HOLLY ENERGY PARTNERS LP0001283140false00012831402023-11-022023-11-02

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________

FORM 8-K
CURRENT REPORT

Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): November 2, 2023
___________________

HOLLY ENERGY PARTNERS, L.P.
(Exact name of Registrant as specified in its charter)
Delaware001-3222520-0833098
(State or other jurisdiction of incorporation)(Commission File Number)(I.R.S. Employer
Identification Number)
2828 N. Harwood, Suite 1300DallasTexas75201
(Address of principal executive offices)(Zip code)
Registrant’s telephone number, including area code: (214) 871-3555
Not applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to 12(b) of the Securities Exchange Act of 1934:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Limited Partner UnitsHEPNew York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company        ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.     ☐


Item 2.02. Results of Operations and Financial Condition.
On November 2, 2023, Holly Energy Partners, L.P. (the “Partnership”) issued a press release announcing the Partnership’s third quarter 2023 results. A copy of the Partnership’s press release is attached hereto as Exhibit 99.1 and incorporated herein in its entirety.
The information contained in, or incorporated into, this Item 2.02 is being furnished and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any registration statement or other filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.


104 Cover Page Interactive Data File (embedded within the Inline XBRL document).

________________________
* Furnished herewith pursuant to Item 2.02.




SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
HOLLY ENERGY PARTNERS, L.P.
By:HEP LOGISTICS HOLDINGS, L.P.,
its General Partner
By:HOLLY LOGISTIC SERVICES, L.L.C.,
its General Partner
By:/s/ John Harrison
Name:John Harrison
Title:Senior Vice President, Chief Financial Officer and Treasurer
                    
Date: November 2, 2023




Earnings Release
November 2, 2023
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Holly Energy Partners, L.P. Reports Third Quarter Results
•Reported net income attributable to HEP of $63.0 million or $0.50 per unit
•Announced quarterly distribution of $0.35 per unit
•Reported EBITDA of $94.4 million and Adjusted EBITDA of $118.5 million
Dallas, Texas -- Holly Energy Partners, L.P. ("HEP") (NYSE: HEP) today reported financial results for the third quarter of 2023. Net income attributable to HEP for the third quarter of 2023 was $63.0 million ($0.50 per basic and diluted limited partner unit), compared to $42.0 million ($0.33 per basic and diluted limited partner unit) for the third quarter of 2022.
Results for the third quarters of 2023 and 2022 reflect reductions to our equity in earnings of equity method investments of $4.3 million and $20.3 million, respectively, for HEP's 50% share of incurred and estimated environmental remediation and recovery expenses and estimated fines and penalties, net of insurance proceeds received, associated with a release of crude oil on the Osage Pipe Line Company, LLC ("Osage") pipeline that occurred on July 8, 2022. Excluding these reductions, net income attributable to HEP for the third quarters of 2023 and 2022 was $67.3 million ($0.53 per basic and diluted limited partner unit) and $62.2 million ($0.49 per basic and diluted limited partner unit), respectively. The increase in net income attributable to HEP in the third quarter of 2023 was mainly due to higher revenues associated with tariff increases that went into effect on July 1, 2023, partially offset by higher interest expense and higher general and administrative expenses.
Distributable cash flow was $78.5 million for the third quarter of 2023, a decrease of $0.3 million, or 0.3%, compared to the third quarter of 2022. HEP declared a quarterly cash distribution of $0.35 per unit on October 19, 2023.
Commenting on our 2023 third quarter results, Michael Jennings, Chief Executive Officer and President, stated, “HEP generated solid results during the quarter, supported by safe and reliable operations and strong volumes across our transportation and storage systems. We also announced a quarterly distribution of $0.35 per unit to be paid on November 10, 2023 to unitholders of record on October 30, 2023.”
Third Quarter 2023 Revenue Highlights
Revenues for the third quarter of 2023 were $158.4 million, an increase of $9.4 million compared to the third quarter of 2022. The increase was mainly due to tariff increases that went into effect on July 1, 2023 as well as more customer billings recognized as revenue rather than interest income under sales-type lease accounting.

•Revenues from our refined product pipelines were $34.6 million, an increase of $3.2 million compared to the third quarter of 2022. Shipments averaged 186.1 thousand barrels per day ("mbpd") compared to 205.7 mbpd for the third quarter of 2022. The volume decrease was mainly due to lower volumes on our product pipelines serving HF Sinclair Corporation's ("HF Sinclair") Navajo refinery. The increase in revenues was mainly due to tariff increases that went into effect on July 1, 2023 as well as more customer billings recognized as revenue rather than interest income under sales-type lease accounting.

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•Revenues from our intermediate pipelines were $9.1 million, an increase of $1.1 million compared to the third quarter of 2022. Shipments averaged 107.0 mbpd for the third quarter of 2023 compared to 137.0 mbpd for the third quarter of 2022. The decrease in volumes was mainly due to lower throughputs on our intermediate pipelines servicing HF Sinclair's Navajo and Tulsa refineries while revenues increased due to tariff increases on contractual minimum volume guarantees.

•Revenues from our crude pipelines were $41.4 million, an increase of $3.6 million compared to the third quarter of 2022. Shipments averaged 631.4 mbpd compared to 639.0 mbpd for the third quarter of 2022. The decrease in volumes was mainly attributable to lower volumes on our New Mexico and Texas crude pipelines as well as our crude pipeline servicing HF Sinclair's Tulsa refinery while revenues increased due to tariff increases that went into effect on July 1, 2023.

•Revenues from terminal, tankage and loading rack fees were $48.3 million, an increase of $3.9 million compared to the third quarter of 2022. Refined products and crude oil terminalled in the facilities averaged 802.4 mbpd compared to 620.9 mbpd for the third quarter of 2022. The increase in volumes was mainly due to higher volumes on the Sinclair Transportation Company LLC ("Sinclair Transportation") assets we acquired on March 14, 2022 and certain crude tanks. Revenues increased mainly due to higher revenues from the increased volumes on the acquired Sinclair Transportation assets as well as rate increases that went into effect on July 1, 2023.

•Revenues from refinery processing units were $25.0 million, a decrease of $2.4 million compared to the third quarter of 2022, and throughputs averaged 67.2 mbpd compared to 72.1 mbpd for the third quarter of 2022. The decrease in volumes was due to decreased throughputs at our El Dorado and Woods Cross refinery processing units. Revenues decreased mainly due to lower natural gas cost recoveries partially offset by rate increases on contractual minimum volume guarantees.

Nine Months Ended September 30, 2023 Revenue Highlights
Revenues for the nine months ended September 30, 2023 were $441.4 million, an increase of $36.4 million compared to the nine months ended September 30, 2022. The increase was mainly attributable to revenues from our Sinclair Transportation assets acquired on March 14, 2022, higher revenues on our Woods Cross refinery processing units, which were down for a scheduled turnaround in March 2022, and rate increases that went into effect on July 1, 2023, partially offset by lower revenues on our product pipelines servicing HF Sinclair's Navajo refinery.

•Revenues from our refined product pipelines were $88.4 million, an increase of $4.7 million compared to the nine months ended September 30, 2022. Shipments averaged 182.8 mbpd compared to 180.3 mbpd for the nine months ended September 30, 2022. The volume and revenue increases were mainly due to volumes on the acquired Sinclair Transportation assets, partially offset by lower volumes on our product pipelines servicing HF Sinclair's Navajo refinery due to lower throughput at the refinery.

•Revenues from our intermediate pipelines were $25.7 million, an increase of $2.6 million compared to the nine months ended September 30, 2022. Shipments averaged 108.6 mbpd compared to 126.6 mbpd for the nine months ended September 30, 2022. The decrease in volumes was mainly due to lower throughputs on our intermediate pipelines servicing HF Sinclair's Navajo refinery while revenues increased due to the acquired Sinclair Transportation intermediate pipelines as well as contractual minimum volume guarantees and rate increases that went into effect on July 1, 2023.

•Revenues from our crude pipelines were $112.6 million, an increase of $9.1 million compared to the nine months ended September 30, 2022. Shipments averaged 626.5 mbpd compared to 594.2 mbpd for the nine months ended September 30, 2022. The increase in volumes was mainly attributable to volumes on the acquired Sinclair Transportation crude pipelines. The increase in

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revenues was mainly due to the acquired Sinclair Transportation crude pipelines, higher revenues on our crude pipeline systems in New Mexico and Texas and rate increases that went into effect on July 1, 2023.

•Revenues from terminal, tankage and loading rack fees were $140.3 million, an increase of $14.3 million compared to the nine months ended September 30, 2022. Refined products and crude oil terminalled in the facilities averaged 755.2 mbpd compared to 575.2 mbpd for the nine months ended September 30, 2022. Volumes increased mainly due to volumes on the acquired Sinclair Transportation assets and certain crude tanks. Revenues increased mainly due to revenues from the increased volumes on the acquired Sinclair Transportation assets, higher butane blending revenues, and rate increases that went into effect on July 1, 2023.

•Revenues from refinery processing units were $74.4 million, an increase of $5.7 million compared to the nine months ended September 30, 2022. Throughputs averaged 60.1 mbpd compared to 69.9 mbpd for the nine months ended September 30, 2022. Revenues increased mainly due to higher revenues from our Woods Cross refinery processing units, which were down for a scheduled turnaround in March 2022, as well as rate increases. The decrease in volumes was primarily due to a turnaround at the El Dorado refinery.

Operating Costs and Expenses Highlights

Operating costs and expenses were $90.7 million and $256.7 million for the three and nine months ended September 30, 2023, respectively, representing increases of $1.3 million and $12.6 million from the three and nine months ended September 30, 2022, respectively. The nine-month increase was mainly due to operating costs and expenses associated with the acquired Sinclair Transportation assets as well as higher employee costs, partially offset by lower natural gas costs.

Interest Expense and Interest Income Highlights

Interest expense was $27.3 million and $79.7 million for the three and nine months ended September 30, 2023, respectively, representing increases of $4.3 million and $22.8 million from the three and nine months ended September 30, 2022, respectively. The increases were mainly due to higher interest rates on our long-term debt due to market interest rate increases on our senior secured revolving credit facility and our April 2022 issuance of $400 million in aggregate principal amount of 6.375% senior unsecured notes maturing in April 2027, the proceeds of which were used to partially repay outstanding borrowings under our senior secured credit facility following the funding of the cash portion of the Sinclair Transportation acquisition.

Interest income for the three and nine months ended September 30, 2023 totaled $20.3 million and $61.1 million, representing decreases of $3.9 million and $0.2 million compared to the three and nine months ended September 30, 2022, respectively. The decreases were mainly due to more pipeline tariffs recognized as revenue rather than interest income under sales-type lease accounting.

HEP and HF Sinclair have scheduled a joint webcast conference on November 2, 2023 at 9:30 a.m. Eastern time to discuss financial results.

This webcast may be accessed at:

https://events.q4inc.com/attendee/172908001
An audio archive of this webcast will be available using the above noted link through November 16, 2023.

About Holly Energy Partners, L.P.
Holly Energy Partners, L.P. (“HEP” or the “Partnership”), headquartered in Dallas, Texas, provides petroleum product and crude oil transportation, terminalling, storage and throughput services to the

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petroleum industry, including subsidiaries of HF Sinclair Corporation ("HF Sinclair"). The Partnership, through its subsidiaries and joint ventures, owns and/or operates petroleum product and crude pipelines, tankage and terminals in Colorado, Idaho, Iowa, Kansas, Missouri, Nevada, New Mexico, Oklahoma, Texas, Utah, Washington and Wyoming, as well as refinery processing units in Kansas and Utah.

HF Sinclair, headquartered in Dallas, Texas, is an independent energy company that produces and markets high value light products such as gasoline, diesel fuel, jet fuel, renewable diesel and other specialty products. HF Sinclair owns and operates refineries located in Kansas, Oklahoma, New Mexico, Washington, Wyoming and Utah and markets its refined products principally in the Southwest U.S., the Rocky Mountains extending into the Pacific Northwest and in other neighboring Plains states. HF Sinclair supplies high-quality fuels to more than 1,500 branded stations and licenses the use of the Sinclair brand at more than 300 additional locations throughout the country. In addition, subsidiaries of HF Sinclair produce and market base oils and other specialized lubricants in the U.S., Canada and the Netherlands, and export products to more than 80 countries. Through its subsidiaries, HF Sinclair produces renewable diesel at two of its facilities in Wyoming and also at its facility in Artesia, New Mexico. HF Sinclair also owns a 47% limited partner interest and a non-economic general partner interest in HEP.

The statements in this press release contain various "forward-looking statements" within the meaning of the federal securities laws. These forward-looking statements are identified as any statement that does not relate strictly to historical or current facts. When used in this press release, words such as “anticipate,” “project,” “expect,” “will,” “plan,” “goal,” “forecast,” “strategy,” “intend,” “should,” “would,” “could,” “believe,” “may,” and similar expressions and statements regarding our plans and objectives for future operations are intended to identify forward-looking statements. These forward-looking statements are based on our beliefs and assumptions and those of our general partner 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 (the “SEC”). Although we and our general partner believe that such expectations reflected in such forward-looking statements are reasonable, neither we nor our general partner can give assurance that our expectations will prove to be correct. All statements concerning our expectations for future results of operations are based on forecasts for our existing operations and do not include the potential impact of any future acquisitions. Our forward-looking statements are subject to a variety of risks, uncertainties and assumptions. If one or more of these risks or uncertainties materialize, or if underlying assumptions prove incorrect, our actual results may vary materially from those anticipated, estimated, projected or expected. Certain factors could cause actual results to differ materially from results anticipated in the forward-looking statements or affect our unit price. These factors include, but are not limited to:

•the risk that the transactions contemplated by the Agreement and Plan of Merger, dated August 15, 2023 (the “Merger Agreement”), which provides for the merger of a subsidiary of HF Sinclair with and into HEP, with HEP surviving as an indirect wholly owned subsidiary of HF Sinclair (such merger, together with the other transactions contemplated by the Merger Agreement, being referred to herein as the “HF Sinclair Merger Transaction”) are not consummated during the expected timeframe, or at all;
•failure to obtain the required approvals for the HF Sinclair Merger Transaction, including the ability to obtain the requisite approvals from HF Sinclair stockholders or our unitholders;
•the substantial transaction-related costs that may be incurred by HF Sinclair and us in connection with the HF Sinclair Merger Transaction;
•the possibility that financial projections by us may not prove to be reflective of actual future results;
•the focus of management time and attention on the HF Sinclair Merger Transaction and other disruptions arising from the HF Sinclair Merger Transaction, which may make it more difficult to maintain relationships with customers, employees or suppliers;
•legal proceedings that may be instituted against HF Sinclair or us in connection with the HF Sinclair Merger Transaction;
•the demand for and supply of crude oil and refined products, including uncertainty regarding the increasing societal expectations that companies address climate change;

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•risks and uncertainties with respect to the actual quantities of petroleum products and crude oil shipped on our pipelines and/or terminalled, stored or throughput in our terminals and refinery processing units;
•the economic viability of HF Sinclair, our other customers and our joint ventures’ other customers, including any refusal or inability of our or our joint ventures’ customers or counterparties to perform their obligations under their contracts;
•the demand for refined petroleum products in the markets we serve;
•our ability to purchase operations and integrate the operations we have acquired or may acquire, including the acquired Sinclair Transportation business;
•our ability to complete previously announced or contemplated acquisitions;
•the availability and cost of additional debt and equity financing;
•the possibility of temporary or permanent reductions in production or shutdowns at refineries utilizing our pipelines, terminal facilities and refinery processing units, due to reductions in demand, accidents, unexpected leaks or spills, unscheduled shutdowns, infection in the workforce, weather events, global health events, civil unrest, expropriation of assets, and other economic, diplomatic, legislative, or political events or developments, terrorism, cyberattacks, or other catastrophes or disruptions affecting our operations, terminal facilities, machinery, pipelines and other logistics assets, equipment, or information systems, or any of the foregoing of our suppliers, customers, or third-party providers or lower gross margins due to the economic impact of inflation and labor costs, and any potential asset impairments resulting from, or the failure to have adequate insurance coverage for or receive insurance recoveries from, such actions;
•the effects of current and future government regulations and policies, including increases in interest rates;
•delay by government authorities in issuing permits necessary for our business or our capital projects;
•our and our joint venture partners' ability to complete and maintain operational efficiency in carrying out routine operations and capital construction projects;
•the possibility of terrorist or cyberattacks and the consequences of any such attacks;
•uncertainty regarding the effects and duration of global hostilities, including the Israel-Gaza conflict, the Russia-Ukraine war, and any associated military campaigns which may disrupt crude oil supplies and markets for refined products and create instability in the financial markets that could restrict our ability to raise capital;
•general economic conditions, including economic slowdowns caused by a local or national recession or other adverse economic condition, such as periods of increased or prolonged inflation;
•the impact of recent or proposed changes in the tax laws and regulations that affect master limited partnerships; and
•other business, financial, operational and legal risks and uncertainties detailed from time to time in our SEC 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 (Unaudited)
Income, Distributable Cash Flow and Volumes
The following tables present income, distributable cash flow and volume information for the nine months ended September 30, 2023 and 2022.
Three Months Ended September 30,Change from
202320222022
(In thousands, except per unit data)
Revenues
Pipelines:
Affiliates – refined product pipelines$25,972 $24,731 $1,241 
Affiliates – intermediate pipelines9,059 7,988 1,071 
Affiliates – crude pipelines25,540 23,169 2,371 
60,571 55,888 4,683 
   Third parties – refined product pipelines8,640 6,694 1,946 
Third parties – crude pipelines15,831 14,565 1,266 
85,042 77,147 7,895 
Terminals, tanks and loading racks:
Affiliates43,722 39,557 4,165 
Third parties4,602 4,875 (273)
48,324 44,432 3,892 
Refinery processing units - Affiliates24,994 27,423 (2,429)
Total revenues158,360 149,002 9,358 
Operating costs and expenses
Operations (exclusive of depreciation and amortization)58,422 60,470 (2,048)
Depreciation and amortization24,362 25,236 (874)
General and administrative7,947 3,751 4,196 
90,731 89,457 1,274 
Operating income67,629 59,545 8,084 
Equity in earnings of equity method investments3,581 (16,334)19,915 
Interest expense, including amortization(27,285)(22,965)(4,320)
Interest income 20,294 24,234 (3,940)
Gain on sale of assets and other708 494 214 
(2,702)(14,571)11,869 
Income before income taxes64,927 44,974 19,953 
State income tax expense(16)(38)22 
Net income64,911 44,936 19,975 
Allocation of net income attributable to noncontrolling interests(1,886)(2,985)1,099 
Net income attributable to Holly Energy Partners$63,025 $41,951 $21,074 
Limited partners’ earnings per unit – basic and diluted$0.50 $0.33 $0.17 
Weighted average limited partners’ units outstanding126,440 126,440 — 
EBITDA(1)
$94,394 $65,956 $28,438 
Adjusted EBITDA(1)
$118,514 $110,092 $8,422 
Distributable cash flow(2)
$78,465 $78,731 $(266)
Volumes (bpd)
Pipelines:
Affiliates – refined product pipelines152,541 167,618 (15,077)
Affiliates – intermediate pipelines107,019 137,049 (30,030)
Affiliates – crude pipelines
426,418 507,419 (81,001)
685,978 812,086 (126,108)
Third parties – refined product pipelines33,549 38,040 (4,491)
Third parties – crude pipelines204,970 131,622 73,348 
924,497 981,748 (57,251)
Terminals and loading racks:
Affiliates761,956 583,089 178,867 
Third parties40,440 37,782 2,658 
802,396 620,871 181,525 
Refinery processing units - Affiliates67,192 72,065 (4,873)
Total for pipelines and terminal assets (bpd)
1,794,085 1,674,684 119,401 

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Nine Months Ended September 30,
Change from
 202320222022
 (In thousands, except per unit data)
Revenues
Pipelines:
Affiliates – refined product pipelines$64,092 $62,511 $1,581 
Affiliates – intermediate pipelines25,659 23,015 2,644 
Affiliates – crude pipelines70,872 62,417 8,455 
160,623 147,943 12,680 
   Third parties – refined product pipelines24,288 21,169 3,119 
Third parties – crude pipelines41,731 41,134 597 
226,642 210,246 16,396 
Terminals, tanks and loading racks:
Affiliates121,039 108,997 12,042 
Third parties19,303 17,008 2,295 
140,342 126,005 14,337 
Refinery processing units - Affiliates74,425 68,719 5,706 
Total revenues441,409 404,970 36,439 
Operating costs and expenses
Operations163,706 156,994 6,712 
Depreciation and amortization74,922 74,397 525 
General and administrative18,094 12,745 5,349 
256,722 244,136 12,586 
Operating income184,687 160,834 23,853 
Equity in earnings of equity method investments11,008 (7,261)18,269 
Interest expense, including amortization(79,711)(56,951)(22,760)
Interest income61,050 61,212 (162)
Gain on sale of assets and other983 640 343 
(6,670)(2,360)(4,310)
Income before income taxes178,017 158,474 19,543 
State income tax expense(18)(83)65 
Net income177,999 158,391 19,608 
Allocation of net income attributable to noncontrolling interests(7,223)(10,089)2,866 
Net income attributable to Holly Energy Partners$170,776 $148,302 $22,474 
Limited partners’ earnings per unit—basic and diluted$1.35 $1.22 $0.13 
Weighted average limited partners’ units outstanding126,440 120,902 5,538 
EBITDA(1)
$264,377 $218,521 $45,856 
Adjusted EBITDA(1)
$330,591 $299,673 $30,918 
Distributable cash flow(2)
$235,648 $221,643 $14,005 
Volumes (bpd)
Pipelines:
Affiliates – refined product pipelines144,082 138,608 5,474 
Affiliates – intermediate pipelines108,579 126,550 (17,971)
Affiliates – crude pipelines429,965 460,641 (30,676)
682,626 725,799 (43,173)
Third parties – refined product pipelines38,702 41,646 (2,944)
Third parties – crude pipelines196,552 133,598 62,954 
917,880 901,043 16,837 
Terminals and loading racks:
Affiliates710,905 534,305 176,600 
Third parties44,263 40,923 3,340 
755,168 575,228 179,940 
Refinery processing units - Affiliates60,131 69,903 (9,772)
Total for pipelines and terminal assets (bpd)
1,733,179 1,546,174 187,005 


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(1)Earnings before interest, taxes, depreciation and amortization (“EBITDA”) is calculated as net income attributable to Holly Energy Partners plus or minus (i) interest expense, (ii) interest income, (iii) state income tax expense and (iv) depreciation and amortization. Adjusted EBITDA is calculated as EBITDA plus or minus (i) our share of Osage environmental remediation costs included in equity in earnings of equity method investments, (ii) acquisition integration and regulatory costs, (iii) tariffs and fees not included in revenues due to impacts from lease accounting for certain tariffs and fees and (iv) pipeline lease payments not included in operating costs and expenses. Portions of our minimum guaranteed tariffs for assets subject to sales-type lease accounting are recorded as interest income with the remaining amounts recorded as a reduction in net investment in leases. Similarly, certain pipeline lease payments were previously recorded as operating costs and expenses, but the underlying lease was reclassified from an operating lease to a financing lease, and these payments are now recorded as interest expense and reductions in the lease liability. EBITDA and Adjusted EBITDA are not calculations based upon generally accepted accounting principles ("GAAP"). However, the amounts included in the EBITDA and Adjusted EBITDA calculations are derived from amounts included in our consolidated financial statements. EBITDA and Adjusted EBITDA should not be considered as alternatives to net income attributable to Holly Energy Partners or operating income, as indications of our operating performance or as alternatives to operating cash flow as a measure of liquidity. EBITDA and Adjusted EBITDA are not necessarily comparable to similarly titled measures of other companies. EBITDA and Adjusted EBITDA are presented here because they are widely used financial indicators used by investors and analysts to measure performance. EBITDA and Adjusted EBITDA are also used by our management for internal analysis and as a basis for compliance with financial covenants.

Set forth below is our calculation of EBITDA and Adjusted EBITDA.
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
(In thousands)
Net income attributable to Holly Energy Partners$63,025 $41,951 $170,776 $148,302 
Add (subtract):
Interest expense27,285 22,965 79,711 56,951 
Interest income(20,294)(24,234)(61,050)(61,212)
State income tax expense16 38 18 83 
Depreciation and amortization24,362 25,236 74,922 74,397 
EBITDA94,394 65,956 264,377 218,521 
Share of Osage environmental remediation costs69 20,297 1,289 20,297 
Acquisition integration and regulatory costs4,285 373 5,757 2,095 
Tariffs and fees not included in revenues21,372 25,072 63,987 63,579 
Lease payments not included in operating costs(1,606)(1,606)(4,819)(4,819)
Adjusted EBITDA$118,514 $110,092 $330,591 $299,673 
(2)Distributable cash flow is not a calculation based upon GAAP. However, the amounts included in the calculation are derived from amounts presented in our consolidated financial statements, with the general exception of maintenance capital expenditures. Distributable cash flow should not be considered in isolation or as an alternative to net income attributable to Holly Energy Partners or operating income, as an indication of our operating performance, or as an alternative to operating cash flow as a measure of liquidity. Distributable cash flow is not necessarily comparable to similarly titled measures of other companies. Distributable cash flow is presented here because it is a widely accepted financial indicator used by investors to compare partnership performance. It is also used by management for internal analysis and our performance units. We believe that this measure provides investors an enhanced perspective of the operating performance of our assets and the cash our business is generating.

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Set forth below is our calculation of distributable cash flow.
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
(In thousands)
Net income attributable to Holly Energy Partners$63,025 $41,951 $170,776 $148,302 
Add (subtract):
Depreciation and amortization24,362 25,236 74,922 74,397 
Amortization of discount and deferred debt charges1,088 1,060 3,241 2,863 
Customer billings greater than net income recognized2,138 (587)11,908 34 
Maintenance capital expenditures(3)
(5,859)(4,679)(13,597)(15,262)
Increase (decrease) in environmental liability(1,550)5,364 (2,553)5,120 
Share of Osage insurance coverage— 12,500 500 12,500 
Reimbursable deferred revenue(3,620)(3,538)(12,534)(10,127)
Other(1,119)1,424 2,985 3,816 
Distributable cash flow$78,465 $78,731 $235,648 $221,643 
    
(3)Maintenance capital expenditures are capital expenditures made to replace partially or fully depreciated assets in order to maintain the existing operating capacity of our assets and to extend their useful lives. Maintenance capital expenditures include expenditures required to maintain equipment reliability, tankage and pipeline integrity, safety and to address environmental regulations.
Set forth below is certain balance sheet data.
September 30,December 31,
20232022
(In thousands)
Balance Sheet Data
Cash and cash equivalents$11,223 $10,917 
Working capital$15,594 $17,293 
Total assets$2,707,434 $2,747,502 
Long-term debt$1,468,505 $1,556,334 
Partners' equity$896,066 $857,126 



FOR FURTHER INFORMATION, Contact:

John Harrison, Senior Vice President,
    Chief Financial Officer and Treasurer
Craig Biery, Vice President, Investor Relations
Holly Energy Partners, L.P.
214-954-6511

9

v3.23.3
Document and Entity Information Document
Nov. 02, 2023
Entity Information [Line Items]  
Document Type 8-K
Document Period End Date Nov. 02, 2023
Entity Central Index Key 0001283140
Amendment Flag false
Entity Registrant Name HOLLY ENERGY PARTNERS LP
Entity Incorporation, State or Country Code DE
Entity File Number 001-32225
Entity Tax Identification Number 20-0833098
Entity Address, Address Line One 2828 N. Harwood, Suite 1300
Entity Address, City or Town Dallas
Entity Address, State or Province TX
Entity Address, Postal Zip Code 75201
City Area Code 214
Local Phone Number 871-3555
Title of 12(b) Security Common Limited Partner Units
Trading Symbol HEP
Security Exchange Name NYSE
Written Communications false
Soliciting Material false
Pre-commencement Tender Offer false
Pre-commencement Issuer Tender Offer false
Entity Emerging Growth Company false
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