uploads///Cash flow

HollyFrontier’s Cash Flow Surplus in 2018

By

Mar. 6 2019, Published 8:04 a.m. ET

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.

Article continues below advertisement

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.

Advertisement

More From Market Realist