by evaluating recent published data and adjusting replacement cost for economic and functional obsolescence.

We used the market approach to measure the value of certain assets through an analysis of recent sales or offerings of comparable properties.

The fair value of crude oil and refined products inventory was based on market prices as of the acquisition date.

Our consolidated financial and operating results reflect the Puget Sound Refinery operations beginning November 1, 2021.

28 unchanged sentences

$ 85,702 $ 61,083

HF SINCLAIR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Supplemental balance sheet information related to our leases was as follows:

5 unchanged sentences

Finance leases

HF SINCLAIR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The components of lease expense were as follows:

26 unchanged sentences

Finance leases $ 38,061 $ 6,149 $ 64,334

HF SINCLAIR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2023, minimum future lease payments of our operating and finance lease obligations were as follows:

12 unchanged sentences

Long-term lease obligations $ 249,479 $ 74,860

Our consolidated statements of operations reflect lease revenue recognized by HEP for contracts with third parties in which HEP is the lessor.

Substantially all of the assets supporting contracts meeting the definition of a lease have long useful lives, and HEP believes these assets will continue to have value when the current agreements expire due to HEP's risk management strategy for protecting the residual fair value of the underlying assets by performing ongoing maintenance during the lease term.

One of HEP’s throughput agreements with Delek US Holdings, Inc.

(“Delek”) was partially renewed during the year ended December 31, 2020.

Certain components of this agreement met the criteria of sales-type leases since the underlying assets are not expected to have an alternative use at the end of the lease term to anyone other than Delek.

Under sales-type lease accounting, at the commencement date, the lessor recognizes a net investment in the lease, based on the estimated fair value of the underlying leased assets at contract inception, and derecognizes the underlying assets with the difference recorded as selling profit or loss arising from the lease.

Therefore, HEP recognized a gain on sales-type leases totaling $ 33.8 million during the year ended December 31, 2020.

This sales-type lease transaction, including the related gain, was a non-cash transaction.

As of December 31, 2023, we entered into certain leases that have not yet commenced.

Such leases include a 15-year lease for a manufacturing and distribution facility, with estimated future undiscounted lease payments of $ 62.8 million, expected to commence in the first quarter of 2024.

Our consolidated statements of income reflect lease revenue recognized by our midstream operations for contracts with third parties in which we are the lessor.

HF SINCLAIR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Substantially all of the assets supporting contracts meeting the definition of a lease have long useful lives, and we believe these assets will continue to have value when the current agreements expire due to our risk management strategy for protecting the residual fair value of the underlying assets by performing ongoing maintenance during the lease term.

Lease income recognized was as follows:

3 unchanged sentences

Operating lease revenues $ 16,879 $ 14,346 $ 15,281

Gain on sales-type leases $ — $ — $ 33,834

Sales-type lease interest income $ 1,634 $ 2,515 $ 2,545

Lease revenues relating to variable lease payments not included in measurement of the sales-type lease receivable $ 1,325 $ 1,782 $ 2,162

For HEP’s sales-type leases, HEP included customer obligations related to minimum volume requirements in guaranteed minimum lease payments.

Portions of HEP’s minimum guaranteed pipeline tariffs for assets subject to sales-type lease accounting are recorded as interest income with the remaining amounts recorded as a reduction in net investment in leases.

HEP recognized any billings for throughput volumes in excess of minimum volume requirements as variable lease payments, and these variable lease payments were recorded in lease revenues.

HF SINCLAIR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Annual minimum undiscounted lease payments in which HEP is a lessor to third-party contracts as of December 31, 2022 were as follows:

For our sales-type leases, we included customer obligations related to minimum volume requirements in guaranteed minimum lease payments.

Portions of our minimum guaranteed pipeline tariffs for assets subject to sales-type lease accounting are recorded as interest income with the remaining amounts recorded as a reduction in net investment in leases.

We recognized any billings for throughput volumes in excess of minimum volume requirements as variable lease payments, and these variable lease payments were recorded in lease revenues.

Annual minimum undiscounted lease payments in which we are a lessor to third-party contracts as of December 31, 2023 were as follows:

Operating Sales-type

2 unchanged sentences

2025 3,441 2,170

2025 3,017 2,955

Thereafter — 13,560

3 unchanged sentences

Net investment in leases $ 33,645

Net investment in sales-type leases recorded on our consolidated balance sheet was composed of the following:

Net investment in sales-type leases recorded on our consolidated balance sheets was composed of the following:

December 31, 2023 December 31, 2022

3 unchanged sentences

Net investment in leases $ 33,645 $ 34,180

Holly Energy Partners

HEP is a publicly held master limited partnership that owns and / or operates logistic and refinery assets consisting of petroleum product and crude oil pipelines, terminals, tankage, loading rack facilities and refinery processing units that principally support our refining and marketing operations, as well as other third-party refineries, in the Mid-Continent, Southwest and Rocky Mountains geographic regions of the United States.

Additionally, as of December 31, 2022, HEP owned a 50 % ownership interest in each of Osage Pipe Line Company, LLC, the owner of a pipeline running from Cushing, Oklahoma to El Dorado, Kansas (the “Osage Pipeline”);

Cheyenne Pipeline, LLC, the owner of a pipeline running from Fort Laramie, Wyoming to Cheyenne, Wyoming (the “Cheyenne Pipeline”) and Cushing Connect Pipeline & Terminal LLC (“Cushing Connect”), the owner of a crude oil storage terminal in Cushing, Oklahoma and a pipeline that runs from Cushing, Oklahoma to our Tulsa West and Tulsa East facilities (collectively, the “Tulsa Refineries”);

a 25.06 % ownership interest in Saddle Butte Pipeline III, LLC, the owner of a pipeline from the Powder River Basin to Casper, Wyoming (the “Saddle Butte Pipeline”);

and a 49.995 % ownership interest in Pioneer Investments Corp., the owner of a pipeline from Sinclair, Wyoming to the North Salt Lake City, Utah Terminal (the “Pioneer Pipeline”).

At December 31, 2022, we owned a 47 % limited partner interest and a non-economic general partner interest in HEP.

As the general partner of HEP, we have the sole ability to direct the activities that most significantly impact HEP's financial performance, and therefore as HEP's primary beneficiary, we consolidate HEP.

HEP generates revenues by charging tariffs for transporting petroleum products and crude oil through its pipelines, by charging fees for terminalling refined products and other hydrocarbons, and by storing and providing other services at its storage tanks and terminals.

Under our long-term transportation agreements with HEP (discussed further below), we accounted for 80 % of HEP’s total revenues for the year ended December 31, 2022.

We do not provide financial or equity support through any liquidity arrangements and / or debt guarantees to HEP.

HEP has outstanding debt under a senior secured revolving credit agreement and its senior notes.

HEP’s creditors have no recourse to our assets.

Furthermore, our creditors have no recourse to the assets of HEP and its consolidated subsidiaries.

See Note 13 for a description of HEP’s debt obligations.

HF SINCLAIR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

HEP has risk associated with its operations.

If a major customer of HEP were to terminate its contracts or fail to meet desired shipping or throughput levels for an extended period of time, revenue would be reduced and HEP could suffer substantial losses to the extent that a new customer is not found.

In the event that HEP incurs a loss, our operating results will reflect HEP’s loss, net of intercompany eliminations, to the extent of our ownership interest in HEP at that point in time.

Sinclair Transportation Company Acquisition

On August 2, 2021, HEP, REH Company and STC, a wholly owned subsidiary of REH Company, entered into a contribution agreement (as amended on March 14, 2022, the “Contribution Agreement”), which closed on March 14, 2022.

Pursuant to the Contribution Agreement, HEP acquired all of the outstanding equity interests of STC in exchange for 21,000,000 newly issued common limited partner units of HEP with a value of approximately $ 349.0 million based on HEP’s fully diluted common limited partner units outstanding and HEP’s closing unit price on March 11, 2022, and cash consideration equal to $ 329.0 million, inclusive of final working capital adjustments pursuant to the Contribution Agreement for an aggregate transaction value of $ 678.0 million.

As a result of this common unit issuance and our resulting HEP ownership change, we adjusted additional capital and equity attributable to HEP’s noncontrolling interest holders to reallocate HEP’s equity among its unitholders.

As part of HEP’s acquisition of STC, HEP acquired the 25.0 % non-operated interest of UNEV not already owned by HEP and as such, UNEV, the owner of a pipeline running from Woods Cross, Utah to Las Vegas, Nevada and associated product terminals, became a wholly owned subsidiary of HEP.

HEP’s existing senior management team continues to operate HEP.

Pursuant to that certain unitholders agreement (the “Unitholders Agreement”) by and among HEP, Holly Logistic Services, L.L.C., Navajo Pipeline Co., L.P.

and the REH Parties, REH Company was granted the right to nominate, and has nominated, one director to the HEP Board of Directors at the Closing Date.

REH Company’s stockholders have also agreed to certain customary lock up restrictions and registration rights for the HEP common limited partner units to be issued to the stockholders of REH Company.

HEP will continue to be named Holly Energy Partners, L.P.

Contemporaneous with the closing of the Sinclair Transactions, HEP and HollyFrontier amended certain intercompany agreements, including the master throughput agreement, to include within the scope of such agreements certain of the assets acquired by HEP pursuant to the Contribution Agreement.

Cushing Connect Joint Venture

In October 2019, HEP Cushing and Plains formed a 50/50 joint venture, Cushing Connect, for (i) the development, construction, ownership and operation of a new 160,000 barrel per day common carrier crude oil pipeline (the “Cushing Connect Pipeline”) that connects the Cushing, Oklahoma crude oil hub to our Tulsa Refineries and (ii) the ownership and operation of 1.5 million barrels of crude oil storage in Cushing, Oklahoma (the “Cushing Connect Terminal”).

In 2019, HEP Cushing LLC, then a wholly owned subsidiary of HEP and now a wholly owned subsidiary of HF Sinclair, and Plains Marketing, L.P., a wholly owned subsidiary of Plains All American Pipeline, L.P.

(“Plains”) formed a 50/50 joint venture, Cushing Connect Pipeline & Terminal LLC (“Cushing Connect”), for (i) the development, construction, ownership and operation of a new 160,000 barrel per day common carrier crude oil pipeline (the “Cushing Connect Pipeline”) that connects the Cushing, Oklahoma crude oil hub to our Tulsa refineries and (ii) the ownership and operation of 1.5 million barrels of crude oil storage in Cushing, Oklahoma (the “Cushing Connect Terminal” and together with Cushing Connect and the Cushing Connect Pipeline, the “Cushing Connect Joint Venture”).

The Cushing Connect Terminal was fully in-service beginning in April 2020, and the Cushing Connect Pipeline was placed in service during the third quarter of 2021.

Long-term commercial agreements have been entered into to support the Cushing Connect assets.

Cushing Connect entered into a contract with an affiliate of HEP to manage the operation of the Cushing Connect Pipeline and with an affiliate of Plains to manage the operation of the Cushing Connect Terminal.

The total investment in Cushing Connect was shared proportionately among the partners.

Cushing Connect entered into a contract with an affiliate of HEP, now a subsidiary of HF Sinclair, to manage the operation of the Cushing Connect Pipeline and with an affiliate of Plains to manage the operation of the Cushing Connect Terminal.

The total investment in Cushing Connect was generally shared proportionately among the partners.

However, HEP was solely responsible for any Cushing Connect Pipeline construction costs that exceeded the budget by more than 10 %.

HEP’s share of the cost of the Cushing Connect Terminal contributed by Plains and Cushing Connect Pipeline construction costs was approximately $ 74.0 million.

Transportation Agreements

HEP serves our refineries under long-term pipeline, terminal and tankage throughput agreements and refinery processing tolling agreements expiring from 2023 through 2037.

Under these agreements, we pay HEP fees to transport, store and process throughput volumes of refined products, crude oil and feedstocks on HEP's pipelines, terminals, tankage, loading rack facilities and refinery processing units that result in minimum annual payments to HEP.

Under these agreements, the agreed upon tariff rates are subject to annual tariff rate adjustments on July 1 at a rate based upon the percentage change in Producer Price Index or Federal Energy Regulatory Commission index.

As of December 31, 2022, these agreements required minimum annualized payments to HEP of $ 452.6 million .

Cushing Connect and its two subsidiaries, Cushing Connect Pipeline and Cushing Connect Terminal are each VIEs as defined under GAAP.

Cushing Connect and its two subsidiaries are each VIE’s because they did not originally have sufficient equity at risk to finance their activities without additional financial support.

We are the primary beneficiary of two of these entities as HEP constructed and operates the Cushing Connect Pipeline, and we have more ability to direct the activities that most significantly impact the financial performance of Cushing Connect and Cushing Connect Pipeline.

Therefore, we consolidate these two entities.

We are not the primary beneficiary of Cushing Connect Terminal, which we account for using the equity method of accounting.

Our maximum exposure to loss as a result of our involvement with Cushing Connect Terminal is not expected to be material due to the long-term terminalling agreements in place to support operations.

With the exception of the assets of HEP Cushing, creditors of the Cushing Connect Joint Venture legal entities have no recourse to our assets.

Any recourse to HEP Cushing would be limited to the extent of HEP Cushing's assets, which other than its investment in Cushing Connect Joint Venture, are not significant.

Furthermore, our creditors have no recourse to the assets of the Cushing Connect Joint Venture legal entities.

The most significant assets of Cushing Connect and Cushing Connect Pipeline that are available to settle only their obligations, along with their most significant liabilities for which their creditors do not have recourse to our general credit, were:

Years Ended December 31,

(In thousands)

Cash and cash equivalents 1,536 2,147

Properties, plants and equipment, at cost 102,936 102,635

Less accumulated depreciation ( 8,022 ) ( 4,484 )

Intangibles and other 32,473 34,746

Substantially all revenue-generating activities relate to sales of refined product, branded fuel, renewable diesel and excess crude oil inventories sold at market prices (variable consideration) under contracts with customers.

Additionally, we have revenues attributable to logistics services provided under petroleum product and crude oil pipeline transportation, processing, storage and terminalling agreements with third parties.

HF SINCLAIR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Our transactions with HEP and fees paid under our transportation agreements with HEP and UNEV are eliminated and have no impact on our consolidated financial statements.

Substantially all revenue-generating activities relate to sales of refined product, branded fuel sales, renewable diesel and excess crude oil inventories sold at market prices (variable consideration) under contracts with customers.

Additionally, we have revenues attributable to HEP logistics services provided under petroleum product and crude oil pipeline transportation, processing, storage and terminalling agreements with third parties.

Disaggregated revenues were as follows:

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Renewable diesel revenues (5)

781,309 654,893 —

Transportation and logistic services 117,749 109,200 103,646

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(1) Transportation fuels revenues are attributable to our Refining segment wholesale marketing of gasoline, diesel and jet fuel.

For the year ended December 31, 2020, $ 1.6 million is reported in our Corporate and Other segment.

(2) Specialty lubricant products consist of base oil, waxes, finished lubricants and other specialty fluids.

(3) Asphalt, fuel oil and other products revenue include revenues attributable to our Refining and Lubricants and Specialty Products segments of $ 1,827.3 million and $ 314.8 million, respectively, for the year ended December 31, 2022.

For the year ended December 31, 2021 such revenues attributable to our Refining and Lubricants and Specialty Products were $ 724.3 million and $ 224.3 million, respectively.

For the year ended December 31, 2020 such revenue attributable to our Refining and Lubricants and Specialty Products segments were $ 533.5 million and $ 135.4 million, respectively.

(3) Asphalt, fuel oil and other products revenue include revenues attributable to our Refining and Lubricants & Specialties segments o f $ 1,928.6 million and $ 238.4 million, res pectively, for the year ended December 31, 2023.

For the year ended December 31, 2022 such revenues attributable to our Refining and Lubricants & Specialties were $ 1,827.3 million and $ 314.8 million, respectively.

For the year ended December 31, 2021 such revenue attributable to our Refining and Lubricants & Specialties segments were $ 724.3 million and $ 224.3 million, respectively.

(4) Excess crude oil revenues represent sales of purchased crude oil inventory that at times exceeds the supply needs of our refineries.

(5) Renewable diesel revenues are attributable to our Renewables segment.

(6) Marketing segment revenues consist primarily of branded gasoline and diesel fuel.

(7) Other revenues are principally attributable to our Refining segment.

HF SINCLAIR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(6) Marketing revenues consist primarily of branded gasoline and diesel fuel.

(7) Other revenues are principally attributable to our Refining segment.

Our consolidated balance sheets reflect contract liabilities related to unearned revenues attributable to future service obligations under HEP’s third-party transportation agreements and production agreements from our Sonneborn operations.

Our consolidated balance sheets reflect contract liabilities related to unearned revenues attributable to future service obligations under our third-party transportation agreements and production agreements from our Sonneborn operations.

The following table presents changes to contract liabilities:

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Balance at December 31 $ 7,533 $ 10,722 $ 9,278

As of December 31, 2022, we have long-term contracts with customers that specify minimum volumes of gasoline, diesel, lubricants and specialty products to be sold ratably at market prices through 2032.

Future prices are subject to market fluctuations and therefore, we have elected the exemption to exclude variable consideration under these contracts under Accounting Standards Codification 606-10-50-14A.

As of December 31, 2023, we have long-term contracts with customers that specify minimum volumes of gasoline, diesel, lubricants and specialties to be sold ratably at market prices through 2032 .

Future prices are subject to market fluctuations and therefore, we have elected the exemption to exclude variable consideration under these contracts under ASC 606-10-50-14A.

Aggregate minimum volumes expected to be sold (future performance obligations) under our long-term product sales contracts with customers are as follows, which include branded sales volumes assumed upon our acquisition of the Acquired Sinclair Businesses:

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35,563 25,506 17,891 47,240 126,200

Additionally, HEP has long-term contracts with third-party customers that specify minimum volumes of product to be transported through its pipelines and terminals that result in fixed-minimum annual reven ues throu gh 2025.

Annua l minimum revenues attributable to HEP’s third-party contracts as of December 31, 2022 are presented below:

2023 2024 2025 Total

Additionally, we have long-term contracts with third-party customers that specify minimum volumes of product to be transported through our pipelines and terminals that result in fixed-minimum annual reven ues throu gh 2033.

Annua l minimum revenues attributable to our third-party contracts as of December 31, 2023 are presented below:

2024 2025 2026 Thereafter Total

(In thousands)

HEP contractual minimum revenues

$ 11,017 $ 11,017 $ 3,017 $ 25,051

For the years ended December 31, 2022 and 2021, we had one customer, Shell, together with certain of its affiliates, that accounted for 10% or more of our total annual revenues at approximately 15 % and 13 %, respectively.

We had no cu stomers which had accounted for over 10% of our annual revenues for the year ended December 31, 2020.

Midstream operations contractual minimum revenues $ 20,656 $ 11,097 $ 7,656 $ 42,592 $ 82,001

For the years ended December 31, 2023, 2022 and 2021, we had one customer, Shell, together with certain of its affiliates, that accounted for 10% or more of our total annual revenues at approximately 12 %, 15 % and 13 %, respectively, which were primarily generated through our Refining segment operations.

Fair Value Measurements

Our financial instruments measured at fair value on a recurring basis consist of derivative instruments and RINs credit obligations.

Fair value measurements are derived using inputs (assumptions that market participants would use in pricing an asset or liability, including assumptions about risk).

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The carrying amounts of derivative instruments and RINs receivable and credit obligations were as follows:

The carrying amounts of derivative instruments and RINs receivable and credit obligations at December 31, 2023 and 2022 were as follows:

Carrying Amount Fair Value by Input Level

Financial Instrument Level 1 Level 2 Level 3

Level 1 Level 2 Level 3

(In thousands)

December 31, 2023

Commodity price swaps $ 342 $ — $ 342 $ —

NYMEX futures contracts $ 836 $ 836 $ — $ —

Commodity forward contracts 2,908 — 2,908 —

RINS receivable (1)

81,232 — 81,232 —

Foreign currency forward contracts 15,359 — 15,359 —

Total assets $ 3,744 $ 836 $ 2,908 $ —

NYMEX futures contracts $ 2,750 $ 2,750 $ — $ —

Commodity collar contracts 6,275 — 6,275 —

Commodity price swaps $ 7,808 $ — $ 7,808 $ —

Commodity forward contracts 1,848 — 1,848 —

RINs credit obligations (1)

81,232 — 81,232 —

Foreign currency forward contracts 7,893 — 7,893 —

Total liabilities $ 17,549 $ — $ 17,549 $ —

Carrying Amount Fair Value by Input Level

Financial Instrument Level 1 Level 2 Level 3

Level 1 Level 2 Level 3

(In thousands)

December 31, 2022

Commodity price swaps $ 342 $ — $ 342 $ —

Commodity forward contracts 2,949 — 2,949 —

RINs receivable (1)

81,232 — 81,232 —

Foreign currency forward contracts 15,359 — 15,359 —

1 unchanged sentence

NYMEX futures contracts $ 2,750 $ 2,750 $ — $ —

Commodity collar contracts 6,275 — 6,275 —

Commodity forward contracts 2,987 — 2,987 —

2 unchanged sentences

Total liabilities $ 93,244 $ 2,750 $ 90,494 $ —

(1) REH Company is financially responsible for satisfaction of RINs credit obligations for all periods prior to the closing of the Sinclair Transactions.

(1) REH Company was financially responsible for satisfaction of RINs credit obligations for all periods prior to the closing of the Sinclair Transactions.

See Note 2 for additional information on RINs credit obligations assumed in the Sinclair Transactions.

(2) Represent obligations for RINs credits for which we did not have sufficient quantities at December 31, 2021 to satisfy our Environmental Protection Agency (“EPA”) regulatory blending requirements.

Level 1 Financial Instruments

Our NYMEX futures contracts are exchange traded and are measured and recorded at fair value using quoted market prices, a Level 1 input.

Level 1 Fair Value Measurements

Our New York Mercantile Exchange (“NYMEX”) futures contracts are exchange traded and are measured and recorded at fair value using quoted market prices, a Level 1 input.

HF SINCLAIR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Level 2 Financial Instruments

Level 2 Fair Value Measurements

Derivative instruments consisting of foreign currency forward contracts, commodity price swaps, commodity collar contracts and forward sales and purchase contracts are measured and recorded at fair value using Level 2 inputs.

The fair value of the commodity price swap contracts is based on the net present value of expected future cash flows related to both variable and fixed rate legs of the respective swap agreements.

The measurements are computed using market-based observable input and quoted forward commodity prices with respect to our commodity price swaps and commodity collars.

The measurements are computed using market-based observable input and quoted forward commodity prices with respect to our commodity price swaps.

The fair value of the commodity collar contracts is based on forward natural gas prices.

The fair value of the forward sales and purchase contracts are computed using quoted forward commodity prices.

The fair value of foreign currency forward contracts are based on values provided by a third party, which were derived using market quotes for similar type instruments, a Level 2 input.

RINs credit obligations are valued based on current market RINs prices.

Nonrecurring Fair Value Measurements

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The fair value measurements were based on a combination of valuation methods including discounted cash flows, the guideline public company and guideline transaction methods and obsolescence adjusted replacement costs, all of which are Level 3 inputs.

During the year ended December 31, 2020, we recognized goodwill and long-lived asset impairment charges based on fair value measurements utilized during our goodwill and long-lived asset impairment testing (see Note 11).

During the year ended December 31, 2020, HEP recognized a gain on sales-type leases (see Note 3).

The estimated fair value of the underlying leased assets at contract inception and the present value of the estimated unguaranteed residual asset at the end of the lease term were used in determining the net investment in leases and related recognized gain on sales-type leases.

The asset valuation estimates included Level 3 inputs based on a replacement cost valuation method.

Earnings Per Share

Basic earnings per share is calculated as net income (loss) attributable to HF Sinclair stockholders, adjusted for participating securities’ share in earnings divided by the average number of shares of common stock outstanding.

Basic earnings per share is calculated as net income attributable to HF Sinclair stockholders, adjusted for participating securities’ share in earnings divided by the average number of shares of common stock outstanding.

Diluted earnings per share includes the incremental shares resulting from certain share-based awards.

The following is a reconciliation of the denominators of the basic and diluted per share computations for net income (loss) attributable to HF Sinclair stockholders:

The following is a reconciliation of the denominators of the basic and diluted per share computations for net income attributable to HF Sinclair stockholders:

Years Ended December 31,

1 unchanged sentence

(In thousands, except per share data)

Net income (loss) attributable to HF Sinclair stockholders $ 2,922,668 $ 558,324 $ ( 601,448 )

Net income attributable to HF Sinclair stockholders $ 1,589,666 $ 2,922,668 $ 558,324

Participating securities’ share in earnings (1)

14,045 29,465 7,465

Net income (loss) attributable to common shares $ 2,893,203 $ 550,859 $ ( 603,259 )

Net income attributable to common shares $ 1,575,621 $ 2,893,203 $ 550,859

Average number of shares of common stock outstanding 190,035 202,566 162,569

1 unchanged sentence

190,035 202,566 162,569

Basic earnings (loss) per share $ 14.28 $ 3.39 $ ( 3.72 )

Diluted earnings (loss) per share $ 14.28 $ 3.39 $ ( 3.72 )

Basic earnings per share $ 8.29 $ 14.28 $ 3.39

Diluted earnings per share $ 8.29 $ 14.28 $ 3.39

(1) Unvested restricted stock unit awards and unvested performance share units that settle in HF Sinclair common stock represent participating securities because they participate in nonforfeitable dividends or distributions with the common stockholders of HF Sinclair.

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Stock-Based Compensation

In connection with the Sinclair Transactions, we assumed all obligations of HollyFrontier under HollyFrontier’s existing stock-based compensation plans, which includes the HF Sinclair Corporation 2007 Long-Term Incentive Compensation Plan (previously known as the HollyFrontier Corporation Long-Term Incentive Compensation Plan, the “2007 Plan”) and the HF Sinclair Corporation Amended and Restated 2020 Long Term Incentive Plan (previously known as the HollyFrontier Corporation 2020 Long Term Incentive Plan, the “2020 Plan”).

Awards are no longer granted, and as of December 1, 2022, none are outstanding, under the 2007 Plan.

The 2007 Plan previously provided for, and the 2020 Plan currently provides for, the grant of unrestricted and restricted stock, restricted stock units, other stock based awards, stock options, performance awards, substitute awards, cash awards and stock appreciation rights.

We have a principal share-based compensation plan (the HF Sinclair Corporation Amended and Restated 2020 Long Term Incentive Plan, the “2020 Plan”).

The 2020 Plan provides for the grant of unrestricted and restricted stock, restricted stock units, other stock-based awards, stock options, performance awards, substitute awards, cash awards and stock appreciation rights.

Subject to adjustment for certain events, an aggregate of 6,368,930 of these awards may be issued pursuant to awards granted under the 2020 Plan.

11 unchanged sentences

Tax benefit recognized on compensation expense $ 10,203 $ 8,918 $ 10,545

Additionally, HEP maintains an equity-based compensation plan for Holly Logistic Services, L.L.C.'s non-employee directors and certain executives and employees.

Additionally, prior to the HEP Merger Transaction, HEP maintained an equity-based compensation plan for Holly Logistic Services, L.L.C.'s non-employee directors and certain executives and employees (the “HEP LTIP”).

Compensation cost attributable to HEP’s equity-based compensation plan was $ 1.5 million, $ 1.9 million and $ 2.6 million for the years ended December 31, 2023, 2022 and 2021, respectively.

In connection with the HEP Merger Transaction, on December 4, 2023, HF Sinclair registered additional shares of HF Sinclair common stock under the 2020 Plan pursuant to General Instruction E of Form S-8, which authorized the 2020 Plan’s assumption of authorized but unissued HEP common units remaining under the HEP LTIP at the time of the HEP Merger Transaction, adjusted to reflect the applicable exchange rate pursuant to the HEP Merger Transaction.

Restricted Stock Units

Under our long-term incentive plan, we grant certain officers and other key employees restricted stock unit awards, which are payable in stock or cash and generally vest over a period of one to three years .

Under the 2020 Plan, we grant certain officers and other key employees restricted stock unit awards, which are payable in stock or cash and generally vest over a period of one to three years .

Restricted stock unit award recipients have the right to receive dividends, however, restricted stock units do not have any other rights of absolute ownership.

9 unchanged sentences

Forfeited ( 65,952 ) $ 38.55

Converted from performance share units 225,217 $ 45.46

Outstanding at December 31, 2023 1,102,755 $ 50.71

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Performance Share Units

Under our long-term incentive plan, we grant certain officers and other key employees performance share units, which are payable in stock or cash upon meeting certain criteria over the service period, and generally vest over a period of three years .

Under the 2020 Plan, we grant certain officers and other key employees performance share units, which are payable in stock or cash upon meeting certain criteria over the service period, and generally vest over a period of three years .

Under the terms of our performance share unit grants, awards are subject to “financial performance” and “market performance” criteria.

8 unchanged sentences

Forfeited ( 25,352 ) $ 40.76

Converted to restricted stock units ( 225,217 ) $ 52.44

Outstanding at December 31, 2023 485,531 $ 61.66

For the year ended December 31, 2022, we issued 151,315 shares of common stock, representing a 150 % payout on vested performance share units having a grant date fair value of $ 6.2 million.

For the year ended December 31, 2023, we issued 375,376 shares of common stock, representing a payout of up to 125 % on vested performance share units having a grant date fair value of $ 7.3 million.

For the years ended December 31, 2022 and 2021, we issued common stock upon the vesting of the performance share units having a grant date fair value of $ 6.2 million and $ 4.5 million, respectively.

1 unchanged sentence

That cost is expected to be recognized over a weighted-average period of 2.2 years.

For the year ended December 31, 2022, we paid $ 0.7 million in cash equal to the value of the stock award on the vest date to certain employees to settle 12,108 performance share units.

For the years ended December 31, 2023 and 2022, we paid $ 1.2 million and $ 0.7 million, respectively, in cash equal to the value of the stock award on the vest date to certain employees to settle 23,587 and 12,108 performance share units, respectively.

HF SINCLAIR CORPORATION

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(4) Includes RINs.

The excess replacement cost over the LIFO value of our refinery inventories was $ 39.0 million and $ 111.1 million at December 31, 2022 and 2021, respectively.

For the year ended December 31, 2021, we recorded a decrease to cost of products sold of $ 318.9 million due to the effect of the change in the lower of cost or market reserve recorded on our refinery inventories at that time.

For the year ended December 31, 2020, we recognized a charge of $ 36.9 million to cost of products sold as we liquidated certain quantities of LIFO inventory at our Cheyenne Refinery that were carried at historical acquisition costs above market prices at the time of liquidation.

Our renewables inventories that are valued at the lower of LIFO cost or market reflect a valuation reserve of $ 61.2 million and $ 8.7 million at December 31, 2022 and 2021, respectively.

Our Refining segment inventories that are valued at the lower of LIFO cost or market reflect a new market reserve of $ 220.6 million that was established as of December 31, 2023 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 $ 220.6 million for the year ended December 31, 2023.

The excess replacement cost over the LIFO value of our Refining segment inventories was $ 39.0 million at December 31, 2022.

Our Renewables segment inventories that are valued at the lower of LIFO cost or market reflect a valuation reserve of $ 111.0 million and $ 61.2 million at December 31, 2023 and 2022, respectively.

A new market reserve of $ 111.0 million as of December 31, 2023 was based on market conditions and prices at that time.

16 unchanged sentences

Depreciation expense was $ 474.3 million, $ 442.2 million and $ 329.4 million for the years ended December 31, 2023, 2022 and 2021, respectively.

Goodwill, Long-lived Assets and Intangibles

Goodwill and long-lived assets

Goodwill and Intangibles

As of December 31, 2023, our goodwill balance was $ 3.0 billion.

The carrying amount of our goodwill may fluctuate from period to period due to the effects of foreign currency translation adjustments on goodwill assigned to our Lubricants and Specialty Products segment.

The carrying amount of our goodwill may fluctuate from period to period due to the effects of foreign currency translation adjustments on goodwill assigned to our Lubricants & Specialties segment.

The following is a summary of our goodwill by segment:

Refining Renewables Marketing Lubricants and Specialty Products HEP Total

Refining Renewables Marketing Lubricants & Specialties Midstream Total

(In thousands)

1 unchanged sentence

$ 1,977,435 $ 159,020 $ 163,839 $ 246,036 $ 431,985 $ 2,978,315

Additional goodwill acquired 243,963 159,020 163,839 — 119,112 685,934

Goodwill disposal and other changes — — — ( 943 ) — ( 943 )

Foreign currency translation adjustment — — — 372 — 372

6 unchanged sentences

We performed our annual goodwill impairment testing quantitatively as of July 1, 2023 and determined there was no impairment of goodwill attributable to our reporting units.

Additionally, there was no impairment of long-lived assets during the years ended December 31, 2022 and 2021.

See below for discussion of our goodwill and long-lived assets impairment recognized in 2020.

During the second quarter of 2020, we determined that indicators of potential goodwill and long-lived asset impairments were present and performed recoverability testing for long-lived assets and an interim test for goodwill impairment as of May 31, 2020.

Impairment indicators included the recent economic slowdown caused by the COVID-19 pandemic, reductions in the prices of our finished goods and raw materials and the related decrease in our gross margins, as well as the recent decline in our market capitalization.

Additionally, our second quarter 2020 announcement of the planned conversion of our Cheyenne Refinery to renewable diesel production was also considered a triggering event requiring assessment of potential impairments to the carrying value of our Cheyenne Refinery asset group.

As a result of our long-lived asset recoverability testing, we determined that the carrying value of the long-lived assets of our Cheyenne Refinery and PCLI asset groups were not recoverable, and thus recorded long-lived asset impairment charges of $ 232.2 million and $ 204.7 million, respectively, in the second quarter of 2020.

Our interim goodwill impairment testing indicated that there was no impairment of goodwill at our Refining and Lubricants and Specialty Products reporting units as of May 31, 2020.

The estimated fair values of the Cheyenne Refinery and PCLI asset groups were determined using a combination of the income and cost approaches.

The income approach was based on management’s best estimates of the expected future cash flows over the remaining useful life of the asset group.

The cost approach utilized assumptions for the current replacement costs of similar assets adjusted for estimated depreciation and economic obsolescence.

These fair value measurements involve significant unobservable inputs (Level 3 inputs).

See Note 6 for further discussion of Level 3 inputs.

HF SINCLAIR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

During the fourth quarter of 2020, we incurred long-lived asset impairment charges of $ 26.5 million for construction-in-progress, consisting primarily of engineering work for potential upgrades to certain processing units at our Tulsa and El Dorado Refineries.

During the fourth quarter of 2020, we concluded not to pursue these projects in light of recent economic and market conditions.

Additionally, in the fourth quarter of 2020, our annual budgeting process identified downward forecast revisions specific to the Sonneborn reporting unit within our Lubricants and Specialty Products segment;

largely from declines in gross margin as compared to historic levels and an increase in forecasted capital expenditures.

As such, we concluded it was more likely than not that the carrying value of the Sonneborn reporting unit exceeded its fair value, and we performed an interim quantitative test for goodwill impairment as of December 1, 2020.

As a result of our impairment testing, we recognized a goodwill impairment charge of $ 81.9 million during the fourth quarter of 2020 for the Sonneborn reporting unit.

No other reporting units required an interim impairment test during the fourth quarter of 2020.

The estimated fair values of our reporting units tested quantitatively were derived using a combination of income and market approaches.

The income approach reflects expected future cash flows based on estimated forecasted production levels, selling prices, gross margins, operating costs and capital expenditures.

Our market approaches include both the guideline public company and guideline transaction methods.

Both methods utilize pricing multiples derived from historical market transactions of other like kind assets.

These fair value measurements involve significant unobservable inputs (Level 3 inputs).

See Note 6 for further discussion of Level 3 inputs.

A reasonable expectation exists that further deterioration in our operating results or overall economic conditions could result in an impairment of goodwill and / or additional long-lived assets impairments at some point in the future.

Future impairment charges could be material to our results of operations and financial condition.

Furthermore, there was no impairment of goodwill during the years ended December 31, 2022 and 2021.

The carrying amounts of our intangible assets presented in “Intangibles and other” on our consolidated balance sheets are as follows:

10 unchanged sentences

Total intangibles, net $ 410,632 $ 463,726

Amortization expense was $ 51.0 million, $ 35.6 million and $ 34.1 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Amortization expense w as $ 55.1 million, $ 51.0 million and $ 35.6 million for the years ended December 31, 2023, 2022 and 2021, respectively.

Estimated future amortization expense related to the intangible assets at December 31, 2023 is as follows:

HF SINCLAIR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands)

4 unchanged sentences

2028 $ 34,253

HF SINCLAIR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Environmental

We expensed $ 13.4 million, $ 7.8 million and $ 7.1 million for the years ended December 31, 2022, 2021 and 2020, respectively, for environmental remediation obligations.

The accrued environmental liability reflected on our consolidated balance sheets was $ 192.3 million and $ 117.2 million at December 31, 2022 and 2021, respectively, of which $ 170.0 million and $ 99.1 million, respectively, were classified as other long-term liabilities.

We expense d $ 26.5 million, $ 13.4 million and $ 7.8 million for the years ended December 31, 2023, 2022 and 2021, respectively, for environmental remediation obligations.

The accrued environmental liability reflected on our consolidated balance sheets was $ 195.4 million and $ 192.3 million at December 31, 2023 and 2022, respectively, of w hich $ 161.4 million and $ 170.0 million, respectively, were classified as other long-term liabilities.

These accruals include remediation and monitoring costs expected to be incurred over an extended period of time.

2 unchanged sentences

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 m aturing in April 2026 (the “HF Sinclair Credit Agreement”).

We have a $ 1.65 billion senior unsecured revolving credit facility maturing in April 2026 (the “HF Sinclair Credit Agreement”).

The HF Sinclair Credit Agreement may be used for revolving credit loans and letters of credit from time to time and is available to fund general corporate purposes.

The HF Sinclair Credit Agreement replaced the $ 1.35 billion senior unsecured credit facility of HollyFrontier, which was terminated on April 27, 2022.

At December 31, 2023, we were in compliance with all covenants, had no outstanding borrowings and had outstanding letters of credit totaling $ 0.3 million under the HF Sinclair Credit Agreement.

2 unchanged sentences

HEP Credit Agreement

HEP has a $ 1.2 billion senior secured revolving credit facility maturity in July 2025 (the “HEP Credit Agreement”).

In August 2022, the HEP Credit Agreement was amended to, among other things, provide an alternative reference rate for LIBOR.

The HEP Credit Agreement 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.

At December 31, 2022, HEP was in compliance with all of its covenants, had outstanding borrowings of $ 668.0 million and no outstanding letters of credit under the HEP Credit Agreement.

Prior to the Investment Grade Date (as defined in the HEP Credit Agreement), indebtedness under the HEP Credit Agreement bears interest, at HEP’s option, at either (a) the Alternate Base Rate (as defined in the HEP Credit Agreement) plus an applicable margin (ranging from 0.75 % - 1.75 %) or (b) Adjusted Term SOFR (as defined in the HEP Credit Agreement) plus an applicable margin (ranging from 1.75 % - 2.75 %).

In each case, the applicable margin is based upon HEP’s Total Leverage Ratio (as defined in the HEP Credit Agreement).

The weighted average interest rate in effect under the HEP Credit Agreement on HEP’s borrowings was 6.32 % and 2.35 % as of December 31, 2022 and 2021, respectively.

HEP’s obligations under the HEP Credit Agreement are collateralized by substantially all of HEP’s assets and are guaranteed by HEP's material wholly-owned subsidiaries.

Any recourse to the general partner would be limited to the extent of HEP Logistics Holdings, L.P.’s assets, which other than its investment in HEP are not significant.

HEP’s creditors have no recourse to our other assets.

Furthermore, our creditors have no recourse to the assets of HEP and its consolidated subsidiaries.

Our wholly owned subsidiary, HEP, has a $ 1.2 billion senior secured revolving credit facility maturing in July 2025 (the “HEP Credit Agreement”).

In connection with the consummation of the HEP Merger Transaction, we amended the HEP Credit Agreement to, among other things, (a) provide a guaranty from us and terminated all guaranties from subsidiaries of HEP, (b) amended the definition of “Investment Grade Rating” (as defined in the HEP Credit Agreement) to reference the credit rating of our senior unsecured indebtedness, (c) eliminated the requirement to deliver separate audited and unaudited financial statements for HEP and its subsidiaries and only provide certain segment-level reporting for HEP with any compliance certificate delivered in accordance with the HEP Credit Agreement and (d) amended certain covenants to eliminate certain restrictions on (i) amendments to intercompany contracts, (ii) transactions with us and our subsidiaries and (iii) investments in and contributions, dividends, transfers and distributions to us and our subsidiaries.

The HEP Credit Agreement is available to fund capital expenditures, investments, acquisitions, distribution payments, working capital and for general corporate purposes.

It is also available to fund letters of credit up to a $ 50 million sub-limit and has an accordion feature that allows us to increase the commitments under the HEP Credit Agreement up to a maximum amount of $ 1.7 billion.

At December 31, 2023, we were in compliance with all of its covenants, had outstanding borrowings of $ 455.5 million an d no outstanding letters of credit under the HEP Credit Agreement.

HF SINCLAIR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

HollyFrontier Bond Exchange and HF Sinclair Senior Notes

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.

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.

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 (the “Securities Act”).

On September 12, 2022, HF Sinclair filed a registration statement, which was declared effective on September 21, 2022, to exchange the HF Sinclair Senior Notes for an equal principal amount of the respective series of the HF Sinclair Senior Notes (the “Registered HF Sinclair Senior Notes”).

The Registered HF Sinclair Senior Notes are substantially identical to the HF Sinclair Senior Notes in all material respects except the Registered HF Sinclair Senior Notes are registered under the Securities Act and will not be subject to restrictions on transfer or to any increase in annual interest rate for failure to comply with the Registration Rights Agreement, dated April 27, 2022, and will not have the registration rights applicable to the HF Sinclair Senior Notes.

On October 21, 2022, HF Sinclair completed its offers to exchange HF Sinclair Senior Notes for Registered HF Sinclair Senior Notes.

Further, we may from time to time seek to retire some or all of our outstanding debt or debt agreements through cash purchases, and/or exchanges, open market purchases, privately negotiated transactions, tender offers or otherwise.

Such transactions, if any, may be material and will depend on prevailing market conditions, our liquidity requirements and other factors.

Prior to the Investment Grade Date (as defined in the HEP Credit Agreement), indebtedness under the HEP Credit Agreement bears interest, at our option, at either (a) the Alternate Base Rate (as defined in the HEP Credit Agreement) plus an applicable margin (ranging from 0.75 % - 1.75 %) or (b) Adjusted Term SOFR (as defined in the HEP Credit Agreement) plus an applicable margin (ranging from 1.75 % - 2.75 %).

In each case, the applicable margin is based upon the Total Leverage Ratio (as defined in the HEP Credit Agreement).

The weighted average interest rate in effect under the HEP Credit Agreement on our borrowings was 7.08 % and 6.32 % as of December 31, 2023 and 2022, respectively.

HEP Senior Notes Exchange

On December 4, 2023, we completed our offers to exchange any and all outstanding HEP 5.000 % senior notes maturing February 2028 (the “HEP 5.000 % Senior Notes”) and HEP 6.375 % senior notes maturing April 2027 (the “HEP 6.375 % Senior Notes” and, collectively with the HEP 5.000 % Senior Notes, the “HEP Senior Notes”) for the HF Sinclair 5.000 % senior notes maturing February 2028 (the “HF Sinclair 5.000 % Senior Notes”) and the HF Sinclair 6.375 % senior notes maturing April 2027 (the “HF Sinclair 6.375 % Senior Notes”, and, collectively with the HF Sinclair 5.000 % Senior Notes , the “New HF Sinclair Senior Notes”) to be issued by HF Sinclair with registration rights and cash.

In connection with the exchange offers, HEP amended the indenture governing the HEP Senior Notes to eliminate (i) substantially all of the restrictive covenants, (ii) certain of the events which may lead to an “Event of Default”, (iii) the SEC reporting covenant and (iv) the requirement of HEP to offer to purchase the HEP Senior Notes upon a change of control.

The New HF Sinclair Senior Notes are unsecured and unsubordinated obligations of ours and rank equally with all our other existing and future unsecured and unsubordinated indebtedness.

Each series of the New HF Sinclair Senior Notes has the same interest rate, interest payment dates, maturity date and redemption terms as the corresponding series of HEP Senior Notes.

The New HF Sinclair Senior Notes were issued in exchange for the HEP Senior Notes pursuant to a private exchange offer exempt from registration under the Securities Act of 1933, as amended.

At December 31, 2023 , our senior notes consisted of the following:

• $ 202.900 million in aggregate principal amount of 5.875 % senior notes maturing April 2026 (the “HollyFrontier 5.875 % Senior Notes”),

• $ 74.966 million in aggregate principal amount of 4.500 % senior notes maturing October 2030 (the “HollyFrontier 4.500 % Senior Notes” and, collectively with the HollyFrontier 5.875 % Senior Notes, the “HollyFrontier Senior Notes”),

• $ 797.100 million in aggregate principal amount of 5.875 % senior notes maturing April 2026 (the “HF Sinclair 5.875 % Senior Notes”),

• $ 325.034 million in aggregate principal amount of 4.500 % senior notes maturing October 2030 (the “HF Sinclair 4.500 % Senior Notes”),

• $ 498.879 million in aggregate principal amount of HF Sinclair 5.000 % Senior Notes,

• $ 399.875 million in aggregate principal amount of HF Sinclair 6.375 % Senior Notes (collectively with the HF Sinclair 5.875 % Senior Notes, HF Sinclair 4.500 % Senior Notes and HF Sinclair 5.000 % Senior Notes, the “HF Sinclair Senior Notes”),

• $ 1.121 million in aggregate principal amount of HEP 5.000 % Senior Notes and

• $ 0.125 million in aggregate principal amount of HEP 6.375 % Senior Notes.

Our senior notes are unsecured and unsubordinated obligations of ours and rank equally with all future unsecured and unsubordinated indebtedness.

In October 2023, we repaid at maturity our $ 59.6 million aggregate principal amount HollyFrontier 2.625 % senior notes maturing October 2023 (the “HollyFrontier 2.625 % Senior Notes”) and $ 248.2 million aggregate principal amount HF Sinclair 2.625 % senior notes maturing October 2023 (the “HF Sinclair 2.625 % Senior Notes”).

During the fourth quarter of 2022, we made open market repurchases of HF Sinclair 2.625 % Senior Notes and HollyFrontier 2.625 % Senior Notes that resulted in the extinguishment of $ 42.2 million in principal of the HF Sinclair 2.625 % Senior Notes and fifteen thousand dollars in principal of the HollyFrontier 2.625 % Senior Notes.

Total cash consideration paid to repurchase the principal amount outstanding, excluding accrued interest, totaled $ 41.4 million, and we recognized a $ 0.6 million gain on the extinguishment of debt during the year ended December 31, 2022.

HF SINCLAIR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Such transactions, if any, may be material and will depend on prevailing market conditions, our liquidity requirements and other factors.

HF Sinclair Financing Arrangements

5 unchanged sentences

See Note 6 for additional information on Level 2 inputs.

HF SINCLAIR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

HEP Senior Notes

In February 2020, HEP closed a private placement of $ 500.0 million in aggregate principal amount of 5.0 % HEP senior unsecured notes maturing in February 2028 (the “HEP 5.0 % Senior Notes”).

Subsequently, in February 2020, HEP redeemed its existing $ 500.0 million aggregate principal amount of 6.0 % senior notes maturing August 2024 at a redemption cost of $ 522.5 million.

HEP recognized a $ 25.9 million early extinguishment loss consisting of a $ 22.5 million debt redemption premium and unamortized discount and financing costs of $ 3.4 million.

On April 8, 2022, HEP closed a private placement of $ 400.0 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 $ 393.0 million, after deducting the initial purchasers’ discounts and commissions and estimated offering expenses.

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.

The HEP 5.0 % Senior Notes and the HEP 6.375 % Senior Notes (collectively, the “HEP 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.

HEP was in compliance with the restrictive covenants for the HEP Senior Notes as of December 31, 2022.

At any time when the HEP Senior Notes are rated investment grade by either Moody’s Investor Service, Inc.

or S&P Global Ratings and no default or event of default exists, HEP will not be subject to many of the foregoing covenants.

Additionally, HEP has certain redemption rights at varying premiums over face value under the HEP Senior Notes.

Indebtedness under the HEP Senior Notes is guaranteed by HEP’s wholly-owned subsidiaries.

HEP’s creditors have no recourse to our assets.

Furthermore, our creditors have no recourse to the assets of HEP and its consolidated subsidiaries.

HF SINCLAIR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

HF Sinclair may, from time to time, issue letters of credit pursuant to uncommitted letters of credit facilities with its lenders.

At December 31, 2023, there were no l etters of credit outstanding under such credit facilities.

The carrying amounts of outstanding debt are as follows:

2 unchanged sentences

2.625 % Senior Notes

$ 59,637 $ 350,000

5.875 % Senior Notes

6 unchanged sentences

5.875 % Senior Notes

797,100 797,100

4.500 % Senior Notes

Less current debt (1)

325,034 325,034

Unamortized discount and debt issuance costs (1)

5.000 % Senior Notes

6.375 % Senior Notes

2,020,888 1,370,324

Total HF Sinclair long-term debt 1,392,179 1,739,688

HEP Credit Agreement 668,000 840,000

5.000 % Senior Notes

2 unchanged sentences

1,246 900,000

HEP Credit Agreement 455,500 668,000

Less current debt (1)

— ( 306,959 )

Unamortized discount and debt issuance costs (1)

Total HEP long-term debt 1,556,334 1,333,049

( 16,417 ) ( 20,355 )

Total long-term debt (2)

(1) The 2.625 % HollyFrontier Senior Notes and HF Sinclair 2.625 % Senior Notes, inclusive of unamortized discount and debt issuance costs of $ 0.9 million, are due October 2023 and are classified as Current debt as of December 31, 2022 on our consolidated balance sheets.

$ 2,739,083 $ 2,948,513

(1) The 2.625 % HollyFrontier Senior Notes and HF Sinclair 2.625 % Senior Notes, inclusive of unamortized discount and debt issuance costs of $ 0.9 million at December 31, 2022 were due October 2023 and were classified as current debt on our consolidated balance sheets.

(2) At December 31, 2022, total HF Sinclair standalone long-term debt, which excluded HEP long-term debt, was $ 1.4 billion.

HF SINCLAIR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The fair values of the senior notes are as follows:

4 unchanged sentences

See Note 6 for additional information on Level 2 inputs.

HF SINCLAIR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Principal maturities of outstanding debt as of December 31, 2023 are as follows:

1 unchanged sentence

2026 1,000,000

Thereafter 400,000

13 unchanged sentences

These fair value adjustments are later reclassified to earnings as the hedging instruments mature.

HF SINCLAIR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table presents the pre-tax effect on other comprehensive income (“OCI”) and earnings due to fair value adjustments and maturities of hedging instruments under hedge accounting:

Net Unrealized Gain (Loss) Recognized in OCI Gain (Loss) Reclassified into Earnings

Derivatives Designated as Cash Flow Hedging Instruments Years Ended December 31, Statement of Operations Location Years Ended December 31,

Net Unrealized Gain Recognized in OCI Gain (Loss) Reclassified into Earnings

Derivatives Designated as Cash Flow Hedging Instruments Years Ended December 31, Income Statement Location Years Ended December 31,

2023 2022 2021 2023 2022 2021

1 unchanged sentence

Commodity contracts $ — $ 326 $ 31 Sales and other revenues $ ( 3,236 ) $ ( 5,288 ) $ ( 19,239 )

Cost of products sold — — 4,281

Operating expenses — — 1,660

Total $ — $ 326 $ 31 $ ( 3,236 ) $ ( 5,288 ) $ ( 17,579 )

HF SINCLAIR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Economic Hedges

We have commodity contracts including NYMEX futures contracts to lock in prices on forecasted purchases and sales of inventory, collar contracts and basis swap contracts to mitigate exposure to natural gas price volatility and forward purchase and sell contracts of refined products, as well as periodically have contracts to lock in basis spread differentials on forecasted purchases of crude oil and swap contracts to lock in the crack spread of WTI and gasoline, that serve as economic hedges (derivatives used for risk management, but not designated as accounting hedges).

We have commodity contracts including NYMEX futures contracts to lock in prices on forecasted purchases and sales of inventory and basis swap contracts to mitigate exposure to natural gas price volatility and forward purchase and sell contracts of refined products, as well as periodically have contracts to lock in basis spread differentials on forecasted purchases of crude oil and collar contracts to mitigate exposure to natural gas price volatility, that serve as economic hedges (derivatives used for risk management, but not designated as accounting hedges).

We also have forward currency contracts to fix the rate of foreign currency.

4 unchanged sentences

Derivatives Not Designated as Hedging Instruments Years Ended December 31,

Statement of Operations Location 2022 2021 2020

Income Statement Location 2023 2022 2021

(In thousands)

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640,000 Barrels

Forward gasoline and diesel contracts - long 425,000 Barrels

Forward gasoline contracts - long 800,000 Barrels

Foreign currency forward contracts

3 unchanged sentences

Natural gas price swaps (basis spread) - long 6,667,000 MMBTU

Natural gas collar contracts 29,200,000 MMBTU

HF SINCLAIR CORPORATION

11 unchanged sentences

— — — 7,808 — 7,808

Commodity collar contracts — — — 6,275 — 6,275

Commodity forward contracts 2,908 — 2,908 1,848 — 1,848

9 unchanged sentences

December 31, 2022

Derivatives designated as cash flow hedging instruments:

Commodity forward contracts

— — — 238 — 238

$ — $ — $ — $ 238 $ — $ 238

Derivatives not designated as cash flow hedging instruments:

NYMEX futures contracts $ — $ — $ — $ 2,750 $ — $ 2,750

Commodity price swap contracts

342 — 342 — — —

Commodity collar contracts — — — 6,275 — 6,275

Commodity forward contracts 2,949 — 2,949 2,987 — 2,987

18 unchanged sentences

$ 441,612 $ 894,872 $ 123,898

The statutory federal income tax rate applied to pre-tax book income reconciles to income tax expense (benefit) as follows:

The statutory federal income tax rate applied to pre-tax book income reconciles to income tax expense as follows:

Years Ended December 31,

5 unchanged sentences

Effect of change in state rate — ( 15,800 ) ( 13,342 )

Nontaxable permanent differences ( 49,420 ) — —

CARES Act benefits — — ( 10,384 )

2 unchanged sentences

US tax on non-US operations 7,239 12,920 18,547

Effect of nondeductible goodwill impairment charge — — 16,573

Other 5,009 ( 6,289 ) 5,564

17 unchanged sentences

Net operating loss and tax credit carryforwards 35,294 — 35,294

Investment in HEP — ( 134,160 ) ( 134,160 )

Valuation allowance — ( 10,614 ) ( 10,614 )

19 unchanged sentences

We have tax benefits attributable to net operating losses of $ 17.6 million in Luxembourg that can be carried forward 16 years which will begin expiring in 2034.

We also have tax benefits attributable to net operating losses of $ 6.9 million in the Netherlands that can be carried forward indefinitely.

We also have tax benefits attributable to net operating losses of $ 11.2 million in the Netherlands that can be carried forward indefinitely, and tax benefits attributable to net operating losses in China of $ 3.5 million which can be carried forward five years.

We have reflected a valuation allowance of $ 10.6 million in 2023 and $ 3.7 million in 2022, with respect to net operating carryforwards that primarily relate to losses in Luxembourg and China.

6 unchanged sentences

Balance at January 1 $ 1,354 $ 54,605 $ 54,899

Additions for tax positions of prior years — — 6

Reductions for tax positions of prior years — ( 53,023 ) ( 49 )

4 unchanged sentences

Unrecognized tax benefits are adjusted in the period in which new information about a tax position becomes available or the final outcome differs from the amount recorded.

Approximately $ 0.7 million of the unrecognized tax benefits relates to claims filed with the IRS on the federal income tax treatment of refundable biodiesel/ethanol blending tax credits for prior years.

Approximately $ 0.7 million of the unrecognized tax benefits relates to claims filed with the U.S.

Internal Revenue Service (“IRS”) on the federal income tax treatment of refundable biodiesel/ethanol blending tax credits for prior years.

We filed suit related to these claims in the Federal District Court of Dallas in March of 2022;

1 unchanged sentence

Court of Appeals for the Fifth Circuit, which were decided in favor of the IRS and were not appealed.

As such precedence is controlling for us, we intend to file a motion to dismiss the suit in the Federal District Court of Dallas in early 2023 and have reduced our unrecognized tax benefits by the expected unrecoverable amount.

As such precedent is controlling for us, we intend to file a motion to dismiss those claims controlled by such precedent in the Federal District Court of Dallas during 2024.

We recognize interest and penalties relating to liabilities for unrecognized tax benefits as an element of tax expense.

1 unchanged sentence

We are subject to U.S.

and Canadian federal income tax, Oklahoma, Kansas, New Mexico, Iowa, Arizona, Utah, Colorado and Nebraska income tax and to income tax of multiple other state jurisdictions.

and Canadian federal income tax, Oklahoma, Oregon, Kansas, New Mexico, Iowa, Arizona, Utah, Colorado and Nebraska income tax and to income tax of multiple other state and local jurisdictions.

We have substantially concluded all state and local income tax matters for tax years through 2019.

1 unchanged sentence

federal income tax matters for tax years through December 31, 2019.

We are currently under audit with the Canada Revenue Agency for the 2018 tax year, and during the fourth quarter of 2022, an IRS audit was initiated for the federal income tax returns for the 2020 and 2021 tax years.

We are currently under audit with the Canada Revenue Agency for the 2018, 2019, and 2020 tax years and the IRS for the 2020 and 2021 tax years.

Stockholders' Equity

As a result of the HFC Transactions, discussed in Note 2, each share of HollyFrontier common stock issued and outstanding immediately prior to the closing of the HFC Transactions (other than treasury shares which were cancelled pursuant to the Business Combination Agreement) was automatically converted into one validly issued, fully paid and non-assessable share of HF Sinclair common stock, having the same designations, rights, powers and preferences and the qualifications, limitations and restrictions as a share of HollyFrontier common stock immediately prior to the closing of the HFC Transactions.

In November 2019, our Board of Directors approved a $ 1.0 billion share repurchase program, which replaced all existing share repurchase programs as of that time, 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 in selling its shares and other limitations.

As of December 31, 2022, we had repurchased $ 975.0 million under this share repurchase program, of which $ 500.0 million were repurchased pursuant to privately negotiated repurchases from REH Company.

HF SINCLAIR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On September 21, 2022, our Board of Directors approved a new $ 1.0 billion share repurchase program, which, effective September 26, 2022, replaced all existing share repurchase programs, including $ 25.0 million remaining under the previously existing $ 1.0 billion share repurchase program.

This new share repurchase program authorizes us to repurchase common stock in the open market or through privately negotiated transactions.

Privately negotiated repurchases from REH Company are also authorized under the share repurchase program, subject to REH Company’s interest in selling its shares and other limitations.

In September 2022, our Board of Directors approved a $ 1.0 billion share repurchase program (the “ September 2022 Share Repurchase Program”), which replaced all existing share repurchase programs at that time, authorizing us to repurchase common stock in the open market or through privately negotiated transactions.

Privately negotiated repurchases from REH Company were also authorized under the September 2022 Share Repurchase Program, subject to REH Company’s interest in selling its shares and other limitations.

As of August 15, 2023, we had repurchased $ 995.0 million under the September 2022 Share Repurchase Program.

On August 15, 2023, our Board of Directors approved a new $ 1.0 billion share repurchase program (the “ August 2023 Share Repurchase Program”), which replaced all existing share repurchase programs, including the $ 5.0 million remaining authorization under the September 2022 Share Repurchase Program.

The August 2023 Share Repurchase Program authorizes us to repurchase common stock in the open market or through privately negotiated transactions.

Privately negotiated repurchases from REH Company are also authorized under the August 2023 Share Repurchase Program, subject to REH Company’s interest in selling its shares 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.

As of December 31, 2022, we repurchased $ 338.0 million under this new share repurchase program, of which $ 250.0 million was pursuant to a privately negotiated repurchase from REH Company.

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.

During the year ended December 31, 2022, we made open market and privately negotiated purchases of 25,716,042 shares for $ 1,313.0 million under our share repurchase programs, of which 14,407,274 shares were repurchased for $ 750.0 million pursuant to privately negotiated repurchases from REH Company.

As of December 31, 2022 we had remaining authorization to repurchase up to $ 662.0 million under the new share repurchase program, of which we repurchased 913,883 shares for $ 48.0 million year-to-date February 15, 2023.

The August 2023 Share Repurchase Program may be discontinued at any time by our Board of Directors.

HF SINCLAIR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On January 3, 2024, we repurchased 454,380 shares of our outstanding common stock from REH Company in a privately negotiated transaction under the August 2023 Share Repurchase Program and pursuant to the Stock Purchase Agreement, dated January 3, 2024 (the “January Stock Purchase Agreement”), between us and REH Company.

The price paid by us under the January Stock Purchase Agreement was $ 55.02 per share resulting in an aggregate purchase price of $ 25.0 million.

The purchase price was funded with cash on hand.

On February 8, 2024, we repurchased 1,061,946 shares of our outstanding common stock from REH Company in a privately negotiated transaction under the August 2023 Share Repurchase Program and pursuant to the Stock Purchase Agreement, dated February 8, 2024 (the “February Stock Purchase Agreement”), between us and REH Company.

The price paid by us under the February Stock Purchase Agreement was $ 56.50 per share resulting in an aggregate purchase price of $ 60.0 million.

The purchase price was funded with cash on hand.

As of February 15, 2024, we had remaining authorization to repurchase up to $ 591.4 million under the August 2023 Share Repurchase Program.

The following table presents total open market and privately negotiated purchases of shares under our share repurchase programs for the years ended December 31, 2023 and 2022.

Years Ended December 31,

Number of shares repurchased (1)

18,779,880 25,716,042

Cash paid for shares repurchased (in thousands) $ 974,474 $ 1,313,006

(1) During the years ended December 31, 2023 and 2022, 15,515,302 and 14,407,274 shares, respectively, were repurchased for $ 810.6 million and $ 750.0 million, respectively, pursuant to privately negotiated repurchases from REH Company.

On December 14, 2022, we agreed to repurchase an aggregate of 1,000,000 shares of our outstanding common stock from a registered broker for an aggregate purchase price of $ 48.6 million (the “December 2022 Repurchase”).

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The December 2022 Repurchase was made in connection with the sale by REH Company of approximately 5,000,000 shares of common stock, inclusive of the 1,000,000 shares we repurchased, in an unregistered block trade permitted under applicable securities laws (such sale, the “Sale”).

In connection with the Sale, REH Company agreed to customary “lock-up” restrictions that will expire 60 days following the date of the Sale, subject to waiver by the broker and certain exceptions, including, but not limited to, privately negotiated sales or transfers of common stock to us from REH Company.

The December Repurchase was made pursuant to separate authorization from our Board of Directors and not as part of our $ 1.0 billion share repurchase program authorized by our Board of Directors on September 21, 2022, and accordingly, did not reduce the remaining authorization thereunder.

In connection with the Sale, REH Company agreed to customary “lock-up” restrictions that expired 60 days following the date of the Sale, subject to waiver by the broker and certain exceptions, including, but not limited to, privately negotiated sales or transfers of common stock to us from REH Company.

The December 2022 Repurchase was made pursuant to separate authorization from our Board of Directors and not as part of the September 2022 Share Repurchase Program, and accordingly, did not reduce the remaining authorization thereunder.

During the years ended December 31, 2023, 2022 and 2021, we withheld 332,741 , 278,025 , and 217,151 shares, respectively, of our common stock from certain employees in the amounts of $ 18.1 million, $ 16.5 million and $ 7.1 million, respectively.

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Other Comprehensive Income (Loss)

The components and allocated tax effects of other comprehensive income (loss) are as follows:

The components and allocated tax effects of other comprehensive income (loss) are as fo llows:

Before-Tax Tax Expense

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$ 13,161 $ 2,760 $ 10,401

Net unrealized gain on hedging instruments 326 67 259

Net change in pension and other post-retirement benefit obligations

Other comprehensive loss attributable to HF Sinclair stockholders $ ( 31,268 ) $ ( 6,584 ) $ ( 24,684 )

101 273 ( 172 )

Other comprehensive income attributable to HF Sinclair stockholders $ 13,262 $ 3,033 $ 10,229

Year Ended December 31, 2022

6 unchanged sentences

Net change in foreign currency translation adjustment $ ( 13,336 ) $ ( 2,793 ) $ ( 10,543 )

Net unrealized loss on hedging instruments ( 4,871 ) ( 1,228 ) ( 3,643 )

Net unrealized gain on hedging instruments 31 8 23

Net change in pension and other post-retirement benefit obligations ( 457 ) ( 186 ) ( 271 )

Other comprehensive loss attributable to HF Sinclair stockholders $ ( 13,762 ) $ ( 2,971 ) $ ( 10,791 )

HF SINCLAIR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table presents the statement of operations line item effects for reclassifications out of accumulated other comprehensive income (“AOCI”):

AOCI Component Gain (Loss) Reclassified From AOCI Statement of Operations Line Item

The following table presents the statement of income line item effects for reclassifications out of accumulated other comprehensive income (“AOCI”):

AOCI Component Gain (Loss) Reclassified From AOCI Income Statement Line Item

Years Ended December 31,

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Commodity price swaps $ ( 3,236 ) $ ( 5,288 ) $ ( 19,239 ) Sales and other revenues

— — 4,281 Cost of products sold

— — 1,660 Operating expenses

( 3,236 ) ( 5,288 ) ( 17,579 )

( 1,282 ) ( 4,430 ) ( 664 ) Income tax benefit

( 784 ) ( 1,282 ) ( 4,430 ) Income tax expense (benefit)

( 2,452 ) ( 4,006 ) ( 13,149 ) Net of tax

1 unchanged sentence

Pension obligations ( 1,378 ) 208 407 Other, net

50 103 108 Income tax expense

( 334 ) 50 103 Income tax expense (benefit)

( 1,044 ) 158 304 Net of tax

Post-retirement healthcare obligations 3,859 3,440 3,328 Other, net

834 839 909 Income tax expense

935 834 839 Income tax expense (benefit)

2,924 2,606 2,489 Net of tax

Retirement restoration plan ( 11 ) ( 39 ) ( 39 ) Other, net

( 9 ) ( 10 ) ( 6 ) Income tax benefit

( 3 ) ( 9 ) ( 10 ) Income tax expense (benefit)

( 8 ) ( 30 ) ( 29 ) Net of tax

Total reclassifications for the period $ ( 580 ) $ ( 1,272 ) $ ( 10,385 )

Accumulated other comprehensive income (loss) in the equity section of our consolidated balance sheets includes:

HF SINCLAIR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Accumulated other comprehensive loss in the equity section of our consolidated balance sheets includes:

Years Ended December 31,

3 unchanged sentences

Unrealized gain on post-retirement benefit obligations 10,623 14,075

Unrealized loss on hedging instruments — ( 259 )

Accumulated other comprehensive income (loss) $ ( 22,013 ) $ 2,671

Accumulated other comprehensive loss $ ( 11,784 ) $ ( 22,013 )

Pension and Post-retirement Plans

Certain PCLI employees are participants in union and non-union pension plans, which are closed to new entrants.

Certain Petro-Canada Lubricants Inc.

(“PCLI”) employees are participants in union and non-union pension plans, which are closed to new entrants.

Effective June 30, 2022, we ceased to accrue additional benefits under these plans, at which time the plan was fully frozen.

We expect that benefits will be settled by the end of 2024, at which point settlement accounting will occur.

During 2023, we had partial settlements in the union and non-union pension plans.

We expect the remaining benefits will be settled by the end of 2024.

In addition, Sonneborn employees in the Netherlands have a defined benefit pension plan which was frozen and all plan participants became inactive in 2016.

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Benefits paid ( 5,472 ) ( 2,306 )

Settlements ( 24,090 ) —

Transfer from other plans 3,849 164

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Transfer payments 3,849 164

Settlements ( 24,090 ) —

Foreign currency exchange rate changes 2,020 ( 6,985 )

1 unchanged sentence

Funded status

Under-funded balance $ ( 2,977 ) $ ( 1,089 )

Over (Under)-funded balance $ 378 $ ( 2,977 )

Amounts recognized in consolidated balance sheets

Intangibles and other $ 1,149 $ —

Other long-term liabilities ( 771 ) ( 2,977 )

Amounts recognized in accumulated other comprehensive income (loss)

$ 378 $ ( 2,977 )

Amounts recognized in accumulated other comprehensive loss

Cumulative actuarial loss $ ( 607 ) $ ( 3,872 )

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The weighted average assumption used to determine the end of period benefit obligation for the PCLI plans for the year ended December 31, 2023 were discount rates of 4.60 % to 4.65 %.

The weighted average assumptions used to determine the end of period benefit obligation for the PCLI plans for the year ended December 31, 2021 were a discount rate 3.00 % and the rate of future compensation increases of 3.00 %.

The weighted average assumptions used to determine the end of period benefit obligation for the PCLI plans for the year ended December 31, 2022 were discount rates of 3.70 % to 4.44 %.

For the years ended December 31, 2023 and 2022, the weighted average assumption used to determine end of period benefit obligations for Sonneborn were discount rates of 3.60 % and 4.20 %, respectively.

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Amortization of gain — ( 208 ) ( 407 )

Curtailment — — ( 137 )

Contractual termination benefits — — 915

Settlements 1,378 — —

Net periodic pension expense $ 2,019 $ 1,494 $ 3,757

The components, other than service cost, of our net periodic pension expense are recorded in Other, net on our consolidated statements of operations.

The components, other than service cost, of our net periodic pension expense are recorded in Other, net on our consolidated statements of income.

The following table presents the fair values of PCLI’s pension plans’ assets, by level within the fair value hierarchy, as of December 31, 2023 and 2022.

2 unchanged sentences

(In thousands)

Equity securities $ — $ — $ — $ — $ — $ 6,802 $ — $ 6,802

Fixed income 822 48,387 — 49,209 457 66,295 — 66,752

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See Note 6 for additional information on Level 1 and 2 inputs.

The expected long-term rate of return on plan assets is 3.50 % for the PCLI pension plans and is based on a target investment of 100 % in fixed income.

We expect to contribute $ 1.5 million to the PCLI and Sonneborn pensions plans in 2023.

Benefit payments, which reflect expected future service, are expected to be paid as follows:

The expected long-term rate of return on plan assets is 4.60 % to 4.65 % for the PCLI pension plans and is based on a target investment of 100 % in fixed income.

We expect to contribute $ 0.2 million to the Sonneborn pension plans in 2024.

PCLI and Sonneborn pension plan benefit payments, which reflect expected future service, are expected to be paid as follows:

$ 1.9 million in 2024, $ 0.8 million in 2025, $ 0.9 million in 2026, $ 0.9 million in 2027, $ 1.0 million in 2028 and $ 6.0 million in 2029 to 2033.

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$ ( 30,497 ) $ ( 28,678 )

Amounts recognized in accumulated other comprehensive income (loss)

Cumulative actuarial gain (loss) $ 7,603 $ ( 271 )

Amounts recognized in accumulated other comprehensive loss

Cumulative actuarial gain $ 8,020 $ 7,603

Prior service credit 8,069 11,550

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Net periodic post-retirement credit $ ( 915 ) $ ( 369 ) $ ( 222 )

The components, other than service cost, of our net periodic post-retirement credit are recorded in Other, net on our consolidated statements of operations.

The components, other than service cost, of our net periodic post-retirement credit are recorded in Other, net on our consolidated statements of income.

Prior service credits are amortized over the average remaining effective period to obtain full benefit eligibility for participants.

Retirement Restoration Plan

We have an unfunded retirement restoration plan that provides for additional payments from us so that total retirement plan benefits for certain executives will be maintained at the levels provided in the retirement plan before the application of Internal Revenue Code limitations.

We expensed $ 0.1 million for each of the years ended December 31, 2022, 2021 and 2020 in connection with this plan.

The accrued liability reflected on the consolidated balance sheets was $ 1.8 million and $ 2.3 million at December 31, 2022 and 2021, respectively.

As of December 31, 2022, the projected benefit obligation under this plan was $ 1.8 million.

Annual benefit payments of $ 0.2 million are expected to be paid through 2032, which reflect expected future service.

Defined Contribution Plans

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We also partially match our employees’ contributions.

We expense d $ 73.7 million , $ 45.0 million and $ 43.3 million for the years ended December 31, 2022, 2021 and 2020, respectively, in connection with these plans.

We expensed $ 80.8 million, $ 73.7 million and $ 45.0 million for the years ended December 31, 2023, 2022 and 2021, respectively, in connection with these plans.

Contingencies and Contractual Commitments

We are a party to various litigation and legal proceedings which we believe, based on advice of counsel, will not either individually or in the aggregate have a materially adverse effect on our financial condition, results of operations or cash flows.

During the year ended December 31, 2022, we recognized a gain of $ 15.2 million, which is reflected in our Corporate and Other segment, from the settlement of our business interruption claim related to winter storm Uri that occurred in the first quarter of 2021.

We filed a business interruption claim with our insurance carriers related to a loss at our Woods Cross Refinery that occurred in the first quarter 2018.

During the year ended December 31, 2020, we reached a final settlement agreement regarding the amounts owed to us pursuant to our business interruption coverage, and we recognized a gain of $ 81.0 million, which is reflected in our Corporate and Other segment.

During the year ended December 31, 2023, we recognized a gain of $ 15.0 million, which is reflected in our Refining segment, from the settlement of a preservation of property claim related to winter storm Uri that occurred in the first quarter of 2021.

Additionally, during the year ended December 31, 2022, we recognized a gain of $ 15.2 million, which is reflected in our Corporate and Other segment, from the settlement of our business interruption claim related to winter storm Uri that occurred in the first quarter of 2021.

Pursuant to the Business Combination Agreement, all pre-closing RINs obligations of REH Company’s subsidiaries (which are now subsidiaries of HF Sinclair as a result of the HFC Transactions) remained with REH Company.

REH Company was required to transfer to HF Sinclair the number of each applicable type of RIN required for REH Company to demonstrate compliance for any pre-closing obligations it retained by the deadlines set forth in the Business Combination Agreement.

If REH Company did not deliver all the required RINs by the applicable deadline, then, within five days following the delivery of an invoice therefor, REH Company was required to pay to HF Sinclair the amount of all out-of-pocket costs and expenses incurred by HF Sinclair to comply with REH Company’s pre-closing obligations prior to such deadline, including the price of any RINs purchased by HF Sinclair.

In relation to thi s, 2,570,000 shares of HF Sinclair common stock, out of the purchase consideration paid to REH Company, were held in escrow to secure REH Company’s RINs credit obligations under Section 6.22 of the Business Combination Agreement and were released in January 2024 upon their satisfaction of the RINs credit obligation relating thereto.

The 5,290,000 HEP common units that were also held in escrow to secure REH Company's RINs credit obligations were released to REH Company in April 2023 upon their satisfaction of the RINs credit obligations relating thereto.

HF SINCLAIR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

REH Company is required to transfer to HF Sinclair the number of each applicable type of RIN required for REH Company to demonstrate compliance for any pre-closing obligations it retained by the deadlines set forth in the Business Combination Agreement.

If REH Company does not deliver all the required RINs by the applicable deadline, then, within five days following the delivery of an invoice therefor, REH Company is required to pay to HF Sinclair the amount of all out-of-pocket costs and expenses incurred by HF Sinclair to comply with REH Company’s pre-closing obligations prior to such deadline, including the price of any RINs purchased by HF Sinclair.

In relation to this, 2,570,000 shares of HF Sinclair common stock and 5,290,000 HEP common units, in each case, out of the purchase consideration paid to REH Company, are held in escrow to secure REH Company’s RINs credit obligations under the Business Combination Agreement.

HF Sinclair, and not HEP, would be entitled to the HEP common units held in escrow in the event of REH Company’s breach of its RINs credit obligations under the Business Combination Agreement.

During 2017, 2018 and 2019, the EPA granted the Cheyenne Refinery and the refinery in Woods Cross, Utah (the “Woods Cross Refinery”) each a one-year small refinery exemption from the Renewable Fuel Standard (“RFS”) program requirements for the 2016, 2017 and 2018, respectively, calendar years.

During 2017 and 2019, the EPA granted the Cheyenne Refinery and the refinery in Woods Cross, Utah (the “Woods Cross Refinery”) each a one-year small refinery exemption from the Renewable Fuel Standard (“RFS”) program requirements for the 2016 and 2018, respectively, compliance years.

As a result, the Cheyenne Refinery’s and Woods Cross Refinery’s gasoline and diesel production are not subject to the Renewable Volume Obligation for the respective years.

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FERC approved the settlement on December 31, 2020 subject to a rehearing period that resulted in a settlement effective date of February 2, 2021.

Under the terms of the settlement agreement, SFPP made the $ 51.5 million payment to us on February 10, 2021 we recorded as "Gain on tariff settlement" on our consolidated statements of operations for the year ended December 31, 2021.

Under the terms of the settlement agreement, SFPP made the $ 51.5 million payment to us on February 10, 2021 we recorded as “Gain on tariff settlement” on our consolidated statements of income for the year ended December 31, 2021.

Contractual Commitments

1 unchanged sentence

The substantial majority of our purchase obligations are based on market prices or rates.

These contracts expire i n 2023 through 2025.

These contracts expire i n 2024 thro ugh 2028.

We also have long-term agreements with third parties for the transportation and storage of crude oil, natural gas and feedstocks to our refineries and for terminal and storage services that expire in 2024 through 2038.

At December 31, 2023 , the minimum future transportation and storage fees under transportation agreements having terms in excess of one year are as follows:

HF SINCLAIR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands)

3 unchanged sentences

Transportation and storage costs incurred under these agreements totaled $ 200.5 million , $ 180.2 million and $ 160.5 million for the years ended December 31, 2023, 2022 and 2021, respectively.

These amounts do not include contractual commitments under our long-term transportation agreements with HEP, as all transactions with HEP are eliminated in these consolidated financial statements.

HF SINCLAIR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Segment Information

Our operations are organized into five reportable segments:

Refining, Renewables, Marketing, Lubricants and Specialty Products and HEP.

Refining, Renewables, Marketing, Lubricants & Specialties and Midstream.

Our operations that are not included in one of these five reportable segments are included in Corporate and Other.

1 unchanged sentence

Corporate and Other and Eliminations are aggregated and presented under the Corporate, Other and Eliminations column.

As a result of the Sinclair Transactions that closed on March 14, 2022, the operations of the Acquired Sinclair Businesses are reported in the Refining, Renewables, Marketing and HEP segments.

As a result of the Sinclair Transactions that closed on March 14, 2022, the operations of the Acquired Sinclair Businesses are reported in the Refining, Renewables, Marketing and Midstream segments.

The Refining segment represents the operations of our El Dorado, Tulsa, Navajo and Woods Cross refineries and HF Sinclair Asphalt Company LLC (“Asphalt”).

3 unchanged sentences

Asphalt operates various asphalt terminals in Arizona, New Mexico and Oklahoma.

The Renewables segment represents the operations of the Cheyenne renewable diesel unit (“RDU”), which was mechanically complete in the fourth quarter of 2021 and operational in the first quarter of 2022, the pre-treatment unit (“PTU”) at our Artesia, New Mexico facility, which was completed and operational in the first quarter of 2022 and the Artesia RDU, which was completed and operational in the second quarter of 2022.

Also, effective with our acquisition that closed on March 14, 2022, the Renewables segment includes the Sinclair RDU.

Effective with our acquisition that closed on March 14, 2022, the Marketing segment includes branded fuel sales to more than 1,300 Sinclair branded sites in the United States and licensing fees for the use of the Sinclair brand at more than 300 additional locations throughout the country.

Additionally, the Marketing segment includes branded fuel sales to 131 non-Sinclair branded sites from legacy HollyFrontier agreements.

The Lubricants and Specialty Products segment represents Petro-Canada Lubricants Inc.’s (“PCLI”) production operations, located in Mississauga, Ontario, that includes lubricant products such as base oils, white oils, specialty products and finished lubricants, and the operations of our Petro-Canada Lubricants business that includes the marketing of products to both retail and wholesale outlets through a global sales network with locations in Canada, the United States, Europe and China.

Additionally, the Lubricants and Specialty Products segment includes specialty lubricant products produced at our Tulsa refineries that are marketed throughout North America and are distributed in Central and South America and the operations of Red Giant Oil Company LLC, one of the largest suppliers of locomotive engine oil in North America.

Also, the Lubricants and Specialty Products segment includes Sonneborn, a producer of specialty hydrocarbon chemicals such as white oils, petrolatums and waxes with manufacturing facilities in the United States and Europe.

The Renewables segment represents the operations of our Cheyenne renewable diesel unit (“RDU”), which was mechanically complete in the fourth quarter of 2021 and operational in the first quarter of 2022, the pre-treatment unit at our Artesia, New Mexico facility, which was completed and operational in the first quarter of 2022 and the Artesia RDU, which was completed and operational in the second quarter of 2022.

Also, effective with the Sinclair Transactions that closed on March 14, 2022, the Renewables segment includes the Sinclair RDU.

Effective with the Sinclair Transactions that closed on March 14, 2022, the Marketing segment represents branded fuel sales to Sinclair branded sites in the United States and licensing fees for the use of the Sinclair brand at additional locations throughout the country.

The Marketing segment also includes branded fuel sales to non-Sinclair branded sites from legacy HollyFrontier agreements and revenues from other marketing activities.

Our branded sites are located in several states across the United States with the highest concentration of the sites located in our West and Mid-Continent regions.

The Lubricants & Specialties segment represents PCLI production operations, located in Mississauga, Ontario, that includes lubricant products such as base oils, white oils, specialty products and finished lubricants, and the operations of our Petro-Canada Lubricants business that includes the marketing of products to both retail and wholesale outlets through a global sales network with locations in Canada, the United States and Europe.

Additionally, the Lubricants & Specialties segment includes specialty lubricant products produced at our Tulsa refineries that are marketed throughout North America and are distributed in Central and South America and the operations of Red Giant Oil Company LLC, one of the largest suppliers of locomotive engine oil in North America.

Also, the Lubricants & Specialties segment includes Sonneborn, a producer of specialty hydrocarbon chemicals such as white oils, petrolatums and waxes with manufacturing facilities in the United States and Europe.

The Midstream segment includes all of the operations of HEP, which owns and operates logistics and refinery assets consisting of petroleum product and crude oil pipelines, terminals, tankage, loading rack facilities and refinery processing units in the Mid-Continent, Southwest and Rocky Mountains geographic regions of the United States.

The Midstream segment also includes 50 % ownership interests in each of the Osage Pipeline, the Cheyenne Pipeline and Cushing Connect, and a 25.12 % ownership interest in the Saddle Butte Pipeline and a 49.995 % ownership interest in the Pioneer Pipeline.

Revenues from the Midstream segment are earned through transactions with unaffiliated parties for pipeline transportation, rental and terminalling operations as well as revenues relating to pipeline transportation services provided for our refining operations.

The accounting policies for our segments are the same as those described in the summary of significant accounting policies (see Note 1).

HF SINCLAIR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The HEP segment includes all of the operations of HEP, which owns and operates logistics and refinery assets consisting of petroleum product and crude oil pipelines, terminals, tankage, loading rack facilities and refinery processing units in the Mid-Continent, Southwest and Rocky Mountains geographic regions of the United States.

The HEP segment also includes 50 % ownership interests in each of the Osage Pipeline, the Cheyenne Pipeline and Cushing Connect, a 25.06 % ownership interest in the Saddle Butte Pipeline and a 49.995 % ownership interest in the Pioneer Pipeline.

Revenues from the HEP segment are earned through transactions with unaffiliated parties for pipeline transportation, rental and terminalling operations as well as revenues relating to pipeline transportation services provided for our refining operations.

Due to certain basis differences, our reported amounts for the HEP segment may not agree to amounts reported in HEP’s periodic public filings.

The accounting policies for our segments are the same as those described in the summary of significant accounting policies (see Note 1).

The following is a summary of the financial information of our reportable segments reconciled to the amounts reported in the consolidated financial statements.

Refining Renewables Marketing Lubricants and Specialty Products HEP Corporate, Other and Eliminations Consolidated

Refining Renewables Marketing Lubricants & Specialties Midstream Corporate, Other and Eliminations Consolidated

(In thousands)

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Capital expenditures $ 223,225 $ 18,154 $ 27,630 $ 37,431 $ 31,962 $ 47,011 $ 385,413

HF SINCLAIR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Refining Renewables Lubricants and Specialty Products HEP Corporate, Other and Eliminations (2)

Refining Renewables Marketing Lubricants & Specialties Midstream Corporate, Other and Eliminations Consolidated

(In thousands)

13 unchanged sentences

$ 3,775,058 $ ( 179,444 ) $ 45,524 $ 296,268 $ 223,171 $ ( 106,328 ) $ 4,054,249

Earnings of equity method investments

$ — $ — $ — $ 12,432 $ — $ 12,432

Loss of equity method investments $ — $ — $ — $ — $ ( 260 ) $ — $ ( 260 )

Capital expenditures $ 162,280 $ 225,274 $ 9,275 $ 34,887 $ 38,964 $ 53,327 $ 524,007

HF SINCLAIR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Refining Renewables Lubricants & Specialties Midstream Corporate, Other and Eliminations Consolidated

(In thousands)

Year Ended December 31, 2021

8 unchanged sentences

Depreciation and amortization $ 334,365 $ 1,672 $ 79,767 $ 86,998 $ 737 $ 503,539

Goodwill and long-lived asset impairment (1)

$ 241,760 $ — $ 286,575 $ 16,958 $ — $ 545,293

Income (loss) from operations $ 451,497 $ ( 65,764 ) $ 242,432 $ 224,336 $ ( 103,315 ) $ 749,186

1 unchanged sentence

Capital expenditures $ 160,431 $ 510,836 $ 30,878 $ 88,336 $ 22,928 $ 813,409

(1) The results of our HEP reportable segment for the year ended December 31, 2020 include a long-lived asset impairment charge attributed to HEP’s logistics assets at our Cheyenne Refinery.

(2) For the year ended December 31, 2020, Corporate and Other includes $ 14.0 million of decommissioning and other shutdown costs related to our Cheyenne Refinery.

In addition, for the year ended December 31, 2020, Corporate and Other includes $ 11.4 million in other operating costs related to our Cheyenne facility.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data