Company Announcements

Holly Energy Partners, L.P. Reports Second Quarter Results

  • Reported net income attributable to HEP of $55.7 million or $0.53 per unit
  • Announced quarterly distribution of $0.35 per unit
  • Reported EBITDA of $88.1 million and Adjusted EBITDA of $88.3 million

DALLAS--(BUSINESS WIRE)--Aug. 3, 2021-- Holly Energy Partners, L.P. (“HEP” or the “Partnership”) (NYSE: HEP) today reported financial results for the second quarter of 2021. Net income attributable to HEP for the second quarter of 2021 was $55.7 million ($0.53 per basic and diluted limited partner unit), compared to $76.5 million ($0.73 per basic and diluted limited partner unit) for the second quarter of 2020.

The second quarter results reflect a gain of $5.3 million related to the sale of a 6-inch refined product pipeline that connected HollyFrontier Corporation's ("HollyFrontier" or "HFC") Navajo Refinery to terminals in El Paso for gross proceeds of $7.0 million. Net income attributable to HEP for the second quarter of 2020 included a gain on sales-type leases of $33.8 million. Excluding these items, net income attributable to HEP for the second quarters of 2021 and 2020 were $50.5 million ($0.48 per basic and diluted limited partner unit) and $42.6 million ($0.40 per basic and diluted limited partner unit), respectively. The increase in earnings was mainly due to higher volumes across our pipelines and higher interest income associated with sales-type leases, partially offset by higher operating expenses.

Distributable cash flow was $66.7 million for the quarter, an increase of $1.2 million, or 1.9% compared to the second quarter of 2020. HEP declared a quarterly cash distribution of $0.35 per unit on July 22, 2021.

Commenting on our 2021 second quarter results, Michael Jennings, Chief Executive Officer, stated, "HEP delivered solid results in the quarter, supported by safe and reliable operations and continued improvement in crude and refined product demand in the markets we serve. Looking forward, we remain focused on consistent operational execution as we continue to see demand recovery from COVID-19 in the markets we serve."

Impact of COVID-19 on Our Business

Our business depends in large part on the demand for the various petroleum products we transport, terminal and store in the markets we serve. The impact of the COVID-19 pandemic on the global macroeconomy created diminished demand for refined products and crude oil transportation, and for the terminalling and storage services that we provide. Since the declines in demand at the beginning of the COVID-19 pandemic, we began to see improvement in demand for these products and services beginning late in the second quarter of 2020 that continued through the second quarter of 2021 with volumes in many of our regions returning to pre-pandemic levels. We expect our customers will continue to adjust refinery production levels commensurate with market demand, and with the increasing availability of vaccines, we believe there is a path to a fulsome recovery in demand in 2021. For additional details of the impact of COVID-19 on our business, please see our Form 10-Q for the quarter ended June 30, 2021.

Second Quarter 2021 Revenue Highlights

Revenues for the second quarter were $126.2 million, an increase of $11.4 million compared to the second quarter of 2020. The increase was mainly due to a 14% increase in overall crude and product pipeline volumes.

  • Revenues from our refined product pipelines were $28.7 million, an increase of $3.7 million compared to the second quarter of 2020. Shipments averaged 171.2 thousand barrels per day ("mbpd") compared to 158.4 mbpd for the second quarter of 2020. The volume and revenue increases were mainly due to higher volumes on pipelines servicing HollyFrontier'sNavajo refinery and our UNEV pipeline.
  • Revenues from our intermediate pipelines were $7.5 million, consistent with the second quarter of 2020. Shipments averaged 143.8 mbpd for the second quarter of 2021 compared to 128.5 mbpd for the second quarter of 2020. The increase in volumes was mainly due to higher throughputs on our intermediate pipelines servicing HollyFrontier'sNavajo refinery while revenue remained relatively constant mainly due to contractual minimum volume guarantees.
  • Revenues from our crude pipelines were $32.1 million, an increase of $5.6 million compared to the second quarter of 2020, and shipments averaged 396.7 mbpd compared to 338.4 mbpd for the second quarter of 2020. The revenue and volume increases were mainly attributable to higher volumes on our crude pipeline systems in Wyoming and Utah.
  • Revenues from terminal, tankage and loading rack fees were $36.9 million, an increase of $0.6 million compared to the second quarter of 2020. Refined products and crude oil terminalled in the facilities averaged 466.7 mbpd compared to 418.0 mbpd for the second quarter of 2020. The volume increase was mainly the result of higher throughputs at HollyFrontier'sEl Dorado refinery. Revenues did not increase in proportion to the increase in volumes mainly due to contractual minimum volume guarantees and lower on-going revenues on our Cheyenne assets as a result of the conversion of the HollyFrontier Cheyenne refinery to renewable diesel production.
  • Revenues from refinery processing units were $21.0 million, an increase of $1.5 million compared to the second quarter of 2020, and throughputs averaged 76.6 mbpd compared to 49.9 mbpd for the second quarter of 2020. The increase in volumes was mainly due to increased throughput for both our Woods Cross and El Dorado processing units. Revenues did not increase in proportion to the increase in volumes mainly due to contractual minimum volume guarantees.

Six Months Ended June 30, 2021 Revenue Highlights

Revenues for the six months ended June 30, 2021, were $253.4 million, an increase of $10.8 million compared to the six months ended June 30, 2020. The increase was mainly attributable to increased volumes on our crude pipeline systems in Wyoming and Utah, the recognition of $9.9 million of the $10 million termination fee related to the termination of HollyFrontier's minimum volume commitment on our Cheyenne assets and higher revenues on our refinery processing units partially offset by lower on-going revenues on our Cheyenne assets as well as a reclassification of certain income from revenue to interest income under sales-type lease accounting.

  • Revenues from our refined product pipelines were $57.2 million, a decrease of $2.7 million compared to the six months ended June 30, 2020. Shipments averaged 167.6 mbpd compared to 169.0 mbpd for the six months ended June 30, 2020. The volume and revenue decreases were mainly due to lower volumes on pipelines servicing Delek's Big Spring refinery. Revenue also decreased due to a reclassification of certain pipeline income from revenue to interest income under sales-type lease accounting.
  • Revenues from our intermediate pipelines were $15.0 million, an increase of $0.1 million compared to the six months ended June 30, 2020. Shipments averaged 129.6 mbpd compared to 135.3 mbpd for the six months ended June 30, 2020. The decrease in volumes was mainly due to lower throughputs on our intermediate pipelines servicing HollyFrontier'sTulsa refinery while revenue remained relatively constant mainly due to contractual minimum volume guarantees.
  • Revenues from our crude pipelines were $62.6 million, an increase of $8.0 million compared to the six months ended June 30, 2020. Shipments averaged 385.3 mbpd compared to 367.8 mbpd for the six months ended June 30, 2020. The increases were mainly attributable to increased volumes on our crude pipeline systems in Wyoming and Utah.
  • Revenues from terminal, tankage and loading rack fees were $75.1 million, an increase of $1.3 million compared to the six months ended June 30, 2020. Refined products and crude oil terminalled in the facilities averaged 418.1 mbpd compared to 446.8 mbpd for the six months ended June 30, 2020. The volume decrease was mainly the result of lower throughputs at HollyFrontier'sTulsa refinery as well as the cessation of petroleum refinery operations at HollyFrontier'sCheyenne refinery. Revenues increased mainly due to the recognition of $9.9 million of the $10 million termination fee related to the termination of HollyFrontier's minimum volume commitment on our Cheyenne assets partially offset by lower on-going revenues on our Cheyenne assets as a result of the conversion of the HollyFrontier Cheyenne refinery to renewable diesel production as well as a reclassification of certain income from revenue to interest income under sales-type lease accounting.
  • Revenues from refinery processing units were $43.5 million, an increase of $4.1 million compared to the six months ended June 30, 2020. Throughputs averaged 68.7 mbpd compared to 59.8 mbpd for the six months ended June 30, 2020. The increase in volumes was mainly due to increased throughput for both our Woods Cross and El Dorado processing units. Revenues increased mainly due to higher recovery of natural gas costs as well as higher throughputs.

Operating Costs and Expenses Highlights

Operating costs and expenses were $69.9 million and $150.4 million for the three and six months ended June 30, 2021, representing increases of $7.6 million and $26.4 million from the three and six months ended June 30, 2020, respectively. The increases were mainly due to the goodwill impairment charge related to our Cheyenne reporting unit, higher maintenance costs, pipeline rental costs and natural gas costs, partially offset by lower materials and supplies, and property taxes.

Interest expense was $13.9 million and $27.2 million for the three and six months ended June 30, 2021, representing an increase of $0.2 million and a decrease of $4.4 million over the same period of 2020. The decrease was mainly due to market interest rate decreases under our senior secured revolving credit facility and refinancing our $500 million aggregate principal amount of 6.0% senior notes due 2024 with $500 million aggregate principal amount of 5.0% senior notes due 2028.

We have scheduled a webcast conference call today at 8:30 AM ET to discuss financial results and this morning’s announced acquisition (replacing the previously scheduled earnings call at 4:00 PM ET):

https://event.on24.com/wcc/r/3347467/55757B35D3CCD93D54C9366AD04CA5C5

An audio archive of this webcast will be available using the above noted link through August 17, 2021.

About Holly Energy Partners, L.P.

Holly Energy Partners, L.P., headquartered in Dallas, Texas, provides petroleum product and crude oil transportation, terminalling, storage and throughput services to the petroleum industry, including HollyFrontier subsidiaries. The Partnership, through its subsidiaries and joint ventures, owns and/or operates petroleum product and crude pipelines, tankage and terminals in Texas, New Mexico, Washington, Idaho, Oklahoma, Utah, Nevada, Wyoming and Kansas, as well as refinery processing units in Utah and Kansas.

HollyFrontier Corporation, headquartered in Dallas, Texas, is an independent petroleum refiner and marketer that produces high value light products such as gasoline, diesel fuel, jet fuel and other specialty products. HollyFrontier owns and operates refineries located in Kansas, Oklahoma, New Mexico and Utah and markets its refined products principally in the Southwest U.S., the Rocky Mountains extending into the Pacific Northwest and in other neighboring Plains states. In addition, HollyFrontier produces base oils and other specialized lubricants in the U.S., Canada and the Netherlands, and exports products to more than 80 countries. HollyFrontier also owns a 57% limited partner interest and a non-economic general partner interest in Holly Energy Partners, L.P.

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. Forward-looking statements use words such as “anticipate,” “project,” “expect,” “plan,” “goal,” “forecast,” “strategy,” “intend,” “should,” “would,” “could,” “believe,” “may,” and similar expressions and statements regarding our plans and objectives for future operations are intended to identify forward-looking statements. These statements are based on our beliefs and assumptions and those of our general partner using currently available information and expectations as of the date hereof, are not guarantees of future performance and involve certain risks and uncertainties. Our forward-looking statements are subject to a variety of risks, uncertainties and assumptions. Although we and our general partner believe that such expectations reflected in such forward-looking statements are reasonable, neither we nor our general partner can give any assurances that our expectations will prove to be 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:

  • HollyFrontier’s and the Partnership’s ability to successfully close the pending acquisition of Sinclair Oil Corporation and Sinclair Transportation Company (collectively, “Sinclair”, and such transactions, the “Sinclair Transactions”), or once closed, integrate the operations of Sinclair with its existing operations and fully realize the expected synergies of the Sinclair Transactions or on the expected timeline;
  • the satisfaction or waivers of the conditions precedent to the proposed Sinclair Transactions, including without limitation, the receipt of the HollyFrontier stockholder approval for the issuance of HF Sinclair common stock at closing and regulatory approvals (including clearance by antitrust authorities necessary to complete the Sinclair Transactions on the terms and timeline desired);
  • risks relating to the value of HEP’s limited partner common units to be issued at the closing of the Sinclair Transactions from sales in anticipation of closing and from sales by the Sinclair holders following the closing of the Sinclair Transactions;
  • legal proceedings that may be instituted against the Partnership following the announcement of the proposed Sinclair Transactions;
  • the extraordinary market environment and effects of the COVID-19 pandemic, including a significant decline in demand for refined petroleum products in markets we serve;
  • risks and uncertainties with respect to the actual quantities of petroleum products and crude oil shipped on our pipelines and/or terminalled, stored or throughput in our terminals and refinery processing units;
  • the economic viability of HollyFrontier, our other customers and our joint ventures’ other customers, including any refusal or inability of our or our joint ventures’ customers or counterparties to perform their obligations under their contracts;
  • the demand for refined petroleum products in the markets we serve;
  • our ability to purchase and integrate future acquired operations;
  • our ability to complete previously announced or contemplated acquisitions;
  • the availability and cost of additional debt and equity financing;
  • the possibility of temporary or permanent reductions in production or shutdowns at refineries utilizing our pipelines, terminal facilities and refinery processing units, due to reasons such as infection in the workforce, in response to reductions in demand or lower gross margins due to the economic impact of the COVID-19 pandemic, and any potential asset impairments resulting from such actions;
  • the effects of current and future government regulations and policies, including the effects of current and future restrictions on various commercial and economic activities in response to the COVID-19 pandemic;
  • delay by government authorities in issuing permits necessary for our business or our capital projects;
  • our and our joint venture partners' ability to complete and maintain operational efficiency in carrying out routine operations and capital construction projects;
  • the possibility of terrorist or cyberattacks and the consequences of any such attacks;
  • general economic conditions, including uncertainty regarding the timing, pace and extent of an economic recovery in the United States;
  • the impact of recent or proposed changes in the tax laws and regulations that affect master limited partnerships; and
  • other financial, operational and legal risks and uncertainties detailed from time to time in our 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 (Unaudited)

Income, Distributable Cash Flow and Volumes
The following tables present income, distributable cash flow and volume information for the three and six months ended June 30, 2021 and 2020.

 

Three Months Ended June 30,

 

Change from

 

2021

 

2020

 

2020

 

(In thousands, except per unit data)

Revenues

 

 

 

 

 

Pipelines:

 

 

 

 

 

Affiliates – refined product pipelines

$

19,213

 

 

 

$

16,302

 

 

 

$

2,911

 

 

Affiliates – intermediate pipelines

7,521

 

 

 

7,475

 

 

 

46

 

 

Affiliates – crude pipelines

19,251

 

 

 

19,311

 

 

 

(60

)

 

 

45,985

 

 

 

43,088

 

 

 

2,897

 

 

Third parties – refined product pipelines

9,526

 

 

 

8,750

 

 

 

776

 

 

Third parties – crude pipelines

12,811

 

 

 

7,116

 

 

 

5,695

 

 

 

68,322

 

 

 

58,954

 

 

 

9,368

 

 

Terminals, tanks and loading racks:

 

 

 

 

 

Affiliates

32,131

 

 

 

32,902

 

 

 

(771

)

 

Third parties

4,756

 

 

 

3,378

 

 

 

1,378

 

 

 

36,887

 

 

 

36,280

 

 

 

607

 

 

 

 

 

 

 

 

Refinery processing units - Affiliates

21,026

 

 

 

19,573

 

 

 

1,453

 

 

 

 

 

 

 

 

Total revenues

126,235

 

 

 

114,807

 

 

 

11,428

 

 

Operating costs and expenses

 

 

 

 

 

Operations

42,068

 

 

 

34,737

 

 

 

7,331

 

 

Depreciation and amortization

25,003

 

 

 

25,034

 

 

 

(31

)

 

General and administrative

2,847

 

 

 

2,535

 

 

 

312

 

 

 

69,918

 

 

 

62,306

 

 

 

7,612

 

 

Operating income

56,317

 

 

 

52,501

 

 

 

3,816

 

 

 

 

 

 

 

 

Equity in earnings of equity method investments

3,423

 

 

 

2,156

 

 

 

1,267

 

 

Interest expense, including amortization

(13,938

)

 

 

(13,779

)

 

 

(159

)

 

Interest income

6,614

 

 

 

2,813

 

 

 

3,801

 

 

Gain on sales-type leases

 

27

 

 

 

33,834

 

 

 

(33,807

)

 

Gain on sale of assets and other

5,415

 

 

 

468

 

 

 

4,947

 

 

 

1,541

 

 

 

25,492

 

 

 

(23,951

)

 

Income before income taxes

57,858

 

 

 

77,993

 

 

 

(20,135

)

 

State income tax expense

(27

)

 

 

(39

)

 

 

12

 

 

Net income

57,831

 

 

 

77,954

 

 

 

(20,123

)

 

Allocation of net income attributable to noncontrolling interests

(2,086

)

 

 

(1,484

)

 

 

(602

)

 

Net income attributable to Holly Energy Partners

$

55,745

 

 

 

$

76,470

 

 

 

$

(20,725

)

 

Limited partners’ earnings per unit – basic and diluted

$

0.53

 

 

 

$

0.73

 

 

 

$

(0.20

)

 

Weighted average limited partners’ units outstanding

105,440

 

 

 

105,440

 

 

 

 

 

EBITDA (1)

$

88,099

 

 

 

$

112,509

 

 

 

$

(24,410

)

 

Adjusted EBITDA (1)

$

88,261

 

 

 

$

80,168

 

 

 

$

8,093

 

 

Distributable cash flow (2)

$

66,680

 

 

 

$

65,456

 

 

 

$

1,224

 

 

Volumes (bpd)

 

 

 

 

 

Pipelines:

 

 

 

 

 

Affiliates – refined product pipelines

119,046

 

 

100,524

 

 

18,522

 

 

Affiliates – intermediate pipelines

143,762

 

 

128,464

 

 

15,298

 

 

Affiliates – crude pipelines

260,756

 

 

252,570

 

 

8,186

 

 

 

523,564

 

 

481,558

 

 

42,006

 

 

Third parties – refined product pipelines

52,126

 

 

57,876

 

 

(5,750

)

 

Third parties – crude pipelines

135,904

 

 

85,851

 

 

50,053

 

 

 

711,594

 

 

625,285

 

 

86,309

 

 

Terminals and loading racks:

 

 

 

 

 

Affiliates

413,441

 

 

372,093

 

 

41,348

 

 

Third parties

53,257

 

 

45,876

 

 

7,381

 

 

 

466,698

 

 

417,969

 

 

48,729

 

 

 

 

 

 

 

 

Refinery processing units - Affiliates

76,589

 

 

49,891

 

 

26,698

 

 

 

 

 

 

 

 

Total for pipelines and terminal assets (bpd)

1,254,881

 

 

1,093,145

 

 

161,736

 

 

 

Six Months Ended June 30,

 

Change from

 

2021

 

2020

 

2020

 

(In thousands, except per unit data)

Revenues

 

 

 

 

 

Pipelines:

 

 

 

 

 

Affiliates – refined product pipelines

$

37,819

 

 

 

$

36,385

 

 

 

$

1,434

 

 

Affiliates – intermediate pipelines

15,027

 

 

 

14,949

 

 

 

78

 

 

Affiliates – crude pipelines

38,705

 

 

 

39,704

 

 

 

(999

)

 

 

91,551

 

 

 

91,038

 

 

 

513

 

 

Third parties – refined product pipelines

19,389

 

 

 

23,548

 

 

 

(4,159

)

 

Third parties – crude pipelines

23,887

 

 

 

14,840

 

 

 

9,047

 

 

 

134,827

 

 

 

129,426

 

 

 

5,401

 

 

Terminals, tanks and loading racks:

 

 

 

 

 

Affiliates

65,995

 

 

 

66,496

 

 

 

(501

)

 

Third parties

9,074

 

 

 

7,282

 

 

 

1,792

 

 

 

75,069

 

 

 

73,778

 

 

 

1,291

 

 

 

 

 

 

 

 

Refinery processing units - Affiliates

43,522

 

 

 

39,457

 

 

 

4,065

 

 

 

 

 

 

 

 

Total revenues

253,418

 

 

 

242,661

 

 

 

10,757

 

 

Operating costs and expenses

 

 

 

 

 

Operations

83,433

 

 

 

69,718

 

 

 

13,715

 

 

Depreciation and amortization

50,068

 

 

 

49,012

 

 

 

1,056

 

 

General and administrative

5,815

 

 

 

5,237

 

 

 

578

 

 

Goodwill impairment

11,034

 

 

 

 

 

 

11,034

 

 

 

150,350

 

 

 

123,967

 

 

 

26,383

 

 

Operating income

103,068

 

 

 

118,694

 

 

 

(15,626

)

 

 

 

 

 

 

 

Equity in earnings of equity method investments

5,186

 

 

 

3,870

 

 

 

1,316

 

 

Interest expense, including amortization

(27,178

)

 

 

(31,546

)

 

 

4,368

 

 

Interest income

13,162

 

 

 

5,031

 

 

 

8,131

 

 

Loss on early extinguishment of debt

 

 

 

(25,915

)

 

 

25,915

 

 

Gain on sales-type leases

 

24,677

 

 

 

33,834

 

 

 

(9,157

)

 

Gain on sale of assets and other

5,917

 

 

 

974

 

 

 

4,943

 

 

 

21,764

 

 

 

(13,752

)

 

 

35,516

 

 

Income before income taxes

124,832

 

 

 

104,942

 

 

 

19,890

 

 

State income tax expense

(64

)

 

 

(76

)

 

 

12

 

 

Net income

124,768

 

 

 

104,866

 

 

 

19,902

 

 

Allocation of net income attributable to noncontrolling interests

(4,626

)

 

 

(3,535

)

 

 

(1,091

)

 

Net income attributable to Holly Energy Partners

$

120,142

 

 

 

$

101,331

 

 

 

$

18,811

 

 

Limited partners’ earnings per unit – basic and diluted

$

1.14

 

 

 

$

0.96

 

 

 

$

0.18

 

 

Weighted average limited partners’ units outstanding

105,440

 

 

 

105,440

 

 

 

 

 

EBITDA (1)

$

184,290

 

 

 

$

176,934

 

 

 

$

7,356

 

 

Adjusted EBITDA (1)

$

176,196

 

 

 

$

171,276

 

 

 

$

4,920

 

 

Distributable cash flow (2)

$

139,899

 

 

 

$

136,164

 

 

 

$

3,735

 

 

Volumes (bpd)

 

 

 

 

 

Pipelines:

 

 

 

 

 

Affiliates – refined product pipelines

119,316

 

 

115,245

 

 

4,071

 

 

Affiliates – intermediate pipelines

129,573

 

 

135,288

 

 

(5,715

)

 

Affiliates – crude pipelines

255,730

 

 

278,801

 

 

(23,071

)

 

 

504,619

 

 

529,334

 

 

(24,715

)

 

Third parties – refined product pipelines

48,298

 

 

53,756

 

 

(5,458

)

 

Third parties – crude pipelines

129,603

 

 

89,027

 

 

40,576

 

 

 

682,520

 

 

672,117

 

 

10,403

 

 

Terminals and loading racks:

 

 

 

 

 

Affiliates

368,612

 

 

400,911

 

 

(32,299

)

 

Third parties

49,526

 

 

45,910

 

 

3,616

 

 

 

418,138

 

 

446,821

 

 

(28,683

)

 

 

 

 

 

 

 

Refinery processing units - Affiliates

68,688

 

 

59,843

 

 

8,845

 

 

 

 

 

 

 

 

Total for pipelines and terminal assets (bpd)

1,169,346

 

 

1,178,781

 

 

(9,435

)

 

(1) 

Earnings before interest, taxes, depreciation and amortization (“EBITDA”) is calculated as net income attributable to Holly Energy Partners plus (i) interest expense, net of interest income, (ii) state income tax and (iii) depreciation and amortization. Adjusted EBITDA is calculated as EBITDA plus (i) loss on early extinguishment of debt, (ii) goodwill impairment and (iii) pipeline tariffs not included in revenues due to impacts from lease accounting for certain pipeline tariffs minus (iv) gain on sales-type leases, (v) gain on significant asset sales, and (vi) pipeline lease payments not included in operating costs and expenses. Portions of our minimum guaranteed pipeline tariffs for assets subject to sales-type lease accounting are recorded as interest income with the remaining amounts recorded as a reduction in net investment in leases. These pipeline tariffs were previously recorded as revenues prior to the renewal of the throughput agreement, which triggered sales-type lease accounting. Similarly, certain pipeline lease payments were previously recorded as operating costs and expenses, but the underlying lease was reclassified from an operating lease to a financing lease, and these payments are now recorded as interest expense and reductions in the lease liability. EBITDA and Adjusted EBITDA are not calculations based upon generally accepted accounting principles ("GAAP"). However, the amounts included in the EBITDA and Adjusted EBITDA calculations are derived from amounts included in our consolidated financial statements. EBITDA and Adjusted EBITDA should not be considered as alternatives to net income attributable to Holly Energy Partners or operating income, as indications of our operating performance or as alternatives to operating cash flow as a measure of liquidity. EBITDA and Adjusted EBITDA are not necessarily comparable to similarly titled measures of other companies. EBITDA and Adjusted EBITDA are presented here because they are widely used financial indicators used by investors and analysts to measure performance. EBITDA and Adjusted EBITDA are also used by our management for internal analysis and as a basis for compliance with financial covenants.

Set forth below is our calculation of EBITDA and Adjusted EBITDA.

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

2021

 

2020

 

2021

 

2020

 

 

(In thousands)

Net income attributable to Holly Energy Partners

 

$

55,745

 

 

 

$

76,470

 

 

 

$

120,142

 

 

 

$

101,331

 

 

Add (subtract):

 

 

 

 

 

 

 

 

Interest expense

 

13,938

 

 

 

13,779

 

 

 

27,178

 

 

 

31,546

 

 

Interest Income

 

(6,614

)

 

 

(2,813

)

 

 

(13,162

)

 

 

(5,031

)

 

State income tax expense

 

27

 

 

 

39

 

 

 

64

 

 

 

76

 

 

Depreciation and amortization

 

25,003

 

 

 

25,034

 

 

 

50,068

 

 

 

49,012

 

 

EBITDA

 

88,099

 

 

 

112,509

 

 

 

184,290

 

 

 

176,934

 

 

Loss on early extinguishment of debt

 

 

 

 

 

 

 

 

 

 

25,915

 

 

Gain on sales-type leases

 

(27

)

 

 

(33,834

)

 

 

(24,677

)

 

 

(33,834

)

 

Gain on significant asset sales

 

(5,263

)

 

 

 

 

 

(5,263

)

 

 

 

 

Goodwill impairment

 

 

 

 

 

 

 

11,034

 

 

 

 

 

Pipeline tariffs not included in revenues

 

7,058

 

 

 

3,099

 

 

 

14,025

 

 

 

5,474

 

 

Lease payments not included in operating costs

 

(1,606

)

 

 

(1,606

)

 

 

(3,213

)

 

 

(3,213

)

 

Adjusted EBITDA

 

$

88,261

 

 

 

$

80,168

 

 

 

$

176,196

 

 

 

$

171,276

 

 

(2) 

Distributable cash flow is not a calculation based upon GAAP. However, the amounts included in the calculation are derived from amounts presented in our consolidated financial statements, with the general exception of maintenance capital expenditures. Distributable cash flow should not be considered in isolation or as an alternative to net income attributable to Holly Energy Partners or operating income, as an indication of our operating performance, or as an alternative to operating cash flow as a measure of liquidity. Distributable cash flow is not necessarily comparable to similarly titled measures of other companies. Distributable cash flow is presented here because it is a widely accepted financial indicator used by investors to compare partnership performance.  It is also used by management for internal analysis and our performance units. We believe that this measure provides

Set forth below is our calculation of distributable cash flow.

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

2021

 

2020

 

2021

 

2020

 

 

(In thousands)

Net income attributable to Holly Energy Partners

 

$

55,745

 

 

 

$

76,470

 

 

 

$

120,142

 

 

 

$

101,331

 

 

Add (subtract):

 

 

 

 

 

 

 

 

Depreciation and amortization

 

25,003

 

 

 

25,034

 

 

 

50,068

 

 

 

49,012

 

 

Amortization of discount and deferred debt charges

 

1,385

 

 

 

842

 

 

 

2,229

 

 

 

1,641

 

 

Loss on early extinguishment of debt

 

 

 

 

 

 

 

 

 

 

25,915

 

 

Customer billings greater than revenue recognized

 

(3,573

)

 

 

(44

)

 

 

(179

)

 

 

(501

)

 

Maintenance capital expenditures (3)

 

(4,111

)

 

 

(1,140

)

 

 

(5,482

)

 

 

(3,627

)

 

Increase (decrease) in environmental liability

 

(78

)

 

 

157

 

 

 

(234

)

 

 

158

 

 

Decrease in reimbursable deferred revenue

 

(3,502

)

 

 

(3,005

)

 

 

(7,516

)

 

 

(5,805

)

 

Gain on sales-type leases

 

(27

)

 

 

(33,834

)

 

 

(24,677

)

 

 

(33,834

)

 

Gain on significant asset sales

 

(5,263

)

 

 

 

 

 

(5,263

)

 

 

 

 

Goodwill impairment

 

 

 

 

 

 

 

11,034

 

 

 

 

 

Other

 

1,101

 

 

 

976

 

 

 

(223

)

 

 

1,874

 

 

Distributable cash flow

 

$

66,680

 

 

 

$

65,456

 

 

 

$

139,899

 

 

 

$

136,164

 

 

(3) 

Maintenance capital expenditures are capital expenditures made to replace partially or fully depreciated assets in order to maintain the existing operating capacity of our assets and to extend their useful lives. Maintenance capital expenditures include expenditures required to maintain equipment reliability, tankage and pipeline integrity, safety and to address environmental regulations.

Set forth below is certain balance sheet data.

 

 

June 30,

 

December 31,

 

 

2021

 

2020

 

 

(In thousands)

Balance Sheet Data

 

 

 

 

Cash and cash equivalents

 

$

19,561

 

 

$

21,990

 

Working capital

 

$

15,367

 

 

$

14,247

 

Total assets

 

$

2,172,822

 

 

$

2,167,565

 

Long-term debt

 

$

1,362,570

 

 

$

1,405,603

 

Partners' equity

 

$

425,218

 

 

$

379,292

 

John Harrison, Senior Vice President and
Chief Financial Officer and Treasurer
Craig Biery, Vice President, Investor Relations
Holly Energy Partners, L.P.
214-954-6511

Source: Holly Energy Partners, L.P.