JP Energy Partners LP (NYSE:JPEP) (“JP Energy”, “we,” “our,” or
“us”) today announced third quarter 2015 financial and operating
results.
JP Energy reported Adjusted EBITDA of $10.4 million for the
third quarter of 2015, compared to $9.6 million for the third
quarter of 2014, and reported a loss from continuing operations of
$8.4 million for the third quarter of 2015, compared to a loss from
continuing operations of $5.6 million for the third quarter of
2014. Distributable Cash Flow was $8.6 million for the third
quarter of 2015, resulting in a distribution coverage ratio for the
quarter of approximately 0.7x.
For the nine months ended September 30, 2015, JP Energy reported
$32.7 million of Adjusted EBITDA, a 51% increase compared to $21.6
million for the first nine months of 2014, and reported a loss from
continuing operations of $12.7 million for the first nine months of
2015 compared to a loss from continuing operations of $24.8 million
for the same period of 2014. Distributable Cash Flow was $26.8
million for the first nine months of 2015 and the distribution
coverage ratio was approximately 0.7x.
“Our third quarter results reflect the investments we have made
in our integrated asset base over the last year, resulting in more
than 50% Adjusted EBITDA growth through the first nine months of
2015,” said J. Patrick Barley, Executive Chairman and Chief
Executive Officer of JP Energy. “While many of our key assets
continued to report strong volume and Adjusted EBITDA growth along
with market share gains, results were partially offset by continued
market pressures, particularly in our Crude Oil Supply and
Logistics business due to the impact of lower crude oil prices and
increased competition for barrels. We continue to have strong
support from our sponsor, both in pursuit of growth opportunities
and in the form of absorbing a portion of our corporate overhead
this quarter as we continue to execute on our plan to reduce the
overall cost structure for the company going forward. We expect to
return to a distribution coverage ratio of 1.0x in the fourth
quarter and are targeting a 1.0x distribution coverage ratio for
the full year of 2016 as well.”
Review of Segment Performance
NGL Distribution and Sales – Adjusted EBITDA for the NGL
Distribution and Sales segment was $6.1 million for the third
quarter of 2015, compared to $2.3 million for the third quarter of
2014. The increase was primarily a result of higher average NGL and
refined products sales margins due to more favorable market
conditions.
Crude Oil Pipelines and Storage – Adjusted EBITDA for the Crude
Oil Pipelines and Storage segment was $6.0 million for the third
quarter of 2015, compared to $5.3 million for the third quarter of
2014. The increase was primarily due to an increase in pipeline
throughput following expansions of the Silver Dollar Pipeline
System and the addition of a significant new customer on the system
during the quarter.
Crude Oil Supply and Logistics – Adjusted EBITDA for the Crude
Oil Supply and Logistics segment was a loss of $1.3 million for the
third quarter of 2015, compared to a gain of $5.5 million for the
third quarter of 2014. The decrease was primarily due to lower
margins associated with continued low crude oil prices driving
lower production volumes and creating more competition for crude
purchases. This decline was partially offset by an increase in
crude oil sales volumes, which was primarily due to the growth in
our market share in the Permian Basin from Silver Dollar Pipeline
System expansions and customer additions.
Refined Products Terminals and Storage – Adjusted EBITDA for the
Refined Products Terminals and Storage segment was $2.3 million for
the third quarter of 2015, compared to $2.5 million for the third
quarter of 2014. The slight decrease was primarily due to
moderately lower margins from a shift in refined product volume mix
along with a one-time operating expense item, mostly offset by
higher refined product sales from the addition of butane blending
capabilities at our North Little Rock Terminal earlier in 2015.
Recent Developments
Expansions of Silver Dollar Pipeline System
In February 2015, we signed a 10-year fee based gathering
agreement with Discovery Natural Resources LLC (“Discovery”) to
construct and operate an extension of our Silver Dollar Pipeline
crude oil gathering system into the core of the Midland Basin. The
agreement with Discovery is supported by a dedication of
approximately 53,000 acres in Reagan, Glasscock, Sterling and Irion
Counties. In addition to pipeline gathering, we also provide crude
oil trucking, marketing and related services for Discovery. The
gathering system extension will consist of approximately 55 miles
of pipeline, extending from southern Reagan County north into
Glasscock County across the Midland Basin. In September 2015, we
completed Phase I of the project: The construction and
commissioning of 32 miles of pipeline and associated truck and
measurement facilities. Phase II of the construction is expected to
be completed in January 2016.
In February 2015, we also commissioned a new 70,000 barrel crude
oil storage tank which increased our total crude oil storage
capacity on the Silver Dollar Pipeline to 110,000 barrels at that
time.
In April 2015, we announced that we have executed an
interconnection agreement with an affiliate of Magellan Midstream
Partners, L.P. (“Magellan”) to connect our Silver Dollar Pipeline
System to Magellan’s Longhorn pipeline at the Barnhart Terminal in
Crockett County, Texas. The interconnection provides producers with
a third takeaway option from the Silver Dollar Pipeline System and
direct access from the core of the Midland Basin to end markets in
Houston. The connection was completed and began service in
September 2015. As part of the Magellan project, we also added
30,000 barrels of crude oil storage which further increased the
total crude oil storage capacity on the Silver Dollar Pipeline to
140,000 barrels.
Acquisition of Southern Propane Inc.
On May 8, 2015, we acquired substantially all of the assets of
Southern Propane Inc. (“Southern”), a Houston-based industrial and
commercial propane distribution and logistics company for
approximately $16.3 million. The acquisition was funded through the
use of borrowings from our revolving credit facility and the
issuance of approximately 267,000 of our common units. The Southern
acquisition expanded the asset base and market share of our NGL
Distribution and Sales segment, specifically the acceleration of
our entry into the Houston, Texas market as well as the expansion
of our industrial, non-seasonal customer base.
Disposition of Crude Oil Supply and Logistics Assets
On September 30, 2015, we entered into an asset purchase
agreement pursuant to which we intend to sell certain crude oil
supply and logistics assets for a sales price of $1.8 million. We
closed the transaction on November 2, 2015 and expect to recognize
a gain on disposal of approximately $1.0 million.
Cash Distributions
On October 27, 2015, JP Energy announced that it would pay on
November 13, 2015, to unitholders of record on November 6, 2015, a
cash distribution of $0.3250 per common and subordinated unit for
the three month period ended September 30, 2015.
Earnings Conference Call Information
We will hold a conference call on Tuesday, November 10, 2015, at
9:00 a.m. Central Time (10:00 a.m. Eastern Time) to discuss our
third quarter 2015 financial results. The call can be accessed live
over the telephone by dialing (877) 407-0784, or for international
callers, (201) 689-8560. A replay will be available shortly after
the call and can be accessed by dialing (877) 870-5176, or for
international callers (858) 384-5517. The passcode for the replay
is 13623247. The replay will be available until November 24,
2015.
Interested parties may also listen to a simultaneous webcast of
the conference call by logging onto JP Energy’s website at
www.jpenergypartners.com in the Investors section. A replay of the
webcast will also be available for approximately 30 days following
the conference call.
About JP Energy Partners LP
JP Energy Partners LP (JPEP) is a publicly traded,
growth-oriented limited partnership that owns, operates, develops
and acquires a diversified portfolio of midstream energy assets.
Our operations currently consist of: (i) crude oil pipelines and
storage; (ii) crude oil supply and logistics; (iii) refined
products terminals and storage; and (iv) NGL distribution and
sales, which together provide midstream infrastructure solutions
for the growing supply of crude oil, refined products and NGLs in
the United States. To learn more, please visit our website at
www.jpenergypartners.com.
Use of Non-GAAP Financial Measures
Adjusted EBITDA, distributable cash flow and adjusted gross
margin are supplemental, non-GAAP financial measures used by
management and by external users of our financial statements, such
as investors and commercial banks, to assess:
- our operating performance as compared
to those of other companies in the midstream sector, without regard
to financing methods, historical cost basis or capital
structure;
- the ability of our assets to generate
sufficient cash flow 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.
We believe that the presentation of Adjusted EBITDA,
distributable cash flow and adjusted gross margin provides
information useful to investors in assessing our financial
condition and results of operations. The GAAP measures most
directly comparable to Adjusted EBITDA and distributable cash flow
are net income (loss) and cash flow from operating activities,
respectively, and the GAAP measure most directly comparable to
adjusted gross margin is operating income (loss). These non-GAAP
measures should not be considered as alternatives to the most
directly comparable GAAP financial measure. Each of these non-GAAP
financial measures exclude some, but not all, items that affect the
most directly comparable GAAP financial measure. Because Adjusted
EBITDA, distributable cash flow and adjusted gross margin may be
defined differently by other companies in the our industry, our
definitions of these non-GAAP financial measures may not be
comparable to similarly titled measures of other companies, thereby
diminishing their utility.
We define Adjusted EBITDA as net income (loss) plus (minus)
interest expense (income), income tax expense (benefit),
depreciation and amortization expense, asset impairments, (gains)
losses on asset sales, certain non-cash charges such as non-cash
equity compensation, non-cash vacation expense, non-cash (gains)
losses on commodity derivative contracts (total (gain) loss on
commodity derivatives less net cash flow associated with commodity
derivatives settled during the period) and selected (gains) charges
and transaction costs that are unusual or non-recurring. We define
distributable cash flow as Adjusted EBITDA plus proceeds from the
sale of assets, less net cash interest paid, income taxes paid and
maintenance capital expenditures. We define adjusted gross margin
as total revenues minus cost of sales, excluding depreciation and
amortization, and certain non-cash charges such as non-cash
vacation expense and non-cash gains (losses) on derivative
contracts (total gain (losses) on commodity derivatives less net
cash flow associated with commodity derivatives settled during the
period).
Forward-Looking Statements
Disclosures in this press release contain “forward-looking
statements.” The words “believe,” “expect,” “anticipate,” “plan,”
“intend,” “foresee,” “should,” “would,” “could” or other similar
expressions are intended to identify forward-looking statements,
which are generally not historical in nature. These forward-looking
statements are based on our current expectations and beliefs
concerning future developments and their potential effect on us.
While management believes that these forward-looking statements are
reasonable as and when made, there can be no assurance that future
developments affecting us will be those that we anticipate. All
comments concerning our expectations for future revenues and
operating results are based on our forecasts for our existing
operations and do not include the potential impact of any future
acquisitions. Our forward-looking statements involve significant
risks and uncertainties (some of which are beyond our control) and
assumptions that could cause actual results to differ materially
from our historical experience and our present expectations or
projections. Important factors that could cause actual results to
differ materially from those in the forward-looking statements
include, but are not limited to the price of, and the demand for,
crude oil, refined products and NGLs in the markets we serve; the
volumes of crude oil that we gather, transport and store, the
throughput volumes at our refined products terminals and our NGL
sales volumes; the fees we receive for the crude oil, refined
products and NGL volumes we handle; pressures from our competitors,
some of which may have significantly greater resources than us; the
cost of propane that we buy for resale, including due to
disruptions in its supply, and whether we are able to pass along
cost increases to our customers; competitive pressures from other
energy sources such as natural gas, which could reduce existing
demand for propane; the risk of contract cancellation, non-renewal
or failure to perform by our customers, and our inability to
replace such contracts and/or customers; leaks or releases of
hydrocarbons into the environment that result in significant costs
and liabilities; the level of our operating, maintenance and
general and administrative expenses; regulatory action affecting
our existing contracts, our operating costs or our operating
flexibility; failure to secure or maintain contracts with our
largest customers, or non-performance of any of those customers
under the applicable contract; competitive conditions in our
industry; changes in the long-term supply of and demand for oil and
natural gas; volatility of fuel prices; actions taken by our
customers, competitors and third-party operators; our ability to
complete growth projects on time and on budget; inclement or
hazardous weather conditions, including flooding, and the physical
impacts of climate change; environmental hazards; industrial
accidents; changes in laws and regulations (or the interpretation
thereof) related to the transportation, storage or terminaling of
crude oil and refined products or the distribution and sales of
NGLs; fires, explosions or other accidents; the effects of future
litigation; and other factors discussed from time to time in each
of our documents and reports filed with the Securities and Exchange
Commission. Any forward-looking statement applies only as of the
date on which such statement is made and we do not intend to
correct or update any forward-looking statement, whether as a
result of new information, future events or otherwise, except as
required by law.
JP ENERGY PARTNERS LP
CONDENSED CONSOLIDATED BALANCE
SHEETS
(Unaudited)
September 30, December 31,
2015 2014 ASSETS (in thousands, except unit
data) Current assets Cash and cash equivalents $
8,529 $ 3,325 Restricted cash - 600 Accounts receivable, net 75,170
108,725 Receivables from related parties 8,531 10,548 Inventory
14,985 20,826 Prepaid expenses and other current assets
10,039 4,915 Total Current Assets 117,254
148,939
Non-current assets Property, plant and
equipment, net 296,749 262,148 Goodwill 254,527 248,721 Intangible
assets, net 141,613 148,311 Deferred financing costs and other
assets, net 3,920 5,054 Total Non-Current Assets
696,809 664,234 Total Assets $ 814,063 $ 813,173
LIABILITIES AND PARTNERS' CAPITAL Current
liabilities Accounts payable $ 60,504 $ 88,052 Payables to
related parties 64 - Accrued liabilities 19,449 28,971 Capital
leases and short-term debt 113 229 Customer deposits and advances
4,082 5,050 Current portion of long-term debt 564 383
Total Current Liabilities 84,776 122,685
Non-current
liabilities Long-term debt 167,737 84,125 Other long-term
liabilities 1,925 5,683 Total Liabilities
254,438 212,493 Commitments and Contingencies
Partners' capital General partner interest 2,568 - Common
units (22,119,170 and 21,852,219 units authorized as of September
30, 2015 and December 31, 2014 respectively; 18,464,685 and
18,209,519 units issued and outstanding as of September 30, 2015
and December 31, 2014, respectively) 295,701 315,630 Subordinated
units (18,197,249 units authorized; 18,131,023 and 18,197,249 units
issued and outstanding as of September 30, 2015 and December 31,
2014, respectively) 261,356 285,050 Total Partners'
Capital 559,625 600,680 Total Liabilities and
Partners' Capital $ 814,063 $ 813,173
JP ENERGY PARTNERS
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(Unaudited)
Three Months Ended September 30,
Nine Months Ended September 30, 2015
2014 2015 2014
(in thousands, except unit and per unit data)
REVENUES: Crude oil sales $ 210,422 $ 371,623 $ 730,859 $
1,102,030 Crude oil sales - related parties 196 - 196 - Gathering,
transportation and storage fees 6,457 8,130 20,057 23,923
Gathering, transportation and storage fees - related parties 926 -
1,206 - NGL and refined product sales 34,773 41,982 127,028 142,146
NGL and refined product sales - related parties - 476 - 7,409
Refined products terminals and storage fees 3,373 3,069 9,549 7,290
Refined products terminals and storage fees - related parties - 74
- 1,521 Other revenues 3,436 3,237
10,461 10,086 Total revenues
259,583 428,591 899,356
1,294,405
COSTS AND EXPENSES: Cost of sales,
excluding depreciation and amortization 224,425 392,662 781,173
1,190,859 Operating expense 19,119 17,048 53,676 52,304 General and
administrative 10,669 11,315 36,132 35,196 Depreciation and
amortization 12,343 10,395 35,768 30,569 (Gain) loss on disposal of
assets, net (14 ) 533 1,395
1,193 Total costs and expenses 266,542
431,953 908,144 1,310,121
OPERATING LOSS (6,959 ) (3,362 ) (8,788 ) (15,716 )
OTHER INCOME (EXPENSE) Interest expense (1,514 )
(2,406 ) (4,069 ) (7,957 ) Loss on extinguishment of debt - - -
(1,634 ) Other income, net 107 -
470 506
LOSS FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES (8,366 ) (5,768 ) (12,387 )
(24,801 ) Income tax (expense) benefit (82 ) 158 (333 ) 2
LOSS FROM CONTINUING OPERATIONS
(8,448 ) (5,610 ) (12,720 ) (24,799 )
DISCONTINUED
OPERATIONS Net loss from discontinued operations - - - (9,608 )
NET LOSS $ (8,448 ) $ (5,610 ) $
(12,720 ) $ (34,407 )
Basic and diluted loss per unit
Net loss allocated to common units $ (4,215 ) $ (6,273 ) Weighted
average number of common units outstanding 18,465,839 18,343,137
Basic and diluted loss per common unit $ (0.23 ) $ (0.34 )
Net loss allocated to subordinated units $ (4,233 ) $ (6,447 )
Weighted average number of subordinated units outstanding
18,142,293 18,159,181 Basic and diluted loss per subordinated unit
$ (0.23 ) $ (0.36 ) Distribution declared per common and
subordinated unit $ 0.325 $ 0.975
JP ENERGY PARTNERS LP
NON-GAAP RECONCILIATIONS
(Unaudited)
Three months ended September 30,
Nine months ended September 30, 2015
2014 2015 2014
(in thousands) Segment Adjusted EBITDA Crude oil
pipelines and storage $ 5,988 $ 5,301 $ 17,593 $ 15,447 Crude oil
supply and logistics (1,276 ) 5,477 394 7,139 Refined products
terminals and storage 2,261 2,525 7,601 7,666 NGL distribution and
sales 6,135 2,256 23,083 9,902 Discontinued operations - - - 983
Corporate and other (2,661 ) (5,966 ) (15,971
) (19,502 )
Total Adjusted EBITDA 10,447 9,593 32,700
21,635 Depreciation and amortization (12,343 ) (10,395 ) (35,768 )
(30,569 ) Interest expense (1,514 ) (2,406 ) (4,069 ) (7,957 ) Loss
on extinguishment of debt - - - (1,634 ) Income tax (expense)
benefit (82 ) 158 (333 ) 2 Gain (loss) on disposal of assets, net
14 (533 ) (1,395 ) (1,193 ) Unit-based compensation (323 ) (578 )
(875 ) (1,163 ) Total gain (loss) on commodity derivatives 3,471
(762 ) (1,449 ) (730 ) Net cash (receipts) payments for commodity
derivatives
settled during the period
7,503 105 15,918 (483 ) Early settlement of commodity derivatives
(8,745 ) - (8,745 ) - Non-cash inventory costing adjustment (3,662
) - (2,671 ) - Corporate overhead support from general partner
(3,000 ) - (3,000 ) - Transaction costs and other (214 ) (792 )
(3,033 ) (1,724 ) Discontinued operations - -
- (10,591 )
Net loss $ (8,448 )
$ (5,610 ) $ (12,720 ) $ (34,407 )
Three
months ended September 30, Nine months ended September
30, 2015 2014 2015
2014 (in thousands) Segment
Adjusted gross margin Crude oil pipelines and storage $ 7,120 $
6,501 $ 21,117 $ 18,868 Crude oil supply and logistics 1,282 8,234
8,471 14,702 Refined products terminals and storage 3,480 3,573
10,524 13,379 NGL distribution and sales 24,709
18,635 75,320 58,540
Total Adjusted gross margin 36,591 36,943 115,432 105,489
Operating expenses (19,119 ) (17,048 ) (53,676 ) (52,304 ) General
and administrative (10,669 ) (11,315 ) (36,132 ) (35,196 )
Depreciation and amortization (12,343 ) (10,395 ) (35,768 ) (30,569
) Gain (loss) on disposal of assets, net 14 (533 ) (1,395 ) (1,193
) Total gain (loss) on commodity derivatives 3,471 (762 ) (1,449 )
(730 ) Net cash (receipts) payments for commodity derivatives
settled during the period
7,503 105 15,918 (483 ) Early settlement of commodity derivatives
(8,745 ) - (8,745 ) - Non-cash inventory costing adjustment (3,662
) - (2,671 ) - Other non-cash items - (357 )
(302 ) (730 )
Operating loss $ (6,959 ) $
(3,362 ) $ (8,788 ) $ (15,716 )
JP ENERGY PARTNERS
NON-GAAP RECONCILIATION
(CONTINUED)
(Unaudited)
Three months endedSeptember 30,
2015
Nine months endedSeptember 30,
2015
(in thousands) Net cash provided by operating
activities $ 4,944 $ 24,266 Depreciation and amortization
(12,343 ) (35,768 ) Derivative valuation changes 11,024 14,625
Amortization of deferred financing costs (227 ) (682 ) Unit-based
compensation (323 ) (875 ) Loss on disposal of assets 14 (1,395 )
Bad debt expense (307 ) (999 ) Other non-cash items 7 193 Changes
in assets and liabilities (11,237 ) (12,085 )
Net
loss $ (8,448 ) $ (12,720 ) Depreciation and amortization
12,343 35,768 Interest expense 1,514 4,069 Income tax expense 82
333 (Gain) loss on disposal of assets, net (14 ) 1,395 Unit-based
compensation 323 875 Total gain (loss) on commodity derivatives
(3,471 ) 1,449 Net cash payments for commodity derivatives
settled during the period
(7,503 ) (15,918 ) Early settlement of commodity derivatives 8,745
8,745 Non-cash inventory costing adjustment 3,662 2,671 Corporate
overhead support from general partner 3,000 3,000 Transaction costs
and other 214 3,033
Adjusted
EBITDA $ 10,447 $ 32,700 Less: Cash interest paid, net of
interest income 1,238 3,209 Cash taxes paid - 450 Maintenance
capital expenditures, net 585 2,290
Distributable cash flow $ 8,624 $ 26,751 Less: Distributions
12,028 36,040
Amount in excess of
(less than) distributions $ (3,404 ) $ (9,289 )
Distribution
coverage 0.72x 0.74x
JP ENERGY PARTNERS
SUPPLEMENTAL OPERATIONAL DATA
(Unaudited)
Three months ended September 30, Segment
Key Operational Data 2015 2014
Change Crude oil pipelines and storage Crude oil
pipeline throughput (Bbls/d) (1) 28,240 20,411 7,829 Crude oil
supply and logistics Crude oil sales (Bbls/d) 65,043 43,063 21,980
Refined products terminals and storage Terminal and storage
throughput (Bbls/d) 66,967 67,628 (661 ) NGL distribution and sales
NGL and refined product sales (Mgal/d) 175 176 (1 )
(1) Represents the average daily throughput volume in our crude
oil pipelines operations. The volumes in our crude oil storage
operations have no effect on operations as we receive a set fee per
month that does not fluctuate with the volume of crude oil
stored.
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JP Energy Partners LPInvestor Relations,
866-912-3714investorrelations@jpep.com
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