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Lubricants
Primer
May 2017
Forward Looking Statement
2
The following is a “safe harbor” statement under the Private Securities Litigation Reform Act of 1995: The statements
made during the course of this presentation relating to matters that are not historical facts are “forward-looking
statements” based on management’s beliefs and assumptions using currently available information and expectations as
of the date hereof, are not guarantees of future performance and involve certain risks and uncertainties, including those
contained in our filings with the Securities and Exchange Commission. Although we believe that the expectations
reflected in these forward-looking statements are reasonable, we cannot assure you that our expectations will prove
correct. Therefore, actual outcomes and results could materially differ from what is expressed, implied or forecast in
such statements. Any differences could be caused by a number of factors, including, but not limited to, risks and
uncertainties with respect to the actions of actual or potential competitive suppliers of refined petroleum products in
HollyFrontier’s markets, the demand for and supply of crude oil and refined products, the spread between market prices
for refined products and market prices for crude oil, the possibility of constraints on the transportation of refined
products, the possibility of inefficiencies, curtailments or shutdowns in refinery operations or pipelines, effects of
governmental and environmental regulations and policies, the availability and cost of financing to HollyFrontier, the
effectiveness of HollyFrontier’s capital investments and marketing strategies, HollyFrontier’s efficiency in carrying out
construction projects, the ability of HollyFrontier to acquire refined product operations or pipeline and terminal operations
on acceptable terms and to integrate any recent and future acquired operations, including PCLI, the possibility of
terrorist attacks and the consequences of any such attacks, general economic conditions and other financial, operational
and legal risks and uncertainties detailed from time to time in HollyFrontier’s Securities and Exchange Commission
filings. The forward-looking statements speak only as of the date made and, other than as required by law, we undertake
no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future
events or otherwise.
High Pressure
Hydrotreating (HTUs)
and Solvent Dewaxing
(MEK)
Catalytic Dewaxing
(CDW)
R&D and Product Development
Global
Distribution
FEEDSTOCKS
BASE OIL
PRODUCTION
BLENDING AND
PACKAGING
GLOBAL DISTRIBUTION
Group II
White Oils
Group
II/II+
Group
III/III+ Base Oils
White Oils
Finished
Lubricants &
Greases
Specialty
Products
Solvent Extraction
(LEU) and
Solvent Dewaxing
(MEK)
Group I
Inline and Batch
Blending
Packaging
(1 Liter to Bulk)
Blending
Waxes
Base Oil Commodity Sales
T
u
ls
a
PCL
I
3
Integrated Lubricants Producer
Vacuum
Gas Oil
(VGO)
Vacuum
Gas Oil
(VGO)
Hydro-
cracker
Bottoms
(HCB)
4
Feedstocks
Vacuum
Gas Oil (VGO)
• Intermediate stream produced by Vacuum Distillation Unit
• VGO is a dark colored, viscous material
• Light vacuum gas oil (LVGO) and Heavy vacuum gas oil (HVGO) are common streams from fuel refinery
• VGOs further processed through Hydrotreating Unit (HTU) which removes wax by physical solvent
dewaxing process
- Sourcing: intermediate stream from domestic and international refineries
- Pricing: VGOs generally price off of Gulf Coast gasoline crack
Hydrocracker
Bottoms (HCB)
• Byproduct of hydrocracking Vacuum Gas oil, HCB is a waxy yellow viscous oil
• HCBs further processed through Catalytic Dewaxing Unit (CDW) which transforms wax by catalytic
process
- Sourcing: European and North American imports & domestic refinery by-product
- Pricing: HCBs generally price off of European diesel crack
Purchased
3rd Party Base
Oils and Additives
• Used in blending & packaging process
• Ability to process and upgrade 3rd party Base Oils to extend the production pool
Crude Oil
Vacuum
Distillation
Tower
HVGO
LVGO
Crude Unit
Crude Oil
Hydro
cracker
HCB
Crude Unit
Vacuum
Distillation
Tower
HollyFrontier & PCLI provide the broadest and purest slate of Base
Oils for finished products and end customers
• Base Oil is the foundation on which all lubricants are built
• 80% of a lubricant is made up of Base Oil
• Additives are blended with Base Oils to make finished
lubricants
• In finished lubricants, Base Oil provides:
- Lubrication, typically measured by viscosity
- A medium in which performance-enhancing
additives can either dissolve or suspend
• Impurities hinder the performance of the final lubricant,
not allowing the additives to work at their best
- Impurities reduce life of lubricant
- Impurities cause more wear on parts
• The purer the Base Oil, the better the final lubricant
performance
5
PURPOSE OF BASE OIL
Base Oils
• Group I: Produced by separation processes such as
distillation, solvent extraction, and solvent dewaxing. This
process produces Base Oils of superior innate solvency as
well as the much-coveted bright stock. HollyFrontier
produces a higher quality Group I Base Oil slate, as
compared to industry standards1
• Group II & II+: Processed through severe hydrotreating and
hydrocracking to make Base Oils which contain lower levels
of aromatics, sulfur, and nitrogen compared to Group I
stocks
• Group III & III+: Highest quality Base Oil, severely
hydrocracked under higher pressure and temperature.
Viscosity Index above 120 allowing formulated lubricants to
maintain properties longer, enabling improved fuel
efficiency in low viscosity motor oils and providing energy
efficiency in multi-grade industrial lubricants
BASE OIL CATEGORIES
1) HFC Group I Base Oil has 85%-89% saturate content vs. industry standard range of 69%-89%
P
ur
it
y
(
%
s
a
turate
l
e
v
el
)
Viscosity Index
Purity:
Level of saturates in a Base Oil vs. impurities
(aromatic molecules including sulfur and polar
compounds)
• Higher the Purity, the longer the Base Oil will last
80
90
100
90 100 110 120 130
GROUP II
Sulfur < 0.03%, (99.9% Pure)
N100
N200
N600
GROUP I
Sulfur > 0.03%, (70-85% Pure)
SN150
SN500
GROUP III
Sulfur < 0.03%, (99.9% Pure)
4cst
6cst
8cst
PETRO-CANADA
GROUP II/II+
PETRO-CANADA
GROUP III/III+
TULSA
GROUP I
6
KEY CHARACTERISTICS OF BASE OILS
Viscosity:
Measures a fluid’s resistance to flow
Viscosity Index (V.I.): Describes a fluid’s tendency to
thin as the temperature rises
• Higher the V.I., the less the viscosity changes due
to temperature change
HFC & PCLI Base Oil Quality
ULTRA PURE GROUP II, II+, III & III+
BASE OILS
• 99.9% pure – virtually no impurities
• Highly stable in intense engine
and equipment environments
• Handles temperature
extremes
• Superior resistance to
oxidation
SPECIALLY SELECTED ADDITIVES
• Anti-wear and protection
• Rust and corrosion protection
• Thermal and Oxidation stability
• Viscometric control
PRODUCT POINTS OF DIFFERENCE
(PODS)
• Better wear protection – longer engine
and equipment life
• Superior resistance to high temperature
thermal breakdown resulting in lower
maintenance costs
• Outstanding low temperature fluidity –
smoother engine and equipment startups
• Energy efficiency – products stay in
grade longer
• We continue to invest in state-of-the art equipment at our research and development
facility
• On-site analytical and bench test facility
• We leverage with a network of institutions and experts at selected universities,
ISO accredited external labs and testing facilities and utilize partnerships with our
additive suppliers
7
MISSION
Develop, implement and promote high value innovative products that go beyond today’s standards
• Over 300 years of combined experience with 7 Ph.D. and 3 Professional Engineer team members
• Received international business “Stevie Award” for best new business-to-business product (SENTRON LD8000) in 2014
EQUIPMENT AND FACILITIES
Research & Development
+ =
8
Base Oils
White Oils
Finished
Lubricants & Greases
Specialty Products
Waxes
Base Oils
45%
Specialty
Products
26%
White Oils
9%
Waxes
6%
Finished
Lubricants
& Greases
14%
Consolidated Product Sales 2016
Product Overview
Mar
g
in
V
a
lu
e
$
/b
b
l
DURONTM
HYDREXTM
PRECISIONTM
9
Finished Lubricants/Greases
Finished lubricants and greases are blended from Base Oils and exhibit superior performance in
many key properties, including:
• Our flagship line of heavy duty
engine oils
• Specialty formulated diesel engine
oils provide exceptional protection
against engine wear
• Engineered to succeed in extreme off-
and on-road conditions
• Improve reliability, extend drain
intervals and cut fuel costs
• Fluids used for the lubrication in high-
performance hydraulic systems such
as industrial plants, utility trucks and
construction equipment
• Protects against accelerated oil
degradation and oxidation, extending
equipment life
• Made for applications operating at high
pressures and in wide temperature
ranges
• Greases are solid to semi-solid
materials designed to lubricate where
a continuous supply of oil cannot be
maintained
• Provides protection in a wide range of
automotive and industrial applications
– used in wheel bearings on race cars
• Viscosity Retention
• Oxidation Resistance
• Thermal Stability
• Reduced Environmental Impact
HFC & PCLI produce over 350 different finished lubricant
products with various applications such as motor oil, hydraulic
fluids, turbine fluids, mining & specialty greases, gear oil and
food-grade lubricants
10
Specialty Products
Finished lubricant products sold in commercial quantities by rail car or truck loads
• PCLI does not offer many of these specialty products in retail package sizes, but sells to other
companies that package and distribute these products
PureDrillTM
SunSpray®
MLO
CIRCOSOL®
• Synthetic drilling mud base fluid
developed for onshore and
offshore drilling
• Maximizes drilling efficiency while
improving health, safety and
environmental practices due to
purity level of base oil in product
• Clear like water and biodegradable
• Provides exceptional temperature
fluidity for deep and horizontal well
applications
• Product used to control mosquito
larvae
• Mosquito larvicide oil is
applied via ground, aerial and
airblast methods
• Aromatic process oil designed for
wide variety of applications in the
rubber industry
• Used as a process oil in tire tread
formulations
• Proven to shorten stopping distances
and provide additional tire wear
protection
White Oils
Sourced from our own base oil supply and produced using the HT PURITY Process
• Food grade white mineral oils are specifically designed for agricultural and food processing industries
• Among the most versatile petroleum products with a wide array of applications
PURETOLTM
PURITYTM
KRYSTOLTM
• Line of white oils that meet rigorous
food, cosmetic and pharmaceutical
industry safety standards for both
direct and indirect food contact
• PURETOL 7: Primary ingredient in
baby oil to create a barrier between
skin and the air to prevent skin from
drying out
• PURETOL 9: Used in denture
adhesives & pharmaceutical capsules
• PURETOL 19: Used in topical creams
(i.e. antibiotic ointment)
• PURETOL 35: Used as a coating on
confectionary “gummy-candies” to
eliminate adhesion
• Lubricants designed to meet food
industry safety standards for
incidental food contact during the
manufacturing process
• PURITY FG WO White Mineral Oil 15:
Sprayed on food processing
equipment after it has been sanitized
to prevent equipment rusting
• PURITY FG WO White Mineral Oil 90:
Used in drinking water treatment
applications (i.e. well pump lubricant)
• Technical grade white oil generally
used in nonfood applications but still
meets FDA standards for indirect food
contact
• KRYSTOL 20: Oil used in mosquito
repellant fuel for tiki torches
• KRYSTOL 350: Used in pressure
sensitive adhesives (i.e. sticky notes)
11
Waxes
Derived from the de-waxing phase in the refining process. Waxes are solid at ambient temperature and become liquid
when melted
• Our waxes are solvent-refined at both our Tulsa, OK and Mississauga, Ontario refineries, and imported into our
terminal in Brownsville, TX
• We have the capability to custom blend waxes to meet customer specific requirements
• HFC has become the go-to source for high performance waxes differentiated by their varying degrees of melting points:
Paraffin Wax
12
Microcrystalline
Wax
Slack Wax
• Used as the main ingredient in the
manufacture of candles
• Used in hot melt adhesives for food
packaging sealants
• Low oil content and high
percentage of normal paraffin
gives the waxes superior moisture
barrier properties
• Used in high-gloss printing inks
• Used in rust prohibitive coatings
for steel and automotive materials
• Can also be sold to other
downstream processors for further
refining into FDA approved
products in the cosmetic, home
care, and pharmaceutical industries
• Used in resin for the manufacture
of composite boards such as
particleboard
• Used in weather protection
coatings for wood-based building
materials
• Higher oil content, but lower
melting point compared to paraffin
and microcrystalline wax
Lubricants Index
Lubricants Index
Jan Feb Mar 1Q17 Apr May Jun 2Q17 Jul Aug Sep 3Q17 Oct Nov Dec 4Q17
Group I $10.13 $11.56 $22.51 $14.73
Group II $18.73 $20.19 $29.85 $22.92
Group III $56.21 $56.41 $70.44 $61.02
Lubricants Index Appendix
HFC's actual pricing and margins di ffer from benchmark indicators due to many factors . For example:
-Reta i l - HFC and PCLI use commodity base oi l s to produce finished lubricants , specia l ty products and white oi l s that are sold into the reta i l market worldwide and have a wide variety of price ranges .
- Feedstock di fferences – HFC runs a variety of vacuum gas oi l s treams and hydrocracker bottms across i ts refining system and feedstock s late may vary quarter to quarter.
Group I Base Oi l Indicator (50% Group I SN150, 50% Group I SN500)-VGO
Group II Base Oi l Indicator (33.3% Group II N100, 33.3% Group II N220, 33.3% Group II N600)-VGO
Group III Base Oi l Indicator (33.3% Group III 4cs t, 33.3% Group III 6cs t, 33.3% Group III 8cst)-VGO
VGO (US Gulf Coast Low Sulfur Vacuum Gas Oil)
The preceding data is for informational purposes only and is not reflective or intended to be an indicator of HollyFrontier's past or future financial results. This data is general industry information
and does not reflect prices paid or received by HFC. The data was compiled from publicly available information, various industry publications, other published industry sources, including OPIS and
Argus, and our own internal data and estimates. Although this data is believed to be reliable, HFC has not had this information verified by independent sources. HFC does not make any representation
as to the accuracy of the data and does not undertake any obligation to update, revise or continue to provide the data.
4Q 2017VGO Based
Base Oil Crack
1Q 2017 2Q 2017 3Q 2017
- Product Yield di fferences – HFC’s product yield di ffers from indicator and can vary quarter to quarter as a resul t of changes in economics and feedstocks .
- Other di fferences including, but not l imited to secondary costs such as product and feedstock transportation costs , qual i ty di fferences and location of purchase or sa le. Moreover, the presented
indicators are genera l ly based on spot commodity base oi l sa les , which may di ffer from real ized contract prices .
Market prices are ava i lable from a variety of sources , each of which may vary s l ightly. Please note that this data may di ffer from other sources due to adjustments made by data providers and due to
di ffering data defini tions . Below are indicator defini tions used for purposes of this data.
Statements made and information that are not his torica l facts are "forward looking s tatements" within the meaning of the U.S. Private Securi ties Li tigation Reform Act of 1995. Forward-looking
s tatements are inherently uncerta in and necessari ly involve ri sks that may affect the bus iness prospects and performance of HFC, and actual results may di ffer materia l ly from estimates . Such risks and
uncerta inties include but are not l imited to actual 1Q15 crude charge di ffering from the Company's expectations , the demand for and supply of crude oi l and refined products and the spread between
market prices for refined products and market prices for crude oi l . Additional information on risks and uncerta inties that could affect the bus iness prospects and performance of HFC is provided in the
14
Viscosity: measure of a fluid’s resistance to flow. It is ordinarily expressed in terms of the
time required for a standard quantity of the fluid at a certain temperature to flow through a
standard orifice. The higher the value, the more viscous the fluid. Since viscosity varies
inversely with temperature, its value is meaningless unless accompanied by the
temperature at which it is determined.
Centistokes (cSt) : a unit of kinematic viscosity, one hundredth of a stokes. In practice,
measurements are usually stated in centistokes, not stokes.
SN (Solvent Neutral) : SN is used to describe the viscosity levels in Group I Base Oils.
Hydrocracking: the elimination of aromatics and impurities by chemically reacting the feed
stock with hydrogen in the presence of a catalyst at high temperature (400OC and high
pressure (3000 psig). This process removes the polar compounds, converts the aromatic
hydrocarbons to saturated cyclic hydrocarbons, and breaks up heavy molecules into lighter
saturated hydrocarbons.
Saturates: saturated molecules contain a higher percentage of carbon-hydrogen bonds,
which is beneficial in lubricating fluids because those bonds remain stable longer, resulting
in a more durable lubricant. The higher number of saturates, the higher molecular bond
strength of the oil and therefore, the better the resistance to breakdown or loss of viscosity.
Aromatics: aromatics are considered unsaturated compounds (impurities) because the
viscosity of aromatics respond relatively poorly to changes in temperature and can shorten
the useful life of a base oil. Aromatics are removed from base oil during the hydrotreating
process.
Polar Compounds: impurities in a base oil that are eliminated in the hydrocracking and
hydrotreating process.
Oxidation: a form of chemical deterioration when oxygen is combined with a lubricant.
Oxidation will lead to an increase in the oil’s viscosity and deposits of varnish and sludge.
The rate of oxidation is dependent upon on the quality of base oil used and is accelerated
by high temperatures, water, acids and catalysts such as copper.
ISO Accredited Lab: meets the strict standards (quality, safety, performance etc.) as set
forth by the International Organization for Standardization.
Process Oil: process oils are used as a raw material component in a large variety of
finished products in the chemical and manufacturing industry.
Hydrotreating Unit (HTU): processes vacuum gas oil (VGO) streams that have been
fractionated from crude oil but not hydrotreated. The HTU eliminates aromatics and polar
compounds by reacting the feedstock with hydrogen in the presence of a catalyst at high
temperatures and pressures. The HTU produces exceptionally high quality basestocks
including Group II base oils and pharmaceutical grade white oils.
Catalytic Dewaxing Unit (CDW): a high-pressure hydrogen and catalyst system that
isomerizes feedstock into high quality basestock with excellent low temperature properties.
This CDW produces exceptionally high quality Group II/II+/III/III+ basestock and technical
grade white mineral oils.
Isomerization: process employs a specialized catalyst to selectively rearrange the atoms
in wax molecules (n-paraffin mixture) to yield base oils with higher VIs and improved
yields, compared to previous conventional dewaxing techniques. The process is capable
of producing 130 VI base fluids.
Bright Stock: base oil at the upper end of the specifications for Group I base oils (85-89%
saturates).
Methyl Ethyl Ketone (MEK): a solvent dewaxing process that separates the wax portion
of the feedstock from the oil portion. This process produces waxes and base oils.
Lube Extraction Unit (LEU): solvent extracting process that prepares the feedstock for
the MEK unit by removing low V.I. material; producing a higher V.I. MEK feed.
Paraffins: a waxy solid substance containing a mixture of saturated hydrocarbons that is
obtained from the vacuum distillation process.
Vacuum Distillation: process of further refining heavy hydrocarbons into LVGO and
HVGO. The distillation column is placed under a vacuum, which reduces that boiling point
low enough so that lighter products can vaporize without cracking, or degrading, the oil.
Thermal Stability: measure of a base oil’s resistance to heat. Higher thermal stability
leads to reduced deposits and cleaner equipment internals.
Synthetic Lubricants : lubricants manufactured by a process, where a
chemical conversion or transformation of one complex mixture of molecules into another
complex mixture takes place.
Definitions
14
2828 N. Harwood, Suite 1300
Dallas, Texas 75201
(214) 954-6510
www.hollyfrontier.com
Craig Biery| Director, Investor Relations
Jared Harding | Investor Relations
Investors@hollyfrontier.com
214-954-6150