Archrock Partners, L.P. (NASDAQ:APLP) today reported net loss
of $4.0 million, or $0.06 per diluted common unit, for
the third quarter of 2017, compared to net income of $5.3
million, or $0.08 per diluted common unit, for the second
quarter of 2017 and a net loss of $0.6 million, or $0.01 per
diluted common unit, for the third quarter of 2016.
EBITDA, as adjusted (as defined below), was $59.9
million for the third quarter of 2017, compared to $66.9
million for the second quarter of 2017 and $67.9
million for the third quarter of 2016.
Revenue was $140.2 million for the third quarter of
2017, compared to $138.3 million for the second quarter
of 2017 and $135.5 million for the third quarter of 2016.
Gross margin was $77.6 million, or 55% of revenue, in the third
quarter of 2017, compared to $84.3 million, or 61% of revenue, in
the second quarter of 2017 and $84.6 million, or 62% of revenue, in
the third quarter of 2016.
Selling, general and administrative expenses (“SG&A”)
were $20.7 million for the third quarter of 2017,
compared to $18.3 million for the second quarter of 2017
and $17.9 million in the third quarter of 2016.
Cash flows from operating activities were $38.4 million for the
third quarter of 2017, compared to $38.0 million for the second
quarter of 2017 and $64.8 million for the third quarter of
2016.
Distributable cash flow (as defined below) was $29.8
million for the third quarter of 2017, compared to $39.1
million for the second quarter of 2017 and $43.7
million for the third quarter of 2016. Distributable cash flow
coverage was 1.46x for the third quarter of 2017, compared to 2.04x
for the second quarter of 2017 and 2.50x for the third quarter of
2016.
“Archrock Partners' operating horsepower growth accelerated in
the third quarter,” said Brad Childers, Chairman, President and
Chief Executive Officer of Archrock Partners’ managing general
partner. “During the quarter, we grew operating horsepower by
50,000 horsepower and drove new orders at the highest quarterly
rate on record. Demand for our services has remained elevated,
setting the foundation for a strong 2018. Additionally, we
strengthened our capital position with the completion of a $60
million equity offering during the third quarter.”
“As we have stated, we expect gross margin percentage volatility
during this phase of the growth cycle,” continued Childers.
“Although gross margin percentage declined in the third quarter, we
expect sequential gross margin percentage improvement in the fourth
quarter. Increased lube oil expense, higher expenses due to
elevated start activities, and higher medical claims contributed to
higher costs in the third quarter.”
“With the industry's largest fleet of high demand large
horsepower units, Archrock Partners is positioned to capture
improving earnings from the long-term secular growth of U.S.
natural gas production as well as the current cyclical recovery in
our business. We continue to expect solid year-over-year growth in
year-end 2017 operating horsepower,” concluded Childers.
Net income, excluding the item listed in the following sentence,
for the third quarter of 2017 was $1.4 million, or $0.02 per
diluted common unit. The excluded item consisted of a non-cash
long-lived asset impairment of $5.4 million. Net income, excluding
the item listed in the following sentence, for the second quarter
of 2017 was $8.4 million, or $0.12 per diluted common unit. The
excluded item consisted of a non-cash long-lived asset impairment
of $3.1 million. Net income, excluding the items listed in the
following sentence, for the third quarter of 2016 was $9.3 million,
or $0.15 per diluted common unit. The excluded items consisted of a
non-cash long-lived asset impairment of $7.9 million as well as
restructuring charges of $1.9 million.
Conference Call
Details
Archrock, Inc. and Archrock Partners, L.P. will host a joint
conference call on Thursday, November 2, 2017, to discuss their
third quarter 2017 financial results. The call will begin at 11:00
a.m. Eastern Time.
To listen to the call via a live webcast, please visit
Archrock’s website at www.archrock.com. The call will also be
available by dialing 1-888-771-4371 in the United States and Canada
or +1-847-585-4405 for international calls. Please call
approximately 15 minutes prior to the scheduled start time and
reference Archrock conference call number 4578 3017.
A replay of the conference call will be available on Archrock’s
website for approximately seven days. Also, a replay may be
accessed for approximately seven days by dialing 1-888-843-7419 in
the United States and Canada, or +1-630-652-3042 for international
calls. The access code is 4578 3017#.
EBITDA, as adjusted, a non-GAAP measure, is defined as net
income (loss) excluding income taxes, interest expense,
depreciation and amortization expense, long-lived asset impairment,
restructuring charges, expensed acquisition costs, debt
extinguishment costs, non-cash SG&A costs and other items. A
reconciliation of EBITDA, as adjusted, to net income (loss), the
most directly comparable GAAP measure, appears below.
Distributable cash flow, a non-GAAP measure, is defined as net
income (loss) (a) plus depreciation and amortization expense,
long-lived asset impairment, restructuring charges, expensed
acquisition costs, non-cash SG&A costs, debt extinguishment
costs, and interest expense (b) less cash interest expense
(excluding amortization of deferred financing fees, amortization of
debt discount and non-cash transactions related to interest rate
swaps) and maintenance capital expenditures, and (c) excluding
gains or losses on asset sales and other items. Distributable cash
flow coverage is defined as distributable cash flow divided by
total distributions declared. A reconciliation of distributable
cash flow to cash flows from operating activities, the most
directly comparable GAAP measure, appears below.
Gross margin, a non-GAAP measure, is defined as total revenue
less cost of sales (excluding depreciation and amortization
expense). Gross margin percentage is defined as gross margin
divided by total revenue. A reconciliation of gross margin to net
income (loss), the most directly comparable GAAP measure, appears
below.
Net income (loss), excluding items, a non-GAAP measure, is
defined as net income (loss) plus long-lived asset impairment,
restructuring charges, expensed acquisition costs and debt
extinguishment costs. A reconciliation of net income (loss),
excluding items, to net income (loss), the most directly comparable
GAAP measure, appears below.
About Archrock Partners
Archrock Partners, L.P., a master limited partnership, is the
leading provider of natural gas contract compression services to
customers throughout the United States. Archrock, Inc. (NYSE:AROC)
owns an equity interest in Archrock Partners, including all of the
general partner interest. For more information, visit
www.archrock.com.
Forward-Looking Statements
All statements in this release (and oral statements made
regarding the subjects of this release) other than historical facts
are forward-looking statements within the meaning of Section 21E of
the Securities Exchange Act of 1934, as amended. These
forward-looking statements rely on a number of assumptions
concerning future events and are subject to a number of
uncertainties and factors, many of which are outside Archrock
Partners’ control, which could cause actual results to differ
materially from such statements. Forward-looking information
includes, but is not limited to: Archrock Partners’ financial and
operational strategies and ability to successfully effect those
strategies; Archrock Partners’ expectations regarding future
commodity prices, demand for natural gas and economic and market
conditions; Archrock Partners’ financial and operational outlook
and ability to fulfill that outlook, including as related to
increasing operating horsepower and gross margin percentage;
statements about Archrock Partners’ distributions; demand for
Archrock Partners’ services; and expectations regarding Archrock
Partners’ access to capital.
While Archrock Partners believes that the assumptions concerning
future events are reasonable, it cautions that there are inherent
difficulties in predicting certain important factors that could
impact the future performance or results of its business. Among the
factors that could cause results to differ materially from those
indicated by such forward-looking statements are: local, regional
and national economic conditions and the impact they may have on
Archrock Partners and its customers; changes in tax laws that
impact master limited partnerships; conditions in the oil and gas
industry, including a sustained decrease in the level of supply or
demand for oil or natural gas or a sustained decrease in the price
of oil or natural gas; changes in safety, health, environmental and
other regulations; the financial condition of Archrock Partners’
customers; the failure of any customer to perform its contractual
obligations; and the performance of Archrock, Inc.
These forward-looking statements are also affected by the risk
factors, forward-looking statements and challenges and
uncertainties described in Archrock Partners’ Annual Report on Form
10-K for the year ended December 31, 2016, and those set forth from
time to time in Archrock Partners’ filings with the Securities and
Exchange Commission, which are available at www.archrock.com.
Except as required by law, Archrock Partners expressly disclaims
any intention or obligation to revise or update any forward-looking
statements whether as a result of new information, future events or
otherwise.
ARCHROCK PARTNERS, L.P. |
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS |
(In thousands, except per unit
amounts) |
|
|
Three Months Ended |
|
September 30, |
|
June 30, |
|
September 30, |
|
2017 |
|
2017 |
|
2016 |
Revenue |
$ |
140,191 |
|
|
$ |
138,255 |
|
|
$ |
135,478 |
|
|
|
|
|
|
|
Costs and
expenses: |
|
|
|
|
|
Cost of
sales (excluding depreciation and amortization expense) —
affiliates |
62,584 |
|
|
53,995 |
|
|
50,854 |
|
Depreciation and amortization |
35,787 |
|
|
36,275 |
|
|
38,087 |
|
Long-lived asset impairment |
5,368 |
|
|
3,081 |
|
|
7,909 |
|
Restructuring charges |
— |
|
|
— |
|
|
1,946 |
|
Selling,
general and administrative — affiliates |
20,711 |
|
|
18,303 |
|
|
17,917 |
|
Interest
expense |
21,839 |
|
|
21,299 |
|
|
20,034 |
|
Other
income, net |
(2,793 |
) |
|
(933 |
) |
|
(890 |
) |
Total
costs and expenses |
143,496 |
|
|
132,020 |
|
|
135,857 |
|
Income (loss) before
income taxes |
(3,305 |
) |
|
6,235 |
|
|
(379 |
) |
Provision for income
taxes |
708 |
|
|
960 |
|
|
188 |
|
Net
income (loss) |
$ |
(4,013 |
) |
|
$ |
5,275 |
|
|
$ |
(567 |
) |
|
|
|
|
|
|
General partner
interest in net income (loss) |
$ |
(82 |
) |
|
$ |
105 |
|
|
$ |
(11 |
) |
|
|
|
|
|
|
Common unitholder
interest in net income (loss) |
$ |
(3,931 |
) |
|
$ |
5,170 |
|
|
$ |
(556 |
) |
|
|
|
|
|
|
Weighted average common
units outstanding used in income (loss) per common unit (1): |
|
|
|
|
|
Basic and
diluted |
68,101 |
|
|
65,399 |
|
|
59,837 |
|
|
|
|
|
|
|
Income (loss) per
common unit (1): |
|
|
|
|
|
Basic and diluted |
$ |
(0.06 |
) |
|
$ |
0.08 |
|
|
$ |
(0.01 |
) |
(1) Basic and diluted income (loss) per
common unit is computed using the two-class method. Under the
two-class method, basic and diluted income (loss) per common unit
is determined by dividing income (loss) allocated to the common
units after deducting the amounts allocated to our general partner
(including distributions to our general partner on its incentive
distribution rights) and participating securities (unvested phantom
units with nonforfeitable tandem distribution equivalent rights to
receive cash distributions), by the weighted average number of
outstanding common units excluding the weighted average number of
outstanding participating securities during the period.
ARCHROCK PARTNERS, L.P. |
UNAUDITED SUPPLEMENTAL
INFORMATION |
(In thousands, except per unit amounts,
percentages and ratios) |
|
|
Three Months Ended |
|
September 30, |
|
June 30, |
|
September 30, |
|
2017 |
|
2017 |
|
2016 |
Revenue |
$ |
140,191 |
|
|
$ |
138,255 |
|
|
$ |
135,478 |
|
|
|
|
|
|
|
Gross margin (1) |
$ |
77,607 |
|
|
$ |
84,260 |
|
|
$ |
84,624 |
|
Gross margin
percentage |
55 |
% |
|
61 |
% |
|
62 |
% |
|
|
|
|
|
|
EBITDA, as adjusted
(1) |
$ |
59,885 |
|
|
$ |
66,927 |
|
|
$ |
67,920 |
|
% of
revenue |
43 |
% |
|
48 |
% |
|
50 |
% |
|
|
|
|
|
|
Capital
expenditures |
$ |
44,327 |
|
|
$ |
57,522 |
|
|
$ |
17,626 |
|
Less: Proceeds from
sale of property, plant and equipment |
(12,254 |
) |
|
(875 |
) |
|
(4,514 |
) |
Net capital
expenditures |
$ |
32,073 |
|
|
$ |
56,647 |
|
|
$ |
13,112 |
|
|
|
|
|
|
|
Cash flows from
operating activities |
$ |
38,414 |
|
|
$ |
38,043 |
|
|
$ |
64,813 |
|
Distributable cash flow
(2) |
$ |
29,809 |
|
|
$ |
39,081 |
|
|
$ |
43,703 |
|
|
|
|
|
|
|
Distributions declared
for the period per common unit |
$ |
0.2850 |
|
|
$ |
0.2850 |
|
|
$ |
0.2850 |
|
Distributions declared
to all unitholders for the period |
$ |
20,459 |
|
|
$ |
19,121 |
|
|
$ |
17,513 |
|
Distributable cash flow
coverage (3) |
|
1.46 |
x |
|
|
2.04 |
x |
|
|
2.50 |
x |
|
|
|
|
|
|
|
September 30, |
|
June 30, |
|
September 30, |
|
2017 |
|
2017 |
|
2016 |
Debt (4) |
$ |
1,317,447 |
|
|
$ |
1,377,152 |
|
|
$ |
1,370,382 |
|
Total partners’
capital |
528,789 |
|
|
486,703 |
|
|
478,200 |
|
(1) Management believes EBITDA, as
adjusted, and gross margin provide useful information to investors
because these non-GAAP measures, when viewed with our GAAP results
and accompanying reconciliations, provide a more complete
understanding of our performance than GAAP results
alone. Management uses these non-GAAP measures as supplemental
measures to review current period operating performance,
comparability measures and performance measures for period to
period comparisons.(2) Management uses distributable cash
flow, a non-GAAP measure, as a supplemental performance and
liquidity measure. Using this metric, management can quickly
compute the coverage ratio of estimated cash flows to planned cash
distributions.(3) Defined as distributable cash flow for the
period divided by distributions declared to all unitholders for the
period.(4) Carrying values are shown net of unamortized debt
discounts and unamortized deferred financing costs.
ARCHROCK PARTNERS, L.P. |
UNAUDITED SUPPLEMENTAL
INFORMATION |
(In thousands, except per unit
amounts) |
|
|
Three Months Ended |
|
September 30, |
|
June 30, |
|
September 30, |
|
2017 |
|
2017 |
|
2016 |
Reconciliation of GAAP
to Non-GAAP Financial Information: |
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) |
$ |
(4,013 |
) |
|
$ |
5,275 |
|
|
$ |
(567 |
) |
Depreciation and amortization |
35,787 |
|
|
36,275 |
|
|
38,087 |
|
Long-lived asset impairment |
5,368 |
|
|
3,081 |
|
|
7,909 |
|
Restructuring charges |
— |
|
|
— |
|
|
1,946 |
|
Selling,
general and administrative — affiliates |
20,711 |
|
|
18,303 |
|
|
17,917 |
|
Interest
expense |
21,839 |
|
|
21,299 |
|
|
20,034 |
|
Other
income, net |
(2,793 |
) |
|
(933 |
) |
|
(890 |
) |
Provision
for income taxes |
708 |
|
|
960 |
|
|
188 |
|
Gross
margin (1) |
77,607 |
|
|
84,260 |
|
|
84,624 |
|
Non-cash
selling, general and administrative — affiliates |
196 |
|
|
37 |
|
|
323 |
|
Less:
Selling, general and administrative — affiliates |
(20,711 |
) |
|
(18,303 |
) |
|
(17,917 |
) |
Less:
Other income, net |
2,793 |
|
|
933 |
|
|
890 |
|
EBITDA,
as adjusted (1) |
59,885 |
|
|
66,927 |
|
|
67,920 |
|
Less:
Provision for income taxes |
(708 |
) |
|
(960 |
) |
|
(188 |
) |
Less:
Gain on sale of property, plant and equipment (in Other income,
net) |
(2,759 |
) |
|
(907 |
) |
|
(795 |
) |
Less:
Cash interest expense |
(19,262 |
) |
|
(19,659 |
) |
|
(18,449 |
) |
Less:
Maintenance capital expenditures |
(7,347 |
) |
|
(6,320 |
) |
|
(4,785 |
) |
Distributable cash flow (2) |
$ |
29,809 |
|
|
$ |
39,081 |
|
|
$ |
43,703 |
|
|
|
|
|
|
|
Cash
flows from operating activities |
$ |
38,414 |
|
|
$ |
38,043 |
|
|
$ |
64,813 |
|
Provision
for doubtful accounts |
(1,346 |
) |
|
(663 |
) |
|
(705 |
) |
Restructuring charges |
— |
|
|
— |
|
|
1,946 |
|
Deferred
income tax provision |
(686 |
) |
|
(930 |
) |
|
(188 |
) |
Payments
for settlement of interest rate swaps that include financing
elements |
(364 |
) |
|
(460 |
) |
|
(754 |
) |
Maintenance capital expenditures |
(7,347 |
) |
|
(6,320 |
) |
|
(4,785 |
) |
Change in
assets and liabilities |
1,138 |
|
|
9,411 |
|
|
(16,624 |
) |
Distributable cash flow (2) |
$ |
29,809 |
|
|
$ |
39,081 |
|
|
$ |
43,703 |
|
|
|
|
|
|
|
Net
income (loss) |
$ |
(4,013 |
) |
|
$ |
5,275 |
|
|
$ |
(567 |
) |
Items: |
|
|
|
|
|
Long-lived asset impairment |
5,368 |
|
|
3,081 |
|
|
7,909 |
|
Restructuring charges |
— |
|
|
— |
|
|
1,946 |
|
Net
income, excluding items |
$ |
1,355 |
|
|
$ |
8,356 |
|
|
$ |
9,288 |
|
|
|
|
|
|
|
Diluted
income (loss) per common unit |
$ |
(0.06 |
) |
|
$ |
0.08 |
|
|
$ |
(0.01 |
) |
Adjustment for items per common unit |
0.08 |
|
|
0.04 |
|
|
0.16 |
|
Diluted
income per common unit, excluding items (1) |
$ |
0.02 |
|
|
$ |
0.12 |
|
|
$ |
0.15 |
|
(1) Management believes EBITDA, as
adjusted, diluted income per common unit, excluding items, and
gross margin provide useful information to investors because these
non-GAAP measures, when viewed with our GAAP results and
accompanying reconciliations, provide a more complete understanding
of our performance than GAAP results alone. Management uses
these non-GAAP measures as supplemental measures to review current
period operating performance, comparability measures and
performance measures for period-to-period
comparisons.(2) Management uses distributable cash flow, a
non-GAAP measure, as a supplemental performance and liquidity
measure. Using this metric, management can quickly compute the
coverage ratio of estimated cash flows to planned cash
distributions.
ARCHROCK PARTNERS, L.P. |
UNAUDITED SUPPLEMENTAL
INFORMATION |
(In thousands, except
percentages) |
|
|
Three Months Ended |
|
September 30, |
|
June 30, |
|
September 30, |
|
2017 |
|
2017 |
|
2016 |
|
|
|
|
|
|
Total available
horsepower (at period end) (1) (2) |
3,296 |
|
|
3,281 |
|
|
3,221 |
|
|
|
|
|
|
|
Total operating
horsepower (at period end) (1) (3) |
2,910 |
|
|
2,860 |
|
|
2,762 |
|
|
|
|
|
|
|
Average operating
horsepower |
2,890 |
|
|
2,843 |
|
|
2,751 |
|
|
|
|
|
|
|
Horsepower
Utilization: |
|
|
|
|
|
Spot (at
period end) |
88 |
% |
|
87 |
% |
|
86 |
% |
Average |
88 |
% |
|
87 |
% |
|
84 |
% |
|
|
|
|
|
|
Total available
contract operations horsepower of Archrock, Inc. and Archrock
Partners (at period end) (2) |
3,866 |
|
|
3,827 |
|
|
3,984 |
|
|
|
|
|
|
|
Total operating
contract operations horsepower of Archrock, Inc. and Archrock
Partners (at period end) (3) |
3,204 |
|
|
3,118 |
|
|
3,153 |
|
(1) Includes compressor units comprising
approximately 28,000, 23,000 and 6,000 horsepower leased from
Archrock as of September 30, 2017, June 30, 2017 and
September 30, 2016, respectively. Excludes compressor units
comprising approximately 33,000, 6,000 and 100 horsepower leased to
Archrock as of September 30, 2017, June 30, 2017 and September
30, 2016, respectively. (2) Defined as idle and operating
horsepower. New compressor units completed by a third party
manufacturer that have been delivered to us are included in the
fleet.(3) Defined as horsepower that is operating under
contract and horsepower that is idle but under contract and
generating revenue such as standby revenue.
For information,
contact:
David Skipper, 281-836-8155
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