Press Releases

OCI Partners LP Reports 2016 Fourth Quarter Results

Mar 13, 2017

NEDERLAND, Texas, March 13, 2017 /PRNewswire/ -- OCI Partners LP, a Delaware limited partnership (the "Partnership"), announced its results for the three and twelve months ended December 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 December 31, 2016

  • Revenues decreased 25% to $66 million compared to $88 million for the same period in 2015
  • EBITDA decreased 58% to $16 million compared to $38 million for the same period in 2015
  • Net loss of $17 million compared to net income of $15 million for the same period in 2015
  • EBITDA and net income (loss) margins were 24% and (26)% respectively, compared to 43% and 17%, respectively, during the same period in 2015

Summary of Financial Results for the Twelve Months Ended December 31, 2016

  • Revenues decreased 17% to $258 million compared to $309 million for the same period in 2015
  • EBITDA decreased 52% to $59 million compared to $123 million for the same period in 2015
  • Net loss of $51 million compared to net income of $52 million for the same period in 2015
  • EBITDA and net income (loss) margins were 23% and (20)% respectively, compared to 40% and 17%, respectively, during the same period in 2015

Buyout Offer from OCI N.V.

On December 6, 2016, the Partnership announced that its board of directors had received a proposal from OCI N.V. (Euronext: OCI) ("OCI") pursuant to which OCI would acquire all publicly held common units of OCI Partners in exchange for OCI N.V. shares. OCI currently owns 79.88% of issued and outstanding common units of OCI Partners. The proposed transaction is subject to the negotiation and execution of a definitive agreement and approval of such definitive agreement and transactions contemplated thereunder by the board of directors of OCI N.V., the board of directors of the general partner of OCI Partners (the "OCIP Board") and a Conflicts Committee, comprising of independent non-executive members of the OCIP Board, established by the OCIP Board, and would be subject to customary closing conditions. There can be no assurance that any such approvals will be forthcoming, that a definitive agreement will be executed or that any transaction will materialize.

Distributions

Based on the results of the three months ended December 31, 2016, the Board of Directors of the general partner of the Partnership has not approved any cash distribution. 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

The decision to forgo our cash distribution for the three months ended December 31, 2016 reflects an average realized methanol price of $257 per metric ton, an average realized ammonia price of $199 per metric ton, and an average natural gas price of $3.10 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

On November 30, 2016, OCI Beaumont LLC ("OCIB"), the Partnership and OCI USA Inc. entered into an amendment to its Term Loan B Credit Facility ("Term Loan"). The amendment, among other things, improved the Term Loan's financial covenants. Concurrently, OCIB agreed to prepay $200 million of term loans under the Term Loan B Credit Facility with the proceeds of a borrowing from its parent company OCI N.V. through an Intercompany Term Facility. The borrowings under the Intercompany Term Facility are subordinated to the existing Term Loan.

On January 4, 2017, OCIB and the Partnership entered into an amendment to the Revolving Credit Agreement with Bank of America, N.A., as administrative agent, and the other lenders party thereto. The amendment, among other things, improved the Revolving Credit Agreement's financial covenants, extended the maturity of the Revolving Credit Facility until March 31, 2018 and increased the applicable margin by 1.25% to LIBOR + 4.75%.

OCI Beaumont becomes ISO 9001 and ISO 14001 certified and achieves Star status in the Voluntary Protection Program of OSHA

On December 20, 2016, OCI Beaumont became ISO 9001 and ISO 14001 certified, which are sets of international standards on quality assurance and environmental management developed by the International Organization for Standardization.

On March 1, 2016, OCI Beaumont also achieved Star status in the Voluntary Protection Program of the Occupational Safety and Health Administration. The program, in which companies participate voluntarily, recognizes facilities for their exemplary safety and health programs.

Statement from President and Chief Executive Officer – Frank Bakker

"During the fourth quarter, our ammonia and methanol production units were in operation for 89 days and 83 days generating capacity utilization rates of 99% and 88%, respectively. This was short of optimal utilization rates due to a power outage causing unplanned downtime of approximately 2.5 days in the ammonia production unit and approximately 4 days in the methanol production unit. We also took our methanol production unit off-line for approximately 8.5 days in order to change out the bearing of the steam turbine.

Contract and spot methanol prices increased during the quarter, but ammonia prices continued to decline. Our average realized methanol price was $257 per metric ton in the fourth quarter, up 20% from $214 per metric ton in the third quarter. Our average realized ammonia price was $199 per metric ton in the fourth quarter, down 15% from $235 per metric ton in the third quarter. Finally, our natural gas price averaged $3.10 per MMBtu during the quarter.

Looking forward, we expect higher first quarter 2017 average realized prices for both methanol and ammonia as a result of recent robust increases in contract and spot prices. Weighted average methanol contract prices increased by 36%, or almost $100 per metric ton during the fourth quarter of 2016, and a further 33% in the beginning of 2017 to reach $491 per metric ton in March. More recently, ammonia markets also turned positive, after reaching a multi-year low in November. Since then, ammonia (Tampa cfr) prices have increased by $120 to reach $330 per metric ton in March.

Methanol prices are currently benefiting from reduced supply globally and healthy demand. Recently, various plant outages around the world and continued natural gas curtailments in Trinidad have tightened global inventories. Global demand is expected to remain supported by Chinese Methanol-to-Olefins (MTO) demand. Two new Chinese MTO facilities started up in December 2016, adding more than 3 million metric tons of methanol demand, and at least one other facility is expected to commence operations in 2017.

Ammonia markets turned more bullish at the end of 2016, supported by widespread supply shortages at key export locations in Eastern Europe, the Middle East and Trinidad, improved demand from key ammonia importers and a rebound in prices of some downstream products, including caprolactam and urea."

 


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, 


2016


2015


2016


2015


Ammonia

199


378


3.10


2.32


Methanol

257


282




















Production

Capacity Utilization


(in '000 tons)

Rate %


For Three-Months Ended December 31, 

For Three-Months Ended December 31, 


2016


2015


2016


2015


Ammonia

83


80


99%


96%


Methanol

203


211


88%


92%
















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, 


2016


2015


2016


2015


Ammonia

258


425


2.57


2.73


Methanol

213


325




















Production

Capacity Utilization


(in '000 tons)

Rate %


For Twelve-Months Ended December 31, 

For Twelve-Months Ended December 31, 


2016


2015


2016


2015


Ammonia

332


235


100%


89%


Methanol

823


652


90%


94%


 

Non-GAAP Financial Measure

EBITDA is defined as net income (loss) plus (i) interest expense and other financing costs, (ii) depreciation expense and (iii) income tax expense. 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 and twelve months ended December 31, 2016 (dollars in thousands).

 



Quarter Ended December 31,



2016


2015








Net income (loss)


$

(17,353)



14,507

Add:







Interest expense 



16,226



8,449

Interest expense – related party



1,532



51

Income tax expense 



217



(33)

Depreciation expense



15,297



15,384








EBITDA


$

15,919



38,358

















Twelve-months Ended December 31,



2016


2015








Net income (loss)


$

(50,553)



52,021

Add:







Interest expense 



45,096



20,018

Interest expense – related party



1,777



203

Income tax expense 



806



613

Depreciation expense



61,441



49,663








EBITDA


$

58,567



122,518








Conference Call with Management

The Partnership will hold a conference call on March 13, 2017, at 12:00pm EST, during which the Partnership's senior management will review the Partnership's financial results for the fourth quarter ended December 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 (816) 287-5664 and entering the conference code 84346892. A replay of the conference call will be made available until March 27, 2017 and the replay can be accessed by dialing (855) 859-2056 or (404) 537-3406 and entering the same conference code 84346892.

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. 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, including the completion of significant capital programs; 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; and the occurrence of operating hazards from accidents, fire, severe weather, floods or other natural disasters. Furthermore, in connection with OCI's proposal, there can be no assurance that any discussions that may occur between us and OCI will result in the entry into of a definitive agreement concerning a transaction or, if such a definitive agreement is reached, will result in the consummation of a transaction provided for in such definitive agreement. 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 most recently filed Annual Report on Form 10-K and Quarterly Reports on Form 10-Q filed thereafter. The Partnership undertakes no obligation 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.

Contacts:
Hans Zayed
Director of Investor Relations
Phone: +1 917-817-5159
hans.zayed@oci.nl

 

SOURCE OCI Partners LP


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