Holly Energy Earnings Call Insights: SG&A Outlook and Southeastern New Mexico Crude Expansion

Holly Energy (NYSE:HEP) recently reported its first quarter earnings and discussed the following topics in its earnings conference call.

SG&A Outlook

Mark Reichman – Simmons & Co.: Just a couple of real quick questions. On the fourth quarter earnings call, the G&A expenses were kind of forecasted to be in the range of $2.5 to $3 million. This quarter they came in at $3.2 million. Is that $2.5 million to $3 million still a good number moving forward, or do you think $3.2 million is a more normal number for SG&A for the remainder of the year?

Bruce R. Shaw – President: We think $2.5 million to $3 million is a good estimate, Mark. We had a few extra G&A expenses this past quarter, some related to the equity offering that we had in the quarter.

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Mark Reichman – Simmons & Co.: Just with regard to the rail facility, I know that it’s still pretty – still early days, but can you talk at all about h0ow you’re envisioning the structure? Is that likely to be developed at the parent, HollyFrontier, and then just later dropdown? Is there any additional color you can provide on the structure?

Bruce R. Shaw – President: Not too much we can provide right at the moment. I would say all options about the initial funding are on the table. But the first step is really estimating the capital which we’re beginning to get our arms around, as well as kind of dividing the responsibilities between HFC and HEP. So we’ll give you can update on that – should be able to update you on that next quarter.

Southeastern New Mexico Crude Expansion

Connie Hsu – Morningstar: I just had a couple of questions on the Southeastern New Mexico crude expansion announced in March. Do you have any estimated returns in terms of EBITDA for that project? Also since part of it involves the pipeline conversion, I was just wondering if this line was previously out of service before, or if we should expect a decline in refined products volumes as well?

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Matthew P. Clifton – Chairman and CEO: This is Matt Clifton. On the last part of the question, there is about a 50-mile segment of line that was previously in product service that we looped that line several years ago. So since that time it’s been out of service. So we’re going to be reactivating that and basically reversing the flow from South to North. So that’s one piece of the component. As far as EBITDAs, I don’t think we’ve disclosed what the EBITDAs are. I would say that the – we feel that the initial EBITDAs will be better result than our previous dropdowns; some of that by virtue of the fact that we’re utilizing that idled asset and starting to get a return on that. But that’s probably as much detail as we’re going to give right now.