- Reported net income attributable to HEP of $68.5 million or
$0.54 per unit
- Announced quarterly distribution of $0.35 per unit
- Reported EBITDA of $88.6 million and Adjusted EBITDA of $115.7
million
Holly Energy Partners, L.P. (“HEP” or the “Partnership”) (NYSE:
HEP) today reported financial results for the fourth quarter of
2022. Net income attributable to HEP for the fourth quarter was
$68.5 million ($0.54 per basic and diluted limited partner unit)
compared to $45.6 million ($0.43 per basic and diluted limited
partner unit) for the fourth quarter of 2021.
Distributable cash flow was $85.8 million for the fourth quarter
of 2022, an increase of $22.7 million, or 36.1%, compared to the
fourth quarter of 2021. HEP declared a quarterly cash distribution
of $0.35 on January 20, 2023.
The increase in net income attributable to HEP was mainly due to
net income from Sinclair Transportation Company LLC ("Sinclair
Transportation"), which was acquired on March 14, 2022, and
pipeline revenues, partially offset by higher interest expense.
Commenting on our 2022 fourth quarter results, Michael Jennings,
Chief Executive Officer and President, stated, "HEP delivered
another excellent quarter, supported by record volumes across our
integrated system. We continue to generate stable earnings and cash
flow, and expect to achieve our leverage target of 3.5 times in
mid-2023. Once that is reached, we look forward to evaluating
incremental cash return to unitholders consistent with our
previously announced capital allocation strategy."
Fourth Quarter 2022 Revenue Highlights
Revenues for the fourth quarter of 2022 were $142.5 million, an
increase of $24.0 million compared to the fourth quarter of 2021.
The increase was mainly due to revenues on our recently acquired
Sinclair Transportation assets, higher volumes on our crude and
product pipelines, and rate increases that went into effect on July
1, 2022.
- Revenues from our refined product pipelines were $30.4
million, an increase of $7.7 million, on shipments averaging 184.4
thousand barrels per day ("mbpd") compared to 135.2 mbpd for the
fourth quarter of 2021. The revenue and volume increases were
mainly due to volumes on our recently acquired Sinclair
Transportation product pipelines, higher volumes on our Navajo and
Woods Cross product pipelines, and rate increases that went into
effect on July 1, 2022. Revenues did not increase in proportion to
volumes due to our recognition of 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 $8.4
million, an increase of $0.8 million on shipments averaging 137.4
mbpd compared to 105.5 mbpd for the fourth quarter of 2021. The
increase in volumes was mainly due to higher throughputs on our
intermediate pipelines servicing HF Sinclair Corporation's ("HF
Sinclair") Navajo refinery and the recently acquired Sinclair
Transportation intermediate pipelines, and revenues increased
mainly due to rate increases that went into effect on July 1, 2022
as well as revenues on the recently acquired Sinclair
Transportation intermediate pipelines.
- Revenues from our crude pipelines were $36.5 million, an
increase of $5.8 million, on shipments averaging 622.2 mbpd
compared to 455.0 mbpd for the fourth quarter of 2021. The increase
in volumes and revenues was mainly attributable to our recently
acquired Sinclair Transportation crude pipelines, our Cushing
Connect pipeline, higher volumes on our crude pipeline systems in
New Mexico, Texas, Wyoming and Utah as well as rate increases that
went into effect on July 1, 2022. Revenues did not increase in
proportion to volumes due to our recognition of most of the Cushing
Connect pipeline tariffs and a significant portion of the Sinclair
Transportation crude pipeline tariffs as interest income under
sales-type lease accounting.
- Revenues from terminal, tankage and loading rack fees
were $41.8 million, an increase of $7.9 million compared to the
fourth quarter of 2021. Refined products and crude oil terminalled
in the facilities averaged 666.6 mbpd compared to 460.4 mbpd for
the fourth quarter of 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, higher butane blending revenues, higher
revenues on our Tulsa assets, and rate increases that went into
effect on July 1, 2022.
- Revenues from refinery processing units were $25.5
million, an increase of $1.8 million compared to the fourth quarter
of 2021, and throughputs averaged 71.2 mbpd compared to 68.8 mbpd
for the fourth quarter of 2021. The increase in volumes was mainly
due to increased throughput for our Woods Cross processing units.
Revenues increased mainly due to higher throughput at our Woods
Cross refinery processing units as well as rate increases that went
into effect on July 1, 2022.
Year Ended December 31, 2022 Revenue Highlights
Revenues for the year ended December 31, 2022, were $547.5
million, an increase of $53.0 million compared to the year ended
December 31, 2021. The increase was mainly attributable to revenues
on our recently acquired Sinclair Transportation assets, increased
revenues from our UNEV assets, higher volumes on our crude
pipelines in New Mexico, Texas, Wyoming and Utah as well as rate
increases that went into effect on July 1, 2022, 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. The year ended December 31, 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 $113.2
million, an increase of $5.8 million, on shipments averaging 181.3
mbpd compared to 158.1 mbpd for the year ended December 31, 2021.
The volume and revenue increases were mainly due to higher 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 $32.2
million, an increase of $2.1 million compared to the year ended
December 31, 2021. Shipments averaged 129.3 mbpd compared to 125.2
mbpd for the year ended December 31, 2021. The increase in volumes
was mainly due to higher throughputs on our intermediate pipelines
servicing HF Sinclair's Tulsa and Navajo refineries and the
recently acquired Sinclair Transportation intermediate pipelines,
and the increase in revenues was mainly due to the recently
acquired Sinclair Transportation intermediate pipelines.
- Revenues from our crude pipelines were $140.0 million,
an increase of $14.4 million compared to the year ended December
31, 2021. Shipments averaged 601.3 mbpd compared to 408.6 mbpd for
the year ended December 31, 2021. The increase in volumes was
mainly attributable to our Cushing Connect pipeline, which went
into service in September 2021, volumes on our recently acquired
Sinclair Transportation crude pipelines and higher volumes on our
crude pipeline systems in New Mexico, Texas, Wyoming and Utah. The
increase in revenues was mainly due to our recently acquired
Sinclair Transportation crude pipelines and higher volumes on our
crude pipelines in New Mexico, Texas, Wyoming and Utah. Revenues
did not increase in proportion to volumes due to our recognition of
most of the Cushing Connect pipeline tariffs and a significant
portion of the Sinclair Transportation crude pipeline tariffs as
interest income under sales-type lease accounting.
- Revenues from terminal, tankage and loading rack fees
were $167.8 million, an increase of $25.5 million compared to the
year ended December 31, 2021. Refined products and crude oil
terminalled in the facilities averaged 598.2 mbpd compared to 442.9
mbpd for the year ended December 31, 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, higher butane blending revenues and
higher revenues on our Tulsa assets. In addition, the year ended
December 31, 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 as a result of the
conversion of the HF Sinclair Cheyenne refinery to renewable diesel
production.
- Revenues from refinery processing units were $94.2
million, an increase of $5.1 million compared to the year ended
December 31, 2021. Throughputs averaged 70.2 mbpd compared to 69.6
mbpd for the year ended December 31, 2021. The increase in volumes
was mainly due to increased throughput for our Woods Cross
processing units. Revenues increased mainly due to higher recovery
of natural gas costs as well as higher throughputs.
Operating Costs and Expenses Highlights
Operating costs and expenses were $82.6 million and $326.7
million for the three months and year ended December 31, 2022,
respectively, representing an increase of $13.4 million and $38.7
million from the three months and year ended December 31, 2021,
respectively. The increase for the three months ended December 31,
2022 was mainly due to operating costs and expenses associated with
our recently acquired Sinclair Transportation assets, higher
employee costs and higher utility costs, partially offset by lower
maintenance and property tax costs. The increase for the year ended
December 31, 2022 was mainly due to operating costs and expenses
associated with our recently acquired Sinclair Transportation
assets and higher employee costs, utility costs, natural gas costs,
and maintenance costs, partially offset by lower general services
costs and a goodwill impairment charge recognized in the year ended
December 31, 2021.
Interest Expense and Interest Income Highlights
Interest expense was $25.6 million and $82.6 million for the
three months and year ended December 31, 2022, respectively,
representing increases of $12.4 million and $28.7 million over the
same periods of 2021. The increases were mainly due to our April
2022 issuance of $400 million aggregate principal amount of 6.375%
senior unsecured notes maturing in April 2027, the proceeds of
which were used to partially repay outstanding borrowings under our
senior secured credit facility following the funding of the cash
portion of the Sinclair Transportation acquisition. In addition,
market interest rates increased on our senior secured revolving
credit facility.
Interest income for the three months and year ended December 31,
2022, totaled $30.2 million and $91.4 million, representing
increases of $20.3 million and $61.5 million compared to the three
months and year ended December 31, 2021. The increases were mainly
due to higher sales-type lease interest income from our recently
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.
Equity in Earnings of Equity Method Investments
Highlights
Equity in earnings of equity method investments was a gain of
$7.0 million for the three months ended December 31, 2022 and a
loss of $0.3 million for the year ended December 31, 2022,
representing an increase of $3.4 million and a decrease of $12.7
million compared to the three months and year ended December 31,
2021. The increase for the three months ended December 31, 2022 was
mainly due to the addition of equity in earnings from Pioneer
Investments Corp., which was acquired as part of our Sinclair
Transportation acquisition.
The decrease for the year ended December 31, 2022 was mainly due
to lower earnings from our equity method investment in Osage Pipe
Line Company, LLC ("Osage") due to HEP's 50% share of incurred and
estimated environmental remediation and recovery expenses, net of
insurance proceeds received to date, of $17.6 million associated
with a release of crude oil that occurred in the third quarter of
2022. Any additional insurance recoveries will be recorded as they
are received. If our insurance policy pays out in full, our share
of the remaining insurance coverage is expected to be $9.5 million.
The pipeline resumed operations in the third quarter of 2022 and
remediation efforts are underway. The decrease in equity in
earnings from Osage was partially offset by the addition of equity
in earnings from Pioneer Investments Corp., which was acquired as
part of our Sinclair Transportation acquisition.
We have scheduled a webcast conference call today at 8:30 AM
Eastern Time to discuss financial results. This webcast may be
accessed at:
https://events.q4inc.com/attendee/250565072
An audio archive of this webcast will be available using the
above noted link through March 10, 2023.
About Holly Energy Partners, L.P.
Holly Energy Partners, L.P. (“HEP” or the “Partnership”),
headquartered in Dallas, Texas, provides petroleum product and
crude oil transportation, terminalling, storage and throughput
services to the petroleum industry, including subsidiaries of HF
Sinclair Corporation. The Partnership, 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 Kansas and
Utah.
HF Sinclair Corporation (“HF Sinclair”), headquartered in
Dallas, Texas, is an independent energy company that produces and
markets high value light products such as gasoline, diesel fuel,
jet fuel, renewable diesel and other specialty products. HF
Sinclair owns and operates refineries located in Kansas, Oklahoma,
New Mexico, Washington, Wyoming 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. HF Sinclair supplies high-quality fuels to more than
1,500 branded stations and licenses the use of the Sinclair brand
at more than 300 additional locations throughout the country. In
addition, subsidiaries of HF Sinclair produce and market base oils
and other specialized lubricants in the U.S., Canada and the
Netherlands, and exports products to more than 80 countries.
Through its subsidiaries, HF Sinclair produces renewable diesel at
two of its facilities in Wyoming and also at its facility in
Artesia, New Mexico. HF Sinclair also owns a 47% limited partner
interest and a non-economic general partner interest in HEP.
The statements in this press release contain various
"forward-looking statements" within the meaning of the federal
securities laws, including statements about our expectations for
future operating results, our expected leverage ratio, and our
capital allocation strategy. 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,” “will,” “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 Securities and Exchange
Commission (the “SEC”). 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:
- 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 operations and integrate the operations
we have acquired or may acquire, including the recently acquired
Sinclair Transportation business;
- 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
reductions in demand, accidents, unexpected leaks or spills,
unscheduled shutdowns, infection in the workforce, 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
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, or the failure to have adequate
insurance coverage for or receive insurance recoveries 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;
- the possibility of terrorist or cyberattacks and the
consequences of any such attacks;
- uncertainty regarding the effects and duration of global
hostilities, including the Russia-Ukraine war, 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 economic slowdowns
caused by a local or national recession or other adverse economic
condition, such as periods of increased or prolonged
inflation;
- 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 and the years ended
December 31, 2022 and 2021.
Three Months Ended December
31,
Change from
2022
2021
2021
(In thousands, except per unit
data)
Revenues
Pipelines:
Affiliates – refined product pipelines
$
22,843
$
12,831
$
10,012
Affiliates – intermediate pipelines
8,358
7,537
821
Affiliates – crude pipelines
21,609
19,527
2,082
52,810
39,895
12,915
Third parties – refined product
pipelines
7,541
9,876
(2,335
)
Third parties – crude pipelines
14,855
11,159
3,696
75,206
60,930
14,276
Terminals, tanks and loading racks:
Affiliates
34,312
29,080
5,232
Third parties
7,494
4,801
2,693
41,806
33,881
7,925
Affiliates - refinery processing units
25,498
23,682
1,816
Total revenues
142,510
118,493
24,017
Operating costs and expenses
Operations
53,629
44,298
9,331
Depreciation and amortization
24,695
21,906
2,789
General and administrative
4,258
2,973
1,285
82,582
69,177
13,405
Operating income
59,928
49,316
10,612
Equity in earnings of equity method
investments
7,001
3,557
3,444
Interest expense, including
amortization
(25,607
)
(13,223
)
(12,384
)
Interest income
30,193
9,928
20,265
Gain on sale of assets and other
27
185
(158
)
11,614
447
11,167
Income before income taxes
71,542
49,763
21,779
State income tax benefit (expense)
(28
)
28
(56
)
Net income
71,514
49,791
21,723
Allocation of net income attributable to
noncontrolling interests
(3,032
)
(4,147
)
1,115
Net income attributable to Holly Energy
Partners
$
68,482
$
45,644
$
22,838
Limited partners’ earnings per unit –
basic and diluted
$
0.54
$
0.43
$
0.11
Weighted average limited partners’
units outstanding
126,440
105,440
21,000
EBITDA(1)
$
88,619
$
70,817
$
17,802
Adjusted EBITDA(1)
$
115,659
$
79,737
$
35,922
Distributable cash flow(2)
$
85,846
$
63,097
$
22,749
Volumes (bpd)
Pipelines:
Affiliates – refined product pipelines
157,236
81,272
75,964
Affiliates – intermediate pipelines
137,440
105,499
31,941
Affiliates – crude pipelines
445,391
334,103
111,288
740,067
520,874
219,193
Third parties – refined product
pipelines
27,178
53,958
(26,780
)
Third parties – crude pipelines
176,765
120,902
55,863
944,010
695,734
248,276
Terminals and loading racks:
Affiliates
636,398
407,261
229,137
Third parties
30,164
53,091
(22,927
)
666,562
460,352
206,210
Affiliates – refinery processing units
71,168
68,810
2,358
Total for pipelines, terminals and
refinery processing unit assets (bpd)
1,681,740
1,224,896
456,844
Years Ended December
31,
Change from
2022
2021
2021
(In thousands, except per unit
data)
Revenues
Pipelines:
Affiliates – refined product pipelines
$
84,535
$
69,351
$
15,184
Affiliates – intermediate pipelines
32,192
30,101
2,091
Affiliates – crude pipelines
84,026
77,768
6,258
200,753
177,220
23,533
Third parties – refined product
pipelines
28,709
38,064
(9,355
)
Third parties – crude pipelines
55,989
47,826
8,163
285,451
263,110
22,341
Terminals, tanks and loading racks:
Affiliates
143,310
124,511
18,799
Third parties
24,502
17,756
6,746
167,812
142,267
25,545
Affiliates - refinery processing units
94,217
89,118
5,099
Total revenues
547,480
494,495
52,985
Operating costs and expenses
Operations
210,623
170,524
40,099
Depreciation and amortization
99,092
93,800
5,292
General and administrative
17,003
12,637
4,366
Goodwill impairment
—
11,034
(11,034
)
326,718
287,995
38,723
Operating income
220,762
206,500
14,262
Equity in earnings of equity method
investments
(260
)
12,432
(12,692
)
Interest expense, including
amortization
(82,560
)
(53,818
)
(28,742
)
Interest income
91,406
29,925
61,481
Gain on sales-type leases
—
24,677
(24,677
)
Gain on sale of assets and other
668
6,179
(5,511
)
9,254
19,395
(10,141
)
Income before income taxes
230,016
225,895
4,121
State income tax expense
(111
)
(32
)
(79
)
Net income
229,905
225,863
4,042
Allocation of net income attributable to
noncontrolling interests
(13,122
)
(10,917
)
(2,205
)
Net income attributable to Holly Energy
Partners
$
216,783
$
214,946
$
1,837
Limited partners’ earnings per
unit—basic and diluted
$
1.77
$
2.03
$
(0.26
)
Weighted average limited partners’
units outstanding
122,298
105,440
16,858
EBITDA(1)
$
307,140
$
332,671
$
(25,531
)
Adjusted EBITDA(1)
$
415,332
$
339,203
$
76,129
Distributable cash flow(2)
$
307,489
$
269,805
$
37,684
Volumes (bpd)
Pipelines:
Affiliates – refined product pipelines
143,303
108,767
34,536
Affiliates – intermediate pipelines
129,295
125,225
4,070
Affiliates – crude pipelines
456,797
279,514
177,283
729,395
513,506
215,889
Third parties – refined product
pipelines
38,000
49,356
(11,356
)
Third parties – crude pipelines
144,478
129,084
15,394
911,873
691,946
219,927
Terminals and loading racks:
Affiliates
560,038
391,698
168,340
Third parties
38,211
51,184
(12,973
)
598,249
442,882
155,367
Affiliates – refinery processing units
70,222
69,628
594
Total for pipelines, terminals and
refinery processing unit assets (bpd)
1,580,344
1,204,456
375,888
(1)
Earnings before interest, taxes, depreciation and amortization
(“EBITDA”) is calculated as net income attributable to Holly Energy
Partners plus or minus (i) interest expense, (ii) interest income,
(iii) state income tax (benefit) expense and (iv) depreciation and
amortization. Adjusted EBITDA is calculated as EBITDA plus or minus
(i) gain on sales-type leases, (ii) gain on significant asset
sales, (iii) goodwill impairment, (iv) our share of Osage
environmental remediation costs, net of insurance recoveries,
included in equity in earnings of equity method investments, (v)
acquisition integration and regulatory costs, (vi) tariffs and fees
not included in revenues due to impacts from lease accounting for
certain tariffs and fees and (vii) pipeline lease payments not
included in operating costs and expenses. Portions of our minimum
guaranteed 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.
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 Holly Energy Partners 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 is our calculation of
EBITDA and Adjusted EBITDA.
Three Months Ended
Years Ended
December 31,
December 31,
2022
2021
2022
2021
(In thousands)
Net income attributable to Holly Energy
Partners
$
68,482
$
45,644
$
216,783
$
214,946
Add (subtract):
Interest expense
25,607
13,223
82,560
53,818
Interest income
(30,193
)
(9,928
)
(91,406
)
(29,925
)
State income tax (benefit) expense
28
(28
)
111
32
Depreciation and amortization
24,695
21,906
99,092
93,800
EBITDA
$
88,619
$
70,817
$
307,140
$
332,671
Gain on sales-type leases
—
—
—
(24,677
)
Gain on significant asset sales
—
—
—
(5,263
)
Goodwill impairment
—
—
—
11,034
Share of Osage environmental remediation
costs, net of insurance recoveries
(2,703
)
—
17,594
—
Acquisition integration and regulatory
costs
336
—
2,431
—
Tariffs and fees not included in
revenues
31,013
10,526
94,592
31,863
Lease payments not included in operating
costs
(1,606
)
(1,606
)
(6,425
)
(6,425
)
Adjusted EBITDA
115,659
79,737
415,332
339,203
(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 Holly Energy Partners
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 our
performance units. We believe that this measure provides investors
an enhanced perspective of the operating performance of our assets
and the cash our business is generating.
Set forth below is our calculation of
distributable cash flow.
Three Months Ended
Years Ended
December 31,
December 31,
2022
2021
2022
2021
(In thousands)
Net income attributable to Holly Energy
Partners
$
68,482
$
45,644
$
216,783
$
214,946
Add (subtract):
Depreciation and amortization
24,695
21,906
99,092
93,800
Amortization of discount and deferred debt
charges
1,066
765
3,929
3,757
Customer billings greater (less) than net
income recognized
1,133
3,656
1,167
3,355
Maintenance capital expenditures(3)
(4,721
)
(6,459
)
(19,982
)
(15,293
)
Increase (decrease) in environmental
liability
255
(697
)
5,375
(661
)
Share of Osage insurance coverage
(3,000
)
—
9,500
—
Decrease in reimbursable deferred
revenue
(3,700
)
(2,987
)
(13,828
)
(13,494
)
Gain on sales-type lease
—
—
—
(24,677
)
Gain on significant asset sales
—
—
—
(5,263
)
Goodwill impairment
—
—
—
11,034
Other
1,636
1,269
5,453
2,301
Distributable cash flow
$
85,846
$
63,097
$
307,489
$
269,805
(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.
December 31,
2022
2021
(In thousands)
Balance Sheet Data
Cash and cash equivalents
$
10,917
$
14,381
Working capital
$
17,293
$
17,461
Total assets
$
2,747,502
$
2,165,867
Long-term debt
$
1,556,334
$
1,333,049
Partners' equity
$
857,126
$
443,017
Our leverage ratio is calculated as total debt outstanding
divided by Adjusted EBITDA.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230224005037/en/
John Harrison, Senior Vice President, Chief Financial Officer
and Treasurer Craig Biery, Vice President, Investor Relations Holly
Energy Partners, L.P. 214-954-6511
Holly Energy Partners (NYSE:HEP)
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