10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 ______________________________________________________________________________________

FORM 10-Q

 ______________________________________________________________________________________

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to _____________                    

Commission File Number: 1-32225

  _____________________________________________________________________________________

HOLLY ENERGY PARTNERS, L.P.

(Exact name of registrant as specified in its charter)

 ______________________________________________________________________________________

Delaware	20-0833098
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
2828 N. Harwood, Suite 1300
Dallas
Texas	75201
(Address of principal executive offices)	(Zip code)

(214) 871-3555

(Registrant’s telephone number, including area code)

________________________________________________________________

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Limited Partner Units	HEP	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes   ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐	Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes ☐ No  ☒

The number of the registrant’s outstanding common units at August 5, 2022, was 126,440,201.

Table of 19,

HOLLY ENERGY PARTNERS, L.P.

INDEX

	FORWARD-LOOKING STATEMENTS		3
PART I. FINANCIAL INFORMATION			5
	Item 1.	Financial Statements (Unaudited)	5
		Consolidated Balance Sheets	5
		Consolidated Statements of Income	6
		Consolidated Statements of Cash Flows	7
		Consolidated Statements of Equity	8
		Notes to Consolidated Financial Statements	9
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	39
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	56
	Item 4.	Controls and Procedures	56
PART II. OTHER INFORMATION			57
	Item 1.	Legal Proceedings	57
	Item 1A.	Risk Factors	57
	Item 6.	Exhibits	57
		Index to Exhibits	58
		SIGNATURES	59

- 2 -

Table of 19,

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains certain “forward-looking statements” within the meaning of the federal securities laws. All statements, other than statements of historical fact included in this Form 10-Q, including, but not limited to, statements regarding funding of capital expenditures and distributions, distributable cash flow coverage and leverage targets, and statements under “Results of Operations” and “Liquidity and Capital Resources” in Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part I are forward-looking statements. Forward-looking statements use words such as “anticipate,” “expect,” “project,” “will,” “plan,” “goal,” “forecast,” “intend,” “should,” “would,” “could,” “believe,” “may,” and similar expressions and statements regarding our plans and objectives for future operations are intended to identify forward-looking statements. 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:

•HF Sinclair Corporation’s (“HF Sinclair”) and our ability to successfully integrate the Sinclair Oil Corporation (now known as Sinclair Oil LLC (“Sinclair Oil”)) and Sinclair Transportation Company LLC (“Sinclair Transportation”) businesses acquired from The Sinclair Companies (now known as REH Company), referred to herein as “Sinclair HoldCo”) with our existing operations and fully realize the expected synergies of the Sinclair Transactions (as defined herein) or on the expected timeline;

•the demand for and supply of crude oil and refined products, including uncertainty regarding the effects of the continuing COVID-19 pandemic on future demand and increasing societal expectations that companies address climate change;

•risks and uncertainties with respect to the actual quantities of petroleum products and crude oil shipped on our pipelines and/or terminalled, stored or throughput in our terminals and refinery processing units;

•the economic viability of HF Sinclair, our other customers and our joint ventures’ other customers, including any refusal or inability of our or our joint ventures’ customers or counterparties to perform their obligations under their contracts;

•the demand for refined petroleum products in the 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 temporary or permanent reductions in production or shutdowns at refineries utilizing our pipelines, terminal facilities and refinery processing units, due to reasons such as infection in the workforce, in response to reductions in demand, accidents, unexpected leaks or spills, unscheduled shutdowns, weather events, civil unrest, expropriation of assets, and other economic, diplomatic, legislative, or political events or developments, terrorism, cyberattacks, or other catastrophes or disruptions affecting our operations, terminal facilities, machinery, pipelines and other logistics assets, equipment, or information systems, or any of the foregoing of our suppliers, customers, or third-party service providers or lower gross margins due to the economic impact of the COVID-19 pandemic, inflation and labor costs, and any potential asset impairments resulting from such actions;

•the effects of current and future government regulations and policies, including the effects of current and future restrictions on various commercial and economic activities in response to the COVID-19 pandemic and increases in interest rates;

•delay by government authorities in issuing permits necessary for our business or our capital projects;

•our and our joint venture partners’ ability to complete and maintain operational efficiency in carrying out routine operations and capital construction projects;

- 3 -

Table of 19,

•the possibility of terrorist or cyberattacks and the consequences of any such attacks;

•uncertainty regarding the effects and duration of global hostilities and any associated military campaigns which may disrupt crude oil supplies and markets for refined products and create instability in the financial markets that could restrict our ability to raise capital;

•general economic conditions, including uncertainty regarding the timing, pace and extent of an economic recovery in the United States;

•the impact of recent or proposed changes in the tax laws and regulations that affect master limited partnerships; and

•other financial, operational and legal risks and uncertainties detailed from time to time in our Securities and Exchange Commission (the “SEC”) filings.

Cautionary statements identifying important factors that could cause actual results to differ materially from our expectations are set forth in this Form 10-Q, including, without limitation, the forward-looking statements that are referred to above. You should not put any undue reliance on any forward-looking statements. When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements set forth in our Annual Report on Form 10-K for the year ended December 31, 2021, and in this Quarterly Report on Form 10-Q in “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” All forward-looking statements included in this Form 10-Q and all subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. 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.

- 4 -

Table of 19,

PART I. FINANCIAL INFORMATION

Item 1.Financial Statements

HOLLY ENERGY PARTNERS, L.P.

CONSOLIDATED BALANCE SHEETS

(In thousands, except unit data)

	June 30, 2022		December 31, 2021
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents (Cushing Connect VIEs: $4,596 and $8,881, respectively)	$	14,884	$	14,381
Accounts receivable:
Trade	13,583		12,745
Affiliates	58,969		56,154
	72,552		68,899
Prepaid and other current assets	11,969		11,033
Total current assets	99,405		94,313
Properties and equipment, net	1,426,492		1,329,028
Operating lease right-of-use assets, net	2,502		2,275
Net investment in leases (Cushing Connect VIEs: $100,866 and $100,042, respectively)	542,281		309,303
Intangible assets, net	66,304		73,307
Goodwill	314,418		223,650
Equity method investments (Cushing Connect VIEs: $35,955 and $37,505, respectively)	280,472		116,378
Deferred turnaround costs	25,813		2,632
Other assets	17,351		14,981
Total assets	$	2,775,038	$	2,165,867
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable:
Trade (Cushing Connect VIEs: $3,427 and $8,285, respectively)	$	25,104	$	28,577
Affiliates	12,696		11,703
	37,800		40,280
Accrued interest	17,963		11,258
Deferred revenue	13,770		14,585
Accrued property taxes	7,145		4,542
Current operating lease liabilities	963		620
Current finance lease liabilities	3,857		3,786
Other current liabilities	2,648		1,781
Total current liabilities	84,146		76,852
Long-term debt	1,608,460		1,333,049
Noncurrent operating lease liabilities	2,006		2,030
Noncurrent finance lease liabilities	62,838		64,649
Other long-term liabilities	23,072		12,527
Deferred revenue	28,865		29,662
Class B unit	58,461		56,549
Equity:
Partners’ equity:
Common unitholders (126,440,201 and 105,440,201 units issued and outstanding     at June 30, 2022 and December 31, 2021, respectively)	837,785		443,017
Noncontrolling interests	69,405		147,532
Total equity	907,190		590,549
Total liabilities and equity	$	2,775,038	$	2,165,867

See accompanying notes.

- 5 -

Table of 19,

HOLLY ENERGY PARTNERS, L.P.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(In thousands, except per unit data)

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Revenues:
Affiliates	$	110,537	$	99,142	$	202,791	$	201,068
Third parties	25,233		27,093		53,177		52,350
	135,770		126,235		255,968		253,418
Operating costs and expenses:
Operations (exclusive of depreciation and amortization)	53,899		42,068		96,524		83,433
Depreciation and amortization	26,974		25,003		49,161		50,068
General and administrative	4,682		2,847		8,994		5,815
Goodwill impairment	—		—		—		11,034
	85,555		69,918		154,679		150,350
Operating income	50,215		56,317		101,289		103,068
Other income (expense):
Equity in earnings of equity method investments	5,447		3,423		9,073		5,186
Interest expense	(20,347)		(13,938)		(33,986)		(27,178)
Interest income	24,331		6,614		36,978		13,162
Gain on sales-type leases	—		27		—		24,677
Gain on sale of assets and other	45		5,415		146		5,917
	9,476		1,541		12,211		21,764
Income before income taxes	59,691		57,858		113,500		124,832
State income tax expense	(14)		(27)		(45)		(64)
Net income	59,677		57,831		113,455		124,768
Allocation of net income attributable to noncontrolling interests	(2,885)		(2,086)		(7,104)		(4,626)
Net income attributable to the partners	56,792		55,745		106,351		120,142
Limited partners’ per unit interest in earnings—basic and diluted	$	0.45	$	0.53	$	0.90	$	1.14
Weighted average limited partners’ units outstanding	126,440		105,440		118,087		105,440

Net income and comprehensive income are the same in all periods presented.

See accompanying notes.

- 6 -

Table of 19,

HOLLY ENERGY PARTNERS, L.P.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

	Six Months Ended June 30,
	2022		2021
Cash flows from operating activities
Net income	$	113,455	$	124,768
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	49,161		50,068
Gain on sale of assets	(25)		(5,586)
Gain on sales-type leases	—		(24,677)
Goodwill impairment	—		11,034
Amortization of deferred charges	1,803		2,229
Equity-based compensation expense	1,227		1,210
Equity in earnings of equity method investments, net of distributions	933		—
(Increase) decrease in operating assets:
Accounts receivable—trade	1,071		1,726
Accounts receivable—affiliates	(2,815)		1,649
Prepaid and other current assets	60		825
Increase (decrease) in operating liabilities:
Accounts payable—trade	1,355		3,068
Accounts payable—affiliates	993		(3,157)
Accrued interest	6,705		(23)
Deferred revenue	(1,612)		(2,176)
Accrued property taxes	1,630		1,065
Other current liabilities	77		438
Turnaround expenditures	(24,158)		(882)
Other, net	2,626		529
Net cash provided by operating activities	152,486		162,108
Cash flows from investing activities
Additions to properties and equipment	(23,246)		(59,375)
Acquisition of Sinclair Transportation	(321,366)		—
Proceeds from sale of assets	33		7,343
Distributions in excess of equity in earnings of equity investments	6,589		3,107
Net cash used for investing activities	(337,990)		(48,925)
Cash flows from financing activities
Borrowings under credit agreement	410,000		141,000
Repayments of credit agreement borrowings	(529,000)		(184,500)
Proceeds from issuance of debt	400,000		—
Contributions from noncontrolling interests	—		17,593
Distributions to HEP unitholders	(81,333)		(75,356)
Distributions to noncontrolling interests	(5,308)		(5,872)
Payments on finance leases	(1,776)		(1,747)
Deferred financing costs	(6,343)		(6,661)
Units withheld for tax withholding obligations	(65)		(69)
Other	(168)		—
Net cash provided (used) by financing activities	186,007		(115,612)
Cash and cash equivalents
Increase (decrease) for the period	503		(2,429)
Beginning of period	14,381		21,990
End of period	$	14,884	$	19,561
Supplemental disclosure of cash flow information
Cash paid during the period for interest	$25,814		$25,072

See accompanying notes.

- 7 -

Table of 19,

HOLLY ENERGY PARTNERS, L.P.

CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

(In thousands)

	Common Units		Noncontrolling Interests		Total Equity
Balance December 31, 2021	$	443,017	$	147,532	$	590,549
Issuance of common units	349,020		—		349,020
Distributions to HEP unitholders	(36,997)		—		(36,997)
Distributions to noncontrolling interests	—		(877)		(877)
Acquisition of remaining UNEV interests	16,537		(78,187)		(61,650)
Amortization of restricted and performance units	620		—		620
Class B unit accretion	(956)		—		(956)
Other	(147)		—		(147)
Net income	50,515		3,263		53,778
Balance March 31, 2022	$	821,609	$	71,731	$	893,340
Distributions to HEP unitholders	(44,336)		—		(44,336)
Distributions to noncontrolling interest	—		(4,431)		(4,431)
Acquisition of remaining UNEV interests	3,198		177		3,375
Amortization of restricted and performance units	607		—		607
Class B unit accretion	(956)		—		(956)
Other	(86)		—		(86)
Net income	57,749		1,928		59,677
Balance June 30, 2022	$	837,785	$	69,405	$	907,190

	Common Units		Noncontrolling Interests		Total Equity
Balance December 31, 2020	$	379,292	$	126,066	$	505,358
Capital Contribution - Cushing Connect	—		9,746		9,746
Distributions to HEP unitholders	(38,328)		—		(38,328)
Distributions to noncontrolling interests	—		(3,819)		(3,819)
Amortization of restricted and performance units	683		—		683
Class B unit accretion	(893)		—		(893)
Other	(68)		—		(68)
Net income	65,290		1,647		66,937
Balance March 31, 2021	$	405,976	$	133,640	$	539,616
Contributions from noncontrolling interest	—		9,780		9,780
Distributions to HEP unitholders	(37,028)		—		(37,028)
Distributions to noncontrolling interest	—		(2,053)		(2,053)
Equity-based compensation	527		—		527
Class B unit accretion	(894)		—		(894)
Other	(2)		—		(2)
Net income	56,639		1,192		57,831
Balance June 30, 2021	$	425,218	$	142,559	$	567,777

See accompanying notes.

- 8 -

Table of 19,

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1:Description of Business and Presentation of Financial Statements

Holly Energy Partners, L.P. (“HEP”), together with its consolidated subsidiaries, is a publicly held master limited partnership. We commenced operations on July 13, 2004, upon the completion of our initial public offering. On March 14, 2022 (the “Closing Date”), HollyFrontier Corporation (“HFC”) and HEP announced the establishment of HF Sinclair Corporation, a Delaware corporation (“HF Sinclair”), as the new parent holding company of HFC and HEP and their subsidiaries, and the completion of their respective acquisitions of Sinclair Oil Corporation (now known as Sinclair Oil LLC (“Sinclair Oil”)) and Sinclair Transportation Company LLC (“Sinclair Transportation”) from The Sinclair Companies (now known as REH Company and referred to herein as “Sinclair HoldCo”). On the Closing Date, pursuant to that certain Business Combination Agreement, dated as of August 2, 2021 (as amended on March 14, 2022, the “Business Combination Agreement”), by and among HFC, HF Sinclair (formerly known as Hippo Parent Corporation), Hippo Merger Sub, Inc., a wholly owned subsidiary of HF Sinclair (“Parent Merger Sub”), Sinclair HoldCo, and Hippo Holding LLC, a wholly owned subsidiary of Sinclair HoldCo (the “Target Company”), HF Sinclair completed its acquisition of the Target Company by effecting (a) a holding company merger in accordance with Section 251(g) of the Delaware General Corporation Law whereby HFC merged with and into Parent Merger Sub, with HFC surviving such merger as a direct wholly owned subsidiary of HF Sinclair (the “HFC Merger”), and (b) immediately following the HFC Merger, a contribution whereby Sinclair HoldCo contributed all of the equity interests of the Target Company to HF Sinclair in exchange for shares of HF Sinclair, resulting in the Target Company becoming a direct wholly owned subsidiary of HF Sinclair (together with the HFC Merger, the “HFC Transactions”).

As of June 30, 2022, HF Sinclair and its subsidiaries owned a 47% limited partner interest and the non-economic general partner interest in HEP.

In connection with the closing of the HFC Transactions, HF Sinclair issued 60,230,036 shares of HF Sinclair common stock to Sinclair HoldCo, representing 27.0% of the pro forma equity of HF Sinclair with a value of approximately $2,149 million based on HFC’s fully diluted shares of common stock outstanding and closing stock price on March 11, 2022. References herein to HF Sinclair with respect to time periods prior to March 14, 2022 refer to HFC and its consolidated subsidiaries and do not include the Target Company, Sinclair Transportation or their respective consolidated subsidiaries. References herein to HF Sinclair with respect to time periods from and after March 14, 2022 refer to HF Sinclair and its consolidated subsidiaries, which includes the operations of the combined Sinclair HoldCo businesses.

Additionally, on the Closing Date, pursuant to that certain Contribution Agreement, dated August 2, 2021 (as amended on March 14, 2022, the “Contribution Agreement”) by and among Sinclair HoldCo, Sinclair Transportation and HEP, HEP acquired all of the outstanding equity interests of Sinclair Transportation from Sinclair HoldCo in exchange for 21 million newly issued common limited partner units of HEP (the “HEP Units”), representing 16.6% of the pro forma outstanding HEP Units with a value of approximately $349 million based on HEP’s fully diluted common limited partner units outstanding and closing unit price on March 11, 2022, and cash consideration equal to $321.4 million, inclusive of estimated working capital adjustments pursuant to the Contribution Agreement for an aggregate transaction value of $670.4 million (the “HEP Transaction” and together with the HFC Transactions, the “Sinclair Transactions”). Of the 21 million HEP Units, 5.29 million units are currently held in escrow to secure Sinclair HoldCo’s renewable identification numbers (“RINs”) credit obligations to HF Sinclair under Section 6.22 of the Business Combination Agreement. HF Sinclair, and not HEP, would be entitled to the HEP common units held in escrow in the event of Sinclair HoldCo’s breach of its RINs credit obligations under the Business Combination Agreement. The cash consideration was funded through a draw under HEP’s senior secured revolving credit facility. The HEP Transaction was conditioned on the closing of the HFC Transactions, which occurred immediately following the HEP Transaction.

Sinclair Transportation, which together with its subsidiaries, owns integrated crude and refined products pipelines and terminal assets, including approximately 1,200 miles of integrated crude and refined product pipeline supporting the Sinclair HoldCo refineries and other third party refineries, eight product terminals and two crude terminals with approximately 4.5 million barrels of operated storage. In addition, HEP acquired Sinclair Transportation’s interests in three pipeline joint ventures for crude gathering and product offtake.

- 9 -

References herein to HEP with respect to time periods prior to March 14, 2022, include HEP and its consolidated subsidiaries and do not include Sinclair Transportation and its consolidated subsidiaries (collectively, the “Acquired Sinclair Businesses”). References herein to HEP with respect to time periods from and after March 14, 2022 include the operations of the Acquired Sinclair Businesses.

Through our subsidiaries and joint ventures, we own and/or operate petroleum product and crude oil pipelines, terminal, tankage and loading rack facilities and refinery processing units that support refining and marketing operations of HF Sinclair and other refineries in the Mid-Continent, Southwest and Northwest regions of the United States. Additionally, we own (a) a 50% interest in Osage Pipe Line Company, LLC (“Osage”), (b) a 50% interest in Cheyenne Pipeline LLC, (c) a 50% interest in Cushing Connect Pipeline & Terminal LLC, (d) a 25.06% interest in Saddle Butte Pipeline III, LLC and (e) a 49.995% interest in Pioneer Investments Corp. Following the HEP Transaction, we now own the remaining 25% interest in UNEV Pipeline, LLC and as a result, UNEV Pipeline, LLC is our wholly owned subsidiary.

On June 1, 2020, HFC announced plans to permanently cease petroleum refining operations at its Cheyenne Refinery (the “Cheyenne Refinery”) and to convert certain assets at that refinery to renewable diesel production. HFC subsequently began winding down petroleum refining operations at the Cheyenne Refinery on August 3, 2020.

On February 8, 2021, HEP and HFC finalized and executed new agreements for HEP’s Cheyenne assets with the following terms, in each case effective January 1, 2021: (1) a ten-year lease with two five-year renewal option periods for HFC’s (and now HF Sinclair’s) use of certain HEP tank and rack assets in the Cheyenne Refinery to facilitate renewable diesel production with an annual lease payment of approximately $5 million, (2) a five-year contango service fee arrangement that will utilize HEP tank assets inside the Cheyenne Refinery where HFC (and now HF Sinclair) will pay a base tariff to HEP for available crude oil storage and HFC (and now HF Sinclair) and HEP will split any profits generated on crude oil contango opportunities and (3) a $10 million one-time cash payment from HFC to HEP for the termination of the existing minimum volume commitment.

We operate in two reportable segments, a Pipelines and Terminals segment and a Refinery Processing Unit segment. Disclosures around these segments are discussed in Note 16.

We generate revenues by charging tariffs for transporting petroleum products and crude oil through our pipelines, by charging fees for terminalling and storing refined products and other hydrocarbons, providing other services at our storage tanks and terminals and by charging a tolling fee per barrel or thousand standard cubic feet of feedstock throughput in our refinery processing units. We do not take ownership of products that we transport, terminal, store or process, and therefore, we are not exposed directly to changes in commodity prices.

The consolidated financial statements included herein have been prepared without audit, pursuant to the rules and regulations of the SEC. The interim financial statements reflect all adjustments, which, in the opinion of management, are necessary for a fair presentation of our results for the interim periods. Such adjustments are considered to be of a normal recurring nature. Although certain notes and other information required by U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted, we believe that the disclosures in these consolidated financial statements are adequate to make the information presented not misleading. These consolidated financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2021. Results of operations for interim periods are not necessarily indicative of the results of operations that will be realized for the year ending December 31, 2022.

Principles of Consolidation and Common Control Transactions

The consolidated financial statements include our accounts and those of subsidiaries and joint ventures that we control. All significant intercompany transactions and balances have been eliminated.

Most of our acquisitions from HFC occurred while we were a consolidated variable interest entity (“VIE”) of HFC. Therefore, as an entity under common control with HFC, we recorded these acquisitions on our balance sheets at HFC's historical basis instead of our purchase price or fair value.

Goodwill and Long-lived Assets

Goodwill represents the excess of our cost of an acquired business over the fair value of the assets acquired, less liabilities assumed. Goodwill is not subject to amortization and is tested annually or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Our goodwill

- 10 -

impairment testing first entails either a quantitative assessment or an optional qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If we determine that based on the qualitative factors that it is more likely than not that the carrying amount of the reporting unit is greater than its fair value, a quantitative test is performed in which we estimate the fair value of the related reporting unit. If the carrying amount of a reporting unit exceeds its fair value, the goodwill of that reporting unit is impaired, and we measure goodwill impairment as the excess of the carrying amount of the reporting unit over the related fair value.

Indicators of Goodwill and Long-lived Asset Impairment

During the first quarter of 2021, changes in our agreements with HFC related to our Cheyenne assets resulted in an increase in the net book value of our Cheyenne reporting unit due to sales-type lease accounting, which led us to determine indicators of potential goodwill impairment for our Cheyenne reporting unit were present.

The estimated fair value of our Cheyenne reporting unit was derived using a combination of income and market approaches. The income approach reflects expected future cash flows based on anticipated gross margins, operating costs, and capital expenditures. The market approaches include both the guideline public company and guideline transaction methods. Both methods utilize pricing multiples derived from historical market transactions of other like-kind assets. These fair value measurements involve significant unobservable inputs (Level 3 inputs). See Note 6 for further discussion of Level 3 inputs.

Our interim impairment testing of our Cheyenne reporting unit goodwill identified an impairment charge of $11.0 million, which was recorded in the three months ended March 31, 2021.

We performed our annual goodwill impairment testing qualitatively as of July 1, 2021, and determined it was not more likely than not that the carrying amount of each reporting unit was greater than its fair value. Therefore, a quantitative test was not necessary, and no additional impairment of goodwill was recorded.

We evaluate long-lived assets, including finite-lived intangible assets, for potential impairment by identifying whether indicators of impairment exist and, if so, assessing whether the long-lived assets are recoverable from estimated future undiscounted cash flows. The actual amount of impairment loss, if any, to be recorded is equal to the amount by which a long-lived asset’s carrying value exceeds its fair value.

Revenue Recognition

Revenues are generally recognized as products are shipped through our pipelines and terminals, feedstocks are processed through our refinery processing units or other services are rendered. The majority of our contracts with customers meet the definition of a lease since (1) performance of the contracts is dependent on specified property, plant, or equipment and (2) it is unlikely that one or more parties other than the customer will take more than a minor amount of the output associated with the specified property, plant, or equipment. Prior to the adoption of the new lease standard (see below), we bifurcated the consideration received between lease and service revenue. The new lease standard allows the election of a practical expedient whereby a lessor does not have to separate non-lease (service) components from lease components under certain conditions. The majority of our contracts meet these conditions, and we have made this election for those contracts. Under this practical expedient, we treat the combined components as a single performance obligation in accordance with Accounting Standards Codification (“ASC”) 606, which largely codified ASU 2014-09, if the non-lease (service) component is the dominant component. If the lease component is the dominant component, we treat the combined components as a lease in accordance with ASC 842, which largely codified ASU 2016-02.

Several of our contracts include incentive or reduced tariffs once a certain quarterly volume is met. Revenue from the variable element of these transactions is recognized based on the actual volumes shipped as it relates specifically to rendering the services during the applicable quarter.

The majority of our long-term transportation contracts specify minimum volume requirements, whereby, we bill a customer for a minimum level of shipments in the event a customer ships below their contractual requirements. If there are no future performance obligations, we will recognize these deficiency payments in revenue.

In certain of these throughput agreements, a customer may later utilize such shortfall billings as credit towards future volume shipments in excess of its minimum levels within its respective contractual shortfall make-up period. Such amounts represent an obligation to perform future services, which may be initially deferred and later recognized as revenue based on estimated future shipping levels, including the likelihood of a customer’s ability to utilize such amounts prior to the end of the contractual

- 11 -

shortfall make-up period. We recognize these deficiency payments in revenue when we do not expect we will be required to satisfy these performance obligations in the future based on the pattern of rights projected to be exercised by the customer. During the six months ended June 30, 2022 and 2021, we recognized $10.4 million and $8.8 million, respectively, of these deficiency payments in revenue, of which $1.9 million and $0.5 million, respectively, related to deficiency payments billed in prior periods.

We have other cost reimbursement provisions in our throughput / storage agreements providing that customers (including HF Sinclair) reimburse us for certain costs. Such reimbursements are recorded as revenue or deferred revenue depending on the nature of the cost. Deferred revenue is recognized over the remaining contractual term of the related throughput agreement.

Leases

We adopted ASC 842 effective January 1, 2019, and elected to adopt using the modified retrospective transition method and practical expedients, both of which are provided as options by the standard and further defined below.

Lessee Accounting

At inception, we determine if an arrangement is or contains a lease. Right-of-use assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our payment obligation under the leasing arrangement. Right-of-use assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. We use our estimated incremental borrowing rate (“IBR”) to determine the present value of lease payments as most of our leases do not contain an implicit rate. Our IBR represents the interest rate which we would pay to borrow, on a collateralized basis, an amount equal to the lease payments over a similar term in a similar economic environment. We use the implicit rate when readily determinable.

Operating leases are recorded in operating lease right-of-use assets and current and noncurrent operating lease liabilities on our consolidated balance sheet. Finance leases are included in properties and equipment, current finance lease liabilities and noncurrent finance lease liabilities on our consolidated balance sheet.

When renewal options are defined in a lease, our lease term includes an option to extend the lease when it is reasonably certain we will exercise that option. Leases with a term of 12 months or less are not recorded on our balance sheet, and lease expense is accounted for on a straight-line basis. In addition, as a lessee, we separate non-lease components that are identifiable and exclude them from the determination of net present value of lease payment obligations.

Lessor Accounting

Customer contracts that contain leases are generally classified as either operating leases, direct finance leases or sales-type leases. We consider inputs such as the lease term, fair value of the underlying asset and residual value of the underlying assets when assessing the classification.

Deferred Turnaround Costs

Our refinery processing units require regular major maintenance and repairs which are commonly referred to as “turnarounds.” The required frequency of the maintenance varies by unit, but generally is every four to five years. Turnaround costs are deferred and amortized over the period until the next scheduled turnaround.

Note 2:Sinclair Acquisition

HEP Transaction

On March 14, 2022, pursuant to the Contribution Agreement, HEP acquired all of the outstanding equity interests of Sinclair Transportation in exchange for 21 million newly issued HEP Units, representing 16.6% of the pro forma outstanding HEP Units with a value of approximately $349 million based on HEP’s fully diluted common limited partner units outstanding and closing unit price on March 11, 2022, and cash consideration equal to $321.4 million, inclusive of estimated working capital adjustments pursuant to the Contribution Agreement for an aggregate transaction value of $670.4 million. On the same date and immediately following the consummation of the HEP Transaction, pursuant to the Business Combination Agreement, Sinclair HoldCo contributed all of the equity interests of the Target Company to HF Sinclair in exchange for 60,230,036 shares of common stock in HF Sinclair, representing 27.0% of the pro forma equity of HF Sinclair with a value of approximately

- 12 -

$2,149 million based on HF Sinclair’s fully diluted shares of common stock outstanding and closing stock price on March 11, 2022.

On August 2, 2021, in connection with the Contribution Agreement, HEP, Holly Logistics Services, L.L.C., the ultimate general partner of HEP (“HLS”) and Navajo Pipeline Co., L.P., the sole member of HLS (the “Sole Member”), entered into a unitholders agreement (the “Unitholders Agreement”) by and among HEP, HLS, the Sole Member, Sinclair HoldCo and the stockholders of Sinclair HoldCo (each a “Unitholder” and collectively, the “Unitholders,” and along with Sinclair HoldCo and each of their permitted transferees, the “Sinclair Parties”), which became effective on the Closing Date.

Pursuant to the Unitholders Agreement, the Sinclair Parties have the right to nominate, and have nominated, one person to the board of directors of HLS until such time that (x) the Sinclair Parties beneficially own less than 10.5 million HEP Units or (y) the HEP Units beneficially owned by the Sinclair Parties constitute less than 5% of all outstanding HEP Units. The Unitholders Agreement also subjects 15.75 million of the HEP Units issued to the Sinclair Parties (the “Restricted Units”) to a “lock-up” period commencing on the Closing Date, during which the Sinclair Parties will be prohibited from selling the Restricted Units, except for certain permitted transfers. One-third of such Restricted Units will be released from such restrictions on the date that is six months after the closing, one-third of the Restricted Units will be released from such restrictions on the first anniversary of the Closing Date, and the remainder will be released from such restrictions on the date that is 15 months from the Closing Date.

Under the terms of the Contribution Agreement, HEP acquired Sinclair Transportation, which together with its subsidiaries, owned Sinclair HoldCo’s integrated crude and refined products pipelines and terminal assets, including approximately 1,200 miles of integrated crude and refined product pipelines supporting the Sinclair HoldCo refineries and other third-party refineries, eight product terminals and two crude terminals with approximately 4.5 million barrels of operated storage. In addition, HEP acquired Sinclair Transportation’s interests in three pipeline joint ventures for crude gathering and product offtake including: Saddle Butte Pipeline III, LLC (25.06% non-operated interest); Pioneer Pipeline (49.995% non-operated interest); and UNEV Pipeline (the 25% non-operated interest not already owned by HEP, resulting in UNEV Pipeline, LLC becoming a wholly owned subsidiary of HEP).

The HEP Transaction was accounted for as a business combination using the acquisition method of accounting, with the assets acquired and liabilities assumed at their respective acquisition date fair values at the Closing Date, with the excess consideration recorded as goodwill. The preliminary purchase consideration allocation resulted in the recognition of $90.8 million in goodwill.

The following tables present the preliminary purchase consideration and preliminary purchase price allocation to the assets acquired and liabilities assumed on March 14, 2022:

Preliminary Purchase Consideration (in thousands except for per share amounts)
HEP common units issued	21,000
Closing price per unit of HEP common units(1)	$	16.62
Purchase consideration paid in HEP common units	349,020
Cash consideration paid by HEP	325,000
Estimated Adjusted Payments HEP(2)	(3,634)
Total cash consideration	321,366
Total purchase consideration	$	670,386

(1) Based on the HEP closing unit price on March 11, 2022.

(2) Net of cash acquired

- 13 -

	(In thousands)
Assets Acquired
Accounts receivable	$	1,910
Prepaid and other current assets	59
Properties and equipment	357,819
Operating lease right-of-use assets	105
Other assets	3,500
Goodwill	90,768
Equity method investments	229,891
Total assets acquired	$	684,052
Liabilities Assumed
Accounts payable	1,528
Accrued property taxes	973
Other current liabilities	789
Operating lease liabilities	33
Noncurrent operating lease liabilities	72
Other long-term liabilities	10,271
Total liabilities assumed	$	13,666
Net assets acquired	$	670,386

The fair value of properties, plants and equipment was based on the combination of the cost and market approaches. Key assumptions in the cost approach include determining the replacement cost by evaluating recently published data and adjusting replacement cost for physical deterioration, functional and economic obsolescence. We used the market approach to measure the value of certain assets through an analysis of recent sales or offerings of comparable properties.

The fair value of the equity method investments were based on a combination of valuation methods including discounted cash flows and the guideline public company method.

The fair values discussed above were based on significant inputs that are not observable in the market and, therefore, represent Level 3 measurements. See Note 6.

The fair values of all other current receivable and payables were equivalent to their carrying values due to their short-term nature.

These fair value estimates are preliminary and, therefore, the final fair values of assets acquired and liabilities assumed and the resulting effect on our financial position may change once all needed information has become available, the working capital true-up is complete, and we finalize our valuations.

Our consolidated financial and operating results reflect the Sinclair Transportation operations beginning March 14, 2022. Our results of operations for the three months ended June 30, 2022 included revenue, interest income from sales-type leases and net income of $10.5 million, $14.5 million and $19.2 million, respectively, and revenue, interest income from sales-type leases and net income of $12.1 million, $17.2 million and $21.8 million for the period from March 14, 2022 through June 30, 2022, respectively, related to these operations.

For the six months ended June 30, 2022, we incurred $1.7 million in incremental direct acquisition and integration costs that principally relate to legal, advisory and other professional fees and are presented as general and administrative expenses in our statements of operations.

- 14 -

The following unaudited pro forma combined condensed financial data for the six months ended June 30, 2022 and the three and six months ended June 30, 2021 was derived from our historical financial statements giving effect to the HEP Transaction as if it had occurred on January 1, 2021. The below information reflects pro forma adjustments based on available information and certain assumptions that we believe are reasonable, including the depreciation of Sinclair Transportation’s fair-valued properties, plants and equipment.

Additionally, pro forma earnings include certain non-recurring charges, the substantial majority of which consist of transaction costs related to financial advisors, legal advisors, financial advisory and professional accounting services.

The pro forma results of operations do not include any contract adjustments to tariffs made after closing, cost savings or other synergies that may result from the HEP Transaction. The pro forma combined condensed financial data has been included for comparative purposes only and is not necessarily indicative of the results that might have occurred had the HEP Transaction taken place on January 1, 2021 and is not intended to be a projection of future results.

	Three Months Ended June 30,		Six Months Ended June 30,
	2021		2022		2021
	(In thousands)
Sales and other revenues	$	143,279	$	270,730	$	286,469
Net income attributable to the partners	$	62,739	$	107,574	$	133,164

Contemporaneous with the closing of the Sinclair Transactions, HEP and HFC amended certain intercompany agreements, including the master throughput agreement, to include within the scope of such agreements certain of the assets acquired by HEP pursuant to the Contribution Agreement.

Note 3:Investment in Joint Venture

On October 2, 2019, HEP Cushing LLC (“HEP Cushing”), a wholly owned subsidiary of HEP, and Plains Marketing, L.P. (“PMLP”), a wholly owned subsidiary of Plains All American Pipeline, L.P. (“Plains”), formed a 50/50 joint venture, Cushing Connect Pipeline & Terminal LLC (the “Cushing Connect Joint Venture”), for (i) the development and construction of a new 160,000 barrel per day common carrier crude oil pipeline (the “Cushing Connect Pipeline”) that connected the Cushing, Oklahoma crude oil hub to the Tulsa, Oklahoma refining complex owned by a subsidiary of HF Sinclair and (ii) the ownership and operation of 1.5 million barrels of crude oil storage in Cushing, Oklahoma (the “Cushing Connect JV Terminal”). The Cushing Connect JV Terminal went in service during the second quarter of 2020, and the Cushing Connect Pipeline was placed into service during the third quarter of 2021. Long-term commercial agreements have been entered into to support the Cushing Connect Joint Venture assets.

The Cushing Connect Joint Venture contracted with an affiliate of HEP to manage the construction and operation of the Cushing Connect Pipeline and with an affiliate of Plains to manage the operation of the Cushing Connect JV Terminal. The total Cushing Connect Joint Venture investment will generally be shared equally among the partners. However, we are solely responsible for any Cushing Connect Pipeline construction costs that exceed the budget by more than 10%. HEP estimates its share of the cost of the Cushing Connect JV Terminal contributed by Plains and Cushing Connect Pipeline construction costs are approximately $73 million, including approximately $5 million of Cushing Connect Pipeline construction costs exceeding the budget by more than 10% borne solely by HEP.

The Cushing Connect Joint Venture legal entities are variable interest entities (“VIEs”) as defined under GAAP. A VIE is a legal entity if it has any one of the following characteristics: (i) the entity does not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support; (ii) the at risk equity holders, as a group, lack the characteristics of a controlling financial interest; or (iii) the entity is structured with non-substantive voting rights. The Cushing Connect Joint Venture legal entities do not have sufficient equity at risk to finance their activities without additional financial support. Since HEP constructed and is operating the Cushing Connect Pipeline, HEP has more ability to direct the activities that most significantly impact the financial performance of the Cushing Connect Joint Venture and Cushing Connect Pipeline legal

- 15 -

entities. Therefore, HEP consolidates those legal entities. We do not have the ability to direct the activities that most significantly impact the Cushing Connect JV Terminal legal entity, and therefore, we account for our interest in the Cushing Connect JV Terminal legal entity using the equity method of accounting. HEP’s maximum exposure to loss as a result of its involvement with the Cushing Connect JV Terminal legal entity is not expected to be material due to the long-term terminalling agreements in place to support its operations.

With the exception of the assets of HEP Cushing, creditors of the Cushing Connect Joint Venture legal entities have no recourse to our assets. Any recourse to HEP Cushing would be limited to the extent of HEP Cushing's assets, which other than its investment in Cushing Connect Joint Venture, are not significant. Furthermore, our creditors have no recourse to the assets of the Cushing Connect Joint Venture legal entities.

Note 4:Revenues

Revenues are generally recognized as products are shipped through our pipelines and terminals, feedstocks are processed through our refinery processing units or other services are rendered. See Note 1 for further discussion of revenue recognition.

Disaggregated revenues were as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(In thousands)				(In thousands)
Pipelines	$	68,319	$	68,322	$	133,099	$	134,827
Terminals, tanks and loading racks	44,558		36,887		81,573		75,069
Refinery processing units	22,893		21,026		41,296		43,522
	$	135,770	$	126,235	$	255,968	$	253,418

Revenues on our consolidated statements of income were composed of the following lease and service revenues:

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(In thousands)				(In thousands)
Lease revenues	$	82,445	$	86,867	$	155,736	$	174,803
Service revenues	53,325		39,368		100,232		78,615
	$	135,770	$	126,235	$	255,968	$	253,418

A contract liability exists when an entity is obligated to perform future services for a customer for which the entity has received consideration. Since HEP may be required to perform future services for these deficiency payments received, the deferred revenues on our balance sheets were considered contract liabilities. A contract asset exists when an entity has a right to consideration in exchange for goods or services transferred to a customer. Our consolidated balance sheets included the contract assets and liabilities in the table below:

	June 30, 2022		December 31, 2021
	(In thousands)
Contract assets	$	6,727	$	6,637
Contract liabilities	$	(2,247)	$	(4,185)

The contract assets and liabilities include both lease and service components. During the six months ended June 30, 2022 and 2021, we recognized $1.9 million and $0.5 million, respectively, of revenue that was previously included in contract liability as

- 16 -

of December 31, 2021 and 2020, respectively. During the six months ended June 30, 2022 and 2021, we also recognized $0.1 million and $0.2 million, respectively, of revenue included in contract assets.

As of June 30, 2022, we expect to recognize $1.6 billion in revenue related to our unfulfilled performance obligations under the terms of our long-term throughput agreements and leases expiring in 2023 through 2037. These agreements generally provide for changes in the minimum revenue guarantees annually for increases or decreases in the Producer Price Index (“PPI”) or Federal Energy Regulatory Commission (“FERC”) index, with certain contracts having provisions that limit the level of the rate increases or decreases. We expect to recognize revenue for these unfulfilled performance obligations as shown in the table below (amounts shown in table include both service and lease revenues):

Years Ending December 31,	(In millions)
Remainder of 2022	$	182
2023	301
2024	266
2025	185
2026	170
2027	137
Thereafter	407
Total	$	1,648

Payment terms under our contracts with customers are consistent with industry norms and are typically payable within 10 to 30 days of the date of invoice.

Note 5:Leases

See Note 1 for further discussion of lease accounting.

Lessee Accounting

As a lessee, we lease land, buildings, pipelines, transportation and other equipment to support our operations. These leases can be categorized into operating and finance leases.

Our leases have remaining terms of less than 1 year to 23 years, some of which include options to extend the leases for up to 10 years.

Finance Lease Obligations

We have finance lease obligations related to vehicle leases with initial terms of 33 to 48 months. The total cost of assets under finance leases was $6.2 million and $6.0 million as of June 30, 2022 and December 31, 2021, respectively, with accumulated depreciation of $4.0 million and $3.6 million as of June 30, 2022 and December 31, 2021, respectively. We include depreciation of finance leases in depreciation and amortization in our consolidated statements of income.

In addition, we have a finance lease obligation related to a pipeline lease with an initial term of 10 years with one remaining subsequent renewal option for an additional 10 years.

- 17 -

Supplemental balance sheet information related to leases was as follows (in thousands, except for lease term and discount rate):

	June 30, 2022		December 31, 2021
Operating leases:
Operating lease right-of-use assets, net	$	2,502	$	2,275
Current operating lease liabilities	963		620
Noncurrent operating lease liabilities	2,006		2,030
Total operating lease liabilities	$	2,969	$	2,650
Finance leases:
Properties and equipment	$	6,160	$	6,031
Accumulated amortization	(4,013)		(3,632)
Properties and equipment, net	$	2,147	$	2,399
Current finance lease liabilities	$	3,857	$	3,786
Noncurrent finance lease liabilities	62,838		64,649
Total finance lease liabilities	$	66,695	$	68,435
Weighted average remaining lease term (in years):
Operating leases	4.8		5.8
Finance leases	14.6		15.0
Weighted average discount rate:
Operating leases	4.5%		4.8%
Finance leases	5.6%		5.6%

Supplemental cash flow and other information related to leases were as follows:

	Six Months Ended June 30,
	2022		2021
	(In thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows on operating leases	$	518	$	576
Operating cash flows on finance leases	$	1,950	$	2,105
Financing cash flows on finance leases	$	1,776	$	1,747

- 18 -

Maturities of lease liabilities were as follows:

	June 30, 2022
	Operating		Finance
	(In thousands)
2022	$	504	$	3,672
2023	935		7,383
2024	524		6,938
2025	443		6,479
2026	289		6,432
2027 and thereafter	501		67,463
Total lease payments	3,196		98,367
Less: Imputed interest	(227)		(31,672)
Total lease obligations	2,969		66,695
Less: Current lease liabilities	(963)		(3,857)
Noncurrent lease liabilities	$	2,006	$	62,838

The components of lease expense were as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(In thousands)
Operating lease costs	$	242	$	249	$	504	$	547
Finance lease costs
Amortization of assets	189		200		381		412
Interest on lease liabilities	946		994		1,905		2,001
Variable lease cost	23		67		59		133
Total net lease cost	$	1,400	$	1,510	$	2,849	$	3,093

Lessor Accounting

As discussed in Note 1, the majority of our contracts with customers meet the definition of a lease.

Substantially all of the assets supporting contracts meeting the definition of a lease have long useful lives, and we believe these assets will continue to have value when the current agreements expire due to our risk management strategy for protecting the residual fair value of the underlying assets by performing ongoing maintenance during the lease term. HF Sinclair generally has the option to purchase assets located within HF Sinclair refinery boundaries, including refinery tankage, truck racks and refinery processing units, at fair market value when the related agreements expire.

During the six months ended June 30, 2022, we entered into new agreements, and amended other agreements, with HFC related to our newly acquired Sinclair Transportation assets. Certain of these agreements met the criteria of sales-type leases. Under sales-type lease accounting, at the commencement date, the lessor recognizes a net investment in the lease, based on the estimated fair value of the underlying leased assets at contract inception, and derecognizes the underlying assets with the difference recorded as selling profit or loss arising from the lease. Because we recorded these assets at fair values under purchase price accounting, there was no gain or loss on these sales-type leases during the six months ended June 30, 2022. The balance sheet impacts were composed of the following:

	Six Months Ended June 30, 2022
	(In thousands)
Net investment in leases	$	235,620
Properties and equipment, net	(235,620)
Gain on sales-type leases	$	—

- 19 -

During the six months ended June 30, 2021, we entered into new agreements and modified other agreements with HF Sinclair related to our Cheyenne assets, Tulsa West lube racks, various crude tanks and new Navajo tanks. These agreements met the criteria of sales-type leases since the underlying assets are not expected to have an alternative use at the end of the lease terms to anyone other than HF Sinclair. Under sales-type lease accounting, at the commencement date, the lessor recognizes a net investment in the lease, based on the estimated fair value of the underlying leased assets at contract inception, and derecognizes the underlying assets with the difference recorded as selling profit or loss arising from the lease. Therefore, we recognized a gain on sales-type leases during the six months ended June 30, 2021 composed of the following:

	Six Months Ended June 30, 2021
	(In thousands)
Net investment in leases	$	47,795
Properties and equipment, net	(29,677)
Deferred revenue	6,559
Gain on sales-type leases	$	24,677

These sales-type lease transactions, including the related gain, were non-cash transactions.

Lease income recognized was as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(In thousands)
Operating lease revenues	$	76,538	$	84,426	$	146,891	$	170,698
Direct financing lease interest income	520		523		1,040		1,047
Gain on sales-type leases	—		27		—		24,677
Sales-type lease interest income	23,814		6,091		35,938		12,115
Lease revenues relating to variable lease payments not included in measurement of the sales-type lease receivable	5,906		2,441		8,846		4,105

For our sales-type leases, we included customer obligations related to minimum volume requirements in guaranteed minimum lease payments. Portions of our minimum guaranteed pipeline tariffs for assets subject to sales-type lease accounting are recorded as interest income with the remaining amounts recorded as a reduction in net investment in leases. We recognized any billings for throughput volumes in excess of minimum volume requirements as variable lease payments, and these variable lease payments were recorded in lease revenues.

- 20 -

Annual minimum undiscounted lease payments under our leases were as follows as of June 30, 2022:

	Operating		Finance		Sales-type
Years Ending December 31,	(In thousands)
Remainder of 2022	$	152,623	$	1,083	$	50,144
2023	272,169		2,175		96,383
2024	242,476		2,192		93,154
2025	166,290		2,209		89,727
2026	151,745		2,227		89,727
2027 and thereafter	473,243		36,610		841,406
Total lease receipt payments	$	1,458,546	$	46,496	$	1,260,541
Less: Imputed interest			(30,173)		(1,131,594)
			16,323		128,947
Unguaranteed residual assets at end of leases			—		402,895
Net investment in leases			$	16,323	$	531,842

Net investments in leases recorded on our balance sheet were composed of the following:

	June 30, 2022				December 31, 2021
	Sales-type Leases		Direct Financing Leases		Sales-type Leases		Direct Financing Leases
	(In thousands)				(In thousands)
Lease receivables (1)	$	426,582	$	16,323	$	207,768	$	16,371
Unguaranteed residual assets	105,260		—		90,097		—
Net investment in leases	$	531,842	$	16,323	$	297,865	$	16,371

(1)    Current portion of lease receivables included in prepaid and other current assets on the balance sheet.

Note 6:Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements are derived using inputs (assumptions that market participants would use in pricing an asset or liability) including assumptions about risk. GAAP categorizes inputs used in fair value measurements into three broad levels as follows:

•(Level 1) Quoted prices in active markets for identical assets or liabilities.

•(Level 2) Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, similar assets and liabilities in markets that are not active or can be corroborated by observable market data.

•(Level 3) Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes valuation techniques that involve significant unobservable inputs.

Financial Instruments

Our financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable, and debt. The carrying amounts of cash equivalents, accounts receivable and accounts payable approximate fair value due to the short-term maturity of these instruments. Debt consists of outstanding principal under our revolving credit agreement (which approximates fair value as interest rates are reset frequently at current interest rates) and our fixed interest rate senior notes.

- 21 -

The carrying amounts and estimated fair values of our senior notes were as follows:

		June 30, 2022		December 31, 2021
Financial Instrument	Fair Value Input Level	Carrying Value	Fair Value	Carrying Value	Fair Value
		(In thousands)
Liabilities:
5% Senior Notes	Level 2	493,541	430,710	493,049	502,705
6.375% Senior Notes	Level 2	393,919	377,996	—	—
Total Liabilities		887,460	808,706	493,049	502,705

Level 2 Financial Instruments

Our senior notes are measured at fair value using Level 2 inputs. The fair value of the senior notes is based on market values provided by a third-party bank, which were derived using market quotes for similar type debt instruments. See Note 10 for additional information.

Non-Recurring Fair Value Measurements

The HEP Transaction was accounted for as a business combination using the acquisition method of accounting, with the assets acquired and liabilities assumed at their respective acquisition date fair values at the Closing Date. The fair value measurements were based on a combination of valuation methods including discounted cash flows, the guideline public company method, the market approach and obsolescence adjusted replacement costs, all of which are Level 3 inputs.

For the net investments in sales-type leases recognized during the six months ended June 30, 2022, the estimated fair value of the underlying leased assets at contract inception and the present value of the estimated unguaranteed residual asset at the end of the lease term are used in determining the net investment in leases recorded. The asset valuation estimates include Level 3 inputs based on a replacement cost valuation method.

Note 7:Properties and Equipment 

The carrying amounts of our properties and equipment were as follows:

	June 30, 2022		December 31, 2021
	(In thousands)
Pipelines, terminals and tankage	$	1,611,170	$	1,527,697
Refinery assets	352,274		348,882
Land and right of way	124,984		98,837
Construction in progress	31,864		26,446
Other	63,372		48,203
	2,183,664		2,050,065
Less accumulated depreciation	(757,172)		(721,037)
	$	1,426,492	$	1,329,028

Depreciation expense was $40.8 million and $42.7 million for the six months ended June 30, 2022 and 2021, respectively, and includes depreciation of assets acquired under capital leases.

Note 8:Intangible Assets

Intangible assets include transportation agreements and customer relationships that represent a portion of the total purchase price of certain assets acquired from Delek US Holdings, Inc. (“Delek”) in 2005, from HFC in 2008 prior to HEP becoming a consolidated VIE of HFC, from Plains in 2017, and from other minor acquisitions in 2018.

- 22 -

The carrying amounts of our intangible assets were as follows:

	Useful Life	June 30, 2022		December 31, 2021
		(In thousands)
Delek transportation agreement	30 years	$	59,933	$	59,933
HF Sinclair transportation agreement	10-15 years	75,131		75,131
Customer relationships	10 years	69,683		69,683
Other	20 years	50		50
		204,797		204,797
Less accumulated amortization		(138,493)		(131,490)
		$	66,304	$	73,307

Amortization expense was $7.0 million for each of the six months ended June 30, 2022 and 2021. We estimate amortization expense to be $9.9 million for 2023, and $9.1 million for 2024 through 2027.

We have additional transportation agreements with subsidiaries of HF Sinclair resulting from historical transactions consisting of pipeline, terminal and tankage assets contributed to us or acquired from subsidiaries of HF Sinclair. These transactions occurred while we were a consolidated variable interest entity of HF Sinclair; therefore, our basis in these agreements is zero and does not reflect a step-up in basis to fair value.

Note 9:Employees, Retirement and Incentive Plans

Direct support for our operations is provided by HLS, which utilizes personnel employed by HF Sinclair who are dedicated to performing services for us. Their costs, including salaries, bonuses, payroll taxes, benefits and other direct costs, are charged to us monthly in accordance with an omnibus agreement that we have with HF Sinclair (the “Omnibus Agreement”). These employees participate in the retirement and benefit plans of HF Sinclair. Our share of retirement and benefit plan costs was $2.7 million and $1.9 million for the three months ended June 30, 2022 and 2021, respectively, and $5.1 million and $4.1 million for the six months ended June 30, 2022 and 2021, respectively.

Under HLS’s secondment agreement with HF Sinclair (the “Secondment Agreement”), certain employees of HF Sinclair are seconded to HLS to provide operational and maintenance services for certain of our processing, refining, pipeline and tankage assets, and HLS reimburses HF Sinclair for its prorated portion of the wages, benefits, and other costs related to these employees.

We have a Long-Term Incentive Plan for employees and non-employee directors who perform services for us. The Long-Term Incentive Plan consists of five components: restricted or phantom units, performance units, unit options, unit appreciation rights and cash awards. Our accounting policy for the recognition of compensation expense for awards with pro-rata vesting (a significant proportion of our awards) is to expense the costs ratably over the vesting periods.

As of June 30, 2022, we had two types of unit-based awards outstanding, which are described below. The compensation cost charged against income was $0.6 million and $0.5 million for the three months ended June 30, 2022 and 2021, respectively, and $1.2 million for both the six months ended June 30, 2022 and 2021. We currently purchase units in the open market instead of issuing new units for settlement of all unit awards under our Long-Term Incentive Plan. As of June 30, 2022, 2,500,000 units were authorized to be granted under our Long-Term Incentive Plan, of which 819,513 were available to be granted, assuming no forfeitures of the unvested units and full achievement of goals for the unvested performance units.

Phantom Units

Under our Long-Term Incentive Plan, we grant phantom units to our non-employee directors and selected employees who perform services for us, with most awards vesting over a period of one to three years. Although full ownership of the units does not transfer to the recipients until the units vest, the recipients have distribution rights on these units from the date of grant.

The fair value of each phantom unit award is measured at the market price as of the date of grant and is amortized on a straight-line basis over the requisite service period for each separately vesting portion of the award.

- 23 -

A summary of phantom unit activity and changes during the six months ended June 30, 2022, is presented below:

Phantom Units	Units	Weighted Average Grant-Date Fair Value
Outstanding at January 1, 2022 (nonvested)	203,263	$	14.85
Granted	4,313	17.40
Vesting and transfer of full ownership to recipients	(3,833)	15.54
Forfeited	(18,158)	14.60
Outstanding at June 30, 2022 (nonvested)	185,585	14.92

The grant date fair values of phantom units that were vested and transferred to recipients during the six months ended June 30, 2022 and 2021 were $60 thousand and $2 thousand, respectively. The grant date fair values of phantom units that were granted during the six months ended June 30, 2022 were $75 thousand. No units were granted during the six months ended June 30, 2021. As of June 30, 2022, $1.0 million of total unrecognized compensation expense related to unvested phantom unit grants is expected to be recognized over a weighted-average period of 1.0 year.

Performance Units

Under our Long-Term Incentive Plan, we grant performance units to selected officers who perform services for us. Performance units granted are payable in common units at the end of a three-year performance period based upon meeting certain criteria over the performance period. Under the terms of our performance unit grants, some awards are subject to the growth in our distributable cash flow per common unit over the performance period while other awards are subject to "financial performance" and "market performance." Financial performance is based on meeting certain earnings before interest, taxes, depreciation and amortization ("EBITDA") targets, while market performance is based on the relative standing of total unitholder return achieved by HEP compared to peer group companies. The number of units ultimately issued under these awards can range from 0% to 200%.

We did not grant any performance units during the six months ended June 30, 2022. Although common units are not transferred to the recipients until the performance units vest, the recipients have distribution rights with respect to the target number of performance units subject to the award from the date of grant at the same rate as distributions paid on our common units.

A summary of performance unit activity and changes for the six months ended June 30, 2022, is presented below:

Performance Units	Units
Outstanding at January 1, 2022 (nonvested)	76,719
Vesting and transfer of common units to recipients	(13,920)
Forfeited	(9,124)
Outstanding at June 30, 2022 (nonvested)	53,675

The grant date fair value of performance units vested and transferred to recipients during both the six months ended June 30, 2022 and 2021 was $0.4 million. Based on the weighted-average fair value of performance units outstanding at June 30, 2022, of $0.9 million, there was $0.5 million of total unrecognized compensation expense related to nonvested performance units, which is expected to be recognized over a weighted-average period of 1.3 years.

During the six months ended June 30, 2022, we did not purchase any of our common units in the open market for the issuance and settlement of unit awards under our Long-Term Incentive Plan.

- 24 -

Note 10:Debt

Credit Agreement

In April 2021, we amended our senior secured revolving credit facility (the “Credit Agreement”) decreasing the size of the facility from $1.4 billion to $1.2 billion and extending the maturity date to July 27, 2025. The Credit Agreement is available to fund capital expenditures, investments, acquisitions, distribution payments, working capital and for general partnership purposes. The Credit Agreement is also available to fund letters of credit up to a $50 million sub-limit and continues to provide for an accordion feature that allows us to increase commitments under the Credit Agreement up to a maximum amount of $1.7 billion.

Our obligations under the Credit Agreement are collateralized by substantially all of our assets, and indebtedness under the Credit Agreement is guaranteed by our material, wholly owned subsidiaries. The Credit Agreement requires us to maintain compliance with certain financial covenants consisting of total leverage, senior secured leverage, and interest coverage. It also limits or restricts our ability to engage in certain activities. If, at any time prior to the maturity of the Credit Agreement, HEP obtains two investment grade credit ratings, the Credit Agreement will become unsecured and many of the covenants, limitations, and restrictions will be eliminated.

We may prepay all loans at any time without penalty, except for tranche breakage costs. If an event of default exists under the Credit Agreement, the lenders will be able to accelerate the maturity of all loans outstanding and exercise other rights and remedies. We were in compliance with the covenants under the Credit Agreement as of June 30, 2022.

Senior Notes

On April 8, 2022, we closed a private placement of $400 million in aggregate principal amount of 6.375% senior unsecured notes due in 2027 (the “6.375% Senior Notes”). The 6.375% Senior Notes were issued at par for net proceeds of approximately $393 million, after deducting the initial purchasers’ discounts and commissions and estimated offering expenses. The total net proceeds from the offering of the 6.375% Senior Notes were used to partially repay outstanding borrowings under the Credit Agreement, increasing our available liquidity.

As of June 30, 2022, we had $500 million aggregate principal amount of 5% senior unsecured notes due in 2028 (the “5% Senior Notes,” and together with the 6.375% Senior Notes, the “Senior Notes”).

The Senior Notes are unsecured and impose certain restrictive covenants, including limitations on our ability to incur additional indebtedness, make investments, sell assets, incur certain liens, pay distributions, enter into transactions with affiliates, and enter into mergers. We were in compliance with the restrictive covenants for the Senior Notes as of June 30, 2022. At any time when the Senior Notes are rated investment grade by either Moody’s or Standard & Poor’s and no default or event of default exists, we will not be subject to many of the foregoing covenants. Additionally, we have certain redemption rights at varying premiums over face value under the Senior Notes.

Indebtedness under the Senior Notes is guaranteed by all of our existing wholly owned subsidiaries (other than Holly Energy Finance Corp. and certain immaterial subsidiaries).

- 25 -

Long-term Debt

The carrying amounts of our long-term debt were as follows:

	June 30, 2022		December 31, 2021
	(In thousands)
Credit Agreement
Amount outstanding	$	721,000	840,000
5% Senior Notes
Principal	500,000		500,000
Unamortized premium and debt issuance costs	(6,459)		(6,951)
	493,541		493,049
6.375% Senior Notes
Principal	400,000		—
Unamortized premium and debt issuance costs	(6,081)		—
	393,919		—
Total long-term debt	$	1,608,460	$	1,333,049

Note 11:Related Party Transactions

We serve HF Sinclair’s refineries under long-term pipeline, terminal and tankage throughput agreements, and refinery processing unit tolling agreements expiring from 2023 to 2037, and revenues from HF Sinclair accounted for 81% and 79% of our total revenues for the three and six months ended June 30, 2022, respectively. Under these agreements, HF Sinclair agrees to transport, store and process throughput volumes of refined product, crude oil and feedstocks on our pipelines, terminals, tankage, loading rack facilities and refinery processing units that result in minimum annual payments to us. These minimum annual payments or revenues are generally subject to annual rate adjustments on July 1st each year based on increases or decreases in PPI or the FERC index. As of July 1, 2022, these agreements with HF Sinclair require minimum annualized payments to us of $445.9 million.

If HF Sinclair fails to meet its minimum volume commitments under the agreements in any quarter, it will be required to pay us the amount of any shortfall in cash by the last day of the month following the end of the quarter. Under certain of these agreements, a shortfall payment may be applied as a credit in the following four quarters after its minimum obligations are met.

Under certain provisions of the Omnibus Agreement, we pay HF Sinclair an annual administrative fee (currently $5.0 million) for the provision by HF Sinclair or its affiliates of various general and administrative services to us. In connection with the HEP Transaction, we pay HF Sinclair a temporary monthly fee of $62,500 relating to transition services to be provided to HEP by HF Sinclair. Neither the annual administrative fee nor the temporary monthly fee includes the salaries of personnel employed by HF Sinclair who perform services for us on behalf of HLS or the cost of their employee benefits, which are charged to us separately by HF Sinclair. Also, we reimburse HF Sinclair and its affiliates for direct expenses they incur on our behalf.

Related party transactions with HF Sinclair and its subsidiaries were as follows:

•Revenues received from HF Sinclair were $110.5 million and $99.1 million for the three months ended June 30, 2022 and 2021, respectively, and $202.8 million and $201.1 million for the six months ended June 30, 2022 and 2021, respectively.

•HF Sinclair charged us general and administrative services under the Omnibus Agreement of $1.3 million and $0.7 million for the three months ended June 30, 2022 and 2021, respectively, and $2.0 million and $1.3 million for the six months ended June 30, 2022 and 2021, respectively. In addition, HF Sinclair charged us $0.2 million for a prorated portion of the temporary administrative fee during the six months ended June 30, 2022.

•We reimbursed HF Sinclair for costs of employees supporting our operations of $19.9 million and $14.3 million for the three months ended June 30, 2022 and 2021, respectively, and $36.1 million and $28.7 million for the six months ended June 30, 2022 and 2021, respectively.

- 26 -

•HF Sinclair reimbursed us $4.2 million and $1.2 million for the three months ended June 30, 2022 and 2021, for expense and capital projects, respectively, and $8.6 million and $4.3 million for the six months ended June 30, 2022 and 2021, respectively.

•We distributed $20.9 million in both the three months ended June 30, 2022 and 2021, and $41.7 million and in both the six months ended June 30, 2022 and 2021, to HF Sinclair as regular distributions on its common units.

•Accounts receivable from HF Sinclair were $59.0 million and $56.2 million at June 30, 2022, and December 31, 2021, respectively.

•Accounts payable to HF Sinclair were $12.7 million and $11.7 million at June 30, 2022, and December 31, 2021, respectively.

•Deferred revenue in the consolidated balance sheets included at June 30, 2022 and December 31, 2021, includes $2.2 million and $4.1 million, respectively, relating to certain shortfall billings to HF Sinclair.

•We received direct financing lease payments from HF Sinclair for use of our Artesia and Tulsa rail yards of $0.5 million for each of the three months ended June 30, 2022 and 2021 and $1.0 million for both of the six months ended June 30, 2022 and 2021.

•We recorded a gain on sales-type leases with HF Sinclair of $24.7 million for the six months ended June 30, 2021, and we received sales-type lease payments of $24.4 million and $6.3 million from HF Sinclair for the three months ended June 30, 2022 and 2021, respectively, and $37.0 million and $12.5 million for the six months ended June 30, 2022 and 2021, respectively.

•HEP and HFC reached an agreement to terminate the existing minimum volume commitments for HEP’s Cheyenne assets and enter into new agreements, which were finalized and executed on February 8, 2021, with the following terms, in each case effective January 1, 2021: (1) a ten-year lease with two five-year renewal option periods for HFC’s (and now HF Sinclair’s) use of certain HEP tank and rack assets in the Cheyenne Refinery to facilitate renewable diesel production with an annual lease payment of approximately $5 million, (2) a five-year contango service fee arrangement that will utilize HEP tank assets inside the Cheyenne Refinery where HFC (and now HF Sinclair) will pay a base tariff to HEP for available crude oil storage and HF Sinclair and HEP will split any profits generated on crude oil contango opportunities and (3) a $10 million one-time cash payment from HF Sinclair to HEP for the termination of the existing minimum volume commitment.

Contemporaneous with the closing of the Sinclair Transactions, HEP and HFC amended certain intercompany agreements, including the master throughput agreement, to include within the scope of such agreements certain of the assets acquired by HEP pursuant to the Contribution Agreement.

Note 12: Partners’ Equity, Income Allocations and Cash Distributions

As of June 30, 2022, HF Sinclair held 59,630,030 of our common units, constituting a 47% limited partner interest in us, and held the non-economic general partner interest.

Continuous Offering Program

We have a continuous offering program under which we may issue and sell common units from time to time, representing limited partner interests, up to an aggregate gross sales amount of $200 million. As of June 30, 2022, HEP has issued 2,413,153 units under this program, providing $82.3 million in gross proceeds.

Allocations of Net Income

Net income attributable to HEP is allocated to the partners based on their weighted-average ownership percentage during the period.

Cash Distributions

On July 21, 2022, we announced our cash distribution for the second quarter of 2022 of $0.35 per unit. The distribution is payable on all common units and will be paid August 12, 2022, to all unitholders of record on August 1, 2022.

- 27 -

Our regular quarterly cash distribution to the limited partners will be $44.3 million for the three months ended June 30, 2022 and was $37.0 million for the three months ended June 30, 2021. For the six months ended June 30, 2022, the regular quarterly distribution to the limited partners will be $88.7 million and was $74.1 million for the six months ended June 30, 2021. Our distributions are declared subsequent to quarter end; therefore, these amounts do not reflect distributions paid during the respective period.

Note 13: Net Income Per Limited Partner Unit

Basic net income per unit applicable to the limited partners is calculated as net income attributable to the partners, adjusted for participating securities’ share in earnings, divided by the weighted average limited partners’ units outstanding. Diluted net income per unit assumes, when dilutive, the issuance of the net incremental units from phantom units and performance units. To the extent net income attributable to the partners exceeds or is less than cash distributions, this difference is allocated to the partners based on their weighted-average ownership percentage during the period. Our dilutive securities are immaterial for all periods presented.

Net income per limited partner unit is computed as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(In thousands, except per unit data)
Net income attributable to the partners	$	56,792	$	55,745	$	106,351	$	120,142
Less: Participating securities’ share in earnings	(107)		(190)		(222)		(411)
Net income attributable to common units	56,685		55,555		106,129		119,731
Weighted average limited partners' units outstanding	126,440		105,440		118,087		105,440
Limited partners' per unit interest in earnings - basic and diluted	$	0.45	$	0.53	$	0.90	$	1.14

Note 14:Environmental

We expensed $0.2 million for both the three and six months ended June 30, 2022, respectively, for environmental remediation obligations and we expensed $0.5 million for both the three and six months ended June 30, 2021, respectively. The accrued environmental liability, net of expected recoveries from indemnifying parties, reflected in our consolidated balance sheets was $13.6 million and $3.9 million at June 30, 2022 and December 31, 2021, of which $11.6 million and $2.4 million was classified as other long-term liabilities for June 30, 2022 and December 31, 2021, respectively. These accruals include remediation and monitoring costs expected to be incurred over an extended period of time. Accrued environmental liabilities assumed in the Sinclair acquisition have preliminarily been fair valued at $10.0 million as of March 14, 2022. Estimated liabilities could increase in the future as the purchase price allocation for the Sinclair Transportation acquisition is finalized and when the results of ongoing investigations become known, are considered probable and can be reasonably estimated.

Under the Omnibus Agreement and certain transportation agreements and purchase agreements with HF Sinclair and/or its subsidiaries, HF Sinclair has agreed to indemnify us, subject to certain monetary and time limitations, for environmental noncompliance and remediation liabilities associated with certain assets transferred to us from HF Sinclair and its subsidiaries and occurring or existing prior to the date of such transfers. Our consolidated balance sheets included additional accrued environmental liabilities of $0.2 million and $0.3 million for HF Sinclair indemnified liabilities as of June 30, 2022 and December 31, 2021, respectively, and other assets included equal and offsetting balances representing amounts due from HF Sinclair related to indemnifications for environmental remediation liabilities.

Note 15: Contingencies

We are a party to various legal and regulatory proceedings, none of which we believe will have a material adverse impact on our financial condition, results of operations or cash flows.

- 28 -

Note 16: Segment Information

Although financial information is reviewed by our chief operating decision makers from a variety of perspectives, they view the business in two reportable operating segments: pipelines and terminals, and refinery processing units. These operating segments adhere to the accounting polices used for our consolidated financial statements.

Pipelines and terminals have been aggregated as one reportable segment as both pipeline and terminals (1) have similar economic characteristics, (2) similarly provide logistics services of transportation and storage of petroleum products, (3) similarly support the petroleum refining business, including distribution of its products, (4) have principally the same customers and (5) are subject to similar regulatory requirements.

We evaluate the performance of each segment based on its respective operating income. Certain general and administrative expenses and interest and financing costs are excluded from segment operating income as they are not directly attributable to a specific reportable segment. Identifiable assets are those used by the segment, whereas other assets are principally equity method investments, cash, deposits and other assets that are not associated with a specific reportable segment.

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(In thousands)
Revenues:
Pipelines and terminals - affiliate	$	87,644	$	78,116	$	161,495	$	157,546
Pipelines and terminals - third-party	25,233		27,093		53,177		52,350
Refinery processing units - affiliate	22,893		21,026		41,296		43,522
Total segment revenues	$	135,770	$	126,235	$	255,968	$	253,418
Segment operating income:
Pipelines and terminals (1)	$	48,673	$	49,391	$	98,477	$	90,875
Refinery processing units	6,224		9,773		11,806		18,008
Total segment operating income	54,897		59,164		110,283		108,883
Unallocated general and administrative expenses	(4,682)		(2,847)		(8,994)		(5,815)
Interest expense	(20,347)		(13,938)		(33,986)		(27,178)
Interest income	24,331		6,614		36,978		13,162
Equity in earnings of equity method investments	5,447		3,423		9,073		5,186
Gain on sales-type leases	—		27		—		24,677
Gain (loss) on sale of assets and other	45		5,415		146		5,917
Income before income taxes	$	59,691	$	57,858	$	113,500	$	124,832
Capital Expenditures:
Pipelines and terminals	$	7,397	$	25,559	$	17,817	$	58,777
Refinery processing units	1,703		598		5,429		598
Total capital expenditures	$	9,100	$	26,157	$	23,246	$	59,375

- 29 -

	June 30, 2022		December 31, 2021
	(In thousands)
Identifiable assets:
Pipelines and terminals (2)	$	2,157,472	$	1,737,388
Refinery processing units	312,931		294,452
Other	304,635		134,027
Total identifiable assets	$	2,775,038	$	2,165,867

(1) Pipelines and terminals segment operating income included goodwill impairment charges of $11.0 million for the six months ended June 30, 2021.

(2) Included goodwill of $314.4 million as of June 30, 2022 and $223.7 million as of December 31, 2021.

- 30 -

Note 17: Supplemental Guarantor/Non-Guarantor Financial Information

Obligations of HEP (“Parent”) under the Senior Notes have been jointly and severally guaranteed by each of its direct and indirect 100% owned subsidiaries, other than Holly Energy Finance Corp., and certain immaterial subsidiaries (“Guarantor Subsidiaries”). These guarantees are full and unconditional, subject to certain customary release provisions. These circumstances include (i) when a Guarantor Subsidiary is sold or sells all or substantially all of its assets, (ii) when a Guarantor Subsidiary is declared “unrestricted” for covenant purposes, (iii) when a Guarantor Subsidiary’s guarantee of other indebtedness is terminated or released and (iv) when the requirements for legal defeasance or covenant defeasance or to discharge the senior notes have been satisfied.

The following financial information presents condensed consolidating balance sheets, statements of income, and statements of cash flows of the Parent, the Guarantor Subsidiaries and the Non-Guarantor Subsidiaries. The information has been presented as if the Parent accounted for its ownership in the Guarantor Subsidiaries, and the Guarantor Restricted Subsidiaries accounted for the ownership of the Non-Guarantor Non-Restricted Subsidiaries, using the equity method of accounting.

As a result of the HEP Transaction, UNEV Pipeline, LLC became a 100% owned subsidiary, and it was subsequently added as a guarantor of the obligations of HEP under the Senior Notes during the second quarter of 2022. UNEV Pipeline, LLC financial information has been included in the Guarantor Subsidiaries financial information for all periods presented.

- 31 -

Condensed Consolidating Balance Sheet

June 30, 2022	Parent		Guarantor Restricted Subsidiaries		Non-Guarantor Non-Restricted Subsidiaries		Eliminations		Consolidated
	(In thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	4,879	$	5,409	$	4,596	$	—	$	14,884
Accounts receivable	—		72,418		1,343		(1,209)		72,552
Prepaid and other current assets	322		11,647		329		(329)		11,969
Total current assets	5,201		89,474		6,268		(1,538)		99,405
Properties and equipment, net	—		1,426,492		—		—		1,426,492
Operating lease right-of-use assets	—		2,502		—		—		2,502
Net investment in leases	—		542,281		100,867		(100,867)		542,281
Investment in subsidiaries	2,461,802		69,405		—		(2,531,207)		—
Intangible assets, net	—		66,304		—		—		66,304
Goodwill	—		314,418		—		—		314,418
Equity method investments	—		244,517		35,955		—		280,472
Deferred turnaround costs	—		25,813		—		—		25,813
Other assets	6,830		10,521		—		—		17,351
Total assets	$	2,473,833	$	2,791,727	$	143,090	$	(2,633,612)	$	2,775,038
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	—	$	35,448	$	3,561	$	(1,209)	$	37,800
Accrued interest	17,963		—		—		—		17,963
Deferred revenue	—		13,770		—		—		13,770
Accrued property taxes	—		7,145		—		—		7,145
Current operating lease liabilities	—		963		—		—		963
Current finance lease liabilities	—		5,862		—		(2,005)		3,857
Other current liabilities	79		1,850		719		—		2,648
Total current liabilities	18,042		65,038		4,280		(3,214)		84,146
Long-term debt	1,608,460		—		—		—		1,608,460
Noncurrent operating lease liabilities	—		2,006		—		—		2,006
Noncurrent finance lease liabilities	—		152,749		—		(89,911)		62,838
Other long-term liabilities	266		22,806		—		—		23,072
Deferred revenue	—		28,865		—		—		28,865
Class B unit	—		58,461		—		—		58,461
Equity - partners	847,065		2,461,802		69,405		(2,540,487)		837,785
Equity - noncontrolling interests	—		—		69,405		—		69,405
Total liabilities and equity	$	2,473,833	$	2,791,727	$	143,090	$	(2,633,612)	$	2,775,038

- 32 -

Condensed Consolidating Balance Sheet

December 31, 2021	Parent		Guarantor Restricted Subsidiaries		Non-Guarantor Non-Restricted Subsidiaries		Eliminations		Consolidated
	(In thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	1,273	$	4,227	$	8,881	$	—	$	14,381
Accounts receivable	—		68,768		2,833		(2,702)		68,899
Prepaid and other current assets	353		10,680		304		(304)		11,033
Total current assets	1,626		83,675		12,018		(3,006)		94,313
Properties and equipment, net	—		1,329,028		—		—		1,329,028
Operating lease right-of-use assets	—		2,275		—		—		2,275
Net investment in leases	—		309,301		100,032		(100,030)		309,303
Investment in subsidiaries	1,785,024		70,437		—		(1,855,461)		—
Intangible assets, net	—		73,307		—		—		73,307
Goodwill	—		223,650		—		—		223,650
Equity method investments	—		78,873		37,505		—		116,378
Deferred turnaround costs	—		2,632		—		—		2,632
Other assets	8,118		6,863		—		—		14,981
Total assets	$	1,794,768	$	2,180,041	$	149,555	$	(1,958,497)	$	2,165,867
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	—	$	34,566	$	8,416	$	(2,702)	$	40,280
Accrued interest	11,258		—		—		—		11,258
Deferred revenue	—		14,585		—		—		14,585
Accrued property taxes	—		4,542		—		—		4,542
Current operating lease liabilities	—		620		—		—		620
Current finance lease liabilities	—		5,566		—		(1,780)		3,786
Other current liabilities	3		1,513		265		—		1,781
Total current liabilities	11,261		61,392		8,681		(4,482)		76,852
Long-term debt	1,333,049		—		—		—		1,333,049
Noncurrent operating lease liabilities	—		2,030		—		—		2,030
Noncurrent finance lease liabilities	—		156,102		—		(91,453)		64,649
Other long-term liabilities	340		12,187		—		—		12,527
Deferred revenue	—		29,662		—		—		29,662
Class B unit	—		56,549		—		—		56,549
Equity - partners	450,118		1,785,024		70,437		(1,862,562)		443,017
Equity - noncontrolling interests	—		77,095		70,437		—		147,532
Total liabilities and equity	$	1,794,768	$	2,180,041	$	149,555	$	(1,958,497)	$	2,165,867

- 33 -

Condensed Consolidating Statement of Income

Three Months Ended June 30, 2022	Parent		Guarantor Restricted Subsidiaries		Non-Guarantor Non-Restricted Subsidiaries		Eliminations		Consolidated
	(In thousands)
Revenues:
Affiliates	$	—	$	110,537	$	—	$	—	$	110,537
Third parties	—		25,233		—		—		25,233
	—		135,770		—		—		135,770
Operating costs and expenses:
Operations (exclusive of depreciation and amortization)	—		52,823		1,076		—		53,899
Depreciation and amortization	—		26,974		—		—		26,974
General and administrative	912		3,770		—		—		4,682
	912		83,567		1,076		—		85,555
Operating income (loss)	(912)		52,203		(1,076)		—		50,215
Other income (expense):
Equity in earnings of subsidiaries	77,104		1,927		—		(79,031)		—
Equity in earnings of equity method investments	—		4,641		806		—		5,447
Interest expense	(19,400)		(5,071)		—		4,124		(20,347)
Interest income	—		24,331		4,124		(4,124)		24,331
Gain on sale of assets and other	—		45		—		—		45
	57,704		25,873		4,930		(79,031)		9,476
Income before income taxes	56,792		78,076		3,854		(79,031)		59,691
State income tax expense	—		(14)		—		—		(14)
Net income	56,792		78,062		3,854		(79,031)		59,677
Allocation of net income attributable to noncontrolling interests	—		(958)		(1,927)		—		(2,885)
Net income attributable to the partners	$	56,792	$	77,104	$	1,927	$	(79,031)	$	56,792

- 34 -

Condensed Consolidating Statement of Income

Three Months Ended June 30, 2021	Parent		Guarantor Restricted Subsidiaries		Non-Guarantor Non-Restricted Subsidiaries		Eliminations		Consolidated
	(In thousands)
Revenues:
Affiliates	$	—	$	99,142	$	—	$	—	$	99,142
Third parties	—		27,093		—		—		27,093
	—		126,235		—		—		126,235
Operating costs and expenses:
Operations (exclusive of depreciation and amortization)	—		41,411		657		—		42,068
Depreciation and amortization	—		25,003		—		—		25,003
General and administrative	907		1,940		—		—		2,847
	907		68,354		657		—		69,918
Operating income (loss)	(907)		57,881		(657)		—		56,317
Other income (expense):
Equity in earnings of subsidiaries	69,596		(14)		—		(69,582)		—
Equity in earnings of equity method investments			2,793		630		—		3,423
Interest expense	(12,944)		(994)		—		—		(13,938)
Interest income			6,614		—		—		6,614
Gain on sales-type lease	—		27		—		—		27
Gain on sale of assets and other	—		5,415		—		—		5,415
	56,652		13,841		630		(69,582)		1,541
Income before income taxes	55,745		71,722		(27)		(69,582)		57,858
State income tax expense	—		(27)		—		—		(27)
Net income	55,745		71,695		(27)		(69,582)		57,831
Allocation of net income attributable to noncontrolling interests	—		(2,099)		13		—		(2,086)
Net income attributable to the partners	$	55,745	$	69,596	$	(14)	$	(69,582)	$	55,745

- 35 -

Condensed Consolidating Statement of Income

Six Months Ended June 30, 2022	Parent		Guarantor Restricted Subsidiaries		Non-Guarantor Non-restricted Subsidiaries		Eliminations			Consolidated
	(In thousands)
Revenues:
Affiliates	$	—	$	202,791	$	—	$	—		$	202,791
Third parties	—		53,177		—		—			53,177
	—		255,968		—		—			255,968
Operating costs and expenses:
Operations (exclusive of depreciation and amortization)	—		94,757		1,767		—			96,524
Depreciation and amortization	—		49,161		—		—			49,161
General and administrative	2,000		6,994		—		—			8,994
	2,000		150,912		1,767		—			154,679
Operating income (loss)	(2,000)		105,056		(1,767)		—		0	101,289
Other income (expense):
Equity in earnings of subsidiaries	140,431		4,098		—		(144,529)			—
Equity in earnings of equity method investments	—		7,361		1,712		—			9,073
Interest expense	(32,080)		(10,157)		—		8,251			(33,986)
Interest income	—		36,978		8,251		(8,251)			36,978
Gain on sale of assets and other	—		146		—		—			146
	108,351		38,426		9,963		(144,529)			12,211
Income before income taxes	106,351		143,482		8,196		(144,529)			113,500
State income tax expense	—		(45)		—		—			(45)
Net income	106,351		143,437		8,196		(144,529)			113,455
Allocation of net income attributable to noncontrolling interests	—		(3,006)		(4,098)		—			(7,104)
Net income attributable to the partners	$	106,351	$	140,431	$	4,098	$	(144,529)		$	106,351

- 36 -

Condensed Consolidating Statement of Income

Six Months Ended June 30, 2021	Parent		Guarantor Restricted Subsidiaries		Non-Guarantor Non-restricted Subsidiaries		Eliminations		Consolidated
	(In thousands)
Revenues:
Affiliates	$	—	$	201,068	$	—	$	—	$	201,068
Third parties	—		52,350		—		—		52,350
	—		253,418		—		—		253,418
Operating costs and expenses:
Operations (exclusive of depreciation and amortization)	—		82,434		999		—		83,433
Depreciation and amortization	—		50,068		—		—		50,068
General and administrative	2,085		3,730		—		—		5,815
Goodwill impairment	—		11,034		—		—		11,034
	2,085		147,266		999		—		150,350
Operating income (loss)	(2,085)		106,152		(999)		—		103,068
Other income (expense):
Equity in earnings of subsidiaries	147,405		388		—		(147,793)		—
Equity in earnings of equity method investments	—		3,411		1,775		—		5,186
Interest expense	(25,178)		(2,000)		—		—		(27,178)
Interest income	—		13,162		—		—		13,162
Gain on sales-type lease	—		24,677		—		—		24,677
Gain on sale of assets and other	—		5,917		—		—		5,917
	122,227		45,555		1,775		(147,793)		21,764
Income before income taxes	120,142		151,707		776		(147,793)		124,832
State income tax expense	—		(64)		—		—		(64)
Net income	120,142		151,643		776		(147,793)		124,768
Allocation of net income attributable to noncontrolling interests	—		(4,238)		(388)		—		(4,626)
Net income attributable to the partners	120,142		147,405		388		(147,793)		120,142

- 37 -

Note 18: Osage Pipeline

On July 8, 2022, the Osage pipeline, which carries crude oil from Cushing, Oklahoma to El Dorado, Kansas, suffered a release of crude oil. The pipeline has resumed operations and recovery operations are ongoing. We expect to accrue amounts related to recovery and remediation in the third quarter of 2022, but cannot estimate those amounts at this time. We do not expect the accrual will have a material impact on our financial position.

- 38 -

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Item 2, including but not limited to the sections under “Results of Operations” and “Liquidity and Capital Resources,” contains forward-looking statements. See “Forward-Looking Statements” at the beginning of Part I of this Quarterly Report on Form 10-Q. In this document, the words “we,” “our,” “ours” and “us” refer to Holly Energy Partners, L.P. (“HEP”) and its consolidated subsidiaries or to HEP or an individual subsidiary and not to any other person. References herein to HF Sinclair Corporation (“HF Sinclair”) with respect to time periods prior to March 14, 2022 refer to HollyFrontier Corporation (“HFC”) and its consolidated subsidiaries and do not include Hippo Holding LLC, the parent company of Sinclair Oil LLC, Sinclair Transportation Company LLC or their respective consolidated subsidiaries (collectively, the “Acquired Sinclair Businesses”). References herein to HF Sinclair with respect to time periods from and after March 14, 2022 refer to HF Sinclair and its consolidated subsidiaries, which include the operations of the combined business operations of HFC and the Acquired Sinclair Businesses.

OVERVIEW

HEP, together with its consolidated subsidiaries, is a publicly held master limited partnership. On March 14, 2022 (the “Closing Date”), HFC and HEP announced the establishment of HF Sinclair, as the new parent holding company of HFC and HEP and their subsidiaries, and the completion of their respective acquisitions of Sinclair Oil Corporation (now known as Sinclair Oil LLC (“Sinclair Oil”)) and Sinclair Transportation Company LLC (“Sinclair Transportation”) from REH Company (formerly known as The Sinclair Companies, referred to herein as “Sinclair HoldCo”). On the Closing Date, HF Sinclair completed its acquisition of Sinclair Oil by effecting (a) a holding company merger with HFC surviving such merger as a direct wholly owned subsidiary of HF Sinclair (the “HFC Merger”), and (b) immediately following the HFC Merger, a contribution whereby Sinclair HoldCo contributed all of the equity interests of Hippo Holding LLC, the parent company of Sinclair Oil (the “Target Company”), to HF Sinclair in exchange for shares of HF Sinclair, resulting in the Target Company becoming a direct wholly owned subsidiary of HF Sinclair (together with the HFC Merger, the “HFC Transactions”).

As of June 30, 2022, HF Sinclair and its subsidiaries owned a 47% limited partner interest and the non-economic general partner interest in HEP.

Additionally, on the Closing Date and immediately prior to consummation of the HFC Transactions, HEP acquired all of the outstanding equity interests of Sinclair Transportation from Sinclair HoldCo in exchange for 21 million newly issued common limited partner units of HEP (the “HEP Units”), representing 16.6% of the pro forma outstanding HEP Units with a value of approximately $349 million based on HEP’s fully diluted common limited partner units outstanding and closing unit price on March 11, 2022, and cash consideration equal to $321.4 million, inclusive of estimated working capital adjustments for an aggregate transaction value of $670.4 million (the “HEP Transaction” and together with the HFC Transactions, the “Sinclair Transactions”). The cash consideration was funded through a draw under HEP’s senior secured revolving credit facility. The HEP Transaction was conditioned on the closing of the HFC Transactions, which occurred immediately following the HEP Transaction.

Sinclair Transportation, together with its subsidiaries, owned Sinclair HoldCo’s integrated crude and refined products pipelines and terminal assets, including approximately 1,200 miles of integrated crude and refined product pipeline supporting the Sinclair HoldCo refineries and other third-party refineries, eight product terminals and two crude terminals with approximately 4.5 million barrels of operated storage. In addition, HEP acquired Sinclair Transportation’s interests in three pipeline joint ventures for crude gathering and product offtake including: Saddle Butte Pipeline III, LLC (25.06% non-operated interest); Pioneer Pipeline (49.995% non-operated interest); and UNEV Pipeline (the 25% non-operated interest not already owned by HEP, resulting in UNEV Pipeline, LLC becoming a wholly owned subsidiary of HEP).

See Notes 1 and 2 of Notes to Consolidated Financial Statements included in “Item 1. Financial Statements” for additional information regarding the acquisitions.

Through our subsidiaries and joint ventures, we own and/or operate petroleum product and crude oil pipelines, terminal, tankage and loading rack facilities and refinery processing units that support the refining and marketing operations of HF Sinclair and other refineries in the Mid-Continent, Southwest and Northwest regions of the United States. HEP, through its subsidiaries and joint ventures, owns and/or operates petroleum product and crude pipelines, tankage and terminals in Colorado, Idaho, Iowa, Kansas, Missouri, Nevada, New Mexico, Oklahoma, Texas, Utah, Washington and Wyoming as well as refinery processing units in Utah and Kansas.

- 39 -

We generate revenues by charging tariffs for transporting petroleum products and crude oil through our pipelines, by charging fees for terminalling and storing refined products and other hydrocarbons, providing other services at our storage tanks and terminals and charging a tolling fee per barrel or thousand standard cubic feet of feedstock throughput in our refinery processing units. We do not take ownership of products that we transport, terminal, store or process, and therefore, we are not directly exposed to changes in commodity prices.

We believe the long-term global refined product demand and U.S. crude production should support high utilization rates for the refineries we serve, which in turn should support volumes in our product pipelines, crude gathering systems and terminals.

Market Developments

Our results for the second quarter and first six months of 2022 were favorably impacted by continued strong global economic activity with global demand for transportation fuels, lubricants and transportation and terminal services having returned to pre-pandemic levels. We expect our customers will continue to adjust refinery production levels commensurate with market demand. The extent to which HEP’s future results are affected by the COVID-19 pandemic or volatile regional and global economic conditions will depend on various factors and consequences beyond our control. However, we have long-term customer contracts with minimum volume commitments, which have expiration dates from 2023 to 2037. These minimum volume commitments accounted for approximately 64% and 66% of our total revenues in the six months ended June 30, 2022 and June 30, 2021, respectively. We are currently not aware of any reasons that would prevent such customers from making the minimum payments required under the contracts or potentially making payments in excess of the minimum payments. In addition to these payments, we also expect to collect payments for services provided to uncommitted shippers.

Investment in Joint Venture

On October 2, 2019, HEP Cushing LLC (“HEP Cushing”), a wholly owned subsidiary of HEP, and Plains Marketing, L.P., a wholly owned subsidiary of Plains All American Pipeline, L.P. (“Plains”), formed a 50/50 joint venture, Cushing Connect Pipeline & Terminal LLC (the “Cushing Connect Joint Venture”), for (i) the development, construction, ownership and operation of a new 160,000 barrel per day common carrier crude oil pipeline (the “Cushing Connect Pipeline”) that will connect the Cushing, Oklahoma crude oil hub to the Tulsa, Oklahoma refining complex owned by a subsidiary of HF Sinclair and (ii) the ownership and operation of 1.5 million barrels of crude oil storage in Cushing, Oklahoma (the “Cushing Connect JV Terminal”). The Cushing Connect JV Terminal went in service during the second quarter of 2020, and the Cushing Connect Pipeline was placed into service at the end of the third quarter of 2021. Long-term commercial agreements have been entered into to support the Cushing Connect Joint Venture assets.

The Cushing Connect Joint Venture has contracted with an affiliate of HEP to manage the construction and operation of the Cushing Connect Pipeline and with an affiliate of Plains to manage the operation of the Cushing Connect JV Terminal. The total Cushing Connect Joint Venture investment will generally be shared equally among HEP and Plains. However, we are solely responsible for any Cushing Connect Pipeline construction costs that exceed the budget by more than 10%. HEP estimates its share of the cost of the Cushing Connect JV Terminal contributed by Plains and Cushing Connect Pipeline construction costs are approximately $73 million, including approximately $5 million of Cushing Connect Pipeline construction costs exceeding the budget by more than 10% borne solely by HEP.

Agreements with HF Sinclair

We serve HF Sinclair’s refineries under long-term pipeline, terminal, tankage and refinery processing unit throughput agreements expiring from 2023 to 2037. Under these agreements, HF Sinclair agrees to transport, store, and process throughput volumes of refined product, crude oil and feedstocks on our pipelines, terminal, tankage, loading rack facilities and refinery processing units that result in minimum annual payments to us. These minimum annual payments or revenues are subject to annual rate adjustments on July 1st each year based on the PPI or the FERC index. On December 17, 2020, FERC established a new price index for the five-year period commencing July 1, 2021 and ending June 30, 2026, in which common carriers charging indexed rates were permitted to adjust their indexed ceilings annually by Producer Price Index plus 0.78%. FERC received requests for rehearing of its December 17, 2020 order, and on January 20, 2022, FERC revised the index level used to determine the annual changes to interstate oil pipeline rate ceilings to Producer Price Index minus 0.21%. The order required the recalculation of the July 1, 2021 index ceilings to be effective as of March 1, 2022. As of July 1, 2022, these agreements with HF Sinclair require minimum annualized payments to us of $446 million.

If HF Sinclair fails to meet its minimum volume commitments under the agreements in any quarter, it will be required to pay us the amount of any shortfall in cash by the last day of the month following the end of the quarter. Under certain of the agreements, a shortfall payment may be applied as a credit in the following four quarters after minimum obligations are met.

A significant reduction in revenues under these agreements could have a material adverse effect on our results of operations.

- 40 -

On June 1, 2020, HFC announced plans to permanently cease petroleum refining operations at its Cheyenne Refinery (the “Cheyenne Refinery”) and to convert certain assets at that refinery to renewable diesel production. HFC subsequently began winding down petroleum refining operations at its Cheyenne Refinery on August 3, 2020.

On February 8, 2021, HEP and HFC finalized and executed new agreements for HEP's Cheyenne assets with the following terms, in each case effective January 1, 2021: (1) a ten-year lease with two five-year renewal option periods for HFC’s (and now HF Sinclair’s) use of certain HEP tank and rack assets in the Cheyenne Refinery to facilitate renewable diesel production with an annual lease payment of approximately $5 million, (2) a five-year contango service fee arrangement that will utilize HEP tank assets inside the Cheyenne Refinery where HFC (and now HF Sinclair) will pay a base tariff to HEP for available crude oil storage and HFC (and now HF Sinclair) and HEP will split any profits generated on crude oil contango opportunities and (3) a $10 million one-time cash payment from HFC to HEP for the termination of the existing minimum volume commitment.

Under certain provisions of an omnibus agreement we have with HF Sinclair (the “Omnibus Agreement”), we pay HF Sinclair an annual administrative fee, currently $5.0 million, for the provision by HF Sinclair or its affiliates of various general and administrative services to us. In connection with the HEP Transaction, we pay HF Sinclair a temporary monthly fee of $62,500 relating to transition services to be provided to HEP by HF Sinclair. Neither the annual administrative fee nor the temporary monthly fee includes the salaries of personnel employed by HF Sinclair who perform services for us on behalf of Holly Logistic Services, L.L.C. (“HLS”), or the cost of their employee benefits, which are separately charged to us by HF Sinclair. We also reimburse HF Sinclair and its affiliates for direct expenses they incur on our behalf.

Under HLS’s Secondment Agreement with HF Sinclair, certain employees of HF Sinclair are seconded to HLS to provide operational and maintenance services for certain of our processing, refining, pipeline and tankage assets, and HLS reimburses HF Sinclair for its prorated portion of the wages, benefits, and other costs of these employees for our benefit.

We have a long-term strategic relationship with HFC (and now HF Sinclair) that has historically facilitated our growth. Our future growth plans include organic projects around our existing assets and select investments or acquisitions that enhance our service platform while creating accretion for our unitholders. While in the near term, any acquisitions would be subject to economic conditions discussed in “Overview - Market Developments” above, we also expect over the longer term to continue to work with HF Sinclair on logistic asset acquisitions in conjunction with HF Sinclair’s refinery acquisition strategies. See “Overview” above for a discussion of the Sinclair Transactions.

Furthermore, as demonstrated by our recent transaction with Sinclair HoldCo, we plan to continue to pursue third-party logistic asset acquisitions that are accretive to our unitholders and increase the diversity of our revenues.

Indicators of Goodwill and Long-lived Asset Impairment

During the three months ended March 31, 2021, changes in our agreements with HFC related to our Cheyenne assets resulted in an increase in the net book value of our Cheyenne reporting unit due to sales-type lease accounting, which led us to determine indicators of potential goodwill impairment for our Cheyenne reporting unit were present.

The estimated fair values of our Cheyenne reporting unit were derived using a combination of income and market approaches. The income approach reflects expected future cash flows based on anticipated gross margins, operating costs, and capital expenditures. The market approaches include both the guideline public company and guideline transaction methods. Both methods utilize pricing multiples derived from historical market transactions of other like-kind assets. These fair value measurements involve significant unobservable inputs (Level 3 inputs). See Note 6 for further discussion of Level 3 inputs.

Our interim impairment testing of our Cheyenne reporting unit goodwill identified an impairment charge of $11.0 million, which was recorded in the three months ended March 31, 2021.

We performed our annual goodwill impairment testing qualitatively as of July 1, 2021, and determined it was not more likely than not that the carrying amount of each reporting unit was greater than its fair value. Therefore, a quantitative test was not necessary, and no additional impairment of goodwill was recorded.

- 41 -

RESULTS OF OPERATIONS (Unaudited)

Income, Distributable Cash Flow, Volumes and Balance Sheet Data

The following tables present income, distributable cash flow and volume information for the three and six months ended June 30, 2022 and 2021.

- 42 -

	Three Months Ended June 30,				Change from
	2022		2021		2021
	(In thousands, except per unit data)
Revenues:
Pipelines:
Affiliates—refined product pipelines	$	20,920	$	19,213	$	1,707
Affiliates—intermediate pipelines	7,521		7,521		—
Affiliates—crude pipelines	20,971		19,251		1,720
	49,412		45,985		3,427
Third parties—refined product pipelines	5,215		9,526		(4,311)
Third parties—crude pipelines	13,692		12,811		881
	68,319		68,322		(3)
Terminals, tanks and loading racks:
Affiliates	38,232		32,131		6,101
Third parties	6,326		4,756		1,570
	44,558		36,887		7,671
Refinery processing units—Affiliates	22,893		21,026		1,867
Total revenues	135,770		126,235		9,535
Operating costs and expenses:
Operations (exclusive of depreciation and amortization)	53,899		42,068		11,831
Depreciation and amortization	26,974		25,003		1,971
General and administrative	4,682		2,847		1,835
	85,555		69,918		15,637
Operating income	50,215		56,317		(6,102)
Other income (expense):
Equity in earnings of equity method investments	5,447		3,423		2,024
Interest expense, including amortization	(20,347)		(13,938)		(6,409)
Interest income	24,331		6,614		17,717
Gain on sales-type leases	—		27		(27)
Gain on sale of assets and other	45		5,415		(5,370)
	9,476		1,541		7,935
Income before income taxes	59,691		57,858		1,833
State income tax expense	(14)		(27)		13
Net income	59,677		57,831		1,846
Allocation of net income attributable to noncontrolling interests	(2,885)		(2,086)		(799)
Net income attributable to the partners	56,792		55,745		1,047
Limited partners’ earnings per unit—basic and diluted	$	0.45	$	0.53	$	(0.08)
Weighted average limited partners’ units outstanding	126,440		105,440		21,000
EBITDA (1)	$	79,796	$	88,099	$	(8,303)
Adjusted EBITDA (1)	$	104,244	$	88,261	$	15,983
Distributable cash flow (2)	$	78,458	$	66,680	$	11,778
Volumes (bpd)
Pipelines:
Affiliates—refined product pipelines	140,333		119,046		21,287
Affiliates—intermediate pipelines	124,588		143,762		(19,174)
Affiliates—crude pipelines	477,241		260,756		216,485
	742,162		523,564		218,598
Third parties—refined product pipelines	37,989		52,126		(14,137)
Third parties—crude pipelines	138,040		135,904		2,136
	918,191		711,594		206,597
Terminals and loading racks:
Affiliates	572,289		413,441		158,848
Third parties	36,748		53,257		(16,509)
	609,037		466,698		142,339
Refinery processing units—Affiliates	72,342		76,589		(4,247)
Total for pipelines and terminal and refinery processing unit assets (bpd)	1,599,570		1,254,881		344,689

- 43 -

	Six Months Ended June 30,				Change from
	2022		2021		2021
	(In thousands, except per unit data)
Revenues:
Pipelines:
Affiliates—refined product pipelines	$	37,780	$	37,819	$	(39)
Affiliates—intermediate pipelines	15,027		15,027		—
Affiliates—crude pipelines	39,248		38,705		543
	92,055		91,551		504
Third parties—refined product pipelines	14,475		19,389		(4,914)
Third parties—crude pipelines	26,569		23,887		2,682
	133,099		134,827		(1,728)
Terminals, tanks and loading racks:
Affiliates	69,440		65,995		3,445
Third parties	12,133		9,074		3,059
	81,573		75,069		6,504
Refinery processing units—Affiliates	41,296		43,522		(2,226)
Total revenues	255,968		253,418		2,550
Operating costs and expenses:
Operations (exclusive of depreciation and amortization)	96,524		83,433		13,091
Depreciation and amortization	49,161		50,068		(907)
General and administrative	8,994		5,815		3,179
Goodwill impairment	—		11,034		(11,034)
	154,679		150,350		4,329
Operating income	101,289		103,068		(1,779)
Other income (expense):
Equity in earnings of equity method investments	9,073		5,186		3,887
Interest expense, including amortization	(33,986)		(27,178)		(6,808)
Interest income	36,978		13,162		23,816
Gain on sales-type leases	—		24,677		(24,677)
Gain on sale of assets and other	146		5,917		(5,771)
	12,211		21,764		(9,553)
Income before income taxes	113,500		124,832		(11,332)
State income tax expense	(45)		(64)		19
Net income	113,455		124,768		(11,313)
Allocation of net income attributable to noncontrolling interests	(7,104)		(4,626)		(2,478)
Net income attributable to the partners	106,351		120,142		(13,791)
Limited partners’ earnings per unit—basic and diluted	$	0.90	$	1.14	$	(0.24)
Weighted average limited partners’ units outstanding	118,087		105,440		12,647
EBITDA (1)	$	152,565	$	184,290	$	(31,725)
Adjusted EBITDA (1)	$	189,581	$	176,196	$	13,385
Distributable cash flow (2)	$	142,912	$	139,899	$	3,013
Volumes (bpd)
Pipelines:
Affiliates—refined product pipelines	123,863		119,316		4,547
Affiliates—intermediate pipelines	121,213		129,573		(8,360)
Affiliates—crude pipelines	436,865		255,730		181,135
	681,941		504,619		177,322
Third parties—refined product pipelines	43,479		48,298		(4,819)
Third parties—crude pipelines	134,602		129,603		4,999
	860,022		682,520		177,502
Terminals and loading racks:
Affiliates	509,509		368,612		140,897
Third parties	42,519		49,526		(7,007)
	552,028		418,138		133,890
Refinery processing units—Affiliates	68,804		68,688		116
Total for pipelines and terminal and refinery processing unit assets (bpd)	1,480,854		1,169,346		311,508

- 44 -

(1)Earnings before interest, taxes, depreciation and amortization (“EBITDA”) is calculated as net income attributable to the partners plus (i) interest expense, net of interest income, (ii) state income tax expense and (iii) depreciation and amortization. Adjusted EBITDA is calculated as EBITDA plus (i) goodwill impairment, (ii) acquisition integration and regulatory costs and (iii) tariffs and fees not included in revenues due to impacts from lease accounting for certain tariffs and fees minus (iv) gain on sales-type leases, (v) gain on significant asset sales and (vi) pipeline lease payments not included in operating costs and expenses. Portions of our minimum guaranteed pipeline and terminal tariffs and fees for assets subject to sales-type lease accounting are recorded as interest income with the remaining amounts recorded as a reduction in net investment in leases. These tariffs and fees were previously recorded as revenues prior to the renewal of the throughput agreements, which triggered sales-type lease accounting. Similarly, certain pipeline lease payments were previously recorded as operating costs and expenses, but the underlying lease was reclassified from an operating lease to a financing lease, and these payments are now recorded as interest expense and reductions in the lease liability. EBITDA and Adjusted EBITDA are not calculations based upon generally accepted accounting principles ("GAAP"). However, the amounts included in the EBITDA and Adjusted EBITDA calculations are derived from amounts included in our consolidated financial statements. EBITDA and Adjusted EBITDA should not be considered as alternatives to net income attributable to HEP or operating income, as indications of our operating performance or as alternatives to operating cash flow as a measure of liquidity. EBITDA and Adjusted EBITDA are not necessarily comparable to similarly titled measures of other companies. EBITDA and Adjusted EBITDA are presented here because they are widely used financial indicators used by investors and analysts to measure performance. EBITDA and Adjusted EBITDA are also used by our management for internal analysis and as a basis for compliance with financial covenants. Set forth below are our calculations of EBITDA and Adjusted EBITDA.

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(In thousands)
Net income attributable to the partners	$	56,792	$	55,745	$	106,351	$	120,142
Add (subtract):
Interest expense	20,347		13,938		33,986		27,178
Interest income	(24,331)		(6,614)		(36,978)		(13,162)
State income tax expense	14		27		45		64
Depreciation and amortization	26,974		25,003		49,161		50,068
EBITDA	$	79,796	$	88,099	$	152,565	$	184,290
Gain on sales-type leases	—		(27)		—		(24,677)
Gain on significant asset sales	—		(5,263)		—		(5,263)
Goodwill impairment	—		—		—		11,034
Acquisition integration and regulatory costs	886		—		1,722		—
Tariffs and fees not included in revenues	25,168		7,058		38,507		14,025
Lease payments not included in operating costs	(1,606)		(1,606)		(3,213)		(3,213)
Adjusted EBITDA	$	104,244	$	88,261	$	189,581	$	176,196

(2)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 exceptions of 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 is also used by management for internal analysis and for 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.

- 45 -

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(In thousands)
Net income attributable to the partners	$	56,792	$	55,745	$	106,351	$	120,142
Add (subtract):
Depreciation and amortization	26,974		25,003		49,161		50,068
Amortization of discount and deferred debt issuance costs	1,033		1,385		1,803		2,229
Customer billings greater than net income recognized	125		(3,573)		621		(179)
Maintenance capital expenditures (3)	(4,963)		(4,111)		(10,583)		(5,482)
Increase in environmental liability	(124)		(78)		(244)		(234)
Decrease in reimbursable deferred revenue	(3,356)		(3,502)		(6,590)		(7,516)
Gain on sales-type leases	—		(27)		—		(24,677)
Gain on significant asset sales	—		(5,263)		—		(5,263)
Goodwill impairment	—		—		—		11,034
Other	1,977		1,101		2,393		(223)
Distributable cash flow	$	78,458	$	66,680	$	142,912	$	139,899

(3)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, safety and to address environmental regulations.

	June 30, 2022		December 31, 2021
	(In thousands)
Balance Sheet Data
Cash and cash equivalents	$	14,884	$	14,381
Working capital	$	15,259	$	17,461
Total assets	$	2,775,038	$	2,165,867
Long-term debt	$	1,608,460	$	1,333,049
Partners’ equity	$	837,785	$	443,017

Results of Operations—Three Months Ended June 30, 2022 Compared with Three Months Ended June 30, 2021

Summary

Net income attributable to the partners for the second quarter of 2022 was $56.8 million ($0.45 per basic and diluted limited partner unit) compared to $55.7 million ($0.53 per basic and diluted limited partner unit) for the second quarter of 2021. Results for the second quarter of 2021 reflect a gain of $5.3 million related to the sale of a refined product pipeline. Excluding this gain, net income attributable to HEP for the second quarter of 2021 was $50. million ($0.48 per basic and diluted limited partner unit). The increase in net income attributable to HEP was mainly due to net income from Sinclair Transportation, which was acquired on March 14, 2022, partially offset by higher interest expense and higher operating costs and expenses.

Revenues

Revenues for the second quarter were $135.8 million, an increase of $9.5 million compared to the second quarter of 2021. The increase was mainly due to revenues on our recently acquired Sinclair Transportation assets and higher revenues on our UNEV pipeline, partially offset by lower revenues on our Cheyenne assets as a result of the conversion of HF Sinclair's Cheyenne refinery to renewable diesel production and lower volumes on our product pipelines servicing HF Sinclair's Navajo refinery due to lower throughput at the refinery.

Revenues from our refined product pipelines were $26.1 million, a decrease of $2.6 million compared to the second quarter of 2021. Shipments averaged 178.3 thousand barrels per day (“mbpd”) compared to 171.2 mbpd for the second quarter of 2021. The volume increase was mainly due to higher volumes on our recently acquired Sinclair Transportation product

- 46 -

pipelines, partially offset by lower volumes on pipelines servicing HF Sinclair's Navajo refinery. The revenue decrease was mainly due to lower volumes on pipelines servicing HF Sinclair's Navajo refinery and lower revenues from Delek US Holdings, Inc. (“Delek”) due to the expiration of a capacity lease, partially offset by revenues on our recently acquired Sinclair Transportation product pipelines. Revenues did not increase in proportion to volumes due to our recognition of a portion of the Sinclair Transportation refined product pipeline tariffs as interest income under sales-type lease accounting.

Revenues from our intermediate pipelines were $7.5 million, consistent with the second quarter of 2021. Shipments averaged 124.6 mbpd for the second quarter of 2022 compared to 143.8 mbpd for the second quarter of 2021. The decrease in volumes was mainly due to lower throughputs on our intermediate pipelines servicing HF Sinclair’s Navajo refinery while revenue remained constant due to contractual minimum volume guarantees.

Revenues from our crude pipelines were $34.7 million, an increase of $2.6 million compared to the second quarter of 2021. Shipments averaged 615.3 mbpd compared to 396.7 mbpd for the second quarter of 2021. The increase in volumes was mainly attributable to our Cushing Connect Pipeline, which went into service in September 2021, as well as volumes on our recently acquired Sinclair Transportation crude pipelines. The increase in revenues was mainly due to our recently acquired Sinclair Transportation crude pipelines. Revenues did not increase in proportion to volumes due to our recognition of most of the Cushing Connect Pipeline and Sinclair Transportation crude pipeline tariffs as interest income under sales-type lease accounting.

Revenues from terminal, tankage and loading rack fees were $44.6 million, an increase of $7.7 million compared to the second quarter of 2021. Refined products and crude oil terminalled in the facilities averaged 609.0 mbpd compared to 466.7 mbpd for the second quarter of 2021. The increase in volumes was mainly due to our recently acquired Sinclair Transportation assets. Revenues increased mainly due to revenues on our recently acquired Sinclair Transportation assets and higher butane blending revenues. In addition, the second quarter of 2021 included the recognition of $3.4 million of the $10 million termination fee related to the termination of HF Sinclair's minimum volume commitment on our Cheyenne assets as a result of the conversion of the HF Sinclair Cheyenne refinery to renewable diesel production.

Revenues from refinery processing units were $22.9 million, an increase of $1.9 million compared to the second quarter of 2021, and throughputs averaged 72.3 mbpd compared to 76.6 mbpd for the second quarter of 2021. The decrease in volumes was mainly due to decreased throughput at our El Dorado refinery processing units. Revenues increased mainly due to the higher natural gas cost recoveries in revenues. Revenues did not decrease in proportion to the decrease in volumes mainly due to contractual minimum volume guarantees.

Operations Expense

Operations (exclusive of depreciation and amortization and goodwill impairment) expense was $53.9 million for the three months ended June 30, 2022, an increase of $11.8 million compared to the second quarter of 2021. The increase was mainly due to operations expenses associated with our recently acquired Sinclair Transportation assets as well as higher employee costs, natural gas costs, maintenance costs and materials and supplies costs, partially offset by lower rentals and leases for the three months ended June 30, 2022.

Depreciation and Amortization

Depreciation and amortization for the three months ended June 30, 2022 increased by $2.0 million compared to the three months ended June 30, 2021. The increase was mainly due to depreciation on our recently acquired Sinclair Transportation assets and amortization of the Woods Cross refinery processing units turnaround.

General and Administrative

General and administrative costs for the three months ended June 30, 2022 increased by $1.8 million compared to the three months ended June 30, 2021, mainly due to higher legal and professional expenses associated with the HEP Transaction.

- 47 -

Equity in Earnings of Equity Method Investments

	Three Months Ended June 30,
Equity Method Investment	2022		2021
	(in thousands)
Osage Pipe Line Company, LLC	606		914
Cheyenne Pipeline LLC	1,586		1,879
Cushing Connect Terminal Holdings LLC	805		630
Pioneer Investments Corp.	3,221		—
Saddle Butte Pipeline III, LLC	(771)		—
Total	$	5,447	$	3,423

Equity in earnings of Osage Pipe Line Company, LLC decreased for the three months ended June 30, 2022, mainly due to higher maintenance costs. Equity in earnings of Cheyenne Pipeline LLC decreased for the three months ended June 30, 2022, mainly due to the recognition in revenue of prior contractual minimum commitment billings in the three months ended June 30, 2021. Equity in earnings of Cushing Connect Terminal Holdings LLC increased for the three months ended June 30, 2022, mainly due to lower property tax expense. Pioneer Investments Corp. and Saddle Butte Pipeline III, LLC were acquired during the first quarter of 2022 as part of the HEP Transaction.

Interest Expense, including Amortization

Interest expense for the three months ended June 30, 2022, totaled $20.3 million, an increase of $6.4 million compared to the three months ended June 30, 2021. The increase was mainly due to our April 2022 issuance of $400 million in aggregate principal amount of 6.375% senior unsecured notes maturing in April 2027 and higher average borrowings outstanding under our senior secured revolving credit facility related to the funding of the cash portion of the Sinclair Transportation acquisition. In addition, market interest rates increased on our senior secured revolving credit facility. Our aggregate effective interest rates were 4.7% and 3.8% for the three months ended June 30, 2022 and 2021, respectively.

Interest Income

Interest income for the three months ended June 30, 2022, totaled $24.3 million, an increase of $17.7 million compared to the three months ended June 30, 2021. The increase was mainly due to higher sales-type lease interest income from our newly acquired Sinclair Transportation pipelines and terminals and our Cushing Connect Pipeline, which was placed into service at the end of the third quarter of 2021.

State Income Tax Expense

We recorded state income tax expense of $14,000 and $27,000 for the three months ended June 30, 2022 and 2021, respectively. All tax expense is solely attributable to the Texas margin tax.

- 48 -

Results of Operations—Six Months Ended June 30, 2022 Compared with Six Months Ended June 30, 2021

Summary

Net income attributable to the partners for the six months ended June 30, 2022, was $106.4 million ($0.90 per basic and diluted limited partner unit) compared to $120.1 million ($1.14 per basic and diluted limited partner unit) for the six months ended June 30, 2021. Results for the six months ended June 30, 2021, reflect special items that collectively increased net income attributable to the partners by a total of $19.0 million. These items included a gain on sales-type leases of $24.7 million, a gain on significant asset sales of $5.3 million and a goodwill impairment charge of $11.0 million related to our Cheyenne reporting unit. Excluding these items, net income attributable to the partners for the six months ended June 30, 2021, was $101.1 million ($0.96 per basic and diluted limited partner unit). The increase in earnings was mainly due to net income from Sinclair Transportation, which was acquired on March 14, 2022, partially offset by higher interest expense and higher operating costs and expenses. In addition, the six months ended June 30, 2021 included the recognition of $9.9 million of the $10 million termination fee related to the termination of HF Sinclair's minimum volume commitment on our Cheyenne assets.

Revenues

Revenues for the six months ended June 30, 2022, were $256.0 million, an increase of $2.6 million compared to the six months ended June 30, 2021. The increase was mainly attributable to revenues on our recently acquired Sinclair Transportation assets and increased revenues from our UNEV assets, partially offset by lower revenues on our Cheyenne assets as a result of the conversion of HF Sinclair’s Cheyenne refinery to renewable diesel production and lower revenues on our product pipelines servicing HF Sinclair's Navajo refinery. The six months ended June 30, 2021 included the recognition of the $10 million termination fee related to the termination of HF Sinclair's minimum volume commitment on our Cheyenne assets.

Revenues from our refined product pipelines were $52.3 million, a decrease of $5.0 million compared to the six months ended June 30, 2021. Shipments averaged 167.3 mbpd compared to 167.6 mbpd for the six months ended June 30, 2021. The volume and revenue decreases were mainly due to lower volumes on pipelines servicing HF Sinclair's Navajo refinery, partially offset by volumes on our recently acquired Sinclair Transportation assets and higher volumes on our UNEV pipeline. We recognized a significant portion of the Sinclair Transportation refined product pipeline tariffs as interest income under sales-type lease accounting.

Revenues from our intermediate pipelines were $15.0 million, consistent with the six months ended June 30, 2021. Shipments averaged 121.2 mbpd compared to 129.6 mbpd for the six months ended June 30, 2021. The decrease in volumes was mainly due to lower throughputs on our intermediate pipelines servicing HF Sinclair's Navajo refinery while revenue remained relatively constant due to contractual minimum volume guarantees.

Revenues from our crude pipelines were $65.8 million, an increase of $3.2 million compared to the six months ended June 30, 2021. Shipments averaged 571.5 mbpd compared to 385.3 mbpd for the six months ended June 30, 2021. The increase in volumes was mainly attributable to our Cushing Connect Pipeline, which went into service in September 2021, as well as volumes on our recently acquired Sinclair Transportation crude pipelines. The increase in revenues was mainly due to our recently acquired Sinclair Transportation crude pipelines and higher volumes revenues on our legacy crude pipelines in Wyoming and Utah. Revenues did not increase in proportion to volumes due to our recognition of most of the Cushing Connect Pipeline and Sinclair Transportation crude pipeline tariffs as interest income under sales-type lease accounting.

Revenues from terminal, tankage and loading rack fees were $81.6 million, an increase of $6.5 million compared to the six months ended June 30, 2021. Refined products and crude oil terminalled in the facilities averaged 552.0 mbpd compared to 418.1 mbpd for the six months ended June 30, 2021. Volumes increased mainly due to volumes on our recently acquired Sinclair Transportation assets and higher throughputs at HF Sinclair's Tulsa refinery. Revenues increased mainly due to revenues on our recently acquired Sinclair Transportation assets and higher butane blending revenues. In addition, the six months ended June 30, 2021 included the recognition of $9.9 million of the $10 million termination fee related to the termination of HF Sinclair's minimum volume commitment on our Cheyenne assets as a result of the conversion of the HF Sinclair Cheyenne refinery to renewable diesel production.

- 49 -

Revenues from refinery processing units were $41.3 million, a decrease of $2.2 million compared to the six months ended June 30, 2021. Throughputs averaged 68.8 mbpd compared to 68.7 mbpd for the six months ended June 30, 2021 with increased throughputs at our El Dorado refinery processing units offset by lower throughputs at our Woods Cross refinery processing units, which were down for a scheduled turnaround in March 2022. Revenues decreased mainly due to the lower throughput at our Woods Cross refinery processing units, partially offset by higher natural gas cost recoveries in revenues.

Operations Expense

Operations expense (exclusive of depreciation and amortization) for the six months ended June 30, 2022, increased by $13.1 million compared to the six months ended June 30, 2021. The increase was mainly due to operations expenses associated with our recently acquired Sinclair Transportation assets as well as higher employee costs, natural gas costs, and materials and supplies costs, partially offset by lower rentals and leases.

Depreciation and Amortization

Depreciation and amortization for the six months ended June 30, 2022, decreased by $0.9 million compared to the six months ended June 30, 2021. The decrease was mainly due to the acceleration of depreciation on certain of our Cheyenne tanks in 2021 as well as retirement of assets due to sales-type lease accounting.

General and Administrative

General and administrative costs for the six months ended June 30, 2022, increased by $3.2 million compared to the six months ended June 30, 2021 mainly due to higher legal and professional expenses incurred in the six months ended June 30, 2022.

Equity in Earnings of Equity Method Investments

	Six Months Ended June 30,
Equity Method Investment	2022		2021
	(in thousands)
Osage Pipe Line Company, LLC	1,249		1,636
Cheyenne Pipeline LLC	3,360		1,774
Cushing Connect Terminal Holdings LLC	1,711		1,776
Pioneer Investments Corp.	3,686		—
Saddle Butte Pipeline III, LLC	(933)		—
Total	$	9,073	$	5,186

Equity in earnings of Osage Pipe Line Company, LLC decreased for the six months ended June 30, 2022, mainly due to higher maintenance costs. Equity in earnings of Cheyenne Pipeline LLC increased for the six months ended June 30, 2022, mainly due to the recognition in revenue of prior contractual minimum commitment billings. Pioneer Investments Corp. and Saddle Butte Pipeline III, LLC were acquired during the first quarter of 2022 as part of the HEP Transaction.

Interest Expense, including Amortization

Interest expense for the six months ended June 30, 2022, totaled $34.0 million, an increase of $6.8 million compared to the six months ended June 30, 2021. The increase was mainly due to our April 2022 issuance of $400 million in aggregate principal amount of 6.375% senior unsecured notes maturing in April 2027 and higher average borrowings outstanding under our senior secured revolving credit facility related to the funding of the cash portion of the Sinclair Transportation acquisition. In addition, market interest rates increased on our senior secured revolving credit facility. Our aggregate effective interest rates were 4.2% and 3.6% for the six months ended June 30, 2022 and 2021, respectively.

State Income Tax Expense

We recorded state income tax expense of $45,000 and $64,000 for the six months ended June 30, 2022 and 2021, respectively. All tax expense is solely attributable to the Texas margin tax.

- 50 -

LIQUIDITY AND CAPITAL RESOURCES

Overview

In April 2021, we amended our Credit Agreement decreasing the size of the facility from $1.4 billion to $1.2 billion and extending the maturity date to July 27, 2025. The Credit Agreement is available to fund capital expenditures, investments, acquisitions, distribution payments and working capital and for general partnership purposes. The Credit Agreement is also available to fund letters of credit up to a $50 million sub-limit and continues to provide for an accordion feature that allows us to increase commitments under the Credit Agreement up to a maximum amount of $1.7 billion.

During the six months ended June 30, 2022, we received advances totaling $410.0 million and repaid $529.0 million under the Credit Agreement, resulting in a net decrease of $119.0 million and an outstanding balance of $721.0 million at June 30, 2022. As of June 30, 2022, we have no letters of credit outstanding under the Credit Agreement and the available capacity under the Credit Agreement was $479.0 million. Amounts repaid under the Credit Agreement may be reborrowed from time to time.

On April 8, 2022, we closed a private placement of $400 million in aggregate principal amount of 6.375% senior unsecured notes due in 2027 (the “6.375% Senior Notes”). The 6.375% Senior Notes were issued at par for net proceeds of approximately $393 million, after deducting the initial purchasers’ discounts and commissions and estimated offering expenses. The total net proceeds from the offering of the 6.375% Senior Notes were used to partially repay outstanding borrowings under the Credit Agreement, increasing our available liquidity.

As of June 30, 2022, we had $500 million in aggregate principal amount of 5% Senior Notes due in 2028 (the “5% Senior Notes”, and together with the 6.375 Senior Notes, the “Senior Notes”).

We have a continuous offering program under which we may issue and sell common units from time to time, representing limited partner interests, up to an aggregate gross sales amount of $200 million. We did not issue any units under this program during the six months ended June 30, 2022. As of June 30, 2022, HEP has issued 2,413,153 units under this program, providing $82.3 million in gross proceeds.

Under our registration statement filed with the Securities and Exchange Commission (“SEC”) using a “shelf” registration process, we currently have the authority to raise up to $2.0 billion by offering securities, through one or more prospectus supplements that would describe, among other things, the specific amounts, prices and terms of any securities offered and how the proceeds would be used. Any proceeds from the sale of securities are expected to be used for general business purposes, which may include, among other things, funding acquisitions of assets or businesses, working capital, capital expenditures, investments in subsidiaries, the retirement of existing debt and/or the repurchase of common units or other securities.

We believe our current sources of liquidity, including cash balances, future internally generated funds, any future issuances of debt or equity securities and funds available under the Credit Agreement will provide sufficient resources to meet our working capital liquidity, capital expenditure and quarterly distribution needs for the foreseeable future. Future securities issuances, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors.

In the third quarter of 2022, HEP expects to hold the quarterly distribution constant at $0.35 per unit, or $1.40 on an annualized basis. We are on track to achieve our short-term leverage target of 3.5x by year-end. Consistent with our disciplined capital allocation framework, we expect to increase unitholder returns in 2023.

In May 2022, we paid a regular quarterly cash distribution of $0.35 on all units in an aggregate amount of $44.3 million.

Cash and cash equivalents increased by $0.5 million during the six months ended June 30, 2022. The cash flows provided by operating activities of $152.5 million and financing activities of $186.0 million were more than the cash flows used for investing activities of $338.0 million. Working capital decreased by $2.2 million to $15.3 million at June 30, 2022, from $17.5 million at December 31, 2021.

- 51 -

Cash Flows—Operating Activities

Cash flows from operating activities decreased by $9.6 million from $162.1 million for the six months ended June 30, 2021, to $152.5 million for the six months ended June 30, 2022. The decrease was mainly due to higher payments for turnaround expenses at our Woods Cross refinery processing units and higher payments for operating expenses, partially offset by higher cash receipts from customers during the six months ended June 30, 2022, as compared to the six months ended June 30, 2021.

Cash Flows—Investing Activities

Cash flows used for investing activities were $338.0 million for the six months ended June 30, 2022, compared to $48.9 million for the six months ended June 30, 2021, an increase of $289.1 million. During the six months ended June 30, 2022, we paid the $321.4 million cash portion of the purchase price consideration for our acquisition of Sinclair Transportation. During the six months ended June 30, 2022 and 2021, we invested $23.2 million and $59.4 million, respectively, in addition to properties and equipment.

Cash Flows—Financing Activities

Cash flows provided by financing activities were $186.0 million for the six months ended June 30, 2022, compared to cash flows used by financing activities of $115.6 million for the six months ended June 30, 2021, an increase of $301.6 million. During the six months ended June 30, 2022, we received $410.0 million and repaid $529.0 million in advances under the Credit Agreement, and we received net proceeds of $393.7 million related to the issuance of our 6.375% Senior Notes. Additionally, we paid $81.3 million in regular quarterly cash distributions to our limited partners and $5.3 million to our noncontrolling interests. During the six months ended June 30, 2021, we received $141.0 million and repaid $184.5 million in advances under the Credit Agreement. We paid $75.4 million in regular quarterly cash distributions to our limited partners, and distributed $5.9 million to our noncontrolling interests. In addition, we received $17.6 million in contributions from noncontrolling interests during the six months ended June 30, 2021.

Capital Requirements

Our pipeline and terminalling operations are capital intensive, requiring investments to maintain, expand, upgrade or enhance existing operations and to meet environmental and operational regulations. Our capital requirements have consisted of, and are expected to continue to consist of, maintenance capital expenditures and expansion capital expenditures. “Maintenance capital expenditures” represent capital expenditures to replace partially or fully depreciated assets to maintain the operating capacity of existing assets. Maintenance capital expenditures include expenditures required to maintain equipment reliability, tankage and pipeline integrity, safety and to address environmental regulations. “Expansion capital expenditures” represent capital expenditures to expand the operating capacity of existing or new assets, whether through construction or acquisition. Expansion capital expenditures include expenditures to acquire assets, to grow our business and to expand existing facilities, such as projects that increase throughput capacity on our pipelines and in our terminals. Repair and maintenance expenses associated with existing assets that are minor in nature and do not extend the useful life of existing assets are charged to operating expenses as incurred.

Each year the board of directors of HLS, our ultimate general partner, approves our annual capital budget, which specifies capital projects that our management is authorized to undertake. Additionally, at times when conditions warrant or as new opportunities arise, additional projects may be approved. The funds allocated for a particular capital project may be expended over a period in excess of a year, depending on the time required to complete the project. Therefore, our planned capital expenditures for a given year consist of expenditures approved for capital projects included in the current year’s capital budget as well as, in certain cases, expenditures approved for capital projects in capital budgets for prior years. Our current 2022 capital forecast includes forecasted expenditures for our recently acquired Sinclair Transportation assets and is comprised of approximately $20 million to $30 million for maintenance capital expenditures, $25 million to $35 million for refinery unit turnarounds and $5 million to $10 million for expansion capital expenditures and our share of Cushing Connect Joint Venture investments. In addition to our capital budget, we may spend funds periodically to perform capital upgrades or additions to our assets where a customer reimburses us for such costs. The upgrades or additions would generally benefit the customer over the remaining life of the related service agreements.

We expect that our currently planned sustaining and maintenance capital expenditures, as well as planned expenditures for acquisitions and capital development projects, will be funded with cash generated by operations.

Under the terms of the transaction to acquire HFC’s 75% interest in UNEV, we issued to a subsidiary of HFC a Class B unit comprising a noncontrolling equity interest in a wholly owned subsidiary subject to redemption to the extent that HFC is entitled to a 50% interest in 75% of annual UNEV earnings before interest, income taxes, depreciation, and amortization above

- 52 -

$40 million beginning July 1, 2015, and ending in June 2032, subject to certain limitations. However, to the extent earnings thresholds are not achieved, no redemption payments are required. No redemption payments have been required to date.

Credit Agreement

In April 2021, we amended our Credit Agreement decreasing the commitments under the facility from $1.4 billion to $1.2 billion and extending the maturity date to July 27, 2025. The Credit Agreement is available to fund capital expenditures, investments, acquisitions, distribution payments and working capital and for general partnership purposes. The Credit Agreement is also available to fund letters of credit up to a $50 million sub-limit, and it continues to provide for an accordion feature that allows us to increase the commitments under the Credit Agreement up to a maximum amount of $1.7 billion.

Our obligations under the Credit Agreement are collateralized by substantially all of our assets, and indebtedness under the Credit Agreement is guaranteed by our material, wholly owned subsidiaries. The Credit Agreement requires us to maintain compliance with certain financial covenants consisting of total leverage, senior secured leverage, and interest coverage. It also limits or restricts our ability to engage in certain activities. If, at any time prior to the expiration of the Credit Agreement, HEP obtains two investment grade credit ratings, the Credit Agreement will become unsecured and many of the covenants, limitations and restrictions will be eliminated.

We may prepay all loans at any time without penalty, except for tranche breakage costs. If an event of default exists under the Credit Agreement, the lenders will be able to accelerate the maturity of all loans outstanding and exercise other rights and remedies. We were in compliance with the covenants under the Credit Agreement as of June 30, 2022.

Senior Notes

As of June 30, 2022, we had $500 million in aggregate principal amount of 5% Senior Notes due in 2028.

On April 8, 2022, we closed a private placement of $400 million in aggregate principal amount of the 6.375% Senior Notes. The 6.375% Senior Notes were issued at par for net proceeds of approximately $393 million, after deducting the initial purchasers’ discounts and commissions and offering expenses. The total net proceeds from the offering of the 6.375% Senior Notes were used to partially repay outstanding borrowings under the Credit Agreement, increasing our available liquidity.

The Senior Notes are unsecured and impose certain restrictive covenants, including limitations on our ability to incur additional indebtedness, make investments, sell assets, incur certain liens, pay distributions, enter into transactions with affiliates, and enter into mergers. We were in compliance with the restrictive covenants for the Senior Notes as of June 30, 2022. At any time when the Senior Notes are rated investment grade by either Moody’s or Standard & Poor’s and no default or event of default exists, we will not be subject to many of the foregoing covenants. Additionally, we have certain redemption rights at varying premiums over face value under the Senior Notes.

Indebtedness under the Senior Notes is guaranteed by all of our existing wholly owned subsidiaries (other than Holly Energy Finance Corp. and certain immaterial subsidiaries).

- 53 -

Long-term Debt

The carrying amounts of our long-term debt are as follows:

	June 30, 2022		December 31, 2021
	(In thousands)
Credit Agreement
Amount outstanding	721,000		840,000
5% Senior Notes
Principal	500,000		500,000
Unamortized debt issuance costs	(6,459)		(6,951)
	493,541		493,049
6.375% Senior Notes
Principal	400,000		—
Unamortized debt issuance costs	(6,081)		—
	393,919		—
Total long-term debt	$	1,608,460	$	1,333,049

Contractual Obligations

There were no significant changes to our long-term contractual obligations during the quarter ended June 30, 2022.

Impact of Inflation

Inflation in the United States did not have a material impact on our results of operations for the six months ended June 30, 2022 and 2021. PPI has increased an average of 2.9% annually over the past five calendar years, including an increase of 8.9% in 2021 and a decrease of 1.3% in 2020.

The substantial majority of our revenues are generated under long-term contracts that provide for increases or decreases in our rates and minimum revenue guarantees annually for increases or decreases in the PPI. Certain of these contracts have provisions that limit the level of annual PPI percentage rate increases or decreases, and the majority of our rates do not decrease when PPI is negative. A significant and prolonged period of high inflation or a significant and prolonged period of negative inflation could adversely affect our cash flows and results of operations if costs increase at a rate greater than the fees we charge our shippers.

Environmental Matters

Our operation of pipelines, terminals, and associated facilities in connection with the transportation and storage of refined products and crude oil is subject to stringent and complex federal, state, and local laws and regulations governing the discharge of materials into the environment, or otherwise relating to the protection of the environment. As with the industry generally, compliance with existing and anticipated laws and regulations increases our overall cost of business, including our capital costs to construct, maintain, and upgrade equipment and facilities. While these laws and regulations affect our maintenance capital expenditures and net income, we believe that they do not affect our competitive position given that the operations of our competitors are similarly affected. However, these laws and regulations, and the interpretation or enforcement thereof, are subject to frequent change by regulatory authorities, and we are unable to predict the ongoing cost to us of complying with these laws and regulations or the future impact of these laws and regulations on our operations. Violation of environmental laws, regulations, and permits can result in the imposition of significant administrative, civil and criminal penalties, injunctions, and construction bans or delays. A major discharge of hydrocarbons or hazardous substances into the environment could, to the extent the event is not insured, subject us to substantial expense, including both the cost to comply with applicable laws and regulations and claims made by employees, neighboring landowners and other third parties for personal injury and property damage.

Under the Omnibus Agreement and certain transportation agreements and purchase agreements with HF Sinclair, HF Sinclair has agreed to indemnify us, subject to certain monetary and time limitations, for environmental noncompliance and remediation liabilities associated with certain assets transferred to us from HF Sinclair and occurring or existing prior to the date of such transfers.

- 54 -

We have an environmental agreement with Delek with respect to pre-closing environmental costs and liabilities relating to the pipelines and terminals acquired from Delek in 2005, under which Delek will indemnify us subject to certain monetary and time limitations.

At June 30, 2022, we had an accrual of $13.6 million related to environmental clean-up projects for which we have assumed liability, including accrued environmental liabilities assumed in the Sinclair Transportation acquisition that have preliminarily been fair valued at $10.0 million as of the acquisition date, or for which the indemnity provided for by HF Sinclair has expired or will expire. There are environmental remediation projects in progress, including assessment and monitoring activities, that relate to certain assets acquired from HF Sinclair. Certain of these projects were underway prior to our purchase, are covered under the HF Sinclair environmental indemnification discussed above, and represent liabilities retained by HF Sinclair.

On July 8, 2022, the Osage pipeline, which carries crude oil from Cushing, Oklahoma to El Dorado, Kansas, suffered a release of crude oil. The pipeline has resumed operations and recovery operations are ongoing. We expect to accrue amounts related to recovery and remediation in the third quarter of 2022, but cannot estimate those amounts at this time. We do not expect the accrual will have a material impact on our financial position.

CRITICAL ACCOUNTING ESTIMATES

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities as of the date of the financial statements. Actual results may differ from these estimates under different assumptions or conditions. Our significant accounting policies are described in “Item 7. Management’s Discussion and Analysis of Financial Condition and Operations—Critical Accounting Policies” in our Annual Report on Form 10-K for the year ended December 31, 2021. Certain critical accounting policies that materially affect the amounts recorded in our consolidated financial statements include revenue recognition, assessing the possible impairment of certain long-lived assets and goodwill, and assessing contingent liabilities for probable losses. There have been no changes to these policies in 2022. We consider these policies to be critical to understanding the judgments that are involved and the uncertainties that could impact our results of operations, financial condition and cash flows.

RISK MANAGEMENT

The market risk inherent in our debt positions is the potential change arising from increases or decreases in interest rates as discussed below.

At June 30, 2022, we had an outstanding principal balance of $900 million on our Senior Notes. A change in interest rates generally would affect the fair value of the Senior Notes, but not our earnings or cash flows. At June 30, 2022, the fair value of our Senior Notes was $808.7 million. We estimate a hypothetical 10% change in the yield-to-maturity applicable to the Senior Notes at June 30, 2022 would result in a change of approximately $28.9 million in the fair value of the underlying Senior Notes.

For the variable rate Credit Agreement, changes in interest rates would affect cash flows, but not the fair value. At June 30, 2022, borrowings outstanding under the Credit Agreement were $721.0 million. A hypothetical 10% change in interest rates applicable to the Credit Agreement would not materially affect our cash flows.

Our operations are subject to catastrophic losses, operational hazards and unforeseen interruptions, including but not limited to fire, explosion, releases or spills, cyberattacks, weather-related perils, vandalism, power failures, mechanical failures and other events beyond our control. We maintain various insurance coverages, including general liability, property damage, business interruption and cyber insurance, subject to certain deductibles and insurance policy terms and conditions. We are not fully insured against certain risks because such risks are not fully insurable, coverage is unavailable, or premium costs, in our judgment, do not justify such expenditures.

- 55 -

We have a risk management oversight committee that is made up of members from our senior management. This committee monitors our risk environment and provides direction for activities to mitigate, to an acceptable level, identified risks that may adversely affect the achievement of our goals.

Item 3.Quantitative and Qualitative Disclosures About Market Risk

Market risk is the risk of loss arising from adverse changes in market rates and prices. See “Risk Management” under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for a discussion of market risk exposures that we have with respect to our long-term debt, which disclosure should be read in conjunction with the quantitative and qualitative disclosures about market risk contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

Since we do not own products shipped on our pipelines or terminalled at our terminal facilities, we do not have direct market risks associated with commodity prices.

Item 4.Controls and Procedures

(a) Evaluation of disclosure controls and procedures

Our principal executive officer and principal financial officer have evaluated, as required by Rule 13a-15(b) under the Securities Exchange Act of 1934 (the “Exchange Act”), our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this quarterly report on Form 10-Q. Our disclosure controls and procedures are designed to provide reasonable assurance that the information we are required to disclose in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure and is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Based upon the evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were effective as of June 30, 2022, at a reasonable level of assurance.

(b) Changes in internal control over financial reporting

We acquired Sinclair Transportation effective March 14, 2022, and have included the operating results and assets and liabilities of Sinclair Transportation in our consolidated financial statements as of June 30, 2022 and for the 109 days then ended. Other than our internal controls for Sinclair Transportation, there have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during our last fiscal quarter that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

- 56 -

PART II. OTHER INFORMATION

Item 1.Legal Proceedings

In the ordinary course of business, we may become party to legal, regulatory or administrative proceedings or governmental investigations, including environmental and other matters. Damages or penalties may be sought from us in some matters and certain matters may require years to resolve. While the outcome and impact of these proceedings and investigations on us cannot be predicted with certainty, based on advice of counsel and information currently available to us, management believes that the resolution of these proceedings and investigations, through settlement or adverse judgment, will not, either individually or in the aggregate, have a materially adverse effect on our financial condition, results of operations or cash flows.

Item 1A.Risk Factors

There have been no material changes in our risk factors as previously disclosed in Part I, “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021. In addition to the other information set forth in this quarterly report, you should consider carefully the information discussed in our 2021 Form 10-K, which could materially affect our business, financial condition or future results. The risks described in our 2021 Form 10-K are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially and adversely affect our business, financial condition or future results.

Item 6.Exhibits

The Exhibit Index beginning on page 58 of this Quarterly Report on Form 10-Q lists the exhibits that are filed or furnished, as applicable, as part of this Quarterly Report on Form 10-Q.

- 57 -

Exhibit Index

Exhibit Number	Description
3.1	Second Amended and Restated Agreement of Limited Partnership of Holly Energy Partners, L.P. (incorporated by reference to Exhibit 3.1 to Registrant’s Current Report on Form 8-K filed on November 1, 2017, File No. 1-32225).
3.2	First Amended and Restated Agreement of Limited Partnership of HEP Operating Company, L.P. (incorporated by reference to Exhibit 3.2 of Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2004, File No. 1-32225).
3.3	First Amended and Restated Agreement of Limited Partnership of HEP Logistics Holdings, L.P. (incorporated by reference to Exhibit 3.4 of Registrant’s Quarterly Report on Form 10-Q for its quarterly period ended June 30, 2004, File No. 1-32225).
3.4	First Amended and Restated Limited Liability Company Agreement of Holly Logistic Services, L.L.C. (incorporated by reference to Exhibit 3.5 of Registrant’s Quarterly Report on Form 10-Q for its quarterly period ended June 30, 2004, File No. 1-32225).
3.5	Amendment No. 1 to the First Amended and Restated Limited Liability Company Agreement of Holly Logistic Services, L.L.C., dated April 27, 2011 (incorporated by reference to Exhibit 3.1 of Registrant’s Form 8-K Current Report filed on May 3, 2011, File No. 1-32225).
3.6	First Amended and Restated Limited Liability Company Agreement of HEP Logistics GP, L.L.C. (incorporated by reference to Exhibit 3.6 of Registrant’s Quarterly Report on Form 10-Q for its quarterly period ended June 30, 2004, File No. 1-32225).
4.1	Indenture, dated April 8, 2022, by and among Holly Energy Partners, L.P., Holly Energy Finance Corp., each of the Guarantors party thereto and U.S. Bank Trust Company, National Association, relating to the offering of the Notes (incorporated by reference to Exhibit 4.1 of Registrant’s Current Report on Form 8-K filed April 8, 2022, File No. 1-32225).
4.2	First Supplemental Indenture, dated May 22, 2022, among UNEV Pipeline, LLC, Holly Energy Partners, L.P. and Holly Energy Finance Corp. and the other Guarantors party thereto and U.S. Bank Trust Company, National Association, as trustee, related to Holly Energy Partners, L.P.’s 6.375% Senior Notes due 2027 (incorporated by reference to Exhibit 4.9 of Registrant’s Registration Statement on Form S-3 filed May 23, 2022, File No. 333-265140).
4.3	Second Supplemental Indenture, dated as of May 22, 2022, among UNEV Pipeline, LLC, Holly Energy Partners, L.P. and Holly Energy Finance Corp. and the other Guarantors party thereto and U.S. Bank Trust Company, National Association, as trustee, related to Holly Energy Partners, L.P.’s 5.000% Senior Notes due 2028 (incorporated by reference to Exhibit 4.7 of Registrant’s Registration Statement on Form S-3 filed May 23, 2022, File No. 333-26514).
22.1*	Subsidiary Guarantors and Issuers of Guaranteed Securities and Affiliates whose Securities Collateralize Securities of the Registrant.
31.1*	Certification of Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**	Certification of Chief Executive Officer under Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**	Certification of Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act of 2002.
101++	The following financial information from Holly Energy Partners, L.P.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2022 formatted in iXBRL (Inline Extensible Business Reporting Language): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income, (iii) Consolidated Statements of Cash Flows, (iv) Consolidated Statement of Partners’ Equity, and (v) Notes to Consolidated Financial Statements. The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.
104	Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).

*	Filed herewith.
**	Furnished herewith.
+	Constitutes management contracts or compensatory plans or arrangements.
++	Filed electronically herewith.
†	Schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The registrant agrees to furnish supplementally a copy of the omitted schedules and exhibits to the SEC upon request.

- 58 -

HOLLY ENERGY PARTNERS, L.P.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	HOLLY ENERGY PARTNERS, L.P.
	(Registrant)
		By: HEP LOGISTICS HOLDINGS, L.P. its General Partner
		By: HOLLY LOGISTIC SERVICES, L.L.C. its General Partner
August 8, 2022		/s/    John Harrison
		John Harrison
		Senior Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer)
August 8, 2022		/s/    Kenneth P. Norwood
		Kenneth P. Norwood
		Vice President and Controller (Principal Accounting Officer)

- 59 -

EX-22.1

EXHIBIT 22.1

Subsidiary Guarantors and Issuers of Guaranteed Securities and Affiliates whose Securities Collateralize Securities of the Registrant

The following subsidiaries of Holly Energy Partners, L.P. (the “Partnership”) were, as of June 30, 2022, listed as guarantors or as co-issuer under the Partnership’s Registration Statement on Form S-3 (No. 333-265154).

Entity	Jurisdiction of Incorporation or Organization	Role
Holly Energy Finance Corp.	Delaware	Co-Issuer
Cheyenne Logistics LLC	Delaware	Guarantor
El Dorado Logistics LLC	Delaware	Guarantor
El Dorado Operating LLC	Delaware	Guarantor
El Dorado Osage LLC	Delaware	Guarantor
Frontier Aspen LLC	Delaware	Guarantor
HEP Cheyenne LLC	Delaware	Guarantor
HEP Cushing LLC	Delaware	Guarantor
HEP El Dorado LLC	Delaware	Guarantor
HEP Fin-Tex/Trust-River, L.P.	Delaware	Guarantor
HEP Logistics GP, L.L.C.	Delaware	Guarantor
HEP Mountain Home, L.L.C.	Delaware	Guarantor
HEP Navajo Southern, L.P.	Delaware	Guarantor
HEP Oklahoma LLC	Delaware	Guarantor
HEP Pipeline Assets, Limited Partnership	Delaware	Guarantor
HEP Pipeline GP, L.L.C.	Delaware	Guarantor
HEP Pipeline, L.L.C.	Delaware	Guarantor
HEP Refining Assets, L.P.	Delaware	Guarantor
HEP Refining GP, L.L.C.	Delaware	Guarantor
HEP Refining, L.L.C.	Delaware	Guarantor
HEP Tulsa LLC	Delaware	Guarantor
HEP UNEV Holdings LLC	Delaware	Guarantor
HEP UNEV Pipeline LLC	Delaware	Guarantor
HEP Woods Cross, L.L.C.	Delaware	Guarantor
Holly Energy Holdings LLC	Delaware	Guarantor
Holly Energy Partners—Operating, L.P.	Delaware	Guarantor
Holly Energy Storage—Lovington LLC	Delaware	Guarantor
Lovington-Artesia, L.L.C.	Delaware	Guarantor
Roadrunner Pipeline, L.L.C.	Delaware	Guarantor
SLC Pipeline LLC	Delaware	Guarantor
Woods Cross Operating LLC	Delaware	Guarantor
Sinclair Transportation Company LLC	Wyoming	Guarantor
Sinclair Logistics LLC	Wyoming	Guarantor
Sinclair Pipeline Company LLC	Wyoming	Guarantor
UNEV Pipeline, LLC	Delaware	Guarantor

* The above-listed entities also serve as co-issuer and as guarantors, respectively, of the Partnership’s (i) 5.000% Senior Notes due 2028 (the “2028 Notes”) and (ii) 6.375% Senior Notes due 2027 (the “2027 Notes” and together with the 2028 Notes, the “Notes”). The Notes were issued in private offerings to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933 (the “Securities Act”) and to persons outside the United States pursuant to Regulation S under the Securities Act.

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Michael C. Jennings, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Holly Energy Partners, L.P;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a.all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

August 8, 2022	/s/ Michael C. Jennings
	Michael C. Jennings
	Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, John Harrison, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Holly Energy Partners, L.P;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a.all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

August 8, 2022	/s/ John Harrison
	John Harrison
	Senior Vice President, Chief Financial Officer  and Treasurer

EX-32.1

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE

OFFICER OF HOLLY ENERGY PARTNERS, L.P.

PURSUANT TO 18 U.S.C. SECTION 1350

In connection with the accompanying report on Form 10-Q for the quarterly period ended June 30, 2022 and filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael C. Jennings, Chief Executive Officer of Holly Logistic Services, L.L.C., the general partner of HEP Logistics Holdings, L.P., the general partner of Holly Energy Partners, L.P (the “Company”), hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

August 8, 2022	/s/ Michael C. Jennings
	Michael C. Jennings
	Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION OF CHIEF FINANCIAL

OFFICER OF HOLLY ENERGY PARTNERS, L.P.

PURSUANT TO 18 U.S.C. SECTION 1350

In connection with the accompanying report on Form 10-Q for the quarterly period ended June 30, 2022 and filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John Harrison, Senior Vice President, Chief Financial Officer and Treasurer of Holly Logistic Services, L.L.C., the general partner of HEP Logistics Holdings, L.P., the general partner of Holly Energy Partners, L.P (the “Company”), hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

August 8, 2022	/s/ John Harrison
	John Harrison
	Senior Vice President, Chief Financial Officer  and Treasurer

XML

Cover Page - shares	6 Months Ended
	Jun. 30, 2022	Aug. 05, 2022
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Jun. 30, 2022
Document Transition Report	false
Entity File Number	1-32225
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	20-0833098
Entity Address, Address Line One	2828 N. Harwood,
Entity Address, Address Line Two	Suite 1300
Entity Address, City or Town	Dallas
Entity Address, State or Province	TX
Entity Address, Postal Zip Code	75201
City Area Code	214
Local Phone Number	871-3555
Title of 12(b) Security	Common Limited Partner Units
Trading Symbol	HEP
Security Exchange Name	NYSE
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding (in shares)		126,440,201
Entity Registrant Name	HOLLY ENERGY PARTNERS LP
Entity Central Index Key	0001283140
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2022
Document Fiscal Period Focus	Q2
Amendment Flag	false

XML

CONSOLIDATED BALANCE SHEEETS - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Current assets:
Cash and cash equivalents (Cushing Connect VIEs: $4,596 and $8,881, respectively)	$ 14,884	$ 14,381
Accounts receivable:
Trade	13,583	12,745
Affiliates	58,969	56,154
Total accounts receivable	72,552	68,899
Prepaid and other current assets	11,969	11,033
Total current assets	99,405	94,313
Properties and equipment, net	1,426,492	1,329,028
Operating lease right-of-use assets, net	2,502	2,275
Net investment in leases (Cushing Connect VIEs: $100,866 and $100,042, respectively)	542,281	309,303
Intangible assets, net	66,304	73,307
Goodwill	314,418	223,650
Equity method investments (Cushing Connect VIEs: $35,955 and $37,505, respectively)	280,472	116,378
Deferred turnaround costs	25,813	2,632
Other assets	17,351	14,981
Total assets	2,775,038	2,165,867
Accounts payable:
Trade (Cushing Connect VIEs: $3,427 and $8,285, respectively)	25,104	28,577
Affiliates	12,696	11,703
Total accounts payable	37,800	40,280
Accrued interest	17,963	11,258
Deferred revenue	13,770	14,585
Accrued property taxes	7,145	4,542
Current operating lease liabilities	963	620
Current finance lease liabilities	3,857	3,786
Other current liabilities	2,648	1,781
Total current liabilities	84,146	76,852
Long-term debt	1,608,460	1,333,049
Noncurrent operating lease liabilities	2,006	2,030
Noncurrent finance lease liabilities	62,838	64,649
Other long-term liabilities	23,072	12,527
Deferred revenue	28,865	29,662
Class B unit	58,461	56,549
Partners’ equity:
Common unitholders (126,440,201 and 105,440,201 units issued and outstanding at June 30, 2022 and December 31, 2021, respectively)	837,785	443,017
Noncontrolling interests	69,405	147,532
Total equity	907,190	590,549
Total liabilities and equity	$ 2,775,038	$ 2,165,867

XML

CONSOLIDATED BALANCE SHEEETS (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Condensed Balance Sheet Statements, Captions [Line Items]
Cash and cash equivalents	$ 14,884	$ 14,381
Net investment in leases	542,281	309,303
Equity method investments	280,472	116,378
Trade payable	$ 25,104	$ 28,577
Common units outstanding (in shares)	126,440,201	105,440,201
Common unit issued (in shares)	126,440,201	105,440,201
VIEs
Condensed Balance Sheet Statements, Captions [Line Items]
Cash and cash equivalents	$ 4,596	$ 8,881
Net investment in leases	100,866	100,042
Equity method investments	35,955	37,505
Trade payable	$ 3,427	$ 8,285

XML

CONSOLIDATED STATEMENTS OF INCOME - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Revenues:
Revenues:	$ 135,770	$ 126,235	$ 255,968	$ 253,418
Operating costs and expenses:
Operations (exclusive of depreciation and amortization)	53,899	42,068	96,524	83,433
Depreciation and amortization	26,974	25,003	49,161	50,068
General and administrative	4,682	2,847	8,994	5,815
Goodwill impairment	0	0	0	11,034
Total operating costs and expenses	85,555	69,918	154,679	150,350
Operating income	50,215	56,317	101,289	103,068
Other income (expense):
Equity in earnings of equity method investments	5,447	3,423	9,073	5,186
Interest expense	(20,347)	(13,938)	(33,986)	(27,178)
Interest income	24,331	6,614	36,978	13,162
Gain on sales-type leases	0	27	0	24,677
Gain on sale of assets and other	45	5,415	146	5,917
Total other income (expense)	9,476	1,541	12,211	21,764
Income before income taxes	59,691	57,858	113,500	124,832
State income tax expense	(14)	(27)	(45)	(64)
Net income	59,677	57,831	113,455	124,768
Allocation of net income attributable to noncontrolling interests	(2,885)	(2,086)	(7,104)	(4,626)
Net income attributable to the partners	$ 56,792	$ 55,745	$ 106,351	$ 120,142
Limited partners’ per unit interest in earnings— basic (in USD per share)	$ 0.45	$ 0.53	$ 0.90	$ 1.14
Limited partners’ per unit interest in earnings— diluted (in USD per share)	$ 0.45	$ 0.53	$ 0.90	$ 1.14
Weighted average limited partners’ units outstanding, basic (in shares)	126,440	105,440	118,087	105,440
Weighted average limited partners’ units outstanding, diluted (in shares)	126,440	105,440	118,087	105,440
Affiliates
Revenues:
Revenues:	$ 110,537	$ 99,142	$ 202,791	$ 201,068
Third parties
Revenues:
Revenues:	$ 25,233	$ 27,093	$ 53,177	$ 52,350

XML

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021
Cash flows from operating activities
Net income	$ 113,455	$ 124,768
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	49,161	50,068
Gain on sale of assets	(25)	(5,586)
Gain on sales-type leases	0	(24,677)
Goodwill impairment	0	11,034
Amortization of deferred charges	1,803	2,229
Equity-based compensation expense	1,227	1,210
Equity in earnings of equity method investments, net of distributions	933	0
(Increase) decrease in operating assets:
Accounts receivable—trade	1,071	1,726
Accounts receivable—affiliates	(2,815)	1,649
Prepaid and other current assets	60	825
Increase (decrease) in operating liabilities:
Accounts payable—trade	1,355	3,068
Accounts payable—affiliates	993	(3,157)
Accrued interest	6,705	(23)
Deferred revenue	(1,612)	(2,176)
Accrued property taxes	1,630	1,065
Other current liabilities	77	438
Turnaround expenditures	(24,158)	(882)
Other, net	2,626	529
Net cash provided by operating activities	152,486	162,108
Cash flows from investing activities
Additions to properties and equipment	(23,246)	(59,375)
Acquisition of Sinclair Transportation	(321,366)	0
Proceeds from sale of assets	33	7,343
Distributions in excess of equity in earnings of equity investments	6,589	3,107
Net cash used for investing activities	(337,990)	(48,925)
Cash flows from financing activities
Borrowings under credit agreement	410,000	141,000
Repayments of credit agreement borrowings	(529,000)	(184,500)
Proceeds from issuance of debt	400,000	0
Contributions from noncontrolling interests	0	17,593
Distributions to HEP unitholders	(81,333)	(75,356)
Distributions to noncontrolling interests	(5,308)	(5,872)
Payments on finance leases	(1,776)	(1,747)
Deferred financing costs	(6,343)	(6,661)
Units withheld for tax withholding obligations	(65)	(69)
Other	(168)	0
Net cash provided (used) by financing activities	186,007	(115,612)
Cash and cash equivalents
Increase (decrease) for the period	503	(2,429)
Beginning of period	14,381	21,990
End of period	14,884	19,561
Supplemental disclosure of cash flow information
Cash paid during the period for interest	$ 25,814	$ 25,072

XML

CONSOLIDATED STATEMENTS OF EQUITY - USD ($) $ in Thousands	Total	UNEV Pipeline, LLC	Common Units	Common Units UNEV Pipeline, LLC	Noncontrolling Interests	Noncontrolling Interests UNEV Pipeline, LLC
Balance, beginning of period at Dec. 31, 2020	$ 505,358		$ 379,292		$ 126,066
Increase (Decrease) in Partners' Equity [Roll Forward]
Capital Contribution-Cushing Connect	9,746				9,746
Distributions to HEP unitholders	(38,328)		(38,328)
Distributions to noncontrolling interests	(3,819)				(3,819)
Acquisition of remaining UNEV interests	(893)		(893)
Amortization of restricted and performance units	683		683
Class B unit accretion	(893)		(893)
Other	(68)		(68)
Net income	66,937		65,290		1,647
Balance, end of period at Mar. 31, 2021	539,616		405,976		133,640
Increase (Decrease) in Partners' Equity [Roll Forward]
Contributions from noncontrolling interest	9,780				9,780
Distributions to HEP unitholders	(37,028)		(37,028)
Distributions to noncontrolling interests	(2,053)				(2,053)
Acquisition of remaining UNEV interests	(894)		(894)
Equity-based compensation	527		527
Class B unit accretion	(894)		(894)
Other	(2)		(2)
Net income	57,831		56,639		1,192
Balance, end of period at Jun. 30, 2021	567,777		425,218		142,559
Balance, beginning of period at Dec. 31, 2021	590,549		443,017		147,532
Increase (Decrease) in Partners' Equity [Roll Forward]
Issuance of common units	349,020		349,020
Distributions to HEP unitholders	(36,997)		(36,997)
Distributions to noncontrolling interests	(877)				(877)
Acquisition of remaining UNEV interests	(956)	$ (61,650)	(956)	$ 16,537		$ (78,187)
Amortization of restricted and performance units	620		620
Class B unit accretion	(956)	(61,650)	(956)	16,537		(78,187)
Other	(147)		(147)
Net income	53,778		50,515		3,263
Balance, end of period at Mar. 31, 2022	893,340		821,609		71,731
Increase (Decrease) in Partners' Equity [Roll Forward]
Distributions to HEP unitholders	(44,336)		(44,336)
Distributions to noncontrolling interests	(4,431)				(4,431)
Acquisition of remaining UNEV interests	(956)	3,375	(956)	3,198		177
Amortization of restricted and performance units	607		607
Class B unit accretion	(956)	$ 3,375	(956)	$ 3,198		$ 177
Other	(86)		(86)
Net income	59,677		57,749		1,928
Balance, end of period at Jun. 30, 2022	$ 907,190		$ 837,785		$ 69,405

XML

Description of Business and Presentation of Financial Statements

6 Months Ended

Jun. 30, 2022

Accounting Policies [Abstract]

Description of Business and Presentation of Financial Statements

Description of Business and Presentation of Financial Statements

Holly Energy Partners, L.P. (“HEP”), together with its consolidated subsidiaries, is a publicly held master limited partnership. We commenced operations on July 13, 2004, upon the completion of our initial public offering. On March 14, 2022 (the “Closing Date”), HollyFrontier Corporation (“HFC”) and HEP announced the establishment of HF Sinclair Corporation, a Delaware corporation (“HF Sinclair”), as the new parent holding company of HFC and HEP and their subsidiaries, and the completion of their respective acquisitions of Sinclair Oil Corporation (now known as Sinclair Oil LLC (“Sinclair Oil”)) and Sinclair Transportation Company LLC (“Sinclair Transportation”) from The Sinclair Companies (now known as REH Company and referred to herein as “Sinclair HoldCo”). On the Closing Date, pursuant to that certain Business Combination Agreement, dated as of August 2, 2021 (as amended on March 14, 2022, the “Business Combination Agreement”), by and among HFC, HF Sinclair (formerly known as Hippo Parent Corporation), Hippo Merger Sub, Inc., a wholly owned subsidiary of HF Sinclair (“Parent Merger Sub”), Sinclair HoldCo, and Hippo Holding LLC, a wholly owned subsidiary of Sinclair HoldCo (the “Target Company”), HF Sinclair completed its acquisition of the Target Company by effecting (a) a holding company merger in accordance with Section 251(g) of the Delaware General Corporation Law whereby HFC merged with and into Parent Merger Sub, with HFC surviving such merger as a direct wholly owned subsidiary of HF Sinclair (the “HFC Merger”), and (b) immediately following the HFC Merger, a contribution whereby Sinclair HoldCo contributed all of the equity interests of the Target Company to HF Sinclair in exchange for shares of HF Sinclair, resulting in the Target Company becoming a direct wholly owned subsidiary of HF Sinclair (together with the HFC Merger, the “HFC Transactions”).

As of June 30, 2022, HF Sinclair and its subsidiaries owned a 47% limited partner interest and the non-economic general partner interest in HEP.

In connection with the closing of the HFC Transactions, HF Sinclair issued 60,230,036 shares of HF Sinclair common stock to Sinclair HoldCo, representing 27.0% of the pro forma equity of HF Sinclair with a value of approximately $2,149 million based on HFC’s fully diluted shares of common stock outstanding and closing stock price on March 11, 2022. References herein to HF Sinclair with respect to time periods prior to March 14, 2022 refer to HFC and its consolidated subsidiaries and do not include the Target Company, Sinclair Transportation or their respective consolidated subsidiaries. References herein to HF Sinclair with respect to time periods from and after March 14, 2022 refer to HF Sinclair and its consolidated subsidiaries, which includes the operations of the combined Sinclair HoldCo businesses.

Additionally, on the Closing Date, pursuant to that certain Contribution Agreement, dated August 2, 2021 (as amended on March 14, 2022, the “Contribution Agreement”) by and among Sinclair HoldCo, Sinclair Transportation and HEP, HEP acquired all of the outstanding equity interests of Sinclair Transportation from Sinclair HoldCo in exchange for 21 million newly issued common limited partner units of HEP (the “HEP Units”), representing 16.6% of the pro forma outstanding HEP Units with a value of approximately $349 million based on HEP’s fully diluted common limited partner units outstanding and closing unit price on March 11, 2022, and cash consideration equal to $321.4 million, inclusive of estimated working capital adjustments pursuant to the Contribution Agreement for an aggregate transaction value of $670.4 million (the “HEP Transaction” and together with the HFC Transactions, the “Sinclair Transactions”). Of the 21 million HEP Units, 5.29 million units are currently held in escrow to secure Sinclair HoldCo’s renewable identification numbers (“RINs”) credit obligations to HF Sinclair under Section 6.22 of the Business Combination Agreement. HF Sinclair, and not HEP, would be entitled to the HEP common units held in escrow in the event of Sinclair HoldCo’s breach of its RINs credit obligations under the Business Combination Agreement. The cash consideration was funded through a draw under HEP’s senior secured revolving credit facility. The HEP Transaction was conditioned on the closing of the HFC Transactions, which occurred immediately following the HEP Transaction.

Sinclair Transportation, which together with its subsidiaries, owns integrated crude and refined products pipelines and terminal assets, including approximately 1,200 miles of integrated crude and refined product pipeline supporting the Sinclair HoldCo refineries and other third party refineries, eight product terminals and two crude terminals with approximately 4.5 million barrels of operated storage. In addition, HEP acquired Sinclair Transportation’s interests in three pipeline joint ventures for crude gathering and product offtake.

References herein to HEP with respect to time periods prior to March 14, 2022, include HEP and its consolidated subsidiaries and do not include Sinclair Transportation and its consolidated subsidiaries (collectively, the “Acquired Sinclair Businesses”). References herein to HEP with respect to time periods from and after March 14, 2022 include the operations of the Acquired Sinclair Businesses.

Through our subsidiaries and joint ventures, we own and/or operate petroleum product and crude oil pipelines, terminal, tankage and loading rack facilities and refinery processing units that support refining and marketing operations of HF Sinclair and other refineries in the Mid-Continent, Southwest and Northwest regions of the United States. Additionally, we own (a) a 50% interest in Osage Pipe Line Company, LLC (“Osage”), (b) a 50% interest in Cheyenne Pipeline LLC, (c) a 50% interest in Cushing Connect Pipeline & Terminal LLC, (d) a 25.06% interest in Saddle Butte Pipeline III, LLC and (e) a 49.995% interest in Pioneer Investments Corp. Following the HEP Transaction, we now own the remaining 25% interest in UNEV Pipeline, LLC and as a result, UNEV Pipeline, LLC is our wholly owned subsidiary.

On June 1, 2020, HFC announced plans to permanently cease petroleum refining operations at its Cheyenne Refinery (the “Cheyenne Refinery”) and to convert certain assets at that refinery to renewable diesel production. HFC subsequently began winding down petroleum refining operations at the Cheyenne Refinery on August 3, 2020.

On February 8, 2021, HEP and HFC finalized and executed new agreements for HEP’s Cheyenne assets with the following terms, in each case effective January 1, 2021: (1) a ten-year lease with two five-year renewal option periods for HFC’s (and now HF Sinclair’s) use of certain HEP tank and rack assets in the Cheyenne Refinery to facilitate renewable diesel production with an annual lease payment of approximately $5 million, (2) a five-year contango service fee arrangement that will utilize HEP tank assets inside the Cheyenne Refinery where HFC (and now HF Sinclair) will pay a base tariff to HEP for available crude oil storage and HFC (and now HF Sinclair) and HEP will split any profits generated on crude oil contango opportunities and (3) a $10 million one-time cash payment from HFC to HEP for the termination of the existing minimum volume commitment.

We operate in two reportable segments, a Pipelines and Terminals segment and a Refinery Processing Unit segment. Disclosures around these segments are discussed in Note 16.

We generate revenues by charging tariffs for transporting petroleum products and crude oil through our pipelines, by charging fees for terminalling and storing refined products and other hydrocarbons, providing other services at our storage tanks and terminals and by charging a tolling fee per barrel or thousand standard cubic feet of feedstock throughput in our refinery processing units. We do not take ownership of products that we transport, terminal, store or process, and therefore, we are not exposed directly to changes in commodity prices.

The consolidated financial statements included herein have been prepared without audit, pursuant to the rules and regulations of the SEC. The interim financial statements reflect all adjustments, which, in the opinion of management, are necessary for a fair presentation of our results for the interim periods. Such adjustments are considered to be of a normal recurring nature. Although certain notes and other information required by U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted, we believe that the disclosures in these consolidated financial statements are adequate to make the information presented not misleading. These consolidated financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2021. Results of operations for interim periods are not necessarily indicative of the results of operations that will be realized for the year ending December 31, 2022.

Principles of Consolidation and Common Control Transactions

The consolidated financial statements include our accounts and those of subsidiaries and joint ventures that we control. All significant intercompany transactions and balances have been eliminated.

Most of our acquisitions from HFC occurred while we were a consolidated variable interest entity (“VIE”) of HFC. Therefore, as an entity under common control with HFC, we recorded these acquisitions on our balance sheets at HFC's historical basis instead of our purchase price or fair value.

Goodwill and Long-lived Assets

Goodwill represents the excess of our cost of an acquired business over the fair value of the assets acquired, less liabilities assumed. Goodwill is not subject to amortization and is tested annually or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Our goodwill

impairment testing first entails either a quantitative assessment or an optional qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If we determine that based on the qualitative factors that it is more likely than not that the carrying amount of the reporting unit is greater than its fair value, a quantitative test is performed in which we estimate the fair value of the related reporting unit. If the carrying amount of a reporting unit exceeds its fair value, the goodwill of that reporting unit is impaired, and we measure goodwill impairment as the excess of the carrying amount of the reporting unit over the related fair value.

Indicators of Goodwill and Long-lived Asset Impairment

During the first quarter of 2021, changes in our agreements with HFC related to our Cheyenne assets resulted in an increase in the net book value of our Cheyenne reporting unit due to sales-type lease accounting, which led us to determine indicators of potential goodwill impairment for our Cheyenne reporting unit were present.

The estimated fair value of our Cheyenne reporting unit was derived using a combination of income and market approaches. The income approach reflects expected future cash flows based on anticipated gross margins, operating costs, and capital expenditures. The market approaches include both the guideline public company and guideline transaction methods. Both methods utilize pricing multiples derived from historical market transactions of other like-kind assets. These fair value measurements involve significant unobservable inputs (Level 3 inputs). See Note 6 for further discussion of Level 3 inputs.

Our interim impairment testing of our Cheyenne reporting unit goodwill identified an impairment charge of $11.0 million, which was recorded in the three months ended March 31, 2021.

We performed our annual goodwill impairment testing qualitatively as of July 1, 2021, and determined it was not more likely than not that the carrying amount of each reporting unit was greater than its fair value. Therefore, a quantitative test was not necessary, and no additional impairment of goodwill was recorded.

We evaluate long-lived assets, including finite-lived intangible assets, for potential impairment by identifying whether indicators of impairment exist and, if so, assessing whether the long-lived assets are recoverable from estimated future undiscounted cash flows. The actual amount of impairment loss, if any, to be recorded is equal to the amount by which a long-lived asset’s carrying value exceeds its fair value.

Revenue Recognition

Revenues are generally recognized as products are shipped through our pipelines and terminals, feedstocks are processed through our refinery processing units or other services are rendered. The majority of our contracts with customers meet the definition of a lease since (1) performance of the contracts is dependent on specified property, plant, or equipment and (2) it is unlikely that one or more parties other than the customer will take more than a minor amount of the output associated with the specified property, plant, or equipment. Prior to the adoption of the new lease standard (see below), we bifurcated the consideration received between lease and service revenue. The new lease standard allows the election of a practical expedient whereby a lessor does not have to separate non-lease (service) components from lease components under certain conditions. The majority of our contracts meet these conditions, and we have made this election for those contracts. Under this practical expedient, we treat the combined components as a single performance obligation in accordance with Accounting Standards Codification (“ASC”) 606, which largely codified ASU 2014-09, if the non-lease (service) component is the dominant component. If the lease component is the dominant component, we treat the combined components as a lease in accordance with ASC 842, which largely codified ASU 2016-02.

Several of our contracts include incentive or reduced tariffs once a certain quarterly volume is met. Revenue from the variable element of these transactions is recognized based on the actual volumes shipped as it relates specifically to rendering the services during the applicable quarter.

The majority of our long-term transportation contracts specify minimum volume requirements, whereby, we bill a customer for a minimum level of shipments in the event a customer ships below their contractual requirements. If there are no future performance obligations, we will recognize these deficiency payments in revenue.

In certain of these throughput agreements, a customer may later utilize such shortfall billings as credit towards future volume shipments in excess of its minimum levels within its respective contractual shortfall make-up period. Such amounts represent an obligation to perform future services, which may be initially deferred and later recognized as revenue based on estimated future shipping levels, including the likelihood of a customer’s ability to utilize such amounts prior to the end of the contractual

shortfall make-up period. We recognize these deficiency payments in revenue when we do not expect we will be required to satisfy these performance obligations in the future based on the pattern of rights projected to be exercised by the customer. During the six months ended June 30, 2022 and 2021, we recognized $10.4 million and $8.8 million, respectively, of these deficiency payments in revenue, of which $1.9 million and $0.5 million, respectively, related to deficiency payments billed in prior periods.

We have other cost reimbursement provisions in our throughput / storage agreements providing that customers (including HF Sinclair) reimburse us for certain costs. Such reimbursements are recorded as revenue or deferred revenue depending on the nature of the cost. Deferred revenue is recognized over the remaining contractual term of the related throughput agreement.

Leases

We adopted ASC 842 effective January 1, 2019, and elected to adopt using the modified retrospective transition method and practical expedients, both of which are provided as options by the standard and further defined below.

Lessee Accounting

At inception, we determine if an arrangement is or contains a lease. Right-of-use assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our payment obligation under the leasing arrangement. Right-of-use assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. We use our estimated incremental borrowing rate (“IBR”) to determine the present value of lease payments as most of our leases do not contain an implicit rate. Our IBR represents the interest rate which we would pay to borrow, on a collateralized basis, an amount equal to the lease payments over a similar term in a similar economic environment. We use the implicit rate when readily determinable.

Operating leases are recorded in operating lease right-of-use assets and current and noncurrent operating lease liabilities on our consolidated balance sheet. Finance leases are included in properties and equipment, current finance lease liabilities and noncurrent finance lease liabilities on our consolidated balance sheet.

When renewal options are defined in a lease, our lease term includes an option to extend the lease when it is reasonably certain we will exercise that option. Leases with a term of 12 months or less are not recorded on our balance sheet, and lease expense is accounted for on a straight-line basis. In addition, as a lessee, we separate non-lease components that are identifiable and exclude them from the determination of net present value of lease payment obligations.

Lessor Accounting

Customer contracts that contain leases are generally classified as either operating leases, direct finance leases or sales-type leases. We consider inputs such as the lease term, fair value of the underlying asset and residual value of the underlying assets when assessing the classification.

Deferred Turnaround Costs

Our refinery processing units require regular major maintenance and repairs which are commonly referred to as “turnarounds.” The required frequency of the maintenance varies by unit, but generally is every four to five years. Turnaround costs are deferred and amortized over the period until the next scheduled turnaround.

XML

Sinclair Acquisition

6 Months Ended

Jun. 30, 2022

Business Combination and Asset Acquisition [Abstract]

Sinclair Acquisition

Sinclair Acquisition

HEP Transaction

On March 14, 2022, pursuant to the Contribution Agreement, HEP acquired all of the outstanding equity interests of Sinclair Transportation in exchange for 21 million newly issued HEP Units, representing 16.6% of the pro forma outstanding HEP Units with a value of approximately $349 million based on HEP’s fully diluted common limited partner units outstanding and closing unit price on March 11, 2022, and cash consideration equal to $321.4 million, inclusive of estimated working capital adjustments pursuant to the Contribution Agreement for an aggregate transaction value of $670.4 million. On the same date and immediately following the consummation of the HEP Transaction, pursuant to the Business Combination Agreement, Sinclair HoldCo contributed all of the equity interests of the Target Company to HF Sinclair in exchange for 60,230,036 shares of common stock in HF Sinclair, representing 27.0% of the pro forma equity of HF Sinclair with a value of approximately

$2,149 million based on HF Sinclair’s fully diluted shares of common stock outstanding and closing stock price on March 11, 2022.

On August 2, 2021, in connection with the Contribution Agreement, HEP, Holly Logistics Services, L.L.C., the ultimate general partner of HEP (“HLS”) and Navajo Pipeline Co., L.P., the sole member of HLS (the “Sole Member”), entered into a unitholders agreement (the “Unitholders Agreement”) by and among HEP, HLS, the Sole Member, Sinclair HoldCo and the stockholders of Sinclair HoldCo (each a “Unitholder” and collectively, the “Unitholders,” and along with Sinclair HoldCo and each of their permitted transferees, the “Sinclair Parties”), which became effective on the Closing Date.

Pursuant to the Unitholders Agreement, the Sinclair Parties have the right to nominate, and have nominated, one person to the board of directors of HLS until such time that (x) the Sinclair Parties beneficially own less than 10.5 million HEP Units or (y) the HEP Units beneficially owned by the Sinclair Parties constitute less than 5% of all outstanding HEP Units. The Unitholders Agreement also subjects 15.75 million of the HEP Units issued to the Sinclair Parties (the “Restricted Units”) to a “lock-up” period commencing on the Closing Date, during which the Sinclair Parties will be prohibited from selling the Restricted Units, except for certain permitted transfers. One-third of such Restricted Units will be released from such restrictions on the date that is six months after the closing, one-third of the Restricted Units will be released from such restrictions on the first anniversary of the Closing Date, and the remainder will be released from such restrictions on the date that is 15 months from the Closing Date.

Under the terms of the Contribution Agreement, HEP acquired Sinclair Transportation, which together with its subsidiaries, owned Sinclair HoldCo’s integrated crude and refined products pipelines and terminal assets, including approximately 1,200 miles of integrated crude and refined product pipelines supporting the Sinclair HoldCo refineries and other third-party refineries, eight product terminals and two crude terminals with approximately 4.5 million barrels of operated storage. In addition, HEP acquired Sinclair Transportation’s interests in three pipeline joint ventures for crude gathering and product offtake including: Saddle Butte Pipeline III, LLC (25.06% non-operated interest); Pioneer Pipeline (49.995% non-operated interest); and UNEV Pipeline (the 25% non-operated interest not already owned by HEP, resulting in UNEV Pipeline, LLC becoming a wholly owned subsidiary of HEP).

The HEP Transaction was accounted for as a business combination using the acquisition method of accounting, with the assets acquired and liabilities assumed at their respective acquisition date fair values at the Closing Date, with the excess consideration recorded as goodwill. The preliminary purchase consideration allocation resulted in the recognition of $90.8 million in goodwill.

The following tables present the preliminary purchase consideration and preliminary purchase price allocation to the assets acquired and liabilities assumed on March 14, 2022:

Preliminary Purchase Consideration (in thousands except for per share amounts)
HEP common units issued	21,000
Closing price per unit of HEP common units(1)	$	16.62
Purchase consideration paid in HEP common units	349,020
Cash consideration paid by HEP	325,000
Estimated Adjusted Payments HEP(2)	(3,634)
Total cash consideration	321,366
Total purchase consideration	$	670,386

(1) Based on the HEP closing unit price on March 11, 2022.

(2) Net of cash acquired

	(In thousands)
Assets Acquired
Accounts receivable	$	1,910
Prepaid and other current assets	59
Properties and equipment	357,819
Operating lease right-of-use assets	105
Other assets	3,500
Goodwill	90,768
Equity method investments	229,891
Total assets acquired	$	684,052
Liabilities Assumed
Accounts payable	1,528
Accrued property taxes	973
Other current liabilities	789
Operating lease liabilities	33
Noncurrent operating lease liabilities	72
Other long-term liabilities	10,271
Total liabilities assumed	$	13,666
Net assets acquired	$	670,386

The fair value of properties, plants and equipment was based on the combination of the cost and market approaches. Key assumptions in the cost approach include determining the replacement cost by evaluating recently published data and adjusting replacement cost for physical deterioration, functional and economic obsolescence. We used the market approach to measure the value of certain assets through an analysis of recent sales or offerings of comparable properties.

The fair value of the equity method investments were based on a combination of valuation methods including discounted cash flows and the guideline public company method.

The fair values discussed above were based on significant inputs that are not observable in the market and, therefore, represent Level 3 measurements. See Note 6.

The fair values of all other current receivable and payables were equivalent to their carrying values due to their short-term nature.

These fair value estimates are preliminary and, therefore, the final fair values of assets acquired and liabilities assumed and the resulting effect on our financial position may change once all needed information has become available, the working capital true-up is complete, and we finalize our valuations.

Our consolidated financial and operating results reflect the Sinclair Transportation operations beginning March 14, 2022. Our results of operations for the three months ended June 30, 2022 included revenue, interest income from sales-type leases and net income of $10.5 million, $14.5 million and $19.2 million, respectively, and revenue, interest income from sales-type leases and net income of $12.1 million, $17.2 million and $21.8 million for the period from March 14, 2022 through June 30, 2022, respectively, related to these operations.

For the six months ended June 30, 2022, we incurred $1.7 million in incremental direct acquisition and integration costs that principally relate to legal, advisory and other professional fees and are presented as general and administrative expenses in our statements of operations.

The following unaudited pro forma combined condensed financial data for the six months ended June 30, 2022 and the three and six months ended June 30, 2021 was derived from our historical financial statements giving effect to the HEP Transaction as if it had occurred on January 1, 2021. The below information reflects pro forma adjustments based on available information and certain assumptions that we believe are reasonable, including the depreciation of Sinclair Transportation’s fair-valued properties, plants and equipment.

Additionally, pro forma earnings include certain non-recurring charges, the substantial majority of which consist of transaction costs related to financial advisors, legal advisors, financial advisory and professional accounting services.

The pro forma results of operations do not include any contract adjustments to tariffs made after closing, cost savings or other synergies that may result from the HEP Transaction. The pro forma combined condensed financial data has been included for comparative purposes only and is not necessarily indicative of the results that might have occurred had the HEP Transaction taken place on January 1, 2021 and is not intended to be a projection of future results.

	Three Months Ended June 30,		Six Months Ended June 30,
	2021		2022		2021
	(In thousands)
Sales and other revenues	$	143,279	$	270,730	$	286,469
Net income attributable to the partners	$	62,739	$	107,574	$	133,164

Contemporaneous with the closing of the Sinclair Transactions, HEP and HFC amended certain intercompany agreements, including the master throughput agreement, to include within the scope of such agreements certain of the assets acquired by HEP pursuant to the Contribution Agreement.

XML

Investment in Joint Venture

6 Months Ended

Jun. 30, 2022

Equity Method Investments and Joint Ventures [Abstract]

Investment in Joint Venture

Investment in Joint Venture

On October 2, 2019, HEP Cushing LLC (“HEP Cushing”), a wholly owned subsidiary of HEP, and Plains Marketing, L.P. (“PMLP”), a wholly owned subsidiary of Plains All American Pipeline, L.P. (“Plains”), formed a 50/50 joint venture, Cushing Connect Pipeline & Terminal LLC (the “Cushing Connect Joint Venture”), for (i) the development and construction of a new 160,000 barrel per day common carrier crude oil pipeline (the “Cushing Connect Pipeline”) that connected the Cushing, Oklahoma crude oil hub to the Tulsa, Oklahoma refining complex owned by a subsidiary of HF Sinclair and (ii) the ownership and operation of 1.5 million barrels of crude oil storage in Cushing, Oklahoma (the “Cushing Connect JV Terminal”). The Cushing Connect JV Terminal went in service during the second quarter of 2020, and the Cushing Connect Pipeline was placed into service during the third quarter of 2021. Long-term commercial agreements have been entered into to support the Cushing Connect Joint Venture assets.

The Cushing Connect Joint Venture contracted with an affiliate of HEP to manage the construction and operation of the Cushing Connect Pipeline and with an affiliate of Plains to manage the operation of the Cushing Connect JV Terminal. The total Cushing Connect Joint Venture investment will generally be shared equally among the partners. However, we are solely responsible for any Cushing Connect Pipeline construction costs that exceed the budget by more than 10%. HEP estimates its share of the cost of the Cushing Connect JV Terminal contributed by Plains and Cushing Connect Pipeline construction costs are approximately $73 million, including approximately $5 million of Cushing Connect Pipeline construction costs exceeding the budget by more than 10% borne solely by HEP.

The Cushing Connect Joint Venture legal entities are variable interest entities (“VIEs”) as defined under GAAP. A VIE is a legal entity if it has any one of the following characteristics: (i) the entity does not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support; (ii) the at risk equity holders, as a group, lack the characteristics of a controlling financial interest; or (iii) the entity is structured with non-substantive voting rights. The Cushing Connect Joint Venture legal entities do not have sufficient equity at risk to finance their activities without additional financial support. Since HEP constructed and is operating the Cushing Connect Pipeline, HEP has more ability to direct the activities that most significantly impact the financial performance of the Cushing Connect Joint Venture and Cushing Connect Pipeline legal

entities. Therefore, HEP consolidates those legal entities. We do not have the ability to direct the activities that most significantly impact the Cushing Connect JV Terminal legal entity, and therefore, we account for our interest in the Cushing Connect JV Terminal legal entity using the equity method of accounting. HEP’s maximum exposure to loss as a result of its involvement with the Cushing Connect JV Terminal legal entity is not expected to be material due to the long-term terminalling agreements in place to support its operations.

With the exception of the assets of HEP Cushing, creditors of the Cushing Connect Joint Venture legal entities have no recourse to our assets. Any recourse to HEP Cushing would be limited to the extent of HEP Cushing's assets, which other than its investment in Cushing Connect Joint Venture, are not significant. Furthermore, our creditors have no recourse to the assets of the Cushing Connect Joint Venture legal entities.

XML

Revenues

6 Months Ended

Jun. 30, 2022

Revenue from Contract with Customer [Abstract]

Revenues

Revenues

Revenues are generally recognized as products are shipped through our pipelines and terminals, feedstocks are processed through our refinery processing units or other services are rendered. See Note 1 for further discussion of revenue recognition.

Disaggregated revenues were as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(In thousands)				(In thousands)
Pipelines	$	68,319	$	68,322	$	133,099	$	134,827
Terminals, tanks and loading racks	44,558		36,887		81,573		75,069
Refinery processing units	22,893		21,026		41,296		43,522
	$	135,770	$	126,235	$	255,968	$	253,418

Revenues on our consolidated statements of income were composed of the following lease and service revenues:

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(In thousands)				(In thousands)
Lease revenues	$	82,445	$	86,867	$	155,736	$	174,803
Service revenues	53,325		39,368		100,232		78,615
	$	135,770	$	126,235	$	255,968	$	253,418

A contract liability exists when an entity is obligated to perform future services for a customer for which the entity has received consideration. Since HEP may be required to perform future services for these deficiency payments received, the deferred revenues on our balance sheets were considered contract liabilities. A contract asset exists when an entity has a right to consideration in exchange for goods or services transferred to a customer. Our consolidated balance sheets included the contract assets and liabilities in the table below:

	June 30, 2022		December 31, 2021
	(In thousands)
Contract assets	$	6,727	$	6,637
Contract liabilities	$	(2,247)	$	(4,185)

The contract assets and liabilities include both lease and service components. During the six months ended June 30, 2022 and 2021, we recognized $1.9 million and $0.5 million, respectively, of revenue that was previously included in contract liability as

of December 31, 2021 and 2020, respectively. During the six months ended June 30, 2022 and 2021, we also recognized $0.1 million and $0.2 million, respectively, of revenue included in contract assets.

As of June 30, 2022, we expect to recognize $1.6 billion in revenue related to our unfulfilled performance obligations under the terms of our long-term throughput agreements and leases expiring in 2023 through 2037. These agreements generally provide for changes in the minimum revenue guarantees annually for increases or decreases in the Producer Price Index (“PPI”) or Federal Energy Regulatory Commission (“FERC”) index, with certain contracts having provisions that limit the level of the rate increases or decreases. We expect to recognize revenue for these unfulfilled performance obligations as shown in the table below (amounts shown in table include both service and lease revenues):

Years Ending December 31,	(In millions)
Remainder of 2022	$	182
2023	301
2024	266
2025	185
2026	170
2027	137
Thereafter	407
Total	$	1,648

Payment terms under our contracts with customers are consistent with industry norms and are typically payable within 10 to 30 days of the date of invoice.

XML

Leases

6 Months Ended

Jun. 30, 2022

Leases [Abstract]

Leases

Leases

See Note 1 for further discussion of lease accounting.

Lessee Accounting

As a lessee, we lease land, buildings, pipelines, transportation and other equipment to support our operations. These leases can be categorized into operating and finance leases.

Our leases have remaining terms of less than 1 year to 23 years, some of which include options to extend the leases for up to 10 years.

Finance Lease Obligations

We have finance lease obligations related to vehicle leases with initial terms of 33 to 48 months. The total cost of assets under finance leases was $6.2 million and $6.0 million as of June 30, 2022 and December 31, 2021, respectively, with accumulated depreciation of $4.0 million and $3.6 million as of June 30, 2022 and December 31, 2021, respectively. We include depreciation of finance leases in depreciation and amortization in our consolidated statements of income.

In addition, we have a finance lease obligation related to a pipeline lease with an initial term of 10 years with one remaining subsequent renewal option for an additional 10 years.

Supplemental balance sheet information related to leases was as follows (in thousands, except for lease term and discount rate):

	June 30, 2022		December 31, 2021
Operating leases:
Operating lease right-of-use assets, net	$	2,502	$	2,275
Current operating lease liabilities	963		620
Noncurrent operating lease liabilities	2,006		2,030
Total operating lease liabilities	$	2,969	$	2,650
Finance leases:
Properties and equipment	$	6,160	$	6,031
Accumulated amortization	(4,013)		(3,632)
Properties and equipment, net	$	2,147	$	2,399
Current finance lease liabilities	$	3,857	$	3,786
Noncurrent finance lease liabilities	62,838		64,649
Total finance lease liabilities	$	66,695	$	68,435
Weighted average remaining lease term (in years):
Operating leases	4.8		5.8
Finance leases	14.6		15.0
Weighted average discount rate:
Operating leases	4.5%		4.8%
Finance leases	5.6%		5.6%

Supplemental cash flow and other information related to leases were as follows:

	Six Months Ended June 30,
	2022		2021
	(In thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows on operating leases	$	518	$	576
Operating cash flows on finance leases	$	1,950	$	2,105
Financing cash flows on finance leases	$	1,776	$	1,747

Maturities of lease liabilities were as follows:

	June 30, 2022
	Operating		Finance
	(In thousands)
2022	$	504	$	3,672
2023	935		7,383
2024	524		6,938
2025	443		6,479
2026	289		6,432
2027 and thereafter	501		67,463
Total lease payments	3,196		98,367
Less: Imputed interest	(227)		(31,672)
Total lease obligations	2,969		66,695
Less: Current lease liabilities	(963)		(3,857)
Noncurrent lease liabilities	$	2,006	$	62,838

The components of lease expense were as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(In thousands)
Operating lease costs	$	242	$	249	$	504	$	547
Finance lease costs
Amortization of assets	189		200		381		412
Interest on lease liabilities	946		994		1,905		2,001
Variable lease cost	23		67		59		133
Total net lease cost	$	1,400	$	1,510	$	2,849	$	3,093

Lessor Accounting

As discussed in Note 1, the majority of our contracts with customers meet the definition of a lease.

Substantially all of the assets supporting contracts meeting the definition of a lease have long useful lives, and we believe these assets will continue to have value when the current agreements expire due to our risk management strategy for protecting the residual fair value of the underlying assets by performing ongoing maintenance during the lease term. HF Sinclair generally has the option to purchase assets located within HF Sinclair refinery boundaries, including refinery tankage, truck racks and refinery processing units, at fair market value when the related agreements expire.

During the six months ended June 30, 2022, we entered into new agreements, and amended other agreements, with HFC related to our newly acquired Sinclair Transportation assets. Certain of these agreements met the criteria of sales-type leases. Under sales-type lease accounting, at the commencement date, the lessor recognizes a net investment in the lease, based on the estimated fair value of the underlying leased assets at contract inception, and derecognizes the underlying assets with the difference recorded as selling profit or loss arising from the lease. Because we recorded these assets at fair values under purchase price accounting, there was no gain or loss on these sales-type leases during the six months ended June 30, 2022. The balance sheet impacts were composed of the following:

	Six Months Ended June 30, 2022
	(In thousands)
Net investment in leases	$	235,620
Properties and equipment, net	(235,620)
Gain on sales-type leases	$	—

During the six months ended June 30, 2021, we entered into new agreements and modified other agreements with HF Sinclair related to our Cheyenne assets, Tulsa West lube racks, various crude tanks and new Navajo tanks. These agreements met the criteria of sales-type leases since the underlying assets are not expected to have an alternative use at the end of the lease terms to anyone other than HF Sinclair. Under sales-type lease accounting, at the commencement date, the lessor recognizes a net investment in the lease, based on the estimated fair value of the underlying leased assets at contract inception, and derecognizes the underlying assets with the difference recorded as selling profit or loss arising from the lease. Therefore, we recognized a gain on sales-type leases during the six months ended June 30, 2021 composed of the following:

	Six Months Ended June 30, 2021
	(In thousands)
Net investment in leases	$	47,795
Properties and equipment, net	(29,677)
Deferred revenue	6,559
Gain on sales-type leases	$	24,677

These sales-type lease transactions, including the related gain, were non-cash transactions.

Lease income recognized was as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(In thousands)
Operating lease revenues	$	76,538	$	84,426	$	146,891	$	170,698
Direct financing lease interest income	520		523		1,040		1,047
Gain on sales-type leases	—		27		—		24,677
Sales-type lease interest income	23,814		6,091		35,938		12,115
Lease revenues relating to variable lease payments not included in measurement of the sales-type lease receivable	5,906		2,441		8,846		4,105

For our sales-type leases, we included customer obligations related to minimum volume requirements in guaranteed minimum lease payments. Portions of our minimum guaranteed pipeline tariffs for assets subject to sales-type lease accounting are recorded as interest income with the remaining amounts recorded as a reduction in net investment in leases. We recognized any billings for throughput volumes in excess of minimum volume requirements as variable lease payments, and these variable lease payments were recorded in lease revenues.

Annual minimum undiscounted lease payments under our leases were as follows as of June 30, 2022:

	Operating		Finance		Sales-type
Years Ending December 31,	(In thousands)
Remainder of 2022	$	152,623	$	1,083	$	50,144
2023	272,169		2,175		96,383
2024	242,476		2,192		93,154
2025	166,290		2,209		89,727
2026	151,745		2,227		89,727
2027 and thereafter	473,243		36,610		841,406
Total lease receipt payments	$	1,458,546	$	46,496	$	1,260,541
Less: Imputed interest			(30,173)		(1,131,594)
			16,323		128,947
Unguaranteed residual assets at end of leases			—		402,895
Net investment in leases			$	16,323	$	531,842

Net investments in leases recorded on our balance sheet were composed of the following:

	June 30, 2022				December 31, 2021
	Sales-type Leases		Direct Financing Leases		Sales-type Leases		Direct Financing Leases
	(In thousands)				(In thousands)
Lease receivables (1)	$	426,582	$	16,323	$	207,768	$	16,371
Unguaranteed residual assets	105,260		—		90,097		—
Net investment in leases	$	531,842	$	16,323	$	297,865	$	16,371

(1)    Current portion of lease receivables included in prepaid and other current assets on the balance sheet.

Leases

Leases

See Note 1 for further discussion of lease accounting.

Lessee Accounting

As a lessee, we lease land, buildings, pipelines, transportation and other equipment to support our operations. These leases can be categorized into operating and finance leases.

Our leases have remaining terms of less than 1 year to 23 years, some of which include options to extend the leases for up to 10 years.

Finance Lease Obligations

We have finance lease obligations related to vehicle leases with initial terms of 33 to 48 months. The total cost of assets under finance leases was $6.2 million and $6.0 million as of June 30, 2022 and December 31, 2021, respectively, with accumulated depreciation of $4.0 million and $3.6 million as of June 30, 2022 and December 31, 2021, respectively. We include depreciation of finance leases in depreciation and amortization in our consolidated statements of income.

In addition, we have a finance lease obligation related to a pipeline lease with an initial term of 10 years with one remaining subsequent renewal option for an additional 10 years.

Supplemental balance sheet information related to leases was as follows (in thousands, except for lease term and discount rate):

	June 30, 2022		December 31, 2021
Operating leases:
Operating lease right-of-use assets, net	$	2,502	$	2,275
Current operating lease liabilities	963		620
Noncurrent operating lease liabilities	2,006		2,030
Total operating lease liabilities	$	2,969	$	2,650
Finance leases:
Properties and equipment	$	6,160	$	6,031
Accumulated amortization	(4,013)		(3,632)
Properties and equipment, net	$	2,147	$	2,399
Current finance lease liabilities	$	3,857	$	3,786
Noncurrent finance lease liabilities	62,838		64,649
Total finance lease liabilities	$	66,695	$	68,435
Weighted average remaining lease term (in years):
Operating leases	4.8		5.8
Finance leases	14.6		15.0
Weighted average discount rate:
Operating leases	4.5%		4.8%
Finance leases	5.6%		5.6%

Supplemental cash flow and other information related to leases were as follows:

	Six Months Ended June 30,
	2022		2021
	(In thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows on operating leases	$	518	$	576
Operating cash flows on finance leases	$	1,950	$	2,105
Financing cash flows on finance leases	$	1,776	$	1,747

Maturities of lease liabilities were as follows:

	June 30, 2022
	Operating		Finance
	(In thousands)
2022	$	504	$	3,672
2023	935		7,383
2024	524		6,938
2025	443		6,479
2026	289		6,432
2027 and thereafter	501		67,463
Total lease payments	3,196		98,367
Less: Imputed interest	(227)		(31,672)
Total lease obligations	2,969		66,695
Less: Current lease liabilities	(963)		(3,857)
Noncurrent lease liabilities	$	2,006	$	62,838

The components of lease expense were as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(In thousands)
Operating lease costs	$	242	$	249	$	504	$	547
Finance lease costs
Amortization of assets	189		200		381		412
Interest on lease liabilities	946		994		1,905		2,001
Variable lease cost	23		67		59		133
Total net lease cost	$	1,400	$	1,510	$	2,849	$	3,093

Lessor Accounting

As discussed in Note 1, the majority of our contracts with customers meet the definition of a lease.

Substantially all of the assets supporting contracts meeting the definition of a lease have long useful lives, and we believe these assets will continue to have value when the current agreements expire due to our risk management strategy for protecting the residual fair value of the underlying assets by performing ongoing maintenance during the lease term. HF Sinclair generally has the option to purchase assets located within HF Sinclair refinery boundaries, including refinery tankage, truck racks and refinery processing units, at fair market value when the related agreements expire.

During the six months ended June 30, 2022, we entered into new agreements, and amended other agreements, with HFC related to our newly acquired Sinclair Transportation assets. Certain of these agreements met the criteria of sales-type leases. Under sales-type lease accounting, at the commencement date, the lessor recognizes a net investment in the lease, based on the estimated fair value of the underlying leased assets at contract inception, and derecognizes the underlying assets with the difference recorded as selling profit or loss arising from the lease. Because we recorded these assets at fair values under purchase price accounting, there was no gain or loss on these sales-type leases during the six months ended June 30, 2022. The balance sheet impacts were composed of the following:

	Six Months Ended June 30, 2022
	(In thousands)
Net investment in leases	$	235,620
Properties and equipment, net	(235,620)
Gain on sales-type leases	$	—

During the six months ended June 30, 2021, we entered into new agreements and modified other agreements with HF Sinclair related to our Cheyenne assets, Tulsa West lube racks, various crude tanks and new Navajo tanks. These agreements met the criteria of sales-type leases since the underlying assets are not expected to have an alternative use at the end of the lease terms to anyone other than HF Sinclair. Under sales-type lease accounting, at the commencement date, the lessor recognizes a net investment in the lease, based on the estimated fair value of the underlying leased assets at contract inception, and derecognizes the underlying assets with the difference recorded as selling profit or loss arising from the lease. Therefore, we recognized a gain on sales-type leases during the six months ended June 30, 2021 composed of the following:

	Six Months Ended June 30, 2021
	(In thousands)
Net investment in leases	$	47,795
Properties and equipment, net	(29,677)
Deferred revenue	6,559
Gain on sales-type leases	$	24,677

These sales-type lease transactions, including the related gain, were non-cash transactions.

Lease income recognized was as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(In thousands)
Operating lease revenues	$	76,538	$	84,426	$	146,891	$	170,698
Direct financing lease interest income	520		523		1,040		1,047
Gain on sales-type leases	—		27		—		24,677
Sales-type lease interest income	23,814		6,091		35,938		12,115
Lease revenues relating to variable lease payments not included in measurement of the sales-type lease receivable	5,906		2,441		8,846		4,105

For our sales-type leases, we included customer obligations related to minimum volume requirements in guaranteed minimum lease payments. Portions of our minimum guaranteed pipeline tariffs for assets subject to sales-type lease accounting are recorded as interest income with the remaining amounts recorded as a reduction in net investment in leases. We recognized any billings for throughput volumes in excess of minimum volume requirements as variable lease payments, and these variable lease payments were recorded in lease revenues.

Annual minimum undiscounted lease payments under our leases were as follows as of June 30, 2022:

	Operating		Finance		Sales-type
Years Ending December 31,	(In thousands)
Remainder of 2022	$	152,623	$	1,083	$	50,144
2023	272,169		2,175		96,383
2024	242,476		2,192		93,154
2025	166,290		2,209		89,727
2026	151,745		2,227		89,727
2027 and thereafter	473,243		36,610		841,406
Total lease receipt payments	$	1,458,546	$	46,496	$	1,260,541
Less: Imputed interest			(30,173)		(1,131,594)
			16,323		128,947
Unguaranteed residual assets at end of leases			—		402,895
Net investment in leases			$	16,323	$	531,842

Net investments in leases recorded on our balance sheet were composed of the following:

	June 30, 2022				December 31, 2021
	Sales-type Leases		Direct Financing Leases		Sales-type Leases		Direct Financing Leases
	(In thousands)				(In thousands)
Lease receivables (1)	$	426,582	$	16,323	$	207,768	$	16,371
Unguaranteed residual assets	105,260		—		90,097		—
Net investment in leases	$	531,842	$	16,323	$	297,865	$	16,371

(1)    Current portion of lease receivables included in prepaid and other current assets on the balance sheet.

XML

Fair Value Measurements

6 Months Ended

Jun. 30, 2022

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements are derived using inputs (assumptions that market participants would use in pricing an asset or liability) including assumptions about risk. GAAP categorizes inputs used in fair value measurements into three broad levels as follows:

•(Level 1) Quoted prices in active markets for identical assets or liabilities.

•(Level 2) Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, similar assets and liabilities in markets that are not active or can be corroborated by observable market data.

•(Level 3) Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes valuation techniques that involve significant unobservable inputs.

Financial Instruments

Our financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable, and debt. The carrying amounts of cash equivalents, accounts receivable and accounts payable approximate fair value due to the short-term maturity of these instruments. Debt consists of outstanding principal under our revolving credit agreement (which approximates fair value as interest rates are reset frequently at current interest rates) and our fixed interest rate senior notes.

The carrying amounts and estimated fair values of our senior notes were as follows:

		June 30, 2022		December 31, 2021
Financial Instrument	Fair Value Input Level	Carrying Value	Fair Value	Carrying Value	Fair Value
		(In thousands)
Liabilities:
5% Senior Notes	Level 2	493,541	430,710	493,049	502,705
6.375% Senior Notes	Level 2	393,919	377,996	—	—
Total Liabilities		887,460	808,706	493,049	502,705

Level 2 Financial Instruments

Our senior notes are measured at fair value using Level 2 inputs. The fair value of the senior notes is based on market values provided by a third-party bank, which were derived using market quotes for similar type debt instruments. See Note 10 for additional information.

Non-Recurring Fair Value Measurements

The HEP Transaction was accounted for as a business combination using the acquisition method of accounting, with the assets acquired and liabilities assumed at their respective acquisition date fair values at the Closing Date. The fair value measurements were based on a combination of valuation methods including discounted cash flows, the guideline public company method, the market approach and obsolescence adjusted replacement costs, all of which are Level 3 inputs.

For the net investments in sales-type leases recognized during the six months ended June 30, 2022, the estimated fair value of the underlying leased assets at contract inception and the present value of the estimated unguaranteed residual asset at the end of the lease term are used in determining the net investment in leases recorded. The asset valuation estimates include Level 3 inputs based on a replacement cost valuation method.

XML

Properties and Equipment

6 Months Ended

Jun. 30, 2022

Property, Plant and Equipment [Abstract]

Properties and Equipment

Properties and Equipment 

The carrying amounts of our properties and equipment were as follows:

	June 30, 2022		December 31, 2021
	(In thousands)
Pipelines, terminals and tankage	$	1,611,170	$	1,527,697
Refinery assets	352,274		348,882
Land and right of way	124,984		98,837
Construction in progress	31,864		26,446
Other	63,372		48,203
	2,183,664		2,050,065
Less accumulated depreciation	(757,172)		(721,037)
	$	1,426,492	$	1,329,028

Depreciation expense was $40.8 million and $42.7 million for the six months ended June 30, 2022 and 2021, respectively, and includes depreciation of assets acquired under capital leases.

XML

Intangible Assets

6 Months Ended

Jun. 30, 2022

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible Assets

Intangible AssetsIntangible assets include transportation agreements and customer relationships that represent a portion of the total purchase price of certain assets acquired from Delek US Holdings, Inc. (“Delek”) in 2005, from HFC in 2008 prior to HEP becoming a consolidated VIE of HFC, from Plains in 2017, and from other minor acquisitions in 2018.

The carrying amounts of our intangible assets were as follows:

	Useful Life	June 30, 2022		December 31, 2021
		(In thousands)
Delek transportation agreement	30 years	$	59,933	$	59,933
HF Sinclair transportation agreement	10-15 years	75,131		75,131
Customer relationships	10 years	69,683		69,683
Other	20 years	50		50
		204,797		204,797
Less accumulated amortization		(138,493)		(131,490)
		$	66,304	$	73,307

Amortization expense was $7.0 million for each of the six months ended June 30, 2022 and 2021. We estimate amortization expense to be $9.9 million for 2023, and $9.1 million for 2024 through 2027.

We have additional transportation agreements with subsidiaries of HF Sinclair resulting from historical transactions consisting of pipeline, terminal and tankage assets contributed to us or acquired from subsidiaries of HF Sinclair. These transactions occurred while we were a consolidated variable interest entity of HF Sinclair; therefore, our basis in these agreements is zero and does not reflect a step-up in basis to fair value.

XML

Employees, Retirement and Incentive Plans

6 Months Ended

Jun. 30, 2022

Share-Based Payment Arrangement [Abstract]

Employees, Retirement and Incentive Plans

Employees, Retirement and Incentive Plans

Direct support for our operations is provided by HLS, which utilizes personnel employed by HF Sinclair who are dedicated to performing services for us. Their costs, including salaries, bonuses, payroll taxes, benefits and other direct costs, are charged to us monthly in accordance with an omnibus agreement that we have with HF Sinclair (the “Omnibus Agreement”). These employees participate in the retirement and benefit plans of HF Sinclair. Our share of retirement and benefit plan costs was $2.7 million and $1.9 million for the three months ended June 30, 2022 and 2021, respectively, and $5.1 million and $4.1 million for the six months ended June 30, 2022 and 2021, respectively.

Under HLS’s secondment agreement with HF Sinclair (the “Secondment Agreement”), certain employees of HF Sinclair are seconded to HLS to provide operational and maintenance services for certain of our processing, refining, pipeline and tankage assets, and HLS reimburses HF Sinclair for its prorated portion of the wages, benefits, and other costs related to these employees.

We have a Long-Term Incentive Plan for employees and non-employee directors who perform services for us. The Long-Term Incentive Plan consists of five components: restricted or phantom units, performance units, unit options, unit appreciation rights and cash awards. Our accounting policy for the recognition of compensation expense for awards with pro-rata vesting (a significant proportion of our awards) is to expense the costs ratably over the vesting periods.

As of June 30, 2022, we had two types of unit-based awards outstanding, which are described below. The compensation cost charged against income was $0.6 million and $0.5 million for the three months ended June 30, 2022 and 2021, respectively, and $1.2 million for both the six months ended June 30, 2022 and 2021. We currently purchase units in the open market instead of issuing new units for settlement of all unit awards under our Long-Term Incentive Plan. As of June 30, 2022, 2,500,000 units were authorized to be granted under our Long-Term Incentive Plan, of which 819,513 were available to be granted, assuming no forfeitures of the unvested units and full achievement of goals for the unvested performance units.

Phantom Units

Under our Long-Term Incentive Plan, we grant phantom units to our non-employee directors and selected employees who perform services for us, with most awards vesting over a period of one to three years. Although full ownership of the units does not transfer to the recipients until the units vest, the recipients have distribution rights on these units from the date of grant.

The fair value of each phantom unit award is measured at the market price as of the date of grant and is amortized on a straight-line basis over the requisite service period for each separately vesting portion of the award.

A summary of phantom unit activity and changes during the six months ended June 30, 2022, is presented below:

Phantom Units	Units	Weighted Average Grant-Date Fair Value
Outstanding at January 1, 2022 (nonvested)	203,263	$	14.85
Granted	4,313	17.40
Vesting and transfer of full ownership to recipients	(3,833)	15.54
Forfeited	(18,158)	14.60
Outstanding at June 30, 2022 (nonvested)	185,585	14.92

The grant date fair values of phantom units that were vested and transferred to recipients during the six months ended June 30, 2022 and 2021 were $60 thousand and $2 thousand, respectively. The grant date fair values of phantom units that were granted during the six months ended June 30, 2022 were $75 thousand. No units were granted during the six months ended June 30, 2021. As of June 30, 2022, $1.0 million of total unrecognized compensation expense related to unvested phantom unit grants is expected to be recognized over a weighted-average period of 1.0 year.

Performance Units

Under our Long-Term Incentive Plan, we grant performance units to selected officers who perform services for us. Performance units granted are payable in common units at the end of a three-year performance period based upon meeting certain criteria over the performance period. Under the terms of our performance unit grants, some awards are subject to the growth in our distributable cash flow per common unit over the performance period while other awards are subject to "financial performance" and "market performance." Financial performance is based on meeting certain earnings before interest, taxes, depreciation and amortization ("EBITDA") targets, while market performance is based on the relative standing of total unitholder return achieved by HEP compared to peer group companies. The number of units ultimately issued under these awards can range from 0% to 200%.

We did not grant any performance units during the six months ended June 30, 2022. Although common units are not transferred to the recipients until the performance units vest, the recipients have distribution rights with respect to the target number of performance units subject to the award from the date of grant at the same rate as distributions paid on our common units.

A summary of performance unit activity and changes for the six months ended June 30, 2022, is presented below:

Performance Units	Units
Outstanding at January 1, 2022 (nonvested)	76,719
Vesting and transfer of common units to recipients	(13,920)
Forfeited	(9,124)
Outstanding at June 30, 2022 (nonvested)	53,675

The grant date fair value of performance units vested and transferred to recipients during both the six months ended June 30, 2022 and 2021 was $0.4 million. Based on the weighted-average fair value of performance units outstanding at June 30, 2022, of $0.9 million, there was $0.5 million of total unrecognized compensation expense related to nonvested performance units, which is expected to be recognized over a weighted-average period of 1.3 years.

During the six months ended June 30, 2022, we did not purchase any of our common units in the open market for the issuance and settlement of unit awards under our Long-Term Incentive Plan.

XML

Debt

6 Months Ended

Jun. 30, 2022

Debt Disclosure [Abstract]

Debt

Debt

Credit Agreement

In April 2021, we amended our senior secured revolving credit facility (the “Credit Agreement”) decreasing the size of the facility from $1.4 billion to $1.2 billion and extending the maturity date to July 27, 2025. The Credit Agreement is available to fund capital expenditures, investments, acquisitions, distribution payments, working capital and for general partnership purposes. The Credit Agreement is also available to fund letters of credit up to a $50 million sub-limit and continues to provide for an accordion feature that allows us to increase commitments under the Credit Agreement up to a maximum amount of $1.7 billion.

Our obligations under the Credit Agreement are collateralized by substantially all of our assets, and indebtedness under the Credit Agreement is guaranteed by our material, wholly owned subsidiaries. The Credit Agreement requires us to maintain compliance with certain financial covenants consisting of total leverage, senior secured leverage, and interest coverage. It also limits or restricts our ability to engage in certain activities. If, at any time prior to the maturity of the Credit Agreement, HEP obtains two investment grade credit ratings, the Credit Agreement will become unsecured and many of the covenants, limitations, and restrictions will be eliminated.

We may prepay all loans at any time without penalty, except for tranche breakage costs. If an event of default exists under the Credit Agreement, the lenders will be able to accelerate the maturity of all loans outstanding and exercise other rights and remedies. We were in compliance with the covenants under the Credit Agreement as of June 30, 2022.

Senior Notes

On April 8, 2022, we closed a private placement of $400 million in aggregate principal amount of 6.375% senior unsecured notes due in 2027 (the “6.375% Senior Notes”). The 6.375% Senior Notes were issued at par for net proceeds of approximately $393 million, after deducting the initial purchasers’ discounts and commissions and estimated offering expenses. The total net proceeds from the offering of the 6.375% Senior Notes were used to partially repay outstanding borrowings under the Credit Agreement, increasing our available liquidity.

As of June 30, 2022, we had $500 million aggregate principal amount of 5% senior unsecured notes due in 2028 (the “5% Senior Notes,” and together with the 6.375% Senior Notes, the “Senior Notes”).

The Senior Notes are unsecured and impose certain restrictive covenants, including limitations on our ability to incur additional indebtedness, make investments, sell assets, incur certain liens, pay distributions, enter into transactions with affiliates, and enter into mergers. We were in compliance with the restrictive covenants for the Senior Notes as of June 30, 2022. At any time when the Senior Notes are rated investment grade by either Moody’s or Standard & Poor’s and no default or event of default exists, we will not be subject to many of the foregoing covenants. Additionally, we have certain redemption rights at varying premiums over face value under the Senior Notes.

Indebtedness under the Senior Notes is guaranteed by all of our existing wholly owned subsidiaries (other than Holly Energy Finance Corp. and certain immaterial subsidiaries).

Long-term Debt

The carrying amounts of our long-term debt were as follows:

	June 30, 2022		December 31, 2021
	(In thousands)
Credit Agreement
Amount outstanding	$	721,000	840,000
5% Senior Notes
Principal	500,000		500,000
Unamortized premium and debt issuance costs	(6,459)		(6,951)
	493,541		493,049
6.375% Senior Notes
Principal	400,000		—
Unamortized premium and debt issuance costs	(6,081)		—
	393,919		—
Total long-term debt	$	1,608,460	$	1,333,049

XML

Related Party Transactions

6 Months Ended

Jun. 30, 2022

Related Party Transactions [Abstract]

Related Party Transactions

Related Party Transactions

We serve HF Sinclair’s refineries under long-term pipeline, terminal and tankage throughput agreements, and refinery processing unit tolling agreements expiring from 2023 to 2037, and revenues from HF Sinclair accounted for 81% and 79% of our total revenues for the three and six months ended June 30, 2022, respectively. Under these agreements, HF Sinclair agrees to transport, store and process throughput volumes of refined product, crude oil and feedstocks on our pipelines, terminals, tankage, loading rack facilities and refinery processing units that result in minimum annual payments to us. These minimum annual payments or revenues are generally subject to annual rate adjustments on July 1st each year based on increases or decreases in PPI or the FERC index. As of July 1, 2022, these agreements with HF Sinclair require minimum annualized payments to us of $445.9 million.

If HF Sinclair fails to meet its minimum volume commitments under the agreements in any quarter, it will be required to pay us the amount of any shortfall in cash by the last day of the month following the end of the quarter. Under certain of these agreements, a shortfall payment may be applied as a credit in the following four quarters after its minimum obligations are met.

Under certain provisions of the Omnibus Agreement, we pay HF Sinclair an annual administrative fee (currently $5.0 million) for the provision by HF Sinclair or its affiliates of various general and administrative services to us. In connection with the HEP Transaction, we pay HF Sinclair a temporary monthly fee of $62,500 relating to transition services to be provided to HEP by HF Sinclair. Neither the annual administrative fee nor the temporary monthly fee includes the salaries of personnel employed by HF Sinclair who perform services for us on behalf of HLS or the cost of their employee benefits, which are charged to us separately by HF Sinclair. Also, we reimburse HF Sinclair and its affiliates for direct expenses they incur on our behalf.

Related party transactions with HF Sinclair and its subsidiaries were as follows:

•Revenues received from HF Sinclair were $110.5 million and $99.1 million for the three months ended June 30, 2022 and 2021, respectively, and $202.8 million and $201.1 million for the six months ended June 30, 2022 and 2021, respectively.

•HF Sinclair charged us general and administrative services under the Omnibus Agreement of $1.3 million and $0.7 million for the three months ended June 30, 2022 and 2021, respectively, and $2.0 million and $1.3 million for the six months ended June 30, 2022 and 2021, respectively. In addition, HF Sinclair charged us $0.2 million for a prorated portion of the temporary administrative fee during the six months ended June 30, 2022.

•We reimbursed HF Sinclair for costs of employees supporting our operations of $19.9 million and $14.3 million for the three months ended June 30, 2022 and 2021, respectively, and $36.1 million and $28.7 million for the six months ended June 30, 2022 and 2021, respectively.

•HF Sinclair reimbursed us $4.2 million and $1.2 million for the three months ended June 30, 2022 and 2021, for expense and capital projects, respectively, and $8.6 million and $4.3 million for the six months ended June 30, 2022 and 2021, respectively.

•We distributed $20.9 million in both the three months ended June 30, 2022 and 2021, and $41.7 million and in both the six months ended June 30, 2022 and 2021, to HF Sinclair as regular distributions on its common units.

•Accounts receivable from HF Sinclair were $59.0 million and $56.2 million at June 30, 2022, and December 31, 2021, respectively.

•Accounts payable to HF Sinclair were $12.7 million and $11.7 million at June 30, 2022, and December 31, 2021, respectively.

•Deferred revenue in the consolidated balance sheets included at June 30, 2022 and December 31, 2021, includes $2.2 million and $4.1 million, respectively, relating to certain shortfall billings to HF Sinclair.

•We received direct financing lease payments from HF Sinclair for use of our Artesia and Tulsa rail yards of $0.5 million for each of the three months ended June 30, 2022 and 2021 and $1.0 million for both of the six months ended June 30, 2022 and 2021.

•We recorded a gain on sales-type leases with HF Sinclair of $24.7 million for the six months ended June 30, 2021, and we received sales-type lease payments of $24.4 million and $6.3 million from HF Sinclair for the three months ended June 30, 2022 and 2021, respectively, and $37.0 million and $12.5 million for the six months ended June 30, 2022 and 2021, respectively.

•HEP and HFC reached an agreement to terminate the existing minimum volume commitments for HEP’s Cheyenne assets and enter into new agreements, which were finalized and executed on February 8, 2021, with the following terms, in each case effective January 1, 2021: (1) a ten-year lease with two five-year renewal option periods for HFC’s (and now HF Sinclair’s) use of certain HEP tank and rack assets in the Cheyenne Refinery to facilitate renewable diesel production with an annual lease payment of approximately $5 million, (2) a five-year contango service fee arrangement that will utilize HEP tank assets inside the Cheyenne Refinery where HFC (and now HF Sinclair) will pay a base tariff to HEP for available crude oil storage and HF Sinclair and HEP will split any profits generated on crude oil contango opportunities and (3) a $10 million one-time cash payment from HF Sinclair to HEP for the termination of the existing minimum volume commitment.

Contemporaneous with the closing of the Sinclair Transactions, HEP and HFC amended certain intercompany agreements, including the master throughput agreement, to include within the scope of such agreements certain of the assets acquired by HEP pursuant to the Contribution Agreement.

XML

Partners' Equity, Income Allocations and Cash Distributions

6 Months Ended

Jun. 30, 2022

Partners' Capital [Abstract]

Partners' Equity, Income Allocations and Cash Distributions

Partners’ Equity, Income Allocations and Cash Distributions

As of June 30, 2022, HF Sinclair held 59,630,030 of our common units, constituting a 47% limited partner interest in us, and held the non-economic general partner interest.

Continuous Offering Program

We have a continuous offering program under which we may issue and sell common units from time to time, representing limited partner interests, up to an aggregate gross sales amount of $200 million. As of June 30, 2022, HEP has issued 2,413,153 units under this program, providing $82.3 million in gross proceeds.

Allocations of Net Income

Net income attributable to HEP is allocated to the partners based on their weighted-average ownership percentage during the period.

Cash Distributions

On July 21, 2022, we announced our cash distribution for the second quarter of 2022 of $0.35 per unit. The distribution is payable on all common units and will be paid August 12, 2022, to all unitholders of record on August 1, 2022.

Our regular quarterly cash distribution to the limited partners will be $44.3 million for the three months ended June 30, 2022 and was $37.0 million for the three months ended June 30, 2021. For the six months ended June 30, 2022, the regular quarterly distribution to the limited partners will be $88.7 million and was $74.1 million for the six months ended June 30, 2021. Our distributions are declared subsequent to quarter end; therefore, these amounts do not reflect distributions paid during the respective period.

XML

Net Income Per Limited Partner Unit

6 Months Ended

Jun. 30, 2022

Net Income per Limited Partner Unit [Abstract]

Net Income Per Limited Partner Unit

Net Income Per Limited Partner Unit

Basic net income per unit applicable to the limited partners is calculated as net income attributable to the partners, adjusted for participating securities’ share in earnings, divided by the weighted average limited partners’ units outstanding. Diluted net income per unit assumes, when dilutive, the issuance of the net incremental units from phantom units and performance units. To the extent net income attributable to the partners exceeds or is less than cash distributions, this difference is allocated to the partners based on their weighted-average ownership percentage during the period. Our dilutive securities are immaterial for all periods presented.

Net income per limited partner unit is computed as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(In thousands, except per unit data)
Net income attributable to the partners	$	56,792	$	55,745	$	106,351	$	120,142
Less: Participating securities’ share in earnings	(107)		(190)		(222)		(411)
Net income attributable to common units	56,685		55,555		106,129		119,731
Weighted average limited partners' units outstanding	126,440		105,440		118,087		105,440
Limited partners' per unit interest in earnings - basic and diluted	$	0.45	$	0.53	$	0.90	$	1.14

XML

Environmental

6 Months Ended

Jun. 30, 2022

Environmental Remediation Obligations [Abstract]

Environmental

Environmental

We expensed $0.2 million for both the three and six months ended June 30, 2022, respectively, for environmental remediation obligations and we expensed $0.5 million for both the three and six months ended June 30, 2021, respectively. The accrued environmental liability, net of expected recoveries from indemnifying parties, reflected in our consolidated balance sheets was $13.6 million and $3.9 million at June 30, 2022 and December 31, 2021, of which $11.6 million and $2.4 million was classified as other long-term liabilities for June 30, 2022 and December 31, 2021, respectively. These accruals include remediation and monitoring costs expected to be incurred over an extended period of time. Accrued environmental liabilities assumed in the Sinclair acquisition have preliminarily been fair valued at $10.0 million as of March 14, 2022. Estimated liabilities could increase in the future as the purchase price allocation for the Sinclair Transportation acquisition is finalized and when the results of ongoing investigations become known, are considered probable and can be reasonably estimated.

Under the Omnibus Agreement and certain transportation agreements and purchase agreements with HF Sinclair and/or its subsidiaries, HF Sinclair has agreed to indemnify us, subject to certain monetary and time limitations, for environmental noncompliance and remediation liabilities associated with certain assets transferred to us from HF Sinclair and its subsidiaries and occurring or existing prior to the date of such transfers. Our consolidated balance sheets included additional accrued environmental liabilities of $0.2 million and $0.3 million for HF Sinclair indemnified liabilities as of June 30, 2022 and December 31, 2021, respectively, and other assets included equal and offsetting balances representing amounts due from HF Sinclair related to indemnifications for environmental remediation liabilities.

XML

Contingencies	6 Months Ended
	Jun. 30, 2022
Commitments and Contingencies Disclosure [Abstract]
Contingencies	ContingenciesWe are a party to various legal and regulatory proceedings, none of which we believe will have a material adverse impact on our financial condition, results of operations or cash flows.

XML

Segment Information

6 Months Ended

Jun. 30, 2022

Segment Reporting [Abstract]

Segment Information

Segment Information

Although financial information is reviewed by our chief operating decision makers from a variety of perspectives, they view the business in two reportable operating segments: pipelines and terminals, and refinery processing units. These operating segments adhere to the accounting polices used for our consolidated financial statements.

Pipelines and terminals have been aggregated as one reportable segment as both pipeline and terminals (1) have similar economic characteristics, (2) similarly provide logistics services of transportation and storage of petroleum products, (3) similarly support the petroleum refining business, including distribution of its products, (4) have principally the same customers and (5) are subject to similar regulatory requirements.

We evaluate the performance of each segment based on its respective operating income. Certain general and administrative expenses and interest and financing costs are excluded from segment operating income as they are not directly attributable to a specific reportable segment. Identifiable assets are those used by the segment, whereas other assets are principally equity method investments, cash, deposits and other assets that are not associated with a specific reportable segment.

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(In thousands)
Revenues:
Pipelines and terminals - affiliate	$	87,644	$	78,116	$	161,495	$	157,546
Pipelines and terminals - third-party	25,233		27,093		53,177		52,350
Refinery processing units - affiliate	22,893		21,026		41,296		43,522
Total segment revenues	$	135,770	$	126,235	$	255,968	$	253,418
Segment operating income:
Pipelines and terminals (1)	$	48,673	$	49,391	$	98,477	$	90,875
Refinery processing units	6,224		9,773		11,806		18,008
Total segment operating income	54,897		59,164		110,283		108,883
Unallocated general and administrative expenses	(4,682)		(2,847)		(8,994)		(5,815)
Interest expense	(20,347)		(13,938)		(33,986)		(27,178)
Interest income	24,331		6,614		36,978		13,162
Equity in earnings of equity method investments	5,447		3,423		9,073		5,186
Gain on sales-type leases	—		27		—		24,677
Gain (loss) on sale of assets and other	45		5,415		146		5,917
Income before income taxes	$	59,691	$	57,858	$	113,500	$	124,832
Capital Expenditures:
Pipelines and terminals	$	7,397	$	25,559	$	17,817	$	58,777
Refinery processing units	1,703		598		5,429		598
Total capital expenditures	$	9,100	$	26,157	$	23,246	$	59,375

	June 30, 2022		December 31, 2021
	(In thousands)
Identifiable assets:
Pipelines and terminals (2)	$	2,157,472	$	1,737,388
Refinery processing units	312,931		294,452
Other	304,635		134,027
Total identifiable assets	$	2,775,038	$	2,165,867

(1) Pipelines and terminals segment operating income included goodwill impairment charges of $11.0 million for the six months ended June 30, 2021.

(2) Included goodwill of $314.4 million as of June 30, 2022 and $223.7 million as of December 31, 2021.

XML

Supplemental Guarantor / Non-Guarantor Financial Information

6 Months Ended

Jun. 30, 2022

Supplemental Guarantor / Non-Guarantor Financial Information [Abstract]

Supplemental Guarantor / Non-Guarantor Financial Information

Supplemental Guarantor/Non-Guarantor Financial Information

Obligations of HEP (“Parent”) under the Senior Notes have been jointly and severally guaranteed by each of its direct and indirect 100% owned subsidiaries, other than Holly Energy Finance Corp., and certain immaterial subsidiaries (“Guarantor Subsidiaries”). These guarantees are full and unconditional, subject to certain customary release provisions. These circumstances include (i) when a Guarantor Subsidiary is sold or sells all or substantially all of its assets, (ii) when a Guarantor Subsidiary is declared “unrestricted” for covenant purposes, (iii) when a Guarantor Subsidiary’s guarantee of other indebtedness is terminated or released and (iv) when the requirements for legal defeasance or covenant defeasance or to discharge the senior notes have been satisfied.

The following financial information presents condensed consolidating balance sheets, statements of income, and statements of cash flows of the Parent, the Guarantor Subsidiaries and the Non-Guarantor Subsidiaries. The information has been presented as if the Parent accounted for its ownership in the Guarantor Subsidiaries, and the Guarantor Restricted Subsidiaries accounted for the ownership of the Non-Guarantor Non-Restricted Subsidiaries, using the equity method of accounting.

As a result of the HEP Transaction, UNEV Pipeline, LLC became a 100% owned subsidiary, and it was subsequently added as a guarantor of the obligations of HEP under the Senior Notes during the second quarter of 2022. UNEV Pipeline, LLC financial information has been included in the Guarantor Subsidiaries financial information for all periods presented.

Condensed Consolidating Balance Sheet

June 30, 2022	Parent		Guarantor Restricted Subsidiaries		Non-Guarantor Non-Restricted Subsidiaries		Eliminations		Consolidated
	(In thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	4,879	$	5,409	$	4,596	$	—	$	14,884
Accounts receivable	—		72,418		1,343		(1,209)		72,552
Prepaid and other current assets	322		11,647		329		(329)		11,969
Total current assets	5,201		89,474		6,268		(1,538)		99,405
Properties and equipment, net	—		1,426,492		—		—		1,426,492
Operating lease right-of-use assets	—		2,502		—		—		2,502
Net investment in leases	—		542,281		100,867		(100,867)		542,281
Investment in subsidiaries	2,461,802		69,405		—		(2,531,207)		—
Intangible assets, net	—		66,304		—		—		66,304
Goodwill	—		314,418		—		—		314,418
Equity method investments	—		244,517		35,955		—		280,472
Deferred turnaround costs	—		25,813		—		—		25,813
Other assets	6,830		10,521		—		—		17,351
Total assets	$	2,473,833	$	2,791,727	$	143,090	$	(2,633,612)	$	2,775,038
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	—	$	35,448	$	3,561	$	(1,209)	$	37,800
Accrued interest	17,963		—		—		—		17,963
Deferred revenue	—		13,770		—		—		13,770
Accrued property taxes	—		7,145		—		—		7,145
Current operating lease liabilities	—		963		—		—		963
Current finance lease liabilities	—		5,862		—		(2,005)		3,857
Other current liabilities	79		1,850		719		—		2,648
Total current liabilities	18,042		65,038		4,280		(3,214)		84,146
Long-term debt	1,608,460		—		—		—		1,608,460
Noncurrent operating lease liabilities	—		2,006		—		—		2,006
Noncurrent finance lease liabilities	—		152,749		—		(89,911)		62,838
Other long-term liabilities	266		22,806		—		—		23,072
Deferred revenue	—		28,865		—		—		28,865
Class B unit	—		58,461		—		—		58,461
Equity - partners	847,065		2,461,802		69,405		(2,540,487)		837,785
Equity - noncontrolling interests	—		—		69,405		—		69,405
Total liabilities and equity	$	2,473,833	$	2,791,727	$	143,090	$	(2,633,612)	$	2,775,038

Condensed Consolidating Balance Sheet

December 31, 2021	Parent		Guarantor Restricted Subsidiaries		Non-Guarantor Non-Restricted Subsidiaries		Eliminations		Consolidated
	(In thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	1,273	$	4,227	$	8,881	$	—	$	14,381
Accounts receivable	—		68,768		2,833		(2,702)		68,899
Prepaid and other current assets	353		10,680		304		(304)		11,033
Total current assets	1,626		83,675		12,018		(3,006)		94,313
Properties and equipment, net	—		1,329,028		—		—		1,329,028
Operating lease right-of-use assets	—		2,275		—		—		2,275
Net investment in leases	—		309,301		100,032		(100,030)		309,303
Investment in subsidiaries	1,785,024		70,437		—		(1,855,461)		—
Intangible assets, net	—		73,307		—		—		73,307
Goodwill	—		223,650		—		—		223,650
Equity method investments	—		78,873		37,505		—		116,378
Deferred turnaround costs	—		2,632		—		—		2,632
Other assets	8,118		6,863		—		—		14,981
Total assets	$	1,794,768	$	2,180,041	$	149,555	$	(1,958,497)	$	2,165,867
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	—	$	34,566	$	8,416	$	(2,702)	$	40,280
Accrued interest	11,258		—		—		—		11,258
Deferred revenue	—		14,585		—		—		14,585
Accrued property taxes	—		4,542		—		—		4,542
Current operating lease liabilities	—		620		—		—		620
Current finance lease liabilities	—		5,566		—		(1,780)		3,786
Other current liabilities	3		1,513		265		—		1,781
Total current liabilities	11,261		61,392		8,681		(4,482)		76,852
Long-term debt	1,333,049		—		—		—		1,333,049
Noncurrent operating lease liabilities	—		2,030		—		—		2,030
Noncurrent finance lease liabilities	—		156,102		—		(91,453)		64,649
Other long-term liabilities	340		12,187		—		—		12,527
Deferred revenue	—		29,662		—		—		29,662
Class B unit	—		56,549		—		—		56,549
Equity - partners	450,118		1,785,024		70,437		(1,862,562)		443,017
Equity - noncontrolling interests	—		77,095		70,437		—		147,532
Total liabilities and equity	$	1,794,768	$	2,180,041	$	149,555	$	(1,958,497)	$	2,165,867

Condensed Consolidating Statement of Income

Three Months Ended June 30, 2022	Parent		Guarantor Restricted Subsidiaries		Non-Guarantor Non-Restricted Subsidiaries		Eliminations		Consolidated
	(In thousands)
Revenues:
Affiliates	$	—	$	110,537	$	—	$	—	$	110,537
Third parties	—		25,233		—		—		25,233
	—		135,770		—		—		135,770
Operating costs and expenses:
Operations (exclusive of depreciation and amortization)	—		52,823		1,076		—		53,899
Depreciation and amortization	—		26,974		—		—		26,974
General and administrative	912		3,770		—		—		4,682
	912		83,567		1,076		—		85,555
Operating income (loss)	(912)		52,203		(1,076)		—		50,215
Other income (expense):
Equity in earnings of subsidiaries	77,104		1,927		—		(79,031)		—
Equity in earnings of equity method investments	—		4,641		806		—		5,447
Interest expense	(19,400)		(5,071)		—		4,124		(20,347)
Interest income	—		24,331		4,124		(4,124)		24,331
Gain on sale of assets and other	—		45		—		—		45
	57,704		25,873		4,930		(79,031)		9,476
Income before income taxes	56,792		78,076		3,854		(79,031)		59,691
State income tax expense	—		(14)		—		—		(14)
Net income	56,792		78,062		3,854		(79,031)		59,677
Allocation of net income attributable to noncontrolling interests	—		(958)		(1,927)		—		(2,885)
Net income attributable to the partners	$	56,792	$	77,104	$	1,927	$	(79,031)	$	56,792

Condensed Consolidating Statement of Income

Three Months Ended June 30, 2021	Parent		Guarantor Restricted Subsidiaries		Non-Guarantor Non-Restricted Subsidiaries		Eliminations		Consolidated
	(In thousands)
Revenues:
Affiliates	$	—	$	99,142	$	—	$	—	$	99,142
Third parties	—		27,093		—		—		27,093
	—		126,235		—		—		126,235
Operating costs and expenses:
Operations (exclusive of depreciation and amortization)	—		41,411		657		—		42,068
Depreciation and amortization	—		25,003		—		—		25,003
General and administrative	907		1,940		—		—		2,847
	907		68,354		657		—		69,918
Operating income (loss)	(907)		57,881		(657)		—		56,317
Other income (expense):
Equity in earnings of subsidiaries	69,596		(14)		—		(69,582)		—
Equity in earnings of equity method investments			2,793		630		—		3,423
Interest expense	(12,944)		(994)		—		—		(13,938)
Interest income			6,614		—		—		6,614
Gain on sales-type lease	—		27		—		—		27
Gain on sale of assets and other	—		5,415		—		—		5,415
	56,652		13,841		630		(69,582)		1,541
Income before income taxes	55,745		71,722		(27)		(69,582)		57,858
State income tax expense	—		(27)		—		—		(27)
Net income	55,745		71,695		(27)		(69,582)		57,831
Allocation of net income attributable to noncontrolling interests	—		(2,099)		13		—		(2,086)
Net income attributable to the partners	$	55,745	$	69,596	$	(14)	$	(69,582)	$	55,745

Condensed Consolidating Statement of Income

Six Months Ended June 30, 2022	Parent		Guarantor Restricted Subsidiaries		Non-Guarantor Non-restricted Subsidiaries		Eliminations			Consolidated
	(In thousands)
Revenues:
Affiliates	$	—	$	202,791	$	—	$	—		$	202,791
Third parties	—		53,177		—		—			53,177
	—		255,968		—		—			255,968
Operating costs and expenses:
Operations (exclusive of depreciation and amortization)	—		94,757		1,767		—			96,524
Depreciation and amortization	—		49,161		—		—			49,161
General and administrative	2,000		6,994		—		—			8,994
	2,000		150,912		1,767		—			154,679
Operating income (loss)	(2,000)		105,056		(1,767)		—		0	101,289
Other income (expense):
Equity in earnings of subsidiaries	140,431		4,098		—		(144,529)			—
Equity in earnings of equity method investments	—		7,361		1,712		—			9,073
Interest expense	(32,080)		(10,157)		—		8,251			(33,986)
Interest income	—		36,978		8,251		(8,251)			36,978
Gain on sale of assets and other	—		146		—		—			146
	108,351		38,426		9,963		(144,529)			12,211
Income before income taxes	106,351		143,482		8,196		(144,529)			113,500
State income tax expense	—		(45)		—		—			(45)
Net income	106,351		143,437		8,196		(144,529)			113,455
Allocation of net income attributable to noncontrolling interests	—		(3,006)		(4,098)		—			(7,104)
Net income attributable to the partners	$	106,351	$	140,431	$	4,098	$	(144,529)		$	106,351

Condensed Consolidating Statement of Income

Six Months Ended June 30, 2021	Parent		Guarantor Restricted Subsidiaries		Non-Guarantor Non-restricted Subsidiaries		Eliminations		Consolidated
	(In thousands)
Revenues:
Affiliates	$	—	$	201,068	$	—	$	—	$	201,068
Third parties	—		52,350		—		—		52,350
	—		253,418		—		—		253,418
Operating costs and expenses:
Operations (exclusive of depreciation and amortization)	—		82,434		999		—		83,433
Depreciation and amortization	—		50,068		—		—		50,068
General and administrative	2,085		3,730		—		—		5,815
Goodwill impairment	—		11,034		—		—		11,034
	2,085		147,266		999		—		150,350
Operating income (loss)	(2,085)		106,152		(999)		—		103,068
Other income (expense):
Equity in earnings of subsidiaries	147,405		388		—		(147,793)		—
Equity in earnings of equity method investments	—		3,411		1,775		—		5,186
Interest expense	(25,178)		(2,000)		—		—		(27,178)
Interest income	—		13,162		—		—		13,162
Gain on sales-type lease	—		24,677		—		—		24,677
Gain on sale of assets and other	—		5,917		—		—		5,917
	122,227		45,555		1,775		(147,793)		21,764
Income before income taxes	120,142		151,707		776		(147,793)		124,832
State income tax expense	—		(64)		—		—		(64)
Net income	120,142		151,643		776		(147,793)		124,768
Allocation of net income attributable to noncontrolling interests	—		(4,238)		(388)		—		(4,626)
Net income attributable to the partners	120,142		147,405		388		(147,793)		120,142

XML

Osage Pipeline	6 Months Ended
	Jun. 30, 2022
Unusual or Infrequent Items, or Both [Abstract]
Osage Pipeline	Osage PipelineOn July 8, 2022, the Osage pipeline, which carries crude oil from Cushing, Oklahoma to El Dorado, Kansas, suffered a release of crude oil. The pipeline has resumed operations and recovery operations are ongoing. We expect to accrue amounts related to recovery and remediation in the third quarter of 2022, but cannot estimate those amounts at this time. We do not expect the accrual will have a material impact on our financial position.

XML

Description of Business and Presentation of Financial Statements (Policies)

6 Months Ended

Jun. 30, 2022

Accounting Policies [Abstract]

Principles of Consolidation and Common Control Transactions

Principles of Consolidation and Common Control Transactions

The consolidated financial statements include our accounts and those of subsidiaries and joint ventures that we control. All significant intercompany transactions and balances have been eliminated.

Most of our acquisitions from HFC occurred while we were a consolidated variable interest entity (“VIE”) of HFC. Therefore, as an entity under common control with HFC, we recorded these acquisitions on our balance sheets at HFC's historical basis instead of our purchase price or fair value.

Goodwill and Long-lived Assets

Goodwill and Long-lived Assets

Goodwill represents the excess of our cost of an acquired business over the fair value of the assets acquired, less liabilities assumed. Goodwill is not subject to amortization and is tested annually or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Our goodwill

impairment testing first entails either a quantitative assessment or an optional qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If we determine that based on the qualitative factors that it is more likely than not that the carrying amount of the reporting unit is greater than its fair value, a quantitative test is performed in which we estimate the fair value of the related reporting unit. If the carrying amount of a reporting unit exceeds its fair value, the goodwill of that reporting unit is impaired, and we measure goodwill impairment as the excess of the carrying amount of the reporting unit over the related fair value.

Indicators of Goodwill and Long-lived Asset Impairment

During the first quarter of 2021, changes in our agreements with HFC related to our Cheyenne assets resulted in an increase in the net book value of our Cheyenne reporting unit due to sales-type lease accounting, which led us to determine indicators of potential goodwill impairment for our Cheyenne reporting unit were present.

The estimated fair value of our Cheyenne reporting unit was derived using a combination of income and market approaches. The income approach reflects expected future cash flows based on anticipated gross margins, operating costs, and capital expenditures. The market approaches include both the guideline public company and guideline transaction methods. Both methods utilize pricing multiples derived from historical market transactions of other like-kind assets. These fair value measurements involve significant unobservable inputs (Level 3 inputs). See Note 6 for further discussion of Level 3 inputs.

Our interim impairment testing of our Cheyenne reporting unit goodwill identified an impairment charge of $11.0 million, which was recorded in the three months ended March 31, 2021.

We performed our annual goodwill impairment testing qualitatively as of July 1, 2021, and determined it was not more likely than not that the carrying amount of each reporting unit was greater than its fair value. Therefore, a quantitative test was not necessary, and no additional impairment of goodwill was recorded.

We evaluate long-lived assets, including finite-lived intangible assets, for potential impairment by identifying whether indicators of impairment exist and, if so, assessing whether the long-lived assets are recoverable from estimated future undiscounted cash flows. The actual amount of impairment loss, if any, to be recorded is equal to the amount by which a long-lived asset’s carrying value exceeds its fair value.

Revenue Recognition

Revenue Recognition

Revenues are generally recognized as products are shipped through our pipelines and terminals, feedstocks are processed through our refinery processing units or other services are rendered. The majority of our contracts with customers meet the definition of a lease since (1) performance of the contracts is dependent on specified property, plant, or equipment and (2) it is unlikely that one or more parties other than the customer will take more than a minor amount of the output associated with the specified property, plant, or equipment. Prior to the adoption of the new lease standard (see below), we bifurcated the consideration received between lease and service revenue. The new lease standard allows the election of a practical expedient whereby a lessor does not have to separate non-lease (service) components from lease components under certain conditions. The majority of our contracts meet these conditions, and we have made this election for those contracts. Under this practical expedient, we treat the combined components as a single performance obligation in accordance with Accounting Standards Codification (“ASC”) 606, which largely codified ASU 2014-09, if the non-lease (service) component is the dominant component. If the lease component is the dominant component, we treat the combined components as a lease in accordance with ASC 842, which largely codified ASU 2016-02.

Several of our contracts include incentive or reduced tariffs once a certain quarterly volume is met. Revenue from the variable element of these transactions is recognized based on the actual volumes shipped as it relates specifically to rendering the services during the applicable quarter.

The majority of our long-term transportation contracts specify minimum volume requirements, whereby, we bill a customer for a minimum level of shipments in the event a customer ships below their contractual requirements. If there are no future performance obligations, we will recognize these deficiency payments in revenue.

In certain of these throughput agreements, a customer may later utilize such shortfall billings as credit towards future volume shipments in excess of its minimum levels within its respective contractual shortfall make-up period. Such amounts represent an obligation to perform future services, which may be initially deferred and later recognized as revenue based on estimated future shipping levels, including the likelihood of a customer’s ability to utilize such amounts prior to the end of the contractual

shortfall make-up period. We recognize these deficiency payments in revenue when we do not expect we will be required to satisfy these performance obligations in the future based on the pattern of rights projected to be exercised by the customer. During the six months ended June 30, 2022 and 2021, we recognized $10.4 million and $8.8 million, respectively, of these deficiency payments in revenue, of which $1.9 million and $0.5 million, respectively, related to deficiency payments billed in prior periods.

We have other cost reimbursement provisions in our throughput / storage agreements providing that customers (including HF Sinclair) reimburse us for certain costs. Such reimbursements are recorded as revenue or deferred revenue depending on the nature of the cost. Deferred revenue is recognized over the remaining contractual term of the related throughput agreement.

Lessee Accounting

Lessee Accounting

At inception, we determine if an arrangement is or contains a lease. Right-of-use assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our payment obligation under the leasing arrangement. Right-of-use assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. We use our estimated incremental borrowing rate (“IBR”) to determine the present value of lease payments as most of our leases do not contain an implicit rate. Our IBR represents the interest rate which we would pay to borrow, on a collateralized basis, an amount equal to the lease payments over a similar term in a similar economic environment. We use the implicit rate when readily determinable.

Operating leases are recorded in operating lease right-of-use assets and current and noncurrent operating lease liabilities on our consolidated balance sheet. Finance leases are included in properties and equipment, current finance lease liabilities and noncurrent finance lease liabilities on our consolidated balance sheet.

When renewal options are defined in a lease, our lease term includes an option to extend the lease when it is reasonably certain we will exercise that option. Leases with a term of 12 months or less are not recorded on our balance sheet, and lease expense is accounted for on a straight-line basis. In addition, as a lessee, we separate non-lease components that are identifiable and exclude them from the determination of net present value of lease payment obligations.

Lessor Accounting

Lessor Accounting

Customer contracts that contain leases are generally classified as either operating leases, direct finance leases or sales-type leases. We consider inputs such as the lease term, fair value of the underlying asset and residual value of the underlying assets when assessing the classification.

Deferred Turnaround Costs

Deferred Turnaround Costs

Our refinery processing units require regular major maintenance and repairs which are commonly referred to as “turnarounds.” The required frequency of the maintenance varies by unit, but generally is every four to five years. Turnaround costs are deferred and amortized over the period until the next scheduled turnaround.

Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements are derived using inputs (assumptions that market participants would use in pricing an asset or liability) including assumptions about risk. GAAP categorizes inputs used in fair value measurements into three broad levels as follows:

•(Level 1) Quoted prices in active markets for identical assets or liabilities.

•(Level 2) Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, similar assets and liabilities in markets that are not active or can be corroborated by observable market data.

•(Level 3) Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes valuation techniques that involve significant unobservable inputs.

XML

Sinclair Acquisition (Tables)

6 Months Ended

Jun. 30, 2022

Business Combination and Asset Acquisition [Abstract]

Schedule of Preliminary Purchase Price Consideration and Allocation

The following tables present the preliminary purchase consideration and preliminary purchase price allocation to the assets acquired and liabilities assumed on March 14, 2022:

Preliminary Purchase Consideration (in thousands except for per share amounts)
HEP common units issued	21,000
Closing price per unit of HEP common units(1)	$	16.62
Purchase consideration paid in HEP common units	349,020
Cash consideration paid by HEP	325,000
Estimated Adjusted Payments HEP(2)	(3,634)
Total cash consideration	321,366
Total purchase consideration	$	670,386

(1) Based on the HEP closing unit price on March 11, 2022.

(2) Net of cash acquired

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed

	(In thousands)
Assets Acquired
Accounts receivable	$	1,910
Prepaid and other current assets	59
Properties and equipment	357,819
Operating lease right-of-use assets	105
Other assets	3,500
Goodwill	90,768
Equity method investments	229,891
Total assets acquired	$	684,052
Liabilities Assumed
Accounts payable	1,528
Accrued property taxes	973
Other current liabilities	789
Operating lease liabilities	33
Noncurrent operating lease liabilities	72
Other long-term liabilities	10,271
Total liabilities assumed	$	13,666
Net assets acquired	$	670,386

Schedule of Pro Forma Information

The pro forma combined condensed financial data has been included for comparative purposes only and is not necessarily indicative of the results that might have occurred had the HEP Transaction taken place on January 1, 2021 and is not intended to be a projection of future results.

	Three Months Ended June 30,		Six Months Ended June 30,
	2021		2022		2021
	(In thousands)
Sales and other revenues	$	143,279	$	270,730	$	286,469
Net income attributable to the partners	$	62,739	$	107,574	$	133,164

XML

Revenues (Tables)

6 Months Ended

Jun. 30, 2022

Revenue from Contract with Customer [Abstract]

Schedule of Disaggregated Revenue

Disaggregated revenues were as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(In thousands)				(In thousands)
Pipelines	$	68,319	$	68,322	$	133,099	$	134,827
Terminals, tanks and loading racks	44,558		36,887		81,573		75,069
Refinery processing units	22,893		21,026		41,296		43,522
	$	135,770	$	126,235	$	255,968	$	253,418

Schedule of Revenues

Revenues on our consolidated statements of income were composed of the following lease and service revenues:

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(In thousands)				(In thousands)
Lease revenues	$	82,445	$	86,867	$	155,736	$	174,803
Service revenues	53,325		39,368		100,232		78,615
	$	135,770	$	126,235	$	255,968	$	253,418

Schedule of Contract Asset and Contract Liability Balances

Our consolidated balance sheets included the contract assets and liabilities in the table below:

	June 30, 2022		December 31, 2021
	(In thousands)
Contract assets	$	6,727	$	6,637
Contract liabilities	$	(2,247)	$	(4,185)

Schedule of Future Performance Obligations

We expect to recognize revenue for these unfulfilled performance obligations as shown in the table below (amounts shown in table include both service and lease revenues):

Years Ending December 31,	(In millions)
Remainder of 2022	$	182
2023	301
2024	266
2025	185
2026	170
2027	137
Thereafter	407
Total	$	1,648

XML

Leases (Tables)

6 Months Ended

Jun. 30, 2022

Leases [Abstract]

Schedule of Supplemental Balance Sheet Information

Supplemental balance sheet information related to leases was as follows (in thousands, except for lease term and discount rate):

	June 30, 2022		December 31, 2021
Operating leases:
Operating lease right-of-use assets, net	$	2,502	$	2,275
Current operating lease liabilities	963		620
Noncurrent operating lease liabilities	2,006		2,030
Total operating lease liabilities	$	2,969	$	2,650
Finance leases:
Properties and equipment	$	6,160	$	6,031
Accumulated amortization	(4,013)		(3,632)
Properties and equipment, net	$	2,147	$	2,399
Current finance lease liabilities	$	3,857	$	3,786
Noncurrent finance lease liabilities	62,838		64,649
Total finance lease liabilities	$	66,695	$	68,435
Weighted average remaining lease term (in years):
Operating leases	4.8		5.8
Finance leases	14.6		15.0
Weighted average discount rate:
Operating leases	4.5%		4.8%
Finance leases	5.6%		5.6%

Schedule of Supplemental Cash Flow Information and Components of Lease Expense

Supplemental cash flow and other information related to leases were as follows:

	Six Months Ended June 30,
	2022		2021
	(In thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows on operating leases	$	518	$	576
Operating cash flows on finance leases	$	1,950	$	2,105
Financing cash flows on finance leases	$	1,776	$	1,747

The components of lease expense were as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(In thousands)
Operating lease costs	$	242	$	249	$	504	$	547
Finance lease costs
Amortization of assets	189		200		381		412
Interest on lease liabilities	946		994		1,905		2,001
Variable lease cost	23		67		59		133
Total net lease cost	$	1,400	$	1,510	$	2,849	$	3,093

Schedule of Operating and Finance Lease Maturities

Maturities of lease liabilities were as follows:

	June 30, 2022
	Operating		Finance
	(In thousands)
2022	$	504	$	3,672
2023	935		7,383
2024	524		6,938
2025	443		6,479
2026	289		6,432
2027 and thereafter	501		67,463
Total lease payments	3,196		98,367
Less: Imputed interest	(227)		(31,672)
Total lease obligations	2,969		66,695
Less: Current lease liabilities	(963)		(3,857)
Noncurrent lease liabilities	$	2,006	$	62,838

Sales-Type Lease, Gain Recognized

Because we recorded these assets at fair values under purchase price accounting, there was no gain or loss on these sales-type leases during the six months ended June 30, 2022. The balance sheet impacts were composed of the following:

	Six Months Ended June 30, 2022
	(In thousands)
Net investment in leases	$	235,620
Properties and equipment, net	(235,620)
Gain on sales-type leases	$	—

Therefore, we recognized a gain on sales-type leases during the six months ended June 30, 2021 composed of the following:

	Six Months Ended June 30, 2021
	(In thousands)
Net investment in leases	$	47,795
Properties and equipment, net	(29,677)
Deferred revenue	6,559
Gain on sales-type leases	$	24,677

Schedule of Lease Income

Lease income recognized was as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(In thousands)
Operating lease revenues	$	76,538	$	84,426	$	146,891	$	170,698
Direct financing lease interest income	520		523		1,040		1,047
Gain on sales-type leases	—		27		—		24,677
Sales-type lease interest income	23,814		6,091		35,938		12,115
Lease revenues relating to variable lease payments not included in measurement of the sales-type lease receivable	5,906		2,441		8,846		4,105

Schedule of Minimum Undiscounted Lease Payments

Annual minimum undiscounted lease payments under our leases were as follows as of June 30, 2022:

	Operating		Finance		Sales-type
Years Ending December 31,	(In thousands)
Remainder of 2022	$	152,623	$	1,083	$	50,144
2023	272,169		2,175		96,383
2024	242,476		2,192		93,154
2025	166,290		2,209		89,727
2026	151,745		2,227		89,727
2027 and thereafter	473,243		36,610		841,406
Total lease receipt payments	$	1,458,546	$	46,496	$	1,260,541
Less: Imputed interest			(30,173)		(1,131,594)
			16,323		128,947
Unguaranteed residual assets at end of leases			—		402,895
Net investment in leases			$	16,323	$	531,842

Schedule of Net Investment in Leases

Net investments in leases recorded on our balance sheet were composed of the following:

	June 30, 2022				December 31, 2021
	Sales-type Leases		Direct Financing Leases		Sales-type Leases		Direct Financing Leases
	(In thousands)				(In thousands)
Lease receivables (1)	$	426,582	$	16,323	$	207,768	$	16,371
Unguaranteed residual assets	105,260		—		90,097		—
Net investment in leases	$	531,842	$	16,323	$	297,865	$	16,371

(1)    Current portion of lease receivables included in prepaid and other current assets on the balance sheet.

XML

Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2022

Fair Value Disclosures [Abstract]

Schedule of Carrying Amounts of Estimated Fair Values of Senior Notes

The carrying amounts and estimated fair values of our senior notes were as follows:

		June 30, 2022		December 31, 2021
Financial Instrument	Fair Value Input Level	Carrying Value	Fair Value	Carrying Value	Fair Value
		(In thousands)
Liabilities:
5% Senior Notes	Level 2	493,541	430,710	493,049	502,705
6.375% Senior Notes	Level 2	393,919	377,996	—	—
Total Liabilities		887,460	808,706	493,049	502,705

XML

Properties and Equipment (Tables)

6 Months Ended

Jun. 30, 2022

Property, Plant and Equipment [Abstract]

Schedule of Properties and Equipment

The carrying amounts of our properties and equipment were as follows:

	June 30, 2022		December 31, 2021
	(In thousands)
Pipelines, terminals and tankage	$	1,611,170	$	1,527,697
Refinery assets	352,274		348,882
Land and right of way	124,984		98,837
Construction in progress	31,864		26,446
Other	63,372		48,203
	2,183,664		2,050,065
Less accumulated depreciation	(757,172)		(721,037)
	$	1,426,492	$	1,329,028

XML

Intangible Assets (Tables)

6 Months Ended

Jun. 30, 2022

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Finite-Lived Intangible Assets by Major Class

The carrying amounts of our intangible assets were as follows:

	Useful Life	June 30, 2022		December 31, 2021
		(In thousands)
Delek transportation agreement	30 years	$	59,933	$	59,933
HF Sinclair transportation agreement	10-15 years	75,131		75,131
Customer relationships	10 years	69,683		69,683
Other	20 years	50		50
		204,797		204,797
Less accumulated amortization		(138,493)		(131,490)
		$	66,304	$	73,307

XML

Employees, Retirement and Incentive Plans (Tables)

6 Months Ended

Jun. 30, 2022

Share-Based Payment Arrangement [Abstract]

Schedule of Phantom Units

A summary of phantom unit activity and changes during the six months ended June 30, 2022, is presented below:

Phantom Units	Units	Weighted Average Grant-Date Fair Value
Outstanding at January 1, 2022 (nonvested)	203,263	$	14.85
Granted	4,313	17.40
Vesting and transfer of full ownership to recipients	(3,833)	15.54
Forfeited	(18,158)	14.60
Outstanding at June 30, 2022 (nonvested)	185,585	14.92

Schedule of Performance Units

A summary of performance unit activity and changes for the six months ended June 30, 2022, is presented below:

Performance Units	Units
Outstanding at January 1, 2022 (nonvested)	76,719
Vesting and transfer of common units to recipients	(13,920)
Forfeited	(9,124)
Outstanding at June 30, 2022 (nonvested)	53,675

XML

Debt (Tables)

6 Months Ended

Jun. 30, 2022

Debt Disclosure [Abstract]

Schedule of Long-term Debt Instruments

The carrying amounts of our long-term debt were as follows:

	June 30, 2022		December 31, 2021
	(In thousands)
Credit Agreement
Amount outstanding	$	721,000	840,000
5% Senior Notes
Principal	500,000		500,000
Unamortized premium and debt issuance costs	(6,459)		(6,951)
	493,541		493,049
6.375% Senior Notes
Principal	400,000		—
Unamortized premium and debt issuance costs	(6,081)		—
	393,919		—
Total long-term debt	$	1,608,460	$	1,333,049

XML

Net Income Per Limited Partner Unit (Tables)

6 Months Ended

Jun. 30, 2022

Net Income per Limited Partner Unit [Abstract]

Schedule of Net Income per Limited Partner Unit

Net income per limited partner unit is computed as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(In thousands, except per unit data)
Net income attributable to the partners	$	56,792	$	55,745	$	106,351	$	120,142
Less: Participating securities’ share in earnings	(107)		(190)		(222)		(411)
Net income attributable to common units	56,685		55,555		106,129		119,731
Weighted average limited partners' units outstanding	126,440		105,440		118,087		105,440
Limited partners' per unit interest in earnings - basic and diluted	$	0.45	$	0.53	$	0.90	$	1.14

XML

Segment Information (Tables)

6 Months Ended

Jun. 30, 2022

Segment Reporting [Abstract]

Schedule of Segment Reporting Information

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(In thousands)
Revenues:
Pipelines and terminals - affiliate	$	87,644	$	78,116	$	161,495	$	157,546
Pipelines and terminals - third-party	25,233		27,093		53,177		52,350
Refinery processing units - affiliate	22,893		21,026		41,296		43,522
Total segment revenues	$	135,770	$	126,235	$	255,968	$	253,418
Segment operating income:
Pipelines and terminals (1)	$	48,673	$	49,391	$	98,477	$	90,875
Refinery processing units	6,224		9,773		11,806		18,008
Total segment operating income	54,897		59,164		110,283		108,883
Unallocated general and administrative expenses	(4,682)		(2,847)		(8,994)		(5,815)
Interest expense	(20,347)		(13,938)		(33,986)		(27,178)
Interest income	24,331		6,614		36,978		13,162
Equity in earnings of equity method investments	5,447		3,423		9,073		5,186
Gain on sales-type leases	—		27		—		24,677
Gain (loss) on sale of assets and other	45		5,415		146		5,917
Income before income taxes	$	59,691	$	57,858	$	113,500	$	124,832
Capital Expenditures:
Pipelines and terminals	$	7,397	$	25,559	$	17,817	$	58,777
Refinery processing units	1,703		598		5,429		598
Total capital expenditures	$	9,100	$	26,157	$	23,246	$	59,375

	June 30, 2022		December 31, 2021
	(In thousands)
Identifiable assets:
Pipelines and terminals (2)	$	2,157,472	$	1,737,388
Refinery processing units	312,931		294,452
Other	304,635		134,027
Total identifiable assets	$	2,775,038	$	2,165,867

(1) Pipelines and terminals segment operating income included goodwill impairment charges of $11.0 million for the six months ended June 30, 2021.

(2) Included goodwill of $314.4 million as of June 30, 2022 and $223.7 million as of December 31, 2021.

XML

Supplemental Guarantor / Non-Guarantor Financial Information (Tables)

6 Months Ended

Jun. 30, 2022

Supplemental Guarantor / Non-Guarantor Financial Information [Abstract]

Schedule of Condensed Consolidating Balance Sheet

Condensed Consolidating Balance Sheet

June 30, 2022	Parent		Guarantor Restricted Subsidiaries		Non-Guarantor Non-Restricted Subsidiaries		Eliminations		Consolidated
	(In thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	4,879	$	5,409	$	4,596	$	—	$	14,884
Accounts receivable	—		72,418		1,343		(1,209)		72,552
Prepaid and other current assets	322		11,647		329		(329)		11,969
Total current assets	5,201		89,474		6,268		(1,538)		99,405
Properties and equipment, net	—		1,426,492		—		—		1,426,492
Operating lease right-of-use assets	—		2,502		—		—		2,502
Net investment in leases	—		542,281		100,867		(100,867)		542,281
Investment in subsidiaries	2,461,802		69,405		—		(2,531,207)		—
Intangible assets, net	—		66,304		—		—		66,304
Goodwill	—		314,418		—		—		314,418
Equity method investments	—		244,517		35,955		—		280,472
Deferred turnaround costs	—		25,813		—		—		25,813
Other assets	6,830		10,521		—		—		17,351
Total assets	$	2,473,833	$	2,791,727	$	143,090	$	(2,633,612)	$	2,775,038
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	—	$	35,448	$	3,561	$	(1,209)	$	37,800
Accrued interest	17,963		—		—		—		17,963
Deferred revenue	—		13,770		—		—		13,770
Accrued property taxes	—		7,145		—		—		7,145
Current operating lease liabilities	—		963		—		—		963
Current finance lease liabilities	—		5,862		—		(2,005)		3,857
Other current liabilities	79		1,850		719		—		2,648
Total current liabilities	18,042		65,038		4,280		(3,214)		84,146
Long-term debt	1,608,460		—		—		—		1,608,460
Noncurrent operating lease liabilities	—		2,006		—		—		2,006
Noncurrent finance lease liabilities	—		152,749		—		(89,911)		62,838
Other long-term liabilities	266		22,806		—		—		23,072
Deferred revenue	—		28,865		—		—		28,865
Class B unit	—		58,461		—		—		58,461
Equity - partners	847,065		2,461,802		69,405		(2,540,487)		837,785
Equity - noncontrolling interests	—		—		69,405		—		69,405
Total liabilities and equity	$	2,473,833	$	2,791,727	$	143,090	$	(2,633,612)	$	2,775,038

Condensed Consolidating Balance Sheet

December 31, 2021	Parent		Guarantor Restricted Subsidiaries		Non-Guarantor Non-Restricted Subsidiaries		Eliminations		Consolidated
	(In thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	1,273	$	4,227	$	8,881	$	—	$	14,381
Accounts receivable	—		68,768		2,833		(2,702)		68,899
Prepaid and other current assets	353		10,680		304		(304)		11,033
Total current assets	1,626		83,675		12,018		(3,006)		94,313
Properties and equipment, net	—		1,329,028		—		—		1,329,028
Operating lease right-of-use assets	—		2,275		—		—		2,275
Net investment in leases	—		309,301		100,032		(100,030)		309,303
Investment in subsidiaries	1,785,024		70,437		—		(1,855,461)		—
Intangible assets, net	—		73,307		—		—		73,307
Goodwill	—		223,650		—		—		223,650
Equity method investments	—		78,873		37,505		—		116,378
Deferred turnaround costs	—		2,632		—		—		2,632
Other assets	8,118		6,863		—		—		14,981
Total assets	$	1,794,768	$	2,180,041	$	149,555	$	(1,958,497)	$	2,165,867
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	—	$	34,566	$	8,416	$	(2,702)	$	40,280
Accrued interest	11,258		—		—		—		11,258
Deferred revenue	—		14,585		—		—		14,585
Accrued property taxes	—		4,542		—		—		4,542
Current operating lease liabilities	—		620		—		—		620
Current finance lease liabilities	—		5,566		—		(1,780)		3,786
Other current liabilities	3		1,513		265		—		1,781
Total current liabilities	11,261		61,392		8,681		(4,482)		76,852
Long-term debt	1,333,049		—		—		—		1,333,049
Noncurrent operating lease liabilities	—		2,030		—		—		2,030
Noncurrent finance lease liabilities	—		156,102		—		(91,453)		64,649
Other long-term liabilities	340		12,187		—		—		12,527
Deferred revenue	—		29,662		—		—		29,662
Class B unit	—		56,549		—		—		56,549
Equity - partners	450,118		1,785,024		70,437		(1,862,562)		443,017
Equity - noncontrolling interests	—		77,095		70,437		—		147,532
Total liabilities and equity	$	1,794,768	$	2,180,041	$	149,555	$	(1,958,497)	$	2,165,867

Schedule of Condensed Consolidating Statement of Income

Condensed Consolidating Statement of Income

Three Months Ended June 30, 2022	Parent		Guarantor Restricted Subsidiaries		Non-Guarantor Non-Restricted Subsidiaries		Eliminations		Consolidated
	(In thousands)
Revenues:
Affiliates	$	—	$	110,537	$	—	$	—	$	110,537
Third parties	—		25,233		—		—		25,233
	—		135,770		—		—		135,770
Operating costs and expenses:
Operations (exclusive of depreciation and amortization)	—		52,823		1,076		—		53,899
Depreciation and amortization	—		26,974		—		—		26,974
General and administrative	912		3,770		—		—		4,682
	912		83,567		1,076		—		85,555
Operating income (loss)	(912)		52,203		(1,076)		—		50,215
Other income (expense):
Equity in earnings of subsidiaries	77,104		1,927		—		(79,031)		—
Equity in earnings of equity method investments	—		4,641		806		—		5,447
Interest expense	(19,400)		(5,071)		—		4,124		(20,347)
Interest income	—		24,331		4,124		(4,124)		24,331
Gain on sale of assets and other	—		45		—		—		45
	57,704		25,873		4,930		(79,031)		9,476
Income before income taxes	56,792		78,076		3,854		(79,031)		59,691
State income tax expense	—		(14)		—		—		(14)
Net income	56,792		78,062		3,854		(79,031)		59,677
Allocation of net income attributable to noncontrolling interests	—		(958)		(1,927)		—		(2,885)
Net income attributable to the partners	$	56,792	$	77,104	$	1,927	$	(79,031)	$	56,792

Condensed Consolidating Statement of Income

Three Months Ended June 30, 2021	Parent		Guarantor Restricted Subsidiaries		Non-Guarantor Non-Restricted Subsidiaries		Eliminations		Consolidated
	(In thousands)
Revenues:
Affiliates	$	—	$	99,142	$	—	$	—	$	99,142
Third parties	—		27,093		—		—		27,093
	—		126,235		—		—		126,235
Operating costs and expenses:
Operations (exclusive of depreciation and amortization)	—		41,411		657		—		42,068
Depreciation and amortization	—		25,003		—		—		25,003
General and administrative	907		1,940		—		—		2,847
	907		68,354		657		—		69,918
Operating income (loss)	(907)		57,881		(657)		—		56,317
Other income (expense):
Equity in earnings of subsidiaries	69,596		(14)		—		(69,582)		—
Equity in earnings of equity method investments			2,793		630		—		3,423
Interest expense	(12,944)		(994)		—		—		(13,938)
Interest income			6,614		—		—		6,614
Gain on sales-type lease	—		27		—		—		27
Gain on sale of assets and other	—		5,415		—		—		5,415
	56,652		13,841		630		(69,582)		1,541
Income before income taxes	55,745		71,722		(27)		(69,582)		57,858
State income tax expense	—		(27)		—		—		(27)
Net income	55,745		71,695		(27)		(69,582)		57,831
Allocation of net income attributable to noncontrolling interests	—		(2,099)		13		—		(2,086)
Net income attributable to the partners	$	55,745	$	69,596	$	(14)	$	(69,582)	$	55,745

Condensed Consolidating Statement of Income

Six Months Ended June 30, 2022	Parent		Guarantor Restricted Subsidiaries		Non-Guarantor Non-restricted Subsidiaries		Eliminations			Consolidated
	(In thousands)
Revenues:
Affiliates	$	—	$	202,791	$	—	$	—		$	202,791
Third parties	—		53,177		—		—			53,177
	—		255,968		—		—			255,968
Operating costs and expenses:
Operations (exclusive of depreciation and amortization)	—		94,757		1,767		—			96,524
Depreciation and amortization	—		49,161		—		—			49,161
General and administrative	2,000		6,994		—		—			8,994
	2,000		150,912		1,767		—			154,679
Operating income (loss)	(2,000)		105,056		(1,767)		—		0	101,289
Other income (expense):
Equity in earnings of subsidiaries	140,431		4,098		—		(144,529)			—
Equity in earnings of equity method investments	—		7,361		1,712		—			9,073
Interest expense	(32,080)		(10,157)		—		8,251			(33,986)
Interest income	—		36,978		8,251		(8,251)			36,978
Gain on sale of assets and other	—		146		—		—			146
	108,351		38,426		9,963		(144,529)			12,211
Income before income taxes	106,351		143,482		8,196		(144,529)			113,500
State income tax expense	—		(45)		—		—			(45)
Net income	106,351		143,437		8,196		(144,529)			113,455
Allocation of net income attributable to noncontrolling interests	—		(3,006)		(4,098)		—			(7,104)
Net income attributable to the partners	$	106,351	$	140,431	$	4,098	$	(144,529)		$	106,351

Condensed Consolidating Statement of Income

Six Months Ended June 30, 2021	Parent		Guarantor Restricted Subsidiaries		Non-Guarantor Non-restricted Subsidiaries		Eliminations		Consolidated
	(In thousands)
Revenues:
Affiliates	$	—	$	201,068	$	—	$	—	$	201,068
Third parties	—		52,350		—		—		52,350
	—		253,418		—		—		253,418
Operating costs and expenses:
Operations (exclusive of depreciation and amortization)	—		82,434		999		—		83,433
Depreciation and amortization	—		50,068		—		—		50,068
General and administrative	2,085		3,730		—		—		5,815
Goodwill impairment	—		11,034		—		—		11,034
	2,085		147,266		999		—		150,350
Operating income (loss)	(2,085)		106,152		(999)		—		103,068
Other income (expense):
Equity in earnings of subsidiaries	147,405		388		—		(147,793)		—
Equity in earnings of equity method investments	—		3,411		1,775		—		5,186
Interest expense	(25,178)		(2,000)		—		—		(27,178)
Interest income	—		13,162		—		—		13,162
Gain on sales-type lease	—		24,677		—		—		24,677
Gain on sale of assets and other	—		5,917		—		—		5,917
	122,227		45,555		1,775		(147,793)		21,764
Income before income taxes	120,142		151,707		776		(147,793)		124,832
State income tax expense	—		(64)		—		—		(64)
Net income	120,142		151,643		776		(147,793)		124,768
Allocation of net income attributable to noncontrolling interests	—		(4,238)		(388)		—		(4,626)
Net income attributable to the partners	120,142		147,405		388		(147,793)		120,142

XML

Description of Business and Presentation of Financial Statements (Details) $ in Thousands, bbl in Millions			3 Months Ended		6 Months Ended
	Mar. 14, 2022 USD ($) terminal mi shares bbl	Jan. 01, 2021 USD ($) renewalOption	Jun. 30, 2022 USD ($)	Jun. 30, 2021 USD ($)	Jun. 30, 2022 USD ($) segment	Jun. 30, 2021 USD ($)
Other Ownership Interests [Line Items]
Lease term		10 years
Lease renewal period options | renewalOption		2
Lease renewal option period		5 years
Annual lease payment due		$ 5,000
Service fee arrangement period		5 years
Payment due for termination of commitment		$ 10,000
Number of reportable segments | segment					2
Goodwill impairment			$ 0	$ 0	$ 0	$ 11,034
Deferred revenue recognized					10,400	8,800
Deferred revenue recognized. billed prior period					$ 1,900	500
Minimum
Other Ownership Interests [Line Items]
Frequency of maintenance					4 years
Maximum
Other Ownership Interests [Line Items]
Frequency of maintenance					5 years
Cheyenne Pipeline LLC
Other Ownership Interests [Line Items]
Goodwill impairment						$ 11,000
Osage
Other Ownership Interests [Line Items]
Equity method investment, ownership percentage			50.00%		50.00%
Cheyenne Pipeline LLC
Other Ownership Interests [Line Items]
Equity method investment, ownership percentage			50.00%		50.00%
Cushing Connect Pipeline & Terminal LLC
Other Ownership Interests [Line Items]
Equity method investment, ownership percentage			50.00%		50.00%
Saddle Butte Pipeline III, LLC
Other Ownership Interests [Line Items]
Equity method investment, ownership percentage	25.06%		25.06%		25.06%
Pioneer Investments Corp.
Other Ownership Interests [Line Items]
Equity method investment, ownership percentage	49.995%		49.995%		49.995%
UNEV Pipeline, LLC
Other Ownership Interests [Line Items]
Remaining ownership interest acquired	0.25
Sinclair Merger
Other Ownership Interests [Line Items]
Units issued in transaction (in shares) | shares	21,000,000
Value of shares issued in transaction	$ 349,020
Transaction cash considerations transferred	321,366
Aggregate consideration paid in transaction	$ 670,386
Size of pipeline | mi	1,200
Number of product terminals | terminal	8
Number of crude terminals | terminal	2
Terminal storage (in barrels) | bbl	4.5
Sinclair Merger | Sinclair HoldCo
Other Ownership Interests [Line Items]
Units issued in transaction (in shares) | shares	21,000,000
Percentage of pro forma equity representing shares issued in transaction	0.166
Value of shares issued in transaction	$ 349,000
Transaction cash considerations transferred	321,400
Aggregate consideration paid in transaction	$ 670,400
Shares held in escrow (in shares) | shares	5,290,000
HF Sinclair
Other Ownership Interests [Line Items]
Percentage of ownership in variable interest entity					47.00%
HF Sinclair | Sinclair Merger | Sinclair HoldCo
Other Ownership Interests [Line Items]
Units issued in transaction (in shares) | shares	60,230,036
Percentage of pro forma equity representing shares issued in transaction	0.270
Value of shares issued in transaction	$ 2,149,000

XML

Sinclair Acquisition - Narrative (Details) $ in Thousands, bbl in Millions		3 Months Ended	4 Months Ended	6 Months Ended
	Mar. 14, 2022 USD ($) terminal nomination mi shares bbl	Jun. 30, 2022 USD ($)	Jun. 30, 2022 USD ($)	Jun. 30, 2022 USD ($)	Dec. 31, 2021 USD ($)
Business Acquisition [Line Items]
Goodwill		$ 314,418	$ 314,418	$ 314,418	$ 223,650
Saddle Butte Pipeline III, LLC
Business Acquisition [Line Items]
Equity method investment, ownership percentage	25.06%	25.06%	25.06%	25.06%
Pioneer Investments Corp.
Business Acquisition [Line Items]
Equity method investment, ownership percentage	49.995%	49.995%	49.995%	49.995%
UNEV Pipeline, LLC
Business Acquisition [Line Items]
Remaining ownership interest acquired	0.25
Sinclair HoldCo
Business Acquisition [Line Items]
Number of nominations to the Board of Directors | nomination	1
Sinclair Merger
Business Acquisition [Line Items]
Units issued in transaction (in shares) | shares	21,000,000
Value of shares issued in transaction	$ 349,020
Transaction cash considerations transferred	321,366
Aggregate consideration paid in transaction	$ 670,386
Size of pipeline | mi	1,200
Number of product terminals | terminal	8
Number of crude terminals | terminal	2
Barrels of crude oil, value | bbl	4.5
Goodwill	$ 90,768
Revenue from acquiree		$ 10,500	$ 12,100
Interest income from sales-type leases from acquiree		14,500	17,200
Income from operations from acquiree		$ 19,200	$ 21,800
Incremental acquisition and integration costs				$ 1,700
Sinclair Merger | Sinclair HoldCo
Business Acquisition [Line Items]
Ownership threshold of units under agreement (in shares) | shares	10,500,000
Ownership percentage threshold under agreement (in shares)	0.05
Sinclair Merger | Sinclair HoldCo
Business Acquisition [Line Items]
Units issued in transaction (in shares) | shares	21,000,000
Percentage of pro forma equity representing shares issued in transaction	0.166
Value of shares issued in transaction	$ 349,000
Transaction cash considerations transferred	321,400
Aggregate consideration paid in transaction	$ 670,400
Units issued in transaction, restricted to lock-up period (in shares) | shares	15,750,000
Sinclair Merger | Sinclair HoldCo | HF Sinclair
Business Acquisition [Line Items]
Units issued in transaction (in shares) | shares	60,230,036
Percentage of pro forma equity representing shares issued in transaction	0.270
Value of shares issued in transaction	$ 2,149,000

XML

Sinclair Acquisition - Schedule of Recognized Identified Assets Acquired and Liabilities Assumed (Details) - Sinclair Merger $ / shares in Units, $ in Thousands	Mar. 14, 2022 USD ($) $ / shares shares
Business Acquisition [Line Items]
HEP Common units issued (in shares) | shares	21,000,000
Closing price per unit (in USD per share) | $ / shares	$ 16.62
Purchase consideration paid in HEP common units	$ 349,020
Cash consideration paid by HEP	325,000
Estimated Adjusted Payments HEP	(3,634)
Total cash consideration	321,366
Total purchase consideration	$ 670,386

XML

Sinclair Acquisition - Schedule of Preliminary Purchase Consideration (Details) - USD ($) $ in Thousands	Jun. 30, 2022	Mar. 14, 2022	Dec. 31, 2021
Assets Acquired
Goodwill	$ 314,418		$ 223,650
Sinclair Merger
Assets Acquired
Accounts receivable		$ 1,910
Prepaid and other current assets		59
Properties and equipment		357,819
Operating lease right-of-use assets		105
Other assets		3,500
Goodwill		90,768
Equity method investments		229,891
Total assets acquired		684,052
Liabilities Assumed
Accounts payable		1,528
Accrued property taxes		973
Other current liabilities		789
Operating lease liabilities		33
Noncurrent operating lease liabilities		72
Other long-term liabilities		10,271
Total liabilities assumed		13,666
Net assets acquired		$ 670,386

XML

Sinclair Acquisition - Schedule of Pro Forma Information (Details) - Sinclair Merger - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Business Acquisition [Line Items]
Sales and other revenues	$ 143,279	$ 270,730	$ 286,469
Net income attributable to the partners	$ 62,739	$ 107,574	$ 133,164

XML

Investment in Joint Venture (Details) - Cushing Connect Joint Venture bbl in Thousands, $ in Millions	Oct. 02, 2019 bbl	Jun. 30, 2022 USD ($)
Schedule of Equity Method Investments [Line Items]
Pipeline volume (in barrels per day) | bbl	160
Terminal storage (in barrels) | bbl	1,500
Percent of budget which construction costs are payable by HEP		10.00%
Payment to acquire joint venture | $		$ 73
Expected construction costs, exceeding budget by more than 10% | $		$ 5

XML

Revenues - Schedule of Disaggregated Revenue (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Disaggregation of Revenue [Line Items]
Disaggregated Revenue	$ 135,770	$ 126,235	$ 255,968	$ 253,418
Pipelines
Disaggregation of Revenue [Line Items]
Disaggregated Revenue	68,319	68,322	133,099	134,827
Terminals, tanks and loading racks
Disaggregation of Revenue [Line Items]
Disaggregated Revenue	44,558	36,887	81,573	75,069
Refinery processing units
Disaggregation of Revenue [Line Items]
Disaggregated Revenue	$ 22,893	$ 21,026	$ 41,296	$ 43,522

XML

Revenues - Schedule of Affiliate and Third Party Revenues (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Revenue from External Customer [Line Items]
Lease revenues	$ 82,445	$ 86,867	$ 155,736	$ 174,803
Revenues:	135,770	126,235	255,968	253,418
Service revenues
Revenue from External Customer [Line Items]
Revenues:	$ 53,325	$ 39,368	$ 100,232	$ 78,615

XML

Revenues - Schedule of Contract Asset and Liability Balances (Details) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Revenue from Contract with Customer [Abstract]
Contract assets	$ 6,727	$ 6,637
Contract liabilities	$ (2,247)	$ (4,185)

XML

Revenues - Narrative (Details) - USD ($) $ in Millions	6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021
Revenue from Contract with Customer [Abstract]
Deferred revenue recognized. billed prior period	$ 1.9	$ 0.5
Revenue included in contract assets	0.1	$ 0.2
Performance obligation revenue	$ 1,648.0

XML

Revenues - Schedule of Future Performance Obligations (Details) $ in Millions	Jun. 30, 2022 USD ($)
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Unfulfilled performance obligation revenue	$ 1,648
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-07-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Unfulfilled performance obligation revenue	$ 182
Satisfaction period	6 months
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-01-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Unfulfilled performance obligation revenue	$ 301
Satisfaction period	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-01-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Unfulfilled performance obligation revenue	$ 266
Satisfaction period	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2025-01-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Unfulfilled performance obligation revenue	$ 185
Satisfaction period	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2026-01-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Unfulfilled performance obligation revenue	$ 170
Satisfaction period	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2027-01-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Unfulfilled performance obligation revenue	$ 137
Satisfaction period	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2028-01-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Unfulfilled performance obligation revenue	$ 407
Satisfaction period	1 year

XML

Leases - Narrative (Details) $ in Thousands	Jun. 30, 2022 USD ($) renewalOption	Dec. 31, 2021 USD ($)
Lessee, Lease, Description [Line Items]
Finance lease term	10 years
Cost of asset under finance leases	$ 6,160	$ 6,031
Accumulated depreciation of assets under finance leases	$ 4,013	$ 3,632
Number of renewal options | renewalOption	1
Finance lease extension option term	10 years
Minimum
Lessee, Lease, Description [Line Items]
Operating lease term	1 year
Minimum | Vehicles
Lessee, Lease, Description [Line Items]
Finance lease term	33 months
Maximum
Lessee, Lease, Description [Line Items]
Operating lease term	23 years
Operating lease renewal term	10 years
Maximum | Vehicles
Lessee, Lease, Description [Line Items]
Finance lease term	48 months

XML

Leases - Supplemental Balance Sheet (Details) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Operating leases:
Operating lease right-of-use assets, net	$ 2,502	$ 2,275
Current operating lease liabilities	963	620
Noncurrent operating lease liabilities	2,006	2,030
Total operating lease liabilities	2,969	2,650
Finance leases:
Properties and equipment	6,160	6,031
Accumulated amortization	(4,013)	(3,632)
Properties and equipment, net	$ 2,147	$ 2,399
Finance Lease, Right-of-Use Asset, Statement of Financial Position [Extensible Enumeration]	Properties and equipment, net	Properties and equipment, net
Current finance lease liabilities	$ 3,857	$ 3,786
Noncurrent finance lease liabilities	62,838	64,649
Total finance lease liabilities	$ 66,695	$ 68,435
Weighted average remaining lease term (in years):
Operating leases	4 years 9 months 18 days	5 years 9 months 18 days
Finance leases	14 years 7 months 6 days	15 years
Weighted average discount rate:
Operating leases	4.50%	4.80%
Finance leases	5.60%	5.60%

XML

Leases - Supplemental Cash Flow Information (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows on operating leases	$ 518	$ 576
Operating cash flows on finance leases	1,950	2,105
Financing cash flows on finance leases	$ 1,776	$ 1,747

XML

Leases - Operating and Finance Lease Maturities (Details) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Operating
2022	$ 504
2023	935
2024	524
2025	443
2026	289
2027 and thereafter	501
Total lease payments	3,196
Less: Imputed interest	(227)
Total operating lease liabilities	2,969	$ 2,650
Less: Current lease liabilities	(963)	(620)
Noncurrent operating lease liabilities	2,006	2,030
Finance
2022	3,672
2023	7,383
2024	6,938
2025	6,479
2026	6,432
2027 and thereafter	67,463
Total lease payments	98,367
Less: Imputed interest	(31,672)
Total finance lease liabilities	66,695	68,435
Less: Current lease liabilities	(3,857)	(3,786)
Noncurrent lease liabilities	$ 62,838	$ 64,649

XML

Leases - Components of Lease Expense (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Leases [Abstract]
Operating lease costs	$ 242	$ 249	$ 504	$ 547
Amortization of assets	189	200	381	412
Interest on lease liabilities	946	994	1,905	2,001
Variable lease cost	23	67	59	133
Total net lease cost	$ 1,400	$ 1,510	$ 2,849	$ 3,093

XML

Leases - Gain on Sales-Type Leases (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Leases [Abstract]
Net investment in leases	$ 235,620	$ 47,795	$ 235,620	$ 47,795
Properties and equipment, net			(235,620)	(29,677)
Deferred revenue				6,559
Gain on sales-type leases	$ 0	$ 27	$ 0	$ 24,677

XML

Leases - Schedule of Lease Income (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Leases [Abstract]
Operating lease revenues	$ 76,538	$ 84,426	$ 146,891	$ 170,698
Direct financing lease interest income	520	523	1,040	1,047
Gain on sales-type leases	0	27	0	24,677
Sales-type lease interest income	23,814	6,091	35,938	12,115
Lease revenues relating to variable lease payments not included in measurement of the sales-type lease receivable	$ 5,906	$ 2,441	$ 8,846	$ 4,105

XML

Leases - Schedule of Minimum Undiscounted Lease Payments (Details) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Operating
Remainder of 2022	$ 152,623
2023	272,169
2024	242,476
2025	166,290
2026	151,745
2027 and thereafter	473,243
Total lease receipt payments	1,458,546
Finance
Finance and Sales-type
Remainder of 2022	1,083
2023	2,175
2024	2,192
2025	2,209
2026	2,227
2027 and thereafter	36,610
Total lease receipt payments	46,496
Less: Imputed interest	(30,173)
Lease receivables	16,323
Unguaranteed residual assets at end of leases	0
Net investment in leases	16,323	$ 16,371
Sales-type
Finance and Sales-type
Remainder of 2022	50,144
2023	96,383
2024	93,154
2025	89,727
2026	89,727
2027 and thereafter	841,406
Total lease receipt payments	1,260,541
Less: Imputed interest	(1,131,594)
Lease receivables	128,947
Unguaranteed residual assets at end of leases	402,895
Net investment in leases	$ 531,842	$ 297,865

XML

Leases - Net Investments in Leases (Details) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Sales-type Leases
Lessor, Lease, Description [Line Items]
Lease receivable	$ 426,582	$ 207,768
Unguaranteed residual assets	105,260	90,097
Net investment in leases	531,842	297,865
Direct Financing Leases
Lessor, Lease, Description [Line Items]
Lease receivable	16,323	16,371
Unguaranteed residual assets	0	0
Net investment in leases	$ 16,323	$ 16,371

XML

Fair Value Measurements (Details) - USD ($) $ in Thousands	Jun. 30, 2022	Apr. 08, 2022	Dec. 31, 2021
5% Senior Notes
Debt Instrument [Line Items]
Stated interest rate, senior notes	5.00%
6.375% Senior Notes
Debt Instrument [Line Items]
Stated interest rate, senior notes	6.375%	6.375%
Carrying Value
Debt Instrument [Line Items]
Total Liabilities	$ 887,460		$ 493,049
Carrying Value | Level 2 | 5% Senior Notes
Debt Instrument [Line Items]
Total Liabilities	493,541		493,049
Carrying Value | Level 2 | 6.375% Senior Notes
Debt Instrument [Line Items]
Total Liabilities	393,919		0
Fair Value
Debt Instrument [Line Items]
Total Liabilities	808,706		502,705
Fair Value | Level 2 | 5% Senior Notes
Debt Instrument [Line Items]
Total Liabilities	430,710		502,705
Fair Value | Level 2 | 6.375% Senior Notes
Debt Instrument [Line Items]
Total Liabilities	$ 377,996		$ 0

XML

Properties and Equipment (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Dec. 31, 2021
Property, Plant and Equipment [Line Items]
Properties and equipment	$ 2,183,664		$ 2,050,065
Less accumulated depreciation	(757,172)		(721,037)
Properties and equipment, net	1,426,492		1,329,028
Depreciation expense	40,800	$ 42,700
Pipelines, terminals and tankage
Property, Plant and Equipment [Line Items]
Properties and equipment	1,611,170		1,527,697
Refinery assets
Property, Plant and Equipment [Line Items]
Properties and equipment	352,274		348,882
Land and right of way
Property, Plant and Equipment [Line Items]
Properties and equipment	124,984		98,837
Construction in progress
Property, Plant and Equipment [Line Items]
Properties and equipment	31,864		26,446
Other
Property, Plant and Equipment [Line Items]
Properties and equipment	$ 63,372		$ 48,203

XML

Intangible Assets (Details) - USD ($)	6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Dec. 31, 2021
Finite-Lived Intangible Assets, Net [Abstract]
Intangible assets, gross	$ 204,797,000		$ 204,797,000
Less accumulated amortization	(138,493,000)		(131,490,000)
Intangible assets, net	66,304,000		73,307,000
Amortization expense	7,000,000	$ 7,000,000
Estimated amortization expense for 2023	9,900,000
Estimated amortization expense for 2024	9,100,000
Estimated amortization expense for 2025	9,100,000
Estimated amortization expense for 2026	9,100,000
Estimated amortization expense for 2027	9,100,000
Basis in transportation agreements	$ 0
Delek transportation agreement
Finite-Lived Intangible Assets, Net [Abstract]
Useful Life	30 years
Intangible assets, gross	$ 59,933,000		59,933,000
HF Sinclair transportation agreement
Finite-Lived Intangible Assets, Net [Abstract]
Intangible assets, gross	$ 75,131,000		75,131,000
HF Sinclair transportation agreement | Minimum
Finite-Lived Intangible Assets, Net [Abstract]
Useful Life	10 years
HF Sinclair transportation agreement | Maximum
Finite-Lived Intangible Assets, Net [Abstract]
Useful Life	15 years
Customer relationships
Finite-Lived Intangible Assets, Net [Abstract]
Useful Life	10 years
Intangible assets, gross	$ 69,683,000		69,683,000
Other
Finite-Lived Intangible Assets, Net [Abstract]
Useful Life	20 years
Intangible assets, gross	$ 50,000		$ 50,000

XML

Employees, Retirement and Incentive Plans - Retirement and Benefit Plan Costs (Details) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2022 USD ($) plan shares	Jun. 30, 2021 USD ($)	Jun. 30, 2022 USD ($) component plan shares	Jun. 30, 2021 USD ($)
Share-based Compensation Arrangements
Retirement and benefit costs | $	$ 2.7	$ 1.9	$ 5.1	$ 4.1
Number of long-term incentive plan components | component			5
Number of incentive-based award plans | plan	2		2
Compensation costs | $	$ 0.6	$ 0.5	$ 1.2	$ 1.2
Long-term Incentive Plan
Share-based Compensation Arrangements
Units authorized to be granted (in shares) | shares	2,500,000		2,500,000
Units not yet granted (in shares) | shares	819,513		819,513

XML

Employees, Retirement and Incentive Plans - Phantom Units (Details) - Phantom Units - USD ($) $ / shares in Units, $ in Thousands	6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward]
Units outstanding at beginning of period (in shares)	203,263
Granted (in shares)	4,313	0
Vesting and transfer of full ownership to recipients (in shares)	(3,833)
Forfeited (in shares)	(18,158)
Units outstanding at end of period (in shares)	185,585
Weighted Average Grant-Date Fair Value
Units outstanding at beginning of period (in USD per share)	$ 14.85
Granted (in USD per share)	17.40
Vesting and transfer of full ownership to recipients (in USD per share)	15.54
Forfeited (in USD per share)	14.60
Units outstanding at end of period (in USD per share)	$ 14.92
Grant date fair value of units vested and transferred	$ 60	$ 2
Grant date fair value of units granted	$ 75
Units granted (in shares)	4,313	0
Unrecognized compensation related to nonvested units	$ 1,000
Weighted average recognition period	1 year
Minimum
Share-based Compensation Arrangements
Award vesting period	1 year
Maximum
Share-based Compensation Arrangements
Award vesting period	3 years

XML

Employees, Retirement and Incentive Plans - Performance Units (Details) - Performance Shares - USD ($) $ in Millions	6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021
Share-based Compensation Arrangement, Nonvested [Roll Forward]
Units outstanding at beginning of period (in shares)	76,719
Vesting and transfer of full ownership to recipients (in shares)	(13,920)
Forfeited (in shares)	(9,124)
Units outstanding at end of period (in shares)	53,675
Grant date fair value of units vested and transferred	$ 0.4	$ 0.4
Value of performance units vested and expected to vest	0.9
Unrecognized compensation related to nonvested units	$ 0.5
Weighted average recognition period	1 year 3 months 18 days
Long-term Incentive Plan
Share-based Compensation Arrangements
Performance period	3 years
Range of performance units earned, minimum	0.00%
Range of performance units earned, maximum	200.00%

XML

Debt - Credit Agreement (Details) - USD ($)	Apr. 30, 2021	Mar. 31, 2021
Debt Instrument [Line Items]
Maximum borrowing capacity under revolving credit agreement	$ 1,200,000,000	$ 1,400,000,000
Line of credit maximum accordion feature	1,700,000,000
Letter of Credit
Debt Instrument [Line Items]
Maximum borrowing capacity under revolving credit agreement	$ 50,000,000

XML

Debt - Senior Notes (Details) - USD ($)		6 Months Ended
	Apr. 08, 2022	Jun. 30, 2022	Jun. 30, 2021
Debt Instrument [Line Items]
Proceeds from issuance of debt		$ 400,000,000	$ 0
6.375% Senior Notes
Debt Instrument [Line Items]
Aggregate principal amount of senior note	$ 400,000,000
Stated interest rate, senior notes	6.375%	6.375%
Proceeds from issuance of debt	$ 393,000,000
5% Senior Notes
Debt Instrument [Line Items]
Aggregate principal amount of senior note		$ 500,000,000
Stated interest rate, senior notes		5.00%

XML

Debt - Long-Term Debt (Details) - USD ($) $ in Thousands	Jun. 30, 2022	Apr. 08, 2022	Dec. 31, 2021
Debt Instrument [Line Items]
Amount outstanding	$ 721,000		$ 840,000
Total long-term debt	1,608,460		1,333,049
5% Senior Notes
Debt Instrument [Line Items]
Principal	500,000		500,000
Unamortized premium and debt issuance costs	(6,459)		(6,951)
Senior Notes	$ 493,541		493,049
Stated interest rate, senior notes	5.00%
6.375% Senior Notes
Debt Instrument [Line Items]
Principal	$ 400,000		0
Unamortized premium and debt issuance costs	(6,081)		0
Senior Notes	$ 393,919		$ 0
Stated interest rate, senior notes	6.375%	6.375%

XML

Related Party Transactions (Details)		3 Months Ended		6 Months Ended
	Jan. 01, 2021 USD ($) renewalOption	Jun. 30, 2022 USD ($)	Jun. 30, 2021 USD ($)	Jun. 30, 2022 USD ($)	Jun. 30, 2021 USD ($)	Jul. 01, 2022 USD ($)	Dec. 31, 2021 USD ($)
Related Party Transaction [Line Items]
Revenues:		$ 135,770,000	$ 126,235,000	$ 255,968,000	$ 253,418,000
Accounts receivables due		58,969,000		58,969,000			$ 56,154,000
Accounts payable due		12,696,000		12,696,000			11,703,000
Lease income		500,000	500,000	1,000,000	1,000,000
Gain on sales-type leases		0	27,000	0	24,677,000
Sales-type lease payments received		24,400,000	6,300,000	37,000,000	12,500,000
Lease term	10 years
Lease renewal period options | renewalOption	2
Lease renewal option period	5 years
Annual lease payment due	$ 5,000,000
Service fee arrangement period	5 years
Payment due for termination of commitment	$ 10,000,000
HF Sinclair
Related Party Transaction [Line Items]
Revenues:		110,500,000	99,100,000	202,800,000	201,100,000
Reimbursements for expense and capital projects		4,200,000	1,200,000	8,600,000	4,300,000
Distributions on common units		20,900,000	20,900,000	41,700,000	41,700,000
Accounts receivables due		59,000,000		59,000,000			56,200,000
Accounts payable due		12,700,000		12,700,000			11,700,000
Deferred revenue		2,200,000		2,200,000			$ 4,100,000
HF Sinclair | Subsequent Event
Related Party Transaction [Line Items]
Minimum annualized payments received						$ 445,900,000
HF Sinclair | Annual Administrative Fee
Related Party Transaction [Line Items]
Administrative fee				5,000,000
HF Sinclair | Monthly Transition Services Fee
Related Party Transaction [Line Items]
Administrative fee				62,500
HF Sinclair | General And Administrative Service s
Related Party Transaction [Line Items]
Administrative fee		1,300,000	700,000	2,000,000	1,300,000
HF Sinclair | Prorated Temporary Administrative Fee
Related Party Transaction [Line Items]
Administrative fee				200,000
HF Sinclair | Reimbursements Paid
Related Party Transaction [Line Items]
Expense of employees supporting operations		$ 19,900,000	$ 14,300,000	$ 36,100,000	$ 28,700,000
HF Sinclair | Revenue Benchmark | Revenue from Rights Concentration Risk
Related Party Transaction [Line Items]
Percentage of total revenue		81.00%		79.00%

XML

Partners' Equity Income Allocations and Cash Distributions (Details) - USD ($) $ / shares in Units, $ in Millions		3 Months Ended		6 Months Ended
	Jul. 21, 2022	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Class of Stock [Line Items]
Partners' capital units held by controlling interest (in shares)		59,630,030		59,630,030
Ownership percentage, controlling interest		47.00%		47.00%
Value of common units available to issue and sell under offering program				$ 200.0
Units issued under offering program (in shares)				2,413,153
Proceeds from common unit issuance program				$ 82.3
Cash distributions		$ 44.3	$ 37.0	$ 88.7	$ 74.1
Subsequent Event
Class of Stock [Line Items]
Cash distribution declared (in USD per share)	$ 0.35

XML

Net Income Per Limited Partner Unit (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Net Income per Limited Partner Unit [Abstract]
Net income attributable to the partners	$ 56,792	$ 55,745	$ 106,351	$ 120,142
Less: Participating securities’ share in earnings	(107)	(190)	(222)	(411)
Net income attributable to common units	$ 56,685	$ 55,555	$ 106,129	$ 119,731
Weighted average limited partners’ units outstanding, basic (in shares)	126,440	105,440	118,087	105,440
Weighted average limited partners’ units outstanding, diluted (in shares)	126,440	105,440	118,087	105,440
Limited partners’ per unit interest in earnings— basic (in USD per share)	$ 0.45	$ 0.53	$ 0.90	$ 1.14
Limited partners’ per unit interest in earnings— diluted (in USD per share)	$ 0.45	$ 0.53	$ 0.90	$ 1.14

XML

Environmental (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021	Mar. 14, 2022	Dec. 31, 2021
Loss Contingencies [Line Items]
Environmental remediation expense	$ 0.2	$ 0.5	$ 0.2	$ 0.5
Accrued environmental liabilities	13.6		13.6			$ 3.9
Affiliates
Loss Contingencies [Line Items]
Accrued environmental liabilities	0.2		0.2			0.3
Sinclair Merger
Loss Contingencies [Line Items]
Accrued environmental liabilities assumed in transaction					$ 10.0
Other Noncurrent Liabilities
Loss Contingencies [Line Items]
Accrued environmental liabilities	$ 11.6		$ 11.6			$ 2.4

XML

Segments Information (Details) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022 USD ($)	Jun. 30, 2021 USD ($)	Jun. 30, 2022 USD ($) segment	Jun. 30, 2021 USD ($)	Dec. 31, 2021 USD ($)
Segment Reporting Information [Line Items]
Number of reportable segments | segment			2
Revenues:	$ 135,770	$ 126,235	$ 255,968	$ 253,418
Operating income	50,215	56,317	101,289	103,068
Unallocated general and administrative expenses	(4,682)	(2,847)	(8,994)	(5,815)
Interest expense	(20,347)	(13,938)	(33,986)	(27,178)
Interest income	24,331	6,614	36,978	13,162
Equity in earnings of equity method investments	5,447	3,423	9,073	5,186
Gain on sales-type leases	0	27	0	24,677
Gain (loss) on sale of assets and other	45	5,415	146	5,917
Income before income taxes	59,691	57,858	113,500	124,832
Capital Expenditures:	9,100	26,157	23,246	59,375
Identifiable assets:	2,775,038		2,775,038		$ 2,165,867
Goodwill impairment	0	0	0	11,034
Goodwill	314,418		314,418		223,650
Affiliates
Segment Reporting Information [Line Items]
Revenues:	110,537	99,142	202,791	201,068
Third parties
Segment Reporting Information [Line Items]
Revenues:	25,233	27,093	53,177	52,350
Pipelines and terminals
Segment Reporting Information [Line Items]
Capital Expenditures:	7,397	25,559	17,817	58,777
Refinery processing units
Segment Reporting Information [Line Items]
Revenues:	22,893	21,026	41,296	43,522
Capital Expenditures:	1,703	598	5,429	598
Operating Segments
Segment Reporting Information [Line Items]
Revenues:	135,770	126,235	255,968	253,418
Operating income	54,897	59,164	110,283	108,883
Operating Segments | Pipelines and terminals
Segment Reporting Information [Line Items]
Operating income	48,673	49,391	98,477	90,875
Identifiable assets:	2,157,472		2,157,472		1,737,388
Operating Segments | Pipelines and terminals | Affiliates
Segment Reporting Information [Line Items]
Revenues:	87,644	78,116	161,495	157,546
Operating Segments | Pipelines and terminals | Third parties
Segment Reporting Information [Line Items]
Revenues:	25,233	27,093	53,177	52,350
Operating Segments | Refinery processing units
Segment Reporting Information [Line Items]
Revenues:	22,893	21,026	41,296	43,522
Operating income	6,224	$ 9,773	11,806	$ 18,008
Identifiable assets:	312,931		312,931		294,452
Other
Segment Reporting Information [Line Items]
Identifiable assets:	$ 304,635		$ 304,635		$ 134,027

XML

Supplemental Guarantor / Non-Guarantor Financial Information - Narrative (Details)	Mar. 14, 2022
UNEV Pipeline, LLC
Other Ownership Interests [Line Items]
Ownership interest percentage	1

XML

Supplemental Guarantor / Non-Guarantor Financial Information - Condensed Consolidating Balance Sheet (Details) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Current assets:
Cash and cash equivalents	$ 14,884	$ 14,381
Accounts receivable	72,552	68,899
Prepaid and other current assets	11,969	11,033
Total current assets	99,405	94,313
Properties and equipment, net	1,426,492	1,329,028
Operating lease right-of-use assets, net	2,502	2,275
Net investment in leases (Cushing Connect VIEs: $100,866 and $100,042, respectively)	542,281	309,303
Investment in subsidiaries	0	0
Intangible assets, net	66,304	73,307
Goodwill	314,418	223,650
Equity method investments	280,472	116,378
Deferred turnaround costs	25,813	2,632
Other assets	17,351	14,981
Total assets	2,775,038	2,165,867
Current liabilities:
Accounts payable	37,800	40,280
Accrued interest	17,963	11,258
Deferred revenue	13,770	14,585
Accrued property taxes	7,145	4,542
Current operating lease liabilities	963	620
Current finance lease liabilities	3,857	3,786
Other current liabilities	2,648	1,781
Total current liabilities	84,146	76,852
Long-term debt	1,608,460	1,333,049
Noncurrent operating lease liabilities	2,006	2,030
Noncurrent finance lease liabilities	62,838	64,649
Other long-term liabilities	23,072	12,527
Deferred revenue	28,865	29,662
Class B unit	58,461	56,549
Equity - partners	837,785	443,017
Equity - noncontrolling interests	69,405	147,532
Total liabilities and equity	2,775,038	2,165,867
Eliminations
Current assets:
Cash and cash equivalents	0	0
Accounts receivable	(1,209)	(2,702)
Prepaid and other current assets	(329)	(304)
Total current assets	(1,538)	(3,006)
Properties and equipment, net	0	0
Operating lease right-of-use assets, net	0	0
Net investment in leases (Cushing Connect VIEs: $100,866 and $100,042, respectively)	(100,867)	(100,030)
Investment in subsidiaries	(2,531,207)	(1,855,461)
Intangible assets, net	0	0
Goodwill	0	0
Equity method investments	0	0
Deferred turnaround costs	0	0
Other assets	0	0
Total assets	(2,633,612)	(1,958,497)
Current liabilities:
Accounts payable	(1,209)	(2,702)
Accrued interest	0	0
Deferred revenue	0	0
Accrued property taxes	0	0
Current operating lease liabilities	0	0
Current finance lease liabilities	(2,005)	(1,780)
Other current liabilities	0	0
Total current liabilities	(3,214)	(4,482)
Long-term debt	0	0
Noncurrent operating lease liabilities	0	0
Noncurrent finance lease liabilities	(89,911)	(91,453)
Other long-term liabilities	0	0
Deferred revenue	0	0
Class B unit	0	0
Equity - partners	(2,540,487)	(1,862,562)
Equity - noncontrolling interests	0	0
Total liabilities and equity	(2,633,612)	(1,958,497)
Parent | Reportable Legal Entities
Current assets:
Cash and cash equivalents	4,879	1,273
Accounts receivable	0	0
Prepaid and other current assets	322	353
Total current assets	5,201	1,626
Properties and equipment, net	0	0
Operating lease right-of-use assets, net	0	0
Net investment in leases (Cushing Connect VIEs: $100,866 and $100,042, respectively)	0	0
Investment in subsidiaries	2,461,802	1,785,024
Intangible assets, net	0	0
Goodwill	0	0
Equity method investments	0	0
Deferred turnaround costs	0	0
Other assets	6,830	8,118
Total assets	2,473,833	1,794,768
Current liabilities:
Accounts payable	0	0
Accrued interest	17,963	11,258
Deferred revenue	0	0
Accrued property taxes	0	0
Current operating lease liabilities	0	0
Current finance lease liabilities	0	0
Other current liabilities	79	3
Total current liabilities	18,042	11,261
Long-term debt	1,608,460	1,333,049
Noncurrent operating lease liabilities	0	0
Noncurrent finance lease liabilities	0	0
Other long-term liabilities	266	340
Deferred revenue	0	0
Class B unit	0	0
Equity - partners	847,065	450,118
Equity - noncontrolling interests	0	0
Total liabilities and equity	2,473,833	1,794,768
Guarantor Restricted Subsidiaries | Reportable Legal Entities
Current assets:
Cash and cash equivalents	5,409	4,227
Accounts receivable	72,418	68,768
Prepaid and other current assets	11,647	10,680
Total current assets	89,474	83,675
Properties and equipment, net	1,426,492	1,329,028
Operating lease right-of-use assets, net	2,502	2,275
Net investment in leases (Cushing Connect VIEs: $100,866 and $100,042, respectively)	542,281	309,301
Investment in subsidiaries	69,405	70,437
Intangible assets, net	66,304	73,307
Goodwill	314,418	223,650
Equity method investments	244,517	78,873
Deferred turnaround costs	25,813	2,632
Other assets	10,521	6,863
Total assets	2,791,727	2,180,041
Current liabilities:
Accounts payable	35,448	34,566
Accrued interest	0	0
Deferred revenue	13,770	14,585
Accrued property taxes	7,145	4,542
Current operating lease liabilities	963	620
Current finance lease liabilities	5,862	5,566
Other current liabilities	1,850	1,513
Total current liabilities	65,038	61,392
Long-term debt	0	0
Noncurrent operating lease liabilities	2,006	2,030
Noncurrent finance lease liabilities	152,749	156,102
Other long-term liabilities	22,806	12,187
Deferred revenue	28,865	29,662
Class B unit	58,461	56,549
Equity - partners	2,461,802	1,785,024
Equity - noncontrolling interests	0	77,095
Total liabilities and equity	2,791,727	2,180,041
Non-Guarantor Non-Restricted Subsidiaries | Reportable Legal Entities
Current assets:
Cash and cash equivalents	4,596	8,881
Accounts receivable	1,343	2,833
Prepaid and other current assets	329	304
Total current assets	6,268	12,018
Properties and equipment, net	0	0
Operating lease right-of-use assets, net	0	0
Net investment in leases (Cushing Connect VIEs: $100,866 and $100,042, respectively)	100,867	100,032
Investment in subsidiaries	0	0
Intangible assets, net	0	0
Goodwill	0	0
Equity method investments	35,955	37,505
Deferred turnaround costs	0	0
Other assets	0	0
Total assets	143,090	149,555
Current liabilities:
Accounts payable	3,561	8,416
Accrued interest	0	0
Deferred revenue	0	0
Accrued property taxes	0	0
Current operating lease liabilities	0	0
Current finance lease liabilities	0	0
Other current liabilities	719	265
Total current liabilities	4,280	8,681
Long-term debt	0	0
Noncurrent operating lease liabilities	0	0
Noncurrent finance lease liabilities	0	0
Other long-term liabilities	0	0
Deferred revenue	0	0
Class B unit	0	0
Equity - partners	69,405	70,437
Equity - noncontrolling interests	69,405	70,437
Total liabilities and equity	$ 143,090	$ 149,555

XML

Supplemental Guarantor / Non-Guarantor Financial Information - Condensed Consolidating Statement Of Income (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Revenues:
Revenues:	$ 135,770	$ 126,235	$ 255,968	$ 253,418
Operating costs and expenses:
Operations (exclusive of depreciation and amortization)	53,899	42,068	96,524	83,433
Depreciation and amortization	26,974	25,003	49,161	50,068
General and administrative	4,682	2,847	8,994	5,815
Goodwill impairment	0	0	0	11,034
Total operating costs and expenses	85,555	69,918	154,679	150,350
Operating income	50,215	56,317	101,289	103,068
Equity in earnings of subsidiaries	0	0	0	0
Equity in earnings of equity method investments	5,447	3,423	9,073	5,186
Interest expense	(20,347)	(13,938)	(33,986)	(27,178)
Interest income	24,331	6,614	36,978	13,162
Gain on sales-type leases	0	27	0	24,677
Gain on sale of assets and other	45	5,415	146	5,917
Total other income (expense)	9,476	1,541	12,211	21,764
Income before income taxes	59,691	57,858	113,500	124,832
State income tax expense	(14)	(27)	(45)	(64)
Net income	59,677	57,831	113,455	124,768
Allocation of net income attributable to noncontrolling interests	(2,885)	(2,086)	(7,104)	(4,626)
Net income attributable to the partners	56,792	55,745	106,351	120,142
Reportable Legal Entities | Parent
Revenues:
Revenues:	0	0	0	0
Operating costs and expenses:
Operations (exclusive of depreciation and amortization)	0	0	0	0
Depreciation and amortization	0	0	0	0
General and administrative	912	907	2,000	2,085
Goodwill impairment				0
Total operating costs and expenses	912	907	2,000	2,085
Operating income	(912)	(907)	(2,000)	(2,085)
Equity in earnings of subsidiaries	77,104	69,596	140,431	147,405
Equity in earnings of equity method investments	0		0	0
Interest expense	(19,400)	(12,944)	(32,080)	(25,178)
Interest income	0		0	0
Gain on sales-type leases		0		0
Gain on sale of assets and other	0	0	0	0
Total other income (expense)	57,704	56,652	108,351	122,227
Income before income taxes	56,792	55,745	106,351	120,142
State income tax expense	0	0	0	0
Net income	56,792	55,745	106,351	120,142
Allocation of net income attributable to noncontrolling interests	0	0	0	0
Net income attributable to the partners	56,792	55,745	106,351	120,142
Reportable Legal Entities | Guarantor Restricted Subsidiaries
Revenues:
Revenues:	135,770	126,235	255,968	253,418
Operating costs and expenses:
Operations (exclusive of depreciation and amortization)	52,823	41,411	94,757	82,434
Depreciation and amortization	26,974	25,003	49,161	50,068
General and administrative	3,770	1,940	6,994	3,730
Goodwill impairment				11,034
Total operating costs and expenses	83,567	68,354	150,912	147,266
Operating income	52,203	57,881	105,056	106,152
Equity in earnings of subsidiaries	1,927	(14)	4,098	388
Equity in earnings of equity method investments	4,641	2,793	7,361	3,411
Interest expense	(5,071)	(994)	(10,157)	(2,000)
Interest income	24,331	6,614	36,978	13,162
Gain on sales-type leases		27		24,677
Gain on sale of assets and other	45	5,415	146	5,917
Total other income (expense)	25,873	13,841	38,426	45,555
Income before income taxes	78,076	71,722	143,482	151,707
State income tax expense	(14)	(27)	(45)	(64)
Net income	78,062	71,695	143,437	151,643
Allocation of net income attributable to noncontrolling interests	(958)	(2,099)	(3,006)	(4,238)
Net income attributable to the partners	77,104	69,596	140,431	147,405
Reportable Legal Entities | Non-Guarantor Non-Restricted Subsidiaries
Revenues:
Revenues:	0	0	0	0
Operating costs and expenses:
Operations (exclusive of depreciation and amortization)	1,076	657	1,767	999
Depreciation and amortization	0	0	0	0
General and administrative	0	0	0	0
Goodwill impairment				0
Total operating costs and expenses	1,076	657	1,767	999
Operating income	(1,076)	(657)	(1,767)	(999)
Equity in earnings of subsidiaries	0	0	0	0
Equity in earnings of equity method investments	806	630	1,712	1,775
Interest expense	0	0	0	0
Interest income	4,124	0	8,251	0
Gain on sales-type leases		0		0
Gain on sale of assets and other	0	0	0	0
Total other income (expense)	4,930	630	9,963	1,775
Income before income taxes	3,854	(27)	8,196	776
State income tax expense	0	0	0	0
Net income	3,854	(27)	8,196	776
Allocation of net income attributable to noncontrolling interests	(1,927)	13	(4,098)	(388)
Net income attributable to the partners	1,927	(14)	4,098	388
Eliminations
Revenues:
Revenues:	0	0	0	0
Operating costs and expenses:
Operations (exclusive of depreciation and amortization)	0	0	0	0
Depreciation and amortization	0	0	0	0
General and administrative	0	0	0	0
Goodwill impairment				0
Total operating costs and expenses	0	0	0	0
Operating income	0	0	0	0
Equity in earnings of subsidiaries	(79,031)	(69,582)	(144,529)	(147,793)
Equity in earnings of equity method investments	0	0	0	0
Interest expense	4,124	0	8,251	0
Interest income	(4,124)	0	(8,251)	0
Gain on sales-type leases		0		0
Gain on sale of assets and other	0	0	0	0
Total other income (expense)	(79,031)	(69,582)	(144,529)	(147,793)
Income before income taxes	(79,031)	(69,582)	(144,529)	(147,793)
State income tax expense	0	0	0	0
Net income	(79,031)	(69,582)	(144,529)	(147,793)
Allocation of net income attributable to noncontrolling interests	0	0	0	0
Net income attributable to the partners	(79,031)	(69,582)	(144,529)	(147,793)
Affiliates
Revenues:
Revenues:	110,537	99,142	202,791	201,068
Affiliates | Reportable Legal Entities | Parent
Revenues:
Revenues:	0	0	0	0
Affiliates | Reportable Legal Entities | Guarantor Restricted Subsidiaries
Revenues:
Revenues:	110,537	99,142	202,791	201,068
Affiliates | Reportable Legal Entities | Non-Guarantor Non-Restricted Subsidiaries
Revenues:
Revenues:	0	0	0	0
Affiliates | Eliminations
Revenues:
Revenues:	0	0	0	0
Third parties
Revenues:
Revenues:	25,233	27,093	53,177	52,350
Third parties | Reportable Legal Entities | Parent
Revenues:
Revenues:	0	0	0	0
Third parties | Reportable Legal Entities | Guarantor Restricted Subsidiaries
Revenues:
Revenues:	25,233	27,093	53,177	52,350
Third parties | Reportable Legal Entities | Non-Guarantor Non-Restricted Subsidiaries
Revenues:
Revenues:	0	0	0	0
Third parties | Eliminations
Revenues:
Revenues:	$ 0	$ 0	$ 0	$ 0