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HollyFrontier Reports 4th-Quarter 2016 Results

- By Alberto Abaterusso

HollyFrontier Corp. (HFC) released its fourth-quarter 2016 results on Feb. 22.

HollyFrontier closed the quarter with a net loss of six cents, a 125% decline from the fourth quarter of 2015. It beat analysts' expectations on income by one cent, generating a positive surprise 14.30%. Fourth-quarter figures are adjusted for one-time charges.


Source: Yahoo Finance

Much of the loss reported is due to lower refining margins, even though the refiner sustained lower costs and operating expenses during the quarter.

The refinery gross margin, on a consolidated basis, fell 27% from $9.91 per produced barrel in fourth-quarter 2015 to $7.23 per produced barrel in fourth-quarter 2016.

During the quarter, the company refined 279,760 barrels per day versus 240,000 barrels per day a year ago. On a consolidated basis, HollyFrontier refined 452,910 barrels per day versus 421,200 barrels per day over that same period.

The company's total operating costs and expenses fell 5% on a year-over-year basis, from $3 billion to $2.84 billion. Refining operating expenses were around $5.51 per produced barrel sold versus an average $6.40 per produced barrel sold during the comparable period of 2015.

HollyFrontier President and CEO George Damiris commented on the industry environment for the year.

"2016 presented a challenging refining environment for the industry as a whole and for HFC due to weak benchmark refining margins, rising RFS compliance costs and narrow crude differentials," Damiris said. "In the face of these macro challenges, we continue to focus on what we can control. We have achieved approximately $300 million of the $700 million in annual EBITDA improvements targeted by 2018."

Cash flow generated from operations during the quarter was $164.3 million.

As of Dec. 31, 2016, HollyFrontier has approximately $1.1 billion in cash and securities. In addition, the company has a $1.35 billion line of credit with maturity in 2022. The total debt amounts to $991.2 million.

The company added it paid $862.1 million in cash to acquire PCLI.

HollyFrontier closed at $29.07 per share yesterday, up 50 cents or 1.73% from the previous trading day, with a volume of 3,296,366 shares traded on the New York Stock Exchange.

The company pays an annual dividend of $1.32 per share through quarterly payments of 33 cents, bringing the dividend yield to 4.57%.

As of today, the majority of analysts suggest holding shares of HollyFrontier with a recommendation rating of 2.8. The recommendation rating ranges between 1.0 (Strong Buy) and 5.0 (Sell). The average target price per share is $33.92, which represents a 16.7% upside from the current share price. This means analysts see substantial upside in the coming year.

Disclosure: I do not have any positions in HollyFrontier Corp.

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This article first appeared on GuruFocus.