USD Partners Announces Acquisition of Crude Oil Destination Terminal in Stroud, Oklahoma, and New Commercial Agreements

HOUSTON–(BUSINESS WIRE)–USD Partners LP (NYSE:USDP) (the “Partnership”) announced today its
acquisition of a crude oil terminal in Stroud, Oklahoma, (the “Stroud
terminal”) to facilitate rail-to-pipeline shipments of crude oil from
the Partnership’s Hardisty terminal in Western Canada to the Cushing,
Oklahoma, crude oil hub (the “Cushing hub”). As part of the transaction,
the Partnership has extended the term of take-or-pay terminalling
services agreements related to 25% of the Hardisty terminal’s available
capacity by approximately one year.

Concurrent with the acquisition, the Partnership entered into a new
multi-year, take-or-pay terminalling services agreement with an
investment grade rated, multi-national energy company (the “Stroud
customer”) for the use of approximately 50% of the Stroud terminal’s
available capacity. The term of this agreement is scheduled to begin on
October 1, 2017, and to conclude on June 30, 2020.

The all-in $25.0 million purchase price represents approximately 2.5x
the estimated 2018 Adjusted EBITDA to be generated by the 33-month
take-or-pay contract with the Stroud customer and includes approximately
$2.2 million of one-time costs and anticipated growth capital
expenditures to retrofit the Stroud terminal to handle heavy grades of
Canadian crude oil. The transaction is expected to be accretive to the
Partnership’s 2018 and 2019 distributable cash flow per limited partner
unit. The Partnership funded the transaction with available capacity on
its revolving credit facility.

“We are proud to announce the successful repositioning of an
underutilized asset to create a competitive network solution for our new
customer’s growing oil sands production,” said Dan Borgen, the
Partnership’s Chief Executive Officer. “Our Hardisty to Stroud rail
solution delivers immediate takeaway capacity, preserves the integrity
of our customer’s heavy barrels and enables substantial end market
optionality at Cushing with available pipeline capacity to the Gulf
Coast.”

“This transaction reinforces the strategic positioning of our Hardisty
asset and confirms our long-held view that rail will continue as an
important component of midstream transportation infrastructure in
Western Canada,” said Jim Albertson, Vice President, Commercial
Development – Canada. “We expect the pairing of the Stroud destination
terminal with our advantaged origination terminals will drive additional
commercial opportunities, particularly as we approach another cycle
where growing crude oil production from Western Canada will exceed
available takeaway capacity.”

The Stroud terminal is located on 76-acres and includes 104 railcar
spots with the ability to unload one unit train per day, two 70,000
barrel onsite storage tanks and one truck bay. Additionally, the
terminal includes a 12-inch diameter, 17-mile pipeline directly
connected to the Cushing hub. Inbound product is delivered by the
Stillwater Central Rail, which handles deliveries from both the BNSF and
the Union Pacific railways. The Partnership also obtained a lease for
300,000 barrels of crude oil tank storage at the Cushing hub to receive
outbound shipments of crude oil from the Stroud terminal.

To facilitate the origination of barrels from the Partnership’s Hardisty
terminal, USD Marketing LLC (“USDM”), a wholly-owned subsidiary of USD
Group LLC (“USDG”), assumed the terminalling services agreement the
Partnership previously had with J. Aron & Company at the Hardisty
terminal and entered into an agreement with the Stroud customer to
provide access to the combined monthly loading slots previously held by
both USDM and J. Aron. Additionally, the contracted term for this
capacity has been extended to June 30, 2020.

In exchange for contributing its Hardisty rail slots to facilitate the
origination of barrels for the Stroud customer, the Partnership granted
USDM the right to market the remaining capacity at the Stroud terminal
in exchange for a per barrel marketing fee. USDM will fund any related
capital costs associated with increasing the throughput or efficiency of
the terminal to handle additional barrels. Management anticipates that
the fees from USDM for any incremental barrels will be accretive to the
Partnership’s cash flows from operating activities and distributable
cash flow. Upon expiration of the Stroud customer’s contract in June
2020, the same marketing rights will apply to throughput in excess of
the throughput necessary for the Stroud terminal to generate Adjusted
EBITDA that is at least equal to the average monthly Adjusted EBITDA
from the Stroud customer during the 12 months prior to expiration. The
Partnership also granted USDG the right to develop other projects at the
Stroud terminal in exchange for the payment of market compensation for
the use of the Partnership’s property for such development projects. Any
such development projects would be wholly-owned by USDG and would be
subject to the Partnership’s right of first offer with respect to
midstream projects developed by USDG.

The Partnership has posted a presentation on its website with additional
information regarding its acquisition of the Stroud terminal. The
presentation can be accessed from the Partnership’s website at http://investor.usdpartners.com/events-and-presentations.

About USD Partners LP

USD Partners LP is a fee-based, growth-oriented master limited
partnership formed in 2014 by US Development Group LLC to acquire,
develop and operate energy-related logistics assets, including rail
terminals and other high-quality and complementary midstream
infrastructure. The Partnership’s assets consist primarily of: (i) a
crude oil origination terminal in Hardisty, Alberta, Canada, with
capacity to load up to two 120-railcar unit trains per day, (ii) a crude
oil terminal in Casper, Wyoming, with unit train-capable railcar loading
capacity in excess of 100,000 barrels per day and six customer-dedicated
storage tanks with 900,000 barrels of total capacity and (iii) a unit
train-capable ethanol destination rail terminal in West Colton,
California. In addition, the Partnership provides railcar services
through the management of a railcar fleet that is committed to customers
on a long-term basis.

Cautionary Note Regarding Forward-Looking Statements

This press release contains forward-looking statements within the
meaning of U.S. federal securities laws, including statements with
respect to the acquisition of the Stroud terminal and its impact on our
cash flows and Adjusted EBITDA, the growth and sustainability of
Canadian crude oil production relative to takeaway capacity, our ability
to grow business at the Stroud terminal, the creditworthiness of our
customers and their ability to pay, and the ability of our network of
terminals to drive additional commercial opportunities. Words and
phrases such as “is expected,” “is planned,” “believes,” “projects,” and
similar expressions are used to identify such forward-looking
statements. However, the absence of these words does not mean that a
statement is not forward-looking. Forward-looking statements relating to
the Partnership are based on management’s expectations, estimates and
projections about the Partnership, its interests and the energy industry
in general on the date this press release was issued. These statements
are not guarantees of future performance and involve certain risks,
uncertainties and assumptions that are difficult to predict. Therefore,
actual outcomes and results may differ materially from what is expressed
or forecast in such forward-looking statements. Factors that could cause
actual results or events to differ materially from those described in
the forward-looking statements include those as set forth under the
heading “Risk Factors” in the Partnership’s most recent Annual Report on
Form 10-K and in our subsequent filings with the Securities and Exchange
Commission. The Partnership is under no obligation (and expressly
disclaims any such obligation) to update or alter its forward-looking
statements, whether as a result of new information, future events or
otherwise.

Contacts

USD Partners LP
Adam Altsuler, 281-291-3995
Vice President and
Chief Financial Officer
or
Ashley Means Zavala, 281-291-3965
Director,
Finance & Investor Relations