Dakota Plains Holdings, Inc. Reports Second Quarter 2015 Financial Results

WAYZATA, Minn.--()--Dakota Plains Holdings, Inc. (“Dakota Plains” or the “Company”) (NYSE MKT: DAKP) today announced financial results for the three months ended June 30, 2015.

Operational & Corporate Update Summary

  • The Company billed 3.3 million barrels of transloaded crude oil, a decrease of approximately 16% compared to second quarter of 2014.
  • Frac sand transloading volumes were 195,000 tons compared to 110,000 tons in the first quarter of 2015, a 78% increase. Frac sand transloading operations commenced late in the second quarter of 2014.
  • Construction of the third crude oil storage tank was completed on time and on budget and it was commissioned in early July, allowing for increased throughput.
  • The Company brought its crude oil and frac sand transloading operations in-house effective June 1, 2015 which will reduce operating costs.

Financial Summary

  • Adjusted EBITDA (a non-GAAP measure defined below) was $3.0 million compared to $(0.2) million for the second quarter of 2014.
  • The Company had a net loss of $550,000 compared to a net loss of $1.0 million for the second quarter of 2014.
  • Revenue from transloading crude oil was $5.8 million compared to $7.3 million for the second quarter of 2014.
  • Revenue from transloading frac sand was $1.6 million compared to $0.9 million in the first quarter 2015.

Craig M. McKenzie, Chief Executive Officer of Dakota Plains, said: “Despite a ‘bear market’ in crude oil, we achieved solid results. Our crude oil volumes were down, consistent with crude by rail market share in the Bakken, while our frac sand volumes are running well ahead of expectations. Bringing our Pioneer operations in-house reduces our operating costs, and positions us well in this competitive environment.”

Added McKenzie, “We believe that conditions are stabilizing. We have contracted 58,000 barrels per day for August, our highest monthly volume ever, and we are seeing renewed interest in multi-month contracts. Our recently completed crude oil storage expansion will allow further increases in volume. We remain confident that the progress we have made over the last two years positions us well for the future.”

Second Quarter 2015 Financial Results

Adjusted EBITDA for the quarter was $3.0 million compared to $(0.2) million for the second quarter of 2014. The difference was primarily driven by an increase in frac sand transloading volumes and fees associated with our crude oil transloading contracts. This was partially offset by the increase in transloading operating expenses as a result of assuming the entire cost associated with insuring the Pioneer Terminal facility.

The Company experienced a net loss of approximately $550,000 for the second quarter 2015, compared to a net loss of approximately $1.0 million for the second quarter 2014. The net loss for the second quarter of 2015 was driven by lower crude oil transloading volumes. The net loss for the second quarter of 2014 was driven by the loss from the Company’s indirect ownership interest in the subsequently discontinued marketing joint venture.

General and administrative expenses were $2.6 million for the second quarter compared to $1.9 million for the second quarter of 2014. The increase in general and administrative expenses was due to an increase in compensation expense associated with increased headcount and higher legal expenses.

Revenue from crude oil transloading was $5.8 million in the second quarter compared to $7.3 million for the second quarter of 2014. The decrease was driven by volume, as second quarter 2015 billed volume was 3.3 million barrels of crude oil transloaded compared to 3.9 million of barrels of crude oil for the second quarter of 2014, a 16% decrease. Cost of revenue in the second quarter of 2015 was $1.7 million compared to $1.8 million for the second quarter 2014 due to the decrease in volume. The Company expects to maintain a lower cost of revenue going forward as it realizes the cost savings from bringing the transloading of crude oil in house effective June 1, 2015.

Revenue from frac sand transloading was $1.6 million for second quarter compared to $0.2 million for the second quarter 2014. The increase in revenue was due to the fact that the frac sand transloading operations did not commence until June 2014. The Company transloaded 195,000 short tons of frac sand during the second quarter 2015, which was the highest quarterly throughput to date. The Company also successfully brought the frac sand transloading services in-house effective June 1, 2015.

For the second quarter, the Company incurred $0.8 million in expenses related to its inventory of tank cars that were assumed upon the dissolution of the joint ventures. The Company accounted for these expenses under Other Income (Expense) on its income statement as it does not consider the tank cars a core business. The $0.8 million was offset by $0.3 million in income reported related to the decrease in the operational override liability after adjusting for actual barrels of crude oil transloaded during the second quarter of 2015.

Interest expense was $2.0 million for the second quarter of 2015 compared to $0.5 million for the second quarter of 2014. The increase was primarily driven by the interest expense related to the operational override liability and the additional debt incurred for the acquisition of 50% of the outstanding interest of the transloading, frac sand, and marketing joint ventures in the fourth quarter of 2014.

Adjusted EBITDA

Adjusted EBITDA and adjusted EBITDA attributable to stockholders of Dakota Plains Holdings, Inc., 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 operating the Pioneer Terminal transloading facility. The Pioneer Terminal is 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.

Forward Looking Statements

Statements made by representatives of Dakota Plains in this press release that are not historical facts are forward-looking statements. These statements are based on certain assumptions and expectations made by the Company which reflect management’s experience, estimates and perception of historical trends, current conditions, anticipated future developments and other factors believed to be appropriate. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company, which may cause actual results to differ materially from those implied or anticipated in the forward-looking statements. These include risks relating to global economics or politics, our ability to obtain additional capital needed to implement our business plan, minimal operating history, loss of key personnel, lack of business diversification, reliance on strategic, third-party relationships, financial performance and results, prices and demand for oil, our ability to make acquisitions on economically acceptable terms, and other factors described from time to time in the Company’s periodic reports filed with the SEC that could cause actual results to differ materially from those anticipated or implied in the forward-looking statements. Dakota Plains undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information or future events.

DAKOTA PLAINS HOLDINGS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2015 AND DECEMBER 31, 2014
               
ASSETS
June 30, December 31,
2015 2014
CURRENT ASSETS
Cash and Cash Equivalents $ 5,221,381 $ 4,690,706
Trade Receivables, Net 6,959,661 3,268,386
Income Tax Receivable 14,803 14,803
Other Current Assets 656,256 99,776
Other Receivables 527,277 781,135
Deferred Tax Asset   912,000     2,266,000  
Total Current Assets   14,291,378     11,120,806  
 
PROPERTY AND EQUIPMENT
Land 3,191,521 3,191,521
Site Development 5,829,640 5,829,640
Terminal 21,505,220 21,383,972
Machinery 18,208,136 18,133,754
Construction in Progress 5,388,163 1,886,470
Other Property and Equipment   12,234,176     11,910,987  
Total Property and Equipment 66,356,856 62,336,344
Less - Accumulated Depreciation   8,391,499     6,143,159  
Total Property and Equipment, Net 57,965,357 56,193,185
 
FINANCE COSTS, NET 1,057,111 1,537,795
 
RESTRICTED CASH 3,000,293 3,000,000
 
DEFERRED TAX ASSET 28,327,000 26,762,000
 
OTHER ASSETS   542,902     512,901  
 
Total Assets $ 105,184,041   $ 99,126,687  
 
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts Payable $ 10,319,666 $ 7,387,612
Accrued Expenses 1,776,197 1,696,358
Promissory Notes, SunTrust 23,625,000 23,250,000
Operational Override Liability 646,702 715,497
Notes Payable - Vehicles   56,745     -  
Total Current Liabilities   36,424,310     33,049,467  
 
LONG-TERM LIABILITIES
Promissory Notes, SunTrust 27,500,000 25,250,000
Operational Override Liability 44,136,636 44,595,370
Notes Payable - Vehicles 198,688 -
Other Non-Current Liabilities   6,417     9,917  
Total Long-Term Liabilities   71,841,741     69,855,287  
Total Liabilities   108,266,051     102,904,754  
 
COMMITMENTS AND CONTINGENCIES (NOTE 12)
 
STOCKHOLDERS' DEFICIT
Preferred Stock - Par Value $.001; 10,000,000 Shares Authorized; None Issued or Outstanding - -
Common Stock, Par Value $.001; 100,000,000 Shares Authorized; 55,095,810
and 55,044,829 Issued and Outstanding, Respectively 55,095 55,044
Additional Paid-In Capital 7,330,751 6,267,788
Accumulated Deficit   (10,467,856 )   (10,100,899 )
Total Stockholders' Deficit   (3,082,010 )   (3,778,067 )
 
Total Liabilities and Stockholders' Deficit $ 105,184,041   $ 99,126,687  
DAKOTA PLAINS HOLDINGS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2015 AND 2014
                   
Three Months Ended Six Months Ended
June 30, June 30,
2015 2014 2015 2014
REVENUES
Transloading Revenue $ 5,804,272 $ 7,298,561 $ 14,283,533 $ 12,754,019
Sand Revenue 1,560,055 176,187 2,438,428 176,187
Rental Income 30,000 30,000 60,000 60,000
Other   1,316,700     -     1,316,700     -  
Total Revenues 8,711,027 7,504,748 18,098,661 12,990,206
 
COST OF REVENUES   2,075,834     1,757,462     4,290,496     3,856,161  
(exclusive of items shown separately below)
 
OPERATING EXPENSES
Transloading Operating Expenses 1,280,374 516,150 2,404,246 978,385
General and Administrative Expenses 2,625,458 1,939,107 4,544,647 4,494,650
Depreciation and Amortization   1,140,326     1,086,271     2,248,340     2,121,486  
Total Operating Expenses   5,046,158     3,541,528     9,197,233     7,594,521  
 
INCOME FROM OPERATIONS   1,589,035     2,205,758     4,610,932     1,539,524  
 
OTHER INCOME (EXPENSE)
Loss from Investment in DPTS Marketing LLC - (1,669,846 ) - (1,583,214 )
Income from Investment in Dakota Plains Services, LLC - 303,226 - 424,680
Interest Expense, Net of Interest Income (2,012,040 ) (504,244 ) (3,958,782 ) (1,006,380 )
Other Expense   (457,945 )   -     (1,222,607 )   -  
Total Other Income (Expense)   (2,469,985 )   (1,870,864 )   (5,181,389 )   (2,164,914 )
 
INCOME (LOSS) BEFORE TAXES (880,950 ) 334,894 (570,457 ) (625,390 )
 
INCOME TAX BENEFIT   (331,000 )   (647,000 )   (203,500 )   (1,161,885 )
 
NET INCOME (LOSS) (549,950 ) 981,894 (366,957 ) 536,495
 
NET INCOME ATTRIBUTABLE TO NON-CONTROLLING INTERESTS   -     2,018,943     -     2,909,807  
 
NET LOSS ATTRIBUTABLE TO SHAREHOLDERS
OF DAKOTA PLAINS HOLDINGS, INC. $ (549,950 ) $ (1,037,049 ) $ (366,957 ) $ (2,373,312 )
 
Net Loss Per Common Share – Basic and Diluted $ (0.01 ) $ (0.02 ) $ (0.01 ) $ (0.04 )
 
Weighted Average Shares Outstanding - Basic and Diluted   54,184,792     53,781,435     54,135,531     53,690,564  
DAKOTA PLAINS HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2015 AND 2014
               
Six Months Ended
June 30,
2015 2014
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $ (366,957 ) $ 536,495
Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by (Used in) Operating Activities:
Depreciation and Amortization 2,248,340 2,121,486
Amortization of Debt Discount - 174,813
Amortization of Finance Costs 480,684 36,586
Deferred Income Taxes (211,000 ) (1,170,000 )
Loss from Investment in DPTS Marketing LLC - 1,583,214
Income from Investment in Dakota Plains Services, LLC - (424,680 )
Non-Cash Rental Expense - 9,790
Amortization of Deferred Rent (3,500 ) (3,500 )
Share-Based Compensation 1,259,951 1,504,293
Changes in Working Capital and Other Items
Increase in Trade Receivables (3,691,275 ) (1,321,269 )
Decrease (Increase) in Other Receivables 253,858 (116,775 )
Decrease (Increase) in Other Current Assets (406,481 ) 153,068
Decrease in Due from Related Party - 1,514,475
Increase in Accounts Payable 428,160 122,509
Decrease in Accrued Expenses (46,048 ) (1,317,679 )
Decrease in Accounts Payable - Related Party - (722 )
Increase in Restricted Cash (293 ) -
Decrease in Operational Override Liability (481,011 ) -
Decrease in Other Assets   -     1,802  
Net Cash Provided By (Used In) Operating Activities   (535,572 )   3,403,906  
 
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of Property and Equipment (1,516,618 ) (8,481,863 )
Cash Paid for Deposits   (30,000 )   -  
Net Cash Used In Investing Activities   (1,546,618 )   (8,481,863 )
 
CASH FLOWS FROM FINANCING ACTIVITIES
Commons Shares Surrendered (221,050 ) (645,679 )
Principal Payments on Promissory Note, Pioneer Terminal - (287,703 )
Cash Distributions Paid to Non-Controlling Interests - (1,954,941 )
Advances on Promissory Notes, SunTrust 3,000,000 -
Payments on Promissory Notes, SunTrust (375,000 ) -
Proceeds from Notes Payable - Vehicles 270,165 -
Payments on Notes Payable - Vehicles (14,732 ) -
Payment on Operational Override Liability   (46,518 )   -  
Net Cash Provided By (Used In) Financing Activities   2,612,865     (2,888,323 )
 
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 530,675 (7,966,280 )
 
CASH AND CASH EQUIVALENTS – BEGINNING OF PERIOD   4,690,706     13,011,608  
 
CASH AND CASH EQUIVALENTS – END OF PERIOD $ 5,221,381   $ 5,045,328  
 
Supplemental Disclosure of Cash Flow Information
Cash Paid During the Period for Interest $ 2,681,241   $ 866,041  
Cash Paid During the Period for Income Taxes $ 7,500   $ 8,115  
 
Non-Cash Financing and Investing Activities:
Purchase of Property and Equipment Paid Subsequent to Period End $ 3,258,527   $ 1,382,639  
Change in Preferred Dividend Receivable $ -   $ 247,942  
Non-GAAP Financial Measures
Dakota Plains Holdings, Inc.
Reconciliation of Adjusted EBITDA
       
Three Months Ended Six Months Ended
June 30, June 30,
2015 2014 2015 2014
Net Income (Loss) $ (549,950 ) $ 981,894 $ (366,957 ) $ 536,495
Add Back:
Income Tax Benefit (331,000 ) (647,000 ) (203,500 ) (1,161,885 )
Depreciation and Amortization 1,140,326 1,086,271 2,248,340 2,121,486
Share-Based Compensation 750,420 375,361 1,259,951 1,504,293
Interest Expense   2,012,040     504,244     3,958,782     1,006,380  
Adjusted EBITDA $ 3,021,836   $ 2,300,770   $ 6,896,616   $ 4,006,769  
 
Adjusted EBITDA Attributable to Non-Controlling

Interests

      2,537,723         3,922,140  
 
Adjusted EBITDA Attributable to Shareholders

of Dakota Plains Holdings, Inc.

$ 3,021,836   $ (236,953 ) $ 6,896,616   $ 84,629  

Contacts

Company:
Dakota Plains Holdings, Inc.
Tim Brady, CFO, 952.473.9950
tbrady@dakotaplains.com
www.dakotaplains.com
or
Investor and Media:
Sard Verbinnen
Dan Gagnier, 212.415.8972
DGagnier@sardverb.com
www.sardverb.com

Contacts

Company:
Dakota Plains Holdings, Inc.
Tim Brady, CFO, 952.473.9950
tbrady@dakotaplains.com
www.dakotaplains.com
or
Investor and Media:
Sard Verbinnen
Dan Gagnier, 212.415.8972
DGagnier@sardverb.com
www.sardverb.com