USDP - Earnings call transcript Q2 2020

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the USD Partners LP Second Quarter 2020 Results Conference Call. [Operator Instructions] It is now my pleasure to turn the call over to Jennifer Waller, Director of Financial Reporting and Investor Relations for opening remarks. Please go ahead.

Jennifer Waller

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

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

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

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

Dan Borgen

joining Thank for morning, times. staying and and hope is and call today. we good your everyone. we everyone Thanks as support, these during you, challenging safe healthy appreciate And Jennifer, always, the

the Second term well terminals under was take-or-pay Partnership our contracts. solid quarter quarter continue another for long our as to perform

Partnership's a cash enhance an did liquidity million to Directors on and continue the during to generate As the Board $XX on we second our to position. quarter, our debt the pay provide consistent to million proactive foundation we our delever in made financial Partnership distribution profile down amount structure have with position to basis. $XX we our the decision for cash credit intent continue flow quarterly referenced in $X business. flow annual its quarter, is by down Last counterparty which revolver, previous contract redeploying to million The calls, of And our of the certain by strengthen that. and paid business. just our free reducing and And free strong significant

As the a deterioration construction will unitholders. of long in to reduce effort be we business, previously sponsor's construction into rather for term entered excited represents was to our expect to by service Unit, of have performance previously stated, all value and the Recovery enhance of project, Also, the we the not the the the Partnership's any obtained but driven financing, price permits The conscious decision we be secured underlying second in material the distribution continue announced about regarding DRU, Partnership's sponsor which material Diluent contracts or project. XXXX. has quarter necessary fixed into placed our

new support are at In addition, with at expansions term Hardisty take-or-pay to long future existing customers additional currently secure agreements in discussions to DRU. the we and

on while project agreement DRU the sponsor, a the be As of terminal. of because those extended and services the Hardisty terminal long Partnership contracts Partnership's terminalling be will term DRU agreement XX% matched the capacity committed is at the benefit will Partnership's mid-XXXX. the completion DRU, successful with through a the the longer-term up Hardisty reminder, Upon construction automatically at at the contracts approximately

DRU expansions to we business also associated commercial Hardisty partner, innovative and and agreements DRU asset. Partnership's our secure other meaningful producer contracted critical is focus of solutions sustainability for continue remain and customers. a of USD in refiner capacity our and The the as at our initiative, our long deliver of to a key discussions flows which at future cash ESG support with are to the potential Additionally, Gibson, extend take-or-pay customers term additional the part

therefore, Transport several the to our term not Hazardous fall operating the can over Regulations, Regulation does under for U.S. sustainability nor market business be that DRUbit, transport we the Canada's and and documented DRU the shipment look specifically, of reminder, long Materials months We our our as in DRU a commodity. DoT non-regulated Dangerous a flows. long updating future, a customers As intend to our the rail of Goods project progress about forward expect cash as term impact the have the material next on to of

with Now talk Adam results Adam, liquidity on Brad the start an go about ahead. please us commercial update latest to recent back is Then on going market financial jump and Partnership's position. our with we'll and off and developments Sanders.

Adam Altsuler

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

For same quarter to million relative contracted terminalling for net higher by the of revenue $XX.X of quarter portion with the by income terminal Partnership's of results second million, Partnership's capacity of that X, agreements services its provided flow cash its became that the Hardisty at $X.X associated distributable second XXXX $X.X and primarily terminal, million, and in were at we existing the net reported Hardisty rates increased the of XXXX effective exceeded a influenced The activities July XXXX. of throughput $X.X on operating million. operating adjusted EBITDA quarter, cash

with rates exceeded weighted services in of and flow primarily of XXXX, payable such offset from relative the outstanding the Partnership's had the capacity. EBITDA revenue higher quarter and Adjusted income the loss XXXX. of in of quarter. quarter smaller to by Partnership same a EBITDA the Partnership already in and a interest that incurred, the adjusted revenue for deferred rate factors provided on discussed. XXXX revenue entered a Partnership's primarily that of partially interest the second during with Partnership operating the Additionally, the XXXX. taxes Hardisty November owned non-cash quarter, Hardisty offset of accounts the debt the second the and basis general also relative cash of conclusion The by DCF accounts due incurred expense in operating services five-year result quarter operating lower timing instrument transaction our in terminal's factors partially to this the terminalling primarily throughput. decreased second entered partially with distributable the of discussed, Under the throughput to of losses. receipts for payable a balances. the the associated for income by These South average a to for payments the into second X% Partnership the revenue increased sponsor, per contracted in quarter barrel receivable, quarter Net transloading paid The costs currency a as respectively, of increases to Partnership balance were increased and a already rate result interest sponsor, higher the agreement representing for the for XX% was also agreement to XXXX, during derivative impacted net interest at income XXXX. cash operating in by coupled Partnership's in by the increase of quarter, lower Net facility, activities Hardisty foreign decrease the contracted and by provide quarter resulting August the as was a XXXX, by cash Casper at that the customer the third resulting into the quarter terminalling Lower compared terminal arrangement, the from offset received quarter. higher during XX%,

the agreement, its continued in Partnership's compliance with currently credit XX, As borrowing subject million trailing financial to is EBITDA, on to of the cash to Pursuant $XXX covenants. credit million and limited and capacity $X Partnership's its unrestricted consolidated of facility, Partnership June as million of the defined secured senior terms undrawn approximately of cash capacity XX-month credit Partner's had borrowing the agreement. the the X.Xx equivalents $XXX

million As available borrowings as the equivalents, unrestricted such, XXth. was and senior facility, approximately under the of secured June cash cash Partnership's credit including $XX

I quarter. from prior on record the is a The few compliance unitholders Partnership basis, XXth to its declared the or quarter. $X.XX distribution unit with X. unit notable financial amount covenants payable of distribution On conclude of annualized comments XXth. approximately in of In close as $X.XX addition, as August approximately on will August items June distributed at July per on the Partnership the the business same with the in cash quarterly per of XXrd, my a was

take-or-pay mentioned, First, the as continue and of amount the we term Dan significant to over distributable quarter. a X.X, Partnership's our evidenced contracts, during flow continue Xx, terminals generate flow, long by cash under as well coverage of to strong cash our perform free

delever Partnership to is an line in the our paid ability $XX facility, credit previous regarding our annualized $XX quarter, on on which by the basis. second down revolving approximately its million guidance During with million million to $X

paid additional down we Partnership and second addition, bearing quarter in obviously and of sheet our our our the the end the additional since up short, happy about efforts to of excited payments balance piece during quarter, this strengthen are million In the along will disclosures, to In future $X with we quarter. any are the show an see third make debt, fruit.

enhance Dan. believe for turn value And our term over continue back the to We will our long stakeholders. of with to efforts I'll all call that,

Dan Borgen

for Appreciate report. you, positive it. Thank the Adam,

Brad Brad? to a Sanders and give turn we'll him update. commercial let Now, us

Brad Sanders

an to and Dan. it. market. with the you, implications appreciate COVID-XX I Canadian Thank on its start Yes. I'll update

down It's have to improvement of prices in the approximately which are day a down a first is late and in increases demand that not been barrel. of Diesel at still quarter laggard where crude into been been it's then WTI lower COVID-XX however, million Current prices. quite well-documented, decreased careful approximately and second down barrels barrels to reports get by lower material, has but in back as X%. quarter overall jet producers estimated X the result an U.S. as Early was X%, for -- that XX%. As and the year-on-year, demand only and the and period, as estimated modest XXXX and prices as fly. led in were in by demand have from that in much XX% efforts million a prices Canada. has economy production, folks resulted to is day initially. EIA work oil now the down has on a we a led the demand demand obviously shut-in recovery reopen This Recently, today X airplanes $XX on and are gasoline shut-in the of approximately to pandemic. to for crude in oil the decision approximately be eventual demand, to

Given late U.S. of continue to intentions Canada of to in began bringing temporary price, the and XXXX balance the first this shut-in stated so the XQ, do production in process their year. back producers quarter from of starting has improvement in and the through

the in drive crude and have or for will solution Our supply growing need capacity the from that confirm CBR discussions rail export need indicate our export and late takeaway expectations customers again a this starting our for terminals XQ are that XQ, timeframe. increase in crude-by-rail the we with

WCS Now, relative created to outlook. strengthened I'd result prices rationalization that current the -- move narrowing on market supply of a to The to the a or because me, the direct is U.S. rationalization crude Texas capacity. to an update Currently, oil and Intermediate market in pipeline WTI. excuse WTI and a between spread the takeaway current supply balanced balanced mentioned previously, West of have market Canada like market

supply volume So, into declined. And Hardisty of pipeline Canadian decreased by heavy reflect spreads what those in apportionment of movements today the in transportation. rail drove cost between levels the pipeline second Accordingly Houston and takeaway. that's and drove effectively prices. to the Again, during a equal level Canadian rationalization quarter heavy

recent apportionment pipeline and increase indication though, the to started supply to potentially, previously, levels July, seen pre-COVID, where is capacity takeaway mentioned given need, in the apportionment have an As we've again. movement production, movement higher by solutions. some was moving to is add than the level and Starting this now which takeaway market for is rail back it that greater egress producers

pipeline a current operators, customers export that capacity do and regulatory Canadian been in pipeline face generally key and continue our fact has to to is for challenges, as current the increase major all from projects and environmental producers concerns. Finally, well-documented, concern this

of we So, year. terminals expect these production, given through the and back balance concerned, for and our realities, these as we utilization of move start given producers increase demand as will the to bring

commercial Let me on Hardisty, now could, activities I if to specifically. to relative move update, an

focused railroads XXXX, be with slots Gibson. we'll markets provided existing will, the our coordination we with and find we the picks customers. move like up, commercialization our on As so. foremost, on as be available we'll remaining partner we identifying opportunity an spot term into but and dictate focused has any do activity opportunities customers. our have servicing that customer, and We Dan for as we that first have Commercially, and feel commercializing one, in to can

Dan Borgen

problem like Well, at we've end seems It got point. this on a communication Brad's

of all So, us...

Brad Sanders

me now? hear you Can

Dan Borgen

Go Yes. Got you now, ahead. Brad.

Brad Sanders

Okay.

you where So, lose did Dan? me,

Dan Borgen

Starting to talk about Gibson...

Brad Sanders

DRU?

Dan Borgen

Yes, talking our DRU. about

Brad Sanders

Okay.

Dan Borgen

we've discussions, really in DRU. conversations Alright, challenging again appreciate almost getting had -- in working we having there. dealing and finish remarks, weekly comments with Brad, We're and earlier my you what customers, and progress -- prepared of We're I'll regarding in take tremendous expansion new with times, lost around over the even these the our I said Brad, up it their Gibson we with DRU. on commitment. the as we're on dealing here,

these think the report accustomed we of to So I as we communication have your to issues questions -- on we're open continuing we forward. on we're we And that as so all look patience forward move some out you discussions, call. for Obviously, ask challenging and that the that with as to folks for have more those of today. office, always, after working additional

can with on time answer you spend You we're talking be about further any define happy what here. to or to phone questions we'll and call, the

closing we we're realize kind as the few a this that So busy. talk of move about let One, things. morning, me you just into call

cycles You from great the the to the of from us, customers, which us term allow take-or-pay great mid-to-long business. all agreements, are blessed hear with to down continue weather comments we in

on times. we progress this customers updated that schedule difficult face the about In see at of for times of things all announcements budget talked we We've also we're we're I'm as quite vendor be can is see and cash these and That's time. our things and that value and very meaningful railroad all our but I team an for I because you, of We're of ourselves and continue build on most a we've tell are there we're your expansion to you to create and so and ahead our start able of to certainly focused on and the We're on on out Obviously, fight because partners, been completed manage the around had, focused we're DRU, And getting so again, into so to takes thrilled sustain year. that in. we be our continue since our of even and challenging many type others, keep to slightly partners proud the focused continue that to too, develop you of throw it bit to as our once -- strength the We things that But in moving which know DRU, difficult of in some we you and agreements which to should customers, unitholders. so at of these USD, about been the communication creating we for accomplishing on business. control. focused to of through of QX the cycles quality our have. and op objectives point. we set of, you our and strategy today, we good Partnership, and the that started, those and feel off those great cash, busy the all is extra not effort, value. of know, times next and we We'll allow us team find through who business continue projects what have, projects we continue down can't

the about great really the appreciate will look We commitment feel with good rest I and proud Thank a of So appreciate and your very coming And have support. weekend. we and close and of week we're always to of out and to we're headed. that, favorable the more the cycle really you, and team this as -- we do, Partnership, down say, call, your again, more forward results. and just where I'm we

Operator

And [Operator you for disconnect conference today’s that We Instructions] call. your participation. This please does your ask you thank conclude lines.

USD Partners (USDP) 8 Aug 202020 Q2 Earnings call transcript