(Mark One)
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ý
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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20-0833098
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer Identification No.)
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2828 N. Harwood, Suite 1300
Dallas, Texas
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75201-1507
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(Address of principal executive offices)
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(Zip Code)
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Large accelerated filer
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ý
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Accelerated filer
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¨
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Non-accelerated filer
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¨
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Smaller reporting company
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¨
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Emerging growth company
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¨
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Item
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Page
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PART I
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1. and 2.
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Business
and Properties
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1A.
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1B.
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3.
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4.
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PART II
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5.
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6.
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7.
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7A.
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8.
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9.
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9A.
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9B.
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PART III
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10.
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11.
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12.
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13.
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14.
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PART IV
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15.
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•
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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;
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the economic viability of HollyFrontier Corporation, Delek US Holdings, Inc. and our other customers;
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the demand for refined petroleum products in markets we serve;
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our ability to purchase and integrate future acquired operations;
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our ability to complete previously announced or contemplated acquisitions;
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the availability and cost of additional debt and equity financing;
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the possibility of reductions in production or shutdowns at refineries utilizing our pipeline and terminal facilities;
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the effects of current and future government regulations and policies;
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our operational efficiency in carrying out routine operations and capital construction projects;
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the possibility of terrorist attacks and the consequences of any such attacks;
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general economic conditions;
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the impact of recent changes in the tax laws and regulations that affect master limited partnerships; and
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other financial, operational and legal risks and uncertainties detailed from time to time in our Securities and Exchange Commission filings.
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6% Senior Notes
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21
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6.5% Senior Notes
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49
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Delek
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5
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bpd
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6
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Credit Agreement
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16
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CWA
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24
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EBITDA
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41
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Expansion capital expenditures
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16
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FERC
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6
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FCC
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14
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Frontier Aspen
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15
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Frontier Pipeline
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8
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GAAP
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42
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Guarantor subsidiaries
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91
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HEP
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5
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HEP Logistics
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5
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HLS
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5
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HFC
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5
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IRAs
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36
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LACT
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10
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LIBOR
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79
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LPG
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5
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Magellan
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6
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Maintenance capital expenditures
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16
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mbbls
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6
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MMSCFD
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9
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Mid-America
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7
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Non-Guarantor
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91
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Omnibus Agreement
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16
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Osage
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14
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Parent
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91
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Plains
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6
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PHMSA
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16
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PPI
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7
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Predecessor
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40
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SCADA
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13
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SEC
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5
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Secondment Agreement
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16
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SLC Pipeline
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8
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UNEV
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8
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Woods Cross Operating
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15
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Years Ended December 31,
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2017
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2016
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2015
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2014
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2013
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Volumes transported for barrels per day ("bpd"):
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HFC
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556,516
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542,762
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558,027
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457,014
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397,359
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Third parties
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99,847
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75,909
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73,555
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64,055
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63,337
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Total
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656,363
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618,671
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631,582
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521,069
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460,696
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Total barrels in thousands (“mbbls”)
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239,572
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226,434
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230,527
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190,190
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168,154
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Origin and Destination
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Diameter
(inches)
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Length
(miles)
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Capacity
(bpd)
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Refined Product Pipelines:
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Artesia, NM to El Paso, TX
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6
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156
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19,000
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Artesia, NM to Orla, TX to El Paso, TX
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8/12
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221
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95,000
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(1)
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Artesia, NM to Moriarty, NM
(2)
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12/8
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215
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27,000
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(3)
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Moriarty, NM to Bloomfield, NM
(2)
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8
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191
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14,400
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(3)
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Big Spring, TX to Abilene, TX
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6/8
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100
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20,000
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Big Spring, TX to Wichita Falls, TX
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6/8
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227
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23,000
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Wichita Falls, TX to Duncan, OK
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6
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47
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21,000
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Midland, TX to Orla, TX
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8/10
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135
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25,000
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Artesia, NM to Roswell, NM
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4
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35
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5,300
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(7)
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Mountain Home, ID
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4
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13
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6,000
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Woods Cross, UT
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10/12/8
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8
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70,000
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Woods Cross, UT to Las Vegas, NV
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12
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427
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62,000
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Salt Lake City, UT to UNEV Pipeline, UT
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10
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1
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60,000
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Tulsa, OK
(4)
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Intermediate Product Pipelines:
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Lovington, NM to Artesia, NM
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8
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65
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48,000
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Lovington, NM to Artesia, NM
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10
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65
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72,000
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Lovington, NM to Artesia, NM
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16
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65
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98,400
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Tulsa, OK
(5)
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8/10/12
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7
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(5)
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Evans Junction to Artesia, NM
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8
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12
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107
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(6)
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Crude Pipelines:
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Artesia Region Gathering
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Various
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497
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70,000
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West Texas Gathering
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Various
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305
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35,000
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Roadrunner Pipeline
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16
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69
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62,400
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Beeson Pipeline
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8/10
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46
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95,000
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El Dorado Crude Delivery Pipeline
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16
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4
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165,000
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Bisti Connection Pipeline
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12
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13
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82,000
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Whites City Pipeline
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8
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61
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50,000
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SLC Pipeline
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16
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95
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105,000
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Frontier Pipeline
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16
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289
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72,000
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(1)
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Includes 15,000 bpd capacity on the Orla to El Paso segment of this pipeline, leased to Delek under capacity lease agreements.
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(2)
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The White Lakes Junction to Moriarty segment of our Artesia to Moriarty pipeline and the Moriarty to Bloomfield pipeline is leased from Mid-America under a long-term lease agreement.
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(3)
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Capacity for this pipeline is reflected in the information for the Artesia to Moriarty pipeline.
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(4)
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Tulsa gasoline and diesel fuel connections to Magellan’s pipeline are less than one mile.
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(5)
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The capacities of the three gas pipelines are 10 million standard cubic feet per day (“MMSCFD”), 22 MMSCFD and 10 MMSCFD, and the two liquid pipelines are 45,000 bpd and 60,000 bpd.
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(6)
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The capacity is in MMSCFD per day.
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(7)
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Pipeline is currently idled.
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distribution;
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blending to achieve specified grades of gasoline and diesel, including the blending of butane, ethanol and biodiesel;
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other ancillary services that include the injection of additives and filtering of jet fuel; and
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storage and inventory management.
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Years Ended December 31,
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2017
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2016
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2015
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2014
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2013
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Refined products and crude terminalled for (bpd):
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HFC
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428,001
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413,487
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391,292
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261,888
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255,108
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Third parties
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68,687
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72,342
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78,403
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69,100
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63,791
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Total
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496,688
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485,829
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469,695
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330,988
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318,899
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Total (mbbls)
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181,291
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177,813
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171,439
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120,811
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116,398
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Terminal Location
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Storage
Capacity
(barrels)
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Number
of
Tanks
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Supply Source
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Mode of Delivery
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Moriarty, NM
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211,000
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9
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Pipeline
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Truck
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Bloomfield, NM
(1)
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203,000
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7
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Pipeline
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Truck
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Tucson, AZ
(2)
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186,000
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9
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Pipeline
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Truck
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Mountain Home, ID
(3)
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122,000
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4
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Pipeline
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Pipeline
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Spokane, WA
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384,000
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28
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Pipeline/Rail
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Truck
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Abilene, TX
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157,000
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6
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Pipeline
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Truck/Pipeline
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Wichita Falls, TX
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220,000
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11
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Pipeline
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Truck/Pipeline
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Las Vegas, NV
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378,000
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12
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Pipeline/Truck
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Truck
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Cedar City, UT
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235,000
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7
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Pipeline/Rail/Truck
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Truck
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Orla tank farm
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129,000
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5
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Pipeline
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Pipeline
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El Dorado, KS crude tankage
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1,150,000
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11
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Pipeline
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Pipeline
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Frontier Anschutz Station
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260,000
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3
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Pipeline
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Pipeline
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Frontier Arepi Station
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100,000
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3
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Pipeline
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Pipeline
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SLC North Salt Lake Station
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10,000
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1
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Pipeline
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Pipeline
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Artesia facility railyard
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N/A
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N/A
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Rail
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Rail
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Artesia facility truck rack
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N/A
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N/A
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Refinery
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Truck
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Lovington facility asphalt truck rack
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N/A
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N/A
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Refinery
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Truck
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Woods Cross facility truck rack
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N/A
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N/A
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Refinery
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Truck/Pipeline
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Tulsa West facility truck and rail rack
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N/A
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N/A
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Refinery
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Truck/Rail/Pipeline
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Tulsa East facility truck and rail racks
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N/A
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N/A
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Refinery
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Truck/Rail/Pipeline
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Tulsa facility railyard
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N/A
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N/A
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Rail
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Rail
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Cheyenne facility truck racks
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N/A
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N/A
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Refinery
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Truck
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El Dorado facility truck racks
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N/A
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N/A
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Refinery
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Truck
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Total
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3,745,000
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(1)
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Inactive
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(2)
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The underlying ground at the Tucson terminal is leased.
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(3)
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Handles only jet fuel.
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Refinery Location
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Storage
Capacity
(barrels)
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Tankage Type
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Number
of
Tanks
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Artesia , NM
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180,000
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Crude oil
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2
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Lovington, NM
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309,000
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Crude oil
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2
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Woods Cross, UT
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190,000
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Crude oil
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3
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Tulsa, OK
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3,727,000
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Crude oil and refined product
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61
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Cheyenne, WY
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1,915,000
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Crude oil and refined product
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54
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El Dorado, KS
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3,877,000
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Refined and intermediate product
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90
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Total
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10,198,000
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Item 1A.
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Risk Factors
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•
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competition from other refineries and pipelines that may be able to supply the refinery's end-user markets on a more cost-effective basis;
|
•
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operational problems such as catastrophic events at the refinery, labor difficulties, environmental proceedings or other litigation that cause a stoppage of all or a portion of the operations at the refinery;
|
•
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planned maintenance or capital projects;
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•
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increasingly stringent environmental laws and regulations, such as the U.S. Environmental Protection Agency's gasoline and diesel sulfur control requirements that limit the concentration of sulfur in motor gasoline and diesel fuel for both on-road and non-road usage as well as various state and federal emission requirements that may affect the refinery itself and potential future climate change regulations;
|
•
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an inability to obtain crude oil for the refinery at competitive prices; or
|
•
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a general reduction in demand for refined products in the area due to:
|
◦
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a local or national recession or other adverse economic condition that results in lower spending by businesses and consumers on gasoline and diesel fuel;
|
◦
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higher gasoline prices due to higher crude oil costs, higher taxes or stricter environmental laws or regulations; or
|
◦
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a shift by consumers to more fuel-efficient or alternative fuel vehicles or an increase in fuel economy, whether as a result of technological advances by manufacturers, legislation either mandating or encouraging higher fuel economy or the use of alternative fuel or otherwise.
|
•
|
meet our obligations as they come due;
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•
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execute our growth strategy;
|
•
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complete future acquisitions or construction projects;
|
•
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take advantage of other business opportunities; or
|
•
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respond to competitive pressures.
|
•
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the accuracy of our assumptions about growth in the markets that we currently serve or have plans to serve in the Southwestern, Northwest and Mid-Continent regions of the United States;
|
•
|
HFC's willingness and ability to capture a share of additional demand in its existing markets; and
|
•
|
HFC's willingness and ability to identify and penetrate new markets in the Southwestern, Northwest and Mid-Continent regions of the United States.
|
•
|
certain pre-closing environmental liabilities discovered within specified time periods after the date of the applicable acquisition;
|
•
|
certain matters arising from the pre-closing ownership and operation of assets; and
|
•
|
ongoing remediation related to the assets.
|
•
|
denial or delay in issuing requisite regulatory approvals and/or permits;
|
•
|
unplanned increases in the cost of construction materials or labor;
|
•
|
disruptions in transportation of modular components and/or construction materials;
|
•
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severe adverse weather conditions, natural disasters, or other events (such as equipment malfunctions explosions, fires or spills) affecting our facilities, or those of vendors and suppliers;
|
•
|
shortages of sufficiently skilled labor, or labor disagreements resulting in unplanned work stoppages;
|
•
|
market-related increases in a project's debt or equity financing costs; and/or
|
•
|
nonperformance by, or disputes with, vendors, suppliers, contractors, or sub-contractors involved with a project.
|
•
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HFC, as a shipper on our pipelines, has an economic incentive not to cause us to seek higher tariff rates or terminalling fees, even if such higher rates or terminalling fees would reflect rates that could be obtained in arm's-length, third-party transactions;
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•
|
neither our partnership agreement nor any other agreement requires HFC to pursue a business strategy that favors us or utilizes our assets, including whether to increase or decrease refinery production, whether to shut down or reconfigure a refinery, or what markets to pursue or grow. HFC's directors and officers have a fiduciary duty to make these decisions in the best interests of the stockholders of HFC;
|
•
|
our general partner is allowed to take into account the interests of parties other than us, such as HFC, in resolving conflicts of interest;
|
•
|
our partnership agreement provides for modified or reduced fiduciary duties for our general partner, and also restricts the remedies available to our unitholders for actions that, without the limitations, might constitute breaches of fiduciary duty;
|
•
|
our general partner determines which costs incurred by HFC and its affiliates are reimbursable by us;
|
•
|
our partnership agreement does not restrict our general partner from causing us to pay it or its affiliates for any services rendered to us or entering into additional contractual arrangements with any of these entities on our behalf;
|
•
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our general partner may, in some circumstances, cause us to borrow funds to make cash distributions, even where the purpose or effect of the borrowing benefits our general partner or affiliates;
|
•
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our general partner determines the amount and timing of our asset purchases and sales, capital expenditures and borrowings, each of which can affect the amount of cash available to us; and
|
•
|
our general partner controls the enforcement of obligations owed to us by our general partner and its affiliates, including the pipelines and terminals agreement with HFC.
|
•
|
our unitholders' proportionate ownership interest in us will decrease;
|
•
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the amount of cash available for distribution on each unit may decrease;
|
•
|
the relative voting strength of each previously outstanding unit may be diminished; and
|
•
|
the market price of the common units may decline.
|
•
|
any business operated by HFC or any of its subsidiaries at the closing of our initial public offering;
|
•
|
any business or asset that HFC or any of its subsidiaries acquires or constructs that has a fair market value or construction cost of less than $5 million; and
|
•
|
any business or asset that HFC or any of its subsidiaries acquires or constructs that has a fair market value or construction cost of $5 million or more if we have been offered the opportunity to purchase the business or asset at fair market value, and we decline to do so.
|
Item 1B.
|
Unresolved Staff Comments
|
Item 3.
|
Legal Proceedings
|
Item 4.
|
Mine Safety Disclosures
|
Item 5.
|
Market for the Registrant’s Common Units, Related Unitholder Matters and Issuer Purchases of Common Units
|
Years Ended December 31,
|
|
High
|
|
Low
|
|
Cash
Distributions
|
|
Trading
Volume
|
|||||||
2017
|
|
|
|
|
|
|
|
|
|||||||
Fourth quarter
|
|
$
|
35.84
|
|
|
$
|
31.56
|
|
|
$
|
0.6500
|
|
|
9,662,789
|
|
Third quarter
|
|
$
|
36.05
|
|
|
$
|
30.11
|
|
|
$
|
0.6450
|
|
|
16,750,589
|
|
Second quarter
|
|
$
|
37.56
|
|
|
$
|
30.36
|
|
|
$
|
0.6325
|
|
|
8,644,252
|
|
First quarter
|
|
$
|
38.09
|
|
|
$
|
32.06
|
|
|
$
|
0.6200
|
|
|
8,883,617
|
|
2016
|
|
|
|
|
|
|
|
|
|||||||
Fourth quarter
|
|
$
|
34.87
|
|
|
$
|
29.53
|
|
|
$
|
0.6075
|
|
|
7,029,100
|
|
Third quarter
|
|
$
|
36.98
|
|
|
$
|
31.30
|
|
|
$
|
0.5950
|
|
|
6,599,800
|
|
Second quarter
|
|
$
|
36.99
|
|
|
$
|
31.75
|
|
|
$
|
0.5850
|
|
|
8,201,400
|
|
First quarter
|
|
$
|
34.50
|
|
|
$
|
21.44
|
|
|
$
|
0.5750
|
|
|
11,258,800
|
|
Period
|
|
Total Number of
Units Purchased
|
|
Average Price
Paid Per Unit
|
|
Total Number of
Units Purchased as
Part of Publicly
Announced Plan or
Program
|
|
Maximum Number
of Units that May
Yet be Purchased
Under a Publicly
Announced Plan or
Program
|
||||||
October 2017
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
—
|
|
November 2017
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
—
|
|
December 2017
|
|
16,818
|
|
|
$
|
33.90
|
|
|
—
|
|
|
$
|
—
|
|
Total for October to December 2017
|
|
16,818
|
|
|
|
|
—
|
|
|
|
Item 6.
|
Selected Financial Data
|
|
|
Years Ended December 31,
|
||||||||||||||||||
|
|
2017
|
|
2016
|
|
2015
|
|
2014
|
|
2013
|
||||||||||
|
|
(In thousands, except per unit data)
|
||||||||||||||||||
Statement of Income Data:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Revenues
|
|
$
|
454,362
|
|
|
$
|
402,043
|
|
|
$
|
358,875
|
|
|
$
|
332,545
|
|
|
$
|
305,182
|
|
Operating costs and expenses
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Operations (exclusive of depreciation and amortization)
|
|
137,605
|
|
|
123,986
|
|
|
105,556
|
|
|
106,185
|
|
|
100,131
|
|
|||||
Depreciation and amortization
|
|
79,278
|
|
|
70,428
|
|
|
63,306
|
|
|
62,529
|
|
|
65,783
|
|
|||||
General and administrative
|
|
14,323
|
|
|
12,532
|
|
|
12,556
|
|
|
10,824
|
|
|
11,749
|
|
|||||
|
|
231,206
|
|
|
206,946
|
|
|
181,418
|
|
|
179,538
|
|
|
177,663
|
|
|||||
Operating income
|
|
223,156
|
|
|
195,097
|
|
|
177,457
|
|
|
153,007
|
|
|
127,519
|
|
|||||
Equity in earnings of equity method investments
|
|
12,510
|
|
|
14,213
|
|
|
4,803
|
|
|
2,987
|
|
|
2,826
|
|
|||||
Interest expense
|
|
(58,448
|
)
|
|
(52,552
|
)
|
|
(37,418
|
)
|
|
(36,101
|
)
|
|
(47,010
|
)
|
|||||
Interest income
|
|
491
|
|
|
440
|
|
|
526
|
|
|
3
|
|
|
161
|
|
|||||
Loss on early extinguishments of debt
|
|
(12,225
|
)
|
|
—
|
|
|
—
|
|
|
(7,677
|
)
|
|
—
|
|
|||||
Remeasurement gain on preexisting equity interests
|
|
36,254
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Gain on sale of assets and other
|
|
422
|
|
|
677
|
|
|
486
|
|
|
82
|
|
|
1,871
|
|
|||||
|
|
(20,996
|
)
|
|
(37,222
|
)
|
|
(31,603
|
)
|
|
(40,706
|
)
|
|
(42,152
|
)
|
|||||
Income before income taxes
|
|
202,160
|
|
|
157,875
|
|
|
145,854
|
|
|
112,301
|
|
|
85,367
|
|
|||||
State income tax expense
|
|
(249
|
)
|
|
(285
|
)
|
|
(228
|
)
|
|
(235
|
)
|
|
(333
|
)
|
|||||
Net income
|
|
201,911
|
|
|
157,590
|
|
|
145,626
|
|
|
112,066
|
|
|
85,034
|
|
|||||
Allocation of net loss attributable to Predecessor
|
|
—
|
|
|
10,657
|
|
|
2,702
|
|
|
1,747
|
|
|
1,047
|
|
|||||
Allocation of net income attributable to noncontrolling interests
|
|
(6,871
|
)
|
|
(10,006
|
)
|
|
(11,120
|
)
|
|
(8,288
|
)
|
|
(6,632
|
)
|
|||||
Net income attributable to the partners
|
|
195,040
|
|
|
158,241
|
|
|
137,208
|
|
|
105,525
|
|
|
79,449
|
|
|||||
General partner interest in net income, including incentive distributions
(1)
|
|
(35,047
|
)
|
|
(57,173
|
)
|
|
(42,337
|
)
|
|
(34,667
|
)
|
|
(27,523
|
)
|
|||||
Limited partners’ interest in net income
|
|
$
|
159,993
|
|
|
$
|
101,068
|
|
|
$
|
94,871
|
|
|
$
|
70,858
|
|
|
$
|
51,926
|
|
Limited partners’ earnings per unit – basic and diluted
(1)
|
|
$
|
2.28
|
|
|
$
|
1.69
|
|
|
$
|
1.60
|
|
|
$
|
1.20
|
|
|
$
|
0.88
|
|
Distributions per limited partner unit
|
|
$
|
2.5475
|
|
|
$
|
2.3625
|
|
|
$
|
2.2025
|
|
|
$
|
2.0750
|
|
|
$
|
1.9550
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Other Financial Data:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash flows from operating activities
|
|
$
|
238,487
|
|
|
$
|
243,548
|
|
|
$
|
231,442
|
|
|
$
|
185,256
|
|
|
$
|
182,393
|
|
Cash flows from investing activities
|
|
$
|
(286,273
|
)
|
|
$
|
(143,030
|
)
|
|
$
|
(246,680
|
)
|
|
$
|
(198,423
|
)
|
|
$
|
(90,704
|
)
|
Cash flows from financing activities
|
|
$
|
51,905
|
|
|
$
|
(111,874
|
)
|
|
$
|
27,421
|
|
|
$
|
9,645
|
|
|
$
|
(90,574
|
)
|
EBITDA
(2)
|
|
$
|
344,749
|
|
|
$
|
277,545
|
|
|
$
|
237,180
|
|
|
$
|
211,701
|
|
|
$
|
192,054
|
|
Distributable cash flow
(3)
|
|
$
|
242,955
|
|
|
$
|
218,810
|
|
|
$
|
197,046
|
|
|
$
|
172,718
|
|
|
$
|
146,579
|
|
Maintenance capital expenditures
(4)
|
|
$
|
7,748
|
|
|
$
|
9,658
|
|
|
$
|
8,926
|
|
|
$
|
4,616
|
|
|
$
|
8,683
|
|
Expansion capital expenditures
|
|
37,062
|
|
|
50,046
|
|
|
30,467
|
|
|
75,343
|
|
|
43,418
|
|
|||||
Acquisition capital expenditures
|
|
245,446
|
|
|
44,119
|
|
|
153,728
|
|
|
118,727
|
|
|
41,635
|
|
|||||
Total capital expenditures
|
|
$
|
290,256
|
|
|
$
|
103,823
|
|
|
$
|
193,121
|
|
|
$
|
198,686
|
|
|
$
|
93,736
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Balance Sheet Data (at period end):
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net property, plant and equipment
|
|
$
|
1,569,471
|
|
|
$
|
1,328,395
|
|
|
$
|
1,293,060
|
|
|
$
|
1,163,631
|
|
|
$
|
1,018,854
|
|
Total assets
|
|
$
|
2,154,114
|
|
|
$
|
1,884,237
|
|
|
$
|
1,777,646
|
|
|
$
|
1,584,114
|
|
|
$
|
1,442,573
|
|
Long-term debt
(5)
|
|
$
|
1,507,308
|
|
|
$
|
1,243,912
|
|
|
$
|
1,008,752
|
|
|
$
|
866,986
|
|
|
$
|
806,655
|
|
Total liabilities
|
|
$
|
1,669,049
|
|
|
$
|
1,412,446
|
|
|
$
|
1,151,424
|
|
|
$
|
989,324
|
|
|
$
|
914,656
|
|
Total equity
(6)
|
|
$
|
485,065
|
|
|
$
|
471,791
|
|
|
$
|
626,222
|
|
|
$
|
594,790
|
|
|
$
|
527,917
|
|
(1)
|
Net income attributable to the partners is allocated between limited partners and the general partner interest in accordance with the provisions of the partnership agreement. HEP net income allocated to the general partner included incentive distributions that were declared subsequent to quarter end. After the amount of incentive distributions and other priority allocations are allocated to the general partner, the remaining net income attributable to the partners is allocated to the partners based on their weighted average ownership percentage during the period. As a result of the IDR restructuring transaction, no IDR or general partner distributions were made after October 31, 2017. See "Business and Properties - Overview."
|
(2)
|
Earnings before interest, taxes, depreciation and amortization (“EBITDA”) is calculated as net income attributable to Holly Energy Partners plus (i) interest expense net of interest income and loss on early extinguishment of debt, (ii) state income tax and (iii) depreciation and amortization excluding amounts related to the Predecessor. EBITDA is not a
|
|
|
Years Ended December 31,
|
||||||||||||||||||
|
|
2017
|
|
2016
|
|
2015
|
|
2014
|
|
2013
|
||||||||||
|
|
(In thousands)
|
||||||||||||||||||
Net income attributable to the partners
|
|
$
|
195,040
|
|
|
$
|
158,241
|
|
|
$
|
137,208
|
|
|
$
|
105,525
|
|
|
$
|
79,449
|
|
Add (subtract):
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest expense
|
|
55,385
|
|
|
49,306
|
|
|
35,490
|
|
|
34,280
|
|
|
44,041
|
|
|||||
Interest income
|
|
(491
|
)
|
|
(440
|
)
|
|
(526
|
)
|
|
(3
|
)
|
|
(161
|
)
|
|||||
Amortization of discount and deferred debt issuance costs
|
|
3,063
|
|
|
3,246
|
|
|
1,928
|
|
|
1,821
|
|
|
2,120
|
|
|||||
Loss on early extinguishment of debt
|
|
12,225
|
|
|
—
|
|
|
—
|
|
|
7,677
|
|
|
—
|
|
|||||
Amortization of unrealized loss attributable to discontinued cash flow hedge
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
849
|
|
|||||
State income tax expense
|
|
249
|
|
|
285
|
|
|
228
|
|
|
235
|
|
|
333
|
|
|||||
Depreciation and amortization
|
|
79,278
|
|
|
70,428
|
|
|
63,306
|
|
|
62,529
|
|
|
65,783
|
|
|||||
Predecessor depreciation and amortization
|
|
—
|
|
|
(3,521
|
)
|
|
(454
|
)
|
|
(363
|
)
|
|
(360
|
)
|
|||||
EBITDA
|
|
$
|
344,749
|
|
|
$
|
277,545
|
|
|
$
|
237,180
|
|
|
$
|
211,701
|
|
|
$
|
192,054
|
|
(3)
|
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 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 for 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.
|
|
|
Years Ended December 31,
|
||||||||||||||||||
|
|
2017
|
|
2016
|
|
2015
|
|
2014
|
|
2013
|
||||||||||
|
|
(In thousands)
|
||||||||||||||||||
Net income attributable to the partners
|
|
$
|
195,040
|
|
|
$
|
158,241
|
|
|
$
|
137,208
|
|
|
$
|
105,525
|
|
|
$
|
79,449
|
|
Add (subtract):
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Depreciation and amortization
|
|
79,278
|
|
|
70,428
|
|
|
63,306
|
|
|
62,529
|
|
|
65,783
|
|
|||||
Remeasurement gain on preexisting equity interests
|
|
(36,254
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Amortization of discount and deferred debt issuance costs
|
|
3,063
|
|
|
3,246
|
|
|
1,928
|
|
|
1,821
|
|
|
2,120
|
|
|||||
Amortization of unrealized loss attributable to discontinued cash flow hedge
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
849
|
|
|||||
Loss on early extinguishment of debt
|
|
12,225
|
|
|
—
|
|
|
—
|
|
|
7,677
|
|
|
—
|
|
|||||
Increase (decrease) in deferred revenue related to minimum revenue commitments
|
|
(1,283
|
)
|
|
(1,292
|
)
|
|
(1,233
|
)
|
|
(2,503
|
)
|
|
3,686
|
|
|||||
Maintenance capital expenditures
(4)
|
|
(7,748
|
)
|
|
(9,658
|
)
|
|
(8,926
|
)
|
|
(4,616
|
)
|
|
(8,683
|
)
|
|||||
Crude revenue settlement
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
918
|
|
|||||
Increase (decrease) in environmental liability
|
|
(581
|
)
|
|
(584
|
)
|
|
1,107
|
|
|
1,596
|
|
|
619
|
|
|||||
Increase (decrease) in reimbursable deferred revenue
|
|
(3,679
|
)
|
|
(2,733
|
)
|
|
176
|
|
|
(2,274
|
)
|
|
(1,642
|
)
|
|||||
Other non-cash adjustments
|
|
2,894
|
|
|
4,683
|
|
|
3,934
|
|
|
3,326
|
|
|
3,840
|
|
|||||
Predecessor depreciation and amortization
|
|
—
|
|
|
(3,521
|
)
|
|
(454
|
)
|
|
(363
|
)
|
|
(360
|
)
|
|||||
Distributable cash flow
|
|
$
|
242,955
|
|
|
$
|
218,810
|
|
|
$
|
197,046
|
|
|
$
|
172,718
|
|
|
$
|
146,579
|
|
(4)
|
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.
|
(5)
|
Includes
$1,012 million
,
$553 million
, $712 million, $571 million and $363 million in Credit Agreement advances that were classified as long-term debt at
December 31, 2017
,
2016
,
2015
,
2014
and
2013
, respectively.
|
(6)
|
As a master limited partnership, we distribute our available cash, which historically has exceeded our net income attributable to HEP because depreciation and amortization expense represents a non-cash charge against income. The result is a decline in partners’ equity since our regular quarterly distributions have exceeded our quarterly net income attributable to HEP. Additionally, if the assets contributed and acquired from HFC while we were a consolidated variable interest entity of HFC had been acquired from third parties, our acquisition cost in excess of HFC’s basis in the transferred assets would have been recorded in our financial statements as increases to our properties and equipment and intangible assets at the time of acquisition instead of decreases to partners’ equity.
|
Item 7.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
|
|
Years Ended December 31,
|
|
Change from
|
||||||||
|
|
2017
|
|
2016
|
|
2016
|
||||||
|
|
(In thousands, except per unit data)
|
||||||||||
Revenues
|
|
|
|
|
|
|
||||||
Pipelines:
|
|
|
|
|
|
|
||||||
Affiliates—refined product pipelines
|
|
$
|
80,030
|
|
|
$
|
83,102
|
|
|
$
|
(3,072
|
)
|
Affiliates—intermediate pipelines
|
|
28,732
|
|
|
26,996
|
|
|
1,736
|
|
|||
Affiliates—crude pipelines
|
|
65,960
|
|
|
70,341
|
|
|
(4,381
|
)
|
|||
|
|
174,722
|
|
|
180,439
|
|
|
(5,717
|
)
|
|||
Third parties—refined product pipelines
|
|
52,379
|
|
|
52,195
|
|
|
184
|
|
|||
Third parties—crude pipelines
|
|
7,939
|
|
|
—
|
|
|
7,939
|
|
|||
|
|
235,040
|
|
|
232,634
|
|
|
2,406
|
|
|||
Terminals, tanks and loading racks:
|
|
|
|
|
|
|
||||||
Affiliates
|
|
125,510
|
|
|
119,633
|
|
|
5,877
|
|
|||
Third parties
|
|
16,908
|
|
|
16,732
|
|
|
176
|
|
|||
|
|
142,418
|
|
|
136,365
|
|
|
6,053
|
|
|||
|
|
|
|
|
|
|
||||||
Affiliates—refinery processing units
|
|
76,904
|
|
|
33,044
|
|
|
43,860
|
|
|||
|
|
|
|
|
|
|
||||||
Total revenues
|
|
454,362
|
|
|
402,043
|
|
|
52,319
|
|
|||
Operating costs and expenses
|
|
|
|
|
|
|
||||||
Operations (exclusive of depreciation and amortization)
|
|
137,605
|
|
|
123,986
|
|
|
13,619
|
|
|||
Depreciation and amortization
|
|
79,278
|
|
|
70,428
|
|
|
8,850
|
|
|||
General and administrative
|
|
14,323
|
|
|
12,532
|
|
|
1,791
|
|
|||
|
|
231,206
|
|
|
206,946
|
|
|
24,260
|
|
|||
Operating income
|
|
223,156
|
|
|
195,097
|
|
|
28,059
|
|
|||
Other income (expense):
|
|
|
|
|
|
|
||||||
Equity in earnings of equity method investments
|
|
12,510
|
|
|
14,213
|
|
|
(1,703
|
)
|
|||
Interest expense, including amortization
|
|
(58,448
|
)
|
|
(52,552
|
)
|
|
(5,896
|
)
|
|||
Interest income
|
|
491
|
|
|
440
|
|
|
51
|
|
|||
Loss on early extinguishment of debt
|
|
(12,225
|
)
|
|
—
|
|
|
(12,225
|
)
|
|||
Remeasurement gain on preexisting equity interests
|
|
36,254
|
|
|
—
|
|
|
36,254
|
|
|||
Gain on sale of assets and other
|
|
422
|
|
|
677
|
|
|
(255
|
)
|
|||
|
|
(20,996
|
)
|
|
(37,222
|
)
|
|
16,226
|
|
|||
Income before income taxes
|
|
202,160
|
|
|
157,875
|
|
|
44,285
|
|
|||
State income tax expense
|
|
(249
|
)
|
|
(285
|
)
|
|
36
|
|
|||
Net income
|
|
201,911
|
|
|
157,590
|
|
|
44,321
|
|
|||
Allocation of net loss attributable to Predecessor
|
|
—
|
|
|
10,657
|
|
|
(10,657
|
)
|
|||
Allocation of net income attributable to noncontrolling interests
|
|
(6,871
|
)
|
|
(10,006
|
)
|
|
3,135
|
|
|||
Net income attributable to the partners
|
|
195,040
|
|
|
158,241
|
|
|
36,799
|
|
|||
General partner interest in net income attributable to the partners
(1)
|
|
(35,047
|
)
|
|
(57,173
|
)
|
|
22,126
|
|
|||
Limited partners’ interest in net income
|
|
$
|
159,993
|
|
|
$
|
101,068
|
|
|
$
|
58,925
|
|
Limited partners’ earnings per unit—basic and diluted
(1)
|
|
$
|
2.28
|
|
|
$
|
1.69
|
|
|
$
|
0.59
|
|
Weighted average limited partners’ units outstanding
|
|
70,291
|
|
|
59,872
|
|
|
10,419
|
|
|||
EBITDA
(2)
|
|
$
|
344,749
|
|
|
$
|
277,545
|
|
|
$
|
67,204
|
|
Distributable cash flow
(3)
|
|
$
|
242,955
|
|
|
$
|
218,810
|
|
|
$
|
24,145
|
|
|
|
|
|
|
|
|
||||||
Volumes (bpd)
|
|
|
|
|
|
|
||||||
Pipelines:
|
|
|
|
|
|
|
||||||
Affiliates—refined product pipelines
|
|
133,822
|
|
|
128,140
|
|
|
5,682
|
|
|||
Affiliates—intermediate pipelines
|
|
141,601
|
|
|
137,381
|
|
|
4,220
|
|
|||
Affiliates—crude pipelines
|
|
281,093
|
|
|
277,241
|
|
|
3,852
|
|
|||
|
|
556,516
|
|
|
542,762
|
|
|
13,754
|
|
|||
Third parties—refined product pipelines
|
|
78,013
|
|
|
75,909
|
|
|
2,104
|
|
|||
Third parties—crude pipelines
|
|
21,834
|
|
|
—
|
|
|
21,834
|
|
|||
|
|
656,363
|
|
|
618,671
|
|
|
37,692
|
|
|||
Terminals and loading racks:
|
|
|
|
|
|
|
||||||
Affiliates
|
|
428,001
|
|
|
413,487
|
|
|
14,514
|
|
|||
Third parties
|
|
68,687
|
|
|
72,342
|
|
|
(3,655
|
)
|
|||
|
|
496,688
|
|
|
485,829
|
|
|
10,859
|
|
|||
|
|
|
|
|
|
|
||||||
Affiliates—refinery processing units
|
|
63,572
|
|
|
51,778
|
|
|
11,794
|
|
|||
|
|
|
|
|
|
|
||||||
Total for pipelines and terminal and refinery processing unit assets (bpd)
|
|
1,216,623
|
|
|
1,156,278
|
|
|
60,345
|
|
|
|
Years Ended December 31,
|
|
Change from
|
||||||||
|
|
2016
|
|
2015
|
|
2015
|
||||||
|
|
(In thousands, except per unit data)
|
||||||||||
Revenues
|
|
|
|
|
|
|
||||||
Pipelines:
|
|
|
|
|
|
|
||||||
Affiliates—refined product pipelines
|
|
$
|
83,102
|
|
|
$
|
81,294
|
|
|
$
|
1,808
|
|
Affiliates—intermediate pipelines
|
|
26,996
|
|
|
28,943
|
|
|
(1,947
|
)
|
|||
Affiliates—crude pipelines
|
|
70,341
|
|
|
67,088
|
|
|
3,253
|
|
|||
|
|
180,439
|
|
|
177,325
|
|
|
3,114
|
|
|||
Third parties—refined product pipelines
|
|
52,195
|
|
|
51,022
|
|
|
1,173
|
|
|||
|
|
232,634
|
|
|
228,347
|
|
|
4,287
|
|
|||
Terminals, tanks and loading racks:
|
|
|
|
|
|
|
||||||
Affiliates
|
|
119,633
|
|
|
111,933
|
|
|
7,700
|
|
|||
Third parties
|
|
16,732
|
|
|
15,632
|
|
|
1,100
|
|
|||
|
|
136,365
|
|
|
127,565
|
|
|
8,800
|
|
|||
|
|
|
|
|
|
|
||||||
Affiliates—refinery processing units
|
|
33,044
|
|
|
2,963
|
|
|
30,081
|
|
|||
|
|
|
|
|
|
|
||||||
Total revenues
|
|
402,043
|
|
|
358,875
|
|
|
43,168
|
|
|||
Operating costs and expenses
|
|
|
|
|
|
|
||||||
Operations (exclusive of depreciation and amortization)
|
|
123,986
|
|
|
105,556
|
|
|
18,430
|
|
|||
Depreciation and amortization
|
|
70,428
|
|
|
63,306
|
|
|
7,122
|
|
|||
General and administrative
|
|
12,532
|
|
|
12,556
|
|
|
(24
|
)
|
|||
|
|
206,946
|
|
|
181,418
|
|
|
25,528
|
|
|||
Operating income
|
|
195,097
|
|
|
177,457
|
|
|
17,640
|
|
|||
Other income (expense):
|
|
|
|
|
|
|
||||||
Equity in earnings of equity method investments
|
|
14,213
|
|
|
4,803
|
|
|
9,410
|
|
|||
Interest expense, including amortization
|
|
(52,552
|
)
|
|
(37,418
|
)
|
|
(15,134
|
)
|
|||
Interest income
|
|
440
|
|
|
526
|
|
|
(86
|
)
|
|||
Gain on sale of assets and other
|
|
677
|
|
|
486
|
|
|
191
|
|
|||
|
|
(37,222
|
)
|
|
(31,603
|
)
|
|
(5,619
|
)
|
|||
Income before income taxes
|
|
157,875
|
|
|
145,854
|
|
|
12,021
|
|
|||
State income tax expense
|
|
(285
|
)
|
|
(228
|
)
|
|
(57
|
)
|
|||
Net income
|
|
157,590
|
|
|
145,626
|
|
|
11,964
|
|
|||
Allocation of net loss attributable to Predecessor
|
|
10,657
|
|
|
2,702
|
|
|
7,955
|
|
|||
Allocation of net income attributable to noncontrolling interests
|
|
(10,006
|
)
|
|
(11,120
|
)
|
|
1,114
|
|
|||
Net income attributable to the partners
|
|
158,241
|
|
|
137,208
|
|
|
21,033
|
|
|||
General partner interest in net income attributable to the partners
(1)
|
|
(57,173
|
)
|
|
(42,337
|
)
|
|
(14,836
|
)
|
|||
Limited partners’ interest in net income
|
|
$
|
101,068
|
|
|
$
|
94,871
|
|
|
$
|
6,197
|
|
Limited partners’ earnings per unit—basic and diluted
(1)
|
|
$
|
1.69
|
|
|
$
|
1.60
|
|
|
$
|
0.09
|
|
Weighted average limited partners’ units outstanding
|
|
59,872
|
|
|
58,657
|
|
|
1,215
|
|
|||
EBITDA
(2)
|
|
$
|
277,545
|
|
|
$
|
237,180
|
|
|
$
|
40,365
|
|
Distributable cash flow
(3)
|
|
$
|
218,810
|
|
|
$
|
197,046
|
|
|
$
|
21,764
|
|
|
|
|
|
|
|
|
||||||
Volumes (bpd)
|
|
|
|
|
|
|
||||||
Pipelines:
|
|
|
|
|
|
|
||||||
Affiliates—refined product pipelines
|
|
128,140
|
|
|
124,061
|
|
|
4,079
|
|
|||
Affiliates—intermediate pipelines
|
|
137,381
|
|
|
142,475
|
|
|
(5,094
|
)
|
|||
Affiliates—crude pipelines
|
|
277,241
|
|
|
291,491
|
|
|
(14,250
|
)
|
|||
|
|
542,762
|
|
|
558,027
|
|
|
(15,265
|
)
|
|||
Third parties—refined product pipelines
|
|
75,909
|
|
|
73,555
|
|
|
2,354
|
|
|||
|
|
618,671
|
|
|
631,582
|
|
|
(12,911
|
)
|
|||
Terminals and loading racks:
|
|
|
|
|
|
|
||||||
Affiliates
|
|
413,487
|
|
|
391,292
|
|
|
22,195
|
|
|||
Third parties
|
|
72,342
|
|
|
78,403
|
|
|
(6,061
|
)
|
|||
|
|
485,829
|
|
|
469,695
|
|
|
16,134
|
|
|||
|
|
|
|
|
|
|
||||||
Affiliates—refinery processing units
|
|
51,778
|
|
|
6,774
|
|
|
45,004
|
|
|||
|
|
|
|
|
|
|
||||||
Total for pipelines and terminal and refinery processing unit assets (bpd)
|
|
1,156,278
|
|
|
1,108,051
|
|
|
48,227
|
|
(1)
|
Net income attributable to the partners is allocated between limited partners and the general partner interest in accordance with the provisions of the partnership agreement. HEP net income allocated to the general partner included incentive distributions that were declared subsequent to quarter end. After the amount of incentive distributions and other priority allocations are allocated to the general partner, the remaining net income attributable to the partners is allocated to the partners based on their weighted average ownership percentage during the period. As a result of the IDR restructuring transaction, no IDR or general partner distributions were made after October 31, 2017. See "Business and Properties - Overview."
|
(2)
|
Earnings before interest, taxes, depreciation and amortization (“EBITDA”) is calculated as net income attributable to the partners plus (i) interest expense and loss on early extinguishment of debt, net of interest income (ii) state income tax and (iii) depreciation and amortization excluding Predecessor. EBITDA is not a calculation based upon generally accepted accounting principles (“GAAP”). 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 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. 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 compliance with financial covenants. See our calculation of EBITDA under Item 6, “Selected Financial Data.”
|
(3)
|
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 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 for 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. See our calculation of distributable cash flow under Item 6, “Selected Financial Data.”
|
|
Years Ended December 31,
|
||||||
Equity Method Investment
|
2017
|
|
2016
|
||||
|
(in thousands)
|
||||||
SLC Pipeline LLC
|
$
|
2,267
|
|
|
$
|
4,508
|
|
Frontier Aspen LLC
|
4,089
|
|
|
4,130
|
|
||
Osage Pipe Line Company, LLC
|
2,447
|
|
|
3,250
|
|
||
Cheyenne Pipeline LLC
|
3,707
|
|
|
2,325
|
|
||
Total
|
$
|
12,510
|
|
|
$
|
14,213
|
|
|
Years Ended December 31,
|
||||||
Equity Method Investment
|
2016
|
|
2015
|
||||
|
(in thousands)
|
||||||
SLC Pipeline LLC
|
$
|
4,508
|
|
|
$
|
3,306
|
|
Frontier Aspen LLC
|
4,130
|
|
|
1,497
|
|
||
Osage Pipe Line Company, LLC
|
3,250
|
|
|
—
|
|
||
Cheyenne Pipeline LLC
|
2,325
|
|
|
—
|
|
||
Total
|
$
|
14,213
|
|
|
$
|
4,803
|
|
|
|
December 31,
2017 |
|
December 31,
2016 |
||||
|
|
(In thousands)
|
||||||
Credit Agreement
|
|
$
|
1,012,000
|
|
|
$
|
553,000
|
|
|
|
|
|
|
||||
6% Senior Notes
|
|
|
|
|
||||
Principal
|
|
500,000
|
|
|
400,000
|
|
||
Unamortized debt issuance costs
|
|
(4,692
|
)
|
|
(6,607
|
)
|
||
|
|
495,308
|
|
|
393,393
|
|
||
6.5% Senior Notes
|
|
|
|
|
||||
Principal
|
|
—
|
|
|
300,000
|
|
||
Unamortized discount and debt issuance costs
|
|
—
|
|
|
(2,481
|
)
|
||
|
|
—
|
|
|
297,519
|
|
||
|
|
|
|
|
||||
Total long-term debt
|
|
$
|
1,507,308
|
|
|
$
|
1,243,912
|
|
|
|
|
|
Payments Due by Period
|
||||||||||||||||
|
|
Total
|
|
Less than
1 Year
|
|
1-3 Years
|
|
3-5 Years
|
|
Over 5
Years
|
||||||||||
|
|
(In thousands)
|
||||||||||||||||||
Long-term debt – principal
|
|
$
|
1,512,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,012,000
|
|
|
$
|
500,000
|
|
Long-term debt - interest
|
|
370,300
|
|
|
67,800
|
|
|
135,600
|
|
|
119,400
|
|
|
47,500
|
|
|||||
Site service fees
|
|
243,772
|
|
|
5,133
|
|
|
10,266
|
|
|
10,266
|
|
|
218,107
|
|
|||||
Pipeline operating lease
|
|
61,038
|
|
|
6,425
|
|
|
12,850
|
|
|
12,850
|
|
|
28,913
|
|
|||||
Right-of-way agreements and other
|
|
20,035
|
|
|
4,007
|
|
|
5,792
|
|
|
4,064
|
|
|
6,172
|
|
|||||
Total
|
|
$
|
2,207,145
|
|
|
$
|
83,365
|
|
|
$
|
164,508
|
|
|
$
|
1,158,580
|
|
|
$
|
800,692
|
|
•
|
the customer receiving the future services provided by these billings,
|
•
|
the period in which the customer is contractually allowed to receive the services expires, or
|
•
|
our determination that we will not be required to provide services within the allowed period.
|
Item 7A.
|
Quantitative and Qualitative Disclosures about Market Risk
|
Item 8.
|
Financial Statements and Supplementary Data
|
|
Page
Reference
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017
|
|
December 31, 2016
|
||||
ASSETS
|
|
|
|
|
||||
Current assets:
|
|
|
|
|
||||
Cash and cash equivalents
|
|
$
|
7,776
|
|
|
$
|
3,657
|
|
Accounts receivable:
|
|
|
|
|
||||
Trade
|
|
12,803
|
|
|
7,846
|
|
||
Affiliates
|
|
51,501
|
|
|
42,562
|
|
||
|
|
64,304
|
|
|
50,408
|
|
||
Prepaid and other current assets
|
|
2,311
|
|
|
2,888
|
|
||
Total current assets
|
|
74,391
|
|
|
56,953
|
|
||
|
|
|
|
|
||||
Properties and equipment, net
|
|
1,569,471
|
|
|
1,328,395
|
|
||
Intangible assets, net
|
|
129,463
|
|
|
66,856
|
|
||
Goodwill
|
|
266,716
|
|
|
256,498
|
|
||
Equity method investments
|
|
85,279
|
|
|
165,609
|
|
||
Other assets
|
|
28,794
|
|
|
9,926
|
|
||
Total assets
|
|
$
|
2,154,114
|
|
|
$
|
1,884,237
|
|
|
|
|
|
|
||||
LIABILITIES AND EQUITY
|
|
|
|
|
||||
Current liabilities:
|
|
|
|
|
||||
Accounts payable:
|
|
|
|
|
||||
Trade
|
|
$
|
14,547
|
|
|
$
|
10,518
|
|
Affiliates
|
|
7,725
|
|
|
16,424
|
|
||
|
|
22,272
|
|
|
26,942
|
|
||
|
|
|
|
|
||||
Accrued interest
|
|
13,256
|
|
|
18,069
|
|
||
Deferred revenue
|
|
9,598
|
|
|
11,102
|
|
||
Accrued property taxes
|
|
4,652
|
|
|
5,397
|
|
||
Other current liabilities
|
|
5,707
|
|
|
3,225
|
|
||
Total current liabilities
|
|
55,485
|
|
|
64,735
|
|
||
|
|
|
|
|
||||
Long-term debt
|
|
1,507,308
|
|
|
1,243,912
|
|
||
Other long-term liabilities
|
|
15,843
|
|
|
16,445
|
|
||
Deferred revenue
|
|
47,272
|
|
|
47,035
|
|
||
|
|
|
|
|
||||
Class B unit
|
|
43,141
|
|
|
40,319
|
|
||
|
|
|
|
|
||||
Equity:
|
|
|
|
|
||||
Partners’ equity:
|
|
|
|
|
||||
Common unitholders (101,568,955 and 62,780,503 units issued and outstanding
at December 31, 2017 and 2016, respectively)
|
|
393,959
|
|
|
510,975
|
|
||
General partner interest
|
|
—
|
|
|
(132,832
|
)
|
||
Accumulated other comprehensive income
|
|
—
|
|
|
91
|
|
||
Total partners’ equity
|
|
393,959
|
|
|
378,234
|
|
||
Noncontrolling interest
|
|
91,106
|
|
|
93,557
|
|
||
Total equity
|
|
485,065
|
|
|
471,791
|
|
||
Total liabilities and equity
|
|
$
|
2,154,114
|
|
|
$
|
1,884,237
|
|
|
|
Years Ended December 31,
|
||||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||||
Revenues:
|
|
|
|
|
|
|
||||||
Affiliates
|
|
$
|
377,136
|
|
|
$
|
333,116
|
|
|
$
|
292,221
|
|
Third parties
|
|
77,226
|
|
|
68,927
|
|
|
66,654
|
|
|||
|
|
454,362
|
|
|
402,043
|
|
|
358,875
|
|
|||
Operating costs and expenses:
|
|
|
|
|
|
|
||||||
Operations (exclusive of depreciation and amortization)
|
|
137,605
|
|
|
123,986
|
|
|
105,556
|
|
|||
Depreciation and amortization
|
|
79,278
|
|
|
70,428
|
|
|
63,306
|
|
|||
General and administrative
|
|
14,323
|
|
|
12,532
|
|
|
12,556
|
|
|||
|
|
231,206
|
|
|
206,946
|
|
|
181,418
|
|
|||
Operating income
|
|
223,156
|
|
|
195,097
|
|
|
177,457
|
|
|||
|
|
|
|
|
|
|
||||||
Other income (expense):
|
|
|
|
|
|
|
||||||
Equity in earnings of equity method investments
|
|
12,510
|
|
|
14,213
|
|
|
4,803
|
|
|||
Interest expense
|
|
(58,448
|
)
|
|
(52,552
|
)
|
|
(37,418
|
)
|
|||
Interest income
|
|
491
|
|
|
440
|
|
|
526
|
|
|||
Loss on early extinguishment of debt
|
|
(12,225
|
)
|
|
—
|
|
|
—
|
|
|||
Remeasurement gain on preexisting equity interests
|
|
36,254
|
|
|
—
|
|
|
—
|
|
|||
Gain on sale of assets and other
|
|
422
|
|
|
677
|
|
|
486
|
|
|||
|
|
(20,996
|
)
|
|
(37,222
|
)
|
|
(31,603
|
)
|
|||
Income before income taxes
|
|
202,160
|
|
|
157,875
|
|
|
145,854
|
|
|||
State income tax expense
|
|
(249
|
)
|
|
(285
|
)
|
|
(228
|
)
|
|||
Net income
|
|
201,911
|
|
|
157,590
|
|
|
145,626
|
|
|||
Allocation of net loss attributable to Predecessor
|
|
—
|
|
|
10,657
|
|
|
2,702
|
|
|||
Allocation of net income attributable to noncontrolling interests
|
|
(6,871
|
)
|
|
(10,006
|
)
|
|
(11,120
|
)
|
|||
Net income attributable to the partners
|
|
195,040
|
|
|
158,241
|
|
|
137,208
|
|
|||
General partner interest in net income attributable to the Partnership, including incentive distributions
|
|
(35,047
|
)
|
|
(57,173
|
)
|
|
(42,337
|
)
|
|||
Limited partners’ interest in net income
|
|
$
|
159,993
|
|
|
$
|
101,068
|
|
|
$
|
94,871
|
|
Limited partners’ per unit interest in earnings—basic and diluted
|
|
$
|
2.28
|
|
|
$
|
1.69
|
|
|
$
|
1.60
|
|
Weighted average limited partners’ units outstanding
|
|
70,291
|
|
|
59,872
|
|
|
58,657
|
|
|
|
Years Ended December 31,
|
||||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||||
Net income
|
|
$
|
201,911
|
|
|
$
|
157,590
|
|
|
$
|
145,626
|
|
|
|
|
|
|
|
|
||||||
Other comprehensive income:
|
|
|
|
|
|
|
||||||
Change in fair value of cash flow hedging instruments
|
|
88
|
|
|
(607
|
)
|
|
(1,864
|
)
|
|||
Reclassification adjustment to net income on partial settlement of cash flow hedge
|
|
(179
|
)
|
|
508
|
|
|
2,100
|
|
|||
Other comprehensive income (loss)
|
|
(91
|
)
|
|
(99
|
)
|
|
236
|
|
|||
Comprehensive income before noncontrolling interest
|
|
201,820
|
|
|
157,491
|
|
|
145,862
|
|
|||
Allocation of net loss attributable to Predecessor
|
|
—
|
|
|
10,657
|
|
|
2,702
|
|
|||
Allocation of comprehensive income to noncontrolling interests
|
|
(6,871
|
)
|
|
(10,006
|
)
|
|
(11,120
|
)
|
|||
|
|
|
|
|
|
|
||||||
Comprehensive income attributable to the partners
|
|
$
|
194,949
|
|
|
$
|
158,142
|
|
|
$
|
137,444
|
|
|
|
Years Ended December 31,
|
||||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||||
Cash flows from operating activities
|
|
|
|
|
|
|
||||||
Net income
|
|
$
|
201,911
|
|
|
$
|
157,590
|
|
|
$
|
145,626
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
||||||
Depreciation and amortization
|
|
79,278
|
|
|
70,428
|
|
|
63,306
|
|
|||
Gain on sale of assets
|
|
(319
|
)
|
|
(150
|
)
|
|
(375
|
)
|
|||
Remeasurement gain on preexisting equity interests
|
|
(36,254
|
)
|
|
—
|
|
|
—
|
|
|||
Amortization of deferred charges
|
|
3,063
|
|
|
3,247
|
|
|
1,928
|
|
|||
Equity-based compensation expense
|
|
2,520
|
|
|
3,519
|
|
|
4,180
|
|
|||
Equity in earnings of equity method investments, net of distributions
|
|
1,450
|
|
|
(2,032
|
)
|
|
(122
|
)
|
|||
Loss on early extinguishment of debt
|
|
12,225
|
|
|
—
|
|
|
—
|
|
|||
(Increase) decrease in operating assets:
|
|
|
|
|
|
|
||||||
Accounts receivable—trade
|
|
(38
|
)
|
|
279
|
|
|
(1,820
|
)
|
|||
Accounts receivable—affiliates
|
|
(8,939
|
)
|
|
(10,080
|
)
|
|
1,419
|
|
|||
Prepaid and other current assets
|
|
830
|
|
|
1,598
|
|
|
(626
|
)
|
|||
Increase (decrease) in operating liabilities:
|
|
|
|
|
|
|
||||||
Accounts payable—trade
|
|
(1,975
|
)
|
|
(365
|
)
|
|
(1,996
|
)
|
|||
Accounts payable—affiliates
|
|
(8,699
|
)
|
|
(16
|
)
|
|
6,396
|
|
|||
Accrued interest
|
|
(4,813
|
)
|
|
11,317
|
|
|
137
|
|
|||
Deferred revenue
|
|
(1,267
|
)
|
|
7,058
|
|
|
9,255
|
|
|||
Accrued property taxes
|
|
(2,179
|
)
|
|
1,633
|
|
|
1,061
|
|
|||
Other current liabilities
|
|
2,091
|
|
|
(553
|
)
|
|
(499
|
)
|
|||
Other, net
|
|
(398
|
)
|
|
75
|
|
|
3,572
|
|
|||
Net cash provided by operating activities
|
|
238,487
|
|
|
243,548
|
|
|
231,442
|
|
|||
|
|
|
|
|
|
|
||||||
Cash flows from investing activities
|
|
|
|
|
|
|
||||||
Additions to properties and equipment
|
|
(44,810
|
)
|
|
(59,704
|
)
|
|
(39,393
|
)
|
|||
Acquisition of tanks and refinery processing units
|
|
—
|
|
|
(44,119
|
)
|
|
(153,728
|
)
|
|||
Purchase of interest in Cheyenne Pipeline
|
|
—
|
|
|
(42,627
|
)
|
|
—
|
|
|||
Purchase of interest in Frontier Aspen
|
|
—
|
|
|
—
|
|
|
(55,032
|
)
|
|||
Purchase of controlling interests in SLC Pipeline and Frontier Aspen
|
|
(245,446
|
)
|
|
—
|
|
|
—
|
|
|||
Proceeds from sale of assets
|
|
849
|
|
|
427
|
|
|
1,279
|
|
|||
Distributions in excess of equity in earnings of equity investments
|
|
3,134
|
|
|
2,993
|
|
|
194
|
|
|||
Net cash used for investing activities
|
|
(286,273
|
)
|
|
(143,030
|
)
|
|
(246,680
|
)
|
|||
|
|
|
|
|
|
|
||||||
Cash flows from financing activities
|
|
|
|
|
|
|
||||||
Borrowings under credit agreement
|
|
969,000
|
|
|
554,000
|
|
|
973,900
|
|
|||
Repayments of credit agreement borrowings
|
|
(510,000
|
)
|
|
(713,000
|
)
|
|
(832,900
|
)
|
|||
Redemption of 6.5% Senior Notes
|
|
(309,750
|
)
|
|
—
|
|
|
—
|
|
|||
Proceeds from issuance of 6% Senior Notes
|
|
101,750
|
|
|
394,000
|
|
|
—
|
|
|||
Proceeds from issuance of common units
|
|
52,110
|
|
|
125,870
|
|
|
—
|
|
|||
Contributions from general partner
|
|
1,072
|
|
|
2,577
|
|
|
—
|
|
|||
Distributions to HEP unitholders
|
|
(234,575
|
)
|
|
(192,037
|
)
|
|
(169,063
|
)
|
|||
Distributions to noncontrolling interest
|
|
(6,500
|
)
|
|
(5,750
|
)
|
|
(4,625
|
)
|
|||
Distribution to HFC for acquisitions
|
|
—
|
|
|
(317,500
|
)
|
|
(62,000
|
)
|
|||
Contributions from HFC for acquisitions
|
|
—
|
|
|
51,262
|
|
|
128,476
|
|
|||
Contributions to HFC for El Dorado Operating Tanks
|
|
(103
|
)
|
|
—
|
|
|
—
|
|
|||
Distributions to HFC for Osage acquisition
|
|
—
|
|
|
(1,245
|
)
|
|
—
|
|
|||
Purchase of units for incentive grants
|
|
—
|
|
|
(3,521
|
)
|
|
(3,555
|
)
|
|||
Units withheld for tax withholding obligations
|
|
(605
|
)
|
|
(800
|
)
|
|
(696
|
)
|
|||
Deferred financing costs
|
|
(9,382
|
)
|
|
(3,995
|
)
|
|
(962
|
)
|
|||
Other
|
|
(1,112
|
)
|
|
(1,735
|
)
|
|
(1,154
|
)
|
|||
Net cash provided by (used for) financing activities
|
|
51,905
|
|
|
(111,874
|
)
|
|
27,421
|
|
|||
|
|
|
|
|
|
|
||||||
Cash and cash equivalents
|
|
|
|
|
|
|
||||||
Increase (decrease) for the year
|
|
4,119
|
|
|
(11,356
|
)
|
|
12,183
|
|
|||
Beginning of year
|
|
3,657
|
|
|
15,013
|
|
|
2,830
|
|
|||
End of year
|
|
$
|
7,776
|
|
|
$
|
3,657
|
|
|
$
|
15,013
|
|
|
|
Holly Energy Partners, L.P. Partners’ Equity (Deficit):
|
|
|
|
|
||||||||||||||
|
|
Common
Units
|
|
General
Partner
Interest
|
|
Accumulated
Other
Comprehensive
Income/(Loss)
|
|
Noncontrolling
Interest
|
|
Total
|
||||||||||
Balance December 31, 2014
|
|
$
|
468,813
|
|
|
$
|
30,941
|
|
|
$
|
(46
|
)
|
|
$
|
95,082
|
|
|
$
|
594,790
|
|
Distributions to HEP unitholders
|
|
(127,152
|
)
|
|
(41,911
|
)
|
|
—
|
|
|
—
|
|
|
(169,063
|
)
|
|||||
Distributions to noncontrolling interests
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4,625
|
)
|
|
(4,625
|
)
|
|||||
Contribution from HFC for acquisitions
|
|
—
|
|
|
128,477
|
|
|
—
|
|
|
—
|
|
|
128,477
|
|
|||||
Distribution to HFC for acquisitions
|
|
—
|
|
|
(62,000
|
)
|
|
—
|
|
|
—
|
|
|
(62,000
|
)
|
|||||
Purchase of units for incentive grants
|
|
(3,555
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,555
|
)
|
|||||
Amortization of restricted and performance units
|
|
3,484
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,484
|
|
|||||
Class B unit accretion
|
|
(7,005
|
)
|
|
(143
|
)
|
|
—
|
|
|
—
|
|
|
(7,148
|
)
|
|||||
Net income
|
|
93,434
|
|
|
48,220
|
|
|
—
|
|
|
3,972
|
|
|
145,626
|
|
|||||
Other comprehensive income
|
|
—
|
|
|
—
|
|
|
236
|
|
|
—
|
|
|
236
|
|
|||||
Balance December 31, 2015
|
|
$
|
428,019
|
|
|
$
|
103,584
|
|
|
$
|
190
|
|
|
$
|
94,429
|
|
|
$
|
626,222
|
|
Issuance of common units
|
|
125,870
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
125,870
|
|
|||||
Capital contribution
|
|
—
|
|
|
2,577
|
|
|
—
|
|
|
—
|
|
|
2,577
|
|
|||||
Distributions to HEP unitholders
|
|
(138,779
|
)
|
|
(53,258
|
)
|
|
—
|
|
|
—
|
|
|
(192,037
|
)
|
|||||
Distributions to noncontrolling interests
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5,750
|
)
|
|
(5,750
|
)
|
|||||
Contributions from HFC for acquisitions
|
|
—
|
|
|
82,549
|
|
|
—
|
|
|
—
|
|
|
82,549
|
|
|||||
Distribution to HFC for acquisitions
|
|
—
|
|
|
(317,500
|
)
|
|
—
|
|
|
—
|
|
|
(317,500
|
)
|
|||||
Purchase of units for incentive grants
|
|
(3,521
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,521
|
)
|
|||||
Amortization of restricted and performance units
|
|
2,719
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,719
|
|
|||||
Class B unit accretion
|
|
(6,250
|
)
|
|
(128
|
)
|
|
—
|
|
|
—
|
|
|
(6,378
|
)
|
|||||
Other
|
|
—
|
|
|
(451
|
)
|
|
—
|
|
|
—
|
|
|
(451
|
)
|
|||||
Net income
|
|
102,917
|
|
|
49,795
|
|
|
—
|
|
|
4,878
|
|
|
157,590
|
|
|||||
Other comprehensive income
|
|
—
|
|
|
—
|
|
|
(99
|
)
|
|
—
|
|
|
(99
|
)
|
|||||
Balance December 31, 2016
|
|
$
|
510,975
|
|
|
$
|
(132,832
|
)
|
|
$
|
91
|
|
|
$
|
93,557
|
|
|
$
|
471,791
|
|
Issuance of common units
|
|
52,100
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
52,100
|
|
|||||
Capital contribution
|
|
—
|
|
|
1,072
|
|
|
—
|
|
|
—
|
|
|
1,072
|
|
|||||
Distributions to HEP unitholders
|
|
(181,439
|
)
|
|
(53,136
|
)
|
|
—
|
|
|
—
|
|
|
(234,575
|
)
|
|||||
Distributions to noncontrolling interests
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(6,500
|
)
|
|
(6,500
|
)
|
|||||
Distribution to HFC for acquisitions
|
|
—
|
|
|
(103
|
)
|
|
—
|
|
|
—
|
|
|
(103
|
)
|
|||||
Amortization of restricted and performance units
|
|
1,915
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,915
|
|
|||||
Class B unit accretion
|
|
(2,780
|
)
|
|
(42
|
)
|
|
—
|
|
|
—
|
|
|
(2,822
|
)
|
|||||
Other
|
|
367
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
367
|
|
|||||
Net income
|
|
162,815
|
|
|
35,047
|
|
|
—
|
|
|
4,049
|
|
|
201,911
|
|
|||||
Equity restructuring transaction
|
|
(149,994
|
)
|
|
149,994
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Other comprehensive loss
|
|
—
|
|
|
—
|
|
|
(91
|
)
|
|
—
|
|
|
(91
|
)
|
|||||
Balance December 31, 2017
|
|
$
|
393,959
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
91,106
|
|
|
$
|
485,065
|
|
Note 1:
|
Description of Business and Summary of Significant Accounting Policies
|
•
|
26 main pipeline segments
|
•
|
Crude gathering networks in Texas and New Mexico
|
•
|
10 refined product terminals
|
•
|
1 crude terminal
|
•
|
31,800 track feet of rail storage located at two facilities
|
•
|
7 locations with truck and/or rail racks
|
•
|
Tankage at all six of HFC's refining facility locations
|
|
|
Balance at December 31, 2017
|
||||||||||
|
|
Underlying Equity
|
|
Recorded Investment Balance
|
|
Difference
|
||||||
|
|
(in thousands)
|
||||||||||
Equity Method Investments
|
|
|
|
|
|
|
||||||
Osage Pipe Line Company, LLC
|
|
$
|
10,631
|
|
|
$
|
42,071
|
|
|
$
|
(31,440
|
)
|
Cheyenne Pipeline LLC
|
|
28,706
|
|
|
43,208
|
|
|
(14,502
|
)
|
|||
Total
|
|
$
|
39,337
|
|
|
$
|
85,279
|
|
|
$
|
(45,942
|
)
|
|
|
Balance at December 31, 2016
|
||||||||||
|
|
Underlying Equity
|
|
Recorded Investment Balance
|
|
Difference
|
||||||
|
|
(in thousands)
|
||||||||||
Equity Method Investments
|
|
|
|
|
|
|
||||||
SLC Pipeline LLC
|
|
$
|
57,273
|
|
|
$
|
24,417
|
|
|
$
|
32,856
|
|
Frontier Aspen LLC
|
|
11,630
|
|
|
53,160
|
|
|
(41,530
|
)
|
|||
Osage Pipe Line Company, LLC
|
|
10,730
|
|
|
43,375
|
|
|
(32,645
|
)
|
|||
Cheyenne Pipeline LLC
|
|
29,658
|
|
|
44,657
|
|
|
(14,999
|
)
|
|||
Total
|
|
$
|
109,291
|
|
|
$
|
165,609
|
|
|
$
|
(56,318
|
)
|
•
|
the customer receiving the future services provided by these billings,
|
•
|
the period in which the customer is contractually allowed to receive the services expires, or
|
•
|
our determination that we will not be required to provide services within the allowed period.
|
Note 2:
|
Acquisitions
|
|
(in thousands)
|
||
Cash and cash equivalents
|
$
|
4,609
|
|
Accounts receivable
|
4,919
|
|
|
Prepaid and other current assets
|
253
|
|
|
Properties and equipment
|
277,016
|
|
|
Intangible assets
|
70,182
|
|
|
Goodwill
|
10,218
|
|
|
Accounts payable
|
(3,694
|
)
|
|
Accrued property taxes
|
(1,438
|
)
|
|
Other current liabilities
|
(65
|
)
|
|
Net assets acquired
|
$
|
362,000
|
|
|
|
Years Ended December 31,
|
||||||
|
|
2017
|
|
2016
|
||||
|
|
(in thousands)
|
||||||
Revenues
|
|
$
|
489,382
|
|
|
$
|
445,017
|
|
Net income attributable to the partners
|
|
$
|
161,900
|
|
|
$
|
162,862
|
|
(1)
|
To retrospectively reflect depreciation and amortization of intangible assets based on the preliminary fair value of the assets as if that fair value had been reflected January 1, 2016
|
(2)
|
To eliminate HEP's equity income previously recorded on its equity method investments in SLC Pipeline and Frontier Aspen
|
(3)
|
To eliminate the remeasurement gain on preexisting equity interests in SLC Pipeline and Frontier Aspen
|
Note 3:
|
Financial Instruments
|
•
|
(Level 1) Quoted prices in active markets for identical assets or liabilities.
|
•
|
(Level 2) Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, similar assets and liabilities in markets that are not active or can be corroborated by observable market data.
|
•
|
(Level 3) Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes valuation techniques that involve significant unobservable inputs.
|
|
|
|
|
December 31, 2017
|
|
December 31, 2016
|
||||||||||||
Financial Instrument
|
|
Fair Value Input Level
|
|
Carrying
Value
|
|
Fair Value
|
|
Carrying
Value
|
|
Fair Value
|
||||||||
|
|
|
|
(In thousands)
|
||||||||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
|
||||||||
Interest rate swaps
|
|
Level 2
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
91
|
|
|
$
|
91
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
||||||||
6.0% Senior Notes
|
|
Level 2
|
|
$
|
495,308
|
|
|
$
|
525,120
|
|
|
$
|
393,393
|
|
|
$
|
415,500
|
|
6.5% Senior Notes
|
|
Level 2
|
|
—
|
|
|
—
|
|
|
297,519
|
|
|
308,250
|
|
||||
|
|
|
|
$
|
495,308
|
|
|
$
|
525,120
|
|
|
$
|
690,912
|
|
|
$
|
723,750
|
|
Note 4:
|
Properties and Equipment
|
|
|
December 31,
2017 |
|
December 31,
2016 |
||||
|
|
(In thousands)
|
||||||
Pipelines, terminals and tankage
|
|
$
|
1,541,722
|
|
|
$
|
1,246,746
|
|
Refinery assets
|
|
347,338
|
|
|
346,058
|
|
||
Land and right of way
|
|
86,484
|
|
|
65,331
|
|
||
Construction in progress
|
|
12,029
|
|
|
28,753
|
|
||
Other
|
|
35,659
|
|
|
27,133
|
|
||
|
|
2,023,232
|
|
|
1,714,021
|
|
||
Less accumulated depreciation
|
|
453,761
|
|
|
385,626
|
|
||
|
|
$
|
1,569,471
|
|
|
$
|
1,328,395
|
|
Note 5:
|
Intangible Assets
|
|
|
Useful Life
|
|
December 31,
2017 |
|
December 31,
2016 |
||||
|
|
|
|
(In thousands)
|
||||||
Delek transportation agreement
|
|
30 years
|
|
$
|
59,933
|
|
|
$
|
59,933
|
|
HFC transportation agreements
|
|
10-15 years
|
|
75,131
|
|
|
74,231
|
|
||
Customer relationships
|
|
10 years
|
|
69,282
|
|
|
—
|
|
||
Other
|
|
|
|
50
|
|
|
50
|
|
||
|
|
|
|
204,396
|
|
|
134,214
|
|
||
Less accumulated amortization
|
|
|
|
74,933
|
|
|
67,358
|
|
||
|
|
|
|
$
|
129,463
|
|
|
$
|
66,856
|
|
Note 6:
|
Employees, Retirement and Incentive Plans
|
Restricted and Phantom Units
|
|
Units
|
|
Weighted-
Average
Grant-Date
Fair Value
|
|||
Outstanding at January 1, 2017 (nonvested)
|
|
123,988
|
|
|
$
|
32.96
|
|
Granted
|
|
81,883
|
|
|
35.59
|
|
|
Vesting and transfer of common units to recipients
|
|
(59,241
|
)
|
|
33.97
|
|
|
Forfeited
|
|
(27,621
|
)
|
|
30.79
|
|
|
Outstanding at December 31, 2017 (nonvested)
|
|
119,009
|
|
|
$
|
34.77
|
|
Performance Units
|
|
Units
|
|
Outstanding at January 1, 2017 (nonvested)
|
|
49,520
|
|
Granted
|
|
10,881
|
|
Vesting and transfer of common units to recipients
|
|
(2,262
|
)
|
Forfeited
|
|
(21,228
|
)
|
Outstanding at December 31, 2017 (nonvested)
|
|
36,911
|
|
Note 7:
|
Debt
|
|
|
December 31,
2017 |
|
December 31,
2016 |
||||
|
|
(In thousands)
|
||||||
Credit Agreement
|
|
|
|
|
||||
Amount outstanding
|
|
$
|
1,012,000
|
|
|
$
|
553,000
|
|
|
|
|
|
|
||||
6% Senior Notes
|
|
|
|
|
||||
Principal
|
|
500,000
|
|
|
400,000
|
|
||
Unamortized debt issuance costs
|
|
(4,692
|
)
|
|
(6,607
|
)
|
||
|
|
495,308
|
|
|
393,393
|
|
||
6.5% Senior Notes
|
|
|
|
|
||||
Principal
|
|
—
|
|
|
300,000
|
|
||
Unamortized discount and debt issuance costs
|
|
—
|
|
|
(2,481
|
)
|
||
|
|
—
|
|
|
297,519
|
|
||
|
|
|
|
|
||||
Total long-term debt
|
|
$
|
1,507,308
|
|
|
$
|
1,243,912
|
|
Years Ending December 31,
|
|
(In thousands)
|
||
2018
|
|
$
|
—
|
|
2019
|
|
—
|
|
|
2020
|
|
—
|
|
|
2021
|
|
—
|
|
|
2022
|
|
1,012,000
|
|
|
Thereafter
|
|
500,000
|
|
|
Total
|
|
$
|
1,512,000
|
|
|
|
Years Ended December 31,
|
||||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||||
|
|
(In thousands)
|
||||||||||
Interest on outstanding debt:
|
|
|
|
|
|
|
||||||
Credit Agreement, net of interest on interest rate swaps
|
|
$
|
28,928
|
|
|
$
|
17,621
|
|
|
$
|
16,107
|
|
6% Senior Notes
|
|
25,813
|
|
|
10,811
|
|
|
—
|
|
|||
6.5% Senior Notes
|
|
—
|
|
|
19,507
|
|
|
19,507
|
|
|||
Amortization of discount and deferred debt issuance costs
|
|
3,063
|
|
|
3,246
|
|
|
1,928
|
|
|||
Commitment fees and other
|
|
1,648
|
|
|
2,069
|
|
|
638
|
|
|||
Total interest incurred
|
|
59,452
|
|
|
53,254
|
|
|
38,180
|
|
|||
Less capitalized interest
|
|
1,004
|
|
|
702
|
|
|
762
|
|
|||
Net interest expense
|
|
$
|
58,448
|
|
|
$
|
52,552
|
|
|
$
|
37,418
|
|
Cash paid for interest
|
|
$
|
62,395
|
|
|
$
|
38,530
|
|
|
$
|
35,938
|
|
Years Ending December 31,
|
(in thousands)
|
||
2018
|
$
|
1,019
|
|
2019
|
765
|
|
|
2020
|
228
|
|
|
2021
|
—
|
|
|
Total minimum lease payments
|
2,012
|
|
|
Less amount representing interest
|
(129
|
)
|
|
Capital lease obligations
|
$
|
1,883
|
|
Note 8:
|
Commitments and Contingencies
|
Years Ending December 31,
|
(In thousands)
|
||
2018
|
$
|
5,616
|
|
2019
|
5,559
|
|
|
2020
|
5,385
|
|
|
2021
|
5,380
|
|
|
2022
|
5,375
|
|
|
Thereafter
|
223,331
|
|
|
Total
|
$
|
250,646
|
|
Note 9:
|
Significant Customers
|
|
Years Ended December 31,
|
|||||||
|
2017
|
|
2016
|
|
2015
|
|||
HFC
|
83
|
%
|
|
83
|
%
|
|
81
|
%
|
Delek
|
8
|
%
|
|
8
|
%
|
|
10
|
%
|
Note 10:
|
Related Party Transactions
|
•
|
Revenues received from HFC were
$377.1 million
,
$333.1 million
and
$292.2 million
for the
years ended December 31, 2017, 2016 and 2015
, respectively.
|
•
|
HFC charged us general and administrative services under the Omnibus Agreement of
$2.5 million
for the year ended
December 31, 2017
,
$2.5 million
for the year ended
December 31, 2016
, and
$2.4 million
for the year ended December 31,
2015
.
|
•
|
We reimbursed HFC for costs of employees supporting our operations of
$46.6 million
,
$40.9 million
and
$34.5 million
for the
years ended December 31, 2017, 2016 and 2015
, respectively.
|
•
|
HFC reimbursed us
$7.2 million
,
$14.0 million
and
$13.5 million
for the
years ended December 31, 2017, 2016 and 2015
, respectively, for expense and capital projects.
|
•
|
We distributed
$130.7 million
,
$105.2 million
and
$90.4 million
, for the
years ended December 31, 2017, 2016 and 2015
, respectively, to HFC as regular distributions on its common units and general partner interest, including general partner incentive distributions.
|
•
|
Accounts receivable from HFC were
$51.5 million
and
$42.6 million
at
December 31, 2017
and
2016
, respectively.
|
•
|
Accounts payable to HFC were
$7.7 million
and
$16.4 million
at
December 31, 2017
and
2016
, respectively.
|
•
|
Revenues for the
years ended December 31, 2017, 2016 and 2015
include
$4.8 million
,
$6.1 million
and
$7.3 million
, respectively, of shortfall payments billed in
2016
,
2015
and
2014
, respectively. Deferred revenue in the consolidated balance sheets at
December 31, 2017
and
2016
, includes
$4.4 million
and
$5.6 million
, respectively, relating to certain shortfall billings. It is possible that HFC may not exceed its minimum obligations to receive credit for any of the
$4.4 million
deferred as of
December 31, 2017
.
|
•
|
We received operating lease payments from HFC for use of our Artesia and Tulsa railyards of
$0.5 million
for each of the years ended December 31, 2017, 2016 and 2015.
|
•
|
In November 2015, we acquired from HFC all the outstanding membership interests in El Dorado Operating which owns the newly constructed naphtha fractionation and hydrogen generation units at HFC’s El Dorado refinery. See Note 2 for a description of this transaction.
|
•
|
On February 22, 2016, HFC obtained a
50%
membership interest in Osage in a non-monetary exchange, whereby a subsidiary of Magellan will provide terminalling services for all HFC products originating in Artesia, New Mexico that require terminalling in or through El Paso, Texas. Concurrent with this transaction, we entered into a non-monetary exchange with HFC, whereby we received HFC’s interest in Osage in exchange for our El Paso terminal. See Note 2 for a description of this transaction.
|
•
|
On March 31, 2016, we acquired crude oil tanks located at HFC’s Tulsa refinery from an affiliate of Plains for
$39.5 million
. See Note 2 for a description of this transaction.
|
•
|
Effective October 1, 2016, we acquired all the membership interests of Woods Cross Operating, a wholly owned subsidiary of HFC, which owns the newly constructed atmospheric distillation tower, fluid catalytic cracking unit, and polymerization unit located at HFC’s Woods Cross refinery, for cash consideration of
$278 million
. See Note 2 for a description of this transaction.
|
•
|
On October 31, 2017, we closed on an equity restructuring transaction with HEP Logistics, a wholly-owned subsidiary of HFC and the general partner of HEP, pursuant to which the incentive distribution rights held by HEP Logistics were canceled, and HEP Logistics' 2% general partner interest in HEP was converted into a non-economic general partner interest in HEP. In consideration, we issued
37,250,000
of our common units to HEP Logistics. In addition, HEP Logistics agreed to waive
$2.5 million
of limited partner cash distributions for each of twelve consecutive quarters beginning with the first quarter the units issued as consideration were eligible to receive distributions.
|
Note 11:
|
Partners’ Equity, Income Allocations and Cash Distributions
|
|
|
Years Ended December 31,
|
||||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||||
|
|
(In thousands)
|
||||||||||
General partner interest in net income
|
|
$
|
919
|
|
|
$
|
3,165
|
|
|
$
|
1,936
|
|
General partner incentive distribution
|
|
34,128
|
|
|
54,008
|
|
|
40,401
|
|
|||
Net loss attributable to Predecessor
|
|
—
|
|
|
(10,657
|
)
|
|
(2,702
|
)
|
|||
Total general partner interest in net income
|
|
$
|
35,047
|
|
|
$
|
46,516
|
|
|
$
|
39,635
|
|
|
|
Total Quarterly Distribution
|
|
Marginal Percentage Interest in Distributions
|
||
|
|
Target Amount
|
|
Unitholders
|
|
General Partner
|
Minimum quarterly distribution
|
|
$0.25
|
|
98%
|
|
2%
|
First target distribution
|
|
Up to $0.275
|
|
98%
|
|
2%
|
Second target distribution
|
|
above $0.275 up to $0.3125
|
|
85%
|
|
15%
|
Third target distribution
|
|
above $0.3125 up to $0.375
|
|
75%
|
|
25%
|
Thereafter
|
|
Above $0.375
|
|
50%
|
|
50%
|
|
|
Years Ended December 31,
|
||||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||||
|
|
(In thousands, except per unit data)
|
||||||||||
General partner interest in distribution
|
|
$
|
2,335
|
|
|
$
|
4,088
|
|
|
$
|
3,563
|
|
General partner incentive distribution
|
|
34,128
|
|
|
54,008
|
|
|
40,401
|
|
|||
Total general partner distribution
|
|
36,463
|
|
|
58,096
|
|
|
43,964
|
|
|||
Limited partner distribution
|
|
206,846
|
|
|
143,796
|
|
|
129,192
|
|
|||
Total regular quarterly cash distribution
|
|
$
|
243,309
|
|
|
$
|
201,892
|
|
|
$
|
173,156
|
|
Cash distribution per unit applicable to limited partners
|
|
$
|
2.5475
|
|
|
$
|
2.3625
|
|
|
$
|
2.2025
|
|
Note 12:
|
Net Income Per Limited Partner Unit
|
|
|
Years Ended December 31,
|
||||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||||
|
|
(in thousands)
|
||||||||||
Net income attributable to the partners
|
|
$
|
195,040
|
|
|
$
|
158,241
|
|
|
$
|
137,208
|
|
Less: General partner’s distribution declared (including IDRs)
|
|
(36,463
|
)
|
|
(58,096
|
)
|
|
(43,964
|
)
|
|||
Limited partner’s distribution declared on common units
|
|
(206,846
|
)
|
|
(143,796
|
)
|
|
(129,192
|
)
|
|||
Distributions in excess of net income attributable to the partners
|
|
$
|
(48,269
|
)
|
|
$
|
(43,651
|
)
|
|
$
|
(35,948
|
)
|
|
|
General Partner (including IDRs)
|
|
Limited Partners’ Common Units
|
|
Total
|
||||||
|
|
(In thousands, except per unit data)
|
||||||||||
Year Ended December 31, 2017
|
|
|
|
|
|
|
||||||
Net income attributable to the partners:
|
|
|
|
|
|
|
||||||
Distributions declared
|
|
$
|
36,463
|
|
|
$
|
206,846
|
|
|
$
|
243,309
|
|
Distributions in excess of net income attributable to partnership
|
|
(1,416
|
)
|
|
(46,853
|
)
|
|
(48,269
|
)
|
|||
Net income attributable to the partners
|
|
$
|
35,047
|
|
|
$
|
159,993
|
|
|
$
|
195,040
|
|
Weighted average limited partners' units outstanding
|
|
|
|
70,291
|
|
|
|
|||||
Limited partners' per unit interest in earnings - basic and diluted
|
|
|
|
$
|
2.28
|
|
|
|
||||
|
|
|
|
|
|
|
||||||
Year Ended December 31, 2016
|
|
|
|
|
|
|
||||||
Net income attributable to the partners:
|
|
|
|
|
|
|
||||||
Distributions declared
|
|
$
|
58,096
|
|
|
$
|
143,796
|
|
|
$
|
201,892
|
|
Distributions in excess of net income attributable to partnership
|
|
(873
|
)
|
|
(42,778
|
)
|
|
(43,651
|
)
|
|||
Net income attributable to the partners
|
|
$
|
57,223
|
|
|
$
|
101,018
|
|
|
$
|
158,241
|
|
Weighted average limited partners' units outstanding
|
|
|
|
59,872
|
|
|
|
|||||
Limited partners' per unit interest in earnings - basic and diluted
|
|
|
|
$
|
1.69
|
|
|
|
||||
|
|
|
|
|
|
|
||||||
Year Ended December 31, 2015
|
|
|
|
|
|
|
||||||
Net income attributable to the partners:
|
|
|
|
|
|
|
||||||
Distributions declared
|
|
$
|
43,964
|
|
|
$
|
129,192
|
|
|
$
|
173,156
|
|
Distributions in excess of net income attributable to partnership
|
|
(719
|
)
|
|
(35,229
|
)
|
|
(35,948
|
)
|
|||
Net income attributable to the partners
|
|
$
|
43,245
|
|
|
$
|
93,963
|
|
|
$
|
137,208
|
|
Weighted average limited partners' units outstanding
|
|
|
|
58,657
|
|
|
|
|||||
Limited partners' per unit interest in earnings - basic and diluted
|
|
|
|
$
|
1.60
|
|
|
|
Note 13:
|
Environmental
|
Note 14:
|
Operating Segments
|
|
|
Years Ended December 31,
|
||||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||||
|
|
(in thousands)
|
||||||||||
Revenues:
|
|
|
|
|
|
|
||||||
Pipelines and terminals - affiliate
|
|
$
|
300,232
|
|
|
$
|
300,072
|
|
|
$
|
289,258
|
|
Pipelines and terminals - third-party
|
|
77,226
|
|
|
68,927
|
|
|
66,654
|
|
|||
Refinery processing units - affiliate
|
|
76,904
|
|
|
33,044
|
|
|
2,963
|
|
|||
Total segment revenues
|
|
$
|
454,362
|
|
|
$
|
402,043
|
|
|
$
|
358,875
|
|
|
|
|
|
|
|
|
||||||
Segment operating income:
|
|
|
|
|
|
|
||||||
Pipelines and terminals
|
|
$
|
204,970
|
|
|
$
|
204,923
|
|
|
$
|
191,451
|
|
Refinery processing units
|
|
32,509
|
|
|
2,706
|
|
|
(1,438
|
)
|
|||
Total segment operating income
|
|
237,479
|
|
|
207,629
|
|
|
190,013
|
|
|||
Unallocated general and administrative expenses
|
|
(14,323
|
)
|
|
(12,532
|
)
|
|
(12,556
|
)
|
|||
Interest and financing costs, net
|
|
(57,957
|
)
|
|
(52,112
|
)
|
|
(36,892
|
)
|
|||
Loss on early extinguishment of debt
|
|
(12,225
|
)
|
|
—
|
|
|
—
|
|
|||
Equity in earnings of unconsolidated affiliates
|
|
12,510
|
|
|
14,213
|
|
|
4,803
|
|
|||
Gain on sale of assets and other
|
|
36,676
|
|
|
677
|
|
|
486
|
|
|||
Income before income taxes
|
|
$
|
202,160
|
|
|
$
|
157,875
|
|
|
$
|
145,854
|
|
|
|
|
|
|
|
|
||||||
Capital Expenditures:
|
|
|
|
|
|
|
||||||
Pipelines and terminals
|
|
$
|
289,993
|
|
|
$
|
59,704
|
|
|
$
|
67,406
|
|
Refinery processing units
|
|
263
|
|
|
44,119
|
|
|
125,715
|
|
|||
Total capital expenditures
|
|
$
|
290,256
|
|
|
$
|
103,823
|
|
|
$
|
193,121
|
|
|
|
December 31, 2017
|
|
December 31, 2016
|
||||
|
|
(in thousands)
|
||||||
Identifiable assets:
|
|
|
|
|
||||
Pipelines and terminals
(1)
|
|
$
|
1,728,074
|
|
|
$
|
1,369,756
|
|
Refinery processing units
|
|
328,585
|
|
|
342,506
|
|
||
Other
|
|
97,455
|
|
|
171,975
|
|
||
Total identifiable assets
|
|
$
|
2,154,114
|
|
|
$
|
1,884,237
|
|
(1)
|
Includes goodwill of
$266.7 million
and
$256.5 million
as of
December 31, 2017
and December 31, 2016, respectively.
|
Note 15:
|
Quarterly Financial Data (Unaudited)
|
|
|
First
|
|
Second
|
|
Third
|
|
Fourth
|
|
Total
|
||||||||||
|
|
(In thousands, except per unit data)
|
||||||||||||||||||
Year Ended December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Revenues
|
|
$
|
105,634
|
|
|
$
|
109,143
|
|
|
$
|
110,364
|
|
|
$
|
129,221
|
|
|
$
|
454,362
|
|
Operating income
|
|
51,734
|
|
|
52,486
|
|
|
51,736
|
|
|
67,200
|
|
|
223,156
|
|
|||||
Income before income taxes
|
|
27,985
|
|
|
42,983
|
|
|
42,992
|
|
|
88,200
|
|
|
202,160
|
|
|||||
Net income
|
|
27,879
|
|
|
42,856
|
|
|
43,061
|
|
|
88,115
|
|
|
201,911
|
|
|||||
Net income attributable to Holly Energy Partners
|
|
25,563
|
|
|
41,335
|
|
|
42,071
|
|
|
86,071
|
|
|
195,040
|
|
|||||
Limited partners’ per unit interest in net income – basic and diluted
|
|
$
|
0.13
|
|
|
$
|
0.36
|
|
|
$
|
0.66
|
|
|
$
|
0.96
|
|
|
$
|
2.28
|
|
Distributions per limited partner unit
|
|
$
|
0.6200
|
|
|
$
|
0.6325
|
|
|
$
|
0.6450
|
|
|
$
|
0.6500
|
|
|
$
|
2.5475
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Year Ended December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Revenues
|
|
$
|
102,010
|
|
|
$
|
94,897
|
|
|
$
|
92,610
|
|
|
$
|
112,526
|
|
|
$
|
402,043
|
|
Operating income
|
|
54,513
|
|
|
47,111
|
|
|
38,924
|
|
|
54,549
|
|
|
195,097
|
|
|||||
Income before income taxes
|
|
46,847
|
|
|
39,569
|
|
|
28,464
|
|
|
42,995
|
|
|
157,875
|
|
|||||
Net income
|
|
46,751
|
|
|
39,516
|
|
|
28,404
|
|
|
42,919
|
|
|
157,590
|
|
|||||
Net income attributable to Holly Energy Partners
|
|
42,975
|
|
|
39,120
|
|
|
34,785
|
|
|
41,361
|
|
|
158,241
|
|
|||||
Limited partners’ per unit interest in net income – basic and diluted
|
|
$
|
0.52
|
|
|
$
|
0.45
|
|
|
$
|
0.33
|
|
|
$
|
0.40
|
|
|
$
|
1.69
|
|
Distributions per limited partner unit
|
|
$
|
0.5750
|
|
|
$
|
0.5850
|
|
|
$
|
0.5950
|
|
|
$
|
0.6075
|
|
|
$
|
2.3625
|
|
Note 16:
|
Supplemental Guarantor/Non-Guarantor Financial Information
|
December 31, 2017
|
|
Parent
|
|
Guarantor
Restricted Subsidiaries
|
|
Non-Guarantor Non-Restricted Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
||||||||||
|
|
(In thousands)
|
||||||||||||||||||
ASSETS
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Current assets:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash and cash equivalents
|
|
$
|
2
|
|
|
$
|
511
|
|
|
$
|
7,263
|
|
|
$
|
—
|
|
|
$
|
7,776
|
|
Accounts receivable
|
|
—
|
|
|
59,448
|
|
|
5,038
|
|
|
(182
|
)
|
|
64,304
|
|
|||||
Prepaid and other current assets
|
|
13
|
|
|
2,016
|
|
|
282
|
|
|
—
|
|
|
2,311
|
|
|||||
Total current assets
|
|
15
|
|
|
61,975
|
|
|
12,583
|
|
|
(182
|
)
|
|
74,391
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Properties and equipment, net
|
|
—
|
|
|
1,213,626
|
|
|
355,845
|
|
|
—
|
|
|
1,569,471
|
|
|||||
Investment in subsidiaries
|
|
1,902,285
|
|
|
273,319
|
|
|
—
|
|
|
(2,175,604
|
)
|
|
—
|
|
|||||
Intangible assets, net
|
|
—
|
|
|
129,463
|
|
|
—
|
|
|
—
|
|
|
129,463
|
|
|||||
Goodwill
|
|
—
|
|
|
266,716
|
|
|
—
|
|
|
—
|
|
|
266,716
|
|
|||||
Equity method investments
|
|
—
|
|
|
85,279
|
|
|
—
|
|
|
—
|
|
|
85,279
|
|
|||||
Other assets
|
|
11,753
|
|
|
17,041
|
|
|
—
|
|
|
—
|
|
|
28,794
|
|
|||||
Total assets
|
|
$
|
1,914,053
|
|
|
$
|
2,047,419
|
|
|
$
|
368,428
|
|
|
$
|
(2,175,786
|
)
|
|
$
|
2,154,114
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
LIABILITIES AND PARTNERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Accounts payable
|
|
$
|
—
|
|
|
$
|
20,928
|
|
|
$
|
1,526
|
|
|
$
|
(182
|
)
|
|
$
|
22,272
|
|
Accrued interest
|
|
12,500
|
|
|
756
|
|
|
—
|
|
|
—
|
|
|
13,256
|
|
|||||
Deferred revenue
|
|
—
|
|
|
8,540
|
|
|
1,058
|
|
|
—
|
|
|
9,598
|
|
|||||
Accrued property taxes
|
|
—
|
|
|
3,431
|
|
|
1,221
|
|
|
—
|
|
|
4,652
|
|
|||||
Other current liabilities
|
|
—
|
|
|
5,707
|
|
|
—
|
|
|
—
|
|
|
5,707
|
|
|||||
Total current liabilities
|
|
12,500
|
|
|
39,362
|
|
|
3,805
|
|
|
(182
|
)
|
|
55,485
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Long-term debt
|
|
1,507,308
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,507,308
|
|
|||||
Other long-term liabilities
|
|
286
|
|
|
15,359
|
|
|
198
|
|
|
—
|
|
|
15,843
|
|
|||||
Deferred revenue
|
|
—
|
|
|
47,272
|
|
|
—
|
|
|
—
|
|
|
47,272
|
|
|||||
Class B unit
|
|
—
|
|
|
43,141
|
|
|
—
|
|
|
—
|
|
|
43,141
|
|
|||||
Equity - partners
|
|
393,959
|
|
|
1,902,285
|
|
|
273,319
|
|
|
(2,175,604
|
)
|
|
393,959
|
|
|||||
Equity - noncontrolling interest
|
|
—
|
|
|
—
|
|
|
91,106
|
|
|
—
|
|
|
91,106
|
|
|||||
Total liabilities and partners’ equity
|
|
$
|
1,914,053
|
|
|
$
|
2,047,419
|
|
|
$
|
368,428
|
|
|
$
|
(2,175,786
|
)
|
|
$
|
2,154,114
|
|
December 31, 2016
|
|
Parent
|
|
Guarantor
Restricted Subsidiaries
|
|
Non-Guarantor Non-Restricted Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
||||||||||
|
|
(In thousands)
|
||||||||||||||||||
ASSETS
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Current assets:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash and cash equivalents
|
|
$
|
2
|
|
|
$
|
301
|
|
|
$
|
3,354
|
|
|
$
|
—
|
|
|
$
|
3,657
|
|
Accounts receivable
|
|
—
|
|
|
45,056
|
|
|
5,554
|
|
|
(202
|
)
|
|
50,408
|
|
|||||
Prepaid and other current assets
|
|
11
|
|
|
2,633
|
|
|
244
|
|
|
—
|
|
|
2,888
|
|
|||||
Total current assets
|
|
13
|
|
|
47,990
|
|
|
9,152
|
|
|
(202
|
)
|
|
56,953
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Properties and equipment, net
|
|
—
|
|
|
957,045
|
|
|
371,350
|
|
|
—
|
|
|
1,328,395
|
|
|||||
Investment in subsidiaries
|
|
1,086,008
|
|
|
280,671
|
|
|
—
|
|
|
(1,366,679
|
)
|
|
—
|
|
|||||
Intangible assets, net
|
|
—
|
|
|
66,856
|
|
|
—
|
|
|
—
|
|
|
66,856
|
|
|||||
Goodwill
|
|
—
|
|
|
256,498
|
|
|
—
|
|
|
—
|
|
|
256,498
|
|
|||||
Equity method investments
|
|
—
|
|
|
165,609
|
|
|
—
|
|
|
—
|
|
|
165,609
|
|
|||||
Other assets
|
|
725
|
|
|
9,201
|
|
|
—
|
|
|
—
|
|
|
9,926
|
|
|||||
Total assets
|
|
$
|
1,086,746
|
|
|
$
|
1,783,870
|
|
|
$
|
380,502
|
|
|
$
|
(1,366,881
|
)
|
|
$
|
1,884,237
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
LIABILITIES AND PARTNERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Accounts payable
|
|
$
|
—
|
|
|
$
|
24,245
|
|
|
$
|
2,899
|
|
|
$
|
(202
|
)
|
|
$
|
26,942
|
|
Accrued interest
|
|
17,300
|
|
|
769
|
|
|
—
|
|
|
—
|
|
|
18,069
|
|
|||||
Deferred revenue
|
|
—
|
|
|
8,797
|
|
|
2,305
|
|
|
—
|
|
|
11,102
|
|
|||||
Accrued property taxes
|
|
—
|
|
|
4,514
|
|
|
883
|
|
|
—
|
|
|
5,397
|
|
|||||
Other current liabilities
|
|
14
|
|
|
3,208
|
|
|
3
|
|
|
—
|
|
|
3,225
|
|
|||||
Total current liabilities
|
|
17,314
|
|
|
41,533
|
|
|
6,090
|
|
|
(202
|
)
|
|
64,735
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Long-term debt
|
|
690,912
|
|
|
553,000
|
|
|
—
|
|
|
—
|
|
|
1,243,912
|
|
|||||
Other long-term liabilities
|
|
286
|
|
|
15,975
|
|
|
184
|
|
|
—
|
|
|
16,445
|
|
|||||
Deferred revenue
|
|
—
|
|
|
47,035
|
|
|
—
|
|
|
—
|
|
|
47,035
|
|
|||||
Class B unit
|
|
—
|
|
|
40,319
|
|
|
—
|
|
|
—
|
|
|
40,319
|
|
|||||
Equity - partners
|
|
378,234
|
|
|
1,086,008
|
|
|
280,671
|
|
|
(1,366,679
|
)
|
|
378,234
|
|
|||||
Equity - noncontrolling interest
|
|
—
|
|
|
—
|
|
|
93,557
|
|
|
—
|
|
|
93,557
|
|
|||||
Total liabilities and partners’ equity
|
|
$
|
1,086,746
|
|
|
$
|
1,783,870
|
|
|
$
|
380,502
|
|
|
$
|
(1,366,881
|
)
|
|
$
|
1,884,237
|
|
Year Ended December 31, 2017
|
|
Parent
|
|
Guarantor
Restricted Subsidiaries
|
|
Non-Guarantor Non-Restricted Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
||||||||||
|
|
(In thousands)
|
||||||||||||||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Affiliates
|
|
$
|
—
|
|
|
$
|
351,395
|
|
|
$
|
25,741
|
|
|
$
|
—
|
|
|
$
|
377,136
|
|
Third parties
|
|
—
|
|
|
55,400
|
|
|
21,826
|
|
|
—
|
|
|
77,226
|
|
|||||
|
|
—
|
|
|
406,795
|
|
|
47,567
|
|
|
—
|
|
|
454,362
|
|
|||||
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Operations (exclusive of depreciation and amortization)
|
|
—
|
|
|
122,619
|
|
|
14,986
|
|
|
—
|
|
|
137,605
|
|
|||||
Depreciation and amortization
|
|
—
|
|
|
62,889
|
|
|
16,389
|
|
|
—
|
|
|
79,278
|
|
|||||
General and administrative
|
|
4,170
|
|
|
10,153
|
|
|
—
|
|
|
—
|
|
|
14,323
|
|
|||||
|
|
4,170
|
|
|
195,661
|
|
|
31,375
|
|
|
—
|
|
|
231,206
|
|
|||||
Operating income (loss)
|
|
(4,170
|
)
|
|
211,134
|
|
|
16,192
|
|
|
—
|
|
|
223,156
|
|
|||||
Equity in earnings of subsidiaries
|
|
254,695
|
|
|
12,148
|
|
|
—
|
|
|
(266,843
|
)
|
|
—
|
|
|||||
Equity in earnings of equity method investments
|
|
—
|
|
|
12,510
|
|
|
—
|
|
|
—
|
|
|
12,510
|
|
|||||
Interest income
|
|
—
|
|
|
491
|
|
|
—
|
|
|
—
|
|
|
491
|
|
|||||
Interest expense
|
|
(43,260
|
)
|
|
(15,188
|
)
|
|
—
|
|
|
—
|
|
|
(58,448
|
)
|
|||||
Loss on early extinguishment of debt
|
|
(12,225
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(12,225
|
)
|
|||||
Remeasurement gain on preexisting equity interests
|
|
—
|
|
|
36,254
|
|
|
—
|
|
|
—
|
|
|
36,254
|
|
|||||
Gain on sale of assets and other
|
|
—
|
|
|
417
|
|
|
5
|
|
|
—
|
|
|
422
|
|
|||||
|
|
199,210
|
|
|
46,632
|
|
|
5
|
|
|
(266,843
|
)
|
|
(20,996
|
)
|
|||||
Income (loss) before income taxes
|
|
195,040
|
|
|
257,766
|
|
|
16,197
|
|
|
(266,843
|
)
|
|
202,160
|
|
|||||
State income tax expense
|
|
—
|
|
|
(249
|
)
|
|
—
|
|
|
—
|
|
|
(249
|
)
|
|||||
Net income (loss)
|
|
195,040
|
|
|
257,517
|
|
|
16,197
|
|
|
(266,843
|
)
|
|
201,911
|
|
|||||
Allocation of net loss applicable to Predecessor
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Allocation of net income attributable to noncontrolling interests
|
|
—
|
|
|
(2,822
|
)
|
|
(4,049
|
)
|
|
—
|
|
|
(6,871
|
)
|
|||||
Net income (loss) attributable to the Partnership
|
|
195,040
|
|
|
254,695
|
|
|
12,148
|
|
|
(266,843
|
)
|
|
195,040
|
|
|||||
Other comprehensive income (loss)
|
|
(91
|
)
|
|
(91
|
)
|
|
—
|
|
|
91
|
|
|
(91
|
)
|
|||||
Comprehensive income (loss) attributable to the Partnership
|
|
$
|
194,949
|
|
|
$
|
254,604
|
|
|
$
|
12,148
|
|
|
$
|
(266,752
|
)
|
|
$
|
194,949
|
|
Year Ended December 31, 2016
|
|
Parent
|
|
Guarantor
Restricted Subsidiaries
|
|
Non-Guarantor Non-Restricted Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
||||||||||
|
|
(In thousands)
|
||||||||||||||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Affiliates
|
|
$
|
—
|
|
|
$
|
307,049
|
|
|
$
|
26,067
|
|
|
$
|
—
|
|
|
$
|
333,116
|
|
Third parties
|
|
—
|
|
|
47,326
|
|
|
21,601
|
|
|
—
|
|
|
68,927
|
|
|||||
|
|
—
|
|
|
354,375
|
|
|
47,668
|
|
|
—
|
|
|
402,043
|
|
|||||
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Operations (exclusive of depreciation and amortization)
|
|
—
|
|
|
111,181
|
|
|
12,805
|
|
|
—
|
|
|
123,986
|
|
|||||
Depreciation and amortization
|
|
—
|
|
|
55,083
|
|
|
15,345
|
|
|
—
|
|
|
70,428
|
|
|||||
General and administrative
|
|
3,804
|
|
|
8,728
|
|
|
—
|
|
|
—
|
|
|
12,532
|
|
|||||
|
|
3,804
|
|
|
174,992
|
|
|
28,150
|
|
|
—
|
|
|
206,946
|
|
|||||
Operating income (loss)
|
|
(3,804
|
)
|
|
179,383
|
|
|
19,518
|
|
|
—
|
|
|
195,097
|
|
|||||
Equity in earnings of subsidiaries
|
|
193,432
|
|
|
14,634
|
|
|
—
|
|
|
(208,066
|
)
|
|
—
|
|
|||||
Equity in earnings of equity method investments
|
|
—
|
|
|
14,213
|
|
|
—
|
|
|
—
|
|
|
14,213
|
|
|||||
Interest income
|
|
—
|
|
|
421
|
|
|
19
|
|
|
—
|
|
|
440
|
|
|||||
Interest expense
|
|
(31,387
|
)
|
|
(21,165
|
)
|
|
—
|
|
|
—
|
|
|
(52,552
|
)
|
|||||
Gain on sale of assets and other
|
|
—
|
|
|
702
|
|
|
(25
|
)
|
|
—
|
|
|
677
|
|
|||||
|
|
162,045
|
|
|
8,805
|
|
|
(6
|
)
|
|
(208,066
|
)
|
|
(37,222
|
)
|
|||||
Income (loss) before income taxes
|
|
158,241
|
|
|
188,188
|
|
|
19,512
|
|
|
(208,066
|
)
|
|
157,875
|
|
|||||
State income tax expense
|
|
—
|
|
|
(285
|
)
|
|
—
|
|
|
—
|
|
|
(285
|
)
|
|||||
Net income (loss)
|
|
158,241
|
|
|
187,903
|
|
|
19,512
|
|
|
(208,066
|
)
|
|
157,590
|
|
|||||
Allocation of net loss applicable to Predecessor
|
|
—
|
|
|
10,657
|
|
|
—
|
|
|
—
|
|
|
10,657
|
|
|||||
Allocation of net income attributable to noncontrolling interests
|
|
—
|
|
|
(5,128
|
)
|
|
(4,878
|
)
|
|
—
|
|
|
(10,006
|
)
|
|||||
Net income (loss) attributable to the Partnership
|
|
158,241
|
|
|
193,432
|
|
|
14,634
|
|
|
(208,066
|
)
|
|
158,241
|
|
|||||
Other comprehensive income (loss)
|
|
(99
|
)
|
|
(99
|
)
|
|
—
|
|
|
99
|
|
|
(99
|
)
|
|||||
Comprehensive income (loss) attributable to the Partnership
|
|
$
|
158,142
|
|
|
$
|
193,333
|
|
|
$
|
14,634
|
|
|
$
|
(207,967
|
)
|
|
$
|
158,142
|
|
Year Ended December 31, 2015
|
|
Parent
|
|
Guarantor
Restricted Subsidiaries
|
|
Non-Guarantor Non-Restricted Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
||||||||||
|
|
(In thousands)
|
||||||||||||||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Affiliates
|
|
$
|
—
|
|
|
$
|
269,277
|
|
|
$
|
22,944
|
|
|
$
|
—
|
|
|
$
|
292,221
|
|
Third parties
|
|
—
|
|
|
47,189
|
|
|
19,465
|
|
|
—
|
|
|
66,654
|
|
|||||
|
|
—
|
|
|
316,466
|
|
|
42,409
|
|
|
—
|
|
|
358,875
|
|
|||||
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Operations (exclusive of depreciation and amortization)
|
|
—
|
|
|
94,087
|
|
|
11,469
|
|
|
—
|
|
|
105,556
|
|
|||||
Depreciation and amortization
|
|
—
|
|
|
48,302
|
|
|
15,004
|
|
|
—
|
|
|
63,306
|
|
|||||
General and administrative
|
|
3,616
|
|
|
8,940
|
|
|
—
|
|
|
—
|
|
|
12,556
|
|
|||||
|
|
3,616
|
|
|
151,329
|
|
|
26,473
|
|
|
—
|
|
|
181,418
|
|
|||||
Operating income (loss)
|
|
(3,616
|
)
|
|
165,137
|
|
|
15,936
|
|
|
—
|
|
|
177,457
|
|
|||||
Equity in earnings (loss) of subsidiaries
|
|
161,097
|
|
|
11,915
|
|
|
—
|
|
|
(173,012
|
)
|
|
—
|
|
|||||
Equity in earnings of equity method investments
|
|
—
|
|
|
4,803
|
|
|
—
|
|
|
—
|
|
|
4,803
|
|
|||||
Interest income
|
|
—
|
|
|
526
|
|
|
—
|
|
|
—
|
|
|
526
|
|
|||||
Interest expense
|
|
(20,273
|
)
|
|
(17,145
|
)
|
|
—
|
|
|
—
|
|
|
(37,418
|
)
|
|||||
Gain on sale of assets and other
|
|
—
|
|
|
535
|
|
|
(49
|
)
|
|
—
|
|
|
486
|
|
|||||
|
|
140,824
|
|
|
634
|
|
|
(49
|
)
|
|
(173,012
|
)
|
|
(31,603
|
)
|
|||||
Income (loss) before income taxes
|
|
137,208
|
|
|
165,771
|
|
|
15,887
|
|
|
(173,012
|
)
|
|
145,854
|
|
|||||
State income tax expense
|
|
—
|
|
|
(228
|
)
|
|
—
|
|
|
—
|
|
|
(228
|
)
|
|||||
Net income (loss)
|
|
137,208
|
|
|
165,543
|
|
|
15,887
|
|
|
(173,012
|
)
|
|
145,626
|
|
|||||
Allocation of net loss applicable to Predecessors
|
|
—
|
|
|
2,702
|
|
|
—
|
|
|
—
|
|
|
2,702
|
|
|||||
Allocation of net income attributable to noncontrolling interests
|
|
—
|
|
|
(7,148
|
)
|
|
(3,972
|
)
|
|
—
|
|
|
(11,120
|
)
|
|||||
Net income (loss) attributable to the Partnership
|
|
137,208
|
|
|
161,097
|
|
|
11,915
|
|
|
(173,012
|
)
|
|
137,208
|
|
|||||
Other comprehensive income (loss)
|
|
236
|
|
|
236
|
|
|
—
|
|
|
(236
|
)
|
|
236
|
|
|||||
Comprehensive income (loss) attributable to the Partnership
|
|
$
|
137,444
|
|
|
$
|
161,333
|
|
|
$
|
11,915
|
|
|
$
|
(173,248
|
)
|
|
$
|
137,444
|
|
Year Ended December 31, 2017
|
|
Parent
|
|
Guarantor
Restricted Subsidiaries
|
|
Non-Guarantor Non-Restricted Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
||||||||||
|
|
(In thousands)
|
||||||||||||||||||
Cash flows from operating activities
|
|
$
|
(51,235
|
)
|
|
$
|
268,978
|
|
|
$
|
32,892
|
|
|
$
|
(12,148
|
)
|
|
$
|
238,487
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Additions to properties and equipment
|
|
—
|
|
|
(41,827
|
)
|
|
(2,983
|
)
|
|
—
|
|
|
(44,810
|
)
|
|||||
Purchase of controlling interests in SLC Pipeline and Frontier Aspen
|
|
—
|
|
|
(245,446
|
)
|
|
—
|
|
|
—
|
|
|
(245,446
|
)
|
|||||
Proceeds from the sale of assets
|
|
—
|
|
|
849
|
|
|
—
|
|
|
—
|
|
|
849
|
|
|||||
Distributions in excess of equity in earnings of equity method investments
|
|
—
|
|
|
3,134
|
|
|
—
|
|
|
—
|
|
|
3,134
|
|
|||||
Distributions from UNEV in excess of earnings
|
|
—
|
|
|
7,352
|
|
|
—
|
|
|
(7,352
|
)
|
|
—
|
|
|||||
|
|
—
|
|
|
(275,938
|
)
|
|
(2,983
|
)
|
|
(7,352
|
)
|
|
(286,273
|
)
|
|||||
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net repayments under credit agreement
|
|
1,012,000
|
|
|
(553,000
|
)
|
|
—
|
|
|
—
|
|
|
459,000
|
|
|||||
Net intercompany financing activities
|
|
(561,675
|
)
|
|
561,675
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Redemption of notes
|
|
(309,750
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(309,750
|
)
|
|||||
Proceeds from issuance of 6% Senior Notes
|
|
101,750
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
101,750
|
|
|||||
Proceeds from issuance of common units
|
|
52,100
|
|
|
10
|
|
|
—
|
|
|
—
|
|
|
52,110
|
|
|||||
Contributions from general partner
|
|
1,440
|
|
|
(368
|
)
|
|
—
|
|
|
—
|
|
|
1,072
|
|
|||||
Distributions to HEP unitholders
|
|
(234,575
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(234,575
|
)
|
|||||
Distributions to noncontrolling interest
|
|
—
|
|
|
—
|
|
|
(26,000
|
)
|
|
19,500
|
|
|
(6,500
|
)
|
|||||
Contributions to HFC for El Dorado Operating Tanks
|
|
(103
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(103
|
)
|
|||||
Deferred financing costs
|
|
(9,347
|
)
|
|
(35
|
)
|
|
—
|
|
|
—
|
|
|
(9,382
|
)
|
|||||
Units withheld for tax withholding obligations
|
|
(605
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(605
|
)
|
|||||
Other
|
|
—
|
|
|
(1,112
|
)
|
|
—
|
|
|
—
|
|
|
(1,112
|
)
|
|||||
|
|
51,235
|
|
|
7,170
|
|
|
(26,000
|
)
|
|
19,500
|
|
|
51,905
|
|
|||||
Cash and cash equivalents
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Increase for the period
|
|
—
|
|
|
210
|
|
|
3,909
|
|
|
—
|
|
|
4,119
|
|
|||||
Beginning of period
|
|
2
|
|
|
301
|
|
|
3,354
|
|
|
—
|
|
|
3,657
|
|
|||||
End of period
|
|
$
|
2
|
|
|
$
|
511
|
|
|
$
|
7,263
|
|
|
$
|
—
|
|
|
$
|
7,776
|
|
Year Ended December 31, 2016
|
|
Parent
|
|
Guarantor
Restricted Subsidiaries
|
|
Non-Guarantor Non-Restricted Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
||||||||||
|
|
(In thousands)
|
||||||||||||||||||
Cash flows from operating activities
|
|
$
|
(19,641
|
)
|
|
$
|
245,771
|
|
|
$
|
32,052
|
|
|
$
|
(14,634
|
)
|
|
$
|
243,548
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Additions to properties and equipment
|
|
—
|
|
|
(44,447
|
)
|
|
(15,257
|
)
|
|
—
|
|
|
(59,704
|
)
|
|||||
Acquisition of tanks and refinery processing units
|
|
—
|
|
|
(44,119
|
)
|
|
—
|
|
|
—
|
|
|
(44,119
|
)
|
|||||
Purchase of interest in Cheyenne Pipeline
|
|
—
|
|
|
(42,627
|
)
|
|
—
|
|
|
—
|
|
|
(42,627
|
)
|
|||||
Proceeds from sale of assets
|
|
—
|
|
|
427
|
|
|
—
|
|
|
—
|
|
|
427
|
|
|||||
Distributions from UNEV in excess of earnings
|
|
—
|
|
|
2,616
|
|
|
—
|
|
|
(2,616
|
)
|
|
—
|
|
|||||
Distribution in excess of equity in earnings in equity investments
|
|
—
|
|
|
2,993
|
|
|
—
|
|
|
—
|
|
|
2,993
|
|
|||||
|
|
—
|
|
|
(125,157
|
)
|
|
(15,257
|
)
|
|
(2,616
|
)
|
|
(143,030
|
)
|
|||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net borrowings under credit agreement
|
|
—
|
|
|
(159,000
|
)
|
|
—
|
|
|
—
|
|
|
(159,000
|
)
|
|||||
Net intercompany financing activities
|
|
(302,600
|
)
|
|
302,600
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Proceeds from issuance of 6% Senior Notes
|
|
394,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
394,000
|
|
|||||
Proceeds from issuance of common units
|
|
125,870
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
125,870
|
|
|||||
Contributions from General partner
|
|
2,577
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,577
|
|
|||||
Distributions to noncontrolling interests
|
|
—
|
|
|
—
|
|
|
(23,000
|
)
|
|
17,250
|
|
|
(5,750
|
)
|
|||||
Distributions to HEP unitholders
|
|
(192,037
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(192,037
|
)
|
|||||
Distributions to HFC for acquisitions
|
|
(30,378
|
)
|
|
(287,122
|
)
|
|
—
|
|
|
—
|
|
|
(317,500
|
)
|
|||||
Contributions from HFC for acquisitions
|
|
(3,397
|
)
|
|
54,659
|
|
|
—
|
|
|
—
|
|
|
51,262
|
|
|||||
Distributions to HFC for acquisitions
|
|
31,287
|
|
|
(31,287
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Distribution to HFC for Osage acquisition
|
|
—
|
|
|
(1,245
|
)
|
|
—
|
|
|
—
|
|
|
(1,245
|
)
|
|||||
Deferred financing costs
|
|
(910
|
)
|
|
(3,085
|
)
|
|
—
|
|
|
—
|
|
|
(3,995
|
)
|
|||||
Purchase of units for incentive grants
|
|
(3,521
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,521
|
)
|
|||||
Units withheld for tax withholding obligations
|
|
(800
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(800
|
)
|
|||||
Other
|
|
(450
|
)
|
|
(1,285
|
)
|
|
—
|
|
|
—
|
|
|
(1,735
|
)
|
|||||
|
|
19,641
|
|
|
(125,765
|
)
|
|
(23,000
|
)
|
|
17,250
|
|
|
(111,874
|
)
|
|||||
Cash and cash equivalents
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Increase (decrease) for the period
|
|
—
|
|
|
(5,151
|
)
|
|
(6,205
|
)
|
|
—
|
|
|
(11,356
|
)
|
|||||
Beginning of period
|
|
2
|
|
|
5,452
|
|
|
9,559
|
|
|
—
|
|
|
15,013
|
|
|||||
End of period
|
|
$
|
2
|
|
|
$
|
301
|
|
|
$
|
3,354
|
|
|
$
|
—
|
|
|
$
|
3,657
|
|
Year Ended December 31, 2015
|
|
Parent
|
|
Guarantor
Restricted Subsidiaries
|
|
Non-Guarantor Non-Restricted Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
||||||||||
|
|
(In thousands)
|
||||||||||||||||||
Cash flows from operating activities
|
|
$
|
(18,794
|
)
|
|
$
|
232,650
|
|
|
$
|
29,501
|
|
|
$
|
(11,915
|
)
|
|
$
|
231,442
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Additions to properties and equipment
|
|
—
|
|
|
(37,951
|
)
|
|
(1,442
|
)
|
|
—
|
|
|
(39,393
|
)
|
|||||
Acquisition of tanks and operating units
|
|
—
|
|
|
(153,728
|
)
|
|
—
|
|
|
—
|
|
|
(153,728
|
)
|
|||||
Purchase of investment in Frontier Pipeline
|
|
—
|
|
|
(55,032
|
)
|
|
—
|
|
|
—
|
|
|
(55,032
|
)
|
|||||
Proceeds from sale of assets
|
|
—
|
|
|
1,279
|
|
|
—
|
|
|
—
|
|
|
1,279
|
|
|||||
Distributions from UNEV in excess of earnings
|
|
—
|
|
|
1,960
|
|
|
—
|
|
|
(1,960
|
)
|
|
—
|
|
|||||
Distributions in excess of equity in earnings in equity investments
|
|
—
|
|
|
194
|
|
|
—
|
|
|
—
|
|
|
194
|
|
|||||
|
|
—
|
|
|
(243,278
|
)
|
|
(1,442
|
)
|
|
(1,960
|
)
|
|
(246,680
|
)
|
|||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net borrowings under credit agreement
|
|
—
|
|
|
141,000
|
|
|
—
|
|
|
—
|
|
|
141,000
|
|
|||||
Net intercompany financing activities
|
|
192,108
|
|
|
(192,108
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Distributions to noncontrolling interests
|
|
—
|
|
|
—
|
|
|
(18,500
|
)
|
|
13,875
|
|
|
(4,625
|
)
|
|||||
Distributions to HEP unitholders
|
|
(169,063
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(169,063
|
)
|
|||||
Contributions from HFC for acquisitions
|
|
—
|
|
|
128,476
|
|
|
—
|
|
|
—
|
|
|
128,476
|
|
|||||
Distributions to HFC for acquisitions
|
|
—
|
|
|
(62,000
|
)
|
|
—
|
|
|
—
|
|
|
(62,000
|
)
|
|||||
Purchase of units for incentive grants
|
|
(3,555
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,555
|
)
|
|||||
Deferred financing costs
|
|
—
|
|
|
(962
|
)
|
|
—
|
|
|
—
|
|
|
(962
|
)
|
|||||
Units withheld for tax withholding obligations
|
|
(696
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(696
|
)
|
|||||
Other
|
|
—
|
|
|
(1,154
|
)
|
|
—
|
|
|
—
|
|
|
(1,154
|
)
|
|||||
|
|
18,794
|
|
|
13,252
|
|
|
(18,500
|
)
|
|
13,875
|
|
|
27,421
|
|
|||||
Cash and cash equivalents
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Increase for the period
|
|
—
|
|
|
2,624
|
|
|
9,559
|
|
|
—
|
|
|
12,183
|
|
|||||
Beginning of period
|
|
2
|
|
|
2,828
|
|
|
—
|
|
|
—
|
|
|
2,830
|
|
|||||
End of period
|
|
$
|
2
|
|
|
$
|
5,452
|
|
|
$
|
9,559
|
|
|
$
|
—
|
|
|
$
|
15,013
|
|
Item 9.
|
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
|
Item 9A.
|
Controls and Procedures
|
Item 9B.
|
Other Information
|
Name
|
Age
|
Position with HLS
|
George J. Damiris
|
57
|
Chief Executive Officer and President
|
Richard L. Voliva III
|
40
|
Executive Vice President and Chief Financial Officer
|
Mark T. Cunningham
|
58
|
Senior Vice President, Operations and Engineering
|
Denise C. McWatters
|
58
|
Senior Vice President, General Counsel and Secretary
|
•
|
designating and calling meetings of the Board;
|
•
|
presiding at all Board meetings;
|
•
|
consulting with management on Board and committee meeting agendas;
|
•
|
facilitating teamwork and communication between the Board and management; and
|
•
|
acting as a liaison between management and the Board.
|
•
|
The Compensation Committee oversees the management of risks relating to HLS’s executive compensation plans and arrangements.
|
•
|
The Audit Committee oversees management of financial reporting and controls risks.
|
•
|
The Conflicts Committee oversees specific matters that the Board or the Conflicts Committee believes may involve conflicts of interest with HFC.
|
Principal Occupation
:
|
Chairman of the Board of HLS and Chairman of the Board of HFC
|
Business Experience
:
|
Mr. Jennings has served as Chairman of the Board of HLS since November 2017 and Chairman of the Board of HFC since January 2017, a position he previously held from January 2013 until January 2016. Mr. Jennings served as Chief Executive Officer of HLS from January 2014 to November 2016 and as President of HLS from October 2015 to February 2016. Mr. Jennings served as Executive Chairman of HFC from January 2016 until January 2017 and as the Chief Executive Officer and President of HFC from the merger of Holly Corporation and Frontier Oil Corporation in July 2011 until January 2016. Mr. Jennings previously served as the President and Chief Executive Officer of Frontier Oil Corporation from 2009 until the merger in July 2011 and as the Executive Vice President and Chief Financial Officer of Frontier Oil Corporation from 2005 until 2009.
|
Additional Directorships:
|
Mr. Jennings currently serves as the Chairman and a director of HFC and a director of ION Geophysical Corporation. Mr. Jennings served as a director of Frontier Oil Corporation from 2008 until the merger in July 2011 and as Chairman of the board of directors of Frontier Oil Corporation from 2010 until the merger in July 2011.
|
Qualifications
:
|
Mr. Jennings provides valuable and extensive industry knowledge and experience. His knowledge of the day-to-day operations of HFC provides a significant resource for the Board and facilitates discussions between the Board and HFC management.
|
Principal Occupation
:
|
Chief Executive Officer and President of HFC and Chief Executive Officer and President of HLS
|
Business Experience
:
|
Mr. Damiris has served as the Chief Executive Officer of HLS since November 2016, as President of HLS since February 2017 and as Chief Executive Officer and President of HFC since January 2016. He previously served as Executive Vice President and Chief Operating Officer of HFC from September 2014 until January 2016 and as Senior Vice President, Supply and Marketing of HFC from January 2008 until September 2014. Mr. Damiris joined HFC in 2007 as Vice President, Corporate Development after an 18-year career with Koch Industries, where he was responsible for managing various refining, chemical, trading, and financial businesses.
|
Additional Directorships:
|
Mr. Damiris currently serves as a director of Eagle Materials Inc. and of HFC.
|
Qualifications
:
|
Mr. Damiris has extensive industry experience and significant insight into issues facing the industry. His knowledge of the day-to-day operations of HFC provides a significant resource for the Board and facilitates discussions between the Board and HFC management.
|
Business Experience
:
|
Mr. Baldwin was employed for 41 years as an auditor by Deloitte LLP and predecessor firms, including 31 years as a partner, prior to retiring from such position in May 2015. While he was a partner at Deloitte LLP, Mr. Baldwin held a number of practice management positions.
|
Qualifications
:
|
Mr. Baldwin brings to the Board his audit, accounting and financial reporting expertise, which also qualify him as an audit committee financial expert. Due to his audit and practice management experience with Deloitte LLP, Mr. Baldwin possesses business, industry and management expertise that provide valuable insight to the Board and the management of the Company.
|
Principal Occupation
:
|
Chief Executive Officer of Turtle Creek Trust Company, Co-founder, President and Portfolio Manager of Turtle Creek Management, LLC and a non-controlling manager and member of TCTC Holdings, LLC
|
Business Experience
:
|
Mr. Hardage has served as Chief Executive Officer of Turtle Creek Trust Company, a private trust and investment management firm, since 2009 and has served as President and Portfolio Manager of Turtle Creek Management, a registered investment advisory firm, since 2006. In addition, Mr. Hardage serves as a non-controlling manager and member of TCTC Holdings, LLC, a bank holding company that is a banking, securities and investment management firm.
|
Additional Directorships:
|
Mr. Hardage currently serves as a director of HFC.
|
Qualifications
:
|
Mr. Hardage brings to the Board executive and general management experience as well as significant financial expertise.
|
Principal Occupation
:
|
Managing General Partner and Principal Owner of Lee, Hite & Wisda Ltd.
|
Business Experience
:
|
Mr. Lee has served as the Managing General Partner of Lee, Hite & Wisda Ltd., a private company with investments in oil and gas working, royalty and mineral interests, since founding the firm in 1984.
|
Additional Directorships:
|
Mr. Lee currently serves as a director of HFC. He served as a director of Frontier Oil Corporation from 2000 until July 2011 and as a director of Forest Oil Corporation from 1991 until December 2014.
|
Qualifications
:
|
Mr. Lee brings to the Board his extensive experience as a consultant and investor in the oil and gas industry, which provides him with significant insights into relevant industry issues.
|
Principal Occupation
:
|
Partner at Akin Gump Strauss Hauer & Feld LLP
|
Business Experience
:
|
Ms. LaFollette has served as a partner at Akin Gump Strauss Hauer & Feld LLP since June 2004. Prior to that, Ms. LaFollette served as a partner at King & Spalding LLP from 1997 to June 2004, as a partner at Andrews & Kurth LLP from 1987 to 1997 and as an associate at Andrews & Kurth LLP from 1980 to 1987.
|
Qualifications
:
|
Ms. LaFollette’s experience as a transactional and securities attorney provides her with valuable insight into corporate finance, global compliance, and governance matters. In addition, Ms. LaFollette brings to the Board a broad range of experiences and skills as a result of her involvement in numerous charitable, community and civic activities.
|
Principal Occupation
:
|
Executive Vice President, Finance of Select Energy Services, Inc.
|
Business Experience
:
|
Mr. Mattson has served as Executive Vice President, Finance of Select Energy Services, Inc., a provider of total water solutions to the U.S. unconventional oil and gas industry, since November 2016 and served as Executive Vice President and Chief Financial Officer of Select Energy Services, Inc. from November 2008 through January 2016. Prior to that, Mr. Mattson served as Senior Vice President and Chief Financial Officer of VeriCenter, Inc., a private provider of managed hosting services, from 2003 until its acquisition in August, 2007. Mr. Mattson worked as an independent consultant from November 2002 to October 2003. Mr. Mattson served as the Chief Financial Officer of Netrail, Inc., a private Internet backbone and broadband service provider, from September 1999 until November 2002. From July 1993 until May 1999, Mr. Mattson served as Senior Vice President and Chief Financial Officer of Baker Hughes Incorporated, a provider of products and services to the oil, gas and process industries. Mr. Mattson joined Baker International, Inc. in 1980, and served in a number of capacities, including Treasurer, prior to the merger of Baker International, Inc. and Hughes Tool Company in 1987, at which time he became Vice President and Treasurer of Baker Hughes, Inc., a position he held until 1993.
|
Additional Directorships:
|
Mr. Mattson has served as a director of National Oilwell Varco, Inc. since March 2005 (having served as a director of Varco (and its predecessor, Tuboscope Inc.) from January 1994 until its merger with National Oilwell Varco in March 2005) and as a director of Rex Energy Corporation since April 2010.
|
Qualifications
:
|
Mr. Mattson brings strong executive leadership skills and financial and risk management experience to the Board. His knowledge of the oil industry as well as the financial and capital markets enables him to provide critical insight to the Board.
|
•
|
an Audit Committee;
|
•
|
a Compensation Committee;
|
•
|
a Conflicts Committee.
|
Name (1)
|
Audit
Committee
|
Compensation
Committee
|
Conflicts
Committee
|
Larry Baldwin
|
x (Chair)
|
|
x
|
George J. Damiris
|
|
x
|
|
R. Kevin Hardage
|
x
|
|
|
Michael C. Jennings
|
|
x (Chair)
|
|
James H. Lee
|
x
|
x
|
|
(1)
|
Effective February 28, 2018, Mr. Hardage will resign from the Board. Effective March 1, 2018, Ms. LaFollette will serve on the Compensation Committee and the Conflicts Committee, and Mr. Mattson will serve on the Conflicts Committee, as Chairman, and the Audit Committee.
|
•
|
selecting, compensating, retaining and overseeing our independent registered public accounting firm and conducting an annual review of the independence and performance of that firm;
|
•
|
reviewing the scope and the planning of the annual audit performed by the independent registered public accounting firm;
|
•
|
overseeing matters related to the internal audit function;
|
•
|
reviewing the audit report issued by the independent registered public accounting firm;
|
•
|
reviewing HEP’s annual and quarterly financial statements with management and the independent registered public accounting firm;
|
•
|
discussing with management HEP’s significant financial risk exposures and the actions management has taken to monitor and control such exposures;
|
•
|
reviewing and, if appropriate, approving transactions involving conflicts of interest, including related party transactions, when required by HEP’s Code of Business Conduct and Ethics;
|
•
|
reviewing and discussing HEP’s internal controls over financial reporting with management and the independent registered public accounting firm;
|
•
|
establishing procedures for the receipt, retention and treatment of complaints received by HEP regarding accounting, internal accounting controls or accounting matters, potential violations of applicable laws, rules and regulations or of our codes, policies and procedures;
|
•
|
reviewing the type and extent of any non-audit work to be performed by the independent registered public accounting firm and its compatibility with their continued objectivity and independence, and to the extent consistent, pre-approving all non-audit services to be performed;
|
•
|
reviewing and approving the Audit Committee Report to be included in the Annual Report of Form 10-K; and
|
•
|
reviewing the adequacy of the Audit Committee charter on an annual basis.
|
•
|
reviewing and approving the goals and objectives of HLS and HEP relevant to the compensation of the officers of HLS for whom the Compensation Committee determines compensation;
|
•
|
determining compensation for the officers of HLS for whom the Compensation Committee determines compensation;
|
•
|
reviewing director compensation and making recommendations to the Board regarding the same;
|
•
|
overseeing the preparation of the Compensation Discussion and Analysis to be included in the Annual Report and preparing the Compensation Committee Report to be included in the Annual Report;
|
•
|
reviewing the Company’s executive compensation plans with respect to behavioral, operational and other risks;
|
•
|
administering and making recommendations to the Board with respect to HEP’s equity plan and HLS’s annual incentive plan; and
|
•
|
reviewing the adequacy of the Compensation Committee charter on an annual basis
|
•
|
reviewed and discussed Holly Energy Partners, L.P.’s quarterly unaudited consolidated financial statements and its audited annual consolidated financial statements for the year ended December 31, 2017 with management and Ernst & Young LLP, including a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments and the clarity of disclosures in the financial statements, including those in management’s discussion and analysis thereof;
|
•
|
discussed with Ernst & Young LLP the matters required to be discussed by Auditing Standard No. 16, Communications with Audit Committees, as adopted by the Public Company Accounting Oversight Board;
|
•
|
discussed with Ernst & Young LLP matters relating to its independence and received the written disclosures and letter from Ernst & Young required by applicable requirements of PCAOB regarding the independent accountant’s communications with the Audit Committee concerning the firm’s independence;
|
•
|
discussed with Holly Energy Partners, L.P.’s internal auditors and Ernst & Young LLP the overall scope and plans for their respective audits and met with the internal auditors and Ernst & Young LLP, with and without management present, to discuss the results of their examinations, their evaluations of our internal controls and the overall quality of Holly Energy Partners, L.P.’s financial reporting; and
|
•
|
considered whether Ernst & Young LLP’s provision of non-audit services to Holly Energy Partners, L.P. is compatible with the auditor’s independence
|
|
Compensation in 2017 (1)
|
Compensation in 2018 (1)
|
Annual cash retainer
|
$60,000
|
$100,000
|
Meeting fee (also paid to non-members of committees who are invited to attend by such committee’s chairman) (2)
|
$1,500
|
$1,500
|
Annual equity retainer of restricted units (3)
|
$80,000
|
$90,000
|
Annual cash retainer for the Chairman of the Board
|
$100,000
|
$75,000
|
Annual cash retainer for Chairmen of committees and subcommittees
|
$15,000
|
$25,000 (4)
|
(1)
|
Because Mr. Hardage was appointed to fill a temporary vacancy on the HLS Board, Mr. Hardage did not participate in the non-employee director compensation program. Instead, he received cash compensation of $18,000 per month for his service on the Board.
|
(2)
|
Represents fees paid for meetings attended in person or telephonically. Beginning in 2018, no meeting fees will be paid for the first 12 Board or Committee meetings. Meeting fees will be paid beginning with the thirteenth meeting of the Board or Committee.
|
(3)
|
The annual award is comprised of a number of restricted units equal to the annual equity retainer divided by the closing price of a common unit on the date of grant, with the number of restricted units rounded up in the case of fractional shares.
|
(4)
|
Beginning in 2018, no cash retainer will be paid to the Chairman of the Compensation Committee since he also serves as Chairman of the Board.
|
Name (1)
|
Fees Earned or Paid in Cash
|
Unit Awards (2)
|
All Other Compensation
|
Total
|
||||
Larry R. Baldwin
|
$138,000
|
$90,026
|
—
|
|
$228,026
|
|||
Matthew P. Clifton (3)
|
218,500
|
|
80,003
|
|
$160,705 (4)
|
|
459,208
|
|
Charles M. Darling, IV (3)
|
133,500
|
|
80,003
|
|
160,705 (4)
|
|
374,208
|
|
R. Kevin Hardage (5)(6)
|
28,200
|
|
—
|
|
—
|
|
28,200
|
|
Michael C. Jennings
|
120,630
|
|
90,026
|
|
—
|
|
210,656
|
|
James H. Lee (5)
|
12,978
|
|
90,032
|
|
—
|
|
103,010
|
|
Jerry W. Pinkerton (3)
|
49,500
|
|
—
|
|
—
|
|
49,500
|
|
William P. Stengel (3)
|
126,000
|
|
80,003
|
|
160,705 (4)
|
|
366,708
|
|
James G. Townsend (3)
|
106,500
|
|
80,003
|
|
160,705 (4)
|
|
347,208
|
|
(1)
|
Mr. Damiris is not included in this table because he received no additional compensation for his service on the Board since, during 2017, Mr. Damiris was an executive officer of HFC and HLS. The compensation paid by HFC to Mr. Damiris in 2017 will be shown in HFC’s 2018 Proxy Statement. A portion of the compensation paid to Mr. Damiris by HFC in 2017 is allocated to the services he performed for us in his capacity as an executive officer of HLS and is disclosed in the “Summary Compensation Table” below. Ms. LaFollette and Mr. Mattson are not included in the table because they did not serve as directors in 2017.
|
(2)
|
Reflects the aggregate grant date fair value of restricted units granted to non-employee directors, computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 (“FASB ASC Topic 718”), determined without regard to forfeitures. See Note 6 to our consolidated financial statements for the fiscal year ended December 31, 2017, for a discussion of the assumptions used in determining the FASB ASC Topic 718 grant date fair value of these awards.
|
(3)
|
In accordance with our director retirement policy, Mr. Pinkerton resigned from the Board effective June 30, 2017. On November 9, 2017, Messrs. Clifton, Darling, Stengel and Townsend retired from the Board. Each of them is included in the table since he served as a non-employee director during 2017.
|
(4)
|
Represents cash payment made to the director at the time of retirement as compensation for forfeited restricted units as a result of his retirement.
|
(5)
|
Mr. Lee was appointed to the Board effective November 10, 2017. Mr. Hardage was appointed to the Board effective November 14, 2017.
|
(6)
|
Because Mr. Hardage was appointed to fill a temporary vacancy on the HLS Board, he did not participate in the director compensation program and instead received $18,000 per month for his service on the Board.
|
Name
|
Position with HLS in 2017
|
George J. Damiris
|
Chief Executive Officer and President
|
Richard L. Voliva III
|
Executive Vice President and Chief Financial Officer
|
Mark T. Cunningham
|
Senior Vice President, Engineering and Technical Services (1)
|
Denise C. McWatters
|
Senior Vice President, General Counsel and Secretary
|
(1)
|
Mr. Cunningham was appointed Senior Vice President, Operations and Engineering in January 2018.
|
•
|
Mr. Cunningham spent all of his professional time managing our business and affairs and did not provide any services to HFC.
|
•
|
Messrs. Damiris and Voliva and Ms. McWatters, who we generally refer to as the “HFC Shared Officers,” also served as executive officers of HFC and devoted as much of their professional time as was necessary to oversee the management of our business and affairs. All compensation paid to such executive officers is paid and determined by HFC, without input from the Compensation Committee.
|
•
|
Administrative Fee Covers HFC Shared Officers.
Under the terms of the Omnibus Agreement we pay an annual administrative fee to HFC (currently $2.5 million) for the provision of general and administrative services for our benefit, which may be increased or decreased as permitted under the Omnibus Agreement. The administrative services covered by the Omnibus Agreement include, without limitation, the costs of corporate services provided to us by HFC such as accounting, tax, information technology, human resources, in-house legal support, and office space, furnishings and equipment. None of the services covered by the administrative fee is assigned any particular value individually. Although the administrative fee covers the services provided to us by the Named Executive Officers who are HFC Shared Officers, no portion of the administrative fee is specifically allocated to services provided by those Named Executive Officers to us. Rather, the administrative fee generally covers services provided to us by HFC and, except as described below, there is no reimbursement by us for the specific costs of such services. See Item 13, “Certain Relationships and Related Transactions, and Director Independence” of this Annual Report on Form 10-K for additional discussion of our relationships and transactions with HFC.
|
•
|
Reimbursements for Compensation of Dedicated HLS Officers.
Under the Omnibus Agreement, we also reimburse HFC for certain expenses incurred on our behalf, such as for salaries and employee benefits for certain personnel employed by HFC who perform services for us on behalf of HLS, including the dedicated HLS officers, as described in greater detail below. The partnership agreement provides that our general partner will determine the expenses that are allocable to us. In 2017, we reimbursed HFC for 100% of the compensation expenses incurred by HFC for salary, bonus, retirement and other benefits provided to Mr. Cunningham. With respect to equity compensation paid by us to Mr. Cunningham, HLS purchases the units delivered pursuant to awards under our Long-Term Incentive Plan, and we reimburse HLS for the purchase price of the units.
|
•
|
Generally.
The Compensation Committee generally makes compensation decisions for Mr. Cunningham, other than with respect to pension and retirement benefits as described below. All compensation provided to Mr. Cunningham for 2017 is discussed and reported, in accordance with SEC rules, in the narratives and tables that follow.
|
•
|
Pension and Retirement Benefits.
The Compensation Committee does not review or approve pension or retirement benefits for any of the Named Executive Officers. Rather, all pension and retirement benefits provided to the executives are the same pension and retirement benefits that are provided to employees of HFC generally, and such benefits are sponsored and administered entirely by HFC without input from HLS or the Compensation Committee. The pension and retirement benefits provided to Mr. Cunningham in 2017 are described below and were charged to us monthly in accordance with the Omnibus Agreement.
|
•
|
Generally.
HFC makes all decisions regarding the compensation paid to the HFC Shared Officers, which compensation is covered by the administrative fee under the Omnibus Agreement (and therefore not subject to reimbursement by us); however, in accordance with SEC rules, for purposes of these disclosures, a portion of the compensation paid by HFC to the HFC Shared Officers for 2017 is allocated to the services they performed for us during 2017. The allocation was made based on the assumption that each of Messrs. Damiris and Voliva and Ms. McWatters spent, in the aggregate, the following percentage of his or her professional time on our business and affairs in 2017:
|
Name
|
Percentage of Time
|
George J. Damiris
|
20%
|
Richard L. Voliva III
|
20%
|
Denise C. McWatters
|
30%
|
Boardwalk Pipeline Partners LP
|
NGL Energy Partners LP
|
Calumet Specialty Products Partners LP
|
NuStar Energy LP
|
Crestwood Equity Partners LP
|
Rose Rock Midstream LP
|
DCP Midstream Partners LP
|
Summit Midstream Partners LP
|
EnLink Midstream Partners LP
|
Targa Resources Partners LP
|
Genesis Energy LP
|
USA Compression Partners LP
|
•
|
base salary;
|
•
|
annual incentive cash bonus compensation;
|
•
|
long-term equity incentive compensation;
|
•
|
severance and change in control benefits;
|
•
|
health and retirement benefits; and
|
•
|
perquisites.
|
Name
|
2016
Base Salary
|
2017
Base Salary (1)
|
Percentage Increase from 2016
|
Mark T. Cunningham
|
$300,000
|
$303,000
|
1%
|
(1)
|
Represents salary effective January 1, 2017.
|
•
|
Actual Distributable Cash Flow vs. Budget
: Half of the target award may be earned based upon our actual distributable cash flow during the performance period compared to the budgeted distributable cash flow for the performance period, adjusted for differences in estimated and actual Producers Price Index adjustments and differences in the timing of known acquisitions.
|
Actual Distributable Cash Flow vs. Budget
|
Bonus Achievement (1)
|
Less than 100%
|
Actual Distributable Cash Flow as Percentage of Budget
|
100%
|
100%
|
Greater than 100%
|
100% plus 3% for each 1% Actual Distributable Cash Flow exceeds Budget
|
(1)
|
The percentages are interpolated between percentage points and rounded to the nearest hundredth percent.
|
•
|
Individual Performance:
The other half of the target award may be earned based on the employee’s individual performance during the performance period, as determined in the discretion of the employee’s immediate supervisor. The employee’s individual performance is evaluated through a performance review by the employee’s immediate supervisor, which includes a written assessment. The assessment reviews several criteria, including how well the employee performed his or her pre-established individual goals during the performance period and the employee’s interpersonal effectiveness, integrity, and business conduct.
|
|
Allocation Between Performance Metrics
|
Award Opportunities
|
||
Name
|
Actual vs. Budgeted DCF
|
Individual
|
Target
|
Maximum
|
Mark T. Cunningham
|
20.0%
|
20.0%
|
40.0%
|
80.0%
|
Name
|
Actual vs. Budgeted DCF
|
Individual
|
Total
|
Mark T. Cunningham
|
22.0%
|
20.0%
|
42.0%
|
•
|
promoting our interests by providing equity incentive compensation awards to eligible individuals,
|
•
|
enhancing our ability to attract and retain the services of individuals who are essential for our growth and profitability,
|
•
|
encouraging those individuals to devote their best efforts to advancing our business, and
|
•
|
aligning the interests of those individuals with the interests of our unitholders.
|
Name
|
Number of Restricted Units
|
Mark T. Cunningham
|
4,128
|
Restricted Unit Vesting Criteria
|
|
Vesting Date
(1)
|
Cumulative Amount of Restricted Units Vested
|
Immediately following December 15, 2017
|
1/3
|
Immediately following December 15, 2018
|
2/3
|
Immediately following December 15, 2019
|
All
|
Name
|
Target Number of Performance Units
|
Mark T. Cunningham
|
4,128
|
(1)
|
The percentages above are interpolated between points up to a maximum of 150% but no less than 50%. The result is rounded to the nearest whole percentage, but not to a number in excess of 150%.
|
Term
|
What It Means
|
Achieved Distributable Cash Flow/Unit
|
Actual Distributable Cash Flow in 2019 adjusted, on an annualized basis, to the extent such adjustment is not reflected in Actual Distributable Cash Flow in 2019, to include the effect of the closing of any acquisition to income and/or outstanding HEP common units and/or to eliminate any general partner give-back and any other aberrational event, as determined by the Compensation Committee, divided by the number of common units outstanding as of year-end 2019
|
Base Distributable Cash Flow/Unit
|
Actual Distributable Cash Flow for 2016 adjusted, on an annualized basis, to include the effect of the closing of any acquisition to income and/or outstanding HEP common units and/or to eliminate any general partner give-back and any other aberrational event, as determined by the Compensation Committee, divided by the number of common units outstanding as of year-end 2016
|
Target Distributable Cash Flow/Unit
|
Base Distributable Cash Flow/Unit x (100% + WAIA
1
) x (100% + WAIA
2
) x (100% + WAIA
3
)
|
Incentive Distributable Cash Flow/Unit
|
Base Distributable Cash Flow/Unit x (100% + (WAIA
1
+ 4%)) x (100% + (WAIA
2
+ 4%)) x (100% + (WAIA
3
+ 4%))
|
WAIA
|
The weighted after inflation adjustment for each of years 1, 2 and 3 of the performance period (identified as WAIA
1
, WAIA
2
, and WAIA
3
, respectively) to HEP’s applicable sources of revenue calculated as follows: annual percentage increase of the Producers Price Index - Commodities-Finished Goods published by the U.S. Department of Labor, Bureau of Labor Statistics
For purposes of calculating Target Distributable Cash Flow/Unit and Incentive Distributable Cash Flow/Unit, the WAIA is rounded to the nearest 0.1%
|
Years of Service
|
Retirement Contribution
(as percentage of eligible compensation)
|
Less than 5 years
|
3%
|
5 to 10 years
|
4%
|
10 to 15 years
|
5.25%
|
15 to 20 years
|
6.5%
|
20 years and over
|
8%
|
Executive Officer
|
Value of Units
|
Mark T. Cunningham
|
1x Base Salary
|
Name
|
Number of Restricted Units
|
Mark T. Cunningham
|
3,861
|
Phantom Unit Vesting Criteria
|
|
Vesting Date
(1)
|
Cumulative Amount of Restricted Units Vested
|
Immediately following December 15, 2018
|
1/3
|
Immediately following December 15, 2019
|
2/3
|
Immediately following December 15, 2020
|
All
|
Name
|
Target Number of Performance Units
|
Mark T. Cunningham
|
3,861
|
Name and Principal Position (1)
|
Year
|
Salary
|
Bonus (2)
|
Unit Awards (3)
|
Non-Equity
Incentive Plan Compensation (4)
|
All Other Compensation (5)
|
Total
|
||||
George J. Damiris
Chief Executive Officer and President (6)
|
2017
|
$1,100,000
|
—
|
|
—
|
|
$881,430
|
|
—
|
|
$1,981,430
|
2016
|
452,187
|
—
|
|
—
|
|
—
|
|
—
|
|
452,187
|
|
Richard L. Voliva III
Executive Vice President and Chief Financial Officer (6)
|
2017
|
$468,750
|
—
|
|
—
|
|
$154,568
|
|
—
|
|
$623,318
|
2016
|
255,288
|
$193,130
|
|
$776,079
|
|
56,870
|
|
$45,225
|
|
1,326,592
|
|
2015
|
199,338
|
$90,000
|
|
$275,048
|
|
—
|
|
$25,838
|
|
590,224
|
|
Mark T. Cunningham
Senior Vice President, Engineering and Technical Services
|
2017
|
$303,000
|
$60,600
|
|
$275,058
|
|
$66,660
|
|
$48,692
|
|
$754,010
|
2016
|
300,000
|
60,000
|
|
275,172
|
|
79,800
|
|
49,431
|
|
764,403
|
|
2015
|
288,112
|
95,512
|
|
325,132
|
|
62,808
|
|
50,189
|
|
821,753
|
|
Denise C. McWatters
Senior Vice President, General Counsel and Secretary (6)
|
2017
|
$500,000
|
—
|
|
—
|
|
$103,867
|
|
—
|
|
$603,867
|
2016
|
470,000
|
—
|
|
—
|
|
93,359
|
|
—
|
|
563,359
|
|
2015
|
430,000
|
—
|
|
—
|
|
70,450
|
|
—
|
|
500,450
|
(1)
|
Mr. Damiris was appointed President of HLS, effective as of February 1, 2017.
|
(2)
|
Represents the discretionary bonus amount, if any, paid pursuant to the individual performance metric under our Annual Incentive Plan and any other bonus paid outside our Annual Incentive Plan. Other payments made under our Annual Incentive Plan are included in the “Non-Equity Incentive Plan Compensation” column.
|
(3)
|
Represents the aggregate grant date fair value of awards of restricted units or phantom units and performance units made in the year indicated computed in accordance with FASB ASC Topic 718, determined without regard to forfeitures, and does not reflect the actual value that may be recognized by the executive. See Note 6 to our consolidated financial statements for the fiscal year ended December 31, 2017 for a discussion of the assumptions used in determining the FASB ASC Topic 718 grant date fair value of these awards.
|
(4)
|
Represents the bonus amount, if any, paid under our Annual Incentive Plan, other than with respect to the individual performance metric (which amounts are reported in the “Bonus” column). The 2017 bonus amounts under our Annual Incentive Plan are
|
(5)
|
For 2017, includes the compensation as described under “All Other Compensation” below.
|
(6)
|
During 2017, each of these officers split his or her professional time between HFC and us, and all compensation paid to him or her for 2017 was determined and paid by HFC. In accordance with SEC rules, for purposes of these disclosures, a portion of the total compensation paid by HFC to these officers for 2017 is allocated to the services he or she performed for us during 2017. The allocation was made based on the assumption that each officer spent, in the aggregate, approximately the following percentage of his or her professional time in 2017 on our business and affairs:
|
Name
|
Percentage of Time
|
George J. Damiris
|
20%
|
Richard L. Voliva III
|
20%
|
Denise C. McWatters
|
30%
|
Name (1)
|
401(k) Plan Company Matching Contributions
|
401(k) Plan Retirement Contributions
|
NQDC Plan Company Matching Contributions
|
NQDC Plan Retirement Contributions
|
Total
|
|||||
George J. Damiris
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Richard L. Voliva III
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Mark T. Cunningham
|
$16,200
|
|
$13,913
|
|
$9,909
|
|
$8,670
|
|
$48,692
|
|
Denise C. McWatters
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(1)
|
The value of the perquisites provided by us to our Named Executive Officers in 2017 did not exceed $10,000 in the aggregate, and therefore, in accordance with SEC rules, are not included in the table above or described in this footnote.
|
|
Type
|
Grant
Date
|
Estimated Possible Payouts Under Non-Equity Incentive Plan Awards (1)
|
Estimated Future Payouts Under
Equity Incentive Plan Awards (2)
|
|
|
||||
Name
|
Threshold
|
Target
|
Maximum
|
Threshold
|
Target
|
Maximum
|
All other
Equity Awards
(3)
|
Grant
Date Fair Value
(4)
|
||
George J. Damiris
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
Richard L. Voliva (5)
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
Mark T. Cunningham
|
AICP
|
|
$0
|
$60,600
|
$121,200
|
|
|
|
|
|
|
PUA
|
11/01/2017
|
|
|
|
1,931
|
3,861
|
5,792
|
|
$137,529
|
|
PHUA
|
11/01/2017
|
|
|
|
|
|
|
3,861
|
137,529
|
Denise C. McWatters
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
(1)
|
Represents the potential payouts for the awards under our Annual Incentive Plan, which were subject to the achievement of certain performance metrics. The performance metrics and awards are described under “Compensation Discussion and Analysis - Overview of 2017 Executive Compensation Components and Decisions - Annual Incentive Cash Bonus Compensation.” Although these awards were granted in the fourth quarter of 2016, they represent the 2017 Annual Incentive Plan awards and any payouts with respect to these awards are reported in the Summary Compensation Table for 2017. Amounts reported do not include amounts potentially payable pursuant to the discretionary individual performance portion of the award. The amount actually paid with respect to the individual performance portion of the award is reported in the “Bonus” column of the Summary Compensation Table for 2017, and the amount actually paid with respect to the portion of the award reported in this table is reported in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table for 2017.
|
(2)
|
Represents the potential number of performance units payable under the Long-Term Incentive Plan. The number of units paid at the end of the performance period may vary from the target amount, based on our achievement of specified performance measures. The terms of the performance unit awards granted in November 2017 for the 2018 fiscal year are described above under “Compensation Discussion and Analysis - 2018 Compensation Decisions - Long-Term Equity Incentive Compensation - Performance Unit Awards.” See “Compensation Discussion and Analysis - Overview of 2018 Compensation Components and Decisions - Long-Term Equity Incentive Compensation - Performance Unit Awards.”
|
(3)
|
Represents awards of phantom units. The terms of the phantom unit awards granted in November 2017 for the 2018 fiscal year are described above under “Compensation Discussion and Analysis - 2018 Compensation Decisions - Long-Term Equity Incentive Compensation - Phantom Unit Awards.”
|
(4)
|
Represents the grant date fair value determined pursuant to FASB ASC Topic 718, based on a closing price of our common units of $35.62 on November 1, 2017. The value of performance units granted on November 1, 2017 reflect a probable payout percentage of 100%. See note 3 to the Summary Compensation Table for additional information regarding the aggregate probable settlement percentage calculation.
|
Name
|
Award Type
|
Number of Units That Have Not Vested (1)
|
Market Value of Units That Have Not Vested
|
Equity Incentive Plan Awards: Number of Unearned Units or Other Rights That Have Not Vested
(2)
|
Equity Incentive Plan Awards: Market or Payout Value of Unearned Units or Other Rights That Have Not Vested
|
||||
George J. Damiris
|
—
|
—
|
|
—
|
|
—
|
|
—
|
|
Richard L. Voliva III
|
RUA
|
447
|
|
$14,523
|
|
|
|||
PUA
|
|
|
2,012
|
|
$65,370
|
|
|||
Mark T. Cunningham
|
RUA
|
4,336
|
|
$140,877
|
|
|
|
||
PHUA
|
3,861
|
|
$125,444
|
|
|
|
|||
PUA
|
|
|
19,112
|
|
$620,949
|
|
|||
Denise C. McWatters
|
—
|
—
|
|
—
|
|
—
|
|
—
|
|
(1)
|
Includes the following restricted unit awards granted by us:
|
•
|
in October 2015 to Mr. Voliva (1,341, after giving effect to the forfeiture by Mr. Voliva on June 1, 2016 of 2,679 of the total 4,020 restricted units originally granted) and Mr. Cunningham (4,752), of which one third vested on December 15, 2016, one third vested on December 15, 2017 and the remaining one third vests on December 15, 2018;
|
•
|
in October 2016 to Mr. Cunningham (4,128), of which one third vested on December 15, 2017, one third vests on December 15, 2018 and the remaining one third vests on December 15, 2019.
|
•
|
in November 2017 to Mr. Cunningham (3,861), of which one third vests on December 15, 2018, one third vests on December 15, 2019 and the remaining one third vests on December 15, 2020.
|
(2)
|
Includes the following performance unit awards granted by us (the amounts included in the parentheticals reflect the target number of performance units subject to each award):
|
•
|
in October 2015 to Mr. Voliva (1,341, after giving effect to the forfeiture by Mr. Voliva on June 1, 2016 of 2,679 of the total 4,020 performance units originally granted) and Mr. Cunningham (4,752), in each case, with a performance period that ends on December 31, 2018;
|
•
|
in October 2016 to Mr. Cunningham (4,128), with a performance period that ends on December 31, 2019; and
|
•
|
in November 2017 to Mr. Cunningham (3,861), with a performance period that ends on December 31, 2020.
|
Named Executive Officer
|
Unit Awards
|
|||
Number of Units Acquired on Vesting
|
Value Realized on Vesting
|
|||
George J. Damiris
|
—
|
|
—
|
|
Richard L. Voliva III
|
1,440
|
|
$ 48,816
|
|
Mark T. Cunningham
|
8,547 (1)
|
|
$ 279,017
|
|
Denise C. McWatters
|
—
|
|
—
|
|
(1)
|
Includes 3,352 units that became payable to Mr. Cunningham on February 7, 2018 upon the determination by the subcommittee of the Compensation Committee that the performance percentage applicable to the target number of 2,235 performance units granted to Mr. Cunningham in October 2014 with a performance period that ended on December 31, 2017 was 150%, which performance units are treated, in accordance with SEC rules, as vesting during 2017. The value realized with respect to such award is calculated based on the closing price of our common units on the date of payment.
|
Years of Services
|
Retirement Contribution
(as percentage of eligible compensation)
|
Less than 5 years
|
3%
|
5 to 10 years
|
4%
|
10 to 15 years
|
5.25%
|
15 to 20 years
|
6.5%
|
20 years and over
|
8%
|
Investment Funds
|
Rate of Return
|
AllianzGI NFJ Small Cap Value I Fund
|
10.02%
|
American Century Mid-Cap Value I Fund
|
11.79%
|
Fidelity Contrafund
|
32.26%
|
Harbor Capital Appreciation Inst Fund
|
36.59%
|
Hartford SmallCap Growth Y Fund
|
20.06%
|
LargeCap S&P 500 Index Inst Fund
|
21.65%
|
MidCap S&P 400 Index Inst Fund
|
15.96%
|
Oppenheimer Developing Markets Institutional Fund
|
35.33%
|
Oppenheimer International Growth Institutional Fund
|
27.15%
|
PIMCO Total Return Instl Fund
|
5.13%
|
SmallCap S&P 600 Index Inst Fund
|
13.01%
|
T. Rowe Price Retirement 2005 Fund
|
10.67%
|
T. Rowe Price Retirement 2010 Fund
|
11.66%
|
T. Rowe Price Retirement 2015 Fund
|
13.34%
|
T. Rowe Price Retirement 2020 Fund
|
15.74%
|
T. Rowe Price Retirement 2025 Fund
|
17.68%
|
T. Rowe Price Retirement 2030 Fund
|
19.45%
|
T. Rowe Price Retirement 2035 Fund
|
20.88%
|
T. Rowe Price Retirement 2040 Fund
|
22.02%
|
T. Rowe Price Retirement 2045 Fund
|
22.41%
|
T. Rowe Price Retirement 2050 Fund
|
22.38%
|
T. Rowe Price Retirement 2055 Fund
|
22.33%
|
T. Rowe Price Retirement 2060 Fund
|
22.29%
|
Vanguard Equity-Income Adm. Fund
|
18.49%
|
Vanguard Federal Money Market Investor Fund
|
0.81%
|
Vanguard Total Bond Market Index Institutional Fund
|
3.57%
|
Vanguard Total International Stock Index Institutional Fund
|
27.55%
|
Victory Munder Mid-Cap Core Growth R6 Fund
|
24.73%
|
Name
|
Executive Contributions in 2017 (1)
|
Company
Contributions in 2017 (2)
|
Aggregate
Earnings in 2017
|
Aggregate
Withdrawals/
Distributions in 2017
|
Aggregate Balance
at December 31, 2017 (3)
|
|||||
George J. Damiris
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Richard L. Voliva III
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Mark T. Cunningham
|
$72,330
|
|
$18,579
|
|
$41,387
|
|
—
|
|
$703,639
|
|
Denise C. McWatters
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(1)
|
The amounts reported were deferred at the election of the Named Executive Officer and are also included in the amounts reported in the “Salary,” “Bonus” and/or “Non-Equity Incentive Plan Compensation” columns of the Summary Compensation Table for 2017.
|
(2)
|
These amounts are also included in the “All Other Compensation” column of the Summary Compensation Table for 2017.
|
(3)
|
The aggregate balance for Mr. Cunningham reflects the cumulative value, as of December 31, 2017, of his and employer-provided contributions to the NQDC Plan for his account, and any earnings on these amounts, since he began participating in the NQDC Plan in 2012. We reported executive and company contributions for Mr. Cunningham in the Summary Compensation Table in the following aggregate amounts:
|
Name
|
2017
|
Years Prior to 2017
|
Mark T. Cunningham
|
$90,909
|
$ 529,243
|
•
|
an amount equal to his accrued and unpaid salary, unreimbursed expenses and accrued vacation pay; and
|
•
|
a lump sum amount equal to a designated multiplier times (i) the executive’s annual base salary as of the date of termination or the date immediately prior to the “Change in Control,” whichever is greater, and (ii) the executive’s annual bonus amount, calculated as the average annual bonus paid to him for the prior three years. The severance multiplier is 1.0 for Mr. Cunningham.
|
•
|
a person or group of persons (other than HFC or any of its wholly-owned subsidiaries; HLS, HEP, HEP Logistics or any of their subsidiaries) becomes the beneficial owner of more than 50% of the combined voting power of the then outstanding securities of HFC, HLS, HEP or HEP Logistics or more than 50% of the outstanding common stock or membership interests, as applicable or HFC or HLS;
|
•
|
the individuals who as of the date of grant constituted a majority of HFC’s Board of Directors and individuals whose election by HFC’s Board of Directors, or nomination for election by the holders of the voting securities of HFC, was approved by a vote of at least two-thirds of the directors, cease for any reason to constitute a majority of HFC’s Board of Directors;
|
•
|
the consummation of a merger, consolidation or recapitalization of HFC, HLS, HEP or HEP Logistics resulting in the holders of voting securities of HFC, HLS, HEP or HEP Logistics, as applicable, prior to the merger or consolidation owning less than 50% of the combined voting power of the voting securities of HFC, HLS, HEP or HEP Logistics, as applicable, or a recapitalization of HFC, HLS, HEP or HEP Logistics in which a person or group becomes the beneficial owner of securities of HFC, HLS, HEP or HEP Logistics, as applicable, representing more than 50% of the combined voting power of the then outstanding securities of HFC, HLS, HEP or HEP Logistics, as applicable;
|
•
|
the holders of voting securities of HFC or HEP approve a plan of complete liquidation or dissolution of HFC or HEP, as applicable; or
|
•
|
the holders of voting securities of HFC or HEP approve the sale or disposition of all or substantially all of the assets of HFC or HEP, as applicable, other than to an entity holding at least 60% of the combined voting power of the voting securities immediately prior to such sale or disposition.
|
•
|
the engagement in any act of willful gross negligence or willful misconduct on a matter that is not inconsequential; or
|
•
|
conviction of a felony.
|
•
|
a material reduction in the executive’s (or his supervisor’s) authority, duties or responsibilities;
|
•
|
a material reduction in the executive’s base compensation; or
|
•
|
the relocation of the executive to an office or location more than 50 miles from the location at which the executive normally performed the executive’s services, except for travel reasonably required in the performance of the executive’s responsibilities.
|
•
|
the executive’s employment is terminated, other than for “Cause,” or
|
•
|
the executive resigns within 90 days following an “Adverse Change.”
|
•
|
Restricted Units
:
Upon death or disability, the executive will vest with respect to a pro rata number of units attributable to the period of service completed during the applicable vesting period and will forfeit any unvested units. Upon retirement, the executive will forfeit any unvested units.
|
•
|
Phantom Units
: Upon death or disability, the executive will vest with respect to a pro rata number of units attributable to the period of service completed during the applicable vesting period and will forfeit any unvested units. Upon “Retirement,” the executive will fully vest in all phantom units.
|
•
|
Performance Units
:
Pursuant to the terms of the November 2017 performance unit award agreement, upon retirement the award will remain outstanding and eligible to vest without proration subject to actual performance. Upon death, disability and retirement, other than with respect to retirement under the terms of the November 2017 performance unit award agreement, the executive will remain eligible to vest with respect to a pro rata number of units attributable to the period of service completed during the applicable performance period (rounded up to include the month of termination) and will forfeit any unvested units. The Compensation Committee will determine the number of remaining performance units earned and the amount to be paid to the executive as soon as administratively possible after the end of the performance period based upon the performance actually attained for the entire performance period (provided that executives will earn and receive payment with respect to no less than 50% of the performance units awarded). The foregoing also applies if the executive separates from employment for any other reason other than a voluntary separation, Special Involuntary Separation or for “Cause.”
|
•
|
a person or group of persons (other than HFC or any of its wholly-owned subsidiaries or HLS, HEP, HEP Logistics or any of their subsidiaries) becomes the beneficial owner of more than 40% of the combined voting power of the then outstanding securities of HFC, HLS, HEP or HEP Logistics;
|
•
|
the individuals who as of the date of grant constituted a majority of HFC’s Board of Directors cease for any reason to constitute a majority of HFC’s Board of Directors;
|
•
|
the consummation of a merger, consolidation or recapitalization of HFC, HLS, HEP or HEP Logistics resulting in the holders of voting securities of HFC, HLS, HEP or HEP Logistics, as applicable, prior to the merger or consolidation owning less than 60% of the combined voting power of the voting securities of HFC, HLS, HEP or HEP Logistics, as applicable, or a recapitalization of HFC, HLS, HEP, or HEP Logistics in which a person or group becomes the beneficial owner of securities of HFC, HLS, HEP or HEP Logistics, as applicable, representing more than 40% of the combined voting power of the then outstanding securities of HFC, HLS, HEP or HEP Logistics, as applicable;
|
•
|
the holders of voting securities of HFC, HLS, HEP or HEP Logistics approve a plan of complete liquidation or dissolution of HFC, HLS, HEP or HEP Logistics, as applicable; or
|
•
|
the holders of voting securities of HFC, HLS, HEP or HEP Logistics approve the sale or disposition of all or substantially all of the assets of HFC, HLS, HEP or HEP Logistics, as applicable, other than to an entity holding at least 60% of the combined voting power of the voting securities immediately prior to such sale or disposition.
|
•
|
a change in the city in which the executive is required to work;
|
•
|
a substantial increase in travel requirements of employment;
|
•
|
a substantial reduction in the duties of the type previously performed by the executive; or
|
•
|
a significant reduction in compensation or benefits (other than bonuses and other discretionary items of compensation) that does not apply generally to executives.
|
•
|
a change in the executive’s principal office of employment of more than 25 miles from the executive’s work address at the time of grant of the award;
|
•
|
a material increase (without adequate consideration) or material reduction in the duties to be performed by the executive; or
|
•
|
a material reduction in the executive’s base compensation (other than bonuses and other discretionary items of compensation) that does not apply generally to employees.
|
•
|
an act of dishonesty constituting a felony or serious misdemeanor and resulting (or intended to result in) gain or personal enrichment to the executive at the expense of HLS;
|
•
|
gross or willful and wanton negligence in the performance of the executive’s material and substantial duties; or
|
•
|
conviction of a felony involving moral turpitude.
|
•
|
For purposes of determining amounts under the “Cash Payments” column, accrued and unpaid salary and unreimbursed expenses were assumed to equal zero.
|
•
|
Accrued vacation for a specific year is not allowed to be carried over to a subsequent year, so we assumed all accrued vacation for the 2017 year was taken prior to December 31, 2017. Because we accrue vacation in any given year for the following year, amounts reported as “Cash Payments” include vacation amounts accrued in 2017 for the 2018 year.
|
•
|
For amounts payable to the Named Executive Officers with respect to performance units upon a termination due to death, disability, retirement, or other separation (other than a voluntary separation, a for “Cause” separation or a Special Involuntary Termination), we assumed the performance units would settle at 100%. The number of units paid at the end of the performance period may vary from the amounts reflected in the following tables, based on our actual achievement compared to the performance targets. Neither Mr. Voliva nor Mr. Cunningham were eligible for retirement vesting at December 31, 2017.
|
•
|
With respect to the treatment of restricted and phantom unit awards upon termination due to death, disability or without Cause, we have reflected accelerated vesting based on the length of employment during the vesting period for each award.
|
•
|
The amount shown for “Value of Welfare Benefits” represents amounts equal to the monthly premium payable pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), for medical and dental premiums, multiplied by 12 months for Mr. Cunningham.
|
•
|
In calculating whether any tax reimbursements were owed to the Named Executive Officers, we used the following assumptions: (a) no amounts will be discounted as attributable to reasonable compensation, (b) all cash severance payments are contingent upon a change in control, and (c) the presumption required under applicable regulations that the equity awards granted in 2017 were contingent upon a change in control could be rebutted. Based on these assumptions, none of the Named Executive Officers would receive any tax reimbursement or “gross-up” payments with respect to any amounts reported in the table below.
|
•
|
No amounts potentially payable pursuant to the NQDC Plan are included in the table below since neither the form nor amount of any such benefits would be enhanced nor vesting or other provisions accelerated in connection with any of the triggering events disclosed below. Please refer to the section titled “Nonqualified Deferred Compensation” for additional information regarding these benefits.
|
Named Executive Officer
|
Cash Payments
|
Value of
Welfare Benefits
|
Vesting
of Equity Awards
|
Total
|
||||
George J. Damiris
|
—
|
|
—
|
|
—
|
|
—
|
|
Richard L. Voliva III
|
|
|
|
|
||||
Termination in connection with or following a Change in Control
|
—
|
|
—
|
|
$79,893
|
|
$79,893
|
|
Termination due to Death, Disability or without Cause
|
—
|
|
—
|
|
$39,142
|
|
$39,142
|
|
Mark T. Cunningham
Termination in connection with or following a Change in Control
|
$473,927
|
|
$17,430
|
|
$887,270
|
|
$1,378,627
|
|
Termination due to Death, Disability or without Cause
|
—
|
|
—
|
|
$236,756
|
|
$236,756
|
|
Denise C. McWatters
|
—
|
|
—
|
|
—
|
|
—
|
|
•
|
each person known to us to be a beneficial owner of 5% or more of the common units;
|
•
|
directors of HLS, the general partner of our general partner;
|
•
|
each Named Executive Officer of HLS; and
|
•
|
all directors and executive officers of HLS as a group.
|
Name of Beneficial Owner
|
Common Units
|
Percentage of Outstanding Common Units
|
|
HollyFrontier Corporation
(1)
|
59,630,030
|
|
56.6%
|
Tortoise Capital Advisors, L.L.C.
(2)
|
6,717,745
|
|
6.4%
|
Energy Income Partners, LLC
(3)
|
6,425,272
|
|
6.1%
|
Oppenheimer Funds, Inc.
(4)
|
5,551,785
|
|
5.3%
|
Mark T. Cunningham
(5)
|
49,117
|
|
*
|
Michael C. Jennings
(6)(7)
|
20,978
|
|
*
|
Richard L. Voliva III
(5)(7)
|
5,506
|
|
*
|
Denise C. McWatters
(7)
|
4,881
|
|
*
|
Larry R. Baldwin
(6)
|
6,516
|
|
*
|
James H. Lee
(6)(7)(8)
|
5,039
|
|
*
|
George J. Damiris
(7)
|
—
|
|
*
|
R. Kevin Hardage
(7)
|
—
|
|
*
|
All directors and executive officers as group (8 persons)
(9)
|
92,037
|
|
*
|
(1)
|
HollyFrontier Corporation directly holds 5,006 common units over which it has sole voting and dispositive power and 59,625,024 common units over which it has shared voting and dispositive power. HollyFrontier Corporation is the record
|
(2)
|
Based on information provided to the Company by Tortoise Capital Advisors, L.L.C, pursuant to an investment advisory agreement or an investment management agreement entered into with certain investment companies, Tortoise Capital Advisors, L.L.C holds sole voting and dispositive power with respect to 6,717,745 common units held by such investment companies. The address of Tortoise Capital Advisors, L.L.C. is 1550 Ash Street, Suite 300, Leawood, Kansas 66211.
|
(3)
|
Based on the Schedule 13G/A filed with the Securities and Exchange Commission on February 14, 2018 by Energy Income Partners, LLC, James J. Murchie, Eva Pao, Linda A. Longville, Saul Ballesteros and John K. Tysseland. James J. Murchie, Eva Pao, and John K. Tysseland are the Portfolio Managers with respect to the portfolios managed by Energy Income Partners, LLC. Linda A. Longville and Saul Ballesteros are control persons of Energy Income Partners, LLC. Each of the foregoing report shared voting and dispositive power over 6,425,272 common units. The address of each of the foregoing is 10 Wright Street, Westport, Connecticut 06880.
|
(4)
|
Based on a Schedule 13G/A filed with the Securities and Exchange Commission on February 7, 2018, Oppenheimer Funds, Inc. has shared voting power and shared dispositive power with respect to 5,551,785 units. The address of Oppenheimer Funds, Inc. is Two World Financial Center, 225 Liberty Street, New York, NY 10281.
|
(5)
|
The number reported includes restricted units for which the executive has sole voting power but no dispositive power, as follows: Mr. Voliva (447 units) and Mr. Cunningham (4,336 units). For Mr. Cunningham, also includes 3,861 common units to be issued upon settlement of phantom units, which may vest and be settled within 60 days of February 14, 2018 under certain circumstances. Until settled, Mr. Cunningham has no voting or dispositive power over the phantom units. The number does not include performance units held by the executive.
|
(6)
|
For each of Mr. Jennings and Mr. Baldwin, includes 2,557 restricted units for which he has sole voting power but no dispositive power. For Mr. Lee, includes 2,754 restricted units for which he has sole voting power but no dispositive power.
|
(7)
|
Messrs. Jennings, Damiris, Voliva, Lee and Hardage and Ms. McWatters each own common stock of HFC. Each of these individuals own common stock of HFC as set forth in the following table:
|
Name of Beneficial Owner
|
Number of Shares
|
George J. Damiris (a)
|
280,747
|
Denise C. McWatters (a)
|
63,258
|
Richard L. Voliva III (a)(b)
|
59,683
|
James H. Lee (c)
|
52,240
|
Michael C. Jennings (c)
|
45,917
|
R. Kevin Hardage (c)
|
30,819
|
Total
|
532,664
|
(a)
|
The number reported includes shares of HFC restricted stock for which the individual has sole voting power but no dispositive power, as follows: Mr. Damiris (105,149 shares), Ms. McWatters (15,528 shares) and Mr. Voliva (16,444 shares). Also includes shares of HFC common stock to be issued to the individual upon settlement of restricted stock units, which may vest and be settled within 60 days of February 14, 2018 under certain circumstances, as follows: Mr. Damiris (77,961 shares), Mr. Voliva (19,491 shares) and Ms. McWatters (11,813 shares). Until settled, the individual has no voting or dispositive power over the restricted stock units. The number does not include unvested performance share units.
|
(b)
|
The number reported includes 3,778 shares of HFC restricted stock and 2,271 restricted stock units held by Mr. Voliva’s wife for which Mr. Voliva disclaims beneficial ownership except to the extent of his pecuniary interest therein.
|
(c)
|
The number reported includes 3,190 shares of HFC common stock to be issued to the individual upon settlement of restricted stock units, which may vest and be settled within 60 days of February 14, 2018 under certain circumstances. Until settled, the individual has no voting or dispositive power over the common stock underlying the restricted stock units.
|
(8)
|
Includes 285 common units held by Mr. Lee’s wife. Mr. Lee’s wife has the right to receive distributions from, and the proceeds from the sale of, these common units. Mr. Lee disclaims beneficial ownership of the common units held by his wife except to the extent of his pecuniary interest therein.
|
(9)
|
The number reported includes 4,783 restricted units held by executive officers for which they have sole voting power but no dispositive power, 3,861 common units to be issued to Mr. Cunningham upon settlement of phantom units, which may vest and be settled within 60 days of February 14, 2018 under certain circumstances and 7,868 restricted units held by non-employee directors for which they have sole voting power but no dispositive power. The number reported also includes 285 common units as to which Mr. Lee disclaims beneficial ownership, except to the extent of his pecuniary interest therein.
|
Plan Category (1)
|
Number of securities to be issued upon exercise of outstanding options, warrants and rights
|
Weighted average exercise price of outstanding options, warrants and rights
|
Number of securities remaining available for future issuance under equity compensation plans
|
Equity compensation plans approved by security holders (2)
|
48,941 (3)
|
—
|
1,341,216
|
Equity compensation plans not approved by security holders
|
—
|
—
|
—
|
Total
|
48,941
|
—
|
1,341,216
|
(1)
|
All stock-based compensation plans are described in Note 6 to our consolidated financial statements for the fiscal year ended December 31, 2017.
|
(2)
|
On April 25, 2012, at a Special Meeting of the Unitholders of the Partnership, the unitholders approved the Amended and Restated Long-Term Incentive Plan, which, among other things, provided for an increase in the maximum number of common units reserved for delivery with respect to awards under the Long-Term Incentive Plan to 2,500,000 common units (as adjusted to reflect the two-for-one common unit split that occurred on January 16, 2013). All securities reported as available for future issuances are available from the additional common units approved by unitholders under the Amended and Restated Long-Term Incentive Plan. At the time the Long-Term Incentive Plan was originally adopted in 2004, it was not required to be approved by the Partnership’s unitholders.
|
(3)
|
Represents units subject to performance units granted to key individuals under the Long-Term Incentive Plan assuming the maximum payout level. If the performance units are paid at the target payout level, 32,628 units would be issued upon the vesting of such performance units. Performance units granted in October 2014 with a performance period that ended on December 31, 2017 were not settled until certification by the subcommittee of the Compensation Committee in February 2018 that a performance percentage of 150% was attained for performance units granted to Mr. Cunningham; however, such awards are not included in this column as outstanding since they are treated for purposes of the preceding executive compensation tables as vesting during 2017 in accordance with SEC rules.
|
Item 13.
|
Certain Relationships and Related Transactions, and Director Independence
|
Distributions of available cash to our general partner and its affiliates
|
|
We generally make cash distributions 98% to the unitholders, including our general partner and its affiliates as the holders of an aggregate of 22,380,030 of the common units and 2% to the general partner. In addition, if distributions exceed the minimum quarterly distribution and other higher target levels, our general partner is entitled to increasing percentages of the distributions, up to 50% of the distributions above the highest target level.
|
|
|
|
Payments to our general partner and its affiliates
|
|
We pay HFC or its affiliates an administrative fee, $2.5 million per year, for the provision of various general and administrative services for our benefit. The administrative fee may increase if we make an acquisition that requires an increase in the level of general and administrative services that we receive from HFC or its affiliates. In addition, the general partner is entitled to reimbursement for all expenses it incurs on our behalf, including other general and administrative expenses. These reimbursable expenses include the salaries and the cost of employee benefits of employees of HFC who provide services to us on behalf of HLS. Finally, HLS is required to reimburse HFC for our benefit pursuant to the secondment arrangement for the wages, benefits, and other costs of HFC employees seconded to HLS to perform services at certain of our pipelines and tankage assets. Please read “Omnibus Agreement” and “Secondment Arrangement” below. Our general partner determines the amount of these expenses.
|
|
|
|
Withdrawal or removal of our general partner
|
|
If our general partner withdraws or is removed, its general partner interest and its incentive distribution rights will either be sold to the new general partner for cash or converted into common units, in each case for an amount equal to the fair market value of those interests.
|
Liquidation
|
|
Upon our liquidation, the partners, including our general partner, will be entitled to receive liquidating distributions according to their particular capital account balances.
|
•
|
our obligation to pay HFC an annual administrative fee, in the amount of $2.5 million for 2017, for the provision by HFC of certain general and administrative services;
|
•
|
HFC’s and its affiliates’ agreement not to compete with us under certain circumstances and our right to notice of, and right of first offer to purchase, certain logistics assets constructed by HFC and acquired as part of an acquisition by HFC of refining assets;
|
•
|
an indemnity by HFC for certain potential environmental liabilities;
|
•
|
our obligation to indemnify HFC for environmental liabilities related to our assets existing on the date of our initial public offering to the extent HFC is not required to indemnify us; and
|
•
|
HFC’s right of first refusal to purchase our assets that serve HFC’s refineries.
|
•
|
any business operated by HFC or any of its affiliates at the time of the closing of our initial public offering;
|
•
|
any business conducted by HFC with the approval of our general partner;
|
•
|
any business or asset that HFC or any of its affiliates acquires or constructs that has a fair market value or construction cost of less than $5 million; and
|
•
|
any business or asset that HFC or any of its affiliates acquires or constructs that has a fair market value or construction cost of $5 million or more if we have been offered the opportunity to purchase the business or asset at fair market value, and we decline to do so.
|
•
|
On February 22, 2016, HFC obtained a
50%
membership interest in Osage in a non-monetary exchange for a
20
-year terminalling services agreement, whereby a subsidiary of Magellan Midstream Partners (“Magellan”) will provide terminalling services for all HFC products originating in Artesia, New Mexico requiring terminalling in or through El Paso, Texas. Osage is the owner of the Osage Pipeline, the primary pipeline supplying HFC’s El Dorado refinery with crude oil. Concurrent with this transaction, we entered into a non-monetary exchange with HFC, whereby we received HFC’s interest in Osage in exchange for our El Paso terminal. Since we are a consolidated Variable Interest Entity ("VIE") of HFC, this transaction was recorded as a transfer between entities under common control and reflects HFC’s carrying basis of its 50% membership interest in Osage of
$44.5 million
offset by our net carrying basis in the El Paso terminal of
$12.1 million
with the difference treated as a contribution from HFC.
|
•
|
On March 31, 2016, we acquired crude oil tanks located at HFC’s Tulsa refinery from an affiliate of Plains for
$39.5 million
. In 2009, HFC sold these tanks to Plains and leased them back, and due to HFC’s continuing interest in the tanks, HFC accounted for the transaction as a financing arrangement. Accordingly, the tanks remained on HFC’s balance sheet and were depreciated for accounting purposes.
|
•
|
Effective October 1, 2016, we acquired all the membership interests of Woods Cross Operating, a wholly owned subsidiary of HFC, which owns the newly constructed atmospheric distillation tower, fluid catalytic cracking unit, and polymerization unit located at HFC’s Woods Cross refinery, for cash consideration of
$278 million
.
|
•
|
See “Acquisitions”
under Item 1, “Business” of this Annual Report on Form 10-K for additional information on the acquisitions of the crude tanks at HFC's Tulsa refinery and Woods Cross Operating from HFC.
|
•
|
On October 31, 2017, we closed on an equity restructuring transaction with HEP Logistics, a wholly-owned subsidiary of HFC and the general partner of HEP, pursuant to which the incentive distribution rights held by HEP Logistics were canceled, and HEP Logistics' 2% general partner interest in HEP was converted into a non-economic general partner interest in HEP. In consideration, we issued
37,250,000
of our common units to HEP Logistics. In addition, HEP Logistics agreed to waive
$2.5 million
of limited partner cash distributions for each of twelve consecutive quarters beginning with the first quarter the units issued as consideration were eligible to receive distributions.
|
•
|
Revenues received from HFC were
$377.1 million
,
$333.1 million
and
$292.2 million
for the
years ended December 31, 2017, 2016 and 2015
, respectively.
|
•
|
HFC charged us general and administrative services under the Omnibus Agreement of
$2.5 million
for the year ended
December 31, 2017
,
$2.5 million
for the year ended
December 31, 2016
, and
$2.4 million
for the year ended December 31,
2015
.
|
•
|
We reimbursed HFC for costs of employees supporting our operations of
$46.6 million
,
$40.9 million
and
$34.5 million
for the
years ended December 31, 2017, 2016 and 2015
, respectively.
|
•
|
HFC reimbursed us
$7.2 million
,
$14.0 million
and
$13.5 million
for the
years ended December 31, 2017, 2016 and 2015
, respectively, for expense and capital projects.
|
•
|
We distributed
$130.7 million
,
$105.2 million
and
$90.4 million
for the
years ended December 31, 2017, 2016 and 2015
, respectively, to HFC as regular distributions on its common units, subordinated units and general partner interest, including general partner incentive distributions.
|
•
|
We received operating lease payments from HFC for use of our Artesia and Tulsa railyards for
$0.5 million
for each of the years ended December 31, 2017, 2016 and 2015.
|
Item 14.
|
Principal Accounting Fees and Services
|
|
|
2017
|
|
2016
|
||||
|
|
|
|
|
||||
Audit Fees
(1)
|
|
$
|
1,154,500
|
|
|
$
|
937,000
|
|
Tax Fees
|
|
224,000
|
|
|
202,000
|
|
||
Total
|
|
$
|
1,378,500
|
|
|
$
|
1,139,000
|
|
(1)
|
Represents fees for professional services provided in connection with the audit of our annual financial statements and internal controls over financial reporting, review of our quarterly financial statements, and procedures performed as part of our securities filings.
|
Item 15.
|
Exhibits and Financial Statement Schedules
|
(a)
|
Documents filed as part of this report
|
(1)
|
Index to Consolidated Financial Statements
|
|
Page in
Form 10-K
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2)
|
Index to Consolidated Financial Statement Schedules
|
(3)
|
Exhibits
|
Exhibit
Number
|
|
Description
|
|
|
|
2.1
|
|
|
2.2
|
|
|
2.3†
|
|
|
2.4*†
|
|
|
2.5†
|
|
|
2.6
|
|
|
2.7*†
|
|
|
2.8
|
|
|
3.1
|
|
|
3.2
|
|
|
3.3
|
|
|
3.4
|
|
|
3.5
|
|
|
3.6
|
|
|
4.1
|
|
|
4.2
|
|
|
4.3
|
|
|
4.4
|
|
10.1
|
|
|
10.2
|
|
|
10.3
|
|
|
10.4
|
|
|
10.5
|
|
|
10.6
|
|
|
10.7
|
|
|
10.8
|
|
|
10.9
|
|
Third Letter Agreement with respect to Pipelines and Terminals Agreement between Holly Energy Partners, L.P. and ALON USA, LP, dated April 1, 2011 (incorporated by reference to Exhibit 10.3 of Registrant's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2011, File No. 1-32225).
|
10.10
|
|
|
10.11
|
|
|
10.12
|
|
|
10.13
|
|
|
10.14
|
|
|
10.15
|
|
|
10.16
|
|
|
10.17
|
|
10.18
|
|
|
10.19
|
|
|
10.20
|
|
|
10.21*
|
|
|
10.22
|
|
|
10.23
|
|
|
10.24
|
|
|
10.25
|
|
|
10.26
|
|
|
10.27
|
|
|
10.28
|
|
|
10.29
|
|
|
10.30
|
|
|
10.31
|
|
|
10.32
|
|
|
10.33
|
|
10.34
|
|
|
10.35
|
|
Second Amended and Restated Pipelines and Terminals Agreement dated February 22, 2016, by and among HollyFrontier Refining & Marketing LLC, HollyFrontier Corporation, Holly Energy Partners - Operating, L.P. and Holly Energy Partners, L.P. (incorporated by reference to Exhibit 10.4 of Registrant’s Current Report on Form 8-K dated February 22, 2016, File No. 1-32225).
|
10.36
|
|
Equity Distribution Agreement, dated May 10, 2016, by and between Holly Energy Partners, L.P., HEP Logistics Holdings, L.P., Holly Logistic Services, L.L.C. and Citigroup Global Markets Inc., Goldman, Sachs & Co., and Merrill Lynch, Pierce, Fenner & Smith Incorporated (incorporated by reference to Exhibit 10.1 of Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2016, File No. 1-32225).
|
10.37
|
|
|
10.38
|
|
|
10.39
|
|
|
10.40+
|
|
|
10.41+
|
|
First Amendment to the Holly Energy Partners, L.P. Long-Term Incentive Plan, effective January 16, 2013 (incorporated by reference to Exhibit 10.68 of Registrant’s Annual Report on Form 10-K for its fiscal year ended December 31, 2012, File No. 1-32225).
|
10.42+
|
|
|
10.43+
|
|
|
10.44+
|
|
|
10.45+
|
|
|
10.46+
|
|
|
10.47+
|
|
|
10.48*+
|
|
|
10.49+
|
|
|
10.50+
|
|
|
10.51+
|
|
|
10.52+
|
|
|
10.53*+
|
|
|
10.54*+
|
|
|
21.1*
|
|
|
23.1*
|
|
|
31.1*
|
|
|
31.2*
|
|
32.1**
|
|
|
32.2**
|
|
|
101++
|
|
The following financial information from Holly Energy Partners, L.P.’s Annual Report on Form 10-K for its fiscal year ended December 31, 2017, formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of Cash Flows, (v) Consolidated Statement of Partners’ Equity, and (vi) Notes to Consolidated Financial Statements.
|
|
|
HOLLY ENERGY PARTNERS, L.P.
|
|
|
(Registrant)
|
|
|
|
|
|
By: HEP LOGISTICS HOLDINGS, L.P.
|
|
|
its General Partner
|
|
|
|
|
|
By: HOLLY LOGISTIC SERVICES, L.L.C.
|
|
|
its General Partner
|
|
|
|
Date: February 21, 2018
|
|
/s/ George J. Damiris
|
|
|
George J. Damiris
|
|
|
Chief Executive Officer
|
|
|
|
|
|
|
Date: February 21, 2018
|
|
/s/ George J. Damiris
|
|
|
George J. Damiris
|
|
|
President, Chief Executive Officer and Director
|
|
|
|
Date: February 21, 2018
|
|
/s/ Richard L. Voliva III
|
|
|
Richard L. Voliva III
|
|
|
Executive Vice President and Chief Financial Officer
|
|
|
(Principal Financial Officer)
|
|
|
|
Date: February 21, 2018
|
|
/s/ Kenneth P. Norwood
|
|
|
Kenneth P. Norwood
|
|
|
Vice President and Controller
|
|
|
(Principal Accounting Officer)
|
|
|
|
Date: February 21, 2018
|
|
/s/ Michael C. Jennings
|
|
|
Michael C. Jennings
|
|
|
Chairman of the Board
|
|
|
|
Date: February 21, 2018
|
|
/s/ Larry R. Baldwin
|
|
|
Larry R. Baldwin
|
|
|
Director
|
|
|
|
Date: February 21, 2018
|
|
/s/ James H. Lee
|
|
|
James H. Lee
|
|
|
Director
|
|
|
|
Date: February 21, 2018
|
|
/s/ R. Kevin Hardage
|
|
|
R. Kevin Hardage
|
|
|
Director
|
1.
|
Amendment to Section 8(c)(vii)
. The following new section shall be added as a new Section 8(c)(vii) of the Purchase Agreement to follow immediately after Section 8(c)(vi) of the Purchase Agreement:
|
2.
|
Amendment to Section 8(c)(viii)
. The following new section shall be added as a new Section 8(c)(viii) of the Purchase Agreement to follow immediately after Section 8(c)(vii) of the Purchase Agreement:
|
3.
|
Amendment to Definitions
. The following new definition shall be added to
Exhibit A
of the Purchase Agreement to follow immediately after “Tax Return”:
|
4.
|
Amendment to Schedule 4(c)(viii)
. Pursuant to Section 8(c)(ii) of the Purchase Agreement, Schedule 4(c)(viii) (Environmental Matters) attached to the Purchase Agreement is hereby deleted in its entirety and replaced with
Exhibit A
attached hereto.
|
5.
|
Amendment to Schedule 8(a)(i)(2)
. Pursuant to Section 8(c)(ii) of the Purchase Agreement, Schedule 8(a)(i)(2) (Additional Assets) attached to the Purchase Agreement is hereby deleted in its entirety and replaced with
Exhibit B
attached hereto.
|
6.
|
Amendment to Schedule 8(c)(vi)(1)
. Pursuant to Section 8(c)(ii) of the Purchase Agreement, Schedule 8(c)(vi)(1) (Available Employees) attached to the Purchase Agreement is hereby deleted in its entirety and replaced with
Exhibit C
attached hereto.
|
7.
|
Amendment to Transferred Vehicles Exhibit
. The Parties agree that the Transferred Vehicles exhibit attached hereto as
Exhibit D
shall be added to the Purchase Agreement to follow immediately after Exhibit G of the Purchase Agreement.
|
8.
|
No Further Amendment
. Except as specifically provided in this Amendment, the Purchase Agreement shall remain in full force and effect pursuant to the terms and conditions thereof. The Parties hereby ratify and confirm the Purchase Agreement as hereby amended. All references to the Purchase Agreement shall hereafter be deemed to refer to the Purchase Agreement as amended hereby.
|
9.
|
Counterparts
. This Amendment may be executed in one or more counterparts (including by means of facsimile or .pdf signature pages), all of which shall be considered one and the same agreement, and shall become effective when one or more such counterparts have been signed by each of the Parties and delivered to the other Party.
|
|
SELLER:
PLAINS PIPELINE, L.P.
By Plains GP LLC, its general partner
By:
/s/ Jeremy Goebel
Name: Jeremy Goebel
Title: Senior Vice President
|
|
BUYER:
HEP CASPER SLC LLC
By:
/s/ George J. Damiris
Name: George J. Damiris
Title: CEO and President
|
1.
|
Amendment to Section 8(c)(viii)
. The following new section shall be added as a new Section 8(c)(viii) of the Purchase Agreement to follow immediately after Section 8(c)(vii) of the Purchase Agreement:
|
2.
|
Amendment to Section 8(c)(ix)
. The following new section shall be added as a new Section 8(c)(ix) of the Purchase Agreement to follow immediately after Section 8(c)(viii) of the Purchase Agreement:
|
3.
|
Amendment to Definitions
. The following new definition shall be added to
Exhibit A
of the Purchase Agreement to follow immediately after “Tax Return”:
|
4.
|
Amendment to Schedule 4(c)(x)
. Pursuant to Section 8(c)(iii) of the Purchase Agreement, Schedule 4(c)(x) (Taxes) attached to the Purchase Agreement is hereby deleted in its entirety and replaced with
Exhibit A
attached hereto.
|
5.
|
Amendment to Schedule 4(c)(xiii)
. Pursuant to Section 8(c)(iii) of the Purchase Agreement, Schedule 4(c)(xiii) (Easements) attached to the Purchase Agreement is hereby deleted in its entirety and replaced with
Exhibit B
attached hereto.
|
6.
|
Amendment to Schedule 8(a)(i)(2)
. Pursuant to Section 8(c)(iii) of the Purchase Agreement, Schedule 8(a)(i)(2) (Inactive Lines) attached to the Purchase Agreement is hereby deleted in its entirety and replaced with
Exhibit C
attached hereto.
|
7.
|
Amendment to Schedule 8(c)(vii)(1)
. Pursuant to Section 8(c)(iii) of the Purchase Agreement, Schedule 8(c)(vii)(1) (Available Employees) attached to the Purchase Agreement is hereby deleted in its entirety and replaced with
Exhibit D
attached hereto.
|
8.
|
Amendment to Transferred Vehicles Exhibit
. The Parties agree that the Transferred Vehicles exhibit attached hereto as
Exhibit E
shall be added to the Purchase Agreement as a new
Exhibit H
to follow immediately after
Exhibit G
of the Purchase Agreement.
|
9.
|
No Further Amendment
. Except as specifically provided in this Amendment, the Purchase Agreement shall remain in full force and effect pursuant to the terms and conditions thereof. The Parties hereby ratify and confirm the Purchase Agreement as hereby amended. All references to the Purchase Agreement shall hereafter be deemed to refer to the Purchase Agreement as amended hereby.
|
10.
|
Counterparts
. This Amendment may be executed in one or more counterparts (including by means of facsimile or .pdf signature pages), all of which shall be considered one and the same agreement, and shall become effective when one or more such counterparts have been signed by each of the Parties and delivered to the other Party.
|
|
SELLER:
ROCKY MOUNTAIN PIPELINE SYSTEM LLC
By:
/s/ Jeremy Goebel
Name: Jeremy Goebel
Title: Senior Vice President
|
|
BUYER:
HEP SLC LLC
By:
/s/ George J. Damiris
Name: George J. Damiris
Title: CEO and President
|
EIGHTEENTH AMENDED AND RESTATED OMNIBUS AGREEMENT
among
HOLLYFRONTIER CORPORATION,
HOLLY ENERGY PARTNERS, L.P.
and
CERTAIN OF THEIR RESPECTIVE SUBSIDIARIES
January 19, 2018
|
HollyFrontier Corporation, a Delaware corporation (“
HFC
”), and its Affiliates listed below (singularly, “
HFC Entity
”; and with HFC collectively, the “
HFC Entities
”):
|
|
|
El Paso Operating LLC (“
El Paso Operating
”)
|
|
HollyFrontier El Dorado Refining LLC (“
HollyFrontier El Dorado
”)
|
|
HollyFrontier Cheyenne Refining LLC (“
HollyFrontier Cheyenne
”)
|
|
HollyFrontier Tulsa Refining LLC (“
HollyFrontier Tulsa
”)
|
|
HollyFrontier Woods Cross Refining LLC (“
HollyFrontier Woods Cross
”)
|
|
Navajo Pipeline Co., L.P., a Delaware limited partnership (“
Navajo Pipeline
”)
|
|
HollyFrontier Navajo Refining LLC (“
HollyFrontier Navajo
”)
|
|
HollyFrontier Refining & Marketing LLC (“
HFRM
”)
|
|
HollyFrontier Transportation LLC (“
HollyFrontier Transportation
”)
|
AND
|
|
Holly Energy Partners, L.P., a Delaware limited partnership (“
HEP
”), and its Affiliates listed below (singularly, “
HEP Entity
”; and with HEP collectively, the “
HEP Entities
”):
|
|
|
Cheyenne Logistics LLC (“
Cheyenne Logistics
”)
|
|
El Dorado Logistics LLC (“
El Dorado Logistics
”)
|
|
El Dorado Operating LLC (“
El Dorado Operating
”)
|
|
El Dorado Osage LLC (“
El Dorado Osage
”)
|
|
Frontier Aspen LLC
|
|
HEP El Dorado LLC (“
HEP El Dorado
”)
|
|
HEP Logistics GP, L.L.C. (the “
OLP GP
”)
|
|
HEP Logistics Holdings, L.P., a Delaware limited partnership (the “
General Partner
”)
|
|
HEP Mountain Home, L.L.C.
|
|
HEP Navajo Southern, L.P., a Delaware limited partnership
|
|
HEP Pipeline Assets, Limited Partnership, a Delaware limited partnership
|
|
HEP Pipeline GP, L.L.C.
|
|
HEP Pipeline, L.L.C. (“
HEP Pipeline
”)
|
|
HEP Refining Assets, L.P., a Delaware limited partnership (“
HEP Refining Assets
”)
|
|
HEP Refining GP, L.L.C.
|
|
HEP Refining, L.L.C. (“
HEP Refining
”)
|
|
HEP Tulsa LLC (“
HEP Tulsa
”)
|
|
HEP UNEV Holdings LLC (“
HEP UNEV
”)
|
|
HEP UNEV Pipeline LLC (“
HEP UNEV Pipeline
”)
|
|
HEP Woods Cross, L.L.C.
|
|
Holly Energy Partners – Operating, L.P., a Delaware limited partnership (the “
Operating Partnership
”)
|
|
Holly Energy Storage – Lovington LLC
|
|
Holly Logistic Services, L.L.C. (“
Holly GP
”),
|
|
Lovington-Artesia, L.L.C.
|
|
NWNAL LLC
|
|
Roadrunner Pipeline, L.L.C. (“
Roadrunner
”)
|
|
SLC Pipeline LLC
|
|
Woods Cross Operating LLC (“
Woods Cross Operating
”)
|
(a)
|
the ownership and/or operation of any of the Retained Assets (including replacements of the Retained Assets);
|
(b)
|
any Restricted Businesses conducted by a HFC Group Member and Holly GP with the approval of the General Partner;
|
(c)
|
the ownership and/or operation of Restricted Businesses by an HFC Entity or Holly GP in its capacity as general partner of HEP or its general partner;
|
(d)
|
the ownership and/or operation of any asset or group of related assets used in the Restricted Business that are acquired or constructed by a HFC Group Member or Holly GP after the Closing Date (the “
Permitted Assets
”), the fair market value of which (as determined in good faith by the Board of Directors of HFC) is as follows:
|
(i)
|
less than $5 million at the time of such acquisition or good faith estimate of construction costs, as the case may be; or
|
(ii)
|
equal to or greater than $5 million at the time of the acquisition or good faith estimate of construction costs; provided, HEP has been offered the opportunity to purchase the Permitted Assets in accordance with
Section 2.3
and HEP has elected not to purchase the Permitted Assets;
|
(e)
|
the ownership of the UNEV Profits Interest;
|
(f)
|
the ownership of limited or any general partnership interests in HEP; and
|
(g)
|
the ownership and/or operation of the El Paso Hawkins Terminal.
|
(a)
|
If Holly GP or a HFC Group Member becomes aware of an opportunity to acquire Permitted Assets with a fair market value (as determined in good faith by the Board of Directors of HFC) equal to or greater than $5 million, then, subject to
Section 2.3(c)
, as soon as practicable, Holly GP or such HFC Group Member shall notify HEP of such opportunity and deliver to HEP, or provide HEP access to all
|
(i)
|
not to cause a HEP Group Member to pursue the opportunity to purchase the Permitted Assets, or
|
(ii)
|
to cause a HEP Group Member to pursue the opportunity to purchase the Permitted Assets, in which case the applicable Parties shall follow the procedures in
Section 2.4
.
|
(b)
|
If, at any time, HEP abandons such opportunity (as evidenced in writing by HEP to the HFC Group Member), Holly GP or the HFC Group Member may pursue such opportunity. Any Permitted Assets which are permitted to be acquired by Holly GP or a HFC Group Member must be so acquired:
|
(i)
|
within 12 months of the later to occur of (i) the date that Holly GP or the HFC Group Member becomes able to pursue such acquisition in accordance with the provisions of this
Section 2.3
, and (ii) the date upon which all required governmental approvals to consummate such acquisition have been obtained, and
|
(ii)
|
on terms not materially more favorable to Holly GP or the HFC Group Member than were offered to HEP.
|
(c)
|
Section 2.3(a)
shall not apply if Holly GP or a HFC Group Member:
|
(i)
|
becomes aware of an opportunity to make an acquisition that includes Permitted Assets and assets that are not Permitted Assets, and the Permitted Assets have a fair market value (as determined in good faith by the Board of Directors of HFC) equal to or greater than $5 million but comprise less than half of the fair market value (as determined in good faith by the Board of Directors of HFC) of the total assets being considered for acquisition, or
|
(ii)
|
desires to construct Permitted Assets with an estimated construction cost (as determined in good faith by the Board of Directors of HFC) equal to or greater than $5 million;
|
(a)
|
Within 180 days after the consummation of the acquisition or the completion of construction by Holly GP or a HFC Group Member of the Permitted Assets, as the case may be, Holly GP or the HFC Group Member shall notify HEP in writing of such acquisition or construction and offer HEP the opportunity to purchase such Permitted Assets (the “
Offer
”). The Offer shall set forth the terms relating to the purchase of the Permitted Assets, and, if Holly GP or any HFC Group Member desires to utilize the Permitted Assets, the Offer will also include (i) the commercially reasonable terms on which the HEP Group will provide services to Holly GP or the HFC Group Member to enable Holly GP or the HFC Group Member to utilize the Permitted Assets and (ii) the terms of any service agreements, leases or access agreements to be provided to HEP by Holly GP or the HFC Group relating to such assets. As soon as practicable, but in any event within 30 days after receipt of such written notification, HEP shall notify Holly GP or the HFC Group Member in writing that HEP has elected (i) not to cause a HEP Group Member to purchase the Permitted Assets, in which event Holly GP or the HFC Group Member shall be forever free to continue to own or operate such Permitted Assets, or (ii) to cause a HEP Group Member to purchase the Permitted Assets, in which event
Section 2.4(b)
and
Section 2.4(c)
shall apply.
|
(b)
|
If within 60 days after receipt by HEP of the Offer, Holly GP or the HFC Group Member and HEP are able to agree on the fair market value of the subject Permitted Assets and the other terms of the Offer including, the terms, if any, on which the HEP Group will provide services to Holly GP or the HFC Group Member to enable it to utilize the Permitted Assets, a HEP Group Member shall purchase the Permitted Assets for the agreed upon fair market value as soon as commercially practicable after such agreement has been reached and, if required by the Offer or otherwise agreed, enter into an agreement with Holly GP or the HFC Group Member to provide services in a manner consistent with the Offer.
|
(c)
|
If Holly GP or the HFC Group Member and HEP are unable to agree within 60 days after receipt by HEP of the Offer on the fair market value of the subject Permitted Assets and/or the other terms of the Offer, Holly GP or the HFC Entity, on the one hand, and HEP, on the other hand, will engage a mutually agreed upon investment banking firm to determine the disputed terms. Such investment banking firm will determine the disputed terms within 30 days of its engagement and furnish Holly GP or the HFC Group Member, on the one hand, and HEP, on the other hand, its determination. The fees of the investment banking firm will be split equally between Holly GP or the HFC Group Member, on the one hand, and HEP, on the other hand. Once the investment banking firm has submitted its determination of the disputed terms, HEP will have the right, but not the obligation, to cause a HEP Group Member to purchase the Permitted Assets pursuant to the Offer as modified by the determination of the investment banking firm. HEP will provide written notice of its decision to Holly GP or the HFC Group Member within 30 days after the investment banking firm has submitted its determination. Failure to provide such notice within such 30-day period shall be deemed to constitute a decision not to purchase the Permitted Assets. If HEP elects to cause a HEP Group Member to purchase the Permitted Assets, then the HEP Group Member shall purchase the Permitted Assets pursuant to the Offer as modified by the determination of the investment banking firm as soon as commercially practicable after such
|
(a)
|
Except for the indemnity in
Sections 3.2(a)(ii)
,
(vii)
and
(viii)
, indemnities apply only to the Transferred Assets and only until the applicable expiration date, if any, related to each such Transferred Asset shown on
Exhibit D
.
|
(b)
|
The aggregate liability of the HFC Entities for all Covered Environmental Losses under
Section 3.2(a)
shall not exceed the amounts shown in column (b) on
Exhibit D
. The liability limits listed in column (b) represent separate individual limits for each location.
|
(c)
|
Indemnities in
Section 3.2(a)(i)
apply only to the extent that such events or conditions occurred before the applicable Closing Date.
|
(a)
|
Subject to
Section 3.1
, the HFC Entities shall indemnify, defend and hold harmless the HEP Entities from and against any Liability or Claim incurred by the HEP Entities or any Third Party to the extent arising out of:
|
(i)
|
the Covered Environmental Losses relating to the Transferred Assets to the extent caused by the acts or omissions of an HFC Entity;
|
(ii)
|
the ownership or operation by HFC and its Affiliates of any asset not constituting part of the Transferred Assets, except to the extent arising out of the negligent acts or omissions or willful misconduct of HEP or any of its Affiliates;
|
(iii)
|
the failure of the applicable HEP Entity to be the owner of valid and indefeasible easement rights or fee ownership for interests in and to the lands on which any pipeline or related pump station, tank farm or equipment conveyed or contributed or otherwise Transferred (including by way of a Transfer of the ownership interest of a Person or by operation of law) to the applicable HEP Entity on the applicable Closing Date;
|
(iv)
|
the failure of the applicable HEP Entity to have the consents, licenses and permits necessary to allow any such Transferred Assets referred to in
Section 3.2(a)(iii)
to cross the roads, waterways, railroads and other areas upon which any such Transferred Assets are located as of the Closing Date;
|
(v)
|
the cost of curing any condition set forth in clauses (iii) or (iv) above to the extent such conditions do not allow any Transferred Asset to be operated in accordance with Prudent Industry Practice;
|
(vi)
|
the following:
|
(A)
|
events and conditions associated with the operation of the Transferred Assets before the Closing Date (other than Covered Environmental Losses which are provided for under
Section 3.2(a)(i)
and events and conditions covered by
Section 3.4
);
|
(B)
|
all legal actions pending against the HFC Entities on July 13, 2004;
|
(C)
|
the completion of remediation projects at the respective HEP Entity’s El Paso Hawkins Terminal, Albuquerque terminal and Mountain Home terminal that were ongoing or scheduled as of July 13, 2004;
|
(D)
|
events and conditions associated with the Retained Assets and whether occurring before or after the Closing Date;
|
(E)
|
all federal, state and local tax liabilities attributable to the operation or ownership of the Transferred Assets prior to the applicable Closing Date, including any such tax liabilities of the HFC Entities that may result from the consummation of the formation transactions for the HEP Entities and the General Partner; and
|
(F)
|
any breach by HollyFrontier Tulsa of the representations and warranties set forth in Section 3.9 of the Master Lease and Access Agreement.
|
(vii)
|
the operation by HEP and its Affiliates of any assets owned by HFC or any of its Affiliates, except to the extent arising out of the gross negligence or willful misconduct of HEP or any of its Affiliates;
|
(viii)
|
any failure to perform any covenant or agreement made or undertaken by HFC or its Affiliates in the (A) Master Lease and Access Agreement, or the exercise by HFC or its Affiliates of any rights and obligations under Section 2.2 thereof; or (B) Services and Secondment Agreement; except in either case to the extent arising out of the willful misconduct or negligence (standard negligence or gross negligence) of HEP or any of its Affiliates; and
|
(ix)
|
any failure of HEP or any of its Affiliates to perform its obligations pursuant to the Storage and Handling Agreement to the extent arising after February 22, 2016, except to the extent arising out of gross negligence and willful misconduct of HEP or any of its Affiliates.
|
(b)
|
The indemnities provided for in
Section 3.2(a)(i)
through
(v)
shall only apply if the HFC Entities are notified in writing of any of the foregoing prior to the applicable expiration date listed in column (b) on
Exhibit D
.
|
(c)
|
The indemnities provided for in
Section 3.2(a)(vi)
shall only apply if to the extent that the HFC Entities are notified in writing of any of the following events and conditions within five years after the applicable Closing Date.
|
(d)
|
Notwithstanding anything in this Agreement to the contrary, because HEP has been involved since the inception with the following Transferred Assets, as used in this
Section 3.2
, the definition of “Transferred Assets” shall not include the 16” Lovington/Artesia Intermediate Pipeline, the Beeson Pipeline, the Roadrunner Pipeline, the Tulsa Interconnecting Pipelines, and the UNEV Pipeline.
|
(e)
|
To the extent that a good faith Claim by the HEP Entities for indemnification under
Section 3.2(a)
arises from events or conditions at the Transferred Tanks or the soil immediately underneath the Transferred Tanks or the Transferred Tanks’ secondary containment, and the HFC Entities refuse to provide such indemnification, then the burden of proof shall be on the HFC Entities to demonstrate that the events or conditions giving rise to the Claim arose after the Closing Date.
|
(f)
|
As used in this
Section 3.2
, “Affiliates” of the Indemnifying Party shall not include the HEP Group Members when a HFC Entity is the Indemnifying Party and shall not include the HFC Group Members when the Indemnifying Party is a HEP Entity.
|
(a)
|
Subject to
Section 3.3
, the HEP Entities shall indemnify, defend and hold harmless the HFC Entities from and against any Liability or Claim suffered or incurred by the HFC Entities or any Third Party to the extent arising from:
|
(i)
|
the Covered Environmental Losses associated with operation of (A) the Other Assets (except as otherwise indicated in Exhibit D, Part 2), and (B) the Transferred Assets by a Person (other than a HFC Entity or ownership and operation of the Transferred Assets by a Person other than a HFC Entity);
|
(ii)
|
operation by HEP and HEP’s Affiliates of any asset owned by HFC or any of HFC’s Affiliates but only to the extent caused by the gross negligence or willful misconduct of any of the HEP Entities; and
|
(iii)
|
any failure to perform any covenant or agreement made or undertaken by any HEP or its Affiliates in the (A) Master Lease and Access Agreement, or the exercise by HEP or its Affiliates of any rights and obligations under Section 2.2 thereof; or (B) Services and Secondment Agreement; except in either case to the extent arising out of the willful misconduct or negligence (standard negligence or gross negligence) of HFC or any of its Affiliates.
|
(b)
|
Nothing set forth in
Section 3.4(a)
shall make the HEP Entities responsible for any post-Closing Date negligent actions or omissions or willful misconduct by the HFC Entities.
|
(c)
|
Notwithstanding
Section 3.4(a)(i)
, the indemnity provided for in
Section 3.4(a)(i)
shall only apply to the El Dorado Repurchased Tanks to the extent the Environmental Losses arise from a violation, correction, event or condition occurring during the period that El Dorado Logistics owned such Repurchased Tanks.
|
(a)
|
any injury to or death of any Person or the damage to or theft, destruction, loss or loss of use of, any property; or
|
(b)
|
the failure to perform any covenant or agreement made or undertaken by the applicable Party in agreements with any of the other Parties.
|
(a)
|
EXCEPT AS EXPRESSLY PROVIDED IN
SECTION 3.2(a)(vii)
, THE INDEMNIFICATION OBLIGATIONS HEREIN SHALL NOT EXTEND TO THE PROPORTIONATE AMOUNT OF ANY SUCH LIABILITY OR CLAIM CAUSED BY THE NEGLIGENCE OR WILLFUL MISCONDUCT OF AN INDEMNITEE OR ITS AGENTS OR EMPLOYEES.
|
(b)
|
No statute, rule or regulation that precludes an injured party from bringing an action against a fellow employee or employer shall preclude a Party from seeking and obtaining a judicial determination of the fault or negligence of such Persons.
|
(c)
|
Each Party shall be responsible for any insurance deductibles or self-insured retention arising out of any Liability or Claim to the extent such Liability or Claim arises out of the negligence or willful misconduct of such Party, except to the extent the subrogation waiver provided for in
Section 3.9
applies to such Liability or Claim.
|
(a)
|
The Indemnified Party agrees that promptly after it becomes aware of facts giving rise to a Claim for indemnification under this
Article III
, it will provide notice thereof in writing to the Indemnifying Party, specifying the nature of and specific basis for such Claim.
|
(b)
|
The Indemnifying Party shall have the right to control all aspects of the defense of (and any counterclaims with respect to) any claims brought against the Indemnified Party that are covered by the indemnification under this
Article III
, including, the selection of counsel, determination of whether to appeal any decision of any court and the settling of any such matter or any issues relating thereto; provided, however, that no such settlement shall be entered into without the consent of the Indemnified Party unless it includes a full release of the Indemnified Party from such matter or issues, as the case may be.
|
(c)
|
The Indemnified Party agrees to cooperate fully with the Indemnifying Party, with respect to all aspects of the defense of any Claims covered by the indemnification under this
Article III
, including, the prompt furnishing to the Indemnifying Party of any correspondence or other notice relating thereto that the Indemnified Party may receive, permitting the name of the Indemnified Party to be utilized in connection with such defense, the making available to the Indemnifying Party of any files, records or other information of the Indemnified Party that the Indemnifying Party considers relevant to such defense and making available to the Indemnifying Party any employees of the Indemnified Party.
|
(d)
|
In no event shall the obligation of the Indemnified Party to cooperate with the Indemnifying Party as set forth in
Section 3.7(c)
be construed as imposing upon the Indemnified Party an obligation to hire and pay for counsel in connection with the defense of any Claims covered by the indemnification set forth in this
Article III
; provided, however, that the Indemnified Party may, at its own option, cost and expense, hire and pay for counsel in connection with any such defense. The Indemnifying Party agrees to keep any such counsel hired by the Indemnified Party informed as to the status of any such defense, but the Indemnifying Party shall have the right to retain sole control over such defense.
|
(e)
|
In connection with the indemnities in this
Article III
, Indemnifying Party:
|
(i)
|
agrees to use reasonable efforts to minimize the impact thereof on the operations of the Indemnified Party;
|
(ii)
|
agrees to enter into a joint defense agreement with Indemnifying Party in order to allow communication by counsel if Indemnified Party elects to involve separate counsel; and
|
(iii)
|
agrees to maintain the confidentiality of all files, records, and other information furnished by the Indemnified Party pursuant to this
Section 3.7
.
|
(f)
|
The amounts for which an Indemnified Party is entitled to indemnification under this
Article III
shall be reduced by the net amounts recovered by the Indemnified Party pursuant to contractual indemnities from any Third Party (other than pursuant to insurance policies that are not required to include a waiver of subrogation pursuant to
Section 3.9
) after deducting the reasonable unreimbursed out-of-pocket fees and expenses incurred by the Indemnified Party in recovering such amounts (the “
Net Recovery
”). If the Indemnified Party receives a Net Recovery subsequent to an indemnification payment by the Indemnifying Party under this
Article III
, then such Indemnified Party shall promptly reimburse the Indemnifying Party for any payment made or expense incurred by such Indemnifying Party in connection with providing such indemnification payment up to Net Recovery. An Indemnified Party shall be obligated to pursue all contractual indemnities (including insurance claims) that such Indemnified Party has with any Third Party, provided, however, if the Indemnified Party’s right to such indemnification is assignable, the Indemnified Party may, in its sole discretion and in lieu of pursuing such claim, elect to assign such indemnification claim to the Indemnifying Party to pursue and shall reasonably cooperate with the Indemnifying Party (including, making its relevant books, records, officers, information and testimony reasonably available to the Indemnifying Party) in the Indemnifying Party’s pursuit of such claim.
|
(g)
|
For avoidance of doubt, no Claim may be asserted pursuant to
Section 3.2
or
Section 3.4
following the applicable expiration of the indemnity related to such Claim; provided that any Claim asserted in writing prior to the expiration date of such indemnity that is the basis for such Claim shall survive until such Claim is finally resolved and satisfied. The date on which notification of a Claim for indemnification is received by the Indemnifying Party shall determine whether such Claim is timely made.
|
(a)
|
Notwithstanding anything in this Agreement to the contrary, when referring to the indemnification obligations of the HFC Entities in
Article III
, the definition of HFC Entities shall be deemed to mean solely (b) the HFC Entity or HFC Entities that own or operate, or owned or operated immediately prior to the transfer to the HEP Entities, the Retained Asset, Transferred Asset or other property in question with respect to which indemnification is sought by reason of such HFC Entity’s or HFC Entities’ ownership or operation of the Retained Asset, Transferred Asset or other
|
(b)
|
Notwithstanding anything in this Agreement to the contrary, when referring to the indemnification obligations of the HEP Entities in
Article III
, the definition of HEP Entities shall be deemed to mean solely (d) the HEP Entity or HEP Entities that own or operate, or previously owned or operated, the Transferred Asset or other property in question or that is responsible for causing such loss, damage, injury, judgment, claim, cost, expense or other liability suffered or incurred by the HFC Entities for which they are entitled to indemnification under
Article III
, (e) HEP and (f) Operating Partnership.
|
(c)
|
For the avoidance of doubt, any indemnification obligations of the HFC Entities in
Article III
with respect to any indemnifiable losses incurred by or attributable to the UNEV Pipeline shall be (i) limited to an amount that is the product of (x) the amount of such losses, multiplied by (y) HEP UNEV’s direct or indirect percentage ownership interest in the UNEV Pipeline at the time such losses were incurred and (ii) payable to, for the benefit of and recoverable solely by HEP UNEV or any HEP Entity designated by HEP UNEV (and not by UNEV Pipeline, LLC).
|
(a)
|
The Operating Partnership will pay HFC an administrative fee (the “
Administrative Fee
”), payable in equal quarterly installments, for the provision by HFC and its Affiliates for the HEP Group’s benefit of all the general and administrative services that HFC and its Affiliates provide, including, the general and administrative
|
(b)
|
The Administrative Fee shall be adjusted on July 1, 2018, effective as of January 1, 2018, by an amount equal to the PPI Adjustment. Thereafter, the Administrative Fee shall be adjusted on July 1 of each calendar year, commencing on July 1, 2019, by an amount equal to the PPI Adjustment. If the PPI is no longer published, then HFC and HEP shall negotiate in good faith to agree on a new index that gives comparable protection against inflation, and the same method of adjustment for increases in the new index shall be used to calculate increases in the Administrative Fee. If the Parties are unable to agree, a new index will be determined by the dispute resolution process in Article VIII.
|
(c)
|
At the end of each year, either Party will have the right to submit to the other Party a proposal to change the Administrative Fee for that year and/or the method of adjusting the Administrative Fee if either Party believes in good faith that the general and administrative services performed by HFC and its Affiliates for the benefit of the HEP Group for the year in question are inconsistent with the Administrative Fee for that year. If either Party submits such a proposal, the Parties agree that they will negotiate in good faith to determine if the Administrative Fee for that year should be changed and, if so, the amount of such change. If the Parties are unable to agree, the Parties will submit the matter to dispute resolution pursuant to Article VIII.
|
(d)
|
The Administrative Fee shall not include and the HEP Group shall reimburse HFC and its Affiliates for:
|
(i)
|
salaries of employees of HFC or its Affiliates, to the extent, but only to the extent, such employees perform services for the HEP Group;
|
(ii)
|
the cost of employee benefits relating to employees of HFC or its Affiliates, such as 401(k), pension, and health insurance benefits, to the extent, but only to the extent, such employees perform services for the HEP Group and have not been paid by HEP pursuant to the Master Site Services Agreement and the Services and Secondment Agreement;
|
(iii)
|
any amounts payable under the Master Site Services Agreement and the Services and Secondment Agreement;
|
(iv)
|
all sales, use, excise, value added or similar taxes, if any, that may be applicable from time to time in respect of the services provided by the HFC and its Affiliates to HEP pursuant to
Section 4.1(a)
; and
|
(v)
|
all premiums for insurance policies carried for and on behalf of HEP.
|
(e)
|
Either HFC, on the one hand, or HEP, on the other hand, may terminate this
Article IV
, by providing the other with written notice of its election to do so at least six months prior to the proposed date of termination.
|
(a)
|
The HEP Entities hereby grant to HFC a right of first refusal on any proposed Transfer (other than a grant of a security interest to a bona fide third-party lender or a Transfer to another HEP Group Member) of any of the Assets.
|
(b)
|
The HEP Entities are prohibited from Transferring any of the Assets to a HEP Group Member that is not a party to this Agreement. In the event the HEP Entities desire to Transfer any of the Assets to a HEP Group Member that is not a Party to this Agreement, they shall first cause the proposed transferee HEP Group Member to become a Party to this Agreement.
|
(c)
|
The Parties acknowledge that all potential Transfers of Sale Assets pursuant to this
Article V
are subject to obtaining any and all required written consents of governmental authorities and other third parties and to the terms of all existing agreements in respect of the Sale Assets.
|
(d)
|
Notwithstanding anything in this Agreement to the contrary, as used in
Article V
the definition of “Assets” shall not include the Tulsa Transferred Assets or the UNEV Pipeline, but shall expressly include the equity interests of UNEV Pipeline, LLC, HEP UNEV Pipeline, HEP UNEV, El Dorado Osage and Osage then owned directly or indirectly by the HEP Entities.
|
(a)
|
If a HEP Entity proposes to Transfer any of the Assets to any Person pursuant to a bona fide third-party offer (an “
Acquisition Proposal
”), then HEP shall promptly give written notice (a “
Disposition Notice
”) thereof to HFC. The Disposition Notice shall set forth the following information in respect of the proposed Transfer:
|
(i)
|
the name and address of the prospective acquiror (the “
Proposed Transferee
”);
|
(ii)
|
the Assets subject to the Acquisition Proposal (the “
Sale Assets
”);
|
(iii)
|
the purchase price offered by such Proposed Transferee (the “
Offer Price
”);
|
(iv)
|
reasonable detail concerning any non-cash portion of the proposed consideration, if any, to allow HFC to reasonably determine the fair market value of such non-cash consideration;
|
(v)
|
the HEP Entities’ estimate of the fair market value of any non-cash consideration; and
|
(vi)
|
all other material terms and conditions of the Acquisition Proposal that are then known to the HEP Entities.
|
(b)
|
To the extent the Acquisition Proposal consists of consideration other than cash (or in addition to cash) the Offer Price shall be deemed equal to the amount of any such cash plus the fair market value of such non-cash consideration. In the event HFC
|
(c)
|
In the event (i) HFC’s determination of the fair market value of any non-cash consideration described in the Disposition Notice (to be determined by HFC within 30 days of receipt of such Disposition Notice) is less than the fair market value of such consideration as determined by the HEP Entities in the Disposition Notice and (ii) HFC and the HEP Entities are unable to mutually agree upon the fair market value of such non-cash consideration within 30 days after HFC notifies the HEP Entities of its determination thereof, the HEP Entities and HFC shall engage a mutually-agreed-upon investment banking firm to determine the fair market value of the non-cash consideration. Such investment banking firm shall be instructed to return its decision within 30 days after all material information is submitted thereto, which decision shall be final. The fees of the investment banking firm will be split equally between HFC and the HEP Entities. HFC will provide written notice of its decision regarding the exercise of its right of first refusal to purchase the Sale Assets to the HEP Entities within 30 days after the investment banking firm has submitted its determination (the “
Second ROFR Acceptance Deadline
”). Failure to provide such notice within such 30-day period shall be deemed to constitute a decision by HFC not to purchase the Sale Assets.
|
(d)
|
If HFC fails to exercise a right during any applicable period set forth in this
Section 5.2
, HFC shall be deemed to have waived its rights with respect to such proposed disposition of the Sale Assets, but not with respect to any future offer of such Sale Assets.
|
(e)
|
If HFC chooses to exercise its right of first refusal to purchase the Sale Assets under
Sections 5.1(a)
and
5.2(c)
, HFC and the HEP Entities shall enter into a purchase and sale agreement for the Sale Assets which shall include the following terms:
|
(i)
|
HFC will agree to deliver cash for the Offer Price (or any other consideration agreed to by HFC and the HEP Entities (each in their sole discretion));
|
(ii)
|
the HEP Entities will represent that they have good, indefeasible and unencumbered title to the Sale Assets, subject to all recorded and unrecorded matters and all physical conditions and other matters in existence on the closing date for the Sale Assets, plus any other reasonable and customary matters and such matters as HFC may approve, which approval will not be unreasonably withheld. If HFC desires to obtain any title insurance with respect to the Sale Assets, the full cost and expense of obtaining the same (including the cost of title examination, document duplication and policy premium) shall be borne by HFC;
|
(iii)
|
the HEP Entities will grant to HFC the right, exercisable at HFC’s risk and expense, to conduct such surveys, tests and inspections of the Sale Assets
|
(iv)
|
HFC will have the right to terminate its obligation to purchase the Sale Assets under this
Article V
if the results of any searches, surveys, tests or inspections conducted pursuant to
Section 5.2(e)(ii)
or
Section 5.2(e)(iii)
above are, in the reasonable opinion of HFC, unsatisfactory;
|
(v)
|
the closing date for the purchase of the Sale Assets shall, unless otherwise agreed to by HFC and the HEP Entities, occur no later than 90 days following receipt by the HEP Entities of written notice by HFC of its intention to exercise its option to purchase the Sale Assets pursuant to
Section 5.2(b)
or
(c)
;
|
(vi)
|
the HEP Entities shall execute, have acknowledged and deliver to HFC a special warranty deed, assignment of easement, or comparable document, as appropriate, in the applicable jurisdiction, on the closing date for the purchase of the Sale Assets constituting real property interests conveying the Sale Assets unto HFC free and clear of all encumbrances created by the HEP Entities other than those set forth in
Section 5.2(e)(ii)
above;
|
(vii)
|
the sale of any Sale Assets shall be made on an “as is,” “where is” and “with all faults” basis, and the instruments conveying such Sale Assets shall contain appropriate disclaimers; and
|
(viii)
|
neither the HEP Entities nor HFC shall have any obligation to sell or buy the Sale Assets if any of the material consents referred to in
Section 5.1(c)
have not been obtained or such sale or purchase is prohibited by Applicable Law.
|
(f)
|
HFC and the HEP Entities shall cooperate in good faith in obtaining all necessary governmental and other Third Party approvals, waivers and consents required for the closing. Any such closing shall be delayed, to the extent required, until the third Business Day following the expiration of any required waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended; provided, however, that such delay shall not exceed 120 days and, if governmental approvals and waiting periods shall not have been obtained or expired, as the case may be, by such 120th day, then HFC shall be deemed to have waived its right of first refusal with respect to the Sale Assets described in the Disposition Notice and thereafter neither HFC nor HEP shall have any further obligation under this
Article V
with respect to such Sale Assets unless such Sale Assets again become subject to this
Article V
pursuant to
Section 5.2(g)
.
|
(g)
|
If the Transfer to the Proposed Transferee is not consummated in accordance with the terms of the Acquisition Proposal within the later of (i) 180 days after the later of the applicable ROFR Acceptance Deadline, and (ii) 10 days after the satisfaction of all governmental approval or filing requirements, if any, the Acquisition Proposal shall be deemed to lapse, and the HEP Entities may not Transfer any of the Sale
|
(a)
|
such HFC Entity shall not reimburse such HEP Entity with respect to the relocated crude oil Tank 437 in the Artesia refinery complex or the new crude oil tank to replace crude oil Tank 439 in the Artesia refinery complex more particularly described in the Purchase and Sale Agreement referenced in the definition of 2008 Crude Pipelines, Tanks and Related Assets, and
|
(b)
|
upon expiration of the Initial Tank Inspection Period, all of the obligations of the applicable HFC Entity pursuant to this
Article VII
shall terminate, except that the Initial Tank Inspection Period shall be extended if, and only to the extent that
|
(i)
|
inaccessibility of the 2008 Tanks during the Initial Tank Inspection Period caused the delay of an Initial Tank Inspection originally scheduled to be performed during the Initial Tank Inspection Period, and
|
(ii)
|
the applicable HFC Entity received notice from the applicable HEP Entity regarding such delay at the time it occurred.
|
(a)
|
Any Arbitrable Dispute arising out of or in connection with this Agreement, including any question regarding the existence, validity or termination of this Agreement, shall be exclusively resolved in accordance with this
Article VIII
.
|
(b)
|
In the event of a Arbitrable Dispute between an HFC Entity and an HEP Entity, the HFC Entity and the HEP Entity shall, within ten (10) days of a written request by either of them to the other, meet in good faith to resolve such Arbitrable Dispute in
|
(c)
|
If the HFC Entity and the HEP Entity are unable to resolve the Arbitrable Dispute within ten (10) days after submission of such Arbitrable Dispute as provided in Section 8.1(b), either the HFC Entity or the HEP Entity may submit the matter to arbitration in accordance with the terms of
Section 8.2
below.
|
(d)
|
Pending resolution of any Arbitrable Dispute between the HFC Entity and the HEP Entity, the HFC Entity and the HEP Entity shall continue to perform in good faith their respective obligations under this Agreement based upon the last agreed performance demonstrated prior to the Arbitrable Dispute.
|
(e)
|
Resolution of any Arbitrable Dispute between the HFC Entity and the HEP Entity involving payment of money by either the HFC Entity and the HEP Entity to the other shall include payment of interest at the Prime Rate from the original due date of such amount.
|
(f)
|
Each of the HFC Entity and the HEP Entity shall, in addition to all rights provided herein or provided by Law, be entitled to the remedies of specific performance and injunction to enforce its rights hereunder.
|
(a)
|
Arbitration must be initiated within the time limits set forth in this Agreement, or if no such limits apply, then within the time period allowed by the applicable statute of limitations. Arbitration may be initiated by either party (“
Claimant
”) by delivering written notice to the other (“
Respondent
”) that the Claimant elects to refer the Arbitrable Dispute to binding arbitration. Claimant’s notice initiating binding arbitration must identify the arbitrator Claimant has appointed. The Respondent shall respond to Claimant within thirty (30) days after receipt of Claimant’s notice, identifying the arbitrator Respondent has appointed. If the Respondent fails for any reason to name an arbitrator within the 30-day period, Claimant shall petition the American Arbitration Association for appointment of an arbitrator for Respondent’s account. The two arbitrators so chosen shall select a third arbitrator within thirty (30) days after the second arbitrator has been appointed.
|
(b)
|
The hearing will be conducted in Dallas, Texas and commence within thirty (30) days after the selection of the third arbitrator. The parties and the arbitrators shall proceed diligently and in good faith in order that the award may be made as promptly as possible. Except as provided in the Federal Arbitration Act, the decision of the arbitrators will be binding on, and non-appealable by, the Claimant and Respondent.
|
(c)
|
The Claimant will pay the compensation and expenses of the arbitrator named by it, and the Respondent will pay the compensation and expenses of the arbitrator
|
(d)
|
All arbitrators must (i) be neutral parties who have never been officers, directors or employees of any of the Parties or any of their Affiliates and who have not provided consulting services (directly or indirectly) for at least three (3) years prior to their appointment and (ii) have at least seven (7) years’ experience in the petroleum transportation industry.
|
(e)
|
The arbitrators shall have no right to grant or award indirect, consequential, punitive or exemplary damages of any kind.
|
(f)
|
The Arbitrable Disputes may be arbitrated in a common proceeding along with disputes under other agreements between the Claimant and Respondent to the extent that the issues raised in such disputes are related. Without the written consent of the Claimant and Respondent, no unrelated disputes (including those with Affiliates of either Claimant or Respondent) or Third Party disputes may be joined to an arbitration pursuant to this Agreement.
|
(a)
|
Any notice or other communication given under this Agreement shall be in writing and shall be (1) delivered personally, (2) sent by documented overnight delivery service, (3) sent by email transmission, or (4) sent by first class mail, postage prepaid (certified or registered mail, return receipt requested). Such notice shall be deemed to have been duly given (x) if received, on the date of the delivery, with a receipt for delivery, (y) if refused, on the date of the refused delivery, with a receipt for refusal, or (z) with respect to email transmissions, on the date the recipient confirms receipt. Notices or other communications shall be directed to the following addresses:
|
(b)
|
Any Party may at any time change its address for service from time to time by giving notice to the other Parties in accordance with this
Section 10.2
.
|
Title:
|
Executive Vice President and Chief Financial Officer
|
Title:
|
Executive Vice President and Chief Financial Officer
|
Agreement
|
Effective Date
|
Reason for Amendment
|
Original Omnibus Agreement
|
July 13, 2004
|
n/a
|
First Amended and Restated Omnibus Agreement
|
June 1, 2009
|
16” Lovington/Artesia Intermediate Pipeline Purchase Agreement
|
Second Amended and Restated Omnibus Agreement
|
August 1, 2009
|
Tulsa West (Sunoco) Asset Purchase Agreement
|
Third Amended and Restated Omnibus Agreement
|
October 19, 2009
|
(i) Tulsa East (Sinclair) Purchase Agreement
(ii) Beeson Pipeline Purchase Agreement, and
(iii) Roadrunner Pipeline Purchase Agreement
|
Fourth Amended and Restated Omnibus Agreement
|
March 31, 2010
|
LLC Interest Purchase Agreement for certain Tulsa East Assets
|
Fifth Amended and Restated Omnibus Agreement
|
August 31, 2011
|
Tulsa Throughput Agreement
|
Sixth Amended and Restated Omnibus Agreement
|
November 1, 2011
|
LLC Interest Purchase Agreement for Cheyenne Assets and El Dorado Assets
|
Seventh Amended and Restated Omnibus Agreement
|
July 12, 2012
|
UNEV LLC Interest Purchase Agreement
|
Eighth Amended and Restated Omnibus Agreement
|
June 1, 2013
|
Malaga Throughput Agreement
|
Ninth Amended and Restated Omnibus Agreement
|
January 7, 2014
|
Amended and Restated El Dorado Throughput Agreement for the El Dorado New Tank No. 647
|
Tenth Amended and Restated Omnibus Agreement
|
September 26, 2014
|
Amended and Restated Malaga Throughput Agreement
|
Eleventh Amended and Restated Omnibus Agreement
|
January 1, 2015
|
Unloading and Blending Services Agreement (Artesia) and Third Amended and Restated Crude Pipelines and Tankage Agreement (Beeson to Lovington System Expansion)
|
Twelfth Amended and Restated Omnibus Agreement
|
January 1, 2015
|
Artesia Rail Yard Facility, El Dorado Terminal and Cheyenne New Tank No. 117
|
Thirteenth Amended and Restated Omnibus Agreement
|
November 2, 2015
|
LLC Interest Purchase Agreement for the membership interest of El Dorado Operating
|
Fourteenth Amended and Restated Omnibus Agreement
|
February 22, 2016
|
LLC Interest Purchase Agreement for the Osage Membership Interest
|
Fifteenth Amended and Restated Omnibus Agreement
|
March 31, 2016
|
Tulsa West Crude Tank Assets and Tulsa New Tanks
|
Sixteenth Amended and Restated Omnibus Agreement
|
October 1, 2016
|
LLC Interest Purchase Agreement for the membership interest of Woods Cross Operating
|
Seventeenth Amended and Restated Omnibus Agreement
|
January 1, 2017
|
El Dorado Repurchased Tanks
|
(a)
|
any violation or correction of violation of Environmental Laws associated with the ownership or operation of the Assets,
or
|
(b)
|
any event or condition associated with ownership or operation of the Assets (including, the presence of Hazardous Substances on, under, about or migrating from the Assets or the disposal or release of Hazardous Substances generated by operation of the Assets at any non-Asset locations), including:
|
(i)
|
the cost and expense of any investigation, assessment, evaluation, monitoring, containment, cleanup, repair, restoration, remediation, or other corrective action required or necessary under Environmental Laws;
|
(ii)
|
the cost or expense of the preparation and implementation of any closure, remedial, corrective action, or other plans required or necessary under Environmental Laws; and
|
(iii)
|
the cost and expense for any environmental or Toxic Tort pre-trial, trial, or appellate legal or litigation support work.
|
(a)
|
any violation or correction of violation of Environmental Laws associated with the operation of the Transferred Assets by a Person other than a HFC Entity or ownership and operation of the Transferred Assets by a Person other than a HFC Entity, or
|
(b)
|
any event or condition associated with the ownership and/or operation of the Transferred Assets by a Person other than a HFC Entity (including the presence of Hazardous Substances on, under, about or migrating to or from the Transferred Assets or the disposal or release of Hazardous Substances generated by operation of the Transferred Assets) including, the Environmental Costs;
|
(a)
|
any violation or correction of violation of Environmental Laws associated with the ownership or operation of the Transferred Assets by a Person other than a HEP Entity or ownership and operation of the Transferred Assets by a Person other than a HEP Entity,
or
|
(b)
|
any event or condition associated with ownership and/or operation of the Transferred Assets by a Person other than a HEP Entity (including, the presence of Hazardous Substances on, under, about or migrating to or from the Transferred Assets or the disposal or release of Hazardous Substances generated by operation of the Transferred Assets), including, the Environmental Costs.
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
(f)
|
(g)
|
(h)
|
TRANSFERRED ASSET AND CLOSING DATE
|
HFC ENVIRONMENTAL
(Expiration Date)
|
HEP ENVIRONMENTAL
|
RIGHT-OF-WAY
|
ADDITIONAL INDEMNITIES
|
OPERATIONAL
INDEMNITY
|
RIGHT OF
FIRST REFUSAL
|
INCLUDES TRANSFERRED TANKS
|
|
Indemnity from HFC to HEP for Pre-Closing Covered Environmental Losses under Section 3.2(a) / Aggregate cap on HFC environmental indemnity in Section 3.1(b)
(expiration date of indemnity)
|
Indemnity from HEP to HFC for Post-Closing Covered Environmental Losses under Section 3.4(a)
|
Right-of-Way Indemnity under Sections 3.2(a)(iii) and 3.2(a)(iv)
(expiration date of indemnity)
|
Additional Indemnities under Section 3.2(a)(vi)
(expiration date of indemnity) |
Additional Indemnities under Section 3.5
|
Right of First Refusal under Article V
|
|
2004 Product Pipelines, Terminal and Related Assets
(July 13, 2004)
|
$15,000,000
(July 13, 2014)
|
ü
|
ü
(July 13, 2014)
|
ü
(July 13, 2009)
|
ü
|
ü
|
No
|
8” and 10” Lovington/Artesia Intermediate Pipelines
(June 1, 2009)
|
$2,500,000
(June 1, 2019) |
ü
|
ü
(June 1, 2019)
|
ü
(June 1, 2014)
|
ü
|
ü
|
No
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
(f)
|
(g)
|
(h)
|
TRANSFERRED ASSET AND CLOSING DATE
|
HFC ENVIRONMENTAL
(Expiration Date)
|
HEP ENVIRONMENTAL
|
RIGHT-OF-WAY
|
ADDITIONAL INDEMNITIES
|
OPERATIONAL
INDEMNITY
|
RIGHT OF
FIRST REFUSAL
|
INCLUDES TRANSFERRED TANKS
|
Cheyenne Assets
(November 1, 2011)
|
$15,000,000
(November 1, 2021)
|
ü
|
ü
(November 1, 2021)
|
ü
(November 1, 2016)
|
ü
|
ü
|
Yes
|
El Dorado Assets
(November 1, 2011)
|
$15,000,000
(November 1, 2021) |
ü
|
ü
(November 1, 2021)
|
ü
(November 1, 2016)
|
ü
|
ü
|
Yes
|
UNEV Pipeline
(July 12, 2012)
|
None
|
ü
|
ü
(July 12, 2022)
|
ü
(July 12, 2017)
|
ü
|
None
|
No
|
El Dorado Refinery Assets
(November 1, 2015)
|
$15,000,000
(November 1, 2025)
|
ü
|
ü
(November 1, 2025)
|
ü
(November 1, 2020)
|
ü
|
ü
|
No
|
Osage
(February 22, 2016) |
None
|
None
|
None
|
None
|
None
|
None
|
No
|
Tulsa West Crude Tank Assets
(11:59 p.m., March 31, 2016)
|
$5,000,000
(11:59 p.m., March 31, 2026)
|
ü
|
None
|
ü
(11:59 p.m., March 31, 2021)
|
ü
|
ü
|
No
|
Woods Cross Refinery Assets
October 1, 2016
|
$15,000,000
October 1, 2026
|
ü
|
ü
October 1, 2026
|
ü
October 1, 2026
|
ü
|
ü
|
No
|
North Loco Tanks
(December 8, 2017)
|
None
|
None
|
None
|
None
|
None
|
ü
|
No
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
(f)
|
(g)
|
(h)
|
OTHER ASSET AND CLOSING DATE
|
HFC ENVIRONMENTAL
(Expiration Date)
|
HEP ENVIRONMENTAL
|
RIGHT-OF-WAY
|
ADDITIONAL INDEMNITIES
|
OPERATIONAL
INDEMNITY
|
RIGHT OF
FIRST REFUSAL
|
INCLUDES TRANSFERRED TANKS
|
|
Indemnity from HFC to HEP for Pre-Closing Covered Environmental Losses under Section 3.2(a) / Aggregate cap on HFC environmental indemnity in Section 3.1(b)
(expiration date of indemnity)
|
Indemnity from HEP to HFC for Post-Closing Covered Environmental Losses under Section 3.4(a)
|
Right-of-Way Indemnity under Sections 3.2(a)(iii) and 3.2(a)(iv)
(expiration date of indemnity)
|
Additional Indemnities under Section 3.2(a)(vi)(A)
(expiration date of indemnity) 1 |
Additional Indemnities under Section 3.5
|
Right of First Refusal under Article V
|
|
Malaga Pipeline System
(July 16, 2013, as amended by that certain Amended and Restated Transportation Services Agreement dated September 26, 2014)
|
None
|
ü
|
None
|
None
|
ü
|
ü
|
No
|
El Dorado New Tank (Tank 647)
(January 7, 2014)
|
None
|
ü
|
ü
(January 7, 2024)
|
None
|
ü
|
ü
|
No
|
Artesia Rail Yard Facility
(November 1, 2014) |
None
|
ü
|
None
|
None
|
ü
|
ü
|
No
|
El Dorado Terminal
(March 6, 2015)
|
None
|
ü
|
None
|
None
|
ü
|
ü
|
No
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
(f)
|
(g)
|
(h)
|
OTHER ASSET AND CLOSING DATE
|
HFC ENVIRONMENTAL
(Expiration Date)
|
HEP ENVIRONMENTAL
|
RIGHT-OF-WAY
|
ADDITIONAL INDEMNITIES
|
OPERATIONAL
INDEMNITY
|
RIGHT OF
FIRST REFUSAL
|
INCLUDES TRANSFERRED TANKS
|
Beeson to Lovington System Expansion (March 12, 2015)
|
None
|
ü
|
None
|
None
|
ü
|
ü
|
No
|
Artesia Blending Facility
(March 12, 2015)
|
None
|
ü
|
ü
(March 12, 2025)
|
None
|
ü
|
ü
|
No
|
Cheyenne New Tank (Tank 117)
(December 4, 2014)
|
None
|
ü
|
ü
(December 4, 2029)
|
None
|
ü
|
ü
|
No
|
Tulsa New Tanks
(Tanks 45 and 444A)
(May 1, 2016)
|
None
|
ü
|
ü
(May 1, 2026)
|
None
|
ü
|
ü
|
No
|
El Dorado New Tank (Tank 651)
(September 12, 2016)
|
None
|
ü
|
ü
(September 12, 2026)
|
None
|
ü
|
ü
|
No
|
SLC Pipeline
(October 31, 2017)
|
None
|
None
|
None
|
None
|
None
|
ü
|
No
|
Frontier Aspen Pipeline
(October 31, 2017)
|
None
|
None
|
None
|
None
|
None
|
ü
|
No
|
NWNAL Assets
(October 31, 2017)
|
None
|
None
|
None
|
None
|
None
|
ü
|
No
|
Achieved DCF/Unit
Equals |
Performance Percentage (%) to be Multiplied by Performance Units
|
Base DCF/Unit or less
|
50%
|
Target DCF/Unit
|
100%
|
Incentive DCF/Unit
|
150%
|
Vesting Schedule
:
|
The restrictions on all of the Phantom Units granted pursuant to the Agreement will expire and the Phantom Units will vest according to the following schedule (or on the first business day thereafter if the date below falls on a weekend) (each such date, a “
Regular Vesting Date
”); provided, that (except as otherwise provided in Section 5 of your Agreement) you remain in the employ of the Company or its subsidiaries continuously from the Date of Grant through such Regular Vesting Dates (as determined under the Agreement).
|
On Each of the Following Regular Vesting Dates
|
Cumulative Portion of Phantom Units that will become Vested
|
December 15, 2018
|
One-third
|
December 15, 2019
|
One-third
|
December 15, 2020
|
One-third
|
(1)
|
Registration Statement (Form S-3 No. 333-204609) of Holly Energy Partners, L.P. and pertaining to the sale of common unitholders of Holly Energy Partners, L.P.,
|
(2)
|
Registration Statement (Form S-3 ASR No. 333-214622) pertaining to the sale of common units on behalf of selling unitholders of Holly Energy Partners, L.P., and
|
(3)
|
Registration Statement (Form S-8 No. 333-182865) of Holly Energy Partners, L.P.
|
1.
|
I have reviewed this annual report on Form 10-K of Holly Energy Partners, L.P.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):
|
a.
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: February 21, 2018
|
|
/s/ George J. Damiris
|
|
|
George J. Damiris
|
|
|
President and Chief Executive Officer
|
1.
|
I have reviewed this annual report on Form 10-K of Holly Energy Partners, L.P.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):
|
a.
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: February 21, 2018
|
|
/s/ Richard L. Voliva III
|
|
|
Richard L. Voliva III
|
|
|
Senior Vice President and
Chief Financial Officer
|
Date: February 21, 2018
|
|
/s/ George J. Damiris
|
|
|
George J. Damiris
|
|
|
President and Chief Executive Officer
|
|
|
|
|
|
|
1.
|
The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Date: February 21, 2018
|
|
/s/ Richard L. Voliva III
|
|
|
Richard L. Voliva III
|
|
|
Senior Vice President and
Chief Financial Officer
|