Valero Energy Partners LP (NYSE:VLP) (the “Partnership”) today
reported first quarter 2018 net income of $66 million, or $0.72 per
limited partner common unit, and EBITDA of $97 million.
The Partnership reported net cash provided by operating activities
of $86 million and distributable cash flow of
$86 million. The distribution coverage ratio for the
first quarter was 1.6x.
“Backed by solid operations, a healthy coverage
ratio and a strong balance sheet, VLP remains well-positioned to
achieve its distribution growth target of at least 20 percent
for 2018 without the need for additional acquisitions,” said Joe
Gorder, Chairman and Chief Executive Officer of VLP’s general
partner.
Financial Results Revenues of
$132 million for the first quarter of 2018 were $26 million higher
than the first quarter of 2017 due primarily to contributions from
the Port Arthur terminal and Parkway Pipeline, which were acquired
from Valero Energy Corporation (“Valero”) in November 2017.
Cost of revenues from lease and customer contracts totaled
$31 million in the first quarter of 2018 compared to
$24 million in the first quarter of 2017, and total
depreciation expense was $19 million in the first quarter of
2018 compared to $12 million in the first quarter of
2017. General and administrative expenses of $4 million
were in line with the first quarter of 2017.
Liquidity and Financial
PositionIn March 2018, VLP issued $500 million of 4.5
percent senior notes due 2028 and used the proceeds to repay all of
its borrowings under its senior unsecured revolving credit facility
and a portion of its borrowings under a subordinated credit
agreement with Valero. As of March 31, 2018, the Partnership
had $821 million of total liquidity consisting of
$71 million in cash and temporary cash investments and $750
million available on its revolving credit facility. Capital
expenditures in the first quarter of 2018 were $6 million,
including $4 million for expansion and $2 million for
maintenance.
The Partnership continues to target capital
expenditures of $35 million to $45 million for 2018,
which includes $15 million to $20 million for expansion and
$20 million to $25 million for maintenance.
On April 19, the board of directors of VLP’s
general partner declared a first quarter 2018 cash distribution of
$0.5275 per unit. This distribution represents a
3.9 percent increase over the fourth quarter of 2017.
Conference CallThe
Partnership’s senior management will host a conference call at 3:00
p.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 petroleum 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 (U.S.) that are integral to the operations of 10 of
Valero’s refineries. Please visit www.valeroenergypartners.com for
more information.
ContactsInvestors: 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,
quarterly reports on Form 10-Q and other reports filed with the SEC
and 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 U.S. 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 (l) 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
LPEARNINGS RELEASE
TABLES(thousands of dollars, except per unit
amounts)(unaudited) |
|
|
|
Three Months Ended March 31, |
|
2018 |
|
2017 |
Statement of
income data: |
|
Revenues
– related party: |
|
|
|
Revenues
from lease contracts |
$ |
105,326 |
|
|
$ |
81,112 |
|
Revenues
from contracts with customer |
26,616 |
|
|
24,704 |
|
Total
revenues – related party (a) |
131,942 |
|
|
105,816 |
|
Costs and
expenses: |
|
|
|
Cost of
revenues from lease contracts (excluding depreciation expense
reflected below) (b) |
24,518 |
|
|
18,520 |
|
Cost of
revenues from contracts with customer (excluding depreciation
expense reflected below) (b) |
6,783 |
|
|
5,025 |
|
Depreciation expense associated with lease contracts (c) |
15,589 |
|
|
9,030 |
|
Depreciation expense associated with contracts with
customer (c) |
2,951 |
|
|
2,745 |
|
General
and administrative expenses (d) |
4,112 |
|
|
3,830 |
|
Total
costs and expenses |
53,953 |
|
|
39,150 |
|
Operating
income |
77,989 |
|
|
66,666 |
|
Other
income, net |
382 |
|
|
64 |
|
Interest
and debt expense, net of capitalized interest (e) |
(11,908 |
) |
|
(8,289 |
) |
Income
before income tax expense |
66,463 |
|
|
58,441 |
|
Income
tax expense |
384 |
|
|
304 |
|
Net
income |
66,079 |
|
|
58,137 |
|
Less: General partner’s interest in net income |
16,555 |
|
|
9,467 |
|
Limited
partners’ interest in net income |
$ |
49,524 |
|
|
$ |
48,670 |
|
|
|
|
|
Net income per limited partner common unit (basic and
diluted) |
$ |
0.72 |
|
|
$ |
0.72 |
|
|
|
|
|
Weighted-average limited partner common units
outstanding(basic and diluted) (in
thousands): |
|
|
|
Public |
22,481 |
|
|
21,977 |
|
Valero |
46,769 |
|
|
45,687 |
|
|
|
|
|
|
|
See Notes to Earnings Release Tables.
|
|
VALERO ENERGY PARTNERS
LPEARNINGS RELEASE
TABLES(thousands of dollars, except per unit and
per barrel amounts)(unaudited) |
|
|
|
Three Months Ended March 31, |
|
2018 |
|
2017 |
Operating
highlights: |
|
Pipeline
transportation: |
|
|
|
Pipeline
transportation revenues (a) |
$ |
31,368 |
|
|
$ |
23,175 |
|
Pipeline
transportation throughput (BPD) (f) |
1,062,103 |
|
|
962,200 |
|
Average
pipeline transportation revenue per barrel (g) (h) |
$ |
0.33 |
|
|
$ |
0.27 |
|
Terminaling: |
|
|
|
Terminaling revenues (a) |
$ |
99,274 |
|
|
$ |
82,506 |
|
Terminaling throughput (BPD) (i) |
3,396,096 |
|
|
2,734,478 |
|
Average
terminaling revenue per barrel (g) (j) |
$ |
0.32 |
|
|
$ |
0.34 |
|
Storage
and other revenues (k) |
$ |
1,300 |
|
|
$ |
135 |
|
Total
revenues – related party |
$ |
131,942 |
|
|
$ |
105,816 |
|
Capital
expenditures: |
|
|
|
Maintenance |
$ |
2,312 |
|
|
$ |
2,038 |
|
Expansion |
4,061 |
|
|
6,979 |
|
Total
capital expenditures |
$ |
6,373 |
|
|
$ |
9,017 |
|
Other financial
information: |
|
|
|
Net cash
provided by operating activities |
$ |
85,948 |
|
|
$ |
74,718 |
|
Distributable cash flow (l) |
$ |
86,467 |
|
|
$ |
73,662 |
|
Distribution declared per unit |
$ |
0.5275 |
|
|
$ |
0.4275 |
|
Distribution declared: |
|
|
|
Limited
partner units – public |
$ |
11,865 |
|
|
$ |
9,610 |
|
Limited
partner units – Valero |
24,671 |
|
|
19,531 |
|
General
partner units – Valero |
16,290 |
|
|
8,902 |
|
Total
distribution declared |
$ |
52,826 |
|
|
$ |
38,043 |
|
Distribution coverage ratio: Distributable cash flow divided by
total distribution declared (l) |
1.64x |
|
|
1.94x |
|
|
|
|
|
|
March 31, |
|
December 31, |
|
2018 |
|
2017 |
Balance sheet
data: |
|
|
|
Cash and
temporary cash investments |
$ |
71,485 |
|
|
$ |
42,052 |
|
Total
assets |
1,544,765 |
|
|
1,517,352 |
|
Debt (no
current portion) |
1,274,115 |
|
|
1,275,283 |
|
Partners’
capital |
232,362 |
|
|
205,797 |
|
Working
capital |
83,473 |
|
|
56,727 |
|
|
|
|
|
|
|
See Notes to Earnings Release Tables.
|
|
VALERO ENERGY PARTNERS
LPEARNINGS RELEASE
TABLESRECONCILIATION OF NON-GAAP MEASURES TO MOST
COMPARABLE AMOUNTSREPORTED UNDER U.S. GAAP
(l)(thousands of
dollars)(unaudited) |
|
|
|
Three Months Ended March 31, |
|
2018 |
|
2017 |
Reconciliation
of net income to EBITDA and distributable cash flow
(l): |
|
|
|
Net
income |
$ |
66,079 |
|
|
$ |
58,137 |
|
Plus: |
|
|
|
Depreciation expense |
18,540 |
|
|
11,775 |
|
Interest
and debt expense, net of capitalized interest |
11,908 |
|
|
8,289 |
|
Income
tax expense |
384 |
|
|
304 |
|
EBITDA |
96,911 |
|
|
78,505 |
|
Plus: |
|
|
|
Adjustments related to minimum throughput commitments |
(221 |
) |
|
(897 |
) |
Less: |
|
|
|
Cash
interest paid |
7,911 |
|
|
1,908 |
|
Maintenance capital expenditures |
2,312 |
|
|
2,038 |
|
Distributable cash flow |
$ |
86,467 |
|
|
$ |
73,662 |
|
Reconciliation
of net cash provided by operating activities to EBITDA and
distributable cash flow (l): |
|
|
|
Net cash
provided by operating activities |
$ |
85,948 |
|
|
$ |
74,718 |
|
Plus: |
|
|
|
Changes
in current assets and current liabilities |
(536 |
) |
|
(4,368 |
) |
Changes
in deferred charges and credits and other operating activities,
net |
(697 |
) |
|
(358 |
) |
Interest
and debt expense, net of capitalized interest |
11,908 |
|
|
8,289 |
|
Current
income tax expense |
288 |
|
|
224 |
|
EBITDA |
96,911 |
|
|
78,505 |
|
Plus: |
|
|
|
Adjustments related to minimum throughput commitments |
(221 |
) |
|
(897 |
) |
Less: |
|
|
|
Cash
interest paid |
7,911 |
|
|
1,908 |
|
Maintenance capital expenditures |
2,312 |
|
|
2,038 |
|
Distributable cash flow |
$ |
86,467 |
|
|
$ |
73,662 |
|
|
|
|
|
|
|
|
|
See Notes to Earnings Release Tables.
(a) The increase in “total revenues – related
party” in the three months ended March 31, 2018 compared to
the three months ended March 31, 2017 was due primarily to the
following:
- Revenues from a terminal and pipeline system acquired from
Valero Energy Corporation (Valero) in November 2017. We generated
revenues of $15.3 million from the operations of our Port
Arthur terminal and $6.5 million from our Parkway pipeline in
the three months ended March 31, 2018.
- Revenues from our rail loading facility placed in service in
May 2017. Our rail loading facility at our St. Charles
terminal generated revenues of $1.2 million in the three
months ended March 31, 2018.
- Incremental throughput at our Red River crude system acquired
in January 2017. We generated incremental revenues of
$1.1 million due to higher throughput at our Red River crude
system in the three months ended March 31, 2018 compared to
the three months ended March 31, 2017.
(b) The combined increase in cost of revenues in
the three months ended March 31, 2018 compared to the three
months ended March 31, 2017 was due primarily to expenses of
$6.8 million related to our Port Arthur terminal and Parkway
pipeline, which were acquired in November 2017. In addition, we
incurred higher maintenance expenses of $1.1 million at our
Port Arthur products systems due primarily to inspection
activity.
(c) The combined increase in depreciation
expense in the three months ended March 31, 2018 compared to
the three months ended March 31, 2017 was due primarily to
depreciation expense recognized on the assets that compose our Port
Arthur terminal and Parkway pipeline, which were acquired in
November 2017.
(d) The increase in general and administrative
expenses in the three months ended March 31, 2018 compared to
the three months ended March 31, 2017 was due primarily to
incremental costs of $173,000 related to the management fee charged
to us by Valero in connection with the acquisition of our Port
Arthur terminal and Parkway pipeline, which were acquired in
November 2017, and an increase of $142,000 in professional
fees.
(e) The increase in “interest and debt expense,
net of capitalized interest” in the three months ended
March 31, 2018 compared to the three months ended
March 31, 2017 was due primarily to the following:
- Incremental borrowings in connection with acquisitions. In
connection with the acquisitions of the Port Arthur terminal and
Parkway pipeline in November 2017, we borrowed $380.0 million
under our revolving credit facility. Interest expense on the
incremental borrowings was $2.9 million in the three months
ended March 31, 2018.
- Higher interest rates in 2018. Borrowings on our revolving
credit facility and subordinated credit agreements with Valero bear
interest at variable rates. We incurred additional interest of
$739,000 in the three months ended March 31, 2018 on these
borrowings due to higher interest rates in 2018 compared to
2017.
(f) The volume amounts reflected represent 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, 2018 compared to the three months ended
March 31, 2017 was due primarily to the effect from new
volumes at our Parkway pipeline.
(g) Management uses average revenue per barrel
to evaluate operating and financial performance and compare results
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.
(h) Average pipeline transportation revenue per
barrel was higher in the three months ended March 31, 2018
compared to the three months ended March 31, 2017 due
primarily to higher pipeline transportation revenue per barrel
generated by our Parkway pipeline.
(i) The volume amounts reflected represent the
sum of throughput volumes at each of our terminals divided by the
number of days in the period. The increase in terminaling
throughput in the three months ended March 31, 2018 compared
to the three months ended March 31, 2017 was due primarily to
incremental throughput volumes attributed to our Port Arthur
terminal.
(j) Average terminaling revenue per barrel was
lower in the three months ended March 31, 2018 compared to the
three months ended March 31, 2017 due primarily to a lower
tariff rate charged at our Port Arthur terminal compared to tariff
rates charged at our other terminals.
(k) Storage and other revenues were higher in
the three months ended March 31, 2018 compared to the three
months ended March 31, 2017 due primarily to revenues
generated by the rail loading facility at our St. Charles
terminal, which was placed in service in May 2017.
(l) Defined terms are as follows:
- EBITDA is defined as net income plus income
tax expense, interest expense, and depreciation expense.
- Distributable cash flow is defined as EBITDA
plus (i) adjustments related to minimum throughput
commitments; less (ii) cash payments during the period for
interest, income taxes, and maintenance capital expenditures.
- 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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