Holly Energy Partners, L.P. (“HEP” or the “Partnership”)
(NYSE:HEP) today reported financial results for the fourth quarter
of 2016. Net income attributable to Holly Energy Partners for the
fourth quarter was $41.4 million ($0.40 per basic and diluted
limited partner unit) compared to $40.5 million ($0.49 per basic
and diluted limited partner unit) for the fourth quarter of
2015.
Distributable cash flow was $58.5 million, an increase of $4.9
million, or 9.2% compared to the fourth quarter of 2015. HEP
announced its 49th consecutive distribution increase on January 26,
2017, raising the quarterly distribution from $0.595 to $0.6075 per
unit, representing a 7.5% increase over the distribution for the
fourth quarter of 2015. This distribution represents an
acceleration in year over year distribution growth and progress
towards HEP's 8% distribution growth rate target.
This increase in earnings is primarily due to newly acquired
Woods Cross refinery processing units as well as recent
acquisitions including interests in the Osage and Cheyenne
pipelines and the Tulsa crude tanks acquired in the first quarter
of 2016, offset by higher interest expense associated with our 6%
Senior Notes due 2024, which we issued in July 2016 in anticipation
of our Woods Cross processing units acquisition.
Commenting on the fourth quarter of 2016, George Damiris, Chief
Executive Officer, stated, “We are pleased with our solid financial
performance in the fourth quarter. Our strong and stable cash
generation allowed us to accelerate our year over year distribution
growth and progress towards our 8% distribution growth target as we
maintained our record of continuous quarterly distribution
increases. Effective as of October 1, 2016, we successfully
completed our acquisition of an atmospheric distillation tower, a
fluid catalytic cracking unit, and a polymerization unit located at
the HollyFrontier Woods Cross refinery, and these units were
accretive to distributable cash flow in the quarter. We will
continue to leverage our relationship with HollyFrontier and our
Mid-Continent, Northwest and Southwest logistics footprint to
generate new organic and external growth opportunities.
"Looking forward, we believe HEP is positioned to continue its
growth based on the quality and location of our assets, our
talented employee base, and our strong and supportive general
partner, HollyFrontier."
Fourth Quarter 2016 Revenue Highlights
Revenues for the quarter were $112.5 million, an increase of
$15.3 million compared to the fourth quarter of 2015. The revenue
increase was mainly due to our newly acquired Woods Cross refinery
processing units, the El Dorado refinery processing units acquired
in the fourth quarter of 2015, and the Tulsa crude tanks acquired
in the 1st quarter of 2016 offset by lower pipeline revenues.
Overall pipeline volumes were down 5% compared to the fourth
quarter of 2015.
- Revenues from our refined product
pipelines were $34.1 million, a decrease of $1.4 million, due
to lower volumes and inflation driven tariff rate decreases.
Shipments averaged 204.0 thousand barrels per day (“mbpd”) compared
to 209.9 mbpd for the fourth quarter of 2015 mainly due to lower
volumes from HFC's Navajo refinery.
- Revenues from our intermediate
pipelines were $6.2 million, a decrease of $1.2 million,
primarily due to lower volumes, inflation driven tariff rate
decreases, and a decrease of $0.3 million in previously deferred
revenue realized. Shipments averaged 134.5 mbpd compared to 139.8
mbpd for the fourth quarter of 2015 due to lower volumes from
pipelines servicing HFC's Navajo refinery.
- Revenues from our crude
pipelines were $17.2 million, a decrease of $0.4 million, on
shipments averaging 272.0 mbpd compared to 289.5 mbpd for the
fourth quarter of 2015. Revenues decreased mainly due to inflation
driven tariff decreases as we continued to recognize revenue on
minimum volume commitments. Volumes were lower due to lower
throughput at HFC's Navajo refinery.
- Revenues from terminal, tankage and
loading rack fees were $34.8 million, an increase of $1.1
million compared to the fourth quarter of 2015. The increase in
revenue is mainly due to the Tulsa West tanks acquired in the first
quarter of 2016. Refined products and crude terminalled in our
facilities increased to an average of 509.0 mbpd compared to 480.0
mbpd for the fourth quarter of 2015.
- Revenues from refinery processing
units were $20.2 million, an increase of $17.2 million on
throughputs averaging 67.7 mbpd compared to 26.9 mbpd for the
fourth quarter of 2015. This increase in revenue is due to the
Woods Cross refinery processing units acquired in the fourth
quarter of 2016 and the El Dorado refinery processing units
acquired during the fourth quarter of 2015.
Revenues for the three months ended December 31, 2016,
include the recognition of $2.7 million of prior shortfalls billed
to shippers in 2015 and 2016, as they did not meet their minimum
volume commitments within the contractual make-up period. As of
December 31, 2016, deferred revenue on our consolidated
balance sheet related to shortfalls billed was $5.6 million. Such
deferred revenue will be recognized in earnings either as (a)
payment for shipments in excess of guaranteed levels, if and to the
extent the pipeline system will have the necessary capacity for
shipments in excess of guaranteed levels, or (b) when shipping
rights expire unused over the contractual make-up period.
Year Ended December 31, 2016 Revenue Highlights
Revenues for the year ended December 31, 2016, were $402.0
million, a $43.2 million increase compared to the year ended
December 31, 2015. The revenue increase was primarily due to our
newly acquired Woods Cross processing units, the El Dorado
processing units acquired in the fourth quarter of 2015, higher
UNEV pipeline revenues, and revenues from the Tulsa crude tanks
acquired in the first quarter of 2016.
- Revenues from our refined product
pipelines were $135.3 million, an increase of $3.0 million,
primarily due to increased revenue from the UNEV pipeline of $4.0
million offset by inflation driven tariff rate decreases. Shipments
averaged 204.0 mbpd compared to 197.6 mbpd for the year ended
December 31, 2015, largely due to higher volumes on our UNEV
pipeline.
- Revenues from our intermediate
pipelines were $27.0 million, a decrease of $1.9 million, on
shipments averaging 137.4 mbpd compared to 142.5 mbpd for the year
ended December 31, 2015. The decrease in revenue is due to lower
volumes from pipelines servicing HFC's Navajo refinery and a $0.7
million decrease in previously deferred revenue realized.
- Revenues from our crude
pipelines were $70.3 million, an increase of $3.3 million, on
shipments averaging 277.2 mbpd compared to 291.5 mbpd for the year
ended December 31, 2015. Revenues increased due to an increase in
deferred revenue recognized and to a surcharge on our Beeson
expansion. Volumes were lower due to lower throughput at HFC's
Navajo refinery.
- Revenues from terminal, tankage and
loading rack fees were $136.4 million, an increase of $8.8
million compared to the year ended December 31, 2015. This increase
is due principally to increased revenues from the El Dorado tanks
and the newly acquired Tulsa crude tanks. Refined products and
crude terminalled in our facilities increased to an average of
485.8 mbpd compared to 469.7 mbpd for the year ended December 31,
2015, largely due to the inclusion of volumes from our Tulsa crude
tanks acquired in the first quarter of 2016 and our El Dorado crude
tanks acquired late in the first quarter of 2015 offset by the
transfer of the El Paso terminal to HFC in the first quarter of
2016.
- Revenues from refinery processing
units were $33.0 million, an increase of $30.1 million on
throughputs averaging 51.8 mbpd compared to 6.8 mbpd for 2015. This
increase in revenue is due to the Woods Cross refinery processing
units acquired in the fourth quarter of 2016 and an increase in
revenue from the El Dorado refinery units acquired late in
2015.
Revenues for the year ended December 31, 2016, include the
recognition of $10.0 million of prior shortfalls billed to shippers
in 2015 and 2016.
Operating Costs and Expenses Highlights
Operating costs and expenses were $58.0 million and $206.9
million for the three months and year ended December 31, 2016,
respectively, representing increases of $11.7 million and $25.5
million over the respective periods of 2015. The increase is mainly
due to operating costs for the Woods Cross and El Dorado refinery
processing units.
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=1131681.
An audio archive of this webcast will be available using the
above noted link through March 9, 2017.
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, through its subsidiaries and joint ventures, owns
and/or operates petroleum product and crude gathering pipelines,
tankage and terminals in Texas, New Mexico, Arizona, Washington,
Idaho, Oklahoma, Utah, Nevada, Wyoming and Kansas as well as
refinery processing units in Utah and Kansas.
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 45,000 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.
Additionally, HollyFrontier owns Petro-Canada Lubricants Inc. whose
Mississauga, Ontario facility produces 15,600 BPD of base oils and
other specialized lubricant products. A subsidiary of HollyFrontier
also owns a 37% 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. 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. Therefore, actual outcomes and results could
materially differ from what is expressed, implied or forecast in
these statements. Any differences could be caused by a number of
factors including, but 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
future acquired operations;
- 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 and years ended December
31, 2016 and 2015.
Three Months EndedDecember
31,
Change from
2016
2015 (5)
2015 (In thousands, except per unit data)
Revenues
Pipelines: Affiliates – refined product pipelines $ 19,301 $ 20,563
$ (1,262 ) Affiliates – intermediate pipelines 6,175 7,420 (1,245 )
Affiliates – crude pipelines 17,235 17,605
(370 ) 42,711 45,588 (2,877 ) Third parties – refined
product pipelines 14,819 14,991
(172 ) 57,530 60,579 (3,049 ) Terminals, tanks and loading racks:
Affiliates 30,808 29,401 1,407 Third parties 4,014
4,308 (294 ) 34,822 33,709 1,113 Affiliates –
refinery processing units 20,174 2,963
17,211 Total revenues 112,526 97,251 15,275
Operating costs and expenses: Operations (exclusive of
depreciation and amortization) 34,818 26,516 8,302 Depreciation and
amortization 19,245 16,886 2,359 General and administrative
3,914 2,897 1,017 57,977
46,299 11,678
Operating
income 54,549 50,952 3,597 Equity in earnings of equity
method investments 4,058 2,169 1,889 Interest expense, including
amortization (16,294 ) (10,107 ) (6,187 ) Interest income 108 142
(34 ) Gain (loss) on sale of assets and other income 574
80 494 (11,554 )
(7,716 ) (3,838 )
Income before income taxes 42,995
43,236 (241 ) State income tax (expense) benefit (76 )
(123 ) 47
Net income 42,919 43,113 (194
) Add net loss applicable to predecessor — 676 (676 ) Allocation of
net income attributable to noncontrolling interests (1,558 )
(3,269 ) 1,711
Net income attributable to
Holly Energy Partners 41,361 40,520 841 General partner
interest in net income, including incentive distributions(1)
(17,172 ) (11,502 ) 5,670
Limited partners’
interest in net income $ 24,189 $ 29,018 $ (4,829
)
Limited partners’ earnings per unit – basic and
diluted:(1) $ 0.40 $ 0.49 $ (0.09 )
Weighted
average limited partners’ units outstanding 62,781
58,657 4,124
EBITDA(2) $
76,868 $ 67,376 $ 9,492
Distributable cash
flow(3) $ 58,479 $ 53,551 $ 4,928
Volumes (bpd) Pipelines: Affiliates – refined product
pipelines 126,594 131,472 (4,878 ) Affiliates – intermediate
pipelines 134,509 139,847 (5,338 ) Affiliates – crude pipelines
271,962 289,513 (17,551 )
533,065 560,832 (27,767 ) Third parties – refined product pipelines
77,410 78,422 (1,012 ) 610,475
639,254 (28,779 ) Terminals and loading racks: Affiliates 440,569
397,473 43,096 Third parties 68,437 82,533
(14,096 ) 509,006 480,006 29,000 Affiliates –
refinery processing units 67,725 26,875
40,850
Total for pipelines and terminal assets
(bpd) 1,187,206 1,146,135
41,071
Years EndedDecember 31,
Change from 2016
2015 (5)
2015 (In thousands, except per unit data)
Revenues
Pipelines: Affiliates – refined product pipelines $ 83,102 $ 81,294
$ 1,808 Affiliates – intermediate pipelines 26,996 28,943 (1,947 )
Affiliates – crude pipelines 70,341 67,088
3,253 180,439 177,325 3,114 Third parties –
refined product pipelines 52,195 51,022
1,173 232,634 228,347 4,287 Terminals, tanks and
loading racks: Affiliates 119,633 111,933 7,700 Third parties
16,732 15,632 1,100
136,365 127,565 8,800 Affiliates – refinery processing units
33,044 2,963 30,081 Total
revenues 402,043 358,875 43,168
Operating costs and
expenses: Operations (exclusive of depreciation and
amortization) 123,986 105,556 18,430 Depreciation and amortization
70,428 63,306 7,122 General and administrative 12,532
12,556 (24 ) 206,946
181,418 25,528
Operating income 195,097
177,457 17,640 Equity in earnings of equity method
investments 14,213 4,803 9,410 Interest expense, including
amortization (52,552 ) (37,418 ) (15,134 ) Interest income 440 526
(86 ) Gain on sale of assets and other income 677
486 191 (37,222 ) (31,603
) (5,619 )
Income before income taxes 157,875 145,854
12,021 State income tax expense (285 ) (228 )
(57 )
Net income 157,590 145,626 11,964 Add net loss
applicable to predecessor 10,657 2,702 7,955 Allocation of net
income attributable to noncontrolling interests (10,006 )
(11,120 ) 1,114
Net income attributable to
Holly Energy Partners 158,241 137,208 21,033 General partner
interest in net income, including incentive distributions(1)
(57,173 ) (42,337 ) (14,836 )
Limited partners’
interest in net income $ 101,068 $ 94,871 $ 6,197
Limited partners’ earnings per unit – basic and
diluted:(1) $ 1.69 $ 1.60 $ 0.09
Weighted average limited partners’ units outstanding
59,872 58,657 1,215
EBITDA(2) $ 277,545 $ 237,180 $ 40,365
Distributable cash flow(3) $ 218,810 $ 197,046
$ 21,764
Volumes (bpd) Pipelines: Affiliates –
refined product pipelines 128,140 124,061 4,079 Affiliates –
intermediate pipelines 137,381 142,475 (5,094 ) Affiliates – crude
pipelines 277,241 291,491
(14,250 ) 542,762 558,027 (15,265 ) Third parties – refined product
pipelines 75,909 73,555 2,354
618,671 631,582 (12,911 ) Terminals and loading racks:
Affiliates 413,487 391,292 22,195 Third parties 72,342
78,403 (6,061 ) 485,829 469,695 16,134
Affiliates – refinery processing units 51,778
6,774 45,004
Total for pipelines and
terminal assets (bpd) 1,156,278 1,108,051
48,227 (1) Net income attributable to
Holly Energy Partners is allocated between limited partners and the
general partner interest in accordance with the provisions of the
partnership agreement. HEP net income allocated to the general
partner includes incentive distributions that are declared
subsequent to quarter end. General partner incentive distributions
were $15.6 million and $10.9 million for the three months ended
December 31, 2016 and 2015, respectively, and $54.0 million and
$40.4 million for the years ended December 31, 2016 and 2015,
respectively. (2) Earnings before interest, taxes,
depreciation and amortization (“EBITDA”) is calculated as net
income attributable to Holly Energy Partners plus (i) interest
expense and loss on early extinguishment of debt, net of interest
income, (ii) state income tax and (iii) depreciation and
amortization. EBITDA is not a calculation based upon generally
accepted accounting principles (“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 is also 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 EndedDecember
31,
Years EndedDecember 31,
2016
2015 (5)
2016
2015 (5)
(In thousands)
Net income attributable to Holly Energy
Partners $ 41,361 $ 40,520 $ 158,241 $ 137,208 Add (subtract):
Interest expense 15,399 9,604 49,306 35,490 Interest income (108 )
(142 ) (440 ) (526 ) Amortization of discount and deferred debt
charges 895 503 3,246 1,928 State income tax 76 123 285 228
Depreciation and amortization 19,245 16,886 70,428 63,306
Predecessor depreciation and amortization —
(118 ) (3,521 ) (454 )
EBITDA $ 76,868
$ 67,376 $ 277,545 $ 237,180 (3)
Distributable cash flow is not a calculation based upon GAAP.
However, the amounts included in the calculation are derived from
amounts presented in our consolidated financial statements, with
the general exception of 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
is also 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 EndedDecember
31,
Years EndedDecember 31,
2016
2015 (5)
2016
2015 (5)
(In thousands)
Net income attributable to Holly Energy
Partners $ 41,361 $ 40,520 $ 158,241 $ 137,208 Add (subtract):
Depreciation and amortization 19,245 16,886 70,428 63,306
Amortization of discount and deferred debt charges 895 503 3,246
1,928 Loss on early extinguishment of debt — — — — Increase
(decrease) in deferred revenue attributable to shortfall billings
(1,113 ) (190 ) (1,292 ) (1,233 ) Maintenance capital expenditures*
(1,861 ) (3,286 ) (9,658 ) (8,926 ) Increase (decrease) in
environmental liability 135 (1,837 ) (584 ) 1,107 Increase
(decrease) in reimbursable deferred revenue (827 ) (495 ) (2,733 )
176 Other non-cash adjustments 644 1,568 4,683 3,934 Predecessor
depreciation and amortization $ — $ (118 ) $ (3,521 ) $ (454
)
Distributable cash flow $ 58,479 $ 53,551 $
218,810 $ 197,046 * 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, safety and to address environmental regulations.
December 31, December 31,
2016
2015 (5)
(In thousands)
Balance Sheet Data Cash and cash equivalents
$ 3,657 $ 15,013 Working capital (deficit) $ (7,782 ) $ 12,218
Total assets $ 1,884,237 $ 1,777,646 Long-term debt $ 1,243,912 $
1,008,752 Partners' equity(4) $ 378,234 $ 531,793 (4) As a
master limited partnership, we distribute our available cash, which
historically has exceeded our net income attributable to HEP
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 HEP. Additionally, if the
assets contributed and acquired from HFC while we were a
consolidated variable interest entity of HFC had been acquired from
third parties, our acquisition cost in excess of HFC’s basis in the
transferred assets would have been recorded in our financial
statements as increases to our properties and equipment and
intangible assets at the time of acquisition instead of decreases
to partners’ equity. (5) We have retrospectively adjusted
our historical financial results for all periods to include the
atmospheric distillation tower, fluid catalytic cracking unit, and
polymerization unit located at HFC’s Woods Cross Refinery and crude
oil tanks located at HFC’s Tulsa refinery for the periods we were
under common control of HFC. The 2015 Balance Sheet presentation
was revised to reflect increases of $243.2 million in properties
and equipment, net, $0.1 million in other long-term liabilities and
$243.1 million in general partner interest. The 2015 Income
Statement presentation was revised to include increases of $2.2
million in operating expenses and $0.5 million in depreciation and
amortization.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170221005503/en/
Holly Energy Partners, L.P.Richard L. Voliva III,
214-954-6511Vice President andChief Financial OfficerorJulia
Heidenreich, 214-954-6511Vice President, Investor RelationsorCraig
Biery, 214-954-6511Investor Relations
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