Exhibit 99.1
Press Release April 28, 2011 |
 |
Holly Energy Partners, L.P. Reports First Quarter Results
Dallas, Texas — Holly Energy Partners, L.P. (“HEP” or the “Partnership”) (NYSE-HEP) today reported
financial results for the first quarter of 2011. For the quarter, distributable cash flow was
$20.8 million, up $0.6 million, or 3% compared to first quarter of 2010. Based on these results,
HEP announced its 26th consecutive distribution increase on April 27, 2011, raising the
quarterly distribution from $0.845 to $0.855, representing a 5% increase over the distribution for
the first quarter of 2010.
For the quarter, net income was $15.2 million ($0.53 per basic and diluted limited partner unit)
compared to $10.7 million ($0.36 per basic and diluted limited partner unit) for the first quarter
of 2010. The increase in overall earnings is due principally to contributions from our March 2010
asset acquisitions and an increase in deferred revenue realized.
Commenting on the first quarter of 2011, Matt Clifton, Chairman of the Board and Chief Executive
Officer stated, “For the quarter, increased distributable cash flow over the same period of 2010
allowed us to declare our 27th consecutive distribution increase. EBITDA was $31.6
million, an increase of $6 million or 24% over last year’s first quarter. Although these results
were up on a year-over-year basis, our financial results were adversely affected by downtime at
Holly’s Navajo refinery during the quarter. As previously announced, the Navajo refinery
experienced a plant-wide power outage in late January, and inclement weather delayed the process of
restoring production to planned operating levels during the month of February.”
“The interconnect pipeline project at Holly’s Tulsa refinery is expected to be completed in the
summer and we are finalizing terms to provide throughput services under a long-term service
agreement with Holly. In addition, Holly expects the UNEV Pipeline to be mechanically complete
later in the summer. Looking forward, we will continue to explore other internal projects and
potential acquisitions to provide further growth in our distributable cash flow, asset base and
geographic footprint — including potential drop-down opportunities that are expected to result
from Holly’s announced merger with Frontier Oil,” Clifton said.
First Quarter 2011 Revenue Highlights
Revenues for the quarter were $45 million, a $4.3 million increase compared to the first quarter of
2010. This was due to revenues attributable to our March 2010 asset acquisitions and a $1.1
million increase in previously deferred revenue realized. Overall pipeline shipments were down
slightly from the first quarter of 2010, reflecting an 8% decrease in affiliate pipeline shipments
that was for the most part offset by an increase in third-party pipeline shipments.
Related-party pipeline and throughput volumes were down during the current year first quarter as a
result of downtime at Holly’s Navajo refinery following the plant-wide power outage in late January
and subsequent delay in restoring production to planned levels during February. Production levels
at the Navajo refinery were down also during the first quarter of 2010 as a result of planned
project work.
| • | Revenues from our refined product pipelines were $19 million, an increase of $2.1
million including a $1.7 million increase in previously deferred revenue realized.
Shipments averaged 125.7 thousand barrels per day (“mbpd”) compared to 124.2 mbpd for the
first quarter of 2010. |
| • | Revenues from our intermediate pipelines were $4.6 million, a decrease of $1.2 million
including a $0.6 million decrease in previously deferred revenue realized. Shipments
averaged 68.6 mbpd compared to 79.1 mbpd for the first quarter of 2010. |
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| • | Revenues from our crude pipelines were $9.3 million, a decrease of $0.1 million, on
shipments averaging 136.3 mbpd compared to 134.9 mbpd for the first quarter of 2010. |
| • | Revenues from terminal, tankage and loading rack fees were $12.1 million, an increase of
$3.4 million compared to the first quarter of 2010, reflecting revenues attributable to our
Tulsa storage and rack facilities acquired from Holly in March 2010. |
Revenues for the three months ended March 31, 2011 include the recognition of $3.6 million of prior
shortfalls billed to shippers in 2010, as they did not meet their minimum volume commitments in any
of the subsequent four quarters. As of March 31, 2011, deferred revenue in our consolidated
balance sheet was $9.3 million. Such deferred revenue will be recognized in earnings either as
payment for shipments in excess of guaranteed levels or when shipping rights expire unused over the
next four quarters.
Cost and Expense Highlights
Operating costs and expenses were $21.8 million for the three months ended March 31, 2011,
representing a decrease of $1 million compared to the same period of 2010. Operating costs for the
first quarter of 2010 include higher professional fees and costs due to our March 2010 asset
acquisitions from Holly.
Additionally, interest expense was $8.5 million for the three months ended March 31, 2011,
representing an increase of $1 million compared to the same period of 2010. This increase reflects
interest on our 8.25% senior notes issued in March 2010.
We have scheduled a webcast conference call today at 4:00 PM Eastern Time to discuss financial
results. This webcast may be accessed at: http://www.videonewswire.com/event.asp?id=78729.
An audio archive of this webcast will be available using the above noted link through May 11, 2011.
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 Holly Corporation subsidiaries. The Partnership owns and operates petroleum product and
crude gathering pipelines, tankage and terminals in Texas, New Mexico, Arizona, Washington, Idaho,
Oklahoma and Utah. In addition, the Partnership owns a 25% interest in SLC Pipeline LLC, a 95-mile
intrastate pipeline system serving refineries in the Salt Lake City, Utah area.
Holly Corporation operates through its subsidiaries a 100,000 barrels-per-stream-day (“bpsd”)
refinery located in Artesia, New Mexico, a 31,000 bpsd refinery in Woods Cross, Utah and a 125,000
bpsd refinery in Tulsa, Oklahoma. A Holly Corporation subsidiary owns a 34% interest (including
the general partner interest) in the Partnership.
The following is a “safe harbor” statement under the Private Securities Litigation Reform Act of
1995: 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 in our terminals; |
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| • | the economic viability of Holly 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.
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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, 2011 and 2010.
| Three Months Ended | Change | |||||||||||
| March 31, | from | |||||||||||
| 2011 | 2010 | 2010 | ||||||||||
| (In thousands, except per unit data) | ||||||||||||
Revenues |
||||||||||||
Pipelines: |
||||||||||||
Affiliates — refined product pipelines |
$ | 9,858 | $ | 11,480 | $ | (1,622 | ) | |||||
Affiliates — intermediate pipelines |
4,633 | 5,792 | (1,159 | ) | ||||||||
Affiliates — crude pipelines |
9,321 | 9,405 | (84 | ) | ||||||||
| 23,812 | 26,677 | (2,865 | ) | |||||||||
Third parties — refined product pipelines |
9,155 | 5,404 | 3,751 | |||||||||
| 32,967 | 32,081 | 886 | ||||||||||
Terminals and loading racks: |
||||||||||||
Affiliates |
10,295 | 6,920 | 3,375 | |||||||||
Third parties |
1,755 | 1,695 | 60 | |||||||||
| 12,050 | 8,615 | 3,435 | ||||||||||
Total revenues |
45,017 | 40,696 | 4,321 | |||||||||
Operating costs and expenses |
||||||||||||
Operations |
12,796 | 13,060 | (264 | ) | ||||||||
Depreciation and amortization |
7,640 | 7,210 | 430 | |||||||||
General and administrative |
1,363 | 2,563 | (1,200 | ) | ||||||||
| 21,799 | 22,833 | (1,034 | ) | |||||||||
Operating income |
23,218 | 17,863 | 5,355 | |||||||||
Equity in earnings of SLC Pipeline |
740 | 481 | 259 | |||||||||
Interest income |
— | 3 | (3 | ) | ||||||||
Interest expense, including amortization |
(8,549 | ) | (7,544 | ) | (1,005 | ) | ||||||
Other |
(12 | ) | (7 | ) | (5 | ) | ||||||
| (7,821 | ) | (7,067 | ) | (754 | ) | |||||||
Income before income taxes |
15,397 | 10,796 | 4,601 | |||||||||
State income tax |
(228 | ) | (94 | ) | (134 | ) | ||||||
Net income |
15,169 | 10,702 | 4,467 | |||||||||
Less general partner interest in net income, including
incentive distributions (1) |
3,562 | 2,646 | 916 | |||||||||
Limited partners’ interest in net income |
$ | 11,607 | $ | 8,056 | $ | 3,551 | ||||||
Limited partners’ earnings per unit — basic and diluted |
$ | 0.53 | $ | 0.36 | $ | 0.17 | ||||||
Weighted average limited partners’ units outstanding |
22,079 | 22,079 | — | |||||||||
EBITDA (2) |
$ | 31,586 | $ | 25,547 | $ | 6,039 | ||||||
Distributable cash flow (3) |
$ | 20,772 | $ | 20,159 | $ | 613 | ||||||
Volumes (bpd) |
||||||||||||
Pipelines: |
||||||||||||
Affiliates — refined product pipelines |
77,218 | 93,382 | (16,164 | ) | ||||||||
Affiliates — intermediate pipelines |
68,617 | 79,118 | (10,501 | ) | ||||||||
Affiliates — crude pipelines |
136,257 | 134,889 | 1,368 | |||||||||
| 282,092 | 307,389 | (25,297 | ) | |||||||||
Third parties — refined product pipelines |
48,528 | 30,835 | 17,693 | |||||||||
| 330,620 | 338,224 | (7,604 | ) | |||||||||
Terminals and loading racks: |
||||||||||||
Affiliates |
157,932 | 163,796 | (5,864 | ) | ||||||||
Third parties |
40,356 | 34,843 | 5,513 | |||||||||
| 198,288 | 198,639 | (351 | ) | |||||||||
Total for pipelines and terminal assets (bpd) |
528,908 | 536,863 | (7,955 | ) | ||||||||
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| (1) | Net income 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. For
the three months ended March 31, 2011 and 2010, general partner incentive distributions
were $3.3 million and $2.5 million, respectively. Net income attributable to the limited
partners is divided by the weighted average limited partner units outstanding in computing
the limited partners’ per unit interest in net income. |
|
| (2) | Earnings before interest, taxes, depreciation and amortization (“EBITDA”) is calculated
as net income plus (i) interest expense, net of interest income, (ii) state income tax and
(iii) depreciation and amortization. EBITDA is not a calculation based upon U.S. 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 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, | ||||||||
| 2011 | 2010 | |||||||
| (In thousands) | ||||||||
Net income |
$ | 15,169 | $ | 10,702 | ||||
Add (subtract): |
||||||||
Interest expense |
8,259 | 5,886 | ||||||
Amortization of discount and deferred debt issuance costs |
290 | 194 | ||||||
Increase in interest expense — change in fair value
of interest rate swaps and swap settlement costs |
— | 1,464 | ||||||
Interest income |
— | (3 | ) | |||||
State income tax |
228 | 94 | ||||||
Depreciation and amortization |
7,640 | 7,210 | ||||||
EBITDA |
$ | 31,586 | $ | 25,547 | ||||
| (3) | Distributable cash flow is not a calculation based upon GAAP. However, the amounts
included in the calculation are derived from amounts separately presented in our
consolidated financial statements, with the exception of equity in excess cash flows over
earnings of SLC Pipeline and maintenance capital expenditures. Distributable cash flow
should not be considered in isolation or as an alternative to net income 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, | ||||||||
| 2011 | 2010 | |||||||
| (In thousands) | ||||||||
Net income |
$ | 15,169 | $ | 10,702 | ||||
Add (subtract): |
||||||||
Depreciation and amortization |
7,640 | 7,210 | ||||||
Amortization of discount and deferred debt
issuance costs |
290 | 194 | ||||||
Increase in interest
expense — change in fair value of interest rate
swaps and swap settlement costs |
— | 1,464 | ||||||
Equity in excess cash flows
over earnings of SLC Pipeline |
6 | 178 | ||||||
Increase (decrease) in deferred revenue |
(1,104 | ) | 1,108 | |||||
Maintenance capital expenditures* |
(1,229 | ) | (697 | ) | ||||
Distributable cash flow |
$ | 20,772 | $ | 20,159 | ||||
| * | 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. |
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| March 31, | December 31, | |||||||
| 2011 | 2010 | |||||||
| Balance Sheet Data | (In thousands) | |||||||
Cash and cash equivalents |
$ | 1,502 | $ | 403 | ||||
Working capital |
$ | 1,507 | $ | (7,758 | ) | |||
Total assets |
$ | 652,150 | $ | 643,273 | ||||
Long-term debt |
$ | 514,733 | $ | 491,648 | ||||
Partners’ equity (4) |
$ | 103,890 | $ | 109,372 | ||||
| (4) | As a master limited partnership, we distribute our available cash, which historically
has exceeded our net income 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. Additionally, if
the assets contributed and acquired from Holly while we were a consolidated variable
interest entity of Holly had been acquired from third parties, our acquisition cost in
excess of Holly’s basis in the transferred assets of $218 million would have been recorded
as increases to our properties and equipment and intangible assets instead of decreases to
partners’ equity. |
FOR FURTHER INFORMATION, Contact:
Bruce R. Shaw, Senior Vice President and
Chief Financial Officer
M. Neale Hickerson, Vice President,
Investor Relations
Holly Energy Partners, L.P.
214/871-3555
Holly Energy Partners, L.P.
214/871-3555
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