News

Genesis Energy, L.P. Reports Second Quarter Results

HOUSTON-(Business Wire)-August 6, 2008 - Genesis Energy, L.P. (AMEX:GEL) reported today net income for the second quarter of 2008 of $7.3 million, or $0.17 per unit. This compares to a loss in the 2007 period of $1.4 million, or $0.09 per unit.

Net income for the first six months of 2008 was $9.0 million, or $0.21 per unit. Net income was $0.2 million, or $0.02 per unit, for the first six months of 2007.

Grant Sims, CEO said, "We are very pleased with the solid performance reported by all of our business segments and the contributions of our dedicated employees. For the second quarter of 2008, we generated total Available Cash before reserves, a non-GAAP measure, of $26.2 million." Available Cash before reserves is a non-GAAP measure that is defined and reconciled later in this press release to its most directly comparable GAAP financial measure, net cash provided by operating activities. Net cash provided by operating activities was $5.3 million for the second quarter of 2008.

"The second quarter results reflect our continuing integration of the assets and businesses we acquired in the third quarter of 2007 from the Davison family with Genesis' historic operations. On May 30, 2008, we completed two transactions representing an aggregate $250 million investment in two CO2 pipelines with Denbury Resources Inc. (NYSE: DNR), the indirect owner of our general partner. We believe those investments will significantly contribute in future periods to our total fee based margins. In July, we completed the acquisition of the inland marine transportation business of Grifco Transportation, Ltd., through a 49% owned joint venture with certain members of the Davison family, and closed a $75 million credit facility at the joint venture level in an otherwise challenging market for new bank credits. While we clearly believe the inland marine joint venture is an outstanding stand-alone investment, we are confident those operations should significantly enhance the utilization and stability of our other assets and operations," Mr. Sims added.

"For meaningful comparative purposes, we focused on the change in our performance from the first quarter of 2008 rather than the second quarter of 2007 since the Davison businesses were not reported therein. Segment margin for the second quarter of 2008 was $37.0 million; an increase of $9.7 million as compared to the first quarter of 2008. The increase in segment margin resulted from increased contribution from all segments of our business, with the drop down transactions with Denbury adding $2.1 million to our pipeline transportation segment margin, reflecting only one month of reported financial results."

Mr. Sims concluded, "On August 14, 2008, we will pay a total distribution of $13.3 million, comprised of $12.4 million or $0.315 per unit with respect to our limited partner units and $0.9 million to our general partner including its incentive distribution, attributable to the second quarter of 2008. This is the twelfth consecutive quarter with an increase in the per unit distribution. Given the $26.2 million of total Available Cash before reserves generated during the second quarter, our total distribution coverage ratio is approximately 1.97 times."

Financial Results

Quarterly Comparison - 2008 Second Quarter to 2007 Second Quarter

Net income for the 2008 second quarter was $7.3 million or $0.17 per unit. For the 2007 second quarter, we sustained a loss of $1.4 million, or $0.09 per unit.

Segment margin is defined and reconciled later in this press release to income before income taxes and minority interest. The following table presents selected financial information by segment for the three month reporting periods: -0- *T Pipeline Refinery Industrial Supply & Transportation Services Gases Logistics Total ——————— ———— ————— ————- ———— Three Months Ended June 30, 2008 ———————— Segment margin excluding depreciation and amortization (a) $ 6,828 $17,616 $3,043 $ 9,492 $ 36,979 Capital expenditures $ 77,246 $ 559 $ - $ - $ 77,805 Maintenance capital expenditures $ - $ 208 $ - $ - $ 208 Revenues: External customers $ 8,885 $55,727 $4,450 $569,477 $638,539 Intersegment 2,001 - - - 2,001 ——————— ———— ————— ————- ———— Total revenues of reportable segments $ 10,886 $55,727 $4,450 $569,477 $640,540 ============== ======== ========== ========= ======== Three Months Ended June 30, 2007 ———————— Segment margin excluding depreciation and amortization (a) $ 2,227 $ - $2,958 $ 1,427 $ 6,612 Capital expenditures $ 337 $ - $ - $ 42 $ 379 Maintenance capital expenditures $ 337 $ - $ - $ 42 $ 379 Revenues: External customers $ 5,347 $ - $3,946 $190,735 $200,028 Intersegment 988 - - - 988 ——————— ———— ————— ————- ———— Total revenues of reportable segments $ 6,335 $ - $3,946 $190,735 $201,016 ============== ======== ========== ========= ======== *T

(a) Segment margin was calculated as revenues less cost of sales and operating expenses. It includes our share of the operating income of our investment in joint ventures. A reconciliation of segment margin to income before income taxes is presented for periods in the table at the end of this release.

Pipeline transportation segment margin increased by $4.6 million between the second-quarter periods. Throughput increases on all three of our crude oil pipeline systems, combined with higher tariff rates contributed $0.5 million of the increased segment margin, with $1.4 million of the remainder primarily due to the effects of higher crude oil market prices on volumetric gains. The CO2 pipelines acquired from Denbury contributed $2.1 million to segment margin for the one month since the acquisition. Decreased operating costs contributed to the improved segment margin, although this decline was related to a non-cash credit for our stock appreciation rights plan in 2008.

Our refinery services segment was acquired in the transaction with the Davison family, therefore it is not included in the second quarter of 2007.

Segment margin from industrial gases activities showed a slight increase primarily related to volumes sold to our CO2 industrial customers. Volumes sold increased 6.6%, and the average sales price of CO2 increased 5.8%, primarily due to variations in the volumes sold under contracts with different pricing terms.

Segment margin from supply and logistics activities reflects an increase between the second quarters of 2008 and 2007 of $8.1 million, with approximately $7.0 million of that amount due to the Davison acquisition. Our historical crude oil related supply and logistics operations showed an improvement of $1.1 million compared to the 2007 second quarter. Much of that improvement resulted from favorable fluctuations in crude oil price differentials for grades of crude oil.

General and administrative expenses increased $3.6 million when comparing the second quarter periods. Approximately $2.8 million of that increase related to the administrative personnel and costs at the Davison locations, with the remainder attributable to increased professional service fees, headcount increases at our headquarters office and bonus plan expense totaling a combined $3.2 million. Offsetting some of these higher costs was a decrease in the expense for our stock appreciation rights plan of $2.4 million between the quarters due to the decrease in our unit price.

The $14.7 million increase in our depreciation and amortization expenses between 2008 and 2007 second quarters is substantially all attributable to our acquisition of the assets in the Davison transaction.

Interest costs in the 2008 second quarter were $1.7 million higher than in the prior year. This increase is due partly to the rise in our average outstanding borrowings of $154.8 million, offset in part by a reduction of 4.4% in our average interest rate. The increase in our outstanding debt at June 30, 2008 is primarily a function of borrowing $225 million to fund the acquisition of CO2 pipelines from Denbury.

Quarterly Comparison - 2008 Second Quarter to 2008 First Quarter

Genesis has owned the Davison businesses for three full quarters as of June 30, 2008. As shown in the table below, segment margin increased in all segments between the first and second quarters of 2008. -0- *T Second First Six Months Quarter Quarter Ended 2008 2008 June 30, 2008 —————————————————————- Segment Margin: Pipeline Transportation $ 6,828 $ 4,643 $ 11,471 Refinery Services 17,616 13,588 31,204 Industrial Gases 3,043 2,776 5,819 Supply & Logistics 9,492 6,261 15,753 —————————————————————- Total Segment Margin $ 36,979 $ 27,268 $ 64,247 =========================================== *T

Pipeline transportation segment margin includes $2.1 million related to the CO2 pipelines acquired from Denbury on May 30, 2008, accounting for the majority of the increase in that segment's contribution. Refinery services segment margin improved as a result of a 12% increase in sodium hydrosulfide (NaHS) sales volumes and a 32% increase in the contribution margin per unit from those sales. The improvement in industrial gases segment between the first two quarters of 2008 resulted from normal seasonal fluctuations in our CO2 sales to industrial customers. Lastly, the supply and logistics segment experienced significant improvement in segment margin due to increased availability of products for blending and an improvement in the availability of barges and their ability, given river levels, to access our terminals to move product out of our facilities. Operational difficulties at some of the refineries from whom we purchase refined products resulted in reduced volumes being available to us during the first quarter.

Year-to-Date Comparison

Segment margin for the six months ended June 30, 2008 increased $50.6 million when compared to the same period in 2007. As illustrated in the table below, approximately $31.2 million of this increase is attributable to the refinery services segment acquired in the Davison transaction that was completed in July 2007. Approximately $10.6 million of the increase in segment margin in the supply and logistics segment is attributable to the operations acquired from the Davison family. Of the remaining $8.8 million increase in total segment margin, $6.4 million is attributable to pipeline transportation, $0.2 million to industrial gases and the remaining $2.2 million to the supply and logistics operations that existed before the Davison acquisition. -0- *T Pipeline Refinery Industrial Supply & Transportation Services Gases (a) Logistics Total ——————— ———— ————— ————- ————— Six Months Ended June 30, 2008 ——————— Segment margin excluding depreciation and amortization (a) $ 11,471 $ 31,204 $ 5,819 $ 15,753 $ 64,247 Capital expenditures $ 78,524 $ 1,710 $ 2,210 $ 4,603 $ 87,047 Maintenance capital expenditures $ 165 $ 489 $ - $ 330 $ 984 Net fixed and other long- term assets $ 286,593 $449,637 $46,387 $143,980 $ 926,597 Revenues: External customers $ 15,673 $ 99,639 $ 8,320 $999,595 $1,123,227 Intersegment 3,498 - - - 3,498 ——————— ———— ————— ————- ————— Total revenues of reportable segments $ 19,171 $ 99,639 $ 8,320 $999,595 $1,126,725 ============== ======== ========== ========= ========== Six Months Ended June 30, 2007 ——————— Segment margin excluding depreciation and amortization (a) $ 5,095 $ - $ 5,572 $ 3,026 $ 13,693 Capital expenditures $ 559 $ - $ - $ 135 $ 694 Maintenance capital expenditures $ 559 $ - $ - $ 135 $ 694 Net fixed and other long- term assets $ 38,964 $ - $48,970 $ 8,309 $ 96,243 Revenues: External customers $ 11,007 $ - $ 7,443 $364,014 $ 382,464 Intersegment 2,116 - - - 2,116 ——————— ———— ————— ————- ————— Total revenues of reportable segments $ 13,123 - $ 7,443 $364,014 $ 384,580 ============== ======== ========== ========= ========== *T

Pipeline segment margin increased $6.4 million, with $2.1 million attributable to the CO2 pipelines acquired from Denbury, $3.3 million to increased volumes and tariffs on the crude oil pipelines and the effects of higher crude oil prices on pipeline loss allowance volumes, and $0.8 million to a reduction in pipeline operating costs. Volumes increased on all three crude oil pipeline systems. Annual tariff increases on the Mississippi and Jay pipeline systems also increased revenues.

The supply and logistics operations that existed before the Davison transaction experienced favorable variations in crude oil price differentials as well as volumetric gains. Costs of operating our truck fleet, primarily fuel costs, reduced the effects of these favorable variations.

General and administrative costs, depreciation and amortization and interest costs all increased between the six-month periods as a function of the growth in our operations. Additionally, we borrowed $225 million under our existing credit facility to fund the CO2 pipeline acquisitions.

We have increased our distribution in the last twelve consecutive quarters, with the most recent increase of $0.015 per unit for the distribution to be paid for the second quarter of 2008. -0- *T Per Unit Distribution For Date Paid Amount ——————————— ———————— ——————— Second quarter 2008 August 2008 $0.315 First quarter 2008 May 2008 $0.300 Fourth quarter 2007 February 2008 $0.285 Third quarter 2007 November 2007 $0.270 Second quarter 2007 August 2007 $0.230 First quarter 2007 May 2007 $0.220 *T

The second quarter 2008 distribution will be paid August 14, 2008 to unitholders of record on August 7, 2008. We generated Available Cash before reserves (a non-GAAP measure) of $26.2 million during the second quarter of 2008. Net cash flows provided by operating activities were $5.3 million for the second quarter period. (Please see the accompanying schedules for a reconciliation of Available Cash before reserves, a non-GAAP measure, to net cash flow provided by operations, the GAAP measure.)

Available Cash

Several adjustments to net income are required to calculate Available Cash before reserves. The calculation of Available Cash before reserves for the quarter ended June 30, 2008 is as follows (in thousands): -0- *T Three Months Ended June 30, 2008 —————————— Net income $ 7,328 Depreciation and amortization 16,721 Cash received from direct financing leases not included in income 397 Cash effects of sales of certain assets 181 Effects of available cash generated by investments in joint ventures not included in income 643 Cash effects of stock appreciation rights plan (113) Loss on asset disposals 76 Deferred tax expense 700 Other non-cash items 460 Maintenance capital expenditures (208) —————————— Available Cash before reserves $ 26,185 ==================== *T

Earnings Conference Call

We will broadcast our Earnings Conference Call on Wednesday, August 6, 2008, at 10:00 a.m. Central time. This call can be accessed at www.genesisenergylp.com. Choose the Investor Relations button. Listeners should go to this website at least fifteen minutes before this event to download and install any necessary audio software. For those unable to attend the live broadcast, a replay will be available beginning approximately one hour after the event and remain available on our website for 30 days. There is no charge to access the event.

Genesis Energy, L.P. is a diversified midstream energy master limited partnership headquartered in Houston, Texas. Genesis engages in four business segments. The Pipeline Transportation Division is engaged in the pipeline transportation of crude oil, carbon dioxide and, to a lesser extent, natural gas. The Refinery Services Division primarily processes sour gas streams to remove sulfur at refining operations, principally located in Texas, Louisiana, and Arkansas. The Supply and Logistics Division is engaged in the transportation, storage and supply of energy products, including crude oil and refined products. The Industrial Gases Division produces and supplies industrial gases, such as carbon dioxide and syngas. Genesis' operations are primarily located in Texas, Louisiana, Arkansas, Mississippi, Alabama, and Florida.

This press release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Although we believe that our expectations are based upon reasonable assumptions, we can give no assurance that our goals will be achieved. Important factors that could cause actual results to differ materially from those in the forward looking statements herein include the timing and extent of changes in commodity prices for oil, ability to obtain adequate credit facilities, managing operating costs, completion of capital projects on schedule and within budget, consummation of accretive acquisitions, capital spending, environmental risks, government regulation, our ability to meet our stated business goals and other risks noted from time to time in our Securities and Exchange Commission filings. Actual results may vary materially. We undertake no obligation to publicly update or revise any forward-looking statement. -0- *T Genesis Energy, L.P. Summary Consolidated Statements of Operations - Unaudited (in thousands except per unit amounts and volumes) Three Months Three Months Ended Ended June 30, June 30, 2008 2007 —————— —————— Revenues $ 640,540 $ 201,016 Cost of sales 603,545 194,697 General and administrative expenses 9,166 5,600 Depreciation and amortization expense 16,721 2,046 Net loss (gain) on disposal of surplus assets 76 (8) —————— —————— OPERATING INCOME (LOSS) 11,032 (1,319) Equity in (losses) earnings of joint ventures (16) 293 Interest expense, net (2,039) (321) —————— —————— INCOME (LOSS) BEFORE INCOME TAXES 8,977 (1,347) Income tax expense (1,648) (25) Minority Interest (1) - —————— —————— NET INCOME (LOSS) $ 7,328 $ (1,372) ============ ============ NET INCOME (LOSS) PER COMMON UNIT - BASIC AND DILUTED $ 0.17 $ (0.09) ============ ============ Volume data: Crude oil pipeline barrels per day (total) 67,434 57,127 Mississippi Pipeline System barrels per day 24,873 20,496 Jay Pipeline System barrels per day 11,828 11,602 Texas Pipeline System barrels per day 30,733 25,029 CO2 sales Mcf per day 79,968 75,039 Units Data: Common units held by general partner and its affiliates 4,028,096 1,019,441 Common units held by Davison family 12,619,069 - Common units held by others 22,805,140 12,765,000 —————— —————— Total common units outstanding 39,452,305 13,784,441 ============ ============ *T -0- *T Genesis Energy, L.P. Summary Consolidated Statements of Operations - Unaudited (in thousands except per unit amounts and volumes) Six Months Six Months Ended Ended June 30, June 30, 2008 2007 —————— —————— Revenues $ 1,126,725 $ 384,580 Cost of sales 1,062,640 371,441 General and administrative expenses 17,690 8,928 Depreciation and amortization expense 33,510 3,974 Net loss (gain) on disposal of surplus assets 94 (24) —————— —————— OPERATING INCOME 12,791 261 Equity in earnings of joint ventures 162 554 Interest expense, net (3,708) (547) —————— —————— INCOME BEFORE INCOME TAXES 9,245 268 Income tax expense (271) (55) Minority Interest (1) - —————— —————— NET INCOME $ 8,973 $ 213 ============ ============ NET INCOME PER COMMON UNIT - BASIC AND DILUTED $ 0.21 $ 0.02 ============ ============ Volume data: Crude oil pipeline barrels per day (total) 66,733 57,627 Mississippi Pipeline System barrels per day 23,864 19,983 Jay Pipeline System barrels per day 13,222 12,230 Texas Pipeline System barrels per day 29,647 25,414 CO2 sales Mcf per day 76,515 71,120 Units Data: Common units held by general partner and its affiliates 4,028,096 1,019,441 Common units held by Davison family 12,619,069 - Common units held by others 22,805,140 12,765,000 —————— —————— Total common units outstanding 39,452,305 13,784,441 ============ ============ *T -0- *T Genesis Energy, L.P. Consolidated Balance Sheets - Unaudited (in thousands) June 30, December 31, 2008 2007 —————— ——————- ASSETS Cash $ 9,187 $ 11,851 Accounts receivable 235,229 180,099 Inventories 18,783 15,988 Net Investment in direct financing leases, net of unearned income 3,639 609 Other current assets 5,807 5,693 —————— ——————- Total current assets 272,645 214,240 Net property 174,442 102,000 Net Investment in direct financing leases, net of unearned income 180,567 4,764 CO2 contracts 26,700 28,916 Joint ventures and other investments 19,687 18,448 Net intangible assets 187,828 211,050 Goodwill 325,045 320,708 Other assets 12,328 8,397 —————— ——————- Total Assets $ 1,199,242 $ 908,523 ============ ============= LIABILITIES AND PARTNERS' CAPITAL Accounts payable $ 197,451 $ 157,261 Accrued liabilities 23,332 17,537 —————— ——————- Total current liabilities 220,783 174,798 Long-term debt 319,000 80,000 Deferred tax liabilities 14,817 20,087 Other liabilities 1,290 1,264 Minority interest 574 570 Partners' capital 642,778 631,804 —————— ——————- Total Liabilities and Partners' Capital $ 1,199,242 $ 908,523 ============ ============= *T -0- *T Genesis Energy, L.P. Summary Consolidated Statements of Cash Flows - Unaudited (in thousands) Six Months Six Months Ended Ended June 30, June 30, 2008 2007 —————- —————- Net income $ 8,973 $ 213 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization 33,510 3,974 Amortization of credit facility issuance costs 535 273 Amortization of unearned income and initial direct costs on direct financing leases (1,772) (315) Deferred and other tax liabilities (926) - Payments received under direct financing leases 594 594 Equity in earnings of joint ventures (162) (554) Distributions from joint ventures - return on investment 815 833 Loss (gain) on asset disposals 94 (24) Non-cash effects of unit-based compensation plans (619) 3,340 Other non-cash items (112) (992) Changes to components of working capital (18,234) (4,287) —————- —————- Net cash provided by operating activities 22,696 3,055 —————- —————- Payments to acquire fixed assets (9,543) (718) CO2 pipeline transactions and related costs (228,833) - Distributions from joint ventures - return of investment 438 361 Investments in joint ventures and other investments (2,210) - Proceeds from disposal of assets 426 195 Prepayment on purchase of Port Hudson assets - (8,100) Other, net (1,272) (1,711) —————- —————- Net cash used in investing activities (240,994) (9,973) —————- —————- Bank borrowings 344,100 77,900 Bank repayments (105,100) (63,100) Other, net (367) (319) General partner contributions 510 - Distributions to common unitholders (22,378) (5,927) Distribution to general partner and minority interest owner (1,131) (122) —————- —————- Net cash provided by financing activities 215,634 8,432 —————- —————- Net (decrease) increase in cash and cash equivalents (2,664) 1,514 Cash and cash equivalents at beginning of period 11,851 2,318 —————- —————- Cash and cash equivalents at end of period $ 9,187 $ 3,832 =========== =========== *T -0- *T Genesis Energy, L.P. Reconciliations ——————————————————————————————————— SEGMENT MARGIN EXCLUDING DEPRECIATION AND AMORTIZATION RECONCILIATION TO INCOME BEFORE INCOME TAXES AND MINORITY INTEREST Three Months Three Months Ended Ended June 30, 2008 June 30, 2007 ——————- ——————- (in thousands) Segment margin excluding depreciation and amortization $ 36,979 $ 6,612 General and administrative expenses (9,166) (5,600) Depreciation and amortization (16,721) (2,046) Net (loss) gain on disposal of surplus assets (76) 8 Interest expense, net (2,039) (321) ——————- ——————- Income before income taxes and minority interest $ 8,977 $ (1,347) ============= ============= Six Months Six Months Ended Ended June 30, 2008 June 30, 2007 ——————- ——————- (in thousands) Segment margin excluding depreciation and amortization $ 64,247 $ 13,693 General and administrative expenses (17,690) (8,928) Depreciation and amortization (33,510) (3,974) Net (loss) gain on disposal of surplus assets (94) 24 Interest expense, net (3,708) (547) ——————- ——————- Income before income taxes and minority interest $ 9,245 $ 268 ============= ============= *T -0- *T GAAP to Non-GAAP Financial Measure Reconciliation ——————————————————————————————————— AVAILABLE CASH BEFORE RESERVES RECONCILIATION TO NET CASH FLOWS FROM OPERATING ACTIVITIES Three Months Ended June 30, 2008 —————————- (in thousands) Net cash flows from operating activities (GAAP measure) $ 5,313 Adjustments to reconcile net cash flow provided by operating activities to Available Cash before reserves: Maintenance capital expenditures (208) Proceeds from asset sales 181 Amortization of credit facility issuance costs (267) Effects of available cash generated by investments in joint ventures not included in cash flows from operating activities 329 Available cash from NEJD pipeline not yet received and included in cash flows from operating activities 1,722 Net effect of changes in operating accounts not included in calculation of Available Cash 19,115 —————————- Available Cash before reserves (Non-GAAP measure) $ 26,185 =================== *T

This press release and the accompanying schedules include a non-generally accepted accounting principle ("non-GAAP") financial measures of available cash. The accompanying schedule provides a reconciliation of this non-GAAP financial measure to its most directly comparable financial measure calculated in accordance with generally accepted accounting principles in the United States of America ("GAAP"). Our non-GAAP financial measure should not be considered as an alternative to GAAP measures of liquidity or financial performance. We believe that investors benefit from having access to the same financial measures being utilized by management, lenders, analysts and other market participants.

Available Cash. Available Cash before reserves is a liquidity measure used by management to compare cash flows generated by us to the cash distribution paid to our limited partners and general partner. This is an important financial measure to the public unitholders since it is an indicator of our ability to provide a cash return on their investment. Specifically, this financial measure aids investors in determining whether or not we are generating cash flows at a level that can support a quarterly cash distribution to the partners. Lastly, Available Cash before reserves (also referred to as distributable cash flow) is a quantitative standard used throughout the investment community with respect to publicly-traded partnerships.

We define available cash as net income or loss plus: (1) depreciation and amortization expense; (2) cash proceeds from the sale of certain assets; (3) the addition of losses or subtraction of gains relating to the sale of assets; (4) payments under direct financing leases in excess of the amount recognized as income; (5) the addition of losses or subtraction of gains on derivative financial instruments; (6) available cash generated by equity method investments; (7) the subtraction of maintenance capital expenditures incurred to replace or enhance partially or fully depreciated assets so as to sustain the existing operating capacity or efficiency of our assets and extend their useful lives; and (8) the addition of losses or subtraction of gains relating to other non-cash amounts affecting net income for the period.

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