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Martin Midstream announce results and acquisition

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Hydrocarbon Engineering,


Ruben Martin, President and Chief Executive Officer of Martin Midstream GP LLC, the general partner of the Partnership said, "I am pleased to announce the acquisition of the Hondo, Texas asphalt terminal facility for US$27.4 million from Martin Resource Management Corporation (MRMC). In addition, the partnership expects to spend US$8.6 million to complete construction. The terminal will be supported by long-term contractual agreements with MRMC whereby the partnership expects to receive cash flow of approximately US$5 million annually. The acquisition of a newly constructed asset at an accretive multiple of cash flow restores growth at the partnership.

"During the fourth quarter, the partnership continued to execute on its stated goals to create balance sheet improvement and strengthen our distribution coverage ratio. The partnership made a strategic decision in the second half of the year to divest of the Corpus Christi terminal assets as throughput at the facility continued to decline commensurate with Eagle Ford crude oil production. In addition to successfully closing the divestiture, we also saw the positive impact of working capital reductions during the quarter in our natural gas liquids businesses. The net result of those two actions reduced leverage by approximately 0.3 turns on our debt to EBITDA leverage ratio at year end as well as providing additional liquidity.

"For the quarter ended 31 December 2016, our distribution coverage ratio was 1.98 times based on our current quarterly distribution of US$0.50. We generated the highest level of adjusted EBITDA in the partnership's history based on strong contributions from our natural gas services segment. We performed above expectations in our cardinal gas storage line of business and met forecast in our refinery grade butane division.

"Looking at our segments, the natural gas services segment generated better than expected cash flow from our cardinal gas storage assets. Cardinal continues to perform exceedingly well, particularly within its interruptible services line of business. I am especially pleased with Cardinal's performance given the re-contracting requirements at our Arcadia, Louisiana location in mid-year 2016. I believe the market continues to value the strategic location of our storage assets amidst the changing geographical flow of natural gas. Additionally, our butane optimisation business performed at a high level during the fourth quarter and in calendar 2016. This performance was anticipated as the partnership had a strong storage season during the second and third quarters of 2016. Based on current fundamentals, we anticipate our butane business will continue to be strong during the first quarter of 2017. The natural gas services segment fell short of full year 2016 cash flow guidance by approximately US$5.5 million. However, giving effect to the previously disclosed West Texas LPG Pipeline tariff reductions and corresponding distribution to the partnership, the segment actually outperformed our estimates by US$1.4 million.

"Within our terminalling and storage segment, our Smackover refinery exceeded cash flow forecast in 2016 primarily as a result of increased tolling and reservation fees. Positively, within this segment, we were able to significantly reduce operating expenses within our specialty terminals, which offset the decline in revenues we experienced through reduced throughput. We experienced weaker margins in our lubricants platform throughout most of 2016, partially offset by the strengths in our grease business. For the year, the terminalling and storage segment was below our cash flow guidance by approximately US$2.5 million.

"Within our sulfur services segment, the partnership significantly exceeded expectations. This is primarily attributed to strength in our fertilizer business in the second and fourth quarters. Margins were consistently strong as sulfur and raw material costs associated with our products fell throughout the year. Additionally, product demand preferences trended toward our higher margin products again in 2016. For the year, the sulfur services segment exceeded our cash flow guidance by approximately US$5.8 million.

"Lastly, our marine transportation segment encountered soft market conditions during 2016. Day rates for our assets continue to be weak even as the partnership successfully reduced operating and general and administrative expenses during the year. Additionally, the partnership has reduced its fleet size by divesting of non-commercially competitive equipment. This resulted in a non-cash asset impairment of approximately US$11.7 million, negatively impacting the partnership's net income for 2016. These divestitures are expected to allow the partnership to benefit from operating expense savings of approximately US$1.4 million annually. For the year, the marine transportation segment was below cash flow guidance by approximately US$6.1 million.

"De-levering will be a top priority of the partnership in 2017. Based on our current annualised distribution run-rate of US$2.00, the partnership is well-positioned to continue generating strong distribution coverage while continuing to improve our balance sheet.

The partnership had net income for the 4Q16 of US$17.9 million, or US$0.49 per limited partner unit. For the fourth quarter of 2016, net income was positively impacted by the gain on disposition of the partnership's terminalling assets located in Corpus Christi, Texas of US$37.3 million and negatively impacted by non-cash impairment charges of US$27 million. Of these non-cash impairment charges, US$15.3 million occurred in our terminalling and storage segment and was related to the discontinuation of certain organic growth projects no longer deemed economically viable. Additionally, our marine transportation segment experienced an US$11.7 million non-cash charge related to the planned disposal of certain inland and offshore non-core transportation assets. The partnership had net income for the 4Q15 of US$6.8 million, or US$0.08 per limited partner unit. For the 4Q15, net income was negatively impacted by non-cash impairment charges of US$10.6 million. These non-cash charges impacted earnings but had no impact on distributable cash flow or adjusted EBITDA. The partnership's adjusted EBITDA from continuing operations for the 4Q16 was US$52.3 million compared to adjusted EBITDA from continuing operations for the 4Q15 of US$51.4 million, an increase of 2%.

Net income from continuing operations for the year ended 31 December 2016 was US$31.7 million, or US$0.65 per limited partner unit. Net income for the year ended 31 December 2016 was positively impacted by the gain on disposition of the partnership's terminalling assets located in Corpus Christi, Texas of US$37.3 million and negatively impacted by non-cash impairment charges of US$31.1 million. Of these non-cash impairment charges, US$15.3 million occurred in our terminalling and storage segment and was related to the discontinuation of certain organic growth projects no longer deemed economically viable. Additionally, our marine transportation segment experienced an US$11.7 million non-cash charge related to the planned disposal of certain inland and offshore non-core transportation assets and a US$4.1 million non-cash goodwill impairment charge.

Net income from continuing operations for the year ended 31 December 2015 was US$37.2 million, or US$0.60 per limited partner unit. Net income for the year ended 31 December 2015 was negatively impacted by non-cash impairment charges of US$10.6 million in our terminalling and storage segment related to the discontinuation of certain organic growth projects no longer deemed economically viable. The partnership's adjusted EBITDA from continuing operations for the year ended 31 December 2016 was US$176.6 million compared to adjusted EBITDA from continuing operations for the year ended 31 December 2015 of US$188.3 million, a decrease of 6%.

The partnership's distributable cash flow from continuing operations for both the fourth quarter of 2016 and 2015 was US$35.8 million. The partnership's distributable cash flow from continuing operations for the year ended 31 December 2016 was US$113.7 million compared to distributable cash flow from continuing operations for the year ended 31 December 2015 of US$133.9 million, a decrease of 15%.

Revenues for the fourth quarter of 2016 were US$236.9 million compared to US$254.4 million for the 4Q15. Revenues for the year ended 31 December 2016 were US$827.4 million compared to US$1 billion for the year ended 31 December 2015. On 12 February 2015, the partnership exited the natural gas liquids floating storage and trans-loading businesses as a result of the sale of its six liquefied petroleum gas pressure barges, collectively referred to as the "floating storage assets", for US$41.3 million. The partnership recorded a gain on the disposition of US$1.5 million.

The partnership had no net income, distributable cash flow or adjusted EBITDA from discontinued operations related to the floating storage assets for the three and twelve months ended 31 December 2016. The partnership had no net income, distributable cash flow or adjusted EBITDA from discontinued operations related to the floating storage assets for the three months ended 31 December 2015. The partnership had net income from discontinued operations for the twelve months ended 31 December 2015 of US$1.2 million, or US$0.02 per limited partner unit. Distributable cash flow and adjusted EBITDA from discontinued operations were negative US$0.2 million for the year ended 31 December 2015.

Read the article online at: https://www.hydrocarbonengineering.com/tanks-terminals/20022017/martin-midstream-announce-results-and-acquisition/


 

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