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  4. BP Pipelines Makes Offer to Acquire BP Midstream Partners & BP Midstream Partners Reports Second Quarter 2021 Results

BP Pipelines Makes Offer to Acquire BP Midstream Partners & BP Midstream Partners Reports Second Quarter 2021 Results

Release date:
5 August 2021
  • BP Midstream Partners receives non-binding offer from BP Pipelines (North America) Inc., through its wholly-owned subsidiary BP Midstream Partners Holdings LLC, to acquire all of  the outstanding common units held by the public in exchange for newly-issued American Depositary Receipts of BP p.l.c. at a value of $13.01 per BPMP common unit
  • Second quarter 2021 results highlights:
    • Gross pipeline throughput of 1.6 million barrels per day
    • Net income attributable to the Partnership of $40.5 million and Adjusted EBITDA of $45.6 million
    • Cash from operating activities was $53.5 million and Cash available for distribution was $45.4 million; increased cash balances by $8 million during the quarter and $10 million for the first half of 2021
    • Declared quarterly cash distribution of 34.75 cents per unit for the second quarter 2021, consistent with the level of the first quarter 2021 distribution; distribution coverage ratio of 1.2 times

HOUSTON – BP Midstream Partners LP (“BPMP” or the “Partnership”) today announced that, on August 4, 2021 the board of directors of the general partner of BPMP, received a non-binding offer from BP Pipelines (North America) Inc., through its wholly-owned subsidiary BP Midstream Partners Holdings LLC, both wholly-owned subsidiaries of BP p.l.c., to acquire all of the outstanding common units of BPMP held by the public in exchange for newly-issued American Depositary Receipts of BP p.l.c. at a value of $13.01 per BPMP common unit. BPMP’s filings today contain all of the details relating to the offer that can currently be shared. BPMP will update its filings as required.

 

In response to this announcement, BPMP has temporarily suspended providing forward guidance and temporarily suspended its formal unitholder engagement program, such as attending investor conferences and roadshows.

 

BPMP today also reported financial results for the second quarter 2021.

 

Commenting on the results, CFO Jack Collins said: “While portfolio gross throughput for the second quarter was lower than expected, we delivered increased Adjusted EBITDA and Cash available for distribution, and increased our cash balances by around $8 million during the quarter. We continue to manage BPMP in a thoughtful, disciplined manner, focusing on safe operations and financial stability."

 

Liquidity position

 

The Partnership has maintained a strong balance sheet and liquidity position, and has a conservative financial framework.

 

At the end of the second quarter 2021, the Partnership had:

  • Cash on hand of $137.3 million, an increase of $10.4 million since year end 2020.
  • Receivables of $10.0 million, of which $10.0 million was with affiliates of our investment grade-rated sponsor, bp. 
  • Long-term debt of $468.0 million, with an available revolver capacity of $132.0 million.
  • No principal payments due until 2025.
  • Gross debt to Adjusted EBITDA ratio of 2.6 times.
  • Distribution coverage ratio of 1.21 times.

 

Operational results

 

During the second quarter 2021, total pipeline gross throughput was approximately 1.6 million barrels of oil equivalent per day, 7% lower than the first quarter 2021 for both onshore and offshore pipelines. This was lower than expected for the second quarter, largely due to a slower ramp-up in production from offshore major projects and new wells impacting Proteus, Endymion and Mars, a higher level of offshore producer maintenance activity impacting Caesar and Ursa, and continued elevated levels of apportionment on the Enbridge mainline and refinery feedstock optimization impacting BP2.

 

Financial results

 

GAAP Measures:

  • Net income attributable to the Partnership in the second quarter was $40.5 million (or $0.37 per common unit).
  • Cash from operating activities was $53.5 million for the second quarter.
  • Cash on hand was $137.3 million at June 30, 2021.
  • Outstanding borrowings were $468.0 million under our unsecured term loan facility with an affiliate of bp, at June 30, 2021.

 

Non-GAAP Measures:

  • Adjusted EBITDA* attributable to the Partnership in the second quarter was $45.6 million.
  • Cash available for distribution* attributable to the Partnership generated in the second quarter was $45.4 million.
  • Quarterly cash distribution: On July 15, 2021, the board of directors of the general partner of BPMP declared a quarterly cash distribution of $0.3475 per unit for the second quarter of 2021.
  • Distribution coverage ratio was 1.21 times for the second quarter.

*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 

 

Net income attributable to the Partnership for the second quarter was $40.5 million, around 4% lower compared with the first quarter 2021, and broadly consistent with the same period in 2020. Compared with the first quarter, lower net income attributable to the Partnership reflected lower income from equity method investments due to lower throughput on Proteus, Endymion and Mars.

 

Adjusted EBITDA attributable to the Partnership 

 

Adjusted EBITDA attributable to the Partnership for the second quarter was $45.6 million, 6% higher compared with the first quarter 2021, and around 4% lower than the same period in 2020. Compared with the first quarter, the result reflected higher distributions from equity method investments.

 

Cash available for distribution

 

Cash available for distribution for the second quarter was $45.4 million, 10% higher compared with the first quarter 2021 and around 5% higher than the same period in 2020. Compared to the first quarter, Cash available for distribution benefited from a lower cash reserve related to the timing of interest payments and lower maintenance capital expenditures during the quarter.

Webcast and conference call

A webcast and conference call will be held at 9:00 a.m. CDT on August 5, 2021, hosted by Jack Collins, chief financial officer and Geoff Carr, vice president investor relations, to discuss BPMP’s performance in the second quarter 2021.


Interested parties may listen to the presentation at www.bpmidstreampartners.com, by clicking on the “2021 Second Quarter Results Webcast” link, found in the "Events & Presentations" section under the Investor Relations menu option. Financial information, including the earnings release and other investor-related materials, will also be available online. A replay of the webcast will be posted on the BPMP website following the live event. Information on the Partnership's website does not constitute a portion of this press release.

 

About BP Midstream Partners

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.

 

Cautionary statement

Certain statements contained in this news release constitute “forward-looking statements” within the meaning of Section27A 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, financial position, estimated revenues and losses, projected cost, prospects, plans and objectives of management 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:

  • a decline in global crude oil demand and crude oil prices for an uncertain period of time and the potential resulting significant reduction of domestic crude oil and natural gas production and significant declines in the actual or expected volumes transported through our pipelines and/or the reduction of commercial opportunities that might otherwise be available to us;
  • uncertainty regarding the easing of restrictions on various commercial, social and economic activities by applicable authorities, as well as the potential reinstatement of such restrictions, in response to the spread of COVID-19;
  • uncertainty regarding the timing, pace and extent of an economic recovery in the United States and elsewhere, which in turn will likely affect demand for crude oil and therefore the demand for the midstream services we provide and the commercial opportunities available to us;
  • the  impact  of  current  or  future  actions  or  expectations  of  governments,  investors,  financial  markets,  or  other stakeholders regarding our environmental, social and governance ("ESG") profile or of any actions we may take or goals we may establish regarding such profile and our related business strategy;
  • the impact of current and future laws, rulings, governmental regulations, accounting standards and statements, and related interpretations, including increased focus by the federal and state governments to develop renewable energy and climate-related policies;
  • our inability to perform our obligations under our contracts, whether due to non-performance by third parties, including our customers or counterparties, market constraints, third-party constraints, legal constraints (including governmental orders or guidance), or other factors; and
  • other factors and uncertainties inherent in our business, as discussed in the “Cautionary Note Regarding Forward- Looking  Statements,” “Risk  Factors” and other cautionary statements found in BPMP’s filings with the SEC, including the annual report on Form 10-K for the year ended December 31, 2020 filed with SEC on February 25, 2021 and the quarterly report on Form 10-Q for the period ended June 30, 2021 filed with SEC on August 5, 2021.

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.

 

Non-GAAP financial measures

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:

  • our operating performance as compared to other publicly traded partnerships in the midstream energy industry, without regard to historical cost basis;
  • the ability of our business to generate sufficient cash to support our decision to make distributions to our unitholders;
  • our ability to incur and service debt and fund capital expenditures; and
  • the viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities.

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.

 

Further Information

bp press office: uspress@bp.com

BPMP investor relations: (832) 664-3187 or bpmpir@bp.com