HollyFrontier Corporation Reports Quarterly Results and Announces Regular Cash Dividend
Dallas, Texas, August 2, 2018 ‑‑ HollyFrontier Corporation (NYSE:HFC) (“HollyFrontier” or the “Company”) today reported second quarter net income attributable to HollyFrontier stockholders of $345.5 million or $1.94 per diluted share for the quarter ended June 30, 2018, compared to $57.8 million or $0.33 per diluted share for the quarter ended June 30, 2017.
The second quarter results reflect special items that collectively increased net income by a total of $86.6 million. These items include a lower of cost or market inventory valuation adjustment that increased pre-tax earnings by $106.9 million and a $25.3 million reduction to RINs costs as a result of our Woods Cross refinery's small refinery exemption for the 2017 calendar year. These items were partially offset by $14.7 million in charges related to damages attributable to our Woods Cross refinery outage that started in March 2018, net of estimated insurance claims.
Excluding these items, net income for the current quarter was $258.9 million ($1.45 per diluted share) compared to $116.0 million ($0.66 per diluted share) for the second quarter of 2017, which excludes certain items that collectively decreased earnings by $58.2 million for the three months ended June 30, 2017. These items include an inventory valuation adjustment, a RINs cost reduction as a result of the small refinery exemption granted to our Cheyenne refinery for the 2016 calendar year, Petro-Canada Lubricants Inc. ("PCLI") acquisition and integration costs, long-lived asset impairment charges and incremental cost of products sold attributable to our PCLI inventory value step-up. Adjusted for these items, net income increased $142.9 million compared to the same period of 2017 due principally to higher margins in our refining business. Total operating expenses for the quarter were $296.2 million compared to $316.3 million for the second quarter of last year.
HollyFrontier’s President & CEO, George Damiris, commented, “HollyFrontier's second quarter reflects our ability to take advantage of both location and quality discounts in the crude oil markets. Within our lubricants business, healthy finished product demand and our integrated business model are generating consistent earnings despite a weak base oil market. Going into the second half of the year, we expect the macro environment to remain very positive and look forward to finishing the year strong."
The Refining and Marketing segment reported adjusted EBITDA of $384.8 million compared to $192.8 million for the second quarter of 2017. This increase was primarily driven by lower laid-in crude costs which resulted in a consolidated refinery gross margin of $16.57 per produced barrel, a 46% increase compared to $11.36 for the second quarter of 2017. Crude oil charges averaged 463,480 barrels per day (“BPD”) for the current quarter compared to 467,090 BPD for the second quarter 2017. Our Woods Cross refinery ran at reduced rates throughout the quarter as a result of the outage beginning in March 2018. We expect to increase production during August and return to full run rate by early September.
Our Lubricants and Specialty Products segment reported EBITDA of $39.4 million, driven by consistent Rack Forward sales volumes and margins. Rack Forward EBITDA was $51.9 million for the quarter and HollyFrontier continues to expect Rack Forward EBITDA in the $190.0 million to $210.0 million range for 2018. Rack Back EBITDA was negatively impacted by weakness in the base oil markets. Additionally, we closed on our previously announced acquisition of Red Giant Oil Company on August 1, 2018.
The following information was filed by Hollyfrontier Corp (HFC) on Thursday, August 2, 2018 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.