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TheStreet Open House

Holly Energy Partners, L.P. Reports Third Quarter Results

HollyFrontier Corporation, headquartered in Dallas, Texas, is an independent petroleum refiner and marketer that produces high value light products such as gasoline, diesel fuel, jet fuel and other specialty products. HollyFrontier operates through its subsidiaries a 135,000 barrels-per-stream-day (“bpsd”) refinery located in El Dorado, Kansas, a 125,000 bpsd refinery in Tulsa, Oklahoma, a 100,000 bpsd refinery located in Artesia, New Mexico, a 52,000 bpsd refinery located in Cheyenne, Wyoming, and a 31,000 bpsd refinery in Woods Cross, Utah. HollyFrontier markets its refined products principally in the Southwest U.S., the Rocky Mountains extending into the Pacific Northwest and in other neighboring Plains states. A subsidiary of HollyFrontier also owns a 44% interest (including the general partner interest) in Holly Energy Partners, L.P.

The statements in this press release relating to matters that are not historical facts are “forward-looking statements” within the meaning of the federal securities laws. Forward looking statements use words such as “anticipate,” “project,” “expect,” “plan,” “goal,” “forecast,” “intend,” “could,” “believe,” “may,” and similar expressions and statements regarding our plans and objectives for future operations. These statements are based on our beliefs and assumptions and those of our general partner using currently available information and expectations as of the date hereof, are not guarantees of future performance and involve certain risks and uncertainties. Although we and our general partner believe that such expectations reflected in such forward-looking statements are reasonable, neither we nor our general partner can give assurance that our expectations will prove to be correct. Such statements are subject to a variety of risks, uncertainties and assumptions. If one or more of these risks or uncertainties materialize, or if underlying assumptions prove incorrect, our actual results may vary materially from those anticipated, estimated, projected or expected. Certain factors could cause actual results to differ materially from results anticipated in the forward-looking statements. These factors include, but are not limited to:

  • risks and uncertainties with respect to the actual quantities of petroleum products and crude oil shipped on our pipelines and/or terminalled, stored and throughput in our terminals;
  • the economic viability of HollyFrontier Corporation, Alon USA, Inc. and our other customers;
  • the demand for refined petroleum products in markets we serve;
  • our ability to successfully purchase and integrate additional operations in the future;
  • our ability to complete previously announced or contemplated acquisitions;
  • the availability and cost of additional debt and equity financing;
  • the possibility of reductions in production or shutdowns at refineries utilizing our pipeline and terminal facilities;
  • the effects of current and future government regulations and policies;
  • our operational efficiency in carrying out routine operations and capital construction projects;
  • the possibility of terrorist attacks and the consequences of any such attacks;
  • general economic conditions; and
  • other financial, operations and legal risks and uncertainties detailed from time to time in our 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.

         

RESULTS OF OPERATIONS (Unaudited)

 

Income, Distributable Cash Flow and Volumes  

The following tables present income, distributable cash flow and volume information for the three and the nine months ended September 30, 2012 and 2011.

 

Three Months Ended

September 30,

Change from

2012     2011 2011
(In thousands, except per unit data)
Revenues
Pipelines:
Affiliates – refined product pipelines $ 16,350 $ 12,414 $ 3,936
Affiliates – intermediate pipelines 7,319 5,935 1,384
Affiliates – crude pipelines 12,306   10,846   1,460  
35,975 29,195 6,780
Third parties – refined product pipelines 9,538   6,525   3,013  
45,513 35,720 9,793
Terminals, tanks and loading racks:
Affiliates 24,601 11,519 13,082
Third parties 2,382   1,797   585  
26,983   13,316   13,667  
Total revenues 72,496 49,036 23,460
Operating costs and expenses:
Operations 21,324 16,398 4,926
Depreciation and amortization 13,044 8,916 4,128
General and administrative 1,399   2,012   (613 )
35,767   27,326   8,441  
Operating income 36,729 21,710 15,019
 
Equity in earnings of SLC Pipeline 877 641 236
Interest expense, including amortization (12,540 ) (8,828 ) (3,712 )
Other income   20   (20 )
(11,663 ) (8,167 ) (3,496 )
Income before income taxes 25,066 13,543 11,523
State income tax expense (137 ) 77   (214 )
Net income 24,929 13,620 11,309
Allocation of net loss attributable to Predecessors (1) 146 3,000 (2,854 )
Allocation of net loss (income) attributable to noncontrolling interests (582 ) 124   (706 )
Net income attributable to Holly Energy Partners 24,493 16,744 7,749
General partner interest in net income, including incentive distributions (2) (5,299 ) (4,009 ) (1,290 )
Limited partners’ interest in net income $ 19,194   $ 12,735   $ 6,459  
Limited partners’ earnings per unit – basic and diluted: (2) $ 0.68   $ 0.58   $ 0.10  
Weighted average limited partners’ units outstanding 28,268   22,079   6,189  
EBITDA (3) $ 49,770   $ 33,228   $ 16,542  
Distributable cash flow (4) $ 40,431   $ 25,731   $ 14,700  
 
Volumes (bpd)
Pipelines:
Affiliates – refined product pipelines 114,113 96,105 18,008
Affiliates – intermediate pipelines 132,220 91,783 40,437
Affiliates – crude pipelines 187,861 175,459   12,402
434,194 363,347 70,847
Third parties – refined product pipelines 66,274 44,212   22,062
500,468 407,559 92,909
Terminals and loading racks:
Affiliates 267,638 183,987 83,651
Third parties 57,496 43,224   14,272
325,134 227,211   97,923
Total for pipelines and terminal assets (bpd) 825,602 634,770   190,832
 

 

Nine Months Ended

September 30,

Change from

2012 2011 2011
(In thousands, except per unit data)
Revenues
Pipelines:
Affiliates – refined product pipelines $ 46,726 $ 33,370 $ 13,356
Affiliates – intermediate pipelines 21,076 15,637 5,439
Affiliates – crude pipelines 33,844   30,296   3,548  
101,646 79,303 22,343
Third parties – refined product pipelines 27,856   27,588   268  
129,502 106,891 22,611
Terminals, tanks and loading racks:
Affiliates 70,695 32,571 38,124
Third parties 6,792   5,447   1,345  
77,487   38,018   39,469  
Total revenues 206,989 144,909 62,080
Operating costs and expenses:
Operations 61,355 43,804 17,551
Depreciation and amortization 39,899 24,627 15,272
General and administrative 5,925   4,948   977  
107,179   73,379   33,800  
Operating income 99,810 71,530 28,280
 
Equity in earnings of SLC Pipeline 2,502 1,848 654
Interest expense, including amortization (34,269 ) (26,101 ) (8,168 )
Loss on early extinguishment of debt (2,979 ) (2,979 )
Other expense   8   (8 )
(34,746 ) (24,245 ) (10,501 )
Income before income taxes 65,064 47,285 17,779
State income tax expense (287 ) (169 ) (118 )
Net income 64,777 47,116 17,661
Allocation of net loss attributable to Predecessors (1) 4,199 3,515 684
Allocation of net loss attributable to noncontrolling interests 658   295   363  
Net income attributable to Holly Energy Partners 69,634 50,926 18,708
General partner interest in net income, including incentive distributions (2) (16,724 ) (11,418 ) (5,306 )
Limited partners’ interest in net income $ 52,910   $ 39,508   $ 13,402  
Limited partners’ earnings per unit – basic and diluted: (2) $ 1.91   $ 1.79   $ 0.12  
Weighted average limited partners’ units outstanding 27,666   22,079   5,587  
EBITDA (3) $ 139,165   $ 100,282   $ 38,883  
Distributable cash flow (4) $ 111,506 $ 67,924 $ 43,582
 
Volumes (bpd)
Pipelines:
Affiliates – refined product pipelines 104,444 88,172 16,272
Affiliates – intermediate pipelines 130,972 81,618 49,354
Affiliates – crude pipelines 169,922   157,598   12,324  
405,338 327,388 77,950
Third parties – refined product pipelines 62,301   48,107   14,194  
467,639 375,495 92,144
Terminals and loading racks:
Affiliates 265,958 174,866 91,092
Third parties 52,918   42,102   10,816  
318,876   216,968   101,908  
Total for pipelines and terminal assets (bpd) 786,515   592,463   194,052  

(1) We are a consolidated variable interest entity and under common control of HollyFrontier. With respect to the July 2012 acquisition of HollyFrontier's 75% interest in UNEV, U.S. generally accepted accounting principles (“GAAP”) require that our financial statements reflect the historical operations of the assets recognized by HollyFrontier, effectively as if the assets were already under our ownership and control. Accordingly, we recognized additional revenues of $0.3 million and $8.1 million and net losses of $0.1 million and $4.2 million for the three and nine months ended September 30, 2012, respectively, that relate to the operations of UNEV prior to our acquisition date. We recognized net losses of $0.4 million and $0.9 million for the three and nine months ended September 30, 2011, respectively, that relate to the operations of UNEV. This retrospective adjustment did not have a significant impact on our operating results prior to 2012 as initial start-up activities of the pipeline commenced December 2011. Results of operations of UNEV prior to the acquisition on July 12, 2012 are herein referred to as the Predecessor's results. Additionally, volume information does not reflect volumes prior to our acquisition date.

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