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OCI Partners LP Reports 2018 First Quarter Results and Announces $0.38 Quarterly Cash Distribution

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OCI Partners LP Reports 2018 First Quarter Results and Announces $0.38 Quarterly Cash Distribution

PR Newswire

NEDERLAND, Texas, May 7, 2018 /PRNewswire/ -- OCI Partners LP, a Delaware limited partnership ("we" or the "Partnership"), announced its results for the three months ended March 31, 2018. 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 March 31, 2018

  • Revenues increased 26% to $117 million compared to $93 million for the same period in 2017

  • Net income increased 114% to $30 million compared to $14 million for the same period in 2017

  • EBITDA increased 48% to $59 million compared to $40 million for the same period in 2017

  • EBITDA and net income margins were 50% and 26% respectively, compared to 43% and 15%, respectively, during the same period in 2017

Closing of New $455M Term Loan

On March 13, 2018, the Partnership successfully closed a new $455 million term loan facility (the "Term Loan Facility") and a $40 million revolving credit facility (the "Revolving Credit Facility"). The Term Loan Facility was priced at LIBOR + 425 bps and matures in 2025. The Revolving Credit Facility was priced at LIBOR + 375 bps, with a maturity in 2020. Both facilities include a leverage-based pricing stepdown provision.

The Partnership used the net proceeds of the Term Loan Facility primarily to repay in full the $232 million previous term loan B facility, and to repay in full $200 million outstanding intercompany loans from and other payables due to OCI N.V.

Changes in Corporate Credit Ratings

On February 13, 2018, Moody's Investors Service raised our corporate credit rating to B1 from B2. On February 15, 2018, Standard & Poor's Global Ratings affirmed our corporate credit rating of B- and revised its outlook to positive from stable. On April 11, 2018, Standard & Poor's Global Ratings revised its assessment and raised our corporate credit rating to B+ from B- and revised its outlook to stable.

Distributions

Based on the results of the three months ended March 31, 2018, the Board of Directors of the general partner of the Partnership has approved a cash distribution of $0.38 per common unit, or approximately $33.1 million in the aggregate. The cash distribution will be paid on June 8, 2018 to unitholders of record at the close of business on May 23, 2018.

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 Sensitivity

We have reviewed the assumptions underlying the cash distribution run-rate calculation to reflect more recent realized commodity prices as well as our revised capital structure and cost profile, among other factors. As a result, our cash distribution run-rate calculation is now based on an assumed average methanol selling price of $350 per metric ton, an assumed average ammonia selling price of $250 per metric ton, and an assumed average cost of natural gas of $3.00 per MMBtu. These assumptions result in a run-rate distribution of $1.40 per year. It should be noted that the run-rate commodity prices are not a reflection of management's expectations for commodity prices, but are intended as benchmarks to aid investors in estimating potential future distributions.

To assist investors with estimating potential future distributions, we provide below a sensitivity analysis assuming 94% capacity utilization:

  • A $0.50 per MMBtu change in annual average natural gas prices would result in an approximately $0.24 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; and

  • 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.

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.

Our distribution of $0.38 with respect to the three months ended March 31, 2018 reflects an average realized methanol price of $401 per metric ton, an average realized ammonia price of $317 per metric ton, and an average natural gas price of $3.30 per MMBtu. In addition, our distribution of $0.38 reflects one-time cash debt issuance costs incurred during the first quarter of 2018, which will allow the Partnership to benefit from lower financing costs going forward as reflected in the new run-rate quarterly distribution sensitivity.

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

"I am very pleased with our achievements and milestones during the quarter. Most importantly, we continued our excellent safety track record and had a great start to the year with no OSHA recordable or lost time incidents. We also successfully closed the new credit facilities, which has greatly optimized our capital structure and which will allow us to markedly reduce our debt service costs. And finally, our financial performance was strong, benefiting from an excellent operational performance of our methanol unit and a continuation of healthy methanol markets.

Methanol prices increased compared to the same quarter last year and compared to the fourth quarter of 2017, with prices supported by solid demand and global outages keeping the market tight. Our average realized methanol price was $401 per metric ton in the first quarter, an increase of 14% from $353 per metric ton in the same quarter last year, and an increase of 26% from $319 per metric ton in the fourth quarter of 2017.

Ammonia prices also increased compared to the same quarter last year and compared to the fourth quarter of 2017. Our average realized ammonia price was $317 per metric ton in the first quarter, up 28% from $247 per metric ton in the same quarter last year and up 29% from $246 per metric ton in the fourth quarter of 2017.

Our methanol production unit operated efficiently and experienced no downtime during the quarter, resulting in a 99% capacity utilization and record high quarterly methanol sales volumes. However, the ammonia production unit experienced 17 days of unplanned downtime during the quarter due to an issue with the steam generator and subsequently required repairs to the pressure swing absorption unit feed gas cooler, both of which were addressed during the outage. This resulted in a capacity utilization of 84% for the ammonia unit compared to 102% in the first quarter last year. At some point in the coming six months, we are contemplating a shutdown to address certain operational deficits of our selective catalytic reduction unit. The shutdown is expected to last approximately two weeks.

In the first quarter, driven by the higher methanol sales volumes, comparatively higher realized methanol and ammonia prices during the quarter, and our continued focus on cost management, our EBITDA improved to $59 million, an increase of 48% compared to the same quarter last year, despite slightly higher natural gas costs and lower ammonia sales volumes.

Looking forward to the second quarter of 2018, methanol prices have remained at a steady level throughout the quarter so far, supported by continued strong demand and tight supply. The US weighted average methanol contract price in both April and May was maintained at $495 per metric ton, compared to $490 per metric ton on average in the first quarter of 2018. We continue to monitor the market as it absorbs new supply additions this year, and believe the outlook for methanol markets remains positive, with good visibility into the next years of limited new major capacity additions, combined with expected solid demand from MTO, fuel applications and core derivatives.

Ammonia prices recently declined due to the restart of previously shutdown supply in some exporting regions including Trinidad and North Africa, the recent start-up of new capacity in the United States and a delay in the spring application season in North America due to poor weather. The monthly Tampa CFR ammonia contract price decreased from $305 per metric ton in March to $255 per metric ton in May. Despite the near-term weakness, general nitrogen fertilizer markets are trending positively with the supply/demand growth outlook for downstream fertilizers."


Volume Weighted Average Price of


Volume Weighted Average Price of


Methanol and Ammonia


Natural Gas


($ per metric ton)


($ per MMBtu)


For Three-Months Ended March 31, 


For Three-Months Ended March 31, 


2018


2017


2018


2017

Ammonia

317


247


3.30


3.15

Methanol

401


353






















Production


Capacity Utilization


(in '000 tons)


Rate %


For Three-Months Ended March 31, 


For Three-Months Ended March 31, 


2018


2017


2018


2017

Ammonia

68


83


84%


102%

Methanol

222


216


99%


96%

 

Non-GAAP Financial Measure

EBITDA is defined as net income (loss) plus (i) interest expense and other financing costs, (ii) loss on extinguishment of debt, (iii) income tax expense and (iv) depreciation expense. EBITDA is used as a supplemental financial measure by management and by external users

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