USD Partners LP (NYSE: USDP) (the “Partnership”) announced today
its operating and financial results for the three and six months
ended June 30, 2018. Financial highlights with respect to the
second quarter of 2018 include the following:
- Generated Net Cash Provided by
Operating Activities of $11.5 million, Adjusted EBITDA of $15.0
million and Distributable Cash Flow of $12.2 million
- Reported Net Income of $6.7
million
- Increased quarterly cash distribution
to $0.3550 per unit ($1.42 per unit on an annualized basis),
representing an increase of 4.4% over the second quarter of
2017
- Ended quarter with $203.9 million of
available liquidity and distribution coverage of approximately
1.3x
“We are proud to announce another successful quarter at the
Partnership. During the quarter, the Partnership announced the
execution of an early extension with one of its investment grade
customers at the Hardisty Terminal as well as the thirteenth
consecutive increase of its quarterly distribution, which was
supported by strong distribution coverage of approximately 1.3x,”
said Dan Borgen, the Partnership’s Chief Executive Officer. “Our
customers’ interest in negotiating extended, long-term commitments
at Hardisty well in advance of their existing contract expirations
strongly validates our strategic commercial vision, and we look
forward to updating the market with continued progress in the near
future.”
Recent Commercial Developments
On June 26, 2018, the Partnership announced that it had entered
into a multi-year renewal and extension of approximately 25% of the
capacity at its Hardisty rail terminal with one of its existing
investment grade customers. The renewal contains consistent
take-or-pay terms with minimum monthly payments and rates that
exceed those of the original terminalling services agreement.
As previously mentioned, customer activity at the Hardisty
origination terminal has increased substantially over the last
several months. Current market demand for the services provided at
the Hardisty terminal exceeds the available capacity, as
substantially all of the terminal’s capacity was previously
contracted by customers under multi-year agreements through
mid-2019 or mid-2020. As a result, the Partnership’s sponsor is
evaluating a potential expansion to meet customer demand. The
Partnership is also actively negotiating with current customers to
extend the terms of their existing take-or-pay agreements.
On June 7, 2018, USD Group LLC (“USDG”) and the Partnership
announced that USDG had executed a five-year, take-or-pay
terminalling services agreement with a high quality refiner
customer. The agreement is for trans-loading capacity at the
Hardisty rail terminal with an expected start date in late 2018.
This new agreement could support the construction of additional
capacity at the Hardisty terminal pursuant to USDG’s existing
development rights.
Second Quarter 2018 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 second quarter of 2018
relative to the same quarter in 2017 were primarily influenced by
additional revenues and costs related to the commencement of
operations at the Stroud terminal in October 2017 and the
conclusion of customer agreements at the Partnership’s San Antonio
facility in May 2017 and its Casper terminal in August 2017. In
addition, as a result of a substantial increase in customer
activity at its Hardisty terminal, the Partnership incurred
additional operating costs during the second quarter of 2018.
Net Cash Provided by Operating Activities increased by 21%
relative to the second quarter of 2017, primarily due to the timing
of receipts and payments on accounts receivable, accounts payable
and deferred revenue balances.
Adjusted EBITDA decreased by 3% and Distributable Cash Flow
increased by 2% relative to the second quarter of 2017.
Net income for the quarter decreased by 22% as compared to the
second quarter of 2017, primarily as a result of a decrease in the
Partnership’s estimated benefit from income taxes of approximately
$1.4 million.
As of June 30, 2018, the Partnership had total available
liquidity of $203.9 million, including $8.9 million of unrestricted
cash and cash equivalents and undrawn borrowing capacity of $195.0
million on its $400.0 million senior secured credit facility,
subject to continued compliance with financial covenants. The
Partnership is in compliance with its financial covenants and has
no maturities under its senior secured credit facility until
October 2019.
On July 27, 2018, the Partnership declared a quarterly cash
distribution of $0.3550 per unit ($1.42 per unit on an annualized
basis), which represents growth of 0.7% relative to the first
quarter of 2018 and 4.4% relative to the second quarter of 2017.
The distribution is payable on August 14, 2018, to unitholders of
record at the close of business on August 7, 2018.
Effective January 1, 2018, the Partnership adopted the
requirements of Accounting Standards Update 2014-09, or ASC 606,
which provides a single comprehensive model for entities to use in
accounting for revenue arising from contracts with customers. The
Partnership adopted ASC 606 by applying the full retrospective
approach, resulting in the restatement of prior period financial
statements to comply with the new standard.
Second Quarter 2018 Conference Call Information
The Partnership will host a conference call and webcast
regarding second quarter 2018 results at 11:00 a.m. Eastern Time
(10:00 a.m. Central Time) on Tuesday, August 7, 2018.
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 7588437. 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 7588437. 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.
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 amount and timing of the Partnership’s second
quarter 2018 cash distribution, as well as statements regarding
production growth in Western Canada, demand for rail takeaway
capacity in Western Canada and the Partnership’s ability to meet
that demand, the Partnership’s ability to achieve long-term
contracts and contract renewals and the ability of the
Partnership’s Sponsor to commercialize and develop expansion
capacity at the Hardisty terminal. 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 our 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.
USD Partners LP
Consolidated Statements of
Income
For the Three and Six Months Ended June 30, 2018 and 2017
(unaudited)
For the Three Months Ended For the Six Months
Ended June 30, June 30,
2018
2017
2018
2017
(in thousands)
Revenues Terminalling services $ 22,169 $
21,981 $ 43,832 $ 45,658 Terminalling services — related party
5,003 2,614 9,699 4,354 Fleet leases — 643 — 1,286 Fleet leases —
related party 983 891 1,967 1,781 Fleet services 81 467 425 935
Fleet services — related party 228 279 455 558 Freight and other
reimbursables 1,111 208 2,928 365 Freight and other reimbursables —
related party 2 — 4
1
Total revenues 29,577
27,083 59,310
54,938 Operating costs Subcontracted rail
services 3,311 1,795 6,373 3,808 Pipeline fees 5,118 5,109 10,842
10,829 Fleet leases 987 1,534 1,977 3,067 Freight and other
reimbursables 1,113 208 2,932 366 Operating and maintenance 1,169
594 2,193 1,301 Selling, general and administrative 2,455 2,362
5,449 4,677 Selling, general and administrative — related party
1,917 1,396 3,747 2,828 Depreciation and amortization 5,260
4,969 10,536 9,910
Total operating costs 21,330
17,967 44,049
36,786 Operating income 8,247
9,116 15,261 18,152 Interest expense 2,713
2,513 5,198 5,120 Loss (gain) associated with derivative
instruments (386 ) 401 (1,410 ) 612 Foreign currency transaction
loss (gain) 117 (100 ) (94 ) (70 ) Other expense (income), net
1 (3 ) 72 (13 )
Income before income taxes
5,802 6,305 11,495 12,503 Benefit from
income taxes (910 ) (2,336 ) (1,817 )
(1,201 )
Net income $ 6,712 $
8,641 $ 13,312 $
13,704 USD Partners LP
Consolidated Statements of Cash Flows For the Three and
Six Months Ended June 30, 2018 and 2017 (unaudited)
For the
Three Months Ended For the Six Months Ended June
30, June 30,
2018
2017
2018
2017
(in thousands)
Cash flows from operating activities:
Net income $ 6,712 $ 8,641 $ 13,312 $ 13,704 Adjustments to
reconcile net income to net cash provided by operating activities:
Depreciation and amortization 5,260 4,969 10,536 9,910 Loss (gain)
associated with derivative instruments (386 ) 401 (1,410 ) 612
Settlement of derivative contracts — 91 (38 ) 390 Unit based
compensation expense 1,558 1,218 2,895 2,016 Other (1,031 ) 570
(2,035 ) 802 Changes in operating assets and liabilities: Accounts
receivable 5,735 (459 ) (2,614 ) (424 ) Accounts receivable —
related party (2,593 ) (34 ) (1,380 ) 179 Prepaid expenses,
inventory and other assets (2,299 ) (2,947 ) (2,460 ) (1,065 )
Other assets — related party 20 — 40 — Accounts payable and accrued
expenses 1,752 (1,409 ) 865 (1,316 ) Accounts payable and accrued
expenses — related party 2,491 (77 ) 2,113 230 Deferred revenue and
other liabilities (5,760 ) (2,428 ) (261 ) (3,666 ) Deferred
revenue — related party 25 929
25 929 Net cash provided by operating
activities
11,484 9,465
19,588 22,301 Cash
flows from investing activities: Additions of property and
equipment (124 ) (25,647 ) (202 ) (25,773 ) Proceeds from the sale
of assets — — 236
— Net cash provided by (used in) investing activities
(124 ) (25,647 )
34 (25,773 ) Cash flows from
financing activities: Distributions (9,904 ) (8,239 ) (19,593 )
(16,142 ) Vested phantom units used for payment of participant
taxes — (2 ) (1,346 ) (1,072 ) Net proceeds from issuance of common
units — 33,700 — 33,700 Proceeds from long-term debt 9,000 35,000
18,000 40,000 Repayments of long-term debt (7,000 )
(41,000 ) (15,000 ) (57,342 ) Net cash provided by
(used in) financing activities
(7,904 )
19,459 (17,939 )
(856 ) Effect of exchange rates on cash (175 )
98 (853 ) 247
Net change in cash, cash equivalents and
restricted cash
3,281 3,375 830 (4,081 ) Cash, cash equivalents and restricted cash
– beginning of period 11,337 9,682
13,788 17,138 Cash, cash equivalents
and restricted cash – end of period
$ 14,618
$ 13,057 $ 14,618
$ 13,057 USD Partners LP
Consolidated Balance Sheets (unaudited)
June 30, December 31, 2018
2017 ASSETS (in thousands) Current assets Cash and
cash equivalents $ 8,926 $ 7,874 Restricted cash 5,692 5,914
Accounts receivable, net 6,727 4,171 Accounts receivable — related
party 899 410 Prepaid expenses 2,190 2,545 Inventory 2,783 — Other
current assets 1,684 226 Other current assets — related party
79 79 Total current assets 28,980
21,219 Property and equipment, net 139,603 146,573 Intangible
assets, net 93,009 99,312 Goodwill 33,589 33,589 Other non-current
assets 136 145 Other non-current assets — related party 134
174
Total assets $
295,451 $ 301,012
LIABILITIES AND PARTNERS’ CAPITAL Current liabilities
Accounts payable and accrued expenses $ 3,530 $ 2,670 Accounts
payable and accrued expenses — related party 1,042 244
Deferred revenue
2,913 3,291
Deferred revenue — related party
1,940 1,986
Other current liabilities
2,614 2,339 Total current liabilities
12,039 10,530 Long-term debt, net 204,057 200,627 Deferred income
tax liability, net 1,823 4,490
Other non-current liabilities
416 475
Total liabilities
218,335 216,122 Commitments and
contingencies Partners’ capital Common units 114,822 136,645 Class
A units 950 1,468 Subordinated units (37,797 ) (55,237 ) General
partner units 95 180 Accumulated other comprehensive income (loss)
(954 ) 1,834
Total partners’ capital
77,116 84,890 Total
liabilities and partners’ capital $ 295,451
$ 301,012 USD Partners
LP GAAP to Non-GAAP Reconciliations For the Three and
Six Months Ended June 30, 2018 and 2017 (unaudited)
For the
Three Months Ended For the Six Months Ended June
30, June 30, 2018 2017 2018
2017 (in thousands)
Net cash provided by operating
activities $ 11,484 $ 9,465
$ 19,588 $ 22,301 Add (deduct):
Amortization of deferred financing costs (215 ) (215 ) (430 ) (430
) Deferred income taxes 1,248 (346 ) 2,538 (354 ) Changes in
accounts receivable and other assets (863 ) 3,440 6,414 1,310
Changes in accounts payable and accrued expenses (4,243 ) 1,486
(2,978 ) 1,086 Changes in deferred revenue and other liabilities
5,735 1,499 236 2,737 Interest expense, net 2,713 2,513 5,198 5,116
Benefit from income taxes (910 ) (2,336 ) (1,817 ) (1,201 ) Foreign
currency transaction loss (gain) (1) 117 (100 ) (94 ) (70 ) Other
income — (6 ) — (21 ) Non-cash contract asset (2) (52 )
— (103 ) —
Adjusted
EBITDA 15,014 15,400 28,552 30,474
Add (deduct): Cash paid for income taxes (3) (267 ) (798 ) (449 )
(1,414 ) Cash paid for interest (2,530 ) (2,575 ) (4,821 ) (4,937 )
Maintenance capital expenditures (31 ) (72 )
(80 ) (198 )
Distributable cash flow $
12,186 $ 11,955 $
23,202 $ 23,925 (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
agreements. (3) Includes a partial refund of $0.7 million
(representing C$0.9 million) received in the three months ended
March 31, 2017, for the Partnership's 2015 foreign income taxes.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20180806005644/en/
USD Partners LPAdam Altsuler, 281-291-3995Senior Vice
President, Chief Financial Officeraaltsuler@usdg.comorJennifer
Waller, 832-991-8383Financial Reporting Managerjwaller@usdg.com
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