OREANDA-NEWS. Western Refining Logistics, LP (NYSE:WNRL) today reported second quarter 2016 net income attributable to limited partners of $17.9 million, or $0.33 per common limited partner unit, which compares to $15.9 million and $0.34, respectively, in the second quarter of 2015. Second quarter 2016 EBITDA was $31.8 million and distributable cash flow was $25.1 million; this compares to $27.0 million and $17.4 million, respectively, for the second quarter of 2015.

"WNRL realized improved net income and delivered its 10th consecutive quarter of distribution growth.  Our strategic location in the Delaware Basin allows us to continue to achieve good financial performance," said WNRL Chief Executive Officer and President Jeff Stevens.

In May, WNRL issued 4,312,500 common units, with proceeds of approximately $92 million which were used to reduce debt.  On July 26, 2016, the board of directors declared a quarterly cash distribution for the second quarter of 2016 of $0.4125 per unit, or $1.65 per unit on an annualized basis. This distribution represents a 2.5% increase over the first quarter 2016 distribution of $0.4025 per unit.

Stevens concluded, “We continued to invest in the business as we completed additional crude oil gathering lines and storage tanks.  These projects will allow us to capture the growing crude oil production that we see in the Delaware Basin.  We continue to target mid-to-high teens distribution growth through 2018 while keeping our debt-to-EBITDA leverage ratio below four times.  Overall, the Partnership is well-positioned for continued growth.”

About Western Refining Logistics, LP

Western Refining Logistics, LP is principally a fee-based, growth-oriented master limited partnership formed by Western Refining, Inc. (NYSE:WNR) to own, operate, develop and acquire terminals, storage tanks, pipelines and other logistics assets related to the terminalling, transportation and storage of crude oil and refined products. Headquartered in El Paso, Texas, Western Refining Logistics, LP's assets include approximately 685 miles of pipelines, approximately 8.4 million barrels of active storage capacity, distribution of wholesale petroleum products and crude oil trucking.

Results of Operations

The following tables set forth WNRL's summary historical financial and operating data for the periods indicated below:

  Three Months Ended   Six Months Ended
  June 30,   June 30,
  2016   2015   2016   2015
  (Unaudited)
  (In thousands, except per unit data)
Revenues:              
Fee based:              
Affiliate $ 53,965     $ 47,465     $ 105,893     $ 92,943  
Third-party 677     679     1,367     1,302  
Sales based:              
Affiliate 126,525     164,576     224,054     297,347  
Third-party 397,435     523,184     715,327     951,708  
Total revenues 578,602     735,904     1,046,641     1,343,300  
Operating costs and expenses:              
Cost of products sold:              
Affiliate 123,870     162,191     219,019     292,699  
Third-party 380,386     501,835     680,827     913,028  
Operating and maintenance expenses 37,574     38,058     76,475     74,429  
Selling, general and administrative expenses 5,758     6,279     10,823     12,234  
Gain on disposal of assets, net (802 )   (160 )   (901 )   (244 )
Depreciation and amortization 7,325     6,670     14,469     12,562  
Total operating costs and expenses 554,111     714,873     1,000,712     1,304,708  
Operating income 24,491     21,031     45,929     38,592  
Other income (expense):              
Interest and debt expense (6,414 )   (6,248 )   (13,466 )   (10,212 )
Other, net 14     18     (104 )   35  
Net income before income taxes 18,091     14,801     32,359     28,415  
Provision for income taxes (217 )   (148 )   (478 )   (351 )
Net income 17,874     14,653     31,881     28,064  
Less net loss attributable to General Partner —     (1,262 )   —     (3,174 )
Net income attributable to limited partners $ 17,874     $ 15,915     $ 31,881     $ 31,238  
               
Net income per limited partner unit:              
Common - basic $ 0.33     $ 0.34     $ 0.61     $ 0.66  
Common - diluted 0.33     0.34     0.61     0.66  
Subordinated - basic and diluted 0.36     0.34     0.64     0.66  
               
Weighted average limited partner units outstanding:              
Common - basic 26,409     24,017     25,429     24,001  
Common - diluted 26,427     24,051     25,441     24,023  
Subordinated - basic and diluted 22,811     22,811     22,811     22,811  
  Three Months Ended   Six Months Ended
  June 30,   June 30,
  2016   2015   2016   2015
  (Unaudited)
  (In thousands)
Cash Flow Data              
Net cash provided by (used in):              
Operating activities $ 34,209     $ 15,400     $ 58,999     $ 48,132  
Investing activities (7,470 )   (14,673 )   (13,592 )   (41,200 )
Financing activities (37,830 )   (10,349 )   (72,450 )   17,320  
Capital expenditures 8,328     14,846     14,569     41,490  
Other Data              
EBITDA (1) $ 31,830     $ 27,048     $ 60,294     $ 51,276  
Distributable cash flow (1) 25,090     17,440     47,618     39,209  
Balance Sheet Data (at end of period)              
Cash and cash equivalents         $ 17,562     $ 78,550  
Property, plant and equipment, net         320,493     316,642  
Total assets         483,221     563,748  
Total liabilities         466,139     463,174  
Division equity         —     128,264  
Partners' capital         17,082     (27,690 )
Total liabilities, division equity and partners' capital         483,221     563,748  

(1) We define EBITDA as earnings before interest and debt expense, provision for income taxes and depreciation and amortization. We define Distributable Cash Flow as EBITDA plus the change in deferred revenues, less debt interest accruals, income taxes paid, maintenance capital expenditures and distributions declared on our TexNew Mex units. The GAAP performance measure most directly comparable to EBITDA is net income. The GAAP liquidity measure most directly comparable to EBITDA and distributable cash flow is net cash provided by operating activities. These non-GAAP financial measures should not be considered alternatives to GAAP net income or net cash provided by operating activities. 

EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are: 

  • EBITDA does not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments;
  • EBITDA does not reflect the interest expense or the cash requirements necessary to service interest or principal payments on our debt;
  • EBITDA does not reflect changes in, or cash requirements for, our working capital needs; and
  • EBITDA, as we calculate it, may differ from the EBITDA calculations of our affiliates or other companies in our industry, thereby limiting its usefulness as a comparative measure.

EBITDA and Distributable Cash Flow are used as supplemental financial measures 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 energy industry, without regard to financial methods, historical cost basis or capital structure;
  • the ability of our assets to generate sufficient cash to make distributions to our unitholders;
  • our ability to incur and service debt and fund capital expenditures; and
  • the viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities.

Distributable Cash Flow is a standard used by the investment community with respect to publicly traded partnerships because the value of a partnership unit is, in part, measured by its yield. Yield is based on the amount of cash distributions a partnership can pay to a unitholder. Although distributable cash flow is a liquidity measure, it is presented in this reconciliation to net income as supplemental information.

We believe that the presentation of these non-GAAP measures provides useful information to investors in assessing our financial condition and results of operations. The GAAP measure most directly comparable to EBITDA and Distributable Cash Flow is net income attributable to limited partners. These non-GAAP measures should not be considered as alternatives to net income or any other measure of financial performance presented in accordance with GAAP. EBITDA excludes some, but not all, items that affect net income attributable to limited partners. These non-GAAP measures may vary from those of other companies. As a result, EBITDA and Distributable Cash Flow as presented herein may not be comparable to similarly titled measures of other companies.

The calculation of EBITDA and Distributable Cash Flow includes the results of operations for the TexNew Mex Pipeline System   for the three and six months ended June 30, 2016. The results of operations for the TexNew Mex Pipeline System are excluded from the EBITDA and Distributable Cash Flow calculations for the comparable periods in the prior year because a retrospective adjustment of these performance measures is not a representative measure of performance results.

The following table reconciles net income attributable to limited partners to EBITDA for the periods presented and Distributable Cash Flow for the three and six months ended June 30, 2016 and 2015, respectively.

  Three Months Ended   Six Months Ended
  June 30,   June 30,
  2016   2015   2016   2015
  (Unaudited)
  (In thousands)
Net income attributable to limited partners $ 17,874     $ 15,915     $ 31,881     $ 31,238  
Interest and debt expense 6,414     6,248     13,466     10,212  
Provision for income taxes 217     148     478     351  
Depreciation and amortization 7,325     4,737     14,469     9,475  
EBITDA 31,830     27,048     60,294     51,276  
               
Change in deferred revenues 1,446     1,215     3,678     2,447  
Interest accruals (6,072 )   (8,908 )   (12,781 )   (9,633 )
Income taxes paid (64 )   (580 )   (94 )   (581 )
Maintenance capital expenditures (2,050 )   (2,117 )   (3,479 )   (5,082 )
Distributions on TexNew Mex Units —     —     —     —  
Other —     782     —     782  
Distributable cash flow $ 25,090     $ 17,440     $ 47,618     $ 39,209  
 

Logistics Segment

  Three Months Ended   Six Months Ended
  June 30,   June 30,
  2016   2015   2016   2015
  (Unaudited)
  (In thousands, except key operating statistics)
Statement of Operations Data:              
Fee based revenues:              
Affiliate $ 43,053     $ 36,279     $ 83,969     $ 71,054  
Third-party 677     679     1,367     1,302  
Total revenues 43,730     36,958     85,336     72,356  
Operating costs and expenses:              
Operating and maintenance expenses 18,317     18,506     39,317     36,758  
General and administrative expenses 548     886     1,263     1,865  
Gain on disposal of assets, net (5 )   —     (5 )   —  
Depreciation and amortization 6,119     5,563     12,080     10,378  
Total operating costs and expenses 24,979     24,955     52,655     49,001  
Operating income $ 18,751     $ 12,003     $ 32,681     $ 23,355  
Key Operating Statistics:              
Pipeline and gathering (bpd):              
Mainline movements (1):              
Permian/Delaware Basin system 55,953     43,873     52,719     40,213  
Four Corners system 58,047     51,486     55,257     48,679  
TexNew Mex system 10,375     3,398     11,460     1,708  
Gathering (truck offloading):              
Permian/Delaware Basin system 17,823     24,019     19,178     23,316  
Four Corners system 11,133     12,950     11,947     11,812  
Pipeline Gathering and Injection system:              
Permian/Delaware Basin system 11,302     5,911     9,594     3,775  
Four Corners system 27,225     22,081     25,831     21,327  
TexNew Mex system 343     —     171     —  
Tank storage capacity (bbls) (2) 845,514     619,893     836,858     620,198  
Terminalling, transportation and storage:              
Shipments into and out of storage (bpd) (includes asphalt) 393,037     389,220     390,647     390,263  
Terminal storage capacity (bbls) (2) 7,385,543     7,482,152     7,385,543     7,486,337  

(1) Some barrels of crude oil in route to Western's Gallup refinery and Permian/Delaware Basin are transported on more than one of our mainlines. Mainline movements for the Four Corners and Delaware Basin systems include each barrel transported on each mainline. During the second quarter of 2015, we began shipping crude oil from the Four Corners system, through the TexNew Mex Pipeline System, to the Permian/Delaware system.

(2) Storage shell capacities represent weighted-average capacities for the periods indicated.

Wholesale Segment

  Three Months Ended   Six Months Ended
  June 30,   June 30,
  2016   2015   2016   2015
  (Unaudited)
  (In thousands, except key operating stats)
Statement of Operations Data:              
Fee based revenues (1):              
Affiliate $ 10,912     $ 11,186     $ 21,924     $ 21,889  
Sales based revenues (1):              
Affiliate 126,525     164,576     224,054     297,347  
Third-party 397,435     523,184     715,327     951,708  
Total revenues 534,872     698,946     961,305     1,270,944  
Operating costs and expenses:              
Cost of products sold:              
Affiliate 123,870     162,191     219,019     292,699  
Third-party 380,386     501,835     680,827     913,028  
Operating and maintenance expenses 19,257     19,552     37,158     37,671  
Selling, general and administrative expenses 2,153     2,250     4,058     4,446  
Gain on disposal of assets, net (797 )   (160 )   (896 )   (244 )
Depreciation and amortization 1,206     1,107     2,389     2,184  
Total operating costs and expenses 526,075     686,775     942,555     1,249,784  
Operating income $ 8,797     $ 12,171     $ 18,750     $ 21,160  
Key Operating Statistics:              
Fuel gallons sold (in thousands) 311,486     310,811     626,429     614,242  
Fuel gallons sold to retail (included in fuel gallons sold above) (in thousands) 83,721     79,023     163,562     154,286  
Fuel margin per gallon (2) $ 0.025     $ 0.037     $ 0.027     $ 0.032  
Lubricant gallons sold (in thousands) 1,846     3,014     4,047     5,971  
Lubricant margin per gallon (3) $ 0.89     $ 0.78     $ 0.78     $ 0.72  
Asphalt trucking volume (tons) 4,876     —     3,875     —  
Crude oil trucking volume (bpd) 42,092     48,992     38,801     46,037  
Average crude oil revenue per barrel $ 2.17     $ 2.51     $ 2.20     $ 2.63  

(1) All wholesale fee based revenues are generated through fees charged to Western's refining segment for truck transportation and delivery of crude oil and asphalt. Affiliate and third-party sales based revenues result from sales of refined products to Western and third-party customers at a delivered price that includes charges for product transportation.

(2) Fuel margin per gallon is a measurement calculated by dividing the difference between fuel sales, net of transportation charges, and cost of fuel sales for our wholesale business by the number of gallons sold. Fuel margin per gallon is a measure frequently used in the petroleum products wholesale industry to measure operating results related to fuel sales.

(3) Lubricant margin per gallon is a measurement calculated by dividing the difference between lubricant sales, net of transportation charges, and lubricant cost of products sold by the number of gallons sold. Lubricant margin is a measure frequently used in the petroleum products wholesale industry to measure operating results related to lubricant sales.