8-K
USD Partners LP (USDP)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): March 31, 2023
USD Partners LP
(Exact name of registrant as specified in its charter)
| Delaware | 001-36674 | 30-0831007 |
|---|---|---|
| (State or other jurisdiction of<br> <br>incorporation) | (Commission<br> <br>File Number) | (IRS Employer<br> <br>Identification No.) |
811 Main Street, Suite 2800
Houston, Texas 77002
(Address of principal executive offices) (Zip Code)
(281) 291-0510
Registrant’s telephone number, including area code
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
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Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading<br> <br>Symbol | Name of each exchange<br> <br>on which registered |
|---|---|---|
| Common Units Representing Limited Partner Interests | USDP | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| Item 2.01 | Completion of Acquisition or Disposition of Assets. |
|---|
On March 31, 2023, USDP CCR LLC (the “Seller”), an indirect, wholly-owned subsidiary of USD Partners LP (the “Partnership”), completed the previously announced sale of its Casper rail terminal (the “Casper Terminal”) to South 49 Holdings Ltd. (the “Buyer”), a member of the Midstream Energy Partners group of companies, pursuant to that certain Membership Interest Purchase Agreement, dated March 20, 2023, by and between Seller and Buyer (the “Purchase Agreement”), for cash consideration of approximately $33 million, subject to customary adjustments.
| Item 7.01 | Regulation FD Disclosure. |
|---|
On April 3, 2023, the Partnership issued a press release announcing certain of the matters described in this Current Report on Form 8-K. A copy of this press release is attached hereto as Exhibit 99.1 to this Current Report. The information set forth in this Item 7.01 and in Exhibit 99.1 shall not be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
| Item 9.01 | Financial Statements and Exhibits. |
|---|
(b) Pro Forma Financial Information
The following unaudited pro forma financial information of the Partnership is filed as Exhibit 99.2 to this Current Report on Form 8-K and is incorporated herein by reference:
| • | Unaudited Pro Forma Condensed Consolidated Balance Sheet as of December 31, 2022. |
|---|---|
| • | Unaudited Pro Forma Condensed Consolidated Statement of Operations as of December 31, 2022. |
| --- | --- |
(d) Exhibits
| Exhibit<br>Number | Description |
|---|---|
| 99.1 | Press Release of USD Partners LP dated April 3, 2023 |
| 99.2 | Unaudited pro forma condensed consolidated financial information |
| 104 | The cover page from this Current Report on Form 8-K, formatted in Inline XBRL. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Partners LP (Registrant) | |
|---|---|
| By: | |
| Date: April 4, 2023 | By: |
| Name: | |
| Title: |
All values are in US Dollars.
EX-99.1
Exhibit 99.1
April 3, 2023
USDPartners LP Announces Closing of Casper Terminal Sale
Houston, TX – A wholly-owned subsidiary of USD Partners LP (NYSE: USDP) (the “Partnership”) announced today that on March 31, 2023, it closed the previously announced sale of the Casper rail terminal to South 49 Holdings Ltd., a member of the Midstream Energy Partners group of companies, for a cash purchase price of approximately $33.0 million, subject to customary adjustments.
Piper Sandler & Co. served as the exclusive financial advisor to the Partnership in connection with the transaction. Gibson, Dunn & Crutcher LLP served as legal advisor to the Partnership.
About USDPartners LP
USD Partners LP is a fee-based, growth-oriented master limited partnership formed in 2014 by US Development Group, LLC (“USD”) to acquire, develop and operate midstream infrastructure and complementary logistics solutions for crude oil, biofuels and other energy-related products. The Partnership generates substantially all of its operating cash flows from multi-year, take-or-pay contracts with primarily investment grade customers, including major integrated oil companies, refiners and marketers. The Partnership’s principal assets include a network of crude oil terminals that facilitate the transportation of heavy crude oil from Western Canada to key demand centers across North America. The Partnership’s operations include railcar loading and unloading, storage and blending in on-site tanks, inbound and outbound pipeline connectivity, truck transloading, as well as other related logistics services. In addition, the Partnership provides customers with leased railcars and fleet services to facilitate the transportation of liquid hydrocarbons and biofuels by rail.
USD, which owns the general partner of USD Partners LP, is engaged in designing, developing, owning, and managing large-scale multi-modal logistics centers and energy-related infrastructure across North America. USD’s solutions create flexible market access for customers in significant growth areas and key demand centers, including Western Canada, the U.S. Gulf Coast and Mexico. Among other projects, USD is currently pursuing the development of a premier energy logistics terminal on the Houston Ship Channel with capacity for substantial tank storage, multiple docks (including barge and deepwater), inbound and outbound pipeline connectivity, as well as a rail terminal with unit train capabilities. For additional information, please visit texasdeepwater.com. Information on websites referenced in this release is not part of this release.
Contact:
Adam Altsuler
Executive Vice President, Chief Financial Officer
(281) 291-3995
aaltsuler@usdg.com
Jennifer Waller
Sr. Director, Financial Reporting and Investor Relations
(832) 991-8383
jwaller@usdg.com
Cautionary Note RegardingForward-Looking Statements
This press release contains forward-looking statements within the meaning of U.S. federal securities laws, including statements with respect to the ability of the Partnership and USD to achieve contract extensions, new customer agreements and expansions; the ability of the Partnership to extend, renew or replace its senior secured credit facility; the ability of the Partnership and USD to develop existing and future additional projects and expansion opportunities (including successful completion of USD’s DRU) and whether those projects and opportunities developed by USD would be made available for acquisition, or acquired, by the Partnership; volumes at, and demand for, the Partnership’s terminals; and the amount and timing of future distribution payments and distribution growth. Words and phrases such as “expect,” “plan,” “intent,” “believes,” “projects,” “begin,” “anticipates,” “subject to” and similar expressions are used to identify such forward-looking statements. However, the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements relating to the Partnership are based on management’s expectations, estimates and projections about the Partnership, its interests and the energy industry in general on the date this press release was issued. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecast in such forward-looking statements. Factors that could cause actual results or events to differ materially from those described in the forward-looking statements include the Partnership’s ability to enter into new contracts for uncontracted capacity and to renew expiring contracts and changes in general economic conditions and commodity prices, as well as those factors set forth under the heading “Risk Factors” and elsewhere in the Partnership’s most recent Annual Report on Form 10-K and in the Partnership’s subsequent filings with the Securities and Exchange Commission (many of which may be amplified by the COVID-19 pandemic and the recent significant reductions in demand for and prices of crude oil, natural gas and natural gas liquids). The Partnership is under no obligation (and expressly disclaims any such obligation) to update or alter its forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
Category: Operations
EX-99.2
Exhibit 99.2
USD PARTNERS LP
UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Background
Presented below are USD Partners LP’s (“we,” “us,” “our” or “the Partnership”) unaudited pro forma condensed consolidated balance sheet as of December 31, 2022 and the pro forma condensed consolidated statement of operations for the year ended December 31, 2022 (together with the notes to the unaudited pro forma consolidated financial statements the “pro forma financial statements”) prepared in accordance with Article 11 of Regulation S-X.
On March 20, 2023, USDP CCR LLC (“the Seller”), an indirect, wholly-owned subsidiary of the Partnership, entered into a Membership Interest Purchase Agreement (the “Purchase Agreement”) with South 49 Holdings Ltd., a member of the Midstream Energy Partners group of companies (collectively the “Buyer”). Upon the terms and subject to conditions set forth in the Purchase Agreement, the seller agreed to sell the Partnership’s Casper rail terminal, by means of a sale of all of the equity interests of the subsidiary of the Partnership, which owns the terminal, to the Buyer for a cash purchase price of $33 million (the “Transaction”), subject to customary adjustments. The Transaction contemplated by the Purchase Agreement is referred to herein as the “Divestiture.” The Partnership plans to use $19.5 million of the net proceeds to repay a portion of the Partnership’s borrowings under its revolving senior secured credit agreement that was originally established in October 2014 and subsequently amended, with Bank of Montreal as administrative agent, the various lenders from time to time party thereto (the “Lenders”), and certain of the Partnership’s subsidiaries party thereto from time to time as guarantors (the “Credit Agreement”).
The Divestiture is considered a disposition of a significant business under Item 2.01 of Form 8-K. As a result, the Partnership prepared the accompanying unaudited pro forma condensed consolidated financial statements included herein in accordance with Article 11 of Regulation S-X and based on historical financial information of the Partnership. The Divestiture does not meet the criteria requiring discontinued operations presentation in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) because it does not represent a strategic shift that will have major effect on the Partnership’s operations or financial results.
The accompanying unaudited pro forma condensed consolidated balance sheet gives effect to the Divestiture as if it had occurred on December 31, 2022, the end of the most recent period for which a balance sheet is required. The accompanying unaudited pro forma condensed consolidated statement of operations for year ended December 31, 2022 gives effect to the Divestiture as if it had occurred on January 1, 2022.
The accompanying unaudited pro forma condensed consolidated financial statements include pro forma adjustments that are directly attributable to the Divestiture and are factually supportable. Pro forma adjustments are presented for informational purposes only and are described in the accompanying notes based on information and assumptions currently available at the time of the filing of the Current Report on Form 8-K to which the unaudited pro forma condensed consolidated financial statements are included as an exhibit (the “8-K”). The unaudited pro forma condensed consolidated financial statements are not necessarily indicative of what the Partnership’s results of operations or financial condition would have been had the Divestiture been completed on the dates indicated above. In addition, it is not necessarily indicative of the Partnership’s future results of operations or financial condition and does not reflect all actions that have been or may be taken by the Partnership following the Divestiture.
The accompanying unaudited pro forma condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 10-K”).
USD PARTNERS LP
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 2022
UNAUDITED
| PartnersLP | Pro Forma<br>TransactionAdjustments | PartnersLPPro Forma | |||||||
|---|---|---|---|---|---|---|---|---|---|
| (in thousands of US dollars, except per unit amounts) | |||||||||
| ASSETS | |||||||||
| Current Assets | |||||||||
| Cash and cash equivalents | $ | (401) | (b | ) | |||||
| 11,500 | (a | ) | |||||||
| Restricted cash | 2,000 | (a | ) | ||||||
| Accounts receivable, net | (416 | ) | (b | ) | |||||
| Accounts receivable – related party | — | ||||||||
| Prepaid expenses | (18 | ) | (b | ) | |||||
| Other current assets | — | ||||||||
| Total current assets | 12,665 | ||||||||
| Property and equipment, net | (22,860 | ) | (b | ) | |||||
| Intangible assets, net | (3,526 | ) | (b | ) | |||||
| Operating lease<br>right-of-use assets | (43 | ) | (b | ) | |||||
| Other non-current assets | (42 | ) | (b | ) | |||||
| Total assets | (13,806 | ) | |||||||
| LIABILITIES AND PARTNERS’ CAPITAL | |||||||||
| Current liabilities | |||||||||
| Accounts payable and accrued expenses | $ | (251) | (b) | ||||||
| 1,873 | (c | ) | |||||||
| Accounts payable and accrued expenses – related party | — | ||||||||
| Deferred revenue | (93 | ) | (b | ) | |||||
| Deferred revenue – related party | — | ||||||||
| Long-term debt, current portion | (19,500 | ) | (a | ) | |||||
| Operating lease liabilities, current | (20 | ) | (b | ) | |||||
| Other current liabilities | (2 | ) | (b | ) | |||||
| Other current liabilities – related party | — | ||||||||
| Total current liabilities | (17,993 | ) | |||||||
| Operating lease liabilities, non-current | — | ||||||||
| Other non-current liabilities | — | ||||||||
| Total liabilities | (17,993 | ) | |||||||
| Commitments and contingencies | |||||||||
| Partners’ capital | |||||||||
| Common units | ) | 4,187 | (b | ) | ) | ||||
| Accumulated other comprehensive loss | ) | — | ) | ||||||
| Total partners’ capital | ) | 4,187 | ) | ||||||
| Total liabilities and partners’ capital | $ | (13,806 | ) |
All values are in US Dollars.
USD PARTNERS LP
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2022
UNAUDITED
| PartnersLP | Pro Forma<br>TransactionAdjustments | Partners LPPro Forma | |||||||
|---|---|---|---|---|---|---|---|---|---|
| (in thousands of US Dollars, except per unit amounts) | |||||||||
| Revenues | |||||||||
| Terminalling services | $ | (3,729 | ) | (d | ) | ||||
| Terminalling services – related party | — | ||||||||
| Fleet leases – related party | — | ||||||||
| Fleet services | — | ||||||||
| Fleet services – related party | — | ||||||||
| Freight and other reimbursables | (24 | ) | (d | ) | |||||
| Freight and other reimbursables – related party | — | ||||||||
| Total revenues | (3,753 | ) | |||||||
| Operating costs | |||||||||
| Subcontracted rail services | (1,720 | ) | (d | ) | |||||
| Pipeline fees | — | ||||||||
| Freight and other reimbursables | (24 | ) | (d | ) | |||||
| Operating and maintenance | (994 | ) | (d | ) | |||||
| Operating and maintenance – related party | — | ||||||||
| Selling, general and administrative | (1,292 | ) | (d | ) | |||||
| 1,873 | (c | ) | |||||||
| Selling, general and administrative – related party | — | ||||||||
| Impairment of intangible and long-lived assets | (71,612 | ) | (d | ) | |||||
| Gain on divestiture | (4,187 | ) | (b | ) | ) | ||||
| Depreciation and amortization | (12,604 | ) | (d | ) | |||||
| Total operating costs | (90,560 | ) | |||||||
| Operating income (loss) | ) | (86,807 | ) | ||||||
| Interest expense | (710 | ) | (e | ) | |||||
| Gain associated with derivative instruments | ) | — | ) | ||||||
| Foreign currency transaction loss | — | ||||||||
| Other income, net | ) | 1 | (d | ) | ) | ||||
| Income (loss) before income taxes | ) | (87,516 | ) | ||||||
| Provision for (benefit from) income taxes | — | ||||||||
| Net income (loss) | $ | (87,516) | |||||||
| Net income (loss) attributable to limited partner interest | |||||||||
| Net income per common unit (basic and diluted) | |||||||||
| Weighted average common units outstanding |
All values are in US Dollars.
Basis of Presentation
The unaudited pro forma condensed consolidated financial statements are based on the Partnership’s historical consolidated financial statements as adjusted to give effect to the transaction accounting adjustments in accordance with GAAP to reflect the Divestiture.
The Divestiture does not meet the criteria requiring discontinued operations presentation in accordance with U.S. GAAP because it does not represent a strategic shift that will have major effect on the Partnership’s operations or financial results. The Divestiture is considered a disposition of a significant business under Item 2.01 of Form 8-K. As a result, the Partnership prepared the unaudited pro forma condensed consolidated financial statements included herein, which were prepared in accordance with Article 11 of Regulation S-X and are based on historical financial statements of the Partnership. The historical consolidated financial statements have been adjusted in the accompanying unaudited pro forma condensed consolidated financial statements to give effect to pro forma events that are directly attributable to the Divestiture. Certain information and disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted from this report, as is permitted by such rules and regulations.
The accompanying unaudited pro forma condensed consolidated financial statements include pro forma adjustments that are directly attributable to the Divestiture and are factually supportable. Pro forma adjustments are presented for informational purposes only and are described in the accompanying notes based on information and assumptions currently available at the time of the filing of the Current Report on Form 8-K with which unaudited pro forma condensed consolidated financial statements are included as an exhibit. The unaudited pro forma condensed consolidated financial statements are not necessarily indicative of what the Partnership’s results of operations or financial condition would have been had the Divestiture been completed on the dates indicated below. In addition, it is not necessarily indicative of the Partnership’s future results of operations or financial condition and does not reflect all actions that have been or may be taken by the Partnership following the Divestiture.
The accompanying unaudited pro forma condensed consolidated financial statements are based on the audited consolidated financial statements and accompanying notes included in the 2022 10-K. The unaudited pro forma condensed consolidated balance sheet as of December 31, 2022 gives effect to the Divestiture as if it had occurred on December 31, 2022. The unaudited pro forma condensed consolidated statement of operations for year ended December 31, 2022 gives effect to the Divestiture as if it had occurred on January 1, 2022.
Unaudited Pro Forma Transaction Adjustments
The unaudited pro forma condensed consolidated statements reflect the following adjustments:
| (a) | Adjustment reflects the estimated proceeds received of $33.0M, net of the repayment of approximately $19.5M to<br>the Partnership’s Credit Agreement and $2M to be held in an Escrow Account as Restricted Cash upon closing. | ||
|---|---|---|---|
| (b) | Adjustment reflects the removal of the historical Partnership assets and liabilities associated with the<br>Divestiture. The following is a summarization of the application of net proceeds and estimated gain on the sale: | ||
| --- | --- | ||
| Estimated net cash proceeds | $ | 33,000 | |
| --- | --- | --- | --- |
| Cash and cash equivalents | (401 | ) | |
| Accounts Receivable, net | (416 | ) | |
| Prepaid Expenses | (18 | ) | |
| Property, plant and equipment, net | (22,860 | ) | |
| Intangible Assets | (3,526 | ) | |
| Operating lease<br>right-of-use assets | (43 | ) | |
| Other noncurrent assets | (42 | ) | |
| Transaction Costs | (1,873 | ) | |
| --- | --- | --- | --- |
| Accounts payable and accrued expense | 251 | ||
| Deferred revenue | 93 | ||
| Operating lease liabilities, current | 20 | ||
| Other current liabilities | 2 | ||
| Estimated gain on Divestiture | $ | 4,187 | |
| (c) | Adjustment reflects the recognition of unrecognized transaction costs associated with the Divestiture.<br> | ||
| --- | --- | ||
| (d) | Adjustment reflects the removal of the historical revenues and expenses of the Partnership’s operations<br>associated with the Divestiture from the Partnership’s consolidated operations. Adjustment includes removal of the intangible and long-lived asset impairment related to the divested entities, as a result of the Divestiture.<br> | ||
| --- | --- | ||
| (e) | Adjustment reflects the estimated decrease to interest expense from the repayment of approximately<br>$19.5 million to the Partnership’s Credit Agreement. | ||
| --- | --- |