DALLAS--(BUSINESS WIRE)--
Holly Energy Partners, L.P. ("HEP" or the "Partnership") (NYSE:HEP)
today reported financial results for the first quarter of 2017. Net
income attributable to Holly Energy Partners for the first quarter was
$25.6 million ($0.13 per basic and diluted limited partner unit)
compared to $43.0 million ($0.52 per basic and diluted limited partner
unit) for the first quarter of 2016.
Distributable cash flow was $57.3 million for the quarter, up $1.9
million, or 3.5% compared to the first quarter of 2016. HEP announced
its 50th consecutive distribution increase on April 27, 2017, raising
the quarterly distribution from $0.6075 to $0.62 per unit, which
represents an increase of 7.8% over the distribution for the first
quarter of 2016 and progress towards HEP's 8% distribution growth rate
target.
The decrease in earnings is primarily due to (a) a charge of $12.2
million related to the early redemption of our previously outstanding
$300 million aggregate principal amount of 6.5% senior notes, due in
2020, (b) a reduction in pipeline revenues of $12.4 million primarily
driven by a turnaround at HollyFrontier Corporation's ("HFC") Navajo
refinery, (c) higher interest expense of $3.0 million and (d) lower
equity in earnings from equity method investments caused by an outage on
the SLC pipeline offset by (e) earnings from our Woods Cross refinery
processing units acquired in the fourth quarter of 2016. Excluding the
loss on early extinguishment of debt, net income attributable to Holly
Energy Partners for the first quarter would be $37.8 million ($0.32 per
basic and diluted limited partner unit).
Commenting on the first quarter of 2017, George Damiris, Chief Executive
Officer, stated, "Despite a significant turnaround at HFC's Navajo
refinery, we are pleased to be able to increase our distributable cash
flow quarter over quarter, which allowed us to maintain our record of
continuous quarterly distribution increases, while still maintaining a
distribution coverage ratio of 1.0. Looking forward, we will continue to
leverage our talented employee base, our relationship with HollyFrontier
and our Mid-Continent, Northwest and Southwest logistics footprint to
generate new organic and external growth opportunities."
First Quarter 2017 Revenue Highlights
Revenues for the quarter were $105.6 million, an increase of $3.6
million compared to the first quarter of 2016. Revenues around assets
serving HFC's Navajo refinery declined by $7.9 million due to the
substantial planned turnaround during the first quarter 2017. Excluding
this decline, revenues increased by $11.5 million primarily due to the
Woods Cross processing units acquired in the fourth quarter of 2016.
Overall pipeline volumes were down 11% compared to the three months
ended March 31, 2016, largely due to the turnaround at HFC's Navajo
refinery.
-
Revenues from our refined product pipelines were $30.3 million,
a decrease of $9.7 million compared to the first quarter of 2016 and
shipments averaged 192.4 mbpd compared to 210.8 mbpd for the first
quarter of 2016. Revenues and volumes both decreased due to the
turnaround at HFC's Navajo refinery as well as lower throughputs on
our UNEV pipeline.
-
Revenues from our intermediate pipelines were $5.3 million, a
decrease of $2.1 million, on shipments averaging 104.3 mbpd compared
to 137.4 mbpd for the first quarter of 2016. These declines were due
to the turnaround at HFC's Navajo refinery.
-
Revenues from our crude pipelines were $16.9 million, a
decrease of $0.6 million, on shipments averaging 268.9 mbpd compared
to 287.4 mbpd for the first quarter of 2016. Revenues and volumes
decreased mainly due to the turnaround at HFC's Navajo refinery.
-
Revenues from terminal, tankage and loading rack fees were
$33.8 million, an increase of $1.2 million compared to the first
quarter of 2016. Refined products terminalled in the facilities
averaged 444.6 mbpd compared to 438.3 mbpd for the first quarter of
2016. The volume and revenue increase is mainly due to volumes from
our Tulsa crude tanks, acquired on the last day of the first quarter
of 2016, offset by the transfer of the El Paso terminal to
HollyFrontier in the first quarter of 2016.
-
Revenues from refinery processing units were $19.4 million, an
increase of $14.9 million on throughputs averaging 62.8 mbpd compared
to 42.4 mbpd for 2016. This increase in revenue and volumes is due to
the Woods Cross refinery processing units acquired in the fourth
quarter of 2016.
Revenues for the three months ended March 31, 2017, include the
recognition of $2.1 million of prior shortfalls billed to shippers in
2016 as they did not meet their minimum volume commitments within the
contractual make-up period. As of March 31, 2017, shortfall deferred
revenue reflected in our consolidated balance sheet was $6.2 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 $53.9 million for the three months
ended March 31, 2017, representing an increase of $6.4 million from the
three months ended March 31, 2016. The increase is primarily due to $8.2
million in operating costs and expenses for our Woods Cross processing
units acquired in the fourth quarter of 2016.
Interest expense was $13.5 million for the three months ended March 31,
2017, representing an increase of $3.0 million over the same period of
2016. The increase is due to the offering of $400 million aggregate
principal amount of our 6% senior notes in July 2016.
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=1139803.
An audio archive of this webcast will be available using the above noted
link through May 16, 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. In addition, HollyFrontier, through its
subsidiary, owns Petro-Canada Lubricants Inc., whose Mississauga,
Ontario facility produces 15,600 barrels per day of base oils and other
specialized lubricant products, and owns a 36% interest (including a 2%
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 ended March 31, 2017 and 2016.
|
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Three Months Ended March 31,
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Change from
|
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|
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2017
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2016 (5)
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|
2016
|
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(In thousands, except per unit data)
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Revenues
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|
|
|
|
|
|
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Pipelines:
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|
|
|
|
|
|
|
|
Affiliates - refined product pipelines
|
|
|
$
|
17,744
|
|
|
|
$
|
25,182
|
|
|
|
$
|
(7,438
|
)
|
Affiliates - intermediate pipelines
|
|
|
|
5,284
|
|
|
|
|
7,413
|
|
|
|
|
(2,129
|
)
|
Affiliates - crude pipelines
|
|
|
|
16,881
|
|
|
|
|
17,491
|
|
|
|
|
(610
|
)
|
|
|
|
|
39,909
|
|
|
|
|
50,086
|
|
|
|
|
(10,177
|
)
|
Third parties - refined product pipelines
|
|
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12,538
|
|
|
|
|
14,766
|
|
|
|
|
(2,228
|
)
|
|
|
|
|
52,447
|
|
|
|
|
64,852
|
|
|
|
|
(12,405
|
)
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Terminals, tanks and loading racks:
|
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|
|
|
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Affiliates
|
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29,736
|
|
|
|
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28,253
|
|
|
|
|
1,483
|
|
Third parties
|
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|
4,071
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|
|
|
|
4,398
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(327
|
)
|
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33,807
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|
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|
|
32,651
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|
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|
|
1,156
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|
Affiliates - refinery processing units
|
|
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|
19,380
|
|
|
|
|
4,507
|
|
|
|
|
14,873
|
|
Total revenues
|
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|
105,634
|
|
|
|
|
102,010
|
|
|
|
|
3,624
|
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|
|
|
|
|
|
|
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|
Operating costs and expenses:
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|
|
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|
|
|
|
|
Operations (exclusive of depreciation and amortization)
|
|
|
|
32,489
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|
|
|
|
27,855
|
|
|
|
|
4,634
|
|
Depreciation and amortization
|
|
|
|
18,777
|
|
|
|
|
16,551
|
|
|
|
|
2,226
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|
General and administrative
|
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|
2,634
|
|
|
|
|
3,091
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(457
|
)
|
|
|
|
|
53,900
|
|
|
|
|
47,497
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|
|
|
|
6,403
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|
Operating income
|
|
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|
51,734
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|
|
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|
54,513
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|
|
|
|
(2,779
|
)
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings of equity method investments
|
|
|
|
1,840
|
|
|
|
|
2,765
|
|
|
|
|
(925
|
)
|
Interest expense, including amortization
|
|
|
|
(13,539
|
)
|
|
|
|
(10,535
|
)
|
|
|
|
(3,004
|
)
|
Interest income
|
|
|
|
102
|
|
|
|
|
112
|
|
|
|
|
(10
|
)
|
Loss on early extinguishment of debt
|
|
|
|
(12,225
|
)
|
|
|
|
—
|
|
|
|
|
(12,225
|
)
|
Gain (loss) on sale of assets and other income
|
|
|
|
73
|
|
|
|
|
(8
|
)
|
|
|
|
81
|
|
|
|
|
|
(23,749
|
)
|
|
|
|
(7,666
|
)
|
|
|
|
(16,083
|
)
|
Income before income taxes
|
|
|
|
27,985
|
|
|
|
|
46,847
|
|
|
|
|
(18,862
|
)
|
State income tax (expense) benefit
|
|
|
|
(106
|
)
|
|
|
|
(95
|
)
|
|
|
|
(11
|
)
|
Net income
|
|
|
|
27,879
|
|
|
|
|
46,752
|
|
|
|
|
(18,873
|
)
|
Add net loss applicable to predecessor
|
|
|
|
—
|
|
|
|
|
1,150
|
|
|
|
|
(1,150
|
)
|
Allocation of net income attributable to noncontrolling interests
|
|
|
|
(2,316
|
)
|
|
|
|
(4,927
|
)
|
|
|
|
2,611
|
|
Net income attributable to Holly Energy Partners
|
|
|
|
25,563
|
|
|
|
|
42,975
|
|
|
|
|
(17,412
|
)
|
General partner interest in net income, including incentive
distributions(1) |
|
|
|
(17,138
|
)
|
|
|
|
(12,103
|
)
|
|
|
|
(5,035
|
)
|
Limited partners' interest in net income
|
|
|
$
|
8,425
|
|
|
|
$
|
30,872
|
|
|
|
$
|
(22,447
|
)
|
Limited partners' earnings per unit - basic and diluted:(1) |
|
|
$
|
0.13
|
|
|
|
$
|
0.52
|
|
|
|
$
|
(0.39
|
)
|
Weighted average limited partners' units outstanding
|
|
|
|
63,113
|
|
|
|
|
58,657
|
|
|
|
|
4,456
|
|
EBITDA(2) |
|
|
$
|
70,108
|
|
|
|
$
|
69,926
|
|
|
|
$
|
182
|
|
Distributable cash flow(3) |
|
|
$
|
57,289
|
|
|
|
$
|
55,365
|
|
|
|
$
|
1,924
|
|
|
|
|
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Volumes (bpd)
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|
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Pipelines:
|
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|
|
|
|
|
|
|
|
Affiliates - refined product pipelines
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|
|
|
107,266
|
|
|
|
|
132,430
|
|
|
|
|
(25,164
|
)
|
Affiliates - intermediate pipelines
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|
|
|
104,340
|
|
|
|
|
137,410
|
|
|
|
|
(33,070
|
)
|
Affiliates - crude pipelines
|
|
|
|
268,890
|
|
|
|
|
287,433
|
|
|
|
|
(18,543
|
)
|
|
|
|
|
480,496
|
|
|
|
|
557,273
|
|
|
|
|
(76,777
|
)
|
Third parties - refined product pipelines
|
|
|
|
85,141
|
|
|
|
|
78,334
|
|
|
|
|
(6,807
|
)
|
|
|
|
|
565,637
|
|
|
|
|
635,607
|
|
|
|
|
(69,970
|
)
|
Terminals and loading racks:
|
|
|
|
|
|
|
|
|
|
Affiliates
|
|
|
|
374,923
|
|
|
|
|
357,022
|
|
|
|
|
17,901
|
|
Third parties
|
|
|
|
69,647
|
|
|
|
|
81,327
|
|
|
|
|
(11,680
|
)
|
|
|
|
|
444,570
|
|
|
|
|
438,349
|
|
|
|
|
6,221
|
|
Affiliates - refinery processing units
|
|
|
|
62,829
|
|
|
|
|
42,442
|
|
|
|
|
20,387
|
|
Total for pipelines and terminal assets (bpd)
|
|
|
|
1,073,036
|
|
|
|
|
1,116,398
|
|
|
|
|
43,362
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
(In thousands)
|
Balance Sheet Data
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
$
|
7,007
|
|
|
$
|
3,657
|
|
Working capital (deficit)
|
|
|
$
|
13,471
|
|
|
$
|
(7,782
|
)
|
Total assets
|
|
|
$
|
1,870,135
|
|
|
$
|
1,884,237
|
|
Long-term debt
|
|
|
$
|
1,240,565
|
|
|
$
|
1,243,912
|
|
Partners' equity(4) |
|
|
$
|
389,526
|
|
|
$
|
378,234
|
|
|
|
|
(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 $16.6 million and $11.5 million for the
three months ended March 31, 2017 and 2016, 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, (In thousands)
|
|
|
|
2017
|
|
|
2016
|
|
Net income attributable to Holly Energy Partners
|
|
|
$
|
25,563
|
|
|
|
$
|
42,975
|
|
Add (subtract):
|
|
|
|
|
|
|
Interest expense
|
|
|
|
12,769
|
|
|
|
|
9,942
|
|
Interest income
|
|
|
|
(102
|
)
|
|
|
|
(112
|
)
|
Amortization of discount and deferred debt charges
|
|
|
|
770
|
|
|
|
|
593
|
|
Loss on early extinguishment of debt
|
|
|
|
12,225
|
|
|
|
|
—
|
|
State income tax
|
|
|
|
106
|
|
|
|
|
95
|
|
Depreciation and amortization
|
|
|
|
18,777
|
|
|
|
|
16,551
|
|
Predecessor depreciation and amortization
|
|
|
|
—
|
|
|
|
|
(118
|
)
|
EBITDA
|
|
|
$
|
70,108
|
|
|
|
$
|
69,926
|
|
|
|
|
(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, (In thousands)
|
|
|
|
2017
|
|
|
2016
|
|
Net income attributable to Holly Energy Partners
|
|
|
$
|
25,563
|
|
|
|
$
|
42,975
|
|
Add (subtract):
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
|
18,777
|
|
|
|
|
16,551
|
|
Amortization of discount and deferred debt charges
|
|
|
|
770
|
|
|
|
|
593
|
|
Loss on early extinguishment of debt
|
|
|
|
12,225
|
|
|
|
|
—
|
|
Increase (decrease) in deferred revenue attributable to shortfall
billings
|
|
|
|
1,178
|
|
|
|
|
(3,658
|
)
|
Maintenance capital expenditures*
|
|
|
|
(825
|
)
|
|
|
|
(1,661
|
)
|
Increase (decrease) in environmental liability
|
|
|
|
(246
|
)
|
|
|
|
(328
|
)
|
Increase (decrease) in reimbursable deferred revenue
|
|
|
|
(925
|
)
|
|
|
|
(528
|
)
|
Other non-cash adjustments
|
|
|
|
772
|
|
|
|
|
1,539
|
|
Predecessor depreciation and amortization
|
|
|
$
|
—
|
|
|
|
$
|
(118
|
)
|
Distributable cash flow
|
|
|
$
|
57,289
|
|
|
|
$
|
55,365
|
|
|
|
|
|
|
|
|
*
|
|
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/20170502005444/en/
Holly Energy Partners, L.P.
Richard L. Voliva III, 214-954-6511
Executive
Vice President and
Chief Financial Officer
or
Craig
Biery, 214-954-6511
Director, Investor Relations
Source: Holly Energy Partners, L.P.
News Provided by Acquire Media