Q4 2019 Earnings Call

[music].

Welcome to be Holly energy Partners' fourth quarter, 2019 conference call and webcast.

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It is now my pleasure to turn the floor over to trace Hunter trade you may begin.

Thanks to major and thank you all for joining or fourth quarter 2019 earnings call arbitration, Ontario, with Investor Relations for Holly Energy partners, joining us today or rich of all of a president and John Harrison Senior Vice President and CFO.

This morning, we issued a press release announcing results for the quarter ending December 31st 2019.

If you like a copy of today's press release, you may find one on our website at Holly energy Dotcom.

Before Retune John proceed with their remarks. Please note the safe Harbor disclosure statement in today's press release.

In summary, it says statements made regarding managements expectation judgments or predictions are forward looking statements. These statements are intended to be covered under the safe Harbor provisions of federal Securities laws. There are many factors that could cause results to differ from expectations, including those noted in our SEC filings.

Today's statements are not guarantees of future outcomes.

Also please note that information presented on today's call speaks only as of today February 19 2020.

Any time sensitive information provided may know may no longer be accurate at the time with any webcast replay or reading of the transcript.

Finally, today's call May include discussion of non-GAAP measures. Please see today's press release for reconciliations to GAAP financial measures and with that I'll turn the call over to rich. Thanks, Trey. Thanks, each of you for joining the call. This afternoon.

BGP wrapped up 2019 with sound fourth quarter results and announced the distribution of 67 in one quarter cents per unit.

For the full year 2019, Holly energy partners declared distributions of $2 68, three quarter cents per unit.

Totaling $273 million of distributions for the year.

In the fourth quarter distribution coverage fell to 0.94 times due to the volume impacts of heavy turnaround activity of Hollyfrontiers refineries.

However in December we began to see pipeline and terminal volumes improved to more normalized levels.

We anticipate our coverage ratio will increase to.

One times are higher for the first quarter of 2020.

The full year 2020, we plan to hold the quarterly distribution constant and 67 in a quarter cents per LP unit, while maintaining a coverage ratio one times.

In October we announced our Cushing connect joint venture with Plains All American.

Which will terminal crude oil for both Hollyfrontiers El Dorado and Tulsa refineries.

And operate a new build pipeline from this terminal to the Tulsa refinery.

The 1.5 million barrel terminal is expected to begin service during the second quarter of 2020.

And we anticipate the 150000 barrel pretty pipeline to come online during the first quarter of 2021.

Combined we expect initial annual EBITDA multiple of eight to nine times once both the terminal and pipeline are in service.

During the quarter, we also renewed certain portions of our agreeing with Delek.

We are actively engage unlocking uses for the specific assets that were not renewed.

Given the quality and location, we remain confident that we will probably utilize these assets during 2020.

Looking to the rest of the year, we're positioned for a good 2020 in terms of commercial risk. We do not have a third party re contracting event until 2022.

Additionally, with a light turnaround year for our largest customer Holly frontier, we expect strong volume levels, we remain committed to the safe clean.

And reliable operations.

Now I'll take the opportunity to introduce you to each of these new Chief Financial Officer, John Harrison since joining the company in 2005, John has played an integral role in each of these finance Treasury <unk> Investor Relations and corporate development efforts, serving most recently as vice President Finance restorations and treasurer for AHGP.

We look forward to getting John out to me all of you soon.

With that I'll turn the call over to John.

Okay. Thanks, rich for the fourth quarter of 2019 net income attributable to AHGP was $45.7 million compared to 47.5 million in the fourth quarter of 2018.

As rich mentioned HFC experienced heavy maintenance across its refining system and the impact AHGP net income was primarily due to lower throughput at Hfcs, Navajo refinery and lower equity in earnings are Osage pipeline joint venture.

During the quarter AHGP generated distributable cash flow of $64.5 million.

$300000 increase over the same period last year.

Our distribution coverage ratio is 0.94 times for the quarter as 0.99 times for the year.

Fourth quarter, adjusted EBITDA was $86.9 billion compared to 89.9 million in the fourth quarter 2018.

In accordance with the new lease accounting standard we recognize that net adjustments to EBITDA of a negative 800000 dollar for the quarter. This is comprised of 2.4 million of pipeline tariffs on included on the revenue line.

Offset by a $3.2 million benefit to operating expense for financing lease payments.

The table, reflecting these adjustments is available in our press release going forward, we expect the new lease accounting standard will require similar adjustments as we renew existing contracts or executing new contracts.

Our capital expenditures and joint venture investments during the quarter were approximately $26 million, including 3 million and maintenance capex at $18 million for Cushing connect.

In 2020, we expect to spend between eight and $12 million for maintenance Capex.

Five to 7 million for refinery unit turnarounds and 45 to 50 million for expansion capital inclusive of our share of the cushioning connect joint venture.

As of December 30, Onest 2019, ATP had $1.46 billion of total debt outstanding.

The resulting in a debt to adjusted EBITDA of just over 4.0 times.

I'd also like to highlight in February this year, we refinanced our 6% of senior notes due 2024 with the new issue, 5% coupon $500 million senior notes due 2028.

This refinancing will save approximately 4 million of interest expense per year, while extending the maturity another four years.

Looking at and we will continue our disciplined approach to growth and evaluate both organic and third party opportunities, where we can create value for our unit holders.

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Thank you. Your first question comes from Craig will one with U.S. capital Advisors.

Soon.

Thank you for taking my questions I have two of them if you don't mind.

First one Greg how are you on.

Good good.

This was just hoping you could provide a quick update on the progress you're making with a cushion connect.

Project and the second one has to do with the monthly FERC meeting tomorrow.

Or the items on the agenda relates to the potential revision of indexing policies and it appears the FERC will consider modifications that could prevent index based tariff increases for pipelines for revenues exceed costs by 15% for both adult the prior to year. So was just curious if you have any thoughts or expectations for the meeting.

And whether you think there any potential read throughs to HBP. Thank you.

Hi, Craig so on Cushing connect.

Good news here so far we are on schedule and on budget is admittedly early days.

Primarily in the right away portion right now.

So we expect a clear that out over the next.

Few weeks a few couple of months really for us the heavy construction phase and heavy spend will be over the course of the summertime. So.

So far so good is would be or answer there.

On the first meaning no I don't we don't really have a whole lot of insight to offer there and then ill.

Based on the kind of comments you are making would not expect on impact the AHGP.

Got it appreciate the insight.

Thank you.

Your next question comes from the recession with Barclays.

Good afternoon.

To ask you about your outlook for a utilization units just given the volatility on the product side.

Bye.

Yes, thanks overarching.

It's still generally the same story, which is to say theres going to be a lot of seasonality there the salt Lake Valley will tend to be long products in the wintertime short in the summertime So we'd expect.

No matter what to see more volume there in the winter fourth quarter in the first quarter than the second third.

There is obviously noise that comes around it depending on refinery uptime and downtime on both ends of the pipe frankly.

So we saw some refinery downtime in the valley.

Into the into October November this year. So it kept more barrels up in Salt Lake City would normally beyond the pipe for that part of the year.

We saw that bounce back in December so with those caveats around refinery Downtimes, we would still expect to see sort of normal seasonality there.

Thank you.

Thanks.

I will now 24 back over to tray for closing remarks.

Alright, Thanks again for joining the call today feel free to reach out to Investor Relations. If you have any questions.

Okay.

This concludes today's conference call you may now disconnect. Thank you for joining and have a great day.

Hi.