HollyFrontier Corporation Reports Quarterly Results

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  • Reported net income attributable to HollyFrontier stockholders of $168.9 million, or $1.03 per diluted share, and adjusted net income of $143.0 million, or $0.87 per diluted share, for the second quarter

  • Reported EBITDA of $444.3 million and Adjusted EBITDA of $334.5 million for the second quarter

DALLAS, August 03, 2021--(BUSINESS WIRE)--HollyFrontier Corporation (NYSE:HFC) ("HollyFrontier" or the "Company") today reported second quarter net income attributable to HollyFrontier stockholders of $168.9 million, or $1.03 per diluted share, for the quarter ended June 30, 2021, compared to a net loss of $(176.7) million, or $(1.09) per diluted share, for the quarter ended June 30, 2020.

The second quarter results reflect special items that collectively increased net income by a total of $25.8 million. On a pre-tax basis, these items include a lower of cost or market inventory valuation adjustment of $118.8 million, partially offset by pre-close acquisition integration costs of $0.7 million and charges related to the Cheyenne Refinery conversion to renewable diesel production, including decommissioning charges of $8.1 million and severance charges totaling $0.2 million. Excluding these items, net income for the current quarter was $143.0 million ($0.87 per diluted share) compared to net loss of $(40.8) million ($(0.25) per diluted share) for the second quarter of 2020, which excludes certain items that collectively increased net loss by $135.9 million.

HollyFrontier’s President & CEO, Michael Jennings, commented, "HollyFrontier delivered strong financial results in the second quarter, driven by improvement in refining margins in both the West and Mid-Continent regions and strengthening base oil margins in the quarter. Our focus remains on executing our renewable diesel projects on-time and within capital guidance and closing the Puget Sound Refinery acquisition in the fourth quarter of this year."

Refining segment income before interest and income taxes was $250.1 million for the second quarter of 2021 compared to a loss before interest and income taxes of $(5.1) million in the second quarter of 2020. The segment reported Adjusted EBITDA of $211.2 million for the second quarter of 2021 compared to $25.0 million for the second quarter of 2020. This increase was driven by stronger product demand, which resulted in a consolidated refinery gross margin of $11.71 per produced barrel, a 45% increase compared to $8.08 for the second quarter of 2020. Crude oil charge averaged 416,350 barrels per day ("BPD") for the current quarter compared to 312,070 BPD for the second quarter of 2020.

Lubricants and Specialty Products segment income before interest and income taxes was $60.1 million for the second quarter of 2021 compared to a loss before interest and income taxes of $(209.3) million in the second quarter of 2020. The segment reported EBITDA of $79.2 million for the second quarter of 2021 compared to $(189.5) million in the second quarter of 2020. Excluding the long-lived asset impairment charge of $204.7 million, Adjusted EBITDA in the second quarter of 2020 was $15.2 million. This increase was driven by strong base oil margins in the second quarter of 2021.

Holly Energy Partners, L.P. ("HEP") reported EBITDA of $88.1 million for the second quarter of 2021 compared to $112.5 million in the second quarter of 2020. The second quarter of 2020 included a gain on sales-type leases of $33.8 million.

For the second quarter of 2021, net cash provided by operations totaled $427.8 million. At June 30, 2021, the Company's cash and cash equivalents totaled $1,398.3 million, a $204.9 million increase over cash and cash equivalents of $1,193.4 million at March 31, 2021. Additionally, the Company's consolidated debt was $3,101.0 million. The Company’s debt, exclusive of HEP debt, which is nonrecourse to HollyFrontier, was $1,738.4 million at June 30, 2021.

The Company has scheduled a webcast conference call for today, August 3, 2021, at 8:30 AM Eastern Time to discuss financial results and this morning's announced acquisition (replacing the previously scheduled earnings call at 8:30 AM Eastern Time on August 4, 2021). This webcast may be accessed at: https://event.on24.com/wcc/r/3347467/55757835D3CCD93D54C9366AD04CA5C5. An audio archive of this webcast will be available using the above noted link through August 17, 2021.

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 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. Forward-looking statements use words such as "anticipate," "project," "expect," "plan," "goal," "forecast," "strategy," "intend," "should," "would," "could," "believe," "may," and similar expressions and statements regarding our plans and objectives for future operations. 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, the Company’s ability to successfully close the pending acquisition by the Company and HEP of Sinclair Oil Corporation and Sinclair Transportation Company (collectively, "Sinclair", and such transactions, the "Sinclair Transactions"), or once closed, integrate the operations of Sinclair with its existing operations and fully realize the expected synergies of the Sinclair Transactions or on the expected timeline; the satisfaction or waivers of the conditions precedent to the proposed Sinclair Transactions, including without limitation, the receipt of the Company stockholder approval for the issuance of HF Sinclair common stock at closing and regulatory approvals (including clearance by antitrust authorities necessary to complete the Sinclair Transactions on the terms and timeline desired), risks relating to the value of HF Sinclair common stock and the value of HEP’s limited partner common units to be issued at the closing of the Sinclair Transactions from sales in anticipation of closing and from sales by the Sinclair holders following the closing of the Sinclair Transactions; legal proceedings that may be instituted against the Company or HEP following the announcement of the proposed Sinclair Transactions; the Company's ability to successfully close the pending Puget Sound refinery transaction, or, once closed, integrate the operation of the Puget Sound refinery with our existing operations; the extraordinary market environment and effects of the COVID-19 pandemic, including a significant decline in demand for refined petroleum products in markets that the Company serves; risks and uncertainties with respect to the actions of actual or potential competitive suppliers and transporters of refined petroleum products or lubricant and specialty products in the Company’s markets; the spread between market prices for refined products and market prices for crude oil; the possibility of constraints on the transportation of refined products or lubricant and specialty products; the possibility of inefficiencies, curtailments or shutdowns in refinery operations or pipelines, whether due to infection in the workforce or in response to reductions in demand; the effects of current and/or future governmental and environmental regulations and policies, including the effects of current and/or future restrictions on various commercial and economic activities in response to the COVID-19 pandemic; 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 and consummating construction projects, including the Company's ability to complete announced capital projects, such as the conversion of the Cheyenne Refinery to a renewable diesel facility and the construction of the Artesia renewable diesel unit and pretreatment unit, on time and within capital guidance; the Company's ability to timely obtain or maintain permits, including those necessary for operations or capital 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 existing or future acquired operations; the possibility of terrorist or cyberattacks and the consequences of any such attacks; general economic conditions, including uncertainty regarding the timing, pace and extent of an economic recovery in the United States; continued deterioration in gross margins or a prolonged economic slowdown due to the COVID-19 pandemic could result in an impairment of goodwill and/or additional long-lived asset impairments; and other financial, operational and legal risks and uncertainties detailed from time to time in the Company’s Securities and Exchange Commission filings. The forward-looking statements speak only as of the date made and, other than as required by law, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

RESULTS OF OPERATIONS

Financial Data (all information in this release is unaudited)

Three Months Ended
June 30,

Change from 2020

2021

2020

Change

Percent

(In thousands, except per share data)

Sales and other revenues

$

4,577,123

$

2,062,930

$

2,514,193

122

%

Operating costs and expenses:

Cost of products sold:

Cost of products sold (exclusive of lower of cost or market inventory valuation adjustment)

3,825,729

1,576,996

2,248,733

143

Lower of cost or market inventory valuation adjustment

(118,825

)

(269,904

)

151,079

(56

)

3,706,904

1,307,092

2,399,812

184

Operating expenses

334,191

303,359

30,832

10

Selling, general and administrative expenses

77,754

75,369

2,385

3

Depreciation and amortization

124,042

130,178

(6,136

)

(5

)

Long-lived asset impairment

436,908

(436,908

)

(100

)

Total operating costs and expenses

4,242,891

2,252,906

1,989,985

88

Income (loss) from operations

334,232

(189,976

)

524,208

(276

)

Other income (expense):

Earnings of equity method investments

3,423

2,156

1,267

59

Interest income

1,029

1,506

(477

)

(32

)

Interest expense

(28,942

)

(32,695

)

3,753

(11

)

Gain on sales-type leases

33,834

(33,834

)

(100

)

Gain on foreign currency transactions

583

2,285

(1,702

)

(74

)

Other, net

7,927

1,572

6,355

404

(15,980

)

8,658

(24,638

)

(285

)

Income (loss) before income taxes

318,252

(181,318

)

499,570

(276

)

Income tax expense (benefit)

123,485

(30,911

)

154,396

(499

)

Net income (loss)

194,767

(150,407

)

345,174

(229

)

Less net income attributable to noncontrolling interest

25,917

26,270

(353

)

(1

)

Net income (loss) attributable to HollyFrontier stockholders

$

168,850

$

(176,677

)

$

345,527

(196

)%

Earnings (loss) per share attributable to HollyFrontier stockholders:

Basic

$

1.03

$

(1.09

)

$

2.12

(194

)%

Diluted

$

1.03

$

(1.09

)

$

2.12

(194

)%

Cash dividends declared per common share

$

$

0.35

$

(0.35

)

(100

)%

Average number of common shares outstanding:

Basic

162,523

161,889

634

%

Diluted

162,523

161,889

634

%

EBITDA

$

444,290

$

(46,221

)

$

490,511

(1,061

)%

Adjusted EBITDA

$

334,501

$

99,711

$

234,790

235

%

Six Months Ended
June 30,

Change from 2020

2021

2020

Change

Percent

(In thousands, except per share data)

Sales and other revenues

$

8,081,416

$

5,463,475

$

2,617,941

48

%

Operating costs and expenses:

Cost of products sold:

Cost of products sold (exclusive of lower of cost or market inventory valuation adjustment)

6,786,034

4,270,722

2,515,312

59

Lower of cost or market inventory valuation adjustment

(318,862

)

290,560

(609,422

)

(210

)

6,467,172

4,561,282

1,905,890

42

Operating expenses

734,100

631,704

102,396

16

Selling, general and administrative expenses

159,729

163,106

(3,377

)

(2

)

Depreciation and amortization

248,121

270,753

(22,632

)

(8

)

Long-lived asset impairment

436,908

(436,908

)

(100

)

Total operating costs and expenses

7,609,122

6,063,753

1,545,369

25

Income (loss) from operations

472,294

(600,278

)

1,072,572

(179

)

Other income (expense):

Earnings of equity method investments

5,186

3,870

1,316

34

Interest income

2,060

5,579

(3,519

)

(63

)

Interest expense

(67,328

)

(55,334

)

(11,994

)

22

Gain on tariff settlement

51,500

51,500

Gain on sales-type leases

33,834

(33,834

)

(100

)

Loss on early extinguishment of debt

(25,915

)

25,915

(100

)

Loss on foreign currency transactions

(734

)

(1,948

)

1,214

(62

)

Other, net

9,817

3,422

6,395

187

501

(36,492

)

36,993

(101

)

Income (loss) before income taxes

472,795

(636,770

)

1,109,565

(174

)

Income tax expense (benefit)

95,178

(193,077

)

288,255

(149

)

Net income (loss)

377,617

(443,693

)

821,310

(185

)

Less net income attributable to noncontrolling interest

60,550

37,607

22,943

61

Net income (loss) attributable to HollyFrontier stockholders

$

317,067

$

(481,300

)

$

798,367

(166

)%

Earnings (loss) per share attributable to HollyFrontier stockholders:

Basic

$

1.92

$

(2.97

)

$

4.89

(165

)%

Diluted

$

1.92

$

(2.97

)

$

4.89

(165

)%

Cash dividends declared per common share

$

0.35

$

0.70

$

(0.35

)

(50

)%

Average number of common shares outstanding:

Basic

162,501

161,882

619

%

Diluted

162,501

161,882

619

%

EBITDA

$

725,634

$

(353,869

)

$

1,079,503

(305

)%

Adjusted EBITDA

$

381,809

$

368,480

$

13,329

4

%

Balance Sheet Data

June 30,

December 31,

2021

2020

(In thousands)

Cash and cash equivalents

$

1,398,280

$

1,368,318

Working capital

$

2,131,679

$

1,935,605

Total assets

$

12,560,033

$

11,506,864

Long-term debt

$

3,100,969

$

3,142,718

Total equity

$

6,040,244

$

5,722,203

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 the Corporate, Other and Eliminations column.

The Refining segment includes the operations of our El Dorado, Tulsa, Navajo, 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 geographic regions of the United States. HFC Asphalt operates various asphalt terminals in Arizona, New Mexico and Oklahoma. The Refining segment also included the operations of the Cheyenne Refinery through the third quarter of 2020, at which time it permanently ceased petroleum refining operations.

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 processing units in the Mid-Continent, Southwest and Rocky Mountain geographic 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, Cheyenne Pipeline LLC and Cushing Connect Pipeline & Terminal 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.

Refining

Lubricants
and Specialty
Products

HEP

Corporate,
Other and
Eliminations

Consolidated
Total

(In thousands)

Three Months Ended June 30, 2021

Sales and other revenues:

Revenues from external customers

$

3,887,273

$

662,755

$

27,092

$

3

$

4,577,123

Intersegment revenues

205,186

6,434

99,142

(310,762

)

$

4,092,459

$

669,189

$

126,234

$

(310,759

)

$

4,577,123

Cost of products sold (exclusive of lower of cost or market inventory)

$

3,619,319

$

491,218

$

$

(284,808

)

$

3,825,729

Lower of cost or market inventory valuation adjustment

$

(118,825

)

$

$

$

$

(118,825

)

Operating expenses

$

231,422

$

61,310

$

42,068

$

(609

)

$

334,191

Selling, general and administrative expenses

$

30,136

$

37,583

$

2,846

$

7,189

$

77,754

Depreciation and amortization

$

79,938

$

19,152

$

22,275

$

2,677

$

124,042

Income (loss) from operations

$

250,469

$

59,926

$

59,045

$

(35,208

)

$

334,232

Income (loss) before interest and income taxes

$

250,111

$

60,093

$

67,911

$

(31,950

)

$

346,165

Net income attributable to noncontrolling interest

$

$

$

1,193

$

24,724

$

25,917

Earnings of equity method investments

$

$

$

3,423

$

$

3,423

Capital expenditures

$

33,150

$

5,614

$

24,498

$

119,618

$

182,880

Three Months Ended June 30, 2020

Sales and other revenues:

Revenues from external customers

$

1,690,042

$

353,644

$

19,244

$

$

2,062,930

Intersegment revenues

37,462

3,643

95,563

(136,668

)

$

1,727,504

$

357,287

$

114,807

$

(136,668

)

$

2,062,930

Cost of products sold (exclusive of lower of cost or market inventory)

$

1,433,437

$

258,347

$

$

(114,788

)

$

1,576,996

Lower of cost or market inventory valuation adjustment

$

(269,904

)

$

$

$

$

(269,904

)

Operating expenses

$

239,359

$

47,840

34,737

$

(18,577

)

$

303,359

Selling, general and administrative expenses

$

32,811

$

35,919

$

2,535

$

4,104

$

75,369

Depreciation and amortization

$

81,694

$

19,779

$

24,008

$

4,697

$

130,178

Long-lived asset impairment

$

215,242

$

204,708

$

16,958

$

$

436,908

Income (loss) from operations

$

(5,135

)

$

(209,306

)

$

36,569

$

(12,104

)

$

(189,976

)

Income (loss) before interest and income taxes

$

(5,135

)

$

(209,257

)

$

73,028

$

(8,765

)

$

(150,129

)

Net income attributable to noncontrolling interest

$

$

$

650

$

25,620

$

26,270

Earnings of equity method investments

$

$

$

2,156

$

$

2,156

Capital expenditures

$

12,102

$

4,311

$

11,798

$

17,776

$

45,987

Refining

Lubricants
and Specialty
Products

HEP

Corporate,
Other
and
Eliminations (1)

Consolidated
Total

(In thousands)

Six Months Ended June 30, 2021

Sales and other revenues:

Revenues from external customers

$

6,844,306

$

1,184,753

$

52,350

$

7

$

8,081,416

Intersegment revenues

265,648

8,999

201,068

(475,715

)

$

7,109,954

$

1,193,752

$

253,418

$

(475,708

)

$

8,081,416

Cost of products sold (exclusive of lower of cost or market inventory)

$

6,381,262

$

822,741

$

$

(417,969

)

$

6,786,034

Lower of cost or market inventory valuation adjustment

$

(318,353

)

$

$

$

(509

)

$

(318,862

)

Operating expenses

$

524,277

$

122,063

$

83,433

$

4,327

$

734,100

Selling, general and administrative expenses

$

58,632

$

83,136

$

5,815

$

12,146

$

159,729

Depreciation and amortization

$

168,020

$

39,273

$

45,281

$

(4,453

)

$

248,121

Income (loss) from operations

$

296,116

$

126,539

$

118,889

$

(69,250

)

$

472,294

Income (loss) before interest and income taxes

$

295,788

$

127,078

$

154,669

$

(39,472

)

$

538,063

Net income attributable to noncontrolling interest

$

$

$

2,839

$

57,711

$

60,550

Earnings of equity method investments

$

$

$

5,186

$

$

5,186

Capital expenditures

$

73,511

$

9,701

$

57,716

$

191,913

$

332,841

Six Months Ended June 30, 2020

Sales and other revenues:

Revenues from external customers

$

4,540,662

$

877,143

$

45,670

$

$

5,463,475

Intersegment revenues

$

121,708

$

6,747

$

196,991

$

(325,446

)

$

$

4,662,370

$

883,890

$

242,661

$

(325,446

)

$

5,463,475

Cost of products sold (exclusive of lower of cost or market inventory)

$

3,902,188

$

649,727

$

$

(281,193

)

$

4,270,722

Lower of cost or market inventory valuation adjustment

$

290,560

$

$

$

$

290,560

Operating expenses

$

498,533

$

101,971

$

69,718

$

(38,518

)

$

631,704

Selling, general and administrative expenses

$

63,811

$

84,881

$

5,237

$

9,177

$

163,106

Depreciation and amortization

$

171,873

$

41,828

$

47,986

$

9,066

$

270,753

Long-lived asset impairment

$

215,242

$

204,708

$

16,958

$

$

436,908

Income (loss) from operations

$

(479,837

)

$

(199,225

)

$

102,762

$

(23,978

)

$

(600,278

)

Income (loss) before interest and income taxes

$

(479,837

)

$

(198,967

)

$

115,526

$

(23,737

)

$

(587,015

)

Net income attributable to noncontrolling interest

$

$

$

1,865

$

35,742

$

37,607

Earnings of equity method investments

$

$

$

3,870

$

$

3,870

Capital expenditures

$

65,116

$

13,392

$

30,740

$

20,488

$

129,736

Refining

Lubricants
and Specialty
Products

HEP

Corporate,
Other and
Eliminations

Consolidated
Total

(In thousands)

June 30, 2021

Cash and cash equivalents

$

6,383

.

$

126,944

$

19,561

$

1,245,392

$

1,398,280

Total assets

$

7,018,933

$

2,015,176

$

2,255,752

$

1,270,172

$

12,560,033

Long-term debt

$

$

$

1,362,570

$

1,738,399

$

3,100,969

December 31, 2020

Cash and cash equivalents

$

3,106

$

163,729

$

21,990

$

1,179,493

$

1,368,318

Total assets

$

6,203,847

$

1,864,313

$

2,198,478

$

1,240,226

$

11,506,864

Long-term debt

$

$

$

1,405,603

$

1,737,115

$

3,142,718

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 long-lived asset impairment charges, 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.

As of June 30, 2021, our refinery operations included the El Dorado, Tulsa, Navajo and Woods Cross Refineries. In the third quarter of 2020, we permanently ceased petroleum refining operations at our Cheyenne Refinery and subsequently began converting certain assets at our Cheyenne Refinery to renewable diesel production. The disaggregation of our refining geographic operating data is presented in two regions, Mid-Continent and West, to best reflect the economic drivers of our refining operations. The Mid-Continent region continues to be comprised of the El Dorado and Tulsa Refineries, and the new West region is comprised of the Navajo and Woods Cross Refineries. Refining segment operating data for the three and the six months ended June 30, 2020 has been retrospectively adjusted to reflect the revised regional groupings.

Three Months Ended
June 30,

Six Months Ended
June 30,

2021

2020

2021

2020

Mid-Continent Region (El Dorado and Tulsa Refineries)

Crude charge (BPD) (1)

278,380

206,950

247,500

229,670

Refinery throughput (BPD) (2)

293,050

220,010

257,030

245,470

Sales of produced refined products (BPD) (3)

287,680

216,280

249,400

237,760

Refinery utilization (4)

107.1

%

79.6

%

95.2

%

88.3

%

Average per produced barrel (5)

Refinery gross margin

$

10.82

$

6.31

$

8.99

$

8.07

Refinery operating expenses (6)

5.27

5.68

7.22

5.47

Net operating margin

$

5.55

$

0.63

$

1.77

$

2.60

Refinery operating expenses per throughput barrel (7)

$

5.18

$

5.58

$

6.89

$

5.30

Feedstocks:

Sweet crude oil

64

%

61

%

62

%

56

%

Sour crude oil

14

%

16

%

14

%

19

%

Heavy sour crude oil

17

%

17

%

19

%

19

%

Other feedstocks and blends

5

%

6

%

5

%

6

%

Total

100

%

100

%

100

%

100

%

Sales of produced refined products:

Gasolines

51

%

54

%

51

%

53

%

Diesel fuels

34

%

36

%

34

%

33

%

Jet fuels

4

%

1

%

5

%

4

%

Fuel oil

1

%

1

%

1

%

1

%

Asphalt

2

%

3

%

2

%

3

%

Base oils

4

%

3

%

4

%

4

%

LPG and other

4

%

2

%

3

%

2

%

Total

100

%

100

%

100

%

100

%

Three Months Ended
June 30,

Six Months Ended
June 30,

2021

2020

2021

2020

West Region (Navajo and Woods Cross Refineries)

Crude charge (BPD) (1)

137,970

105,120

134,940

122,690

Refinery throughput (BPD) (2)

151,680

117,840

148,160

136,090

Sales of produced refined products (BPD) (3)

156,260

132,610

150,290

141,610

Refinery utilization (4)

95.2

%

72.5

%

93.1

%

84.6

%

Average per produced barrel (5)

Refinery gross margin

$

13.35

$

10.96

$

11.88

$

12.41

Refinery operating expenses (6)

6.57

7.26

7.29

7.07

Net operating margin

$

6.78

$

3.70

$

4.59

$

5.34

Refinery operating expenses per throughput barrel (7)

$

6.77

$

7.62

$

7.40

$

7.36

Feedstocks:

Sweet crude oil

22

%

32

%

23

%

29

%

Sour crude oil

59

%

48

%

59

%

50

%

Black wax crude oil

10

%

9

%

9

%

11

%

Other feedstocks and blends

9

%

11

%

9

%

10

%

Total

100

%

100

%

100

%

100

%

Sales of produced refined products:

Gasolines

52

%

55

%

53

%

56

%

Diesel fuels

37

%

34

%

37

%

35

%

Fuel oil

3

%

2

%

3

%

2

%

Asphalt

5

%

6

%

4

%

4

%

LPG and other

3

%

3

%

3

%

3

%

Total

100

%

100

%

100

%

100

%

Consolidated

Crude charge (BPD) (1)

416,350

312,070

382,440

352,360

Refinery throughput (BPD) (2)

444,730

337,850

405,190

381,560

Sales of produced refined products (BPD) (3)

443,940

348,890

399,690

379,370

Refinery utilization (4)

102.8

%

77.1

%

94.4

%

87.0

%

Average per produced barrel (5)

Refinery gross margin

$

11.71

$

8.08

$

10.07

$

9.69

Refinery operating expenses (6)

5.73

6.28

7.25

6.07

Net operating margin

$

5.98

$

1.80

$

2.82

$

3.62

Refinery operating expenses per throughput barrel (7)

$

5.72

$

6.48

$

7.07

$

6.03

Feedstocks:

Sweet crude oil

50

%

51

%

48

%

46

%

Sour crude oil

30

%

27

%

30

%

30

%

Heavy sour crude oil

11

%

11

%

12

%

12

%

Black wax crude oil

3

%

3

%

3

%

4

%

Other feedstocks and blends

6

%

8

%

7

%

8

%

Total

100

%

100

%

100

%

100

%

Three Months Ended
June 30,

Six Months Ended
June 30,

2021

2020

2021

2020

Consolidated

Sales of produced refined products:

Gasolines

51

%

54

%

52

%

54

%

Diesel fuels

35

%

35

%

35

%

34

%

Jet fuels

3

%

1

%

3

%

3

%

Fuel oil

1

%

1

%

1

%

1

%

Asphalt

3

%

4

%

3

%

3

%

Base oils

3

%

2

%

3

%

2

%

LPG and other

4

%

3

%

3

%

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)

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 405,000 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 and Cheyenne Refinery operating expenses, divided by sales volumes of refined products produced at our refineries.

(7)

Represents total refining segment operating expenses, exclusive of depreciation and amortization and Cheyenne Refinery operating expenses, divided by refinery throughput.

Lubricants and Specialty Products Segment Operating Data

The following table sets forth information about our lubricants and specialty products operations.

Three Months Ended June 30,

Six Months Ended June 30,

2021

2020

2021

2020

Lubricants and Specialty Products

Throughput (BPD)

19,310

16,370

19,860

19,060

Sales of produced products (BPD)

36,670

26,990

34,630

31,900

Sales of produced products:

Finished products

51

%

56

%

52

%

51

%

Base oils

29

%

19

%

27

%

23

%

Other

20

%

25

%

21

%

26

%

Total

100

%

100

%

100

%

100

%

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 June 30, 2021

Sales and other revenues

$

254,485

$

629,211

$

(214,507

)

$

669,189

Cost of products sold

$

163,280

$

542,445

$

(214,507

)

$

491,218

Operating expenses

$

29,106

$

32,204

$

$

61,310

Selling, general and administrative expenses

$

5,914

$

31,669

$

$

37,583

Depreciation and amortization

$

6,230

$

12,922

$

$

19,152

Income from operations

$

49,955

$

9,971

$

$

59,926

Income before interest and income taxes

$

49,955

$

10,138

$

$

60,093

EBITDA

$

56,185

$

23,060

$

$

79,245

Three months ended June 30, 2020

Sales and other revenues

$

85,857

$

343,927

$

(72,497

)

$

357,287

Cost of products sold

$

67,210

$

263,634

$

(72,497

)

$

258,347

Operating expenses

$

21,034

$

26,806

$

$

47,840

Selling, general and administrative expenses

$

5,617

$

30,302

$

$

35,919

Depreciation and amortization

$

5,877

$

13,902

$

$

19,779

Long-lived asset impairment

$

167,017

$

37,691

$

$

204,708

Loss from operations

$

(180,898

)

$

(28,408

)

$

$

(209,306

)

Loss before interest and income taxes

$

(180,898

)

$

(28,359

)

$

$

(209,257

)

EBITDA

$

(175,021

)

$

(14,457

)

$

$

(189,478

)

Six months ended June 30, 2021

Sales and other revenues

$

427,927

$

1,112,457

$

(346,632

)

$

1,193,752

Cost of products sold

$

295,812

$

873,561

$

(346,632

)

$

822,741

Operating expenses

$

57,727

$

64,336

$

$

122,063

Selling, general and administrative expenses

$

12,653

$

70,483

$

$

83,136

Depreciation and amortization

$

13,535

$

25,738

$

$

39,273

Income from operations

$

48,200

$

78,339

$

$

126,539

Income before interest and income taxes

$

48,200

$

78,878

$

$

127,078

EBITDA

$

61,735

$

104,616

$

$

166,351

Six months ended June 30, 2020

Sales and other revenues

$

250,686

$

817,984

$

(184,780

)

$

883,890

Cost of products sold

$

247,810

$

586,697

$

(184,780

)

$

649,727

Operating expenses

$

44,303

$

57,668

$

$

101,971

Selling, general and administrative expenses

$

10,980

$

73,901

$

$

84,881

Depreciation and amortization

$

16,744

$

25,084

$

$

41,828

Long-lived asset impairment

$

167,017

$

37,691

$

$

204,708

Income (loss) from operations

$

(236,168

)

$

36,943

$

$

(199,225

)

Income (loss) before interest and income taxes

$

(236,168

)

$

37,201

$

$

(198,967

)

EBITDA

$

(219,424

)

$

62,285

$

$

(157,139

)

(1)

Rack Back consists of the PCLI base oil production activities, by-product sales to third parties and intra-segment base oil sales to Rack Forward.

(2)

Rack Forward activities include the purchase of base oils from Rack Back and the blending, packaging, marketing and distribution and sales of finished lubricants and specialty products to third parties.

(3)

Intra-segment sales of Rack Back produced base oils to Rack Forward are eliminated under the "Eliminations" column.

Reconciliations to Amounts Reported Under Generally Accepted Accounting Principles

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

Earnings before interest, taxes, depreciation and amortization, referred 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 adjustments, (ii) long-lived asset impairment, inclusive of HollyFrontier's pro-rata share of impairment in HEP segment, (iii) HollyFrontier's pro-rata share of HEP's gain on sales-type leases, (iv) HollyFrontier's pro-rata share of HEP's loss on early extinguishment of debt, (v) severance costs, (vi) restructuring charges, (vii) Cheyenne Refinery LIFO inventory liquidation costs, (viii) decommissioning costs, (ix) pre-close acquisition integration costs, (x) acquisition integration and regulatory costs and (xi) gain on tariff settlement.

EBITDA and Adjusted EBITDA are not calculations provided for under accounting principles generally accepted in the United States; 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. These 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
June 30,

Six Months Ended
June 30,

2021

2020

2021

2020

(In thousands)

Net income (loss) attributable to HollyFrontier stockholders

$

168,850

$

(176,677

)

$

317,067

$

(481,300

)

Add interest expense

28,942

32,695

67,328

55,334

Subtract interest income

(1,029

)

(1,506

)

(2,060

)

(5,579

)

Add (subtract) income tax expense (benefit)

123,485

(30,911

)

95,178

(193,077

)

Add depreciation and amortization

124,042

130,178

248,121

270,753

EBITDA

$

444,290

$

(46,221

)

$

725,634

$

(353,869

)

Add (subtract) lower of cost or market inventory valuation adjustment

(118,825

)

(269,904

)

(318,862

)

290,560

Add long-lived asset impairment, inclusive of pro-rata share of impairment in HEP segment

429,540

429,540

Subtract HollyFrontier's pro-rata share of HEP's gain on sales-type leases

(19,134

)

(19,134

)

Add HollyFrontier's pro-rata share of HEP's loss on early extinguishment of debt

14,656

Add severance costs

194

1,117

708

1,117

Add restructuring charges

3,679

7,813

3,679

Add Cheyenne Refinery LIFO inventory liquidation costs

923

Add decommissioning costs

8,096

16,347

Add pre-close acquisition integration costs

746

746

Add acquisition integration and regulatory costs

634

1,931

Subtract gain on tariff settlement

(51,500

)

Adjusted EBITDA

$

334,501

$

99,711

$

381,809

$

368,480

EBITDA and Adjusted EBITDA attributable to our Refining segment is presented below:

Three Months Ended
June 30,

Six Months Ended
June 30,

Refining Segment

2021

2020

2021

2020

(In thousands)

Income (loss) from before interest and income taxes (1)

$

250,111

$

(5,135

)

$

295,788

$

(479,837

)

Add depreciation and amortization

79,938

81,694

168,020

171,873

EBITDA

330,049

76,559

463,808

(307,964

)

Add (subtract) lower of cost or market inventory valuation adjustment

(118,825

)

(269,904

)

(318,353

)

290,560

Add long-lived asset impairment

215,242

215,242

Add severance costs

1,117

1,117

Add restructuring charges

2,009

2,009

Adjusted EBITDA

$

211,224

$

25,023

$

145,455

$

200,964

(1)

Income (loss) before interest and income taxes of our Refining segment represents income (loss) plus (i) interest expense net of interest income and (ii) income tax provision.

EBITDA and Adjusted EBITDA attributable to our Lubricants and Specialty Products segment is set forth below.

Lubricants and Specialty Products Segment

Rack Back

Rack Forward

Total Lubricants
and Specialty
Products

(In thousands)

Three months ended June 30, 2021

Income before interest and income taxes (1)

$

49,955

$

10,138

$

60,093

Add depreciation and amortization

6,230

12,922

19,152

EBITDA

$

56,185

$

23,060

$

79,245

Three months ended June 30, 2020

Loss before interest and income taxes (1)

$

(180,898

)

$

(28,359

)

$

(209,257

)

Add depreciation and amortization

5,877

13,902

19,779

EBITDA

(175,021

)

(14,457

)

(189,478

)

Add long-lived asset impairment

167,017

37,691

204,708

Adjusted EBITDA

$

(8,004

)

$

23,234

$

15,230

Lubricants and Specialty Products Segment

Rack Back

Rack Forward

Total Lubricants
and Specialty
Products

(In thousands)

Six months ended June 30, 2021

Income before interest and income taxes (1)

$

48,200

$

78,878

$

127,078

Add depreciation and amortization

13,535

25,738

39,273

EBITDA

61,735

104,616

166,351

Add restructuring charges

1,079

6,734

7,813

Adjusted EBITDA

$

62,814

$

111,350

$

174,164

Six months ended June 30, 2020

Income (loss) before interest and income taxes (1)

$

(236,168

)

$

37,201

$

(198,967

)

Add depreciation and amortization

16,744

25,084

41,828

EBITDA

(219,424

)

62,285

(157,139

)

Add long-lived asset impairment

167,017

37,691

204,708

Adjusted EBITDA

$

(52,407

)

$

99,976

$

47,569

(1)

Income (loss) before interest and income taxes of our Lubricants and Specialty Products segment represents income (loss) plus (i) interest expense net of interest income and (ii) income tax provision.

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 produced barrel sold is total refining segment revenues less total refining segment cost of products sold, exclusive of lower of cost or market inventory valuation adjustments, divided by sales volumes of produced refined products sold. Net operating margin per barrel sold is the difference between refinery gross margin and refinery operating expenses per produced barrel sold. These two margins do not include the non-cash effects of lower of cost or market inventory valuation adjustments, depreciation and amortization or long-lived asset impairments. 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.

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

Reconciliation of average refining segment net operating margin per produced barrel sold to refinery gross margin to total sales and other revenues

Three Months Ended
June 30,

Six Months Ended
June 30,

2021

2020

2021

2020

(Dollars in thousands, except per barrel amounts)

Consolidated

Net operating margin per produced barrel sold

$

5.98

$

1.80

$

2.82

$

3.62

Add average refinery operating expenses per produced barrel sold

5.73

6.28

7.25

6.07

Refinery gross margin per produced barrel sold

$

11.71

$

8.08

$

10.07

$

9.69

Times produced barrels sold (BPD)

443,940

348,890

399,690

379,370

Times number of days in period

91

91

181

182

Refining gross margin

$

473,067

$

256,532

$

728,503

$

669,049

Add (subtract) rounding

73

(115

)

189

12

West and Mid-Continent regions gross margin

473,140

256,417

728,692

669,061

Add West and Mid-Continent regions cost of products sold

3,619,319

1,335,427

6,381,262

3,622,535

Add Cheyenne refinery sales and other revenues

135,660

370,774

Refining segment sales and other revenues

4,092,459

1,727,504

7,109,954

4,662,370

Add lubricants and specialty products segment sales and other revenues

669,189

357,287

1,193,752

883,890

Add HEP segment sales and other revenues

126,234

114,807

253,418

242,661

Subtract corporate, other and eliminations

(310,759

)

(136,668

)

(475,708

)

(325,446

)

Sales and other revenues

$

4,577,123

$

2,062,930

$

8,081,416

$

5,463,475

Reconciliation of average refining segment operating expenses per produced barrel sold to total operating expenses

Three Months Ended
June 30,

Six Months Ended
June 30,

2021

2020

2021

2020

(Dollars in thousands, except per barrel amounts)

Consolidated

Average operating expenses per produced barrel sold

$

5.73

$

6.28

$

7.25

$

6.07

Times produced barrels sold (BPD)

443,940

348,890

399,690

379,370

Times number of days in period

91

91

181

182

Refining operating expenses

$

231,484

$

199,384

$

524,493

$

419,105

Add (subtract) rounding

(62

)

(98

)

(216

)

(165

)

West and Mid-Continent regions operating expenses

231,422

199,286

524,277

418,940

Add Cheyenne Refinery operating expenses

40,073

79,593

Refining segment operating expenses

231,422

239,359

524,277

498,533

Add lubricants and specialty products segment operating expenses

61,310

47,840

122,063

101,971

Add HEP segment operating expenses

42,068

34,737

83,433

69,718

Subtract corporate, other and eliminations

(609

)

(18,577

)

4,327

(38,518

)

Operating expenses (exclusive of depreciation and amortization)

$

334,191

$

303,359

$

734,100

$

631,704

Reconciliation of net income (loss) attributable to HollyFrontier stockholders to adjusted net income (loss) attributable to HollyFrontier stockholders

Adjusted net income (loss) attributable to HollyFrontier stockholders is a non-GAAP financial measure that excludes non-cash lower of cost or market inventory valuation adjustments, long-lived asset impairments, HEP's gain on sales-type leases, HEP's loss on early extinguishment of debt, severance costs, restructuring charges, Cheyenne Refinery LIFO inventory liquidation costs, decommissioning costs, pre-close acquisition integration costs, acquisition integration and regulatory costs and gain on tariff settlement. We believe this measure is helpful to investors and others in evaluating our financial performance and to compare our results to that of other companies in our industry. Similarly titled performance measures of other companies may not be calculated in the same manner.

Three Months Ended
June 30,

Six Months Ended
June 30,

2021

2020

2021

2020

(In thousands, except per share amounts)

Consolidated

GAAP:

Income (loss) before income taxes

$

318,252

$

(181,318

)

$

472,795

$

(636,770

)

Income tax expense (benefit)

123,485

(30,911

)

95,178

(193,077

)

Net income (loss)

194,767

(150,407

)

377,617

(443,693

)

Less net income attributable to noncontrolling interest

25,917

26,270

60,550

37,607

Net income (loss) attributable to HollyFrontier stockholders

168,850

(176,677

)

317,067

(481,300

)

Non-GAAP adjustments to arrive at adjusted results:

Lower of cost or market inventory valuation adjustment

(118,825

)

(269,904

)

(318,862

)

290,560

Long-lived asset impairment

436,908

436,908

HEP's gain on sales-type leases

(33,834

)

(33,834

)

HEP's loss on early extinguishment of debt

25,915

Severance costs

194

1,117

708

1,117

Restructuring charges

3,679

7,813

3,679

Cheyenne Refinery LIFO inventory liquidation costs

923

Decommissioning costs

8,096

16,347

Pre-close acquisition integration costs

746

746

Acquisition integration and regulatory costs

634

1,931

Gain on tariff settlement

(51,500

)

Total adjustments to income (loss) before income taxes

(109,789

)

138,600

(343,825

)

726,276

Adjustment to income tax expense (benefit) (1)

(83,987

)

10,065

(84,512

)

195,404

Adjustment to net income attributable to noncontrolling interest

(7,332

)

3,927

Total adjustments, net of tax

(25,802

)

135,867

(259,313

)

526,945

Adjusted results - Non-GAAP:

Adjusted income (loss) before income taxes

208,463

(42,718

)

128,970

89,506

Adjusted income tax expense (benefit) (2)

39,498

(20,846

)

10,666

2,327

Adjusted net income (loss)

168,965

(21,872

)

118,304

87,179

Less net income attributable to noncontrolling interest

25,917

18,938

60,550

41,534

Adjusted net income (loss) attributable to HollyFrontier stockholders

$

143,048

$

(40,810

)

$

57,754

$

45,645

Adjusted earnings (loss) per share - diluted (3)

$

0.87

$

(0.25

)

$

0.35

$

0.28

(1)

Represents adjustment to GAAP income tax benefit to arrive at adjusted income tax expense (benefit), which is computed as follows:

Three Months Ended
June 30,

Six Months Ended
June 30,

2021

2020

2021

2020

(In thousands)

Non-GAAP income tax expense (benefit) (2)

$

39,498

$

(20,846

)

$

10,666

$

2,327

Add (subtract) GAAP income tax expense (benefit)

123,485

(30,911

)

95,178

(193,077

)

Non-GAAP adjustment to income tax expense (benefit)

$

(83,987

)