Holly Energy Partners, L.P. Reports Fourth Quarter Results

Holly Energy Partners, L.P. Reports Fourth Quarter Results

DALLAS--(BUSINESS WIRE)-- Holly Energy Partners, L.P. ("HEP" or the "Partnership") (NYSE-HEP) today reported financial results for the fourth quarter of 2012. For the quarter, distributable cash flow was $41.6 million, up $9.2 million, or 28.6% compared to the fourth quarter of 2011. Based on these results, HEP announced its 33rdconsecutive distribution increase on January 24, 2013, raising the quarterly distribution from $0.4625 to $0.47 per unit, representing a 6% increase over the distribution for the fourth quarter of 2011. On January 16, 2013, HEP completed its two-for-one unit split. All per unit amounts in this earnings release have been adjusted to reflect the unit split.

Net income attributable to Holly Energy Partners for the fourth quarter was $27.0 million ($0.37 per basic and diluted limited partner unit) compared to $30.9 million ($0.51 per basic and diluted limited partner unit) for the fourth quarter of 2011. This decrease in earnings is due principally to a one-time positive crude oil pipeline settlement of $5.5 million with HollyFrontier in the fourth quarter of 2011, increased operating costs and expenses and higher interest expense. These factors were partially offset by increased volumes, earnings attributable to our November 2011 asset acquisition and annual tariff increases.


Commenting on the fourth quarter of 2012, Matt Clifton, Chairman of the Board and Chief Executive Officer stated, "We are extremely pleased with our financial results, particularly with the record levels of our distributable cash flow and EBITDA. EBITDA for the fourth quarter was $54.7 million, an increase of $5.0 million, or 10%, over last year's fourth quarter."

"Increased domestic oil production has positively impacted the gross margins of the refineries we serve throughout our Midcontinent, Rocky Mountain and Southwest asset base. This has given our refinery shippers strong incentives to maximize their production levels, which correspondingly kept our pipeline and terminal utilization rates at historically high levels during the quarter. Additionally, increased oil drilling activity near our crude oil gathering pipelines in Southeast New Mexico should continue to raise the amount of oil we gather and transport on our New Mexico crude oil pipeline assets. These positive industry fundamentals have increased the financial contribution from our heritage assets while our tankage and terminals acquisition in November 2011 and our UNEV pipeline acquisition in July 2012 further contributed to our year over year growth in distributable cash flow," Clifton said.

Fourth Quarter 2012 Revenue Highlights

Revenues for the quarter were $81.4 million, a $12.3 million increase compared to the fourth quarter of 2011. The revenue increase was due to increased pipeline shipments, revenues attributable to our July 2012 and November 2011 acquisitions, the effect of annual tariff increases and an increase of $2.1 million in previously deferred revenue realized under our guaranteed shipping contracts, partially offset by the crude oil pipeline settlement of $5.5 million with HollyFrontier in the fourth quarter of 2011. Overall pipeline volumes were up 1% compared to the fourth quarter of 2011.

  • Revenues from our refined product pipelines were $30.6 million, an increase of $6.7 million primarily due to increased refined pipeline shipments, revenues attributable to UNEV, annual tariff increases and an increase of $1.8 million in previously deferred revenue realized. Shipments averaged 182.3 thousand barrels per day ("mbpd") compared to 163.5 mbpd for the fourth quarter of 2011.
  • Revenues from our intermediate pipelines were $7.5 million, an increase of $1.2 million primarily due to increased shipments on our intermediate lines serving the Navajo refinery and an increase of $0.3 million in previously deferred revenue realized. Shipments averaged 115.8 mbpd compared to 128.4 mbpd for the fourth quarter of 2011. The overall volume decrease was attributable to a scheduled refinery turnaround that reduced volumes on our Tulsa interconnect pipelines.
  • Revenues from our crude pipelines were $12.0 million, a decrease of $5.2 million, on shipments averaging 174.4 mbpd compared to 174.2 mbpd for the fourth quarter of 2011. Revenues in 2011 included $5.5 million attributable to a crude oil pipeline settlement with HollyFrontier in October 2011.
  • Revenues from terminal, tankage and loading rack fees were $31.3 million, an increase of $9.7 million compared to the fourth quarter of 2011. This includes $7.2 million of increased throughput revenues attributable to our assets acquired in November 2011 that serve HollyFrontier's El Dorado and Cheyenne refineries. Refined products terminalled in our facilities increased to an average of 343.3 mbpd compared to 300.8 mbpd for the fourth quarter of 2011.

Revenues for the three months ended December 31, 2012 include the recognition of $4.6 million of prior shortfalls billed to shippers in 2011 and 2012. As of December 31, 2012, deferred revenue in our consolidated balance sheet was $7.8 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.

Year Ended December 31, 2012 Revenue Highlights

Revenues for the year ended December 31, 2012 were $292.6 million, a $78.3 million increase compared to the same period of 2011. The revenue increase was due to increased pipeline shipments, revenues attributable to our July 2012 and November 2011 acquisitions and the effect of annual tariff increases, partially offset by a $4.6 million decrease in previously deferred revenue realized under our guaranteed shipping contracts. Overall pipeline volumes were up 18% compared to the same period of 2011.

  • Revenues from our refined product pipelines were $105.2 million, an increase of $20.3 million primarily due to increased refined pipeline shipments, revenues attributable to UNEV and annual tariff increases partially offset by the effects of a $5.4 million decrease in previously deferred revenue realized. Shipments averaged 170.7 mbpd compared to 143.1 mbpd for the year ended December 31, 2011.
  • Revenues from our intermediate pipelines were $28.5 million, an increase of $6.6 million, on shipments averaging 127.2 mbpd compared to 93.4 mbpd for the year ended December 31, 2011. This includes $3.4 million of increased revenues attributable to our Tulsa interconnect pipelines and the effects of a $0.8 million increase in previously deferred revenue realized.
  • Revenues from our crude pipelines were $45.9 million, a decrease of $1.7 million, on shipments averaging 171.0 mbpd compared to 161.8 mbpd for the year ended December 31, 2011. The decrease in revenues was due to the crude oil pipeline settlement of $5.5 million with HollyFrontier in 2011.
  • Revenues from terminal, tankage and loading rack fees were $112.9 million, an increase of $53.0 million compared to the year ended December 31, 2011. This includes $45.4 million of increased throughput revenues attributable to our terminal, tankage and loading racks serving HollyFrontier's El Dorado and Cheyenne refineries. Refined products terminalled in our facilities increased to an average of 325.0 mbpd compared to 238.1 mbpd for the year ended December 31, 2011.

Revenues for the year ended December 31, 2012 include the recognition of $4.0 million of prior shortfalls billed to shippers in 2011.

Cost and Expense Highlights

Operating costs and expenses were $40.5 million and $154.3 million for the three months and year ended December 31, 2012, respectively, representing increases of $8.1 million and $46.2 million over the respective periods of 2011. These increases reflect incremental operating costs and expenses attributable to UNEV and our recently acquired assets serving HollyFrontier's El Dorado and Cheyenne refineries and higher throughput levels on our legacy assets, as well as year-over-year increases in depreciation expense, maintenance service, payroll costs and professional fees.

Interest expense was $12.9 million and $47.2 million for the three months and year ended December 31, 2012, respectively, representing increases of $3.1 million and $11.2 million over the respective periods of 2011 due to higher year-over-year debt levels. Also, we recognized a loss of $3.0 million for the year ended December 31, 2012, on the early extinguishment of our $185 million 6.25% senior notes.

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=1012527.

An audio archive of this webcast will be available using the above noted link through March 7, 2013.

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 44% 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 successfully purchase and integrate additional operations in the future;
  • 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 year ended December 31, 2012 and 2011.

 

Three Months Ended
December 31,

Change from

2012

2011(1)

2011
(In thousands, except per unit data)
Revenues
Pipelines:
Affiliates - refined product pipelines$20,955$13,280$7,675
Affiliates - intermediate pipelines7,4636,3101,153
Affiliates - crude pipelines12,044 17,245 (5,201) 
40,46236,8353,627
Third parties - refined product pipelines9,658 10,628 (970) 
50,12047,4632,657
Terminals, tanks and loading racks:
Affiliates28,70019,3419,359
Third parties2,612 2,283 329 
31,312 21,624 9,688 
Total revenues81,43269,08712,345
Operating costs and expenses:
Operations24,12920,2003,929
Depreciation and amortization14,66010,5544,106
General and administrative1,669 1,628 41 
40,458 32,382 8,076 
Operating income40,97436,7054,269
 
Equity in earnings of SLC Pipeline862704158
Interest expense, including amortization(12,914)(9,858)(3,056)
Other income10 9 1 
(12,042)(9,145) (2,897) 
Income before income taxes28,93227,5601,372
State income tax expense(83)(65) (18) 
Net income28,84927,4951,354
Allocation of net loss attributable to Predecessors(1)-2,836(2,836)
Allocation of net loss (income) attributable to noncontrolling interests(1,810)563 (2,373) 
Net income attributable to Holly Energy Partners27,03930,894(3,855)
General partner interest in net income, including incentive distributions(3)5,777 5,429 348 
Limited partners' interest in net income$21,262 $25,465 $(4,203) 
Limited partners' earnings per unit - basic and diluted:(2)(3)$0.37 $0.51 $(0.14) 
Weighted average limited partners' units outstanding(2)56,782 50,217 6,565 
EBITDA(4)$54,696 $49,728 $4,968 
Distributable cash flow(5)$41,618 $32,371 $9,247 
 
Volumes (bpd)
Pipelines:
Affiliates - refined product pipelines116,63798,52818,109
Affiliates - intermediate pipelines115,843128,437(12,594)
Affiliates - crude pipelines174,368174,226 142 
406,848401,1915,657
Third parties - refined product pipelines65,68864,986 702 
472,536466,1776,359
Terminals and loading racks:
Affiliates288,203249,36538,838
Third parties55,05751,434 3,623 
343,260300,799 42,461 
Total for pipelines and terminal assets (bpd)815,796766,976 48,820 
 
Year Ended December 31,

Change from

2012

2011(1)

2011
(In thousands, except per unit data)
Revenues
Pipelines:
Affiliates - refined product pipelines$67,682$46,649$21,033
Affiliates - intermediate pipelines28,54021,9486,592
Affiliates - crude pipelines45,888 47,542 (1,654) 
142,110116,13925,971
Third parties - refined product pipelines37,521 38,216 (695) 
179,631154,35525,276
Terminals, tanks and loading racks:
Affiliates103,47252,12251,350
Third parties9,457 7,791 1,666 
112,929 59,913 53,016 
Total revenues292,560214,26878,292
Operating costs and expenses:
Operations89,24264,52124,721
Depreciation and amortization57,46136,95820,503
General and administrative7,594 6,576 1,018 
154,297 108,055 46,242 
Operating income138,263106,21332,050
 
Equity in earnings of SLC Pipeline3,3642,552812
Interest expense, including amortization(47,182)(35,959)(11,223)
Loss on early extinguishment of debt(2,979)(2,979)
Other expense10 17 (7) 
(46,787)(33,390) (13,397) 
Income before income taxes91,47672,82318,653
State income tax expense(371)(234) (137) 
Net income91,10572,58918,516
Allocation of net loss attributable to Predecessors(1)4,2006,351(2,151 Read Full Story

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