Valero Energy Partners LP (NYSE:VLP) (the “Partnership”) today
reported first quarter 2017 net income attributable to partners of
$58 million, or $0.72 per common limited partner unit, and
earnings before interest, income taxes, depreciation, and
amortization (“EBITDA”) attributable to the Partnership of $79
million. The Partnership reported net cash provided by
operating activities of $75 million and distributable cash flow of
$74 million. The distribution coverage ratio for the first
quarter was 1.9x.
“Our team continues to operate safely and
reliably, which supports our ability to deliver solid distribution
growth,” said Joe Gorder, Chairman and Chief Executive Officer of
VLP’s general partner.
The Partnership is targeting annual distribution
growth of 25 percent for 2017 and at least 20 percent for
2018.
On April 20, the board of directors of VLP’s
general partner declared a first quarter 2017 cash distribution of
$0.4275 per unit. This distribution represents a 5.2 percent
increase from the fourth quarter of 2016.
Financial Results Revenues were
$106 million for the first quarter of 2017 compared to $79 million
for the first quarter of 2016. Operating expenses were $24
million, general and administrative expenses were $4 million, and
depreciation expense was $12 million, all of which were in line
with the first quarter of 2016. Revenues were higher in the
first quarter of 2017 compared to the first quarter of 2016
primarily due to contributions from the McKee, Meraux, and Three
Rivers terminals, which were acquired subsequent to the first
quarter of last year, and the Red River pipeline segment, which was
acquired in January 2017.
Liquidity and Financial
PositionAs of March 31, 2017, the Partnership had $786
million of total liquidity consisting of $66 million in cash
and cash equivalents and $720 million available on its revolving
credit facility. Capital expenditures attributable to the
Partnership in the first quarter of 2017 were $9 million,
including $7 million for expansion and $2 million for
maintenance.
“We’re executing on several organic growth
projects in the Gulf Coast and are pleased with their progress,”
said Gorder. “We’re continuing to invest in logistics assets that
optimize Valero’s feedstock and product flexibility.”
The Partnership reaffirmed its expectation for
2017 capital expenditures of approximately $49 million,
including $14 million for maintenance and $35 million for
expansion.
Conference CallThe
Partnership’s senior management will host a conference call at 10
a.m. ET today to discuss this earnings release. A live broadcast of
the conference call will be available on the Partnership’s website
at www.valeroenergypartners.com.
About Valero Energy Partners
LPValero Energy Partners LP is a master limited
partnership formed by Valero Energy Corporation to own, operate,
develop and acquire crude oil and refined products pipelines,
terminals, and other transportation and logistics assets. With
headquarters in San Antonio, the Partnership’s assets include crude
oil and refined petroleum products pipeline and terminal systems in
the Gulf Coast and Mid-Continent regions of the United States that
are integral to the operations of 10 of Valero’s refineries. Please
visit www.valeroenergypartners.com for more information.
Contacts
Investors:John Locke, Vice President – Investor Relations,
210-345-3077Karen Ngo, Senior Manager – Investor Relations,
210-345-4574Tom Mahrer, Manager – Investor Relations,
210-345-1953Media:Lillian Riojas, Director – Media and
Communications, 210-345-5002
Safe-Harbor StatementThis
release contains forward-looking statements within the meaning of
federal securities laws. These statements discuss future
expectations, contain projections of results of operations or of
financial condition or state other forward-looking information. You
can identify forward-looking statements by words such as
“anticipate,” “believe,” “estimate,” “expect,” “forecast,”
“project,” “could,” “may,” “should,” “would,” “will” or other
similar expressions that convey the uncertainty of future events or
outcomes. These forward-looking statements are not guarantees of
future performance and are subject to risks, uncertainties and
other factors, some of which are beyond the Partnership’s control
and are difficult to predict. These statements are often based upon
various assumptions, many of which are based, in turn, upon further
assumptions, including examination of historical operating trends
made by the management of the Partnership. Although the Partnership
believes that these assumptions were reasonable when made, because
assumptions are inherently subject to significant uncertainties and
contingencies, which are difficult or impossible to predict and are
beyond its control, the Partnership cannot give assurance that it
will achieve or accomplish these expectations, beliefs or
intentions. When considering these forward-looking
statements, you should keep in mind the risk factors and other
cautionary statements contained in the Partnership’s filings with
the SEC, including the Partnership’s annual reports on Form 10-K
and quarterly reports on Form 10-Q available on the Partnership’s
website at www.valeroenergypartners.com. These risks could cause
the Partnership’s actual results to differ materially from those
contained in any forward-looking statement.
Use of Non-GAAP Financial
InformationThis earnings release includes the terms
“EBITDA,” “distributable cash flow,” and “coverage ratio.”
These terms are supplemental financial measures that are not
defined under United States generally accepted accounting
principles (GAAP). We reconcile these non-GAAP measures to the most
directly comparable GAAP measures in the tables that accompany this
release. In note (k) to the tables that accompany this
release, we disclose the reasons why we believe our use of the
non-GAAP financial measures in this release provides useful
information.
VALERO ENERGY PARTNERS LP |
EARNINGS RELEASE TABLES |
(thousands of dollars, except per unit
amounts) |
(unaudited) |
|
|
|
Three Months Ended March 31, |
|
2017 |
|
2016 |
Statement of
income data (a): |
|
Operating
revenues – related party (b) |
$ |
105,816 |
|
|
$ |
78,767 |
|
Costs and
expenses: |
|
|
|
Operating
expenses (c) |
23,545 |
|
|
24,286 |
|
General
and administrative expenses (d) |
3,830 |
|
|
4,365 |
|
Depreciation expense (e) |
11,775 |
|
|
11,512 |
|
Total
costs and expenses |
39,150 |
|
|
40,163 |
|
Operating
income |
66,666 |
|
|
38,604 |
|
Other
income, net |
64 |
|
|
77 |
|
Interest
and debt expense, net of capitalized interest (f) |
(8,289 |
) |
|
(2,659 |
) |
Income
before income taxes |
58,441 |
|
|
36,022 |
|
Income
tax expense |
304 |
|
|
242 |
|
Net
income |
58,137 |
|
|
35,780 |
|
Less: Net loss attributable to Predecessor |
— |
|
|
(7,518 |
) |
Net
income attributable to partners |
58,137 |
|
|
43,298 |
|
Less: General partner’s interest in net income |
9,467 |
|
|
3,504 |
|
Limited
partners’ interest in net income |
$ |
48,670 |
|
|
$ |
39,794 |
|
|
|
|
|
Net income per limited partner unit (basic and
diluted): |
|
|
|
Common
units |
$ |
0.72 |
|
|
$ |
0.61 |
|
Subordinated units (g) |
$ |
— |
|
|
$ |
0.61 |
|
|
|
|
|
Weighted-average limited partner units outstanding (basic
and diluted) (in thousands): |
|
|
|
Common
units – public |
21,977 |
|
|
21,501 |
|
Common
units – Valero |
45,687 |
|
|
15,019 |
|
Subordinated units – Valero (g) |
— |
|
|
28,790 |
|
|
|
|
|
|
|
See Notes to Earnings Release Tables. |
VALERO ENERGY PARTNERS LP |
EARNINGS RELEASE TABLES |
(thousands of dollars, except per unit and per barrel
amounts) |
(unaudited) |
|
|
|
Three Months Ended March 31, |
|
2017 |
|
2016 |
Operating
highlights (a): |
|
Pipeline
transportation: |
|
|
|
Pipeline
transportation revenues (b) |
$ |
23,175 |
|
|
$ |
20,245 |
|
Pipeline
transportation throughput (BPD) (h) |
962,200 |
|
|
918,936 |
|
Average
pipeline transportation revenue per barrel (i) (j) |
$ |
0.27 |
|
|
$ |
0.24 |
|
Terminaling: |
|
|
|
Terminaling revenues (b) |
$ |
82,506 |
|
|
$ |
58,387 |
|
Terminaling throughput (BPD) |
2,734,478 |
|
|
1,849,858 |
|
Average
terminaling revenue per barrel (i) |
$ |
0.34 |
|
|
$ |
0.35 |
|
Storage
revenues |
$ |
135 |
|
|
$ |
135 |
|
Total
operating revenues – related party |
$ |
105,816 |
|
|
$ |
78,767 |
|
Capital
expenditures (a): |
|
|
|
Maintenance |
$ |
2,038 |
|
|
$ |
2,845 |
|
Expansion |
6,979 |
|
|
4,355 |
|
Total
capital expenditures |
9,017 |
|
|
7,200 |
|
Less:
Capital expenditures attributable to Predecessor |
— |
|
|
933 |
|
Capital
expenditures attributable to Partnership |
$ |
9,017 |
|
|
$ |
6,267 |
|
Other financial
information: |
|
|
|
Net cash
provided by operating activities |
$ |
74,718 |
|
|
$ |
45,512 |
|
Distributable cash flow (k) |
$ |
73,662 |
|
|
$ |
51,097 |
|
Distribution declared per unit |
$ |
0.4275 |
|
|
$ |
0.3400 |
|
Distribution declared: |
|
|
|
Limited
partner units – public |
$ |
9,610 |
|
|
$ |
7,315 |
|
Limited
partner units – Valero |
19,531 |
|
|
15,143 |
|
General
partner units – Valero |
8,902 |
|
|
3,150 |
|
Total
distribution declared |
$ |
38,043 |
|
|
$ |
25,608 |
|
Distribution coverage ratio: Distributable cash flow divided by
total distribution declared (k) |
1.94x |
|
2.00x |
|
|
|
|
|
March 31, |
|
December 31, |
|
2017 |
|
2016 |
Balance sheet
data: |
|
|
|
Cash and
cash equivalents |
$ |
65,724 |
|
|
$ |
71,491 |
|
Total
assets |
1,038,856 |
|
|
971,909 |
|
Debt and
capital lease obligations, less current portion |
895,057 |
|
|
895,355 |
|
Total
debt and capital lease obligations |
895,057 |
|
|
895,355 |
|
Partners’
capital |
122,265 |
|
|
55,824 |
|
Working
capital |
76,047 |
|
|
84,688 |
|
|
|
|
|
|
|
See Notes to Earnings Release Tables. |
VALERO ENERGY PARTNERS LP |
EARNINGS RELEASE TABLES |
RECONCILIATION OF NON-GAAP MEASURES TO MOST
COMPARABLE AMOUNTS |
REPORTED UNDER U.S. GAAP
(k) |
(thousands of dollars) |
(unaudited) |
|
|
Three Months Ended |
March 31, |
|
2017 |
|
2016 |
Reconciliation of net income to EBITDA and distributable
cash flow (a) (k): |
|
|
|
Net
income |
$ |
58,137 |
|
|
$ |
35,780 |
|
Plus: |
|
|
|
Depreciation expense |
11,775 |
|
|
11,512 |
|
Interest
and debt expense, net of capitalized interest |
8,289 |
|
|
2,659 |
|
Income
tax expense |
304 |
|
|
242 |
|
EBITDA |
78,505 |
|
|
50,193 |
|
Less: EBITDA attributable to Predecessor |
— |
|
|
(5,394 |
) |
EBITDA
attributable to Partnership |
78,505 |
|
|
55,587 |
|
Plus: |
|
|
|
Adjustments related to minimum throughput commitments |
(897 |
) |
|
14 |
|
Less: |
|
|
|
Cash
interest paid |
1,908 |
|
|
2,502 |
|
Maintenance capital expenditures attributable to Partnership |
2,038 |
|
|
2,002 |
|
Distributable cash flow |
$ |
73,662 |
|
|
$ |
51,097 |
|
Reconciliation of net cash provided by operating activities
to EBITDA and distributable cash
flow (a) (k): |
|
|
|
Net cash
provided by operating activities |
$ |
74,718 |
|
|
$ |
45,512 |
|
Plus: |
|
|
|
Changes
in current assets and current liabilities |
(4,368 |
) |
|
1,986 |
|
Changes
in deferred charges and credits and other operating activities,
net |
(358 |
) |
|
(111 |
) |
Interest
and debt expense, net of capitalized interest |
8,289 |
|
|
2,659 |
|
Current
income tax expense |
224 |
|
|
147 |
|
EBITDA |
78,505 |
|
|
50,193 |
|
Less: EBITDA attributable to Predecessor |
— |
|
|
(5,394 |
) |
EBITDA
attributable to Partnership |
78,505 |
|
|
55,587 |
|
Plus: |
|
|
|
Adjustments related to minimum throughput commitments |
(897 |
) |
|
14 |
|
Less: |
|
|
|
Cash
interest paid |
1,908 |
|
|
2,502 |
|
Maintenance capital expenditures attributable to Partnership |
2,038 |
|
|
2,002 |
|
Distributable cash flow |
$ |
73,662 |
|
|
$ |
51,097 |
|
|
See Notes to Earnings Release Tables. |
VALERO ENERGY PARTNERS LP |
EARNINGS RELEASE TABLES |
(thousands of dollars, except per unit
amounts) |
(unaudited) |
|
|
The following table presents our statement of income for the
three months ended March 31, 2016. Our financial results have
been adjusted for the acquisitions of the McKee Terminal Services
Business and the Meraux and Three Rivers Terminal Services
Business. See Note (a) of Notes to Earnings Release
Tables for a discussion of the basis of this presentation. |
|
|
|
Three Months Ended March 31,
2016 |
|
ValeroEnergyPartners
LP(PreviouslyReported) |
|
McKeeTerminalServicesBusiness |
|
Meraux
andThree RiversTerminalServicesBusiness |
|
ValeroEnergyPartners
LP(CurrentlyReported) |
Operating revenues –
related party |
$ |
78,767 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
78,767 |
|
Costs and
expenses: |
|
|
|
|
|
|
|
Operating
expenses |
19,096 |
|
|
1,781 |
|
|
3,409 |
|
|
24,286 |
|
General
and administrative expenses |
4,161 |
|
|
67 |
|
|
137 |
|
|
4,365 |
|
Depreciation expense |
9,388 |
|
|
1,233 |
|
|
891 |
|
|
11,512 |
|
Total
costs and expenses |
32,645 |
|
|
3,081 |
|
|
4,437 |
|
|
40,163 |
|
Operating income
(loss) |
46,122 |
|
|
(3,081 |
) |
|
(4,437 |
) |
|
38,604 |
|
Other income, net |
77 |
|
|
— |
|
|
— |
|
|
77 |
|
Interest and debt
expense, net of capitalized interest |
(2,659 |
) |
|
— |
|
|
— |
|
|
(2,659 |
) |
Income (loss) before
income taxes |
43,540 |
|
|
(3,081 |
) |
|
(4,437 |
) |
|
36,022 |
|
Income tax expense |
242 |
|
|
— |
|
|
— |
|
|
242 |
|
Net income (loss) |
43,298 |
|
|
(3,081 |
) |
|
(4,437 |
) |
|
35,780 |
|
Less: Net loss
attributable to Predecessor |
— |
|
|
(3,081 |
) |
|
(4,437 |
) |
|
(7,518 |
) |
Net income attributable
to partners |
$ |
43,298 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
43,298 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Earnings Release Tables. |
(a) References to “Partnership,” “we,” “us,” or
“our” refer to Valero Energy Partners LP, one or more of its
subsidiaries, or all of them taken as a whole. For businesses that
we acquired from Valero, those terms refer to Valero Energy
Partners LP Predecessor, our Predecessor for accounting purposes.
References in these notes to “Valero” may refer to Valero Energy
Corporation, one or more of its subsidiaries, or all of them taken
as a whole, other than Valero Energy Partners LP, any of its
subsidiaries, or its general partner.
We acquired the following businesses from Valero
in 2016:
- On September 1, 2016, we acquired the Meraux and Three
Rivers Terminal Services Business for total consideration of
$325.0 million.
- On April 1, 2016, we acquired the McKee Terminal Services
Business for total consideration of $240.0 million.
Each acquisition was accounted for as the
transfer of a business between entities under the common control of
Valero. Accordingly, the statement of income data, operating
highlights, and capital expenditures data have been retrospectively
adjusted to include the historical results of operations of the
acquired businesses for periods prior to their dates of
acquisition.
(b) The increase in operating revenues in the
three months ended March 31, 2017 compared to the three months
ended March 31, 2016 was due primarily to $22.5 million
of revenues generated by the acquired businesses described in Note
(a) and $2.0 million of revenues generated by our Red River crude
system. Prior to being acquired by us, the businesses described in
Note (a) did not charge Valero for services provided and did not
generate revenues. Effective with the date of each acquisition, we
entered into additional schedules to our commercial agreements with
Valero with respect to the services we provide to Valero using the
assets of the acquired businesses. This resulted in new charges for
terminaling services provided by these assets. In addition,
effective January 18, 2017, we acquired a 40 percent undivided
interest in (i) the newly constructed Hewitt segment of Plains All
American L.P.’s Red River pipeline, (ii) two 150,000 shell barrel
capacity tanks located at Hewitt Station, and (iii) a
pipeline connection from Hewitt Station to Wasson Station
(collectively, Red River crude system).
(c) The decrease in operating expenses in the
three months ended March 31, 2017 compared to the three months
ended March 31, 2016 was due primarily to lower maintenance
expense of $1.1 million at the St. Charles and Meraux
terminals, which was mainly related to inspection activity in the
2016 period. This decrease was partially offset by operating
expenses of $459,000 related to our Red River crude system, which
was acquired in the first quarter of 2017.
(d) The decrease in general and administrative
expenses in the three months ended March 31, 2017 compared to
the three months ended March 31, 2016 was due primarily to
lower transaction costs of $375,000 associated with the acquisition
of businesses from Valero and lower public company costs of
$245,000. These decreases were partially offset by incremental
costs of $124,000 related to the management fee charged to us by
Valero for our acquisitions in 2016 described in Note (a).
(e) The increase in depreciation expense in the
three months ended March 31, 2017 compared to the three months
ended March 31, 2016 was attributed primarily to depreciation
expense recognized on the assets that compose our Red River
crude system, which was acquired in the first quarter of 2017.
(f) The increase in “interest and debt expense,
net of capitalized interest” in the three months ended
March 31, 2017 compared to the three months ended
March 31, 2016 was due to incremental borrowings of $139.0
million and $210.0 million under our revolving credit facility in
connection with the acquisitions described in Note (a) and to
incremental interest expense incurred on $500.0 million of
4.375% senior notes due December 2026, which we issued in
December 2016. Interest expense on the incremental borrowings was
approximately $2.0 million in the three months ended March 31,
2017. We used the proceeds of the senior notes to repay $494.0
million of outstanding borrowings under our revolving credit
facility. The interest rate on these senior notes is higher than
our revolving credit facility, thereby increasing the effective
interest rate in 2017. Incremental interest expense resulting from
these senior notes was approximately $2.6 million in the three
months ended March 31, 2017.
(g) The requirements under our partnership
agreement for the conversion of all of our outstanding subordinated
units into common units were satisfied upon the payment of our
quarterly cash distribution on August 9, 2016. Therefore,
effective August 10, 2016, all of our subordinated units,
which were owned by Valero, were converted on a one-for-one basis
into common units. The conversion of the subordinated units does
not impact the amount of cash distributions paid or the total
number of outstanding units. The subordinated units were only
allocated earnings generated by us through the conversion date.
(h) Represents the sum of volumes transported
through each separately tariffed pipeline segment divided by the
number of days in the period. The increase in pipeline
transportation throughput in the three months ended March 31,
2017 compared to the three months ended March 31, 2016 was due
primarily to volumes at our Red River crude system, which was
acquired in the first quarter of 2017.
(i) Management uses average revenue per barrel
to evaluate performance and compare profitability to other
companies in the industry. There are a variety of ways to calculate
average revenue per barrel; different companies may calculate it in
different ways. We calculate average revenue per barrel as revenue
divided by throughput for the period. Throughput is derived by
multiplying the throughput barrels per day (BPD) by the
number of days in the period. Investors and analysts use this
financial measure to help analyze and compare companies in the
industry on the basis of operating performance.
(j) Average pipeline transportation revenue per
barrel was higher in the three months ended March 31, 2017
compared to the three months ended March 31, 2016 due
primarily to higher transportation revenue per barrel generated by
our Red River crude system, which was acquired in the first quarter
of 2017.
(k) Defined terms are as follows:
- EBITDA is defined as net income less income
tax expense, interest expense, and depreciation expense.
- Distributable cash flow is defined as EBITDA
less (i) EBITDA attributable to Predecessor and cash payments
during the period for interest, income taxes, and maintenance
capital expenditures; plus (ii) adjustments related to minimum
throughput commitments, capital projects prefunded by Valero, and
certain other items.
- Distribution coverage ratio is defined as the
ratio of distributable cash flow to the total distribution
declared.
These terms are not defined under United States (U.S.)
generally accepted accounting principles (GAAP) and are
considered non-GAAP measures. Management has defined these terms
and believes that the presentation of the associated measures is
useful to external users of our financial statements, such as
industry analysts, investors, lenders, and rating agencies, to:
- describe our expectation of forecasted earnings;
- assess our operating performance as compared to other publicly
traded limited partnerships in the transportation and logistics
industry, without regard to historical cost basis or, in the case
of EBITDA, financing methods;
- assess the ability of our business to generate sufficient cash
to support our decision to make distributions to our
unitholders;
- assess our ability to incur and service debt and fund capital
expenditures; and
- assess the viability of acquisitions and other capital
expenditure projects and the returns on investment of various
investment opportunities.
We believe that the presentation of EBITDA
provides useful information to investors in assessing our financial
condition and results of operations. The U.S. GAAP measures most
directly comparable to EBITDA are net income and net cash provided
by operating activities. EBITDA should not be considered an
alternative to net income or net cash provided by operating
activities presented in accordance with U.S. GAAP. EBITDA has
important limitations as an analytical tool because it excludes
some, but not all, items that affect net income or net cash
provided by operating activities. EBITDA should not be considered
in isolation or as a substitute for analysis of our results as
reported under U.S. GAAP. Additionally, because EBITDA may be
defined differently by other companies in our industry, our
definition of EBITDA may not be comparable to similarly titled
measures of other companies, thereby diminishing its utility.
We use distributable cash flow to measure
whether we have generated from our operations, or “earned,” an
amount of cash sufficient to support the payment of the minimum
quarterly distributions. Our partnership agreement contains the
concept of “operating surplus” to determine whether our operations
are generating sufficient cash to support the distributions that we
are paying, as opposed to returning capital to our partners.
Because operating surplus is a cumulative concept (measured from
our initial public offering (IPO) date and compared to cumulative
distributions from the IPO date), we use distributable cash flow to
approximate operating surplus on a quarterly or annual, rather than
a cumulative, basis. As a result, distributable cash flow is not
necessarily indicative of the actual cash we have on hand to
distribute or that we are required to distribute.
We use the distribution coverage ratio to
reflect the relationship between our distributable cash flow and
the total distribution declared.
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