Holly Energy Partners(HEP) - 2023 Q1 - Quarterly Report

Financial Performance - Total revenues for Q1 2023 reached $143.294 million, a 19.2% increase from $120.198 million in Q1 2022[16] - Net income attributable to partners for Q1 2023 was $57.522 million, compared to $49.559 million in Q1 2022, reflecting a 15.4% year-over-year growth[16] - Operating income for Q1 2023 was $61.854 million, up from $51.074 million in Q1 2022, representing a 21.1% increase[16] - For the three months ended March 31, 2023, total revenues were $143.294 million, an increase from $120.198 million in the same period of 2022, representing a growth of approximately 19.2%[68] - Operating income for the three months ended March 31, 2023, was $61,854,000, compared to $51,074,000 for the same period in 2022, reflecting an increase of about 21%[148][150] - Net income attributable to partners for the three months ended March 31, 2023, was $57,522,000, compared to $49,559,000 in the same period in 2022, indicating a year-over-year increase of approximately 15.4%[148][150] - EBITDA for Q1 2023 was $87.8 million, up $15.0 million (20.6%) from $72.8 million in Q1 2022[179] - Adjusted EBITDA for Q1 2023 was $108.4 million, an increase of $23.0 million (27.0%) from $85.3 million in Q1 2022[179] - Distributable cash flow for Q1 2023 was $83.9 million, an increase of $19.5 million (30.3%) from $64.5 million in Q1 2022[180] Cash Flow and Liquidity - Cash flows from operating activities for Q1 2023 were $69.814 million, slightly down from $71.814 million in Q1 2022[18] - Cash and cash equivalents decreased to $7.105 million as of March 31, 2023, from $10.917 million at the end of 2022[18] - Cash flows used for investing activities were $9.3 million in Q1 2023, significantly lower than $333.8 million in Q1 2022, which included a $321.4 million acquisition of Sinclair Transportation[206] - Cash flows used by financing activities were $64.4 million in Q1 2023, compared to $262.6 million provided in Q1 2022, reflecting repayments and cash distributions[207] - As of March 31, 2023, the company had $651.5 million outstanding under its $1.2 billion credit facility, with available capacity of $548.5 million[197] Debt and Assets - Total assets as of March 31, 2023, were $2.733 billion, a decrease from $2.748 billion as of December 31, 2022[13] - Long-term debt as of March 31, 2023, was $1.540 billion, down from $1.556 billion at the end of 2022[13] - Total long-term debt as of March 31, 2023, was $1.54 billion, a decrease from $1.56 billion as of December 31, 2022[117] - The company has $1.2 billion available under a senior secured revolving credit facility, maturing in July 2025, with an accordion feature allowing increases up to $1.7 billion[110] Acquisitions and Investments - The company made an acquisition of Sinclair Transportation, which involved a cash outflow of $321.366 million[18] - HEP acquired Sinclair Transportation for an aggregate transaction value of $678 million, consisting of 21 million HEP Units valued at approximately $349 million and cash consideration of $329 million[27] - Total purchase consideration for the acquisition was $677.975 million, consisting of $349.020 million in HEP common units and $328.955 million in cash[55] - The HEP Transaction resulted in the recognition of $119.1 million in goodwill due to the excess consideration over the fair value of acquired assets[54] - The company expects to recognize $2.375 billion in revenue related to unfulfilled performance obligations under long-term agreements expiring between 2024 and 2037[70] Revenue Sources - Revenue is generated through tariffs for transporting petroleum products and fees for terminal and storage services, without taking ownership of the products[32] - HEP's long-term customer contracts with minimum volume commitments accounted for approximately 72% of total tariffs and fees billed for the three months ended March 31, 2023[167] - Minimum annualized payments from HF Sinclair under pipeline and terminal agreements are required to be $457 million, subject to annual rate adjustments[168] - Revenues from HF Sinclair for the three months ended March 31, 2023, were $116.9 million, up from $92.3 million in the same period of 2022, representing a 27% increase[126] Operational Metrics - The company operates in two reportable segments: Pipelines and Terminals, and Refinery Processing Unit[31] - Operating income for the pipelines and terminals segment rose to $55.053 million, compared to $49.804 million in the previous year, an increase of 10.1%[137] - Refinery processing units segment operating income surged to $11.436 million, up from $5.582 million, reflecting a significant increase of 104.8%[137] - The company recognized $19,864,000 in sales-type lease interest income for the three months ended March 31, 2023, compared to $12,123,000 in 2022, marking a 63.5% increase[86] Expenses and Liabilities - Interest expense increased to $25.978 million in Q1 2023, compared to $13.639 million in Q1 2022, marking an increase of 90.3%[137] - Operations expense (exclusive of depreciation and amortization) was $52.1 million, an increase of $9.5 million (22.3%) compared to $42.6 million in Q1 2022[189] - General and administrative costs for Q1 2023 rose by $0.3 million compared to Q1 2022, mainly due to higher external audit expenses and administrative fees[191] - The total lease obligations as of March 31, 2023, were $68,702,000 after accounting for current lease liabilities[78] Future Outlook - The company expects 2023 capital expenditures of $25 million to $35 million for maintenance and $5 million to $10 million for expansion projects[209] - HEP's future growth plans include organic projects and selective investments or acquisitions to enhance its service platform[173]