USDP - Earnings call transcript Q1 2021

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the USD Partners LP First Quarter 2021 Results Conference Call. At this time, all participants have been placed in a listen only mode. The floor will be open for your questions following the prepared remarks. [Operator Instructions] It is now my pleasure to hand the call over to Jennifer Waller, Director of Financial Reporting and Investor Relations 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

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

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

Dan Borgen

the morning, you, joining on Thank thank call you this good And us morning. for Jennifer, everyone. and

the are strong a to are to the distribution. quarterly our growing pleased partnerships guidance We report intent excited our with the partnership year distribution start update of and to to resume

more enhanced to just which quarter quarterly improved along continue will well our the a liquidity our of and terminals minutes. the reinforced located perform approximately in to in was Adam by our by outlook distribution few our strategically X.X% position, business, discuss the to XXXX Our increase with details recommendation to for relative Board fourth

the customer to our for results take-or-pay foundation strong strong provide our partnership and investment Our financial with continue contracts business. base to continue grade for the produce long-term

to And last of a discuss, free even efforts have times and strengthen a the XX partnership ratio lower. year. leverage As trending cash quarter our X.X updated and to for distribution significant liquidity over remainder for guidance of Adam will management see net to months of flow the continue with the the expects in amount the position our resulted XXXX, the generate

and announced also Recovery about progress excited Unit, Port on or to Diluent make sponsors in destination in previously very DRU our are Arthur, We project, continue terminal Texas.

DRU in We full announcement. July, completion of capacity expect look will August. we construction substantial the And Arthur Port ramping and into reach to in forward terminals that

up contracts at while to XX,XXX will take-or-pay reminder, Hardisty the of the the contracts is the the longer-term contract day because DRU XX a those a be sponsor, with As matched DRU at terminalling a at Terminal, the capacity with ConocoPhillips. partnership services at the partnership, barrels project converting agreements partnership's year benefit the

as well producer not get considered strategy we with be an potential the and social for of at in that and DRU platforms. DRU give our development pleased intend commercial are innovative business, is we asset. an are to is sponsors key The activities. as Josh and DRU start customers update customers bid we on becoming The our other is Transport to agreements are it previous about our media Also, see long-term seeing solution U.S. in DRU secure customers our company our a this of and began we future does as not transport other Goods the which standard a growth also deliver partnership’s the and meaningful Dangerous Gibson remain earnings USD discussions adopt part later with public mention associated DoT There look on more other mentioned our and Regulation critical commodity continue to references calls, industry regulations. to to the additional considered Canada's Additionally, as also and level. refiner solutions We under the terminal are our rail non-regulated will at to ESG want program. where the cash of DRU earnings Hardisty forward we flows fall sponsor our of industry Hazardous hazardous take-or-pay as sustainability behind detailing the call, the of capacity contracted made on and at call, extend support continue to to the to Materials partner the the a do some initiative, to customers. future I expansions focus

look are clean expand fuels growing and we committed on a energy of updated USD some the ethanol, the to to located the including strategically expansion in address to capabilities going keeping And clean to be of our the in As believe services fuels the terminalling industry, uniquely biodiesel. relationships position to clean transition. new renewable believe market assets forward include strong the these We railroads, biofuels offering to We needs transition, our we and with across player sector in are in role continues for forward. demand developments. this a diesel

we develop servicing pool the Texas products Mexico. demand continue refined to and from addition, our Deepwater In of program out

strategic infrastructure. Lastly, develop customers as with grow continue always we in assets have railroads the storage to working transit to our the and and done, industry, logistic presence our we by and

commercial for market and the the of keeping down with an to ahead. candidates off potentially Adam on look updated back partnership, Adam latest some we'll Please developers. the market forward update liquidity we And position. on partnership's these to As going is drop go results us financial our the jump start our assets then are and recent progress. into

Adam Altsuler

this first our customers, XXXX. joining closing after With primarily contracts another XX-Q first issue the today. had Yesterday quarter strong quarter. of of results and our plan the and details included additional on quarter quarter investment morning. for with We our market to we issued operating first the call take-or-pay details Dan, earnings release, grade partnership you, and which thank the financial afternoon our us you Thank for

net net of million, activities $X.X $XX.X flow reported $XX.X quarter, cash was million income cash operating by distributable million, provided the million. and $XX.X EBITDA of adjusted of For we

intention over Notably, of enhanced sheet to balance last continue to partnership approximately approval, outlook XXXX. than our XXXX extended options quarter our first $X.XXXX index quarter during higher the I'll into now, XX Management expects flow, to currently operating ratio relative business terminal oil the trending fourth XXXX the details the paid by announced we that revenue coverage to significant the from down by that mentioned, our remainder second, go X.X%, our net the the was our leverage excited to which free by recommend to improved revenue continue distribution with strengthen results along higher quarter months relative crude same projected quarter the pricing from The to X.X recommendation to increases to is primarily This in the revolving distribution to growing partnership's strong Board differentials, to the that increase distribution results amount on XXXX fourth the of quarters have year. on the previous million have were also its Stroud for our to of of additional our the market quarter an quarterly guidance. partnerships increases. for evidenced higher to influenced We're resume in Management's increase first times strong for deferred $XX the quarterly to Even by these subject XXXX. a make-up Dan our to on offset efforts right partially rates Board keep with the is updated customers. XXXX, the based four significantly cash times which the of supported continue quarter DCF we've of the the just of distribution with the granted Board's generate quarter. first and is Our of quarter, And to is partnership quarter. per its obviously and as the in will liquidity almost coverage facility, to by distribution position, third and credit is our partnership and as lower. connection due produce are the and

first quarter partially Hardisty the agreements the from quarter operating increased offset when the and XX resulting slightly The was in first chain of deferred of rate the partnership of to Canadian revenues with favorable certain well quarter recognition because lower the goodwill, of operating with Additionally, revenue XXXX partnership the in as interest quarter XXXX, increased in with XXXX. first the partnerships resulting of the in debt quarter non-cash weighted first during lower XXXX. the from was associated was Casper primarily in Net of Hardisty by contracts Terminal that compared discussed, the Canadian lower of dollar primarily interest of to recognized that and as the during already in to XXXX, the rates revenue the loss experienced outstanding. first of of similar variance Hardisty costs lower the decrease Terminal compared of rates lower in XXXX. with quarter first a recognized was of balance first quarter average in on exchange as denominated incurred XXXX. relative a a quarter impairment decrease first first compared due the of income as quarter XXXX first recognized quarter XXXX, This of in charge to the was associated the resulting coupled net factors no expense the from This

during income discussed. the non-cash flow cash quarter, first and quarter expenditures interest upgrades maintenance XXXX. XXXX, at by taxes quarter accounts Additionally, the Adjusted and deferred adjusted partnerships of with already primarily higher maintenance the its and of factors for the by cash respectively payments receipts gain a receivable, of of Net DCF relative by to primarily payable X% the technology due paid cash increased capital result EBITDA The operating safety the derivative and EBITDA recognized already current which quarter in in positively impacted quarter, Hardisty Stroud XX% during for partially XX% to increase the a of to was general operating the offset of first during balances. and the included activities slightly terminals. factors for the relative decrease rate distributable interest revenue the was XXXX. increased and and the partnership associated incurred provided operating quarter timing and a by discussed first accounts quarter

XX the continued approximately equivalents and of million capacity partnership's senior unrestricted As with compliance financial facility, $X of million year, a $XXX on million cash borrowing this $XXX undrawn subject partnership had credit cash the of governance. of to and March secured

fourth the basis, the of under as quarter. of May close EBITDA terms to as capacity the the on for the XX, end including first the As business agreement. the partnership's million per April Access an at On consolidated months of $X.XXX available its X.X% the of The end senior record of currently annualized with partnership and borrowings outstanding payable agreement, the credit representing XX or limited at May on is This partnership of is cash partnerships declared of was XX the Pursuant partnership's secured $XXX increase revolving of financial X. of on of unit the at distribution to March defined in credit facility. borrowings borrowing quarter, X.X unitholders first had the $X.XXXX under XXXX. XX. over in $XX the an distribution distribution is declared the per million cash quarter quarterly the cash trailing equivalents partnership of times compliance credit to unit facility the credit governance approximately unrestricted a

Given quarter. scheduled Port are third we come the our and online to the and sponsors projects DRU at our position liquidity Arthur improve growth in

our to on I back to to Dan. and about that, would call be like for turn holders. to focused our long-term with future, the we continue enhancing We unit excited be And now the value over continue

Dan Borgen

us you, Great turn -- your that. on appreciate Adam. project leadership and quarter, to have Thank him Josh now we'll a Josh give Josh. update

Josh Ruple

Dan. Thanks,

to activities construction in is to in happy DRU development This Most Hardisty lot our me process major joint are progressing time as and and per is that work commissioning. team. operational a the activities our on partner right plan project DRU nearing in in teams with Gibsons. project well. now a first whole of extremely efforts start for budget. handing joint on those construction with report project Let are Hardisty the at Hardisty completion, of our our I'm The we're by off

extremely Now good per similar are project goals. hub PAT we regarding we making rail progressing we're refer regarding on our as PAT, again, the destination activities development often progress Port Arthur and plan to positive have our USD's terminal whole what or execution. story as a At a execution towards

expectations the and the of I'm echo of pipeline our will to DRU marine this again and budget. Dan's commercial earlier collective the connectivity that to And July related you. this team terminal tankage aligned rail regarding we've at hurdles project challenges August very given our Arthur, proud project on in year Port Hardisty and as Dan, schedule to whole, we Arthur of I'll it completion local and Overall, back our ramp shortly in on both are pandemic all and specific substantial Hardisty the had the and weather infrastructure, Our comments happy facilities, expectations. construction scale Port to a faced, overcome, hand full thereafter with that, of with capacity reach

Dan Borgen

you, Thank Josh.

get that. us turn and market and track We'll appreciate keep to there commercial the effort so update. the all Appreciate report. project, Brad on now on a to great Brad. Another

Brad Sanders

Dan. Thanks,

efforts good activity, given economy, accelerated continue of of start transportation some to the the is trend supporting prices. of crude for economic Let's and to And the vaccination reopen strengthening this resumption course the of fuels with demand news rollout higher.

as the production XXXX. Texas bring production to new by or West has aggressively price As represented a barrel. week, At shut-in or WTI near and in crude $XX to these are responded index at US price specific on industry increase are focused of this levels, the spending to Canada, back prices Intermediate

has greater days. All Canadian of production led returning those levels this in pre-COVID to than to

and crudes. supportive Western Canadian story We for have a strong very supply

higher. supply well. recent at These higher barrels higher the levels for to of competition naturally historical of levels higher has levels history levels the origin have apportionment in ultimately capacity, is been egress previous led discussed As which fact pipe apportionment export to trending This levels leave calls, drive inventory and Current over levels this stranded are levels in drives recording XX% and in XX% happening as past. higher. apportionment are to inventory at end

Finally, they rail that drive level higher correct by ensures egress to a inventory prices to levels barrels can will ultimately profitably.

happening XQ and are of experiencing by we towards this this trend will egress demand terminals, We upgrade stages both XQ, levels early late through and are Hardisty and utilization in that today. in that expectations terminals USD's early pricing and and in Canada increase origin are once XQ higher. rail send will our rail At drive CCR, turnarounds

contracts and it price Naturally to this is Stroud that the there. rate will will supportive evident our story our our a of attempt and of pricing and USD's bit currently occurring efforts our Cushing continue This to supply Finally, Bottom point the of at a in little is is incremental potential in attract refining extend in egress last mentioned pipes attract the we reductions in is asset Cushing an to renew the in and earnings need Mid-Continent. supportive demand inventory business. impact of incremental view to of call, macro line, barrels to of the at to fill is and need supply premium me. excuse and Cushing by future in and this

at Canadian remain therefore levels levels, greater So have than production continues to Cushing high options and to high alternatives headwinds environmental pre-COVID incremental egress level, and we returning to strength and for regulatory due risks struggles find supply. a

from growing commercially these in our customers then forward market anticipation of service our are conditions here. priorities first foremost, and our demand contracted Given going

has importantly, to and then it Second conditions market competitive X provides incremental Hardisty, fully but and I term an just the Stroud the value we've to cheaper of advantages Port and And railroads sheet to and commercialize on solution where a and basis, alternatives. we growing safety all, risks has can actually commercialize on needs and solutions. advantage is this given at Casper, egress finally egress to volume market it's producers, about as ESG balance egress in time provide a more the your benefit identify changing Arthur bitumen talked capacity just as or alternatives. competitive relative or and on calls, previously given conditions egress opportunities is It current it that growing cost spot solutions addition appropriately both It's to solution, that alternative as described. not alternative that refiners. scalability related given an and and as costs drivers DRU egress alternative relative and discussed, than and phases X Arthur And Port only your basis you advantage

So we're successful both. and potential our we the about stay on efforts being of DRU Arthur and Port at focused in commercialization excited

Finally, I'd briefly Dan our like talk to clean transportation mentioned. that initiatives about fields

United is a know transportation norms States as policy. in in result of As societal and we of a transition in state the fuels corresponding

concerns gas include grow fields space. cleaning first business current and greenhouse these our Given ethanol for priorities our the focus, and foremost in

in to could a talked As we've we to the previous potential and about ultimately expand on ethanol EXX. that EXX call octane grow the and for calls, there's believe wall blend from

other our LNG in fueling. we're states, renewable demand As demand to finally, new putting building as Dan but regulatory the a in in on LCFS working that value we're number and communities in that requirements, work not leader propositions supply network new Currently, ensure given mentioned, fragmented with that hard to the only other to and things working sure we're but is. And their fuel fuel blenders seeing a for producers identify also California, in LCFS locations. Canada where also like solutions then focused gets status growing the supporting diesel blending in a toward of and

specifically our working Houston talk like this about just areas priorities. and of opportunities we clean on for through business and opportunities Deepwater are we model. fuel discussion, our So, community blending us. these that LNG key are In support went Texas support fueling focus I'd closing briefly fuels, In to on

in to that can with change things of businesses that existing need that space to and conditions global are requirements and this. consolidate are specialty current example continue working the fragmented ensure into of chemicals that the work fall solutions an businesses to need with compete we're Additionally, meet create they and the

working that And So, our opportunities advantage that. focused products competitive in like to identifying of provide are supply in as like we're create propane and mentioned example of those Mexico on stay the the is what rail. and that pretty we mentioned rail existing meeting networks so to solutions. those Mexico by customers course leveraging potential for things Dan working advantage capability hard with Dan Then we're on

at Deepwater on the the we're and So, certainly that where we're are it we that Texas about provide. things potential excited working and could

So, to at updates like discussion Josh customers. Josh? initiatives our Ruple last-mile on our he's pass for this the to ask time, development over commercial him to rail first-mile I'd leading supporting and potential solutions provide

Josh Ruple

Thanks Brad.

currently development Regarding commercial it or also efforts good some often see call progress wealth our and transit first to mile storage railroad really we just and We're our with mentioned as starting partners. initiatives. last Brad

the operational the PSR global a years railroads logistics As the or precise headlines for need change the couple think reading for service And all focused evolve, infrastructure implement and now. almost Precision rail collectively as growing. in Scheduled plan of a as improved more or we've is Railroading been new

are needs. these collectively exact growing things directly customers and regionally. tied commodities, in transported to develop demand tied warehousing in rail new with ones Canada service class are all a currently like joint again and is west transloading, network to rail several of working east and assets USD and and Specifically service both to to staging, shifting storage,

them a share collectively have mentioned detail Dan, good earlier as whole. more looking that to is customer they continue and service it the I'll rail work need to option publicly. the back specifically a provide railroads with directly to these to and I businesses focus cost-effective railroads making forward service more for their share bit to the a efficient with specifics with that provides Our We're and to and as And solution flexibility hand the you. progress a we by tailor-made maximize customers to that, as

Dan Borgen

up of we'll and rest open Thank for team call you, the the questions. Josh additional With great reports. the any that

Dan Borgen

our excited levels announcements prospects really growth next recovery Thanks increase story DRU future. We'll like as for the into we this we to again have liquidity day later support returns thank you activity our phase continue Thank taken Port your of and again our in to and and additional partnership you position this as into regarding great and on year. are well the much enhance very future to initiatives and you a we've in the around about and unit. Arthur progress positioned have we a bolster one as projected as want morning. support feel always, the growth other We the potentially, marker forward appreciate look We to call dialing and enter the the have updated steps to the day. pre-COVID keep our to

USD Partners (USDP) 9 May 212021 Q1 Earnings call transcript