HollyFrontier 2015 Annual Report Download - page 75

Download and view the complete annual report

Please find page 75 of the 2015 HollyFrontier annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 122

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122

Table of Contents HOLLYFRONTIER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Continued
67
Transportation Agreements
HEP serves our refineries under long-term pipeline, terminal, tankage and refinery processing unit throughput agreements expiring
from 2019 through 2030. Under these agreements, we pay HEP fees to transport, store and process throughput volumes of refined
products, crude oil and feedstocks on HEP's pipelines, terminals, tankage, loading rack facilities and refinery processing units that
result in minimum annual payments to HEP, including UNEV (a consolidated subsidiary of HEP). Under these agreements, the
agreed upon tariff rates are subject to annual tariff rate adjustments on July 1 at a rate based upon the percentage change in Producer
Price Index or Federal Energy Regulatory Commission index. As of December 31, 2015, these agreements result in minimum
annualized payments to HEP of $244.9 million.
Our transactions with HEP including the acquisitions discussed above and fees paid under our transportation agreements with
HEP and UNEV are eliminated and have no impact on our consolidated financial statements.
HEP's recent common unit issuances (2013 through present) are summarized below:
2013 Issuances
In March 2013, HEP closed on a public offering of 1,875,000 of its common units. Additionally, our wholly-owned subsidiary,
HollyFrontier Holdings LLC, as a selling unitholder, closed on a public sale of 1,875,000 HEP common units held by it. HEP used
net proceeds of $73.4 million to repay indebtedness incurred under its credit facility and for general partnership purposes.
As a result of this transaction and resulting HEP ownership changes, we adjusted additional capital and equity attributable to HEP's
noncontrolling interest holders to effectively reallocate a portion of HEP's equity among its unitholders.
NOTE 3: Financial Instruments
Our financial instruments consist of cash and cash equivalents, investments in marketable securities, accounts receivable, accounts
payable, debt and derivative instruments. The carrying amounts of cash and cash equivalents, accounts receivable and accounts
payable approximate fair value. HEP's outstanding credit agreement borrowings also approximate fair value as interest rates are
reset frequently at current interest rates.
Fair value measurements are derived using inputs (assumptions that market participants would use in pricing an asset or liability,
including assumptions about risk). GAAP categorizes inputs used in fair value measurements into three broad levels as follows:
• (Level 1) Quoted prices in active markets for identical assets or liabilities.
• (Level 2) Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and
liabilities in active markets, similar assets and liabilities in markets that are not active or can be corroborated by observable
market data.
• (Level 3) Unobservable inputs that are supported by little or no market activity and that are significant to the fair value
of the assets or liabilities. This includes valuation techniques that involve significant unobservable inputs.