Holly Energy Partners, L.P. Reports First Quarter Results
Holly Energy Partners (HEP) reported a first quarter 2021 net income of $64.4 million ($0.61 per unit), significantly up from $24.9 million ($0.24 per unit) in Q1 2020. The results were boosted by special items totaling $13.6 million. Revenues for the quarter reached $127.2 million, a slight decline from the previous year, attributed to a 9% drop in pipeline volumes. Distributable cash flow increased by 3.5% to $73.2 million. Operating expenses rose to $80.4 million, primarily due to a goodwill impairment. The Partnership declared a distribution of $0.35 per unit on April 22, 2021.
- Net income increased by 158% year-over-year, from $24.9 million to $64.4 million.
- Distributable cash flow rose by $2.5 million, or 3.5%, compared to Q1 2020.
- Quarterly cash distribution of $0.35 per unit declared.
- Revenues decreased by $0.7 million, primarily due to a 9% reduction in overall pipeline volumes.
- Operating costs increased by $18.8 million from Q1 2020, mainly due to a goodwill impairment charge.
Holly Energy Partners, L.P. (“HEP” or the “Partnership”) (NYSE: HEP) today reported financial results for the first quarter of 2021. Net income attributable to HEP for the first quarter was
The first quarter results reflect special items that collectively increased net income attributable to HEP by a total of
Distributable cash flow was
Commenting on our 2021 first quarter results, Michael Jennings, Chief Executive Officer, stated, "HEP delivered solid results for the quarter, underpinned by our long-term minimum volume commitment contracts across our asset base. During the quarter, refined product volumes improved and we are optimistic for continued improvement of refined product demand in our markets as we head into the summer driving season. Looking forward, we believe we are well positioned to continue reducing leverage after capital investments and distributions."
Impact of COVID-19 on Our Business
Our business depends in large part on the demand for the various petroleum products we transport, terminal and store in the markets we serve. The impact of the COVID-19 pandemic on the global macroeconomy has created diminished demand, as well as lack of forward visibility, for refined products and crude oil transportation, and for the terminalling and storage services that we provide. Over the course of the last three quarters, demand for transportation fuels showed incremental improvement over the second quarter of 2020. We expect our customers will continue to adjust refinery production levels commensurate with market demand and ultimately expect demand to return to pre-COVID-19 levels. For additional details of the impact of COVID-19 on our business, please see our Form 10-Q for the quarter ended March 31, 2021.
First Quarter 2021 Revenue Highlights
Revenues for the first quarter were
-
Revenues from our refined product pipelines were
$28.5 million , a decrease of$6.4 million compared to the first quarter of 2020. Shipments averaged 164.0 thousand barrels per day ("mbpd") compared to 179.6 mbpd for the first quarter of 2020. The volume and revenue decreases were mainly due to lower volumes on pipelines servicing HFC's Navajo refinery, Delek's Big Spring refinery and our UNEV pipeline. Revenue also decreased due to a reclassification of certain pipeline income from revenue to interest income under sales-type lease accounting.
-
Revenues from our intermediate pipelines were
$7.5 million , consistent with the first quarter of 2020. Shipments averaged 115.2 mbpd for the first quarter of 2021 compared to 142.1 mbpd for the first quarter of 2020. The decrease in volumes was mainly due to lower throughputs on our intermediate pipelines servicing HFC's Navajo refinery while revenue remained relatively constant mainly due to contractual minimum volume guarantees.
-
Revenues from our crude pipelines were
$30.5 million , an increase of$2.4 million compared to the first quarter of 2020, and shipments averaged 373.9 mbpd compared to 397.2 mbpd for the first quarter of 2020. The revenue increase was mainly attributable to higher volumes on our crude pipeline systems in Wyoming and Utah. Those volume increases were more than offset by decreased volumes on our crude pipeline systems in New Mexico and Texas. Revenues did not decrease in proportion to the decrease in volumes mainly due to contractual minimum volume guarantees.
-
Revenues from terminal, tankage and loading rack fees were
$38.2 million , an increase of$0.7 million compared to the first quarter of 2020. Refined products and crude oil terminalled in the facilities averaged 369.0 mbpd compared to 475.7 mbpd for the first quarter of 2020. The volume decrease was mainly the result of lower throughputs at HFC's Tulsa refinery as well as the cessation of petroleum refinery operations at HFC's Cheyenne refinery. Revenues did not decrease in proportion to the decrease in volumes mainly due to the recognition of$6.5 million of the$10 million termination fee related to the termination of HFC's existing minimum volume commitment on our Cheyenne assets and contractual minimum volume guarantees partially offset by lower on-going revenues on our Cheyenne assets as a result of the conversion of the HFC Cheyenne refinery to renewable diesel production.
-
Revenues from refinery processing units were
$22.5 million , an increase of$2.6 million compared to the first quarter of 2020, and throughputs averaged 60.7 mbpd compared to 69.8 mbpd for the first quarter of 2020. The decrease in volumes was mainly due to reduced throughput for both our Woods Cross and El Dorado processing units largely as a result of extreme weather while revenue increased due to higher recovery of natural gas costs.
Operating Costs and Expenses Highlights
Operating costs and expenses were
Interest expense was
We have scheduled a webcast conference call today at 4:00 PM Eastern Time to discuss financial results. This webcast may be accessed at:
https://event.on24.com/wcc/r/3079844/D06584BC4076CF9EE6D14C88ED60E588
An audio archive of this webcast will be available using the above noted link through May 18, 2021.
About Holly Energy Partners, L.P.
Holly Energy Partners, L.P., headquartered in Dallas, Texas, provides petroleum product and crude oil transportation, terminalling, storage and throughput services to the petroleum industry, including HollyFrontier Corporation ("HollyFrontier" or "HFC") subsidiaries. The Partnership, through its subsidiaries and joint ventures, owns and/or operates petroleum product and crude pipelines, tankage and terminals in Texas, New Mexico, Washington, Idaho, Oklahoma, Utah, Nevada, Wyoming and Kansas, as well as refinery processing units in Utah and Kansas.
HollyFrontier Corporation, headquartered in Dallas, Texas, is an independent petroleum refiner and marketer that produces high value light products such as gasoline, diesel fuel, jet fuel and other specialty products. HollyFrontier owns and operates refineries located in Kansas, Oklahoma, New Mexico and Utah and markets its refined products principally in the Southwest U.S., the Rocky Mountains extending into the Pacific Northwest and in other neighboring Plains states. In addition, HollyFrontier produces base oils and other specialized lubricants in the U.S., Canada and the Netherlands, and exports products to more than 80 countries. HollyFrontier also owns a
The statements in this press release relating to matters that are not historical facts are “forward-looking statements” within the meaning of the federal securities laws. Forward-looking statements use words such as “anticipate,” “project,” “expect,” “plan,” “goal,” “forecast,” “intend,” “should,” “would,” “could,” “believe,” “may,” and similar expressions and statements regarding our plans and objectives for future operations 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. Our forward-looking statements are subject to a variety of risks, uncertainties and assumptions. 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 any assurances that our expectations will prove to be correct. Therefore, actual outcomes and results could materially differ from what is expressed, implied or forecast in these statements. Any differences could be caused by a number of factors including, but not limited to:
- the extraordinary market environment and effects of the COVID-19 pandemic, including a significant decline in demand for refined petroleum products in markets we serve;
- 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 HollyFrontier, 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;
- 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 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 March 31, 2021 and 2020.
|
Three Months Ended March 31, |
|
Change from |
|||||||||||
|
2021 |
|
2020 |
|
2020 |
|||||||||
|
(In thousands, except per unit data) |
|||||||||||||
Revenues |
|
|
|
|
|
|||||||||
Pipelines: |
|
|
|
|
|
|||||||||
Affiliates – refined product pipelines |
$ |
18,606 |
|
|
|
$ |
20,083 |
|
|
|
$ |
(1,477 |
) |
|
Affiliates – intermediate pipelines |
7,506 |
|
|
|
7,474 |
|
|
|
32 |
|
|
|||
Affiliates – crude pipelines |
19,454 |
|
|
|
20,393 |
|
|
|
(939 |
) |
|
|||
|
45,566 |
|
|
|
47,950 |
|
|
|
(2,384 |
) |
|
|||
Third parties – refined product pipelines |
9,863 |
|
|
|
14,798 |
|
|
|
(4,935 |
) |
|
|||
Third parties – crude pipelines |
11,076 |
|
|
|
7,724 |
|
|
|
3,352 |
|
|
|||
|
66,505 |
|
|
|
70,472 |
|
|
|
(3,967 |
) |
|
|||
Terminals, tanks and loading racks: |
|
|
|
|
|
|||||||||
Affiliates |
33,864 |
|
|
|
33,594 |
|
|
|
270 |
|
|
|||
Third parties |
4,318 |
|
|
|
3,904 |
|
|
|
414 |
|
|
|||
|
38,182 |
|
|
|
37,498 |
|
|
|
684 |
|
|
|||
|
|
|
|
|
|
|||||||||
Refinery processing units - Affiliates |
22,496 |
|
|
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FAQ
What were the financial results of HEP for the first quarter of 2021?
HEP reported a net income of $64.4 million, up from $24.9 million in Q1 2020.
How much was the distributable cash flow for HEP in Q1 2021?
The distributable cash flow for Q1 2021 was $73.2 million, an increase of 3.5% from the previous year.
What was the impact of special items on HEP's net income in Q1 2021?
Special items increased HEP’s net income by $13.6 million in Q1 2021.
Did HEP declare a distribution in April 2021?
Yes, HEP declared a distribution of $0.35 per unit on April 22, 2021.
What factors contributed to HEP's revenue decline in Q1 2021?
The revenue decline was mainly due to a 9% reduction in pipeline volumes.
Holly Energy Partners, L.P.
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