Welcome to the HollyFrontier Corporation's Third Quarter 2016 Conference Call and Webcast. Hosting the call today from HollyFrontier is George Damiris, President and Chief Executive Officer. He is joined by Doug Aron, Executive Vice President and Chief Financial Officer. At this time, all participants have been placed in a listen-only mode, and the floor will be opened for questions following the presentation. It is now my pleasure to turn the floor over to Julia Heidenreich, Vice President, Investor Relations. Julia, you may begin.

Good morning, everyone, and welcome to our third quarter conference call. This morning, we issued a press release announcing results for the quarter ending September 30, 2016. If you'd like a copy of the release, you may find one on our website, hollyfrontier.com. Before George and Doug proceed with their prepared 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 securities laws. There are many factors that could cause results to differ from expectations, including those noted in our SEC filings. Today's statements are not guarantees of future outcomes. Also the call may also include discussion of non-GAAP measures. Please see the press release for reconciliations to GAAP financials. Lastly, please note that the information presented on today's call speaks only as of today, November 3, 2016. Any time-sensitive information provided may no longer be accurate at the time of any replay of the webcast or rereading of the transcript. And with that, let me turn the call over to George Damiris.

Thanks, Julia. Good morning, everyone. Thank you for joining us on HollyFrontier's third quarter earnings call. Today, we reported third quarter net income attributable to HFC shareholders of $74 million or $0.42 per diluted share. Third quarter EBITDA was $207 million, 49% below the comparable quarter last year, primarily due to the combination of weaker benchmark margins and increase in compliance costs associated with the RFS mandate. Crude throughput was 444,000 barrels per day, within our 440,000 to 450,000 barrel per day guidance range. We ran 25% sour and 20% WCS and black wax crude. Our average laid-in crude cost under WTI was $0.69 in the Mid-Con, $4 in the Rockies and $1.27 in the Southwest. Our plants ran safely and reliably during the quarter, with El Dorado and Tulsa each setting new processing and production records. Out of our Tulsa facility, we sold 12,400 barrels per day of lubricants at an average crack of $62. Unfortunately, excellent operational reliability was overshadowed by weak industry margins and escalating RFS compliance costs. Consolidated refinery gross margin was $9.83 per barrel, 50% below the $19.85 recorded in Q3 of last year. We spent $63 million purchasing RINs in the third quarter, which in the low margin environment has a significant impact as a proportion of earnings. For the fourth quarter, we expect to run between 440,000 and 450,000 barrels per day of crude. We have a turnaround underway on our Woods Cross FCC which will impact crude rate in the Rockies in the quarter. I'd like to now take a moment to provide additional detail about our growth aspirations. Earlier this year, we developed our vision with the objective to double the size of each of our businesses refining, midstream and lubricants by 2020. We wanted a vision that was not only…

Thank you, George. Good morning, everyone. We appreciate you joining us this morning. For the third quarter of 2016, cash flow provided by operations totaled $128 million. Turnaround spending in the second quarter totaled $32 million, and HollyFrontier's standalone CapEx totaled $79 million. As a reminder, we plan to defer about $40 million in capital spending this year, which will take our 2016 capital and turnaround spend to a total of approximately $560 million for this year. We expect 2017 capital and turnaround spending to be between $400 million and $450 million depending on the 2017 margin environment. As of September 30, 2016, our total cash and marketable securities balance stood at $478 million. The Woods Cross expansion asset dropdown was completed on October 3 for total cash consideration of $278 million, which took our cash position to $756 million. We have $600 million of stand-alone debt and no drawings under our $1 billion revolving credit facility. This puts our current liquidity, including dropdown proceeds, at $1.75 billion and debt to cap, excluding Holly Energy Partners, at 11.4%. HEP units continue to perform strongly. HollyFrontier owns 35% of HEP; that's 22.4 million common units plus the 2% general partner interest. The current market value of our LP units is approximately $675 million as of last night's closing price. As a reminder, HEP recently announced its 48th consecutive quarterly distribution increase, and is gaining momentum and achieving their stated 8% distribution growth target. Second quarter GP incentive distributions were $15.2 million or a 41% increase over the same quarter last year. As George already mentioned, earlier this week we announced the acquisition of PCLI's business for approximately US$845 million. We expect to fund the purchase price with a combination of cash on hand as well as a potential new senior note…

And the floor is now open for questions. Thank you. Our first question comes from the line of Brad Heffern with RBC Capital. Please go ahead.

Good morning, everyone.

Good morning, Brad.

Hey, George, on your M&A commentary before, about the 1 million barrel per day goal, I'm curious, you said, you prefer assets in your existing markets but at the same time, your existing markets tend to have a relatively small refining footprint. The average across your assets is less than 100,000 barrels a day. So would you consider doing a deal outside your existing footprint potentially with a larger asset in order to get you more throughput and how do you think about the balance between those?

Well, first and foremost, like we said, we are going to maintain our focus on value and quality of assets. So our strong preference would be to find high-quality assets within our own geography, even if they don't get us to doubling the capacity of our refineries, Brad. We will only buy a good asset at good value outside of our existing geography, if it is indeed good value. Again the doubling vision is, again, meant to be more inspirational than concrete. We're going to focus on value of the asset we buy, just like the Petro-Canada lubricants deal over volume. It would have to be a good deal at a good price.

Okay, understood. And then I wanted to give you the opportunity to talk about RINs a little bit. Can you give your expectations for what's going to happen here at the end of November, and also talk a little bit about the commentary that you are hearing back on changing the point of obligation?

Yeah, I mean, Brad, the truthful answer to that is who really knows at the end of the day. We have our government affairs people all over this. I've been spending a lot of time in Washington myself; Doug has as well. As far as what's going to happen in November, we don't expect much to change versus the current expectations that EPA has set for next year's RVO. We would like to think they're going to come off of those RVOs a little bit, but we would not expect it to be material. So I wouldn't expect much to be revolutionary or evolutionary there on that front. As far as the point of obligation, I think we are making steady headway in progress there. Having said that, we still have a long way to go. Everybody we speak to understands the issue, agrees with us that it's unfair on independent refiners to have the obligation be solely on us when others are reaping windfall profits on it, but it's going to take some time to work through the process in Washington, but we're optimistic because of the progress that we're seeing and the feedback we're getting from the people we're talking to.

Okay. Thanks, George.

Thanks, Brad.

And your next question comes from the line of Roger Read with Wells Fargo. Please go ahead.

Hey, thank you. Good morning.

Good morning, Roger.

George, I guess, we could talk a little bit about, sort of the inventory situation in Pad 2. Diesel has been kind of stubbornly high versus normal gasoline not so bad. I was just wondering how you look at that market cleaning itself up here as we go through the wintertime. What we should be watching for?

Well, I think the number one thing that would help us, honestly, is the cold winter. I think what triggered a lot of the inventory built in diesel across the board was the very warm winter we had last year. Now, having said that, we all hate to bet on weather conditions to bail us out of an inventory position, but the other thing contributing to inventory build was – demand has been pretty weak outside of the heating sector. The railroad activity is off, trucking volumes are off, and I think you saw refiners adjusting accordingly by shifting gasoline production, or diesel production to gasoline earlier this year. I think there might be a little bit more of that left to come, but I don't think there's much left there. So we just have to see an increase in industrial activity in the U.S. that drives again trucking and the railroad sectors, and hope for a colder winter, at least a normal winter relative to the warm winter we had last year.

Okay great. Thanks. And Doug, this is probably a little more for you. Obviously, the lubes acquisition is going to affect the balance sheet in terms of debt, at least the net debt increase, depending on exactly how it all gets financed. Cash flow this quarter, pretty close to covering all the obligations, but I'm wondering as you look to next year, you think about these acquisitions, you'd like to – well, I say next year – next couple of years, the doubling of the size of the business. How should we think about a reasonable financing option from HollyFrontier for expansions, either in logistics or refining going forward?

Fair question Brad, and I'm sorry, rather Roger.

Roger, Brad, whatever.

No, no, sorry. I was still thinking into the previous question. Apologies for that, Roger. But on financing, look, what we've said is that maintaining investment-grade rating is important to us, and we believe gives us a competitive advantage, such that capital markets are available to you sort of in any market, and that wasn't always true when you get into tougher financing markets, it's certainly preferable to be investment grade. So in order for us to do that, guidelines we've seen from the rating agencies have indicated keeping your debt to cap, or debt to EBITDA anyway at sort of less than 2 times, given our size and scale, but they've also told us that as you add size and scale, you get more benefit on that metric. So what I'd tell you is we've historically been very conservative sort of targeted debt to EBITDA of 1 times. I would say probably looking forward 1.5 times might be where we get, maybe pushing towards 2 times at an actual acquisition time with an expectation of quick repaying that back down more into the comfortable 1 times to 1.5 times range.

Okay. Thank you.

And your next question comes from the line of Phil Gresh with JPMorgan. Please go ahead.

Hey, good morning.

Good morning, Phil.

First question just kind of be a follow-up to the balance sheet target. So it sounds like you have some pretty aggressive goals out there longer-term. If my math is right, after the lubes deal you'd be on a net debt to EBITDA basis kind of approaching 1 times but probably still below 1 times, with kind of the target of 1.5 times to 2 times. So as you pursue opportunity, would you be willing to issue equity for a deal if a larger deal came along that fit your parameters?

Yes. I mean, look, I think the answer is everything is going to be case-by-case dependent. If there's accretion in transactions and we can maintain the appropriate leverage targets, maintain our investment-grade rating, then we'll consider all different forms and opportunities. I guess, I would reiterate sort of the way George concluded his prepared remarks, Phil, with sort of your comment of our aggressive or aspirational targets. I mean, I think, it's exactly that. And I know this feels like a bit of a different tone from us, but what George is suggesting is we think we have a platform and a balance sheet for growth. We think certainly the Petro-Canada acquisition shows you the type of growth we're interested in, which is immediately accretive not what I think anybody would think of as a very high risk transaction. So those are the kinds of things we'll continue to look for as time marches on, and very much the same pattern you've seen from us in terms of deals and the way we'd finance them, and the kind of deals we buy is what we'll be looking for, but with more of a focus on that from management on a day-to-day basis. George, is that the way you'd sort of reiterate it?

Yeah. And probably maybe trying to boil it down to what was the line of thinking Phil had. I think your thought of 1 times EBITDA as a debt target for us is a good thought, Phil. But for the right deal, again, it fits us well, and that we think it has values, we'd be willing to go above the 1 times EBITDA with the expectation that after that deal is done that we'd work real hard to get back to that 1 times target.

Okay. Thanks. The second question is just in terms of the change in tone that you mentioned, Doug, the buybacks last year were over $700 million, obviously, at a higher price for the stock, and now it seems like there is much more of a focus on acquiring for growth. So just should we interpret that the buyback just doesn't really compete as much as for the use of capital, and how do you think about the IRR of acquisition versus buying back your own stock here in the low-$20s?

Well, I think, it's very time-dependent, Phil. I mean, when we were buying back stock last year, we really didn't see much in the way of external opportunities out there. Refining margins were substantially higher in 2015, all businesses were doing well and healthy, and there really wasn't much on the market, or at least that was interesting to us. And as we looked at our own shares relative to our business improvement plan and where we expected the 2016 margin environment to be, those looked attractive to us. The 2016 margin environment and RINs environment turned out to be substantially different than what we expected, and we started to see that in January, February timeframe certainly looking at the forward strip, which is when we really stopped buying back shares, certainly at the rate that we were, and said even though the share price itself looks very attractive, the current business environment is not as attractive, particularly for a company that was planning to spend at the time $600 million on CapEx in the year, and we didn't expect free cash flow generation to cover that. We've continued to pay, and will continue to pay a very competitive regular dividend. And so, all of those things go into the way we think about capital allocation, and as we look at deals going forward, again it will be dependent on what does the deal bring us. It's not just a financial metric. Yes, we look at IRR in both of them, but are there diversification benefits that might outweigh a slightly higher IRR on buying back your own stock.

Okay. And just one clarification, Doug, the CapEx for 2017 of $400 million to $450 million, I think per quarter it was $100 million, is the difference just you're including lubes in there, or was that a pre-lubes number?

That's a pre-lubes number. And I'd also tell you, I still think $400 million is an achievable target. We are seeing forward margins strip, since we last announced on our last quarterly call, are up certainly on the diesel side, they are a little higher, despite the higher inventories, forward margins look a little better. We do have some opportunity capital as part of the business improvement plan we announced that we see as very quick hit, high return, but we're giving more of a range at this point as we're just not certain whether we want to spend that capital depending on the margin environment.

Okay. Thank you.

And our next question comes from the line of Ed Westlake with Credit Suisse. Please go ahead. Edward George Westlake - Credit Suisse Securities (USA) LLC (Broker) Hi, guys. Good morning. Two questions, if I may. The first one is just around Woods Cross and Cheyenne. I mean, obviously there's a lot of work going on this year at those two refineries, and utilization was still relatively low, maybe just give us a roadmap as how to think about Q4 and Q1.

I think the first thing to know about Woods Cross, and I think we've said this before is we still have a lot of gas oil inventory that was built up in anticipation of the start up of the expansion. So a lot of that was being run off in the third quarter. Edward George Westlake - Credit Suisse Securities (USA) LLC (Broker) Right.

Then we have the Woods Cross, the old FCC, if you will, at Woods Cross currently in turnaround, and we were preparing for that even in the third quarter. So coming out of the turnaround, we will again have gas oil inventory that was built with that FCC being down. So long-winded way of saying that we don't anticipate much difference in crude rate at Woods Cross in the fourth quarter versus the third quarter because again we'll be running off the inventory of gas oil that's going to be built-up during the FCC turnaround. A comment that applies to both Woods Cross and Cheyenne is we're seeing crude differentials tightening appreciably in both of those areas with this low crude price environment. So a lot of the Bakken diffs, the U crude that we run at Woods Cross, the black wax crude, those crudes – the supply is not as prevalent as it has been in the past, and that's reflected in the crude differential we see. Our incremental barrel at Woods Cross now comes from Canada. It's a Syncrude or Syncrude comparable. And in these crude diffs, tight crude diff environment, those incremental barrels are not as economic as they used to be when the price of crude was $100 and supply of those crudes was more prevalent. So again, a long-winded way of saying that I think what you saw here in the third quarter is going to be what you are going to see in the fourth quarter and the first quarter out of our Rockies sector. Edward George Westlake - Credit Suisse Securities (USA) LLC (Broker) Okay, thanks. And then second question is really another follow-on from the conference call on Monday, thanks for that, on the lubricants. So since then doing some digging and find that companies like Valvoline are saying, look, there was that big build up in capacity through to 2014. They are not that bullish on base oil demand because certainly for perhaps on-road vehicles because those vehicles are growing. The drain interval is lengthening, the time you have to replace the lubes in the vehicles, and presumably that's happening in industrial applications as well. So to the extent that you agree with that view, that's I guess the first part of the question. The second part is how do you execute levers to sort of add value in other areas as opposed to just the initial base oil profitability for plants that you bought?

Yes, I think your statement regarding the drain intervals is correct, and it's the other end of the sword, if you will, of people upgrading their engine oils to higher-quality products like Group II plus, Group III type base oil derived engine oils. But I think one thing that we probably didn't do as good a job as we should have emphasizing in the Monday call that we need to emphasize is this business that we are buying is more than just an engine oil company. So a lot of the finished lubricants that we discussed on Monday, a lot of the specialty products that we discussed on Monday, obviously, the white oil products that we discussed on Monday, they are not passenger car motor oil based. A lot of them are in differentiated markets such as natural gas engines, diesel engines, they are for very specific applications. Granted, they're not of the size or scale of passenger car motor oils. But that's truly what differentiates Petro-Canada lubricants is their R&D, product development, and sales force orientation to continue to develop and find new markets and new applications like that to get an even better price and netback for the base oils than even the passenger car motor oil markets. Edward George Westlake - Credit Suisse Securities (USA) LLC (Broker) Okay. Thank you very much.

Thanks, Ed.

And our next question comes from the line of Paul Cheng with Barclays. Please go ahead.

Hey, guys, good morning.

Good morning, Paul.

George, you were talking about want to grow the HEP. From that standpoint, have you guys, looking ahead, whether that you need to restructure the GP and the LP to find a way that to permanently lower the HEP capital cost. One of your major competitor have been indicating that – or actually that a couple of them that indicated to do that. So wondering if that's something that in the near horizon that you guys would consider.

The short answer to that is yes. So it's not the first time we've heard the question obviously, Paul, and we think about that all the time, even if we weren't looking at doing acquisitions at the HEP level. I think the other comment we've made in the past along these regardless we don't have to do a complete structuring of the IDR. I think you saw an example of this when we did the unit drop from HFC to HEP that we can have some sort of temporary mechanism rather than a permanent IDR adjustment to facilitate the same deal.

From that standpoint, do you think the other argument is that, if you're going to merge the economic interest of the GP into the LP, and in exchange for more LP unit, not only a small clean cut, but it is also the value to have a public marker in terms of what is the value of the GP cash flow?

You're talking about IPOing a portion of the GP?

No, I'm saying that to take the GP into two units, one is the operation controls, you continue to keep 100%, the other one is the economic interest, and that economic interest you're going to sell it back to the LP in exchange for more LP units.

Yeah, Paul, all of those things that you're mentioning are on the table, and we are open to all of those. And as we've said before, we will do whatever we think is the right thing to do from both an HFC and HEP perspective along the lines of the things you're talking about.

And is there kind of a timeline that you guys have in mind, or that this is an open end discussion and variation inside the company?

Well, I think what's going to drive it the most, Paul, is the individual opportunities that we see available to us in the market to do an acquisition in HEP.

I see. My second question, very quick, wondering if you will be willing to share what is the EBITDA contribution from your Tulsa lubes business for the last several quarters – first quarter, second quarter and third quarter, and also whether the Woods Cross expansion, and upgrade, any EBITDA contribution in the third quarter?

Okay. So first question was regarding Tulsa lubes EBITDA?

Yeah.

Yeah. I don't know if you want to get too specific on look back. I think like we indicated on our Monday call, we will provide some additional detail and context going forward. But let us think about the historical quarterly breakdown, Paul, but I think for right now what we've said we'll stick with that that business roughly $100 million per year of EBITDA. And then as far as the Woods Cross expansion, I don't think we have any further updates from what we've provided before. We still expect that EBITDA contributions to be in the $80 million to $100 million per year range with the caveat that just like I just talked about for the third quarter and fourth quarter, crude diffs in the Rockies have tightened quite a bit, but I think we've factored some of that in when we gave the guidance of $80 million to $100 million of EBITDA. And it might be a little bit tighter now than when we gave that guidance, but again we're not trying to provide that guidance on a quarter-by-quarter basis of what we expect from that expansion. We're trying to give what we think that expansion will do for us over the long haul.

No, I totally understand. Just curious, if there is a number you can share in terms of the actual contribution in the third quarter from the Woods Cross expansion.

Yeah. I don't have that number off the top of my head, and I don't know, Julia, if you have something there, if we need to get back to Paul later.

I think, Paul, it's only been up and running really in full obviously for the third quarter, so I would look to having more of an update on the specific contribution after we've seen it running for six months, and particularly without a turnaround going on also at that plant. So we will be providing more granularity, but not just on one quarters of operations when we both have turnaround and inventories to work off.

All right. Thank you.

Thanks, Paul.

And our next question comes from the line of Chi Chow with Tudor, Pickering, Holt. Please go ahead.

Great. Thank you. There has been a lot of chatter about the upcoming need to build out crude gathering pipes in the Delaware basin. You're positioned there already at HEP, so how do you assess that opportunity, and is this a core part of your growth strategy in midstream?

Yeah, I think that's one of the areas that we are excited about is the Permian, and especially the Delaware, and that we are well-positioned within HEP to participate in that. I think from what little I've heard, Chi, in the market, I'm hearing numbers as high as 5 million barrels per day of production out of the Permian. That sounds extremely high to me. There's no question that the Permian is one of the better basins and the Delaware is one of the better fields within that basin, but again, I don't follow this as much as other people do, but I think a lot of the chatter that I'm hearing is a lot more optimistic than I would tend to believe. But we still think production still around 2 million barrels a day now. We still think it's going to grow even in the $50 WTI crude environment. And like you said we think we're well-positioned within HEP to find opportunities to participate in that gathering and transportation sector of the crude world.

What is your gathered volumes in the basin right now, and are you specifically seeing and going after opportunities to build out that system?

I think nominally we touch about 150,000 barrels per day in that area. Obviously, we run 100,000-ish at Navajo, and then as we've said in the past, we're moving most of the remainder from the Permian up to Cushing, where we run it at our Mid-Con refineries. And we are working with producers to better understand their production plans, and to see where those plants fit with our existing HEP footprint to build more connections, Chi.

Okay. Thanks. And then back on the Rockies, I'm a bit confused by the throughput guidance. You've expanded the Woods Cross plant, yet you are just flattish from the sound of it going forward on throughput. So are you making economic run cuts, given the environment, or how should we think about the incremental volume on the expansion, and when that comes through?

Okay. So again, we are running gas oil, and think in terms of say, 2000 to 3000 barrels per day of gas oil inventory that we're still working off. And when you equate that to crude roughly, roughly gas oil is about a third of the crude barrel. So that two to three of gas oil equates to six to nine of crude. So that's why – that's one of the reasons why the crude rate's been less than you would expect. But again the incremental barrel now that the black wax that we're expecting for the expansion, Chi, is not available, it's again a Syncrude barrel. And our incremental crude runs will depend on the Syncrude diff. And there are times where Syncrude trades at, let's say, a $3 premium to WTI up in Canada, and we see that type of diff it's going to be difficult for us to run unless the Salt Lake or Vegas product margins drive us to run the Syncrude barrel with that type of differential.

All right. Thanks. It's just been a struggle in the region lately, what needs to happen to get the results going there in your view, George?

Well, I think again we're fighting the headwind, Chi, of low crude price. One of the regions that's hit the hardest by the low crude price is the Rockies as far as crude production goes. So we're not seeing that type of impact in Cushing barrels. Cushing is well supplied. As we just talked about, the Permian is well supplied. But the area where we're seeing the most impact on our crude availability and crude pricing is in the Rockies. So a little bit of crude price could go a long way in helping us there.

Okay. Okay, great. Thanks. Appreciate it.

And our next question comes from the line of Jeff Dietert with Simmons. Please go ahead, sir.

Good morning.

Good morning, Jeff.

On your lubes strategy with the acquisition you've made, do you see further opportunity for consolidation within the lubes segment, or do you feel like with this acquisition you've kind of optimized lubes relative to the rest of your portfolio?

No, that's one of the reasons why we like the Petro-Canada lubricants deal is that it gives us a solid platform for more bolt-on or even step-up type of acquisitions and growth. We think the lubes industry is fairly or very fragmented, and we think there are a lot of companies that would be logical candidates for us to add on to that platform.

Good. And are there other downstream related business lines that you would consider for diversification of cash flows? Asphalt for example appears to have some federal and state funds supporting the demand outlook there. Any other business lines that you think are ripe for acquisition?

Yes. The one-word answer to that is yes. But none of them are as exciting to us or maybe especially me as lubricants. There are opportunities in the asphalt sector like you said. We have a nice position within that asphalt sector, but I wouldn't call asphalt a growth industry. I wouldn't even begin to compare it to lubricants as far as how differentiated the product offerings are, how much growth potential there is for us to participate in that sector. I think one of the areas that we've talked about in the past that we are looking at, and this is mostly driven by RINs, is to participate further downstream in our fuels marketing activity.

Good. And you talked about very manageable maintenance capital within the lubes business. Is there an opportunity for growth capital there, or do you see that more in the consolidation and bolt-on type opportunities within lubes?

No, we're very excited about the opportunity to deploy some capital within Petro-Canada lubricants. And again, this is not meant to disparage the prior owner of that business but at the end of the day the prior owner is a large Canadian crude producer first and foremost. Second, they had their refining business, and third, probably in that pecking order for capital allocation was Petro-Canada lubricants. I think it's safe to say that they will have a higher priority for receiving capital within HollyFrontier than they have had as part of their existing ownership. So we think there are some pent-up demands for capital that will have great returns within Petro-Canada lubricants.

Thanks, George.

Thanks, Jeff.

And our next question comes from the line of Neil Mehta with Goldman Sachs. Please go ahead.

Good morning, everyone.

Hey, Neil.

George and Doug, two easy housekeeping questions. First, what were RINs cost in the quarter in dollar millions basis? And then the tax rate in the quarter seems a little low. Anything funky going on there?

I'll take the RINs question and let Doug take the tax question, because it's harder. RINs, I think we said we've spent $63 million on RINs in the third quarter.

Okay.

Yeah, so on taxes, Neil, we came in at about 20% for the quarter and that was, obviously, lower than the statutory rate for a couple of reasons. One is just lower expected earnings for the fiscal year, and then secondarily a higher percentage of our earnings coming from HEP and the tax advantage structure there. So, I think we're seeing that as a pretty common theme across the refining space in the third quarter; no exception at HollyFrontier.

Makes a lot of sense. And then a follow-up on the HEP logistics M&A point, as it seems like that's where some of the focus is shifting from an acquisition standpoint. How do you think about corporate level M&A versus asset level? Is there a distinction there, or would you be open to either, and do you think – as you think about ultimately where to execute a potential transaction at the HEP level versus the HFC level, how do you think about that?

Well, regarding the first question corporate versus asset, we're open to either. And I think with the caveat typically it's a little bit easier to do an asset deal than a corporate deal, but that's a minor nuance. The higher level question is that we're open to either. Then as far as where to execute, I'm a little bit not sure what you're getting at there, Neil, but my top of the answer there is that it seems like we're going to do something in logistics. It's logical to do it at HEP rather than HFC corporate.

Yeah, make sense. All right. Thanks, guys.

Thanks, Neil.

And our next question comes from the line of Paul Sankey with Wolfe Research. Please go ahead, sir.

Hi, guys. I appreciate that you answered a lot of the questions already. I noted particularly, George, that you said that this is more of an inspirational target than a concrete target, so I realize that it's more conceptual. Just on the balance sheet, did you say that you would – how far can you go with that, could we just re-clarify how far you're prepared to take your debt levels in order to accomplish this goal?

Well, I hate getting too concrete on that Paul, but I'll offer up 2 times EBITDA for the right deal.

Yeah.

And then again with the concerted effort to get it back to the 1 times level.

Yeah. I think I heard that earlier. And again it's conceptual, but you've just expanded on petchems, I think what you're saying is you'd like to keep going in petchems, is that fair if you can find the right deals? I mean, I'm wondering whether or not you've doubled petchems and then you are going to double everything else or whether you...

No, we've – these visions always create a lot of discussion, and I'm glad that it did. But at the risk of creating more confusion and unwarranted discussion, there's still four years left between now and 2020, and because we never rest on our laurels at HollyFrontier. We've reset the lubricants growth target to double again by 2020. Because to not reset it would mean that we're happy with where we are and we're never happy with where we are.

Okay. And then I think on just maybe just the previous answer, one of the obvious areas to grow would be retail in terms of RINs coverage, but at the same time you were earlier saying that you think you can get there on points of obligation. Were you saying that you would want to expand in retail?

I would say it's an area that we're looking at in evaluating. But honestly, it would be a tough thing to do from a grassroots level, so it would be something that would have to come through an acquisition.

Yeah. I get it. And are you going to be planning a meeting, I mean, obviously, we appreciate that you've come in subsequent to the analyst meeting where it was all about buyback, and you're a new CEO, are you planning any sort of analyst meeting or formal events for us to go through all of this?

I think the short answer to that is, no, but I think we've been thinking about it, and if we do want it will probably be next September, which would mark the two-year anniversary from the last one.

Great. Okay. Thank you. Thanks, George.

Okay.

And thank you. At this time, I would now like to turn the commerce back over to Julia for any closing remarks.

Thanks, everyone, for joining us today in addition to joining us on Monday. I know it's been a very busy week for you all. We look forward to sharing our full-year results, which is at the end of February. Of course, there is always Investor Relations available for any follow-up questions you might have throughout the day. Thanks. Have a good day.

This does conclude today's conference call. Please disconnect your lines at this time and have a wonderful day.