HARDISTY SOUTH TERMINAL ACQUISITION

6 Months Ended

Jun. 30, 2022

Business Combination and Asset Acquisition [Abstract]

On April 6, 2022, we completed the acquisition of 100% of the entities owning the Hardisty South Terminal assets from USDG, exchanged our sponsor’s economic general partner interest in us for a non-economic general partner interest and eliminated our sponsor’s incentive distribution rights, or IDRs, for a total consideration of $75 million in cash and 5,751,136 common units representing non-cash consideration, that was made effective as of April 1, 2022. The cash portion was funded with borrowings from our Credit Agreement. The Hardisty South Terminal, which commenced operations in January 2019, primarily consists of railcar loading facilities with capacity of one and one-half 120-railcar unit trains of transloading capacity per day, or approximately 112,500 barrels per day, of takeaway capacity.

We accounted for our acquisition of the Hardisty South Terminal as a business combination under common control, whereby we recognized the acquisition of identifiable assets at historical costs and recast our prior financial statements for all periods presented. The following tables show the adjustments and resulting balance for each affected line item in our consolidated statements of operations for the periods indicated:


	Three Months Ended June 30, 2021
	USD Partners LP (1)		Hardisty South Acquisition		Eliminations (2)		Consolidated Results
	(in thousands)
Revenues
Terminalling services	$	30,992	$	57,989	$	—	$	88,981
Terminalling services — related party	1,111		2,101		(2,101)		1,111


Fleet leases — related party	983		—		—		983
Fleet services	—		—		—		—
Fleet services — related party	228		—		—		228
Freight and other reimbursables	207		3		—		210

Total revenues	33,521		60,093		(2,101)		91,513
Operating costs
Subcontracted rail services	3,523		1,181		—		4,704
Pipeline fees	6,398		20,227		—		26,625
Freight and other reimbursables	207		3		—		210
Operating and maintenance	2,602		234		—		2,836
Operating and maintenance — related party	2,101		—		(2,101)		—
Selling, general and administrative	2,411		282		—		2,693
Selling, general and administrative — related party	1,625		37,897				39,522

Depreciation and amortization	5,500		273		—		5,773
Total operating costs	24,367		60,097		(2,101)		82,363
Operating income	9,154		(4)		—		9,150
Interest expense	1,591		154		—		1,745
Loss associated with derivative instruments	718		—		—		718
Foreign currency transaction gain	(41)		(480)		—		(521)
Other expense (income), net	4		(1)		—		3
Income before income taxes	6,882		323		—		7,205
Provision for income taxes	166		153		—		319
Net income	$	6,716	$	170	$	—	$	6,886

(1)As previously reported in our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2021.

(2)Represents business transactions between USDP and Hardisty South, whereby Hardisty South provided terminalling services for a third-party customer of USDP for contracted capacity that exceeded the transloading capacity that was available.


	Six Months Ended June 30, 2021
	USD Partners LP (1)		Hardisty South Acquisition		Eliminations (2)		Consolidated Results
	(in thousands)
Revenues
Terminalling services	$	59,097	$	71,015	$	—	$	130,112
Terminalling services — related party	2,214		4,191		(4,191)		2,214


Fleet leases — related party	1,967		—		—		1,967
Fleet services	24		—		—		24
Fleet services — related party	455		—		—		455
Freight and other reimbursables	363		5		—		368

Total revenues	64,120		75,211		(4,191)		135,140
Operating costs
Subcontracted rail services	6,664		2,214		—		8,878
Pipeline fees	12,444		25,122		—		37,566
Freight and other reimbursables	363		5		—		368
Operating and maintenance	5,434		549		—		5,983
Operating and maintenance — related party	4,191		—		(4,191)		—
Selling, general and administrative	5,467		511		—		5,978
Selling, general and administrative — related party	3,302		46,068				49,370

Depreciation and amortization	10,971		538		—		11,509
Total operating costs	48,836		75,007		(4,191)		119,652
Operating income	15,284		204		—		15,488
Interest expense	3,326		335		—		3,661
Gain associated with derivative instruments	(2,358)		—		—		(2,358)
Foreign currency transaction gain	(102)		(687)		—		(789)
Other income, net	(16)		—		—		(16)
Income before income taxes	14,434		556		—		14,990
Provision for income taxes	390		190		—		580
Net income	$	14,044	$	366	$	—	$	14,410

(1)As previously reported in our Quarterly Report on Form 10-Q for the six months ended June 30, 2021.

We recorded a cumulative adjustment totaling $2.3 million to the January 1, 2021 opening balance of our General Partner’s capital account associated with the recast of our financial statements due to our acquisition of the Hardisty South terminal entities.