HollyFrontier Corporation
HollyFrontier Corp (Form: 8-K, Received: 02/22/2017 06:44:00)


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 22, 2017 ( February 22, 2017 )

 

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))




Item 2.02. Results of Operations and Financial Condition.

On February 22, 2017 , HollyFrontier Corporation (the “Company”) issued a press release announcing the Company’s fourth quarter 2016 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
—    Press Release of the Company issued February 22, 2017 .*

* 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/ Douglas S. Aron            
Douglas S. Aron
Executive Vice President and
Chief Financial Officer

Date: February 22, 2017




EXHIBIT INDEX



Exhibit
Number      Exhibit Title

99.1
—    Press Release of the Company issued February 22, 2017 .*

* Furnished herewith pursuant to Item 2.02.




Press Release
February 22, 2017
HFCQ12014EARNINGSRELEASEA01.JPG


HollyFrontier Corporation Reports Quarterly Net Income

Dallas, Texas, February 22, 2017 ‑‑ HollyFrontier Corporation (NYSE-HFC) (“HollyFrontier” or the “Company”) today reported fourth quarter net income attributable to HollyFrontier stockholders of $53.2 million or $0.30 per diluted share for the quarter ended December 31, 2016 , compared to a net loss of $(43.9) million or $(0.24) per diluted share for the quarter ended December 31, 2015 . Included in the current quarter results were items consisting of a non-cash lower of cost or market inventory adjustment that increased pre-tax earnings by $97.7 million and pre-acquisition costs related to our recent PCLI purchase that decreased pre-tax earnings by $13.4 million. Excluding these items, net loss attributable to HollyFrontier stockholders was $(10.0) million or $(0.06) per diluted share. Actual to adjusted amounts are reconciled in the tables included in the accompanying reconciliations to amounts reported under Generally Accepted Accounting Principles.

For the fourth quarter, net income attributable to our stockholders, exclusive of lower of cost or market inventory adjustments, PCLI pre-acquisition costs and related tax effects, decreased by $54.1 million compared to the same period of 2015 , principally reflecting lower refining margins. Production levels averaged approximately 453,000 barrels per day ("BPD") and crude oil charges averaged 432,000 BPD for the current quarter. On a per barrel basis, consolidated refinery gross margin was $7.23 per produced barrel, a 27% decrease compared to $9.91 for the fourth quarter of 2015 . Total operating expenses for the quarter were $258.7 million compared to $285.2 million for the fourth quarter of last year, and refining operating expenses averaged $5.51 per produced barrel sold compared to $6.40 per barrel for the same period of 2015.

HollyFrontier’s President & CEO, George Damiris, commented, "2016 presented a challenging refining environment for the industry as a whole and for HFC due to weak benchmark refining margins, rising RFS compliance costs and narrow crude differentials In the face of these macro challenges we continue to focus on what we can control. We have achieved approximately $300 million of the $700 million in annual EBITDA improvements targeted by 2018. We also completed the largest acquisition in our company’s history with the addition of the Petro-Canada Lubricants business. We look forward to realizing the benefits from combining this differentiated, high margin business with HollyFrontier.”

For the fourth quarter of 2016 , net cash provided by operations totaled $164.3 million . During the period, we declared a regular dividend of $0.33 per share to shareholders totaling approximately $58.8 million. At December 31, 2016 , our combined balance of cash and short-term investments totaled $1.1 billion , and our consolidated debt was $2.2 billion . Our debt, exclusive of Holly Energy Partners' debt which is nonrecourse to HollyFrontier, was $991.2 million at December 31, 2016 . In February 2017, we amended our credit agreement, increasing the credit facility size to $1.35 billion and extended the maturity to 2022. Additionally, we paid $862.1 million in cash upon closing of our PCLI acquisition on February 1, 2017.

The Company has scheduled a webcast conference call for today, February 22, 2017 , at 8:30 AM Eastern Time to discuss fourth quarter financial results. This webcast may be accessed at: https://event.webcasts.com/starthere.jsp?ei=1131678. An audio archive of this webcast will be available using the above noted link through March 10, 2017.

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

1



refinery located in Artesia, New Mexico, a 52,000 BPSD refinery located in Cheyenne, Wyoming and a 45,000 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. Additionally, HollyFrontier owns Petro-Canada Lubricants Inc. whose Mississauga, Ontario facility produces 15,600 BPD of base oils and other specialized lubricant products. A subsidiary of HollyFrontier also owns a 37% 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 following:
the actions of actual or potential competitive suppliers of refined petroleum products in the Company’s markets;
the ability to successfully integrate PCLI's business with the company;
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.

2



RESULTS OF OPERATIONS

Financial Data (all information in this release is unaudited)
 
Three Months Ended December 31,
 
Change from 2015
 
2016
 
2015
 
Change
 
Percent
 
(In thousands, except per share data)
Sales and other revenues
$
2,955,068

 
$
2,943,559

 
$
11,509

 
 %
Operating costs and expenses:
 
 
 
 
 
 
 
Cost of products sold:
 
 
 
 
 
 
 
Cost of products sold (exclusive of lower of cost or market inventory valuation adjustment)
2,550,772

 
2,446,511

 
104,261

 
4

Lower of cost or market inventory adjustment
(97,656
)
 
143,554

 
(241,210
)
 
(168
)
 
2,453,116

 
2,590,065

 
(136,949
)
 
(5
)
Operating expenses
258,688

 
285,214

 
(26,526
)
 
(9
)
General and administrative expenses
37,378

 
34,414

 
2,964

 
9

Depreciation and amortization
93,594

 
90,572

 
3,022

 
3

Total operating costs and expenses
2,842,776

 
3,000,265

 
(157,489
)
 
(5
)
Income (loss) from operations
112,292

 
(56,706
)
 
168,998

 
(298
)
Other income (expense):
 
 
 
 
 
 
 
Earnings of equity method investments
4,058

 
2,169

 
1,889

 
87

Interest income
1,111

 
988

 
123

 
12

Interest expense
(26,304
)
 
(11,657
)
 
(14,647
)
 
126

Other, net
(7,741
)
 
535

 
(8,276
)
 
(1,547
)
 
(28,876
)
 
(7,965
)
 
(20,911
)
 
263

Income (loss) before income taxes
83,416

 
(64,671
)
 
148,087

 
(229
)
Income tax expense (benefit)
12,952

 
(40,724
)
 
53,676

 
(132
)
Net income (loss)
70,464

 
(23,947
)
 
94,411

 
(394
)
Less net income attributable to noncontrolling interest
17,299

 
19,974

 
(2,675
)
 
(13
)
Net income (loss) attributable to HollyFrontier stockholders
$
53,165

 
$
(43,921
)
 
$
97,086

 
(221
)%
Earnings (loss) per share attributable to HollyFrontier stockholders:
 
 
 
 
 
 
 
Basic
$
0.30

 
$
(0.24
)
 
$
0.54

 
(225
)%
Diluted
$
0.30

 
$
(0.24
)
 
$
0.54

 
(225
)%
Cash dividends declared per common share
$
0.33

 
$
0.33

 
$

 
 %
Average number of common shares outstanding:
 
 
 
 
 
 
 
Basic
175,936

 
181,460

 
(5,524
)
 
(3
)%
Diluted
176,137

 
181,460

 
(5,323
)
 
(3
)%
EBITDA
$
184,904

 
$
16,596

 
$
168,308

 
1,014
 %
Adjusted EBITDA
$
100,654

 
$
160,150

 
$
(59,496
)
 
(37
)%


3



 
Years Ended December 31,
 
Change from 2015
 
2016
 
2015
 
Change
 
Percent
 
(In thousands, except per share data)
Sales and other revenues
$
10,535,700

 
$
13,237,920

 
$
(2,702,220
)
 
(20
)%
Operating costs and expenses:
 
 
 
 
 
 
 
Cost of products sold:
 
 
 
 
 
 
 
Cost of products sold (exclusive of lower of cost or market inventory valuation adjustment)
8,765,927

 
10,239,218

 
(1,473,291
)
 
(14
)
Lower of cost or market inventory adjustment
(291,938
)
 
226,979

 
(518,917
)
 
(229
)
 
8,473,989

 
10,466,197

 
(1,992,208
)
 
(19
)
Operating expenses
1,018,839

 
1,060,373

 
(41,534
)
 
(4
)
General and administrative expenses
125,648

 
120,846

 
4,802

 
4

Depreciation and amortization
363,027

 
346,151

 
16,876

 
5

Goodwill and asset impairment
654,084

 

 
654,084

 

Total operating costs and expenses
10,635,587

 
11,993,567

 
(1,357,980
)
 
(11
)
Income (loss) from operations
(99,887
)
 
1,244,353

 
(1,344,240
)
 
(108
)
Other income (expense):
 
 
 
 
 
 
 
Loss of equity method investments
14,213

 
(3,738
)
 
17,951

 
(480
)
Interest income
2,491

 
3,391

 
(900
)
 
(27
)
Interest expense
(72,192
)
 
(43,470
)
 
(28,722
)
 
66

Loss on early extinguishment of debt
(8,718
)
 
(1,370
)

(7,348
)
 
536

Other, net
(7,441
)
 
9,402

 
(16,843
)
 
(179
)
 
(71,647
)
 
(35,785
)
 
(35,862
)
 
100

Income (loss) before income taxes
(171,534
)
 
1,208,568

 
(1,380,102
)
 
(114
)
Income tax expense
19,411

 
406,060

 
(386,649
)
 
(95
)
Net income (loss)
(190,945
)
 
802,508

 
(993,453
)
 
(124
)
Less net income attributable to noncontrolling interest
69,508

 
62,407

 
7,101

 
11

Net income (loss) attributable to HollyFrontier stockholders
$
(260,453
)
 
$
740,101

 
$
(1,000,554
)
 
(135
)%
Earnings (loss) per share attributable to HollyFrontier stockholders:
 
 
 
 
 
 
 
Basic
$
(1.48
)
 
$
3.91

 
$
(5.39
)
 
(138
)%
Diluted
$
(1.48
)
 
$
3.90

 
$
(5.38
)
 
(138
)%
Cash dividends declared per common share
$
1.32

 
$
1.31

 
$
0.01

 
1
 %
Average number of common shares outstanding:
 
 
 
 
 
 
 
Basic
176,101

 
188,731

 
(12,630
)
 
(7
)%
Diluted
176,101

 
188,940

 
(12,839
)
 
(7
)%
EBITDA
$
200,404

 
$
1,533,761

 
$
(1,333,357
)
 
(87
)%
Adjusted EBITDA
$
575,956

 
$
1,760,740

 
$
(1,184,784
)
 
(67
)%

Balance Sheet Data
 
December 31,
 
2016
 
2015
 
(In thousands)
Cash, cash equivalents and investments in marketable securities
$
1,134,727

 
$
210,552

Working capital
$
1,767,780

 
$
587,450

Total assets
$
9,435,661

 
$
8,388,299

Long-term debt
$
2,235,137

 
$
1,040,040

Total equity
$
5,301,985

 
$
5,809,773


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 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

4



Mountain regions of the United States. Additionally, the Refining Segment includes specialty lubricant products produced at our Tulsa refineries that are marketed throughout North America and are distributed in Central and South America. HFC Asphalt operates various terminals in Arizona, New Mexico and Oklahoma.

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 (an HEP consolidated subsidiary), a 50% ownership interest in each of the Frontier Pipeline, Osage Pipeline and Cheyenne Pipeline and a 25% ownership 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. Due to certain basis differences, our reported amounts for the HEP segment may not agree to amounts reported in HEP's periodic public filings.
 
Refining
 
HEP
 
Corporate and Other
 
Consolidations and Eliminations
 
Consolidated Total
 
(In thousands)
Three Months Ended December 31, 2016
 
 
 
 
 
 
 
 
 
Sales and other revenues
$
2,936,386

 
$
112,526

 
$

 
$
(93,844
)
 
$
2,955,068

Depreciation and amortization
$
71,973

 
$
18,841

 
$
2,987

 
$
(207
)
 
$
93,594

Income (loss) from operations
$
95,455

 
$
54,953

 
$
(37,548
)
 
$
(568
)
 
$
112,292

Earnings of equity method investments
$

 
$
4,058

 
$

 
$

 
$
4,058

Capital expenditures
$
78,360

 
$
11,480

 
$
2,473

 
$

 
$
92,313

 
 
 
 
 
 
 
 
 
 
Three Months Ended December 31, 2015
 
 
 
 
 
 
 
 
 
Sales and other revenues
$
2,924,218

 
$
97,251

 
$
190

 
$
(78,100
)
 
$
2,943,559

Depreciation and amortization
$
70,997

 
$
16,483

 
$
3,299

 
$
(207
)
 
$
90,572

Income (loss) from operations
$
(72,473
)
 
$
52,356

 
$
(36,020
)
 
$
(569
)
 
$
(56,706
)
Earnings of equity method investments
$

 
$
2,169

 
$

 
$

 
$
2,169

Capital expenditures
$
164,141

 
$
34,967

 
$
3,150

 
$

 
$
202,258

 
 
 
 
 
 
 
 
 
 
Year Ended December 31, 2016
 
 
 
 
 
 
 
 
 
Sales and other revenues
$
10,467,190

 
$
402,043

 
$
168

 
$
(333,701
)
 
$
10,535,700

Depreciation and amortization
$
282,321

 
$
68,811

 
$
12,723

 
$
(828
)
 
$
363,027

Income (loss) from operations
$
(163,624
)
 
$
196,716

 
$
(130,565
)
 
$
(2,414
)
 
$
(99,887
)
Earnings of equity method investments
$

 
$
14,213

 
$

 
$

 
$
14,213

Capital expenditures
$
363,115

 
$
107,595

 
$
9,080

 
$

 
$
479,790

 
 
 
 
 
 
 
 
 
 
Year Ended December 31, 2015
 
 
 
 
 
 
 
 
 
Sales and other revenues
$
13,171,183

 
$
358,875

 
$
663

 
$
(292,801
)
 
$
13,237,920

Depreciation and amortization
$
273,345

 
$
61,690

 
$
11,944

 
$
(828
)
 
$
346,151

Income (loss) from operations
$
1,190,578

 
$
179,075

 
$
(123,004
)
 
$
(2,296
)
 
$
1,244,353

Earnings (loss) of equity method investments
$

 
$
4,803

 
$
(8,541
)
 
$

 
$
(3,738
)
Capital expenditures
$
469,011

 
$
193,121

 
$
14,023

 
$

 
$
676,155

 
 
 
 
 
 
 
 
 
 
December 31, 2016
 
 
 
 
 
 
 
 
 
Cash, cash equivalents and investments in marketable securities
$
49

 
$
3,657

 
$
1,131,021

 
$

 
$
1,134,727

Total assets
$
6,513,806

 
$
1,920,487

 
$
1,306,169

 
$
(304,801
)
 
$
9,435,661

Long-term debt
$

 
$
1,243,912

 
$
991,225

 
$

 
$
2,235,137

 
 
 
 
 
 
 
 
 
 
December 31, 2015
 
 
 
 
 
 
 
 
 
Cash, cash equivalents and investments in marketable securities
$
91

 
$
15,013

 
$
195,448

 
$

 
$
210,552

Total assets
$
6,597,355

 
$
1,812,279

 
$
289,225

 
$
(310,560
)
 
$
8,388,299

Long-term debt
$

 
$
1,008,752

 
$
31,288

 
$

 
$
1,040,040



5



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 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 December 31,
 
Years Ended December 31,
 
2016
 
2015
 
2016
 
2015
Mid-Continent Region (El Dorado and Tulsa Refineries)
 
 
 
 
 
 
 
Crude charge (BPD) (1)
272,520

 
238,280

 
262,170

 
263,340

Refinery throughput (BPD)  (2)
289,990

 
250,080

 
280,920

 
277,260

Refinery production (BPD) (3)
279,760

 
240,010

 
269,840

 
266,170

Sales of produced refined products (BPD)
284,480

 
238,240

 
261,200

 
258,420

Sales of refined products (BPD) (4)
299,770

 
308,110

 
285,080

 
295,470

Refinery utilization (5)
104.8
%
 
91.6
%
 
100.8
%
 
101.3
%
 
 
 
 
 
 
 
 
Average per produced barrel (6)
 
 
 
 
 
 
 
Net sales
$
62.19

 
$
62.38

 
$
58.14

 
$
72.33

Cost of products (7)
55.41

 
52.30

 
50.17

 
56.88

Refinery gross margin (8)
6.78

 
10.08

 
7.97

 
15.45

Refinery operating expenses (9)
4.22

 
5.82

 
4.69

 
4.95

Net operating margin (8)
$
2.56

 
$
4.26

 
$
3.28

 
$
10.50

 
 
 
 
 
 
 
 
Refinery operating expenses per throughput barrel (10)
$
4.14

 
$
5.54

 
$
4.36

 
$
4.61

 
 
 
 
 
 
 
 
Feedstocks:
 
 
 
 
 
 
 
Sweet crude oil
59
%
 
56
%
 
58
%
 
59
%
Sour crude oil
19
%
 
23
%
 
18
%
 
21
%
Heavy sour crude oil
16
%
 
16
%
 
17
%
 
15
%
Other feedstocks and blends
6
%
 
5
%
 
7
%
 
5
%
Total
100
%
 
100
%
 
100
%
 
100
%
 
 
 
 
 
 
 
 
Sales of produced refined products:
 
 
 
 
 
 
 
Gasolines
53
%
 
53
%
 
50
%
 
50
%
Diesel fuels
31
%
 
29
%
 
33
%
 
33
%
Jet fuels
8
%
 
8
%
 
7
%
 
7
%
Fuel oil
1
%
 
1
%
 
1
%
 
1
%
Asphalt
1
%
 
2
%
 
2
%
 
2
%
Lubricants
4
%
 
4
%
 
5
%
 
4
%
LPG and other
2
%
 
3
%
 
2
%
 
3
%
Total
100
%
 
100
%
 
100
%
 
100
%



6



 
Three Months Ended December 31,
 
Years Ended December 31,
 
2016
 
2015
 
2016
 
2015
Southwest Region (Navajo Refinery)
 
 
 
 
 
 
 
Crude charge (BPD) (1)
92,450

 
101,500

 
98,090

 
100,450

Refinery throughput (BPD)  (2)
100,720

 
112,850

 
107,690

 
111,840

Refinery production (BPD) (3)
99,930

 
111,590

 
106,460

 
110,210

Sales of produced refined products (BPD)
102,460

 
112,320

 
108,280

 
111,580

Sales of refined products (BPD) (4)
107,430

 
118,160

 
110,740

 
119,560

Refinery utilization (5)
92.5
%
 
101.5
%
 
98.1
%
 
100.5
%
 
 
 
 
 
 
 
 
Average per produced barrel (6)
 
 
 
 
 
 
 
Net sales
$
64.45

 
$
59.14

 
$
57.87

 
$
69.76

Cost of products (7)
55.21

 
50.96

 
48.68

 
53.57

Refinery gross margin (8)
9.24

 
8.18

 
9.19

 
16.19

Refinery operating expenses (9)
5.04

 
5.07

 
4.72

 
4.92

Net operating margin (8)
$
4.20

 
$
3.11

 
$
4.47

 
$
11.27

 
 
 
 
 
 
 
 
Refinery operating expenses per throughput barrel (10)
$
5.13

 
$
5.05

 
$
4.75

 
$
4.91

 
 
 
 
 
 
 
 
Feedstocks:
 
 
 
 
 
 
 
Sweet crude oil
25
%
 
42
%
 
28
%
 
36
%
Sour crude oil
67
%
 
48
%
 
63
%
 
54
%
Heavy sour crude oil
%
 
%
 
%
 
%
Other feedstocks and blends
8
%
 
10
%
 
9
%
 
10
%
Total
100
%
 
100
%
 
100
%
 
100
%
 
 
 
 
 
 
 
 
Sales of produced refined products:
 
 
 
 
 
 
 
Gasolines
53
%
 
56
%
 
54
%
 
55
%
Diesel fuels
39
%
 
40
%
 
40
%
 
39
%
Fuel oil
4
%
 
1
%
 
3
%
 
2
%
Asphalt
1
%
 
1
%
 
1
%
 
1
%
LPG and other
3
%
 
2
%
 
2
%
 
3
%
Total
100
%
 
100
%
 
100
%
 
100
%
Rocky Mountain Region (Cheyenne and Woods Cross Refineries)
 
 
 
 
 
 
 
Crude charge (BPD) (1)
67,100

 
67,530

 
63,650

 
68,770

Refinery throughput (BPD)  (2)
75,930

 
73,650

 
68,870

 
74,480

Refinery production (BPD) (3)
73,220

 
69,600

 
65,810

 
70,180

Sales of produced refined products (BPD)
72,290

 
68,940

 
65,940

 
68,000

Sales of refined products (BPD) (4)
73,190

 
75,700

 
69,160

 
73,320

Refinery utilization (5)
69.2
%
 
81.4
%
 
65.6
%
 
82.9
%


7



 
Three Months Ended December 31,
 
Years Ended December 31,
 
2016
 
2015
 
2016
 
2015
Rocky Mountain Region (Cheyenne and Woods Cross Refineries)
 
 
 
 
 
 
 
Average per produced barrel (6)
 
 
 
 
 
 
 
Net sales
$
60.54

 
$
59.13

 
$
57.80

 
$
70.05

Cost of products (7)
54.38

 
46.92

 
49.13

 
51.80

Refinery gross margin (8)
6.16

 
12.21

 
8.67

 
18.25

Refinery operating expenses (9)
11.25

 
10.60

 
10.45

 
9.89

Net operating margin (8)
$
(5.09
)
 
$
1.61

 
$
(1.78
)
 
$
8.36

 
 
 
 
 
 
 
 
Refinery operating expenses per throughput barrel (10)
$
10.71

 
$
9.92

 
$
10.01

 
$
9.03

 
 
 
 
 
 
 
 
Feedstocks:
 
 
 
 
 
 
 
Sweet crude oil
37
%
 
40
%
 
39
%
 
42
%
Sour crude oil
%
 
%
 
%
 
%
Heavy sour crude oil
32
%
 
36
%
 
35
%
 
37
%
Black wax crude oil
19
%
 
16
%
 
18
%
 
13
%
Other feedstocks and blends
12
%
 
8
%
 
8
%
 
8
%
Total
100
%
 
100
%
 
100
%
 
100
%
 
 
 
 
 
 
 
 
Sales of produced refined products:
 
 
 
 
 
 
 
Gasolines
61
%
 
59
%
 
60
%
 
57
%
Diesel fuels
30
%
 
32
%
 
33
%
 
36
%
Jet fuels
%
 
1
%
 
%
 
%
Fuel oil
3
%
 
3
%
 
2
%
 
3
%
Asphalt
4
%
 
2
%
 
3
%
 
2
%
LPG and other
2
%
 
3
%
 
2
%
 
2
%
Total
100
%
 
100
%
 
100
%
 
100
%
Consolidated
 
 
 
 
 
 
 
Crude charge (BPD) (1)
432,070

 
407,310

 
423,910

 
432,560

Refinery throughput (BPD)  (2)
466,640

 
436,580

 
457,480

 
463,580

Refinery production (BPD) (3)
452,910

 
421,200

 
442,110

 
446,560

Sales of produced refined products (BPD)
459,230

 
419,500

 
435,420

 
438,000

Sales of refined products (BPD) (4)
480,390

 
501,970

 
464,980

 
488,350

Refinery utilization (5)
94.5
%
 
91.9
%
 
92.8
%
 
97.6
%
 
 
 
 
 
 
 
 
Average per produced barrel (6)
 
 
 
 
 
 
 
Net sales
$
62.43

 
$
60.97

 
$
58.02

 
$
71.32

Cost of products (7)
55.20

 
51.06

 
49.64

 
55.25

Refinery gross margin (8)
7.23

 
9.91

 
8.38

 
16.07

Refinery operating expenses (9)
5.51

 
6.40

 
5.57

 
5.71

Net operating margin (8)
$
1.72

 
$
3.51

 
$
2.81

 
$
10.36

 
 
 
 
 
 
 
 
Refinery operating expenses per throughput barrel (10)
$
5.42

 
$
6.15

 
$
5.30

 
$
5.39

 
 
 
 
 
 
 
 
Feedstocks:
 
 
 
 
 
 
 
Sweet crude oil
48
%
 
49
%
 
48
%
 
51
%
Sour crude oil
26
%
 
26
%
 
26
%
 
25
%
Heavy sour crude oil
16
%
 
15
%
 
16
%
 
15
%
Black wax crude oil
3
%
 
3
%
 
3
%
 
2
%
Other feedstocks and blends
7
%
 
7
%
 
7
%
 
7
%
Total
100
%
 
100
%
 
100
%
 
100
%



8



 
Three Months Ended December 31,
 
Years Ended December 31,
 
2016
 
2015
 
2016
 
2015
Consolidated
 
 
 
 
 
 
 
Sales of produced refined products:
 
 
 
 
 
 
 
Gasolines
54
%
 
55
%
 
52
%
 
52
%
Diesel fuels
33
%
 
32
%
 
35
%
 
35
%
Jet fuels
5
%
 
4
%
 
4
%
 
4
%
Fuel oil
2
%
 
2
%
 
2
%
 
1
%
Asphalt
2
%
 
2
%
 
2
%
 
2
%
Lubricants
2
%
 
2
%
 
3
%
 
3
%
LPG and other
2
%
 
3
%
 
2
%
 
3
%
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). Effective July 1, 2016, our consolidated crude capacity increased
from 443,000 BPSD to 457,000 BPSD upon completion of our Woods Cross Refinery expansion project.
(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)
Excludes lower of cost or market inventory valuation adjustments of $(97.7) million and $(291.9) million for the three months and year ended December 31, 2016 , respectively and $143.6 million and $227.0 million for the three months and year ended December 31, 2015 , respectively.
(9)
Represents operating expenses of our refineries, exclusive of depreciation and amortization.
(10)
Represents refinery operating expenses, exclusive of depreciation and amortization, divided by refinery throughput.




9



Reconciliations to Amounts Reported Under Generally Accepted Accounting Principles

Reconciliations of earnings before interest, taxes, depreciation and amortization (“EBITDA”) and EBITDA excluding “non-cash” lower of cost or market inventory valuation adjustments, goodwill and asset impairment charges and PCLI pre-acquisition costs (“Adjusted 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 (loss) attributable to HollyFrontier stockholders plus (i) interest expense, net of interest income, (ii) income tax provision, and (iii) depreciation and amortization. Adjusted EBITDA is calculated as EBITDA plus or minus (i) lower of cost or market inventory valuation adjustment, (ii) goodwill and asset impairment charges and (iii) PCLI pre-acquisition costs. EBITDA and Adjusted EBITDA are not calculations provided for under GAAP; however, the amounts included in these calculations are derived from amounts included in our consolidated financial statements. EBITDA and Adjusted EBITDA should not be considered as alternatives 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 and Adjusted EBITDA are not necessarily comparable to similarly titled measures of other companies. They are presented here because they are widely used financial indicators used by investors and analysts to measure performance. EBITDA and Adjusted EBITDA are also used by our management for internal analysis and as a basis for financial covenants.

Set forth below is our calculation of EBITDA and Adjusted EBITDA.
 
Three Months Ended December 31,
 
Years Ended December 31,
 
2016
 
2015
 
2016
 
2015
 
(In thousands)
Net income (loss) attributable to HollyFrontier stockholders
$
53,165

 
$
(43,921
)
 
$
(260,453
)
 
$
740,101

    Add (subtract) income tax provision (benefit)
12,952

 
(40,724
)
 
19,411

 
406,060

    Add interest expense (1)
26,304

 
11,657

 
80,910

 
44,840

    Subtract interest income
(1,111
)
 
(988
)
 
(2,491
)
 
(3,391
)
    Add depreciation and amortization
93,594

 
90,572

 
363,027

 
346,151

EBITDA
$
184,904

 
$
16,596

 
$
200,404

 
$
1,533,761

    Add (subtract) lower of cost or market inventory adjustment
(97,656
)
 
143,554

 
(291,938
)
 
226,979

    Add goodwill and asset impairment

 

 
654,084

 

    PCLI pre-acquisition costs
13,406

 

 
13,406

 

Adjusted EBITDA
$
100,654

 
$
160,150

 
$
575,956

 
$
1,760,740

(1) Includes loss on early extinguishment of debt of $8.7 million and $1.4 million for the years ended December 31, 2016 and 2015 , respectively.
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 non-cash effects of lower of cost or market inventory valuation adjustments, goodwill and asset impairment charges and 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 sold (exclusive of lower of cost or market inventory valuation adjustment) and operating expenses, in each case averaged per produced barrel sold, and

10



(ii) net operating margin and refinery gross margin. Due to rounding of reported numbers, some amounts may not calculate exactly.

Reconciliation of produced product sales to total sales and other revenues
 
Three Months Ended December 31,
 
Years Ended December 31,
 
2016
 
2015
 
2016
 
2015
 
(Dollars in thousands, except per barrel amounts)
Consolidated
 
 
 
 
 
 
 
Average sales price per produced barrel sold
$
62.43

 
$
60.97

 
$
58.02

 
$
71.32

Times sales of produced refined products (BPD)
459,230

 
419,500

 
435,420

 
438,000

Times number of days in period
92

 
92

 
366

 
365

Produced refined product sales
$
2,637,615

 
$
2,353,076

 
$
9,246,283

 
$
11,401,928

 
 
 
 
 
 
 
 
Total produced refined product sales
$
2,637,615

 
$
2,353,076

 
$
9,246,283

 
$
11,401,928

Add refined product sales from purchased products and rounding (1)     
123,401

 
438,809

 
624,233

 
1,214,920

Total refined product sales
2,761,016

 
2,791,885

 
9,870,516

 
12,616,848

Add direct sales of excess crude oil (2)     
142,129

 
91,435

 
436,974

 
352,113

Add other refining segment revenue (3)     
33,241

 
40,898

 
159,700

 
202,222

Total refining segment revenue
2,936,386

 
2,924,218

 
10,467,190

 
13,171,183

Add HEP segment sales and other revenues
112,526

 
97,251

 
402,043

 
358,875

Add corporate and other revenues

 
190

 
168

 
663

Subtract consolidations and eliminations
(93,844
)
 
(78,100
)
 
(333,701
)
 
(292,801
)
Sales and other revenues
$
2,955,068

 
$
2,943,559

 
$
10,535,700

 
$
13,237,920


Reconciliation of average cost of products per produced barrel sold to cost of products sold (exclusive of lower of cost or market inventory valuation adjustment)
 
Three Months Ended December 31,
 
Years Ended December 31,
 
2016
 
2015
 
2016
 
2015
 
(Dollars in thousands, except per barrel amounts)
Consolidated
 
 
 
 
 
 
 
Average cost of products per produced barrel sold
$
55.20

 
$
51.06

 
$
49.64

 
$
55.25

Times sales of produced refined products (BPD)
459,230

 
419,500

 
435,420

 
438,000

Times number of days in period
92

 
92

 
366

 
365

Cost of products for produced products sold
$
2,332,154

 
$
1,970,610

 
$
7,910,815

 
$
8,832,818

 
 
 
 
 
 
 
 
Total cost of products for produced products sold
$
2,332,154

 
$
1,970,610

 
$
7,910,815

 
$
8,832,818

Add refined product costs from purchased products and rounding (1)     
129,858

 
439,110

 
638,540

 
1,245,451

Total cost of refined products sold
2,462,012

 
2,409,720

 
8,549,355

 
10,078,269

Add crude oil cost of direct sales of excess crude oil (2)     
143,686

 
93,833

 
441,180

 
348,362

Add other refining segment cost of products sold (4)     
17,818

 
17,430

 
72,222

 
98,979

Total refining segment cost of products sold
2,623,516

 
2,520,983

 
9,062,757

 
10,525,610

Subtract consolidations and eliminations
(72,744
)
 
(74,472
)
 
(296,830
)
 
(286,392
)
Costs of products sold (exclusive of lower of cost or market inventory valuation adjustment and depreciation and amortization)
$
2,550,772

 
$
2,446,511

 
$
8,765,927

 
$
10,239,218



11



Reconciliation of average refinery operating expenses per produced barrel sold to total operating expenses
 
Three Months Ended December 31,
 
Years Ended December 31,
 
2016
 
2015
 
2016
 
2015
 
(Dollars in thousands, except per barrel amounts)
Consolidated
 
 
 
 
 
 
 
Average refinery operating expenses per produced barrel sold
$
5.51

 
$
6.40

 
$
5.57

 
$
5.71

Times sales of produced refined products (BPD)
459,230

 
419,500

 
435,420

 
438,000

Times number of days in period
92

 
92

 
366

 
365

Refinery operating expenses for produced products sold
$
232,793

 
$
247,002

 
$
887,656

 
$
912,858

 
 
 
 
 
 
 
 
Total refinery operating expenses for produced products sold
$
232,793

 
$
247,002

 
$
887,656

 
$
912,858

Add other refining segment operating expenses and rounding (5)     
10,305

 
14,715

 
35,934

 
41,813

Total refining segment operating expenses
243,098

 
261,717

 
923,590

 
954,671

Add HEP segment operating expenses
34,819

 
24,955

 
123,985

 
105,554

Add corporate and other costs
1,096

 
1,394

 
4,893

 
3,433

Subtract consolidations and eliminations
(20,325
)
 
(2,852
)
 
(33,629
)
 
(3,285
)
Operating expenses (exclusive of depreciation and amortization)
$
258,688

 
$
285,214

 
$
1,018,839

 
$
1,060,373


Reconciliation of net operating margin per barrel to refinery gross margin per barrel to total sales and other revenues
 
Three Months Ended December 31,
 
Years Ended December 31,
 
2016
 
2015
 
2016
 
2015
 
(Dollars in thousands, except per barrel amounts)
Consolidated
 
 
 
 
 
 
 
Net operating margin per barrel
$
1.72

 
$
3.51

 
$
2.81

 
$
10.36

Add average refinery operating expenses per produced barrel
5.51

 
6.40

 
5.57

 
5.71

Refinery gross margin per barrel
7.23

 
9.91

 
8.38

 
16.07

Add average cost of products per produced barrel sold
55.20

 
51.06

 
49.64

 
55.25

Average sales price per produced barrel sold
$
62.43

 
$
60.97

 
$
58.02

 
$
71.32

Times sales of produced refined products (BPD)
459,230

 
419,500

 
435,420

 
438,000

Times number of days in period
92

 
92

 
366

 
365

Produced refined product sales
$
2,637,615

 
$
2,353,076

 
$
9,246,283

 
$
11,401,928

 
 
 
 
 
 
 
 
Total produced refined product sales
$
2,637,615

 
$
2,353,076

 
$
9,246,283

 
$
11,401,928

Add refined product sales from purchased products and rounding (1)     
123,401

 
438,809

 
624,233

 
1,214,920

Total refined product sales
2,761,016