Holly Corporation Announces 25% Dividend Increase DALLAS, Feb. 12
/PRNewswire-FirstCall/ -- Holly Corporation (NYSE:HOC) ("Holly" or
the "Company") today reported record fourth quarter net income of
$47.7 million ($0.86 per basic and $0.84 per diluted share) for the
three months ended December 31, 2006, compared to net income of
$39.9 million ($0.67 per basic and $0.65 per diluted share) for the
three months ended December 31, 2005. Net income for the year ended
December 31, 2006 was a record $266.6 million ($4.68 per basic and
$4.58 per diluted share) as compared to our previous record net
income of $167.7 million ($2.72 per basic and $2.65 per diluted
share) for the year ended December 31, 2005. Holly also announced
that our Board of Directors has declared a regular quarterly cash
dividend in the amount of $0.10 per share, payable April 3, 2007 to
holders of record on March 22, 2007. This dividend represents a 25%
increase from the most recent quarterly dividend rate of $0.08 per
share. 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 fourth quarter of 2006 as compared to the fourth quarter of
2005 increased 27% or $10.3 million due principally to an increase
in volumes of refined products sold in the fourth quarter of 2006.
Also, revenues for the fourth quarter of 2006 include sales of $3.9
million in sulfur credits generated from our Navajo Refinery.
Company-wide refinery margins were $12.08 per produced barrel for
the fourth quarter of 2006 compared to refinery margins of $13.71
per produced barrel for the fourth quarter of 2005. Higher refining
margins in the fourth quarter of 2005 reflected the spike in prices
for refined products following the effects of an unusually
destructive Gulf Coast hurricane season. Income from continuing
operations for the year ended December 31, 2006 increased 51% or
$82.9 million from the year ended December 31, 2005. This increase
was principally due to the higher refined product margins
experienced throughout much of 2006. Our 2006 earnings also
benefited from higher valued refinery yields due to the December
2005 start-up of our ROSE unit, which converts a significant
portion of lower value asphalt into high value transportation fuels
and the production of all our diesel fuel at both refineries as
higher priced Ultra Low Sulfur Diesel ("ULSD") beginning in July
2006 upon completion of our ULSD capital projects. Furthermore,
revenues for the year ended December 31, 2006 include sales of
$15.9 million in sulfur credits which were generated because our
Navajo Refinery is producing gasoline with a substantially lower
sulfur content than EPA requirements. These favorable factors were
partially offset by the effects of higher operating costs and
expenses incurred throughout most of 2006. Refinery production
levels from continuing operations were relatively flat for the year
ended December 31, 2006 as compared to 2005 primarily due to the
offset of reduced production levels during the implementation of
our ULSD and expansion projects against higher post-expansion
production levels during the latter half of the year. Company-wide
refinery margins from continuing operations were $15.78 per
produced barrel for the year ended December 31, 2006 compared to
refinery margins of $12.62 per produced barrel for the year ended
December 31, 2005. Sales and other revenues from continuing
operations increased 15% for the fourth quarter of 2006 and 32% for
the year ended December 31, 2006 as compared to the fourth quarter
and year ended December 31, 2005, respectively. Refined product
sales volumes increased 10% and 2% for the fourth quarter and year
ended December 31, 2006, respectively, as compared to the same
periods in 2005. Additionally, the fourth quarter and year ended
December 31, 2006 include revenues attributable to certain direct
crude oil sales that were previously netted against the
corresponding purchases and presented in cost of products sold
prior to our adoption of new accounting guidance effective April 1,
2006. Cost of products sold was higher for the fourth quarter and
year ended December 31, 2006 due principally to the higher costs of
purchased crude oil and the inclusion of costs attributable to
direct crude oil sales. Operating expenses decreased for the fourth
quarter of 2006 as compared to fourth quarter of 2005 due
principally to lower utility costs (natural gas and electricity).
Operating expenses increased overall for the year ended December
31, 2006 as compared to 2005 due principally to higher utility
costs throughout most of the year and refinery maintenance,
partially offset by the exclusion of operating costs of Holly
Energy Partners, L.P. ("HEP') in 2006 resulting from the
deconsolidation of HEP effective July 1, 2005. General and
administrative expenses increased for the fourth quarter and year
ended December 31, 2006, as compared to the same periods in 2005,
due primarily to increased equity-based compensation expense. 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, which provides tax incentives for small business refiners
incurring costs to produce ultra low sulfur diesel fuel. "We are
very pleased with our 2006 fourth quarter results, which completed
a third consecutive all-time record year for Holly, due to the
continued high margin environment, reliable refinery operations and
the successful execution of our refinery profit initiatives," said
Matthew Clifton, Chief Executive Officer of Holly. "We generated
$84.7 million of earnings before interest, taxes and depreciation
("EBITDA") from continuing operations in the fourth quarter,
bringing our total EBITDA from continuing operations for the year
ended December 31, 2006 to a record $414.5 million. Refining
margins reached seasonal all-time high levels during our spring and
summer months; although they have since moderated, fourth quarter
margins remained solid." "During 2006, we repurchased 4.5 million
shares of Holly common stock at a cost of approximately $177.0
million or an average of $39.70 per share, reducing our shares
outstanding by approximately 6%. During 2006, capital spending was
approximately $120.4 million, primarily associated with expanding
refinery capacity, meeting new diesel fuel specifications and
improving our higher valued product yields. Strong profitability
enabled this blend of significant stock repurchases and capital
expenditures while maintaining an extremely strong balance sheet;
ending the year with $256.0 million in cash and marketable
securities and no outstanding debt. Our share price continued a
consistent trend in 2006, increasing 75%. Last year, Forbes
magazine reported our five-year annualized total return of 80.7% as
the best in the oil and gas industry. This year, Forbes reported
our five-year average growth in earnings per share of 52.3% as the
best in the oil and gas industry. We will continue to take steps to
enhance shareholder value." "Operationally, we capitalized on the
successful completion of value-added refining projects including
our ROSE unit start-up in December 2005, our Navajo and Woods Cross
ULSD conversions and the 8,000 barrels-per-day expansion at our
Navajo refinery. Looking forward, we remain convinced that the
strong industry fundamentals will remain in our favor, as demand
for refined products should continue to press refining supply
capabilities for at least the next several years. This, combined
with our high sour crude oil processing capabilities, our continued
execution of value-added refining initiatives and the high growth
markets we serve, should keep our earnings at healthy levels. With
respect to Holly Energy Partners, we continue to be pleased with
its level of growth to date and look forward to its continued
success," said Clifton. The Company no longer consolidates the
results of HEP, and since July 1, 2005, Holly's share of the
earnings of HEP is being recorded using the equity method of
accounting. HEP has, since July 2004, owned and operated product
pipelines and terminals previously 100% owned by the Company.
Following HEP's acquisition in July 2005 of the intermediate
feedstock pipelines formerly owned by Holly, the Company determined
that its beneficial variable interest in HEP is now less than 50%;
and therefore as required, HEP was deconsolidated as of July 1,
2005. The Company has scheduled a conference call for today,
February 12, 2007 at 10:00AM EST to discuss financial results.
Listeners may access this call by dialing (888) 548-4639. The ID#
for this call is #6974637. Listeners may access the call via the
internet at: http://www.videonewswire.com/event.asp?id=37565.
Additionally, listeners may replay this call approximately two
hours after the call concludes by dialing (800) 642-1687 (enter
conference ID: 4390286). 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 an 83,000 barrels per stream day
("bpsd") refinery located in southeast 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 belief 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 Years Ended
December 31, December 31, 2006 2005 2006 2005 (In thousands, except
per share data) Sales and other revenues $938,090 $812,418
$4,023,217 $3,046,313 Operating costs and expenses: Cost of
products sold (exclusive of depreciation, depletion and
amortization) 786,601 670,178 3,349,404 2,498,810 Operating
expenses (exclusive of depreciation, depletion and amortization)
52,755 60,020 208,460 192,051 General and administrative expenses
(exclusive of depreciation, depletion and amortization) 18,442
16,156 63,255 51,683 Depreciation, depletion and amortization
11,534 8,651 39,721 40,547 Exploration expenses, including dry
holes 157 171 486 481 Total operating costs and expenses 869,489
755,176 3,661,326 2,783,572 Income from operations 68,601 57,242
361,891 262,741 Other income (expense): Equity in loss of joint
ventures - - - (685) Equity in earnings of Holly Energy Partners
4,605 3,221 12,929 6,517 Minority interests in income of
partnerships - - - (6,721) Interest income 2,867 2,446 9,757 6,901
Interest expense (261) (395) (1,076) (5,101) 7,211 5,272 21,610 911
Income from continuing operations before income taxes 75,812 62,514
383,501 263,652 Income tax provision 27,004 24,024 136,603 99,626
Income from continuing operations 48,808 38,490 246,898 164,026
Income (loss) from discontinued operations, net of taxes (1,149)
1,391 19,668 2,963 Income before cumulative effect of change in
accounting principle 47,659 39,881 266,566 166,989 Cumulative
effect of accounting change (net of income tax expense of $426) - -
- 669 Net income $47,659 $39,881 $266,566 $167,658 Basic earnings
per share: Continuing operations $0.88 $0.64 $4.33 $2.66
Discontinued operations (0.02) 0.03 0.35 0.05 Cumulative effect of
accounting change - - - 0.01 Net income $0.86 $0.67 $4.68 $2.72
Diluted earnings per share: Continuing operations $0.86 $0.63 $4.24
$2.59 Discontinued operations (0.02) 0.02 0.34 0.05 Cumulative
effect of accounting change - - - 0.01 Net income $0.84 $0.65 $4.58
$2.65 Cash dividends declared per common share $0.08 $0.05 $0.25
$0.19 Average number of common shares outstanding: Basic 55,741
59,420 56,976 61,728 Diluted 56,965 60,992 58,210 63,244 Balance
Sheet Data December 31, December 31, 2006 2005 (In thousands) Cash,
cash equivalents and investments in marketable securities $255,953
$254,842 Working capital $247,459 $210,103 Total assets $1,237,869
$1,142,900 Stockholders' equity $466,094 $377,351 Other Financial
Data Three Months Ended Years Ended December 31, December 31, 2006
2005 2006 2005 (In thousands) Net cash provided by operating
activities $36,912 $88,358 $245,183 $251,234 Net cash provided by
(used for) investing activities $(37,537) $(56,669) $35,805
$(320,135) Net cash provided by (used for) financing activities
$(39,886) $(58,934) $(175,935) $50,505 Capital expenditures $31,247
$48,200 $120,429 $106,262 EBITDA from continuing operations(1)
$84,740 $69,114 $414,541 $302,399 (1) 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. Refining Operating Data Our refinery
operations include the Navajo Refinery and the Woods Cross
Refinery. The following tables set forth information, including
non-generally accepted accounting principles ("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 presented under "Reconciliations to Amounts Reported
under Generally Accepted Accounting Principles." Three Months Ended
Years Ended December 31, December 31, 2006 2005 2006 2005 Navajo
Refinery Crude charge (BPD) (1) 83,060 68,210 72,930 71,850
Refinery production (BPD) (2) 93,100 79,360 80,540 80,190 Sales of
produced refined products (BPD) 92,580 79,950 79,940 80,110 Sales
of refined products (BPD) (3) 102,770 90,170 93,660 89,400 Refinery
utilization (4) 101.3% 90.9% 92.9% 95.8% Average per produced
barrel (5) Net sales $70.90 $74.02 $79.62 $69.11 Cost of products
(6) 59.60 59.66 64.25 55.50 Refinery gross margin 11.30 14.36 15.37
13.61 Refinery operating expenses (7) 4.10 5.31 4.74 3.94 Net
operating margin $7.20 $9.05 $10.63 $9.67 Feedstocks: Sour crude
oil 76% 80% 80% 85% Sweet crude oil 10% 4% 8% 2% Other feedstocks
and blends 14% 16% 12% 13% Total 100% 100% 100% 100% Sales of
produced refined products: Gasolines 61% 61% 60% 59% Diesel fuels
28% 24% 28% 27% Jet fuels 3% 4% 4% 4% Asphalt 3% 5% 3% 6% LPG and
other 5% 6% 5% 4% Total 100% 100% 100% 100% Woods Cross Refinery
Crude charge (BPD) (1) 22,190 24,450 23,640 24,100 Refinery
production (BPD) (2) 23,910 26,130 25,190 25,850 Sales of produced
refined products (BPD) 24,630 25,430 25,150 26,390 Sales of refined
products (BPD) (3) 25,730 26,930 26,210 27,710 Refinery utilization
(4) 85.3% 94.0% 90.9% 92.7% Average per produced barrel (5) Net
sales $72.20 $71.94 $82.09 $69.13 Cost of products (6) 57.15 60.29
64.99 59.51 Refinery gross margin 15.05 11.65 17.10 9.62 Refinery
operating expenses (7) 5.49 5.96 5.13 4.61 Net operating margin
$9.56 $5.69 $11.97 $5.01 Three Months Ended Years Ended December
31, December 31, 2006 2005 2006 2005 Woods Cross Refinery
Feedstocks: Sour crude oil -% 5% 2% 8% Sweet crude oil 90% 85% 89%
82% Other feedstocks and blends 10% 10% 9% 10% Total 100% 100% 100%
100% Sales of produced refined products: Gasolines 60% 57% 63% 60%
Diesel fuels 26% 29% 28% 29% Jet fuels 1% 1% 2% 2% Fuel oil 8% 9%
5% 7% LPG and other 5% 4% 2% 2% Total 100% 100% 100% 100%
Consolidated(8) Crude charge (BPD) (1) 105,250 92,660 96,570 95,950
Refinery production (BPD) (2) 117,010 105,490 105,730 106,040 Sales
of produced refined products (BPD) 117,210 105,380 105,090 106,500
Sales of refined products (BPD) (3) 128,500 117,100 119,870 117,110
Refinery utilization (4) 97.5% 91.7% 92.4% 95.0% Average per
produced barrel (5) Net sales $71.17 $73.52 $80.21 $69.12 Cost of
products (6) 59.09 59.81 64.43 56.50 Refinery gross margin 12.08
13.71 15.78 12.62 Refinery operating expenses (7) 4.39 5.47 4.83
4.11 Net operating margin $7.69 $8.24 $10.95 $8.51 Feedstocks: Sour
crude oil 61% 61% 61% 67% Sweet crude oil 26% 24% 28% 21% Other
feedstocks and blends 13% 15% 11% 12% Total 100% 100% 100% 100%
Sales of produced refined products: Gasolines 61% 60% 61% 59%
Diesel fuels 28% 25% 28% 27% Jet fuels 3% 4% 3% 4% Asphalt 2% 3% 2%
4% LPG and other 6% 8% 6% 6% Total 100% 100% 100% 100% (1) Crude
charge represents the barrels per day of crude oil processed at the
crude units at our refineries. (2) 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. (3) Includes refined
products purchased for resale. (4) Represents crude charge divided
by total crude capacity (BPSD). (5) 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." (6) Transportation costs billed by HEP are
included in cost of products. (7) Represents operating expenses of
our refineries, exclusive of depreciation, depletion and
amortization. (8) 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 only from continuing operations. Set forth below is our
calculation of EBITDA from continuing operations. Three Months
Ended Years Ended December 31, December 31, 2006 2005 2006 2005 (In
thousands) Income from continuing operations $48,808 $38,490
$246,898 $164,026 Add provision for income tax 27,004 24,024
136,603 99,626 Add interest expense 261 395 1,076 5,101 Subtract
interest income (2,867) (2,446) (9,757) (6,901) Add depreciation,
depletion and amortization 11,534 8,651 39,721 40,547 EBITDA from
continuing operations $84,740 $69,114 $414,541 $302,399
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
Consolidated 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 Years Ended December 31, December 31, 2006 2005 2006 2005
Average per produced barrel: Navajo Refinery Net sales $70.90
$74.02 $79.62 $69.11 Less cost of products 59.60 59.66 64.25 55.50
Refinery gross margin $11.30 $14.36 $15.37 $13.61 Woods Cross
Refinery Net sales $72.20 $71.94 $82.09 $69.13 Less cost of
products 57.15 60.29 64.99 59.51 Refinery gross margin $15.05
$11.65 $17.10 $9.62 Consolidated Net sales $71.17 $73.52 $80.21
$69.12 Less cost of products 59.09 59.81 64.43 56.50 Refinery gross
margin $12.08 $13.71 $15.78 $12.62 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 both of our refineries on a consolidated basis is calculated as
shown below. Three Months Ended Years Ended December 31, December
31, 2006 2005 2006 2005 Average per produced barrel: Navajo
Refinery Refinery gross margin $11.30 $14.36 $15.37 $13.61 Less
refinery operating expenses 4.10 5.31 4.74 3.94 Net operating
margin $7.20 $9.05 $10.63 $9.67 Woods Cross Refinery Refinery gross
margin $15.05 $11.65 $17.10 $9.62 Less refinery operating expenses
5.49 5.96 5.13 4.61 Net operating margin $9.56 $5.69 $11.97 $5.01
Consolidated Refinery gross margin $12.08 $13.71 $15.78 $12.62 Less
refinery operating expenses 4.39 5.47 4.83 4.11 Net operating
margin $7.69 $8.24 $10.95 $8.51 Below are reconciliations to our
Consolidated Statements of Income for (i) sales and other revenues,
cost of products sold 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 Years Ended December 31, December 31,
2006 2005 2006 2005 Navajo Refinery Average sales price per
produced barrel sold $70.90 $74.02 $79.62 $69.11 Times sales of
produced refined products sold (BPD) 92,580 79,950 79,940 80,110
Times number of days in period 92 92 365 365 Refined product sales
from produced products sold $603,881 $544,447 $2,323,160 $2,020,787
Woods Cross Refinery Average sales price per produced barrel sold
$72.20 $71.94 $82.09 $69.13 Times sales of produced refined
products sold (BPD) 24,630 25,430 25,150 26,390 Times number of
days in period 92 92 365 365 Refined product sales from produced
products sold $163,602 $168,308 $753,566 $665,884 Sum of refined
products sales from produced products sold from our two refineries
(4) $767,483 $712,755 $3,076,726 $2,686,671 Add refined product
sales from purchased products and rounding (1) 82,662 81,096
480,641 273,608 Total refined products sales 850,145 793,851
3,557,367 2,960,279 Add direct sales of excess crude oil(2) 48,624
- 323,002 - Add other refining segment revenue (3) 38,610 17,958
141,605 68,056 Total refining segment revenue 937,379 811,809
4,021,974 3,028,335 Add HEP sales and other revenue - - - 36,034
Add corporate and other revenues 824 738 1,752 1,772 Subtract
consolidations and eliminations (113) (129) (509) (19,828) Sales
and other revenues $938,090 $812,418 $4,023,217 $3,046,313 (1) We
purchase finished products when opportunities arise that provide a
profit on the sale of such products, or to meet delivery
commitments. (2) 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.
(3) Other refining segment revenue includes the incremental
revenues associated with NK Asphalt Partners subsequent to its
consolidation in February 2005 and revenue derived from sulfur
credit sales. (4) 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 Years Ended December 31,
December 31, 2006 2005 2006 2005 Average sales price per produced
barrel sold $71.17 $73.52 $80.21 $69.12 Times sales of produced
refined products sold (BPD) 117,210 105,380 105,090 106,500 Times
number of days in period 92 92 365 365 Refined product sales from
produced products sold $767,483 $712,755 $3,076,726 $2,686,671
Reconciliation of average cost of products per produced barrel sold
to total cost of products sold Three Months Ended Years Ended
December 31, December 31, 2006 2005 2006 2005 Navajo Refinery
Average cost of products per produced barrel sold $59.60 $59.66
$64.25 $55.50 Times sales of produced refined products sold (BPD)
92,580 79,950 79,940 80,110 Times number of days in period 92 92
365 365 Cost of products for produced products sold $507,635
$438,823 $1,874,693 $1,622,828 Woods Cross Refinery Average cost of
products per produced barrel sold $57.15 $60.29 $64.99 $59.51 Times
sales of produced refined products sold (BPD) 24,630 25,430 25,150
26,390 Times number of days in period 92 92 365 365 Cost of
products for produced products sold $129,500 $141,052 $596,592
$573,221 Sum of cost of products for produced products sold from
our two refineries (4) $637,135 $579,875 $2,471,285 $2,196,049 Add
refined product costs from purchased products sold and rounding (1)
77,946 76,619 473,903 274,948 Total refined costs of products sold
715,081 656,494 2,945,188 2,470,997 Add crude oil cost of direct
sales of excess crude oil(2) 49,413 - 323,337 - Add other refining
segment costs of products sold (3) 22,220 13,813 81,388 47,641
Total refining segment cost of products sold 786,714 670,307
3,349,913 2,518,638 Subtract consolidations and eliminations (113)
(129) (509) (19,828) Cost of products sold (exclusive of
depreciation, depletion and amortization) $786,601 $670,178
$3,349,404 $2,498,810 (1) We purchase finished products when
opportunities arise that provide a profit on the sale of such
products, or to meet delivery commitments. (2) 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. (3) Other refining segment
costs of products sold includes the incremental costs of products
for NK Asphalt Partners subsequent to its consolidation in February
2005 and costs attributable to sulfur credit sales. (4) 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 Years Ended December 31, December 31, 2006 2005 2006 2005
Average cost of products per produced barrel sold $59.09 $59.81
$64.43 $56.50 Times sales of produced refined products sold (BPD)
117,210 105,380 105,090 106,500 Times number of days in period 92
92 365 365 Cost of products for produced products sold $637,135
$579,875 $2,471,285 $2,196,049 Reconciliation of average refinery
operating expenses per produced barrel sold to total operating
expenses Three Months Ended Years Ended December 31, December 31,
2006 2005 2006 2005 Navajo Refinery Average refinery operating
expenses per produced barrel sold $4.10 $5.31 $4.74 $3.94 Times
sales of produced refined products sold (BPD) 92,580 79,950 79,940
80,110 Times number of days in period 92 92 365 365 Refinery
operating expenses for produced products sold $34,921 $39,057
$138,304 $115,206 Woods Cross Refinery Average refinery operating
expenses per produced barrel sold $5.49 $5.96 $5.13 $4.61 Times
sales of produced refined products sold (BPD) 24,630 25,430 25,150
26,390 Times number of days in period 92 92 365 365 Refinery
operating expenses for produced products sold $12,440 $13,944
$47,092 $44,405 Sum of refinery operating expenses per produced
products sold from our two refineries (2) $47,361 $53,001 $185,396
$159,611 Add other refining segment operating expenses and rounding
(1) 5,385 6,960 23,015 20,545 Total refining segment operating
expenses 52,746 59,961 208,411 180,156 Add HEP operating expenses -
- - 11,836 Add corporate and other costs 9 59 49 59 Operating
expenses (exclusive of depreciation, depletion and amortization)
$52,755 $60,020 $208,460 $192,051 (1) Other refining segment
operating expenses include the marketing costs associated with our
refining segment and the incremental operating expenses of NK
Asphalt Partners subsequent to its consolidation in February 2005.
(2) 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 Years Ended December 31,
December 31, 2006 2005 2006 2005 Average refinery operating
expenses per produced barrel sold $4.39 $5.47 $4.83 $4.11 Times
sales of produced refined products sold (BPD) 117,210 105,380
105,090 106,500 Times number of days in period 92 92 365 365
Refinery operating expenses for produced products sold $47,361
$53,001 $185,396 $159,611 Reconciliation of net operating margin
per barrel to refinery gross margin per barrel to total sales and
other revenues Three Months Ended Years Ended December 31, December
31, 2006 2005 2006 2005 Navajo Refinery Net operating margin per
produced barrel $7.20 $9.05 $10.63 $9.67 Add average refinery
operating expenses per produced barrel 4.10 5.31 4.74 3.94 Refinery
gross margin per produced barrel 11.30 14.36 15.37 13.61 Add
average cost of products per produced barrel sold 59.60 59.66 64.25
55.50 Average net sales per produced barrel sold $70.90 $74.02
$79.62 $69.11 Times sales of produced refined products sold (BPD)
92,580 79,950 79,940 80,110 Times number of days in period 92 92
365 365 Refined product sales from produced products sold $603,881
$544,447 $2,323,160 $2,020,787 Woods Cross Refinery Net operating
margin per produced barrel $9.56 $5.69 $11.97 $5.01 Add average
refinery operating expenses per produced barrel 5.49 5.96 5.13 4.61
Refinery gross margin per produced barrel 15.05 11.65 17.10 9.62
Add average cost of products per produced barrel sold 57.15 60.29
64.99 59.51 Average net sales per produced barrel sold $72.20
$71.94 $82.09 $69.13 Times sales of produced refined products sold
(BPD) 24,630 25,430 25,150 26,390 Times number of days in period 92
92 365 365 Refined product sales from produced products sold
$163,602 $168,308 $753,566 $665,884 Sum of refined product sales
from produced products sold from our two refineries (4) $767,483
$712,755 $3,076,726 $2,686,671 Add refined product sales from
purchased products and rounding (1) 82,662 81,096 480,641 273,608
Total refining product sales 850,145 793,851 3,557,367 2,960,279
Add direct sales of excess crude oil(2) 48,624 - 323,002 - Add
other refining segment revenue (3) 38,610 17,958 141,605 68,056
Total refining segment revenue 937,379 811,809 4,021,974 3,028,335
Add HEP sales and other revenue - - - 36,034 Add corporate and
other revenues 824 738 1,752 1,772 Subtract consolidations and
eliminations (113) (129) (509) (19,828) Sales and other revenues
$938,090 $812,418 $4,023,217 $3,046,313 (1) We purchase finished
products when opportunities arise that provide a profit on the sale
of such products, or to meet delivery commitments. (2) 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. (3) Other refining segment
revenue includes the incremental revenues associated with NK
Asphalt Partners subsequent to its consolidation in February 2005
and revenue derived from sulfur credit sales. (4) 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 Years Ended December 31, December 31, 2006 2005 2006 2005 Net
operating margin per produced barrel $7.69 $8.24 $10.95 $8.51
Average refinery operating expenses per produced barrel 4.39 5.47
4.83 4.11 Refinery gross margin per produced barrel 12.08 13.71
15.78 12.62 Add average cost of products per produced barrel sold
59.09 59.81 64.43 56.50 Average net sales per produced barrel sold
$71.17 $73.52 $80.21 $69.12 Times sales of produced refined
products sold (BPD) 117,210 105,380 105,090 106,500 Times number of
days in period 92 92 365 365 Refined product sales from produced
products sold $767,483 $712,755 $3,076,726 $2,686,671 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 Web
site: http://www.hollycorp.com/
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