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HollyFrontier Corporation Reports Quarterly Results

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  • HFC
  • 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, November 03, 2021--(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