USD Partners LP (NYSE: USDP) (the “Partnership”) announced today
its operating and financial results for the three and nine months
ended September 30, 2021. Financial highlights with respect to the
third quarter of 2021 include the following:
- Generated Net Cash Provided by Operating Activities of $11.0
million, Adjusted EBITDA(1) of $12.3 million and Distributable Cash
Flow(1) of $10.7 million
- Reported Net Income of $3.8 million
- Amended and extended existing revolving credit agreement,
extending the maturity date by one year to November 2, 2023
- Increased quarterly cash distribution to $0.1185 per unit
($0.474 per unit on an annualized basis) with over 3.0x
Distributable Cash Flow Coverage(2)
“During the third quarter, we were excited to announce that
construction of the Sponsor’s Diluent Recovery Unit, or DRU, and
its destination facility at Port Arthur were completed,” said Dan
Borgen, the Partnership’s Chief Executive Officer. “Both the DRU
and the Port Arthur Terminal are now operating in the start-up
phase, and throughput volumes are consistent with contractual
obligations and our customer’s expectations. As mentioned
previously, our DRUbit™ by Rail™ network has already enhanced the
sustainability and quality of the Partnership’s cash flows by
significantly increasing the tenor of three terminalling services
agreements at the Partnership’s Hardisty terminal, representing
approximately 32% of the terminal’s capacity, through 2031. In
addition, our DRUbit™ by Rail™ network provides transportation
safety and environmental benefits to our customers, as well as
increased market access and additional jobs along the rail
routes.”
“We continue to be very excited about our future as we engage
with our customers regarding the second phase of USD’s growth,
which could include a second DRU customer commitment, with the
resulting DRUbit™ available to be transloaded through the
Partnership’s Hardisty rail terminal to the Gulf Coast and other
potential destinations,” added Mr. Borgen. “We look forward to
keeping our investors updated with future announcements regarding
the DRU.”
“The Partnership also announced it has successfully amended and
extended its senior secured credit facility for an additional
year,” said Adam Altsuler, the Partnership’s Chief Financial
Officer. “The success of the extension was largely due to our
supportive bank group, our strong contracted cash flows and
conservative leverage position, and the positive market outlook for
our strategically located assets.”
Partnership’s Third Quarter 2021 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
2021 relative to the same quarter in 2020 were primarily influenced
by lower revenue at the Stroud terminal during the quarter
associated with the existing DRU customer electing to reduce its
contracted volume commitments by one-third of their previous
commitment effective August 2021, which was primarily driven by the
successful commencement of the DRU. These factors were partially
offset by slightly higher revenue at the Hardisty terminal in the
third quarter of 2021 relative to the third quarter of 2020 due to
a favorable variance resulting from the change in the Canadian
exchange rate associated with the Partnership’s Canadian-dollar
denominated contracts.
The Partnership experienced higher operating costs during the
third quarter of 2021 as compared to the third quarter of 2020
primarily attributable to an increase in subcontracted rail
services costs due to increased throughput.
Net income decreased in the third quarter of 2021 as compared to
the third quarter of 2020, primarily because of the operating
factors discussed above coupled with a non-cash foreign currency
transaction loss in the third quarter of 2021 as compared to a
non-cash gain recognized in the 2020 comparative period. Partially
offsetting was lower interest expense incurred during the 2021
period resulting from lower interest rates and a lower weighted
average balance of debt outstanding and a small non-cash gain
associated with the Partnership’s interest rate derivatives during
the third quarter of 2021 as compared to a non-cash loss during the
same period in 2020.
Net Cash Provided by Operating Activities for the quarter
decreased 34% relative to the third quarter of 2020, primarily due
to the operating factors discussed above and 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
21% and 24%, respectively, for the quarter relative to the third
quarter of 2020. 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 income taxes and higher
maintenance capital expenditures incurred during the current
quarter, which included technology upgrades and safety maintenance
at the Partnership’s Hardisty and Stroud terminals. Partially
offsetting was a decrease in cash paid for interest during the
quarter.
As of September 30, 2021, the Partnership had approximately $4.4
million of unrestricted cash and cash equivalents and undrawn
borrowing capacity of $211.0 million on its $385.0 million senior
secured credit facility, subject to the Partnership’s continued
compliance with financial covenants. As of the end of the third
quarter of 2021, the Partnership had borrowings of $174.0 million
outstanding under the revolving credit facility. The Partnership
was in compliance with its financial covenants, as of September 30,
2021.
On October 29, 2021 the Partnership and its subsidiaries entered
into an amendment to its senior secured credit facility with its
bank group. Among other things, the amendment extends the maturity
date by one year to November 2, 2023 and decreases the aggregate
revolving commitments of the lenders from $385 million to $275
million. After giving effect to the amendment, the Partnership has
the ability to request one additional one-year maturity date
extension, subject to the satisfaction of certain conditions,
including consent of the lenders. The terms and conditions of the
senior secured credit facility, as amended, are substantially
similar to the terms and conditions in the senior secured credit
facility prior to the amendment, except that the senior secured
credit facility, as amended, sets forth provisions for replacing
LIBOR with an alternative benchmark rate.
Pursuant to the terms of the Partnership’s senior secured credit
facility, as amended, the Partnership’s borrowing capacity
continues to be limited to 4.5 times its trailing 12-month
consolidated EBITDA, as defined in the senior secured credit
facility. As such, the Partnership’s available borrowings under the
senior secured credit facility, including unrestricted cash and
cash equivalents, was approximately $92 million as of September 30,
2021.
On October 21, 2021, the Partnership declared a quarterly cash
distribution of $0.1185 per unit ($0.474 per unit on an annualized
basis), representing an increase of $0.0025 per unit, or 2.2% over
the distribution declared for the second quarter of 2021. The
distribution is payable on November 12, 2021, to unitholders of
record at the close of business on November 3, 2021.
Since the end of the first quarter of 2020, the Partnership has
reduced the outstanding balance of its revolving credit facility by
$50 million as of September 30, 2021.
Third Quarter 2021 Conference Call Information
The Partnership will host a conference call and webcast
regarding third quarter 2021 results at 11:00 a.m. Eastern Time
(10:00 a.m. Central Time) on Wednesday November 3, 2021.
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 (866)
342-8591 domestically or +1 (203) 518-9713 internationally,
conference ID 2035204. 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) 839-4514 domestically or +1 (402)
220-2680 internationally, conference ID 2035204. 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 (“USD”) 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, refiners and marketers. 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.
USD, 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. USD’s 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, USD, along with its partner Gibson Energy, Inc., is
progressing on a long-term solution to transport heavier grades of
crude oil produced in Western Canada to the U.S Gulf Coast through
a Diluent Recovery Unit at the Hardisty Terminal and USD’s
destination terminal in Port Arthur, Texas. Both projects are
currently operating in the start-up phase. USD is also 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 is not part of this release.
DRUbit™ and DRUbit™ by Rail™ are registered trademarks of DRU
Assets LLC, a wholly-owned subsidiary of USD. All rights
reserved.
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 in 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 USD to achieve
contract extensions and commitments, new customer agreements and
expansions; the ability of the Partnership and USD to develop
existing and future additional projects and expansion opportunities
and whether those projects and opportunities developed by USD would
be made available for acquisition, or acquired, by the Partnership;
the impact of the West Colton Renewable Diesel project; the impact
of the completion of USD’s DRU project; volumes at, and demand for,
the Partnership’s terminals; the amount and timing of future
distribution payments and distribution growth; and statements about
actions by third parties. Words and phrases such as “expect,”
“progressing on,” “plan,” “intent,” “believes,” “projects,”
“begin,” “anticipates,” “subject to” 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, USD’s projects
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 the impact of
the novel coronavirus (COVID-19) pandemic and related economic
impact and changes in general economic conditions and commodity
prices, as well as those factors set forth under the heading “Risk
Factors” and elsewhere 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 (many of which may be
amplified by the COVID-19 pandemic and the significant volatility
in demand for, and fluctuations in the prices of, crude oil,
natural gas and natural gas liquids). 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” and
reconciliations of Net Cash Provided by Operating Activities, the
most directly comparable GAAP measure, to Adjusted EBITDA and
Distributable Cash Flow in this press release.
(2)
The Partnership calculates
quarterly Distributable Cash Flow Coverage by dividing
Distributable Cash Flow for the quarter as presented in this press
release by the cash distributions declared for the quarter, or
approximately $3.3 million.
USD Partners LP Consolidated Statements of Operations
For the Three and Nine Months Ended September 30, 2021 and
2020 (unaudited)
For the Three Months
Ended
For the Nine Months
Ended
September 30,
September 30,
2021
2020
2021
2020
(in thousands)
Revenues Terminalling services
$
28,070
$
28,905
$
87,167
$
75,449
Terminalling services — related party
313
1,041
2,527
8,929
Fleet leases — related party
984
984
2,951
2,951
Fleet services
—
51
24
152
Fleet services — related party
227
227
682
682
Freight and other reimbursables
170
64
533
750
Freight and other reimbursables — related party
—
65
—
66
Total revenues
29,764
31,337
93,884
88,979
Operating costs Subcontracted rail services
3,693
2,300
10,357
8,433
Pipeline fees
6,031
5,936
18,475
17,678
Freight and other reimbursables
170
129
533
816
Operating and maintenance
2,538
2,299
7,972
7,944
Operating and maintenance — related party
1,959
2,102
6,150
6,194
Selling, general and administrative
2,596
2,510
8,063
8,310
Selling, general and administrative — related party
1,649
1,735
4,951
5,563
Goodwill impairment loss
—
—
—
33,589
Depreciation and amortization
5,604
5,430
16,575
16,055
Total operating costs
24,240
22,441
73,076
104,582
Operating income (loss)
5,524
8,896
20,808
(15,603
)
Interest expense
1,480
2,045
4,806
7,040
Loss (gain) associated with derivative instruments
(110
)
1,200
(2,468
)
4,405
Foreign currency transaction loss (gain)
294
(246
)
192
812
Other expense (income), net
3
(33
)
(13
)
(876
)
Income (loss) before income taxes
3,857
5,930
18,291
(26,984
)
Provision for (benefit from) income taxes
49
(307
)
439
(626
)
Net income (loss)
$
3,808
$
6,237
$
17,852
$
(26,358
)
USD Partners LP Consolidated Statements of Cash Flows
For the Three and Nine Months Ended September 30, 2021 and
2020 (unaudited)
For the Three Months
Ended
For the Nine Months
Ended
September 30,
September 30,
2021
2020
2021
2020
Cash flows from operating activities: (in thousands) Net
income (loss)
$
3,808
$
6,237
$
17,852
$
(26,358
)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities: Depreciation and amortization
5,604
5,430
16,575
16,055
Loss (gain) associated with derivative instruments
(110
)
1,200
(2,468
)
4,405
Settlement of derivative contracts
(286
)
(342
)
(829
)
(631
)
Unit based compensation expense
1,357
1,644
4,274
4,909
Loss associated with disposal of assets
6
—
11
—
Deferred income taxes
(135
)
(722
)
(225
)
(1,263
)
Amortization of deferred financing costs
208
208
622
622
Goodwill impairment loss
—
—
—
33,589
Changes in operating assets and liabilities: Accounts receivable
861
202
12
892
Accounts receivable – related party
(1,251
)
(12
)
(182
)
(758
)
Prepaid expenses and other assets
734
268
1,467
(1,303
)
Other assets – related party
(31
)
(389
)
(837
)
(899
)
Accounts payable and accrued expenses
102
536
684
(609
)
Accounts payable and accrued expenses – related party
(48
)
9
(84
)
(78
)
Deferred revenue and other liabilities
146
2,372
768
6,218
Deferred revenue and other liabilities – related party
20
(7
)
44
(1,031
)
Net cash provided by operating activities
10,985
16,634
37,684
33,760
Cash flows from investing activities: Additions of property
and equipment
(961
)
(18
)
(2,345
)
(395
)
Net cash used in investing activities
(961
)
(18
)
(2,345
)
(395
)
Cash flows from financing activities: Distributions
(3,375
)
(3,183
)
(9,861
)
(17,020
)
Vested Phantom Units used for payment of participant taxes
(2
)
(1
)
(859
)
(1,789
)
Proceeds from long-term debt
—
2,000
—
12,000
Repayments of long-term debt
(5,000
)
(11,000
)
(23,000
)
(23,000
)
Net cash used in financing activities
(8,377
)
(12,184
)
(33,720
)
(29,809
)
Effect of exchange rates on cash
13
(145
)
(135
)
293
Net change in cash, cash equivalents and restricted cash
1,660
4,287
1,484
3,849
Cash, cash equivalents and restricted cash – beginning of period
10,818
10,246
10,994
10,684
Cash, cash equivalents and restricted cash – end of period
$
12,478
$
14,533
$
12,478
$
14,533
USD Partners LP Consolidated Balance Sheets
(unaudited)
September 30,
December 31,
2021
2020
ASSETS (in thousands) Current assets Cash and cash
equivalents
$
4,392
$
3,040
Restricted cash
8,086
7,954
Accounts receivable, net
4,043
4,049
Accounts receivable — related party
2,658
2,460
Prepaid expenses
2,609
1,959
Other current assets
129
1,777
Other current assets — related party
259
15
Total current assets
22,176
21,254
Property and equipment, net
135,243
139,841
Intangible assets, net
52,037
61,492
Operating lease right-of-use assets
7,047
9,630
Other non-current assets
3,876
3,625
Other non-current assets — related party
2,290
1,706
Total assets
$
222,669
$
237,548
LIABILITIES AND PARTNERS’ CAPITAL Current liabilities
Accounts payable and accrued expenses
$
2,566
$
1,865
Accounts payable and accrued expenses — related party
299
383
Deferred revenue
5,569
6,367
Deferred revenue — related party
410
410
Operating lease liabilities, current
5,180
5,291
Other current liabilities
6,963
4,222
Other current liabilities — related party
28
—
Total current liabilities
21,015
18,538
Long-term debt, net
173,102
195,480
Operating lease liabilities, non-current
1,823
4,392
Other non-current liabilities
9,303
12,870
Other non-current liabilities — related party
16
—
Total liabilities
205,259
231,280
Commitments and contingencies Partners’ capital Common units
14,806
3,829
General partner units
2,026
1,892
Accumulated other comprehensive income
578
547
Total partners’ capital
17,410
6,268
Total liabilities and partners’ capital
$
222,669
$
237,548
USD Partners LP GAAP to Non-GAAP Reconciliations
For the Three and Nine Months Ended September 30, 2021 and
2020 (unaudited)
For the Three Months
Ended
For the Nine Months
Ended
September 30,
September 30,
2021
2020
2021
2020
(in thousands)
Net cash provided by operating activities
$
10,985
$
16,634
$
37,684
$
33,760
Add (deduct): Amortization of deferred financing costs
(208
)
(208
)
(622
)
(622
)
Deferred income taxes
135
722
225
1,263
Changes in accounts receivable and other assets
(313
)
(69
)
(460
)
2,068
Changes in accounts payable and accrued expenses
(54
)
(545
)
(600
)
687
Changes in deferred revenue and other liabilities
(166
)
(2,365
)
(812
)
(5,187
)
Interest expense, net
1,479
2,036
4,803
7,004
Provision for (benefit from) income taxes
49
(307
)
439
(626
)
Foreign currency transaction loss (gain) (1)
294
(246
)
192
812
Non-cash deferred amounts (2)
118
(16
)
2,344
1,540
Adjusted EBITDA
12,319
15,636
43,193
40,699
Add (deduct): Cash received (paid) for income taxes (3)
(144
)
260
(678
)
(173
)
Cash paid for interest
(1,309
)
(1,880
)
(4,296
)
(6,837
)
Maintenance capital expenditures
(158
)
(16
)
(596
)
(130
)
Distributable cash flow
$
10,708
$
14,000
$
37,623
$
33,559
____________________________
(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.
(3)
Includes the net effect of tax refunds of $480 thousand received in
the third quarter of 2020 associated with carrying back U.S. net
operating losses incurred during 2020 and prior periods allowed for
by the provisions of the CARES Act.
Category: Earnings
View source
version on businesswire.com: https://www.businesswire.com/news/home/20211102006324/en/
Adam Altsuler Executive Vice President, Chief Financial Officer
(281) 291-3995 aaltsuler@usdg.com
Jennifer Waller Director, Financial Reporting and Investor
Relations (832) 991-8383 jwaller@usdg.com
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