Cypress Energy Partners, L.P. (“CELP”)
(NYSE:CELP) today reported:
- Revenues - $90.4 million, up 39% over
the prior year;
- Gross margin - $10.0 million, up 23%
over the prior year;
- Net income - $1.4 million, up 44% over
the prior year;
- Adjusted EBITDA attributable to limited
partners - $4.5 million, up 58% over the prior year;
- Net debt leverage - 3.19x, down 39%
from the prior year; and
- Cash distribution of $0.21 per unit,
consistent with the last eight quarters.
Peter C. Boylan III, CELP’s Chairman and Chief Executive
Officer, stated, “We posted a great first quarter with strong
revenue growth driven by Tulsa Inspection Resources (“TIR”), our
Pipeline Inspection segment. During the fourth quarter of 2018, we
began work on the largest contract in the 15-year history of TIR.
During the second quarter of 2019, we are expecting very strong
results. Pipeline inspection and integrity services, our primary
businesses, represented 98% of our revenue and 86% of our gross
margin during the first three months of 2019.”
Mr. Boylan continued, “Revenues of our Pipeline Inspection
segment grew from $58.0 million in the first quarter of 2018 to
$86.2 million in the first quarter of 2019, an increase of
49%. This increase was due to growing demand for our services and
increased business development efforts. Gross margins in this
segment increased 53% from $5.5 million in the first quarter of
2018 to $8.4 million in the first quarter of 2019.
“Revenues of our Pipeline & Process Services segment
decreased in the first quarter of 2019. The decrease was due
primarily to adverse weather, which delayed several large projects
scheduled to begin in the first quarter of 2019. We currently
have the largest project backlog in this segment’s history which we
have begun work on in the second quarter of 2019.
“Revenues of our Water Services segment decreased in the
first quarter of 2019, due to the sale of our Texas facilities
in 2018 and lower crude oil prices which led to a decline in
exploration and production activity in the areas around our
facilities.
“As previously disclosed, our sponsor Cypress Energy Holdings,
LLC, completed two acquisitions in 2018. Our sponsor continues to
make progress with both of these acquisitions and intends to offer
them to the Partnership once it has accomplished certain
developmental goals. These acquisitions would move us into several
new pipeline services including water treatment, in-line inspection
(“ILI”), equipment rental (which could be converted into a service
business before offering this business to the Partnership), and
offshore pipeline process services. We remain excited about
entering the ILI industry with next-generation technology capable
of helping pipeline owners and operators better manage the
integrity of their assets in both the energy and municipal water
industries.”
Mr. Boylan further stated, “We had an excellent 2018 year with
strong growth and we are off to a great start in 2019. The
long-term increasing demand for pipeline inspection, integrity
services, and water solutions remains strong due to our nation’s
aging pipeline infrastructure as well as growing production, and we
believe we are well-positioned to capitalize on the opportunities
that improving market conditions will create. The future addition
of the acquisitions referred to above should also position us to
eventually resume increasing our distributions. Our ownership
interests continue to remain fully aligned with our unitholders, as
our General Partner and insiders collectively own 64% of our
common units and an affiliate of our General Partner owns 100% of
our preferred units.”
First Quarter:
- Revenue of $90.4 million for the three
months ended March 31, 2019, compared with $64.8 million for the
three months ended March 31, 2018, an increase of 39%.
- Gross margin of $10.0 million or 11.1%
for the three months ended March 31, 2019, compared to $8.1 million
or 12.5% for the three months ended March 31, 2018, an increase of
23%.
- Net income of $1.4 million for the
three months ended March 31, 2019, compared to a net income of $1.0
million for the three months ended March 31, 2018, an increase of
44%.
- Net income attributable to common
unitholders of $0.6 million for the three months ended March 31,
2019, compared to $0.7 million for the three months ended March 31,
2018 (after giving effect to $1.0 million of net income
attributable to preferred unitholders in the three months ended
March 31, 2019 related to preferred units that were issued in May
2018).
- Adjusted EBITDA of $4.4 million for the
three months ended March 31, 2019, compared to $3.3 million for the
three months ended March 31, 2018, an increase of 37%.
- Adjusted EBITDA attributable to limited
partners of $4.5 million for the three months ended March 31, 2019,
compared to $2.9 million for the three months ended March 31, 2018,
an increase of 58%.
- Distributable Cash Flow available to
common unitholders of $2.3 million for the three months ended March
31, 2019, compared to $0.9 million for the three months ended March
31, 2018, an increase of 145%.
- A coverage ratio of 0.90x for the three
months ended March 31, 2019 compared to the March 31, 2018 coverage
ratio of 0.37x. Historically, our Distributable Cash Flow has been
lowest during the first quarter of the year, due to the seasonal
nature of our business as can be seen in prior years.
- A net debt leverage ratio of 3.19x and
a credit facility covenant leverage ratio of 3.4x, and an interest
coverage ratio of 4.8x, on March 31, 2019, pursuant to the terms of
our credit facilities.
Highlights include:
- We deployed an average of 1,432
inspectors per week for the first quarter of 2019, compared to
1,030 in the first quarter of 2018, an increase of 39%.
- We disposed of 2.8 million barrels of
saltwater during the first quarter of 2019 at an average revenue
per barrel of $0.77, compared to the disposal of 3.1 million
barrels at an average revenue per barrel of $0.82 in the first
quarter of 2018, a decrease in volume of 8%.
- Maintenance capital expenditures for
the first quarter of 2019 and 2018 were $0.1 million, reflecting
the minimal maintenance capital expenditures necessary for the
operations of our businesses.
- Our expansion capital expenditures
during the three months ended March 31, 2019 were $0.3 million. The
expansion capital expenditures included the purchase of new
equipment to support our inspection and integrity businesses.
Looking forward:
- We continue to pursue new customers and
new projects as they are announced and to renew existing contracts.
During the second quarter of 2019, our Pipeline Inspection segment
will likely set a new inspector headcount record for us.
- Our Pipeline & Process Services
segment began the second quarter of 2019 with a healthy backlog
including projects that were delayed due to first quarter weather
issues.
- We continue our focus on maintenance,
integrity, and nondestructive examination services. These business
lines yield higher gross margins than our standard inspection
work.
- During the first quarter of 2019, 98%
of total saltwater disposal volumes came from produced water, and
piped water represented 52% of total water volumes. We have
significant operating leverage with our unused capacity, cost
structure and minimal maintenance capital expenditure requirements
should drilling activity and water volumes increase.
- LIBOR interest rates have remained
relatively unchanged over the last quarter but have risen by about
62 basis points compared to this time last year. However, our
outstanding borrowings were significantly reduced as a result of
our preferred equity offering and debt refinancing in May
2018.
- Our relationship with PG&E remains
strong. We have continued to provide services to PG&E after
their bankruptcy filing and began receiving payment for such
services. The bankruptcy court (the “Court”) granted a motion
authorizing PG&E to pay certain pre-petition claims to certain
key suppliers, including “operational integrity suppliers.”
PG&E has advised us that we have been approved to receive a
payment under the operational integrity supplier order. Details
regarding the amount of such award and associated release terms
have not yet been finalized. The Court also authorized PG&E to
pay pre-petition claims to certain suppliers that have filed or
could file liens on PG&E’s assets. We filed and perfected liens
in the counties in which we performed services that are subject to
our pre-petition receivables. We are working with PG&E to
ensure they have all the required information to support our liens
as they work through their payment approval process.
CELP will file its quarterly report on Form 10-Q for the three
months ended March 31, 2019 with the Securities and Exchange
Commission later today. CELP will also post a copy of the Form 10-Q
on its website at www.cypressenergy.com. Unitholders may
receive a printed copy of the Quarterly Report on Form 10-Q free of
charge by contacting Investor Relations at Cypress Energy Partners,
L.P., 5727 South Lewis Avenue, Suite 300, Tulsa, Oklahoma, 74105 or
emailing ir@cypressenergy.com.
CELP will host an Earnings Release Conference Call on Monday,
May 13, 2019 at 10:00 am EDT (9:00 am CDT), to discuss its first
quarter 2019 financial results. Analysts, investors, and other
interested parties may access the Earnings Release Conference Call
by dialing toll-free (US & Canada): (888) 567-1602, or
International Direct: +1 (862) 298-0701.
An archived audio replay of the call will be available in the
Investor section of our website at www.cypressenergy.com on
Tuesday, May 14, 2019 beginning at 10:00 am EDT (9:00 am CDT).
Non-GAAP Measures:
Cypress defines Adjusted EBITDA as net income, plus interest
expense, depreciation, amortization and accretion expenses, income
tax expenses, impairments, non-cash allocated expenses, and
equity-based compensation, less certain other unusual or
non-recurring items. Cypress defines Adjusted EBITDA attributable
to limited partners as net income attributable to limited partners,
plus interest expense attributable to limited partners,
depreciation, amortization and accretion attributable to limited
partners, impairments attributable to limited partners, income tax
expense attributable to limited partners, and equity-based
compensation attributable to limited partners, less certain other
unusual or non-recurring items attributable to limited partners.
Cypress defines Distributable Cash Flow as Adjusted EBITDA
attributable to limited partners less cash interest paid, cash
income taxes paid, maintenance capital expenditures, and cash
distributions on preferred equity. These are supplemental, non-GAAP
financial measures used by management and by external users of our
financial statements, such as investors and commercial banks, to
assess our operating performance as compared to those of other
companies in the midstream sector, without regard to financing
methods, historical cost basis or capital structure; the ability of
our assets to generate sufficient cash flow to make distributions
to our unitholders; our ability to incur and service debt and fund
capital expenditures; the viability of acquisitions and other
capital expenditure projects; and the returns on investment of
various investment opportunities. The GAAP measures most directly
comparable to Adjusted EBITDA, Adjusted EBITDA attributable to
limited partners, and Distributable Cash Flow are net income and
cash flow from operating activities, respectively. These non-GAAP
measures should not be considered as alternatives to the most
directly comparable GAAP financial measure. Each of these non-GAAP
financial measures exclude some, but not all, items that affect the
most directly comparable GAAP financial measure. Adjusted EBITDA,
Adjusted EBITDA attributable to limited partners and Distributable
Cash Flow should not be considered an alternative to net income,
income before income taxes, net income attributable to limited
partners, cash flows from operating activities, or any other
measure of financial performance calculated in accordance with GAAP
as those items are used to measure operating performance,
liquidity, or the ability to service debt obligations. Cypress
believes that the presentation of Adjusted EBITDA, Adjusted EBITDA
attributable to limited partners and Distributable Cash Flow will
provide useful information to investors in assessing our financial
condition and results of operations. Cypress uses Adjusted EBITDA,
Adjusted EBITDA attributable to limited partners and Distributable
Cash Flow as a supplemental financial measure to both manage our
business and assess the cash flows generated by our assets (prior
to the establishment of any retained cash reserves by the general
partner) to fund the cash distributions we expect to pay to
unitholders, to evaluate our success in providing a cash return on
investment, and whether or not the Partnership is generating cash
flow at a level that can sustain or support an increase in its
quarterly distribution rates and to determine the yield of our
units, which is a quantitative standard used throughout the
investment community with respect to publicly-traded partnerships,
as the value of a unit is generally determined by a unit’s yield
(which in turn is based on the amount of cash distributions the
entity pays to a unitholder). Because Adjusted EBITDA, Adjusted
EBITDA attributable to limited partners and Distributable Cash Flow
may be defined differently by other companies in our industry, our
definitions of Adjusted EBITDA, Adjusted EBITDA attributable to
limited partners and Distributable Cash Flow may not be comparable
to similarly titled measures of other companies, thereby
diminishing their utility. Reconciliations of (i) Net Income to
Adjusted EBITDA and Distributable Cash Flow, (ii) Net Income
attributable to limited partners to Adjusted EBITDA attributable to
limited partners and Distributable Cash Flow and (iii) Net Cash
Provided by (Used In) Operating Activities to Adjusted EBITDA and
Distributable Cash Flow are provided below.
This press release includes “forward-looking statements.”
All statements, other than statements of historical facts included
or incorporated herein, may constitute forward-looking statements.
Actual results could vary significantly from those expressed or
implied in such statements and are subject to a number of risks and
uncertainties. While CELP believes its expectations, as reflected
in the forward-looking statements, are reasonable, CELP can give no
assurance that such expectations will prove to be correct. The
forward-looking statements involve risks and uncertainties that
affect operations, financial performance, and other factors as
discussed in filings with the Securities and Exchange Commission.
Other factors that could impact any forward-looking statements are
those risks described in CELP’s Annual Report filed on Form 10-K
and other public filings. You are urged to carefully review and
consider the cautionary statements and other disclosures made in
those filings, specifically those under the heading “Risk Factors.”
CELP undertakes no obligation to publicly update or revise any
forward-looking statements except as required by law.
About Cypress Energy Partners, L.P.
Cypress Energy Partners, L.P. is a master limited partnership
that provides essential midstream services, including pipeline
inspection, integrity, and hydrostatic testing services to various
energy companies and their vendors throughout the U.S. and Canada.
Cypress also provides saltwater disposal and environmental services
to upstream energy companies and their vendors in North Dakota in
the Bakken region of the Williston Basin. In all of these business
segments, Cypress works closely with its customers to help them
comply with increasingly complex and strict environmental and
safety rules and regulations and reduce their operating costs.
Cypress is headquartered in Tulsa, Oklahoma.
CYPRESS ENERGY PARTNERS, L.P. Unaudited
Condensed Consolidated Balance Sheets As of March 31, 2019
and December 31, 2018 (in thousands)
March 31,
December 31,
2019 2018 ASSETS Current assets: Cash
and cash equivalents $ 6,169 $ 15,380 Trade accounts receivable,
net 70,727 48,789 Prepaid expenses and other 1,135
1,396 Total current assets 78,031 65,565 Property and
equipment: Property and equipment, at cost 24,254 23,988 Less:
Accumulated depreciation 11,846 11,266
Total property and equipment, net 12,408 12,722 Intangible assets,
net 22,085 22,759 Goodwill 50,322 50,294 Finance lease right-of-use
assets, net 641 - Operating lease right-of-use assets 3,328 - Debt
issuance costs, net 1,130 1,260 Other assets 461
253 Total assets $ 168,406 $ 152,853
LIABILITIES AND OWNERS' EQUITY Current liabilities:
Accounts payable $ 6,862 $ 4,848 Accounts payable - affiliates
4,421 4,060 Accrued payroll and other 16,877 12,276 Income taxes
payable 944 737 Finance lease obligations 165 90 Operating lease
obligations 454 - Total current
liabilities 29,723 22,011 Long-term debt 83,129 76,129 Finance
lease obligations 413 248 Operating lease obligations 2,798 - Other
noncurrent liabilities 179 178 Total
liabilities 116,242 98,566 Owners' equity: Partners’
capital:
Common units (12,053 and 11,947 units
outstanding at March 31, 2019 and December 31, 2018,
respectively)
32,845 34,677
Preferred units (5,769 units outstanding
at March 31, 2019 and December 31, 2018)
44,291 44,291 General partner (25,876 ) (25,876 ) Accumulated other
comprehensive loss (2,486 ) (2,414 ) Total partners'
capital 48,774 50,678 Noncontrolling interests 3,390
3,609 Total owners' equity 52,164
54,287 Total liabilities and owners' equity $ 168,406
$ 152,853
CYPRESS ENERGY PARTNERS,
L.P. Unaudited Condensed Consolidated Statements of
Operations For the Three Months Ended March 31, 2019 and
2018 (in thousands, except per unit data)
Three Months Ended March 31, 2019 2018
Revenue $ 90,376 $ 64,826 Costs of services 80,353
56,697 Gross margin 10,023 8,129
Operating costs and expense: General and administrative 6,231 5,455
Depreciation, amortization and accretion 1,104 1,134 Gain on asset
disposals, net (21 ) (1,709 ) Operating income 2,709
3,249 Other (expense) income: Interest expense, net (1,311 )
(1,956 ) Foreign currency gains (losses) 101 (334 ) Other, net
88 82 Net income before income tax
expense 1,587 1,041 Income tax expense 206 81
Net income 1,381 960 Net (loss) income attributable
to noncontrolling interests (219 ) 235 Net
income attributable to limited partners 1,600 725 Net income
attributable to preferred unitholder 1,033 -
Net income attributable to common unitholders $ 567 $
725 Net income per common limited partner unit (basic
and diluted) $ 0.05 $ 0.06 Weighted average common units
outstanding: Basic 11,971 11,899 Diluted 12,355 11,984
Reconciliation of Net Income to
Adjusted EBITDA and Distributable Cash Flow
Three Months ended March 31,
2019 2018 (in thousands) Net income $ 1,381 $
960 Add: Interest expense 1,311 1,956 Depreciation, amortization
and accretion 1,376 1,418 Income tax expense 206 81 Equity based
compensation 269 212 Foreign currency losses - 334 Less: Gains on
asset disposals, net - 1,709 Foreign currency gains 101
- Adjusted EBITDA $ 4,442 $ 3,252
Adjusted EBITDA attributable to noncontrolling interests (89
) 386 Adjusted EBITDA attributable to limited partners $
4,531 $ 2,866 Less: Preferred unit distributions
1,033 - Cash interest paid, cash taxes paid, maintenance capital
expenditures 1,218 1,936 Distributable cash
flow $ 2,280 $ 930
Reconciliation of Net
Income Attributable to Limited Partners to Adjusted EBITDA
Attributable to Limited Partners and Distributable Cash Flow
Three Months ended March 31, 2019 2018
(in thousands) Net income attributable to limited partners $
1,600 $ 725 Add: Interest expense attributable to limited partners
1,311 1,956 Depreciation, amortization and accretion attributable
to limited partners 1,249 1,275 Income tax expense attributable to
limited partners 203 73 Equity based compensation attributable to
limited partners 269 212 Foreign currency losses attributable to
limited partners - 334 Less: Gains on asset disposals, net
attributable to limited partners - 1,709 Foreign currency gains
attributable to limited partners 101 -
Adjusted EBITDA attributable to limited partners 4,531 2,866
Less: Preferred unit distributions 1,033 -
Cash interest paid, cash taxed paid and
maintenance capital expenditures attributable to limited
partners
1,218 1,936 Distributable cash flow $ 2,280 $ 930
Reconciliation of Net Cash Flows (Used In) Provided by
Operating Activities to Adjusted EBITDA and Distributable
Cash Flow Three Months ended March 31,
2019 2018 (in thousands) Cash
flows (used in) provided by operating activities $ (12,250 ) $
6,783 Changes in trade accounts receivable, net 21,935 (1,565 )
Changes in prepaid expenses and other (6 ) (762 ) Changes in
accounts payable and accounts payable - affiliates (1,905 ) (1,811
) Changes in accrued liabilities and other (4,562 ) (1,168 ) Change
in income taxes payable (207 ) (82 ) Interest expense (excluding
non-cash interest) 1,181 1,803 Income tax expense (excluding
deferred tax benefit) 206 81 Other 50 (27 )
Adjusted EBITDA $ 4,442 $ 3,252 Adjusted
EBITDA attributable to noncontrolling interests (89 )
386 Adjusted EBITDA attributable to limited partners $ 4,531
$ 2,866 Less: Preferred unit distributions
1,033 - Cash interest paid, cash taxes paid, maintenance capital
expenditures 1,218 1,936 Distributable
cash flow $ 2,280 $ 930
Operating Data
Three Months Ended March 31,
2019 2018 Total barrels of
saltwater disposed (000's) 2,814 3,075 Avg. revenue per barrel $
0.77 $ 0.82 Water Services gross margins 64.3% 57.8% Avg. number of
inspectors 1,432 1,030 Avg. revenue per inspector per week $ 4,682
$ 4,377 Pipeline Inspection Services gross margins 9.7% 9.5% Avg.
number of field personnel 28 24 Avg. revenue per field personnel
per week $ 5,483 $ 14,097 Pipeline & Process Services gross
margins 12.9% 27.4% Maintenance capital expenditures (000's) $ 52 $
124 Expansion capital expenditures (000's) $ 301 $ 1,907 Common
unit distributions (000's) $ 2,531 $ 2,506 Preferred unit
distributions (000's) $ 1,033 $ - Coverage ratio 0.90x 0.37x Net
debt leverage ratio 3.19x 5.19x
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190513005144/en/
Cypress Energy Partners, L.P.Jeff Herbers,
918-947-5730Chief Financial
Officerjeff.herbers@cypressenergy.com
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