USDP - Earnings call transcript Q1 2018

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Operator

Thank you for standing by, and welcome to the USD Partners LP First Quarter 2018 Conference Call. At this time, all participants have been placed in a listen-only mode. The floor will be opened for your questions following the prepared remarks. [Operator Instructions] It is now my pleasure to turn the call over to Jennifer Waller, National Reporting Manager for opening remarks. Please go ahead.

Jennifer Waller

you us. thank and morning for joining Good Welcome first quarter call. XXXX earnings to our are Chief management Chief Borgen, Altsuler, me members Officer, Dan With today several as our Ruple, Chief Financial other Brad as well Josh our our Officer; Executive Sanders, Officer; our senior Commercial of our Operating team. Chief Adam Officer; the March XX, ended Yesterday issued press a months evening, release three we announcing results for XXXX.

at one usdpartners.com. copy of the release, on If our would find website like a you you press can

of Before note and disclosure or night’s call. statements please on transcript. that the we regarding accurate press statement XXXX. May on at note X, information management reading of longer to today’s as Any webcast Harbor proceed, information any of be Safe call the that presented time applies forward-looking this last speaks the replay statements please today, of provided only Also, time-sensitive may release no

will night’s to And measures. I’ll include financial financial measures. the discussion with non-GAAP for Finally, most Borgen. GAAP the over call release today’s to turn press call comparable of last Dan that, see Please reconciliations

Dan Borgen

Jennifer. everybody. And good joining for you, Thanks Thank us. morning,

get go remarks then our few usual a Let ahead and into to started more we’ll prepared get [suited] responses me as individual questions. and with

storage developments industry. to the continues out previously Canada Western large-scale remain as So play heavy first Uncertainty been crude to grow high we pipeline reached Canada. heavy XX% from on report pushed market increasing during available continue pleased as continue Western infrastructure historic the straining Apportionment levels to anticipating barrels Western levels that production in we the oil future to are export to highs. reported U.S. take-away Stranded the in major the inventory March, around have system events overshadow capacity. crude Canada in the we to quarter. as

located partner rail have for sands beginning potential result, negotiations general export an agreements our expansion existing extend the capacity and our evaluating new strategically outlet take-or seen are demand. we We Hardisty the the current and as near-term has with since meet growing activity well of terminal to potential actively and a year increase a as substantially, as our to provided at terms of we pay our oil As origination production. customers

with we addition, has is into Stroud that With start our to back update our market remaining our Adam its on off on to terminal at barrels. then Stroud company proud increased position, also latest and commercial In and recent Hardisty with operating the the to or customer energy initial the are grade going report investment sponsor that position an us capacity and multi at Adam, origination distribution jump the contracted national partnerships those who we’ll results, support for rated the coverage liquidity over. developments. take financial

Adam Altsuler

XX-Q with Great, Dan morning. And for call issued the us included we today. the after which additional of results thank you and issue our we this on our the first XXXX to Yesterday thanks release QX, joining quarter financial plan quarter. close details earnings our for the details afternoon,

reported $XX of and times. relative EBIDTA flow influenced additional results first were For and Partnerships same million, the $XX.X with by quarter revenues the at cash customer XX%. by primarily of cash the our August $X.X XXXX operations approximately and of respectively commencement $XXX by XX% Antonio by and agreements in flow costs quarter by XX% million XXXX our the distributable San at related cash distribution and $X.X in distributable by adjusted to increased net in Net net the conclusion XXXX. XXXX in the first terminal we operating decreased the million decreased of income million, and Relative activities quarter, facility of XXXX quarter XXXX, EBITDA cash, income and the provided of of quarter liquidity of Adjusted and Casper October net coverage first available operating the X.X to and to partnership provided of activities million. at terminal May of in during X% approximately Stroud

contracts result substantial quarter the a partnership comply as accounting of cost full addition, January standard. X, In to customers. applying its by partnership year. for ASC prior the at increase new additional The of period the restatement terminal, XXX partnership ASC activity revenue of ASC in customer for or Hardisty this first with operating XXX approach in with adopted the with the incurred Effective the regard the to finances our adopted during retrospective arriving resulting

be excited last very has quick recent Dan Hardisty give for demand to the on the some XXXX activity we the months. market at continue Customer update several and a our Terminal developments. increased over I’ll about As the said, previously substantially recontracting Current at the Origination capacity was substantially available capacity our give services Adam all by efforts terminal agreements. exceed multiyear Brad our customers contracted later to call. on detailed the and and terminals provided on updates at under Hardisty will continues more of

Moving to Stroud.

a available discussed the operations agreement with terminal customer XX, acquisition multi-year, Stroud take-or-pay for June approximately XX% Stroud’s through have successfully our previously, capacity XXXX. with of in of the terminal’s we commenced the Concurrent terminal, XXXX. entered the terminalling of we October As of use into services

For supports increased increased agreement, of fourth $XX Also, a XXXX. guidance the day annual adjusted of first the barrels X, volumes from during of XXXX increases initial with to January terminal. customer That take-or-pay on financial of Stroud reflected million our approximately EBITDA XX,XXX the volume the quarter the results. day XX,XXX this per original contracted in barrels quarter the

slots capacity at from its Hardisty original representing agreements. was corresponding at the and per Partnership as for terminal contracted to XXXX. XXXX our or the the The position month for June volumes. was Hardisty these available and XXXX time in During economic increased XXXX the over the this slots customer and and term. And acquisition. at contracted beginning Stroud Stroud to per the remaining the per of extension year, in in quarter the capacity this April the the marketing January attending seven the Hardisty Services barrel of Stroud secured with periods the XX Hardisty fee XXXX origination the initial second later ending March beginning customer two terminal second Under of established for of month from quarter ending same This USD capacities and Stroud the currently, Marketing XXXX agreement, and to XX customers LLC, nominal a at pursuant customer Agreement the terms Partnership origination June receives periods initial of contract January by a month

and continuing the that Hardisty the contribute terminals. million the $XX at and agreements Stroud For EBITDA other estimate a and adjusted through XXXX, obtained of terminalling new of approximately Stroud year the and through of full the contemplated for nine Including agreements will terminal contracted the month at further of these origination destination June XXXX. left management $XX unchanged services slots deadline Stroud partnership in second little Hardisty related activity in were extensions. of Casper, more the to customers XXXX. through agreement to million color, portion five XX of this of XXXX see extended to capacity of no these Also the approximately extend XXXX is quarter With were with year increased XXXX January the adjusted June EBITDA to recently the the of August the of terms per regard

customers continue the ongoing We tank of use we several term use support agreements to shipments potential spot are terminal. to capacities for with negotiating whom for

Brad strategy will hub more existing downstream pursuing a through well. connections is Additionally, that an the give Partnership update other to potential the additional in on area. as and pipelines

secured approximately to senior capacity no As XXXX. acquisition net the range to relative cash pro to the and declared and an X. to $XXX on adjustments made of compliance to times of or a LTM million, cash to Partnership its maturities total cash call covenants quarter close quarter of regard quarterly a the quarter $XXX million the of May $X facility of of of of $XXX be continued senior on And annualized in net $XXX,XXX compliance growth equivalents to in undrawn million unit, Stroud its and the million. on cash would With is over Dan. Partnership back distribution $X.XX net had year March XXXX. taxes facility X.X total financial and available XX, of the on like until and with and tax, financial liquidity the XXXX first the EBITDA, under full unit credit distribution now The XX, for per secured represents holders basis, the including XX is of we million of May adjusted including estimated cash I of with $X.XXXX business relative unrestricted $XXX,XXX has forma covenants. to leverage turn first cash the of borrowing in to credit record payable The at that, Partnership October X.X% with fourth taxes XXXX April for $X X.X% unit subject which per On

Dan Borgen

significant the Canada, walk with – in big Obviously what’s the shift that. crude Adam. you, Thank happening in production Brad changes questions one us so of have that Western I’ll as with the market the and through

Brad Sanders

Dan. you thank Okay,

first ranges allowing increased high as led as apportionment heavy about for into saw XX% Canada we price profitable builds $XX quarter grow low XX% in XX% to on historically price for discounting Canada rail. as levels XX%. as ultimately so trading take levels, around seen during somewhere materially. into high, [ph] to $XX Pipeline as away by between calls, and Canadian we’ve supplying but for inventory differentials Canadian heavy the drove So previous That which remains we’ve talked have uncertainty high levels from mostly

differentials through and has somewhere a been move some, to Canada Inventory levels and that have rail a levels of things. we’ve XX% So levels the today still picked up bit, East allow into remained as accomplish Gulf Coast, between Coast -- of those Adam the said assets, Coast. apportionment activity tightened decline remain but movements have with trading we and our of into high, at Dan by summer, and With macro but and seen our number out kind U.S. as this environment, West we’ve able existing XX%.

commercialize we’ve our Stroud As to able been fully capacity. mentioned,

and solution to and desiring given position discussions ultimately, are at but to they to in also only solve in accomplish only both not customers given the we grow all participants to objective with to with Hardisty, And at Hardisty We’re their that oil extend Hardisty. customers renewing are discussions have at our Water mentioned, is currently Texas positions positions relevant keep but our have later finally asset. to Coast expectation desiring do that extending, not which then able our renew than Gulf problems, Stroud, Hardisty, with that. and than an to as activity Deep developing be volumetrically at at their U.S. who up our opportunities And we’re leverage also in a to in heavy we sooner

So we that on are about excited likelihood. potential

allow As on we’ve reasons got also heavy capacity customers. to our but by City of those that for and say away well relates we do are potential the U.S. term progress is Lake Salt types were sour about both express call term get to are the constraints. areas rail Remember reasons that grow about City that Lake spot that activity strategy Wyoming’s Casper seen at pipeline. and/or seen and We’ve the a to activity pipe shippers those new who’ve of is for with both truck we’re there. typically We mid-continent excited higher take the are something and and Salt of I’ll us by happening to excited investments participants access stated, the of Casper. we hub it about as likelihood Casper, potential with that making discussion of excited opportunities solving short, of producers, customers to our we’ve is short, also the is number

Dan Borgen

around me road’s so that let means a Canadian roads rail you I to and right, comments the of that rail a – know forth little and growing crude of status crude about or All us, the both producers have and have Brad. talk involvement by what seen current number the and business. Thanks their questions bit about

with as growing Casper business. the a as our ramp good done as of as demand our crew BN support terms pleased the job to with very very handling well to continuing performance. interchanging Hardisty road are has the as well of facility out the as out up, availability in with of that coming So are been CP. Pacific has a Canadian improvement feel rail we terminal, our There substantial well The of we locomotives where

in So customers continued, a full support completing new on completing for be our late customers And their customers guess that existing that are now a feel and both to strongly at rail for has full volume start see so agreements I With to now their as for are Casper. continues June. track – multiyear. Hardisty high degree freight we and a roads confidence, and have loading we releasing they that for [Indiscernible] are capacity will be and of fleet

so with the customers agreements to as engaged well process a for very about say of opportunity freight as we’d support said, from standpoint, then said some as us those we as current agreements, now the for completing table coming The – rail non to with the board road are customers we’ll [ph] feel customers, long-term So that. have seek as some our Brad to are good non those multiyear us finalizing therefore the in I existing well. agreements have, renewals, customers

where a So are and look continue, support our we position we forward grow from we market, we to we like are where we like with to that. railroad continuing from

I’m growth initiatives. maybe seen you’ve going some quickly of shift some talk, about our little a me releases press bit and around to of although talk the Let

Let us, have the do at through to mean a mean I those our what terminal bit demand to just available anyone not Hardisty exceed the me little for capacity. we continues Obviously capacity potentially more at Partnership. and the else to talk road any those rail our terminal. and

XXXX just existing and are with remember agreements, customers those reminder, agreements and those existing our through – Hardisty. are XXXX at we So a

to negotiated a would at the a like I online in are previously. to year trains soon from late going And to been we dependant. we have as strongly, two releasing unit that are close commence weather very be three day very with and we’re of in unit very place firmly we to Hardisty we construction feel to we we we -- construction had a strategic facility able I permit our in able have would customers We win new December that expansion our be very hand, will extend are November, discussions trains believe be which to of said day, coming those announce we in to this see that contracts, and

contract new to at few take-or-pay by We and a to five-year coming announce support expect take within strongly large or days a a growth Hardisty. weeks, week, refiner supported off additional

XX our mentioned, As increase capacity sponsor at Stroud we XX are Hardisty their volume commitment position at month slots the to proud report the has contracted almost Hardisty. Stroud remaining the that Adam to per initial per from doubling with also customer slots to at month,

So coming again, a partnership. the value to network

with increased new that Coast with are going Gulf want an at As heavy Texas we customers -- that active of and Water be the sponsor crude existing sheet the in to to we have customers discussions go receive volume and who reach discussions of Coast. network many in very discussions term continue to Gulf our call from well Deep what the customers at and with and to growing Gulf the we that term interest wants sheet our to to in bodes discussions sponsor

uniquely We the Gulf on are Coast. situated

demand, via the therefore producer and/or network We XXX blending pass distributing and rail to and be true offloading over solution support bringing and today, market barge refiner in have to the to to start in and receiving pipe a a could cars refiner. position

previously this recently a could So and down Stroud drop expansion, capacity year. be both as to within contracted the the partnership Hardisty at we mentioned,

and very but it that. to and question later, me a Adam to friendly of a mid-to-late And potentially that will that forward will we this – the how about at counterparties, of to customers how being at expansion let sustainable, bit minute end strategic that on in the we is and in sure the be Stroud say assets solid partnership address just about will termed look for be and many terms, a be done, do will continue with we that Hardisty. financed, talking We’re making are summer year more be looking the little continue

happening terms these kind seeing? rates, of speed us of are volumes, what discuss bring to going I’m again on all what things that what it’s kind what of of that ask to up Brad you given ask market. the marketplace kind of reasonable to today, seeing So are in we are and the to kind in

Brad Sanders

thanks Dan. Yes,

can growing and do we in we somewhere term What closer starting So $XX. first for there, out spot limited at determines price to to what rates differential, seeing table use prices are XXXX, today, of to people all, allow those XXXX facility, and and because negotiate even are XXXX our the and differentials that between trading though of take-away. we want the the away, assets, you macro that. story around of that into determines rail is, been higher support to today, an might, are through rates have At XXXX only we’d type transparent we our you trading in are levels, can types these that, like the achieve so perceives to winter we first point somewhere those at take but historically, at look we terms in that to supply, XX and And $XX the would expect to able WCS XXXX. is then there least but what they market future the we’ve what levels, commercialize at what not the actually a for when like of future at out look at indicator look simply are and and be, look but differentials to

any to extend business three – of five actively new and at renew our we’re three year and So kind facilities. pursuing and

Dan Borgen

that. appreciate Okay. Good. Brad,

one also that. Let add to just thing me

our you the curve. are tightening surprised if at curve We look of short the not by

the side on the do investor will that accept perhaps see differ the to and maintenance that months would you'll at lesser susparity had that's full-out summer look that be when -- traditional suggested some of feed tightening producers able And curve on the becoming we look done the their to during you turnarounds other in maintenance a refiners often look option whereas run deck [ph] our of our WiFi additional Therefore in cheaper a to If to feed. have time. cost in – that Canada. traditional buy online website a who there's

So by months. going summer widening the traditional the obviously exacerbated that's of that in our move

we and later on once and be full that that a we'll expect turnarounds year the again into curve So completed few the absorbed years to come. as a that supporting continuing back and in are suggest see the for widening mid-XXs

Brad that. covering appreciate So,

producer. will simply cost in will efficiencies diluent heavy. by return back Remember Therefore Let handle. longer-term of for feel me a Canada, to our is DRU strongly best the that. barrel. building good heavy for They go there creating over Pembina longer-term more blend to refiners our best industry very the run the in what with to we and with Again, a that. condensate solution, condensate. now partnership mid on our the solution opportunity product we it are that we They heavy with -- the or and a Gulf that better extremely freeze not of a in plus barrel. we highly €XXX,XXX It provides capacity, XX% up want. to and that DRU trade our a a railroads we we bitumen refining what non-hazardous, It's name of feel nonflammable, the you barrels took if cycle existing is is its called about rail, would remove want preferred The valued said which want you the blend, diluent out XX% easily bit Gulf the necessarily pipeline give market XX,XXX and our the pipe customers

We a with like imported move producer that net and have we Mexico elsewhere. going a to shrinking barrel active, quickly, and as see new heavy very -- good for and opportunity exiting it’s discussions places because and back customers simply more seeking active coming Venezuelan customers a from towards to barrel better

bit and taking multi-year that contracts again So sustainable us and very make in from active plus we once around call more a longer continue that are year to goes about reminder discussions pipelinable. XX feel as is very, long-term a I'll into to that. sustainable Therefore good form we the barrel no DRU contracts the -- we assets long-term

product. that to all So and option a moves efficiently It capacity safely net avails producer at today. than commitment and they the the a more it has existing barrel want heavier refiner pipeline long-term a to what gives do back a other better pipe

So to quality that of why feel being are the table. why on are very that about And and customers we that. make around customers commitments there. they aggressive at that's looking the are the That's the good

to just multiyear sustainable – I to vision cover that of distance more folks wanted the contract terms length longer-term, greater So have we increase committed move to that of in remind revenues. to do is our

So appreciate the that. time on

ask me on some which about our we're our to and the is update update let give Gulf Brad Houston that a projects development and So U.S. Coast Brad? about. Channel Venture two then talking primary been in we've Ship Joint excited that the Texas Mexico of Deepwater,

Brad Sanders

Yes.

our meet shifting is major reinvention and/or the crude to Channel exporter to make its uniquely that most North project think light global potential cams underpinned of that their by pet growing the of to is requires people that of and become each margin particular, energy products a current new demand So the high Ship demand in with oil solves that role is happen. the infrastructure U.S. opportunity I the investments which familiar macro whether and NGOs, for for America, is products those are or on assets and that sure one Houston

positioned on uniquely participate we're that. So to

from instead to about so life provides a U.S. from option today being working one heavy Canada hub information Casper on a solution about that, working great been potential We are Stroud destination inbound forward making a We're pretty we particular that then and origin and soon standpoint. to it announcements pursued advantage heavy, are demand a standpoint the solution. high. that Canadian as play export make look hard, a for as been to on in that solving on and a products Petchem meets there believe as with oil in roll growing our progress exciting and to And the Petchem we the identified, CX is Houston leaves of a to some that's to day Hardisty, well We it assets. Maybe there, be we're will options particularly advantage that the on our from firmly terms plus to outcome a in of as the connectivity they example, a by things get east feedstock, inventions ability From with So excited least outbound Petchem to all, the would train in that west completed of as sure put the crude all one standpoint our export customers day, options why priority trying from going on and likely go there's of that standpoint that industry and nicely talked network to some align new and rail they access that. provides that train coast, on there solution for that. finding a sure, hoping standpoint customers. and and fee, move Stroud at to we're a U.S. in of production a lot coast. day role then Coast, a those. cheap train public the train including the to meet as of Coast because from for our Coast It’s have currently out we've said, to Gulf import Texas work advantage need think be We having creating we're we of relates given the NGLs, specific We that who Gulf can standpoint. Dan expect that of advantage infrastructure at demand to how we and world Gulf and do facilities Deepwater in a connectivity accomplish supplying traditional an is customers accept think the rest uniquely and

but area and in of as expect course our we're went excited expectation with point going is the about to in of lots origin it late on the Texas demand for we other Mexico go summer gone that that to I it course through all as Deepwater supported one so all live announced very and story Mexico. tied closest our real those the facility or relates product. macro live own Texas just of Deepwater that So Consistent we potential Mexico, be light just advantage to light our is with with on the well that of are meet able by Keitro both a as [Indiscernible] through. those We've our so we're for about is just recently certainly there. for We're light and [ph] growing excited about recently to develop that. there well to in as into meeting excited terminals, with the re-refining that create and our We'll an needs customer terminal also feedstock to a our first products as more we've I solution products – that in macro blend supporting announced three that advantage destination that. went the first only and not intentions stock, projects demand two regions, story relates

Dan Borgen

Okay. Thanks Brad. With that, we'll to it some open questions.

You good always questions. have

good happy all questions we’ll musket, won't we'll be to all eat answer. good So, on we --

up we'll so So questions. open anyway the to --

Operator

first Your question Zak Instructions] Mirek [Operator is Citigroup. with from

Mirek Zak

morning everyone. Hi. Good

Brad Sanders

morning. Good

Mirek Zak

getting outlook What the three in your their with years? them extension rather to of you new of inclined contract region of Are new next discussions when talk you're on and to regarding more sort producers contracts. they shippers them? of are coming ample that just getting seems about confident speak options in is commentary possibly like two more them crude or time over online your than longer-term little sort out expectations the it So, with from capacity and for pipeline

Dan Borgen

a question. That's Yes. good

I think be – clear. let's

extensions of mimic as the well. should those Our customers new

So years when on were terming those five we say multiyear three agreements. to we're suggesting, type to we six

able then, that's And newest a table bullish that some look at is next the here customers – early obviously have the a freight think very should I got days, to few them. I we with is agreement deal. play more it way continuing for to railroad. so be who This get around five-year best and someone the a We able customer rail at long-term announce greater our well. probably are in think there was is role just within which I the similar understands market

were coming curve and of bit saw it so credit. their little they And ahead the to

The whether us it that commentary be think I certain is it around pipeline but would be delays of about. good concern it of what of pipe rail again Nebraska, whether cause very been would it whether be we Coast Canada, for of it whether would So Minnesota, feel are matter West markets, types the a has and continued is, proven. commodities as would certainly supporter the certainly we flexibility of certain no be customers

more for I I customers agreements good learned to have the improve, ratability, multi-year all and more got think the that are I the performance in railroads producer things engaging refiner. as to continue are you and and/or operating which the think think Brad, sustainability add.

Brad Sanders

extend are said question, customers from to for Dan addition all indication our and driving but hard say It's Yes. extended indications the the what curves it's it future. And that to – and term discussions of velocity our forward in extend, prices uncertainty that's the term the customers. relates or the of is It's markets secondly it's in mean any but only railroads Yes. requiring but and to answer new contracts, I renew quality then we on said, not providing the sure. customers would predict to so the renew I the this, leading is on your we as with high to as earlier discussions.

Mirek Zak

Okay.

Dan Borgen

more demand And than interest we for today. spots the we and have have

the able we those So relative customers for small $XX to disadvantage, tumbling give but great certainly overall good they spots there afford so pressure conditions can't they -- the to going and if can variance as wide at some to price. be them and more $XX, that backstop under to as I've in move have continue well barrel especially they a under term, not or want move you that amount, to extend, that serve option customer to extend product a customers and is spots our for to market normal you're heard is pay and fee existing in from where as impact commentary be renew to customers for

Brad Sanders

commentary I'm to And quote job with this and at risk of uncertainty higher on and here for we also want a pipeline, cost. as who that. led these but to from doing capital already going like rail likelihood the solution it is critical a than is going is our anybody that's up to potential pipelines different We've there, so the contract. more extended said term to with the out apologize go a of But standpoint customers, anything producers sounds make the the that, sales is kind cost this with becoming efficient and I any expenditure

and we timely. we the capital people's standpoint can from efficiently that fact So like meet a needs takeaway

interested are people drivers critical rail in and why takeaway. are those So

Dan Borgen

logistics DRU that their to much that No. And our – barrels term they pipe going will demand engage that more in Canada government as for Canadian own meet longer that we're like the barrel the in growing seeing have project. as well sovereign will meet non-sovereign our on solutions

Mirek Zak

right what your that, Okay, sort Is rail economic might make the you assessment any of just that potentially now, of pipe And be for a I either can you that provide sort around WCS producers on to are producers great. or the when themselves? there tie your price them? just with with around into equivalent initial talks seeing estimate speak netback And based and just feedback can then Understood. around secondly, that of type traction yet? if DRU And discussions that you'll you pushback actionable or getting

Dan Borgen

question. great That's powerful

to address I and had. think ask try as let in I'll traction about well of as perhaps ever different it me Certainly Brad comment good attraction, to we as have as a couple well. Josh and ways we've

look continuing very have forward We able to to this to be so look we discussion. have week engage the on meetings And a active customer week DRU. in over because we group – we

to We engineering. our in very very spend good soon sizeable engineering things that. will think be and to support our have to we dollars on talk I We have about that able

you that. Brad, to relates ask to netback it Now cover I'll

Brad Sanders

pretty to say it, Yes. I'm going simply.

with build and the can pretty estimation First DRU new pipe. compete foremost that DRU important. it's our That's

that if that you new we've Secondly, money differential pipe as it's build you'd relative compete spreads. the in those the with our forward can given stated be estimation if to materially

significantly So standpoint improve you from netback a your netback.

materially, So, for and again industry use capital curves excited of how the are we're or potential is production opportunities my money, And gets what when we're in allow that's What the money, out whole create me sustainable and most out the forward not want it my schedule on. effectively trying anything. I we this an money, significantly, solutions the and at to and looking competitive capital its my to our it predict to that there of counterparties to money, is so it. something back fit do solution about takeaway and do comes efficiently customers at in expenditure build

uncertainty lot savings are doing of people So recognizing we've and all a And that traditional government that recently from interface to are between business bridge clearly change. and to want ways a potentially their lot people value this of the in they time material is of is the risk the that, and royalty sustainable understand need chain that to doesn't barrel building a production solutions there at move seen schedules pipes. ensure every

pretty So good we feel about it.

Mirek Zak

Okay. Great. Thank you.

Brad Sanders

Josh a quick do give that timing from build of want update you time as and can to. to Josh a start project

Josh Ruple

refine DRU solution that itself those And our to been entire now have our enabled discussions customers, around assets the that building discussions detailed and to our assets with with are nature. around, the assets logistics XX not are been the DRU ago. quality the at but XX was months Ultimately very question better continue to pretty and months. Sure. strategy, underpin detailed have simple network timelines And of it they've us just associated the levels DRU than in overall those with is just involved

Brad Sanders

cheaper. And

Josh Ruple

with logistics and That's pipeline more the competitive affordable the more all Ultimately alternative. in are better.

Mirek Zak

you. Thank great. Okay, Thank you for the time.

Brad Sanders

Sure.

Operator

Walker Your with Bank of next question is America. from Derek

Brad Sanders

Hi, Derek.

Derek Walker

in morning Congratulations commercial the there Hardisty. Good extension Stroud Hey, guys. on and

Brad Sanders

you. Thank

Derek Walker

clarification questions. couple a Just of

You XX [ph] mentioned customer and train there there another XX a of there, expansion? is here just extension was – that's or part XX or with the the day change slots to in a that that was

Adam Altsuler

customers rest Stroud the basically origination of filling at from the was existing at Hardisty That the customer getting and Stroud. capacity then slots

up Stroud. XX already original to of can the slots at So, Hardisty, deliver slots per they Stroud gave Hardisty, that to slot month need had they the they matching from with increased slots to origination to slots XX so position had of

Derek Walker

then, Appreciate the of to Adam. And five going the expansion? potential that. kind the before agreement, to that's Thanks -- five-year

Adam Altsuler

Right now, that. that's contemplating where we're

Brad Sanders

current than of We're contemplating because for We're contemplating there because supply. renew Hardisty and that the our demand as more demand asset. occupying extend is is capacity it

Adam Altsuler

Hardisty And there's not that space the want.

Derek Walker

Okay.

on what look of that of like sort kind that balancing So to extensions depends out? the

Adam Altsuler

of the customers right given we we'll now. demand Well, as Dan able that existing our feel But near extend to want. term Hardisty if it's falling where said that's kind strong

Dan Borgen

out not support grow would to don't something, we that the able we we're time want in me in to be were to have to same as existing we're provide for base we we throw spots demand try more looking them. to to we're and place, able extending here, with to actively customers multiyears that's while renewing have to – to case customer that build there the particular speak. we If Yes. the do and and we're that engage needs We've assets, and market we be permit our confident this in to therefore strongly didn't to why we or why were so that at literally those just that's let -- Derek say, to but spots space We unless delay able got have the customer seek not the to existing customer capital if those and for immediately.

Derek Walker

little then color would year, [Indiscernible] next a Dan. kind late Thanks, the mentioned the of months? on in require of be few put maybe else kind you that to this And over just what service

Dan Borgen

Sure, Josh – I'll have that. Josh answer

Josh Ruple

technical complete We're ready soon now team perspective as up to is as to a of right Dan is nothing commercial We're process is our begin commercial mentioned earlier as working that expansion. go. construction process required. the the our From finishing ready

Dan Borgen

more Stroud color up gave little reason bit in this I the on XXXX from there's EBITDA year. a a Derek, ramp XXXX and And because

So in it gets QX. fully ramped up

So slightly cash Stroud looks flow EBITDA the of what XXXX projected remaining higher XXXX like. than is for for

Derek Walker

Got me. it. one a last And Okay. from just then

of extended now. direction? in that of XX discussions on those right Is mentioned that obviously basis get there having like deadline. You that August a its going the multiyear the to appetite kind so you're Seems is sort how

Brad Sanders

objective. our is That

people As of who and we've cycle a new kind are participants changing. into the this it's moved the cycle coming support activity, through

in would new we I will whether that they or volumetrically extend what deal. as uncertain and who are interested got equivalent, less expect participants more customer or So but tell also you to renew do term we've

by to we're actually term has Spot to what Derek, but also asset provider for heavy asking and function to Spot where during the we is should high. led that periods the up redefining ultimate away objective be asks to end activity, asset led where of be activity heading, the during take has of So think we're capacity, that needs where asset day-to-day determine. our is continue we're cycle especially so oil is about when what be to where to is to we're certain discussions. quite solution Spot an excited will create sustainable be to why participants activity and it's going has that to choice utilized market, extend been in not.

about that. we're So excited

Derek Walker

Thanks, Brad. me. That's from it

Dan Borgen

you, Derek. Thank

Operator

Your Instructions] is from question Gyure [Operator Mike with next Janney.

Mike Gyure

like we're at Yes. capabilities have assets Stroud talk Can it you that you about It sounds the there. expansion now capacity. little a and full guys this specifically

far that as I to need there, guess So do you as guess kind trends I storage what of stuff? in would

Brad Sanders

Go ahead, Josh.

Josh Ruple

for oil upstream drivers typically associated within mean really question. any any With with and what capacity those Stroud there's good assets Mike, facility. asset the the anywhere drivers serving network, rail Absolutely, are the capacity are and always our provider like

Stroud the make And working facility. Those ability that. improvements capacity. do as existing this At this and considerations our have unloading, us itself in Enbridge. terminal beyond tank And to capability are ultimately Stroud case specifically some barrel facility and downstream ability enable tankage to also entail it volume our to itself pipe pushing actual to pushing We more Our well to at utilize to our barrel network At then railroads required assets increase on for options line pipeline capacity. upstream and configured Stroud move at we serve and in and Enbridge, with to that that minor tankage that to that and very crushing. tank. downstream their are increase of with plans terminal short minor working at we railroad ability its in facilities do to every today to there Stroud is current we at one as our and – options store our to constantly as improvements configured are with

of function So have the warrants we and to ability We're on place to step execute. to will commercial increase in Stroud. be basis on be able a those volume working as the demand plans currently finalizing

Dan Borgen

is folks capacity but also inbounds there additional have Yes. challenge supply takeaway obviously and to we that cushing, can are only Texas as had want demand we Mike, we're I getting also on here. there. getting as there follow-on. what --- as from Canada, you growing think take Dan from not as a and The seen see increased West

taking we're see certainly away network further those the not at Casper and all opportunities. the that looking Stroud, to expand we in our looking with that optimization just what to between put Hardisty, program can at and come kitchen up but So to from that

or demand Casper. there from is continuing not growing Canadian just So

Brad Sanders

And is through that point, moving relative Stroud a your to barrel to doable. Dan to segregated

around So had are infrastructure expansion segregated a proposed the all perspective. ideas movement. efficient vision implement terminal capital a from to we've to or a we've to always alternatives support very be plan these And fortunately serving cushing got would of and new important a that how

Mike Gyure

Great. Thanks much, guys. very

Dan Borgen

Sure, Mike. Thanks.

Operator

hand would I closing questions. Borgen for further no are Dan the over call back to There remarks.

Dan Borgen

the and we information this hope to I Okay. We'd forward I spot and look able always ran know them Well, appreciate questions all call the on in been have to shows thanks given that everybody. have I the market. confidence very we announce. the long

[ph] extensions completed. engage. and before coming announcements is therefore I USDP renewal rail team, and on now customer completed. the for doing. I and the for agreement get the So our multiyear needed today, what with renewals out we're the of –and quickly facility we look Therefore them. support causes said Remember with customers why we to capacity But U.S. on have able growing on said terms to actively for us quite That now look sooner being to of some their even as are we freight than engaged other they need expand that in us for challenges business. to which existing And again more than with in now frankly them demand later. as the

want Casper train expand looking And we support handle need the there so have and the we they to demand are do. able in coming with Hardisty one remember volume full, the and therefore Deep product there, and facility customers be Hardisty that are what get that and to to said Casper to efficiencies their the on we’ve at. of to additional and move that be need and/or able optimize of an in both there train in our out the in demand to to those, as Texas that a perfectly situated every departing our to then do to additional blend we destination, that to Stroud location Water land location, is

very So, we and that. so are very bullish around

had great that, to again to and we all of following fruition the for be to of value and again. rest of you the unit our and continue see suggested support Thank to are the who call, the I’ll you community thankful going the forward really let had again USDP. look and USDP look analyst nice market the just soon. for for we unit our and thankful we have that week, look forward holders very So, we vision, holders talking on we confidence say, continuing support me are to come it’s the who to the grow and and call. Have as With from we a trading appreciate all our confidence to was that on close

Operator

call. Thank conference today’s you. concludes This

may You disconnect. now

USD Partners (USDP) 8 May 182018 Q1 Earnings call transcript