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OCI Partners LP Reports 2017 Second Quarter Results and Announces $0.12 Quarterly Cash Distribution

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NEDERLAND, Texas, Aug. 7, 2017 /PRNewswire/ -- OCI Partners LP, a Delaware limited partnership (the "Partnership"), announced its results for the three and six months ended June 30, 2017. The Partnership owns and operates an integrated methanol and ammonia production facility that is strategically located on the Texas Gulf Coast near Beaumont.

OCI Partners LP. (PRNewsFoto/OCI Partners LP)

Summary of Financial Results for the Three Months Ended June 30, 2017

  • Revenues increased 32% to $74 million compared to $56 million for the same period in 2016
  • EBITDA increased 140% to $24 million compared to $10 million for the same period in 2016
  • Net loss of $1 million compared to a net loss of $15 million for the same period in 2016
  • EBITDA and net loss margins were 32% and (1)% respectively, compared to 18% and (27)%, respectively, during the same period in 2016

Summary of Financial Results for the Six Months Ended June 30, 2017

  • Revenues increased 33% to $167 million compared to $126 million for the same period in 2016
  • EBITDA increased 125% to $63 million compared to $28 million for the same period in 2016
  • Net income of $12 million compared to a net loss of $22 million for the same period in 2016
  • EBITDA and net income (loss) margins were 38% and 7% respectively, compared to 22% and (17)%, respectively, during the same period in 2016

Unplanned Shutdown

As previously announced, on April 27, both the methanol and ammonia plants tripped and upon restart a leak was discovered in one of the waste heat boilers that needed to be repaired. The Partnership decided to take the opportunity to carry out several other repairs, which were previously scheduled for a later date, but management accelerated the timing of these repairs while the plants were down. The ammonia plant was restarted on May 2, but was running at reduced capacity utilization rates until the restart of the methanol plant on May 22. Since the restart of the methanol plant, both plants have been running at average utilization rates above nameplate capacity.

Distributions

Based on the results of the three months ended June 30, 2017, the Board of Directors of the general partner of the Partnership has approved a cash distribution of $0.12 per common unit or approximately $10.4 million in the aggregate. The cash distribution will be paid on September 8, 2017 to unitholders of record at the close of business on August 18, 2017. The amount of any subsequent quarterly cash distributions will vary depending on our future earnings as well as our cash requirements for working capital, capital expenditures, debt service and other contractual obligations, and reserves for future operating or capital needs.

Run-Rate Quarterly Distribution Guidance

Partnership distributions, including the distribution of $0.12 being declared with respect to the three months ended June 30, 2017, remain largely consistent with our prior run-rate guidance, where the run-rate distribution amount is primarily affected each quarter for changes in average realized prices of methanol, ammonia and natural gas.

Our distribution with respect to the three months ended June 30, 2017 reflects an average realized methanol price of $331 per metric ton, an average realized ammonia price of $291 per metric ton, and an average natural gas price of $3.32 per MMBtu. The lost volume resulting from the unplanned shutdown had a negative impact of approximately $0.13 on the distribution for the three months ended June 30, 2017, based on average contribution margins for the second quarter of 2017.

To assist investors in making the linkage between these prices and potential future distributions, we provide below a sensitivity analysis assuming full utilization:

  • A $0.50 per MMBtu change in annual natural gas prices results in an approximately $0.23 impact on annual distributions
  • A $10 per metric ton change in annual methanol prices results in an approximately $0.10 impact on annual distributions
  • A $10 per metric ton change in annual ammonia prices results in an approximately $0.04 impact on annual distributions

We intend to continue making distributions consistent with our run-rate guidance, but there can be no assurance we will be able to do so. In addition to the impact of commodity prices, our distributions are subject to fluctuations in capacity utilization, working capital, capital expenditures, debt service and other contractual obligations, reserves for future operating or capital needs and other factors, including overall business, regulatory and financial considerations that may affect the availability of cash to distribute. Please see "Forward-Looking Statements" below."

Statement from President and Chief Executive Officer – Ahmed El-Hoshy

"During the quarter, as a result of the unplanned shutdown in April and May, our ammonia and methanol production units experienced 6 and 25 days of downtime, resulting in capacity utilization rates of 87% and 72%, respectively. We are pleased that the plants have been running consistently at rates above nameplate capacity since both plants were back up and running.

Despite the unplanned shutdown and higher natural gas costs compared to last year, second quarter EBITDA improved compared to the same quarter last year, benefiting from comparatively higher realized prices for methanol during the quarter.

After the rapid increase in US weighted average methanol contract prices during the first quarter, prices started to decline towards the end of March and into the second quarter, largely due to the return of supply from various methanol plants following turnarounds, and reduced Methanol-to-Olefins (MTO) operating rates in China. After reaching a high of $491 per metric ton in March, the contract price declined to $377 per metric ton in June. Ammonia prices (Tampa cfr) also improved rapidly during the first quarter and reached $330 per metric ton in May before the June contract price dropped to $265 per metric ton.

Our average realized methanol price was $331 per metric ton in the second quarter, an increase of 72% from $192 per metric ton in the same quarter last year and a drop of 6% from $353 per metric ton in the first quarter of 2017. Our average realized ammonia price was $291 per metric ton in the second quarter, down 3% from $301 per metric ton in the same quarter last year, but up 18% from $247 per metric ton in the first quarter of 2017. Finally, our natural gas price averaged $3.32 per MMBtu during the quarter, up from $2.13 per MMBtu during the second quarter of 2016, offsetting some of the benefits of the higher pricing.

Looking forward, methanol spot prices have been relatively stable in the past few months. The US weighted average methanol contract price was $367 per metric ton for July and $370 per metric ton for August, only slightly below the $377 per metric ton in June and at levels that generate healthy returns for our operations. The lower prices have resulted in improved economics and increases in Chinese MTO operating rates during the second quarter and into the third. Global demand is expected to remain underpinned by MTO affordability.

Ammonia markets weakened into the third quarter of 2017, reflecting increased supply availability and low seasonal demand. The Tampa CFR ammonia contract price decreased from $265 per metric ton in June to $240 per metric ton in July and to $190 per metric ton in August."

 


Volume Weighted Average Price of

Volume Weighted Average Price of


Methanol and Ammonia

Natural Gas


($ per metric ton)

($ per MMBtu)


For Three-Months Ended June 30, 

For Three-Months Ended June 30, 


2017


2016


2017


2016


Ammonia

291


301


3.32


2.13


Methanol

331


192




















Production

Capacity Utilization


(in '000 tons)

Rate %


For Three-Months Ended June 30, 

For Three-Months Ended June 30, 


2017


2016


2017


2016


Ammonia

72


75


87%


91%


Methanol

164


174


72%


77%















 


Volume Weighted Average Price of

Volume Weighted Average Price of


Methanol and Ammonia

Natural Gas


($ per metric ton)

($ per MMBtu)


For Six-Months Ended June 30, 

For Six-Months Ended June 30, 


2017


2016


2017


2016


Ammonia

265


298


3.22


2.13


Methanol

343


191




















Production

Capacity Utilization


(in '000 tons)

Rate %


For Six-Months Ended June 30, 

For Six-Months Ended June 30, 


2017


2016


2017


2016


Ammonia

155


163


94%


99%


Methanol

380


399


84%


88%















 

Non-GAAP Financial Measure

EBITDA is defined as net income (loss) plus (i) interest expense and other financing costs, (ii) depreciation expense and (iii) income tax expense. EBITDA is used as a supplemental financial measure by management and by external users of our unaudited financial statements, such as investors and commercial banks, to assess:

  • the financial performance of our assets without regard to financing methods, capital structure or historical cost basis; and
  • our operating performance and return on invested capital compared to those of other publicly traded partnerships, without regard to financing methods and capital structure.

EBITDA should not be considered as an alternative to net income, operating income, net cash provided by operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP. EBITDA may have material limitations as a performance measure because it excludes items that are necessary elements of our costs and operations. In addition, EBITDA presented by other companies may not be comparable to our presentation because each company may define EBITDA differently.

EBITDA margin is defined as EBITDA divided by revenues. EBITDA margin is used as a supplemental financial measure by the Partnership's management in its analysis of our operating performance.

The tables below reconcile EBITDA to net income, its most directly comparable financial measure calculated and presented in accordance with GAAP, for the three months and six months ended June 30, 2017 (dollars in thousands).



Quarter Ended June 30,



2017


2016








Net loss


$

(1,426)



(15,447)

Add:







Interest expense 



5,725



9,973

Interest expense – related party



4,211



51

Income tax expense 



93



(47)

Depreciation expense



15,283



15,513








EBITDA


$

23,886



10,043








 

 



Six-Months Ended June 30,



2017


2016








Net income (loss)


$

12,318



(21,501)

Add:







Interest expense 



11,272



18,765

Interest expense – related party



8,741



102

Income tax expense 



559



33

Depreciation expense



30,527



30,891








EBITDA


$

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