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USD Partners Announces Five Year Ethanol Customer Renewal at its West Colton Terminal; Commencement of Renewable Diesel Operations
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Rhea-AI Summary
USD Partners LP (NYSE:USDP) has signed a five-year Terminal Services Agreement with a major ethanol producer at its West Colton, CA terminal, effective January 1, 2022. This agreement replaces a short-term contract and is projected to generate an additional $1.0 to $1.5 million annually in Net Cash from Operating Activities and Adjusted EBITDA. The Partnership also initiated renewable diesel operations at the same terminal, backed by a five-year contract with USD Clean Fuels LLC. Executive VP Brad Sanders emphasized the commitment to sustainable fuels as a growth opportunity.
Positive
New five-year contract expected to generate $1.0 to $1.5 million in annual Adjusted EBITDA.
Commencement of renewable diesel operations at West Colton Terminal.
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None.
HOUSTON--(BUSINESS WIRE)--
USD Partners LP (NYSE:USDP) (the “Partnership”) announced it has entered into a five-year Terminal Services Agreement with a minimum monthly throughput commitment with a major ethanol producer at its West Colton, CA terminal, effective January 1, 2022. This contract replaces an existing short-term contract at the terminal and is expected to add incremental Net Cash from Operating Activities and Adjusted EBITDA of approximately $1.0 million to $1.5 million per year, subject to changes in expected throughput.
Additionally, the Partnership has commenced renewable diesel operations at its West Colton Terminal and the previously announced five-year Terminal Services Agreement with USD Clean Fuels LLC (“USDCF”) became effective December 1, 2021. As previously stated, this agreement is supported by a minimum throughput commitment to USDCF from an investment-grade rated, refining customer as well as a performance guaranty from US Development Group, LLC, the Partnership’s sponsor.
“We are excited to announce this renewed long-term partnership at our West Colton Terminal. We believe the extended contract term, combined with the expansion and long-term commitment in renewable diesel handling, speaks to our strategically advantaged portfolio of assets,” said Brad Sanders, Executive Vice President and Chief Commercial Officer for USD. “We are committed to the transition into sustainable fuels and see our USD Clean Fuels business as a strong growth platform for USD and potentially, the Partnership. We look forward to future announcements of continued growth within clean fuels.”
About USD Partners LP
USD Partners LP is a fee-based, growth-oriented master limited partnership formed in 2014 by US Development Group, LLC (“USD”) 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.
About USD
USD and its affiliates, which own the general partner of USD Partners LP, are engaged in designing, developing, owning, and managing large-scale multi-modal logistics centers and energy-related infrastructure across North America. USD 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, USD 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 www.usdg.com. DRUbit™, DBR™ and DRUbit™ by Rail™ are trademarks of DRU Assets LLC, a subsidiary of USD, and are used by permission. All rights reserved. Information on websites referenced in this release is not part of this release.
Adjusted EBITDA
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 believes that the presentation of Adjusted EBITDA 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 is Net Cash Provided by Operating Activities. Adjusted EBITDA should not be considered an alternative to Net Cash Provided by Operating Activities or any other measure of liquidity presented in accordance with GAAP. Adjusted EBITDA exclude some, but not all, items that affect Net Cash Provided by Operating Activities and this measure may vary among other companies. Due to the uncertainty and inherent difficulty of predicting the occurrence and future impact of certain items, which could be significant, the Partnership is unable to provide a quantitative reconciliation of the estimated Adjusted EBITDA contribution from the agreement to Net Cash Provided by Operating Activities.
This press release contains forward-looking statements within the meaning of U.S. federal securities laws, including statements with respect to the Net Cash from Operating Activities and Adjusted EBITDA impact of the agreement and the ability of the Partnership and USD to achieve growth in its clean fuels business. Words and phrases such as “expect,” “progressing on,” “plan,” “intent,” “believes,” “projects,” “begin,” “anticipates,” “subject to” 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, USD’s projects 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 the impact of the novel coronavirus (COVID-19) pandemic and related economic impact and changes in general economic conditions and commodity prices, as well as those factors set forth under the heading “Risk Factors” and elsewhere 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 (many of which may be amplified by the COVID-19 pandemic and the significant volatility in demand for, and fluctuations in the prices of, crude oil, natural gas and natural gas liquids). 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, except as required by law.
What is the significance of USD Partners LP's new Terminal Services Agreement?
The new five-year Terminal Services Agreement is expected to generate an additional $1.0 to $1.5 million in annual Adjusted EBITDA for USD Partners LP.
When does the Terminal Services Agreement with the ethanol producer take effect?
The agreement takes effect on January 1, 2022.
What new operations has USD Partners LP started at the West Colton Terminal?
USD Partners LP has commenced renewable diesel operations at its West Colton Terminal.
What was the previous contract type at the West Colton Terminal?
The new agreement replaces an existing short-term contract at the terminal.
Who is the major customer for the Terminal Services Agreement?
The major customer is a significant ethanol producer.
