HollyFrontier 2015 Annual Report Download - page 36

Table of Content
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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.
We may be subject to information technology system failures, network disruptions and breaches in data security.
Information technology system failures, network disruptions (whether intentional by a third party or due to natural disaster),
breaches of network or data security, or disruption or failure of the network system used to monitor and control pipeline operations
could disrupt our operations by impeding our processing of transactions, our ability to protect customer or company information
and our financial reporting. Our computer systems, including our back-up systems, could be damaged or interrupted by power
outages, computer and telecommunications failures, computer viruses, internal or external security breaches, events such as fires,
earthquakes, floods, tornadoes and hurricanes, and/or errors by our employees. There can be no assurance that a system failure or
data security breach will not have a material adverse effect on our financial condition and results of operations.
We may not be able to obtain funding on acceptable terms or at all because of volatility and uncertainty in the credit and capital
markets. This may hinder or prevent us from meeting our future capital needs.
The domestic and global financial markets and economic conditions are disrupted and volatile from time to time due to a variety
of factors, including low consumer confidence, high unemployment, geoeconomic and geopolitical issues, weak economic
conditions and uncertainty in the financial services sector. In addition, the fixed-income markets have experienced periods of
extreme volatility, which negatively impacted market liquidity conditions. Recently, the equity and debt markets for many energy
industry companies have been adversely affected by low oil prices. As a result, the cost of raising money in the debt and equity
capital markets has increased substantially at times while the availability of funds from these markets diminished significantly. In
particular, as a result of concerns about the stability of financial markets generally and the solvency of lending counterparties
specifically, the cost of obtaining money from the credit markets may increase as many lenders and institutional investors increase
interest rates, enact tighter lending standards, refuse to refinance existing debt on similar terms or at all and reduce, or in some
cases cease, to provide funding to borrowers. In addition, lending counterparties under any existing revolving credit facility and
other debt instruments may be unwilling or unable to meet their funding obligations, or we may experience a decrease in our
capacity to issue debt or obtain commercial credit or a deterioration in our credit profile, including a rating agency lowering or
withdrawing of our credit ratings if, in its judgment, the circumstances warrant. Due to these factors, we cannot be certain that
new debt or equity financing will be available on acceptable terms. If funding is not available when needed, or is available only
on unfavorable terms, we may be unable to meet our obligations as they come due or we may be required to sell assets. Moreover,
without adequate funding, we may be unable to execute our growth strategy, complete future acquisitions or construction projects,
take advantage of other business opportunities or respond to competitive pressures, comply with regulatory requirements, or meet
our short-term or long-term working capital requirements, any of which could have a material adverse effect on our revenues and
results of operations. Failure to comply with regulatory requirements in a timely manner or meet our short-term or long-term
working capital requirements could subject us to regulatory action.
We depend upon HEP for a substantial portion of the crude supply and distribution network that serve our refineries, and we
own a significant equity interest in HEP.
We currently own a 39% interest in HEP, including the 2% general partner interest. HEP operates a system of crude oil and
petroleum product pipelines, distribution terminals and refinery tankage in Arizona, Idaho, Kansas, Nevada, New Mexico,
Oklahoma, Texas, Utah, Washington and Wyoming. HEP generates revenues by charging tariffs for transporting petroleum products
and crude oil through its pipelines, leasing certain pipeline capacity to Alon, charging fees for terminalling refined products and
other hydrocarbons and storing and providing other services at its terminals. HEP serves the Cheyenne, El Dorado, Navajo, Woods
Cross and Tulsa Refineries under several long-term pipeline and terminal, tankage and throughput agreements expiring in 2019
through 2026 and serves the El Dorado Refinery under long-term tolling agreements expiring in 2030. Furthermore, our financial
statements include the consolidated results of HEP. HEP is subject to its own operating and regulatory risks, including, but not
limited to:
• its reliance on its significant customers, including us;
• competition from other pipelines;