OCI PARTNERS LP NEDERLAND, Texas, Aug. 5, 2016 /PRNewswire/-- OCI Partners LP, a Delaware limited partnership (the "Partnership"), announced its results for the three and six months ended June 30, 2016. The Partnership owns and operates an integrated methanol and ammonia production facility that is strategically located on the Texas Gulf Coast near Beaumont.
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Summary of Financial Results for the Three Months Ended June 30, 2016
-- Revenues decreased 30% to $56 million compared to $80 million for the
same period in 2015
-- EBITDA decreased 64% to $10 million compared to $28 million for the same
period in 2015
-- Net income (loss) decreased to ($15) million compared to $13 million for
the same period in 2015
-- EBITDA and net income margins were 18% and (27)%, respectively, compared
to 35% and 16%, respectively, during the same period in 2015
Summary of Financial Results for the Six Months Ended June 30, 2016
-- Revenues increased 8% to $126 million compared to $117 million for the
same period in 2015
-- EBITDA decreased 26% to $28 million compared to $38 million for the same
period in 2015
-- Net income (loss) decreased to ($22) million compared to $14 million for
the same period in 2015
-- EBITDA and net income margins were 22% and (17)%, respectively, compared
to 32% and 12%, respectively, during the same period in 2015
Distributions
Based on the results of the three months ended June 30, 2016, the Board of Directors of the general partner of the Partnership has not approved any cash distribution. The amount of any subsequent quarterly cash distributions will vary depending on our future earnings as well as our cash requirements for working capital, capital expenditures, debt service and other contractual obligations, and reserves for future operating or capital needs.
Run-Rate Quarterly Distribution Guidance
The decision to forgo our cash distribution for the three months ended June 30, 2016 reflects an average realized methanol price of $192 per metric ton, an average realized ammonia price of $301 per metric ton, and an average natural gas price of $2.13 per MMBtu and the fact that our ammonia and methanol production units were in operation for 86 days and 74 days generating capacity utilization rates of 91% and 77% respectively. To assist investors in making the linkage between these prices and potential future distributions, we provide below a sensitivity analysis:
-- A $0.50 per MMBtu change in natural gas prices results in an
approximately $0.23 impact on annual distributions
-- A $10 per metric ton change in methanol prices results in an
approximately $0.10 impact on annual distributions
-- A $10 per metric ton change in ammonia prices results in an
approximately $0.04 impact on annual distributions
It is our intention to continue making distributions consistent with our run-rate guidance, but there can be no assurance we will be able to do so. In addition to the impact of commodity prices, our distributions are subject to fluctuations in capacity utilization, working capital, capital expenditures, debt service and other contractual obligations, reserves for future operating or capital needs and other factors, including overall business, regulatory and financial considerations that may affect the availability of cash to distribute. Please see "Forward-Looking Statements" below."
Statement from President and Chief Executive Officer - Frank Bakker
"During the quarter, an underground cooling water line leakage caused unplanned downtime of approximately 5 days in the ammonia production unit and approximately 8.5 days in the methanol production unit. We also took our methanol production unit off-line for approximately 8.5 days in order to make repairs to our reformer. As a result of the downtime, our ammonia and methanol production units were in operation for 86 days and 74 days generating capacity utilization rates of 91% and 77%, respectively.
During the quarter, our average realized methanol price was $192 per metric ton. Methanol prices in the United States on the contract market increased $17 to $266 per metric ton. The contract price for the month of August rolled over for the third month consecutively at $266 per metric ton. Our average realized methanol price during the quarter did not reflect the contract price increase as a result of a pricing lag in our sales contracts. The pricing increase will be reflected during the third quarter. Finally, spot prices have come off their lows during the second quarter eliminating some of the wide spread that existed earlier in the year. At present, however, spot prices remain trading lower than discount-adjusted contract prices.
During the quarter, our average realized ammonia price was $301 per metric ton. Ammonia prices decreased during the quarter and settled at $270 per metric ton for the month of August. The price decline was anticipated as the seasonal buying for the spring application season was complete. Finally, spot natural gas prices traded at an average of $2.13 per MMBtu during the quarter.
Looking forward, higher crude oil prices, persistent production issues in Venezuela and Egypt, rolling natural gas curtailments in Trinidad, strong and improving Methanol-to-Olefin (MTO) margins as well as new MTO capacities commissioning in China should support methanol prices in the next 12 months. We are also witnessing strong global MTBE demand and expect to see improved demand in the more traditional methanol derivative sectors on the back of an improved crude oil pricing environment.
In China, despite a rise in methanol coastal inventories and weaker demand in formaldehyde as a result of the rainy season, methanol spot prices have remained stable at $220. Moving forward, MTO related demand is expected to continue to grow for the remainder of the year and in 2017. Strong and improved MTO margins have encouraged Chinese MTO operators to accelerate commissioning their new facilities. We expect an additional three MTO plants to be completed in 2016 which are expected to add an additional 5 million metric tons of merchant methanol demand. At present, despite unfavorable weather conditions and technical issues, overall operating rates for MTO plants remain strong at 78%. Finally, methanol demand for MTO is expected to be 10 million metric tons by 2020 representing approximately 40-50% of total Chinese methanol demand.
At present, the ammonia market in the United States is entering a seasonal lull as the spring application has ended. In the meantime, natural gas curtailments for ammonia producers in Trinidad are currently at 20%, helping reduce exports to the United States. This should help offset the new ammonia capacity that is expected to commission during the fourth quarter."
Volume Weighted Average Price of Volume Weighted Average Price of
Methanol and Ammonia Natural Gas
($ per metric ton) ($ per MMBtu)
For Three-Months Ended June 30, For Three-Months Ended June 30,
2016 2015 2016 2015
---- ---- ---- ----
Ammonia $301 $447 $2.13 $2.87
Methanol $192 $362
Production Capacity
(in '000 tons) Utilization
Rate %
For Three-Months Ended June 30, For Three-Months Ended June 30
2016 2015 2016 2015
---- ---- ----
Ammonia 75 63 91% 83%
Methanol 174 158 77% 90%
Volume Weighted Average Price of Volume Weighted Average Price of
Methanol and Ammonia Natural Gas
($ per metric ton) ($ per MMBtu)
For Six-Months Ended June 30, For Six-Months Ended June 30,
2016 2015 2016 2015
---- ---- ---- ----
Ammonia $298 $473 $2.13 $2.94
Methanol $191 $363
Production Capacity
(in '000 tons) Utilization
Rate %
For Six-Months Ended June 30, For Six-Months Ended June 30,
2016 2015 2016 2015
---- ---- ----
Ammonia 163 84 99% 88%
Methanol 399 215 88% 91%
Non-GAAP Financial Measure
EBITDA is defined as net income plus (i) interest expense and other financing costs, (ii) depreciation expense and (iii) income tax expense. EBITDA is used as a supplemental financial measure by management and by external users of our unaudited financial statements, such as investors and commercial banks, to assess:
-- the financial performance of our assets without regard to financing
methods, capital structure or historical cost basis; and
-- our operating performance and return on invested capital compared to
those of other publicly traded partnerships, without regard to financing
methods and capital structure.
EBITDA should not be considered as an alternative to net income, operating income, net cash provided by operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP. EBITDA may have material limitations as a performance measure because it excludes items that are necessary elements of our costs and operations. In addition, EBITDA presented by other companies may not be comparable to our presentation because each company may define EBITDA differently.
EBITDA margin is defined as EBITDA divided by revenues. EBITDA margin is used as a supplemental financial measure by the Partnership's management in its analysis of our operating performance.
The table below reconciles EBITDA to net income, its most directly comparable financial measure calculated and presented in accordance with GAAP, for the three months ended June 30, 2016.
Quarter Ended June 30,
----------------------
2016 2015
---- ----
(thousands)
Net income (loss) $(15,447) 13,478
Add:
Interest expense 9,973 1,785
Interest expense - related
party 51 51
Income tax expense -47 228
Depreciation expense 15,513 12,648
EBITDA $10,043 28,190
======= ======
Six-months Ended June 30,
-------------------------
2016 2015
---- ----
(thousands)
Net income (loss) $(21,501) 14,371
Add:
Interest expense 18,765 4,291
Interest expense - related
party 102 101
Income tax expense 33 293
Depreciation expense 30,891 18,732
EBITDA $28,290 37,788
======= ======
Conference Call with Management
The Partnership will hold a conference call on August 5, 2016, at 11:00am EDT, during which the Partnership's senior management will review the Partnership's financial results for the second quarter ended June 30, 2016 and provide an update on corporate developments. Callers may listen to the live presentation, which will be followed by a question and answer segment, by dialing (866) 902-4572 and entering the conference code 60392256. A replay of the conference call will be made available until September 5, 2016 and the replay can be accessed by dialing (855) 859-2056 or (404) 537-3406 and entering the same conference code 60392256.
About OCI Partners LP
OCI Partners LP (NYSE: OCIP) owns and operates an integrated methanol and ammonia production facility that is strategically located on the Texas Gulf Coast near Beaumont. The Partnership is headquartered in Nederland, Texas and currently has a methanol production design capacity of 912,500 metric tons per year and an ammonia production design capacity of 331,000 metric tons per year.
Notice to Foreign Investors
This release is intended to be a qualified notice to nominees as provided for under Treasury Regulation Section 1.1446-4(b)(4) and (d). Please note that 100% of the Partnership's distributions to foreign investors are attributable to income that is effectively connected with a United States trade or business. Accordingly, all of the Partnership's distributions to foreign investors are subject to federal income tax withholding at the highest applicable effective tax rate. Nominees, and not the Partnership, are treated as the withholding agents responsible for withholding on the distributions received by them on behalf of foreign investors.
Forward-Looking Statements
This press release contains forward-looking statements. Statements that are predictive in nature, that depend upon or refer to future events or conditions or that include the words "believe," "expect," "anticipate," "intend," "estimate" and other expressions that are predictions of or indicate future events and trends and that do not relate to historical matters identify forward-looking statements. These forward-looking statements involve certain risks and uncertainties, including, among others, the following: our business plans may change as the methanol and ammonia industry and markets warrant; the demand and sales prices for methanol, ammonia and their derivatives may decrease due to market, governmental and other factors; we may be unable to obtain economically priced natural gas and other feedstocks; we may be unable to successfully implement our business strategies, including the completion of significant capital programs; the occurrence of shutdowns (either temporary or permanent) or restarts of existing methanol and ammonia facilities (including our own facility); the timing and length of planned and unplanned downtime; and the occurrence of operating hazards from accidents, fire, severe weather, floods or other natural disasters For more information concerning factors that could cause actual results to differ materially from those conveyed in the forward-looking statements, please refer to the "Risk Factors" section of the Partnership's most recently filed Annual Report on Form 10-K and Quarterly Reports on Form 10-Q filed thereafter. The Partnership undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changed circumstances or otherwise, unless required by law.
Contacts:
Omar Darwazah
Director of Investor Relations & Strategy
Phone: +1 917-434-7734
omar.darwazah@oci.nl
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SOURCE OCI Partners LP
