Holly Energy Partners, L.P. Reports First Quarter Results
Holly Energy Partners, L.P. (“HEP” or the “Partnership”) (NYSE:HEP)
today reported financial results for the first quarter of 2013. For the
quarter, distributable cash flow was $32.4 million, down $4.2 million,
or 11% compared to the first quarter of 2012. HEP announced its 34th
consecutive distribution increase on April 25, 2013, raising the
quarterly distribution from $0.47 to $0.4775 per unit, representing a 7%
increase over the distribution for the first quarter of 2012.
Net income attributable to Holly Energy Partners for the first quarter
was $18.4 million ($0.21 per basic and diluted limited partner unit)
compared to $21.8 million ($0.30 per basic and diluted limited partner
unit) for the first quarter of 2012. This decrease in earnings is due
principally to lower pipeline shipments resulting from major maintenance
turnarounds at both HollyFrontier's Navajo refinery and Alon's Big
Spring refinery that had a significant impact on pipeline and terminal
volumes. Also operating costs and expenses increased.
Commenting on the first quarter of 2013, Matt Clifton, Chairman of the
Board and Chief Executive Officer, stated, “Although our distributable
cash flow and earnings were down in the first quarter, they were near
expected levels due to the major refinery maintenance work performed at
HollyFrontier's Navajo refinery and at Alon's Big Spring refinery. With
these two refinery turnarounds now completed, shipments through our
pipelines have increased, returning to pre-turnaround throughput rates.
Looking forward, positive industry fundamentals combined with HEP's
strong asset base and our planned capital projects should drive
continued growth in our distributable cash flow.”
First Quarter 2013 Revenue Highlights
Revenues for the quarter were $74.3 million, a $5.9 million increase
compared to the first quarter of 2012. This is principally due to a $5.0
million increase in deferred revenue realized, increased shipments on
the UNEV Pipeline and the effect of annual tariff increases. However,
major maintenance performed at two of the refineries we serve
significantly impacted revenue and resulted in overall pipeline volumes
being down 6% compared to the three months ended March 31, 2012.
-
Revenues from our refined product pipelines were $27.1 million,
an increase of $2.8 million primarily due to the effects of a $5.6
million increase in deferred revenue realized, increased revenues of
$1.7 million from increased volumes on the UNEV Pipeline and the
effect of annual tariff increases. Shipments averaged 147.1 thousand
barrels per day (“mbpd”) compared to 161.5 mbpd for the first quarter
of 2012, with the decrease due principally to the major maintenance
performed at the two refineries.
-
Revenues from our intermediate pipelines were $6.2 million, a
decrease of $0.9 million, on shipments averaging 120.8 mbpd compared
to 123.6 mbpd for the first quarter of 2012.
-
Revenues from our crude pipelines were $11.6 million, an
increase of $1.0 million, on shipments averaging 145.9 mbpd compared
to 153.7 mbpd for the first quarter of 2012. 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
$29.4 million, an increase of $2.9 million compared to the first
quarter of 2012. This increase is due principally to increased tankage
revenues. Refined products terminalled in our facilities averaged
315.7 mbpd compared to 314.6 mbpd for the first quarter of 2012.
Revenues for the three months ended March 31, 2013 include the
recognition of $6.7 million of prior shortfalls billed to shippers in
2012, as they did not meet their minimum volume commitments within the
contractual make-up period. As of March 31, 2013, deferred revenue in
our consolidated balance sheet was $5.4 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.
Cost and Expense Highlights
Operating costs and expenses were $43.3 million for the three months
ended March 31, 2013, representing an increase of $6.4 million over the
same period of 2012. This increase is due to higher maintenance costs
incurred to coincide with refinery turnaround, environmental accruals
and employee costs.
Interest expense was $12.5 million for the three months ended March 31,
2013, representing increases of $2.1 million over the respective period
of 2012 due to higher year-over-year debt levels.
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=1015237.
An audio archive of this webcast will be available using the above noted
link through May 14, 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 months ended March 31, 2013 and 2012.
|
|
|
|
Three Months Ended March 31,
|
|
|
Change from
|
|
|
|
|
2013
|
|
|
2012
|
|
|
2012
|
|
|
|
|
(In thousands, except per unit data)
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
Pipelines:
|
|
|
|
|
|
|
|
|
|
|
Affiliates – refined product pipelines
|
|
|
$
|
16,770
|
|
|
|
$
|
14,856
|
|
|
|
$
|
1,914
|
|
|
Affiliates – intermediate pipelines
|
|
|
|
6,172
|
|
|
|
|
7,045
|
|
|
|
|
(873
|
)
|
|
Affiliates – crude pipelines
|
|
|
|
11,579
|
|
|
|
|
10,545
|
|
|
|
|
1,034
|
|
|
|
|
|
|
34,521
|
|
|
|
|
32,446
|
|
|
|
|
2,075
|
|
|
Third parties – refined product pipelines
|
|
|
|
10,343
|
|
|
|
|
9,469
|
|
|
|
|
874
|
|
|
|
|
|
|
44,864
|
|
|
|
|
41,915
|
|
|
|
|
2,949
|
|
|
Terminals, tanks and loading racks:
|
|
|
|
|
|
|
|
|
|
|
Affiliates
|
|
|
|
26,991
|
|
|
|
|
24,085
|
|
|
|
|
2,906
|
|
|
Third parties
|
|
|
|
2,443
|
|
|
|
|
2,415
|
|
|
|
|
28
|
|
|
|
|
|
|
29,434
|
|
|
|
|
26,500
|
|
|
|
|
2,934
|
|
|
Total revenues
|
|
|
|
74,298
|
|
|
|
|
68,415
|
|
|
|
|
5,883
|
|
|
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
Operations
|
|
|
|
25,865
|
|
|
|
|
20,475
|
|
|
|
|
5,390
|
|
|
Depreciation and amortization
|
|
|
|
14,154
|
|
|
|
|
14,300
|
|
|
|
|
(146
|
)
|
|
General and administrative
|
|
|
|
3,232
|
|
|
|
|
2,039
|
|
|
|
|
1,193
|
|
|
|
|
|
|
43,251
|
|
|
|
|
36,814
|
|
|
|
|
6,437
|
|
|
Operating income
|
|
|
|
31,047
|
|
|
|
|
31,601
|
|
|
|
|
(554
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings of SLC Pipeline
|
|
|
|
657
|
|
|
|
|
831
|
|
|
|
|
(174
|
)
|
|
Interest expense, including amortization
|
|
|
|
(12,484
|
)
|
|
|
|
(10,405
|
)
|
|
|
|
(2,079
|
)
|
|
Interest income
|
|
|
|
103
|
|
|
|
|
—
|
|
|
|
|
103
|
|
|
Loss on early extinguishment of debt
|
|
|
|
—
|
|
|
|
|
(2,596
|
)
|
|
|
|
2,596
|
|
|
Gain on sale of assets
|
|
|
|
2,022
|
|
|
|
|
—
|
|
|
|
|
2,022
|
|
|
|
|
|
|
(9,702
|
)
|
|
|
|
(12,170
|
)
|
|
|
|
2,468
|
|
|
Income before income taxes
|
|
|
|
21,345
|
|
|
|
|
19,431
|
|
|
|
|
1,914
|
|
|
State income tax expense
|
|
|
|
(56
|
)
|
|
|
|
(75
|
)
|
|
|
|
19
|
|
|
Net income
|
|
|
|
21,289
|
|
|
|
|
19,356
|
|
|
|
|
1,933
|
|
|
Allocation of net loss attributable to Predecessors
|
|
|
|
—
|
|
|
|
|
1,861
|
|
|
|
|
(1,861
|
)
|
|
Allocation of net loss (income) attributable to noncontrolling
interests
|
|
|
|
(2,890
|
)
|
|
|
|
557
|
|
|
|
|
(3,447
|
)
|
|
Net income attributable to Holly Energy Partners
|
|
|
|
18,399
|
|
|
|
|
21,774
|
|
|
|
|
(3,375
|
)
|
|
General partner interest in net income, including incentive
distributions(1) |
|
|
|
(6,231
|
)
|
|
|
|
(5,503
|
)
|
|
|
|
(728
|
)
|
|
Limited partners’ interest in net income
|
|
|
$
|
12,168
|
|
|
|
$
|
16,271
|
|
|
|
$
|
(4,103
|
)
|
|
Limited partners’ earnings per unit – basic and diluted:(1) |
|
|
$
|
0.21
|
|
|
|
$
|
0.30
|
|
|
|
$
|
(0.09
|
)
|
|
Weighted average limited partners’ units outstanding
|
|
|
|
56,990
|
|
|
|
|
54,722
|
|
|
|
|
2,268
|
|
|
EBITDA(2) |
|
|
$
|
44,990
|
|
|
|
$
|
45,426
|
|
|
|
$
|
(436
|
)
|
|
Distributable cash flow(3) |
|
|
$
|
32,385
|
|
|
|
$
|
36,555
|
|
|
|
$
|
(4,170
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Volumes (bpd)
|
|
|
|
|
|
|
|
|
|
|
Pipelines:
|
|
|
|
|
|
|
|
|
|
|
Affiliates – refined product pipelines
|
|
|
|
94,148
|
|
|
|
|
97,226
|
|
|
|
|
(3,078
|
)
|
|
Affiliates – intermediate pipelines
|
|
|
|
120,777
|
|
|
|
|
123,568
|
|
|
|
|
(2,791
|
)
|
|
Affiliates – crude pipelines
|
|
|
|
145,926
|
|
|
|
|
153,662
|
|
|
|
|
(7,736
|
)
|
|
|
|
|
|
360,851
|
|
|
|
|
374,456
|
|
|
|
|
(13,605
|
)
|
|
Third parties – refined product pipelines
|
|
|
|
52,986
|
|
|
|
|
64,287
|
|
|
|
|
(11,301
|
)
|
|
|
|
|
|
413,837
|
|
|
|
|
438,743
|
|
|
|
|
(24,906
|
)
|
|
Terminals and loading racks:
|
|
|
|
|
|
|
|
|
|
|
Affiliates
|
|
|
|
260,242
|
|
|
|
|
262,230
|
|
|
|
|
(1,988
|
)
|
|
Third parties
|
|
|
|
55,459
|
|
|
|
|
52,383
|
|
|
|
|
3,076
|
|
|
|
|
|
|
315,701
|
|
|
|
|
314,613
|
|
|
|
|
1,088
|
|
|
Total for pipelines and terminal assets (bpd)
|
|
|
|
729,538
|
|
|
|
|
753,356
|
|
|
|
|
(23,818
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 $6.0 million and $5.2
million for the three months ended March 31, 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.
|
|
|
|
|
|
(2)
|
|
Earnings before interest, taxes, depreciation and amortization
(“EBITDA”) is calculated as net income attributable to Holly Energy
Partners plus (i) interest expense, net of interest income, (ii)
state income tax and (iii) depreciation and amortization (excluding
Predecessor amounts). EBITDA is not a calculation based upon GAAP.
However, the amounts included in the EBITDA calculation are derived
from amounts included in our consolidated financial statements.
EBITDA should not be considered as an alternative to net income
attributable to Holly Energy Partners or operating income, as an
indication of our operating performance or as an alternative to
operating cash flow as a measure of liquidity. EBITDA is not
necessarily comparable to similarly titled measures of other
companies. EBITDA is presented here because it is a widely used
financial indicator used by investors and analysts to measure
performance. EBITDA also is used by our management for internal
analysis and as a basis for compliance with financial covenants.
|
|
|
|
|
|
|
|
Set forth below is our calculation of EBITDA.
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
2013
|
|
2012
|
|
|
|
(In thousands)
|
|
Net income attributable to Holly Energy Partners
|
|
$
|
18,399
|
|
|
$
|
21,774
|
|
|
Add (subtract):
|
|
|
|
|
|
Interest expense
|
|
|
11,105
|
|
|
|
8,760
|
|
|
Interest Income
|
|
|
(103
|
)
|
|
|
—
|
|
|
Amortization of discount and deferred debt charges
|
|
|
530
|
|
|
|
371
|
|
|
Loss on early extinguishment of debt
|
|
|
—
|
|
|
|
2,596
|
|
|
Increase in interest expense - non-cash charges attributable to
interest rate swaps
|
|
|
849
|
|
|
|
1,274
|
|
|
State income tax
|
|
|
56
|
|
|
|
75
|
|
|
Depreciation and amortization
|
|
|
14,154
|
|
|
|
14,300
|
|
|
Predecessor depreciation and amortization
|
|
|
—
|
|
|
|
(3,724
|
)
|
|
EBITDA
|
|
$
|
44,990
|
|
|
$
|
45,426
|
|
|
|
|
|
|
|
|
|
|
|
|
(3)
|
|
Distributable cash flow is not a calculation based upon GAAP.
However, the amounts included in the calculation are derived from
amounts separately presented in our consolidated financial
statements, with the exception of billed crude revenue settlement
and maintenance capital expenditures. Distributable cash flow should
not be considered in isolation or as an alternative to net income
attributable to Holly Energy Partners or operating income, as an
indication of our operating performance, or as an alternative to
operating cash flow as a measure of liquidity. Distributable cash
flow is not necessarily comparable to similarly titled measures of
other companies. Distributable cash flow is presented here because
it is a widely accepted financial indicator used by investors to
compare partnership performance. It also is used by management for
internal analysis and our performance units. We believe that this
measure provides investors an enhanced perspective of the operating
performance of our assets and the cash our business is generating.
|
|
|
|
|
|
|
|
Set forth below is our calculation of distributable cash flow.
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
2013
|
|
|
2012
|
|
|
|
|
(In thousands)
|
|
Net income attributable to Holly Energy Partners
|
|
|
$
|
18,399
|
|
|
|
$
|
21,774
|
|
|
Add (subtract):
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
|
14,154
|
|
|
|
|
14,300
|
|
|
Predecessor depreciation and amortization
|
|
|
|
—
|
|
|
|
|
(3,724
|
)
|
|
Amortization of discount and deferred debt charges
|
|
|
|
530
|
|
|
|
|
371
|
|
|
Loss on early extinguishment of debt
|
|
|
|
—
|
|
|
|
|
2,596
|
|
|
Increase in interest expense - non-cash charges attributable to
interest rate swaps
|
|
|
|
849
|
|
|
|
|
1,274
|
|
|
Increase (decrease) in deferred revenue attributable to shortfall
billings
|
|
|
|
(1,224
|
)
|
|
|
|
(592
|
)
|
|
Billed crude revenue settlement
|
|
|
|
918
|
|
|
|
|
918
|
|
|
Maintenance capital expenditures*
|
|
|
|
(2,335
|
)
|
|
|
|
(307
|
)
|
|
Other non-cash adjustments
|
|
|
|
1,094
|
|
|
|
|
(55
|
)
|
|
Distributable cash flow
|
|
|
$
|
32,385
|
|
|
|
$
|
36,555
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
Maintenance capital expenditures are capital expenditures made to
replace partially or fully depreciated assets in order to maintain
the existing operating capacity of our assets and to extend their
useful lives. Maintenance capital expenditures include expenditures
required to maintain equipment reliability, tankage and pipeline
integrity, and safety and to address environmental regulations.
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
|
2013
|
|
|
2012
|
|
|
|
|
(In thousands)
|
|
Balance Sheet Data
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
$
|
18,193
|
|
|
$
|
5,237
|
|
Working capital
|
|
|
$
|
32,315
|
|
|
$
|
11,826
|
|
Total assets
|
|
|
$
|
1,398,186
|
|
|
$
|
1,394,110
|
|
Long-term debt
|
|
|
$
|
811,913
|
|
|
$
|
864,674
|
|
Partners' equity(4) |
|
|
$
|
412,604
|
|
|
$
|
352,653
|
|
|
|
|
|
|
|
|
|
|
|
(4)
|
|
As a master limited partnership, we distribute our available cash,
which historically has exceeded our net income attributable to Holly
Energy Partners because depreciation and amortization expense
represents a non-cash charge against income. The result is a decline
in partners’ equity since our regular quarterly distributions have
exceeded our quarterly net income attributable to Holly Energy
Partners. Additionally, if the assets contributed and acquired from
HollyFrontier while we were a consolidated variable interest entity
of HollyFrontier had been acquired from third parties, our
acquisition cost in excess of HollyFrontier’s basis in the
transferred assets of $305.5 million would have been recorded as
increases to our properties and equipment and intangible assets
instead of decreases to partners’ equity.
|
