Delaware | 1-36232 | 90-1006559 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) |
One Valero Way San Antonio, Texas | 78249 | |
(Address of principal executive offices) | (Zip Code) |
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
(d) | Exhibits. |
VALERO ENERGY PARTNERS LP | |||
By: | Valero Energy Partners GP LLC | ||
its general partner | |||
Date: | July 26, 2018 | By: | /s/ Donna M. Titzman |
Donna M. Titzman | |||
Executive Vice President and Chief Financial Officer | |||
• | Reported net income of $64 million and EBITDA of $98 million. |
• | Reported net cash provided by operating activities of $89 million and distributable cash flow of $80 million. |
• | Declared cash distribution of $0.551 per unit, a 4.5 percent increase over the first quarter 2018, with a distribution coverage ratio of 1.4x. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Statement of income data: | |||||||||||||||
Revenues – related party: | |||||||||||||||
Revenues from lease contracts | $ | 108,251 | $ | 84,657 | $ | 213,577 | $ | 165,769 | |||||||
Revenues from contracts with customer | 26,376 | 25,888 | 52,992 | 50,592 | |||||||||||
Total revenues – related party (a) | 134,627 | 110,545 | 266,569 | 216,361 | |||||||||||
Costs and expenses: | |||||||||||||||
Cost of revenues from lease contracts (excluding depreciation expense reflected below) (b) | 26,596 | 20,848 | 51,114 | 39,368 | |||||||||||
Cost of revenues from contracts with customer (excluding depreciation expense reflected below) (b) | 6,758 | 6,207 | 13,541 | 11,232 | |||||||||||
Depreciation expense associated with lease contracts (c) | 15,849 | 9,450 | 31,438 | 18,480 | |||||||||||
Depreciation expense associated with contracts with customer (c) | 3,016 | 3,055 | 5,967 | 5,800 | |||||||||||
General and administrative expenses (d) | 4,158 | 3,863 | 8,270 | 7,693 | |||||||||||
Total costs and expenses | 56,377 | 43,423 | 110,330 | 82,573 | |||||||||||
Operating income | 78,250 | 67,122 | 156,239 | 133,788 | |||||||||||
Other income, net | 411 | 182 | 793 | 246 | |||||||||||
Interest and debt expense, net of capitalized interest (e) | (14,271 | ) | (8,551 | ) | (26,179 | ) | (16,840 | ) | |||||||
Income before income tax expense | 64,390 | 58,753 | 130,853 | 117,194 | |||||||||||
Income tax expense | 371 | 310 | 755 | 614 | |||||||||||
Net income | 64,019 | 58,443 | 130,098 | 116,580 | |||||||||||
Less: General partner’s interest in net income | 18,077 | 11,419 | 34,632 | 20,886 | |||||||||||
Limited partners’ interest in net income | $ | 45,942 | $ | 47,024 | $ | 95,466 | $ | 95,694 | |||||||
Net income per limited partner common unit (basic and diluted) | $ | 0.66 | $ | 0.69 | $ | 1.38 | $ | 1.41 | |||||||
Weighted-average limited partner common units outstanding (basic and diluted) (in thousands): | |||||||||||||||
Public | 22,482 | 22,470 | 22,481 | 22,225 | |||||||||||
Valero | 46,769 | 45,687 | 46,769 | 45,687 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Operating highlights: | |||||||||||||||
Pipeline transportation: | |||||||||||||||
Pipeline transportation revenues (a) | $ | 30,307 | $ | 24,859 | $ | 61,675 | $ | 48,034 | |||||||
Pipeline transportation throughput (BPD) (f) | 1,032,687 | 1,003,320 | 1,047,313 | 982,873 | |||||||||||
Average pipeline transportation revenue per barrel (g) (h) | $ | 0.32 | $ | 0.27 | $ | 0.33 | $ | 0.27 | |||||||
Terminaling: | |||||||||||||||
Terminaling revenues (a) | $ | 102,393 | $ | 84,797 | $ | 201,667 | $ | 167,303 | |||||||
Terminaling throughput (BPD) (i) | 3,561,961 | 2,852,182 | 3,479,487 | 2,793,654 | |||||||||||
Average terminaling revenue per barrel (g) (j) | $ | 0.32 | $ | 0.33 | $ | 0.32 | $ | 0.33 | |||||||
Storage and other revenues (k) | $ | 1,927 | $ | 889 | $ | 3,227 | $ | 1,024 | |||||||
Total revenues – related party | $ | 134,627 | $ | 110,545 | $ | 266,569 | $ | 216,361 | |||||||
Capital expenditures: | |||||||||||||||
Maintenance | $ | 2,613 | $ | 1,335 | $ | 4,925 | $ | 3,373 | |||||||
Expansion | 4,097 | 4,888 | 8,158 | 11,867 | |||||||||||
Total capital expenditures | $ | 6,710 | $ | 6,223 | $ | 13,083 | $ | 15,240 | |||||||
Other financial information: | |||||||||||||||
Net cash provided by operating activities | $ | 89,276 | $ | 66,264 | $ | 175,157 | $ | 140,982 | |||||||
Distributable cash flow (l) | $ | 80,297 | $ | 62,815 | $ | 166,764 | $ | 136,477 | |||||||
Distribution declared per unit | $ | 0.5510 | $ | 0.4550 | $ | 1.0785 | $ | 0.8825 | |||||||
Distribution declared: | |||||||||||||||
Limited partner units – public | $ | 12,394 | $ | 10,231 | $ | 24,259 | $ | 19,841 | |||||||
Limited partner units – Valero | 25,769 | 20,788 | 50,440 | 40,319 | |||||||||||
General partner units – Valero | 17,918 | 11,092 | 34,208 | 19,994 | |||||||||||
Total distribution declared | $ | 56,081 | $ | 42,111 | $ | 108,907 | $ | 80,154 | |||||||
Distribution coverage ratio: Distributable cash flow divided by total distribution declared (l) | 1.43x | 1.49x | 1.53x | 1.70x | |||||||||||
June 30, 2018 | December 31, 2017 | ||||||||||||||
Balance sheet data: | |||||||||||||||
Cash and cash equivalents | $ | 100,094 | $ | 42,052 | |||||||||||
Total assets | 1,568,848 | 1,517,352 | |||||||||||||
Debt (no current portion) | 1,274,380 | 1,275,283 | |||||||||||||
Partners’ capital | 255,392 | 205,797 | |||||||||||||
Working capital | 110,175 | 56,727 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Reconciliation of net income to EBITDA and distributable cash flow: | |||||||||||||||
Net income | $ | 64,019 | $ | 58,443 | $ | 130,098 | $ | 116,580 | |||||||
Plus: | |||||||||||||||
Depreciation expense | 18,865 | 12,505 | 37,405 | 24,280 | |||||||||||
Interest and debt expense, net of capitalized interest | 14,271 | 8,551 | 26,179 | 16,840 | |||||||||||
Income tax expense | 371 | 310 | 755 | 614 | |||||||||||
EBITDA | 97,526 | 79,809 | 194,437 | 158,314 | |||||||||||
Plus: | |||||||||||||||
Adjustments related to minimum throughput commitments | 32 | (828 | ) | (189 | ) | (1,725 | ) | ||||||||
Less: | |||||||||||||||
Cash interest paid | 13,730 | 14,136 | 21,641 | 16,044 | |||||||||||
Income taxes paid | 918 | 695 | 918 | 695 | |||||||||||
Maintenance capital expenditures | 2,613 | 1,335 | 4,925 | 3,373 | |||||||||||
Distributable cash flow | $ | 80,297 | $ | 62,815 | $ | 166,764 | $ | 136,477 | |||||||
Reconciliation of net cash provided by operating activities to EBITDA and distributable cash flow: | |||||||||||||||
Net cash provided by operating activities | $ | 89,276 | $ | 66,264 | $ | 175,157 | $ | 140,982 | |||||||
Plus: | |||||||||||||||
Changes in current assets and current liabilities | (5,632 | ) | 5,102 | (6,101 | ) | 734 | |||||||||
Changes in deferred charges and credits and other operating activities, net | (675 | ) | (334 | ) | (1,372 | ) | (692 | ) | |||||||
Interest and debt expense, net of capitalized interest | 14,271 | 8,551 | 26,179 | 16,840 | |||||||||||
Current income tax expense | 286 | 226 | 574 | 450 | |||||||||||
EBITDA | 97,526 | 79,809 | 194,437 | 158,314 | |||||||||||
Plus: | |||||||||||||||
Adjustments related to minimum throughput commitments | 32 | (828 | ) | (189 | ) | (1,725 | ) | ||||||||
Less: | |||||||||||||||
Cash interest paid | 13,730 | 14,136 | 21,641 | 16,044 | |||||||||||
Income taxes paid | 918 | 695 | 918 | 695 | |||||||||||
Maintenance capital expenditures | 2,613 | 1,335 | 4,925 | 3,373 | |||||||||||
Distributable cash flow | $ | 80,297 | $ | 62,815 | $ | 166,764 | $ | 136,477 |
(a) | The increase in “total revenues – related party” in the three and six months ended June 30, 2018 compared to the three and six months ended June 30, 2017 was due primarily to the following: |
• | Revenues from a terminal and pipeline system acquired from Valero Energy Corporation (Valero) in November 2017. We generated revenues of $15.8 million and $31.2 million from the operations of our Port Arthur terminal and $6.1 million and $12.6 million from our Parkway pipeline in the three and six months ended June 30, 2018, respectively. |
• | Incremental revenues from our rail loading facility placed in service in May 2017. Our rail loading facility at our St. Charles terminal generated incremental revenues of $1.0 million and $2.2 million in the three and six months ended June 30, 2018, respectively, compared to the three and six months ended June 30, 2017. |
• | Incremental throughput at our Red River crude system acquired in January 2017. We generated incremental revenues of $1.0 million and $2.9 million due to higher throughput at our Red River crude system in the three and six months ended June 30, 2018, respectively, compared to the three and six months ended June 30, 2017. |
(b) | The combined increase in cost of revenues in the three and six months ended June 30, 2018 compared to the three and six months ended June 30, 2017 was due primarily to expenses of $6.0 million and $12.9 million, respectively, related to our Port Arthur terminal and Parkway pipeline, which were acquired in November 2017. |
(c) | The combined increase in depreciation expense in the three and six months ended June 30, 2018 compared to the three and six months ended June 30, 2017 was due primarily to depreciation expense recognized on the assets that compose our Port Arthur terminal and Parkway pipeline, which were acquired in November 2017. |
(d) | The increase in general and administrative expenses in the three and six months ended June 30, 2018 compared to the three and six months ended June 30, 2017 was due primarily to incremental costs of $173,000 and $345,000, respectively, related to the management fee charged to us by Valero in connection with the acquisition of our Port Arthur terminal and Parkway pipeline, which were acquired in November 2017, and an increase of $122,000 and $202,000, respectively, in professional fees. |
(e) | The increase in “interest and debt expense, net of capitalized interest” in the three and six months ended June 30, 2018 compared to the three and six months ended June 30, 2017 was due primarily to the following: |
• | Incremental borrowings in connection with acquisitions. In connection with the acquisitions of the Port Arthur terminal and Parkway pipeline in November 2017, we borrowed $380.0 million under our revolving credit facility. Interest expense on the incremental borrowings was $3.4 million and $6.3 million in the three and six months ended June 30, 2018, respectively. |
• | Incremental interest expense on senior notes. In March 2018, we issued $500.0 million of 4.5 percent senior notes due March 2028. We used the proceeds of the senior notes to repay $410.0 million of outstanding borrowings under our revolving credit facility and $85.0 million on a portion of the outstanding balance under one of our subordinated credit agreements with Valero. The interest rate on these senior notes is higher than our revolving credit facility and our subordinated credit agreements with Valero, thereby increasing the effective interest rate in 2018. Incremental interest expense resulting from these senior notes was approximately $1.4 million in the three and six months ended June 30, 2018. |
• | Higher interest rates in 2018. Borrowings under our revolving credit facility and our subordinated credit agreements with Valero bear interest at variable rates. We incurred additional interest of $636,000 and $1.4 million in the three and six months ended June 30, 2018, respectively, on these borrowings due to higher interest rates in 2018 compared to 2017. |
(f) | The volume amounts reflected represent the sum of volumes transported through each separately tariffed pipeline segment divided by the number of days in the period. The increase in pipeline transportation throughput in the three and six months ended June 30, 2018 compared to the three and six months ended June 30, 2017 was due primarily to the effect from new volumes at our Parkway pipeline. |
(g) | Management uses average revenue per barrel to evaluate operating and financial performance and compare results 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 is 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. |
(h) | Average pipeline transportation revenue per barrel was higher in the three and six months ended June 30, 2018 compared to the three and six months ended June 30, 2017 due primarily to higher pipeline transportation revenue per barrel generated by our Parkway pipeline. |
(i) | The volume amounts reflected represent the sum of throughput volumes at each of our terminals divided by the number of days in the period. The increase in terminaling throughput in the three and six months ended June 30, 2018 compared to the three and six months ended June 30, 2017 was due primarily to incremental throughput volumes attributed to our Port Arthur terminal. |
(j) | Average terminaling revenue per barrel was lower in the three and six months ended June 30, 2018 compared to the three and six months ended June 30, 2017 due primarily to a lower tariff rate charged at our Port Arthur terminal compared to tariff rates charged at our other terminals. |
(k) | Storage and other revenues were higher in the three and six months ended June 30, 2018 compared to the three and six months ended June 30, 2017 due primarily to revenues generated by the rail loading facility at our St. Charles terminal, which was placed in service in May 2017. |
(l) | Defined terms are as follows: |
• | EBITDA is defined as net income plus income tax expense, interest expense, and depreciation expense. |
• | Distributable cash flow is defined as EBITDA plus (i) adjustments related to minimum throughput commitments; less (ii) cash payments during the period for interest, income taxes, and maintenance capital expenditures. |
• | Distribution coverage ratio is defined as the ratio of distributable cash flow to the total distribution declared. |
• | describe our expectation of forecasted earnings; |
• | 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; |
• | assess the ability of our business to generate sufficient cash to support our decision to make distributions to our unitholders; |
• | assess our ability to incur and service debt and fund capital expenditures; and |
• | assess the viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities. |