Press Releases

OCI Partners LP Reports 2016 First Quarter Earnings and Announces $0.06 Quarterly Cash Distribution

May 9, 2016

NEDERLAND, Texas, May 9, 2016 /PRNewswire/ -- OCI Partners LP, a Delaware limited partnership (the "Partnership"), announced its results for the three months ended March 31, 2016. The Partnership owns and operates an integrated methanol and ammonia production facility that is strategically located on the Texas Gulf Coast near Beaumont.

OCI Partners LP.

Summary of Financial Results for the Three Months Ended March 31, 2016

  • Revenues increased 84% to $70 million compared to $38 million for the same period in 2015
  • EBITDA increased 80% to $18 million compared to $10 million for the same period in 2015
  • Net income decreased to ($6) million compared to $893 thousand for the same period in 2015
  • EBITDA and net income margins were 26% and (9)%, respectively, compared to 26% and 2%, respectively, during the same period in 2015

Distributions                                    

Based on the results of the three months ended March 31, 2016, the Board of Directors of the general partner of the Partnership has approved a cash distribution of $0.06 per common unit or approximately $5.2 million in the aggregate. The cash distribution will be payable on July 8, 2016 to unitholders of record at the close of business on June 24, 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 $0.06 being declared with respect to the three months ended March 31, 2016 remain largely consistent with our prior run-rate guidance, where the run-rate distribution amount is primarily affected each quarter for changes in average realized prices of methanol, ammonia and natural gas. Our distribution with respect to three months ended March 31, 2016 reflects an average realized methanol price of $189 per metric ton, an average realized ammonia price of $295 per metric ton, and an average natural gas price of $2.13 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."

Statement from President and Chief Executive Officer – Frank Bakker

"We set production records for both our production lines during the quarter. Our first quarter performance reflects capacity utilization rates of 99% and 107%, respectively, on our methanol and ammonia production units. The facility ran with improved reliability as a result of the successful completion of the debottlenecking project and planned turnaround.

During the quarter, methanol prices in the United States on the contract market remained stable at $249 per metric ton. The methanol contract pricing market witnessed four consecutive months of rollover prices in to the month of May[1] potentially signaling a pricing bottom. However, pricing on the spot market witnessed weakness during the first two months of the quarter trading at wide spread to contract prices. On the back of a healthier crude oil pricing environment, spot prices have since witnessed a rebound helping close the spread. During the quarter, we sold approximately 20% of our methanol sales volumes on the spot market at prices that are lower than our discount-adjusted contract prices. The pricing differential reflected the weak spot methanol market environment during January and February. As a result, our realized methanol price during the quarter was impacted accordingly. However, with the recent rebound in spot prices, we expect to witness better realized spot pricing during the second quarter.

In the United States, ammonia prices remained flat at $310 per metric throughout the quarter but increased $10 to $320 per metric for the month of May as weather conditions continue to improve in the Corn Belt which helped increase application activity.  

Finally, during the quarter, spot natural gas prices in the United States declined to their lowest level in several years reaching levels below $1.50 per MMBtu. Prices have since rebounded from these lows but continue to trade at favorable levels. Moreover and at present, the US natural gas market is in its initial weeks of the spring shoulder season when weather-related gas demand is typically weaker and inventories begin to be replenished.

On a forward-looking basis, we are encouraged by higher crude oil prices, a drawdown of US methanol inventory, production issues and outages in Venezuela, Egypt and Libya, improved and strong Methanol-to-Olefin (MTO) margins and new MTO capacity which should bode well for methanol pricing on the short-to-medium term. Moreover, global MTBE demand is coming out of its winter lull and warmer weather should help boost demand for methanol from conventional products such as formaldehyde and resins.

In China, MTO related demand is expected to grow further during the remainder of the second quarter of 2016 as new capacity is commissioned and operating rates improve due to a rebound in crude oil and olefin pricing. There are now a total of thirteen completed MTO/Methanol-to-Propylene (MTP) plants in China that have the capacity to consume up to 12 million metric tons of methanol annually. We expect an additional four MTO plants to be completed in 2016, of which one is currently in its commissioning phase. These four new plants are expected to add an additional 6.5 million metric tons of merchant methanol demand. At present, operating rates for MTO plants are approximately 84% up from 74% and 70% during the first quarter and fourth quarter of last year, respectively. In addition, demand for direct methanol blending into gasoline in China has remained firm as more provinces adopt fuel-blending standards.

At present, tight ammonia supply in the Midwest could help support prices in the next few weeks. In addition, according to the US Department of Agriculture (USDA), the corn planting progress in the United States is slightly ahead of last year despite the recent rain and cool weather that has delayed fieldwork in several states."    

 



Volume Weighted Average Price of




Volume Weighted Average Price of



Methanol and Ammonia




 Natural Gas 



 ($ per metric ton)




 ($ per MMBtu)

                                For Three-Months Ended March 31,



For Three-Months Ended March 31,



2016



2015




2016



2015

Ammonia


$295



$509




$2.13



$3.21

Methanol


$189



$366
























Production




Capacity



 (in '000 tons)




Utilization












Rate %

                                For Three-Months Ended March 31,



For Three-Months Ended March 31



2016



2015




2016



2015

Ammonia


88



21




107%



104%

Methanol


225



57




99%



95%

 

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 March 31, 2016.



Quarter Ended March 31,



2016


2015








Net income


$

(6,054)



893

Add:







Interest expense 



8,792



2,506

Interest expense – related party



51



50

Income tax expense 



80



65

Depreciation expense



15,378



6,084

EBITDA


$

18,247



9,598








 

Conference Call with Management

The Partnership will hold a conference call on May 10, 2016, at 11:00am EDT, during which the Partnership's senior management will review the Partnership's financial results for the first quarter ended March 31, 2016 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 8096424. A replay of the conference call will be made available until June 11, 2016 and the replay can be accessed by dialing (855) 859-2056 or (404) 537-3406 and entering the same conference code 8096424.

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.

Forward-Looking Statements

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 proposed business combination transactions (the "CF-OCI Combination Transaction") involving OCI N.V. ("OCI"), the new holding company (the "new Dutch Company") and CF Industries Holding, Inc. ("CF"), financing of the proposed transactions, the benefits, effects and timing of the proposed transactions, future financial and operating results of the combined company, and the combined company's plans, objectives, expectations (financial or otherwise) and intentions. Statements that are predictive in nature, that depend upon or refer to future events or conditions or that include the words "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. These forward-looking statements involve certain risks and uncertainties, including, among others, the following:  our business plans may change as the methanol and ammonia industry and markets warrant; 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; we may be unable to successfully implement our business strategies; 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 certain risks and uncertainties related to the business combination transactions between OCI, the new holding company and CF:  the possibility that the various closing conditions for the transactions may not be satisfied or waived, including the ability to obtain regulatory approvals of the transactions on the proposed terms and schedule; the risk that competing offers will be made; the failure of OCI or CF shareholders to approve the transactions; the risk that access to financing, including for refinancing of indebtedness of the new holdings company or CF, may not be available on a timely basis and on reasonable terms; the outcome of pending or potential litigation or governmental investigations; the risk that the businesses will not be integrated successfully or such integration may be more difficult, time-consuming or costly than expected; uncertainty of the expected financial performance of the combined company following completion of the proposed transactions; the combined company's ability to achieve the cost savings and synergies contemplated by the proposed transactions within the expected time frame; disruption from the proposed transactions making it more difficult to maintain relationships with customers, employees or suppliers; changes in tax laws or interpretations, including but not limited to changes that could increase the new holding company's or CF's consolidated tax liabilities, or that would result, if the transactions were consummated, in the new holding company being treated as a domestic corporation for U.S. federal tax purposes, or that could impose U.S. federal income taxes in connection with the spin-off from OCI; and general economic conditions that are less favorable than expected.  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 investor.relations@oci.nl, tel. +31 6 1825 1367, or to CF's Investor Relations department at investorrelations@cfindustries.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.

Contacts: 
Omar Darwazah
Director of Investor Relations & Strategy
Phone: +1 917-434-7734
omar.darwazah@oci.nl

[1] The methanol prices refer to Methanex's Non-Discounted North American Reference Price.

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SOURCE OCI Partners LP


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