FOR IMMEDIATE RELEASE
Contact: Ross A. Benavides
Chief Financial Officer
(713) 860-2528
GENESIS ENERGY, L.P. REPORTS THIRD QUARTER RESULTS
November 3, 2005 - Genesis Energy, L.P. (AMEX:GEL) reported today a net
loss for the third quarter of 2005 of $596,000, or $0.06 per unit. Net income
for the nine months of 2005 was $2,917,000, or $0.31 per unit.
Mark Gorman, President and CEO said "We are pleased with the results
for the quarter. We expected a weaker than normal performance for the third and
fourth quarters of 2005 due to the previously discussed initiative to make
repairs and capital expenditures on the Mississippi pipeline system as a result
of federally mandated pipeline integrity management programs (IMP). At this
point we believe we are ahead of schedule and expect costs for the Mississippi
IMP to be less than we previously expected. In addition to meeting these
requirements, we have substantially completed our objective to place the
Mississippi pipeline in condition to handle expected future throughput growth.
Results for the third quarter of 2005 were modestly affected by the
hurricanes that hit the Gulf Coast during the third quarter of 2005. We suffered
minimal direct damage from the hurricanes. However, power outages and damage to
third parties' facilities created brief disruptions to our crude oil gathering
and pipeline operations, as well as our wholesale CO2 operations.
We are on track for meeting our objectives for 2005. The Mississippi
pipeline integrity management program work is substantially complete, on time,
and under our expected cost. We have made $31 million in acquisitions year to
date. The acquisition we made during the second quarter of a 50% interest in a
syngas manufacturing facility has added $823,000 to Available Cash before
Reserves so far in 2005. We also purchased a third volumetric production payment
from Denbury Resources in October 2005 for $14.4 million that we expect will add
$3.2 million annually to Available Cash in the future.
During the third quarter, we generated Available Cash before Reserves,
a non-GAAP measure, of $1.2 million or $0.12 per unit, and drew upon reserves
established in prior periods to declare a distribution of $1.5 million or $0.16
per unit for the third quarter of 2005. This distribution is a $0.01 per unit,
or 6.7 percent, increase over our second quarter distribution."
Financial Results
Genesis recorded a loss for the third quarter of 2005 of $0.6 million,
or $0.06 per unit, compared to a third quarter 2004 loss of $0.4 million, or
$0.04 per unit.
For the nine month period, Genesis generated net income for 2005 of
$2.9 million, or $0.31 per unit, with $2.6 million of income, or $0.28 per unit,
from continuing operations and
income of $0.3 million, or $0.03 per unit from
discontinued operations. In the comparable period in 2004, Genesis's experienced
a loss of $0.3 million, or $0.03 per unit, with continuing operations breaking
even and discontinued operations generating the loss.
The following table presents selected financial information by segment
for the three month and nine month reporting periods for continuing operations:
Crude Oil
Gathering and Pipeline CO2
Marketing Transportation Sales Total
------------- -------------- ---------- ------
(in thousands)
Three Months Ended September 30, 2005
Revenues:
External customers $ 291,074 $ 5,989 $ 2,523 $ 299,586
Intersegment - 991 - 991
--------- --------- -------- ---------
Total revenues of reportable segments $ 291,074 $ 6,980 $ 2,523 $ 300,577
========= ========= ======== =========
Segment margin excluding depreciation
and amortization (a) $ 1,053 $ 1,885 $ 1,680 $ 4,618
Capital expenditures $ 38 $ 555 $ - $ 593
Maintenance capital
expenditures $ 7 $ 407 $ - $ 414
Three Months Ended September 30, 2004
Revenues:
External customers $ 244,377 $ 2,877 $ 2,295 $ 249,549
Intersegment - 1,187 - 1,187
--------- --------- ------- ----------
Total revenues of reportable segments $ 244,377 $ 4,064 $ 2,295 $ 250,736
========= ========= ======= ==========
Segment margin excluding depreciation
and amortization (a) $ 948 $ 2,601 $ 1,543 $ 5,092
Capital expenditures $ 56 $ 4,173 $ 4,723 $ 8,952
Maintenance capital
expenditures $ 56 $ 161 $ - $ 217
Nine Months Ended September 30, 2005
Revenues:
External customers $ 785,774 $ 18,579 $ 7,371 $ 811,724
Intersegment - 2,597 - 2,597
--------- --------- ------- ----------
Total revenues of reportable segments $ 785,774 $ 21,176 $ 7,371 $ 814,321
========= ========= ======= ===========
Segment margin excluding depreciation
and amortization (a) $ 2,391 $ 7,136 $ 4,962 $ 14,489
Capital expenditures $ 315 $ 5,157 $ - $ 5,472
Maintenance capital
expenditures $ 55 $ 1,070 $ - $ 1,125
Nine Months Ended September 30, 2004
Revenues:
External customers $ 663,245 $ 9,346 $ 6,275 $ 678,866
Intersegment - 2,889 - 2,889
--------- --------- ------- ----------
Total revenues of reportable segments $ 663,245 $ 12,235 $ 6,275 $ 681,755
========= ========= ======= ==========
Segment margin excluding depreciation
and amortization (a) $ 3,898 $ 6,111 $ 4,244 $ 14,253
Capital expenditures $ 131 $ 5,577 $ 4,723 $ 10,431
Maintenance capital
expenditures $ 131 $ 496 $ - $ 627
(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 $1.1 million for the 2005 third quarter, an increase of $0.1
million from the 2004 period. The primary factor increasing segment margin
between the two periods was increased margins between purchases and sales of
crude oil. Increased field operating costs partially offset the higher margin.
Higher field costs were due primarily to increases in fuel costs and personnel
costs.
For the nine month periods, segment margin from crude oil gathering and
marketing decreased $1.5 million in 2005 as compared to the prior period. The
reduced segment margin in the first nine months of 2005 was due primarily to an
increase in field costs of $2.4 million. Higher fuel and personnel costs, a $0.4
million accrual for our share of the expected costs for the environmental
remediation of a site we no longer operate, and the addition in the third
quarter of 2004 of five more leased vehicles were responsible for the increase
for the nine-month period. These increased costs were offset slightly by credit
cost reductions and increased margins from purchasing and transporting crude
oil.
Pipeline transportation segment margin from continuing operations was
$1.9 million for the third quarter of 2005, as compared to $2.6 million for the
2004 period. An increase in pipeline operating costs was responsible for the
decrease. This cost increase was due primarily to expenditures related to
pipeline integrity repairs. Partially offsetting the cost increases were greater
revenues from the sale of crude oil from volumetric gains resulting from higher
crude oil prices. 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.
Segment margin from our pipeline operations increased $1.0 million
between the nine month periods. Higher tariffs on the Mississippi System in the
2005 period and greater revenues from volumetric gains added $2.3 million to
revenues, with an increase in pipeline operating costs of $1.3 million reducing
the increase in segment margin to $1.0 million.
Segment margin from CO2 sales activities in the 2005 three and nine
month periods was $1.7 million and $5.0 million, respectively, as compared to
$1.5 million and $4.2 million for the three and nine 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 $0.6 million during
the 2005 third quarter as compared to the 2004 period. During the 2005 quarter,
Genesis recorded a $0.8 million non-cash 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. In the second quarter of 2004,
the unit price was the same as the unit price at the prior quarter end. Other
general and administrative expenses decreased by $0.1 million.
General and administrative expenses decreased by $1.3 million during the
2005 nine-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 $0.5 million.
In the first nine months of 2005, we disposed of idle assets for $1.6
million, generating $0.8 million of gain. The assets sold included pipelines
that were idled 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 six months that we have owned our
interest, net of the amortization of our purchase price over our share of the
equity of T&P Syngas, was $0.3 million.
Interest costs were $0.7 million more in the 2005 nine month period due
to higher debt balances from borrowings to make acquisitions. Additionally
market interest rates were higher in 2005.
Genesis paid distributions of $0.15 per unit for both the first and
second quarters of 2005. For the third quarter of 2005, Genesis has increased
the regular quarterly distribution to $0.16 per unit, payable in November 2005.
This distribution is a $0.01 per unit, or 6.7 percent increase over our second
quarter distribution. Genesis generated Available Cash before reserves (a
non-GAAP measure) of $1.2 million during the third quarter of 2005 and $7.1
million during the first nine months of 2005. For the first half of 2005, we
generated Available Cash before Reserves of $5.9 million or $0.62 per unit,
which exceeded our distributions of $2.9 million or $0.30 per unit by $3.0
million or $0.32 per unit. (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
September 30, 2005 is as follows (in thousands):
Net loss $ (596)
Depreciation and amortization expense 1,601
Cash in excess of gain on asset sales 92
Cash from direct financing leases in excess of income
recorded 125
Effect of cash distributions from T&P Syngas 502
Non-cash credit for incentive compensation plan and
other non-cash items (145)
Maintenance capital expenditures (414)
-------------
Available Cash before reserves $ 1,165
=============
Available Cash (a non-GAAP liquidity measure) has been reconciled to
cash flow from operating activities (the GAAP measure) for the three and nine
months ended September 30, 2005 in the financial tables below.
Earnings Conference Call
Genesis Energy, L.P. will broadcast its Earnings Conference Call on
Thursday, November 3, 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
September 30, 2005 September 30, 2004
------------------ ------------------
Revenues $ 300,577 $ 250,736
Cost of sales 295,959 245,644
General & administrative expenses 3,210 2,639
Depreciation and amortization expense 1,601 2,599
(Gain) loss from disposals of surplus assets (84) 10
-------------- -------------
OPERATING LOSS (109) (156)
Equity in earnings of investment in T&P Syngas Supply
Company 8 -
Interest, net (540) (203)
-------------- -------------
Loss from continuing operations (641) (359)
Gain (loss) from discontinued operations 45 (35)
-------------- -------------
NET LOSS $ (596) $ (394)
============== =============
NET LOSS PER COMMON UNIT - BASIC AND DILUTED
Continuing operations $ (0.06) $ (0.04)
Discontinued operations 0.00 0.00
-------------- -------------
Net Loss Per Common Unit - Basic and Diluted $ (0.06) $ (0.04)
============== =============
Continuing Operations Volumes:
Crude oil wellhead barrels per day 37,213 46,676
Total gathering and marketing barrels per day 51,639 61,919
Crude oil pipeline barrels per day 60,164 57,544
CO2 sales Mcf per day 51,386 48,634
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, 2005 September 30, 2004
------------------ ------------------
Revenues $ 814,321 $ 681,755
Cost of sales 799,832 667,502
General & administrative expenses 6,536 7,825
Depreciation and amortization expense 4,695 5,773
Gains from disposals of surplus assets (482) (65)
--------------- -------------
OPERATING INCOME 3,740 720
Equity in earnings of investment in T&P Syngas Supply
Company 260 -
Interest, net (1,401) (701)
-------------- -------------
Income from continuing operations 2,599 19
Income (loss) from discontinued operations 318 (319)
-------------- -------------
NET INCOME (LOSS) $ 2,917 $ (300)
============== =============
NET INCOME (LOSS) PER COMMON UNIT - BASIC AND DILUTED
Continuing operations $ 0.28 $ 0.00
Discontinued operations 0.03 (0.03)
-------------- -------------
Net Income (Loss) Per Common Unit - Basic and Diluted $ 0.31 $ (0.03)
Continuing Operations Volumes:
Crude oil wellhead barrels per day 39,818 48,078
Total gathering and marketing barrels per day 55,211 62,556
Crude oil pipeline barrels per day 61,690 64,402
CO2 sales Mcf per day 50,094 44,337
Genesis Energy, L.P.
Summary Consolidated Balance Sheets - Unaudited
(in thousands)
September 30, 2005 December 31, 2004
------------------ -----------------
ASSETS
Cash $ 2,149 $ 2,078
Accounts receivable 95,420 69,321
Inventories 4,825 1,866
Other current assets 5,062 4,131
-------------- -------------
Total Current Assets 107,456 77,396
Net property 34,064 33,786
CO2 contracts 24,327 26,344
Investment in T&P Syngas Supply Company 13,365 -
Other assets 7,407 5,628
-------------- -------------
Total Assets $ 186,619 $ 143,154
============== =============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 101,542 $ 75,415
Accrued liabilities 7,895 6,523
-------------- -------------
Total Current Liabilities 109,437 81,938
Long-term debt and other liabilities 32,786 15,460
Minority interest 517 517
Partners' capital 43,879 45,239
-------------- -------------
Total Liabilities and Partners' Capital $ 186,619 $ 143,154
============== =============
Genesis Energy, L.P.
Summary Consolidated Statements of Cash Flows - Unaudited
(in thousands)
Nine Months Ended Nine Months Ended
September 30, 2005 September 30, 2004
------------------ ------------------
Net income (loss) $ 2,917 $ (300)
Adjustments to reconcile net income to cash provided by
operating activities:
Depreciation and amortization 4,695 5,773
Amortization of credit facility issuance costs 279 289
Amortization of unearned income (521) -
Cash received from direct financing leases 890 -
Change in fair value of derivatives (1,101) (16)
Gains on asset disposals (800) (65)
Other non-cash items 23 564
Changes to components of working capital (2,139) (1,966)
-------------- -------------
Net cash provided by operating activities 4,243 4,279
-------------- -------------
Additions to property and equipment and other assets (18,792) (9,208)
Proceeds from sales of assets 1,581 82
Distributions from T&P Syngas Supply in excess of earnings 53 -
Other, net (209) -
-------------- -------------
Net cash used in investing activities (17,367) (9,126)
-------------- -------------
Net borrowings (repayments) of debt 17,300 8,000
Distributions to partners (4,277) (4,278)
Credit facility issuance fees - (839)
Other, net 172 -
-------------- -------------
Net cash provided by financing activities 13,195 2,883
-------------- -------------
Net increase (decrease) in cash and cash equivalents 71 (1,964)
Cash and cash equivalents at beginning of period 2,078 2,869
-------------- -------------
Cash and cash equivalents at end of period $ 2,149 $ 905
============== =============
Genesis Energy, L.P.
Reconciliations
SEGMENT MARGIN EXCLUDING DEPRECIATION AND AMORTIZATION RECONCILIATION TO
OPERATING INCOME FROM CONTINUING OPERATIONS
Three Months Ended Three Months Ended
September 30, 2005 September 30, 2004
------------------ ------------------
(in thousands)
Segment margin excluding depreciation and amortization $ 4,618 $ 5,092
General & administrative expenses 3,210 2,639
Depreciation and amortization expense 1,601 2,599
(Gain) loss from disposals of surplus assets (84) 10
-------------- -------------
Operating loss from continuing operations $ (109) $ (156)
============== =============
Nine Months Ended Nine Months Ended
September 30, 2005 September 30, 2004
------------------ ------------------
(in thousands)
Segment margin excluding depreciation and amortization $ 14,489 $ 14,253
General & administrative expenses 6,536 7,825
Depreciation and amortization expense 4,695 5,773
Gains from disposals of surplus assets (482) (65)
-------------- -------------
Operating income from continuing operations $ 3,740 $ 720
============== =============
GAAP to Non-GAAP Financial Measure Reconciliation
AVAILABLE CASH BEFORE RESERVES RECONCILIATION TO NET CASH
PROVIDED BY OPERATING ACTIVITIES
Three Months Ended Nine Months Ended
September 30, 2005 September 30, 2005
------------------ ------------------
(in thousands)
Net cash flow provided by operating activities (GAAP measure) $ 5,098 $ 4,243
Adjustments to reconcile net cash flow provided by
operating activities to Available Cash before reserves:
Maintenance capital expenditures (414) (1,125)
Proceeds from asset sales 221 1,581
Amortization of credit facility issuance costs (92) (279)
Cash effects of stock appreciation rights plan (9) (59)
Effect of cash distributions from T&P Syngas 250 563
Net effect of changes in operating accounts not
included in calculation of Available Cash before
reserves (3,889) 2,139
-------------- -------------
Available Cash before reserves (non-GAAP measure) $ 1,165 $ 7,063
============== =============
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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