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

We have scheduled a webcast conference call today at 4:00 PM Eastern Time to discuss financial results. This webcast may be accessed at: https://event.webcasts.com/starthere.jsp?ei=1018662.

An audio archive of this webcast will be available using the above noted link through August 13, 2013.

About Holly Energy Partners, L.P.

Holly Energy Partners, L.P., headquartered in Dallas, Texas, provides petroleum product and crude oil transportation, terminalling, storage and throughput services to the petroleum industry, including HollyFrontier Corporation subsidiaries. The Partnership owns and operates petroleum product and crude gathering pipelines, tankage and terminals in Texas, New Mexico, Arizona, Washington, Idaho, Oklahoma, Utah, Wyoming and Kansas. In addition, the Partnership owns a 75% interest in UNEV Pipeline, LLC, the owner of a Holly Energy operated refined products pipeline running from Utah to Las Vegas, Nevada, and related product terminals and a 25% interest in SLC Pipeline LLC, a 95-mile intrastate pipeline system serving refineries in the Salt Lake City, Utah area.

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 owns a 39% 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 purchase and integrate additional operations in the future successfully;
  • 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 six months ended June 30, 2013.

     
Three Months Ended June 30,

Change from

2013   2012 2012
(In thousands, except per unit data)
Revenues
Pipelines:
Affiliates – refined product pipelines $ 16,952 $ 15,520 $ 1,432
Affiliates – intermediate pipelines 7,291 6,712 579
Affiliates – crude pipelines 12,187   10,994   1,193  
36,430 33,226 3,204
Third parties – refined product pipelines 9,823   8,857   966  
46,253 42,083 4,170
Terminals, tanks and loading racks:
Affiliates 26,757 24,540 2,217
Third parties 2,275   2,037   238  
29,032   26,577   2,455  
Total revenues 75,285 68,660 6,625
Operating costs and expenses:
Operations 24,538 21,907 2,631
Depreciation and amortization 15,127 14,150 977
General and administrative 3,100   2,487   613  
42,765   38,544   4,221  
Operating income 32,520 30,116 2,404
 
Equity in earnings of SLC Pipeline 746 794 (48 )
Interest expense, including amortization (11,629 ) (11,324 ) (305 )
Interest income 4 4
Loss on early extinguishment of debt   (383 ) 383  
(10,879 ) (10,913 ) 34  
Income before income taxes 21,641 19,203 2,438
State income tax expense (344 ) (75 ) (269 )
Net income 21,297 19,128 2,169
Allocation of net loss attributable to Predecessors 2,192 (2,192 )
Allocation of net loss (income) attributable to noncontrolling interests (1,130 ) 683   (1,813 )
Net income attributable to Holly Energy Partners 20,167 22,003 (1,836 )
General partner interest in net income, including incentive distributions (1) (6,680 ) (5,894 ) (786 )
Limited partners’ interest in net income $ 13,487   $ 16,109   $ (2,622 )
Limited partners’ earnings per unit – basic and diluted: (1) $ 0.23   $ 0.29   $ (0.06 )
Weighted average limited partners’ units outstanding 58,657   54,722   3,935  
EBITDA (2) $ 47,263   $ 44,201   $ 3,062  
Distributable cash flow (3) $ 36,065   $ 34,520   $ 1,545  
 
Volumes (bpd)
Pipelines:
Affiliates – refined product pipelines 119,519 101,886 17,633
Affiliates – intermediate pipelines 142,406 137,115 5,291
Affiliates – crude pipelines 184,267 168,047   16,220
446,192 407,048 39,144
Third parties – refined product pipelines 67,044 56,297   10,747
513,236 463,345 49,891
Terminals and loading racks:
Affiliates 274,040 267,988 6,052
Third parties 59,810 48,825   10,985
333,850 316,813   17,037
Total for pipelines and terminal assets (bpd) 847,086 780,158   66,928
 
     
Six Months Ended June 30, Change from
2013   2012 2012
(In thousands, except per unit data)
Revenues
Pipelines:
Affiliates—refined product pipelines $ 33,723 $ 30,376 $ 3,347
Affiliates—intermediate pipelines 13,463 13,757 (294 )
Affiliates—crude pipelines 23,765   21,538   2,227  
70,951 65,671 5,280
Third parties—refined product pipelines 20,166   18,326   1,840  
91,117 83,997 7,120
Terminals, tanks and loading racks:
Affiliates 53,748 48,626 5,122
Third parties 4,718   4,452   266  
58,466   53,078   5,388  
Total revenues 149,583 137,075 12,508
Operating costs and expenses
Operations 50,403 42,382 8,021
Depreciation and amortization 29,281 28,450 831
General and administrative 6,332   4,526   1,806  
86,016   75,358   10,658  
Operating income 63,567 61,717 1,850
Equity in earnings of SLC Pipeline 1,403 1,625 (222 )
Interest expense, including amortization (24,113 ) (21,729 ) (2,384 )
Interest income 107 107
Loss on early extinguishment of debt (2,979 ) 2,979
Gain on sale of assets 2,022     2,022  
(20,581 ) (23,083 ) 2,502  
Income before income taxes 42,986 38,634 4,352
State income tax expense (400 ) (150 ) (250 )
Net income 42,586 38,484 4,102
Allocation of net loss attributable to Predecessors 4,053 (4,053 )
Allocation of net loss (income) attributable to noncontrolling interests (4,020 ) 1,240   (5,260 )
Net income attributable to Holly Energy Partners 38,566 43,777 (5,211 )
General partner interest in net income, including incentive distributions (1) 12,910     11,398   1,512  
Limited partners’ interest in net income $ 25,656     $ 32,379   $ (6,723 )
Limited partners’ earnings per unit—basic and diluted (1) $ 0.44     $ 0.59   $ (0.15 )
Weighted average limited partners’ units outstanding 57,828     54,722   3,106  
EBITDA (2) $ 92,253     $ 89,626   $ 2,627  
Distributable cash flow (3) $ 68,450     $ 71,075   $ (2,625 )
 
Volumes (bpd)
Pipelines:
Affiliates—refined product pipelines 106,904 99,556 7,348
Affiliates—intermediate pipelines 131,651 130,341 1,310
Affiliates—crude pipelines 165,203   160,855   4,348  
403,758 390,752 13,006
Third parties—refined product pipelines 60,054   60,292   (238 )
463,812 451,044 12,768
Terminals and loading racks:
Affiliates 267,179 265,109 2,070
Third parties 57,647   50,604   7,043  
324,826   315,713   9,113  
Total for pipelines and terminal assets (bpd) 788,638   766,757   21,881  
 

(1) Net income is allocated between limited partners and the general partner interest in accordance with the provisions of the partnership agreement. Net income allocated to the general partner includes incentive distributions declared subsequent to quarter end. General partner incentive distributions were $6.4 million and $5.6 million for the three months ended June 30, 2013 and 2012, respectively, and $12.4 million and $10.7 million for the six months ended June 30, 2013 and 2012, respectively. Net income attributable to the limited partners is divided by the weighted average limited partner units outstanding in computing the limited partners’ per unit interest in net income.

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