USDP - Earnings call transcript Q4 2018

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the USD Partners LP Fourth Quarter 2018 Results Conference Call. [Operator Instructions] It is now my pleasure to turn the call over to Jennifer Waller, Associate Director of Financial Reporting and Investor Relations for opening remarks. Please go ahead.

Jennifer Waller

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

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

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

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

Dan Borgen

Thank you, everybody. Jennifer. Good morning,

Hardisty Partnership. We XXXX successful are another positive our continued momentum a quarter was announce the in our pleased year efforts at the for Partnership very recontracting at to and terminal.

at announced refinanced the strategy Stroud to basis potentially next our with the our previous with quarterly Casper project bank our of revolving meaningful our We've customers. We've we've our guidance early an with grown higher the new we and strong We Over hub at last rates. growth in our on facility advancing accomplished for XX% credit our of discussion annualized consistent months, access support accretive terminal extended terminal deal. gaining refiner and and we re-contracted the renewal Hardisty flows distribution multi-years. group. approximately XX a great an terminal's are customer cash over Also,

that and addition, to we year. construction our service in January expansion of South this the of see are facility the In go completed excited Hardisty sponsor into has

XXXX a In first Petroleum take-or-pay our at addition, APMC, minimum agreement the January rights the terms contains terminalling support take-or-pay services expansion for in will The at USDG's will payments. provide growth with sponsor additional quarter capacity Marketing rail executed terminal. The Hardisty its the to of and at with an to APMC will agent expansion Alberta pursuant development terminal Hardisty monthly Government funded XXXX, agreement Commission starting is the referred commitment. transloading and by agreement as beyond be our new multi-year capacity This sponsor the of Alberta. in of the further South Hardisty

candidates All sponsor could the of possible dropdown these the at our future. in for be opportunities Partnership

start announced project annualized Given us in that, full deliver jump our year and XXXX, distribution results, XXXX with update recent market go latest rates into financial at we liquidity remaining our our is relative to commercial successful of the to cash re-contracted of off growth project back Adam successful the developments. and capacity Stroud we'll and Casper. then Partnership's of ahead. previously our an going the position; the With on execution coverage, organic flows our momentum distribution Adam, recent for July and our higher starting the full digit subject the mid-single Hardisty terminal to re-contracting that year reflect XXXX, to expect we growth to fact the the

Adam Altsuler

details XX-K issue financial operating close Yesterday us today. our our plan this details you after quarter And the on additional we with Thank included release, earnings the morning. the the afternoon, our quarter fourth for of and call and you, and we of year. which for joining Dan, results for thank the market issued XXXX to XXXX full

the of during EBITDA and results the and operating by times reported X.X fourth flow with For of fourth million, million, $X.X approximately we coverage activities net of by times at 'XX. net additional the provided quarter of additional influenced were with terminal quarter and adjusted the quarter flow of executed that of The ended associated cash to distributable Partnership and distribution X.X 'XX in $XX.X quarter million. generated million The terminal XXXX. agreement Partnership's XXXX that the XXXX the quarter, Stroud $XX.X fourth for to of cash were income XXXX. same year three-year the $XX.X full became our in contracts effective of September of relative April primarily costs also additional cash March due revenues during Casper

customer during Stroud in provided the to cash and terminal, of fourth by our terminals. to from result incremental by increased a quarter fourth partnership Casper relative the activities cash In flows of substantial as Hardisty of incurred a XXXX. Net the the to quarter the operating at addition, XX% XXXX, compared due higher XXXX activity cost increase operating as

the As a the a income for in a non-cash by by XX%, entered interest distributable quarter additional loss as result of result, 'XX. adjusted that November, a of relative instrument result X% X% to fourth increased interest into derivative associated interest higher expense of quarter increased during the rates and 'XX. with primarily quarter EBITDA by cash and Net XXXX we decreased rate of fourth we an incurred as flow

XXXX. On unitholders prior compliance of and on year, months unit an over of represents and covenants. million,, the or with of adjusted quarterly including continued per annualized $XXX financial February X% for basis, X.X% available senior net the its XX, which business borrowing times, facility, of on XX a million million leverage $X.XX growth of to January $X.XX paid based total per trailing covenants was cash close Partnership XX. we quarter unrestricted declared distribution financial on EBITDA unit at the to full credit of year liquidity and on of February its record XX capacity $XXX the The this subject on Partnership of $XXX is distribution December covenants. of XX its X financial As cash and with secured cash in million X.X compliance The of undrawn equivalents had

As to annualized distribution we've deliver expect seen with terminal Dan basis on digit for rates, an the mentioned, given we full the Hardisty recontracting at mid-single at higher success our significantly growth XXXX to our re-contracting to successful execution year full our organic of the project the at the XXXX, Hardisty successful of and growth remaining Stroud previously-announced relative year capacity and Casper. subject

like to the we've where to than are half be Given of experienced, for of in of call see Dan. back and terminal of I'd July in period spreads transition coverage distribution turn over we XXXX half re-contracted XXXX growth today, distribution lower as first the our kicking second XXXX. to in, the result to with rates a cash in coverage with the that, partnership, flows now newly typically expect the of a And somewhat

Dan Borgen

Adam. Thanks,

us you on interested that. I'd hearing have some an like of would I'm happened things the in Canadian Western and that Brad to key from give the be Now market ask sure crude in update to oil

So, Brad?

Brad Sanders

Dan. Thanks,

So provides macro continues the overall our Western support Canadian assets. business our for to for and terminalling specifically

sustainable WCS levels the We closer in crude pipelines to XX% oil rates end government December WTI curtail improve a the also higher barrels greater see primarily levels, narrowed for production greater continue the twofold; the bitumen leverage to levels and crude Since so beginning barrels by day. those netbacks and to range, drive see historical XX that oil were as than XXX,XXX objective of and levels export a government at utilization one high XX%. to inventory the currently the producers function producers apportionment announcement to at inventory Government's improved. spread to the on million the we continue of year, is of total of has The and Canadian to netbacks in was the Alberta by than lower and to and

change the primarily to haven't driven remain inventories at seen this function unfortunately, of the tight any these As as said by in That's this that I prior changes. a incentives we is time.

closer the government $XX spot So $XX to traded market to are with the differentials that seen under. changes we've

So at differentials $XX. last its very year and fourth saw those a at WTI In peak, the closer to quarter the strong. That's we average WCS at of that was of differential kind historically trading levels. discount $XX

left the that was in market its point to was do when it than greater thing, at was that time. So takeaway capacity supply clear

in caused strong our facilities for is strength reduced as While terminal. continues see our who constraints takeaway demand curtailment by given are Partnership crude the and third see for to on narrowed shipments, has solutions This refiners. Hardisty such the spread customers focused at resulting a long-term the producers as party region, solution rail for of both from industry capacity some to Canada this out

pipeline in impact to from and well the So everybody proposed additions of oil facility. continue our timing we that the is the from our grow not Western Production expected production seen the of the at export remain Canada narrowing utilization uncertain. impacting have remind projected to sands spreads

in of reflect $XX. you Forward can spreads XXXX and curves see half currently this that second are uncertainty the

So $XX to we spot our under. $XX

there look then are and Just when XXXX differentials to the second $XX half of you $XX. out XXXX, through are the forward XXXX

demand the high. for remains So takeaway

our are commercial As we actively to need with relative pursuing expansion, we South meet Dan creating that and mentioned are to capacity that. Hardisty opportunities

Dan Borgen

Brad. you, Thank Okay.

to and you and two that. our to Now update gears development a key I'd on shift give status parent doing we're like about what projects talk the at

starting I'll So update. those Josh then to and with our ask Deepwater Texas two points, Brad cover and Mexico

Brad Sanders

Dan, a comments about Casper. And couple make of like if okay, to I'd

Dan Borgen

Sure.

Brad Sanders

excited that about. got very We've couple initiatives we're there

and opportunities, to You efficient and sustainable markets solutions those It's mentioned new potential new one customers. which connection. is and the customers pipeline creating access for

that's In with addition, Enbridge. working

agent to can but capacity Casper throughput adding second, work that? drag which In resistance a not anything Express to add standpoint, addition, on their given we're pipeline demand sort, announced from you speak got but we're standpoint, terminal, right. Josh, of is takeaway that doing. to pipeline the enhancement for a to Josh working on increase to to add a in from try some a that express DRA, our their would that with only rail Enbridge add by and a project

Josh Ruple

with out to deep calls, path with we're would volumes connection add activities. in we the expected project, are poised to Enbridge Enbridge, to we're additional the of Brad's are coming I've on and is planning reasonable receive involved Relative today we're to Sure. on as Only project our past thing side of DRA associated -- Express. the point, the the the regards the of actively mentioned scope that to is, that fence, I down

are back connection third to the expected of pipeline of which well completed quarter sometime that delivered with on activities of development new be this and way be is their year. to per All end plan, associated the

Brad Sanders

destination say on standpoint. that a thanks, for solution would a crude. I the of every from Canada of focus we've all areas a about heavy or All solution out for find demand is Deepwater to talked Texas a of capability finds our needs also Josh takeaway for that obvious takeaway one then, one primary barrel priorities our standpoint from

about excited and solution asset and I we're heavy the ability all producer have, of that got which that we a Josh to focus current CBR Canadian any say destination offtakers CBR opportunity the infrastructure for Texas hub creating Deepwater, would provides anything for to for or maximize and the So, to that? our we rail customers, those connectivity provide our netback have greatest crude at our them the current potential destination to by is add solution a you the Canadian,

Josh Ruple

just basis our we're the commercial on the Again development quality reinforcing on and site. way on of well activities,

We today. have ongoing construction physical

under We development under are rail power development. under Marine development. are and that's have that that a facility activities large activities

plan. permitted which, per of are are past the fully projects in as mentioned and All progressing we've again

Dan Borgen

know. not held They're where other about are we on supporting only and to as the are that those confidence initiatives we very complete supporting And good also feel CBR we the purposed think range from opportunities progress pet consistent of but in to can about the the NGLs. story macro those, we we share US, cams that crude to very are with I

very of Nothing excited about those we're potential the to add. developments. So

previously. on both quick, us those. at real on of viable commercially those. terminals Okay, talk heard We're two Mexico, our about both delivered of destination you've We've

of are We growth full opportunities. both a we're for XXX% and those at looking

have additional that Our successful same two we've terminals two there by solution, to and relationships we to learnings terminals pursuing which plan rail. we're had and being the going forward is products provide we've the the these four and that built the with is light success industry take that and

So we're Josh? excited about that.

Josh Ruple

two the you The we additions have in for growth. Mexico, facilities there, add that Brad, that I would mentioned operational

facilities in are and where that accretive those plans all the the two the to have assets, four each to We permitting process. to we double of do at way, working today capacity are options those very relative developing facilities in of a on we're to

the those again of process all All execution Thank you. from perspective. in are per pre-procurement and plan an

Dan Borgen

right. All

announcing of thing coming that we're be and to the feed destination other will feed to fourth there Texas additional that additional there just things refined our one network along markets. component for so position is as we'll Mexico add and help that, Deepwater, with as So some at looking well our that products

So both by rail and by water.

to forward discussing those very look we'll of soon. So more

up that, for with will anybody the call. the I on So call open questions for

Operator

[Operator of is Walker from Bank of Instructions] question Derek And your first America.

Derek Walker

one. period in half. maybe 'XX sounds increasing with Dan, Adam's first and transition half quick It remark, just second a from of a the sort of flows the cash like,

You provided kind mentioned, of some an subject growth. you XXXX initial contracts rate distribution some of growth to organic

are sort the moving given sort the interest, dropdowns of about I color, of incremental you So guess just parts how thinking some about guess it's those for I you're how that? I of of funding, XXXX it, thinking there, any guess timing whether

Dan Borgen

question. the appreciate Sure. And I

past, those at commercializing the done, be attractive market we at been but would about to we've the always yes, majority like feel those, tried fully goal looking and attractive first the that's delivering Partnership we've the of parent still everything commercialize Obviously, So, somewhat once things in candidates maintaining leverage we're the the talked sponsor. we at all in dropdowns. challenged. our We've we could is I drop projects know and increasing distribution, do on and by they'd certain those successful so said to be to at down.

able once And at to we be build at say, we've so parent. said, low ranges do vocal different I always those at multiples would the these I've opportunities, Like flexibility multiple. of relatively we'd because dropdown look the been have about we commercialize to

with are things talking that about do these and evaluating, look for So to value maximize Board constantly the shareholders. we'll our we're always and

to and lower. of really So get get cost we I'd say it's commercialized do a fully possibility to first everything can capital try try in but our 'XX, to

Derek Walker

rates you more the South either Thanks, to Hardisty Pace a Did Can mentioned Hardisty with capacity around or the signed just you follow-up. the come that and those was Alberta comparable little color Adam. Government? to existing And you contracts they a maybe spread contracting just for? are did and actually at up the

Dan Borgen

they and we deliver Derek, believer, free -- a to it's this, we and us shareholders. let for our believe just so Yes, say opportunities market on a also we're approached but me important are for us

they strategy and have in And so needed, well the and to terms do of came were shorten as us trying to thought government a in we do, numbers thought-out line to it inventory what was that. their

with case terminal, that The generally us. so, further true good up for driven prices I asset last the available, by any that which think continued were a the is saw is we demand as thing that and think barrel higher was price on that, a confirmation. for particular that this and I

time a priority that so capacity we no in and a the move to we customers and other customers, which continuing facility, way help it as enforce us for and and that to existing want forward I look can the we government the to operating to have this that our customer have our product project. with have think we the that with relationship grow at as both and strategy to to and to including associated work we the as with sound demand we're government additional our we clear province serve for but continue continue country and with would well our maintain a APMC and over of be customers good important new railroads run we'll our continue business so what Canada, that new that that is onboarding out product supports building barrels we and is

Brad Sanders

Brad. is this Derek, Hey,

trains In to drive rail. was a try the of by two day effectively unit capacity actually to their takeaway objective government, addition,

think additional they've of of capacity. we've not contemplating our is Texas supportive trains achieved Stroud Stroud development that and was Deepwater's good that efforts of and unit efforts not most up at if renew marketplace both bringing the and of an all I'm we point extend at it. The that, because destination, and two -- So that's news the and very is takeaway

So current our and it's assets very supportive assets. future of

Dan Borgen

Derek? that answer that for Did you,

Derek Walker

on just Maybe follow-up that. so. a think I

unit not statement just -- was two the a exactly what more that's So contracted? that's of broader It's right? a trains, a

Dan Borgen

Yes.

Derek Walker

right? sounds it Or

Dan Borgen

I they That's we volumetric but state so. barrels to that's than statement for a up sign more about broader or it statement a think probably wanted way, create XXX,XXX capacity as railroad that's how and effectively that shouldn't Effectively a day. and takeaway

Derek Walker

it. Got

Dan Borgen

say that significant And would that to we portion that. not -- so Derek, you, we're assets, just a totality I to would of further that running be but the through of our that have help

Derek Walker

Thanks Dan, Got appreciate it. Brad. it. I

Dan Borgen

bet. You you. Thank

Operator

at we closing this Dan for over have turn Instructions] further I any floor no the And Borgen Thank time, remarks. back or questions to you. additional [Operator will

Dan Borgen

Thank say, our higher It's been of -- really capacity prices. I'm been extended you, at busy. Christy, the we've is into this our We've contract and let we've over team XXXX. me been mid and extended extremely substantial proud accomplished timeframe. just We've -- and what renegotiations successful

today. the to by on And support, both in announcements and really you the market look with spending development our we to strongly their the the We dynamics we're go and that we activities don't that, share. to forward there. customer market in clearly that renew the and forward discussions what have discussions Derek, are and further USDP renewal for The volume they appreciate macro especially and in we're about everyone existing early Thank volume. the us Canadian evidenced with term, feel we ahead doing with Western we're bullish, the Western call, very near you. going the are have we as at and we now, curves They curves to additional we us Canada, sponsor renew sorry, appreciate where time that to and renew but full

Operator

call conclude does conference This . you. today's Thank

You may disconnect. now

USD Partners (USDP) 7 Mar 192018 Q4 Earnings call transcript