VALERO ENERGY PARTNERS LP SAN ANTONIO, Nov. 12, 2014 /PRNewswire/ -- Valero Energy Partners LP (NYSE: VLP, the Partnership), today reported third quarter 2014 net income of $17.5 million, or $0.30 per limited partner unit. The Partnership generated earnings before interest, income taxes, depreciation, and amortization (EBITDA) of $22.2 million and distributable cash flow of $21.1 million. The Partnership's coverage ratio for the third quarter of 2014 was 1.50x.
Third quarter 2014 revenues were $33.7 million versus third quarter 2013 revenues of $32.0 million. The increase was related primarily to higher throughput volumes in the Memphis and Port Arthur Logistics Systems.
Total operating expenses in the third quarter of 2014 were $8.6 million, general and administrative expenses were $3.1 million, and depreciation expense was $4.3 million. Combined, these expenses were $1.0 million greater than those for the third quarter of 2013, mainly due to additional costs of operating as a separate publicly traded limited partnership, incremental costs related to the management fee charged by Valero Energy Corporation (Valero), and costs related to the acquisition of the Texas Crude Systems Business on July 1, 2014.
Consistent with its growth strategy, the Partnership closed its acquisition of the Texas Crude Systems Business from subsidiaries of Valero 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. Similar to the existing assets, the acquired assets are high quality and highly integrated with key Valero refineries.
"We delivered strong throughput and revenue growth during the third quarter," said Chairman and CEO Joe Gorder. "We also completed our first acquisition and increased the quarterly distribution by nearly eight percent to $0.24 per unit. We're executing our growth strategy."
As of September 30, 2014, the Partnership had $531 million of total liquidity consisting of $231 million in cash and cash equivalents and $300 million in an undrawn revolving credit facility. Capital expenditures are expected to be approximately $14 million for 2014, including $6.7 million for maintenance projects. The Partnership expects 2015 capital expenditures to be approximately $9 million, including approximately $4 million for maintenance projects.
The Partnership's senior management will host a conference call at 3 p.m. ET 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
Logo - http://photos.prnewswire.com/prnh/20131202/DA25769LOGO
To download our investor relations mobile app, which offers access to U.S. Securities and Exchange Commission filings, press releases, unit quotes, and upcoming events, please visit Apple's iTunes App Store for your iPhone and iPad or Google's Play Store for your Android mobile device.
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 Nine Months Ended
September 30, September 30,
------------- -------------
2014 2013 2014 2013
---- ---- ---- ----
Statement of income data (a):
Operating revenues - related
party $33,666 $32,012 $94,998 $91,916
------- ------- ------- -------
Costs and expenses:
Operating expenses (b) 8,553 9,085 24,027 22,611
General and administrative
expenses (c) 3,065 1,797 9,392 5,026
Depreciation expense (d) 4,318 4,028 12,087 12,032
----- ----- ------ ------
Total costs and expenses 15,936 14,910 45,506 39,669
------ ------ ------ ------
Operating income 17,730 17,102 49,492 52,247
Other income, net (e) 156 61 1,315 111
Interest expense (f) (214) (37) (663) (139)
---- --- ---- ----
Income before income taxes 17,672 17,126 50,144 52,219
Income tax expense (g) 129 156 436 1,734
--- --- --- -----
Net income 17,543 16,970 49,708 50,485
Less: Net income attributable to
Predecessor - 16,970 9,483 50,485
--- ------ ----- ------
Net income attributable to
partners 17,543 $ - 40,225 $ -
=== === === ===
Less: General partner's interest
in net income 351 805
--- ---
Limited partners' interest in net
income $17,192 $39,420
======= =======
Net income per limited partner
unit (basic and diluted):
Common units $0.30 $0.68
Subordinated units $0.30 $0.68
Weighted-average limited partner
units outstanding:
Common units - public (basic) 17,250 17,250
Common units - public (diluted) 17,251 17,251
Common units - Valero (basic and
diluted) 11,540 11,540
Subordinated units - Valero
(basic and diluted) 28,790 28,790
See Notes to Earnings Release.
VALERO ENERGY PARTNERS LP
EARNINGS RELEASE
(In Thousands, Except per Unit Amounts, per Barrel Amounts, and Ratios)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
2014 2013 2014 2013
---- ---- ---- ----
Operating highlights (a):
Pipeline transportation:
Pipeline transportation revenues $20,602 $20,182 $51,842 $55,944
======= ======= ======= =======
Pipeline transportation
throughput (BPD) (h) 955,285 830,885 879,192 806,533
Average pipeline transportation
revenue per barrel (i) $0.23 $0.26 $0.22 $0.25
Terminaling:
Terminaling revenues $12,827 $7,045 $42,343 $20,557
======= ====== ======= =======
Terminaling throughput (BPD) 479,923 247,030 560,139 241,482
Average terminaling revenue per
barrel (i) $0.29 $0.31 $0.28 $0.31
Storage revenues (j) $237 $4,785 $813 $15,415
==== ====== ==== =======
Total operating revenues -
related party $33,666 $32,012 $94,998 $91,916
======= ======= ======= =======
Capital expenditures (a):
Maintenance $1,035 $431 $3,030 $1,752
Expansion 1,990 3,419 4,252 8,736
----- ----- ----- -----
Total capital expenditures 3,025 3,850 7,282 10,488
Less: Capital expenditures
attributable to Predecessor (a) - 3,850 1,033 10,488
Capital expenditures
attributable to Partnership $3,025 $ - $6,249 $ -
====== === === ====== === ===
Other financial information:
Distribution declared per unit $0.2400 n/a $0.6750 n/a
EBITDA attributable to
Partnership (k) $22,204 n/a $51,627 n/a
Distributable cash flow (k) $21,131 n/a $50,346 n/a
Distribution declared:
Limited partner units - public $4,141 n/a $11,647 n/a
Limited partner units - Valero 9,679 n/a 27,223 n/a
General partner units - Valero 282 n/a 793 n/a
Total distribution declared $14,102 n/a $39,663 n/a
======= =======
Coverage ratio (k) 1.50x n/a 1.27x n/a
September 30, December 31,
2014 2013
-------------- -------------
Balance sheet data (a):
Cash and cash equivalents $230,834 $375,118
Total assets 593,113 737,590
Total capital lease obligations 3,085 4,127
Partners' capital 580,248 722,164
Working capital 232,004 372,230
See Notes to Earnings Release.
VALERO ENERGY PARTNERS LP
EARNINGS RELEASE
(In Thousands, Except per Unit Amounts, per Barrel Amounts, and Ratios)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
2014 2013 2014 2013
---- ---- ---- ----
Reconciliation of net income to EBITDA and
distributable cash flow (a)(k):
Net income $17,543 $16,970 $49,708 $50,485
Plus:
Depreciation expense 4,318 4,028 12,087 12,032
Interest expense 214 37 663 139
Income tax expense 129 156 436 1,734
--- ---
EBITDA 22,204 21,191 62,894 64,390
Less: EBITDA attributable to
Predecessor - 21,191 11,267 64,390
--- ------ ------ ------
EBITDA attributable to Partnership 22,204 $ - 51,627 $ -
=== === === ===
Plus:
Adjustments related to minimum
throughput commitments (235) 272
Projects prefunded by Valero 418 2,046
Less:
Cash interest paid 221 686
Income taxes paid - 9
Maintenance capital expenditures 1,035 2,904
Distributable cash flow $21,131 $50,346
======= =======
Reconciliation of net cash provided
by operating activities to EBITDA
and distributable cash flow (a)(k):
Net cash provided by operating
activities $19,351 $20,938 $59,859 $63,494
Plus:
Change in current assets and current
liabilities 2,515 (25) 1,935 44
Change in deferred charges and
credits and other operating
activities, net (2) 1 72 3
Amortization of fair value adjustment
to capital lease obligations 90 109 270 327
Amortization of debt issuance costs (83) - (247) -
Unit-based compensation expense (15) - (51) -
Interest expense 214 37 663 139
Current income tax expense 134 131 393 383
EBITDA 22,204 21,191 62,894 64,390
Less: EBITDA attributable to
Predecessor - 21,191 11,267 64,390
--- ------ ------ ------
EBITDA attributable to Partnership 22,204 $ - 51,627 $ -
=== === === ===
Plus:
Adjustments related to minimum
throughput commitments (235) 272
Projects prefunded by Valero 418 2,046
Less:
Cash interest paid 221 686
Income taxes paid - 9
Maintenance capital expenditures 1,035 2,904
Distributable cash flow $21,131 $50,346
======= =======
Three Months Ended Nine Months Ended
September 30, September 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 $17,543 n/a $40,225 n/a
Total distribution declared $14,102 n/a $39,663 n/a
Ratio of net income attributable to
partners divided by total
distribution declared 1.24x n/a 1.01x n/a
Coverage ratio: Distributable cash
flow divided by total distribution
declared 1.50x n/a 1.27x n/a
See Notes to Earnings Release.
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 the Partnership
completed its initial public offering (IPO) of
17,250,000 common units representing limited
partner interests. For periods prior to the IPO and
periods prior to the Acquisition (defined below),
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.
On July 1, 2014, we acquired the Texas Crude Systems
Business from Valero (the Acquisition). The
Acquisition was accounted for as a transfer of a
business between entities under common control. As
entities under the common control of Valero, we
recorded the Acquisition on our balance sheet at
Valero's carrying value rather than fair value.
Transfers between entities under common control are
accounted for as though the transfer occurred as of
the beginning of the period of transfer, and prior
period financial statements and financial
information are retrospectively adjusted to furnish
comparative information. Accordingly, the statement
of income data, operating highlights, and balance
sheet data have been retrospectively adjusted to
include the historical results of the Texas Crude
Systems Business for all periods presented prior to
July 1, 2014.
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 and Acquisition, we
entered into new commercial agreements with Valero.
Under these new agreements, certain of 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
included 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 and this
fee was increased effective July 1, 2014, in
connection with the Acquisition. In addition, the
Partnership incurs additional incremental general
and administrative expenses as a result of being a
separate publicly traded limited partnership.
(b) The decrease in operating expenses for the three
months ended September 30, 2014 compared to the
three months ended September 30, 2013 was due
primarily to lower maintenance expense of $1.2
million at our Memphis, Port Arthur, and McKee
logistics systems. The decrease in maintenance
expense was partially offset by an increase of
$721,000 in insurance expense 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 increase in operating expenses for the nine
months ended September 30, 2014 compared to the
nine months ended September 30, 2013 was due
primarily to an increase of $1.8 million in
insurance expense as a result of us acquiring our
own insurance policies as described above. The
increase in insurance expense was partially offset
by lower maintenance expense of $193,000 at our
Wynnewood products system and McKee logistics
system.
(c) The increase in general and administrative expenses
for the three and nine months ended September 30,
2014 compared to the three and nine months ended
September 30, 2013 was due primarily to $516,000
and $2.1 million, respectively, in incremental
costs related to the management fee charged to us
by Valero effective with the IPO; and $603,000 and
$1.8 million, respectively, of additional
incremental costs of being a separate publicly
traded limited partnership. During the three and
nine months ended September 30, 2014, we also
incurred $149,000 and $457,000, respectively, in
costs related to the Acquisition.
(d) The increase in depreciation expense for the three
months ended September 30, 2014 compared to the
three months ended September 30, 2013 was due to
the retirement of $280,000 in net book value of
assets primarily at the West Memphis terminal that
were replaced during the third quarter of 2014.
(e) The increase in "other income, net" for the three
and nine months ended September 30, 2014 compared
to the three and nine months ended September 30,
2013 was due primarily to interest income (net of
bank fees) of $154,000 and $710,000, respectively,
earned on our cash and cash equivalents. 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.
Incremental income of $296,000 from the sale of
scrap metal and $143,000 related to right-of-way
fees collected during the nine months ended
September 30, 2014 also contributed to the
increase.
(f) The increase in interest expense for the three and
nine months ended September 30, 2014 compared to
the three and nine months ended September 30, 2013
was 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 nine months ended September 30, 2014
compared to 3 percent during the nine months ended
September 30, 2013. The decrease was due primarily
to deferred tax expense recorded during the second
quarter of 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.
(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, certain of
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.
SOURCE Valero Energy Partners LP
