VALERO ENERGY PARTNERS LP SAN ANTONIO, Aug. 11, 2014 /PRNewswire/ -- Valero Energy Partners LP (NYSE: VLP, the Partnership), today reported second quarter 2014 net income of $12.2 million, or $0.21 per limited partner unit. The Partnership generated earnings before interest, income taxes, depreciation, and amortization (EBITDA) of $15.6 million and distributable cash flow of $15.7 million, and had a coverage ratio of 1.20 in the second quarter of 2014.
Second quarter 2014 revenues were $23.7 million versus second quarter 2013 revenues of $22.9 million. The increase was related primarily to higher throughput volumes in the Port Arthur Logistics System, which were partially offset by lower throughput volumes in the Memphis Logistics System.
Total operating expenses in the second quarter of 2014 were $5.7 million, general and administrative expenses were $2.9 million, and depreciation expense was $3.0 million. Combined, these expenses were $1.7 million greater than those for the second quarter of 2013, mainly due to incremental costs related to the management fee charged by Valero Energy Corporation, effective with the Partnership's initial public offering of common units in December 2013, and additional costs of operating as a separate publicly traded limited partnership.
As of June 30, 2014, the Partnership had $682 million of total liquidity consisting of $382 million in cash and cash equivalents plus $300 million in an undrawn revolving credit facility.
"Our results for the second quarter were solid," said Chairman and Chief Executive Officer Joe Gorder. "We increased the Partnership's distribution by nearly 5 percent to $0.2225 per unit, and subsequent to the close of the quarter, we completed our first acquisition of assets. These actions are consistent with our previously communicated growth strategy for the Partnership."
On July 1, 2014, the Partnership closed its acquisition of the Texas Crude Systems Business from subsidiaries of Valero Energy Corporation for total cash consideration of $154 million. The acquired assets included the McKee Crude System, the Three Rivers Crude System, and the Wynnewood Products System.
The Partnership's senior management will host a conference call at 3 p.m. ET (2 p.m. CT) today to discuss this earnings release. A live broadcast of the conference call will be available on the Partnership's web site at www.valeroenergypartners.com.
About Valero Energy Partners LP
Valero Energy Partners LP is a fee-based, growth-oriented, traditional master limited partnership formed by Valero Energy Corporation to own, operate, develop, and acquire crude oil and refined petroleum products pipelines, terminals, and other transportation and logistics assets. With headquarters in San Antonio, the Partnership's assets include crude oil and refined petroleum products pipeline and terminal systems in the Gulf Coast and Mid-Continent regions of the United States that are integral to the operations of several of Valero's refineries.
Contacts
Investors:
John Locke, Executive Director - Investor Relations, 210-345-3077
Karen Ngo, Manager - Investor Relations, 210-345-4574
Media:
Bill Day, Vice President - Communications, 210-345-2928
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Safe-Harbor Statement
This release contains forward-looking statements within the meaning of federal securities laws. These statements discuss future expectations, contain projections of results of operations or of financial condition or state other forward-looking information. You can identify forward-looking statements by words such as "anticipate," "believe," "estimate," "expect," "forecast," "project," "could," "may," "should," "would," "will" or other similar expressions that convey the uncertainty of future events or outcomes. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond the Partnership's control and are difficult to predict. These statements are often based upon various assumptions, many of which are based, in turn, upon further assumptions, including examination of historical operating trends made by the management of the Partnership. Although the Partnership believes that these assumptions were reasonable when made, because assumptions are inherently subject to significant uncertainties and contingencies, which are difficult or impossible to predict and are beyond its control, the Partnership cannot give assurance that it will achieve or accomplish these expectations, beliefs or intentions. When considering these forward-looking statements, you should keep in mind the risk factors and other cautionary statements contained in the Partnership's filings with the U.S. Securities and Exchange Commission, including the Form S-1 and prospectus relating to the initial public offering of the Partnership's common units and the Partnership's annual report on Form 10-K for the year ended December 31, 2013. These risks could cause the Partnership's actual results to differ materially from those contained in any forward-looking statement.
VALERO ENERGY PARTNERS LP
EARNINGS RELEASE
(In Thousands, Except per Unit Amounts, per Barrel Amounts, and Ratios)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2014 2013 2014 2013
Statement of income data (a):
Operating revenues - related
party $23,660 $22,865 $45,191 $46,343
Costs and expenses:
Operating expenses (b) 5,738 5,551 11,464 9,847
General and administrative
expenses (c) 2,848 1,357 5,443 2,414
Depreciation expense (d) 3,024 2,984 6,082 6,453
Total costs and expenses 11,610 9,892 22,989 18,714
Operating income 12,050 12,973 22,202 27,629
Other income, net (e) 491 24 1,139 50
Interest expense (f) (221) (47) (449) (102)
Income before income taxes 12,320 12,950 22,892 27,577
Income tax expense (g) 120 1,337 210 1,444
Net income 12,200 $11,613 22,682 $26,133
Less: General partner's
interest in net income 244 454
Limited partners' interest in
net income $11,956 $22,228
Net income per limited partner
unit (basic and diluted):
Common units $0.21 $0.39
Subordinated units $0.21 $0.39
Weighted-average limited
partner units outstanding
(basic and diluted):
Common units - public 17,250 17,250
Common units - Valero 11,540 11,540
Subordinated units - Valero 28,790 28,790
VALERO ENERGY PARTNERS LP
EARNINGS RELEASE
(In Thousands, Except per Unit Amounts, per Barrel Amounts, and Ratios)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2014 2013 2014 2013
Operating highlights:
Pipeline transportation:
Pipeline transportation
revenues $11,128 $13,647 $21,608 $27,853
Pipeline transportation
throughput (BPD) (h) 622,209 571,026 598,492 581,307
Average pipeline transportation
revenue per barrel (i) $0.20 $0.26 $0.26
$0.20
Terminaling:
Terminaling revenues $12,532 $4,293 $23,583 $8,490
Terminaling throughput (BPD) 499,424 132,962 469,297 132,603
Average terminaling revenue per
barrel (i) $0.28 $0.35 $0.28 $0.35
Storage revenues (j) $- $4,925 $- $10,000
Total operating revenues -
related party $23,660 $22,865 $45,191 $46,343
Capital expenditures:
Maintenance $1,005 $289 $1,869 $547
Expansion 1,355 700 1,355 1,607
Total capital expenditures 2,360 989 3,224 2,154
Less: Capital expenditures
attributable to Predecessor
(a) - 989 - 2,154
Capital expenditures
attributable to Partnership $2,360 $- $3,224 $-
Other financial information:
Distribution declared per unit $0.2225 n/a $0.4350 n/a
EBITDA attributable to
Partnership (k) $15,565 n/a $29,423 n/a
Distributable cash flow (k) $15,650 n/a $29,215 n/a
Distribution declared:
Limited partner units - public $3,839 n/a $7,506 n/a
Limited partner units - Valero 8,974 n/a 17,544 n/a
General partner units - Valero 261 n/a 511 n/a
Total distribution declared $13,074 n/a $25,561 n/a
Coverage ratio (k) 1.20x n/a 1.14x n/a
June 30, December
2014 31, 2013
Balance sheet data (a):
Cash and cash equivalents $381,815 $375,118
Total assets 658,771 656,442
Total capital lease obligations 3,441 4,127
Partners' capital 649,648 641,591
Working capital 382,903 372,230
VALERO ENERGY PARTNERS LP
EARNINGS RELEASE
(In Thousands, Except per Unit Amounts, per Barrel Amounts, and Ratios)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2014 2013 2014 2013
Reconciliation of net income to
EBITDA and distributable cash flow
(k):
Net income $12,200 $11,613 $22,682 $26,133
Plus:
Depreciation expense 3,024 2,984 6,082 6,453
Interest expense 221 47 449 102
Income tax expense 120 1,337 210 1,444
EBITDA 15,565 15,981 29,423 34,132
Less: Predecessor EBITDA prior to
IPO on December 16, 2013 (a) - 15,981 - 34,132
EBITDA attributable to Partnership 15,565 $- 29,423 $-
Plus:
Adjustments related to minimum
throughput Commitments 475 507
Projects prefunded by Valero 853 1,628
Less:
Cash interest paid 229 465
Income taxes paid 9 9
Maintenance capital expenditures 1,005 1,869
Distributable cash flow $15,650 $29,215
Reconciliation of net cash provided
by operating activities to EBITDA
and distributable cash flow (k):
Net cash provided by operating
activities $13,060 $15,789 $29,382 $33,563
Plus:
Change in current assets and
current liabilities 2,191 (60) (580) 46
Amortization of fair value
adjustment to capital lease
obligations 90 109 180 218
Amortization of debt issuance costs (82) - (164) -
Unit-based compensation expense (25) - (36) -
Other noncash expense (2) - (2) -
Interest expense 221 47 449 102
Current income tax expense 112 96 194 203
EBITDA 15,565 15,981 29,423 34,132
Less: Predecessor EBITDA prior to
IPO on December 16, 2013 (a) - 15,981 - 34,132
EBITDA attributable to Partnership 15,565 $- 29,423 $-
Plus:
Adjustments related to minimum
throughput commitments 475 507
Projects prefunded by Valero 853 1,628
Less:
Cash interest paid 229 465
Income taxes paid 9 9
Maintenance capital expenditures 1,005 1,869
Distributable cash flow $15,650 $29,215
Three Months Ended Six Months Ended
June 30, June 30,
2014 2013 2014 2013
Comparison of ratio of net income
attributable to partners divided
by total distribution declared to
coverage ratio (k):
Net income attributable to partners $12,200 n/a $22,682 n/a
Total distribution declared $13,074 n/a $25,561 n/a
Ratio of net income attributable to
partners divided by total
distribution declared 0.93x n/a 0.89x n/a
Coverage ratio: Distributable cash
flow divided by total distribution
declared 1.20x n/a 1.14x n/a
VALERO ENERGY PARTNERS LP
NOTES TO EARNINGS RELEASE
(a) References in these notes to the
"Partnership," "we," "us," or
"our" refer to Valero Energy
Partners LP, one or more of its
subsidiaries, or all of them
taken as a whole for periods
after December 16, 2013, the date
of completion of the
Partnership's initial public
offering (IPO) of 17,250,000
common units representing limited
partner interests. For periods
prior to the IPO, those terms
refer to Valero Energy Partners
LP Predecessor, our Predecessor
for accounting purposes.
References in these notes to
"Valero" may refer to Valero
Energy Corporation, one or more
of its subsidiaries, or all of
them taken as a whole, other than
Valero Energy Partners LP, any of
its subsidiaries, or its general
partner.
On December 16, 2013, Valero
contributed certain crude oil and
refined petroleum products
pipelines, terminals, and other
logistics assets (the Contributed
Assets) to us and we completed
the IPO of our common units,
which represented a 29.4 percent
limited partner interest in us.
Valero owns the remaining 68.6
percent limited partner interest
in us and the 2 percent general
partner interest.
The statement of income data for
the three and six months ended
June 30, 2013 reflects the
results of operations of the
Contributed Assets. The financial
data for these periods are for
our Predecessor. The statement of
income data for the three and six
months ended June 30, 2014 and
the balance sheet data as of June
30, 2014 and December 31, 2013
reflect the results of
operations, assets, liabilities,
and partners' capital of the
Partnership.
The Partnership's results of
operations may not be comparable
to our Predecessor's historical
results of operations for the
reasons described below:
-- Revenues. Our Predecessor
generated revenues by providing
fee-based transportation and
terminaling services to Valero
and by leasing certain crude oil
and refined petroleum products
storage capacity to Valero.
Subsequent to the IPO, we entered
into a master transportation
services agreement and a master
terminal services agreement with
Valero with respect to our
pipelines and terminals. Under
these commercial agreements, the
historical storage capacity lease
arrangements were replaced with
terminaling throughput fees. In
addition, we began charging a
terminaling throughput fee for
crude oil delivered to our Lucas
terminal for which we did not
historically charge a throughput
fee, and we revised the rates
charged for transportation
services provided by certain of
our pipelines.
-- General and administrative
expenses. Our Predecessor's
general and administrative
expenses include direct charges
for the management and operation
of our logistics assets and
certain expenses allocated by
Valero for general corporate
services, such as treasury,
accounting, and legal services.
These expenses were charged, or
allocated, to our Predecessor
based on the nature of the
expenses. Effective with the IPO,
the Partnership pays a fee to
Valero for the management of our
operations and general corporate
services. In addition, the
Partnership incurs additional
incremental general and
administrative expenses as a
result of being a separate
publicly traded limited
partnership.
(b) The increase in operating
expenses for the three months
ended June 30, 2014 compared to
the three months ended June 30,
2013 is due to higher insurance
expense of $545,000 as a result
of us acquiring our own
insurance policies. Prior to
being a separate publicly traded
limited partnership, we were
allocated a portion of Valero's
insurance costs. The increased
insurance expense was partially
offset by a charge for sales
taxes of $312,000 during the
three months ended June 30, 2013
related to the settlement of a
Texas sales tax audit that did
not recur.
The increase in operating
expenses for the six months
ended June 30, 2014 compared to
the six months ended June 30,
2013 is due primarily to an
increase of $1.1 million in
insurance expense as a result of
us acquiring our own insurance
policies as described above. In
addition, maintenance expense
increased $622,000 primarily due
to work at our Collierville
crude system, which included
repair of a crude prover and
tank inspection, cleaning, and
repair work for regulatory and
compliance purposes.
(c) The increase in general and
administrative expenses for the
three and six months ended June
30, 2014 compared to the three
and six months ended June 30,
2013 is due primarily to
$629,000 and $1.6 million,
respectively, in incremental
costs related to the management
fee charged to us by Valero
effective with the IPO; and
$554,000 and $1.2 million,
respectively, of additional
incremental costs of being a
separate publicly traded limited
partnership. During the three
months ended June 30, 2014, we
also incurred $308,000 in costs
related to the acquisition of
the Texas Crude Systems Business
from Valero that occurred on
July 1, 2014.
(d) The decrease in depreciation
expense for the six months ended
June 30, 2014 compared to the
six months ended June 30, 2013
is due primarily to the write-
off of the remaining net book
value of $306,000 in 2013
associated with a tank at our
Lucas crude system that was no
longer in service.
(e) The increase in "other income,
net" for the three and six
months ended June 30, 2014
compared to the three and six
months ended June 30, 2013 is
due primarily to interest income
(net of bank fees) of $258,000
and $556,000, respectively,
earned on our cash and cash
equivalents; incremental income
of $34,000 and $379,000,
respectively, from the sale of
scrap metal; and incremental
income of $143,000 during the
three months ended June 30, 2014
related to right-of-way fees
collected. Prior to the IPO, our
Predecessor participated in
Valero's centralized cash
management system; therefore, it
held no cash or cash
equivalents, and no interest
income was allocated to our
Predecessor by Valero.
(f) The increase in interest expense
for the three and six months
ended June 30, 2014 compared to
the three and six months ended
June 30, 2013 is due primarily
to commitment fees and
amortization of the debt
issuance costs related to the
Partnership's revolving credit
facility, which was entered into
in connection with the IPO.
(g) Our income tax expense is
associated with the Texas margin
tax. Our effective tax rate was
1 percent during the three and
six months ended June 30, 2014
compared to 10 percent and 5
percent during the three and six
months ended June 30, 2013,
respectively. The decrease was
due primarily to deferred tax
expense recorded in 2013 in
connection with the initial
recognition of a deferred tax
liability associated with a
change in the law with respect
to the Texas margin tax. Because
this was a one-time item
associated with a law change,
our effective tax rate returned
to previous levels.
(h) Represents the sum of volumes
transported through each
separately tariffed pipeline
segment.
(i) Management uses average revenue
per barrel to evaluate
performance and compare
profitability to other companies
in the industry. There are a
variety of ways to calculate
average revenue per barrel;
different companies may
calculate it in different ways.
We calculate average revenue per
barrel as revenue divided by
throughput for the period.
Throughput can be derived by
multiplying the throughput
barrels per day (BPD) by the
number of days in the period.
Investors and analysts use this
financial measure to help
analyze and compare companies in
the industry on the basis of
operating performance. This
financial measure should not be
considered as an alternative to
revenues presented in accordance
with U.S. generally accepted
accounting principles (GAAP).
(j) Prior to the IPO, our Predecessor
leased some of our refined
petroleum products and crude oil
storage capacity to Valero.
Subsequent to the IPO, under our
commercial agreements with
Valero, these storage capacity
lease agreements were replaced
with terminaling fees.
(k) We define EBITDA as net income
before income tax expense,
interest expense, and
depreciation expense. We define
distributable cash flow as
EBITDA less cash payments during
the period for interest, income
taxes, and maintenance capital
expenditures, plus adjustments
related to minimum throughput
commitments and capital projects
prefunded by Valero. We define
coverage ratio as the ratio of
distributable cash flow to the
total distribution declared.
EBITDA, distributable cash flow,
and coverage ratio are
supplemental financial measures
that are not defined under GAAP;
they may be used by management
and external users of our
financial statements, such as
industry analysts, investors,
lenders, and rating agencies, to
assess:
-- our operating performance as
compared to other publicly
traded limited partnerships in
the transportation and logistics
industry, without regard to
historical cost basis or, in the
case of EBITDA, financing
methods;
-- the ability of our business to
generate sufficient cash to
support our decision to make
distributions to our
unitholders;
-- our ability to incur and
service debt and fund capital
expenditures; and
-- the viability of acquisitions
and other capital expenditure
projects and the returns on
investment of various investment
opportunities.
We believe that the presentation
of EBITDA provides useful
information to investors in
assessing our financial
condition and results of
operations. The GAAP measures
most directly comparable to
EBITDA are net income and net
cash provided by operating
activities. EBITDA should not be
considered an alternative to net
income or net cash provided by
operating activities presented
in accordance with GAAP. EBITDA
has important limitations as an
analytical tool because it
excludes some, but not all,
items that affect net income or
net cash provided by operating
activities. EBITDA should not be
considered in isolation or as a
substitute for analysis of our
results as reported under GAAP.
Additionally, because EBITDA may
be defined differently by other
companies in our industry, our
definition of EBITDA may not be
comparable to similarly titled
measures of other companies,
thereby diminishing its utility.
We use distributable cash flow to
measure whether we have
generated from our operations,
or "earned," an amount of cash
sufficient to support the
payment of the minimum quarterly
distributions. Our partnership
agreement contains the concept
of "operating surplus" to
determine whether our operations
are generating sufficient cash
to support the distributions
that we are paying, as opposed
to returning capital to our
partners. Because operating
surplus is a cumulative concept
(measured from the IPO date and
compared to cumulative
distributions from the IPO
date), we use the term
distributable cash flow to
approximate operating surplus on
a quarterly or annual, rather
than a cumulative, basis. As a
result, distributable cash flow
is not necessarily indicative of
the actual cash we have on hand
to distribute or that we are
required to distribute.
We use the coverage ratio to
reflect the relationship between
our distributable cash flow and
the total distribution declared.
We have also provided the ratio
of net income attributable to
partners, the most directly
comparable GAAP measure to
distributable cash flow, to the
total distribution declared.
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SOURCE Valero Energy Partners LP
