USD Partners LP Announces First Quarter 2019 Results

Category:

Monday, May 6, 2019 5:10 pm EDT

Dateline:

HOUSTON

Public Company Information:

NYSE:
USDP
US9033181036
"We are pleased to announce our sixteenth consecutive quarterly distribution increase, which is consistent with our previously stated 2019 distribution guidance"

HOUSTON--(BUSINESS WIRE)--USD Partners LP (NYSE: USDP) (the “Partnership”) announced today its operating and financial results for the three months ended March 31, 2019. Financial highlights with respect to the first quarter of 2019 include the following:

  • Generated Net Cash Provided by Operating Activities of $10.2 million, Adjusted EBITDA(1) of $11.5 million and Distributable Cash Flow of $8.4 million
  • Reported Net Income of $1.3 million
  • Increased quarterly cash distribution to $0.3625 per unit ($1.45 per unit on an annualized basis), delivering distribution growth of 0.7% over the prior quarter and 2.8% over the first quarter of 2018
  • Ended quarter with $181 million of available liquidity

“We are pleased to announce our sixteenth consecutive quarterly distribution increase, which is consistent with our previously stated 2019 distribution guidance,” said Dan Borgen, the Partnership’s Chief Executive Officer. “As we mentioned on our fourth quarter earnings call, we look forward to transitioning into the second half of this year, when the higher rates from our recently extended terminalling services agreements will begin to show up in our financial results. In addition, the forward curves today show the spread between a Western Canadian Select and a West Texas Intermediate barrel of crude oil widening to levels that should incentivize our customers to fully utilize the capacity at our terminals.”

First Quarter 2019 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 results during the first quarter of 2019 relative to the same quarter in 2018 were primarily influenced by lower revenues at its Casper terminal resulting from the conclusion of a customer agreement at the end of 2018, which were partially offset by higher revenues at its Stroud terminal associated with additional contracts that were executed in March and April of 2018. Additionally, the Partnership experienced higher variable operating costs at its Hardisty and Stroud terminals, which it incurred with the anticipation of higher volumes during the quarter, as well as higher operations and maintenance costs at its Stroud terminal, which were partially offset by a reduction in pipeline fees and a decrease in depreciation expense.

Net Cash Provided by Operating Activities increased by 26% relative to the first quarter of 2018, primarily due to the timing of receipts and payments on accounts receivable, accounts payable and deferred revenue balances.

Adjusted EBITDA decreased by 15% and Distributable Cash Flow (“DCF”) decreased by 24% relative to the first quarter of 2018. The decrease in Adjusted EBITDA was primarily a result of the operating factors discussed above. DCF was also impacted by higher cash paid for interest associated with higher interest rates in the first quarter of 2019.

Net income for the quarter decreased as compared to the first quarter of 2018, primarily as a result of the operating factors discussed above coupled with a non-cash loss associated with the five-year interest rate derivative instrument that the Partnership entered into in November 2017 and higher interest expense incurred resulting from higher interest rates during the first quarter of 2019.

As of March 31, 2019, the Partnership had total available liquidity of $181 million, including $3 million of unrestricted cash and cash equivalents and undrawn borrowing capacity of $177 million on its $385 million senior secured credit facility, subject to continued compliance with financial covenants. The Partnership is in compliance with its financial covenants.

On April 26, 2019, the Partnership declared a quarterly cash distribution of $0.3625 per unit ($1.45 per unit on an annualized basis), which represents growth of 0.7% over the prior quarter and 2.8% over the first quarter of 2018. The distribution is payable on May 15, 2019, to unitholders of record at the close of business on May 7, 2019.

Effective January 1, 2019, the Partnership adopted the requirements of Accounting Standards Update 2016-02, or ASC 842, that requires balance sheet recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases.

First Quarter 2019 Conference Call Information

The Partnership will host a conference call and webcast regarding first quarter 2019 results at 11:00 a.m. Eastern Time (10:00 a.m. Central Time) on Tuesday, May 7, 2019.

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 2899784. 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 2899784. 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, 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 9 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 USDG to achieve contract extensions, new customer agreements and expansions; the ability of the Partnership and USDG to develop existing and future additional projects and expansion opportunities and whether those projects and opportunities developed by USDG would be made available for acquisition, or acquired, by the Partnership; volumes at, and demand for, the Partnership’s terminals; the price of WCS relative to WTI and other crude benchmarks, and the drivers causing such pricing spreads; and the amount and timing of future distribution payments and distribution growth. 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 the Partnership’s 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.

________________________________

(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 3 and reconciliations of Net Cash Provided by Operating Activities, the most directly comparable GAAP measure, to Adjusted EBITDA and Distributable Cash Flow on page 9 of this press release.
 
 
USD Partners LP
Consolidated Statements of Income
For the Three Months Ended March 31, 2019 and 2018
(unaudited)
       
For the Three Months Ended
March 31,
2019 2018

(in thousands)

Revenues
Terminalling services $ 19,998 $ 22,005
Terminalling services — related party 5,638 4,696
Fleet leases — related party 984 984
Fleet services 57 344
Fleet services — related party 227 227
Freight and other reimbursables 403 1,475
Freight and other reimbursables — related party   61     2  
Total revenues   27,368     29,733  
Operating costs
Subcontracted rail services 3,565 3,062
Pipeline fees 5,061 5,724
Freight and other reimbursables 464 1,477
Operating and maintenance 3,211 2,356
Selling, general and administrative 2,477 2,994
Selling, general and administrative — related party 2,450 1,830
Depreciation and amortization   4,734     5,276  
Total operating costs   21,962     22,719  
Operating income 5,406 7,014
Interest expense 3,187 2,485
Loss (gain) associated with derivative instruments 672 (1,024 )
Foreign currency transaction loss (gain) 182 (211 )
Other expense (income), net   (24 )   71  
Income before income taxes 1,389 5,693
Provision for (benefit from) income taxes   70     (907 )
Net income $ 1,319   $ 6,600  
 
USD Partners LP
Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 2019 and 2018
(unaudited)
       
For the Three Months Ended
March 31,
2019 2018
Cash flows from operating activities:

(in thousands)

Net income $ 1,319 $ 6,600
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 4,734 5,276
Loss (gain) associated with derivative instruments 672 (1,024 )
Settlement of derivative contracts 1 (38 )
Unit based compensation expense 1,414 1,337
Deferred income taxes (249 ) (1,290 )
Other 458 286
Changes in operating assets and liabilities:
Accounts receivable 691 (8,349 )
Accounts receivable – related party (628 ) 1,213
Prepaid expenses and other assets 753 (161 )
Other assets – related party 20 20
Accounts payable and accrued expenses 69 (887 )
Accounts payable and accrued expenses – related party 719 (378 )
Deferred revenue and other liabilities   198     5,499  
Net cash provided by operating activities   10,171     8,104  
Cash flows from investing activities:
Additions of property and equipment (244 ) (78 )
Proceeds from the sale of assets       236  
Net cash provided by (used in) investing activities   (244 )   158  
Cash flows from financing activities:
Distributions (10,133 ) (9,689 )
Payments for deferred financing costs (7 )
Vested Phantom Units used for payment of participant taxes (1,821 ) (1,346 )
Proceeds from long-term debt 9,000 9,000
Repayments of long-term debt (11,000 ) (8,000 )
Other financing activities   (13 )    
Net cash used in financing activities   (13,974 )   (10,035 )
Effect of exchange rates on cash   388     (678 )
Net change in cash, cash equivalents and restricted cash (3,659 ) (2,451 )
Cash, cash equivalents and restricted cash – beginning of period   12,383     13,788  
Cash, cash equivalents and restricted cash – end of period $ 8,724   $ 11,337  
       
USD Partners LP
Consolidated Balance Sheets
(unaudited)
 
March 31, December 31,
2019 2018
ASSETS

(in thousands)

Current assets
Cash and cash equivalents $ 3,069 $ 6,439
Restricted cash 5,655 5,944
Accounts receivable, net 4,462 5,132
Accounts receivable — related party 1,255 624
Prepaid expenses 1,681 2,115
Other current assets 477 634
Other current assets — related party   79     79  
Total current assets 16,678 20,967
Property and equipment, net 146,635 145,308
Intangible assets, net 83,554 86,705
Goodwill 33,589 33,589
Operating lease right-of-use assets 15,581
Other non-current assets 255 631
Other non-current assets — related party   75     95  
Total assets $ 296,367   $ 287,295  
 
LIABILITIES AND PARTNERS’ CAPITAL
Current liabilities
Accounts payable and accrued expenses $ 5,660 $ 3,464
Accounts payable and accrued expenses — related party 1,179 460
Deferred revenue 2,980 2,921
Deferred revenue — related party 1,916 1,885
Operating lease liabilities, current 5,236
Other current liabilities   2,910     2,804  
Total current liabilities 19,881 11,534
Long-term debt, net 204,028 205,581
Deferred income tax liabilities, net 119 360
Operating lease liabilities, non-current 10,682
Other non-current liabilities   120     356  
Total liabilities   234,830     217,831  
Commitments and contingencies
Partners’ capital
Common units 80,539 107,903
Class A units 1,018
Subordinated units (20,555 ) (39,723 )
General partner units 3,147 3,275
Accumulated other comprehensive loss   (1,594 )   (3,009 )
Total partners’ capital   61,537     69,464  
Total liabilities and partners’ capital $ 296,367   $ 287,295  
       
USD Partners LP
GAAP to Non-GAAP Reconciliations
For the Three Months Ended March 31, 2019 and 2018
(unaudited)
 
For the Three Months Ended
March 31,
2019 2018

(in thousands)

 
Net cash provided by operating activities $ 10,171 $ 8,104
Add (deduct):
Amortization of deferred financing costs (450 ) (215 )
Deferred income taxes 249 1,290
Changes in accounts receivable and other assets (836 ) 7,277
Changes in accounts payable and accrued expenses (788 ) 1,265
Changes in deferred revenue and other liabilities (198 ) (5,499 )
Interest expense, net 3,180 2,485
Provision for (benefit from) income taxes 70 (907 )
Foreign currency transaction loss (gain) (1) 182 (211 )
Other income (17 )
Non-cash contract asset (2)   (51 )   (51 )
Adjusted EBITDA 11,512 13,538
Add (deduct):
Cash paid for income taxes (278 ) (182 )
Cash paid for interest (2,820 ) (2,291 )
Maintenance capital expenditures       (49 )
Distributable cash flow $ 8,414   $ 11,016  

__________________

(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 associated with revenue recognized in advance at blended rates based on the escalation clauses in certain of the Partnership's customer contracts.

Contact:

Adam Altsuler
Senior Vice President, Chief Financial Officer
(281) 291-3995
aaltsuler@usdg.com

Jennifer Waller
Associate Director, Financial Reporting and Investor Relations
(832) 991-8383
jwaller@usdg.com