USD Partners LP Announces First Quarter 2019 Results

USD Partners LP (NYSE: USDP) (the "Partnership”) announced today its operating and financial results for the three months ended March 31, 2019. Financial highlights with respect to the first quarter of 2019 include the following:

• Generated Net Cash Provided by Operating Activities of $10.2 million, Adjusted EBITDA⁽¹⁾ of $11.5 million and Distributable Cash Flow of $8.4 million
• Reported Net Income of $1.3 million
• Increased quarterly cash distribution to $0.3625 per unit ($1.45 per unit on an annualized basis), delivering distribution growth of 0.7% over the prior quarter and 2.8% over the first quarter of 2018
• Ended quarter with $181 million of available liquidity

"We are pleased to announce our sixteenth consecutive quarterly distribution increase, which is consistent with our previously stated 2019 distribution guidance,” said Dan Borgen, the Partnership’s Chief Executive Officer. "As we mentioned on our fourth quarter earnings call, we look forward to transitioning into the second half of this year, when the higher rates from our recently extended terminalling services agreements will begin to show up in our financial results. In addition, the forward curves today show the spread between a Western Canadian Select and a West Texas Intermediate barrel of crude oil widening to levels that should incentivize our customers to fully utilize the capacity at our terminals.”

First Quarter 2019 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 first quarter of 2019 relative to the same quarter in 2018 were primarily influenced by lower revenues at its Casper terminal resulting from the conclusion of a customer agreement at the end of 2018, which were partially offset by higher revenues at its Stroud terminal associated with additional contracts that were executed in March and April of 2018. Additionally, the Partnership experienced higher variable operating costs at its Hardisty and Stroud terminals, which it incurred with the anticipation of higher volumes during the quarter, as well as higher operations and maintenance costs at its Stroud terminal, which were partially offset by a reduction in pipeline fees and a decrease in depreciation expense.

Net Cash Provided by Operating Activities increased by 26% relative to the first quarter of 2018, primarily due to the timing of receipts and payments on accounts receivable, accounts payable and deferred revenue balances.

Adjusted EBITDA decreased by 15% and Distributable Cash Flow ("DCF”) decreased by 24% relative to the first quarter of 2018. The decrease in Adjusted EBITDA was primarily a result of the operating factors discussed above. DCF was also impacted by higher cash paid for interest associated with higher interest rates in the first quarter of 2019.

Net income for the quarter decreased as compared to the first quarter of 2018, primarily as a result of the operating factors discussed above coupled with a non-cash loss associated with the five-year interest rate derivative instrument that the Partnership entered into in November 2017 and higher interest expense incurred resulting from higher interest rates during the first quarter of 2019.

As of March 31, 2019, the Partnership had total available liquidity of $181 million, including $3 million of unrestricted cash and cash equivalents and undrawn borrowing capacity of $177 million on its $385 million senior secured credit facility, subject to continued compliance with financial covenants. The Partnership is in compliance with its financial covenants.

On April 26, 2019, the Partnership declared a quarterly cash distribution of $0.3625 per unit ($1.45 per unit on an annualized basis), which represents growth of 0.7% over the prior quarter and 2.8% over the first quarter of 2018. The distribution is payable on May 15, 2019, to unitholders of record at the close of business on May 7, 2019.

Effective January 1, 2019, the Partnership adopted the requirements of Accounting Standards Update 2016-02, or ASC 842, that requires balance sheet recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases.

First Quarter 2019 Conference Call Information

The Partnership will host a conference call and webcast regarding first quarter 2019 results at 11:00 a.m. Eastern Time (10:00 a.m. Central Time) on Tuesday, May 7, 2019.

To listen live over the Internet, participants are advised to log on to the Partnership’s website at www.usdpartners.com 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 2899784. 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 2899784. 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 texasdeepwater.com.

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 expenditures.

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 unit.

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. Reconciliations of Net Cash Provided by Operating Activities to Adjusted EBITDA and DCF are presented on page 9 of this press release.

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 ability of the Partnership and USDG to achieve contract extensions, new customer agreements and expansions; the ability of the Partnership and USDG to develop existing and future additional projects and expansion opportunities and whether those projects and opportunities developed by USDG would be made available for acquisition, or acquired, by the Partnership; volumes at, and demand for, the Partnership’s terminals; the price of WCS relative to WTI and other crude benchmarks, and the drivers causing such pricing spreads; and the amount and timing of future distribution payments and distribution growth. 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 the Partnership’s 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 otherwise.

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