HEP - Earnings call transcript Q1 2018 | Holly Energy Partners LP

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Operator

Welcome to the Holly Energy Partners First Quarter 2018 Conference Call and Webcast. At this time, all participants have been placed in a listen-only mode. The floor will be open for your questions following the presentation. [Operator Instructions] Please note that this conference is being recorded. It is now my pleasure to turn the floor over to Jared Harding. begin. may you Jared,

Jared Harding

you I joining Investor am Partners. Holly Thank XXXX Relations first earnings Energy call. Jared all Jason. our for quarter for Thanks, Harding with

Rich George morning, This issued ending a results and Joining March and announcing we Damiris, release the today Vice President are CEO; us and for Voliva, press XX, Executive CFO. President quarter XXXX.

website copy you may on our If release, find press you’d at of like today’s a hollyenergy.com. it

of Harbor remarks, results Before made in Harbor to disclosure on including to of expectations, are George statements Safe or provisions that not longer guarantees SEC any noted the Safe please provided factors Rich statements. transcript. the may call future note of and intended could summary, or our today’s regarding webcast be statements information the Any statements covered speaks May are forward-looking These There judgments statement many no accurate time that reading their in press note differ says from please of In at Also, as X, with expectations, release. predictions Federal outcomes. XXXX. today’s are today, under Laws. of time-sensitive cause be presented are the information replay filings. proceed it Today’s management Securities those only

George. GAAP to may measures. over And of today’s today’s I’ll non-GAAP to the discussion for include call reconciliations financial Finally, press with call measures. Please release see turn that,

George Damiris

this Thanks, Jared. And thanks you the each to afternoon. joining of for call

in to fee-based model driven minimum the continues of foundation refined Frontier also very us growth. a our which occurred of shipments, to last year. consecutive turnaround due October for long-term increase to in enabled to HEP’s largely volume volumes pleased the the Lake announce increased in quarter business Salt completed IPO XXth are refinery acquisition remaining period provide by in the pipelines with volume distribution product HEP XX% results by had quarter Pipeline City the commitments primarily higher strong We first compared our since distribution and supported HollyFrontier’s first the Navajo our interest year, in last same XXXX. that the XXXX.

in no anticipate service announced allow have As many the have MLPs this the revision will to tariff. you longer the that limited income impact tax in as would know, include we FERC ruling policy We calculation tariffs. of on HEP cost cost March not do the of of a material allowance service very of

activity to patch organically, our oil asset system Permian. product Looking will the Delaware associated and and new forward, footprint grow leverage connected to the our to serve the Mexico. New demand especially Texas in intention This Orla, existing morning, in we basin. rack with focus refined our announced diesel our around a is to in Texas growing This construct in

have call Rich. year. crude Lake and pipeline turn also I’ll plan project the upcoming this that, to Salt With pipelines system We an oil the and Frontier over debottleneck for City the to expand Malaga

Rich Voliva

April first unit for paid which May XXXX. April announced a XXth on increase unitholders On is distribution distribution as represents Partners the George. Holly X.XXX per be to Thanks, quarterly to quarter record XXth, distribution X.X% the scheduled the Energy on over of This of of XXth.

higher flow During million period than the HEP $XX $XX year. the period, distributable cash generated same million, of last

for times. the was ratio coverage distribution quarter Our X.XX

X coverage The related increase and the operating interest is Pipeline. ratio in quarter, factors times acquisition for of a seasonal to Operating under period Frontier expect will in half cost expenditures in SLC totaled same $XX.X expenses to and remaining higher of million year. of versus followed XXXX the million the or year. coverage to with $XX.X stronger second the the drive the attributable the continue by times full X much We second last

CapEx and capital by $XXX,XXX Our was capital HollyFrontier. of the including quarter reimbursed maintenance million in $X.X $XXX,XXX approximately for

recognized as of $X.X deferred of carried quarter quarter due $XXX of balance additional the deferred finance equity to of of temporarily first the revenue In of XXXX, senior from partner a In private deferred issued XXXX, we $X.X quarter February revenue XXXX first as and during our $XXX,XXX XXXX, the XXXX, XX, limited $X expense as the credit million an our million to completed acquisitions For offering on Frontier notes recognizing to increased a prior of million in March all our HEP SLC we placement. of X% million approximately $XXX of the to shippers. facility. second revenue. the sheet. Interest we well million of our of shortfalls tack-on and via revolving quarter anticipate third billed decision compared through

of units SLC the and Frontier raised We additional $X.X debt the period the from LP with our through These also portion or a proceeds associated acquisitions. sale repay an million At-The-Market during were the used to program. of ATM

As of to cash our quarter, leverage of debt roughly and expect XXXX. availability, is revolver and to roughly our XX EBITDA X.XX leverage times $XXX the quarter X the of was we reach by times Including end million. current months end first liquidity over trailing the

growth, access turn future markets that to [Ph] O&A. We us to organically confident to that strong achieve the I’ll period. Jason through and are over will our capital call liquidity both and for with Q&A to the And ability enable

Operator

now The for [Operator Thank open up you. floor is questions. Instructions]

is question from Barclays. from Chen, Theresa first Your

Your is line open.

Theresa Chen

second has do What question to seasonal first quarter the the My is below afternoon. for with being cause of times. X guidance the Good factors?

Rich Voliva

primarily Hey Theresa, it’s unit related.

quarter second lower and significantly run the volumes unit recall, third the you’ll typically. As in

So there. that’s driver the big

Theresa Chen

change to And revenue there? what was recognition segment, the terminalling Got related your it.

Rich Voliva

terminalling? to Specific

Theresa Chen

are Yes. to sentence primarily due volumes… There that higher these a is says increases

Rich Voliva

$X $X million and It was between Yes. million.

Theresa Chen

revenue But, was Okay. forward? what rationale going about how think that should and the behind the recognition change we

Rich Voliva

sure. Yes,

you recognize that And tariff that works it’s than of over have having So This pretty a is relates to of standard contract. And accounting essentially contracts couple life enforcement that’ll year. going the forward. the a RevRec into be that of life the the that X%. minimum, this to is standard greater over escalation; accounting that minimum came need the way earlier we the

Theresa Chen

Okay. And previously, you recognized… have

Rich Voliva

as It would that be increased. tariff recognized

So, actual little lower essentially the higher a it years the of a little billing early the of than somewhat perverse in the in the making the EBITDA, has and year revenue effect contract contract. look later of

we cash for flow adjusted Importantly, have distributable this.

So, really billing end what of flow are the the the the like cash metrics looks at day.

Theresa Chen

Understood.

$XX project, you million diesel you how about much your of can terms generate $XX to this? of do the to expected on from million returns In the EBITDA spend, talk expect

Rich Voliva

going going what to what cost in get midstream the are EBITDA for the is be capital I to the think space. think specific I multiples there, we’re too and Theresa. we disclosed Yes. don’t we project mean,

So, that. you can from have imputed number

Theresa Chen

debottlenecking the What Malaga, Frontier? SLC expansion the project Okay. at capital and about of cost and the for

Rich Voliva

those our embedded in kind capital single So, digit are already. range,. in of they million and guidance are Theresa,

So, nothing those. incremental for there’s

Operator

from the of question from Raymond comes James. next Your line Jenkins Justin

Your line is open.

Justin Jenkins

Great, in thanks. a call on I maybe supply your of HFC’s a question the prepared on high guys. Obviously, of kind better afternoon, Good tomorrow. George, here And growth guess, focus the on question and Permian. this following lot maybe it’s up referenced you for But remarks. differentials. Theresa’s basis

opportunities side, system? longer HFC gathering down new even whether if Permian to get road barrels into pipelines or the haul refining the it’s curious more there’s Just here any on crude the

George Damiris

gathering on barrels to are we our to going systems. more on look getting think, HEP continue existing I

of XXX% on we some Cushing. you Navajo. of will in as into also top capacity we get the have there the that, level to then know, that, to addition crude pipeline out on In on run And the HFC of Permian tomorrow. we And least a Permian volumes

Justin Jenkins

missed that. I the new did forgive CapEx And the But get a supply project? if Rich, addition number of me with we diesel

Rich Voliva

Yes.

million. raising basically are range about We capital guidance $XX

XX roughly in So, XX to total.

Justin Jenkins

to for XQ down bit for me. of end quarter any being XQ? Cross With issue one here, impact Woods HEP a start into towards for and that and in last potential then, the maybe of XQ the related And

Rich Voliva

don’t It second expect typically We runs in quarter. -- certainly flat or the really lower anything.

be to some SLC begin on is that. but see from lower with. lines they may Frontier there were any We So, going really to operation in volumes change the and not

sure not huge to of at end am have impact going I So. the day. it’s really a the

Operator

from Instructions] from next Your comes Jeremy question Tonet Morgan. [Operator JP

line is open. Your

Jeremy Tonet

go see expand quarter the a just if here? bit might able more how the I over back to and -- a far be the little Permian afternoon. you bit little as as gathering trending to trended here wanted Good volumes

George Damiris

clearly I sure well, the Cushing ran much trend not of over which is were a decent being the number barrels to we gathering am was to able for healthy, quarter. there the then well. of up differential as course with Navajo base system. And move the of

Jeremy Tonet

any Okay, then, might I there, to build turning And I out guess was you if wondering provide just M&A thoughts. updated or thanks.

out that strong could the in opportunities be anything the smaller that some kind that guess, think, there. there I not do? or same commented you on were past, any are might of to unique you But, valuations your see you others footprint value the that size of might execute I

George Damiris

Permian that systems in in the new area. of construction think We the as really still in oriented are earlier. are activity far the of from the out new market Permian. lot there think don’t whole smaller that a it’s coming hot aren’t I in discussed as change already. there’s most most volumes is overall Yes. we’ve the M&A of what and or opportunities full smaller around the much smaller especially market pretty And opportunities, And

Operator

are I over will remarks. further questions, back to no turn there for floor If Jared closing any the

Jared Harding

the Thanks call today. for again joining

please Investor Relations. any out have reach follow-ups, you to If

Operator

This concludes today’s conference call.

now day. disconnect. You Thank have a joining and you for great may

Holly Energy Partners (HEP) 1 May 182018 Q1 Earnings call transcript