Document

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 

FORM 8-K
CURRENT REPORT

Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): February 20, 2019 (February 20, 2019)

 
HOLLYFRONTIER CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware
(State or other
jurisdiction of incorporation)
001-03876
(Commission File Number)
75-1056913
(I.R.S. Employer
Identification Number)

2828 N. Harwood, Suite 1300
Dallas, TX
(Address of principal
executive offices)
 

75201
(Zip code)

Registrant’s telephone number, including area code: (214) 871-3555

Not applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[  ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[  ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[  ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[  ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company        ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.     ¨
  



Item 2.02. Results of Operations and Financial Condition.

On February 20, 2019, HollyFrontier Corporation (the “Company”) issued a press release announcing the Company’s fourth quarter and full year 2018 results. A copy of the Company’s press release is attached hereto as Exhibit 99.1 and incorporated herein in its entirety.

The information contained in, or incorporated into, this Item 2.02 is being furnished and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any registration statement or other filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference to such filing.


Item 9.01 Financial Statements and Exhibits.

(d)    Exhibits.
99.1

* Furnished herewith pursuant to Item 2.02.







SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
HOLLYFRONTIER CORPORATION

By:    /s/ Richard L. Voliva III            
Richard L. Voliva III
Executive Vice President and
Chief Financial Officer

Date: February 20, 2019


Exhibit


Press Release
February 20, 2019
http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12721662&doc=3

HollyFrontier Corporation Reports 2018 Fourth Quarter and Full Year Results

Reported net income attributable to HollyFrontier stockholders of $1.1 billion or $6.19 per diluted share and adjusted net income of $1.14 billion or $6.44 per diluted share, for the year

Reported EBITDA of $2.0 billion and adjusted EBITDA of $2.1 billion, for the year

Returned $597.0 million to shareholders through dividends and share repurchases in the year

Acquisitions of Red Giant Oil and Sonneborn, further strengthening our finished lubricants and specialty products business

Dallas, Texas, February 20, 2019‑‑ HollyFrontier Corporation (NYSE:HFC) (“HollyFrontier” or the “Company”) today reported fourth quarter net income attributable to HollyFrontier stockholders of $141.9 million or $0.81 per diluted share for the quarter ended December 31, 2018, compared to $521.1 million or $2.92 per diluted share for the quarter ended December 31, 2017.

The fourth quarter results include a lower of cost or market inventory valuation adjustment that decreased pre-tax earnings by $329.2 million. Excluding this item, net income for the fourth quarter was $393.9 million ($2.25 per diluted share) compared to $124.6 million ($0.70 per diluted share) for the fourth quarter of 2017, which excludes certain items that collectively decreased earnings by $396.5 million for the three months ended December 31, 2017. A reconciliation of actual to adjusted earnings is presented in the accompanying reconciliations to amounts reported under Generally Accepted Accounting Principles ("GAAP").

HollyFrontier’s President & CEO, George Damiris, commented, “HollyFrontier achieved strong financial results in 2018 as we were able to capture the favorable crude discounts and healthy product cracks across our refining system. We returned approximately $597 million in cash to shareholders in the form of regular dividends and share repurchases, while continuing to invest in our assets. Looking to 2019, despite tightening crude differentials, we are optimistic that strength in the diesel markets will continue and we will see a seasonal rebound in gasoline markets. On February 1, 2019, we closed on our previously announced acquisition of Sonneborn. With the addition of Sonneborn, we continue to focus on advancing our downward integration strategy into the high-margin finished lubricants and specialty products market.”

The Refining and Marketing segment reported adjusted EBITDA of $583.4 million compared to $233.1 million for the fourth quarter of 2017. This increase was primarily driven by lower laid-in crude costs which resulted in a consolidated refinery gross margin of $22.17 per produced barrel, a 77% increase compared to $12.54 for the fourth quarter of 2017. Crude oil charge averaged 405,580 barrels per day (“BPD”) for the fourth quarter compared to 461,110 BPD for the fourth quarter 2017. The lower crude charge was due to the planned turnaround at our El Dorado refinery.

Our Lubricants and Specialty Products segment reported EBITDA of $(3.9) million, driven by negative Rack Back EBITDA. Rack Forward EBITDA was $48.5 million for the quarter and $213.4 million for the year ended December 31, 2018. Rack Back EBITDA was negatively impacted by continued weakness in the base oil markets, coupled with a turnaround at the Mississauga plant in the fourth quarter.


1



Holly Energy Partners, L.P. ("HEP") reported EBITDA of $89.9 million for the fourth quarter 2018 compared to $124.6 million in the fourth quarter of 2017, which included a remeasurement gain related to the acquisition of the remaining interest in the SLC and Frontier Pipelines. HEP EBITDA was negatively impacted by lower UNEV volumes and unplanned maintenance on a refinery process unit at Woods Cross in the fourth quarter.

For the fourth quarter of 2018, net cash provided by operations totaled $424.5 million. During the period, we declared and paid a dividend of $0.33 per share to shareholders totaling $57.6 million and spent $185.2 million in stock repurchases. At December 31, 2018, our cash and cash equivalents totaled $1,154.8 million, a $79.1 million increase over cash and cash equivalents of $1,075.7 million at September 30, 2018. Additionally, our consolidated long-term debt was $2,411.5 million. Our debt, exclusive of HEP debt, which is nonrecourse to HollyFrontier, was $992.6 million at December 31, 2018.

The Company has scheduled a webcast conference call for today, February 20, 2019, at 8:30 AM Eastern Time to discuss fourth quarter financial results. This webcast may be accessed at: https://78449.themediaframe.com/dataconf/productusers/hfc/mediaframe/27948/indexl.html. An audio archive of this webcast will be available using the above noted link through March 6, 2019.

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 owns and operates refineries located in Kansas, Oklahoma, New Mexico, Wyoming and Utah and markets its refined products principally in the Southwest U.S., the Rocky Mountains extending into the Pacific Northwest and in other neighboring Plains states. In addition, HollyFrontier produces base oils and other specialized lubricants in the U.S., Canada and Netherlands, and exports products to more than 80 countries.  HollyFrontier also owns a 57% limited partner interest and a non-economic general partner interest in Holly Energy Partners, L.P., a master limited partnership that provides petroleum product and crude oil transportation, terminalling, storage and throughput services to the petroleum industry, including HollyFrontier Corporation subsidiaries.

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 or lubricant product operations or pipeline and terminal operations on acceptable terms and to integrate any future acquired operations, the possibility of terrorist and cyber 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.


2



RESULTS OF OPERATIONS

Financial Data (all information in this release is unaudited)
 
Three Months Ended
December 31,
 
Change from 2017
 
2018
 
2017
 
Change
 
Percent
 
(In thousands, except per share data)
Sales and other revenues
$
4,344,204

 
$
3,992,705

 
$
351,499

 
9
 %
Operating costs and expenses:
 
 
 
 
 
 
 
Cost of products sold:
 
 
 
 
 
 
 
Cost of products sold (exclusive of lower of cost or market inventory valuation adjustment)
3,245,507

 
3,184,690

 
60,817

 
2

Lower of cost or market inventory valuation adjustment
329,232

 
(93,362
)
 
422,594

 
(453
)
 
3,574,739

 
3,091,328

 
483,411

 
16

Operating expenses
352,139

 
350,405

 
1,734

 

Selling, general and administrative expenses
85,955

 
80,411

 
5,544

 
7

Depreciation and amortization
113,719

 
105,731

 
7,988

 
8

Total operating costs and expenses
4,126,552

 
3,627,875

 
498,677

 
14

Income from operations
217,652

 
364,830

 
(147,178
)
 
(40
)
 
 
 
 
 
 
 
 
Other income (expense):
 
 
 
 
 
 
 
Earnings of equity method investments
1,698

 
1,545

 
153

 
10

Interest income
6,232

 
1,667

 
4,565

 
274

Interest expense
(33,917
)
 
(32,063
)
 
(1,854
)
 
6

Gain on foreign currency transactions
681

 
(2,596
)
 
3,277

 
(126
)
Remeasurement gain on HEP pipeline interest acquisitions

 
36,254

 
(36,254
)
 
(100
)
Other, net
(528
)
 
1,625

 
(2,153
)
 
(132
)
 
(25,834
)
 
6,432

 
(32,266
)
 
(502
)
Income before income taxes
191,818

 
371,262

 
(179,444
)
 
(48
)
Income tax expense (benefit)
28,501

 
(185,972
)
 
214,473

 
(115
)
Net income
163,317

 
557,234

 
(393,917
)
 
(71
)
Less net income attributable to noncontrolling interest
21,421

 
36,152

 
(14,731
)
 
(41
)
Net income attributable to HollyFrontier stockholders
$
141,896

 
$
521,082

 
$
(379,186
)
 
(73
)%
 
 
 
 
 
 
 
 
Earnings per share attributable to HollyFrontier stockholders:
 
 
 
 
 
 
 
Basic
$
0.82

 
$
2.94

 
$
(2.12
)
 
(72
)%
Diluted
$
0.81

 
$
2.92

 
$
(2.11
)
 
(72
)%
Cash dividends declared per common share
$
0.33

 
$
0.33

 
$

 
 %
Average number of common shares outstanding:
 
 
 
 
 
 
 
Basic
172,485

 
176,265

 
(3,780
)
 
(2
)%
Diluted
174,259

 
177,457

 
(3,198
)
 
(2
)%
EBITDA
$
311,801

 
$
471,237

 
$
(159,436
)
 
(34
)%
Adjusted EBITDA
$
641,033

 
$
333,921

 
$
307,112

 
92
 %



3



 
Years Ended
December 31,
 
Change from 2017
 
2018
 
2017
 
Change
 
Percent
 
(In thousands, except per share data)
Sales and other revenues
$
17,714,666

 
$
14,251,299

 
$
3,463,367

 
24
 %
Operating costs and expenses:
 
 
 
 
 
 
 
Cost of products sold:
 
 
 
 
 
 
 
Cost of products sold (exclusive of lower of cost or market inventory valuation adjustment)

13,940,782

 
11,467,873

 
2,472,909

 
22

Lower of cost or market inventory valuation adjustment

136,305

 
(108,685
)
 
244,990

 
(225
)
 
14,077,087

 
11,359,188

 
2,717,899

 
24

Operating expenses
1,285,838

 
1,296,669

 
(10,831
)
 
(1
)
Selling, general and administrative expenses
290,424

 
265,721

 
24,703

 
9

Depreciation and amortization
437,324

 
409,937

 
27,387

 
7

Asset impairment

 
19,247

 
(19,247
)
 
(100
)
Total operating costs and expenses
16,090,673

 
13,350,762

 
2,739,911

 
21

Income from operations
1,623,993

 
900,537

 
723,456

 
80

 
 
 
 
 
 
 
 
Other income (expense):
 
 
 
 
 
 
 
Earnings of equity method investments
5,825

 
12,510

 
(6,685
)
 
(53
)
Interest income
16,892

 
3,736

 
13,156

 
352

Interest expense
(131,363
)
 
(117,597
)
 
(13,766
)
 
12

Loss on early extinguishment of debt

 
(12,225
)
 
12,225

 
(100
)
Gain on foreign currency transactions
6,197

 
16,921

 
(10,724
)
 
(63
)
Gain on foreign currency swap contracts

 
24,545

 
(24,545
)
 
(100
)
Remeasurement gain on HEP pipeline interest acquisitions

 
36,254

 
(36,254
)
 
(100
)
Other, net
2,923

 
4,182

 
(1,259
)
 
(30
)
 
(99,526
)
 
(31,674
)
 
(67,852
)
 
214

Income before income taxes
1,524,467

 
868,863

 
655,604

 
75

Income tax expense (benefit)
347,243

 
(12,379
)
 
359,622

 
(2,905
)
Net income
1,177,224

 
881,242

 
295,982

 
34

Less net income attributable to noncontrolling interest
79,264

 
75,847

 
3,417

 
5

Net income attributable to HollyFrontier stockholders
$
1,097,960

 
$
805,395

 
$
292,565

 
36
 %
 
 
 
 
 
 
 
 
Earnings per share attributable to HollyFrontier stockholders:
 
 
 
 
 
 
 
Basic
$
6.25

 
$
4.54

 
$
1.71

 
38
 %
Diluted
$
6.19

 
$
4.52

 
$
1.67

 
37
 %
Cash dividends declared per common share
$
1.32

 
$
1.32

 
$

 
 %
Average number of common shares outstanding:
 
 
 
 
 
 
 
Basic
175,009

 
176,174

 
(1,165
)
 
(1
)%
Diluted
176,661

 
177,196

 
(535
)
 
 %
EBITDA
$
1,996,998

 
$
1,316,814

 
$
680,184

 
52
 %
Adjusted EBITDA
$
2,054,653

 
$
1,179,479

 
$
875,174

 
74
 %


4




Balance Sheet Data
 
Years Ended December 31,
 
2018
 
2017
 
(In thousands)
Cash and cash equivalents
$
1,154,752

 
$
630,757

Working capital
$
2,128,224

 
$
1,640,118

Total assets
$
10,994,601

 
$
10,692,154

Long-term debt
$
2,411,540

 
$
2,498,993

Total equity
$
6,459,059

 
$
5,896,940



Segment Information

Our operations are organized into three reportable segments, Refining, Lubricants and Specialty Products and HEP. Our operations that are not included in the Refining, Lubricants and Specialty Products and HEP segments are included in Corporate and Other. Intersegment transactions are eliminated in our consolidated financial statements and are included in Eliminations. Corporate and Other and Eliminations are aggregated and presented under Corporate, Other and Eliminations column. The Refining segment includes the operations of our El Dorado, Tulsa, Navajo, Cheyenne and Woods Cross refineries and HFC Asphalt (aggregated as a reportable segment). Refining activities involve the purchase and refining of crude oil and wholesale and branded marketing of refined products, such as gasoline, diesel fuel and jet fuel. These petroleum products are primarily marketed in the Mid-Continent, Southwest and Rocky Mountain regions of the United States. HFC Asphalt operates various terminals in Arizona, New Mexico and Oklahoma.

The Lubricants and Specialty Products segment involves PCLI's production operations, located in Mississauga, Ontario, that
include lubricant products such as base oils, white oils, specialty products and finished lubricants and the operations of our Petro-Canada Lubricants business that includes the marketing of products to both retail and wholesale outlets through a global sales network with locations in Canada, the United States, Europe and China. Additionally, the Lubricants and Specialty Products segment includes specialty lubricant products produced at our Tulsa refineries that are marketed throughout North America and are distributed in Central and South America and the operations of Red Giant Oil Company LLC, one of the largest suppliers of locomotive engine oil in North America.

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, terminals, tankage, loading rack facilities and refinery process units in the Mid-Continent, Southwest and Rocky Mountain regions of the United States. The HEP segment also includes a 75% interest in UNEV Pipeline, LLC (an HEP consolidated subsidiary), and a 50% ownership interest in each of Osage Pipeline Company, LLC and Cheyenne Pipeline LLC. 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. Due to certain basis differences, our reported amounts for the HEP segment may not agree to amounts reported in HEP's periodic public filings.




5



 
 
Refining
 
Lubricants and Specialty Products
 
HEP
 
Corporate, Other and Eliminations
 
Consolidated Total
 
 
(In thousands)
Three Months Ended December 31, 2018
 
 
 
 
 
 
 
 
Sales and other revenues:
 
 
 
 
 
 
 
 
 
 
Revenues from external customers
 
$
3,890,507

 
$
422,975

 
$
30,613

 
$
109

 
$
4,344,204

Intersegment revenues
 
$
85,721

 
$
1,313

 
$
102,179

 
$
(189,213
)
 
$

 
 
$
3,976,228

 
$
424,288

 
$
132,792

 
$
(189,104
)
 
$
4,344,204

Cost of products sold (exclusive of lower of cost or market inventory adjustment)
 
$
3,071,340

 
$
341,126

 
$

 
$
(166,959
)
 
$
3,245,507

Lower of cost or market inventory valuation adjustment
 
$
329,232

 
$

 
$

 
$

 
$
329,232

Operating expenses
 
$
290,794

 
$
42,719

 
$
39,699

 
$
(21,073
)
 
$
352,139

Selling, general and administrative expenses
 
$
30,675

 
$
44,325

 
$
2,748

 
$
8,207

 
$
85,955

Depreciation and amortization
 
$
73,482

 
$
13,232

 
$
24,375

 
$
2,630

 
$
113,719

Income (loss) from operations
 
$
180,705

 
$
(17,114
)
 
$
65,970

 
$
(11,909
)
 
$
217,652

Earnings of equity method investments
 
$

 
$

 
$
1,698

 
$

 
$
1,698

Capital expenditures
 
$
70,741

 
$
14,309

 
$
13,030

 
$
3,871

 
$
101,951

 
 
 
 
 
 
 
 
 
 
 
Three Months Ended December 31, 2017
 
 
 
 
 
 
 
 
Sales and other revenues:
 
 
 
 
 
 
 
 
 
 
Revenues from external customers
 
$
3,546,444

 
$
415,693

 
$
29,399

 
$
1,169

 
$
3,992,705

Intersegment revenues
 
$
70,262

 
$

 
$
99,822

 
$
(170,084
)
 
$

 
 
$
3,616,706

 
$
415,693

 
$
129,221

 
$
(168,915
)
 
$
3,992,705

Cost of products sold (exclusive of lower of cost or market inventory adjustment)
 
$
3,059,606

 
$
275,003

 
$

 
$
(149,919
)
 
$
3,184,690

Lower of cost or market inventory valuation adjustment
 
$
(92,114
)
 
$
(1,248
)
 
$

 
$

 
$
(93,362
)
Operating expenses
 
$
265,365

 
$
67,666

 
$
35,084

 
$
(17,710
)
 
$
350,405

Selling, general and administrative expenses
 
$
31,629

 
$
33,783

 
$
5,454

 
$
9,545

 
$
80,411

Depreciation and amortization
 
$
70,500

 
$
11,324

 
$
21,145

 
$
2,762

 
$
105,731

Income (loss) from operations
 
$
281,720

 
$
29,165

 
$
67,538

 
$
(13,593
)
 
$
364,830

Earnings of equity method investments
 
$

 
$

 
$
1,545

 
$

 
$
1,545

Capital expenditures
 
$
46,295

 
$
10,691

 
$
14,135

 
$
8,021

 
$
79,142




6



 
 
Refining
 
Lubricants and Specialty Products
 
HEP
 
Corporate, Other and Eliminations
 
Consolidated Total
 
 
(In thousands)
Year Ended December 31, 2018
 
 
 
 
 
 
 
 
Sales and other revenues:
 
 
 
 
 
 
 
 
 
 
Revenues from external customers
 
$
15,806,304

 
$
1,799,506

 
$
108,412

 
$
444

 
$
17,714,666

Intersegment revenues
 
$
370,259

 
$
13,197

 
$
397,808

 
$
(781,264
)
 
$

 
 
$
16,176,563

 
$
1,812,703

 
$
506,220

 
$
(780,820
)
 
$
17,714,666

Cost of products sold (exclusive of lower of cost or market inventory adjustment)
 
$
13,250,849

 
$
1,381,540

 
$

 
$
(691,607
)
 
$
13,940,782

Lower of cost or market inventory valuation adjustment
 
$
136,305

 
$

 
$

 
$

 
$
136,305

Operating expenses
 
$
1,055,209

 
$
167,820

 
$
146,430

 
$
(83,621
)
 
$
1,285,838

Selling, general and administrative expenses
 
$
113,641

 
$
143,750

 
$
11,041

 
$
21,992

 
$
290,424

Depreciation and amortization
 
$
284,439

 
$
43,255

 
$
98,492

 
$
11,138

 
$
437,324

Income (loss) from operations
 
$
1,336,120

 
$
76,338

 
$
250,257

 
$
(38,722
)
 
$
1,623,993

Earnings of equity method investments
 
$

 
$

 
$
5,825

 
$

 
$
5,825

Capital expenditures
 
$
202,791

 
$
37,448

 
$
54,141

 
$
16,649

 
$
311,029

 
 
 
 
 
 
 
 
 
 
 
Year Ended December 31, 2017
 
 
 
 
 
 
 
 
Sales and other revenues:
 
 
 
 
 
 
 
 
 
 
Revenues from external customers
 
$
12,579,672

 
$
1,594,036

 
$
77,225

 
$
366

 
$
14,251,299

Intersegment revenues
 
$
338,390

 
$

 
$
377,137

 
$
(715,527
)
 
$

 
 
$
12,918,062

 
$
1,594,036

 
$
454,362

 
$
(715,161
)
 
$
14,251,299

Cost of products sold (exclusive of lower of cost or market inventory adjustment)
 
$
11,009,419

 
$
1,093,984

 
$

 
$
(635,530
)
 
$
11,467,873

Lower of cost or market inventory valuation adjustment
 
$
(107,479
)
 
$
(1,206
)
 
$

 
$

 
$
(108,685
)
Operating expenses
 
$
1,008,859

 
$
222,461

 
$
137,856

 
$
(72,507
)
 
$
1,296,669

Selling, general and administrative expenses
 
$
103,246

 
$
105,666

 
$
14,336

 
$
42,473

 
$
265,721

Depreciation and amortization
 
$
289,434

 
$
31,894

 
$
77,660

 
$
10,949

 
$
409,937

Asset impairment
 
$
19,247

 
$

 
$

 
$

 
$
19,247

Income (loss) from operations
 
$
595,336

 
$
141,237

 
$
224,510

 
$
(60,546
)
 
$
900,537

Earnings of equity method investments
 
$

 
$

 
$
12,510

 
$

 
$
12,510

Capital expenditures
 
$
176,533

 
$
31,464

 
$
44,810

 
$
19,452

 
$
272,259

December 31, 2018
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
7,236

 
$
80,931

 
$
3,045

 
$
1,063,540

 
$
1,154,752

Total assets
 
$
6,465,155

 
$
1,506,209

 
$
2,142,027

 
$
881,210

 
$
10,994,601

Long-term debt
 
$

 
$

 
$
1,418,900

 
$
992,640

 
$
2,411,540

 
 
 
 
 
 
 
 
 
 
 
December 31, 2017
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
7,488

 
$
41,756

 
$
7,776

 
$
573,737

 
$
630,757

Total assets
 
$
6,474,666

 
$
1,610,472

 
$
2,191,984

 
$
415,032

 
$
10,692,154

Long-term debt
 
$

 
$

 
$
1,507,308

 
$
991,685

 
$
2,498,993



7



Refining Segment Operating Data

The following tables set forth information, including non-GAAP performance measures about our refinery operations. Refinery gross and net operating margins do not include the non-cash effects of lower of cost or market inventory valuation adjustments and depreciation and amortization. Reconciliations to amounts reported under GAAP are provided below.
 
 
Three Months Ended
December 31,
 
Years Ended
December 31,
 
 
2018
 
2017
 
2018
 
2017
Mid-Continent Region (El Dorado and Tulsa Refineries)
 
 
 
 
 
 
 
 
Crude charge (BPD) (1)
 
216,870

 
270,180

 
249,240

 
261,380

Refinery throughput (BPD) (2)
 
236,240

 
289,050

 
264,730

 
277,940

Sales of produced refined products (BPD) (3)
 
243,680

 
277,560

 
255,800

 
260,800

Refinery utilization (4)
 
83.4
%
 
103.9
%
 
95.9
%
 
100.5
%
 
 
 
 
 
 
 
 
 
Average per produced barrel (5)
 
 
 
 
 
 
 
 
Refinery gross margin
 
$
19.01

 
$
11.42

 
$
14.44

 
$
9.91

Refinery operating expenses (6)
 
6.55

 
5.09

 
5.51

 
5.15

Net operating margin
 
$
12.46

 
$
6.33

 
$
8.93

 
$
4.76

 
 
 
 
 
 
 
 
 
Refinery operating expenses per throughput barrel (7)
 
$
6.76

 
$
4.89

 
$
5.32

 
$
4.83

 
 
 
 
 
 
 
 
 
Feedstocks:
 
 
 
 
 
 
 
 
Sweet crude oil
 
56
%
 
59
%
 
54
%
 
61
%
Sour crude oil
 
25
%
 
19
%
 
24
%
 
17
%
Heavy sour crude oil
 
11
%
 
16
%
 
16
%
 
16
%
Other feedstocks and blends
 
8
%
 
6
%
 
6
%
 
6
%
Total
 
100
%
 
100
%
 
100
%
 
100
%
 
 
 
 
 
 
 
 
 
Sales of produced refined products:
 
 
 
 
 
 
 
 
Gasolines
 
52
%
 
53
%
 
51
%
 
50
%
Diesel fuels
 
30
%
 
32
%
 
33
%
 
33
%
Jet fuels
 
7
%
 
7
%
 
6
%
 
7
%
Fuel oil
 
1
%
 
1
%
 
1
%
 
1
%
Asphalt
 
3
%
 
2
%
 
3
%
 
3
%
Base oils
 
4
%
 
3
%
 
4
%
 
4
%
LPG and other
 
3
%
 
2
%
 
2
%
 
2
%
Total
 
100
%
 
100
%
 
100
%
 
100
%






8



 
 
Three Months Ended
December 31,
 
Years Ended
December 31,
 
 
2018
 
2017
 
2018
 
2017
Southwest Region (Navajo Refinery)
 
 
 
 
 
 
 
 
Crude charge (BPD) (1)
 
110,160

 
110,980

 
109,440

 
100,040

Refinery throughput (BPD) (2)
 
119,640

 
121,400

 
118,630

 
109,280

Sales of produced refined products (BPD) (3)
 
119,390

 
122,710

 
120,520

 
111,630

Refinery utilization (4)
 
110.2
%
 
111.0
%
 
109.4
%
 
100.0
%
 
 
 
 
 
 
 
 
 
Average per produced barrel (5)
 
 
 
 
 
 
 
 
Refinery gross margin
 
$
22.68

 
$
12.91

 
$
19.05

 
$
12.40

Refinery operating expenses (6)
 
5.37

 
4.71

 
4.81

 
5.20

Net operating margin
 
$
17.31

 
$
8.20

 
$
14.24

 
$
7.20

 
 
 
 
 
 
 
 
 
Refinery operating expenses per throughput barrel (7)
 
$
5.36

 
$
4.76

 
$
4.89

 
$
5.31

 
 
 
 
 
 
 
 
 
Feedstocks:
 
 
 
 
 
 
 
 
Sweet crude oil
 
14
%
 
31
%
 
27
%
 
25
%
Sour crude oil
 
78
%
 
61
%
 
65
%
 
66
%
Other feedstocks and blends
 
8
%
 
8
%
 
8
%
 
9
%
Total
 
100
%
 
100
%
 
100
%
 
100
%
 
 
 
 
 
 
 
 
 
Sales of produced refined products:
 
 
 
 
 
 
 
 
Gasolines
 
51
%
 
51
%
 
50
%
 
51
%
Diesel fuels
 
39
%
 
40
%
 
40
%
 
39
%
Fuel oil
 
3
%
 
3
%
 
3
%
 
3
%
Asphalt
 
4
%
 
3
%
 
4
%
 
4
%
LPG and other
 
3
%
 
3
%
 
3
%
 
3
%
Total
 
100
%
 
100
%
 
100
%
 
100
%
Rocky Mountain Region (Cheyenne and Woods Cross Refineries)
 
 
 
 
 
 
Crude charge (BPD) (1)
 
78,550

 
79,950

 
72,890

 
77,380

Refinery throughput (BPD) (2)
 
84,670

 
87,000

 
79,980

 
84,790

Sales of produced refined products (BPD) (3)
 
80,600

 
82,590

 
76,300

 
79,840

Refinery utilization (4)
 
81.0
%
 
82.4
%
 
75.1
%
 
79.8
%
 
 
 
 
 
 
 
 
 
Average per produced barrel (5)
 
 
 
 
 
 
 
 
Refinery gross margin
 
$
30.96

 
$
15.77

 
$
26.55

 
$
15.78

Refinery operating expenses (6)
 
11.45

 
10.75

 
11.83

 
10.46

Net operating margin
 
$
19.51

 
$
5.02

 
$
14.72

 
$
5.32

 
 
 
 
 
 
 
 
 
Refinery operating expenses per throughput barrel (7)
 
$
10.90

 
$
10.20

 
$
11.28

 
$
9.85

 
 
 
 
 
 
 
 
 
Feedstocks:
 
 
 
 
 
 
 
 
Sweet crude oil
 
34
%
 
35
%
 
28
%
 
34
%
Heavy sour crude oil
 
38
%
 
34
%
 
42
%
 
35
%
Black wax crude oil
 
21
%
 
23
%
 
21
%
 
22
%
Other feedstocks and blends
 
7
%
 
8
%
 
9
%
 
9
%
Total
 
100
%
 
100
%
 
100
%
 
100
%
 
 
 
 
 
 
 
 
 

9



 
 
Three Months Ended
December 31,
 
Years Ended
December 31,
 
 
2018
 
2017
 
2018
 
2017
Sales of produced refined products:
 
 
 
 
 
 
 
 
Gasolines
 
52
%
 
59
%
 
55
%
 
58
%
Diesel fuels
 
32
%
 
30
%
 
33
%
 
32
%
Fuel oil
 
4
%
 
3
%
 
3
%
 
3
%
Asphalt
 
6
%
 
4
%
 
5
%
 
4
%
LPG and other
 
6
%
 
4
%
 
4
%
 
3
%
Total
 
100
%
 
100
%
 
100
%
 
100
%
Consolidated
 
 
 
 
 
 
 
 
Crude charge (BPD) (1)
 
405,580

 
461,110

 
431,570

 
438,800

Refinery throughput (BPD) (2)
 
440,550

 
497,450

 
463,340

 
472,010

Sales of produced refined products (BPD) (3)
 
443,670

 
482,860

 
452,630

 
452,270

Refinery utilization (4)
 
88.7
%
 
100.9
%
 
94.4
%
 
96.0
%
 
 
 
 
 
 
 
 
 
Average per produced barrel (5)
 
 
 
 
 
 
 
 
Refinery gross margin
 
$
22.17

 
$
12.54

 
$
17.71

 
$
11.56

Refinery operating expenses (6)
 
7.12

 
5.97

 
6.39

 
6.11

Net operating margin
 
$
15.05

 
$
6.57

 
$
11.32

 
$
5.45

 
 
 
 
 
 
 
 
 
Refinery operating expenses per throughput barrel (7)
 
$
7.17

 
$
5.80

 
$
6.24

 
$
5.86

 
 
 
 
 
 
 
 
 
Feedstocks:
 
 
 
 
 
 
 
 
Sweet crude oil
 
40
%
 
48
%
 
43
%
 
48
%
Sour crude oil
 
35
%
 
26
%
 
30
%
 
25
%
Heavy sour crude oil
 
13
%
 
15
%
 
17
%
 
16
%
Black wax crude oil
 
4
%
 
4
%
 
4
%
 
4
%
Other feedstocks and blends
 
8
%
 
7
%
 
6
%
 
7
%
Total
 
100
%
 
100
%
 
100
%
 
100
%
Consolidated
 
 
 
 
 
 
 
 
Sales of produced refined products:
 
 
 
 
 
 
 
 
Gasolines
 
52
%
 
53
%
 
52
%
 
52
%
Diesel fuels
 
33
%
 
34
%
 
34
%
 
34
%
Jet fuels
 
4
%
 
4
%
 
3
%
 
4
%
Fuel oil
 
2
%
 
2
%
 
2
%
 
2
%
Asphalt
 
4
%
 
3
%
 
4
%
 
4
%
Base oils
 
2
%
 
2
%
 
2
%
 
2
%
LPG and other
 
3
%
 
2
%
 
3
%
 
2
%
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)
Represents barrels sold of refined products produced at our refineries (including HFC Asphalt) and does not include volumes of refined products purchased for resale or volumes of excess crude oil sold.
(4)
Represents crude charge divided by total crude capacity ("BPSD"). Our consolidated crude capacity is 457,000 BPSD.
(5)
Represents average amount per produced barrel sold, which is a non-GAAP measure. Reconciliations to amounts reported under GAAP are provided below.
(6)
Represents total refining segment operating expenses, exclusive of depreciation and amortization, divided by sales volumes of
refined products produced at our refineries.
(7) Represents total refining segment operating expenses, exclusive of depreciation and amortization, divided by refinery throughput.




10



Lubricants and Specialty Products Segment Operating Data

We acquired our Petro-Canada Lubricants business on February 1, 2017. For the twelve months ended December 31, 2017, our lubricants and specialty product operating results reflect the operations of our Petro-Canada Lubricants business for the period February 1, 2017 through December 31, 2017.

The following table sets forth information about our lubricants and specialty products operations.
 
 
Three Months Ended
December 31,
 
Years Ended
December 31,
 
 
2018
 
2017
 
2018
 
2017
Lubricants and Specialty Products
 
 
 
 
 
 
 
 
Throughput (BPD)
 
16,790

 
20,990

 
19,590

 
21,710

Sales of produced products (BPD)
 
27,550

 
29,670

 
30,510

 
32,910

 
 
 
 
 
 
 
 
 
Sales of produced products:
 
 
 
 
 
 
 
 
Finished products
 
51
%
 
46
%
 
48
%
 
45
%
Base oils
 
30
%
 
28
%
 
31
%
 
31
%
Other
 
19
%
 
26
%
 
21
%
 
24
%
Total
 
100
%
 
100
%
 
100
%
 
100
%

Our Lubricants and Specialty Products segment includes base oil production activities, by-product sales to third parties and intra-segment base oil sales to rack forward, referred to as “Rack Back.” "Rack Forward" includes the purchase of base oils and the blending, packaging, marketing and distribution and sales of finished lubricants and specialty products to third parties. Supplemental financial data attributable to our Lubricants and Specialty Products segment is presented below:

 
 
Rack Back (1)
 
Rack Forward (2)
 
Eliminations (3)
 
Total Lubricants and Specialty Products
 
 
(In thousands)
Three Months Ended December 31, 2018
 
 
 
 
 
 
 
 
Sales and other revenues
 
$
136,592

 
$
401,170

 
$
(113,474
)
 
$
424,288

Cost of products sold (exclusive of lower of cost or market inventory valuation adjustment)
 
$
150,617

 
$
303,983

 
$
(113,474
)
 
$
341,126

Operating expenses
 
$
28,426

 
$
14,293

 
$

 
$
42,719

Selling, general and administrative expenses
 
$
9,940

 
$
34,385

 
$

 
$
44,325

Depreciation and amortization
 
$
8,969

 
$
4,263

 
$

 
$
13,232

Income (loss) from operations
 
$
(61,360
)
 
$
44,246

 
$

 
$
(17,114
)
EBITDA
 
$
(52,391
)
 
$
48,509

 
$

 
$
(3,882
)
 
 
 
 
 
 
 
 
 
Three Months Ended December 31, 2017
 
 
 
 
 
 
 
 
Sales and other revenues
 
$
186,478

 
$
361,681

 
$
(132,466
)
 
$
415,693

Cost of products sold (exclusive of lower of cost or market inventory valuation adjustment)
 
$
153,141

 
$
254,328

 
$
(132,466
)
 
$
275,003

Lower of cost or market inventory valuation adjustment
 
$

 
$
(1,248
)
 
$

 
$
(1,248
)
Operating expenses
 
$
30,051

 
$
37,615

 
$

 
$
67,666

Selling, general and administrative expenses
 
$
11,713

 
$
22,070

 
$

 
$
33,783

Depreciation and amortization
 
$
8,996

 
$
2,328

 
$

 
$
11,324

Income from operations
 
$
(17,423
)
 
$
46,588

 
$

 
$
29,165

EBITDA
 
$
(8,427
)
 
$
48,916

 
$

 
$
40,489



11



 
 
Rack Back (1)
 
Rack Forward (2)
 
Eliminations (3)
 
Total Lubricants and Specialty Products
 
 
(In thousands)
Year Ended December 31, 2018
 
 
 
 
 
 
 
 
Sales and other revenues
 
$
682,892

 
$
1,650,056

 
$
(520,245
)
 
$
1,812,703

Cost of products sold (exclusive of lower of cost or market inventory valuation adjustment)
 
$
633,459

 
$
1,268,326

 
$
(520,245
)
 
$
1,381,540

Operating expenses
 
$
111,155

 
$
56,665

 
$

 
$
167,820

Selling, general and administrative expenses
 
$
32,086

 
$
111,664

 
$

 
$
143,750

Depreciation and amortization
 
$
26,955

 
$
16,300

 
$

 
$
43,255

Income (loss) from operations
 
$
(120,763
)
 
$
197,101

 
$

 
$
76,338

EBITDA
 
$
(93,808
)
 
$
213,401

 
$

 
$
119,593

 
 
 
 
 
 
 
 
 
Year Ended December 31, 2017
 
 
 
 
 
 
 
 
Sales and other revenues
 
$
621,153

 
$
1,415,842

 
$
(442,959
)
 
$
1,594,036

Cost of products sold (exclusive of lower of cost or market inventory valuation adjustment)
 
$
504,782

 
$
1,032,161

 
$
(442,959
)
 
$
1,093,984

Lower of cost or market inventory valuation adjustment
 
$

 
$
(1,206
)
 
$

 
$
(1,206
)
Operating expenses
 
$
95,303

 
$
127,158

 
$

 
$
222,461

Selling, general and administrative expenses
 
$
27,764

 
$
77,902

 
$

 
$
105,666

Depreciation and amortization
 
$
23,471

 
$
8,423

 
$

 
$
31,894

Income (loss) from operations
 
$
(30,167
)
 
$
171,404

 
$

 
$
141,237

EBITDA
 
$
(6,696
)