Q3 2021 Holly Energy Partners LP Earnings Call

Today's call speak only as of today November <unk> 2021.

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.

With that I'll turn the call over to rich Thanks Trey.

Thanks to each of you for joining the call. This afternoon.

<unk> delivered solid results in the third quarter, driven by record volumes on our SLC and frontier pipelines.

Standing operations across our business.

During the third quarter, we surpassed one year without an employee recordable injury, congratulations to our entire team on this important milestone.

<unk> announced a 35 per LP unit quarterly cash distribution to be paid on November 12 to unit holders of record as of November one.

Turning to project updates we are excited to announce the completion of the Cushing pipeline, which went into service at the end of September.

We also advanced construction on the frontier pipeline expansion, which is expected to be in service at the beginning of 2022.

This expansion will allow for an additional 10000 barrels per day of crude oil into the Salt Lake City market and are supported by long term minimum volume commitments with third party refiners.

Looking forward, we still expect to close the acquisition of Sinclair is logistics assets by mid 2022 subject to closing conditions.

And we remain focused on strong operational execution and our near term leverage target of three five times debt to EBITDA.

I will now turn the call over to John.

Thanks, Rich for the third quarter of 2021 net income attributable to Holly Energy partners was $49 2 million.

Compared to $17 8 million in the third quarter of 2020, which included special items that collectively decreased net income by a total of $29 6 million.

Excluding these items third quarter 2020, net income was $47 4 million.

The year over year increase was primarily due to higher joint venture earnings and lower depreciation, partially offset by lower revenues and higher operating expenses.

Third quarter 2021, adjusted EBITDA was $83 3 million.

Compared to $86 4 million in the same period last year, a reconciliation table, reflecting these adjustments can be found in our press release.

During the quarter Hep's generated distributable cash flow of $66 $8 million with a quarterly distribution coverage ratio of one eight times and one nine times to year to date.

Capital expenditures and joint venture investments during the quarter were approximately $19 million, including $11 million for the Cushing connect joint venture and $3 million in maintenance Capex.

For full year 2021, we are slightly reducing our capital guidance from $60 million to $71 million down to 57% to $69 million.

Our updated capital guidance includes $40 to $45 million of expansion capital and joint venture investment 15.

<unk> $15 million to $20 million for maintenance capital and $2 million to $4 million for refinery processing unit turnarounds.

As of September 30th HCP had approximately $1 3 billion of total debt outstanding consisting of $500 billion of senior notes due 2028 and $841 million drawn on our revolving credit facility.

Our liquidity at the end of the third quarter was approximately $360 million.

Our debt to trailing 12 month adjusted EBITDA ratio was three eight times.

During the quarter, we continued to execute on our deleveraging strategy by repaying $30 million of borrowings on our credit facility.

Looking forward, we plan to continue using retained cash flow to reduce debt down.

Down to our target leverage ratio of three to three five times that.

Now I'd like to turn the call over to the operator for any questions.

Thank you the floor is now open for your questions. If you would like to ask a question at this time. Please press Star then the number one on your Touchtone phone.

If at any point. Your question has been answered you may remove yourself from the queue by pressing star one.

Again, we ask that you. Please pickup your handset to allow optimal sound quality.

Thank you. Your first question comes from Spiro <unk> from <unk>.

Credit Suisse. Please go ahead your line is open.

Thanks, that's great Congrats again.

Thanks Barry.

Good good I.

Just want to start maybe with the Puget sound on the back of the transaction closing earlier this week.

And maybe just get your latest thinking around some of the logistics assets. There I think at some point maybe slated for dropdown of course, you've got Sinclair in the mix now and that process is proceeding. So I'm just curious how to think about maybe the potential timing and how we're thinking about structuring that drop at some point.

Yes, I think we've put that on the backburner Spiro with obviously Sinclair coming focus is there right now.

No immediate plans with respect to Puget sound.

Okay got it and then just as we're thinking about volumes and the outlook here for the rest of the year I think you all have some turnarounds and maybe some maintenance this quarter that impacted volumes a little bit. So just curious as we get into the fourth quarter and you didn't call out there just from a volume trajectory and how youre thinking about volumes overall as we head into next year.

Yes, we will.

Holly Frontier's Navajo refinery is in the latter stages of a turnaround right now so we will see impact from that both in terms of crude and to a greater extent on affiliate product volumes in the fourth quarter, we would expect that to bounce back than in the first quarter and going forward from there.

Okay perfect last one if I could sneak it in.

So one of your peers had mentioned just tracking renewables and the potential for that to be MLP qualifying income.

Some point and potentially opening up some opportunities for them on the renewable side.

I would imagine youre watching that as well, but I don't know how close you are to moving on some renewable projects, but that's something we're also watching and is there anything else going on in Washington, right now that you're sort of focused on from an MLP perspective.

So I.

I don't think we know anything more or less than anyone else does we read the daily updates on the last minute changes two trillion dollars bills.

So look we are we're actively paying attention here. It is it could be very potentially very interesting for AEP, but more to come we'll clearly pay attention to what's happening there.

Yeah, no I understand that that's about as clear as mud.

Tom.

Thank you all.

Thank you Sir.

Once again, if you do have a question you May press star one on your Touchtone phone at this time.

If there are no further questions I will turn the floor back over to Trey for any closing remarks.

Alright, Thanks again for joining the call today and 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.

[music].

Okay.

[music].

Okay.