News Column

Dakota Plains Holdings, Inc. Reports First Quarter 2014 Financial Results

May 9, 2014

Expanded Pioneer Terminal Positions Company for Growth

WAYZATA, Minn.--(BUSINESS WIRE)-- Dakota Plains Holdings, Inc. (“Dakota Plains” and “DAKP”), (OTCQB:DAKP) today announced financial results for the three months ended March 31, 2014.

Operational Summary

  • Transloading joint venture averaged over 31,000 bopd for the first quarter 2014, up from the 2013 average of 24,000 bopd.
  • Dakota Plains began transloading crude oil for third parties, including Continental Resources and Bridger.
  • First quarter transloading joint venture volumes were 2.8 million barrels of oil, an increase of approximately 26% sequentially and 17% compared to the same period in 2013.
  • First quarter marketing joint venture volumes were 2.2 million barrels of oil, a decrease of 7% sequentially and 15% compared to the same period in 2013.
  • First quarter trucking joint venture volumes were 1.6 million barrels of oil, a decrease of 7% sequentially and an increase of 52% compared to the same period in 2013.
  • The Company continued executing on its agreement with UNIMIN Corporation (“UNIMIN”), which began moving sand at the New Town Pioneer Terminal in February 2014 with permanent operations expected to begin in June 2014. In addition, UNIMIN increased its sand storage from 8,000 to 10,000 tons.
  • The Company purchased steel for a third crude oil storage tank at the Pioneer Terminal, which would enable a sustained daily throughput increase of 30,000 bopd to 80,000 bopd. The Company is seeking partner approval to begin construction.

    Financial Summary

  • Dakota Plains began consolidating all financial statements for the transloading joint venture in the first quarter of 2014.
  • Net loss for the first quarter was $1.3 million compared to net income of $0.6 million for the same period in 2013.
  • Adjusted consolidated EBITDA for the quarter was $0.3 million compared to $2.4 million for the first quarter of 2013.
  • Revenue from the transloading joint venture was $5.5 million for the first quarter 2014, compared to $4.9 million for the same period in 2013.1
  • Net income from the transloading joint venture was $1.8 million for the first quarter 2014, compared to $2.6 million for the same period in 2013.
  • Income from the Company’s indirect investment in the marketing joint venture was $87,000 for the first quarter 2014, compared to $1.8 million for the same period in 2013.
  • Income from the Company’s indirect investment in the trucking joint venture was $121,000 for the first quarter 2014, compared to $62,000 for the same period in 2013.

    Craig M. McKenzie, Chairman and Chief Executive Officer of Dakota Plains, said: “We continued our transition in the first quarter. The newly-expanded Pioneer Terminal commenced operations in January, and we have seen steady growth in transloading throughput and efficiency. We are experiencing increased demand for third party volumes, and Pioneer is living up to our expectations. We remain confident that we will be able to deliver our average daily throughput target of 45,000 bopd.”

    McKenzie continued, “We will execute our strategy to grow Pioneer, build out our inbound businesses, improve our balance sheet, and continue our transition to becoming an operating company. Transloading is on the right track and gaining momentum, however we continue to be disappointed with the performance of our marketing and trucking joint ventures. We are working closely with our joint venture partners to improve the profitability and predictability of these businesses.”

    First Quarter 2014 Financial Results

    The Company reported a net loss of $1.3 million for the first quarter 2014, compared to net income of $0.6 million for the first quarter of 2013. The net loss for the first quarter of 2014 was driven by a decrease in the income of the Company’s indirect ownership interest in the marketing joint venture, primarily due to a lower per barrel margin as a result of the significant narrowing of the price spread between Brent and WTI experienced in the last two months of the quarter. In addition, income from the Company’s indirect ownership in the transloading joint venture was lower, primarily the result of a higher depreciation expense, as a majority of the Pioneer Project was placed into service at the end of 2013.

    Adjusted consolidated EBITDA for the quarter was $0.3 million compared to $2.4 million for the first quarter of 2013. The difference was primarily the result of reduced income from the Company’s indirect investment in DPTS Marketing, LLC and the increase in professional fees.

    General and administrative expenses were $3.0 million for the three months ended March 31, 2014, compared to $1.4 million for the three months ended March 31, 2013. The $1.0 million increase (note: $0.5 million of the $3.0 million general and administrative expenses relate to the consolidation of transloading joint venture in 2014) was primarily due to non-cash expense related to employee share issuances and an increase in professional fees.

    Revenue from the transloading joint venture was $5.5 million for the three months ended March 31, 2014, compared to $4.9 million for the three months ended March 31, 2013.2 The increase was driven by higher volume, as first quarter 2014 volume was 2.8 million barrels of oil compared to 2.4 million barrels of oil for the first quarter of 2013, a 17% increase.

    Net income from the transloading joint venture was $1.8 million for the three months ended March 31, 2014 compared to $2.6 million for the three months ended March 31, 2013. The decrease was primarily driven by the $1.0 million non-cash impact related to depreciation of the Pioneer terminal, as a majority of assets were placed into service at the end of 2013. Cost of revenue was also higher due to the increased volume and employee expenses associated with the terminal manager, which Dakota Plains hired in September 2013.

    Income from the Company’s indirect investment in the marketing joint venture was $87,000 for the three months ended March 31, 2014, compared to $1.8 million for the three months ended March 31, 2013. The reduction in income was due to a 15% decrease in volume, as first quarter 2014 volume was 2.2 million barrels of crude oil compared to 2.6 million barrels of crude oil for the first quarter of 2013, and lower margins per barrel.

    Income from Dakota Plains’ indirect investment in the trucking joint venture was $121,000 for the three months ended March 31, 2014, compared to $62,000 for the three months ended March 31, 2013. The trucking joint venture hauled 1.6 million barrels of crude oil in the first quarter of 2014 compared to 1.1 million barrels of crude oil hauled for the first quarter of 2013, a 52% increase. The trucking joint venture increased its trucking fleet to 27 trucks at March 31, 2014 compared to 14 trucks at March 31, 2013.

    Adjusted EBITDA

    Adjusted EBITDA is a non-GAAP measure. A reconciliation of this measure to its most directly comparable GAAP measure is included in the accompanying financial tables found later in this release. Management believes the use of this non-GAAP financial measure provides useful information to investors to gain an overall understanding of current financial performance. Specifically, management believes the non-GAAP results included herein provide useful information to both management and investors by excluding certain expenses and gains and losses on the extinguishment of debt that management believes are not indicative of Dakota Plains’ core operating results. In addition, this non-GAAP financial measure is used by management for budgeting and forecasting as well as subsequently measuring Dakota Plains’ performance, and management believes it is providing investors with a financial measure that most closely aligns to its internal measurement processes.

    About Dakota Plains Holdings, Inc.

    Dakota Plains Holdings, Inc. is an integrated midstream energy company, which competes through its 50/50 joint ventures to provide customers with crude oil off take services that include marketing, transloading and trucking of crude oil and related products. Direct and indirect assets include a proprietary trucking fleet, over 1000 railroad tank cars, and the Pioneer Terminal transloading facility centrally located in Mountrail County, North Dakota, for Bakken and Three Forks related Energy & Production activity. For more information please visit the corporate website at: www.dakotaplains.com.

    Cautionary Note Regarding Forward Looking Statements

    This announcement contains forward-looking statements that reflect the current views of Dakota Plains, including, but not limited to, statements regarding our future growth and plans for our business and operations. We do not undertake to update our forward-looking statements. These statements involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of lack of diversification, dependency upon strategic relationships, dependency on a limited number of major customers, competition for the loading, marketing and transporting of crude oil and related products, difficulty in obtaining additional capital that will be needed to implement business plans, difficulties in attracting and retaining talented personnel, risks associated with building and operating a transloading facility, changes in commodity prices and the demand for crude oil and natural gas, competition from other energy sources, inability to obtain necessary facilities, difficulty in obtaining crude oil to transport, increases in our operating expenses, an economic downturn or change in government policy that negatively impacts demand for our services, penalties we may incur, costs imposed by environmental laws and regulations, inability to obtain or maintain necessary licenses, challenges to our properties, technological unavailability or obsolescence, and future acts of terrorism or war, as well as the threat of war and other factors described from time to time in the company’s reports filed with the U.S. Securities and Exchange Commission.

     

    DAKOTA PLAINS HOLDINGS, INC. AND SUBSIDIARIES

    UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

    AS OF MARCH 31, 2014 AND DECEMBER 31, 2013

     
    ASSETS
      March 31,     December 31,
    20142013
    CURRENT ASSETS
    Cash and Cash Equivalents $ 8,122,345 $ 13,011,608
    Trade Receivables 856,273 -
    Income Tax Receivable 1,120,057 1,120,057
    Other Current Assets 592,164 542,523
    Due from Related Party 1,451,310 2,840,292
    Other Receivables 171,752 68,896
    Deferred Tax Asset   3,648,000     3,728,000  
    Total Current Assets   15,961,901     21,311,376  
     
    PROPERTY AND EQUIPMENT
    Land 3,166,849 3,166,849
    Site Development 5,808,781 5,498,501
    Terminal 20,211,177 19,813,452
    Machinery 17,721,691 12,702,655
    Construction in Progress 70,312 7,551,187
    Other Property and Equipment   11,201,223     6,747,349  
    Total Property and Equipment 58,180,033 55,479,993
    Less - Accumulated Depreciation   2,845,474     1,810,259  
    Total Property and Equipment, Net 55,334,559 53,669,734
     
    PREFERRED DIVIDEND RECEIVABLE 375,345 252,057
     
    INVESTMENT IN DPTS MARKETING LLC 11,422,180 11,458,836
     
    INVESTMENT IN DAKOTA PLAINS SERVICES, LLC 191,853 70,399
     
    FINANCE COSTS, NET 104,580 123,280
     
    DEFERRED TAX ASSET 756,000 153,000
     
    OTHER ASSETS   15,902     15,902  
     
    $ 84,162,320   $ 87,054,584  
    LIABILITIES AND STOCKHOLDERS' EQUITY
    CURRENT LIABILITIES
    Accounts Payable $ 6,698,226 $ 8,286,489
    Accrued Expenses 207,265 1,547,645
    Accounts Payable-Related Parties   8,694     722  
    Total Current Liabilities   6,914,185     9,834,856  
     
    LONG-TERM LIABILITIES
    Promissory Notes, Net of Debt Discount 7,163,740 7,076,332
    Promissory Note, Pioneer Terminal 7,500,000 7,500,000
    Other Non-Current Liabilities   15,167     16,917  
    Total Long-Term Liabilities   14,678,907     14,593,249  
     
    Total Liabilities   21,593,092     24,428,105  
    STOCKHOLDERS' EQUITY
    Preferred Stock - Par Value $.001; 10,000,000 Shares Authorized; None Issued or Outstanding - -
    Common Stock - Par Value $.001; 100,000,000 Shares Authorized; 54,770,351 and 54,206,380 Issued and Outstanding, Respectively 54,770 54,206
    Additional Paid-In Capital 44,218,721 43,836,032
    Accumulated Deficit   (8,173,088 )   (6,836,825 )
    Total Equity Dakota Plains Holdings, Inc. 36,100,403 37,053,413
    Non-Controlling Interest in Subsidiary   26,468,825     25,573,066  
    Total Stockholders' Equity   62,569,228     62,626,479  
     
    Total Liabilities and Stockholders' Equity $ 84,162,320   $ 87,054,584  
     
     

    DAKOTA PLAINS HOLDINGS, INC. AND SUBSIDIARIES

    UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

    FOR THE THREE MONTHS ENDED MARCH 31, 2014 AND 2013

     
      Three Months Ended
    March 31,
    2014     2013
    REVENUES
    Transloading Revenue $ 5,455,458 $ -
    Rental Income   30,000     95,199  
    Total Revenues 5,485,458 95,199
     
    COST OF REVENUE   2,098,699     -  
     
    Gross Profit   3,386,759     95,199  
     
    OPERATING EXPENSES
    General and Administrative Expenses 3,017,778 1,444,391
    Depreciation and Amortization   1,035,215     40,984  
    Total Operating Expenses   4,052,993     1,485,375  
     
    LOSS FROM OPERATIONS   (666,234 )   (1,390,176 )
     
    OTHER INCOME (EXPENSE)
    Income from Investment in Dakota Petroleum Transport Solutions, LLC - 1,414,260
    Income from Investment in DPTS Marketing LLC 86,632 1,766,563
    Income from Investment in Dakota Plains Services, LLC 121,454 62,055
    Interest Expense (Net of Interest Income)   (502,136 )   (890,805 )
    Total Other Income (Expense), net   (294,050 )   2,352,073  
     
    INCOME (LOSS) BEFORE TAXES (960,284 ) 961,897
     
    INCOME TAX PROVISION (BENEFIT)   (514,885 )   373,000  
     
    NET INCOME (LOSS) (445,399 ) 588,897
     
    NET INCOME ATTRIBUTABLE TO NON-CONTROLLING INTERESTS   890,864     -  
     
    NET INCOME (LOSS) ATTRIBUTABLE TO SHAREHOLDERS OF DAKOTA PLAINS HOLDINGS, INC. $ (1,336,263 ) $ 588,897  
     
    Net Income (Loss) Per Common Share – Basic and Diluted $ (0.02 ) $ 0.01  
     
    Weighted Average Shares Outstanding - Basic   53,598,684     41,418,606  
     
    Weighted Average Shares Outstanding - Diluted   53,598,684     42,827,077  
     
     

    DAKOTA PLAINS HOLDINGS, INC. AND SUBSIDIARIES

    UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

    FOR THE THREE MONTHS ENDED MARCH 31, 2014 AND 2013

     
        Three Months Ended

     

    March 31,
    2014     2013
    CASH FLOWS FROM OPERATING ACTIVITIES
    Net Income (Loss) $ (445,399 ) $ 588,897
    Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by (Used in) Operating Activities
    Depreciation and Amortization 1,035,215 40,984
    Amortization of Debt Discount 87,408 87,408
    Amortization of Finance Costs 18,700 16,255
    Deferred Income Taxes (523,000 ) 257,000
    Share-Based Consulting Fees - 130,769
    Decrease in Deferred Rental Income - (21,273 )
    Income from Investment in Dakota Petroleum Transport Solutions, LLC - (1,414,260 )
    Income from Investment in DPTS Marketing LLC (86,632 ) (1,766,563 )
    Income from Investment in Dakota Plains Services, LLC (121,454 ) (62,055 )
    Non-Cash Rental Income - (3,875 )
    Non-Cash Rental Expense 4,895 -
    Amortization of Deferred Rent (1,750 ) -
    Share-Based Compensation 1,128,932 420,890
    Changes in Working Capital and Other Items
    Increase in Trade Receivables (856,273 ) -
    Increase in Income Taxes Receivable - (42,883 )
    Increase in Other Receivables (102,856 ) -
    Increase in Other Current Assets (49,641 ) (201,105 )
    Decrease in Due from Related Party 1,388,982 19,433
    Increase in Accounts Payable 421,134 362,361
    Increase in Income Taxes Payable - 21,546
    Increase (Decrease) in Accrued Expenses (1,440,380 ) 82,000
    Decrease in Deferred Rental Income - (176,662 )
    Increase in Accounts Payable-Related Party 7,972 -
    Increase in Other Assets   -     (894 )
    Net Cash Provided By (Used In) Operating Activities   465,853     (1,662,027 )
     
    CASH FLOWS FROM INVESTING ACTIVITIES
    Purchases of Property and Equipment (4,709,437 ) (67,482 )
    Cash Received from Dakota Petroleum Transport Solutions, LLC   -     47,822  
    Net Cash Used In Investing Activities (4,709,437 ) (19,660 )
     
    CASH FLOWS USED IN FINANCING ACTIVITIES
    Common Shares Surrendered   (645,679 )   -  
     
    NET DECREASE IN CASH AND CASH EQUIVALENTS (4,889,263 ) (1,681,687 )
     
    CASH AND CASH EQUIVALENTS – BEGINNING OF PERIOD   13,011,608     2,340,083  
     
    CASH AND CASH EQUIVALENTS – END OF PERIOD $ 8,122,345   $ 658,396  
     
    Supplemental Disclosure of Cash Flow Information
    Cash Paid During the Period for Interest $ 445,246   $ 787,225  
    Cash Paid During the Period for Income Taxes $ 8,115   $ 34,000  
     
    Non-Cash Financing and Investing Activities:
    Purchase of Property and Equipment Paid Subsequent to Period End $ 4,174,456   $ -  
    Change in Preferred Dividend Receivable $ 123,288   $ 121,918  
     


    1 Revenue from the transloading joint venture reflects consolidated revenue. 1Q 2013 revenue from the transloading joint venture is pro forma for consolidation.

    2 Revenue from the transloading joint venture reflects consolidated revenue. 1Q 2013 revenue from the transloading joint venture is pro forma for consolidation.



    For more information:

    Dakota Plains Holdings, Inc.

    Tim Brady, 952-473-9950

    CFO

    tbrady@dakotaplains.com

    www.dakotaplains.com

    or

    Investor and Media Contact

    Sard Verbinnen

    Dan Gagnier, 212-415-8972

    DGagnier@sardverb.com

    www.sardverb.com


    Source: Dakota Plains Holdings, Inc.


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