Press Release Details

HollyFrontier Corporation Reports Quarterly Results and Announces Regular Cash Dividend

08/02/2017

DALLAS--(BUSINESS WIRE)-- HollyFrontier Corporation (NYSE:HFC) (“HollyFrontier” or the “Company”) today reported second quarter net income attributable to HollyFrontier stockholders of $57.8 million or $0.33 per diluted share for the quarter ended June 30, 2017, compared to net loss of $(409.4) million or $(2.33) per diluted share for the quarter ended June 30, 2016.

The second quarter included several special items that together reduced net income by a total of $58.2 million. On a pre-tax basis, these items included a lower of cost or market inventory valuation charge of $84.0 million, long-lived asset impairment charges of $23.2 million, incremental cost of products sold attributable to our Petro-Canada Lubricants Inc. (“PCLI”) inventory value step-up of $5.1 million and PCLI integration costs totaling $3.7 million, partially offset by a $30.5 million reduction to RINs costs as a result of our Cheyenne refinery's small refinery exemption.

Excluding these items, net income for the current quarter was $116.1 million ($0.66 per diluted share) compared to $49.0 million ($0.28 per diluted share) for the same period of 2016, which excludes net after-tax charges totaling $458.4 million. Special items for the second quarter of 2016 included pre-tax goodwill and asset impairment charges of $654.1 million that was partially offset by a lower of cost or market inventory valuation adjustment of $138.5 million. Adjusted for these items, the increase in net income for the current quarter was principally driven by higher product sales volumes and margins combined with earnings attributable to our recently acquired PCLI operations totaling $12.7 million. For the current quarter, production levels averaged approximately 483,000 barrels per day (“BPD”) and crude oil charges averaged 467,000 BPD. On a per barrel basis, consolidated refinery gross margin was $11.47 per produced barrel, a 29% increase compared to $8.88 for the second quarter of 2016. Total operating expenses for the quarter were $315.7 million compared to $251.3 million for the second quarter of last year and include $52.7 million in costs attributable to our PCLI operations.

HollyFrontier’s President & CEO, George Damiris, commented, “Excellent operational performance, margin improvement and our PCLI operations contributed to stronger earnings for the second quarter of 2017. Thanks to the efforts of HollyFrontier employees, our refining segment reached a new quarterly production record, which drove operating and free cash flow. With no major planned downtime until November, our refineries remain well positioned for strong operational and financial performance for the remainder of the year.”

For the second quarter of 2017, net cash provided by operations totaled $512.8 million. During the period, we declared and paid a dividend of $0.33 per share to shareholders totaling $58.8 million. At June 30, 2017, our cash and cash equivalents totaled $460.3 million, a $330.8 million increase over cash and cash equivalents of $129.5 million at March 31, 2017. Additionally, our consolidated debt was $2,228.0 million. Our debt, exclusive of Holly Energy Partners' debt, which is nonrecourse to HollyFrontier, was $991.2 million at June 30, 2017.

HollyFrontier also announced today that its Board of Directors declared a regular quarterly dividend of $0.33 per share. The dividend will be paid on September 20, 2017 to holders of record of common stock on August 23, 2017.

The Company has scheduled a webcast conference call for today, August 2, 2017, at 8:30 AM Eastern Time to discuss second quarter financial results. This webcast may be accessed at: https://event.webcasts.com/starthere.jsp?ei=1154338&tp_key=25e3e5850f. An audio archive of this webcast will be available using the above noted link through August 16, 2017.

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 operates through its subsidiaries a 135,000 barrels per stream day (“BPSD”) refinery located in El Dorado, Kansas, two refinery facilities with a combined capacity of 125,000 BPSD located in Tulsa, Oklahoma, a 100,000 BPSD refinery located in Artesia, New Mexico, a 52,000 BPSD refinery located in Cheyenne, Wyoming and a 45,000 BPSD refinery in Woods Cross, Utah. HollyFrontier 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, through its subsidiary, owns Petro-Canada Lubricants Inc., whose Mississauga, Ontario facility produces 15,600 barrels per day of base oils and other specialized lubricant products, and also owns a 36% interest (including the 2% general partner interest) in Holly Energy Partners, L.P.

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 and environmental regulations and policies, 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 construction projects, the ability of the Company to acquire refined product operations or pipeline and terminal operations on acceptable terms and to integrate any recent and future acquired operations, 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
June 30,
      Change from 2016
2017     2016 Change     Percent
(In thousands, except per share data)
Sales and other revenues $ 3,458,864 $ 2,714,638 $ 744,226 27 %
Operating costs and expenses:
Cost of products sold:
Cost of products sold (exclusive of lower of cost or market inventory valuation adjustment) 2,753,440 2,248,155 505,285 22
Lower of cost or market inventory valuation adjustment   83,982     (138,473 )   222,455   (161 )
2,837,422 2,109,682 727,740 34
Operating expenses 315,652 251,336 64,316 26
General and administrative expenses 59,576 29,655 29,921 101
Depreciation and amortization 105,282 90,423 14,859 16
Goodwill and asset impairment   19,247     654,084     (634,837 ) (97 )
Total operating costs and expenses   3,337,179     3,135,180     201,999   6
Income (loss) from operations 121,685 (420,542 ) 542,227 (129 )
 
Other income (expense):
Earnings of equity method investments 4,053 3,623 430 12
Interest income 176 527 (351 ) (67 )
Interest expense (29,645 ) (14,251 ) (15,394 ) 108
Gain on foreign currency transactions 10,328 10,328
Other, net   (528 )   128     (656 ) (513 )
  (15,616 )   (9,973 )   (5,643 ) 57
Income (loss) before income taxes 106,069 (430,515 ) 536,584 (125 )
Income tax expense (benefit)   31,996     (38,045 )   70,041   (184 )
Net income (loss) 74,073 (392,470 ) 466,543 (119 )
Less net income attributable to noncontrolling interest   16,306     16,898     (592 ) (4 )
Net income (loss) attributable to HollyFrontier stockholders $ 57,767   $ (409,368 ) $ 467,135   (114 )%
 
Earnings (loss) per share attributable to HollyFrontier stockholders:
Basic $ 0.33   $ (2.33 ) $ 2.66   (114 )%
Diluted $ 0.33   $ (2.33 ) $ 2.66   (114 )%
Cash dividends declared per common share $ 0.33   $ 0.33   $   %
Average number of common shares outstanding:
Basic 176,147 175,865 282 %
Diluted 176,302 175,865 437 %
EBITDA $ 224,514 $ (343,266 ) $ 567,780 (165 )%
Adjusted EBITDA $ 306,069 $ 172,345 $ 133,724 78 %
 
         
Six Months Ended
June 30,
Change from 2016
2017     2016 Change     Percent
(In thousands, except per share data)
Sales and other revenues $ 6,539,347 $ 4,733,362 $ 1,805,985 38 %
Operating costs and expenses:
Cost of products sold:
Cost of products sold (exclusive of lower of cost or market inventory valuation adjustment) 5,394,597 3,873,318 1,521,279 39
Lower of cost or market inventory valuation adjustment   95,805     (194,594 )   290,399   (149 )
5,490,402 3,678,724 1,811,678 49
Operating expenses 622,769 503,919 118,850 24
General and administrative expenses 116,646 55,276 61,370 111
Depreciation and amortization 201,322 178,303 23,019 13
Goodwill and asset impairment   19,247     654,084     (634,837 ) (97 )
Total operating costs and expenses   6,450,386     5,070,306     1,380,080   27
Income (loss) from operations 88,961 (336,944 ) 425,905 (126 )
 
Other income (expense):
Earnings of equity method investments 5,893 6,388 (495 ) (8 )
Interest income 995 602 393 65
Interest expense (56,803 ) (26,338 ) (30,465 ) 116
Loss on early extinguishment of debt (12,225 ) (8,718 ) (3,507 ) 40
Gain on foreign currency swaps 24,545 24,545
Loss on foreign currency transactions 395 395
Other, net   (263 )   193     (456 ) (236 )
  (37,463 )   (27,873 )   (9,590 ) 34
Income (loss) before income taxes 51,498 (364,817 ) 416,315 (114 )
Income tax expense (benefit)   15,207     (15,737 )   30,944   (197 )
Net income (loss) 36,291 (349,080 ) 385,371 (110 )
Less net income attributable to noncontrolling interest   23,992     39,035     (15,043 ) (39 )
Net income (loss) attributable to HollyFrontier stockholders $ 12,299   $ (388,115 ) $ 400,414   (103 )%
 
Earnings (loss) per share attributable to HollyFrontier stockholders:
Basic $ 0.07   $ (2.20 ) $ 2.27   (103 )%
Diluted $ 0.07   $ (2.20 ) $ 2.27   (103 )%
Cash dividends declared per common share $ 0.66   $ 0.66   $   %
Average number of common shares outstanding:
Basic 176,141 176,301 (160 ) %
Diluted 176,490 176,301 189 %
EBITDA $ 296,861 $ (191,095 ) $ 487,956 (255 )%
Adjusted EBITDA $ 391,529 $ 268,395 $ 123,134 46 %
 
       

Balance Sheet Data

 
June 30, December 31,
2017 2016
(In thousands)
Cash, cash equivalents and total investments in marketable securities $ 460,326 $ 1,134,727
Working capital $ 1,073,315 $ 1,767,780
Total assets $ 9,643,035 $ 9,435,661
Long-term debt $ 2,227,951 $ 2,235,137
Total equity $ 5,242,084 $ 5,301,985
 
 

Segment Information

Our operations are organized into three reportable segments, Refining, PCLI and HEP. Our operations that are not included in the Refining, PCLI 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 El Dorado, Tulsa, Navajo, Cheyenne and Woods Cross refineries and 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 regions of the United States. Additionally, the Refining segment includes specialty lubricant products produced at our Tulsa refineries that are marketed throughout North America and are distributed in Central and South America. HFC Asphalt operates various asphalt terminals in Arizona, New Mexico and Oklahoma.

On February 1, 2017, we acquired PCLI, a Canadian-based producer of lubricant products such as base oils, white oils, specialty products and finished lubricants. The PCLI segment involves production operations, located in Mississauga, Ontario, and marketing of its products to both retail and wholesale outlets through a global sales network with locations in Canada, the United States, Europe and China.

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 process units in the Mid-Continent, Southwest and Rocky Mountain regions of the United States. The HEP segment also includes a 75% interest in the UNEV Pipeline (an HEP consolidated subsidiary), a 50% ownership interest in each of the Frontier Pipeline, Osage Pipeline and the Cheyenne Pipeline and a 25% ownership interest in SLC Pipeline. 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     PCLI     HEP    

Corporate
and Other

   

Consolidations
and
Eliminations

   

Consolidated
Total

(In thousands)
Three Months Ended June 30, 2017
Sales and other revenues $ 3,141,137 $ 309,566 $ 109,143 $ 15 $ (100,997 ) $ 3,458,864
Operating expenses $ 245,265 $ 52,652 $ 34,097 $ 1,322 $ (17,684 ) $ 315,652
Depreciation and amortization $ 75,656 $ 7,302 $ 19,541 $ 2,990 $ (207 ) $ 105,282
Income (loss) from operations $ 86,603 $ 17,511 $ 52,890 $ (34,746 ) $ (573 ) $ 121,685
Net income (loss) $ 86,603 $ 12,640 $ 43,260 $ (68,378 ) $ (52 ) $ 74,073
Capital expenditures $ 52,190 $ 8,757 $ 12,259 $ 4,087 $ $ 77,293
 
Three Months Ended June 30, 2016
Sales and other revenues $ 2,699,022 $ $ 94,896 $ 47 $ (79,327 ) $ 2,714,638
Operating expenses $ 225,683 $ $ 29,212 $ 1,152 $ (4,711 ) $ 251,336
Depreciation and amortization $ 72,023 $ $ 15,308 $ 3,299 $ (207 ) $ 90,423
Income (loss) from operations $ (436,214 ) $ $ 47,514 $ (31,197 ) $ (645 ) $ (420,542 )
Net income (loss) $ (436,214 ) $ $ 39,921 $ 3,843 $ (20 ) $ (392,470 )
Capital expenditures $ 105,875 $ $ 33,201 $ 1,396 $ $ 140,472
 
Six Months Ended June 30, 2017
Sales and other revenues $ 6,003,213 $ 511,506 $ 214,777 $ 42 $ (190,191 ) $ 6,539,347
Operating expenses $ 502,380 $ 88,681 $ 66,586 $ 2,335 $ (37,213 ) $ 622,769
Depreciation and amortization $ 145,324 $ 12,376 $ 37,914 $ 6,122 $ (414 ) $ 201,322
Income (loss) from operations $ 36,348 $ 29,905 $ 105,028 $ (81,181 ) $ (1,139 ) $ 88,961
Net income (loss) $ 36,348 $ 21,056 $ 71,543 $ (92,561 ) $ (95 ) $ 36,291
Capital expenditures $ 99,864 $ 10,352 $ 20,524 $ 6,310 $ $ 137,050
 
Six Months Ended June 30, 2016
Sales and other revenues $ 4,698,609 $ $ 196,906 $ 157 $ (162,310 ) $ 4,733,362
Operating expenses $ 453,512 $ $ 56,968 $ 2,407 $ (8,968 ) $ 503,919
Depreciation and amortization $ 140,901 $ $ 31,337 $ 6,479 $ (414 ) $ 178,303
Income (loss) from operations $ (380,281 ) $ $ 102,648 $ (58,052 ) $ (1,259 ) $ (336,944 )
Net income (loss) $ (380,281 ) $ $ 87,293 $ (56,060 ) $ (32 ) $ (349,080 )
Capital expenditures $ 210,582 $ $ 75,385 $ 4,078 $ $ 290,045
 
June 30, 2017
Cash, cash equivalents and total investments in marketable securities $ 2,311 $ 68,346 $ 16,339 $ 373,330 $ $ 460,326
Total assets $ 6,354,911 $ 1,194,478 $ 1,904,951 $ 471,367 $ (282,672 ) $ 9,643,035
Long-term debt $ $ $ 1,236,739 $ 991,212 $ $ 2,227,951
 
December 31, 2016
Cash, cash equivalents and total investments in marketable securities $ 49 $ $ 3,657 $ 1,131,021 $ $ 1,134,727
Total assets $ 6,513,806 $ $ 1,920,487 $ 1,306,169 $ (304,801 ) $ 9,435,661
Long-term debt $ $ $ 1,243,912 $ 991,225 $ $ 2,235,137
 
 

Refining Operating Data

The following tables set forth information, including non-GAAP performance measures about our refinery operations. The cost of products and refinery gross and net operating margins do not include the non-cash effects of 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.

    Three Months Ended June 30,       Six Months Ended June 30,
2017     2016 2017     2016
Mid-Continent Region (El Dorado and Tulsa Refineries)
Crude charge (BPD) (1) 290,460 270,590 256,370 252,070
Refinery throughput (BPD) (2) 304,840 292,320 263,730 272,240
Refinery production (BPD) (3) 293,860 280,590 263,400 261,340
Sales of produced refined products (BPD) 281,670 264,660 254,830 249,010
Sales of refined products (BPD) (4) 308,280 285,780 281,970 274,000
Refinery utilization (5) 111.7 % 104.1 % 98.6 % 97.0 %
 
Average per produced barrel (6)
Net sales $ 65.01 $ 60.24 $ 65.76 $ 53.89
Cost of products (7)   55.63     52.55     57.59     46.13  
Refinery gross margin (8) 9.38 7.69 8.17 7.76
Refinery operating expenses (9)   4.48     4.56     5.21     4.95  
Net operating margin (8) $ 4.90   $ 3.13   $ 2.96   $ 2.81  
 
Refinery operating expenses per throughput barrel (10) $ 4.14 $ 4.13 $ 5.03 $ 4.53
 
Feedstocks:
Sweet crude oil 62 % 58 % 60 % 55 %
Sour crude oil 18 % 17 % 19 % 19 %
Heavy sour crude oil 15 % 17 % 15 % 19 %
Other feedstocks and blends   5 %   8 %   6 %   7 %
Total   100 %   100 %   100 %   100 %
 
Sales of produced refined products:
Gasolines 50 % 47 % 50 % 48 %
Diesel fuels 34 % 35 % 32 % 35 %
Jet fuels 6 % 6 % 7 % 6 %
Fuel oil 1 % 1 % 1 % 1 %
Asphalt 3 % 3 % 3 % 2 %
Lubricants 4 % 5 % 5 % 5 %
LPG and other   2 %   3 %   2 %   3 %
Total   100 %   100 %   100 %   100 %
 
         
Three Months Ended June 30, Six Months Ended June 30,
2017     2016 2017     2016
Southwest Region (Navajo Refinery)
Crude charge (BPD) (1) 102,120 101,660 88,370 99,890
Refinery throughput (BPD) (2) 112,720 111,610 96,200 110,370
Refinery production (BPD) (3) 111,240 110,520 94,770 109,020
Sales of produced refined products (BPD) 108,390 110,360 92,460 111,870
Sales of refined products (BPD) (4) 110,350 111,570 100,570 112,660
Refinery utilization (5) 102.1 % 101.7 % 88.4 % 99.9 %
 
Average per produced barrel (6)
Net sales $ 65.97 $ 61.86 $ 66.46 $ 53.67
Cost of products (7)   54.63     50.71     56.32     44.66  
Refinery gross margin (8) 11.34 11.15 10.14 9.01
Refinery operating expenses (9)   4.96     4.77     5.76     4.50  
Net operating margin (8) $ 6.38   $ 6.38   $ 4.38   $ 4.51  
 
Refinery operating expenses per throughput barrel (10) $ 4.77 $ 4.72 $ 5.54 $ 4.56
 
Feedstocks:
Sweet crude oil 25 % 27 % 22 % 30 %
Sour crude oil 66 % 64 % 70 % 60 %
Other feedstocks and blends   9 %   9 %   8 %   10 %
Total   100 %   100 %   100 %   100 %
 
Sales of produced refined products:
Gasolines 52 % 54 % 52 % 55 %
Diesel fuels 42 % 41 % 41 % 40 %
Fuel oil 2 % 2 % 3 % 2 %
Asphalt 1 % 1 % 1 % 1 %
LPG and other   3 %   2 %   3 %   2 %
Total   100 %   100 %   100 %   100 %
 
Rocky Mountain Region (Cheyenne and Woods Cross Refineries)
Crude charge (BPD) (1) 74,510 56,340 74,610 57,880
Refinery throughput (BPD) (2) 80,740 54,680 82,240 61,950
Refinery production (BPD) (3) 78,110 51,550 79,630 58,900
Sales of produced refined products (BPD) 75,840 56,090 78,300 61,370
Sales of refined products (BPD) (4) 76,070 61,950 78,740 65,960
Refinery utilization (5) 76.8 % 67.9 % 76.9 % 69.7 %
 
         
Three Months Ended June 30, Six Months Ended June 30,
2017     2016 2017     2016
Rocky Mountain Region (Cheyenne and Woods Cross Refineries)
Average per produced barrel (6)
Net sales $ 68.52 $ 62.26 $ 67.14 $ 53.86
Cost of products (7)   49.05     52.22     52.47     45.04  
Refinery gross margin (8) 19.47 10.04 14.67 8.82
Refinery operating expenses (9)   10.34     11.48     10.20     10.51  
Net operating margin (8) $ 9.13   $ (1.44 ) $ 4.47   $ (1.69 )
 
Refinery operating expenses per throughput barrel (10) $ 9.71 $ 11.78 $ 9.71 $ 10.41
 
Feedstocks:
Sweet crude oil 32 % 45 % 35 % 42 %
Heavy sour crude oil 39 % 35 % 36 % 34 %
Black wax crude oil 21 % 20 % 20 % 17 %
Other feedstocks and blends   8 %   %   9 %   7 %
Total   100 %   100 %   100 %   100 %
 
Sales of produced refined products:
Gasolines 59 % 58 % 59 % 60 %
Diesel fuels 33 % 36 % 33 % 34 %
Fuel oil 3 % 1 % 2 % 2 %
Asphalt 3 % 1 % 4 % 1 %
LPG and other   2 %   4 %   2 %   3 %
Total   100 %   100 %   100 %   100 %
 
Consolidated
Crude charge (BPD) (1) 467,090 428,590 419,350 409,840
Refinery throughput (BPD) (2) 498,300 458,610 442,170 444,560
Refinery production (BPD) (3) 483,210 442,660 437,800 429,260
Sales of produced refined products (BPD) 465,900 431,110 425,590 422,250
Sales of refined products (BPD) (4) 494,700 459,300 461,280 452,620
Refinery utilization (5) 102.2 % 96.7 % 91.8 % 92.5 %
 
Average per produced barrel (6)
Net sales $ 65.80 $ 60.92 $ 66.17 $ 53.83
Cost of products (7)   54.33     52.04     56.37     45.58  
Refinery gross margin (8) 11.47 8.88 9.80 8.25
Refinery operating expenses (9)   5.54     5.51     6.25     5.64  
Net operating margin (8) $ 5.93   $ 3.37   $ 3.55   $ 2.61  
 
Refinery operating expenses per throughput barrel (10) $ 5.18 $ 5.18 $ 6.01 $ 5.35
 
Feedstocks:
Sweet crude oil 49 % 49 % 48 % 47 %
Sour crude oil 26 % 27 % 26 % 27 %
Heavy sour crude oil 16 % 15 % 15 % 16 %
Black wax crude oil 3 % 2 % 4 % 2 %
Other feedstocks and blends   6 %   7 %   7 %   8 %
Total   100 %   100 %   100 %   100 %
 
         
Three Months Ended June 30, Six Months Ended June 30,
2017     2016 2017     2016
Consolidated
Sales of produced refined products:
Gasolines 52 % 50 % 52 % 51 %
Diesel fuels 36 % 37 % 34 % 36 %
Jet fuels 4 % 4 % 5 % 4 %
Fuel oil 1 % 1 % 1 % 1 %
Asphalt 2 % 2 % 2 % 2 %
Lubricants 3 % 3 % 3 % 3 %
LPG and other 2 % 3 % 3 % 3 %
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) 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.
(4) Includes refined products purchased for resale.
(5) Represents crude charge divided by total crude capacity (BPSD). Effective July 1, 2016, our consolidated crude capacity increased from 443,000 BPSD to 457,000 BPSD upon completion of our Woods Cross Refinery expansion project.
(6) 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.
(7) Transportation, terminal and refinery storage costs billed from HEP are included in cost of products.
(8) Excludes lower of cost or market inventory valuation adjustments of $84.0 million and $138.5 million for the three months ended June 30, 2017 and 2016, respectively, and $95.8 million and $194.6 million for the six months ended June 30, 2017 and 2016, respectively.
(9) Represents operating expenses of our refineries, exclusive of depreciation and amortization.
(10) Represents refinery operating expenses, exclusive of depreciation and amortization, divided by refinery throughput.
 
 

PCLI Operating Data

The following table sets forth information about our PCLI operations for the period from February 1, 2017 (date of acquisition) through June 30, 2017.

   

Three Months Ended
June 30,

   

Period From
February 1, 2017
Through June 30, 2017

PCLI
Throughput (BPD) (1) 21,470 21,750
Production (BPD) (2) 20,880 21,230
Sales of produced products (BPD) 23,720 20,690
 
(1)   Throughput represents the barrels per day of feedstocks (principally vacuum gas oil and hydrocracker bottoms) input into our PCLI production facilities.
(2) Production represents the barrels per day of products yielded from our PCLI production facilities.
 
 

Reconciliations to Amounts Reported Under Generally Accepted Accounting Principles

Reconciliations of earnings before interest, taxes, depreciation and amortization (“EBITDA”) and EBITDA excluding lower of cost or market inventory valuation adjustments and PCLI acquisition and integration costs, incremental cost of products sold attributable to our PCLI inventory value step-up and net gain on foreign currency swaps ("Adjusted EBITDA") to amounts reported under generally accepted accounting principles ("GAAP") in financial statements.

Earnings before interest, taxes, depreciation and amortization, which we refer 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) incremental cost of products sold attributable to our PCLI inventory value step-up, (iii) PCLI acquisition and integration costs, (iv) goodwill and asset impairment charges, (v) our RINs cost reduction related to our Cheyenne Refinery small refinery exemption, and (vi) net gain on foreign currency swaps.

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 June 30,       Six Months Ended June 30,
2017     2016 2017     2016
(In thousands)
Net income (loss) attributable to HollyFrontier stockholders $ 57,767 $ (409,368 ) $ 12,299 $ (388,115 )
Add income tax provision 31,996 (38,045 ) 15,207 (15,737 )
Add interest expense (1) 29,645 14,251 69,028 35,056
Subtract interest income (176 ) (527 ) (995 ) (602 )
Add depreciation and amortization   105,282     90,423     201,322     178,303  
EBITDA $ 224,514 $ (343,266 ) $ 296,861 $ (191,095 )
Add (subtract) lower of cost or market inventory valuation adjustment 83,982 (138,473 ) 95,805 (194,594 )
Add Incremental cost of products sold attributable to PCLI inventory value step-up 5,089 15,327
Add PCLI acquisition and integration costs 3,693 19,290
Add goodwill and asset impairment 19,247 654,084 19,247 654,084
Subtract RINs cost reduction (30,456 ) (30,456 )
Subtract gain on foreign currency swaps           (24,545 )    
Adjusted EBITDA $ 306,069   $ 172,345   $ 391,529   $ 268,395  
 
Adjusted EBITDA attributable to our PCLI segment is calculated as follows:
PCLI income from operations (see segment data on page 6) $ 17,511 $ 29,905
Add depreciation and amortization (see segment data on page 6)   7,302     12,376  
PCLI EBITDA $ 24,813 $ 42,281
Add Incremental cost of products sold attributable to PCLI inventory value step-up   5,089     15,327  
Adjusted PCLI EBITDA $ 29,902   $ 57,608  
 
(1)   Includes loss on early extinguishment of debt of $12.2 million and $8.7 million for the six months ended June 30, 2017 and 2016, respectively.
 
 

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 barrel is the difference between average net sales price and average cost of products per barrel of produced refined products. Net operating margin per barrel is the difference between refinery gross margin and refinery operating expenses per barrel of produced refined products.

These two margins do not include the non-cash effects of lower of cost or market inventory valuation adjustments or 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 and Net Operating Margins

Below are reconciliations to our consolidated statements of income for (i) net sales, cost of products sold (exclusive of lower of cost or market inventory valuation adjustment) 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.

Reconciliation of produced refined product sales to total sales and other revenues

    Three Months Ended June 30,       Six Months Ended June 30,
2017     2016 2017     2016
(Dollars in thousands, except per barrel amounts)
Consolidated
Average sales price per produced barrel sold $ 65.80 $ 60.92 $ 66.17 $ 53.83
Times sales of produced refined products (BPD) 465,900 431,110 425,590 422,250
Times number of days in period   91     91     181     182  
Produced refined product sales $ 2,789,716   $ 2,389,953   $ 5,097,194   $ 4,136,809  
 
Total produced refined product sales $ 2,789,716 $ 2,389,953 $ 5,097,194 $ 4,136,809
Add refined product sales from purchased products and rounding (1)   172,841     161,860     433,131     293,460  
Total refined product sales 2,962,557 2,551,813 5,530,325 4,430,269
Add direct sales of excess crude oil (2) 121,566 100,782 380,307 191,700
Add other refining segment revenue (3)   57,014     46,427     92,581     76,640  
Total refining segment revenue 3,141,137 2,699,022 6,003,213 4,698,609
Add PCLI segment sales and other revenues 309,566 511,506
Add HEP segment sales and other revenues 109,143 94,896 214,777 196,906
Add corporate and other revenues 15 47 42 157
Subtract consolidations and eliminations   (100,997 )   (79,327 )   (190,191 )   (162,310 )
Sales and other revenues $ 3,458,864   $ 2,714,638   $ 6,539,347   $ 4,733,362  
 
 

Reconciliation of average cost of products per produced barrel sold to cost of products sold (exclusive of lower of cost or market inventory valuation adjustment)

    Three Months Ended June 30,       Six Months Ended June 30,
2017     2016 2017     2016
(Dollars in thousands, except per barrel amounts)
Consolidated
Average cost of products per produced barrel sold $ 54.33 $ 52.04 $ 56.37 $ 45.58
Times sales of produced refined products (BPD) 465,900 431,110 425,590 422,250
Times number of days in period   91     91     181     182  
Cost of products for produced products sold $ 2,303,424   $ 2,041,582   $ 4,342,282   $ 3,502,800  
 
Total cost of products for produced products sold $ 2,303,424 $ 2,041,582 $ 4,342,282 $ 3,502,800
Add refined product costs from purchased products sold and rounding (1)   172,554     159,155     433,615     297,519  
Total cost of refined products sold 2,475,978 2,200,737 4,775,897 3,800,319
Add crude oil cost of direct sales of excess crude oil (2) 121,454 101,719 381,284 193,307
Add other refining segment cost of products sold (4)   32,952     19,463     46,928     31,361  
Total refining segment cost of products sold 2,630,384 2,321,919 5,204,109 4,024,987
Add PCLI segment cost of products sold 205,559 341,863
Subtract consolidations and eliminations   (82,503 )   (73,764 )   (151,375 )   (151,669 )
Costs of products sold (exclusive of lower of cost or market inventory valuation adjustment and depreciation and amortization) $ 2,753,440   $ 2,248,155   $ 5,394,597   $ 3,873,318  
 
 

Reconciliation of average refinery operating expenses per produced barrel sold to total operating expenses

    Three Months Ended June 30,       Six Months Ended June 30,
2017     2016 2017     2016
(Dollars in thousands, except per barrel amounts)
Consolidated
Average refinery operating expenses per produced barrel sold $ 5.54 $ 5.51 $ 6.25 $ 5.64
Times sales of produced refined products (BPD) 465,900 431,110 425,590 422,250
Times number of days in period   91     91     181     182  
Refinery operating expenses for produced products sold $ 234,879   $ 216,163   $ 481,449   $ 433,431  
 
Total refinery operating expenses for produced products sold $ 234,879 $ 216,163 $ 481,449 $ 433,431
Add other refining segment operating expenses and rounding(5)   10,386     9,520     20,931     20,081  
Total refining segment operating expenses 245,265 225,683 502,380 453,512
Add PCLI segment operating expenses 52,652 88,681
Add HEP segment operating expenses 34,097 29,212 66,586 56,968
Add corporate and other costs 1,322 1,152 2,335 2,407
Subtract consolidations and eliminations   (17,684 )   (4,711 )   (37,213 )   (8,968 )
Operating expenses (exclusive of depreciation and amortization) $ 315,652   $ 251,336   $ 622,769   $ 503,919  
 
 

Reconciliation of net operating margin per barrel to refinery gross margin per barrel to total sales and other revenues

    Three Months Ended June 30,       Six Months Ended June 30,
2017     2016 2017     2016
(Dollars in thousands, except per barrel amounts)
Consolidated
Net operating margin per barrel $ 5.93 $ 3.37 $ 3.55 $ 2.61
Add average refinery operating expenses per produced barrel   5.54     5.51     6.25     5.64  
Refinery gross margin per barrel 11.47 8.88 9.80 8.25
Add average cost of products per produced barrel sold   54.33     52.04     56.37     45.58  
Average sales price per produced barrel sold $ 65.80 $ 60.92 $ 66.17 $ 53.83
Times sales of produced refined products (BPD) 465,900 431,110 425,590 422,250
Times number of days in period   91     91     181     182  
Produced refined product sales $ 2,789,716   $ 2,389,953   $ 5,097,194   $ 4,136,809  
 
Total produced refined product sales $ 2,789,716 $ 2,389,953 $ 5,097,194 $ 4,136,809
Add refined product sales from purchased products and rounding (1)   172,841     161,860     433,131     293,460  
Total refined product sales 2,962,557 2,551,813 5,530,325 4,430,269
Add direct sales of excess crude oil (2) 121,566 100,782 380,307 191,700
Add other refining segment revenue (3)   57,014     46,427     92,581     76,640  
Total refining segment revenue 3,141,137 2,699,022 6,003,213 4,698,609
Add PCLI segment sales and other revenues 309,566 511,506
Add HEP segment sales and other revenues 109,143 94,896 214,777 196,906
Add corporate and other revenues 15 47 42 157
Subtract consolidations and eliminations   (100,997 )   (79,327 )   (190,191 )   (162,310 )
Sales and other revenues $ 3,458,864   $ 2,714,638   $ 6,539,347   $ 4,733,362  
 
(1)   We purchase finished products to facilitate delivery to certain locations 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, at times 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 cost.
(3) Other refining segment revenue includes the incremental revenues associated with HFC Asphalt, product purchased and sold forward for profit as market conditions and available storage capacity allows and miscellaneous revenue.
(4) Other refining segment cost of products sold includes the incremental cost of products for HFC Asphalt, the incremental cost associated with storing product purchased and sold forward as market conditions and available storage capacity allows and miscellaneous costs.
(5) Other refining segment operating expenses include the marketing costs associated with our refining segment and the operating expenses of HFC Asphalt.

Source: HollyFrontier Corporation

HollyFrontier Corporation

Richard L. Voliva III, 214-954-6510

Executive Vice President and

Chief Financial Officer

or

Craig Biery, 214-954-6510

Director, Investor Relations