EX-99.1 2 f8k0426er.htm

 

 

VALERO L.P. REPORTS FIRST QUARTER 2005 EARNINGS

AND ANNOUNCES QUARTERLY DISTRIBUTION

 

SAN ANTONIO, April 26, 2005 -- Valero L.P. (NYSE: VLI) today announced net income applicable to limited partners of $17.8 million, or $0.77 per unit, for the first quarter of 2005, compared to $18.5 million, or $0.80 per unit, for the first quarter of 2004. Distributable cash flow available to limited partners for the first quarter was $23.1 million, compared to $23.2 million for the first quarter of 2004.

 

Valero L.P. also announced that it has declared a distribution for the first quarter of 2005 of $0.80 per unit payable May 13, 2005 to holders of record as of May 6, 2005. Distributable cash flow covers the distribution to the limited partners by 1.25 times.

 

For the first quarter of 2005, revenues were higher than in the first quarter of last year primarily due to the acquisition of two asphalt terminals from Royal Trading in February of last year, higher throughputs in the crude oil storage tank business segment and the completion of the new propane storage and distribution terminal in Nuevo Laredo, Mexico in June of last year. Despite higher revenues, net income applicable to limited partners in the first quarter of 2005 was lower than in the first quarter of 2004, primarily due to higher operating and administrative expenses. Higher administrative costs in the first quarter were primarily due to the April 2004 amendment of the service agreement with Valero Energy and costs associated with the pending merger with Kaneb Pipe Line Partners, L.P. and Kaneb Services LLC. In addition, an outage in late March on the partnership’s Corpus Christi to Houston pipeline also impacted its results.

 

“We continue to benefit from our strategic growth investments,” said Curt Anastasio, Valero L.P.’s Chief Executive Officer. “In particular, we benefited from the new Royal Trading asphalt terminals located near Tulsa, Oklahoma and Santa Fe, New Mexico we acquired in February 2004 and our propane storage and distribution terminal in Nuevo Laredo, Mexico, which we refer to as the Dos Laredos system. Starting in the second quarter, we expect to see higher propane throughput volumes on our Dos Laredos system, reflecting the strong demand in the rapidly growing northern Mexico region. In fact, thus far in April we are averaging around 8,500 barrels per day compared to 6,000 barrels per day in the first quarter.

 

“With regard to the Kaneb acquisition, the companies continue to work diligently to complete the transaction during the second quarter. The proposed acquisitions by Valero L.P. of Kaneb Partners and Kaneb Services were approved by the unitholders of Valero L.P. and

 

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Kaneb Partners and the shareholders of Kaneb Services in special meetings held on March 11, 2005. We look forward to the growth opportunities that the larger, more diversified entity will possess.

 

“Looking at the second quarter, Valero Energy’s Ardmore and Three Rivers refineries are currently down for scheduled plant-wide turnarounds. Since we own crude and refined product pipelines and terminals that serve each of these plants, we expect this to have an effect on our second quarter earnings. Taking the turnarounds into account and excluding any potential contribution from our acquisition of Kaneb, we currently expect second quarter earnings to be slightly lower than first quarter earnings,” said Anastasio.

 

A conference call with management is scheduled for 11:00 a.m. ET (10:00 a.m. CT) today, April 26, 2005, to discuss the financial and operational results for the first quarter of 2005. Anyone interested in listening to the presentation may call 866/261-8578, passcode 5354816. The company intends to have a playback available following the presentation and may be accessed by calling 800/642-1687, passcode 5354816. A live broadcast of the conference call will also be available on the company’s website at www.valerolp.com.

 

A master limited partnership, Valero L.P. (NYSE: VLI) owns and operates crude oil and refined product pipelines, refined product terminals and crude oil storage facilities located predominantly in Texas, New Mexico, Colorado, Oklahoma, California, New Jersey and Mexico. The partnership’s crude oil pipelines and storage facilities supply nine of Valero Energy Corporation’s key refineries with domestic and foreign crude oil and other feedstocks. Its refined product pipelines and terminals primarily supply gasoline and distillates to established and growing markets in the Mid-Continent, Southwest and Texas-Mexico border region of the United States. Valero L.P.’s primary customer is Valero Energy Corporation, which has a limited partnership interest and 2 percent general partnership interest in Valero L.P.

 

 

 

Cautionary Statement Regarding Forward-Looking Statements

 

This press release includes forward-looking statements within the meaning of the Securities Litigation Reform Act of 1995 regarding future events and the future financial performance of Valero L.P. All forward-looking statements are based on the partnership’s beliefs as well as assumptions made by and information currently available to the partnership. These statements reflect the partnership’s current views with respect to future events and are subject to various risks, uncertainties and assumptions. These risks, uncertainties and assumptions are discussed in Valero L.P.’s 2004 annual report on Form 10-K and subsequent filings with the Securities and Exchange Commission including the definitive joint proxy statement/prospectus referred to in this press release.

 

For more information, visit Valero L.P.’s website at www.valerolp.com.

 

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Valero L.P.
Consolidated Financial Information
March 31, 2005 and 2004
(unaudited, in thousands, except unit data and per unit data)

Three Months Ended
March 31,
2005
2004
Statement of Income Data:            
 Revenues     $ 56,635   $ 52,324  
 Costs and expenses:    
         Operating expenses       19,685     17,908  
         General and administrative expenses       3,503     1,999  
         Depreciation and amortization       8,732     7,874  
            Total costs and expenses       31,920     27,781  
 Operating income       24,715     24,543  
         Equity income from Skelly-Belvieu    
           Pipeline Company       378     553  
         Interest and other expense, net       (5,829 )   (5,126 )
 Net income       19,264     19,970  
         Net income applicable to general partner    
           including incentive distributions (Note 1)       (1,476 )   (1,489 )
  Net income applicable to limited partners     $ 17,788   $ 18,481  
     
 Net income per unit applicable to limited    
        partners (Note 1)     $ 0.77   $ 0.80  
 Weighted average number of limited    
        partnership units outstanding       23,041,394     23,041,394  
 Earnings before interest, taxes and    
        depreciation and amortization (EBITDA, Note 2)     $ 33,825   $ 32,970  
 Distributable cash flow (Note 2)     $ 26,193   $ 26,262  
     
        March 31,     December 31,  
        2005     2004  
Balance Sheet Data:    
 Long-term debt, including current portion (a)     $ 385,057   $ 385,161  
 Partners' equity (b)       437,642     438,311  
 Debt-to-capitalization ratio (a) / ((a)+(b))       46.8%   46.8%

Valero L.P.
Consolidated Financial Information — Continued
March 31, 2005 and 2004
(unaudited, in thousands, except barrel information)

Three Months Ended
March 31,
2005
2004
Operating Data:            
         Crude oil pipelines:    
           Throughput (barrels/day)      

381,086

    

381,832

  
           Revenues     $ 13,185   $ 12,792  
           Operating expenses       3,823     3,234  
           Depreciation and amortization       1,146     1,098  
            Segment operating income     $ 8,216   $ 8,460  
         Refined product pipelines:    
           Throughput (barrels/day)      

443,993

    

437,207

  
           Revenues     $ 22,182   $ 20,526  
           Operating expenses       9,303     8,538  
           Depreciation and amortization       3,857     3,778  
            Segment operating income     $ 9,022   $ 8,210  
         Refined product terminals:    
           Throughput (barrels/day)      

253,531

    

254,950

  
           Revenues     $ 9,937   $ 8,810  
           Operating expenses       4,497     4,333  
           Depreciation and amortization       1,859     1,132  
            Segment operating income     $ 3,581   $ 3,345  
         Crude oil storage tanks:    
           Throughput (barrels/day)      

505,643

    

461,102

  
           Revenues     $ 11,331   $ 10,196  
           Operating expenses       2,062     1,803  
           Depreciation and amortization       1,870     1,866  
            Segment operating income     $ 7,399   $ 6,527  
         Consolidated Information:    
           Throughput (barrels/day)      

1,584,253

    

1,535,091

  
           Revenues     $ 56,635   $ 52,324  
           Operating expenses       19,685     17,908  
           Depreciation and amortization       8,732     7,874  
            Segment operating income       28,218     26,542  
           General and administrative expenses       3,503     1,999  
            Consolidated operating income     $ 24,715   $ 24,543  

Valero L.P.
Consolidated Financial Information — Continued
March 31, 2005 and 2004
(unaudited)

Notes:

  1.   Net income is allocated between limited partners and the general partner’s interests based on provisions in the partnership agreement. The net income applicable to limited partners is divided by the weighted average number of limited partnership units outstanding in computing the net income per unit applicable to limited partners. Net income applicable to the general partner includes incentive distributions aggregating $1.1 million for each of the three months ended March 31, 2005 and 2004.

  2.   Valero L.P. utilizes two financial measures, EBITDA and distributable cash flow, which are not defined in United States generally accepted accounting principles. Management uses these financial measures because they are widely accepted financial indicators used by investors to compare partnership performance. In addition, management believes that these measures provide investors an enhanced perspective of the operating performance of the partnership’s assets and the cash that the business is generating. Neither EBITDA nor distributable cash flow are intended to represent cash flows for the period, nor are they presented as an alternative to net income. They should not be considered in isolation or as substitutes for a measure of performance prepared in accordance with United States generally accepted accounting principles.

      The following is a reconciliation of net income to EBITDA and distributable cash flow (in thousands):

Three Months Ended
March 31,
2005
2004
Net income     $ 19,264   $ 19,970  
  Plus interest and other expense, net       5,829     5,126  
  Plus depreciation and amortization       8,732     7,874  
EBITDA       33,825     32,970  
  Less equity income from Skelly-Belvieu    
   Pipeline Company       (378 )   (553 )
  Less interest and other expense, net       (5,829 )   (5,126 )
  Less reliability capital expenditures       (1,425 )   (1,717 )
  Plus distributions from Skelly-Belvieu    
     Pipeline Company       0     688  
Distributable cash flow     $ 26,193   $ 26,262  
General Partner interest in distributable    
cash flow       (3,073 )   (3,091 )
Limited Partners' interest in distributable    
cash flow     $ 23,120   $ 23,171