USD Partners LP Announces Third Quarter 2019 Results

Category:

Wednesday, November 6, 2019 4:39 pm EST

Dateline:

HOUSTON

Public Company Information:

NYSE:
USDP
US9033181036
"We are excited to announce the Partnership’s eighteenth consecutive quarterly distribution increase this quarter"

HOUSTON--(BUSINESS WIRE)--USD Partners LP (NYSE: USDP) (the “Partnership”) announced today its operating and financial results for the three and nine months ended September 30, 2019. Financial highlights with respect to the third quarter of 2019 include the following:

  • Generated Net Cash Provided by Operating Activities of $14.6 million, Adjusted EBITDA(1) of $14.0 million and Distributable Cash Flow(1) of $10.5 million
  • Reported Net Income of $2.1 million
  • Increased quarterly cash distribution to $0.3675 per unit ($1.47 per unit on an annualized basis), delivering distribution growth of 0.7% over the prior quarter and 2.8% over the third quarter of 2018
  • Ended quarter with approximately $176 million of available liquidity, subject to continued compliance with financial covenants

“We are excited to announce the Partnership’s eighteenth consecutive quarterly distribution increase this quarter,” said Dan Borgen, the Partnership’s Chief Executive Officer. “As we have mentioned on previous calls, we continue to work with our remaining customer at Hardisty and Stroud on renewing and extending its commitments, which come due in 2020. Given the current lack of infrastructure supporting egress out of Western Canada, we continue to be optimistic about our re-contracting efforts and our ability to create long-term, sustainable solutions that include diluent recovery units (“DRU”) for our customers. We look forward to reporting more on this in the near future.”

Third 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 operating results for the third quarter of 2019 relative to the same quarter in 2018 were primarily influenced by higher revenue at its Hardisty terminal due to increased rates on a portion of the terminalling services agreements that became effective July 1, 2019, resulting from the Partnership’s successful re-contracting efforts. In addition, the Partnership experienced higher revenue during the quarter associated with contracted throughput that exceeded the Partnership’s existing capacity at its Hardisty terminal. 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.

However, lower revenue at the Partnership’s Casper terminal resulting from the conclusion of customer agreements in December 2018 and in August 2019 offset the higher revenue at Hardisty during quarter.

Net income for the quarter decreased as compared to the third 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 slightly higher interest expense incurred resulting from higher interest rates as well as a higher weighted average balance of debt outstanding in the third quarter of 2019.

Net Cash Provided by Operating Activities for the quarter increased by 16% relative to the third quarter of 2018, primarily due to higher rates on a portion of the terminalling services agreements that became effective July 1, 2019 at the Hardisty terminal, offset by the conclusion of customer agreements at the Partnership’s Casper terminal in December 2018 and in August 2019. Cash flows were also affected by the general timing of receipts and payments of accounts receivable, accounts payable and deferred revenue balances.

Adjusted EBITDA and Distributable Cash Flow (“DCF”) decreased by 3% and 9%, respectively, for the quarter relative to the third quarter of 2018. The decrease in Adjusted EBITDA was primarily a result of the operating factors discussed above. DCF was also impacted by an increase in cash paid for interest associated with higher interest rates and higher average debt balances.

As of September 30, 2019, the Partnership had total available liquidity of approximately $176 million, including $7 million of unrestricted cash and cash equivalents and undrawn borrowing capacity of $169 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. The Partnership was in compliance with its financial covenants, as of September 30, 2019.

On October 24, 2019, the Partnership declared a quarterly cash distribution of $0.3675 per unit ($1.47 per unit on an annualized basis), which represents growth of 0.7% over the prior quarter and 2.8% over the third quarter of 2018. The distribution is payable on November 14, 2019, to unitholders of record at the close of business on November 4, 2019.

Third Quarter 2019 Conference Call Information

The Partnership will host a conference call and webcast regarding third quarter 2019 results at 11:00 a.m. Eastern Time (10:00 a.m. Central Time) on Thursday, November 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 2764905. 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 2764905. 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. Information on websites referenced in this release are 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 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 (including potential DRUs) 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; and the amount and timing of future distribution payments and distribution growth. Words and phrases such as “is expected,” “is planned,” “believes,” “projects,” “begin,” “anticipates,” “expects,” 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, 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 Income
For the Three and Nine Months Ended September 30, 2019 and 2018
(unaudited)
     

For the Three Months Ended

 

For the Nine Months Ended

September 30,

 

September 30,

2019

 

2018

 

2019

 

2018

(in thousands)

Revenues    
Terminalling services

$

23,709

 

$

22,070

 

$

63,437

 

$

66,586

 

Terminalling services — related party

 

4,459

 

 

5,715

 

 

15,622

 

 

15,414

 

Fleet leases — related party

 

984

 

 

984

 

 

2,951

 

 

2,951

 

Fleet services

 

50

 

 

80

 

 

158

 

 

505

 

Fleet services — related party

 

227

 

 

227

 

 

682

 

 

682

 

Freight and other reimbursables

 

272

 

 

510

 

 

973

 

 

2,754

 

Freight and other reimbursables — related party

 

193

 

— 

 

254

 

 

4

 

Total revenues

 

29,894

 

 

29,586

 

 

84,077

 

 

88,896

 

Operating costs    
Subcontracted rail services

 

3,689

 

 

3,674

 

 

10,953

 

 

10,047

 

Pipeline fees

 

5,411

 

 

5,267

 

 

15,374

 

 

16,109

 

Freight and other reimbursables

 

465

 

 

510

 

 

1,227

 

 

2,758

 

Operating and maintenance

 

2,481

 

 

2,686

 

 

8,202

 

 

7,540

 

Operating and maintenance — related party

 

2,471

 

— 

 

2,471

 

— 

Selling, general and administrative

 

2,940

 

 

2,463

 

 

8,139

 

 

7,912

 

Selling, general and administrative — related party

 

1,406

 

 

1,893

 

 

6,081

 

 

5,640

 

Depreciation and amortization

 

5,300

 

 

5,271

 

 

15,317

 

 

15,807

 

Total operating costs

 

24,163

 

 

21,764

 

 

67,764

 

 

65,813

 

Operating income

 

5,731

 

 

7,822

 

 

16,313

 

 

23,083

 

Interest expense

 

3,005

 

 

2,827

 

 

9,174

 

 

8,025

 

Loss (gain) associated with derivative instruments

 

220

 

 

(413

)

 

1,966

 

 

(1,823

)

Foreign currency transaction loss (gain)

 

35

 

 

(89

)

 

237

 

 

(183

)

Other expense (income), net

 

(49

)

 

(1

)

 

(52

)

 

71

 

Income before income taxes

 

2,520

 

 

5,498

 

 

4,988

 

 

16,993

 

Provision for (benefit from) income taxes

 

414

 

 

(430

)

 

612

 

 

(2,247

)

Net income

$

2,106

 

$

5,928

 

$

4,376

 

$

19,240

 

USD Partners LP
Consolidated Statements of Cash Flows
For the Three and Nine Months Ended September 30, 2019 and 2018
(unaudited)
                 

For the Three Months Ended

 

For the Nine Months Ended

 

 

September 30,

 

September 30,

 

 

2019

 

2018

 

2019

 

2018

Cash flows from operating activities:

(in thousands)

Net income

$

2,106

 

$

5,928

 

$

4,376

 

$

19,240

 

Adjustments to reconcile net income to net cash provided by operating activities:        
Depreciation and amortization

 

5,300

 

 

5,271

 

 

15,317

 

 

15,807

 

Loss (gain) associated with derivative instruments

 

220

 

 

(413

)

 

1,966

 

 

(1,823

)

Settlement of derivative contracts

 

 

1

 

 

(38

)

Unit based compensation expense

 

1,537

 

 

1,438

 

 

4,533

 

 

4,333

 

Deferred income taxes

 

104

 

 

(731

)

 

(299

)

 

(3,269

)

Other

 

208

 

 

216

 

 

915

 

 

719

 

Changes in operating assets and liabilities:        
Accounts receivable

 

1,704

 

 

(845

)

 

1,511

 

 

(3,459

)

Accounts receivable – related party

 

(383

)

 

3,830

 

 

(1,054

)

 

2,450

 

Prepaid expenses and other assets

 

1,546

 

 

2,832

 

 

72

 

 

372

 

Other assets – related party

 

(369

)

 

19

 

 

(329

)

 

59

 

Accounts payable and accrued expenses

 

(2,463

)

 

(593

)

 

(411

)

 

272

 

Accounts payable and accrued expenses – related party

 

2,472

 

 

(4,174

)

 

2,429

 

 

(2,061

)

Deferred revenue and other liabilities

 

2,661

 

 

(142

)

 

5,590

 

 

(403

)

Deferred revenue – related party

 

5

 

 

(8

)

 

(462

)

 

17

 

Net cash provided by operating activities

 

14,648

 

 

12,628

 

 

34,155

 

 

32,216

 

Cash flows from investing activities:        
Additions of property and equipment

 

(4,395

)

 

(241

)

 

(7,072

)

 

(443

)

Proceeds from the sale of assets

 

 

 

 

236

 

Net cash used in investing activities

 

(4,395

)

 

(241

)

 

(7,072

)

 

(207

)

Cash flows from financing activities:        
Distributions

 

(10,477

)

 

(9,980

)

 

(30,994

)

 

(29,573

)

Payments for deferred financing costs

(7

)

 
Vested Phantom Units used for payment of participant taxes

 

(5

)

 

(4

)

 

(1,826

)

 

(1,350

)

Proceeds from long-term debt

 

8,000

 

 

2,000

 

 

28,000

 

 

20,000

 

Repayments of long-term debt

 

(8,000

)

 

(6,000

)

 

(21,000

)

 

(21,000

)

Other financing activities

 

 

 

(13

)

Net cash used in financing activities

 

(10,482

)

 

(13,984

)

 

(25,840

)

 

(31,923

)

Effect of exchange rates on cash

 

(108

)

 

174

 

 

497

 

 

(679

)

Net change in cash, cash equivalents and restricted cash

 

(337

)

 

(1,423

)

 

1,740

 

 

(593

)

Cash, cash equivalents and restricted cash – beginning of period

 

14,460

 

 

14,618

 

 

12,383

 

 

13,788

 

Cash, cash equivalents and restricted cash – end of period

$

14,123

 

$

13,195

 

$

14,123

 

$

13,195

 

         
USD Partners LP
Consolidated Balance Sheets

(unaudited)

 

 

 

 

 

 

 

 

 

September 30,

 

December 31,

 

 

2019

 

2018

ASSETS (in thousands)
Current assets    
Cash and cash equivalents

$

6,479

 

$

6,439

 

Restricted cash

 

7,644

 

 

5,944

 

Accounts receivable, net

 

3,653

 

 

5,132

 

Accounts receivable — related party

 

1,689

 

 

624

 

Prepaid expenses

 

1,435

 

 

2,115

 

Other current assets

 

404

 

 

634

 

Other current assets — related party

 

468

 

 

79

 

Total current assets

 

21,772

 

 

20,967

 

Property and equipment, net

 

148,544

 

 

145,308

 

Intangible assets, net

 

77,250

 

 

86,705

 

Goodwill

 

33,589

 

 

33,589

 

Operating lease right-of-use assets

 

13,083

 

— 

Other non-current assets

 

764

 

 

631

 

Other non-current assets — related party

 

35

 

 

95

 

Total assets

$

295,037

 

$

287,295

 

   
LIABILITIES AND PARTNERS’ CAPITAL    
Current liabilities    
Accounts payable and accrued expenses

$

4,120

 

$

3,464

 

Accounts payable and accrued expenses — related party

 

2,899

 

 

460

 

Deferred revenue

 

6,016

 

 

2,921

 

Deferred revenue — related party

 

1,464

 

 

1,885

 

Operating lease liabilities, current

 

5,075

 

— 

Other current liabilities

 

3,765

 

 

2,804

 

Total current liabilities

 

23,339

 

 

11,534

 

Long-term debt, net

 

213,444

 

 

205,581

 

Deferred income tax liabilities, net

 

70

 

 

360

 

Operating lease liabilities, non-current

 

8,275

 

— 
Other non-current liabilities

 

2,828

 

 

356

 

Total liabilities

 

247,956

 

 

217,831

 

Commitments and contingencies    
Partners’ capital    
Common units

 

67,240

 

 

107,903

 

Class A units

— 

 

1,018

 

Subordinated units

 

(21,941

)

 

(39,723

)

General partner units

 

2,888

 

 

3,275

 

Accumulated other comprehensive loss

 

(1,106

)

 

(3,009

)

Total partners’ capital

 

47,081

 

 

69,464

 

Total liabilities and partners’ capital

$

295,037

 

$

287,295

 

USD Partners LP
GAAP to Non-GAAP Reconciliations
For the Three and Nine Months Ended September 30, 2019 and 2018
(unaudited)
   

For the Three Months Ended

 

For the Nine Months Ended

September 30,

 

September 30,

2019

 

2018

 

2019

 

2018

(in thousands)
   
Net cash provided by operating activities

$

14,648

 

$

12,628

 

$

34,155

 

$

32,216

 

Add (deduct):    
Amortization of deferred financing costs

 

(208

)

 

(216

)

 

(865

)

 

(646

)

Deferred income taxes

 

(104

)

 

731

 

 

299

 

 

3,269

 

Changes in accounts receivable and other assets

 

(2,498

)

 

(5,836

)

 

(200

)

 

578

 

Changes in accounts payable and accrued expenses

 

(9

)

 

4,767

 

 

(2,018

)

 

1,789

 

Changes in deferred revenue and other liabilities

 

(2,666

)

 

150

 

 

(5,128

)

 

386

 

Interest expense, net

 

2,983

 

 

2,827

 

 

9,133

 

 

8,025

 

Provision for (benefit from) income taxes

 

414

 

 

(430

)

 

612

 

 

(2,247

)

Foreign currency transaction loss (gain) (1)

 

35

 

 

(89

)

 

237

 

 

(183

)

Other income

 

(27

)

 —

 

(69

)

 —
Non-cash deferred amounts (2)

 

1,435

 

 

(51

)

 

1,545

 

 

(154

)

Adjusted EBITDA

 

14,003

 

 

14,481

 

 

37,701

 

 

43,033

 

Add (deduct):    
Cash paid for income taxes

 

(297

)

 

(177

)

 

(904

)

 

(626

)

Cash paid for interest

 

(3,045

)

 

(2,678

)

 

(8,860

)

 

(7,499

)

Maintenance capital expenditures

 

(131

)

 

(18

)

 

(176

)

 

(98

)

Distributable cash flow

$

10,530

 

$

11,608

 

$

27,761

 

$

34,810

 

________________________

(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.

 

Multimedia Files:

Preview image

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