Holly Corporation Reports Second Quarter 2009 Results
DALLAS, Aug. 10 /PRNewswire-FirstCall/ — Holly Corporation (NYSE: HOC) (“Holly” or the “Company”) today reported second quarter financial results. For the quarter, net income attributable to Holly Corporation stockholders was $14.6 million ($0.29 per basic and diluted share) compared to $11.5 million ($0.23 per basic and diluted share) for the same period of 2008. For the six months ended June 30, 2009, net income was $36.6 million ($0.73 per basic and diluted share) compared to $20.1 million ($0.40 per basic and $0.39 per diluted share) for the first six months of 2008.
For the quarter, net income attributable to our stockholders increased by $3.2 million compared to the second quarter of 2008. This increase was due to the effects of increased refining production, partially offset by an overall decrease in refinery gross margins. Overall refinery gross margins were $7.82 per produced barrel, a 14% decrease compared to $9.09 for the second quarter of 2008. For the three months ended June 30, 2009, our refinery production levels increased 41% over the same period of 2008 due to incremental production attributable to the operations of our newly acquired Tulsa refinery and production gains resulting from our recent Navajo and Woods Cross refinery capacity expansions. Also contributing to the year-over-year increase in second quarter production levels were the effects of reduced production during the second quarter of 2008 as a result of a fluid catalytic cracking unit (“FCC”) outage that resulted in downtime at our Navajo refinery. Furthermore, increased earnings attributable to our asphalt marketing business also contributed to the increased earnings in the current year.
For the six months ended June 30, 2009, net income attributable to our stockholders increased by $16.5 million compared to the same period of 2008. This increase was due to an overall year-over-year increase in refined product margins combined with a slight increase in year-to-date production levels. Overall refinery gross margins were $9.41 per produced barrel, a 13% increase compared to $8.35 for the first six months of 2008. For the six months ended June 30, 2009, our refinery production levels increased 4% over the same period of 2008. This was due to the effects of incremental production attributable to our Tulsa refinery operations, production gains resulting from our recent Navajo and Woods Cross refinery capacity expansions and production downtime during the second quarter of 2008. These factors were largely offset by the effects of production downtime during the first quarter of 2009. During the first quarter of 2009, we timed our scheduled major maintenance turnaround at the Navajo refinery to coincide with completion of our 15,000 BPSD capacity expansion, increasing its refining capacity to 100,000 BPSD.
“Despite a challenging refining environment, we remained profitable for the quarter,” said Matthew Clifton, Chairman of the Board and Chief Executive Officer of Holly. “Our EBITDA for the quarter was $56.8 million, a 59% increase over the second quarter of 2008. Although overall refining margins were tight in the second quarter, we experienced a small improvement in the markets served by our Navajo refinery averaging $8.39 per barrel, a 4% increase over last year’s second quarter. During the second quarter, we started to see the positive impact from our recent Navajo refinery expansion with refinery production averaging over 96,000 barrels per day. We expect our phase two operation upgrades to be complete in late 2009 that will allow us to run a wider variety of crudes while increasing our flexibility in varying the mix of transportation fuels. At our Woods Cross refinery, margin levels averaged $8.95 per barrel, a 28% decrease from last year’s second quarter. However most of the Woods Cross margin reduction was driven by drawdowns of gasoline inventories during early 2009 and the resulting impact on the second quarter of 2009 in a higher current cost environment. Negatively affecting our overall margin numbers for both refineries were reductions in diesel crack spreads from the very high levels realized during 2008.”
“On June 1, 2009, we completed the acquisition of our 85,000 BPSD Tulsa refinery. Our employees (including our new valued Tulsa employees) did a fantastic job in smoothly transitioning the Tulsa operations into our overall refining business. Although we remain extremely pleased with the facility and its contribution potential, June’s results at Tulsa were well below expectations. However, as we start the third quarter, while facing continued headwinds from low diesel crack spreads, we expect the positive effects of a 15% increase in our crude charge levels in July and improved gross margins on our specialty lubricant products to lead to improved financial performance.”
“We were pleased by the record earnings of Holly Energy Partners, our affiliated MLP, during the second quarter of 2009. Having just completed its fifth year of operation since its initial public offering, it continues to grow and increase its distribution to Holly and its other unitholders. It has increased its quarterly distribution every quarter since inception. On June 1, 2009, Holly sold a newly constructed intermediate pipeline to HEP, and on August 1, 2009, Holly sold certain rail and truck loading facilities at the Tulsa refinery to HEP. These sales resulted in proceeds of approximately $52.0 million to Holly and has provided HEP attractive continued growth opportunities.”
“Looking forward, 2009 will remain a challenging year for the refining industry. We do believe, however, that the markets we serve, the improvements and initiatives that we have recently executed, the quality of our employees and our strong balance sheet, position us to meet these challenges,” Clifton said.
Sales and other revenues for the 2009 second quarter were $1,038.4 million, a 41% decrease compared to the three months ended June 30, 2008. This decrease was due to the effects of a 48% decline in year-over-year second quarter sales prices of produced refined products sold, partially offset by a 25% current quarter increase in volumes of refined products sold over the same period in 2008. Additionally, direct sales of excess crude oil decreased in the current year. Cost of products sold was $879.9 million, a 46% decrease compared to the three months ended June 30, 2008 due mainly to lower crude oil acquisition costs.
Sales and other revenues for the first six months of 2009 were $1,689.2 million, a 48% decrease compared to the six months ended June 30, 2008. This decrease was due to the effects of an overall 46% decline in year-over-year prices of produced refined products sold for the current year-to-date period combined with a 2% decrease in refined products sold compared to the first six months of 2008. Cost of products sold was $1,391.6 million, a 54% decrease compared to the six months ended June 30, 2008.
Operating costs and expenses for the three and six months ended June 30, 2009 increased due to the inclusion of costs attributable to the operations of our Tulsa refinery beginning June 1, 2009, increased costs attributable to the operations of Holly Energy Partners, L.P. (“HEP”) and increased depreciation and amortization expense. A factor contributing to the overall year-to-date increase in operating costs and expenses was due to the inclusion of HEP’s costs for a full six month period during the six months ended June 30, 2009 compared to four months in 2008 as a result of our reconsolidation of HEP effective March 1, 2008. For the six months ended June 30, 2009, HEP’s operating costs and expenses were $37.1 million, an increase of $13.5 million compared to 2008. Additionally, interest expense for the three and six months ended June 30, 2009 and 2008 primarily relates to interest costs attributable to HEP. This press release includes key segment information that shows the impact of HEP’s consolidation on certain balance sheet and income statement amounts.
We issued $200 million of senior notes at a 9.875% coupon in June due 2017. The proceeds from this offering were primarily used to fund the purchase of the Tulsa refinery and associated inventories from Sunoco in June.
The Company has scheduled a webcast conference call for today, August 10, 2009 at 10:00 AM Eastern Time to discuss financial results. This webcast may be accessed at: http://www.videonewswire.com/event.asp?id=60707.
An audio archive of this webcast will be available using the link above through August 24, 2009.
Holly Corporation, headquartered in Dallas, Texas, is an independent petroleum refiner and marketer that produces high value light products such as gasoline, diesel fuel and jet fuel. Holly operates through its subsidiaries a 100,000 BPSD refinery located in Artesia, New Mexico, a 31,000 BPSD refinery in Woods Cross, Utah and an 85,000 BPSD refinery located in Tulsa, Oklahoma that was acquired on June, 1 2009. Also, a subsidiary of Holly owns a 41% interest (including the general partner interest) in Holly Energy Partners, L.P., which through subsidiaries owns or leases approximately 2,700 miles of petroleum product and crude oil pipelines in Texas, New Mexico, Utah and Oklahoma and tankage and refined product terminals in several Southwest and Rocky Mountain states.
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” 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, including those contained in our filings with the Securities and Exchange Commission. 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 such statements. Any differences could be caused by a number of factors, including, but not limited to, risks and uncertainties with respect to the actions of actual or potential competitive suppliers of refined petroleum products in the Company’s markets, the demand for and supply of crude oil and refined products, the spread between market prices for refined products and market prices for crude oil, the possibility of constraints on the transportation of refined products, the possibility of inefficiencies, curtailments or shutdowns in refinery operations or pipelines, effects of governmental regulations and policies, the availability and cost of financing to the Company, the effectiveness of the Company’s capital investments and marketing strategies, the ability of the Company to acquire refined product operations or pipeline and terminal operations on acceptable terms and to integrate any future acquired operations, the Company’s efficiency in carrying out construction projects, the Company’s ability to successfully integrate the operations of the Tulsa refinery into its business, the possibility of terrorist attacks and the consequences of any such attacks, general economic conditions, and other financial, operational and legal risks and uncertainties detailed from time to time in the Company’s 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
Financial Data (all information in this release is unaudited)
Three Months Ended Change from 2008
------------------ ----------------
June 30,
--------
2009 2008 Change Percent
---- ---- ------ -------
(In thousands, except per share data)
Sales and other revenues $1,038,381 $1,743,822 $(705,441) (40.5)%
Operating costs and
expenses:
Cost of products sold
(exclusive of
depreciation and
amortization) 879,926 1,620,550 (740,624) (45.7)
Operating expenses
(exclusive of
depreciation and
amortization) 78,508 74,175 4,333 5.8
General and
administrative expenses
(exclusive of
depreciation
and amortization) 15,108 12,942 2,166 16.7
Depreciation and
amortization 25,500 15,929 9,571 60.1
------ ------ -----
Total operating costs
and expenses 999,042 1,723,596 (724,554) (42.0)
------- --------- ---------
Income from operations 39,339 20,226 19,113 94.5
Other income (expense):
Equity in earnings of
SLC Pipeline 488 - 488 -
Interest income 134 3,826 (3,692) (96.5)
Interest expense (7,205) (6,251) (954) 15.3
Tulsa Refinery
acquisition costs (1,610) - (1,610) -
------- --- -------
(8,193) (2,425) (5,768) 237.9
------- ------- -------
Income before income
taxes 31,146 17,801 13,345 75.0
Income tax provision 9,575 5,856 3,719 63.5
----- ----- -----
Net income(1) 21,571 11,945 9,626 80.6
Less noncontrolling
interest in net
income(1) 6,966 493 6,473 1,313.0
----- --- -----
Net income attributable
to Holly Corporation
stockholders(1) $14,605 $11,452 $3,153 27.5%
======= ======= ======
Net income per share
attributable to Holly
Corporation
stockholders - basic $0.29 $0.23 $0.06 26.1%
===== ===== =====
Net income per share
attributable to Holly
Corporation
stockholders - diluted $0.29 $0.23 $0.06 26.1%
===== ===== =====
Cash dividends declared
per common share $0.15 $0.15 $- -%
Average number of common
shares outstanding:
Basic 50,170 50,158 12 -%
Diluted 50,226 50,515 (289) (0.6)%
EBITDA $56,751 $35,662 $21,089 59.1%
Six Months Ended Change from 2008
---------------- ----------------
June 30,
--------
2009 2008 Change Percent
---- ---- ------ -------
(In thousands, except per share data)
Sales and other
revenues $1,689,204 $3,223,806 $(1,534,602) (47.6)%
Operating costs and
expenses:
Cost of products sold
(exclusive of
depreciation and
amortization) 1,391,580 3,003,987 (1,612,407) (53.7)
Operating expenses
(exclusive of
depreciation and
amortization) 145,710 134,883 10,827 8.0
General and
administrative
expenses (exclusive
of depreciation
and amortization) 26,855 25,879 976 3.8
Depreciation and
amortization 45,821 29,238 16,583 56.7
------ ------ ------
Total operating costs
and expenses 1,609,966 3,193,987 (1,584,021) (49.6)
--------- --------- -----------
Income from operations 79,238 29,819 49,419 165.7
Other income
(expense):
Equity in earnings of
SLC Pipeline 663 - 663 -
Interest income 2,330 7,381 (5,051) (68.4)
Interest expense (13,444) (8,243) (5,201) 63.1
Tulsa Refinery
acquisition costs (1,610) - (1,610) -
Equity in earnings of
HEP - 2,990 (2,990) (100.0)
--- ----- -------
(12,061) 2,128 (14,189) (666.8)
-------- ----- --------
Income before income
taxes 67,177 31,947 35,230 110.3
Income tax provision 21,706 10,551 11,155 105.7
------ ------ ------
Net income(1) 45,471 21,396 24,075 112.5
Less noncontrolling
interest in net
income(1) 8,921 1,295 7,626 588.9
----- ----- -----
Net income
attributable to Holly
Corporation
stockholders(1) $36,550 $20,101 $16,449 81.8%
======= ======= =======
Net income per share
attributable to Holly
Corporation
stockholders - basic $0.73 $0.40 $0.33 82.5%
===== ===== =====
Net income per share
attributable to Holly
Corporation
stockholders - diluted $0.73 $0.39 $0.34 87.2%
===== ===== =====
Cash dividends
declared per common
share $0.30 $0.30 $- -%
Average number of
common shares
outstanding:
Basic 50,106 50,654 (548) (1.1)%
Diluted 50,189 51,015 (826) (1.6)%
EBITDA $115,191 $60,752 $54,439 89.6%
Balance Sheet Data
June 30, December 31,
2009 2008
---- ----
(In thousands)
Cash, cash equivalents and investments in
marketable securities $109,479 $96,008
Working capital $159,367 $68,465
Total assets $2,621,441 $1,874,225
Long-term debt - Holly Corporation $187,964 $-
Long-term debt - HEP $390,056 $341,914
Total equity(1) $1,026,569 $936,332
(1) During the first quarter of 2009, we adopted SFAS No. 160,
"Noncontrolling Interests in Consolidated Financial Statements - an
amendment of ARB No. 51." As a result, net income attributable to
the noncontrolling interest in our HEP subsidiary is now presented as
an adjustment to net income to arrive at "Net income attributable to
Holly Corporation stockholders" in our Consolidated Statements of
Income. Prior to our adoption of this standard, this amount was
presented as "Minority interest in earnings of HEP," a non-operating
expense item before "Income before income taxes." Additionally,
equity attributable to noncontrolling interests is now presented as a
separate component of total equity in our consolidated financial
statements. We have adopted this standard on a retrospective basis.
While this presentation differs from previous GAAP requirements, this
standard did not affect our net income and equity attributable to
Holly Corporation stockholders.
Segment Information
Our operations are currently organized into two reportable segments, Refining and HEP. Our operations that are not included in the Refining and HEP segments are included in Corporate and Other. Intersegment transactions are eliminated in our consolidated financial statements and are included in Consolidations and Eliminations.
The Refining segment includes the operations of our Navajo, Woods Cross and Tulsa Refineries and Holly Asphalt Company. The Refining segment involves the purchase and refining of crude oil and wholesale and branded marketing of refined products, such as gasoline, diesel fuel, jet fuel and specialty lubricant products. The petroleum products produced by the Refining segment are primarily marketed the southwest, rocky mountain and mid-continent regions of the United States and northern Mexico. Additionally, the Refining segment includes specialty lubricant products produced at our Tulsa Refinery that are marketed throughout North America and to customers with operations in Central and South America. Holly Asphalt Company manufactures and markets asphalt and asphalt products in Arizona, New Mexico, Texas and northern Mexico.
The HEP segment involves all of the operations of HEP effective March 1, 2008 (date of reconsolidation). HEP owns and operates a system of petroleum product and crude gathering pipelines in Texas, New Mexico, Oklahoma and Utah, distribution terminals in Texas, New Mexico, Arizona, Utah, Idaho, and Washington and refinery tankage in New Mexico and Utah. Revenues are generated by charging tariffs for transporting petroleum products and crude oil through its pipelines and by charging fees for terminalling petroleum products and other hydrocarbons, and storing and providing other services at their storage tanks and terminals. The HEP segment also includes a 70% interest in Rio Grande Pipeline Company (“Rio Grande”) which provides petroleum products transportation services. Additionally, HEP owns a 25% interest in SLC Pipeline LLC (“SLC Pipeline”) that services refiners in the Salt Lake City, Utah area. Revenues from the HEP segment are earned through transactions with for pipeline transportation, rental and terminalling operations as well as revenues relating to pipeline transportation services provided for our refining operations and from HEP’s interest in Rio Grande.
Consolidations
Corporate and Consolidated
Refining HEP and Other Eliminations Total
-------- --- --------- ------------ -----
(In thousands)
Three Months Ended
June 30, 2009
Sales and other
revenues $1,019,919 $40,602 $2,979 $(25,119) $1,038,381
Operating expenses $67,640 $11,086 $8 $(226) $78,508
General and
administrative
expenses $- $1,817 $13,193 $98 $15,108
Depreciation and
amortization $17,832 $6,482 $1,186 $- $25,500
Income (loss) from
operations $29,530 $21,217 $(11,408) $- $39,339
Three Months Ended
June 30, 2008
Sales and other
revenues $1,736,201 $26,774 $886 $(20,039) $1,743,822
Operating expenses $64,183 $9,985 $7 $- $74,175
General and
administrative
expenses $(6) $1,359 $11,589 $- $12,942
Depreciation and
amortization $8,699 $6,220 $1,010 $- $15,929
Income (loss) from
operations $22,736 $9,210 $(11,720) $- $20,226
Consolidations
Corporate and Consolidated
Refining HEP and Other Eliminations Total
-------- --- --------- ------------ -----
(In thousands)
Six Months Ended
June 30, 2009
Sales and other
revenues $1,656,829 $72,727 $3,078 $(43,430) $1,689,204
Operating expenses $124,055 $21,882 $27 $(254) $145,710
General and
administrative
expenses $- $3,142 $23,713 $- $26,855
Depreciation and
amortization $29,783 $12,300 $3,738 $- $45,821
Income (loss) from
operations $68,235 $35,403 $(24,400) $- $79,238
Six Months Ended
June 30, 2008
Sales and other
revenues $3,213,577 $36,716 $1,287 $(27,774) $3,223,806
Operating expenses $121,399 $13,661 $7 $(184) $134,883
General and
administrative
expenses $1 $1,881 $23,997 $- $25,879
Depreciation and
amortization $18,980 $8,230 $2,028 $- $29,238
Income (loss) from
operations $41,620 $12,944 $(24,745) $- $29,819
June 30, 2009
Cash, cash
equivalents and
investments in
marketable
securities $- $4,195 $105,284 $- $109,479
Total assets $1,807,743 $524,285 $302,476 $(13,063) $2,621,441
December 31, 2008
Cash, cash
equivalents and
investments in
marketable
securities $- $5,269 $90,739 $- $96,008
Total assets $1,288,211 $458,049 $141,768 $(13,803) $1,874,225
Refining Operating Data
Our refinery operations include the Navajo, Woods Cross and Tulsa Refineries. The following tables set forth information, including non-GAAP performance measures about our consolidated refinery operations. The cost of products and refinery gross margin do not include the effect of depreciation and amortization. Reconciliations to amounts reported under GAAP are provided under “Reconciliations to Amounts Reported Under Generally Accepted Accounting Principles” below.
Three Months Ended Six Months Ended
------------------ ----------------
June 30, June 30,
-------- --------
2009 2008 2009 2008
---- ---- ---- ----
Navajo Refinery
Crude charge (BPD) (1) 85,760 72,800 71,800 78,000
Refinery production (BPD)
(2) 96,670 76,960 79,960 85,800
Sales of produced refined
products (BPD) 95,810 79,910 79,070 86,980
Sales of refined products
(BPD) (3) 96,340 88,720 83,810 97,070
Refinery utilization (4) 85.8% 85.6% 71.8% 91.8%
Average per produced
barrel (5)
Net sales $67.93 $133.89 $63.80 $117.33
Cost of products (6) 59.54 125.82 53.83 110.15
----- ------ ----- ------
Refinery gross margin 8.39 8.07 9.97 7.18
Refinery operating
expenses (7) 4.56 5.68 5.19 4.98
---- ---- ---- ----
Net operating margin $3.83 $2.39 $4.78 $2.20
===== ===== ===== =====
Three Months Ended Six Months Ended
------------------ ----------------
June 30, June 30,
-------- --------
2009 2008 2009 2008
---- ---- ---- ----
Feedstocks:
Sour crude oil 83% 83% 83% 81%
Sweet crude oil 6% 10% 7% 9%
Other feedstocks and
blends 11% 7% 10% 10%
--- --- --- ---
Total 100% 100% 100% 100%
==== ==== ==== ====
Sales of produced refined
products:
Gasolines 57% 55% 58% 57%
Diesel fuels 34% 34% 33% 33%
Jet fuels 1% 1% 1% 1%
Fuel oil 3% 3% 3% 3%
Asphalt 3% 4% 3% 3%
LPG and other 2% 3% 2% 3%
--- --- --- ---
Total 100% 100% 100% 100%
==== ==== ==== ====
Woods Cross Refinery
Crude charge (BPD) (1) 25,940 23,980 24,630 24,470
Refinery production (BPD)
(2) 27,700 23,540 25,510 24,490
Sales of produced refined
products (BPD) 27,060 23,790 27,040 24,550
Sales of refined products
(BPD) (3) 27,750 24,490 27,710 26,010
Refinery utilization (4) 83.7% 92.2% 79.5% 94.1%
Average per produced
barrel (5)
Net sales $69.05 $133.09 $59.74 $117.56
Cost of products (6) 60.10 120.60 49.90 105.05
----- ------ ----- ------
Refinery gross margin 8.95 12.49 9.84 12.51
Refinery operating
expenses (7) 5.98 8.13 6.45 7.17
---- ---- ---- ----
Net operating margin $2.97 $4.36 $3.39 $5.34
===== ===== ===== =====
Feedstocks:
Sour crude oil 3% -% 3% 2%
Sweet crude oil 62% 76% 64% 75%
Black wax crude oil 27% 22% 27% 19%
Other feedstocks and
blends 8% 2% 6% 4%
--- --- --- ---
Total 100% 100% 100% 100%
==== ==== ==== ====
Sales of produced refined
products:
Gasolines 66% 62% 67% 65%
Diesel fuels 28% 29% 26% 26%
Jet fuels -% -% -% -%
Fuel oil 3% 6% 4% 5%
Asphalt 2% 2% 1% 1%
LPG and other 1% 1% 2% 3%
--- --- --- ---
Total 100% 100% 100% 100%
==== ==== ==== ====
Tulsa Refinery(8)
Crude charge (BPD) (1) 17,930 - 9,010 -
Refinery production (BPD)
(2) 17,280 - 9,690 -
Sales of produced refined
products (BPD) 16,970 - 8,530 -
Sales of refined products
(BPD) (3) 17,250 - 8,670 -
Refinery utilization (4) 64.0% -% 64.0% -%
Average per produced
barrel (5)
Net sales $76.14 $- $76.14 $-
Cost of products (6) 73.31 - 73.31 -
----- --- ----- ---
Refinery gross margin 2.83 - 2.83 -
Refinery operating
expenses (7) 5.21 - 5.21 -
---- --- ---- ---
Net operating margin $(2.38) $- $(2.38) $-
====== === ====== ===
Three Months Ended Six Months Ended
------------------ ----------------
June 30, June 30,
-------- --------
2009 2008 2009 2008
---- ---- ---- ----
Feedstocks:
Sour crude oil -% -% -% -%
Sweet crude oil 100% -% 100% -%
Other feedstocks and
blends -% -% -% -%
--- --- --- ---
Total 100% -% 100% -%
==== === ==== ===
Sales of produced refined
products:
Gasolines 23% -% 23% -%
Diesel fuels 28% -% 28% -%
Jet fuels 9% -% 9% -%
Lubricants 22% -% 22% -%
Gas oil / intermediates 16% -% 16% -%
LPG and other 2% -% 2% -%
--- --- --- ---
Total 100% -% 100% -%
==== === ==== ===
Consolidated
Crude charge (BPD) (1) 129,620 96,780 105,440 102,470
Refinery production
(BPD) (2) 141,650 100,500 115,150 110,290
Sales of produced refined
products (BPD) 139,840 103,700 114,650 111,530
Sales of refined products
(BPD) (3) 141,340 113,210 120,190 123,080
Refinery utilization (4) 81.5% 87.2% 77.0% 92.3%
Average per produced
barrel (5)
Net sales $69.14 $133.71 $63.76 $117.38
Cost of products (6) 61.32 124.62 54.35 109.03
----- ------ ----- ------
Refinery gross margin 7.82 9.09 9.41 8.35
Refinery operating
expenses (7) 4.91 6.24 5.49 5.46
---- ---- ---- ----
Net operating margin $2.91 $2.85 $3.92 $2.89
===== ===== ===== =====
Feedstocks:
Sour crude oil 56% 63% 59% 63%
Sweet crude oil 29% 26% 27% 24%
Black wax crude oil 5% 5% 6% 4%
Other feedstocks and
blends 10% 6% 8% 9%
--- --- --- ---
Total 100% 100% 100% 100%
==== ==== ==== ====
Sales of produced refined
products:
Gasolines 54% 56% 58% 58%
Diesel fuels 32% 32% 31% 31%
Jet fuels 1% 1% 1% 1%
Fuel oil 3% 4% 3% 4%
Asphalt 3% 4% 2% 3%
Lubricants 3% -% 2% -%
Gas oil / intermediates 2% -% 1% -%
LPG and other 2% 3% 2% 3%
-- -- -- --
Total 100% 100% 100% 100%
==== ==== ==== ====
(1) Crude charge represents the barrels per day of crude oil processed at
the crude units at our refineries.
(2) Refinery production represents the barrels per day of refined
products yielded from processing crude and other refinery feedstocks
through the crude units and other conversion units at our refineries.
(3) Includes refined products purchased for resale.
(4) Represents crude charge divided by total crude capacity (BPSD). Our
consolidated crude capacity was increased by 5,000 BPSD effective
January 1, 2009 (our Woods Cross Refinery expansion), 15,000 BPSD
effective April 1, 2009 (our Navajo Refinery expansion) and 85,000
BPSD effective June 1, 2009 (our Tulsa Refinery acquisition),
increasing our consolidated crude capacity to 216,000 BPSD.
(5) Represents average per barrel amount for produced refined products
sold, which is a non-GAAP measure. Reconciliations to amounts
reported under GAAP are provided under "Reconciliations to Amounts
Reported Under Generally Accepted Accounting Principles" below.
(6) Transportation costs billed from HEP are included in cost of products.
(7) Represents operating expenses of our refineries, exclusive of
depreciation and amortization.
(8) The amounts reported for the Tulsa Refinery for the three and six
months ended June 30, 2009 include crude oil processed and products
yielded from the refinery for the period from June 1, 2009 through
June 30, 2009 only, and averaged over the number of days in the
periods (91 days and 182 days for the three and six months,
respectively). Operating data for the period from June 1, 2009
through June 30, 2009 is as follows:
Tulsa Refinery
Crude charge (BPD) 54,390
Refinery production (BPD) 52,400
Sales of produced refined products (BPD) 51,480
Sales of refined products (BPD) 52,310
Refinery utilization 64.0%
Reconciliations to Amounts Reported Under Generally Accepted Accounting Principles
Reconciliations of earnings before interest, taxes, depreciation and amortization (“EBITDA”) to amounts reported under generally accepted accounting principles in financial statements.
Earnings before interest, taxes, depreciation and amortization, which we refer to as EBITDA, is calculated as net income plus (i) interest expense, net of interest income, (ii) income tax provision, and (iii) depreciation and amortization. EBITDA is not a calculation based upon accounting principles generally accepted in the United States; 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 financial covenants.
Set forth below is our calculation of EBITDA.
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
2009 2008 2009 2008
---- ---- ---- ----
(In thousands)
Net income attributable to
Holly Corporation
stockholders $14,605 $11,452 $36,550 $20,101
Add provision for income
tax 9,575 5,856 21,706 10,551
Add interest expense 7,205 6,251 13,444 8,243
Subtract interest income (134) (3,826) (2,330) (7,381)
Add depreciation and
amortization 25,500 15,929 45,821 29,238
------ ------ ------ ------
EBITDA $56,751 $35,662 $115,191 $60,752
======= ======= ======== =======
Reconciliations of refinery operating information (non-GAAP performance measures) to amounts reported under generally accepted accounting principles in financial statements.
Refinery gross margin and net operating margin are non-GAAP performance measures that are used by our management and others to compare our refining performance to that of other companies in our industry. We believe these margin measures are helpful to investors in evaluating our refining performance on a relative and absolute basis.
We calculate refinery gross margin and net operating margin using net sales, cost of products and operating expenses, in each case averaged per produced barrel sold. These two margins do not include the effect of depreciation and amortization. Each of these component performance measures can be reconciled directly to our Consolidated Statements of Income.
Other companies in our industry may not calculate these performance measures in the same manner.
Refinery Gross Margin
Refinery gross margin per barrel is the difference between average net sales price and average cost of products per barrel of produced refined products. Refinery gross margin for each of our refineries and for all of our refineries on a consolidated basis is calculated as shown below.
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
2009 2008 2009 2008
---- ---- ---- ----
Average per produced barrel:
Navajo Refinery
Net sales $67.93 $133.89 $63.80 $117.33
Less cost of products 59.54 125.82 53.83 110.15
----- ------ ----- ------
Refinery gross margin $8.39 $8.07 $9.97 $7.18
===== ===== ===== =====
Woods Cross Refinery
Net sales $69.05 $133.09 $59.74 $117.56
Less cost of products 60.10 120.60 49.90 105.05
----- ------ ----- ------
Refinery gross margin $8.95 $12.49 $9.84 $12.51
===== ====== ===== ======
Tulsa Refinery
Net sales $76.14 $- $76.14 $-
Less cost of products 73.31 - 73.31 -
----- --- ----- ---
Refinery gross margin $2.83 $- $2.83 $-
===== === ===== ===
Consolidated
Net sales $69.14 $133.71 $63.76 $117.38
Less cost of products 61.32 124.62 54.35 109.03
----- ------ ----- ------
Refinery gross margin $7.82 $9.09 $9.41 $8.35
===== ===== ===== =====
Net Operating Margin
Net operating margin per barrel is the difference between refinery gross margin and refinery operating expenses per barrel of produced refined products. Net operating margin for each of our refineries and for all of our refineries on a consolidated basis is calculated as shown below.
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
2009 2008 2009 2008
---- ---- ---- ----
Average per produced barrel:
Navajo Refinery
Refinery gross margin $8.39 $8.07 $9.97 $7.18
Less refinery operating expenses 4.56 5.68 5.19 4.98
---- ---- ---- ----
Net operating margin $3.83 $2.39 $4.78 $2.20
===== ===== ===== =====
Woods Cross Refinery
Refinery gross margin $8.95 $12.49 $9.84 $12.51
Less refinery operating expenses 5.98 8.13 6.45 7.17
---- ---- ---- ----
Net operating margin $2.97 $4.36 $3.39 $5.34
===== ===== ===== =====
Tulsa Refinery
Refinery gross margin $2.83 $- $2.83 $-
Less refinery operating expenses 5.21 - 5.21 -
---- --- ---- ---
Net operating margin $(2.38) $- $(2.38) $-
====== === ====== ===
Consolidated
Refinery gross margin $7.82 $9.09 $9.41 $8.35
Less refinery operating expenses 4.91 6.24 5.49 5.46
---- ---- ---- ----
Net operating margin $2.91 $2.85 $3.92 $2.89
===== ===== ===== =====
Below are reconciliations to our Consolidated Statements of Income for (i) net sales, cost of products and operating expenses, in each case averaged per produced barrel sold, and (ii) net operating margin and refinery gross margin. Due to rounding of reported numbers, some amounts may not calculate exactly.
Reconciliations of refined product sales from produced products sold to total sales and other revenue
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
2009 2008 2009 2008
---- ---- ---- ----
Navajo Refinery
Average sales price per
produced barrel sold $67.93 $133.89 $63.80 $117.33
Times sales of produced
refined products sold
(BPD) 95,812 79,910 79,072 86,980
Times number of days in
period 91 91 181 182
--- --- --- ---
Refined product sales
from produced products
sold $592,274 $973,623 $913,108 $1,857,376
======== ======== ======== ==========
Woods Cross Refinery
Average sales price per
produced barrel sold $69.05 $133.09 $59.74 $117.56
Times sales of produced
refined products sold
(BPD) 27,059 23,790 27,042 24,550
Times number of days in
period 91 91 181 182
--- --- --- ---
Refined product sales
from produced products
sold $170,027 $288,125 $292,404 $525,270
======== ======== ======== ========
Tulsa Refinery
Average sales price per
produced barrel sold $76.14 $- $76.14 $-
Times sales of produced
refined products sold
(BPD) 16,971 - 8,532 -
Times number of days in
period 91 - 181 -
--- --- --- ---
Refined product sales
from produced products
sold $117,588 $- $117,582 $-
======== === ======== ===
Sum of refined products
sales from produced
products sold from our
three refineries (4) $879,889 $1,261,748 $1,323,094 $2,382,646
Add refined product
sales from purchased
products and
rounding(1) 8,303 120,310 61,984 255,556
----- ------- ------ -------
Total refined products
sales 888,192 1,382,058 1,385,078 2,638,202
Add direct sales of
excess crude oil(2) 100,621 314,486 221,876 517,437
Add other refining
segment revenue(3) 31,106 39,657 49,875 57,938
------ ------ ------ ------
Total refining segment
revenue 1,019,919 1,736,201 1,656,829 3,213,577
Add HEP segment sales
and other revenue 40,602 26,774 72,727 36,716
Add corporate and other
revenues 2,979 886 3,078 1,287
Subtract consolidations
and eliminations (25,119) (20,039) (43,430) (27,774)
-------- -------- -------- --------
Sales and other
revenues $1,038,381 $1,743,822 $1,689,204 $3,223,806
========== ========== ========== ==========
(1) We purchase finished products when opportunities arise that provide a
profit on the sale of such products, or to meet delivery commitments.
(2) We purchase crude oil that at times exceeds the supply needs of our
refineries. Quantities in excess of our needs are sold at market
prices to purchasers of crude oil that are recorded on a gross basis
with the sales price recorded as revenues and the corresponding
acquisition cost as inventory and then upon sale as cost of products
sold. Additionally, we enter into buy/sell exchanges of crude oil
with certain parties to facilitate the delivery of quantities to
certain locations that are netted at carryover cost.
(3) Other refining segment revenue includes the revenues associated with
Holly Asphalt Company and revenue derived from feedstock and sulfur
credit sales.
(4) The above calculations of refined product sales from produced
products sold can also be computed on a consolidated basis. These
amounts may not calculate exactly due to rounding of reported numbers.
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
2009 2008 2009 2008
---- ---- ---- ----
Average sales price per
produced barrel sold $69.14 $133.71 $63.76 $117.38
Times sales of produced
refined products sold (BPD) 139,842 103,700 114,646 111,530
Times number of days in
period 91 91 181 182
--- --- --- ---
Refined product sales from
produced products sold $879,889 $1,261,748 $1,323,094 $2,382,646
======== ========== ========== ==========
Reconciliation of average cost of products per produced barrel sold to total cost of products sold
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
2009 2008 2009 2008
---- ---- ---- ----
Navajo Refinery
Average cost of products
per produced barrel sold $59.54 $125.82 $53.83 $110.15
Times sales of produced
refined products sold
(BPD) 95,812 79,910 79,072 86,980
Times number of days in
period 91 91 181 182
--- --- --- ---
Cost of products for
produced products sold $519,123 $914,939 $770,417 $1,743,714
======== ======== ======== ==========
Woods Cross Refinery
Average cost of products
per produced barrel sold $60.10 $120.60 $49.90 $105.05
Times sales of produced
refined products sold
(BPD) 27,059 23,790 27,042 24,550
Times number of days in
period 91 91 181 182
--- --- --- ---
Cost of products for
produced products sold $147,988 $261,086 $244,241 $469,374
======== ======== ======== ========
Tulsa Refinery
Average cost of products
per produced barrel sold $73.31 $- $73.31 $-
Times sales of produced
refined products sold
(BPD) 16,971 - 8,532 -
Times number of days in
period 91 - 181 -
-- --- --- ---
Cost of products for
produced products sold $113,217 $- $113,212 $-
======== === ======== ===
Sum of cost of products for
produced products sold
from our three refineries
(4) $780,328 $1,176,025 $1,127,870 $2,213,088
Add refined product costs
from purchased products
sold and rounding (1) 9,180 123,226 66,859 258,415
----- ------- ------ -------
Total refined cost of
products sold 789,508 1,299,251 1,194,729 2,471,503
Add crude oil cost of
direct sales of excess
crude oil(2) 99,872 311,963 220,554 514,176
Add other refining segment
costs of products sold(3) 15,537 29,375 19,473 45,898
------ ------ ------ ------
Total refining segment cost
of products sold 904,917 1,640,589 1,434,756 3,031,577
Subtract consolidations and
eliminations (24,991) (20,039) (43,176) (27,590)
-------- -------- -------- --------
Costs of products sold
(exclusive of depreciation
and amortization) $879,926 $1,620,550 $1,391,580 $3,003,987
======== ========== ========== ==========
(1) We purchase finished products when opportunities arise that provide a
profit on the sale of such products, or to meet delivery commitments.
(2) We purchase crude oil that at times exceeds the supply needs of our
refineries. Quantities in excess of our needs are sold at market
prices to purchasers of crude oil that are recorded on a gross basis
with the sales price recorded as revenues and the corresponding
acquisition cost as inventory and then upon sale as cost of products
sold. Additionally, we enter into buy/sell exchanges of crude oil
with certain parties to facilitate the delivery of quantities to
certain locations that are netted at carryover cost.
(3) Other refining segment cost of products sold includes the cost of
products for Holly Asphalt Company and costs attributable to
feedstock and sulfur credit sales.
(4) The above calculations of cost of products from produced products
sold can also be computed on a consolidated basis. These amounts
may not calculate exactly due to rounding of reported numbers.
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
2009 2008 2009 2008
---- ---- ---- ----
Average cost of products per
produced barrel sold $61.32 $124.62 $54.35 $109.03
Times sales of produced
refined products sold (BPD) 139,842 103,700 114,646 111,530
Times number of days in
period 91 91 181 182
--- --- --- ---
Cost of products for
produced products sold $780,328 $1,176,025 $1,127,870 $2,213,088
======== ========== ========== ==========
Reconciliation of average refinery operating expenses per produced barrel sold to total operating expenses
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
2009 2008 2009 2008
---- ---- ---- ----
Navajo Refinery
Average refinery operating
expenses per produced barrel
sold $4.56 $5.68 $5.19 $4.98
Times sales of produced refined
products sold (BPD) 95,812 79,910 79,072 86,980
Times number of days in period 91 91 181 182
--- --- --- ---
Refinery operating expenses for
produced products sold $39,758 $41,304 $74,279 $78,835
======= ======= ======= =======
Woods Cross Refinery
Average refinery operating
expenses per produced barrel
sold $5.98 $8.13 $6.45 $7.17
Times sales of produced refined
products sold (BPD) 27,059 23,790 27,042 24,550
Times number of days in period 91 91 181 182
--- --- --- ---
Refinery operating expenses for
produced products sold $14,725 $17,601 $31,570 $32,036
======= ======= ======= =======
Tulsa Refinery
Average refinery operating
expenses per produced barrel
sold $5.21 $- $5.21 $-
Times sales of produced refined
products sold (BPD) 16,971 - 8,532 -
Times number of days in period 91 - 181 -
-- --- --- ---
Refinery operating expenses for
produced products sold $8,046 $- $8,046 $-
====== === ====== ===
Sum of refinery operating
expenses per produced products
sold from our three refineries
(2) $62,529 $58,905 $113,895 $110,871
Add other refining segment
operating expenses and
rounding (1) 5,111 5,278 10,160 10,528
----- ----- ------ ------
Total refining segment
operating expenses 67,640 64,183 124,055 121,399
Add HEP segment operating
expenses 11,086 9,985 21,882 13,661
Add corporate and other costs (226) - (254) (184)
Subtract consolidations and
eliminations 8 7 27 7
--- --- --- ---
Operating expenses (exclusive
of depreciation and
amortization) $78,508 $74,175 $145,710 $134,883
======= ======= ======== ========
(1) Other refining segment operating expenses include the marketing costs
associated with our refining segment and the operating expenses of
Holly Asphalt Company.
(2) The above calculations of refinery operating expenses from produced
products sold can also be computed on a consolidated basis. These
amounts may not calculate exactly due to rounding of reported numbers.
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
2009 2008 2009 2008
---- ---- ---- ----
Average refinery operating
expenses per produced barrel
sold $4.91 $6.24 $5.49 $5.46
Times sales of produced refined
products sold (BPD) 139,842 103,700 114,646 111,530
Times number of days in period 91 91 181 182
--- --- --- ---
Refinery operating expenses for
produced products sold $62,529 $58,905 $113,895 $110,871
======= ======= ======== ========
Reconciliation of net operating margin per barrel to refinery gross margin per barrel to total sales and other revenues
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
2009 2008 2009 2008
---- ---- ---- ----
Navajo Refinery
Net operating margin
per barrel $3.83 $2.39 $4.78 $2.20
Add average refinery
operating expenses per
produced barrel 4.56 5.68 5.19 4.98
---- ---- ---- ----
Refinery gross margin
per barrel 8.39 8.07 9.97 7.18
Add average cost of
products per produced
barrel sold 59.54 125.82 53.83 110.15
----- ------ ----- ------
Average sales price per
produced barrel sold $67.93 $133.89 $63.80 $117.33
Times sales of produced
refined products sold
(BPD) 95,812 79,910 79,072 86,980
Times number of days in
period 91 91 181 182
--- --- --- ---
Refined products sales
from produced products
sold $592,274 $973,623 $913,108 $1,857,376
======== ======== ======== ==========
Woods Cross Refinery
Net operating margin
per barrel $2.97 $4.36 $3.39 $5.34
Add average refinery
operating expenses per
produced barrel 5.98 8.13 6.45 7.17
---- ---- ---- ----
Refinery gross margin
per barrel 8.95 12.49 9.84 12.51
Add average cost of
products per produced
barrel sold 60.10 120.60 49.90 105.05
----- ------ ----- ------
Average net sales per
produced barrel sold $69.05 $133.09 $59.74 $117.56
Times sales of produced
refined products sold
(BPD) 27,059 23,790 27,042 24,550
Times number of days in
period 91 91 181 182
--- --- --- ---
Refined products sales
from produced products
sold $170,027 $288,125 $292,404 $525,270
======== ======== ======== ========
Tulsa Refinery
Net operating margin
per barrel $(2.38) $- $(2.38) $-
Add average refinery
operating expenses per
produced barrel 5.21 - 5.21 -
---- --- ---- ---
Refinery gross margin
per barrel 2.83 - 2.83 -
Add average cost of
products per produced
barrel sold 73.31 - 73.31 -
----- --- ----- ---
Average net sales per
produced barrel sold $76.14 $- $76.14 $-
Times sales of produced
refined products sold
(BPD) 16,971 - 8,532 -
Times number of days in
period 91 - 181 -
-- --- --- ---
Refined products sales
from produced products
sold $117,588 $- $117,582 $-
======== === ======== ===
Sum of refined products
sales from produced
products sold from our
three refineries (4)
$879,889 $1,261,748 $1,323,094 $2,382,646
Add refined product
sales from purchased
products and rounding
(1) 8,303 120,310 61,984 255,556
----- ------- ------ -------
Total refined products
sales 888,192 1,382,058 1,385,078 2,638,202
Add direct sales of
excess crude oil(2) 100,621 314,486 221,876 517,437
Add other refining
segment revenue (3) 31,106 39,657 49,875 57,938
------ ------ ------ ------
Total refining segment
revenue 1,019,919 1,736,201 1,656,829 3,213,577
Add HEP segment sales
and other revenues 40,602 26,774 72,727 36,716
Add corporate and other
revenues 2,979 886 3,078 1,287
Subtract consolidations
and eliminations (25,119) (20,039) (43,430) (27,774)
-------- -------- -------- --------
Sales and other
revenues $1,038,381 $1,743,822 $1,689,204 $3,223,806
========== ========== ========== ==========
(1) We purchase finished products when opportunities arise that provide a
profit on the sale of such products or to meet delivery commitments.
(2) We purchase crude oil that at times exceeds the supply needs of our
refineries. Quantities in excess of our needs are sold at market
prices to purchasers of crude oil that are recorded on a gross basis
with the sales price recorded as revenues and the corresponding
acquisition cost as inventory and then upon sale as cost of products
sold. Additionally, we enter into buy/sell exchanges of crude oil
with certain parties to facilitate the delivery of quantities to
certain locations that are netted at carryover cost.
(3) Other refining segment revenue includes the revenues associated with
Holly Asphalt Company and revenue derived from feedstock and sulfur
credit sales.
(4) The above calculations of refined product sales from produced
products sold can also be computed on a consolidated basis. These
amounts may not calculate exactly due to rounding of reported numbers.
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
2009 2008 2009 2008
---- ---- ---- ----
Net operating margin per
barrel $2.91 $2.85 $3.92 $2.89
Add average refinery
operating expenses per
produced
barrel 4.91 6.24 5.49 5.46
---- ---- ---- ----
Refinery gross margin per
barrel 7.82 9.09 9.41 8.35
Add average cost of
products per produced
barrel sold 61.32 124.62 54.35 109.03
----- ------ ----- ------
Average sales price per
produced barrel sold $69.14 $133.71 $63.76 $117.38
Times sales of produced
refined products sold
(BPD) 139,842 103,700 114,646 111,530
Times number of days in
period 91 91 181 182
--- --- --- ---
Refined product sales from
produced products sold $879,889 $1,261,748 $1,323,094 $2,382,646
======== ========== ========== ==========
SOURCE Holly Corporation