Holly Energy Partners, L.P. reports second quarter results

Holly Energy Partners, L.P. (“HEP” or the “Partnership”) (NYSE:HEP) today reported financial results for the second quarter of 2017. Net income attributable to HEP for the second quarter was $41.3 million ($0.36 per basic and diluted limited partner unit) compared to $39.1 million ($0.45 per basic and diluted limited partner unit) for the second quarter of 2016.

Distributable cash flow was $60.9 million for the quarter, up $5.2 million, or 9.3% compared to the second quarter of 2016. HEP announced its 51st consecutive distribution increase on July 27, 2017, raising the quarterly distribution from $0.62 to $0.6325 per unit, which represents an increase of 8.1% over the distribution for the second quarter of 2016, exceeding HEP’s distribution growth target of 8%.

The increase in earnings is primarily due to increased operating income from our Woods Cross refinery processing units of $4.5 million, offset by higher interest expense of $2.5 million.

Commenting on 2017 second quarter results, George Damiris, Chief Executive Officer, stated, “We are pleased with our solid financial performance in the second quarter, which allowed us to maintain our record of continuous quarterly distribution increases and achieve our distribution growth target of 8%, while still maintaining a distribution coverage ratio greater than 1.0. Looking forward, we will continue to leverage our talented employee base, our relationship with HollyFrontier and our Mid-Continent, Northwest and Southwest logistics footprint to generate new organic and external growth opportunities.”

Second Quarter 2017 Revenue Highlights
Revenues for the quarter were $109.1 million, an increase of $14.2 million compared to the second quarter of 2016. The increase is primarily attributable to the $12.9 million of revenue recorded for the Woods Cross processing units acquired in the fourth quarter of 2016. Overall pipeline volumes were up 2% compared to the three months ended June 30, 2016, largely due to an increase in intermediate pipeline shipments.

Revenues for the three months ended June 30, 2017, include the recognition of $0.6 million of prior shortfalls billed to shippers in 2016 as they did not exceed their minimum volume commitments within the contractual make-up period. As of June 30, 2017, shortfall deferred revenue reflected in our consolidated balance sheet was $8.0 million. Such deferred revenue will be recognized in earnings either as (a) payment for shipments in excess of guaranteed levels, if and to the extent the pipeline system has the necessary capacity for shipments in excess of guaranteed levels, or (b) when shipping rights expire unused over the contractual make-up period.

Six Months Ended June 30, 2017 Revenue Highlights
Revenues for the six months ended June 30, 2017, were $214.8 million, an increase of $17.9 million compared to the six months ended June 20, 2016. The increase is primarily attributable to the $27.6 million of revenue recorded for the Woods Cross refinery processing units acquired in the fourth quarter of 2016, offset by a $7.9 million decrease in revenues around assets serving HFC’s Navajo refinery due to the substantial turnaround at the Navajo refinery during the first quarter of 2017.

Revenues for the six months ended June 30, 2017, include the recognition of $2.7 million of prior shortfalls billed to shippers in 2016 as they did not exceed their minimum volume commitments within the contractual make-up period.

Operating Costs and Expenses Highlights
Operating costs and expenses were $56.7 million and $110.6 million for the three and six months ended June 30, 2017, representing increases of $8.9 million and $15.3 million from the three and six months ended June 30, 2016. The increases are primarily due to new operating costs and expenses for our Woods Cross refinery processing units acquired in the fourth quarter of 2016.

Interest expense was $13.7 million and $27.3 million for the three and six months ended June 30, 2017, representing increases of $2.5 million and $5.5 million over the same periods of 2016. The increases are due to the offering of $400 million aggregate principal 6% senior notes in July 2016, higher average balances outstanding under our senior secured revolving credit facility, and market interest rate increases.

We have scheduled a webcast conference call today at 4:00 PM Eastern Time to discuss financial results. This webcast may be accessed at https://event.webcasts.com/starthere.jsp?ei=1154339.