DALLAS, Aug. 2 /PRNewswire-FirstCall/ -- Holly Corporation
(NYSE:HOC) ("Holly" or the "Company") today reported record
quarterly net income of $93.1 million ($1.62 per basic and $1.60
per diluted share) for the three months ended June 30, 2006,
compared to net income of $52.4 million ($0.83 per basic and $0.81
per diluted share) for the three months ended June 30, 2005. Net
income was $139.9 million ($2.42 per basic and $2.37 per diluted
share) for the six months ended June 30, 2006, compared to net
income of $66.1 million ($1.05 per basic and $1.02 per diluted
share) for the six months ended June 30, 2005. As previously
reported, on March 31, 2006 we sold our petroleum refinery in Great
Falls, Montana (the "Montana Refinery") to a subsidiary of
Connacher Oil and Gas Limited. Accordingly, the results of
operations of the Montana Refinery and a gain on the sale of $14.0
million, net of income taxes of $8.3 million, are shown in
discontinued operations. Income from continuing operations for the
three months ended June 30, 2006 was $87.7 million ($1.53 per basic
and $1.51 per diluted share) as compared to $51.1 million ($0.81
per basic and $0.79 per diluted share) for the three months ended
June 30, 2005. Income from continuing operations for the six months
ended June 30, 2006 was $118.9 million ($2.06 per basic and $2.01
per diluted share) as compared to $65.5 million ($1.04 per basic
and $1.01 per diluted share) for the six months ended June 30,
2005. Income from continuing operations increased $36.6 million for
the second quarter of 2006 and $53.4 million for the first six
months of 2006 as compared to the second quarter and first six
months of 2005, respectively, due principally to improved refined
product margins experienced in the current year. In addition,
earnings benefited in 2006 from the start-up in December 2005 of
our ROSE unit (the ROSE unit converts a significant portion of
lower value asphalt into high value transportation fuels) that
contributed to higher refinery yields in the current year, and
revenues in the 2006 second quarter attributable to sales of $12.0
million of sulfur credits generated because our Navajo Refinery is
making gasoline that is substantially lower in sulfur than required
by EPA regulations. These favorable factors were partially offset
by the effects of reduced production volumes and higher operating
costs and expenses. Overall refinery production levels from
continuing operations showed a decrease of 12% in the 2006 second
quarter and 7% for the six months ended June 30, 2006, as compared
to the same periods in 2005 due primarily to production downtime
arising from planned capital and refinery maintenance projects at
our Navajo and Woods Cross Refineries. Refinery gross margins from
continuing operations were $22.37 per produced barrel for the
second quarter of 2006 compared to margins of $14.02 per produced
barrel for the second quarter of 2005, and $16.95 per produced
barrel for the six months ended June 30, 2006 compared to margins
of $10.74 per produced barrel for the six months ended June 30,
2005. Sales and other revenues from continuing operations increased
54% for the second quarter of 2006 and 41% for the first six months
of 2006 as compared to the second quarter and first six months of
2005, respectively, due principally to increased refined product
prices. Cost of products sold was higher in the second quarter and
first six months of 2006 due principally to the higher costs of
purchased crude oil. Operating expenses increased due principally
to higher utility costs (natural gas and electricity) and refinery
maintenance, partially offset by the exclusion of operating costs
of Holly Energy Partners, L.P. ("HEP") in the first six months of
2006 resulting from the deconsolidation of HEP effective July 1,
2005. General and administrative expenses increased due primarily
to increased equity-based incentive compensation. The Company's
effective tax rate decreased in 2006 as compared to 2005 primarily
due to the impact of the American Jobs Creation Act of 2004 that
provides tax incentives for small business refiners incurring costs
to produce ultra low sulfur diesel fuel. "We are especially pleased
with our 2006 second quarter results, as we realized solid refined
product margins and completed significant capital projects," said
Matthew Clifton, Chief Executive Officer of Holly. "Our income from
continuing operations was at a record quarterly level, and we
generated $146.4 million of earnings before interest, taxes and
depreciation ("EBITDA") for the quarter. I am very pleased that
both our Navajo and Woods Cross refineries completed major capital
projects in the second quarter allowing the refineries to meet the
industry-wide requirements for ultra low sulfur diesel
specifications and providing a 9% expansion of the crude capacity
at the Navajo Refinery. Our employees and support teams are to be
commended for their fine contributions on these projects that
allowed us to meet the required clean diesel fuel standards by the
June 2006 deadline." "During the 2006 second quarter, our
shareholders benefited from a two-for-one stock split and we
continued with our $200 million share repurchase program,
purchasing 676,300 shares during the quarter at an average cost of
$40.03. In addition to the stock repurchase program, in this era of
high profitability, we are reinvesting significant sums in capital
projects at our refineries aimed at maximizing shareholder return.
Together with our just completed clean diesel fuel projects at both
of our refineries, we completed the first phase of an expansion at
the Navajo Refinery to 82,000 barrels-per-day, and with the ROSE
unit completed in late 2005, we expect a very favorable overall
return on these investments. Additionally, as previously reported,
our Board of Directors is evaluating proposed projects to
significantly enhance our feedstock flexibility at the Navajo and
Woods Cross refineries and to expand the capacity of both
refineries." "Looking forward, we remain convinced that the strong
industry fundamentals will remain in our favor, as demand for
refined products should continue to press the country's refining
supply capabilities. This, combined with our sour crude oil
processing capabilities and our continued execution of value-added
refining projects, should favorably impact our future earnings
levels. With respect to Holly Energy Partners, we continue to be
extremely pleased with its operations to date and look forward to
its continued success," said Clifton. The Company has scheduled a
conference call for today, August 2, 2006 at 10:00AM EDT to discuss
financial results. Listeners may access this call by dialing (800)
858-5936. The ID# for this call is 2943429. Listeners may access
the call via the internet at: http://audioevent.mshow.com/304358.
Additionally, listeners may replay this call approximately two
hours after the call concludes by dialing (800) 642-1687. This
audio archive will be available for two weeks. Holly Corporation,
headquartered in Dallas, Texas, is an independent petroleum refiner
and marketer that produces high value light products such as
gasoline, diesel fuel and jet fuel. Holly operates through its
subsidiaries a 82,000 barrels per stream day ("bpsd") refinery
located in Artesia, New Mexico and a 26,000 bpsd refinery in Woods
Cross, Utah. Holly also owns a 45% interest (including the general
partner interest) in Holly Energy Partners, L.P., which through
subsidiaries owns or leases approximately 1,600 miles of petroleum
product pipelines in Texas, New Mexico and Oklahoma and refined
product terminals in several Southwest and Rocky Mountain states.
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" 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, including those contained
in our filings with the Securities and Exchange Commission.
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 such statements. Such differences
could be caused by a number of factors including, but not limited
to, risks and uncertainties with respect to the actions of actual
or potential competitive suppliers of refined petroleum products in
the Company's markets, the demand for and supply of crude oil and
refined products, the spread between market prices for refined
products and market prices for crude oil, the possibility of
constraints on the transportation of refined products, the
possibility of inefficiencies, curtailments or shutdowns in
refinery operations or pipelines, effects of governmental
regulations and policies, the availability and cost of financing to
the Company, the effectiveness of the Company's capital investments
and marketing strategies, the ability of the Company to acquire
refined product operations or pipeline and terminal operations on
acceptable terms and to integrate any future acquired operations,
the Company's efficiency in carrying out construction projects, the
possibility of terrorist attacks and the consequences of any such
attacks, general economic conditions, and other financial,
operational and legal risks and uncertainties detailed from time to
time in the Company's 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 Financial Data (all information in this release is
unaudited) Three Months Ended June 30, Change from 2005 2006 2005
Change Percent (In thousands, except per share data) Sales and
other revenues $1,120,840 $728,655 $392,185 53.8% Operating costs
and expenses: Cost of products sold (exclusive of depreciation,
depletion, and amortization) 908,009 569,933 338,076 59.3 Operating
expenses (exclusive of depreciation, depletion, and amortization)
49,092 48,268 824 1.7 General and administrative expenses
(exclusive of depreciation, depletion and amortization) 18,731
12,328 6,403 51.9 Depreciation, depletion and amortization 10,683
12,317 (1,634) (13.3) Exploration expenses, including dry holes 100
139 (39) (28.1) Total operating costs and expenses 986,615 642,985
343,630 53.4 Income from operations 134,225 85,670 48,555 56.7
Other income (expense): Equity in loss of joint ventures -- -- --
-- Equity in earnings of HEP 1,516 -- 1,516 -- Minority interests
in income of partnerships -- (3,119) 3,119 (100.0) Interest income
2,408 2,085 323 15.5 Interest expense (272) (2,661) 2,389 (89.8)
3,652 (3,695) 7,347 (198.8) Income from continuing operations
before income taxes 137,877 81,975 55,902 68.2 Income tax provision
50,148 30,872 19,276 62.4 Income from continuing operations 87,729
51,103 36,626 71.7 Income from discontinued operations, net of
taxes 5,372 1,321 4,051 306.7 Net income $93,101 $52,424 $40,677
77.6% Basic earnings per share: Continuing operations $1.53 $0.81
$0.72 88.9% Discontinued operations 0.09 0.02 0.07 350.0 Net income
$1.62 $0.83 $0.79 95.2% Diluted earnings per share: Continuing
operations $1.51 $0.79 $0.72 91.1% Discontinued operations 0.09
0.02 0.07 350.0 Net income $1.60 $0.81 $0.79 97.5% Cash dividends
declared per common share $0.08 $0.05 $0.03 60.0% Average number of
common shares outstanding: Basic 57,186 63,274 (6,088) (9.6)%
Diluted 58,363 64,718 (6,355) (9.8)% On May 11, 2006, we announced
that our Board of Directors approved a two-for-one stock split
payable in the form of a stock dividend of one share of common
stock for each issued and outstanding share of common stock. The
dividend was paid on June 1, 2006 to all holders of record of
common stock at the close of business on May 22, 2006. All
references to the number of shares of common stock and per share
amounts have been adjusted to reflect the split on a retrospective
basis. Due to the sale of the Montana Refinery, we have
reclassified certain amounts previously reported and now report as
discontinued operations. Also, as previously reported, we adopted
Statement of Financial Accounting Standards ("SFAS") 123 (revised)
on July 1, 2005 based on modified retrospective application with
early application under SFAS 123 (revised) to earlier quarters in
2005, resulting in a previously reported restatement to the
financial statements for the three months ended June 30, 2005. Six
Months Ended June 30, Change from 2005 2006 2005 Change Percent (In
thousands, except per share data) Sales and other revenues
$1,912,434 $1,353,374 $559,060 41.3% Operating costs and expenses:
Cost of products sold (exclusive of depreciation, depletion, and
amortization) 1,583,494 1,103,347 480,147 43.5 Operating expenses
(exclusive of depreciation, depletion, and amortization) 101,559
89,744 11,815 13.2 General and administrative expenses (exclusive
of depreciation, depletion and amortization) 32,247 22,908 9,339
40.8 Depreciation, depletion and amortization 18,707 23,345 (4,638)
(19.9) Exploration expenses, including dry holes 227 241 (14) (5.8)
Total operating costs and expenses 1,736,234 1,239,585 496,649 40.1
Income from operations 176,200 113,789 62,411 54.8 Other income
(expense): Equity in loss of joint ventures -- (685) 685 (100.0)
Equity in earnings of HEP 4,728 -- 4,728 -- Minority interests in
income of partnerships -- (6,721) 6,721 (100.0) Interest income
4,143 3,253 890 27.4 Interest expense (547) (4,205) 3,658 (87.0)
8,324 (8,358) 16,682 (199.6) Income from continuing operations
before income taxes 184,524 105,431 79,093 75.0 Income tax
provision 65,635 39,912 25,723 64.4 Income from continuing
operations 118,889 65,519 53,370 81.5 Income from discontinued
operations, net of taxes 21,016 539 20,477 -- Net income $139,905
$66,058 $73,847 111.8% Basic earnings per share: Continuing
operations $2.06 $1.04 $1.02 98.1% Discontinued operations 0.36
0.01 0.35 -- Net income $2.42 $1.05 $1.37 130.5% Diluted earnings
per share: Continuing operations $2.01 $1.01 $1.00 99.0%
Discontinued operations 0.36 0.01 0.35 -- Net income $2.37 $1.02
$1.35 132.4% Cash dividends declared per common share $0.13 $0.09
$0.04 44.4% Average number of common shares outstanding: Basic
57,819 63,152 (5,333) (8.4)% Diluted 59,072 64,564 (5,492) (8.5)%
Balance Sheet Data (Unaudited) June 30, December 31, 2006 2005 (In
thousands) Cash, cash equivalents and investments in marketable
securities $233,003 $254,842 Working capital $235,426 $210,103
Total assets $1,257,342 $1,142,900 Stockholders' equity $434,345
$377,351 Other Financial Data (Unaudited) Three Months Ended Six
Months Ended June 30, June 30, 2006 2005 2006 2005 (In thousands)
Net cash provided by operating activities $96,920 $65,673 $78,580
$72,480 Net cash provided by (used for) investing activities
$(42,545) $(18,670) $77,343 $(150,423) Net cash provided by (used
for) financing activities $(31,130) $1,159 $(87,131) $122,084
Capital expenditures $34,044 $15,197 $66,279 $28,645 EBITDA from
continuing operations (A) $146,424 $94,868 $199,635 $129,728 (A)
Earnings before interest, taxes, depreciation and amortization,
which we refer to as EBITDA as presented above is reconciled to net
income under "Reconciliations to Amounts Reported under Generally
Accepted Accounting Principles" below. Our sole reportable business
segment is Refining after the deconsolidation of HEP effective July
1, 2005. From the closing of the initial public offering of HEP on
July 13, 2004 through June 30, 2005, our segments reflected two
business divisions, Refining and HEP. The HEP segment did not have
any activity subsequent to the deconsolidation effective July 1,
2005. Three Months Ended Six Months Ended June 30, June 30, 2006
2005 2006 2005 (In thousands) Sales and other revenues (A) Refining
$1,120,838 $719,026 $1,912,186 $1,336,297 HEP -- 19,521 -- 36,034
Corporate and other 143 252 524 617 Consolidations and eliminations
(141) (10,144) (276) (19,574) Consolidated $1,120,840 $728,655
$1,912,434 $1,353,374 Income (loss) from operations (A) Refining
$153,307 $88,845 $208,895 $118,920 HEP -- 8,234 -- 16,019 Corporate
and other (19,082) (11,409) (32,695) (21,150) Consolidated $134,225
$85,670 $176,200 $113,789 (A) The Refining segment involves the
purchase and refining of crude oil and wholesale and branded
marketing of refined products, such as gasoline, diesel fuel and
jet fuel, and includes our Navajo Refinery and Woods Cross
Refinery. Although we previously included the Montana Refinery in
the Refining segment, the results from the Montana Refinery are now
reported in discontinued operations and are not included in the
above tables. The petroleum products produced by the Refining
segment are marketed in Texas, New Mexico, Arizona, Utah, Wyoming,
Idaho, Washington and northern Mexico. The Refining segment also
includes certain crude oil pipelines that we own and operate in
conjunction with our refining operations as part of the supply
networks of the refineries. The Refining segment also includes the
equity in earnings from our 49% interest in NK Asphalt partners
prior to February 2005. In February 2005, we acquired the other 51%
interest in the joint venture from our other partner; subsequent to
the purchase, we include the operations of NK Asphalt Partners in
our consolidated financial statements. NK Asphalt Partners, doing
business as Holly Asphalt Company, manufactures and markets asphalt
and asphalt products in Arizona, New Mexico, Texas and California.
The cost of pipeline transportation and terminal services provided
by HEP is included in the Refining segment. The HEP segment
involves all of the operations of HEP, including approximately
1,300 miles (780 miles prior to the Alon asset acquisition) of
pipeline assets principally in Texas, New Mexico and Oklahoma and
refined product terminals in several Southwest and Rocky Mountain
states. The HEP segment also includes a 70% interest in Rio Grande
which provides petroleum products transportation. Revenues from the
HEP segment are earned through transactions with unaffiliated
parties for pipeline transportation, rental and terminalling
operations as well as revenues relating to pipeline transportation
services provided for our refining operations and from its interest
in Rio Grande. Our operations not included in the reportable
segment or segments are included in Corporate and Other, which
includes costs of Holly Corporation, the parent company, consisting
primarily of general and administrative expenses and interest
charges as well as a small-scale oil and gas exploration and
production program. The consolidations and eliminations amount
includes the elimination of the revenue associated with pipeline
transportation services between us and HEP, prior to July 1, 2005.
Refining Operating Data Our refinery operations include the Navajo
Refinery and the Woods Cross Refinery. The following tables set
forth information, including non-GAAP performance measures about
our refinery operations. The cost of products and refinery gross
margin do not include the effect of depreciation, depletion and
amortization. Reconciliations to amounts reported under GAAP are
provided under "Reconciliations to Amounts Reported under Generally
Accepted Accounting Principles" below. Three Months Ended Six
Months Ended June 30, June 30, 2006 2005 2006 2005 Navajo Refinery
Crude charge (BPD) (A) 60,380 71,920 66,420 73,100 Refinery
production (BPD) (B) 65,600 77,750 73,320 80,880 Sales of produced
refined products (BPD) 66,320 77,600 73,000 80,230 Sales of refined
products (BPD) (C) 83,940 85,960 87,340 89,800 Refinery utilization
(D) 80.5% 95.9% 88.6% 97.5% Average per produced barrel (E) Net
sales $90.76 $65.73 $82.49 $61.50 Cost of products (F) 67.34 50.30
64.90 49.47 Refinery gross margin 23.42 15.43 17.59 12.03 Refinery
operating expenses (G) 5.37 3.84 5.07 3.45 Net operating margin
$18.05 $11.59 $12.52 $8.58 Feedstocks: Sour crude oil 80% 90% 81%
88% Sweet crude oil 9% 0% 7% 0% Other feedstocks and blends 11% 10%
12% 12% Total 100% 100% 100% 100% Sales of produced refined
products: Gasolines 57% 56% 60% 59% Diesel fuels 27% 30% 26% 27%
Jet fuels 5% 4% 5% 4% Asphalt 4% 7% 3% 7% LPG and other 7% 3% 6% 3%
Total 100% 100% 100% 100% Woods Cross Refinery Crude charge (BPD)
(A) 25,270 25,820 24,010 23,780 Refinery production (BPD) (B)
27,030 27,170 25,530 25,540 Sales of produced refined products
(BPD) 27,500 27,820 25,410 26,450 Sales of refined products (BPD)
(C) 28,800 29,120 26,640 27,500 Refinery utilization (D) 97.2%
99.3% 92.3% 91.5% Average per produced barrel (E) Net sales $89.63
$67.35 $80.52 $61.17 Cost of products (F) 69.80 57.28 65.42 54.35
Refinery gross margin 19.83 10.07 15.10 6.82 Refinery operating
expenses (G) 4.36 3.86 4.99 4.08 Net operating margin $15.47 $6.21
$10.11 $2.74 Three Months Ended Six Months Ended June 30, June 30,
2006 2005 2006 2005 Woods Cross Refinery Feedstocks: Sour crude oil
3% 9% 4% 9% Sweet crude oil 89% 83% 87% 81% Other feedstocks and
blends 8% 8% 9% 10% Total 100% 100% 100% 100% Sales of produced
refined products: Gasolines 64% 60% 63% 60% Diesel fuels 30% 31%
28% 28% Jet fuels 1% 2% 2% 2% Fuel oil 4% 6% 5% 7% LPG and other 1%
1% 2% 3% Total 100% 100% 100% 100% Consolidated(H) Crude charge
(BPD) (A) 85,650 97,740 90,430 96,880 Refinery production (BPD) (B)
92,630 104,920 98,850 106,420 Sales of produced refined products
(BPD) 93,820 105,420 98,410 106,680 Sales of refined products (BPD)
(C) 112,740 115,080 113,980 117,300 Refinery utilization (D) 84.8%
96.8% 89.5% 95.9% Average per produced barrel (E) Net sales $90.43
$66.16 $81.98 $61.42 Cost of products (F) 68.06 52.14 65.03 50.68
Refinery gross margin 22.37 14.02 16.95 10.74 Refinery operating
expenses (G) 5.08 3.84 5.05 3.61 Net operating margin $17.29 $10.18
$11.90 $7.13 Feedstocks: Sour crude oil 58% 69% 61% 69% Sweet crude
oil 32% 22% 28% 20% Other feedstocks and blends 10% 9% 11% 11%
Total 100% 100% 100% 100% Sales of produced refined products:
Gasolines 59% 57% 61% 59% Diesel fuels 27% 30% 27% 28% Jet fuels 4%
3% 4% 3% Asphalt 3% 5% 2% 5% LPG and other 7% 5% 6% 5% Total 100%
100% 100% 100% (A) Crude charge represents the barrels per day of
crude oil processed at the crude units at our refineries. (B)
Refinery production represents the barrels per day of refined
products yielded from processing crude and other refinery
feedstocks through the crude units and other conversion units at
our refineries. (C) Includes refined products purchased for resale.
(D) Represents crude charge divided by total crude capacity (BPSD).
(E) Represents average per barrel amounts for produced refined
products sold, which are non-GAAP. Reconciliations to amounts
reported under GAAP are located under "Reconciliations to Amounts
Reported under Generally Accepted Accounting Principles" below. (F)
Transportation costs billed from HEP are included in cost of
products. (G) Represents operating expenses of our refinery,
exclusive of depreciation, depletion, and amortization, and
excludes refining segment expenses of product pipelines and
terminals. (H) The Montana Refinery was sold on March 31, 2006.
Amounts reported are for the Navajo and Woods Cross Refineries.
Reconciliations to Amounts Reported Under Generally Accepted
Accounting Principles Reconciliations of earnings before interest,
taxes, depreciation and amortization ("EBITDA") to amounts reported
under generally accepted accounting principles in financial
statements. Earnings before interest, taxes, depreciation and
amortization, which we refer to as EBITDA, is calculated as net
income plus (i) interest expense net of interest income, (ii)
income tax provision, and (iii) depreciation, depletion and
amortization. EBITDA is not a calculation based upon accounting
principles generally accepted in the United States; 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 is a widely
used financial indicator used by investors and analysts to measure
performance. EBITDA is also used by our management for internal
analysis and as a basis for financial covenants. We are reporting
EBITDA from continuing operations. Set forth below is our
calculation of EBITDA from continuing operations. Three Months
Ended Six Months Ended June 30, June 30, 2006 2005 2006 2005 (In
thousands) Income from continuing operations $87,729 $51,103
$118,889 $65,519 Add provision for income tax 50,148 30,872 65,635
39,912 Add interest expense 272 2,661 547 4,205 Subtract interest
income (2,408) (2,085) (4,143) (3,253) Add depreciation, depletion
and amortization 10,683 12,317 18,707 23,345 EBITDA from continuing
operations $146,424 $94,868 $199,635 $129,728 Reconciliations of
refinery operating information (non-GAAP performance measures) to
amounts reported under generally accepted accounting principles in
financial statements. Refinery gross margin and net operating
margin are non-GAAP performance measures that are used by our
management and others to compare our refining performance to that
of other companies in our industry. We believe these margin
measures are helpful to investors in evaluating our refining
performance on a relative and absolute basis. We calculate refinery
gross margin and net operating margin using net sales, cost of
products and operating expenses, in each case averaged per produced
barrel sold. These two margins do not include the effect of
depreciation, depletion and amortization. Each of these component
performance measures can be reconciled directly to our Statements
of Income. Other companies in our industry may not calculate these
performance measures in the same manner. Refinery Gross Margin
Refinery gross margin per barrel is the difference between average
net sales price and average cost of products per barrel of produced
refined products. Refinery gross margin for each of our refineries
and for both of our refineries on a consolidated basis is
calculated as shown below. Three Months Ended Six Months Ended June
30, June 30, 2006 2005 2006 2005 Average per produced barrel:
Navajo Refinery Net sales $90.76 $65.73 $82.49 $61.50 Less cost of
products 67.34 50.30 64.90 49.47 Refinery gross margin $23.42
$15.43 $17.59 $12.03 Woods Cross Refinery Net sales $89.63 $67.35
$80.52 $61.17 Less cost of products 69.80 57.28 65.42 54.35
Refinery gross margin $19.83 $10.07 $15.10 $6.82 Consolidated Net
sales $90.43 $66.16 $81.98 $61.42 Less cost of products 68.06 52.14
65.03 50.68 Refinery gross margin $22.37 $14.02 $16.95 $10.74 Net
Operating Margin Net operating margin per barrel is the difference
between refinery gross margin and refinery operating expenses per
barrel of produced refined products. Net operating margin for each
of our refineries and for both of our refineries on a consolidated
basis is calculated as shown below. Three Months Ended Six Months
Ended June 30, June 30, 2006 2005 2006 2005 Average per produced
barrel: Navajo Refinery Refinery gross margin $23.42 $15.43 $17.59
$12.03 Less refinery operating expenses 5.37 3.84 5.07 3.45 Net
operating margin $18.05 $11.59 $12.52 $8.58 Woods Cross Refinery
Refinery gross margin $19.83 $10.07 $15.10 $6.82 Less refinery
operating expenses 4.36 3.86 4.99 4.08 Net operating margin $15.47
$6.21 $10.11 $2.74 Consolidated Refinery gross margin $22.37 $14.02
$16.95 $10.74 Less refinery operating expenses 5.08 3.84 5.05 3.61
Net operating margin $17.29 $10.18 $11.90 $7.13 Below are
reconciliations to our Consolidated Statements of Income for (i)
net sales, cost of products and operating expenses, in each case
averaged per produced barrel sold, and (ii) net operating margin
and refinery gross margin. Due to rounding of reported numbers,
some amounts may not calculate exactly. Reconciliations of refined
product sales from produced products sold to total sales and other
revenue Three Months Ended Six Months Ended June 30, June 30, 2006
2005 2006 2005 Navajo Refinery Average sales price per produced
barrel sold $90.76 $65.73 $82.49 $61.50 Times sales of produced
refined products sold (BPD) 66,320 77,600 73,000 80,230 Times
number of days in period 91 91 181 181 Refined product sales from
produced products sold $547,747 $464,159 $1,089,940 $893,080 Woods
Cross Refinery Average sales price per produced barrel sold $89.63
$67.35 $80.52 $61.17 Times sales of produced refined products sold
(BPD) 27,500 27,820 25,410 26,450 Times number of days in period 91
91 181 181 Refined product sales from produced products sold
$224,299 $170,505 $370,328 $292,848 Sum of refined products sales
from produced products sold from our two refineries (D) $772,046
$634,664 $1,460,268 $1,185,928 Add refined product sales from
purchased products and rounding (A) 168,064 60,863 252,343 123,030
Total refined products sales 940,110 695,527 1,712,611 1,308,958
Add direct sales of excess crude oil(B) 131,275 -- 131,275 -- Add
other refining segment revenue (C) 49,453 23,499 68,300 27,339
Total refining segment revenue 1,120,838 719,026 1,912,186
1,336,297 Add HEP sales and other revenue -- 19,521 -- 36,034 Add
corporate and other revenues 143 252 524 617 Subtract
consolidations and eliminations (141) (10,144) (276) (19,574) Sales
and other revenues $1,120,840 $728,655 $1,912,434 $1,353,374 (A) We
purchase finished products when opportunities arise that provide a
profit on the sale of such products, or to meet delivery
commitments. (B) We purchase crude oil and enter into buy/sell
exchanges in excess of the needs to supply our refineries. Certain
direct sales of this excess crude oil are made to purchasers or
users of crude oil. Under new accounting guidance, these sales and
related purchases starting April 1, 2006 are being measured at fair
value and accounted for as revenues with the related acquisition
costs included as cost of products sold. Prior to April 1, 2006,
sales and cost of sales attributable to such excess crude oil
direct sales were netted and presented in cost of products sold.
(C) Other refining segment revenue includes the revenues associated
with NK Asphalt Partners subsequent to their consolidation in
February 2005 and revenue derived from sulfur credit sales. (D) The
above calculations of refined product sales from produced products
sold can also be computed on a consolidated basis. These amounts
may not calculate exactly due to rounding of reported numbers.
Three Months Ended Six Months Ended June 30, June 30, 2006 2005
2006 2005 Average sales price per produced barrel sold $90.43
$66.16 $81.98 $61.42 Times sales of produced refined products sold
(BPD) 93,820 105,420 98,410 106,680 Times number of days in period
91 91 181 181 Refined product sales from produced products sold
$772,046 $634,664 $1,460,268 $1,185,928 Reconciliation of average
cost of products per produced barrel sold to total costs of
products sold Three Months Ended Six Months Ended June 30, June 30,
2006 2005 2006 2005 Navajo Refinery Average cost of products per
produced barrel sold $67.34 $50.30 $64.90 $49.47 Times sales of
produced refined products sold (BPD) 66,320 77,600 73,000 80,230
Times number of days in period 91 91 181 181 Cost of products for
produced products sold $406,405 $355,198 $857,524 $718,385 Woods
Cross Refinery Average cost of products per produced barrel sold
$69.80 $57.28 $65.42 $54.35 Times sales of produced refined
products sold (BPD) 27,500 27,820 25,410 26,450 Times number of
days in period 91 91 181 181 Cost of products for produced products
sold $174,675 $145,011 $300,880 $260,198 Sum of cost of products
for produced products sold from our two refineries (D) $581,080
$500,209 $1,158,404 $978,583 Add refined product costs from
purchased products sold and rounding (A) 172,348 63,712 257,966
127,295 Total refined cost of products sold 753,428 563,921
1,416,370 1,105,878 Add crude oil cost of direct sales of excess
crude oil(B) 131,061 -- 131,061 -- Add other refining segment costs
of products sold (C) 23,661 16,156 36,339 17,043 Total refining
segment cost of products sold 908,150 580,077 1,583,770 1,122,921
Add corporate and other costs -- -- -- -- Subtract consolidations
and eliminations (141) (10,144) (276) (19,574) Costs of products
sold (exclusive of depreciation, depletion and amortization)
$908,009 $569,933 $1,583,494 $1,103,347 (A) We purchase finished
products when opportunities arise that provide a profit on the sale
of such products, or to meet delivery commitments. (B) We purchase
crude oil and enter into buy/sell exchanges in excess of the needs
to supply our refineries. Certain direct sales of this excess crude
oil are made to purchasers or users of crude oil. Under new
accounting guidance, these sales and related purchases starting
April 1, 2006 are being measured at fair value and accounted for as
revenues with the related acquisition costs included as cost of
products sold. Prior to April 1, 2006, sales and cost of sales
attributable to such excess crude oil direct sales were netted and
presented in cost of products sold. (C) Other refining segment
costs of products sold includes the costs of products for NK
Asphalt Partners subsequent to their consolidation in February 2005
and costs attributable to sulfur credit sales. (D) The above
calculations of costs of products from produced products sold can
also be computed on a consolidated basis. These amounts may not
calculate exactly due to rounding of reported numbers. Three Months
Ended Six Months Ended June 30, June 30, 2006 2005 2006 2005
Average cost of products per produced barrel sold $68.06 $52.14
$65.03 $50.68 Times sales of produced refined products sold (BPD)
93,820 105,420 98,410 106,680 Times number of days in period 91 91
181 181 Cost of products for produced products sold $581,080
$500,209 $1,158,404 $978,583 Reconciliation of average refinery
operating expenses per produced barrel sold to total operating
expenses Three Months Ended Six Months Ended June 30, June 30, 2006
2005 2006 2005 Navajo Refinery Average refinery operating expenses
per produced barrel sold $5.37 $3.84 $5.07 $3.45 Times sales of
produced refined products sold (BPD) 66,320 77,600 73,000 80,230
Times number of days in period 91 91 181 181 Refinery operating
expenses for produced products sold $32,409 $27,117 $66,990 $50,100
Woods Cross Refinery Average refinery operating expenses per
produced barrel sold $4.36 $3.86 $4.99 $4.08 Times sales of
produced refined products sold (BPD) 27,500 27,820 25,410 26,450
Times number of days in period 91 91 181 181 Refinery operating
expenses for produced products sold $10,911 $9,772 $22,950 $19,533
Sum of refinery operating expenses per produced products sold from
our two refineries (B) $43,320 $36,889 $89,940 $69,633 Add other
refining segment operating expenses and rounding (A) 5,790 4,931
11,603 8,275 Total refining segment operating expenses 49,110
41,820 101,543 77,908 Add HEP operating expenses -- 6,448 -- 11,836
Add corporate and other costs (18) -- 16 -- Operating expenses
(exclusive of depreciation, depletion and amortization) $49,092
$48,268 $101,559 $89,744 (A) Other refining segment operating
expenses include the marketing costs associated with our refining
segment and the operating expenses of NK Asphalt Partners
subsequent to their consolidation in February 2005. (B) The above
calculations of refinery operating expenses from produced products
sold can also be computed on a consolidated basis. These amounts
may not calculate exactly due to rounding of reported numbers.
Three Months Ended Six Months Ended June 30, June 30, 2006 2005
2006 2005 Average refinery operating expenses per produced barrel
sold $5.08 $3.84 $5.05 $3.61 Times sales of produced refined
products sold (BPD) 93,820 105,420 98,410 106,680 Times number of
days in period 91 91 181 181 Refinery operating expenses for
produced products sold $43,320 $36,889 $89,940 $69,633
Reconciliation of net operating margin per barrel to refinery gross
margin per barrel to total sales and other revenues Three Months
Ended Six Months Ended June 30, June 30, 2006 2005 2006 2005 Navajo
Refinery Net operating margin per barrel $18.05 $11.59 $12.52 $8.58
Add average refinery operating expenses per produced barrel 5.37
3.84 5.07 3.45 Refinery gross margin per barrel 23.42 15.43 17.59
12.03 Add average cost of products per produced barrel sold 67.34
50.30 64.90 49.47 Average net sales per produced barrel sold $90.76
$65.73 $82.49 $61.50 Times sales of produced refined products sold
(BPD) 66,320 77,600 73,000 80,230 Times number of days in period 91
91 181 181 Refined products sales from produced products sold
$547,747 $464,159 $1,089,940 $893,080 Woods Cross Refinery Net
operating margin per barrel $15.47 $6.21 $10.11 $2.74 Add average
refinery operating expenses per produced barrel 4.36 3.86 4.99 4.08
Refinery gross margin per barrel 19.83 10.07 15.10 6.82 Add average
cost of products per produced barrel sold 69.80 57.28 65.42 54.35
Average net sales per produced barrel sold $89.63 $67.35 $80.52
$61.17 Times sales of produced refined products sold (BPD) 27,500
27,820 25,410 26,450 Times number of days in period 91 91 181 181
Refined products sales from produced products sold $224,299
$170,505 $370,328 $292,848 Sum of refined products sales from
produced products sold from our two refineries (D) $772,046
$634,664 $1,460,268 $1,185,928 Add refined product sales from
purchased products and rounding (A) 168,064 60,863 252,343 123,030
Total refined products sales 940,110 695,527 1,712,611 1,308,958
Add direct sales of excess crude oil(B) 131,275 -- 131,275 -- Add
other refining segment revenue (C) 49,453 23,499 68,300 27,339
Total refining segment revenue 1,120,838 719,026 1,912,186
1,336,297 Add HEP sales and other revenue -- 19,521 -- 36,034 Add
corporate and other revenues 143 252 524 617 Subtract
consolidations and eliminations (141) (10,144) (276) (19,574) Sales
and other revenues $1,120,840 $728,655 $1,912,434 $1,353,374 (A) We
purchase finished products when opportunities arise that provide a
profit on the sale of such products or to meet delivery
commitments. (B) We purchase crude oil and enter into buy/sell
exchanges in excess of the needs to supply our refineries. Certain
direct sales of this excess crude oil are made to purchasers or
users of crude oil. Under new accounting guidance, these sales and
related purchases starting April 1, 2006 are being measured at fair
value and accounted for as revenues with the related acquisition
costs included as cost of products sold. Prior to April 1, 2006,
sales and cost of sales attributable to such excess crude oil
direct sales were netted and presented in cost of products sold.
(C) Other refining segment revenue includes the revenues associated
with NK Asphalt Partners subsequent to their consolidation in
February 2005 and revenue derived from sulfur credit sales. (D) The
above calculations of refined product sales from produced products
sold can also be computed on a consolidated basis. These amounts
may not calculate exactly due to rounding of reported numbers.
Three Months Ended Six Months Ended June 30, June 30, 2006 2005
2006 2005 Net operating margin per barrel $17.29 $10.18 $11.90
$7.13 Add average refinery operating expenses per produced barrel
5.08 3.84 5.05 3.61 Refinery gross margin per barrel 22.37 14.02
16.95 10.74 Add average cost of products per produced barrel sold
68.06 52.14 65.03 50.68 Average sales price per produced barrel
sold $90.43 $66.16 $81.98 $61.42 Times sales of produced refined
products sold (BPD) 93,820 105,420 98,410 106,680 Times number of
days in period 91 91 181 181 Refined product sales from produced
products sold $772,046 $634,664 $1,460,268 $1,185,928 DATASOURCE:
Holly Corporation CONTACT: Stephen J. McDonnell, Vice President and
Chief Financial Officer, or M. Neale Hickerson, Vice President,
Investor Relations, both of Holly Corporation, +1-214-871-3555
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