Navios Midstream disappoints in Q4

Navios_Frangou

Navios Maritime Midstream Partners L.P. (“Navios Midstream”) (NYSE:NAP), an owner and operator of tanker vessels, reported its financial results for the fourth quarter and year ended December 31, 2016. 

Angeliki Frangou, Chairman and Chief Executive Officer of Navios Midstream stated “We are pleased to report results for the full year and fourth quarter of 2016. For the full year, we reported $24.9 million of net income and $66.2 million of EBITDA. For the fourth quarter, we recorded $6.0 million of net income and $16.4 million of EBITDA. We also recently announced a distribution of $0.4225 per unit, representing an annualized distribution of $1.69 per unit and a current yield of 14%.”

Angeliki Frangou continued, “Navios Midstream is a cash generating platform positioned to take advantage of market opportunity.  On the revenue side, our fleet is 100% fixed through 2018.  On the cost side, operating and related costs are fixed through 2018 as well. Further, we have no forward growth capex commitments, and we have no debt maturities until 2020.”  

RECENT DEVELOPMENTS

Cash Distribution

The Board of Directors of Navios Midstream declared a cash distribution for the fourth quarter of 2016 of $0.4225 per unit. The cash distribution is payable on February 14, 2017 to unitholders of record as of February 9, 2017.

Fleet updates

The Nave Celeste has been chartered out to an oil-major for one year at a rate based on the BITR TD3-TCE index. Navios Midstream will receive 100% of the index rate up to $37,525 net per day and 50% of any amount in excess of $37,525 net per day. The contract provides a minimum rate of $17,775 net per day. Pursuant to the backstop agreement in place, Navios Maritime Acquisition Corporation (“Navios Acquisition”) has provided a backstop commitment at a rate of $35,000 net per day until December 2018.

The Shinyo Ocean and the Shinyo Kannika have been placed in a VLCC pool for a minimum period of three months. Pursuant to the backstop agreement in place, Navios Acquisition has provided a backstop commitment at a rate of $38,400 net per day until January 2019 for the Shinyo Ocean and at a rate of $38,025 net per day until February 2019 for the Shinyo Kannika.

Long – Term Cash Flow and Profit Sharing

Navios Midstream has entered into long-term charter-out agreements for its vessels, with a remaining average term of 4.3 years, which are expected to provide a stable base of revenue and distributable cash flow. Navios Midstream has currently contracted out 100% of its available days for 2017 and 2018 expecting to generate revenues, including the backstop commitment provided by Navios Acquisition, of approximately $86.7 million and $86.6 million for 2017 and 2018, respectively. The average expected daily charter-out rate for the fleet is $39,580 and $39,559 for 2017 and 2018, respectively.

Profit share recognized for the year ended December 31, 2016, was $4.9 million, under its profit sharing arrangements.

Continuous Offering Program

Pursuant to the Continuous Offering Program in place, Navios Midstream issued 313,103 common units in 2016 (of which 56,000 common units were issued during the three month period ended December 31, 2016) and received net proceeds of $4.0 million (of which $0.6 million were received during the three month period ended December 31, 2016).  In connection with the issuance of the common units, Navios Midstream issued 6,798 general partnership units to its general partner in order for it to maintain its 2.0% general partner interest. The net proceeds from the issuance of the general partnership units were $0.1 million.

FINANCIAL HIGHLIGHTS

For the following results and the selected financial data presented herein, Navios Midstream has compiled condensed consolidated statements of operations for the three months and years ended December 31, 2016 and 2015. The quarterly information for 2016 and 2015 was derived from the unaudited condensed consolidated financial statements for the respective periods. EBITDA and Operating Surplus are non-GAAP financial measures and should not be used in isolation or substitution for Navios Midstream’s results.

 (in $‘000 except per unit data) Three Month
Period ended
December 31, 2016
(unaudited)
Three Month
Period ended
December 31, 2015
(unaudited)
Year ended
December 31, 2016
(unaudited)
Year ended
December 31, 2015
(unaudited)
Revenue $ 22,781 $ 25,836 $ 91,834 $ 83,362
Net income 6,049 9,134 24,890 27,072
EBITDA 16,365 19,381 66,170 62,190
Earnings per common unit (basic and diluted) 0.28 0.44 1.19 1.33
Operating Surplus 10,007 12,946 40,609 42,406
Maintenance and replacement capital expenditure reserve 3,580 3,591 14,321 11,684

Three month periods ended December 31, 2016 and 2015

Revenue for the three month period ended December 31, 2016 decreased by $3.1 million to $22.8 million, as compared to $25.8 million for the same period in 2015. Time Charter Equivalent (“TCE”) was $40,719 for the three month period ended December 31, 2016 and $45,940 for the three month period ended December 31, 2015. The decrease in TCE was mainly due to the decrease in profit sharing recognized in relation to certain charters for the three month period ended December 31, 2016, as compared to the same period of 2015.

EBITDA decreased by $3.0 million to $16.4 million for the three month period ended December 31, 2016, as compared to $19.4 million for the same period in 2015. The decrease in EBITDA was due to a: (a) $3.1 million decrease in revenue; and (b) $0.3 million increase in other expense; partially mitigated by a: (i) $0.2 million decrease in time charter expenses; and (ii) $0.2 million decrease in general and administrative expenses.

The reserve for estimated maintenance and replacement for capital expenditures for each of the three month periods ended December 31, 2016 and 2015 was $3.6 million (please see Reconciliation of Non-GAAP Financial Measures in Exhibit 3).

Navios Midstream generated an Operating Surplus for the three month period ended December 31, 2016 of $10.0 million. Operating Surplus is a non-GAAP financial measure used by certain investors to assist in evaluating a partnership’s ability to make quarterly cash distributions (please see Reconciliation of Non-GAAP Financial Measures in Exhibit 3).

Net income for the three month period ended December 31, 2016 was $6.0 million compared to $9.1 million for the three month period ended December 31, 2015. The decrease in net income of $3.1 million was due to a: (a) $3.0 million decrease in EBITDA; and (b) $0.1 million increase in direct vessel expenses.

Earnings per common unit for the three month period ended December 31, 2016 were $0.28.

Year ended December 31, 2016 and 2015

Revenue for the year ended December 31, 2016 increased by $8.5 million to $91.8 million, as compared to $83.4 million for the same period in 2015. The increase was mainly due to the acquisition of the Nave Celeste and the C. Dream in June 2015 and was partially mitigated by a decrease of $3.2 million in profit sharing recognized in relation to certain charters for the year ended December 31, 2016, as compared to the same period of 2015. Time Charter Equivalent (“TCE”) was $42,625 for the year ended December 31, 2016 and $45,924 for the year ended December 31, 2015. The decrease in TCE was due to the lower average charter rate of the two VLCCs acquired in June 2015, compared to the existing fleet.

EBITDA increased by $4.0 million to $66.2 million for the year ended December 31, 2016, as compared to $62.2 million for the same period in 2015. The increase in EBITDA was mainly due to an $8.5 million increase in revenue. The above increase was partially mitigated by a: (a) $3.7 million increase in management fees and general and administrative expenses, mainly due to the acquisition of the Nave Celeste and the C. Dream in June 2015; (b) $0.4 million increase in time charter expenses; (c) $0.3 million increase in other expense; and (d) $0.1 million decrease in other income.

The reserve for estimated maintenance and replacement capital expenditures for the year ended December 31, 2016 and 2015 was $14.3 million and $11.7 million, respectively (please see Reconciliation of Non-GAAP Financial Measures in Exhibit 3).

Navios Midstream generated an Operating Surplus for the year ended December 31, 2016 of $40.6 million. Operating Surplus is a non-GAAP financial measure used by certain investors to assist in evaluating a partnership’s ability to make quarterly cash distributions (please see Reconciliation of Non-GAAP Financial Measures in Exhibit 3).

Net income for the year ended December 31, 2016 was $24.9 million compared to $27.1 million for the year ended December 31, 2015. The decrease of approximately $2.2 million in net income was due to a: (a) $2.8 million increase in depreciation and amortization; (b) $2.0 million increase in interest expenses and finance cost; and (c) $1.5 million increase in direct vessel expenses; partially mitigated by a: (i) $4.0 million increase in EBITDA; and (ii) $0.2 million increase in interest income.

 Earnings per common unit for the year ended December 31, 2016 were $1.19.

Fleet Employment Profile

The following table reflects certain key indicators of Navios Midstream’s core fleet performance for the three months and years ended December 31, 2016 and 2015.

Three Month
Period ended
December 31, 2016
(unaudited)
Three Month
Period ended
December 31, 2015
(unaudited)
Year ended
December 31, 2016
(unaudited)
Year ended
December 31, 2015
(unaudited)
FLEET DATA
Available days(1) 552 552 2,120 1,791
Operating days(2) 551 547 2,113 1,785
Fleet utilization(3) 99.9 % 99.1 % 99.7 % 99.7 %
Vessels operating at period end 6 6 6 6
AVERAGE DAILY RESULTS
Time Charter Equivalent per day(4) $ 40,719 $ 45,940 $ 42,625 $ 45,924
(1 ) Available days for the fleet represent total calendar days the vessels were in Navios Midstream’s possession for the relevant period after subtracting off-hire days associated with scheduled repairs, dry dockings or special surveys. The shipping industry uses available days to measure the number of days in a relevant period during which a vessel is capable of generating revenues.
(2 ) Operating days is the number of available days in the relevant period less the aggregate number of days that the vessels are off-hire due to any reason, including unforeseen circumstances. The shipping industry uses operating days to measure the aggregate number of days in a relevant period during which vessels actually generate revenues.
(3 ) Fleet utilization is the percentage of time that Navios Midstream’s vessels were available for revenue generating available days, and is determined by dividing the number of operating days during a relevant period by the number of available days during that period. The shipping industry uses fleet utilization to measure efficiency in finding employment for vessels and minimizing the amount of days that its vessels are off-hire for reasons other than scheduled repairs, drydockings or special surveys.
(4 ) Time Charter Equivalent (“TCE”) rates: TCE rates are defined as voyage and time charter revenues less voyage expenses during a period divided by the number of available days during the period. The TCE rate is a standard shipping industry performance measure used primarily to present the actual daily earnings generated by vessels on various types of charter contracts for the number of available days of the fleet.

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