USD Partners LP (NYSE: USDP) (the “Partnership”) announced today
its operating and financial results for the three and nine months
ended September 30, 2017. Highlights with respect to the third
quarter of 2017 include the following:
- Completed Stroud terminal retrofit
activities on time and under the Partnership’s initial budget,
resulting in the commencement of operations on October 1, 2017
- Activity at the Hardisty terminal
reached two-year highs during the quarter
- Generated Net cash provided by
operating activities of $16.2 million, Adjusted EBITDA of $13.4
million and Distributable cash flow of $13.6 million
- Reported Net income of $6.4
million
- Increased quarterly cash distribution
for tenth consecutive quarter to $0.345 per unit ($1.38 per unit
annualized) while maintaining approximately 1.5x coverage
- Ended quarter with $206.8 million of
available liquidity
“Multiple market indicators are confirming our long-held thesis
about the upcoming opportunity to provide critical takeaway
capacity for growing crude oil production in Western Canada,” said
Dan Borgen, the Partnership’s Chief Executive Officer. “We look
forward to leveraging our flexible and scalable network to deliver
timely solutions for our current and future customers.”
Stroud Terminal Update
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. Following the acquisition, the Partnership
spent approximately $1.2 million of growth capital expenditures on
retrofit activities necessary to handle heavy grades of Canadian
crude oil on behalf of the customer. These efforts were completed
on time and under the Partnership’s initial budget. As such, the
Partnership successfully commenced operations at the Stroud
terminal on October 1, 2017.
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 for
use of approximately 50% of the available capacity at the Stroud
terminal from October 2017 through June 2020. The Partnership
expects the Stroud terminal to generate net cash flows from
operating activities of approximately $1.5 million during the
fourth quarter of 2017 and approximately $10.2 million during
2018.
Third 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 third quarter of 2017 relative to the third quarter of
2016, Net cash provided by operating activities increased by 11%,
while Adjusted EBITDA and Distributable cash flow decreased by 17%
and 5%, respectively.
During the third quarter of 2017 relative to 2016, increased
activity at the Hardisty terminal resulted in an increase in
terminalling services revenue recognized, as well as an increase in
associated operating costs. These increases were partially offset
by the discontinuation of operations at the San Antonio terminal
following the conclusion of the related customer contract in May
2017 and the expiration of a customer contract at the Casper
terminal in August 2017. Additionally, the Partnership incurred
approximately $0.9 million of operating costs during the third
quarter related to the Stroud terminal in preparation for the
commencement of operations, which includes $0.4 million of
depreciation.
During the third quarter of 2017, the Partnership received a tax
refund of approximately $2.6 million in connection with Canadian
income tax returns for 2016 that were filed in June 2017. In 2016,
the Partnership adopted a methodology for determining the return
attributable to its Canadian subsidiaries based upon a study
initially commissioned in 2015, which modified the amount of
Canadian federal and provincial income taxes to which the
Partnership’s Canadian operations are subject. As a result, the
Partnership expects to pay minimal taxes for the remainder of
2017.
On October 26, 2017, the Partnership declared a quarterly cash
distribution of $0.345 per unit ($1.38 per unit on an annualized
basis), which represents growth of 1.5% relative to the prior
quarter and 7.0% relative to the third quarter of 2016. The
distribution is payable on November 13, 2017, to unitholders of
record as of the close of business on November 6, 2017.
As of September 30, 2017, the Partnership had net leverage of
3.2x LTM Adjusted EBITDA and total available liquidity of $206.8
million, including $7.8 million of unrestricted cash and cash
equivalents and undrawn borrowing capacity of $199.0 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.
Third Quarter 2017 Conference Call Information
The Partnership will host a conference call and webcast
regarding third quarter 2017 results at 10:00 a.m. Eastern Time
(9:00 a.m. Central Time) on Wednesday, November 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 7897869. 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
thirty days by dialing (800) 585-8367 domestically or +1 (404)
537-3406 internationally, conference ID 7897869. 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 oil 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 U.S. Gulf Coast and Mexico. Among
other projects, USDG is currently pursuing the development of a
premier energy logistics terminal on the Houston Ship Channel with
capacity for substantial tank storage, multiple docks (including
barge and deepwater), inbound and outbound pipeline connectivity,
as well as a rail terminal with unit train capabilities. For
additional information, please visit texasdeepwater.com.
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 as alternatives to Net cash
provided by operating activities or any other measure of liquidity
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, growth in Canadian
crude oil production and takeaway capacity needs, 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 LP Consolidated
Statements of Income For the Three and Nine Months Ended
September 30, 2017 and 2016 (unaudited) For
the Three Months Ended For the Nine Months Ended
September 30, September 30, 2017
2016 2017
2016 (in thousands)
Revenues Terminalling
services $ 21,799 $ 24,078 $ 67,335 $ 69,560 Terminalling services
— related party 4,716 1,736 8,974 5,142 Railroad incentives 4 24 25
61 Fleet leases 643 643 1,929 1,933 Fleet leases — related party
1,013 890 2,794 2,671 Fleet services 470 475 1,405 613 Fleet
services — related party 218 279 776 1,647 Freight and other
reimbursables 118
218
483 944 Freight and other reimbursables — related party —
— 1 —
Total
revenues 28,981
28,343
83,722 82,571
Operating costs Subcontracted rail services 2,340 2,004
6,148 6,073 Pipeline fees 6,367 5,492 17,153 15,544 Fleet leases
1,656 1,534 4,723 4,605 Freight and other reimbursables 118
218
484 944 Operating and maintenance 749 746 2,050 2,399 Selling,
general and administrative 2,221 2,505 6,898 7,472 Selling, general
and administrative — related party 1,477 1,438 4,305 4,369
Depreciation and amortization 5,254 4,906
15,164 14,725
Total operating
costs 20,182
18,843
56,925 56,131
Operating income 8,799 9,500 26,797
26,440 Interest expense 2,388 2,572 7,508 7,288 Loss (gain)
associated with derivative instruments 667 (349 ) 1,279 921 Foreign
currency transaction loss (gain) (457 ) 25 (527 ) (120 ) Other
income, net (48 ) — (40 ) —
Income before income taxes 6,249 7,252
18,577 18,351 Benefit from income taxes (178 )
(5,579 ) (1,427 ) (1,865 )
Net income
$ 6,427 $ 12,831 $
20,004 $ 20,216
USD Partners LP Consolidated Statements of
Cash Flows For the Three and Nine Months Ended September 30,
2017 and 2016 (unaudited) For the Three Months
Ended For the Nine Months Ended September 30,
September 30, 2017 2016
2017 2016 Cash
flows from operating activities: (in thousands) Net income $
6,427 $ 12,831 $ 20,004 $ 20,216 Adjustments to reconcile net
income to net cash provided by operating activities: Depreciation
and amortization 5,254 4,906 15,164 14,725 Loss (gain) associated
with derivative instruments 667 (349 ) 1,279 921 Settlement of
derivative contracts (148 ) 604 242 1,640 Unit based compensation
expense 946 1,127 2,962 2,824 Other (5 ) 314 750 648 Changes in
operating assets and liabilities: Accounts receivable 691 (39 ) 267
168 Accounts receivable – related party (403 ) (1,693 ) (224 ) 67
Prepaid expenses and other current assets 2,927 (2,577 ) 1,819
(3,037 ) Accounts payable and accrued expenses 2,306 584 990 (1,377
) Accounts payable and accrued expenses – related party (273 )
1,443 (43 ) 1,467 Deferred revenue and other liabilities (3,188 )
(445 ) (6,733 ) 2,284 Deferred revenue – related party 41 (2,154 )
1,066 (2,783 ) Change in restricted cash 915
(31 ) 685 (664 ) Net cash provided by
operating activities
16,157
14,521 38,228
37,099 Cash flows from investing activities:
Additions of property and equipment (935 ) (225 )
(26,708 ) (471 ) Net cash used in investing
activities
(935 ) (225 )
(26,708 ) (471 ) Cash
flows from financing activities: Distributions (9,390 ) (7,547
) (25,532 ) (21,943 ) Vested phantom units used for payment of
participant taxes — — (1,072 ) (77 ) Net proceeds from issuance of
common units — — 33,700 — Proceeds from long-term debt 4,000 5,000
44,000 15,000 Repayments of long-term debt (9,000 )
(11,929 ) (66,342 ) (30,831 ) Net cash used in
financing activities
(14,390 )
(14,476 ) (15,246 )
(37,851 ) Effect of exchange rates on cash
(197 ) 120 (148 ) 559 Net change
in cash and cash equivalents 635 (60 ) (3,874 ) (664 ) Cash and
cash equivalents – beginning of period 7,196
9,896 11,705 10,500 Cash and
cash equivalents – end of period
$ 7,831
$ 9,836 $ 7,831 $
9,836 USD Partners LP
Consolidated Balance Sheets (unaudited)
September 30, December 31, 2017
2016 ASSETS (in thousands) Current
assets Cash and cash equivalents $ 7,831 $ 11,705 Restricted cash
5,138 5,433 Accounts receivable, net 4,168 4,321 Accounts
receivable — related party 438 219 Prepaid expenses 8,717 10,325
Other current assets 3,178 2,562 Total
current assets 29,470 34,565 Property and equipment, net 150,207
125,702 Intangible assets, net 102,464 111,919 Goodwill 33,589
33,589 Other non-current assets 180 192
Total assets $ 315,910 $
305,967 LIABILITIES AND PARTNERS’
CAPITAL Current liabilities Accounts payable and accrued
expenses $ 3,555 $ 2,221 Accounts payable and accrued expenses —
related party 210 214 Deferred revenue, current portion 22,991
26,928 Deferred revenue, current portion — related party 5,710
4,292 Other current liabilities 3,189 3,513
Total current liabilities 35,655 37,168 Long-term debt, net
199,411 220,894 Deferred revenue, net of current portion — 264
Deferred income tax liability, net 957 823
Total liabilities 236,023
259,149 Commitments and contingencies Partners’
capital Common units 135,609 122,802 Class A units 1,284 1,811
Subordinated units (59,066 ) (76,749 ) General partner units 58 111
Accumulated other comprehensive income (loss) 2,002
(1,157 )
Total partners’ capital 79,887
46,818 Total liabilities and
partners’ capital $ 315,910 $
305,967 USD Partners
LP GAAP to Non-GAAP Reconciliations For the Three and
Nine Months Ended September 30, 2017 and 2016
(unaudited) For the Three Months Ended For
the Nine Months Ended September 30, September 30,
2017 2016 2017
2016 (in thousands)
Net cash
provided by operating activities $ 16,157
$ 14,521 $ 38,228 $
37,099 Add (deduct): Amortization of deferred financing
costs (216 ) (216 ) (646 ) (646 ) Deferred income taxes 221 (98 )
(86 ) (2 ) Changes in accounts receivable and other assets (3,215 )
4,309 (1,862 ) 2,802 Changes in accounts payable and accrued
expenses (2,033 ) (2,027 ) (947 ) (90 ) Changes in deferred revenue
and other liabilities 3,147 2,599 5,667 499 Change in restricted
cash (915 ) 31 (685 ) 664 Interest expense, net 2,384 2,572 7,500
7,288 Benefit from income taxes (178 ) (5,579 ) (1,427 ) (1,865 )
Foreign currency transaction loss (gain) (1) (457 ) 25 (527 ) (120
) Deferred revenue associated with minimum monthly commitment fees
(2) (1,473 ) 43 (1,331 ) 1,230
Adjusted EBITDA 13,422 16,180 43,884
46,859 Add (deduct): Cash received (paid) for income taxes
(3) 2,664 1,036 1,250 (2,160 ) Cash paid for interest (2,165 )
(2,571 ) (7,102 ) (6,558 ) Maintenance capital expenditures
(274 ) (227 ) (472 ) (245 )
Distributable
cash flow $ 13,647 $ 14,418
$ 37,560 $ 37,896
(1) Represents foreign exchange transaction gains and losses
associated with activities between our 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 a refund of $2.6 million
(representing C$3.4 million) received in the three and nine months
ended September 30, 2017, for our 2016 foreign income taxes. Also
includes refunds of approximately $0.7 million (representing C$0.9
million) received in the nine months ended September 30, 2017, and
approximately $1.4 million (representing C$1.8 million) received in
the three and nine months ended September 30, 2016, for our 2015
foreign income taxes.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20171107006783/en/
USD Partners LPAdam Altsuler, 281-291-3995Vice President, Chief
Financial Officeraaltsuler@usdg.comorAshley Means Zavala,
281-291-3965Director, Finance & Investor
Relationsazavala@usdg.com
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