EX-99 2 pr080307.htm PRESS RELEASE ISSUED AUGUST 3, 2007 Press release issued August 3, 2007
 FOR IMMEDIATE RELEASE
Contact:            Ross A. Benavides
                        Chief Financial Officer
                        (713) 860-2528
 
 
GENESIS ENERGY, L.P. REPORTS SECOND QUARTER RESULTS
 
    Houston, TX - August 3, 2007– Genesis Energy, L.P. (AMEX:GEL) reported today a net loss of $1.4 million, or $0.09 per unit for the second quarter of 2007.  Expense related to our stock appreciation rights (SAR) plan for the quarter of $3.7 million, resulting predominately from the 63 percent increase in our common unit price during the second quarter of the year, was the primary reason for this loss.  Without this charge, net income would have been $2.3 million, or $0.17 per unit, for the quarter. This compares to net income in the 2006 second quarter period of $3.4 million, or $0.24 per unit. For the second quarter of 2007, Available Cash before reserves, a non-GAAP measure was $3.9 million, or $0.27 per unit.  Available Cash before reserves is a non-GAAP measure that is defined and reconciled later in this press release to its most directly comparable GAAP financial measure, net cash provided by operating activities.  Net cash provided by operating activities was $1.3 million for the second quarter of 2007.
    Net income for the first six months of 2007 was $0.2 million, or $0.02 per unit.  Excluding the effects of the $4.3 million of expense for the SAR plan, net income would have been $4.5 million, or $0.32 per unit.  Net income was $6.0 million, or $0.43 per unit, for the first six months of 2006.
    Grant Sims, CEO said “For the second quarter of 2007, we generated Available Cash before reserves, a non-GAAP measure, of $3.9 million or $0.27 per unit, which was more than adequate to cover distributions to the common unitholders and general partner for the quarter totaling $3.2 million or $0.23 per unit.  The holders of common units issued in connection with the recently announced acquisition waived their right to receive the second quarter distribution, instead receiving adjustments to the purchase price of transactions with us.” 
    For the first six months of 2007, Available Cash before reserves was $7.8 million, or $0.55 per unit.  Net cash provided by operating activities was $3.1 million for the six months ended June 30, 2007.
    On July 25, 2007, we completed a transaction to acquire the assets of five energy-related businesses focused on the transportation, storage, marketing and procurement of petroleum products and refinery services from several entities owned and controlled by the Davison family of Ruston, Louisiana.  The acquisition consideration was comprised of 13,459,209 common units and approximately $318 million in cash, which included the purchase of working capital.  The cash consideration was funded through our $500 million Revolving Credit Facility led by Fortis Capital Corp. and Deutsche Bank Securities, Inc.  Additionally, our general partner exercised its right to maintain its proportionate share of our outstanding common units by purchasing 1,074,882 common units from us for $22.4 million.  In addition, as required under Genesis’ partnership agreement, the Partnership’s general partner contributed approximately $6.2 million to maintain its capital account balance.
 
 
 

    “Our existing operations continue to provide steady cash flows.  When we combine those operations with the operations we have acquired from the Davisons, we believe we have a solid base of diverse assets and businesses that should provide significant operating synergies and numerous organic growth opportunities. Having completed that transaction, we are now positioned to move forward to negotiate several anticipated transactions with Denbury involving certain of their CO2 pipelines.  We currently expect those transactions to consist of property purchases combined with associated transportation or service arrangements or direct financing leases, or a combination of both.  We anticipate that during the fourth quarter of 2007, we will enter into transactions with Denbury for CO2 pipelines with a total currently estimated value of between $200 to $250 million, and anticipate similar transactions for the new CO2 pipeline that Denbury is constructing once it is completed, forecasted to be in 2008,” added Mr. Sims.
    On August 14, 2007, we will pay a distribution of $3.2 million, or $0.23 per unit, attributable to the second quarter of 2007.  This is the eighth consecutive $0.01 per unit increase in our quarterly distribution.
Financial Results
    Segment margin is defined and reconciled later in this press release to net income.  The following tables present selected financial information by segment for the three and six month reporting periods:
                                                          
           
Crude Oil
      
   
Pipeline
  
Industrial
  
Gathering &
      
   
Transportation
  
Gases
  
Marketing
  
Total
  
   
(in thousands)
  
                   
Three Months Ended June 30, 2007
                  
Segment margin excluding depreciation
                 
and amortization (a)
  
$
2,227
  
$
2,958
  
$
1,427
  
$
6,612
  
Total capital expenditures
  
$
337
  
$
-
  
$
42
  
$
379
  
Maintenance capital expenditures
  
$
337
  
$
-
  
$
42
  
$
379
  
                           
Revenues:
                          
External Customers
  
$
5,347
  
$
3,946
  
$
190,735
  
$
200,028
  
Intersegment
    
988
   
-
   
-
   
988
 
Total revenues of reportable segments
  
$
6,335
  
$
3,946
  
$
190,735
  
$
201,016
  
                           
Three Months Ended June 30, 2006
                          
Segment margin excluding depreciation
                         
and amortization (a)
  
$
3,602
  
$
3,026
  
$
2,347
  
$
8,975
  
Total capital expenditures
  
$
257
  
$
5,550
  
$
35
  
$
5,842
  
Maintenance capital expenditures
  
$
126
  
$
-
  
$
35
  
$
161
  
                           
Revenues:
                          
External Customers
  
$
6,828
  
$
3,894
  
$
220,828
  
$
231,550
  
Intersegment
    
1,793
   
-
   
-
   
1,793
 
Total revenues of reportable segments
  
$
8,621
  
$
3,894
  
$
220,828
  
$
233,343
  
                           

 
 
 

   
 
  
 
  
Crude Oil
  
 
  
 
  
Pipeline
  
Industrial
  
Gathering &
  
 
  
 
  
Transportation
  
Gases
  
Marketing
  
Total
  
   
(in thousands)
  
Six Months Ended June 30, 2007
                  
Segment margin excluding depreciation
                 
and amortization (a)
  
$
5,095
  
$
5,572
  
$
3,026
  
$
13,693
  
Total capital expenditures
  
$
559
  
$
-
  
$
135
  
$
694
  
Maintenance capital expenditures
  
$
559
  
$
-
  
$
135
  
$
694
  
                           
Revenues:
                          
External Customers
  
$
11,007
  
$
7,443
  
$
364,014
  
$
382,464
  
Intersegment
    
2,116
   
-
   
-
   
2,116
 
Total revenues of reportable segments
  
$
13,123
  
$
7,443
  
$
364,014
  
$
384,580
  
                           
Six Months Ended June 30, 2006
                          
Segment margin excluding depreciation
                         
and amortization (a)
  
$
6,404
  
$
5,653
  
$
4,075
  
$
16,132
  
Total capital expenditures
  
$
423
  
$
5,550
  
$
156
  
$
6,129
  
Maintenance capital expenditures
  
$
224
  
$
-
  
$
156
  
$
380
  
                           
Revenues:
                          
External Customers
  
$
13,926
  
$
7,281
  
$
473,273
  
$
494,480
  
Intersegment
    
2,465
   
-
   
-
   
2,465
 
Total revenues of reportable segments
  
$
16,391
  
$
7,281
  
$
473,273
  
$
496,945
  
                           
(a)  Segment margin was calculated as revenues less cost of sales and operating expenses, plus our share of the operating income of our investment in joint ventures.  A reconciliation of segment margin to income from continuing operations is presented for periods presented in the table at the end of this release.
Quarterly Comparison
    Pipeline transportation segment margin for the second quarter period declined $1.4 million as compared to the prior year period.  Of this decrease, $0.6 million is attributable to increased stock appreciation rights plan expense.  The remaining decrease resulted primarily from a decline in revenue from volumetric gains. Volumetric gain quantities were approximately 8,000 barrels less. Throughput increases on the Mississippi system, where the tariffs per barrel are greater, offset the effects on segment margin of a decline in the volume on the Texas system where the tariff per barrel is significantly less.  Volumes on the Jay system declined while a shipper performed maintenance on a separation plant connected to our pipeline. 
    Segment margin from crude oil gathering and marketing activities declined by $0.9 million in 2007 when compared to 2006, with $0.6 million of the decrease due to increased expense for our stock appreciation rights plan.  Other field costs increased by $0.5 million, with compensation and related personnel costs increasing $0.4 million and fuel expense increasing costs by $0.1 million.  Offsetting these increased costs was an improvement in revenues from fees for transportation only activities totaling $0.5 million, primarily for transporting crude oil for Denbury.   Volumes of crude oil purchased and sold decreased as did the marketing margin (the difference in the sales and purchase prices); however the overall effect was only $0.4 million.
    General and administrative expenses increased $2.4 million when comparing the second quarter periods.  The portion of expense related to our stock appreciation rights plan that was
 
 
 

included in general and administrative expense increased by $2.2 million.  The remaining increase resulted primarily from increased compensation, legal and consultant fees.
Year-to-Date Comparison
    As in the quarterly periods, the increase in stock appreciation rights (SAR) plan expense had a significant impact on the comparisons of the results for the six months ended June 30, 2007 and 2006. 
    Pipeline segment margin decreased $1.3 million, with $0.7 million due to increased SAR plan expense.  Other pipeline operating costs increased $0.2 million from more integrity testing in the 2007 period and costs to tear down a tank on the Texas system that we are replacing for regulatory reasons.  Revenues from crude oil and CO2 pipeline tariff activities decreased $0.1 million.  Segment margin from natural gas activities was negatively impacted by $0.3 million primarily due to production difficulties of a producer connected to one of our systems.
    Crude oil gathering and marketing segment margin declined $1.0 million between the six month periods, with $0.8 million resulting from increased SAR plan expense.  The remaining decrease resulted from increased compensation and related costs to operate our trucks and manage our operations and increased fuel costs totaling $0.2 million.  The effects of a reduction in volumes marketed was offset by an increase in segment margin from storing inventory in the current contango market, and increased revenues from volumes transported for a fee.
     Since the distribution paid in November 2005, we have increased the distribution rate on our common units by a total of $0.07 per unit, or 44%.

       
Per Unit
  
Distribution For
  
Date Paid
  
Amount
  
           
Second quarter 2007
    
August 2007
  
$
0.23
  
First quarter 2007
    
May 2007
  
$
0.22
  
Fourth quarter 2006
    
February 2007
  
$
0.21
  
Third quarter 2006
    
November 2006
  
$
0.20
  
Second quarter 2006
    
August 2006
  
$
0.19
  
First quarter 2006
    
May 2006
  
$
0.18
  
Fourth quarter 2005
    
February 2006
  
$
0.17
  
Third quarter 2005
    
November 2005
  
$
0.16
  
               
    The second quarter 2007 distribution will be paid August 14, 2007 to unitholders of record on August 6, 2007, excluding the units issued in July 2007 in connection with the Davison acquisition.  We generated Available Cash before reserves (a non-GAAP measure) of $3.9 million during the second quarter of 2007.  Net cash flows provided by operating activities were $1.3 million for the second quarter period.  (Please see the accompanying schedules for a reconciliation of Available Cash before reserves, a non-GAAP measure, to net cash flow provided by operations, the GAAP measure.)
 
 
 

Available Cash
    Several adjustments to net income are required to calculate Available Cash before reserves.  The calculation of Available Cash before reserves is as follows (in thousands):

   
Three Months Ended
  
Six Months Ended
  
   
June 30, 2007
  
June 30, 2007
  
           
Net (loss) income
  
$
(1,372
)
$
213
  
Depreciation and amortization expense
    
2,046
   
3,974
 
Cash from direct financing leases in
              
excess of income recorded
    
141
   
279
 
Available cash generated by joint ventures in
              
excess of earnings
    
186
   
485
 
Non-cash expense for incentive compensation plan
              
and other non-cash items
    
3,050
   
3,333
 
Proceeds from disposals of surplus assets
    
179
   
195
 
Maintenance capital expenditures
    
(379
)
  
(694
)
Available Cash before reserves
  
$
3,851
  
$
7,785
  
               
Earnings Conference Call
We will broadcast our Earnings Conference Call on Friday, August 3, 2007, at 10:00 a.m. Central time.  This call can be accessed at www.genesiscrudeoil.com.  Choose the Investor Relations button.  Listeners should go to this website at least fifteen minutes before this event to download and install any necessary audio software.  For those unable to attend the live broadcast, a replay will be available beginning approximately one hour after the event and remain available on our website for 30 days.  There is no charge to access the event.
Genesis Energy, L.P., operates crude oil common carrier pipelines and is an independent gatherer and marketer of crude oil in North America, with operations concentrated in Texas, Louisiana, Alabama, Florida, and Mississippi.  Genesis Energy, L.P. also operates an industrial gas business.
This press release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.  Although we believe that our expectations are based upon reasonable assumptions, we can give no assurance that our goals will be achieved.  Important factors that could cause actual results to differ materially from those in the forward looking statements herein include the timing and extent of changes in commodity prices for oil, ability to obtain adequate credit facilities, managing operating costs, completion of capital projects on schedule and within budget, consummation of accretive acquisitions, capital spending, environmental risks, government regulation, our ability to meet our stated business goals and other risks noted from time to time in our Securities and Exchange Commission filings.  Actual results may vary materially.  We undertake no obligation to publicly update or revise any forward-looking statement.
(tables to follow)
 
 
 

Genesis Energy, L.P.
          
Summary Consolidated Statements of Operations - Unaudited
          
(in thousands except per unit amounts and volumes)
          
           
   
Three Months Ended
  
Three Months Ended
  
   
June 30, 2007
  
June 30, 2006
  
           
Revenues
  
$
201,016
  
$
233,343
  
Cost of sales
    
194,697
   
224,707
 
General and administrative expenses
    
5,600
   
3,249
 
Depreciation and amortization expense
    
2,046
   
2,029
 
Losses (gains) from disposal of surplus assets
    
(8
)
  
1
 
OPERATING (LOSS) INCOME
    
(1,319
)
  
3,357
 
Equity in earnings of joint ventures
    
293
   
339
 
Interest expense, net
    
(321
)
  
(263
)
Income tax (expense) benefit
    
(25
)
  
11
 
NET (LOSS) INCOME
  
$
(1,372
)
$
3,444
  
               
NET (LOSS) INCOME PER COMMON UNIT -
             
BASIC AND DILUTED
  
$
(0.09
)
$
0.24
  
               
Volume data:
              
Crude oil pipeline barrels per day (total)
    
57,127
   
62,778
 
Mississippi Pipeline System barrels per day
    
20,496
   
16,990
 
Jay Pipeline System barrels per day
    
11,602
   
13,727
 
Texas Pipeline System barrels per day
    
25,029
   
32,061
 
CO2 sales Mcf per day
    
75,039
   
73,495
 
Total crude oil gathering and marketing
              
barrels per day
    
32,429
   
35,372
 
               
Units Data:
              
Common units held by Public
    
12,765,000
   
12,765,000
 
Common units held by general partner
    
1,019,441
   
1,019,441
 
Total common units outstanding
    
13,784,441
   
13,784,441
 
               
 
 
 

Genesis Energy, L.P.
          
Summary Consolidated Statements of Operations - Unaudited
          
(in thousands except per unit amounts and volumes)
          
           
   
Six Months Ended
  
Six Months Ended
  
   
June 30, 2007
  
June 30, 2006
  
           
Revenues
  
$
384,580
  
$
496,945
  
Cost of sales
    
371,441
   
481,465
 
General and administrative expenses
    
8,928
   
5,909
 
Depreciation and amortization expense
    
3,974
   
3,893
 
Gains from disposal of surplus assets
    
(24
)
  
(49
)
OPERATING INCOME
    
261
   
5,727
 
Equity in earnings of joint ventures
    
554
   
652
 
Interest expense, net
    
(547
)
  
(385
)
Income tax (expense) benefit
    
(55
)
  
11
 
Income before cumulative effect adjustment
    
213
   
6,005
 
Cumulative effect adjustment from adoption of new
              
accounting principle
    
-
   
30
 
NET INCOME
  
$
213
  
$
6,035
  
               
NET INCOME PER COMMON UNIT -
             
BASIC AND DILUTED
              
Income before cumulative effect adjustment
  
$
0.02
  
$
0.43
  
Cumulative effect adjustment
    
-
   
-
 
Net income per common unit - basic
              
and diluted
  
$
0.02
  
$
0.43
  
               
Volume data:
              
Crude oil pipeline barrels per day (total)
    
57,499
   
62,420
 
Mississippi Pipeline System barrels per day
    
19,929
   
16,701
 
Jay Pipeline System barrels per day
    
12,204
   
12,577
 
Texas Pipeline System barrels per day
    
25,366
   
33,142
 
CO2 sales Mcf per day
    
71,120
   
70,049
 
Total crude oil gathering and marketing
              
barrels per day (1)
    
32,931
   
40,303
 
               
Units Data:
              
Common units held by Public
    
12,765,000
   
12,765,000
 
Common units held by general partner
    
1,019,441
   
1,019,441
 
Total common units outstanding
    
13,784,441
   
13,784,441
 
               
(1) For purposes of comparison, barrels per day before netting of buy/sell volumes was 43,381 for the 2007 period and 45,670 for the 2006 period.
              
 
              
 
 
 

Genesis Energy, L.P.
          
Consolidated Balance Sheets - Unaudited
          
(in thousands)
          
           
           
   
June 30, 2007
  
December 31, 2006
  
           
ASSETS
          
Cash
  
$
3,832
  
$
2,318
  
Accounts receivable
    
89,485
   
89,106
 
Inventories
    
11,302
   
5,172
 
Other current assets
    
2,464
   
3,396
 
Total current assets
    
107,083
   
99,992
 
Net property
    
29,893
   
31,316
 
CO2 contracts
    
31,351
   
33,404
 
Joint ventures and other investments
    
17,619
   
18,226
 
Other assets
    
17,380
   
8,149
 
Total Assets
  
$
203,326
  
$
191,087
  
               
LIABILITIES AND PARTNERS' CAPITAL
              
Accounts payable
  
$
87,325
  
$
86,692
  
Accrued liabilities
    
11,890
   
9,220
 
Total current liabilities
    
99,215
   
95,912
 
Long-term debt
    
22,800
   
8,000
 
Other liabilities
    
963
   
991
 
Minority interest
    
521
   
522
 
Partners' capital
    
79,827
   
85,662
 
Total Liabilities and Partners' Capital
  
$
203,326
  
$
191,087
  
               
 
 
 

Genesis Energy, L.P.
          
Summary Consolidated Statements of Cash Flows - Unaudited
          
(in thousands)
          
           
   
Six Months Ended
  
Six Months Ended
  
   
June 30, 2007
  
June 30, 2006
  
           
Net income
  
$
213
  
$
6,035
  
Adjustments to reconcile net income to cash
              
provided by (used in) operating activities:
              
Depreciation and amortization
    
3,974
   
3,893
 
Amortization of credit facility issuance costs
    
273
   
186
 
Amortization of unearned income
    
(315
)
  
(333
)
Cash received from direct financing leases
    
594
   
594
 
Equity in earnings of joint ventures
    
(554
)
  
(652
)
Distributions from joint ventures - return on investment
    
833
   
677
 
Gains on asset disposals
    
(24
)
  
(49
)
Non-cash effects of stock appreciation rights plan
    
3,340
   
442
 
Other non-cash items
    
(992
)
  
(362
)
Changes to components of working capital
    
(4,287
)
  
(11,975
)
Net cash provided by (used in) operating activities
    
3,055
   
(1,544
)
               
Additions to property and equipment
    
(718
)
  
(480
)
Distributions from joint ventures that are a return
              
of investment
    
361
   
153
 
Investment in Sandhill Group, LLC
    
-
   
(5,037
)
Investments, other
    
-
   
(513
)
Proceeds from sales of assets
    
195
   
67
 
Other, net
    
(9,811
)
  
(26
)
Net cash used in investing activities
    
(9,973
)
  
(5,836
)
               
Bank borrowings, net
    
14,800
   
11,500
 
Distributions to partners
    
(6,049
)
  
(4,923
)
Other, net
    
(319
)
  
(580
)
Net cash provided by financing activities
    
8,432
   
5,997
 
               
Net increase (decrease) in cash and cash equivalents
    
1,514
   
(1,383
)
Cash and cash equivalents at beginning of period
    
2,318
   
3,099
 
Cash and cash equivalents at end of period
  
$
3,832
  
$
1,716
  
               
 
 
 
 

Genesis Energy, L.P.
          
Reconciliations
          
           
SEGMENT MARGIN EXCLUDING DEPRECIATION AND AMORTIZATION
          
RECONCILIATION TO NET INCOME
          
           
 
    
Three Months Ended
    
Three Months Ended
  
   
June 30, 2007 
    
June 30, 2006
  
 
(in thousands) 
               
Segment margin excluding depreciation and
              
amortization
  
$
6,612
  
$
8,975
  
General and administrative expenses
    
(5,600
)
  
(3,249
)
Depreciation and amortization expense
    
(2,046
)
  
(2,029
)
Gain (loss) from disposal of surplus assets
    
8
   
(1
)
Interest expense, net
    
(321
)
  
(263
)
Income tax (expense) benefit
    
(25
)
  
11
 
Net (loss) income
  
$
(1,372
)
$
3,444
  
               
               
               
 
    
Six Months Ended  
    
Six Months Ended
  
  
    
June 30, 2007 
    
June 30, 2006
  
     
  
(in thousands) 
               
Segment margin excluding depreciation and
              
amortization
  
$
13,693
  
$
16,132
  
General and administrative expenses
    
(8,928
)
  
(5,909
)
Depreciation and amortization expense
    
(3,974
)
  
(3,893
)
Gain from disposal of surplus assets
    
24
   
49
 
Interest expense, net
    
(547
)
  
(385
)
Income tax (expense) benefit
    
(55
)
  
11
 
Cumulative effect adjustment
    
-
   
30
 
Net income
  
$
213
  
$
6,035
  
               
 

 
 
 
GAAP to Non-GAAP Financial Measure Reconciliation
          
           
AVAILABLE CASH BEFORE RESERVES RECONCILIATION TO
         
NET CASH FLOWS FROM OPERATING ACTIVITIES
          
           
   
Three Months Ended
  
Six Months Ended
  
   
June 30, 2007
  
June 30, 2007
  
   
(in thousands)
  
           
Net cash flows from operating activities (GAAP measure)
  
$
1,318
  
$
3,055
  
Adjustments to reconcile net cash flow provided by operating
             
activities to Available Cash before reserves:
              
Maintenance capital expenditures
    
(379
)
  
(694
)
Amortization of credit facility issuance costs
    
(137
)
  
(273
)
Cash effects of stock appreciation rights plan
    
(588
)
  
(995
)
Available cash from joint ventures not included in
              
operating cash flows
    
70
   
206
 
Other items affecting available cash
    
690
   
1,009
 
Proceeds from asset sales
    
179
   
195
 
Net effect of changes in components of working capital
    
2,698
   
5,282
 
Available Cash before reserves (Non-GAAP measure)
  
$
3,851
  
$
7,785
  
               

 
 
    This press release and the accompanying schedules include a non-generally accepted accounting principle (“non-GAAP”) financial measure of Available Cash.  The accompanying schedule provides a reconciliation of this non-GAAP financial measure to its most directly comparable financial measure calculated in accordance with generally accepted accounting principles in the United States of America (“GAAP”). Our non-GAAP financial measure should not be considered as an alternative to GAAP measures of liquidity or financial performance.  We believe that investors benefit from having access to the same financial measures being utilized by management, lenders, analysts and other market participants.
    Available Cash.  Available Cash before reserves is a liquidity measure used by management to compare cash flows generated by us to the cash distribution paid to our limited partners and general partner.  This is an important financial measure to the public unitholders since it is an indicator of our ability to provide a cash return on their investment.  Specifically, this financial measure aids investors in determining whether or not we are generating cash flows at a level that can support a quarterly cash distribution to the partners.  Lastly, Available Cash before reserves (also referred to as distributable cash flow) is the quantitative standard used throughout the investment community with respect to publicly-traded partnerships.
    We define Available Cash as net income or loss plus: (1) depreciation and amortization expense; (2) cash proceeds from the sale of certain assets; (3) the addition of losses or subtraction of gains relating to the sale of assets; (4) payments under direct financing leases in excess of the amount recognized as income; (5) the addition of losses or subtraction of gains on derivative financial instruments; (6) available cash generated by equity method investments in excess of earnings; (7) the subtraction of maintenance capital expenditures incurred to replace or enhance partially or fully depreciated assets so as to sustain the existing operating capacity or

 
 
 
efficiency of our assets and extend their useful lives; and (8) the addition of losses or subtraction of gains relating to other non-cash amounts affecting net income for the period.
# # #