Oiltanking Partners, L.P. Reports Financial Results for the Third Quarter of 2011

HOUSTON, Nov. 9, 2011 /PRNewswire/ -- Oiltanking Partners, L.P. (NYSE: OILT) (the "Partnership") today reported third quarter 2011 net income of $35.3 million compared to third quarter 2010 net income of $7.8 million.  The third quarter of 2011 includes an income tax benefit of $27.3 million as a result of the elimination of deferred tax accounts related to the conversion to a non-taxable entity in connection with the Partnership's initial public offering.  Net income for the third quarter of 2011, excluding this benefit and other gains and losses, was $13.8 million.  Net income excluding gains and losses, which is a non-GAAP financial measure, is defined and reconciled to net income below.  

Adjusted EBITDA was $18.1 million for the third quarter of 2011 compared to $16.6 million for the third quarter of 2010.  Adjusted EBITDA was $51.7 million for the nine months ended September 30, 2011 compared to $48.5 million for the corresponding period in 2010.   Adjusted EBITDA, which is a non-GAAP financial measure, is defined and reconciled to net income below.

"We are pleased to report solid results for the third quarter, our first period of operations since going public in July," said Carlin Conner, Chairman, President and Chief Executive Officer of the Partnership's general partner.  "The successful launch of the Partnership was a significant milestone for Oiltanking and an integral part of our strategy to continue to grow our North American operations."  

"Over the last 30 years, we have established a strategic position with deepwater docks, tank storage and pipeline connectivity to the major refineries along the upper Gulf Coast, making us an important part of the crude oil supply chain in the U.S.  With several significant pipelines being reversed or under-construction to deliver additional crude oil from domestic shale plays, Cushing and Canadian oil sands to the Gulf Coast refineries, we are excited about our prospects for growth.  Our recently announced crude expansion project represents our first phase of growth plans to take advantage of the incremental crude flows to the Gulf Coast that will allow us to transport and store additional crude for our customers and further position us for growth."  

On October 20, 2011, the Partnership declared its first regular cash distribution of $10.6 million, or $0.2678 per unit.  This prorated amount corresponds to a quarterly distribution of $0.3375 per unit, or $1.35 per unit on an annualized basis.  Distributable cash flow for the third quarter of 2011 provided distribution coverage of 1.20 times the amount needed for the Partnership to fund a full quarter distribution to both the general and limited partners.  Distributable cash flow and distribution coverage ratio, which are non-GAAP financial measures, are defined and reconciled to net income below.    

The Partnership's additional storage capacity of one million barrels that is in the process of being constructed is progressing on time and on budget.  We expect that the first two-thirds of this storage capacity will be placed into service by December 1, 2011, with the remaining capacity coming on line early in the second quarter of 2012.  

The Partnership's overall operating results for the third quarter of 2011 improved as compared to the third quarter of 2010.  Operating expenses were lower for the third quarter of 2011 by $0.7 million as compared to the third quarter of 2010, primarily due to favorable property taxes.  Selling, general and administrative expenses were also lower quarter-over-quarter by $0.8 million primarily due to lower employee-related costs.  Revenues remained strong for the third quarter of 2011 as compared to the third quarter of 2010, as higher storage service fees and throughput fees were offset by lower ancillary service fees.    

Conference Call

The Partnership will hold a conference call to discuss its third quarter 2011 financial results on November 10, 2011 at 10:00 a.m. Eastern Time (9:00 a.m. Central Time).  To participate in the call, dial (480) 629-9692 and ask for the Oiltanking call 10 minutes prior to the start time, or access it live over the internet at www.oiltankingpartners.com on the "Investor Relations" page of the Partnership's website.

A replay of the audio webcast will be available shortly after the call on the Partnership's website.  A telephonic replay will be available through November 17, 2011 by calling (303) 590-3030 and using the pass code 4478844#.

Oiltanking Partners is a master limited partnership engaged in independent storage and transportation of crude oil, refined petroleum products and liquefied petroleum gas.  We provide our services to a variety of customers, including major integrated oil companies, distributors, marketers and chemical and petrochemical companies. Our assets are located along the upper Gulf Coast of the United States.  For more information, visit www.oiltankingpartners.com.

Forward-Looking Statements

This press release contains forward-looking statements. These forward-looking statements reflect the Partnership's current expectations, opinions, views or beliefs with respect to future events, based on what it believes are reasonable assumptions. No assurance can be given, however, that these events will occur. These statements are subject to risks and uncertainties as described in the Partnership's filings with the Securities and Exchange Commission, available at the SEC's website at www.sec.gov.  The Partnership has no obligation and, except as required by law, does not undertake any obligation, to update or revise these statements or provide any other information relating to such statements.

Use of Non-GAAP Financial Measures

This news release and the accompanying schedules include the non-GAAP financial measures of Adjusted EBITDA, net income excluding gains and losses, distributable cash flow and distribution coverage ratio, which may be used periodically by management when discussing our financial results with investors and analysts.  The accompanying schedules of this news release provide reconciliations of these non-GAAP financial measures to their most directly comparable financial measures calculated and presented in accordance with generally accepted accounting principles in the United States of America ("GAAP").  Adjusted EBITDA, net income excluding gains and losses, distributable cash flow and distribution coverage ratio are presented as management believes they provide additional information and metrics relative to the performance of our business, such as the cash distributions we expect to pay to our unitholders, and are commonly employed by financial analysts and investors to evaluate the operating and financial performance of the Partnership from period to period and to compare it with the performance of other publicly traded partnerships within the industry.  You should not consider Adjusted EBITDA, net income excluding gains and losses, distributable cash flow and distribution coverage ratio in isolation or as a substitute for analysis of the Partnership's results as reported under GAAP.  Because Adjusted EBITDA, net income excluding gains and losses, distributable cash flow and distribution coverage ratio may be defined differently by other companies in the Partnership's industry, the Partnership's definitions of Adjusted EBITDA, net income excluding gains and losses, distributable cash flow and distribution coverage ratio may not be comparable to similarly titled measures of other companies, thereby diminishing its utility.

The Partnership defines Adjusted EBITDA as net income (loss) before net interest expense, income tax expense (benefit) and depreciation and amortization expense, as further adjusted to exclude certain other non-cash and non-recurring items, including gains and losses on disposals of fixed assets, property casualty indemnification and early extinguishment of debt.  Adjusted EBITDA is not a presentation made in accordance with GAAP.  Adjusted EBITDA is a non-GAAP supplemental financial performance measure that management and external users of the consolidated financial statements, such as industry analysts, investors, lenders and rating agencies, may use to assess: (i) the Partnership's operating performance as compared to other publicly traded partnerships in the midstream energy industry, without regard to historical cost basis or financing methods, and (ii) the viability of proposed projects and acquisitions and determine overall rates of returns on investment in various opportunities.  The GAAP measure most directly comparable to Adjusted EBITDA is net income.  Adjusted EBITDA has important limitations as an analytical tool because it excludes some but not all items that affect net income.

This press release also includes the non-GAAP measure net income excluding gains and losses.  The Partnership defines net income excluding gains and losses as net income excluding gains and losses from (i) the disposal of fixed assets, (ii) property casualty indemnification and (iii) early extinguishment of debt, and excluding income tax benefit due to the elimination of deferred tax account balances, which occurred upon the change in tax status of the entity.  The Partnership's management believes net income excluding gains and losses from the disposal of fixed assets, from property casualty indemnification and early extinguishment of debt, and income tax benefit due to the elimination of deferred tax account balances is a useful measure for investors because it allows comparison of the Partnership's results from core operations from period to period.

Distributable cash flow, which is a financial measure included in the schedules to this press release, is another non-GAAP financial measure.  The Partnership defines distributable cash flow as the Partnership's net income before (i) depreciation and amortization expense; (ii) gains or losses on disposal of fixed assets and from property casualty indemnification; (iii) loss on early extinguishment of debt; (iv) other (income) expense; and (v) income tax expense (benefit); less maintenance capital expenditures.  The Partnership's management believes that distributable cash flow is useful to investors because it removes non-cash items from net income and provides a clearer picture of the Partnership's cash available for distribution to its unitholders.  

The Partnership defines distribution coverage ratio for any given period as the ratio of distributable cash flow during such period to the total quarterly distribution payable to all common and subordinated unitholders and the general partner interest.

Adjusted EBITDA, net income excluding gains and losses, distributable cash flow and distribution coverage ratio should not be considered alternatives to net income, operating income, cash flow from operations, or any other measure of financial performance presented in accordance with GAAP.

The Partnership believes that investors benefit from having access to the same financial measures used by its management. Further, the Partnership believes that these measures are useful to investors because they are one of the bases for comparing the Partnership's operating and financial performance with that of other companies with similar operations, although the Partnership's measures may not be directly comparable to similar measures used by other companies. Please see the attached reconciliations of Adjusted EBITDA, net income excluding gains and losses, distributable cash flow and distribution coverage ratio, to net income.

Contacts:
Ken Owen, Chief Financial Officer
[email protected]
281-457-7900

Jack Lascar  /  [email protected]
Lisa Elliott / [email protected]
DRG&L / 713-529-6600

- Tables to Follow  -

SOURCE Oiltanking Partners, L.P.

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