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Holly Energy Partners, L.P. (“HEP” or the “Partnership”) (NYSE:HEP) today reported financial results for the second quarter of 2014. For the quarter, distributable cash flow was $43.5 million, up $7.4 million, or 21% compared to the second quarter of 2013. HEP announced its 39th consecutive distribution increase on July 24, 2014, raising the quarterly distribution from $0.5075 to $0.515 per unit, representing a 6% increase over the distribution for the second quarter of 2013.
Net income attributable to Holly Energy Partners for the second quarter was $23.0 million ($0.25 per basic and diluted limited partner unit) compared to $20.2 million ($0.23 per basic and diluted limited partner unit) for the second quarter of 2013. The increase in earnings is primarily due to decreased interest expense incurred on our 8.25% Senior Notes retired in March 2014, which was partially offset by lower pipeline shipments due to a major maintenance turnaround at Alon's Big Spring refinery.
Commenting on the second quarter of 2014, Mike Jennings, Chief Executive Officer, stated, “We are pleased our financial results for the second quarter of 2014 allowed us to continue our record of raising our quarterly distribution.
“We expect the previously announced expansion of our New Mexico crude gathering system to be in full service by September, and we are already seeing increased volumes from new segments now in operation. Additionally, we continue to pursue potential new growth opportunities that leverage our capabilities and HFC’s refining footprint.
“As we look forward, we believe HEP is well positioned for continued growth due to the quality and geographic location of our assets, our talented employee base, and our financially strong and supportive general partner, HollyFrontier.”
Second Quarter 2014 Revenue Highlights
Revenues for the quarter were $75.0 million, a $0.3 million decrease compared to the second quarter of 2013 due to the effect of lower pipeline volumes offset by higher terminal volumes. Major maintenance performed at Alon's Big Spring refinery affected revenue and resulted in overall pipeline volumes being down 5% compared to the three months ended June 30, 2013.
Revenues from our refined product pipelines were $25.0 million, a decrease of $1.8 million compared to the second quarter of 2013 primarily due to decreased volumes. Shipments averaged 163.2 mbpd compared to 186.6 mbpd for the second quarter of 2013.
Revenues from our intermediate pipelines were $6.7 million, a decrease of $0.6 million, on shipments averaging 143.4 mbpd compared to 142.4 mbpd for the second quarter of 2013. Revenues decreased mainly due to a $0.5 million decrease in deferred revenue recognized.
Revenues from our crude pipelines were $13.0 million, an increase of $0.8 million, on shipments averaging 178.6 mbpd compared to 184.3 mbpd for the second quarter of 2013. Although crude pipeline shipments were down, revenues from our crude pipelines increased due to annual tariff increases, increased volumes on certain pipeline segments and minimum quarterly revenue billings on segments where volumes decreased.
Revenues from terminal, tankage and loading rack fees were $30.3 million, an increase of $1.2 million compared to the second quarter of 2013. Refined products terminalled in our facilities averaged 325.8 mbpd compared to 333.9 mbpd, for the second quarter of 2013. Although volumes were down at the loading rack facilities, revenue increased due to annual fee increases, higher tank cost reimbursement receipts from HFC and minimum quarterly revenue billings at facilities where volumes decreased.
Revenues for the three months ended June 30, 2014, include the recognition of $0.2 million of prior shortfalls billed to shippers in 2013, as they did not meet their minimum volume commitments within the contractual make-up period. As of June 30, 2014, shortfall deferred revenue in our consolidated balance sheet was $9.7 million. Such deferred revenue will be recognized in earnings either as payment for shipments in excess of guaranteed levels, if and to the extent the pipeline system will not have the necessary capacity for shipments in excess of guaranteed levels, or when shipping rights expire unused over the contractual make-up period.