DALLAS, Oct. 31 /PRNewswire-FirstCall/ -- Holly Energy Partners, L.P.
(NYSE: HEP) today reported third quarter net income of $7.3 million ($0.44 per
basic and diluted limited partner unit). For the nine months ended
September 30, 2005, net income was $19.7 million ($1.27 per basic and diluted
limited partner unit).
The Partnership commenced operations July 13, 2004, upon successful
completion of its initial public offering and the concurrent contribution of
certain assets from its predecessor entity. Results of operations for the
three and nine months ended September 30, 2005 include the operations from the
assets acquired from Alon USA, Inc. subsequent to the acquisition date of
February 28, 2005, including four refined products pipelines aggregating
approximately 500 miles, an associated tank farm and two refined products
terminals with aggregate storage capacity of approximately 347,000 barrels.
Additionally, included in the results of operations for the three and nine
months ended September 30, 2005 are the two 65-mile parallel intermediate
feedstock pipelines acquired from Holly Corporation (NYSE: HOC), our general
partner, on July 8, 2005, which connect Holly's Lovington, NM and Artesia, NM
refining facilities. Results of operations for the three and nine months
ended September 30, 2004 reflect the results of operations of Navajo Pipeline
Co., L.P., the predecessor to Holly Energy Partners, L.P. until July 12, 2004,
at which time Holly Energy Partners, L.P. commenced operations. Historically,
Holly Corporation did not allocate general and administrative costs to the
predecessor entity. In addition, the results of operations of the predecessor
entity include results of operations from certain crude oil and intermediate
product pipelines that were not contributed to Holly Energy Partners, L.P. at
inception (as discussed above, the intermediate product pipelines were
acquired by the Partnership on July 8, 2005). As a result of these items,
operating results are not comparable on a period-to-period basis.
Revenues of $21.5 million for the three months ended September 30, 2005
were $7.0 million greater than the $14.5 million in the comparable period of
2004, principally due to $5.0 million of revenues from the pipeline and
terminal assets acquired from Alon following the February 28, 2005 acquisition
and $2.2 million of revenues from the intermediate pipeline assets acquired
from Holly on July 8, 2005. Also, we experienced additional revenues from our
existing pipelines and terminals of $1.0 million and a reduction in revenues
from the Rio Grande Pipeline of $0.8 million. For the three months ended
September 30, 2004, assets not originally contributed to the Partnership
generated revenues of $0.4 million. Shipments on the Partnership's refined
product pipelines averaged 133.1 thousand barrels per day ("mbpd") for the
three months ended September 30, 2005 as compared to 87.3 mbpd for the three
months ended September 30, 2004, principally due to the incremental volumes
from the pipelines acquired from Alon, and additional volumes from our
existing pipelines. Shipments on the Partnership's intermediate product
pipelines averaged 53.7 mbpd for the three months ended September 30, 2005.
As previously disclosed, during the first quarter of 2005 BP Plc ("BP") became
no longer required to pay the border crossing fee pursuant to its contract
with the Rio Grande Pipeline. For the three months ended September 30, 2004,
the border crossing fee was $0.9 million. Refined products terminalled in our
facilities for the comparable quarters rose to 166.2 mbpd in the 2005 third
quarter from 139.2 mbpd in the 2004 third quarter, due to the incremental
volumes from the terminals acquired from Alon and volume gains at our existing
terminals. Net income was $7.3 million for the three months ended
September 30, 2005, an increase of $1.3 million from $6.0 million for the
three months ended September 30, 2004. The increase in overall net income was
principally due to income generated from the assets acquired from Alon and the
intermediate pipelines acquired from Holly, offset by increased interest
expense principally related to the senior notes issued in connection with the
Alon and intermediate pipelines transactions. Additionally impacting income
for the current year's third quarter were additional revenues from our
existing pipelines and terminals, offset by a reduction in revenues from the
Rio Grande Pipeline.
Revenues of $57.6 million for the nine months ended September 30, 2005
were $5.8 million greater than the $51.8 million in the comparable period of
2004, principally due to $12.2 million of revenues from the pipeline and
terminal assets acquired from Alon following the February 28, 2005 acquisition
and $2.2 million of revenues from the intermediate pipeline assets acquired
from Holly on July 8, 2005, partially offset by revenues of $7.9 million in
the nine months ended September 30, 2004 from assets not originally
contributed to the Partnership. Also, we had additional revenues from our
existing pipelines and terminals of $1.7 million and a reduction in revenues
from the Rio Grande Pipeline of $2.4 million. Shipments on the Partnership's
refined product pipelines averaged 126.5 mbpd for the nine months ended
September 30, 2005 as compared to 93.3 mbpd for the nine months ended
September 30, 2004, principally due to the incremental March to September 2005
volumes from the pipelines acquired from Alon, combined with increased volumes
shipped by Holly and its affiliates, partially offset by a reduction in
volumes shipped on the Rio Grande Pipeline. As stated above, BP is no longer
required to pay the border crossing fee pursuant to its contract. For the
nine months ended September 30, 2005 and 2004, the border crossing fee was
$0.8 million and $3.2 million, respectively. Refined products terminalled in
our facilities for the comparable periods rose to 163.4 mbpd in the first nine
months of 2005 from 141.0 mbpd in the 2004 first nine months, due to the
incremental March to September 2005 volumes from the terminals acquired from
Alon and volume gains at our existing terminals. Net income was $19.7 million
for the nine months ended September 30, 2005, a decrease of $6.3 million from
$26.0 million for the nine months ended September 30, 2004. The decrease in
income was principally due to the inclusion in earnings in the prior year
period of the crude oil and intermediate product pipelines that were not
contributed to the Partnership at inception, a reduction in revenues from the
Rio Grande Pipeline, general and administrative charges currently being
incurred by the Partnership that were not allocated prior to the initial
public offering, and interest expense principally related to the senior notes
issued in connection with the Alon and intermediate pipelines transactions,
partially offset by the additional income generated from the assets acquired
from Alon and the intermediate pipelines acquired from Holly, and additional
revenues from our existing pipelines and terminals.
"We are very pleased with our operations and the results for the third
quarter of 2005," said Matt Clifton, Chairman of the Board and Chief Executive
Officer. "During the quarter we successfully took over the operations of the
intermediate pipelines serving Holly's Navajo Refinery after our July purchase
of those assets. That follows our successful integration earlier in the year
of the pipeline and terminal assets acquired from Alon. With the combination
of those acquisitions, along with increased volumes from most of our existing
assets, our EBITDA for the third quarter was at a record level of
$14.1 million, an increase of 75% from the amount reported in the 2004 third
quarter. We continue to be satisfied with the excellent operation of our
assets and the number of organic and third-party growth opportunities that are
being explored by our operating and corporate development staff."
"On October 28, 2005, we announced our cash distribution for the third
quarter of 2005 of $0.60 per unit, an increase of 4.3% over the amount of
$0.575 distributed per unit for the second quarter of 2005. Our EBITDA for
the third quarter was $14.1 million, and after subtracting net interest
expense of $2.6 million and maintenance capital expenditures of $27,000,
distributable cash flow for the quarter was $11.4 million. The distribution
declared for the quarter amounts to $10.0 million."
The Partnership has scheduled a conference call today at 10:00 AM EST to
discuss financial results. Listeners may access this call by dialing
(800) 858-5936. The ID# for this call is #1346971. Additionally, listeners may
access the call via the internet at: http://audioevent.mshow.com/256723 .
Holly Energy Partners, L.P., headquartered in Dallas, Texas, provides
petroleum product transportation and terminal services to the petroleum
industry, including Holly Corporation, which owns a 45% interest (including
the general partner interest) in the Partnership. The Partnership owns and
operates petroleum product pipelines and terminals primarily in Texas, New
Mexico, Oklahoma, Arizona, Washington, Idaho and Utah. In addition, the
Partnership owns a 70% interest in Rio Grande Pipeline Company, a transporter
of LPGs from West Texas to Northern Mexico.
Holly Corporation operates through its subsidiaries a 75,000 barrels per
day ("bpd") refinery located in Artesia, New Mexico, a 26,000 bpd refinery in
Woods Cross, Utah, and an 8,000 bpd refinery in Great Falls, Montana.
The following is a "safe harbor" statement under the Private Securities
Litigation Reform Act of 1995: 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. These statements are based
on management's beliefs and assumptions using currently available information
and expectations as of the date hereof, are not guarantees of future
performance and involve certain risks and uncertainties. Although we believe
that the expectations reflected in these forward-looking statements are
reasonable, we cannot assure you that our expectations will prove 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:
* Risks and uncertainties with respect to the actual quantities of
refined petroleum products shipped on our pipelines and/or terminalled
in our terminals;
* The future performance of the assets acquired from Alon USA, Inc. and
the intermediate pipelines recently acquired from Holly Corporation;
* The economic viability of Holly Corporation, Alon USA, Inc. and our
other customers;
* The demand for refined petroleum products in markets we serve;
* Our ability to successfully purchase and integrate any future acquired
operations;
* The availability and cost of our financing;
* The possibility of inefficiencies or shutdowns of refineries utilizing
our pipeline and terminal facilities;
* The effects of current or future government regulations and policies;
* Our operational efficiency in carrying out routine operations and
capital construction projects;
* The possibility of terrorist attacks and the consequences of any such
attacks;
* General economic conditions; and
* Other financial, operations and legal risks and uncertainties detailed
from time to time in our SEC 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 nine months ended September 30, 2005 and 2004.
Three Months Ended Nine Months Ended
September 30, September 30,
2005 2004 2005 2004
(In thousands, except per unit data)
Revenues
Pipelines:
Affiliates - refined product
pipelines $7,659 $6,947 $21,848 $21,046
Affiliates - intermediate
pipelines 2,224 --- 2,224 ---
Third parties 7,873 4,030 22,371 13,552
17,756 10,977 46,443 34,598
Terminals & truck loading racks:
Affiliates 2,624 2,310 7,806 6,769
Third parties 1,137 780 3,302 2,499
3,761 3,090 11,108 9,268
Other --- 1 --- 15
Total for pipelines and
terminal assets 21,517 14,068 57,551 43,881
Crude system and intermediate
pipelines not contributed to HEP
at inception (A):
Lovington crude oil pipelines --- 167 --- 3,325
Intermediate pipelines --- 247 --- 4,568
Total for crude system and
intermediate pipeline assets
not contributed to HEP
at inception --- 414 --- 7,893
Total revenues 21,517 14,482 57,551 51,774
Operating costs and expenses
Costs related to refined product
pipeline and terminal assets:
Operations 6,333 5,156 18,169 15,625
Depreciation and amortization 3,924 1,723 10,136 5,053
General and administrative 1,075 888 3,042 888
11,332 7,767 31,347 21,566
Crude system and intermediate
pipelines not contributed
to HEP at inception (A):
Operations --- 89 --- 2,280
Depreciation and amortization --- 26 --- 433
--- 115 --- 2,713
Total operating costs and expenses 11,332 7,882 31,347 24,279
Operating income 10,185 6,600 26,204 27,495
Interest income 201 16 434 88
Interest expense, including
amortization (3,038) (301) (6,521) (301)
Minority interest in Rio Grande (56) (324) (458) (1,319)
Net income 7,292 5,991 19,659 25,963
Less:
Net income applicable
to predecessor --- 1,132 --- 21,104
General partner interest in
net income, including
incentive distributions (B) 208 97 455 97
Limited partners' interest
in net income $7,084 $4,762 $19,204 $4,762
Net income per unit applicable
to limited partners (B) $0.44 $0.34 $1.27 $0.34
Weighted average limited
partners' units outstanding 16,018 14,000 15,103 14,000
EBITDA (C) $14,053 $8,025 $35,882 $31,662
Distributable cash flow (D) $11,424 $6,274 $30,114 $6,274
Three Months Ended Nine Months Ended
September 30, September 30,
2005 2004 2005 2004
Volumes (bpd) (E)
Pipelines:
Affiliates - refined product
pipelines 66,541 62,186 66,504 64,186
Affiliates - intermediate
pipelines 53,725 --- 18,105 ---
Third parties 66,584 25,135 60,007 29,076
186,850 87,321 144,616 93,262
Terminals & truck loading racks:
Affiliates 121,835 113,303 122,460 114,662
Third parties 44,369 25,925 40,911 26,333
166,204 139,228 163,371 140,995
Total for petroleum pipelines
and terminal assets (bpd) 353,054 226,549 307,987 234,257
(A) Revenue and expense items generated by the crude system and
intermediate pipeline assets that were not contributed to HEP at
inception in July 2004. Historically, these items were included in
the income of Navajo Pipeline Co. as predecessor, but are not
included in the income of HEP beginning July 13, 2004. The
intermediate pipelines were later purchased by HEP on July 8, 2005.
(B) Net income is allocated between limited partners and the general
partner interest in accordance with the provisions of the
partnership agreement. Net income allocated to the general partner
includes any incentive distributions declared in the period. As of
September 30, 2005, $62,844 of incentive distributions had been
declared. The net income applicable to the limited partners is
divided by the weighted average limited partner units outstanding in
computing the net income per unit applicable to limited partners.
(C) Earnings before interest, taxes, depreciation and amortization
("EBITDA") is calculated as net income plus (i) interest expense net
of interest income and (ii) depreciation and amortization. EBITDA
is not a calculation based upon U.S. generally accepted accounting
principles ("U.S. GAAP"). However, the amounts included in the
EBITDA calculation are derived from amounts included in our
consolidated financial statements. EBITDA should not be considered
as an alternative to net income or operating income, as an
indication of our operating performance or as an alternative to
operating cash flow as a measure of liquidity. EBITDA is not
necessarily comparable to similarly titled measures of other
companies. EBITDA is presented here because it is a widely used
financial indicator used by investors and analysts to measure
performance. EBITDA is 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.
Three Months Ended Nine Months Ended
September 30, September 30,
2005 2004 2005 2004
(In thousands)
Net income $7,292 $5,991 $19,659 $25,963
Add interest expense 2,803 237 5,978 237
Add amortization of discount
and deferred debt
issuance costs 235 64 543 64
Subtract interest income (201) (16) (434) (88)
Add depreciation and
amortization 3,924 1,749 10,136 5,486
EBITDA $14,053 $8,025 $35,882 $31,662
(D) Distributable cash flow is not a calculation based upon U.S. GAAP.
However, the amounts included in the calculation are derived from
amounts separately presented in our consolidated financial
statements, with the exception of maintenance capital expenditures.
Distributable cash flow should not be considered in isolation or as
an alternative to net income 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. We believe that this measure provides
investors an enhanced perspective of the operating performance of
our assets and the cash our business is generating.
Set forth below is our calculation of distributable cash flow attributable
to partners subsequent to the formation on July 13, 2004.
Three Months Ended Nine Months Ended
September 30, September 30,
2005 2004 2005 2004
(In thousands)
Net income $7,292 $5,991 $19,659 $25,963
Subtract income attributable
to predecessor --- (1,132) --- (21,104)
Add depreciation and
amortization subsequent
to formation 3,924 1,503 10,136 1,503
Add amortization of discount
and deferred debt issuance
costs subsequent to formation 235 64 543 64
Subtract maintenance capital
expenditures subsequent
to formation* (27) (152) (224) (152)
Distributable cash flow
of partnership subsequent
to formation on
July 13, 2004 $11,424 $6,274 $30,114 $6,274
* 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.
(E) The amounts reported represent volumes from the initial assets
contributed to HEP at inception in July 2004 and additional volumes
from the assets acquired from Alon starting in March 2005 and the
intermediate pipelines acquired from Holly starting in July 2005.
The amounts reported in the 2005 periods include volumes on the
acquired assets from their respective acquisition dates averaged
over the full reported periods.
Balance Sheet Data
September 30, December 31,
2005 2004
(Dollars in thousands)
Cash and cash equivalents $ 20,524 $ 19,104
Working capital $ 19,888 $ 19,120
Total assets $254,262 $103,758
Long-term debt $181,349 $ 25,000
Partners' equity $ 54,831 $ 61,528
SOURCE Holly Energy Partners, L.P.
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Related links:
http://www.hollycorp.com
CONTACT:
Stephen J. McDonnell, Vice President and
Chief Financial Officer, or M. Neale Hickerson, Vice President,
Investor Relations, both of Holly Energy Partners, L.P.,
+1-214-871-3555
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