Rose Rock Midstream, L.P. RRMS reported first-quarter 2014 earnings per unit of 45 cents, lagging the Zacks Consensus Estimate of 49 cents by 8.2%. Quarterly earnings also fell 23.7% year over year primarily due to higher operating and interest expenses.
Revenue
The partnership's total revenues were $290.9 million, surpassing the Zacks Consensus Estimate of $229.0 million by 27%. On a year-over-year basis, revenues jumped 69.9% on the back of strong contribution from the partnership's Product (up 67.8% year over year) and Service (up 97% year over year) segments.
Operational Update
In the quarter under review, Rose Rock Midstream's total expenses shot up 76.2% year over year to $283.6 million. This was primarily due to increased costs of products sold and operating as well as depreciation expenses.
Soaring costs overshadowed the revenue upsurge. Operating margin in the reported quarter decreased to 6.3% from 8.2% in the year-ago quarter.
Rose Rock Midstream's interest expenses rose sharply by 29.5% from the year-ago quarter. Quarterly adjusted earnings before interest, tax, depreciation and amortization (EBITDA) was $27.8 million, 69.5% higher than the year-ago figure.
Financial Update
As of Mar 31, 2014, the partnership's current assets were $349.6 million versus $321.6 million as of Dec 31, 2013.
Long-term debt as of Mar 31, 2014 was $244.6 million compared with $245.1 million at the end of 2013.
During the first quarter of 2014, the partnership invested $0.9 million under its maintenance capital expenditure program.
During the reported quarter, the partnership's net cash provided by (used in) operating activities was $18.4 million compared with $9.9 million a year ago.
Cash Distribution Update
On Apr 24, 2014, the board of directors of Rose Rock Midstream increased its quarterly cash distribution by 6.5% to 49.5 cents per unit. The new distribution will be paid on May 15, 2014, to unitholders of record as on May 5, 2014. On an annualized basis, the new distribution rate will be $1.98 per unit.
Guidance
The partnership expects adjusted EBITDA in the range of $92 million to $97 million for 2014.
Zacks Rank
Rose Rock Midstream currently has a Zacks Rank #3 (Hold). The partnership is on a growth-by-acquisition mode and plans to incur capital investments of $75 million in 2014. The spur in upstream activity thanks to the onshore shale boom in the U.S. has triggered a pent-up demand for midstream infrastructure. This is driving Rose Rock Midstream to expand its operations.
Other industry players that are presently performing well include Magellan Midstream Partners L.P. MMP, Targa Resources Partners L.P. NGLS and Boardwalk Pipeline Partners, L.P. BWP. All the above stocks currently carry a Zacks Rank #1 (Strong Buy).
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