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USD Partners LP Announces First Quarter 2021 Results

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USD Partners LP (NYSE: USDP) (the "Partnership") announced today its operating and financial results for the three months ended March 31, 2021. Financial highlights with respect to the first quarter of 2021 include the following:

  • Generated Net Cash Provided by Operating Activities of $12.6 million, Adjusted EBITDA(1) of $14.6 million and Distributable Cash Flow(1) of $12.5 million

  • Reported Net Income of $7.3 million

  • Increased quarterly cash distribution to $0.1135 per unit ($0.454 per unit on an annualized basis) with approximately 4.0x Distributable Cash Flow Coverage(2)

  • Announced that Management intends to recommend to the Board of Directors of the Partnership’s general partner to increase the quarterly cash distribution per unit by an additional $0.0025 per quarter for each of the second, third and fourth quarters in 2021 as compared to the preceding quarter

"We are pleased to report a strong start to 2021 at the Partnership as well as our intent to resume growing our quarterly distribution during 2021," said Dan Borgen, the Partnership’s Chief Executive Officer. "Our strategically located terminals continue to perform well, and our recommendation to the Board to increase our quarterly distribution by 2.25% relative to the fourth quarter of 2020 was reinforced by our improved outlook for our business along with our enhanced liquidity position."

"We continue to be very excited about our Sponsor’s previously announced diluent recovery unit ("DRU") project and destination terminal in Port Arthur, Texas ("PAT") and look forward to announcing their in-service dates next quarter. We expect that construction of the DRU will reach substantial completion in July, ramping to its full capacity in August," added Mr. Borgen.

Partnership’s First Quarter 2021 Liquidity, Operational and Financial Results

Substantially all of the Partnership’s cash flows are generated from multi-year, take-or-pay terminalling services agreements related to its crude oil terminals, which include minimum monthly commitment fees. The Partnership’s customers include major integrated oil companies, refiners and marketers, the majority of which are investment-grade rated.

The Partnership’s operating results for the first quarter of 2021 relative to the same quarter in 2020 were primarily influenced by higher revenue at its Stroud terminal during the quarter due to higher rates that are based on crude oil index pricing differentials, which was partially offset by revenue that was deferred in the first quarter of 2021 in connection with the make-up right options that the Partnership granted to its customers. Additionally, revenue at the Hardisty terminal was slightly lower in the first quarter of 2021 relative to the first quarter of 2020 resulting from the recognition in the first quarter of 2020 of revenue that was deferred in 2019 in connection with the make-up rights granted to our customers, compared to the first quarter of 2021 where no previously deferred revenue was recognized and a minor amount of revenue was deferred. This decrease in Hardisty revenues was partially offset by a favorable variance resulting from the change in the Canadian exchange rate associated with the Partnership’s Canadian-dollar denominated contracts and increased rates on certain of the Partnership’s Hardisty agreements when compared to the first quarter of 2020.

The Partnership experienced lower operating costs during the first quarter of 2021 as compared to the first quarter of 2020. This decrease was primarily due to a non-cash impairment of the goodwill associated with the Casper terminal that was recognized in the first quarter of 2020, with no similar charge recognized in the first quarter of 2021.

Net income increased in the first quarter of 2021 as compared to the net loss recognized in the first quarter of 2020, primarily because of the operating factors discussed above coupled with lower interest expense incurred during the 2021 period resulting from lower interest rates and a lower weighted average balance of debt outstanding. Additionally, the Partnership recognized a non-cash gain associated with its interest rate derivatives during the first quarter of 2021.

Net Cash Provided by Operating Activities for the quarter increased 8% relative to the first quarter of 2020, primarily due to the operating factors discussed above and the general timing of receipts and payments of accounts receivable, accounts payable and deferred revenue balances.

Adjusted EBITDA and Distributable Cash Flow ("DCF") increased by 18% and 27%, respectively, for the quarter relative to the first quarter of 2020. The increase in Adjusted EBITDA was primarily a result of the operating factors discussed above. DCF was also positively impacted by a decrease in cash paid for interest and income taxes during the quarter, partially offset by slightly higher maintenance capital expenditures incurred during the current quarter, which included technology upgrades and safety maintenance at the Partnership’s Hardisty and Stroud terminals.

As of March 31, 2021, the Partnership had approximately $3 million of unrestricted cash and cash equivalents and undrawn borrowing capacity of $196 million on its $385 million senior secured credit facility, subject to the Partnership’s continued compliance with financial covenants. As of the end of the first quarter of 2021, the Partnership had borrowings of $189 million outstanding under the Revolving Credit Facility. Pursuant to the terms of the Partnership’s Credit Agreement, the Partnership’s borrowing capacity is currently limited to 4.5 times its trailing 12-month consolidated EBITDA, as defined in the Credit Agreement. As such, the Partnership’s available borrowings under the senior secured credit facility, including unrestricted cash and cash equivalents, was approximately $75 million as of March 31, 2021. The Partnership was in compliance with its financial covenants, as of March 31, 2021.

On April 22, 2021, the Partnership declared a quarterly cash distribution of $0.1135 per unit ($0.454 per unit on an annualized basis), representing an increase of $0.0025 per unit, or 2.25% over the distribution declared for the fourth quarter of 2020. The distribution is payable on May 14, 2021, to unitholders of record at the close of business on May 5, 2021.

Since the end of the first quarter of 2020, the Partnership has reduced the outstanding balance of its revolving credit facility by $35 million as of March 31, 2021. In addition, the Partnership has repaid an additional $3 million subsequent to the end of the first quarter of 2021.

First Quarter 2021 Conference Call Information

The Partnership will host a conference call and webcast regarding first quarter 2021 results at 11:00 a.m. Eastern Time (10:00 a.m. Central Time) on Thursday, May 6, 2021.

To listen live over the Internet, participants are advised to log on to the Partnership’s website at www.usdpartners.com and select the "Events & Presentations" sub-tab under the "Investors" tab. To join via telephone, participants may dial (877) 266-7551 domestically or +1 (339) 368-5209 internationally, conference ID 4593597. Participants are advised to dial in at least five minutes prior to the call.

An audio replay of the conference call will be available for thirty days by dialing (800) 585-8367 domestically or +1 (404) 537-3406 internationally, conference ID 4593597. In addition, a replay of the audio webcast will be available by accessing the Partnership's website after the call is concluded.

About USD Partners LP

USD Partners LP is a fee-based, growth-oriented master limited partnership formed in 2014 by US Development Group, LLC ("USD") to acquire, develop and operate midstream infrastructure and complementary logistics solutions for crude oil, biofuels and other energy-related products. The Partnership generates substantially all of its operating cash flows from multi-year, take-or-pay contracts with primarily investment grade customers, including major integrated oil companies, refiners and marketers. The Partnership’s principal assets include a network of crude oil terminals that facilitate the transportation of heavy crude oil from Western Canada to key demand centers across North America. The Partnership’s operations include railcar loading and unloading, storage and blending in on-site tanks, inbound and outbound pipeline connectivity, truck transloading, as well as other related logistics services. In addition, the Partnership provides customers with leased railcars and fleet services to facilitate the transportation of liquid hydrocarbons and biofuels by rail.

USD, which owns the general partner of USD Partners LP, is engaged in designing, developing, owning, and managing large-scale multi-modal logistics centers and energy-related infrastructure across North America. USD solutions create flexible market access for customers in significant growth areas and key demand centers, including Western Canada, the U.S. Gulf Coast and Mexico. Among other projects, USDG, along with its partner Gibson Energy, Inc., is pursuing long-term solutions to transport heavier grades of crude oil produced in Western Canada through the construction of a Diluent Recovery Unit at the Hardisty terminal. USDG is also currently pursuing the development of a premier energy logistics terminal on the Houston Ship Channel with capacity for substantial tank storage, multiple docks (including barge and deepwater), inbound and outbound pipeline connectivity, as well as a rail terminal with unit train capabilities. For additional information, please visit texasdeepwater.com. Information on websites referenced in this release is not part of this release.

Non-GAAP Financial Measures

The Partnership defines Adjusted EBITDA as Net Cash Provided by Operating Activities adjusted for changes in working capital items, interest, income taxes, foreign currency transaction gains and losses, and other items which do not affect the underlying cash flows produced by the Partnership’s businesses. Adjusted EBITDA is a non-GAAP, supplemental financial measure used by management and external users of the Partnership’s financial statements, such as investors and commercial banks, to assess:

  • the Partnership’s liquidity and the ability of the Partnership’s businesses to produce sufficient cash flows to make distributions to the Partnership’s unitholders; and

  • the Partnership’s ability to incur and service debt and fund capital expenditures.

The Partnership defines Distributable Cash Flow, or DCF, as Adjusted EBITDA less net cash paid for interest, income taxes and maintenance capital expenditures. DCF does not reflect changes in working capital balances. DCF is a non-GAAP, supplemental financial measure used by management and by external users of the Partnership’s financial statements, such as investors and commercial banks, to assess:

  • the amount of cash available for making distributions to the Partnership’s unitholders;

  • the excess cash flow being retained for use in enhancing the Partnership’s existing business; and

  • the sustainability of the Partnership’s current distribution rate per unit.

The Partnership believes that the presentation of Adjusted EBITDA and DCF in this press release provides information that enhances an investor's understanding of the Partnership’s ability to generate cash for payment of distributions and other purposes. The GAAP measure most directly comparable to Adjusted EBITDA and DCF is Net Cash Provided by Operating Activities. Adjusted EBITDA and DCF should not be considered alternatives to Net Cash Provided by Operating Activities or any other measure of liquidity presented in accordance with GAAP. Adjusted EBITDA and DCF exclude some, but not all, items that affect Net Cash Provided by Operating Activities and these measures may vary among other companies. As a result, Adjusted EBITDA and DCF may not be comparable to similarly titled measures of other companies. Reconciliations of Net Cash Provided by Operating Activities to Adjusted EBITDA and DCF are presented in this press release.

Cautionary Note Regarding Forward-Looking Statements

This press release contains forward-looking statements within the meaning of U.S. federal securities laws, including statements with respect to the ability of the Partnership and USD to achieve contract extensions, new customer agreements and expansions; the ability of the Partnership and USD to develop existing and future additional projects and expansion opportunities and whether those projects and opportunities developed by USD would be made available for acquisition, or acquired, by the Partnership; the timing and impact of the completion of USD’s DRU project; volumes at, and demand for, the Partnership’s terminals; and the amount and timing of future distribution payments and distribution growth. Words and phrases such as "expect," "plan," "intent," "believes," "projects," "begin," "anticipates," "subject to" and similar expressions are used to identify such forward-looking statements. However, the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements relating to the Partnership are based on management’s expectations, estimates and projections about the Partnership, its interests and the energy industry in general on the date this press release was issued. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecast in such forward-looking statements. Factors that could cause actual results or events to differ materially from those described in the forward-looking statements include the impact of the novel coronavirus (COVID-19) pandemic and related economic downturn and changes in general economic conditions and commodity prices, as well as those factors set forth under the heading "Risk Factors" and elsewhere in the Partnership’s most recent Annual Report on Form 10-K and in the Partnership’s subsequent filings with the Securities and Exchange Commission (many of which may be amplified by the COVID-19 pandemic and the significant reductions in demand for, and fluctuations in the prices of, crude oil, natural gas and natural gas liquids). The Partnership is under no obligation (and expressly disclaims any such obligation) to update or alter its forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

__________________________

(1)

The Partnership presents both GAAP and non-GAAP financial measures in this press release to assist in understanding the Partnership’s liquidity and ability to fund distributions. See "Non-GAAP Financial Measures" and reconciliations of Net Cash Provided by Operating Activities, the most directly comparable GAAP measure, to Adjusted EBITDA and Distributable Cash Flow in this press release.

(2)

The Partnership calculates quarterly Distributable Cash Flow Coverage by dividing Distributable Cash Flow for the quarter as presented in this press release by the cash distributions declared for the quarter, or approximately $3.1 million.

USD Partners LP

Consolidated Statements of Operations

For the Three Months Ended March 31, 2021 and 2020

(unaudited)

For the Three Months Ended

March 31,

2021

2020

(in thousands)

Revenues

Terminalling services

$

28,105

$

24,235

Terminalling services — related party

1,103

4,088

Fleet leases — related party

984

984

Fleet services

24

50

Fleet services — related party

227

227

Freight and other reimbursables

156

622

Total revenues

30,599

30,206

Operating costs

Subcontracted rail services

3,141

3,445

Pipeline fees

6,046

6,347

Freight and other reimbursables

156

622

Operating and maintenance

2,832

3,081

Operating and maintenance — related party

2,090

2,027

Selling, general and administrative

3,056

3,180

Selling, general and administrative — related party

1,677

1,993

Goodwill impairment loss

33,589

Depreciation and amortization

5,471

5,422

Total operating costs

24,469

59,706

Operating income (loss)

6,130

(29,500

)

Interest expense

1,735

2,739

Loss (gain) associated with derivative instruments

(3,076

)

2,873

Foreign currency transaction gain

(61

)

(92

)

Other income, net

(20

)

(732

)

Income (loss) before income taxes

7,552

(34,288

)

Provision for (benefit from) income taxes

224

(507

)

Net income (loss)

$

7,328

$

(33,781

)

USD Partners LP

Consolidated Statements of Cash Flows

For the Three Months Ended March 31, 2021 and 2020

(unaudited)

For the Three Months Ended

March 31,

2021

2020

(in thousands)

Cash flows from operating activities:

Net income (loss)

$

7,328

$

(33,781

)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation and amortization

5,471

5,422

Loss (gain) associated with derivative instruments

(3,076

)

2,873

Settlement of derivative contracts

(264

)

(6

)

Unit based compensation expense

1,512

1,635

Deferred income taxes

(18

)

(352

)

Amortization of deferred financing costs

207

207

Goodwill impairment loss

33,589

Changes in operating assets and liabilities:

Accounts receivable

(402

)

608

Accounts receivable – related party

(84

)

(941

)

Prepaid expenses and other assets

884

(1,220

)

Other assets – related party

(394

)

(250

)

Accounts payable and accrued expenses

290

407

Accounts payable and accrued expenses – related party

(25

)

491

Deferred revenue and other liabilities

1,212

3,035

Other liabilities – related party

4

Net cash provided by operating activities

12,645

11,717

Cash flows from investing activities:

Additions of property and equipment

(483

)

(147

)

Net cash used in investing activities

(483

)

(147

)

Cash flows from financing activities:

Distributions

(3,183

)

(10,655

)

Vested Phantom Units used for payment of participant taxes

(857

)

(1,788

)

Proceeds from long-term debt

10,000

Repayments of long-term debt

(8,000

)

(6,000

)

Net cash used in financing activities

(12,040

)

(8,443

)

Effect of exchange rates on cash

(95

)

(989

)

Net change in cash, cash equivalents and restricted cash

27

2,138

Cash, cash equivalents and restricted cash – beginning of period

10,994

10,684

Cash, cash equivalents and restricted cash – end of period

$

11,021

$

12,822

USD Partners LP

Consolidated Balance Sheets

(unaudited)

March 31,

December 31,

2021

2020

ASSETS

(in thousands)

Current assets

Cash and cash equivalents

$

3,066

$

3,040

Restricted cash

7,955

7,954

Accounts receivable, net

4,467

4,049

Accounts receivable — related party

2,569

2,460

Prepaid expenses

1,788

1,959

Other current assets

1,035

1,777

Other current assets — related party

15

Total current assets

20,880

21,254

Property and equipment, net

138,731

139,841

Intangible assets, net

58,341

61,492

Operating lease right-of-use assets

8,320

9,630

Other non-current assets

4,320

3,625

Other non-current assets — related party

2,138

1,706

Total assets

$

232,730

$

237,548

LIABILITIES AND PARTNERS’ CAPITAL

Current liabilities

Accounts payable and accrued expenses

$

2,303

$

1,865

Accounts payable and accrued expenses — related party

359

383

Deferred revenue

6,968

6,367

Deferred revenue — related party

410

410

Operating lease liabilities, current

5,153

5,291

Other current liabilities

4,407

4,222

Total current liabilities

19,600

18,538

Long-term debt, net

187,688

195,480

Operating lease liabilities, non-current

3,155

4,392

Other non-current liabilities

10,927

12,870

Other non-current liabilities — related party

4

Total liabilities

221,374

231,280

Commitments and contingencies

Partners’ capital

Common units

8,472

3,829

General partner units

1,962

1,892

Accumulated other comprehensive income

922

547

Total partners’ capital

11,356

6,268

Total liabilities and partners’ capital

$

232,730

$

237,548

USD Partners LP

GAAP to Non-GAAP Reconciliations

For the Three Months Ended March 31, 2021 and 2020

(unaudited)

For the Three Months Ended

March 31,

2021

2020

(in thousands)

Net cash provided by operating activities

$

12,645

$

11,717

Add (deduct):

Amortization of deferred financing costs

(207

)

(207

)

Deferred income taxes

18

352

Changes in accounts receivable and other assets

(4

)

1,803

Changes in accounts payable and accrued expenses

(265

)

(898

)

Changes in deferred revenue and other liabilities

(1,216

)

(3,035

)

Interest expense, net

1,734

2,715

Provision for (benefit from) income taxes

224

(507

)

Foreign currency transaction gain (1)

(61

)

(92

)

Non-cash deferred amounts (2)

1,683

437

Adjusted EBITDA

14,551

12,285

Add (deduct):

Cash paid for income taxes

(286

)

(317

)

Cash paid for interest

(1,549

)

(2,083

)

Maintenance capital expenditures

(203

)

(32

)

Distributable cash flow

$

12,513

$

9,853

__________________________

(1)

Represents foreign exchange transaction amounts associated with activities between the Partnership's U.S. and Canadian subsidiaries.

(2)

Represents the change in non-cash contract assets and liabilities associated with revenue recognized at blended rates based on tiered rate structures in certain of the Partnership's customer contracts and deferred revenue associated with deficiency credits that are expected to be used in the future prior to their expiration. Amounts presented are net of the corresponding prepaid Gibson pipeline fee that will be recognized as expense concurrently with the recognition of revenue.

Category: Earnings

View source version on businesswire.com: https://www.businesswire.com/news/home/20210505006137/en/

Contacts

Adam Altsuler
Senior Vice President, Chief Financial Officer
(281) 291-3995
aaltsuler@usdg.com

Jennifer Waller
Director, Financial Reporting and Investor Relations
(832) 991-8383
jwaller@usdg.com

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