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Cypress Energy Partners, L.P. Announces Fourth Quarter 2018 Results

Nachrichtenquelle: Business Wire (engl.)
18.03.2019, 11:50  |  236   |   |   

Cypress Energy Partners, L.P. (NYSE:CELP) today reported:

  • Revenues of $88.9 million for the fourth quarter, an increase of 28% from the fourth quarter of 2017;
  • Gross margin of $12.1 million for the fourth quarter, an increase of 30% from the fourth quarter of 2017;
  • Full-year 2018 net income attributable to limited partners increased 253%;
  • Common unit coverage ratio of 1.22x; and
  • Cash distribution of $0.21 per unit, consistent with the last seven quarters.

Peter C. Boylan III, Cypress Energy Partners, L.P.’s (“CELP”, “Cypress”, or the “Partnership”) Chairman and Chief Executive Officer, stated, “I am both proud of our team and very pleased with our operating results during the fourth quarter, which historically is seasonally slower as a result of the holidays and weather conditions. All three of our business segments, Pipeline Inspection, Pipeline and Process Services, and Water Services generated increased revenues in the fourth quarter of 2018 relative to the fourth quarter of 2017 with strong gross margins, which reflect not only the diversity and strength of our customers, but also the need for the services we offer. Our 2018 performance was very strong across the board and we successfully deleveraged the company, reducing our net debt by 46% with additional equity that materially strengthened our balance sheet.

“Revenues of our Pipeline Inspection segment increased from $63.6 million in the fourth quarter of 2017 to $82.2 million in the fourth quarter of 2018, an increase of 29%. Gross margins in this segment increased from $7.0 million in the fourth quarter of 2017 to $9.0 million in the fourth quarter of 2018, an increase of 28%. The gross margin percentage for this segment was 11.0% in both the fourth quarter of 2017 and the fourth quarter of 2018. We continue to make progress on our goal of diversifying our revenues into higher-margin inspection and integrity services. We finished 2018 with strong headcount (our weekly headcount averaged 1,375 inspectors in the fourth quarter of 2018, compared to 1,101 inspectors during the fourth quarter of 2017). During the fourth quarter of 2018, we began work on the largest contract award in our history, a pipeline project that we announced last quarter that will continue throughout 2019.

“Revenues of our Pipeline & Process Services segment increased from $3.3 million in the fourth quarter of 2017 to $3.7 million in the fourth quarter of 2018, an increase of 11%. The increase was due in part to increasing demand, and in part to improved business development efforts. Gross margins in this segment were $1.0 million in the fourth quarter of 2017 and $0.8 million in the fourth quarter of 2018. We began 2019 with a solid project backlog and have recently experienced robust bidding activity on new projects.

“Revenues in our Water Services Segment increased from $2.4 million during the fourth quarter of 2017 to $3.0 million during the fourth quarter of 2018, an increase of 24%, partially driven by the completion of some new pipelines attached to our facilities early in the year. Demand for this segment increased in 2018 as customer activity increased in the Bakken shale region due to higher commodity prices. Gross margins in this segment increased from $1.3 million in the fourth quarter of 2017 to $2.2 million in the fourth quarter of 2018, an increase of 77%. These increases occurred despite the fact that we sold our two saltwater disposal facilities in Texas during January 2018 and May 2018, respectively, on attractive terms, effectively exiting our saltwater disposal presence in the Permian Basin.

“Our sponsor, Cypress Energy Holdings, LLC (CEH), completed two acquisitions in the third quarter of 2018 with the intention of offering these businesses to the Partnership, when appropriate, that we believe will allow us to expand the breadth and depth of the pipeline integrity services we offer our clients. Both transactions were asset purchases that will require some repositioning before bringing them into the Partnership. Our sponsor has made solid progress on both acquisitions related to this goal in the fourth quarter, and intends to offer them to the Partnership once it has accomplished certain developmental goals, most likely in early 2020 (if not sooner). These acquisitions would move us into several new lines of work, including water treatment, in-line inspection (“ILI”) with next-generation high resolution technology for energy companies, equipment rental (which could be converted into a service business before offering this line of business to the Partnership), and other pipeline process services including nitrogen and dehydration. CEH’s new Lafayette facility also allows us to expand into the offshore market and positions us to better serve the Southeastern part of the country. CEH’s ILI technology is also the first high definition tool capable of serving the municipal water industry’s aging mortar-lined steel pipelines used to transport drinking water that are in need of substantial maintenance, repair, and replacement. The potential acquisition by the Partnership of these businesses should also position us to eventually resume increasing our distributions.

“In all of our business segments, we continue to invest in talent, technologies, and capabilities that we believe will drive growth, expand the number of customers we serve, increase margins, and deliver attractive returns on capital. Despite a material decline in crude oil prices in the fourth quarter of 2018, the outlook for global supply and demand dynamics remains solid. We remain confident that Cypress has a winning strategy and provides essential services required by our customers to deliver attractive, long-term growth. We have a solid balance sheet and, with these two new potential acquisitions, some attractive future strategic opportunities to enhance our growth. We remain a leader in North America in the inspection and integrity industry and continue to grow the breadth and depth of our service offerings. We believe this industry is poised for attractive long-term growth, given the aging energy infrastructure in North America, as well as new construction that requires our essential midstream services. I am also excited to serve the large municipal water industry with our inspection services. The future of our Partnership will continue to be focused on pipeline inspection and integrity services that are mandated by various Federal and State laws. Today these services represent over 95% of our revenue. Management and insiders continue to be fully aligned with our minority unit holders, given their 64% common unit ownership of the Partnership, which is rare in our industry.”

Fourth Quarter:

  • Revenue of $88.9 million for the three months ended December 31, 2018, compared with $69.4 million for the three months ended December 31, 2017, representing a 28% increase.
  • Gross margin of $12.1 million for the three months ended December 31, 2018, compared to $9.3 million for the three months ended December 31, 2017, representing a 30% increase. The gross margin percentage was 13.6% for the three months ended December 31, 2018, compared to 13.4% for the three months ended December 31, 2017.
  • Net income of $2.6 million for the three months ended December 31, 2018, compared to $1.9 million for the three months ended December 31, 2017, an increase of 36%.
  • Net income attributable to limited partners of $2.6 million for the three months ended December 31, 2018 ($1.0 million attributable to our preferred unitholder), compared to $3.1 million for the three months ended December 31, 2017. During the three months ended December 31, 2017, net income attributable to limited partners benefitted from $1.3 million of sponsor support.
  • Adjusted EBITDA of $6.3 million for the three months ended December 31, 2018 (including noncontrolling interests), compared to $4.5 million for the three months ended December 31, 2017 (including noncontrolling interests), an increase of 40%.
  • Adjusted EBITDA attributable to limited partners of $6.2 million for the three months ended December 31, 2018, compared to $5.5 million for the three months ended December 31, 2017, representing an increase of 13%. During the three months ended December 31, 2017, Adjusted EBITDA attributable to limited partners benefitted from $1.3 million of sponsor support.
  • Distributable Cash Flow of $3.1 million for the three months ended December 31, 2018, compared to $3.2 million for the three months ended December 30, 2017. During the three months ended December 31, 2017, Distributable Cash Flow benefitted from $1.3 million of sponsor support.
  • A common unit distribution coverage ratio of 1.22x in the fourth quarter of 2018, compared to a coverage ratio of 1.28x in the fourth quarter of 2017 that benefitted from the sponsor support.
  • Net debt (calculated as long-term debt less cash and cash equivalents) was $60.2 million at December 31, 2018, or 2.6x trailing twelve-month Adjusted EBITDA. The net debt of $60.2 million at December 31, 2018 decreased 46% from net debt of $111.9 million at December 31, 2017.
  • Pursuant to the credit facility covenants, the leverage ratio (calculated as the gross debt balance divided by trailing twelve-month EBITDA) was 3.3x, compared to a 4.0x covenant maximum. The interest coverage ratio was 5.1x, compared to a 3.0x covenant minimum at December 31, 2018.

Full Year:

  • Revenue of $315.0 million for the year ended December 31, 2018, compared to $286.3 million for the year ended December 31, 2017, representing a 10% increase. This increase was due to increased customer activity in each of our business segments, despite the sale during 2018 of our two saltwater disposal facilities in Texas and a significant reduction in our Canadian operations. Revenues of the U.S. operations of the Pipeline Inspection Segment increased by 17% in 2018 compared to 2017. Revenues of the North Dakota operations of the Water Services Segment increased by 72% in 2018 compared to 2017, driven in part by the two new pipelines.
  • Gross margin of $44.0 million for the year ended December 31, 2018, compared to $33.6 million for the year ended December 31, 2017, representing a 31% increase. The gross margin percentage was 14.0% for the year ended December 31, 2018, compared to 11.7% for the year ended December 31, 2017, representing an increase of 20%.
  • Net income of $12.1 million for the year ended December 31, 2018, compared to net loss of $1.9 million for 2017. Net income for the years ended December 31, 2018 and 2017 included net gains on asset disposals of $4.1 million and $0.6 million, respectively.
  • Net income attributable to limited partners of $11.4 million for the year ended December 31, 2018 ($2.4 million attributable to our preferred unitholder), compared to $3.2 million in 2017. During 2017, net income attributable to limited partners benefitted from $4.1 million of sponsor support.
  • Adjusted EBITDA of $23.1 million for the year ended December 31, 2018 (including noncontrolling interests), compared to $16.6 million in 2017, an increase of 39%. During 2017, Adjusted EBITDA benefitted from $1.8 million of sponsor support. Excluding sponsor support in the prior year, Adjusted EBITDA increased 55%.
  • Adjusted EBITDA attributable to limited partners of $21.9 million for the year ended December 31, 2018, compared to $18.7 million in 2017, an increase of 17%. During 2017, Adjusted EBITDA attributable to limited partners benefitted from $4.1 million of sponsor support. Excluding sponsor support in the prior year, Adjusted EBITDA attributable to limited partners increased 49%.
  • Distributable Cash Flow of $12.9 million for the year ended December 31, 2018 (which was reduced by $1.4 million of distributions to our preferred unitholder), compared to $10.0 million in 2017, an increase of 28%. During 2017, Adjusted Distributable Cash Flow benefitted from $4.1 million of sponsor support. Excluding sponsor support in the prior year, Distributable Cash Flow increased 115%.

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