HollyFrontier 2013 Annual Report Download - page 34

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Competition in the refining and marketing industry is intense, and an increase in competition in the markets in which we sell
our products could adversely affect our earnings and profitability.
We compete with a broad range of refining and marketing companies, including certain multinational oil companies. Because of
their geographic diversity, larger and more complex refineries, integrated operations and greater resources, some of our competitors
may be better able to withstand volatile market conditions, to obtain crude oil in times of shortage and to bear the economic risks
inherent in all areas of the refining industry.
We are not engaged in petroleum exploration and production activities and do not produce any of the crude oil feedstocks used at
our refineries. We do not have a retail business and therefore are dependent upon others for outlets for our refined products. Certain
of our competitors, however, obtain a portion of their feedstocks from company-owned production and have retail outlets.
Competitors that have their own production or extensive retail outlets, with brand-name recognition, are at times able to offset
losses from refining operations with profits from producing or retailing operations, and may be better positioned to withstand
periods of depressed refining margins or feedstock shortages.
In recent years there have been several refining and marketing consolidations or acquisitions between entities competing in our
geographic market. These transactions could increase the future competitive pressures on us.
The markets in which we compete may be impacted by competitors' plans for expansion projects and refinery improvements that
could increase the production of refined products in our areas of operation and significantly affect our profitability.
Also, the potential operation of new or expanded refined product transportation pipelines, or the conversion of existing pipelines
into refined product transportation pipelines, could impact the supply of refined products to our existing markets and negatively
affect our profitability.
In addition, we compete with other industries that provide alternative means to satisfy the energy and fuel requirements of our
industrial, commercial and individual consumers. The more successful these alternatives become as a result of governmental
regulations, technological advances, consumer demand, improved pricing or otherwise, the greater the impact on pricing and
demand for our products and our profitability. There are presently significant governmental and consumer pressures to increase
the use of alternative fuels in the United States.
A material decrease in the supply of crude oil available to our refineries could significantly reduce our production levels.
To maintain or increase production levels at our refineries, we must continually contract for crude oil supplies from third parties.
A material decrease in crude oil production from the fields that supply our refineries, as a result of depressed commodity prices,
lack of drilling activity, natural production declines or otherwise, could result in a decline in the volume of crude oil available to
our refineries. In addition, any prolonged disruption of a significant pipeline that is used in supplying crude oil to our refineries
or the potential operation of a new, converted or expanded crude oil pipeline that transports crude oil to other markets could result
in a decline in the volume of crude oil available to our refineries. Such an event could result in an overall decline in volumes of
refined products processed at our refineries and therefore a corresponding reduction in our cash flow. In addition, the future growth
of our operations will depend in part upon whether we can contract for additional supplies of crude oil at a greater rate than the
rate of natural decline in our currently connected supplies. If we are unable to secure additional crude oil supplies of sufficient
quality or crude pipeline expansion to our refineries, we will be unable to take full advantage of current and future expansion of
our refineries' production capacities.
A disruption to or proration of the refined product distribution systems we utilize could negatively impact our profitability.
We utilize various common carrier or other third party pipeline systems to deliver our products to market. The key systems utilized
by the Cheyenne, El Dorado, Navajo, Woods Cross, and Tulsa Refineries are Rocky Mountain, NuStar Energy, SFPP and Plains,
Chevron, and Magellan, respectively. All five refineries also utilize systems owned by HEP. If these key pipelines or their associated
tanks and terminals become inoperative or decrease the capacity available to us, we may not be able to sell our product, or we
may be required to hold our product in inventory or supply products to our customers through an alternative pipeline or by rail or
additional tanker trucks from the refinery, all of which could increase our costs and result in a decline in profitability.
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