Genesis Energy, L.P. Reports First Quarter 2013 Results

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Genesis Energy, L.P. Reports First Quarter 2013 Results

HOUSTON--(BUSINESS WIRE)-- Genesis Energy, L.P. (NYS: GEL) today announced its first quarter results. Results for the quarter ended March 31, 2013 included the following items:

  • We generated total Available Cash before Reserves of $48.7 million in the first quarter of 2013, an increase of $9.1 million, or 23%, over the first quarter of 2012. Adjusted EBITDA increased $9.6 million, or 19%, to $60.8 million over the prior year quarter. 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 of $22.8 million, or $0.28 per unit for the first quarter of 2013, compared to $19.6 million, or $0.27 per unit, for the same period in 2012.
  • On May 15, 2013, we will pay a total quarterly distribution of $40.4 million attributable to our financial and operational results for the first quarter of 2013, based on our quarterly declared distribution of $0.4975 per unit. Our Available Cash before Reserves provided 1.21 times coverage for this quarterly distribution.

Grant Sims, CEO of Genesis Energy, said, "Our measured growth has allowed us to increase distributions to our unitholders for the thirty-first consecutive quarter, twenty-six of which have been 10% or greater over the prior year quarter and none were less than 8.7%.


As a result of a 35% increase in our unit price during the quarter, our equity-based compensation expense increased by an additional $2.6 million. Without such significant increase in our unit price, our Available Cash before Reserves would have been $51.3 million, providing a coverage ratio of 1.27, and our Adjusted EBITDA would have been $63.4 million.

Our existing businesses continue to perform as expected, including integrating new assets that allowed us to increase volumes. We continue to expect to realize an increasing contribution in 2013 and 2014 from our organic projects. Some projects, such as our Walnut Hill facility, have recently been completed and others, such as our Natchez, Wink, Wyoming and Texas City facilities, are progressing to completion. Our two largest growth projects announced to date, our SEKCO joint venture with Enterprise Products and our project around ExxonMobil's Baton Rouge refinery complex, will contribute in 2014 and accelerate into 2015. We believe that we are well-positioned, given the current available capacity in our offshore oil pipelines, to benefit in the latter part of this decade from the dramatically increasing level of development activity in the deepwater Gulf of Mexico.

As a result, we believe we are very well positioned to continue to achieve our goals of delivering low double-digit growth in distributions while increasing our coverage ratio and maintaining a better than investment grade leverage ratio, all without ever losing sight of our absolute commitment to safe, reliable and responsible operations."

Financial Results

Available Cash before Reserves increased to $48.7 million in the first quarter of 2013 (or "2013 Quarter") as compared to $39.6 million for the first quarter of 2012 (or "2012 Quarter"). The primary components impacting Available Cash before Reserves are Segment Margin, corporate general and administrative expenses (excluding certain non-cash charges), interest expense and maintenance capital expenditures. Variances from the first quarter of 2012 in these components are explained as follows:

Segment Margin

Segment Margin (a non-GAAP measure) is defined below and reconciled later in this press release to income before income taxes. During the 2013 Quarter, Segment Margin increased $11.8 million over the 2012 Quarter primarily reflecting the impact of higher volumes in our supply and logistics segment.

Segment results for the first quarters of 2013 and 2012 were as follows:

   Three Months Ended
March 31,
2013  2012
(in thousands)
Pipeline transportation$25,196$25,347
Refinery services17,96517,249
Supply and logistics28,904 17,656
Total Segment Margin (1)$72,065 $60,252
 

(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 decreased $0.2 million, or 1%, between the first quarter periods. Crude oil tariff revenues of our onshore crude oil pipelines increased due to increased total throughput volumes, primarily on our Texas and Jay pipeline systems and upward tariff indexing on our FERC-regulated pipelines. These increases were offset by decreases in pipeline loss allowance revenues from both our onshore and offshore crude oil pipelines in addition to increased operating costs due to required five-year integrity testing expenditures on our onshore pipelines and general increases in operating costs inclusive of increased safety program costs.

Refinery services Segment Margin increased $0.7 million, or 4%, between the first quarter periods primarily due to higher NaHS sales volumes resulting from increased demand from customers in the pulp and paper industry. The pricing in our sales contracts for NaHS includes adjustments for fluctuations in commodity benchmarks, freight, labor, energy costs and government indexes. The frequency at which these adjustments are applied varies by contract, geographic region and supply point.

Supply and logistics Segment Margin increased $11.2 million, or 64%, between the first quarter periods. The increase in Segment Margin during the 2013 Quarter resulted primarily from a 28% increase in crude and petroleum products volumes. The increase in volumes is principally due to increased crude oil gathering and marketing activities in West and South Texas that benefited from our expanded trucking fleet. Segment Margin also increased due to the contribution from our crude oil rail loading and unloading operations completed in the second half of 2012. Our operating costs, excluding non-cash charges, increased 24% between the two quarters due to our expanded trucking and barge fleets.

Other Components of Available Cash

Corporate general and administrative expenses included in the calculation of Available Cash before Reserves increased by $2.2 million substantially due to an increase in equity-based compensation costs related primarily to the increase in our unit price.

Interest costs for the first quarter of 2013 increased $0.8 million from the first quarter of 2012 primarily as a result of increased borrowings for acquisitions and other growth projects, a portion of which were financed with our issuance in the first quarter of 2013 of $350 million of senior unsecured notes bearing interest at 5.75% per annum. This increase was net of capitalized interest costs attributable to our growth capital expenditures and investments in the SEKCO pipeline joint venture.

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

The calculation of Available Cash before Reserves for the quarters ended March 31, 2013 and 2012 was as follows:

   Three Months Ended
March 31,
2013  2012
(in thousands)
Net income$22,846$19,604
Depreciation and amortization15,05314,779
Cash received from direct financing leases not included in income1,2321,221
Cash effects of sales of certain assets332359
Effects of distributable cash generated by equity method investees not included in income6,5646,733
Cash effects of equity-based compensation plans(1,523)(1,577)
Non-cash legacy stock appreciation rights plan expense4,630476
Non-cash executive equity award expense500
Expenses related to acquiring or constructing assets that provide new sources of cash flow216608
Unrealized gain on derivative transactions excluding fair value hedges(52)(1,992)
Maintenance capital expenditures(819)(1,213)
Non-cash tax benefit(323)(37)
Other items, net538 156 
Available Cash before Reserves$48,694 $39,617 
 

Other Components of Net Income

In the 2013 Quarter, we recorded net income of $22.8 million compared to $19.6 million in the 2012 Quarter. Our derivative positions resulted in a $0.1 million non-cash unrealized gain in the 2013 Quarter compared to a $2 million non-cash unrealized gain in the 2012 Quarter. In the 2013 Quarter, we recorded a non-cash expense related to our non-cash legacy stock appreciation rights plan of $4.6 million compared to $0.5 million in the 2012 Quarter. Fluctuations in the market price of our common units were the reasons for the difference.

Distributions

We have increased our quarterly distribution rate for thirty-one consecutive quarters. During that period, twenty-six 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 $0.0475 per unit, or 10.6%. Distributions paid over the last four quarters, and the distribution to be paid on May 15, 2013 for the first quarter of 2013, are as follows:

     Per Unit
Distribution ForDate PaidAmount
2013
1st QuarterMay 15, 2013$0.4975
2012
4th QuarterFebruary 14, 2013$0.4850
3rd QuarterNovember 14, 2012$0.4725
2nd QuarterAugust 14, 2012$0.4600
1st QuarterMay 15, 2012$0.4500
 

Earnings Conference Call

We will broadcast our Earnings Conference Call on Thursday, May 2, 2013, at 8:00 a.m. Central time. This call can be accessed at www.genesisenergy.com. Choose the Investor Relations button. 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

March 31,
2013  2012
REVENUES$1,147,214$960,717
 
COSTS AND EXPENSES:
Costs of sales1,090,266909,616
General and administrative expenses11,7479,592
Depreciation and amortization15,053 14,779 
OPERATING INCOME30,14826,730
Equity in earnings of equity investees3,9363,492
Interest expense(11,441)(10,596)
INCOME BEFORE INCOME TAXES22,64319,626
Income tax benefit (expense)203 (22)
NET INCOME$22,846 $19,604 
NET INCOME PER COMMON UNIT:
Basic and Diluted$0.28$0.27
 
WEIGHTED AVERAGE OUTSTANDING COMMON UNITS:
Basic and Diluted81,20372,836
 

Immaterial Restatement

Quarterly amounts for revenues and cost of sales for 2012 include corrections to previously reported quarterly amounts for the first quarter of 2012. These corrections were made to present certain sales transactions on a gross basis that previously had been recorded on a net basis. The corrections had no effect on previously reported operating income, net income Segment Margin, Adjusted EBITDA or Available Cash before Reserves.

GENESIS ENERGY, L.P.
OPERATING DATA - UNAUDITED
 
   Three Months Ended
March 31,
2013  2012
Pipeline Transportation Segment
Onshore crude oil pipelines (barrels/day):
Texas53,41244,535
Jay28,09818,820
Mississippi18,98318,263
Onshore crude oil pipelines total100,49381,618
Offshore crude oil pipelines (barrels/day):
CHOPS (1)114,174101,528
Poseidon (1)204,550189,746
Odyssey (1)43,17440,068
GOPL8,92624,608
Offshore crude oil pipelines total370,824355,950
CO2 pipeline (Mcf/day)
Free State208,416178,012
 
Refinery Services Segment
NaHS (dry short tons sold)36,62233,765
NaOH (caustic soda dry short tons sold)19,23020,918
 
Supply and Logistics Segment
Crude oil and petroleum products sales (barrels/day)107,38983,928
 

(1) Volumes for our equity method investees are presented on a 100% basis.

 
GENESIS ENERGY, L.P.
CONDENSED CONSOLIDATED BALANCE SHEETS - UNAUDITED

(in thousands, except number of units)

 
   March 31,  December 31,
20132012
ASSETS
Cash and cash equivalents$15,983$11,282
Accounts receivable - trade, net356,972270,925
Inventories79,15587,050
Other current assets30,14734,777
Total current assets482,257404,034
Fixed assets, net591,745565,281
Investment in direct financing leases, net156,055157,385
Equity investees608,076549,235
Intangible assets, net72,22275,065
Goodwill325,046325,046
Other assets, net39,88233,618
Total assets$2,275,283$2,109,664
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable - trade$312,719$258,053
Accrued liabilities60,66054,598
Total current liabilities373,379312,651
Senior secured credit facility271,000500,000
Senior unsecured notes700,865350,895
Deferred tax liabilities13,48813,810
Other long-term liabilities16,60015,813
Partners' capital:
Common unitholders899,951916,495
Total liabilities and partners' capital$2,275,283$2,109,664
 
Units Data:
Total common units outstanding81,202,75281,202,752
 
GENESIS ENERGY, L.P.
RECONCILIATION OF SEGMENT MARGIN TO INCOME BEFORE INCOME TAXES - UNAUDITED

(in thousands)

 
   Three Months Ended
March 31,
2013  2012
Segment margin$72,065$60,252
Corporate general and administrative expenses(10,837)(8,621)
Non-cash items included in general and administrative costs846499
Cash expenditures not included in Adjusted EBITDA216608
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