HollyFrontier 2014 Annual Report Download

Download and view the complete annual report

Please find the complete 2014 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

2014 ANNUAL REPORT

Table of contents

  • Page 1
    2014 ANNUAL REPORT

  • Page 2
    ... WOODS CROSS REFINERY • • • Located in Woods Cross, Utah (near Salt Lake City) 31,000 BPSD capacity and Nelson Complexity rating of 12.5 Processes regional sweet and advantaged waxy crude as well as Canadian sour crude oils Distributes to high-margin markets in Utah, Idaho, Nevada, Wyoming...

  • Page 3
    ... Region comprises our Cheyenne and Woods Cross Refineries and has a combined crude oil processing capacity of 83,000 BPSD. Holly Energy Partners owns and operates substantially all of the refined product pipeline and terminalling assets that support our refining and marketing operations in the Mid...

  • Page 4
    ...Moines WOODS CROSS Sidney Salt Lake City CHEYENNE Denver Kansas City Omaha Express Platte Chicago PADD V yh Ja Cedar City Las Vegas Bloomfield Wichita Cushing Albuquerque Phoenix NAVAJO Tucson Wichita Falls Abilene El Paso Orla Moriarty Duncan aw k EL DORADO TULSA PADD III Houston Proximity...

  • Page 5
    ...per stream day refining capacity ATTRACTIVE NICHE PRODUCT MARKETS WITH ADVANTAGED CRUDE SUPPLY • Rocky Mountains, Southwest and Mid-Continent Plains states STRONG INVESTMENT TRACK RECORD • Future growth focused on underwritten projects • Woods Cross, El Dorado and Tulsa Refineries purchased at...

  • Page 6
    .... In 2014, HollyFrontier returned over $780 million to stockholders through regular quarterly dividends, special dividends and share repurchases. On an annualized basis, the Company's cash dividend yield was 8.7% as of year-end 2014. In February 2015, the Board of Directors authorized a new $500...

  • Page 7
    ... the Las Vegas market with refined products through the UNEV Pipeline, as well as serving our traditional Salt Lake City and other markets across the Inter-Mountain West. We are on track to complete the expansion in the fourth quarter of 2015. • El Dorado Naphtha Fractionation: Our ongoing work at...

  • Page 8
    ... Revenues $ in millions 443 5,524 9,576 425 10,329 6,053 226 332 5,204 10 11 12 13 14 697 10 11 12 13 14 3,050 10 11 12 Refinery Production BPD in thousands HFC Stockholders' Equity $ in millions Total Assets $ in millions 4 HollyFrontier Corporation 2014 Annual Report...

  • Page 9
    ... _____ HOLLYFRONTIER CORPORATION (Exact name of registrant as specified in its charter) _____ Delaware (State or other jurisdiction of incorporation or organization) 75-1056913 (I.R.S. Employer Identification No.) 2828 N. Harwood, Suite 1300 Dallas, Texas (Address of principal executive offices...

  • Page 10
    ... governance Executive compensation Security ownership of certain beneficial owners and management and related stockholder matters Certain relationships and related transactions, and director independence Principal accounting fees and services PART IV 15. Exhibits, financial statement schedules 98...

  • Page 11
    ...; the availability and cost of our financing; the effectiveness of our capital investments and marketing strategies; our efficiency in carrying out construction projects; our ability to acquire refined product operations or pipeline and terminal operations on acceptable terms and to integrate any...

  • Page 12
    ... biological resources. "Black wax crude oil" is a low sulfur, low gravity crude oil produced in the Uintah Basin in Eastern Utah that has certain characteristics that require specific facilities to transport, store and refine into transportation fuels. "Catalytic reforming" means a refinery process...

  • Page 13
    ... gasoline blend stocks while producing hydrogen in the process. "Roofing flux" is produced from the bottom cut of crude oil and is the base oil used to make roofing shingles for the housing industry. "ROSE," or "Solvent deasphalter / residuum oil supercritical extraction," means a refinery unit that...

  • Page 14
    ...65 miles away in Lovington, New Mexico (collectively, the "Navajo Refinery"), the Cheyenne Refinery and a refinery in Woods Cross, Utah (the "Woods Cross Refinery"); • owned and operated NK Asphalt Partners ("NK Asphalt") which operates various asphalt terminals in Arizona, New Mexico and Oklahoma...

  • Page 15
    ... of Items 1 and 2, "Business and Properties." Our operations are currently organized into two reportable segments, Refining and HEP. The Refining segment includes the operations of our El Dorado, Tulsa, Navajo, Cheyenne and Woods Cross Refineries and NK Asphalt. The HEP segment involves all of the...

  • Page 16
    ... of heavy and sour crudes. The integrated refining processes at the Tulsa West and East refinery facilities provide us with a highly complex refining operation having a combined crude processing rate of approximately 125,000 barrels per stream day. For 2014, gasoline, diesel fuel, jet fuel and...

  • Page 17
    ...units. The Tulsa East facility's Supporting Infrastructure includes approximately 3.4 million barrels of tankage owned by HEP. Markets and Competition The primary markets for the El Dorado Refinery's refined products are Colorado and the Plains States, which include the Kansas City metropolitan area...

  • Page 18
    ...of wax production capacity in the United States market and is one of four refineries of specialty aromatic oils in North America. Principal Products Set forth below is information regarding the principal products produced at our El Dorado and Tulsa Refineries: Years Ended December 31, 2013 2014 Mid...

  • Page 19
    ... feedstocks for processing at our Mid-Continent Refineries. The El Dorado Refinery is connected to Conway, Kansas, a major gas liquids trading and storage hub, via the Oneok Pipeline. From time to time, other feedstocks such gas oil, naphtha and light cycle oil are purchased from other refiners for...

  • Page 20
    ... terminals agreement with HEP at terminals in El Paso, Texas; Tucson, Arizona; and Artesia and Moriarty, New Mexico. El Paso Market The El Paso market for refined products is currently supplied by a number of area and Gulf Coast refiners and pipelines. Area refiners include Navajo, WRB Refining, LLC...

  • Page 21
    ... running from Lovington to Artesia. From time to time, we purchase gas oil, naphtha and light cycle oil from other refiners for use as feedstock. Rocky Mountain Region (Cheyenne and Woods Cross Refineries) Facilities The Cheyenne and the Woods Cross Refineries have crude oil processing capacities of...

  • Page 22
    ... at Spokane, Washington and to terminals at Pocatello and Boise, Idaho and Pasco, Washington that are owned by Tesoro Logistics. We sell to branded and unbranded customers in these markets. In 2012, we began shipping refined products to Cedar City, Utah and Las Vegas, Nevada via the UNEV Pipeline...

  • Page 23
    ... common carrier pipeline in which HEP owns a 25% interest. Supplies of black wax crude oil are shipped via truck. NK Asphalt Partners We manufacture commodity and modified asphalt products at our manufacturing facilities located in Glendale, Arizona; Albuquerque, New Mexico; Artesia, New Mexico and...

  • Page 24
    ... miles of crude oil trunk, gathering and connection pipelines located in west Texas, New Mexico and Oklahoma that deliver crude oil to our Navajo Refinery; • approximately 8 miles of refined product pipelines that support our Woods Cross Refinery located near Salt Lake City, Utah; • gasoline and...

  • Page 25
    ... tankage at our El Dorado, Tulsa and Cheyenne Refineries having an aggregate storage capacity of approximately 8,100,000 barrels. Additionally, HEP owns a 75% interest in UNEV, which owns the UNEV Pipeline, a 12-inch refined products pipeline from Salt Lake City, Utah to Las Vegas, Nevada together...

  • Page 26
    ... of our produced gasoline. Our refineries currently purchase a portion of their benzene credits to meet these requirements. If economically justified, we could implement additional benzene reduction projects to eliminate the need to purchase benzene credits. The Energy Policy Act of 2005 and the...

  • Page 27
    ..., handled, used, released or disposed of. We currently have environmental remediation projects that relate to recovery, treatment and monitoring activities resulting from past releases of refined product and crude oil into the environment. As of December 31, 2014, we had an accrual of $104.5 million...

  • Page 28
    ...information included in this Annual Report on Form 10-K, including the financial statements and related notes, when deciding ...pipelines or the construction of certain new pipelines transporting additional crude oil or refined products to markets that serve competing refineries could affect the market...

  • Page 29
    ...of used units from another refinery) and the expansion of existing ones. Projects are generally initiated to increase the yields of higher-value products, increase the amount of lower cost crude oils that can be processed, increase refinery production capacity, meet new governmental requirements, or...

  • Page 30
    ... results. We may incur significant costs to comply with new or changing environmental, energy, health and safety laws and regulations, and face potential exposure for environmental matters. Refinery and pipeline operations are subject to federal, state and local laws regulating, among other things...

  • Page 31
    ...and trade programs. These cap and trade programs generally work by requiring major sources of emissions, such as electric power plants, or major producers of fuels, such as refineries and gas processing plants, to acquire and on an annual basis surrender emission allowances. The number of allowances...

  • Page 32
    .... 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...

  • Page 33
    ... 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...

  • Page 34
    ...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, New Mexico, Oklahoma, Texas, Utah, Washington and Wyoming. HEP generates revenues by charging tariffs for transporting petroleum...

  • Page 35
    ... with refineries, terminals, pipelines and related facilities. We are dependent on the production and sale of quantities of refined products at refined product margins sufficient to cover operating costs, including any increases in costs resulting from future inflationary pressures or market...

  • Page 36
    ... and/or special dividends. We will only be able to pay dividends from our available cash on hand, cash from operations or borrowings under our credit agreement. The declaration of future regular and/or special dividends on our common stock will be at the discretion of our board of directors and will...

  • Page 37
    ... 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...

  • Page 38
    ... counsel and has paid the penalty. Between November 2010 and February 2012, certain of our subsidiaries submitted multiple reports to the EPA to voluntarily disclose non-compliance with fuels regulations at the Cheyenne, El Dorado, Navajo, Tulsa and Woods Cross refineries and at the Cedar City, Utah...

  • Page 39
    ... Content In correspondence dated December 26, 2013, the Oklahoma Department of Environmental Quality ("ODEQ") notified our Tulsa Refinery of allegations of noncompliance with certain regulations, permit conditions and consent decree provisions at the Tulsa East and West refineries. ODEQ intends to...

  • Page 40
    ... program. The timing and amount of stock repurchases will depend on market conditions, corporate, regulatory and other relevant considerations. This program may be discontinued at any time by our Board of Directors. As of February 9, 2015, we had approximately 124,680 stockholders, including...

  • Page 41
    ... 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and related notes thereto included elsewhere in this Annual Report on Form 10-K. Years Ended December 31, 2013 2012 2011 (In thousands, except per share data) 2014...

  • Page 42
    ... facilities situated 65 miles away in Lovington, New Mexico (the Navajo Refinery), Cheyenne, Wyoming (the Cheyenne Refinery) and Woods Cross, Utah (the Woods Cross Refinery). For the year ended December 31, 2014, net income attributable to HollyFrontier stockholders was $281.3 million compared to...

  • Page 43
    ... 31, 2014 2013 2012 (In thousands, except per share data) 19,764,327 $ 20,160,560 $ 20,090,724 Sales and other revenues Operating costs and expenses: Cost of products sold (exclusive of depreciation and amortization): Cost of products sold (exclusive of lower of cost or market inventory valuation...

  • Page 44
    ... Information" in the Notes to Consolidated Financial Statements for additional information on our reportable segments. Refining Operating Data Our refinery operations include the El Dorado, Tulsa, Navajo, Cheyenne and Woods Cross Refineries. The following tables set forth information, including...

  • Page 45
    .... This is attributable to a significant decrease in market prices for crude oil and refined products at December 31, 2014. There was no comparable inventory valuation adjustment for the year ended December 31, 2013. Gross Refinery Margins Gross refinery margin per produced barrel decreased 13% from...

  • Page 46
    ... planned turnaround and maintenance projects at our refineries and other unplanned refinery outages during 2013. Sales and other revenues for the years ended December 31, 2013 and 2012 include $53.4 million and $47.6 million, respectively, in HEP revenues attributable to pipeline and transportation...

  • Page 47
    ... ended December 31, 2013 and 2012, respectively. LIQUIDITY AND CAPITAL RESOURCES HollyFrontier Credit Agreement On July 1, 2014, we entered into a new $1 billion senior unsecured revolving credit facility maturing in July 2019 (the "HollyFrontier Credit Agreement") and contemporaneously terminated...

  • Page 48
    ... available under our credit facilities will provide sufficient resources to fund currently planned capital projects and our liquidity needs for the foreseeable future. In addition, components of our growth strategy include construction of new refinery processing units and the expansion of existing...

  • Page 49
    ... and $27.0 million on tank work. Refinery turnaround spending is amortized over the useful life of the turnaround. Our new capital appropriation for 2015 and expected cash spending is as follows: New Appropriation Location: El Dorado Tulsa Navajo Cheyenne Woods Cross Corporate and Other Total Type...

  • Page 50
    ... 1, 2014, Holly Refining & Marketing Company Woods Cross LLC, our wholly-owned subsidiary, and the State of Utah jointly submitted proposed findings of fact and conclusions of law to the ALJ. The expansion is expected to be completed in the fourth quarter of 2015. This project work includes a new...

  • Page 51
    ...) HollyFrontier Corporation (1) Long-term debt - principal (2) Long-term debt - interest (3) Supply agreements (4) Transportation and storage agreements (5) Other long-term obligations Operating leases Holly Energy Partners Long-term debt - principal (6) Long-term debt - interest (7) Pipeline...

  • Page 52
    ... these fixed-quantity agreements expiring between 2015 and 2025 using current market rates. Additionally, commitments include purchases of 20,000 BPD of crude oil under a 10-year agreement to supply our Woods Cross Refinery that is expected to commence upon completion of our expansion project in the...

  • Page 53
    ... of our El Dorado and HEP reporting units exceeded their respective carrying values by a much larger percentage. There were no impairments of goodwill during the years December 31, 2014, 2013 and 2012. Historically, the refining industry has experienced significant fluctuations in operating results...

  • Page 54
    ... or that the cost of eliminating the exposure would outweigh the benefit. Commodity Price Risk Management Our primary market risk is commodity price risk. We are exposed to market risks related to the volatility in crude oil and refined products, as well as volatility in the price of natural gas...

  • Page 55
    ...7A. Quantitative and Qualitative Disclosures About Market Risk See "Risk Management" under "Management's Discussion and Analysis of Financial Condition and Results of Operations." Reconciliations to Amounts Reported Under Generally Accepted Accounting Principles Reconciliations of earnings before...

  • Page 56
    ...years ended December 31, 2014 and 2013, respectively. Reconciliations of refinery operating information (non-GAAP performance measures) to amounts reported under generally accepted accounting principles in financial statements. Refinery gross margin and net operating margin are non-GAAP performance...

  • Page 57
    ... Add direct sales of excess crude oil (2) Add other refining segment revenue (3) Total refining segment revenue Add HEP segment sales and other revenues Add corporate and other revenues Subtract consolidations and eliminations Sales and other revenues 2012 (Dollars in thousands, except per barrel...

  • Page 58
    ... NK Asphalt and miscellaneous revenue. (4) Other refining segment cost of products sold includes the incremental cost of products for NK Asphalt and miscellaneous costs. (5) Other refining segment operating expenses include the marketing costs associated with our refining segment and the operating...

  • Page 59
    Table of Content Item 8. Financial Statements and Supplementary Data MANAGEMENT'S REPORT ON ITS ASSESSMENT OF THE COMPANY'S INTERNAL CONTROL OVER FINANCIAL REPORTING Management of HollyFrontier Corporation (the "Company") is responsible for establishing and maintaining adequate internal control ...

  • Page 60
    ... 31, 2014, based on the COSO criteria. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of HollyFrontier Corporation as of December 31, 2014 and 2013, and the related consolidated statements of...

  • Page 61
    ...to Consolidated Financial Statements Page Reference Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets at December 31, 2014 and 2013 Consolidated Statements of Income for the years ended December 31, 2014, 2013 and 2012 Consolidated Statements of Comprehensive Income...

  • Page 62
    ... PUBLIC ACCOUNTING FIRM The Board of Directors and Stockholders of HollyFrontier Corporation We have audited the accompanying consolidated balance sheets of HollyFrontier Corporation (the "Company") as of December 31, 2014 and 2013, and the related consolidated statements of income, comprehensive...

  • Page 63
    ... of Content HOLLYFRONTIER CORPORATION CONSOLIDATED BALANCE SHEETS (In thousands, except share data) December 31, 2014 2013 ASSETS Current assets: Cash and cash equivalents (HEP: $2,830 and $6,352, respectively) Marketable securities Total cash, cash equivalents and short-term marketable securities...

  • Page 64
    ... HOLLYFRONTIER CORPORATION CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share data) 2014 Sales and other revenues Operating costs and expenses: Cost of products sold (exclusive of depreciation and amortization): Cost of products sold (exclusive of lower of cost or market inventory...

  • Page 65
    Table of Content HOLLYFRONTIER CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In thousands) Years Ended December 31, 2014 Net income Other comprehensive income (loss): Securities available-for-sale: Unrealized gain (loss) on marketable securities Reclassification adjustments to net ...

  • Page 66
    Table of Content HOLLYFRONTIER CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Years Ended December 31, 2013 $ 767,823 - 303,446 5,198 7,...stock Dividends Distributions to noncontrolling interest Excess tax benefit from equity-based compensation Other, net Net cash used for financing...

  • Page 67
    ... of tax Issuance of common stock under incentive compensation plans, net of forfeitures Equity-based compensation, inclusive of tax benefit Purchase of treasury stock Purchase of HEP units for restricted grants Other Balance at December 31, 2013 $ Net income Dividends Distributions to noncontrolling...

  • Page 68
    ... away in Lovington, New Mexico (collectively, the "Navajo Refinery"), a refinery located in Cheyenne, Wyoming (the "Cheyenne Refinery") and a refinery in Woods Cross, Utah (the "Woods Cross Refinery"); owned and operated NK Asphalt Partners ("NK Asphalt") which operates various asphalt terminals in...

  • Page 69
    ... locations. In many cases, we enter into net settlement agreements relating to the buy/sell arrangements, which may mitigate credit risk. Inventories: Inventories are stated at the lower of cost, using the last-in, first-out ("LIFO") method for crude oil, unfinished and finished refined products...

  • Page 70
    ...at December 31, 2014. Revenue Recognition: Refined product sales and related cost of sales are recognized when products are shipped and title has passed to customers. HEP recognizes pipeline transportation revenues as products are shipped through its pipelines. All revenues are reported inclusive of...

  • Page 71
    ..., marketing expense and other direct operating costs. General and administrative expenses include compensation, professional services and other support costs. Deferred Maintenance Costs: Our refinery units require regular major maintenance and repairs which are commonly referred to as "turnarounds...

  • Page 72
    ... States. HEP also owns and operates refined product pipelines and terminals, located primarily in Texas, that serve Alon's refinery in Big Spring, Texas. As of December 31, 2014, we owned a 39% interest in HEP, including the 2% general partner interest. As the general partner of HEP, we have the...

  • Page 73
    ...December 31, 2014 and December 31, 2013 were as follows: Fair Value by Input Level Financial Instrument December 31, 2014 Assets: Marketable securities NYMEX futures contracts Commodity price swaps HEP interest rate swaps Total assets Liabilities: Commodity price swaps HollyFrontier senior notes HEP...

  • Page 74
    Table of Contents HOLLYFRONTIER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued Fair Value by Input Level Financial Instrument December 31, 2013 Assets: Marketable securities Commodity price swaps HEP interest rate swaps Total assets Liabilities: NYMEX futures contracts Commodity ...

  • Page 75
    Table of Contents HOLLYFRONTIER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued Level 3 Financial Instruments We have commodity price swap contracts that relate to forecasted sales of diesel and forecasted purchases of WCS and WTS for which quoted forward market prices were ...

  • Page 76
    ... Holly Logistic Services, L.L.C.'s non-employee directors and certain executives and employees. Compensation cost attributable to HEP's share-based compensation plan was $3.5 million, $3.6 million and $2.7 million for the years ended December 31, 2014, 2013 and 2012, respectively. Restricted Stock...

  • Page 77
    ...December 31, 2013 and 2012, we issued common stock upon the vesting of the performance share units having a grant date fair value of $11.6 million and $6.0 million, respectively. As of December 31, 2014, there was $20.2 million of total unrecognized compensation cost related to nonvested performance...

  • Page 78
    ... HOLLYFRONTIER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued NOTE 7: Inventories Inventory consists of the following components: December 31, 2014 2013 (In thousands) Crude oil Other raw materials and unfinished products Finished products(2) Lower of cost or market reserve...

  • Page 79
    .... Based on our testing as of July 1, 2014, the fair value of our Cheyenne reporting unit exceeded its carrying cost by slightly less than 20%, and the fair value of our El Dorado and HEP reporting units exceeded their respective carrying values by a much larger percentage. Historically, the refining...

  • Page 80
    ... of Contents HOLLYFRONTIER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued NOTE 11: Debt HollyFrontier Credit Agreement On July 1, 2014, we entered into a new $1 billion senior unsecured revolving credit facility maturing in July 2019 (the "HollyFrontier Credit Agreement") and...

  • Page 81
    ... million debt redemption premium and unamortized discount and financing cost of $1.5 million. HEP funded the redemption with borrowings under the HEP Credit Agreement. Indebtedness under the HEP Senior Notes involves recourse to HEP Logistics Holdings, L.P., its general partner, and is guaranteed...

  • Page 82
    ...027 1,054,167 NOTE 12: Derivative Instruments and Hedging Activities Commodity Price Risk Management Our primary market risk is commodity price risk. We are exposed to market risks related to the volatility in crude oil and refined products, as well as volatility in the price of natural gas used in...

  • Page 83
    ...Contents HOLLYFRONTIER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ...2014, we have the following notional contract volumes related to outstanding derivative instruments serving as cash flow hedges against price risk on forecasted purchases of natural gas and crude oil and sales of refined...

  • Page 84
    ... Recognized in Income Cost of products sold Operating expenses Total $ $ 2014 68,509 (185) 68,324 $ 2013 (In thousands) $ 20,751 (5,250) 15,501 $ 2012 $ 12,295 573 12,868 As of December 31, 2014, we have the following notional contract volumes related to our outstanding derivative contracts serving...

  • Page 85
    Table of Contents HOLLYFRONTIER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued The following table presents...Ended December 31, 2014 Interest rate swaps Change in fair value Loss reclassified to earnings due to settlements Total Year Ended December 31, 2013 Interest rate swaps ...

  • Page 86
    ... into the statement of income as the hedging instruments contractually mature over the next twelve-month period. NOTE 13: Income Taxes The provision for income taxes is comprised of the following: 2014 Current Federal State Deferred Federal State Years Ended December 31, 2013 2012 (In thousands...

  • Page 87
    ... Total current Properties, plants and equipment (due primarily to tax in excess of book depreciation) Accrued employee benefits Accrued post-retirement benefits Accrued environmental costs Hedging instruments Deferred turnaround costs Net operating loss and tax credit carryforwards Investment in HEP...

  • Page 88
    Table of Contents HOLLYFRONTIER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued December 31, 2013 Liabilities (In thousands) Assets Deferred income taxes Accrued employee benefits Accrued environmental costs Hedging instruments Inventory differences Prepaid insurance Prepayments ...

  • Page 89
    ... of Contents HOLLYFRONTIER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued NOTE 14: Stockholders' Equity Shares of our common stock outstanding and activity for the years ended December 31, 2014, 2013 and 2012 are presented below: 2014 Years Ended December 31, 2013 2012 Common...

  • Page 90
    ... interest Other comprehensive income attributable to HollyFrontier stockholders Year Ended December 31, 2013 Net unrealized gain on marketable securities Net unrealized loss on hedging instruments Net change in pension and other post-retirement benefit obligations Other comprehensive income Less...

  • Page 91
    ... of tax Cost of products sold Operating expenses General and administrative expenses Income tax expense Net of tax Post-retirement healthcare obligation Retirement restoration plan (63) General and administrative expenses (25) Income tax benefit (38) Net of tax (35,240) Total reclassifications...

  • Page 92
    ... NOTE 16: Retirement Plans Post-retirement Healthcare Plans We provide post-retirement medical benefits to certain eligible employees. These plans are unfunded and provide differing levels of healthcare benefits dependent upon hire date and work location. Not all of our employees are covered by...

  • Page 93
    ... 31, 2013 2012 3.45% 8.10% 5.00% 2023 4.60% 8.40% 5.00% 2023 4.25% 8.00% 5.00% 2045 (In thousands) Pension Plan In 2013, we terminated the HollyFrontier Corporation Pension Plan (the "Plan"), a non-contributory defined benefit retirement plan that covered certain employees. In June 2013, we...

  • Page 94
    ... year. The payments are based on each employee's years of service and eligible salary. Transition benefit costs under this program were $10.8 million, $12.5 million and $15.6 million for the years ended December 31, 2014, 2013 and 2012, respectively. Retirement Restoration Plan We have an unfunded...

  • Page 95
    ... employees at our El Dorado and Woods Cross Refineries of its intention to commence a work stoppage in early May 2015 and could receive a similar communication from the United Steelworkers Union representing employees at our Cheyenne Refinery. We have plans allowing for the continued operations...

  • Page 96
    .... The Refining segment represents the operations of the El Dorado, Tulsa, Navajo, Cheyenne and Woods Cross Refineries and NK Asphalt (aggregated as a reportable segment). Refining activities involve the purchase and refining of crude oil and wholesale and branded marketing of refined products...

  • Page 97
    ... HOLLYFRONTIER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued Corporate and Other (In thousands) Consolidations and Eliminations Consolidated Total Refining HEP Year Ended December 31, 2014 Sales and other revenues Depreciation and amortization Income (loss) from operations...

  • Page 98
    Table of Contents HOLLYFRONTIER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued Condensed Consolidating Balance Sheet Guarantor Restricted Subsidiaries NonGuarantor Restricted Subsidiaries HollyFrontier Corp. Before Consolidation of HEP Non-Guarantor Non-Restricted Subsidiaries (...

  • Page 99
    ...Subsidiaries NonGuarantor Restricted Subsidiaries HollyFrontier Corp. Before Consolidation of HEP Non-Guarantor Non-Restricted Subsidiaries (HEP Segment) Consolidations and Eliminations December 31, 2013 ASSETS Current assets: Cash and cash equivalents Marketable securities Accounts receivable, net...

  • Page 100
    ...and Eliminations $ Year Ended December 31, 2014 Sales and other revenues Operating costs and expenses: Cost of products sold Lower of cost or market inventory adjustment Operating expenses General and administrative Depreciation and amortization Total operating costs and expenses Income (loss) from...

  • Page 101
    ... Eliminations $ Year Ended December 31, 2013 Sales and other revenues Operating costs and expenses: Cost of products sold Operating expenses General and administrative Depreciation and amortization Total operating costs and expenses Income (loss) from operations Other income (expense): Earnings of...

  • Page 102
    ...of marketable securities Other, net Net intercompany advances Cash flows from financing activities Net borrowings under credit agreement - HEP Redemption of senior notes HEP Purchase of treasury stock Dividends Distributions to noncontrolling interest Excess tax benefit from equitybased compensation...

  • Page 103
    ...activities: Net borrowings under credit agreement - HEP Redemption of senior notes Proceeds from common unit offerings - HEP Purchase of treasury stock Contribution from general partner Dividends Distributions to noncontrolling interest Excess tax benefit from equitybased compensation Other, net Net...

  • Page 104
    ...credit agreement - HEP Proceeds from issuance of common units - HEP Redemptions of senior notes Principal tender on senior notes Purchase of treasury stock Contribution from general partner Distribution from HEP upon UNEV transfer Dividends Distributions to noncontrolling interest Excess tax benefit...

  • Page 105
    Table of Contents HOLLYFRONTIER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued NOTE 21: Significant Customers All revenues are domestic revenues, except for sales of fuel oil for export into Mexico. We have two significant customers (Shell Oil and Sinclair), each of which has ...

  • Page 106
    ... in our definitive proxy statement for the annual meeting of stockholders to be held on May 13, 2015 and is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The equity compensation plan information required by...

  • Page 107
    ... proxy statement for the annual meeting of stockholders to be held on May 13, 2015 and is incorporated herein by reference. PART IV Item 15. Exhibits, Financial Statement Schedules (a) (1) Documents filed as part of this report Index to Consolidated Financial Statements Page in Form 10-K Report...

  • Page 108
    ..., General Counsel and Secretary Director Date February 25, 2015 February 25, 2015 /s/ J.W. Gann, Jr. J.W. Gann, Jr. February 25, 2015 /s/ Denise C. McWatters Denise C. McWatters /s/ Douglas Y. Bech Douglas Y. Bech /s/ Leldon Echols Leldon Echols /s/ R. Kevin Hardage R. Kevin Hardage /s/ Robert...

  • Page 109
    ... Indenture, dated December 29, 2011, among Cheyenne Logistics LLC, El Dorado Logistics LLC, Holly Energy Partners, L.P., Holly Energy Finance Corp., the other Guarantors and U.S. Bank National Association (incorporated by reference to Exhibit 4.16 of Holly Energy Partners, L.P.'s Annual Report on...

  • Page 110
    ..., File No. 1-32225). Second Amended and Restated Crude Pipelines and Tankage Agreement, dated July 16, 2013, among Navajo Refining Company, L.L.C., Holly Refining & Marketing Company - Woods Cross LLC, HollyFrontier Refining & Marketing LLC, Holly Energy Partners-Operating, L.P., HEP Pipeline, LLC...

  • Page 111
    ... Report on Form 8-K filed December 7, 2009, File No. 1-03876). Pipeline Systems Operating Agreement, dated February 8, 2010, among Navajo Refining Company, L.L.C., Lea Refining Company, Woods Cross Refining Company, L.L.C., Holly Refining & Marketing - Tulsa LLC and Holly Energy Partners - Operating...

  • Page 112
    ... Dorado Refining LLC and El Dorado Logistics LLC (incorporated by reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K filed January 13, 2014, File No. 1-03876). Eighth Amended and Restated Omnibus Agreement, dated July 16, 2013, among HollyFrontier Corporation, Holly Energy Partners...

  • Page 113
    ... dated August 27, 2013, to the Frontier Products Offtake Agreement El Dorado Refinery, dated October 19, 1999, between Frontier Oil and Refining Company (now HollyFrontier Refining & Marketing LLC, as successor-by-merger to Frontier Oil and Refining Company) and Equiva Trading Company (now Shell Oil...

  • Page 114
    ... 10.1 of Registrant's Current Report on Form 8K filed July 22, 2013, File No. 1-03876). Amended and Restated Transportation Services Agreement dated September 26, 2014, by and between HollyFrontier Refining & Marketing LLC and Holly Energy Partners - Operating L.P. (incorporated by reference to...

  • Page 115
    ... in Control Agreement (for HollyFrontier Corporation new hires and promotes) (incorporated by reference to Exhibit 10.2 of Registrant's Current Report on Form 8-K filed March 30, 2012, File No. 1-03876). HollyFrontier Corporation Form of Amendment to Change in Control Agreement for David L. Lamp and...

  • Page 116
    ...10.87+ 10.88+ HollyFrontier Corporation Executive Nonqualified Deferred Compensation Plan (formerly the Frontier Deferred Compensation Plan) (incorporated by reference to Exhibit 10.73 of Registrant's Annual Report on Form 10-K for its fiscal year ended December 31, 2012, File No. 1-03876). Form of...

  • Page 117
    Exhibit 31.1 CERTIFICATION I, Michael C. Jennings, certify that: 1. 2. I have reviewed this annual report on Form 10-K of HollyFrontier Corporation; Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the ...

  • Page 118
    Exhibit 31.2 CERTIFICATION I, Douglas S. Aron, certify that: 1. 2. I have reviewed this annual report on Form 10-K of HollyFrontier Corporation; Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the ...

  • Page 119
    ... on Form 10-K for the period ending December 31, 2014 and filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Michael C. Jennings, Chief Executive Officer of HollyFrontier Corporation (the "Company") hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted...

  • Page 120
    ... Form 10-K for the period ending December 31, 2014 and filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Douglas S. Aron, Chief Financial Officer of HollyFrontier Corporation (the "Company") hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant...

  • Page 121
    ... Hardage Robert J. Kostelnik James H. Lee Franklin Myers Michael E. Rose Tommy A. Valenta CORPORATE OFFICE HollyFrontier Corporation 2828 North Harwood, Suite 1300 Dallas, TX 75201-1507 214.871.3555 www.hollyfrontier.com AUDITORS Ernst & Young LLP Dallas, Texas STOCK EXCHANGE LISTING New York Stock...

  • Page 122
    2828 North Harwood Suite 1300 Dallas, Texas 75201-1507