USD Partners LP (NYSE: USDP) (the “Partnership”) announced today
its operating and financial results for the three and six months
ended June 30, 2020. Financial highlights with respect to the
second quarter of 2020 include the following:
- Generated Net Cash Provided by Operating Activities of $5.4
million, Adjusted EBITDA(1) of $12.8 million and Distributable Cash
Flow(1) of $9.7 million
- Reported Net Income of $1.2 million
- Declared a quarterly cash distribution of $0.111 per unit
($0.444 per unit on an annualized basis) with over 3.0x
Distributable Cash Flow Coverage
“We are pleased to report another solid quarter for the
Partnership,” said Dan Borgen, the Partnership’s Chief Executive
Officer. “We continue to execute on our plan to divert some of our
free cash flow towards paying down debt. During the second quarter,
the Partnership paid down $6 million on our Revolver which is
consistent with our intent to de-lever by approximately $20-$25
million on an annual basis.”
“In addition, we continue to be excited about our Sponsor’s
previously announced diluent recovery unit (“DRU”) project, which
we expect will be placed into service in the second quarter of
2021. The Partnership’s Sponsor has secured the necessary
financing, obtained all material permits and entered into
fixed-price construction contracts regarding the construction of
the project. Upon the successful construction and completion of the
DRU, approximately 32% of the Partnership’s Hardisty terminal’s
capacity will be automatically extended under a long-term committed
agreement through mid-2031,” added Mr. Borgen. “USD and our
partner, Gibson, are currently in commercial discussions with other
potential producer and refiner customers to secure additional
long-term, take-or-pay agreements to support future expansions of
capacity at the DRU, and we look forward to keeping the market
updated as things continue to develop.”
Partnership’s Second Quarter 2020 Liquidity, Operational and
Financial Results
Substantially all of the Partnership’s cash flows are generated
from multi-year, take-or-pay terminalling services agreements
related to its crude oil terminals, 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.
The Partnership’s operating results for the second quarter of
2020 relative to the same quarter in 2019 were primarily influenced
by higher revenue at its Hardisty terminal associated with
contracted throughput that exceeded the Partnership’s existing
capacity at its Hardisty terminal and increased rates on a portion
of the terminalling services agreements that became effective July
1, 2019. Additionally, in the third quarter of 2019, the
Partnership entered into a terminalling services agreement with the
Hardisty South facility owned by the Partnership’s Sponsor to
provide terminalling services for the contracted throughput that
exceeded the Hardisty terminal’s transloading capacity. Under this
arrangement, the Partnership incurred operating costs payable to
the Partnership’s Sponsor representing the same rate, on a per
barrel basis, that the Partnership received in revenue for such
contracted throughput.
Lower revenue at the Partnership’s Casper terminal resulting
from the conclusion of a customer agreement in August 2019
partially offset the higher revenue at Hardisty during the
quarter.
Net income for the quarter increased as compared to the second
quarter of 2019, primarily as a result of the operating factors
discussed above coupled with lower interest expense incurred
resulting from lower interest rates during the quarter partially
offset by a higher weighted average balance of debt outstanding in
the second quarter of 2020. The Partnership also had a smaller
non-cash loss associated with the five-year interest rate
derivative instrument that the Partnership entered into in November
2017 when compared to the prior period. Partially offsetting this
increased net income were higher foreign currency transactions
losses.
Net Cash Provided by Operating Activities for the quarter
decreased by 42% relative to the second quarter of 2019, primarily
due to the general timing of receipts and payments of accounts
receivable, accounts payable and deferred revenue balances.
Adjusted EBITDA and Distributable Cash Flow (“DCF”) increased by
5% and 10%, respectively, for the quarter relative to the second
quarter of 2019. The increase in Adjusted EBITDA was primarily a
result of the operating factors discussed above. DCF was also
impacted by a decrease in cash paid for interest and income taxes
during the quarter.
As of June 30, 2020, the Partnership had approximately $3
million of unrestricted cash and cash equivalents and undrawn
borrowing capacity of $167 million on its $385 million senior
secured credit facility, subject to the Partnership’s continued
compliance with financial covenants. Pursuant to the terms of the
Partnership’s Credit Agreement, the Partnership’s borrowing
capacity is currently limited to 4.5 times its trailing 12-month
consolidated EBITDA, as defined in the Credit Agreement. As such,
the Partnership’s available borrowings under the senior secured
credit facility, including unrestricted cash and cash equivalents,
was approximately $29 million as of June 30, 2020. The Partnership
was in compliance with its financial covenants, as of June 30,
2020.
On July 23, 2020, the Partnership declared a quarterly cash
distribution of $0.111 per unit ($0.444 per unit on an annualized
basis), the same amount as distributed in the prior quarter. The
distribution is payable on August 14, 2020, to unitholders of
record at the close of business on August 4, 2020. Given the
current uncertainty in the energy industry, the board of directors
made a proactive decision to strengthen the Partnership’s financial
position by reducing its quarterly distribution and redeploying
certain free cash flow to pay down debt. The decision to reduce the
quarterly distribution was not driven by any material deterioration
in the performance of the Partnership’s underlying business, but
rather represents a conscious effort to enhance long-term value by
proactively strengthening the Partnership’s balance sheet. During
the second quarter of 2020, the Partnership repaid $6 million of
the outstanding balance of its revolving credit facility.
Second Quarter 2020 Conference Call Information
The Partnership will host a conference call and webcast
regarding second quarter 2020 results at 11:00 a.m. Eastern Time
(10:00 a.m. Central Time) on Thursday, August 6, 2020.
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 7459481. 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 7459481. 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 (“USD”) 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.
USD, 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. USD 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, USD 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.
Information on websites referenced in this release is not part of
this release.
Non-GAAP Financial Measures
The Partnership defines Adjusted EBITDA as Net Cash Provided by
Operating Activities adjusted for changes in working capital items,
interest, income taxes, foreign currency transaction gains and
losses, 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 flow being retained for use in enhancing the
Partnership’s existing business; 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 presented
in accordance with GAAP. Adjusted EBITDA and DCF exclude some, but
not all, items that affect Net Cash Provided by Operating
Activities 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. Reconciliations of Net Cash
Provided by Operating Activities to Adjusted EBITDA and DCF are
presented on page 10 of this press release.
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 ability of the Partnership and USD to achieve
contract extensions, new customer agreements and expansions; the
ability of the Partnership and USD to develop existing and future
additional projects and expansion opportunities (including
successful completion of USD’s DRU) and whether those projects and
opportunities developed by USD would be made available for
acquisition, or acquired, by the Partnership; volumes at, and
demand for, the Partnership’s terminals; and the amount and timing
of future distribution payments and distribution growth. Words and
phrases such as “expect,” “plan,” “intent,” “believes,” “projects,”
“begin,” “anticipates,” “expects,” “subject to” 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 the impact of the novel
coronavirus (COVID-19) pandemic and related economic downturn and
changes in general economic conditions and commodity prices, as
well as those factors set forth under the heading “Risk Factors”
and elsewhere in the Partnership’s most recent Annual Report on
Form 10-K and in the Partnership’s subsequent filings with the
Securities and Exchange Commission (many of which may be amplified
by the COVID-19 pandemic and the recent significant reductions in
demand for and prices of crude oil, natural gas and natural gas
liquids). 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, except as required by law.
_____________
(1)
The Partnership presents both GAAP and
non-GAAP financial measures in this press release to assist in
understanding the Partnership’s liquidity and ability to fund
distributions. See “Non-GAAP Financial Measures” on page 4 and
reconciliations of Net Cash Provided by Operating Activities, the
most directly comparable GAAP measure, to Adjusted EBITDA and
Distributable Cash Flow on page 10 of this press release.
USD Partners LP Consolidated Statements of Operations
For the Three and Six Months Ended June 30, 2020 and 2019
(unaudited) For the Three Months Ended For
the Six Months Ended June 30, June 30,
2020
2019
2020
2019
(in thousands)
Revenues Terminalling services
$
22,309
$
19,730
$
46,544
$
39,728
Terminalling services — related party
3,800
5,525
7,888
11,163
Fleet leases — related party
983
983
1,967
1,967
Fleet services
51
51
101
108
Fleet services — related party
228
228
455
455
Freight and other reimbursables
64
298
686
701
Freight and other reimbursables — related party
1
—
1
61
Total revenues
27,436
26,815
57,642
54,183
Operating costs Subcontracted rail services
2,688
3,699
6,133
7,264
Pipeline fees
5,395
4,902
11,742
9,963
Freight and other reimbursables
65
298
687
762
Operating and maintenance
2,564
2,510
5,645
5,721
Operating and maintenance — related party
2,065
—
4,092
—
Selling, general and administrative
2,620
2,722
5,800
5,199
Selling, general and administrative — related party
1,835
2,225
3,828
4,675
Goodwill impairment loss
—
—
33,589
—
Depreciation and amortization
5,203
5,283
10,625
10,017
Total operating costs
22,435
21,639
82,141
43,601
Operating income (loss)
5,001
5,176
(24,499
)
10,582
Interest expense
2,256
2,982
4,995
6,169
Loss associated with derivative instruments
332
1,074
3,205
1,746
Foreign currency transaction loss
1,150
20
1,058
202
Other expense (income), net
(111
)
21
(843
)
(3
)
Income (loss) before income taxes
1,374
1,079
(32,914
)
2,468
Provision for (benefit from) income taxes
188
128
(319
)
198
Net income (loss)
$
1,186
$
951
$
(32,595
)
$
2,270
USD Partners LP Consolidated Statements of Cash Flows
For the Three and Six Months Ended June 30, 2020 and 2019
(unaudited) For the Three Months Ended For
the Six Months Ended June 30, June 30,
2020
2019
2020
2019
Cash flows from operating activities: (in thousands) Net
income (loss)
$
1,186
$
951
$
(32,595
)
$
2,270
Adjustments to reconcile net income (loss) to net cash provided by
operating activities: Depreciation and amortization
5,203
5,283
10,625
10,017
Loss associated with derivative instruments
332
1,074
3,205
1,746
Settlement of derivative contracts
(283
)
—
(289
)
1
Unit based compensation expense
1,630
1,582
3,265
2,996
Deferred income taxes
(189
)
(154
)
(541
)
(403
)
Other
207
249
414
707
Goodwill impairment loss
—
—
33,589
—
Changes in operating assets and liabilities: Accounts receivable
82
(884
)
690
(193
)
Accounts receivable – related party
195
(43
)
(746
)
(671
)
Prepaid expenses and other assets
(351
)
(2,227
)
(1,571
)
(1,474
)
Other assets – related party
(260
)
20
(510
)
40
Accounts payable and accrued expenses
(1,552
)
1,983
(1,145
)
2,052
Accounts payable and accrued expenses – related party
(578
)
(762
)
(87
)
(43
)
Deferred revenue and other liabilities
811
2,731
3,846
2,929
Deferred revenue – related party
(1,024
)
(467
)
(1,024
)
(467
)
Net cash provided by operating activities
5,409
9,336
17,126
19,507
Cash flows from investing activities: Additions of property
and equipment
(230
)
(2,433
)
(377
)
(2,677
)
Net cash used in investing activities
(230
)
(2,433
)
(377
)
(2,677
)
Cash flows from financing activities: Distributions
(3,182
)
(10,384
)
(13,837
)
(20,517
)
Payments for deferred financing costs
—
—
—
(7
)
Vested Phantom Units used for payment of participant taxes
—
—
(1,788
)
(1,821
)
Proceeds from long-term debt
—
11,000
10,000
20,000
Repayments of long-term debt
(6,000
)
(2,000
)
(12,000
)
(13,000
)
Other financing activities
—
—
—
(13
)
Net cash used in financing activities
(9,182
)
(1,384
)
(17,625
)
(15,358
)
Effect of exchange rates on cash
1,427
217
438
605
Net change in cash, cash equivalents and restricted cash
(2,576
)
5,736
(438
)
2,077
Cash, cash equivalents and restricted cash – beginning of period
12,822
8,724
10,684
12,383
Cash, cash equivalents and restricted cash – end of period
$
10,246
$
14,460
$
10,246
$
14,460
USD Partners LP Consolidated Balance Sheets
(unaudited) June 30, December 31,
2020
2019
ASSETS (in thousands) Current assets Cash and cash
equivalents
$
3,093
$
3,083
Restricted cash
7,153
7,601
Accounts receivable, net
4,515
5,313
Accounts receivable — related party
2,461
1,778
Prepaid expenses
2,129
1,915
Other current assets
995
954
Other current assets — related party
55
343
Total current assets
20,401
20,987
Property and equipment, net
140,976
147,737
Intangible assets, net
67,796
74,099
Goodwill
—
33,589
Operating lease right-of-use assets
11,948
11,804
Other non-current assets
2,663
1,335
Other non-current assets — related party
800
15
Total assets
$
244,584
$
289,566
LIABILITIES AND PARTNERS’ CAPITAL Current liabilities
Accounts payable and accrued expenses
$
1,633
$
3,087
Accounts payable and accrued expenses — related party
374
465
Deferred revenue
5,531
6,104
Deferred revenue — related party
410
1,482
Operating lease liabilities, current
5,130
4,649
Other current liabilities
4,524
3,150
Total current liabilities
17,602
18,937
Long-term debt, net
216,066
217,651
Deferred income tax liabilities, net
31
458
Operating lease liabilities, non-current
6,961
7,386
Other non-current liabilities
9,542
4,078
Total liabilities
250,202
248,510
Commitments and contingencies Partners’ capital Common units
(5,670
)
61,013
Subordinated units
—
(22,597
)
General partner units
1,784
2,767
Accumulated other comprehensive loss
(1,732
)
(127
)
Total partners’ capital
(5,618
)
41,056
Total liabilities and partners’ capital
$
244,584
$
289,566
USD Partners LP GAAP to Non-GAAP Reconciliations
For the Three and Six Months Ended June 30, 2020 and 2019
(unaudited) For the Three Months Ended For
the Six Months Ended June 30, June 30,
2020
2019
2020
2019
(in thousands)
Net cash provided by operating
activities
$
5,409
$
9,336
$
17,126
$
19,507
Add (deduct): Amortization of deferred financing costs
(207
)
(207
)
(414
)
(657
)
Deferred income taxes
189
154
541
403
Changes in accounts receivable and other assets
334
3,134
2,137
2,298
Changes in accounts payable and accrued expenses
2,130
(1,221
)
1,232
(2,009
)
Changes in deferred revenue and other liabilities
213
(2,264
)
(2,822
)
(2,462
)
Interest expense, net
2,253
2,970
4,968
6,150
Provision for (benefit from) income taxes
188
128
(319
)
198
Foreign currency transaction loss (1)
1,150
20
1,058
202
Other income
—
(25
)
—
(42
)
Non-cash deferred amounts (2)
1,119
161
1,556
110
Adjusted EBITDA
12,778
12,186
25,063
23,698
Add (deduct): Cash paid for income taxes
(116
)
(329
)
(433
)
(607
)
Cash paid for interest
(2,874
)
(2,995
)
(4,957
)
(5,815
)
Maintenance capital expenditures
(82
)
(45
)
(114
)
(45
)
Distributable cash flow
$
9,706
$
8,817
$
19,559
$
17,231
(1)
Represents foreign exchange transaction amounts associated with
activities between the Partnership's U.S. and Canadian
subsidiaries.
(2)
Represents the change in non-cash contract assets and liabilities
associated with revenue recognized at blended rates based on tiered
rate structures in certain of the Partnership's customer contracts
and deferred revenue associated with deficiency credits that are
expected to be used in the future prior to their expiration.
Amounts presented are net of the corresponding prepaid Gibson
pipeline fee that will be recognized as expense concurrently with
the recognition of revenue.
Category: Earnings
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200805006056/en/
Adam Altsuler Senior Vice President, Chief Financial Officer
(281) 291-3995 aaltsuler@usdg.com
Jennifer Waller Director, Financial Reporting and Investor
Relations (832) 991-8383 jwaller@usdg.com
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