Holly Energy Partners, L.P. Reports Fourth Quarter Results
Dallas, Texas Holly Energy Partners, L.P. (NYSE-HEP) today reported its financial results for
the fourth quarter of 2008. Distributable cash flow for the fourth quarter was $16.9 million, up
$4.6 million or 37% from the same period last year. For the year ended December 31, 2008
distributable cash flow was $60.4 million, up $9.4 million or 18% from the same period last year.
Net income for the fourth quarter of 2008 was $7.1 million ($0.37 per basic and diluted limited
partner unit) compared to $10.1 million ($0.58 per basic and diluted limited partner unit) for the
same period of 2007. Net income includes $2.3 million of non-cash interest expense related to
changes in fair value of certain interest rate swaps. For the year ended December 31, 2008, net
income was $25.4 million ($1.34 per basic and diluted limited partner unit) compared to $39.3
million ($2.26 per basic and diluted limited partner unit) for the same period of 2007.
The strength of our distributable cash flow relative to our net income when comparing our 2008
results to 2007 is due to the contractual minimum commitments that we have in place with our
shippers. Under our transportation agreements, Holly Corporation subsidiaries and Alon USA, Inc.
are obligated to ship product volumes that generally result in a minimum level of billings. If
these shippers do not meet their minimum commitments, we bill them quarterly an amount related to
such shortfalls. Although these shortfall billings are required to be recorded as deferred
revenues, such shortfall billings are included in our distributable cash flow as they occur.
Deferred revenue amounts are later recognized as revenue and included in net income when no longer
subject to recapture. This typically occurs within one year after the shortfall occurs and does
not affect distributable cash flow. At December 31, 2008, we had $15.7 million in deferred revenue
as a result of such shortfall billings in 2008.
Commenting on the fourth quarter results for 2008, Matt Clifton, Chairman of the Board and Chief
Executive Officer stated, Our fourth quarter EBITDA and distributable cash flow were at record
quarterly levels with each increasing $4.6 million or 27% and 37% over the same period in 2007,
respectively. Additionally revenues improved for the quarter from those levels reported during the
first nine months of 2008 as Alons Big Spring refinery returned to normal operating levels. Cash
flows from our crude pipeline and tankage assets acquired in the first quarter contributed greatly
to the increase in our distributable cash flow in the current year. I am pleased with our
performance during the quarter that allowed us to increase our fourth quarter distribution to
$0.765 per unit, representing our sixteenth consecutive quarterly increase and a 6% increase over
our distribution for the fourth quarter of 2007. We believe this performance in turbulent times
underscores both the stability of our fee-based income and the fiscally prudent nature of our past
growth initiatives. Looking forward, the 85,000 bpd to 100,000 bpd capacity expansion upgrade to
Hollys Navajo Refinery will be completed and tied in during Hollys first quarter 2009 planned
maintenance turnaround. It is expected that increased crude oil deliveries to and increased
production from the Navajo Refinery should have a positive impact on our transported crude oil and
product volumes beginning in the second quarter of 2009. Higher revenues from increased movements
on our existing pipelines will provide another opportunity to continue our growth trajectory in
distributable cash flow.
Total revenues for the fourth quarter of 2008 were $34.5 million, a $7.3 million increase compared
to the three months ended December 31, 2007. This increase was due to revenues attributable to our
crude pipeline and tankage assets acquired in the first quarter of 2008, an increase in affiliate
refined product pipeline shipments and the effect of tariff increases on pipeline shipments. These
increases were partially offset by a decrease in third party refined product shipments, a decrease
in shipments on our intermediate pipeline system and a decrease in previously deferred revenue