Q4 2021 Holly Energy Partners LP Earnings Call

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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, Craig and thanks to each of you for joining our call. This afternoon.

<unk> finished 2021 with another quarter of consistent results.

We completed the year without an employee recordable injury, and we're incredibly proud of our team for achieving this significant accomplishment.

Overall transportation volumes were down slightly quarter over quarter, primarily due to planned turnaround.

And unplanned maintenance at Holly Frontier's Navajo refinery.

Partially offset by a full quarter's contribution from the Cushing connect pipeline.

We are happy to announce the frontier pipeline expansion came online in January and expect the expansion to provide approximately $6 million in annualized EBITDA underpinned by long term minimum volume commitments.

We also announced a 35 per LP unit quarterly cash distribution to be paid on February 11th to unitholders of record as of February one.

For 2022, we expect to hold the quarterly distribution constant at 35 per LP unit or a $1 40 on an annualized basis, while we continue to reduce financial leverage.

Looking forward into 2022, we remain focused on completion with the pending acquisition of Sinclair is logistics assets.

And our commitment to strong operational performance.

Now I'll turn the call over to John .

Thanks, Rich for the fourth quarter of 2021 net income attributable to Holly Energy partners was $45 6 million compared to $51 3 million in the fourth quarter of 2020.

The year over year decrease was mainly due to lower volumes on our pipeline systems lower ongoing revenues from our Cheyenne assets as a result of the conversion of Holly Frontier Cheyenne refinery to renewable diesel production.

And higher operating expenses, partially offset by lower interest expense and an increase in joint venture earnings.

Fourth quarter 2021, adjusted EBITDA was $80 million.

Compared to $88 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 $63 million with a quarterly distribution coverage ratio of one seven times at one eight times for the full year.

Capital expenditures and joint venture investments during the quarter were approximately $18 million, including $6 million in maintenance Capex and $5 million for the Cushing connect joint venture.

For 2022, we expect to spend between $35 and $50 million for refinery processing unit turnarounds $15 million to $20 million for maintenance capital and $5 million to $10 million in expansion capital.

As of December 31, <unk> had approximately $1 3 billion of total debt outstanding consisting of $500 million of senior notes due 2028 and $840 million drawn on our $1 2 billion revolving credit facility.

Our liquidity at the end of the year was approximately $360 million and our debt to trailing 12 month adjusted EBITDA ratio was three nine times.

During the year, we repaid over $70 million in debt and we expect to continue using retained cash flow to further reduce leverage down to our target range of three point out to three five times.

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

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

And we will go first to Spiro <unk> of credit Suisse.

Thanks, operator, good morning, guys.

If we could maybe just start with capex.

You on that and start with the guidance seems to point to kind of a heavier turnaround year. In 2022 can you speak to maybe roughly when we should expect some of those turnarounds and then how we should think about the ultimate impact that HEB and EBIT there.

Okay.

Sure John So the turnaround that we have scheduled this year for the Woods Cross refinery processing units in that.

It is scheduled to begin in March.

And we will essentially be down for about 40 days or so.

And you can think about the impact of not only the capex, but also the.

The lost revenue associated with the downtime.

So the MVC is won't apply for.

I will let walnut asset is down for service.

Okay got it and is that is that the only one or is that just to close this one coming up.

The only one.

Got it perfect.

Sticking with Capex switching to expansion Capex seeing that come in a little.

Bit lighter here in 2022, but if I go back to your slides from from December you guys had pointed out several avenues for growth you gave if you sort of generic examples of what that could look like I was wondering if you give us a little bit more color on that front.

Maybe to focus our attention on what you see as maybe more of the near term tangible areas for you guys to grow.

Hey, rich.

Generally speaking right I think what we're seeing this year is a lot of the smaller projects that we typically find an eater, so normal year will find $30 million to $40 million of.

Of seven to nine times multiple type spending these are projects in the 5 million to $2 million type range. So none of them are worth spiking out.

From <unk> perspective, we don't have anything larger this year at.

At least currently scheduled.

The frontier expansion of the Cushing connect line.

Looking forward right. We're really excited about what we think we're going to be able to do when.

Sinclair closed and in the portfolio. So a lot of our attention and focus in this area is going to be there I think once we get the deal completed.

Yes that makes sense and I guess on that anything you could share in terms of the timing around Sinclair some milestones to look for going forward and then while you're on that point. If you go back to the original slides I think you guys had talked about sort of pro forma EBITDA in the $400 million of $450 million range I'm curious if that's still a good benchmark to use for <unk>.

Now.

Yes, so with regards to the closing.

We are working diligently with Sinclair to satisfy all the closing conditions currently the primary or the gating factor is the FTC process.

We are cooperating with the FTC Sinclair is working with US we expect to close the transaction as soon as possible and right now kind of our best guidance would be sometime in 2022.

To your question on the earnings power of the deal, Yes, I think thats still a good number broadly speaking right. We expect the Sinclair asset to add 70 plus million dollars of EBITDA, a year to our existing base.

Perfect. Thanks for the color guys.

Thank you.

And as a reminder, if you would like to ask a question. Please press star one we'll pause just a moment.

Okay.

Okay.

And at this time, we have no further questions I will turn the conference back over to management for any additional remarks.

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

And this concludes today's conference call you May now disconnect. Thank you for joining and have a great day.

[music].

With regard.