Document
false0000048039 0000048039 2019-10-31 2019-10-31

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): October 31, 2019
___________________

HOLLYFRONTIER CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware
001-03876
75-1056913
(State or other jurisdiction of incorporation)
(Commission File Number)
(I.R.S. Employer
Identification Number)
2828 N. Harwood, Suite 1300
Dallas
Texas
75201
(Address of principal executive offices)
 
(Zip code)
       
Registrant’s telephone number, including area code: (214) 871-3555
 
Not applicable
(Former name or former address, if changed since last report)
Securities registered pursuant to 12(b) of the Securities Exchange Act of 1934:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock $0.01 par value
HFC
New York Stock Exchange
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 October 31, 2019, HollyFrontier Corporation (the “Company”) issued a press release announcing the Company’s third quarter 2019 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

104
—    Cover Page Interactive Data File (the cover page XBRL tags are embedded within the inline XBRL document).
* 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: October 31, 2019


Exhibit


Press Release
October 31, 2019
http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=13172105&doc=8

HollyFrontier Corporation Reports Quarterly Results

Reported net income attributable to HollyFrontier stockholders of $261.8 million, or $1.58 per diluted share, and adjusted net income of $278.0 million, or $1.68 per diluted share, for the third quarter

Reported EBITDA of $521.7 million and adjusted EBITDA of $523.1 million for the third quarter

Returned $259.5 million to shareholders through dividends and share repurchases in the third quarter

Dallas, Texas, October 31, 2019 ‑‑ HollyFrontier Corporation (NYSE:HFC) (“HollyFrontier” or the “Company”) today reported third quarter net income attributable to HollyFrontier stockholders of $261.8 million, or $1.58 per diluted share, for the quarter ended September 30, 2019, compared to $342.5 million, or $1.93 per diluted share, for the quarter ended September 30, 2018.

The third quarter results reflect special items that collectively decreased net income by a total of $16.2 million. These items include a lower of cost or market inventory valuation adjustment that decreased pre-tax earnings by $34.1 million, a RINs cost reduction as a result of the small refinery exemptions granted to our Cheyenne and Woods Cross refineries for the 2018 calendar year of $36.6 million and Sonneborn integration and regulatory costs of $3.9 million. Excluding these items, net income for the current quarter was $278.0 million ($1.68 per diluted share) compared to $350.7 million ($1.98 per diluted share) for the third quarter of 2018, which excludes certain items that collectively decreased net income by $8.3 million for the three months ended September 30, 2018. Total operating expenses for the quarter were $345.6 million compared to $317.2 million for the third quarter of last year.

HollyFrontier’s President & CEO, George Damiris, commented, “HollyFrontier's solid third quarter results were driven by record throughput volumes and healthy gasoline and diesel margins across our refining system. We returned over $259 million to shareholders through dividends and share repurchases, signaling our strong commitment to return free cash flow to our shareholders. We are currently undergoing turnarounds at our El Dorado and Cheyenne refineries and plan to return to normal operations later in the fourth quarter.”

The Refining and Marketing segment reported adjusted EBITDA of $424.6 million compared to $507.2 million for the third quarter of 2018. This decrease was primarily driven by lower product margins and weaker laid-in crude advantage across our refining system which resulted in a consolidated refinery gross margin of $17.23 per produced barrel, a 11% decrease compared to $19.41 for the third quarter of 2018. Crude oil charge averaged 476,030 barrels per day (“BPD”) for the current quarter compared to 441,990 BPD for the third quarter 2018.

Our Lubricants and Specialty Products segment reported EBITDA of $38.0 million, compared to $42.4 million in the prior year, despite improvements in base oil markets. Rack Forward EBITDA was $51.3 million, compared to $57.1 million in the prior year, driven by an unfavorable product sales mix and the impact of macroeconomic headwinds on end markets in the quarter.

Holly Energy Partners, L.P. (“HEP”) reported EBITDA of $123.1 million for the third quarter 2019 compared to $86.9 million in the third quarter of 2018. Third quarter results reflected strong third-party volumes and higher spot revenues on its crude oil pipeline systems in Wyoming and Utah. Reported EBITDA in third quarter 2019 includes a $35.2 million gain on sales-type leases that eliminates on HFC consolidation.


1



For the third quarter of 2019, net cash provided by operations totaled $441.9 million. During the period, we declared and paid a dividend of $0.33 per share to shareholders totaling $54.5 million and spent $205.0 million in stock repurchases. At September 30, 2019, our cash and cash equivalents totaled $981.9 million, a $67.3 million increase over cash and cash equivalents of $914.6 million at June 30, 2019. Additionally, our consolidated debt was $2,425.2 million. Our debt, exclusive of HEP debt, which is nonrecourse to HollyFrontier, was $993.4 million at September 30, 2019.

The Company has scheduled a webcast conference call for today, October 31, 2019, at 9:30 AM Eastern Time to discuss third quarter financial results. This webcast may be accessed at: https://event.on24.com/wcc/r/2080006/F990110BD66EA00A36965449876CB61F. An audio archive of this webcast will be available using the above noted link through November 14, 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 the 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 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
September 30,
 
Change from 2018
 
2019
 
2018
 
Change
 
Percent
 
(In thousands, except per share data)
Sales and other revenues
$
4,424,828

 
$
4,770,799

 
$
(345,971
)
 
(7
)%
Operating costs and expenses:
 
 
 
 
 
 
 
Cost of products sold:
 
 
 
 
 
 
 
Cost of products sold (exclusive of lower of cost or market inventory valuation adjustment)
3,403,767

 
3,752,234

 
(348,467
)
 
(9
)
Lower of cost or market inventory valuation adjustment
34,062

 
17,837

 
16,225

 
91

 
3,437,829

 
3,770,071

 
(332,242
)
 
(9
)
Operating expenses
345,578

 
317,196

 
28,382

 
9

Selling, general and administrative expenses
87,626

 
71,130

 
16,496

 
23

Depreciation and amortization
127,016

 
108,885

 
18,131

 
17

Total operating costs and expenses
3,998,049

 
4,267,282

 
(269,233
)
 
(6
)
Income from operations
426,779

 
503,517

 
(76,738
)
 
(15
)
 
 
 
 
 
 
 
 
Other income (expense):
 
 
 
 
 
 
 
Earnings of equity method investments
1,334

 
1,114

 
220

 
20

Interest income
6,164

 
5,136

 
1,028

 
20

Interest expense
(36,027
)
 
(32,399
)
 
(3,628
)
 
11

Gain on foreign currency transactions
395

 
281

 
114

 
41

Other, net
2,356

 
741

 
1,615

 
218

 
(25,778
)
 
(25,127
)
 
(651
)
 
3

Income before income taxes
401,001

 
478,390

 
(77,389
)
 
(16
)
Income tax expense
103,021

 
116,258

 
(13,237
)
 
(11
)
Net income
297,980

 
362,132

 
(64,152
)
 
(18
)
Less net income attributable to noncontrolling interest
36,167

 
19,666

 
16,501

 
84

Net income attributable to HollyFrontier stockholders
$
261,813

 
$
342,466

 
$
(80,653
)
 
(24
)%
 
 
 
 
 
 
 
 
Earnings per share attributable to HollyFrontier stockholders:
 
 
 
 
 
 
 
Basic
$
1.60

 
$
1.95

 
$
(0.35
)
 
(18
)%
Diluted
$
1.58

 
$
1.93

 
$
(0.35
)
 
(18
)%
Cash dividends declared per common share
$
0.33

 
$
0.33

 
$

 
 %
Average number of common shares outstanding:
 
 
 
 
 
 
 
Basic
163,676

 
175,097

 
(11,421
)
 
(7
)%
Diluted
165,011

 
176,927

 
(11,916
)
 
(7
)%
EBITDA
$
521,713

 
$
594,872

 
$
(73,159
)
 
(12
)%
Adjusted EBITDA
$
523,082

 
$
612,709

 
$
(89,627
)
 
(15
)%

3



 
Nine Months Ended
September 30,
 
Change from 2018
 
2019
 
2018
 
Change
 
Percent
 
(In thousands, except per share data)
Sales and other revenues
$
13,104,690

 
$
13,370,462

 
$
(265,772
)
 
(2
)%
Operating costs and expenses:
 
 
 
 
 
 
 
Cost of products sold:
 
 
 
 
 
 
 
Cost of products sold (exclusive of lower of cost or market inventory valuation adjustment)

10,307,856

 
10,695,275

 
(387,419
)
 
(4
)
Lower of cost or market inventory valuation adjustment

(150,483
)
 
(192,927
)
 
42,444

 
(22
)
 
10,157,373

 
10,502,348

 
(344,975
)
 
(3
)
Operating expenses
1,010,422

 
933,699

 
76,723

 
8

Selling, general and administrative expenses
260,977

 
204,469

 
56,508

 
28

Depreciation and amortization
375,345

 
323,605

 
51,740

 
16

Goodwill impairment
152,712

 

 
152,712

 

Total operating costs and expenses
11,956,829

 
11,964,121

 
(7,292
)
 

Income from operations
1,147,861

 
1,406,341

 
(258,480
)
 
(18
)
 
 
 
 
 
 
 
 
Other income (expense):
 
 
 
 
 
 
 
Earnings of equity method investments
5,217

 
4,127

 
1,090

 
26

Interest income
17,127

 
10,660

 
6,467

 
61

Interest expense
(106,938
)
 
(97,446
)
 
(9,492
)
 
10

Gain on foreign currency transactions
4,873

 
5,516

 
(643
)
 
(12
)
Other, net
3,005

 
3,451

 
(446
)
 
(13
)
 
(76,716
)
 
(73,692
)
 
(3,024
)
 
4

Income before income taxes
1,071,145

 
1,332,649

 
(261,504
)
 
(20
)
Income tax expense
279,862

 
318,742

 
(38,880
)
 
(12
)
Net income
791,283

 
1,013,907

 
(222,624
)
 
(22
)
Less net income attributable to noncontrolling interest
79,500

 
57,843

 
21,657

 
37

Net income attributable to HollyFrontier stockholders
$
711,783

 
$
956,064

 
$
(244,281
)
 
(26
)%
 
 
 
 
 
 
 
 
Earnings per share attributable to HollyFrontier stockholders:
 
 
 
 
 
 
 
Basic
$
4.23

 
$
5.42

 
$
(1.19
)
 
(22
)%
Diluted
$
4.20

 
$
5.37

 
$
(1.17
)
 
(22
)%
Cash dividends declared per common share
$
0.99

 
$
0.99

 
$

 
 %
Average number of common shares outstanding:
 
 
 
 
 
 
 
Basic
167,935

 
175,865

 
(7,930
)
 
(5
)%
Diluted
169,125

 
177,557

 
(8,432
)
 
(5
)%
EBITDA
$
1,456,801

 
$
1,685,197

 
$
(228,396
)
 
(14
)%
Adjusted EBITDA
$
1,451,864

 
$
1,413,620

 
$
38,244

 
3
 %

Balance Sheet Data
 
September 30,
 
December 31,
 
2019
 
2018
 
(In thousands)
Cash and cash equivalents
$
981,856

 
$
1,154,752

Working capital
$
1,827,420

 
$
2,128,224

Total assets
$
12,191,328

 
$
10,994,601

Long-term debt
$
2,425,234

 
$
2,411,540

Total equity
$
6,541,363

 
$
6,459,059



4




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 HollyFrontier Asphalt Company LLC (“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 Petro-Canada Lubricants Inc.’s (“PCLI”) 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, the operations of Red Giant Oil, one of the largest suppliers of locomotive engine oil in North America and the operations of Sonneborn, a producer of specialty hydrocarbon chemicals such as white oils, petrolatums and waxes with manufacturing facilities in the United States and Europe.

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 September 30, 2019
 
 
 
 
 
 
 
 
Sales and other revenues:
 
 
 
 
 
 
 
 
 
 
Revenues from external customers
 
$
3,865,399

 
$
529,561

 
$
29,868

 
$

 
$
4,424,828

Intersegment revenues
 
81,571

 
8,157

 
106,027

 
(195,755
)
 

 
 
$
3,946,970

 
$
537,718

 
$
135,895

 
$
(195,755
)
 
$
4,424,828

Cost of products sold (exclusive of lower of cost or market inventory)
 
$
3,177,167

 
$
397,926

 
$

 
$
(171,326
)
 
$
3,403,767

Lower of cost or market inventory valuation adjustment
 
$
34,062

 
$

 
$

 
$

 
$
34,062

Operating expenses
 
$
276,869

 
$
57,974

 
$
44,924

 
$
(34,189
)
 
$
345,578

Selling, general and administrative expenses
 
$
31,707

 
$
43,875

 
$
2,714

 
$
9,330

 
$
87,626

Depreciation and amortization
 
$
76,765

 
$
22,700

 
$
24,121

 
$
3,430

 
$
127,016

Income (loss) from operations
 
$
350,400

 
$
15,243

 
$
64,136

 
$
(3,000
)
 
$
426,779

Income before interest and income taxes (1)
 
$
350,400

 
$
15,325

 
$
100,778

 
$
(35,639
)
 
$
430,864

Net income attributable to noncontrolling interest
 
$

 
$

 
$
1,004

 
$
35,163

 
$
36,167

Capital expenditures
 
$
53,506

 
$
8,697

 
$
6,076

 
$
6,310

 
$
74,589

 
 
 
 
 
 
 
 
 
 
 
Three Months Ended September 30, 2018
 
 
 
 
 
 
 
 
Sales and other revenues:
 
 
 
 
 
 
 
 
 
 
Revenues from external customers
 
$
4,270,835

 
$
474,260

 
$
25,596

 
$
108

 
$
4,770,799

Intersegment revenues
 
101,334

 
1,626

 
100,188

 
(203,148
)
 

 
 
$
4,372,169

 
$
475,886

 
$
125,784

 
$
(203,040
)
 
$
4,770,799

Cost of products sold (exclusive of lower of cost or market inventory)
 
$
3,572,593

 
$
359,742

 
$

 
$
(180,101
)
 
$
3,752,234

Lower of cost or market inventory valuation adjustment
 
$
17,837

 
$

 
$

 
$

 
$
17,837

Operating expenses
 
$
262,010

 
$
40,288

 
$
35,995

 
$
(21,097
)
 
$
317,196

Selling, general and administrative expenses
 
$
30,394

 
$
33,514

 
$
2,498

 
$
4,724

 
$
71,130

Depreciation and amortization
 
$
70,793

 
$
11,139

 
$
24,367

 
$
2,586

 
$
108,885

Income (loss) from operations
 
$
418,542

 
$
31,203

 
$
62,924

 
$
(9,152
)
 
$
503,517

Income before interest and income taxes
 
$
418,542

 
$
31,262

 
$
64,076

 
$
(8,227
)
 
$
505,653

Net income attributable to noncontrolling interest
 
$

 
$

 
$
751

 
$
18,915

 
$
19,666

Capital expenditures
 
$
47,088

 
$
8,094

 
$
9,541

 
$
5,214

 
$
69,937


6



 
 
Refining
 
Lubricants and Specialty Products
 
HEP
 
Corporate, Other and Eliminations
 
Consolidated Total
 
 
(In thousands)
Nine Months Ended September 30, 2019
 
 
 
 
 
 
 
 
Sales and other revenues:
 
 
 
 
 
 
 
 
 
 
Revenues from external customers
 
$
11,446,841

 
$
1,568,241

 
$
89,388

 
$
220

 
$
13,104,690

Intersegment revenues
 
244,799

 
8,157

 
311,755

 
(564,711
)
 

 
 
$
11,691,640

 
$
1,576,398

 
$
401,143

 
$
(564,491
)
 
$
13,104,690

Cost of products sold (exclusive of lower of cost or market inventory)
 
$
9,598,539

 
$
1,202,296

 
$

 
$
(492,979
)
 
$
10,307,856

Lower of cost or market inventory valuation adjustment
 
$
(150,483
)
 
$

 
$

 
$

 
$
(150,483
)
Operating expenses
 
$
794,081

 
$
170,655

 
$
123,045

 
$
(77,359
)
 
$
1,010,422

Selling, general and administrative expenses
 
$
88,322

 
$
125,681

 
$
7,322

 
$
39,652

 
$
260,977

Depreciation and amortization
 
$
227,405

 
$
65,891

 
$
72,192

 
$
9,857

 
$
375,345

Goodwill impairment
 
$

 
$
152,712

 
$

 
$

 
$
152,712

Income (loss) from operations
 
$
1,133,776

 
$
(140,837
)
 
$
198,584

 
$
(43,662
)
 
$
1,147,861

Income before interest and income taxes (1)
 
$
1,133,776

 
$
(140,518
)
 
$
238,910

 
$
(71,212
)
 
$
1,160,956

Net income attributable to noncontrolling interest
 
$

 
$

 
$
3,524

 
$
75,976

 
$
79,500

Capital expenditures
 
$
129,167

 
$
25,887

 
$
23,828

 
$
16,175

 
$
195,057

 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended September 30, 2018
 
 
 
 
 
 
 
 
Sales and other revenues:
 
 
 
 
 
 
 
 
 
 
Revenues from external customers
 
$
11,915,797

 
$
1,376,531

 
$
77,799

 
$
335

 
$
13,370,462

Intersegment revenues
 
284,538

 
11,884

 
295,629

 
(592,051
)
 

 
 
$
12,200,335

 
$
1,388,415

 
$
373,428

 
$
(591,716
)
 
$
13,370,462

Cost of products sold (exclusive of lower of cost or market inventory)
 
$
10,179,509

 
$
1,040,414

 
$

 
$
(524,648
)
 
$
10,695,275

Lower of cost or market inventory valuation adjustment
 
$
(192,927
)
 
$

 
$

 
$

 
$
(192,927
)
Operating expenses
 
$
764,415

 
$
125,101

 
$
106,731

 
$
(62,548
)
 
$
933,699

Selling, general and administrative expenses
 
$
82,966

 
$
99,425

 
$
8,293

 
$
13,785

 
$
204,469

Depreciation and amortization
 
$
210,957

 
$
30,023

 
$
74,117

 
$
8,508

 
$
323,605

Income (loss) from operations
 
$
1,155,415

 
$
93,452

 
$
184,287

 
$
(26,813
)
 
$
1,406,341

Income before interest and income taxes
 
$
1,155,415

 
$
94,377

 
$
188,485

 
$
(18,842
)
 
$
1,419,435

Net income attributable to noncontrolling interest
 
$

 
$

 
$
3,115

 
$
54,728

 
$
57,843

Capital expenditures
 
$
132,050

 
$
23,138

 
$
41,111

 
$
12,779

 
$
209,078


(1) HEP segment includes a $35.2 million gain due to new throughput agreements on specific HEP assets that meet the definition of sales-type leases. This gain is eliminated in HFC consolidation.
 
 
Refining
 
Lubricants and Specialty Products
 
HEP
 
Corporate, Other and Eliminations
 
Consolidated Total
 
 
(In thousands)
September 30, 2019
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
21,443

 
$
170,116

 
$
7,469

 
$
782,828

 
$
981,856

Total assets
 
$
7,321,741

 
$
2,139,092

 
$
2,089,110

 
$
641,385

 
$
12,191,328

Long-term debt
 
$

 
$

 
$
1,431,869

 
$
993,365

 
$
2,425,234

 
 
 
 
 
 
 
 
 
 
 
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


7





8



Refining Segment Operating Data

The following tables set forth information, including non-GAAP (Generally Accepted Accounting Principles) 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 under “Reconciliations to Amounts Reported Under Generally Accepted Accounting Principles” below.

 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2019
 
2018
 
2019
 
2018
Mid-Continent Region (El Dorado and Tulsa Refineries)
 
 
 
 
 
 
 
 
Crude charge (BPD) (1)
 
294,380

 
262,550

 
257,590

 
260,150

Refinery throughput (BPD) (2)
 
307,720

 
276,560

 
272,440

 
274,330

Sales of produced refined products (BPD) (3)
 
290,930

 
255,840

 
260,780

 
259,890

Refinery utilization (4)
 
113.2
%
 
101.0
%
 
99.1
%
 
100.1
%
 
 
 
 
 
 
 
 
 
Average per produced barrel (5)
 
 
 
 
 
 
 
 
Refinery gross margin
 
$
14.61

 
$
16.43

 
$
14.55

 
$
12.99

Refinery operating expenses (6)
 
5.05

 
5.48

 
5.48

 
5.18

Net operating margin
 
$
9.56

 
$
10.95

 
$
9.07

 
$
7.81

 
 
 
 
 
 
 
 
 
Refinery operating expenses per throughput barrel (7)
 
$
4.77

 
$
5.07

 
$
5.25

 
$
4.90

 
 
 
 
 
 
 
 
 
Feedstocks:
 
 
 
 
 
 
 
 
Sweet crude oil
 
59
%
 
59
%
 
56
%
 
54
%
Sour crude oil
 
21
%
 
21
%
 
23
%
 
24
%
Heavy sour crude oil
 
16
%
 
15
%
 
16
%
 
17
%
Other feedstocks and blends
 
4
%
 
5
%
 
5
%
 
5
%
Total
 
100
%
 
100
%
 
100
%
 
100
%
 
 
 
 
 
 
 
 
 
Sales of produced refined products:
 
 
 
 
 
 
 
 
Gasolines
 
49
%
 
49
%
 
51
%
 
51
%
Diesel fuels
 
34
%
 
34
%
 
32
%
 
33
%
Jet fuels
 
6
%
 
6
%
 
7
%
 
6
%
Fuel oil
 
1
%
 
1
%
 
1
%
 
1
%
Asphalt
 
4
%
 
4
%
 
3
%
 
3
%
Base oils
 
4
%
 
4
%
 
4
%
 
4
%
LPG and other
 
2
%
 
2
%
 
2
%
 
2
%
Total
 
100
%
 
100
%
 
100
%
 
100
%



9



 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2019
 
2018
 
2019
 
2018
Southwest Region (Navajo Refinery)
 
 
 
 
 
 
 
 
Crude charge (BPD) (1)
 
106,860

 
109,560

 
107,330

 
109,200

Refinery throughput (BPD) (2)
 
117,250

 
117,880

 
117,660

 
118,300

Sales of produced refined products (BPD) (3)
 
116,890

 
122,210

 
120,760

 
120,900

Refinery utilization (4)
 
106.9
%
 
109.6
%
 
107.3
%
 
109.2
%
 
 
 
 
 
 
 
 
 
Average per produced barrel (5)
 
 
 
 
 
 
 
 
Refinery gross margin
 
$
18.61

 
$
22.60

 
$
19.35

 
$
17.84

Refinery operating expenses (6)
 
5.25

 
4.53

 
4.90

 
4.63

Net operating margin
 
$
13.36

 
$
18.07

 
$
14.45

 
$
13.21

 
 
 
 
 
 
 
 
 
Refinery operating expenses per throughput barrel (7)
 
$
5.23

 
$
4.69

 
$
5.03

 
$
4.73

 
 
 
 
 
 
 
 
 
Feedstocks:
 
 
 
 
 
 
 
 
Sweet crude oil
 
22
%
 
28
%
 
21
%
 
31
%
Sour crude oil
 
69
%
 
65
%
 
70
%
 
61
%
Other feedstocks and blends
 
9
%
 
7
%
 
9
%
 
8
%
Total
 
100
%
 
100
%
 
100
%
 
100
%
 
 
 
 
 
 
 
 
 
Sales of produced refined products:
 
 
 
 
 
 
 
 
Gasolines
 
50
%
 
49
%
 
51
%
 
50
%
Diesel fuels
 
40
%
 
41
%
 
39
%
 
40
%
Fuel oil
 
3
%
 
3
%
 
3
%
 
3
%
Asphalt
 
5
%
 
5
%
 
5
%
 
4
%
LPG and other
 
2
%
 
2
%
 
2
%
 
3
%
Total
 
100
%
 
100
%
 
100
%
 
100
%
Rocky Mountain Region (Cheyenne and Woods Cross Refineries)
 
 
 
 
 
 
 
 
Crude charge (BPD) (1)
 
74,790

 
69,880

 
78,530

 
71,000

Refinery throughput (BPD) (2)
 
81,830

 
76,120

 
85,300

 
78,410

Sales of produced refined products (BPD) (3)
 
77,680

 
69,720

 
77,890

 
74,850

Refinery utilization (4)
 
77.1
%
 
72.0
%
 
81.0
%
 
73.2
%
 
 
 
 
 
 
 
 
 
Average per produced barrel (5)
 
 
 
 
 
 
 
 
Refinery gross margin
 
$
24.97

 
$
24.75

 
$
19.73

 
$
24.95

Refinery operating expenses (6)
 
11.95

 
12.80

 
11.39

 
11.97

Net operating margin
 
$
13.02

 
$
11.95

 
$
8.34

 
$
12.98

 
 
 
 
 
 
 
 
 
Refinery operating expenses per throughput barrel (7)
 
$
11.34

 
$
11.72

 
$
10.40

 
$
11.42

 
 
 
 
 
 
 
 
 
Feedstocks:
 
 
 
 
 
 
 
 
Sweet crude oil
 
38
%
 
24
%
 
36
%
 
25
%
Heavy sour crude oil
 
30
%
 
44
%
 
33
%
 
44
%
Black wax crude oil
 
23
%
 
24
%
 
23
%
 
22
%
Other feedstocks and blends
 
9
%
 
8
%
 
8
%
 
9
%
Total
 
100
%
 
100
%
 
-

 
100
%
 
 
 
 
 
 
 
 
 

10



 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2019
 
2018
 
2019
 
2018
Rocky Mountain Region (Cheyenne and Woods Cross Refineries)
 
 
 
 
 
 
 
 
Sales of produced refined products:
 
 
 
 
 
 
 
 
Gasolines
 
54
%
 
54
%
 
53
%
 
56
%
Diesel fuels
 
32
%
 
34
%
 
34
%
 
33
%
Fuel oil
 
4
%
 
2
%
 
4
%
 
3
%
Asphalt
 
5
%
 
7
%
 
5
%
 
5
%
LPG and other
 
5
%
 
3
%
 
4
%
 
3
%
Total
 
100
%
 
100
%
 
100
%
 
100
%
Consolidated
 
 
 
 
 
 
 
 
Crude charge (BPD) (1)
 
476,030

 
441,990

 
443,450

 
440,350

Refinery throughput (BPD) (2)
 
506,800

 
470,560

 
475,400

 
471,040

Sales of produced refined products (BPD) (3)
 
485,500

 
447,770

 
459,440

 
455,640

Refinery utilization (4)
 
104.2
%
 
96.7
%
 
97.0
%
 
96.4
%
 
 
 
 
 
 
 
 
 
Average per produced barrel (5)
 
 
 
 
 
 
 
 
Refinery gross margin
 
$
17.23

 
$
19.41

 
$
16.69

 
$
16.25

Refinery operating expenses (6)
 
6.20

 
6.36

 
6.33

 
6.15

Net operating margin
 
$
11.03

 
$
13.05

 
$
10.36

 
$
10.10

 
 
 
 
 
 
 
 
 
Refinery operating expenses per throughput barrel (7)
 
$
5.94

 
$
6.05

 
$
6.12

 
$
5.94

 
 
 
 
 
 
 
 
 
Feedstocks:
 
 
 
 
 
 
 
 
Sweet crude oil
 
47
%
 
45
%
 
44
%
 
43
%
Sour crude oil
 
29
%
 
29
%
 
30
%
 
30
%
Heavy sour crude oil
 
14
%
 
16
%
 
15
%
 
17
%
Black wax crude oil
 
4
%
 
4
%
 
4
%
 
4
%
Other feedstocks and blends
 
6
%
 
6
%
 
7
%
 
6
%
Total
 
100
%
 
100
%
 
100
%
 
100
%
Sales of produced refined products:
 
 
 
 
 
 
 
 
Gasolines
 
50
%
 
50
%
 
51
%
 
52
%
Diesel fuels
 
35
%
 
36
%
 
35
%
 
35
%
Jet fuels
 
4
%
 
3
%
 
4
%
 
3
%
Fuel oil
 
2
%
 
2
%
 
2
%
 
2
%
Asphalt
 
4
%
 
5
%
 
4
%
 
4
%
Base oils
 
2
%
 
2
%
 
2
%
 
2
%
LPG and other
 
3
%
 
2
%
 
2
%
 
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 under “Reconciliations to Amounts Reported Under Generally Accepted Accounting Principles” 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.




11



Lubricants and Specialty Products Segment Operating Data

We acquired our Sonneborn business on February 1, 2019. For the nine months ended September 30, 2019 our lubricants and specialty product operating results reflect the operations of our Sonneborn business for the period February 1, 2019 through September 30, 2019.

The following table sets forth information about our lubricants and specialty products operations.
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2019
 
2018
 
2019
 
2018
Lubricants and Specialty Products
 
 
 
 
 
 
 
 
Throughput (BPD)
 
23,190

 
21,410

 
19,920

 
20,530

Sales of produced products (BPD)
 
36,160

 
31,970

 
34,740

 
21,340

 
 
 
 
 
 
 
 
 
Sales of produced products:
 
 
 
 
 
 
 
 
Finished products
 
50
%
 
49
%
 
50
%
 
48
%
Base oils
 
24
%
 
28
%
 
27
%
 
31
%
Other
 
26
%
 
23
%
 
23
%
 
21
%
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 September 30, 2019
 
 
 
 
 
 
 
 
Sales and other revenues
 
$
196,355

 
$
477,261

 
$
(135,898
)
 
$
537,718

Cost of products sold
 
$
175,976

 
$
357,848

 
$
(135,898
)
 
$
397,926

Operating expenses
 
$
27,825

 
$
30,149

 
$

 
$
57,974

Selling, general and administrative expenses
 
$
5,862

 
$
38,013

 
$

 
$
43,875

Depreciation and amortization
 
$
11,390

 
$
11,310

 
$

 
$
22,700

Income (loss) from operations
 
$
(24,698
)
 
$
39,941

 
$

 
$
15,243

Income (loss) before interest and income taxes
 
$
(24,698
)
 
$
40,023

 
$

 
$
15,325

EBITDA
 
$
(13,308
)
 
$
51,333

 
$

 
$
38,025

 
 
 
 
 
 
 
 
 
Three months ended September 30, 2018
 
 
 
 
 
 
 
 
Sales and other revenues
 
$
197,226

 
$
424,386

 
$
(145,726
)
 
$
475,886

Cost of products sold
 
$
177,748

 
$
327,720

 
$
(145,726
)
 
$
359,742

Operating expenses
 
$
26,748

 
$
13,540

 
$

 
$
40,288

Selling, general and administrative expenses
 
$
7,439

 
$
26,075

 
$

 
$
33,514

Depreciation and amortization
 
$
6,345

 
$
4,794

 
$

 
$
11,139

Income (loss) from operations
 
$
(21,054
)
 
$
52,257

 
$

 
$
31,203

Income (loss) before interest and income taxes
 
$
(21,054
)
 
$
52,316

 
$

 
$
31,262

EBITDA
 
$
(14,709
)
 
$
57,110

 
$

 
$
42,401


12




 
 
Rack Back (1)
 
Rack Forward (2)
 
Eliminations (3)
 
Total Lubricants and Specialty Products
 
 
(In thousands)
Nine months ended September 30, 2019
 
 
 
 
 
 
 
 
Sales and other revenues
 
$
486,035

 
$
1,428,786

 
$
(338,423
)
 
$
1,576,398

Cost of products sold
 
$
453,519

 
$
1,087,200

 
$
(338,423
)
 
$
1,202,296

Operating expenses
 
$
87,970

 
$
82,685

 
$

 
$
170,655

Selling, general and administrative expenses
 
$
25,707

 
$
99,974

 
$

 
$
125,681

Depreciation and amortization
 
$
32,991

 
$
32,900

 
$

 
$
65,891

Goodwill impairment
 
$
152,712

 
$

 
$

 
$
152,712

Income (loss) from operations
 
$
(266,864
)
 
$
126,027

 
$

 
$
(140,837
)
Income (loss) before interest and income taxes
 
$
(266,864
)
 
$
126,346

 
$

 
$
(140,518
)
EBITDA
 
$
(233,873