investor-relations

Press Release Details

HollyFrontier Corporation Reports Quarterly Results

11/03/2021
  • Reported net income attributable to HollyFrontier stockholders of $280.8 million, or $1.71 per diluted share, and adjusted net income of $209.9 million, or $1.28 per diluted share, for the third quarter
  • Reported EBITDA of $482.6 million and Adjusted EBITDA of $407.8 million for the third quarter

DALLAS--(BUSINESS WIRE)-- HollyFrontier Corporation (NYSE:HFC) (“HollyFrontier” or the “Company”) today reported third quarter net income attributable to HollyFrontier stockholders of $280.8 million, or $1.71 per diluted share, for the quarter ended September 30, 2021, compared to a net loss of $(2.4) million, or $(0.01) per diluted share, for the quarter ended September 30, 2020.

The third quarter results reflect special items that collectively increased net income by a total of $70.8 million. On a pre-tax basis, these items include a gain on sale of real property of $86.0 million, partially offset by pre-close acquisition integration costs of $4.3 million and charges related to the Cheyenne Refinery conversion to renewable diesel production, including decommissioning charges of $6.7 million and severance charges totaling $0.2 million. Excluding these items, net income for the current quarter was $209.9 million ($1.28 per diluted share) compared to net loss of $(66.9) million ($(0.41) per diluted share) for the third quarter of 2020, which excludes certain items that collectively decreased net loss by $64.5 million.

HollyFrontier’s President & CEO, Michael Jennings, commented, “HollyFrontier’s standout third quarter results were driven by continued refined product margin strength in our regions, healthy base oil prices and robust operational performance in the quarter. On November 1, 2021, we closed on our previously announced acquisition of the Puget Sound Refinery. We are excited to add this high-quality refinery to our existing asset base along with the geographical diversification and earnings potential it provides.”

Refining segment income before interest and income taxes was $217.4 million for the third quarter of 2021 compared to a loss before interest and income taxes of $(118.5) million in the third quarter of 2020. The segment reported EBITDA of $295.3 million for the third quarter of 2021 compared to $(39.3) million for the third quarter of 2020. This increase was driven by stronger product demand, which resulted in a consolidated refinery gross margin of $14.87 per produced barrel, a 140% increase compared to $6.20 for the third quarter of 2020. Crude oil charge averaged 416,430 barrels per day (“BPD”) for the current quarter compared to 375,880 BPD for the third quarter of 2020.

Lubricants and Specialty Products segment income before interest and income taxes was $148.5 million for the third quarter of 2021 compared to $43.1 million in the third quarter of 2020. The segment reported EBITDA of $167.7 million for the third quarter of 2021 compared to $60.6 million in the third quarter of 2020. Excluding a gain on sale of real property of $86.0 million, Adjusted EBITDA in the third quarter of 2021 was $81.7 million. This increase was driven by strong base oil margins in the third quarter of 2021.

Holly Energy Partners, L.P. (“HEP”) reported EBITDA of $77.6 million for the third quarter of 2021 compared to $55.3 million in the third quarter of 2020. Reported EBITDA for the third quarter of 2020 included a $35.7 million goodwill impairment charge, which was eliminated on the Company's consolidation. HEP reported Adjusted EBITDA of $83.3 million for the third quarter of 2021 compared to $86.4 million for the third quarter of 2020.

For the third quarter of 2021, net cash provided by operations totaled $249.4 million. At September 30, 2021, the Company's cash and cash equivalents totaled $1,481.6 million, an $83.3 million increase over cash and cash equivalents of $1,398.3 million at June 30, 2021. Additionally, the Company's consolidated debt was $3,072.4 million. The Company’s debt, exclusive of HEP debt, which is nonrecourse to HollyFrontier, was $1,739.0 million at September 30, 2021.

The company has scheduled a webcast conference call for today, November 3, 2021, at 8:30 AM Eastern Time to discuss third quarter financial results. This webcast may be accessed at https://event.on24.com/wcc/r/3453047/731944E4F0294137EB72C182BC77BB87. An audio archive of this webcast will be available using the above noted link through November 17, 2021.

HollyFrontier Corporation, headquartered in Dallas, Texas, is an independent petroleum refiner and marketer that produces high value light products such as gasoline, diesel fuel, jet fuel and other specialty products. HollyFrontier owns and operates refineries located in Kansas, Oklahoma, New Mexico, Washington and Utah and markets its refined products principally in the Southwest U.S., the Rocky Mountains extending into the Pacific Northwest and in other neighboring Plains states. In addition, HollyFrontier produces base oils and other specialized lubricants in the U.S., Canada and the Netherlands, and exports products to more than 80 countries. HollyFrontier also owns a 57% limited partner interest and a non-economic general partner interest in Holly Energy Partners, L.P., a master limited partnership that provides petroleum product and crude oil transportation, terminalling, storage and throughput services to the petroleum industry, including HollyFrontier Corporation subsidiaries.

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. Forward-looking statements use words such as “anticipate,” “project,” “expect,” “plan,” “goal,” “forecast,” “strategy,” “intend,” “should,” “would,” “could,” “believe,” “may,” and similar expressions and statements regarding our plans and objectives for future operations. 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, the Company’s ability to successfully close the pending acquisition by the Company and HEP of Sinclair Oil Corporation and Sinclair Transportation Company (collectively, “Sinclair”, and such transactions, the “Sinclair Transactions”), or once closed, integrate the operations of Sinclair with its existing operations and fully realize the expected synergies of the Sinclair Transactions or on the expected timeline; the satisfaction or waivers of the conditions precedent to the proposed Sinclair Transactions, including without limitation, the receipt of the Company stockholder approval for the issuance of HF Sinclair common stock at closing and regulatory approvals (including clearance by antitrust authorities necessary to complete the Sinclair Transactions on the terms and timeline desired), risks relating to the value of HF Sinclair common stock and the value of HEP’s limited partner common units to be issued at the closing of the Sinclair Transactions from sales in anticipation of closing and from sales by the Sinclair holders following the closing of the Sinclair Transactions; the cost and potential for a delay in closing as a result of litigation challenging the Sinclair Transactions; the Company's ability to successfully integrate the operation of the Puget Sound refinery with our existing operations; the demand for and supply of crude oil and refined products, including uncertainty regarding the effects of the continuing COVID-19 pandemic on future demand; risks and uncertainties with respect to the actions of actual or potential competitive suppliers and transporters of refined petroleum products or lubricant and specialty products in the Company’s markets; the spread between market prices for refined products and market prices for crude oil; the possibility of constraints on the transportation of refined products or lubricant and specialty products; the possibility of inefficiencies, curtailments or shutdowns in refinery operations or pipelines, whether due to infection in the workforce or in response to reductions in demand; the effects of current and/or future governmental and environmental regulations and policies, including the effects of current and/or future restrictions on various commercial and economic activities in response to the COVID-19 pandemic; the availability and cost of financing to the Company; the effectiveness of the Company’s capital investments and marketing strategies; the Company’s efficiency in carrying out and consummating construction projects, including the Company's ability to complete announced capital projects, such as the conversion of the Cheyenne Refinery to a renewable diesel facility and the construction of the Artesia renewable diesel unit and pretreatment unit, on time and within capital guidance; the Company's ability to timely obtain or maintain permits, including those necessary for operations or capital projects; the ability of the Company to acquire refined or lubricant product operations or pipeline and terminal operations on acceptable terms and to integrate any existing or future acquired operations; the possibility of terrorist or cyberattacks and the consequences of any such attacks; general economic conditions, including uncertainty regarding the timing, pace and extent of an economic recovery in the United States; a prolonged economic slowdown due to the COVID-19 pandemic could result in an impairment of goodwill and/or additional long-lived asset impairments; 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
September 30,

 

Change from 2020

 

2021

 

2020

 

Change

 

Percent

 

(In thousands, except per share data)

Sales and other revenues

$

4,685,059

 

 

$

2,819,400

 

 

$

1,865,659

 

 

66

%

Operating costs and expenses:

 

 

 

 

 

 

 

Cost of products sold:

 

 

 

 

 

 

 

Cost of products sold (exclusive of lower of cost or market inventory valuation adjustment)

3,822,858

 

 

2,377,238

 

 

1,445,620

 

 

61

 

Lower of cost or market inventory valuation adjustment

 

 

(62,849

)

 

62,849

 

 

(100

)

 

3,822,858

 

 

2,314,389

 

 

1,508,469

 

 

65

 

Operating expenses (exclusive of depreciation and amortization)

352,520

 

 

332,496

 

 

20,024

 

 

6

 

Selling, general and administrative expenses

91,056

 

 

74,453

 

 

16,603

 

 

22

 

Depreciation and amortization

121,220

 

 

125,280

 

 

(4,060

)

 

(3

)

Total operating costs and expenses

4,387,654

 

 

2,846,618

 

 

1,541,036

 

 

54

 

Income (loss) from operations

297,405

 

 

(27,218

)

 

324,623

 

 

(1,193

)

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

Earnings of equity method investments

3,689

 

 

1,316

 

 

2,373

 

 

180

 

Interest income

1,018

 

 

1,011

 

 

7

 

 

1

 

Interest expense

(26,892

)

 

(30,589

)

 

3,697

 

 

(12

)

Gain on business interruption insurance settlement

 

 

81,000

 

 

(81,000

)

 

(100

)

Gain (loss) on foreign currency transactions

(3,492

)

 

1,030

 

 

(4,522

)

 

(439

)

Gain on sale of assets and other

85,779

 

 

1,368

 

 

84,411

 

 

6,170

 

 

60,102

 

 

55,136

 

 

4,966

 

 

9

 

Income before income taxes

357,507

 

 

27,918

 

 

329,589

 

 

1,181

 

Income tax expense

54,766

 

 

4,573

 

 

50,193

 

 

1,098

 

Net income

302,741

 

 

23,345

 

 

279,396

 

 

1,197

 

Less net income attributable to noncontrolling interest

21,954

 

 

25,746

 

 

(3,792

)

 

(15

)

Net income (loss) attributable to HollyFrontier stockholders

$

280,787

 

 

$

(2,401

)

 

$

283,188

 

 

(11,795

)%

 

 

 

 

 

 

 

 

Earnings (loss) per share attributable to HollyFrontier stockholders:

 

 

 

 

 

 

 

Basic

$

1.71

 

 

$

(0.01

)

 

$

1.72

 

 

(17,200

)%

Diluted

$

1.71

 

 

$

(0.01

)

 

$

1.72

 

 

(17,200

)%

Cash dividends declared per common share

$

 

 

$

0.35

 

 

$

(0.35

)

 

(100

)%

Average number of common shares outstanding:

 

 

 

 

 

 

 

Basic

162,551

 

 

162,015

 

 

536

 

 

%

Diluted

162,551

 

 

162,015

 

 

536

 

 

%

 

 

 

 

 

 

 

 

EBITDA

$

482,647

 

 

$

157,030

 

 

$

325,617

 

 

207

%

Adjusted EBITDA

$

407,830

 

 

$

65,638

 

 

$

342,192

 

 

521

%

 

Nine Months Ended
September 30,

 

Change from 2020

 

2021

 

2020

 

Change

 

Percent

 

(In thousands, except per share data)

Sales and other revenues

$

12,766,475

 

 

$

8,282,875

 

 

$

4,483,600

 

 

54

%

Operating costs and expenses:

 

 

 

 

 

 

 

Cost of products sold:

 

 

 

 

 

 

 

Cost of products sold (exclusive of lower of cost or market inventory valuation adjustment)

10,608,892

 

 

6,647,960

 

 

3,960,932

 

 

60

 

Lower of cost or market inventory valuation adjustment

(318,862

)

 

227,711

 

 

(546,573

)

 

(240

)

 

10,290,030

 

 

6,875,671

 

 

3,414,359

 

 

50

 

Operating expenses (exclusive of depreciation and amortization)

1,086,620

 

 

964,200

 

 

122,420

 

 

13

 

Selling, general and administrative expenses

250,785

 

 

237,559

 

 

13,226

 

 

6

 

Depreciation and amortization

369,341

 

 

396,033

 

 

(26,692

)

 

(7

)

Long-lived asset impairment

 

 

436,908

 

 

(436,908

)

 

(100

)

Total operating costs and expenses

11,996,776

 

 

8,910,371

 

 

3,086,405

 

 

35

 

Income (loss) from operations

769,699

 

 

(627,496

)

 

1,397,195

 

 

(223

)

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

Earnings of equity method investments

8,875

 

 

5,186

 

 

3,689

 

 

71

 

Interest income

3,078

 

 

6,590

 

 

(3,512

)

 

(53

)

Interest expense

(94,220

)

 

(85,923

)

 

(8,297

)

 

10

 

Gain on business interruption insurance settlement

 

 

81,000

 

 

(81,000

)

 

(100

)

Gain on tariff settlement

51,500

 

 

 

 

51,500

 

 

 

Gain on sales-type leases

 

 

33,834

 

 

(33,834

)

 

(100

)

Loss on early extinguishment of debt

 

 

(25,915

)

 

25,915

 

 

(100

)

Loss on foreign currency transactions

(4,226

)

 

(918

)

 

(3,308

)

 

360

 

Gain on sale of assets and other

95,596

 

 

4,790

 

 

90,806

 

 

1,896

 

 

60,603

 

 

18,644

 

 

41,959

 

 

225

 

Income (loss) before income taxes

830,302

 

 

(608,852

)

 

1,439,154

 

 

(236

)

Income tax expense (benefit)

149,944

 

 

(188,504

)

 

338,448

 

 

(180

)

Net income (loss)

680,358

 

 

(420,348

)

 

1,100,706

 

 

(262

)

Less net income attributable to noncontrolling interest

82,504

 

 

63,353

 

 

19,151

 

 

30

 

Net income (loss) attributable to HollyFrontier stockholders

$

597,854

 

 

$

(483,701

)

 

$

1,081,555

 

 

(224

)%

 

 

 

 

 

 

 

 

Earnings (loss) per share attributable to HollyFrontier stockholders:

 

 

 

 

 

 

 

Basic

$

3.63

 

 

$

(2.99

)

 

$

6.62

 

 

(221

)%

Diluted

$

3.63

 

 

$

(2.99

)

 

$

6.62

 

 

(221

)%

Cash dividends declared per common share

$

0.35

 

 

$

1.05

 

 

$

(0.70

)

 

(67

)%

Average number of common shares outstanding:

 

 

 

 

 

 

 

Basic

162,518

 

 

161,927

 

 

591

 

 

%

Diluted

162,518

 

 

161,927

 

 

591

 

 

%

 

 

 

 

 

 

 

 

EBITDA

$

1,208,281

 

 

$

(196,839

)

 

$

1,405,120

 

 

(714

)%

Adjusted EBITDA

$

789,639

 

 

$

434,118

 

 

$

355,521

 

 

82

%

Balance Sheet Data

 

September 30,

 

December 31,

 

2021

 

2020

 

(In thousands)

Cash and cash equivalents

$

1,481,562

 

 

$

1,368,318

 

Working capital

$

2,310,815

 

 

$

1,935,605

 

Total assets

$

12,897,181

 

 

$

11,506,864

 

Long-term debt

$

3,072,352

 

 

$

3,142,718

 

Total equity

$

6,329,539

 

 

$

5,722,203

 

Segment Information

Our operations are organized into three reportable segments, Refining, Lubricants and Specialty Products and HEP. Our operations that are not included in the Refining, Lubricants and Specialty Products and HEP segments are included in Corporate and Other. Intersegment transactions are eliminated in our consolidated financial statements and are included in Eliminations. Corporate and Other and Eliminations are aggregated and presented under the Corporate, Other and Eliminations column.

The Refining segment includes the operations of our El Dorado, Tulsa, Navajo, Woods Cross Refineries and HollyFrontier Asphalt Company LLC (“HFC Asphalt”) (aggregated as a reportable segment). Refining activities involve the purchase and refining of crude oil and wholesale and branded marketing of refined products, such as gasoline, diesel fuel and jet fuel. These petroleum products are primarily marketed in the Mid-Continent, Southwest and Rocky Mountain geographic regions of the United States. HFC Asphalt operates various asphalt terminals in Arizona, New Mexico and Oklahoma. The Refining segment also included the operations of the Cheyenne Refinery through the third quarter of 2020, at which time it permanently ceased petroleum refining operations.

The Lubricants and Specialty Products segment involves Petro-Canada Lubricants Inc.’s (“PCLI”) production operations, located in Mississauga, Ontario, that include lubricant products such as base oils, white oils, specialty products and finished lubricants and the operations of our Petro-Canada Lubricants business that includes the marketing of products to both retail and wholesale outlets through a global sales network with locations in Canada, the United States, Europe and China. Additionally, the Lubricants and Specialty Products segment includes specialty lubricant products produced at our Tulsa refineries that are marketed throughout North America and are distributed in Central and South America, the operations of Red Giant Oil, one of the largest suppliers of locomotive engine oil in North America and the operations of Sonneborn, a producer of specialty hydrocarbon chemicals such as white oils, petrolatums and waxes with manufacturing facilities in the United States and Europe.

The HEP segment involves all of the operations of HEP, a consolidated variable interest entity, which owns and operates logistics assets consisting of petroleum product and crude oil pipelines, terminals, tankage, loading rack facilities and refinery processing units in the Mid-Continent, Southwest and Rocky Mountain geographic regions of the United States. The HEP segment also includes a 75% interest in UNEV Pipeline, LLC (an HEP consolidated subsidiary), and a 50% ownership interest in each of Osage Pipeline Company, LLC, Cheyenne Pipeline LLC and Cushing Connect Pipeline & Terminal LLC. Revenues from the HEP segment are earned through transactions with unaffiliated parties for pipeline transportation, rental and terminalling operations as well as revenues relating to pipeline transportation services provided for our refining operations. Due to certain basis differences, our reported amounts for the HEP segment may not agree to amounts reported in HEP's periodic public filings.

 

 

Refining

 

Lubricants
and Specialty
Products

 

HEP

 

Corporate,
Other and
Eliminations

 

Consolidated
Total

 

 

(In thousands)

Three Months Ended September 30, 2021

 

 

 

 

 

 

 

 

Sales and other revenues:

 

 

 

 

 

 

 

 

 

 

Revenues from external customers

 

$

3,993,570

 

 

$

666,033

 

 

$

25,459

 

 

$

(3

)

 

$

4,685,059

 

Intersegment revenues

 

189,441

 

 

501

 

 

97,125

 

 

(287,067

)

 

 

 

 

$

4,183,011

 

 

$

666,534

 

 

$

122,584

 

 

$

(287,070

)

 

$

4,685,059

 

Cost of products sold (exclusive of lower of cost or market inventory)

 

$

3,605,600

 

 

$

482,533

 

 

$

 

 

$

(265,275

)

 

$

3,822,858

 

Operating expenses

 

$

248,316

 

 

$

60,940

 

 

$

42,793

 

 

$

471

 

 

$

352,520

 

Selling, general and administrative expenses

 

$

32,345

 

 

$

41,476

 

 

$

3,849

 

 

$

13,386

 

 

$

91,056

 

Depreciation and amortization

 

$

77,890

 

 

$

19,226

 

 

$

21,627

 

 

$

2,477

 

 

$

121,220

 

Income (loss) from operations

 

$

218,860

 

 

$

62,359

 

 

$

54,315

 

 

$

(38,129

)

 

$

297,405

 

Income (loss) before interest and income taxes

 

$

217,438

 

 

$

148,460

 

 

$

58,081

 

 

$

(40,598

)

 

$

383,381

 

Net income attributable to noncontrolling interest

 

$

 

 

$

 

 

$

1,188

 

 

$

20,766

 

 

$

21,954

 

Earnings of equity method investments

 

$

 

 

$

 

 

$

3,689

 

 

$

 

 

$

3,689

 

Capital expenditures

 

$

40,814

 

 

$

7,833

 

 

$

19,217

 

 

$

147,640

 

 

$

215,504

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30, 2020

 

 

 

 

 

 

 

 

Sales and other revenues:

 

 

 

 

 

 

 

 

 

 

Revenues from external customers

 

$

2,339,782

 

 

$

452,878

 

 

$

26,740

 

 

$

 

 

$

2,819,400

 

Intersegment revenues

 

56,331

 

 

2,164

 

 

100,991

 

 

(159,486

)

 

 

 

 

$

2,396,113

 

 

$

455,042

 

 

$

127,731

 

 

$

(159,486

)

 

$

2,819,400

 

Cost of products sold (exclusive of lower of cost or market inventory)

 

$

2,211,342

 

 

$

302,703

 

 

$

 

 

$

(136,807

)

 

$

2,377,238

 

Lower of cost or market inventory valuation adjustment

 

$

(62,849

)

 

$

 

 

$

 

 

$

 

 

$

(62,849

)

Operating expenses

 

$

256,079

 

 

$

54,488

 

 

$

40,003

 

 

$

(18,074

)

 

$

332,496

 

Selling, general and administrative expenses

 

$

30,866

 

 

$

36,773

 

 

$

2,332

 

 

$

4,482

 

 

$

74,453

 

Depreciation and amortization

 

$

79,146

 

 

$

17,432

 

 

$

24,109

 

 

$

4,593

 

 

$

125,280

 

Income (loss) from operations

 

$

(118,471

)

 

$

43,646

 

 

$

61,287

 

 

$

(13,680

)

 

$

(27,218

)

Income (loss) before interest and income taxes

 

$

(118,471

)

 

$

43,120

 

 

$

70,067

 

 

$

62,780

 

 

$

57,496

 

Net income attributable to noncontrolling interest

 

$

 

 

$

 

 

$

2,293

 

 

$

23,453

 

 

$

25,746

 

Earnings of equity method investments

 

$

 

 

$

 

 

$

1,316

 

 

$

 

 

$

1,316

 

Capital expenditures

 

$

41,740

 

 

$

6,995

 

 

$

7,902

 

 

$

26,635

 

 

$

83,272

 

 

 

Refining

 

Lubricants
and Specialty
Products

 

HEP

 

Corporate,
Other
and
Eliminations

 

Consolidated
Total

 

 

(In thousands)

Nine Months Ended September 30, 2021

 

 

 

 

 

 

 

 

Sales and other revenues:

 

 

 

 

 

 

 

 

 

 

Revenues from external customers

 

$

10,837,876

 

 

$

1,850,786

 

 

$

77,809

 

 

$

4

 

 

$

12,766,475

 

Intersegment revenues

 

455,089

 

 

9,500

 

 

298,193

 

 

(762,782

)

 

 

 

 

$

11,292,965

 

 

$

1,860,286

 

 

$

376,002

 

 

$

(762,778

)

 

$

12,766,475

 

Cost of products sold (exclusive of lower of cost or market inventory)

 

$

9,986,862

 

 

$

1,305,274

 

 

$

 

 

$

(683,244

)

 

$

10,608,892

 

Lower of cost or market inventory valuation adjustment

 

$

(318,353

)

 

$

 

 

$

 

 

$

(509

)

 

$

(318,862

)

Operating expenses

 

$

772,593

 

 

$

183,003

 

 

$

126,226

 

 

$

4,798

 

 

$

1,086,620

 

Selling, general and administrative expenses

 

$

90,977

 

 

$

124,612

 

 

$

9,664

 

 

$

25,532

 

 

$

250,785

 

Depreciation and amortization

 

$

245,910

 

 

$

58,499

 

 

$

66,908

 

 

$

(1,976

)

 

$

369,341

 

Income (loss) from operations

 

$

514,976

 

 

$

188,898

 

 

$

173,204

 

 

$

(107,379

)

 

$

769,699

 

Income (loss) before interest and income taxes

 

$

513,226

 

 

$

275,538

 

 

$

212,750

 

 

$

(80,070

)

 

$

921,444

 

Net income attributable to noncontrolling interest

 

$

 

 

$

 

 

$

4,027

 

 

$

78,477

 

 

$

82,504

 

Earnings of equity method investments

 

$

 

 

$

 

 

$

8,875

 

 

$

 

 

$

8,875

 

Capital expenditures

 

$

114,325

 

 

$

17,534

 

 

$

76,933

 

 

$

339,553

 

 

$

548,345

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 2020

 

 

 

 

 

 

 

 

Sales and other revenues:

 

 

 

 

 

 

 

 

 

 

Revenues from external customers

 

$

6,880,444

 

 

$

1,330,021

 

 

$

72,410

 

 

$

 

 

$

8,282,875

 

Intersegment revenues

 

$

178,039

 

 

$

8,911

 

 

$

297,982

 

 

$

(484,932

)

 

$

 

 

 

$

7,058,483

 

 

$

1,338,932

 

 

$

370,392

 

 

$

(484,932

)

 

$

8,282,875

 

Cost of products sold (exclusive of lower of cost or market inventory)

 

$

6,113,530

 

 

$

952,430

 

 

$

 

 

$

(418,000

)

 

$

6,647,960

 

Lower of cost or market inventory valuation adjustment

 

$

227,711

 

 

$

 

 

$

 

 

$

 

 

$

227,711

 

Operating expenses

 

$

754,612

 

 

$

156,459

 

 

$

109,721

 

 

$

(56,592

)

 

$

964,200

 

Selling, general and administrative expenses

 

$

94,677

 

 

$

121,654

 

 

$

7,569

 

 

$

13,659

 

 

$

237,559

 

Depreciation and amortization

 

$

251,019

 

 

$

59,260

 

 

$

72,095

 

 

$

13,659

 

 

$

396,033

 

Long-lived asset impairment

 

$

215,242

 

 

$

204,708

 

 

$

16,958

 

 

$

 

 

$

436,908

 

Income (loss) from operations

 

$

(598,308

)

 

$

(155,579

)

 

$

164,049

 

 

$

(37,658

)

 

$

(627,496

)

Income (loss) before interest and income taxes

 

$

(598,308

)

 

$

(155,847

)

 

$

185,593

 

 

$

39,043

 

 

$

(529,519

)

Net income attributable to noncontrolling interest

 

$

 

 

$

 

 

$

4,158

 

 

$

59,195

 

 

$

63,353

 

Earnings of equity method investments

 

$

 

 

$

 

 

$

5,186

 

 

$

 

 

$

5,186

 

Capital expenditures

 

$

106,856

 

 

$

20,387

 

 

$

38,642

 

 

$

47,123

 

 

$

213,008

 

 

 

Refining

 

Lubricants
and Specialty
Products

 

HEP

 

Corporate,
Other and
Eliminations

 

Consolidated
Total

 

 

(In thousands)

September 30, 2021

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

18,056

 

 

$

218,970

 

 

$

12,816

 

 

$

1,231,720

 

 

$

1,481,562

 

Total assets

 

$

7,266,496

 

 

$

2,119,076

 

 

$

2,236,091

 

 

$

1,275,518

 

 

$

12,897,181

 

Long-term debt

 

$

 

 

$

 

 

$

1,333,309

 

 

$

1,739,043

 

 

$

3,072,352

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2020

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

3,106

 

 

$

163,729

 

 

$

21,990

 

 

$

1,179,493

 

 

$

1,368,318

 

Total assets

 

$

6,203,847

 

 

$

1,864,313

 

 

$

2,198,478

 

 

$

1,240,226

 

 

$

11,506,864

 

Long-term debt

 

$

 

 

$

 

 

$

1,405,603

 

 

$

1,737,115

 

 

$

3,142,718

 

Refining Segment Operating Data

The following tables set forth information, including non-GAAP (Generally Accepted Accounting Principles) performance measures about our refinery operations. Refinery gross and net operating margins do not include the non-cash effects of long-lived asset impairment charges, lower of cost or market inventory valuation adjustments and depreciation and amortization. Reconciliations to amounts reported under GAAP are provided under “Reconciliations to Amounts Reported Under Generally Accepted Accounting Principles” below.

As of September 30, 2021, our refinery operations included the El Dorado, Tulsa, Navajo and Woods Cross Refineries. In the third quarter of 2020, we permanently ceased petroleum refining operations at our Cheyenne Refinery and subsequently began converting certain assets at our Cheyenne Refinery to renewable diesel production. The disaggregation of our refining geographic operating data is presented in two regions, Mid-Continent and West, to best reflect the economic drivers of our refining operations. The Mid-Continent region continues to be comprised of the El Dorado and Tulsa Refineries, and the new West region is comprised of the Navajo and Woods Cross Refineries. Refining segment operating data for the three and the nine months ended September 30, 2020 has been retrospectively adjusted to reflect the revised regional groupings.

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

2021

 

2020

 

2021

 

2020

Mid-Continent Region (El Dorado and Tulsa Refineries)

 

 

 

 

 

 

 

Crude charge (BPD) (1)

 

 

280,220

 

 

 

244,200

 

 

 

258,530

 

 

 

234,550

 

Refinery throughput (BPD) (2)

 

 

294,970

 

 

 

257,280

 

 

 

272,770

 

 

 

249,430

 

Sales of produced refined products (BPD) (3)

 

 

277,310

 

 

 

243,830

 

 

 

258,800

 

 

 

239,800

 

Refinery utilization (4)

 

 

107.8

%

 

 

93.9

%

 

 

99.4

%

 

 

90.2

%

 

 

 

 

 

 

 

 

 

Average per produced barrel (5)

 

 

 

 

 

 

 

 

Refinery gross margin

 

$

13.59

 

 

$

3.21

 

 

$

10.65

 

 

$

6.41

 

Refinery operating expenses (6)

 

 

5.72

 

 

 

5.47

 

 

 

6.68

 

 

 

5.47

 

Net operating margin

 

$

7.87

 

 

$

(2.26

)

 

$

3.97

 

 

$

0.94

 

 

 

 

 

 

 

 

 

 

Refinery operating expenses per throughput barrel (7)

 

$

5.37

 

 

$

5.19

 

 

$

6.33

 

 

$

5.26

 

 

 

 

 

 

 

 

 

 

Feedstocks:

 

 

 

 

 

 

 

 

Sweet crude oil

 

 

66

%

 

 

62

%

 

 

63

%

 

 

58

%

Sour crude oil

 

 

13

%

 

 

18

%

 

 

14

%

 

 

19

%

Heavy sour crude oil

 

 

16

%

 

 

15

%

 

 

18

%

 

 

17

%

Other feedstocks and blends

 

 

5

%

 

 

5

%

 

 

5

%

 

 

6

%

Total

 

 

100

%

 

 

100

%

 

 

100

%

 

 

100

%

 

 

 

 

 

 

 

 

 

Sales of produced refined products:

 

 

 

 

 

 

 

 

Gasolines

 

 

52

%

 

 

53

%

 

 

51

%

 

 

52

%

Diesel fuels

 

 

32

%

 

 

35

%

 

 

33

%

 

 

34

%

Jet fuels

 

 

5

%

 

 

3

%

 

 

5

%

 

 

4

%

Fuel oil

 

 

1

%

 

 

1

%

 

 

1

%

 

 

1

%

Asphalt

 

 

4

%

 

 

2

%

 

 

3

%

 

 

3

%

Base oils

 

 

4

%

 

 

4

%

 

 

4

%

 

 

4

%

LPG and other

 

 

2

%

 

 

2

%

 

 

3

%

 

 

2

%

Total

 

 

100

%

 

 

100

%

 

 

100

%

 

 

100

%

 

 

Three Months Ended
September 30,

 

Nine Months Ended
S
eptember 30,

 

 

2021

 

2020

 

2021

 

2020

West Region (Navajo and Woods Cross Refineries)

 

 

 

 

 

 

 

 

Crude charge (BPD) (1)

 

 

136,210

 

 

 

131,680

 

 

 

135,370

 

 

 

125,710

 

Refinery throughput (BPD) (2)

 

 

149,760

 

 

 

146,860

 

 

 

148,700

 

 

 

139,710

 

Sales of produced refined products (BPD) (3)

 

 

144,710

 

 

 

144,970

 

 

 

148,410

 

 

 

142,740

 

Refinery utilization (4)

 

 

93.9

%

 

 

90.8

%

 

 

93.4

%

 

 

86.7

%

 

 

 

 

 

 

 

 

 

Average per produced barrel (5)

 

 

 

 

 

 

 

 

Refinery gross margin

 

$

17.33

 

 

$

11.24

 

 

$

13.67

 

 

$

12.01

 

Refinery operating expenses (6)

 

 

7.70

 

 

 

6.88

 

 

 

7.43

 

 

 

7.01

 

Net operating margin

 

$

9.63

 

 

$

4.36

 

 

$

6.24

 

 

$

5.00

 

 

 

 

 

 

 

 

 

 

Refinery operating expenses per throughput barrel (7)

 

$

7.44

 

 

$

6.79

 

 

$

7.41

 

 

$

7.16

 

 

 

 

 

 

 

 

 

 

Feedstocks:

 

 

 

 

 

 

 

 

Sweet crude oil

 

 

22

%

 

 

30

%

 

 

22

%

 

 

30

%

Sour crude oil

 

 

58

%

 

 

48

%

 

 

59

%

 

 

49

%

Black wax crude oil

 

 

11

%

 

 

12

%

 

 

10

%

 

 

11

%

Other feedstocks and blends

 

 

9

%

 

 

10

%

 

 

9

%

 

 

10

%

Total

 

 

100

%

 

 

100

%

 

 

100

%

 

 

100

%

 

 

 

 

 

 

 

 

 

Sales of produced refined products:

 

 

 

 

 

 

 

 

Gasolines

 

 

51

%

 

 

57

%

 

 

52

%

 

 

56

%

Diesel fuels

 

 

39

%

 

 

34

%

 

 

38

%

 

 

35

%

Fuel oil

 

 

3

%

 

 

2

%

 

 

3

%

 

 

2

%

Asphalt

 

 

5

%

 

 

6

%

 

 

4

%

 

 

5

%

LPG and other

 

 

2

%

 

 

1

%

 

 

3

%

 

 

2

%

Total

 

 

100

%

 

 

100

%

 

 

100

%

 

 

100

%

Consolidated

 

 

 

 

 

 

 

 

Crude charge (BPD) (1)

 

416,430

 

 

375,880

 

 

393,900

 

 

360,260

 

Refinery throughput (BPD) (2)

 

444,730

 

 

404,140

 

 

421,470

 

 

389,140

 

Sales of produced refined products (BPD) (3)

 

422,020

 

 

388,800

 

 

407,210

 

 

382,540

 

Refinery utilization (4)

 

102.8

%

 

92.8

%

 

97.3

%

 

89.0

%

 

 

 

 

 

 

 

 

 

Average per produced barrel (5)

 

 

 

 

 

 

 

 

Refinery gross margin

 

$

14.87

 

 

$

6.20

 

 

$

11.75

 

 

$

8.50

 

Refinery operating expenses (6)

 

6.40

 

 

6.00

 

 

6.95

 

 

6.04

 

Net operating margin

 

$

8.47

 

 

$

0.20

 

 

$

4.80

 

 

$

2.46

 

 

 

 

 

 

 

 

 

 

Refinery operating expenses per throughput barrel (7)

 

$

6.07

 

 

$

5.77

 

 

$

6.71

 

 

$

5.94

 

 

 

 

 

 

 

 

 

 

Feedstocks:

 

 

 

 

 

 

 

 

Sweet crude oil

 

51

%

 

51

%

 

49

%

 

48

%

Sour crude oil

 

28

%

 

28

%

 

29

%

 

30

%

Heavy sour crude oil

 

11

%

 

10

%

 

12

%

 

11

%

Black wax crude oil

 

4

%

 

4

%

 

4

%

 

4

%

Other feedstocks and blends

 

6

%

 

7

%

 

6

%

 

7

%

Total

 

100

%

 

100

%

 

100

%

 

100

%

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

2021

 

2020

 

2021

 

2020

Consolidated

 

 

 

 

 

 

 

 

Sales of produced refined products:

 

 

 

 

 

 

 

 

Gasolines

 

51

%

 

54

%

 

52

%

 

54

%

Diesel fuels

 

35

%

 

35

%

 

35

%

 

34

%

Jet fuels

 

3

%

 

2

%

 

3

%

 

2

%

Fuel oil

 

2

%

 

1

%

 

1

%

 

1

%

Asphalt

 

4

%

 

4

%

 

4

%

 

4

%

Base oils

 

3

%

 

2

%

 

2

%

 

3

%

LPG and other

 

2

%

 

2

%

 

3

%

 

2

%

Total

 

100

%

 

100

%

 

100

%

 

100

%

(1)

Crude charge represents the barrels per day of crude oil processed at our refineries.

(2)

Refinery throughput represents the barrels per day of crude and other refinery feedstocks input to the crude units and other conversion units at our refineries.

(3)

Represents barrels sold of refined products produced at our refineries (including HFC Asphalt) and does not include volumes of refined products purchased for resale or volumes of excess crude oil sold.

(4)

Represents crude charge divided by total crude capacity (“BPSD”). Our consolidated crude capacity is 405,000 BPSD.

(5)

Represents average amount per produced barrel 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)

Represents total refining segment operating expenses, exclusive of depreciation and amortization and Cheyenne Refinery operating expenses, divided by sales volumes of refined products produced at our refineries.

(7)

Represents total refining segment operating expenses, exclusive of depreciation and amortization and Cheyenne Refinery operating expenses, divided by refinery throughput.

Lubricants and Specialty Products Segment Operating Data

The following table sets forth information about our lubricants and specialty products operations.

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

2021

 

2020

 

2021

 

2020

Lubricants and Specialty Products

 

 

 

 

 

 

 

 

Throughput (BPD)

 

18,260

 

 

19,020

 

 

29,140

 

 

19,050

 

Sales of produced products (BPD)

 

31,700

 

 

33,560

 

 

33,640

 

 

32,460

 

 

 

 

 

 

 

 

 

 

Sales of produced products:

 

 

 

 

 

 

 

 

Finished products

 

53

%

 

50

%

 

52

%

 

51

%

Base oils

 

28

%

 

27

%

 

28

%

 

24

%

Other

 

19

%

 

23

%

 

20

%

 

25

%

Total

 

100

%

 

100

%

 

100

%

 

100

%

Supplemental financial data attributable to our Lubricants and Specialty Products segment is presented below:

 

 

Rack Back (1)

 

Rack Forward (2)

 

Eliminations (3)

 

Total Lubricants
and Specialty
Products

 

 

(In thousands)

Three months ended September 30, 2021

 

 

 

 

 

 

 

 

Sales and other revenues

 

$

270,207

 

 

$

634,654

 

 

$

(238,327

)

 

$

666,534

 

Cost of products sold

 

$

148,171

 

 

$

572,689

 

 

$

(238,327

)

 

$

482,533

 

Operating expenses

 

$

29,046

 

 

$

31,894

 

 

$

 

 

$

60,940

 

Selling, general and administrative expenses

 

$

7,058

 

 

$

34,418

 

 

$

 

 

$

41,476

 

Depreciation and amortization

 

$

6,375

 

 

$

12,851

 

 

$

 

 

$

19,226

 

Income (loss) from operations

 

$

79,557

 

 

$

(17,198

)

 

$

 

 

$

62,359

 

Income (loss) before interest and income taxes

 

$

165,575

 

 

$

(17,115

)

 

$

 

 

$

148,460

 

EBITDA

 

$

171,950

 

 

$

(4,264

)

 

$

 

 

$

167,686

 

 

 

 

 

 

 

 

 

 

Three months ended September 30, 2020

 

 

 

 

 

 

 

 

Sales and other revenues

 

$

110,952

 

 

$

423,418

 

 

$

(79,328

)

 

$

455,042

 

Cost of products sold

 

$

98,033

 

 

$

283,998

 

 

$

(79,328

)

 

$

302,703

 

Operating expenses

 

$

25,400

 

 

$

29,088

 

 

$

 

 

$

54,488

 

Selling, general and administrative expenses

 

$

5,616

 

 

$

31,157

 

 

$

 

 

$

36,773

 

Depreciation and amortization

 

$

5,419

 

 

$

12,013

 

 

$

 

 

$

17,432

 

Income (loss) from operations

 

$

(23,516

)

 

$

67,162

 

 

$

 

 

$

43,646

 

Income (loss) before interest and income taxes

 

$

(23,516

)

 

$

66,636

 

 

$

 

 

$

43,120

 

EBITDA

 

$

(18,097

)

 

$

78,649

 

 

$

 

 

$

60,552

 

Nine months ended September 30, 2021

 

 

 

 

 

 

 

 

Sales and other revenues

 

$

698,134

 

 

$

1,747,111

 

 

$

(584,959)

 

 

$

1,860,286

 

Cost of products sold

 

$

443,983

 

 

$

1,446,250

 

 

$

(584,959)

 

 

$

1,305,274

 

Operating expenses

 

$

86,773

 

 

$

96,230

 

 

$

 

 

$

183,003

 

Selling, general and administrative expenses

 

$

19,711

 

 

$

104,901

 

 

$

 

 

$

124,612

 

Depreciation and amortization

 

$

19,910

 

 

$

38,589

 

 

$

 

 

$

58,499

 

Income from operations

 

$

127,757

 

 

$

61,141

 

 

$

 

 

$

188,898

 

Income before interest and income taxes

 

$

213,775

 

 

$

61,763

 

 

$

 

 

$

275,538

 

EBITDA

 

$

233,685

 

 

$

100,352

 

 

$

 

 

$

334,037

 

 

 

 

 

 

 

 

 

 

Nine months ended September 30, 2020

 

 

 

 

 

 

 

 

Sales and other revenues

 

$

361,638

 

 

$

1,241,402

 

 

$

(264,108)

 

 

$

1,338,932

 

Cost of products sold

 

$

345,843

 

 

$

870,695

 

 

$

(264,108)

 

 

$

952,430

 

Operating expenses

 

$

69,703

 

 

$

86,756

 

 

$

 

 

$

156,459

 

Selling, general and administrative expenses

 

$

16,596

 

 

$

105,058

 

 

$

 

 

$

121,654

 

Depreciation and amortization

 

$

22,163

 

 

$

37,097

 

 

$

 

 

$

59,260

 

Long-lived asset impairment

 

$

167,017

 

 

$

37,691

 

 

$

 

 

$

204,708

 

Income (loss) from operations

 

$

(259,684)

 

 

$

104,105

 

 

$

 

 

$

(155,579)

 

Income (loss) before interest and income taxes

 

$

(259,684)

 

 

$

103,837

 

 

$

 

 

$

(155,847)

 

EBITDA

 

$

(237,521)

 

 

$

140,934

 

 

$

 

 

$

(96,587)

 

(1)

Rack Back consists of the PCLI base oil production activities, by-product sales to third parties and intra-segment base oil sales to Rack Forward.

(2)

Rack Forward activities include the purchase of base oils from Rack Back and the blending, packaging, marketing and distribution and sales of finished lubricants and specialty products to third parties.

(3)

Intra-segment sales of Rack Back produced base oils to Rack Forward are eliminated under the “Eliminations” column.

Reconciliations to Amounts Reported Under Generally Accepted Accounting Principles

Reconciliations of earnings before interest, taxes, depreciation and amortization (“EBITDA”) and EBITDA excluding special items (“Adjusted EBITDA”) to amounts reported under generally accepted accounting principles (“GAAP”) in financial statements.

Earnings before interest, taxes, depreciation and amortization, referred to as EBITDA, is calculated as net income (loss) attributable to HollyFrontier stockholders plus (i) interest expense, net of interest income, (ii) income tax provision and (iii) depreciation and amortization. Adjusted EBITDA is calculated as EBITDA plus or minus (i) lower of cost or market inventory valuation adjustments, (ii) gain on sale of real property, (iii) HollyFrontier's pro-rata share of gain on business interruption insurance settlement, (iv) long-lived asset impairment, inclusive of HollyFrontier's pro-rata share of impairment in HEP segment, (v) HollyFrontier's pro-rata share of HEP's gain on sales-type leases, (vi) HollyFrontier's pro-rata share of HEP's loss on early extinguishment of debt, (vii) severance costs, (viii) restructuring charges, (ix) Cheyenne Refinery LIFO inventory liquidation costs, (x) decommissioning costs, (xi) pre-close acquisition integration costs, (xii) acquisition integration and regulatory costs and (xiii) gain on tariff settlement.

EBITDA and Adjusted EBITDA are not calculations provided for under accounting principles generally accepted in the United States; however, the amounts included in these calculations are derived from amounts included in our consolidated financial statements. EBITDA and Adjusted EBITDA should not be considered as alternatives 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 and Adjusted EBITDA are not necessarily comparable to similarly titled measures of other companies. These are presented here because they are widely used financial indicators used by investors and analysts to measure performance. EBITDA and Adjusted EBITDA are also used by our management for internal analysis and as a basis for financial covenants.

Set forth below is our calculation of EBITDA and Adjusted EBITDA.

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

2021

 

2020

 

2021

 

2020

 

 

(In thousands)

Net income (loss) attributable to HollyFrontier stockholders

 

$

280,787

 

 

$

(2,401

)

 

$

597,854

 

 

$

(483,701

)

Add interest expense

 

26,892

 

 

30,589

 

 

94,220

 

 

85,923

 

Subtract interest income

 

(1,018

)

 

(1,011

)

 

(3,078

)

 

(6,590

)

Add (subtract) income tax expense (benefit)

 

54,766

 

 

4,573

 

 

149,944

 

 

(188,504

)

Add depreciation and amortization

 

121,220

 

 

125,280

 

 

369,341

 

 

396,033

 

EBITDA

 

$

482,647

 

 

$

157,030

 

 

$

1,208,281

 

 

$

(196,839

)

Add (subtract) lower of cost or market inventory valuation adjustment

 

 

 

(62,849

)

 

(318,862

)

 

227,711

 

Subtract gain on sale of real property

 

(86,018

)

 

 

 

(86,018

)

 

 

Subtract HollyFrontier's pro-rata share of gain on business interruption insurance settlement

 

 

 

(77,143

)

 

 

 

(77,143

)

Add long-lived asset impairment, inclusive of pro-rata share of impairment in HEP segment

 

 

 

 

 

 

 

429,540

 

Subtract HollyFrontier's pro-rata share of HEP's gain on sales-type leases

 

 

 

 

 

 

 

(19,134

)

Add HollyFrontier's pro-rata share of HEP's loss on early extinguishment of debt

 

 

 

 

 

 

 

14,656

 

Add severance costs

 

198

 

 

2,429

 

 

906

 

 

3,546

 

Add restructuring charges

 

 

 

 

 

7,813

 

 

3,679

 

Add Cheyenne Refinery LIFO inventory liquidation costs

 

 

 

33,814

 

 

923

 

 

33,814

 

Add decommissioning costs

 

6,714

 

 

12,309

 

 

23,061

 

 

12,309

 

Add pre-close acquisition integration costs

 

4,289

 

 

 

 

5,035

 

 

 

Add acquisition integration and regulatory costs

 

 

 

48

 

 

 

 

1,979

 

Subtract gain on tariff settlement

 

 

 

 

 

(51,500

)

 

 

Adjusted EBITDA

 

$

407,830

 

 

$

65,638

 

 

$

789,639

 

 

$

434,118

 

EBITDA and Adjusted EBITDA attributable to our Refining segment is presented below:

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

Refining Segment

 

2021

 

2020

 

2021

 

2020

 

 

(In thousands)

Income (loss) from before interest and income taxes (1)

 

$

217,438

 

 

$

(118,471

)

 

$

513,226

 

 

$

(598,308

)

Add depreciation and amortization

 

77,890

 

 

79,146

 

 

245,910

 

 

251,019

 

EBITDA

 

295,328

 

 

(39,325

)

 

759,136

 

 

(347,289

)

Add (subtract) lower of cost or market inventory valuation adjustment

 

 

 

(62,849

)

 

(318,353

)

 

227,711

 

Add long-lived asset impairment

 

 

 

 

 

 

 

215,242

 

Add severance costs

 

 

 

2,429

 

 

 

 

3,546

 

Add restructuring charges

 

 

 

 

 

 

 

2,009

 

Add Cheyenne Refinery LIFO inventory liquidation costs

 

 

 

33,814

 

 

 

 

33,814

 

Add decommissioning costs

 

 

 

12,309

 

 

 

 

12,309

 

Adjusted EBITDA

 

$

295,328

 

 

$

(53,622

)

 

$

440,783

 

 

$

147,342

 

(1)

Income (loss) before interest and income taxes of our Refining segment represents income (loss) plus (i) interest expense, net of interest income and (ii) income tax provision.

EBITDA and Adjusted EBITDA attributable to our Lubricants and Specialty Products segment is set forth below.

Lubricants and Specialty Products Segment

 

Rack Back

 

Rack Forward

 

Total Lubricants
and Specialty
Products

 

 

(In thousands)

Three months ended September 30, 2021

 

 

 

 

 

 

Income before interest and income taxes (1)

 

$

165,575

 

 

$

(17,115

)

 

$

148,460

 

Add depreciation and amortization

 

6,375

 

 

12,851

 

 

19,226

 

EBITDA

 

171,950

 

 

(4,264

)

 

167,686

 

Subtract gain on sale of real property

 

(86,018

)

 

 

 

(86,018

)

Adjusted EBITDA

 

$

85,932

 

 

$

(4,264

)

 

$

81,668

 

 

 

 

 

 

 

 

Three months ended September 30, 2020

 

 

 

 

 

 

Income (loss) before interest and income taxes (1)

 

$

(23,516

)

 

$

66,636

 

 

$

43,120

 

Add depreciation and amortization

 

5,419

 

 

12,013

 

 

17,432

 

EBITDA

 

(18,097

)

 

78,649

 

 

60,552

 

Lubricants and Specialty Products Segment

 

Rack Back

 

Rack Forward

 

Total Lubricants
and Specialty
Products

 

 

(In thousands)

Nine months ended September 30, 2021

 

 

 

 

 

 

Income before interest and income taxes (1)

 

$

213,775

 

 

$

61,763

 

 

$

275,538

 

Add depreciation and amortization

 

19,910

 

 

38,589

 

 

58,499

 

EBITDA

 

233,685

 

 

100,352

 

 

334,037

 

Subtract gain on sale of real property

 

(86,018

)

 

 

 

(86,018

)

Add restructuring charges

 

1,079

 

 

6,734

 

 

7,813

 

Adjusted EBITDA

 

$

148,746

 

 

$

107,086

 

 

$

255,832

 

 

 

 

 

 

 

 

Nine months ended September 30, 2020

 

 

 

 

 

 

Income (loss) before interest and income taxes (1)

 

$

(259,684

)

 

$

103,837

 

 

$

(155,847

)

Add depreciation and amortization

 

22,163

 

 

37,097

 

 

59,260

 

EBITDA

 

(237,521

)

 

140,934

 

 

(96,587

)

Add long-lived asset impairment

 

167,017

 

 

37,691

 

 

204,708

 

Adjusted EBITDA

 

$

(70,504

)

 

$

178,625

 

 

$

108,121

 

(1)

Income (loss) before interest and income taxes of our Lubricants and Specialty Products segment represents income (loss) plus (i) interest expense, net of interest income and (ii) income tax provision.

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. Refinery gross margin per produced barrel sold is total refining segment revenues less total refining segment cost of products sold, exclusive of lower of cost or market inventory valuation adjustments, divided by sales volumes of produced refined products sold. Net operating margin per barrel sold is the difference between refinery gross margin and refinery operating expenses per produced barrel sold. These two margins do not include the non-cash effects of lower of cost or market inventory valuation adjustments, depreciation and amortization or long-lived asset impairments. 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.

Below are reconciliations to our consolidated statements of income for refinery net operating and gross margin and operating expenses, in each case averaged per produced barrel sold. Due to rounding of reported numbers, some amounts may not calculate exactly.

Reconciliation of average refining segment net operating margin per produced barrel sold to refinery gross margin to total sales and other revenues

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

2021

 

2020

 

2021

 

2020

 

 

(Dollars in thousands, except per barrel amounts)

Consolidated

 

 

 

 

 

 

 

 

Net operating margin per produced barrel sold

 

$

8.47

 

 

$

0.20

 

 

$

4.80

 

 

$

2.46

 

Add average refinery operating expenses per produced barrel sold

 

6.40

 

 

6.00

 

 

6.95

 

 

6.04

 

Refinery gross margin per produced barrel sold

 

$

14.87

 

 

$

6.20

 

 

$

11.75

 

 

$

8.50

 

Times produced barrels sold (BPD)

 

422,020

 

 

388,800

 

 

407,210

 

 

382,540

 

Times number of days in period

 

92

 

 

92

 

 

273

 

 

274

 

Refining gross margin

 

$

577,340

 

 

$

221,772

 

 

$

1,306,228

 

 

$

890,936

 

Add (subtract) rounding

 

71

 

 

164

 

 

(125

)

 

61

 

West and Mid-Continent regions gross margin

 

577,411

 

 

221,936

 

 

1,306,103

 

 

890,997

 

Add West and Mid-Continent regions cost of products sold

 

3,605,600

 

 

2,043,361

 

 

9,986,862

 

 

5,665,897

 

Add Cheyenne refinery sales and other revenues

 

 

 

130,816

 

 

 

 

501,589

 

Refining segment sales and other revenues

 

4,183,011

 

 

2,396,113

 

 

11,292,965

 

 

7,058,483

 

Add Lubricants and Specialty Products segment sales and other revenues

 

666,534

 

 

455,042

 

 

1,860,286

 

 

1,338,932

 

Add HEP segment sales and other revenues

 

122,584

 

 

127,731

 

 

376,002

 

 

370,392

 

Subtract corporate, other and eliminations

 

(287,070

)

 

(159,486

)

 

(762,778

)

 

(484,932

)

Sales and other revenues

 

$

4,685,059

 

 

$

2,819,400

 

 

$

12,766,475

 

 

$

8,282,875

 

Reconciliation of average refining segment operating expenses per produced barrel sold to total operating expenses

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

 

 

 

 

 

 

 

 

 

(Dollars in thousands, except per barrel amounts)

Consolidated

 

 

 

 

 

 

 

 

Average operating expenses per produced barrel sold

 

$

6.40

 

 

$

6.00

 

 

$

6.95

 

 

$

6.04

 

Times produced barrels sold (BPD)

 

422,020

 

 

388,800

 

 

407,210

 

 

382,540

 

Times number of days in period

 

92

 

 

92

 

 

273

 

 

274

 

Refining operating expenses

 

$

248,485

 

 

$

214,618

 

 

$

772,620

 

 

$

633,088

 

Add (subtract) rounding

 

(169

)

 

(97

)

 

(27

)

 

373

 

West and Mid-Continent regions operating expenses

 

248,316

 

 

214,521

 

 

772,593

 

 

633,461

 

Add Cheyenne Refinery operating expenses

 

 

 

41,558

 

 

 

 

121,151

 

Refining segment operating expenses

 

248,316

 

 

256,079

 

 

772,593

 

 

754,612

 

Add Lubricants and Specialty Products segment operating expenses

 

60,940

 

 

54,488

 

 

183,003

 

 

156,459

 

Add HEP segment operating expenses

 

42,793

 

 

40,003

 

 

126,226

 

 

109,721

 

Subtract corporate, other and eliminations

 

471

 

 

(18,074

)

 

4,798

 

 

(56,592

)

Operating expenses (exclusive of depreciation and amortization)

 

$

352,520

 

 

$

332,496

 

 

$

1,086,620

 

 

$

964,200

 

Reconciliation of net income (loss) attributable to HollyFrontier stockholders to adjusted net income (loss) attributable to HollyFrontier stockholders

Adjusted net income (loss) attributable to HollyFrontier stockholders is a non-GAAP financial measure that excludes non-cash lower of cost or market inventory valuation adjustments, gain on sale of real property, gain on business interruption insurance settlement, long-lived asset impairment, HEP's gain on sales-type leases, HEP's loss on early extinguishment of debt, severance costs, restructuring charges, Cheyenne Refinery LIFO inventory liquidation costs, decommissioning costs, pre-close acquisition integration costs, acquisition integration and regulatory costs and gain on tariff settlement. We believe this measure is helpful to investors and others in evaluating our financial performance and to compare our results to that of other companies in our industry. Similarly titled performance measures of other companies may not be calculated in the same manner.

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

2021

 

2020

 

2021

 

2020

 

 

(In thousands, except per share amounts)

Consolidated

 

 

 

 

 

 

 

 

GAAP:

 

 

 

 

 

 

 

 

Income (loss) before income taxes

 

$

357,507

 

 

$

27,918

 

 

$

830,302

 

 

$

(608,852

)

Income tax expense (benefit)

 

54,766

 

 

4,573

 

 

149,944

 

 

(188,504

)

Net income (loss)

 

302,741

 

 

23,345

 

 

680,358

 

 

(420,348

)

Less net income attributable to noncontrolling interest

 

21,954

 

 

25,746

 

 

82,504

 

 

63,353

 

Net income (loss) attributable to HollyFrontier stockholders

 

280,787

 

 

(2,401

)

 

597,854

 

 

(483,701

)

 

 

 

 

 

 

 

 

 

Non-GAAP adjustments to arrive at adjusted results:

 

 

 

 

 

 

 

 

Lower of cost or market inventory valuation adjustment

 

 

 

(62,849

)

 

(318,862

)

 

227,711

 

Gain on sale of real property

 

(86,018

)

 

 

 

(86,018

)

 

 

Gain on business interruption insurance settlement

 

 

 

(81,000

)

 

 

 

(81,000

)

Long-lived asset impairment

 

 

 

 

 

 

 

436,908

 

HEP's gain on sales-type leases

 

 

 

 

 

 

 

(33,834

)

HEP's loss on early extinguishment of debt

 

 

 

 

 

 

 

25,915

 

Severance costs

 

198

 

 

2,429

 

 

906

 

 

3,546

 

Restructuring charges

 

 

 

 

 

7,813

 

 

3,679

 

Cheyenne Refinery LIFO inventory liquidation costs

 

 

 

33,814

 

 

923

 

 

33,814

 

Decommissioning costs

 

6,714

 

 

12,309

 

 

23,061

 

 

12,309

 

Pre-close acquisition integration costs

 

4,289

 

 

 

 

5,035

 

 

 

Acquisition integration and regulatory costs

 

 

 

48

 

 

 

 

1,979

 

Gain on tariff settlement

 

 

 

 

 

(51,500

)

 

 

Total adjustments to income (loss) before income taxes

 

(74,817

)

 

(95,249

)

 

(418,642

)

 

631,027

 

Adjustment to income tax expense (benefit) (1)

 

(3,979

)

 

(26,907

)

 

(88,493

)

 

168,497

 

Adjustment to net income attributable to noncontrolling interest

 

 

 

(3,857

)

 

 

 

70

 

Total adjustments, net of tax

 

(70,838

)

 

(64,485

)

 

(330,149

)

 

462,460

 

 

 

 

 

 

 

 

 

 

Adjusted results - Non-GAAP:

 

 

 

 

 

 

 

 

Adjusted income (loss) before income taxes

 

282,690

 

 

(67,331

)

 

411,660

 

 

22,175

 

Adjusted income tax expense (benefit) (2)

 

50,787

 

 

(22,334

)

 

61,451

 

 

(20,007

)

Adjusted net income (loss)

 

231,903

 

 

(44,997

)

 

350,209

 

 

42,182

 

Less net income attributable to noncontrolling interest

 

21,954

 

 

21,889

 

 

82,504

 

 

63,423

 

Adjusted net income (loss) attributable to HollyFrontier stockholders

 

$

209,949

 

 

$

(66,886

)

 

$

267,705

 

 

$

(21,241

)

Adjusted earnings (loss) per share - diluted (3)

 

$

1.28

 

 

$

(0.41

)

 

$

1.63

 

 

$

(0.13

)

(1)

Represents adjustment to GAAP income tax benefit to arrive at adjusted income tax expense (benefit), which is computed as follows:

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

2021

 

2020

 

2021

 

2020

 

 

(In thousands)

 

 

 

 

 

 

 

 

 

Non-GAAP income tax expense (benefit) (2)

 

$

50,787

 

 

$

(22,334

)

 

$

61,451

 

 

$

(20,007

)

Add (subtract) GAAP income tax expense (benefit)

 

54,766

 

 

4,573

 

 

149,944

 

 

(188,504

)

Non-GAAP adjustment to income tax expense (benefit)

 

$

(3,979

)

 

$

(26,907

)

 

$

(88,493

)

 

$

168,497

 

(2)

Non-GAAP income tax expense (benefit) is computed by (a) adjusting HFC’s consolidated estimated Annual Effective Tax Rate (“AETR”) for GAAP purposes for the effects of the above Non-GAAP adjustments (b) applying the resulting Adjusted Non-GAAP AETR to Non-GAAP adjusted income before income taxes and (c) adjusting for discrete tax items applicable to the period.

 

(3)

Adjusted earnings per share - diluted is calculated as adjusted net income (loss) attributable to HollyFrontier stockholders divided by the average number of shares of common stock outstanding assuming dilution, which is based on weighted-average diluted shares outstanding as that used in the GAAP diluted earnings per share calculation. Income allocated to participating securities, if applicable, in the adjusted earnings per share calculation is calculated the same way as that used in GAAP diluted earnings per share calculation.

Reconciliation of effective tax rate to adjusted effective tax rate

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

2021

 

2020

 

2021

 

2020

 

 

(Dollars in thousands)

GAAP:

 

 

 

 

 

 

 

 

Income (loss) before income taxes

 

$

357,507

 

 

$

27,918

 

 

$

830,302

 

 

$

(608,852

)

Income tax expense (benefit)

 

$

54,766

 

 

$

4,573

 

 

$

149,944

 

 

$

(188,504

)

Effective tax rate for GAAP financial statements

 

15.3

%

 

16.4

%

 

18.1

%

 

31.0

%

Adjusted - Non-GAAP:

 

 

 

 

 

 

 

 

Effect of Non-GAAP adjustments

 

2.7

%

 

16.8

%

 

(3.2

)%

 

(121.2

)%

Effective tax rate for adjusted results

 

18.0

%

 

33.2

%

 

14.9

%

 

(90.2

)%

 

Richard L. Voliva III, Executive Vice President and
Chief Financial Officer
Craig Biery, Vice President,
Investor Relations
HollyFrontier Corporation
214-954-6510

Source: HollyFrontier Corporation