Calumet Specialty Products Partners, L.P. last Wednesday reported a net loss for the second quarter ended June 30, 2014 of $8.3 million, compared to net income of $7.8 million in the second quarter 2013. Second quarter 2014 results include $23.6 million in non-cash unrealized derivative gains, compared to $4.0 million non-cash unrealized derivative losses in the prior year period.
Calumet generated Adjusted EBITDA of $39.3 million during the second quarter 2014 versus $70.0 million in the prior-year period. During the second quarter 2014, both the Fuel Products and Specialty Products segments were impacted by a 30-day plant-wide turnaround at the Partnership's 60,000 barrels per day Shreveport, Louisiana refinery. This extended turnaround, together with a rapid escalation in crude oil prices during the second quarter, impacted refined product margins in the Fuel Products segment during the second quarter 2014. Within the Fuel Products segment, benchmark diesel and gasoline crack spreads declined on a year-over-year basis by 23% and 14%, respectively, when compared to the second quarter 2013.
"Our second quarter results were severely challenged by several factors, including approximately 30 days of extended, planned maintenance at our Shreveport refinery, in addition to less favorable fuels refining economics, when compared to the prior year period," stated Bill Grube, Vice Chairman and Chief Executive Officer. "The extended turnaround at Shreveport, which included multiple plant optimization and reliability improvement projects, reached completion in early June. We are currently operating the refinery at elevated rates during the third quarter 2014."
"On August 1, we completed the acquisition of substantially all the assets of privately-held Specialty Oilfield Solutions, Ltd. ("SOS"), a full service drilling fluids and solids control company," continued Grube. "We believe this transaction, together with our recent acquisition of Anchor Drilling Fluids ("Anchor"), positions Calumet as a leading independent supplier of products and services to some of the most active conventional and unconventional oil and natural gas resource plays in North America. This year, we expect both to generate favorable EBITDA growth, consistent with rates achieved in 2013."
"Calumet has a long history of achieving growth through innovation," continued Grube. "To that end, we recently announced our investment as a joint venture partner in the construction of an 1,100 bpd commercial gas-to-liquids ("GTL") plant located in Lake Charles, Louisiana," continued Grube. "We believe this facility, which is expected to reach completion by year-end 2015, positions Calumet as an early adopter of advanced technology capable of converting lower cost natural gas into higher margin liquids. Importantly, we expect yields from this plant will result in premium quality, high margin products, including waxes and diesel."
"We are pleased with the continued integration of Royal Purple, Quantum and Bel-Ray synthetic lubricant brands into our portfolio of branded and packaged products," continued Grube. "Our expanded product offering, coupled with our growing global product distribution capabilities, position this product line as a key growth engine for the Partnership in the years ahead."
On June 2, 2014, it was announced that Calumet had earned a position as No. 467 on the 2014 FORTUNE 500 list of largest U.S. companies. According to FORTUNE magazine, Calumet is currently among the largest U.S. companies, based on total annual sales. In 2013, Calumet ranked as No. 514 on the FORTUNE 1000 list. Calumet's total sales exceeded $5.0 billion for the first time in 2013, an increase of more than 16% from 2012.
On June 9, 2014, Calumet announced its investment as a joint venture partner with Juniper GTL in the construction of a commercial gas-to-liquids plant that is expected to produce 1,100 bpd of refined products, including waxes, drilling fluids, diesel and naphtha, from natural gas. The Lake Charles, Louisiana plant will be owned and operated by Juniper GTL LLC, a company also co-owned by SGC Energia and Great Northern Project Development and will be funded through a combination of equity and senior secured debt.
Beginning in 2013, the Partnership initiated a series of organic growth projects, the last of which is expected to be completed by the first quarter 2016. Collectively, these projects are estimated to cost approximately $600 million and are expected to return approximately $200 million in annualized Adjusted EBITDA upon completion. As of June 30, 2014, Calumet had invested over $200 million in these growth related capital projects.
Calumet continues to make progress on a project that is expected to double esters production capacity at its Missouri esters plant from 35 million to 75 million pounds per year. Esters are a key base stock used in the aviation, refrigeration and automotive lubricants markets. The Partnership anticipates completion of the project during the second quarter 2015. The estimated total cost of the expansion project is approximately $40 million.
