Shell Midstream Partners, L.P. (NYSE: SHLX), a growth-oriented
mainstream midstream master limited partnership formed by Royal
Dutch Shell plc (RDS), reported net income attributable to the
partnership of $56.3 million for the second quarter of 2016, which
equated to $0.28 per common limited partner unit. Shell
Midstream Partners also generated adjusted earnings before
interest, income taxes, depreciation and amortization attributable
to the partnership of $68.0 million and cash available for
distribution of $61.1 million.
“Our systems have demonstrated resilience despite volatility in
the industry and have delivered consistent results on a quarterly
basis. We have continued to build the scale with six acquisitions
over the last two years totaling $2.3 billion and have more than
tripled the EBITDA of Shell Midstream Partners,” said John
Hollowell, CEO, Shell Midstream Partners. “As we look ahead, and
based on current market performance, we plan to acquire between
$2.5 and $2.9 billion of assets from our sponsor through
2018. We also are targeting distributions growth at a 20%
compound annual growth rate (CAGR) over the same period.”
Shell Midstream Partners today announced that, effective March
1, 2017, Shawn Carsten, currently Shell’s Downstream Controller in
the Americas, will assume the role of Vice President and Chief
Financial Officer of Shell Midstream GP, LLC. Mr. Carsten will
succeed Susan Ward, who has served as Vice President and Chief
Financial Officer since Shell Midstream Partners’ initial public
offering. After March 1, 2017, Ms. Ward will continue in her
role as Head of M&A and Commercial Finance for Shell’s
businesses in the Americas. In that role, Ms. Ward will
continue in an M&A advisory capacity to Shell Midstream
Partners.
“Susan played a key role in the successful planning and
execution of the IPO, the completion and financing of its
subsequent acquisitions and the ongoing delivery of strong
financial performance. The partnership is grateful for her
service, as well as her continued stewardship and support of an
orderly transition of the CFO role in early 2017,” said John
Hollowell.
A 28 year employee of Shell, Mr. Carsten brings broad financial
experience and knowledge of Shell Pipeline Company with his most
recent role as Shell’s Downstream Controller for the Americas. Mr.
Carsten is a highly regarded leader in Shell's Finance organization
with deep business knowledge across Shell businesses including
Shell Pipeline Company. He has regional and global experience
in strategy and planning, business performance management, and
financial reporting.
FINANCIAL HIGHLIGHTS
- Net income attributable to the partnership was $56.3 million,
compared to $63.8 million for the prior quarter.
- Net cash provided by operating activities was $73.4 million,
compared to $78.3 million for the prior quarter.
- Cash available for distribution was $61.1 million, compared to
$69.7 million for the prior quarter, representing a 12.3% decrease
quarter on quarter. The reduction to cash available for
distribution is primarily due to lower storage revenue at Mars,
cash held back at Bengal for tank repair expenses, and lower
dividend income from Colonial.
- Total cash distribution declared was $53.9 million resulting in
a 1.1x coverage ratio.
- Adjusted EBITDA attributable to the partnership was $68.0
million, compared to $77.1 million for the prior quarter.
- As of September 30, 2016, the partnership had $160.8 million of
consolidated cash and cash equivalents on hand.
- In September, the partnership acquired 49.0% interest in
Odyssey Pipeline L.L.C. and an additional 20.0% of Mars Oil
Pipeline Company for $350.0 million. The acquisition was funded
using cash on hand and debt under the upsized revolver.
- As of September 30, 2016, there were 109,842,376 common units
outstanding, of which 88,367,308 were publicly owned. Shell
Pipeline Company, through its ownership of common units,
subordinated units and the general partner units, owned 51.2% of
the partnership.
Cash available for distribution and Adjusted EBITDA are non-GAAP
supplemental financial measures. See reconciliation tables later in
this press release.
ASSET HIGHLIGHTS
Crude Systems and Related Storage
- Zydeco - The partnership saw steady demand to move onshore and
offshore crude to key markets in Louisiana. Mainline volumes were
545 kbpd in the current quarter, compared to 541 kbpd in the prior
quarter.
- Lockport - Storage volumes remained steady as the terminal is
fully utilized.
- Auger - Volumes were 103 kbpd, lower than the prior quarter of
113 kbpd primarily due to market choices as shippers are moving
greater than expected volumes to SMI 205 to get into Louisiana
markets.
- Mars - Volumes were 461 kbpd compared to 398 kbpd in the prior
quarter primarily due to deliveries out of the caverns as storage
positions unwound with increasing crude prices. Underlying volumes
remained steady quarter over quarter.
- Poseidon - Volumes were 264 kbpd, in line with the prior
quarter of 275 kbpd due to continued demand on the system for
deliveries into Houma.
Refined Products Systems and Related Storage
- Colonial - Dividends were $1.1 million lower than prior quarter
due to a 10-day outage following a release in early September.
- Bengal - Volumes were 537 kbpd, lower than previous prior
quarter of 544 kbpd due to delivery curtailment into Colonial
during the outage.
ABOUT SHELL MIDSTREAM PARTNERS, L.P.
Shell Midstream Partners, headquartered in Houston, Texas, is a
fee-based, growth-oriented midstream master limited partnership
formed by Royal Dutch Shell to own, operate, develop and acquire
pipelines and other midstream assets. Shell Midstream Partners'
assets consist of pipelines, crude tank storage and terminal
systems that serve as key infrastructure to transport and store
onshore and offshore crude oil production to Gulf Coast and Midwest
refining markets and to deliver refined products from Gulf Coast
markets to major demand centers.
For more information on Shell Midstream Partners and the assets
owned by the partnership, please visit
www.shellmidstreampartners.com.
FORTHCOMING EVENTS
At 9:30 a.m. CST today, Shell Midstream Partners will hold a
webcast to discuss the reported results and provide an update on
partnership operations. Interested parties may listen to the
conference call on Shell Midstream Partners’ website at
www.shellmidstreampartners.com by clicking on the “2016
Third-Quarter Financial Results Webcast” link, found under the
"Events and Conferences" section. A replay of the conference
call will be available following the live webcast.
Unaudited Summarized Financial Statement
Information
|
|
For the Three Months
Ended |
(in millions of dollars) |
|
September 30,
2016 |
|
June 30, 2016 |
Revenue (1) |
|
$ |
67.9 |
|
|
$ |
71.1 |
|
Costs and expenses |
|
|
|
|
Operations and maintenance |
|
16.7 |
|
|
17.5 |
|
General and administrative |
|
7.9 |
|
|
7.8 |
|
Depreciation, amortization and accretion |
|
6.0 |
|
|
5.8 |
|
Property and other taxes |
|
1.3 |
|
|
1.9 |
|
Total costs and expenses |
|
31.9 |
|
|
33.0 |
|
Operating income |
|
36.0 |
|
|
38.1 |
|
Income from equity investments |
|
21.4 |
|
|
25.6 |
|
Dividend income from investment |
|
4.2 |
|
|
4.6 |
|
Investment and dividend income |
|
25.6 |
|
|
30.2 |
|
Interest expense, net |
|
2.8 |
|
|
2.0 |
|
Income before income taxes |
|
58.8 |
|
|
66.3 |
|
Income tax expense |
|
— |
|
|
— |
|
Net income |
|
58.8 |
|
|
66.3 |
|
Less: Net income attributable to noncontrolling
interests |
|
2.5 |
|
|
2.5 |
|
Net income attributable to the Partnership |
|
$ |
56.3 |
|
|
$ |
63.8 |
|
Less: general partner's interest in net income
attributable to the Partnership |
|
7.2 |
|
|
5.0 |
|
Limited Partners' interest in net income
attributable to the Partnership |
|
$ |
49.1 |
|
|
$ |
58.8 |
|
|
|
|
|
|
Net income per Limited Partner Unit – Basic and
Diluted (in dollars): |
|
|
|
|
Common |
|
$ |
0.28 |
|
|
$ |
0.35 |
|
Subordinated |
|
$ |
0.28 |
|
|
$ |
0.34 |
|
|
|
|
|
|
Weighted average Limited Partner Units
outstanding – Basic and Diluted (in millions): |
|
|
|
|
Common units – public |
|
88.3 |
|
|
81.1 |
|
Common units – SPLC |
|
21.5 |
|
|
21.5 |
|
Subordinated units – SPLC |
|
67.5 |
|
|
67.5 |
|
(1) Deferred revenue for the three months ended September 30,
3016 and June 30, 2016, including the impact of overshipments and
expiring credits, was $1.9 million and $1.7 million,
respectively.
Reconciliation of Adjusted
EBITDA and Cash Available for Distribution to Net
Income |
|
|
For the Three Months
Ended |
(in millions of dollars) |
|
September 30,
2016 |
|
June 30, 2016 |
Net income |
|
$ |
58.8 |
|
|
$ |
66.3 |
|
Add: |
|
|
|
|
Depreciation, amortization and accretion |
|
6.0 |
|
|
5.8 |
|
Interest expense, net |
|
2.8 |
|
|
2.0 |
|
Income tax expense |
|
— |
|
|
— |
|
Cash distribution received from equity
investments – Mars |
|
11.5 |
|
|
13.1 |
|
Cash distribution received from equity
investments – Bengal |
|
2.7 |
|
|
7.1 |
|
Cash distribution received from equity
investments – Poseidon |
|
10.5 |
|
|
11.3 |
|
Less: |
|
|
|
|
Income from equity investments |
|
21.4 |
|
|
25.6 |
|
Adjusted EBITDA |
|
70.9 |
|
|
80.0 |
|
Less: |
|
|
|
|
Adjusted EBITDA attributable to noncontrolling
interests |
|
2.9 |
|
|
2.9 |
|
Adjusted EBITDA attributable to the
Partnership |
|
68.0 |
|
|
77.1 |
|
Less: |
|
|
|
|
Net interest paid attributable to the
Partnership |
|
1.8 |
|
|
1.0 |
|
Maintenance capex attributable to the
Partnership |
|
7.0 |
|
|
6.7 |
|
Add: |
|
|
|
|
Net adjustments from volume deficiency payments
attributable to the Partnership |
|
0.8 |
|
|
(0.1 |
) |
Reimbursements from Parent included in partners'
Capital |
|
1.1 |
|
|
0.4 |
|
Cash Available for Distribution Attributable to
the Partnership |
|
$ |
61.1 |
|
|
$ |
69.7 |
|
See "Non-GAAP Financial Measures" later in this press
release.
Reconciliation of Adjusted
EBITDA and Cash Available for Distribution to Net Cash Provided by
Operating Activities |
|
|
For the Three Months
Ended |
(in millions of dollars) |
|
September 30,
2016 |
|
June 30, 2016 |
Net cash provided by operating activities |
|
$ |
73.4 |
|
|
$ |
78.3 |
|
Add: |
|
|
|
|
Interest expense, net |
|
2.8 |
|
|
2.0 |
|
Income tax expense |
|
— |
|
|
— |
|
Return of investment |
|
1.6 |
|
|
3.9 |
|
Less: |
|
|
|
|
Change in deferred revenue |
|
1.3 |
|
|
0.1 |
|
Amortization of debt issuance cost |
|
0.1 |
|
|
— |
|
Change in other assets and liabilities |
|
5.5 |
|
|
4.1 |
|
Adjusted EBITDA |
|
70.9 |
|
|
80.0 |
|
Less: |
|
|
|
|
Adjusted EBITDA attributable to noncontrolling
interests |
|
2.9 |
|
|
2.9 |
|
Adjusted EBITDA attributable to the
Partnership |
|
68.0 |
|
|
77.1 |
|
Less: |
|
|
|
|
Net interest paid attributable to the
Partnership |
|
1.8 |
|
|
1.0 |
|
Maintenance capex attributable to the
Partnership |
|
7.0 |
|
|
6.7 |
|
Add: |
|
|
|
|
Net adjustments from volume deficiency payments
attributable to the Partnership |
|
0.8 |
|
|
(0.1 |
) |
Reimbursements from Parent included in partners'
Capital |
|
1.1 |
|
|
0.4 |
|
Cash Available for Distribution Attributable to
the Partnership |
|
$ |
61.1 |
|
|
$ |
69.7 |
|
See "Non-GAAP Financial Measures" later in this press
release.
Distribution
Information |
|
|
|
|
|
(in millions of dollars, except per-unit
and ratio data) |
|
For the Three Months
Ended |
|
|
September 30,
2016 |
|
June 30, 2016 |
Quarterly distribution declared per unit |
|
$ |
0.26375 |
|
|
$ |
0.25000 |
|
|
|
|
|
|
Adjusted EBITDA attributable to the Partnership
(1) |
|
$ |
68.0 |
|
|
$ |
77.1 |
|
|
|
|
|
|
Cash available for distribution attributable to
the Partnership (1) |
|
$ |
61.1 |
|
|
$ |
69.7 |
|
|
|
|
|
|
Distribution declared: |
|
|
|
|
Limited Partner units – Common |
|
$ |
29.0 |
|
|
$ |
27.4 |
|
Limited Partner units – Subordinated |
|
17.8 |
|
|
16.9 |
|
General partner units |
|
7.1 |
|
|
4.7 |
|
Total distribution declared |
|
$ |
53.9 |
|
|
$ |
49.0 |
|
|
|
|
|
|
Coverage ratio (2) |
|
1.1 |
|
|
1.4 |
|
(1) Non-GAAP measures. See reconciliation tables earlier
in this press release.
(2) Coverage ratio is equal to Cash available for distribution
attributable to the partnership divided by Total distribution
declared.
Capital
Expenditures |
(in millions of dollars) |
|
For the Three Months
Ended |
|
|
September 30,
2016 |
|
June 30, 2016 |
Expansion capital expenditures |
|
$ |
0.2 |
|
|
$ |
2.0 |
|
Maintenance capital expenditures |
|
7.3 |
|
|
7.1 |
|
Total capital expenditures paid |
|
$ |
7.5 |
|
|
$ |
9.1 |
|
Condensed Consolidated
Balance Sheet Information |
(in millions of dollars) |
|
September 30,
2016 |
|
June 30, 2016 |
Cash and cash equivalents |
|
$ |
160.8 |
|
|
$ |
168.6 |
|
Property, plant & equipment |
|
395.5 |
|
|
394.4 |
|
Total assets |
|
797.2 |
|
783.1 |
Total related party debt |
|
343.9 |
|
344.4 |
Total equity |
|
400.4 |
|
392.2 |
Pipeline and Terminal
Volumes and Revenue per Barrel |
|
|
For the Three Months
Ended |
|
|
September 30,
2016 |
|
June 30, 2016 |
Pipeline throughput (thousands of barrels per
day) (1) |
|
|
|
|
Zydeco – Mainlines |
|
545 |
|
|
541 |
|
Zydeco – Other segments |
|
517 |
|
|
509 |
|
Zydeco total system |
|
1,062 |
|
|
1,050 |
|
Mars total system |
|
461 |
|
|
398 |
|
Bengal total system |
|
537 |
|
|
544 |
|
Poseidon total system |
|
264 |
|
|
275 |
|
Auger total system |
|
103 |
|
|
113 |
|
|
|
|
|
|
Terminals (2) |
|
|
|
|
Lockport terminaling throughput and storage
volumes |
|
170 |
|
|
196 |
|
|
|
|
|
|
Revenue per barrel ($ per barrel) |
|
|
|
|
Zydeco total system (3) |
|
$ |
0.53 |
|
|
|
|
$ |
0.58 |
|
|
|
Mars total system (3) |
|
1.17 |
|
|
1.41 |
|
Bengal total system (3) |
|
0.35 |
|
|
0.35 |
|
Auger total system (3) |
|
1.08 |
|
|
1.02 |
|
Lockport total system (4) |
|
0.29 |
|
|
0.26 |
|
|
|
|
|
|
|
|
|
|
(1) Pipeline throughput is defined as the volume of
delivered barrels.
(2) Terminaling throughput is defined as the volume of delivered
barrels and storage is defined as the volume of stored barrels.
(3) Based on reported revenues from transportation and allowance
oil divided by delivered barrels over the same time period. Actual
tariffs charged are based on shipping points along the pipeline
system, volume and length of contract.
(4) Based on reported revenues from transportation and storage
divided by delivered and stored barrels over the same time period.
Actual rates are based on contract volume and length.
FORWARD LOOKING STATEMENTS
This press release includes various “forward-looking statements”
within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. All statements other than statements of historical fact
are, or may be deemed to be, forward-looking statements.
Forward-looking statements are statements of future expectations
that are based on management’s current expectations and assumptions
and involve known and unknown risks and uncertainties that could
cause actual results, performance or events to differ materially
from those expressed or implied in these statements.
Forward-looking statements include, among other things, statements
expressing management’s expectations, beliefs, estimates,
forecasts, projections and assumptions. You can identify our
forward-looking statements by words such as “anticipate”,
“believe”, “estimate”, “expect”, “forecast”, “goals”, “objectives”,
“outlook”, “intend”, “plan”, “predict”, “project”, “risks”,
“schedule”, “seek”, “target”, “could”, “may”, “should” or “would”
or other similar expressions that convey the uncertainty of future
events or outcomes. In accordance with “safe harbor” provisions of
the Private Securities Litigation Reform Act of 1995, these
statements are accompanied by cautionary language identifying
important factors, though not necessarily all such factors, which
could cause future outcomes to differ materially from those set
forth in forward-looking statements. In particular, expressed or
implied statements concerning future growth, future actions,
closing and funding of acquisitions, future drop downs, volumes,
capital requirements, conditions or events, future impact of prior
acquisitions, future operating results or the ability to generate
sales, income or cash flow or the amount of distributions are
forward-looking statements. Forward-looking statements are not
guarantees of performance. They involve risks, uncertainties and
assumptions. Future actions, conditions or events and future
results of operations may differ materially from those expressed in
these forward-looking statements. Forward-looking statements speak
only as of the date of this press release, November 3, 2016, and we
disclaim any obligation to update such statements for any reason,
except as required by law. All forward-looking statements contained
in this document are expressly qualified in their entirety by the
cautionary statements contained or referred to in this paragraph.
Many of the factors that will determine these results are beyond
our ability to control or predict. These factors include the risk
factors described in Part I, Item 1A. “Risk Factors” in our
Annual Report on Form 10-K for the year ended December 31, 2015, as
updated by the information in our other filings with the SEC. If
any of those risks occur, it could cause our actual results to
differ materially from those contained in any forward-looking
statement. Because of these risks and uncertainties, you should not
place undue reliance on any forward-looking statement.
NON-GAAP FINANCIAL MEASURES
This press release includes the terms Adjusted EBITDA and cash
available for distribution. We believe that the presentation of
Adjusted EBITDA and cash available for distribution provides useful
information to investors in assessing our financial condition and
results of operations. Adjusted EBITDA and cash available for
distribution are non-GAAP supplemental financial measures that
management and external users of our condensed consolidated
financial statements, such as industry analysts, investors, lenders
and rating agencies, may use to assess:
- our operating performance as compared to other publicly traded
partnerships in the midstream energy industry, without regard to
historical cost basis or, in the case of Adjusted EBITDA, financing
methods;
- the ability of our business to generate sufficient cash to
support our decision to make distributions to our unitholders;
- our ability to incur and service debt and fund capital
expenditures; and
- the viability of acquisitions and other capital expenditure
projects and the returns on investment of various investment
opportunities.
The GAAP measures most directly comparable to Adjusted EBITDA
and cash available for distribution are net income and net cash
provided by operating activities. These non-GAAP measures should
not be considered as alternatives to GAAP net income or net cash
provided by operating activities. Adjusted EBITDA and cash
available for distribution have important limitations as analytical
tools because they exclude some but not all items that affect net
income and net cash provided by operating activities. They should
not be considered in isolation or as substitutes for analysis of
our results as reported under GAAP. Additionally, because Adjusted
EBITDA and cash available for distribution may be defined
differently by other companies in our industry, our definition of
Adjusted EBITDA and cash available for distribution may not be
comparable to similarly titled measures of other companies, thereby
diminishing their utility.
References in this press release to Adjusted EBITDA refer to net
income before income taxes, net interest expense, gain or loss from
disposition of fixed assets, allowance oil reduction to net
realizable value, and depreciation, amortization and accretion,
plus cash distributed to Shell Midstream Partners, L.P. from equity
investments for the applicable period, less income from equity
investments. We define Adjusted EBITDA attributable to Shell
Midstream Partners as Adjusted EBITDA less Adjusted EBITDA
attributable to noncontrolling interests. References to cash
available for distribution refer to Adjusted EBITDA attributable to
Shell Midstream Partners, less maintenance capital expenditures
attributable to Shell Midstream Partners, net interest paid, cash
reserves and income taxes paid, plus net adjustments from volume
deficiency payments attributable to Shell Midstream Partners and
certain one-time payments not reflected in net income. Cash
available for distribution will not reflect changes in working
capital balances.
November 3, 2016
The information in this Report reflects the unaudited
consolidated financial position and results of Shell Midstream
Partners, L.P.
Inquiries:
Shell Media Relations
Americas: +1 713 241 4544
Shell Investor Relations
North America: +1 832 337 2034
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