Partners' Equity

6 Months Ended

Jun. 30, 2012

Partners' Capital [Abstract]

Partners' Equity

Partners’ Equity

As of June 30, 2012, HFC held 11,097,615 of our common units and the 2% general partner interest, which together constituted a 42% ownership interest in us. On July 12, 2012, we issued HFC 1,029,900 of our common units as partial consideration for our acquisition of its 75% interest in UNEV, which increased HFC's ownership interest in us to 44%, inclusive of the general partner interest.

Allocations of Net Income

Net income attributable to HEP 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 includes incentive distributions that are declared subsequent to quarter end. After the amount of incentive distributions is allocated to the general partner, the remaining net income attributable to HEP is allocated to the partners based on their weighted-average ownership percentage during the period.

The following table presents the allocation of the general partner interest in net income for the periods presented below:

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
	(In thousands)
General partner interest in net income	$	352	$	310	$	688	$	547
General partner incentive distribution	5,565		3,537		10,737		6,862
Total general partner interest in net income	$	5,917	$	3,847	$	11,425	$	7,409

Cash Distributions

Our general partner, HEP Logistics, is entitled to incentive distributions if the amount we distribute with respect to any quarter exceeds specified target levels.

On July 25, 2012, we announced our cash distribution for the second quarter of 2012 of $0.91 per unit. The distribution is payable on all common and general partner units and will be paid August 14, 2012 to all unitholders of record on August 7, 2012.

The following table presents the allocation of our regular quarterly cash distributions to the general and limited partners for the periods in which they apply. Our distributions are declared subsequent to quarter end; therefore, the amounts presented do not reflect distributions paid during the periods presented below.

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
	(In thousands, except per unit data)
General partner interest	$	622	$	462	$	1,227	$	915
General partner incentive distribution	5,565		3,537		10,737		6,862
Total general partner distribution	6,187		3,999		11,964		7,777
Limited partner distribution	24,899		19,098		49,387		37,975
Total regular quarterly cash distribution	$	31,086	$	23,097	$	61,351	$	45,752
Cash distribution per unit applicable to limited partners	$	0.910	$	0.865	$	1.805	$	1.720

As a master limited partnership, we distribute our available cash, which historically has exceeded our net income because depreciation and amortization expense represents a non-cash charge against income. The result is a decline in our partners’ equity since our regular quarterly distributions have exceeded our quarterly net income. Additionally, if the assets contributed and acquired from HFC had occurred while we were not a consolidated variable interest entity of HFC, our acquisition cost in excess of HFC’s historical basis in the transferred assets of $295.6 million, exclusive of depreciation and amortization, (as of June 30, 2012) would have been recorded in our financial statements as increases to our properties and equipment and intangible assets instead of decreases to our partners’ equity.