Holly Energy Partners Lp (HEP) 10-Q Quarterly Report May 2022

Dallas, Texas -- Holly Energy Partners, L.P. ("HEP" or the "Partnership") (NYSE: HEP) today reported financial results for the first quarter of 2022. Net income attributable to HEP for the first quarter of 2022 was $49.6 million ($0.45 per basic and diluted limited partner unit), compared to $64.4 million ($0.61 per basic and diluted limited partner unit) for the first quarter of 2021.

Results for the first quarter of 2021 reflect special items that collectively increased net income attributable to HEP by a total of $13.6 million. These items included a gain on sales-type leases of $24.7 million and a goodwill impairment charge of $11.0 million related to our Cheyenne assets. Excluding these items, net income attributable to HEP for the first quarter of 2021 was $50.8 million ($0.48 per basic and diluted limited partner unit).

Distributable cash flow was $64.5 million for the first quarter of 2022, a decrease of $8.8 million, or 12.0%, compared to the first quarter of 2021. The decrease was mainly due to increased maintenance capital expenditures and a decrease in customer billings in excess of net income recognized in the first quarter of 2022. HEP declared a quarterly cash distribution of $0.35 per unit on April 21, 2022.

As previously announced, we completed our acquisition of Sinclair Transportation Company LLC (“Sinclair Transportation”) pursuant to that certain Contribution Agreement, dated August 2, 2021 (as amended on March 14, 2022, the “Contribution Agreement”), on March 14, 2022 in exchange for 21 million newly issued common limited partner units of HEP (the “HEP Units”), representing 17% of the outstanding HEP Units with a value of approximately $349 million based on HEP’s fully diluted common limited partner units outstanding and closing unit price on March 11, 2022, and cash consideration equal to $321.4 million, inclusive of estimated working capital adjustments pursuant to the Contribution Agreement for an aggregate transaction value of $670.4 million. Our consolidated financial and operating results for the first quarter of 2022 reflect Sinclair Transportation operations beginning March 14, 2022.

Commenting on our 2022 first quarter results, Michael Jennings, Chief Executive Officer, stated, “During the quarter, we successfully completed the Sinclair Transportation acquisition and have re-contracted the acquired assets with long-term minimum volume commitment contracts. Additionally, we are pleased with HEP’s solid financial performance in the first quarter, supported by on-going strength in our crude pipelines in Wyoming and Utah, which includes the recently acquired Sinclair Transportation crude pipeline system.”

“As we look forward, we believe HEP is positioned for significant earnings growth due to the quality and geographic location of our assets, our talented employee base, and our financially strong and supportive general partner, HF Sinclair.”

The following information was filed by Holly Energy Partners Lp (HEP) on Monday, May 9, 2022 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.

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Inside Holly Energy Partners Lp's 10-Q Quarterly Report:

Financial - Cash Flow Highlight
A significant and prolonged period of high inflation or a significant and prolonged period of negative inflation could adversely affect our cash flows and results of operations if costs increase at a rate greater than the fees we charge our shippers.

Revenue - Product Highlight
The decrease was mainly due to lower revenues on our Cheyenne assets as a result of the conversion of HF Sinclair's Cheyenne refinery to renewable diesel production, lower revenues on our Woods Cross refinery processing units, which were down for planned maintenance in March 2022, and lower revenues on our product pipelines servicing HF Sinclair's Navajo refinery.
Financial - Expense Highlight
General and Administrative General and administrative costs for the three months ended March 31, 2022 increased by $1.3 million compared to the three months ended March 31, 2021, mainly due to higher legal and professional expenses associated with the HEP Transaction.
M & A - Other Highlight
The increase was mainly due to higher average borrowings outstanding under our senior secured revolving credit facility (the "Credit Agreement") during the first quarter of 2022 related to the funding of the cash portion of the Sinclair Transportation acquisition.
Financial - Cash Flow Highlight
- 45 - Table o Cash Flows-Operating Activities Cash flows from operating activities decreased by $10.3 million from $82.1 million for the three months ended March 31, 2021, to $71.8 million for the three months ended March 31, 2022.
Financial - Cash Flow
Cash Flows-Investing Activities Cash flows...Read more
Financial - Cash Flow
Cash Flows-Financing Activities Cash flows...Read more
Revenue - Product
Certain critical accounting policies that...Read more
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- 43 - Table o...Read more
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A major discharge of hydrocarbons...Read more
Other - Other
During the three months ended...Read more
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The total net proceeds from...Read more
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The total net proceeds from...Read more
M & A - Other
Our future growth plans include...Read more
Other - Other
Depreciation and Amortization Depreciation and...Read more
Other - Other
Cash and cash equivalents increased...Read more
Financial - Shares
HEP estimates its share of...Read more
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The COVID-19 pandemic, and the...Read more
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Under our registration statement filed...Read more
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- 37 - Table o...Read more
Financial - Cash Flow
We reduced our quarterly distribution...Read more
Revenue - Product
The increase in revenues was...Read more
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However, these laws and regulations,...Read more
Other - Other
Set forth below are our...Read more
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The order required the recalculation...Read more
Other - Other
The upgrades or additions would...Read more
Revenue - Product
Revenues from our crude pipelines...Read more
Other - Other
At March 31, 2022, borrowings...Read more
Financial - Earnings
On February 8, 2021, HEP...Read more
Financial - Shares
Equity in earnings of Cushing...Read more
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Under the terms of the...Read more
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Our aggregate effective interest rates...Read more
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Operations Expense Operations (exclusive of...Read more
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"Expansion capital expenditures" represent capital...Read more
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The increase in volumes was...Read more
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Adjusted EBITDA is calculated as...Read more
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As of March 31, 2022,...Read more
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Any proceeds from the sale...Read more
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The 6.375% Senior Notes were...Read more
Financial - Expense
The 6.375% Senior Notes were...Read more
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RISK MANAGEMENT The market risk...Read more
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The increase was mainly due...Read more
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Since the declines in demand...Read more

Financial Statements, Disclosures and Schedules

Inside this 10-Q Quarterly Report

Material Contracts, Statements, Certifications & more

Holly Energy Partners Lp provided additional information to their SEC Filing as exhibits

Exhibit 2.1: Plan Of Acquisition, Reorganization, Arrangement, Liquidation Or Succession

Exhibit 4.2: Instruments Defining The Rights Of Security Holders, Including Indentures

Exhibit 31.1: Rule 13A-14(A)/15D-14(A) Certification

Exhibit 31.2: Rule 13A-14(A)/15D-14(A) Certification

Exhibit 32.1: Section 1350 Certification

Exhibit 32.2: Section 1350 Certification

Ticker: HEP
CIK: 1283140
Form Type: 10-Q Quarterly Report
Accession Number: 0001283140-22-000024
Submitted to the SEC: Mon May 09 2022 2:15:38 PM EST
Accepted by the SEC: Mon May 09 2022
Period: Thursday, March 31, 2022
Industry: Pipe Lines No Natural Gas