HF Sinclair 8-K Holly Corporation Reports Third Quarter Results

Exhibit 99.1

Press Release
November 4, 2008

Holly Corporation Reports Third Quarter Results

Dallas, Texas, November 4, 2008 — Holly Corporation (NYSE-HOC) (“Holly” or the “Company”) today reported third quarter net income of $49.9 million ($1.00 per basic and diluted share) compared to $58.1 million ($1.06 per basic and $1.04 per diluted share) for the same period of 2007. For the nine months ended September 30, 2008, net income was $70.0 million ($1.39 per basic and $1.38 per diluted share) compared to $284.3 million ($5.17 per basic and $5.08 per diluted share) for the first nine months of 2007.

Net income for the third quarter and the nine months ended September 30, 2008 decreased compared to the same periods in 2007. Our pre-tax income for the 2008 third quarter of $75.6 million decreased $1.6 million as compared to the 2007 third quarter. Contributing to the relatively flat quarter-over-quarter pre-tax income levels were an improvement in refined product margins, increased production at the Navajo Refinery and a reduction in general and administrative expenses, offset by reduced production at the Woods Cross Refinery and increases in overall refinery operating expenses. Overall refinery gross margins were $15.17 per produced barrel for the 2008 third quarter, an 18% increase compared to $12.84 for last year’s third quarter. Net income for the 2008 third quarter was negatively affected versus the 2007 third quarter due to a higher normalized income tax rate as compared to the third quarter of 2007. Comparing the first nine months of 2008 to the same period in 2007, the net income decrease was principally the result of a reduction in refined product margins during the first half of 2008. Our overall refinery gross margins were $10.57 per produced barrel for the first nine months of 2008, a 45% decrease compared to $19.32 for the comparable period of 2007.

Overall refinery production levels were relatively flat for the third quarter. Production gains at our Navajo Refinery during the current year’s third quarter were offset by a decline in production at our Woods Cross Refinery due to a scheduled major maintenance turnaround. For the first nine months of 2008, our production levels decreased 3% compared to the same period of 2007 due to unplanned downtime and power outages at our refineries during the second quarter of 2008 and the turnaround at Woods Cross in the third quarter.

Sales and other revenues increased 42% for the three months ended September 30, 2008 and 48% for the nine months ended September 30, 2008 compared to the three and nine months ended September 30, 2007, respectively, due principally to higher refined product sales prices offset by a decrease in produced refined products sold. Cost of products sold increased 45% for the three months ended September 30, 2008 and 68% for the nine months ended September 30, 2008 compared to the three and nine months ended September 30, 2007, respectively, due principally to higher crude oil acquisition costs. Operating expenses for both the three and nine month periods increased primarily due to the inclusion of Holly Energy Partners, L.P. (NYSE-HEP) (“HEP”) operating costs beginning March 1, 2008. Excluding the inclusion of HEP’s

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operating expenses in the current year, operating expenses were $7.9 million and $27.9 million higher for the three months and nine months ended September 30, 2008, respectively, compared to the same periods in 2007. This increase was primarily the result of and higher utility and payroll costs. Also contributing to the increase for the first nine months of 2008, was a year-to-date increase in maintenance costs resulting from unplanned downtime during the second quarter. Partially offsetting these operating expense increases was a year-over-year reduction in general and administrative expenses of $4.6 million and $16.2 million for the three and nine months ended September 30, 2009, respectively. Our income tax rate for the three months ended September 30, 2007 was unusually low due to the utilization of low sulfur diesel fuel production tax credits and the effects of a higher estimated effective tax rate during the first half of 2007 as compared to the nine months ended September 30, 2007.

In February 2008, HEP acquired our crude pipelines and tankage assets. As a result of this transaction, we determined that our beneficial interest in HEP exceeds 50%, therefore, we reconsolidated HEP effective March 1, 2008. We no longer record our share of its earnings under the equity method of accounting. Accordingly, a significant increase in operating costs and expenses for the nine months ended September 30, 2008 was due to the inclusion of $24.7 million of HEP’s operating expenses and $14.3 million of additional depreciation and amortization resulting from our consolidation of HEP. This press release includes key segment information that shows the impact of this reconsolidation on certain balance sheet and income statement amounts.

“We are very pleased with our third quarter results. In a quarter that included turnaround related downtime at our Woods Cross Refinery, our company delivered a solid performance. Although 2008 has been a challenging year, we realized an 18% year-over-year increase in our overall gross refining margins for the quarter. Refining gross margins returned to a much healthier level during the quarter as gasoline and non-transportation product crack spreads widened considerably relative to the first six months of the year, and we realized increased production of higher valued diesel fuel. Margin improvement was particularly evident in the markets served by our Woods Cross refinery where our gross refining margin averaged $28.04 per barrel, a 42% increase over last year’s third quarter. Our Navajo Refinery also performed well, realizing a gross margin increase of 19% on a per barrel basis for the quarter. During the third quarter, we completed a major maintenance turnaround at Woods Cross and are in the process of commissioning our feedstock flexibility and expansion project at the same refinery. This will result in a 5,000 BPSD or 19% capacity increase, increase our ability to produce a higher percentage of diesel fuel and process a greater percentage of lower priced crude oil. Also, our project to expand and upgrade our Navajo Refinery remains on schedule for completion in the first quarter of 2009. Good financial performance coupled with a culture of fiscal conservatism has allowed us to continue to improve our facilities while retaining one of the strongest balance sheets in our industry. We finished the third quarter of 2008 with over $225.0 million in cash and marketable securities, no Holly Corporation debt and nothing outstanding under our $175 million credit facility. I commend the hard work of our employees who have and continue to make these accomplishments possible,” said Matthew Clifton, Chairman of the Board and Chief Executive Officer of Holly.”

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The Company has scheduled a conference call for today, November 4, 2008 at 10:00 a.m. Eastern Time to discuss financial results. Listeners may access this call by dialing (888) 548-4639. The ID# for this call is 68070249. Listeners may access the call via the internet at:http://www.videonewswire.com/event.asp?id=52112. Additionally, listeners may replay this call approximately two hours after the call concludes by dialing (800) 642-1687. This audio archive will be available through November 18, 2008.

Holly Corporation, headquartered in Dallas, Texas, is an independent petroleum refiner and marketer that produces high value light products such as gasoline, diesel fuel and jet fuel. Holly operates through its subsidiaries an 85,000 BPSD refinery located in Artesia, New Mexico and a 31,000 BPSD refinery in Woods Cross, Utah. Also, a subsidiary of Holly owns a 46% interest (including the general partner interest) in Holly Energy Partners, L.P., which through subsidiaries owns or leases approximately 2,500 miles of petroleum product and crude oil pipelines in Texas, New Mexico, Utah and Oklahoma and tankage and refined product terminals in several Southwest and Rocky Mountain states.

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. Such 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 regulations and policies, the availability and cost of financing to the Company, the effectiveness of the Company’s capital investments and marketing strategies, 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 Company’s efficiency in carrying out construction projects, 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.

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RESULTS OF OPERATIONS

Financial Data (all information in this release is unaudited)

	Three Months Ended
	September 30,						Change from 2007
	2008			2007			Change			Percent
				(In thousands, except per share data)
Sales and other revenues	$	1,719,920		$	1,208,671		$	511,249			42.3	%
Operating costs and expenses:
Cost of products sold (exclusive of depreciation, depletion and amortization)		1,534,776			1,059,471			475,305			44.9
Operating expenses (exclusive of depreciation, depletion and amortization)		71,130			52,185			18,945			36.3
General and administrative expenses (exclusive of depreciation, depletion and amortization)		14,169			18,798			(4,629	)		(24.6	)
Depreciation, depletion and amortization		16,740			10,531			6,209			59.0
Exploration expenses, including dry holes		129			54			75			138.9
Total operating costs and expenses		1,636,944			1,141,039			495,905			43.5
Income from operations		82,976			67,632			15,344			22.7
Other income (expense):
Equity in earnings of HEP		—			5,564			(5,564	)		(100.0	)
Minority interest in earnings of HEP		(1,847	)		—			(1,847	)		—
Interest income		1,896			4,368			(2,472	)		(56.6	)
Interest expense		(7,376	)		(297	)		(7,079	)		2,383.5
		(7,327	)		9,635			(16,962	)		(176.0	)
Income from operations before income taxes		75,649			77,267			(1,618	)		(2.1	)
Income tax provision		25,750			19,141			6,609			34.5
Net income	$	49,899		$	58,126		$	(8,227	)		(14.2	)%
Net income per share — basic	$	1.00		$	1.06		$	(0.06	)		(5.7	)%
Net income per share — diluted	$	1.00		$	1.04		$	(0.04	)		(3.8	)%
Cash dividends declared per common share	$	0.15		$	0.12		$	0.03			25.0	%
Average number of common shares outstanding:
Basic		49,717			54,819			(5,102	)		(9.3	)%
Diluted		50,032			55,853			(5,821	)		(10.4	)%

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	Nine Months Ended
	September 30,						Change from 2007
	2008			2007			Change			Percent
				(In thousands, except per share data)
Sales and other revenues	$	4,943,726		$	3,351,535		$	1,592,191			47.5	%
Operating costs and expenses:
Cost of products sold (exclusive of depreciation, depletion and amortization)		4,538,763			2,708,422			1,830,341			67.6
Operating expenses (exclusive of depreciation, depletion and amortization)		206,013			153,430			52,583			34.3
General and administrative expenses (exclusive of depreciation, depletion and amortization)		39,833			55,993			(16,160	)		(28.9	)
Depreciation, depletion and amortization		45,978			32,623			13,355			40.9
Exploration expenses, including dry holes		344			311			33			10.6
Total operating costs and expenses		4,830,931			2,950,779			1,880,152			63.7
Income from operations		112,795			400,756			(287,961	)		(71.9	)
Other income (expense):
Equity in earnings of HEP		2,990			13,864			(10,874	)		(78.4	)
Minority interest in earnings of HEP		(3,142	)		—			(3,142	)		(100.0	)
Interest income		9,277			10,478			(1,201	)		(11.5	)
Interest expense		(15,619	)		(840	)		(14,779	)		1,759.4
		(6,494	)		23,502			(29,996	)		(127.6	)
Income from operations before income taxes		106,301			424,258			(317,957	)		(74.9	)
Income tax provision		36,301			139,963			(103,662	)		(74.1	)
Net income	$	70,000		$	284,295		$	(214,295	)		(75.4	)%
Net income per share — basic	$	1.39		$	5.17		$	(3.78	)		(73.1	)%
Net income per share — diluted	$	1.38		$	5.08		$	(3.70	)		(72.8	)%
Cash dividends declared per common share	$	0.45		$	0.34		$	0.11			32.4	%
Average number of common shares outstanding:
Basic		50,339			54,988			(4,649	)		(8.5	)%
Diluted		50,717			56,017			(5,300	)		(9.5	)%

Balance Sheet Data

	September 30,		December 31,
	2008		2007
	(In thousands)
Cash, cash equivalents and investments in marketable securities	$	230,592	$	329,784
Working capital	$	85,920	$	216,541
Total assets	$	2,240,423	$	1,663,945
Long-term debt – HEP	$	340,851	$	—
Stockholders’ equity	$	509,917	$	593,794

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Segment Information

Our operations are currently 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 and include the operations of Holly Corporation, our parent company, and a small-scale oil and gas exploration and production program.

The Refining segment includes the operations of our Navajo Refinery, Woods Cross Refinery and Holly Asphalt Company. The Refining segment involves the purchase and refining of crude oil and wholesale and branded marketing of refined products, such as gasoline, diesel fuel and jet fuel, and includes our Navajo Refinery and Woods Cross Refinery. The petroleum products produced by the Refining segment are marketed in Texas, New Mexico, Arizona, Utah, Wyoming, Idaho, Washington and northern Mexico. The Refining segment also includes Holly Asphalt Company which manufactures and markets asphalt and asphalt products in Arizona, New Mexico, Texas and northern Mexico.

The HEP segment involves all of the operations of HEP effective March 1, 2008 (date of reconsolidation). HEP owns and operates a system of petroleum product and crude gathering pipelines in Texas, New Mexico, Oklahoma and Utah, distribution terminals in Texas, New Mexico, Arizona, Utah, Idaho, and Washington and refinery tankage in New Mexico and Utah. Revenues are generated by charging tariffs for transporting petroleum products and crude oil through their pipelines and by charging fees for terminalling petroleum products and other hydrocarbons, and storing and providing other services at their storage tanks and terminals. The HEP segment also includes a 70% interest in Rio Grande Pipeline Company (“Rio Grande”) which provides petroleum products transportation services. 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 and from HEP’s interest in Rio Grande.

								Consolidations
					Corporate			and			Consolidated
	Refining		HEP		and Other			Eliminations			Total
					(In thousands)
Three Months Ended September 30, 2008
Sales and other revenues	$	1,711,445	$	30,518	$	570		$	(22,613	)	$	1,719,920
Operating expenses	$	60,084	$	11,033	$	13		$	—		$	71,130
General and administrative expenses	$	4	$	1,596	$	12,569		$	—		$	14,169
Depreciation and amortization	$	9,666	$	6,044	$	1,030		$	—		$	16,740
Income (loss) from operations	$	84,302	$	11,845	$	(13,171	)	$	—		$	82,976
Capital expenditures	$	83,154	$	8,835	$	660		$	—		$	92,649
Three Months Ended September 30, 2007
Sales and other revenues	$	1,208,245	$	—	$	426		$	—		$	1,208,671
Operating expenses	$	52,188	$	—	$	(3	)	$	—		$	52,185
General and administrative expenses	$	—	$	—	$	18,798		$	—		$	18,798
Depreciation and amortization	$	9,574	$	—	$	957		$	—		$	10,531
Income (loss) from operations	$	87,048	$	—	$	(19,416	)	$	—		$	67,632
Capital expenditures	$	38,829	$	—	$	1,855		$	—		$	40,684

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								Consolidations
					Corporate			and			Consolidated
	Refining		HEP		and Other			Eliminations			Total
	(In thousands)
Nine Months Ended September 30, 2008
Sales and other revenues	$	4,925,022	$	67,234	$	1,857		$	(50,387	)	$	4,943,726
Operating expenses	$	181,483	$	24,694	$	20		$	(184	)	$	206,013
General and administrative expenses	$	5	$	3,477	$	36,351		$	—		$	39,833
Depreciation and amortization	$	28,646	$	14,274	$	3,058		$	—		$	45,978
Income (loss) from operations	$	125,922	$	24,789	$	(37,916	)	$	—		$	112,795
Capital expenditures	$	268,479	$	21,037	$	1,917		$	—		$	291,433
Nine Months Ended September 30, 2007
Sales and other revenues	$	3,350,604	$	—	$	931		$	—		$	3,351,535
Operating expenses	$	153,419	$	—	$	11		$	—		$	153,430
General and administrative expenses	$	—	$	—	$	55,993		$	—		$	55,993
Depreciation and amortization	$	30,504	$	—	$	2,119		$	—		$	32,623
Income (loss) from operations	$	458,295	$	—	$	(57,539	)	$	—		$	400,756
Capital expenditures	$	103,798	$	—	$	9,417		$	—		$	113,215
September 30, 2008
Cash, cash equivalents and investments in marketable securities	$	—	$	2,118	$	228,474		$	—		$	230,592
Total assets	$	1,546,877	$	449,934	$	256,855		$	(13,243	)	$	2,240,423
Total debt	$	—	$	364,851	$	—		$	—		$	364,851
December 31, 2007
Cash, cash equivalents and investments in marketable securities	$	—	$	—	$	329,784		$	—		$	329,784
Total assets	$	1,271,163	$	—	$	392,782		$	—		$	1,663,945

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Refining Operating Data

Our refinery operations include the Navajo Refinery and the Woods Cross Refinery. 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, depletion and amortization. Reconciliations to amounts reported under GAAP are provided under “Reconciliations to Amounts Reported Under Generally Accepted Accounting Principles” below.

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2008			2007			2008			2007
Navajo Refinery
Crude charge (BPD)(1)		78,610			76,100			78,200			78,550
Refinery production (BPD)(2)		88,710			81,110			86,780			86,030
Sales of produced refined products (BPD)		88,920			80,500			87,630			85,500
Sales of refined products (BPD)(3)		94,760			99,000			96,290			98,740
Refinery utilization(4)		92.5	%		89.5	%		92.0	%		93.9	%
Average per produced barrel(5)
Net sales	$	133.44		$	88.46		$	122.82		$	85.88
Cost of products(6)		120.75			77.80			113.76			67.32
Refinery gross margin		12.69			10.66			9.06			18.56
Refinery operating expenses(7)		4.92			4.69			4.96			4.37
Net operating margin	$	7.77		$	5.97		$	4.10		$	14.19
Feedstocks:
Sour crude oil		75	%		84	%		79	%		79	%
Sweet crude oil		13	%		8	%		10	%		9	%
Other feedstocks and blends		12	%		8	%		11	%		12	%
Total		100	%		100	%		100	%		100	%
Sales of produced refined products:
Gasolines		56	%		57	%		57	%		58	%
Diesel fuels		34	%		31	%		33	%		30	%
Jet fuels		1	%		3	%		1	%		3	%
Fuel oil		3	%		3	%		3	%		3	%
Asphalt		3	%		3	%		3	%		3	%
LPG and other		3	%		3	%		3	%		3	%
Total		100	%		100	%		100	%		100	%
Woods Cross Refinery(8)
Crude charge (BPD)(1)		14,400			22,130			21,090			24,180
Refinery production (BPD)(2)		15,080			22,580			21,330			25,460
Sales of produced refined products (BPD)		17,250			25,250			22,090			26,490
Sales of refined products (BPD)(3)		18,450			25,550			23,470			26,760
Refinery utilization(4)		55.4	%		85.1	%		81.1	%		93.0	%
Average per produced barrel(5)
Net sales	$	145.86		$	93.06		$	124.98		$	86.69
Cost of products(6)		117.82			73.27			108.40			64.91
Refinery gross margin		28.04			19.79			16.58			21.78
Refinery operating expenses(7)		8.78			5.01			7.59			4.66
Net operating margin	$	19.26		$	14.78		$	8.99		$	17.12

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	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2008			2007			2008			2007
Woods Cross Refinery
Feedstocks:
Sour crude oil		—	%		1	%		1	%		1	%
Sweet crude oil		68	%		77	%		74	%		76	%
Black wax crude oil		23	%		15	%		20	%		14	%
Other feedstocks and blends		9	%		7	%		5	%		9	%
Total		100	%		100	%		100	%		100	%
Sales of produced refined products:
Gasolines		59	%		59	%		63	%		60	%
Diesel fuels		35	%		30	%		28	%		29	%
Jet fuels		1	%		3	%		1	%		2	%
Fuel oil		3	%		6	%		5	%		6	%
Asphalt		1	%		1	%		1	%		1	%
LPG and other		1	%		1	%		2	%		2	%
Total		100	%		100	%		100	%		100	%
Consolidated
Crude charge (BPD)(1)		93,010			98,230			99,290			102,730
Refinery production (BPD)(2)		103,790			103,690			108,110			111,490
Sales of produced refined products (BPD)		106,170			105,750			109,720			111,990
Sales of refined products (BPD)(3)		113,210			124,550			119,760			125,500
Refinery utilization(4)		83.8	%		88.5	%		89.5	%		93.7	%
Average per produced barrel(5)
Net sales	$	135.45		$	89.56		$	123.25		$	86.07
Cost of products(6)		120.28			76.72			112.68			66.75
Refinery gross margin		15.17			12.84			10.57			19.32
Refinery operating expenses(7)		5.55			4.77			5.49			4.44
Net operating margin	$	9.62		$	8.07		$	5.08		$	14.88
Feedstocks:
Sour crude oil		64	%		66	%		63	%		61	%
Sweet crude oil		21	%		23	%		23	%		25	%
Black wax crude oil		3	%		3	%		4	%		3	%
Other feedstocks and blends		12	%		8	%		10	%		11	%
Total		100	%		100	%		100	%		100	%
Sales of produced refined products:
Gasolines		57	%		57	%		58	%		59	%
Diesel fuels		34	%		31	%		32	%		29	%
Jet fuels		1	%		3	%		1	%		3	%
Fuel oil		3	%		4	%		3	%		4	%
Asphalt		3	%		3	%		3	%		2	%
LPG and other		2	%		2	%		3	%		3	%
Total		100	%		100	%		100	%		100	%

(1)	Crude charge represents the barrels per day of crude oil processed at the crude units at our refineries.
(2)	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.
(3)	Includes refined products purchased for resale.
(4)	Represents crude charge divided by total crude capacity (BPSD). Our consolidated crude capacity was increased from 109,000 BPSD to 111,000 BPSD in mid-year 2007.
(5)	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.

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(6)	Transportation costs billed from HEP are included in cost of products.
(7)	Represents operating expenses of our refineries, exclusive of depreciation, depletion, and amortization.
(8)	There was a scheduled major maintenance turnaround at the Woods Cross Refinery during the 2008 third quarter.

Reconciliations to Amounts Reported Under Generally Accepted Accounting Principles

Reconciliations 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 plus (i) interest expense net of interest income, (ii) income tax provision, and (iii) depreciation, depletion and amortization. EBITDA is not a calculation based upon 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						Nine Months Ended
	September 30,						September 30,
	2008			2007			2008			2007
				(In thousands)
Income	$	49,899		$	58,126		$	70,000		$	284,295
Add provision for income tax		25,750			19,141			36,301			139,963
Add interest expense		7,376			297			15,619			840
Subtract interest income		(1,896	)		(4,368	)		(9,277	)		(10,478	)
Add depreciation and amortization		16,740			10,531			45,978			32,623
EBITDA	$	97,869		$	83,727		$	158,621		$	447,243

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.

We calculate refinery gross margin and net operating margin using net sales, cost of products and operating expenses, in each case averaged per produced barrel sold. These two margins do not include the effect of depreciation, depletion and amortization. Each of these component performance measures can be reconciled directly to our Statements of Income.

Other companies in our industry may not calculate these performance measures in the same manner.

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Refinery Gross Margin

Refinery gross margin per barrel is the difference between average net sales price and average cost of products per barrel of produced refined products. Refinery gross margin for each of our refineries and for both of our refineries on a consolidated basis is calculated as shown below.

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2008		2007		2008		2007
Average per produced barrel:
Navajo Refinery
Net sales	$	133.44	$	88.46	$	122.82	$	85.88
Less cost of products		120.75		77.80		113.76		67.32
Refinery gross margin	$	12.69	$	10.66	$	9.06	$	18.56
Woods Cross Refinery
Net sales	$	145.86	$	93.06	$	124.98	$	86.69
Less cost of products		117.82		73.27		108.40		64.91
Refinery gross margin	$	28.04	$	19.79	$	16.58	$	21.78
Consolidated
Net sales	$	135.45	$	89.56	$	123.25	$	86.07
Less cost of products		120.28		76.72		112.68		66.75
Refinery gross margin	$	15.17	$	12.84	$	10.57	$	19.32

Net Operating Margin

Net operating margin per barrel is the difference between refinery gross margin and refinery operating expenses per barrel of produced refined products. Net operating margin for each of our refineries and for both of our refineries on a consolidated basis is calculated as shown below.

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2008		2007		2008		2007
Average per produced barrel:
Navajo Refinery
Refinery gross margin	$	12.69	$	10.66	$	9.06	$	18.56
Less refinery operating expenses		4.92		4.69		4.96		4.37
Net operating margin	$	7.77	$	5.97	$	4.10	$	14.19
Woods Cross Refinery
Refinery gross margin	$	28.04	$	19.79	$	16.58	$	21.78
Less refinery operating expenses		8.78		5.01		7.59		4.66
Net operating margin	$	19.26	$	14.78	$	8.99	$	17.12
Consolidated
Refinery gross margin	$	15.17	$	12.84	$	10.57	$	19.32
Less refinery operating expenses		5.55		4.77		5.49		4.44
Net operating margin	$	9.62	$	8.07	$	5.08	$	14.88

Below 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.

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Reconciliations of refined product sales from produced products sold to total sales and other revenue

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2008			2007		2008			2007
Navajo Refinery
Average sales price per produced barrel sold	$	133.44		$	88.46	$	122.82		$	85.88
Times sales of produced refined products sold (BPD)		88,920			80,500		87,630			85,500
Times number of days in period		92			92		274			273
Refined product sales from produced products sold	$	1,091,625		$	655,135	$	2,948,984		$	2,004,568
Woods Cross Refinery
Average sales price per produced barrel sold	$	145.86		$	93.06	$	124.98		$	86.69
Times sales of produced refined products sold (BPD)		17,250			25,250		22,090			26,490
Times number of days in period		92			92		274			273
Refined product sales from produced products sold	$	231,480		$	216,178	$	756,461		$	626,922
Sum of refined products sales from produced products sold from our two refineries(4)	$	1,323,105		$	871,313	$	3,705,445		$	2,631,490
Add refined product sales from purchased products and rounding(1)		83,435			150,574		338,933			321,443
Total refined products sales		1,406,540			1,021,887		4,044,378			2,952,933
Add direct sales of excess crude oil(2)		259,725			143,277		777,162			296,800
Add other refining segment revenue(3)		45,180			43,081		103,482			100,871
Total refining segment revenue		1,711,445			1,208,245		4,925,022			3,350,604
Add HEP segment sales and other revenue		30,518			—		67,234			—
Add corporate and other revenues		570			426		1,857			931
Subtract consolidations and eliminations		(22,613	)		—		(50,387	)		—
Sales and other revenues	$	1,719,920		$	1,208,671	$	4,943,726		$	3,351,535

(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, 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 revenues associated with Holly Asphalt Company and revenue derived from sulfur credit sales.
(4)	The above calculations of refined product sales from produced products sold can also be computed on a consolidated basis. These amounts may not calculate exactly due to rounding of reported numbers.

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2008		2007		2008		2007
Average sales price per produced barrel sold	$	135.45	$	89.56	$	123.25	$	86.07
Times sales of produced refined products sold (BPD)		106,170		105,750		109,720		111,990
Times number of days in period		92		92		274		273
Refined product sales from produced products sold	$	1,323,105	$	871,313	$	3,705,445	$	2,631,490

Reconciliation of average cost of products per produced barrel sold to total costs of products sold

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2008		2007		2008		2007
Navajo Refinery
Average cost of products per produced barrel sold	$	120.75	$	77.80	$	113.76	$	67.32
Times sales of produced refined products sold (BPD)		88,920		80,500		87,630		85,500
Times number of days in period		92		92		274		273
Cost of products for produced products sold	$	987,812	$	576,187	$	2,731,448	$	1,571,350

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	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2008			2007		2008			2007
Woods Cross Refinery
Average cost of products per produced barrel sold	$	117.82		$	73.27	$	108.40		$	64.91
Times sales of produced refined products sold (BPD)		17,250			25,250		22,090			26,490
Times number of days in period		92			92		274			273
Cost of products for produced products sold	$	186,980		$	170,206	$	656,108		$	469,414
Sum of cost of products for produced products sold from our two refineries(4)	$	1,174,792		$	746,393	$	3,387,556		$	2,040,764
Add refined product costs from purchased products sold and rounding(1)		85,188			149,569		343,712			317,905
Total refined cost of products sold		1,259,980			895,962		3,731,268			2,358,669
Add crude oil cost of direct sales of excess crude oil(2)		257,033			143,383		771,209			297,289
Add other refining segment costs of products sold(3)		40,376			20,126		86,489			52,464
Total refining segment cost of products sold		1,557,389			1,059,471		4,588,966			2,708,422
Subtract consolidations and eliminations		(22,613	)		—		(50,203	)		—
Costs of products sold (exclusive of depreciation, depletion and amortization)	$	1,534,776		$	1,059,471	$	4,538,763		$	2,708,422

(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, 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 cost of products sold includes the cost of products for Holly Asphalt Company and costs attributable to sulfur credit sales.
(4)	The above calculations of costs of products from produced products sold can also be computed on a consolidated basis. These amounts may not calculate exactly due to rounding of reported numbers.

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2008		2007		2008		2007
Average cost of products per produced barrel sold	$	120.28	$	76.72	$	112.68	$	66.75
Times sales of produced refined products sold (BPD)		106,170		105,750		109,720		111,990
Times number of days in period		92		92		274		273
Cost of products for produced products sold	$	1,174,792	$	746,393	$	3,387,556	$	2,040,764

Reconciliation of average refinery operating expenses per produced barrel sold to total operating expenses

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2008		2007		2008		2007
Navajo Refinery
Average refinery operating expenses per produced barrel sold	$	4.92	$	4.69	$	4.96	$	4.37
Times sales of produced refined products sold (BPD)		88,920		80,500		87,630		85,500
Times number of days in period		92		92		274		273
Refinery operating expenses for produced products sold	$	40,249	$	34,734	$	119,093	$	102,002
Woods Cross Refinery
Average refinery operating expenses per produced barrel sold	$	8.78	$	5.01	$	7.59	$	4.66
Times sales of produced refined products sold (BPD)		17,250		25,250		22,090		26,490
Times number of days in period		92		92		274		273
Refinery operating expenses for produced products sold	$	13,934	$	11,638	$	45,940	$	33,700

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	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2008		2007			2008			2007
Sum of refinery operating expenses per produced products sold from our two refineries(2)	$	54,183	$	46,372		$	165,033		$	135,702
Add other refining segment operating expenses and rounding(1)		5,901		5,816			16,450			17,717
Total refining segment operating expenses		60,084		52,188			181,483			153,419
Add HEP segment operating expenses		11,033		—			24,694			—
Add corporate and other costs		13		(3	)		(164	)		11
Operating expenses (exclusive of depreciation, depletion and amortization)	$	71,130	$	52,185		$	206,013		$	153,430

(1)	Other refining segment operating expenses include the marketing costs associated with our refining segment and the operating expenses of Holly Asphalt Company.
(2)	The above calculations of refinery operating expenses from produced products sold can also be computed on a consolidated basis. These amounts may not calculate exactly due to rounding of reported numbers.

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2008		2007		2008		2007
Average refinery operating expenses per produced barrel sold	$	5.55	$	4.77	$	5.49	$	4.44
Times sales of produced refined products sold (BPD)		106,170		105,750		109,720		111,990
Times number of days in period		92		92		274		273
Refinery operating expenses for produced products sold	$	54,183	$	46,372	$	165,033	$	135,702

Reconciliation of net operating margin per barrel to refinery gross margin per barrel to total sales and other revenues

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2008			2007		2008			2007
Navajo Refinery
Net operating margin per barrel	$	7.77		$	5.97	$	4.10		$	14.19
Add average refinery operating expenses per produced barrel		4.92			4.69		4.96			4.37
Refinery gross margin per barrel		12.69			10.66		9.06			18.56
Add average cost of products per produced barrel sold		120.75			77.80		113.76			67.32
Average net sales per produced barrel sold	$	133.44		$	88.46	$	122.82		$	85.88
Times sales of produced refined products sold (BPD)		88,920			80,500		87,630			85,500
Times number of days in period		92			92		274			273
Refined products sales from produced products sold	$	1,091,625		$	655,135	$	2,948,984		$	2,004,568
Woods Cross Refinery
Net operating margin per barrel	$	19.26		$	14.78	$	8.99		$	17.12
Add average refinery operating expenses per produced barrel		8.78			5.01		7.59			4.66
Refinery gross margin per barrel		28.04			19.79		16.58			21.78
Add average cost of products per produced barrel sold		117.82			73.27		108.40			64.91
Average net sales per produced barrel sold	$	145.86		$	93.06	$	124.98		$	86.69
Times sales of produced refined products sold (BPD)		17,250			25,250		22,090			26,490
Times number of days in period		92			92		274			273
Refined products sales from produced products sold	$	231,480		$	216,178	$	756,461		$	626,922
Sum of refined products sales from produced products sold from our two refineries(4)	$	1,323,105		$	871,313	$	3,705,445		$	2,631,490
Add refined product sales from purchased products and rounding(1)		83,435			150,574		338,933			321,443
Total refined products sales		1,406,540			1,021,887		4,044,378			2,952,933
Add direct sales of excess crude oil(2)		259,725			143,277		777,162			296,800
Add other refining segment revenue(3)		45,180			43,081		103,482			100,871
Total refining segment revenue		1,711,445			1,208,245		4,925,022			3,350,604
Add HEP segment sales and other revenues		30,518			—		67,234			—
Add corporate and other revenues		570			426		1,857			931
Subtract consolidations and eliminations		(22,613	)		—		(50,387	)		—
Sales and other revenues	$	1,719,920		$	1,208,671	$	4,943,726		$	3,351,535

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(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, 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 revenues associated with Holly Asphalt Company and revenue derived from sulfur credit sales.
(4)	The above calculations of refined product sales from produced products sold can also be computed on a consolidated basis. These amounts may not calculate exactly due to rounding of reported numbers.

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2008		2007		2008		2007
Net operating margin per barrel	$	9.62	$	8.07	$	5.08	$	14.88
Add average refinery operating expenses per produced barrel		5.55		4.77		5.49		4.44
Refinery gross margin per barrel		15.17		12.84		10.57		19.32
Add average cost of products per produced barrel sold		120.28		76.72		112.68		66.75
Average sales price per produced barrel sold	$	135.45	$	89.56	$	123.25	$	86.07
Times sales of produced refined products sold (BPD)		106,170		105,750		109,720		111,990
Times number of days in period		92		92		274		273
Refined product sales from produced products sold	$	1,323,105	$	871,313	$	3,705,445	$	2,631,490

FOR FURTHER INFORMATION, Contact:

Bruce R, Shaw, Senior Vice President and
      Chief Financial Officer
M. Neale Hickerson, Vice President,
     Investor Relations
Holly Corporation
214/871-3555

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