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Press release from PR Newswire

HollyFrontier Corporation Reports First Quarter 2012 Results

Monday, May 07, 2012

HollyFrontier Corporation Reports First Quarter 2012 Results07:00 EDT Monday, May 07, 2012DALLAS, May 7, 2012 /PRNewswire/ -- HollyFrontier Corporation (NYSE-HFC) ("HollyFrontier" or the "Company") today reported first quarter net income attributable to HollyFrontier stockholders of $241.7 million or $1.16 per diluted share for the quarter ended March 31, 2012, compared to $84.7 million or $0.79 per diluted share for the quarter ended March 31, 2011. For the first quarter, net income attributable to our stockholders increased by $157.0 million, or 185% compared to the same period of 2011, principally reflecting increased operating scale due to our July 2011 merger, strong first quarter refining margins as well as favorable differentials between inland and coastal-sourced crude oils.  Refinery gross margins were $17.46 per produced barrel, an 11% increase compared to $15.72 for the first quarter of 2011. Production levels averaged approximately 433,000 barrels per day ("BPD") and crude oil charges averaged approximately 408,000 BPD for the current quarter.  Operating expenses for the quarter were $241.6 million or $5.51 per barrel compared to $134.7 million or $6.24 per barrel for the first quarter of last year.HollyFrontier's President & CEO, Mike Jennings, commented, "Our first quarter results benefited from strong product margins, improved heavy crude oil differentials and robust differentials between inland and coastal crude oils.  While we believe upcoming pipeline reversals and expansion projects will compress the WTI to Brent crude oil spread over time, we expect that the increasing North American crude oil production will continue to provide HollyFrontier with advantaged feedstock pricing versus coastal markets. The margin environment thus far in the second quarter remains favorable for our Company, and given our continued free cash flow generation, we expect to maintain our strategy of prudently returning cash to shareholders through regular dividends, special dividends and share repurchases."For the first quarter of 2012, cash flows from operations totaled $253.9 million.  In the quarter we paid dividends to shareholders of $126.0 million and repurchased $62.5 million in common stock.  Subsequent to quarter end, we have repurchased an additional $30.2 million in common stock, leaving $255.6 million available under our current $350 million share repurchase authorization.  Our combined balance of cash and short-term investments totaled $1.9 billion at March 31, 2012, compared to consolidated debt of $1.3 billion and $687.8 million of debt exclusive of Holly Energy Partners debt, which is non-recourse to HollyFrontier.  There were no cash borrowings under our credit facility during the first quarter of 2012.The Company has scheduled a webcast conference call for today, May 7, 2012, at 10:00 AM Eastern Time to discuss financial results.  This webcast may be accessed at: http://www.videonewswire.com/event.asp?id=86420.  An audio archive of this webcast will be available using the above noted link through May 21, 2012.HollyFrontier Corporation, headquartered in Dallas, Texas, is an independent petroleum refiner and marketer that produces high-value light products such as gasoline, diesel fuel, jet fuel and other specialty products. HollyFrontier operates through its subsidiaries a 135,000 barrels per stream day ("bpsd") refinery located in El Dorado, Kansas, two refinery facilities with a combined capacity of 125,000 bpsd located in Tulsa, Oklahoma, a 100,000 bpsd refinery located in Artesia, New Mexico, a 52,000 bpsd refinery located in Cheyenne, Wyoming  and a 31,000 bpsd refinery in Woods Cross, Utah.  HollyFrontier markets its refined products principally in the Southwest U.S., the Rocky Mountains extending into the Pacific Northwest and in other neighboring Plains states.  A subsidiary of HollyFrontier also owns a 42% interest (including the general partner interest) in Holly Energy Partners, L.P. The following is a "safe harbor" statement under the Private Securities Litigation Reform Act of 1995: The statements in this press release relating to matters that are not historical facts are "forward-looking statements" based on management's beliefs and assumptions using currently available information and expectations as of the date hereof, are not guarantees of future performance and involve certain risks and uncertainties, including those contained in our filings with the Securities and Exchange Commission.  Although we believe that the expectations reflected in these forward-looking statements are reasonable, we cannot assure you that our expectations will prove correct.  Therefore, actual outcomes and results could materially differ from what is expressed, implied or forecast in such statements.  Any differences could be caused by a number of factors, including, but not limited to, risks and uncertainties with respect to the actions of actual or potential competitive suppliers of refined petroleum products in the Company's markets, the demand for and supply of crude oil and refined products, the spread between market prices for refined products and market prices for crude oil, the possibility of constraints on the transportation of refined products, the possibility of inefficiencies, curtailments or shutdowns in refinery operations or pipelines, effects of governmental and environmental regulations and policies, the availability and cost of financing to the Company, the effectiveness of the Company's capital investments and marketing strategies, the Company's efficiency in carrying out construction projects, the ability of the Company to acquire refined product operations or pipeline and terminal operations on acceptable terms and to integrate any future acquired operations, the possibility of terrorist attacks and the consequences of any such attacks, general economic conditions, our ability to realize fully or at all the anticipated benefits of our "merger of equals" with Frontier 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 OPERATIONSFinancial Data (all information in this release is unaudited)Three Months EndedMarch 31,Change from 201120122011ChangePercent(In thousands, except per share data)Sales and other revenues$4,931,738$2,326,585$2,605,153112.0%Operating costs and expenses:Cost of products sold (exclusive of depreciation and amortization)4,186,9171,984,6172,202,300111.0Operating expenses (exclusive of depreciation and amortization)241,627134,743106,88479.3General and administrative expenses (exclusive of depreciation and amortization)27,52816,81810,71063.7Depreciation and amortization56,10231,30824,79479.2Total operating costs and expenses4,512,1742,167,4862,344,688108.2Income from operations419,564159,099260,465163.7Other income (expense):Earnings in equity method investments717740(23)(3.1)Interest income46085375441.2Interest expense(33,315)(16,204)(17,111)105.6Merger transaction costs?(3,698)3,698(100.0)(32,138)(19,077)(13,061)68.5Income before income taxes387,426140,022247,404176.7Income tax provision140,40649,01191,395186.5Net income247,02091,011156,009171.4Less net income attributable to noncontrolling interest5,3246,317(993)(15.7)Net income attributable to HollyFrontier stockholders$241,696$84,694$157,002185.4%Earnings per share attributable to HollyFrontier stockholders:Basic$1.16$0.79$0.3746.8%Diluted$1.16$0.79$0.3746.8%Cash dividends declared per common share$0.60$0.075$0.525700.0%Average number of common shares outstanding:Basic208,531106,614101,91795.6%Diluted209,138107,266101,87295.0%EBITDA$471,059$181,132$289,927160.1%Our consolidated financial and operating results reflect the operations of the merged Frontier businesses beginning July 1, 2011.Balance Sheet DataMarch 31,December 31,20122011(In thousands)Cash, cash equivalents and investments in marketable securities$1,927,536$1,840,610Working capital$2,009,220$2,030,063Total assets$9,785,750$9,576,243Long-term debt, including current portion$1,312,042$1,214,742Total equity$5,789,579$5,835,900Segment Information Our operations are organized into two reportable segments, Refining and HEP.  Our operations that are not included in the Refining and HEP segments are included in Corporate and Other.  Intersegment transactions are eliminated in our consolidated financial statements and are included in Consolidations and Eliminations.  The Refining segment includes the operations of our El Dorado, Tulsa, Navajo, Cheyenne and Woods Cross refineries and NK Asphalt and involves the purchase and refining of crude oil and wholesale and branded marketing of refined products, such as gasoline, diesel fuel, jet fuel, specialty lubricant products, and specialty and modified asphalt. The petroleum products are primarily marketed in the Mid-Continent, Southwest and Rocky Mountain regions of the United States and northern Mexico. Additionally, specialty lubricant products produced at our Tulsa West facility are marketed throughout North America and are distributed in Central and South America. NK Asphalt manufactures and markets asphalt and asphalt products in Arizona, New Mexico, Oklahoma, Kansas, Missouri, Texas and northern Mexico.The HEP segment involves all of the operations of HEP, which owns and operates logistic assets consisting  of petroleum product and crude oil pipelines and terminal, tankage and loading rack facilities in the Mid-Continent, Southwest and Rocky Mountain regions of the United States. Revenues are generated by charging tariffs for transporting petroleum products and crude oil through its pipelines and by charging fees for terminalling petroleum products and other hydrocarbons, and storing and providing other services at its storage tanks and terminals. Additionally, HEP owns a 25% interest in the SLC Pipeline that serves refineries in the Salt Lake City, Utah area. 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.RefiningHEPCorporateand OtherConsolidations andEliminationsConsolidated Total(In thousands)Three Months Ended March 31, 2012Sales and other revenues$4,919,731$63,515$4,224$(55,732)$4,931,738Depreciation and amortization$41,532$9,859$4,918$(207)$56,102Income (loss) from operations$415,126$34,629$(29,749)$(442)$419,564Capital expenditures$45,534$6,327$9,526$?$61,387Three Months Ended March 31, 2011Sales and other revenues$2,315,092$45,005$648$(34,160)$2,326,585Depreciation and amortization$22,983$7,235$1,297$(207)$31,308Income (loss) from operations$152,104$23,611$(16,098)$(518)$159,099Capital expenditures$22,965$11,475$39,598$?$74,038March 31, 2012Cash, cash equivalents and investments in marketable securities$?$12,402$1,915,134$?$1,927,536Total assets$6,350,079$998,400$2,481,873$(44,602)$9,785,750Long-term debt, including current portion$?$624,237$704,126$(16,321)$1,312,042December 31, 2011Cash, cash equivalents and investments in marketable securities$?$3,269$1,837,341$?$1,840,610Total assets$6,280,426$992,408$2,421,140$(117,731)$9,576,243Long-term debt, including current portion$?$598,761$705,331$(89,350)$1,214,742Refining Operating DataOur refinery operations include the El Dorado, Tulsa, Navajo, Cheyenne and Woods Cross refineries. The following tables set forth information, including non-GAAP performance measures about our refinery operations.  The cost of products and refinery gross margin do not include the effect of depreciation and amortization.  Reconciliations to amounts reported under GAAP are provided under "Reconciliations to Amounts Reported Under Generally Accepted Accounting Principles" below.Three Months Ended March 31,20122011Mid-Continent Region (El Dorado and Tulsa Refineries)Crude charge (BPD) (1)               256,270105,600Refinery throughput (BPD) (2)     272,790106,690Refinery production (BPD) (3)       268,260106,160Sales of produced refined products (BPD) 259,060100,010Sales of refined products (BPD) (4)             264,390100,400Refinery utilization (5)                                   98.6%84.5%Average per produced barrel (6)    Net sales$119.99$115.29    Cost of products (7)                    102.20100.50    Refinery gross margin17.7914.79    Refinery operating expenses (8)       4.815.98    Net operating margin$12.98$8.81Refinery operating expenses per throughput barrel (9)   $4.57$5.61Feedstocks:    Sweet crude oil70%97%    Sour crude oil9%?%    Heavy sour crude oil15%2%    Other feedstocks and blends6%1%    Total100%100%Sales of produced refined products:    Gasolines47%37%    Diesel fuels32%31%    Jet fuels9%8%    Lubricants5%11%    Asphalt1%4%    Gas oil/intermediates1%7% LPG and other5%2%Total100%100%Three Months Ended March 31,20122011Southwest Region (Navajo Refinery)Crude charge (BPD) (1)                                                                                                       81,14069,980Refinery throughput (BPD) (2)                                                                                           90,40078,930Refinery production (BPD) (3)                                                                                            87,06076,720Sales of produced refined products (BPD)87,25079,840Sales of refined products (BPD) (4)                                                                                    93,13086,700Refinery utilization (5)                                                                                                         81.1%70.0%Average per produced barrel (6)    Net sales$125.91$110.99    Cost of products (7)                                                                                                         106.3795.60    Refinery gross margin19.5415.39    Refinery operating expenses (8)                                                                                       6.676.34    Net operating margin$12.87$9.05Refinery operating expenses per throughput barrel (9)                                                    $6.44$6.42Feedstocks:    Sweet crude oil?%5%    Sour crude oil81%73%    Heavy sour crude oil9%11%    Other feedstocks and blends10%11%    Total100%100%Sales of produced refined products:    Gasolines54%51%    Diesel fuels36%35%    Jet fuels?%1%    Fuel oil5%5%    Asphalt2%5%    LPG and other3%3%    Total100%100%Rocky Mountain Region (Cheyenne and Woods Cross Refineries)Crude charge (BPD) (1)                                                                                                       70,24025,770Refinery throughput (BPD) (2)                                                                                           78,74027,900Refinery production (BPD) (3)                                                                                            77,20026,620Sales of produced refined products (BPD)76,64026,650Sales of refined products (BPD) (4)                                                                                    79,32026,740Refinery utilization (5)                                                                                                         84.6%83.1%Three Months Ended March 31,20122011Rocky Mountain Region (Cheyenne and Woods Cross Refineries)Average per produced barrel (6)Net sales$110.76$108.77Cost of products (7)96.7989.87Refinery gross margin13.9718.90Refinery operating expenses (8)           6.576.43Net operating margin$7.40$12.47Refinery operating expenses per throughput barrel (9)         $6.39$6.14Feedstocks:Sweet crude oil45%57%Sour crude oil2%?%Heavy sour crude oil31%4%Black wax crude oil11%31%Other feedstocks and blends11%8%Total100%100%Sales of produced refined products:Gasolines56%61%Diesel fuels30%29%Jet fuels1%2%Fuel oil2%2%Asphalt5%3%LPG and other6%3%Total100%100%ConsolidatedCrude charge (BPD) (1)                          407,650201,350Refinery throughput (BPD) (2)                441,930213,520Refinery production (BPD) (3)                432,520209,500Sales of produced refined products (BPD)422,950206,500Sales of refined products (BPD) (4)    436,840213,840Refinery utilization (5)                          92.0%78.7%Average per produced barrel (6)    Net sales$119.54$113.28    Cost of products (7)      102.0897.56    Refinery gross margin17.4615.72    Refinery operating expenses (8)   5.516.24    Net operating margin$11.95$9.48Refinery operating expenses per throughput barrel (9) $5.28$5.98Feedstocks:    Sweet crude oil52%58%    Sour crude oil22%27%    Heavy sour crude oil16%5%    Black wax crude oil2%4%    Other feedstocks and blends8%6%    Total100%100%Three Months Ended March 31,20122011ConsolidatedSales of produced refined products:    Gasolines50%45%    Diesel fuels32%33%    Jet fuels6%4%    Fuel oil2%2%    Asphalt2%4%    Lubricants3%6%    Gas oil / intermediates?%3%    LPG and other5%3%    Total100%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).  As a result of our merger effective July 1, 2011 our consolidated crude capacity increased from 256,000 BPSD to 443,000 BPSD.(6)Represents average per barrel amount for produced refined products sold, which is a non-GAAP measure.  Reconciliations to amounts reported under GAAP are provided under "Reconciliations to Amounts Reported Under Generally Accepted Accounting Principles" below.(7)Transportation costs billed from HEP are included in cost of products. (8)Represents operating expenses of our refineries, exclusive of depreciation and amortization.(9)Represents refinery operating expenses, exclusive of depreciation and amortization divided by refinery throughput.Reconciliations to Amounts Reported Under Generally Accepted Accounting PrinciplesReconciliations of earnings before interest, taxes, depreciation and amortization ("EBITDA") to amounts reported under generally accepted accounting principles in financial statements.Earnings before interest, taxes, depreciation and amortization, which we refer to as EBITDA, is calculated as net income attributable to HollyFrontier stockholders plus (i) interest expense, net of interest income, (ii) income tax provision, and (iii) depreciation and amortization.  EBITDA is not a calculation provided for under accounting principles generally accepted in the United States; however, the amounts included in the EBITDA calculation are derived from amounts included in our consolidated financial statements.  EBITDA should not be considered as an alternative to net income or operating income as an indication of our operating performance or as an alternative to operating cash flow as a measure of liquidity.  EBITDA is not necessarily comparable to similarly titled measures of other companies.  EBITDA is presented here because it is a widely used financial indicator used by investors and analysts to measure performance.  EBITDA is also used by our management for internal analysis and as a basis for financial covenants. Set forth below is our calculation of EBITDA. Three Months Ended March 31,20122011(In thousands)Net income attributable to HollyFrontier stockholders$241,696$84,694     Add income tax provision140,40649,011     Add interest expense33,31516,204     Subtract interest income(460)(85)     Add depreciation and amortization56,10231,308EBITDA$471,059$181,132Reconciliations of refinery operating information (non-GAAP performance measures) to amounts reported under generally accepted accounting principles in financial statements.Refinery gross margin and net operating margin are non-GAAP performance measures that are used by our management and others to compare our refining performance to that of other companies in our industry.  We believe these margin measures are helpful to investors in evaluating our refining performance on a relative and absolute basis.Refinery gross margin per barrel is the difference between average net sales price and average cost of products per barrel of produced refined products.  Net operating margin per barrel is the difference between refinery gross margin and refinery operating expenses per barrel of produced refined products.  These two margins do not include the effect of depreciation and amortization.  Each of these component performance measures can be reconciled directly to our consolidated statements of income.Other companies in our industry may not calculate these performance measures in the same manner.Refinery Gross and Net Operating MarginsBelow are reconciliations to our consolidated statements of income for (i) net sales, cost of products and operating expenses, in each case averaged per produced barrel sold, and (ii) net operating margin and refinery gross margin.  Due to rounding of reported numbers, some amounts may not calculate exactly.Reconciliations of refined product sales from produced products sold to total sales and other revenuesThree Months Ended March 31,20122011(Dollars in thousands, except per barrel amounts)ConsolidatedAverage sales price per produced barrel sold$119.54$113.28Times sales of produced refined products (BPD)422,950206,500Times number of days in period9190Refined product sales from produced products sold$4,600,909$2,105,309Total refined product sales$4,600,909$2,105,309Add refined product sales from purchased products and rounding (1) 155,61366,624Total refined product sales4,756,5222,171,933Add direct sales of excess crude oil (2)       158,282135,409Add other refining segment revenue (3)      4,9277,750Total refining segment revenue4,919,7312,315,092Add HEP segment sales and other revenues63,51545,005Add corporate and other revenues4,224648Subtract consolidations and eliminations(55,732)(34,160)Sales and other revenues$4,931,738$2,326,585Reconciliation of average cost of products per produced barrel sold to total cost of products soldThree Months Ended March 31,20122011(Dollars in thousands, except per barrel amounts)ConsolidatedAverage cost of products per produced barrel sold$102.08$97.56Times sales of produced refined products (BPD)422,950206,500Times number of days in period9190Cost of products for produced products sold$3,928,901$1,813,153Total cost of products for produced products sold$3,928,901$1,813,153Add refined product costs from purchased products sold and rounding (1)156,67269,555Total cost of refined products sold4,085,5731,882,708Add crude oil cost of direct sales of excess crude oil (2) 155,810132,880Add other refining segment cost of products sold (4)      4092,338Total refining segment cost of products sold4,241,7922,017,926Subtract consolidations and eliminations(54,875)(33,309)Costs of products sold (exclusive of depreciation and amortization)$4,186,917$1,984,617Reconciliation of average refinery operating expenses per produced barrel sold to total operating expensesThree Months Ended March 31,20122011(Dollars in thousands, except per barrel amounts)ConsolidatedAverage refinery operating expenses per produced barrel sold$5.51$6.24Times sales of produced refined products (BPD)422,950206,500Times number of days in period9190Refinery operating expenses for produced products sold$212,071$115,970Total refinery operating expenses for produced products sold$212,071$115,970Add other refining segment operating expenses and rounding (5)                                  9,2106,109Total refining segment operating expenses221,281122,079Add HEP segment operating expenses16,98812,796Add corporate and other costs3,566(6)Subtract consolidations and eliminations(208)(126)Operating expenses (exclusive of depreciation and amortization)$241,627$134,743Reconciliation of net operating margin per barrel to refinery gross margin per barrel to total sales and other revenuesThree Months Ended March 31,20122011(Dollars in thousands, except per barrel amounts)ConsolidatedNet operating margin per barrel$11.95$9.48Add average refinery operating expenses per produced barrel5.516.24Refinery gross margin per barrel17.4615.72Add average cost of products per produced barrel sold102.0897.56Average sales price per produced barrel sold$119.54$113.28Times sales of produced refined products (BPD)422,950206,500Times number of days in period9190Refined product sales from produced products sold$4,600,909$2,105,309Total refined product sales from produced products sold$4,600,909$2,105,309Add refined product sales from purchased products and rounding (1)155,61366,624Total refined product sales4,756,5222,171,933Add direct sales of excess crude oil (2)                                                158,282135,409Add other refining segment revenue (3)                                               4,9277,750Total refining segment revenue4,919,7312,315,092Add HEP segment sales and other revenues63,51545,005Add corporate and other revenues4,224648Subtract consolidations and eliminations(55,732)(34,160)Sales and other revenues$4,931,738$2,326,585(1)We purchase finished products when opportunities arise that provide a profit on the sale of such products, or to meet delivery commitments. (2)We purchase crude oil that at times exceeds the supply needs of our refineries. Quantities in excess of our needs are sold at market prices to purchasers of crude oil that are recorded on a gross basis with the sales price recorded as revenues and the corresponding acquisition cost as inventory and then upon sale as cost of products sold.  Additionally, at times we enter into buy/sell exchanges of crude oil with certain parties to facilitate the delivery of quantities to certain locations that are netted at carryover cost.(3)Other refining segment revenue includes the incremental revenues associated with NK Asphalt and miscellaneous revenue.(4)Other refining segment cost of products sold includes the incremental cost of products for NK Asphalt and miscellaneous costs.(5)Other refining segment operating expenses include the marketing costs associated with our refining segment and the operating expenses of NK Asphalt.FOR FURTHER INFORMATION, Contact:Douglas S. Aron, Executive Vice President and Chief Financial OfficerM. Neale Hickerson, Vice President, Investor RelationsHollyFrontier Corporation214/871-3555SOURCE HollyFrontier Corporation