USD Partners LP (NYSE: USDP) (the “Partnership”) announced today
its operating and financial results for the three and six months
ended June 30, 2017. Highlights with respect to the second quarter
of 2017 include the following:
- Established rail-to-pipeline solution
from Western Canada with the Stroud terminal acquisition, which
~$25 million in total acquisition and other costs represents
approximately 2.5x the estimated 2018 Adjusted EBITDA expected to
be generated by the three-year, take-or-pay contract signed
concurrently with the transaction
- Extended contracted term for 25% of
Hardisty terminal’s available capacity through mid-2020
- Generated Net cash provided by
operating activities of $9.3 million, Adjusted EBITDA of $15.1
million and Distributable cash flow of $11.7 million
- Reported Net income of $8.4
million
- Raised $33.7 million from public equity
offering of 3,000,000 units
- Increased quarterly cash distribution
for ninth consecutive quarter to $0.34 per unit ($1.36 per unit
annualized)
- Ended quarter with $201.2 million of
available liquidity
“Our Stroud terminal acquisition − supported by a new customer
and multi-year take-or-pay cash flows − demonstrates the ongoing
value of rail takeaway solutions for Western Canada’s vast crude
oil resource,” said Dan Borgen, the Partnership’s Chief Executive
Officer. “We believe our origin-to-destination capabilities and
rail-to-pipeline solutions will drive additional commercial
opportunities at the Partnership, particularly as current
production normalizes and grows, new projects are brought online
and available takeaway capacity becomes constrained.”
Recent Transactions
On June 2, 2017, the Partnership acquired a 76-acre crude oil
terminal in Stroud, Oklahoma (the “Stroud terminal”) to facilitate
rail-to-pipeline shipments of crude oil from its Hardisty terminal
to Cushing, Oklahoma. The Stroud terminal includes unit
train-capable unloading capacity of approximately 50,000 barrels
per day, or Bpd, expandable to approximately 70,000 Bpd, as well as
onsite tanks with 140,000 barrels of total capacity and a truck
bay. Additionally, the terminal includes a 12-inch diameter,
17-mile pipeline with a direct connection to the crude oil storage
hub located in Cushing, Oklahoma. The Partnership also obtained a
lease for 300,000 barrels of crude oil tank storage at the Cushing
hub to receive outbound shipments of crude oil from the Stroud
terminal. Inbound product is delivered by the Stillwater Central
Rail, which handles deliveries from both the BNSF and the Union
Pacific railways.
Concurrent with the Stroud acquisition, the Partnership entered
into a new multi-year, take-or-pay terminalling services agreement
with an investment grade rated multi-national energy company (the
“Stroud customer”) for use of approximately 50% of the available
capacity at the Stroud terminal from October 2017 through June
2020. Additionally, to facilitate the origination of barrels from
the Partnership’s Hardisty terminal to be shipped to the Stroud
terminal, the Partnership extended the contracted term for
approximately 25% of the Hardisty terminal’s capacity to June
2020.
The Partnership believes the Stroud terminal represents one of
the most advantaged rail destinations for Western Canadian crude
oil given established connectivity from Cushing to multiple
refining centers across the U.S., including underutilized pipelines
to major refining centers along the Gulf Coast.
The Partnership expects to incur approximately $1.2 million of
growth capital expenditures to retrofit the Stroud terminal to
handle heavy grades of Canadian crude oil, of which approximately
$245 thousand was spent in the second quarter.
Second Quarter 2017 Operational and Financial Results
Substantially all of the Partnership’s cash flows are generated
from multi-year, take-or-pay terminal service agreements, which
include minimum monthly commitment fees. The Partnership’s
customers include major integrated oil companies, refiners and
marketers, the majority of which are investment grade rated.
For the second quarter of 2017 relative to the second quarter of
2016, Net cash provided by operating activities decreased by 31%,
while Adjusted EBITDA and Distributable cash flow both decreased by
7%. These decreases are primarily the result of discontinuing
operations at the San Antonio terminal during the second quarter of
2017 following the termination of the related customer contract and
were partially offset by lower operating costs. Additionally, the
Partnership received a smaller benefit from the settlement of its
derivatives contracts during the second quarter of 2017 relative to
2016 as the Partnership’s 2017 foreign exchange hedges have lower
exercise prices than its 2016 foreign exchange hedges, as it
relates to the relative strength of the Canadian dollar to the U.S.
dollar. Net cash provided by operating activities was also impacted
by net changes in working capital associated with the timing of
payments and collection of receipts.
During the second quarter of 2017, the Partnership revised its
estimated Canadian income tax expenses for the 2016 and 2017 tax
years based on actual taxable income calculated for 2016 and, as
such, recorded a $2.4 million Benefit from income taxes. As a
result, Net income for the second quarter of 2017 increased by 60%
relative to the prior year. Additionally, Distributable cash flow
for the second quarter of 2017 benefited from an approximate $0.7
million decrease in Cash paid for income taxes relative to the
second quarter of 2016, which was partially offset by higher Cash
paid for interest. The Partnership expects to receive a refund of
approximately C$3.4 million in the second half of 2017.
On July 27, 2017, the Partnership declared a quarterly cash
distribution of $0.34 per unit ($1.36 per unit on an annualized
basis), which represents growth of 1.5% relative to the prior
quarter and 7.9% relative to the second quarter of 2016. The
distribution is payable on August 11, 2017, to unitholders of
record as of the close of business on August 7, 2017.
As of June 30, 2017, the Partnership had total available
liquidity of $201.2 million, including $7.2 million of unrestricted
cash and cash equivalents and undrawn borrowing capacity of $194.0
million on its $400.0 million senior secured credit facility,
subject to continued compliance with financial covenants. The
Partnership is in compliance with its financial covenants and has
no maturities under its senior secured credit facility until
October 2019.
Second Quarter 2017 Conference Call Information
The Partnership will host a conference call and webcast
regarding second quarter 2017 results at 11:00 a.m. Eastern Time
(10:00 a.m. Central Time) on Tuesday, August 8, 2017.
To listen live over the Internet, participants are advised to
log on to the Partnership’s website at www.usdpartners.com and
select the “Events & Presentations” sub-tab under the
“Investors” tab. To join via telephone, participants may dial (877)
266-7551 domestically or +1 (339) 368-5209 internationally,
conference ID 61530722. Participants are advised to dial in at
least five minutes prior to the call.
An audio replay of the conference call will be available for 30
days by dialing (800) 585-8367 domestically or +1 (404) 537-3406
internationally, conference ID 61530722. In addition, a replay of
the audio webcast will be available by accessing the Partnership's
website after the call is concluded.
About USD Partners LP
USD Partners LP is a fee-based, growth-oriented master limited
partnership formed in 2014 by US Development Group, LLC (“USDG”) to
acquire, develop and operate midstream infrastructure and
complementary logistics solutions for crude oil, biofuels and other
energy-related products. The Partnership generates substantially
all of its operating cash flows from multi-year, take-or-pay
contracts with primarily investment grade customers, including
major integrated oil companies and refiners. The Partnership’s
principal assets include a network of crude terminals that
facilitate the transportation of heavy crude oil from Western
Canada to key demand centers across North America. The
Partnership’s operations include railcar loading and unloading,
storage and blending in on-site tanks, inbound and outbound
pipeline connectivity, truck transloading, as well as other related
logistics services. In addition, the Partnership provides customers
with leased railcars and fleet services to facilitate the
transportation of liquid hydrocarbons and biofuels by rail.
USDG, which owns the general partner of USD Partners LP, is
engaged in designing, developing, owning, and managing large-scale
multi-modal logistics centers and energy-related infrastructure
across North America. USDG solutions create flexible market access
for customers in significant growth areas and key demand centers,
including Western Canada, the Permian Basin and the U.S. Gulf
Coast. Among other projects, USDG is currently pursuing the
development of a premier energy logistics terminal on the Houston
Ship Channel with substantial tank storage capacity, multiple docks
(including barge and deepwater), inbound and outbound pipeline
connectivity, as well as a rail terminal with unit train
capabilities.
Non-GAAP Financial Measures
The Partnership defines Adjusted EBITDA as Net cash provided by
operating activities adjusted for changes in working capital items,
changes in restricted cash, interest, income taxes, foreign
currency transaction gains and losses, adjustments related to
deferred revenue associated with minimum monthly commitment fees
and other items which do not affect the underlying cash flows
produced by the Partnership’s businesses. Adjusted EBITDA is a
non-GAAP, supplemental financial measure used by management and
external users of the Partnership’s financial statements, such as
investors and commercial banks, to assess:
- the Partnership’s liquidity and the
ability of the Partnership’s businesses to produce sufficient cash
flows to make distributions to the Partnership’s unitholders;
and
- the Partnership’s ability to incur and
service debt and fund capital expenditures.
The Partnership defines Distributable cash flow, or DCF, as
Adjusted EBITDA less net cash paid for interest, income taxes and
maintenance capital expenditures. DCF does not reflect changes in
working capital balances. DCF is a non-GAAP, supplemental financial
measure used by management and by external users of the
Partnership’s financial statements, such as investors and
commercial banks, to assess:
- the amount of cash available for making
distributions to the Partnership’s unitholders;
- the excess cash being retained for use
in enhancing the Partnership’s existing businesses; and
- the sustainability of the Partnership’s
current distribution rate per unit.
The Partnership believes that the presentation of Adjusted
EBITDA and DCF in this press release provides information that
enhances an investor's understanding of the Partnership’s ability
to generate cash for payment of distributions and other purposes.
The GAAP measure most directly comparable to Adjusted EBITDA and
DCF is Net cash provided by operating activities. Adjusted EBITDA
and DCF should not be considered alternatives to Net cash provided
by operating activities or any other measure of liquidity or
performance presented in accordance with GAAP. Adjusted EBITDA and
DCF exclude some, but not all, items that affect cash from
operations and these measures may vary among other companies. As a
result, Adjusted EBITDA and DCF may not be comparable to similarly
titled measures of other companies.
Cautionary Note Regarding Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of U.S. federal securities laws, including statements
with respect to the Partnership’s liquidity, the ability of the
Partnership to grow and opportunities to grow, the expected
Adjusted EBITDA contribution of the Stroud terminal, the expected
commencement date of operations of the Stroud terminal, and the
amount and timing of future distribution payments. Words and
phrases such as “is expected,” “is planned,” “believes,”
“projects,” and similar expressions are used to identify such
forward-looking statements. However, the absence of these words
does not mean that a statement is not forward-looking.
Forward-looking statements relating to the Partnership are based on
management’s expectations, estimates and projections about the
Partnership, its interests and the energy industry in general on
the date this press release was issued. These statements are not
guarantees of future performance and involve certain risks,
uncertainties and assumptions that are difficult to predict.
Therefore, actual outcomes and results may differ materially from
what is expressed or forecast in such forward-looking statements.
Factors that could cause actual results or events to differ
materially from those described in the forward-looking statements
include those as set forth under the heading “Risk Factors” in the
Partnership’s most recent Annual Report on Form 10-K and in our
subsequent filings with the Securities and Exchange Commission. The
Partnership is under no obligation (and expressly disclaims any
such obligation) to update or alter its forward-looking statements,
whether as a result of new information, future events or
otherwise.
USD
Partners LPConsolidated Statements of IncomeFor the
Three and Six Months Ended June 30, 2017 and
2016(unaudited) For the Three Months Ended
For the Six Months Ended June 30, June 30,
2017 2016 2017 2016 (in thousands)
Revenues Terminalling services $ 21,977 $ 23,459 $ 45,536 $
45,482 Terminalling services — related party 2,518 1,756 4,258
3,406 Railroad incentives 6 22 21 37 Fleet leases 643 647 1,286
1,290 Fleet leases — related party 891 891 1,781 1,781 Fleet
services 467 69 935 138 Fleet services — related party 279 684 558
1,368 Freight and other reimbursables 208 350 365 733 Freight and
other reimbursables — related party
—
— 1 —
Total
revenues 26,989 27,878
54,741 54,235
Operating costs Subcontracted rail services 1,795 2,026
3,808 4,069 Pipeline fees 5,369 5,338 10,786 10,052 Fleet leases
1,534 1,538 3,067 3,071 Freight and other reimbursables 208 350 366
733 Operating and maintenance 594 783 1,301 1,653 Selling, general
and administrative 2,362 2,073 4,677 4,967 Selling, general and
administrative — related party 1,396 1,439 2,828 2,931 Depreciation
and amortization 4,969 4,914
9,910 9,819
Total operating costs
18,227 18,461
36,743 37,295 Operating
income 8,762 9,417 17,998 16,940
Interest expense 2,513 2,533 5,120 4,716 Loss (gain) associated
with derivative instruments 401 (253 ) 612 1,270 Foreign currency
transaction gain (100 ) (15 ) (70 ) (145 ) Other expense, net
3 — 8 —
Income before provision for income taxes 5,945
7,152 12,328 11,099 Provision for (benefit
from) income taxes (2,434 ) 1,917
(1,249 ) 3,714
Net income $
8,379 $ 5,235 $
13,577 $ 7,385 USD
Partners LPConsolidated Statements of Cash FlowsFor
the Three and Six Months Ended June 30, 2017 and
2016(unaudited)
For the Three Months Ended For the
Six Months Ended June 30, June 30, 2017
2016 2017 2016 Cash flows from operating
activities: (in thousands) Net income $ 8,379 $ 5,235 $ 13,577
$ 7,385 Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization 4,969 4,914
9,910 9,819 Loss (gain) associated with derivative instruments 401
(253 ) 612 1,270 Settlement of derivative contracts 91 546 390
1,036 Unit based compensation expense 1,218 969 2,016 1,697 Other
473 165 755 334 Changes in operating assets and liabilities:
Accounts receivable (459 ) 269 (424 ) 207 Accounts receivable –
related party (34 ) 54 179 1,760 Prepaid expenses and other current
assets (2,687 ) (790 ) (1,108 ) (460 ) Accounts payable and accrued
expenses (1,409 ) (1,224 ) (1,316 ) (1,961 ) Accounts payable and
accrued expenses – related party (77 ) 119 230 24 Deferred revenue
and other liabilities (2,425 ) 1,857 (3,545 ) 2,729 Deferred
revenue – related party 1,025 (300 ) 1,025 (629 ) Change in
restricted cash (209 ) 1,793 (230 )
(633 ) Net cash provided by operating activities
9,256 13,354
22,071 22,578 Cash flows from
investing activities: Additions of property and equipment
(25,647 ) 27 (25,773 ) (246 )
Net cash provided by (used in) investing activities
(25,647 ) 27
(25,773 ) (246 ) Cash flows
from financing activities: Distributions (8,239 ) (7,366 )
(16,142 ) (14,396 ) Vested phantom units used for payment of
participant taxes (2 ) — (1,072 ) (77 ) Net proceeds from issuance
of common units 33,700 — 33,700 — Proceeds from long-term debt
35,000 5,000 40,000 10,000 Repayments of long-term debt
(41,000 ) (9,825 ) (57,342 ) (18,902 ) Net
cash provided by (used in) financing activities
19,459 (12,191 )
(856 ) (23,375 ) Effect of
exchange rates on cash (56 ) 114 49
439 Net change in cash and cash equivalents
3,012 1,304 (4,509 ) (604 ) Cash and cash equivalents – beginning
of period 4,184 8,592 11,705
10,500 Cash and cash equivalents – end of
period
$ 7,196 $ 9,896
$ 7,196 $ 9,896
USD Partners LPConsolidated Balance
Sheets(unaudited) June 30, December
31, 2017 2016 ASSETS (in thousands)
Current assets Cash and cash equivalents $ 7,196 $ 11,705
Restricted cash 5,861 5,433 Accounts receivable, net 4,800 4,321
Accounts receivable — related party — 219 Prepaid expenses 9,372
10,325 Other current assets 5,361 2,562
Total current assets 32,590 34,565 Property and equipment, net
148,626 125,702 Intangible assets, net 105,615 111,919 Goodwill
33,589 33,589 Other non-current assets 182 192
Total assets $ 320,602 $
305,967 LIABILITIES AND PARTNERS’
CAPITAL Current liabilities Accounts payable and accrued
expenses $ 976 $ 2,221 Accounts payable and accrued expenses —
related party 419 214 Deferred revenue, current portion 25,167
26,928 Deferred revenue, current portion — related party 5,481
4,292 Other current liabilities 2,904 3,513
Total current liabilities 34,947 37,168 Long-term debt, net
204,196 220,894 Deferred revenue, net of current portion — 264
Deferred income tax liability, net 1,153 823
Total liabilities 240,296
259,149 Commitments and contingencies Partners’
capital Common units 136,838 122,802 Class A units 1,416 1,811
Subordinated units (58,378 ) (76,749 ) General partner units 88 111
Accumulated other comprehensive income (loss) 342
(1,157 )
Total partners’ capital 80,306
46,818 Total liabilities and
partners’ capital $ 320,602 $
305,967
USD Partners LPGAAP to Non-GAAP
ReconciliationsFor the Three and Six Months Ended June 30,
2017 and 2016(unaudited) For the Three Months
Ended For the Six Months Ended June 30, June
30, 2017 2016 2017 2016 (in
thousands)
Net cash provided by operating activities
$ 9,256 $ 13,354 $ 22,071
$ 22,578 Add (deduct): Amortization of deferred
financing costs (215 ) (215 ) (430 ) (430 ) Deferred income taxes
(249 ) 50 (307 ) 96 Changes in accounts receivable and other assets
3,180 467 1,353 (1,507 ) Changes in accounts payable and accrued
expenses 1,486 1,105 1,086 1,937 Changes in deferred revenue and
other liabilities 1,400 (1,557 ) 2,520 (2,100 ) Change in
restricted cash 209 (1,793 ) 230 633 Interest expense, net 2,513
2,533 5,116 4,716 Provision for (benefit from) income taxes (2,434
) 1,917 (1,249 ) 3,714 Foreign currency transaction gain (1) (100 )
(15 ) (70 ) (145 ) Deferred revenue associated with minimum monthly
commitment fees (2) 62 424 142
1,187
Adjusted EBITDA 15,108
16,270 30,462 30,679 Add (deduct): Cash paid
for income taxes (3) (798 ) (1,486 ) (1,414 ) (3,196 ) Cash paid
for interest (2,575 ) (2,180 ) (4,937 ) (3,987 ) Maintenance
capital expenditures (72 ) (18 ) (198 )
(18 )
Distributable cash flow $ 11,663
$ 12,586 $ 23,913
$ 23,478 (1) Represents foreign
exchange transaction gains and losses associated with activities
between the Partnership’s U.S. and Canadian subsidiaries.
(2) Represents deferred revenue associated with minimum monthly
commitment fees in excess of throughput utilized, which fees are
not refundable to the Partnership's customers. Amounts presented
are net of: (a) the corresponding prepaid Gibson pipeline fee that
will be recognized as expense concurrently with the recognition of
revenue; (b) revenue recognized in the current period that was
previously deferred; and (c) expense recognized for previously
prepaid Gibson pipeline fees, which correspond with the revenue
recognized that was previously deferred. (3) Includes
amounts we received as a partial refund of approximately $0.7
million (representing C$0.9 million) for our 2015 foreign income
taxes.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170807005993/en/
USD Partners LPAdam Altsuler, (281) 291-3995Vice President,
Chief Financial Officeraaltsuler@usdg.comorAshley Means Zavala,
(281) 291-3965Director, Finance & Investor
Relationsameans@usdg.com
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