FOR IMMEDIATE RELEASE
Contact: Ross A. Benavides
Chief Financial Officer
(713) 860-2528
GENESIS ENERGY, L.P. REPORTS SECOND QUARTER RESULTS
August 4, 2005 - Genesis Energy, L.P. (AMEX:GEL) announced today that
its net income for the second quarter of 2005 was $743,000, or $0.08 per unit.
Net income for the six months of 2005 was $3,513,000, or $0.37 per unit.
Mark Gorman, President and CEO said "Results for the second quarter of
2005 benefited from the increased segment margin resulting from construction
projects and acquisitions placed in service in late 2004 and during the first
quarter of 2005. We generated Available Cash before Reserves, a non-GAAP
measure, of $2.7 million or $0.28 per unit, which exceeded our distribution of
$1.4 million or $0.15 per unit for the second quarter of 2005.
"During the second quarter of 2005, we acquired a 50% interest in a
syngas manufacturing facility, which produces syngas (a combination of carbon
monoxide and hydrogen) and high pressure steam for a processing fee.
This acquisition added $313,000 to Available Cash before Reserves."
Financial Results
Genesis generated income for the second quarter of 2005 of $0.7
million, or $0.08 per unit, compared to second quarter 2004 earnings of $1.1
million, or $0.12 per unit. Genesis generated income from continuing operations
of $0.7 million, or $0.08 per unit, for the 2005 period and income from
continuing operations of $1.2 million, or $0.12, per unit for the 2004 quarter.
Loss from discontinued operations for the 2005 period was $9,000. Loss from
discontinued operations for the comparable period of 2004 was $0.1 million.
For the six month period, Genesis generated net income for 2005 of $3.5
million, or $0.37 per unit, with $3.2 million of income, or $0.34 per unit, from
continuing operations and net income of $0.3 million, or $0.03 per unit from
discontinued operations. In the comparable period in 2004, income was $0.1
million, or $0.01 per unit, with $0.4 million, or $0.04 per unit from continuing
operations and a loss of $0.3 million, or $0.03 per unit, from discontinued
operations.
The following table presents selected financial information by segment
for the three month and six month reporting periods for continuing operations:
Crude Oil
Gathering and Pipeline CO2
Marketing Transportation Sales Total
------------ -------------- -------- --------
(in thousands)
Three Months Ended June 30, 2005
Revenues:
External customers $247,692 $ 5,957 $ 2,568 $256,217
Intersegment - 927 - 927
-------- --------- -------- --------
Total revenues of reportable segments $247,692 $ 6,884 $ 2,568 $257,144
======== ========= ======== ========
Segment margin excluding depreciation
and amortization (a) $ 450 $ 2,808 $ 1,757 $ 5,015
Capital expenditures $ 254 $ 926 $ - $ 1,180
Maintenance capital expenditures $ 25 $ 175 $ - $ 200
Three Months Ended June 30, 2004
Revenues:
External customers $225,872 $ 3,206 $ 2,149 $231,227
Intersegment - 880 - 880
-------- -------- -------- --------
Total revenues of reportable segments $225,872 $ 4,086 $ 2,149 $232,107
======== ======== ======== ========
Segment margin excluding depreciation
and amortization (a) $ 1,944 $ 1,657 $ 1,461 $ 5,062
Capital expenditures $ 24 $ 1,055 $ - $ 1,079
Maintenance capital expenditures $ 24 $ 231 $ - $ 255
Six Months Ended June 30, 2005
Revenues:
External customers $494,700 $ 12,590 $ 4,848 $512,138
Intersegment - 1,606 - 1,606
-------- -------- -------- --------
Total revenues of reportable segments $494,700 $ 14,196 $ 4,848 $513,744
======== ======== ======== ========
Segment margin excluding depreciation
and amortization (a) $ 1,338 $ 5,251 $ 3,282 $ 9,871
Capital expenditures $ 276 $ 4,602 $ - $ 4,878
Maintenance capital expenditures $ 47 $ 664 $ - $ 711
Six Months Ended June 30, 2004
Revenues:
External customers $418,868 $ 6,469 $ 3,980 $429,317
Intersegment - 1,702 - 1,702
-------- -------- -------- --------
Total revenues of reportable segments $418,868 $ 8,171 $ 3,980 $431,019
======== ======== ======== ========
Segment margin excluding depreciation
and amortization (a) $ 2,950 $ 3,510 $ 2,701 $ 9,161
Capital expenditures $ 75 $ 1,404 $ - $ 1,479
Maintenance capital expenditures $ 75 $ 335 $ - $ 410
(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
activities was $0.5 million for the 2005 second quarter, a decrease of $1.5
million from the 2004 period. The primary factor decreasing segment margin
between the two periods was increased field operating
costs, including a $0.4
million accrual for our share of the expected costs for the environmental
remediation of a site we no longer operate. Also contributing to the higher
field costs were increases in fuel costs and personnel costs. The addition of
five tractors and trailers to the fleet during the third quarter of 2004
increased vehicle lease costs. A reduction in volumes of crude oil purchased and
fluctuations in margins on purchases of crude oil also contributed to the
reduction in segment margin.
For the six month periods, segment margin from crude oil gathering and
marketing decreased $1.6 million in 2005 as compared to the prior period. The
reduced segment margin in the first half of 2005 was due primarily to an
increase in field costs of $1.8 million. The same factors that increased field
costs in the three-month period were responsible for the increase for the
six-month period. These increased costs were offset slightly by credit cost
reductions and increased margins from purchasing and transporting the crude oil.
Pipeline transportation segment margin from continuing operations was
$2.8 million for the second quarter of 2005, as compared to $1.7 million for the
2004 period. Higher crude oil prices resulted in greater revenues from the sale
of crude oil from volumetric gains. Additionally, the 2005 quarter included
segment margin from the CO2 pipeline segment constructed in 2004 and from
natural gas gathering pipelines acquired during the first quarter of 2005.
Finally, changes to tariffs in Mississippi combined with increased volumes on
that system increased segment margin more than offsetting volume and tariff
reductions on the Texas System.
Segment margin from our crude oil pipeline operations increased $1.7
million between the six month periods for the same reasons noted above for the
second quarter of 2005.
Segment margin from CO2 sales activities in the 2005 three and six month
periods was $1.8 million and $3.3 million, respectively, as compared to $1.5
million and $2.7 million for the three and six month periods in 2004,
respectively. The additional volumetric production payment acquired in the third
quarter of 2004 provided most of this margin increase.
General and administrative expenses increased by $0.4 million during
the 2005 second quarter as compared to the 2004 period. During the 2004 quarter,
Genesis recorded a $0.5 million credit to account for its employee stock
appreciation rights program that was implemented in 2003. This credit resulted
from a decrease in Genesis' unit price. In the second quarter of 2005, the unit
price increased slightly, resulting in a small charge. Other general and
administrative expenses decreased by $0.1 million.
General and administrative expenses decreased by $1.9 million during the
2005 six-month period as compared to the 2004 period principally due to the
accrual related to the stock appreciation rights plan. In the 2004 period our
unit market price increased, requiring us to record a charge of $0.6 million. In
2005, the decrease in our unit price resulted in a credit to general and
administrative expenses of $1.3 million.
In the first half of 2005, we disposed of idle assets for $1.3 million,
generating $0.7 million of gain. The assets sold included pipelines that had
been idle in 2002 and 2003. $0.3 million of this gain is reflected as
discontinued operations.
On April 1, 2005, we acquired a 50% interest in T&P Syngas. Our equity
in the earnings of T&P Syngas for the second quarter of 2005, net of the
amortization of our purchase price over our share of the equity of T&P Syngas,
was $0.3 million for the second quarter.
Interest costs were $0.4 million more in the 2005 six month period due
to higher debt balances from borrowings to make acquisitions. Additionally
market interest rates were higher in 2005.
Genesis paid a distribution of $0.15 per unit for the first quarter of
2005 in May 2005, and will pay a distribution of $0.15 per unit for the second
quarter of 2005 in August 2005. Genesis generated Available Cash before reserves
(a non-GAAP measure) of $2.7 million during the second quarter of 2005 and $5.9
million during the first six months of 2005. (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.)
Available Cash
Several adjustments to net income are required to calculate Available
Cash. The calculation of Available Cash before reserves for the quarter ended
June 30, 2005 is as follows (in thousands):
Net income $ 743
Depreciation and amortization expense 1,568
Cash in excess of gain on asset sales 23
Cash from direct financing leases in excess of income
recorded 124
Cash distribution for the second quarter of 2005 from
T&P Syngas 313
Non-cash credit for incentive compensation plan and
other non-cash items 126
Maintenance capital expenditures (200)
-------------
Available Cash before reserves $ 2,697
=============
Available Cash (a non-GAAP liquidity measure) has been reconciled to
cash flow from operating activities (the GAAP measure) for the three and six
months ended June 30, 2005 in the financial tables below.
Outlook
Genesis expects pipeline segment margin from continuing operations for
2005 to be approximately the same as in 2004. Increased costs for pipeline
integrity testing and repairs are expected to offset increased revenues. Segment
margin from the CO2 sales operation in 2005 is expected to be greater than the
2004 amount due to the acquisition of an additional volumetric production
payment in September of 2004. Genesis expects gathering and marketing segment
margins from continuing operations to be significantly less than the 2004
amounts due primarily to lower volumes and increased operating costs. We expect
our investment in T&P Syngas to contribute to Available Cash before reserves
during 2005. 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 approximately 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
costs of repairs and improvements under of our integrity management program, 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
Thursday, August 4, 2005, at 2:00 p.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 30 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 sales 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, managing operating costs, completion of capital
projects on schedule and within budget, consummation of accretive acquisitions,
capital spending, 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. We undertake no obligation to publicly update or
revise any forward-looking statement.
(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
June 30, 2005 June 30, 2004
------------- -------------
Revenues $ 257,144 $ 232,107
Cost of sales 252,129 227,045
General & administrative expenses 2,468 2,022
Depreciation and amortization expense 1,568 1,627
Gains from disposals of surplus assets (27) (75)
--------------- -------------
OPERATING INCOME 1,006 1,488
Equity in earnings of investment in T&P Syngas Supply
Company 252 -
Interest, net (506) (328)
-------------- -------------
Income from continuing operations 752 1,160
Loss from discontinued operations (9) (61)
-------------- --------------
NET INCOME $ 743 $ 1,099
============== =============
NET INCOME PER COMMON UNIT - BASIC AND DILUTED
Continuing operations $ 0.08 $ 0.12
Discontinued operations 0.00 0.00
-------------- -------------
Net Income Per Common Unit - Basic and Diluted $ 0.08 $ 0.12
============== =============
Continuing Operations Volumes:
Crude oil wellhead barrels per day 40,323 49,128
Total gathering and marketing barrels per day 55,722 65,164
Crude oil pipeline barrels per day 64,094 67,156
CO2 sales Mcf per day 51,049 45,480
Genesis Energy, L.P.
Summary Consolidated Statements of Operations - Unaudited
(in thousands except per unit amounts and volumes)
Six Months Ended Six Months Ended
June 30, 2005 June 30, 2004
------------- -------------
Revenues $ 513,744 $ 431,019
Cost of sales 503,873 421,858
General & administrative expenses 3,326 5,186
Depreciation and amortization expense 3,094 3,174
Gains from disposals of surplus assets (398) (75)
--------------- -------------
OPERATING INCOME 3,849 876
Equity in earnings of investment in T&P Syngas Supply
Company 252 -
Interest, net (861) (498)
-------------- -------------
Income from continuing operations 3,240 378
Income (loss) from discontinued operations 273 (284)
-------------- --------------
NET INCOME $ 3,513 $ 94
============== =============
NET INCOME (LOSS) PER COMMON UNIT - BASIC AND DILUTED
Continuing operations $ 0.34 $ 0.04
Discontinued operations 0.03 (0.03)
-------------- -------------
Net Income Per Common Unit - Basic and Diluted $ 0.37 $ 0.01
============== =============
Continuing Operations Volumes:
Crude oil wellhead barrels per day 41,142 48,787
Total gathering and marketing barrels per day 57,027 62,877
Crude oil pipeline barrels per day 62,466 67,869
CO2 sales Mcf per day 49,437 42,164
Genesis Energy, L.P.
Summary Consolidated Balance Sheets - Unaudited
(in thousands)
June 30, 2005 December 31, 2004
------------- -----------------
ASSETS
Cash $ 1,628 $ 2,078
Accounts receivable 90,231 69,321
Inventories 4,329 1,866
Other current assets 4,059 4,131
-------------- -------------
Total Current Assets 100,247 77,396
Net property 34,589 33,786
CO2 contracts 25,023 26,344
Investment in T&P Syngas Supply Company 13,757 -
Other assets 7,500 5,628
-------------- -------------
Total Assets $ 181,116 $ 143,154
============== =============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 92,056 $ 75,415
Accrued liabilities 8,050 6,523
-------------- -------------
Total Current Liabilities 100,106 81,938
Long-term debt and other liabilities 34,592 15,460
Minority interest 517 517
Partners' capital 45,901 45,239
-------------- -------------
Total Liabilities and Partners' Capital $ 181,116 $ 143,154
============== =============
Genesis Energy, L.P.
Summary Consolidated Statements of Cash Flows - Unaudited
(in thousands)
Six Months Ended Six Months Ended
June 30, 2005 June 30, 2004
------------- -------------
Net income $ 3,513 $ 94
Adjustments to reconcile net income to cash provided by
operating activities:
Depreciation and amortization 3,094 3,174
Amortization of credit facility issuance costs 187 194
Equity in earnings of investment in T&P Syngas Supply
Company (252) -
Amortization of unearned income (349) -
Cash received from direct financing leases 593 -
Change in fair value of derivatives (432) (18)
Gains on asset disposals (671) (75)
Other non-cash items (510) 592
Changes to components of working capital (6,028) 1,503
-------------- -------------
Net cash (used in) provided by operating activities (855) 5,464
-------------- -------------
Additions to property and equipment and other assets (17,899) (1,490)
Proceeds from sales of assets 1,360 79
Other, net (53) -
-------------- -------------
Net cash used in investing activities (16,592) (1,411)
-------------- -------------
Net borrowings (repayments) of debt 19,100 (1,500)
Distributions to partners (2,851) (2,851)
Credit facility issuance fees - (839)
Other, net 748 -
-------------- -------------
Net cash provided by (used in) financing activities 16,997 (5,190)
-------------- -------------
Net decrease in cash and cash equivalents (450) (1,137)
Cash and cash equivalents at beginning of period 2,078 2,869
-------------- -------------
Cash and cash equivalents at end of period $ 1,628 $ 1,732
============== =============
Genesis Energy, L.P.
Reconciliations
SEGMENT MARGIN EXCLUDING DEPRECIATION AND AMORTIZATION RECONCILIATION TO
OPERATING INCOME FROM CONTINUING OPERATIONS
Three Months Ended Three Months Ended
June 30, 2005 June 30, 2004
------------- -------------
(in thousands)
Segment margin excluding depreciation and amortization $ 5,015 $ 5,062
General & administrative expenses 2,468 2,022
Depreciation and amortization expense 1,568 1,627
Gains from disposals of surplus assets (27) (75)
-------------- -------------
Operating income from continuing operations $ 1,006 $ 1,488
============== =============
Six Months Ended Six Months Ended
June 30, 2005 June 30, 2004
------------- -------------
(in thousands)
Segment margin excluding depreciation and amortization $ 9,871 $ 9,161
General & administrative expenses 3,326 5,186
Depreciation and amortization expense 3,094 3,174
Gains from disposals of surplus assets (398) (75)
-------------- -------------
Operating income from continuing operations $ 3,849 $ 876
============== =============
GAAP to Non-GAAP Financial Measure Reconciliation
AVAILABLE CASH BEFORE RESERVES RECONCILIATION TO NET
CASH PROVIDED BY OPERATING ACTIVITIES
Three Months Ended Six Months Ended
June 30, 2005 June 30, 2005
------------- -------------
(in thousands)
Net cash flow provided by operating activities (GAAP measure) $ (3,394) $ (855)
Adjustments to reconcile net cash flow provided by operating activities to
Available Cash before reserves:
Maintenance capital expenditures (200) (711)
Proceeds from asset sales 41 1,360
Amortization of credit facility issuance costs (94) (187)
Cash effects of stock appreciation rights plan - (50)
Cash distribution for second quarter 2005 from T&P Syngas 313 313
Net effect of changes in operating accounts not
included in calculation of Available Cash before
reserves 6,031 6,028
-------------- -------------
Available Cash before reserves (non-GAAP measure) $ 2,697 $ 5,898
============== =============
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.
The GAAP measure most directly comparable to total segment margin is operating
income.
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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