OKLAHOMA CITY--(BUSINESS WIRE)--Gulfport Energy Corporation (NYSE: GPOR) (“Gulfport” or the “Company”) today reported financial and operating results for the three months ended September 30, 2022 and provided an update on its 2022 development plan and financial guidance.
Third Quarter 2022 and Recent Highlights
"The third quarter marked the most active quarter of Gulfport's 2022 operational plan, as we completed 18 wells across our operating areas. Our third quarter production came in as expected, turning to sales nine wells in total, six of which occurred during September providing minimal production uplift for the quarter. Our base production and 2022 turn in lines continue to perform at or above expectations and we remain on track to bring online an additional 11 wells during the fourth quarter. We forecast a strong quarter over quarter production increase of more than 15%, and we reiterate our previously provided production guidance," commented Tim Cutt, CEO of Gulfport.
"To improve the efficiency of our 2023 development program, we have elected to add a top hole drilling rig in the Utica during the fourth quarter of 2022. This will accelerate our drilling program as we enter 2023 and begin drilling seven additional wells during 2022. The accelerated activity will enable us to execute a continuous completion program in the Utica, eliminating the risk of releasing crews in today's tight service market and providing the opportunity for increased efficiencies and cost savings. This additional capital, coupled with the recent decrease in commodity prices and widening of basis differentials, has resulted in an update to our full year 2022 free cash flow guidance to approximately $300 million."
"We continue to prioritize the return of capital to our shareholders through common stock repurchases, repurchasing a total of 2.7 million shares since initiating the program, reducing our outstanding common shares by over 10% compared to the start of the program. Consistent with 2022, we expect to return our 2023 free cash flow to shareholders, excluding acquisitions, while maintaining a conservative leverage ratio."
A company presentation to accompany the Gulfport earnings conference call can be accessed by clicking here.
2022 Corporate Sustainability Report
Gulfport today released its 2022 Corporate Sustainability Report. The report is a direct reflection of Gulfport’s continuous improvement culture and incorporates numerous ESG data points. The Company continues prioritizing the delivery of low-emission hydrocarbons the world needs while maintaining our position as a responsible producer. The report is available at gulfportenergy.com/sustainability.
Common Stock Repurchase Program
Gulfport's Board of Directors previously authorized the Company to repurchase up to $300 million of its outstanding shares of common stock. Purchases under the repurchase program may be made from time to time in open market or privately negotiated transactions, and will be subject to available liquidity, market conditions, credit agreement restrictions, applicable legal requirements, contractual obligations and other factors. The repurchase program does not require the Company to acquire any specific number of shares. The Company intends to purchase shares under the repurchase program opportunistically with available funds while maintaining sufficient liquidity to fund its capital development program. The repurchase program may be suspended from time to time, modified, extended or discontinued by the board of directors at any time.
As of October 27, 2022, the Company had repurchased approximately 2.7 million shares of common stock at a weighted-average share price of $87.37 during 2022, totaling approximately $232.8 million in aggregate.
Operational Update
The table below summarizes Gulfport's operated drilling and completion activity for the third quarter of 2022:
|
Quarter Ended September 30, 2022 |
||
|
Gross |
Net |
Lateral Length |
Spud |
|
|
|
Utica |
4 |
3.8 |
17,950 |
SCOOP |
— |
— |
— |
|
|
|
|
Drilled |
|
|
|
Utica |
3 |
2.6 |
14,250 |
SCOOP |
2 |
1.5 |
10,150 |
|
|
|
|
Completed |
|
|
|
Utica |
12 |
11.7 |
15,000 |
SCOOP |
6 |
3.7 |
10,200 |
|
|
|
|
Turned-to-Sales |
|
|
|
Utica |
7 |
6.8 |
14,850 |
SCOOP |
2 |
1.2 |
10,000 |
Gulfport’s net daily production for the third quarter of 2022 averaged 914.9 MMcfe per day, primarily consisting of 615.6 MMcfe per day in the Utica and 299.2 MMcfe per day in the SCOOP. For the third quarter of 2022, Gulfport’s net daily production mix was comprised of approximately 89% natural gas, 8% natural gas liquids ("NGL") and 3% oil and condensate.
|
Successor |
||
|
Three Months Ended September 30, 2022 |
||
Production |
|
||
Natural gas (Mcf/day) |
|
815,660 |
|
Oil and condensate (Bbl/day) |
|
4,366 |
|
NGL (Bbl/day) |
|
12,172 |
|
Total (Mcfe/day) |
|
914,888 |
|
Average Prices |
|
||
Natural Gas: |
|
||
Average price without the impact of derivatives ($/Mcf) |
$ |
7.80 |
|
Impact from settled derivatives ($/Mcf) |
|
(4.72 |
) |
Average price, including settled derivatives ($/Mcf) |
$ |
3.08 |
|
Oil and condensate: |
|
||
Average price without the impact of derivatives ($/Bbl) |
$ |
89.75 |
|
Impact from settled derivatives ($/Bbl) |
|
(22.49 |
) |
Average price, including settled derivatives ($/Bbl) |
$ |
67.26 |
|
NGL: |
|
||
Average price without the impact of derivatives ($/Bbl) |
$ |
39.61 |
|
Impact from settled derivatives ($/Bbl) |
|
(2.53 |
) |
Average price, including settled derivatives ($/Bbl) |
$ |
37.08 |
|
Total: |
|
||
Average price without the impact of derivatives ($/Mcfe) |
$ |
7.91 |
|
Impact from settled derivatives ($/Mcfe) |
|
(4.35 |
) |
Average price, including settled derivatives ($/Mcfe) |
$ |
3.56 |
|
Selected operating metrics |
|
||
Lease operating expenses ($/Mcfe) |
$ |
0.18 |
|
Taxes other than income ($/Mcfe) |
$ |
0.20 |
|
Transportation, gathering, processing and compression expense ($/Mcfe) |
$ |
1.06 |
|
Recurring cash general and administrative expenses ($/Mcfe) (non-GAAP) |
$ |
0.12 |
|
Interest expenses ($/Mcfe) |
$ |
0.18 |
|
Capital Investment
Capital investment was $141.4 million (on an incurred basis) for the third quarter of 2022, of which $133.3 million related to drilling and completion (“D&C”) activity and $8.1 million related to leasehold and land investment.
For the nine-month period ended September 30, 2022, capital investment was $346.7 million (on an incurred basis), of which $322.5 million related to D&C activity and $24.2 million to leasehold and land investment.
Financial Position and Liquidity
As of September 30, 2022, Gulfport had approximately $8.3 million of cash and cash equivalents, $179.0 million of borrowings under its credit facility, $113.2 million of letters of credit outstanding and $550 million of outstanding 2026 Senior Notes.
Gulfport’s liquidity at September 30, 2022, totaled approximately $416 million, comprised of the $8.3 million of cash and cash equivalents and approximately $407.8 million of available borrowing capacity under its credit facility.
In September 2022, the company paid approximately $1.3 million in cash dividends on its preferred stock.
Fall Borrowing Base Redetermination
On October 31, 2022, Gulfport completed its semi-annual borrowing base redetermination during which the borrowing base was reaffirmed at $1.0 billion with the elected commitments to remain at $700 million.
Updated Full Year 2022 Guidance
Gulfport has updated its forecasted capital expenditures for D&C activity to include the addition of a top hole drilling rig in the Utica during the fourth quarter of 2022. This increased level of activity will allow for Gulfport to execute a continuous completion program during 2023, ultimately providing the opportunity for increased efficiencies and cost savings. Including this incremental activity, Gulfport now expects to invest in approximately $415 million on D&C capital during 2022. The Company continues to finalize the details of its 2023 development plan but assuming approximately 1.5 rigs in the Utica and a continuous rig program in the SCOOP, we are currently forecasting an increase of less than 5% in D&C capital for 2023 over 2022.
Gulfport has updated its guidance for its expected realized natural gas differential, before hedges, to $(0.30) to $(0.40) off NYMEX from a range of $(0.15) to $(0.25) previously. The widening differential is driven by actual settled prices during the months of September and October as well as current expectations for the remainder of the fourth quarter of 2022.
Taking into account the previously mentioned updates, Gulfport has also updated its free cash flow guidance for the year to approximately $300 million.
Gulfport's 2022 guidance assumes commodity strip prices as of October 10, 2022, adjusted for applicable commodity and location differentials, and no property acquisitions or divestitures.
|
Year Ending |
||
|
December 31, 2022 |
||
|
Low |
|
High |
Production |
|
|
|
Average daily gas equivalent (MMcfepd) |
975 |
|
1,000 |
% Gas |
~90% |
||
|
|
|
|
Realizations (before hedges) |
|
|
|
Natural gas (differential to NYMEX settled price) ($/Mcf) |
$(0.30) |
|
$(0.40) |
NGL (% of WTI) |
45% |
|
55% |
Oil (differential to NYMEX WTI) ($/Bbl) |
$(3.00) |
|
$(4.00) |
|
|
|
|
Operating costs |
|
|
|
Lease operating expense ($/Mcfe) |
$0.16 |
|
$0.18 |
Taxes other than income ($/Mcfe) |
$0.15 |
|
$0.17 |
Transportation, gathering, processing and compression(1) ($/Mcfe) |
$0.96 |
|
$1.00 |
Recurring cash general and administrative(2,3) (in millions) |
$42 |
|
$44 |
(1) Assumes rejection of Rover firm transportation agreement. |
|
|
|
(2) Recurring cash G&A includes capitalization. It excludes non-cash stock compensation and expenses related to certain legal and restructuring charges. |
|
|
|
|
|
|
|
|
Total |
||
Capital expenditures (incurred) |
(in millions) |
||
D&C |
$415 |
||
Leasehold and land |
35 |
||
Total |
$450 |
||
|
|
|
|
Free cash flow(3) |
$300 |
||
(3) This is a non-GAAP measure. Reconciliations of these non-GAAP measures and other disclosures are provided with the supplemental financial tables available on our website at www.gulfportenergy.com. |
|
|
|
Derivatives
Gulfport enters into commodity derivative contracts on a portion of its expected future production volumes to mitigate the Company's exposure to commodity price fluctuations. For details, please refer to the "Derivatives" section provided with the supplemental financial tables available on our website at ir.gulfportenergy.com.
Third Quarter 2022 Conference Call
Gulfport will host a teleconference and webcast to discuss its third quarter of 2022 results beginning at 9:30 a.m. ET (8:30 a.m. CT) on Wednesday, November 2, 2022.
The conference call can be heard live through a link on the Gulfport website, www.gulfportenergy.com. In addition, you may participate in the conference call by dialing 866-373-3408 domestically or 412-902-1039 internationally. A replay of the conference call will be available on the Gulfport website and a telephone audio replay will be available from November 3, 2022 to November 17, 2022, by calling 877-660-6853 domestically or 201-612-7415 internationally and then entering the replay passcode 13731701.
Financial Statements and Guidance Documents
Third quarter of 2022 earnings results and supplemental information regarding quarterly data such as production volumes, pricing, financial statements and non-GAAP reconciliations are available on our website at ir.gulfportenergy.com.
Non-GAAP Disclosures
This news release includes non-GAAP financial measures. Such non-GAAP measures should be not considered as an alternative to GAAP measures. Reconciliations of these non-GAAP measures and other disclosures are provided with the supplemental financial tables available on our website at ir.gulfportenergy.com.
About Gulfport
Gulfport is an independent, natural gas-weighted exploration and production company focused on the exploration, acquisition and production of natural gas, crude oil and NGL in the United States with primary focus in the Appalachia and Anadarko basins. Our principal properties are located in eastern Ohio targeting the Utica formation and in central Oklahoma targeting the SCOOP Woodford and SCOOP Springer formations.
Forward Looking Statements
This press release includes “forward-looking statements” for purposes of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are statements other than statements of historical fact. They include statements regarding Gulfport’s current expectations, management's outlook guidance or forecasts of future events, projected cash flow and liquidity, inflation, share repurchases and other return of capital plans, its ability to enhance cash flow and financial flexibility, future production and commodity mix, plans and objectives for future operations, the ability of our employees, portfolio strength and operational leadership to create long-term value, the rejection of certain midstream contracts and the assumptions on which such statements are based. Gulfport believes the expectations and forecasts reflected in the forward-looking statements are reasonable, Gulfport can give no assurance they will prove to have been correct. They can be affected by inaccurate or changed assumptions or by known or unknown risks and uncertainties. Important risks, assumptions and other important factors that could cause future results to differ materially from those expressed in the forward-looking statements are described under "Risk Factors" in Item 1A of Gulfport’s annual report on Form 10-K for the year ended December 31, 2021 and any updates to those factors set forth in Gulfport's subsequent quarterly reports on Form 10-Q or current reports on Form 8-K (available at https://www.gulfportenergy.com/investors/sec-filings). Gulfport undertakes no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events.
Investors should note that Gulfport announces financial information in SEC filings, press releases and public conference calls. Gulfport may use the Investors section of its website (www.gulfportenergy.com) to communicate with investors. It is possible that the financial and other information posted there could be deemed to be material information. The information on Gulfport’s website is not part of this filing.
Investor Contact:
Jessica Antle – Director, Investor Relations
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405-252-4550
Media Contact
Reevemark
Hugh Burns / Paul Caminiti / Nicholas Leasure
212-433-4600
Application deadline is January 23, 2023
OAK RIDGE, Tenn.--(BUSINESS WIRE)--#MickeyLeland--The Oak Ridge Institute for Science and Education (ORISE) is currently accepting applications for the U.S. Department of Energy’s (DOE) 2023 Mickey Leland Energy Fellowship Program (MLEF). This 10-week summer program, managed by the DOE Office of Fossil Energy and Carbon Management, is for students pursuing degrees in science, technology, engineering and math at the associate’s, bachelor’s or master’s degree level. U.S. citizenship is required.
Under the mentorship of DOE scientists and engineers, students will complete a cutting-edge research project at one of the Department’s National Laboratories or DOE Headquarters in support of the Department’s mission to minimize the environmental impacts of fossil fuels while working towards net-zero emissions. The mission of the MLEF program is to strengthen a diverse pipeline of future STEM professionals, and this program has mentored nearly 1,000 of the best and brightest students from across the nation for future careers in the STEM workforce.
During the 10-week appointment, students receive a weekly stipend, and may be eligible for housing and travel allowances. Students will also gain insight into how the Department of Energy is working toward an equitable and clean energy future. The goal of the program is to improve opportunities for women and minority students in the STEM fields although all eligible candidates are encouraged to apply.
The summer program may place students at one of several possible sites including:
The MLEF program may institute a virtual program as necessary.
The MLEF Program offers the following benefits:
How to Apply & Program Information:
MLEF Program applications are due by January 23, 2023, at 11:59 EST. For application information and to apply, visit the MLEF website: https://orise.orau.gov/mlef/. The MLEF program is administered through ORISE. For questions, email: This email address is being protected from spambots. You need JavaScript enabled to view it..
About ORISE
The Oak Ridge Institute for Science and Education is a U.S. Department of Energy asset that is dedicated to enabling critical scientific, research, and health initiatives of the department and its laboratory system by providing world class expertise in STEM workforce development, scientific and technical reviews, and the evaluation of radiation exposure and environmental contamination.
ORISE is managed by ORAU, a 501(c)(3) nonprofit corporation and federal contractor, for DOE’s Office of Science. The single largest supporter of basic research in the physical sciences in the United States, the Office of Science is working to address some of the most pressing challenges of our time. For more information, please visit science.energy.gov
Like us on Facebook: ORISE Facebook and MLEF Facebook
Follow us on Twitter: ORISE Twitter
Connect with us on LinkedIn: ORISE LinkedIn
Amy Schwinge
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DALLAS--(BUSINESS WIRE)--Energy Transfer LP (NYSE:ET) (“Energy Transfer” or the “Partnership”) today reported financial results for the quarter ended September 30, 2022.
Energy Transfer reported net income attributable to partners for the three months ended September 30, 2022 of $1.01 billion, a $371 million increase from the same period last year. For the three months ended September 30, 2022, net income per limited partner unit (basic and diluted) was $0.29 per unit.
Adjusted EBITDA for the three months ended September 30, 2022 was $3.09 billion compared to $2.58 billion for the three months ended September 30, 2021. In the third quarter 2022, the Partnership experienced a $126 million charge in the crude oil transportation and services segment related to a legal matter. In addition, Energy Transfer’s third quarter 2022 results were impacted by an approximately $130 million negative adjustment related to hedged inventory in the NGL and refined products transportation and services segment. These two items impacted third quarter 2022 Adjusted EBITDA by approximately $260 million in the aggregate.
Distributable Cash Flow attributable to partners, as adjusted, for the three months ended September 30, 2022 was $1.58 billion compared to $1.31 billion for the three months ended September 30, 2021.
The improved results were primarily due to higher volumes across all of our core segments and the impacts of the recent acquisition of Enable Midstream.
Key accomplishments and recent developments:
Operational
Strategic
Financial
Energy Transfer benefits from a portfolio of assets with exceptional product and geographic diversity. The Partnership’s multiple segments generate high-quality, balanced earnings with no single segment contributing more than 30% of the Partnership’s consolidated Adjusted EBITDA for the three or nine months ended September 30, 2022. The vast majority of the Partnership’s segment margins are fee-based and therefore have limited commodity price sensitivity.
Conference Call information:
The Partnership has scheduled a conference call for 3:30 p.m. Central Time/4:30 p.m. Eastern Time on Tuesday, November 1, 2022 to discuss its third quarter 2022 results and provide an update on the Partnership. The conference call will be broadcast live via an internet webcast, which can be accessed through www.energytransfer.com and will also be available for replay on the Partnership’s website for a limited time.
Energy Transfer LP (NYSE: ET) owns and operates one of the largest and most diversified portfolios of energy assets in the United States, with a strategic footprint in all of the major U.S. production basins. Energy Transfer is a publicly traded limited partnership with core operations that include complementary natural gas midstream, intrastate and interstate transportation and storage assets; crude oil, natural gas liquids (“NGL”) and refined product transportation and terminalling assets; and NGL fractionation. Energy Transfer also owns Lake Charles LNG Company, as well as the general partner interests, the incentive distribution rights and 28.5 million common units of Sunoco LP (NYSE: SUN), and the general partner interests and 46.1 million common units of USA Compression Partners, LP (NYSE: USAC). For more information, visit the Energy Transfer LP website at www.energytransfer.com.
Sunoco LP (NYSE: SUN) is a master limited partnership with core operations that include the distribution of motor fuel to approximately 10,000 convenience stores, independent dealers, commercial customers and distributors located in more than 40 U.S. states and territories, as well as refined product transportation and terminalling assets. SUN’s general partner is owned by Energy Transfer LP (NYSE: ET). For more information, visit the Sunoco LP website at www.sunocolp.com.
USA Compression Partners, LP (NYSE: USAC) is a growth-oriented Delaware limited partnership that is one of the nation’s largest independent providers of natural gas compression services in terms of total compression fleet horsepower. USAC partners with a broad customer base composed of producers, processors, gatherers and transporters of natural gas and crude oil. USAC focuses on providing compression services to infrastructure applications primarily in high-volume gathering systems, processing facilities and transportation applications. For more information, visit the USAC website at www.usacompression.com.
Forward-Looking Statements
This news release may include certain statements concerning expectations for the future that are forward-looking statements as defined by federal law. Such forward-looking statements are subject to a variety of known and unknown risks, uncertainties, and other factors that are difficult to predict and many of which are beyond management’s control. An extensive list of factors that can affect future results, including future distribution levels and leverage ratio, are discussed in the Partnership’s Annual Report on Form 10-K and other documents filed from time to time with the Securities and Exchange Commission. In addition to the risks and uncertainties previously disclosed, the Partnership has also been, or may in the future be, impacted by new or heightened risks related to the COVID-19 pandemic, and we cannot predict the length and ultimate impact of those risks. The Partnership undertakes no obligation to update or revise any forward-looking statement to reflect new information or events.
The information contained in this press release is available on our website at www.energytransfer.com.
ENERGY TRANSFER LP AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In millions) (unaudited) |
|||||||
|
|
|
|
||||
|
September 30, 2022 |
|
December 31, 2021 |
||||
ASSETS |
|
|
|
||||
Current assets |
$ |
12,159 |
|
|
$ |
10,537 |
|
|
|
|
|
||||
Property, plant and equipment, net |
|
80,261 |
|
|
|
81,607 |
|
|
|
|
|
||||
Investments in unconsolidated affiliates |
|
2,869 |
|
|
|
2,947 |
|
Lease right-of-use assets, net |
|
815 |
|
|
|
838 |
|
Other non-current assets, net |
|
1,573 |
|
|
|
1,645 |
|
Intangible assets, net |
|
5,505 |
|
|
|
5,856 |
|
Goodwill |
|
2,553 |
|
|
|
2,533 |
|
Total assets |
$ |
105,735 |
|
|
$ |
105,963 |
|
LIABILITIES AND EQUITY |
|
|
|
||||
Current liabilities |
$ |
11,243 |
|
|
$ |
10,835 |
|
|
|
|
|
||||
Long-term debt, less current maturities |
|
47,413 |
|
|
|
49,022 |
|
Non-current derivative liabilities |
|
33 |
|
|
|
193 |
|
Non-current operating lease liabilities |
|
794 |
|
|
|
814 |
|
Deferred income taxes |
|
3,661 |
|
|
|
3,648 |
|
Other non-current liabilities |
|
1,530 |
|
|
|
1,323 |
|
|
|
|
|
||||
Commitments and contingencies |
|
|
|
||||
Redeemable noncontrolling interests |
|
493 |
|
|
|
783 |
|
|
|
|
|
||||
Equity: |
|
|
|
||||
Limited Partners: |
|
|
|
||||
Preferred Unitholders |
|
6,077 |
|
|
|
6,051 |
|
Common Unitholders |
|
26,725 |
|
|
|
25,230 |
|
General Partner |
|
(3 |
) |
|
|
(4 |
) |
Accumulated other comprehensive income |
|
32 |
|
|
|
23 |
|
Total partners’ capital |
|
32,831 |
|
|
|
31,300 |
|
Noncontrolling interests |
|
7,737 |
|
|
|
8,045 |
|
Total equity |
|
40,568 |
|
|
|
39,345 |
|
Total liabilities and equity |
$ |
105,735 |
|
|
$ |
105,963 |
|
ENERGY TRANSFER LP AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In millions, except per unit data) (unaudited) |
|||||||||||||||
|
|
|
|
||||||||||||
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
||||||||||||
|
2022 |
|
2021 |
|
2022 |
|
2021 |
||||||||
REVENUES |
$ |
22,939 |
|
|
$ |
16,664 |
|
|
$ |
69,375 |
|
|
$ |
48,760 |
|
COSTS AND EXPENSES: |
|
|
|
|
|
|
|
||||||||
Cost of products sold |
|
18,516 |
|
|
|
13,188 |
|
|
|
56,169 |
|
|
|
35,641 |
|
Operating expenses |
|
973 |
|
|
|
898 |
|
|
|
2,982 |
|
|
|
2,585 |
|
Depreciation, depletion and amortization |
|
1,030 |
|
|
|
943 |
|
|
|
3,104 |
|
|
|
2,837 |
|
Selling, general and administrative |
|
361 |
|
|
|
198 |
|
|
|
802 |
|
|
|
583 |
|
Impairment losses and other |
|
86 |
|
|
|
— |
|
|
|
386 |
|
|
|
11 |
|
Total costs and expenses |
|
20,966 |
|
|
|
15,227 |
|
|
|
63,443 |
|
|
|
41,657 |
|
OPERATING INCOME |
|
1,973 |
|
|
|
1,437 |
|
|
|
5,932 |
|
|
|
7,103 |
|
OTHER INCOME (EXPENSE): |
|
|
|
|
|
|
|
||||||||
Interest expense, net of interest capitalized |
|
(577 |
) |
|
|
(558 |
) |
|
|
(1,714 |
) |
|
|
(1,713 |
) |
Equity in earnings of unconsolidated affiliates |
|
68 |
|
|
|
71 |
|
|
|
186 |
|
|
|
191 |
|
Losses on extinguishments of debt |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(8 |
) |
Gains on interest rate derivatives |
|
60 |
|
|
|
1 |
|
|
|
303 |
|
|
|
72 |
|
Other, net |
|
(120 |
) |
|
|
33 |
|
|
|
(117 |
) |
|
|
45 |
|
INCOME BEFORE INCOME TAX EXPENSE |
|
1,404 |
|
|
|
984 |
|
|
|
4,590 |
|
|
|
5,690 |
|
Income tax expense |
|
82 |
|
|
|
77 |
|
|
|
159 |
|
|
|
234 |
|
NET INCOME |
|
1,322 |
|
|
|
907 |
|
|
|
4,431 |
|
|
|
5,456 |
|
Less: Net income attributable to noncontrolling interests |
|
304 |
|
|
|
260 |
|
|
|
793 |
|
|
|
870 |
|
Less: Net income attributable to redeemable noncontrolling interests |
|
12 |
|
|
|
12 |
|
|
|
37 |
|
|
|
37 |
|
NET INCOME ATTRIBUTABLE TO PARTNERS |
|
1,006 |
|
|
|
635 |
|
|
|
3,601 |
|
|
|
4,549 |
|
General Partner’s interest in net income |
|
1 |
|
|
|
1 |
|
|
|
3 |
|
|
|
5 |
|
Preferred Unitholders’ interest in net income |
|
106 |
|
|
|
99 |
|
|
|
317 |
|
|
|
185 |
|
Limited Partners’ interest in net income |
$ |
899 |
|
|
$ |
535 |
|
|
$ |
3,281 |
|
|
$ |
4,359 |
|
NET INCOME PER COMMON UNIT: |
|
|
|
|
|
|
|
||||||||
Basic |
$ |
0.29 |
|
|
$ |
0.20 |
|
|
$ |
1.06 |
|
|
$ |
1.61 |
|
Diluted |
$ |
0.29 |
|
|
$ |
0.20 |
|
|
$ |
1.06 |
|
|
$ |
1.60 |
|
WEIGHTED AVERAGE NUMBER OF UNITS OUTSTANDING: |
|
|
|
|
|
|
|
||||||||
Basic |
|
3,087.6 |
|
|
|
2,705.2 |
|
|
|
3,085.6 |
|
|
|
2,704.0 |
|
Diluted |
|
3,108.6 |
|
|
|
2,720.6 |
|
|
|
3,106.4 |
|
|
|
2,718.4 |
|
ENERGY TRANSFER LP AND SUBSIDIARIES SUPPLEMENTAL INFORMATION (Dollars and units in millions) (unaudited) |
|||||||||||||||
|
|
|
|
||||||||||||
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
||||||||||||
|
2022 |
|
2021 |
|
2022 |
|
2021(a) |
||||||||
Reconciliation of net income to Adjusted EBITDA and Distributable Cash Flow(b): |
|
|
|
|
|
|
|
||||||||
Net income |
$ |
1,322 |
|
|
$ |
907 |
|
|
$ |
4,431 |
|
|
$ |
5,456 |
|
Interest expense, net of interest capitalized |
|
577 |
|
|
|
558 |
|
|
|
1,714 |
|
|
|
1,713 |
|
Impairment losses and other |
|
86 |
|
|
|
— |
|
|
|
386 |
|
|
|
11 |
|
Income tax expense |
|
82 |
|
|
|
77 |
|
|
|
159 |
|
|
|
234 |
|
Depreciation, depletion and amortization |
|
1,030 |
|
|
|
943 |
|
|
|
3,104 |
|
|
|
2,837 |
|
Non-cash compensation expense |
|
27 |
|
|
|
26 |
|
|
|
88 |
|
|
|
81 |
|
Gains on interest rate derivatives |
|
(60 |
) |
|
|
(1 |
) |
|
|
(303 |
) |
|
|
(72 |
) |
Unrealized (gains) losses on commodity risk management activities |
|
(76 |
) |
|
|
19 |
|
|
|
(130 |
) |
|
|
(74 |
) |
Losses on extinguishments of debt |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
8 |
|
Inventory valuation adjustments (Sunoco LP) |
|
40 |
|
|
|
(9 |
) |
|
|
(81 |
) |
|
|
(168 |
) |
Equity in earnings of unconsolidated affiliates |
|
(68 |
) |
|
|
(71 |
) |
|
|
(186 |
) |
|
|
(191 |
) |
Adjusted EBITDA related to unconsolidated affiliates |
|
147 |
|
|
|
141 |
|
|
|
409 |
|
|
|
400 |
|
Other, net |
|
(19 |
) |
|
|
(11 |
) |
|
|
65 |
|
|
|
— |
|
Adjusted EBITDA (consolidated) |
|
3,088 |
|
|
|
2,579 |
|
|
|
9,656 |
|
|
|
10,235 |
|
Adjusted EBITDA related to unconsolidated affiliates |
|
(147 |
) |
|
|
(141 |
) |
|
|
(409 |
) |
|
|
(400 |
) |
Distributable cash flow from unconsolidated affiliates |
|
102 |
|
|
|
103 |
|
|
|
270 |
|
|
|
268 |
|
Interest expense, net of interest capitalized |
|
(577 |
) |
|
|
(558 |
) |
|
|
(1,714 |
) |
|
|
(1,713 |
) |
Preferred unitholders’ distributions |
|
(118 |
) |
|
|
(110 |
) |
|
|
(353 |
) |
|
|
(305 |
) |
Current income tax expense |
|
(31 |
) |
|
|
(10 |
) |
|
|
(1 |
) |
|
|
(34 |
) |
Transaction-related income taxes(c) |
|
— |
|
|
|
— |
|
|
|
(42 |
) |
|
|
— |
|
Maintenance capital expenditures |
|
(247 |
) |
|
|
(155 |
) |
|
|
(527 |
) |
|
|
(371 |
) |
Other, net |
|
5 |
|
|
|
14 |
|
|
|
17 |
|
|
|
50 |
|
Distributable Cash Flow (consolidated) |
|
2,075 |
|
|
|
1,722 |
|
|
|
6,897 |
|
|
|
7,730 |
|
Distributable Cash Flow attributable to Sunoco LP (100%) |
|
(195 |
) |
|
|
(146 |
) |
|
|
(496 |
) |
|
|
(399 |
) |
Distributions from Sunoco LP |
|
41 |
|
|
|
41 |
|
|
|
124 |
|
|
|
124 |
|
Distributable Cash Flow attributable to USAC (100%) |
|
(55 |
) |
|
|
(52 |
) |
|
|
(161 |
) |
|
|
(157 |
) |
Distributions from USAC |
|
25 |
|
|
|
25 |
|
|
|
73 |
|
|
|
73 |
|
Distributable Cash Flow attributable to noncontrolling interests in other non-wholly-owned consolidated subsidiaries |
|
(315 |
) |
|
|
(284 |
) |
|
|
(926 |
) |
|
|
(786 |
) |
Distributable Cash Flow attributable to the partners of Energy Transfer |
|
1,576 |
|
|
|
1,306 |
|
|
|
5,511 |
|
|
|
6,585 |
|
Transaction-related adjustments |
|
5 |
|
|
|
6 |
|
|
|
26 |
|
|
|
34 |
|
Distributable Cash Flow attributable to the partners of Energy Transfer, as adjusted |
$ |
1,581 |
|
|
$ |
1,312 |
|
|
$ |
5,537 |
|
|
$ |
6,619 |
|
Distributions to partners: |
|
|
|
|
|
|
|
||||||||
Limited Partners |
$ |
818 |
|
|
$ |
413 |
|
|
$ |
2,145 |
|
|
$ |
1,238 |
|
General Partner |
|
1 |
|
|
|
1 |
|
|
|
2 |
|
|
|
2 |
|
Total distributions to be paid to partners |
$ |
819 |
|
|
$ |
414 |
|
|
$ |
2,147 |
|
|
$ |
1,240 |
|
Common Units outstanding – end of period |
|
3,088.0 |
|
|
|
2,705.8 |
|
|
|
3,088.0 |
|
|
|
2,705.8 |
|
Distribution coverage ratio |
1.93x |
|
3.17x |
|
2.58x |
|
5.34x |
||||||||
(a) |
Winter Storm Uri, which occurred in February 2021, resulted in one-time impacts to the Partnership’s consolidated net income, Adjusted EBITDA and Distributable Cash Flow. |
|
(b) |
Adjusted EBITDA, Distributable Cash Flow and distribution coverage ratio are non-GAAP financial measures used by industry analysts, investors, lenders and rating agencies to assess the financial performance and the operating results of Energy Transfer’s fundamental business activities and should not be considered in isolation or as a substitute for net income, income from operations, cash flows from operating activities or other GAAP measures. |
|
|
There are material limitations to using measures such as Adjusted EBITDA, Distributable Cash Flow and distribution coverage ratio, including the difficulty associated with using any such measure as the sole measure to compare the results of one company to another, and the inability to analyze certain significant items that directly affect a company’s net income or loss or cash flows. In addition, our calculations of Adjusted EBITDA, Distributable Cash Flow and distribution coverage ratio may not be consistent with similarly titled measures of other companies and should be viewed in conjunction with measurements that are computed in accordance with GAAP, such as operating income, net income and cash flow from operating activities. |
|
|
Definition of Adjusted EBITDA |
|
|
We define Adjusted EBITDA as total partnership earnings before interest, taxes, depreciation, depletion, amortization and other non-cash items, such as non-cash compensation expense, gains and losses on disposals of assets, the allowance for equity funds used during construction, unrealized gains and losses on commodity risk management activities, inventory valuation adjustments, non-cash impairment charges, losses on extinguishments of debt and other non-operating income or expense items. Inventory adjustments that are excluded from the calculation of Adjusted EBITDA represent only the changes in lower of cost or market reserves on inventory that is carried at last-in, first-out (“LIFO”). These amounts are unrealized valuation adjustments applied to Sunoco LP’s fuel volumes remaining in inventory at the end of the period. |
|
|
Adjusted EBITDA reflects amounts for unconsolidated affiliates based on the same recognition and measurement methods used to record equity in earnings of unconsolidated affiliates. Adjusted EBITDA related to unconsolidated affiliates excludes the same items with respect to the unconsolidated affiliate as those excluded from the calculation of Adjusted EBITDA, such as interest, taxes, depreciation, depletion, amortization and other non-cash items. Although these amounts are excluded from Adjusted EBITDA related to unconsolidated affiliates, such exclusion should not be understood to imply that we have control over the operations and resulting revenues and expenses of such affiliates. We do not control our unconsolidated affiliates; therefore, we do not control the earnings or cash flows of such affiliates. The use of Adjusted EBITDA or Adjusted EBITDA related to unconsolidated affiliates as an analytical tool should be limited accordingly. |
|
|
Adjusted EBITDA is used by management to determine our operating performance and, along with other financial and volumetric data, as internal measures for setting annual operating budgets, assessing financial performance of our numerous business locations, as a measure for evaluating targeted businesses for acquisition and as a measurement component of incentive compensation. |
|
|
Definition of Distributable Cash Flow |
|
|
We define Distributable Cash Flow as net income, adjusted for certain non-cash items, less distributions to preferred unitholders and maintenance capital expenditures. Non-cash items include depreciation, depletion and amortization, non-cash compensation expense, amortization included in interest expense, gains and losses on disposals of assets, the allowance for equity funds used during construction, unrealized gains and losses on commodity risk management activities, inventory valuation adjustments, non-cash impairment charges, losses on extinguishments of debt and deferred income taxes. For unconsolidated affiliates, Distributable Cash Flow reflects the Partnership’s proportionate share of the investee’s distributable cash flow. |
|
|
Distributable Cash Flow is used by management to evaluate our overall performance. Our partnership agreement requires us to distribute all available cash, and Distributable Cash Flow is calculated to evaluate our ability to fund distributions through cash generated by our operations. |
|
|
On a consolidated basis, Distributable Cash Flow includes 100% of the Distributable Cash Flow of Energy Transfer’s consolidated subsidiaries. However, to the extent that noncontrolling interests exist among our subsidiaries, the Distributable Cash Flow generated by our subsidiaries may not be available to be distributed to our partners. In order to reflect the cash flows available for distributions to our partners, we have reported Distributable Cash Flow attributable to partners, which is calculated by adjusting Distributable Cash Flow (consolidated), as follows: |
|
|
|
|
|
|
|
|
For Distributable Cash Flow attributable to partners, as adjusted, certain transaction-related adjustments and non-recurring expenses that are included in net income are excluded. |
|
|
Definition of Distribution Coverage Ratio |
|
|
Distribution coverage ratio for a period is calculated as Distributable Cash Flow attributable to partners, as adjusted, divided by distributions expected to be paid to the partners of Energy Transfer in respect of such period. |
|
(c) |
For the nine months ended September 30, 2022, the amount reflected for transaction-related income taxes was related to an amended return from a previous transaction. |
|
ENERGY TRANSFER LP AND SUBSIDIARIES SUMMARY ANALYSIS OF QUARTERLY RESULTS BY SEGMENT (Tabular dollar amounts in millions) (unaudited) |
|||||
|
|
||||
|
Three Months Ended September 30, |
||||
|
2022 |
|
2021 |
||
Segment Adjusted EBITDA: |
|
|
|
||
Intrastate transportation and storage |
$ |
301 |
|
$ |
172 |
Interstate transportation and storage |
|
409 |
|
|
334 |
Midstream |
|
868 |
|
|
556 |
NGL and refined products transportation and services |
|
634 |
|
|
706 |
Crude oil transportation and services |
|
461 |
|
|
496 |
Investment in Sunoco LP |
|
276 |
|
|
198 |
Investment in USAC |
|
109 |
|
|
99 |
All other |
|
30 |
|
|
18 |
Total Segment Adjusted EBITDA |
$ |
3,088 |
|
$ |
2,579 |
The following analysis of segment operating results includes a measure of segment margin. Segment margin is a non-GAAP financial measure and is presented herein to assist in the analysis of segment operating results and particularly to facilitate an understanding of the impacts that changes in sales revenues have on the segment performance measure of Segment Adjusted EBITDA.
Energy Transfer
Investor Relations:
Bill Baerg, Brent Ratliff, Lyndsay Hannah, 214-981-0795
or
Media Relations:
Vicki Granado, 214-840-5820
Third Quarter 2022 Highlights
HOUSTON--(BUSINESS WIRE)--Solaris Oilfield Infrastructure, Inc. (NYSE:SOI) (“Solaris” or the “Company”), a leading provider of supply chain management and logistics solutions designed to drive efficiencies and reduce costs for the oil and natural gas industry, today reported financial results for the third quarter 2022.
Operational Update and Outlook
During the third quarter of 2022, an average of 94 mobile proppant management systems were fully utilized, which was up 12% from average second quarter 2022 levels.
“The Solaris team executed on another strong quarter of growth, while maintaining a healthy balance sheet and continuing to return cash to shareholders,” Solaris’ Chairman and Chief Executive Officer Bill Zartler commented. “Throughout 2022, the success of our new top fill solutions has helped us grow with both new and existing customers. The new technology has also helped us expand in historically untapped markets for Solaris, including the Rockies. We are excited to partner with our customers as we help to provide solutions that can increase logistics and well site efficiency and ultimately lower well costs.”
Third Quarter 2022 Financial Review
Solaris reported net income of $11.5 million, or $0.22 per diluted Class A share, for third quarter 2022, compared to second quarter 2022 net income of $8.3 million, or $0.16 per diluted Class A share. Adjusted pro forma net income for third quarter 2022 was $11.1 million, or $0.24 per fully diluted share, compared to second quarter 2022 adjusted pro forma net income of $9.4 million, or $0.20 per fully diluted share. A description of adjusted pro forma net income and a reconciliation to net income attributable to Solaris, its most directly comparable generally accepted accounting principles (“GAAP”) measure, and the computation of adjusted pro forma earnings per fully diluted share are provided below.
Revenues were $92.3 million for third quarter 2022, which were up 6% from second quarter 2022, driven by an increase in systems deployed and contribution from new technologies, partially offset by a reduction in last mile trucking logistics activity.
Adjusted EBITDA for third quarter 2022 was $23.9 million, which was up 14% from second quarter 2022. The increase in Adjusted EBITDA was driven by an increase in the number of fully utilized systems and contribution from new technologies, partially offset by lower last mile logistics activity and profitability mix, and start up costs associated with the ramp in new technologies and expansion into growth basins. A description of Adjusted EBITDA and a reconciliation to net income, its most directly comparable GAAP measure, is provided below.
Capital Expenditures, Free Cash Flow and Liquidity
Capital expenditures in the third quarter 2022 were $27.2 million. The Company expects total capital expenditures in the fourth quarter 2022 to be between $15 million and $20 million, including investments in new technology deployments. Based on the success of the Solaris top fill deployments and strong indicators for incremental demand, the Company is providing initial guidance for total 2023 capital expenditures to be approximately $75 million, inclusive of $10 million to $15 million for maintenance capital expenditures.
Free cash flow (defined as net cash provided by operating activities less investment in property, plant and equipment) during third quarter 2022 was $(5.7) million and reflects increased capital expenditures and working capital use of $(2.6) million to support growth. Distributable cash flow (defined as Adjusted EBITDA less maintenance capital expenditures) was approximately $22 million for the third quarter 2022 and covered quarterly dividend distributions of approximately $4.9 million.
As of September 30, 2022, the Company had approximately $10.4 million of cash on the balance sheet. The Company has $6.0 million in borrowings outstanding on the credit facility, and total liquidity, including availability under the credit facility, was $54.4 million as of the end of the third quarter 2022.
Shareholder Returns
On August 22, 2022, the Company’s Board of Directors declared a cash dividend of $0.105 per share of Class A common stock, which was paid on September 16, 2022 to holders of record as of September 6, 2022. A distribution of $0.105 per unit was also approved for holders of units in Solaris Oilfield Infrastructure, LLC (“Solaris LLC”). Since initiating the dividend in December 2018, the Company has paid 16 consecutive quarterly dividends. Cumulatively, the Company has returned approximately $107 million in cash to shareholders through dividends and share repurchases since December 2018.
Conference Call
The Company will host a conference call to discuss its third quarter 2022 results on Tuesday, November 1, 2022 at 8:00 a.m. Central Time (9:00 a.m. Eastern Time). To join the conference call from within the United States, participants may dial (844) 413-3978. To join the conference call from outside of the United States, participants may dial (412) 317-6594. When instructed, please ask the operator to be joined to the Solaris Oilfield Infrastructure, Inc. call. Participants are encouraged to log in to the webcast or dial in to the conference call approximately ten minutes prior to the start time. To listen via live webcast, please visit the Investor Relations section of the Company’s website at http://www.solarisoilfield.com.
An audio replay of the conference call will be available shortly after the conclusion of the call and will remain available for approximately seven days. It can be accessed by dialing (877) 344-7529 within the United States or (412) 317-0088 outside of the United States. The conference call replay access code is 2240232. The replay will also be available in the Investor Relations section of the Company’s website shortly after the conclusion of the call and will remain available for approximately seven days.
About Solaris Oilfield Infrastructure, Inc.
Solaris Oilfield Infrastructure, Inc. (NYSE:SOI) provides mobile equipment that drives supply chain and execution efficiencies in the completion of oil and natural gas wells. Solaris’ patented equipment and systems are deployed across oil and natural gas basins in the United States. Additional information is available on our website, www.solarisoilfield.com.
Website Disclosure
We use our website (www.solarisoilfield.com) as a routine channel of distribution of company information, including news releases, analyst presentations, and supplemental financial information, as a means of disclosing material non-public information and for complying with our disclosure obligations under the U.S. Securities and Exchange Commission’s (the “SEC”) Regulation FD. Accordingly, investors should monitor our website in addition to following press releases, SEC filings and public conference calls and webcasts. Additionally, we provide notifications of news or announcements on our investor relations website. Investors and others can receive notifications of new information posted on our investor relations website in real time by signing up for email alerts.
None of the information provided on our website, in our press releases, public conference calls and webcasts, or through social media channels is incorporated by reference into, or deemed to be a part of, this press release or will be incorporated by reference into any report or document we file with the SEC unless we expressly incorporate any such information by reference, and any references to our website are intended to be inactive textual references only.
Forward Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Examples of forward-looking statements include, but are not limited to, our business strategy, our industry, our future profitability, the various risks and uncertainties associated with the extraordinary market environment and impacts resulting from the volatility in global oil markets and the COVID-19 pandemic, expected capital expenditures and the impact of such expenditures on performance, management changes, current and potential future long-term contracts and our future business and financial performance. Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, by their nature, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. As a result, our actual results may differ materially from those contemplated by the forward-looking statements. Factors that could cause our actual results to differ materially from the results contemplated by such forward-looking statements include, but are not limited to the factors discussed or referenced in our filings made from time to time with the SEC. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.
SOLARIS OILFIELD INFRASTRUCTURE, INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited) |
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
Three Months Ended |
|
Nine Months Ended |
||||||||||||||||
|
|
September 30, |
|
June 30, |
|
September 30, |
||||||||||||||
|
|
2022 |
|
2021 |
|
2022 |
|
2022 |
|
2021 |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Revenue |
|
|
89,376 |
|
|
|
46,390 |
|
|
|
81,130 |
|
|
|
222,342 |
|
|
|
104,139 |
|
Revenue - related parties |
|
|
2,949 |
|
|
|
2,987 |
|
|
|
5,581 |
|
|
|
13,609 |
|
|
|
9,101 |
|
Total revenue |
|
|
92,325 |
|
|
|
49,377 |
|
|
|
86,711 |
|
|
|
235,951 |
|
|
|
113,240 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Operating costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cost of services (excluding depreciation and amortization) |
|
|
64,171 |
|
|
|
38,460 |
|
|
|
61,237 |
|
|
|
163,079 |
|
|
|
82,816 |
|
Depreciation and amortization |
|
|
7,716 |
|
|
|
6,842 |
|
|
|
7,132 |
|
|
|
21,777 |
|
|
|
20,288 |
|
Property tax contingency (1) |
|
|
— |
|
|
|
— |
|
|
|
3,072 |
|
|
|
3,072 |
|
|
|
— |
|
Selling, general and administrative |
|
|
5,929 |
|
|
|
4,760 |
|
|
|
6,062 |
|
|
|
17,202 |
|
|
|
14,326 |
|
Other operating (income) expenses (2) |
|
|
524 |
|
|
|
(2,690 |
) |
|
|
(1,114 |
) |
|
|
(899 |
) |
|
|
(2,074 |
) |
Total operating costs and expenses |
|
|
78,340 |
|
|
|
47,372 |
|
|
|
76,389 |
|
|
|
204,231 |
|
|
|
115,356 |
|
Operating income (loss) |
|
|
13,985 |
|
|
|
2,005 |
|
|
|
10,322 |
|
|
|
31,720 |
|
|
|
(2,116 |
) |
Interest expense, net |
|
|
(141 |
) |
|
|
(66 |
) |
|
|
(88 |
) |
|
|
(308 |
) |
|
|
(170 |
) |
Total other expense |
|
|
(141 |
) |
|
|
(66 |
) |
|
|
(88 |
) |
|
|
(308 |
) |
|
|
(170 |
) |
Income (loss) before income tax expense |
|
|
13,844 |
|
|
|
1,939 |
|
|
|
10,234 |
|
|
|
31,412 |
|
|
|
(2,286 |
) |
Provision for income taxes |
|
|
2,332 |
|
|
|
507 |
|
|
|
1,945 |
|
|
|
5,889 |
|
|
|
77 |
|
Net income (loss) |
|
|
11,512 |
|
|
|
1,432 |
|
|
|
8,289 |
|
|
|
25,523 |
|
|
|
(2,363 |
) |
Less: net (income) loss related to non-controlling interests |
|
|
(4,106 |
) |
|
|
(558 |
) |
|
|
(2,836 |
) |
|
|
(9,162 |
) |
|
|
857 |
|
Net income (loss) attributable to Solaris |
|
$ |
7,406 |
|
|
$ |
874 |
|
|
$ |
5,453 |
|
|
$ |
16,361 |
|
|
$ |
(1,506 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Earnings per share of Class A common stock - basic |
|
$ |
0.22 |
|
|
$ |
0.03 |
|
|
$ |
0.16 |
|
|
$ |
0.49 |
|
|
$ |
(0.06 |
) |
Earnings per share of Class A common stock - diluted |
|
$ |
0.22 |
|
|
$ |
0.03 |
|
|
$ |
0.16 |
|
|
$ |
0.49 |
|
|
$ |
(0.06 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Basic weighted average shares of Class A common stock outstanding |
|
|
31,599 |
|
|
|
31,058 |
|
|
|
31,432 |
|
|
|
31,425 |
|
|
|
30,671 |
|
Diluted weighted average shares of Class A common stock outstanding |
|
|
31,599 |
|
|
|
31,058 |
|
|
|
31,432 |
|
|
|
31,425 |
|
|
|
30,671 |
|
1) |
Property tax contingency represents a reserve related to an unfavorable Texas District Court ruling related to prior period property taxes. The ruling is currently under appeal. |
|
2) |
Other (income) expense include the sale or disposal of assets, settlements of insurance claims, change in payable related to Tax Receivable Agreement, credit losses or recoveries, and transaction costs. |
SOLARIS OILFIELD INFRASTRUCTURE, INC AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except per share amounts) (Unaudited) |
||||||
|
|
|
|
|
|
|
|
|
September 30, |
|
December 31, |
||
|
|
2022 |
|
2021 |
||
Assets |
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
10,433 |
|
$ |
36,497 |
Accounts receivable, net of allowances for credit losses of $385 and $746, respectively |
|
|
68,496 |
|
|
29,513 |
Accounts receivable - related party |
|
|
2,596 |
|
|
3,607 |
Prepaid expenses and other current assets |
|
|
8,548 |
|
|
9,797 |
Inventories |
|
|
5,615 |
|
|
1,654 |
Total current assets |
|
|
95,688 |
|
|
81,068 |
Property, plant and equipment, net |
|
|
284,913 |
|
|
240,091 |
Non-current inventories |
|
|
2,249 |
|
|
2,676 |
Operating lease right-of-use assets |
|
|
4,213 |
|
|
4,182 |
Goodwill |
|
|
13,004 |
|
|
13,004 |
Intangible assets, net |
|
|
1,619 |
|
|
2,203 |
Deferred tax assets |
|
|
58,148 |
|
|
62,942 |
Other assets |
|
|
295 |
|
|
57 |
Total assets |
|
$ |
460,129 |
|
$ |
406,223 |
Liabilities and Stockholders' Equity |
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
Accounts payable |
|
$ |
26,079 |
|
$ |
9,927 |
Accrued liabilities |
|
|
30,147 |
|
|
16,918 |
Current portion of payables related to Tax Receivable Agreement |
|
|
1,210 |
|
|
1,210 |
Current portion of operating lease liabilities |
|
|
886 |
|
|
717 |
Current portion of finance lease liabilities |
|
|
1,222 |
|
|
31 |
Other current liabilities |
|
|
1,301 |
|
|
496 |
Total current liabilities |
|
|
60,845 |
|
|
29,299 |
Operating lease liabilities, net of current |
|
|
6,410 |
|
|
6,702 |
Credit agreement |
|
|
6,000 |
|
|
— |
Finance lease liabilities, net of current |
|
|
2,331 |
|
|
70 |
Payables related to Tax Receivable Agreement |
|
|
71,422 |
|
|
71,892 |
Other long-term liabilities |
|
|
372 |
|
|
384 |
Total liabilities |
|
|
147,380 |
|
|
108,347 |
Stockholders' equity: |
|
|
|
|
|
|
Preferred stock, $0.01 par value, 50,000 shares authorized, none issued and outstanding |
|
|
— |
|
|
— |
Class A common stock, $0.01 par value, 600,000 shares authorized, 31,638 shares issued and outstanding as of September 30, 2022 and 31,146 shares issued and outstanding as of December 31, 2021 |
|
|
316 |
|
|
312 |
Class B common stock, $0.00 par value, 180,000 shares authorized, 13,674 shares issued and outstanding as of September 30, 2022 and 13,770 issued and outstanding as of December 31, 2021 |
|
|
— |
|
|
— |
Additional paid-in capital |
|
|
201,720 |
|
|
196,912 |
Retained earnings |
|
|
11,509 |
|
|
5,925 |
Total stockholders' equity attributable to Solaris and members' equity |
|
|
213,545 |
|
|
203,149 |
Non-controlling interest |
|
|
99,204 |
|
|
94,727 |
Total stockholders' equity |
|
|
312,749 |
|
|
297,876 |
Total liabilities and stockholders' equity |
|
$ |
460,129 |
|
$ |
406,223 |
SOLARIS OILFIELD INFRASTRUCTURE, INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) |
||||||||||||
|
|
|
|
|
|
|
|
|
|
|||
|
|
Nine Months Ended
|
|
Three Months Ended
|
||||||||
|
|
2022 |
|
2021 |
|
2022 |
||||||
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|||
Net (loss) income |
|
$ |
25,523 |
|
|
$ |
(2,363 |
) |
|
$ |
11,512 |
|
Adjustment to reconcile net (loss) income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|||
Depreciation and amortization |
|
|
21,777 |
|
|
|
20,288 |
|
|
|
7,716 |
|
Loss on disposal of asset |
|
|
1,307 |
|
|
|
113 |
|
|
|
1,346 |
|
Stock-based compensation |
|
|
4,665 |
|
|
|
3,907 |
|
|
|
1,553 |
|
Amortization of debt issuance costs |
|
|
127 |
|
|
|
132 |
|
|
|
29 |
|
Allowance for credit losses |
|
|
(420 |
) |
|
|
630 |
|
|
|
(32 |
) |
Change in payables related to Tax Receivable Agreement |
|
|
(654 |
) |
|
|
— |
|
|
|
— |
|
Deferred income tax expense (benefit) |
|
|
5,143 |
|
|
|
(273 |
) |
|
|
2,042 |
|
Other |
|
|
(178 |
) |
|
|
(153 |
) |
|
|
— |
|
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
|
|||
Accounts receivable |
|
|
(38,563 |
) |
|
|
(17,995 |
) |
|
|
(5,555 |
) |
Accounts receivable - related party |
|
|
1,011 |
|
|
|
(1,852 |
) |
|
|
1,349 |
|
Prepaid expenses and other assets |
|
|
2,972 |
|
|
|
(3,266 |
) |
|
|
(2,126 |
) |
Inventories |
|
|
(4,744 |
) |
|
|
(714 |
) |
|
|
(1,287 |
) |
Accounts payable |
|
|
12,569 |
|
|
|
7,076 |
|
|
|
4,667 |
|
Accrued liabilities |
|
|
10,305 |
|
|
|
6,167 |
|
|
|
304 |
|
Property tax contingency (1) |
|
|
3,072 |
|
|
|
— |
|
|
|
— |
|
Net cash provided by operating activities |
|
|
43,912 |
|
|
|
11,697 |
|
|
|
21,518 |
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|||
Investment in property, plant and equipment |
|
|
(59,527 |
) |
|
|
(13,702 |
) |
|
|
(27,201 |
) |
Cash received from insurance proceeds |
|
|
1,308 |
|
|
|
35 |
|
|
|
448 |
|
Proceeds from disposal of assets |
|
|
422 |
|
|
|
42 |
|
|
|
365 |
|
Net cash used in investing activities |
|
|
(57,797 |
) |
|
|
(13,625 |
) |
|
|
(26,388 |
) |
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|||
Distribution and dividend paid to Solaris LLC unitholders and Class A common shareholders |
|
|
(14,675 |
) |
|
|
(14,400 |
) |
|
|
(4,898 |
) |
Borrowings under the credit agreement |
|
|
9,000 |
|
|
|
— |
|
|
|
9,000 |
|
Repayment of the credit agreement |
|
|
(3,000 |
) |
|
|
— |
|
|
|
(3,000 |
) |
Payments under finance leases |
|
|
(1,100 |
) |
|
|
(23 |
) |
|
|
(533 |
) |
Payments under insurance premium financing |
|
|
(946 |
) |
|
|
(410 |
) |
|
|
(524 |
) |
Proceeds from stock option exercises |
|
|
— |
|
|
|
12 |
|
|
|
— |
|
Payments related to debt issuance costs |
|
|
(358 |
) |
|
|
— |
|
|
|
— |
|
Payments for shares withheld for taxes from RSU vesting and cancelled |
|
|
(1,100 |
) |
|
|
(786 |
) |
|
|
(93 |
) |
Net cash used in financing activities |
|
|
(12,179 |
) |
|
|
(15,607 |
) |
|
|
(48 |
) |
Net decrease in cash and cash equivalents |
|
|
(26,064 |
) |
|
|
(17,535 |
) |
|
|
(4,918 |
) |
Cash and cash equivalents at beginning of period |
|
|
36,497 |
|
|
|
60,366 |
|
|
|
15,351 |
|
Cash and cash equivalents at end of period |
|
$ |
10,433 |
|
|
$ |
42,831 |
|
|
$ |
10,433 |
|
Non-cash activities |
|
|
|
|
|
|
|
|
|
|||
Operating: |
|
|
|
|
|
|
|
|
|
|||
Employee retention credit |
|
$ |
— |
|
|
$ |
1,900 |
|
|
$ |
— |
|
Investing: |
|
|
|
|
|
|
|
|
|
|||
Capitalized depreciation in property, plant and equipment |
|
|
424 |
|
|
|
2,260 |
|
|
|
135 |
|
Capitalized stock based compensation |
|
|
296 |
|
|
|
228 |
|
|
|
89 |
|
Property and equipment additions incurred but not paid at period-end |
|
|
3,436 |
|
|
|
323 |
|
|
|
3,436 |
|
Property, plant and equipment additions transferred from inventory |
|
|
1,210 |
|
|
|
958 |
|
|
|
152 |
|
Additions to fixed assets through finance leases |
|
|
4,554 |
|
|
|
— |
|
|
|
2,287 |
|
Financing: |
|
|
|
|
|
|
|
|
|
|||
Insurance premium financing |
|
|
806 |
|
|
|
410 |
|
|
|
806 |
|
Cash paid for: |
|
|
|
|
|
|
|
|
|
|||
Interest |
|
|
102 |
|
|
|
99 |
|
|
|
65 |
|
Income taxes |
|
|
370 |
|
|
|
325 |
|
|
|
— |
|
1) |
Property tax contingency represents a reserve related to an unfavorable Texas District Court ruling related to prior period property taxes. The ruling is currently under appeal. |
SOLARIS OILFIELD INFRASTRUCTURE, INC AND SUBSIDIARIES RECONCILIATION AND CALCULATION OF NON-GAAP FINANCIAL AND OPERATIONAL MEASURES (In thousands) (Unaudited) |
||||||||||||||||||||
| EBITDA AND ADJUSTED EBITDA | ||||||||||||||||||||
| We view EBITDA and Adjusted EBITDA as important indicators of performance. We define EBITDA as net income, plus (i) depreciation and amortization expense, (ii) interest expense and (iii) income tax expense, including franchise taxes. We define Adjusted EBITDA as EBITDA plus (i) stock-based compensation expense and (ii) certain non-cash items and extraordinary, unusual or non-recurring gains, losses or expenses. | ||||||||||||||||||||
We believe that our presentation of EBITDA and Adjusted EBITDA provides useful information to investors in assessing our financial condition and results of operations. Net income is the GAAP measure most directly comparable to EBITDA and Adjusted EBITDA. EBITDA and Adjusted EBITDA should not be considered alternatives to net income presented in accordance with GAAP. Because EBITDA and Adjusted EBITDA may be defined differently by other companies in our industry, our definitions of EBITDA and Adjusted EBITDA may not be comparable to similarly titled measures of other companies, thereby diminishing their utility. The following table presents a reconciliation of net income to EBITDA and Adjusted EBITDA for each of the periods indicated. |
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
Three Months Ended |
|
Nine months ended |
||||||||||||||||
|
|
September 30, |
|
June 30 |
|
September 30, |
||||||||||||||
|
|
2022 |
|
2021 |
|
2022 |
|
2022 |
|
2021 |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net income (loss) |
|
$ |
11,512 |
|
|
$ |
1,432 |
|
|
$ |
8,289 |
|
|
$ |
25,523 |
|
|
$ |
(2,363 |
) |
Depreciation and amortization |
|
|
7,716 |
|
|
|
6,842 |
|
|
|
7,132 |
|
|
|
21,777 |
|
|
|
20,288 |
|
Interest expense, net |
|
|
141 |
|
|
|
66 |
|
|
|
88 |
|
|
|
308 |
|
|
|
170 |
|
Income taxes (1) |
|
|
2,332 |
|
|
|
507 |
|
|
|
1,945 |
|
|
|
5,889 |
|
|
|
77 |
|
EBITDA |
|
$ |
21,701 |
|
|
$ |
8,847 |
|
|
$ |
17,454 |
|
|
$ |
53,497 |
|
|
$ |
18,172 |
|
Property tax contingency (2) |
|
|
— |
|
|
|
— |
|
|
|
3,072 |
|
|
|
3,072 |
|
|
|
— |
|
Stock-based compensation expense (3) |
|
|
1,553 |
|
|
|
1,355 |
|
|
|
1,519 |
|
|
|
4,665 |
|
|
|
3,907 |
|
Employee retention credit (4) |
|
|
— |
|
|
|
(2,992 |
) |
|
|
— |
|
|
|
— |
|
|
|
(2,992 |
) |
Change in payables related to Tax Receivable Agreement (5) |
|
|
— |
|
|
|
— |
|
|
|
(654 |
) |
|
|
(654 |
) |
|
|
— |
|
Credit losses and adjustments to credit losses |
|
|
(32 |
) |
|
|
30 |
|
|
|
(361 |
) |
|
|
(420 |
) |
|
|
630 |
|
Other (6) |
|
|
712 |
|
|
|
422 |
|
|
|
34 |
|
|
|
578 |
|
|
|
563 |
|
Adjusted EBITDA |
|
$ |
23,934 |
|
|
$ |
7,662 |
|
|
$ |
21,064 |
|
|
$ |
60,738 |
|
|
$ |
20,280 |
|
| ___________________ | ||
1) |
Federal and state income taxes. |
|
2) |
Property tax contingency represents a reserve related to an unfavorable Texas District Court ruling related to prior period property taxes. The ruling is currently under appeal. |
|
3) |
Represents stock-based compensation expense related to restricted stock awards. |
|
4) |
Employee retention credit as part of Consolidated Appropriations Act of 2021, net of administrative fees. |
|
5) |
Reduction in liability due to state tax rate change. |
|
6) |
Other includes loss on disposal of assets, gain on insurance claims and other settlements, and costs related to the evaluation of potential acquisitions. |
|
ADJUSTED PRO FORMA NET INCOME AND ADJUSTED PRO FORMA EARNINGS PER FULLY DILUTED SHARE
Adjusted pro forma net income represents net income attributable to Solaris assuming the full exchange of all outstanding membership interests in Solaris LLC not held by Solaris Oilfield Infrastructure, Inc. for shares of Class A common stock, adjusted for certain non-recurring items that the Company doesn't believe directly reflect its core operations and may not be indicative of ongoing business operations. Adjusted pro forma earnings per fully diluted share is calculated by dividing adjusted pro forma net income by the weighted-average shares of Class A common stock outstanding, assuming the full exchange of all outstanding units of Solaris LLC (“Solaris LLC Units”), after giving effect to the dilutive effect of outstanding equity-based awards.
When used in conjunction with GAAP financial measures, adjusted pro forma net income and adjusted pro forma earnings per fully diluted share are supplemental measures of operating performance that the Company believes are useful measures to evaluate performance period over period and relative to its competitors. By assuming the full exchange of all outstanding Solaris LLC Units, the Company believes these measures facilitate comparisons with other companies that have different organizational and tax structures, as well as comparisons period over period because it eliminates the effect of any changes in net income attributable to Solaris as a result of increases in its ownership of Solaris LLC, which are unrelated to the Company's operating performance, and excludes items that are non-recurring or may not be indicative of ongoing operating performance.
Adjusted pro forma net income and adjusted pro forma earnings per fully diluted share are not necessarily comparable to similarly titled measures used by other companies due to different methods of calculation.
Yvonne Fletcher
Senior Vice President, Finance and Investor Relations
(281) 501-3070
This email address is being protected from spambots. You need JavaScript enabled to view it.
Achieves Record Third Quarter Adjusted EBITDA
OKLAHOMA CITY, Okla.--(BUSINESS WIRE)--LSB Industries, Inc. (NYSE: LXU) (“LSB” or the “Company”) today announced results for the third quarter ended September 30, 2022.
Third Quarter 2022 Highlights
"We delivered strong top and bottom line growth as compared to last year despite executing two turnarounds in this year's third quarter versus one in last year's third quarter," stated Mark Behrman, LSB’s President and CEO. "We continued to benefit from higher selling prices compared to last year, and our strategic commercial initiatives that enabled us to optimize our sales mix in the face of a rapidly changing market environment. Pricing remains well above year-ago levels and there are multiple supply and demand factors currently at play that we expect will continue to support strong pricing for the final two months of 2022 and for 2023, if not longer."
"Even with the reduced volumes resulting from our third quarter scheduled maintenance activities at our Pryor and El Dorado facilities, we once again generated meaningful positive operating cash flow. Our increasingly strong balance sheet enabled us to complete a total of $100 million of share repurchases for a total of approximately 7.6 million shares since the program began in May. These repurchases included 5.5 million shares that we bought from our largest shareholder, efficiently returning capital to our shareholders while not diminishing the liquidity of our stock."
Mr. Behrman continued, "Over the next several years, we believe we have an opportunity to continue to drive shareholder value through ongoing improvement of our operating rates, continued product optimization and potential debottlenecking projects. We believe these projects could materially increase the production capacities of our facilities, enhancing our profit margins as we capitalize on the operating leverage inherent in our business model. We expect to formalize and announce our debottlenecking plans in early 2023."
"In addition, we continue to advance our decarbonization activities. In April we announced our CO2 capture and sequestration or 'blue' ammonia project at our El Dorado facility where we intend to initially capture approximately 450,000 tons of CO2 annually. We have made significant advancements on data collection necessary for a Class VI permit application and expect to file that application in the second quarter of 2023. Additionally, in May we announced a feasibility study for a zero-carbon or 'green' ammonia project at our Pryor facility and we are in the final stages of completing that study. We will report on the results of the feasibility study when it is complete."
Mr. Behrman concluded, "As we head into the final months of 2022 we are highly enthusiastic about our near and longer term prospects for profitable growth, free cash flow generation and increased shareholder value given the favorable outlook for our markets coupled with the company-specific initiatives we have underway. Supporting that belief, on Monday we announced an increase of $75 million to our share repurchase program bringing the total repurchase program to $175 million."
| ______________________ |
(1) This is a Non-GAAP measure. Refer to the Non-GAAP Reconciliation section. |
Third Quarter Results Overview
|
|
Three Months Ended
|
|
|||||||||
Product (Gross Sales in $000's) |
|
2022 |
|
|
2021 |
|
|
% Change |
|
|||
AN & Nitric Acid |
|
$ |
66,161 |
|
|
$ |
47,453 |
|
|
|
39 |
% |
Urea ammonium nitrate (UAN) |
|
|
50,459 |
|
|
|
26,034 |
|
|
|
94 |
% |
Ammonia |
|
|
52,075 |
|
|
|
42,307 |
|
|
|
23 |
% |
Other |
|
|
15,578 |
|
|
|
11,405 |
|
|
|
37 |
% |
|
|
$ |
184,273 |
|
|
$ |
127,199 |
|
|
|
45 |
% |
Comparison of 2022 to 2021 quarterly periods:
The following tables provide key sales metrics for our products:
|
|
Three Months Ended
|
|
|||||||||
Key Product Volumes (short tons sold) |
|
2022 |
|
|
2021 |
|
|
% Change |
|
|||
AN & Nitric Acid |
|
|
125,446 |
|
|
|
135,279 |
|
|
|
(7 |
)% |
Urea ammonium nitrate (UAN) |
|
|
115,352 |
|
|
|
82,555 |
|
|
|
40 |
% |
Ammonia |
|
|
55,825 |
|
|
|
80,001 |
|
|
|
(30 |
)% |
|
|
|
296,623 |
|
|
|
297,835 |
|
|
|
(0 |
)% |
Average Selling Prices (price per short ton) (A) |
|
|
|
|
|
|
|
|
|
|||
AN & Nitric Acid |
|
$ |
458 |
|
|
$ |
290 |
|
|
|
58 |
% |
Urea ammonium nitrate (UAN) |
|
$ |
417 |
|
|
$ |
305 |
|
|
|
37 |
% |
Ammonia |
|
$ |
906 |
|
|
$ |
515 |
|
|
|
76 |
% |
(A) Average selling prices represent “net back” prices which are calculated as sales less freight expenses divided by product sales volume in tons. |
||||||||||||
|
|
Three Months Ended
|
|
|||||||||
|
|
2022 |
|
|
2021 |
|
|
% Change |
|
|||
Average Benchmark Prices (price per ton) |
|
|
|
|
|
|
|
|
|
|||
Tampa Ammonia (MT) Benchmark |
|
$ |
1,093 |
|
|
$ |
610 |
|
|
|
79 |
% |
UAN Southern Plains |
|
$ |
482 |
|
|
$ |
355 |
|
|
|
36 |
% |
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Input Costs |
|
|
|
|
|
|
|
|
|
|||
Average natural gas cost/MMBtu |
|
$ |
7.65 |
|
|
$ |
3.71 |
|
|
|
106 |
% |
Financial Position and Capital Expenditures
As of September 30, 2022, our total liquidity was approximately $450 million, including $385 million in cash and short-term investments and approximately $65 million of borrowing availability under our Working Capital Revolver. Total long-term debt, including the $10 million current portion, was $714 million on September 30, 2022 compared to $528 million on December 31, 2021.
Interest expense for the third quarter of 2022 was $12 million as compared to $13 million in the third quarter of 2021.
During the third quarter we repurchased approximately $90 million of the Company’s stock at an average price of approximately $13 per share under the share repurchase plan that our Board of Directors increased from the $50 million originally authorized on May 16, 2022 to $100 million on August 8, 2022.
Capital expenditures were approximately $16.1 million for the third quarter of 2022. For the full year 2022, total capital expenditures are expected to be approximately $65 million.
Outlook
Market conditions remain intact to keep fertilizer prices above historical averages for the remainder of 2022 and full year 2023. Farmer economics continue to be very favorable as a result of strong global demand for corn in the face of constrained supply. Key factors include the impact on global corn supplies of dry conditions in South America, the Western U.S. and parts of Europe coupled with continued high demand for corn from China. As a result, corn prices remain above 10-year averages and farmer profitability is meaningfully positive despite inflation across their cost inputs. In order to maximize yield in 2023 to capitalize on these favorable economics, we expect demand for agricultural ammonia to be strong through November and into December as farmers seek to replenish the nitrogen in their soil in advance of the coming Spring planting season.
Natural gas costs in Europe continue to be a major driver of high fertilizer prices. While down from the peak levels reached in August, which caused operations at numerous European ammonia facilities to cease due to prohibitively high production costs, natural gas prices in Europe remain well above historical averages. Moving into the winter heating season it appears possible that European gas prices could rise again if temperatures are below average for periods of time as supply remains tight. This would limit or prevent many of the continent's ammonia facilities from resuming production, keeping nitrogen fertilizer prices high. Despite energy cost inflation in the U.S., domestic natural gas prices remain a fraction of those in Europe, giving U.S. ammonia producers a substantial cost advantage in the global market.
The impact of the Russian invasion of Ukraine and the ongoing conflict in the region has contributed to the constraints to both global grain and ammonia supplies, as well as an aggravating factor to Europe's high gas prices. Ukraine is one of the world’s largest exporters of corn while Russia is among the world’s largest exporters of wheat and ammonia and was historically a major supplier of gas to much of Europe. At this point, it seems likely that even if the current unstable geopolitical situation in the region were to be resolved soon, the global supply of these commodities would still be short to meet demand throughout the entirety of 2023 and beyond.
With respect to industrial markets, demand remains stable from domestic end-use markets, while orders from customers producing products largely for export to Europe and Asia have softened to a degree given weakening international economies. Importantly, in addition to our contractual agreements with industrial customers that specify minimum volumes, our product mix flexibility helps us mitigate the impact of a reduction in demand from certain end markets by shifting production to products with stronger demand. An example would be our ability to reduce our nitric acid volumes in favor of increased production of ammonium nitrate. Relative to this, we have been experiencing favorable trends in our mining business as rising global consumption of coal has strengthened demand and pricing for ammonium nitrate, a product we sell to mining services companies for use in aggregates and metals mining operations. Overall, despite growing global recessionary forces, our industrial and mining business remains stable as a whole.
Conference Call
LSB’s management will host a conference call covering the third quarter results on Wednesday, November 2, 2022 at 10:00 am ET / 9:00 am CT to discuss these results and recent corporate developments. Participating in the call will be President & Chief Executive Officer, Mark Behrman and Executive Vice President & Chief Financial Officer, Cheryl Maguire. Interested parties may participate in the call by dialing (888) 437-3179 / (862) 298-0702. Please call in 10 minutes before the conference is scheduled to begin and ask for the LSB conference call. To coincide with the conference call, LSB will post a slide presentation at www.lsbindustries.com on the webcast section of the Investor tab of our website.
To listen to a webcast of the call, please go to the Company’s website at www.lsbindustries.com at least 15 minutes prior to the conference call to download and install any necessary audio software. If you are unable to listen live, the conference call webcast will be archived on the Company’s website.
LSB Industries, Inc.
LSB Industries, Inc., headquartered in Oklahoma City, Oklahoma, manufactures and sells chemical products for the agricultural, mining, and industrial markets. The Company owns and operates facilities in Cherokee, Alabama, El Dorado, Arkansas and Pryor, Oklahoma, and operates a facility for a global chemical company in Baytown, Texas. LSB’s products are sold through distributors and directly to end customers primarily throughout the United States. Committed to improving the world by setting goals that will reduce our environmental impact on the planet and improve the quality of life for all of its people, the Company is well positioned to play a key role in the reduction of global carbon emissions through its planned carbon capture and sequestration, and zero carbon ammonia strategies. Additional information about LSB can be found on its website at www.lsbindustries.com.
Forward-Looking Statements
Statements in this release that are not historical are forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements, which are subject to known and unknown risks, uncertainties and assumptions about us, may include projections of our future financial performance including the effects of the COVID-19 pandemic and anticipated performance based on our growth and other strategies and anticipated trends in our business. These statements are only predictions based on our current expectations and projections about future events. There are important factors that could cause our actual results, level of activity, performance or actual achievements to differ materially from the results, level of activity, performance or anticipated achievements expressed or implied by the forward-looking statements. Significant risks and uncertainties may relate to, but are not limited to, business and market disruptions related to the COVID-19 pandemic, market conditions and price volatility for our products and feedstocks, as well as global and regional economic downturns, including as a result of the COVID-19 pandemic, that adversely affect the demand for our end-use products; disruptions in production at our manufacturing facilities and other financial, economic, competitive, environmental, political, legal and regulatory factors. These and other risk factors are discussed in the Company’s filings with the Securities and Exchange Commission (SEC).
Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for our management to predict all risks and uncertainties, nor can management assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. Neither we nor any other person assumes responsibility for the accuracy or completeness of any of these forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. Unless otherwise required by applicable laws, we undertake no obligation to update or revise any forward-looking statements, whether because of new information or future developments.
See Accompanying Tables
LSB Industries, Inc. |
||||||||||||||||
Condensed Consolidated Statements of Operations |
||||||||||||||||
(Unaudited) |
||||||||||||||||
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
|
|
(In Thousands, Except Per Share Amounts) |
|
|||||||||||||
Net sales |
|
$ |
184,273 |
|
|
$ |
127,199 |
|
|
$ |
668,057 |
|
|
$ |
366,011 |
|
Cost of sales |
|
|
162,144 |
|
|
|
109,752 |
|
|
|
412,274 |
|
|
|
305,496 |
|
Gross profit |
|
|
22,129 |
|
|
|
17,447 |
|
|
|
255,783 |
|
|
|
60,515 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Selling, general and administrative expense |
|
|
9,138 |
|
|
|
11,600 |
|
|
|
29,711 |
|
|
|
28,938 |
|
Other expense (income), net |
|
|
(75 |
) |
|
|
474 |
|
|
|
377 |
|
|
|
217 |
|
Operating income |
|
|
13,066 |
|
|
|
5,373 |
|
|
|
225,695 |
|
|
|
31,360 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest expense, net |
|
|
12,193 |
|
|
|
12,956 |
|
|
|
34,455 |
|
|
|
37,618 |
|
Loss (gain) on extinguishment of debt |
|
|
— |
|
|
|
— |
|
|
|
113 |
|
|
|
(10,000 |
) |
Non-operating other expense (income), net |
|
|
(2,219 |
) |
|
|
1,326 |
|
|
|
(5,627 |
) |
|
|
2,466 |
|
Income before provision (benefit) for income taxes |
|
|
3,092 |
|
|
|
(8,909 |
) |
|
|
196,754 |
|
|
|
1,276 |
|
Provision (benefit) for income taxes |
|
|
780 |
|
|
|
19 |
|
|
|
32,277 |
|
|
|
(187 |
) |
Net income (loss) |
|
|
2,312 |
|
|
|
(8,928 |
) |
|
|
164,477 |
|
|
|
1,463 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Dividends on convertible preferred stocks |
|
|
— |
|
|
|
75 |
|
|
|
— |
|
|
|
225 |
|
Dividends on Series E redeemable preferred stock |
|
|
— |
|
|
|
10,190 |
|
|
|
— |
|
|
|
29,914 |
|
Accretion of Series E redeemable preferred stock |
|
|
— |
|
|
|
499 |
|
|
|
— |
|
|
|
1,523 |
|
Deemed dividend on Series E and Series F redeemable preferred stocks |
|
|
— |
|
|
|
231,812 |
|
|
|
— |
|
|
|
231,812 |
|
Net income (loss) attributable to common stockholders |
|
$ |
2,312 |
|
|
$ |
(251,504 |
) |
|
$ |
164,477 |
|
|
$ |
(262,011 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income (loss) per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income (loss) |
|
$ |
0.03 |
|
|
$ |
(6.39 |
) |
|
$ |
1.89 |
|
|
$ |
(6.94 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Diluted: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income (loss) |
|
$ |
0.03 |
|
|
$ |
(6.39 |
) |
|
$ |
1.86 |
|
|
$ |
(6.94 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Adjusted Net Income and Adjusted EPS(1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Adjusted net income (loss) attributable to common stockholders, excluding Exchange Transaction |
|
$ |
2,312 |
|
|
$ |
(9,003 |
) |
|
$ |
164,477 |
|
|
$ |
1,238 |
|
Other adjustments |
|
|
20,483 |
|
|
|
15,645 |
|
|
|
29,896 |
|
|
|
19,716 |
|
Adjusted net income (loss) attributable to common stockholders, excluding Exchange Transaction and other adjustments |
|
$ |
22,795 |
|
|
$ |
6,642 |
|
|
$ |
194,373 |
|
|
$ |
20,954 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Adjusted net income per common share, excluding Exchange Transaction and other adjustments |
|
$ |
0.27 |
|
|
$ |
0.07 |
|
|
$ |
2.20 |
|
|
$ |
0.24 |
|
(1) This is a Non-GAAP measure. Refer to the Non-GAAP Reconciliation section. |
||||||||||||||||
LSB Industries, Inc. |
||||||||
Consolidated Balance Sheets |
||||||||
(Information at September 30, 2022 is unaudited) |
||||||||
|
|
|
|
|
|
|
||
|
|
September 30, |
|
|
December 31, |
|
||
|
|
2022 |
|
|
2021 |
|
||
|
|
(In Thousands) |
|
|||||
Assets |
|
|
|
|
|
|
||
Current assets: |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
19,635 |
|
|
$ |
82,144 |
|
Short-term investments |
|
|
365,573 |
|
|
|
— |
|
Accounts receivable |
|
|
107,847 |
|
|
|
86,902 |
|
Allowance for doubtful accounts |
|
|
(620 |
) |
|
|
(474 |
) |
Accounts receivable, net |
|
|
107,227 |
|
|
|
86,428 |
|
Inventories: |
|
|
|
|
|
|
||
Finished goods |
|
|
28,165 |
|
|
|
14,688 |
|
Raw materials |
|
|
1,565 |
|
|
|
1,895 |
|
Total inventories |
|
|
29,730 |
|
|
|
16,583 |
|
Supplies, prepaid items and other: |
|
|
|
|
|
|
||
Prepaid insurance |
|
|
1,758 |
|
|
|
14,244 |
|
Precious metals |
|
|
14,843 |
|
|
|
14,945 |
|
Supplies |
|
|
27,036 |
|
|
|
26,558 |
|
Other |
|
|
5,250 |
|
|
|
2,234 |
|
Total supplies, prepaid items and other |
|
|
48,887 |
|
|
|
57,981 |
|
Total current assets |
|
|
571,052 |
|
|
|
243,136 |
|
|
|
|
|
|
|
|
||
Property, plant and equipment, net |
|
|
853,939 |
|
|
|
858,480 |
|
|
|
|
|
|
|
|
||
Other assets: |
|
|
|
|
|
|
||
Operating lease assets |
|
|
24,885 |
|
|
|
27,317 |
|
Intangible and other assets, net |
|
|
2,856 |
|
|
|
3,907 |
|
|
|
|
27,741 |
|
|
|
31,224 |
|
|
|
|
|
|
|
|
||
|
|
$ |
1,452,732 |
|
|
$ |
1,132,840 |
|
LSB Industries, Inc. |
||||||||
Consolidated Balance Sheets (continued) |
||||||||
(Information at September 30, 2022 is unaudited) |
||||||||
|
|
September 30, |
|
|
December 31, |
|
||
|
|
2022 |
|
|
2021 |
|
||
|
|
(In Thousands) |
|
|||||
Liabilities and Stockholders' Equity |
|
|
|
|
|
|
||
Current liabilities: |
|
|
|
|
|
|
||
Accounts payable |
|
$ |
93,887 |
|
|
$ |
49,458 |
|
Short-term financing |
|
|
1,425 |
|
|
|
12,716 |
|
Accrued and other liabilities |
|
|
42,062 |
|
|
|
33,301 |
|
Current portion of long-term debt |
|
|
10,269 |
|
|
|
9,454 |
|
Total current liabilities |
|
|
147,643 |
|
|
|
104,929 |
|
|
|
|
|
|
|
|
||
Long-term debt, net |
|
|
703,811 |
|
|
|
518,190 |
|
|
|
|
|
|
|
|
||
Noncurrent operating lease liabilities |
|
|
16,768 |
|
|
|
19,568 |
|
|
|
|
|
|
|
|
||
Other noncurrent accrued and other liabilities |
|
|
523 |
|
|
|
3,030 |
|
|
|
|
|
|
|
|
||
Deferred income taxes |
|
|
57,843 |
|
|
|
26,633 |
|
|
|
|
|
|
|
|
||
Commitments and contingencies |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Stockholders' equity: |
|
|
|
|
|
|
||
Common stock, $.10 par value; 150 million shares authorized, 91.2 million shares issued |
|
|
9,117 |
|
|
|
9,117 |
|
Capital in excess of par value |
|
|
496,251 |
|
|
|
493,161 |
|
Retained earnings (accumulated deficit) |
|
|
133,222 |
|
|
|
(31,255 |
) |
|
|
|
638,590 |
|
|
|
471,023 |
|
Less treasury stock, at cost: |
|
|
|
|
|
|
||
Common stock, 9.2 million shares (1.4 million shares at December 31, 2021) |
|
|
112,446 |
|
|
|
10,533 |
|
Total stockholders' equity |
|
|
526,144 |
|
|
|
460,490 |
|
|
|
$ |
1,452,732 |
|
|
$ |
1,132,840 |
|
Non-GAAP Reconciliations
This news release includes certain “non-GAAP financial measures” under the rules of the Securities and Exchange Commission, including Regulation G. These non-GAAP measures are calculated using GAAP amounts in our consolidated financial statements.
EBITDA and Adjusted EBITDA Reconciliation
EBITDA is defined as net income (loss) plus interest expense, less gain (loss) on extinguishment of debt, plus depreciation and amortization (D&A) (which includes D&A of property, plant and equipment and amortization of intangible and other assets), plus provision (benefit) for income taxes. Adjusted EBITDA is reported to show the impact of non-cash stock-based compensation, one time/non-cash or non-operating items-such as, one-time income or fees, loss (gain) on sale of a business and/or other property and equipment, certain fair market value (FMV) adjustments, and consulting costs associated with reliability and purchasing initiatives (Initiatives). We historically have performed Turnaround activities on an annual basis; however, we have moved towards extending Turnarounds to a two or three-year cycle. Rather than being capitalized and amortized over the period of benefit, our accounting policy is to recognize the costs as incurred. Given these Turnarounds are essentially investments that provide benefits over multiple years, they are not reflective of our operating performance in a given year.
We believe that certain investors consider EBITDA a useful means of measuring our ability to meet our debt service obligations and evaluating our financial performance. In addition, we believe that certain investors consider adjusted EBITDA as more meaningful to further assess our performance. We believe that the inclusion of supplementary adjustments to EBITDA is appropriate to provide additional information to investors about certain items.
EBITDA and adjusted EBITDA have limitations and should not be considered in isolation or as a substitute for net income, operating income, cash flow from operations or other consolidated income or cash flow data prepared in accordance with GAAP. Because not all companies use identical calculations, this presentation of EBITDA and adjusted EBITDA may not be comparable to a similarly titled measure of other companies. The following table provides a reconciliation of net income (loss) to EBITDA and adjusted EBITDA for the periods indicated. Adjusted EBITDA margin is calculated by taking adjusted EBITDA divided by Net Sales.
Adjusted Net Income (Loss) and Adjusted Net Income (Loss) Per Share
Adjusted Net Income (Loss) and Adjusted Net Income (Loss) per share have been adjusted for the impact of the closing of the Exchange Transaction on September 27, 2021 as well as the one time/non-cash or non-operating items referred to in the above section relating to Adjusted EBITDA.
LSB Industries, Inc. |
||||||||||||||||
Non-GAAP Reconciliations (continued) |
||||||||||||||||
LSB Consolidated ($ In Thousands) |
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Net income (loss), common shareholders |
|
$ |
2,312 |
|
|
$ |
(8,928 |
) |
|
$ |
164,477 |
|
|
$ |
1,463 |
|
Plus: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest expense, net |
|
|
9,960 |
|
|
|
12,956 |
|
|
|
31,499 |
|
|
|
37,618 |
|
Loss (gain) on extinguishment of debt |
|
- |
|
|
- |
|
|
|
113 |
|
|
|
(10,000 |
) |
||
Depreciation and amortization |
|
|
16,398 |
|
|
|
17,970 |
|
|
|
50,902 |
|
|
|
52,324 |
|
Provision (benefit) for income taxes |
|
|
780 |
|
|
|
19 |
|
|
|
32,277 |
|
|
|
(187 |
) |
EBITDA |
|
$ |
29,450 |
|
|
$ |
22,017 |
|
|
$ |
279,268 |
|
|
$ |
81,218 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Stock-based compensation |
|
|
921 |
|
|
|
2,553 |
|
|
|
3,089 |
|
|
|
4,329 |
|
Change of Control |
|
- |
|
|
|
3,223 |
|
|
- |
|
|
|
3,223 |
|
||
Noncash (gain) on natural gas contracts |
|
- |
|
|
- |
|
|
- |
|
|
|
(1,205 |
) |
|||
Legal fees (Leidos) |
|
|
301 |
|
|
|
271 |
|
|
|
914 |
|
|
|
1,598 |
|
Loss on disposal of assets |
|
|
22 |
|
|
|
516 |
|
|
|
828 |
|
|
|
690 |
|
Fair market value adjustment on preferred stock embedded derivatives |
|
- |
|
|
|
1,106 |
|
|
- |
|
|
|
2,258 |
|
||
Turnaround costs |
|
|
19,238 |
|
|
|
7,976 |
|
|
|
25,064 |
|
|
|
8,823 |
|
Adjusted EBITDA |
|
$ |
49,932 |
|
|
$ |
37,662 |
|
|
$ |
309,163 |
|
|
$ |
100,934 |
|
Company Contact:
Cheryl Maguire, Executive Vice President & CFO
(405) 510-3524
Fred Buonocore, CFA, Vice President of Investor Relations
(405) 510-3550
This email address is being protected from spambots. You need JavaScript enabled to view it.
NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR RELEASE, PUBLICATION, DISTRIBUTION OR DISSEMINATION DIRECTLY, OR INDIRECTLY, IN WHOLE OR IN PART, IN OR INTO THE UNITED STATES
TORONTO--(BUSINESS WIRE)--Greenland Resources Inc. (“Greenland Resources” or the “Company”; NEO: MOLY | FSE: M0LY) is pleased to announce that it will be conducting a best efforts non-brokered private placement of up to 3,846,154 units of the Company (the “Units”) at a price of C$0.52 per Unit (the “Offering Price”) for gross proceeds of up to C$2,000,000 (the “Offering”). Each Unit will be comprised of one common share of the Company (a “Common Share”) and one half of one Common Share purchase warrant (each whole warrant, a “Warrant”). Each Warrant shall be exercisable to acquire one Common Share (a “Warrant Share”) at a price of C$0.70 per Warrant Share for a period of 24 months from the closing of the Offering. The Company intends to use the net proceeds from the Offering to advance capex and offtaking of its Malmbjerg Molybdenum Project (the “Project”) in Greenland and for general corporate and working capital purposes.
The Project is a Climax type open pit primary molybdenum operation with an environmentally friendly mine design focused on reduced CO2 emissions and water usage. The Project benefits from a NI 43-101 Definitive Feasibility Study completed by Tetra Tech in 2022, which concluded an expected Base case after-tax IRR of 22.4%, NPV6% of US$1.17 billion and a Levered pre-tax IRR of 40.4%, after tax IRR of 33.8% and payback of 2.4 years. Based on the Definitive Feasibility Study, the Project has the pontential to supply approximately 23% of the European Union (the “EU”) molybdenum demand for an estimated twenty years. The EU is the second largest user of molybdenum worldwide and has no production of its own. The Project is sponsored by the European Raw Material Alliance, a EU body responsible to secure critical minerals and strategic project for the EU Green Deal.
The securities to be issued under the Offering will be offered by way of private placement in each of the provinces and territories of Canada and such other jurisdictions as may be determined by the Company, in each case, pursuant to applicable exemptions from the prospectus requirements under applicable securities laws. Closing of the Offering (the “Closing”) is anticipated to occur on or around November 10, 2022 and is subject to certain conditions including, but not limited to, the receipt of all necessary regulatory approvals including the approval of the NEO Exchange. The Units to be issued under the Offering will have a standard hold period of four months and one day from Closing.
Qualified Person Statement
Mr. Jim Steel, P.Geo., M.B.A., a Qualified Person under National Instrument 43-101 has reviewed and approved the technical information in this press release.
About Greenland Resources Inc.
Greenland Resources is a Canadian public company with the Ontario Securities Commission as its principal regulator and is focused on the development of its 100% owned world-class Climax type pure molybdenum deposit located in central east Greenland. The Malmbjerg molybdenum project is an open pit operation with an environmentally friendly mine design focused on reduced CO2 emissions and water usage, with Proven and Probable Reserves of 245 million tonnes at 0.176% MoS2, for 571 million pounds of contained molybdenum metal. The Malmbjerg project benefits from a NI 43-101 Definitive Feasibility Study completed by Tetra Tech in 2022 and had a previous exploitation license granted in 2009. With offices in Toronto, the Company is led by a management team with an extensive track record in the mining industry and capital markets. For further details, please refer to our web site (www.greenlandresources.ca) and our Canadian regulatory filings on Greenland Resources’ profile at www.sedar.com
About Molybdenum and the European Union
Molybdenum is a critical metal used mainly in steel and chemicals that is needed in all technologies in the upcoming green energy transition (World Bank, 2020; IEA, 2021). When added to steel and cast iron, it enhances strength, hardenability, weldability, toughness, temperature strength, and corrosion resistance. Based on data from the International Molybdenum Association and the European Commission Steel Report, the world produced around 576 million pounds of molybdenum in 2021 where the European Union (“EU”) as the second largest steel producer in the world used approximately 25% of global molybdenum supply and has no domestic molybdenum production. To a greater degree, the EU steel dependent industries like the automotive, construction, and engineering, represent around 18% of the EU’s ≈ US$16 trillion GDP. Greenland Resources strategically located Malmbjerg molybdenum project has the potential to supply in and for the EU approximately 25 million pounds per year, of environmentally friendly molybdenum from a responsible EU Associate country, for decades to come. The high quality of the Malmbjerg ore, having low impurity content, makes it an ideal source of molybdenum for the high-performance steel industry lead worldwide by Europe, specifically the Scandinavian countries and Germany.
Forward Looking Statements
CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS
This news release contains "forward-looking information" (also referred to as "forward looking statements"), which relate to future events or future performance and reflect management’s current expectations and assumptions. Often, but not always, forward-looking statements can be identified by the use of words such as "plans", "hopes", "expects","is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates", or "believes" or variations (including negative variations) of such words and phrases, or state that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved. Such forward-looking statements reflect management’s current beliefs and are based on assumptions made by and information currently available to the Company. All statements, other than statements of historical fact, are forward-looking statements or information. Forward-looking statements or information in this news release relate to, among other things: the Company’s objectives, goals or future plans, receipt of regulatory approvals, anticipated closing date and completion of the Offering, anticipated size of the Offering, the Offering Price, anticipated use of proceeds from the Offering, exploration results, potential mineralization, the estimation of mineral resources and reserves and their valuation, exploration and mine development plans, timing of the commencement of operations, estimates of market conditions, the Company’s ability to supply molybdenum to the EU, the EU’s future expected demand for molybdenum, the Company’s ability to commercialize the project, and the Company’s intentions regarding its objectives, goals or future plans and statements.
These forward-looking statements and information reflect the Company’s current views with respect to future events and are necessarily based upon a number of assumptions that, while considered reasonable by the Company, are inherently subject to significant operational, business, economic and regulatory uncertainties and contingencies. These assumptions include: mineral reserve estimates and the assumptions upon which they are based, including geotechnical and metallurgical characteristics of rock confirming to sampled results and metallurgical performance; tonnage of ore to be mined and processed; ore grades and recoveries; assumptions and discount rates being appropriately applied to the technical studies; estimated valuation and probability of success of the Company’s projects, including the Malmbjerg molybdenum project; prices for molybdenum remaining as estimated; currency exchange rates remaining as estimated; availability of funds for the Company’s projects; capital decommissioning and reclamation estimates; mineral reserve and resource estimates and the assumptions upon which they are based; prices for energy inputs, labour, materials, supplies and services (including transportation); no labour-related disruptions; no unplanned delays or interruptions in scheduled construction and production; all necessary permits, licenses and regulatory approvals are received in a timely manner; the Offering proceeds as anticipated; all requisite regulatory and stock exchange approvals for the Offering are obtained in a timely fashion, if at all; reliance on finders and other third parties; investor participation in the Offering; anticipated use of proceeds from the Offering; the continued economic feasibility of the Company’s current corporate social responsibility commitments; and the ability to comply with environmental, health and safety laws. The foregoing list of assumptions is not exhaustive.
The Company cautions the reader that forward-looking statements and information include known and unknown risks, uncertainties and other factors that may cause actual results and developments to differ materially from those expressed or implied by such forward-looking statements or information contained in this news release and the Company has made assumptions and estimates based on or related to many of these factors. Such factors include, without limitation: an inability to complete the Offering on the terms or on the timeline as announced or at all; an inability to commercialize the Company’s Malmbjerg Project; a change to the demand for molybdenum in the EU and elsewhere; the projected and actual effects of the COVID-19 pandemic or the conflict in Ukraine on the factors relevant to the business of the Corporation, including the effect on supply chains, labour market, currency and commodity prices and global and Canadian capital markets; fluctuations in molybdenum and commodity prices; fluctuations in prices for energy inputs, labour, materials, supplies and services (including transportation); fluctuations in currency markets (such as the Canadian dollar versus the U.S. dollar versus the Euro); operational risks and hazards inherent with the business of mining (including environmental accidents and hazards, industrial accidents, equipment breakdown, unusual or unexpected geological or structure formations, cave-ins, flooding and severe weather); inadequate insurance, or the inability to obtain insurance, to cover these risks and hazards; our ability to obtain all necessary permits, licenses, regulatory and stock exchange approvals in a timely manner; changes in laws, regulations and government practices in Greenland and Canada, including environmental, export and import laws and regulations; legal restrictions relating to mining; risks relating to expropriation; increased competition in the mining industry for equipment and qualified personnel; reallocation of proceeds from the Offering to cover unanticipated expenses; title matters; the relationship with local communities and its effects on the business of the Corporation; and the additional risks identified in our filings with Canadian securities regulators on SEDAR in Canada (available at www.sedar.com). Although the Company has attempted to identify important factors that could cause actual results to differ materially, there may be other factors that cause results not to be as anticipated, estimated, described or intended. Investors are cautioned against undue reliance on forward-looking statements or information.
The securities described herein have not been, and will not be, registered under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”), or any state securities laws, and accordingly, may not be offered or sold within the United States except in compliance with the registration requirements of the U.S. Securities Act and applicable state securities requirements or pursuant to exemptions therefrom. This press release does not constitute an offer to sell or a solicitation to buy any securities in any jurisdiction. These forward-looking statements are made as of the date hereof and, except as required by applicable securities regulations, the Company does not intend, and does not assume any obligation, to update the forward-looking information. Neither the NEO Exchange Inc. nor its regulation services provider accepts responsibility for the adequacy of this release. No stock exchange, securities commission or other regulatory authority has approved or disapproved the information contained herein.
For further information please contact:
Ruben Shiffman, PhD Chairman, President
Keith Minty, P.Eng, MBA Engineering and Project Management
Jim Steel, P.Geo, MBA Exploration and Mining Geology
Nauja Bianco, M.Pol.Sci. Public and Community Relations
Gary Anstey Investor Relations
Eric Grossman, CPA, CGA Chief Financial Officer
Corporate office Suite 1410, 181 University Av. Toronto, Ontario, Canada M5H 3M7
Telephone +1 647 273 9913
Email This email address is being protected from spambots. You need JavaScript enabled to view it.
Web www.greenlandresources.ca
Company Delivers Continued Financial Improvement Over Prior Year Period
$37.0 Million in Net Income Improved by $14.8 Million, or 67%
$2.49 in Net Income Per Share Improved by $0.97
$88.6 Million in Adjusted EBITDA Increased by $23.4 Million, or 36%
WESTLAKE, Ohio--(BUSINESS WIRE)--TravelCenters of America Inc. (Nasdaq: TA) today announced financial results for the quarter ended September 30, 2022.
Jonathan M. Pertchik, TA’s Chief Executive Officer, made the following statement regarding the 2022 third quarter results:
“TA delivered another strong quarter, demonstrating continued resilience and strength in our business resulting in a 67% increase in net income and a 36% improvement in Adjusted EBITDA. TA has completed the transformation stage of our strategic plan and we are squarely focused on the growth and innovation phase to drive results into 2023 and beyond. Our fuel team continued to navigate ongoing uncertain macroeconomic conditions, delivering not only an ample supply of fuel to the field but also a 24.9% increase in fuel gross margin versus the prior year. Nonfuel gross margin also increased by 11.4% versus the prior year quarter, as strength in truck service and improved pricing benefited results. While we were able to increase pricing to help offset inflationary pressures felt across our industry as well as the broader economy, we are continuing to see the impact of cost growth and a relative softening in hospitality as inflation impacts consumer behavior.
Our ongoing investment in growth initiatives is designed to drive performance in 2023 and beyond, with a focus on site refreshes, technology initiatives and network expansion, which includes a total of five travel centers and two truck service facilities acquired thus far in 2022 and 16 franchise agreements signed. To date, these acquisitions are meeting or exceeding our EBITDA underwriting expectations. In addition, we expect that 15 of the previously signed franchise locations will begin operations in 2023, furthering the growth that our transformation plan envisioned. While our results in the third quarter continued to benefit from strong fuel margins, we are confident that our overall operational excellence will ensure TA remains resilient as we move towards our long-term targets in 2023 and beyond.”
Reconciliations to GAAP:
Adjusted net income, adjusted net income per share of common stock attributable to common stockholders, EBITDA, adjusted EBITDA, and adjusted EBITDAR are non-GAAP financial measures. The U.S. generally accepted accounting principles, or GAAP, financial measures that are most directly comparable to the non-GAAP measures disclosed herein are included in the supplemental tables below.
Third Quarter 2022 Highlights:
(in thousands, except per gallon amounts) |
Three Months Ended
|
|
|
|||||
2022 |
|
2021 |
|
Change |
||||
Fuel sales volume (gallons): |
|
|
|
|
|
|||
Diesel fuel |
|
518,778 |
|
|
513,827 |
|
1.0 |
% |
Gasoline |
|
63,861 |
|
|
72,021 |
|
(11.3 |
)% |
Total fuel sales volume |
|
582,639 |
|
|
585,848 |
|
(0.5 |
)% |
|
|
|
|
|
|
|||
Fuel gross margin |
$ |
132,402 |
|
$ |
106,010 |
|
24.9 |
% |
Fuel gross margin per gallon |
$ |
0.227 |
|
$ |
0.181 |
|
25.4 |
% |
(in thousands, except percentages) |
Three Months Ended
|
|
|
|||||||
2022 |
|
2021 |
|
Change |
||||||
Nonfuel revenues: |
|
|
|
|
|
|||||
Store and retail services |
$ |
204,010 |
|
|
$ |
197,842 |
|
|
3.1 |
% |
Truck service |
|
227,428 |
|
|
|
200,192 |
|
|
13.6 |
% |
Restaurant |
|
87,486 |
|
|
|
79,850 |
|
|
9.6 |
% |
Diesel exhaust fluid |
|
46,017 |
|
|
|
33,179 |
|
|
38.7 |
% |
Total nonfuel revenues |
$ |
564,941 |
|
|
$ |
511,063 |
|
|
10.5 |
% |
|
|
|
|
|
|
|||||
Nonfuel gross margin |
$ |
339,560 |
|
|
$ |
304,798 |
|
|
11.4 |
% |
Nonfuel gross margin percentage |
|
60.1 |
% |
|
|
59.6 |
% |
|
50 pts |
|
Growth Strategies
TA continues to prioritize and focus on key initiatives across its organization with the purpose of network growth through high return capital investments, bottom-line growth through process improvement and cost discipline, continued introduction of efficient technology and systems, and defining the future of on-highway mobility through a commitment to energy alternatives, all in support of its core mission to return every traveler to the road better than they came.
Acquiring high quality existing travel centers is a key aspect of TA’s strategic network growth plan. TA completed the acquisitions of certain assets of five travel centers and two truck service facilities during the first nine months of 2022. TA’s active acquisition pipeline may enable TA to add independent and franchised sites along active corridors to strengthen the geographic coverage of its network.
TA’s growth strategy also includes adding franchised travel centers to its network. Since the beginning of 2020, TA has entered into franchise agreements covering approximately 56 travel centers to be operated under its travel center brand names. Five of these franchised travel centers began operations during 2020, two began operations during 2021 and one began operations during the second quarter of 2022. TA expects the remaining 48 to all open by the fourth quarter of 2024.
TA’s capital expenditures for 2022 are expected to be in the range of $175.0 million to $200.0 million and includes projects to improve the guest experience through significant upgrades at TA’s travel centers, the expansion of restaurants and food offerings and improvements to TA’s technology systems infrastructure. Approximately 55% of TA’s expected capital expenditures in 2022 are focused on growth initiatives that TA expects will meet or exceed TA’s 15% to 20% cash on cash return hurdle.
TA is committed to embracing environmentally friendly energy sources through its eTA division, which seeks to deliver sustainable and alternative energy to the marketplace by working with the public sector, private companies, customers and guests to facilitate this initiative. Recent accomplishments include expanding TA’s biodiesel blending capabilities, increasing the availability of diesel exhaust fluid, or DEF, at all diesel pumps nationwide and installing electric vehicle charging stations. TA is also exploring ultra-high power truck charging and hydrogen fuel dispensing in parallel with traditional fossil fuels to provide energy alternatives as the transportation sector transitions to a lighter carbon footprint. TA believes its large, well-located sites will allow it to make both fossil and, eventually, non-fossil fuels available throughout its nationwide network of sites.
Conference Call
On November 2, 2022, at 10:00 a.m. Eastern time, TA will host a conference call to discuss its financial results and other activities for the three months ended September 30, 2022. Following management's remarks, there will be a question and answer period.
The conference call telephone number is 877-329-4614. Participants calling from outside the United States and Canada should dial 412-317-5437. No pass code is necessary to access the call from either number. Participants should dial in about 15 minutes prior to the scheduled start of the call. A replay of the conference call will be available through November 9, 2022. To hear the replay, dial 412-317-0088. The replay pass code is 2272611.
A live audio webcast of the conference call will also be available in a listen-only mode on TA’s website which is located at www.ta-petro.com. Participants who want to access the webcast should visit TA’s website about five minutes before the call. The archived webcast will be available for replay on TA’s website after the call. The transcription, recording and retransmission in any way of TA’s third quarter conference call is strictly prohibited without the prior written consent of TA. The Company’s website is not incorporated as part of this press release.
About TravelCenters of America Inc.
TravelCenters of America Inc. (Nasdaq: TA) is the nation’s largest publicly traded full-service travel center network. Founded in 1972 and headquartered in Westlake, Ohio, its more than 19,000 team members serve guests in over 275 locations in 44 states, principally under the TA®, Petro Stopping Centers® and TA Express® brands. Offerings include diesel and gasoline fuel, truck maintenance and repair, full-service and quick-service restaurants, travel stores, car and truck parking and other services dedicated to providing great experiences for its guests. TA is committed to sustainability, with its specialized business unit, eTA, focused on sustainable energy options for professional drivers and motorists, while leveraging alternative energy to support its own operations. TA operates approximately 600 full-service and quick-service restaurants and nine proprietary brands, including Iron Skillet® and Country Pride®. For more information, visit www.ta-petro.com.
TRAVELCENTERS OF AMERICA INC. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (in thousands, except per share amounts) |
|||||||||||||||
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
2022 |
|
2021 |
|
2022 |
|
2021 |
||||||||
Revenues: |
|
|
|
|
|
|
|
||||||||
Fuel |
$ |
2,242,821 |
|
|
$ |
1,424,997 |
|
|
$ |
6,570,691 |
|
|
$ |
3,830,886 |
|
Nonfuel |
|
564,941 |
|
|
|
511,063 |
|
|
|
1,605,385 |
|
|
|
1,460,787 |
|
Rent and royalties from franchisees |
|
3,317 |
|
|
|
3,886 |
|
|
|
11,123 |
|
|
|
11,649 |
|
Total revenues |
|
2,811,079 |
|
|
|
1,939,946 |
|
|
|
8,187,199 |
|
|
|
5,303,322 |
|
|
|
|
|
|
|
|
|
||||||||
Cost of goods sold (excluding depreciation): |
|
|
|
|
|
|
|
||||||||
Fuel |
|
2,110,419 |
|
|
|
1,318,987 |
|
|
|
6,168,740 |
|
|
|
3,547,154 |
|
Nonfuel |
|
225,381 |
|
|
|
206,265 |
|
|
|
638,749 |
|
|
|
577,195 |
|
Total cost of goods sold |
|
2,335,800 |
|
|
|
1,525,252 |
|
|
|
6,807,489 |
|
|
|
4,124,349 |
|
|
|
|
|
|
|
|
|
||||||||
Site level operating expense |
|
276,717 |
|
|
|
246,871 |
|
|
|
788,864 |
|
|
|
708,097 |
|
Selling, general and administrative expense |
|
46,497 |
|
|
|
39,563 |
|
|
|
134,206 |
|
|
|
112,083 |
|
Real estate rent expense |
|
64,954 |
|
|
|
63,898 |
|
|
|
194,753 |
|
|
|
191,378 |
|
Depreciation and amortization expense |
|
29,267 |
|
|
|
24,276 |
|
|
|
80,260 |
|
|
|
72,244 |
|
Other operating expense (income), net |
|
692 |
|
|
|
230 |
|
|
|
(1,795 |
) |
|
|
(642 |
) |
|
|
|
|
|
|
|
|
||||||||
Income from operations |
|
57,152 |
|
|
|
39,856 |
|
|
|
183,422 |
|
|
|
95,813 |
|
|
|
|
|
|
|
|
|
||||||||
Interest expense, net |
|
9,800 |
|
|
|
11,843 |
|
|
|
32,503 |
|
|
|
34,966 |
|
Other (income) expense, net |
|
(1,358 |
) |
|
|
(1,034 |
) |
|
|
(3,212 |
) |
|
|
1,667 |
|
Income before income taxes |
|
48,710 |
|
|
|
29,047 |
|
|
|
154,131 |
|
|
|
59,180 |
|
Provision for income taxes |
|
(11,735 |
) |
|
|
(6,847 |
) |
|
|
(36,872 |
) |
|
|
(13,776 |
) |
Net income |
|
36,975 |
|
|
|
22,200 |
|
|
|
117,259 |
|
|
|
45,404 |
|
Less: net loss for noncontrolling interest |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(333 |
) |
Net income attributable to common stockholders |
$ |
36,975 |
|
|
$ |
22,200 |
|
|
$ |
117,259 |
|
|
$ |
45,737 |
|
|
|
|
|
|
|
|
|
||||||||
Net income per share of common stock attributable to common stockholders: |
|
|
|
|
|
|
|
||||||||
Basic and diluted |
$ |
2.49 |
|
|
$ |
1.52 |
|
|
$ |
7.90 |
|
|
$ |
3.14 |
|
|
|
|
|
|
|
|
|
||||||||
Weighted average vested shares of common stock |
|
14,396 |
|
|
|
14,254 |
|
|
|
14,383 |
|
|
|
14,239 |
|
Weighted average unvested shares of common stock |
|
460 |
|
|
|
327 |
|
|
|
462 |
|
|
|
334 |
|
These financial statements should be read in conjunction with TA’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2022, to be filed with the U.S. Securities and Exchange Commission.
TRAVELCENTERS OF AMERICA INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(dollars in thousands, except for amounts listed in the footnotes to the tables below or unless indicated otherwise)
TA believes the non-GAAP financial measures presented in the tables below are meaningful supplemental disclosures. Management uses these measures in developing internal budgets and forecasts and analyzing TA’s performance and believes that they may help investors gain a better understanding of changes in TA’s operating results and its ability to pay rent or service debt when due, make capital expenditures and expand its business. These non-GAAP financial measures also may help investors to make comparisons between TA and other companies and to make comparisons of TA’s financial and operating results between periods.
The non-GAAP financial measures TA presents should not be considered as alternatives to net income (loss) attributable to common stockholders, net income (loss), income (loss) from operations, or net income (loss) per share of common stock attributable to common stockholders as an indicator of TA’s operating performance or as a measure of TA’s liquidity. Also, the non-GAAP financial measures TA presents may not be comparable to similarly titled amounts calculated by other companies.
TA believes that adjusted net income (loss), adjusted net income (loss) per share of common stock attributable to common stockholders, EBITDA and adjusted EBITDA are meaningful disclosures that may help investors to better understand TA’s financial performance by providing financial information that represents the operating results of TA’s operations without the effects of items that do not result directly from TA’s normal recurring operations and may allow investors to better compare TA’s performance between periods and to the performance of other companies. TA calculates EBITDA as net income (loss) before interest, income taxes and depreciation and amortization expense, as shown below. TA calculates adjusted EBITDA by excluding items that it considers not to be normal, recurring, cash operating expenses or gains or losses.
In addition, TA believes that, because it leases a majority of its travel centers, presenting adjusted EBITDAR may help investors compare the value of TA against companies that own and finance ownership of their properties with debt financing, since this measure eliminates the effects of variability in leasing methods and capital structures. This measure may also help investors evaluate TA’s valuation if it owned its leased properties and financed that ownership with debt, in which case the interest expense TA incurred for that debt financing would be added back when calculating EBITDA. Adjusted EBITDAR is presented solely as a valuation measure and should not be viewed as a measure of overall operating performance or considered in isolation or as an alternative to net income (loss) because it excludes the real estate rent expense associated with TA’s leases and it is presented for the limited purposes referenced herein. TA calculates EBITDAR as net income (loss) before interest, income taxes, real estate rent expense and depreciation and amortization expense and adjusted EBITDAR by excluding items that it considers not to be normal, recurring, cash operating expenses or gains or losses.
TA believes that net income (loss) is the most directly comparable GAAP financial measure to adjusted net income (loss), EBITDA, adjusted EBITDA and adjusted EBITDAR, and that net income (loss) per share of common stock attributable to common stockholders is the most directly comparable GAAP financial measure to adjusted net income (loss) per share of common stock attributable to common stockholders.
The following tables present the reconciliations of the non-GAAP financial measures to the respective most directly comparable GAAP financial measures for the three and nine months ended September 30, 2022 and 2021.
Calculation of adjusted net income: |
|
Three Months Ended
|
|
Nine Months Ended
|
|||||||||||
|
2022 |
|
2021 |
|
2022 |
|
2021 |
||||||||
Net income |
|
$ |
36,975 |
|
|
$ |
22,200 |
|
$ |
117,259 |
|
|
$ |
45,404 |
|
Add: QSL impairment (1) |
|
|
— |
|
|
|
— |
|
|
— |
|
|
|
650 |
|
Less: Net gain on Seymour insurance recovery(2) |
|
|
— |
|
|
|
— |
|
|
(1,984 |
) |
|
|
— |
|
Add: Costs related to the exit of TA’s Canadian travel center (3) |
|
|
— |
|
|
|
— |
|
|
1,005 |
|
|
|
— |
|
Add: Equity investment ownership dilution (4) |
|
|
— |
|
|
|
— |
|
|
— |
|
|
|
1,826 |
|
Less: Gain on sale of assets, net (5) |
|
|
— |
|
|
|
— |
|
|
— |
|
|
|
(897 |
) |
Add: Costs related to acquisitions(6) |
|
|
826 |
|
|
|
— |
|
|
826 |
|
|
|
— |
|
(Less) Add: Tax impact of adjusting items (7) |
|
|
(199 |
) |
|
|
— |
|
|
36 |
|
|
|
(331 |
) |
Adjusted net income |
|
$ |
37,602 |
|
|
$ |
22,200 |
|
$ |
117,142 |
|
|
$ |
46,652 |
|
TRAVELCENTERS OF AMERICA INC. RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (dollars in thousands, except for amounts listed in the footnotes to the tables below or unless indicated otherwise) |
|||||||||||||||
| Calculation of adjusted net income per share of common stock attributable to common stockholders (basic and diluted): |
|
Three Months Ended
|
|
Nine Months Ended
|
|||||||||||
|
2022 |
|
2021 |
|
2022 |
|
2021 |
||||||||
Net income per share of common stock attributable to common stockholders (basic and diluted) |
|
$ |
2.49 |
|
|
$ |
1.52 |
|
$ |
7.90 |
|
|
$ |
3.14 |
|
Add: QSL impairment (1) |
|
|
— |
|
|
|
— |
|
|
— |
|
|
|
0.04 |
|
Less: Net gain on Seymour insurance recovery (2) |
|
|
— |
|
|
|
— |
|
|
(0.13 |
) |
|
|
— |
|
Add: Costs related to the exit of TA’s Canadian travel center (3) |
|
|
— |
|
|
|
— |
|
|
0.07 |
|
|
|
— |
|
Add: Equity investment ownership dilution (4) |
|
|
— |
|
|
|
— |
|
|
— |
|
|
|
0.13 |
|
Less: Gain on sale of assets, net (5) |
|
|
— |
|
|
|
— |
|
|
— |
|
|
|
(0.06 |
) |
Add: Costs related to acquisitions (6) |
|
|
0.06 |
|
|
|
— |
|
|
0.06 |
|
|
|
— |
|
Add (Less): Tax impact of adjusting items (7) |
|
|
(0.01 |
) |
|
|
— |
|
|
— |
|
|
|
(0.02 |
) |
Adjusted net income per share of common stock attributable to common stockholders (basic and diluted) |
|
$ |
2.54 |
|
|
$ |
1.52 |
|
$ |
7.90 |
|
|
$ |
3.23 |
|
| Calculation of EBITDA and adjusted EBITDA: |
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|||||||
Net income |
|
$ |
36,975 |
|
$ |
22,200 |
|
$ |
117,259 |
|
|
$ |
45,404 |
|
Add: Provision for income taxes |
|
|
11,735 |
|
|
6,847 |
|
|
36,872 |
|
|
|
13,776 |
|
Add: Depreciation and amortization expense |
|
|
29,267 |
|
|
24,276 |
|
|
80,260 |
|
|
|
72,244 |
|
Add: Interest expense, net |
|
|
9,800 |
|
|
11,843 |
|
|
32,503 |
|
|
|
34,966 |
|
EBITDA |
|
|
87,777 |
|
|
65,166 |
|
|
266,894 |
|
|
|
166,390 |
|
Less: Net gain on Seymour insurance recovery (2) |
|
|
— |
|
|
— |
|
|
(1,984 |
) |
|
|
— |
|
Add: Costs related to the exit of TA’s Canadian travel center (3) |
|
|
— |
|
|
— |
|
|
1,005 |
|
|
|
— |
|
Add: Equity investment ownership dilution (4) |
|
|
— |
|
|
— |
|
|
— |
|
|
|
1,826 |
|
Less: Gain on sale of assets, net (5) |
|
|
— |
|
|
— |
|
|
— |
|
|
|
(897 |
) |
Add: Costs related to acquisitions (6) |
|
|
826 |
|
|
— |
|
|
826 |
|
|
|
— |
|
Adjusted EBITDA |
|
$ |
88,603 |
|
$ |
65,166 |
|
$ |
266,741 |
|
|
$ |
167,319 |
|
Calculation of adjusted EBITDAR: |
|
Three Months Ended
|
|
Nine Months Ended
|
||
|
2022 |
|
2022 |
|||
Adjusted EBITDA |
|
$ |
88,603 |
|
$ |
266,741 |
Add: Real estate rent expense |
|
|
64,954 |
|
|
194,753 |
Adjusted EBITDAR |
|
$ |
153,557 |
|
$ |
461,494 |
TRAVELCENTERS OF AMERICA INC. RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (dollars in thousands, except for amounts listed in the footnotes to the tables below or unless indicated otherwise) |
||||||||||||
| Total fuel gross margin and nonfuel revenues: |
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|||||
Fuel gross margin |
|
$ |
132,402 |
|
$ |
106,010 |
|
$ |
401,951 |
|
$ |
283,732 |
Nonfuel revenues |
|
|
564,941 |
|
|
511,063 |
|
|
1,605,385 |
|
|
1,460,787 |
Total fuel gross margin and nonfuel revenues |
|
$ |
697,343 |
|
$ |
617,073 |
|
$ |
2,007,336 |
|
$ |
1,744,519 |
| (1) |
|
QSL Impairment. On April 21, 2021, TA completed the sale of its Quaker Steak and Lube, or QSL, business for $5.0 million, excluding costs to sell and certain closing adjustments. During the nine months ended September 30, 2021, TA recorded a pre-sale impairment charge of $0.7 million relating to its QSL business, which was included in depreciation and amortization expense in TA’s consolidated statements of operations and comprehensive income. Refer to note 5 below for more information on the sale of QSL. |
| (2) |
|
Net Gain on Seymour Insurance Recovery. Following a fire at TA’s Seymour, Indiana travel center in July 2020, TA pursued recoveries under its property and business interruption insurance policies. During the nine months ended September 30, 2022, TA recognized a net gain of $2.0 million, related to these recoveries as other operating expense (income), net in TA's consolidated statements of operations and comprehensive income. |
| (3) |
|
Costs Related to the Exit of TA’s Canadian Travel Center. In March 2022, TA agreed to sell the assets of its travel center in Woodstock, Ontario, Canada for C$26.0 million (subsequently revised to C$23.0 million, or approximately $17.0 million based on foreign exchange rates as of September 30, 2022), excluding costs to sell and certain closing adjustments. TA expects the sale to close by the end of 2022. During the nine months ended September 30, 2022, TA recognized expense of $0.4 million for employee termination benefits and $0.6 million of environmental costs associated with the closure of its Woodstock travel center, which were included in site level operating expense in TA’s consolidated statements of operations and comprehensive income. |
| (4) |
|
Equity Investment Ownership Dilution. During the nine months ended September 30, 2021, TA reduced its ownership in Epona, LLC, owner of QuikQ LLC, an equity method investment, to less than 50%, for which a loss of $1.8 million was included in other (income) expense, net in TA’s consolidated statements of operations and comprehensive income. |
| (5) |
|
Gain on Sale of Assets, Net. In May 2021, TA sold a property located in Mesquite, Texas for a sales price of $2.2 million, excluding selling costs. TA recognized a gain on the sale of $1.5 million. On April 21, 2021, TA completed the sale of its QSL business for $5.0 million, excluding costs to sell and certain closing adjustments. TA recognized a loss on the sale of $0.6 million. The gain and loss on the sale of assets were included in other operating expense (income), net, for the nine months ended September 30, 2021. |
| (6) |
|
Costs Related to Acquisitions. During the three and nine months ended September 30, 2022, TA incurred costs of $0.8 million for success fees related to the completion of certain acquisitions, which were included in other operating expense (income), net in TA’s consolidated statements of operations and comprehensive income. |
| (7) |
|
Tax Impact of Adjusting Items. TA calculated the income tax impact of the adjustments described above by using the expected tax accounting treatment and estimated statutory income tax rate for the jurisdiction of each adjusting item. |
TRAVELCENTERS OF AMERICA INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (in thousands) |
|||||
|
September 30, |
|
December 31, |
||
Assets: |
|
|
|
||
Current assets: |
|
|
|
||
Cash and cash equivalents |
$ |
467,342 |
|
$ |
536,002 |
Accounts receivable, net |
|
219,379 |
|
|
111,392 |
Inventory |
|
242,606 |
|
|
191,843 |
Other current assets |
|
35,623 |
|
|
37,947 |
Total current assets |
|
964,950 |
|
|
877,184 |
|
|
|
|
||
Property and equipment, net |
|
982,319 |
|
|
831,427 |
Operating lease assets |
|
1,600,551 |
|
|
1,659,526 |
Goodwill |
|
34,832 |
|
|
22,213 |
Intangible assets, net |
|
14,871 |
|
|
10,934 |
Other noncurrent assets |
|
85,695 |
|
|
107,217 |
Total assets |
$ |
3,683,218 |
|
$ |
3,508,501 |
|
|
|
|
||
Liabilities and Stockholders’ Equity: |
|
|
|
||
Current liabilities: |
|
|
|
||
Accounts payable |
$ |
284,668 |
|
$ |
206,420 |
Current operating lease liabilities |
|
116,303 |
|
|
118,005 |
Other current liabilities |
|
239,486 |
|
|
194,853 |
Total current liabilities |
|
640,457 |
|
|
519,278 |
|
|
|
|
||
Long term debt, net |
|
524,355 |
|
|
524,781 |
Noncurrent operating lease liabilities |
|
1,579,064 |
|
|
1,655,359 |
Other noncurrent liabilities |
|
114,759 |
|
|
106,230 |
Total liabilities |
|
2,858,635 |
|
|
2,805,648 |
|
|
|
|
||
Stockholders’ equity (14,854 and 14,839 shares of common stock outstanding as of September 30, 2022 and December 31, 2021, respectively) |
|
824,583 |
|
|
702,853 |
Total liabilities and stockholders’ equity |
$ |
3,683,218 |
|
$ |
3,508,501 |
Stephen Colbert, Director of Investor Relations
(617) 796-8251
www.ta-petro.com
HOUSTON--(BUSINESS WIRE)--Black Stone Minerals, L.P. (NYSE: BSM) ("Black Stone Minerals," "Black Stone," or "the Company") today announces its financial and operating results for the third quarter of 2022.
Financial and Operational Highlights
Management Commentary
Thomas L. Carter, Jr., Black Stone Minerals’ Chief Executive Officer and Chairman commented, “Production for the quarter exceeded our expectations as operators ramped up activity and initial flow rates in the Haynesville play and Permian Basin to take advantage of the favorable commodity price environment. As a result, combined with the continued increase in activity in our Haynesville Shelby Trough acreage, we now believe our production for the full year will come in at or above the midpoint of our original guidance range of 34 to 37 MBoe per day, with further upside to that estimate should similar new well activity continue in the fourth quarter.”
Quarterly Financial and Operating Results
Production
Black Stone Minerals reported mineral and royalty volumes of 37.3 MBoe/d (77% natural gas) for the third quarter of 2022, compared to 30.3 MBoe/d for the second quarter of 2022 and 33.0 MBoe/d for the third quarter of 2021. Royalty volumes benefitted from new wells brought on line by XTO Energy and Aethon Energy ("Aethon") on high interest acreage in the Shelby Trough, as well as from numerous first payments received on new wells brought on line at high initial flow rates. The initial payment Black Stone receives from an operator typically covers multiple months of production, and as such, wells on high net acreage positions or those with robust initial production rates can have a significant impact on reported production volumes. In the third quarter, Black Stone received the first payment on several such new wells, the majority of which were located in the Louisiana Haynesville. The Company has received or expects to receive additional initial payments on wells already drilled that should increase reported fourth quarter 2022 production volumes by an estimated 1.5 – 2.5 MBoe/d over original estimates.
Working interest production for the third quarter of 2022 was 2.6 MBoe/d, representing a decrease of 19% from the levels generated in the quarter ended June 30, 2022 and a decrease of 49% from the quarter ended September 30, 2021. The continued decline in working interest volumes is consistent with the Company's decision to farm out its working-interest participation to third-party capital providers.
Total reported production averaged 40.0 MBoe/d (93% mineral and royalty, 77% natural gas) for the third quarter of 2022 compared to 33.5 MBoe/d and 38.0 MBoe/d for the quarters ended June 30, 2022 and September 30, 2021, respectively.
Realized Prices, Revenues, and Net Income
The Company’s average realized price per Boe, excluding the effect of derivative settlements, was $59.30 for the quarter ended September 30, 2022. This is a decrease of 12% from $67.41 per Boe from the second quarter of 2022 and a 54% increase compared to $38.60 for the third quarter of 2021.
Black Stone reported oil and gas revenue of $218.0 million (37% oil and condensate) for the third quarter of 2022, an increase of 6% from $205.5 million in the second quarter of 2022. Oil and gas revenue in the third quarter of 2021 was $135.1 million.
The Company reported a loss on commodity derivative instruments of $4.7 million for the third quarter of 2022, composed of a $68.9 million loss from realized settlements and a non-cash $64.1 million unrealized gain due to the change in value of Black Stone’s derivative positions during the quarter. Black Stone reported a loss of $27.3 million and a loss of $77.6 million on commodity derivative instruments for the quarters ended June 30, 2022 and September 30, 2021, respectively.
Lease bonus and other income was $3.2 million for the third quarter of 2022, primarily related to leasing activity in the Haynesville and Permian. Lease bonus and other income for the quarters ended June 30, 2022 and September 30, 2021 was $2.2 million and $2.3 million, respectively.
The Company reported net income of $168.5 million for the quarter ended September 30, 2022, compared to net income of $131.8 million in the preceding quarter. For the quarter ended September 30, 2021, the Company reported net income of $16.2 million.
Adjusted EBITDA and Distributable Cash Flow
Adjusted EBITDA for the third quarter of 2022 was $123.1 million, which compares to $112.8 million in the second quarter of 2022 and $76.5 million in the third quarter of 2021. Distributable cash flow for the quarter ended September 30, 2022 was $116.5 million. For the quarters ended June 30, 2022 and September 30, 2021, distributable cash flow was $106.6 million and $70.2 million, respectively.
Financial Position and Activities
As of September 30, 2022, Black Stone Minerals had $0.8 million in cash and $60.0 million outstanding under its credit facility. At September 30, 2022, the ratio of total debt to trailing twelve-month Adjusted EBITDA was 0.15x. As of October 28, 2022, $19.0 million was outstanding under the credit facility and the Company had $2.1 million in cash.
Subsequent to quarter-end, Black Stone revised and amended its credit facility to extend the maturity date from November 1, 2024 to October 31, 2027. Concurrent with the amendment, the borrowing base under the credit facility was increased from $400 million to $550 million, and the Company elected to lower total commitments under the credit facility from $400 million to $375 million.
During the third quarter of 2022, the Company made no repurchases of units under the Board-approved $75 million unit repurchase program.
Third Quarter 2022 Distributions
As previously announced, the Board approved a cash distribution of $0.45 for each common unit attributable to the third quarter of 2022. The quarterly distribution coverage ratio attributable to the third quarter of 2022 was approximately 1.24x. These distributions will be payable on November 17, 2022 to unitholders of record as of the close of business on November 10, 2022.
Activity Update
Rig Activity
As of September 30, 2022, Black Stone had 92 rigs operating across its acreage position, an increase relative to the 81 rigs on the Company's acreage as of June 30, 2022 and to the 59 rigs operating on the Company's acreage as of September 30, 2021. The quarter over quarter increase in rig count was associated primarily with rigs located in the Haynesville and Permian Basin.
Shelby Trough Development Update
Aethon has successfully turned ten wells to sales and has commenced operations on eight additional wells under the development agreement covering Angelina County. Aethon has turned four wells to sales and is currently drilling one well with another waiting on completion under the separate development agreement covering San Augustine County. Aethon’s completions are more intensive than those of prior operators in the area and result in higher initial flowback rates. Additionally, XTO Energy has turned to sales the three wells on our Shelby Trough acreage in San Augustine County that were originally spud in 2019.
Austin Chalk Update
Black Stone has entered into agreements with multiple operators to drill wells in the Austin Chalk in East Texas, where the Company has significant acreage positions. The results of the three well test program in the Brookeland Field demonstrates that modern completion technology can greatly improve production rates and increase reserves when compared to the vintage, unstimulated wells in the Austin Chalk formation. In addition to the test well program, eighteen new horizontal wells have been drilled on Black Stone acreage to test various portions of the field across a four-county area. Although production results have varied on those wells, the play is becoming better delineated, with consistent well performance across certain areas. Seven operators are actively engaged in redevelopment of the field, with three rigs currently running in the play. To date, twenty-two wells with modern completions are now producing in the area, and an additional five are currently either being drilled or completed.
Update to 2022 Guidance
The Company now expects total production for 2022 to be at or above the midpoint of its original guidance range of 34.0 to 37.0 MBoe/d. The Company expects lease operating expenses to be at the high end of the guidance range of $10-$12 million and production costs as a percentage of oil and gas revenues to be below the guidance range of 10%-12%. Black Stone expects cash G&A to be in line with the guidance range of $36-$38 million. The Company expects non-cash G&A to be at the high end of the guidance range of $13-$15 million, due primarily to the impact of the increase in Black Stone’s unit price during the year on the Company's long-term incentive compensation expense.
Update to Hedge Position
Black Stone has commodity derivative contracts in place covering portions of its anticipated production for 2022 and 2023. The Company's hedge position as of October 28, 2022 is summarized in the following tables:
Oil Swap Contracts |
|
|
|
Volume |
|
|
Bbl |
$/Bbl |
3Q22 |
220,000 |
$66.47 |
4Q22 |
660,000 |
$66.47 |
1Q23 |
570,000 |
$78.99 |
2Q23 |
480,000 |
$80.42 |
3Q23 |
480,000 |
$80.42 |
4Q23 |
480,000 |
$80.42 |
Natural Gas Swap Contracts |
||
|
Volume |
|
|
MMBtu |
$/MMbtu |
4Q22 |
9,000,000 |
$3.12 |
1Q23 |
9,000,000 |
$5.07 |
2Q23 |
8,190,000 |
$5.15 |
3Q23 |
8,280,000 |
$5.15 |
4Q23 |
8,280,000 |
$5.15 |
More detailed information about the Company's existing hedging program can be found in the Quarterly Report on Form 10-Q for the third quarter of 2022, which is expected to be filed on or around November 1, 2022.
Conference Call
Black Stone Minerals will host a conference call and webcast for investors and analysts to discuss its results for the third quarter of 2022 on Tuesday, November 1, 2022 at 9:00 a.m. Central Time. Black Stone recommends participants who do not anticipate asking questions to listen to the call via the live broadcast available at http://investor.blackstoneminerals.com. Analysts and investors who wish to ask questions should dial (800) 343-4849 for domestic participants and (203) 518-9848 for international participants. The conference ID for the call is BSMQ322. A recording of the conference call will be available on Black Stone's website.
About Black Stone Minerals, L.P.
Black Stone Minerals is one of the largest owners of oil and natural gas mineral interests in the United States. The Company owns mineral interests and royalty interests in 41 states in the continental United States. Black Stone believes its large, diversified asset base and long-lived, non-cost-bearing mineral and royalty interests provide for stable to growing production and reserves over time, allowing the majority of generated cash flow to be distributed to unitholders.
Forward-Looking Statements
This news release includes forward-looking statements. All statements, other than statements of historical facts, included in this news release that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future are forward-looking statements. Terminology such as “will,” “may,” “should,” “expect,” “anticipate,” “plan,” “project,” “intend,” “estimate,” “believe,” “target,” “continue,” “potential,” the negative of such terms, or other comparable terminology often identify forward-looking statements. Except as required by law, Black Stone Minerals undertakes no obligation and does not intend to update these forward-looking statements to reflect events or circumstances occurring after this news release. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this news release. All forward-looking statements are qualified in their entirety by these cautionary statements. These forward-looking statements involve risks and uncertainties, many of which are beyond the control of Black Stone Minerals, which may cause the Company’s actual results to differ materially from those implied or expressed by the forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, those summarized below, as well as the Risk Factors section in our most recent annual report on Form 10-K and quarterly report on Form 10-Q:
BLACK STONE MINERALS, L.P. AND SUBSIDIARIES |
|||||||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS |
|||||||||||||||
(Unaudited) |
|||||||||||||||
(In thousands, except per unit amounts) |
|||||||||||||||
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
2022 |
|
2021 |
|
2022 |
|
2021 |
||||||||
|
|
|
|
|
|
|
|
||||||||
REVENUE |
|
|
|
|
|
|
|
||||||||
Oil and condensate sales |
$ |
80,240 |
|
|
$ |
61,916 |
|
|
$ |
250,367 |
|
|
$ |
160,028 |
|
Natural gas and natural gas liquids sales |
|
137,756 |
|
|
|
73,167 |
|
|
|
324,691 |
|
|
|
172,537 |
|
Lease bonus and other income |
|
3,159 |
|
|
|
2,305 |
|
|
|
10,262 |
|
|
|
12,195 |
|
Revenue from contracts with customers |
|
221,155 |
|
|
|
137,388 |
|
|
|
585,320 |
|
|
|
344,760 |
|
Gain (loss) on commodity derivative instruments |
|
(4,726 |
) |
|
|
(77,561 |
) |
|
|
(152,095 |
) |
|
|
(164,923 |
) |
TOTAL REVENUE |
|
216,429 |
|
|
|
59,827 |
|
|
|
433,225 |
|
|
|
179,837 |
|
OPERATING (INCOME) EXPENSE |
|
|
|
|
|
|
|
||||||||
Lease operating expense |
|
2,896 |
|
|
|
3,303 |
|
|
|
9,256 |
|
|
|
9,804 |
|
Production costs and ad valorem taxes |
|
17,856 |
|
|
|
14,331 |
|
|
|
51,309 |
|
|
|
35,469 |
|
Exploration expense |
|
10 |
|
|
|
5 |
|
|
|
192 |
|
|
|
1,080 |
|
Depreciation, depletion, and amortization |
|
12,208 |
|
|
|
14,925 |
|
|
|
35,018 |
|
|
|
46,353 |
|
General and administrative |
|
13,044 |
|
|
|
12,320 |
|
|
|
39,326 |
|
|
|
37,359 |
|
Accretion of asset retirement obligations |
|
209 |
|
|
|
273 |
|
|
|
616 |
|
|
|
863 |
|
(Gain) loss on sale of assets, net |
|
— |
|
|
|
(2,850 |
) |
|
|
(17 |
) |
|
|
(2,850 |
) |
TOTAL OPERATING EXPENSE |
|
46,223 |
|
|
|
42,307 |
|
|
|
135,700 |
|
|
|
128,078 |
|
INCOME (LOSS) FROM OPERATIONS |
|
170,206 |
|
|
|
17,520 |
|
|
|
297,525 |
|
|
|
51,759 |
|
OTHER INCOME (EXPENSE) |
|
|
|
|
|
|
|
||||||||
Interest and investment income |
|
20 |
|
|
|
— |
|
|
|
22 |
|
|
|
— |
|
Interest expense |
|
(1,693 |
) |
|
|
(1,359 |
) |
|
|
(4,264 |
) |
|
|
(4,197 |
) |
Other income (expense) |
|
(58 |
) |
|
|
17 |
|
|
|
(22 |
) |
|
|
231 |
|
TOTAL OTHER EXPENSE |
|
(1,731 |
) |
|
|
(1,342 |
) |
|
|
(4,264 |
) |
|
|
(3,966 |
) |
NET INCOME (LOSS) |
|
168,475 |
|
|
|
16,178 |
|
|
|
293,261 |
|
|
|
47,793 |
|
Distributions on Series B cumulative convertible preferred units |
|
(5,250 |
) |
|
|
(5,250 |
) |
|
|
(15,750 |
) |
|
|
(15,750 |
) |
NET INCOME (LOSS) ATTRIBUTABLE TO THE GENERAL PARTNER AND COMMON UNITS |
$ |
163,225 |
|
|
$ |
10,928 |
|
|
$ |
277,511 |
|
|
$ |
32,043 |
|
ALLOCATION OF NET INCOME (LOSS): |
|
|
|
|
|
|
|
||||||||
General partner interest |
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Common units |
|
163,225 |
|
|
|
10,928 |
|
|
|
277,511 |
|
|
|
32,043 |
|
|
$ |
163,225 |
|
|
$ |
10,928 |
|
|
$ |
277,511 |
|
|
$ |
32,043 |
|
NET INCOME (LOSS) ATTRIBUTABLE TO LIMITED PARTNERS PER COMMON UNIT: |
|
|
|
|
|
|
|
||||||||
Per common unit (basic) |
$ |
0.78 |
|
|
$ |
0.05 |
|
|
$ |
1.33 |
|
|
$ |
0.15 |
|
Per common unit (diluted) |
$ |
0.75 |
|
|
$ |
0.05 |
|
|
$ |
1.31 |
|
|
$ |
0.15 |
|
WEIGHTED AVERAGE COMMON UNITS OUTSTANDING: |
|
|
|
|
|
|
|
||||||||
Weighted average common units outstanding (basic) |
|
209,402 |
|
|
|
208,653 |
|
|
|
209,374 |
|
|
|
208,018 |
|
Weighted average common units outstanding (diluted) |
|
224,371 |
|
|
|
208,653 |
|
|
|
224,343 |
|
|
|
208,018 |
|
The following table shows the Company’s production, revenues, pricing, and expenses for the periods presented:
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
(Unaudited) (Dollars in thousands, except for realized prices and per Boe data) |
||||||||||||||
Production: |
|
|
|
|
|
|
|
|
||||||||
Oil and condensate (MBbls) |
|
|
844 |
|
|
|
922 |
|
|
|
2,574 |
|
|
|
2,610 |
|
Natural gas (MMcf)1 |
|
|
16,994 |
|
|
|
15,467 |
|
|
|
42,648 |
|
|
|
46,053 |
|
Equivalents (MBoe) |
|
|
3,676 |
|
|
|
3,500 |
|
|
|
9,682 |
|
|
|
10,286 |
|
Equivalents/day (MBoe) |
|
|
40.0 |
|
|
|
38.0 |
|
|
|
35.5 |
|
|
|
37.7 |
|
Realized prices, without derivatives: |
|
|
|
|
|
|
|
|
||||||||
Oil and condensate ($/Bbl) |
|
$ |
95.07 |
|
|
$ |
67.15 |
|
|
$ |
97.27 |
|
|
$ |
61.31 |
|
Natural gas ($/Mcf)1 |
|
|
8.11 |
|
|
|
4.73 |
|
|
|
7.61 |
|
|
|
3.75 |
|
Equivalents ($/Boe) |
|
$ |
59.30 |
|
|
$ |
38.60 |
|
|
$ |
59.39 |
|
|
$ |
32.33 |
|
Revenue: |
|
|
|
|
|
|
|
|
||||||||
Oil and condensate sales |
|
$ |
80,240 |
|
|
$ |
61,916 |
|
|
$ |
250,367 |
|
|
$ |
160,028 |
|
Natural gas and natural gas liquids sales1 |
|
|
137,756 |
|
|
|
73,167 |
|
|
|
324,691 |
|
|
|
172,537 |
|
Lease bonus and other income |
|
|
3,159 |
|
|
|
2,305 |
|
|
|
10,262 |
|
|
|
12,195 |
|
Revenue from contracts with customers |
|
|
221,155 |
|
|
|
137,388 |
|
|
|
585,320 |
|
|
|
344,760 |
|
Gain (loss) on commodity derivative instruments |
|
|
(4,726 |
) |
|
|
(77,561 |
) |
|
|
(152,095 |
) |
|
|
(164,923 |
) |
Total revenue |
|
$ |
216,429 |
|
|
$ |
59,827 |
|
|
$ |
433,225 |
|
|
$ |
179,837 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
||||||||
Lease operating expense |
|
$ |
2,896 |
|
|
$ |
3,303 |
|
|
$ |
9,256 |
|
|
$ |
9,804 |
|
Production costs and ad valorem taxes |
|
|
17,856 |
|
|
|
14,331 |
|
|
|
51,309 |
|
|
|
35,469 |
|
Exploration expense |
|
|
10 |
|
|
|
5 |
|
|
|
192 |
|
|
|
1,080 |
|
Depreciation, depletion, and amortization |
|
|
12,208 |
|
|
|
14,925 |
|
|
|
35,018 |
|
|
|
46,353 |
|
General and administrative |
|
|
13,044 |
|
|
|
12,320 |
|
|
|
39,326 |
|
|
|
37,359 |
|
Other expense: |
|
|
|
|
|
|
|
|
||||||||
Interest expense |
|
|
1,693 |
|
|
|
1,359 |
|
|
|
4,264 |
|
|
|
4,197 |
|
Per Boe: |
|
|
|
|
|
|
|
|
||||||||
Lease operating expense (per working interest Boe) |
|
$ |
11.97 |
|
|
$ |
7.10 |
|
|
$ |
11.21 |
|
|
$ |
6.53 |
|
Production costs and ad valorem taxes |
|
|
4.86 |
|
|
|
4.09 |
|
|
|
5.30 |
|
|
|
3.45 |
|
Depreciation, depletion, and amortization |
|
|
3.32 |
|
|
|
4.26 |
|
|
|
3.62 |
|
|
|
4.51 |
|
General and administrative |
|
|
3.55 |
|
|
|
3.52 |
|
|
|
4.06 |
|
|
|
3.63 |
|
1 |
As a mineral-and-royalty interest owner, Black Stone Minerals is often provided insufficient and inconsistent data on natural gas liquid ("NGL") volumes by its operators. As a result, the Company is unable to reliably determine the total volumes of NGLs associated with the production of natural gas on its acreage. Accordingly, no NGL volumes are included in reported production; however, revenue attributable to NGLs is included in natural gas revenue and the calculation of realized prices for natural gas. |
Non-GAAP Financial Measures
Adjusted EBITDA and Distributable cash flow are supplemental non-GAAP financial measures used by Black Stone's management and external users of the Company's financial statements such as investors, research analysts, and others, to assess the financial performance of its assets and its ability to sustain distributions over the long term without regard to financing methods, capital structure, or historical cost basis.
The Company defines Adjusted EBITDA as net income (loss) before interest expense, income taxes, and depreciation, depletion, and amortization adjusted for impairment of oil and natural gas properties, if any, accretion of asset retirement obligations, unrealized gains and losses on commodity derivative instruments, non-cash equity-based compensation, and gains and losses on sales of assets, if any. Black Stone defines Distributable cash flow as Adjusted EBITDA plus or minus amounts for certain non-cash operating activities, cash interest expense, and restructuring charges, if any.
Adjusted EBITDA and Distributable cash flow should not be considered an alternative to, or more meaningful than, net income (loss), income (loss) from operations, cash flows from operating activities, or any other measure of financial performance presented in accordance with generally accepted accounting principles ("GAAP") in the United States as measures of the Company's financial performance.
Adjusted EBITDA and Distributable cash flow have important limitations as analytical tools because they exclude some but not all items that affect net income (loss), the most directly comparable U.S. GAAP financial measure. The Company's computation of Adjusted EBITDA and Distributable cash flow may differ from computations of similarly titled measures of other companies.
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
(Unaudited) (In thousands, except per unit amounts) |
||||||||||||||
Net income (loss) |
|
$ |
168,475 |
|
|
$ |
16,178 |
|
|
$ |
293,261 |
|
|
$ |
47,793 |
|
Adjustments to reconcile to Adjusted EBITDA: |
|
|
|
|
|
|
|
|
||||||||
Depreciation, depletion, and amortization |
|
|
12,208 |
|
|
|
14,925 |
|
|
|
35,018 |
|
|
|
46,353 |
|
Interest expense |
|
|
1,693 |
|
|
|
1,359 |
|
|
|
4,264 |
|
|
|
4,197 |
|
Income tax expense (benefit) |
|
|
140 |
|
|
|
20 |
|
|
|
229 |
|
|
|
(131 |
) |
Accretion of asset retirement obligations |
|
|
209 |
|
|
|
273 |
|
|
|
616 |
|
|
|
863 |
|
Equity–based compensation |
|
|
4,534 |
|
|
|
3,172 |
|
|
|
11,809 |
|
|
|
9,705 |
|
Unrealized (gain) loss on commodity derivative instruments |
|
|
(64,145 |
) |
|
|
43,421 |
|
|
|
(10,472 |
) |
|
|
108,915 |
|
(Gain) loss on sale of assets, net |
|
|
— |
|
|
|
(2,850 |
) |
|
|
(17 |
) |
|
|
(2,850 |
) |
Adjusted EBITDA |
|
|
123,114 |
|
|
|
76,498 |
|
|
|
334,708 |
|
|
|
214,845 |
|
Adjustments to reconcile to Distributable cash flow: |
|
|
|
|
|
|
|
|
||||||||
Change in deferred revenue |
|
|
(8 |
) |
|
|
(2 |
) |
|
|
(23 |
) |
|
|
(16 |
) |
Cash interest expense |
|
|
(1,346 |
) |
|
|
(1,011 |
) |
|
|
(3,223 |
) |
|
|
(2,965 |
) |
Preferred unit distributions |
|
|
(5,250 |
) |
|
|
(5,250 |
) |
|
|
(15,750 |
) |
|
|
(15,750 |
) |
Distributable cash flow |
|
$ |
116,510 |
|
|
$ |
70,235 |
|
|
$ |
315,712 |
|
|
$ |
196,114 |
|
|
|
|
|
|
|
|
|
|
||||||||
Total units outstanding1 |
|
|
209,407 |
|
|
|
208,666 |
|
|
|
|
|
||||
Distributable cash flow per unit |
|
$ |
0.556 |
|
|
$ |
0.337 |
|
|
|
|
|
||||
1 |
The distribution attributable to the three months ended September 30, 2022 is estimated using 209,406,927 common units as of October 28, 2022; the exact amount of the distribution attributable to the three months ended September 30, 2022 will be determined based on units outstanding as of the record date of November 10, 2022. Distributions attributable to the three months ended September 30, 2021 were calculated using 208,665,648 common units as of the record date of November 12, 2021. |
Black Stone Minerals, L.P. Contacts
Jeff Wood
President and Chief Financial Officer
Evan Kiefer
Vice President, Finance and Investor Relations
Telephone: (713) 445-3200
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NEW YORK--(BUSINESS WIRE)--SLB (NYSE: SLB) today announced that it is hosting its 2022 Investors Conference on Thursday, November 3, 2022 in New York.
Olivier Le Peuch, chief executive officer, SLB, will present at the Investors Conference beginning at approximately 8:30 a.m. US Eastern Time (ET), where he will discuss, among other things, SLB’s strategy and business outlook. In addition, Stephane Biguet, chief financial officer, SLB, will present at the conference beginning at approximately 4:05 p.m. ET, where he will discuss, among other things, SLB’s financial performance, strategic objectives, 2023 guidance, and capital allocation framework.
A live webcast of Mr. Le Peuch’s address will be available on a listen-only basis beginning at approximately 8:30 a.m. ET. In addition, a second live webcast of Mr. Biguet’s address, as well as a Q&A session, will be available on a listen-only basis beginning at approximately 4:05 p.m. ET. The live webcasts can be accessed at https://investorcenter.slb.com/news-events/investor-day. Viewers should log in 15 minutes prior to the start of each webcast to test their browsers. Following the end of the event, a replay of the webcasts will be available at the same website, along with a transcript of the Q&A session.
Executive management presentations will be available on the company’s website at https://investorcenter.slb.com/news-events/investor-day, beginning at approximately 8:30 a.m. ET on November 3, 2022.
About SLB
SLB (NYSE: SLB) is a global technology company driving energy innovation for a balanced planet. With a global presence in more than 100 countries and employees representing almost twice as many nationalities, we work each day on innovating oil and gas, delivering digital at scale, decarbonizing industries, and developing and scaling new energy systems that accelerate the energy transition. Find out more at slb.com.
Media
Josh Byerly – Vice President of Communications
Moira Duff – Director of External Communications
Tel: +1 (713) 375-3407
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Investors
Ndubuisi Maduemezia – Vice President of Investor Relations
Joy V. Domingo – Director of Investor Relations
Tel: +1 (713) 375-3535
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HOUSTON--(BUSINESS WIRE)--PACIFIC COAST OIL TRUST (OTC–ROYTL) (the “Trust”), a royalty trust formed by Pacific Coast Energy Company LP (“PCEC”), announced today that there will be no cash distribution to the holders of its units of beneficial interest of record on October 31, 2022 based on the Trust’s calculation of net profits generated during August 2022 (the “Current Month”) as provided in the conveyance of net profits interests and overriding royalty interest (the “Conveyance”). Given the Trust’s receipt of insufficient monthly income from its net profits interests and overriding royalty interest during 2020 and 2021, the Trust had been expected to terminate by its terms at the end of 2021; however, as described further below, a court has issued a temporary restraining order enjoining the dissolution of the Trust until an arbitration tribunal can rule on the plaintiff’s request for injunctive relief. As described further below, based on information from PCEC, the likelihood of distributions to the unitholders in the foreseeable future is extremely remote. All financial and operational information in this press release has been provided to the Trustee by PCEC.
The Current Month’s distribution calculation for the Developed Properties resulted in operating income of approximately $2.1 million. Revenues from the Developed Properties were approximately $4.0 million, lease operating expenses including property taxes were approximately $1.9 million, and development costs were approximately $44,000. The average realized price for the Developed Properties was $94.50 per Boe for the Current Month, as compared to $101.46 per Boe in July 2022. Oil prices in recent months generally have remained elevated well above their 2020 and 2021 levels, and were higher in the Current Month as compared to August 2021. The cumulative net profits deficit amount for the Developed Properties declined approximately $1.6 million, to approximately $8.9 million in the Current Month versus approximately $10.6 million in the prior month.
As revenues from the Remaining Properties during the month of August were sufficient to repay the remaining cumulative net profits deficit for the Remaining Properties, the Trust received income from the 25% net profits interest instead of income from the 7.5% overriding royalty interest, as provided under the Conveyance. Revenues from the Remaining Properties were $1.6 million and lease operating expenses including property taxes were approximately $0.6 million. Average realized prices for the Remaining Properties were $92.24 per Boe in August, as compared to $99.25 per Boe in July. Income from the net profits interest for the Remaining Properties for the month of August was approximately $250,000, offset by the remaining cumulative net profits deficit of approximately $91,000, resulting in a net amount of approximately $160,000 payable to the Trust.
The monthly operating and services fee of approximately $100,000 payable to PCEC, together with Trust general and administrative expenses of approximately $19,000 and the payment to PCEC of approximately $60,000 of accrued interest under the promissory note between the Trust and PCEC, together exceeded the payment of approximately $160,000 received from PCEC from the 25% net profits interest on the Remaining Properties, creating a shortfall of approximately $19,000.
PCEC has provided the Trust with a $1 million letter of credit to be used by the Trust if its cash on hand (including available cash reserves) is not sufficient to pay ordinary course administrative expenses as they become due. As of March 31, 2021, the letter of credit has been fully drawn down. Further, the trust agreement provides that if the Trust requires more than the $1 million under the letter of credit to pay administrative expenses, PCEC will, upon written request of the Trustee, loan funds to the Trust in such amount as necessary to pay such expenses. Under the trust agreement, the Trust may only use funds provided under the letter of credit or loaned by PCEC or another source to pay the Trust’s current accounts or other obligations to trade creditors in connection with obtaining goods or services or for the payment of other accrued current liabilities arising in the ordinary course of the Trust’s business. As the Trust has fully drawn down the letter of credit, PCEC will be loaning funds to the Trust to pay the expected shortfall of approximately $19,000, which would bring the total amount of outstanding borrowings (including the amount drawn from the letter of credit, which also must be repaid as provided in the trust agreement) from PCEC to approximately $3.6 million plus interest thereon, related to shortfalls from prior months. Consequently, no further distributions may be made to Trust unitholders until the Trust’s indebtedness created by such amounts drawn or borrowed, including interest thereon, has been paid in full.
Sales Volumes and Prices
The following table displays PCEC’s underlying sales volumes and average prices for the Current Month:
Underlying Properties |
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Sales Volumes |
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|
Average Price |
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(Boe) |
|
|
(Boe/day) |
|
|
(per Boe) |
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Developed Properties (a) |
42,356 |
|
1,366 |
|
$94.50 |
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Remaining Properties (b) |
17,812 |
|
575 |
|
$92.24 |
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(a) Crude oil sales represented 99% of sales volumes |
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(b) Crude oil sales represented 100% of sales volumes |
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Update on Estimated Asset Retirement Obligations
As previously disclosed, in November 2019, PCEC informed the Trustee that, as permitted by the Conveyance, PCEC intended to begin deducting its estimated asset retirement obligations (“ARO”) associated with the West Pico, Orcutt Hill, Orcutt Hill Diatomite, East Coyote and Sawtelle fields, thereby reducing the amounts payable to the Trust under its Net Profits Interests. ARO is the recognition related to net present value of future plugging and abandonment costs that all oil and gas operators face. PCEC engaged an accounting firm, Moss Adams LLP (“Moss Adams”), acting as third-party consultants, to assist PCEC in determining its estimated ARO, and on February 27, 2020, PCEC informed the Trustee that based on the analysis performed by Moss Adams, PCEC’s estimated ARO, as of December 31, 2019, was $45,695,643, which is approximately $10.0 million less than the undiscounted amount that was originally estimated before Moss Adams completed its analysis, as previously disclosed in the Trust’s Current Report on Form 8‑K filed on November 13, 2019. According to PCEC and its third-party consultants, its estimated ARO, which reflected PCEC’s assessment of current market conditions as of December 31, 2019 and changes in California law, was determined to be approximately $33.2 million for the Developed Properties and approximately $12.5 million for the Remaining Properties, or approximately $26.5 million and approximately $3.1 million net to the Trust, respectively, and PCEC has reflected these amounts beginning with the calculation of the net profits generated during January 2020. The accrual has resulted in a current cumulative net profits deficit of approximately $8.9 million, which must be recouped from proceeds otherwise payable to the Trust from the Trust’s Net Profits Interests. Therefore, until the net profits deficit for the Remaining Properties was eliminated in the Current Month, the only cash proceeds the Trust had received were pursuant to the 7.5% overriding royalty interest. With the repayment of the remaining cumulative net profits deficit for the Remaining Properties in the Current Month as described above, the current cumulative net profits deficit relates only to the Developed Properties and will be repaid from proceeds otherwise payable to the Trust from the Trust’s 80% net profits interest.
PCEC has informed the Trustee that in accordance with generally accepted accounting principles, PCEC will evaluate the ARO on a quarterly basis. As a result of that re-evaluation, the actual ARO incurred in the future may be greater or less than the estimated amounts provided by PCEC. As previously disclosed, PCEC has informed the Trustee that at year-end 2020, and following the end of each of the first, second and third quarters of 2021, in light of the accounting guidance under Accounting Standards Codification 410-20-35-3, which requires the recognition of changes in the asset retirement obligation due to the passage of time and revision of the timing or amount of the originally estimated undiscounted cash flows, PCEC re-evaluated the estimated ARO, which resulted in an aggregate increase to the ARO accrual for the Developed Properties by approximately $5.1 million, net to the Trust’s interest, and an aggregate increase to the ARO accrual for the Remaining Properties by approximately $288,000, net to the Trust’s interest. PCEC has informed the Trustee that the audit of PCEC’s financial statements for the year ended December 31, 2021 has not yet been completed, and that when the audit is completed, PCEC expects to recognize further revisions to the ARO accrual for the Developed Properties, but at this time cannot estimate the amount or direction of any such revisions.
Based on PCEC’s estimate of its ARO attributable to the Net Profits Interest, deductions relating to estimated ARO are likely to eliminate the likelihood of any distributions to Trust unitholders for the foreseeable future, as previously disclosed in the Trust’s Current Report on Form 8-K filed on November 13, 2019.
As previously disclosed, the Trust engaged Martindale Consultants, Inc. (“Martindale”), a provider of analysis and compliance review services to the oil and gas industry, to perform an independent review of the estimated ARO in the Moss Adams report that PCEC provided to the Trustee. The Trustee also has engaged an accounting expert to advise the Trustee regarding the accruals that PCEC has booked relating to its estimated ARO. As disclosed in the Trust’s Current Report on Form 8-K filed on December 29, 2020, Martindale has completed its review of the estimated ARO and on December 21, 2020 provided its analysis and recommendations to the Trustee. Based on Martindale’s recommendations provided in its report to the Trust, as disclosed in the Trust’s Current Report on Form 8-K filed on December 29, 2020, the Trustee requested that PCEC promptly make several adjustments to its calculations and methods of deducting ARO from the proceeds to which the Trust is otherwise entitled pursuant to its Net Profits Interests. PCEC has responded to the Trustee, indicating PCEC’s view that the adjustments would violate applicable contracts and accounting standards, and has therefore declined to make any adjustments to the estimated ARO calculation based on those requests and the recommendations of the Martindale report. The Trustee has concluded that it has taken all action reasonably available to it under the Trust’s governing documents in connection with PCEC’s ARO calculation and therefore has determined not to take further action at this time.
As described in more detail in the Trust’s filings with the SEC, the trust agreement provides that the Trust will terminate if the annual cash proceeds received by the Trust from the Net Profits Interests and 7.5% overriding royalty interest total less than $2.0 million for each of any two consecutive calendar years. Because of the cumulative net profits deficit—which PCEC contends is the result of the substantial reduction in commodity prices during 2020 due to the COVID-19 pandemic and PCEC’s deduction of estimated ARO beginning in the first quarter of 2020—the only cash proceeds the Trust has received since March 2020 have been attributable to the 7.5% overriding royalty interest. As a result, the total proceeds received by the Trust in each of 2020 and 2021 were less than $2.0 million. Therefore, the Trust had been expected to terminate by its terms at the end of 2021.
Status of the Dissolution of the Trust
As previously disclosed in the Trust’s Current Report on Form 8-K filed on December 23, 2021, on December 8, 2021, Evergreen Capital Management LLC (“Evergreen”) filed an Amended Class Action and Shareholder Derivative Complaint alleging a derivative action on behalf of the Trust and against PCEC in the Superior Court of the State of California for the County of Los Angeles (the “Court”).
On December 10, 2021, Evergreen filed a motion for temporary restraining order and for preliminary injunction, seeking to (1) enjoin the Trustee from dissolving the Trust, (2) enjoin PCEC from dissolving the Trust, (3) direct PCEC to account for all monies withheld from the Trust on the basis of ARO costs since September 2019, and (4) direct PCEC to place such monies in escrow. On December 16, 2021, the Court granted Evergreen’s application for a temporary restraining order only to the extent of enjoining the dissolution of the Trust. Accordingly, the Trust did not dissolve at the end of 2021 and commence the process of selling its assets and winding up its affairs.
On January 11, 2022, PCEC and Evergreen filed an agreed stipulation to stay the prosecution of Evergreen’s derivative claims pending an arbitration of such claims. On January 13, 2022, the Court signed an Order dissolving the December 16, 2021, temporary restraining order and entering a new temporary restraining order to preserve the status quo until a tribunal of three arbitrators appointed pursuant to the trust agreement could rule on any request by Evergreen for injunctive relief. On April 11, 2022, PCEC notified the Court, at the arbitrators’ request, that the arbitration panel had issued an order on April 7, 2022, denying Evergreen’s request for injunctive relief. On April 13, 2022, Evergreen notified the Court that Evergreen had filed a motion for reconsideration with the arbitration panel that same day, which was denied on May 26, 2022. On August 30, 2022, the arbitration Panel issued a Partial Final Award dismissing with prejudice Evergreen’s derivative claims against PCEC, including Evergreen’s application for an injunction. PCEC has moved to confirm that Partial Final Award in the California Superior Court which is scheduled to hear that application on December 5, 2022.
On June 20, 2022, Evergreen filed an amended pleading in the arbitration, adding the Trustee as a party to that proceeding. In early September 2022, Evergreen informed the Trustee that it was going to seek a preliminary injunction while its claims against the Trustee were pending. At the request of the arbitration panel, the Trustee agreed to take no steps toward the sale of the Trust corpus until the Panel decided Evergreen’s application for a preliminary injunction. On September 12, 2022, the Trustee filed a motion to dismiss Evergreen’s claims against the Trustee. On September 22, 2022, Evergreen filed an opposition to the Trustee’s motion to dismiss. On September 15, 2022, Evergreen filed a motion to enjoin the Trustee from selling the Trust assets or dissolving the Trust during the pendency of the arbitration. The Trustee and PCEC filed oppositions to Evergreen’s motion on September 22, 2022. Both motions were heard by the Panel on October 24, 2022, and the parties are awaiting the Panel’s decision on both motions.
Production Update
PCEC has informed the Trustee that PCEC continues to strategically deploy capital to enhance and maintain production. Costs associated with returning wells to service must be recovered before cash flow to the Trust can be created. Although oil prices have improved significantly from their lowest levels in 2020, any monthly payments, as a result of enhanced production, that PCEC may make to the Trust may not be sufficient to cover the Trust’s administrative expenses and outstanding debt to PCEC, and therefore the likelihood of distributions to the unitholders in the foreseeable future is extremely remote.
Cancellation of Connection Agreement with Phillips 66
PCEC has informed the Trustee that on September 22, 2022, PCEC received notice from Phillips 66 of the cancellation of the Connection Agreement between PCEC and Phillips 66 with respect to the three leases located south of Orcutt in Santa Barbara, California, effective upon completion of PCEC’s deliveries in December 2022. As a result of the cancellation, PCEC will no longer have a pipeline interconnection between the Orcutt properties and the Santa Maria Refinery, which Phillips 66 is expected to shut down in early 2023. Currently this pipeline is the sole means by which PCEC transports its crude oil from the Orcutt properties, which relates to approximately 86% and 91% of the production attributable to the Trust’s interests in 2021 and to date in 2022, respectively.
The shutdown of the refinery and the pipeline will adversely affect PCEC’s financial performance, and the revenues that may be payable to the Trust, if PCEC is unable to secure alternative means of transporting oil from the Orcutt properties to market. PCEC has indicated to the Trustee that it has been and continues to explore options to secure the transport of its oil from the Orcutt properties by other means.
Overview of Trust Structure
Pacific Coast Oil Trust is a Delaware statutory trust formed by PCEC to own interests in certain oil and gas properties in the Santa Maria Basin and the Los Angeles Basin in California (the “Underlying Properties”). The Underlying Properties and the Trust’s net profits, and royalty interests are described in the Trust’s filings with the SEC. As described in the Trust’s filings with the SEC, the amount of any periodic distributions is expected to fluctuate, depending on the proceeds received by the Trust as a result of actual production volumes, oil and gas prices, development expenses, and the amount and timing of the Trust’s administrative expenses, among other factors. For additional information on the Trust, please visit https://royt.q4web.com/home/default.aspx.
Cautionary Statement Regarding Forward-Looking Information
This press release contains statements that are "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. All statements contained in this press release, other than statements of historical facts, are "forward-looking statements" for purposes of these provisions. These forward-looking statements include estimates of future asset retirement obligations, expectations regarding the impact of deductions for such obligations on future distributions to unitholders, estimates of future total distributions to unitholders, expectations regarding the outcome of the legal proceedings relating to the Trust and any future dissolution of the Trust, statements regarding the impact of returning shut-in wells to production, expectations regarding the cancellation of the Connection Agreement between Phillips 66 and PCEC and the shutdown of the Santa Maria refinery, and the impact of such cancellation and shutdown on PCEC’s financial condition and future payments to the Trust, expectations regarding PCEC’s ability to loan funds to the Trust, and the amount and date of any anticipated distribution to unitholders. In any case, PCEC’s deductions of its estimated asset retirement obligations will have a material adverse effect on distributions to the unitholders and on the trading price of the Trust units and may result in the termination of the Trust. Any anticipated distribution is based, in part, on the amount of cash received or expected to be received by the Trust from PCEC with respect to the relevant period. Any differences in actual cash receipts by the Trust could affect this distributable amount. The amount of such cash received or expected to be received by the Trust (and its ability to pay distributions) has been and will be significantly and negatively affected by low commodity prices, which declined significantly during 2020, could decline again and could remain low for an extended period of time as a result of a variety of factors that are beyond the control of the Trust and PCEC. Other important factors that could cause actual results to differ materially include expenses related to the operation of the Underlying Properties, including lease operating expenses, expenses of the Trust, and reserves for anticipated future expenses. Statements made in this press release are qualified by the cautionary statements made in this press release. Neither PCEC nor the Trustee intends, and neither assumes any obligation, to update any of the statements included in this press release. An investment in units issued by Pacific Coast Oil Trust is subject to the risks described in the Trust's Annual Report on Form 10-K for the year ended December 31, 2018 filed with the SEC on March 8, 2019, and if applicable, the Trust’s subsequent Quarterly Reports on Form 10-Q. The Trust's Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q are available over the Internet at the SEC's website at http://www.sec.gov.
Pacific Coast Oil Trust
The Bank of New York Mellon Trust Company, N.A., as Trustee
Sarah Newell
1(512) 236-6555
HOUSTON--(BUSINESS WIRE)--USD Partners LP (NYSE: USDP) (the “Partnership”) announced today its operating and financial results for the three and nine months ended September 30, 2022. Financial highlights with respect to the third quarter of 2022 include the following:
“Despite recent volatility in global crude oil markets, we continue to project future heavy crude oil production in Western Canada to exceed the associated availability of egress alternatives, and we believe that the Partnership’s strategically located assets will be well-positioned to renew, extend or replace agreements that have expired during 2022 and those that are set to expire next year, sometime during the first half of 2023,” said Dan Borgen, the Partnership’s Chief Executive Officer. “In addition, we continue to have detailed discussions regarding our DRUbit™ by Rail™ network with new and existing customers to provide safer and economically beneficial Canadian crude transportation options. As always, we look forward to sharing additional announcements around our DRU program and other initiatives with you before the end of the year.”
Commercial Update
At the end of June 2022, contracts representing approximately 26% of the combined Hardisty Terminal’s capacity expired. In addition, the remaining contracted capacity at the Stroud Terminal also expired at the end of June 2022. Management is focused on renewing, extending or replacing the agreements that have expired in mid-2022 or are set to expire at the Hardisty and Stroud Terminals in mid-2023 with new, multi-year, take or pay commitments and is actively engaged with current and new customers. Given current and expected market conditions, the Partnership’s estimates for future heavy crude oil production in Western Canada and the current availability of egress alternatives, management believes that the Partnership will have the opportunity to renew and extend or replace the agreements that expired during the first half of 2023.
Partnership’s Third Quarter 2022 Liquidity, Operational and Financial Results
Substantially all of the Partnership’s cash flows are generated from multi-year, take-or-pay terminalling services agreements related to its crude oil terminals, which include minimum monthly commitment fees. The Partnership’s customers include major integrated oil companies, refiners and marketers, the majority of which are investment-grade rated.
The Partnership’s financial statements have been retrospectively recast to include the pre-acquisition results of the Hardisty South acquisition that occurred in the second quarter of 2022 because the acquisition represented a business combination between entities under common control.
The Partnership’s revenues for the third quarter of 2022 relative to the same quarter in 2021 were lower primarily due to lower revenues at the combined Hardisty Terminal due to a reduction in contracted capacity at both the legacy Hardisty and Hardisty South terminals that was effective July 1, 2022. Revenues were also lower at the Hardisty terminal due to an unfavorable variance in the Canadian exchange rate on the Partnership’s Canadian-dollar denominated contracts during the third quarter of 2022 as compared to the third quarter of 2021, coupled with a deferral of revenues in the current quarter associated with the make-up right options the Partnership granted to its customers with no similar occurrence in 2021. Revenue was also lower at the Stroud Terminal due to the conclusion of the Partnership’s terminalling services contracts with the sole customer effective July 1, 2022. The Partnership also had lower storage revenue generated at its Casper Terminal associated with the end of one of its customer contracts that occurred in September 2021. Partially offsetting these decreases in revenue was higher revenue at the Partnership’s West Colton Terminal resulting from the commencement of the renewable diesel contract that occurred in December 2021.
The Partnership experienced higher operating costs during the third quarter of 2022 as compared to the third quarter of 2021 primarily attributable to the non-cash impairment of the intangible and long-lived assets associated with the Casper terminal recognized in the third quarter of 2022, resulting from recurring periods where cash flow projections were not met due to adverse market conditions at the terminal.
Partially offsetting the increase in operating costs discussed above was a decrease in selling, general and administrative costs (“SG&A costs”) associated with the Hardisty South entities, as discussed in more detail below. The Partnership also experienced lower pipeline fee expense which is directly attributable to the associated decrease in the combined Hardisty terminal revenues previously discussed, as compared to the third quarter of 2021. In addition, subcontracted rail services costs were lower due to decreased throughput at the terminals.
Third quarter 2021 SG&A costs include service fees paid by Hardisty South to our Sponsor related to a services agreement that was in place with our Sponsor prior to the Partnership’s acquisition of Hardisty South. Upon the Partnership’s acquisition of Hardisty South, the services agreement between the acquired entities and the Partnership’s Sponsor was terminated and a similar agreement was established between those entities and the Partnership. This results in the service fee income being allocated to the Partnership, and therefore offsetting the expense in Hardisty South for periods subsequent to the acquisition date of April 1, 2022.
Net income decreased to a net loss in the third quarter of 2022 as compared to the third quarter of 2021 primarily because of the operating factors discussed above coupled with higher interest expense incurred during the third quarter of 2022 resulting from higher interest rates and a higher balance of debt outstanding during the quarter, partially offset by a decrease in commitment fees, as compared to the third quarter of 2021. Partially offsetting the decrease was a higher gain associated with the Partnership’s interest rate derivatives recognized in the third quarter of 2022 that included the cash proceeds from the settlement of the Partnership’s interest rate derivative that occurred in July 2022.
Net Cash Provided by Operating Activities for the quarter increased 53% relative to the third quarter of 2021. The decrease in the Partnership’s operating cash flow resulting from the conclusion of some of the Partnership’s terminalling agreements was offset by the previously mentioned cash settlement of the Partnership’s interest rate derivative that occurred in July 2022. Net cash provided by Operating Activities was also impacted by the general timing of receipts and payments of accounts receivable, accounts payable and deferred revenue balances.
Adjusted EBITDA was slightly lower than the prior period while Distributable Cash Flow (“DCF”) decreased 11% for the current quarter relative to the third quarter of 2021. The slight decrease in Adjusted EBITDA and decrease in DCF was primarily a result of the factors discussed above. Additionally, DCF was impacted by higher cash paid for interest during the quarter partially offset by lower maintenance capital expenditures.
As of September 30, 2022, the Partnership had approximately $4.8 million of unrestricted cash and cash equivalents and undrawn borrowing capacity of $53 million on its $275.0 million senior secured credit facility, subject to the Partnership’s continued compliance with financial covenants. As of the end of the third quarter of 2022, the Partnership had borrowings of $222.0 million outstanding under its revolving credit facility. The Partnership’s acquisition of Hardisty South is treated as a Material Acquisition under the terms of its senior secured credit facility. As a result, the Partnership’s available borrowings is limited to 5.0 times its 12-month trailing consolidated EBITDA through December 31, 2022, at which point it will revert back to 4.5 times the Partnership’s 12-month trailing consolidated EBITDA. As such, the borrowing capacity and available borrowings under the senior secured credit facility, including unrestricted cash and cash equivalents, was approximately $57.8 million as of September 30, 2022. The Partnership was in compliance with its financial covenants as of September 30, 2022.
The Partnership’s senior secured credit facility expires on November 2, 2023. The Partnership is in active discussions with the administrative agent and other banks within the lender group, as well as other potential financing sources, regarding the possible extension, renewal or replacement of the senior secured credit facility and any amendments or waivers that may become required prior to maturity.
Subsequent to quarter end, on October 12, 2022, the Partnership settled its existing interest rate swap for proceeds of $9.0 million. The Partnership plans to use the proceeds from this settlement to pay down outstanding debt on its senior secured credit facility and fund ongoing working capital needs. The Partnership simultaneously entered into a new interest rate swap that was made effective as of October 17, 2022. The new interest rate swap is a five-year contract with the same notional value that fixes the secured overnight financing rate, or SOFR, to 3.956% for the notional value of the swap agreement instead of the variable rate that the Partnership pays under the Partnership’s Credit Agreement.
On October 20, 2022, the Partnership declared a quarterly cash distribution of $0.1235 per unit ($0.494 per unit on an annualized basis), the same as the amount distributed in the prior quarter. The distribution is payable on November 14, 2022, to unitholders of record at the close of business on November 2, 2022. The Partnership’s board determined to keep the distribution unchanged from the prior quarter and to evaluate the distribution on a quarterly basis going forward and will take into consideration updated commercial progress, including the Partnership’s ability to renew, extend or replace its customer agreements at the Hardisty and Stroud Terminals, current market conditions, and Management’s expectations regarding future performance.
Third Quarter 2022 Conference Call Information
The Partnership will host a conference call and webcast regarding third quarter 2022 results at 11:00 a.m. Eastern Time (10:00 a.m. Central Time) on Wednesday, November 2, 2022.
To listen live over the Internet, participants are advised to log on to the Partnership’s website at www.usdpartners.com and select the “Events & Presentations” sub-tab under the “Investors” tab. To join via telephone, participants may dial (800) 445-7795 domestically or +1 (203) 518-9814 internationally, conference ID 9104568. Participants are advised to dial in at least five minutes prior to the call.
An audio replay of the conference call will be available for thirty days by dialing (800) 839-5103 domestically or +1 (402) 220-2687 internationally, conference ID 9104568. In addition, a replay of the audio webcast will be available by accessing the Partnership's website after the call is concluded.
About USD Partners LP
USD Partners LP is a fee-based, growth-oriented master limited partnership formed in 2014 by US Development Group, LLC (“USD”) to acquire, develop and operate midstream infrastructure and complementary logistics solutions for crude oil, biofuels and other energy-related products. The Partnership generates substantially all of its operating cash flows from multi-year, take-or-pay contracts with primarily investment grade customers, including major integrated oil companies, refiners and marketers. The Partnership’s principal assets include a network of crude oil terminals that facilitate the transportation of heavy crude oil from Western Canada to key demand centers across North America. The Partnership’s operations include railcar loading and unloading, storage and blending in on-site tanks, inbound and outbound pipeline connectivity, truck transloading, as well as other related logistics services. In addition, the Partnership provides customers with leased railcars and fleet services to facilitate the transportation of liquid hydrocarbons and biofuels by rail.
USD, which owns the general partner of USD Partners LP, is engaged in designing, developing, owning, and managing large-scale multi-modal logistics centers and energy-related infrastructure across North America. USD’s solutions create flexible market access for customers in significant growth areas and key demand centers, including Western Canada, the U.S. Gulf Coast and Mexico. Among other projects, USD is currently pursuing the development of a premier energy logistics terminal on the Houston Ship Channel with capacity for substantial tank storage, multiple docks (including barge and deepwater), inbound and outbound pipeline connectivity, as well as a rail terminal with unit train capabilities. For additional information, please visit texasdeepwater.com. Information on websites referenced in this release is not part of this release.
Non-GAAP Financial Measures
The Partnership defines Adjusted EBITDA as Net Cash Provided by Operating Activities adjusted for changes in working capital items, interest, income taxes, foreign currency transaction gains and losses, and other items which do not affect the underlying cash flows produced by the Partnership’s businesses. Adjusted EBITDA is a non-GAAP, supplemental financial measure used by management and external users of the Partnership’s financial statements, such as investors and commercial banks, to assess:
The Partnership defines Distributable Cash Flow, or DCF, as Adjusted EBITDA less net cash paid for interest, income taxes and maintenance capital expenditures. DCF does not reflect changes in working capital balances. DCF is a non-GAAP, supplemental financial measure used by management and by external users of the Partnership’s financial statements, such as investors and commercial banks, to assess:
The Partnership believes that the presentation of Adjusted EBITDA and DCF in this press release provides information that enhances an investor's understanding of the Partnership’s ability to generate cash for payment of distributions and other purposes. The GAAP measure most directly comparable to Adjusted EBITDA and DCF is Net Cash Provided by Operating Activities. Adjusted EBITDA and DCF should not be considered alternatives to Net Cash Provided by Operating Activities or any other measure of liquidity presented in accordance with GAAP. Adjusted EBITDA and DCF exclude some, but not all, items that affect Net Cash Provided by Operating Activities and these measures may vary among other companies. As a result, Adjusted EBITDA and DCF may not be comparable to similarly titled measures of other companies. Reconciliations of Net Cash Provided by Operating Activities to Adjusted EBITDA and DCF are presented in this press release.
Cautionary Note Regarding Forward-Looking Statements
This press release contains forward-looking statements within the meaning of U.S. federal securities laws, including statements with respect to the ability of the Partnership and USD to achieve contract extensions, new customer agreements and expansions, and the terms and timing of such extensions, new customer agreements and expansions, if at all; the Partnership’s ability to renew, extend or refinance its senior secured credit facility and obtain an necessary waivers thereunder; the ability of the Partnership and USD to develop existing and future additional projects and expansion opportunities (including successful completion of USD’s DRU) and whether those projects and opportunities developed by USD would be made available for acquisition, or acquired, by the Partnership; volumes at, and demand for, the Partnership’s terminals; the acquisition of the Hardisty South Terminal from USDG and its anticipated benefits, and the amount and timing of future distribution payments and distribution growth. Words and phrases such as “expect,” “plan,” “intent,” “believes,” “projects,” “begin,” “anticipates,” “subject to” and similar expressions are used to identify such forward-looking statements. However, the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements relating to the Partnership are based on management’s expectations, estimates and projections about the Partnership, its interests and the energy industry in general on the date this press release was issued. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecast in such forward-looking statements. Factors that could cause actual results or events to differ materially from those described in the forward-looking statements include our ability to continue as a going concern, the impact of world health events, epidemics and pandemics, such as the novel coronavirus (COVID-19) pandemic, changes in general economic conditions and commodity prices, the Partnership’s ability to renew, extend or replace customer agreements at the Hardisty and Stroud Terminals on favorable terms, if at all, and the Partnership’s ability to renew, extend or refinance its senior secured credit facility and obtain any necessary waives thereunder, as well as those factors set forth under the heading “Risk Factors” and elsewhere in the Partnership’s most recent Annual Report on Form 10-K and in the Partnership’s subsequent filings with the Securities and Exchange Commission (many of which may be amplified by the COVID-19 pandemic and the volatility in demand for and prices of crude oil, natural gas and natural gas liquids). The Partnership is under no obligation (and expressly disclaims any such obligation) to update or alter its forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
| _________________ | ||
(1) |
The Partnership presents both GAAP and non-GAAP financial measures in this press release to assist in understanding the Partnership’s liquidity and ability to fund distributions. See “Non-GAAP Financial Measures” and reconciliations of Net Cash Provided by Operating Activities, the most directly comparable GAAP measure, to Adjusted EBITDA and Distributable Cash Flow in this press release. |
|
(2) |
The Partnership calculates quarterly Distributable Cash Flow Coverage by dividing Distributable Cash Flow for the quarter as presented in this press release by the cash distributions declared for the quarter, or approximately $4.1 million. |
|
| USD Partners LP | ||||||||||||||||
| Consolidated Statements of Operations | ||||||||||||||||
| For the Three and Nine Months Ended September 30, 2022 and 2021 | ||||||||||||||||
| (unaudited) | ||||||||||||||||
For the Three Months Ended |
|
For the Nine Months Ended |
||||||||||||||
September 30, |
|
September 30, |
||||||||||||||
2022 |
|
2021 (1) |
|
2022 |
|
2021 (1) |
||||||||||
| (in thousands) | ||||||||||||||||
| Revenues | ||||||||||||||||
| Terminalling services | $ |
19,345 |
|
$ |
33,751 |
|
$ |
84,872 |
|
$ |
163,863 |
|
||||
| Terminalling services — related party |
|
670 |
|
|
313 |
|
|
1,987 |
|
|
2,527 |
|
||||
| Fleet leases — related party |
|
912 |
|
|
984 |
|
|
2,737 |
|
|
2,951 |
|
||||
| Fleet services |
|
— |
|
|
— |
|
|
— |
|
|
24 |
|
||||
| Fleet services — related party |
|
298 |
|
|
227 |
|
|
896 |
|
|
682 |
|
||||
| Freight and other reimbursables |
|
254 |
|
|
173 |
|
|
514 |
|
|
541 |
|
||||
| Total revenues |
|
21,479 |
|
|
35,448 |
|
|
91,006 |
|
|
170,588 |
|
||||
| Operating costs | ||||||||||||||||
| Subcontracted rail services |
|
2,742 |
|
|
4,642 |
|
|
10,337 |
|
|
13,520 |
|
||||
| Pipeline fees |
|
5,735 |
|
|
8,431 |
|
|
22,625 |
|
|
45,997 |
|
||||
| Freight and other reimbursables |
|
254 |
|
|
173 |
|
|
514 |
|
|
541 |
|
||||
| Operating and maintenance |
|
2,888 |
|
|
2,667 |
|
|
9,464 |
|
|
8,650 |
|
||||
| Operating and maintenance — related party |
|
— |
|
|
85 |
|
|
258 |
|
|
85 |
|
||||
| Selling, general and administrative |
|
2,633 |
|
|
2,791 |
|
|
10,885 |
|
|
8,769 |
|
||||
| Selling, general and administrative — related party |
|
2,318 |
|
|
5,171 |
|
|
10,207 |
|
|
54,541 |
|
||||
| Impairment of intangibles and long-lived assets |
|
71,612 |
|
|
— |
|
|
71,612 |
|
|
— |
|
||||
| Depreciation and amortization |
|
5,758 |
|
|
5,869 |
|
|
17,362 |
|
|
17,378 |
|
||||
| Total operating costs |
|
93,940 |
|
|
29,829 |
|
|
153,264 |
|
|
149,481 |
|
||||
| Operating income (loss) |
|
(72,461 |
) |
|
5,619 |
|
|
(62,258 |
) |
|
21,107 |
|
||||
| Interest expense |
|
3,126 |
|
|
1,567 |
|
|
6,725 |
|
|
5,228 |
|
||||
| Gain associated with derivative instruments |
|
(6,904 |
) |
|
(110 |
) |
|
(13,800 |
) |
|
(2,468 |
) |
||||
| Foreign currency transaction loss (gain) |
|
152 |
|
|
(54 |
) |
|
1,942 |
|
|
(843 |
) |
||||
| Other expense (income), net |
|
(28 |
) |
|
4 |
|
|
(55 |
) |
|
(12 |
) |
||||
| Income (loss) before income taxes |
|
(68,807 |
) |
|
4,212 |
|
|
(57,070 |
) |
|
19,202 |
|
||||
| Provision for income taxes |
|
546 |
|
|
79 |
|
|
1,005 |
|
|
659 |
|
||||
| Net income (loss) | $ |
(69,353 |
) |
$ |
4,133 |
|
$ |
(58,075 |
) |
$ |
18,543 |
|
||||
| _________________ | ||||||||||
(1) |
|
The Partnership's consolidated financial statements have been retrospectively recast to include the pre-acquisition results of the Hardisty South Terminal Acquisition which we acquired effective April 1, 2022 because the transaction was between entities under common control. |
||||||||
| USD Partners LP | ||||||||||||||||
| Consolidated Statements of Cash Flows | ||||||||||||||||
| For the Three and Nine Months Ended September 30, 2022 and 2021 | ||||||||||||||||
| (unaudited) | ||||||||||||||||
For the Three Months Ended |
|
For the Nine Months Ended |
||||||||||||||
September 30, |
|
September 30, |
||||||||||||||
2022 |
|
2021 (1) |
|
2022 |
|
2021 (1) |
||||||||||
| Cash flows from operating activities: | (in thousands) | |||||||||||||||
| Net income (loss) | $ |
(69,353 |
) |
$ |
4,133 |
|
$ |
(58,075 |
) |
$ |
18,543 |
|
||||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||||||||||
| Depreciation and amortization |
|
5,758 |
|
|
5,869 |
|
|
17,362 |
|
|
17,378 |
|
||||
| Gain associated with derivative instruments |
|
(6,904 |
) |
|
(110 |
) |
|
(13,800 |
) |
|
(2,468 |
) |
||||
| Settlement of derivative contracts |
|
7,637 |
|
|
(286 |
) |
|
7,029 |
|
|
(829 |
) |
||||
| Unit based compensation expense |
|
1,183 |
|
|
1,357 |
|
|
3,703 |
|
|
4,274 |
|
||||
| Loss associated with disposal of assets |
|
— |
|
|
6 |
|
|
3 |
|
|
11 |
|
||||
| Deferred income taxes |
|
442 |
|
|
(119 |
) |
|
328 |
|
|
(178 |
) |
||||
| Amortization of deferred financing costs |
|
271 |
|
|
234 |
|
|
899 |
|
|
698 |
|
||||
| Impairment of intangibles and long-lived assets |
|
71,612 |
|
|
— |
|
|
71,612 |
|
|
— |
|
||||
| Changes in operating assets and liabilities: | ||||||||||||||||
| Accounts receivable |
|
4,184 |
|
|
786 |
|
|
4,582 |
|
|
3,414 |
|
||||
| Accounts receivable – related party |
|
(29 |
) |
|
(856 |
) |
|
1,688 |
|
|
1,016 |
|
||||
| Prepaid expenses, inventory and other assets |
|
7,998 |
|
|
917 |
|
|
5,271 |
|
|
1,565 |
|
||||
| Other assets – related party |
|
— |
|
|
— |
|
|
— |
|
|
15 |
|
||||
| Accounts payable and accrued expenses |
|
(7,760 |
) |
|
(405 |
) |
|
(4,399 |
) |
|
92 |
|
||||
| Accounts payable and accrued expenses – related party |
|
278 |
|
|
(2,444 |
) |
|
(760 |
) |
|
4,931 |
|
||||
| Deferred revenue and other liabilities |
|
(1,780 |
) |
|
(268 |
) |
|
(6,824 |
) |
|
(2,915 |
) |
||||
| Deferred revenue and other liabilities – related party |
|
(16 |
) |
|
20 |
|
|
350 |
|
|
44 |
|
||||
| Net cash provided by operating activities |
|
13,521 |
|
|
8,834 |
|
|
28,969 |
|
|
45,591 |
|
||||
| Cash flows from investing activities: | ||||||||||||||||
| Additions of property and equipment |
|
(117 |
) |
|
(1,513 |
) |
|
(405 |
) |
|
(4,550 |
) |
||||
| Reimbursement of capital expenditures from collaborative arrangement |
|
1,774 |
|
|
— |
|
|
1,774 |
|
|
— |
|
||||
| Acquisition of Hardisty South entities from Sponsor |
|
— |
|
|
— |
|
|
(75,000 |
) |
|
— |
|
||||
| Net cash used in investing activities |
|
1,657 |
|
|
(1,513 |
) |
|
(73,631 |
) |
|
(4,550 |
) |
||||
| Cash flows from financing activities: | ||||||||||||||||
| Distributions |
|
(4,292 |
) |
|
(3,375 |
) |
|
(11,446 |
) |
|
(9,861 |
) |
||||
| Payments for deferred financing costs |
|
— |
|
|
— |
|
|
(13 |
) |
|
— |
|
||||
| Vested Phantom Units used for payment of participant taxes |
|
(5 |
) |
|
(2 |
) |
|
(1,096 |
) |
|
(859 |
) |
||||
| Proceeds from long-term debt |
|
— |
|
|
— |
|
|
75,000 |
|
|
— |
|
||||
| Repayments of long-term debt |
|
(10,000 |
) |
|
(6,012 |
) |
|
(22,396 |
) |
|
(36,456 |
) |
||||
| Net cash provided by (used in) financing activities |
|
(14,297 |
) |
|
(9,389 |
) |
|
40,049 |
|
|
(47,176 |
) |
||||
| Effect of exchange rates on cash |
|
(354 |
) |
|
(175 |
) |
|
703 |
|
|
(570 |
) |
||||
| Net change in cash, cash equivalents and restricted cash |
|
527 |
|
|
(2,243 |
) |
|
(3,910 |
) |
|
(6,705 |
) |
||||
| Cash, cash equivalents and restricted cash – beginning of period |
|
8,280 |
|
|
16,037 |
|
|
12,717 |
|
|
20,499 |
|
||||
| Cash, cash equivalents and restricted cash – end of period | $ |
8,807 |
|
$ |
13,794 |
|
$ |
8,807 |
|
$ |
13,794 |
|
||||
Adam Altsuler
Executive Vice President, Chief Financial Officer
(281) 291-3995
This email address is being protected from spambots. You need JavaScript enabled to view it.
Jennifer Waller
Senior Director, Financial Reporting and Investor Relations
(832) 991-8383
This email address is being protected from spambots. You need JavaScript enabled to view it.
Board of Directors Declares Quarterly Dividend of $0.4125 per Share
FERGUS FALLS, Minn.--(BUSINESS WIRE)--Otter Tail Corporation (Nasdaq: OTTR) today announced financial results for the quarter ended September 30, 2022.
SUMMARY
Compared to the quarter ended September 30, 2021:
CEO OVERVIEW
“Our diversified business model produced exceptional financial results for the quarter ended September 30, 2022,” said President and CEO Chuck MacFarlane. “Each operating segment contributed double digit earnings growth compared to the same period last year. Our Plastics segment completed another outstanding quarter, producing $56.0 million of earnings in the third quarter of 2022, compared to $28.4 million in the same period last year, as operating margins continue to benefit from elevated spreads of PVC pipe sale prices over resin input costs. However, demand for PVC pipe began to decline in the quarter due to multiple, larger than anticipated, resin price reductions which caused pipe distributors and contractors to reduce PVC pipe purchases in an effort to reduce inventory levels.
“Electric segment earnings increased 10.3% compared to the third quarter of 2021, primarily driven by increased commercial and industrial sales volumes. Our Manufacturing segment produced earnings growth of 48.1% compared to the third quarter of 2021 driven by increased sales volumes, improved manufacturing cost absorption and lower operating and maintenance costs.
“MISO recently approved several projects within the first tranche of its long-range transmission plan, which includes two new 345 kV transmission projects and a project to upgrade an existing transmission line. Otter Tail Power will have a varying level of ownership interest in these investments. We are beginning the early development phases of these projects and will be working with the co-owners and various industry partners to complete these projects over several years. Our total capital investment is anticipated to be $330 million, with approximately $122 million of the investment expected to occur before 2028. We have updated our five year capital expenditure plan to reflect this investment opportunity along with other updates.
“We are adjusting our 2022 diluted earnings per share guidance to a range of $6.42 to $6.72 from our most recent guidance of $6.83 to $7.13 per share. This change is primarily driven by announced resin price reductions throughout the third quarter, which negatively impacts sales volumes within our Plastics segment as distributors and contractors reduce their own inventory levels before purchasing additional PVC pipe.
“Our long-term focus remains on executing our strategy to grow our business and achieving operational, commercial and talent excellence to strengthen our position in the markets we serve. We remain confident in our ability to achieve a compounded annual growth rate in earnings per share in the range of 5% to 7% using 2024 as the base year. We currently expect to see elevated earnings from our manufacturing platform into 2023 with our earnings mix expected to move to approximately 65% from our Electric segment and 35% from our manufacturing platform beginning in 2024.”
THIRD QUARTER HIGHLIGHTS AND UPDATES
QUARTERLY DIVIDEND
On October 31, 2022, the corporation’s Board of Directors declared a quarterly common stock dividend of $0.4125 per share. This dividend is payable December 9, 2022 to shareholders of record on November 15, 2022.
CASH FLOWS AND LIQUIDITY
Our consolidated cash provided by operating activities for the nine months ended September 30, 2022 was $288.0 million compared to $154.8 million for the nine months ended September 30, 2021, with the increase primarily due to a $117.0 million increase in net income and a lower level of working capital needs compared to last year. Investing activities for the nine months ended September 30, 2022 included capital expenditures of $123.2 million, primarily related to capital investments within our Electric segment. Financing activities for the nine months ended September 30, 2022 included the issuance of $90.0 million of long-term debt at Otter Tail Power and the maturity and repayment of $30.0 million of debt at Otter Tail Power. Financing activities for the nine months ended September 30, 2022 also included net repayments of short-term borrowings of $91.2 million and dividend payments of $51.6 million.
As of September 30, 2022, we had $170.0 million and $160.1 million of available liquidity under our Otter Tail Corporation Credit Agreement and Otter Tail Power Credit Agreement, respectively, along with $73.0 million of available cash and cash equivalents, for total available liquidity of $403.1 million.
SEGMENT PERFORMANCE |
||||||||||||
Electric Segment |
||||||||||||
|
Three Months Ended September 30, |
|
|
|
|
|||||||
($ in thousands) |
|
2022 |
|
|
2021 |
|
Change |
|
% Change |
|||
|
|
|
|
|
|
|
|
|||||
Operating Revenues |
$ |
142,747 |
|
$ |
118,775 |
|
$ |
23,972 |
|
|
20.2 |
% |
Net Income |
|
24,847 |
|
|
22,528 |
|
|
2,319 |
|
|
10.3 |
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|||||
Retail MWh Sales |
|
1,275,051 |
|
|
1,076,580 |
|
|
198,471 |
|
|
18.4 |
% |
Heating Degree Days (HDDs) |
|
22 |
|
|
3 |
|
|
19 |
|
|
633.3 |
|
Cooling Degree Days (CDDs) |
|
376 |
|
|
463 |
|
|
(87 |
) |
|
(18.8 |
) |
|
|
|
|
|
|
|
|
|||||
The following table shows heating and cooling degree days as a percent of normal.
|
Three Months Ended September 30, |
||||
|
2022 |
|
|
2021 |
|
|
|
|
|
||
HDDs |
43.1 |
% |
|
5.8 |
% |
CDDs |
108.4 |
% |
|
132.7 |
% |
|
|
|
|
||
The following table summarizes the estimated effect on diluted earnings per share of the difference in retail kilowatt-hour (kwh) sales under actual weather conditions and expected retail kwh sales under normal weather conditions in 2022 and 2021.
|
2022 vs Normal |
|
2022 vs 2021 |
|
2021 vs Normal |
||||
|
|
|
|
|
|
||||
Effect on Diluted Earnings Per Share |
$ |
0.01 |
|
$ |
(0.02 |
) |
|
$ |
0.03 |
|
|
|
|
|
|
||||
Operating Revenues increased $24.0 million primarily due to increased fuel recovery revenues and higher sales volumes. The increase in fuel recovery revenues is the result of higher purchased power and production fuel costs arising from increased natural gas and market energy costs. Sales volumes benefited from demand from commercial and industrial customers, including a new commercial customer load in North Dakota added in the current year, partially offset by the impact of unfavorable weather. Operating revenues in the third quarter of 2021 were impacted by additional adjustments to our estimated interim rate refund.
Net Income increased $2.3 million primarily due to the increased operating revenues described above, partially offset by increased operating and maintenance expenses driven by a number of maintenance activities, including our planned outage at Coyote Station, maintenance at our wind farm facilities, and vegetation management, as well as higher transmission tariff expenses.
Manufacturing Segment
|
Three Months Ended September 30, |
|
|
|
|
||||||
(in thousands) |
2022 |
|
2021 |
|
$ Change |
|
% Change |
||||
|
|
|
|
|
|
|
|
||||
Operating Revenues |
$ |
98,767 |
|
$ |
89,977 |
|
$ |
8,790 |
|
9.8 |
% |
Net Income |
|
6,219 |
|
|
4,200 |
|
|
2,019 |
|
48.1 |
|
|
|
|
|
|
|
|
|
||||
Operating Revenues increased $8.8 million primarily due to a 17% increase in sales volumes at BTD, partially offset by lower steel prices, which resulted in a $5.4 million decrease in material costs that are passed through to customers. Declines in scrap metal prices resulted in a $1.3 million decrease in scrap revenue. End market demand remains strong, however, supply chain disruptions experienced by our customers have continued to cause unpredictable shipments of our products to our customers. Increases in sales prices and volumes at T.O. Plastics, due to continued strong customer demand, also contributed to the segment increase in operating revenues.
Net Income increased $2.0 million due to increased operating revenues described above, as well as lower operating expenses.
Plastics Segment
|
Three Months Ended September 30, |
|
|
|
|
||||||
(in thousands) |
|
2022 |
|
|
2021 |
|
$ Change |
|
% Change |
||
|
|
|
|
|
|
|
|
||||
Operating Revenues |
$ |
142,342 |
|
$ |
107,542 |
|
$ |
34,800 |
|
32.4 |
% |
Net Income |
|
55,982 |
|
|
28,410 |
|
|
27,572 |
|
97.1 |
|
|
|
|
|
|
|
|
|
||||
Operating Revenues increased $34.8 million due to a 57% increase in the price per pound of PVC pipe sold, as sales prices remain high due to extraordinary market conditions. Demand for PVC pipe began to soften during the third quarter as customers started to consume high priced inventory instead of buying additional PVC pipe. Sales volumes for the quarter decreased 15% due to softening customer demand.
Net Income increased $27.6 million due to the increased operating revenues described above, and an increase in gross profit margins, as the increase in sales prices exceeded the increased costs of PVC resin and other input materials. Resin prices in the third quarter of 2022 increased compared to the same period in the previous year, but decreased compared to the second quarter of 2022.
Corporate Costs
|
Three Months Ended September 30, |
|
|
|
|
|||||||||
(in thousands) |
|
2022 |
|
|
|
2021 |
|
|
$ Change |
|
% Change |
|||
|
|
|
|
|
|
|
|
|||||||
Losses Before Income Taxes |
$ |
4,727 |
|
|
$ |
3,346 |
|
|
$ |
1,381 |
|
|
41.3 |
% |
Income Tax Benefit |
|
(1,918 |
) |
|
|
(962 |
) |
|
|
(956 |
) |
|
99.4 |
|
Net Loss |
$ |
2,809 |
|
|
$ |
2,384 |
|
|
$ |
425 |
|
|
17.8 |
% |
Net Loss at our corporate cost center was impacted by increased employee health care costs, increased professional service costs and losses on our corporate-owned life insurance policy investments, partially offset by a decrease in interest expense due to lower average borrowings on our corporate credit facility and a favorable effective tax rate based on our estimated consolidated effective tax rate for 2022.
2022 BUSINESS OUTLOOK
We are lowering our 2022 diluted earnings per share guidance to a range of $6.42 to $6.72 primarily driven by expected sales volume reductions in our Plastics segment due to declining PVC resin prices. The midpoint of our revised 2022 diluted earnings per share guidance of $6.57 per share reflects a 55% growth rate from our 2021 diluted earnings per share of $4.23.
The segment components of our revised 2022 diluted earnings per share guidance range compared to 2021 actual earnings are as follows:
|
|
|
2021 EPS
|
|
2022 EPS Guidance
|
|
2022 EPS Guidance
|
||||||||||||||
|
|
|
Low |
|
High |
|
Low |
|
High |
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Electric |
|
|
$ |
1.73 |
|
|
$ |
1.84 |
|
|
$ |
1.88 |
|
|
$ |
1.90 |
|
|
$ |
1.94 |
|
Manufacturing |
|
|
|
0.41 |
|
|
|
0.42 |
|
|
|
0.46 |
|
|
|
0.47 |
|
|
|
0.51 |
|
Plastics |
|
|
|
2.34 |
|
|
|
4.96 |
|
|
|
5.15 |
|
|
|
4.45 |
|
|
|
4.64 |
|
Corporate |
|
|
|
(0.25 |
) |
|
|
(0.39 |
) |
|
|
(0.36 |
) |
|
|
(0.40 |
) |
|
|
(0.37 |
) |
Total |
|
|
$ |
4.23 |
|
|
$ |
6.83 |
|
|
$ |
7.13 |
|
|
$ |
6.42 |
|
|
$ |
6.72 |
|
Return on Equity |
|
|
|
19.2 |
% |
|
|
25.9 |
% |
|
|
26.8 |
% |
|
|
24.4 |
% |
|
|
25.3 |
% |
The following items contributed to our revised 2022 earnings guidance:
Electric Segment - We are increasing our guidance for our Electric Segment based on the following:
Manufacturing Segment - We are increasing our guidance for our Manufacturing segment based on the following:
Plastics Segment - We are decreasing our guidance for our Plastics segment based on the following:
Corporate Costs - We are increasing our guidance for corporate costs based on the following:
CAPITAL EXPENDITURES
The following provides a summary of actual capital expenditures for the year ended December 31, 2021, anticipated annual capital expenditures for the current year ending December 31, 2022, and anticipated capital expenditures for the next five years, along with average rate base and annual rate base growth of our Electric segment:
(in millions) |
|
2021 |
|
|
|
2022(1) |
|
|
|
2023 |
|
|
|
2024 |
|
|
|
2025 |
|
|
|
2026 |
|
|
|
2027 |
|
|
Total
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Electric Segment: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Renewables and Natural Gas Generation |
|
|
|
$ |
33 |
|
|
|
$ |
88 |
|
|
$ |
119 |
|
|
$ |
88 |
|
|
$ |
79 |
|
|
$ |
10 |
|
|
$ |
384 |
|
Technology and Infrastructure |
|
|
|
|
9 |
|
|
|
|
33 |
|
|
|
30 |
|
|
|
6 |
|
|
|
5 |
|
|
|
1 |
|
|
|
75 |
|
Distribution Plant Replacements |
|
|
|
|
40 |
|
|
|
|
33 |
|
|
|
37 |
|
|
|
38 |
|
|
|
38 |
|
|
|
43 |
|
|
|
189 |
|
Transmission (includes replacements) |
|
|
|
|
38 |
|
|
|
|
34 |
|
|
|
36 |
|
|
|
46 |
|
|
|
87 |
|
|
|
78 |
|
|
|
281 |
|
Other |
|
|
|
|
30 |
|
|
|
|
26 |
|
|
|
25 |
|
|
|
30 |
|
|
|
25 |
|
|
|
22 |
|
|
|
128 |
|
Total Electric Segment |
$ |
140 |
|
|
$ |
150 |
|
|
|
$ |
214 |
|
|
$ |
247 |
|
|
$ |
208 |
|
|
$ |
234 |
|
|
$ |
154 |
|
|
$ |
1,057 |
Manufacturing and Plastics Segments |
|
32 |
|
|
|
34 |
|
|
|
|
48 |
|
|
|
53 |
|
|
|
29 |
|
|
|
25 |
|
|
|
24 |
|
|
|
179 |
Total Capital Expenditures |
$ |
172 |
|
|
$ |
184 |
|
|
|
$ |
262 |
|
|
$ |
300 |
|
|
$ |
237 |
|
|
$ |
259 |
|
|
$ |
178 |
|
|
$ |
1,236 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Total Electric Utility Average Rate Base |
$ |
1,575 |
|
|
$ |
1,620 |
|
|
|
$ |
1,750 |
|
|
$ |
1,850 |
|
|
$ |
1,990 |
|
|
$ |
2,110 |
|
|
$ |
2,210 |
|
|
|
|
Annual Rate Base Growth |
|
|
|
|
2.9 |
% |
|
|
|
8.0 |
% |
|
|
5.7 |
% |
|
|
7.6 |
% |
|
|
6.0 |
% |
|
|
4.7 |
% |
|
|
||
(1) Includes actual results for the nine months ended September 30, 2022, and anticipated capital expenditures for the fourth quarter of 2022. |
|||||||||||||||||||||||||||||||
Our capital expenditure plan for the next five years includes Electric segment investments in wind and solar resources, transmission and distribution assets, and investments in system reliability and technology. Our Electric segment capital plan produces a compounded annual growth rate in average rate base of 6.4% over the next five years and will serve as a key driver in increasing Electric segment earnings over this timeframe. Our capital expenditure plan in our Manufacturing and Plastics segments includes investments to bring additional capacity to our operations, providing an opportunity for organic growth within these segments.
CONFERENCE CALL AND WEBCAST
The corporation will host a live webcast on Tuesday, November 1, 2022, at 10:00 a.m. CDT to discuss its financial and operating performance.
The presentation will be posted on our website before the webcast. To access the live webcast, go to www.ottertail.com/presentations and select “Webcast.” Please allow time prior to the call to visit the site and download any software needed to listen in. An archived copy of the webcast will be available on our website shortly after the call.
If you are interested in asking a question during the live webcast, visit and follow the link provided in the press release announcing the upcoming conference call.
FORWARD-LOOKING STATEMENTS
Except for historical information contained here, the statements in this release are forward-looking and made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The words “anticipate,” “believe,” “could,” “estimate,” “expect,” “goal,” “intend,” “may,” “outlook,” “plan,” “possible,” “potential,” “projected,” “should,” “will,” “would” and similar words and expressions are intended to identify forward-looking statements. Such statements are based upon the current beliefs and expectations of management. Forward-looking statements made herein, which include statements regarding 2022 earnings and earnings per share, long-term earnings, earnings per share growth and earnings mix, anticipated levels of energy generation from renewable resources, anticipated reductions in carbon dioxide emissions, future investments and capital expenditures, rate base levels and rate base growth, future raw materials costs, future raw materials availability and supply constraints, future operating revenues and operating results, and expectations regarding regulatory proceedings, as well as other assumptions and statements, involve known and unknown risks and uncertainties that may cause our actual results in current or future periods to differ materially from the forecasted assumptions and expected results. The Company’s risks and uncertainties include, among other things, uncertainty of the impact and duration of the COVID-19 pandemic, long-term investment risk, seasonal weather patterns and extreme weather events, counterparty credit risk, future business volumes with key customers, reductions in our credit ratings, our ability to access capital markets on favorable terms, assumptions and costs relating to funding our employee benefit plans, our subsidiaries’ ability to make dividend payments, cyber security threats or data breaches, the impact of government legislation and regulation including foreign trade policy and environmental laws and regulations, the impact of climate change including compliance with legislative and regulatory changes to address climate change, operational and economic risks associated with our electric generating and manufacturing facilities, risks associated with energy markets, the availability and pricing of resource materials, attracting and maintaining a qualified and stable workforce, and changing macroeconomic and industry conditions. These and other risks are more fully described in our filings with the Securities and Exchange Commission, including our most recently filed Annual Report on Form 10-K, as updated in subsequently filed Quarterly Reports on Form 10-Q, as applicable. Forward-looking statements speak only as of the date they are made, and we expressly disclaim any obligation to update any forward-looking information.
Category: Earnings
About the Corporation: Otter Tail Corporation has interests in diversified operations that include an electric utility and manufacturing businesses. Otter Tail Corporation stock trades on the Nasdaq Global Select Market under the symbol OTTR. The latest investor and corporate information is available at www.ottertail.com. Corporate offices are in Fergus Falls, Minnesota, and Fargo, North Dakota.
OTTER TAIL CORPORATION |
|||||||||||||
CONSOLIDATED STATEMENTS OF INCOME (unaudited) |
|||||||||||||
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
||||||||||
(in thousands, except per-share amounts) |
|
2022 |
|
|
|
2021 |
|
|
2022 |
|
|
|
2021 |
|
|
|
|
|
|
|
|
||||||
Operating Revenues |
|
|
|
|
|
|
|
||||||
Electric |
$ |
142,747 |
|
|
$ |
118,775 |
|
$ |
404,112 |
|
|
$ |
348,629 |
Product Sales |
|
241,109 |
|
|
|
197,519 |
|
|
754,688 |
|
|
|
514,983 |
Total Operating Revenues |
|
383,856 |
|
|
|
316,294 |
|
|
1,158,800 |
|
|
|
863,612 |
Operating Expenses |
|
|
|
|
|
|
|
||||||
Electric Production Fuel |
|
24,972 |
|
|
|
17,698 |
|
|
54,538 |
|
|
|
44,576 |
Electric Purchased Power |
|
19,913 |
|
|
|
9,878 |
|
|
64,604 |
|
|
|
40,273 |
Electric Operating and Maintenance Expense |
|
39,799 |
|
|
|
36,465 |
|
|
126,460 |
|
|
|
114,615 |
Cost of Products Sold (excluding depreciation) |
|
139,361 |
|
|
|
134,212 |
|
|
443,586 |
|
|
|
358,767 |
Other Nonelectric Expenses |
|
16,524 |
|
|
|
16,224 |
|
|
50,981 |
|
|
|
45,587 |
Depreciation and Amortization |
|
22,716 |
|
|
|
22,815 |
|
|
69,829 |
|
|
|
68,109 |
Electric Property Taxes |
|
4,438 |
|
|
|
4,474 |
|
|
13,304 |
|
|
|
13,136 |
Total Operating Expenses |
|
267,723 |
|
|
|
241,766 |
|
|
823,302 |
|
|
|
685,063 |
Operating Income |
|
116,133 |
|
|
|
74,528 |
|
|
335,498 |
|
|
|
178,549 |
Other Income and Expense |
|
|
|
|
|
|
|
||||||
Interest Charges |
|
9,259 |
|
|
|
9,648 |
|
|
27,198 |
|
|
|
28,601 |
Nonservice Cost Components of Postretirement Benefits |
|
(52 |
) |
|
|
505 |
|
|
(824 |
) |
|
|
1,511 |
Other Income (Expense), net |
|
(174 |
) |
|
|
203 |
|
|
(802 |
) |
|
|
2,095 |
Income Before Income Taxes |
|
106,752 |
|
|
|
64,578 |
|
|
308,322 |
|
|
|
150,532 |
Income Tax Expense |
|
22,513 |
|
|
|
11,824 |
|
|
66,143 |
|
|
|
25,380 |
Net Income |
$ |
84,239 |
|
|
$ |
52,754 |
|
$ |
242,179 |
|
|
$ |
125,152 |
|
|
|
|
|
|
|
|
||||||
Weighted-Average Common Shares Outstanding: |
|
|
|
|
|
|
|
||||||
Basic |
|
41,600 |
|
|
|
41,504 |
|
|
41,582 |
|
|
|
41,487 |
Diluted |
|
41,974 |
|
|
|
41,869 |
|
|
41,930 |
|
|
|
41,795 |
Earnings Per Share: |
|
|
|
|
|
|
|
||||||
Basic |
$ |
2.02 |
|
|
$ |
1.27 |
|
$ |
5.82 |
|
|
$ |
3.02 |
Diluted |
$ |
2.01 |
|
|
$ |
1.26 |
|
$ |
5.78 |
|
|
$ |
2.99 |
Media Contact: Stephanie Hoff, Director of Corporate Communications, (218) 739-8535
Investor Contact: Tyler Akerman, Manager of Investor Relations, (800) 664-1259
Highly Complementary Service Offerings Create Significant Cross-Selling Opportunities Across Combined Blue-Chip Customer Base
Transaction Expected to Be Meaningfully Accretive to ProPetro Across All Financial Metrics
ProPetro to Host Conference Call November 2, 2022, at 8:00 a.m. CT to Discuss Transaction and Third Quarter 2022 Results
MIDLAND, Texas--(BUSINESS WIRE)--ProPetro Holding Corp. ("ProPetro" or the “Company”) (NYSE: PUMP), an oilfield services company providing completions services to upstream oil and gas companies, today announced it has acquired Silvertip Completion Services Operating, LLC ("Silvertip"), a provider of wireline perforating and pumpdown services solely in the Permian Basin, creating a leading completions-focused oilfield services company headquartered in the Permian Basin. The transaction consideration consisted of the issuance of 10.1 million shares of ProPetro common stock, $30 million of cash, the payoff of approximately $7 million of assumed debt, and certain other transaction costs, subject to customary post-closing adjustments, which implies a value of $150 million based upon a 15-day volume weighted average price ("VWAP") of ProPetro’s stock price as of October 27, 2022.
Headquartered in Midland, Texas, Silvertip owns and operates 23 wireline units and a best-in-class pumpdown fleet. Silvertip provides operators with efficient wireline and pumpdown services including logging, perforating, and pressure control, while showcasing its culture of data-driven decision-making, and established track record of safety.
Sam Sledge, Chief Executive Officer of ProPetro, commented, “This acquisition represents another important step for ProPetro, advancing our strategy of pursuing accretive growth opportunities that expand our margins and increase free cash flow generation to create a stronger, more resilient and more diversified company. With our highly complementary service offerings including Silvertip’s premier wireline franchise, strong cash flow metrics, and blue-chip customer relationships, ProPetro is now well-positioned to execute on cross-selling opportunities, while accelerating our ability to achieve our financial growth targets through a more integrated and diversified service offering. We are excited to welcome the Silvertip team as we work to deliver best-in-class services for our customers through a more integrated and diverse service offering to aid us in unlocking meaningful value for our shareholders.”
Mike Wood, Co-Founder and President of Silvertip, commented, “We are excited to complete this transaction, which creates an organization that is well-positioned to serve our E&P customers with greater scale and efficiency. Combining ProPetro and Silvertip pairs the best-in-class Permian hydraulic fracturing and cementing company with one of the largest Permian wireline companies. As part of a larger, more diversified and well-capitalized company, our wireline-focused business will have the resources and support to accelerate earnings, share best practices and benefit from ProPetro’s deep completions experience and technical capabilities. Importantly, we believe this transaction is also in the best interest of our valued team members, who will benefit from expanded career opportunities and a well-aligned culture focused on safety and operational excellence. We look forward to working closely with ProPetro’s talented team here in Midland to realize the full potential of this combination.”
ProPetro management expects the acquisition of Silvertip to increase 2023 Adjusted EBITDA expectations by approximately $65 million to $75 million, while converting approximately 80% of that Adjusted EBITDA into free cash flow. Given its Adjusted EBITDA-to-cash flow conversion rate, which is double ProPetro’s approximately 40% Adjusted EBITDA-to-cash flow conversion rate, Silvertip will significantly enhance the free cash flow generation of ProPetro. The transaction is expected to be immediately accretive across all financial metrics. Such estimates are based on information currently available to ProPetro, depend on certain estimates and assumptions and are subject to change. Adjusted EBITDA and free cash flow are non-GAAP measures. See "Non-GAAP Measures" later in this release.
ProPetro will continue to analyze opportunities to prudently deploy capital towards value-enhancing growth opportunities along with investments in its frac fleet conversion strategy. In parallel, ProPetro intends to work towards reducing capital spending through operational efficiency and enhanced maintenance capabilities. ProPetro and Silvertip will share best practices for customer service and operational processes, leveraging their combined resources to enhance already strong partnerships and organizational agility.
Transaction Details
The Company acquired Silvertip for consideration of 10.1 million shares of ProPetro common stock, $30 million of cash, the payoff of $7 million of assumed debt, and certain other transaction costs, subject to customary post-closing adjustments, which implies a value of $150 million based upon a 15-day VWAP of ProPetro’s stock price as of October 27, 2022. On a fully-diluted basis, Silvertip's former shareholders now own approximately 9% of ProPetro.
In connection with the acquisition of Silvertip, the Company and New Silvertip Holdco, LLC, the direct parent of Silvertip (the “Seller”), entered into a Registration Rights and Lock-Up Agreement, dated November 1, 2022. Pursuant to such agreement, the Company agreed to file a registration statement as soon as practicable, but in any event within three business days of the closing of the acquisition. The Seller agreed, subject to certain customary exceptions, not to, directly or indirectly, sell, offer or agree to sell, or otherwise transfer, or loan or pledge, through swap or hedging transactions, or grant any option to purchase, make any short sale or otherwise dispose of 90% of the shares comprising the Stock Consideration for specified periods of time ranging from six to eighteen months following the closing of the acquisition. The Seller and certain of its affiliates will also have the right to demand that the Company undertake an underwritten offering of shares comprising the Stock Consideration so long as the minimum market price of the shares to be included in the offering is $30 million, subject to certain other limitations. In addition, the Seller and certain of its affiliates will have certain “piggyback” rights if the Company or certain other holders of the Company’s common stock undertakes an underwritten offering, subject to customary cutbacks.
Additional details regarding the Silvertip transaction are available in the presentation posted today to ProPetro’s website, at https://ir.propetroservices.com. as well as in the Company’s filings with the Securities and Exchange Commission.
ProPetro Conference Call
In a separate press release issued today, ProPetro reported results for its third quarter of 2022 which is available on ProPetro’s website at https://ir.propetroservices.com.The Company will host a conference call tomorrow, November 2, 2022, at 8:00 AM Central Time to discuss these results. It will also discuss the Silvertip transaction at that time.
To access the conference call, U.S. callers may dial toll free 1-844-340-9046 and international callers may dial 1-412-858-5205. Please call ten minutes ahead of the scheduled start time to ensure a proper connection. The call will also be webcast on ProPetro’s website at https://ir.propetroservices.com.
A replay of the conference call will be available for one week following the call and can be accessed toll free by dialing 1-877-344-7529 for U.S. callers, 1-855-669-9658 for Canadian callers, as well as 1-412-317-0088 for international callers. The access code for the replay is 5206703.
Advisors
PPHB of Houston, Texas, served as financial advisor to ProPetro, and Vinson & Elkins LLP served as legal counsel. TPH & Co. served as financial advisor to Silvertip, and Latham & Watkins LLP served as legal counsel.
About ProPetro
ProPetro Holding Corp. is a Midland, Texas-based oilfield services company providing completions services to leading upstream oil and gas companies engaged in the exploration and production of North American unconventional oil and natural gas resources. For more information visit www.propetroservices.com.
About Silvertip
Silvertip Completion Services Operating, LLC, is a Midland, Texas-based oilfield services company that owns and operates 23 wireline units and a best-in-class pumpdown fleet. Silvertip has deep data collection capabilities, a culture of data-driven decision making and an established track record of safety, providing operators with efficient wireline and pumpdown services including logging, perforating and pressure control. The company was founded and funded by Silvertip management, CrownRock LP, and Lime Rock Partners.
Forward-Looking Statements
Except for historical information contained herein, the statements and information in this news release are forward-looking statements that are made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. Statements that are predictive in nature, that depend upon or refer to future events or conditions or that include the words “may,” “could,” “plan,” “project,” “budget,” “predict,” “pursue,” “target,” “seek,” “objective,” “believe,” “expect,” “anticipate,” “intend,” “estimate,” and other expressions that are predictions of, or indicate, future events and trends and that do not relate to historical matters identify forward‑looking statements. Our forward‑looking statements include, among other matters, statements about our business strategy, industry, projected financial results and future financial performance, expected fleet utilization, sustainability efforts, the future performance of newly improved technology, expected capital expenditures and the impact of such expenditures on our performance and capital programs, as well as our ability to integrate the business of Silvertip and realize the expected benefits of the Silvertip acquisition. A forward‑looking statement may include a statement of the assumptions or bases underlying the forward‑looking statement. We believe that we have chosen these assumptions or bases in good faith and that they are reasonable.
Although forward‑looking statements reflect our good faith beliefs at the time they are made, forward-looking statements are subject to a number of risks and uncertainties that may cause actual events and results to differ materially from the forward-looking statements. Such risks and uncertainties include the volatility of oil prices, the operational disruption and market volatility resulting from the COVID-19 pandemic, the global macroeconomic uncertainty related to the Russia-Ukraine war, general economic conditions, including the impact of continued inflation and the risk of a global recession, and other factors described in the Company's Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, particularly the “Risk Factors” sections of such filings, and other filings with the Securities and Exchange Commission (the “SEC”). In addition, the Company may be subject to currently unforeseen risks that may have a materially adverse impact on it, including matters related to shareholder litigation. Accordingly, no assurances can be given that the actual events and results will not be materially different than the anticipated results described in the forward-looking statements. Readers are cautioned not to place undue reliance on such forward-looking statements and are urged to carefully review and consider the various disclosures made in the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and other filings made with the SEC from time to time that disclose risks and uncertainties that may affect the Company’s business. The forward-looking statements in this news release are made as of the date of this news release. ProPetro does not undertake, and expressly disclaims, any duty to publicly update these statements, whether as a result of new information, new developments or otherwise, except to the extent that disclosure is required by law.
Non-GAAP Measures
This release contains certain measures that are not determined in accordance with GAAP, including Adjusted EBITDA and free cash flow. We define Adjusted EBITDA as net income (loss) before interest expense, income tax expense, depreciation and amortization. We define free cash flow as net cash flow provided from operating activities less net cash used in investing activities. We believe that the presentation of these non-GAAP financial measures provide useful information to investors in assessing our financial condition and results of operations. Non-GAAP financial measures should not be considered as alternatives to the most directly comparable GAAP financial measures. Non-GAAP financial measures have important limitations as analytical tools because they exclude some, but not all, items that affect the most directly comparable GAAP financial measures. You should not consider Adjusted EBITDA or Free Cash Flow in isolation or as a substitute for an analysis of our results as reported under GAAP. Because Adjusted EBITDA and Free Cash Flow may be defined differently by other companies in our industry, our definitions of these non-GAAP financial measures may not be comparable to similarly titled measures of other companies, thereby diminishing their utility. Due to the forward-looking nature of the non-GAAP measures presented in this release, reconciliations of the non-GAAP measures to their most directly comparable GAAP measure are not available without unreasonable efforts. This is due to the inherent difficulty of forecasting the timing or amount of various reconciling items that would impact the most directly comparable forward-looking GAAP financial measure, that have not yet occurred, are out of our control and/or cannot be reasonably predicted. Accordingly, such reconciliations are excluded from this release. Forward-looking non-GAAP financial measures provided without the most directly comparable GAAP financial measures may vary materially from the corresponding GAAP financial measures.
David Schorlemer
Chief Financial Officer
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432-227-0864
Matt Augustine
Investor Relations
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432-848-0871
Directors David Trice and Robert Evans Announce Retirement
WALL, N.J.--(BUSINESS WIRE)--The board of directors of New Jersey Resources (NYSE: NJR) today announced the unanimous election of Michael O’Sullivan, former senior vice president of Development at NextEra Energy Resources (NextEra), to the board.
“Mike O’Sullivan is an accomplished leader with extensive experience across the energy industry, particularly in the areas of sustainability, technology and innovation, all of which are priorities for our business,” said Steve Westhoven, president and CEO of New Jersey Resources. “He is a welcome addition to our board of directors.”
Mr. O’Sullivan is a recognized leader in the energy industry with significant executive management experience in finance, development, operations, regulatory and ESG. For nearly two decades, he served as senior vice president of development at NextEra, where he led the company’s renewable development and M&A/divestiture efforts, including the deployment of approximately $40 billion into more than 250 solar, wind, storage, nuclear and fossil fuel projects across 36 states and 4 provinces in Canada. He also served as a member of NextEra’s executive team and operating committee from 2001 until his retirement in 2020.
Prior to joining NextEra, Mr. O’Sullivan served as vice president of the Midwest division of AES; division vice president of NRG North America; vice president of business development at Indeck Energy Services; development manager at Homart Development, a subsidiary of Sears; and began his career as a staff engineer at Commonwealth Edison in 1982.
Mr. O'Sullivan received an MBA from the University of Chicago and a bachelor’s degree in civil engineering from the University of Notre Dame. He is a member of the University of Notre Dame’s President’s Circle, Engineering Advisory Council and Campus Energy Committee.
Separately, NJR announced the retirement of two long-serving directors, David Trice and Robert Evans.
Mr. Trice will retire at the end of his term, which expires at the NJR Annual Meeting of Shareowners on January 25, 2023. He joined NJR’s board in 2004, and during his 18 years as a director he provided leadership as a member of the Nominating/Corporate Governance and Leadership Development and Compensation Committees.
Mr. Evans will also retire at the 2023 Annual Meeting, before the end of his current term, which was set to expire in January 2024. He became a director in 2009 and for the past 13 years, he shared his experience and expertise as a member of the Audit Committee.
“There are no two people of higher integrity than David and Bobby,” said Don Correll, Chairman of the NJR board of directors. “I am grateful for their thoughtful, independent leadership and unique perspective that has provided a lasting contribution to our board and helped shape New Jersey Resources’ growth and success. Without question, we are a better, stronger company because of them.”
About New Jersey Resources
New Jersey Resources (NYSE: NJR) is a Fortune 1000 company that, through its subsidiaries, provides safe and reliable natural gas and clean energy services, including transportation, distribution, asset management and home services. NJR is composed of five primary businesses:
NJR and its more than 1,200 employees are committed to helping customers save energy and money by promoting conservation and encouraging efficiency through Conserve to Preserve® and initiatives such as The SAVEGREEN Project® and The Sunlight Advantage®.
For more information about NJR: www.njresources.com.
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Media:
Mike Kinney
732-938-1031
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Investors:
Adam Prior
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MIDLAND, Texas--(BUSINESS WIRE)--ProPetro Holding Corp. ("ProPetro" or "the Company") (NYSE: PUMP) today announced financial and operational results for the third quarter of 2022.
Third Quarter 2022 and Recent Highlights
(1) Adjusted EBITDA is a Non-GAAP financial measure and is described and reconciled to net income (loss) in the table under “Non-GAAP Financial Measures”. |
|
(2) Free Cash Flow is a Non-GAAP financial measure and is described and reconciled to cash from operating activities in the table under “Non-GAAP Financial Measures". |
Sam Sledge, Chief Executive Officer, commented, “We are pleased with our sequential top and bottom line growth this quarter, which were driven by exceptional execution from the ProPetro team. Consistent with our strategic goals of pursuing a more capital-light asset profile and next generation fleet, we divested our coiled tubing assets and acquired Silvertip, a provider of wireline perforating and pumpdown services. These actions underscore our commitment to optimizing our business while bringing new services and technologies and more efficient, environmentally responsible solutions to the Permian Basin.”
Sledge concluded, “We remain focused on evolving and industrializing our business into a vehicle that can provide more direct returns to our shareholders. We believe that the potential longevity of this cycle, coupled with our competitive position in the best resource play in the world, the Permian Basin, will continue to give us these opportunities. We’re proud of how our team continues to consistently perform for our customers through safe, reliable and predictable operational performance.”
David Schorlemer, Chief Financial Officer, commented, “We delivered strong Adjusted EBITDA performance with incremental Adjusted EBITDA margins of nearly 80% on stable effective fleet utilization in the third quarter due in large part to our successful pricing actions and ongoing fleet repositioning efforts. Our performance reflects how we’re generating improved profitability through our disciplined approach to asset deployment. We also continue to pursue accretive growth, and the acquisition of Silvertip we announced today is evidence of our intentions to pursue value-enhancing transactions. We believe our strong balance sheet, liquidity, and potent operational capabilities can lead to improved performance going forward. Looking ahead, we expect to generate an increasing free cash flow profile and enhance value for all ProPetro shareholders in 2023."
Third Quarter 2022 Financial Summary
Revenue was $333 million, compared to $315 million for the second quarter of 2022. Despite the Company's stable level of fleet utilization, the 6% increase in revenue is attributable to fleet repositioning and improved pricing.
Cost of services, excluding depreciation and amortization of approximately $30 million, increased to $224 million from $219 million during the second quarter of 2022. The 2% increase was attributable to the increased operational activity levels and cost inflation across all of our service lines in the third quarter of 2022.
General and administrative expense of $28 million increased from $25 million in the second quarter of 2022. General and administrative expense excluding non-recurring expense (net) of $9 million relating to legal settlement and expenses (net of insurance recovery), stock-based compensation, and other non-recurring expenses was $19 million, or 6% of revenue, which is flat compared to the second quarter of 2022.
Net income totaled $10 million, or $0.10 per diluted share, compared to net loss of $33 million, or $(0.32) per diluted share, for the second quarter of 2022.
Adjusted EBITDA increased to $90 million from $76 million for the second quarter of 2022. The increase in Adjusted EBITDA was primarily attributable to net pricing improvements, additional material revenue, and a favorable job mix.
Liquidity and Capital Spending
As of September 30, 2022, total cash was $43 million and the Company remained debt free. Total liquidity at the end of the third quarter of 2022 was $155 million, which included total cash balance and available borrowing capacity under the Company’s revolving credit facility.
As of October 31, 2022, borrowings under the Company's ABL Credit Facility were $30 million and ProPetro's total liquidity was approximately $185 million, consisting of cash and cash equivalents of $88 million and $97 million of availability under our ABL Credit Facility.
Capital expenditures incurred during the third quarter of 2022 were $115 million, the majority of which related to maintenance expenditures and our previously announced Tier IV DGB conversions. Net cash used in investing activities from our statement of cash flow during the third quarter of 2022 was $98 million.
Guidance
Based on projected activity levels and ProPetro's purchase of additional Tier IV DGB pumps, the Company's outlook for full year 2022 cash capital expenditures is expected to be approximately $325 million, which will be shown in the statement of cash flows and which represents the midpoint of the prior range. We expect incurred capital expenditures to be slightly above the top end of the prior range of $350 million due to timing. Looking to next year and beyond, the Company expects capital expenditures to decrease and are accordingly focused on creating a more resilient company with the financial strength and flexibility to power ProPetro’s strategy to deliver returns to shareholders.
Additionally, based on our current calendar outlook for the fourth quarter of 2022, we anticipate to be in line with our prior second half of 2022 fleet guidance ranging between 14 and 15 fleets.
Acquisition of Silvertip
In a separate press release issued today, ProPetro announced the acquisition of Silvertip Completion Services Operating, LLC, a provider of wireline perforating and pumpdown services, together creating a leading completions-focused oilfield services company focused in the Permian Basin. The press release is available at https://ir.propetroservices.com.
Outlook
Mr. Sledge commented, “We are very excited to announce progress in the execution of several aspects of our strategy, inclusive of the continued optimization of our operations, our fleet transition momentum, and value-enhancing transactions, namely our recent acquisition of Silvertip. We will remain focused on enhancing value for shareholders and accelerating our ability to explore value-sharing and value-distribution strategies in the coming year.”
"Going forward, we expect the crude oil market to remain structurally undersupplied for the foreseeable future assuming production growth investments continue to lag, which we believe to be the case. In light of the limited visibility due to the overhang of a potential global recession, we are anticipating steady-to-flat activity through the end of this fiscal year and into the first quarter of 2023. As we look ahead, while at a slower pace, pricing momentum in the top half of the market continues to be strong. The sense of urgency among our customers and ProPetro's addressable market remains intense, and we are optimistic that opportunities will continue to surface to expand margins.”
Conference Call Information
The Company will host a conference call at 8:00 AM Central Time on Wednesday, November 2, 2022, to discuss financial and operating results for the third quarter of 2022. The call will also be webcast on ProPetro’s website at www.propetroservices.com. To access the conference call, U.S. callers may dial toll free 1-844-340-9046 and international callers may dial 1-412-858-5205. Please call ten minutes ahead of the scheduled start time to ensure a proper connection. A replay of the conference call will be available for one week following the call and can be accessed toll free by dialing 1-877-344-7529 for U.S. callers, 1-855-669-9658 for Canadian callers, as well as 1-412-317-0088 for international callers. The access code for the replay is 5206703.
About ProPetro
ProPetro Holding Corp. is a Midland, Texas-based oilfield services company providing pressure pumping and other complementary services to leading upstream oil and gas companies engaged in the exploration and production of North American unconventional oil and natural gas resources. For more information visit www.propetroservices.com.
Forward-Looking Statements
Except for historical information contained herein, the statements and information in this news release are forward-looking statements that are made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. Statements that are predictive in nature, that depend upon or refer to future events or conditions or that include the words “may,” “could,” “plan,” “project,” “budget,” “predict,” “pursue,” “target,” “seek,” “objective,” “believe,” “expect,” “anticipate,” “intend,” “estimate,” and other expressions that are predictions of, or indicate, future events and trends and that do not relate to historical matters identify forward‑looking statements. Our forward‑looking statements include, among other matters, statements about our business strategy, industry, future profitability, expected fleet utilization, sustainability efforts, the future performance of newly improved technology, expected capital expenditures and the impact of such expenditures on our performance and capital programs. A forward‑looking statement may include a statement of the assumptions or bases underlying the forward‑looking statement. We believe that we have chosen these assumptions or bases in good faith and that they are reasonable.
Although forward‑looking statements reflect our good faith beliefs at the time they are made, forward-looking statements are subject to a number of risks and uncertainties that may cause actual events and results to differ materially from the forward-looking statements. Such risks and uncertainties include the volatility of oil prices, the operational disruption and market volatility resulting from the COVID-19 pandemic, the global macroeconomic uncertainty related to the Russia-Ukraine war, general economic conditions, including the impact of continued inflation and the risk of a global recession, and other factors described in the Company's Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, particularly the “Risk Factors” sections of such filings, and other filings with the Securities and Exchange Commission (the “SEC”). In addition, the Company may be subject to currently unforeseen risks that may have a materially adverse impact on it, including matters related to shareholder litigation. Accordingly, no assurances can be given that the actual events and results will not be materially different than the anticipated results described in the forward-looking statements. Readers are cautioned not to place undue reliance on such forward-looking statements and are urged to carefully review and consider the various disclosures made in the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and other filings made with the SEC from time to time that disclose risks and uncertainties that may affect the Company’s business. The forward-looking statements in this news release are made as of the date of this news release. ProPetro does not undertake, and expressly disclaims, any duty to publicly update these statements, whether as a result of new information, new developments or otherwise, except to the extent that disclosure is required by law.
PROPETRO HOLDING CORP. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited) |
||||||||||||
|
|
Three Months Ended |
||||||||||
|
|
September 30,
|
|
June 30,
|
|
September 30,
|
||||||
REVENUE - Service revenue |
|
$ |
333,014 |
|
|
$ |
315,083 |
|
|
$ |
250,099 |
|
COSTS AND EXPENSES |
|
|
|
|
|
|
||||||
Cost of services (exclusive of depreciation and amortization) |
|
|
224,118 |
|
|
|
218,813 |
|
|
|
188,690 |
|
General and administrative (inclusive of stock-based compensation) |
|
|
28,190 |
|
|
|
25,135 |
|
|
|
21,348 |
|
Depreciation and amortization |
|
|
30,417 |
|
|
|
31,462 |
|
|
|
33,531 |
|
Impairment expense |
|
|
— |
|
|
|
57,454 |
|
|
|
— |
|
Loss on disposal of assets |
|
|
36,636 |
|
|
|
22,485 |
|
|
|
12,424 |
|
Total costs and expenses |
|
|
319,361 |
|
|
|
355,349 |
|
|
|
255,993 |
|
OPERATING INCOME (LOSS) |
|
|
13,653 |
|
|
|
(40,266 |
) |
|
|
(5,894 |
) |
OTHER INCOME (EXPENSE): |
|
|
|
|
|
|
||||||
Interest expense |
|
|
(237 |
) |
|
|
(669 |
) |
|
|
(143 |
) |
Other income (expense) |
|
|
(616 |
) |
|
|
6 |
|
|
|
(309 |
) |
Total other income (expense) |
|
|
(853 |
) |
|
|
(663 |
) |
|
|
(452 |
) |
INCOME (LOSS) BEFORE INCOME TAXES |
|
|
12,800 |
|
|
|
(40,929 |
) |
|
|
(6,346 |
) |
INCOME TAX (EXPENSE) BENEFIT |
|
|
(2,768 |
) |
|
|
8,069 |
|
|
|
1,279 |
|
NET INCOME (LOSS) |
|
$ |
10,032 |
|
|
$ |
(32,860 |
) |
|
$ |
(5,067 |
) |
|
|
|
|
|
|
|
||||||
NET INCOME (LOSS) PER COMMON SHARE: |
|
|
|
|
|
|
||||||
Basic |
|
$ |
0.10 |
|
|
$ |
(0.32 |
) |
|
$ |
(0.05 |
) |
Diluted |
|
$ |
0.10 |
|
|
$ |
(0.32 |
) |
|
$ |
(0.05 |
) |
|
|
|
|
|
|
|
||||||
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: |
|
|
|
|
|
|
||||||
Basic |
|
|
104,372 |
|
|
|
104,236 |
|
|
|
103,257 |
|
Diluted |
|
|
105,070 |
|
|
|
104,236 |
|
|
|
103,257 |
|
PROPETRO HOLDING CORP. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share data) (Unaudited) |
||||||||
|
|
September 30,
|
|
December 31,
|
||||
ASSETS |
|
|
|
|
||||
CURRENT ASSETS: |
|
|
|
|
||||
Cash and cash equivalents |
|
$ |
43,208 |
|
|
$ |
111,918 |
|
Accounts receivable - net of allowance for credit losses of $217 and $217, respectively |
|
|
210,522 |
|
|
|
128,148 |
|
Inventories |
|
|
3,944 |
|
|
|
3,949 |
|
Prepaid expenses |
|
|
4,026 |
|
|
|
6,752 |
|
Short-term investment, net |
|
|
8,503 |
|
|
|
— |
|
Other current assets |
|
|
30,038 |
|
|
|
297 |
|
Total current assets |
|
|
300,241 |
|
|
|
251,064 |
|
PROPERTY AND EQUIPMENT - net of accumulated depreciation |
|
|
841,513 |
|
|
|
808,494 |
|
OPERATING LEASE RIGHT-OF-USE ASSETS |
|
|
600 |
|
|
|
409 |
|
OTHER NONCURRENT ASSETS: |
|
|
|
|
||||
Other noncurrent assets |
|
|
1,252 |
|
|
|
1,269 |
|
Total other noncurrent assets |
|
|
1,252 |
|
|
|
1,269 |
|
TOTAL ASSETS |
|
$ |
1,143,606 |
|
|
$ |
1,061,236 |
|
|
|
|
|
|
||||
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|
|
|
||||
CURRENT LIABILITIES: |
|
|
|
|
||||
Accounts payable |
|
$ |
187,381 |
|
|
$ |
152,649 |
|
Operating lease liabilities |
|
|
490 |
|
|
|
369 |
|
Accrued and other current liabilities |
|
|
65,946 |
|
|
|
20,767 |
|
Total current liabilities |
|
|
253,817 |
|
|
|
173,785 |
|
DEFERRED INCOME TAXES |
|
|
59,127 |
|
|
|
61,052 |
|
NONCURRENT OPERATING LEASE LIABILITIES |
|
|
124 |
|
|
|
97 |
|
Total liabilities |
|
|
313,068 |
|
|
|
234,934 |
|
COMMITMENTS AND CONTINGENCIES |
|
|
|
|
||||
SHAREHOLDERS’ EQUITY: |
|
|
|
|
||||
Preferred stock, $0.001 par value, 30,000,000 shares authorized, none issued, respectively |
|
|
— |
|
|
|
— |
|
Common stock, $0.001 par value, 200,000,000 shares authorized, 104,426,520 and 103,437,177 shares issued, respectively |
|
|
104 |
|
|
|
103 |
|
Additional paid-in capital |
|
|
860,075 |
|
|
|
844,829 |
|
Accumulated deficit |
|
|
(29,641 |
) |
|
|
(18,630 |
) |
Total shareholders’ equity |
|
|
830,538 |
|
|
|
826,302 |
|
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
$ |
1,143,606 |
|
|
$ |
1,061,236 |
|
PROPETRO HOLDING CORP. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) |
||||||||
|
|
Nine Months Ended September 30, |
||||||
|
|
2022 |
|
2021 |
||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
||||
Net income (loss) |
|
$ |
(11,012 |
) |
|
$ |
(33,953 |
) |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
|
|
|
|
||||
Depreciation and amortization |
|
|
93,734 |
|
|
|
100,253 |
|
Impairment expense |
|
|
57,454 |
|
|
|
— |
|
Deferred income tax expense (benefit) |
|
|
(1,926 |
) |
|
|
(11,639 |
) |
Amortization of deferred debt issuance costs |
|
|
720 |
|
|
|
405 |
|
Stock-based compensation |
|
|
18,128 |
|
|
|
8,405 |
|
Provision for credit losses |
|
|
— |
|
|
|
282 |
|
Loss on disposal of assets |
|
|
75,240 |
|
|
|
40,500 |
|
Unrealized loss on short-term investment |
|
|
3,349 |
|
|
|
— |
|
Non cash income from settlement with equipment manufacturer |
|
|
(2,668 |
) |
|
|
— |
|
Changes in operating assets and liabilities: |
|
|
|
|
||||
Accounts receivable |
|
|
(82,374 |
) |
|
|
(65,244 |
) |
Other current assets |
|
|
(29,647 |
) |
|
|
325 |
|
Inventories |
|
|
6 |
|
|
|
(747 |
) |
Prepaid expenses |
|
|
2,847 |
|
|
|
6,027 |
|
Accounts payable |
|
|
7,117 |
|
|
|
64,237 |
|
Accrued and other current liabilities |
|
|
43,983 |
|
|
|
408 |
|
Net cash provided by operating activities |
|
|
174,951 |
|
|
|
109,259 |
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
||||
Capital expenditures |
|
|
(247,164 |
) |
|
|
(87,700 |
) |
Proceeds from sale of assets |
|
|
7,207 |
|
|
|
2,151 |
|
Net cash used in investing activities |
|
|
(239,957 |
) |
|
|
(85,549 |
) |
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
||||
Repayments of insurance financing |
|
|
— |
|
|
|
(5,473 |
) |
Payment of debt issuance costs |
|
|
(824 |
) |
|
|
— |
|
Proceeds from exercise of equity awards |
|
|
963 |
|
|
|
3,365 |
|
Tax withholdings paid for net settlement of equity awards |
|
|
(3,843 |
) |
|
|
(5,773 |
) |
Net cash used in financing activities |
|
|
(3,704 |
) |
|
|
(7,881 |
) |
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |
|
|
(68,710 |
) |
|
|
15,829 |
|
CASH AND CASH EQUIVALENTS - Beginning of period |
|
|
111,918 |
|
|
|
68,772 |
|
CASH AND CASH EQUIVALENTS - End of period |
|
$ |
43,208 |
|
|
$ |
84,601 |
|
Reportable Segment Information
|
Three Months Ended |
||||||||||||||||||
|
September 30, 2022 |
|
June 30, 2022 |
||||||||||||||||
(in thousands) |
Pressure
|
|
All Other |
|
Total |
|
Pressure
|
|
All Other |
|
Total |
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Service revenue |
$ |
330,780 |
|
$ |
2,234 |
|
|
$ |
333,014 |
|
$ |
309,445 |
|
$ |
5,638 |
|
|
$ |
315,083 |
Adjusted EBITDA |
$ |
102,550 |
|
$ |
(12,550 |
) |
|
$ |
90,000 |
|
$ |
86,291 |
|
$ |
(10,344 |
) |
|
$ |
75,947 |
Depreciation and amortization |
$ |
29,736 |
|
$ |
681 |
|
|
$ |
30,417 |
|
$ |
30,528 |
|
$ |
934 |
|
|
$ |
31,462 |
Capital expenditures |
$ |
112,865 |
|
$ |
2,258 |
|
|
$ |
115,123 |
|
$ |
83,170 |
|
$ |
5,911 |
|
|
$ |
89,081 |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Non-GAAP Financial Measures
Adjusted EBITDA and Free Cash Flow are not financial measures presented in accordance with GAAP. We believe that the presentation of these non-GAAP financial measures provide useful information to investors in assessing our financial condition and results of operations. Net income (loss) is the GAAP measure most directly comparable to Adjusted EBITDA, and net cash from operating activities is the GAAP measure most directly comparable to Free Cash Flow. Non-GAAP financial measures should not be considered as alternatives to the most directly comparable GAAP financial measures. Non-GAAP financial measures have important limitations as analytical tools because they exclude some, but not all, items that affect the most directly comparable GAAP financial measures. You should not consider Adjusted EBITDA or Free Cash Flow in isolation or as a substitute for an analysis of our results as reported under GAAP. Because Adjusted EBITDA and Free Cash Flow may be defined differently by other companies in our industry, our definitions of these non-GAAP financial measures may not be comparable to similarly titled measures of other companies, thereby diminishing their utility.
Reconciliation of Net Income (Loss) to Adjusted EBITDA
|
|
Three Months Ended |
|||||||||||||||||||||
|
|
September 30, 2022 |
|
June 30, 2022 |
|||||||||||||||||||
(in thousands) |
|
Pressure
|
|
All Other |
|
Total |
|
Pressure
|
|
All Other |
|
Total |
|||||||||||
Net income (loss) |
|
$ |
46,805 |
|
|
$ |
(36,773 |
) |
|
$ |
10,032 |
|
$ |
(24,392 |
) |
|
$ |
(8,468 |
) |
|
$ |
(32,860 |
) |
Depreciation and amortization |
|
|
29,736 |
|
|
|
681 |
|
|
|
30,417 |
|
|
30,528 |
|
|
|
934 |
|
|
|
31,462 |
|
Impairment expense |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
57,454 |
|
|
|
— |
|
|
|
57,454 |
|
Interest expense |
|
|
— |
|
|
|
237 |
|
|
|
237 |
|
|
— |
|
|
|
669 |
|
|
|
669 |
|
Income tax expense (benefit) |
|
|
— |
|
|
|
2,768 |
|
|
|
2,768 |
|
|
— |
|
|
|
(8,069 |
) |
|
|
(8,069 |
) |
Loss (gain) on disposal of assets |
|
|
22,850 |
|
|
|
13,786 |
|
|
|
36,636 |
|
|
22,680 |
|
|
|
(195 |
) |
|
|
22,485 |
|
Stock-based compensation |
|
|
— |
|
|
|
3,306 |
|
|
|
3,306 |
|
|
— |
|
|
|
3,458 |
|
|
|
3,458 |
|
Other expense (income)(2)(3) |
|
|
(2,668 |
) |
|
|
3,284 |
|
|
|
616 |
|
|
— |
|
|
|
(6 |
) |
|
|
(6 |
) |
Other general and administrative expense, (net) (1) |
|
|
4,775 |
|
|
|
145 |
|
|
|
4,920 |
|
|
21 |
|
|
|
1,333 |
|
|
|
1,354 |
|
Severance expense |
|
|
1,052 |
|
|
|
16 |
|
|
|
1,068 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Adjusted EBITDA |
|
$ |
102,550 |
|
|
$ |
(12,550 |
) |
|
$ |
90,000 |
|
$ |
86,291 |
|
|
$ |
(10,344 |
) |
|
$ |
75,947 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| (1) | Other general and administrative expense, (net of reimbursement from insurance carriers) primarily relates to nonrecurring professional fees paid to external consultants in connection with the Company's audit committee review, SEC investigation, shareholder litigation, legal settlement to a vendor and other legal matters, net of insurance recoveries. During the three months ended September 30, 2022 and June 30, 2022, we received approximately $3.4 million and $2.4 million, respectively, from our insurance carriers in connection with the SEC investigation and shareholder litigation. |
|
| (2) | Includes $10.7 million of net tax refund (net of advisory fees) received in March 2022 from the Texas Comptroller of Public Accounts in connection with limited sales, excise and use tax beginning July 1, 2015 through December 31, 2018. |
|
| (3) | Includes $2.7 million non cash income from fixed asset inventory received as part of a settlement of warranty claims with an equipment manufacturer and a $3.3 million unrealized loss on short-term investment. |
Reconciliation of Cash from Operating Activities to Free Cash Flow
|
|
Three Months Ended |
||||||
(in thousands) |
|
September 30, 2022 |
|
June 30, 2022 |
||||
|
|
|
|
|
||||
Cash from Operating Activities |
|
$ |
71,643 |
|
|
$ |
78,138 |
|
Cash used in Investing Activities |
|
|
(98,389 |
) |
|
|
(77,520 |
) |
Free Cash Flow |
|
$ |
(26,746 |
) |
|
$ |
618 |
|
Investor Contacts:
David Schorlemer
Chief Financial Officer
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432-227-0864
Matt Augustine
Investor Relations
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432-848-0871
CALGARY, Alberta--(BUSINESS WIRE)--Imperial Oil Limited (TSE: IMO, NYSE American: IMO) announced today the terms of its substantial issuer bid (the “Offer”) pursuant to which the company will offer to purchase for cancellation up to $1,500,000,000 of its common shares (the “Shares”). Subject to obtaining certain exemptive relief under applicable securities laws in the United States, the Offer will proceed by way of a modified Dutch auction that includes the ability for shareholders to participate via a proportionate tender. The modified Dutch auction procedure will have a tender price range from $72.50 per Share to $87.00 per Share. All amounts are in Canadian dollars.
The Offer is expected to commence on November 4, 2022 and remain open for acceptance until 5:00 p.m. (Calgary time) on December 9, 2022, unless withdrawn, extended or varied by Imperial. The Company has obtained routine exemptive relief from Canadian securities regulatory authorities with respect to the proportionate take-up and extension requirements of the Offer, the details of which can be found under section 3 of the Offer to Purchase (which will be available on SEDAR upon commencement of the Offer).
The Offer will be for up to approximately 3.4 percent of Imperial’s total number of issued and outstanding Shares (based on a purchase price equal to the minimum purchase price per Share and 604,842,373 Shares issued and outstanding as at the close of business on October 31, 2022).
Exxon Mobil Corporation (“ExxonMobil”), Imperial’s majority shareholder, has advised Imperial that it will make a proportionate tender in connection with the Offer in order to maintain its proportionate Share ownership at approximately 69.6 percent following completion of the Offer.
Holders of Shares wishing to tender to the Offer may do so pursuant to: (i) auction tenders in which the tendering shareholders specify the number of Shares being tendered at a specified price of not less than $72.50 per Share and not more than $87.00 per Share in increments of $0.25 per Share; (ii) purchase price tenders in which they will not specify a price per Share, but will rather agree to have a specified number of Shares purchased at the Purchase Price, as defined below; or (iii) proportionate tenders in which they will agree to sell, at the Purchase Price, a number of Shares that will result in them maintaining their proportionate Share ownership in Imperial following completion of the Offer. Shareholders who validly tender Shares without specifying the method in which they are tendering their Shares, or who make an invalid proportionate tender, including by tendering an insufficient number of Shares, will be deemed to have made a purchase price tender.For purposes of determining the Purchase Price, shareholders who make, or who are deemed to have made, a purchase price tender will be deemed to have tendered their Shares at the minimum price of $72.50 per Share.
The purchase price to be paid by Imperial for each validly deposited Share taken up by the company (the “Purchase Price”) will be determined upon expiry of the Offer and will be based on the number of Shares validly deposited pursuant to auction tenders and purchase price tenders, and prices specified by shareholders making auction tenders. As a result, Imperial’s shareholders who tender their Shares (other than ExxonMobil and shareholders who make proportionate tenders) will set the Purchase Price for the Offer. The Purchase Price will be the lowest price (which will not be less than $72.50 per Share and not more than $87.00 per Share) that enables the company to purchase Shares up to the maximum amount available for auction tenders and purchase price tenders, determined in accordance with the terms of the Offer. Shares deposited at or below the Purchase Price as finally determined by Imperial will be purchased at such Purchase Price. Shares that will not be taken up in connection with the Offer, including Shares deposited pursuant to auction tenders at prices above the Purchase Price, will be returned to the shareholders.
If the aggregate purchase price for Shares validly tendered pursuant to auction tenders and purchase price tenders is greater than the amount available for auction tenders and purchase price tenders (after taking into consideration the proportionate tenders), Imperial will purchase Shares from the shareholders who made purchase price tenders or tendered at or below the Purchase Price as finally determined by Imperial on a pro rata basis, except that “odd lot” holders (shareholders who own fewer than 100 Shares) will not be subject to proration.
Imperial expects to mail the formal offer to purchase, issuer bid circular, letter of transmittal, notice of guaranteed delivery and other related documents (collectively, the “Offer Documents”) containing the terms and conditions of the Offer, instructions for tendering Shares, and the factors considered by Imperial, its Special Committee and its Board of Directors in determining to approve the Offer, among other considerations, on or about November 4, 2022. The Offer Documents will be filed with the applicable securities regulators in Canada and the United States and will be available free of charge on SEDAR at www.sedar.com and on EDGAR at www.sec.gov. Shareholders should carefully read the Offer Documents prior to making a decision with respect to the Offer.
The Offer will not be conditional upon any minimum number of Shares being tendered. The Offer will, however, be subject to other conditions described in the Offer Documents and Imperial will reserve the right, subject to applicable laws, to withdraw, extend or vary the Offer, if, at any time prior to the payment for deposited Shares, certain events occur.
Imperial’s Board of Directors has approved the making of the Offer and the price range for the purchase of Shares thereunder upon the recommendation of its Special Committee. However, none of Imperial, its Special Committee, its Board of Directors, the dealer manager or the depositary makes any recommendation to any shareholder as to whether to deposit or refrain from depositing Shares under the Offer. Shareholders are urged to evaluate carefully all information in the Offer, consult their own financial, legal, investment and tax advisors and make their own decisions whether to deposit Shares under the Offer, how many Shares to deposit, whether to deposit Shares pursuant to the same tender option or different tender options and whether to specify a price or prices and, if so, at what price or prices to deposit such Shares.
The Offer referred to in this news release has not yet commenced. This news release is for informational purposes only and does not constitute an offer to buy or the solicitation of an offer to sell Shares. An offer to buy the Shares will only be made pursuant to Offer Documents to be filed with the applicable securities regulators in Canada and the United States which remains subject to obtaining the necessary exemptive relief under applicable securities laws in Canada and the United States. The Offer will be optional for all shareholders, who will be free to choose whether to participate, how many Shares to tender and, in the case of auction tenders, at what price to tender within the specified range. Any shareholder who does not deposit any Shares (or whose Shares are not repurchased under the Offer) will realize a proportionate increase in equity interest in Imperial, to the extent that Shares are purchased under the Offer.
Imperial has retained RBC Capital Markets to act as financial advisor and dealer manager in connection with the Offer and Computershare Investor Services Inc. (“Computershare”) to act as depositary. Any questions or requests for information may be directed to Computershare at 1 (800) 564-6253 (Toll Free within North America) or 1 (514) 982-7555 (outside North America) or to RBC Capital Markets as dealer manager for the Offer atThis email address is being protected from spambots. You need JavaScript enabled to view it..
Imperial is one of Canada’s largest integrated oil companies. It is active in all phases of the petroleum industry in Canada, including the exploration for, and production and sale of, crude oil and natural gas. In Canada, it is a major producer of crude oil, the largest petroleum refiner and a leading marketer of petroleum products. It is also a major producer of petrochemicals. The company’s operations are conducted in three main segments: Upstream, Downstream and Chemical.
Cautionary statement: Statements of future events or conditions in this release, including projections, expectations and estimates are forward-looking statements. Forward-looking statements can be identified by words such as believe, anticipate, intend, propose, plan, expect, future, continue, likely, may, should, will and similar references to future periods. Forward-looking statements in this release include, but are not limited to, references to the aggregate amount of Shares to be purchased for cancellation under the Offer; the structure of the bid including a modified Dutch auction procedure and proportionate tender; the terms and conditions and tender price range; timing for mailing the Offer Documents, commencement and expiration; and ExxonMobil’s intent to make a proportionate tender.
Forward-looking statements are based on the company's current expectations, estimates, projections and assumptions at the time the statements are made. Actual future financial and operating results, including expectations and assumptions concerning demand growth and energy source, supply and mix; commodity prices, foreign exchange rates and general market conditions; production rates, growth and mix; project plans, timing, costs, technical evaluations and capacities, and the company’s ability to effectively execute on these plans and operate its assets; that the necessary exemptive relief to proceed with the Offer under applicable securities laws in the United States and Canada will be received on the timeline anticipated; ExxonMobil making a proportionate tender in connection with the Offer; progression of COVID-19 and its impacts on Imperial’s ability to operate its assets; applicable laws and government policies, including restrictions in response to COVID-19; and capital and environmental expenditures could differ materially depending on a number of factors. These factors include global, regional or local changes in supply and demand for oil, natural gas, and petroleum and petrochemical products and resulting price, differential and margin impacts, including foreign government action with respect to supply levels and prices and the impact of COVID-19 on demand; the receipt, in a timely manner, of regulatory approvals; availability and allocation of capital; unanticipated technical or operational difficulties; operational hazards and risks; availability and performance of third-party service providers, including in light of restrictions related to COVID-19; management effectiveness and disaster response preparedness, including business continuity plans in response to COVID-19; currency exchange rates; political or regulatory events, including changes in law or government policy in response to COVID-19; general economic conditions; and other factors discussed in Item 1A risk factors and Item 7 management’s discussion and analysis of financial condition and results of operations of Imperial Oil Limited’s most recent annual report on Form 10-K and subsequent interim reports on Form 10-Q.
Forward-looking statements are not guarantees of future performance and involve a number of risks and uncertainties, some that are similar to other oil and gas companies and some that are unique to Imperial Oil Limited. Imperial’s actual results may differ materially from those expressed or implied by its forward-looking statements and readers are cautioned not to place undue reliance on them. Imperial undertakes no obligation to update any forward-looking statements contained herein, except as required by applicable law.
Source: Imperial
After more than a century, Imperial continues to be an industry leader in applying technology and innovation to responsibly develop Canada’s energy resources. As Canada’s largest petroleum refiner, a major producer of crude oil, a key petrochemical producer and a leading fuels marketer from coast to coast, our company remains committed to high standards across all areas of our business.
Investor Relations
(587) 476-4743
Media Relations
(587) 476-7010
HOUSTON--(BUSINESS WIRE)--Orion Engineered Carbons (NYSE: OEC), a specialty chemicals company, said today it has reached a major sustainability milestone, becoming the first to achieve International Sustainability and Carbon Certifications (ISCC Plus) for multiple carbon black grades made from different feedstocks at plants in two regions of the world.
The ISCC PLUS certification involved rigorous audits of Orion’s plants and processes that confirmed the company’s compliance with high sustainability requirements. It also verified the transparency and traceability of sustainable raw materials in the company’s value chain at three plants producing the concerned grades of carbon black.
“The globally recognized certification further strengthens Orion’s position as the leader in our industry for developing sustainable solutions for our tire, mechanical rubber goods and specialty customers,” said Corning Painter, Orion’s CEO. “Earning the certification is a major achievement for the commercialization of our portfolio of sustainable products. ISCC PLUS documents to our customers that Orion continues to make progress with innovation focused on sustainability.”
The ISCC PLUS certified products include the ECORAX® Circular grades produced in Borger, Texas, and Belpre, Ohio, using pyrolysis oils from end-of-life tires. Also covered is ECORAX® Nature 200, produced in Jaslo, Poland, and based on bio-circular feedstocks.
Significantly, the certified products are similar to conventional grades and are “drop-ins” that require minimal reformulation in the complex rubber compounds used by our major tire manufacturing customers.
“No other company is making multiple grades of sustainable carbon black with different feedstocks at multiple plants across the world,” Painter added. “Introducing a broad range of products that can be used in highly demanding tire applications using such materials is a critical step to enable the transition to a circular economy for tires.”
A decade ago, Orion was the first major producer to develop and commercialize carbon black made from renewable feedstocks, such as industrial-grade vegetable oils or other oils derived from waste and residues of biological origin from agriculture or forestry.
Orion is also the only carbon black producer in the BlackCycle initiative, an EU-funded project focused on developing the production of circular carbon black.
“Our customers have shown a tremendous amount of interest in our sustainable products,” said Pedro Riveros, senior vice president for global rubber carbon black and general manager for the Americas. “Several companies have made very public statements about achieving fully sustainable raw materials by 2050, or earlier. Since rubber and carbon black are the largest raw materials in rubber compounds, replacing conventional carbon blacks with our sustainable products will largely contribute to the achievement of these commitments.”
Carbon black makes up about 30% of a typical tire by weight. The material reinforces tires, making treads more resistant to tearing, cutting, abrasion and other wear. Carbon black also plays an important role in creating tires with lower rolling resistance, which leads to increased fuel efficiency. It also enables engineers to fine tune performance and protects tires from the damaging effects of UV light.
The ISCC PLUS certification is granted by the ISCC Association, which is based in Cologne, Germany, and promotes the sustainable production of biomass, circular and bio-based materials and renewables.
About Orion Engineered Carbons
Orion Engineered Carbons (NYSE: OEC) is a leading global supplier of carbon black, a solid form of carbon produced as powder or pellets. The material is made to customers’ exacting specifications for tires, coatings, ink, batteries, plastics and numerous other specialty, high-performance applications. Carbon black is used to tint, colorize, provide reinforcement, conduct electricity, increase durability, and add UV protection. Orion has innovation centers on three continents and 14 plants worldwide, offering the most diverse variety of production processes in the industry. The company’s corporate lineage goes back more than 160 years to Germany, where it operates the world’s longest-running carbon black plant. Orion is a leading innovator, applying a deep understanding of customers’ needs to deliver sustainable solutions. For more information, please visit orioncarbons.com.
Forward-Looking Statements
This document contains certain forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements of future expectations that are based on current expectations and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in these statements. You should not place undue reliance on forward-looking statements. Each forward-looking statement speaks only as of the date of the particular statement. New risk factors and uncertainties emerge from time to time and it is not possible to predict all risk factors and uncertainties, nor can we assess the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or other information, other than as required by applicable law.
William Foreman
Director of Corporate Communications and
Government Affairs
Orion Engineered Carbons
Direct: +1 832-445-3305
Mobile: +1 281-889-7833
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Wendy Wilson
Head of Investor Relations
Orion Engineered Carbons
Direct: +1 281-974-0155
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Grant will provide fiber broadband service and wireless broadband access to households, businesses, educational facilities, community facilities, and local emergency services in rural New Mexico
TAOS, N.M--(BUSINESS WIRE)--Kit Carson Electric Cooperative, Inc (KCEC) today announced the acceptance of a recent grant application from the United States Department of Agriculture’s Rural Development team and its Rural Utilities Service ReConnect Program, for $23,624,986. This significant grant will be used to deploy fiber-to-the-premises broadband service and wireless broadband access in rural New Mexico. The funded service area spans the Rio Arriba area and includes 3,078 customers including households, businesses, educational facilities, community facilities, and local emergency services.
Kit Carson Internet (KCI) began serving customers with broadband in 2000 and turned on its first fiber optic plant in 2015. Since that time, the organization has expanded its customer base and service area through fiber to the home delivery. Currently, KCI provides broadband service to 11,700 active customers in Taos, Rio Arriba and Colfax counties in New Mexico.
The community members served by this grant include individuals in need of high-speed internet options for learning, health, and business in addition to improvement of quality of life. The COVID-19 pandemic revealed the need for school aged students to have access to broadband not only for distance education effort but also to be in line with their peers in terms of research opportunity, ability to complete homework, and ability to engage with classmates and teachers online. In addition, 19% of individuals in these tracts are over 65 years of age and 16% are disabled. Both of these populations are vulnerable to negative effects of low access to medical care and are poised to have significant increases in quality of life with access to telehealth services. Businesses in this area are very small and require adequate broadband access in order to promote products and diversify customer bases. All fiber connections will support 1 Gigabit (Gbps) speeds upstream/1Gbps downstream service and be priced under the current pricing model for KCI.
“KCEC understands our customer population and due to the rural nature of many of the homes and businesses in this area, coupled with the overall economic status of its residents, there is an immediate need for an affordable fiber network. We are incredibly grateful to the U.S. Department of Agriculture for recognizing our commitment to deliver modern products and high speed services to those within our Northern New Mexico communities that are under-served,” said KCEC CEO Luis A. Reyes.
This project is expected to kick-off in late 2022 with an estimated completion date of late 2023 in to early 2024.
About Kit Carson Electric Cooperative
Formed in 1944, Kit Carson is a member owned electric distribution cooperative in northern New Mexico and is the second largest cooperative in the state. Kit Carson is one of 16 electric cooperatives that serve rural New Mexico communities, serving nearly 30,000 members in Taos, Colfax and Rio Arriba counties. To learn more about Kit Carson, visit www.kitcarson.com.
Regan Petersen
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Increases Adjusted EBITDA Guidance to Exceed $175 million
JACKSONVILLE, Fla.--(BUSINESS WIRE)--Rayonier Advanced Materials Inc. (NYSE:RYAM) (the “Company”) reported net income of $30 million, or $0.45 per diluted share, for the quarter ended September 24, 2022, compared to a net loss of $5 million, or $(0.07) per diluted share, for the same prior year quarter. Income from continuing operations for the quarter ended September 24, 2022 was $18 million, or $0.28 per diluted share, compared to a loss from continuing operations of $13 million, or $(0.21) per diluted share, for the same prior year quarter. The Company sold its lumber and newsprint assets in the third quarter of 2021 and presents the results of those operations as discontinued operations. Unless otherwise stated, information in this press release relates to continuing operations.
“The quarter’s improved financial results are evidence of the significant earnings power of RYAM. Increased productivity in the third quarter led to higher sales volumes in High Purity Cellulose and stronger financial results,” said De Lyle W. Bloomquist, President and Chief Executive Officer. “Though the global economy appears to be slowing, we remain optimistic about capturing additional productivity gains and value for our key products. As such, we are confident about our business and have increased our full year Adjusted EBITDA guidance to exceed $175 million for 2022. We also continue to reduce debt, including net repayments of $59 million year to date. As our credit metrics continue to improve, we are actively monitoring debt markets for an opportune time to refinance our 2024 debt maturities.”
Third Quarter 2022 Operating Results from Continuing Operations
The Company operates in the following business segments: High Purity Cellulose, Paperboard, High-Yield Pulp and Corporate.
Net sales were comprised of the following for the periods presented:
|
Three Months Ended |
|
Nine Months Ended |
||||||||||||||||
(in millions) |
September 24,
|
|
June 25, |
|
September 25,
|
|
September 24,
|
|
September 25,
|
||||||||||
High Purity Cellulose |
$ |
369 |
|
|
$ |
302 |
|
|
$ |
288 |
|
|
$ |
952 |
|
|
$ |
792 |
|
Paperboard |
|
66 |
|
|
|
63 |
|
|
|
52 |
|
|
|
183 |
|
|
|
157 |
|
High-Yield Pulp |
|
40 |
|
|
|
40 |
|
|
|
42 |
|
|
|
102 |
|
|
|
106 |
|
Eliminations |
|
(9 |
) |
|
|
(6 |
) |
|
|
(8 |
) |
|
|
(20 |
) |
|
|
(21 |
) |
Net sales |
$ |
466 |
|
|
$ |
399 |
|
|
$ |
374 |
|
|
$ |
1,217 |
|
|
$ |
1,034 |
|
Operating results were comprised of the following for the periods presented:
|
Three Months Ended |
|
Nine Months Ended |
||||||||||||||||
(in millions) |
September 24,
|
|
June 25, |
|
September 25,
|
|
September 24,
|
|
September 25,
|
||||||||||
High Purity Cellulose |
$ |
22 |
|
|
$ |
7 |
|
|
$ |
2 |
|
|
$ |
21 |
|
|
$ |
19 |
|
Paperboard |
|
12 |
|
|
|
10 |
|
|
|
2 |
|
|
|
28 |
|
|
|
10 |
|
High-Yield Pulp |
|
6 |
|
|
|
(2 |
) |
|
|
8 |
|
|
|
4 |
|
|
|
8 |
|
Corporate |
|
(11 |
) |
|
|
(18 |
) |
|
|
(9 |
) |
|
|
(43 |
) |
|
|
(33 |
) |
Operating income (loss) |
$ |
29 |
|
|
$ |
(3 |
) |
|
$ |
3 |
|
|
$ |
10 |
|
|
$ |
4 |
|
High Purity Cellulose
Net sales for the quarter increased $81 million, or 28 percent, to $369 million compared to the prior year period. Net sales for the nine months ended September 24, 2022 increased $160 million, or 20 percent, to $952 million compared to the prior year period. Included within net sales for the three and nine months ended September 24, 2022 were $33 million and $84 million, respectively, of other sales, primarily from bio-based energy and lignosulfonates. Sales prices increased 21 percent and 19 percent during the three-month and nine-month periods, respectively, when compared to the same prior year periods, driven by increases in cellulose specialties prices of 25 percent and 19 percent, respectively, which were inclusive of the $146 per metric ton cost surcharge effective April 2022, and increases in commodity prices of 13 percent and 19 percent, respectively. Total volumes increased 7 percent and 1 percent during the current three-month and nine-month periods, respectively. Operating income for the three and nine months ended September 24, 2022 increased $20 million and $2 million, respectively, when compared to the prior year. Costs increased compared to the prior year periods as the result of inflation on key inputs, including chemicals, wood fiber and energy costs, and higher supply chain expenses, partially offset by improved productivity in the most recent quarter. Energy costs for the three and nine months ended September 24, 2022 were partially mitigated by $2 million and $12 million, respectively, of sales of excess emission allowances, which are at elevated pricing levels and related to the operations in Tartas, France.
Compared to the second quarter of 2022, operating income increased by $15 million, driven by higher sales prices and volumes of both cellulose specialties and commodity products and improved productivity, partially offset by higher energy and maintenance costs. Total sales prices and volumes increased by 3 percent and 17 percent, respectively.
Paperboard
Net sales for the quarter increased $14 million, or 27 percent, to $66 million compared to the prior year period. Net sales for the nine months ended September 24, 2022 increased $26 million, or 17 percent, to $183 million compared to the prior year period. Sales prices increased 34 percent and 26 percent during the three-month and nine-month periods, respectively, when compared to the same prior year periods, driven by strong demand. Sales volumes decreased 7 percent and 8 percent during the three-month and nine-month periods, respectively, when compared to the same prior year periods, driven primarily by lower productivity. Operating income for the three and nine months ended September 24, 2022 increased $10 million and $18 million, respectively, when compared to the same periods in the prior year, driven by higher sales prices, partially offset by higher raw material pulp, chemicals and logistics costs, as well as lower sales volumes.
Compared to the second quarter of 2022, operating income increased $2 million driven by a 10 percent increase in sales prices, partially offset by a 7 percent decrease in sales volumes.
High-Yield Pulp
Net sales for the three months ended September 24, 2022 decreased $2 million, or 5 percent, to $40 million compared to the prior year period, despite a 15 percent increase in sales prices, due to an 18 percent decrease in sales volumes. Net sales for the nine months ended September 24, 2022 decreased $4 million, or 4 percent, to $102 million compared to the prior year period, driven by a 16 percent decline in sales volumes, partially offset by a 15 percent increase in sales prices. Operating income for the three and nine months ended September 24, 2022 declined $2 million and $4 million, respectively, when compared to the same periods in the prior year despite the higher sales prices, due to lower productivity, logistics constraints and higher input and supply chain costs.
Operating results improved by $8 million when compared to the second quarter of 2022 driven by higher sales prices, partially offset by decreased sales volumes.
Corporate
The operating loss for the three months ended September 24, 2022 increased $2 million to $11 million when compared to the same prior year period, driven primarily by higher variable stock-based compensation costs. The operating loss for the nine months ended September 24, 2022 increased $10 million to $43 million when compared to the same prior year period, driven by an increase in severance and variable stock-based compensation costs, partially offset by favorable foreign exchange impacts.
Compared to the second quarter of 2022, the operating loss improved by $7 million, to $11 million, driven primarily by a decrease in severance and variable stock-based compensation costs.
Non-Operating Expenses
Included in non-operating expenses for the nine months ended September 24, 2022 was a $5 million gain associated with the GreenFirst Forest Products, Inc. (“GreenFirst”) shares received in connection with the sale of lumber and newsprint assets in August 2021. A loss of $8 million was recognized on the shares during the three and nine months ended September 25, 2021. The shares were sold in May 2022 for $43 million.
Income Taxes
The effective tax rate on income from continuing operations for the three months ended September 24, 2022 was a benefit of 11 percent. The effective tax rate on the loss on continuing operations for the nine months ended September 24, 2022 was an expense of 13 percent. The most significant item creating a difference between the 2022 effective tax rates and the statutory rate of 21 percent were changes in the valuation allowance on disallowed interest deductions in the U.S.
The effective tax rates on the loss from continuing operations for the three and nine months ended September 25, 2021 were benefits of 24 percent and 59 percent, respectively. The effective tax rate for the nine months ended September 25, 2021 differs from the statutory rate of 21 percent primarily due to a tax benefit recognized by remeasuring the Company’s Canadian deferred tax assets at a higher Canadian blended statutory tax rate. The Canadian statutory tax rate is higher as a result of changing the allocation of income between the Canadian provinces after the sale of the Company’s lumber and newsprint assets.
Discontinued Operations
As a result of the sale of lumber and newsprint assets in August 2021, the Company presents prior year results and activity for the current period related to the Forest Products and Newsprint segments as discontinued operations.
The cash received at closing was preliminary and remains subject to final purchase price and other sale-related adjustments. During the first quarter of 2022, the Company trued-up certain sale-related items with GreenFirst for a total net cash outflow of $3 million, as expected and previously disclosed. No adjustments have been made in 2022 to the gain on sale recorded during the year ended December 31, 2021. Pursuant to the terms of the asset purchase agreement, GreenFirst and the Company continue efforts to finalize the closing inventory valuation adjustment.
During the third quarter of 2022, the U.S. Department of Commerce completed its third administrative review of duties applied to Canadian softwood lumber exports to the U.S. during 2020 and reduced rates applicable to the Company to a combined 8.6 percent. In connection with this development, the Company recorded a $16 million gain, pre-tax, and increased the long-term receivable related to all of the administrative reviews to date to $38 million. In total, the Company paid approximately $112 million in softwood lumber duties from 2017 through 2021. The Company expects to receive all or the vast majority of these duties upon the settlement of the dispute.
Cash Flows & Liquidity
For the nine months ended September 24, 2022, the Company generated operating cash flows of $7 million, which was primarily driven by the receipt of a $23 million U.S. federal tax refund, partially offset by increased cash outflows from working capital and other items as a result of extensive planned maintenance outages through the second quarter.
For the nine months ended September 24, 2022, the Company used $114 million in its investing activities for continuing operations. The investing cash outflows related to capital expenditures, net of proceeds from sale of assets, including approximately $22 million of strategic capital spending focused on enhancing reliability and productivity.
For the nine months ended September 24, 2022, the Company used $51 million in its financing activities for continuing operations primarily for repayments of long-term debt.
The Company ended the quarter with $283 million of global liquidity, including $132 million of cash, borrowing capacity of $128 million under the ABL Credit Facility and $23 million of availability under the factoring facility in France.
In October 2022, we repaid a Canadian dollar fixed interest rate term loan in the amount of CAD $12 million (USD $9 million).
With its next significant debt maturity in mid-2024, the Company continues to monitor the capital markets and is prepared to opportunistically refinance its senior notes due June 2024 at the appropriate time considering market conditions and all other relevant factors. The Company is confident that by executing on its strategy to improve its credit profile in the back half of 2022, it can obtain a refinancing at acceptable terms based on market conditions. The Company may also use a portion of its cash balances to opportunistically repay debt or assist in a holistic refinancing of its capital structure.
Market Assessment
This market assessment represents the Company’s best current estimate of its business segments’ future performance.
The Company updated its Adjusted EBITDA guidance to exceed $175 million for 2022, subject to ongoing supply chain constraints. Additionally, the Company remains on track to reduce its net debt level to $725 million by the end of the year. The Company has reduced its net leverage ratio to 5.1 times as of the end of the third quarter and as it continues to reduce this ratio towards 4.0 times, it expects to have opportunities to refinance its senior notes due June 2024 in the near future.
High Purity Cellulose
Demand for cellulose specialties and commodity products remains strong albeit somewhat tempered as global economic growth slows. As such, average sales prices are expected to be down modestly in the fourth quarter driven by a greater mix of commodity sales volumes as production and logistics constraints improve. Key raw material inflation is expected to remain elevated. Adjusted EBITDA for the segment is expected to be down slightly compared to the third quarter but higher for the full year 2022 compared to 2021.
Paperboard
Paperboard prices are expected to remain elevated in the fourth quarter driven by strong demand in both the commercial printing and packaging end-use markets. Sales volumes and raw material costs are expected to remain steady. As a result, Paperboard is anticipated to deliver another solid quarter of Adjusted EBITDA.
High-Yield Pulp
High-yield pulp markets appear to be peaking as global economic demand slows. However, due to the sales lag experienced in this segment, realized prices are still expected to increase in the fourth quarter. Sales volumes are anticipated to increase significantly as production and logistics constraints improve. As such, Adjusted EBITDA for High-Yield Pulp is anticipated to improve in the coming quarter.
A Sustainable Future
For over 95 years, the Company has invested in renewable product offerings and the Company’s biorefinery model provides a platform to grow existing and new products to address needs of the changing economy. The Company continues to focus on growing its bio-based product offering. In the first nine months of 2022, other sales in the High Purity Cellulose segment were $84 million primarily related to sales of bioelectricity and lignosulfonates. The Company expects to grow these sales and increase overall margins over time.
The Company’s investment into a bioethanol facility at its Tartas, France facility is anticipated to be operational in 2024, subject to the approval of certain permits. Further updates will be provided as the schedule is finalized.
Conference Call Information
RYAM will host a conference call and live webcast at 9:00 a.m. ET on Wednesday, November 2, 2022 to discuss these results. Supplemental materials and access to the live audio webcast will be available at www.RYAMglobal.com. A replay of this webcast will be archived on the company’s website shortly after the call.
Investors may listen to the conference call by dialing 888-645-4404, no passcode required. For international parties, dial 404-267-0371. A replay of the teleconference will be available one hour after the call ends until 6:00 p.m. ET on Wednesday, November 16, 2022. The replay dial-in number within the U.S. is 877-660-6853, international is 201-612-7415, Conference ID: 13731224.
About RYAM
RYAM is a global leader of cellulose-based technologies, including high purity cellulose specialties, a natural polymer commonly found in filters, food, pharmaceuticals and other industrial applications. The Company also manufactures products for paper and packaging markets. With manufacturing operations in the U.S., Canada and France, RYAM employs just over 2,500 people and generated $1.4 billion of revenues in 2021. More information is available at www.RYAMglobal.com.
Forward-Looking Statements
Certain statements in this document regarding anticipated financial, business, legal or other outcomes including business and market conditions, outlook and other similar statements relating to RYAM’s future events, developments, or financial or operational performance or results, are “forward-looking statements” made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. These forward-looking statements are identified by the use of words such as “may,” “will,” “should,” “expect,” “estimate,” “believe,” “intend,” “forecast,” “anticipate,” “guidance,” and other similar language. However, the absence of these or similar words or expressions does not mean a statement is not forward-looking. While we believe these forward-looking statements are reasonable when made, forward-looking statements are not guarantees of future performance or events and undue reliance should not be placed on these statements. Although we believe the expectations reflected in any forward-looking statements are based on reasonable assumptions, we can give no assurance these expectations will be attained and it is possible actual results may differ materially from those indicated by these forward-looking statements due to a variety of risks and uncertainties. All statements made in this earnings release are made only as of the date set forth at the beginning of this release. The Company undertakes no obligation to update the information made in this release in the event facts or circumstances subsequently change after the date of this release. The Company has not filed its Form 10-Q for the quarter ended September 24, 2022. As a result, all financial results described in this earnings release should be considered preliminary, and are subject to change to reflect any necessary adjustments or changes in accounting estimates, that are identified prior to the time the Company files its Form 10-Q.
Our operations are subject to a number of risks and uncertainties including, but not limited to, those listed below. When considering an investment in our securities, you should carefully read and consider these risks, together with all other information in our Annual Report on Form 10-K and our other filings and submissions to the SEC, which provide much more information and detail on the risks described below. If any of the events described in the following risk factors actually occur, our business, financial condition or operating results, as well as the market price of our securities, could be materially adversely affected. These risks and events include, without limitation: Epidemic and Pandemic Risks We are subject to risks associated with epidemics and pandemics, including the COVID-19 pandemic and related impacts. The nature and extent of ongoing and future impacts of the pandemic are highly uncertain and unpredictable. Macroeconomic and Industry Risks The businesses we operate are highly competitive which may result in fluctuations in pricing and volume that can materially adversely affect our business, financial condition and results of operations. Changes in raw material and energy availability and prices could have a material adverse effect on our business, results of operations and financial condition. We are subject to material risks associated with doing business outside of the United States. Currency fluctuations may have a material negative impact on our business, financial condition and results of operations. Restrictions on trade through tariffs, countervailing and anti-dumping duties, quotas and other trade barriers, in the United States and internationally, could materially adversely affect our ability to access certain markets. The Company’s business, financial condition and results of operations could be adversely affected by disruptions in the global economy caused by the ongoing conflict between Russia and Ukraine or other geopolitical conflict. Business and Operational Risks Our ten largest customers represent approximately 40 percent of our 2021 revenue, and the loss of all or a substantial portion of our revenue from these large customers could have a material adverse effect on our business. A material disruption at one of our major manufacturing facilities could prevent us from meeting customer demand, reduce our sales and profitability, increase our cost of production and capital needs, or otherwise materially adversely affect our business, financial condition and results of operation. The availability of, and prices for, wood fiber may have a material adverse impact on our business, results of operations and financial condition. Our operations require substantial capital. We depend on third parties for transportation services and increases in costs and the availability of transportation could materially adversely affect our business. Our failure to maintain satisfactory labor relations could have a material adverse effect on our business. We are dependent upon attracting and retaining key personnel, the loss of whom could materially adversely affect our business. Failure to develop new products or discover new applications for our existing products, or our inability to protect the intellectual property underlying such new products or applications, could have a material negative impact on our business. The risk of loss of the Company’s intellectual property and sensitive data, or disruption of its manufacturing operations, in each case due to cyberattacks or cybersecurity breaches, could materially adversely impact the Company. Regulatory Risks Our business is subject to extensive environmental laws, regulations and permits that may materially restrict or adversely affect how we conduct business and our financial results. The Company considers and evaluates climate-related risk in three general categories; Regulatory, Transition to low-carbon economy, and Physical risks related to climate-change. The potential longer-term impacts of climate-related risks remain uncertain at this time. Financial Risks We may need to make significant additional cash contributions to our retirement benefit plans if investment returns on pension assets are lower than expected or interest rates decline, and/or due to changes to regulatory, accounting and actuarial requirements. We have debt obligations that could materially adversely affect our business and our ability to meet our obligations. The phase-out of the London Inter Bank Offered Rate (“LIBOR”) as an interest rate benchmark in 2023 may impact our borrowing costs. Challenges in the commercial and credit environments, including material increases in interest rates, may materially adversely affect our future access to capital.
Media: Ryan Houck, 904-357-9134
Investors: Mickey Walsh, 904-357-9162
HAMILTON, Bermuda--(BUSINESS WIRE)--Valaris Limited (NYSE: VAL) ("Valaris" or the "Company") today reported third quarter 2022 results.
President and Chief Executive Officer Anton Dibowitz said, “During the third quarter, we continued to deliver strong operational performance while remaining focused on providing safe, reliable, and efficient operations. We are pleased to once again be recognized by our customers as the No. 1 offshore driller in total satisfaction in the leading independent survey covering offshore drillers. We remain disciplined in our approach to fleet management and recently executed an agreement on a value-accretive rig sale, which will position us to redeploy capital on opportunities with more attractive return profiles.”
Dibowitz added, “The fundamental outlook for our industry remains constructive. A lack of investment in new sources of production over the past several years has contributed to a tight supply picture that has been exacerbated by geopolitical instability and an increased focus on energy security. We believe that the outlook for commodity supply and demand, and the significant reduction in excess rig capacity over the past several years, lay the foundation for a sustained upcycle. We retain significant operational leverage to the improving market through our high-quality stacked fleet and will continue to exercise our operational leverage in a disciplined manner to help maximize future earnings and free cash flow.”
Financial and Operational Highlights
Third Quarter Review
Net income was $78 million compared to $113 million in the second quarter 2022. Adjusted EBITDA increased to $76 million from $29 million in the second quarter. Adjusted EBITDAR increased to $94 million from $54 million in the second quarter.
Revenues increased to $437 million from $413 million in the second quarter 2022. Excluding reimbursable items, revenues increased to $416 million from $385 million in the second quarter. The increase was primarily due to higher utilization for floaters and higher average day rates for both the floater and jackup fleets, partially offset by a $51 million termination fee related to the termination of a contract for VALARIS DS-11 during the second quarter.
Contract drilling expense decreased to $337 million from $362 million in the second quarter 2022. Excluding reimbursable items, contract drilling expense decreased to $316 million from $334 million in the second quarter, primarily due to increased costs of certain claims and costs associated with the VALARIS DS-11 contract termination in the second quarter as well as lower reactivation costs, which decreased to $18 million from $24 million in the second quarter. This was partially offset by higher rig operating costs in the third quarter related to an increase in operating days across the fleet.
There was no loss on impairment in the third quarter 2022. Loss on impairment of $35 million in the second quarter related to the termination of a contract for VALARIS DS-11. Costs incurred for capital upgrades specific to the customer requirements resulted in a pre-tax, non-cash loss on impairment during the second quarter.
Depreciation expense increased marginally to $23 million from $22 million in the second quarter 2022. General and administrative expense of $19 million was in line with the second quarter.
Other income decreased to $30 million from $149 million in the second quarter 2022 due to gain on sale of assets of $135 million primarily related to the sale of jackups VALARIS 113, 114 and 36 in the second quarter as well as additional proceeds received in the second quarter on the sale of a rig in a prior year. This was partially offset by non-cash interest income of $15 million recognized in the third quarter for a write-off of the discount attributable to the $40 million of shareholder notes receivable repaid by ARO.
Tax expense was $14 million compared to $20 million in the second quarter 2022. The third quarter tax provision included $2 million of discrete tax expense primarily attributable to changes in liabilities for unrecognized tax benefits associated with tax positions taken in prior years, partially offset by discrete tax benefits attributable to the resolution of other prior period tax matters. The second quarter tax provision included $6 million of discrete tax expense primarily attributable to income associated with a contract termination. Adjusted for discrete items, tax expense decreased to $12 million from $14 million in the second quarter.
Third Quarter Segment Review
Floaters
Floater revenues increased to $202 million from $188 million in the second quarter 2022. Excluding reimbursable items, revenues increased to $192 million from $171 million in the second quarter. The increase was primarily due to the impact of reactivated rigs returning to work as VALARIS DS-9 and DS-4 started contracts early in the third quarter, following VALARIS DS-16 and DPS-1, which commenced contracts during the second quarter. Also, revenues increased for VALARIS MS-1 due to more operating days and a higher average day rate during the third quarter as compared to the second quarter. This was partially offset by a $51 million termination fee related to the termination of a contract for VALARIS DS-11 recognized during the second quarter.
Contract drilling expense decreased to $161 million from $165 million in the second quarter 2022. Excluding reimbursable items, contract drilling expense increased to $151 million from $148 million in the second quarter primarily due to higher activity levels resulting from the reactivation of several rigs. This was partially offset by increased costs of certain claims and costs associated with the VALARIS DS-11 contract termination during the second quarter, and lower rig reactivation costs in the third quarter as reactivated rigs returned to work.
Jackups
Jackup revenues increased to $196 million from $186 million in the second quarter 2022. Excluding reimbursable items, revenues increased to $190 million from $180 million in the second quarter primarily due to more operating days for VALARIS Viking and 107, which experienced some idle time between contracts in the second quarter, and higher average day rates for VALARIS Stavanger and 123. This was partially offset by idle time between contracts for VALARIS 118, out of service time for planned maintenance on VALARIS 92, and a lower average day rate for VALARIS Viking.
Contract drilling expense decreased to $128 million from $142 million in the second quarter 2022. Excluding reimbursable items, contract drilling expense decreased to $123 million from $136 million in the second quarter primarily due to repair and maintenance costs incurred during the second quarter related to leg repairs on VALARIS 107 and lower costs due to VALARIS 141 commencing a three-year bareboat charter agreement with ARO during the third quarter.
ARO Drilling
Revenues decreased to $111 million from $116 million in the second quarter 2022 primarily due to an increase in out of service time related to planned maintenance on certain rigs. Contract drilling expense increased to $90 million from $82 million in the second quarter primarily due to an increase in planned maintenance costs. Operating income was $1 million compared to $16 million in the second quarter. EBITDA was $17 million compared to $31 million in the second quarter.
Other
Revenues increased marginally to $40 million from $39 million in the second quarter 2022. Contract drilling expense decreased to $18 million from $25 million in the second quarter primarily due to increased costs of certain claims in the second quarter. Operating income was $21 million compared to $13 million in the second quarter. EBITDA was $22 million compared to $15 million in the second quarter.
|
Third Quarter |
|||||||||||||||||||||||||||||||||||||||||||
|
Floaters |
|
Jackups |
|
ARO |
|
Other |
|
Reconciling Items |
|
Consolidated Total |
|||||||||||||||||||||||||||||||||
(in millions of $, except %) |
Q3 2022 |
Q2 2022 |
Chg |
|
Q3 2022 |
Q2 2022 |
Chg |
|
Q3 2022 |
Q2 2022 |
Chg |
|
Q3 2022 |
Q2 2022 |
Chg |
|
Q3 2022 |
Q2 2022 |
|
Q3 2022 |
Q2 2022 |
Chg |
||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||
Revenues |
201.7 |
188.1 |
|
7 |
% |
|
195.9 |
185.8 |
5 |
% |
|
111.4 |
|
116.4 |
(4 |
)% |
|
39.6 |
39.4 |
1 |
% |
|
(111.4 |
) |
(116.4 |
) |
|
437.2 |
413.3 |
|
6 |
% |
||||||||||||
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||
Contract drilling |
160.5 |
165.3 |
|
3 |
% |
|
128.0 |
142.2 |
10 |
% |
|
90.0 |
|
82.1 |
(10 |
)% |
|
17.8 |
24.7 |
28 |
% |
|
(59.6 |
) |
(52.5 |
) |
|
336.7 |
361.8 |
|
7 |
% |
||||||||||||
Loss on Impairment |
— |
34.5 |
|
100 |
% |
|
— |
— |
— |
|
|
— |
|
— |
— |
% |
|
— |
— |
— |
% |
|
— |
|
— |
|
|
— |
34.5 |
|
100 |
% |
||||||||||||
Depreciation |
12.6 |
12.3 |
|
(2 |
)% |
|
8.7 |
8.7 |
— |
% |
|
15.4 |
|
15.4 |
— |
% |
|
1.2 |
1.3 |
8 |
% |
|
(15.3 |
) |
(15.4 |
) |
|
22.6 |
22.3 |
|
(1 |
)% |
||||||||||||
General and admin. |
— |
— |
|
— |
% |
|
— |
— |
— |
% |
|
4.7 |
|
3.2 |
(47 |
)% |
|
— |
— |
— |
% |
|
14.5 |
|
15.8 |
|
|
19.2 |
19.0 |
|
(1 |
)% |
||||||||||||
Equity in earnings of ARO |
— |
— |
|
— |
% |
|
— |
— |
— |
% |
|
— |
|
— |
— |
% |
|
— |
— |
— |
% |
|
2.9 |
|
8.7 |
|
|
2.9 |
8.7 |
|
(67 |
)% |
||||||||||||
Operating income (loss) |
28.6 |
(24.0 |
) |
nm |
|
59.2 |
34.9 |
70 |
% |
|
1.3 |
|
15.7 |
(92 |
)% |
|
20.6 |
13.4 |
54 |
% |
|
(48.1 |
) |
(55.6 |
) |
|
61.6 |
(15.6 |
) |
nm |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||
Net income (loss) |
28.6 |
(24.1 |
) |
nm |
|
59.1 |
170.3 |
(65 |
)% |
|
(1.3 |
) |
9.9 |
nm |
|
20.7 |
13.4 |
54 |
% |
|
(29.4 |
) |
(56.7 |
) |
|
77.7 |
112.8 |
|
(31 |
)% |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||
Adjusted EBITDA |
40.7 |
23.1 |
|
76 |
% |
|
62.6 |
40.0 |
57 |
% |
|
16.7 |
|
31.1 |
(46 |
)% |
|
22.1 |
14.9 |
48 |
% |
|
(66.1 |
) |
(79.8 |
) |
|
76.0 |
29.3 |
|
159 |
% |
||||||||||||
Adjusted EBITDAR |
58.5 |
47.2 |
|
24 |
% |
|
62.6 |
40.2 |
56 |
% |
|
16.7 |
|
31.1 |
(46 |
)% |
|
22.1 |
14.9 |
48 |
% |
|
(66.1 |
) |
(79.8 |
) |
|
93.8 |
53.6 |
|
75 |
% |
||||||||||||
As previously announced, Valaris will hold its third quarter 2022 earnings conference call at 9:00 a.m. CT (10:00 a.m. ET) on Tuesday, November 1, 2022. An updated investor presentation will be available on the Valaris website after the call.
About Valaris Limited
Valaris Limited (NYSE: VAL) is the industry leader in offshore drilling services across all water depths and geographies. Operating a high-quality rig fleet of ultra-deepwater drillships, versatile semisubmersibles, and modern shallow-water jackups, Valaris has experience operating in nearly every major offshore basin. Valaris maintains an unwavering commitment to safety, operational excellence, and customer satisfaction, with a focus on technology and innovation. Valaris Limited is a Bermuda exempted company. To learn more, visit the Valaris website at www.valaris.com.
Forward-Looking Statements
Statements contained in this press release that are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include words or phrases such as "anticipate," "believe," "estimate," "expect," "intend," "likely," "plan," "project," "could," "may," "might," "should," "will" and similar words and specifically include statements regarding expected financial performance; expected utilization, day rates, revenues, operating expenses, rig commitments and availability, cash flows, contract status, terms and duration, contract backlog, capital expenditures, insurance, financing and funding; impact of our emergence from bankruptcy; the offshore drilling market, including supply and demand, customer drilling programs, stacking of rigs, effects of new rigs on the market and effect of the volatility of commodity prices; expected work commitments, awards and contracts; letters of intent; scheduled delivery dates for rigs; performance of our joint venture with Saudi Aramco; the timing of delivery, mobilization, contract commencement, availability, relocation or other movement of rigs; future rig reactivations; expected divestitures of assets; general economic, market, business and industry conditions, including inflation and recessions, trends and outlook; general political conditions, including political tensions, conflicts and war (such as the ongoing conflict in Ukraine); future operations; increasing regulatory complexity; the outcome of tax disputes; assessments and settlements; and expense management. The forward-looking statements contained in this press release are subject to numerous risks, uncertainties and assumptions that may cause actual results to vary materially from those indicated, including cancellation, suspension, renegotiation or termination of drilling contracts and programs, including drilling contracts which grant the customer termination right if FID is not received with respect to projects for which the drilling rig is contracted; potential additional asset impairments; failure to satisfy our debt obligations; our ability to obtain financing, service our debt, fund capital expenditures and pursue other business opportunities; adequacy of sources of liquidity for us and our customers; the COVID-19 outbreak and global pandemic and the related public health measures implemented by governments worldwide, which may, among other things, impact our ability to staff rigs and rotate crews; the effects of our emergence from bankruptcy on the Company's business, relationships, comparability of our financial results and ability to access financing sources; actions by regulatory authorities, or other third parties; actions by our security holders; commodity price fluctuations and volatility, customer demand, new rig supply, downtime and other risks associated with offshore rig operations; severe weather or hurricanes; changes in worldwide rig supply and demand, competition and technology; consumer preferences for alternative fuels; increased scrutiny of our Environmental, Social and Governance practices and reporting responsibilities; changes in customer strategy; future levels of offshore drilling activity; governmental action, civil unrest and political and economic uncertainties; terrorism, piracy and military action; risks inherent to shipyard rig reactivation, upgrade, repair, maintenance or enhancement; our ability to enter into, and the terms of, future drilling contracts; suitability of rigs for future contracts; the cancellation of letters of intent or letters of award or any failure to execute definitive contracts following announcements of letters of intent, letters of award or other expected work commitments; the outcome of litigation, legal proceedings, investigations or other claims or contract disputes; governmental regulatory, legislative and permitting requirements affecting drilling operations; our ability to attract and retain skilled personnel on commercially reasonable terms; environmental or other liabilities, risks or losses; debt restrictions that may limit our liquidity and flexibility; and cybersecurity risks and threats. In addition to the numerous factors described above, you should also carefully read and consider "Item 1A. Risk Factors" in Part I and "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II of our most recent annual report on Form 10-K, which is available on the SEC's website at www.sec.gov or on the Investor Relations section of our website at www.valaris.com. Each forward-looking statement speaks only as of the date of the particular statement, and we undertake no obligation to update or revise any forward-looking statements, except as required by law.
VALARIS LIMITED AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF OPERATIONS |
(In millions, except per share amounts) |
|
|
Three Months Ended |
||||||||||||||||||
|
September 30,
|
|
June 30,
|
|
March 31,
|
|
December 31,
|
|
September 30,
|
||||||||||
OPERATING REVENUES |
$ |
437.2 |
|
|
$ |
413.3 |
|
|
$ |
318.4 |
|
|
$ |
305.5 |
|
|
$ |
326.7 |
|
|
|
|
|
|
|
|
|
|
|
||||||||||
OPERATING EXPENSES |
|
|
|
|
|
|
|
|
|
||||||||||
Contract drilling (exclusive of depreciation) |
|
336.7 |
|
|
|
361.8 |
|
|
|
331.3 |
|
|
|
285.5 |
|
|
|
274.6 |
|
Loss on impairment |
|
— |
|
|
|
34.5 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Depreciation |
|
22.6 |
|
|
|
22.3 |
|
|
|
22.5 |
|
|
|
25.1 |
|
|
|
24.4 |
|
General and administrative |
|
19.2 |
|
|
|
19.0 |
|
|
|
18.8 |
|
|
|
18.3 |
|
|
|
27.2 |
|
Total operating expenses |
|
378.5 |
|
|
|
437.6 |
|
|
|
372.6 |
|
|
|
328.9 |
|
|
|
326.2 |
|
EQUITY IN EARNINGS (LOSSES) OF ARO |
|
2.9 |
|
|
|
8.7 |
|
|
|
4.3 |
|
|
|
(1.3 |
) |
|
|
2.6 |
|
OPERATING INCOME (LOSS) |
|
61.6 |
|
|
|
(15.6 |
) |
|
|
(49.9 |
) |
|
|
(24.7 |
) |
|
|
3.1 |
|
|
|
|
|
|
|
|
|
|
|
||||||||||
OTHER INCOME (EXPENSE) |
|
|
|
|
|
|
|
|
|
||||||||||
Interest income |
|
27.9 |
|
|
|
11.2 |
|
|
|
10.9 |
|
|
|
11.0 |
|
|
|
9.7 |
|
Interest expense, net |
|
(11.7 |
) |
|
|
(11.6 |
) |
|
|
(11.5 |
) |
|
|
(11.7 |
) |
|
|
(11.3 |
) |
Reorganization items, net |
|
(0.4 |
) |
|
|
(0.7 |
) |
|
|
(1.0 |
) |
|
|
(4.9 |
) |
|
|
(6.5 |
) |
Other, net |
|
14.1 |
|
|
|
149.7 |
|
|
|
11.0 |
|
|
|
27.0 |
|
|
|
5.5 |
|
|
|
29.9 |
|
|
|
148.6 |
|
|
|
9.4 |
|
|
|
21.4 |
|
|
|
(2.6 |
) |
|
|
|
|
|
|
|
|
|
|
||||||||||
INCOME (LOSS) BEFORE INCOME TAXES |
|
91.5 |
|
|
|
133.0 |
|
|
|
(40.5 |
) |
|
|
(3.3 |
) |
|
|
0.5 |
|
|
|
|
|
|
|
|
|
|
|
||||||||||
PROVISION (BENEFIT) FOR INCOME TAXES |
|
13.8 |
|
|
|
20.2 |
|
|
|
(0.7 |
) |
|
|
(31.0 |
) |
|
|
53.3 |
|
|
|
|
|
|
|
|
|
|
|
||||||||||
NET INCOME (LOSS) |
|
77.7 |
|
|
|
112.8 |
|
|
|
(39.8 |
) |
|
|
27.7 |
|
|
|
(52.8 |
) |
|
|
|
|
|
|
|
|
|
|
||||||||||
NET (INCOME) LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS |
|
(3.4 |
) |
|
|
(1.2 |
) |
|
|
1.2 |
|
|
|
— |
|
|
|
(1.7 |
) |
|
|
|
|
|
|
|
|
|
|
||||||||||
NET INCOME (LOSS) ATTRIBUTABLE TO VALARIS |
$ |
74.3 |
|
|
$ |
111.6 |
|
|
$ |
(38.6 |
) |
|
$ |
27.7 |
|
|
$ |
(54.5 |
) |
|
|
|
|
|
|
|
|
|
|
||||||||||
INCOME (LOSS) PER SHARE |
|
|
|
|
|
|
|
|
|
||||||||||
Basic |
$ |
0.99 |
|
|
$ |
1.49 |
|
|
$ |
(0.51 |
) |
|
$ |
0.37 |
|
|
$ |
(0.73 |
) |
Diluted |
$ |
0.98 |
|
|
$ |
1.48 |
|
|
$ |
(0.51 |
) |
|
$ |
0.37 |
|
|
$ |
(0.73 |
) |
WEIGHTED-AVERAGE SHARES OUTSTANDING |
|
|
|
|
|
|
|
|
|
||||||||||
Basic |
|
75.1 |
|
|
|
75.0 |
|
|
|
75.0 |
|
|
|
75.0 |
|
|
|
75.0 |
|
Diluted |
|
75.6 |
|
|
|
75.6 |
|
|
|
75.0 |
|
|
|
75.0 |
|
|
|
75.0 |
|
VALARIS LIMITED AND SUBSIDIARIES |
CONSOLIDATED BALANCE SHEETS |
(In millions) |
|
|
September 30,
|
June 30,
|
March 31,
|
December 31,
|
September 30,
|
|||||||||
ASSETS |
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|||||||||
CURRENT ASSETS |
|
|
|
|
|
|||||||||
Cash and cash equivalents |
$ |
406.0 |
$ |
553.5 |
$ |
578.2 |
$ |
608.7 |
$ |
620.8 |
||||
Restricted cash |
|
18.2 |
|
23.8 |
|
30.0 |
|
35.9 |
|
33.9 |
||||
Short-term investments |
|
220.0 |
|
— |
|
— |
|
— |
|
— |
||||
Accounts receivable, net |
|
535.5 |
|
544.6 |
|
439.3 |
|
444.2 |
|
455.8 |
||||
Other current assets |
|
162.9 |
|
159.0 |
|
125.7 |
|
117.8 |
|
117.0 |
||||
Total current assets |
$ |
1,342.6 |
$ |
1,280.9 |
$ |
1,173.2 |
$ |
1,206.6 |
$ |
1,227.5 |
||||
|
|
|
|
|
|
|||||||||
PROPERTY AND EQUIPMENT, NET |
|
953.6 |
|
931.7 |
|
930.2 |
|
890.9 |
|
892.3 |
||||
|
|
|
|
|
|
|||||||||
LONG-TERM NOTES RECEIVABLE FROM ARO |
|
246.9 |
|
264.5 |
|
256.8 |
|
249.1 |
|
241.3 |
||||
|
|
|
|
|
|
|||||||||
INVESTMENT IN ARO |
|
102.6 |
|
99.6 |
|
90.9 |
|
86.6 |
|
87.9 |
||||
|
|
|
|
|
|
|||||||||
OTHER ASSETS |
|
175.5 |
|
184.1 |
|
186.6 |
|
176.0 |
|
153.5 |
||||
|
|
|
|
|
|
|||||||||
|
$ |
2,821.2 |
$ |
2,760.8 |
$ |
2,637.7 |
$ |
2,609.2 |
$ |
2,602.5 |
||||
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|||||||||
LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|||||||||
CURRENT LIABILITIES |
|
|
|
|
|
|||||||||
Accounts payable - trade |
$ |
256.6 |
$ |
287.0 |
$ |
311.2 |
$ |
225.8 |
$ |
203.0 |
||||
Accrued liabilities and other |
|
262.5 |
|
260.1 |
|
212.1 |
|
196.2 |
|
223.8 |
||||
Total current liabilities |
$ |
519.1 |
$ |
547.1 |
$ |
523.3 |
$ |
422.0 |
$ |
426.8 |
||||
|
|
|
|
|
|
|||||||||
LONG-TERM DEBT |
|
541.8 |
|
545.7 |
|
545.5 |
|
545.3 |
|
545.1 |
||||
|
|
|
|
|
|
|||||||||
OTHER LIABILITIES |
|
539.8 |
|
527.6 |
|
544.8 |
|
581.1 |
|
591.3 |
||||
|
|
|
|
|
|
|||||||||
TOTAL LIABILITIES |
|
1,600.7 |
|
1,620.4 |
|
1,613.6 |
|
1,548.4 |
|
1,563.2 |
||||
|
|
|
|
|
|
|||||||||
TOTAL EQUITY |
|
1,220.5 |
|
1,140.4 |
|
1,024.1 |
|
1,060.8 |
|
1,039.3 |
||||
|
|
|
|
|
|
|||||||||
|
$ |
2,821.2 |
$ |
2,760.8 |
$ |
2,637.7 |
$ |
2,609.2 |
$ |
2,602.5 |
||||
VALARIS LIMITED AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF CASH FLOWS |
(In millions) |
|
|
Successor |
|
|
Predecessor |
|
Combined (Non-GAAP) (3) |
||||||||||
|
Nine Months Ended September 30, 2022 |
|
Five Months Ended September 30, 2021 (1) |
|
|
Four Months Ended April 30, 2021 (2) |
|
Nine Months Ended September 30, 2021 |
||||||||
OPERATING ACTIVITIES |
|
|
|
|
|
|
|
|
||||||||
Net income (loss) |
$ |
150.7 |
|
|
$ |
(56.9 |
) |
|
|
$ |
(4,463.8 |
) |
|
$ |
(4,520.7 |
) |
Adjustments to reconcile net income (loss) to net cash used in operating activities: |
|
|
|
|
|
|
|
|
||||||||
Gain on asset disposals |
|
(137.7 |
) |
|
|
(0.2 |
) |
|
|
|
(6.0 |
) |
|
|
(6.2 |
) |
Depreciation expense |
|
67.4 |
|
|
|
41.0 |
|
|
|
|
159.6 |
|
|
|
200.6 |
|
Accretion of discount on notes receivable |
|
(37.8 |
) |
|
|
(12.9 |
) |
|
|
|
— |
|
|
|
(12.9 |
) |
Loss on impairment |
|
34.5 |
|
|
|
— |
|
|
|
|
756.5 |
|
|
|
756.5 |
|
Equity in earnings of ARO |
|
(15.9 |
) |
|
|
(7.4 |
) |
|
|
|
(3.1 |
) |
|
|
(10.5 |
) |
Net periodic pension and retiree medical income |
|
(12.1 |
) |
|
|
(6.1 |
) |
|
|
|
(5.4 |
) |
|
|
(11.5 |
) |
Share-based compensation expense |
|
11.5 |
|
|
|
1.6 |
|
|
|
|
4.8 |
|
|
|
6.4 |
|
Deferred income tax expense (benefit) |
|
7.1 |
|
|
|
1.2 |
|
|
|
|
(18.2 |
) |
|
|
(17.0 |
) |
Amortization, net |
|
(7.0 |
) |
|
|
2.8 |
|
|
|
|
(4.8 |
) |
|
|
(2.0 |
) |
Amortization of debt issuance cost |
|
0.7 |
|
|
|
0.3 |
|
|
|
|
— |
|
|
|
0.3 |
|
Non-cash reorganization items, net |
|
— |
|
|
|
— |
|
|
|
|
3,487.3 |
|
|
|
3,487.3 |
|
Other |
|
0.8 |
|
|
|
— |
|
|
|
|
7.3 |
|
|
|
7.3 |
|
Changes in operating assets and liabilities: |
|
(85.9 |
) |
|
|
19.3 |
|
|
|
|
68.5 |
|
|
|
87.8 |
|
Contributions to pension plans and other post-retirement benefits |
|
(3.3 |
) |
|
|
(1.7 |
) |
|
|
|
(22.5 |
) |
|
|
(24.2 |
) |
Net cash used in operating activities |
$ |
(27.0 |
) |
|
$ |
(19.0 |
) |
|
|
$ |
(39.8 |
) |
|
$ |
(58.8 |
) |
|
|
|
|
|
|
|
|
|
||||||||
INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
||||||||
Purchases of short-term investments |
$ |
(220.0 |
) |
|
$ |
— |
|
|
|
$ |
— |
|
|
$ |
— |
|
Additions to property and equipment |
|
(153.1 |
) |
|
|
(23.7 |
) |
|
|
|
(8.7 |
) |
|
|
(32.4 |
) |
Net proceeds from disposition of assets |
|
146.8 |
|
|
|
1.5 |
|
|
|
|
30.1 |
|
|
|
31.6 |
|
Repayments of note receivable from ARO |
|
40.0 |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
Net cash provided by (used in) investing activities |
$ |
(186.3 |
) |
|
$ |
(22.2 |
) |
|
|
$ |
21.4 |
|
|
$ |
(0.8 |
) |
|
|
|
|
|
|
|
|
|
||||||||
FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
||||||||
Consent solicitation fees |
$ |
(3.9 |
) |
|
$ |
— |
|
|
|
$ |
— |
|
|
$ |
— |
|
Payments related to tax withholdings for share-based awards |
|
(2.5 |
) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
Issuance of first lien notes |
|
— |
|
|
|
— |
|
|
|
|
520.0 |
|
|
|
520.0 |
|
Payment to Predecessor creditors |
|
— |
|
|
|
— |
|
|
|
|
(129.9 |
) |
|
|
(129.9 |
) |
Other |
|
— |
|
|
|
— |
|
|
|
|
(1.4 |
) |
|
|
(1.4 |
) |
Net cash provided by (used in) financing activities |
$ |
(6.4 |
) |
|
$ |
— |
|
|
|
$ |
388.7 |
|
|
$ |
388.7 |
|
|
|
|
|
|
|
|
|
|
||||||||
Effect of exchange rate changes on cash and cash equivalents |
$ |
(0.7 |
) |
|
$ |
(0.1 |
) |
|
|
$ |
(0.1 |
) |
|
$ |
(0.2 |
) |
|
|
|
|
|
|
|
|
|
||||||||
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH |
$ |
(220.4 |
) |
|
$ |
(41.3 |
) |
|
|
$ |
370.2 |
|
|
$ |
328.9 |
|
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD |
|
644.6 |
|
|
|
696.0 |
|
|
|
|
325.8 |
|
|
|
325.8 |
|
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD |
$ |
424.2 |
|
|
$ |
654.7 |
|
|
|
$ |
696.0 |
|
|
$ |
654.7 |
|
(1) |
Represents cash flows for the period from May 1, 2021, through September 30, 2021 (the "Successor" period). |
(2) |
Represents cash flows for the period from January 1, 2021, through April 30, 2021 (the "Predecessor" period). |
(3) |
As required by GAAP, results for the Successor and Predecessor periods must be presented separately. However, the Company has combined the cash flows of the Successor and Predecessor periods ("combined" results) as a non-GAAP measure to compare the nine-month period ended September 30, 2022, to the nine-month period ended September 30, 2021, since we believe it provides the most meaningful basis to analyze our results. These combined results do not comply with GAAP and have not been prepared as pro forma results under applicable SEC rules. |
VALARIS LIMITED AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF CASH FLOWS |
(In millions) |
|
|
Three Months Ended |
|||||||||||||||||||
|
September 30,
|
June 30,
|
March 31,
|
December 31,
|
September 30,
|
|||||||||||||||
OPERATING ACTIVITIES |
|
|
|
|
|
|||||||||||||||
Net income (loss) |
$ |
77.7 |
|
$ |
112.8 |
|
$ |
(39.8 |
) |
$ |
27.7 |
|
$ |
(52.8 |
) |
|||||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |
|
|
|
|
|
|||||||||||||||
Depreciation expense |
|
22.6 |
|
|
22.3 |
|
|
22.5 |
|
|
25.1 |
|
|
24.4 |
|
|||||
Accretion of discount on notes receivable |
|
(22.4 |
) |
|
(7.7 |
) |
|
(7.7 |
) |
|
(7.9 |
) |
|
(6.9 |
) |
|||||
Amortization, net |
|
(5.4 |
) |
|
(3.2 |
) |
|
1.6 |
|
|
(0.5 |
) |
|
3.1 |
|
|||||
Share-based compensation expense |
|
4.6 |
|
|
3.5 |
|
|
3.4 |
|
|
2.7 |
|
|
1.6 |
|
|||||
Net periodic pension and retiree medical income |
|
(4.0 |
) |
|
(4.1 |
) |
|
(4.0 |
) |
|
(2.6 |
) |
|
(3.7 |
) |
|||||
Equity in losses (earnings) of ARO |
|
(2.9 |
) |
|
(8.7 |
) |
|
(4.3 |
) |
|
1.3 |
|
|
(2.6 |
) |
|||||
Deferred income tax expense (benefit) |
|
0.4 |
|
|
7.3 |
|
|
(0.6 |
) |
|
(22.5 |
) |
|
0.1 |
|
|||||
Amortization of debt issuance cost |
|
0.3 |
|
|
0.2 |
|
|
0.2 |
|
|
0.2 |
|
|
(0.1 |
) |
|||||
Gain on asset disposals |
|
(0.1 |
) |
|
(135.1 |
) |
|
(2.5 |
) |
|
(21.0 |
) |
|
(0.3 |
) |
|||||
Loss on impairment |
|
— |
|
|
34.5 |
|
|
— |
|
|
— |
|
|
— |
|
|||||
Other |
|
0.5 |
|
|
0.3 |
|
|
— |
|
|
0.3 |
|
|
0.2 |
|
|||||
Changes in operating assets and liabilities |
|
16.4 |
|
|
(134.8 |
) |
|
32.5 |
|
|
(9.0 |
) |
|
45.0 |
|
|||||
Contributions to pension plans and other post-retirement benefits |
|
(0.6 |
) |
|
(1.9 |
) |
|
(0.8 |
) |
|
(1.0 |
) |
|
(1.1 |
) |
|||||
Net cash provided by (used in) operating activities |
$ |
87.1 |
|
$ |
(114.6 |
) |
$ |
0.5 |
|
$ |
(7.2 |
) |
$ |
6.9 |
|
|||||
|
|
|
|
|
|
|||||||||||||||
INVESTING ACTIVITIES |
|
|
|
|
|
|||||||||||||||
Purchases of short-term investments |
$ |
(220.0 |
) |
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
|||||
Additions to property and equipment |
|
(53.5 |
) |
|
(61.1 |
) |
|
(38.5 |
) |
|
(26.5 |
) |
|
(15.6 |
) |
|||||
Repayments of note receivable from ARO |
|
40.0 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|||||
Net proceeds from disposition of assets |
|
0.3 |
|
|
145.2 |
|
|
1.3 |
|
|
23.6 |
|
|
1.3 |
|
|||||
Net cash provided by (used in) investing activities |
$ |
(233.2 |
) |
$ |
84.1 |
|
$ |
(37.2 |
) |
$ |
(2.9 |
) |
$ |
(14.3 |
) |
|||||
|
|
|
|
|
|
|||||||||||||||
FINANCING ACTIVITIES |
|
|
|
|
|
|||||||||||||||
Consent solicitation fees |
$ |
(3.9 |
) |
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
|||||
Payments for tax withholdings for share-based awards |
|
(2.3 |
) |
|
(0.2 |
) |
|
— |
|
|
— |
|
|
— |
|
|||||
Net cash used in financing activities |
$ |
(6.2 |
) |
$ |
(0.2 |
) |
$ |
— |
|
$ |
— |
|
$ |
— |
|
|||||
|
|
|
|
|
|
|||||||||||||||
Effect of exchange rate changes on cash and cash equivalents |
$ |
(0.8 |
) |
$ |
(0.2 |
) |
$ |
0.3 |
|
$ |
— |
|
$ |
0.2 |
|
|||||
|
|
|
|
|
|
|||||||||||||||
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH |
$ |
(153.1 |
) |
$ |
(30.9 |
) |
$ |
(36.4 |
) |
$ |
(10.1 |
) |
$ |
(7.2 |
) |
|||||
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD |
|
577.3 |
|
|
608.2 |
|
|
644.6 |
|
|
654.7 |
|
|
661.9 |
|
|||||
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD |
$ |
424.2 |
|
$ |
577.3 |
|
$ |
608.2 |
|
$ |
644.6 |
|
$ |
654.7 |
|
|||||
Investor & Media Contacts:
Darin Gibbins
Vice President - Investor Relations and Treasurer
+1-713-979-4623
Tim Richardson
Director - Investor Relations
+1-713-979-4619
Offshore Source keeps you updated with relevant information concerning the Offshore Energy Sector.
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