FOR IMMEDIATE RELEASE
Contact: Ross A. Benavides
Chief Financial Officer
(713) 860-2528
GENESIS ENERGY, L.P. REPORTS 2004 RESULTS
March 8, 2005 - Genesis Energy, L.P. (AMEX:GEL) announced today that
it reported a loss of $1,412,000, or $0.15 per unit for 2004 and a loss for the
fourth quarter of 2004 of $1,112,000, or $0.12 per unit.
Mark Gorman, President and CEO said "We continued to make strides
toward our objectives during 2004. During the year we (i) generated Available
Cash before Reserves of $6.3 million or $0.66 per unit, which exceeded our
distributions of $5.7 million or $0.60 per unit for the year, (ii) expanded our
credit facility with a group of banks led by Bank of America to include a $50
million acquisition facility, (iii) acquired a 33 Bcf CO2 volumetric production
payment and related industrial sales contracts from our general partner,
Denbury Resources for $4.7 million, and (iv) substantially completed $7.5
million of pipeline construction projects in Mississippi. Since the end of the
year, wehave announced $16.6 million in acquisitions that have been completed
or are in progress at this time."
"Results for the fourth quarter, in contrast, were disappointing. We
generated Available Cash before reserves during the quarter of $871,000 or
$0.09 per unit, which was $555,000 or $0.06 less than our distribution of
$1,426,000 or $0.15 per unit for the quarter. In effect, during the fourth
quarter, we consumed much of the Available Cash reserves that were built up
during the first three quarters of 2004. Our crude oil pipeline segment and CO2
wholesale distribution segment performed well during the quarter. However, our
gathering and marketing segment did not perform well due to higher field costs
and volatility in marketing margins. We also incurred significant costs for
compliance with the Sarbanes-Oxley Act of 2002 during the quarter."
2004 Financial Results
Genesis had a loss for 2004 of $1.4 million, or $0.15 per unit,
compared to income for 2003 of $13.3 million, or $1.50 per unit. Genesis's loss
from continuing operations was $0.9 million, or $0.10 per unit, for 2004 and
$0.4 million, or $0.05 per unit, for 2003. Loss from discontinued operations
for 2004 was $0.5 million, or $0.05 per unit. Income from discontinued
operations for 2003, including a gain of $13.0 million on the sale of portions
of the Texas pipeline system, was $13.7 million, or $1.55 per unit.
For the 2004 fourth quarter, Genesis generated a loss of $1.1 million,
or $0.12 per unit, with a loss of $1.0 million, or $0.10 per unit, from
continuing operations and a loss of $0.1 million, or $0.02 per unit from
discontinued operations. In the comparable period in 2003, income was $11.8
million, with income of $15,000 from continuing operations and income of $11.8
million, or $1.28 per unit, from discontinued operations.
The following table presents selected financial information by segment
for the three month and annual reporting periods for continuing operations:
Crude Oil
Gathering and Pipeline CO2
Marketing Transportation Marketing Total
(in thousands)
Three Months Ended December 31, 2004
Revenues:
External customers $ 238,657 $ 3,866 $ 2,286 $ 244,809
Intersegment - 579 - 579
------------ ---------- --------- ----------
Total revenues of reportable segments $ 238,657 $ 4,445 $ 2,286 $ 245,388
============ ========== ========= ==========
Segment margin excluding depreciation
and amortization (a) $ 136 $ 2,432 $ 1,518 $ 4,086
Capital expenditures $ 153 $ 2,610 $ - $ 2,763
Maintenance capital
expenditures $ 153 $ 159 $ - $ 312
Three Months Ended December 31, 2003
Revenues:
External customers $ 173,401 $ 3,124 $ 1,079 $ 177,604
Intersegment - 847 - 847
------------ ---------- --------- ----------
Total revenues of reportable segments $ 173,401 $ 3,971 $ 1,079 $ 178,451
============ ========== ========= ==========
Segment margin excluding depreciation
and amortization (a) $ 848 $ 2,203 $ 724 $ 3,775
Capital expenditures $ 107 $ 666 $ 24,401 $ 25,174
Maintenance capital
expenditures $ 107 $ 590 $ - $ 697
Year Ended December 31, 2004
Revenues:
External customers $ 901,902 $ 13,212 $ 8,561 $ 923,675
Intersegment - 3,468 - 3,468
----------- ---------- --------- ----------
Total revenues of reportable segments $ 901,902 $ 16,680 $ 8,561 $ 927,143
============ ========== ========= ==========
Segment margin excluding depreciation
and amortization (a) $ 4,034 $ 8,543 $ 5,762 $ 18,339
Capital expenditures $ 284 $ 8,187 $ 4,723 $ 13,194
Maintenance capital
expenditures $ 284 $ 655 $ - $ 939
Year Ended December 31, 2003
Revenues:
External customers $ 641,684 $ 11,799 $ 1,079 $ 654,562
Intersegment - 3,335 - 3,335
------------ ---------- --------- ----------
Total revenues of reportable segments $ 681,684 $ 15,134 $ 1,079 $ 657,897
============ ========== ========= ==========
Segment margin excluding depreciation
and amortization (a) $ 7,908 $ 5,108 $ 724 $ 13,740
Capital expenditures $ 635 $ 2,302 $ 24,401 $ 27,338
Maintenance capital
expenditures $ 635 $ 2,226 $ - $ 2,861
(a) Segment margin was calculated as revenues less cost of sales and operating
expenses. A reconciliation of segment margin to income from continuing
operations is presented for periods presented in the tables at the end of this
release.
Segment margin from continuing crude oil gathering and marketing
operations was $0.1 million for the 2004 fourth quarter, a decrease of $0.7
million from the 2003 period margin. An increase of $1.0 million in field costs
reduced segment margin in the fourth quarter of 2004. Decreased volumes were
offset by improved margin per barrel as compared to the prior year period,
adding $0.3 million to segment margin, partially offsetting the effect of the
higher field costs.
For the year, segment margin from continuing crude oil gathering and
marketing operations decreased $3.9 million in 2004 as compared to margin in
2003. Field costs increased in 2004 by $2.4 million due to higher fuel prices
and increases in payroll and fleet repair costs. The remaining difference was
due to fluctuations in the difference between crude purchase and sales prices.
In 2003, Genesis benefited from price volatility in P-Plus as P-Plus prices
increased. In the latter half of 2003 as P-Plus prices declined, many contract
arrangements were changed to reduce exposure to price volatility. Therefore the
Partnership did not experience the same increases in margin in 2004 even though
P-Plus prices increased.
Crude oil pipeline segment margin from continuing operations was $2.4
million for the fourth quarter of 2004 as compared to $2.2 million for the 2003
period. Higher tariffs combined with sales of pipeline measurement gain volumes
at higher crude oil prices were the primary reasons for the increase in
pipeline segment margin. Pipeline operating costs increased slightly in the
2004 period, offsetting some of the increased revenues.
Segment margin from our crude oil pipeline operations increased $3.4
million between the annual periods. Revenues increased $1.5 million due to a
combination of higher tariffs and higher crude oil prices for sales of pipeline
measurement gain volumes. In the 2003 period, initial compliance with new
regulatory and spill prevention regulations increased costs. The recurring
costs under these programs in 2004 were significantly less. An $0.8 million
difference related to an accrual for the removal of an abandoned pipeline
contributed to the increase in 2004.
Segment margin from CO2 wholesale distribution activities in the 2004
three month and annual periods was $1.5 million and $5.8 million, respectively.
Genesis entered this business in November 2003.
General and administrative expenses increased by $1.0 million during
the 2004 fourth quarter as compared to the 2003 period. This increase was
attributable to professional services and audit fees related to the
documentation and assessment of the Partnership's internal controls as required
by the Sarbanes-Oxley Act and a charge related to the Partnership's stock
appreciation rights plan.
For the annual periods, general and administrative expenses increased
$2.3 million in 2004, which includes a charge related to the Partnership's
stock appreciation rights plan. During 2004, Genesis recorded a $1.2 million
charge to account for its employee stock appreciation rights program that was
implemented in 2003. This charge resulted from an increase in Genesis' unit
price from $9.80 at the beginning of the year to $12.60 at December 31, 2004.
Additionally, Genesis incurred costs of $1.3 million for the Sarbanes internal
control project including higher audit fees.
During 2004 Genesis recorded an impairment charge of $0.9 million
related to a segment of our Mississippi pipeline that is idle. Depreciation and
amortization also increased due to additions of capital assets.
Interest costs were $0.1 million less in 2004. Costs in 2003 included a
charge for unamortized deferred costs related to a credit facility that was
replaced in March 2003. Interest on increased borrowings in the 2004 period
combined with higher market interest rates offset a portion of the decline.
The $0.5 million loss from discontinued operations in 2004 period was
due to costs to dismantle and dispose of abandoned assets. The operations that
were disposed of in the fourth quarter of 2003 generated income of $0.7 million
of operating income and a gain of $13.0 million from the sale of the assets
during 2003.
Genesis paid a distribution of $0.15 per unit for each of the first
three quarters of 2004, and paid a distribution of $0.15 per unit for the
fourth quarter of 2004 on February 14, 2005. Genesis generated Available Cash
before reserves (a non-GAAP measure) of $0.9 million during the fourth quarter
of 2004 and $6.3 million during 2004. In order to make the fourth quarter
distribution of $0.15 per unit, the Partnership used reserves generated earlier
in the year. (Please see the accompanying schedules for a reconciliation of
Available Cash, a non-GAAP liquidity measure, to net cash flow provided by
operations, the GAAP measure.)
Available Cash
Several adjustments to net income are required to calculate Available
Cash. The calculation of Available Cash before reserves for the quarter ended
December 31, 2004 is as follows:
Net loss $ (1,112,000)
Depreciation and amortization expense 1,525,000
Non-cash charge for incentive compensation
plan 587,000
Other items 183,000
Maintenance capital expenditures (312,000)
-----------------
Available Cash before reserves $ 871,000
=================
The calculation of Available Cash before reserves for the year ended December
31, 2004 is as follows:
Net loss $ (1,412,000)
Depreciation and amortization expense 7,298,000
Other items 184,000
Non-cash charges 1,151,000
Maintenance capital expenditures (939,000)
-----------------
Available Cash before reserves $ 6,282,000
=================
Outlook
The Partnership's continuing gathering and marketing business remains
volatile. We continue to take steps to improve the performance of this segment.
Genesis expects pipeline segment margin from continuing operations for 2005 to
be approximately the same as in 2004. Segment margin from the CO2 marketing
operation in 2005 is expected to be greater than the 2004 amount due to the
acquisition made in September of 2004. Genesis expects general and
administrative expenses to be lower in 2005 than in 2004 primarily due to
incurring the initial costs of complying with the Sarbanes Oxley Act during
2004. Genesis expects 2005 projected maintenance capital expenditures to be
more than twice as much as the amounts expended during 2004 due primarily to
pipeline integrity management program expenditures on the Mississippi Pipeline
System.
Genesis' earnings are likely to be impacted in future periods from
volatility in its unit price and the effect of that volatility on the
accounting for the stock appreciation rights plan. This non-cash expense is not
expected to have an adverse impact on the Partnership's ability to make or
increase distributions to its Unitholders.
Based on the foregoing, Genesis expects to be able to sustain its
regular quarterly distribution of $0.15 per unit during 2005. Our ability to
increase distributions during 2005 will depend in part on our success in
developing and executing capital projects and making accretive acquisitions,
the results of our integrity management program testing, and our ability to
generate sustained improvements in the gathering and marketing segment.
Earnings Conference Call
Genesis Energy, L.P. will broadcast its Earnings Conference Call on
Tuesday, March 8, 2005, 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.
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.
Genesis Energy, L.P. also operates a wholesale CO2 marketing business.
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. Actual results may vary materially.
(tables to follow)
Genesis Energy, L.P.
Summary Consolidated Statements of Operations - Unaudited
(in thousands except per unit amounts and volumes)
Three Months Ended Three Months Ended
December 31, 2004 December 31, 2003
----------------- -----------------
Revenues $ 245,388 $ 178,451
Cost of sales 241,302 174,676
General & administrative expenses 3,206 2,194
Depreciation and amortization expense 1,525 1,556
Losses (gains) from disposals of surplus assets 98 (120)
-------------- -------------
OPERATING (LOSS) INCOME (743) 145
Interest and other, net (225) (130)
-------------- -------------
(Loss) income from continuing operations (968) 15
(Loss) income from discontinued operations (144) 11,751
--------------- -------------
NET (LOSS) INCOME $ (1,112) $ 11,766
=============== =============
NET (LOSS) INCOME PER COMMON UNIT - BASIC AND DILUTED
Continuing operations $ (0.10) $ 0.00
Discontinued operations (0.02) 1.28
--------------- -------------
Net (Loss) Income Per Common Unit - Basic and Diluted $ (0.12) $ 1.28
=============== =============
Continuing Operations Volumes:
Crude oil wellhead barrels per day 39,489 48,409
Total gathering and marketing barrels per day 54,054 61,350
Crude oil pipeline barrels per day 60,577 67,855
CO2 marketing Mcf per day 48,217 36,332
Genesis Energy, L.P.
Summary Consolidated Statements of Operations - Unaudited
(in thousands except per unit amounts and volumes)
Year Ended Year Ended
December 31, 2004 December 31, 2003
----------------- -----------------
Revenues $ 927,143 $ 657,897
Cost of sales 908,804 644,157
General & administrative expenses 11,031 8,768
Depreciation and amortization expense 7,298 4,641
Losses (gains) from disposals of surplus assets 33 (236)
-------------- -------------
OPERATING (LOSS) INCOME (23) 567
Interest and other, net (926) (986)
-------------- -------------
Income (loss) from continuing operations (949) (419)
(Loss) income from discontinued operations (463) 13,741
-------------- -------------
NET (LOSS) INCOME $ (1,412) $ 13,322
=============== =============
NET (LOSS) INCOME PER COMMON UNIT - BASIC AND DILUTED
Continuing operations $ (0.10) $ (0.05)
Discontinued operations (0.05) 1.55
-------------- --------------
Net (Loss) Income Per Common Unit - Basic and Diluted $ (0.15) $ 1.50
=============== ==============
Continuing Operations Volumes:
Crude oil wellhead barrels per day 45,919 45,015
Total gathering and marketing barrels per day 60,419 56,805
Crude oil pipeline barrels per day 63,441 66,959
CO2 marketing Mcf per day 45,312 36,332
Genesis Energy, L.P.
Summary Consolidated Balance Sheets - Unaudited
(in thousands)
December 31, 2004 December 31, 2003
----------------- -----------------
ASSETS
Cash $ 2,078 $ 2,869
Accounts receivable 69,321 66,732
Inventories 1,866 1,546
Other current assets 4,131 17,064(1)
-------------- -------------
Total Current Assets 77,396 88,211
Net property 33,786 33,971
CO2 contracts 26,344 24,073
Other assets 5,628 860
-------------- -------------
Total Assets $ 143,154 $ 147,115
============== =============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 75,415 $ 67,175
Accrued liabilities 6,523 20,069(1)
-------------- -------------
Total Current Liabilities 81,938 87,244
Long-term debt and other liabilities 15,460 7,000
Minority interest 517 517
Partners' capital 45,239 52,354
-------------- -------------
Total Liabilities and Partners' Capital $ 143,154 $ 147,115
============== =============
(1) Includes $12.8 million accrual for settlement of litigation and the
related receivable for reimbursement from insurers.
Genesis Energy, L.P.
Summary Consolidated Statements of Cash Flows - Unaudited
(in thousands)
Year Ended Year Ended
December 31, 2004 December 31, 2003
----------------- -----------------
Net (loss) income $ (1,412) $ 13,322
Adjustments to reconcile net (loss) income to cash
provided by operating activities:
Depreciation and amortization 7,298 6,504
Amortization/write-off of credit facility issuance
costs 373 1,031
Change in fair value of derivatives - 39
Losses (gains) on asset disposals 33 (13,264)
Amortization of unearned income (36) -
Cash received from direct financing leases 75 -
Other non-cash compensation plan charges 1,151 229
Changes to components of working capital 2,220 (3,168)
-------------- --------------
Net cash provided by operating activities 9,702 4,693
-------------- -------------
Additions to property and equipment and other assets (13,045) (29,335)
Proceeds from sales of assets and other 112 22,341
Other, net 128 -
-------------- -------------
Net cash used in investing activities (12,805) (6,994)
-------------- -------------
Net (repayments) borrowings of debt 8,300 1,500
Issuance of units and minority interest contributions - 5,013
Distributions to partners (5,703) (1,321)
Credit facility issuance fees (826) (1,093)
Other, net 541 -
-------------- -------------
Net cash provided by financing activities 2,312 4,099
-------------- -------------
Net (decrease) increase in cash and cash equivalents (791) 1,798
Cash and cash equivalents at beginning of period 2,869 1,071
-------------- -------------
Cash and cash equivalents at end of period $ 2,078 $ 2,869
============== =============
Genesis Energy, L.P.
Reconciliations
SEGMENT MARGIN EXCLUDING DEPRECIATION AND AMORTIZATION
RECONCILIATION TO OPERATING (LOSS) INCOME
Three Months Ended Three Months Ended
December 31, 2004 December 31, 2003
----------------- -----------------
(in thousands)
Segment margin excluding depreciation and amortization
(non-GAAP measure) $ 4,086 $ 3,775
General & administrative expenses (3,206) (2,194)
Depreciation and amortization expense (1,525) (1,556)
(Loss) gains from disposals of surplus assets (98) 120
--------------- -------------
Operating (loss) income (GAAP measure) $ (743) $ 145
=============== =============
Year Ended Year Ended
December 31, 2004 December 31, 2003
----------------- -----------------
(in thousands)
Segment margin excluding depreciation and amortization
(non-GAAP measure) $ 18,339 $ 13,740
General & administrative expenses (11,031) (8,768)
Depreciation and amortization expense (7,298) (4,641)
(Loss) gains from disposals of surplus assets (33) 236
--------------- -------------
Operating (loss) income (GAAP measure) $ (23) $ 567
=============== =============
GAAP to Non-GAAP Financial Measure Reconciliation
AVAILABLE CASH BEFORE RESERVES RECONCILIATION TO NET CASH
PROVIDED BY OPERATING ACTIVITIES
Three Months Ended Year Ended
December 31, 2004 December 31, 2004
----------------- -----------------
(in thousands)
Net cash flow provided by operating activities (GAAP measure) $ 5,423 $ 9,702
Adjustments to reconcile net cash flow provided by operating
activities to Available Cash before reserves:
Maintenance capital expenditures (312) (939)
Proceeds from asset sales 30 112
Amortization of credit facility issuance costs (84) (373)
Net effect of changes in operating accounts not
included in calculation of Available Cash before
reserves (4,186) (2,220)
--------------- ---------------
Available Cash before reserves (non-GAAP measure) $ 871 $ 6,282
=============== ===============
Genesis believes that investors benefit from having access to the same
financial measures being utilized by management.
Segment margin forms the basis of our internal financial reporting and
is used by senior management in deciding how to allocate capital resources
among business segments. We believe that investors benefit from having access
to the same financial measures that our management uses in evaluating segment
results.
We define segment margin as revenues less costs of sales and operating
expenses, plus the adjustments for the effects of derivative instruments. This
measure is exclusive of depreciation and amortization, general and
administrative expenses, and any gains or losses on asset disposals. It also
excludes the effects of minority interests and the cumulative effect of any
accounting changes.
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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