8-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K
CURRENT REPORT

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

Date of Report (Date of earliest event reported): June 22, 2005

HOLLY ENERGY PARTNERS, L.P.

(Exact name of Registrant as specified in its charter)

Delaware
(State or other
jurisdiction of incorporation) 001-32225
(Commission File Number) 20-0833098
(I.R.S. Employer
Identification Number)

100 Crescent Court,
Suite 1600
Dallas, Texas
(Address of principal
executive offices) 75201-6927
(Zip code)

Registrant’s telephone number, including area code: (214) 871-3555

Not applicable
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 7.01 Regulation FD Disclosure.

      The following information is furnished pursuant to Item 7.01, “Regulation FD Disclosure.”

      Furnished as Exhibits 99.1 and 99.2, and incorporated herein by reference in their entirety, are copies of the sections “Risk factors” and “The proposed intermediate pipelines transaction,” respectively, contained in the offering memorandum dated June 14, 2005 relating to Holly Energy Partners, L.P.’s (the “Partnership”) previously announced private offering of an additional $35,000,000 principal amount of its 6.25% Senior Notes due 2015.

      In accordance with General Instruction B.2. of Form 8-K, the information furnished in this report on Form 8-K, including Exhibits 99.1 and 99.2, shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934 (“Exchange Act”), or otherwise subject to the liabilities of that section, unless the Partnership specifically incorporates it by reference in a document filed under the Exchange Act or the Securities Act of 1933. By filing this report on Form 8-K and furnishing this information, the Partnership makes no admission as to the materiality of any information in this report, including Exhibits 99.1 and 99.2, or that any such information includes material investor information that is not otherwise publicly available.

      The information contained in this report on Form 8-K, including the information contained in Exhibits 99.1 and 99.2, is intended to be considered in the context of the Partnership’s Securities and Exchange Commission’s (“SEC”) filings and other public announcements that the Partnership may make, by press release or otherwise, from time to time. The Partnership disclaims any current intention to revise or update the information contained in this report, including the information contained in Exhibits 99.1 and 99.2, although the Partnership may do so from time to time as its management believes is warranted. Any such updating may be made through the furnishing or filing of other reports or documents with the SEC, through press releases or through other public disclosure.

Item 9.01 Financial Statements and Exhibits.

99.1	—	Section entitled “Risk factors” in the offering memorandum.*
99.2	—	Section entitled “The proposed intermediate pipelines transaction” in the offering memorandum.*

* Furnished pursuant to Regulation FD.

SIGNATURES

      Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

HOLLY ENERGY PARTNERS, L.P.
By:	HEP Logistics Holdings, L.P. its General Partner
	By:	Holly Logistic Services, L.L.C. its General Partner
		By:	/s/ Scott C. Surplus
			Scott C. Surplus Vice President & Controller

Date: June 22, 2005

EXHIBIT INDEX

Exhibit
Number		Exhibit Title
99.1	—	Section entitled “Risk factors” in the offering memorandum.*
99.2	—	Section entitled “The proposed intermediate pipelines transaction” in the offering memorandum.*

* Furnished pursuant to Regulation FD.

EX-99.1

Exhibit 99.1

Risk factors

This offering involves a high degree of risk, including the risks described below and other risks described in the offering memorandum for the existing notes, our Quarterly Report on Form 10-Q for the quarter ended March 31, 2005 and our Annual Report on Form 10-K for the year ended December 31, 2004, each of which is included as an exhibit to this offering memorandum, and the risks described in any other documents incorporated by reference into this offering memorandum. You should carefully consider all of these risks together with all of the other information included in this offering memorandum and the documents incorporated by reference herein before deciding to invest in the notes offered hereby. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially and adversely affect our business operations. If any of the following risks actually occurs, our business, financial condition or results of operations could be materially and adversely affected. In that event, we may be unable to pay interest on, or the principal of, the notes. In that event, you may lose all of part of your investment.

RISKS RELATED TO THE PROPOSED INTERMEDIATE PIPELINES TRANSACTION

We may not be able to complete the proposed intermediate pipelines transaction or realize the expected benefits of our proposed acquisition of the intermediate pipelines from Holly Corporation.

On June 10, 2005, our board of directors approved the acquisition of the intermediate pipelines from Holly Corporation. However, the completion of the proposed transaction is subject to the execution of definitive agreements, regulatory approval and certain other customary closing conditions and may not occur or may take longer to complete than we anticipate. Even if completed, the acquisition of the intermediate pipelines and any other future acquisitions may not produce the revenues, earnings or business synergies that we anticipate and our expectations regarding the revenues and operating cash flow resulting from our proposed acquisition of the intermediate pipelines from Holly Corporation may prove to be incorrect. Pursuant to the pipelines agreement we plan to enter into with Holly Corporation, Holly Corporation would be obligated to meet its minimum revenue commitment of $3.0 million per quarter. If Holly Corporation is unable to meet its minimum revenue commitment for any reason, our revenues and operating cash flow from these assets will be lower than expected. As a result, our revenues and operating cash flow could be adversely affected.

Following the proposed acquisition of the intermediate pipelines from Holly Corporation, our dependence upon Holly and its Navajo Refinery will increase.

Upon the completion of the proposed acquisition of the intermediate pipelines from Holly Corporation, we expect the percentage of our total revenues attributable to Holly Corporation to be approximately 58%. We expect to continue to derive a majority of our revenues from Holly Corporation and its Navajo Refinery for the foreseeable future. If those revenues decline, we could suffer a material adverse effect on our results of operations which could affect our ability to pay interest on, or the principal of, the notes.

We may incur substantial environmental costs and liabilities as a result of our proposed acquisition of the intermediate pipelines from Holly Corporation.

Some of the pipelines to be acquired in our proposed transaction with Holly Corporation have been used for many years to distribute, store or transport petroleum products, and releases may have occurred from Holly Corporation’s pipeline rights-of-way that require remediation. In addition, releases may have occurred in the past that have not yet been discovered, which could require costly future remediation. In connection with the proposed acquisition, Holly Corporation has agreed to amend the omnibus agreement between us that requires Holly Corporation to indemnify us for certain environmental costs and liabilities, including with respect to the intermediate pipelines if we acquire them, to increase the maximum liability cap to $17.5 million. The first $15 million of the maximum liability cap would apply to environmental costs and liabilities associated with the intermediate pipelines and the assets contributed to us by Holly Corporation at the time of our initial public offering, and the amount of the maximum liability cap between $15 million and $17.5 million will only be available to indemnify us for environmental costs and liabilities associated with the intermediate pipelines. Additionally, we would have ten years from the date of our acquisition of the intermediate pipelines to notify Holly Corporation of any claims. If indemnification is not available for any pre-closing conditions such as a significant release or event or if Holly Corporation refuses or is unable to comply with its indemnification obligations, it could adversely affect our financial position and results of operations.

If we do not complete our proposed acquisition from Holly Corporation, the proceeds of the offering will be used for other purposes and holders of the notes offered hereby will not benefit from the increased revenues and cash flows that we expect following this acquisition.

If our proposed acquisition of the intermediate pipelines is not completed for any reason, we will use the proceeds of the offering for general partnership purposes rather than to fund a portion of the cash consideration to acquire the intermediate pipelines from Holly Corporation. If this occurs, we will not receive the anticipated benefits of adding Holly Corporation’s intermediate pipelines to our existing business, including increased revenues and cash flows that we expect to receive from these pipelines.

EX-99.2

Exhibit 99.2

The proposed intermediate pipelines transaction

Substantially all of the information presented below regarding the proposed acquisition of the intermediate pipelines from Holly Corporation is based on information provided to us by Holly Corporation in connection with the proposed acquisition of these assets.

OVERVIEW

On June 10, 2005, we announced that our board of directors had approved a proposed transaction for us to acquire Holly Corporation’s intermediate pipelines which connect its Lovington, New Mexico and Artesia, New Mexico refining facilities. The proposed transaction was also approved by our Conflicts Committee, which is comprised solely of independent outside directors. The intermediate pipelines consist of two parallel pipelines, an 8-inch and a 10-inch pipeline, which originate in Lovington, New Mexico and terminate at the Artesia refining facility. The pipelines are 65 miles in length and have a current aggregate throughput capacity of 84,000 bpd. The proposed intermediate pipelines transaction is being made pursuant to an option to purchase the intermediate pipelines granted by Holly Corporation to us at the time of our initial public offering in July 2004.

The proposed purchase price for the intermediate pipelines is $81.5 million, at least 90% of which will be paid in cash and the remaining amount through the transfer of our common units to Holly Corporation. We expect to use the proceeds of this offering as part of the financing for the cash portion of the proposed purchase price for the intermediate pipelines. For further detail on the financing of the proposed intermediate pipelines transaction, please read “—Financing.” Following the proposed transaction, we would expend approximately $3.5 million to expand the capacity of the intermediate pipelines to meet the needs of the previously announced expansion of Holly’s Navajo Refinery.

Except under certain circumstances, the proposed purchase and sale agreement with Holly Corporation for the intermediate pipelines would restrict our ability to sell the intermediate pipelines, and from repaying the notes offered hereby other than pursuant to their terms, prior to March 1, 2015.

In connection with the proposed intermediate pipelines transaction, we expect to enter into a 15-year pipelines agreement with Holly Corporation. Under this proposed agreement, Holly Corporation would transport on the pipelines 72,000 bpd of intermediate products that, at the agreed tariff rates, would result in minimum revenues to us of approximately $3.0 million per calendar quarter. This minimum commitment would increase each year at a rate equal to the percentage change in the producer price index, but would not decrease as a result of a decrease in the producer price index. For all barrels shipped in excess of 72,000 bpd up to and including 95,000 bpd, the tariff Holly Corporation would pay per barrel would be reduced from the full base tariff of $0.45 per barrel to $0.25 per barrel, except that for any non-Holly Corporation owned barrels shipped on the intermediate pipelines, the full base tariff would be due. The full base tariff would be adjusted each year at a rate equal to the percentage change in the producer price index. We may grant Holly Corporation a second mortgage on the intermediate pipelines to secure our performance under the proposed pipelines agreement. Additionally, Holly Corporation would have a right of first refusal to purchase the intermediate pipelines should we decide to sell them in the future.

DESCRIPTION OF THE INTERMEDIATE PIPELINES

The following table sets forth certain operating data for each of the intermediate pipelines that we propose to acquire. Throughput is the total average number of barrels per day transported on a pipeline, but does not aggregate barrels moved between different points on the same pipeline. The capacity of the intermediate pipelines is based on the throughput capacity for barrels of gasoline equivalent that may be transported in the existing configuration; in some cases, this includes the use of drag reducing agents. Holly Corporation is the only shipper on each of these pipelines.

									Year ended
									December 31,
									2004
			Approximate						Average			Average
	Diameter		length		Tariff(1)		Capacity		capacity			throughput
Origin and Destination	(inches)		(miles)		($/bbl)		(bpd)		utilization			(bpd)
Intermediate Product
Pipelines:
Lovington, NM to Artesia, NM		8		65	$	.45		24,000		75	%		18,052
Lovington, NM to Artesia, NM		10		65	$	.45		60,000		61	%		36,794

(1) Represents the initial tariff rate under the proposed pipelines agreement. These tariffs are reduced in the event certain throughput levels are achieved.

For the year ended December 31, 2004, Holly Corporation accounted for all of the product volumes transported on the intermediate pipelines.

8” pipeline, from Lovington, NM to Artesia, NM. The eight-inch diameter pipeline was constructed in 1981. This pipeline is used for the shipment of intermediate feedstocks and crude oil from Holly Corporation’s Lovington, New Mexico facility to Holly Corporation’s Artesia, New Mexico facility.

10” pipeline, from Lovington, NM to Artesia, NM. The ten-inch diameter pipeline was constructed in 1999. This pipeline is used for the shipment of intermediate feedstocks and crude oil from Holly Corporation’s Lovington, New Mexico facility to Holly Corporation’s Artesia, New Mexico facility.

PROPOSED PURCHASE AND SALE AGREEMENT

We expect to enter into a purchase and sale agreement with Holly Corporation that would provide for the transfer of the intermediate pipelines to us. The closing of the proposed intermediate pipelines transaction would be subject to the following conditions:

†	the absence of any law, order or injunction prohibiting the proposed transaction;
†	the absence of any action or enactment of any law by any governmental entity that makes the completion of the proposed transaction illegal;
†	the expiration or termination of the applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended;
†	the receipt of governmental consents required for each party to complete the proposed transaction;

†	the accuracy of Holly Corporation’s representations and warranties except as would not, in the aggregate, result in a material adverse effect upon Holly Corporation or the intermediate pipelines;
†	the accuracy of our representations and warranties except as would not, in the aggregate, result in a material adverse effect upon us;
†	the performance in all material respects of each party’s covenants and agreements required to be performed at or prior to the completion of the proposed transaction;
†	the receipt of the consent of our lenders under our credit agreement;
†	the results of any searches, surveys, tests or inspections conducted by us on the intermediate pipelines being, in our reasonable opinion, satisfactory;
†	four receipt of net proceeds in an amount sufficient to fund the cash portion of the proposed purchase price plus transaction costs from any source of financing acceptable to us;
†	the approval for listing by the New York Stock Exchange, subject to official notice of issuance, of our common units that we expect to issue to Holly Corporation in connection with the proposed transaction; and
†	fother customary closing conditions relating to the delivery of certain closing documents.

Either party would be able to terminate the proposed purchase and sale agreement in the event of:

†	any order by a governmental entity permanently prohibiting the proposed transaction;
†	a breach by the other party that would cause the failure of the conditions relating to the accuracy of representations and warranties or performance of covenants and agreements at the closing that had not been cured within 20 days of notice of the failure; and
†	the failure of the closing to occur within 90 days of the date of the proposed purchase and sale agreement.

In connection with our initial public offering and the assets contributed to us by Holly Corporation at that time, we entered into an omnibus agreement with Holly Corporation under which it agreed to indemnify us for ten years after the closing of our initial public offering against certain potential environmental liabilities associated with the operation of the assets and occurring before the closing date. Holly Corporation’s indemnification obligation under the omnibus agreement is subject to a $200,000 deductible and $15.0 million maximum liability cap, which also applies to any pre-existing environmental costs and liabilities associated with the intermediate pipelines that we expect to acquire in the proposed intermediate pipelines transaction. We would have ten years from the date of the proposed acquisition of the intermediate pipelines to notify Holly Corporation of any indemnification claims with regard to the intermediate pipelines. Under the proposed purchase and sale agreement Holly Corporation would agree to amend the omnibus agreement to increase the maximum liability cap for environmental claims with regard to the intermediate pipelines to $17.5 million. The first $15.0 million of the cap would apply to environmental costs and liabilities associated with both the intermediate pipelines and the assets contributed to us by Holly Corporation at the time of our initial public offering, while the cap between

$15.0 million and $17.5 million would apply only to environmental costs and liabilities associated with the intermediate pipelines.

Pursuant to the requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, we filed a Notification and Report Form with respect to the proposed intermediate pipelines transaction with the Antitrust Division of the Department of Justice and the Federal Trade Commission on June 2, 2005. As a result, the waiting period applicable to the proposed transaction will expire at 11:59 p.m., New York City time, on July 5, 2005, absent a second request from either of these agencies or its earlier termination.

PROPOSED PIPELINES AGREEMENT

In connection with the proposed intermediate pipelines transaction, we expect to enter into a 15-year pipelines agreement with Holly Corporation. The proposed pipelines agreement would be able to be extended by the mutual agreement of the parties, provided that any party desiring to extend the agreement provides the other party with at least 12 months written notice of its request to extend the agreement. For one year following the termination without renewal of the pipelines agreement, Holly Corporation would have a limited right of first refusal giving it the right to enter into a new pipelines agreement with us on commercial terms that substantially match the terms offered to us by a third-party. Holly Corporation would have a right of first refusal to purchase the intermediate pipelines should we decide to sell them in the future.

Under the proposed pipelines agreement, Holly Corporation would transport on the intermediate pipelines 72,000 bpd of intermediate products that, at the agreed tariff rates, would result in minimum revenues to us of approximately $3.0 million per calendar quarter. This minimum commitment would increase each year at a rate equal to the percentage change in the producer price index, but would not decrease as a result of a decrease in the producer price index. For all barrels shipped in excess of 72,000 bpd up to and including 95,000 bpd, the tariff Holly Corporation would pay per barrel would be reduced from the full base tariff of $0.45 per barrel to $0.25 per barrel, except that for any non-Holly Corporation owned barrels shipped on the intermediate pipelines the full base tariff would be due. The full base tariff would be adjusted each year at a rate equal to the percentage change in the producer price index. Holly Corporation’s minimum revenue commitment would apply only to the intermediate pipelines as of the closing date of the proposed transaction, and Holly Corporation would not be able to spread its minimum revenue commitment among pipeline assets we already own or subsequently acquire. If Holly Corporation fails to meet its minimum revenue commitment in any quarter, it would be required to pay us in cash the amount of any shortfall by the last day of the month following the end of the quarter. A shortfall payment would be applied as a credit in the following four quarters after Holly Corporation’s minimum obligations were met.

At Holly Corporation’s request, we would be required to use our commercially reasonable efforts to transport by pipeline each month during the term of the proposed pipelines agreement up to 72,000 bpd, subject to our common carrier duty to pro-ration capacity, where applicable.

If new laws or regulations are enacted that would require us to make substantial and unanticipated capital expenditures with regard to the intermediate pipelines, we would have the right to amend the tariff rates to recover our costs of complying with these new laws or regulations (including a reasonable rate of return). We and Holly Corporation would be required to negotiate in good faith to mitigate the economic costs associated with these new laws and to determine the amount of the new tariff rate.

Either party to the proposed pipelines agreement would be able to temporarily suspend its obligations during the occurrence of an event that is outside its control and renders its performance impossible for at least 30 days. An event with a duration of longer than one year would allow us or Holly Corporation to terminate the proposed pipelines agreement.

Holly Corporation would agree not to challenge, or to cause others to challenge or assist others in challenging, our tariff rates for the term of the proposed intermediate pipelines agreement. This agreement would not prevent other current or future shippers from challenging our tariff rates. At the termination of the agreement, Holly Corporation would be free to challenge, or to cause others to challenge or assist others in challenging, our tariff rates.

During the term of the proposed pipelines agreement, we would agree not to reverse the direction of the intermediate pipelines or to connect any other pipelines to the intermediate pipelines without the consent of Holly Corporation. Holly Corporation would have the right to reverse the direction of either intermediate pipeline, so long as Holly Corporation agrees to reimburse us for the additional costs and expenses we would incur as a result of changing the direction of either intermediate pipeline and to pay a flow reversal rate of $0.45 per barrel for any product shipped in a reversed direction on either intermediate pipeline. Such flow reversal rates would be adjusted each year at a rate equal to the percentage change in the producer price index.

Holly Corporation’s obligations under the proposed intermediate pipelines agreement would not terminate if Holly Corporation and its affiliates no longer own our general partner. The agreement would also be assignable by Holly Corporation only with the consent of our Conflicts Committee, which consent would not be unreasonably withheld.

If we enter into the proposed pipelines agreement and Holly Corporation does not extend the agreement or enter into a new pipelines agreement with us on substantially similar or better terms for us, our financial condition and results of operations may be adversely affected. If we consummate the proposed intermediate pipelines transaction, we would purchase the intermediate pipelines primarily to service Holly Corporation’s refining needs at its Lovington, New Mexico and Artesia, New Mexico refining facilities. Because the intermediate pipelines are well-situated to suit such refining needs, we would expect Holly Corporation to extend the proposed pipelines agreement or enter into a new pipelines agreement with us. However, we cannot assure you that Holly Corporation would continue to use the intermediate pipelines or that we would be able to generate sufficient revenues from third parties should Holly Corporation not extend the proposed pipelines agreement or enter into a new pipelines agreement with us.

From time to time Holly Corporation considers changes to its refineries. Those changes may involve new facilities, reduction in certain operations or modifications of facilities or operations. Changes may be considered to meet market demands, to satisfy regulatory requirements or environmental and safety objectives, to improve operational efficiency or for other reasons. Holly Corporation has advised us that although it continually considers the types of matters referred to above, it currently does not intend to close or dispose of the refineries currently served by the intermediate pipelines or to cause any changes that would have a material adverse effect on us. Holly Corporation is, however, actively managing its assets and operations, and, therefore, changes of some nature, possibly material to us, are likely to occur at some point in the future.

NO HISTORICAL FINANCIAL INFORMATION

Historically, the intermediate pipelines we propose to acquire from Holly Corporation have been operated as part of its more extensive transportation, terminalling, crude oil and refined and intermediate products operations. As a result, Holly Corporation has not maintained complete and separate financial statements for these assets.

FINANCING

The proposed purchase price for the intermediate pipelines is $81.5 million, at least 90% of which would be paid in cash and the remaining amount through the transfer of our common units to Holly Corporation. We intend to fund the cash portion of the proposed purchase price principally from the proceeds of a private sale of up to 1.2 million of our common units to institutional investors, as well as from the proceeds of this offering. We also may finance a portion of the purchase price from existing working capital. In connection with the proposed intermediate pipelines transaction, we also anticipate amending our existing credit agreement to allow for the proposed transaction as well as amend certain other provisions of our existing credit agreement subject to the consent of a majority of our lenders. We currently do not have any amounts borrowed under our credit agreement. Based on preliminary discussions with our agent bank, we believe we can successfully amend our credit agreement. However, there can be no assurance that sufficient financing can be arranged, our bank credit agreement will be amended or that the proposed intermediate pipelines transaction will occur. The sale of the notes offered hereby is not conditioned on the consummation of the proposed transaction, the amendment of our credit agreement or the private equity financing. In the event the proposed intermediate pipelines transaction is not consummated, the proceeds from the notes offered hereby may be used for general partnership purposes, including future acquisitions.