Holly Energy Partners, L.P., owner and operator of refineries including one in Tulsa reported a first quarter 2022 decline in net income compared to a year ago.
The Dallas-based firm said net income was $49.6 million or 45 cents a basic and diluted limited partner unit compared to $64.4 million and 61 cents a share in the first quarter of 2021.
Why the decline? Revenues for the first quarter of 2022 were $120.2 million, a decrease of $7.0 million compared to the first quarter of 2021. The decrease was mainly due to lower revenues on the company’s Cheyenne assets as a result of the conversion of HF Sinclair Corporation’s Cheyenne refinery to renewable diesel production, lower revenues on the Woods Cross refinery processing units, which were down for planned maintenance in March 2022, and lower revenues on the company’s product pipelines servicing HF Sinclair’s Navajo refinery.
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.
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).
HEP previously announced the completion of its acquisition of Sinclair Transportation Company, an agreement made in August of last year in exchange for 21 million newly issued common limited partner units of HEP.
The agreement represented 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.
The firm’s consolidated financial and operating results for the first quarter of 2022 reflect Sinclair Transportation operations beginning March 14, 2022.
“—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,” said Michael Jennings, Chief Executive Officer.
“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 company reported a more than $2 million decline in revenues from its refined product pipelines but an increase in revenues from its crude pipelines.
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