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Why an Acquisition Drove Genesis Energy’s 1Q16 Earnings

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Genesis Energy’s 1Q16 EBITDA

Genesis Energy (GEL) reported its 1Q16 earnings on May 4. Genesis Energy’s 1Q16 adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) increased to $133.8 million from $82.4 million in 1Q15, a year-over-year increase of 62%. Plus, Genesis Energy beat its 1Q16 EBITDA estimate by 1.4%. GEL forms 0.50% of the Vanguard FTSE All-World ex-US Small-Cap ETF (VSS).

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Genesis Energy’s 1Q16 EBITDA drivers

The increase in GEL’s 1Q16 EBITDA was mainly driven by its acquisition of Enterprise Product Partners’ (EPD) offshore pipeline business.

  • Offshore Pipeline: The segment’s margin grew 212% year-over-year, mostly due to the asset acquisition.
  • Onshore Pipeline: The segment saw a 9% year-over-year increase in segment margin, driven by higher throughput volumes and tariffs along the Wyoming and Louisiana pipeline systems. This growth was partially offset by lower throughput volumes on other onshore pipeline systems.
  • Marine Transportation: Marine Transportation was GEL’s worst-performing segment in 1Q16. It was impacted by “pressure on rates and utilization of our blue water, offshore barges.”
  • Refinery Services: GEL’s Refinery Services segment provides sulfur extraction services to refiners and sells NaOH (caustic soda) and NaHS (Sodium hydrosulfide) to industrial customers. It saw an 11% year-over-year increase in segment margin.

Genesis Energy’s 1Q16 distributions

GEL declared a distribution per unit of $0.673 for the first quarter of 2016. This distribution represents a 10.2% year-over-year increase from 1Q15 and a 2.7% sequential increase from 4Q15. 1Q16 is the forty-third consecutive quarter in which Genesis has increased its quarterly distribution. GEL’s peers Rose Rock Midstream Partners (RRMS), Phillips 66 Partners (PSXP), and Enbridge Energy Partners (EEP) grew their quarterly distributions by 4%, 30%, and 2.3%, respectively.

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