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Valero L.P. Reports Higher Fourth Quarter and Full Year 2006 Earnings and Announces Quarterly Distribution Monday, January 29, 2007
Valero L.P. (NYSE:VLI) today announced income applicable to limited partners from continuing operations of $33.0 million, or $0.70 per unit, for the fourth quarter of 2006 compared to $25.1 million, or $0.54 per unit, for the fourth quarter of 2005. For the year ended December 31, 2006, income applicable to limited partners from continuing operations was $133.0 million, or $2.84 per unit, compared to $97.0 million or $2.76 per unit.
Distributable cash flow available to limited partners from continuing operations for the fourth quarter of 2006 was $45.3 million, or $0.97 per unit, compared to $42.9 million, or $0.92 per unit, for the fourth quarter of 2005. For the year ended December 31, 2006, distributable cash flow available to limited partners from continuing operations was $195.7 million, or $4.18 per unit, compared to $142.6 million, or $4.09 per unit. As of December 31, 2006, the partnership's debt-to-capitalization ratio was 41.9 percent compared to 38.1 percent as of December 31, 2005.
With respect to the quarterly distribution to unitholders payable for the fourth quarter of 2006, Valero L.P. also announced that it has declared a distribution of $0.915 per unit, or $3.66 per unit on an annual basis, which will be paid on February 14, 2007, to holders of record as of February 7, 2007. This distribution represents an increase of $0.06 per unit, or 7 percent, over the distribution for the fourth quarter of 2005. In total, Valero L.P. declared cash distributions for 2006 of $3.60 per unit, up 7 percent from $3.365 per unit in distributions for 2005 and on target with its previously stated goal. Distributable cash flow available to limited partners from continuing operations covers the distribution to the limited partners by 1.06 times for the fourth quarter of 2006 and 1.16 times for the full year of 2006.
"We are pleased to end the year with solid fourth quarter results as earnings came in at the top of our guidance range of $0.60 to $0.70 per unit," said Curt Anastasio, Valero L.P.'s Chief Executive Officer. "We are also pleased with our full year results, as net income applicable to limited partners from continuing operations and distributable cash flow available to limited partners from continuing operations increased by approximately 37 percent each compared to last year.
"During 2006, we had several notable achievements that will position Valero L.P. for further growth. We completed around $92 million of expansion projects, started many construction projects as part of our $300 million capital expenditure program and acquired the St. James crude oil terminal in Louisiana for $140 million. We also completed the financial separation of Valero L.P. from Valero Energy with the recent follow-on offering by Valero GP Holdings, LLC this past December, which will free each company to pursue its strategic objectives independently.
"We are making significant progress on the expansion projects already started at our terminals in Amsterdam, St. Eustatius, Linden (New York Harbor), Texas City, Portland, Stockton and Savannah. We expect the majority of these projects will start contributing to the partnership's earnings starting in mid to late 2007. Construction on our Vancouver terminal in Washington is scheduled to start in March. Additionally, at our Baltimore terminal, we have recently constructed a new dock line and completed tank repairs, which has returned to service around 230,000 barrels of storage capacity for one of our customers.
"With respect to new expansion projects, I am pleased to announce that we plan to start construction on expanding our St. James crude oil terminal later this quarter. In total, we will spend around $54 million on four additional crude oil tanks with a total storage capacity of approximately 1.45 million barrels. These tanks should be in service by mid-2008. We have also identified an additional $30 million of expansion projects at our Amsterdam terminal on top of the $68 million of projects that are currently underway. These projects will contribute an additional one million barrels of storage to this facility and are expected to be complete in early to mid-2008. Last, we have identified an additional $21 million of expansion projects at our Texas City terminal on top of the $8.5 million of projects that are currently underway, which should add another 430 thousand barrels of storage capacity and will be in service by mid-2008. We continue to identify and evaluate other major expansion projects and look forward to the strong growth opportunities this will provide the partnership.
"Looking ahead to the first quarter of 2007, we believe results will be in the range of $0.45 to $0.55 per unit, as we previously disclosed. Despite lower expectations for Valero L.P.'s first quarter of 2007, we believe earnings before interest, taxes, depreciation and amortization ("EBITDA") will be higher in 2007 compared to 2006 driven primarily by the Burgos pipeline project completed in July 2006, the acquisition of our St. James crude oil terminal in December 2006 and the ramp-up of terminal expansion projects. Additionally, we are targeting a 7 percent increase in our distribution from the $3.60 per unit in distributions declared for 2006," 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 fourth quarter of 2006. Investors interested in listening to the presentation may call 800-622-7620, passcode 5994994. International callers may access the presentation by dialing 706-645-0327, passcode 5994994. The company intends to have a playback available following the presentation, which may be accessed by calling 800-642-1687, passcode 5994994. A live broadcast of the conference call will also be available on the partnership's website at www.nustarenergy.com.
About Valero L.P.
Valero L.P. is a publicly traded, limited partnership based in San Antonio, with 9,303 miles of pipeline, 87 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 80 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 website at www.nustarenergy.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.
Valero L.P.
Consolidated Financial Information
December 31, 2006 and 2005
(unaudited, thousands of dollars, except unit data and per unit data)
Three Months Ended Year Ended
December 31, December 31,
----------------------- -----------------------
2006 2005 2006 2005
----------- ----------- ----------- -----------
Statement of Income (Note 2) (Note 2)
Data (Note 1):
Revenues:
Services revenues $162,790 $144,043 $624,701 $407,194
Product sales 127,889 142,188 510,973 252,363
----------- ----------- ----------- -----------
Total revenues 290,679 286,231 1,135,674 659,557
Costs and expenses:
Cost of product sales 116,016 128,589 466,276 229,806
Operating expenses 79,877 75,592 312,604 185,351
General and
administrative
expenses 14,893 9,489 45,216 26,553
Depreciation and
amortization 26,244 24,640 100,266 64,895
----------- ----------- ----------- -----------
Total costs and
expenses 237,030 238,310 924,362 506,605
----------- ----------- ----------- -----------
Operating income 53,649 47,921 211,312 152,952
Equity earnings from
joint ventures 1,368 (21) 5,882 2,319
Interest and other
expenses, net (13,797) (16,539) (61,427) (42,883)
----------- ----------- ----------- -----------
Income from continuing
operations before
income tax expense 41,220 31,361 155,767 112,388
Income tax expense 3,864 2,663 5,861 4,713
----------- ----------- ----------- -----------
Income from continuing
operations 37,356 28,698 149,906 107,675
Income (loss) from
discontinued
operations 1 (908) (376) 3,398
----------- ----------- ----------- -----------
Net income applicable
to general partner
and limited partners'
interest 37,357 27,790 149,530 111,073
Net income applicable
to general partner
(Note 3) (4,360) (3,543) (16,910) (10,758)
----------- ----------- ----------- -----------
Net income applicable
to limited partners $32,997 $24,247 $132,620 $100,315
=========== =========== =========== ===========
Income per unit
applicable to limited
partners (Note 3):
Continuing operations $0.70 $0.54 $2.84 $2.76
Discontinued
operations - (0.02) (0.01) 0.10
----------- ----------- ----------- -----------
Net income $0.70 $0.52 $2.83 $2.86
=========== =========== =========== ===========
Weighted average
number of basic and
diluted units
outstanding 46,809,749 46,809,749 46,809,749 35,023,250
EBITDA from continuing
operations (Note 4) $84,824 $71,298 $322,299 $218,671
Distributable cash
flow from continuing
operations (Note 4) $50,213 $46,862 $214,203 $153,873
December 31,
2006 2005
----------- -----------
Balance Sheet Data:
Long-term debt, including current portion
(a) $1,354,367 $1,170,705
Partners' equity (b) 1,875,681 1,900,779
Debt-to-capitalization ratio (a) / ((a)+(b)) 41.9% 38.1%
Valero L.P.
Consolidated Financial Information - Continued
December 31, 2006 and 2005
(unaudited, thousands of dollars, except barrel information)
Three Months Ended Year Ended
December 31, December 31,
------------------- ---------------------
2006 2005 2006 2005
--------- --------- ----------- ---------
Operating Data:
Refined product terminals
(Note 2):
Throughput (barrels/day)
(a) 265,352 221,798 262,560 245,084
Throughput revenues $12,563 $9,809 $49,252 $43,617
Storage lease revenues 64,573 58,941 247,524 115,352
Product sales (bunkering) 123,213 142,188 505,531 252,363
--------- --------- ----------- ---------
Total revenues 200,349 210,938 802,307 411,332
Cost of product sales 112,367 128,589 462,029 229,806
Operating expenses 48,731 44,935 192,357 94,607
Depreciation and
amortization 12,289 9,353 45,485 25,008
--------- --------- ----------- ---------
Segment operating income $26,962 $28,061 $102,436 $61,911
========= ========= =========== =========
Refined product pipelines:
Throughput (barrels/day) 712,252 652,689 711,476 556,654
Throughput revenues $59,542 $51,244 $222,356 $149,853
Product sales 4,676 - 5,442 -
--------- --------- ----------- ---------
Total revenues 64,218 51,244 227,798 149,853
Cost of product sales 3,649 - 4,247 -
Operating expenses 23,804 23,309 93,314 64,671
Depreciation and
amortization 10,788 12,245 42,084 27,778
--------- --------- ----------- ---------
Segment operating income $25,977 $15,690 $88,153 $57,404
========= ========= =========== =========
Crude oil pipelines:
Throughput (barrels/day) 408,424 348,260 421,666 358,965
Revenues $14,665 $11,828 $58,654 $51,429
Operating expenses 4,279 3,914 16,825 16,378
Depreciation and
amortization 1,252 1,155 5,061 4,612
--------- --------- ----------- ---------
Segment operating income $9,134 $6,759 $36,768 $30,439
========= ========= =========== =========
Crude oil storage tanks:
Throughput (barrels/day) 499,483 532,425 502,689 517,409
Revenues $11,447 $12,221 $46,915 $46,943
Operating expenses 3,063 3,434 10,108 9,695
Depreciation and
amortization 1,915 1,887 7,636 7,497
--------- --------- ----------- ---------
Segment operating income $6,469 $6,900 $29,171 $29,751
========= ========= =========== =========
Consolidated Information:
Revenues $290,679 $286,231 $1,135,674 $659,557
Cost of product sales 116,016 128,589 466,276 229,806
Operating expenses 79,877 75,592 312,604 185,351
Depreciation and
amortization 26,244 24,640 100,266 64,895
--------- --------- ----------- ---------
Segment operating income 68,542 57,410 256,528 179,505
General and administrative
expenses 14,893 9,489 45,216 26,553
--------- --------- ----------- ---------
Consolidated operating
income $53,649 $47,921 $211,312 $152,952
========= ========= =========== =========
(a) Excludes throughputs related to the storage lease and bunkering
revenues.
Notes:
1. The statement of income data for the years ended December 31, 2006 and 2005 includes $96.7 million and $55.5 million, respectively, of operating income related to the Kaneb Acquisition on July 1, 2005. Of the $96.7 million and $55.5 million for the years ended December 31, 2006 and 2005, respectively, $64.8 million and $42.3 million is attributed to the refined product terminals segment, respectively, and $31.9 million and $13.2 million is attributed to the refined product pipelines segment, respectively.
2. Certain previously reported amounts in the statement of income data for 2005 have been reclassified to conform to the 2006 presentation.
3. 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.
During the year ended December 31, 2006 our general partner reimbursed us for certain charges we incurred related to services historically provided under our Services Agreement with Valero Energy Corporation. Generally accepted accounting principles require us to record the charges as expenses and record the reimbursement as partner's capital contribution.
Valero L.P.
Consolidated Financial Information - Continued
December 31, 2006 and 2005
(unaudited, thousands of dollars, except unit data and per unit data)
Notes: (continued)
The following table details the calculation of net income applicable
to the general partner (in thousands):
Three Months Ended Year Ended
December 31, December 31,
------------------ -------------------
2006 2005 2006 2005
--------- -------- --------- ---------
Net income applicable to
general partner and limited
partners' interest $37,357 $27,790 $149,530 $111,073
Charges reimbursed by general
partner 223 - 575 -
--------- -------- --------- ---------
Net income before charges
reimbursed by general partner 37,580 27,790 150,105 111,073
General partner incentive
distribution 3,909 3,049 14,778 8,711
--------- -------- --------- ---------
Net income before charges
reimbursed by general partner
and after general partner
incentive distribution 33,671 24,741 135,327 102,362
General partner interest 2% 2% 2% 2%
--------- -------- --------- ---------
General partner allocation of
net income before charges
reimbursed by general partner
and after general partner
incentive distribution 674 494 2,707 2,047
Charges reimbursed by general
partner (223) - (575) -
General partner incentive
distribution 3,909 3,049 14,778 8,711
--------- -------- --------- ---------
Net income applicable to
general partner $4,360 $3,543 $16,910 $10,758
========= ======== ========= =========
4. 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.
Distributable cash flow from continuing operations per limited partner unit for the year and three months ended December 31, 2005 differs from previously reported amounts. The difference results from a change in methodology for calculating the amount of distributable cash flow applicable to the general partner, which Valero L.P. adopted in the fourth quarter of 2006. Under the new methodology, the amount of distributable cash flow applicable to the general partner equals the amount they will actually receive based upon the current distribution.
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 Year Ended
December 31, December 31,
----------------------- -----------------------
2006 2005 2006 2005
----------- ----------- ----------- -----------
Income from continuing
operations $37,356 $28,698 $149,906 $107,675
Plus interest
expense, net 17,360 15,297 66,266 41,388
Plus income tax
expense (benefit) 3,864 2,663 5,861 4,713
Plus depreciation
and amortization 26,244 24,640 100,266 64,895
----------- ----------- ----------- -----------
EBITDA from continuing
operations 84,824 71,298 322,299 218,671
Less equity earnings
from joint ventures (1,368) 21 (5,882) (2,319)
Less interest
expense, net (17,360) (15,297) (66,266) (41,388)
Less reliability
capital
expenditures (12,986) (11,338) (35,803) (23,707)
Less income tax
expense (3,864) (2,663) (5,861) (4,713)
Plus general partner
reimbursable
charges 223 - 575 -
Plus distributions
from joint ventures 744 2,169 5,141 4,657
Plus other non-cash
items - 2,672 - 2,672
----------- ----------- ----------- -----------
Distributable cash
flow from continuing
operations 50,213 46,862 214,203 153,873
General partner's
interest in
distributable cash
flow from continuing
operations (4,864) (3,928) (18,520) (11,300)
----------- ----------- ----------- -----------
Limited partners'
interest in
distributable cash
flow from continuing
operations $45,349 $42,934 $195,683 $142,573
=========== =========== =========== ===========
Weighted average
number of basic and
diluted units
outstanding 46,809,749 46,809,749 46,809,749 35,023,250
Distributable cash
flow from continuing
operations per
limited partner unit $0.969 $0.917 $4.181 $4.094 Contact: Valero L.P., San Antonio
Investors
Mark Meador
Manager,
Investor Relations: 210-345-2895
or
Media
Mary Rose Brown
Senior Vice President
Corporate Communications: 210-345-2314
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