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November 06, 2013
HollyFrontier Corporation Reports Quarterly Net Income

DALLAS--(BUSINESS WIRE)-- HollyFrontier Corporation (NYSE:HFC) ("HollyFrontier" or the "Company") today reported third quarter net income attributable to HollyFrontier stockholders of $82.3 million or $0.41 per diluted share for the quarter ended September 30, 2013, compared to $600.4 million or $2.94 per diluted share for the quarter ended September 30, 2012.

For the third quarter, net income attributable to our stockholders decreased by $518.1 million compared to the same period of 2012, principally reflecting lower third quarter refining margins. Refinery gross margins were $10.64 per produced barrel, a 65% decrease compared to $30.55 for the third quarter of 2012. Production levels averaged approximately 436,000 barrels per day ("BPD") and crude oil charges averaged approximately 417,000 BPD for the current quarter. Operating expenses for the quarter were $256.3 million or $5.53 per barrel compared to $233.9 million or $5.11 per barrel for the third quarter of last year.

HollyFrontier's President & CEO, Mike Jennings, commented, "Contraction in the Brent to WTI differential continued to squeeze inland refined product margins from prior year highs, resulting in a year-over-year decrease in third quarter earnings. In addition, higher crude oil prices and elevated RIN costs negatively affected our capture of benchmark refining margins during the third quarter. Looking forward, we see continued growth in North American crude oil production and are confident that our geographic proximity and ability to process both light and heavy crude streams will create attractive opportunities, even as transportation logistics and related crude differentials are rationalized."

For the third quarter of 2013, net cash provided by operations totaled $350.6 million. During the period, we declared $0.30 regular and $0.50 special dividends to shareholders totaling approximately $160.0 million. At September 30, 2013, our combined balance of cash and short-term investments totaled $2.0 billion and our consolidated debt was $1.0 billion. Our debt, exclusive of Holly Energy Partners' debt, which is nonrecourse to HollyFrontier, was $190.5 million at September 30, 2013. We had no cash borrowings or outstanding principal under our credit facility during the quarter.

The Company has scheduled a webcast conference call for today, November 6, 2013, at 8:30 AM Eastern Time to discuss third quarter financial results. This webcast may be accessed at: https://event.webcasts.com/starthere.jsp?ei=1022776. An audio archive of this webcast will be available using the above noted link through November 20, 2013.

HollyFrontier Corporation, headquartered in Dallas, Texas, is an independent petroleum refiner and marketer that produces high-value light products such as gasoline, diesel fuel, jet fuel and other specialty products. HollyFrontier operates through its subsidiaries a 135,000 barrels per stream day ("bpsd") refinery located in El Dorado, Kansas, two refinery facilities with a combined capacity of 125,000 bpsd located in Tulsa, Oklahoma, a 100,000 bpsd refinery located in Artesia, New Mexico, a 52,000 bpsd refinery located in Cheyenne, Wyoming and a 31,000 bpsd refinery in Woods Cross, Utah. HollyFrontier markets its refined products principally in the Southwest U.S., the Rocky Mountains extending into the Pacific Northwest and in other neighboring Plains states. A subsidiary of HollyFrontier also owns a 39% interest (including the general partner interest) in Holly Energy Partners, L.P.

The following is a "safe harbor" statement under the Private Securities Litigation Reform Act of 1995: The statements in this press release relating to matters that are not historical facts are "forward-looking statements" based on management's beliefs and assumptions using currently available information and expectations as of the date hereof, are not guarantees of future performance and involve certain risks and uncertainties, including those contained in our filings with the Securities and Exchange Commission. Although we believe that the expectations reflected in these forward-looking statements are reasonable, we cannot assure you that our expectations will prove correct. Therefore, actual outcomes and results could materially differ from what is expressed, implied or forecast in such statements. Any differences could be caused by a number of factors, including, but not limited to, risks and uncertainties with respect to the actions of actual or potential competitive suppliers of refined petroleum products in the Company's markets, the demand for and supply of crude oil and refined products, the spread between market prices for refined products and market prices for crude oil, the possibility of constraints on the transportation of refined products, the possibility of inefficiencies, curtailments or shutdowns in refinery operations or pipelines, effects of governmental and environmental regulations and policies, the availability and cost of financing to the Company, the effectiveness of the Company's capital investments and marketing strategies, the Company's efficiency in carrying out construction projects, the ability of the Company to acquire refined product operations or pipeline and terminal operations on acceptable terms and to integrate any future acquired operations, the possibility of terrorist attacks and the consequences of any such attacks, general economic conditions and other financial, operational and legal risks and uncertainties detailed from time to time in the Company's Securities and Exchange Commission filings. The forward-looking statements speak only as of the date made and, other than as required by law, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

RESULTS OF OPERATIONS

Financial Data (all information in this release is unaudited)

         

Three Months Ended
September 30,

Change from 2012
2013     2012 Change     Percent
(In thousands, except per share data)
Sales and other revenues $ 5,327,122 $ 5,204,798 $ 122,324 2 %
Operating costs and expenses:
Cost of products sold (exclusive of depreciation and amortization) 4,809,990 3,898,736 911,254 23
Operating expenses (exclusive of depreciation and amortization) 256,318 233,859 22,459 10
General and administrative expenses (exclusive of depreciation and amortization) 28,937 28,787 150 1
Depreciation and amortization   82,127     65,112     17,015   26
Total operating costs and expenses   5,177,372     4,226,494     950,878   22
Income from operations 149,750 978,304 (828,554 ) (85 )
Other income (expense):
Earnings (loss) of equity method investments 159 852 (693 ) (81 )
Interest income 1,482 2,219 (737 ) (33 )
Interest expense   (13,954 )   (21,103 )   7,149   (34 )
  (12,313 )   (18,032 )   5,719   (32 )
Income before income taxes 137,437 960,272 (822,835 ) (86 )
Income tax provision   48,528     349,622     (301,094 ) (86 )
Net income 88,909 610,650 (521,741 ) (85 )
Less net income attributable to noncontrolling interest   6,619     10,277     (3,658 ) (36 )
Net income attributable to HollyFrontier stockholders $ 82,290   $ 600,373   $ (518,083 ) (86 )%
Earnings per share attributable to HollyFrontier stockholders:
Basic $ 0.41   $ 2.95   $ (2.54 ) (86 )%
Diluted $ 0.41   $ 2.94   $ (2.53 ) (86 )%
Cash dividends declared per common share $ 0.80   $ 1.15   $ (0.35 ) (30 )%
Average number of common shares outstanding:
Basic 199,098 202,655 (3,557 ) (2 )%
Diluted 199,509 203,532 (4,023 ) (2 )%
EBITDA $ 225,417 $ 1,033,991 $ (808,574 ) (78 )%
 
         

Nine Months Ended
September 30,

Change from 2012
2013     2012 Change     Percent
(In thousands, except per share data)
Sales and other revenues $ 15,333,759 $ 14,943,217 $ 390,542 3 %
Operating costs and expenses:
Cost of products sold (exclusive of depreciation and amortization) 13,059,333 11,767,417 1,291,916 11
Operating expenses (exclusive of depreciation and amortization) 798,959 698,212 100,747 14
General and administrative expenses (exclusive of depreciation and amortization) 92,135 88,421 3,714 4
Depreciation and amortization   224,381     178,162     46,219   26
Total operating costs and expenses   14,174,808     12,732,212     1,442,596   11
Income from operations 1,158,951 2,211,005 (1,052,054 ) (48 )
Other income (expense):
Earnings (loss) of equity method investments (871 ) 2,455 (3,326 ) (135 )
Interest income 3,791 3,360 431 13
Interest expense (55,068 ) (81,360 ) 26,292 (32 )
Loss on early extinguishment of debt (22,109 ) (22,109 )
Gain on sale of marketable securities       326     (326 ) (100 )
  (74,257 )   (75,219 )   962   (1 )
Income before income taxes 1,084,694 2,135,786 (1,051,092 ) (49 )
Income tax provision   386,665     775,746     (389,081 ) (50 )
Net income 698,029 1,360,040 (662,011 ) (49 )
Less net income attributable to noncontrolling interest   25,089     24,472     617   3
Net income attributable to HollyFrontier stockholders $ 672,940   $ 1,335,568   $ (662,628 ) (50 )%
Earnings per share attributable to HollyFrontier stockholders:
Basic $ 3.33   $ 6.46   $ (3.13 ) (48 )%
Diluted $ 3.33   $ 6.44   $ (3.11 ) (48 )%
Cash dividends declared per common share $ 2.40   $ 2.40   $   %
Average number of common shares outstanding:
Basic 201,109 205,768 (4,659 ) (2 )%
Diluted 201,486 206,654 (5,168 ) (3 )%
EBITDA $ 1,357,372 $ 2,367,476 $ (1,010,104 ) (43 )%
 
       

Balance Sheet Data

 
September 30, December 31,
2013 2012
(In thousands)
Cash, cash equivalents and investments in marketable securities $ 1,956,648 $ 2,393,401
Working capital $ 2,516,187 $ 2,815,821
Total assets $ 10,498,644 $ 10,328,997
Long-term debt $ 999,884 $ 1,336,238
Total equity $ 6,796,150 $ 6,642,658
 

Segment Information

Our operations are organized into two reportable segments, Refining and HEP. Our operations that are not included in the Refining and HEP segments are included in Corporate and Other. Intersegment transactions are eliminated in our consolidated financial statements and are included in Consolidations and Eliminations. The Refining segment includes the operations of our El Dorado, Tulsa, Navajo, Cheyenne and Woods Cross refineries and NK Asphalt and involves the purchase and refining of crude oil and wholesale and branded marketing of refined products, such as gasoline, diesel fuel, jet fuel, specialty lubricant products, and specialty and modified asphalt. The petroleum products are primarily marketed in the Mid-Continent, Southwest and Rocky Mountain regions of the United States and northern Mexico. Additionally, specialty lubricant products produced at our Tulsa West facility are marketed throughout North America and are distributed in Central and South America. NK Asphalt manufactures and markets asphalt and asphalt products in Arizona, New Mexico, Oklahoma, Kansas, Missouri, Texas and northern Mexico.

The HEP segment involves all of the operations of HEP, a consolidated variable interest entity, which owns and operates logistics assets consisting of petroleum product and crude oil pipelines and terminal, tankage and loading rack facilities in the Mid-Continent, Southwest and Rocky Mountain regions of the United States. Revenues are generated by charging tariffs for transporting petroleum products and crude oil through its pipelines and by charging fees for terminalling petroleum products and other hydrocarbons, and storing and providing other services at its storage tanks and terminals. The HEP segment also includes a 75% interest in the UNEV Pipeline (an HEP consolidated subsidiary) and a 25% interest in the SLC Pipeline. Revenues from the HEP segment are earned through transactions with unaffiliated parties for pipeline transportation, rental and terminalling operations as well as revenues relating to pipeline transportation services provided for our refining operations.

    Refining     HEP    

Corporate
and Other

   

Consolidations
and
Eliminations

   

Consolidated
Total

(In thousands)
Three Months Ended September 30, 2013
Sales and other revenues $ 5,314,954 $ 77,625 $ 257 $ (65,714 ) $ 5,327,122
Depreciation and amortization $ 61,553 $ 19,042 $ 1,739 $ (207 ) $ 82,127
Income (loss) from operations $ 144,508 $ 34,481 $ (28,701 ) $ (538 ) $ 149,750
Capital expenditures $ 92,918 $ 14,238 $ 8,230 $ $ 115,386
 
Three Months Ended September 30, 2012
Sales and other revenues $ 5,192,649 $ 72,570 $ 352 $ (60,773 ) $ 5,204,798
Depreciation and amortization $ 47,555 $ 12,971 $ 4,793 $ (207 ) $ 65,112
Income (loss) from operations $ 973,837 $ 36,876 $ (31,861 ) $ (548 ) $ 978,304
Capital expenditures $ 70,069 $ 5,683 $ 3,765 $ $ 79,517
 
Nine Months Ended September 30, 2013
Sales and other revenues $ 15,294,261 $ 229,230 $ 1,054 $ (190,786 ) $ 15,333,759
Depreciation and amortization $ 172,166 $ 48,410 $ 4,426 $ (621 ) $ 224,381
Income (loss) from operations $ 1,145,487 $ 102,347 $ (87,319 ) $ (1,564 ) $ 1,158,951
Capital expenditures $ 231,416 $ 31,099 $ 23,674 $ $ 286,189
 
Nine Months Ended September 30, 2012
Sales and other revenues $ 14,908,033 $ 207,250 $ 653 $ (172,719 ) $ 14,943,217
Depreciation and amortization $ 133,087 $ 38,683 $ 7,013 $ (621 ) $ 178,162
Income (loss) from operations $ 2,200,564 $ 100,918 $ (88,889 ) $ (1,588 ) $ 2,211,005
Capital expenditures $ 171,865 $ 29,302 $ 6,370 $ $ 207,537
 
September 30, 2013
Cash, cash equivalents and investments in marketable securities $ 40 $ 11,220 $ 1,945,388 $ $ 1,956,648
Total assets $ 7,285,965 $ 1,413,368 $ 2,129,518 $ (330,207 ) $ 10,498,644
Long-term debt $ $ 809,391 $ 205,943 $ (15,450 ) $ 999,884
 
December 31, 2012
Cash, cash equivalents and investments in marketable securities $ 2,101 $ 5,237 $ 2,386,063 $ $ 2,393,401
Total assets $ 6,702,872 $ 1,426,800 $ 2,531,967 $ (332,642 ) $ 10,328,997
Long-term debt $ $ 864,673 $ 487,472 $ (15,907 ) $ 1,336,238
 

Refining Operating Data

The following tables set forth information, including non-GAAP performance measures about our refinery operations. The cost of products and refinery gross margin do not include the effect of depreciation and amortization. Reconciliations to amounts reported under GAAP are provided under "Reconciliations to Amounts Reported Under Generally Accepted Accounting Principles" below.

   

Three Months Ended
September 30,

     

Nine Months Ended
September 30,

2013     2012 2013     2012
Mid-Continent Region (El Dorado and Tulsa Refineries)
Crude charge (BPD) (1) 248,130 256,850 231,490 252,110

Refinery throughput (BPD) (2)

264,900 278,990 252,630 270,380
Refinery production (BPD) (3) 257,410 268,310 246,120 262,830
Sales of produced refined products (BPD) 261,270 246,360 239,080 249,320
Sales of refined products (BPD) (4) 274,350 248,690 263,430 253,050
Refinery utilization (5) 95.4 % 98.8 % 89.0 % 97.0 %
 
Average per produced barrel (6)
Net sales $ 120.09 $ 121.83 $ 118.30 $ 120.19
Cost of products (7)   107.61     92.84     99.89     96.49  
Refinery gross margin 12.48 28.99 18.41 23.70
Refinery operating expenses (8)   4.93     4.71     5.59     4.72  
Net operating margin $ 7.55   $ 24.28   $ 12.82   $ 18.98  
 
Refinery operating expenses per throughput barrel (9) $ 4.86 $ 4.16 $ 5.29 $ 4.35
 
Feedstocks:
Sweet crude oil 71 % 69 % 72 % 70 %
Sour crude oil 8 % 9 % 5 % 8 %
Heavy sour crude oil 15 % 14 % 15 % 15 %
Other feedstocks and blends   6 %   8 %   8 %   7 %
Total   100 %   100 %   100 %   100 %
 
Sales of produced refined products:
Gasolines 47 % 50 % 46 % 47 %
Diesel fuels 33 % 26 % 32 % 29 %
Jet fuels 6 % 10 % 8 % 10 %
Fuel oil 1 % 1 % 1 % 1 %
Asphalt 3 % 2 % 3 % 2 %
Lubricants 4 % 5 % 4 % 5 %
LPG and other   6 %   6 %   6 %   6 %
Total   100 %   100 %   100 %   100 %
 
         

Three Months Ended
September 30,

Nine Months Ended
September 30,

2013     2012 2013     2012
Southwest Region (Navajo Refinery)
Crude charge (BPD) (1) 100,950 101,480 92,470 91,890

Refinery throughput (BPD) (2)

110,380 110,080 102,010 100,558
Refinery production (BPD) (3) 107,770 108,810 98,910 98,980
Sales of produced refined products (BPD) 108,420 106,370 96,940 97,470
Sales of refined products (BPD) (4) 112,660 110,760 107,490 102,450
Refinery utilization (5) 101.0 % 101.5 % 92.5 % 91.9 %
 
Average per produced barrel (6)
Net sales $ 119.68 $ 122.16 $ 119.23 $ 123.64
Cost of products (7)   113.17     92.26     103.96     97.37  
Refinery gross margin 6.51 29.90 15.27 26.27
Refinery operating expenses (8)   5.15     5.14     5.84     5.57  
Net operating margin $ 1.36   $ 24.76   $ 9.43   $ 20.70  
 
Refinery operating expenses per throughput barrel (9) $ 5.06 $ 4.97 $ 5.55 $ 5.40
 
Feedstocks:
Sweet crude oil 13 % 2 % 8 % 2 %
Sour crude oil 69 % 75 % 72 % 78 %
Heavy sour crude oil 10 % 16 % 11 % 11 %
Other feedstocks and blends   8 %   7 %   9 %   9 %
Total   100 %   100 %   100 %   100 %
 
Sales of produced refined products:
Gasolines 50 % 52 % 50 % 52 %
Diesel fuels 40 % 36 % 39 % 37 %
Fuel oil 6 % 7 % 6 % 6 %
Asphalt 2 % 2 % 2 % 2 %
LPG and other   2 %   3 %   3 %   3 %
Total   100 %   100 %   100 %   100 %
 
Rocky Mountain Region (Cheyenne and Woods Cross Refineries)
Crude charge (BPD) (1) 67,830 75,040 69,170 73,660

Refinery throughput (BPD) (2)

72,960 82,030 74,800 81,550
Refinery production (BPD) (3) 70,630 79,500 72,330 79,650
Sales of produced refined products (BPD) 71,690 81,200 72,650 79,360
Sales of refined products (BPD) (4) 73,110 83,080 75,560 81,590
Refinery utilization (5) 81.7 % 90.4 % 83.3 % 88.7 %
 
         

Three Months Ended
September 30,

Nine Months Ended
September 30,

2013     2012 2013     2012
Rocky Mountain Region (Cheyenne and Woods Cross Refineries)
Average per produced barrel (6)
Net sales $ 117.87 $ 120.44 $ 114.30 $ 117.51
Cost of products (7)   107.67     84.35     95.57     88.87  
Refinery gross margin 10.20 36.09 18.73 28.64
Refinery operating expenses (8)   8.25     6.30     7.94     6.30  
Net operating margin $ 1.95   $ 29.79   $ 10.79   $ 22.34  
 
Refinery operating expenses per throughput barrel (9) $ 8.11 $ 6.24 $ 7.71 $ 6.13
 
Feedstocks:
Sweet crude oil 43 % 51 % 43 % 44 %
Sour crude oil 1 % 2 % 1 % 2 %
Heavy sour crude oil 35 % 28 % 34 % 33 %
Black wax crude oil 14 % 11 % 14 % 11 %
Other feedstocks and blends   7 %   8 %   8 %   10 %
Total   100 %   100 %   100 %   100 %
 
Sales of produced refined products:
Gasolines 54 % 56 % 54 % 55 %
Diesel fuels 32 % 31 % 32 % 31 %
Fuel oil 2 % 2 % 1 % 2 %
Asphalt 5 % 7 % 6 % 6 %
LPG and other   7 %   4 %   7 %   6 %
Total   100 %   100 %   100 %   100 %
 
Consolidated
Crude charge (BPD) (1) 416,910 433,370 393,130 417,660

Refinery throughput (BPD) (2)

448,240 471,100 429,440 452,488
Refinery production (BPD) (3) 435,810 456,620 417,360 441,460
Sales of produced refined products (BPD) 441,380 433,930 408,670 426,150
Sales of refined products (BPD) (4) 460,120 442,530 446,480 437,090
Refinery utilization (5) 94.1 % 97.8 % 88.7 % 94.3 %
 
Average per produced barrel (6)
Net sales $ 119.62 $ 121.66 $ 117.81 $ 120.48
Cost of products (7)   108.98     91.11     100.09     95.28  
Refinery gross margin 10.64 30.55 17.72 25.20
Refinery operating expenses (8)   5.53     5.11     6.07     5.21  
Net operating margin $ 5.11   $ 25.44   $ 11.65   $ 19.99  
 

Refinery operating expenses per throughput barrel (9)

$ 5.44 $ 4.71 $ 5.77 $ 4.91
 
Feedstocks:
Sweet crude oil 52 % 50 % 52 % 49 %
Sour crude oil 22 % 23 % 20 % 22 %
Heavy sour crude oil 17 % 17 % 17 % 16 %
Black wax crude oil 2 % 2 % 3 % 2 %
Other feedstocks and blends   7 %   8 %   8 %   11 %
Total   100 %   100 %   100 %   100 %
 
   

Three Months Ended
September 30,

     

Nine Months Ended
September 30,

2013     2012 2013     2012
Consolidated
Sales of produced refined products:
Gasolines 49 % 51 % 49 % 50 %
Diesel fuels 35 % 29 % 34 % 31 %
Jet fuels 4 % 6 % 4 % 6 %
Fuel oil 2 % 3 % 2 % 2 %
Asphalt 3 % 3 % 3 % 3 %
Lubricants 2 % 3 % 2 % 3 %
LPG and other 5 % 5 % 6 % 5 %
Total 100 % 100 % 100 % 100 %
 
(1)   Crude charge represents the barrels per day of crude oil processed at our refineries.
(2) Refinery throughput represents the barrels per day of crude and other refinery feedstocks input to the crude units and other conversion units at our refineries.
(3) Refinery production represents the barrels per day of refined products yielded from processing crude and other refinery feedstocks through the crude units and other conversion units at our refineries.
(4) Includes refined products purchased for resale.
(5) Represents crude charge divided by total crude capacity (BPSD). Our consolidated crude capacity is 443,000 BPSD.
(6) Represents average per barrel amount for produced refined products sold, which is a non-GAAP measure. Reconciliations to amounts reported under GAAP are provided under "Reconciliations to Amounts Reported Under Generally Accepted Accounting Principles" below.
(7) Transportation, terminal and refinery storage costs billed from HEP are included in cost of products.
(8) Represents operating expenses of our refineries, exclusive of depreciation and amortization and pension settlement costs.
(9) Represents refinery operating expenses, exclusive of depreciation and amortization and pension settlement costs, divided by refinery throughput.
 

Reconciliations to Amounts Reported Under Generally Accepted Accounting Principles

Reconciliations of earnings before interest, taxes, depreciation and amortization ("EBITDA") to amounts reported under generally accepted accounting principles in financial statements.

Earnings before interest, taxes, depreciation and amortization, which we refer to as EBITDA, is calculated as net income attributable to HollyFrontier stockholders plus (i) interest expense, net of interest income, (ii) income tax provision, and (iii) depreciation and amortization. EBITDA is not a calculation provided for under accounting principles generally accepted in the United States; however, the amounts included in the EBITDA calculation are derived from amounts included in our consolidated financial statements. EBITDA should not be considered as an alternative to net income or operating income as an indication of our operating performance or as an alternative to operating cash flow as a measure of liquidity. EBITDA is not necessarily comparable to similarly titled measures of other companies. EBITDA is presented here because it is a widely used financial indicator used by investors and analysts to measure performance. EBITDA is also used by our management for internal analysis and as a basis for financial covenants.

Set forth below is our calculation of EBITDA.

   

Three Months Ended
September 30,

     

Nine Months Ended
September 30,

2013     2012 2013     2012
(In thousands)
 
Net income attributable to HollyFrontier stockholders $ 82,290 $ 600,373 $ 672,940 $ 1,335,568
Add income tax provision 48,528 349,622 386,665 775,746
Add interest expense (1) 13,954 21,103 77,177 81,360
Subtract interest income (1,482 ) (2,219 ) (3,791 ) (3,360 )
Add depreciation and amortization   82,127     65,112     224,381     178,162  
EBITDA $ 225,417   $ 1,033,991   $ 1,357,372   $ 2,367,476  
 

(1) Includes loss on early extinguishment of debt of $22.1 million for the nine months ended September 30, 2013.

Reconciliations of refinery operating information (non-GAAP performance measures) to amounts reported under generally accepted accounting principles in financial statements.

Refinery gross margin and net operating margin are non-GAAP performance measures that are used by our management and others to compare our refining performance to that of other companies in our industry. We believe these margin measures are helpful to investors in evaluating our refining performance on a relative and absolute basis.

Refinery gross margin per barrel is the difference between average net sales price and average cost of products per barrel of produced refined products. Net operating margin per barrel is the difference between refinery gross margin and refinery operating expenses per barrel of produced refined products. These two margins do not include the effect of depreciation and amortization. Each of these component performance measures can be reconciled directly to our consolidated statements of income.

Other companies in our industry may not calculate these performance measures in the same manner.

Refinery Gross and Net Operating Margins

Below are reconciliations to our consolidated statements of income for (i) net sales, cost of products and operating expenses, in each case averaged per produced barrel sold, and (ii) net operating margin and refinery gross margin. Due to rounding of reported numbers, some amounts may not calculate exactly.

Reconciliations of refined product sales from produced products sold to total sales and other revenues

   

Three Months Ended
September 30,

     

Nine Months Ended
September 30,

2013     2012 2013     2012
(Dollars in thousands, except per barrel amounts)
 
Consolidated
Average sales price per produced barrel sold $ 119.62 $ 121.66 $ 117.81 $ 120.48
Times sales of produced refined products (BPD) 441,380 433,930 408,670 426,150
Times number of days in period   92     92     273     274  
Refined product sales from produced products sold $ 4,857,405   $ 4,856,857   $ 13,143,698   $ 14,067,859  
 
Total refined product sales from produced products sold $ 4,857,405 $ 4,856,857 $ 13,143,698 $ 14,067,859
Add refined product sales from purchased products and rounding (1)   214,892     100,674     1,281,251     376,813  
Total refined product sales 5,072,297 4,957,531 14,424,949 14,444,672
Add direct sales of excess crude oil (2) 200,073 187,196 758,847 378,036
Add other refining segment revenue (3)   42,584     47,922     110,465     85,325  
Total refining segment revenue 5,314,954 5,192,649 15,294,261 14,908,033
Add HEP segment sales and other revenues 77,625 72,570 229,230 207,250
Add corporate and other revenues 257 352 1,054 653
Subtract consolidations and eliminations   (65,714 )   (60,773 )   (190,786 )   (172,719 )
Sales and other revenues $ 5,327,122   $ 5,204,798   $ 15,333,759   $ 14,943,217  
 

Reconciliation of average cost of products per produced barrel sold to total cost of products sold

   

Three Months Ended
September 30,

     

Nine Months Ended
September 30,

2013     2012 2013     2012
(Dollars in thousands, except per barrel amounts)
Consolidated
Average cost of products per produced barrel sold $ 108.98 $ 91.11 $ 100.09 $ 95.28
Times sales of produced refined products (BPD) 441,380 433,930 408,670 426,150
Times number of days in period   92     92     273     274  
Cost of products for produced products sold $ 4,425,347   $ 3,637,253   $ 11,166,732   $ 11,125,379  
 
Total cost of products for produced products sold $ 4,425,347 $ 3,637,253 $ 11,166,732 $ 11,125,379
Add refined product costs from purchased products sold and rounding (1)   213,114     100,078     1,253,932     377,476  
Total cost of refined products sold 4,638,461 3,737,331 12,420,664 11,502,855
Add crude oil cost of direct sales of excess crude oil (2) 198,885 182,252 744,806 367,795
Add other refining segment cost of products sold (4)   37,257     38,817     81,413     67,259  
Total refining segment cost of products sold 4,874,603 3,958,400 13,246,883 11,937,909
Subtract consolidations and eliminations   (64,613 )   (59,664 )   (187,550 )   (170,492 )
Costs of products sold (exclusive of depreciation and amortization) $ 4,809,990   $ 3,898,736   $ 13,059,333   $ 11,767,417  
 

Reconciliation of average refinery operating expenses per produced barrel sold to total operating expenses

   

Three Months Ended
September 30,

     

Nine Months Ended
September 30,

2013     2012 2013     2012
(Dollars in thousands, except per barrel amounts)
Consolidated
Average refinery operating expenses per produced barrel sold $ 5.53 $ 5.11 $ 6.07 $ 5.21
Times sales of produced refined products (BPD) 441,380 433,930 408,670 426,150
Times number of days in period   92     92     273     274  
Refinery operating expenses for produced products sold $ 224,556   $ 203,999   $ 677,211   $ 608,346  
 
Total refinery operating expenses for produced products sold $ 224,556 $ 203,999 $ 677,211 $ 608,346
Add refining segment pension settlement costs 23,773
Add other refining segment operating expenses and rounding (5)   10,206     8,858     29,213     28,127  
Total refining segment operating expenses 234,762 212,857 730,197 636,473
Add HEP segment operating expenses 21,687 21,323 69,726 61,724
Add corporate and other costs 225 33 87 33
Subtract consolidations and eliminations   (356 )   (354 )   (1,051

)

  (18 )
Operating expenses (exclusive of depreciation and amortization) $ 256,318   $ 233,859   $ 798,959   $ 698,212  
 

Reconciliation of net operating margin per barrel to refinery gross margin per barrel to total sales and other revenues

   

Three Months Ended
September 30,

     

Nine Months Ended
September 30,

2013     2012 2013     2012
(Dollars in thousands, except per barrel amounts)
Consolidated
Net operating margin per barrel $ 5.11 $ 25.44 $ 11.65 $ 19.99
Add average refinery operating expenses per produced barrel   5.53     5.11     6.07     5.21  
Refinery gross margin per barrel 10.64 30.55 17.72 25.20
Add average cost of products per produced barrel sold   108.98     91.11     100.09     95.28  
Average sales price per produced barrel sold $ 119.62 $ 121.66 $ 117.81 $ 120.48
Times sales of produced refined products (BPD) 441,380 433,930 408,670 426,150
Times number of days in period   92     92     273     274  
Refined product sales from produced products sold $ 4,857,405   $ 4,856,857   $ 13,143,698   $ 14,067,859  
 
Total refined product sales from produced products sold $ 4,857,405 $ 4,856,857 $ 13,143,698 $ 14,067,859
Add refined product sales from purchased products and rounding (1)   214,892     100,674     1,281,251     376,813  
Total refined product sales 5,072,297 4,957,531 14,424,949 14,444,672
Add direct sales of excess crude oil (2) 200,073 187,196 758,847 378,036
Add other refining segment revenue (3)   42,584     47,922     110,465     85,325  
Total refining segment revenue 5,314,954 5,192,649 15,294,261 14,908,033
Add HEP segment sales and other revenues 77,625 72,570 229,230 207,250
Add corporate and other revenues 257 352 1,054 653
Subtract consolidations and eliminations   (65,714 )   (60,773 )   (190,786 )   (172,719 )
Sales and other revenues $ 5,327,122   $ 5,204,798   $ 15,333,759   $ 14,943,217  
 

(1)

 

We purchase finished products when opportunities arise that provide a profit on the sale of such products, or to meet delivery commitments.

(2)

We purchase crude oil that at times exceeds the supply needs of our refineries. Quantities in excess of our needs are sold at market prices to purchasers of crude oil that are recorded on a gross basis with the sales price recorded as revenues and the corresponding acquisition cost as inventory and then upon sale as cost of products sold. Additionally, at times we enter into buy/sell exchanges of crude oil with certain parties to facilitate the delivery of quantities to certain locations that are netted at carryover cost.

(3)

Other refining segment revenue includes the incremental revenues associated with NK Asphalt and miscellaneous revenue.

(4)

Other refining segment cost of products sold includes the incremental cost of products for NK Asphalt and miscellaneous costs.

(5)

Other refining segment operating expenses include the marketing costs associated with our refining segment and the operating expenses of NK Asphalt.

HollyFrontier Corporation
Douglas S. Aron, 214-954-6510
Executive Vice President and
Chief Financial Officer
or
Julia Heidenreich, 214-954-6510
Vice President Investor Relations

Source: HollyFrontier Corporation

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