HF 辛克莱 (DINO) 2026年第三季度业绩电话会议：调整后EBITDA达到30亿美元lg...

核心要点

• HF Sinclair公布2026年第三季度归属于股东的净利润为20亿美元，即摊薄后每股收益11.38美元。调整后净利润为21亿美元，即摊薄后每股收益11.75美元，而2025年第三季度为4.59亿美元，即每股收益2.44美元。
• 调整后EBITDA从去年同期的8.70亿美元升至30亿美元，其中炼油业务贡献了26亿美元，主要受运输燃料供应紧张、裂解价差处于高位以及小型炼油厂RIN豁免收益的推动。
• 经营活动现金流达到18亿美元。公司通过4.79亿美元的股票回购和9300万美元的股息，向股东累计回报5.72亿美元，同时重申了2026年50%的派息率目标。
• 管理层预计2026年第四季度炼油厂原油加工量为每天56万至60万桶，反映了埃尔多拉多（El Dorado）炼油厂计划中的停工检修影响。
• Steve Ledbetter将于2027年1月1日出任首席执行官。公司将优先考虑对炼油可靠性、营销和中游连接性的内生性投资，以在整个周期内创造更稳定的现金流。
• West Line Connect项目第一阶段预计将于2027年第一季度做出最终投资决定。该项目将为犹他州和内华达州增加约每天35,000桶的成品油输送能力，目标投产时间为2029年。

核心财务数据

业务与经营业绩

炼油业务

炼油业务调整后EBITDA从2025年第三季度的6.61亿美元增至26亿美元。管理层将这一增长归因于运输燃料供应紧张、裂解价差处于高位、小型炼油厂RIN豁免收益以及西部地区强劲的燃料销售。这些收益部分被埃尔多拉多停工检修期间美中大陆地区销量的下降所抵消。

原油加工量平均为每天61.4万桶，而去年同期为每天63.9万桶。扣除小型炼油厂豁免影响后，管理层表示炼油收率约为105%，反映出更高的可靠性、商业优化以及更高的轻质产品产出率。

埃尔多拉多减压炉项目预计将提高可靠性和产品产出率，同时使该炼油厂每天能额外加工多达10,000桶具备价格优势的重质原油。

营销与中游业务

营销业务EBITDA从2900万美元升至3900万美元。品牌燃料销量从2025年第三季度的3.6亿加仑增加到4.2亿加仑。

中游业务EBITDA从1.14亿美元下降至1.01亿美元。尽管如此，管理层仍将中游连接性和营销扩张列为重点领域，以建立更稳定的现金流，并提升目前通过大宗或非品牌渠道销售的原油/成品油价值。

可再生能源

可再生能源调整后EBITDA为1.09亿美元（不含3000万美元的成本与市价孰低法库存计价收益），而去年同期为亏损1300万美元。业绩受益于RIN价格上涨、生产者税收抵免增加以及销售量提升。

可再生燃料销量从5700万加仑增至6300万加仑。管理层表示，原材料采购、地理多元化以及经营成本纪律推动了业绩改善。扣除夏延（Cheyenne）炼厂停工检修的影响，本季度产能利用率为72%。

润滑油与特种产品

受销售组合优化以及成品和基础油价格上涨支撑，调整后EBITDA从7800万美元增至1.74亿美元。该板块录得2200万美元的先进先出（FIFO）收益，而2025年第三季度为200万美元。

特殊项目包括与报废在建资产相关的2700万美元减值，以及与密西沙加（Mississauga）炼油厂退役相关的2800万美元遣散费。公司还录得5400万美元的加速折旧和摊销。

HF Sinclair正在推进润滑油业务的拆分。管理层的目标是在2027年第三季度初前具备作为独立公司运营的条件，而密西沙加炼油厂的过渡预计将在2027年下半年基本完成。新公司预计将以灵活、低杠杆的资产负债表启动运营，不过其最终资本结构尚未确定。

管理层业绩指引

公司预计将通过手头现金和经营现金流来资助West Line Connect和Western Gateway项目的承诺支出。管理层表示，大部分增长性支出将针对内生性增长机会，而非重大收购。

风险与关注领域

• 管理层表示，中东和俄罗斯仍有约每天400万桶的炼油产能处于停产状态，加剧了清洁燃料供应紧张和库存极低的情况。
• 公司预计更广泛的炼油系统要到2028年某个时候才能全面恢复，不过具体时间仍存在不确定性。
• 加拿大重质原油（WCS）价差最近达到每桶25美元以上，甚至高达30美元。管理层预计价差将会收窄，但至少在2027年前仍将保持在较宽水平；未来的管道输送能力可能会缩小这一折价。
• 小型炼油厂RIN豁免带来的收益通过降低合规费用体现，但相关的RIN库存在本季度并未变现。管理层将这一收益定性为延期的未来现金义务，而非当前产生的现金流。
• 炼油运营成本受到了环保预提费用调整、员工福利支出、催化剂与化学品通胀以及额外可靠性维护的影响。管理层未重申此前每桶7.25美元的运营成本目标。
• West Line Connect在计划于2027年第一季度做出投资决定之前，仍取决于最终的工程范围和路线决策。

分析师问答环节点评

资本配置：管理层重申了50%的派息率目标，同时保持投资灵活性。公司在评估内生项目的同时持有较高的现金余额，但计划继续发放股息和回购股票。

增长战略：Ledbetter表示，主要重点是营销、中游连接性和炼油可靠性方面的内生性增长。仅在收购能够增厚业绩、符合战略方向且满足投资门槛时，才会予以考虑。

西部扩张：管理层认为Western Gateway和West Line Connect是互补而非竞争项目。两者的目的都是将HF Sinclair的炼油系统与西部及西南部市场相连，同时增加更稳定的中游现金流。

可再生能源业务转机：直接原材料采购的改善、对加州依赖度的降低以及更好的工厂运营推动了盈利能力的增强。目前超过50%的可再生柴油投放于加州以外地区，包括太平洋西北地区、加拿大和墨西哥。

管理层交接：Ledbetter将于2027年1月1日接任首席执行官一职。Franklin Myers计划在2027年上半年担任执行主席，以支持过渡并监督润滑油业务拆分。

业绩电话会议完整文字记录

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完整财报电话会议逐字稿

管理层陈述

Operator

Welcome to HF Sinclair Corporation's Third Quarter 2026 Conference Call and Webcast. Hosting the call today is Franklin Myers, who is serving as Chief Executive Officer of HF Sinclair. He is joined by Steve Ledbetter, President and COO; Vivek Garg, Acting Chief Financial Officer; Valerie Pona, President, Growth, Technology and Transformation; and Matt Joyce, SVP of Lubricants and Specialties. [Operator Instructions] Please note that this conference is being recorded.

It is now my pleasure to turn the floor over to Craig Biery, Vice President, Investor Relations. Craig, you may begin.

Craig Biery

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

Franklin Myers

Thank you, Craig, and thank you for joining us on the HF Sinclair earnings call for the third quarter. As you've already seen from this morning's news release, the company has had a very good quarter. All segments of the business performed well with all areas adding to our earnings and working hard to capture market gains in these unique circumstances. I want to say thank you to the over 5,000 employees of the company for their efforts in contributing to the success of the quarter. I'd like to give a special shoutout to the team at our El Dorado refinery who are wrapping up their turnaround in a safe and compliant manner, which sets the plan up for several years of operations to come. On the geopolitical front, nothing has really changed during the last three months. Modest improvement has been made in the transit of crude to the straight for moves, but limitations on refining complex in the Middle East still exist and kinetic activity by the many parties still occur on most days. Likewise, the Ukraine-Russian conflict remains at a stalemate with very little, if any, improvement to the Russian refining complex. Finally, the Chinese continue to curtail the export of product to their historical customers. This is due to a combination of the need to replenish their strategic reserves and not being able to access discounted crude from Venezuela and around, which kept them competitive with U.S. sources. We continue to believe, as we've mentioned in our last call that full recovery is unlikely to occur within the broader refining assets and therefore, their products until sometime into 2028.

Our view continues to be that we must stay the course on how we operate our assets as we should expect an extended time of experiencing shortage in the frogs and lubes markets. The activity surrounding the previously announced spinoff of the company's lubes business continues to pace. Likewise, progress is occurring with the safe shutdown of the Missile refining assets. We are targeting a completion of the spin and the finalization of the shutdown in the middle of next year. We will keep the market updated appropriately as we get closer in time. As I'm sure you've also noted in a separate press release this morning that we've determined exactly how long temporary actually is.

Beginning January 1, 2027, Steve Ledbetter will assume the role of CEO of the company. Both the Bor and I are very excited for Steve and the company as we look forward to as tenure and leading the company. I will continue to play a role for the first couple of quarters of next year as I step back into an Executive Chair role to assure a smooth transition and lend oversight to the activities surrounding the spin of the loss business. With that, let me turn it over to Steve to take us through some of the results.

Steven Ledbetter

Thank you, Franklin, and thank you all for joining our call. I'm excited to take on the role of CEO and President of HF Sinclair. Having worked across our businesses and closely with our employees over the past several years, I have tremendous confidence in our people, our assets and our ability to execute. We have a strong foundation and a portfolio of high-quality, strategically positioned businesses. As we move forward, our objectives are clear: operate safely, compliantly and reliably. Drive commercial excellence, continue our competitiveness improvement, both at the site level and through leveraging our value chain, invest selectively to further our competitive advantages and maintain a disciplined approach to capital allocation.

I would like to thank Franklin for his leadership and successful tenure as CEO in 2026, and I'm honored and humbled to lead HF Sinclair into its next chapter.

I will now cover our strategic highlights. Third quarter results reflected the strength of our diversified portfolio as each business segment contributed meaningfully through solid operational performance and commercial execution. From a strategic perspective, we continue to progress the previously announced multi-phase Western expansion project, which we have now named West Line Connect and expect to reach final investment decision on the first phase in the first quarter of 2027. This phase would increase the capacity to move product supply from our Rockies production into Utah and Nevada by approximately 35,000 barrels per day and is targeted to be online in 2029.

We expect to fund the project with cash on hand and operating cash flows. At our El Dorado refinery, we are wrapping up the turnaround and our previously discussed vacuum furnace project. We expect the project to enhance reliability improved product yields enable us to process up to an additional 10,000 barrels per day of advantaged heavy crude. More broadly, we continue to advance growth, technology and transformation initiatives designed to strengthen our competitiveness, improve safety and reliability. We continue to see compelling organic investment opportunities across the portfolio, and we are comfortable carrying a higher cash balance while we complete our valuations and make final investment decisions.

At the same time, we will continue to return cash to shareholders through share repurchases and our quarterly dividend while targeting a 50% payout ratio and preserving our disciplined capital allocation framework. During the quarter, we returned $572 million in cash to shareholders, consisting of $93 million in regular dividends and $479 million in share repurchases. Since the Sinclair acquisition in March 2022. We have returned approximately $5.7 billion in cash to shareholders and have reduced our share count by over 73 million shares.

Today, we also announced that our Board of Directors declared a regular quarterly dividend of $0.525 per share. As we look ahead, we believe the current environment presents attractive opportunities to further strengthen the competitive advantages of our portfolio and grow more ratable and stable cash flows through the cycle by optimizing our integrated value chain. We see accretive opportunities through growth investments in our marketing and midstream businesses while also investing in our refining assets to reduce risk and improve operational reliability, safety and yields.

We have the unique opportunity to advance our competitive position and take advantage of the current market environment, and we are confident that our diversified asset base will continue to deliver strong results. With that, let me turn the call over to Vivek.

Vivek Garg

Thank you, Steve, and good morning, everyone. Let's begin by reviewing HF Sinclair's financial highlights. Today, we reported third quarter net income attributable to HF Sinclair shareholders of $2 billion or $11.38 per diluted share. These results reflect special items that collectively decreased net income by $64 million. Excluding these items, adjusted net income for the third quarter was $2.1 billion or $11.75 per diluted share, compared to adjusted net income of $459 million or $2.44 per diluted share for the same period in 2025.

Adjusted EBITDA for the third quarter was $3 billion compared to $870 million in the third quarter of 2025. In our refining segment, third quarter adjusted EBITDA was $2.6 billion compared to $661 million in the third quarter of 2025. This increase was principally driven by the tight supply of transportation fuels across the markets, elevated crack spreads and benefits from the small refinery RINs waivers granted by the EBA. Additionally, strong transportation fuel sales in the West region were offset by lower sales volumes in the Mid-Con region due to the planned turnaround at our El Dorado refinery.

Crude charge averaged 614,000 barrels per day for the third quarter compared to 639,000 barrels per day for the third quarter of 2025. Our Marketing segment reported EBITDA of $39 million for the third quarter compared to $29 million for the third quarter of 2025. Total branded fuel sales volumes were 420 million gallons for the third quarter of 2026 compared to 360 million gallons for the third quarter of 2025. Our Midstream segment reported EBITDA of $101 million in the third quarter compared to $114 million in the same period of last year.

In our Renewables segment, excluding the lower of cost or market inventory valuation adjustment benefit of $30 million, we reported adjusted EBITDA of $109 million for the third quarter compared to negative $13 million for the third quarter of 2025. Adjusted renewables gross margins increased as a result of improved RINs prices, higher producers tax credit benefits and increased sales volumes compared to the third quarter of 2025. The Total sales volumes were 63 million gallons for the third quarter of 2026 as compared to 57 million gallons for the third quarter of 2025.

The third quarter Lubricants and Specialties results reflect special items related to the decision to retire our Message refinery with the transition expected to be substantially completed in the second half of 2027. During the period, we incurred onetime costs related to the Mis saga asset retirement, including the impairment charge for the abandonment of certain assets under construction of $27 million and severance charges totaling $28 million in addition to certain acquisition integration and regulatory costs of $1 million.

Excluding these items, the segment reported adjusted EBITDA of $174 million for the third quarter compared to $78 million for the third quarter of 2025. The increase was primarily driven by sales mix optimization and strong product and base oil prices in the third quarter of 2026 compared to the third quarter of 2025. During the third quarter of 2026, we recognized a FIFO benefit of $22 million compared to FIFO benefit of $2 million during the third quarter of 2025. We also recorded incremental accelerated depreciation and amortization of $54 million related to the Mis saga asset retirement during the quarter.

Net cash provided by operations totaled $1.8 billion in the third quarter, which included $114 million of turnaround spend. HS and class capital expenditure totaled $137 million for the third quarter. As of September 30, 2026, HF Symcare's total liquidity stood at approximately $5.3 billion, which includes a cash balance of approximately $3.3 billion and our undrawn $2 billion unsecured credit facility. As of September 30, we had $2.8 billion debt outstanding with a debt-to-cap ratio of 19% and net debt-to-cap ratio of negative 4%.

Let's go through some guidance items. With respect to capital spending for full year 2026, we have revised our capital guidance and now expect to spend approximately $725 million on sustaining capital and turnarounds and $150 million in growth capital. Included in growth capital is our expected spend in 2026 for investments in Western Gateway West Line Connect and marketing joint ventures. For the fourth quarter of 2026, we expect to run 560,000 to 600,000 barrels per day of crude oil in our refining segment, which reflects the planned turnaround at our El Dorado refinery in the period. We are now ready to take questions from the audience. Kelcy?

Operator

[Operator Instructions] Your first question comes from the line of Neil Mehta with Goldman Sachs & Company. Neil.

分析师问答

Neil Mehta

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

Franklin Myers

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

Neil Mehta

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

Franklin Myers

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

Operator

Your next question comes from the line of Manav Gupta with UBS ahead.

Manav Gupta

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

Steven Ledbetter

Yes. Thanks, Manav. Again, very excited. Appreciate the tagline to lead better. That was quite limbic and gave us all the chuckle here this morning. So I appreciate that. From a refining macro, we don't know how long this is going to last. This is traditionally what we've seen since the geopolitical issues, particularly in the Middle East, has been mainly a distillate story. But the factors that continue to play out in terms of shortage of refining capacity, that's not coming back anytime soon. And depending on who you talk to. And I think that the picture is getting even more murky. I understand there was another impact last night.

But there's roughly 4 million barrels a day of refining production offline, split kind of 2.5 million barrels in the Middle East, another 1.5 million barrels in Russia. And all that creates a major constraint in terms of clean fuels on the market, and the inventories are at all-time lows. So -- as far as the market environment, I see us enjoying the benefits and the most competitive refining complex in the world in the United States. And so that tightness will continue.

As far as our performance, I feel like we've done a lot in the past to ensure the underlying liability performance as well as our commercial execution and optimization. Our crude guidance, we just came in slightly above the midpoint closer to the high end, and I think that's 100% associated with us operating better and looking at the opportunities in between the refineries and ensuring that we can take the shorts to other parts and use the integrated value chain a little better. We're placing barrels in better markets we are high-grading the molecules, and we have better light product yield across the fleet. And the combination of those things, I think, continue to demonstrate our improvement through year-over-year capture.

If you strip out SR our capture was right at 105%. And so year-over-year, that is a structural improvement, and we've continued to see that quarter-over-quarter. So staying focused on commercial excellence and improving our reliability. We're seeing that start to play out in the outcomes, and we'll continue to drive that journey forward as far as our base principle.

Manav Gupta

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

Vivek Garg

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

Operator

Your next question comes from the line of Theresa Chen with Barclays.

Theresa Chen

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

Steven Ledbetter

Yes. So thanks, Teresa. We've talked about our FID approach. One of the things that we're very careful about is making sure we not only do the right thing. And we had previously discussed maybe taking FID in Q4. We have some options in terms of route in terms of scope that may make a better outcome. And so we're pushing that FID target to 2027. But the underlying premise from the commercial perspective, we're still very bullish on this project. We think it's complementary to the other project that we took a position in Western Gateway. And we're in the middle of scope definition right now. So nothing more to guide on other than we're still very bullish on this, and we'll come back to the market in Q1.

We believe it does set us apart and will help the overall not only our midstream business, but the entire commodity complex for our integrated assets.

Theresa Chen

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

Steven Ledbetter

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

Operator

Your next question comes from the line of Doug Leggate with Wolf Research.

Douglas George Blyth Leggate

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

Steven Ledbetter

Yes. I mean, so we've made heavy investments over the past several years and taken some very good steps forward in terms of PSM risk reduction, personal risk reduction and reliability. Are you ever done investing in these things. I don't know that you ever are, and there's really a baseline set that you will continue to have to invest. That's what I mentioned earlier, this range bound of turnaround and sustaining capital.

Having said that, we will look and take the current market environment and the opportunity in this cash build scenario to see where we could take a step forward, not only investments in the kit, but also investments in technology where we see opportunities to go improve, seeing things sooner, fixing things sooner and learning through AI technology that will give us a better footprint in terms of improvement and finding small and fixing small. So not guiding really any more on explicit projects, but we are going to be very diligent in terms of how we evaluate any additional capital spend, and where we find projects like the El Dorado Vactor furnace project are being implemented and wrapping up now to the extent that they meet our capital allocation framework and investment hurdles, we'll take those decisions at that time.

Douglas George Blyth Leggate

I appreciate that. My follow-up is I expect this for Vivek, but whoever you want to allocate this to. So you had about a $600 million SRE tailwind. It seems this quarter. But I'd like to understand the mechanism as to how you realize that. What was the cash mechanism if you like? Are you selling RINs into the market -- how is that -- is that a swing in working capital? If you could walk us through how it actually shows up in cash flow, that would be great? And any expectations for the future would be appreciated.

Vivek Garg

Thanks, Doug. I'll take those questions. So we recognize the expense as we generate the obligation, as you would expect through the year with the SRE granted towards the end of the quarter, we essentially ended up reducing our expense or reversing our expense that we had already taken over the period. Now we're left with incremental rents in our inventory and we have not monetized on any of those because we do have the flexibility to utilize a lot of those against our next year's compliance. And so while you see the benefit come through in earnings, you will actually not see any of that benefit come through cash flow statement.

Steven Ledbetter

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

Operator

Your next question comes from the line of Philip Genworth with BMO.

Phillip Jungwirth

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

Steven Ledbetter

Yes. And on Western Gateway, I think we've talked about this a little bit in terms of our Go West initiatives. The reality that we believe in our market view in the Midwest is that depending what happens, we believe that there's something coming as far as E15, you see the demand and people moving out demand patterns or people Ruben West. And as part of that, with our asset locations, it made a lot of sense to go participate in Western Gateway, not only because we believe the Southwest is a key important market, and we've going to be connected to our El Dorado Tulsa and Artesia refinery.

And then ultimately, when we take an equity investment, we feel like growing again, some of our ratable stable cash flow businesses. That's a great way to do it, and it somewhat backstops our placement. So that falls right in with our thesis from a strategy perspective. It's a project that we think makes a lot to the overall complex. And then, again, it does not, in our view, compete with West line Connect. When you think about what's happening in California with the recent refinery closures and the cost to operate in that geography.

We think that's only going to continue. And so the combination of both of these projects should be competitive to supply efficiently those markets, and we think we have a strategic advantage there. As far as cash goes, we will fund that out of normal operating cash flows and cash on the balance sheet and don't anticipate any liquidity impacts or draw into our credit facilities to make that happen.

Phillip Jungwirth

Great. And then, Steve, as you step into the CEO role, just hoping to get your views on refining M&A in this environment versus the opportunity for higher growth CapEx across the business, plus M&A across other business lines such as midstream and marketing?

Steven Ledbetter

Yes. I mean, so just to be clear, this may be a question because we are building a sizable amount of cash when we're talking about growth and we structured the organization to go execute that growth well with Valcom taking the President of Growth transformation technology, putting some strength and capability associated with doing projects right the majority of our growth is going to be targeted at organic opportunities. While we're not active in material inorganic, of course, we would look at things where it makes sense, and we're accretive and fit our strategic approach and investment hurdles, but that's not the primary growth objective for us. And when we talk about M&A or growth in midstream and marketing, we've been happy with the performance of our joint venture that we entered into late last year.

That continues to grow. We continue to find packages and put it in there, but growing and scaling JVs, having exposure to the rack to retail and the full suite of that integrated value delivery is something that we like. I would also like to point out that as we grow our marketing business, it's not just what we see in marketing, it high grades our entire commodity stack as we move our lowest-valued barrels out of bulk and unbranded into that channel. So it improves refining capture. And I failed to mention that was another element that we continue to see improving our year-over-year capture. In the midstream space, we would hesitate to look at anything that didn't have massive integrated value. So to the extent that we find something that can accelerate connectivity of our production facilities and our markets that we are targeting to go grow, we will evaluate those projects. But make no mistake, our focus is on growth in mainly organic opportunities at this point.

Operator

Your next question comes from the line of Matthew Blair with TPH.

Matthew Blair

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

Steven Ledbetter

Yes. Thanks, Matt. This is an area of which we've been pretty proud. It was pretty hard sledding for a couple of years in this business, but the team has done an outstanding job in terms of three key things. One is in our feedstock strategy, and we believe that getting really focused on direct versus brokers and location proximity has really helped us out. That's a significant amount. And then market placement, we're greater than 50% outside of California now. That has been an objective to make sure that we find markets that are not reliant on an area that is to be honest, chart full with distillate product and renewable diesel.

And so we're finding areas in the Pacific Northwest, leveraging our integrated products value chain as well as Canada and the new market in Mexico, we're seeing benefits already from. And then OpEx, we remain disciplined there, keeping it flat. And our performance in running these kits is improving. You mentioned we were below 70% utilization, but just to call out, when you take out the Cheyenne turnaround this past quarter, we were at 72% utilization. And last quarter, when you take out the PARCO outage, we were at 67%. We think our sweet spot because of the co-located facilities is north of 70%. We delivered that the Cheyenne turnaround, and we see that moving forward as of the target utilization given the macro and the backdrop.

I couldn't be more proud of this team. And I do believe that this is an area of bright spot that has been a significant business turnaround for our company. And we see the future of it bright for Q4. We don't normally guide on capture, but we have plans to take advantage of the favorable market environment. For next quarter or this quarter.

Matthew Blair

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

Steven Ledbetter

Yes. I mean so we had some onetime OpEx events in the quarter and year-to-date, really driven by environmental accrual true-ups when they become probable and Essie and it was time to do that. given our performance of employee benefit charges. And then we've seen some inflationary pressures, particularly in the cat Chem space, we're running harder and producing more accolade as an example. Sorferacid has gone quite a bit higher. And then going after some maintenance items to improve risk and reliability performance where we have a window to do so. And that accounted for the majority of it.

The trajectory of our underlying programs to drive our competitiveness continue to mature. And we're seeing that as evidenced by our holistic delivery of crude charge and our associated reliability trends across the fleet. So we feel like we're being good stewards of cost. Now let me talk about the $7.25 target we're committed to improving our competitiveness across the entire fleet. And but we're focused on technology and capability to drive reliability. And ultimately, we want to improve not only cost, but total earnings. And we want to be mindful that we don't prioritize the cost-only picture without contemplating the underlying operational safety and reliability performance.

As you know, that's foundational to the profitability of our business. So not committing to the $7.25million. If you look at the underlying trajectory, minus the onetime elements, we still are demonstrating cost efficiency and competitiveness, and we'll continue to keep that as one of the focus areas.

Operator

Your next question comes from the line of John Royall with Piper Sandler.

Unknown Analyst

Congrats to Steve. I was hoping first, maybe you could talk through the process of separating moves and what are the near-term steps we can expect from here? And any big pieces of progress we should expect from now to the next time we speak to you in January excuse me -- so the next time we speak to you in January.

Matt Joyce

John, this is Matt Joyce, and thanks for the question. Yes, the separation is still on track for the second quarter of '27 -- or second half of '27. And we continue to make solid progress across all the separation work streams moving from our planning processes now into an execution stage. And that includes the PLR, the Form 10 and getting some key leadership roles starting to get filled in. We're also undertaking a lot of work and understanding the lift and shift required for our IT infrastructure and all the operating agreements that go along with that.

So our focus is on being fully operational and ready as a stand-alone company by early quarter 3 and not simply completing the legal separation by that time.

Unknown Analyst

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

Matt Joyce

Yes. The underlying business remains pretty healthy. Obviously, we've had some tailwinds from FIFO in the third quarter, but the demand and the mix has been very good. We've been working really hard with the team to recover costs as a lot of our raw material increases hit the business and the team did a really terrific job getting out with pricing and portfolio management. And that was primarily driven as well. There was a big piece of that, that we enjoyed from the base oils market that did get a little bit tighter on both Group II and Group III.

But both in the finished and specialty side of the business, we saw some pretty impressive performance and finished in particular, has been tremendously successful in pricing discipline and some new business gains that we were able to take advantage of, and we've secured those for longer-term contracted periods of time.

Operator

The next question comes from the line of Jason Gabelman with Cowen.

Jason Gabelman

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

Matt Joyce

Yes. Thanks, Jason. It's Matt Joyce again. With regards to the earnings potential and what the business looks like on a go-forward basis. We're really not guiding all that much on that particular point at this time. But we are changing the supply model, okay, where we're not going to be manufacturing base wells any longer. But we're not walking away from the market. We expect that we're going to have a more flexible supply model, lower fixed cost continued growth in both our finished and specialties business segments and improved operating efficiencies to help offset some of the historical contribution that came from Mississauga.

So that's really what we're looking to do. And I think we've given some indications as to what we expect with regards to historical 12-month trailing EBITDA that we would strive to secure and provide as a coming out into the marketplace as an independent company. With regards to the capital structure and how we view that as part of our stand-alone entity and the debt and so on and so forth. Our objective is really to launch Newco with a strong, flexible balance sheet that supports both the resilience of the business as well as our growth objectives.

And we're looking to continue to entertain and consider businesses that are tuck-ins that make sense for us to put on and complement our business, but we're also looking to get that organic growth out of the business that we have in hand. The final capitalization levels are still being determined, but financial flexibility remains the priority. And we don't plan to load this up with that.

Franklin Myers

And just to jump in here, Jason. You see the balance sheet of Sinclair just in general as we believe that having a very flexible under levered company gives us optionality for opportunities in the future. that attitude is not going to change with lubes as it comes out the door that they're going to have sufficient financial opportunities without too much debt on it. We haven't described or determined with now at as to how much debt that is at this point.

But it's not going to be, as you've seen with some spends that are loaded out and kicked out the door because this is a thriving business that has opportunity and they need to have the options to take advantage of that once they are independent.

Jason Gabelman

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

Steven Ledbetter

Yes, Jason, thanks. That's exactly one of the benefits that the back tower furnace at Albarado that's coming online as we wrap up this turnaround is directed at, not only reliability but yield improvement. But it gives us the ability to run up to another 10,000 barrels a day of heavy crude, and then we can take further advantage of that through our heavy oil value chain in our retail asphalt business. But we will continue to look at those elements because I do think, structurally, near term, there's going to be some widening what happens as trade flows normalize. You've seen a lot of pipelines being announced that will bring more egress online.

And depending on production timing and egress capability that could have some narrowing when that shapes up. But structurally, it's going to be an opportunity, and we will look to continue to go drive as much discounted heavy advantage crude through our complex as we can.

Operator

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

Franklin Myers

Thank you so much, and thank you all for joining our call this morning. I just want to express my personal appreciation to the executive leadership team and to the many employees of Sinclair who've worked hard in making my temporary assignment here as CEO, an exciting and meaningful part of my time here.

Also, I want to thank you on the call for supporting our company. We have a great team here, and we have a great company that's been developed over many years with a lot of opportunity going forward. The Board has taken a deliberate approach looking inward at the team for the leadership to go forward because we believe that within this company, we have the talent to do that.

Steve's elevation, the CEO, is setting up the company for a great leadership, not only with Steve, but the entire team going forward. I look forward to many, many days of very good operations and results ahead of us. Thank you for supporting the company. Thank you for being us on the call.

Operator

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

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