DALLAS--(BUSINESS WIRE)--
Holly Energy Partners, L.P. ("HEP" or the "Partnership") (NYSE:HEP)
today reported financial results for the first quarter of 2016. For the
quarter, distributable cash flow was $55.4 million, up $9.5 million, or
21% compared to the first quarter of 2015. HEP announced its 46thconsecutive
distribution increase on April 22, 2016, raising the quarterly
distribution from $0.565 to $0.575 per unit, which represents an
increase of 7.0% over the distribution for the first quarter of 2015.
Net income attributable to Holly Energy Partners for the first quarter
was $42.8 million ($0.52 per basic and diluted limited partner unit)
compared to $31.6 million ($0.37 per basic and diluted limited partner
unit) for the first quarter of 2015. The increase in earnings is
primarily due to increased revenues from our 75% interest in the UNEV
products pipeline, our share of earnings from our 50% interest in
Frontier Pipeline Company, and our refinery processing units acquired in
the fourth quarter of 2015, as well as higher pipeline and terminal
volumes and annual tariff increases.
Commenting on the first quarter of 2016, Mike Jennings, Chief Executive
Officer, stated, "We are pleased with our solid financial results for
the first quarter of 2016, which allowed us to maintain our record of
quarterly distribution increases, while maintaining a very strong
distribution coverage ratio. We remain optimistic about our organic
growth potential, especially on the UNEV products pipeline.
Additionally, we successfully completed our acquisition of crude oil
tankage at HollyFrontier Corporation's Tulsa refinery. As we look
forward, we believe HEP is 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 2016 Revenue Highlights
Revenues for the quarter were $102.0 million, an increase of $12.3
million compared to the first quarter of 2015 due to the effect of
higher pipeline volumes and annual tariff increases in addition to $4.5
million increased revenue from the El Dorado operating units. Overall
pipeline volumes were up 5% compared to the three months ended March 31,
2015, largely due to increased volumes from pipelines servicing HFC's
Navajo refinery and the UNEV pipeline.
-
Revenues from our refined product pipelines were $39.9 million,
an increase of $3.7 million compared to the first quarter of 2015
mainly due to increased revenue from the UNEV pipeline of $2.9 million
in addition to increased volumes and annual tariff increases.
Shipments averaged 210.8 mbpd compared to 186.9 mbpd for the first
quarter of 2015 mainly due to increased volumes from pipelines
servicing HFC's Navajo refinery and the UNEV pipeline.
-
Revenues from our intermediate pipelines were $7.4 million, an
increase of $0.6 million, on shipments averaging 137.4 mbpd compared
to 138.1 mbpd for the first quarter of 2015. Even though volumes
decreased slightly, revenues increased due to annual tariff increases
and an increase in deferred revenue realized.
-
Revenues from our crude pipelines were $17.5 million, an
increase of $0.5 million, on shipments averaging 287.4 mbpd compared
to 282.7 mbpd for the first quarter of 2015. Revenues increased mainly
due to increased volumes and annual tariff increases.
-
Revenues from terminal, tankage and loading rack fees were
$32.7 million, an increase of $3.0 million compared to the first
quarter of 2015. Refined products terminalled in our facilities
averaged 466.9 mbpd compared to 397.1 mbpd for the first quarter of
2015. The volume increase is mainly due to inclusion of full quarter
volumes from our El Dorado crude tanks acquired in the first quarter
of 2015. Revenues increased due to increased revenue from the El
Dorado crude tanks as well as increased volumes and annual tariff
increases.
Revenues for the three months ended March 31, 2016, include the
recognition of $6.6 million of prior shortfalls billed to shippers in
2015 as they did not meet their minimum volume commitments within the
contractual make-up period. As of March 31, 2016, shortfall deferred
revenue in our consolidated balance sheet was $2.8 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 has the necessary capacity for shipments in excess of
guaranteed levels, or (b) when shipping rights expire unused over the
contractual make-up period.
Operating Costs and Expenses Highlights
Operating costs and expenses were $46.6 million for the three months
ended March 31, 2016, representing an increase of $0.4 million from the
three months ended March 31, 2015. This increase is primarily due to
operating expenses for our El Dorado operating units acquired in the
fourth quarter of 2015, and higher depreciation expense partially offset
by lower environmental costs.
Interest expense was $10.5 million for the three months ended March 31,
2016, representing an increase of $1.8 million over the same period of
2015. The increase for the three months ended March 31, 2016, is due to
an increase in borrowings under our credit agreement.
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=1098789.
An audio archive of this webcast will be available using the above noted
link through May 17, 2016.
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 as well as refinery processing units in 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 Salt Lake City, Utah to Las Vegas, Nevada, and related product
terminals, a 50% interest in Osage Pipe Line Company, LLC, which owns a
135-mile crude oil pipeline from Cushing, Oklahoma to El Dorado, Kansas,
a 50% interest in Frontier Pipeline Company, which owns a 289-mile crude
oil pipeline from Casper, Wyoming to Frontier Station, Utah and a 25%
interest in SLC Pipeline LLC which owns 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, 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 months ended March 31, 2016 and 2015.
|
|
|
Three Months Ended March 31,
|
|
|
Change from
|
|
|
|
2016
|
|
|
2015
|
|
|
2015
|
|
|
|
(In thousands, except per unit data)
|
Revenues
|
|
|
|
|
|
|
|
|
|
Pipelines:
|
|
|
|
|
|
|
|
|
|
Affiliates - refined product pipelines
|
|
|
$
|
25,182
|
|
|
|
$
|
22,541
|
|
|
|
$
|
2,641
|
|
Affiliates - intermediate pipelines
|
|
|
|
7,413
|
|
|
|
|
6,862
|
|
|
|
|
551
|
|
Affiliates - crude pipelines
|
|
|
|
17,491
|
|
|
|
|
16,994
|
|
|
|
|
497
|
|
|
|
|
|
50,086
|
|
|
|
|
46,397
|
|
|
|
|
3,689
|
|
Third parties - refined product pipelines
|
|
|
|
14,766
|
|
|
|
|
13,723
|
|
|
|
|
1,043
|
|
|
|
|
|
64,852
|
|
|
|
|
60,120
|
|
|
|
|
4,732
|
|
Terminals, tanks and loading racks:
|
|
|
|
|
|
|
|
|
|
Affiliates
|
|
|
|
28,253
|
|
|
|
|
25,858
|
|
|
|
|
2,395
|
|
Third parties
|
|
|
|
4,398
|
|
|
|
|
3,778
|
|
|
|
|
620
|
|
|
|
|
|
32,651
|
|
|
|
|
29,636
|
|
|
|
|
3,015
|
|
|
|
|
|
|
|
|
|
|
|
Affiliates - refinery processing units
|
|
|
|
4,507
|
|
|
|
|
—
|
|
|
|
|
4,507
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
|
102,010
|
|
|
|
|
89,756
|
|
|
|
|
12,254
|
|
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
|
Operations
|
|
|
|
26,922
|
|
|
|
|
28,065
|
|
|
|
|
(1,143
|
)
|
Depreciation and amortization
|
|
|
|
16,551
|
|
|
|
|
14,798
|
|
|
|
|
1,753
|
|
General and administrative
|
|
|
|
3,091
|
|
|
|
|
3,290
|
|
|
|
|
(199
|
)
|
|
|
|
|
46,564
|
|
|
|
|
46,153
|
|
|
|
|
411
|
|
Operating income
|
|
|
|
55,446
|
|
|
|
|
43,603
|
|
|
|
|
11,843
|
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings of equity method investments
|
|
|
|
2,765
|
|
|
|
|
734
|
|
|
|
|
2,031
|
|
Interest expense, including amortization
|
|
|
|
(10,535
|
)
|
|
|
|
(8,768
|
)
|
|
|
|
(1,767
|
)
|
Interest income
|
|
|
|
112
|
|
|
|
|
—
|
|
|
|
|
112
|
|
Gain on sale of assets
|
|
|
|
—
|
|
|
|
|
159
|
|
|
|
|
(159
|
)
|
Other income
|
|
|
|
(8
|
)
|
|
|
|
—
|
|
|
|
|
(8
|
)
|
|
|
|
|
(7,666
|
)
|
|
|
|
(7,875
|
)
|
|
|
|
209
|
|
Income before income taxes
|
|
|
|
47,780
|
|
|
|
|
35,728
|
|
|
|
|
12,052
|
|
State income tax expense
|
|
|
|
(95
|
)
|
|
|
|
(101
|
)
|
|
|
|
6
|
|
Net income
|
|
|
|
47,685
|
|
|
|
|
35,627
|
|
|
|
|
12,058
|
|
Allocation of net income attributable to noncontrolling interests
|
|
|
|
(4,927
|
)
|
|
|
|
(4,027
|
)
|
|
|
|
(900
|
)
|
Net income attributable to Holly Energy Partners
|
|
|
|
42,758
|
|
|
|
|
31,600
|
|
|
|
|
11,158
|
|
General partner interest in net income, including incentive
distributions(1) |
|
|
|
(11,886
|
)
|
|
|
|
(9,607
|
)
|
|
|
|
(2,279
|
)
|
Limited partners' interest in net income
|
|
|
$
|
30,872
|
|
|
|
$
|
21,993
|
|
|
|
$
|
8,879
|
|
Limited partners' earnings per unit - basic and diluted:(1) |
|
|
$
|
0.52
|
|
|
|
$
|
0.37
|
|
|
|
$
|
0.15
|
|
Weighted average limited partners' units outstanding
|
|
|
|
58,657
|
|
|
|
|
58,657
|
|
|
|
|
—
|
|
EBITDA(2) |
|
|
$
|
69,827
|
|
|
|
$
|
55,267
|
|
|
|
$
|
14,560
|
|
Distributable cash flow(3) |
|
|
$
|
55,365
|
|
|
|
$
|
45,890
|
|
|
|
$
|
9,475
|
|
|
|
|
|
|
|
|
|
|
|
Volumes (bpd)
|
|
|
|
|
|
|
|
|
|
Pipelines:
|
|
|
|
|
|
|
|
|
|
Affiliates - refined product pipelines
|
|
|
|
132,430
|
|
|
|
|
115,430
|
|
|
|
|
17,000
|
|
Affiliates - intermediate pipelines
|
|
|
|
137,410
|
|
|
|
|
138,073
|
|
|
|
|
(663
|
)
|
Affiliates - crude pipelines
|
|
|
|
287,433
|
|
|
|
|
282,705
|
|
|
|
|
4,728
|
|
|
|
|
|
557,273
|
|
|
|
|
536,208
|
|
|
|
|
21,065
|
|
Third parties - refined product pipelines
|
|
|
|
78,334
|
|
|
|
|
71,420
|
|
|
|
|
6,914
|
|
|
|
|
|
635,607
|
|
|
|
|
607,628
|
|
|
|
|
27,979
|
|
Terminals and loading racks:
|
|
|
|
|
|
|
|
|
|
Affiliates
|
|
|
|
385,538
|
|
|
|
|
323,150
|
|
|
|
|
62,388
|
|
Third parties
|
|
|
|
81,327
|
|
|
|
|
73,988
|
|
|
|
|
7,339
|
|
|
|
|
|
466,865
|
|
|
|
|
397,138
|
|
|
|
|
69,727
|
|
|
|
|
|
|
|
|
|
|
|
Affiliates- refinery processing units
|
|
|
|
42,442
|
|
|
|
|
—
|
|
|
|
|
42,442
|
|
|
|
|
|
|
|
|
|
|
|
Total for pipelines and terminal assets (bpd)
|
|
|
|
1,144,914
|
|
|
|
|
1,004,766
|
|
|
|
|
140,148
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
(In thousands)
|
Balance Sheet Data
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
$
|
9,034
|
|
|
$
|
15,013
|
Working capital
|
|
|
$
|
20,717
|
|
|
$
|
12,218
|
Total assets
|
|
|
$
|
1,572,561
|
|
|
$
|
1,543,765
|
Long-term debt
|
|
|
$
|
1,061,944
|
|
|
$
|
1,008,752
|
Partners' equity(4) |
|
|
$
|
288,178
|
|
|
$
|
297,912
|
|
|
|
|
|
|
|
|
|
(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 $11.5 million and $9.4 million for the
three months ended March 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 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,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
(In thousands)
|
Net income attributable to Holly Energy Partners
|
|
|
$
|
42,758
|
|
|
|
$
|
31,600
|
Add (subtract):
|
|
|
|
|
|
|
Interest expense
|
|
|
|
9,942
|
|
|
|
|
8,332
|
Interest Income
|
|
|
|
(112
|
)
|
|
|
|
—
|
Amortization of discount and deferred debt charges
|
|
|
|
593
|
|
|
|
|
436
|
State income tax expense
|
|
|
|
95
|
|
|
|
|
101
|
Depreciation and amortization
|
|
|
|
16,551
|
|
|
|
|
14,798
|
EBITDA
|
|
|
$
|
69,827
|
|
|
|
$
|
55,267
|
|
|
|
|
|
|
|
|
|
|
(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 Ended March 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
(In thousands)
|
Net income attributable to Holly Energy Partners
|
|
|
$
|
42,758
|
|
|
|
$
|
31,600
|
|
Add (subtract):
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
|
16,551
|
|
|
|
|
14,798
|
|
Amortization of discount and deferred debt charges
|
|
|
|
593
|
|
|
|
|
436
|
|
Decrease in deferred revenue attributable to shortfall billings
|
|
|
|
(3,658
|
)
|
|
|
|
(3,550
|
)
|
Maintenance capital expenditures*
|
|
|
|
(1,661
|
)
|
|
|
|
(1,649
|
)
|
Increase (decrease) in environmental liability
|
|
|
|
(328
|
)
|
|
|
|
3,856
|
|
Decrease in reimbursable deferred revenue
|
|
|
|
(528
|
)
|
|
|
|
(544
|
)
|
Other non-cash adjustments
|
|
|
|
1,638
|
|
|
|
|
943
|
|
Distributable cash flow
|
|
|
$
|
55,365
|
|
|
|
$
|
45,890
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
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.
|
|
|
|
(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 as increases to our
properties and equipment and intangible assets at the time of
acquisition instead of decreases to partners' equity.
|
View source version on businesswire.com: http://www.businesswire.com/news/home/20160503005555/en/
Holly Energy Partners, L.P.
Richard L. Voliva III, 214-954-6511
Vice
President and
Chief Financial Officer
or
Julia
Heidenreich, 214-954-6511
Vice President, Investor Relations
or
Craig
Biery, 214-954-6511
Investor Relations
Source: Holly Energy Partners, L.P.
News Provided by Acquire Media