Calumet Posts Second Quarter LossPosted: Updated:
Indianapolis-based Calumet Specialty Products Partners LP (Nasdaq: CLMT) is reporting an $8.3 million net loss for the second quarter, compared to net income of $7.8 million during the same period the previous year. The company says extended maintenance at its Shreveport refinery affected performance. August 6, 2014
INDIANAPOLIS, Ind. -- Calumet Specialty Products Partners, L.P. (NASDAQ: CLMT) a leading independent producer of specialty hydrocarbon and fuel products, reported a net loss for the second quarter ended June 30, 2014 of $8.3 million, or $(0.17) per diluted unit, compared to net income of $7.8 million, or $0.05 per diluted unit, in the second quarter 2013. Second quarter 2014 results include $23.6 million in non-cash unrealized derivative gains, compared to $4.0 million non-cash unrealized derivative losses in the prior year period.
Calumet generated Adjusted EBITDA (as defined below in the section of this press release titled "Non-GAAP Financial Measures") of $39.3 million during the second quarter 2014 versus $70.0 million in the prior-year period. During the second quarter 2014, both the Fuel Products and Specialty Products segments were impacted by a 30-day plant-wide turnaround at the Partnership's 60,000 barrels per day ("bpd") Shreveport, Louisiana refinery. This extended turnaround, together with a rapid escalation in crude oil prices during the second quarter, impacted refined product margins in the Fuel Products segment during the second quarter 2014. Within the Fuel Products segment, benchmark diesel and gasoline crack spreads declined on a year-over-year basis by 23% and 14%, respectively, when compared to the second quarter 2013.
Distributable Cash Flow ("DCF") (as defined below in the section of this press release titled "Non-GAAP Financial Measures") for the second quarter 2014 was $(20.4) million, compared to $(2.5) million in the prior year period. The year-over-year decrease in DCF was driven primarily by a decline in Adjusted EBITDA and higher cash interest expense, partially offset by lower turnaround costs.
"Our second quarter results were severely challenged by several factors, including approximately 30 days of extended, planned maintenance at our Shreveport refinery, in addition to less favorable fuels refining economics, when compared to the prior year period," stated Bill Grube, Vice Chairman and Chief Executive Officer. "The extended turnaround at Shreveport, which included multiple plant optimization and reliability improvement projects, reached completion in early June. We are currently operating the refinery at elevated rates during the third quarter 2014."
"We recently amended and restated our revolving credit agreement, an opportunistic transaction which increases our liquidity and lowers our borrowing rates," continued Grube. "We increased lending commitments under the credit facility by $150 million to $1.0 billion, providing for additional access to capital with which to fund the continued growth of the Partnership."
"On August 1, we completed the acquisition of substantially all the assets of privately-held Specialty Oilfield Solutions, Ltd. ("SOS"), a full service drilling fluids and solids control company," continued Grube. "We believe this transaction, together with our recent acquisition of Anchor Drilling Fluids ("Anchor"), positions Calumet as a leading independent supplier of products and services to some of the most active conventional and unconventional oil and natural gas resource plays in North America. This year, we expect both to generate favorable EBITDA growth, consistent with rates achieved in 2013."
"Calumet has a long history of achieving growth through innovation," continued Grube. "To that end, we recently announced our investment as a joint venture partner in the construction of an 1,100 bpd commercial gas-to-liquids ("GTL") plant located in Lake Charles, Louisiana," continued Grube. "We believe this facility, which is expected to reach completion by year-end 2015, positions Calumet as an early adopter of advanced technology capable of converting lower cost natural gas into higher margin liquids. Importantly, we expect yields from this plant will result in premium quality, high margin products, including waxes and diesel."
"The Dakota Prairie refinery remains on schedule to come on-stream beginning in the fourth quarter 2014," continued Grube. "Given the continued structural discount in the price of locally sourced, Bakken crude oil that we expect to process at this refinery, we believe this investment has the potential to be a meaningful contributor to Calumet's Adjusted EBITDA beginning in 2015."
"We are pleased with the continued integration of Royal Purple, Quantum and Bel-Ray synthetic lubricant brands into our portfolio of branded and packaged products," continued Grube. "Our expanded product offering, coupled with our growing global product distribution capabilities, position this product line as a key growth engine for the Partnership in the years ahead."
"We remain committed to maintaining a distribution policy that provides for consistent cash distributions to our unitholders," stated Grube. "In July, we announced a quarterly cash distribution of $0.685 per unit for the quarter ended June 30, 2014 on all of our outstanding limited partner units."
Recent Performance Highlights
Calumet named to the FORTUNE 500 List. On June 2, 2014, it was announced that Calumet had earned a position as No. 467 on the 2014 FORTUNE 500 list of largest U.S. companies. According to FORTUNE magazine, Calumet is currently among the largest U.S. companies, based on total annual sales. In 2013, Calumet ranked as No. 514 on the FORTUNE 1000 list. Calumet's total sales exceeded $5.0 billion for the first time in 2013, an increase of more than 16% from 2012.
Acquired Specialty Oilfield Solutions, Ltd. On August 1, Calumet announced that it had acquired substantially all of the assets of privately-held SOS for total cash consideration of approximately $30 million. Houston-based SOS is a full-service drilling fluids and solids control company with operations in the Eagle Ford, Marcellus and Utica shale plays. This transaction further positions Calumet as one of the leading suppliers of specialty products and services to the oil field services industry, building upon the Partnership's acquisition of Anchor Drilling Fluids in March 2014. The Partnership believes this transaction will enable Calumet to offer a more comprehensive product offering that expands beyond drilling fluids into solids control and wastewater treatment.
Amended and extended revolving credit agreement. On July 14, 2014, Calumet announced the successful completion of an amendment and restatement of its revolving credit agreement. The amended revolving credit facility is comprised of a syndicate of banks with commitments of $1.0 billion and matures in July 2019. The amended credit agreement provides for a reduction in borrowing rates and increased covenant flexibility.
Entered into "Gas-To-Liquids" joint venture with Juniper GTL. On June 9, 2014, Calumet announced its investment as a joint venture partner in the construction of a commercial gas-to-liquids plant that is expected to produce 1,100 bpd of refined products, including waxes, drilling fluids, diesel and naphtha, from natural gas. The Lake Charles, Louisiana plant will be owned and operated by Juniper GTL LLC ("Juniper"), a company also co-owned by SGC Energia and Great Northern Project Development and will be funded through a combination of equity and senior secured debt.
Executed crude oil supply and refined product marketing agreements with Dakota Oil Processing which is expected to commence operations in 2016.
Organic Growth Projects Update
Beginning in 2013, the Partnership initiated a series of organic growth projects, the last of which is expected to