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 $72.6 million for the third quarter of 2017, which
equated to $0.31 per common limited partner unit. Shell
Midstream Partners also generated adjusted earnings before
interest, income taxes, depreciation and amortization attributable
to the partnership of $92.2 million.
"Underlying performance across Shell Midstream Partners in the
third quarter was good: throughput volumes increased across the
portfolio, distribution growth remained in line with our promise,
and we achieved a 1.1x coverage ratio for the quarter. And
these positive results were accomplished despite the impact of
Hurricane Harvey, which as everyone knows, was a significant event
forthe Texas Gulf Coast" said John Hollowell, CEO of Shell
Midstream Partners.
Total cash available for distribution was $83.9
million, about 5% lower than the prior quarter. The financial
results of the quarter were largely impacted by the effects of
Hurricane Harvey on Zydeco and Colonial, which in total accounted
for about $10.0 million less operating income and cash available
for distribution. This was tempered by better volume performance
offshore and an increase in committed shipper demand at Zydeco.
The Board of Directors of the general partner
previously declared a cash distribution of $0.3180 per limited
partnership unit for the third quarter of 2017. This distribution
represented an increase of 4.6% over the second quarter 2017
distribution and 21% increase over the third quarter 2016
distribution. This represents the eleventh consecutive quarter of
distribution growth, which supports the partnership's intent to
increase distributions by 20% in 2017 and 2018. The distribution
coverage ratio was 1.1x for the third quarter.
FINANCIAL HIGHLIGHTS
- Net income attributable to the partnership was $72.6 million,
compared to $65.5 million for the prior quarter.
- Net cash provided by operating activities was $100.7 million,
compared to $78.6 million for the prior quarter.
- Cash available for distribution was $83.9 million, compared to
$88.7 million for the prior quarter, driven by better underlying
performance offset by impacts from Hurricane Harvey.
- Total cash distribution declared was $77.4 million resulting in
a 1.1x coverage ratio.
- Adjusted EBITDA attributable to the partnership was $92.2
million, compared to $82.7 million for the prior quarter.
- As of September 30, 2017, the partnership had $171.9 million of
consolidated cash and cash equivalents on hand. Net Debt to
Adjusted EBITDA was 2.2x as of the end of the third quarter.
- Net proceeds received from equity issuances of $275.0 million
which were primarily used to repay $265.0 million of Debt.
Cash available for distribution and Adjusted EBITDA are non-GAAP
supplemental financial measures. See reconciliation tables later in
this press release.
ASSET HIGHLIGHTS
Significant Crude Systems and Related Storage
- Zydeco - Mainline volumes were 616 kbpd in the current quarter,
compared to 589 kbpd in the prior quarter. Volumes were higher
primarily due to an increase in committed shipper demand largely
driven by Bakken crude supply into Nederland, in addition to the
completion of the Caillou island maintenance project. Total
operating income and cash available for distribution was higher due
to better asset performance and lower maintenance spend, tempered
by losses resulting from Hurricane Harvey.
- Mars - Volumes were 480 kbpd compared to 506 kbpd in the prior
quarter. Decrease in volume was driven by shippers showing slight
builds in inventory positions compared to prior quarter. Total
operating income and cash available for distribution was up from
the prior quarter due to an allowance oil sale.
- Poseidon - Volumes were 257 kbpd, consistent with the prior
quarter. Total operating income and cash available for distribution
was largely in line with the prior quarter.
- Auger - Volumes were 78 kbpd, higher than the prior quarter of
43 kbpd primarily due to the completion of two producer planned
turnarounds. This has helped contribute to a total operating income
and cash available for distribution increase from the prior
quarter.
- Eastern Corridor - Volumes were 409 kbpd compared to 371 kbpd
in the prior quarter. Increase in volume was primarily driven
by new wells coming online from multiple fields.
Significant Refined Products Systems and Related Storage
- Refinery Gas Pipelines - Volumes were as expected backed by a
long-term take or pay contract.
- Colonial - Dividends were $4.0 million, down $1.3 million from
the prior quarter, primarily due to constrained supply from Texas
Gulf Coast refineries during Hurricane Harvey.
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 interests in entities that
own crude oil and refined products pipelines serving as key
infrastructure to transport onshore and offshore crude oil
production to Gulf Coast and Midwest refining markets and to
deliver refined products from those markets to major demand
centers, as well as interests in entities that own natural gas and
refinery gas pipelines which transport offshore natural gas to
market hubs and deliver refinery gas from refineries and plants to
chemical sites along the Gulf Coast.
For more information on Shell Midstream Partners and the assets
owned by the partnership, please visit
www.shellmidstreampartners.com.
FORTHCOMING EVENTS
Shell Midstream Partners will hold a webcast at
10:00am CT 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 “2017
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, 2017 |
|
June 30, 2017 |
Revenue (1) |
|
$ |
94.4 |
|
|
$ |
86.8 |
|
Costs and expenses |
|
|
|
|
Operations and
maintenance |
|
34.2 |
|
|
30.0 |
|
General and
administrative |
|
9.6 |
|
|
11.0 |
|
Depreciation,
amortization and accretion |
|
8.9 |
|
|
9.6 |
|
Property and other
taxes |
|
3.6 |
|
|
3.4 |
|
Total costs and
expenses |
|
56.3 |
|
|
54.0 |
|
Operating income |
|
38.1 |
|
|
32.8 |
|
Income from equity
investments |
|
41.2 |
|
|
37.2 |
|
Dividend income from
cost investments |
|
4.8 |
|
|
6.2 |
|
Other income |
|
0.1 |
|
|
— |
|
Investment, dividend
and other income |
|
46.1 |
|
|
43.4 |
|
Interest expense,
net |
|
9.7 |
|
|
7.5 |
|
Income before income
taxes |
|
74.5 |
|
|
68.7 |
|
Income tax expense |
|
— |
|
|
— |
|
Net income |
|
74.5 |
|
|
68.7 |
|
Net income attributable
to Parent |
|
— |
|
|
1.0 |
|
Less: Net income
attributable to noncontrolling interests |
|
1.9 |
|
|
2.2 |
|
Net income attributable
to the Partnership |
|
$ |
72.6 |
|
|
$ |
65.5 |
|
Less: general partner's
interest in net income attributable to the Partnership |
|
17.6 |
|
|
14.3 |
|
Limited Partners'
interest in net income attributable to the Partnership |
|
$ |
55.0 |
|
|
$ |
51.2 |
|
|
|
|
|
|
Net income per Limited
Partner Unit – Basic and Diluted: |
|
|
|
|
Common |
|
$ |
0.31 |
|
|
$ |
0.29 |
|
Subordinated (2) |
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
|
Weighted average
Limited Partner Units outstanding – Basic and Diluted (in
millions): |
|
|
|
|
Common units –
public |
|
90.2 |
|
|
88.4 |
|
Common units –
SPLC |
|
89.0 |
|
|
89.0 |
|
Subordinated units –
SPLC (2) |
|
— |
|
|
|
(1) Deferred revenue for the three months ended September 30,
2017 and June 30, 2017, including the impact of overshipments and
expiring credits, was $2.3 million and $2.6 million,
respectively.(2) The subordinated units converted into common units
on February 15, 2017, and were considered outstanding common units
for the entire period with respect to the weighted average number
of units outstanding.
Reconciliation of Adjusted EBITDA and Cash Available for
Distribution to Net Income |
|
|
For the Three Months Ended |
(in millions of
dollars) |
|
September 30, 2017 |
|
June 30, 2017 |
Net income |
|
$ |
74.5 |
|
|
$ |
68.7 |
|
Add: |
|
|
|
|
Allowance
oil reduction to net realizable value |
|
— |
|
|
0.3 |
|
Depreciation, amortization and accretion |
|
8.9 |
|
|
9.6 |
|
Interest
expense, net |
|
9.7 |
|
|
7.5 |
|
Income
tax expense |
|
— |
|
|
— |
|
Cash
distribution received from equity investments |
|
42.5 |
|
|
38.9 |
|
Less: |
|
|
|
|
Income
from equity investments |
|
41.2 |
|
|
37.2 |
|
Adjusted EBITDA |
|
94.4 |
|
|
87.8 |
|
Less: |
|
|
|
|
Adjusted
EBITDA attributable to Parent |
|
— |
|
|
2.5 |
|
Adjusted
EBITDA attributable to noncontrolling interests |
|
2.2 |
|
|
2.6 |
|
Adjusted EBITDA
attributable to the Partnership |
|
92.2 |
|
|
82.7 |
|
Less: |
|
|
|
|
Net
interest paid attributable to the Partnership (1) |
|
9.7 |
|
|
7.5 |
|
Maintenance capex attributable to the Partnership (2) |
|
6.1 |
|
|
10.4 |
|
Add: |
|
|
|
|
Net
adjustments from volume deficiency payments attributable to the
Partnership |
|
4.4 |
|
|
0.4 |
|
Reimbursements from Parent included in partners' Capital |
|
3.1 |
|
|
4.1 |
|
April
2017 divestiture attributable to the Partnership |
|
— |
|
|
19.4 |
|
Cash Available for
Distribution Attributable to the Partnership |
|
$ |
83.9 |
|
|
$ |
88.7 |
|
(1) Amount represents both paid
and accrued interest attributable to the
period. (2) For both the three months
ended September 30, 2017 and June 30, 2017, the amount is inclusive
of cash paid during the period, as well as accruals incurred for
work performed during the period. Prior period amounts have not
been changed and represent cash paid during the period.
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, 2017 |
|
June 30, 2017 |
Net cash provided by
operating activities |
|
$ |
100.7 |
|
|
$ |
78.6 |
|
Add: |
|
|
|
|
Interest
expense, net |
|
9.7 |
|
|
7.5 |
|
Income
tax expense |
|
— |
|
|
— |
|
Return of
investment |
|
3.9 |
|
|
2.4 |
|
Less: |
|
|
|
|
Deferred
revenue |
|
3.6 |
|
|
1.9 |
|
Non-cash
interest expense |
|
0.2 |
|
|
0.1 |
|
Change in
other assets and liabilities |
|
16.1 |
|
|
(1.3 |
) |
Adjusted EBITDA |
|
94.4 |
|
|
87.8 |
|
Less: |
|
|
|
|
Adjusted
EBITDA attributable to Parent |
|
— |
|
|
2.5 |
|
Adjusted
EBITDA attributable to noncontrolling interests |
|
2.2 |
|
|
2.6 |
|
Adjusted EBITDA
attributable to the Partnership |
|
92.2 |
|
|
82.7 |
|
Less: |
|
|
|
|
Net
interest paid attributable to the Partnership (1) |
|
9.7 |
|
|
7.5 |
|
Maintenance capex attributable to the Partnership (2) |
|
6.1 |
|
|
10.4 |
|
Add: |
|
|
|
|
Net
adjustments from volume deficiency payments attributable to
the Partnership |
|
4.4 |
|
|
0.4 |
|
Reimbursements from Parent included in partners' Capital |
|
3.1 |
|
|
4.1 |
|
April
2017 divestiture attributable to the Partnership |
|
— |
|
|
19.4 |
|
Cash Available for
Distribution Attributable to the Partnership |
|
$ |
83.9 |
|
|
$ |
88.7 |
|
(1) Amount represents both paid
and accrued interest attributable to the
period. (2) For both the three months
ended September 30, 2017 and June 30, 2017, the amount is
inclusive of cash paid during the period, as well as accruals
incurred for work performed during the period. Prior period amounts
have not been changed and represent cash paid during the
period.
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, 2017 |
|
June 30, 2017 |
Quarterly distribution
declared per unit |
|
$ |
0.31800 |
|
|
$ |
0.30410 |
|
|
|
|
|
|
Adjusted EBITDA
attributable to the Partnership (1) |
|
$ |
92.2 |
|
|
$ |
82.7 |
|
|
|
|
|
|
Cash available for
distribution attributable to the Partnership (1) |
|
$ |
83.9 |
|
|
$ |
88.7 |
|
|
|
|
|
|
Distribution
declared: |
|
|
|
|
Limited Partner units –
Common |
|
$ |
59.7 |
|
|
$ |
53.9 |
|
Limited Partner units –
Subordinated (2) |
|
— |
|
|
— |
|
General partner
units |
|
17.7 |
|
|
14.3 |
|
Total distribution
declared |
|
$ |
77.4 |
|
|
$ |
68.2 |
|
|
|
|
|
|
Coverage ratio (4) |
|
1.1 |
|
|
1.3 |
|
(1) Non-GAAP measures. See reconciliation tables earlier in this
press release.(2) The subordinated units converted to common units
on February 15, 2017.(3) 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, 2017 |
|
June 30, 2017 |
Expansion capital
expenditures |
|
$ |
4.8 |
|
|
$ |
4.3 |
|
Maintenance capital
expenditures |
|
9.8 |
|
|
8.6 |
|
Total capital
expenditures paid |
|
$ |
14.6 |
|
|
$ |
12.9 |
|
Condensed Consolidated Balance Sheet
Information |
(in millions of
dollars) |
|
September 30, 2017 |
|
June 30, 2017 |
Cash and cash
equivalents |
|
$ |
171.9 |
|
|
$ |
135.4 |
|
Property, plant &
equipment |
|
608.9 |
|
|
614.3 |
|
Total assets |
|
1,116.7 |
|
|
1098.7 |
Total related party
debt |
|
1,000.6 |
|
|
1265.4 |
Total equity |
|
24.2 |
|
|
(252.5 |
) |
Pipeline and Terminal Volumes and Revenue per
Barrel |
|
|
For the Three Months Ended |
|
|
September 30, 2017 |
|
June 30, 2017 |
Pipeline throughput
(thousands of barrels per day) (1) |
|
|
|
|
Zydeco – Mainlines |
|
616 |
|
|
589 |
|
Zydeco – Other
segments |
|
253 |
|
|
368 |
|
Zydeco total
system |
|
869 |
|
|
957 |
|
Mars total system |
|
480 |
|
|
506 |
|
Bengal total
system |
|
583 |
|
|
608 |
|
Poseidon total
system |
|
257 |
|
|
257 |
|
Auger total system |
|
78 |
|
|
43 |
|
Delta total system |
|
234 |
|
|
218 |
|
Na Kika total
System |
|
40 |
|
|
38 |
|
Odyssey total
system |
|
135 |
|
|
115 |
|
Other systems |
|
314 |
|
|
308 |
|
|
|
|
|
|
Terminals (2) |
|
|
|
|
Lockport terminaling
throughput and storage volumes |
|
136 |
|
|
195 |
|
|
|
|
|
|
Revenue per barrel ($
per barrel) |
|
|
|
|
Zydeco total system
(3) |
|
$ |
0.69 |
|
|
$ |
0.65 |
|
Mars total system
(3) |
|
1.43 |
|
|
1.35 |
|
Bengal total system
(3) |
|
0.34 |
|
|
0.32 |
|
Auger total system
(3) |
|
1.14 |
|
|
1.03 |
|
Delta total system
(3) |
|
0.54 |
|
|
0.53 |
|
Na Kika total System
(3) |
|
0.74 |
|
|
0.71 |
|
Odyssey total system
(3) |
|
0.89 |
|
|
0.95 |
|
Lockport total system
(4) |
|
0.31 |
|
|
0.23 |
|
(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.” 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. 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, 2017, 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, 2016, 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, 2017
The information in this Report reflects the unaudited
consolidated financial position and results of Shell Midstream
Partners, L.P.
Inquiries:Shell Media RelationsAmericas: +1 832 337 4355
Shell Investor RelationsNorth America: +1 832 337 2034
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