Genesis Energy, L.P. Reports Second Quarter 2013 Results
Genesis Energy, L.P. Reports Second Quarter 2013 Results
- We generated total Available Cash before Reserves of $45.7 million in the second quarter of 2013, an increase of $2.5 million, or 6%, over the second quarter of 2012. Adjusted EBITDA increased $4.7 million, or 9%, to $59 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 $26.9 million, or $0.33 per unit for the second quarter of 2013, compared to $18.6 million, or $0.23 per unit, for the same period in 2012.
- On August 14, 2013, we will pay a total quarterly distribution of $42.3 million attributable to our financial and operational results for the second quarter of 2013, based on our quarterly declared distribution of $0.51 per unit. Our Available Cash before Reserves provided 1.08 times coverage for this quarterly distribution.
Grant Sims, CEO of Genesis Energy, said, "We have increased distributions to our unitholders for the thirty-second consecutive quarter, twenty-seven of which have been 10% or greater over the prior year quarter and none were less than 8.7%. In the second quarter of 2013, a number of items, as discussed below, combined to negatively impact Available Cash before Reserves. Pro forma Available Cash before Reserves, excluding the effects of those items, for the second quarter of 2013 would have been approximately $52.2 million, providing 1.23 times coverage for our second quarter distribution, which is inclusive of the increase in our outstanding common units due to the conversion of our Class 3 waiver units. Pro forma Adjusted EBITDA, excluding the effects of those items, would have been $65.5 million for the second quarter of 2013. These results are reflective of our underlying businesses performing as expected.
In July, we agreed to acquire substantially all of the assets of the downstream transportation business of Hornbeck Offshore Transportation, LLC for approximately $230 million. That business is primarily comprised of nine barges and nine tug boats which transport crude oil and refined petroleum products, principally serving refineries and storage terminals along the Gulf Coast, Eastern Seaboard, Great Lakes and Caribbean. Those ocean going vessels will allow us to expand our marine transportation capabilities complementing our inland waterway operations as well as our other crude oil and heavy refined product assets. We have available and committed liquidity under our $1 billion revolving credit facility to effect that acquisition in addition to funding all of our organic growth capital requirements and we expect that transaction to close by the end of the third quarter of 2013.
We continue to anticipate that we will realize an increasing contribution in 2013 and 2014 from the combined effects of our acquisitions and 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 begin contributing in 2014 and ramp up into 2015. We believe 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."
Available Cash before Reserves increased to $45.7 million in the second quarter of 2013 (or "2013 Quarter") as compared to $43.2 million for the second 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.
In the 2013 Quarter, a number of items combined to negatively impact our pipeline transportation and supply and logistics segments.
In our pipeline transportation segment, operating results from our offshore crude oil pipelines were adversely affected by approximately $2.5 million due to production variations at connected fields and unplanned downtime on the Eugene Island System.
In our supply and logistics segment, operating results were negatively impacted by approximately $2.9 million for several items including (1) expenses for repairs to one of our marine vessels as well as foregone Segment Margin attributable to that vessel's downtime, (2) demurrage costs incurred due to damage to a river lock caused by a third party operator that idled certain of our barge activities during a shipment of petroleum products, (3) downtime as a result of a turnaround at our crude processing facility in Wyoming, (4) ineffectiveness of hedging certain crude oil volumes, and (5) volumetric measurement losses associated with our crude oil gathering and marketing activities.
The Available Cash before Reserves increase in the 2013 Quarter was also offset by approximately $1.1 million of equity-based compensation costs related to the increase in the market price of our common units. The market price of our common units at June 30, 2013 was $51.83 compared to $48.22 at March 31, 2013, representing a 7% increase.
Variances from the second quarter of 2012 in these components are explained as follows:
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 $7.6 million over the 2012 Quarter primarily reflecting the impact of higher volumes in our pipeline transportation and supply and logistics segments.
Segment results for the second quarters of 2013 and 2012 were as follows:
Three Months Ended
|Supply and logistics||25,290||24,768|
|Total Segment Margin (1)||$||70,442||$||62,831|
(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 $5.7 million, or 27%, between the second quarter periods. In the 2013 Quarter, the operating results from our offshore crude oil pipelines were adversely affected by approximately $2.5 million due to production variations at connected fields and unplanned downtime on the Eugene Island System. Pipeline transportation Segment Margin increased overall quarter-over-quarter due to higher onshore crude oil tariff revenues, an increased contribution from CHOPS and an increase in revenues from onshore pipeline loss allowance volumes. Onshore crude oil tariff revenue increased primarily due to increases in total throughput volumes, primarily on our Jay pipeline system, as a result of additional barrels received at our crude-by-rail unloading terminal at Walnut Hill, Florida and upward tariff indexing on our FERC-regulated pipelines. The contribution from CHOPS increased as ongoing improvements by producers at the connected production fields resulted in lower volumes transported on CHOPS in the 2012 Quarter. Pipeline loss allowance revenues increased as a result of an increase in barrels sold in the 2013 Quarter as compared to the 2012 Quarter. These increases were partially offset by increased onshore pipeline operating costs, excluding non-cash charges, due to increased employee compensation and related benefit costs and general increases in operating costs inclusive of increased safety program costs.
Refinery services Segment Margin increased $1.4 million, or 8%, between the second quarter periods primarily due to higher NaHS revenues resulting from increases in the average index prices for caustic soda, partially offset by decreased sales volumes primarily attributable to our South American customers. Sales volumes between quarters to customers in South America can fluctuate due to timing of bulk deliveries. 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. Although caustic soda sales are not a significant portion of our refinery services activities, increased sales volumes did have a positive impact to our Segment Margin.
Supply and logistics Segment Margin increased $0.5 million, or 2%, between the second quarter periods. In the 2013 Quarter, our operating results were negatively impacted by approximately $2.9 million for several items including (1) expenses for repairs to one of our marine vessels as well as foregone Segment Margin attributable to that vessel's downtime, (2) demurrage costs incurred due to damage to a river lock caused by a third party operator that idled certain of our barge activities during a shipment of petroleum products, (3) downtime as a result of a turnaround at our crude processing facility in Wyoming, (4) ineffectiveness of hedging certain crude oil volumes, and (5) volumetric measurement losses associated with our crude oil gathering and marketing activities. Supply and logistics Segment Margin increased overall primarily from a 33% increase in crude and petroleum products volumes, however the overall composition of our supply and logistics revenue streams limited the relative impact on Segment Margin. Segment Margin also increased due to the contribution from our crude oil rail loading and unloading operations completed in the second half of 2012. These increases were partially offset by a 14% increase in operating costs, excluding non-cash charges, between the two second quarters primarily due to employee compensation and related benefit costs. Increases in those costs are the result of higher employee counts from our expanded trucking fleet and the recent growth in our crude oil rail loading and unloading operations.
Other Components of Available Cash
Corporate general and administrative expenses included in the calculation of Available Cash before Reserves increased by $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 second quarter of 2013 increased $2 million from the second 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 $350 million of senior unsecured notes bearing interest at 5.75% per annum. This increase was net of capitalized interest costs attributable to our growth capital expenditures and investments in the SEKCO pipeline joint venture.
Several adjustments to net income are required to calculate Available Cash before Reserves.
The calculation of Available Cash before Reserves for the quarters ended June 30, 2013 and 2012 was as follows:
Three Months Ended
|Depreciation and amortization||15,670||15,830|
|Cash received from direct financing leases not included in income||1,263||1,249|
|Cash effects of sales of certain assets||294||294|
|Effects of distributable cash generated by equity method investees not included in income||4,891||6,752|
|Cash effects of equity-based compensation plans||(1,896||)||(477||)|
|Non-cash legacy stock appreciation rights plan expense||705||1,013|
|Expenses related to acquiring or constructing assets that provide new sources of cash flow||667||180|
|Unrealized (gain) loss on derivative transactions excluding fair value hedges||(1,971||)||816|
|Maintenance capital expenditures||(1,015||)||(806||)|
|Non-cash tax benefit||(213||)||(402||)|
|Other items, net||412||181|
|Available Cash before Reserves||$||45,709||$||43,214|
Other Components of Net Income
In the 2013 Quarter, we recorded net income of $26.9 million compared to $18.6 million in the 2012 Quarter. Our derivative positions resulted in a $2 million non-cash unrealized gain in the 2013 Quarter compared to a $0.8 million non-cash unrealized loss in the 2012 Quarter.
We have increased our quarterly distribution rate for thirty-two consecutive quarters. During that period, twenty-seven 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 $0.05 per unit, or 10.9%. Distributions attributable to each quarter of 2013 (to date) and 2012, are as follows:
|Distribution For||Date Paid|
|2nd Quarter||August 14, 2013||$||0.5100|
|1st Quarter||May 15, 2013||$||0.4975|
|4th Quarter||February 14, 2013||$||0.4850|
|3rd Quarter||November 14, 2012||$||0.4725|
|2nd Quarter||August 14, 2012||$||0.4600|
|1st Quarter||May 15, 2012||$||0.4500|
Earnings Conference Call
We will broadcast our Earnings Conference Call on Thursday, August 1, 2013, at 10:00 a.m. Central time. This call can be accessed at www.genesisenergy.com. Choose the Investor Relations button. For those unable to attend the live broadcast, a replay will be available beginning approximately one hour after the event and remain available on our website for 30 days. There is no charge to access the event.
Genesis Energy, L.P. is a diversified midstream energy master limited partnership headquartered in Houston, Texas. Genesis' operations include pipeline transportation, refinery services and supply and logistics. The Pipeline Transportation Division is engaged in the pipeline transportation of crude oil and carbon dioxide. The Refinery Services Division primarily processes sour gas streams to remove sulfur at refining operations. The Supply and Logistics Division is engaged in the transportation, storage and supply and marketing of energy products, including crude oil, refined products, and certain industrial gases. Genesis' operations are primarily located in Texas, Louisiana, Arkansas, Mississippi, Alabama, Florida and the Gulf of Mexico.
|GENESIS ENERGY, L.P.|
|CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED|
(in thousands, except per unit amounts)
Three Months Ended
|Six Months Ended|
|COSTS AND EXPENSES:|
|Costs of sales||1,153,023||959,965||2,243,289||1,869,581|
|General and administrative expenses||11,314||9,967||23,061||19,559|
|Depreciation and amortization||15,670||15,830||30,723||30,609|
|Equity in earnings of equity investees||5,623||1,047||9,559||4,539|
|INCOME BEFORE INCOME TAXES||27,019||18,488||49,662||38,114|
|Income tax (expense) benefit||(117||)||96||86||74|
|NET INCOME PER COMMON UNIT:|
|Basic and Diluted||$||0.33||$||0.23||$||0.61||$||0.50|
|WEIGHTED AVERAGE OUTSTANDING COMMON UNITS:|
|Basic and Diluted||81,973||79,465||81,590||76,150|
Revenues and cost of sales for 2012 include corrections to previously reported quarterly and annual amounts for the three and six months ended June 30, 2012. These corrections were made to present certain sales transactions on a gross basis that previously had been recorded on a net basis. The corrections had no effect on previously reported operating income, net income, Segment Margin, Adjusted EBITDA or Available Cash before Reserves.
|GENESIS ENERGY, L.P.|
|OPERATING DATA - UNAUDITED|
Three Months Ended
|Six Months Ended|
|Pipeline Transportation Segment|
|Onshore crude oil pipelines (barrels/day):|
|Onshore crude oil pipelines total||111,937||90,683||106,247||86,151|
|Offshore crude oil pipelines (barrels/day):|
|Offshore crude oil pipelines total||401,334||312,093||386,163||334,023|
|CO2 pipeline (Mcf/day)|
|Refinery Services Segment|
|NaHS (dry short tons sold)||36,665||39,184||73,287||72,949|
|NaOH (caustic soda dry short tons sold)||21,720||14,670||40,950||35,588|
|Supply and Logistics Segment|
|Crude oil and petroleum products sales (barrels/day)||119,648||90,211||113,552||87,069|
(1) Volumes for our equity method investees are presented on a 100% basis.
GENESIS ENERGY, L.P.
CONDENSED CONSOLIDATED BALANCE SHEETS - UNAUDITED
(in thousands, except number of units)
|Cash and cash equivalents||$||18,668||$||11,282|
|Accounts receivable - trade, net||353,545||270,925|
|Other current assets||25,879||34,777|
|Total current assets||486,000||404,034|
|Fixed assets, net||656,039||565,281|
|Investment in direct financing leases, net||154,694||157,385|
|Intangible assets, net||68,786||75,065|
|Other assets, net||38,107||33,618|
|LIABILITIES AND PARTNERS' CAPITAL|
|Accounts payable - trade||$||326,843||$||258,053|
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