DALLAS--(BUSINESS WIRE)--
Holly Energy Partners, L.P. ("HEP" or the "Partnership") (NYSE:HEP)
today reported financial results for the first quarter of 2014. For the
quarter, distributable cash flow was $41.8 million, up $9.4 million, or
29% compared to the first quarter of 2013. HEP announced its 38thconsecutive
distribution increase on April 24, 2014, raising the quarterly
distribution from $0.50 to $0.5075 per unit, representing a 6% increase
over the distribution for the first quarter of 2013.
Net income attributable to Holly Energy Partners for the first quarter
was $24.1 million ($0.27 per basic and diluted limited partner unit)
compared to $18.4 million ($0.21 per basic and diluted limited partner
unit) for the first quarter of 2013. The increase in earnings is
primarily due to higher pipeline and terminal volumes as pipeline
shipments returned to normal levels, following the reduced shipments we
experienced during the fourth quarter of 2013 due to operational
constraints experienced at HollyFrontier Corporation's ("HFC") Navajo
refinery. Shipments were also reduced in the first quarter of 2013 as a
result of maintenance turnarounds at both HFC's Navajo refinery and
Alon's Big Spring refinery. Additionally, a charge of $7.7 million
related to the redemption of our previously outstanding $150 million
8.25% Senior Notes significantly impacted earnings in the first quarter
of 2014.
Commenting on the first quarter of 2014, Mike Jennings, Chief Executive
Officer, stated, "We are pleased with our financial results for the
first quarter of 2014. Strong volumes across our asset base, including
increased volumes on our New Mexico crude gathering system, drove higher
than anticipated revenue in the quarter. As we previously announced,
certain unexpected operational constraints at our largest shipper's New
Mexico refinery significantly reduced shipments on our pipelines into
and out of that facility during the fourth quarter of last year; these
shipments returned to normal levels in January.
"We expect to complete the previously announced expansion of our New
Mexico crude gathering system by August, and we are already seeing
increased volumes from new segments now in operation. We are also
pursuing potential opportunities to build new crude gathering systems in
the Rockies, leveraging our capabilities and HFC's refining footprint if
possible.
"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."
First Quarter 2014 Revenue Highlights
Revenues for the quarter were $87.0 million, a $12.7 million increase
compared to the first quarter of 2013 due to the effect of higher
volumes, an increase in deferred revenue recognized and annual tariff
increases. Overall pipeline volumes were up 22% compared to the three
months ended March 31, 2013.
-
Revenues from our refined product pipelines were $35.8 million,
an increase of $8.7 million compared to the first quarter of 2013
primarily due to increased volumes. Additionally benefiting refined
product revenues were the effect of annual tariff increases and an
increase of $2.0 million in deferred revenue recognized. Shipments
averaged 189.5 thousand barrels per day ("mbpd") compared to 147.1
mbpd for the first quarter of 2013.
-
Revenues from our intermediate pipelines were $7.9 million, an
increase of $1.7 million, on shipments averaging 138.6 mbpd compared
to 120.8 mbpd for the first quarter of 2013. Revenues increased due to
the increased volumes and a $0.7 million increase in deferred revenue
recognized.
-
Revenues from our crude pipelines were $12.6 million, an
increase of $1.0 million, on shipments averaging 177.0 mbpd compared
to 145.9 mbpd for the first quarter of 2013.
-
Revenues from terminal, tankage and loading rack fees were
$30.7 million, an increase of $1.3 million compared to the first
quarter of 2013. Refined products terminalled in our facilities
averaged 340.3 mbpd compared to 315.7 mbpd for the first quarter of
2013.
Revenues for the three months ended March 31, 2014 include the
recognition of $9.3 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 March 31, 2014, shortfall deferred
revenue in our consolidated balance sheet was $4.4 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.
Operating Costs and Expenses Highlights
Operating costs and expenses were $41.6 million for the three months
ended March 31, 2014, representing a decrease of $1.7 million over the
same period of 2013. This decrease is due to the timing of maintenance
services offset by higher depreciation expense.
Interest expense was $10.5 million for the three months ended March 31,
2014, a decrease of $2.0 million over the first quarter of 2013. The
decrease is due principally to amortization of costs related to a
terminated cash flow hedge that became fully amortized in February 2013
as well as decreased interest expense incurred on our 8.25% Senior Notes
due to early retirement in March 2014. Also, we recognized a loss of
$7.7 million on the early extinguishment of $150 million of outstanding
principal under our 8.25% Senior Notes during the quarter.
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=1031837.
An audio archive of this webcast will be available using the above noted
link through May 15, 2014.
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, L.L.C., the owner of a Holly Energy operated
refined products pipeline running from Salt Lake City, Utah to Las
Vegas, Nevada, and related product terminals and a 25% interest in SLC
Pipeline, L.L.C., 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 also 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," "should," "would," "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. All statements concerning our expectations for future results
of operations are based on forecasts for our existing operations and do
not include the potential impact of any future acquisitions. Our
forward-looking 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 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 ended March 31, 2014.
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
Change from
|
|
|
|
|
2014
|
|
2013
|
|
2013
|
|
|
|
|
(In thousands, except per unit data)
|
|
Revenues
|
|
|
|
|
|
|
|
|
Pipelines:
|
|
|
|
|
|
|
|
|
Affiliates - refined product pipelines
|
|
|
$
|
24,173
|
|
|
$
|
16,770
|
|
|
$
|
7,403
|
|
|
Affiliates - intermediate pipelines
|
|
|
|
7,911
|
|
|
|
6,172
|
|
|
|
1,739
|
|
|
Affiliates - crude pipelines
|
|
|
|
12,618
|
|
|
|
11,579
|
|
|
|
1,039
|
|
|
|
|
|
|
44,702
|
|
|
|
34,521
|
|
|
|
10,181
|
|
|
Third parties - refined product pipelines
|
|
|
|
11,618
|
|
|
|
10,343
|
|
|
|
1,275
|
|
|
|
|
|
|
56,320
|
|
|
|
44,864
|
|
|
|
11,456
|
|
|
Terminals, tanks and loading racks:
|
|
|
|
|
|
|
|
|
Affiliates
|
|
|
|
27,130
|
|
|
|
26,991
|
|
|
|
139
|
|
|
Third parties
|
|
|
|
3,554
|
|
|
|
2,443
|
|
|
|
1,111
|
|
|
|
|
|
|
30,684
|
|
|
|
29,434
|
|
|
|
1,250
|
|
|
Total revenues
|
|
|
|
87,004
|
|
|
|
74,298
|
|
|
|
12,706
|
|
|
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
Operations
|
|
|
|
22,812
|
|
|
|
25,865
|
|
|
|
(3,053
|
)
|
|
Depreciation and amortization
|
|
|
|
15,588
|
|
|
|
14,154
|
|
|
|
1,434
|
|
|
General and administrative
|
|
|
|
3,151
|
|
|
|
3,232
|
|
|
|
(81
|
)
|
|
|
|
|
|
41,551
|
|
|
|
43,251
|
|
|
|
(1,700
|
)
|
|
Operating income
|
|
|
|
45,453
|
|
|
|
31,047
|
|
|
|
14,406
|
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings of SLC Pipeline
|
|
|
|
522
|
|
|
|
657
|
|
|
|
(135
|
)
|
|
Interest expense, including amortization
|
|
|
|
(10,454
|
)
|
|
|
(12,484
|
)
|
|
|
2,030
|
|
|
Interest income
|
|
|
|
3
|
|
|
|
103
|
|
|
|
(100
|
)
|
|
Loss on early extinguishment of debt
|
|
|
|
(7,677
|
)
|
|
|
—
|
|
|
|
(7,677
|
)
|
|
Gain on sale of assets
|
|
|
|
—
|
|
|
|
2,022
|
|
|
|
(2,022
|
)
|
|
Other
|
|
|
|
8
|
|
|
|
—
|
|
|
|
8
|
|
|
|
|
|
|
(17,598
|
)
|
|
|
(9,702
|
)
|
|
|
(7,896
|
)
|
|
Income before income taxes
|
|
|
|
27,855
|
|
|
|
21,345
|
|
|
|
6,510
|
|
|
State income tax expense
|
|
|
|
(75
|
)
|
|
|
(56
|
)
|
|
|
(19
|
)
|
|
Net income
|
|
|
|
27,780
|
|
|
|
21,289
|
|
|
|
6,491
|
|
|
Allocation of net income attributable to noncontrolling interests
|
|
|
|
(3,637
|
)
|
|
|
(2,890
|
)
|
|
|
(747
|
)
|
|
Net income attributable to Holly Energy Partners
|
|
|
|
24,143
|
|
|
|
18,399
|
|
|
|
5,744
|
|
|
General partner interest in net income, including incentive
distributions(1) |
|
|
|
(8,001
|
)
|
|
|
(6,231
|
)
|
|
|
(1,770
|
)
|
|
Limited partners' interest in net income
|
|
|
$
|
16,142
|
|
|
$
|
12,168
|
|
|
$
|
3,974
|
|
|
Limited partners' earnings per unit - basic and diluted:(1) |
|
|
$
|
0.27
|
|
|
$
|
0.21
|
|
|
$
|
0.06
|
|
|
Weighted average limited partners' units outstanding
|
|
|
|
58,657
|
|
|
|
56,990
|
|
|
|
1,667
|
|
|
EBITDA(2) |
|
|
$
|
57,934
|
|
|
$
|
44,990
|
|
|
$
|
12,944
|
|
|
Distributable cash flow(3) |
|
|
$
|
41,808
|
|
|
$
|
32,385
|
|
|
$
|
9,423
|
|
|
|
|
|
|
|
|
|
|
|
Volumes (bpd)
|
|
|
|
|
|
|
|
|
Pipelines:
|
|
|
|
|
|
|
|
|
Affiliates - refined product pipelines
|
|
|
|
123,171
|
|
|
|
94,148
|
|
|
|
29,023
|
|
|
Affiliates - intermediate pipelines
|
|
|
|
138,608
|
|
|
|
120,777
|
|
|
|
17,831
|
|
|
Affiliates - crude pipelines
|
|
|
|
176,953
|
|
|
|
145,926
|
|
|
|
31,027
|
|
|
|
|
|
|
438,732
|
|
|
|
360,851
|
|
|
|
77,881
|
|
|
Third parties - refined product pipelines
|
|
|
|
66,294
|
|
|
|
52,986
|
|
|
|
13,308
|
|
|
|
|
|
|
505,026
|
|
|
|
413,837
|
|
|
|
91,189
|
|
|
Terminals and loading racks:
|
|
|
|
|
|
|
|
|
Affiliates
|
|
|
|
262,635
|
|
|
|
260,242
|
|
|
|
2,393
|
|
|
Third parties
|
|
|
|
77,704
|
|
|
|
55,459
|
|
|
|
22,245
|
|
|
|
|
|
|
340,339
|
|
|
|
315,701
|
|
|
|
24,638
|
|
|
Total for pipelines and terminal assets (bpd)
|
|
|
|
845,365
|
|
|
|
729,538
|
|
|
|
115,827
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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. Net income allocated
to the general partner includes incentive distributions declared
subsequent to quarter end. General partner incentive distributions were
$7.7 million and $6.0 million for the three months ended March 31, 2014
and 2013, respectively.
(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,
|
|
|
|
|
2014
|
|
2013
|
|
|
|
|
(In thousands)
|
|
Net income attributable to Holly Energy Partners
|
|
|
$
|
24,143
|
|
|
$
|
18,399
|
|
|
Add (subtract):
|
|
|
|
|
|
|
Interest expense
|
|
|
|
9,943
|
|
|
|
11,105
|
|
|
Interest Income
|
|
|
|
(3
|
)
|
|
|
(103
|
)
|
|
Amortization of discount and deferred debt charges
|
|
|
|
511
|
|
|
|
530
|
|
|
Loss on early extinguishment of debt
|
|
|
|
7,677
|
|
|
|
—
|
|
|
Amortization of unrecognized loss attributable to terminated cash
flow hedge
|
|
|
|
—
|
|
|
|
849
|
|
|
State income tax
|
|
|
|
75
|
|
|
|
56
|
|
|
Depreciation and amortization
|
|
|
|
15,588
|
|
|
|
14,154
|
|
|
EBITDA
|
|
|
$
|
57,934
|
|
|
$
|
44,990
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 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,
|
|
|
|
|
2014
|
|
2013
|
|
|
|
|
(In thousands)
|
|
Net income attributable to Holly Energy Partners
|
|
|
$
|
24,143
|
|
|
$
|
18,399
|
|
|
Add (subtract):
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
|
15,588
|
|
|
|
14,154
|
|
|
Amortization of discount and deferred debt charges
|
|
|
|
511
|
|
|
|
530
|
|
|
Loss on early extinguishment of debt
|
|
|
|
7,677
|
|
|
|
—
|
|
|
Amortization of unrecognized loss attributable to terminated cash
flow hedge
|
|
|
|
—
|
|
|
|
849
|
|
|
Increase (decrease) in deferred revenue attributable to shortfall
billings
|
|
|
|
(5,898
|
)
|
|
|
(1,224
|
)
|
|
Maintenance capital expenditures*
|
|
|
|
(849
|
)
|
|
|
(2,335
|
)
|
|
Billed crude revenue settlement
|
|
|
|
—
|
|
|
|
918
|
|
|
Other non-cash adjustments
|
|
|
|
636
|
|
|
|
1,094
|
|
|
Distributable cash flow
|
|
|
$
|
41,808
|
|
|
$
|
32,385
|
|
|
|
|
|
|
|
|
|
|
|
|
* 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,
|
|
|
|
|
2014
|
|
2013
|
|
|
|
|
(In thousands)
|
|
Balance Sheet Data
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
$
|
4,879
|
|
$
|
6,352
|
|
|
Working capital
|
|
|
$
|
12,943
|
|
$
|
(6,604
|
)
|
|
Total assets
|
|
|
$
|
1,378,731
|
|
$
|
1,382,508
|
|
|
Long-term debt
|
|
|
$
|
833,790
|
|
$
|
807,630
|
|
|
Partners' equity(4) |
|
|
$
|
356,826
|
|
$
|
369,446
|
|
|
|
|
|
|
|
|
|
|
|
(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 $305.3 million would
have been recorded as increases to our properties and equipment and
intangible assets at the time of acquisition instead of decreases to
partners' equity.
Holly Energy Partners, L.P.
Douglas S. Aron, 214-954-6511
Executive
Vice President and
Chief Financial Officer
or
Julia
Heidenreich, 214-954-6511
Vice President, Investor Relations
or
Blake
Barfield, 214-954-6511
Investor Relations
Source: Holly Energy Partners, L.P.
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