Genesis Energy, L.P. Reports Fourth Quarter 2018 Results HOUSTON
Genesis Energy, L.P. (NYSE: GEL) today announced its fourth quarter
results.
We generated the following financial results for the fourth quarter of
2018:
-
Net Loss Attributable to Genesis Energy, L.P. of $24.8 million for the
fourth quarter of 2018 compared to Net Income Attributable to Genesis
Energy, L.P. of $15.5 million for the same period in 2017.
-
Cash Flows from Operating Activities of $82.5 million for the fourth
quarter of 2018 compared to $117.2 million for the same period in
2017, a decrease of $34.8 million, principally due to an increase in
working capital.
-
Total Segment Margin in the fourth quarter of 2018 of $185.5 million.
-
Available Cash before Reserves of $150.8 million for the fourth
quarter of 2018, inclusive of a one-time gain on sale of assets of
$38.9 million. Excluding the gain on sale of assets, Available Cash
before Reserves provided 1.66X coverage for the quarterly distribution
of $0.55 per common unit attributable to the fourth quarter. We paid
distributions on our preferred units in the form of 534,576 additional
convertible preferred units.
-
Adjusted EBITDA of $213.2 million for the fourth quarter of 2018,
inclusive of a one-time gain on sale of assets of $38.9 million.
Excluding the gain on sale of assets, Adjusted EBITDA would have been
$174.3 million.
Grant Sims, CEO of Genesis Energy, said, “We are pleased to announce
Total Segment Margin of $185.5 million in the quarter which is a
testament to the strength of our underlying diverse business segments.
This was primarily driven by continued over performance in our soda ash
business and continued ramping up of volumes on our Louisiana
infrastructure.
As we have previously alluded, we have identified and are currently
evaluating several organic growth opportunities that are complementary
to our existing core businesses with apparent multiples to Adjusted
EBITDA of plus or minus 5 times. In conjunction with our desire to
internally fund these potential investments and possibly other future
opportunities and to further strengthen our balance sheet and maintain
our financial flexibility, our Board of Directors has made the decision
to hold our quarterly distribution rate flat at $0.55 per common unit
beginning with the distribution attributable to the quarter ending March
31, 2019. We intend to use our capital for the highest and best use for
all of our stakeholders. We will revisit our distribution policy
quarterly, but we currently expect for our quarterly distribution rate
to remain at $0.55 per common unit for the foreseeable future.
Turning to our quarterly financial results, our business continued to
perform well, generating consistent financial results that provided
1.66X coverage for our increased quarterly distribution. Our
distribution coverage ratio should be slightly lower in future periods,
everything else the same, as we move out of the paid-in-kind period on
our preferred equity units beginning on March 1, 2019 and start paying
the 8.75% preferred payment in cash on a go forward basis.
In our offshore business, we continue to be encouraged by the current
activity in and around our substantial footprint in the Gulf of Mexico.
We are currently seeing increasing demand for our assets from production
that is currently dedicated to pipelines of our competitors that, in our
estimation, appear to be oversubscribed. Given our excess capacity and
connectivity on certain of our systems, we expect to benefit from this
takeaway capacity constraint for the next twelve to twenty-four months.
In addition, we have several new dedicated tie-backs scheduled to come
on-line in the second half of 2019 representing up to an additional
40-50 thousand barrels per day, or kbd, of throughput exiting 2019. In
fact, we have either executed or are in the process of finalizing
agreements adding incremental, dedicated volumes approaching 80 kbd in
2020 (including Atlantis Phase 3), 70 kbd in 2021 and 150 kbd in 2022
(including Mad Dog 2) none of which requires any capital expenditures by
us. We are in early but active discussions regarding an incremental 300
kbd that could quite possibly come on in the 2022-2025 time-frame, a
portion of which represents one of the strategic capital opportunities
mentioned earlier. However, unless and until the parties enter into
definitive agreements, there is no guarantee that we will be successful
in capturing some or any of these volumes.
Our soda ash operations continue to exceed our original acquisition date
expectations. In 2018, we beat our previously raised target range of
$165-$175 million in segment margin contribution driven by strong export
pricing supported by higher than expected international demand growth
and lower than expected international supply growth. We currently expect
this tight international supply/demand balance to stay in place in 2019
and, in all likelihood, to strengthen into 2020 and 2021. During the
2019 domestic contract season, we gained some domestic market share to
bring our portfolio back in line with the domestic-international mix of
the average U.S. producer, after incurring some domestic losses over the
last couple years. Our intent is to maintain this balanced portfolio
moving forward.
Our refinery services business continues to perform at or above our
expectations and to be a remarkably steady contributor.
Margin in our marine segment actually increased slightly for the fourth
quarter in a row. We are reasonably hopeful we’ve put in a bottom for
the quarterly segment margin from our entire fleet of assets and have
seen some strength in near term day rates and utilization rates. It will
be interesting to see how IMO 2020 plays out, as we would otherwise
expect an increased demand for our type of inland barge that can get the
right intermediate refined barrel to the right refinery location under
the more stringent requirements for finished products. Also, there has
been a recent firming in Jones Act tanker rates, possibly indicating
that more and more shale crude oil volumes delivered to the Gulf Coast
are further transported to the East and West coasts of the US on Jones
Act vessels, in addition to international exports.
In the quarter, even after reflecting the sale of our Powder River Basin
midstream assets at the beginning of the fourth quarter, our segment
margin contribution from our onshore facilities and transportation
segment increased from the third quarter. That increase was primarily
driven by increasing crude by rail volumes flowing through our
infrastructure in the Baton Rouge corridor in Louisiana. Those increased
volumes were primarily attributable to Imperial Oil shipping a portion
of its equity Canadian production via rail to ExxonMobil’s Baton Rouge
refinery for consumption and export through our capital Aframax capable
facilities at the Port of Baton Rouge.
As many have read, on December 2, 2018 the government of Alberta took an
unprecedented action of intervention in a free market by imposing
mandatory upstream production curtailments on Canadian producers. We
believe that artificially impacted the short to near term spread between
WCS and WTI and resulted in making rail movements out of Canada
uneconomical. We believe that, over the long term, the market takeaway
capacity supply and demand dynamics are in place to ultimately return to
fourth quarter volumes, but we expect to see a reduction in volume in
the first half of 2019. The government of Alberta has already eased its
curtailment and will continue to revisit its policy from time to time.
Touching on the outlook for 2019, we are excited about the overall
current operating environment for our business segments, notwithstanding
the loss of segment margin expected in onshore facilities and
transportation in the first half of 2019 relating to the Alberta
production curtailment, as mentioned above. We expect 2019 Adjusted
EBITDA to be in a range of $685 to $715 million, which assumes an
Adjusted EBITDA reduction of approximately $15 million due to the
Alberta situation described above. We expect our fourth quarter Adjusted
EBITDA to be in a range of $180 to $190 million, driven by a reasonable
recovery of crude by rail volumes and expected growth from our offshore
segment attributable to the startup of several new dedicated tie-backs
in the second half of the year, discussed in more detail above. 1
We continue to enjoy a strong distribution coverage ratio and remain on
our path to naturally de-lever our balance sheet. We are encouraged by
our view of the operating environment for 2019 for our businesses,
especially after the Alberta oil production curtailment ends. As always,
we intend to be prudent and diligent in maintaining our financial
flexibility to allow the partnership to opportunistically build long
term value for all stakeholders without ever losing our commitment to
safe, reliable and responsible operations.”
1 We are unable to provide a reconciliation of the
forward-looking Adjusted EBITDA, a non-GAAP financial measure, to the
most directly comparable GAAP financial measure without unreasonable
efforts. The probable significance is that such comparable GAAP
financial measure may be materially different.
Financial Results
Segment Margin
Variances between the fourth quarter of 2018 (the “2018 Quarter”) and
the fourth quarter of 2017 (the “2017 Quarter”) in these components are
explained below.
Segment margin results for the 2018 Quarter and 2017 Quarter were as
follows:
|
|
|
|
|
|
|
Three Months Ended December 31,
|
|
|
|
2018
|
|
2017
|
|
|
|
(in thousands)
|
Offshore pipeline transportation
|
|
|
$
|
69,276
|
|
|
$
|
74,012
|
Sodium minerals and sulfur services
|
|
|
67,613
|
|
|
66,469
|
Onshore facilities and transportation
|
|
|
36,296
|
|
|
24,377
|
Marine transportation
|
|
|
12,272
|
|
|
10,526
|
Total Segment Margin
|
|
|
$
|
185,457
|
|
|
$
|
175,384
|
|
|
|
|
|
|
|
|
|
Offshore pipeline transportation Segment Margin for the 2018 Quarter
decreased $4.7 million, or 6%, from the 2017 Quarter. The decrease is
primarily attributable to lower cash distributions received from our
equity investees, specifically Poseidon, during the 2018 Quarter.
Poseidon has pipeline capacity reservation agreements with certain
producers in the Gulf of Mexico that require them to make minimum bill
payments to us in excess of the standard throughput fee charged per
barrel. These minimum bill payments ended prior to the 2018 Quarter.
This decrease was partially offset by higher overall volumes and
throughput fees on the Poseidon system, and higher volumes on our CHOPS
pipeline system and its associated laterals.
Sodium minerals and sulfur services Segment Margin for the 2018 Quarter
increased $1.1 million, or 2%. The contributions thus far from our
Alkali Business have exceeded our expectations, and we expect continued
strong performance into 2019. Although soda ash volumes were slightly
down during the 2018 Quarter, we were able to take advantage of
favorable export pricing supported by higher than expected international
demand growth and lower than expected international supply growth.
Additionally, our refinery services business continues to perform as
expected. NaHS volumes were slightly lower during the 2018 Quarter due
to the timing of certain of our sales to our international customers.
Onshore facilities and transportation Segment Margin for the 2018
Quarter increased $11.9 million, or 49%. Even after reflecting the sale
of our Powder River Basin midstream assets and realizing no margin from
the associated assets during the 2018 Quarter, our margin contribution
from the segment increased sequentially from the third quarter and from
the 2017 Quarter. This increase in the 2018 Quarter is primarily
attributable to increased volumes flowing through our infrastructure in
the Baton Rouge corridor in Louisiana. These increased volumes are the
realization of the expected growth in this business that we have
discussed over the last few quarters. This comes from actually moving
increased volumes of crude oil rather than marketing or merchant fees
which, for context, contributed less than $1 million for the fourth
quarter.
Marine transportation Segment Margin for the 2018 Quarter increased $1.7
million, or 17%, from the 2017 Quarter. This increase in Segment Margin
is primarily attributable to an increase in utilization during the 2018
Quarter on our inland barge operation. This was partially offset by our
offshore barge fleet entering into more short-term spot price contracts,
which can lead to a less favorable rebill structure and higher operating
costs, as our last legacy long term contract rolled off during the first
quarter of 2018. Additionally, we had an increase in operating costs
during the 2018 Quarter relative to the 2017 Quarter due to an increase
in dry-docking costs. We have continued to enter into short term
contracts (less than a year) in both the inland and offshore markets
because we believe the day rates currently being offered by the market
are at, or approaching, cyclical lows. We are reasonably hopeful that
we've put in a bottom for the quarterly segment margin from our entire
fleet of assets and have seen some strength in near term day rates and
utilization, but we have no expectation of the fundamentals for marine
transportation showing significant improvement through at least the next
several years.
Other Components of Net Income
In the 2018 Quarter, we recorded Net Loss Attributable to Genesis
Energy, L.P. of $24.8 million compared to Net Income Attributable to
Genesis Energy, L.P. of $15.5 million in the 2017 Quarter. The 2018
Quarter was negatively impacted by impairment expense of $120.2 million
associated with: (i) an impairment of $23.1 million on the goodwill
associated with our supply and logistics reporting unit, which primarily
consists of our legacy crude oil and refined products marketing and
trucking businesses; (ii) an impairment of certain of our non-core
offshore gas pipeline and platform assets of approximately $75.9 million
for which the abandonment timing has accelerated; and (iii) an
impairment of approximately $21.2 million related to our remaining
non-core assets in the Powder River Basin.
This decrease was offset by an increase in the 2018 Quarter on gains on
asset sales, primarily due to the closing of our Powder River Basin
asset sale. Additionally, we reported an increase in segment margin
during the 2018 Quarter of $10.1 million, a decrease in general and
administrative expenses of $10.2 million principally due lower corporate
and transaction costs, and other income (expense) effects of
approximately $23.0 million primarily driven by the valuation of the
embedded derivative associated with our Class A Convertible Preferred
Units and a loss on debt extinguishment, which was recognized during the
2017 Quarter.
Earnings Conference Call
We will broadcast our Earnings Conference Call on Wednesday,
February 20, 2019, at 8:30 a.m. Central time (9:30 a.m. Eastern 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
offshore pipeline transportation, sodium minerals and sulfur services,
marine transportation and onshore facilities and transportation.
Genesis’ operations are primarily located in Texas, Louisiana, Arkansas,
Mississippi, Alabama, Florida, Wyoming and the Gulf of Mexico.
|
GENESIS ENERGY, L.P.
|
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED
|
(in thousands, except per unit amounts)
|
|
|
|
Three Months Ended December 31,
|
|
Year Ended December 31,
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
REVENUES
|
|
$
|
689,296
|
|
|
$
|
720,049
|
|
|
$
|
2,912,770
|
|
|
$
|
2,028,377
|
|
|
|
|
|
|
|
|
|
|
COSTS AND EXPENSES:
|
|
|
|
|
|
|
|
|
Costs of sales and operating expenses
|
|
511,931
|
|
|
566,544
|
|
|
2,278,416
|
|
|
1,529,236
|
|
General and administrative expenses
|
|
17,486
|
|
|
27,698
|
|
|
66,898
|
|
|
66,421
|
|
Depreciation, depletion and amortization
|
|
74,401
|
|
|
76,027
|
|
|
313,190
|
|
|
252,480
|
|
Impairment expense
|
|
120,260
|
|
|
—
|
|
|
126,282
|
|
|
—
|
|
Gain on sale of assets
|
|
(38,901
|
)
|
|
(13,627
|
)
|
|
(42,264
|
)
|
|
(40,311
|
)
|
OPERATING INCOME
|
|
4,119
|
|
|
63,407
|
|
|
170,248
|
|
|
220,551
|
|
Equity in earnings of equity investees
|
|
15,238
|
|
|
16,241
|
|
|
43,626
|
|
|
51,046
|
|
Interest expense
|
|
(56,327
|
)
|
|
(54,645
|
)
|
|
(229,191
|
)
|
|
(176,762
|
)
|
Other income (expense)
|
|
8,627
|
|
|
(14,439
|
)
|
|
5,023
|
|
|
(16,715
|
)
|
INCOME BEFORE INCOME TAXES
|
|
(28,343
|
)
|
|
10,564
|
|
|
(10,294
|
)
|
|
78,120
|
|
Income tax benefit (expense)
|
|
(584
|
)
|
|
4,837
|
|
|
(1,498
|
)
|
|
3,959
|
|
NET INCOME (LOSS)
|
|
(28,927
|
)
|
|
15,401
|
|
|
(11,792
|
)
|
|
82,079
|
|
Net loss attributable to noncontrolling interests
|
|
4,144
|
|
|
111
|
|
|
5,717
|
|
|
568
|
|
NET INCOME (LOSS) ATTRIBUTABLE TO GENESIS ENERGY, L.P.
|
|
$
|
(24,783
|
)
|
|
$
|
15,512
|
|
|
$
|
(6,075
|
)
|
|
$
|
82,647
|
|
Less: Accumulated distributions attributable to Class A Convertible
Preferred Units
|
|
(18,021
|
)
|
|
(16,526
|
)
|
|
(69,801
|
)
|
|
(21,995
|
)
|
NET INCOME(LOSS) AVAILABLE TO COMMON UNITHOLDERS
|
|
$
|
(42,804
|
)
|
|
$
|
(1,014
|
)
|
|
$
|
(75,876
|
)
|
|
$
|
60,652
|
|
NET INCOME(LOSS) PER COMMON UNIT:
|
|
|
|
|
|
|
|
|
Basic and Diluted
|
|
$
|
(0.35
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.62
|
)
|
|
$
|
0.50
|
|
WEIGHTED AVERAGE OUTSTANDING COMMON UNITS:
|
|
|
|
|
|
|
|
|
Basic and Diluted
|
|
122,579
|
|
|
122,579
|
|
|
122,579
|
|
|
121,546
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GENESIS ENERGY, L.P.
|
OPERATING DATA - UNAUDITED
|
|
|
|
Three Months Ended December 31,
|
|
Year Ended December 31,
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Offshore Pipeline Transportation Segment
|
|
|
|
|
|
|
|
|
Crude oil pipelines (barrels/day unless otherwise noted):
|
|
|
|
|
|
|
|
|
CHOPS
|
|
202,008
|
|
|
193,210
|
|
|
202,121
|
|
|
213,527
|
|
Poseidon (1)
|
|
251,512
|
|
|
240,241
|
|
|
234,960
|
|
|
253,547
|
|
Odyssey (1)
|
|
131,088
|
|
|
98,529
|
|
|
115,239
|
|
|
116,408
|
|
GOPL
|
|
8,485
|
|
|
8,243
|
|
|
10,147
|
|
|
8,185
|
|
Offshore crude oil pipelines total
|
|
593,093
|
|
|
540,223
|
|
|
562,467
|
|
|
591,667
|
|
|
|
|
|
|
|
|
|
|
Natural gas transportation volumes (MMbtus/d) (1)
|
|
421,104
|
|
|
434,591
|
|
|
432,261
|
|
|
496,302
|
|
|
|
|
|
|
|
|
|
|
Sodium Minerals and Sulfur Services Segment
|
|
|
|
|
|
|
|
|
NaHS (dry short tons sold)
|
|
36,125
|
|
|
37,829
|
|
|
150,671
|
|
|
133,404
|
|
Soda Ash volumes (short tons sold)
|
|
929,953
|
|
|
965,031
|
|
|
3,669,206
|
|
|
1,274,421
|
|
NaOH (caustic soda) volumes (dry short tons sold) (2)
|
|
22,917
|
|
|
28,854
|
|
|
110,107
|
|
|
84,816
|
|
|
|
|
|
|
|
|
|
|
Onshore Facilities and Transportation Segment
|
|
|
|
|
|
|
|
|
Crude oil pipelines (barrels/day):
|
|
|
|
|
|
|
|
|
Texas
|
|
48,877
|
|
|
45,343
|
|
|
33,303
|
|
|
32,684
|
|
Jay
|
|
12,733
|
|
|
13,189
|
|
|
14,036
|
|
|
14,155
|
|
Mississippi
|
|
5,879
|
|
|
7,732
|
|
|
6,359
|
|
|
8,290
|
|
Louisiana (3)
|
|
165,426
|
|
|
152,954
|
|
|
159,754
|
|
|
135,310
|
|
Wyoming (4)
|
|
—
|
|
|
29,789
|
|
|
33,957
|
|
|
22,329
|
|
Onshore crude oil pipelines total
|
|
232,915
|
|
|
249,007
|
|
|
247,409
|
|
|
212,768
|
|
|
|
|
|
|
|
|
|
|
Free State- CO2 Pipeline (Mcf/day)
|
|
125,213
|
|
|
92,397
|
|
|
107,674
|
|
|
77,921
|
|
|
|
|
|
|
|
|
|
|
Crude oil and petroleum products sales (barrels/day)
|
|
37,617
|
|
|
59,237
|
|
|
45,845
|
|
|
51,771
|
|
|
|
|
|
|
|
|
|
|
Rail load/unload volumes (barrels/day) (5)
|
|
165,902
|
|
|
46,544
|
|
|
89,082
|
|
|
52,877
|
|
|
|
|
|
|
|
|
|
|
Marine Transportation Segment
|
|
|
|
|
|
|
|
|
Inland Fleet Utilization Percentage (6)
|
|
97.0
|
%
|
|
90.0
|
%
|
|
95.2
|
%
|
|
90.4
|
%
|
Offshore Fleet Utilization Percentage (6)
|
|
96.5
|
%
|
|
97.5
|
%
|
|
93.5
|
%
|
|
98.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Volumes for our equity method investees are presented on a 100%
basis. We own 64% of Poseidon and 29% of Odyssey, as well as equity
interests in various other entities.
|
(2)
|
|
Caustic soda sales volumes also include volumes sold from our Alkali
business.
|
(3)
|
|
Total daily volume for the three and twelve months ended December
31, 2018 includes 49,802 and 55,202 barrels per day, respectively,
of intermediate refined products associated with our Port of Baton
Rouge Terminal pipelines. Total daily volume for the three and
twelve months ended December 31, 2017 includes 62,012 and 56,748
barrels per day, respectively, of intermediate refined products
associated with our Port of Baton Rouge Terminal pipelines.
|
(4)
|
|
Volumes on our Wyoming system during 2018 represent actual
throughput as of September 30, 2018 as the relevant assets were
divested at the beginning of the 2018 Quarter.
|
(5)
|
|
Indicates total barrels for which fees were charged for either
loading or unloading at all rail facilities.
|
(6)
|
|
Utilization rates are based on a 365 day year, as adjusted for
planned downtime and dry-docking.
|
|
|
|
|
GENESIS ENERGY, L.P.
|
CONDENSED CONSOLIDATED BALANCE SHEETS - UNAUDITED
|
(in thousands, except number of units)
|
|
|
|
December 31, 2018
|
|
December 31, 2017
|
ASSETS
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
10,300
|
|
|
$
|
9,041
|
|
Accounts receivable - trade, net
|
|
323,462
|
|
|
495,449
|
|
Inventories
|
|
73,531
|
|
|
88,653
|
|
Other current assets
|
|
35,986
|
|
|
42,890
|
|
Total current assets
|
|
443,279
|
|
|
636,033
|
|
Fixed assets and mineral leaseholds, net
|
|
4,977,514
|
|
|
5,430,535
|
|
Investment in direct financing leases, net
|
|
116,925
|
|
|
125,283
|
|
Equity investees
|
|
355,085
|
|
|
381,550
|
|
Intangible assets, net
|
|
162,602
|
|
|
182,406
|
|
Goodwill
|
|
301,959
|
|
|
325,046
|
|
Other assets, net
|
|
121,707
|
|
|
56,628
|
|
Total assets
|
|
$
|
6,479,071
|
|
|
$
|
7,137,481
|
|
LIABILITIES AND CAPITAL
|
|
|
|
|
Accounts payable - trade
|
|
$
|
127,327
|
|
|
$
|
270,855
|
|
Accrued liabilities
|
|
205,507
|
|
|
185,409
|
|
Total current liabilities
|
|
332,834
|
|
|
456,264
|
|
Senior secured credit facility
|
|
970,100
|
|
|
1,099,200
|
|
Senior unsecured notes, net of debt issuance costs
|
|
2,462,363
|
|
|
2,598,918
|
|
Deferred tax liabilities
|
|
12,576
|
|
|
11,913
|
|
Other long-term liabilities
|
|
259,198
|
|
|
256,571
|
|
Total liabilities
|
|
4,037,071
|
|
|
4,422,866
|
|
Mezzanine capital:
|
|
|
|
|
Class A convertible preferred units
|
|
761,466
|
|
|
697,151
|
|
Partners' capital:
|
|
|
|
|
Common unitholders
|
|
1,690,799
|
|
|
2,026,147
|
|
Accumulated other comprehensive income (loss)
|
|
939
|
|
|
(604
|
)
|
Noncontrolling interests
|
|
(11,204
|
)
|
|
(8,079
|
)
|
Total partners' capital
|
|
1,680,534
|
|
|
2,017,464
|
|
Total liabilities, mezzanine capital and partners' capital
|
|
$
|
6,479,071
|
|
|
$
|
7,137,481
|
|
|
|
|
|
|
Common Units Data:
|
|
|
|
|
Total common units outstanding
|
|
122,579,218
|
|
|
122,579,218
|
|
|
|
|
|
|
|
|
|
GENESIS ENERGY, L.P.
|
RECONCILIATION OF NET INCOME TO SEGMENT MARGIN - UNAUDITED
|
(in thousands)
|
|
|
|
Three Months Ended December 31,
|
|
|
2018
|
|
2017
|
Net income (loss) attributable to Genesis Energy, L.P.
|
|
$
|
(24,783
|
)
|
|
$
|
15,512
|
|
Corporate general and administrative expenses
|
|
16,997
|
|
|
26,335
|
|
Depreciation, depletion, amortization and accretion
|
|
70,816
|
|
|
77,808
|
|
Impairment expense
|
|
120,260
|
|
|
—
|
|
Interest expense, net
|
|
56,327
|
|
|
54,645
|
|
Income tax expense (benefit)
|
|
584
|
|
|
(4,837
|
)
|
Gain on sale of assets
|
|
(38,901
|
)
|
|
(13,627
|
)
|
Equity compensation adjustments
|
|
(126
|
)
|
|
(283
|
)
|
Provision for leased items no longer in use
|
|
(434
|
)
|
|
—
|
|
Other
|
|
—
|
|
|
2,987
|
|
Plus (minus) Select Items, net
|
|
(15,283
|
)
|
|
16,844
|
|
Segment Margin (1)
|
|
$
|
185,457
|
|
|
$
|
175,384
|
|
(1)
|
|
See definition of Segment Margin later in this press release.
|
|
|
|
|
GENESIS ENERGY, L.P.
|
RECONCILIATIONS OF NET INCOME TO ADJUSTED EBITDA AND AVAILABLE
CASH BEFORE RESERVES- UNAUDITED
|
(in thousands)
|
|
|
|
Three Months Ended December 31,
|
|
|
2018
|
|
2017
|
|
|
(in thousands)
|
Net income (loss) attributable to Genesis Energy, L.P.
|
|
$
|
(24,783
|
)
|
|
$
|
15,512
|
|
Interest expense, net
|
|
56,327
|
|
|
54,645
|
|
Income tax expense (benefit)
|
|
584
|
|
|
(4,837
|
)
|
Depreciation, depletion, amortization, and accretion
|
|
70,816
|
|
|
77,808
|
|
Impairment expense
|
|
120,260
|
|
|
—
|
|
EBITDA
|
|
223,204
|
|
|
143,128
|
|
Plus (minus) Select Items, net
|
|
(10,024
|
)
|
|
21,652
|
|
Adjusted EBITDA, net(1)
|
|
213,180
|
|
|
164,780
|
|
Maintenance capital utilized(2)
|
|
(5,755
|
)
|
|
(3,750
|
)
|
Interest expense, net
|
|
(56,327
|
)
|
|
(54,645
|
)
|
Cash tax expense (benefit)
|
|
(301
|
)
|
|
270
|
|
Other
|
|
—
|
|
|
53
|
|
Available Cash before Reserves(1)
|
|
$
|
150,797
|
|
|
$
|
106,708
|
|
(1)
|
|
Includes a gain on sale of assets of $38.9 million related to the
sale of our Powder River Basin midstream assets.
|
(2)
|
|
Maintenance capital expenditures in the 2018 Quarter and 2017
Quarter were $27.3 million and $35.7 million, respectively. These
expenditures are primarily related to our Alkali business.
|
|
|
|
|
GENESIS ENERGY, L.P.
|
RECONCILIATION OF NET CASH FLOWS FROM OPERATING ACTIVITIES TO
ADJUSTED EBITDA - UNAUDITED
|
(in thousands)
|
|
|
|
Three Months Ended December 31,
|
|
|
2018
|
|
2017
|
Cash Flows from Operating Activities (1)
|
|
$
|
82,475
|
|
|
$
|
117,166
|
|
Adjustments to reconcile net cash flow provided by operating
activities to Adjusted EBITDA:
|
|
|
|
|
Interest Expense, net
|
|
56,327
|
|
|
54,645
|
|
Amortization of debt issuance costs and discount
|
|
(2,676
|
)
|
|
(4,949
|
)
|
Effects of available cash from equity method investees not included
in operating cash flows (1)
|
|
2,937
|
|
|
9,665
|
|
Net effect of changes in components of operating assets and
liabilities
|
|
29,482
|
|
|
(36,418
|
)
|
Non-cash effect of long-term incentive compensation expense
|
|
(832
|
)
|
|
(121
|
)
|
Expenses related to acquiring or constructing growth capital assets
|
|
2,970
|
|
|
5,324
|
|
Differences in timing of cash receipts for certain contractual
arrangements (2)
|
|
(1,358
|
)
|
|
(5,846
|
)
|
Loss on debt extinguishment
|
|
—
|
|
|
6,242
|
|
Other items, net
|
|
4,954
|
|
|
5,445
|
|
Gain on sale of assets
|
|
38,901
|
|
|
13,627
|
|
Adjusted EBITDA
|
|
$
|
213,180
|
|
|
$
|
164,780
|
|
(1)
|
|
Amounts for the 2017 periods have been re-cast in accordance with
our retrospective adoption of the FASB's update to ASC 230.
|
(2)
|
|
Includes the difference in timing of cash receipts from customers
during the period and the revenue we recognize in accordance with
GAAP on our related contracts. For purposes of our Non-GAAP
measures, we add those amounts in the period of payment and deduct
them in the period in which GAAP recognizes them.
|
|
|
|
|
GENESIS ENERGY, L.P.
|
ADJUSTED DEBT-TO-ADJUSTED CONSOLIDATED EBITDA RATIO - UNAUDITED
|
(in thousands)
|
|
|
|
December 31, 2018
|
Senior secured credit facility
|
|
$
|
970,100
|
|
Senior unsecured notes
|
|
2,462,363
|
|
Less: Outstanding inventory financing sublimit borrowings
|
|
(17,800
|
)
|
Less: Cash and cash equivalents
|
|
(10,300
|
)
|
Adjusted Debt (2)
|
|
$
|
3,404,363
|
|
|
|
|
|
|
Pro Forma LTM
|
|
|
December 31, 2018
|
Consolidated EBITDA (per our senior secured credit facility)(3)
|
|
$
|
670,957
|
|
Acquisitions, material projects and other Consolidated EBITDA
adjustments(4)
|
|
(7,351
|
)
|
Adjusted Consolidated EBITDA (per our senior secured credit facility)(5)
|
|
$
|
663,606
|
|
|
|
|
Adjusted Debt-to-Adjusted Consolidated EBITDA
|
|
5.13X
|
|
|
|
(1)
|
|
Our credit facility allows for pro forma credit for asset sales
completed subsequent to the reporting period but prior to the date
our compliance certificate is due for such period.
|
|
|
|
(2)
|
|
We define Adjusted Debt as the amounts outstanding under our senior
secured credit facility and senior unsecured notes (including any
unamortized premiums or discounts) less the amount outstanding under
our inventory financing sublimit, less cash and cash equivalents on
hand at the end of the period.
|
|
|
|
(3)
|
|
Consolidated EBITDA for the four-quarter period ending with the most
recent quarter, as calculated under our senior secured credit
facility.
|
|
|
|
(4)
|
|
This amount reflects the adjustment we are permitted to make under
our senior secured credit facility for purposes of calculating
compliance with our leverage ratio. It includes a pro rata portion
of projected future annual EBITDA from material projects (i.e.
organic growth) and includes Adjusted EBITDA (using historical
amounts and other permitted amounts) since the beginning of the
calculation period attributable to each acquisition completed during
such calculation period, regardless of the date on which such
acquisition was actually completed. This adjustment may not be
indicative of future results.
|
|
|
|
(5)
|
|
Adjusted Consolidated EBITDA for the four-quarter period ending with
the most recent quarter, as calculated under our senior secured
credit facility.
|
|
|
|
This press release includes forward-looking statements as defined under
federal law. Although we believe that our expectations are based upon
reasonable assumptions, we can give no assurance that our goals will be
achieved. Actual results may vary materially. All statements, other than
statements of historical facts, included in this press release that
address activities, events or developments that we expect, believe or
anticipate will or may occur in the future are forward-looking
statements, and historical performance is not necessarily indicative of
future performance. Those forward-looking statements rely on a number of
assumptions concerning future events and are subject to a number of
uncertainties, factors and risks, many of which are outside our control,
that could cause results to differ materially from those expected by
management. Such risks and uncertainties include, but are not limited
to, weather, political, economic and market conditions, including a
decline in the price and market demand for products, the timing and
success of business development efforts and other uncertainties. Those
and other applicable uncertainties, factors and risks that may affect
those forward-looking statements are described more fully in our Annual
Report on Form 10-K for the year ended December 31, 2017 filed with the
Securities and Exchange Commission and other filings, including our
Current Reports on Form 8-K and Quarterly Reports on Form 10-Q. We
undertake no obligation to publicly update or revise any forward-looking
statement.
NON-GAAP MEASURES
This press release and the accompanying schedules include non-generally
accepted accounting principle (non-GAAP) financial measures of Adjusted
EBITDA and total Available Cash before Reserves. In this press release,
we also present total Segment Margin as if it were a non-GAAP measure.
Our Non-GAAP measures may not be comparable to similarly titled measures
of other companies because such measures may include or exclude other
specified items. The accompanying schedules provide reconciliations of
these non-GAAP financial measures to their most directly comparable
financial measures calculated in accordance with generally accepted
accounting principles in the United States of America (GAAP). Our
non-GAAP financial measures should not be considered (i) as alternatives
to GAAP measures of liquidity or financial performance or (ii) as being
singularly important in any particular context; they should be
considered in a broad context with other quantitative and qualitative
information. Our Available Cash before Reserves, Adjusted EBITDA and
total Segment Margin measures are just three of the relevant data points
considered from time to time.
When evaluating our performance and making decisions regarding our
future direction and actions (including making discretionary payments,
such as quarterly distributions) our board of directors and management
team have access to a wide range of historical and forecasted
qualitative and quantitative information, such as our financial
statements; operational information; various non-GAAP measures; internal
forecasts; credit metrics; analyst opinions; performance, liquidity and
similar measures; income; cash flow; and expectations for us, and
certain information regarding some of our peers. Additionally, our board
of directors and management team analyze, and place different weight on,
various factors from time to time. We believe that investors benefit
from having access to the same financial measures being utilized by
management, lenders, analysts and other market participants. We attempt
to provide adequate information to allow each individual investor and
other external user to reach her/his own conclusions regarding our
actions without providing so much information as to overwhelm or confuse
such investor or other external user.
In the fourth quarter of 2017, we revised portions of the format and
definitions relating to our presentation of non-GAAP financial measures.
Amounts attributable to prior periods have been recast.
AVAILABLE CASH BEFORE RESERVES
Purposes, Uses and Definition
Available Cash before Reserves, also referred to as distributable cash
flow, is a quantitative standard used throughout the investment
community with respect to publicly traded partnerships and is commonly
used as a supplemental financial measure by management and by external
users of financial statements such as investors, commercial banks,
research analysts and rating agencies, to aid in assessing, among other
things:
(1) the financial performance of our assets;
(2) our operating performance;
(3) the viability of potential projects, including our cash and overall
return on alternative capital investments as compared to those of other
companies in the midstream energy industry;
(4) the ability of our assets to generate cash sufficient to satisfy
certain non-discretionary cash requirements, including interest payments
and certain maintenance capital requirements; and
(5) our ability to make certain discretionary payments, such as
distributions on our units, growth capital expenditures, certain
maintenance capital expenditures and early payments of indebtedness.
We define Available Cash before Reserves ("Available Cash before
Reserves") as Adjusted EBITDA as adjusted for certain items, the most
significant of which in the relevant reporting periods have been the sum
of maintenance capital utilized, net cash interest expense and cash tax
expense.
Disclosure Format Relating to Maintenance Capital
We use a modified format relating to maintenance capital requirements
because our maintenance capital expenditures vary materially in nature
(discretionary vs. non-discretionary), timing and amount from time to
time. We believe that, without such modified disclosure, such changes in
our maintenance capital expenditures could be confusing and potentially
misleading to users of our financial information, particularly in the
context of the nature and purposes of our Available Cash before Reserves
measure. Our modified disclosure format provides those users with
information in the form of our maintenance capital utilized measure
(which we deduct to arrive at Available Cash before Reserves). Our
maintenance capital utilized measure constitutes a proxy for
non-discretionary maintenance capital expenditures and it takes into
consideration the relationship among maintenance capital expenditures,
operating expenses and depreciation from period to period.
Maintenance Capital Requirements
Maintenance Capital Expenditures
Maintenance capital expenditures are capitalized costs that are
necessary to maintain the service capability of our existing assets,
including the replacement of any system component or equipment which is
worn out or obsolete. Maintenance capital expenditures can be
discretionary or non-discretionary, depending on the facts and
circumstances.
Initially, substantially all of our maintenance capital expenditures
were (a) related to our pipeline assets and similar infrastructure, (b)
non-discretionary in nature and (c) immaterial in amount as compared to
our Available Cash before Reserves measure. Those historical
expenditures were non-discretionary (or mandatory) in nature because we
had very little (if any) discretion as to whether or when we incurred
them. We had to incur them in order to continue to operate the related
pipelines in a safe and reliable manner and consistently with past
practices. If we had not made those expenditures, we would not have been
able to continue to operate all or portions of those pipelines, which
would not have been economically feasible. An example of a
non-discretionary (or mandatory) maintenance capital expenditure would
be replacing a segment of an old pipeline because one can no longer
operate that pipeline safely, legally and/or economically in the absence
of such replacement.
As we exist today, a substantial amount of our maintenance capital
expenditures from time to time will be (a) related to our assets other
than pipelines, such as our marine vessels, trucks and similar assets,
(b) discretionary in nature and (c) potentially material in amount as
compared to our Available Cash before Reserves measure. Those
expenditures will be discretionary (or non-mandatory) in nature because
we will have significant discretion as to whether or when we incur them.
We will not be forced to incur them in order to continue to operate the
related assets in a safe and reliable manner. If we chose not make those
expenditures, we would be able to continue to operate those assets
economically, although in lieu of maintenance capital expenditures, we
would incur increased operating expenses, including maintenance
expenses. An example of a discretionary (or non-mandatory) maintenance
capital expenditure would be replacing an older marine vessel with a new
marine vessel with substantially similar specifications, even though one
could continue to economically operate the older vessel in spite of its
increasing maintenance and other operating expenses.
In summary, as we continue to expand certain non-pipeline portions of
our business, we are experiencing changes in the nature (discretionary
vs. non-discretionary), timing and amount of our maintenance capital
expenditures that merit a more detailed review and analysis than was
required historically. Management’s recently increasing ability to
determine if and when to incur certain maintenance capital expenditures
is relevant to the manner in which we analyze aspects of our business
relating to discretionary and non-discretionary expenditures. We believe
it would be inappropriate to derive our Available Cash before Reserves
measure by deducting discretionary maintenance capital expenditures,
which we believe are similar in nature in this context to certain other
discretionary expenditures, such as growth capital expenditures,
distributions/dividends and equity buybacks. Unfortunately, not all
maintenance capital expenditures are clearly discretionary or
non-discretionary in nature. Therefore, we developed a measure,
maintenance capital utilized, that we believe is more useful in the
determination of Available Cash before Reserves. Our maintenance capital
utilized measure, which is described in more detail below, constitutes a
proxy for non-discretionary maintenance capital expenditures and it
takes into consideration the relationship among maintenance capital
expenditures, operating expenses and depreciation from period to period.
Maintenance Capital Utilized
We believe our maintenance capital utilized measure is the most useful
quarterly maintenance capital requirements measure to use to derive our
Available Cash before Reserves measure. We define our maintenance
capital utilized measure as that portion of the amount of previously
incurred maintenance capital expenditures that we utilize during the
relevant quarter, which would be equal to the sum of the maintenance
capital expenditures we have incurred for each project/component in
prior quarters allocated ratably over the useful lives of those
projects/components.
Because we did not initially use our maintenance capital utilized
measure, our future maintenance capital utilized calculations will
reflect the utilization of solely those maintenance capital expenditures
incurred since December 31, 2013.
ADJUSTED EBITDA
Purposes, Uses and Definition
Adjusted EBITDA is commonly used as a supplemental financial measure by
management and by external users of financial statements such as
investors, commercial banks, research analysts and rating agencies, to
aid in assessing, among other things:
(1) the financial performance of our assets without regard to financing
methods, capital structures or historical cost basis;
(2) our operating performance as compared to those of other companies in
the midstream energy industry, without regard to financing and capital
structure;
(3) the viability of potential projects, including our cash and overall
return on alternative capital investments as compared to those of other
companies in the midstream energy industry;
(4) the ability of our assets to generate cash sufficient to satisfy
certain non-discretionary cash requirements, including interest payments
and certain maintenance capital requirements; and
(5) our ability to make certain discretionary payments, such as
distributions on our units, growth capital expenditures, certain
maintenance capital expenditures and early payments of indebtedness.
We define Adjusted EBITDA (“Adjusted EBITDA”) as earnings before
interest, taxes, depreciation and amortization (including impairment,
write-offs, accretion and similar items, often referred to as EBITDA)
after eliminating other non-cash revenues, expenses, gains, losses and
charges (including any loss on asset dispositions), plus or minus
certain other select items that we view as not indicative of our core
operating results (collectively, "Select Items"). Although, we do not
necessarily consider all of our Select Items to be non-recurring,
infrequent or unusual, we believe that an understanding of these Select
Items is important to the evaluation of our core operating results. The
most significant Select Items in the relevant reporting periods are set
forth below.
The table below includes the Select Items discussed above as applicable
to the reconciliation of Adjusted EBITDA and Available Cash before
Reserves to net income:
|
|
|
|
|
|
|
|
|
Three Months Ended December 31,
|
|
|
|
|
2018
|
|
2017
|
I.
|
|
Applicable to all Non-GAAP Measures
|
|
|
|
|
|
|
Differences in timing of cash receipts for certain contractual
arrangements(1)
|
|
$
|
(1,358
|
)
|
|
$
|
(5,846
|
)
|
|
|
Adjustment regarding direct financing leases(2)
|
|
1,979
|
|
|
1,794
|
|
|
|
Certain non-cash items:
|
|
|
|
|
|
|
Unrealized loss (gain) on derivative transactions excluding fair
value hedges, net of changes in inventory value
|
|
(11,288
|
)
|
|
8,253
|
|
|
|
Adjustment regarding equity investees(3)
|
|
1,442
|
|
|
6,286
|
|
|
|
Other
|
|
(6,058
|
)
|
|
115
|
|
|
|
Sub-total Select Items, net(4)
|
|
(15,283
|
)
|
|
16,844
|
|
II.
|
|
Applicable only to Adjusted EBITDA and Available Cash before Reserves
|
|
|
|
|
|
|
Certain transaction costs(5)
|
|
2,970
|
|
|
5,324
|
|
|
|
Equity compensation adjustments
|
|
(151
|
)
|
|
(373
|
)
|
|
|
Other
|
|
2,440
|
|
|
(143
|
)
|
|
|
Total Select Items, net(6)
|
|
$
|
(10,024
|
)
|
|
$
|
21,652
|
|
(1)
|
|
Includes the difference in timing of cash receipts from customers
during the period and the revenue we recognize in accordance with
GAAP on our related contracts. For purposes of our Non-GAAP
measures, we add those amounts in the period of payment and deduct
them in the period in which GAAP recognizes them.
|
(2)
|
|
Represents the net effect of adding cash receipts from direct
financing leases and deducting expenses relating to direct financing
leases.
|
(3)
|
|
Represents the net effect of adding distributions from equity
investees and deducting earnings of equity investees net to us.
|
(4)
|
|
Represents all Select Items applicable to Segment Margin, Adjusted
EBITDA and Available Cash before Reserves.
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(5)
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Represents transaction costs relating to certain merger,
acquisition, transition, and financing transactions incurred in
acquisition activities.
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(6)
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Represents Select Items applicable to Adjusted EBITDA and Available
Cash before Reserves.
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SEGMENT MARGIN
Our chief operating decision maker (our Chief Executive Officer)
evaluates segment performance based on a variety of measures including
Segment Margin, segment volumes where relevant and capital investment.
We define Segment Margin as revenues less product costs, operating
expenses, and segment general and administrative expenses, after
eliminating gain or loss on sale of assets, plus or minus applicable
Select Items. Although, we do not necessarily consider all of our Select
Items to be non-recurring, infrequent or unusual, we believe that an
understanding of these Select Items is important to the evaluation of
our core operating results.
View source version on businesswire.com: https://www.businesswire.com/news/home/20190220005281/en/ Copyright Business Wire 2019
Source: Business Wire
(February 20, 2019 - 6:15 AM EST)
News by QuoteMedia
www.quotemedia.com
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