Sprague Resources Expands Terminal Capacity in Rhode Island, Connecticut, Builds on Major Acquisitions

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Researched by Industrial Info Resources (Sugar Land, Texas)--Sprague Resources LP (NYSE:SRLP) (Portsmouth, New Hampshire), a master limited partnership that trades, stores and distributes refined petroleum products and natural gas on the Eastern Seaboard, continued to expand its bulk terminal capacity in the U.S. Northeast, despite steep costs in second-quarter 2014 that eroded some of the company's acquisition-related gains. The company reported net losses of $9.49 million, compared with losses of $2.04 million in second-quarter 2013.

Sprague executives noted in a quarterly conference call that the results better reflected the company's operational performance when excluding interest expenses, tax benefits and expenses, depreciation, amortization, and gains and losses on commodity derivatives. Using this measurement, called "adjusted EBITDA," the company saw income of $3.53 million during the quarter, although it saw higher profits of $8.07 million in second-quarter 2013.

As part of its North American Oil & Gas Terminals Project Database, Industrial Info is tracking $5 million in tank inspection and upgrade projects at Sprague terminals. These include projects that are scheduled to kick off next year at petroleum products terminals in Newington, New Hampshire; Quincy, Massachusetts; Everett, Massachusetts; and Portsmouth, New Hampshire.

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Total net sales were reported to be $846.77 million, a 9.57% increase from the same period last year. The Refined Products segment reported a jump in sales volumes, particularly diesel, following Sprague's acquisition of Hess Corporation's (NYSE:HES) (New York, New York) commercial fuels businesses late last year. However, overall volumes and margins in the segment were diminished by several Northeastern states' transition to lower-sulfur heating oil. The Natural Gas segment saw a decline in volumes that was attributed to cooler-than-expected weather.

The Materials Handling segment gave Sprague a slight boost, with higher revenue from salt shipments, stronger demand for windmill components and higher fees for liquid bulk storage.

"The majority of the higher operating expenses were attributable to our Bridgeport terminal [in Connecticut], which was acquired in the third quarter of 2013 [from Motiva Enterprises LLC]," said Gary Rinaldi, the senior vice president, chief financial officer and chief operating officer of Sprague, in a conference call. "The balance of the operating expense increase was due to higher terminal maintenance and utility expenses, partially offset by lower costs related to bulk-handling activities in our Materials Handling businesses, due to vessel timing differences."

View Plant Profile - 1045116

Sprague executives continue to expect full-year adjusted EBITDA to total between $70 million and $80 million. Full-year maintenance capital expenditures are expected to total between $6.5 million and $7 million.

"Sprague's refined products team continued to strengthen its position in key markets in the second quarter by signing a multiple-year, exclusive terminal operating agreement with Dunellen Incorporated for over 1 million barrels of distillate storage at its Capital Terminal in East Providence, Rhode Island," said David Glendon, the president and chief executive officer of Sprague, in the conference call. "This agreement extends Sprague's marketing presence to both sides of Providence Harbor and allows our team to capitalize on one of the region's largest and most convenient terminal assets.

"On July 2, Sprague signed another multi-year, exclusive terminal operating agreement in the New Haven, Connecticut, market with New Haven Terminal Incorporated for 700,000 barrels of distillate petroleum storage. Together, these facilities extend our Northeast network of proprietary terminals, and position us to capture additional volume."

This was Sprague's second quarter as a publicly traded company. In late October, Sprague Resources sold off a significant portion of the company to the public. Earlier, Sprague's results had included those of Kildair, a Canadian business that is no longer counted as part of Sprague's assets or operations. Sprague remains largely controlled by Axel Johnson Group (Stockholm, Sweden).

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.