EX-99.1 2 hfcex9919-30x2020.htm EX-99.1 Document

Press Release
November 5, 2020
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HollyFrontier Corporation Reports Quarterly Results

Reported net loss attributable to HollyFrontier stockholders of $(2.4) million, or $(0.01) per diluted share, and adjusted net loss of $(66.9) million, or $(0.41) per diluted share, for the third quarter

Reported EBITDA of $157.0 million and adjusted EBITDA of $65.6 million for the third quarter

Raised $750.0 million in a public bond offering in the third quarter to enhance liquidity and fund expansion into renewable diesel production

Dallas, Texas, November 5, 2020 ‑ HollyFrontier Corporation (NYSE:HFC) (“HollyFrontier” or the “Company”) today reported third quarter net loss attributable to HollyFrontier stockholders of $(2.4) million, or $(0.01) per diluted share, for the quarter ended September 30, 2020, compared to net income of $261.8 million, or $1.58 per diluted share, for the quarter ended September 30, 2019.

The third quarter results reflect special items that collectively increased net income by a total of $64.5 million. On a pre-tax basis, these items include HollyFrontier's pro-rata share of a gain recognized upon the settlement of the Company's business interruption claim with its insurance carrier related to a loss at the Woods Cross Refinery totaling $77.1 million and a lower of cost or market inventory valuation adjustment of $62.8 million, partially offset by charges related to the Cheyenne Refinery conversion to renewable diesel production, including last-in, first-out (“LIFO”) inventory liquidation costs of $33.8 million, decommissioning charges of $12.3 million and severance charges totaling $2.4 million. Excluding these items, net loss for the current quarter was $(66.9) million ($(0.41) per diluted share) compared to net income of $278.0 million ($1.68 per diluted share) for the third quarter of 2019, which excludes certain items that collectively decreased net income by $16.2 million.

HollyFrontier’s President & CEO, Michael Jennings, commented, “Despite the difficult operating environment, HollyFrontier delivered solid results in the third quarter, led by resilient financial performances from our lubricants and midstream businesses. In August, we ran the last barrel of crude oil at Cheyenne and began the conversion to renewable diesel production. I would like to thank all of the employees at Cheyenne for safely achieving this milestone. In September, we reinforced our strong liquidity position through the successful $750.0 million bond offering, providing us the necessary capital to fully fund the previously announced renewable diesel projects at our Artesia, New Mexico and Cheyenne, Wyoming facilities.”

The COVID-19 pandemic caused a decline in U.S. and global economic activity starting in the first quarter of 2020. This decrease reduced both volumes and unit margins across the Company's businesses, resulting in lower gross margins and earnings. During the third quarter of 2020, demand for transportation fuels remained challenged while lubricants and specialties saw meaningful improvement in industrial and transportation-related markets and increased global demand for base oils.

The Refining segment reported adjusted EBITDA of $(53.6) million for the third quarter of 2020 compared to $424.6 million for the third quarter of 2019. This decrease was primarily due to continued weak demand for gasoline and diesel coupled with compressed crude differentials. Refinery gross margin for the third quarter of 2020 was $4.93 per produced barrel, a 71% decrease compared to $17.23 for the third quarter of 2019. Crude oil charge averaged 390,580 barrels per day (“BPD”) for the current quarter compared to 476,030 BPD for the third quarter of 2019.

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The Lubricants and Specialty Products segment reported EBITDA of $60.6 million for the third quarter of 2020 compared to $38.0 million in the third quarter of 2019. This increase was driven by the strong recovery in global demand for finished lubricants and base oils, resulting in higher sales volumes and margins during the quarter.

Holly Energy Partners, L.P. (“HEP”) reported EBITDA of $55.3 million for the third quarter of 2020 compared to $123.1 million in the third quarter of 2019. Reported EBITDA for the third quarter of 2020 included a $35.7 million goodwill impairment charge, and reported EBITDA for the third quarter of 2019 included a $35.2 million gain on sales-type leases, both of which eliminated on the Company's consolidation.

For the third quarter of 2020, net cash provided by operations totaled $81.7 million. During the period, HollyFrontier declared and paid a dividend of $0.35 per share to shareholders totaling $57.2 million. At September 30, 2020, the Company's cash and cash equivalents totaled $1,524.9 million, a $622.4 million increase over cash and cash equivalents of $902.5 million at June 30, 2020. Additionally, the Company's consolidated debt was $3,176.3 million. The Company’s debt, exclusive of HEP debt, which is nonrecourse to HollyFrontier, was $1,736.5 million at September 30, 2020.

The Company has scheduled a webcast conference call for today, November 5, 2020, at 8:30 AM Eastern Time to discuss third quarter financial results. This webcast may be accessed at: https://event.on24.com/wcc/r/2628168/9BE4DA1E13C98135F6352CD76762D475. An audio archive of this webcast will be available using the above noted link through November 19, 2020.

HollyFrontier Corporation, headquartered in Dallas, Texas, is an independent petroleum refiner and marketer that produces high value light products such as gasoline, diesel fuel, jet fuel and other specialty products. HollyFrontier owns and operates refineries located in Kansas, Oklahoma, New Mexico and Utah and markets its refined products principally in the Southwest U.S., the Rocky Mountains extending into the Pacific Northwest and in other neighboring Plains states. In addition, HollyFrontier produces base oils and other specialized lubricants in the U.S., Canada and the Netherlands, and exports products to more than 80 countries. HollyFrontier also owns a 57% limited partner interest and a non-economic general partner interest in Holly Energy Partners, L.P., a master limited partnership that provides petroleum product and crude oil transportation, terminalling, storage and throughput services to the petroleum industry, including HollyFrontier Corporation subsidiaries.

The following is a “safe harbor” statement under the Private Securities Litigation Reform Act of 1995: The statements in this press release relating to matters that are not historical facts are “forward-looking statements” based on management’s beliefs and assumptions using currently available information and expectations as of the date hereof, are not guarantees of future performance and involve certain risks and uncertainties, including those contained in our filings with the Securities and Exchange Commission. Although we believe that the expectations reflected in these forward-looking statements are reasonable, we cannot assure you that our expectations will prove correct. Therefore, actual outcomes and results could materially differ from what is expressed, implied or forecast in such statements. Any differences could be caused by a number of factors, including, but not limited to, the extraordinary market environment and effects of the COVID-19 pandemic, including the continuation of a material decline in demand for refined petroleum products in markets the Company serves; risks and uncertainties with respect to the actions of actual or potential competitive suppliers and transporters of refined petroleum products or lubricant and specialty products in the Company’s markets; the spread between market prices for refined products and market prices for crude oil; the possibility of constraints on the transportation of refined products or lubricant and specialty products; the possibility of inefficiencies, curtailments or shutdowns in refinery operations or pipelines, whether due to infection in the workforce or in response to reductions in demand; effects of governmental and environmental regulations and policies, including the effects of current restrictions on various commercial and economic activities in response to the COVID-19 pandemic; the availability and cost of financing to the Company; the effectiveness of the Company’s capital investments and marketing strategies; the Company’s efficiency in carrying out and consummating construction projects, including the Company's ability to complete announced capital projects, such as the conversion of the Cheyenne Refinery to a renewable diesel facility and the construction of the Artesia renewable diesel unit and pretreatment unit, on time and within budget; the Company's ability to timely obtain or maintain permits, including those necessary for operations or capital projects; the ability of the
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Company to acquire refined or lubricant product operations or pipeline and terminal operations on acceptable terms and to integrate any existing or future acquired operations; the possibility of terrorist or cyberattacks and the consequences of any such attacks; general economic conditions, including uncertainty regarding the timing, pace and extent of an economic recovery in the United States; further deterioration in gross margins or a prolonged economic slowdown due to COVID-19 could result in an impairment of goodwill and / or additional long-lived asset impairments; and other financial, operational and legal risks and uncertainties detailed from time to time in the Company’s Securities and Exchange Commission filings. The forward-looking statements speak only as of the date made and, other than as required by law, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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RESULTS OF OPERATIONS

Financial Data (all information in this release is unaudited)
Three Months Ended
September 30,
Change from 2019
20202019ChangePercent
(In thousands, except per share data)
Sales and other revenues$2,819,400 $4,424,828 $(1,605,428)(36)%
Operating costs and expenses:
Cost of products sold:
Cost of products sold (exclusive of lower of cost or market inventory valuation adjustment)
2,377,238 3,403,767 (1,026,529)(30)
Lower of cost or market inventory valuation adjustment(62,849)34,062 (96,911)(285)
2,314,389 3,437,829 (1,123,440)(33)
Operating expenses332,496 345,578 (13,082)(4)
Selling, general and administrative expenses
74,453 87,626 (13,173)(15)
Depreciation and amortization125,280 127,016 (1,736)(1)
Total operating costs and expenses2,846,618 3,998,049 (1,151,431)(29)
Income (loss) from operations(27,218)426,779 (453,997)(106)
Other income (expense):
Earnings of equity method investments1,316 1,334 (18)(1)
Interest income1,011 6,164 (5,153)(84)
Interest expense(30,589)(36,027)5,438 (15)
Gain on business interruption insurance settlement81,000 — 81,000 — 
Gain on foreign currency transactions1,030 395 635 161 
Other, net1,368 2,356 (988)(42)
55,136 (25,778)80,914 (314)
Income before income taxes27,918 401,001 (373,083)(93)
Income tax expense 4,573 103,021 (98,448)(96)
Net income23,345 297,980 (274,635)(92)
Less net income attributable to noncontrolling interest25,746 36,167 (10,421)(29)
Net income (loss) attributable to HollyFrontier stockholders$(2,401)$261,813 $(264,214)(101)%
Earnings (loss) per share attributable to HollyFrontier stockholders:
Basic$(0.01)$1.60 $(1.61)(101)%
Diluted$(0.01)$1.58 $(1.59)(101)%
Cash dividends declared per common share$0.35 $0.33 $0.02 %
Average number of common shares outstanding:
Basic162,015 163,676 (1,661)(1)%
Diluted162,015 165,011 (2,996)(2)%
EBITDA$157,030 $521,713 $(364,683)(70)%
Adjusted EBITDA$65,638 $523,082 $(457,444)(87)%
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Nine Months Ended
September 30,
Change from 2019
20202019ChangePercent
(In thousands, except per share data)
Sales and other revenues$8,282,875 $13,104,690 $(4,821,815)(37)%
Operating costs and expenses:
Cost of products sold:
Cost of products sold (exclusive of lower of cost or market inventory valuation adjustment)6,647,960 10,307,856 (3,659,896)(36)
Lower of cost or market inventory valuation adjustment227,711 (150,483)378,194 (251)
6,875,671 10,157,373 (3,281,702)(32)
Operating expenses964,200 1,010,422 (46,222)(5)
Selling, general and administrative expenses
237,559 260,977 (23,418)(9)
Depreciation and amortization396,033 375,345 20,688 
Long-lived asset and goodwill impairments436,908 152,712 284,196 186 
Total operating costs and expenses8,910,371 11,956,829 (3,046,458)(25)
Income (loss) from operations(627,496)1,147,861 (1,775,357)(155)
Other income (expense):
Earnings of equity method investments5,186 5,217 (31)(1)
Interest income6,590 17,127 (10,537)(62)
Interest expense(85,923)(106,938)21,015 (20)
Gain on business interruption insurance settlement81,000 — 81,000 — 
Gain on sales-type leases33,834 — 33,834 — 
Loss on early extinguishment of debt(25,915)— (25,915)— 
Gain (loss) on foreign currency transactions(918)4,873 (5,791)(119)
Other, net4,790 3,005 1,785 59 
18,644 (76,716)95,360 (124)
Income (loss) before income taxes(608,852)1,071,145 (1,679,997)(157)
Income tax expense (benefit)(188,504)279,862 (468,366)(167)
Net income (loss)(420,348)791,283 (1,211,631)(153)
Less net income attributable to noncontrolling interest63,353 79,500 (16,147)(20)
Net income (loss) attributable to HollyFrontier stockholders$(483,701)$711,783 $(1,195,484)(168)%
Earnings (loss) per share attributable to HollyFrontier stockholders:
Basic$(2.99)$4.23 $(7.22)(171)%
Diluted$(2.99)$4.20 $(7.19)(171)%
Cash dividends declared per common share$1.05 $0.99 $0.06 %
Average number of common shares outstanding:
Basic161,927 167,935 (6,008)(4)%
Diluted161,927 169,125 (7,198)(4)%
EBITDA$(196,839)$1,456,801 $(1,653,640)(114)%
Adjusted EBITDA$434,118 $1,451,864 $(1,017,746)(70)%

Balance Sheet Data
September 30,December 31,
20202019
(In thousands)
Cash and cash equivalents$1,524,888 $885,162 
Working capital$2,081,978 $1,620,261 
Total assets$11,579,741 $12,164,841 
Long-term debt$3,176,349 $2,455,640 
Total equity$5,876,569 $6,509,426 

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Segment Information

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 includes the operations of our El Dorado, Tulsa, Navajo, Cheyenne and Woods Cross refineries and HollyFrontier Asphalt Company LLC (“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 terminals in Arizona, New Mexico and Oklahoma.

The Lubricants and Specialty Products segment involves Petro-Canada Lubricants Inc.’s (“PCLI”) production operations, located in Mississauga, Ontario, that include 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, the operations of Red Giant Oil, one of the largest suppliers of locomotive engine oil in North America and the operations of 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 involves all of the operations of HEP, a consolidated variable interest entity, which owns and operates logistics 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. The HEP segment also includes a 75% interest in UNEV Pipeline, LLC (an HEP consolidated subsidiary), and a 50% ownership interest in each of Osage Pipeline Company, LLC, Cheyenne Pipeline LLC and Cushing Connect Pipeline & Terminal LLC. 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.


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Refining Lubricants and Specialty ProductsHEP Corporate, Other and EliminationsConsolidated Total
(In thousands)
Three Months Ended September 30, 2020
Sales and other revenues:
Revenues from external customers$2,339,782 $452,878 $26,740 $— $2,819,400 
Intersegment revenues56,331 2,164 100,991 (159,486)— 
$2,396,113 $455,042 $127,731 $(159,486)$2,819,400 
Cost of products sold (exclusive of lower of cost or market inventory)
$2,211,342 $302,703 $— $(136,807)$2,377,238 
Lower of cost or market inventory valuation adjustment
$(62,849)$— $— $— $(62,849)
Operating expenses$256,079 $54,488 $40,003 $(18,074)$332,496 
Selling, general and administrative expenses
$30,866 $36,773 $2,332 $4,482 $74,453 
Depreciation and amortization$79,146 $17,432 $24,109 $4,593 $125,280 
Income (loss) from operations$(118,471)$43,646 $61,287 $(13,680)$(27,218)
Income (loss) before interest and income taxes
$(118,471)$43,120 $70,067 $62,780 $57,496 
Net income attributable to noncontrolling interest
$— $— $2,293 $23,453 $25,746 
Earnings of equity method investments$— $— $1,316 $— $1,316 
Capital expenditures$41,740 $6,995 $7,902 $26,635 $83,272 
Three Months Ended September 30, 2019
Sales and other revenues:
Revenues from external customers$3,865,399 $529,561 $29,868 $— $4,424,828 
Intersegment revenues81,571 8,157 106,027 (195,755)— 
$3,946,970 $537,718 $135,895 $(195,755)$4,424,828 
Cost of products sold (exclusive of lower of cost or market inventory)
$3,177,167 $397,926 $— $(171,326)$3,403,767 
Lower of cost or market inventory valuation adjustment
$34,062 $— $— $— $34,062 
Operating expenses$276,869 $57,974 $44,924 $(34,189)$345,578 
Selling, general and administrative expenses
$31,707 $43,875 $2,714 $9,330 $87,626 
Depreciation and amortization$76,765 $22,700 $24,121 $3,430 $127,016 
Income (loss) from operations$350,400 $15,243 $64,136 $(3,000)$426,779 
Income (loss) before interest and income taxes
$350,400 $15,325 $100,778 $(35,639)$430,864 
Net income attributable to noncontrolling interest
$— $— $1,004 $35,163 $36,167 
Earnings of equity method investments$— $— $1,334 $— $1,334 
Capital expenditures$53,506 $8,697 $6,076 $6,310 $74,589 
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RefiningLubricants and Specialty ProductsHEPCorporate, Other and EliminationsConsolidated Total
(In thousands)
Nine Months Ended September 30, 2020
Sales and other revenues:
Revenues from external customers$6,880,444 $1,330,021 $72,410 $— $8,282,875 
Intersegment revenues178,039 8,911 297,982 (484,932)— 
$7,058,483 $1,338,932 $370,392 $(484,932)$8,282,875 
Cost of products sold (exclusive of lower of cost or market inventory)
$6,113,530 $952,430 $— $(418,000)$6,647,960 
Lower of cost or market inventory valuation adjustment
$227,711 $— $— $— $227,711 
Operating expenses$754,612 $156,459 $109,721 $(56,592)$964,200 
Selling, general and administrative expenses
$94,677 $121,654 $7,569 $13,659 $237,559 
Depreciation and amortization$251,019 $59,260 $72,095 $13,659 $396,033 
Long-lived asset impairment$215,242 $204,708 $16,958 $— $436,908 
Income (loss) from operations$(598,308)$(155,579)$164,049 $(37,658)$(627,496)
Income (loss) before interest and income taxes
$(598,308)$(155,847)$185,593 $39,043 $(529,519)
Net income attributable to noncontrolling interest
$— $— $4,158 $59,195 $63,353 
Earnings of equity method investments$— $— $5,186 $— $5,186 
Capital expenditures$106,856 $20,387 $38,642 $47,123 $213,008 
Nine Months Ended September 30, 2019
Sales and other revenues:
Revenues from external customers$11,446,841 $1,568,241 $89,388 $220 $13,104,690 
Intersegment revenues244,799 8,157 311,755 (564,711)— 
$11,691,640 $1,576,398 $401,143 $(564,491)$13,104,690 
Cost of products sold (exclusive of lower of cost or market inventory)
$9,598,539 $1,202,296 $— $(492,979)$10,307,856 
Lower of cost or market inventory valuation adjustment
$(150,483)$— $— $— $(150,483)
Operating expenses$794,081 $170,655 $123,045 $(77,359)$1,010,422 
Selling, general and administrative expenses$88,322 $125,681 $7,322 $39,652 $260,977 
Depreciation and amortization$227,405 $65,891 $72,192 $9,857 $375,345 
Goodwill impairment$— $152,712 $— $— $152,712 
Income (loss) from operations$1,133,776 $(140,837)$198,584 $(43,662)$1,147,861 
Income (loss) before interest and income taxes
$1,133,776 $(140,518)$238,910 $(71,212)$1,160,956 
Net income attributable to noncontrolling interest
$— $— $3,524 $75,976 $79,500 
Earnings of equity method investments$— $— $5,217 $— $5,217 
Capital expenditures$129,167 $25,887 $23,828 $16,175 $195,057 

RefiningLubricants and Specialty ProductsHEPCorporate, Other and EliminationsConsolidated Total
(In thousands)
September 30, 2020
Cash and cash equivalents
$6,085 $211,646 $18,091 $1,289,066 $1,524,888 
Total assets$6,197,301 $1,933,482 $2,193,770 $1,255,188 $11,579,741 
Long-term debt$— $— $1,439,874 $1,736,475 $3,176,349 
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 
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Refining Segment Operating Data

The following tables set forth information, including non-GAAP (Generally Accepted Accounting Principles) performance measures about our refinery operations. Refinery gross and net operating margins do not include the non-cash effects of long-lived asset impairment charges, lower of cost or market inventory valuation adjustments and depreciation and amortization. Reconciliations to amounts reported under GAAP are provided under “Reconciliations to Amounts Reported Under Generally Accepted Accounting Principles” below.
Three Months Ended
September 30,
Nine Months Ended
September 30,
2020201920202019
Mid-Continent Region (El Dorado and Tulsa Refineries)
Crude charge (BPD) (1)
244,200 294,380 234,550 257,590 
Refinery throughput (BPD) (2)
257,280 307,720 249,430 272,440 
Sales of produced refined products (BPD) (3)
243,830 290,930 239,800 260,780 
Refinery utilization (4)
93.9 %113.2 %90.2 %99.1 %
Average per produced barrel (5)
Refinery gross margin$3.21 $14.61 $6.41 $14.55 
Refinery operating expenses (6)
5.47 5.05 5.47 5.48 
Net operating margin$(2.26)$9.56 $0.94 $9.07 
Refinery operating expenses per throughput barrel (7)
$5.19 $4.77 $5.26 $5.25 
Feedstocks:
Sweet crude oil62 %59 %58 %56 %
Sour crude oil18 %21 %19 %23 %
Heavy sour crude oil15 %16 %17 %16 %
Other feedstocks and blends%%%%
Total100 %100 %100 %100 %
Sales of produced refined products:
Gasolines53 %49 %52 %51 %
Diesel fuels35 %34 %34 %32 %
Jet fuels%%%%
Fuel oil%%%%
Asphalt%%%%
Base oils%%%%
LPG and other%%%%
Total100 %100 %100 %100 %

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Three Months Ended
September 30,
Nine Months Ended
September 30,
2020201920202019
Southwest Region (Navajo Refinery) (8)
Crude charge (BPD) (1)
96,660 106,860 94,320 107,330 
Refinery throughput (BPD) (2)
106,780 117,250 104,570 117,660 
Sales of produced refined products (BPD) (3)
106,350 116,890 107,270 120,760 
Refinery utilization (4)
96.7 %106.9 %94.3 %107.3 %
Average per produced barrel (5)
Refinery gross margin$9.70 $18.61 $11.16 $19.35 
Refinery operating expenses (6)
5.07 5.25 5.17 4.90 
Net operating margin$4.63 $13.36 $5.99 $14.45 
Refinery operating expenses per throughput barrel (7)
$5.05 $5.23 $5.31 $5.03 
Feedstocks:
Sweet crude oil25 %22 %24 %21 %
Sour crude oil66 %69 %66 %70 %
Other feedstocks and blends%%10 %%
Total100 %100 %100 %100 %
Sales of produced refined products:
Gasolines55 %50 %54 %51 %
Diesel fuels34 %40 %36 %39 %
Fuel oil%%%%
Asphalt%%%%
LPG and other%%%%
Total100 %100 %100 %100 %
Rocky Mountain Region (Cheyenne and Woods Cross Refineries) (8)
Crude charge (BPD) (1)
49,720 74,790 63,300 78,530 
Refinery throughput (BPD) (2)
57,040 81,830 69,370 85,300 
Sales of produced refined products (BPD) (3)
57,110 77,680 67,070 77,890 
Refinery utilization (4)
51.3 %77.1 %65.3 %81.0 %
Average per produced barrel (5)
Refinery gross margin$3.39 $24.97 $10.63 $19.73 
Refinery operating expenses (6)
15.94 11.95 13.25 11.39 
Net operating margin$(12.55)$13.02 $(2.62)$8.34 
Refinery operating expenses per throughput barrel (7)
$15.96 $11.34 $12.81 $10.40 
Feedstocks:
Sweet crude oil38 %38 %36 %36 %
Heavy sour crude oil19 %30 %33 %33 %
Black wax crude oil30 %23 %22 %23 %
Other feedstocks and blends13 %%%%
Total100 %100 %100 %100 %
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Three Months Ended
September 30,
Nine Months Ended
September 30,
2020201920202019
Rocky Mountain Region (Cheyenne and Woods Cross Refineries) (8)
Sales of produced refined products:
Gasolines57 %54 %56 %53 %
Diesel fuels31 %32 %33 %34 %
Fuel oil%%%%
Asphalt%%%%
LPG and other%%%%
Total100 %100 %100 %100 %
Consolidated
Crude charge (BPD) (1)
390,580 476,030 392,170 443,450 
Refinery throughput (BPD) (2)
421,100 506,800 423,370 475,400 
Sales of produced refined products (BPD) (3)
407,280 485,500 414,140 459,440 
Refinery utilization (4)
85.5 %104.2 %85.8 %97.0 %
Average per produced barrel (5)
Refinery gross margin$4.93 $17.23 $8.33 $16.69 
Refinery operating expenses (6)
6.83 6.20 6.65 6.33 
Net operating margin$(1.90)$11.03 $1.68 $10.36 
Refinery operating expenses per throughput barrel (7)
$6.61 $5.94 $6.50 $6.12 
Feedstocks:
Sweet crude oil50 %47 %46 %44 %
Sour crude oil27 %29 %27 %30 %
Heavy sour crude oil12 %14 %16 %15 %
Black wax crude oil%%%%
Other feedstocks and blends%%%%
Total100 %100 %100 %100 %
Sales of produced refined products:
Gasolines54 %50 %54 %51 %
Diesel fuels34 %35 %34 %35 %
Jet fuels%%%%
Fuel oil%%%%
Asphalt%%%%
Base oils%%%%
LPG and other%%%%
Total100 %100 %100 %100 %

(1)Crude charge represents the barrels per day of crude oil processed at our refineries.
(2)Refinery throughput represents the barrels per day of crude and other refinery feedstocks input to the crude units and other conversion units at our refineries.
(3)Represents barrels sold of refined products produced at our refineries (including HFC Asphalt) and does not include volumes of refined products purchased for resale or volumes of excess crude oil sold.
(4)Represents crude charge divided by total crude capacity (“BPSD”). Our consolidated crude capacity is 457,000 BPSD.
(5)Represents average amount per produced barrel sold, which is a non-GAAP measure. Reconciliations to amounts reported under GAAP are provided under “Reconciliations to Amounts Reported Under Generally Accepted Accounting Principles” below.
(6)Represents total refining segment operating expenses, exclusive of depreciation and amortization, divided by sales volumes of
refined products produced at our refineries.
(7) Represents total refining segment operating expenses, exclusive of depreciation and amortization, divided by refinery throughput.
(8) As previously disclosed, our Cheyenne Refinery ceased petroleum refining operations in the third quarter of 2020. Beginning with the fourth quarter of 2020, activities associated with the conversion of our Cheyenne Refinery to renewable diesel production will be reported in the Corporate and Other segment, and the disaggregation of our refining geographic operating data will be presented in two regions, Mid-Continent and West, to best reflect the economic drivers of our refining operations. The Mid-Continent region will continue to be comprised of our El Dorado and Tulsa Refineries, and the new West region will be comprised of our Navajo and Woods Cross Refineries.

11




Lubricants and Specialty Products Segment Operating Data

We acquired our Sonneborn business on February 1, 2019. For the nine months ended September 30, 2019 our lubricants and specialty product operating results reflect the operations of our Sonneborn business for the period February 1, 2019 through September 30, 2019.

The following table sets forth information about our lubricants and specialty products operations.
Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Lubricants and Specialty Products
Throughput (BPD)19,020 23,190 19,050 19,920 
Sales of produced products (BPD)33,560 36,160 32,460 34,740 
Sales of produced products:
Finished products50 %50 %51 %50 %
Base oils27 %24 %24 %27 %
Other23 %26 %25 %23 %
Total100 %100 %100 %100 %

Our Lubricants and Specialty Products segment includes base oil production activities, by-product sales to third parties and intra-segment base oil sales to rack forward, referred to as “Rack Back.” “Rack Forward” includes the purchase of base oils and the blending, packaging, marketing and distribution and sales of finished lubricants and specialty products to third parties. Supplemental financial data attributable to our Lubricants and Specialty Products segment is presented below:
Rack Back (1)
Rack Forward (2)
Eliminations (3)
Total Lubricants and Specialty Products
(In thousands)
Three months ended September 30, 2020
Sales and other revenues
$110,952 $423,418 $(79,328)$455,042 
Cost of products sold
$98,033 $283,998 $(79,328)$302,703 
Operating expenses$25,400 $29,088 $— $54,488 
Selling, general and administrative expenses$5,616 $31,157 $— $36,773 
Depreciation and amortization$5,419 $12,013 $— $17,432 
Income (loss) from operations$(23,516)$67,162 $— $43,646 
Income (loss) before interest and income taxes$(23,516)$66,636 $— $43,120 
EBITDA$(18,097)$78,649 $— $60,552 
Three months ended September 30, 2019
Sales and other revenues$196,355 $477,261 $(135,898)$537,718 
Cost of products sold
$175,976 $357,848 $(135,898)$397,926 
Operating expenses$27,825 $30,149 $— $57,974 
Selling, general and administrative expenses$5,862 $38,013 $— $43,875 
Depreciation and amortization$11,390 $11,310 $— $22,700 
Income (loss) from operations$(24,698)$39,941 $— $15,243 
Income (loss) before interest and income taxes$(24,698)$40,023 $— $15,325 
EBITDA $(13,308)$51,333 $— $38,025 
12


Rack Back (1)
Rack Forward (2)
Eliminations (3)
Total Lubricants and Specialty Products
(In thousands)
Nine months ended September 30, 2020
Sales and other revenues
$361,638 $1,241,402 $(264,108)$1,338,932 
Cost of products sold
$345,843 $870,695 $(264,108)$952,430 
Operating expenses$69,703 $86,756 $— $156,459 
Selling, general and administrative expenses$16,596 $105,058 $— $121,654 
Depreciation and amortization$22,163 $37,097 $— $59,260 
Long-lived asset impairment$167,017 $37,691 $— $204,708 
Income (loss) from operations$(259,684)$104,105 $— $(155,579)
Income (loss) before interest and income taxes$(259,684)$103,837 $— $(155,847)
EBITDA$(237,521)$140,934 $— $(96,587)
Nine months ended September 30, 2019
Sales and other revenues$486,035 $1,428,786 $(338,423)$1,576,398 
Cost of products sold
$453,519 $1,087,200 $(338,423)$1,202,296 
Operating expenses$87,970 $82,685 $— $170,655 
Selling, general and administrative expenses$25,707 $99,974 $— $125,681 
Depreciation and amortization$32,991 $32,900 $— $65,891 
Goodwill impairment$152,712 $— $— $152,712 
Income (loss) from operations$(266,864)$126,027 $— $(140,837)
Income (loss) before interest and income taxes$(266,864)$126,346 $— $(140,518)
EBITDA $(233,873)$159,246 $— $(74,627)

(1)Rack Back consists of the PCLI base oil production activities, by-product sales to third parties and intra-segment base oil sales to rack forward.
(2)Rack Forward activities include the purchase of base oils from Rack Back and the blending, packaging, marketing and distribution and sales of finished lubricants and specialty products to third parties.
(3)Intra-segment sales of Rack Back produced base oils to rack forward are eliminated under the “Eliminations” column.
13


Reconciliations to Amounts Reported Under Generally Accepted Accounting Principles

Reconciliations of earnings before interest, taxes, depreciation and amortization (“EBITDA”) and EBITDA excluding special items (“Adjusted EBITDA”) to amounts reported under generally accepted accounting principles (“GAAP”) in financial statements.

Earnings before interest, taxes, depreciation and amortization, referred to as EBITDA, is calculated as net income (loss) attributable to HollyFrontier stockholders plus (i) interest expense, net of interest income, (ii) income tax expense, and (iii) depreciation and amortization. Adjusted EBITDA is calculated as EBITDA plus or minus (i) lower of cost or market inventory valuation adjustments, (ii) HollyFrontier's pro-rata share of gain on business interruption insurance settlement, (iii) long-lived asset impairment, inclusive of pro-rata share of impairment in HEP segment, (iv) goodwill impairment, (v) HollyFrontier's pro-rata share of HEP's gain on sales-type leases, (vi) HollyFrontier's pro-rata share of HEP's loss on early extinguishment of debt, (vii) severance costs, (viii) restructuring charges, (ix) Cheyenne Refinery LIFO inventory liquidation costs, (x) decommissioning costs, (xi) acquisition integration and regulatory costs, (xii) incremental cost of products sold attributable to our Sonneborn inventory value step-up and (xiii) RINs cost reductions.

EBITDA and Adjusted EBITDA are not calculations provided for under accounting principles generally accepted in the United States; however, the amounts included in these calculations are derived from amounts included in our consolidated financial statements. EBITDA and Adjusted EBITDA should not be considered as alternatives 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. EBITDA and Adjusted EBITDA are not necessarily comparable to similarly titled measures of other companies. These are presented here because they are widely used financial indicators used by investors and analysts to measure performance. EBITDA and Adjusted EBITDA are also used by our management for internal analysis and as a basis for financial covenants.

Set forth below is our calculation of EBITDA and adjusted EBITDA.
Three Months Ended
September 30,
Nine Months Ended
September 30,
2020201920202019
(In thousands)
Net income (loss) attributable to HollyFrontier stockholders
$(2,401)$261,813 $(483,701)$711,783 
Add interest expense30,589 36,027 85,923 106,938 
Subtract interest income(1,011)(6,164)(6,590)(17,127)
Add (subtract) income tax expense (benefit)4,573 103,021 (188,504)279,862 
Add depreciation and amortization125,280 127,016 396,033 375,345 
EBITDA$157,030 $521,713 $(196,839)$1,456,801 
Add (subtract) lower of cost or market inventory valuation adjustment
(62,849)34,062 227,711 (150,483)
Subtract HollyFrontier's pro-rata share of gain on business interruption insurance settlement(77,143)— (77,143)— 
Add long-lived asset impairment, inclusive of pro-rata share of impairment in HEP segment
— — 429,540 — 
Add goodwill impairment— — — 152,712 
Subtract HollyFrontier's pro-rata share of HEP's gain on sales-type leases
— — (19,134)— 
Add HollyFrontier's pro-rata share of HEP's loss on early extinguishment of debt
— — 14,656 — 
Add severance costs2,429 — 3,546 — 
Add restructuring charges— — 3,679 — 
Add Cheyenne Refinery LIFO inventory liquidation costs33,814 — 33,814 — 
Add decommissioning costs12,309 — 12,309 — 
Add acquisition integration and regulatory costs48 3,887 1,979 20,076 
Add incremental cost of products sold attributable to Sonneborn inventory value step-up
— — — 9,338 
Subtract RINs cost reduction
— (36,580)— (36,580)
Adjusted EBITDA$65,638 $523,082 $434,118 $1,451,864 

14



EBITDA and Adjusted EBITDA attributable to our Refining segment is presented below:

Three Months Ended
September 30,
Nine Months Ended
September 30,
Refining Segment2020201920202019
(In thousands)
Income (loss) from operations (1)
$(118,471)$350,400 $(598,308)$1,133,776 
Add depreciation and amortization79,146 76,765 251,019 227,405 
EBITDA(39,325)427,165 (347,289)1,361,181 
Add (subtract) lower of cost or market inventory valuation adjustment(62,849)34,062 227,711 (150,483)
Subtract RINs cost reduction— (36,580)— (36,580)
Add long-lived asset impairment— — 215,242 — 
Add severance costs2,429 — 3,546 — 
Add restructuring charges— — 2,009 — 
Add Cheyenne Refinery LIFO inventory liquidation costs33,814 — 33,814 — 
Add decommissioning costs12,309 — 12,309 — 
Adjusted EBITDA$(53,622)$424,647 $147,342 $1,174,118 

(1) Income from operations of our Refining segment represents income plus (i) interest expense, net of interest income and (ii) income tax provision.

EBITDA and Adjusted EBITDA attributable to our Lubricants and Specialty Products segment is set forth below.
Lubricants and Specialty Products SegmentRack BackRack ForwardTotal Lubricants and Specialty Products
(In thousands)
Three months ended September 30, 2020
Income (loss) before interest and income taxes (1)
$(23,516)$66,636 $43,120 
Add depreciation and amortization
5,419 12,013 17,432 
EBITDA(18,097)78,649 60,552 
Three months ended September 30, 2019
Income (loss) before interest and income taxes (1)
$(24,698)$40,023 $15,325 
Add depreciation and amortization
11,390 11,310 22,700 
EBITDA$(13,308)$51,333 $38,025 
Nine months ended September 30, 2020
Income (loss) before interest and income taxes (1)
$(259,684)$103,837 $(155,847)
Add depreciation and amortization
22,163 37,097 59,260 
EBITDA$(237,521)$140,934 $(96,587)
Add long-lived asset impairment
167,017 37,691 204,708 
Adjusted EBITDA$(70,504)$178,625 $108,121 
Nine months ended September 30, 2019
Income (loss) before interest and income taxes (1)
$(266,864)$126,346 $(140,518)
Add depreciation and amortization
32,991 32,900 65,891 
EBITDA(233,873)159,246 (74,627)
Add goodwill impairment
152,712 — 152,712 
Add incremental cost of products sold attributable to Sonneborn inventory value step-up
— 9,338 9,338 
Adjusted EBITDA$(81,161)$168,584 $87,423 

(1) Income (loss) before interest and income taxes of our Lubricants and Specialty Products segment represents income (loss) plus (i) interest expense, net of interest income and (ii) income tax provision.

15


Reconciliations of refinery operating information (non-GAAP performance measures) to amounts reported under generally accepted accounting principles in financial statements.

Refinery gross margin and net operating margin are non-GAAP performance measures that are used by our management and others to compare our refining performance to that of other companies in our industry. We believe these margin measures are helpful to investors in evaluating our refining performance on a relative and absolute basis. Refinery gross margin per produced barrel sold is total refining segment revenues less total refining segment cost of products sold, exclusive of lower of cost or market inventory valuation adjustments, divided by sales volumes of produced refined products sold. Net operating margin per barrel sold is the difference between refinery gross margin and refinery operating expenses per produced barrel sold. These two margins do not include the non-cash effects of long-lived asset impairment charges, lower of cost or market inventory valuation adjustments or depreciation and amortization. Each of these component performance measures can be reconciled directly to our consolidated statements of income. Other companies in our industry may not calculate these performance measures in the same manner.

Below are reconciliations to our consolidated statements of income for refinery net operating and gross margin and operating expenses, in each case averaged per produced barrel sold. Due to rounding of reported numbers, some amounts may not calculate exactly.

Reconciliation of average refining segment net operating margin per produced barrel sold to refinery gross margin to total sales and other revenues
Three Months Ended
September 30,
Nine Months Ended
September 30,
2020201920202019
(Dollars in thousands, except per barrel amounts)
Consolidated
Net operating margin per produced barrel sold$(1.90)$11.03 $1.68 $10.36 
Add average refinery operating expenses per produced barrel sold
6.83 6.20 6.65 6.33 
Refinery gross margin per produced barrel sold$4.93 $17.23 $8.33 $16.69 
Times produced barrels sold (BPD)407,280 485,500 414,140 459,440 
Times number of days in period92 92 274 273 
Refining segment gross margin$184,726 $769,595 $945,241 $2,093,379 
Add (subtract) rounding45 208 (288)(278)
Total refining segment gross margin184,771 769,803 944,953 2,093,101 
Add refining segment cost of products sold
2,211,342 3,177,167 6,113,530 9,598,539 
Refining segment sales and other revenues2,396,113 3,946,970 7,058,483 11,691,640 
Add lubricants and specialty products segment sales and other revenues
455,042 537,718 1,338,932 1,576,398 
Add HEP segment sales and other revenues127,731 135,895 370,392 401,143 
Subtract corporate, other and eliminations(159,486)(195,755)(484,932)(564,491)
Sales and other revenues$2,819,400 $4,424,828 $8,282,875 $13,104,690 
16



Reconciliation of average refining segment operating expenses per produced barrel sold to total operating expenses
Three Months Ended
September 30,
Nine Months Ended
September 30,
2020201920202019
(Dollars in thousands, except per barrel amounts)
Consolidated
Average operating expenses per produced barrel sold$6.83 $6.20 $6.65 $6.33 
Times produced barrels sold (BPD)407,280 485,500 414,140 459,440 
Times number of days in period92 92 274 273 
Refining segment operating expenses$255,918 $276,929 $754,604 $793,954 
Add (subtract) rounding161 (60)127 
Total refining segment operating expenses256,079 276,869 754,612 794,081 
Add lubricants and specialty products segment operating expenses
54,488 57,974 156,459 170,655 
Add HEP segment operating expenses40,003 44,924 109,721 123,045 
Subtract corporate, other and eliminations(18,074)(34,189)(56,592)(77,359)
Operating expenses (exclusive of depreciation and amortization)
$332,496 $345,578 $964,200 $1,010,422 

17


Reconciliation of net income (loss) attributable to HollyFrontier stockholders to adjusted net income attributable to HollyFrontier stockholders

Adjusted net income (loss) attributable to HollyFrontier stockholders is a non-GAAP financial measure that excludes non-cash lower of cost or market inventory valuation adjustments, gain on business interruption insurance settlement, long-lived asset and goodwill impairments, HEP's gain on sales-type leases, HEP's loss on early extinguishment of debt, severance costs, restructuring charges, Cheyenne Refinery LIFO inventory liquidation costs, decommissioning costs, acquisition integration and regulatory costs, incremental cost of products sold due to Sonneborn inventory value step-up and RINs cost reductions. We believe this measure is helpful to investors and others in evaluating our financial performance and to compare our results to that of other companies in our industry. Similarly titled performance measures of other companies may not be calculated in the same manner.
Three Months Ended
September 30,
Nine Months Ended
September 30,
2020201920202019
(In thousands, except per share amounts)
Consolidated
GAAP:
Income (loss) before income taxes
$27,918 $401,001 $(608,852)$1,071,145 
Income tax expense (benefit)4,573 103,021 (188,504)279,862 
Net income (loss)23,345 297,980 (420,348)791,283 
Less net income attributable to noncontrolling interest25,746 36,167 63,353 79,500 
Net income (loss) attributable to HollyFrontier stockholders(2,401)261,813 (483,701)711,783 
Non-GAAP adjustments to arrive at adjusted results:
Lower of cost or market inventory valuation adjustment(62,849)34,062 227,711 (150,483)
Gain on business interruption insurance settlement(81,000)— (81,000)— 
Long-lived asset and goodwill impairments— — 436,908 152,712 
HEP's gain on sales-type leases— — (33,834)— 
HEP's loss on early extinguishment of debt— — 25,915 — 
Severance costs2,429 — 3,546 — 
Restructuring charges— — 3,679 — 
Cheyenne Refinery LIFO inventory liquidation costs33,814 — 33,814 — 
Decommissioning costs12,309 — 12,309 — 
Acquisition integration and regulatory costs48 3,887 1,979 20,076 
Incremental cost of products sold attributable to Sonneborn inventory value step-up
— — — 9,338 
RINs cost reduction— (36,580)— (36,580)
Total adjustments to income (loss) before income taxes(95,249)1,369 631,027 (4,937)
Adjustment to income tax expense (1)
(26,907)(14,818)168,497 (36,553)
Adjustment to net income attributable to noncontrolling interest(3,857)— 70 — 
Total adjustments, net of tax(64,485)16,187 462,460 31,616 
Adjusted results - Non-GAAP:
Adjusted income before income taxes(67,331)402,370 22,175 1,066,208 
Adjusted income tax expense (2)
(22,334)88,203 (20,007)243,309 
Adjusted net income(44,997)314,167 42,182 822,899 
Adjusted net income attributable to noncontrolling interest21,889 36,167 63,423 79,500 
Adjusted net income (loss) attributable to HollyFrontier stockholders$(66,886)$278,000 $(21,241)$743,399 
Adjusted earnings per share attributable to HollyFrontier stockholders - diluted (3)
$(0.41)$1.68 $(0.13)$4.39 
Average number of common shares outstanding - diluted162,015165,011 161,927169,125 

18


(1)     Represents adjustment to GAAP income tax expense to arrive at adjusted income tax expense, which is computed as follows:

Three Months Ended
September 30,
Nine Months Ended
September 30,
2020201920202019
(In thousands)
Non-GAAP income tax expense (2)
$(22,334)$88,203 $(20,007)$243,309 
Subtract GAAP income tax expense (benefit)4,573 103,021 (188,504)279,862