Q2 2020 Holly Energy Partners LP Earnings Call
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Shelter.
Thanks, Ian and thank you all for joining our second quarter 220, 20 earnings call.
I'm trace owner with Investor Relations for Holly Energy partners, joining us today, our rich of all of a president and John Hendrickson Senior Vice President and CFO. This morning, we issued a press release announcing results for the quarter ending June Thirtyth 20 point, if you would like a copy of today's press release, you may find one on our website at Holly energy Dotcom.
Before rich and John proceed with their remarks. Please note the safe Harbor disclosure statement in today's press release.
In summary, it says statements made regarding management expectations judgments or predictions are forward looking statements. These statements are intended to be covered on 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 a few.
Your outcomes also please note that information presented on today's call speak only as of today August 2020.
Any time sensitive information provided may no longer be accurate at the time of 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.
Thank you Trey good afternoon, everyone and thanks for joining the call today.
On behalf of Holly Energy partners, we hope that you and your families are safe and in good health during this difficult time.
To begin I'd like to thank our employees for their continued focus and flexibility in this challenging environment.
In response to cope with 19 and with that health and safety. We have maintained several safety protocols to help protect our employees, which include limiting onsite staff to essential operational per shifts and monitoring health.
For everyone in our pipeline control center.
And to work from home policy for certain employees.
These actions have been successful and supporting the continuity of our operations.
And we will closely monitor covert 19 developments to properly address these policies going forward.
Despite the volatile and challenging backdrop.
ATP delivered solid second quarter results, highlighting the strength and resilience of our business model.
On July 20, Threerd consistence with consistent with the guidance issued in April our board approved the 35 cents per unit quarterly cash distribution to be paid on August 13th.
This represents the same amount paid the previous quarter.
As a result, the demand destruction from Kobin 19, we experienced a 26% reduction in overall crude and product pipeline volumes.
Comparative the second quarter of 2019.
However, total revenues were only down 12% representative of the strength of our minimum volume commitments.
Over the course of the second quarter, we sell volumes bottom in May.
With June showing incremental improvement.
Looking forward, we anticipate this improvement to continue as our customers adjust refinery production to match increasing market demand.
Turning to project updates the cushion connect joint venture terminal when full service on April 1st of 2020.
And we anticipate two and a half million dollars in annualized EBITDA net to AGP.
The pipeline portion of the JV remains on schedule with an expected start date in the first quarter of 2021.
We expect the pipeline to produce $5 million annualized EBITDA net TGP.
Both JV assets are supported by a long term minimum volume commitment.
On June Onest, Hollyfrontier announced plans to convert at Cheyenne refinery to a renewable diesel plant.
The conversion project beginning in the third quarter of 2020.
ATP receives minimum annualized payments of approximately 17, and a half million dollars related to our assets inside the refinery gate.
As the conversion process begins we will begin negotiations with with hollyfrontier related to potential changes to our existing throughput agreement.
Moving forward, we will maintain the same level focus and commitment to operating safely and responsibly in order to facilitate the continuity our business during this challenging environment.
Again, I hope everyone stays healthy during this time and with that I'll turn the call over to John.
Thanks, Rich for the second quarter of 2020 net income attributable to Holly Energy partners was so compared to 45.7 million in the second quarter of 2019.
The increase was primarily due to a $33.8 million are noncash gain resulting.
And from the renewal of a third party throughput agreement than met the definition of a sales type lease.
Excluding this one time gain net income attributable to AHGP for the quarter was $42.6 billion or 40 cents per limited partner unit.
This represents a $3.1 billion decrease compared to the same period in 2019.
The decrease was due to lower refinery utilization rates related to Kobin, 19, and partially offset by lower operating expenses and lower interest expense.
And the second quarter of 2020, adjusted EBITDA was $80.2 billion compared to 88.6 million in the same period last year, a reconciliation table, reflecting these adjustments can be found in our press release.
During the quarter AHGP generated distributable cash flow of $65.5 million, a $2 million decrease compared to the same period last year. Our distribution coverage ratio was 1.9 times for the quarter and just under 2.0 times year to date.
Capital expenditures and joint venture investments during the quarter were approximately $15 million, including $11 million for the Cushing connect joint venture and approximately 1 million and maintenance Capex.
For the full year 2020 are projected capital expenditures and share of joint venture investments remain unchanged at $58 million to $69 million.
As of June Thirtyth AHGP at approximately 1.5 billion of total debt outstanding consisting of 500 million of senior notes due 2028, and approximately $1 billion drawn on our $1.4 billion revolving credit facility, which matures in July of 2022.
Our liquidity at the end of the second quarter was over $400 million at our debt to trailing 12 month. Adjusted EBITDA was 4.3 times, which is well below our leverage covenant of 5.25 times.
As previously communicated we intend to fund all capital investment with cash flow from operations and plan to use incremental retained cash flow to reduce leverage.
In summary, AHGP delivered solid second quarter model continues to position us well, even during a challenging macro environment.
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Alright, Thanks again for joining the call today feel free to reach out to Investor Relations. If you have any questions. Thank you.
This concludes today's conference call you may now disconnect. Thank you for joining and have a great day.
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