NEDERLAND, Texas, March 17, 2016 /PRNewswire/ – OCI Partners LP, a Delaware limited partnership (the “Partnership”), announced its results for the three and twelve months ended December 31, 2015. The Partnership owns and operates an integrated methanol and ammonia production facility that is strategically located on the Texas Gulf Coast near Beaumont.
Summary of Financial Results for the Three Months Ended December 31, 2015
- Revenues decreased 11% to $88 million compared to $99 million for the same period in 2014
- EBITDA decreased 7% to $38 million compared to $41 million for the same period in 2014
- Net income decreased 52% to $15 million compared to $31 million for the same period in 2014
- EBITDA and net income margins were 43% and 17%, respectively, compared to 41% and 31%, respectively, during the same period in 2014
Summary of Financial Results for the Twelve Months Ended December 31, 2015
- Revenues decreased 23% to $309 million compared to $403 million for the same period in 2014
- EBITDA decreased 25% to $123 million compared to $163 million for the same period in 2014
- Net income decreased 56% to $52 million compared to $119 million for the same period in 2014
- EBITDA and net income margins were 40% and 17%, respectively, compared to 40% and 30%, respectively, during the same period in 2014
On August 6, 2015, the Partnership’s sponsor company, OCI N.V., announced that it had entered into a definitive agreement to combine its North American, European and Global Distribution businesses with CF Industries’ global assets in a transaction (the “CF-OCI Combination Transaction”) valued at approximately $8 billion, based on CF’s then current share price including the assumption of approximately $2 billion in net debt.
On December 24, 2015, OCI N.V., announced the filing with the U.S. Securities and Exchange Commission of an amended registration statement on Form S-4 containing a preliminary proxy statement/shareholder circular/prospectus in connection with the CF-OCI Combination Transaction.
Under the terms of the combination agreement, CF will become a subsidiary of a new holding company domiciled in the Netherlands (the “new Dutch Company”) and OCI will contribute, among other subsidiaries and interests, its 79.88% stake in the Partnership to the new Dutch Company. The transaction requires the approval of shareholders of both OCI N.V. and CF and is subject to receipt of certain regulatory approvals and other customary closing conditions.
Subject to closing, this transaction will qualify as a change of control under the provisions of the Partnership’s current Term Loan B Credit Facility and Revolving Credit Facility which may result in the principal and accrued interest of those facilities to be declared due and payable in the manner and with the effect provided in those agreements. Such facilities are expected to be refinanced in connection with the closing of the CF-OCI Combination Transaction.
Based on the results of the three months ended December 31, 2015, the Board of Directors of the general partner of the Partnership has approved a cash distribution of $0.32 per common unit or approximately $27.8 million in the aggregate. The cash distribution will be payable on April 8, 2016 to unitholders of record at the close of business on March 30, 2016. The amount of any subsequent quarterly cash distributions will vary depending on our future earnings as well as our cash requirements for working capital, capital expenditures, debt service and other contractual obligations, and reserves for future operating or capital needs.
Run-Rate Quarterly Distribution Guidance
Partnership distributions, including the distribution of $0.32 being declared with respect to the three months ended December 31, 2015 remain largely consistent with our prior run-rate guidance, where the run-rate distribution amount is adjusted each quarter for changes in average realized prices of methanol, ammonia and natural gas. Our distribution with respect to three months ended December 31, 2015 reflects an average realized methanol price of $282 per metric ton, an average realized ammonia price of $378 per metric ton, and an average natural gas price of $2.32 per MMBtu. To assist investors in making the linkage between these prices and potential future distributions, we provide below a sensitivity analysis:
- A $0.50 per MMBtu change in natural gas prices results in an approximately $0.23 impact on annual distributions
- A $10 per metric ton change in methanol prices results in an approximately $0.10 impact on annual distributions
- A $10 per metric ton change in ammonia prices results in an approximately $0.04 impact on annual distributions
It is our intention to continue making distributions consistent with our run-rate guidance, but there can be no assurance we will be able to do so. In addition to the impact of commodity prices, our distributions are subject to fluctuations in capacity utilization, working capital, capital expenditures, debt service and other contractual obligations, reserves for future operating or capital needs and other factors, including overall business, regulatory and financial considerations that may affect the availability of cash to distribute. Please see “Forward-Looking Statements” below.”
Term B Loan and Revolver Covenant Amendments
Due to lower product prices resulting in lower profitability, our next 12 months projections at current prevailing product prices showed potential loan covenant breaches starting in the second quarter of 2016. Therefore, we worked with the lenders under our Term Loan B Credit Facility and with Bank of America, N.A., as the Lender under our Revolving Credit Facility, to revise certain covenants under each credit facility for all quarters through March 31, 2017 and December 31, 2016 respectively. The covenant details will be available in our financial statements, the following is a summary:
On March 11, 2016, the Partnership and OCI Beaumont LLC, the Partnership’s wholly owned subsidiary (“OCIB”), entered into Amendment No. 4 (the “Revolving Credit Amendment No. 4″) to the Partnership’s Revolving Credit Agreement with Bank of America, N.A., as administrative agent, and the other lenders party thereto to extend the maturity of the Revolving Credit Agreement until March 31, 2016.
On March 17, 2016, the Partnership, OCIB and OCI USA Inc. entered into Amendment No. 6 (the “Term Loan Amendment No. 6″) to the Partnership’s Term Loan B Credit Facility with Bank of America, N.A., as administrative agent, and the other lenders party thereto to, among other things, (i) amend certain financial covenants and (ii) increase the interest rate on outstanding term loans.
In addition, on March 17, 2016, the Partnership and OCIB entered into Amendment No. 5 (the “Revolving Credit Amendment No. 5″) to the Partnership’s Revolving Credit Agreement with Bank of America, N.A., as administrative agent, and the other lenders party thereto to, among other things, (i) amend certain financial covenants, (ii) extend the maturity date until March 31, 2017, (iii) increase the applicable interest rate margin and (iv) introduce specified liquidity targets to meet on a quarterly basis for each of the three quarters ending between now and December 31, 2016.
Statement from President and Chief Executive Officer – Frank Bakker
“We continue to witness improved reliability on both our production lines after completion of the debottlenecking project and planned turnaround. We were able to set production records for both the months of December 2015 and January 2016. Our fourth quarter performance reflects capacity utilization rates of 92% and 96%, respectively, on our methanol and ammonia production units. Both units were shut down for 8 days each due to an electrical power outage caused by our electricity supplier. During those down days, we took the opportunity to conduct other repairs. The facility’s production lines ran without interruption during the rest of the quarter. As a result of our excellent safety track record, OSHA awarded us the STAR level in the voluntary protection program.
In the United States, methanol prices were adversely impacted during the quarter and over the past several months predominantly due to a bearish crude oil price environment and an oversupplied methanol market. Contract prices in the United States rolled over to $249 per metric ton for the month of March.1 While crude oil and methanol prices have generally exhibited a decoupling over the past several years as compared to their historic correlation, lower crude oil prices have negatively impacted methanol affordability for the production of olefins and other energy applications and therefore methanol prices.
Fourth quarter ammonia prices declined as the fall application season witnessed subdued demand due to unfavorable weather conditions which were too warm in most regions of the United States. The Tampa CFR contact price for the month of March rolled over from the month of February settling at $310 per metric ton.
Finally, during the quarter, spot natural gas prices in the United States dipped to their lowest level in several years. The low natural gas pricing environment helped offset declines in our realized methanol and ammonia prices during the quarter. Natural gas prices continued to drop during the first quarter of 2016 reaching levels below $1.70 per MMBtu.
Looking forward, we are encouraged by the recent rebound in crude oil prices as well as potential production freezes from major oil producers that could help stabilize prices further. As a result, higher crude oil prices lend support to higher olefin prices and help methanol affordability and demand. In addition, we are encouraged that MTBE production is expected to increase as all producers are back in operation and planned turnarounds are delayed to later quarters during the year. Methanol production disruptions in Egypt, Malaysia and Libya continue to provide pricing support for the methanol export market.
In China there are now a total of twelve completed MTO/MTP plants that have capacity to consume up to 6.5 million metric tons of methanol. We expect an additional four MTO plants to be completed in 2016 which are expected to add an additional 6.5 million metric tons of merchant methanol demand. MTO demand in China has shown strong growth despite weak profitability which is only marginally positive. During the quarter, operating rates for existing MTO plants were approximately 70%. Despite weak olefin economics, several MTO producers who use olefins for derivative products, such as polyethylene, have shown better margins as a result of better derivative pricing.
Ammonia markets in the United States are currently witnessing prices firming in all regions of the country as farmers pre-pay for the spring application season. We are anticipating an early spring application season in the Corn Belt due to favorable weather conditions which may help ammonia prices recover during the second quarter.
Despite the current weak pricing environment, we remain confident that both methanol and ammonia prices will follow a pattern of seasonal increases into the spring and should crude oil prices increase to a new steady-state level, methanol prices may benefit. In addition, we are encouraged by the strong demand outside the United States for methanol blending in gasoline and the new incremental methanol demand for production of olefins and their derivatives. Finally, we are encouraged by the fact that global methanol demand has grown at 6.3% annually over the last 15 years and we expect the methanol industry to grow at a CAGR in excess of 6% during the period 2016-2025, outstripping supply growth.”
|Volume Weighted Average Price of||Volume Weighted Average Price of|
|Methanol and Ammonia||Natural Gas|
|($ per metric ton)||($ per MMBtu)|
|For Three-Months Ended December 31,||For Three-Months Ended December 31,|
|(in ’000 tons)||Utilization|
|For Three-Months Ended December 31,||For Three-Months Ended December 31|
|Volume Weighted Average Price of||Volume Weighted Average Price of|
|Methanol and Ammonia||Natural Gas|
|($ per metric ton)||($ per MMBtu)|
|For Twelve-Months Ended December 31,||For Twelve-Months Ended December 31,|
|(in ’000 tons)||Utilization|
|For Twelve-Months Ended December 31,||For Twelve-Months Ended December 31|
Non-GAAP Financial Measure
EBITDA is defined as net income plus (i) interest expense and other financing costs (ii) depreciation expense (iii) income tax expense and (iv) net loss on extinguishment of debt. EBITDA is used as a supplemental financial measure by management and by external users of our unaudited financial statements, such as investors and commercial banks, to assess:
- the financial performance of our assets without regard to financing methods, capital structure or historical cost basis; and
- our operating performance and return on invested capital compared to those of other publicly traded partnerships, without regard to financing methods and capital structure.
EBITDA should not be considered as an alternative to net income, operating income, net cash provided by operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP. EBITDA may have material limitations as a performance measure because it excludes items that are necessary elements of our costs and operations. In addition, EBITDA presented by other companies may not be comparable to our presentation because each company may define EBITDA differently.
EBITDA margin is defined as EBITDA divided by revenues. EBITDA margin is used as a supplemental financial measure by the Partnership’s management in its analysis of our operating performance.
The table below reconciles EBITDA to net income, its most directly comparable financial measure calculated and presented in accordance with GAAP, for the three months ended December 31, 2015.
|Quarter Ended December 31,|
|Interest expense – related party||51||51|
|Income tax expense||-33||390|
|Net Income Margin||17%||31%|
|Twelve-months Ended December 31,|
|Interest expense – related party||203||203|
|Income tax expense||613||1,564|
|Net Income Margin||17%||30%|
|*unaudited financial statements|
Conference Call with Management
The Partnership will hold a conference call, March 18, 2016, at 11:00am EDT, during which the Partnership’s senior management will review the Partnership’s financial results for the fourth quarter ended December 31, 2015 and provide an update on corporate developments. Callers may listen to the live presentation, which will be followed by a question and answer segment, by dialing (866) 902-4572 and entering the conference code 69173231. A replay of the conference call will be made available until April 17, 2016 and the replay can be accessed by dialing (855) 859-2056 or (404) 537-3406 and entering the same conference code 69173231.
About OCI Partners LP
OCI Partners LP (NYSE: OCIP) owns and operates an integrated methanol and ammonia production facility that is strategically located on the Texas Gulf Coast near Beaumont. The Partnership is headquartered in Nederland, Texas and currently has a methanol production design capacity of 912,500 metric tons per year and an ammonia production design capacity of 331,000 metric tons per year.
Notice to Foreign Investors
This release is intended to be a qualified notice to nominees as provided for under Treasury Regulation Section 1.1446-4(b)(4) and (d). Please note that 100% of the Partnership’s distributions to foreign investors are attributable to income that is effectively connected with a United States trade or business. Accordingly, all of the Partnership’s distributions to foreign investors are subject to federal income tax withholding at the highest applicable effective tax rate. Nominees, and not the Partnership, are treated as the withholding agents responsible for withholding on the distributions received by them on behalf of foreign investors.
This press release contains forward-looking statements and may address certain plans, activities or events which will or may occur in the future and relate to, among other things, the benefits and overall impact of the proposed transactions on the Partnership. Statements that are predictive in nature, that depend upon or refer to future events or conditions or that include the words “will,” “believe,” “expect,” “anticipate,” “intend,” “estimate” and other expressions that are predictions of or indicate future events and trends and that do not relate to historical matters identify forward-looking statements. Our forward-looking statements include statements about our business strategy, our industry, our expected revenues, our future profitability, our expected capital expenditures (including for maintenance or expansion projects and environmental expenditures) and the impact of such expenditures on our performance, and the costs of operating as a publicly traded partnership. These statements involve known and unknown risks, uncertainties and other factors, including others, the following: our reliance on a single facility for conducting our operations; intense competition from other methanol and ammonia producers, including recent announcements by other producers, including other OCI N.V. affiliates, of their intentions to relocate, restart or construct methanol or ammonia plants in the Texas Gulf Coast region or elsewhere in the United States; our lack of contracts that provide for minimum commitments from our customers; the demand and sales prices for methanol, ammonia and their derivatives may decrease due to market, governmental and other factors; we may be unable to obtain economically priced natural gas and other feedstocks; global and regional economic activity (including industrial production levels); the occurrence of shutdowns (either temporary or permanent) or restarts of existing methanol and ammonia facilities (including our own facility); the timing and length of planned and unplanned downtime; the occurrence of operating hazards from accidents, fire, severe weather, floods or other natural disasters; and the following risks and uncertainties related to the CF-OCI Combination Transactions: the risk that the businesses of OCI N.V. and CF, including the Partnership’s business, will not be integrated successfully or such integration may be more disruptive, time consuming or costly than expected; uncertainty of the expected financial performance of the combined company (and any resulting benefits to the Partnership) following the completion of the proposed transactions; disruption from the proposed transactions making it more difficult to maintain relationships with customers, employees or suppliers; the Partnership’s ability to repay outstanding principal and accrued but unpaid interest amounts on the Partnership’s Term Loan B Credit Facility and the Partnership’s Revolving Credit Facility under a change of control event; and the Partnership’s ability to obtain further amendment or waivers under the Partnership’s Term Loan B Credit Facility and the Partnership’s Revolving Credit Facility to the extent the business combination transaction between OCI and CF does not close at all. For more information concerning factors that could cause actual results to differ materially from those conveyed in the forward-looking statements, please refer to the “Risk Factors” section of the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2015 and to the “Forward Looking Statements” and “Risk Factors” sections of CF’s most recent Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q filed with the Securities and Exchange Commission (the “SEC”) up to the date hereof, which are available at the SEC’s website http://www.sec.gov. Neither the Partnership, OCI, the new holding company nor CF undertake to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changed circumstances or otherwise, unless required by law.
Important Additional Information and Where to Find It
This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval.
In connection with the CF-OCI Combination Transaction involving OCI, the new Dutch Company and CF, the Dutch Company has filed with the SEC a registration statement on Form S-4 that include as prospectuses a shareholder circular of OCI and a preliminary proxy statement of CF. After the registration statement has been declared effective by the SEC, the shareholder circular/prospectus will be mailed to OCI shareholders and a definitive proxy statement/prospectus will be mailed to CF shareholders. INVESTORS AND SHAREHOLDERS ARE URGED TO CAREFULLY READ THESE DOCUMENTS (INCLUDING ALL AMENDMENTS AND SUPPLEMENTS THERETO), AND ALL OTHER DOCUMENTS RELATING TO THE TRANSACTIONS FILED WITH THE SEC WHEN THEY BECOME AVAILABLE, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTIONS. You may obtain a copy of the shareholder circular/prospectus and the proxy statement/prospectus (when available) and other related documents filed by OCI, the new Dutch Company and CF with the SEC regarding the proposed transactions, free of charge, through the website maintained by the SEC at www.sec.gov, by directing a request to OCI’s Investor Relations department at firstname.lastname@example.org, tel. +31 6 1825 1367, or to CF’s Investor Relations department at email@example.com, tel. +1-847-405-2550. Copies of the shareholder circular/prospectus, the proxy statement/prospectus and the filings with the SEC that will be incorporated by reference therein (when available) can also be obtained, free of charge, through OCI’s website at www.oci.nl under the heading “Investor Relations” and through CF’s website at www.cfindustries.com under the heading “CF Industries (CF) Investors” and then under the heading “SEC Filings”.
Participants in the Solicitation
OCI, the new Dutch Company, CF and their respective directors, executive officers and certain other members of management and employees may be deemed to be participants in the solicitation of proxies in favor of the proposed transactions. Information regarding the persons who may, under the rules of the SEC, be considered participants in the solicitation of proxies in favor of the proposed transactions set forth in the proxy statement/prospectus/shareholder circular filed with the SEC. You can find information about OCI’s executive and non-executive directors in its 2014 annual report filed on April 29, 2015 available on OCI’s website at www.oci.nl under the heading “Investor Relations” and about CF’s directors and executive officers in its definitive proxy statement filed with the SEC on April 2, 2015. You can obtain free copies of these documents from OCI or CF using the contact information above.
Director of Investor Relations & Strategy
Phone: +1 917-434-7734
1The methanol prices refer to Methanex’s Non-Discounted North American Reference Price.