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Did Holly Energy Partners Beat 1Q16 Earnings Estimates?

Ruth King

Did Holly Energy Partners Beat 1Q16 Earnings Estimates?

HEP beat EBITDA estimates

Holly Energy Partners (HEP) reported its 1Q16 results yesterday. The company’s adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) for 1Q16 came in at $69.8 million, 26% higher than its 1Q15 EBITDA of $55.3 million. The 1Q16 EBITDA beat estimates of $66.2 million by 5.4%. Distributable cash flow for the quarter was $55.4 million, up 21% compared to 1Q15.

The above graph compares HEP’s EBITDA estimates with its adjusted EBITDA. HEP has beaten EBITDA estimates in five out of the last ten quarters. HEP forms ~0.03% of the PowerShares Dividend Achievers Portfolio (PFM).

Higher volumes and acquired assets drove growth

Holly Energy Partners’ 1Q16 EBITDA growth was driven by increased revenues from HEP’s 75% interest in the UNEV products pipeline, its share of earnings from its 50% interest in Frontier Pipeline Company, and refinery processing units acquired in 4Q15. Higher pipeline and terminal volumes and annual tariff increases also contributed to the growth.

Operating expenses for the quarter increased $0.4 million year-over-year.

HEP’s distributions

On April 22, 2016, Holly Energy Partners announced a 1Q16 distribution of $0.58 per unit, 1.8% higher than in the previous quarter. This represents HEP’s 46th consecutive distribution increase. Holly Energy Partners was formed in 2004 by HollyFrontier Corporation (HFC).

Mike Jennings, chief executive officer of HEP, said, “We are pleased with our solid financial results for the first quarter of 2016, which allowed us to maintain our record of quarterly distribution increases, while maintaining a very strong distribution coverage ratio. We remain optimistic about our organic growth potential, especially on the UNEV products pipeline. Additionally, we successfully completed our acquisition of crude oil tankage at HollyFrontier Corporation’s Tulsa refinery.”

HEP’s peer Phillips 66 Partners (PSXP) reported a 13% decline in its 1Q16 distributable cash flow. Tesoro Logistics (TLLP) and Delek Logistics Partners (DKL) are scheduled to report 1Q16 results today and tomorrow, respectively.

In the next part of this series, we’ll compare Holly Energy Partners to its peers in terms of year-to-date stock performance.

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