Segment Information

6 Months Ended

Jun. 30, 2020

Our operations are organized into three reportable segments, Refining, Lubricants and Specialty Products and HEP. Our operations that are not included in the Refining, Lubricants and Specialty Products and HEP segments are included in Corporate and Other. Intersegment transactions are eliminated in our consolidated financial statements and are included in Eliminations. Corporate and

Other and Eliminations are aggregated and presented under the Corporate, Other and Eliminations column.

The Refining segment represents the operations of the El Dorado, Tulsa, Navajo, Cheyenne and Woods Cross Refineries and HFC Asphalt (aggregated as a reportable segment). Refining activities involve the purchase and refining of crude oil and wholesale and branded marketing of refined products, such as gasoline, diesel fuel and jet fuel. These petroleum products are primarily marketed in the Mid-Continent, Southwest and Rocky Mountain regions of the United States. HFC Asphalt operates various asphalt terminals in Arizona, New Mexico and Oklahoma.

The Lubricants and Specialty Products segment involves PCLI’s production operations, located in Mississauga, Ontario, that includes lubricant products such as base oils, white oils, specialty products and finished lubricants, and the operations of our Petro- Canada Lubricants business that includes the marketing of products to both retail and wholesale outlets through a global sales network with locations in Canada, the United States, Europe and China. Additionally, the Lubricants and Specialty Products segment includes specialty lubricant products produced at our Tulsa Refineries that are marketed throughout North America and are distributed in Central and South America and Red Giant Oil, one of the largest suppliers of locomotive engine oil in North America. Also, effective with our acquisition that closed February 1, 2019, the Lubricants and Specialty Products segment includes Sonneborn, a producer of specialty hydrocarbon chemicals such as white oils, petrolatums and waxes with manufacturing facilities in the United States and Europe.

The HEP segment includes all of the operations of HEP, which owns and operates logistics and refinery assets consisting of petroleum product and crude oil pipelines, terminals, tankage, loading rack facilities and refinery processing units in the Mid-Continent, Southwest and Rocky Mountain regions of the United States. As of June 30, 2020, the HEP segment also includes a 75% ownership interest in UNEV (a consolidated subsidiary of HEP) and 50% ownership interests in each of the Osage Pipeline, the Cheyenne Pipeline and Cushing Connect. Revenues from the HEP segment are earned through transactions with unaffiliated parties for pipeline transportation, rental and terminalling operations as well as revenues relating to pipeline transportation services provided for our refining operations. Due to certain basis differences, our reported amounts for the HEP segment may not agree to amounts reported in HEP’s periodic public filings.

The accounting policies for our segments are the same as those described in the summary of significant accounting policies in our Annual Report on Form 10-K for the year ended December 31, 2019.



	Refining			Lubricants and Specialty Products			HEP		Corporate, Other and Eliminations			Consolidated Total
	(In thousands)
Three Months Ended June 30, 2020
Sales and other revenues:
Revenues from external customers	$	1,690,042		$	353,644		$	19,244	$	—		$	2,062,930
Intersegment revenues	37,462			3,643			95,563		(136,668		)	—
	$	1,727,504		$	357,287		$	114,807	$	(136,668	)	$	2,062,930
Cost of products sold (exclusive of lower of cost or market inventory)	$	1,433,437		$	258,347		$	—	$	(114,788	)	$	1,576,996
Lower of cost or market inventory valuation adjustment	$	(269,904	)	$	—		$	—	$	—		$	(269,904	)
Operating expenses	$	239,359		$	47,840		$	34,737	$	(18,577	)	$	303,359
Selling, general and administrative expenses	$	32,811		$	35,919		$	2,535	$	4,104		$	75,369
Depreciation and amortization	$	81,694		$	19,779		$	24,008	$	4,697		$	130,178
Long-lived asset impairment ⁽¹⁾	$	215,242		$	204,708		$	16,958	$	—		$	436,908
Income (loss) from operations	$	(5,135	)	$	(209,306	)	$	36,569	$	(12,104	)	$	(189,976	)
Earnings of equity method investments	$	—		$	—		$	2,156	$	—		$	2,156
Capital expenditures	$	12,102		$	4,311		$	11,798	$	17,776		$	45,987

Three Months Ended June 30, 2019
Sales and other revenues:
Revenues from external customers	$	4,208,776		$	545,346		$	28,382	$	111		$	4,782,615
Intersegment revenues	88,484			—			102,369		(190,853		)	—
	$	4,297,260		$	545,346		$	130,751	$	(190,742	)	$	4,782,615
Cost of products sold (exclusive of lower of cost or market inventory)	$	3,458,832		$	415,353		$	—	$	(169,301	)	$	3,704,884
Lower of cost or market inventory valuation adjustment	$	47,801		$	—		$	—	$	—		$	47,801
Operating expenses	$	252,715		$	59,122		$	40,608	$	(19,193	)	$	333,252
Selling, general and administrative expenses	$	29,638		$	42,087		$	1,988	$	11,604		$	85,317
Depreciation and amortization	$	76,225		$	23,020		$	24,241	$	3,422		$	126,908
Goodwill impairment	$	—		$	152,712		$	—	$	—		$	152,712
Income (loss) from operations	$	432,049		$	(146,948	)	$	63,914	$	(17,274	)	$	331,741
Earnings of equity method investments	$	—		$	—		$	1,783	$	—		$	1,783
Capital expenditures	$	33,899		$	9,331		$	7,034	$	6,470		$	56,734



	Refining			Lubricants and Specialty Products			HEP		Corporate, Other and Eliminations			Consolidated Total
	(In thousands)
Six Months Ended June 30, 2020
Sales and other revenues:
Revenues from external customers	$	4,540,662		$	877,143		$	45,670	$	—		$	5,463,475
Intersegment revenues	121,708			6,747			196,991		(325,446		)	—
	$	4,662,370		$	883,890		$	242,661	$	(325,446	)	$	5,463,475
Cost of products sold (exclusive of lower of cost or market inventory)	$	3,902,188		$	649,727		$	—	$	(281,193	)	$	4,270,722
Lower of cost or market inventory valuation adjustment	$	290,560		$	—		$	—	$	—		$	290,560
Operating expenses	$	498,533		$	101,971		$	69,718	$	(38,518	)	$	631,704
Selling, general and administrative expenses	$	63,811		$	84,881		$	5,237	$	9,177		$	163,106
Depreciation and amortization	$	171,873		$	41,828		$	47,986	$	9,066		$	270,753
Long-lived asset impairment ⁽¹⁾	$	215,242		$	204,708		$	16,958	$	—		$	436,908
Income (loss) from operations	$	(479,837	)	$	(199,225	)	$	102,762	$	(23,978	)	$	(600,278	)
Earnings of equity method investments	$	—		$	—		$	3,870	$	—		$	3,870
Capital expenditures	$	65,116		$	13,392		$	30,740	$	20,488		$	129,736

Six Months Ended June 30, 2019
Sales and other revenues:
Revenues from external customers	$	7,581,442		$	1,038,680		$	59,520	$	220		$	8,679,862
Intersegment revenues	163,228			—			205,728		(368,956		)	—
	$	7,744,670		$	1,038,680		$	265,248	$	(368,736	)	$	8,679,862
Cost of products sold (exclusive of lower of cost or market inventory)	$	6,421,372		$	804,370		$	—	$	(321,653	)	$	6,904,089
Lower of cost or market inventory valuation adjustment	$	(184,545	)	$	—		$	—	$	—		$	(184,545	)
Operating expenses	$	517,212		$	112,681		$	78,121	$	(43,170	)	$	664,844
Selling, general and administrative expenses	$	56,615		$	81,806		$	4,608	$	30,322		$	173,351
Depreciation and amortization	$	150,640		$	43,191		$	48,071	$	6,427		$	248,329
Goodwill impairment	$	—		$	152,712		$	—	$	—		$	152,712
Income (loss) from operations	$	783,376		$	(156,080	)	$	134,448	$	(40,662	)	$	721,082
Earnings of equity method investments	$	—		$	—		$	3,883	$	—		$	3,883
Capital expenditures	$	75,662		$	17,190		$	17,752	$	9,865		$	120,469

(1) The results of our HEP reportable segment for the three and six months ended June 30, 2020 include a long-lived asset impairment charge attributed to HEP’s logistics assets at our Cheyenne Refinery.



	Refining		Lubricants and Specialty Products		HEP		Corporate, Other and Eliminations		Consolidated Total
	(In thousands)
June 30, 2020
Cash and cash equivalents	$	15,652	$	189,571	$	18,913	$	678,373	$	902,509
Total assets	$	6,327,809	$	1,910,431	$	2,215,053	$	610,527	$	11,063,820
Long-term debt	$	—	$	—	$	1,486,648	$	994,098	$	2,480,746

December 31, 2019
Cash and cash equivalents	$	9,755	$	169,277	$	13,287	$	692,843	$	885,162
Total assets	$	7,189,094	$	2,223,418	$	2,205,437	$	546,892	$	12,164,841
Long-term debt	$	—	$	—	$	1,462,031	$	993,609	$	2,455,640