Market Overview

USD Partners LP Announces Second Quarter 2018 Results


USD Partners LP (NYSE:USDP) (the "Partnership") announced today its
operating and financial results for the three and six months ended June
30, 2018. Financial highlights with respect to the second quarter of
2018 include the following:

  • Generated Net Cash Provided by Operating Activities of $11.5 million,
    Adjusted EBITDA of $15.0 million and Distributable Cash Flow of $12.2
  • Reported Net Income of $6.7 million
  • Increased quarterly cash distribution to $0.3550 per unit ($1.42 per
    unit on an annualized basis), representing an increase of 4.4% over
    the second quarter of 2017
  • Ended quarter with $203.9 million of available liquidity and
    distribution coverage of approximately 1.3x

"We are proud to announce another successful quarter at the Partnership.
During the quarter, the Partnership announced the execution of an early
extension with one of its investment grade customers at the Hardisty
Terminal as well as the thirteenth consecutive increase of its quarterly
distribution, which was supported by strong distribution coverage of
approximately 1.3x," said Dan Borgen, the Partnership's Chief Executive
Officer. "Our customers' interest in negotiating extended, long-term
commitments at Hardisty well in advance of their existing contract
expirations strongly validates our strategic commercial vision, and we
look forward to updating the market with continued progress in the near

Recent Commercial Developments

On June 26, 2018, the Partnership announced that it had entered into a
multi-year renewal and extension of approximately 25% of the capacity at
its Hardisty rail terminal with one of its existing investment grade
customers. The renewal contains consistent take-or-pay terms with
minimum monthly payments and rates that exceed those of the original
terminalling services agreement.

As previously mentioned, customer activity at the Hardisty origination
terminal has increased substantially over the last several months.
Current market demand for the services provided at the Hardisty terminal
exceeds the available capacity, as substantially all of the terminal's
capacity was previously contracted by customers under multi-year
agreements through mid-2019 or mid-2020. As a result, the Partnership's
sponsor is evaluating a potential expansion to meet customer demand. The
Partnership is also actively negotiating with current customers to
extend the terms of their existing take-or-pay agreements.

On June 7, 2018, USD Group LLC ("USDG") and the Partnership announced
that USDG had executed a five-year, take-or-pay terminalling services
agreement with a high quality refiner customer. The agreement is for
trans-loading capacity at the Hardisty rail terminal with an expected
start date in late 2018. This new agreement could support the
construction of additional capacity at the Hardisty terminal pursuant to
USDG's existing development rights.

Second Quarter 2018 Liquidity, Operational and Financial Results

Substantially all of the Partnership's cash flows are generated from
multi-year, take-or-pay terminalling services agreements related to its
crude oil terminals, which include minimum monthly commitment fees. The
Partnership's customers include major integrated oil companies, refiners
and marketers, the majority of which are investment-grade rated.

The Partnership's results during the second quarter of 2018 relative to
the same quarter in 2017 were primarily influenced by additional
revenues and costs related to the commencement of operations at the
Stroud terminal in October 2017 and the conclusion of customer
agreements at the Partnership's San Antonio facility in May 2017 and its
Casper terminal in August 2017. In addition, as a result of a
substantial increase in customer activity at its Hardisty terminal, the
Partnership incurred additional operating costs during the second
quarter of 2018.

Net Cash Provided by Operating Activities increased by 21% relative to
the second quarter of 2017, primarily due to the timing of receipts and
payments on accounts receivable, accounts payable and deferred revenue

Adjusted EBITDA decreased by 3% and Distributable Cash Flow increased by
2% relative to the second quarter of 2017.

Net income for the quarter decreased by 22% as compared to the second
quarter of 2017, primarily as a result of a decrease in the
Partnership's estimated benefit from income taxes of approximately $1.4

As of June 30, 2018, the Partnership had total available liquidity of
$203.9 million, including $8.9 million of unrestricted cash and cash
equivalents and undrawn borrowing capacity of $195.0 million on its
$400.0 million senior secured credit facility, subject to continued
compliance with financial covenants. The Partnership is in compliance
with its financial covenants and has no maturities under its senior
secured credit facility until October 2019.

On July 27, 2018, the Partnership declared a quarterly cash distribution
of $0.3550 per unit ($1.42 per unit on an annualized basis), which
represents growth of 0.7% relative to the first quarter of 2018 and 4.4%
relative to the second quarter of 2017. The distribution is payable on
August 14, 2018, to unitholders of record at the close of business on
August 7, 2018.

Effective January 1, 2018, the Partnership adopted the requirements of
Accounting Standards Update 2014-09, or ASC 606, which provides a single
comprehensive model for entities to use in accounting for revenue
arising from contracts with customers. The Partnership adopted ASC 606
by applying the full retrospective approach, resulting in the
restatement of prior period financial statements to comply with the new

Second Quarter 2018 Conference Call Information

The Partnership will host a conference call and webcast regarding second
quarter 2018 results at 11:00 a.m. Eastern Time (10:00 a.m. Central
Time) on Tuesday, August 7, 2018.

To listen live over the Internet, participants are advised to log on to
the Partnership's website at
and select the "Events & Presentations" sub-tab under the "Investors"
tab. To join via telephone, participants may dial (877) 266-7551
domestically or +1 (339) 368-5209 internationally, conference ID
7588437. Participants are advised to dial in at least five minutes prior
to the call.

An audio replay of the conference call will be available for thirty days
by dialing (800) 585-8367 domestically or +1 (404) 537-3406
internationally, conference ID 7588437. In addition, a replay of the
audio webcast will be available by accessing the Partnership's website
after the call is concluded.

About USD Partners LP

USD Partners LP is a fee-based, growth-oriented master limited
partnership formed in 2014 by US Development Group, LLC ("USDG") to
acquire, develop and operate midstream infrastructure and complementary
logistics solutions for crude oil, biofuels and other energy-related
products. The Partnership generates substantially all of its operating
cash flows from multi-year, take-or-pay contracts with primarily
investment grade customers, including major integrated oil companies and
refiners. The Partnership's principal assets include a network of crude
oil terminals that facilitate the transportation of heavy crude oil from
Western Canada to key demand centers across North America. The
Partnership's operations include railcar loading and unloading, storage
and blending in on-site tanks, inbound and outbound pipeline
connectivity, truck transloading, as well as other related logistics
services. In addition, the Partnership provides customers with leased
railcars and fleet services to facilitate the transportation of liquid
hydrocarbons and biofuels by rail.

USDG, which owns the general partner of USD Partners LP, is engaged in
designing, developing, owning, and managing large-scale multi-modal
logistics centers and energy-related infrastructure across North
America. USDG solutions create flexible market access for customers in
significant growth areas and key demand centers, including Western
Canada, the U.S. Gulf Coast and Mexico. Among other projects, USDG is
currently pursuing the development of a premier energy logistics
terminal on the Houston Ship Channel with capacity for substantial tank
storage, multiple docks (including barge and deepwater), inbound and
outbound pipeline connectivity, as well as a rail terminal with unit
train capabilities. For additional information, please visit

Non-GAAP Financial Measures

The Partnership defines Adjusted EBITDA as Net Cash Provided by
Operating Activities adjusted for changes in working capital items,
interest, income taxes, foreign currency transaction gains and losses,
and other items which do not affect the underlying cash flows produced
by the Partnership's businesses. Adjusted EBITDA is a non-GAAP,
supplemental financial measure used by management and external users of
the Partnership's financial statements, such as investors and commercial
banks, to assess:

  • the Partnership's liquidity and the ability of the Partnership's
    businesses to produce sufficient cash flows to make distributions to
    the Partnership's unitholders; and
  • the Partnership's ability to incur and service debt and fund capital

The Partnership defines Distributable Cash Flow, or DCF, as Adjusted
EBITDA less net cash paid for interest, income taxes and maintenance
capital expenditures. DCF does not reflect changes in working capital
balances. DCF is a non-GAAP, supplemental financial measure used by
management and by external users of the Partnership's financial
statements, such as investors and commercial banks, to assess:

  • the amount of cash available for making distributions to the
    Partnership's unitholders;
  • the excess cash flow being retained for use in enhancing the
    Partnership's existing business; and
  • the sustainability of the Partnership's current distribution rate per

The Partnership believes that the presentation of Adjusted EBITDA and
DCF in this press release provides information that enhances an
investor's understanding of the Partnership's ability to generate cash
for payment of distributions and other purposes. The GAAP measure most
directly comparable to Adjusted EBITDA and DCF is Net Cash Provided by
Operating Activities. Adjusted EBITDA and DCF should not be considered
alternatives to Net Cash Provided by Operating Activities or any other
measure of liquidity presented in accordance with GAAP. Adjusted EBITDA
and DCF exclude some, but not all, items that affect Net Cash Provided
by Operating Activities and these measures may vary among other
companies. As a result, Adjusted EBITDA and DCF may not be comparable to
similarly titled measures of other companies.

Cautionary Note Regarding Forward-Looking Statements

This press release contains forward-looking statements within the
meaning of U.S. federal securities laws, including statements with
respect to the amount and timing of the Partnership's second quarter
2018 cash distribution, as well as statements regarding production
growth in Western Canada, demand for rail takeaway capacity in Western
Canada and the Partnership's ability to meet that demand, the
Partnership's ability to achieve long-term contracts and contract
renewals and the ability of the Partnership's Sponsor to commercialize
and develop expansion capacity at the Hardisty terminal. Words and
phrases such as "is expected," "is planned," "believes," "projects," and
similar expressions are used to identify such forward-looking
statements. However, the absence of these words does not mean that a
statement is not forward-looking. Forward-looking statements relating to
the Partnership are based on management's expectations, estimates and
projections about the Partnership, its interests and the energy industry
in general on the date this press release was issued. These statements
are not guarantees of future performance and involve certain risks,
uncertainties and assumptions that are difficult to predict. Therefore,
actual outcomes and results may differ materially from what is expressed
or forecast in such forward-looking statements. Factors that could cause
actual results or events to differ materially from those described in
the forward-looking statements include those as set forth under the
heading "Risk Factors" in the Partnership's most recent Annual Report on
Form 10-K and in our subsequent filings with the Securities and Exchange
Commission. The Partnership is under no obligation (and expressly
disclaims any such obligation) to update or alter its forward-looking
statements, whether as a result of new information, future events or

USD Partners LP

Consolidated Statements of Income

For the Three and Six Months Ended June 30, 2018 and 2017
For the Three Months Ended For the Six Months Ended
June 30, June 30,





(in thousands)
Terminalling services $ 22,169 $ 21,981 $ 43,832 $ 45,658
Terminalling services — related party 5,003 2,614 9,699 4,354
Fleet leases 643 1,286
Fleet leases — related party 983 891 1,967 1,781
Fleet services 81 467 425 935
Fleet services — related party 228 279 455 558
Freight and other reimbursables 1,111 208 2,928 365
Freight and other reimbursables — related party   2         4     1  
Total revenues   29,577     27,083     59,310     54,938  
Operating costs
Subcontracted rail services 3,311 1,795 6,373 3,808
Pipeline fees 5,118 5,109 10,842 10,829
Fleet leases 987 1,534 1,977 3,067
Freight and other reimbursables 1,113 208 2,932 366
Operating and maintenance 1,169 594 2,193 1,301
Selling, general and administrative 2,455 2,362 5,449 4,677
Selling, general and administrative — related party 1,917 1,396 3,747 2,828
Depreciation and amortization   5,260     4,969     10,536     9,910  
Total operating costs   21,330     17,967     44,049     36,786  
Operating income 8,247 9,116 15,261 18,152
Interest expense 2,713 2,513 5,198 5,120
Loss (gain) associated with derivative instruments (386 ) 401 (1,410 ) 612
Foreign currency transaction loss (gain) 117 (100 ) (94 ) (70 )
Other expense (income), net   1     (3 )   72     (13 )

Income before income taxes

5,802 6,305 11,495 12,503
Benefit from income taxes   (910 )   (2,336 )   (1,817 )   (1,201 )
Net income $ 6,712   $ 8,641   $ 13,312   $ 13,704  
USD Partners LP
Consolidated Statements of Cash Flows
For the Three and Six Months Ended June 30, 2018 and 2017
For the Three Months Ended For the Six Months Ended
June 30, June 30,





(in thousands)
Cash flows from operating activities:
Net income $ 6,712 $ 8,641 $ 13,312 $ 13,704
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 5,260 4,969 10,536 9,910
Loss (gain) associated with derivative instruments (386 ) 401 (1,410 ) 612
Settlement of derivative contracts 91 (38 ) 390
Unit based compensation expense 1,558 1,218 2,895 2,016
Other (1,031 ) 570 (2,035 ) 802
Changes in operating assets and liabilities:
Accounts receivable 5,735 (459 ) (2,614 ) (424 )
Accounts receivable — related party (2,593 ) (34 ) (1,380 ) 179
Prepaid expenses, inventory and other assets (2,299 ) (2,947 ) (2,460 ) (1,065 )
Other assets — related party 20 40
Accounts payable and accrued expenses 1,752 (1,409 ) 865 (1,316 )
Accounts payable and accrued expenses — related party 2,491 (77 ) 2,113 230
Deferred revenue and other liabilities (5,760 ) (2,428 ) (261 ) (3,666 )
Deferred revenue — related party   25     929     25     929  
Net cash provided by operating activities   11,484     9,465     19,588     22,301  
Cash flows from investing activities:
Additions of property and equipment (124 ) (25,647 ) (202 ) (25,773 )
Proceeds from the sale of assets           236      
Net cash provided by (used in) investing activities   (124 )   (25,647 )   34     (25,773 )
Cash flows from financing activities:
Distributions (9,904 ) (8,239 ) (19,593 ) (16,142 )
Vested phantom units used for payment of participant taxes (2 ) (1,346 ) (1,072 )
Net proceeds from issuance of common units 33,700 33,700
Proceeds from long-term debt 9,000 35,000 18,000 40,000
Repayments of long-term debt   (7,000 )   (41,000 )   (15,000 )   (57,342 )
Net cash provided by (used in) financing activities   (7,904 )   19,459     (17,939 )   (856 )
Effect of exchange rates on cash   (175 )   98     (853 )   247  

Net change in cash, cash equivalents and restricted cash

3,281 3,375 830 (4,081 )
Cash, cash equivalents and restricted cash – beginning of period   11,337     9,682     13,788     17,138  
Cash, cash equivalents and restricted cash – end of period $ 14,618   $ 13,057   $ 14,618   $ 13,057  
USD Partners LP
Consolidated Balance Sheets
June 30, December 31,
2018 2017
ASSETS (in thousands)
Current assets
Cash and cash equivalents $ 8,926 $ 7,874
Restricted cash 5,692 5,914
Accounts receivable, net 6,727 4,171
Accounts receivable — related party 899 410
Prepaid expenses 2,190 2,545
Inventory 2,783
Other current assets 1,684 226
Other current assets — related party   79     79  
Total current assets 28,980 21,219
Property and equipment, net 139,603 146,573
Intangible assets, net 93,009 99,312
Goodwill 33,589 33,589
Other non-current assets 136 145
Other non-current assets — related party   134     174  
Total assets $ 295,451   $ 301,012  
Current liabilities
Accounts payable and accrued expenses $ 3,530 $ 2,670
Accounts payable and accrued expenses — related party 1,042 244

Deferred revenue

2,913 3,291

Deferred revenue — related party

1,940 1,986

Other current liabilities

  2,614     2,339  
Total current liabilities 12,039 10,530
Long-term debt, net 204,057 200,627
Deferred income tax liability, net 1,823 4,490

Other non-current liabilities

  416     475  
Total liabilities   218,335     216,122  
Commitments and contingencies
Partners' capital
Common units 114,822 136,645
Class A units 950 1,468
Subordinated units (37,797 ) (55,237 )
General partner units 95 180
Accumulated other comprehensive income (loss)   (954 )   1,834  
Total partners' capital   77,116     84,890  
Total liabilities and partners' capital $ 295,451   $ 301,012  
USD Partners LP
GAAP to Non-GAAP Reconciliations
For the Three and Six Months Ended June 30, 2018 and 2017
For the Three Months Ended For the Six Months Ended
June 30, June 30,
2018 2017 2018 2017
(in thousands)
Net cash provided by operating activities $ 11,484 $ 9,465 $ 19,588 $ 22,301
Add (deduct):
Amortization of deferred financing costs (215 ) (215 ) (430 ) (430 )
Deferred income taxes 1,248 (346 ) 2,538 (354 )
Changes in accounts receivable and other assets (863 ) 3,440 6,414 1,310
Changes in accounts payable and accrued expenses (4,243 ) 1,486 (2,978 ) 1,086
Changes in deferred revenue and other liabilities 5,735 1,499 236 2,737
Interest expense, net 2,713 2,513 5,198 5,116
Benefit from income taxes (910 ) (2,336 ) (1,817 ) (1,201 )
Foreign currency transaction loss (gain) (1) 117 (100 ) (94 ) (70 )
Other income (6 ) (21 )
Non-cash contract asset (2)   (52 )       (103 )    
Adjusted EBITDA 15,014 15,400 28,552 30,474
Add (deduct):
Cash paid for income taxes (3) (267 ) (798 ) (449 ) (1,414 )
Cash paid for interest (2,530 ) (2,575 ) (4,821 ) (4,937 )
Maintenance capital expenditures   (31 )   (72 )   (80 )   (198 )
Distributable cash flow $ 12,186   $ 11,955   $ 23,202   $ 23,925  
(1)   Represents foreign exchange transaction amounts associated with
activities between the Partnership's U.S. and Canadian subsidiaries.
(2) Represents the change in non-cash contract assets associated with
revenue recognized in advance at blended rates based on the
escalation clauses in certain of the Partnership's agreements.
(3) Includes a partial refund of $0.7 million (representing C$0.9
million) received in the three months ended March 31, 2017, for the
Partnership's 2015 foreign income taxes.

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