FOR IMMEDIATE RELEASE
Contact: Ross A. Benavides
Chief Financial Officer
(713) 860-2528
GENESIS ENERGY, L.P. REPORTS THIRD QUARTER RESULTS
November 11, 2003 - Genesis Energy, L.P. (AMEX:GEL) announced today
that its net loss for the third quarter of 2003 was $1,213,000, or $0.14 per
unit, compared to net income of $103,000, or $0.01 per unit, for the third
quarter of 2002.
Net Income for the nine months ended September 30, 2003, was
$1,556,000, or $0.18 per unit. For the nine months ended September 30, 2002, net
income was $3,523,000, or $0.40 per unit. Minority interests had no effect on
the results for the quarterly or nine months periods.
Mark Gorman, President and CEO said "We are on track to implement our
2003 strategy. We closed the transaction for the sale of the Texas Gulf Coast
Operations on October 31 and expect to close the purchase of the CO2 assets from
Denbury during November. We look forward to executing our strategy with the new
asset base. Third quarter results were adversely impacted by several charges
that are infrequent in nature, including the removal of an abandoned pipeline,
water disposal at a crude gathering facility, and termination benefits for
employees affected by the sale of the Texas Gulf Coast Operations. For the nine
months of 2003, Available Cash before Reserves was $2.4 million compared to
distributions of $1.3 million."
Highlights of the Third Quarter
Genesis made a regular quarterly distribution of $0.05 per common unit
for the second quarter of 2003 on August 14, 2003 and will make a distribution
for the third quarter of $0.05 per common unit on November 14, 2003, to
unitholders of record on October 31, 2003.
Net cash flow provided by operating activities was $2,086,000 for the
third quarter of 2003. Genesis did not generate Available Cash before reserves
(a non-GAAP measure) during the third quarter, instead reducing reserves by
$386,000. Reserves from prior periods will be used to fund the regular quarterly
distribution of $440,000. (Please see the accompanying schedules for a
reconciliation of Available Cash, a non-GAAP measure, to net cash flow provided
by operations, the GAAP measure.)
Gross margin (excluding depreciation) from gathering and marketing
operations was $1.6 million for the third quarter of 2003, as compared to $3.2
million in the prior year period. This decrease in gross margin (excluding
depreciation) between the two periods resulted principally from a $0.8 million
price variance and the benefit in the prior year period of a $0.6 million
increase in gross margin from the sale of crude oil with a low cost basis.
P-Plus prices declined by 25% during the third quarter of 2003 as compared to a
34% increase in P-Plus prices during the prior year quarter. This decline in
P-Plus prices was the primary cause of the Partnership's $0.8 million price
variance between periods.
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Pipeline gross margin (excluding depreciation) was $0.6 million for the
third quarter of 2003, as compared to $1.5 million for the third quarter of
2002. The factors decreasing pipeline gross margin (excluding depreciation) were
$1.4 million of higher pipeline operating costs related to an accrual for an
obligation to remove an out-of-service offshore pipeline and regulatory and
spill prevention requirements, a $0.4 million decrease in revenue due to a
decline in throughput of 10 percent between the two periods, and a $0.9 million
decrease in revenues from sales of pipeline loss allowance volumes. Offsetting
these factors were a $0.3 million increase in revenues due to an increase of 7
percent in the average tariff on shipments and a $1.5 million accrual in the
2002 period related to fines for the Mississippi spill in 1999. No such accrual
was taken in the 2003 period.
General and administrative expenses and interest costs were flat between
the two third quarter periods.
Highlights of the Nine Months
Genesis paid distributions for the first and second quarters of 2003 in
addition to the one to be paid for the third quarter. Available Cash before
Reserves generated during the nine months of 2003 totaled $2.4 million.
Gross margin (excluding depreciation) from gathering and marketing
activities was $9.3 million for the nine month period in 2003, a decrease of
$1.7 million from 2002. The primary factors decreasing gross margin (excluding
depreciation) between the two periods were a decrease in purchased volumes of
22% reducing gross margin (excluding depreciation) by $5.1 million and the
benefit in the prior year period of a $0.9 million increase in gross margin from
the sale of crude oil with a low cost basis. Partially offsetting the decreases
was a $5.0 million positive price variance.
Pipeline gross margin (excluding depreciation) was $4.0 million for the
nine months of 2003 as compared to $5.5 million for the 2002 nine-month period.
Pipeline operating costs were $4.1 greater in 2003 principally due to the asset
retirement obligation recorded in the third quarter of 2003, regulatory and
spill prevention requirements and right of way maintenance. Partially offsetting
these higher costs was the $2.3 million benefit of increases in tariff rates.
Additionally, in the 2002 period, the accrual for fines and penalties related to
the 1999 Mississippi spill was increased.
Outlook
The sale of the Texas Gulf Coast Operations closed on October 31, 2003.
Genesis expects to report a gain on the sale of the Texas Gulf Coast operations
of approximately $12.0 million during the fourth quarter.
The purchase of CO2 assets from Denbury is expected to close during
November. Results for the fourth quarter are expected to include two months of
activity from operating the wholesale CO2 marketing business.
The Partnership's gathering and marketing business is expected to
perform better in the fourth quarter than the in third quarter of 2003, but not
as well as in the first two quarters of 2003, principally due to continuing
market pressure on P-Plus prices. Genesis expects pipeline gross margin
excluding depreciation for the final quarter of 2003 to be generally consistent
with that in the first two quarters of the year.
During 2004, Genesis expects to generate gross margin before
depreciation from the wholesale CO2 marketing business of approximately the same
amount as the gross margin before depreciation that was expected for 2004 from
the Texas Gulf Coast gathering and marketing
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operations and pipeline operations which were sold. However, 2004 projected
maintenance capital expenditures related to theses sold assets are expected to
be reduced by $6.6 million as a result of the sale of the Texas Gulf Coast
operations.
Genesis anticipates increasing the regular quarterly distributions to
$0.15 per unit beginning with the distribution for the fourth quarter of 2003
that will be paid in February 2004, and expects to be able to sustain the
distribution at this level. Based on current conditions, the Partnership expects
to be able to restore the regular distribution to the targeted minimum
distribution amount of $0.20 per unit per quarter in 2005. However, as Genesis
gains experience with the new asset base, as cost savings are implemented, and
as opportunities to make accretive acquisitions are developed, the Partnership
may be able to increase its regular quarterly distributions or restore the
targeted minimum quarterly distribution sooner.
Other Matters
Several adjustments to net income are required to calculate Available
Cash. The calculation of Available Cash before reserves for the quarter ended
September 30, 2003 is as follows:
Net loss $ (1,213,000)
Depreciation and amortization expense 1,360,000
Cash proceeds in excess of gains on asset
sales 6,000
Maintenance capital expenditures (539,000)
--------------
Available Cash before reserves $ (386,000)
==============
The calculation of Available Cash before reserves for the nine months ended
September 30, 2003 is as follows:
Net income $ 1,556,000
Depreciation and amortization expense 4,244,000
Cash proceeds in excess of gains on asset
sales 46,000
Maintenance capital expenditures (3,479,000)
--------------
Available Cash before reserves $ 2,367,000
==============
Available Cash (a non-GAAP liquidity measure) has been reconciled to
cash flow from operating activities for the three and nine months ended
September 30, 2003 in the financial tables below.
Genesis Energy, L.P. will broadcast its Third Quarter Earnings
Announcement Conference Call on Tuesday, November 11, 2003, at 10:00 a.m.
Central time. This call can be accessed at www.genesiscrudeoil.com. Choose the
Investor Relations button. Listeners should go to this website at least fifteen
minutes before this event to download and install any necessary audio software.
For those unable to attend the live broadcast, a replay will be available
beginning approximately one hour after the event and remain available on our
website for 60 days. There is no charge to access the event.
For important information about the tax impact to unitholders of the
sale of the Texas Operation to Teppco, please visit our Web site at
www.genesiscrudeoil.com or call Investor Relations at 713-860-2500.
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Genesis Energy, L.P. operates crude oil common carrier pipelines and is
an independent gatherer and marketer of crude oil in North America, with
operations concentrated in Texas, Louisiana, Alabama, Florida, and Mississippi.
This press release includes forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Although Genesis believes that its expectations
are based upon reasonable assumptions, it can give no assurance that its goals
will be achieved. Important factors that could cause actual results to differ
materially from those in the forward looking statements herein include the
timing and extent of changes in commodity prices for oil, ability to obtain
adequate credit facilities, environmental risks, government regulation, the
ability of the Partnership to meet its stated business goals and other risks
noted from time to time in the Partnership's Securities and Exchange Commission
filings.
(tables to follow)
4
Genesis Energy, L.P.
Summary Consolidated Statements of Operations - Unaudited
(in thousands except per unit amounts and volumes)
Nine Months Ended Nine Months Ended
September 30, 2003 September 30, 2002
------------------ ------------------
Revenues $ 720,862 $ 696,358
Cost of Sales 707,594 679,930
-------------- -------------
GROSS MARGIN 13,268 16,428
General & Administrative Expenses 6,802 6,352
Depreciation and Amortization Expense 4,244 4,310
Other (190) -
--------------- -------------
OPERATING INCOME 2,412 5,766
Interest Expense, Net (856) (847)
Unrealized Loss on Change in Fair Value of Derivatives - (2,094)
Gains from Disposals of Surplus Assets - 698
-------------- -------------
Income Before Minority Interests 1,556 3,523
Minority Interests - -
-------------- -------------
NET INCOME $ 1,556 $ 3,523
============== =============
NET INCOME PER COMMON UNIT - BASIC AND DILUTED $ 0.18 $ 0.40
============== =============
Wellhead barrels per day 60,135 64,308
Pipeline barrels per day 70,285 75,385
Three Months Ended Three Months Ended
September 30, 2003 September 30, 2002
------------------ ------------------
Revenues $ 239,031 $ 216,350
Cost of Sales 236,877 211,582
-------------- -------------
GROSS MARGIN 2,154 4,768
General & Administrative Expenses 1,994 2,060
Depreciation and Amortization Expense 1,360 1,412
Other (143) -
-------------- -------------
OPERATING INCOME (LOSS) (1,057) 1,296
Interest and Other, Net (156) (268)
Unrealized Loss on Change in Fair Value of Derivatives - (1,037)
Gains from Disposals of Surplus Assets - 23
-------------- -------------
Income (Loss) Before Minority Interests (1,213) 103
Minority Interests - -
-------------- -------------
NET INCOME (LOSS) $ (1,213) $ 103
============== =============
NET INCOME (LOSS) PER COMMON UNIT - BASIC AND DILUTED $ (0.14) $ 0.01
============== =============
Wellhead barrels per day 60,155 60,044
Pipeline barrels per day 68,029 75,172
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Genesis Energy, L.P.
Summary Consolidated Balance Sheets - Unaudited
(in thousands)
September 30, 2003 December 31, 2002
------------------ -----------------
ASSETS
Cash $ 3,933 $ 1,071
Accounts Receivable 74,582 80,664
Inventories 575 4,952
Other Current Assets 5,344 5,410
-------------- -------------
Total Current Assets 84,434 92,097
Net Property 44,947 44,460
Other Assets 1,064 980
-------------- -------------
Total Assets $ 130,445 $ 137,537
============== =============
LIABILITIES AND PARTNERS' CAPITAL
Accounts Payable $ 79,386 $ 87,386
Accrued Liabilities 8,527 8,834
-------------- -------------
Total Current Liabilities 87,913 96,220
Long-Term Debt 6,000 5,500
Minority Interest 515 515
Partners' Capital 36,017 35,302
-------------- -------------
Total Liabilities and Partners' Capital $ 130,445 $ 137,537
============== =============
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Genesis Energy, L.P.
Summary Consolidated Statements of Cash Flows - Unaudited
(in thousands)
Nine Months Ended Nine Months Ended
September 30, 2003 September 30, 2002
------------------ ------------------
Net income $ 1,556 $ 3,523
Adjustments to reconcile net income to cash provided
by operating activities:
Depreciation and amortization 4,244 4,310
Amortization/write-off of credit facility issuance costs 903 551
Gains on asset disposals (190) (698)
Other non-cash charges 39 3,594
Changes to components of working capital 1,783 2,330
-------------- -------------
Net cash provided by operating activities 8,335 13,610
-------------- -------------
Additions to property and equipment (4,136) (2,753)
Proceeds from sales of assets and other 136 2,205
-------------- -------------
Net cash (used in) provided by investing activities (4,000) (548)
-------------- -------------
Net borrowings (repayments) of debt 500 (13,900)
Distributions to partners (880) -
Credit facility issuance fees (1,093) -
--------------- -------------
Net cash used in financing activities (1,473) (13,900)
--------------- -------------
Net increase (decrease) in cash and cash equivalents 2,862 (838)
Cash and cash equivalents at beginning of period 1,071 5,777
-------------- -------------
Cash and cash equivalents at end of period $ 3,933 $ 4,939
============== =============
7
Genesis Energy, L.P.
Reconciliation of Unaudited GAAP
"Net Cash Flow Provided by Operating Activities"
to Non-GAAP "Available Cash before Reserves"
for the Three and Nine Months Ended September 30, 2003
(in thousands)
Three Months Ended Nine Months Ended
September 30, 2003 September 30, 2003
------------------ ------------------
Net Cash Flow Provided by Operating Activities $ 2,086 $ 8,335
Adjustments to reconcile Net Cash Flow Provided
by Operating Activities to Available Cash
before reserves:
Maintenance capital expenditures (539) (3,479)
Proceeds in excess of gains from sales of assets 149 236
Change in fair value of derivatives - (39)
Amortization of credit facility issuance costs (62) (903)
Net effect of changes in operating accounts not included in calculation of
Available Cash before reserves (2,020) (1,783)
-------------- -------------
Available Cash before reserves $ (386) $ 2,367
============== =============
Genesis believes that investors benefit from having access to the same
financial measures being utilized by management. Available Cash is a liquidity
measure used by management to compare cash flows generated by the Partnership to
the cash distribution paid to the limited partners and the general partner. This
is an important financial measure to the public unitholders since it is an
indicator of the Partnership's ability to provide a cash return on their
investment. Specifically, this financial measure tells investors whether or not
the Partnership is generating cash flows at a level that can support a quarterly
cash distribution to the partners. Lastly, Available Cash (also referred to as
distributable cash flow) is the quantitative standard used throughout the
investment community with respect to publicly-traded partnerships.
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