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8-K/A - FORM 8-K/A - HOLLY ENERGY PARTNERS LPd415046d8ka.htm
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EX-99.2 - EX-99.2 - HOLLY ENERGY PARTNERS LPd415046dex992.htm
EX-99.3 - EX-99.3 - HOLLY ENERGY PARTNERS LPd415046dex993.htm

Exhibit 99.1

FINANCIAL STATEMENTS

UNEV Pipeline, LLC

Six Months Ended June 30, 2012


UNEV Pipeline, LLC

Financial Statements

Six Months Ended June 30, 2012

Contents

Financial Statements (unaudited)

 

Balance Sheets

     1   

Statements of Operations

     2   

Statement of Changes in Partners Capital

     3   

Statements of Cash Flows

     4   

Notes to Financial Statements

     5   


UNEV Pipeline, LLC

Balance Sheets

(In Thousands)

 

     June 30,  2012
(Unaudited)
     December 31, 2011  

Cash and cash equivalents

   $ —         $ 3,100   

Restricted cash

     1,000         1,000   

Receivable from affiliates

     4,719         4,080   

Other current assets

     43         85   
  

 

 

    

 

 

 

Total current assets

     5,762         8,265   

Properties and equipment, net

     403,452         401,287   
  

 

 

    

 

 

 

Total assets

   $ 409,214       $ 409,552   
  

 

 

    

 

 

 

Accounts payable

   $ 3,032       $ 12,268   

Payable to affiliates

     597         1,274   

Deferred Revenue

     2,534         —     
  

 

 

    

 

 

 

Total current liabilities

     6,163         13,542   

Partners’ Capital

     403,051         396,010   
  

 

 

    

 

 

 

Total liabilities & partners’ capital

   $ 409,214       $ 409,552   
  

 

 

    

 

 

 

See accompanying notes.

 

1


UNEV Pipeline, LLC

Statements of Operations

(Unaudited)

(In Thousands)

 

     Six Months Ended
June 30,
 
     2012     2011  

Revenues:

    

Transportation revenue from affliates

   $ 7,792      $ —     

Other revenue

     21        2   
  

 

 

   

 

 

 
     7,813        2   

Expenses:

    

Operating (exclusive of depreciation)

     5,648        330   

Depreciation

     7,124        358   
  

 

 

   

 

 

 
     12,772        688   
  

 

 

   

 

 

 

Net loss

   $ (4,959   $ (686
  

 

 

   

 

 

 

See accompanying notes.

 

2


UNEV Pipeline, LLC

Statement of Changes in Partners’ Capital

(Unaudited)

(In Thousands)

 

     Sinclair     HFC     Total  

Balance December 31, 2011

   $ 99,002      $  297,008      $  396,010   

Contributions made

     3,000        9,000        12,000   

Net loss

     (1,240     (3,719     (4,959
  

 

 

   

 

 

   

 

 

 

Balance June 30, 2012

   $ 100,762      $ 302,289      $ 403,051   
  

 

 

   

 

 

   

 

 

 

See accompanying notes.

 

3


UNEV Pipeline, LLC

Statements of Cash Flows

(Unaudited)

(In Thousands)

 

     Six Months Ended June 30,  
     2012     2011  

Cash flows from operating activities:

    

Net loss

   $ (4,959   $ (686

Adjustments to reconcile net loss to net cash provided by operating activities:

    

Depreciation and amortization

     7,124        358   

(Increase) decrease in current assets

    

Receivable from affiliates

     (3,639     (57

Other current assets

     42        —     

Increase (decrease) in current liabilities

    

Accounts payable

     (4,177     3,528   

Payable to affiliates

     (677     277   

Deferred revenue

     2,534        —     

Other

     19        —     
  

 

 

   

 

 

 

Net cash (provided by) operating activities:

     (3,733     3,420   

Cash flows from investing activity:

    

Acquisitions of property and equipment

     (14,367     (77,768

Cash flows from financing activity:

    

Cash contributions made

     15,000        79,500   
  

 

 

   

 

 

 

Increase (decrease) in cash and cash equivalents

     (3,100     5,152   

Cash and cash and equivalents at beginning of year

     3,100        7,649   
  

 

 

   

 

 

 

Cash and cash equivalents at end of year

   $ —        $ 12,801   
  

 

 

   

 

 

 

See accompanying notes.

 

4


UNEV Pipeline, LLC

Notes to Financial Statements (Unaudited)

As of and for the six months ended

June 30, 2012

1. Organization and Nature of Business

UNEV Pipeline, LLC (“UNEV”), a Delaware limited liability company, recently completed the UNEV Pipeline, a 400 mile, 12-inch refined products pipeline from Salt Lake City, Utah to Las Vegas, Nevada, together with terminal and ethanol blending facilities in the Cedar City, Utah and North Las Vegas areas and storage facilities at the Cedar City terminal. As of December 31, 2011, a subsidiary of HollyFrontier Corporation (“HFC”) owned 75% of the pipeline with a subsidiary of Sinclair Oil Corporation (“Sinclair”) owning the remaining 25% interest. The cost of constructing this pipeline including terminals and ethanol blending and storage facilities was approximately $410 million. The pipeline was mechanically complete in November 2011, and initial start-up activities commenced in December 2011.

The financial statements included herein have been prepared without audit. The interim financial statements reflect all adjustments, which, in the opinion of management, are necessary for a fair presentation of our results for the interim periods. Such adjustments are considered to be of a normal recurring nature. Although certain notes and other information required by U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted, we believe that the disclosures in these financial statements are adequate to make the information presented not misleading. These financial statements should be read in conjunction with annual financials for the year ended December 31, 2011. Results of operations for interim periods are not necessarily indicative of the results of operations that will be realized for the year ending December 31, 2012.

In this document, the words “we”, “our”, “ours” and “us” refer to UNEV unless the context otherwise indicates.

2. Related Parties

HFC was the largest shipper on the pipeline operating under a ten-year transportation agreement as discussed in Note 4 below. Sinclair is the other shipper on the pipeline operating under a ten-year transportation agreement discussed below. All transactions with HFC and Sinclair have been labeled as affiliate transactions on the balance sheets and statements of operations.

In June 2011, a subsidiary of Holly Energy Partners L.P. (“HEP”) was appointed the operator of UNEV. We paid management fees to HEP totaling $450,000 and $75,000 for the six months ended June 30, 2012 and 2011, respectively, which are included in operating costs.

Employees who provide direct services to us are employed by Holly Logistic Services, L.L.C., a subsidiary of HFC which is the general partner of HEP’s general partner. These employees’ costs, including salaries, bonuses, payroll taxes, benefits, and other direct costs, are charged to us monthly. We paid $991,000 and $100,600 with respect to such costs for the six months ended 2012 and 2011, respectively which are included in operating costs.

 

5


UNEV Pipeline, LLC

Notes to Financial Statements (continued)

3. Properties and Equipment

 

     June 30, 2012     December 31, 2011  
     (in thousands)     (in thousands)  

Pipelines and terminals

   $ 375,300      $ 229,423   

Construction in progress

     1,669        157,653   

Land and right of way

     35,110        16,755   

Buildings and other

     2,035        1,047   
  

 

 

   

 

 

 
     414,114        404,878   

Less accumulated depreciation

     (10,662     (3,591
  

 

 

   

 

 

 
   $ 403,452      $ 401,287   
  

 

 

   

 

 

 

4. Transportation Agreements

Effective January 1, 2012, we entered into ten-year transportation agreements with HFC and Sinclair, which ten-year term commenced on March 1, 2012, and will result in minimum annualized payments to UNEV of $15.6 million and $7.4 million, respectively.

5. Restricted Cash

The restricted cash consists of $1.0 million held in an escrow account pursuant to an agreement among UNEV, a utility services contractor and the financial institution. The escrow agreement was entered following settlement of certain claims between UNEV and the contractor regarding asset construction work. Funds will be released to UNEV or the contractor upon mutual agreement or pursuant to the determination of a court of competent jurisdiction if UNEV and the contractor are unable to reach an agreement.

6. Subsequent Event

On July 12, 2012, HEP acquired HFC’s 75% interest in UNEV. HEP paid consideration consisting of $260.0 million in cash and 1,029,900 of their common units. Under the terms of the transaction, HEP also issued to HFC equity interests in its wholly owned subsidiary that entitles HFC to an interest in HEP’s share of future UNEV profits beginning in 2015 through 2032, subject to a cap of approximately $34.0 million and certain other limitations.

We have evaluated subsequent events through September 25, 2012.

 

6