HF Sinclair Corp

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities as of the date of the financial statements. Actual results may differ from these estimates under different assumptions or conditions. We consider the following policies to be the most critical to understanding the judgments that are involved and the uncertainties that could impact our results of operations, financial condition and cash flows. For additional information, see Note 1 “Description of Business and Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements. Certain critical accounting policies that materially affect the amounts recorded in our consolidated financial statements include assessing the possible impairment of certain assets and goodwill and assessing contingent liabilities for probable losses.

Goodwill and Long-lived Assets

As of December 31, 2025, our Goodwill balancewas$2,978 million, with goodwill assigned to reporting units in our Refining, Renewables, Marketing, Lubricants & Specialties and Midstream segments. Goodwill represents the excess of the purchase price of an acquired business over the fair value of the assets acquired and liabilities assumed. Goodwill is not subject to amortization and is tested annually or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Our goodwill impairment testing entails either a quantitative assessment or an optional qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. With our qualitative assessment, if we determine based on the qualitative factors that it is more likely than not that a reporting unit’s carrying value is greater than its fair value, a quantitative test is performed in which we estimate the fair value of the related reporting unit. If the carrying amount of a reporting unit exceeds its fair value, the goodwill of that reporting unit is impaired, and we measure goodwill impairment as the excess of the carrying amount of the reporting unit over the related fair value.

During the year ended December 31, 2025, we elected to change our annual goodwill impairment testing date from July 1 to October 1 to better align the timing of our goodwill impairment assessment with our annual budgeting processes. The change in annual goodwill impairment testing date constitutes a voluntary change in accounting principle. This change does not delay, accelerate, or avoid an impairment charge and has been applied prospectively as retrospective application was impracticable due to the inability to objectively determine the assumptions and significant estimates used in prior periods without the benefit of hindsight. Prior to the goodwill impairment test performed as of October 1, 2025, the most recent annual goodwill impairment test was performed as of July 1, 2025. For the test performed on July 1, 2025, one reporting unit within each of the Refining, Renewables and Lubricants & Specialties segments was tested for impairment using a quantitative approach, and all other reporting units were assessed for impairment using a qualitative approach. For the test performed as of October 1, 2025, all reporting units were assessed for impairment using a qualitative approach. No impairment was identified in 2025.

In performing our quantitative goodwill impairment tests, the estimated fair values of our reporting units were derived using a combination of income and market approaches. The income approach reflects expected future cash flows based on estimated forecasted production levels, selling prices, gross margins, operating costs and capital expenditures. Our market approaches include both the guideline public company and guideline transaction methods. Both methods utilize pricing multiples derived from historical market transactions and other market data for like-kind assets. The fair values of the reporting units tested quantitatively on July 1, 2025 exceeded their respective carrying values by more than 10%. Increasing the discount rate by 1.0% or reducing the terminal cash flow growth rate by 1.0% would not have changed the results of our annual assessment.

In performing our quantitative impairment test of goodwill, we developed cash flow forecasts for each of our reporting units. Significant judgment is involved in performing these fair value estimates since the results are based on forecasted financial information. The cash flow forecasts include significant assumptions such as planned utilization, end-user demand, selling prices, gross margins, operating costs and capital expenditures. Other key assumptions applied to these forecasts to determine the fair value of a reporting unit are the discount rate and terminal cash flow growth rate. The discount rate is intended to reflect the weighted-average cost of capital for a market participant and the risks associated with the realization of the estimated future cash flows. Our fair value estimates are based on projected cash flows, which we believe to be reasonable.

In performing the qualitative goodwill impairment assessment as of October 1, 2025, management evaluated whether events or changes in circumstances occurring subsequent to the July 1, 2025 impairment tests indicated that it was more likely than not that the fair value of any reporting unit was less than its carrying amount. Factors considered included changes in forecasted operating results, commodity price assumptions, discount rates, market capitalization, overall macroeconomic conditions, regulatory developments and other entity-specific and reporting unit-specific events. Based on this evaluation, management concluded that no reporting unit met the criteria requiring a quantitative goodwill impairment test as of October 1, 2025.

We continually monitor and evaluate various factors for potential indicators of goodwill and asset impairments. A reasonable expectation exists that sustained deterioration in our operating results or overall economic conditions could lead to goodwill and/or asset impairments at some point in the future. Future impairment charges could be material to our results of operations and financial condition.

Contingencies

We are subject to proceedings, lawsuits and other claims related to environmental, labor, product and other matters. We are required to assess the likelihood of any adverse judgments or outcomes of these matters as well as potential ranges of probable losses. A determination of the amount of reserves required, if any, for these contingencies is made after careful analysis of each individual issue. The required reserves may change in the future due to new developments in each matter or changes in approach, such as a change in settlement strategy when dealing with these matters.