Market Overview

OCI Partners LP Reports 2017 Third Quarter Results and Announces $0.08 Quarterly Cash Distribution

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NEDERLAND, Texas, Nov. 6, 2017 /PRNewswire/ -- OCI Partners LP, a Delaware limited partnership ("we" or the "Partnership"), announced its results for the three and nine months ended September 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 September 30, 2017

  • Revenues increased 18% to $78 million compared to $66 million for the same period in 2016
  • EBITDA increased 79% to $25 million compared to $14 million for the same period in 2016
  • Net loss improved to $1 million compared to a net loss of $12 million for the same period in 2016
  • EBITDA and net loss margins were 32% and (1)% respectively, compared to 21% and (18)%, respectively, during the same period in 2016

Summary of Financial Results for the Nine Months Ended September 30, 2017

  • Revenues increased 28% to $245 million compared to $192 million for the same period in 2016
  • EBITDA increased 105% to $88 million compared to $43 million for the same period in 2016
  • Net income improved to $12 million compared to a net loss of $33 million for the same period in 2016
  • EBITDA and net income (loss) margins were 36% and 5% respectively, compared to 22% and (17)%, respectively, during the same period in 2016

Hurricane Harvey

In late August 2017, Hurricane Harvey caused extensive flooding and damage to residences and businesses across Southeast Texas, including Beaumont and surrounding areas. The Partnership's equipment or facilities did not incur any significant damage, but incurred some downtime due to the temporary lack of availability of raw materials from our suppliers, who were impacted by Hurricane Harvey. The methanol facility continued to operate at high utilization rates during the storms, but was taken offline on August 30 and resumed production on September 3. The ammonia facility ceased production on August 28, but production could not be resumed until September 13, due to inventory constraints and reduced marine traffic caused by the temporary closure of the Sabine-Neches waterway as a result of Hurricane Harvey. The Partnership estimates the impact of the shutdown on EBITDA to be approximately $3 million.

Distributions

Based on the results of the three months ended September 30, 2017, the Board of Directors of the general partner of the Partnership has approved a cash distribution of $0.08 per common unit, or approximately $7.0 million in the aggregate. The cash distribution will be paid on December 8, 2017 to unitholders of record at the close of business on November 17, 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 $0.08 being declared with respect to the three months ended September 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 September 30, 2017 reflects an average realized methanol price of $299 per metric ton, an average realized ammonia price of $185 per metric ton, and an average natural gas price of $3.08 per MMBtu. The lost volume and additional expenses resulting from the shutdown due to Hurricane Harvey had a negative impact of approximately $0.04 on the distribution for the three months ended September 30, 2017, based on average contribution margins for the third 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 average natural gas prices would result in an approximately $0.25 impact on annual distributions per common unit
  • A $10 per metric ton change in annual average methanol prices would result in an approximately $0.10 impact on annual distributions per common unit
  • A $10 per metric ton change in annual average ammonia prices would result in an approximately $0.04 impact on annual distributions per common unit

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

"Hurricane Harvey caused significant damage in Texas and affected many people in the Beaumont and surrounding areas, including our own employees. Despite the difficult circumstances, all our employees came together as a team to help the impacted employees, regardless of department and level, and I believe the Partnership has come through the storm as a stronger organization. We established a fund of $100,000 to provide financial assistance, temporary housing and supplies to our employees. In addition, the Partnership donated $100,000 to the Southeast Texas Emergency Relief Fund to help in the relief and recovery efforts in the Beaumont community.

I would like to thank all our employees for their commitment and for keeping the plant operational during these unprecedented weather conditions. As a result, we are fortunate that the storm caused only minor disruptions to our operations. Our ammonia and methanol production units experienced 17 and three days of downtime during the quarter, resulting in capacity utilization rates of 86% and 96%, respectively. Outside this downtime, we are pleased that the plants have been running consistently at rates above nameplate capacity and that repairs to the methanol unit in May 2017 have resulted in daily production rates that are on average higher than we achieved before the downtime in the second quarter.

Our average realized methanol price was $299 per metric ton in the third quarter, an increase of 40% from $214 per metric ton in the same quarter last year, but a decrease of 10% from $331 per metric ton in the second quarter of 2017. Our average realized ammonia price was $185 per metric ton in the third quarter, down 21% from $235 per metric ton in the same quarter last year and down 36% from $291 per metric ton in the second quarter of 2017. Finally, our natural gas price averaged $3.08 per MMBtu during the quarter, up from $2.88 per MMBtu during the third quarter of 2016.

We estimate the economic impact of the downtime during Hurricane Harvey to be approximately $3 million at the EBITDA level. This is a smaller impact than would be typical for a 17-day shutdown of the ammonia plant, because of the historically low level of ammonia prices during the quarter. Despite this impact from Hurricane Harvey, as well as the higher natural gas costs and the drop in ammonia prices year-over-year, our third quarter EBITDA improved compared to the same quarter last year, benefiting from the comparatively higher realized methanol prices during the quarter.

Looking forward into the fourth quarter, we expect our business to benefit from a recent increase in methanol and ammonia prices. The US weighted average methanol contract price increased from $370 per metric ton in August to $382 per metric ton in September as a result of better Methanol-to-Olefins (MTO) affordability and healthy demand. The US weighted average methanol contract price has been stable in recent months at $387 per metric ton in October and $383 per metric ton in November. Global methanol demand is expected to remain underpinned by MTO affordability in China and the expected start-up of new MTO units in the next 12 months. Traditional demand for methanol in the United States has also increased and is expected to remain strong in the near term due to increased demand for downstream products used for building materials.

Ammonia markets were weak in the third quarter of 2017. The Tampa CFR ammonia contract price reached a multi-year low of $190 per metric ton in August, a price that is too low to incentivize imports into the United States, despite the United States being a deficit market for ammonia. However, ammonia markets turned more bullish in September and prices have steadily increased into the fourth quarter. The Tampa CFR ammonia contract price reached $305 per metric ton in November. The price increases have been driven by a rebound in prices of downstream fertilizer products, in particular urea, and tight supply at key export hubs, where the availability of merchant ammonia is limited, partly due to outages and partly as a result of higher local ammonia demand."

 















Volume Weighted Average Price of

Volume Weighted Average Price of


Methanol and Ammonia

Natural Gas


($ per metric ton)

($ per MMBtu)


For The Three-Months Ended September 30, 

For The Three-Months Ended September 30, 


2017


2016


2017


2016


Ammonia

185


235


3.08


2.88


Methanol

299


214




















Production

Capacity Utilization


(in '000 tons)

Rate %


For The Three-Months Ended September 30, 

For The Three-Months Ended September 30, 


2017


2016


2017


2016


Ammonia

72


85


86%


102%


Methanol

220


221


96%


96%










































Volume Weighted Average Price of

Volume Weighted Average Price of


Methanol and Ammonia

Natural Gas


($ per metric ton)

($ per MMBtu)


For The Nine-Months Ended September 30, 

For The Nine-Months Ended September 30, 


2017


2016


2017


2016


Ammonia

237


277


3.17


2.40


Methanol

327


199




















Production

Capacity Utilization


(in '000 tons)

Rate %


For The Nine-Months Ended September 30, 

For The Nine-Months Ended September 30, 


2017


2016


2017


2016


Ammonia

227


249


92%


100%


Methanol

599


620


88%


91%


 

Non-GAAP Financial Measure

EBITDA is defined as net income (loss) plus (i) interest expense and other financing costs, (ii) income tax expense and (iii) depreciation 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 nine months ended September 30, 2017 (dollars in thousands).



Three-Months Ended September 30,



2017


2016








Net loss


$

(523)



(11,697)

Add:







Interest expense 



5,782



10,104

Interest expense – related party



4,265



143

Income tax expense 



102



556

Depreciation expense



15,269



15,253








EBITDA


$

24,895



14,359








 



Nine-Months Ended September 30,



2017


2016


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