Exhibit 99.1
FINANCIAL STATEMENTS
UNEV Pipeline, LLC
Six Months Ended June 30, 2012
UNEV Pipeline, LLC
Financial Statements
Six Months Ended June 30, 2012
Contents
Financial Statements (unaudited)
Balance Sheets | 1 | |||
Statements of Operations | 2 | |||
Statement of Changes in Partners’ Capital | 3 | |||
Statements of Cash Flows | 4 | |||
Notes to Financial Statements | 5 |
UNEV Pipeline, LLC
Balance Sheets
(In Thousands)
June 30, 2012 (Unaudited) | December 31, 2011 | |||||||
Cash and cash equivalents | $ | — | $ | 3,100 | ||||
Restricted cash | 1,000 | 1,000 | ||||||
Receivable from affiliates | 4,719 | 4,080 | ||||||
Other current assets | 43 | 85 | ||||||
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Total current assets | 5,762 | 8,265 | ||||||
Properties and equipment, net | 403,452 | 401,287 | ||||||
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Total assets | $ | 409,214 | $ | 409,552 | ||||
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Accounts payable | $ | 3,032 | $ | 12,268 | ||||
Payable to affiliates | 597 | 1,274 | ||||||
Deferred Revenue | 2,534 | — | ||||||
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Total current liabilities | 6,163 | 13,542 | ||||||
Partners’ Capital | 403,051 | 396,010 | ||||||
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Total liabilities & partners’ capital | $ | 409,214 | $ | 409,552 | ||||
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See accompanying notes.
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UNEV Pipeline, LLC
Statements of Operations
(Unaudited)
(In Thousands)
Six Months Ended June 30, | ||||||||
2012 | 2011 | |||||||
Revenues: | ||||||||
Transportation revenue from affliates | $ | 7,792 | $ | — | ||||
Other revenue | 21 | 2 | ||||||
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7,813 | 2 | |||||||
Expenses: | ||||||||
Operating (exclusive of depreciation) | 5,648 | 330 | ||||||
Depreciation | 7,124 | 358 | ||||||
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12,772 | 688 | |||||||
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Net loss | $ | (4,959 | ) | $ | (686 | ) | ||
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See accompanying notes.
2
UNEV Pipeline, LLC
Statement of Changes in Partners’ Capital
(Unaudited)
(In Thousands)
Sinclair | HFC | Total | ||||||||||
Balance December 31, 2011 | $ | 99,002 | $ | 297,008 | $ | 396,010 | ||||||
Contributions made | 3,000 | 9,000 | 12,000 | |||||||||
Net loss | (1,240 | ) | (3,719 | ) | (4,959 | ) | ||||||
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Balance June 30, 2012 | $ | 100,762 | $ | 302,289 | $ | 403,051 | ||||||
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See accompanying notes.
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UNEV Pipeline, LLC
Statements of Cash Flows
(Unaudited)
(In Thousands)
Six Months Ended June 30, | ||||||||
2012 | 2011 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (4,959 | ) | $ | (686 | ) | ||
Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 7,124 | 358 | ||||||
(Increase) decrease in current assets | ||||||||
Receivable from affiliates | (3,639 | ) | (57 | ) | ||||
Other current assets | 42 | — | ||||||
Increase (decrease) in current liabilities | ||||||||
Accounts payable | (4,177 | ) | 3,528 | |||||
Payable to affiliates | (677 | ) | 277 | |||||
Deferred revenue | 2,534 | — | ||||||
Other | 19 | — | ||||||
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Net cash (provided by) operating activities: | (3,733 | ) | 3,420 | |||||
Cash flows from investing activity: | ||||||||
Acquisitions of property and equipment | (14,367 | ) | (77,768 | ) | ||||
Cash flows from financing activity: | ||||||||
Cash contributions made | 15,000 | 79,500 | ||||||
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Increase (decrease) in cash and cash equivalents | (3,100 | ) | 5,152 | |||||
Cash and cash and equivalents at beginning of year | 3,100 | 7,649 | ||||||
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Cash and cash equivalents at end of year | $ | — | $ | 12,801 | ||||
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See accompanying notes.
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UNEV Pipeline, LLC
Notes to Financial Statements (Unaudited)
As of and for the six months ended
June 30, 2012
1. Organization and Nature of Business
UNEV Pipeline, LLC (“UNEV”), a Delaware limited liability company, recently completed the UNEV Pipeline, a 400 mile, 12-inch refined products pipeline from Salt Lake City, Utah to Las Vegas, Nevada, together with terminal and ethanol blending facilities in the Cedar City, Utah and North Las Vegas areas and storage facilities at the Cedar City terminal. As of December 31, 2011, a subsidiary of HollyFrontier Corporation (“HFC”) owned 75% of the pipeline with a subsidiary of Sinclair Oil Corporation (“Sinclair”) owning the remaining 25% interest. The cost of constructing this pipeline including terminals and ethanol blending and storage facilities was approximately $410 million. The pipeline was mechanically complete in November 2011, and initial start-up activities commenced in December 2011.
The financial statements included herein have been prepared without audit. The interim financial statements reflect all adjustments, which, in the opinion of management, are necessary for a fair presentation of our results for the interim periods. Such adjustments are considered to be of a normal recurring nature. Although certain notes and other information required by U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted, we believe that the disclosures in these financial statements are adequate to make the information presented not misleading. These financial statements should be read in conjunction with annual financials for the year ended December 31, 2011. Results of operations for interim periods are not necessarily indicative of the results of operations that will be realized for the year ending December 31, 2012.
In this document, the words “we”, “our”, “ours” and “us” refer to UNEV unless the context otherwise indicates.
2. Related Parties
HFC was the largest shipper on the pipeline operating under a ten-year transportation agreement as discussed in Note 4 below. Sinclair is the other shipper on the pipeline operating under a ten-year transportation agreement discussed below. All transactions with HFC and Sinclair have been labeled as affiliate transactions on the balance sheets and statements of operations.
In June 2011, a subsidiary of Holly Energy Partners L.P. (“HEP”) was appointed the operator of UNEV. We paid management fees to HEP totaling $450,000 and $75,000 for the six months ended June 30, 2012 and 2011, respectively, which are included in operating costs.
Employees who provide direct services to us are employed by Holly Logistic Services, L.L.C., a subsidiary of HFC which is the general partner of HEP’s general partner. These employees’ costs, including salaries, bonuses, payroll taxes, benefits, and other direct costs, are charged to us monthly. We paid $991,000 and $100,600 with respect to such costs for the six months ended 2012 and 2011, respectively which are included in operating costs.
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UNEV Pipeline, LLC
Notes to Financial Statements (continued)
3. Properties and Equipment
June 30, 2012 | December 31, 2011 | |||||||
(in thousands) | (in thousands) | |||||||
Pipelines and terminals | $ | 375,300 | $ | 229,423 | ||||
Construction in progress | 1,669 | 157,653 | ||||||
Land and right of way | 35,110 | 16,755 | ||||||
Buildings and other | 2,035 | 1,047 | ||||||
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414,114 | 404,878 | |||||||
Less accumulated depreciation | (10,662 | ) | (3,591 | ) | ||||
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$ | 403,452 | $ | 401,287 | |||||
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4. Transportation Agreements
Effective January 1, 2012, we entered into ten-year transportation agreements with HFC and Sinclair, which ten-year term commenced on March 1, 2012, and will result in minimum annualized payments to UNEV of $15.6 million and $7.4 million, respectively.
5. Restricted Cash
The restricted cash consists of $1.0 million held in an escrow account pursuant to an agreement among UNEV, a utility services contractor and the financial institution. The escrow agreement was entered following settlement of certain claims between UNEV and the contractor regarding asset construction work. Funds will be released to UNEV or the contractor upon mutual agreement or pursuant to the determination of a court of competent jurisdiction if UNEV and the contractor are unable to reach an agreement.
6. Subsequent Event
On July 12, 2012, HEP acquired HFC’s 75% interest in UNEV. HEP paid consideration consisting of $260.0 million in cash and 1,029,900 of their common units. Under the terms of the transaction, HEP also issued to HFC equity interests in its wholly owned subsidiary that entitles HFC to an interest in HEP’s share of future UNEV profits beginning in 2015 through 2032, subject to a cap of approximately $34.0 million and certain other limitations.
We have evaluated subsequent events through September 25, 2012.
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