Genesis Energy, L.P. Reports Third Quarter 2012 Results

Before you go, we thought you'd like these...
Before you go close icon

Genesis Energy, L.P. Reports Third Quarter 2012 Results

HOUSTON--(BUSINESS WIRE)-- Genesis Energy, L.P. (NYS: GEL) today announced its third quarter results. Results for the quarter ended September 30, 2012 included the following items:

  • For the third quarter of 2012, we generated a record total Available Cash before Reserves of $45.9 million, an increase of $8.8 million, or 23.8%, over the third quarter of 2011. Adjusted EBITDA increased $11.4 million to $56.6 million, or 25%, over the prior year period. Available Cash before Reserves and Adjusted EBITDA are non-GAAP measures that are defined and reconciled later in this press release to the most directly comparable GAAP financial measure, net income.
  • We recorded net income for the quarter ended September 30, 2012 of $31.2 million, or $0.39 per unit, compared to $19.1 million, or $0.27 per unit, for the same period in 2011. Net income for the 2012 quarter included a non-cash $8.2 million benefit from the one-time reversal of certain tax provisions. Without this benefit, net income would have been $23 million, representing an increase of $3.9 million over the year earlier quarter.
  • On November 14, 2012, we will pay a total quarterly distribution of $38.4 million attributable to our financial and operational results for the third quarter of 2012, based on our quarterly declared distribution of $0.4725 per unit. Our Available Cash before Reserves provided 1.20 times coverage for this quarterly distribution.

Grant Sims, CEO of Genesis Energy, said, "We are pleased to yet again announce a record quarter of Available Cash before Reserves for the partnership. Volume growth, whether on our pipelines, in our trucks or barges, or related to our refinery service operations, is a critical operating metric, and we continue to demonstrate the relative insensitivity of our financial results to volatile (absolute or relative) commodity price levels.


Our measured, stable growth allowed us to increase distributions to unitholders for the twenty-ninth consecutive quarter, twenty-four of which have been 10% or greater, and never less than 8.7%, over the year earlier quarter. None of this would have been possible without the hard work of our dedicated employees, and their, as well as management's, commitment to safe, reliable and responsible operations.

Subsequent to the end of the quarter, we facilitated the orderly exit of several large unitholders. I believe the important message in those transactions is that our largest unitholders and management actually significantly increased their ownership in the partnership.

As we look forward to the fourth quarter and into 2013, we would expect to see continuing sequential quarterly growth as we will benefit from the end to the extended maintenance at several offshore fields dedicated to our pipeline transportation segment, the return of development drilling at those dedicated fields, the contribution from our previously announced projects at Walnut Hill, in Texas City, and Natchez, as well as the continuing integration of our substantially expanded asset footprint, service capabilities and customer relationships. Consequently, we believe we are well positioned to achieve our goals of continuing to deliver double-digit growth in distributions, increasing our coverage ratio and maintaining a better than investment grade leverage ratio, all without ever losing sight of our commitment to safe, reliable and responsible operations."

Financial Results

Available Cash before Reserves (a non-GAAP measure) increased to $45.9 million in the third quarter of 2012 as compared to $37 million for the same period in 2011. The primary components impacting Available Cash before Reserves are Segment Margin, corporate general and administrative expenses (excluding non-cash charges), interest expense and maintenance capital expenditures. Variances from the third quarter of 2011 in these components are explained as follows:

Segment Margin

Segment Margin is defined and reconciled later in this press release to income before income taxes. During the third quarter of 2012 (or "2012 Quarter"), Segment Margin increased $13 million over the third quarter of 2011 (or "2011 Quarter") primarily reflecting the impact of acquisitions and higher volumes in our pipeline transportation and supply and logistics segments.

Segment results for the third quarters of 2012 and 2011 were as follows:

 Three Months Ended
September 30,
2012 2011
(in thousands)
Pipeline transportation$23,295$16,030
Refinery services18,98317,992
Supply and logistics23,65118,909
Total Segment Margin (1)$65,929$52,931

(1) We define Segment Margin as revenues less product costs, operating expenses (excluding non-cash charges, such as depreciation and amortization), and segment general and administrative expenses, plus our equity in distributable cash generated by our equity investees. In addition, our Segment Margin definition excludes the non-cash effects of our stock appreciation rights plan and includes the non-income portion of payments received under direct financing leases. A reconciliation of Segment Margin to income before income taxes is presented for periods presented in the table at the end of this release.

Pipeline transportation Segment Margin increased $7.3 million, or 45%, between the third quarter periods. The contribution from our interests in the Gulf of Mexico pipelines that we acquired in 2012 and higher crude oil tariff revenues were the primary factors increasing Segment Margin. These increases were partially offset by a decrease in the contribution to Segment Margin from CHOPS as a result of ongoing improvements being made by producers at several connected production fields. Improvements at those fields were substantially completed late in the 2012 Quarter.

Our refinery services Segment Margin increased $1 million, or 6%, between the quarters due to increased NaHS sales volumes and operating efficiencies realized at several of our sour gas processing facilities as well as our favorable management of the acquisition and utilization of caustic soda in our, and our customers', operations and our logistics operations.

Supply and logistics Segment Margin increased $4.7 million, or 25%, between the quarters. The primary factors for Segment Margin increasing quarter-over-quarter were the contribution of the black oil barge transportation assets that we acquired in August 2011 and February 2012 and increased volumes handled by our expanded trucking and barge fleets. Our total volumes of crude oil and refined products increased 30% as a result of these expansions.

Other Components of Available Cash

Corporate general and administrative expenses included in the calculation of Available Cash before Reserves increased by $1.6 million primarily due to increased salaries and benefits associated with additional personnel to support our growth and increased equity compensation expense driven by a higher common unit price. Interest costs increased $2.2 million from the 2011 Quarter primarily as a result of increased borrowings for acquisitions and other growth projects. Capitalized interest costs of $1.3 million attributable to our growth capital expenditures and investments in the SEKCO pipeline joint venture partially offset the increase in interest expense, resulting in a net increase in interest expense of $0.9 million.

Several adjustments to net income are required to calculate Available Cash before Reserves.

The calculation of Available Cash before Reserves for the quarters ended September 30, 2012 and 2011 was as follows:

 Three Months Ended
September 30,
2012 2011
(in thousands)
Net income$31,194$19,088
Depreciation and amortization14,83814,706
Cash received from direct financing leases not included in income1,2781,167
Cash effects of sales of certain assets133,269
Effects of distributable cash generated by equity method investees not included in income5,6133,701
Cash effects of equity-based compensation plans(466)(306)
Non-cash equity-based compensation expense (benefit)2,001(930)
Expenses related to acquiring or constructing assets that provide new sources of cash flow2281,008
Unrealized gain on derivative transactions excluding fair value hedges(75)(4,355)
Maintenance capital expenditures(701)(2,244)
Non-cash tax benefit(8,717)(48)
Other items, net653 1,985 
Available Cash before Reserves$45,859 $37,041 
 

Other Components of Net Income

In the 2012 Quarter, we recorded net income of $31.2 million compared to $19.1 million for the third quarter of 2011. In addition to the factors impacting Available Cash before Reserves, income tax expense decreased $8.7 million between the quarterly periods primarily due to the reversal of uncertain tax positions as a result of tax audit settlements and the expiration of statutes of limitations. Our derivative positions resulted in a $0.1 million non-cash unrealized gain in the 2012 Quarter compared to a $4.4 million non-cash unrealized gain in the 2011 Quarter. In the 2012 Quarter, we recorded a non-cash expense related to certain equity-based compensation plans of $2 million. In the 2011 Quarter, we recorded a non-cash benefit of $0.9 million. Fluctuations in the market price of our common units were the reasons for the difference.

Distributions

We have increased our quarterly distribution rate for twenty-nine consecutive quarters. During that period, twenty-four of those quarterly increases have been 10% or greater year-over-year. Over the last four quarters, we have increased the distribution rate on our common units by a total of $0.045 per unit, or 10.5%. Distributions paid over the last four quarters, and the distribution to be paid on November 14, 2012 for the third quarter of 2012, are as follows:

Distribution For Date Paid Per Unit

Amount

2012
3rd QuarterNovember 14, 2012$0.4725
2nd QuarterAugust 14, 2012$0.4600
1st QuarterMay 15, 2012$0.4500
2011
4th QuarterFebruary 14, 2012$0.4400
3rd QuarterNovember 14, 2011$0.4275
 

Earnings Conference Call

We will broadcast our Earnings Conference Call on Tuesday, November 6, 2012, at 8:00 a.m. Central time. This call can be accessed at www.genesisenergy.com. Choose the Investor Relations button. Listeners should go to this website at least fifteen minutes before this event to download and install any necessary audio software. For those unable to attend the live broadcast, a replay will be available beginning approximately one hour after the event and remain available on our website for 30 days. There is no charge to access the event.

Genesis Energy, L.P. is a diversified midstream energy master limited partnership headquartered in Houston, Texas. Genesis' operations include pipeline transportation, refinery services and supply and logistics. The Pipeline Transportation Division is engaged in the pipeline transportation of crude oil and carbon dioxide. The Refinery Services Division primarily processes sour gas streams to remove sulfur at refining operations. The Supply and Logistics Division is engaged in the transportation, storage and supply and marketing of energy products, including crude oil, refined products, and certain industrial gases. Genesis' operations are primarily located in Texas, Louisiana, Arkansas, Mississippi, Alabama, Florida and the Gulf of Mexico.

GENESIS ENERGY, L.P.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED

(in thousands, except per unit amounts)

  
Three Months Ended
September 30,
Nine Months Ended
September 30,
2012 20112012 2011
REVENUES$942,334$830,200$2,797,945$2,282,788
 
COSTS AND EXPENSES:
Costs of sales888,003777,9572,639,0472,146,954
General and administrative expenses10,3758,90529,93425,339
Depreciation and amortization14,838 14,706 45,447 43,100 
OPERATING INCOME29,11828,63283,51767,395
Equity in earnings (losses) of equity investees3,432(412)7,9713,377
Interest expense(9,873)(8,960)(30,697)(26,670)
INCOME BEFORE INCOME TAXES22,67719,26060,79144,102
Income tax benefit (expense)8,517 (172)8,591 (626)
NET INCOME$31,194 $19,088 $69,382 $43,476 
NET INCOME PER COMMON UNIT:
Basic and Diluted$0.39$0.27$0.90$0.65
WEIGHTED AVERAGE OUTSTANDING COMMON UNITS:
Basic and Diluted79,90170,44777,41066,580
 

GENESIS ENERGY, L.P.

OPERATING DATA - UNAUDITED

  
Three Months Ended
September 30,
Nine Months Ended
September 30,
2012 20112012 2011
Pipeline Transportation Segment
Onshore crude oil pipelines (barrels/day):
Jay22,84117,72019,93116,499
Texas52,76744,14950,32746,020
Mississippi17,942 20,884 18,377 20,883
Onshore crude oil pipelines total93,550 82,753 88,635 83,402
Offshore crude oil pipelines (barrels/day):
CHOPS (1)91,37790,31278,817123,034
Poseidon (1) (2)215,474206,596
Odyssey (1) (2)31,86935,994
GOPL (2)8,300  16,979 
Offshore crude oil pipelines total347,020 90,312 338,386 123,034
CO2 pipeline (Mcf/day)
Free State188,165 192,041 177,527 166,302
 
Refinery Services Segment
NaHS (dry short tons sold)34,372 33,396 107,321 106,709
NaOH (caustic soda dry short tons sold)21,152 23,440 56,740 74,289
 
Supply and Logistics Segment
Crude oil and petroleum products sales (barrels/day)100,095 77,179 91,444 71,770
(1)Volumes for our equity method investees are presented on a 100% basis.
(2)Acquired in January 2012.
 

GENESIS ENERGY, L.P.

CONDENSED CONSOLIDATED BALANCE SHEETS - UNAUDITED

(in thousands, except number of units)

  
September 30,
2012
December 31,
2011
ASSETS
Cash and cash equivalents$15,461$10,817
Accounts receivable - trade, net318,892237,989
Inventories67,298101,124
Other current assets25,616 26,174
Total current assets427,267376,104
Fixed assets, net535,951416,925
Investment in direct financing leases, net158,698162,460
Equity investees547,925326,947
Intangible assets, net79,14093,356
Goodwill325,046325,046
Other assets, net33,128 30,006
Total assets$2,107,155 $1,730,844
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable - trade$254,688$199,357
Accrued liabilities63,691 50,071
Total current liabilities318,379249,428
Senior secured credit facility483,000409,300
Senior unsecured notes350,924250,000
Deferred tax liabilities11,59812,549
Other long-term liabilities15,32116,929
Partners' capital:
Common unitholders927,933 792,638
Total liabilities and partners' capital$2,107,155 $1,730,844
 
Units Data:
Total common units outstanding81,202,752 71,965,062
 

GENESIS ENERGY, L.P.

RECONCILIATION OF SEGMENT MARGIN TO INCOME BEFORE INCOME TAXES - UNAUDITED

(in thousands)

 
Three Months Ended
September 30,
2012 2011
Segment margin$65,929$52,931
Corporate general and administrative expenses Read Full Story

Want more news like this?

Sign up for Finance Report by AOL and get everything from business news to personal finance tips delivered directly to your inbox daily!

Subscribe to our other newsletters

Emails may offer personalized content or ads. Learn more. You may unsubscribe any time.

From Our Partners

Gift Finder Promo
More to Explore
Fri, Dec 02
Set Your Location
City, State, or Zip