Holly Energy Partners, L.P. Reports First Quarter Results
Holly Energy Partners, L.P. (HEP) reported a first quarter 2022 net income of $49.6 million, down from $64.4 million in Q1 2021. This translates to $0.45 per unit, a decline from $0.61 per unit a year prior. Distributable cash flow fell by 12% to $64.5 million. The company declared a quarterly distribution of $0.35 per unit. HEP successfully closed the acquisition of Sinclair Transportation for $670.4 million, expected to boost future earnings due to newly contracted long-term minimum volume commitments. Revenues declined by $7 million year-over-year, totaling $120.2 million.
- Acquisition of Sinclair Transportation completed for $670.4 million, enhancing asset portfolio.
- Long-term minimum volume commitments secured for acquired assets, expected to support future earnings.
- Crude pipeline revenues increased due to successful operations post-acquisition.
- Net income declined from $64.4 million in Q1 2021 to $49.6 million in Q1 2022.
- Distributable cash flow decreased by 12%, impacting cash distributions.
- Overall revenues dropped by $7 million compared to Q1 2021.
-
Reported net income attributable to HEP of
or$49.6 million per unit$0.45
-
Announced quarterly distribution of
per unit$0.35
-
Reported EBITDA of
and Adjusted EBITDA of$72.8 million $85.3 million
-
Closed the acquisition of
Sinclair Transportation Company LLC
Results for the first quarter of 2021 reflect special items that collectively increased net income attributable to HEP by a total of
Distributable cash flow was
As previously announced, we completed our acquisition of
Commenting on our 2022 first quarter results,
“As we look forward, we believe HEP is positioned for significant earnings growth due to the quality and geographic location of our assets, our talented employee base, and our financially strong and supportive general partner, HF Sinclair.”
First Quarter 2022 Revenue Highlights
Revenues for the first quarter of 2022 were
-
Revenues from our refined product pipelines were
, a decrease of$26.1 million compared to the first quarter of 2021. Shipments averaged 156.2 thousand barrels per day ("mbpd") compared to 164.0 mbpd for the first quarter of 2021. The volume and revenue decreases were mainly due to lower volumes on pipelines servicing HF Sinclair's$2.3 million Navajo refinery , partially offset by higher volumes and revenues on our UNEV pipeline and our newly acquired Sinclair Transportation product pipelines.
-
Revenues from our intermediate pipelines were
, consistent with the first quarter of 2021. Shipments averaged 117.8 mbpd for the first quarter of 2022 compared to 115.2 mbpd for the first quarter of 2021. The increase in volumes was mainly due to higher throughputs on our intermediate pipelines servicing HF Sinclair's$7.5 million Tulsa refinery while revenue remained constant mainly due to contractual minimum volume guarantees.
-
Revenues from our crude pipelines were
, an increase of$31.2 million compared to the first quarter of 2021. Shipments averaged 527.2 mbpd compared to 373.9 mbpd for the first quarter of 2021. The increase in volumes was mainly attributable to our Cushing Connect pipeline, which went into service in$0.6 million September 2021 , as well as volumes on our newly acquired Sinclair Transportation crude pipelines. The increase in revenues was mainly due to our crude pipeline systems inWyoming andUtah , including the Sinclair Transportation crude pipelines. Revenues did not increase in proportion to volumes due to recognizing 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
, a decrease of$37.0 million compared to the first quarter of 2021. Refined products and crude oil terminalled in the facilities averaged 494.4 mbpd compared to 369.0 mbpd for the first quarter of 2021. The increase in volumes was mainly the result of higher throughputs at HF Sinclair's$1.2 million Tulsa refinery . Revenues decreased mainly because the first quarter of 2021 included the recognition of of the$6.5 million termination fee related to the termination of HF Sinclair's minimum volume commitment on our$10 million Cheyenne assets as a result of the conversion of theHF Sinclair Cheyenne refinery to renewable diesel production, partially offset by revenues on our newly acquired Sinclair Transportation terminal assets and higher revenues at ourTulsa andEl Dorado tank farms.
-
Revenues from refinery processing units were
, a decrease of$18.4 million compared to the first quarter of 2021, and throughputs averaged 65.2 mbpd compared to 60.7 mbpd for the first quarter of 2021. The increase in volumes was mainly due to increased throughput at our$4.1 million El Dorado refinery processing units, partially offset by lower throughput at ourWoods Cross refinery processing units, which were down for a scheduled turnaround inMarch 2022 . Revenues decreased mainly due to the turnaround atWoods Cross , partially offset by higher natural gas recoveries in revenues. Revenues did not increase in proportion to the increase in volumes mainly due to contractual minimum volume guarantees.
Operating Costs and Expenses Highlights
Operating costs and expenses were
Interest Expense and Interest Income Highlights
Interest expense was
Interest income for the three months ended
We have scheduled a conference call today at
https://events.q4inc.com/attendee/607702822
An audio archive of this webcast will be available using the above noted link through
About
HF Sinclair Corporation, headquartered in
This press release contains various “forward-looking statements” within the meaning of the federal securities laws. These forward-looking statements are identified as any statement that does not relate strictly to historical or current facts. When used in this press release, words such as “anticipate,” “project,” “expect,” “plan,” “goal,” “forecast,” “strategy,” “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 forward-looking 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, including those contained in our filings with the
-
HF Sinclair’s and the Partnership’s ability to successfully integrate the
Sinclair Oil Corporation and Sinclair Transportation businesses acquired fromREH Company (formerly known asThe Sinclair Companies , referred to herein as “Sinclair”) (collectively, the “Sinclair Transactions”), with its existing operations and fully realize the expected synergies of the Sinclair Transactions 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 or lower gross margins due to the economic impact of the COVID-19 pandemic, 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;
- 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;
- 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
SEC filings.
The forward-looking statements speak only as of the date made and, other than as required by law, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
RESULTS OF OPERATIONS (Unaudited)
Income, Distributable Cash Flow and Volumes
The following tables present income, distributable cash flow and volume information for the three months ended |
|||||||||||
|
Three Months Ended |
|
Change from |
||||||||
|
2022 |
|
2021 |
|
2021 |
||||||
|
(In thousands, except per unit data) |
||||||||||
Revenues |
|
|
|
|
|
||||||
Pipelines: |
|
|
|
|
|
||||||
Affiliates – refined product pipelines |
$ |
16,860 |
|
|
$ |
18,606 |
|
|
$ |
(1,746 |
) |
Affiliates – intermediate pipelines |
|
7,506 |
|
|
|
7,506 |
|
|
|
— |
|
Affiliates – crude pipelines |
|
18,277 |
|
|
|
19,454 |
|
|
|
(1,177 |
) |
|
|
42,643 |
|
|
|
45,566 |
|
|
|
(2,923 |
) |
Third parties – refined product pipelines |
|
9,260 |
|
|
|
9,863 |
|
|
|
(603 |
) |
Third parties – crude pipelines |
|
12,877 |
|
|
|
11,076 |
|
|
|
1,801 |
|
|
|
64,780 |
|
|
|
66,505 |
|
|
|
(1,725 |
) |
Terminals, tanks and loading racks: |
|
|
|
|
|
||||||
Affiliates |
|
31,208 |
|
|
|
33,864 |
|
|
|
(2,656 |
) |
Third parties |
|
5,807 |
|
|
|
4,318 |
|
|
|
1,489 |
|
|
|
37,015 |
|
|
|
38,182 |
|
|
|
(1,167 |
) |
|
|
|
|
|
|
||||||
Refinery processing units - Affiliates |
|
18,403 |
|
|
|
22,496 |
|
|
|
(4,093 |
) |
|
|
|
|
|
|
||||||
Total revenues |
|
120,198 |
|
|
|
127,183 |
|
|
|
(6,985 |
) |
Operating costs and expenses |
|
|
|
|
|
||||||
Operations |
|
42,625 |
|
|
|
41,365 |
|
|
|
1,260 |
|
Depreciation and amortization |
|
22,187 |
|
|
|
25,065 |
|
|
|
(2,878 |
) |
General and administrative |
|
4,312 |
|
|
|
2,968 |
|
|
|
1,344 |
|
|
|
— |
|
|
|
11,034 |
|
|
|
(11,034 |
) |
|
|
69,124 |
|
|
|
80,432 |
|
|
|
(11,308 |
) |
Operating income |
|
51,074 |
|
|
|
46,751 |
|
|
|
4,323 |
|
|
|
|
|
|
|
||||||
Equity in earnings of equity method investments |
|
3,626 |
|
|
|
1,763 |
|
|
|
1,863 |
|
Interest expense, including amortization |
|
(13,639 |
) |
|
|
(13,240 |
) |
|
|
(399 |
) |
Interest income |
|
12,647 |
|
|
|
6,548 |
|
|
|
6,099 |
|
Gain on sales-type leases
|
|
— |
|
|
|
24,650 |
|
|
|
(24,650 |
) |
Gain on sale of assets and other |
|
101 |
|
|
|
502 |
|
|
|
(401 |
) |
|
|
2,735 |
|
|
|
20,223 |
|
|
|
(17,488 |
) |
Income before income taxes |
|
53,809 |
|
|
|
66,974 |
|
|
|
(13,165 |
) |
State income tax benefit (expense) |
|
(31 |
) |
|
|
(37 |
) |
|
|
6 |
|
Net income |
|
53,778 |
|
|
|
66,937 |
|
|
|
(13,159 |
) |
Allocation of net income attributable to noncontrolling interests |
|
(4,219 |
) |
|
|
(2,540 |
) |
|
|
(1,679 |
) |
Net income attributable to |
$ |
49,559 |
|
|
$ |
64,397 |
|
|
$ |
(14,838 |
) |
Limited partners’ earnings per unit – basic and diluted |
$ |
0.45 |
|
|
$ |
0.61 |
|
|
$ |
(0.16 |
) |
Weighted average limited partners’ units outstanding |
|
109,640 |
|
|
|
105,440 |
|
|
|
4,200 |
|
EBITDA(1) |
$ |
72,769 |
|
|
$ |
96,191 |
|
|
$ |
(23,422 |
) |
Adjusted EBITDA(1) |
$ |
85,338 |
|
|
$ |
87,936 |
|
|
$ |
(2,598 |
) |
Distributable cash flow(2) |
$ |
64,455 |
|
|
$ |
73,218 |
|
|
$ |
(8,763 |
) |
Volumes (bpd) |
|
|
|
|
|
|
Pipelines: |
|
|
|
|
|
|
Affiliates – refined product pipelines |
107,210 |
|
119,590 |
|
(12,380 |
) |
Affiliates – intermediate pipelines |
117,802 |
|
115,225 |
|
2,577 |
|
Affiliates – crude pipelines |
396,040 |
|
250,647 |
|
145,393 |
|
|
621,052 |
|
485,462 |
|
135,590 |
|
Third parties – refined product pipelines |
49,029 |
|
44,428 |
|
4,601 |
|
Third parties – crude pipelines |
131,126 |
|
123,232 |
|
7,894 |
|
|
801,207 |
|
653,122 |
|
148,085 |
|
Terminals and loading racks: |
|
|
|
|
|
|
Affiliates |
446,032 |
|
323,286 |
|
122,746 |
|
Third parties |
48,354 |
|
45,753 |
|
2,601 |
|
|
494,386 |
|
369,039 |
|
125,347 |
|
|
|
|
|
|
|
|
Refinery processing units - Affiliates |
65,227 |
|
60,699 |
|
4,528 |
|
|
|
|
|
|
|
|
Total for pipelines and terminal assets (bpd) |
1,360,820 |
|
1,082,860 |
|
277,960 |
|
(1) |
Earnings before interest, taxes, depreciation and amortization (“EBITDA”) is calculated as net income attributable to |
Set forth below is our calculation of EBITDA and Adjusted EBITDA.
|
Three Months Ended |
||||||
|
2022 |
|
2021 |
||||
|
(In thousands) |
||||||
Net income attributable to |
$ |
49,559 |
|
|
$ |
64,397 |
|
Add (subtract): |
|
|
|
||||
Interest expense |
|
13,639 |
|
|
|
13,240 |
|
Interest income |
|
(12,647 |
) |
|
|
(6,548 |
) |
State income tax (benefit) expense |
|
31 |
|
|
|
37 |
|
Depreciation and amortization |
|
22,187 |
|
|
|
25,065 |
|
EBITDA |
|
72,769 |
|
|
|
96,191 |
|
Gain on sales-type leases |
|
— |
|
|
|
(24,650 |
) |
|
|
— |
|
|
|
11,034 |
|
Acquisition integration and regulatory costs |
|
836 |
|
|
|
— |
|
Tariffs and fees not included in revenues |
|
13,339 |
|
|
|
6,967 |
|
Lease payments not included in operating costs |
|
(1,606 |
) |
|
|
(1,606 |
) |
Adjusted EBITDA |
$ |
85,338 |
|
|
$ |
87,936 |
|
(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 exception of maintenance capital expenditures. Distributable cash flow should not be considered in isolation or as an alternative to net income attributable to |
Set forth below is our calculation of distributable cash flow.
|
Three Months Ended |
||||||
|
2022 |
|
2021 |
||||
|
(In thousands) |
||||||
Net income attributable to |
$ |
49,559 |
|
|
$ |
64,397 |
|
Add (subtract): |
|
|
|
||||
Depreciation and amortization |
|
22,187 |
|
|
|
25,065 |
|
Amortization of discount and deferred debt charges |
|
770 |
|
|
|
844 |
|
Customer billings greater than net income recognized |
|
497 |
|
|
|
4,336 |
|
Maintenance capital expenditures(3) |
|
(5,620 |
) |
|
|
(1,372 |
) |
Increase (decrease) in environmental liability |
|
(120 |
) |
|
|
(156 |
) |
Decrease in reimbursable deferred revenue |
|
(3,234 |
) |
|
|
(4,014 |
) |
Gain on sales-type leases |
|
— |
|
|
|
(24,650 |
) |
|
|
— |
|
|
|
11,034 |
|
Other |
|
416 |
|
|
|
(2,266 |
) |
Distributable cash flow |
$ |
64,455 |
|
|
$ |
73,218 |
|
(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. |
Set forth below is certain balance sheet data.
|
|
|
|
||
|
2022 |
|
2021 |
||
|
(In thousands) |
||||
Balance Sheet Data |
|
|
|
||
Cash and cash equivalents |
$ |
15,016 |
|
$ |
14,381 |
Working capital |
$ |
8,866 |
|
$ |
17,461 |
Total assets |
$ |
2,777,276 |
|
$ |
2,165,867 |
Long-term debt |
$ |
1,634,367 |
|
$ |
1,333,049 |
Partners' equity |
$ |
821,609 |
|
$ |
443,017 |
View source version on businesswire.com: https://www.businesswire.com/news/home/20220509005157/en/
Chief Financial Officer and Treasurer
214-954-6511
Source:
FAQ
What were Holly Energy Partners' Q1 2022 financial results?
What is the quarterly distribution declared by HEP for Q1 2022?
What was the revenue for HEP in Q1 2022?
How did the acquisition of Sinclair Transportation impact HEP?