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HollyFrontier’s Refining and Lubricants Earnings Fell in Q1

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May. 3 2019, Published 8:19 p.m. ET

HollyFrontier’s adjusted EBITDA

HollyFrontier (HFC) posted its first-quarter earnings results on May 2, 2019. The company’s adjusted EPS stood at $0.54 in the quarter, higher than Wall Street analysts’ consensus estimate of $0.43. HFC’s refining earnings fell steeply. For more on its earnings, read HollyFrontier’s Q1 Earnings Fell but Beat Estimate. Now, let’s review HollyFrontier’s earnings by segment in more detail.

HollyFrontier’s adjusted EBITDA fell from $316 million in the first quarter of 2018 to $282 million in the first quarter of 2019 due to a fall in its Refining and Lubricants earnings partly offset by a rise in its HEP (or midstream) earnings.

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Refining, Lubricants, and HEP earnings

HollyFrontier’s Refining segment is critical to the company’s overall earnings. The segment’s adjusted EBITDA fell 4% to $193 million in the first quarter. Lower refining margins and throughputs led to these weaker refining earnings. HollyFrontier’s gross refining margin contracted by $0.1 per barrel YoY (year-over-year) to $12.7 per barrel in the first quarter of 2019. Its operating costs also rose $1.3 per barrel in the same period. For more information, read How HollyFrontier’s Refining Margin Trended in Q1 2019.

HollyFrontier’s refining throughputs fell in the quarter due to maintenance activity at its Tulsa East refinery and unplanned maintenance at its El Dorado refinery.

In the first quarter of 2019, HollyFrontier’s Lubricants segment saw a 51% YoY fall in its adjusted EBITDA to $20 million. The fall was led by negative Rack Back (production and sale of base oils) EBITDA due to weaker base oil markets. Its Rack Forward (purchase and processing of base oils to produce and sell finished lubricant products) EBITDA fell to $53 million in the quarter.

HollyFrontier’s HEP segment’s earnings rose 6% YoY to $94 million in the first quarter of 2019 due to higher pipeline volumes.

Peers’ segmental performances

Valero Energy’s (VLO) operating earnings fell 62% YoY to $308 million in the first quarter of 2019 due to a fall in its Refining and Ethanol earnings. Phillips 66’s (PSX) adjusted pretax earnings fell due to YoY falls in its Refining, Chemicals, and Marketing and Specialties earnings partially offset by a YoY rise in its Midstream earnings.

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