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Press Release
November 7, 2012

HollyFrontier Corporation Reports Record Quarterly Net Income

Dallas, Texas, November 7, 2012 ‑‑ HollyFrontier Corporation (NYSE-HFC) (“HollyFrontier” or the “Company”) today reported third quarter net income attributable to HollyFrontier stockholders of $600.4 million or $2.94 per diluted share for the quarter ended September 30, 2012, compared to $523.1 million or $2.48 per diluted share for the quarter ended September 30, 2011. For the nine months ended September 30, 2012, net income attributable to HollyFrontier stockholders totaled $1,335.6 million or $6.44 per diluted share compared to $800.0 million or $5.63 per diluted share for the nine months ended September 30, 2011.

For the third quarter, net income attributable to our stockholders increased by $77.3 million, or 15% compared to the same period of 2011, principally reflecting higher third quarter refining margins. Refinery gross margins were $30.55 per produced barrel, a 9% increase compared to $28.10 for the third quarter of 2011. Production levels averaged approximately 457,000 barrels per day (“BPD”) and crude oil charges averaged approximately 433,000 BPD for the current quarter. Operating expenses for the quarter were $233.9 million or $5.11 per barrel compared to $227.9 million or $5.07 per barrel for the third quarter of last year.

HollyFrontier’s President & CEO, Mike Jennings, commented, “We had a tremendous quarter with third quarter results reaching new record levels. Exceptionally high inland to coastal crude oil differentials as well as robust heavy crude oil differentials helped drive our refined product margins to all time highs. Looking forward, we believe that the structural crude advantages currently driving our strong operating margins will continue to positively impact our operating income, allowing us to continue to pay both regular and special dividends. We remain focused on increasing total shareholder return while maintaining a strong balance sheet.”

For the third quarter of 2012, net cash provided by operations totaled $742.3 million. During the period, we paid dividends to shareholders of $132.7 million consisting of our $0.15 regular and a $0.50 special dividend. In addition, we declared a second third quarter special dividend of $0.50 that was paid early in the fourth quarter. At September 30, 2012, our combined balance of cash and short-term investments totaled $2.3 billion and our consolidated debt was $1.3 billion. Our debt, exclusive of Holly Energy Partners' debt which is nonrecourse to HollyFrontier, was $471.8 million at September 30, 2012, which reflects the redemption of our $200 million 8.5% senior notes that were called in September 2012. We had no cash borrowings or outstanding principal under our credit facility during the quarter.

The Company has scheduled a webcast conference call for today, November 7, 2012, at 11:00 AM Eastern Time to discuss third quarter financial results. This webcast may be accessed at: https://event.webcasts.com/starthere.jsp?ei=1009187. An audio archive of this webcast will be available using the above noted link through November 19, 2012.

HollyFrontier Corporation, headquartered in Dallas, Texas, is an independent petroleum refiner and marketer that produces high-value light products such as gasoline, diesel fuel, jet fuel and other specialty products. HollyFrontier operates through its subsidiaries a 135,000 barrels per stream day (“bpsd”) refinery located in El Dorado, Kansas, two refinery facilities with a combined capacity of 125,000 bpsd located in Tulsa, Oklahoma, a 100,000 bpsd refinery located in Artesia, New Mexico, a 52,000 bpsd refinery located in Cheyenne, Wyoming and a 31,000 bpsd refinery in Woods Cross, Utah. HollyFrontier markets its refined products principally in the Southwest U.S., the Rocky Mountains extending into the Pacific Northwest and in other neighboring Plains states. A subsidiary of HollyFrontier also owns a 44% interest (including the general partner interest) in Holly Energy Partners, L.P.

1



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

2



RESULTS OF OPERATIONS

Financial Data (all information in this release is unaudited)
 
Three Months Ended September 30,
 
Change from 2011
 
2012
 
2011
 
Change
 
Percent
 
(In thousands, except per share data)
Sales and other revenues
$
5,204,798

 
$
5,173,398

 
$
31,400

 
0.6
 %
Operating costs and expenses:
 
 
 
 
 
 
 
Cost of products sold (exclusive of depreciation and amortization)
3,898,736

 
3,989,927

 
(91,191
)
 
(2.3
)
Operating expenses (exclusive of depreciation and amortization)
233,859

 
227,883

 
5,976

 
2.6

General and administrative expenses (exclusive of depreciation and amortization)
28,787

 
43,141

 
(14,354
)
 
(33.3
)
Depreciation and amortization
65,112

 
43,240

 
21,872

 
50.6

Total operating costs and expenses
4,226,494

 
4,304,191

 
(77,697
)
 
(1.8
)
Income from operations
978,304

 
869,207

 
109,097

 
12.6

Other income (expense):
 
 
 
 
 
 
 
Earnings of equity method investments
852

 
532

 
320

 
60.2

Interest income
2,219

 
204

 
2,015

 
987.7

Interest expense
(21,103
)
 
(25,074
)
 
3,971

 
(15.8
)
Merger transaction costs

 
(9,100
)
 
9,100

 
(100.0
)
 
(18,032
)
 
(33,438
)
 
15,406

 
(46.1
)
Income before income taxes
960,272

 
835,769

 
124,503

 
14.9

Income tax provision
349,622

 
304,758

 
44,864

 
14.7

Net income
610,650

 
531,011

 
79,639

 
15.0

Less net income attributable to noncontrolling interest
10,277

 
7,923

 
2,354

 
29.7

Net income attributable to HollyFrontier stockholders
$
600,373

 
$
523,088

 
$
77,285

 
14.8
 %
Earnings per share attributable to HollyFrontier stockholders:
 
 
 
 
 
 
 
Basic
$
2.95

 
$
2.50

 
$
0.45

 
18.0
 %
Diluted
$
2.94

 
$
2.48

 
$
0.46

 
18.5
 %
Cash dividends declared per common share
$
1.15

 
$
0.59

 
$
0.56

 
94.9
 %
Average number of common shares outstanding:
 
 
 
 
 
 
 
Basic
203,557

 
209,583

 
(6,026
)
 
(2.9
)%
Diluted
204,434

 
210,579

 
(6,145
)
 
(2.9
)%
EBITDA
$
1,033,991

 
$
895,956

 
$
138,035

 
15.4
 %


3



 
Nine Months Ended September 30,
 
Change from 2011
 
2012
 
2011
 
Change
 
Percent
 
(In thousands, except per share data)
Sales and other revenues
$
14,943,217

 
$
10,467,116

 
$
4,476,101

 
42.8
 %
Operating costs and expenses:
 
 
 
 
 
 
 
Cost of products sold (exclusive of depreciation and amortization)
11,767,417

 
8,421,639

 
3,345,778

 
39.7

Operating expenses (exclusive of depreciation and amortization)
698,212

 
501,971

 
196,241

 
39.1

General and administrative expenses (exclusive of depreciation and amortization)
88,421

 
78,641

 
9,780

 
12.4

Depreciation and amortization
178,162

 
106,380

 
71,782

 
67.5

Total operating costs and expenses
12,732,212

 
9,108,631

 
3,623,581

 
39.8

Income from operations
2,211,005

 
1,358,485

 
852,520

 
62.8

Other income (expense):
 
 
 
 
 
 
 
Earnings of equity method investments
2,455

 
1,739

 
716

 
41.2

Interest income
3,360

 
946

 
2,414

 
255.2

Interest expense
(81,360
)
 
(56,471
)
 
(24,889
)
 
44.1

Gain on sale of marketable securities
326

 

 
326

 

Merger transaction costs

 
(15,114
)
 
15,114

 
(100.0
)
 
(75,219
)
 
(68,900
)
 
(6,319
)
 
9.2

Income before income taxes
2,135,786

 
1,289,585

 
846,201

 
65.6

Income tax provision
775,746

 
465,730

 
310,016

 
66.6

Net income
1,360,040

 
823,855

 
536,185

 
65.1

Less net income attributable to noncontrolling interest
24,472

 
23,838

 
634

 
2.7

Net income attributable to HollyFrontier stockholders
$
1,335,568

 
$
800,017

 
$
535,551

 
66.9
 %
Earnings per share attributable to HollyFrontier stockholders:
 
 
 
 
 
 
 
Basic
$
6.46

 
$
5.66

 
$
0.80

 
14.1
 %
Diluted
$
6.44

 
$
5.63

 
$
0.81

 
14.4
 %
Cash dividends declared per common share
$
2.40

 
$
0.74

 
$
1.66

 
224.3
 %
Average number of common shares outstanding:
 
 
 
 
 
 
 
Basic
206,657

 
141,353

 
65,304

 
46.2
 %
Diluted
207,546

 
142,092

 
65,454

 
46.1
 %
EBITDA
$
2,367,476

 
$
1,427,652

 
$
939,824

 
65.8
 %
Our consolidated financial and operating results reflect the operations of the merged Frontier businesses beginning July 1, 2011.

Balance Sheet Data
 
September 30,
 
December 31,
 
2012
 
2011
 
(In thousands)
Cash, cash equivalents and investments in marketable securities
$
2,343,336

 
$
1,840,610

Working capital
$
2,554,761

 
$
2,030,063

Total assets
$
10,345,936

 
$
9,576,243

Long-term debt
$
1,346,227

 
$
1,214,742

Total equity
$
6,359,496

 
$
5,835,900


Segment Information

Our operations are 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. Intersegment transactions are eliminated in our consolidated financial statements and are included in Consolidations and Eliminations. The Refining segment includes the operations of our El Dorado, Tulsa, Navajo, Cheyenne and Woods Cross refineries and NK Asphalt and involves the purchase and refining of crude oil and wholesale and branded marketing of refined products, such as gasoline, diesel fuel, jet fuel, specialty lubricant products, and specialty and modified asphalt. The petroleum products are primarily marketed in the Mid-Continent, Southwest and Rocky Mountain regions of the United States and northern Mexico. Additionally, specialty lubricant products produced at our Tulsa West facility are marketed throughout North America and are distributed in Central and South America. NK Asphalt manufactures and markets asphalt and asphalt products in Arizona, New Mexico, Oklahoma, Kansas, Missouri, Texas and northern Mexico.

4




The HEP segment involves all of the operations of HEP, a consolidated variable interest entity, which owns and operates logistics assets consisting of petroleum product and crude oil pipelines and terminal, tankage and loading rack facilities in the Mid-Continent, Southwest and Rocky Mountain regions of the United States. Revenues are generated by charging tariffs for transporting petroleum products and crude oil through its pipelines and by charging fees for terminalling petroleum products and other hydrocarbons, and storing and providing other services at its storage tanks and terminals. The HEP segment also includes a 75% interest in the UNEV Pipeline (an HEP consolidated subsidiary) and a 25% interest in the SLC Pipeline. 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.
 
Refining (1)
 
HEP (2)
 
Corporate and Other
 
Consolidations and Eliminations
 
Consolidated Total
 
(In thousands)
Three Months Ended September 30, 2012
 
 
 
 
 
 
 
 
 
Sales and other revenues
$
5,192,649

 
$
72,496

 
$
352

 
$
(60,699
)
 
$
5,204,798

Depreciation and amortization
$
47,890

 
$
12,636

 
$
4,793

 
$
(207
)
 
$
65,112

Income (loss) from operations
$
973,651

 
$
37,137

 
$
(31,871
)
 
$
(613
)
 
$
978,304

Capital expenditures
$
70,069

 
$
5,683

 
$
3,765

 
$

 
$
79,517

 
 
 
 
 
 
 
 
 
 
Three Months Ended September 30, 2011
 
 
 
 
 
 
 
 
 
Sales and other revenues
$
5,164,853

 
$
49,131

 
$
299

 
$
(40,885
)
 
$
5,173,398

Depreciation and amortization
$
35,070

 
$
7,505

 
$
872

 
$
(207
)
 
$
43,240

Income (loss) from operations
$
884,997

 
$
24,587

 
$
(40,135
)
 
$
(242
)
 
$
869,207

Capital expenditures
$
46,294

 
$
68,101

 
$
3,523

 
$

 
$
117,918

 
 
 
 
 
 
 
 
 
 
Nine Months Ended September 30, 2012
 
 
 
 
 
 
 
 
 
Sales and other revenues
$
14,907,849

 
$
207,250

 
$
912

 
$
(172,794
)
 
$
14,943,217

Depreciation and amortization
$
133,087

 
$
38,683

 
$
7,013

 
$
(621
)
 
$
178,162

Income (loss) from operations
$
2,207,253

 
$
100,918

 
$
(89,899
)
 
$
(7,267
)
 
$
2,211,005

Capital expenditures
$
171,865

 
$
29,302

 
$
6,370

 
$

 
$
207,537

 
 
 
 
 
 
 
 
 
 
Nine Months Ended September 30, 2011
 
 
 
 
 
 
 
 
 
Sales and other revenues
$
10,432,720

 
$
144,916

 
$
1,100

 
$
(111,620
)
 
$
10,467,116

Depreciation and amortization
$
81,875

 
$
22,407

 
$
2,719

 
$
(621
)
 
$
106,380

Income (loss) from operations
$
1,357,739

 
$
75,700

 
$
(73,689
)
 
$
(1,265
)
 
$
1,358,485

Capital expenditures
$
92,078

 
$
175,795

 
$
6,350

 
$

 
$
274,223

 
 
 
 
 
 
 
 
 
 
September 30, 2012
 
 
 
 
 
 
 
 
 
Cash, cash equivalents and investments in marketable securities
$
557

 
$
1,993

 
$
2,340,786

 
$

 
$
2,343,336

Total assets
$
6,567,224

 
$
1,409,151

 
$
2,426,067

 
$
(56,506
)
 
$
10,345,936

Long-term debt
$

 
$
874,434

 
$
487,843

 
$
(16,050
)
 
$
1,346,227

 
 
 
 
 
 
 
 
 
 
December 31, 2011
 
 
 
 
 
 
 
 
 
Cash, cash equivalents and investments in marketable securities
$

 
$
6,369

 
$
1,834,241

 
$

 
$
1,840,610

Total assets
$
6,280,426

 
$
1,418,660

 
$
1,997,601

 
$
(120,444
)
 
$
9,576,243

Long-term debt
$

 
$
598,761

 
$
705,331

 
$
(89,350
)
 
$
1,214,742


(1) The Refining segment reflects the operations of the El Dorado and Cheyenne Refineries beginning July 1, 2011 (date of Holly-Frontier merger).
(2) HEP acquired our 75% interest in the UNEV Pipeline in July 2012. We have recast our HEP segment information to include the UNEV Pipeline operations for all periods presented. For the three and nine months ended September 30, 2012, UNEV Pipeline revenues were $3.0 million and $10.8 million, respectively. The UNEV Pipeline was previously included in Corporate and Other.

5



Refining Operating Data

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 and amortization. Reconciliations to amounts reported under GAAP are provided under “Reconciliations to Amounts Reported Under Generally Accepted Accounting Principles” below.
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2012
 
2011
 
2012
 
2011 (10)

Mid-Continent Region (El Dorado and Tulsa Refineries)
 
 
 
 
 
 
 
Crude charge (BPD) (1)
256,850

 
263,260

 
252,110

 
160,230

Refinery throughput (BPD) (2)
278,990

 
283,970

 
270,380

 
168,150

Refinery production (BPD) (3)
268,310

 
272,790

 
262,830

 
162,900

Sales of produced refined products (BPD)
246,360

 
263,180

 
249,320

 
159,230

Sales of refined products (BPD) (4)
248,690

 
268,680

 
253,050

 
161,750

Refinery utilization (5)
98.8
%
 
101.3
%
 
97.0
%
 
94.0
%
 
 
 
 
 
 
 
 
Average per produced barrel (6)
 
 
 
 
 
 
 
Net sales
$
121.83

 
$
122.82

 
$
120.19

 
$
122.74

Cost of products (7)
92.84

 
96.18

 
96.49

 
100.32

Refinery gross margin
28.99

 
26.64

 
23.70

 
22.42

Refinery operating expenses (8)
4.71

 
4.57

 
4.72

 
5.09

Net operating margin
$
24.28

 
$
22.07

 
$
18.98

 
$
17.33

 
 
 
 
 
 
 
 
Refinery operating expenses per throughput barrel (9)
$
4.16

 
$
4.23

 
$
4.35

 
$
4.82

 
 
 
 
 
 
 
 
Feedstocks:
 
 
 
 
 
 
 
Sweet crude oil
69
%
 
75
%
 
70
%
 
84
%
Sour crude oil
9
%
 
7
%
 
8
%
 
4
%
Heavy sour crude oil
14
%
 
11
%
 
15
%
 
7
%
Other feedstocks and blends
8
%
 
7
%
 
7
%
 
5
%
Total
100
%
 
100
%
 
100
%
 
100
%
 
 
 
 
 
 
 
 
Sales of produced refined products:
 
 
 
 
 
 
 
Gasolines
50
%
 
44
%
 
47
%
 
41
%
Diesel fuels
26
%
 
35
%
 
29
%
 
33
%
Jet fuels
10
%
 
7
%
 
10
%
 
7
%
Fuel oil
1
%
 
%
 
1
%
 
%
Asphalt
2
%
 
2
%
 
2
%
 
4
%
Lubricants
5
%
 
4
%
 
5
%
 
7
%
Gas oil/intermediates
%
 
2
%
 
%
 
4
%
LPG and other
6
%
 
6
%
 
6
%
 
4
%
Total
100
%
 
100
%
 
100
%
 
100
%



6



 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2012
 
2011
 
2012
 
2011 (10)

Southwest Region (Navajo Refinery)
 
 
 
 
 
 
 
Crude charge (BPD) (1)
101,480

 
92,270

 
91,890

 
82,860

Refinery throughput (BPD) (2)
110,080

 
100,290

 
100,558

 
91,220

Refinery production (BPD) (3)
108,810

 
100,100

 
98,980

 
90,230

Sales of produced refined products (BPD)
106,370

 
99,530

 
97,470

 
91,310

Sales of refined products (BPD) (4)
110,760

 
102,940

 
102,450

 
95,980

Refinery utilization (5)
101.5
%
 
92.3
%
 
91.9
%
 
82.9
%
 
 
 
 
 
 
 
 
Average per produced barrel (6)
 
 
 
 
 
 
 
Net sales
$
122.16

 
$
120.67

 
$
123.64

 
$
119.84

Cost of products (7)
92.26

 
92.33

 
97.37

 
97.37

Refinery gross margin
29.90

 
28.34

 
26.27

 
22.47

Refinery operating expenses (8)
5.14

 
5.30

 
5.57

 
5.56

Net operating margin
$
24.76

 
$
23.04

 
$
20.70

 
$
16.91

 
 
 
 
 
 
 
 
Refinery operating expenses per throughput barrel (9)
$
4.97

 
$
5.26

 
$
5.40

 
$
5.57

 
 
 
 
 
 
 
 
Feedstocks:
 
 
 
 
 
 
 
Sweet crude oil
2
%
 
4
%
 
2
%
 
4
%
Sour crude oil
75
%
 
70
%
 
78
%
 
72
%
Heavy sour crude oil
16
%
 
18
%
 
11
%
 
15
%
Other feedstocks and blends
7
%
 
8
%
 
9
%
 
9
%
Total
100
%
 
100
%
 
100
%
 
100
%
 
 
 
 
 
 
 
 
Sales of produced refined products:
 
 
 
 
 
 
 
Gasolines
52
%
 
50
%
 
52
%
 
51
%
Diesel fuels
36
%
 
34
%
 
37
%
 
34
%
Jet fuels
%
 
1
%
 
%
 
1
%
Fuel oil
7
%
 
7
%
 
6
%
 
6
%
Asphalt
2
%
 
5
%
 
2
%
 
5
%
LPG and other
3
%
 
3
%
 
3
%
 
3
%
Total
100
%
 
100
%
 
100
%
 
100
%
Rocky Mountain Region (Cheyenne and Woods Cross Refineries)
 
 
 
 
 
 
 
Crude charge (BPD) (1)
75,040

 
70,060

 
73,660

 
41,050

Refinery throughput (BPD) (2)
82,030

 
75,860

 
81,550

 
44,340

Refinery production (BPD) (3)
79,500

 
73,620

 
79,650

 
43,030

Sales of produced refined products (BPD)
81,200

 
72,400

 
79,360

 
42,390

Sales of refined products (BPD) (4)
83,080

 
74,410

 
81,590

 
43,090

Refinery utilization (5)
90.4
%
 
84.4
%
 
88.7
%
 
84.6
%


7



 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2012
 
2011
 
2012
 
2011 (10)

Rocky Mountain Region (Cheyenne and Woods Cross Refineries)
 
 
 
 
 
 
 
Average per produced barrel (6)
 
 
 
 
 
 
 
Net sales
$
120.44

 
$
119.40

 
$
117.51

 
$
119.07

Cost of products (7)
84.35

 
86.35

 
88.87

 
90.00

Refinery gross margin
36.09

 
33.05

 
28.64

 
29.07

Refinery operating expenses (8)
6.30

 
6.55

 
6.30

 
6.44

Net operating margin
$
29.79

 
$
26.50

 
$
22.34

 
$
22.63

 
 
 
 
 
 
 
 
Refinery operating expenses per throughput barrel (9)
$
6.24

 
$
6.25

 
$
6.13

 
$
6.16

 
 
 
 
 
 
 
 
Feedstocks:
 
 
 
 
 
 
 
Sweet crude oil
51
%
 
49
%
 
44
%
 
53
%
Sour crude oil
2
%
 
3
%
 
2
%
 
2
%
Heavy sour crude oil
28
%
 
31
%
 
33
%
 
20
%
Black wax crude oil
11
%
 
10
%
 
11
%
 
18
%
Other feedstocks and blends
8
%
 
7
%
 
10
%
 
7
%
Total
100
%
 
100
%
 
100
%
 
100
%
 
 
 
 
 
 
 
 
Sales of produced refined products:
 
 
 
 
 
 
 
Gasolines
56
%
 
50
%
 
55
%
 
55
%
Diesel fuels
31
%
 
34
%
 
31
%
 
32
%
Jet fuels
%
 
%
 
%
 
1
%
Fuel oil
2
%
 
1
%
 
2
%
 
2
%
Asphalt
7
%
 
7
%
 
6
%
 
5
%
LPG and other
4
%
 
8
%
 
6
%
 
5
%
Total
100
%
 
100
%
 
100
%
 
100
%
Consolidated
 
 
 
 
 
 
 
Crude charge (BPD) (1)
433,370

 
425,590

 
417,660

 
284,140

Refinery throughput (BPD) (2)
471,100

 
460,120

 
452,488

 
303,710

Refinery production (BPD) (3)
456,620

 
446,510

 
441,460

 
296,160

Sales of produced refined products (BPD)
433,930

 
435,110

 
426,150

 
292,930

Sales of refined products (BPD) (4)
442,530

 
446,030

 
437,090

 
300,820

Refinery utilization (5)
97.8
%
 
96.1
%
 
94.3
%
 
89.1
%
 
 
 
 
 
 
 
 
Average per produced barrel (6)
 
 
 
 
 
 
 
Net sales
$
121.66

 
$
121.76

 
$
120.48

 
$
121.31

Cost of products (7)
91.11

 
93.66

 
95.28

 
97.91

Refinery gross margin
30.55

 
28.10

 
25.20

 
23.40

Refinery operating expenses (8)
5.11

 
5.07

 
5.21

 
5.43

Net operating margin
$
25.44

 
$
23.03

 
$
19.99

 
$
17.97

 
 
 
 
 
 
 
 
Refinery operating expenses per throughput barrel (9)
$
4.71

 
$
4.79

 
$
4.91

 
$
5.24

 
 
 
 
 
 
 
 
Feedstocks:
 
 
 
 
 
 
 
Sweet crude oil
50
%
 
55
%
 
49
%
 
55
%
Sour crude oil
23
%
 
20
%
 
22
%
 
24
%
Heavy sour crude oil
17
%
 
15
%
 
16
%
 
12
%
Black wax crude oil
2
%
 
2
%
 
2
%
 
3
%
Other feedstocks and blends
8
%
 
8
%
 
11
%
 
6
%
Total
100
%
 
100
%
 
100
%
 
100
%


8



 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2012
 
2011
 
2012
 
2011 (10)

Consolidated
 
 
 
 
 
 
 
Sales of produced refined products:
 
 
 
 
 
 
 
Gasolines
51
%
 
47
%
 
50
%
 
47
%
Diesel fuels
29
%
 
35
%
 
31
%
 
33
%
Jet fuels
6
%
 
4
%
 
6
%
 
4
%
Fuel oil
3
%
 
2
%
 
2
%
 
2
%
Asphalt
3
%
 
4
%
 
3
%
 
4
%
Lubricants
3
%
 
2
%
 
3
%
 
4
%
Gas oil / intermediates
%
 
1
%
 
%
 
2
%
LPG and other
5
%
 
5
%
 
5
%
 
4
%
Total
100
%
 
100
%
 
100
%
 
100
%

(1)
Crude charge represents the barrels per day of crude oil processed at our refineries.
(2)
Refinery throughput represents the barrels per day of crude and other refinery feedstocks input to the crude units and other conversion units at our refineries.
(3)
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.
(4)
Includes refined products purchased for resale.
(5)
Represents crude charge divided by total crude capacity (BPSD). As a result of our merger effective July 1, 2011, our consolidated crude capacity increased from 256,000 BPSD to 443,000 BPSD.
(6)
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.
(7)
Transportation, terminal and refinery storage costs billed from HEP are included in cost of products.
(8)
Represents operating expenses of our refineries, exclusive of depreciation and amortization.
(9)
Represents refinery operating expenses, exclusive of depreciation and amortization divided by refinery throughput.
(10)
We merged with Frontier effective July 1, 2011. Refining operating data for the nine months ended September 30, 2011 include crude oil processed and products yielded from the El Dorado and Cheyenne Refineries for the period from July 1, 2011 through September 30, 2011 only, and averaged over the 273 days in the nine months ended September 30, 2011.



9



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 attributable to HollyFrontier stockholders plus (i) interest expense, net of interest income, (ii) income tax provision, and (iii) depreciation and amortization. EBITDA is not a calculation provided for under 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 September 30,
 
Nine Months Ended September 30,
 
2012
 
2011
 
2012
 
2011
 
(In thousands)
 
 
 
 
 
 
 
 
Net income attributable to HollyFrontier stockholders
$
600,373

 
$
523,088

 
$
1,335,568

 
$
800,017

    Add income tax provision
349,622

 
304,758

 
775,746

 
465,730

    Add interest expense
21,103

 
25,074

 
81,360

 
56,471

    Subtract interest income
(2,219
)
 
(204
)
 
(3,360
)
 
(946
)
    Add depreciation and amortization
65,112

 
43,240

 
178,162

 
106,380

EBITDA
$
1,033,991

 
$
895,956

 
$
2,367,476

 
$
1,427,652


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.

Refinery gross margin per barrel is the difference between average net sales price and average cost of products per barrel of produced refined products. Net operating margin per barrel is the difference between refinery gross margin and refinery operating expenses per barrel of produced refined products. These two margins do not include the effect of depreciation and amortization. Each of these component performance measures can be reconciled directly to our consolidated statements of income.

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

Refinery Gross and Net Operating Margins

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.


10



Reconciliations of refined product sales from produced products sold to total sales and other revenues
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2012
 
2011
 
2012
 
2011
 
(Dollars in thousands, except per barrel amounts)
 
 
 
 
 
 
 
 
Consolidated
 
 
 
 
 
 
 
Average sales price per produced barrel sold
$
121.66

 
$
121.76

 
$
120.48

 
$
121.31

Times sales of produced refined products (BPD)
433,930

 
435,110

 
426,150

 
292,930

Times number of days in period
92

 
92

 
274

 
273

Refined product sales from produced products sold
$
4,856,857

 
$
4,874,067

 
$
14,067,859

 
$
9,701,147

 
 
 
 
 
 
 
 
Total refined product sales
$
4,856,857

 
$
4,874,067

 
$
14,067,859

 
$
9,701,147

Add refined product sales from purchased products and rounding (1)    
100,674

 
127,520

 
376,813

 
266,355

Total refined product sales
4,957,531

 
5,001,587

 
14,444,672

 
9,967,502

Add direct sales of excess crude oil (2)    
187,196

 
148,989

 
378,036

 
422,890

Add other refining segment revenue (3)    
47,922

 
14,277

 
85,141

 
42,328

Total refining segment revenue
5,192,649

 
5,164,853

 
14,907,849

 
10,432,720

Add HEP segment sales and other revenues
72,496

 
49,131

 
207,250

 
144,916

Add corporate and other revenues
352

 
299

 
912

 
1,100

Subtract consolidations and eliminations
(60,699
)
 
(40,885
)
 
(172,794
)
 
(111,620
)
Sales and other revenues
$
5,204,798

 
$
5,173,398

 
$
14,943,217

 
$
10,467,116


Reconciliation of average cost of products per produced barrel sold to total cost of products sold
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2012
 
2011
 
2012
 
2011
 
(Dollars in thousands, except per barrel amounts)
Consolidated
 
 
 
 
 
 
 
Average cost of products per produced barrel sold
$
91.11

 
$
93.66

 
$
95.28

 
$
97.91

Times sales of produced refined products (BPD)
433,930

 
435,110

 
426,150

 
292,930

Times number of days in period
92

 
92

 
274

 
273

Cost of products for produced products sold
$
3,637,253

 
$
3,749,221

 
$
11,125,379

 
$
7,829,852

 
 
 
 
 
 
 
 
Total cost of products for produced products sold
$
3,637,253

 
$
3,749,221

 
$
11,125,379

 
$
7,829,852

Add refined product costs from purchased products sold and rounding (1)    
100,078

 
128,857

 
377,476

 
268,390

Total cost of refined products sold
3,737,331

 
3,878,078

 
11,502,855

 
8,098,242

Add crude oil cost of direct sales of excess crude oil (2)    
182,252

 
147,223

 
367,795

 
416,084

Add other refining segment cost of products sold (4)    
38,678

 
4,696

 
61,580

 
17,032

Total refining segment cost of products sold
3,958,261

 
4,029,997

 
11,932,230

 
8,531,358

Subtract consolidations and eliminations
(59,525
)
 
(40,070
)
 
(164,813
)
 
(109,719
)
Costs of products sold (exclusive of depreciation and amortization)
$
3,898,736

 
$
3,989,927

 
$
11,767,417

 
$
8,421,639



11



Reconciliation of average refinery operating expenses per produced barrel sold to total operating expenses
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2012
 
2011
 
2012
 
2011
 
(Dollars in thousands, except per barrel amounts)
Consolidated
 
 
 
 
 
 
 
Average refinery operating expenses per produced barrel sold
$
5.11

 
$
5.07

 
$
5.21

 
$
5.43

Times sales of produced refined products (BPD)
433,930

 
435,110

 
426,150

 
292,930

Times number of days in period
92

 
92

 
274

 
273

Refinery operating expenses for produced products sold
$
203,999

 
$
202,953

 
$
608,346

 
$
434,237

 
 
 
 
 
 
 
 
Total refinery operating expenses for produced products sold
$
203,999

 
$
202,953

 
$
608,346

 
$
434,237

Add other refining segment operating expenses and rounding (5)    
8,848

 
10,080

 
26,933

 
26,156

Total refining segment operating expenses
212,847

 
213,033

 
635,279

 
460,393

Add HEP segment operating expenses
21,324

 
15,015

 
61,799

 
41,872

Add corporate and other costs
42

 
291

 
1,302

 
117

Subtract consolidations and eliminations
(354
)
 
(456
)
 
(168
)
 
(411
)
Operating expenses (exclusive of depreciation and amortization)
$
233,859

 
$
227,883

 
$
698,212

 
$
501,971


Reconciliation of net operating margin per barrel to refinery gross margin per barrel to total sales and other revenues
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2012
 
2011
 
2012
 
2011
 
(Dollars in thousands, except per barrel amounts)
Consolidated
 
 
 
 
 
 
 
Net operating margin per barrel
$
25.44

 
$
23.03

 
$
19.99

 
$
17.97

Add average refinery operating expenses per produced barrel
5.11

 
5.07

 
5.21

 
5.43

Refinery gross margin per barrel
30.55

 
28.10

 
25.20

 
23.40

Add average cost of products per produced barrel sold
91.11

 
93.66

 
95.28

 
97.91

Average sales price per produced barrel sold
$
121.66

 
$
121.76

 
$
120.48

 
$
121.31

Times sales of produced refined products (BPD)
433,930

 
435,110

 
426,150

 
292,930

Times number of days in period
92

 
92

 
274

 
273

Refined product sales from produced products sold
$
4,856,857

 
$
4,874,067

 
$
14,067,859

 
$
9,701,147

 
 
 
 
 
 
 
 
Total refined product sales from produced products sold
$
4,856,857

 
$
4,874,067

 
$
14,067,859

 
$
9,701,147

Add refined product sales from purchased products and rounding (1)    
100,674

 
127,520

 
376,813

 
266,355

Total refined product sales
4,957,531

 
5,001,587

 
14,444,672

 
9,967,502

Add direct sales of excess crude oil (2)    
187,196

 
148,989

 
378,036

 
422,890

Add other refining segment revenue (3)    
47,922

 
14,277

 
85,141

 
42,328

Total refining segment revenue
5,192,649

 
5,164,853

 
14,907,849

 
10,432,720

Add HEP segment sales and other revenues
72,496

 
49,131

 
207,250

 
144,916

Add corporate and other revenues
352

 
299

 
912

 
1,100

Subtract consolidations and eliminations
(60,699
)
 
(40,885
)
 
(172,794
)
 
(111,620
)
Sales and other revenues
$
5,204,798

 
$
5,173,398

 
$
14,943,217

 
$
10,467,116

(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, at times 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 incremental revenues associated with NK Asphalt and miscellaneous revenue.
(4)
Other refining segment cost of products sold includes the incremental cost of products for NK Asphalt and miscellaneous costs.
(5)
Other refining segment operating expenses include the marketing costs associated with our refining segment and the operating expenses of NK Asphalt.

12





FOR FURTHER INFORMATION, Contact:

Douglas S. Aron, Executive Vice President and
Chief Financial Officer
Julia Heidenreich,
Investor Relations
HollyFrontier Corporation
214/871-3555


13