Southcross Energy Partners, L.P. Reports First Quarter Results
Source: Nasdaq GlobeNewswire / 09 May 2017 06:10:09 Eastern Standard Time
DALLAS, Texas, May 09, 2017 (GLOBE NEWSWIRE) -- Southcross Energy Partners, L.P. (NYSE:SXE) (“Southcross” or the “Partnership”) today announced first quarter financial and operating results.
Southcross’ net loss was $15.4 million for the quarter ended March 31, 2017, compared to $15.5 million for the same period in the prior year and $39.5 million for the quarter ended December 31, 2016. Adjusted EBITDA (as defined below) was $18.0 million for the quarter ended March 31, 2017, compared to $20.7 million for the same period in the prior year and $18.4 million for the quarter ended December 31, 2016. Adjusted EBITDA for the first quarter was 2% lower than the prior quarter despite 11% lower processed gas volumes resulting from the planned shut-down of the Conroe processing facility, as operating cost savings initiatives and higher Y-grade production substantially offset the gross margin impact.
Processed gas volumes during the quarter averaged 256 MMcf/d, a decrease of 25% compared to 343 MMcf/d for the same period in the prior year and a decrease of 11% compared to 287 MMcf/d for the quarter ended December 31, 2016.
“In the first quarter of 2017, we benefitted from companywide cost-savings initiatives started at the end of last year, including lower operational expenses at our facilities,” said Bruce A. Williamson, President and Chief Executive Officer of Southcross’ general partner. “When adjusting for the decrease in volumes from the planned shut-down of our Conroe facility, we are starting to see our processed gas volumes stabilize, which is consistent with the recent increase in rig counts in the Eagle Ford Shale.”
“This quarter we also made progress on improving our liquidity position through debt pay downs and a reduction in our outstanding collateral posted. Looking ahead, we will continue our focus on efficient and reliable management of our operations while remaining disciplined in our efforts to reduce operating expenses and strengthen our liquidity.”
For the quarter ended March 31, 2017, growth and maintenance capital expenditures were $6.9 million and were related primarily to the installation of a new gas gathering pipeline in Mississippi to support sales to end-use markets in the area. Southcross expects that capital expenditures for full-year 2017, including growth and maintenance expenditures, will be in the range of $15 million to $20 million and will be limited to projects with contractually committed volumes, along with recurring maintenance spending.
Capital and Liquidity
As of March 31, 2017, Southcross had total outstanding debt of $548 million, including $113 million under its revolving credit facility, as compared to total outstanding debt of $560 million as of December 31, 2016.
Cash Distributions and Distributable Cash Flow
Distributable cash flow (as defined below) for the quarter ended March 31, 2017 was $8.9 million, compared to $10.3 million for the same period in the prior year and $11.5 million for the quarter ended December 31, 2016. The Partnership did not make a cash distribution for the quarter ended March 31, 2017 and is restricted from making cash distributions until the Partnership’s consolidated total leverage ratio, as defined under its credit agreement, is at or below 5.0x to 1.
About Southcross Energy Partners, L.P.
Southcross Energy Partners, L.P. is a master limited partnership that provides natural gas gathering, processing, treating, compression and transportation services and NGL fractionation and transportation services. It also sources, purchases, transports and sells natural gas and NGLs. Its assets are located in South Texas, Mississippi and Alabama and include two gas processing plants, one fractionation plant and approximately 3,100 miles of pipeline. The South Texas assets are located in or near the Eagle Ford shale region. Southcross is headquartered in Dallas, Texas. Visit www.southcrossenergy.com for more information.
This press release includes certain statements concerning expectations for the future that are forward-looking within the meaning of the federal securities laws. Forward-looking statements include, without limitation, any statement that may project, indicate or imply future results, events, performance or achievements, and may contain the words “expect,” “intend,” “plan,” “anticipate,” “estimate,” “believe,” “will be,” “will continue,” “will likely result,” and similar expressions, or future conditional verbs such as “may,” “will,” “should,” “would” and “could.” Without limiting the generality of the foregoing, forward-looking statements contained in this press release specifically include: the expectations, plans, strategies, objectives and growth of Southcross; and anticipated capital expenditures and Adjusted EBITDA. Although Southcross believes the expectations and forecasts reflected in these and other forward-looking statements are reasonable, Southcross can give no assurance they will prove to be correct. Forward-looking statements contain known and unknown risks and uncertainties (many of which are difficult to predict and beyond management’s control) that may cause Southcross’ actual results in future periods to differ materially from anticipated or projected results. An extensive list of specific material risks and uncertainties affecting Southcross is described in reports filed with the Securities and Exchange Commission, including its Annual Report on Form 10-K and in subsequent reports, which are available through the SEC’s EDGAR system at www.sec.gov and on our website. Any forward-looking statements in this press release are made as of the date hereof and Southcross undertakes no obligation to update or revise any forward-looking statements to reflect new information or events.
Use of Non-GAAP Financial Measures
We report our financial results in accordance with accounting principles generally accepted in the United States, or GAAP. We also present the non-GAAP financial measures of Adjusted EBITDA and distributable cash flow.
We define Adjusted EBITDA as net income/loss, plus interest expense, income tax expense, depreciation and amortization expense, equity in losses of joint venture investments, certain non-cash charges (such as non-cash unit-based compensation, impairments, loss on extinguishment of debt and unrealized losses on derivative contracts), major litigation costs net of recoveries, transaction-related costs, revenue deferral adjustment, loss on sale of assets, severance expense and selected charges that are unusual or non-recurring; less interest income, income tax benefit, unrealized gains on derivative contracts, equity in earnings of joint venture investments, gain on sale of assets and selected gains that are unusual or non-recurring. Adjusted EBITDA should not be considered an alternative to net income, operating cash flow or any other measure of financial performance presented in accordance with GAAP.
Adjusted EBITDA is a key metric used in measuring our compliance with our financial covenants under our debt agreements and is used as a supplemental measure by our management and by external users of our financial statements, such as investors, commercial banks, research analysts and others, to assess the ability of our assets to generate cash sufficient to support our indebtedness and make future cash distributions; operating performance and return on capital as compared to those of other companies in the midstream energy sector, without regard to financing or capital structure; and the attractiveness of capital projects and acquisitions and the overall rates of return on investment opportunities.
We define distributable cash flow as Adjusted EBITDA, plus interest income and income tax benefit, less cash paid for interest (net of capitalized costs), income tax expense and maintenance capital expenditures. We use distributable cash flow to analyze our liquidity. Distributable cash flow does not reflect changes in working capital balances. Distributable cash flow is used to assess the ability of our assets to generate cash sufficient to support our indebtedness and make future cash distributions to our unitholders; and the attractiveness of capital projects and acquisitions and the overall rates of return on alternative investment opportunities.
Adjusted EBITDA and distributable cash flow are not financial measures presented in accordance with GAAP. We believe that the presentation of these non-GAAP financial measures provides useful information to investors in assessing our financial condition, results of operations and cash flows from operations. Reconciliations of Adjusted EBITDA and distributable cash flow to their most directly comparable GAAP measure are included in this press release. Net income and net cash provided by operating activities are the GAAP measures most directly comparable to Adjusted EBITDA. The GAAP measure most directly comparable to distributable cash flow is net cash provided by operating activities. Our non-GAAP financial measures should not be considered as alternatives to the most directly comparable GAAP financial measure. Each of these non-GAAP financial measures has important limitations as an analytical tool because each excludes some but not all items that affect the most directly comparable GAAP financial measure. You should not consider Adjusted EBITDA or distributable cash flow in isolation or as a substitute for analysis of our results as reported under GAAP. Because Adjusted EBITDA and distributable cash flow may be defined differently by other companies in our industry, our definitions of these non-GAAP financial measures may not be comparable to similarly titled measures of other companies, thereby diminishing their utility.
SOUTHCROSS ENERGY PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except for per unit data)
Three Months Ended March 31, 2017 2016 Revenues: Revenues $ 114,387 $ 95,455 Revenues - affiliates 40,771 24,271 Total revenues 155,158 119,726 Expenses: Cost of natural gas and liquids sold 118,691 79,447 Operations and maintenance 14,306 16,778 Depreciation and amortization 17,850 18,541 General and administrative 8,196 7,886 Impairment of assets 649 — Gain on sale of assets (62 ) — Total expenses 159,630 122,652 Loss from operations (4,472 ) (2,926 ) Other income (expense): Equity in losses of joint venture investments (3,316 ) (3,429 ) Interest expense (9,103 ) (9,170 ) Gain on insurance proceeds 1,508 — Total other expense (10,911 ) (12,599 ) Loss before income tax benefit (15,383 ) (15,525 ) Income tax benefit — 5 Net loss $ (15,383 ) $ (15,520 ) General partner unit in-kind distribution (8 ) — Net loss attributable to partners $ (15,391 ) $ (15,520 ) Earnings per unit Net loss allocated to limited partner common units $ (9,380 ) $ (7,643 ) Weighted average number of limited partner common units outstanding 48,522 28,446 Basic and diluted loss per common unit $ (0.19 ) $ (0.27 ) Net loss allocated to limited partner subordinated units $ (2,360 ) $ (3,280 ) Weighted average number of limited partner subordinated units outstanding 12,214 12,214 Basic and diluted loss per subordinated unit $ (0.19 ) $ (0.27 ) SOUTHCROSS ENERGY PARTNERS, L.P.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except for unit data)
March 31, 2017 December 31, 2016 ASSETS Current assets: Cash and cash equivalents $ 4,441 $ 21,226 Trade accounts receivable 33,315 51,894 Accounts receivable - affiliates 16,996 7,976 Prepaid expenses 2,346 2,751 Other current assets 5,303 4,343 Total current assets 62,401 88,190 Property, plant and equipment, net 960,516 971,286 Investments in joint ventures 120,948 124,096 Other assets 2,446 2,504 Total assets $ 1,146,311 $ 1,186,076 LIABILITIES AND PARTNERS' CAPITAL Current liabilities: Accounts payable and accrued liabilities $ 39,408 $ 50,639 Accounts payable - affiliates — 524 Current portion of long-term debt 4,256 4,500 Other current liabilities 6,289 10,976 Total current liabilities 49,953 66,639 Long-term debt 533,310 543,872 Other non-current liabilities 12,400 11,936 Total liabilities 595,663 622,447 Commitments and contingencies Partners' capital: Common units (48,538,451 and 48,502,090 units outstanding as of March 31, 2017 and December 31, 2016, respectively) 247,826 255,124 Class B Convertible units (17,405,250 and 17,105,875 units issued and outstanding as of March 31, 2017 and December 31, 2016) 275,575 278,508 Subordinated units (12,213,713 units issued and outstanding as of March 31, 2017 and December 31, 2016) 16,800 19,240 General partner interest 10,447 10,757 Total partners' capital 550,648 563,629 Total liabilities and partners' capital $ 1,146,311 $ 1,186,076 SOUTHCROSS ENERGY PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31, 2017 2016 Cash flows from operating activities: Net loss $ (15,383 ) $ (15,520 ) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 17,850 18,541 Unit-based compensation 257 981 Amortization of deferred financing costs, original issuance discount and PIK interest 951 1,073 Gain on sale of assets (62 ) — Unrealized loss (gain) on financial instruments (17 ) 30 Equity in losses of joint venture investments 3,316 3,429 Distribution from joint venture investment — 390 Impairment of assets 649 — Gain on insurance proceeds (1,508 ) — Other, net (285 ) (121 ) Changes in operating assets and liabilities: Trade accounts receivable, including affiliates 11,257 9,099 Prepaid expenses and other current assets (630 ) 1,173 Deposits paid to suppliers — (15,300 ) Other non-current assets 61 (280 ) Accounts payable and accrued expenses, including affiliates (12,099 ) (18,663 ) Other liabilities (4,167 ) (2,004 ) Net cash provided by (used in) operating activities 190 (17,172 ) Cash flows from investing activities: Capital expenditures (7,048 ) (5,474 ) Insurance proceeds from property damage claims 2,000 125 Net proceeds from sales of assets 143 — Investment contributions to joint venture investments (168 ) (5,072 ) Net cash used in investing activities (5,073 ) (10,421 ) Cash flows from financing activities: Borrowings under our credit facility — 3,110 Repayments under our credit facility (9,500 ) (250 ) Repayments under our term loan agreement (2,161 ) (1,125 ) Payments on capital lease obligations (122 ) (103 ) Financing costs (74 ) (86 ) Tax withholdings on unit-based compensation vested units (45 ) (57 ) Borrowing of senior unsecured paid in-kind notes — 14,000 Valley Wells operating expense cap adjustment — 1,647 Common unit issuances to Holdings for equity contributions — 11,884 Net cash provided by (used in) financing activities (11,902 ) 29,020 Net increase (decrease) in cash and cash equivalents (16,785 ) 1,427 Cash and cash equivalents — Beginning of period 21,226 11,348 Cash and cash equivalents — End of period $ 4,441 $ 12,775 SOUTHCROSS ENERGY PARTNERS, L.P.
SELECTED FINANCIAL AND OPERATIONAL DATA
(In thousands, except for operating data)
Three Months Ended March 31, 2017 2016 Financial data: Adjusted EBITDA $ 18,018 $ 20,696 Maintenance capital expenditures $ 680 $ 2,331 Growth capital expenditures 6,185 3,143 Distributable cash flow $ 8,919 $ 10,324 Operating data: Average volume of processed gas (MMcf/d) 256 343 Average volume of NGLs produced (Bbls/d) 31,230 39,651 Average daily throughput Mississippi/Alabama (MMcf/d) 168 216 Realized prices on natural gas volumes ($/Mcf) $ 3.13 $ 1.87 Realized prices on NGL volumes ($/gal) 0.68 0.27 SOUTHCROSS ENERGY PARTNERS, L.P.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
Three Months Ended March 31, 2017 2016 Net cash provided by (used in) operating activities $ 190 $ (17,172 ) Add (deduct): Depreciation and amortization (17,850 ) (18,541 ) Unit-based compensation (257 ) (981 ) Amortization of deferred financing costs, original issuance discount and PIK interest (951 ) (1,073 ) Gain on sale of assets 62 — Unrealized loss (gain) on financial instruments 17 (30 ) Equity in losses of joint venture investments (3,316 ) (3,429 ) Distribution from joint venture investment — (390 ) Impairment of assets (649 ) — Gain on insurance proceeds 1,508 — Other, net 285 121 Changes in operating assets and liabilities: Trade accounts receivable, including affiliates (11,257 ) (9,099 ) Prepaid expenses and other current assets 630 (1,173 ) Other non-current assets (61 ) 280 Accounts payable and accrued expenses, including affiliates 12,099 18,663 Deposits paid to suppliers — 15,300 Other liabilities 4,167 2,004 Net loss $ (15,383 ) $ (15,520 ) Add (deduct): Depreciation and amortization $ 17,850 $ 18,541 Interest expense 9,103 9,170 Gain on insurance proceeds (1,508 ) — Income tax benefit — (5 ) Impairment of assets 649 — Gain on sale of assets (62 ) — Revenue deferral adjustment 754 754 Unit-based compensation 257 981 Major litigation costs, net of recoveries 33 125 Equity in losses of joint venture investments 3,316 3,429 Severance expense 2,334 — Retention bonus funded by Holdings — 898 Valley Wells' operating expense cap adjustment — 991 Fees related to Equity Cure Agreement — 510 Distribution from joint venture investment — 390 Expenses related to shut-down of Conroe processing plant 294 — Other, net 381 432 Adjusted EBITDA $ 18,018 $ 20,696 Cash interest, net of capitalized costs (8,419 ) (8,046 ) Income tax benefit — 5 Maintenance capital expenditures (680 ) (2,331 ) Distributable cash flow $ 8,919 $ 10,324
Contact: Southcross Energy Partners, L.P. Mallory Biegler, 214-979-3720 Investor Relations email@example.com