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USD Partners: FY 2020 Will Be Slow But The Dividend Cuts Aren't That Bad

Jun. 09, 2020 3:51 PM ETUSD Partners LP (USDP)6 Comments
Aitezaz Khan profile picture
Aitezaz Khan


  • Dividend cuts to improve balance sheet will enhance long-term shareholder value.
  • Near-term operational milestones at Casper and Hardisty will enhance take-or-pay revenues for USDP's terminalling services business.
  • USDP is well positioned to take advantage of recovering crude prices, and the growing price differential between WTI/Brent and WCS.
  • USDP is technically attractive, and fit for witnessing slow but stable price growth over the medium-to-long term.


USD Partners (NYSE:USDP) was on a tear prior to the reduction in oil demand, and the Saudi-Russian oil price war that was triggered amid the prevailing pandemic. The company's dividend profile had seen 19 consecutive dividend hikes until recently, when USDP slashed its quarterly payout by ~70% QoQ in an attempt to reduce its towering debt in these shaky times; which is a good management decision, in my view. However, this ended the prolonged era of dividend hikes.

The oil market crash had a devastating impact on the share price which tanked from its 52-week highs to its 52-week lows in a short span of time, thus technically providing a very attractive entry point in a company having stable cash flows and suitable medium-to-long term growth opportunities embedded with the Hardisty DRU and the Enbridge DRA projects, debt reductions, and the prospects of gradual recovery in oil prices. This classifies USDP as a long-term buy. Let's get into the details.

Figure-1 (Source: Houston Chronicle)

Q1 2020: Quick overview

During Q1 2020, USDP reported a net loss of $33.8 million (owing primarily to an impairment loss recorded at the company's Casper terminal) against revenues of ~$30 MM. With the exception of Q1 2020, USDP's revenues and net income have remained relatively consistent during the prior 4 quarters (Figure-2) and indicates stability of its business model. However, the economic challenges triggered by the pandemic has indirectly impacted its business outlook. A gradual but sustainable recovery in oil prices is around the corner and this is positive news for USDP (discussed later).

Figure-2 (Source: TIKR.com)

The company reported $4.62 MM cash & equivalents at the end of Q1. USDP's Q1 DCF (read: distributable cash flows) have seen suitable YoY improvement from $8.4 MM to $9.8 MM and the liquidity profile looks sound enough for a distribution company that's delivered 19 consecutive

This article was written by

Aitezaz Khan profile picture
Associated with the securities and exchange business for nearly a decade, and educated in finance, auditing, law, HR and marketing; my main focus is on growth investing (though I do sometimes identify value picks in the metals and mining sector). The focus of my coverage is on the precious metals/ base metals/ energy/ commodities/ and automobile industry.In my experience, the SA audience is an inevitable part of the value chain on this forum. Thus, I encourage my readers to share constructive feedback, as it almost always help support a never-ending learning process.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (6)

I agree with matt & todd....this company is a sleeper....I was in near peak price last year and am still in......Divvy cut was painful but I love a Company which recognizes the huge opportunity to reduce debt while growing..........I believe the stock price will rebound THIS year to a major degree ($5-7/shr) and be back around $10-12 by end of 2021.......
From 3/17 press release: For the year ended December 31, 2019, the Hardisty and Stroud terminals contributed approximately 67% and 22% of the Partnership’s Terminalling Services Segment Adjusted EBITDA, respectively, while the Casper terminal contributed approximately 9% of the Partnership’s Terminalling Services Segment Adjusted EBITDA.
Overall article is ok; but missed some biggies; mentioned full pipelines, but failed to mention Keystone JUST got blocked in 9th circuit appeals court. Canadian oil industry needs rail to get to gulf coast. Demand is huge.
Why would progress be slow in 2020? 90% of EBITDA is take-or-pay through mid 2022? Casper not big enough impact vs current state and represents upside...
In addition, debt level was not a mistake, it was part of the business model. Rate was already low, now debt service will be even lower as credit agreement tied to Libor.
Casper has represented less than 10% of EBITDA up until recently. COO stated on Q1 cc that they new hub strategy was implemented and “tested” during Covid and they have significant new interest in contracting there...I expect upside very soon
toddkaz profile picture
I am in at 3 and have been sitting on this stock for a few weeks. Doesn't seem to get much exposure and seems like an easy multi-bagger. Where are all the investors at? I realize it is not sexy but where else can you get a return on your investment this late in the game?
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