Oiltanking Partners Reports Record Financial Results for the Second Quarter of 2014

HOUSTON, Aug. 6, 2014 /PRNewswire/ -- Oiltanking Partners, L.P. (NYSE: OILT) (the "Partnership") today reported record second quarter 2014 net income of $42.3 million, or $0.37 per unit, an increase of 43.3% over second quarter 2013 net income of $29.5 million, or $0.31 per unit.  The Partnership completed a two-for-one common and subordinated unit split on July 14, 2014, and all references to unit and per unit amounts in this document have been adjusted to reflect the effect of the unit split.

Adjusted EBITDA increased 34.3% to $48.8 million for the second quarter of 2014, compared to $36.4 million for the second quarter of 2013.  Adjusted EBITDA, which is a financial measure not presented in accordance with U.S. generally accepted accounting principles ("GAAP"), is defined and reconciled to net income in the financial tables below. 

The Partnership's revenues increased by approximately $17.0 million, or 32.6%, to $69.1 million during the second quarter of 2014 compared to the same period in 2013, due to higher storage service fee revenues, throughput fee revenues and ancillary service fee revenues.  Storage service fee revenue grew by $6.8 million due to new storage capacity of approximately 3.2 million barrels placed into service in the second half of 2013 and 2.0 million barrels placed into service since January 2014.  Throughput fee revenues grew by $8.9 million during the second quarter of 2014 due to fees related to pipeline throughput, fees from in-terminal sales between customers, liquefied petroleum gas ("LPG") exports at the Partnership's Houston terminal and customer deficiency charges recognized in the current period.   

"We continue to benefit from strong growth in customer export initiatives and logistics needs.  General activity at our terminals has increased, and we achieved a new throughput record of more than 1.25 million barrels per day this quarter," said Ken Owen, President and Chief Executive Officer of the Partnership's general partner.  "Our Houston expansion projects are enhancing our storage, distribution and export capabilities, allowing us to capitalize on increased customer demand for energy logistics services."

"We have made excellent progress at Appelt II, successfully placing into service six storage tanks with a total storage capacity of approximately 2.0 million barrels.  We are on track to deliver the remainder of the tanks along with the two previously-announced Crossroads pipelines on schedule," said Owen.  "We are also very pleased to have received the necessary permits and broken ground on our Beaumont expansion.  Our goal is to build a world-class crude terminal in Beaumont that positions us to execute the same business model we have applied in Houston of delivering maximum connectivity and logistics flexibility to our customers." 

Operating expenses during the second quarter of 2014 were $14.0 million, increasing by $3.0 million compared to the same period in 2013, due to higher costs associated with operations personnel, rental expense, insurance and other expenses largely attributable to increased capacity.  Selling, general and administrative expenses during the second quarter of 2014 were $6.3 million, increasing by $1.5 million compared to the same period in 2013, primarily due to the July 2013 increase in the fixed services agreement fee. 

As announced at its Analyst Day on June 24, 2014, the Partnership has increased its estimate of 2014 capital expenditures by $50 million primarily to reflect its investment in the Beaumont crude expansion we announced in June, and it now expects to spend between $300 million and $320 million this year.   

On July 21, 2014, the Partnership declared an increase in its quarterly cash distribution to $0.26 per unit, or $1.04 per unit on an annualized basis, for the second quarter of 2014.  The second quarter distribution is our eleventh consecutive quarterly increase since going public in the third quarter of 2011 and represents a 5.1% increase over the distribution of $0.2475 ($0.495 on a pre-split basis) per unit for the first quarter of 2014 and a 22.4% increase over the distribution of $0.2125 ($0.425 on a pre-split basis) per unit for the second quarter of 2013.  The second quarter 2014 cash distribution is expected to be paid on August 14, 2014. 

Distributable cash flow for the second quarter of 2014 provided distribution coverage of 1.94 times the amount needed for the Partnership to fund the quarterly distribution to both the limited and general partners and incentive distribution rights.  The Partnership will continue to retain cash flow in excess of distributions paid to fund, in part, announced expansion projects. 

Distributable cash flow and distribution coverage ratio, which are non-GAAP financial measures, are defined and reconciled to net income in the financial tables below.     

Conference Call

The Partnership will hold a conference call to discuss its second quarter 2014 financial results on August 7, 2014, at 10:00 a.m. Eastern Time (9:00 a.m. Central Time).  To participate in the call, dial (719) 325-2215 and ask for the Oiltanking call 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 August 14, 2014 by calling (719) 457-0820 and using the pass code 2967735.

Oiltanking Partners, L.P. is a growth-oriented master limited partnership engaged in independent storage and transportation of crude oil, refined petroleum products and liquefied petroleum gas.  We are the logistics provider of choice to major integrated oil companies, distributors, marketers and chemical and petrochemical companies. Our core assets are strategically located along the Gulf Coast of the United States on the Houston Ship Channel and in Beaumont, Texas.  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.  Important factors that could cause actual results to differ from forward-looking statements include, but are not limited to:  adverse economic or market conditions, changes in demand for the products that we handle or for our services, increased competition, changes in the availability and cost of capital, operating hazards and the effects of existing and future government regulations.  These and other significant risks and uncertainties are described more fully in the Partnership's filings with the U.S. Securities and Exchange Commission (the "SEC"), 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, distributable cash flow, distribution coverage ratio and the ratio of debt to Adjusted EBITDA, 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 the most directly comparable financial measures calculated and presented in accordance with GAAP.  The Partnership believes investors benefit from having access to the same financial measures used by its management.  These non-GAAP financial measures are commonly employed by management, financial analysts and investors to evaluate our performance from period to period and to compare our performance with the performance of our peers. 

The Partnership defines Adjusted EBITDA as net income before net interest expense, income tax expense, depreciation and amortization expense and other income, as further adjusted to exclude gains and losses on disposals of fixed assets.  Adjusted EBITDA is a non-GAAP supplemental financial performance measure management and other third parties, such as industry analysts, investors, lenders and rating agencies, may use to assess: (i) the Partnership's financial performance as compared to the performance of its peers, without regard to historical cost basis or financing methods, and (ii) the viability of proposed projects and acquisitions and determine 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 affecting net income.

Distributable cash flow is another non-GAAP financial measure used by the Partnership's management.  The Partnership defines distributable cash flow as net income before (i) depreciation and amortization expense; (ii) gains or losses on disposal of fixed assets; and (iii) other (income) expense; less maintenance capital expenditures.  Maintenance capital expenditures are capital expenditures (as defined by GAAP) resulting from improvements to and major renewals of existing assets.  Such expenditures serve to maintain existing operations but do not generate additional revenues.  Management believes distributable cash flow is useful to investors because it removes non-cash items from net income and provides visibility regarding the Partnership's cash available for distribution to unitholders. 

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

The Partnership defines the ratio of debt to Adjusted EBITDA for any given period as the ratio of total outstanding debt, including the current portion at the end of such period, to Adjusted EBITDA for the latest twelve month period. 

Adjusted EBITDA, distributable cash flow, distribution coverage ratio and the ratio of debt to Adjusted EBITDA 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 presentation of these measures may not be comparable to similarly titled measures of other companies in the industry because the Partnership may define these measures differently than other companies.

Please see the attached reconciliations of Adjusted EBITDA, distributable cash flow, distribution coverage ratio and the ratio of debt to Adjusted EBITDA.

Contact Information:

Mark Buscovich
Manager, FP&A and IR
[email protected]
(855) 866-6458

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SOURCE Oiltanking Partners, L.P.

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