FOR IMMEDIATE RELEASE
Contact: Ross A. Benavides
Chief Financial Officer
(713) 860-2528
GENESIS ENERGY, L.P. REPORTS THIRD QUARTER RESULTS
November 3, 2006 (Houston, TX) - Genesis Energy, L.P. (AMEX:GEL)
announced today that net income for the third quarter of 2006 was $1.7 million,
or $0.12 per unit. Net income for the quarter was reduced by approximately $1.3
million for costs related to the transition to a new senior management team.
Without this charge, net income would have been $3.0 million, or $0.21 per unit,
for the quarter. In the third quarter of 2005, we recorded a loss of $0.6
million, or $0.06 per unit.
Net income for the nine months of 2006 was $7.7 million, or $0.55 per
unit. Excluding the effects of the $1.3 million of transition costs, net income
would have been $9.0 million, or $0.64 per unit. Net income was $2.9 million, or
$0.31 per unit, for the nine months of 2005.
Grant Sims, CEO said "We are very pleased with our results for both the
third quarter and the nine month period. All segments reported improved
performance from the prior year period. For the third quarter of 2006, we
generated Available Cash before Reserves, a non-GAAP measure, of $4.1 million or
$0.29 per unit, which was more than adequate to cover distributions to the
holders of our common units and general partner interest of $2.8 million or
$0.20 per unit. Without the transition costs, Available Cash before Reserves for
the 2006 quarter would have been $5.4 million, or $0.38 per unit." 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 $8.3 million for the third quarter of 2006.
"For the nine month period, Available Cash before Reserves was $15.2
million, or $1.08 per unit. Without the transition costs such amounts would have
been $16.5 million and $1.17, respectively." Net cash provided by operating
activities was $6.7 million for the nine months ended September 30, 2006.
"Given the performance of our existing business segments, we have the
flexibility to now focus to a greater extent on increasing the long-term value
of our partnership units. To further that strategy, we have recently received
commitments from a syndicate of banks and are in the process of completing
documentation to replace our existing credit facility with a new facility. This
facility, with up to $500 million of ultimate availability, will position us to
execute our plan to make significant accretive investments to grow the
partnership," added Mr. Sims.
In August, we hired three new senior officers: Grant E. Sims, former
CEO of Leviathan Gas Pipeline Partners, L.P. was appointed as the new Chief
Executive Officer and a member of the Board of Directors; Joseph A. Blount, Jr.,
former President and Chief Operating Officer of Unocal Midstream & Trade, was
appointed as President and Chief Operating Officer; and Brad N. Graves, former
Vice President of Enterprise Products Partners, L.P., was appointed as
Executive
Vice President of Business Development. This management team will be responsible
for designing and implementing a growth-oriented strategy that will include
acquisitions from third parties, development projects and, ultimately,
acquisitions from (or lease arrangements with) Denbury.
Financial Results
The following table presents certain selected financial information by
segment for the three month and nine month reporting periods for continuing
operations:
Crude Oil
Pipeline Industrial Gathering and
Transportation Gases Marketing Total
(in thousands)
Three Months Ended September 30, 2006
-------------------------------------
Segment margin excluding depreciation
and amortization (a) $ 3,458 $ 3,155 $ 1,999 $ 8,612
Total capital expenditures $ 216 $ 194 $ 34 $ 444
Maintenance capital
expenditures $ 146 $ - $ 34 $ 180
Revenues:
External customers $ 6,232 $ 4,262 $ 218,141 $ 228,635
Intersegment 916 - - 916
----------- -------- ----------- ---------
Total revenues of reportable segments $ 7,148 $ 4,262 $ 218,141 $ 229,551
=========== ======== =========== =========
Crude Oil
Pipeline Industrial Gathering and
Transportation Gases Marketing Total
(in thousands)
Three Months Ended September 30, 2005
-------------------------------------
Segment margin excluding depreciation
and amortization (a) $ 1,885 $ 1,688 $ 1,053 $ 4,626
Total capital expenditures $ 555 $ - $ 38 $ 593
Maintenance capital
expenditures $ 407 $ - $ 7 $ 414
Revenues:
External customers $ 5,989 $ 2,523 $ 291,074 $ 299,586
Intersegment 991 - - 991
---------- -------- ----------- ---------
Total revenues of reportable segments $ 6,980 $ 2,523 $ 291,074 $ 300,577
========== ======== =========== =========
Crude Oil
Pipeline Industrial Gathering and
Transportation Gases Marketing Total
(in thousands)
Nine Months Ended September 30, 2006
------------------------------------
Segment margin excluding depreciation
and amortization (a) $ 9,862 $ 8,808 $ 6,074 $ 24,744
Total capital expenditures $ 639 $ 5,744 $ 190 $ 6,573
Maintenance capital
expenditures $ 370 $ - $ 190 $ 560
Revenues:
External customers $ 20,158 $ 11,543 $ 691,414 $ 723,115
Intersegment 3,381 - - 3,381
--------- -------- ----------- ----------
Total revenues of reportable segments $ 23,539 $ 11,543 $ 691,414 $ 726,496
========= ======== =========== ==========
Crude Oil
Pipeline Industrial Gathering and
Transportation Gases Marketing Total
(in thousands)
Nine Months Ended September 30, 2005
------------------------------------
Segment margin excluding depreciation
and amortization (a) $ 7,136 $ 5,222 $ 2,391 $ 14,749
Total capital expenditures $ 5,157 $ 13,418 $ 315 $ 18,890
Maintenance capital
expenditures $ 1,070 $ - $ 55 $ 1,125
Revenues:
External customers $ 18,579 $ 7,371 $ 785,774 $ 811,724
Intersegment 2,597 - - 2,597
-------- -------- ----------- ---------
Total revenues of reportable segments $ 21,176 $ 7,371 $ 785,774 $ 814,321
======== ======== =========== =========
(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.
Quarterly Comparison
Pipeline transportation segment margin from continuing operations was
$3.5 million for the third quarter of 2006 as compared to $1.9 million for the
2005 period. Revenues from tariffs increased $0.5 million due to the combination
of greater volumes and slightly higher rates. Higher crude oil prices resulted
in greater revenues from the sale of crude oil from volumetric gains. Operating
costs also declined $0.6 million between the two periods, as a result of
completing most of the first cycle of pipeline integrity management program, or
IMP, work by 2005.
Segment margin from industrial gas activities in the 2006 third quarter
was $3.2 million as compared to $1.7 million for 2005. The additional CO2 sales
contracts acquired in the fourth quarter of 2005 provided most of this margin
increase. Also contributing to the increase was greater earnings from our
investments in joint ventures, which we made in the second quarters of 2006 and
2005.
Segment margin from crude oil gathering and marketing activities was
$2.0 million for the 2006 third quarter, an increase of $0.9 million from 2005
levels. The primary factor increasing segment margin between the two periods was
a decrease in field operating costs of $0.7 million. Marketing margins also
improved between the periods as we have focused on eliminating volumes providing
insufficient contribution to our segment margin.
General and administrative expenses increased by $1.3 million during the
2006 third quarter as compared to the 2005 period, principally due to transition
costs incurred in connection with the change in our senior management team.
Increased employee related costs were offset by a credit related to the accrual
for our stock appreciation rights plan.
Depreciation and amortization expense increased due to amortization of a
greater amount of our CO2 assets for the increased volumes sold under our CO2
contracts.
Interest costs were $0.3 million lower in the 2006 third quarter than
the 2005 period, due to lower debt balances. Although market interest rates rose
between the periods, our average outstanding borrowing during the quarter was
$16.1 million less than in the 2005 quarter.
Year-to-Date Comparison
For the nine-month period, pipeline transportation segment margin
increased in 2006 by $2.7 million. The sale of crude oil from volumetric gains
provided $1.6 million greater revenues due to higher crude oil prices. Increased
tariff revenues and net margin from gas sales totaling $0.7 million and a $0.4
million decrease in pipeline operating costs produced the remaining increase in
segment margin. Tariff revenues improved due to increased throughput and higher
tariffs. The first cycle of our IMP testing and remediation program was
substantially completed during 2005, reducing maintenance costs in 2006.
Our industrial gases activities provided improved segment margin of $8.8
million for the nine-month period. The additional CO2 industrial sales contracts
acquired in 2005 provided most of the improvement. The 2006 period also included
nine months rather than six months of results from the joint venture acquired on
April 1, 2005.
Crude oil gathering and marketing segment margin improved by $3.7
million to $6.1 million. This significant improvement resulted from lower field
operating costs of $1.6 million and improved margins on transactions of $2.1
million. The majority of the decrease in field operating costs is attributable
to a reduction in the size of our fleet, combined with a $0.4 million reserve
recorded in the 2005 period for environmental remediation of a truck unload
site. Marketing margins improved from eliminating less profitable volumes and
increasing profitability on volumes retained.
General and administrative expenses for the nine months in 2006 were
$10.4 million, an increase of $3.9 million over 2005. $1.3 million of the
increase resulted from transition costs for the senior management team change.
In 2006, we adopted a new method of accounting for our stock appreciation rights
plan, which resulted in expense of $0.9 million. In the 2005 period, under the
previous method of accounting, we recorded a non-cash credit of $0.5 million due
to a decrease in our unit price. The effect of this change in accounting for the
plan was an increase in expense of $1.4 million between the two periods. The
remaining increase in general and administrative expenses related to
compensation, benefits costs and bonus accrual. We also recorded a cumulative
effect adjustment of $30,000 of income for the adoption of the new accounting
pronouncement for stock appreciation rights.
The increase in our depreciation and amortization expenses resulted
from amortization of our increased investment in CO2 industrial sales contracts
and related assets in the fourth quarter of 2005.
In the first nine months of 2005, we disposed of idle assets for net
cash proceeds of $1.6 million, generating $0.8 million of gain. The assets sold
included pipelines that had been idle in 2002 and 2003. $0.3 million of this
gain was reflected as discontinued operations.
Interest costs in the 2006 nine-month period were $0.8 million lower
than the 2005 period, due to lower average outstanding debt balances. We made
acquisitions in late 2004 and early 2005 that significantly increased our
outstanding debt balance. In the fourth quarter of 2005, we issued new
partnership units and used a portion of the proceeds to repay the debt.
Consequently, we had lower outstanding borrowings under our revolving credit
facility during the first nine months of 2006.
Over the last five quarters, we have increased the distribution rate on
our common units by a total of $0.05 per unit, or 33.3%.
Distribution
Distribution for Payment Date Amount per Unit
Third Quarter 2006 November 2006 $ 0.20
Second Quarter 2006 August 2006 $ 0.19
First Quarter 2006 May 2006 $ 0.18
Fourth Quarter 2005 February 2006 $ 0.17
Third Quarter 2005 November 2005 $ 0.16
Second Quarter 2005 August 2005 $ 0.15
The third quarter 2006 distribution will be paid November 14, 2006 to
unitholders of record on November 2, 2006. We generated Available Cash before
Reserves (a non-GAAP measure) during the third quarter of 2006 of $4.1 million
and net cash flow provided by operations was $8.3 million. (Please see the
accompanying schedules for a reconciliation of Available Cash, a non-GAAP
measure, to net cash flow utilized in operations, the comparative GAAP measure.)
Available Cash before Reserves
Several adjustments to net income are required to calculate Available
Cash before Reserves. The calculation of Available Cash before Reserves is as
follows (in thousands):
Three Months Ended Nine Months Ended
September 30, 2006 September 30, 2006
Net income $ 1,695 $ 7,730
Depreciation and amortization expense 2,107 6,000
Cash from direct financing leases in excess
of income recorded 133 394
Available cash generated by joint ventures in
excess of earnings 288 988
Non-cash charge for incentive compensation
plan and other non-cash items 12 605
Maintenance capital expenditures (180) (560)
-------------- ---------------
Available Cash before reserves $ 4,055 $ 15,157
============== ===============
Available Cash before Reserves (a non-GAAP liquidity measure) has been
reconciled to net cash flows from operating activities of $8.3 million and $6.7
million (the GAAP measure) for the three months and nine months ended September
30, 2006, respectively, in the financial tables below.
Earnings Conference Call
We will broadcast our Earnings Conference Call on Friday, November 3,
2006, at 10 a. m. Central time. This call can be accessed at
www.genesiscrudeoil.com by choosing 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 or by calling 1-877-660-6853 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 volume data)
Three Months Ended Three Months Ended
September 30, 2006 September 30, 2005
------------------ ------------------
Revenues $ 229,551 $ 300,577
Cost of sales 221,206 295,959
General & administrative expenses 4,539 3,210
Depreciation and amortization expense 2,107 1,601
Losses (gains) from disposals of surplus assets 11 (84)
-------------- --------------
OPERATING INCOME (LOSS) 1,688 (109)
Equity in earnings of investment in joint ventures 267 8
Interest, net (260) (540)
-------------- -------------
Income (loss) from Continuing Operations before income taxes 1,695 (641)
Income tax benefit - -
-------------- -------------
Income (loss) from Continuing Operations 1,695 (641)
Income from Discontinued Operations - 45
-------------- -------------
NET INCOME (LOSS) $ 1,695 $ (596)
============== =============
NET INCOME (LOSS) PER COMMON UNIT - BASIC AND DILUTED
Continuing Operations $ 0.12 $ (0.06)
Discontinued Operations - -
-------------- -------------
Net income (loss) per Common Unit - Basic and Diluted $ 0.12 $ (0.06)
============== =============
Volume Data:
Crude oil pipeline barrels per day (total) 62,610 60,164
Mississippi Pipeline System barrels per day 17,078 14,924
Jay Pipeline System barrels per day 14,785 11,704
Texas Pipeline System barrels per day 30,747 33,536
CO2 sales Mcf per day 82,072 51,386
Crude oil gathering wellhead barrels per day 31,626 37,213
Total gathering and marketing barrels per day 34,190 51,639
Units Data:
Common units held by Public 12,765,000 8,625,000
Common units held by general partner 1,019,441 688,811
-------------- -------------
Total common units outstanding 13,784,441 9,313,811
============== =============
Genesis Energy, L.P.
Summary Consolidated Statements of Operations - Unaudited
(in thousands except per unit amounts and volume data)
Nine Months Ended Nine Months Ended
September 30, 2006 September 30, 2005
------------------ ------------------
Revenues $ 726,496 $ 814,321
Cost of sales 702,671 799,832
General & administrative expenses 10,448 6,536
Depreciation and amortization expense 6,000 4,695
Gains from disposals of surplus assets (38) (482)
-------------- -------------
OPERATING INCOME 7,415 3,740
Equity in earnings of investment in joint ventures 919 260
Interest, net (645) (1,401)
-------------- -------------
Income from Continuing Operations before income taxes 7,689 2,599
Income tax benefit 11 -
-------------- -------------
Income from Continuing Operations 7,700 2,599
Income from Discontinued Operations - 318
Income from cumulative effect adjustment from adoption of new
accounting principle 30 -
-------------- -------------
NET INCOME $ 7,730 $ 2,917
============== =============
NET INCOME PER COMMON UNIT - BASIC AND DILUTED
Continuing Operations $ 0.55 $ 0.28
Discontinued Operations - 0.03
Cumulative Effect Adjustment - -
-------------- -------------
Net income per Common Unit - Basic and Diluted $ 0.55 $ 0.31
============== =============
Volume Data:
Crude oil pipeline barrels per day (total) 62,484 61,690
Mississippi Pipeline System barrels per day 16,828 15,568
Jay Pipeline System barrels per day 13,321 13,909
Texas Pipeline System barrels per day 32,335 32,213
CO2 sales Mcf per day 74,321 50,094
Crude oil gathering wellhead barrels per day 34,009 39,818
Total gathering and marketing barrels per day 38,243 55,211
Units Data:
Common units held by Public 12,765,000 8,625,000
Common units held by general partner 1,019,441 688,811
-------------- -------------
Total common units outstanding 13,784,441 9,313,811
============== =============
Genesis Energy, L.P.
Summary Consolidated Balance Sheets - Unaudited
(in thousands)
September 30, 2006 December 31, 2005
------------------ -----------------
ASSETS
Cash $ 2,384 $ 3,099
Accounts receivable 91,702 82,634
Inventories 4,435 498
Other current assets 3,772 4,218
-------------- -------------
Total Current Assets 102,293 90,449
Net property 31,803 33,769
CO2 contracts 34,415 37,648
Joint ventures and other investments 18,289 13,042
Other assets 6,182 6,869
-------------- -------------
Total Assets $ 192,982 $ 181,777
============== =============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 89,908 $ 85,286
Accrued liabilities 7,719 7,325
-------------- -------------
Total Current Liabilities 97,627 92,611
Long-term debt and other liabilities 7,009 955
Minority interest 522 522
Partners' capital 87,824 87,689
-------------- -------------
Total Liabilities and Partners' Capital $ 192,982 $ 181,777
============== =============
Genesis Energy, L.P.
Summary Consolidated Statements of Cash Flows - Unaudited
(in thousands)
Nine Months Ended Nine Months Ended
September 30, 2006 September 30, 2005
------------------ ------------------
Net income $ 7,730 $ 2,917
Adjustments to reconcile net income to cash provided by
operating activities:
Depreciation and amortization 6,000 4,695
Amortization of credit facility issuance costs 279 279
Amortization of unearned income (495) (521)
Cash received from direct financing leases 889 890
Distributions from joint ventures in excess of
earnings from those joint ventures 232 -
Gains on asset disposals (38) (800)
Other non-cash items 911 (1,078)
Changes to components of working capital (8,786) (2,139)
-------------- -------------
Net cash provided by operating activities 6,722 4,243
-------------- -------------
Additions to property and equipment (830) (5,374)
Investments in joint ventures and other investments (5,749) (13,418)
Distributions from joint ventures that are a return of
investment 352 53
Proceeds from sales of assets 67 1,581
Other, net (54) (209)
-------------- -------------
Net cash used in investing activities (6,214) (17,367)
-------------- -------------
Net borrowings of debt 6,000 17,300
Distributions to partners (7,595) (4,277)
Other, net 372 172
-------------- -------------
Net cash (used in) provided by financing activities (1,223) 13,195
-------------- -------------
Net decrease in cash and cash equivalents (715) 71
Cash and cash equivalents at beginning of period 3,099 2,078
-------------- -------------
Cash and cash equivalents at end of period $ 2,384 $ 2,149
============== =============
Genesis Energy, L.P.
Reconciliations
SEGMENT MARGIN EXCLUDING DEPRECIATION AND AMORTIZATION RECONCILIATION TO INCOME FROM CONTINUING OPERATIONS
Three Months Ended Three Months Ended
September 30, 2006 September 30, 2005
------------------ ------------------
(in thousands)
Segment margin excluding depreciation and amortization $ 8,612 $ 4,626
General & administrative expenses (4,539) (3,210)
Depreciation and amortization expense (2,107) (1,601)
(Losses) gains from disposals of surplus assets (11) 84
Interest, net (260) (540)
-------------- -------------
Income (loss) from continuing operations $ 1,695 $ (641)
============== =============
Nine Months Ended Nine Months Ended
September 30, 2006 September 30, 2005
------------------ ------------------
(in thousands)
Segment margin excluding depreciation and amortization $ 24,744 $ 14,749
General & administrative expenses (10,448) (6,536)
Depreciation and amortization expense (6,000) (4,695)
Gains from disposals of surplus assets 38 482
Interest, net (645) (1,401)
Income tax credit 11 -
-------------- -------------
Income from continuing operations $ 7,700 $ 2,599
============== =============
GAAP to Non-GAAP Financial Measure Reconciliation
AVAILABLE CASH BEFORE RESERVES RECONCILIATION TO NET CASH FLOWS FROM OPERATING ACTIVITIES
Three Months Ended Nine Months Ended
September 30, 2006 September 30, 2006
------------------ ------------------
(in thousands)
Net cash flows from operating activities (GAAP
measure) $ 8,266 $ 6,722
Adjustments to reconcile net cash flow provided by
operating activities to Available Cash before reserves:
Maintenance capital expenditures (180) (560)
Amortization of credit facility issuance costs (93) (279)
Cash effects of stock appreciation rights plan (242) (271)
Available Cash from joint ventures not included
in operating cash flows 81 756
Unrealized gains on fair value hedges (588) (64)
Proceeds from asset sales - 67
Net effect of changes in components of working
capital (3,189) 8,786
----------- ------------
Available Cash before reserves (non-GAAP measure) $ 4,055 $ 15,157
=========== ============
This press release and the accompanying schedules include a
non-generally accepted accounting principle ("non-GAAP") financial measures of
available cash. The accompanying schedule provides 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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