HEP - Earnings call transcript Q3 2019 | Holly Energy Partners LP

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Operator

Welcome to Holly Energy Partners Third Quarter 2019 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 Trey Schonter. begin. may you Trey,

Trey Schonter

thank call. for Relations I'm Partners. Holly and quarter representative our XXXX Energy earnings Trey you Julie, joining all third for Thanks, Schonter, Investor

Rich George morning, This issued ending a results and Joining Septem 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. one

Harbor remarks, Before made be in disclosure to George or Safe Rich statements. note and SEC future outcomes. intended summary, regarding There statements statements expectations, are forward-looking differ covered Federal These of judgments, statement their press from says of factors please In with expectations, filings. not release. Safe predictions today's those are are guaranteeing results the Securities proceed provisions noted it management in to Today's are including under statements our Laws. that the Harbor many could cause

speaks on of any may Also, no time accurate the please or provided note at today, call longer information presented that be the webcast XXXX. only time-sensitive of information of Any transcript. the reading October, replay as

call of today’s release measures. see reconciliations discussion measures. Please press financial may to today’s GAAP include for non-GAAP Finally,

over And that, to turn with the I’ll call George.

George Damiris

of thanks distribution to a XX. afternoon. of to we quarter us each to representing our on from Thanks, HEP Trey, maintain the the holders unit, and joining quarter distribution November this for X.X% allow to paid to $X.XXXX the XX generated of XXXX, in October the call you unit third solid earnings the distribution on third record per

our due XX% Utah our strength pipeline of in crude the as on as For UNEV and HEP's the strong continued product volumes pipeline. third total to well shipments Wyoming volume systems strong oil increased as quarter, year-over-year remain

to crude storage will Tulsa HollyFrontier's refineries. Oklahoma joint day We recently hub American. Plains well supporting as as crude the pipeline, Tulsa operate connecting Cushing Connect XXX,XXX X.X venture our and joint oil Cushing per with in a barrels oil own Dorado construct and of Cushing, The venture El All announced refinery barrel million HollyFrontier's

provides HEP to logistic terminal we XXXX, coming begin the joint by service second This anticipate in-sourcing the spend. growth of quarter on during The to expected the first and venture HFC's during is line of quarter pipeline JV XXXX. added

Combined, $X million a transaction we $X X to of expect multiple X annual EBITDA initial million of times. to representing

time. at per forward, Looking while constant maintaining $X.XXXX to through unit one quarter the we plan LP the XXXX hold distribution of coverage per distribution

venture, reflects Cushing and distribution the distributing tariff growth to sheet commitment and flow balance announced for escalators Connect HEPs our guidance to recently holders. a cash unit contractual joint and both our balances healthy

Rich. And I'll to with turn over that, the call

Rich Voliva

Thank you, George.

in The the to million, million mainly gain million XXXX. Corporation. income HollyFrontier triggered between non-cash HEP by quarter and was For was $XX.X $XX attributable third third of to renewal compared due original increase throughput quarter HEP of XXXX, the to agreement of net the $XX.X the a

this agreement the of into of sale-type the gain. as we standards qualified at effect Under went lease the ASC determined generated beginning from XXX a XXXX, which accounting lease, portions that

gain, to unit. net increase LP this This diluted represents $XX.X $X.X Excluding basic for the XXXX. quarter and HEP million million or of to compared was third $X.XX income a attributable quarter for the

year. the amortization as investment to income million, classified asset to of revenue on recognize requires The or compared in Third tariff new $XX.X $XX.X leases quarter as the was million us leases. lease net EBITDA the in adjusted prior either XXXX standard sales the interest the

interest in revenue income form During outside as of the line, $X.X $XXX,XXX the recognized total approximately quarter, tariffs third million we $X.X and a amortization. the of million of of

and that the old comparison we treatment as new amortization. an our amount in To the evaluate tariffs under we and table press will number we EBITDA adjusted or of report interest contracts, available as are either adjustments expect them initiate aid release. of analysis, growth the recognizing new reflecting renew will tariff in we revenue these and reverses or contracts forward economic lease Going is expense standards revenue. The

During same the period, last HEP increase cash $XX.X year. generated million, a million $X.X distributable over flow the period

George to LP per for remainder distribution the As and expect quarter. the at through we mentioned per $X.XXXX of XXXX, XXXX unit hold constant

coverage quarter, ratio averaging third year-to-date. times the was our X.XX distribution For times, X.XX

$X were of reimbursable quarter of CapEx including maintenance Our $X approximately $X capital CapEx. expenditures million and million for the million,

in in maintenance the spending For capital the of we venture XXXX, driven million $XX is and The approximately million expansion million JV. $X in by investments. Cushing capital, joint full year $XX spend Connect expect to increase

the quarter expense balances third credit higher to XXXX, approximately average grows revolving $XXX,XXX to due senior primarily outstanding secured of under compared facility. our Interest

of debt ratio debt-to-adjusted X.X EBITDA XXth, resulting have As HEP September billion of of $X.X total a in outstanding times.

Including revolver cash our over liquidity and million. availability, $XXX current is

strength family the reinforcing HEP's cash rating HollyFrontier. from and BaX parent corporate relationship credit our quarter, BaX, the upgraded flows During to HEP's of with advantageous stable Moody's further

pursue our Together HEP Connect third-party position announced will future recently the to our liquidity growth Cushing and JV. opportunities support strong as organic enable and demonstrated by

I'll And with questions. over any the turn to that, for call Julie

Operator

Jeremy The questions. first open floor Tonet [Operator now with is Instructions] question for JP from Your comes Morgan.

James Kirby

Jeremy. on guys. This for is Hey. afternoon Good James

George Damiris

Hey. Good afternoon.

James Kirby

due Delek portion contract, and not to any on update if was year? there the start off the wanted Just next coming renewed with is

George Damiris

really, product time. for continue Not update to the this no both we'd at evaluate service, crude and but asset alternatives oil in our

James Kirby

Okay. I up following question. that guess just

year, guidance that distribution -- for there is there the the utilized on For for is capacity assumption the any next what system? the

George Damiris

contract expiration the quarter. after of first utilization at the no assume of end the the we So,

James Kirby

above Cushing connectivity? target more I ticking you see could. Do to leverage And the fund just if the one

George Damiris

a we're earnings little venture. bit back for yet capital down and a not as here think as then to rise on JV in see the probably spending but the with going capital we're the I kick that earning come joint

Operator

comes question from next Dounis Credit Our Suisse. from Spiro

Spiro Dounis

the within JV guy kind to to if just that Cushing work overtime or without Just of X with either curious multiple, multiple CapEx? opportunity you of Connect, sort X maybe the following have down incremental what up do on

George Damiris

crude on system. could up besides we We and toss Cushing we migrate that get there line. more those Cushing Well, other potentially under volumes potentially and crude could crude additional some oil Cushing have that for is from oil to oil from put locations volume volume

There probably and around is also but terminal some long think upside near-term a run the we issue, some opportunities in barrels that. the at that's there is more

Spiro Dounis

on, assets, that. I probably there are? the maybe And some follow-up who there it. describe DJ marketability types is appreciate what additional a of I alternatives would but be other to people I Got on in like the just they just want their terms think out Then color the maybe bit counterparties little to would those the assets, contract assets? guess just those get hand able of

George Damiris

but Yes, currently of They end service, in Permian Basin. barrels product Coast service these the are be get Permian Gulf obviously to at the oil potential are day, well the location. to the the crude the to convert primarily from assets. have in located are they few They the

we're So, some to as other are well your interested these ideas point, I project be think as may at. that looking in parties internal there lines that

Spiro Dounis

the one, distribution. Yes, able flat just year. it sneak I in if next now fair. could to being Last on on eyes Totally hold point that's get your it

one maybe the guys think of sort more reach. little sense consider, Just base, yield out a slate just looked as I well, you guess that how at cash where your seem risking you more at Did weigh within like to go yield I given or sort conclusion? of around your of stuff? growth, just is. thoughts opportunities investor there, maybe get point sort which for after didn't got that's it that I curious a you of to as worth retaining focus options, the you just was of any

George Damiris

the to one a argue or magnitude seeing way order We're we historically, we To needed that. distribution One we we've here. options and we cut your type if have got not. We've Or the not points two it's value two cut for had you would of leverage that shareholders Yes, when at they dollar our real combine the be lot on capital and would to looked your of of good which finance point, a billion distribution. growth think point program really here. but where you had if here. don't our the in the we I with opportunities, distribution for problem, a as and here steady you a the your felt reasons. appreciate cutting yield what project do you anyone seen thought for there, didn't see that some Really, we consistent distribution, them

Operator

Our next Gershuni Shneur instructions] question UBS. comes from with [Operator

Shneur Gershuni

HEP the it remember expires quick HFC million level. few a if correctly, second was think XXXX. remember quarter at I was the questions here. think I correctly, -- quarter $X.X to the Just if I of And it in I a There

or gets about Your coverage, expectation re-upped that that does that assume that expires? that

George Damiris

that assumed consistent we've contract. the No, expires existing with

right the You're on date.

Shneur Gershuni

there at is you about maybe where now? extending discussion And you're feel right or comfortable it any

George Damiris

No, we're comfortable at. where we're

Shneur Gershuni

the Or would coverage All right. Delek who number. recent inside you’d any well, In expiration too? you’ve remember is ratio first considered ask question future ask the I that expiration it, as just that the can't most Delek if the Is question, expiration? included the if were that

George Damiris

We have XXXX considered everything through up that's coming already.

Shneur Gershuni

from I actual okay, that remember related is dollar there's last venture. to HEP's terminal perfect. CapEx on contribution XXXX, One Plains million $XX Plains I with a valuation. think joint about the question Through What a that because spent

Just going that come kind to from is of HEP? your is want cash to understand component what

George Damiris

the Yes, combines about that the cash JV and the around total and million, be the pipeline. $XX component would investment, capital

Operator

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

Trey Schonter

to for Investor Feel you free have to if joining call questions. the any again out today. Thanks Relations, reach

Operator

call. today's concludes This conference

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

Holly Energy Partners (HEP) 30 Oct 192019 Q3 Earnings call transcript