USD Partners LP (NYSE: USDP) (the “Partnership”) announced today
its operating and financial results for the three months ended
March 31, 2022. Financial highlights with respect to the first
quarter of 2022 include the following:
- Generated Net Cash Provided by Operating Activities of $10.7
million, Adjusted EBITDA(1) of $10.0 million and Distributable Cash
Flow(1) of $8.4 million
- Reported Net Income of $9.0 million
- Declared a quarterly cash distribution of $0.1235 per unit
($0.494 per unit on an annualized basis) with approximately 2.4x
Distributable Cash Flow Coverage(2)
“We are pleased to announce another eventful quarter at the
Partnership,” said Dan Borgen, the Partnership’s Chief Executive
Officer. “During the first quarter, we announced the acquisition of
Hardisty South from USDG as well as the simplification of the
Partnership’s financial structure by eliminating its IDRs and
economic GP interest. We feel that this was an appropriate step to
maintain our momentum in 2022 as we continue to see opportunities
for our DRUbit™ by Rail™ network to provide safer and more economic
benefits to our customers.”
“The acquisition of Hardisty South is expected to provide the
Partnership with a growth platform by which it can realize the
accretion and additional long-term commitments that our DRUbit™ by
Rail™ network is able to support. Also, simplifying the
Partnership’s structure was critical to our growth strategy in
further aligning our interests with our unitholders,” added Mr.
Borgen. “Consistent with our expectations from the transaction, the
Partnership’s board approved another increase to our quarterly cash
distribution with respect to the first quarter of $0.0025 per
unit.”
Acquisition of Hardisty South
On April 6, 2022, the Partnership announced that it had closed
the acquisition of the Hardisty South Terminal assets (“Hardisty
South”) from USD Group LLC (“USDG” or the “Sponsor”), and exchanged
the Sponsor’s economic general partner interest in the Partnership
(“GP Interest”) for a non-economic GP Interest and eliminated the
Sponsor’s incentive distribution rights (“IDRs”) in the Partnership
for total consideration of $75 million in cash and approximately
5.75 million common units (the “Transaction”). The cash portion of
the transaction was funded with borrowings under the Partnership’s
$275 million senior secured credit facility.
Today, the Partnership’s combined Hardisty Terminal has the
designed takeaway capacity of three and one-half unit trains per
day, or approximately 262,500 barrels per day, including the
newly-acquired Hardisty South Terminal. The acquisition of the
Hardisty South Terminal increases the size, scale and growth
capacity of the Partnership’s asset base, while optimizing
operational and commercial synergies of the Hardisty Terminal in
order to capitalize on the growth benefits associated with the
Sponsor’s Diluent Recovery Unit (“DRU”) program.
The Transaction was approved by the Board of Directors of the
general partner of the Partnership based on the approval and
recommendation of its Conflicts Committee, which consists entirely
of independent directors.
Partnership’s First Quarter 2022 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 first quarter of
2022 relative to the same quarter in 2021 were primarily influenced
by lower revenue at its Stroud terminal during the quarter. This
lower revenue was associated with a decrease in contracted volume
commitments at the terminal that became effective August 2021,
partially offset by recognizing previously deferred revenue in the
current quarter associated with the make-up right options we
granted to our customers as compared to a deferral of revenue in
the prior year period associated with make-up right options. The
Partnership also had lower storage revenue generated by our Casper
Terminal associated with the end of one of our customer contracts
that occurred in September 2021. Partially offsetting these
decreases in revenue was higher revenue at our West Colton Terminal
due to the commencement of the renewable diesel contract that
occurred in December 2021.
The Partnership experienced higher operating costs during the
first quarter of 2022 as compared to the first quarter of 2021
primarily attributable to an increase in operating and maintenance
costs at the Hardisty Terminal for increased operational supplies
and utilities costs resulting from increased throughput volumes and
higher fuel costs. The Partnership also experienced higher selling,
general and administrative costs during the current quarter as
compared to the first quarter in 2021, mainly due to approximately
$0.5 million of legal and consulting fees incurred in the current
period related to the aforementioned acquisition of the Hardisty
South Terminal.
Net income increased in the first quarter of 2022 as compared to
the first quarter of 2021. The impact of the operating factors
discussed above to Net income were offset by a larger non-cash gain
associated with the Partnership’s interest rate derivatives and
lower interest expense incurred during the first quarter of 2022
resulting from lower interest rates and a lower weighted average
balance of debt outstanding during the quarter as compared to the
first quarter of 2021.
Net Cash Provided by Operating Activities for the quarter
decreased 15% relative to the first quarter of 2021, 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
31% and 33%, respectively, for the quarter relative to the first
quarter of 2021. The decrease in Adjusted EBITDA and DCF was
primarily a result of the factors discussed above. Adjusted EBITDA
and DCF for the three months ended March 31, 2022 include the
impact of the aforementioned $0.5 million of transaction expenses
incurred during the period associated with our recent drop down
acquisition of the Hardisty South Terminal assets. Additionally,
DCF was impacted by higher cash paid for taxes, partially offset by
a decrease in cash paid for interest and maintenance capital
expenditures during the quarter. The Partnership expects to incur
between approximately $2.0 million and $2.5 million of additional
expenses during the second quarter of 2022 associated with the
acquisition.
As of March 31, 2022, the Partnership had approximately $4.5
million of unrestricted cash and cash equivalents and undrawn
borrowing capacity of $112.0 million on its $275.0 million senior
secured credit facility, subject to the Partnership’s continued
compliance with financial covenants. As of the end of the first
quarter of 2022, the Partnership had borrowings of $163.0 million
outstanding under its revolving credit facility. The Partnership
was in compliance with its financial covenants as of March 31,
2022.
Subsequent to March 31, 2022, the Partnership borrowed an
additional $75.0 million under the senior secured credit facility
to finance the cash portion of the Hardisty South acquisition. As
such, the Partnership had outstanding borrowings of $238.0 million
as of May 2, 2022 and available undrawn borrowing capacity under
our senior secured credit facility of $37.0 million, subject to our
continued compliance with financial covenants. Our acquisition of
Hardisty South is treated as a Material Acquisition under the terms
of our senior secured credit facility. As a result, our borrowing
capacity will be limited to 5.0 times our 12-month trailing
consolidated EBITDA through December 31, 2022, at which point it
will revert to 4.5 times our 12-month trailing consolidated
EBITDA.
On April 21, 2022, the Partnership declared a quarterly cash
distribution of $0.1235 per unit ($0.494 per unit on an annualized
basis), representing an increase of $0.0025 per unit, or 2.1% over
the distribution declared for the fourth quarter of 2021. The
distribution is payable on May 13, 2022, to unitholders of record
at the close of business on May 4, 2022.
First Quarter 2022 Conference Call Information
The Partnership will host a conference call and webcast
regarding first quarter 2022 results at 11:00 a.m. Eastern Time
(10:00 a.m. Central Time) on Thursday, May 5, 2022.
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)
518-6930 domestically or +1 (203) 518-9797 internationally,
conference ID 9626417. 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 (888) 269-5319 domestically or +1 (402)
220-7322 internationally, conference ID 9626417. 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 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 is 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 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, new customer agreements and expansions; the
ability of the Partnership and USD to develop existing and future
additional projects and expansion opportunities (including
successful completion of USD’s DRU) and whether those projects and
opportunities developed by USD would be made available for
acquisition, or acquired, by the Partnership; volumes at, and
demand for, the Partnership’s terminals; the acquisition of the
Hardisty South Terminal from USDG; and the amount and timing of
future distribution payments and distribution growth. Words and
phrases such as “expect,” “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 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 downturn 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 volatility in demand for and
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 $3.5
million.
USD Partners LP Consolidated Statements of Operations
For the Three Months Ended March 31, 2022 and 2021
(unaudited)
For the Three Months
Ended
March 31,
2022
2021
(in thousands)
Revenues Terminalling services
$
28,185
$
28,105
Terminalling services — related party
655
1,103
Fleet leases — related party
912
984
Fleet services
—
24
Fleet services — related party
299
227
Freight and other reimbursables
78
156
Total revenues
30,129
30,599
Operating costs Subcontracted rail services
3,252
3,141
Pipeline fees
6,060
6,046
Freight and other reimbursables
78
156
Operating and maintenance
3,034
2,832
Operating and maintenance — related party
2,206
2,090
Selling, general and administrative
3,223
3,056
Selling, general and administrative — related party
2,032
1,677
Depreciation and amortization
5,507
5,471
Total operating costs
25,392
24,469
Operating income
4,737
6,130
Interest expense
1,385
1,735
Gain associated with derivative instruments
(6,084
)
(3,076
)
Foreign currency transaction loss (gain)
47
(61
)
Other income, net
(23
)
(20
)
Income before income taxes
9,412
7,552
Provision for income taxes
421
224
Net income
$
8,991
$
7,328
USD Partners LP Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 2022 and 2021
(unaudited)
For the Three Months
Ended
March 31,
2022
2021
Cash flows from operating activities:
(in thousands)
Net income
$
8,991
$
7,328
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization
5,507
5,471
Gain associated with derivative instruments
(6,084
)
(3,076
)
Settlement of derivative contracts
(273
)
(264
)
Unit based compensation expense
1,237
1,512
Deferred income taxes
144
(18
)
Amortization of deferred financing costs
272
207
Changes in operating assets and liabilities: Accounts receivable
(5,060
)
(402
)
Accounts receivable – related party
154
(84
)
Prepaid expenses, inventory and other assets
2,360
884
Other assets – related party
65
(394
)
Accounts payable and accrued expenses
4,034
290
Accounts payable and accrued expenses – related party
906
(25
)
Deferred revenue and other liabilities
(1,529
)
1,212
Deferred revenue and other liabilities – related party
(16
)
4
Net cash provided by operating activities
10,708
12,645
Cash flows from investing activities: Additions of property
and equipment
(135
)
(483
)
Net cash used in investing activities
(135
)
(483
)
Cash flows from financing activities: Distributions
(3,518
)
(3,183
)
Payments for deferred financing costs
(13
)
—
Vested Phantom Units used for payment of participant taxes
(1,052
)
(857
)
Repayments of long-term debt
(5,000
)
(8,000
)
Net cash used in financing activities
(9,583
)
(12,040
)
Effect of exchange rates on cash
21
(95
)
Net change in cash, cash equivalents and restricted cash
1,011
27
Cash, cash equivalents and restricted cash – beginning of period
10,923
10,994
Cash, cash equivalents and restricted cash – end of period
$
11,934
$
11,021
USD Partners LP
Consolidated Balance
Sheets
(unaudited)
March 31,
December 31,
2022
2021
ASSETS
(in thousands)
Current assets Cash and cash equivalents
$
4,495
$
3,747
Restricted cash
7,439
7,176
Accounts receivable, net
10,773
5,688
Accounts receivable — related party
2,817
2,953
Prepaid expenses
3,206
3,857
Inventory
1,667
3,027
Other current assets
1,567
129
Other current assets — related party
264
260
Total current assets
32,228
26,837
Property and equipment, net
131,446
133,102
Intangible assets, net
45,734
48,886
Operating lease right-of-use assets
4,214
5,658
Other non-current assets
8,855
4,881
Other non-current assets — related party
2,196
2,227
Total assets
$
224,673
$
221,591
LIABILITIES AND PARTNERS’ CAPITAL Current liabilities
Accounts payable and accrued expenses
$
11,527
$
7,621
Accounts payable and accrued expenses — related party
2,393
1,486
Deferred revenue
5,850
6,889
Operating lease liabilities, current
3,285
4,674
Other current liabilities
8,011
7,223
Other current liabilities — related party
48
64
Total current liabilities
31,114
27,957
Long-term debt, net
161,275
166,003
Operating lease liabilities, non-current
778
793
Other non-current liabilities
6,297
7,751
Total liabilities
199,464
202,504
Commitments and contingencies Partners’ capital Common units
21,835
16,355
General partner units
2,119
2,029
Accumulated other comprehensive income
1,255
703
Total partners’ capital
25,209
19,087
Total liabilities and partners’ capital
$
224,673
$
221,591
USD Partners LP GAAP to Non-GAAP Reconciliations
For the Three Months Ended March 31, 2022 and 2021
(unaudited)
For the Three Months
Ended
March 31,
2022
2021
(in thousands)
Net cash provided by operating activities
$
10,708
$
12,645
Add (deduct): Amortization of deferred financing costs
(272
)
(207
)
Deferred income taxes
(144
)
18
Changes in accounts receivable and other assets
2,481
(4
)
Changes in accounts payable and accrued expenses
(4,940
)
(265
)
Changes in deferred revenue and other liabilities
1,545
(1,216
)
Interest expense, net
1,384
1,734
Provision for income taxes
421
224
Foreign currency transaction loss (gain) (1)
47
(61
)
Non-cash deferred amounts (2)
(1,225
)
1,683
Adjusted EBITDA
10,005
14,551
Add (deduct): Cash paid for income taxes
(533
)
(286
)
Cash paid for interest
(1,116
)
(1,549
)
Maintenance capital expenditures
—
(203
)
Distributable cash flow
$
8,356
$
12,513
______________________________
(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.
Category: Earnings
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220504005815/en/
Adam Altsuler Executive Vice President, Chief Financial Officer
(281) 291-3995 aaltsuler@usdg.com
Jennifer Waller Senior Director, Financial Reporting and
Investor Relations (832) 991-8383 jwaller@usdg.com
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