HollyFrontier 2015 Annual Report Download - page 39

Table of Content
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Our hedging transactions may limit our gains and expose us to other risks.
We periodically enter into derivative transactions as it relates to inventory levels and/or future production to manage the risks from
changes in the prices of crude oil, refined products and other feedstocks. These transactions limit our potential gains if commodity
prices move above or below the certain price levels established by our hedging instruments. We hedge price risk on inventories
above our target levels to minimize the impact these price fluctuations have on our earnings and cash flows. Consequently, our
hedging results may fluctuate significantly from one reporting period to the next depending on commodity price fluctuations and
our relative physical inventory positions. These transactions may also expose us to risks of financial losses; for example, if our
production is less than we anticipated at the time we entered into a hedge agreement or if a counterparty to our hedge agreements
fails to perform its obligations under the agreements.
Changes in our credit profile, or a significant increase in the price of crude oil, may affect our relationship with our suppliers,
which could have a material adverse effect on our liquidity and limit our ability to purchase sufficient quantities of crude oil
to operate our refineries at desired capacity.
An unfavorable credit profile, or a significant increase in the price of crude oil, could affect the way crude oil suppliers view our
ability to make payments and induce them to shorten the payment terms of their invoices with us or require credit enhancement.
Due to the large dollar amounts and volume of our crude oil and other feedstock purchases, any imposition by our suppliers of
more burdensome payment terms or credit enhancement requirements on us may have a material adverse effect on our liquidity
and our ability to make payments to our suppliers. This in turn could cause us to be unable to operate our refineries at desired
capacity. A failure to operate our refineries at desired capacity could adversely affect our profitability and cash flow.
Our credit facility contains certain covenants and restrictions that may constrain our business and financing activities.
The operating and financial restrictions and covenants in our credit facility and any future financing agreements could adversely
affect our ability to finance future operations or capital needs or to engage, expand or pursue our business activities. For example,
our revolving credit facility imposes usual and customary requirements for this type of credit facility, including: (i) limitations on
liens and indebtedness; (ii) a prohibition on changes in control and (iii) restrictions on engaging in mergers and consolidations. If
we fail to satisfy the covenants set forth in the credit facility or another event of default occurs under the credit facility, the maturity
of the loan could be accelerated or we could be prohibited from borrowing for our future working capital needs and issuing letters
of credit. We might not have, or be able to obtain, sufficient funds to make these immediate payments. If we desire to undertake
a transaction that is prohibited by the covenants in our credit facility, we will need to obtain consent under our credit facility. Such
refinancing may not be possible or may not be available on commercially acceptable terms.
Our business may suffer due to a departure of any of our key senior executives or other key employees. Furthermore, a shortage
of skilled labor or disruptions in our labor force may make it difficult for us to maintain labor productivity.
Our future performance depends to a significant degree upon the continued contributions of our senior management team and key
technical personnel. We do not currently maintain key man life insurance, non-compete agreements, or employment agreements
with respect to any member of our senior management team. The loss or unavailability to us of any member of our senior management
team or a key technical employee could significantly harm us. We face competition for these professionals from our competitors,
our customers and other companies operating in our industry. To the extent that the services of members of our senior management
team and key technical personnel would be unavailable to us for any reason, we may be required to hire other personnel to manage
and operate our company. We may not be able to locate or employ such qualified personnel on acceptable terms, or at all.
Furthermore, our operations require skilled and experienced laborers with proficiency in multiple tasks. A shortage of trained
workers due to retirements or otherwise could have an adverse impact on our labor productivity and costs and our ability to expand
production in the event there is an increase in the demand for our products and services, which could adversely affect our operations.
As of December 31, 2015, approximately 34% of our employees were represented by labor unions under collective bargaining
agreements with various expiration dates. We may not be able to renegotiate our collective bargaining agreements when they
expire on satisfactory terms or at all. A failure to do so may increase our costs. In addition, our existing labor agreements may not
prevent a strike or work stoppage at any of our facilities in the future, and any work stoppage could negatively affect our results
of operations and financial condition.