Pipeline and refinery operator Holly Energy Partners reported third quarter 2021 net income that was nearly two and one-half times that of a year earlier. But it also saw a decline in revenues in the third quarter.
The Dallas-based company, with pipeline and refinery operations across Oklahoma and other oil and gas producing states reported net income of $49.2 million or 46 cents a basic and diluted limited partner unit compared to $17.8 million and 17 cents a share in the third quarter of 2020.
Net income attributable to HEP for the third quarter of 2020 included a goodwill impairment charge of $35.7 million related to its Cheyenne business unit and a $6.1 million gain related to HEP’s pro-rata share of a business interruption insurance claim settlement resulting from a loss at HollyFrontier Corporation’s Woods Cross refinery.
Excluding these items, net income attributable to HEP for the third quarters of 2021 and 2020 were $49.2 million ($0.46 per basic and diluted limited partner unit) and $47.4 million ($0.45 per basic and diluted limited partner unit), respectively. The increase in earnings was mainly due to higher interest income associated with sales-type leases, higher equity in earnings from our joint ventures and lower depreciation expense partially offset by lower revenues and higher operating expenses.
Distributable cash flow was $66.8 million for the third quarter of 2021, a decrease of $10.1 million, or 13.1% compared to the third quarter of 2020. HEP declared a quarterly cash distribution of $0.35 per unit on October 21, 2021.
“HEP delivered solid results in the quarter, supported by record volumes on the SLC and Frontier pipelines in the Rockies region, in addition to on going strength in our terminal and storage systems,” said Michael Jennings, Chief Executive Officer.
“During the quarter, we completed the Cushing Connect Pipeline project and continued to execute our deleveraging plan. Looking forward, we continue to make progress on the Frontier Pipeline expansion and expect completion later this year.”
He said the impact of the COVID-19 pandemic on the global macroeconomy created a diminished demand for refined products and crude oil transportation but the company started seeing improvement in the second quarter of 2020 and it continued through the third quarter this year.
“We expect our customers will continue to adjust refinery production levels commensurate with market demand, and with the increasing availability of vaccines, we believe there is a path to a fulsome recovery in demand in 2021,” added Jennings.
Revenues for the third quarter were $122.6 million, a decrease of $5.1 million compared to the third quarter of 2020. The decrease was mainly due to lower on-going revenues on Holly’s Cheyenne assets as a result of the conversion of the HollyFrontier Cheyenne refinery to renewable diesel production.
The company also reported a decline in revenues from its refined product pipelines. They totaled $27.5 million for the quarter, a drop of $0.9 million from a year ago. Shipments averaged 162.3 thousand barrels a day compared to 179.6 mbpd for third quarter quarter 2020.
Holly reported revenues from crude pipelines were $32.3 million, about the same as a year earlier. Shipments averaged 408.0 mbpd , up slightly from 404.3 mbpd for the third quarter 2020.
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