USDP - Earnings call transcript Q1 2019

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the USD Partners LP, First Quarter 2019 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, Brandi. Good morning and thank you for joining us. quarter call. first 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 XX, press Yesterday a results the release evening, we three XXXX. for announcing issued months ended March

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

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

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

Dan Borgen

good Jennifer, morning, Thanks on the for and call today. you, Thank being everyone.

with quarterly positive increase, We XXth are our the which distribution consecutive stated previously another partnership pleased is and at quarter XXXX to announce consistent guidance. our distribution

to spreads see to continue We projected due incentivize utilize to levels a up capacity have current that the terminals. seen to material customers widening terminals ramp our and and fully momentum of at our nominations in our should recent

the we forward fourth of the higher somewhat our a the half this to rates as first when Hardisty in. mentioned and second extended of on services view look the our for period kick year of terminal As agreements earnings quarter recently transition half we at call we from to transition XXXX partnership

and executed or at Hardisty an Alberta see agreement the increased agent Marketing sponsors Commission government of take-or-pay new quarter, the during rail first agreement terminal the growth to South sponsor will at previously January APMC, minimum with rights is commitment. our Petroleum provide monthly by beyond continue services at be capacity This the will with capacity development our at XXXX the Hardisty starting translating mentioned, terms funded expansion in Alberta. a expansion The momentum sponsor multi-year pursuant also We to contains terminalling payments. of and additional for further APMC agreement The will support Hardisty USDGs take-or-pay the its terminal. our

this is in could with jump dropdown recent opportunity, we've our developments. our latest Then As going other results Adam market sponsor and on back into possible along opportunities the past, start the be future. us to discussed Adam financial partnership partnerships we'll commercial and liquidity the position. for the at update off in with the candidates an

Adam Altsuler

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

conclusion income adjusted relative of results partnership's million. cash operating XX.X the net XX.X quarter of $X.X activities EBITDA quarter during we provided the For of first million, X.X XXXX the The million, distributable reported and first quarter of flow executed that revenues million XXXX in March same the net with cash XXXX, higher of by to by were at were partially end at lower additional by revenues which influenced our our terminal, Stroud the of agreement a primarily April of of in XXXX. customer and contracts Casper terminal were resulting from at associated offset

to higher to of to XX%, of discussed relative the factors terminal, in maintenance quarter first which we Hardisty depreciation the and cash volumes costs also previously operating the primarily impacted adjusted for the incurred by Net for by EBITDA well associated DCF of and decrease receivables, XXXX. quarter, XXXX, to result high associated variable first as entered a terminals, rates partially fees anticipation Stroud by factors November relative loss timing accounts operating by a during with at higher compared the balances. non-cash interest XX% with during operating with as the derivative by first a the the XXXX. were Additionally, a quarter EBITDA quarter our of interest year as quarter primarily offset XXXX quarter higher deferred as as of coupled quarter first by XXXX. operations result the partnership reduction first with compared was cash in our as Net The paid and interest due and already and instrument, partnership on Stroud pipeline which and was experienced the revenue at decreased Adjusted higher payable income of the flow decrease activities rate expense. five of and of XX% distributed of increased in into decreased operating accounts of receipts cash provided payments in to the decreased costs 'XX, primarily discussed,

with undrawn and XXX partnership of X.X million of net unrestricted compliance the financial of cash million, XX, senior and point unit quarterly over continue distribution those unitholders to per leverage as per XX and The including of of As leases. liabilities cash the of covenants. its January declared on partnership on $XXX adopted update unit had XX sheet growth over capacity classified X% the times and basis, XXX prior assets available leased XXX covenants financial EBITDA on quarter which X, cents requirements financial lessees and quarter, balance Effective based of accounting borrowing payable equivalents total the a liquidity cash leased X.X% standards On for ASE secured the is XXXX. of XXXX-XX May its of X XX, credit LTM with close partnership its annualized business compliance requires April of May distribution facility, operating and March a adjusted first partnership of million subject The covenants. a of X. on the in XXXX, million at represents quarter by an on the is or record XX $X that to or recognition leases

a period As mentioned, into are with increase the coverage of to XXth first the somewhat consecutive quarter, the quarterly which partnership distribution of And XXXX we've experienced. pleased our be than We our announce as Dan to is to distribution mentioned, we XXXX this typically look of transitioning transition had with this guidance. forward half distribution half lower second for stated we previously previously we expected consistent from crude terminalling results agreements in Dan. services will and Hardisty extended begin the and higher between to show rates our spread at WTF when up customers of oil call to the our of to recently terminals, back WCS barrel year utilize their over our I'd financial turn incentivize the forward capacity that, contracts suggested to our With the as curves like more by today.

Dan Borgen

Thank you, Adam.

we'll I'll update. to overview shift an Now, Brad us commercial and ask our to update. give Sanders

Brad Sanders

Thanks, Dan.

inventory people This away capacity pipelines, out as and are at the crude strengthening government are for export all a we building are to for mandate production in as relative an so crude see quarter cuts the the wide began This on at we continue and in imbalance a values prices, by for a those where producers there's barrel, to cuts between WTI. morning that trading $XX.XX well we as to continue weakening by their given values changes given last they've and of WCS which need moving specifically. we've to though, last rail. achieved Late Despite inventory indicates we've take and rail WTI backs So that levels apportionment worth the for week, high to prices have that XX see currently primary $XX, XX levels. incentive as objective. levels seen net of high began seen to origin premium Canada, in higher Houston, values of approximately December then who year, to supply XX on

are our we an role Canadian provider rates, busy clearly customers that obviously solution facility as utilization is at industry operating producers at indicative opportunities. given egress need our which of very So who high and and for

work at our with existing on to and mentioned our commercial final extend in Dan to Specifically Stroud, the we final both our with renew working to activity or Hardisty are customer addition APMC, Stroud. and at that and Hardisty

the had as So we've period that's commercially take of indication than success capacity. gone through this good of away pretty a we've supply greater

We expect able our to be prior progress next that call. on to earnings to announce

lead we're excited the two provides about As Casper that is opportunities One Express working more of to off investment Casper. demand connection refining want specifically, us currently with capacity customers that working we're to the on it Express who crude their line, on our will you the specifically those? by solutions to take are for But improve pipeline optionality also update which an there. for Enbridge at we're and relates on on both Josh, give rail system. direct very to

Josh Ruple

to regards engineering the that and in activity within project acquisition pipeline the procurement, deliver Casper, on the at down project with and working is budget. away organic time We're per plan. growth connection associated in work the we path Absolutely, deep right will

an be and are to quite now as part of integral creative with and where so Our the associated that Enbridge Express solution, are also Enbridge well. project Casper complete you a both of folks And pipeline, mentioned working going both right substantially goal excited becomes we November. in solutions and closely is the Brad, the overall have lot about with

Dan Borgen

our the Texas where ask so our talk a we lot Thank energy. as you. of spend Alright, look to and at our Brad upstairs sponsor, bit opportunities Mexico I'll a update about little we Deepwater expansion at

Brad Sanders

so both and reminder Texas a provides Channel function a pipe and and doc. on is access Ship connectivity local and of the Dan, bet to You as as Houston water refiners Deepwater

capability in very destination given crude building we the up by naturally, excited So for story Canada, about are rail.

barrel exit out in but hub Canada, that you Houston naturally And Ship to need Canadian provides to or of For heavy to are destination, with connectivity that Channel. in demand. of refiners situated not destination a that we the uniquely the multiple every out here egress only Houston access match that seeks a

excited we're that. that's a about And currently. priority So critical

origin a addition, for building going the and make on happen. specifically, there like to natural talk little real about Mexico a values what's bit and that bulk have we'll In need we this, to in that on is for given maximize into products Mexico

As we supportive finally, levels and crude cams discussions you'll export export and of seeking connectivity and and And logic. through we're Houston, things NGLs, in how distribution distribution talked for solution. opportunities and all pet the industrial that various product, Mexico, makes at like details then in see of

you excited So about very, generally. Deepwater just want very Texas that. Josh, about to we're talk

Josh Ruple

pass our additions that the think efforts. and are by just remind make to is opportunities I all to on those call the permitting Yeah, of supported folks

some now. loading we're And for that the Texas into are work. good. at things quite the mentioned, a destinations We be scoping is all to have origin live competitiveness Mexico. cost of connectivity Houston, though, we're hub, very story refined phases an it planning, delivery various of and at and for a the path, all as projects beginning the crude going of by the quickly move product are talking projects; are of point barrels, also, to rail been stage XXX% and as those of in shovel-ready We're about on developing able Deepwater down you the timelines capability the then aggressive each to in development, and development well export quite pretty we've then just the whether in levels options this far at the for Houston critical while our the others All network project

Brad Sanders

a Both is have our Thanks, priority Josh. those is both have Specific to down Cuauhtémoc. growing of of there and of Cuauhtémoc successful as those our terminals both outside operating and at our operating been currently Chihuahua. reminder assets with are two Querétaro customers. Mexico, we existing today, first just

terminals the purpose then and have customers growing very of and network taking our comfortable terminals. had logically take to these grow at we're a to that they're success, our additional create specific With success of those want with logic So two on very, them. terminals and

provide talked from the learnings we'll taking have first a those I using and creating origin, is economic which Texas two finally, of towards basically solution specifically grow about which products facility. as Josh a Deepwater can will network. unit at like into So sense rail And rail origin both train work that is our specific terminals leverage solution, which then to as people makes a our better solution and we origin,

success So those we're Mexico new we into our we we and about very size how bets, excited how about growth leverage grow, and opportunities. how we're purposeful

Dan Borgen

Thank you, Brad.

that process with and Just had seen Deepwater, a soon barrels have into date which a agreement additional that Texas Shell of to with fuel the approximately will XX,XXX rack originally to back capacity will Shell at many completion very comment an service at on you moving and that into idle on with are putting that, new redeveloping day sponsor to Texas be announced have in to diesel West that, some move ago may we built Mexico. our of years we do a and up

demand out So leg that's as Mexico and to a more development, look needs Deepwater getting look we're that into Texas excited for within West product first future we ties about obviously but is further Texas to that, the that opportunity, development there. moving sharing about forward additional and but to of meet our

questions talk over to and with for happy we'll So turn it. that, to it

Operator

open floor questions. America. [Operator The for Walker Instructions] comes of First of question you. is Bank Derek Thank from

Dan Borgen

Good morning, Derek.

Derek Walker

good morning. Hey,

Brad Sanders

seeing to forward next you Look week.

Derek Walker

new Yeah, definitely for be and so venue a sure, nice. it'll too,

Brad Sanders

that's Yeah, right.

Derek Walker

coverage about also think quick half second Just coming in you this mentioned we also given the the half how for half products Dan, guess of cadence line well. I last to quarter a where I quarter? you're you're about a and this came second couple sort the growth And kind of they and quarter coverage couple first And thinking think sort should how of from the of period improving. reiterating distribution ones year. transition the that of the in as have

of me through I and of walk sort the kind think how cadence thought sort of year. for the I about so the there guess, process So should

Adam Altsuler

of at Casper. that's spot Adam. right, Yeah. No, And this lower our Derry, I'd this result was coverage is say volumes primarily quarter

spot So implemented well by as on cuts on the spread business. know have government and the Alberta impact you production the did an

I and matter, actually However, this and curves increased for year Hardisty suggest the this morning. business think increased at and demand the strengthened with Casper actually, forward of at starting they that half second

forward. and on seeing widen, November structural that spreads And on of we support we also progress to It's So to enhance that. the our change open sure and about term discussions to future about on market Brad the spot are up will help our Josh at scheduled we update will will a we complete talk At business customers to already are new Casper, with going the keep new it'll an talked think connection. we spot customers the outbound be Hardisty. as of gave and we've in there, are that'll of the that discussions about, updated that think do which a renegotiations asset and think sustainability said, in and we any but new business we pool pipeline with

July. kick second kicking said, extensions half our and along So rates the in I is of just contract view what in the the new will year, renegotiations Hardisty also in this with the from but

with and an the our spreads, with see increase connection to in times. we'll coupled at X.XX that target widening distribution like feel that we the coverage we'll So coupled continue Casper,

Derek Walker

that could I just get that. for color or some kind more of Maybe some Thanks around Adam. just if elaborate of

just mentioned maybe the fair that you is is be onetime spot And quarter. a then on is and of would quarter, to expecting rate, kind contract XQ starting of today spot similar of factors sort that you sort a for you most where So you that lower came need for next to - MBCs XQ should this a it kind is XQ, of and the so of coverage to be, a the in with mentioned? get by coverage would the we improvement for derivative backed lots obviously, EBITDA MBC for the really in your of

to moving some parts of try understand the there. Just

Adam Altsuler

as a helps. I with throughput then terminal. at get We've fees Sure, some we the associated fee utilize they Casper that always think usage. have that spot it's the then commitment agreements - tank got But

So a paying are the to in reservation utilize money. really I terminal spreads when fees think they're the these

above like that average will we and times QX see for year. kind up QX and then in for and be in do we feel the one So the ramping of QX

signed in talked that foreign getting XX per an over exposure be things got been the With the regards supports your relatively of in all we change of that steady paid change of those that are and there to especially only the any much. last rates. have - kind the kind point, about we So connection. MBCs kind The at the we've months. contracts but there, one would pipeline Casper, the MBC, always contract basically new the underwrote To are those we don't exchange escalation that's

Dan Borgen

an new Which under contract seeing starting. the increase in the we're MBCs

Adam Altsuler

Yeah. that July, those of based higher new we've XX to kicks bit contract And get that are the months. those within rates are obviously, are little any escalations, to that in color past rates on on based new over new the tried a

Dan Borgen

So in, we've we revenues on points, our good somewhere first agreements five, increase. that over increased got rolling with our definition increase in remember increased renewals XX% July, approximately that an at flow our XX% cash now coming have around price base into around

about with that feel feel about ability to So continue our we guidance. very confident bullish and our

Derek Walker

with know kind about that point? Thanks, expansion USDP of or additional sort that get And mentioned the you're how this I government this think me, type don't there's maybe parts scale before Is South hey, talking And executing we're you the for Dan. that a moving of for the or lot about one sort of if for broader Hardisty drop Canadian additional what more of to kind just you might your into that of be first belt want kind agreement? beyond of then contracting sort stepping contracted under the So last Thanks, at for opportunities year? project. guess, that downs capacity Maybe of of Hardisty kind and one for fully beyond of this the Adam. the then Dan. I question Is agreement South at dropdowns? seeing

Brad Sanders

Brad. is this Derek, Okay,

was capacity four efficiencies and As it planned means the in relates are and to work our per extra month. is to Josh that capacity that slots referenced doing the that railroads capacity. extra work driven create That Hardisty the to somewhere together South, seven really good primarily to is around the

to So material. we find that be

when when and we today of but capacity, of very and the want already are they $XX spot. up those that patient slots be very those we differentials demand as spreads remember, will where return. we spread know XXXX. as basically wide much marketing at the available, $XX.XX been And you widen given forward, that $XX spreads n in at the about the see earlier, market if look we've timing in starting Given as between in we've seen spreads out pent to And would participate Hardisty spoke

to be we spot design we're facilities in our and So all and it's expecting our always capacity windfall. a grow. In have of windfall will slots there, widen activity. capacity see for That's activity spot spreads Casper utilization at simply that to for given Adam? that demand those is, the excess

Adam Altsuler

I'll question. dropdown and take Yeah the Derek,

MLP to capacity, to take. re-contracting, expansion Stroud, de-risk de-risk and Hardisty with the risk to regard kind that our any full really there is would I with think and finish So South, goal to construction the have of them get them the up Stroud

evaluate board well. a the is evaluation really our parent evaluate day, commercialized and and true would markets and the look and the of at We and our them dropdown is at get meetings always goal as de-risk we then in kind dropdowns. then day these the de-risk been obvious we'd of to things do then the capital to but So constantly them full, get

Dan Borgen

be conservatively, - our great increase. to give about our our around be to able that do which good continue And XX we to unique pride in distribution we take us was the And it feel guidance guide we able troubled to that. revenue ability investment positive Yeah, to to always able to that. business that's we've based, maybe and what do done fee our done quarters. high That's that's allow quality But be backed meet very to for business. what now in and up we've guidance through signed waters grow grade and we've streams, straight

very change where And So again, in want think we that sure to new very it see done, good with get about which coming we I we make feel good are our happens. that, that we we said Adam online. that well, about. no feel contracts all and But we

Derek Walker

see I it, it. next to guys appreciate forward Got week. Look you

Adam Altsuler

it Hey, next week Presentation hopefully eye Derek to like going to Investor before conference. your well our the out publish we're - keep looks update that for early help

Derek Walker

Excellent, thanks.

Adam Altsuler

Thanks.

Dan Borgen

Thanks, Derek.

Operator

private comes next from a Instructions] question [Operator investor. Roger Your young,

Roger Young

Thank you.

product. the your LPG Regarding an Deepwater is for opportunity primary assets there crude Texas the exports with whereas focus and

Dan Borgen

one Good to a to designed able you crude, well as for business We've customers. Roger, be tying refining to destination an of four right, heavy both being be into hi, be for to for to the create kind in areas, blend Canadian and facility would Yeah. stock as our a talk investor. light suite so thanks blending

of that's part it. So

Second, the export of with is course side. LNG

Roger Young

LPG.

Dan Borgen

LPG. around Thank which an we with have that. folks And you. discussion on earnest going Sorry,

specifically, as as go products well spots to both and as chemical about to to talked to products, our originate yes. just side. West well side question so answer like And components. Then Texas the as Mexico and then third refined component is your refined and We

Roger Young

you. Thank

Dan Borgen

Sure.

Operator

at or Thank closing further Borgen you. comments. Dan additional I'll to time. any turn over no now this for There are questions floor the

Dan Borgen

capacity Okay, successful appreciate have thank the terminals we through said the Hardisty today and XXXX negotiations Obviously, XXXX as you with contract amount extended very substantial Brandi, I at it. our respectively. been of

to this a forward We're the earnings that and year we're be create for look working every with of continue something at We'll through the value to updated we we'll And next and shareholders. customer. announce look our for as actively customers making progress and forward As and contract said And we we've again. to before and we commitment the Stroud USDG. our Brad of day engaged our all reminder, earlier, hard usual, to there our more continue regarding you to capacity look call. you. Hardisty USDP substantially appreciate keep announcements Thanks to with your additional sharing to end as

Operator

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

You may now disconnect.

USD Partners (USDP) 7 May 192019 Q1 Earnings call transcript