Sanchez Midstream Partners LP (NYSE American: SNMP) (“SNMP” or the
“Partnership”) today reported fourth-quarter and full year 2019
results. Highlights from the report include:
- Fourth-quarter 2019 net loss of
$47.8 million, compared to a net loss of $6.8 million for
third-quarter 2019 and net income of $15.6 million for
fourth-quarter 2018;
- Fourth-quarter 2019 Adjusted EBITDA
(a non-GAAP financial measure) of approximately $12.2 million,
compared to Adjusted EBITDA of $17.4 million for third-quarter 2019
and approximately $14.9 million for fourth-quarter 2018; and
- The Partnership has reduced debt by
$36.0 million (20 percent) since Dec. 31, 2018.
FINANCIAL RESULTS
The Partnership’s fourth-quarter 2019 revenues
totaled approximately $16.4 million, of which $14.4 million came
from the midstream activities of Western Catarina Midstream and the
Seco Pipeline. The balance of the Partnership’s fourth-quarter 2019
revenues came from production activities (approximately $3.7
million, which includes a gain on hedge settlements of $0.2
million) and a loss on mark-to-market activities ($1.7 million),
which is a non-cash item.
The Partnership’s full-year 2019 revenues
totaled $76.6 million, of which $65.9 million came from the
midstream activities of Western Catarina Midstream and the Seco
Pipeline. The balance of the Partnership’s full-year 2019 revenues
came from production activities ($15.4 million, which includes a
gain on hedge settlements of $0.9 million) and a loss on
mark-to-market activities (approximately $4.7 million), which is a
non-cash item.
The activities of Carnero G&P LLC (the
“Carnero JV”) contributed a loss of approximately $0.2 million for
fourth-quarter 2019 and income of $2.8 million for full-year 2019.
The Partnership received a cash distribution of $1.6 million from
the Carnero JV in February 2020 related to fourth-quarter 2019
activity, resulting in total cash distributions from midstream
joint ventures of approximately $14.2 million for full-year
2019.
On a GAAP basis, the Partnership reported a net
loss of $47.8 million for fourth-quarter 2019, compared to a net
loss of $6.8 million for third-quarter 2019 and net income of $15.6
million for fourth-quarter 2018. The Partnership reported a
net loss of $51.1 million for full-year 2019, compared to net
income of approximately $15.7 million for full-year 2018.
Adjusted EBITDA was approximately $12.2 million
for fourth-quarter 2019, compared to Adjusted EBITDA of $17.4
million for third-quarter 2019 and approximately $14.9 million for
fourth-quarter 2018. The Partnership’s full-year 2019 Adjusted
EBITDA was approximately $65.7 million, which is more than five
percent lower when compared to Adjusted EBITDA of approximately
$69.4 million for full-year 2018.
Adjusted EBITDA is a non-GAAP financial measure
that is defined below and reconciled in a table included with this
press release.
LIQUIDITY AND CREDIT FACILITY
UPDATE
The Partnership had approximately $5.1 million
in cash and cash equivalents as of Dec. 31, 2019.
As of Dec. 31, 2019, the Partnership had $150.0
million in debt outstanding under its credit facility, which has a
current borrowing base of $235.5 million and a revolving commitment
amount of $20.0 million. The Partnership has made principal
payments totaling $6 million since Dec. 31, 2019, resulting in
$144.0 million in debt outstanding under the credit facility as of
March 13, 2020.
Since Dec. 31, 2018, the Partnership has reduced
its debt outstanding by $36.0 million (20 percent), from $180.0
million to $144.0 million.
COMMON UNITS
The Partnership had 19,975,193 common units
issued and outstanding as of March 13, 2020.
CLASS C DISTRIBUTION
As required by the Third Amended and Restated
Agreement of Limited Partnership of the Partnership, if a quarterly
distribution on the Partnership’s Class C Preferred Units cannot be
paid in cash, it must be paid 100 percent in Class C Preferred PIK
Units. Accordingly, on Feb. 13, 2020, the Partnership
declared a fourth-quarter 2019 distribution to the holders of its
Class C Preferred Units consisting of 1,039,314 Class C Preferred
PIK Units which was paid on Feb. 28, 2020 to holders of record on
Feb. 20, 2020.
ABOUT THE PARTNERSHIP
Sanchez Midstream Partners LP (NYSE American:
SNMP) is a growth-oriented publicly-traded limited partnership
focused on the acquisition, development, ownership and operation of
midstream and other energy-related assets in North America. The
Partnership has ownership stakes in oil and natural gas gathering
systems, natural gas pipelines and natural gas processing
facilities, all located in the Western Eagle Ford in South
Texas.
ADDITIONAL INFORMATION
Additional information about SNMP can be found
in our documents on file with the SEC which are available on our
website at www.sanchezmidstream.com and on the SEC’s website at
www.sec.gov.
UNITHOLDER ACCESS TO 2019
10-K
The Partnership has filed its Annual Report on
Form 10-K for the fiscal year ended Dec. 31, 2019 (“Form
10-K”) with the SEC. A copy of the Form 10-K, which includes
the Partnership’s complete audited financial statements, may be
found on the SEC’s website at www.sec.gov and on the
Partnership’s website at www.sanchezmidstream.com by
selecting the “Investors” tab and then selecting “SEC Filings” from
the dropdown menu. The Partnership will provide any unitholder with
a hard copy of its Form 10-K, which includes SNMP’s complete
audited financial statements, free of charge at any time upon
request. Requests can be directed in writing to SNMP Investor
Relations, 1000 Main Street, Suite 3000, Houston,
TX 77002 or by email to ir@sanchezmidstream.com.
NON-GAAP FINANCIAL MEASURES
To supplement our financial results and guidance
presented in accordance with U.S. generally accepted accounting
principles (GAAP), we use Adjusted EBITDA, a non-GAAP financial
measure, in this press release. We believe that non-GAAP financial
measures are helpful in understanding our past financial
performance and potential future results, particularly in light of
the effect of various transactions affected by us. We define
Adjusted EBITDA as net income (loss) adjusted by: (i) interest
(income) expense, net, which includes interest expense, interest
expense net (gain) loss on interest rate derivative contracts, and
interest (income); (ii) income tax expense (benefit);
(iii) depreciation, depletion and amortization;
(iv) asset impairments; (v) accretion expense;
(vi) (gain) loss on sale of assets; (vii) unit-based
compensation expense; (viii) unit-based asset management fees;
(ix) distributions in excess of equity earnings; (x) (gain)
loss on mark-to-market activities; (xi) commodity derivatives
settled early; (xii) (gain) loss on embedded derivatives; and
(xiii) acquisition and divestiture costs.
Adjusted EBITDA is used as a quantitative
standard by our management and by external users of our financial
statements such as investors, research analysts, our lenders and
others to assess: (i) the financial performance of our assets
without regard to financing methods, capital structure or
historical cost basis; (ii) the ability of our assets to
generate cash sufficient to pay interest costs and support our
indebtedness; and (iii) our operating performance and return
on capital as compared to those of other companies in our industry,
without regard to financing or capital structure.
We believe that the presentation of Adjusted
EBITDA provides useful information to investors in assessing our
financial condition and results of operations. The GAAP measure
most directly comparable to Adjusted EBITDA is net income (loss).
Our non-GAAP financial measure of Adjusted EBITDA should not be
considered as an alternative to GAAP net income (loss). Adjusted
EBITDA has important limitations as an analytical tool because it
excludes some but not all items that affect net income (loss).
Adjusted EBITDA should not be considered in isolation or as a
substitute for analysis of our results as reported under GAAP.
Because Adjusted EBITDA may be defined differently by other
companies in our industry, our definition of Adjusted EBITDA may
not be comparable to similarly titled measures of other companies,
thereby diminishing its utility.
For a reconciliation of Adjusted EBITDA to net
income (loss), the most comparable GAAP financial metric, please
see the tables below.
FORWARD-LOOKING STATEMENTS
This press release contains, and the officers
and representatives of the Partnership and its general partner may
from time to time make, statements that are considered
“forward–looking statements” as defined by the SEC. These
forward-looking statements are subject to a number of risks and
uncertainties, many of which are beyond our control, which may
include statements about our business strategy; the ability of our
customers to meet their drilling and development plans on a timely
basis, or at all, and perform under gathering, processing and other
agreements; our financing strategy; our acquisition strategy; our
ability to make distributions; our future operating results; the
ability of our partners to perform under our joint ventures; our
future capital expenditures; and our plans, objectives,
expectations, forecasts, outlook and intentions. All of these types
of statements, other than statements of historical fact included in
this press release, are forward-looking statements. In some cases,
forward-looking statements can be identified by terminology such as
“may,” “could,” “should,” “expect,” “plan,” “project,” “intend,”
“anticipate,” “believe,” “estimate,” “predict,” “potential,”
“pursue,” “target,” “continue,” the negative of such terms or other
comparable terminology.
The forward-looking statements contained in this
press release are largely based on our expectations, which reflect
estimates and assumptions made by the management of our general
partner. These estimates and assumptions reflect our best judgment
based on currently known market conditions and other factors.
Although we believe such estimates and assumptions to be
reasonable, they are inherently uncertain and involve a number of
risks and uncertainties that are beyond our control. In addition,
management’s assumptions about future events may prove to be
inaccurate. Important factors that could cause our actual results
to differ materially from the expectations listed in the
forward-looking statements include, among others: the resolution of
the pending Chapter 11 bankruptcy of Sanchez Energy Corporation and
certain of its subsidiaries and its impact on our business, results
of operations and financial condition; our ability to successfully
execute our business, acquisition and financing strategies; the
ability of our customers to meet their drilling and development
plans on a timely basis, or at all, and perform under gathering,
processing and other agreements; the creditworthiness and
performance of our counterparties, including financial
institutions, operating partners, customers and other
counterparties; our ability to extend, replace or refinance our
credit facility; our ability to grow enterprise value; the ability
of our partners to perform under our joint ventures; the
availability, proximity and capacity of, and costs associated with,
gathering, processing, compression and transportation facilities;
our ability to utilize the services, personnel and other assets of
the sole member of our general partner (“Manager”) pursuant to a
shared services agreement; Manager’s ability to retain personnel to
perform its obligations under its shared services agreement with
Sanchez Oil & Gas Corporation; our ability to access the credit
and capital markets to obtain financing on terms we deem
acceptable, if at all, and to otherwise satisfy our capital
expenditure requirements; the timing and extent of changes in
prices for, and demand for, natural gas, natural gas liquids and
oil; our ability to successfully execute our hedging strategy and
the resulting realized prices therefrom; the accuracy of reserve
estimates, which by their nature involve the exercise of
professional judgment and may, therefore, be imprecise; and other
factors described in our most recent Annual Report on Form 10-K and
any updates to those risk factors set forth in our Quarterly
Reports on Form 10-Q or Current Reports on Form 8-K. Our filings
with the SEC are available on our website at
www.sanchezmidstream.com and on the SEC’s website at www.sec.gov.
Management cautions all readers that the forward-looking statements
contained in this press release are not guarantees of future
performance, and we cannot assure any reader that such statements
will be realized or the forward-looking events and circumstances
will occur. Actual results may differ materially from those
anticipated or implied in forward-looking statements. The
forward-looking statements speak only as of the date made, and
other than as required by law, we do not intend to publicly update
or revise any forward-looking statements as a result of new
information, future events or otherwise. These cautionary
statements qualify all forward-looking statements attributable to
us or persons acting on our behalf.
PARTNERSHIP CONTACT
Charles C. WardChief Financial
Officerir@sanchezmidstream.com(877) 847-0009
General Inquiries: (713) 783-8000
www.sanchezmidstream.com
Sanchez
Midstream Partners LP |
Operating
Statistics |
|
Three Months
Ended |
|
Year
Ended |
|
December 31, |
|
December 31, |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Gathering and Transportation Throughput: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Seco
Pipeline |
|
|
|
|
|
|
|
Natural gas (MMcf) |
|
— |
|
|
539 |
|
|
693 |
|
|
12,920 |
Western Catarina Midstream |
|
|
|
|
|
|
|
Oil (MBbls) |
|
812 |
|
|
1,354 |
|
|
4,036 |
|
|
4,655 |
Oil (MBbls/d) |
|
9 |
|
|
15 |
|
|
11 |
|
|
13 |
Natural gas (MMcf) |
|
10,135 |
|
|
15,302 |
|
|
48,087 |
|
|
57,372 |
Natural gas (MMcf/d) |
|
110 |
|
|
166 |
|
|
132 |
|
|
157 |
|
|
|
|
|
|
|
|
Net
Production in MBoe: |
|
|
|
|
|
|
|
Total
production (MBoe) |
|
73 |
|
|
82 |
|
|
309 |
|
|
439 |
Average
daily production (Boe/d) |
|
793 |
|
|
891 |
|
|
847 |
|
|
1,203 |
|
|
|
|
|
|
|
|
Average Sales Price per Boe: |
|
|
|
|
|
|
|
Net realized
price, including hedges (1) |
$ |
50.33 |
|
$ |
53.06 |
|
$ |
49.86 |
|
$ |
48.41 |
Net realized
price, excluding hedges (2) |
$ |
47.11 |
|
$ |
53.32 |
|
$ |
46.94 |
|
$ |
51.52 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Excludes impact of
mark-to-market gains (losses). |
(2) Excludes the
impact of all hedging gains (losses). |
Sanchez
Midstream Partners LP |
Condensed
Consolidated Statements of Operations |
|
|
|
|
|
Three
Months |
|
|
|
|
|
Three Months
Ended |
|
Ended |
|
Year
Ended |
|
December 31, |
|
September
30, |
|
December 31, |
|
2019 |
|
2018 |
|
2019 |
|
2019 |
|
2018 |
|
|
|
|
|
|
|
|
|
($ in
thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil, liquids, and gas sales |
$ |
3,674 |
|
|
$ |
4,373 |
|
|
$ |
4,107 |
|
|
$ |
15,407 |
|
|
$ |
22,618 |
|
Gathering
and transportation sales |
|
1,720 |
|
|
|
1,720 |
|
|
|
1,720 |
|
|
|
6,825 |
|
|
|
6,651 |
|
Gathering
and transportation lease revenues |
|
12,729 |
|
|
|
14,391 |
|
|
|
14,135 |
|
|
|
59,090 |
|
|
|
53,025 |
|
Gain (loss)
on mark-to-market activities |
|
(1,735 |
) |
|
|
9,399 |
|
|
|
954 |
|
|
|
(4,673 |
) |
|
|
1,316 |
|
Total revenues |
|
16,388 |
|
|
|
29,883 |
|
|
|
20,916 |
|
|
|
76,649 |
|
|
|
83,610 |
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses: |
|
|
|
|
|
|
|
|
|
Lease operating expenses |
|
1,493 |
|
|
|
1,981 |
|
|
|
2,105 |
|
|
|
7,378 |
|
|
|
7,864 |
|
Transportation operating expenses |
|
3,077 |
|
|
|
3,337 |
|
|
|
2,752 |
|
|
|
11,553 |
|
|
|
12,316 |
|
Production taxes |
|
132 |
|
|
|
203 |
|
|
|
165 |
|
|
|
621 |
|
|
|
1,104 |
|
General and administrative |
|
4,373 |
|
|
|
6,460 |
|
|
|
4,317 |
|
|
|
17,610 |
|
|
|
23,653 |
|
Unit-based compensation expense (benefit) |
|
270 |
|
|
|
(1,002 |
) |
|
|
271 |
|
|
|
1,351 |
|
|
|
1,938 |
|
Gain on sale of assets |
|
— |
|
|
|
(560 |
) |
|
|
— |
|
|
|
— |
|
|
|
(3,186 |
) |
Depreciation, depletion and amortization |
|
6,289 |
|
|
|
6,307 |
|
|
|
6,441 |
|
|
|
25,333 |
|
|
|
25,987 |
|
Asset impairments |
|
32,119 |
|
|
|
— |
|
|
|
— |
|
|
|
32,119 |
|
|
|
— |
|
Accretion expense |
|
135 |
|
|
|
125 |
|
|
|
132 |
|
|
|
526 |
|
|
|
497 |
|
Total operating expenses |
|
47,888 |
|
|
|
16,851 |
|
|
|
16,183 |
|
|
|
96,491 |
|
|
|
70,173 |
|
|
|
|
|
|
|
|
|
|
|
Other
(income) expense: |
|
|
|
|
|
|
|
|
|
Interest expense, net |
|
22,048 |
|
|
|
2,796 |
|
|
|
12,141 |
|
|
|
39,789 |
|
|
|
10,961 |
|
Earnings from equity investments |
|
182 |
|
|
|
(3,163 |
) |
|
|
(780 |
) |
|
|
(2,831 |
) |
|
|
(12,859 |
) |
Other income |
|
(5,762 |
) |
|
|
(2,422 |
) |
|
|
(31 |
) |
|
|
(5,860 |
) |
|
|
(546 |
) |
Total expenses, net |
|
64,356 |
|
|
|
14,062 |
|
|
|
27,513 |
|
|
|
127,589 |
|
|
|
67,729 |
|
Income
(loss) before income taxes |
|
(47,968 |
) |
|
|
15,821 |
|
|
|
(6,597 |
) |
|
|
(50,940 |
) |
|
|
15,881 |
|
Income tax expense (benefit) |
|
(133 |
) |
|
|
190 |
|
|
|
213 |
|
|
|
202 |
|
|
|
190 |
|
Net income
(loss) |
$ |
(47,835 |
) |
|
$ |
15,631 |
|
|
$ |
(6,810 |
) |
|
$ |
(51,142 |
) |
|
$ |
15,691 |
|
Sanchez Midstream Partners LP |
Condensed Consolidated Balance Sheets |
|
December 31, |
|
2019 |
|
2018 |
|
|
|
|
|
($ in thousands) |
|
|
|
|
Current assets |
$ |
13,370 |
|
|
$ |
13,886 |
|
Midstream
and production assets, net |
|
155,228 |
|
|
|
198,334 |
|
Other
assets |
|
245,842 |
|
|
|
274,465 |
|
Total assets |
$ |
414,440 |
|
|
$ |
486,685 |
|
|
|
|
|
Current
liabilities |
$ |
7,322 |
|
|
$ |
10,809 |
|
Current
liabilities - short-term debt, net of debt issuance costs |
|
39,374 |
|
|
|
— |
|
Long-term
debt, net of debt issuance costs |
|
109,437 |
|
|
|
178,582 |
|
Class C
preferred units |
|
281,688 |
|
|
|
— |
|
Other
long-term liabilities |
|
12,419 |
|
|
|
12,057 |
|
Total liabilities |
|
450,240 |
|
|
|
201,448 |
|
|
|
|
|
Mezzanine
equity |
|
— |
|
|
|
349,857 |
|
|
|
|
|
Partners'
deficit |
|
(35,800 |
) |
|
|
(64,620 |
) |
Total
partners' deficit |
|
(35,800 |
) |
|
|
(64,620 |
) |
Total liabilities and partners' deficit |
$ |
414,440 |
|
|
$ |
486,685 |
|
Sanchez
Midstream Partners LP |
Reconciliation
of Net Income (Loss) to Adjusted EBITDA |
|
|
|
|
|
Three
Months |
|
|
|
|
|
Three Months
Ended |
|
Ended |
|
Year
Ended |
|
December 31, |
|
September
30, |
|
December 31, |
|
2019 |
|
2018 |
|
2019 |
|
2019 |
|
2018 |
|
|
|
|
|
|
|
|
|
($ in
thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
$ |
(47,835 |
) |
|
$ |
15,631 |
|
|
$ |
(6,810 |
) |
|
$ |
(51,142 |
) |
|
$ |
15,691 |
|
Adjusted
by: |
|
|
|
|
|
|
|
|
|
Interest expense, net |
|
22,048 |
|
|
|
2,796 |
|
|
|
12,141 |
|
|
|
39,789 |
|
|
|
10,961 |
|
Income tax expense (benefit) |
|
(133 |
) |
|
|
190 |
|
|
|
213 |
|
|
|
202 |
|
|
|
190 |
|
Depreciation, depletion and amortization |
|
6,289 |
|
|
|
6,307 |
|
|
|
6,441 |
|
|
|
25,333 |
|
|
|
25,987 |
|
Asset impairments |
|
32,119 |
|
|
|
— |
|
|
|
— |
|
|
|
32,119 |
|
|
|
— |
|
Accretion expense |
|
135 |
|
|
|
125 |
|
|
|
132 |
|
|
|
526 |
|
|
|
497 |
|
Gain on sale of assets |
|
— |
|
|
|
(560 |
) |
|
|
— |
|
|
|
— |
|
|
|
(3,186 |
) |
Unit-based compensation expense (benefit) |
|
270 |
|
|
|
(1,002 |
) |
|
|
271 |
|
|
|
1,351 |
|
|
|
1,938 |
|
Unit-based asset management fees |
|
1,528 |
|
|
|
1,355 |
|
|
|
1,922 |
|
|
|
7,321 |
|
|
|
8,646 |
|
Distributions in excess of equity earnings |
|
1,797 |
|
|
|
1,496 |
|
|
|
4,079 |
|
|
|
11,352 |
|
|
|
9,754 |
|
Gain on mark-to-market activities |
|
(4,027 |
) |
|
|
(11,843 |
) |
|
|
(985 |
) |
|
|
(1,183 |
) |
|
|
(3,229 |
) |
Acquisition and divestiture costs |
|
— |
|
|
|
370 |
|
|
|
— |
|
|
|
— |
|
|
|
2,150 |
|
Adjusted
EBITDA (1) |
$ |
12,191 |
|
|
$ |
14,865 |
|
|
$ |
17,404 |
|
|
$ |
65,668 |
|
|
$ |
69,399 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Adjusted EBITDA is
a non-GAAP financial measure. For more information, see the
NON-GAAP FINANCIAL MEASURES section of this press release. |
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