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USD Partners LP Announces Fourth Quarter and Full Year 2019 Results

USD Partners LP (NYSE: USDP) (the "Partnership") announced today its operating and financial results for the three and twelve months ended December 31, 2019. Financial highlights with respect to the fourth quarter of 2019 include the following:

  • Generated Net Cash Provided by Operating Activities of $4.3 million, Adjusted EBITDA(1) of $12.8 million and Distributable Cash Flow(1) of $9.5 million
  • Reported Net Income of $2.1 million
  • Increased quarterly cash distribution to $0.37 per unit ($1.48 per unit on an annualized basis), delivering distribution growth of 0.7% over the prior quarter and 2.8% over the fourth quarter of 2018

"2019 was another successful year for the Partnership," said Dan Borgen, the Partnership’s Chief Executive Officer. "We announced our nineteenth consecutive quarterly distribution increase this quarter and recently renewed and extended the remaining customer at Hardisty and Stroud on a multi-year basis. Additionally, our Sponsor’s parent recently announced a joint venture project at the Hardisty terminal to build a diluent recovery unit that will create long-term, sustainable takeaway solutions for the industry and enhance the cash flow profile of the Partnership."

Commercial and Development Update

Hardisty Terminal

To date, the Partnership has renewed and extended 100% of the Hardisty terminal’s capacity through mid-2022, with approximately 73% extended through mid-2023 with primarily high-quality investment grade customers under multi-year take-or-pay agreements. Upon the successful completion of the Diluent Recovery Unit ("DRU") project of US Development Group, LLC "USD" discussed below, approximately 32% of the Hardisty terminal’s capacity will be automatically extended through mid-2031.

USD’s Diluent Recovery Unit Project

USD and Gibson Energy Inc. ("Gibson") jointly announced in December 2019 an agreement to construct and operate a diluent recovery unit near Hardisty, Alberta, Canada. A subsidiary of ConocoPhillips has contracted to process 50,000 barrels per day of inlet bitumen blend through the DRU to be shipped by Canadian Pacific Railway and Kansas City Southern Railway Company to the U.S. Gulf Coast.

USD’s patented diluent recovery unit "DRU" technology separates the diluent that has been added to the raw bitumen in the production process which meets two important market needs – it returns the recovered diluent for reuse in the Alberta market, reducing delivered costs for diluent, and it creates DRUbit™, a proprietary heavy Canadian crude oil specifically designed for rail transportation. DRUbit™ is crude oil or bitumen that has been returned to a more concentrated, viscous state that is classified as a non-hazardous, non-flammable commodity when transported by rail in Canada and the U.S. DRUbit™ is a market access solution that will satisfy demand for heavy Canadian crude oil on the U.S. Gulf Coast and in other markets at a cost that is economically competitive to the crude oil that is transported by pipeline today.

In addition, USD is constructing a new destination terminal in Port Arthur, Texas for the DRUbit™ that will be transloaded at the Partnership’s Hardisty origination terminal. The Port Arthur terminal will have the capability for rail unloading, barge dock loading and unloading, tank storage and blending and will be pipeline connected to Phillips 66’s Beaumont Terminal, providing customers access to a large network of refining and marine facilities.

In February 2020, USD and Gibson jointly announced the receipt of all required regulatory approvals from the Government of Alberta to proceed with the construction of a DRU. Additionally, USD and Gibson have finalized all required commercial agreements with a subsidiary of ConocoPhillips to fully underpin and sanction the construction of the initial phase of the DRU at 50,000 barrels per day of inlet bitumen blend capacity and enable rail shipments of DRUbit™ to the U.S. Gulf Coast.

Construction of the DRU is expected to begin in April 2020, and the DRU could be placed into service later in the second quarter of 2021. USD and Gibson are currently in commercial discussions with other potential producer and refiner customers to secure additional long-term, take-or-pay agreements to support future expansions of capacity at the DRU.

Upon the successful completion of USD’s DRU project, three of the Partnership’s terminalling services agreements, or approximately 32% of the Hardisty terminal’s current capacity, will automatically be extended through mid-2031, which will significantly enhance the sustainability and quality of the Partnership’s cash flows.

Fourth 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 fourth 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. Furthermore, in the third quarter of 2019, 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 partially offset the higher revenue at Hardisty during quarter.

Net income for the quarter increased as compared to the fourth quarter of 2018, primarily as a result of the operating factors discussed above coupled with a non-cash gain associated with the five-year interest rate derivative instrument that the Partnership entered into in November 2017 and lower interest expense incurred resulting from lower interest rates during the quarter partially offset by a higher weighted average balance of debt outstanding in the fourth quarter of 2019.

Net Cash Provided by Operating Activities for the quarter decreased by 67% relative to the fourth quarter of 2018, primarily due to the general timing of receipts and payments of accounts receivable, accounts payable and deferred revenue balances and the conclusion of customer agreements at the Partnership’s Casper terminal in December 2018 and in August 2019.

Adjusted EBITDA and Distributable Cash Flow ("DCF") decreased by 7% and 12%, respectively, for the quarter relative to the fourth 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 during the quarter.

As of December 31, 2019, the Partnership had total available liquidity of approximately $168 million, including $3 million of unrestricted cash and cash equivalents and undrawn borrowing capacity of $165 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. As such, the Partnership’s available liquidity based on the Partnership’s Credit Agreement covenants is approximately $32 million as of December 31, 2019. The Partnership was in compliance with its financial covenants, as of December 31, 2019.

On January 30, 2020, the Partnership declared a quarterly cash distribution of $0.37 per unit ($1.48 per unit on an annualized basis), which represents growth of 0.7% over the prior quarter and 2.8% over the fourth quarter of 2018. The distribution was paid on February 19, 2020, to unitholders of record at the close of business on February 10, 2020.

Fourth Quarter 2019 Conference Call Information

The Partnership will host a conference call and webcast regarding fourth quarter 2019 results at 11:00 a.m. Eastern Time (10:00 a.m. Central Time) on Thursday, March 5, 2020.

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 4197582. 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 4197582. 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 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.

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 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 on page 11 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 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; 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 5 and reconciliations of Net Cash Provided by Operating Activities, the most directly comparable GAAP measure, to Adjusted EBITDA and Distributable Cash Flow on page 11 of this press release.

USD Partners LP
Consolidated Statements of Income
For the Three Months and the Years Ended December 31, 2019 and 2018
(unaudited)
 

For the Three Months Ended

 

For the Years Ended

December 31,

 

December 31,

 

2019

 

 

 

2018

 

 

 

2019

 

 

 

2018

 

(in thousands)
Revenues
Terminalling services

$

23,736

 

$

21,480

 

$

87,173

 

$

88,066

 

Terminalling services — related party

 

3,958

 

 

6,735

 

 

19,580

 

 

22,149

 

Fleet leases — related party

 

984

 

 

984

 

 

3,935

 

 

3,935

 

Fleet services

 

50

 

 

68

 

 

208

 

 

573

 

Fleet services — related party

 

228

 

 

228

 

 

910

 

 

910

 

Freight and other reimbursables

 

639

 

 

835

 

 

1,612

 

 

3,589

 

Freight and other reimbursables — related party

 

(16

)

 

238

 

 

4

 

Total revenues

 

29,579

 

 

30,330

 

 

113,656

 

 

119,226

 

Operating costs
Subcontracted rail services

 

3,824

 

 

3,738

 

 

14,777

 

 

13,785

 

Pipeline fees

 

5,597

 

 

5,570

 

 

20,971

 

 

21,679

 

Freight and other reimbursables

 

623

 

 

835

 

 

1,850

 

 

3,593

 

Operating and maintenance

 

2,751

 

 

3,655

 

 

10,953

 

 

11,195

 

Operating and maintenance — related party

 

2,493

 

 

4,964

 

Selling, general and administrative

 

2,577

 

 

2,928

 

 

10,716

 

 

10,840

 

Selling, general and administrative — related party

 

2,047

 

 

1,942

 

 

8,128

 

 

7,582

 

Depreciation and amortization

 

5,347

 

 

5,296

 

 

20,664

 

 

21,103

 

Total operating costs

 

25,259

 

 

23,964

 

 

93,023

 

 

89,777

 

Operating income

 

4,320

 

 

6,366

 

 

20,633

 

 

29,449

 

Interest expense

 

2,832

 

 

3,333

 

 

12,006

 

 

11,358

 

Loss (gain) associated with derivative instruments

 

(546

)

 

1,449

 

 

1,420

 

 

(374

)

Foreign currency transaction loss (gain)

 

128

 

 

169

 

 

365

 

 

(14

)

Other expense (income), net

 

(284

)

 

(55

)

 

(336

)

 

16

 

Income before income taxes

 

2,190

 

 

1,470

 

 

7,178

 

 

18,463

 

Provision for (benefit from) income taxes

 

50

 

 

(422

)

 

662

 

 

(2,669

)

Net income

$

2,140

 

$

1,892

 

$

6,516

 

$

21,132

 

 
USD Partners LP
Consolidated Statements of Cash Flows
For the Three Months and the Years Ended December 31, 2019 and 2018
(unaudited)
 

For the Three Months Ended

 

For the Years Ended

December 31,

 

December 31,

 

2019

 

 

 

2018

 

 

 

2019

 

 

 

2018

 

Cash flows from operating activities: (in thousands)
Net income

$

2,140

 

$

1,892

 

$

6,516

 

$

21,132

 

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

 

5,347

 

 

5,296

 

 

20,664

 

 

21,103

 

Loss (gain) associated with derivative instruments

 

(546

)

 

1,449

 

 

1,420

 

 

(374

)

Settlement of derivative contracts

 

1

 

 

(38

)

Unit based compensation expense

 

1,533

 

 

2,025

 

 

6,066

 

 

6,358

 

Deferred income taxes

 

378

 

 

(702

)

 

79

 

 

(3,971

)

Other

 

214

 

 

220

 

 

1,129

 

 

939

 

Changes in operating assets and liabilities:
Accounts receivable

 

(1,620

)

 

2,413

 

 

(109

)

 

(1,046

)

Accounts receivable – related party

 

(68

)

 

(582

)

 

(1,122

)

 

1,868

 

Prepaid expenses and other assets

 

(1,556

)

 

(458

)

 

(1,484

)

 

(86

)

Other assets – related party

 

149

 

 

20

 

 

(180

)

 

79

 

Accounts payable and accrued expenses

 

(195

)

 

544

 

 

(606

)

 

816

 

Accounts payable and accrued expenses – related party

 

(2,427

)

 

606

 

 

2

 

 

(1,455

)

Deferred revenue and other liabilities

 

939

 

 

190

 

 

6,529

 

 

(213

)

Deferred revenue – related party

 

(1

)

 

(463

)

 

17

 

Net cash provided by operating activities

 

4,287

 

 

12,913

 

 

38,442

 

 

45,129

 

Cash flows from investing activities:
Additions of property and equipment

 

(1,368

)

 

(8,373

)

 

(8,440

)

 

(8,816

)

Proceeds from the sale of assets

 

236

 

Net cash used in investing activities

 

(1,368

)

 

(8,373

)

 

(8,440

)

 

(8,580

)

Cash flows from financing activities:
Payments for deferred financing costs

 

(2,906

)

 

(7

)

 

(2,906

)

Distributions

 

(10,563

)

 

(10,059

)

 

(41,557

)

 

(39,632

)

Vested Phantom Units used for payment of participant taxes

 

(3

)

 

(2

)

 

(1,829

)

 

(1,352

)

Proceeds from long-term debt

 

10,000

 

 

14,000

 

 

38,000

 

 

34,000

 

Repayments of long-term debt

 

(6,000

)

 

(6,000

)

 

(27,000

)

 

(27,000

)

Other financing activities

 

(13

)

Net cash used in financing activities

 

(6,566

)

 

(4,967

)

 

(32,406

)

 

(36,890

)

Effect of exchange rates on cash

 

208

 

 

(385

)

 

705

 

 

(1,064

)

Net change in cash, cash equivalents and restricted cash

 

(3,439

)

 

(812

)

 

(1,699

)

 

(1,405

)

Cash, cash equivalents and restricted cash – beginning of period

 

14,123

 

 

13,195

 

 

12,383

 

 

13,788

 

Cash, cash equivalents and restricted cash – end of period

$

10,684

 

$

12,383

 

$

10,684

 

$

12,383

 

USD Partners LP
Consolidated Balance Sheets
(unaudited)
 

December 31,

December 31,

 

2019

 

 

2018

 

ASSETS

(in thousands)

Current assets
Cash and cash equivalents

$

3,083

 

$

6,439

 

Restricted cash

 

7,601

 

 

5,944

 

Accounts receivable, net

 

5,313

 

 

5,132

 

Accounts receivable — related party

 

1,778

 

 

624

 

Prepaid expenses

 

1,915

 

 

2,115

 

Other current assets

 

954

 

 

634

 

Other current assets — related party

 

343

 

 

79

 

Total current assets

 

20,987

 

 

20,967

 

Property and equipment, net

 

147,737

 

 

145,308

 

Intangible assets, net

 

74,099

 

 

86,705

 

Goodwill

 

33,589

 

 

33,589

 

Operating lease right-of-use assets

 

11,804

 

Other non-current assets

 

1,335

 

 

631

 

Other non-current assets — related party

 

15

 

 

95

 

Total assets

$

289,566

 

$

287,295

 

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

$

3,087

 

$

3,464

 

Accounts payable and accrued expenses — related party

 

465

 

 

460

 

Deferred revenue

 

6,104

 

 

2,921

 

Deferred revenue — related party

 

1,482

 

 

1,885

 

Operating lease liabilities, current

 

4,649

 

Other current liabilities

 

3,150

 

 

2,804

 

Total current liabilities

 

18,937

 

 

11,534

 

Long-term debt, net

 

217,651

 

 

205,581

 

Deferred income tax liabilities, net

 

458

 

 

360

 

Operating lease liabilities, non-current

 

7,386

 

Other non-current liabilities

 

4,078

 

 

356

 

Total liabilities

 

248,510

 

 

217,831

 

Commitments and contingencies
Partners’ capital
Common units

 

61,013

 

 

107,903

 

Class A units

 

1,018

 

Subordinated units

 

(22,597

)

 

(39,723

)

General partner units

 

2,767

 

 

3,275

 

Accumulated other comprehensive loss

 

(127

)

 

(3,009

)

Total partners’ capital

 

41,056

 

 

69,464

 

Total liabilities and partners’ capital

$

289,566

 

$

287,295

 

USD Partners LP
GAAP to Non-GAAP Reconciliations
For the Three Months and the Years Ended December 31, 2019 and 2018
(unaudited)
 

For the Three Months Ended

For the Years Ended

December 31,

December 31,

 

2019

 

 

2018

 

 

2019

 

 

2018

 

(in thousands)
 
Net cash provided by operating activities

$

4,287

 

$

12,913

 

$

38,442

 

$

45,129

 

Add (deduct):
Amortization of deferred financing costs

 

(207

)

 

(220

)

 

(1,072

)

 

(866

)

Deferred income taxes

 

(378

)

 

702

 

 

(79

)

 

3,971

 

Changes in accounts receivable and other assets

 

3,095

 

 

(1,393

)

 

2,895

 

 

(815

)

Changes in accounts payable and accrued expenses

 

2,622

 

 

(1,150

)

 

604

 

 

639

 

Changes in deferred revenue and other liabilities

 

(938

)

 

(190

)

 

(6,066

)

 

196

 

Interest expense, net

 

2,803

 

 

3,331

 

 

11,936

 

 

11,356

 

Provision for (benefit from) income taxes

 

50

 

 

(422

)

 

662

 

 

(2,669

)

Foreign currency transaction loss (gain) (1)

 

128

 

 

169

 

 

365

 

 

(14

)

Other income

 

69

 

Non-cash deferred amounts (2)

 

1,264

 

 

(51

)

 

2,809

 

 

(205

)

Adjusted EBITDA

 

12,795

 

 

13,689

 

 

50,496

 

 

56,722

 

Add (deduct):
Cash paid for income taxes

 

(302

)

 

(188

)

 

(1,206

)

 

(814

)

Cash paid for interest

 

(2,915

)

 

(2,539

)

 

(11,775

)

 

(10,038

)

Maintenance capital expenditures

 

(40

)

 

(103

)

 

(216

)

 

(201

)

Distributable cash flow

$

9,538

 

$

10,859

 

$

37,299

 

$

45,669

 

________________

(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.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20200304005823/en/

Contacts

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