Holly Energy Partners, L.P. Reports Fourth Quarter Results

Holly Energy Partners, L.P. (“HEP” or the “Partnership”) (NYSE:HEP) today reported financial results for the fourth quarter of 2020. Net income attributable to HEP for the fourth quarter was $51.3 million ($0.49 per basic and diluted limited partner unit) compared to $45.7 million ($0.43 per basic and diluted limited partner unit) for the fourth quarter of 2019.

Distributable cash flow was $70.0 million for the quarter, an increase of $5.5 million, or 8.5%, compared to the fourth quarter of 2019. HEP declared a quarterly cash distribution of $0.35 on January 22, 2021.

The increase in net income attributable to HEP was mainly due to lower interest expense and higher equity in earnings of equity method investments, partially offset by lower volumes on our crude and product pipeline systems.

Commenting on our 2020 fourth quarter results, Michael Jennings, Chief Executive Officer, stated, “HEP delivered another quarter of solid financial and operational results demonstrating the strength and resiliency of HEP's business model. Our assets continue to generate strong and steady cash flows, and we believe we are well positioned to progress our deleveraging efforts while continuing to fully fund our quarterly distributions and our anticipated capital expenditures.

Impact of COVID-19 on Our Business

Our business depends in large part on the demand for the various petroleum products we transport, terminal and store in the markets we serve. The impact of the COVID-19 pandemic on the global macroeconomy has created diminished demand, as well as a lack of forward visibility, for refined products and crude oil transportation, and for the terminalling and storage services that we provide. Over the course of the third and fourth quarters, demand for transportation fuels showed incremental improvement over the second quarter of 2020. We expect our customers will continue to adjust refinery production levels commensurate with market demand and ultimately expect demand to return to pre-COVID-19 levels. For additional details of the impact of COVID-19 on our business, please see our Form 10-K for the year ended December 31, 2020.

Fourth Quarter 2020 Revenue Highlights

Revenues for the quarter were $127.5 million, a decrease of $4.2 million compared to the fourth quarter of 2019. The decrease was mainly attributable to lower volumes on our product pipelines servicing Delek US Holdings, Inc. and our crude pipelines systems in New Mexico and Texas, partially offset by higher revenues on our refinery units. Compared to the fourth quarter of 2019, our overall pipeline volumes decreased for the quarter by 11%.

• Revenues from our refined product pipelines were $28.6 million, a decrease of $2.2 million, on shipments averaging 155.8 thousand barrels per day ("mbpd") compared to 175.7 mbpd for the fourth quarter of 2019. The revenue and volume decreases were mainly due to lower volumes on our product pipelines servicing Delek US Holdings, Inc. partially offset by higher volumes on our product pipelines servicing HFC's Navajo refinery. Revenue also decreased due to a reclassification of certain pipeline income from revenue to interest income under sales-type lease accounting.

• Revenues from our intermediate pipelines were $7.5 million, consistent with the fourth quarter of 2019. Shipments averaged 134.8 mbpd compared to 136.4 mbpd for the fourth quarter of 2019.

• Revenues from our crude pipelines were $32.0 million, a decrease of $1.8 million, on shipments averaging 410.4 mbpd compared to 479.2 mbpd for the fourth quarter of 2019. The revenue decreased mainly due to lower volumes on our crude pipeline systems in New Mexico and Texas.

• Revenues from terminal, tankage and loading rack fees were $38.9 million, a decrease of $2.5 million compared to the fourth quarter of 2019. Refined products and crude oil terminalled in the facilities averaged 440.7 mbpd compared to 456.7 mbpd for the fourth quarter of 2019. The revenue decrease was mainly due to lower butane blending margins and lower reimbursable project revenues.

• Revenues from refinery processing units were $20.5 million, an increase of $2.3 million compared to the fourth quarter of 2019, and throughputs averaged 63.9 mbpd compared to 55.7 mbpd for the fourth quarter of 2019. The revenue increase was primarily due to higher revenues from our Woods Cross FCC unit, which was unavailable for a portion of the fourth quarter of 2019 due to maintenance. The volume increase was mainly due to higher volumes on our naphtha fractionation unit in El Dorado and the crude unit in Woods Cross.

Year Ended December 31, 2020 Revenue Highlights

Revenues for the year ended December 31, 2020, were $497.8 million, a decrease of $34.9 million compared to the year ended December 31, 2019. The decrease was mainly attributable to an 18% reduction in overall crude and product pipeline volumes predominantly in our Southwest and Northwest regions.

• Revenues from our refined product pipelines were $116.9 million, a decrease of $15.4 million, on shipments averaging 161.5 mbpd compared to 195.5 mbpd for the year ended December 31, 2019. The volume and revenue decreases were mainly due to lower volumes on pipelines servicing HFC's Navajo refinery, Delek's Big Spring refinery and our UNEV pipeline largely as a result of demand destruction associated with the COVID-19 pandemic as well as the recording of certain pipeline tariffs as interest income as the related throughput contract renewals were determined to be sales-type leases.

• Revenues from our intermediate pipelines were $30.0 million, an increase of $0.5 million compared to the year end