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.”
Capital Expenditures
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.
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, 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)(Unaudited) |
| |
| |
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)(Unaudited) |
| |
| |
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(In
thousands)(Unaudited) |
| |
| |
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)(Unaudited) |
| |
| |
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(In
thousands)(Unaudited) |
| |
|
|
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
investorrelations@southcrossenergy.com