FOR IMMEDIATE RELEASE
Contact: Ross A. Benavides
Chief Financial Officer
(713) 860-2528
GENESIS ENERGY, L.P. REPORTS 2005 RESULTS
Houston - February 24, 2006 - Genesis Energy, L.P. (AMEX:GEL) reported
today net income for 2005 of $3,415,000, or $0.35 per unit and net income for
the fourth quarter of 2005 of $498,000, or $0.05 per unit. For 2004, Genesis had
a loss of $1,412,000, or $0.15 per unit. In the fourth quarter of 2004, Genesis
had a loss of $1,112,000, or $0.12 per unit.
Mark Gorman, President and CEO said "We achieved several objectives
during 2005 that set the stage for improved performance going forward. We
completed acquisitions of approximately $31 million during 2005. Operationally,
we completed a major component of our federally mandated pipeline integrity
management program requirements, and have substantially completed our objective
to place the Mississippi Pipeline System in condition to handle expected future
throughput growth. Additionally, in December, we raised $45 million of equity
capital in connection with a public offering by issuing 4.1 million new limited
partner units. We used the proceeds of that offering to temporarily reduce the
balance outstanding under our revolving credit facility.
During the fourth quarter, we generated Available Cash before Reserves,
a non-GAAP measure, of $4.1 million, or $0.29 per unit, and, in February 2006,
paid a distribution of $2.4 million, or $0.17 per unit, attributable to the
fourth quarter of 2005. That distribution represented an increase of $0.01 per
unit, or 6.3%, over our third quarter of 2005 distribution and $0.02 per unit,
or 13.3% over our fourth quarter of 2004 distribution. Available Cash before
Reserves is a non-GAAP financial measure that is defined and reconciled later in
this press release to its most directly comparable GAAP financial measure, net
cash provided by operating activities. Net cash provided by operating activities
was $5.2 million for the fourth quarter of 2005.
We made $31 million in acquisitions during 2005. Our purchase of two
long-term contracts with industrial customers, along with a third volumetric
production payment, from Denbury Resources in October for $14.4 million and our
acquisition of a 50% interest in a syngas manufacturing facility during the
second quarter for $13.4 million increased the size and scope of our industrial
gas business and provided increased diversity and stability to our cash flows.
Our pipeline operating costs and capital expenditures associated with
our pipeline integrity management program increased to $2.8 million in 2005. The
increase related to our last major section of pipeline that needed to be tested
for the first time under our program. While we expect to continue to incur costs
to comply with increasing levels of regulatory safety standards, we believe that
total annual expenditures attributable to meeting those standards will be less
than the amount incurred in 2005."
Financial Results
We recorded net income for 2005 of $3.4 million, or $0.35 per unit,
compared to a loss for 2004 of $1.4 million, or $0.15 per unit. Our income from
continuing operations for 2005 was $3.7 million, or $0.38 per unit, and our
income from discontinued operations for 2005 was $0.3 million, or $0.03 per
unit. Additionally, we recorded a loss of $0.6 million, or $0.06 per unit, for
the cumulative effect of the adoption of an accounting change due to a new
accounting pronouncement. For the 2004 period, continuing operations resulted in
a loss of $0.9 million, or $0.10 per unit, and discontinued operations resulted
in a loss of $0.5 million or $0.05 per unit.
For the 2005 fourth quarter, we generated net income of $0.5 million,
or $0.05 per unit, including $1.1 million, or $0.10 per unit, attributable to
continuing operations and a loss of $0.6 million, or $0.05 per unit from the
cumulative effect of the accounting change adoption. In the comparable period in
2004, we experienced a net loss of $1.1 million, or $0.12 per unit, including a
loss of $1.0 million, or $0.10 per unit, attributable to continuing operations
and a loss of $0.1 million, or $0.02 per unit attributable to discontinued
operations.
Segment margin is defined and reconciled later in this press release to
income from continuing operations. The following table presents selected
financial information by segment for the three month and annual reporting
periods for continuing operations:
Crude Oil
Pipeline Industrial Gathering and
Transportation Gases Marketing Total
(in thousands)
Three Months Ended December 31, 2005
Segment margin excluding depreciation
and amortization (a) $ 2,668 $ 2,932 $ 1,270 $ 6,870
Total capital expenditures $ 269 $ 14,445 $ 232 $ 14,946
Maintenance capital expenditures $ 186 $ - $ 232 $ 418
Revenues:
External customers $ 7,712 $ 3,931 $ 252,097 $ 263,740
Intersegment - - 678 678
-------- -------- ---------- ----------
Total revenues of reportable segments $ 7,712 $ 3,931 $ 252,775 $ 264,418
======== ======== ========== ==========
Three Months Ended December 31, 2004
Segment margin excluding depreciation
and amortization (a) $ 2,432 $ 1,518 $ 136 $ 4,086
Total capital expenditures $ 2,610 $ - $ 153 $ 2,763
Maintenance capital expenditures $ 159 $ - $ 153 $ 312
Revenues:
External customers $ 3,866 $ 2,286 $ 238,657 $ 244,809
Intersegment 579 - - 579
------- ------- ---------- ----------
Total revenues of reportable segments $ 4,445 $ 2,286 $ 238,657 $ 245,388
======== ======== ========== ==========
Year Ended December 31, 2005
Segment margin excluding depreciation
and amortization (a) $ 9,804 $ 8,154 $ 3,661 $ 21,619
Total capital expenditures $ 5,425 $ 27,863 $ 547 $ 33,835
Maintenance capital expenditures $ 1,256 $ - $ 287 $ 1,543
Revenues:
External customers $ 28,888 $ 11,302 $1,035,274 $1,075,464
Intersegment - - 3,275 3,275
-------- -------- ---------- ----------
Total revenues of reportable segments $ 28,888 $ 11,302 $1,038,549 $1,078,739
======== ======== ========== ==========
Year Ended December 31, 2004
Segment margin excluding depreciation
and amortization (a) $ 8,543 $ 5,762 $ 4,034 $ 18,339
Total capital expenditures $ 8,187 $ 4,723 $ 284 $ 13,194
Maintenance capital expenditures $ 655 $ - $ 284 $ 939
Revenues:
External customers $ 13,212 $ 8,561 $ 901,902 $ 923,675
Intersegment 3,468 - - 3,468
-------- ------- ---------- ----------
Total revenues of reportable segments $ 16,680 $ 8,561 $ 901,902 $ 927,143
======== ======= ========== ==========
(a) Segment margin was calculated as revenues less cost of sales and operating
expenses, plus our share of the operating income of our investment in joint
ventures. A reconciliation of segment margin to income from continuing
operations is presented for periods presented in the tables at the end of this
release.
Pipeline transportation segment margin from continuing operations was
$2.7 million for the fourth quarter of 2005, as compared to $2.4 million for the
2004 period. The period to period increase was primarily attributable to an
increase in the average tariff per barrel and an increase in revenues
attributable to the sale of volumetric gains, most of which resulted from higher
crude oil prices. Additionally, the 2005 quarter included segment margin from
the natural gas gathering pipelines that we acquired in the first quarter of
2005. We also had a complete quarter of revenue from our CO2 pipeline segment,
which we placed in service late in 2004. Those segment margin improvements were
partially offset by an increase in pipeline operating costs primarily related to
expenditures for pipeline integrity repairs.
Segment margin from our pipeline operations increased $1.3 million in
2005 as compared to 2004. Higher tariffs in Mississippi combined with increased
volumes on that system added to segment margin as did increased revenues from
volumetric gains, most of which resulted from higher crude oil market prices.
Our CO2 pipeline segment contributed to segment margin, as did our natural gas
gathering pipelines. Partially offsetting the revenue gain was an increase in
pipeline operating costs of $1.6 million, primarily related to increased
expenditures for pipeline integrity testing and repairs.
Segment margin from industrial gas activities in the 2005 three month
and annual periods was $2.9 million and $8.2 million, respectively, as compared
to $1.5 million and $5.8 million for the three month and annual periods in 2004,
respectively. The additional volumetric production payment acquired in the
fourth quarter of 2005 and the earnings from our 50% investment in T&P Syngas
Supply provided most of this margin increase. For the nine months in 2005 during
which we owned an interest in T&P Syngas, our share of the operating earnings,
net of the amortization of our purchase price over our share of the equity of
T&P Syngas, was $0.5 million.
Segment margin from continuing crude oil gathering and marketing
activities was $1.3 million for the 2005 fourth quarter, an increase of $1.1
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. Decreased field operating costs also improved the segment margin.
For the annual periods, segment margin from crude oil gathering and
marketing decreased $0.4 million in 2005 as compared to the prior period. The
reduced segment margin in 2005 was due primarily to an increase in field costs
of $2.1 million. Increases in fuel costs 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. Those increased costs were partially offset by credit cost reductions
and increased margins from purchasing and transporting crude oil.
General and administrative expenses decreased by $0.1 million during
the 2005 fourth quarter as compared to the 2004 period. Increased accruals for
the employee bonus plan were offset by decreases in accruals under our stock
appreciation rights plan and audit and internal control assessment fees.
General and administrative expenses decreased by $1.4 million during the
2005 annual period as compared to the 2004 period principally related to changes
in the accrual related to our stock appreciation rights plan. In the 2004 period
our unit price increased, requiring us to record a charge of $1.2 million. In
2005, the decrease in our unit price resulted in a credit to general and
administrative expenses of $0.5 million.
In 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.
Interest costs were $1.1 million more in 2005 due to increased debt
associated with our acquisitions. Additionally interest rates were higher in
2005. However, because we used the proceeds from our December equity offering to
repay indebtedness, we had no balances outstanding at December 31, 2005 under
our revolving credit facility.
Upon adoption at December 31, 2005 of a new accounting pronouncement,
Genesis recorded a non-cash charge of $0.6 million for the cumulative effect of
the accounting change. This accounting change related to estimates of future
asset retirement obligations.
We paid distributions of $0.15 per unit for both the first and second
quarters of 2005. For the third quarter of 2005, we increased our regular
quarterly distribution to $0.16 per unit. For the fourth quarter of 2005, we
increased our regular quarterly distribution to $0.17 per unit, which we paid on
February 14, 2006. The increase in our quarterly distribution rate of $0.01 per
unit represented a 6.3 percent increase over our third quarter distribution
rate. We generated Available Cash before reserves (a non-GAAP measure) of $4.1
million during the fourth quarter of 2005 and $11.1 million during 2005. Net
cash flows provided by operating activities was $5.2 million and 9.5 million for
the fourth quarter and annual periods in 2005, respectively. (Please see the
accompanying schedules for a reconciliation of Available Cash before reserves, 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
December 31, 2005 is as follows (in thousands):
Net income $ 498
Depreciation and amortization expense 2,026
Cash in excess of gain on asset sales 13
Cash from direct financing leases in excess of income
recorded 126
Available cash generated by T&P Syngas in excess of
earnings 273
Non-cash credit for incentive compensation plan and
other non-cash items 1,555
Maintenance capital expenditures (418)
-------------
Available Cash before reserves $ 4,073
=============
The calculation of Available Cash before reserves for the year ended
December 31, 2005 is as follows (in thousands):
Net income $ 3,415
Depreciation and amortization expense 6,721
Cash in excess of gain on asset sales 794
Cash from direct financing leases in excess of income
recorded 495
Available cash generated by T&P Syngas in excess of
earnings 836
Non-cash credit for incentive compensation plan and
other non-cash items 418
Maintenance capital expenditures (1,543)
-------------
Available Cash before reserves $ 11,136
=============
Earnings Conference Call
We will broadcast our Earnings Conference Call on Friday, February 24,
2006, 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 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 an industrial gases 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 we believe that our expectations are
based upon reasonable assumptions, we can give no assurance that our 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, our ability to
meet our stated business goals and other risks noted from time to time in our
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
December 31, 2005 December 31, 2004
----------------- -----------------
Revenues $ 264,418 $ 245,388
Cost of sales 257,789 241,302
General & administrative expenses 3,120 3,206
Depreciation and amortization expense 2,026 1,525
Loss from disposals of surplus assets 3 98
-------------- -------------
OPERATING INCOME (LOSS) 1,480 (743)
Equity in earnings of investment in T&P Syngas Supply
Company 241 -
Interest, net (631) (225)
-------------- -------------
Income (loss) from continuing operations 1,090 (968)
Loss from discontinued operations (6) (144)
Cumulative effect adjustment (586) -
-------------- -------------
NET INCOME (LOSS) $ 498 $ (1,112)
============== =============
NET INCOME (LOSS) PER COMMON UNIT - BASIC AND DILUTED
Continuing operations $ 0.10 $ (0.10)
Discontinued operations 0.00 (0.02)
Cumulative effect adjustment (0.05) -
-------------- -------------
Net Income (Loss) Per Common Unit - Basic and Diluted $ 0.05 $ (0.12)
Continuing Operations Volumes:
Crude oil pipeline barrels per day 60,124 60,577
CO2 sales Mcf per day 76,791 48,217
Crude oil wellhead barrels per day 37,342 39,489
Total gathering and marketing barrels per day 46,211 54,054
Genesis Energy, L.P.
Summary Consolidated Statements of Operations - Unaudited
(in thousands except per unit amounts and volumes)
Year Ended Year Ended
December 31, 2005 December 31, 2004
----------------- -----------------
Revenues $ 1,078,739 $ 927,143
Cost of sales 1,057,621 908,804
General & administrative expenses 9,656 11,031
Depreciation and amortization expense 6,721 7,298
(Gains) losses from disposals of surplus assets (479) 33
--------------- -------------
OPERATING INCOME (LOSS) 5,220 (23)
Equity in earnings of investment in T&P Syngas Supply
Company 501 -
Interest, net (2,032) (926)
-------------- -------------
Income (loss) from continuing operations 3,689 (949)
Income (loss) from discontinued operations 312 (463)
Cumulative effect adjustment (586) -
-------------- -------------
NET INCOME (LOSS) $ 3,415 $ (1,412)
============== =============
NET INCOME (LOSS) PER COMMON UNIT - BASIC AND DILUTED
Continuing operations $ 0.38 $ (0.10)
Discontinued operations 0.03 (0.05)
Cumulative effect adjustment (0.06) -
-------------- -------------
Net Income (Loss) Per Common Unit - Basic and Diluted $ 0.35 $ (0.15)
Continuing Operations Volumes:
Crude oil pipeline barrels per day 61,295 63,441
CO2 sales Mcf per day 56,823 45,312
Crude oil wellhead barrels per day 39,194 45,919
Total gathering and marketing barrels per day 52,943 60,419
Genesis Energy, L.P.
Summary Consolidated Balance Sheets - Unaudited
(in thousands)
December 31, 2005 December 31, 2004
----------------- -----------------
ASSETS
Cash $ 3,099 $ 2,078
Accounts receivable 82,634 69,321
Inventories 498 1,866
Other current assets 4,218 4,131
-------------- -------------
Total Current Assets 90,449 77,396
Net property 33,769 33,786
CO2 contracts 37,648 26,344
Investment in T&P Syngas Supply Company 13,042 -
Other assets 6,869 5,628
-------------- -------------
Total Assets $ 181,777 $ 143,154
============== =============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 85,286 $ 75,415
Accrued liabilities 7,325 6,523
-------------- -------------
Total Current Liabilities 92,611 81,938
Long-term debt and other liabilities 955 15,460
Minority interest 522 517
Partners' capital 87,689 45,239
-------------- -------------
Total Liabilities and Partners' Capital $ 181,777 $ 143,154
============== =============
Genesis Energy, L.P.
Summary Consolidated Statements of Cash Flows - Unaudited
(in thousands)
Year Ended Year Ended
December 31, 2005 December 31, 2004
----------------- -----------------
Net income (loss) $ 3,415 $ (1,412)
Adjustments to reconcile net income to cash provided by
operating activities:
Depreciation and amortization 6,721 7,298
Amortization of credit facility issuance costs 373 373
Amortization of unearned income (689) (36)
Cash received from direct financing leases 1,185 75
(Gains) losses on asset disposals (791) 33
Other non-cash items 466 1,151
Changes to components of working capital (1,190) 2,220
-------------- -------------
Net cash provided by operating activities 9,490 9,702
-------------- -------------
Additions to property and equipment and other assets (33,970) (13,045)
Proceeds from sales of assets 1,585 112
Distributions from T&P Syngas Supply in excess of earnings 388 -
Other, net 188 128
-------------- -------------
Net cash used in investing activities (31,809) (12,805)
-------------- -------------
Net (repayments) borrowings of debt (15,300) 8,300
Issuance of units and minority interest contributions 44,838 -
Distributions to partners (5,798) (5,703)
Credit facility issuance fees - (826)
Other, net (400) 541
-------------- -------------
Net cash provided by financing activities 23,340 2,312
-------------- -------------
Net increase (decrease) in cash and cash equivalents 1,021 (791)
Cash and cash equivalents at beginning of period 2,078 2,869
-------------- -------------
Cash and cash equivalents at end of period $ 3,099 $ 2,078
============== =============
Genesis Energy, L.P.
Reconciliations
SEGMENT MARGIN EXCLUDING DEPRECIATION AND AMORTIZATION RECONCILIATION TO INCOME FROM CONTINUING OPERATIONS
Three Months Ended Three Months Ended
December 31, 2005 December 31, 2004
----------------- -----------------
(in thousands)
Segment margin excluding depreciation and amortization $ 6,870 $ 4086
General & administrative expenses (3,120) (3,206)
Depreciation and amortization expense (2,026) (1,525)
Loss from disposals of surplus assets (3) (98)
Interest and other, net (631) (225)
-------------- -------------
Income (loss) from continuing operations $ 1,090 $ (968)
============== =============
Year Ended Year Ended
December 31, 2005 December 31, 2004
----------------- -----------------
(in thousands)
Segment margin excluding depreciation and amortization $ 21,619 $ 18,339
General & administrative expenses (9,656) (11,031)
Depreciation and amortization expense (6,721) (7,298)
Gain (loss) from disposals of surplus assets 479 (33)
Interest and other, net (2,032) (926)
-------------- -------------
Income (loss) from continuing operations $ 3,689 $ (949)
============= =============
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, 2005 December 31, 2005
----------------- -----------------
(in thousands)
Net cash flow provided by operating activities (GAAP measure) $ 5,247 $ 9,490
Adjustments to reconcile net cash flow provided by operating activities to
Available Cash before reserves:
Maintenance capital expenditures (418) (1,543)
Proceeds from asset sales 4 1,585
Amortization of credit facility issuance costs (94) (373)
Cash effects of stock appreciation rights plan (2) (61)
Available cash from T&P Syngas Supply not included in
operating cash flows 285 848
Net effect of changes in operating accounts not
included in calculation of Available Cash before
reserves (949) 1,190
------------ --------------
Available Cash before reserves (non-GAAP measure) $ 4,073 $ 11,136
============ ==============
This press release and the accompanying schedules include a
non-generally accepted accounting principle ("non-GAAP") financial measures of
available cash. The accompanying schedules provide a reconciliation of this
non-GAAP financial measure to its most directly comparable financial measure
calculated in accordance with generally accepted accounting principles in the
United States of America ("GAAP"). Our non-GAAP financial measure should not be
considered as an alternative to GAAP measures of liquidity or financial
performance. We believe that investors benefit from having access to the same
financial measures being utilized by management, lenders, analysts and other
market participants.
Available cash. Available Cash before Reserves is a liquidity measure
used by management to compare cash flows generated by us to the cash
distribution paid to our limited partners and general partner. This is an
important financial measure to the public unitholders since it is an indicator
of our ability to provide a cash return on their investment. Specifically, this
financial measure aids investors in determining whether or not we are generating
cash flows at a level that can support a quarterly cash distribution to the
partners. Lastly, Available Cash before Reserves (also referred to as
distributable cash flow) is the quantitative standard used throughout the
investment community with respect to publicly-traded partnerships.
We define available cash as net income or loss plus: (1) depreciation
and amortization expense; (2) cash proceeds from the sale of certain assets; (3)
the addition of losses or subtraction of gains relating to the sale of assets;
(4) payments under direct financing leases in excess of the amount recognized as
income; (5) the addition of losses or subtraction of gains on derivative
financial instruments; (6) available cash generated by equity method
investments; (7) the subtraction of maintenance capital expenditures incurred to
replace or enhance partially or fully depreciated assets so as to sustain the
existing operating capacity or efficiency of our assets and extend their useful
lives; and (8) the addition of losses or subtraction of gains relating to other
non-cash amounts affecting net income for the period.
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