10-Q 1 hep-20220331.htm 10-Q hep-20220331
HOLLY ENERGY PARTNERS LP000128314012/312022Q1falseP4YP9MP1YP1YP1YP1YP1YP1Yhttp://fasb.org/us-gaap/2021-01-31#PropertyPlantAndEquipmentAndFinanceLeaseRightOfUseAssetAfterAccumulatedDepreciationAndAmortizationhttp://fasb.org/us-gaap/2021-01-31#PropertyPlantAndEquipmentAndFinanceLeaseRightOfUseAssetAfterAccumulatedDepreciationAndAmortizationP1Y00012831402022-01-012022-03-3100012831402022-05-06xbrli:shares0001283140us-gaap:VariableInterestEntityPrimaryBeneficiaryMember2022-03-31iso4217:USD0001283140us-gaap:VariableInterestEntityPrimaryBeneficiaryMember2021-12-3100012831402022-03-3100012831402021-12-310001283140srt:AffiliatedEntityMember2022-01-012022-03-310001283140srt:AffiliatedEntityMember2021-01-012021-03-310001283140hep:ThirdPartyCustomerMember2022-01-012022-03-310001283140hep:ThirdPartyCustomerMember2021-01-012021-03-3100012831402021-01-012021-03-31iso4217:USDxbrli:shares00012831402020-12-3100012831402021-03-310001283140us-gaap:CapitalUnitsMember2021-12-310001283140us-gaap:NoncontrollingInterestMember2021-12-310001283140us-gaap:CapitalUnitsMember2022-01-012022-03-310001283140us-gaap:NoncontrollingInterestMember2022-01-012022-03-310001283140us-gaap:CapitalUnitsMemberhep:UNEVPipelineLLCMember2022-01-012022-03-310001283140us-gaap:NoncontrollingInterestMemberhep:UNEVPipelineLLCMember2022-01-012022-03-310001283140hep:UNEVPipelineLLCMember2022-01-012022-03-310001283140us-gaap:CapitalUnitsMember2022-03-310001283140us-gaap:NoncontrollingInterestMember2022-03-310001283140us-gaap:CapitalUnitsMember2020-12-310001283140us-gaap:NoncontrollingInterestMember2020-12-310001283140us-gaap:NoncontrollingInterestMember2021-01-012021-03-310001283140us-gaap:CapitalUnitsMember2021-01-012021-03-310001283140us-gaap:CapitalUnitsMember2021-03-310001283140us-gaap:NoncontrollingInterestMember2021-03-310001283140hep:HFSinclairCorporationMember2022-01-012022-03-31xbrli:pure0001283140hep:HFSinclairCorporationMemberhep:TheSinclairCompaniesMemberhep:SinclairMergerMember2022-03-142022-03-140001283140hep:HFSinclairCorporationMemberhep:TheSinclairCompaniesMemberhep:SinclairMergerMember2022-03-140001283140hep:TheSinclairCompaniesMemberhep:SinclairMergerMember2022-03-142022-03-140001283140hep:TheSinclairCompaniesMemberhep:SinclairMergerMember2022-03-140001283140hep:SinclairMergerMember2022-03-142022-03-14utr:mihep:terminalutr:bbl0001283140hep:OsagePipeLineCompanyLLCMember2022-03-310001283140hep:CheyennePipelineLLCMember2022-03-310001283140hep:CushingConnectPipelineAndTerminalLLCMember2022-03-310001283140hep:SaddleButtePipelineIIILLCMember2022-03-310001283140hep:PioneerInvestmentsCorpMember2022-03-310001283140hep:UNEVPipelineLLCMember2022-03-1400012831402021-01-01hep:renewalOption00012831402021-01-012021-01-01hep:segment0001283140hep:CheyennePipelineLLCMember2021-01-012021-03-310001283140srt:MinimumMember2022-01-012022-03-310001283140srt:MaximumMember2022-01-012022-03-310001283140hep:TheSinclairCompaniesMember2022-03-14hep:nomination0001283140hep:TheSinclairCompaniesMemberhep:SinclairMergerMember2022-03-140001283140hep:SinclairMergerMember2022-03-140001283140hep:SinclairMergerMember2022-01-012022-03-310001283140hep:SinclairMergerMember2021-01-012021-03-310001283140hep:CushingConnectJointVentureMember2019-10-022019-10-020001283140hep:CushingConnectJointVentureMember2022-03-310001283140srt:MinimumMemberhep:CushingConnectJointVentureMember2022-03-310001283140srt:MaximumMemberhep:CushingConnectJointVentureMember2022-03-310001283140hep:PipelinesAndTerminalsPipelinesMember2022-01-012022-03-310001283140hep:PipelinesAndTerminalsPipelinesMember2021-01-012021-03-310001283140hep:PipelinesAndTerminalsTerminalsMember2022-01-012022-03-310001283140hep:PipelinesAndTerminalsTerminalsMember2021-01-012021-03-310001283140hep:RefineryProcessingUnitSegmentMember2022-01-012022-03-310001283140hep:RefineryProcessingUnitSegmentMember2021-01-012021-03-310001283140us-gaap:ServiceOtherMember2022-01-012022-03-310001283140us-gaap:ServiceOtherMember2021-01-012021-03-3100012831402022-04-012022-03-3100012831402023-01-012022-03-3100012831402024-01-012022-03-3100012831402025-01-012022-03-3100012831402026-01-012022-03-3100012831402027-01-012022-03-3100012831402028-01-012022-03-310001283140srt:MinimumMember2022-03-310001283140srt:MaximumMember2022-03-310001283140us-gaap:VehiclesMembersrt:MinimumMember2022-03-310001283140us-gaap:VehiclesMembersrt:MaximumMember2022-03-310001283140hep:DirectFinanceLeaseMember2022-03-310001283140hep:SalesTypeLeaseMember2022-03-310001283140hep:SalesTypeLeaseMember2021-12-310001283140hep:DirectFinanceLeaseMember2021-12-310001283140hep:A5SeniorNotesDue2028Member2022-03-310001283140us-gaap:CarryingReportedAmountFairValueDisclosureMemberus-gaap:FairValueInputsLevel2Memberhep:A5SeniorNotesDue2028Member2022-03-310001283140us-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:FairValueInputsLevel2Memberhep:A5SeniorNotesDue2028Member2022-03-310001283140us-gaap:CarryingReportedAmountFairValueDisclosureMemberus-gaap:FairValueInputsLevel2Memberhep:A5SeniorNotesDue2028Member2021-12-310001283140us-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:FairValueInputsLevel2Memberhep:A5SeniorNotesDue2028Member2021-12-310001283140us-gaap:PipelinesMember2022-03-310001283140us-gaap:PipelinesMember2021-12-310001283140us-gaap:RefiningEquipmentMember2022-03-310001283140us-gaap:RefiningEquipmentMember2021-12-310001283140us-gaap:LandMember2022-03-310001283140us-gaap:LandMember2021-12-310001283140us-gaap:ConstructionInProgressMember2022-03-310001283140us-gaap:ConstructionInProgressMember2021-12-310001283140us-gaap:PropertyPlantAndEquipmentOtherTypesMember2022-03-310001283140us-gaap:PropertyPlantAndEquipmentOtherTypesMember2021-12-310001283140hep:DelekTransportationAgreementMember2022-01-012022-03-310001283140hep:DelekTransportationAgreementMember2022-03-310001283140hep:DelekTransportationAgreementMember2021-12-310001283140srt:MinimumMemberhep:HFSinclairCorporationMember2022-01-012022-03-310001283140srt:MaximumMemberhep:HFSinclairCorporationMember2022-01-012022-03-310001283140hep:HFSinclairCorporationMember2022-03-310001283140hep:HFSinclairCorporationMember2021-12-310001283140us-gaap:CustomerRelationshipsMember2022-01-012022-03-310001283140us-gaap:CustomerRelationshipsMember2022-03-310001283140us-gaap:CustomerRelationshipsMember2021-12-310001283140us-gaap:OtherIntangibleAssetsMember2022-01-012022-03-310001283140us-gaap:OtherIntangibleAssetsMember2022-03-310001283140us-gaap:OtherIntangibleAssetsMember2021-12-31hep:componenthep:plan0001283140hep:LongTermIncentivePlanMember2022-03-310001283140srt:MinimumMemberus-gaap:PhantomShareUnitsPSUsMember2022-01-012022-03-310001283140srt:MaximumMemberus-gaap:PhantomShareUnitsPSUsMember2022-01-012022-03-310001283140us-gaap:PhantomShareUnitsPSUsMember2021-12-310001283140us-gaap:PhantomShareUnitsPSUsMember2022-01-012022-03-310001283140us-gaap:PhantomShareUnitsPSUsMember2022-03-310001283140us-gaap:PhantomShareUnitsPSUsMember2021-01-012021-03-310001283140us-gaap:PerformanceSharesMemberhep:LongTermIncentivePlanMember2022-01-012022-03-310001283140us-gaap:PerformanceSharesMember2021-12-310001283140us-gaap:PerformanceSharesMember2022-01-012022-03-310001283140us-gaap:PerformanceSharesMember2022-03-310001283140us-gaap:PerformanceSharesMember2021-01-012021-03-3100012831402021-04-300001283140us-gaap:LetterOfCreditMember2021-04-300001283140hep:A6375SeniorNotesDue2027Memberus-gaap:SubsequentEventMember2022-04-080001283140hep:A6375SeniorNotesDue2027Memberus-gaap:SubsequentEventMember2022-04-082022-04-080001283140hep:A5SeniorNotesDue2028Member2020-02-040001283140hep:A5SeniorNotesDue2028Member2021-12-310001283140hep:HFSinclairCorporationMemberus-gaap:SalesRevenueNetMemberus-gaap:RevenueFromRightsConcentrationRiskMember2022-01-012022-03-310001283140hep:HFSinclairCorporationMember2022-03-310001283140hep:HFSinclairCorporationMemberhep:AnnualAdministrativeFeeMember2022-01-012022-03-310001283140hep:HFSinclairCorporationMemberhep:MonthlyTransitionServicesFeeMember2022-01-012022-03-310001283140hep:HFSinclairCorporationMember2022-01-012022-03-310001283140hep:HFSinclairCorporationMember2021-01-012021-03-310001283140hep:GeneralAndAdministrativeServicesMemberhep:HFSinclairCorporationMember2022-01-012022-03-310001283140hep:GeneralAndAdministrativeServicesMemberhep:HFSinclairCorporationMember2021-01-012021-03-310001283140hep:HFSinclairCorporationMemberhep:ProratedTemporaryAdministrativeFeeMember2022-01-012022-03-310001283140hep:HFSinclairCorporationMemberhep:ReimbursementsPaidMember2022-01-012022-03-310001283140hep:HFSinclairCorporationMemberhep:ReimbursementsPaidMember2021-01-012021-03-310001283140hep:HFSinclairCorporationMember2021-12-310001283140us-gaap:SubsequentEventMember2022-04-212022-04-210001283140us-gaap:OtherNoncurrentLiabilitiesMember2022-03-310001283140us-gaap:OtherNoncurrentLiabilitiesMember2021-12-310001283140srt:AffiliatedEntityMember2022-03-310001283140us-gaap:OperatingSegmentsMemberhep:PipelinesAndTerminalsSegmentMembersrt:AffiliatedEntityMember2022-01-012022-03-310001283140us-gaap:OperatingSegmentsMemberhep:PipelinesAndTerminalsSegmentMembersrt:AffiliatedEntityMember2021-01-012021-03-310001283140us-gaap:OperatingSegmentsMemberhep:PipelinesAndTerminalsSegmentMemberhep:ThirdPartyCustomerMember2022-01-012022-03-310001283140us-gaap:OperatingSegmentsMemberhep:PipelinesAndTerminalsSegmentMemberhep:ThirdPartyCustomerMember2021-01-012021-03-310001283140us-gaap:OperatingSegmentsMemberhep:RefineryProcessingUnitSegmentMember2022-01-012022-03-310001283140us-gaap:OperatingSegmentsMemberhep:RefineryProcessingUnitSegmentMember2021-01-012021-03-310001283140us-gaap:OperatingSegmentsMember2022-01-012022-03-310001283140us-gaap:OperatingSegmentsMember2021-01-012021-03-310001283140us-gaap:OperatingSegmentsMemberhep:PipelinesAndTerminalsSegmentMember2022-01-012022-03-310001283140us-gaap:OperatingSegmentsMemberhep:PipelinesAndTerminalsSegmentMember2021-01-012021-03-310001283140hep:PipelinesAndTerminalsSegmentMember2022-01-012022-03-310001283140hep:PipelinesAndTerminalsSegmentMember2021-01-012021-03-310001283140us-gaap:OperatingSegmentsMemberhep:PipelinesAndTerminalsSegmentMember2022-03-310001283140us-gaap:OperatingSegmentsMemberhep:PipelinesAndTerminalsSegmentMember2021-12-310001283140us-gaap:OperatingSegmentsMemberhep:RefineryProcessingUnitSegmentMember2022-03-310001283140us-gaap:OperatingSegmentsMemberhep:RefineryProcessingUnitSegmentMember2021-12-310001283140us-gaap:CorporateNonSegmentMember2022-03-310001283140us-gaap:CorporateNonSegmentMember2021-12-310001283140srt:ReportableLegalEntitiesMembersrt:ParentCompanyMember2022-03-310001283140srt:ReportableLegalEntitiesMembersrt:GuarantorSubsidiariesMember2022-03-310001283140srt:ReportableLegalEntitiesMembersrt:NonGuarantorSubsidiariesMember2022-03-310001283140srt:ConsolidationEliminationsMember2022-03-310001283140srt:ReportableLegalEntitiesMembersrt:ParentCompanyMember2021-12-310001283140srt:ReportableLegalEntitiesMembersrt:GuarantorSubsidiariesMember2021-12-310001283140srt:ReportableLegalEntitiesMembersrt:NonGuarantorSubsidiariesMember2021-12-310001283140srt:ConsolidationEliminationsMember2021-12-310001283140srt:ReportableLegalEntitiesMembersrt:ParentCompanyMembersrt:AffiliatedEntityMember2022-01-012022-03-310001283140srt:ReportableLegalEntitiesMembersrt:GuarantorSubsidiariesMembersrt:AffiliatedEntityMember2022-01-012022-03-310001283140srt:ReportableLegalEntitiesMembersrt:NonGuarantorSubsidiariesMembersrt:AffiliatedEntityMember2022-01-012022-03-310001283140srt:ConsolidationEliminationsMembersrt:AffiliatedEntityMember2022-01-012022-03-310001283140srt:ReportableLegalEntitiesMembersrt:ParentCompanyMemberhep:ThirdPartyCustomerMember2022-01-012022-03-310001283140srt:ReportableLegalEntitiesMembersrt:GuarantorSubsidiariesMemberhep:ThirdPartyCustomerMember2022-01-012022-03-310001283140srt:ReportableLegalEntitiesMembersrt:NonGuarantorSubsidiariesMemberhep:ThirdPartyCustomerMember2022-01-012022-03-310001283140srt:ConsolidationEliminationsMemberhep:ThirdPartyCustomerMember2022-01-012022-03-310001283140srt:ReportableLegalEntitiesMembersrt:ParentCompanyMember2022-01-012022-03-310001283140srt:ReportableLegalEntitiesMembersrt:GuarantorSubsidiariesMember2022-01-012022-03-310001283140srt:ReportableLegalEntitiesMembersrt:NonGuarantorSubsidiariesMember2022-01-012022-03-310001283140srt:ConsolidationEliminationsMember2022-01-012022-03-310001283140srt:ReportableLegalEntitiesMembersrt:ParentCompanyMembersrt:AffiliatedEntityMember2021-01-012021-03-310001283140srt:ReportableLegalEntitiesMembersrt:GuarantorSubsidiariesMembersrt:AffiliatedEntityMember2021-01-012021-03-310001283140srt:ReportableLegalEntitiesMembersrt:NonGuarantorSubsidiariesMembersrt:AffiliatedEntityMember2021-01-012021-03-310001283140srt:ConsolidationEliminationsMembersrt:AffiliatedEntityMember2021-01-012021-03-310001283140srt:ReportableLegalEntitiesMembersrt:ParentCompanyMemberhep:ThirdPartyCustomerMember2021-01-012021-03-310001283140srt:ReportableLegalEntitiesMembersrt:GuarantorSubsidiariesMemberhep:ThirdPartyCustomerMember2021-01-012021-03-310001283140srt:ReportableLegalEntitiesMembersrt:NonGuarantorSubsidiariesMemberhep:ThirdPartyCustomerMember2021-01-012021-03-310001283140srt:ConsolidationEliminationsMemberhep:ThirdPartyCustomerMember2021-01-012021-03-310001283140srt:ReportableLegalEntitiesMembersrt:ParentCompanyMember2021-01-012021-03-310001283140srt:ReportableLegalEntitiesMembersrt:GuarantorSubsidiariesMember2021-01-012021-03-310001283140srt:ReportableLegalEntitiesMembersrt:NonGuarantorSubsidiariesMember2021-01-012021-03-310001283140srt:ConsolidationEliminationsMember2021-01-012021-03-31

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 ______________________________________________________________________________________
FORM 10-Q
 ______________________________________________________________________________________
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to _____________                    
Commission File Number: 1-32225
  _____________________________________________________________________________________
HOLLY ENERGY PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
 ______________________________________________________________________________________
Delaware20-0833098
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
2828 N. Harwood, Suite 1300
Dallas
Texas
75201
(Address of principal executive offices) (Zip code)
(214) 871-3555
(Registrant’s telephone number, including area code)
________________________________________________________________
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Limited Partner UnitsHEPNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes       No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth” company in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes  No  
The number of the registrant’s outstanding common units at May 6, 2022, was 126,440,201.


HOLLY ENERGY PARTNERS, L.P.
INDEX
 
- 2 -


FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains certain “forward-looking statements” within the meaning of the federal securities laws. All statements, other than statements of historical fact included in this Form 10-Q, including, but not limited to, statements regarding funding of capital expenditures and distributions, distributable cash flow coverage and leverage targets, and statements under “Results of Operations” and “Liquidity and Capital Resources” in Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part I are forward-looking statements. Forward-looking statements use words such as “anticipate,” “expect,” “project,” “will,” “plan,” “goal,” “forecast,” “intend,” “should,” “would,” “could,” “believe,” “may,” and similar expressions and statements regarding our plans and objectives for future operations are intended to identify forward-looking statements. These statements are based on our beliefs and assumptions and those of our general partner using currently available information and expectations as of the date hereof, are not guarantees of future performance and involve certain risks and uncertainties. Although we and our general partner believe that such expectations reflected in such forward-looking statements are reasonable, neither we nor our general partner can give assurance that our expectations will prove to be correct. All statements concerning our expectations for future results of operations are based on forecasts for our existing operations and do not include the potential impact of any future acquisitions. Our forward-looking statements are subject to a variety of risks, uncertainties and assumptions. If one or more of these risks or uncertainties materialize, or if underlying assumptions prove incorrect, our actual results may vary materially from those anticipated, estimated, projected or expected. Certain factors could cause actual results to differ materially from results anticipated in the forward-looking statements. These factors include, but are not limited to:

HF Sinclair Corporation’s (“HF Sinclair”) and our ability to successfully integrate the Sinclair Oil Corporation (now known as Sinclair Oil LLC, (“Sinclair Oil”)) and Sinclair Transportation Company LLC (“Sinclair Transportation”) businesses acquired from The Sinclair Companies (now known as REH Company), referred to herein as “Sinclair HoldCo”) with our existing operations and fully realize the expected synergies of the Sinclair Transactions (as defined herein) or on the expected timeline;
the demand for and supply of crude oil and refined products, including uncertainty regarding the effects of the continuing COVID-19 pandemic on future demand and increasing societal expectations that companies address climate change;
risks and uncertainties with respect to the actual quantities of petroleum products and crude oil shipped on our pipelines and/or terminalled, stored or throughput in our terminals and refinery processing units;
the economic viability of HF Sinclair, our other customers and our joint ventures’ other customers, including any refusal or inability of our or our joint ventures’ customers or counterparties to perform their obligations under their contracts;
the demand for refined petroleum products in the markets we serve;
our ability to purchase and integrate future acquired operations;
our ability to complete previously announced or contemplated acquisitions;
the availability and cost of additional debt and equity financing;
the possibility of temporary or permanent reductions in production or shutdowns at refineries utilizing our pipelines, terminal facilities and refinery processing units, due to reasons such as infection in the workforce, in response to reductions in demand or lower gross margins due to the economic impact of the COVID-19 pandemic, and any potential asset impairments resulting from such actions;
the effects of current and future government regulations and policies, including the effects of current and future restrictions on various commercial and economic activities in response to the COVID-19 pandemic;
delay by government authorities in issuing permits necessary for our business or our capital projects;
our and our joint venture partners’ ability to complete and maintain operational efficiency in carrying out routine operations and capital construction projects;
the possibility of terrorist or cyberattacks and the consequences of any such attacks;
uncertainty regarding the effects and duration of global hostilities and any associated military campaigns which may disrupt crude oil supplies and markets for refined products and create instability in the financial markets that could restrict our ability to raise capital;
- 3 -

general economic conditions, including uncertainty regarding the timing, pace and extent of an economic recovery in the United States;
the impact of recent or proposed changes in the tax laws and regulations that affect master limited partnerships; and
other financial, operational and legal risks and uncertainties detailed from time to time in our Securities and Exchange Commission (the “SEC”) filings.

Cautionary statements identifying important factors that could cause actual results to differ materially from our expectations are set forth in this Form 10-Q, including, without limitation, the forward-looking statements that are referred to above. You should not put any undue reliance on any forward-looking statements. When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements set forth in our Annual Report on Form 10-K for the year ended December 31, 2021, and in this Quarterly Report on Form 10-Q in “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” All forward-looking statements included in this Form 10-Q and all subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. 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.
- 4 -

PART I. FINANCIAL INFORMATION

Item 1.Financial Statements
HOLLY ENERGY PARTNERS, L.P.
CONSOLIDATED BALANCE SHEETS
(In thousands, except unit data)
March 31,
2022
December 31, 2021
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents (Cushing Connect VIEs: $9,688 and $8,881, respectively)
$15,016 $14,381 
Accounts receivable:
Trade15,191 12,745 
Affiliates44,336 56,154 
59,527 68,899 
Prepaid and other current assets11,705 11,033 
Total current assets86,248 94,313 
Properties and equipment, net1,440,888 1,329,028 
Operating lease right-of-use assets, net2,727 2,275 
Net investment in leases (Cushing Connect VIEs: $100,797 and $100,042, respectively)
543,623 309,303 
Intangible assets, net69,806 73,307 
Goodwill307,387 223,650 
Equity method investments (Cushing Connect VIEs: $36,658 and $37,505, respectively)
292,028 116,378 
Deferred turnaround costs20,155 2,632 
Other assets14,414 14,981 
Total assets$2,777,276 $2,165,867 
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable:
Trade (Cushing Connect VIEs: $4,967 and $8,285, respectively)
$31,849 $28,577 
Affiliates10,708 11,703 
42,557 40,280 
Accrued interest5,736 11,258 
Deferred revenue14,563 14,585 
Accrued property taxes7,189 4,542 
Current operating lease liabilities1,000 620 
Current finance lease liabilities3,825 3,786 
Other current liabilities2,512 1,781 
Total current liabilities77,382 76,852 
Long-term debt 1,634,367 1,333,049 
Noncurrent operating lease liabilities2,207 2,030 
Noncurrent finance lease liabilities63,765 64,649 
Other long-term liabilities18,908 12,527 
Deferred revenue29,802 29,662 
Class B unit57,505 56,549 
Equity:
Partners’ equity:
Common unitholders (126,440,201 and 105,440,201 units issued and outstanding
    at March 31, 2022 and December 31, 2021, respectively)
821,609 443,017 
Noncontrolling interests71,731 147,532 
Total equity893,340 590,549 
Total liabilities and equity$2,777,276 $2,165,867 
See accompanying notes.
- 5 -

HOLLY ENERGY PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per unit data)
Three Months Ended
March 31,
20222021
Revenues:
Affiliates$92,254 $101,926 
Third parties27,944 25,257 
120,198 127,183 
Operating costs and expenses:
Operations (exclusive of depreciation and amortization)42,625 41,365 
Depreciation and amortization22,187 25,065 
General and administrative4,312 2,968 
Goodwill impairment 11,034 
69,124 80,432 
Operating income51,074 46,751 
Other income (expense):
Equity in earnings of equity method investments3,626 1,763 
Interest expense
(13,639)(13,240)
Interest income12,647 6,548 
Gain on sales-type leases 24,650 
Gain on sale of assets and other101 502 
2,735 20,223 
Income before income taxes53,809 66,974 
State income tax expense(31)(37)
Net income53,778 66,937 
Allocation of net income attributable to noncontrolling interests
(4,219)(2,540)
Net income attributable to the partners
49,559 64,397 
Limited partners’ per unit interest in earnings—basic and diluted
$0.45 $0.61 
Weighted average limited partners’ units outstanding109,640 105,440 


Net income and comprehensive income are the same in all periods presented.
See accompanying notes.

- 6 -

HOLLY ENERGY PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
 
Three Months Ended
March 31,
20222021
Cash flows from operating activities
Net income $53,778 $66,937 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization22,187 25,065 
Gain on sale of assets(25)(262)
Gain on sales-type leases (24,650)
Goodwill impairment 11,034 
Amortization of deferred charges342 844 
Equity-based compensation expense620 683 
Equity in earnings of equity method investments, net of distributions(520)(617)
(Increase) decrease in operating assets:
Accounts receivable—trade(1,132)506 
Accounts receivable—affiliates11,190 2,505 
Prepaid and other current assets222 463 
Increase (decrease) in operating liabilities:
Accounts payable—trade5,525 8,565 
Accounts payable—affiliates(994)(7,930)
Accrued interest(5,522)(6,232)
Deferred revenue118 4,013 
Accrued property taxes1,675 1,258 
Other current liabilities2,337 484 
Turnaround expenditures(17,523)(355)
Other, net(464)(169)
Net cash provided by operating activities71,814 82,142 
Cash flows from investing activities
Additions to properties and equipment(14,147)(33,218)
Acquisition of Sinclair Transportation(321,366) 
Proceeds from sale of assets33 283 
Distributions in excess of equity in earnings of equity investments1,704 2,897 
Net cash used for investing activities(333,776)(30,038)
Cash flows from financing activities
Borrowings under credit agreement360,000 73,000 
Repayments of credit agreement borrowings(58,500)(90,500)
Contributions from noncontrolling interests 6,332 
Distributions to HEP unitholders(36,997)(38,328)
Distributions to noncontrolling interests(877)(3,819)
Payments on finance leases(881)(958)
Units withheld for tax withholding obligations(57)(68)
Other(91) 
Net cash provided (used) by financing activities262,597 (54,341)
Cash and cash equivalents
Increase (decrease) for the period635 (2,237)
Beginning of period14,381 21,990 
End of period$15,016 $19,753 
Supplemental disclosure of cash flow information
Cash paid during the period for interest$18,548$18,674
See accompanying notes.
- 7 -

HOLLY ENERGY PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited)
(In thousands)
 
Common
Units
Noncontrolling InterestsTotal Equity
 
Balance December 31, 2021$443,017 $147,532 $590,549 
Issuance of common units349,020 — 349,020 
Distributions to HEP unitholders(36,997)— (36,997)
Distributions to noncontrolling interests— (877)(877)
Acquisition of remaining UNEV interests16,537 (78,187)(61,650)
Amortization of restricted and performance units620 — 620 
Class B unit accretion(956)— (956)
   Other(147)— (147)
Net income50,515 3,263 53,778 
Balance March 31, 2022$821,609 $71,731 $893,340 

Common
Units
Noncontrolling InterestsTotal Equity
 
Balance December 31, 2020$379,292 $126,066 $505,358 
Capital Contribution - Cushing Connect— 9,746 9,746 
Distributions to HEP unitholders(38,328)— (38,328)
Distributions to noncontrolling interests— (3,819)(3,819)
Amortization of restricted and performance units683 — 683 
Class B unit accretion(893)— (893)
Other(68)— (68)
Net income65,290 1,647 66,937 
Balance March 31, 2021$405,976 $133,640 $539,616 

See accompanying notes.


- 8 -

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 1:Description of Business and Presentation of Financial Statements

Holly Energy Partners, L.P. (“HEP”), together with its consolidated subsidiaries, is a publicly held master limited partnership. We commenced operations on July 13, 2004, upon the completion of our initial public offering. On March 14, 2022 (the “Closing Date”), HollyFrontier Corporation (“HFC”) and HEP announced the establishment of HF Sinclair Corporation, a Delaware corporation (“HF Sinclair”), as the new parent holding company of HFC and HEP and their subsidiaries, and the completion of their respective acquisitions of Sinclair Oil Corporation (now known as Sinclair Oil LLC, (“Sinclair Oil”)) and Sinclair Transportation Company LLC (“Sinclair Transportation”) from The Sinclair Companies (now known as REH Company and referred to herein as “Sinclair HoldCo”). On the Closing Date, pursuant to that certain Business Combination Agreement, dated as of August 2, 2021 (as amended on March 14, 2022, the “Business Combination Agreement”), by and among HFC, HF Sinclair (formerly known as Hippo Parent Corporation), Hippo Merger Sub, Inc., a wholly owned subsidiary of HF Sinclair (“Parent Merger Sub”), Sinclair HoldCo, and Hippo Holding LLC, a wholly owned subsidiary of Sinclair HoldCo (the “Target Company”), HF Sinclair completed its acquisition of the Target Company by effecting (a) a holding company merger in accordance with Section 251(g) of the Delaware General Corporation Law whereby HFC merged with and into Parent Merger Sub, with HFC surviving such merger as a direct wholly owned subsidiary of HF Sinclair (the “HFC Merger”), and (b) immediately following the HFC Merger, a contribution whereby Sinclair HoldCo contributed all of the equity interests of the Target Company to HF Sinclair in exchange for shares of HF Sinclair, resulting in the Target Company becoming a direct wholly owned subsidiary of HF Sinclair (together with the HFC Merger, the “HFC Transactions”).

As of March 31, 2022, HF Sinclair and its subsidiaries owned a 47% limited partner interest and the non-economic general partner interest in HEP.

In connection with the closing of the HFC Transactions, HF Sinclair issued 60,230,036 shares of HF Sinclair common stock to Sinclair HoldCo, representing 27.0% of the pro forma equity of HF Sinclair with a value of approximately $2,149 million based on HFC’s fully diluted shares of common stock outstanding and closing stock price on March 11, 2022. References herein to HF Sinclair with respect to time periods prior to March 14, 2022 refer to HFC and its consolidated subsidiaries and do not include the Target Company, Sinclair Transportation or their respective consolidated subsidiaries. References herein to HF Sinclair with respect to time periods from and after March 14, 2022 refer to HF Sinclair and its consolidated subsidiaries, which includes the operations of the combined Sinclair HoldCo businesses.

Additionally, on the Closing Date, pursuant to that certain Contribution Agreement, dated August 2, 2021 (as amended on March 14, 2022, the “Contribution Agreement”) by and among Sinclair HoldCo, Sinclair Transportation and HEP, HEP acquired all of the outstanding equity interests of Sinclair Transportation from Sinclair HoldCo in exchange for 21 million newly issued common limited partner units of HEP (the “HEP Units”), representing 16.6% of the pro forma outstanding HEP Units with a value of approximately $349 million based on HEP’s fully diluted common limited partner units outstanding and closing unit price on March 11, 2022, and cash consideration equal to $321.4 million, inclusive of estimated working capital adjustments pursuant to the Contribution Agreement for an aggregate transaction value of $670.4 million (the “HEP Transaction” and together with the HFC Transactions, the “Sinclair Transactions”). Of the 21 million HEP Units, 5.29 million units are currently held in escrow to secure Sinclair HoldCo’s renewable identification numbers (“RINs”) credit obligations to HF Sinclair under Section 6.22 of the Business Combination Agreement. HF Sinclair, and not HEP, would be entitled to the HEP common units held in escrow in the event of Sinclair HoldCo’s breach of its RINs credit obligations under the Business Combination Agreement. The cash consideration was funded through a draw under HEP’s senior secured revolving credit facility. The HEP Transaction was conditioned on the closing of the HFC Transactions, which occurred immediately following the HEP Transaction.

Sinclair Transportation, which together with its subsidiaries, owns integrated crude and refined products pipelines and terminal assets, including approximately 1,200 miles of integrated crude and refined product pipeline supporting the Sinclair HoldCo refineries and other third party refineries, eight product terminals and two crude terminals with approximately 4.5 million barrels of operated storage. In addition, HEP acquired Sinclair Transportation’s interests in three pipeline joint ventures for crude gathering and product offtake.
- 9 -


References herein to HEP with respect to time periods prior to March 14, 2022, include HEP and its consolidated subsidiaries and do not include Sinclair Transportation and its consolidated subsidiaries (collectively, the “Acquired Sinclair Businesses”). References herein to HEP with respect to time periods from and after March 14, 2022 include the operations of the Acquired Sinclair Businesses.

Through our subsidiaries and joint ventures, we own and/or operate petroleum product and crude oil pipelines, terminal, tankage and loading rack facilities and refinery processing units that support refining and marketing operations of HF Sinclair and other refineries in the Mid-Continent, Southwest and Northwest regions of the United States. Additionally, we own (a) a 50% interest in Osage Pipe Line Company, LLC (“Osage”), (b) a 50% interest in Cheyenne Pipeline LLC, (c) a 50% interest in Cushing Connect Pipeline & Terminal LLC, (d) a 25.06% interest in Saddle Butte Pipeline III, LLC and (e) a 49.995% interest in Pioneer Investments Corp. Following the HEP Transaction, we now own the remaining 25% interest in UNEV Pipeline, LLC and as a result, UNEV Pipeline, LLC is our wholly owned subsidiary.

On June 1, 2020, HFC announced plans to permanently cease petroleum refining operations at its Cheyenne Refinery (the “Cheyenne Refinery”) and to convert certain assets at that refinery to renewable diesel production. HFC subsequently began winding down petroleum refining operations at the Cheyenne Refinery on August 3, 2020.

On February 8, 2021, HEP and HFC finalized and executed new agreements for HEP’s Cheyenne assets with the following terms, in each case effective January 1, 2021: (1) a ten-year lease with two five-year renewal option periods for HFC’s (and now HF Sinclair’s) use of certain HEP tank and rack assets in the Cheyenne Refinery to facilitate renewable diesel production with an annual lease payment of approximately $5 million, (2) a five-year contango service fee arrangement that will utilize HEP tank assets inside the Cheyenne Refinery where HFC (and now HF Sinclair) will pay a base tariff to HEP for available crude oil storage and HFC (and now HF Sinclair) and HEP will split any profits generated on crude oil contango opportunities and (3) a $10 million one-time cash payment from HFC to HEP for the termination of the existing minimum volume commitment.

We operate in two reportable segments, a Pipelines and Terminals segment and a Refinery Processing Unit segment. Disclosures around these segments are discussed in Note 16.

We generate revenues by charging tariffs for transporting petroleum products and crude oil through our pipelines, by charging fees for terminalling and storing refined products and other hydrocarbons, providing other services at our storage tanks and terminals and by charging a tolling fee per barrel or thousand standard cubic feet of feedstock throughput in our refinery processing units. We do not take ownership of products that we transport, terminal, store or process, and therefore, we are not exposed directly to changes in commodity prices.

The consolidated financial statements included herein have been prepared without audit, pursuant to the rules and regulations of the SEC. The interim financial statements reflect all adjustments, which, in the opinion of management, are necessary for a fair presentation of our results for the interim periods. Such adjustments are considered to be of a normal recurring nature. Although certain notes and other information required by U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted, we believe that the disclosures in these consolidated financial statements are adequate to make the information presented not misleading. These consolidated financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2021. Results of operations for interim periods are not necessarily indicative of the results of operations that will be realized for the year ending December 31, 2022.

Principles of Consolidation and Common Control Transactions
The consolidated financial statements include our accounts and those of subsidiaries and joint ventures that we control. All significant intercompany transactions and balances have been eliminated.

Most of our acquisitions from HFC occurred while we were a consolidated variable interest entity (“VIE”) of HFC. Therefore, as an entity under common control with HFC, we recorded these acquisitions on our balance sheets at HFC's historical basis instead of our purchase price or fair value.

Goodwill and Long-lived Assets
Goodwill represents the excess of our cost of an acquired business over the fair value of the assets acquired, less liabilities assumed. Goodwill is not subject to amortization and is tested annually or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Our goodwill
- 10 -


impairment testing first entails either a quantitative assessment or an optional qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If we determine that based on the qualitative factors that it is more likely than not that the carrying amount of the reporting unit is greater than its fair value, a quantitative test is performed in which we estimate the fair value of the related reporting unit. If the carrying amount of a reporting unit exceeds its fair value, the goodwill of that reporting unit is impaired, and we measure goodwill impairment as the excess of the carrying amount of the reporting unit over the related fair value.

Indicators of Goodwill and Long-lived Asset Impairment
During the first quarter of 2021, changes in our agreements with HF Sinclair related to our Cheyenne assets resulted in an increase in the net book value of our Cheyenne reporting unit due to sales-type lease accounting, which led us to determine indicators of potential goodwill impairment for our Cheyenne reporting unit were present.

The estimated fair value of our Cheyenne reporting unit was derived using a combination of income and market approaches. The income approach reflects expected future cash flows based on anticipated gross margins, operating costs, and capital expenditures. The market approaches include both the guideline public company and guideline transaction methods. Both methods utilize pricing multiples derived from historical market transactions of other like-kind assets. These fair value measurements involve significant unobservable inputs (Level 3 inputs). See Note 6 for further discussion of Level 3 inputs.

Our interim impairment testing of our Cheyenne reporting unit goodwill identified an impairment charge of $11.0 million, which was recorded in the three months ended March 31, 2021.

We performed our annual goodwill impairment testing qualitatively as of July 1, 2021, and determined it was not more likely than not that the carrying amount of each reporting unit was greater than its fair value. Therefore, a quantitative test was not necessary, and no additional impairment of goodwill was recorded.

We evaluate long-lived assets, including finite-lived intangible assets, for potential impairment by identifying whether indicators of impairment exist and, if so, assessing whether the long-lived assets are recoverable from estimated future undiscounted cash flows. The actual amount of impairment loss, if any, to be recorded is equal to the amount by which a long-lived asset’s carrying value exceeds its fair value.

Revenue Recognition
Revenues are generally recognized as products are shipped through our pipelines and terminals, feedstocks are processed through our refinery processing units or other services are rendered. The majority of our contracts with customers meet the definition of a lease since (1) performance of the contracts is dependent on specified property, plant, or equipment and (2) it is unlikely that one or more parties other than the customer will take more than a minor amount of the output associated with the specified property, plant, or equipment. Prior to the adoption of the new lease standard (see below), we bifurcated the consideration received between lease and service revenue. The new lease standard allows the election of a practical expedient whereby a lessor does not have to separate non-lease (service) components from lease components under certain conditions. The majority of our contracts meet these conditions, and we have made this election for those contracts. Under this practical expedient, we treat the combined components as a single performance obligation in accordance with Accounting Standards Codification (“ASC”) 606, which largely codified ASU 2014-09, if the non-lease (service) component is the dominant component. If the lease component is the dominant component, we treat the combined components as a lease in accordance with ASC 842, which largely codified ASU 2016-02.
Several of our contracts include incentive or reduced tariffs once a certain quarterly volume is met. Revenue from the variable element of these transactions is recognized based on the actual volumes shipped as it relates specifically to rendering the services during the applicable quarter.
The majority of our long-term transportation contracts specify minimum volume requirements, whereby, we bill a customer for a minimum level of shipments in the event a customer ships below their contractual requirements. If there are no future performance obligations, we will recognize these deficiency payments in revenue.
In certain of these throughput agreements, a customer may later utilize such shortfall billings as credit towards future volume shipments in excess of its minimum levels within its respective contractual shortfall make-up period. Such amounts represent an obligation to perform future services, which may be initially deferred and later recognized as revenue based on estimated future shipping levels, including the likelihood of a customer’s ability to utilize such amounts prior to the end of the contractual
- 11 -


shortfall make-up period. We recognize these deficiency payments in revenue when we do not expect we will be required to satisfy these performance obligations in the future based on the pattern of rights projected to be exercised by the customer. During the three months ended March 31, 2022 and 2021, we recognized $5.2 million and $3.8 million, respectively, of these deficiency payments in revenue, of which $0.9 million and $0.5 million, respectively, related to deficiency payments billed in prior periods.
We have other cost reimbursement provisions in our throughput / storage agreements providing that customers (including HF Sinclair) reimburse us for certain costs. Such reimbursements are recorded as revenue or deferred revenue depending on the nature of the cost. Deferred revenue is recognized over the remaining contractual term of the related throughput agreement.

Leases
We adopted ASC 842 effective January 1, 2019, and elected to adopt using the modified retrospective transition method and practical expedients, both of which are provided as options by the standard and further defined below.

Lessee Accounting
At inception, we determine if an arrangement is or contains a lease. Right-of-use assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our payment obligation under the leasing arrangement. Right-of-use assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. We use our estimated incremental borrowing rate (“IBR”) to determine the present value of lease payments as most of our leases do not contain an implicit rate. Our IBR represents the interest rate which we would pay to borrow, on a collateralized basis, an amount equal to the lease payments over a similar term in a similar economic environment. We use the implicit rate when readily determinable.

Operating leases are recorded in operating lease right-of-use assets and current and noncurrent operating lease liabilities on our consolidated balance sheet. Finance leases are included in properties and equipment, current finance lease liabilities and noncurrent finance lease liabilities on our consolidated balance sheet.

When renewal options are defined in a lease, our lease term includes an option to extend the lease when it is reasonably certain we will exercise that option. Leases with a term of 12 months or less are not recorded on our balance sheet, and lease expense is accounted for on a straight-line basis. In addition, as a lessee, we separate non-lease components that are identifiable and exclude them from the determination of net present value of lease payment obligations.

Lessor Accounting
Customer contracts that contain leases are generally classified as either operating leases, direct finance leases or sales-type leases. We consider inputs such as the lease term, fair value of the underlying asset and residual value of the underlying assets when assessing the classification.

Deferred Turnaround Costs
Our refinery processing units require regular major maintenance and repairs which are commonly referred to as “turnarounds.” The required frequency of the maintenance varies by unit, but generally is every four to five years. Turnaround costs are deferred and amortized over the period until the next scheduled turnaround.



Note 2:Sinclair Acquisition

HEP Transaction

On March 14, 2022, pursuant to the Contribution Agreement, HEP acquired all of the outstanding equity interests of Sinclair Transportation in exchange for 21 million newly issued HEP Units, representing 16.6% of the pro forma outstanding HEP Units with a value of approximately $349 million based on HEP’s fully diluted common limited partner units outstanding and closing unit price on March 11, 2022, and cash consideration equal to $321.4 million, inclusive of estimated working capital adjustments pursuant to the Contribution Agreement for an aggregate transaction value of $670.4 million. On the same date and immediately following the consummation of the HEP Transaction, pursuant to the Business Combination Agreement, Sinclair HoldCo contributed all of the equity interests of the Target Company to HF Sinclair in exchange for 60,230,036 shares of common stock in HF Sinclair, representing 27.0% of the pro forma equity of HF Sinclair with a value of approximately
- 12 -


$2,149 million based on HF Sinclair’s fully diluted shares of common stock outstanding and closing stock price on March 11, 2022.

On August 2, 2021, in connection with the Contribution Agreement, HEP, Holly Logistics Services, L.L.C., the ultimate general partner of HEP (“HLS”) and Navajo Pipeline Co., L.P., the sole member of HLS (the “Sole Member”), entered into a unitholders agreement (the “Unitholders Agreement”) by and among HEP, HLS, the Sole Member, Sinclair HoldCo and the stockholders of Sinclair HoldCo (each a “Unitholder” and collectively, the “Unitholders,” and along with Sinclair HoldCo and each of their permitted transferees, the “Sinclair Parties”), which became effective on the Closing Date.

Pursuant to the Unitholders Agreement, the Sinclair Parties have the right to nominate, and have nominated, one person to the board of directors of HLS until such time that (x) the Sinclair Parties beneficially own less than 10.5 million HEP Units or (y) the HEP Units beneficially owned by the Sinclair Parties constitute less than 5% of all outstanding HEP Units. The Unitholders Agreement also subjects 15.75 million of the HEP Units issued to the Sinclair Parties (the “Restricted Units”) to a “lock-up” period commencing on the Closing Date, during which the Sinclair Parties will be prohibited from selling the Restricted Units, except for certain permitted transfers. One-third of such Restricted Units will be released from such restrictions on the date that is six months after the closing, one-third of the Restricted Units will be released from such restrictions on the first anniversary of the Closing Date, and the remainder will be released from such restrictions on the date that is 15 months from the Closing Date.

Under the terms of the Contribution Agreement, HEP acquired Sinclair Transportation, which together with its subsidiaries, owned Sinclair HoldCo’s integrated crude and refined products pipelines and terminal assets, including approximately 1,200 miles of integrated crude and refined product pipeline supporting the Sinclair HoldCo refineries and other third-party refineries, eight product terminals and two crude terminals with approximately 4.5 million barrels of operated storage. In addition, HEP acquired Sinclair Transportation’s interests in three pipeline joint ventures for crude gathering and product offtake including: Saddle Butte Pipeline III, LLC (25.06% non-operated interest); Pioneer Pipeline (49.995% non-operated interest); and UNEV Pipeline (the 25% non-operated interest not already owned by HEP, resulting in UNEV Pipeline, LLC becoming a wholly owned subsidiary of HEP).

The HEP Transaction was accounted for as a business combination using the acquisition method of accounting, with the assets acquired and liabilities assumed at their respective acquisition date fair values at the Closing Date, with the excess consideration recorded as goodwill. The preliminary purchase consideration allocation resulted in the recognition of $83.7 million in goodwill.

The following tables present the preliminary purchase consideration and preliminary purchase price allocation to the assets acquired and liabilities assumed on March 14, 2022:

Preliminary Purchase Consideration (in thousands except for per share amounts)
HEP common units issued 21,000 
Closing price per unit of HEP common units(1)
$16.62 
Purchase consideration paid in HEP common units349,020 
Cash consideration paid by HEP(2)
325,000 
Estimated Adjusted Payments HEP(3,634)
Total cash consideration321,366 
Total purchase consideration$670,386 

(1) Based on the HEP closing unit price on March 11, 2022.
(2) Net of cash acquired



- 13 -


(In thousands)
Assets Acquired
Accounts receivable$687 
Prepaid and other current assets59 
Properties and equipment357,144 
Operating lease right-of-use assets105 
Other assets46 
Goodwill83,737 
Equity method investments238,484 
Total assets acquired$680,262 
Liabilities Assumed
Accounts payable2,376 
Accrued property taxes973 
Other current liabilities454 
Operating lease liabilities33 
Noncurrent operating lease liabilities72 
Other long-term liabilities5,968 
Total liabilities assumed$9,876 
Net assets acquired$670,386 


The fair value of properties, plants and equipment was based on the combination of the cost and market approaches. Key assumptions in the cost approach include determining the replacement cost by evaluating recently published data and adjusting replacement cost for physical deterioration, functional and economic obsolescence. We used the market approach to measure the value of certain assets through an analysis of recent sales or offerings of comparable properties.

The fair value of the equity method investments were based on a combination of valuation methods including discounted cash flows and the guideline public company method.

The fair values discussed above were based on significant inputs that are not observable in the market and, therefore, represent Level 3 measurements. See Note 6.

The fair values of all other current receivable and payables were equivalent to their carrying values due to their short-term nature.

These fair value estimates are preliminary and, therefore, the final fair values of assets acquired and liabilities assumed and the resulting effect on our financial position may change once all needed information has become available, the working capital true-up is complete, and we finalize our valuations.

Our consolidated financial and operating results reflect the Sinclair Transportation operations beginning March 14, 2022. Our results of operations included revenue, interest income from sales-type leases and net income of $1.7 million, $2.8 million and $2.6 million, respectively, for the period from March 14, 2022 through March 31, 2022 related to these operations.

For the three months ended March 31, 2022, we incurred $0.8 million in incremental direct acquisition and integration costs that principally relate to legal, advisory and other professional fees and are presented as general and administrative expenses in our statements of operations.

- 14 -


The following unaudited pro forma combined condensed financial data for the three months ended March 31, 2022 and 2021 was derived from our historical financial statements giving effect to the HEP Transaction as if it had occurred on January 1, 2021. The below information reflects pro forma adjustments based on available information and certain assumptions that we believe are reasonable, including the depreciation of Sinclair Transportation’s fair-valued properties, plants and equipment.

Additionally, pro forma earnings include certain non-recurring charges, the substantial majority of which consist of transaction costs related to financial advisors, legal advisors, financial advisory and professional accounting services.

The pro forma results of operations do not include any contract adjustments to tariffs made after closing, cost savings or other synergies that may result from the HEP Transaction. The pro forma combined condensed financial data has been included for comparative purposes only and is not necessarily indicative of the results that might have occurred had the HEP Transaction taken place on January 1, 2021 and is not intended to be a projection of future results.

Three Months Ended March 31,
20222021
(In thousands)
Sales and other revenues$134,960 $143,190 
Net income (loss) attributable to HEP stockholders$50,782 $70,425 

See Note 11 for a description of the Letter Agreement between HF Sinclair and HEP entered into in connection with the Contribution Agreement.


Note 3:Investment in Joint Venture

On October 2, 2019, HEP Cushing LLC (“HEP Cushing”), a wholly owned subsidiary of HEP, and Plains Marketing, L.P. (“PMLP”), a wholly owned subsidiary of Plains All American Pipeline, L.P. (“Plains”), formed a 50/50 joint venture, Cushing Connect Pipeline & Terminal LLC (the “Cushing Connect Joint Venture”), for (i) the development and construction of a new 160,000 barrel per day common carrier crude oil pipeline (the “Cushing Connect Pipeline”) that connected the Cushing, Oklahoma crude oil hub to the Tulsa, Oklahoma refining complex owned by a subsidiary of HF Sinclair and (ii) the ownership and operation of 1.5 million barrels of crude oil storage in Cushing, Oklahoma (the “Cushing Connect JV Terminal”). The Cushing Connect JV Terminal went in service during the second quarter of 2020, and the Cushing Connect Pipeline was placed into service during the third quarter of 2021. Long-term commercial agreements have been entered into to support the Cushing Connect Joint Venture assets.

The Cushing Connect Joint Venture contracted with an affiliate of HEP to manage the construction and operation of the Cushing Connect Pipeline and with an affiliate of Plains to manage the operation of the Cushing Connect JV Terminal. The total Cushing Connect Joint Venture investment will generally be shared equally among the partners. However, we are solely responsible for any Cushing Connect Pipeline construction costs that exceed the budget by more than 10%. HEP estimates its share of the cost of the Cushing Connect JV Terminal contributed by Plains and Cushing Connect Pipeline construction costs are approximately $70 million to $75 million, including $4 million to $6 million of Cushing Connect Pipeline construction costs exceeding the budget by more than 10% to be borne solely by HEP.

The Cushing Connect Joint Venture legal entities are variable interest entities (“VIEs”) as defined under GAAP. A VIE is a legal entity if it has any one of the following characteristics: (i) the entity does not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support; (ii) the at risk equity holders, as a group, lack the characteristics of a controlling financial interest; or (iii) the entity is structured with non-substantive voting rights. The Cushing Connect Joint Venture legal entities do not have sufficient equity at risk to finance their activities without additional financial support. Since HEP constructed and is operating the Cushing Connect Pipeline, HEP has more ability to direct the activities that most significantly impact the financial performance of the Cushing Connect Joint Venture and Cushing Connect Pipeline legal entities. Therefore, HEP consolidates those legal entities. We do not have the ability to direct the activities that most significantly impact the Cushing Connect JV Terminal legal entity, and therefore, we account for our interest in the Cushing Connect JV Terminal legal entity using the equity method of accounting. HEP’s maximum exposure to loss as a result of its
- 15 -


involvement with the Cushing Connect JV Terminal legal entity is not expected to be material due to the long-term terminalling agreements in place to support its operations.

With the exception of the assets of HEP Cushing, creditors of the Cushing Connect Joint Venture legal entities have no recourse to our assets. Any recourse to HEP Cushing would be limited to the extent of HEP Cushing's assets, which other than its investment in Cushing Connect Joint Venture, are not significant. Furthermore, our creditors have no recourse to the assets of the Cushing Connect Joint Venture legal entities.


Note 4:Revenues

Revenues are generally recognized as products are shipped through our pipelines and terminals, feedstocks are processed through our refinery processing units or other services are rendered. See Note 1 for further discussion of revenue recognition.

Disaggregated revenues were as follows:
Three Months Ended
March 31,
20222021
(In thousands)
Pipelines$64,780 $66,505 
Terminals, tanks and loading racks37,015 38,182 
Refinery processing units18,403 22,496 
$120,198 $127,183 

Revenues on our consolidated statements of income were composed of the following lease and service revenues:
Three Months Ended
March 31,
20222021
(In thousands)
Lease revenues$72,914 $87,944 
Service revenues47,284 39,239 
$120,198 $127,183 
A contract liability exists when an entity is obligated to perform future services for a customer for which the entity has received consideration. Since HEP may be required to perform future services for these deficiency payments received, the deferred revenues on our balance sheets were considered contract liabilities. A contract asset exists when an entity has a right to consideration in exchange for goods or services transferred to a customer. Our consolidated balance sheets included the contract assets and liabilities in the table below:
March 31,
2022
December 31,
2021
 (In thousands)
Contract assets$6,682 $6,637 
Contract liabilities$(3,431)$(4,185)

The contract assets and liabilities include both lease and service components. During the three months ended March 31, 2022 and 2021, we recognized $0.9 million and $0.5 million, respectively, of revenue that was previously included in contract liability as of December 31, 2021 and 2020, respectively. During the three months ended March 31, 2022 and 2021, we also recognized $45,000 and $0.1 million, respectively, of revenue included in contract assets.

- 16 -


As of March 31, 2022, we expect to recognize $1.7 billion in revenue related to our unfulfilled performance obligations under the terms of our long-term throughput agreements and leases expiring in 2023 through 2037. These agreements generally provide for changes in the minimum revenue guarantees annually for increases or decreases in the Producer Price Index (“PPI”) or Federal Energy Regulatory Commission (“FERC”) index, with certain contracts having provisions that limit the level of the rate increases or decreases. We expect to recognize revenue for these unfulfilled performance obligations as shown in the table below (amounts shown in table include both service and lease revenues):
Years Ending December 31,(In millions)
Remainder of 2022$256 
2023290 
2024248 
2025178 
2026163 
2027132 
Thereafter388 
Total$1,655 
Payment terms under our contracts with customers are consistent with industry norms and are typically payable within 10 to 30 days of the date of invoice.

Note 5:Leases

See Note 1 for further discussion of lease accounting.

Lessee Accounting
As a lessee, we lease land, buildings, pipelines, transportation and other equipment to support our operations. These leases can be categorized into operating and finance leases.

Our leases have remaining terms of less than 1 year to 23 years, some of which include options to extend the leases for up to 10 years.

Finance Lease Obligations
We have finance lease obligations related to vehicle leases with initial terms of 33 to 48 months. The total cost of assets under finance leases was $6.2 million and $6.0 million as of March 31, 2022 and December 31, 2021, respectively, with accumulated depreciation of $3.8 million and $3.6 million as of March 31, 2022 and December 31, 2021, respectively. We include depreciation of finance leases in depreciation and amortization in our consolidated statements of income.

In addition, we have a finance lease obligation related to a pipeline lease with an initial term of 10 years with one remaining subsequent renewal option for an additional 10 years.

- 17 -


Supplemental balance sheet information related to leases was as follows (in thousands, except for lease term and discount rate):
March 31,
2022
December 31, 2021
Operating leases:
   Operating lease right-of-use assets, net$2,727 $2,275 
   Current operating lease liabilities 1,000 620 
   Noncurrent operating lease liabilities2,207 2,030 
      Total operating lease liabilities$3,207 $2,650 
Finance leases:
   Properties and equipment$6,172 $6,031 
   Accumulated amortization(3,823)(3,632)
      Properties and equipment, net$2,349 $2,399 
   Current finance lease liabilities $3,825 $3,786 
   Noncurrent finance lease liabilities63,765 64,649 
      Total finance lease liabilities$67,590 $68,435 
Weighted average remaining lease term (in years):
   Operating leases5.75.8
   Finance leases14.815.0
Weighted average discount rate:
   Operating leases4.8%4.8%
   Finance leases5.6%5.6%


Supplemental cash flow and other information related to leases were as follows:
Three Months Ended
March 31,
20222021
(In thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows on operating leases$276 $312 
Operating cash flows on finance leases$981 $1,058 
Financing cash flows on finance leases$881 $958 
- 18 -


Maturities of lease liabilities were as follows:
March 31, 2022
OperatingFinance
(In thousands)
2022$783 $5,499 
2023935 7,383 
2024524 6,938 
2025443 6,479 
2026289 6,432 
2027 and thereafter501 67,463 
   Total lease payments3,475 100,194 
Less: Imputed interest(268)(32,604)
   Total lease obligations3,207 67,590 
Less: Current lease liabilities(1,000)(3,825)
   Noncurrent lease liabilities$2,207 $63,765 

The components of lease expense were as follows:
Three Months Ended
March 31,
20222021
(In thousands)
Operating lease costs$262 $298 
Finance lease costs
   Amortization of assets192 212 
   Interest on lease liabilities959 1,006 
Variable lease cost37 66 
Total net lease cost$1,450 $1,582 

Lessor Accounting
As discussed in Note 1, the majority of our contracts with customers meet the definition of a lease.

Substantially all of the assets supporting contracts meeting the definition of a lease have long useful lives, and we believe these assets will continue to have value when the current agreements expire due to our risk management strategy for protecting the residual fair value of the underlying assets by performing ongoing maintenance during the lease term. HF Sinclair generally has the option to purchase assets located within HF Sinclair refinery boundaries, including refinery tankage, truck racks and refinery processing units, at fair market value when the related agreements expire.

During the three months ended March 31, 2022, we entered into new agreements, and amended other agreements, with HFC related to our newly acquired Sinclair Transportation assets. Certain of these agreements met the criteria of sales-type leases. Under sales-type lease accounting, at the commencement date, the lessor recognizes a net investment in the lease, based on the estimated fair value of the underlying leased assets at contract inception, and derecognizes the underlying assets with the difference recorded as selling profit or loss arising from the lease. Because we recorded these assets at fair values under purchase price accounting, there was no gain or loss on these sales-type leases during the three months ended March 31, 2022. The balance sheet impacts were composed of the following:
Three Months Ended March 31, 2022
(In thousands)
Net investment in leases$235,620 
Properties and equipment, net(235,620)
Gain on sales-type leases$ 

- 19 -


During the three months ended March 31, 2021, we entered into new agreements and modified other agreements with HF Sinclair related to our Cheyenne assets, Tulsa West lube racks, and various crude tanks. These agreements met the criteria of sales-type leases since the underlying assets are not expected to have an alternative use at the end of the lease terms to anyone other than HF Sinclair. Under sales-type lease accounting, at the commencement date, the lessor recognizes a net investment in the lease, based on the estimated fair value of the underlying leased assets at contract inception, and derecognizes the underlying assets with the difference recorded as selling profit or loss arising from the lease. Therefore, we recognized a gain on sales-type leases during the three months ended March 31, 2021 composed of the following:

Three Months Ended March 31, 2021
(In thousands)
Net investment in leases$41,246 
Properties and equipment, net(23,155)
Deferred revenue6,559 
Gain on sales-type leases$24,650 

These sales-type lease transactions, including the related gain, were non-cash transactions.

Lease income recognized was as follows:
Three Months Ended
March 31,
20222021
(In thousands)
Operating lease revenues$69,975 $85,892 
Direct financing lease interest income520 524 
Gain on sales-type leases 24,650 
Sales-type lease interest income12,123 6,025 
Lease revenues relating to variable lease payments not included in measurement of the sales-type lease receivable 2,939 2,052 
For our sales-type leases, we included customer obligations related to minimum volume requirements in guaranteed minimum lease payments. Portions of our minimum guaranteed pipeline tariffs for assets subject to sales-type lease accounting are recorded as interest income with the remaining amounts recorded as a reduction in net investment in leases. We recognized any billings for throughput volumes in excess of minimum volume requirements as variable lease payments, and these variable lease payments were recorded in lease revenues.

- 20 -


Annual minimum undiscounted lease payments under our leases were as follows as of March 31, 2022:
OperatingFinanceSales-type
Years Ending December 31,(In thousands)
Remainder of 2022$214,431 $1,627 $75,223 
2023261,938 2,175 96,383 
2024224,373 2,192 93,154 
2025159,983 2,209 89,727 
2026145,748 2,227 89,727 
2027 and thereafter449,793 36,610 841,406 
Total lease receipt payments$1,456,266 $47,040 $1,285,620 
Less: Imputed interest(30,693)(1,155,318)
16,347 130,302 
Unguaranteed residual assets at end of leases 402,750 
Net investment in leases$16,347 $533,052 

Net investments in leases recorded on our balance sheet were composed of the following:
March 31, 2022December 31, 2021
Sales-type LeasesDirect Financing LeasesSales-type LeasesDirect Financing Leases
(In thousands)(In thousands)
Lease receivables (1)
$430,779 $16,347 $207,768 $16,371 
Unguaranteed residual assets102,273  90,097  
Net investment in leases$533,052 $16,347 $297,865 $16,371 

(1)    Current portion of lease receivables included in prepaid and other current assets on the balance sheet.


Note 6:Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements are derived using inputs (assumptions that market participants would use in pricing an asset or liability) including assumptions about risk. GAAP categorizes inputs used in fair value measurements into three broad levels as follows:
(Level 1) Quoted prices in active markets for identical assets or liabilities.
(Level 2) Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, similar assets and liabilities in markets that are not active or can be corroborated by observable market data.
(Level 3) Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes valuation techniques that involve significant unobservable inputs.

Financial Instruments
Our financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable, and debt. The carrying amounts of cash equivalents, accounts receivable and accounts payable approximate fair value due to the short-term maturity of these instruments. Debt consists of outstanding principal under our revolving credit agreement (which approximates fair value as interest rates are reset frequently at current interest rates) and our fixed interest rate senior notes.

- 21 -


The carrying amounts and estimated fair values of our senior notes were as follows:
 March 31, 2022December 31, 2021
Financial InstrumentFair Value Input LevelCarrying
Value
Fair ValueCarrying
Value
Fair Value
(In thousands)
Liabilities:
5% Senior Notes
Level 2492,867 474,605 493,049 502,705 

Level 2 Financial Instruments
Our senior notes are measured at fair value using Level 2 inputs. The fair value of the senior notes is based on market values provided by a third-party bank, which were derived using market quotes for similar type debt instruments. See Note 10 for additional information.

Non-Recurring Fair Value Measurements
The HEP Transaction was accounted for as a business combination using the acquisition method of accounting, with the assets acquired and liabilities assumed at their respective acquisition date fair values at the Closing Date. The fair value measurements were based on a combination of valuation methods including discounted cash flows, the guideline public company method, the market approach and obsolescence adjusted replacement costs, all of which are Level 3 inputs.

For the net investments in sales-type leases recognized during the three months ended March 31, 2022, the estimated fair value of the underlying leased assets at contract inception and the present value of the estimated unguaranteed residual asset at the end of the lease term are used in determining the net investment in leases recorded. The asset valuation estimates include Level 3 inputs based on a replacement cost valuation method.


Note 7:Properties and Equipment 

The carrying amounts of our properties and equipment were as follows:
March 31,
2022
December 31,
2021
 (In thousands)
Pipelines, terminals and tankage$1,608,197 $1,527,697 
Refinery assets348,882 348,882 
Land and right of way124,150 98,837 
Construction in progress35,111 26,446 
Other62,809 48,203 
2,179,149 2,050,065 
Less accumulated depreciation(738,261)(721,037)
$1,440,888 $1,329,028 

Depreciation expense was $18.5 million and $21.4 million for the three months ended March 31, 2022 and 2021, respectively, and includes depreciation of assets acquired under capital leases.


Note 8:Intangible Assets

Intangible assets include transportation agreements and customer relationships that represent a portion of the total purchase price of certain assets acquired from Delek US Holdings, Inc. (“Delek”) in 2005, from HFC in 2008 prior to HEP becoming a consolidated VIE of HFC, from Plains in 2017, and from other minor acquisitions in 2018.

- 22 -


The carrying amounts of our intangible assets were as follows:
Useful LifeMarch 31,
2022
December 31,
2021
 (In thousands)
Delek transportation agreement
30 years
$59,933 $59,933 
HF Sinclair transportation agreement
10-15 years
75,131 75,131 
Customer relationships
10 years
69,683 69,683 
Other
20 years
50 50 
204,797 204,797 
Less accumulated amortization(134,991)(131,490)
$69,806 $73,307 

Amortization expense was $3.5 million for each of the three months ended March 31, 2022 and 2021. We estimate amortization expense to be $9.9 million for 2023, and $9.1 million for 2024 through 2027.

We have additional transportation agreements with subsidiaries of HF Sinclair resulting from historical transactions consisting of pipeline, terminal and tankage assets contributed to us or acquired from subsidiaries of HF Sinclair. These transactions occurred while we were a consolidated variable interest entity of HF Sinclair; therefore, our basis in these agreements is zero and does not reflect a step-up in basis to fair value.


Note 9:Employees, Retirement and Incentive Plans

Direct support for our operations is provided by HLS, which utilizes personnel employed by HF Sinclair who are dedicated to performing services for us. Their costs, including salaries, bonuses, payroll taxes, benefits and other direct costs, are charged to us monthly in accordance with an omnibus agreement that we have with HF Sinclair (the “Omnibus Agreement”). These employees participate in the retirement and benefit plans of HF Sinclair. Our share of retirement and benefit plan costs was $2.4 million and $2.2 million for the three months ended March 31, 2022 and 2021, respectively.

Under HLS’s secondment agreement with HF Sinclair (the “Secondment Agreement”), certain employees of HF Sinclair are seconded to HLS to provide operational and maintenance services for certain of our processing, refining, pipeline and tankage assets, and HLS reimburses HF Sinclair for its prorated portion of the wages, benefits, and other costs related to these employees.
We have a Long-Term Incentive Plan for employees and non-employee directors who perform services for us. The Long-Term Incentive Plan consists of five components: restricted or phantom units, performance units, unit options, unit appreciation rights and cash awards. Our accounting policy for the recognition of compensation expense for awards with pro-rata vesting (a significant proportion of our awards) is to expense the costs ratably over the vesting periods.

As of March 31, 2022, we had two types of unit-based awards outstanding, which are described below. The compensation cost charged against income was $0.6 million and $0.7 million for the three months ended March 31, 2022 and 2021, respectively. We currently purchase units in the open market instead of issuing new units for settlement of all unit awards under our Long-Term Incentive Plan. As of March 31, 2022, 2,500,000 units were authorized to be granted under our Long-Term Incentive Plan, of which 814,440 were available to be granted, assuming no forfeitures of the unvested units and full achievement of goals for the unvested performance units.

Phantom Units
Under our Long-Term Incentive Plan, we grant phantom units to our non-employee directors and selected employees who perform services for us, with most awards vesting over a period of one to three years. Although full ownership of the units does not transfer to the recipients until the units vest, the recipients have distribution rights on these units from the date of grant.

The fair value of each phantom unit award is measured at the market price as of the date of grant and is amortized on a straight-line basis over the requisite service period for each separately vesting portion of the award.

- 23 -


A summary of phantom unit activity and changes during the three months ended March 31, 2022, is presented below:
Phantom UnitsUnitsWeighted Average Grant-Date Fair Value
Outstanding at January 1, 2022 (nonvested)203,263 $14.85 
Vesting and transfer of full ownership to recipients(2,558)15.11 
Forfeited(13,085)14.28 
Outstanding at March 31, 2022 (nonvested)187,620 14.89 

The grant date fair values of phantom units that were vested and transferred to recipients during the three months ended March 31, 2022 were $39 thousand. No phantom units vested and transferred to recipients during the three months ended March 31, 2021. As of March 31, 2022, $1.3 million of total unrecognized compensation expense related to unvested phantom unit grants is expected to be recognized over a weighted-average period of 1.2 years.

Performance Units
Under our Long-Term Incentive Plan, we grant performance units to selected officers who perform services for us. Performance units granted are payable in common units at the end of a three-year performance period based upon meeting certain criteria over the performance period. Under the terms of our performance unit grants, some awards are subject to the growth in our distributable cash flow per common unit over the performance period while other awards are subject to "financial performance" and "market performance." Financial performance is based on meeting certain earnings before interest, taxes, depreciation and amortization ("EBITDA") targets, while market performance is based on the relative standing of total unitholder return achieved by HEP compared to peer group companies. The number of units ultimately issued under these awards can range from 0% to 200%.

We did not grant any performance units during the three months ended March 31, 2022. Although common units are not transferred to the recipients until the performance units vest, the recipients have distribution rights with respect to the target number of performance units subject to the award from the date of grant at the same rate as distributions paid on our common units.

A summary of performance unit activity and changes for the three months ended March 31, 2022, is presented below:
Performance UnitsUnits
Outstanding at January 1, 2022 (nonvested)76,719 
Vesting and transfer of common units to recipients(24,809)
Forfeited(9,124)
Outstanding at March 31, 2022 (nonvested)42,786 

The grant date fair value of performance units vested and transferred to recipients during the three months ended March 31, 2022 and 2021 was $0.6 million and $0.4 million, respectively. Based on the weighted-average fair value of performance units outstanding at March 31, 2022, of $0.7 million, there was $0.4 million of total unrecognized compensation expense related to nonvested performance units, which is expected to be recognized over a weighted-average period of 1.7 years.

During the three months ended March 31, 2022, we did not purchase any of our common units in the open market for the issuance and settlement of unit awards under our Long-Term Incentive Plan.


- 24 -


Note 10:Debt

Credit Agreement
In April 2021, we amended our senior secured revolving credit facility (the “Credit Agreement”) decreasing the size of the facility from $1.4 billion to $1.2 billion and extending the maturity date to July 27, 2025. The Credit Agreement is available to fund capital expenditures, investments, acquisitions, distribution payments, working capital and for general partnership purposes. The Cred