Holly Energy Partners, L.P. Reports Fourth Quarter Earnings DALLAS,
Feb. 1 /PRNewswire-FirstCall/ -- Holly Energy Partners, L.P.
(NYSE:HEP) today reported fourth quarter net income of $6.5 million
($0.46 per basic and diluted limited partners unit). For the period
from July 13, 2004, inception of operations, to December 31, 2004,
net income was $11.4 million ($0.80 per basic and diluted limited
partners unit). The Partnership commenced operations July 13, 2004
upon successful completion of its initial public offering and the
concurrent contribution of certain assets from its predecessor
entity. Results of operations for the year ended December 31, 2004
include the results of operations of Navajo Pipeline Co., L.P., the
predecessor to Holly Energy Partners, L.P. up to July 12, 2004, at
which time Holly Energy Partners, L.P. commenced operations.
Historically, Holly Corporation (NYSE:HOC), our general partner and
majority owner, did not record intra- company revenues on most of
the operations of the predecessor until January 1, 2004, nor did
Holly Corporation allocate general and administrative costs to the
predecessor entity. In addition, the results of operations of the
predecessor entity include results of operations from certain crude
oil and intermediate product pipelines that were not contributed to
Holly Energy Partners, L.P. As a result, operating results and
volumes are not comparable on a period-to-period basis. Revenues of
$16.0 million from the combined operations of the assets
contributed to the Partnership for the three months ended December
31, 2004 were $7.6 million higher than the $8.4 million in the
comparable period of 2003, primarily as a result of the
commencement of recording of revenues on intra-company
transactions. During the quarter ended December 31, 2003, revenues
from assets not contributed to the Partnership were $1.1 million.
Refined product shipments on the Partnership's pipeline system,
excluding barrels moved pursuant to a capacity lease agreement,
averaged 90.0 thousand barrels-per-day ("mbpd") for the three
months ended December 31, 2004 as compared to 60.7 mbpd for the
comparable period ended December 31, 2003. Volumes shipped by Holly
Corporation and its affiliates increased 28.7 mbpd as a result of
the 15.0 mbpd expansion of their Navajo refinery that came on line
in January 2004 combined with reduced production volumes in the
fourth quarter of 2003 at the Navajo refinery due to 30 days of
downtime for scheduled maintenance, while volumes shipped on the
Rio Grande Pipeline increased approximately 0.5 mbpd. Refined
products terminalled in Partnership facilities for the comparable
quarters rose to 136.3 mbpd in the 2004 fourth quarter from 115.2
mbpd in the 2003 fourth quarter. Net income increased to $6.5
million for the three months ended December 31, 2004, an increase
of $5.1 from $1.5 million for the three months ended December 31,
2003, again primarily as a result of the change in recording
intra-company revenues. Revenues of $59.9 million from the combined
operations of the assets contributed to the Partnership for the
year ended December 31, 2004 were $34.0 million higher than the
$25.9 million in the comparable period of 2003, primarily as a
result of commencement of recording of revenues on intra- company
transactions effective January 1, 2004. During the year ended
December 31, 2004, revenues from assets not contributed to the
Partnership increased to $7.9 million from $4.9 million largely as
a result of recording revenues on intermediate product pipelines,
which are currently owned by Holly Corporation. Refined product
shipments on the Partnership's pipeline system, excluding barrels
moved pursuant to a capacity lease agreement, averaged 82.7 mbpd
for the year ended December 31, 2004 as compared to 60.7 mbpd for
the year ended December 31, 2003, largely as a result of the
expansion of the Navajo refinery and the consolidation of the Rio
Grande Pipeline in July 2003, when the ownership interest increased
to 70%. Average volumes of products terminalled in Partnership
facilities increased to 139.8 mbpd for the year ended December 31,
2004 from 106.7 mbpd in 2003. In addition to the increase in
capacity of the Navajo refinery, the average volume was
significantly impacted by the acquisition of the Woods Cross
refinery by Holly Corporation in June 2003, which resulted in the
Partnership's acquisition of terminals and truck loading facilities
in Utah, Idaho and Washington. Net income increased to $32.5
million for the year ended December 31, 2004, an increase of $31.9
million from $0.6 million for the year ended December 31, 2003,
again primarily as a result of the change in recording
intra-company revenues. "We are very pleased with the fourth
quarter," said Matt Clifton, Chairman of the Board and Chief
Executive Officer, "as pipeline volumes substantially improved from
the third quarter with the return of full refinery production
levels at the Navajo Refinery and volumes shipped on the Rio Grande
pipeline increased to the normally higher winter levels. We
continue to be pleased with the excellent operation of our assets
to date and the number of organic and third-party growth
opportunities that are being explored by our operating and
corporate development staff. As we announced last week, we have
entered into a definitive agreement with Alon USA, Inc. and certain
of its affiliates to acquire over 500 miles of light products
pipelines and two light product terminals for $120 million in cash
and 937,500 Holly Energy Partners, L.P. Class B Subordinated Units.
We believe this transaction will result in over $17 million of
incremental EBITDA. "Earlier today, we announced our cash
distribution for the fourth quarter of 2004 of $.50 per unit,
payable on all common, subordinated and general partner units. Our
EBITDA for the fourth quarter was $8.6 million, and after
subtracting net interest expense of $238,000 and maintenance
capital expenditures of $153,000, distributable cash flow for the
quarter was $8.2 million. The distribution declared for the quarter
of $.50 per unit amounts to $7.1 million." The Partnership has
scheduled a conference call for February 2, 2005 at 9:00AM EST to
discuss financial results. Listeners may access this call by
dialing (800) 858-5936. The ID# for this call is #3722239.
Additionally, listeners may access the call via the internet at:
http://audioevent.mshow.com/211598 . Holly Energy Partners, L.P.,
headquartered in Dallas, Texas, provides refined petroleum product
transportation and terminal services to the petroleum industry,
including Holly Corporation which owns a 51% interest in the
Partnership. The Partnership owns and operates refined product
pipelines and terminals primarily in West Texas, New Mexico,
Arizona, Washington, Idaho and Utah. In addition, the Partnership
owns a 70% interest in Rio Grande Pipeline Company, a transporter
of LPG from West Texas to Northern Mexico. Holly Corporation
operates through its subsidiaries a 75,000 bpd refinery located in
Artesia, New Mexico, a 25,000 bpd refinery in Woods Cross, Utah,
and an 8,000 bpd refinery in Great Falls, Montana. Holly
Corporation also owns a majority interest (including the general
partner interest) in Holly Energy Partners, L.P. The following is a
"safe harbor" statement under the Private Securities Litigation
Reform Act of 1995: The statements in this press release relating
to matters that are not historical facts are "forward-looking
statements" within the meaning of the federal securities laws.
These statements are based on management's beliefs and assumptions
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 believe that the
expectations reflected in these forward-looking statements are
reasonable, we cannot assure you that our expectations will prove
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: * Risks and uncertainties with
respect to the actual quantities of refined petroleum products
shipped on our pipelines and/or terminalled in our terminals; * The
economic viability of Holly Corporation and our other customers; *
The successful closing of the proposed Alon transaction; * The
future performance of the assets being acquired from Alon; * The
demand for refined petroleum products in markets we serve; * Our
ability to successfully purchase and integrate any future acquired
operations; * The availability and cost of our financing; * The
possibility of inefficiencies or shutdowns of refineries utilizing
our pipeline and terminal facilities; * The effects of government
regulations and policies; * Our operational efficiency in carrying
out routine operations and capital construction projects; * The
possibility of terrorist attacks and the consequences of any such
attacks; * General economic conditions; and * Other financial,
operations and legal risks and uncertainties detailed from time to
time in our SEC filings. The forward-looking statements speak only
as of the date made, other than as required by law, and 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)
Supplemental Data For the period after completion of the initial
public offering of limited partner units in Holly Energy Partners,
L.P. ("HEP") on July 13, 2004, HEP results include only those
assets contributed from Holly and its subsidiaries to HEP. The
reported income numbers for the periods prior to July 13, 2004,
include revenues and expenses related to crude oil and intermediate
product pipelines, that were not contributed to HEP. The table for
the year ended December 31, 2004, shows separately our revenue and
expense data for (i) the refined product pipeline and terminal
assets that were contributed to HEP commencing on July 13, 2004,
(ii) the predecessor's operation of such assets through July 12,
2004 and (iii) the revenues and expenses through July 12, 2004 for
the crude oil and intermediate product pipeline assets that were
not contributed to HEP by Holly and its subsidiaries. Three Months
Ended December 31, 2004 HEP - Refined Product Pipelines and
Terminals (In thousands) Revenues: Affiliates $ 9,913 Third Parties
6,079 15,992 Operating costs and expenses: Operations 5,736
Depreciation and amortization 1,738 General and administrative 972
8,446 Operating income 7,546 Interest income 56 Interest expense,
including amortization (396) Minority interest in Rio Grande
Pipeline Company (675) Net income 6,531 Add interest expense 294
Add amortization of deferred debt issuance costs 102 Subtract
interest income (56) Add depreciation and amortization 1,738 EBITDA
(D) 8,609 Subtract interest expense (294) Add interest income 56
Subtract maintenance capital expenditures (E) (153) Distributable
cash flow (F) $ 8,218 Year Ended December 31, 2004 Crude Systems
and Refined Product Pipelines and Intermediate Terminals(A)
Pipelines(B) Total (C) HEP Predecessor Total Predecessor (In
thousands) Revenues: Affiliates $17,917 $19,810 $ 37,727 $7,619
$45,346 Third Parties 10,265 11,881 22,146 274 22,420 28,182 31,691
59,873 7,893 67,766 Operating costs and expenses: Operations 10,104
11,257 21,361 2,280 23,641 Depreciation and amortization 3,241
3,550 6,791 433 7,224 General and administrative 1,859 1 1,860 ---
1,860 15,204 14,808 30,012 2,713 32,725 Operating income 12,978
16,883 29,861 5,180 35,041 Interest income 65 79 144 --- 144
Interest expense, including amortization (697) --- (697) --- (697)
Minority interest in Rio Grande Pipeline Company (956) (1,038)
(1,994) --- (1,994) Net income 11,390 15,924 27,314 5,180 32,494
Add interest expense 531 --- 531 --- 531 Add amortization of
deferred debt issuance costs 166 --- 166 --- 166 Subtract interest
income (65) (79) (144) --- (144) Add depreciation and amortization
3,241 3,550 6,791 433 7,224 EBITDA (D) 15,263 $19,395 $34,658
$5,613 $40,271 Subtract interest expense (531) Add interest income
65 Subtract maintenance capital expenditures (E) (305)
Distributable cash flow (F) $14,492 (A) Revenue and expense items
generated by the pipeline and terminal assets contributed to HEP.
Amounts presented in the HEP column include only the activity for
the period beginning on July 13, 2004, the formation date. Amounts
presented in the Predecessor column are for the period prior to
July 13, 2004. (B) Revenue and expense items generated by the crude
system and intermediate pipeline assets that were not contributed
to HEP. Historically, these items were included in the income of
Navajo Pipeline, L.P. as predecessor, but are not included in the
income of HEP beginning July 13, 2004. (C) Total income and expense
items included in the Consolidated Combined Statements of
Operations of HEP and its predecessor. (D) Earnings before
interest, taxes, depreciation and amortization ("EBITDA") is
calculated as net income plus (i) interest expense net of interest
income and (ii) depreciation and amortization. EBITDA is not a
calculation based upon U.S. generally accepted accounting
principles ("U.S. GAAP"). However, the amounts included in the
EBITDA calculation are derived from amounts included in our
consolidated financial statements. EBITDA should not be considered
as an alternative to net income or operating income, as an
indication of our operating performance or as an alternative to
operating cash flow as a measure of liquidity. EBITDA is not
necessarily comparable to similarly titled measures of other
companies. EBITDA is presented here because it enhances an
investor's understanding of our ability to satisfy principal and
interest obligations with respect to our indebtedness and to use
cash for other purposes, including capital expenditures and
distributions. EBITDA is also used by our management for internal
analysis and as a basis for compliance with financial covenants.
(E) Maintenance capital expenditures are capital expenditures made
in order to maintain the existing operating capacity of our assets
and to extend their useful lives. (F) Distributable cash flow is
not a calculation based upon U.S. GAAP. However, the amounts
included in the calculation are derived from amounts included in
our consolidated financial statements, with the exception 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. We
believe that this measure provides investors an enhanced
perspective of the operating performance of our assets and the cash
our business is generating. Operating Results and Volumes The
following tables present operating results and volume information
for the three months and year ended December 31, 2004 and 2003.
Prior to January 1, 2004 we recorded pipeline tariff revenues only
on FERC-regulated pipelines and terminal service fee revenues from
third-party customers. No revenues from affiliates were recorded on
non-FERC regulated pipelines and no terminal services fee revenues
from affiliates were recorded for use of our terminal facilities.
Commencing January 1, 2004 affiliate revenues have been recorded
for all pipeline and terminal facilities included in our pipeline
and terminal facilities. Additionally, data for the crude systems
and intermediate pipelines are not included for any periods after
July 12, 2004. As a result, the information included in the
following tables of operating results and volumes are not
comparable on a year-over-year basis. Three Months Ended Year Ended
December 31, December 31, 2004 2003 2004 2003 (In thousands)
Revenues Pipelines: Affiliates $7,487 $2,058 $28,533 $9,935 Third
parties 5,400 5,414 18,952 13,249 12,887 7,472 47,485 23,184
Terminals & truck loading racks: Affiliates 2,425 --- 9,194 ---
Third parties 680 817 3,179 2,551 3,105 817 12,373 2,551 Other ---
111 15 128 Total for refined product pipeline and terminal assets
15,992 8,400 59,873 25,863 Crude system and intermediate pipelines
not contributed to HEP: Lovington crude oil pipelines --- 1,063
3,325 4,937 Intermediate pipelines --- --- 4,568 --- Total for
crude system and intermediate pipeline assets --- 1,063 7,893 4,937
Total revenues 15,992 9,463 67,766 30,800 Operating costs and
expenses Costs related to refined product pipeline and terminal
assets: Operations 5,736 4,280 21,361 18,762 Depreciation and
amortization 1,738 2,319 6,791 5,622 General and administrative 972
--- 1,860 --- 8,446 6,599 30,012 24,384 Crude system and
intermediate pipelines not contributed to HEP: Operations --- 1,139
2,280 5,431 Depreciation and amortization --- 206 433 831 --- 1,345
2,713 6,262 Total operating costs and expenses 8,446 7,944 32,725
30,646 Operating income 7,546 1,519 35,041 154 Other income
(expense) (340) 539 (553) 1,185 Minority interest in Rio Grande
Pipeline Company (675) (598) (1,994) (758) Net income $6,531 $1,460
$32,494 $581 Three Months Ended Year Ended December 31, December
31, 2004 2003 2004 2003 Volumes (bpd) Pipelines: Affiliates 69,513
40,822 65,525 51,456 Third parties - Rio Grande (A) 20,444 19,922
17,205 9,231 Third parties - Other (B) 12,175 14,681 12,762 14,238
102,132 75,425 95,492 74,925 Terminals & truck loading racks:
Affiliates 115,971 89,456 114,991 86,780 Third parties 20,317
25,724 24,821 19,956 136,288 115,180 139,812 106,736 Total for
refined product pipeline and terminal assets (bpd) 238,420 190,605
235,304 181,661 (A) We began consolidating the results of Rio
Grande as of June 30, 2003, when we increased our ownership from
25% to 70%. Therefore, the year ended December 31, 2003 includes
volumes for only 184 days averaged over the full 365 days in the
year. (B) Represents volumes transported under capacity lease
agreement. Balance Sheet Data December 31, December 31, 2004 2003
(Dollars in thousands) Cash and cash equivalents $ 19,104 $ 6,694
Working capital, excluding borrowings under credit agreement (A) $
19,120 $(18,330) Total assets $103,758 $140,425 Borrowings under
revolving credit agreement $ 25,000 $ --- Partners' equity $ 61,528
$ 68,860 Total debt to capitalization ratio (A) 28.9% n.a. (A) The
total debt to capitalization ratio is calculated by dividing total
debt, including borrowings under the revolving credit agreement, by
the sum of total debt, including borrowings under the revolving
credit agreement, and partners' equity. Short-term debt to Holly
Corporation of $30,082,000 is included in the working capital
amount at December 31, 2003. DATASOURCE: Holly Energy Partners,
L.P. CONTACT: Stephen J. McDonnell, Vice President and Chief
Financial Officer, or M. Neale Hickerson, Vice President, Treasury
and Investor Relations, both of Holly Energy Partners, L.P.,
+1-214-871-3555 Web site: http://www.hollycorp.com/
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