Earnings call transcript Q1 2023

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the USD Partners LP First Quarter 2023 Results Conference Call. [Operator Instructions] It is now my pleasure to turn the call over to Jennifer Waller, Senior Director of Financial Reporting and Investor Relations for opening remarks. Please go ahead.

Jennifer Waller

Good morning and thank you for joining us. Welcome to our first quarter 2023 earnings call. Operating Dan Financial Chief Chief our Officer; Josh our are Altsuler, Officer; Commercial senior today as Ruple, Chief well our Brad Chief management me team. Borgen, members Executive our Adam Officer; several With other as of Officer Sanders, our Yesterday issued release a announcing X for the evening, ended March we months XX, press results XXXX.

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

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

comparable press last Finally, reconciliations to today’s Please measures. call see most financial will financial include release for non-GAAP of GAAP measures. night’s discussion the

And turn with Borgen. the to Dan that, call over I will

Dan Borgen

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

the volatile. quarter, surrounding Dilbit oil continued challenging for market difficult Short-term continued Canadian heavy the During crude to the macro. be to has market partnership and see conditions

transloading expansions While terminal joint Unit term, current we Hardisty at to sponsor’s business the from more still remain transitioning the to Hardisty sustainable our at through primarily to we longer are and Diluent secure Dilbit venture. Dilbit transloading terminal, working DRUbit fill near-term capacity to focused Recovery on

cycles within by the for DRUbit similar egress experienced rail solutions in fluctuations the industry. during we’ve demand years, Over the our

at market in XXXX this also conditions of and reference, XXXX, transloaded a examples the terminal when include both lower were challenging. respectively, Hardisty As our volumes

the of and oil in recovered life we we to that barrels has to the the transloaded have date, industry. the our to approximately offer remain terminal at Hardisty XXX confident million value and Hardisty volumes we terminal, crude renewed However, and

of potential additional lead that multiple benefit DRUbit and take-or-pay of discussions customers by partnership’s DRU could the our of the our regarding increasing network the and project average venture our of the flows a at encouraged cash by the quality successful progressed terminal. to sustainability sponsor’s with commitments terminal phase first of rail long-term significantly completion discussions have We portion remain these the the The tenure expansion joint agreements enhanced partnership. services will partnership’s Hardisty Hardisty of that the

moves We netback with day As with of and footprint pioneer help Pending and opportunities that and we’ve a that lower product a new year customer handling of we’d a safer, end through program. the to markets. creates that we Terminal. be customers million have nonflammable planned terminal. a reminder, expansion XX XX,XXX DRUbit enhanced DRUbit successful offers barrel great through date, moved carbon barrels are blending our nonhazardous, DRU, egress the the approximately pleased the XX solution approximately this for per million encouraged To an DRUbit remain barrels our Hardisty of Hardisty

would I Stroud million acquired customers handling, but we’re more in about Terminal of crude it – sorry, Terminal XXXX. approximately there. Hardisty, Stroud are remind the paid Stroud terminal Brad in but like crude our potential grades at for has moment, heavier that itself just we more heavier during at to to discussion to underway The than ownership, XX since with Like oil. not the done handled we’ve transition will oil talk terminal the of to a everyone barrels

free quarterly suspend pay to operations to to and cycle, As difficult distribution navigate the partnership’s we continue potentially to utilize cash the Board down Directors to the partner of of the the general support made recontracting debt. flow partnership’s partnership’s the decision

of This strategic partnership means. year. wasn’t the of later made for by for review believe we or a senior this, and prudent be lightly with positioned to our do thing this or measure, alternatives credit of matures refinancing recontracting will decision secured the this it any all we was Given both before proactive replacement management’s best coupled facility

As a XX% the achieve unitholders very sponsor partnership reminder, in more approximately cash in other the the of currently continue both the as well with to as, return success. sustainable long-term aligned importantly, owns partnership is and seeing unitholders partnership seeing to

our distribution to decision, have hopeful that at was in the we we past replace our in a terminals. able and will providing we to remain if future, to difficult we or the be to steadfast renew are restore this While in agreements our our unitholders commitment value are as able customer

is Adam liquidity partnership’s position. the and financial on give our to Next, results going an update

we will will and Adam? Brad about commercial market back talk recent Then and developments. jump

Adam Altsuler

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

on net adjusted associated million million, cash distributable flow and million cash of activities Casper sale phase $XX of first million used of the negative Terminal. EBITDA the March impact this balance cycle. of of plan approximately which with of strengthen closed income $X.X liquidity net of We the EBITDA and transaction operating was successfully of the million. Casper during sheet $X.X on partnership’s recontracting The partnership reported included $X.X the in $X position Terminal costs XX, of our for Adjusted sale the to $XXX,XXX,

We the down distribution general The to Board with the flow to quarterly of counsel free evaluating and potentially of engagement and and Board as cash Directors of the of DRU partnership’s senior and utilization our mentioned, and Fuels Clean rationalizing operations viability our support consider alternatives. forward look in advisers as We of capital we financing and we and the updates the pursuing initiative, long-term sharing of believe this the debt are strategic partnership’s key also to partnership’s of suspension as sources. more Dan next partnership’s As the the assets long-term the approved the assist the to to partner financing we approved the strategic Directors months. structure of pay and these network financial options management Board in sponsor’s business. phases committed grow coming partnership’s and components alternative securing on of

primarily And the Terminal revenues relative now result at were for partnership’s the a the due exchange in lower Hardisty of revenues first quarter as XXXX the of also the in capacity. Canadian reduction XXXX. same the quarter, were due in rate the unfavorable contracts the XXXX an details from Hardisty quarter for during lower partnership’s as a dollar-denominated to of quarter of to first compared Revenues on at to lower XXXX variance first to the contracted quarter Canadian the

Partially at effective Revenue its Stroud current XXXX. an July to XXXX. operating due as with partnership throughput X, period. partnership’s prior due in compared was sole increase contract year this the lower quarter of was to the a the XXXX first the increase terminal compared as to period Terminal the to Casper the services at of slight in customer first of the decrease terminalling conclusion partnership’s lower costs quarter offsetting in the revenues The during achieved

the Hardisty Hardisty the XXXX. decrease as were fees Terminal pipeline compared lower, already to quarter directly associated to first mentioned the is which Terminal revenues attributable partnership’s with SG&A of and in costs associated

costs partnership’s due were decreased rail terminals. subcontracted In addition, lower throughput services to at the

resulting expenses Depreciation the the the and September associated impairment at first primarily the the the assets of carrying from also amortization of were terminal Casper decrease in quarter XXXX, was lower in in that recognized with value XXXX.

first this by first Partially the and Terminal, XXXX in depreciation partnership’s quarter the related assets amortization sale costs to the of quarter terminal addition, of during SG&A expenses no with the in during associated decrease the discontinued divestiture the classified assets of January the In Hardisty acquisition were expenses held partnership South for were its incurred XXXX transaction with quarter the offsetting costs offset as incurred the the XXXX. of partially Casper as acquisition Casper in incurred of in year.

to in income, year partnership of The year. first quarter lower during reduction compared comparative the a transaction this is partnership quarter income of loss associated gain net with the quarter interest due rate compared had of the net net XXXX the The of generated as primarily in partnership in compared million million period. of offsetting noncash non-cash higher the first of XXXX. this partnership’s first balance of the to in income recognized resulting $X decrease also the the as XXXX. recognized debt first quarter discussed, to first coupled quarter higher to a to first rates this in The of compared from higher interest the $X.X incurred and of expense quarter first the as foreign quarter interest as loss XXXX, outstanding during Partially this with the factors currency derivatives already year

in accounts X activities $X.X $XXX,XXX in operating of The by for XX net March million partnership operating had activities net cash the deferred The the from provided in by operating receivable, of decrease months and for also compared operating year of as of cash to period. prior payable ended revenue discussed. used used resulted impacted receipts partnership’s activities flow accounts payments the cash cash already factors the was balances. and the Net timing general

decreased factors current the first of to cash due impact the when prior already $X.X quarter and to also taxes the for compared in year. higher EBITDA to for the period the when compared to decreased Distributable same XX% and by XXXX Adjusted interest flow paid million quarter negative primarily for discussed. the cash includes

agreement, XX, borrowing financial X.Xx the unrestricted of limited approximately to on the terms the XX-month Per of $XX senior secured partnership’s undrawn March compliance the trailing the equivalents its $XX its of capacity and consolidated partnership subject of was of facility, million. million borrowings partnership’s with credit approximately and EBITDA. million cash $XXX to amended available $XXX As and covenants credit continued had cash million borrowings,

the the equivalents and available unrestricted of cash capacity borrowing March secured such, borrowings including was facility, credit under $XX XX. senior and as million approximately cash As

million borrowings proceeds partnership Terminal facility the to and of of the credit of sale support purposes. used general partnership under senior repay its Casper proceeds the $XX April XXXX, In secured net from remaining the retain approximately to

of unrestricted of March cash under covenants with of credit facility approximately million. as the had partnership of compliance partnership was million borrowings April equivalents financial XX, As cash its approximately senior XX. its and and $XXX The in $X secured

And partnership’s program. DRUbit mentioned, by rail we lastly, the encouraged longer-term our are existing and focused on to remain Dilbit as capacity Dan by sustainable converting

that always, to with more we in updates forward on sharing future. the As you look

to And that, call over like I’d with now to back Dan. the turn

Dan Borgen

there. the Thank commercial the it over update. to pitch Appreciate Brad? update We’ll you, Brad Adam. for

Brad Sanders

Dan. me. Thank you, Excuse

is supply opening the continue U.S. near conditions to at and less Spreads Canada macro egress economics. As in This the indicates dialogue, continue Canadian Canadian or capacity. Gulf you between your price mentioned equal challenging. be Coast to to or pipe than pipeline

egress though, where environment only XXXX we’ve should projected calls, previous growth sufficient enough is on The unknown, is to As should when. this supply stated, course, exceed to production one pipe it but capacity. be not up, that Canadian macro the show transition biggest does of supply

rail is half conditions parity. inventory to materialize the should high the Hardisty levels, more commercialize remains timing second of in second business to capacity and our this likely given our more has Given Canadian traditional renewing potential ability current then issues, crude growth in XXXX. market now and be it the in to challenged, return these contracts the by possibly ‘XX, appears Dilbit and likely the to half of Therefore, our

is update really to quick a to DRU. on give Dan there earlier. what Effectively, me nothing messaged Let add

to me business One, continue are and customers by we momentum And what Dilbit with and to and purposed encouraged rail our is two, have solution. sustainable advanced potential to let progress. transitioning simply we discussions their a committed competitive more with So critical. and restate are DRUbit

ask operating I’d regarding performance an the Now DRU. like to to update provide Josh at our

Josh Ruple

operated to Gibson, unit regards our quite by partner, DRU Brad. performing is In well. Thanks, operations, that

aligned Our per also are ratability, DRUbit mention we’ve per are run commercial spec. condensate I’d percentages Yields like rates, and our recently with plan, and and for to And both efforts, both and operating also feed. unit Dilbit That and multiple a on plan. volume designing proved completed was range Dilbit feed, of to handle of a DRU successful was an a test flexible alternative alternative our test that feedstocks. goal on an

So do. it the quite unit with it’s for doing overall, we expected planned DRU and happy and to we’re what

to back you, hand I’ll it Brad.

Brad Sanders

That’s great update. it. news, Josh. Thanks, great Appreciate

update a asset, rail Finally, I’d rail our provide the terminal. quick to Stroud Cushing like on

North Stroud in for As is tankage connectivity the crude a and advantaged both Cushing reminder, the hub. and producers hub only largest refiners. Terminal more the rail And America, importantly, providing is supporting asset capacity our

in U.S., the blend Cushing stocks to the Coast. hub the and in refiners Gulf Midwest provides largest tankage the As access U.S.

also cycles, provides his on or access for I’m importantly, markets macro relies opening Our both and as at mentioned rail have unique access – egress does more pipe Cushing micro statement, and sorry, advantaged but egress that production connectivity then Dan to not access rail in market for during advantage origin and access. to

third the waxy solution throughputting beginning basin’s of market unlimited. is ratable quarter ‘XX, the constrained production. Cushing we growing part our destination at as logistics rail Uinta from for basin to crude to In the that At in The this the access access growth by scalable primarily vein, via begin and rail assets, ability expect new is destinations. and of

steps. and to and So we’re startup excited updates look business initial its potential new about and this forward next providing

to pass Dan, back it I’ll you. Now

Dan Borgen

questions, thank Thank you, With that, the Brad. any open up for you. we’ll call

Operator

Kyle Sidoti our Instructions] [Operator from May you. Thank with come question Company. will & first And

open. is line Your

Kyle May

everyone. Hi, good morning,

Adam Altsuler

morning. Good

Kyle May

was you potentially maybe provide it around would great. when refinancing? start would And color we could with if Maybe wondering on on just reinstating could progress I – would you additional be the details distribution. wondering new some if Any contracts, take that. just plan

Dan Borgen

renewals. we state that never Kyle. that’s the like it doing, but in with given Sure, re-cycle something address to was felt we’re that. prudent – Happy the like Obviously, we on

back to get which, would look So clearly, being extension to speed. have increase as flow to look our distributable distribution both and/or able our new renew extension, we of see – one contracts Dilbit hopefully of – the up soon, we DRUbit that one our cash DRUbit, being and we then and be existing

So this the renewal for also not revolver year. our market season, season’s I re-cycling the here, the the of the but do our end have think only have we of we year, long-term up at

kind of increasing. would can double we highlights this have we as then look as prudent the Adam, year the to we – trying but so about. of be And go we’re that And a just soon see And renewals, ahead. to

Adam Altsuler

right. to cycle. liquidity And And recontracting that’s obviously Yes. quarter every debt. exactly this I as mean we’ll our it and our position, No, we do us get did something evaluated net that continue said, this Dan I think reduce by preserve just is our every as to Board, reminder, a that’s through quarter.

Dan Borgen

or Kyle do further need Does color? that help, you

Kyle May

us the conversations terminal No, that’s wondering I you’re very a you bit agreements. confidence touched having And you’re can you that next definitely about seeing network. kind of if helpful. more what then maybe in talk of or for question, it. detail the just and discussions, give appreciate some maybe about recent little those kind of your the new on DRUbit in And winning

would Just any more details be really helpful.

Dan Borgen

would say if remain jump completely. cover in, to it would we and I say then ask I But don’t – Brad I’ll confident. Yes. very I

we’ll And to weekly we we that when volume. well are say – and I on obviously, customers see quickly we wish, existing share with but it discussions have have discussions, And mean, look forward happen news we new to can. active as to as believe as customers we We we had a being would Brad? faster, their having, that it size increase that very would soon. that able as result We happen anticipated we faster. of

Brad Sanders

Brad. overall, Kyle, and maybe with would I financially that with would would – is performance this say our reliability. and as most customer well. that messaging the is feedback they’re say performance one is be our happy happy I important

And control get and critical. their process and across what really process challenges are is things and what authority decision capital things are. competing those of they line two the So, we they’re the can’t how

that’s gives grow grow and only validation think most we discussions. being pleased what’s customers, new. we’re to and from what that And existing confidence the which competitive, impacts and therefore, I those really obviously think capacity But us, with that of us type we critical our a of not with can So timing. performance our sustainability is but relationship

Dan Borgen

over market as which with give said, the has and handled through additional importance it every that a facility continues prove growing – the giving us And officials but Canada egress, destination, million it to not does additional barrels industry new XX elected also us its gives of only and in proven. day, the in it been one already

greenhouse not customers that coming only gives and And emissions to an alternatives, more of obviously, a of new are transportation. point but play XX% better other Canada, has GHG, we carbon of Those it with pressure – that that producers. in netbacks the over gas our origination footprint. being Canada it relative a destination So for customer with again, means important most pieces and competitive out established a is customers as lower market lower

table. good multiple evident. positive is as are the up of program impacts the said, and That’s the ratability why for customers customer. renewing. Brad feel to why adds All success at proven And that the we about of That’s

Kyle May

Okay, great. additional I appreciate the color.

Dan Borgen

Sure. Thanks, Kyle.

Operator

we questions. Thank you. this At no further have time,

over like the remarks. to for closing would Dan additional I call So Borgen to turn back and

Dan Borgen

Thanks, everybody. I cash us thing your you’re all the back partner both XX% of get obviously. as for but on – see to committed here, of this and roughly flow. know know produce, patience, strong the it intent, we to was that a are and partner, our phone, appreciate tough as we call – That’s production

Brad – quite we to that, that feel the highly they customers again, We about are and customers good have different move approval engaged. remind And as ourselves but processes, often in that said, happening.

need. we’ve shared some being important serve to we just about. that assets that And able to the look share today, to to we a reminder, continue these volumes commitments that They’ll need. a the by talking They with of the industry. been think a forward I and as are serve evidenced

long-term our through But DRUbit it Transition right we to grades our cleaner for long-term heavy program, safer sustainability with the transition it’s business to transportation do and transportation to grow is methods. and into assure cleaner tough. safer partnership. right thing crude the the continue strategy of As is and

So and in exciting the that, on look to call. look Thanks don’t future, sharing forward forward being it that with We far we think updates we will being additional you. too for news with to again share with the be to able you.

Operator

appreciate and and we ladies today’s participation. you, Thank This your gentlemen. call, concludes

You may disconnect at time. any

USD Partners (USDP) 4 May 232023 Q1 Earnings call transcript