Sanchez Midstream Partners LP (NYSE American: SNMP) (“SNMP” or the
“Partnership”) today reported first-quarter 2019 results.
Highlights from the report include:
- First-quarter 2019 net loss of $0.4
million, compared to net income of $15.6 million for fourth-quarter
2018 and net income of $1.4 million for first-quarter 2018;
- First-quarter 2019 Adjusted EBITDA
(a non-GAAP financial measure) of $18.6 million, compared to
Adjusted EBITDA of $14.9 million for fourth-quarter 2018 and $18.6
million for first-quarter 2018;
- The Partnership declared a
first-quarter 2019 cash distribution on common units of $0.15 per
unit ($0.60 per unit annualized), which is payable May 31, 2019 to
holders of record May 22, 2019; and
- First-quarter 2019 cash available
for distribution (a non-GAAP financial measure) was $6.7 million,
resulting in a distribution coverage ratio of approximately 2.5
times.
MANAGEMENT COMMENTARY“The
Partnership once again returned solid operating and financial
results in first-quarter 2019,” said Gerry Willinger, chief
executive officer of the general partner of SNMP. “Despite a
significant reduction in capital spending by Sanchez Energy
Corporation (“Sanchez Energy”) heading into this year, oil and
natural gas throughput volumes on the Western Catarina Midstream
system showed only modest declines compared to fourth-quarter 2018,
while up 25.7 percent and 3.6 percent, respectively, compared to
first-quarter 2018. The financial impact of the
quarter-on-quarter throughput declines was offset by an increase in
the rates charged for services provided on the non-dedicated
portion of the Catarina asset and a decrease in the Partnership’s
general and administrative expenses. As a result, the
Partnership’s Adjusted EBITDA for first-quarter 2019 came in at
$18.6 million, up approximately 25 percent compared to
fourth-quarter 2018.
“The Partnership’s financial performance during
first-quarter 2019 placed us in a position to declare a
distribution of $0.15 per common unit, which will be paid May 31,
2019 at approximately 2.5 times coverage. We continue to
monitor the progress of Sanchez Energy, however, as management
works under its current capital spending plan to meet the company's
drilling and development commitments, manage production declines
and strengthen the company’s balance sheet. As these
initiatives progress, we continue to evaluate the various means
available to us to return value to unitholders, which may include
further reduction in cash distributions in favor of a more
accelerated approach to reducing the Partnership’s leverage.”
FINANCIAL RESULTSThe
Partnership’s first-quarter 2019 revenues totaled $17.5 million.
First-quarter 2019 revenues include $17.9 million from the
midstream activities of Western Catarina Midstream and the Seco
Pipeline and $4.1 million from production activities. The
balance of the Partnership’s first-quarter 2019 revenues came from
a gain on hedge settlements of $0.3 million offset by a loss on
mark-to-market activities of $4.8 million), which is a non-cash
item.
Earnings from Carnero G&P LLC (the “Carnero
JV”) totaled $1.4 million for first-quarter 2019. The
Partnership expects to receive a cash distribution of over $3.5
million from the Carnero JV in May 2019 related to first-quarter
2019 activity.
On a GAAP basis, the Partnership reported a net
loss of $0.4 million for first-quarter 2019, compared to net income
of $15.6 million for fourth-quarter 2018 and net income of $1.4
million for first-quarter 2018.
Adjusted EBITDA was approximately $18.6 million
for first-quarter 2019, compared to Adjusted EBITDA of $14.9
million for fourth-quarter 2018 and $18.6 million for first-quarter
2018. Adjusted EBITDA is a non-GAAP financial measure that is
defined below and reconciled in a table included with this press
release.
LIQUIDITY UPDATEThe Partnership
had approximately $6.9 million in cash and cash equivalents as of
March 31, 2019.
As of March 31, 2019, the Partnership had $178.0
million in debt outstanding under its credit facility, which has a
current borrowing base of $303.1 million and an elected commitment
amount of $210.0 million. The midstream portion of the
borrowing base is approximately $278.1 million, which results in
the Partnership’s midstream collateral covering the $210.0 million
elected commitment amount by more than 1.3 times. The
Partnership made a principal payment of $2.0 million in April 2019,
resulting in $176.0 million in debt outstanding under the credit
facility as of May 8, 2019.
HEDGE UPDATEFor 2019, the
Partnership has hedged approximately 0.5 billion cubic feet of its
natural gas production at an effective NYMEX fixed price of
approximately $2.85 per million British thermal units and
approximately 234 thousand barrels of its crude oil production at
an effective NYMEX fixed price of
approximately $60.46 per barrel. The Partnership
has additional hedges covering a portion of its production in
2020. More information on the Partnership’s complete hedge
position can be found in SNMP’s documents on file with the U.S.
Securities and Exchange Commission (SEC) at www.sec.gov.
COMMON UNITSThe Partnership had
18,300,817 common units issued and outstanding as of May 8,
2019.
DISTRIBUTIONSOn May 3, 2019,
the Partnership declared a first-quarter 2019 cash distribution on
its common units of $0.15 per unit ($0.60 per unit
annualized). The Partnership also declared a first-quarter
2019 cash distribution to the holders of its Class B preferred
units equal to $0.28225 per Class B preferred unit.
Based on first-quarter 2019 Adjusted EBITDA of
$18.6 million, cash interest expense of $2.6 million, maintenance
capital of $0.4 million, and $8.8 million in preferred
distributions, the Partnership generated approximately $6.7 million
in cash available for distribution during first-quarter 2019,
resulting in a distribution coverage ratio of approximately 2.5
times.
Cash available for distribution is a non-GAAP
financial measure that is defined below. The Partnership’s
calculation of cash available for distribution is provided in a
table included with this press release.
ABOUT THE PARTNERSHIPSanchez
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
INFORMATIONAdditional 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.
NON-GAAP FINANCIAL MEASURESTo
supplement our financial results and guidance presented in
accordance with U.S. generally accepted accounting principles
(GAAP), we use Adjusted EBITDA and cash available for distribution,
non-GAAP financial measures, 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. We define cash available
for distribution as Adjusted EBITDA less cash interest expense;
cash distributions on preferred units; and maintenance capital.
Adjusted EBITDA and cash available for
distribution are significant performance metrics used by our
management to indicate (prior to the establishment of any cash
reserves by the board of directors of our general partner) the
distributions that we would expect to pay to our unitholders.
Specifically, these financial measures indicate to investors
whether or not we are generating cash flows at a level that can
sustain or support a quarterly distribution or any increase in our
quarterly distribution rates. Adjusted EBITDA and cash
available for distribution are also used as quantitative standards
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 and cash available for distribution provides useful
information to investors in assessing our financial condition and
results of operations. The most directly comparable GAAP
measure to Adjusted EBITDA and cash available for distribution is
net income (loss). Our non-GAAP financial measures of
Adjusted EBITDA and cash available for distribution should not be
considered as alternatives to GAAP net income (loss).
Adjusted EBITDA and cash available for distribution have
important limitations as analytical tools because they exclude some
but not all items that affect net income (loss). Adjusted
EBITDA and cash available for distribution should not be considered
in isolation or as substitutes for analysis of our results as
reported under GAAP. Because Adjusted EBITDA and cash
available for distribution may be defined differently by other
companies in our industry, our definitions of Adjusted EBITDA and
cash available for distribution may not be comparable to similarly
titled measures of other companies, thereby diminishing their
utility.
For reconciliations of Adjusted EBITDA and cash
available for distribution to net income (loss), the most
comparable GAAP financial metric, please see the tables below.
FORWARD-LOOKING STATEMENTSThis
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; our acquisition strategy; our financing strategy; our
ability to make, maintain and grow distributions; 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 future operating results; the ability of
our partners to perform under our joint ventures and partnerships;
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, 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 make,
maintain and grow distributions; the ability of our partners to
perform under our joint ventures and partnerships; 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
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 |
|
March 31, |
|
December 31, |
|
March 31, |
|
2019 |
|
2018 |
|
2018 |
Gathering and
Transportation Throughput: |
|
|
|
|
|
|
|
|
|
|
|
Seco
Pipeline |
|
|
|
|
|
Natural gas (MMcf) |
|
675 |
|
|
539 |
|
|
6,114 |
|
|
|
|
|
|
Western Catarina
Midstream |
|
|
|
|
|
Oil (MBbls) |
|
1,291 |
|
|
1,354 |
|
|
1,027 |
Oil (MBbls/d) |
|
14 |
|
|
15 |
|
|
11 |
Natural gas (MMcf) |
|
14,141 |
|
|
15,302 |
|
|
13,653 |
Natural gas (MMcf/d) |
|
157 |
|
|
166 |
|
|
152 |
|
|
|
|
|
|
Net Production in
MBoe: |
|
|
|
|
|
|
|
|
|
|
|
Total production (MBoe) |
|
85 |
|
|
82 |
|
|
141 |
Average daily production
(Boe/d) |
|
944 |
|
|
891 |
|
|
1,567 |
|
|
|
|
|
|
Average Sales Price
per Boe: |
|
|
|
|
|
|
|
|
|
|
|
Net realized price, including
hedges (1) |
$ |
51.58 |
|
$ |
53.06 |
|
$ |
44.24 |
Net realized price, excluding
hedges (2) |
$ |
47.93 |
|
$ |
53.32 |
|
$ |
45.87 |
|
|
|
|
|
|
(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 Ended |
|
March 31, |
|
December 31, |
|
March 31, |
|
2019 |
|
2018 |
|
2018 |
|
($ in thousands, except per unit amounts) |
|
|
|
|
|
|
Oil, liquids, and gas sales |
$ |
4,384 |
|
|
$ |
4,373 |
|
|
$ |
6,238 |
|
Gathering and transportation
sales |
|
1,683 |
|
|
|
1,720 |
|
|
|
1,688 |
|
Gathering and transportation
lease revenues |
|
16,257 |
|
|
|
14,391 |
|
|
|
12,318 |
|
Gain (loss) on mark-to-market
activities |
|
(4,834 |
) |
|
|
9,399 |
|
|
|
(1,708 |
) |
Total revenues |
|
17,490 |
|
|
|
29,883 |
|
|
|
18,536 |
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
Lease operating expenses |
|
1,715 |
|
|
|
1,981 |
|
|
|
1,971 |
|
Transportation operating expenses |
|
2,676 |
|
|
|
3,337 |
|
|
|
2,847 |
|
Cost of sales |
|
— |
|
|
|
— |
|
|
|
— |
|
Production taxes |
|
183 |
|
|
|
203 |
|
|
|
322 |
|
General and administrative |
|
4,749 |
|
|
|
6,460 |
|
|
|
5,165 |
|
Unit-based compensation expense (benefit) |
|
635 |
|
|
|
(1,002 |
) |
|
|
1,438 |
|
Gain on sale of assets |
|
— |
|
|
|
(560 |
) |
|
|
— |
|
Depreciation, depletion and amortization |
|
6,429 |
|
|
|
6,307 |
|
|
|
6,628 |
|
Accretion expense |
|
133 |
|
|
|
125 |
|
|
|
126 |
|
Total operating expenses |
|
16,520 |
|
|
|
16,851 |
|
|
|
18,497 |
|
|
|
|
|
|
|
Other (income) expense: |
|
|
|
|
|
Interest expense, net |
|
2,786 |
|
|
|
2,796 |
|
|
|
2,599 |
|
Earnings from equity investments |
|
(1,442 |
) |
|
|
(3,163 |
) |
|
|
(4,272 |
) |
Other (income) expense |
|
(46 |
) |
|
|
(2,422 |
) |
|
|
270 |
|
Total expenses, net |
|
17,818 |
|
|
|
14,062 |
|
|
|
17,094 |
|
Income (loss) before income
taxes |
|
(328 |
) |
|
|
15,821 |
|
|
|
1,442 |
|
Income tax expense |
|
46 |
|
|
|
190 |
|
|
|
— |
|
Net income (loss) |
|
(374 |
) |
|
|
15,631 |
|
|
|
1,442 |
|
Less: |
|
|
|
|
|
Preferred unit distributions |
|
(8,838 |
) |
|
|
(8,837 |
) |
|
|
(8,750 |
) |
Preferred unit amortization |
|
(697 |
) |
|
|
(651 |
) |
|
|
(531 |
) |
Net gain (loss) attributable
to common unitholders |
$ |
(9,909 |
) |
|
$ |
6,143 |
|
|
$ |
(7,839 |
) |
|
|
|
|
|
|
Adjusted EBITDA (1) |
$ |
18,554 |
|
|
$ |
14,865 |
|
|
$ |
18,578 |
|
|
|
|
|
|
|
Net loss per unit |
|
|
|
|
|
Common units - Basic |
$ |
(0.61 |
) |
|
$ |
0.39 |
|
|
$ |
(0.53 |
) |
Common units - Diluted |
$ |
(0.61 |
) |
|
$ |
0.33 |
|
|
$ |
(0.53 |
) |
Weighted Average Units
Outstanding |
|
|
|
|
|
Common units - Basic |
|
16,173,858 |
|
|
|
15,708,244 |
|
|
|
14,738,528 |
|
Common units -Diluted |
|
16,173,858 |
|
|
|
47,019,140 |
|
|
|
14,738,528 |
|
|
|
|
|
|
|
(1) Adjusted EBITDA is a non-GAAP financial measure.
For more information, see the NON-GAAP FINANCIAL MEASURES section
of this press release. |
|
|
|
|
|
|
Sanchez Midstream
Partners LP |
|
|
|
Condensed Consolidated
Balance Sheets |
|
|
|
|
March 31, |
|
December 31, |
|
2019 |
|
2018 |
|
($ in thousands) |
|
|
|
|
Current assets |
$ |
14,877 |
|
|
$ |
13,886 |
|
Midstream and production
assets, net |
|
195,632 |
|
|
|
198,334 |
|
Other assets |
|
267,042 |
|
|
|
274,465 |
|
Total assets |
$ |
477,551 |
|
|
$ |
486,685 |
|
|
|
|
|
Current liabilities |
$ |
188,980 |
|
|
$ |
10,809 |
|
Long-term debt, net of debt
issuance costs |
|
— |
|
|
|
178,582 |
|
Other long-term
liabilities |
|
13,028 |
|
|
|
12,057 |
|
Total liabilities |
|
202,008 |
|
|
|
201,448 |
|
|
|
|
|
Mezzanine equity |
|
350,554 |
|
|
|
349,857 |
|
|
|
|
|
Partners' deficit |
|
(75,011 |
) |
|
|
(64,620 |
) |
Total partners' deficit |
|
(75,011 |
) |
|
|
(64,620 |
) |
Total liabilities and partners' capital |
$ |
477,551 |
|
|
$ |
486,685 |
|
|
|
|
|
Sanchez Midstream
Partners LP |
|
|
|
|
|
Reconciliation of Net
Income (Loss) to Adjusted EBITDA and Cash Available for
Distribution |
|
|
|
|
|
|
Three Months Ended |
|
March 31, |
|
December 31, |
|
March 31, |
|
2019 |
|
2018 |
|
2018 |
|
($ in thousands) |
|
|
|
|
|
|
Net income (loss) |
$ |
(374 |
) |
|
$ |
15,631 |
|
|
$ |
1,442 |
|
Adjusted by: |
|
|
|
|
|
Interest expense, net |
|
2,786 |
|
|
|
2,796 |
|
|
|
2,599 |
|
Income tax expense |
|
46 |
|
|
|
190 |
|
|
|
— |
|
Depreciation, depletion and amortization |
|
6,429 |
|
|
|
6,307 |
|
|
|
6,628 |
|
Accretion expense |
|
133 |
|
|
|
125 |
|
|
|
126 |
|
Gain on sale of assets |
|
— |
|
|
|
(560 |
) |
|
|
— |
|
Unit-based compensation expense (benefit) |
|
635 |
|
|
|
(1,002 |
) |
|
|
1,438 |
|
Unit-based asset management fees |
|
2,032 |
|
|
|
1,355 |
|
|
|
2,279 |
|
Distributions in excess of equity earnings |
|
2,064 |
|
|
|
1,496 |
|
|
|
1,837 |
|
(Gain) loss on mark-to-market activities |
|
4,803 |
|
|
|
(11,843 |
) |
|
|
1,978 |
|
Acquisition and divestiture costs |
|
— |
|
|
|
370 |
|
|
|
251 |
|
Adjusted EBITDA (1) |
$ |
18,554 |
|
|
$ |
14,865 |
|
|
$ |
18,578 |
|
Adjusted by: |
|
|
|
|
|
Maintenance capital expenditures(2) |
|
(400 |
) |
|
|
(400 |
) |
|
|
(400 |
) |
Cash interest expense |
|
(2,582 |
) |
|
|
(2,447 |
) |
|
|
(2,300 |
) |
Cash distributions on preferred units |
|
(8,838 |
) |
|
|
(8,837 |
) |
|
|
(8,750 |
) |
Cash available for
distribution |
$ |
6,734 |
|
|
$ |
3,181 |
|
|
$ |
7,128 |
|
|
|
|
|
|
|
(1) Adjusted EBITDA and cash available for distribution are
non-GAAP financial measures. For more information, see the
NON-GAAP FINANCIAL MEASURES section of this press release. |
(2) Represents estimated maintenance capital expenditures
attributable to our controlling interest in our midstream and
production assets. Maintenance capital expenditures are cash
expenditures made to maintain, over the long-term, our operating
capacity, operating income or asset base. Examples of maintenance
capital expenditures are expenditures to develop and replace our
oil and natural gas reserves as well as the repair, refurbishment
and replacement of gathering and transportation assets, to maintain
equipment reliability, integrity and safety and to address
environmental laws and regulations. |
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