Holly Energy reported its financial results for the first quarter of 2009. For the quarter, distributable cash flow was $14.4 million, up $0.6 million or 5% from the same period last year.

Under new accounting guidance effective January 1, 2009, Holly Energy is required to expense certain acquisition costs of $2.5 million associated with its joint venture agreement with Plains All American Pipeline, L.P. (Plains) that closed in March 2009. Under guidance effective until December 31, 2008, the company would have been required to capitalize these costs as part of its investments. The agreement gives Holly Energy a 25% interest in a new 95-mile intrastate pipeline system that delivers crude oil into the Salt Lake City area (the SLC Pipeline).

Commenting on the first quarter results for 2009, Matt Clifton, chairman of the board and chief executive officer stated, “In light of the effects of downtime from a major maintenance turnaround at Holly Corporation’s (“Holly”) Navajo refinery during the quarter, HEP delivered solid financial results. Our first quarter EBITDA was $17.2 million, an increase of $1.3 million or 8% over the same period of 2008. Comparing our 2009 first quarter to the same period in 2008, our earnings benefited from revenues attributable to a full three month period of crude oil pipeline operations as well as an increase in third-party refined product pipeline shipments. Additionally, $3.1 million of shortfall billings from the first quarter of 2008 expired without recapture and were recognized as revenues during the quarter, resulting in a $1.7 million increase in previously deferred revenue realized.”

“During the quarter, Holly completed its planned major maintenance turnaround at its Navajo refinery that was timed with the completion of its 85,000 bpd to 100,000 bpd capacity expansion upgrade. Although reduced production during this period resulted in reduced volumes of affiliate shipments, the effects of these reduced volumes on our distributable cash flow were mitigated through the contractual minimum commitments that we have in place with our shippers.

Looking forward, Holly’s recent Navajo expansion will provide another great revenue growth opportunity as we anticipate increased movements on our refined product, intermediate and crude pipeline systems as a result of increased refining capacity following this expansion. Additionally, the SLC Pipeline commenced operations in March 2009 which will further contribute to our profitability. Furthermore, I am pleased to announce an increase to our 2009 first quarter distribution to $0.775 per unit, representing our eighteenth consecutive quarterly increase and a 5% increase over our distribution for the first quarter of 2008.”

The increase in revenue was due to increased revenues attributable to Holly Energy’s crude pipeline assets acquired in the first quarter of 2008, an increase in third-party refined product pipeline shipments, the effect of the annual tariff increase on affiliate refined product and crude pipeline shipments and an increase in previously deferred revenue realized. These increases were partially offset by a decrease in affiliate volume shipments on the company’s pipeline systems as Holly Energy completed a planned major maintenance turnaround at its Navajo refinery. Reduced production during this period resulted in a decrease in affiliate pipeline shipments during the first quarter of 2009. Additionally during last year’s first quarter, third-party refined product shipments were down as a result of an explosion and fire at Alon’s Big Spring refinery in February 2008 that resulted in the temporary shutdown of production at the refinery.

— Revenues from Holly Energy’s refined product pipelines were $19.8 million, an increase of $2.4 million compared to the first quarter of 2008. This increase was due to an increase in third-party shipments on the company’s refined product pipeline system, the effect of the annual tariff increase on affiliate refined product shipments and a $2.1 million increase in previously deferred revenue realized. These increases were partially offset by the effects of a 26% decline in affiliate refined product pipeline shipments as a result of the first quarter turnaround at the Holly Energy’s Navajo refinery. Shipments on the company’s refined product pipeline system decreased to an average of 128.6 thousand barrels per day (mbpd) compared to 130.1 mbpd for the same period last year.

— Revenues from Holly Energy’s intermediate pipelines were $1.8 million, a decrease of $1.8 million compared to the first quarter of 2008. This decrease was due to the effects of a 49% decline in volumes shipped as a result of the first quarter turnaround at the Holly Energy’s Navajo refinery and a $0.4 million decrease in previously deferred revenue realized. These decreases were partially offset by the effect of the annual tariff increase on intermediate pipeline shipments. Shipments on Holly Energy’s intermediate product pipeline system decreased to an average of 34.3 mbpd compared to 67.6 mbpd for the same period last year

— Revenues from Holly Energy’s crude pipelines were $6.9 million, an increase of $4.7 million compared to the first quarter of 2008. This increase was due to the realization of revenues from crude oil shipments for a full three-month period during the first quarter of 2009 compared to one month of shipments during the same period last year. For the first quarter of 2008, crude pipeline revenues reflect crude oil shipments for the period from March 1 through March 31, 2008 due to the commencement of the company’s crude pipeline operations effective March 1, 2008. This was partially offset by the effects of a decrease in average crude oil shipments during the quarter compared to March 2008 as a result of reduced production arising from planned downtime at Holly’s Navajo refinery. Shipments on the company’s crude pipeline system decreased to an average of 122.2 mbpd during the quarter compared to 139.1 mbpd during the month of March 2008.

— Revenues from terminal, tankage and truck loading rack fees were $3.6 million, a decrease of $0.4 million compared to the first quarter of 2008. Operating costs and expenses were $18.4 million for the three months ended March 31, 2009, an increase of $3.1 million compared to same period of 2008. This increase was due to additional costs attributable to the crude pipelines acquired in 2008 and higher depreciation. Also, under new accounting guidance effective January 1, 2009, Holly Energy is required to expense rather than capitalize certain acquisition costs of $2.5 million associated with its joint venture agreement with Plains All American Pipeline, L.P. (“Plains”) that closed in March 2009. Additionally, interest expense for the three months ended March 31, 2009 increased $1.6 million over the same period of 2008. This increase is due primarily to interest attributable to advances from the company’s revolving credit agreement that were used to finance crude pipeline asset purchase on February 29, 2008.