HollyFrontier’s cash flow
In 2018, HollyFrontier (HFC) generated $1,554 million in cash from operations. The company had cash outflows of $365 million in the form of capex and acquisitions and $234 million in the form of dividends in 2018. The acquisition outflows were mainly related to the acquisition of Red Giant Oil.
HollyFrontier’s cash flow surplus
HollyFrontier’s cash outflows were ~$599 million in 2018, considering the capex, acquisitions, and dividend outflows. The cash flow from operations easily covered these vital outflows. There was a surplus of ~$956 million—the difference between cash inflows from operations of $1554 million and outflows due to the capex, acquisition, and dividend of $599 million.
The company used a portion of the surplus to buy back shares. In 2018, HollyFrontier purchased $363 million worth of shares. After utilizing cash for other activities, the company added the remaining cash to its reserves. HollyFrontier’s cash balance rose from $631 million on January 1, 2018, to $1,154 million on December 31, 2018.
Like HollyFrontier, Phillips 66 (PSX) also saw a cash flow surplus in 2018.
What does HollyFrontier’s cash flow analysis reveal?
HollyFrontier has witnessed a cash flow surplus in 2018—a comfortable situation. In 2017, the company had a cash flow shortfall. The previous year, the shortfall was mainly due to acquisition outflows related to Petro Canada. The company swapping from a cash flow shortfall to a cash flow surplus (despite acquisition outflows related to Red Giant Oil) is a positive sign. The swap hints that the company’s liquidity position is favorable. HollyFrontier acquired Sonneborn US Holdings in an all-cash transaction.
HollyFrontier saw a sharp improvement in its liquidity position in 2018.