Press Releases

<< Back

October 30, 2019
Holly Energy Partners, L.P. Reports Third Quarter Results
  • Reported net income attributable to HEP of $82.3 million or $0.78 per unit
  • Announced quarterly distribution of $0.6725 per unit, a 1.1% increase over third quarter 2018
  • Reported EBITDA of $123.1 million, Adjusted EBITDA of $90.3 million and distributable cash flow of $68.8 million providing a 1.01x distribution coverage ratio

DALLAS--(BUSINESS WIRE)--Oct. 30, 2019-- Holly Energy Partners, L.P. (“HEP” or the “Partnership”) (NYSE:HEP) today reported financial results for the third quarter of 2019. Net income attributable to HEP for the third quarter was $82.3 million ($0.78 per basic and diluted limited partner unit), compared to $45.0 million ($0.43 per basic and diluted limited partner unit) for the third quarter of 2018.

Distributable cash flow was $68.8 million for the quarter, an increase of $2.2 million, or 3.4% compared to the third quarter of 2018. HEP declared a quarterly cash distribution of $0.6725 on 10/17/2019. This distribution remains the same as the $0.6725 paid in the second quarter of 2019.

During the third quarter of 2019, HEP and HollyFrontier Corporation ("HFC" or "HollyFrontier") renewed the original throughput agreement on specific HEP assets. Portions of the new throughput agreement meet the definition of sales-type leases, which resulted in an accounting gain of $35.2 million upon the initial recognition of the sales-type leases during the third quarter. Excluding this gain, net income attributable to HEP for the quarter was $47.2 million ($0.45 per basic and diluted limited partner unit), an increase of $2.2 million compared to the same period of 2018. The increase in net income attributable to HEP was mainly due to strong third-party volumes on our UNEV pipeline, higher spot revenues on our crude oil pipeline systems in Wyoming and Utah and stronger terminal and tank volumes at El Dorado and Tulsa.

Commenting on our 2019 third quarter results, George Damiris, Chief Executive Officer, stated, “HEP had a solid third quarter led by the continued strength in crude transportation across our system. The recently announced Cushing Connect joint venture highlights both our opportunities to grow HEP as well as our strong parent, HollyFrontier.

“Looking forward, HEP expects to hold quarterly cash distribution constant at $0.6725, while maintaining a coverage of 1.0x for the full year 2019 and through 2020.”

Third Quarter 2019 Revenue Highlights

Revenues for the third quarter were $135.9 million, an increase of $10.1 million compared to the third quarter of 2018. The increase was mainly attributable to higher volumes on our UNEV pipeline and our crude pipeline systems in Wyoming and Utah, which contributed to an increase in overall pipeline volumes of 8%. Along with higher volumes through our refinery tankage and terminals, contractual tariff escalators across our assets also led to an increase in revenues year over year.

  • Revenues from our refined product pipelines were $32.7 million, an increase of $0.7 million compared to the third quarter of 2018, due to higher throughput and contractual tariff escalators. Shipments averaged 197.1 thousand barrels per day ("mbpd") compared to 187.1 mbpd for the third quarter of 2018. The volume increase was mainly due to higher volumes on our UNEV pipeline and pipelines servicing HFC's Navajo refinery.
  • Revenues from our intermediate pipelines were $7.5 million, an increase of $0.7 million compared to the third quarter of 2018, due to higher throughput and contractual tariff escalators. Shipments averaged 153.5 mbpd for the third quarter of 2019 compared to 148.3 mbpd for the third quarter of 2018. The increase in volumes was mainly due to higher throughputs on our intermediate pipelines servicing HollyFrontier'sTulsa refinery.
  • Revenues from our crude pipelines were $33.0 million, an increase of $2.0 million compared to the third quarter of 2018, and shipments averaged 488.1 mbpd compared to 442.1 mbpd for the third quarter of 2018. The increases were mainly attributable to increased volumes on our crude pipeline systems in New Mexico and Texas and on our crude pipeline systems in Wyoming and Utah, as well as contractual tariff escalators.
  • Revenues from terminal, tankage and loading rack fees were $42.5 million, an increase of $6.0 million compared to the third quarter of 2018. Refined products and crude oil terminalled in the facilities averaged 541.6 mbpd compared to 475.1 mbpd for the third quarter of 2018. The revenue and volume increases were mainly due to higher volumes at HFC's Tulsa and El Dorado refineries, our new Orla diesel rack and our Catoosa, Las Vegas and Spokane terminals.
  • Revenues from refinery processing units were $20.3 million, an increase of $0.7 million compared to the third quarter of 2018, and throughputs averaged 75.9 mbpd compared to 65.6 mbpd for the third quarter of 2018. The increase in revenue was mainly due to contractual rate increases.

Nine Months Ended September 30, 2019 Revenue Highlights

Revenues for the nine months ended September 30, 2019, were $401.1 million, an increase of $27.7 million compared to the nine months ended September 30, 2018. The increase was mainly attributable to higher crude oil pipeline volumes around the Permian Basin and our crude pipeline systems in Wyoming and Utah, higher revenues on our refinery processing units and contractual tariff escalators.

  • Revenues from our refined product pipelines were $101.5 million, an increase of $3.6 million compared to the nine months ended September 30, 2018. Shipments averaged 202.2 mbpd compared to 196.5 mbpd for the nine months ended September 30, 2018. The volume and revenue increases were mainly due to higher Delek volumes, higher volumes on pipelines servicing HFC's Woods Cross refinery, which had lower throughput in 2018 due to operational issues, and contractual tariff escalators.
  • Revenues from our intermediate pipelines were $22.1 million, a decrease of $0.4 million compared to the nine months ended September 30, 2018. Shipments averaged 142.0 mbpd compared to 142.4 mbpd for the nine months ended September 30, 2018. The decrease in revenue was primarily attributable to a decrease in deferred revenue realized.
  • Revenues from our crude pipelines were $96.9 million, an increase of $9.9 million compared to the nine months ended September 30, 2018. Shipments averaged 508.6 mbpd compared to 455.6 mbpd for the nine months ended September 30, 2018. The increases were mainly attributable to increased volumes on our crude pipeline systems in New Mexico and Texas and on our crude pipeline systems in Wyoming and Utah as well as contractual tariff escalators.
  • Revenues from terminal, tankage and loading rack fees were $119.1 million, an increase of $10.1 million compared to the nine months ended September 30, 2018. Refined products and crude oil terminalled in the facilities averaged 492.1 mbpd compared to 477.8 mbpd for the nine months ended September 30, 2018. The revenue and volume increases were mainly due to volumes at our new Orla diesel rack and higher volumes at the Spokane and Catoosa terminals, partially offset by lower volumes at HFC's Tulsa refinery as a result of the planned turnaround in the first quarter and flooding in the second quarter.
  • Revenues from refinery processing units were $61.5 million, an increase of $4.5 million compared to the nine months ended September 30, 2018. Throughputs averaged 73.2 mbpd compared to 67.9 mbpd for the nine months ended September 30, 2018. The increase in revenue was mainly due to an adjustment in revenue recognition and contractual rate increases.

Operating Costs and Expenses Highlights

Operating costs and expenses were $71.8 million and $202.6 million for the three and nine months ended September 30, 2019, respectively, representing increases of $8.9 million and $13.4 million from the three and nine months ended September 30, 2018, respectively. These increases were mainly due to higher employee compensation expenses, maintenance costs and property taxes.

Interest expense was $18.8 million and $57.1 million for the three and nine months ended September 30, 2019, representing increases of $0.8 million and $3.8 million over the same periods of 2018. These increases were mainly due to higher average balances outstanding under our senior secured revolving credit facility and market interest rate increases under the facility.

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.on24.com/wcc/r/2080138/CAE357C8554E8B7B173607A94575B76B

An audio archive of this webcast will be available using the above noted link through November 13, 2019.

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 pipelines, tankage and terminals in Texas, New Mexico, 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 owns and operates refineries located in Kansas, Oklahoma, New Mexico, Wyoming and Utah and markets its refined products principally in the Southwest U.S., the Rocky Mountains extending into the Pacific Northwest and in other neighboring Plains states. In addition, HollyFrontier produces base oils and other specialized lubricants in the U.S., Canada and the Netherlands, and exports products to more than 80 countries. HollyFrontier also owns a 57% limited partner interest and a non-economic general partner interest in Holly Energy Partners, L.P., a master limited partnership that provides petroleum product and crude oil transportation, terminalling, storage and throughput services to the petroleum industry, including HollyFrontier.

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 and refinery processing units;
  • the economic viability of HollyFrontier Corporation, Delek US Holdings, 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 pipelines, terminal facilities and refinery processing units;
  • 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 or cyber attacks and the consequences of any such attacks;
  • general economic conditions;
  • the impact of recent or proposed changes in tax laws and regulations that affect master limited partnerships; and
  • other financial, operational 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, 2019 and 2018.

 

Three Months Ended September 30,

 

Change from

 

2019

 

2018

 

2018

 

(In thousands, except per unit data)

Revenues

 

 

 

 

 

Pipelines:

 

 

 

 

 

Affiliates – refined product pipelines

$

19,401

 

 

$

20,803

 

 

$

(1,402

)

Affiliates – intermediate pipelines

7,490

 

 

6,772

 

 

718

 

Affiliates – crude pipelines

21,675

 

 

20,461

 

 

1,214

 

 

48,566

 

 

48,036

 

 

530

 

Third parties – refined product pipelines

13,270

 

 

11,194

 

 

2,076

 

Third parties – crude pipelines

11,327

 

 

10,505

 

 

822

 

 

73,163

 

 

69,735

 

 

3,428

 

Terminals, tanks and loading racks:

 

 

 

 

 

Affiliates

37,183

 

 

32,572

 

 

4,611

 

Third parties

5,271

 

 

3,897

 

 

1,374

 

 

42,454

 

 

36,469

 

 

5,985

 

 

 

 

 

 

 

Affiliates - refinery processing units

20,278

 

 

19,580

 

 

698

 

 

 

 

 

 

 

Total revenues

135,895

 

 

125,784

 

 

10,111

 

Operating costs and expenses

 

 

 

 

 

Operations

44,924

 

 

35,996

 

 

8,928

 

Depreciation and amortization

24,121

 

 

24,367

 

 

(246

)

General and administrative

2,714

 

 

2,498

 

 

216

 

 

71,759

 

 

62,861

 

 

8,898

 

Operating income

64,136

 

 

62,923

 

 

1,213

 

 

 

 

 

 

 

Equity in earnings of equity method investments

1,334

 

 

1,114

 

 

220

 

Interest expense, including amortization

(18,807

)

 

(18,042

)

 

(765

)

Interest income

2,243

 

 

540

 

 

1,703

 

Gain on sales-type leases

35,166

 

 

 

 

35,166

 

Gain on sale of assets and other

142

 

 

38

 

 

104

 

 

20,078

 

 

(16,350

)

 

36,428

 

Income before income taxes

84,214

 

 

46,573

 

 

37,641

 

State income tax benefit (expense)

(30

)

 

(39

)

 

9

 

Net income

84,184

 

 

46,534

 

 

37,650

 

Allocation of net income attributable to noncontrolling interests

(1,839

)

 

(1,531

)

 

(308

)

Net income attributable to Holly Energy Partners

$

82,345

 

 

$

45,003

 

 

$

37,342

 

Limited partners’ earnings per unit – basic and diluted

$

0.78

 

 

$

0.43

 

 

$

0.35

 

Weighted average limited partners’ units outstanding

105,440

 

 

105,440

 

 

 

EBITDA(1)

$

123,060

 

 

$

86,911

 

 

$

36,149

 

Adjusted EBITDA(1)

$

90,269

 

 

$

86,911

 

 

$

3,358

 

Distributable cash flow(2)

$

68,838

 

 

$

66,598

 

 

$

2,240

 

 

 

 

 

 

 

 

 

 

 

 

 

Volumes (bpd)

 

 

 

 

 

Pipelines:

 

 

 

 

 

Affiliates – refined product pipelines

129,681

 

 

120,024

 

 

9,657

 

Affiliates – intermediate pipelines

153,547

 

 

148,347

 

 

5,200

 

Affiliates – crude pipelines

358,867

 

 

322,590

 

 

36,277

 

 

642,095

 

 

590,961

 

 

51,134

 

Third parties – refined product pipelines

67,440

 

 

67,112

 

 

328

 

Third parties – crude pipelines

129,222

 

 

119,503

 

 

9,719

 

 

838,757

 

 

777,576

 

 

61,181

 

Terminals and loading racks:

 

 

 

 

 

Affiliates

482,291

 

 

417,079

 

 

65,212

 

Third parties

59,307

 

 

57,990

 

 

1,317

 

 

541,598

 

 

475,069

 

 

66,529

 

 

 

 

 

 

 

Affiliates – refinery processing units

75,857

 

 

65,640

 

 

10,217

 

 

 

 

 

 

 

Total for pipelines and terminal assets (bpd)

1,456,212

 

 

1,318,285

 

 

137,927

 

 

Nine Months Ended September 30,

 

Change from

 

2019

 

2018

 

2018

 

(In thousands, except per unit data)

Revenues

 

 

 

 

 

Pipelines:

 

 

 

 

 

Affiliates – refined product pipelines

$

60,892

 

 

$

60,841

 

 

$

51

 

Affiliates – intermediate pipelines

22,068

 

 

22,496

 

 

(428

)

Affiliates – crude pipelines

63,447

 

 

58,737

 

 

4,710

 

 

146,407

 

 

142,074

 

 

4,333

 

Third parties – refined product pipelines

40,652

 

 

37,124

 

 

3,528

 

Third parties – crude pipelines

33,467

 

 

28,245

 

 

5,222

 

 

220,526

 

 

207,443

 

 

13,083

 

Terminals, tanks and loading racks:

 

 

 

 

 

Affiliates

103,852

 

 

96,606

 

 

7,246

 

Third parties

15,269

 

 

12,430

 

 

2,839

 

 

119,121

 

 

109,036

 

 

10,085

 

 

 

 

 

 

 

Affiliates - refinery processing units

61,496

 

 

56,949

 

 

4,547

 

 

 

 

 

 

 

Total revenues

401,143

 

 

373,428

 

 

27,715

 

Operating costs and expenses

 

 

 

 

 

Operations

123,045

 

 

106,731

 

 

16,314

 

Depreciation and amortization

72,192

 

 

74,117

 

 

(1,925

)

General and administrative

7,322

 

 

8,293

 

 

(971

)

 

202,559

 

 

189,141

 

 

13,418

 

Operating income

198,584

 

 

184,287

 

 

14,297

 

 

 

 

 

 

 

Equity in earnings of equity method investments

5,217

 

 

4,127

 

 

1,090

 

Interest expense, including amortization

(57,059

)

 

(53,249

)

 

(3,810

)

Interest income

3,322

 

 

1,581

 

 

1,741

 

Gain on sales-type leases

35,166

 

 

 

 

35,166

 

Gain (loss) on sale of assets and other

(57

)

 

71

 

 

(128

)

 

(13,411

)

 

(47,470

)

 

34,059

 

Income before income taxes

185,173

 

 

136,817

 

 

48,356

 

State income tax expense

(36

)

 

(149

)

 

113

 

Net income

185,137

 

 

136,668

 

 

48,469

 

Allocation of net income attributable to noncontrolling interests

(5,920

)

 

(5,354

)

 

(566

)

Net income attributable to Holly Energy Partners

$

179,217

 

 

$

131,314

 

 

$

47,903

 

Limited partners’ earnings per unit—basic and diluted

$

1.70

 

 

$

1.25

 

 

$

0.45

 

Weighted average limited partners’ units outstanding

105,440

 

 

104,908

 

 

532

 

EBITDA(1)

$

305,182

 

 

$

257,248

 

 

$

47,934

 

Adjusted EBITDA(1)

$

272,391

 

 

$

257,248

 

 

$

15,143

 

Distributable cash flow(2)

$

206,923

 

 

$

200,878

 

 

$

6,045

 

 

 

 

 

 

 

Volumes (bpd)

 

 

 

 

 

Pipelines:

 

 

 

 

 

Affiliates – refined product pipelines

130,426

 

 

125,642

 

 

4,784

 

Affiliates – intermediate pipelines

141,991

 

 

142,371

 

 

(380

)

Affiliates – crude pipelines

376,518

 

 

336,224

 

 

40,294

 

 

648,935

 

 

604,237

 

 

44,698

 

Third parties – refined product pipelines

71,773

 

 

70,830

 

 

943

 

Third parties – crude pipelines

132,101

 

 

119,344

 

 

12,757

 

 

852,809

 

 

794,411

 

 

58,398

 

Terminals and loading racks:

 

 

 

 

 

Affiliates

429,660

 

 

418,009

 

 

11,651

 

Third parties

62,437

 

 

59,776

 

 

2,661

 

 

492,097

 

 

477,785

 

 

14,312

 

 

 

 

 

 

 

Affiliates – refinery processing units

73,178

 

 

67,873

 

 

5,305

 

 

 

 

 

 

 

Total for pipelines and terminal assets (bpd)

1,418,084

 

 

1,340,069

 

 

78,015

 

(1)

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. Adjusted EBITDA is calculated as EBITDA minus gain on sales-type leases plus pipeline tariffs not included in revenues due to impacts from lease accounting for certain pipeline tariffs. Portions of our minimum guaranteed pipeline tariffs for assets subject to sales-type lease accounting are recorded as interest income with the remaining amounts recorded as a reduction in net investment in leases. These pipeline tariffs were previously recorded as revenues prior to the adoption of ASU No. 2016-02, "Leases". EBITDA and Adjusted EBITDA are not calculations based upon generally accepted accounting principles ("GAAP"). However, the amounts included in the EBITDA and Adjusted EBITDA calculations are derived from amounts included in our consolidated financial statements. EBITDA and Adjusted EBITDA should not be considered as alternatives to net income attributable to Holly Energy Partners or operating income, as indications of our operating performance or as alternatives to operating cash flow as a measure of liquidity. EBITDA and Adjusted EBITDA are not necessarily comparable to similarly titled measures of other companies. EBITDA and Adjusted EBITDA are presented here because they are widely used financial indicators used by investors and analysts to measure performance. EBITDA and Adjusted EBITDA are 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 and Adjusted EBITDA.

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30, 2019

 

 

2019

 

2018

 

2019

 

2018

 

 

(In thousands)

Net income attributable to Holly Energy Partners

 

$

82,345

 

 

$

45,003

 

 

$

179,217

 

 

$

131,314

 

Add (subtract):

 

 

 

 

 

 

 

 

Interest expense

 

18,807

 

 

18,042

 

 

57,059

 

 

53,249

 

Interest Income

 

(2,243

)

 

(540

)

 

(3,322

)

 

(1,581

)

State income tax expense

 

30

 

 

39

 

 

36

 

 

149

 

Depreciation and amortization

 

24,121

 

 

24,367

 

 

72,192

 

 

74,117

 

EBITDA

 

123,060

 

 

86,911

 

 

305,182

 

 

257,248

 

Gain on sales-type leases

 

(35,166

)

 

 

 

(35,166

)

 

 

Pipeline tariffs not included in revenues

 

2,375

 

 

 

 

2,375

 

 

 

Adjusted EBITDA

 

$

90,269

 

 

$

86,911

 

 

$

272,391

 

 

$

257,248

 

(2)

 

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 Ended
September 30,

 

Nine Months Ended
September 30, 2019

 

 

2019

 

2018

 

2019

 

2018

 

 

(In thousands)

Net income attributable to Holly Energy Partners

 

$

82,345

 

 

$

45,003

 

 

$

179,217

 

 

$

131,314

 

Add (subtract):

 

 

 

 

 

 

 

 

Depreciation and amortization

 

24,121

 

 

24,367

 

 

72,192

 

 

74,117

 

Amortization of discount and deferred debt charges

 

771

 

 

762

 

 

2,307

 

 

2,278

 

Revenue recognized (greater) less than customer billings

 

504

 

 

1,294

 

 

(2,827

)

 

2,994

 

Maintenance capital expenditures (3)

 

(2,118

)

 

(3,198

)

 

(3,477

)

 

(4,504

)

Increase (decrease) in environmental liability

 

91

 

 

(150

)

 

(464

)

 

(368

)

Decrease in reimbursable deferred revenue

 

(1,964

)

 

(1,517

)

 

(5,604

)

 

(3,937

)

Gain on sales-type leases

 

(35,166

)

 

 

 

(35,166

)

 

 

Other

 

254

 

 

37

 

 

745

 

 

(1,016

)

Distributable cash flow

 

$

68,838

 

 

$

66,598

 

 

$

206,923

 

 

$

200,878

 

(3)

 

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.

Set forth below is certain balance sheet data.

 

 

September 30,

 

December 31,

 

 

2019

 

2018

 

 

(In thousands)

Balance Sheet Data

 

 

 

 

Cash and cash equivalents

 

$

7,469

 

 

$

3,045

 

Working capital

 

$

10,762

 

 

$

8,577

 

Total assets

 

$

2,154,275

 

 

$

2,102,540

 

Long-term debt

 

$

1,431,869

 

 

$

1,418,900

 

Partners' equity (4)

 

$

404,584

 

 

$

427,435

 

(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 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.

 

Source: Holly Energy Partners, L.P.

Richard L. Voliva III, Executive Vice President and Chief Financial Officer
Craig Biery, Director, Investor Relations
Holly Energy Partners, L.P.
214-954-6511