HOUSTON, November 5, 2020 - BP Midstream Partners LP (“BPMP” or the “Partnership”) today reported financial results for the third quarter 2020.
Commenting on the results, CEO Rip Zinsmeister said: “We have navigated yet another challenging quarter, dominated by continuing COVID-19 concerns and an elevated number of storms in the Gulf of Mexico. While these storms impacted our third quarter results, our underlying business continues to perform well. It’s in times like these, that the strength of our high-quality portfolio is highlighted – demonstrating stability and resilience in a turbulent period. And our new three-year minimum volume commitment arrangements with BP underpin already stable, reliable cash flows - securing protection from significant disruptions and maintenance at the Whiting refinery and the onshore pipeline network.”
The Partnership has maintained a strong balance sheet and liquidity position, and has a conservative financial framework.
At the end of the third quarter 2020, the Partnership had:
Total pipeline gross throughput was approximately 1.5 million barrels of oil equivalent per day in the third quarter, around 5% lower compared to the second quarter of 2020.
Gross throughput on our offshore pipelines was around 8% lower compared to the second quarter. The Atlantic hurricane season this year has been a historic season in terms of the number of named storms. Multiple weather events in the Gulf of Mexico during the quarter negatively impacted throughput on the offshore pipelines. The third quarter lower throughput was mainly driven by impacts from Hurricanes Laura and Sally. The estimated quarterly gross impact on throughput was in the range of 150-200 thousand barrels of oil equivalent per day. This was partially offset by higher production from some offshore platforms as production from new major projects and wells ramped up. Hurricanes Delta and Zeta in October are also expected to impact fourth quarter throughput on the offshore pipelines.
Gross throughput on the onshore pipelines was around 2% higher compared to the second quarter, primarily driven by higher throughput on River Rouge. This reflected recovery in refined products demand during the quarter, with demand returning to levels last seen in the first quarter of 2020 before the full effects of the pandemic on product demand were felt. This was partially offset by lower volume on BP2 due to refinery supply optimization by BP.
* Adjusted EBITDA and cash available for distribution are Non-GAAP supplemental financial measures. See reconciliation tables later in this press release.
Net income attributable to the Partnership for the third quarter was $45.3 million, around 12% higher compared with the second quarter of 2020, and around 1% lower than the same period in 2019. Compared with the second quarter 2020, the result reflected:
These favorable impacts were partially offset by:
Adjusted EBITDA attributable to the Partnership for the third quarter was $46.5 million, 2% lower compared with the second quarter of 2020, and around 11% lower than the same period in 2019. Compared with the second quarter 2020, the lower result in the third quarter was primarily due to lower distributions from offshore pipeline joint ventures.
Cash available for distribution for the third quarter was $42.8 million, only slightly lower compared with the second quarter of 2020 and around 5% lower than the same period in 2019.
On November 3, 2020, the Partnership entered into throughput and deficiency agreements with BP Products with respect to volumes transported on the following lines (i) BP2 crude oil pipeline system and related assets; (ii) River Rouge refined products pipeline system and related assets; and (iii) Diamondback diluent pipeline system and related assets (each a “Throughput and Deficiency Agreement” and collectively, the “Throughput and Deficiency Agreements”).
Pursuant to the Throughput and Deficiency Agreements, the Partnership will provide transportation services to BP Products, and BP Products will commit to pay the Partnership for minimum volumes of crude oil, refined products and diluent, regardless of whether such volumes are physically shipped by BP Products through the Partnership’s pipelines during the term of the agreements. BP Products will have the right to terminate these agreements if the Partnership fails to perform any of its material obligations and fails to correct such non-performance within specified periods, or in the event of a change of control of the Partnership’s general partner.
A webcast and conference call will be held at 9:00 a.m. CST on November 5, 2020, hosted by Robert Zinsmeister, chief executive officer; Craig Coburn, chief financial officer; and Brian Sullivan, vice president investor relations, to discuss BPMP’s performance in the third quarter 2020. Interested parties may listen to the presentation at www.bpmidstreampartners.com, by clicking on the “2020 Third Quarter Results Webcast” link, found in the "Events & Presentations" section under the Investor Relations menu option. A replay of the webcast will be available following the live event. The Partnership has also posted an investor presentation to its website. Information on the Partnership's website does not constitute a portion of this press release.
BPMP is a fee-based, growth-oriented master limited partnership formed by BP Pipelines (North America), Inc. (“BP Pipelines”) to own, operate, develop and acquire pipelines and other midstream assets. BPMP’s assets consist of interests in entities that own crude oil, natural gas, refined products and diluent pipelines, and refined product terminals, serving as key infrastructure for BP and other customers to transport onshore crude oil production to BP’s Whiting Refinery and offshore crude oil and natural gas production to key refining markets and trading and distribution hubs. Certain of BPMP’s assets deliver refined products and diluent from the Whiting Refinery and other U.S. supply hubs to major demand centers.
For more information on BPMP and the assets owned by BPMP, please visit www.bpmidstreampartners.com.
Certain statements contained in this news release constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include, among other things, statements concerning management’s expectations, beliefs, estimates, forecasts, projections and assumptions. You can identify our forward-looking statements by words such as “anticipate”, “believe”, “estimate”, “budget”, “continue”, “potential”, “guidance”, “effort”, “expect”, “forecast”, “goals”, “objectives”, “outlook”, “intend”, “plan”, “predict”, “project”, “seek”, “target”, “begin”, “could”, “may”, “should” or “would” or other similar expressions that convey the uncertainty of future events or outcomes. In accordance with “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, these statements are accompanied by cautionary language identifying important factors, though not necessarily all such factors, which could cause future outcomes to differ materially from those set forth in forward-looking statements. In particular, expressed or implied statements concerning future growth, future actions, the continued effects of the global COVID-19 pandemic on demand, the effects of the continued volatility of commodity prices and the related macroeconomic and political environment, volumes, capital requirements, conditions or events, future operating results or the ability to generate sales, the potential exposure of the Partnership to market risks, and statements relating to the expected amount of cash available for distribution and level of distributions are forward-looking statements. These forward-looking statements represent BPMP’s expectations or beliefs concerning future events, and it is possible that the results described in this news release will not be achieved. These forward-looking statements are subject to risks, uncertainties and other factors, many of which are outside of BPMP’s control. These risks include, but are not limited to, the following:
Any forward-looking statement speaks only as of the date on which it is made, and, except as required by law, BPMP does not undertake any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. New factors emerge from time to time, and it is not possible for BPMP to predict all such factors.
This press release includes the terms Adjusted EBITDA and cash available for distribution. Adjusted EBITDA and cash available for distribution are non-GAAP supplemental financial measures that management and external users of our consolidated financial statements, such as industry analysts, investors, lenders and rating agencies, may use to assess:
We believe that the presentation of Adjusted EBITDA and cash available for distribution provides useful information to investors in assessing our financial condition and results of operations. The GAAP measures most directly comparable to Adjusted EBITDA and cash available for distribution are net income and net cash provided by operating activities, respectively.
Adjusted EBITDA and cash available for distribution should not be considered as an alternative to GAAP net income or net cash provided by operating activities.
Adjusted EBITDA and cash available for distribution have important limitations as analytical tools because they exclude some but not all items that affect net income and net cash provided by operating activities. You should not consider Adjusted EBITDA or cash available for distribution in isolation or as a substitute for analysis of our results as reported under GAAP. Additionally, because Adjusted EBITDA and cash available for distribution may be defined differently by other companies in our industry, our definitions of Adjusted EBITDA and cash available for distribution may not be comparable to similarly titled measures of other companies, thereby diminishing their utility.
References to Adjusted EBITDA refer to net income before net interest expense, income taxes, gain or loss from disposition of property, plant and equipment and depreciation and amortization, plus cash distributed to the Partnership from equity method investments for the applicable period, less income from equity method investments. We define Adjusted EBITDA attributable to the Partnership as Adjusted EBITDA less Adjusted EBITDA attributable to non-controlling interests. We define cash available for distribution as Adjusted EBITDA attributable to the Partnership plus net adjustments from volume deficiency agreements and maintenance capital recovery less maintenance capital expenditures, net interest paid/received, cash reserves, and income taxes paid. Cash available for distribution does not reflect changes in working capital balances.
The Partnership is unable to provide financial guidance for projected net income or net cash provided by operating activities without unreasonable effort, and, therefore, is unable to provide a reconciliation of its Adjusted EBITDA and cash available for distributions projections to net income or net cash provided by operating activities, the most comparable financial measures calculated in accordance with GAAP.
The Partnership has not included a reconciliation of projected cash available for distribution to the nearest GAAP financial measure for 2020 because it cannot do so without unreasonable effort and any attempt to do so would be inherently imprecise.
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