Holly Energy Partners, L.P. Reports Second Quarter Results
Holly Energy Partners, L.P. Reports Second Quarter Results
DALLAS--(BUSINESS WIRE)-- Holly Energy Partners, L.P. ("HEP" or the "Partnership") (NYS: HEP) today reported financial results for the second quarter of 2013. For the quarter, distributable cash flow was $36.1 million, up $1.5 million, or 4% compared to the second quarter of 2012. HEP announced its 35thconsecutive distribution increase on July 26, 2013, raising the quarterly distribution from $0.4775 to $0.4850 per unit, representing a 7% increase over the distribution for the second quarter of 2012.
Net income for the second quarter was $21.3 million compared to $19.1 million for the second quarter of 2012. The increase in net income is due principally to increased pipeline shipments and annual tariff increases, partially offset by increased operating costs and expenses. Net income attributable to Holly Energy Partners for the second quarter was $20.2 million ($0.23 per basic and diluted limited partner unit) compared to $22.0 million ($0.29 per basic and diluted limited partner unit) for the second quarter of 2012. The decrease in net income attributable to Holly Energy Partners is due principally to allocations of income to noncontrolling interests.
Commenting on the second quarter of 2013, Matt Clifton, Chairman of the Board and Chief Executive Officer stated, "We are pleased with the improvement in distributable cash flow and EBITDA compared to the second quarter of 2012 and the first quarter of 2013. As expected, pipeline shipments improved this quarter following the major maintenance turnarounds at both HollyFrontier's Navajo refinery and Alon's Big Spring refinery in the first quarter of 2013. Looking forward, positive industry fundamentals combined with HEP's strong asset base and our planned capital projects should drive continued growth in our distributable cash flow."
Second Quarter 2013 Revenue Highlights
Revenues for the quarter were $75.3 million, a $6.6 million increase compared to the second quarter of 2012. The revenue increase was due to increased pipeline shipments and the effect of annual tariff increases. Overall pipeline volumes were up 11% compared to the three months ended June 30, 2012.
- Revenues from our refined product pipelines were $26.8 million, an increase of $2.4 million primarily due to increased refined product shipments and the effect of annual tariff increases. Shipments averaged 186.6 thousand barrels per day ("mbpd") compared to 158.2 mbpd for the second quarter of 2012.
- Revenues from our intermediate pipelines were $7.3 million, an increase of $0.6 million, on shipments averaging 142.4 mbpd compared to 137.1 mbpd for the second quarter of 2012.
- Revenues from our crude pipelines were $12.2 million, an increase of $1.2 million, on shipments averaging 184.3 mbpd compared to 168.0 mbpd for the second quarter of 2012.
- Revenues from terminal, tankage and loading rack fees were $29.0 million, an increase of $2.5 million compared to the second quarter of 2012. Refined products terminalled in our facilities averaged 333.9 mbpd compared to 316.8 mbpd for the second quarter of 2012.
Revenues for the three months ended June 30, 2013 include the recognition of $0.7 million of prior shortfalls billed to shippers in 2012, as they did not meet their minimum volume commitments within the contractual make-up period. As of June 30, 2013, shortfall deferred revenue in our consolidated balance sheet was $7.4 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.
Six Months Ended June 30, 2013 Revenue Highlights
Revenues for six months ended June 30, 2013 were $149.6 million, a $12.5 million increase compared to the first six months of quarter of 2012. This is due principally to a $4.8 million increase in deferred revenue realized, increased pipeline shipments in the second quarter and the effect of annual tariff increases.
- Revenues from our refined product pipelines were $53.9 million, an increase of $5.2 million primarily due to the effects of a $5.6 million increase in deferred revenue realized. Shipments averaged 167.0 thousand barrels per day ("mbpd") compared to 159.8 mbpd for the six months ended June 30, 2012.
- Revenues from our intermediate pipelines were $13.5 million, a decrease of $0.3 million, on shipments averaging 131.7 mbpd compared to 130.3 mbpd for the six months ended June 30, 2012. The decrease in revenue is due to the effects of a $0.7 million decrease in deferred revenue realized.
- Revenues from our crude pipelines were $23.8 million, an increase of $2.2 million, on shipments averaging 165.2 mbpd compared to 160.9 mbpd for the six months ended June 30, 2012.
- Revenues from terminal, tankage and loading rack fees were $58.5 million, an increase of $5.4 million compared to the six months ended June 30, 2012. This increase is due principally to increased tankage revenues. Refined products terminalled in our facilities averaged 324.8 mbpd compared to 315.7 mbpd for the six months ended June 30, 2012.
Revenues for six months ended June 30, 2013 include the recognition of $7.3 million of prior shortfalls billed to shippers in 2012, as they did not meet their minimum volume commitments within the contractual make-up period.
Operating Costs and Expenses Highlights
Operating costs and expenses were $42.8 million and $86.0 million for the three and six months ended June 30, 2013, representing increases of $4.2 million and $10.7 million over the respective periods of 2012. These increases are due to higher throughput levels on our assets, as well as year-over-year increases in maintenance costs, environmental accruals, employee costs and depreciation expense.
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=1018662.
An audio archive of this webcast will be available using the above noted link through August 13, 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, LLC, the owner of a Holly Energy operated refined products pipeline running from Utah to Las Vegas, Nevada, and related product terminals and a 25% interest in SLC Pipeline LLC, 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 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," "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. Such 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 additional operations in the future successfully;
- 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 and six months ended June 30, 2013.
|Three Months Ended June 30,|
|(In thousands, except per unit data)|
|Affiliates - refined product pipelines||$||16,952||$||15,520||$||1,432|
|Affiliates - intermediate pipelines||7,291||6,712||579|
|Affiliates - crude pipelines||12,187||10,994||1,193|
|Third parties - refined product pipelines||9,823||8,857||966|
|Terminals, tanks and loading racks:|
|Operating costs and expenses:|
|Depreciation and amortization||15,127||14,150||977|
|General and administrative||3,100||2,487||613|
|Equity in earnings of SLC Pipeline||746||794||(48||)|
|Interest expense, including amortization||(11,629||)||(11,324||)||(305||)|
|Loss on early extinguishment of debt||—||(383||)||383|
|Income before income taxes||21,641||19,203||2,438|
|State income tax expense||(344||)||(75||)||(269||)|
|Allocation of net loss attributable to Predecessors||—||2,192||(2,192||)|
|Allocation of net loss (income) attributable to noncontrolling interests||(1,130||)||683||(1,813||)|
|Net income attributable to Holly Energy Partners||20,167||22,003||(1,836||)|
|General partner interest in net income, including incentive distributions(1)||(6,680||)||(5,894||)||(786||)|
|Limited partners' interest in net income||$||13,487||$||16,109||$||(2,622||)|
|Limited partners' earnings per unit - basic and diluted:(1)||$||0.23||$||0.29||$||(0.06||)|
|Weighted average limited partners' units outstanding||58,657||54,722||3,935|
|Distributable cash flow(3)||$||36,065||$||34,520||$||1,545|
|Affiliates - refined product pipelines||119,519||101,886||17,633|
|Affiliates - intermediate pipelines||142,406||137,115||5,291|
|Affiliates - crude pipelines||184,267||168,047||16,220|
|Third parties - refined product pipelines||67,044||56,297||10,747|
|Terminals and loading racks:|
|Total for pipelines and terminal assets (bpd)||847,086||780,158||66,928|
|Six Months Ended June 30,||Change from|
|(In thousands, except per unit data)|
|Affiliates—refined product pipelines||$||33,723||$||30,376||$||3,347|
|Third parties—refined product pipelines||20,166||18,326||1,840|
|Terminals, tanks and loading racks:|
|Operating costs and expenses|
|Depreciation and amortization||29,281||28,450||831|
|General and administrative||6,332||4,526||1,806|
|Equity in earnings of SLC Pipeline||1,403||1,625||(222||)|
|Interest expense, including amortization||(24,113||)||(21,729||)||(2,384||)|
|Loss on early extinguishment of debt||—||(2,979||)||2,979|
|Gain on sale of assets||2,022||—||2,022|
|Income before income taxes||42,986||38,634||4,352|
|State income tax expense||(400||)||(150||)||(250||)|
|Allocation of net loss attributable to Predecessors||—||4,053||(4,053||)|
|Allocation of net loss (income) attributable to noncontrolling interests||(4,020||)||1,240||(5,260||)|
|Net income attributable to Holly Energy Partners||38,566||43,777||(5,211||)|
|General partner interest in net income, including incentive distributions (1)||12,910||11,398||1,512|
|Limited partners' interest in net income|