Cypress Energy Partners, L.P. (“CELP”) (NYSE:CELP) today reported:
Peter C. Boylan III, CELP’s Chairman and Chief Executive Officer stated, “During the first quarter of 2018, we made solid progress on our stated goals of improving our gross margins and more efficiently managing our working capital requirements. Customer spending continues to improve, and numerous new projects have been announced by several clients that should benefit us later this year. Demand remains strong for inspection and integrity services. Pipeline Inspection and Integrity Services represented approximately 96% of our revenues and approximately 82% of our gross margin.”
Mr. Boylan continued, “Revenues from our 51%-owned Integrity Services segment were much greater than the first quarter of 2017. Revenues from our Water Services segment were approximately 34% greater than in the first quarter of 2017, despite the sale of our Pecos saltwater disposal (“SWD”) facility. Additionally, this week we completed a sale of our Orla, Texas facility on attractive terms, thereby reducing the amount of equity funding that will be required to deleverage the partnership. The Orla facility was struck by lightning in early 2017 and contributed very minimally to our EBITDA or distributable cash flow over the last fifteen months. After the sale of both our Pecos and Orla SWD facilities in the Permian Basin, we are now solely operating our Water Services segment in the Bakken region of North Dakota. We currently operate nine facilities and approximately 49% of our saltwater disposal volumes for the first quarter were received via seven different pipelines, with two other pipelines currently under development. About 95% of our saltwater is produced water from completed oil wells. We simply have better economies of scale to operate efficiently in North Dakota and we continue to benefit from higher rig counts, well counts, well completions, and higher oil prices.”
“In April 2018, we obtained $10 million more in commitments to our proposed new credit facility. Last quarter, we announced that CELP had retained a financial advisor to shop the market to determine if more favorable private investment in public equity (“PIPE”) terms could be obtained from an independent third party, and to explore strategic alternatives to determine if any more attractive transformational opportunities exist. We have completed the first phase of this process and the process is advancing toward the next round of discussions. We hope to complete this process during the second quarter of 2018. Regardless of the outcome of these discussions, after our refinancing, CELP would have substantially lower leverage which would, in turn, significantly reduce interest expense, improve distributable cash flow, and position CELP to increase the size of our credit facility when we find a suitable acquisition opportunity.”
Mr. Boylan further stated, “Our ownership interests remain fully aligned with our unitholders because the general partner and insiders own approximately 64% of CELP. We continue to believe that a pro forma stronger balance sheet with less debt, as the result of the contemplated PIPE transaction or other strategic transaction, will allow us to both support the current distribution and ultimately position us to begin growing the distribution again.”
First Quarter:
Highlights include:
Looking forward:
CELP will file its quarterly report on Form 10-Q for the three months ended March 31, 2018 with the Securities and Exchange Commission tomorrow. 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 [email protected].
CELP will host an Earnings Release Conference Call on Friday, May 11, 2018 at 10:00 am EDT (9:00 am CDT), to discuss its first quarter 2018 financial results. Analysts, investors, and other interested parties may access the Earnings Release Conference Call by dialing toll-free (US & Canada): (888) 419-5570 Passcode 22980541, or International Direct: +1 (617) 896-9871.
An archived audio replay of the call will be available in the Investor section of our website at www.cypressenergy.com on Tuesday, May 15, 2018 beginning at 10:00 am EDT (9:00 am CDT).
Non-GAAP Measures:
CELP defines Adjusted EBITDA as net income (loss), plus interest expense, depreciation, amortization and accretion expenses, income tax expenses, impairments, non-cash allocated expenses, and equity-based compensation expense, less certain other unusual or non-recurring items. CELP defines Adjusted EBITDA attributable to limited partners as net income (loss) attributable to limited partners, plus interest expense attributable to limited partners, depreciation, amortization and accretion expenses attributable to limited partners, impairments attributable to limited partners, income tax expense attributable to limited partners, non-cash allocated expenses attributable to limited partners and equity-based compensation expense attributable to limited partners, less certain other unusual or non-recurring items attributable to limited partners. CELP defines Distributable Cash Flow as Adjusted EBITDA attributable to limited partners less cash interest paid, cash income taxes paid, and maintenance capital expenditures. Adjusted EBITDA and Distributable Cash Flow 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 the following: 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 (loss) 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, of the 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 alternatives 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. CELP 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. CELP uses Adjusted EBITDA, Adjusted EBITDA attributable to limited partners, and Distributable Cash Flow as supplemental financial measures 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 the utility of these measures. Reconciliations of (i) Adjusted EBITDA to net income, (ii) Adjusted EBITDA attributable to limited partners and Distributable Cash Flow to net income attributable to limited partners and (iii) Adjusted EBITDA to net cash provided by operating activities 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 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, 2018 and December 31, 2017 | |||||||||||
(in thousands, except unit data) | |||||||||||
March 31, | December 31, | ||||||||||
2018 | 2017 | ||||||||||
ASSETS | |||||||||||
Current assets: | |||||||||||
Cash and cash equivalents | $ | 26,140 | $ | 24,508 | |||||||
Trade accounts receivable, net | 40,075 | 41,693 | |||||||||
Prepaid expenses and other | 1,544 | 2,294 | |||||||||
Assets held for sale | - | 2,172 | |||||||||
Total current assets | 67,759 | 70,667 | |||||||||
Property and equipment: | |||||||||||
Property and equipment, at cost | 25,132 | 22,700 | |||||||||
Less: Accumulated depreciation | 10,015 | 9,312 | |||||||||
Total property and equipment, net | 15,117 | 13,388 | |||||||||
Intangible assets, net | 24,797 | 25,477 | |||||||||
Goodwill | 53,395 | 53,435 | |||||||||
Other assets | 293 | 236 | |||||||||
Total assets | $ | 161,361 | $ | 163,203 | |||||||
LIABILITIES AND OWNERS' EQUITY | |||||||||||
Current liabilities: | |||||||||||
Accounts payable | $ | 5,342 | $ | 3,757 | |||||||
Accounts payable - affiliates | 3,725 | 3,173 | |||||||||
Accrued payroll and other | 10,291 | 9,109 | |||||||||
Liabilities held for sale | - | 97 | |||||||||
Income taxes payable | 727 | 646 | |||||||||
Current portion of long-term debt | 132,447 | 136,293 | |||||||||
Total current liabilities | 152,532 | 153,075 | |||||||||
Asset retirement obligations | 143 | 143 | |||||||||
Total liabilities | 152,675 | 153,218 | |||||||||
Owners' equity: | |||||||||||
Partners’ capital: | |||||||||||
Common units (11,933,237 and 11,889,958 units outstanding at March 31, 2018 and December 31, 2017, respectively) |
32,984 | 34,614 | |||||||||
General partner | (25,876 | ) | (25,876 | ) | |||||||
Accumulated other comprehensive loss | (2,575 | ) | (2,677 | ) | |||||||
Total partners' capital | 4,533 | 6,061 | |||||||||
Noncontrolling interests | 4,153 | 3,924 | |||||||||
Total owners' equity | 8,686 | 9,985 | |||||||||
Total liabilities and owners' equity | $ | 161,361 | $ | 163,203 | |||||||
CYPRESS ENERGY PARTNERS, L.P. | |||||||||||
Unaudited Condensed Consolidated Statements of Operations | |||||||||||
For the Three Months Ended March 31, 2018 and 2017 | |||||||||||
(in thousands, except unit and per unit data) | |||||||||||
Three Months Ended March 31, | |||||||||||
2018 | 2017 | ||||||||||
Revenue | $ | 64,826 | $ | 64,722 | |||||||
Costs of services | 56,697 | 58,393 | |||||||||
Gross margin | 8,129 | 6,329 | |||||||||
Operating costs and expense: | |||||||||||
General and administrative | 5,455 | 5,110 | |||||||||
Depreciation, amortization and accretion | 1,134 | 1,171 | |||||||||
Impairments | - | 3,598 | |||||||||
Gain on asset disposals, net | (1,709 | ) | - | ||||||||
Operating income (loss) | 3,249 | (3,550 | ) | ||||||||
Other (expense) income: | |||||||||||
Interest expense, net | (1,956 | ) | (1,709 | ) | |||||||
Foreign currency losses | (334 | ) | - | ||||||||
Other, net | 82 | 45 | |||||||||
Net income (loss) before income tax expense | 1,041 | (5,214 | ) | ||||||||
Income tax expense (benefit) | 81 | (293 | ) | ||||||||
Net income (loss) | 960 | (4,921 | ) | ||||||||
Net income (loss) attributable to noncontrolling interests | 235 | (1,165 | ) | ||||||||
Net income (loss) attributable to partners / controlling interests | 725 | (3,756 | ) | ||||||||
Net loss attributable to general partner | - | (921 | ) | ||||||||
Net income (loss) attributable to limited partners | $ | 725 | $ | (2,835 | ) | ||||||
Net income (loss) per common limited partner unit (basic and diluted) | $ | 0.06 | $ | (0.32 | ) | ||||||
Weighted average common units outstanding: | |||||||||||
Basic | 11,898,672 | 8,911,196 | |||||||||
Diluted | 11,984,442 | 8,911,196 | |||||||||
Weighted average subordinated units outstanding - basic and diluted | - | 2,956,500 | |||||||||
Reconciliation of Net Income (Loss) to Adjusted EBITDA to Distributable Cash Flow |
||||||||||
Three Months ended March 31, | ||||||||||
2018 | 2017 | |||||||||
(in thousands) | ||||||||||
Net income (loss) | $ | 960 | $ | (4,921 | ) | |||||
Add: | ||||||||||
Interest expense | 1,956 | 1,709 | ||||||||
Depreciation, amortization and accretion | 1,418 | 1,432 | ||||||||
Impairments | - | 3,598 | ||||||||
Income tax expense (benefit) | 81 | (293 | ) | |||||||
Non-cash allocated expenses | - | 921 | ||||||||
Equity based compensation | 212 | 357 | ||||||||
Foreign currency losses | 334 | - | ||||||||
Less: | ||||||||||
Gains on asset disposals, net | 1,709 | - | ||||||||
Adjusted EBITDA | $ | 3,252 | $ | 2,803 | ||||||
Adjusted EBITDA attributable to noncontrolling interests | 386 | (248 | ) | |||||||
Adjusted EBITDA attributable to limited partners / controlling interests | $ | 2,866 | $ | 3,051 | ||||||
Less: | ||||||||||
Cash interest paid, cash taxes paid, maintenance capital expenditures | 1,936 | 1,747 | ||||||||
Distributable cash flow | $ | 930 | $ | 1,304 | ||||||
Reconciliation of Net Income (Loss) Attributable to Limited Partners to Adjusted EBITDA Attributable to | ||||||||||
Limited Partners and Distributable Cash Flow | ||||||||||
Three Months ended March 31, | ||||||||||
2018 | 2017 | |||||||||
(in thousands) | ||||||||||
Net income (loss) attributable to limited partners | $ | 725 | $ | (2,835 | ) | |||||
Add: | ||||||||||
Interest expense attributable to limited partners | 1,956 | 1,709 | ||||||||
Depreciation, amortization and accretion attributable to limited partners | 1,275 | 1,290 | ||||||||
Impairments attributable to limited partners | - | 2,823 | ||||||||
Income tax expense (benefit) attributable to limited partners | 73 | (293 | ) | |||||||
Equity based compensation attributable to limited partners | 212 | 357 | ||||||||
Foreign currency losses | 334 | - | ||||||||
Less: | ||||||||||
Gains on asset disposals, net | 1,709 | - | ||||||||
Adjusted EBITDA attributable to limited partners | 2,866 | 3,051 | ||||||||
Less: | ||||||||||
Cash interest paid, cash taxes paid and maintenance capital expenditures attributable to limited partners |
1,936 | 1,747 | ||||||||
Distributable cash flow | $ | 930 | $ | 1,304 | ||||||
Reconciliation of Net Cash Provided by Operating Activities to Adjusted EBITDA to Distributable Cash Flow | |||||||||||
Attributable to Limited Partners | |||||||||||
Three Months ended March 31, | |||||||||||
2018 | 2017 | ||||||||||
(in thousands) | |||||||||||
Cash flows provided by operating activities | $ | 6,683 | $ | 3,351 | |||||||
Changes in trade accounts receivable, net | (1,565 | ) | 855 | ||||||||
Changes in prepaid expenses and other | (662 | ) | 145 | ||||||||
Changes in accounts payable and accrued liabilities | (2,979 | ) | (3,207 | ) | |||||||
Change in income taxes payable | (82 | ) | 11 | ||||||||
Interest expense (excluding non-cash interest) | 1,803 | 1,563 | |||||||||
Income tax expense (excluding deferred tax benefit) | 81 | 63 | |||||||||
Other | (27 | ) | 22 | ||||||||
Adjusted EBITDA | $ | 3,252 | $ | 2,803 | |||||||
Adjusted EBITDA attributable to noncontrolling interests | 386 | (248 | ) | ||||||||
Adjusted EBITDA attributable to limited partners / controlling interests | $ | 2,866 | $ | 3,051 | |||||||
Less: | |||||||||||
Cash interest paid, cash taxes paid, maintenance capital expenditures | 1,936 | 1,747 | |||||||||
Distributable cash flow | $ | 930 | $ | 1,304 | |||||||
Operating Data | ||||||||||
Three Months | ||||||||||
Ended March 31, | ||||||||||
2018 | 2017 | |||||||||
Total barrels of saltwater disposed (in thousands) | 3,075 | 2,773 | ||||||||
Average revenue per barrel | $ | 0.82 | $ | 0.68 | ||||||
Water and environmental services gross margins | 57.8% | 52.7% | ||||||||
Average number of inspectors | 1,030 | 1,083 | ||||||||
Average revenue per inspector per week | $ | 4,377 | $ | 4,463 | ||||||
Pipeline inspection services gross margins | 9.5% | 8.9% | ||||||||
Average number of field personnel | 24 | 15 | ||||||||
Average revenue per field personnel per week | $ | 14,097 | $ | 3,609 | ||||||
Pipeline integrity services gross margins | 27.4% | (29.9%) | ||||||||
Maintenance capital expenditures (in thousands) | $ | 124 | $ | 74 | ||||||
Expansion capital expenditures (in thousands) | $ | 1,907 | $ | 224 | ||||||
Distributions (in thousands) | $ | 2,506 | $ | 2,495 | ||||||
Coverage ratio | 0.37x | 0.52x |
View source version on businesswire.com: https://www.businesswire.com/news/home/20180510006387/en/
Cypress Energy Partners, L.P.
Jeff Herbers, 918-947-5730
Chief
Accounting Officer
[email protected]