Valero (NYSE:VLI)
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Valero L.P. (NYSE:VLI) today announced income applicable
to limited partners from continuing operations of $27.8 million, or
$0.60 per unit, for the second quarter of 2006, compared to $17.0
million, or $0.74 per unit, for the second quarter of 2005. For the
six months ended June 30, 2006, income applicable to limited partners
from continuing operations was $63.1 million, or $1.35 per unit,
compared to $34.8 million, or $1.51 per unit, for the six months ended
June 30, 2005.
Including discontinued operations, Valero L.P. reported net income
applicable to limited partners of $27.5 million, or $0.59 per unit,
for the second quarter of 2006 and $62.8 million, or $1.34 per unit
for the six months ended June 30, 2006.
Distributable cash flow available to limited partners from
continuing operations for the second quarter was $41.4 million, or
$0.88 per unit, compared to $22.1 million, or $0.96 per unit for the
second quarter of 2005. Distributable cash flow available to limited
partners from continuing operations for the six months ended June 30,
2006 was $91.8 million, or $1.96 per unit, compared to $45.2 million,
or $1.96 per unit for the six months ended June 30, 2005. As of June
30, 2006, the partnership's debt-to-capitalization ratio was 38.0
percent compared to 47.7 percent as of June 30, 2005.
The increases in income and distributable cash flow applicable to
limited partners from continuing operations were primarily due to the
acquisition of Kaneb completed on July 1, 2005. Valero L.P.'s second
quarter 2005 results do not include any results from Kaneb.
With respect to the quarterly distribution to unitholders payable
for the second quarter of 2006, Valero L.P. also announced that it has
declared a distribution of $0.885 per unit payable August 14, 2006, to
holders of record as of August 7, 2006. Distributable cash flow
available to limited partners from continuing operations covers the
distribution to the limited partners by 1.0 times for the second
quarter of 2006 and 1.11 times for the six months ended June 30, 2006.
"The partnership's earnings for the second quarter met our
guidance and expectations provided to investors on the first quarter
conference call," said Curt Anastasio, Valero L.P.'s Chief Executive
Officer and President. "During the quarter, our results were primarily
impacted by higher operating and interest expenses. Scheduled
turnarounds and operating problems at several of our customers'
refineries also had an impact on the partnership's results.
"I am pleased to report we continue to make substantial progress
on our strategic growth projects. The partnership has completed the
Burgos pipeline construction project in South Texas and northeastern
Mexico. On an annual basis, we are expecting incremental throughputs
of approximately 36,000 barrels per day and a contribution of $8.2
million of EBITDA from this project.
"Additionally, we have completed several ethanol blending and
storage projects at our Linden and Paulsboro terminals located on the
East Coast, our Southlake terminal in the Dallas area and our Glasgow,
Grangemouth and Grays terminals in the United Kingdom. The expected
annual EBITDA contribution from these projects is around $2.8 million.
And, in the second half of this year we will begin construction on
several terminal expansion projects that are part of the nearly $300
million of strategic growth capital we have identified for 2006
through 2008. The terminal expansion projects in Texas City, Portland,
the New York Harbor area, Jacksonville, Savannah, St. Eustatius in the
Caribbean and elsewhere are expected to start contributing to the
partnership's results in 2007. Our growth strategy is supported by a
strong balance sheet and a low cost of capital given our incentive
distribution rights are capped at 25 percent.
"Looking ahead to the third quarter of 2006, results will be
positively impacted by increases in our pipeline tariffs that took
effect July 1, Burgos project volumes and higher seasonal demand for
asphalt and refined products. However, we expect to continue to be
negatively impacted by scheduled turnarounds at refineries we serve
and higher maintenance expenses. As a result, we expect third quarter
earnings to be similar to the second quarter.
"For the fourth quarter of 2006, operations and results should
improve significantly as the partnership benefits from fewer
turnarounds, lower maintenance expenses and a seasonal increase in
bunker fuel sales. We continue to expect that the results for the
second half of 2006 will exceed the results achieved in the first half
of this year," said Anastasio.
A conference call with management is scheduled for 2:30 p.m. ET
(1:30 p.m. CT) today to discuss the financial and operational results
for the second quarter of 2006. Investors interested in listening to
the presentation may call 800-622-7620, passcode 2888567.
International callers may access the presentation by dialing
706-645-0327, passcode 2888567. The company intends to have a playback
available following the presentation, which may be accessed by calling
800-642-1687, passcode 2888567. A live broadcast of the conference
call will also be available on the company's website at
www.valerolp.com.
Valero L.P. is a publicly traded, limited partnership based in San
Antonio, with 9,243 miles of pipeline, 88 terminal facilities and four
crude oil storage facilities. One of the largest independent terminal
and petroleum liquids pipeline operators in the nation, the
partnership has operations in the United States, the Netherlands
Antilles, Canada, Mexico, the Netherlands and the United Kingdom. The
partnership's combined system has approximately 77 million barrels of
storage capacity, and includes crude oil and refined product
pipelines, refined product terminals, a petroleum and specialty
liquids storage and terminaling business, as well as crude oil storage
tank facilities. For more information, visit Valero L.P.'s web site at
www.valerolp.com.
Cautionary Statement Regarding Forward-Looking Statements
This press release includes forward-looking statements within the
meaning of the Securities Litigation Reform Act of 1995 regarding
future events and the future financial performance of Valero L.P. All
forward-looking statements are based on the partnership's beliefs as
well as assumptions made by and information currently available to the
partnership. These statements reflect the partnership's current views
with respect to future events and are subject to various risks,
uncertainties and assumptions. These risks, uncertainties and
assumptions are discussed in Valero L.P.'s 2005 annual report on Form
10-K and subsequent filings with the Securities and Exchange
Commission.
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Valero L.P.
Consolidated Financial Information
June 30, 2006 and 2005
(unaudited, thousands of dollars, except unit data and per unit data)
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- -----------------------
2006 2005 2006 2005
----------- ----------- ----------- -----------
Statement of Income
Data (Note 1):
Revenues:
Services revenues $152,094 $58,306 $300,023 $114,941
Product sales 127,874 - 253,949 -
----------- ----------- ----------- -----------
Total revenues 279,968 58,306 553,972 114,941
Costs and expenses:
Cost of product
sales 118,283 - 232,501 -
Operating expenses 79,155 21,645 150,225 41,330
General and
administrative
expenses 10,375 3,561 18,935 7,064
Depreciation and
amortization 24,839 8,791 49,028 17,523
----------- ----------- ----------- -----------
Total costs and
expenses 232,652 33,997 450,689 65,917
----------- ----------- ----------- -----------
Operating income 47,316 24,309 103,283 49,024
Equity income from
joint ventures 1,844 421 3,050 799
Interest and other
expenses, net (16,876) (5,878) (32,341) (11,707)
----------- ----------- ----------- -----------
Income from
continuing
operations before
income tax expense 32,284 18,852 73,992 38,116
Income tax expense 492 - 2,611 -
----------- ----------- ----------- -----------
Income from
continuing
operations 31,792 18,852 71,381 38,116
Loss from
discontinued
operations (239) - (377) -
----------- ----------- ----------- -----------
Net income applicable
to general partner
and limited
partners' interest 31,553 18,852 71,004 38,116
Net income applicable
to general partner
including incentive
distributions
(Note 2) (4,041) (1,847) (8,240) (3,323)
----------- ----------- ----------- -----------
Net income applicable
to limited partners $27,512 $17,005 $62,764 $34,793
=========== =========== =========== ===========
Income per unit
applicable to
limited partners
(Note 2):
Continuing
operations $0.60 $0.74 $1.35 $1.51
Discontinued
operations (0.01) - (0.01) -
----------- ----------- ----------- -----------
Net income $0.59 $0.74 $1.34 $1.51
Weighted average
number of basic and
diluted units
outstanding 46,809,749 23,041,394 46,809,749 23,041,394
EBITDA from
continuing
operations (Note 3) $73,727 $33,521 $155,320 $67,346
Distributable cash
flow from continuing
operations (Note 3) $45,772 $24,867 $103,577 $51,060
June 30, June 30, December 31,
2006 2005 2005
------------- ------------ -------------
Balance Sheet Data:
Long-term debt, including
current portion (a) $1,159,482 $397,983 $1,170,705
Partners' equity (b) 1,891,092 436,579 1,900,779
Debt-to-capitalization
ratio (a) / ((a)+(b)) 38.0% 47.7% 38.1%
Valero L.P.
Consolidated Financial Information - Continued
June 30, 2006 and 2005
(unaudited, thousands of dollars, except barrel information)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ -------------------
2006 2005 2006 2005
--------- -------- --------- ---------
Operating Data:
Refined product terminals:
Throughput (barrels/day) (a) 265,277 251,851 258,811 252,686
Throughput revenues $12,876 $11,484 $23,416 $21,421
Storage lease revenues 60,493 - 120,026 -
Bunkering revenues 127,874 - 253,949 -
--------- -------- --------- ---------
Total revenues 201,243 11,484 397,391 21,421
Cost of product sales 118,283 - 232,501 -
Operating expenses 50,092 5,725 94,071 10,222
Depreciation and
amortization 11,041 1,860 21,947 3,719
--------- -------- --------- ---------
Segment operating income $21,827 $3,899 $48,872 $7,480
========= ======== ========= =========
Refined product pipelines:
Throughput (barrels/day) 709,480 438,067 705,248 441,014
Revenues $52,201 $22,678 $104,247 $44,860
Operating expenses 23,736 9,552 43,538 18,855
Depreciation and
amortization 10,603 3,904 20,742 7,761
--------- -------- --------- ---------
Segment operating income $17,862 $9,222 $39,967 $18,244
========= ======== ========= =========
Crude oil pipelines:
Throughput (barrels/day) 440,691 324,001 434,219 352,386
Revenues $14,868 $12,375 $28,917 $25,560
Operating expenses 4,290 4,186 7,987 8,009
Depreciation and
amortization 1,283 1,156 2,532 2,302
--------- -------- --------- ---------
Segment operating income $9,295 $7,033 $18,398 $15,249
========= ======== ========= =========
Crude oil storage tanks:
Throughput (barrels/day) 484,322 527,361 498,618 516,562
Revenues $11,656 $11,769 $23,417 $23,100
Operating expenses 1,037 2,182 4,629 4,244
Depreciation and
amortization 1,912 1,871 3,807 3,741
--------- -------- --------- ---------
Segment operating income $8,707 $7,716 $14,981 $15,115
========= ======== ========= =========
Consolidated Information:
Revenues $279,968 $58,306 $553,972 $114,941
Cost of product sales 118,283 - 232,501 -
Operating expenses 79,155 21,645 150,225 41,330
Depreciation and
amortization 24,839 8,791 49,028 17,523
--------- -------- --------- ---------
Segment operating income 57,691 27,870 122,218 56,088
General and administrative
expenses 10,375 3,561 18,935 7,064
--------- -------- --------- ---------
Consolidated operating
income $47,316 $24,309 $103,283 $49,024
========= ======== ========= =========
(a) Excludes throughputs related to the storage lease and bunkering
operations acquired in the Kaneb Acquisition.
Valero L.P.
Consolidated Financial Information - Continued
June 30, 2006 and 2005
(unaudited)
Notes:
1. The statement of income data for the three and six months ended
June 30, 2006 includes $17.7 million and $46.4 million,
respectively, of operating income related to the Kaneb Acquisition
on July 1, 2005. Of the $17.7 million and $46.4 million for the
three and six months ended June 30, 2006, respectively, $13.5
million and $34.7 million is attributed to the refined product
terminals segment, respectively, and $4.2 million and $11.7
million is attributed to the refined product pipelines segment,
respectively.
2. Income is allocated between limited partners and the general
partner's interests based on provisions in the partnership
agreement. The income applicable to limited partners is divided by
the weighted average number of limited partnership units
outstanding in computing the income per unit applicable to limited
partners. On July 1, 2005, Valero L.P. issued 23,768,355 of common
units in exchange for all of the outstanding common units of Kaneb
Pipe Line Partners, L.P. As of June 30, 2006, Valero L.P. has
46,809,749 common units outstanding. Net income applicable to the
general partner includes incentive distributions aggregating $3.5
million and $1.5 million for the three months ended June 30, 2006
and 2005, respectively, and $7.0 million and $2.6 million for the
six months ended June 30, 2006 and 2005, respectively.
3. Valero L.P. utilizes two financial measures, EBITDA from
continuing operations and distributable cash flow from continuing
operations, which are not defined in United States generally
accepted accounting principles. Management uses these financial
measures because they are widely accepted financial indicators
used by investors to compare partnership performance. In addition,
management believes that these measures provide investors an
enhanced perspective of the operating performance of the
partnership's assets and the cash that the business is generating.
Neither EBITDA from continuing operations nor distributable cash
flow from continuing operations are intended to represent cash
flows for the period, nor are they presented as an alternative to
income from continuing operations. They should not be considered
in isolation or as substitutes for a measure of performance
prepared in accordance with United States generally accepted
accounting principles.
The following is a reconciliation of income from continuing
operations to EBITDA from continuing operations and distributable
cash flow from continuing operations (in thousands):
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- -----------------------
2006 2005 2006 2005
----------- ----------- ----------- -----------
Income from
continuing
operations $31,792 $18,852 $71,381 $38,116
Plus interest
expense, net 16,604 5,878 32,300 11,707
Plus income tax
expense 492 - 2,611 -
Plus depreciation
and amortization 24,839 8,791 49,028 17,523
----------- ----------- ----------- -----------
EBITDA from
continuing
operations 73,727 33,521 155,320 67,346
Less equity income
from joint
ventures (1,844) (421) (3,050) (799)
Less interest
expense, net (16,604) (5,878) (32,300) (11,707)
Less reliability
capital
expenditures (10,052) (2,468) (16,216) (3,893)
Less income tax
expense (492) - (2,611) -
Plus distributions
from joint
ventures 1,037 113 2,434 113
----------- ----------- ----------- -----------
Distributable cash
flow from continuing
operations 45,772 24,867 103,577 51,060
General partner's
interest in
distributable cash
flow from continuing
operations (4,383) (2,741) (11,775) (5,814)
----------- ----------- ----------- -----------
Limited partners'
interest in
distributable cash
flow from continuing
operations $41,389 $22,126 $91,802 $45,246
=========== =========== =========== ===========
Weighted average
number of basic and
diluted units
outstanding 46,809,749 23,041,394 46,809,749 23,041,394
Distributable cash
flow from continuing
operations per
limited partner unit $0.884 $0.960 $1.961 $1.964
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