USD Partners LP announced its operating and financial results for the three and six months ended June 30, 2021. Financial highlights with respect to the second quarter of 2021 include the following:
- Generated Net Cash Provided by Operating Activities of $14.1 million, Adjusted EBITDA(1) of $16.3 million and Distributable Cash Flow(1) of $14.4 million
- Reported Net Income of $6.7 million
- Increased quarterly cash distribution to $0.116 per unit ($0.464 per unit on an annualized basis) with over 4.0x Distributable Cash Flow Coverage(2)
- Announced West Colton Renewable Diesel project and new terminalling services agreement that once operational is expected to generate approximately $2.0 million per year of Adjusted EBITDA(3) over the five-year term of the agreement for the Partnership.
“We are pleased to report another strong quarter in 2021,” said Dan Borgen, the Partnership’s Chief Executive Officer. “Our terminals performed well during the second quarter, and we are very excited to report that construction of our Sponsor’s Diluent Recovery Unit project, or DRU, was completed in July. The DRU is now in the start-up phase, and our Sponsor expects the facility to be placed into service during the third quarter. In addition, construction of all major items at our Sponsor’s destination facility at Port Arthur necessary to receive DRUbit™ by rail, and blend and ship product by pipe, is complete and start-up of the new terminal has begun. As mentioned previously, our DRUbit™ by Rail™ network provides the Partnership with long-term take-or-pay revenues while providing transportation safety and environmental benefits to our customers, as well as providing increased market access and additional jobs along the rail routes.”
“We continue to be very excited about our future as well as the future of our Sponsor’s new DRU and Port Arthur Terminal as we engage with our customers regarding the second phase of USD’s growth, which could include a second DRU customer committing to delivering the next 50,000 barrels per day of diluted bitumen into the DRU, with the resulting DRUbitTM available to be transloaded through the Partnership’s Hardisty rail terminal to the Gulf Coast and other potential destinations,” added Mr. Borgen. “We look forward to keeping our investors updated with future announcements regarding the DRU.”
Partnership’s Second 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 second 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. Also during the quarter the Partnership recognized revenue that was previously deferred at the Stroud terminal during the first quarter of 2021 associated with the make-up right options that are granted to the Partnership’s customers. Additionally, revenue at the Hardisty terminal in the second quarter of 2021 relative to the second quarter of 2020, was higher due to 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.
The Partnership experienced higher operating costs during the second quarter of 2021 as compared to the second quarter of 2020. This increase was primarily attributable to an increase in subcontracted rail services costs and pipeline fees associated with higher throughput, partially offset by lower selling, general and administrative costs.
Net income increased in the second quarter of 2021 as compared to the second 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. The Partnership also recognized a small non-cash foreign currency transaction gain in the second quarter of 2021 as compared to a non-cash loss recognized in the 2020 comparative period. Partially offsetting was a higher non-cash loss associated with the Partnership’s interest rate derivatives during the second quarter of 2021 when compared to the same period in 2020.
Net Cash Provided by Operating Activities for the quarter increased 160% relative to the second 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 28% and 48%, respectively, for the quarter relative to the second 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 during the quarter, partially offset by an increase in cash paid for income taxes and 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 June 30, 2021, the Partnership had approximately $3 million of unrestricted cash and cash equivalents and undrawn borrowing capacity of $206 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 second quarter of 2021, the Partnership had borrowings of $179 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 $100 million as of June 30, 2021. The Partnership was in compliance with its financial covenants, as of June 30, 2021.
On July 21, 2021, the Partnership declared a quarterly cash distribution of $0.116 per unit ($0.464 per unit on an annualized basis), representing an increase of $0.0025 per unit, or 2.2% over the distribution declared for the first quarter of 2021. The distribution is payable on August 13, 2021, to unitholders of record at the close of business on August 4, 2021.
Since the end of the first quarter of 2020, the Partnership has reduced the outstanding balance of its revolving credit facility by $45 million as of June 30, 2021.