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Oiltanking Partners, L.P. Reports Financial Results for the Fourth Quarter and Full Year 2012

HOUSTON, March 6, 2013 /PRNewswire/ -- Oiltanking Partners, L.P. (NYSE: OILT) (the "Partnership") today reported fourth quarter 2012 net income of $15.2 million, or $0.38 per unit, an increase of 28% over fourth quarter 2011 net income of $11.9 million, or $0.30 per unit.  Full year 2012 net income was $62.6 million, or $1.57 per unit, compared to net income for the full year of 2011 of $62.4 million.  The full year 2011 included a $27.1 million income tax benefit due to the elimination of deferred tax accounts related to the conversion to a non-taxable entity in connection with the Partnership's initial public offering.  Net income for the full year 2011, excluding this benefit and other gains and losses, was $41.3 million.  Net income excluding gains and losses, which is a financial measure not presented in accordance with U.S. generally accepted accounting principles ("GAAP"), is defined and reconciled to net income below. 

Adjusted EBITDA for the fourth quarter of 2012 increased 25.1% to $19.8 million compared to $15.9 million for the fourth quarter of 2011.  Adjusted EBTIDA for the full year 2012 increased 19.4% to $80.6 million compared to $67.5 million for 2011.  Adjusted EBITDA, which is a financial measure not presented in accordance with GAAP, is defined and reconciled to net income below.

"Oiltanking Partners delivered a record year in 2012 in terms of revenue and Adjusted EBITDA," said Anne-Marie Ainsworth, President and Chief Executive Officer of the Partnership's general partner.  "2012 results were driven by records for capacity, traffic at our docks and volumes handled at our facilities.  We handled over 300 million barrels of crude oil, refined products and liquefied petroleum gas during 2012, and anticipate that further growth will be supported by strong domestic and international demand for the products we handle and the increasing flow of crude oil and natural gas liquids to the Gulf Coast region."

The Partnership's overall operating income for the fourth quarter of 2012 improved 34% compared to the prior year period primarily due to higher storage and throughput volumes that generated increased service fees, and to higher ancillary service fees, partially offset by higher operating expenses.  More specifically, revenues increased approximately $5.2 million, or 17.9%, to $34.1 million during the 2012 quarter, mainly due to additional revenues from new storage capacity placed into service in December 2011 and in April 2012 and to an escalation in storage fees, resulting in an increase in storage service fee revenue of $2.9 million.  Additionally, the fourth quarter benefitted from higher throughput fee revenue of $1.9 million, largely attributable to higher liquefied petroleum gas exports during 2012.  Ancillary services fee revenue increased by $0.4 million during the quarter.

Operating expenses during the fourth quarter of 2012 were $9.4 million, increasing $1.1 million compared to the same period in 2011, primarily due to higher legal and professional fees associated with easements, customer contracts and rights of ways and to higher operational labor and benefit costs, partially offset by lower property taxes. 

During 2012, the Partnership added 1,045,000 barrels of storage under long-term take-or-pay contracts and in the first quarter of 2013, placed in service the new pipeline projects on-time and on-budget, as well as 825,000 barrels of contracted crude storage.  The final 275,000 barrel tank of this four tank expansion is in the final stages of construction and should be placed into service in the second quarter of 2013.

Based on our current plans, we expect to spend $135 million to $145 million on capital expenditures in 2013 as we continue construction on our previously announced growth projects.  The two crude storage expansion projects that we announced during 2012 are expected to add 3.2 million and 3.3 million barrels of new storage capacity by the end of 2013 and the end of 2014, respectively, bringing total capacity to over 25 million barrels by the end of 2014. 

In addition, on March 6, 2013, we announced a new $44 million project and an expansion of our relationship with Enterprise Products Partners L.P. ("Enterprise") with plans to increase our ability to import/export liquefied petroleum gas at our terminal on the Houston Ship Channel.  In connection with the new multi-year agreement with Enterprise, we will construct a new vessel dock and add infrastructure to existing docks with the capability of handling significantly more liquefied petroleum gas vessels at multiple docks.    

"The Partnership's strong results demonstrate that we are continuing to benefit from our customers' growing demand for our services and the execution of our organic growth plans," added Ainsworth.  "We are actively identifying additional expansion projects that we believe will contribute to our EBITDA growth and position us to continue to increase distributable cash flow to our unitholders.  In addition to organic crude oil storage projects, we anticipate that the increased natural gas liquids production in the U.S. will drive more demand for the handling and export of liquefied petroleum gas from our facilities."

On January 22, 2013, the Partnership declared an increase in its cash distribution to $0.39 per unit, or $1.56 per unit on an annualized basis, for all of its outstanding limited partner units.  The fourth quarter distribution represents a 14.7% increase over the distribution of $0.34 for the fourth quarter of 2011, and our fifth consecutive quarterly increase since going public in the third quarter of 2011.  The $15.5 million fourth quarter 2012 cash distribution was paid on February 14, 2013.  Distributable cash flow for the fourth quarter of 2012 provided distribution coverage of 1.14 times the amount needed for the Partnership to fund the quarterly distribution to both the general and limited partners and incentive distribution rights.  Distributable cash flow and distribution coverage ratio, which are non-GAAP financial measures, are defined and reconciled to net income below.     

Conference Call

The Partnership will hold a conference call to discuss its fourth quarter 2012 financial results on March 7, 2013 at 10:00 a.m. Eastern Time (9:00 a.m. Central Time).  To participate in the call, dial (480) 629-9692 and ask for the Oiltanking call ten minutes prior to the start time, or access it live over the internet at www.oiltankingpartners.com on the "Investor Relations" page of the Partnership's website.

A replay of the audio webcast will be available shortly after the call on the Partnership's website.  A telephonic replay will be available through March 14, 2013 by calling (303) 590-3030 and using the pass code 4592997#.

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

Forward-Looking Statements

This press release contains forward-looking statements. These forward-looking statements reflect the Partnership's current expectations, opinions, views or beliefs with respect to future events, based on what it believes are reasonable assumptions. No assurance can be given, however, that these events will occur.  Important factors that could cause actual results to differ from forward-looking statements include, but are not limited to:  adverse economic or market conditions, changes in demand for the products that we handle or for our services, increased competition, changes in the availability and cost of capital, operating hazards and the effects of existing and future government regulations.  These and other significant risks and uncertainties are described more fully in the Partnership's filings with the U.S. Securities and Exchange Commission (the "SEC"), available at the SEC's website at www.sec.gov.  The Partnership has no obligation and, except as required by law, does not undertake any obligation, to update or revise these statements or provide any other information relating to such statements.

Use of Non-GAAP Financial Measures

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

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

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

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

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

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

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

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

Contacts:
Mark Buscovich, Manager FP&A and IR
ir@oiltankingpartners.com 
(855) 866-6458

Dennard ▪ Lascar Associates
Jack Lascar / Lisa Elliott
(713) 529-6600

— Tables to Follow —





OILTANKING PARTNERS, L.P.

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per unit data)

(Unaudited)










Three Months Ended


Year Ended


December 31,


December 31,


2012


2011


2012


2011









Revenues

$

34,061



$

28,901



$

135,497



$

117,377


Costs and expenses:








Operating

9,386



8,320



36,025



31,862


Selling, general and administrative

4,841



4,727



18,856



17,985


Depreciation and amortization

3,828



3,881



15,901



15,676


Loss on disposal of fixed assets





13



544


Gain on property casualty indemnification







(928)


Total costs and expenses

18,055



16,928



70,795



65,139


Operating income

16,006



11,973



64,702



52,238


Other income (expense):








Interest expense

(560)



(236)



(1,654)



(5,438)


Loss on early extinguishment of debt







(6,382)


Interest income

2



11



33



42


Other income

66





140



431


Total other expense, net

(492)



(225)



(1,481)



(11,347)


Income before income tax (expense) benefit

15,514



11,748



63,221



40,891


Income tax (expense) benefit

(336)



103



(576)



21,506


Net income

$

15,178



$

11,851



$

62,645



$

62,397










Allocation of 2011 net income for earnings per unit calculation:








Net income



$

11,851





$

62,397


Net income prior to initial public offering on July 19, 2011







(38,591)


Net income subsequent to initial public offering on July 19, 2011



$

11,851





$

23,806










Allocation of net income to partners: (1)








Net income allocated to general partner

$

316



$

237



$

1,489



$

476


Net income allocated to common unitholders

$

7,431



$

5,807



$

30,578



$

11,665


Net income allocated to subordinated unitholders

$

7,431



$

5,807



$

30,578



$

11,665










Earnings per limited partner unit: (1)








Common unit (basic and diluted)

$

0.38



$

0.30



$

1.57



$

0.60


Subordinated unit (basic and diluted)

$

0.38



$

0.30



$

1.57



$

0.60










Weighted average number of limited partner units outstanding:








Common units (basic and diluted)

19,450



19,450



19,450



19,450


Subordinated units (basic and diluted)

19,450



19,450



19,450



19,450


___________

(1)

Amounts attributable to the 2011 periods are reflective of general and limited partner interest in net income subsequent to the closing of the Partnership's initial public offering on July 19, 2011.

 

 




OILTANKING PARTNERS, L.P.

CONSOLIDATED BALANCE SHEETS

(In thousands, except unit amounts)

(Unaudited)




December 31,


2012


2011

Assets:




Current assets:




Cash and cash equivalents

$

7,071



$

23,836


Receivables:




Trade

12,160



5,613


Affiliates

615



3,751


Other

313



261


Note receivable, affiliate

28,000



15,300


Prepaid expenses and other

1,290



1,352


Total current assets

49,449



50,113


Property, plant and equipment, net

418,289



271,644


Other assets, net

1,482



278


Total assets

$

469,220



$

322,035


Liabilities and partners' capital:




Current liabilities:




Accounts payable and accrued expenses

$

29,399



$

13,582


Current maturities of long-term debt, affiliate

2,500



2,500


Accounts payable, affiliates

2,049



3,681


Federal income taxes due to parent



1,210


Total current liabilities

33,948



20,973


Long-term debt, affiliate, less current maturities

146,800



18,300


Deferred revenue

2,544



2,915


Total liabilities

183,292



42,188


Commitments and contingencies




Partners' capital:




    Common units (19,449,901 units issued and outstanding at December 31, 2012 and 2011)

248,176



245,314


    Subordinated units (19,449,901 units issued and outstanding at December 31, 2012 and 2011)

36,354



33,492


    General partner's interest

1,398



1,041


Total partners' capital

285,928



279,847


Total liabilities and partners' capital

$

469,220



$

322,035


 



OILTANKING PARTNERS, L.P.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)




Year Ended December 31,


2012


2011

Cash flows from operating activities:




Net income

$

62,645



$

62,397


Adjustments to reconcile net income to net cash provided by operating activities:




Depreciation and amortization

15,901



15,676


Deferred income tax benefit



(27,366)


Postretirement net periodic benefit cost



695


Unrealized gain on investment in mutual funds



(96)


Increase in cash surrender value of life insurance policies



(42)


Loss on disposal of fixed assets

13



544


Gain on property casualty indemnification



(928)


Amortization of deferred financing costs

165



66


Changes in assets and liabilities:




Trade and other receivables

(6,599)



(579)


Federal income taxes due (to) from parent

(1,210)



4,174


Prepaid expenses and other assets

(57)



665


Accounts receivable/payable, affiliates

1,682



3,754


Accounts payable and accrued expenses

2,847



(3,070)


Deferred compensation



453


Deferred revenue

(133)



33


Total adjustments from operating activities

12,609



(6,021)


Net cash provided by operating activities

75,254



56,376


Cash flows from investing activities:




Issuance of notes receivable, affiliate

(52,000)



(38,500)


Collections of notes receivable, affiliate

39,300



20,200


Payments for purchase of property, plant and equipment

(149,827)



(27,772)


Proceeds from sale of property, plant and equipment



14


Payment for disposal of assets



(544)


Proceeds from property casualty indemnification



1,298


Investment in life insurance policies



(1,378)


Proceeds from sale of mutual funds



1,378


Net cash used in investing activities

(162,527)



(45,304)


Cash flows from financing activities:




Borrowings under loan agreement, affiliate

125,000




Borrowings under credit agreement, affiliate

6,000




Payments under notes payable, affiliate

(2,500)



(127,458)


Net proceeds from issuance of common units



227,807


Debt issuance costs

(1,250)



(250)


Contributions from partners



1


Distributions paid to partners

(56,742)



(96,082)


Net cash provided by financing activities

70,508



4,018


Net increase (decrease) in cash and cash equivalents

(16,765)



15,090


Cash and cash equivalents — Beginning of period

23,836



8,746


Cash and cash equivalents — End of period

$

7,071



$

23,836


 

 









OILTANKING PARTNERS, L.P.

SELECTED OPERATING DATA

(Unaudited)









Operating data:

















Three Months Ended



Year Ended



December 31,



December 31,



2012


2011


2012


2011

Storage capacity, end of period (mmbbls) (1)

17.7



17.3



17.7



17.3


Storage capacity, average (mmbbls)

17.7



16.8



17.6



16.8


Terminal throughput (mbpd) (2)

823.0



709.1



822.2



771.9


Vessels per period

218



209



879



823


Barges per period

887



631



3,233



2,509


Trucks per period (3)

3,326



3,454



11,307



5,158


Rail cars per period (4)

1,390



702



7,979



702


________________

(1)

Represents million barrels ("mmbbls").

(2)

Represents thousands of barrels per day ("mbpd").

(3)

Beginning in June 2011, one of our customers began unloading product by truck.

(4)

Beginning in November 2011, one of our customers began unloading product by rail car. 

 

 

Revenues by service category:








(In thousands)









Three Months Ended


Year Ended


December 31,


December 31,


2012


2011


2012


2011









Storage service fees

$

23,781



$

20,914



$

97,591



$

87,794


Throughput fees

8,328



6,391



29,096



23,973


Ancillary service fees

1,952



1,596



8,810



5,610


Total revenues

$

34,061



$

28,901



$

135,497



$

117,377


 

 





OILTANKING PARTNERS, L.P.

SELECTED FINANCIAL DATA

Non-GAAP Reconciliations

(In thousands)

(Unaudited)






Three Months Ended


Year Ended


December 31,


December 31,


2012


2011


2012


2011









Reconciliation of net income, excluding gains and losses:








Net income

$

15,178



$

11,851



$

62,645



$

62,397


Loss on early extinguishment of debt







6,382


Loss on disposal of fixed assets





13



544


Gain on property casualty indemnification







(928)


Income tax benefit for elimination of deferred tax account balances







(27,052)


Net income, excluding gains and losses

$

15,178



$

11,851



$

62,658



$

41,343










Reconciliation of Adjusted EBITDA and Distributable cash flow from net income:








Net income

$

15,178



$

11,851



$

62,645



$

62,397


Depreciation and amortization

3,828



3,881



15,901



15,676


Income tax expense (benefit)

336



(103)



576



(21,506)


Interest expense, net

558



225



1,621



5,396


Loss on early extinguishment of debt







6,382


Loss on disposal of fixed assets





13



544


Gain on property casualty indemnification







(928)


Other income

(66)





(140)



(431)


Adjusted EBITDA

$

19,834



$

15,854



$

80,616



$

67,530


Interest expense, net

(558)



(225)



(1,621)



(5,396)


Income tax (expense) benefit (1)

(336)



309



(576)



(5,546)


Maintenance capital expenditures

(1,276)



(943)



(3,682)



(4,160)


Distributable cash flow

$

17,664



$

14,995



$

74,737



$

52,428










Cash distributions (2)

$

15,492



$

13,496



$

58,560












Distribution coverage ratio

1.14x



1.11x



1.28x












_____________

(1)

Excludes income tax benefit in the 2011 periods related to the elimination of deferred tax accounts in connection with our initial public offering.

(2)

Amounts represent cash distributions declared for our limited partner units and general partner interest for each respective period.

 



OILTANKING PARTNERS, L.P.

SELECTED FINANCIAL DATA

Non-GAAP Reconciliations (Continued)

(In thousands)

(Unaudited)



Reconciliation of Debt to Adjusted EBITDA Ratio:




2012 Latest Twelve Months (LTM) Adjusted EBITDA (as of December 31, 2012):


2012 Adjusted EBITDA

$

80,616

Total debt, including current portion at December 31, 2012

$

149,300

Debt/Adjusted EBITDA Ratio

1.9x

 

SOURCE Oiltanking Partners, L.P.

 
 
   
 
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