Acquisitions

2011 Acquisition

Legacy Frontier Tankage and Terminal Asset Transaction

On November 9, 2011, we acquired from HFC certain tankage, loading rack and crude receiving assets located at HFC’s El Dorado and Cheyenne refineries. We paid non-cash consideration consisting of promissory notes with an aggregate principal amount of $150 million and 3,807,615 of our common units. In connection with the transaction, we entered into 15-year throughput agreements with HFC that result in minimum annual revenue commitments to us of $47 million. This transaction meets the criteria of a business combination under GAAP. Since we are a consolidated variable interest entity of HFC, we accounted for this transaction as a business combination between entities under common control and therefore, we have recorded this transfer at HFC’s cost basis. In addition, we have retrospectively adjusted our operating results as if HFC had contributed these assets to us on July 1, 2011 (date of HFC’s merger with Frontier Oil Corporation). We recorded properties and equipment of $88.1 million, goodwill of $207.4 million and a non-cash capital contribution of $295.5 million, representing HFC’s cost basis in the acquired assets. On November 9, 2011, we recorded a $150 million liability representing the promissory notes issued to HFC at the time of the closing of this transaction and a corresponding decrease to HFC’s non-cash contribution.

For the year ended December 31, 2011, our consolidated statement of income includes revenues of $7.1 million and net income of $1.6 million that are attributable to the operations of these assets. Although these assets did not generate revenues prior to November 9, 2011, our operating results include operating costs and depreciation expense of these assets beginning July 1, 2011 of which $3.8 million was incurred by HFC prior to our acquisition date. Of this amount, $2.3 million represents actual cash operating costs incurred by HFC and not by us, which we have recorded as additional non-cash capital contribution.

Assuming this acquisition had occurred on January 1, 2010 and our throughput agreements with HFC were in effect at this time, pro forma revenues, net income and earnings per unit are estimated to have been as follows:



	Years Ended December 31,
	2011		2010
	(In thousands) (Unaudited)
Revenues	$	253,679	$	229,113
Net income	$	109,087	$	90,828
Basic and diluted earnings per unit	$	3.46	$	2.94

2010 Acquisitions

Tulsa East / Lovington Storage Asset Transaction

On March 31, 2010, we acquired from HFC certain storage assets for $88.6 million consisting of hydrocarbon storage tanks having approximately 2 million barrels of storage capacity, a rail loading rack and a truck unloading rack located at HFC’s Tulsa refinery east facility. Also, as part of this same transaction, we acquired HFC’s asphalt loading rack facility located at its Navajo refinery facility in Lovington, New Mexico for $4.4 million.

In accounting for these 2010 acquisitions from HFC, we recorded total property and equipment at HFC’s historical basis of $35.5 million and the purchase price in excess of HFC’s basis in the assets of $57.6 million as a decrease to our partners’ equity.

2009 Acquisitions

Sinclair Logistics and Storage Asset Transaction

On December 1, 2009, we acquired from an affiliate of Sinclair Oil Company (“Sinclair”) storage tanks having approximately 1.4 million barrels of storage capacity and loading racks at its refinery located in Tulsa, Oklahoma for $79.2 million. The purchase price consisted of $25.7 million in cash, including $4.2 million in taxes and 1,373,609 of our common units having a fair value of $53.5 million. Separately, HFC, also a party to the transaction acquired Sinclair’s Tulsa refinery.

With respect to this purchase, we recorded $30.2 million in properties and equipment, $49.1 million in goodwill and $0.2 million in other long-term liabilities. The value of the acquired assets, which does not include goodwill, is based on fair value using a cost approach methodology.

Roadrunner / Beeson Pipelines Transaction

Also on December 1, 2009, we acquired from HFC two newly constructed pipelines for $46.5 million, consisting of a 65-mile, 16-inch crude oil pipeline (the “Roadrunner Pipeline”) that connects the Navajo refinery facility located in Lovington, New Mexico to a terminus of Centurion Pipeline L.P.’s pipeline extending between west Texas and Cushing, Oklahoma and a 37-mile, 8-inch crude oil pipeline that connects our New Mexico crude oil gathering system to the Navajo refinery Lovington facility (the “Beeson Pipeline”).

Tulsa West Loading Racks Transaction

On August 1, 2009, we acquired from HFC for $17.5 million certain truck and rail loading/unloading facilities located at HFC’s Tulsa refinery west facility. The racks load refined products and lube oils produced at the Tulsa refinery onto rail cars and/or tanker trucks.

Lovington-Artesia Pipeline Transaction

On June 1, 2009, we acquired from HFC a newly constructed 16-inch intermediate pipeline for $34.2 million. The pipeline runs 65 miles from the Navajo refinery’s crude oil distillation and vacuum facilities in Lovington, New Mexico to its petroleum refinery located in Artesia, New Mexico.

In accounting for our 2009 acquisitions from HFC, consisting of the Roadrunner and Beeson Pipelines, the Tulsa west loading rack facilities and 16-inch intermediate pipeline as discussed above, we recorded total property and equipment of $95.1 million representing HFC’s historical basis in the transferred assets. The $3.1 million aggregate purchase price in excess of HFC’s historical basis in the assets was recorded as a decrease to our partners’ equity.

SLC Pipeline Joint Venture Interest

On March 1, 2009, we acquired a 25% joint venture interest in the SLC Pipeline, a new 95-mile intrastate pipeline system that we jointly own with All American Pipeline, L.P. (“Plains”). The total cost of our investment in the SLC Pipeline was $28 million, consisting of the capitalized $25.5 million joint venture contribution and the $2.5 million finder’s fee paid to HFC that was expensed as acquisition costs.