Shares of HollyFrontier Corp., Dallas, fell more than 11% Feb. 23 after the company said its fourth-quarter refinery volume fell short of projections “due to heavy planned and unplanned refinery maintenance and weather-related downtime” that also will affect first-quarter results.
The leaders of HollyFrontier said the company’s fourth-quarter crude throughput average 421,000 b/d during the last 3 months of 2021, which was more than 8% below the midpoint of the guidance they had given last fall.
Tim Go, HollyFrontier’s president and chief operating officer, said his team was disappointed to have to carry out some unplanned maintenance on their Puget Sound refinery—which HollyFrontier acquired Nov. 1—after major flooding that affected much of the Pacific Northwest and British Columbia. The company needed to repair a compressor damaged by those weather events but Go said the issues there have been resolved, although the downtime’s effect carried over into early this year. The company’s operations in Oklahoma and New Mexico also had to contend with severe cold during recent weeks.
“On one hand, I recognize the major events made by our team to recover from these issues,” Chief Executive Officer Mike Jennings said on a conference call with analysts and investors. “And on the other, I’m going to say that my expectations are for better reliability and throughput.”
For the first 3 months of this year, Jennings and his team expect HollyFrontier’s refining volumes to climb to 490,000-510,000 b/d. That number includes the impact of the downtime at Puget Sound as well as turnaround work at the company’s Woods Cross refinery near Salt Lake City and maintenance activities at its Navajo refinery in New Mexico. The company’s new renewable diesel units will be brought online slowly, executives said, and are not expected to contribute to HollyFrontier’s EBITDA until closer to the middle of the year.
HollyFrontier posted a net loss of $17.1 million on sales of $5.6 billion in the fourth quarter, with those numbers being an improvement from the loss of $94.6 million and revenues of $2.9 billion in late 2020. The company’s refinery net operating margin was $1.42/bbl versus a loss of $2.05 the year prior. Jennings said that the broad economic recovery out of the COVID-19 shock, as seen via vehicle miles traveled and demand for distillates, bodes well for 2022.
“While backwardation hurts capture, the overall level of product margin is pretty good,” he said. “And as we look forward into this year, we expect it to be a strong financial year for our sector.”
Despite the drop Feb. 23, which added to recent losses that have taken the stock to $30 and change from nearly $39, HollyFrontier shares (Ticker: HFC) are still roughly in line with their levels 6 months ago.
