Holly Energy Partners, L.P.

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Thanks, Simon, and thank you all for joining our third quarter 2020 earnings call. I'm Trey Shonter with Investor Relations for Holley Energy Partners. Joining us today are Rich Volova, President, and John Harrison, Senior Vice President and CFO. This morning, we issued a press release announcing results for the quarter ending September 30th, 2020. If you would like a copy of today's press release, you may find one on our website at hollyenergy.com. Before Rich and John proceed with their remarks, please note the Safe Harbor disclosure statement in today's press release. In summary, it says statements made regarding management expectations, judgments, or predictions are forward-looking statements. These statements are intended to be covered under the Safe Harbor provisions of federal securities laws. There are many factors that could cause results to differ from expectations, including those noted in our SEC filings. Today's statements are not guarantees of future outcomes. Also, please note that information presented on today's call speaks only as of today, November 4, 2020. Any time-sensitive information provided may no longer be accurate at the time of any webcast replay or reading of the transcript. Finally, today's call may include discussion of non-GAAP measures Please see today's press release for reconciliations to gap financial measures. And with that, I'll turn the call over to Rich. Thanks, Trey.

Good afternoon, everyone, and thank you for joining our call today. On behalf of Holley Energy Partners, we hope that you and your families are healthy and safe. I'd like to take a moment to thank our employees for their hard work and their flexibility as we continue to navigate these challenging conditions. During the quarter, I'm happy to report that we maintain safe and reliable operations. Despite the ongoing volatility and challenging macro environment, HEP delivered solid third quarter results, highlighting the consistency of our fee-based business model, underpinned by long-term minimum volume commitments. During the quarter, total volumes improved 14% across our system, driven by improvement in refined product demand, which in turn drove our customers' refinery utilization. This was most visible on the frontier and SLC pipelines, where volumes ramped substantially as Salt Lake Valley product demand rebounded. As a result of our minimum volume contracts and customer base, total revenue has remained relatively stable, and we have been able to generate cash flow, which allows us to both distribute cash to our shareholders, and in the third quarter, repay $47 million of debt. In October, we announced a $0.35 per unit quarterly cash distribution to be paid on November 12th. This represents the same amount paid in the previous quarter. Turning to project updates, the pipeline portion of our Cushing Connect joint venture is currently on schedule and expected to be in service in the first quarter of 2021. We are also excited to announce the expansion of the Frontier pipeline, which will allow for an additional 10,000 barrels per day of crude oil transport into the Salt Lake City market. Thanks to a successful open season, the project is backed by long-term minimum volume commitments with third-party refiners and is expected to be completed in the third quarter of 2021. Total cost is estimated to be $7 million. We also announced a tank project at Holly Frontier's Navajo Refinery. We plan to build and operate four new refined product tanks with a total shell capacity of 200,000 barrels. These additional tanks will help Holly Frontier optimize refined product deliveries out of its Navajo refinery. Estimated cost of this project is $7.5 million, and it is expected to be in service in the third quarter of 2021. HEP and Holly Frontier have reached an agreement in principle on a long-term minimum volume commitment. Additionally, Following Holly Frontier's previously announced conversion of the Cheyenne Refinery to renewable diesel production, HEP and HFC have reached an agreement in principle to terminate the existing minimum volume commitments related to HEP's Cheyenne assets and enter into new agreements effective January 2021. These new agreements will provide for a 10-year annual lease for HFC's use of certain HEP tanks and racks with an annual lease payment of approximately $5 million, a five-year contango service fee arrangement that will utilize HEP tank assets inside the Cheyenne Refinery where Holly Frontier will pay a base tariff to HEP for available crude storage, and Holly Frontier and HEP will split profits generated in crude oil trading opportunities, and a $10 million one-time cash payment from Holly Frontier to HEP for the termination of the existing contract. And with that, I'll turn the call over to John. Thanks, Rich. For the third quarter of 2020, net income attributable to Holley Energy Partners was $17.8 million, compared to $82.3 million in the third quarter of 2019. Third quarter results reflect special items that collectively decrease net income attributable to HEP by a total of $29.6 million. These items include a $36 million goodwill impairment charge related to our Cheyenne business unit and a $6 million gain related to a business interruption insurance settlement resulting from a loss at Holly Frontier's Woods Cross Refinery. In addition, net income attributable to HEP for the third quarter of 2019 included a gain on sales type leases of $35.2 million. Excluding these items, third quarter 2020 net income attributable to HEP is $47.4 million or $0.45 per diluted LP unit compared to third quarter 2019 net income attributable to HEP of $47.2 million or $0.45 per diluted LP unit. Third quarter 2020 adjusted EBITDA was $86.4 million compared to $90.3 million in the same period last year. A reconciliation table reflecting these adjustments can be found in our press release. During the quarter, ATP generated distributable cash flow of $76.9 million, an $8 million increase compared to the same period last year. Our distribution coverage ratio was 2.1 times for the quarter, bringing us to just over 2.0 times year-to-date. Capital expenditures and joint venture investments during the quarter were approximately $11 million, including $6 million for the Cushing Connect joint venture and approximately $2 million in maintenance CapEx. We are reducing our full-year 2020 CapEx forecast from a range of $58 to $69 million down to $43 to $58 million, inclusive of our share of joint venture investments. This 20% reduction is largely a result of deferred maintenance and turnaround related expenditures. As of September 30th, 2020, HEP had approximately 1.4 billion of total debt outstanding, consisting of 500 million of senior notes due 2028 and approximately 950 million drawn on our $1.4 billion revolving credit facility. Our liquidity at the end of the third quarter was 470 million, and our debt to trailing 12-month adjusted EBITDA was 4.1 times, which continues to be well below our leverage covenant of 5.25 times. During the quarter, we repaid $47 million on our revolving credit facility, and we plan to continue using retained cash flow with a goal of reducing leverage down to 3.0 to 3.5 times. In summary, despite the challenging macro conditions, our fee-based business model, which is underpinned by long-term minimum volume commitments, allows us to generate positive free cash flow after capital investment and distributions. With that, I'd like to turn the call back to the operator to answer questions.