• Southcross Energy Partners, L.P. Reports Fourth Quarter Results

    Source: Nasdaq GlobeNewswire / 09 Mar 2017 06:10:16   Eastern Standard Time

    DALLAS, Texas, March 09, 2017 (GLOBE NEWSWIRE) -- Southcross Energy Partners, L.P. (NYSE:SXE) (“Southcross” or the “Partnership”) today announced fourth quarter and full-year 2016 financial and operating results. 

    Southcross’ net loss was $39.5 million for the quarter ended December 31, 2016, compared to $16.5 million for the same period in the prior year and $32.6 million for the quarter ended September 30, 2016.  Adjusted EBITDA (as defined below) was $18.4 million for the quarter ended December 31, 2016, compared to $24.9 million for the same period in the prior year and $14.8 million for the quarter ended September 30, 2016. Adjusted EBITDA for the fourth quarter was higher than the prior quarter due to improved frac spreads, annual deficiency payments from producers and lower overall general and administrative expenses.

    Processed gas volumes during the quarter averaged 287 MMcf/d, a decrease of 34% compared to 437 MMcf/d for the same period in the prior year and a decrease of 4% compared to 299 MMcf/d for the quarter ended September 30, 2016.

    “In 2016, Southcross focused on improving safe, reliable operation of its assets and beginning to reduce costs to better align with the current energy market environment and realities,” said Bruce A. Williamson, President and Chief Executive Officer of Southcross’ general partner. “We began several initiatives that should result in reduced 2017 general and administrative and operating expenses and lower future capital expenditure requirements. We also began rationalizing some of our assets including the planned shut-down and sale of two of our older and less efficient processing facilities.”

    “Looking ahead to 2017, we will continue an internal focus on safe, reliable operations while seeking to accelerate and expand cost reductions, rationalize assets and capacity, and reduce our overall debt level toward a sustainable capital structure,” said Williamson. “Externally, with the recently announced bank amendment, we are now focused on seeking to take advantage of any potential upturn in the natural gas and NGL markets.”

    Capital Expenditures

    For the quarter ended December 31, 2016, growth and maintenance capital expenditures were $8.7 million and were related primarily to work to enhance system efficiency and capability. For the year ended December 31, 2016, growth and maintenance capital expenditures were $26.1 million and were related primarily to various expansion and reliability improvement projects in the Partnership’s South Texas assets, compared to $108.7 million for the year ended December 31, 2015.

    Southcross expects that capital expenditures for full-year 2017, including growth and maintenance expenditures, will be in the range of $14 million to $20 million and will be limited to projects with contractually committed volumes, along with recurring maintenance spending.

    Capital and Liquidity

    As of December 31, 2016, Southcross had total outstanding debt of $560 million including $123 million under its revolving credit facility as compared to total outstanding debt of $561 million as of September 30, 2016.

    In conjunction with the amendment to Southcross’ revolving credit agreement executed December 29, 2016, Southcross Holdings LP, the parent of Southcross’ general partner, invested $17 million into Southcross to further improve Southcross’ liquidity position. 

    Cash Distributions and Distributable Cash Flow

    Distributable cash flow (as defined below) for the quarter ended December 31, 2016 was $9.5 million, compared to $11.4 million for the same period in the prior year and $5.8 million for the quarter ended September 30, 2016.  The Partnership did not make a cash distribution for the quarter ended December 31, 2016 and is not allowed to make any 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.

    About Southcross Holdings LP

    Southcross Holdings LP, through its subsidiary Southcross Holdings Borrower LP, owns 100% of Southcross Energy Partners GP, LLC, the general partner of Southcross, as well as a portion of Southcross' common units, and all of Southcross' subordinated units and Class B convertible units. Holdings also owns natural gas gathering and treating assets as well as NGL pipelines and fractionation facilities in South Texas.

    Forward-Looking Statements

    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 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)
    (Unaudited)
         
      Three Months Ended December 31, Twelve Months Ended December 31,
      2016 2015 2016 2015
    Revenues:        
    Revenues $134,598  $132,080  $451,271  $603,815 
    Revenues - affiliates 25,126  33,665  97,452  94,658 
    Total revenues 159,724  165,745  548,723  698,473 
             
    Expenses:        
    Cost of natural gas and liquids sold 122,236  118,046  395,874  517,157 
    Operations and maintenance 16,069  21,001  70,242  82,529 
    Depreciation and amortization 38,049  18,358  106,947  70,814 
    General and administrative 5,757  6,414  28,546  30,026 
    Impairment of assets   6,874  476  7,067 
    Loss (gain) on sale of assets, net 987  270  (11,768) 416 
    Total expenses 183,098  170,963  590,317  708,009 
             
    Loss from operations (23,374) (5,218) (41,594) (9,536)
    Other income (expense):        
    Equity in losses of joint venture investments (10,466) (2,730) (21,123) (13,452)
    Interest expense (8,565) (8,651) (35,166) (32,738)
    Write-off of deferred financing costs (1,006)   (1,006)  
    Gain on legal settlements 3,939    3,939   
    Total other expense (16,098) (11,381) (53,356) (46,190)
    Loss before income tax benefit (39,472) (16,599) (94,950) (55,726)
    Income tax benefit   120  2  233 
    Net loss $(39,472) $(16,479) $(94,948) $(55,493)
    General partner unit in-kind distribution (9)   (47) (164)
    Net loss attributable to Holdings       (4,258)
    Net loss attributable to partners $(39,481) $(16,479) $(94,995) $(51,399)
             
    Earnings per unit and distributions declared        
    Net loss allocated to limited partner common units $(21,705) $(4,799) $(50,612) $(24,790)
    Weighted average number of limited partner common units outstanding 37,265  28,372  34,161  26,781 
    Basic and diluted loss per common unit $(0.58) $(0.17) $(1.48) $(0.93)
             
    Net loss allocated to limited partner subordinated units $(7,111) $(2,065) $(18,089) $(11,300)
    Weighted average number of limited partner subordinated units outstanding 12,214  12,214  12,214  12,214 
    Basic and diluted loss per subordinated unit $(0.58) $(0.17) $(1.48) $(0.93)
    Distributions declared and paid per common unit $  $0.40  $  $1.60 
                     


    SOUTHCROSS ENERGY PARTNERS, L.P.
    CONDENSED CONSOLIDATED BALANCE SHEETS
    (In thousands, except for unit data)
    (Unaudited)
         
      December 31, 2016 December 31, 2015
    ASSETS    
    Current assets:    
    Cash and cash equivalents $21,226  $11,348 
    Trade accounts receivable 51,894  39,585 
    Accounts receivable - affiliates 7,976  49,734 
    Prepaid expenses 2,751  3,915 
    Other current assets 4,343  1,256 
    Total current assets 88,190  105,838 
         
         
         
    Property, plant and equipment, net 971,286  1,066,001 
    Investments in joint ventures 124,096  140,526 
    Other assets 2,504  6,595 
    Total assets $1,186,076  $1,318,960 
         
    LIABILITIES AND PARTNERS’ CAPITAL    
    Current liabilities:    
    Accounts payable and accrued liabilities $50,639  $66,458 
    Accounts payable - affiliates 524  7,871 
    Current portion of long-term debt 4,500  4,500 
    Other current liabilities 10,976  10,406 
    Total current liabilities 66,639  89,235 
         
    Long-term debt 543,872  604,518 
    Other non-current liabilities 11,936  3,871 
    Total liabilities 622,447  697,624 
         
    Commitments and contingencies    
         
    Partners' capital:    
    Common units (48,502,090 and 28,420,619 units outstanding as of December 31, 2016 and December 31, 2015, respectively) 255,124  271,236 
    Class B Convertible units (17,105,875 and 15,958,990 units issued and outstanding as of December 31, 2016 and December 31, 2015) 278,508  300,596 
    Subordinated units (12,213,713 units issued and outstanding as of December 31, 2016 and 2015) 19,240  37,920 
    General partner interest 10,757  11,584 
    Total partners' capital 563,629  621,336 
    Total liabilities and partners' capital $1,186,076  $1,318,960 
             


    SOUTHCROSS ENERGY PARTNERS, L.P.
    CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
    (In thousands) (Unaudited)
     
      Twelve Months Ended December 31,
      2016 2015
    Cash flows from operating activities:    
    Net loss $(94,948) $(55,493)
    Adjustments to reconcile net loss to net cash provided by operating activities:    
    Depreciation and amortization 106,947  70,814 
    Unit-based compensation 3,523  4,573 
    Amortization of deferred financing costs and PIK interest 3,614  3,494 
    Loss (gain) on sale of assets, net (11,768) 416 
    Unrealized loss (gain) on financial instruments (147) 110 
    Equity in losses of joint venture investments 21,123  13,452 
    Distribution from joint venture investment 740  500 
    Impairment of assets 476  7,067 
    Gain on legal settlements (2,375)  
    Write-off of deferred financing costs 1,006   
    Other, net (310) (82)
    Changes in operating assets and liabilities:    
    Trade accounts receivable, including affiliates 31,554  (3,069)
    Prepaid expenses and other current assets 947  (495)
    Other non-current assets (358) 296 
    Accounts payable and accrued liabilities (18,234) (24,559)
    Other liabilities, including affiliates 9,112  1,701 
    Net cash provided by operating activities 50,902  18,725 
    Cash flows from investing activities:    
    Capital expenditures (26,066) (108,698)
    Insurance proceeds from property damage claims, net of expenditures 125  78 
    Net proceeds from sales of assets 22,470  4,693 
    Investment contribution to joint venture investments (5,433) (8,910)
    Consideration paid for Holdings' drop-down acquisition   (15,000)
    Net cash used in investing activities (8,904) (127,837)
    Cash flows from financing activities:    
    Borrowings under our credit facility 11,210  187,695 
    Repayments under our credit facility (70,350) (36,000)
    Repayments under our term loan agreement (4,500) (4,500)
    Payments on capital lease obligations (419) (528)
    Financing costs (1,366) (698)
    Tax withholdings on unit-based compensation vested units (138)  
    Contributions from general partner   1,301 
    Common unit issuances to Holdings for equity contributions 29,416   
    Payments of distributions and distribution equivalent rights   (46,915)
    Expenses paid by Holdings on behalf of Valley Wells' assets   17,858 
    Borrowing of senior unsecured PIK notes 14,000   
    Repayment of senior unsecured PIK notes and PIK interest (14,260)  
    Valley Wells operating expense cap adjustments 4,053  1,023 
    Other, net 234  (425)
    Net cash provided by (used in) financing activities (32,120) 118,811 
         
    Net increase in cash and cash equivalents 9,878  9,699 
    Cash and cash equivalents — Beginning of period 11,348  1,649 
    Cash and cash equivalents — End of period $21,226  $11,348 
             


    SOUTHCROSS ENERGY PARTNERS, L.P.
    SELECTED FINANCIAL AND OPERATIONAL DATA
    (In thousands, except for operating data)
    (Unaudited)
     
      Three Months Ended December 31, Twelve Months Ended December 31,
      2016 2015 2016 2015
    Financial data:        
    Adjusted EBITDA $18,398  $24,892  $69,527  $83,883 
             
    Maintenance capital expenditures $630  $2,650  $4,711  $11,618 
    Growth capital expenditures 8,107  8,740  21,355  93,718 
             
    Operating data:        
    Average volume of processed gas (MMcf/d) 287  437  312  434 
    Average volume of NGLs produced (Bbls/d) 30,987  43,234  32,271  43,234 
    Average daily throughput Mississippi/Alabama (MMcf/d) 158  156  160  145 
             
    Realized prices on natural gas volumes ($/Mcf) $2.95  $2.51  $2.34  $3.16 
    Realized prices on NGL volumes ($/gal) 0.37  0.36  0.34  0.36 
                 


    SOUTHCROSS ENERGY PARTNERS, L.P.
    RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
    (In thousands)
    (Unaudited)
     
      Three Months Ended December 31, Twelve Months Ended December 31,
      2016 2015 2016 2015
    Net cash provided by operating activities $9,301  $(5,783) $50,902  $18,725 
    Add (deduct):        
    Depreciation and amortization (38,049) (18,358) (106,947) (70,814)
    Unit-based compensation (888) (1,060) (3,523) (4,573)
    Amortization of deferred financing costs and PIK interest (818) (879) (3,614) (3,494)
    Gain (loss) on sale of assets, net (987) (270) 11,768  (416)
    Unrealized gain (loss) on financial instruments 31  179  147  (110)
    Equity in losses of joint venture investments (10,466) (2,730) (21,123) (13,452)
    Impairment of assets   (6,874) (476) (7,067)
    Distribution from joint venture investment     (740) (500)
    Gain on legal settlements 2,375    2,375   
    Write-off of deferred financing costs (1,006)   (1,006)  
    Other, net 64  13  310  82 
    Changes in operating assets and liabilities:        
    Trade accounts receivable, including affiliates 14,890  8,682  (31,554) 3,069 
    Prepaid expenses and other current assets (1,603) (1,021) (947) 495 
    Other non-current assets 295  (219) 358  (296)
    Accounts payable and accrued expenses (6,417) 10,379  18,234  24,559 
    Other liabilities, including affiliates (6,194) 1,462  (9,112) (1,701)
    Net loss $(39,472) $(16,479) $(94,948) $(55,493)
    Add (deduct):        
    Depreciation and amortization $38,049  $18,358  $106,947  $70,814 
    Interest expense 8,565  8,651  35,166  32,738 
    Unrealized loss on commodity swap derivatives   237    111 
    Revenue deferral adjustment 754  754  3,016  3,016 
    Unit-based compensation 888  1,060  3,523  4,573 
    Income tax benefit   (120) (2) (233)
    Loss (gain) on sale of assets, net 987  270  (11,768) 416 
    Major litigation costs, net of recoveries 79  4  495  513 
    Equity in losses of joint venture investments 10,466  2,730  21,123  13,452 
    Severance expense 456  222  472  956 
    Retention bonus funded by Holdings 474    3,168   
    Valley Wells' operating expense cap adjustments   1,647  2,406  2,670 
    Fees related to Equity Cure Agreement 61    650   
    Distribution from joint venture investment     740  500 
    Transaction-related costs   698  6  2,483 
    Impairment of assets   6,874  476  7,067 
    Gain on legal settlements (3,939)   (3,939)  
    Write-off of deferred financing costs 1,006    1,006   
    Other, net 24  (14) 990  300 
    Adjusted EBITDA $18,398  $24,892  $69,527  $83,883 
                     
    Contact:
    Southcross Energy Partners, L.P.
    Mallory Biegler, 214-979-3720
    Investor Relations
    investorrelations@southcrossenergy.com

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