THE WOODLANDS, Texas,
Feb. 25, 2016 /PRNewswire/
-- Summit Midstream Partners, LP (NYSE: SMLP) announced today
that it has entered into an agreement with a wholly owned
subsidiary of Summit Midstream Partners, LLC ("Summit
Investments"), to acquire all of the issued and outstanding
membership interests of Summit Utica, Meadowlark Midstream, and
Tioga Midstream. In addition, SMLP will acquire Summit
Investments' 40.0% equity interest in each of Ohio Gathering and
Ohio Condensate. The total transaction is estimated at
$1.2 billion with consideration
structured as a $360.0 million
Initial Payment and a Deferred Payment estimated at approximately
$800.0 million to $900.0 million due
in 2020. The Deferred Payment will be based on a 6.5x
multiple of the average of 2018 and 2019 adjusted EBITDA from the
Drop Down Assets, adjusted for the Initial Payment, and the capital
expenditures and adjusted EBITDA from the Drop Down Assets incurred
during the deferral period.
![Summit Midstream Partners Logo. Summit Midstream Partners Logo.](http://photos.prnewswire.com/prnvar/20120927/MM82470LOGO)
In conjunction with the drop down, SMLP has increased its
revolving credit facility from $700.0
million to $1.25
billion. Given the deferral structure and the
increased capacity available under its credit facility, SMLP will
not need to access the capital markets to meet its currently
planned capital expenditure program. The Deferred Payment due
in 2020 may be made in cash or SMLP units, at the discretion of
SMLP, further eliminating the potential need for the capital
markets. The transaction, which SMLP expects to be
immediately accretive to distributable cash flow on a per unit
basis, is expected to close in March
2016.
Steve Newby, President and CEO of
SMLP commented, "With this transaction, SMLP is being transformed
from a drop down story into an organic growth story with more than
20% of SMLP's expected 2016 adjusted EBITDA originating from our
fee-based gathering services in the Utica. Summit Utica and
Ohio Gathering provide SMLP with an expansive gathering footprint
in the Utica, and we expect that
cash flows from this play will represent more than 40% of SMLP's
total adjusted EBITDA by 2019 as volumes on our systems continue to
grow. This drop down transaction also diversifies our
customer base and enhances relationships with, or adds, several
strong and well capitalized counterparties into SMLP's customer
portfolio, including Gulfport, XTO, EOG and Hess. Together,
these customers represent over 70% of the volumes associated with
the Drop Down Assets.
The accelerated drop down of all of the operating assets from
Summit Investments, the deferred payment structure, and the
attractive all-in drop down multiple work together in this
challenging commodity and capital markets environment to
demonstrate the substantial and ongoing support of Energy Capital
Partners, the ultimate owner of our general partner. This
support allows us to move high growth Utica assets to SMLP without the need to
access the public debt or equity capital markets and enables the
transaction to be immediately accretive to distributable cash flow
per unit. We expect our distribution coverage ratio to
average 1.15x for 2016 with 2016 distributable cash flow increasing
30% over our fourth quarter of 2015 run rate. The
distribution coverage ratio is expected to continue to grow through
the deferral period. Given the current uncertainty and
volatility in the market, we plan on evaluating distribution per
unit growth on a quarter to quarter basis throughout
2016.
I would also like to thank our bank group for their continued
support and confidence in the SMLP business. We increased our
revolving credit facility by $550.0 million
to $1.25 billion in conjunction with this transaction,
providing us with the pro forma liquidity we need to continue to
execute our growth plans without any further capital markets
needs."
2016 Financial Guidance
Pro forma for the 2016 Drop Down, SMLP is providing financial
guidance for 2016 with adjusted EBITDA expected to range from
$260.0 million to $290.0 million,
including approximately $75.0 million to
$85.0 million attributable to the Drop Down Assets.
The 2016 financial guidance is based on an assumed Henry Hub
average natural gas price of $2.30
per MMBtu and West Texas Intermediate average crude oil price of
$41.00 per barrel.
Given the challenging commodity price environment, coupled with
the current volatility of the capital markets, SMLP will take a
measured approach regarding the pace of its distribution per unit
growth rate in 2016. In the near-term, SMLP intends to focus
on building distribution coverage and strengthening its balance
sheet. We expect SMLP's distribution coverage ratio for 2016
to range from 1.10x to 1.20x.
Overview of Drop Down Assets
Summit Midstream Utica, LLC ("Summit Utica") is a natural gas
gathering system located in the Appalachian Basin in southeastern
Ohio serving producers targeting
the Utica and Point Pleasant shale formations. The
system is currently in service and under development with fourth
quarter of 2015 volume throughput of 75 million cubic feet per day
("MMcf/d"). Upon full development, Summit Utica will be
composed of 60 miles of low-pressure and high-pressure gathering
pipelines and three compressor and dehydration stations with total
throughput capacity of 450 MMcf/d. The Summit Utica system
gathers and delivers natural gas, primarily under long-term,
fee-based contracts which include acreage dedications. XTO
Energy Inc. serves as the anchor customer on the system. The
system interconnects with Energy Transfer Partners, L.P.'s Utica
Ohio River Pipeline.
Ohio Gathering Company, L.L.C. ("Ohio Gathering") is a natural
gas gathering system located in the core of the Utica Shale in
southeastern Ohio which is
currently in service and under development. The gathering
system, which is currently in service and under development, spans
the condensate, rich-gas, and dry-gas windows of the Utica Shale
for multiple producers that are targeting natural gas, condensate
and NGL production from the Utica
and Point Pleasant formations
across Harrison, Guernsey, Belmont, Noble, and Monroe counties in Ohio. Currently, the
system is composed of more than 250 miles of low-pressure and
high-pressure gathering pipeline and offers throughput capacity in
excess of 1.9 Bcf/d. Condensate and rich gas production is
gathered, compressed, dehydrated and delivered to the Cadiz and Seneca processing complexes, which are owned
by a joint venture owned between MPLX LP ("MPLX") and The Energy
and Minerals Group ("EMG"). Dry gas production is gathered,
compressed, dehydrated and delivered to a downstream interconnect
with TETCO and another third party pipeline. All gathering
services on the Ohio Gathering system are provided pursuant to
long-term, fee-based gathering agreements. Gulfport Energy
Corporation ("Gulfport") serves as the anchor customer for Ohio
Gathering. In the fourth quarter of 2015, Ohio Gathering
gathered an average of 813 MMcf/d of natural gas. SMLP is
acquiring a 40.0% equity interest in Ohio Gathering; MPLX and EMG
own the remaining 60.0%.
Ohio Condensate Company, L.L.C. ("Ohio Condensate") is a 23
thousand barrel per day ("Mbbl/d") condensate stabilization
facility located in the core of the Utica Shale in southeastern
Ohio. The facility commenced operations in February 2015 and is underpinned by a long-term,
fee-based agreement with Gulfport. Condensate stabilization
allows for producers to capture the NGLs that would otherwise flash
from condensate in atmospheric conditions. Ohio Condensate is
the largest stabilization facility in the Utica Shale and will
ultimately serve as the origination point for MPLX's Cornerstone
Pipeline which will deliver condensate to Marathon Petroleum's
refinery in Canton, Ohio. In
the fourth quarter of 2015, Ohio Condensate handled an average of
18 Mbbl/d of condensate. SMLP is acquiring a 40.0% equity
interest in Ohio Condensate; MPLX owns the remaining 60.0%.
Tioga Midstream, LLC ("Tioga Midstream") is a crude oil,
produced water and associated natural gas gathering system which is
currently in service with 73 miles of crude oil gathering pipeline,
83 miles of produced water gathering pipeline and 79 miles of
associated natural gas gathering pipeline. The Tioga
Midstream system is located in Williams
County, North Dakota and has 20 Mbbl/d of crude oil
gathering capacity, 25 Mbbl/d of produced water gathering capacity
and 14 MMcf/d of natural gas gathering capacity. All
gathering services on the Tioga Midstream system are provided
pursuant to long-term, fee-based gathering agreements with Hess
Corp. ("Hess"), which is primarily targeting crude oil production
from the Bakken and Three Forks shale formations. All crude
oil, produced water and natural gas gathered on the Tioga Midstream
system is delivered to downstream pipelines and disposal wells (for
produced water) that are owned and operated by Hess. In the
fourth quarter of 2015, Tioga Midstream gathered an average of 5
Mbbl/d of crude oil, 5 Mbbl/d of produced water, and 7 MMcf/d of
natural gas.
Meadowlark Midstream Company, LLC ("Meadowlark Midstream") is
currently composed of two separate gathering systems, including (i)
an associated natural gas gathering and processing system located
in the DJ Basin serving producers primarily targeting crude oil
production from the Niobrara and
Codell shale formations in northern Colorado and southern Wyoming ("Niobrara G&P") and (ii) a crude
oil and produced water gathering system located in the Williston Basin serving an independent
producer targeting the Bakken and Three Forks shale formations in
northwestern North Dakota
("Blacktail").
- The Niobrara G&P system is currently in service with 91
miles of low-pressure and high-pressure gathering pipeline and a
cryogenic natural gas processing plant with processing capacity of
15 MMcf/d; processing capacity is currently being expanded to 20
MMcf/d pursuant to a long-term, fee-based gathering and processing
agreement with EOG Resources, Inc. Volume throughput on the
Niobrara G&P system averaged 7 MMcf/d in the fourth quarter of
2015. Residue gas is delivered to the Colorado Interstate Gas
pipeline and processed NGLs are delivered to the Overland Pass
Pipeline.
- The Blacktail gathering system is currently in service with 53
miles of crude oil gathering pipeline and 96 miles of produced
water gathering pipeline. The Blacktail system is located in
Williams County, North Dakota and
has 40 Mbbls/d of crude oil throughput capacity and 30 Mbbls/d of
produced water throughput capacity. All gathering services on the
Blacktail system are provided pursuant to a long-term, fee-based
gathering agreement with an independent producer that is primarily
targeting crude oil production from the Bakken and Three Forks
shale formations. Crude oil on the Blacktail system is currently
delivered to the COLT rail terminal in Epping, North Dakota and produced water is
delivered to third-party disposal wells located throughout
Williams County, North Dakota. In
the fourth quarter of 2015, Blacktail gathered an average of 4
Mbbl/d of crude oil and 7 Mbbl/d of produced water.
Transaction Structure Overview
SMLP has entered into a Contribution Agreement with Summit
Midstream Partners Holdings, LLC ("SMP Holdings"), a wholly owned
subsidiary of Summit Investments to acquire all of the issued and
outstanding membership interests of Summit Utica, Meadowlark
Midstream and Tioga Midstream. In addition, SMLP will acquire
SMP Holdings' 40.0% equity interest in each of Ohio Gathering and
Ohio Condensate. Collectively, we refer to all of the assets
being acquired as the "Drop Down Assets" and we refer to the
transaction as the "2016 Drop Down".
The consideration that SMLP pays for the Drop Down Assets will
consist of (i) an initial $360.0
million cash payment (the "Initial Payment") which will be
funded with borrowings under SMLP's upsized $1.25 billion revolving credit facility, and (ii)
a deferred payment which will be paid no later than December 31, 2020 (the "Deferred Payment").
At the discretion of the board of directors of SMLP's general
partner, Summit Midstream GP, LLC, the Deferred Payment can be made
in either cash or SMLP common units, or a combination
thereof. The transaction is expected to close in March 2016 (the "Initial Close").
The Deferred Payment will be equal to: (a) six-and-one-half
(6.5) multiplied by the average adjusted EBITDA of the Drop Down
Assets for 2018 and 2019; less (b) the Initial Payment; less (c)
all capital expenditures incurred for the Drop Down Assets between
the Initial Close and December 31, 2019; plus (d) all adjusted
EBITDA from the Drop Down Assets between the Initial Close and
December 31, 2019.
Management estimates that the Deferred Payment will be
approximately $800.0 million to $900.0
million and currently expects that the Deferred Payment will
be financed in 2020 with a combination of (i) net proceeds from the
sale of SMLP common units, (ii) net proceeds from the issuance of
senior unsecured debt, (iii) borrowings under SMLP's revolving
credit facility, and/or (iv) other internally generated sources of
cash.
SMLP expects to incur approximately $400.0 million to $500.0 million of growth capex
associated with the Drop Down Assets over the approximate four-year
period, from the Initial Close through 2019. Upon settlement
of the Deferred Payment, the all-in acquisition multiple (the
Initial Payment and the Deferred Payment) is expected to represent
a 6.5x multiple of the Drop Down Assets' 2018 and 2019 average
EBITDA and a less than 6.0x multiple of 2020 adjusted EBITDA.
The terms of the Contribution Agreement were approved by the
conflicts committee of the board of directors of our general
partner, which committee consists entirely of independent
directors, and by the entire board of SMLP's general partner. The
conflicts committee engaged Evercore Partners to act as its
independent financial advisor and to render a fairness opinion, and
Akin Gump Strauss Hauer & Feld, LLP to act as its legal
advisor.
Fourth Quarter and Full Year 2015 Financial Results
SMLP announced today its financial and operating results for the
three months and year ended December
31, 2015. SMLP reported fourth quarter 2015 adjusted
EBITDA of $53.3 million and adjusted
distributable cash flow of $38.3
million compared to $54.1
million and $40.4 million,
respectively, for the fourth quarter of 2014. SMLP reported a
net loss of $220.5 million for the
fourth quarter of 2015, primarily due to a $248.9 million noncash goodwill impairment
related to the Polar and Divide
and Grand River systems, compared
to a net loss of $34.1 million for
the fourth quarter of 2014, which included a $54.2 million noncash goodwill impairment related
to our Bison Midstream system. Natural gas volume throughput
averaged 1,308 MMcf/d in the fourth quarter of 2015 compared to
1,491 MMcf/d in the fourth quarter of 2014 and 1,390 MMcf/d in the
third quarter of 2015. Crude oil and produced water volume
throughput in the fourth quarter of 2015 averaged 65.9 Mbbl/d
compared to 47.1 Mbbl/d in the fourth quarter of 2014 and 51.5
Mbbl/d in the third quarter of 2015.
For the year ended December 31,
2015, SMLP reported adjusted EBITDA of $210.4 million and adjusted distributable cash
flow of $154.3 million compared to
$204.9 million and $151.4 million, respectively, for the comparable
period in 2014. SMLP reported a net loss of $186.8 million for the year ended December 31, 2015 compared to a net loss of
$14.7 million for the year ended
December 31, 2014. Natural gas
volume throughput averaged 1,449 MMcf/d for the year ended
December 31, 2015 compared to 1,418
MMcf/d for the comparable period in 2014. Crude oil and
produced water volume throughput averaged 55.0 Mbbl/d for the year
ended December 31, 2015 compared to
33.6 Mbbl/d for the comparable period in 2014.
Steve Newby, President and Chief
Executive Officer commented, "SMLP reported strong fourth quarter
financial results driven primarily by a combination of higher
liquids volumes across our Bakken gathering system and reduced
G&A and operation and maintenance expense across all of our
systems. Liquids volumes in the Bakken increased by 28%
compared to the third quarter of 2015. We continue to benefit
from our highly contracted and fee-based business model, which
provides us with cash flow protection and the ability to perform
consistently, even in a challenging commodity price environment.
Over the last several months, we have received a great deal of
inquiry regarding our counterparty exposure. While we believe
that we have a strong and high-quality contract portfolio, it is
our role as a third-party gatherer that is the best mitigant to any
counterparty exposure that we have. The vast majority of
SMLP's gathering assets are strategically positioned at the
beginning of the midstream value chain, meaning that the majority
of our infrastructure is connected directly to our customers'
wellheads and pad sites. Our gathering systems are typically
the first third-party infrastructure through which our customers'
commodities flow and in many cases, the only way for our customers
to get their production to market. As a result, we believe
that we are a critical service provider that cannot be easily
substituted and we expect that our customers will continue to
perform, as we continue to perform, pursuant to our long-term
contracts, in order to access downstream markets."
Fourth Quarter 2015 Segment Results
Marcellus Shale
The Mountaineer Midstream gathering system provides SMLP's
midstream services for the Marcellus Shale reportable segment. This
system gathers high-pressure natural gas received from upstream
pipeline interconnections with third parties, including Crestwood
Equity Partners LP and Antero Midstream Partners, LP. Antero
Resources Corp. ("Antero") is the only customer on the Mountaineer
Midstream system. Natural gas on the Mountaineer Midstream
system is delivered to the Sherwood Processing Complex located in
Doddridge County, West Virginia.
Segment adjusted EBITDA totaled $4.7
million for the fourth quarter of 2015, up 10.7% over the
fourth quarter of 2014, primarily due to the receipt of minimum
volume commitments ("MVC") shortfall payments related to the Zinnia
Loop, partially offset by a 20.3% decrease in volume throughput (to
366 MMcf/d). Segment adjusted EBITDA also benefitted from
$0.5 million of lower combined
operation and maintenance and general and administrative
("G&A") expense in the fourth quarter of 2015 compared to the
fourth quarter of 2014.
Lower volume throughput relative to the fourth quarter of 2014
resulted from Antero slowing the pace of its well completion
activity on wells located upstream of the Mountaineer Midstream
system throughout 2015. Antero continues to defer completion
activities on its Marcellus Shale wells located upstream of the
Mountaineer Midstream system. SMLP expects volumes on the
Mountaineer Midstream system to increase throughout the second and
third quarters of 2016 as Antero completes work on certain of its
previously identified 50 deferred well completions. Volume
throughput in the fourth quarter of 2015 was down 19.9% from 457
MMcf/d in the third quarter of 2015.
Our Marcellus Shale segment gathering agreement includes MVCs,
which largely mitigate the financial impact associated with volume
declines. As a result, lower volume throughput in the fourth
quarter of 2015 primarily translated into larger MVC shortfall
payments, thereby minimizing the impact on segment adjusted
EBITDA.
Segment G&A expenses decreased $0.5
million in the fourth quarter of 2015, relative to the
fourth quarter of 2014, primarily related to our decision to
discontinue allocating certain corporate overhead expenses to the
reportable segments beginning in the first quarter of
2015.
Williston Basin
The Bison Midstream and the Polar and Divide gathering systems provide SMLP's
midstream services for the Williston Basin reportable segment.
Bison Midstream gathers and delivers low-pressure associated
natural gas production from pad sites located in Mountrail and Burke counties in North Dakota to third-party pipelines serving
Aux Sable Midstream, LLC's processing plant in Channahon, Illinois. Polar and
Divide gathers and delivers crude
oil received from pad sites located in Williams and Divide counties in North Dakota to the Colt Hub rail terminal in
Epping, North Dakota and, as of
January 2016, to the Basin Transload
rail terminal in Columbus, North
Dakota. The Basin Transload rail terminal is served by the
Stampede Lateral transmission pipeline, which was commissioned at
the end of 2015 and is contracted under a long-term, fee-based
agreement with Global Partners, LP and includes minimum volume
commitments. SMLP expects to add a third delivery point for
its crude oil customers by the end of the first quarter of 2016,
the Little Muddy Interconnect, which will provide customers with
access to Enbridge's North Dakota Pipeline System and the ability
to access various downstream markets including Chicago, Patoka, Cushing, Eastern
Canada, and the Gulf Coast. Produced water gathered on
the Polar and Divide system is
delivered to various third-party disposal wells connected to our
gathering infrastructure.
Segment adjusted EBITDA totaled $14.6
million for the fourth quarter of 2015, up 32.8% from the
fourth quarter of 2014 primarily due to higher liquids volumes on
the Polar and Divide system,
partially offset by lower volumes and lower margins (associated
with a percent-of-proceeds contract) on the Bison Midstream
system. Compared to the fourth quarter of 2014, liquids
volumes on the Polar and Divide
system increased 39.9% to 65.9 Mbbl/d in the fourth quarter of
2015. Compared to the fourth quarter of 2014, associated
natural gas volumes on the Bison system decreased 13.6% to 19
MMcf/d in the fourth quarter of 2015. Stronger liquids
volumes were positively impacted by producers completing new wells
across our gathering footprint during the quarter, together with
our work to connect pad sites that previously had liquids volumes
being gathered by third-party trucks. Liquids volumes and
natural gas volumes in the fourth quarter of 2015 were up 28.0% and
11.8%, respectively, compared to the third quarter of 2015.
Adjusted EBITDA for the Williston Basin segment in the fourth quarter
of 2015 was negatively impacted by $0.8
million of higher segment operation and maintenance expense,
but positively impacted by $1.3
million of lower segment G&A expense, compared to the
fourth quarter of 2014. Lower segment G&A expense in the
fourth quarter of 2015, compared to the fourth quarter of 2014,
resulted primarily from the aforementioned decision to discontinue
allocating certain corporate overhead expenses beginning in the
first quarter of 2015.
Barnett Shale
The DFW Midstream gathering system provides SMLP's midstream
services for the Barnett Shale reportable segment. This
system gathers and delivers low-pressure natural gas received from
pad sites primarily located in southeastern Tarrant County, Texas to downstream intrastate
pipelines serving various natural gas hubs in the region.
Segment adjusted EBITDA totaled $14.1
million for the fourth quarter of 2015, down 5.6% from the
fourth quarter of 2014 primarily due to lower volume
throughput. Volume throughput of 325 MMcf/d in the fourth
quarter of 2015 was negatively impacted by a natural decline from
our customers' existing wells on the system, partially offset by a
10-well pad site, which was commissioned by one of our customers in
December 2015. These ten wells, coupled with three additional
wells that were commissioned by a different customer in
mid-November 2015, stimulated volume
throughput late in the fourth quarter of 2015, with December 2015 volume throughput averaging 356
MMcf/d. Volume throughput in the fourth quarter of 2015 was
flat with the third quarter of 2015.
Customers on the DFW Midstream system have another 15 previously
identified drilled and uncompleted wells ("DUCs") that are in
various stages of the completion process; we expect these 15 DUCs
will be producing by the end of the second quarter of 2016.
In addition, one producer recently moved a drilling rig back into
our service area to drill six new wells which we expect to begin
production in the second half of 2016.
Segment adjusted EBITDA for the fourth quarter of 2015
benefitted from a $1.5 million
decrease in operation and maintenance expense relative to the
fourth quarter of 2014 as well as the aforementioned decision to
discontinue allocating certain corporate overhead expenses
beginning in the first quarter of 2015. Segment G&A
expenses decreased $0.8 million in
the fourth quarter of 2015 compared to the fourth quarter of
2014.
Piceance Basin
The Grand River gathering system provides SMLP's midstream
services for the Piceance Basin reportable segment. This
system provides low-pressure and high-pressure natural gas
gathering and processing services for producers operating in
western Colorado and eastern
Utah.
Segment adjusted EBITDA totaled $26.0
million for the fourth quarter of 2015, down 5.2% over the
fourth quarter of 2014. Fourth quarter 2015 volume throughput
on the Grand River system averaged 598 MMcf/d, a decrease of 6.3%
from 638 MMcf/d in the fourth quarter of 2014, primarily as a
result of our anchor customer's continued suspension of drilling
activities in the basin and the resulting natural declines from
existing wells. The impact of these volume declines were
partially offset by higher MVC shortfall payment adjustments
associated with certain of our customers' gas gathering
agreements. Volume throughput was up 1.2% (from 591 MMcf/d)
relative to the third quarter of 2015. In addition to lower
volume throughput, lower commodity prices negatively impacted the
margins that we earn from our percent-of-proceeds contracts and the
condensate drip that we retain on the Legacy Grand River system and
sell for our own account.
Segment adjusted EBITDA for the fourth quarter of 2015 also
benefitted from the aforementioned decision to discontinue
allocating certain corporate overhead expenses beginning in the
first quarter of 2015. Segment G&A expenses decreased
$1.5 million in the fourth quarter of
2015 compared to the fourth quarter of 2014.
The majority of the gathering agreements for the Piceance Basin
segment include MVCs, which largely mitigate the financial impact
associated with volume declines. As a result, lower volume
throughput in the fourth quarter of 2015 primarily translated into
larger MVC shortfall payments, thereby minimizing the impact on
segment adjusted EBITDA.
The following table presents average daily throughput by
reportable segment:
|
Three months
ended December
31,
|
|
|
Twelve months
ended December,
|
|
2015
|
|
|
2014
|
|
|
|
2015
|
|
|
2014
|
|
Average daily
throughput (MMcf/d):
|
|
|
|
|
|
|
|
|
|
|
|
|
Marcellus
Shale
|
366
|
|
|
459
|
|
|
|
477
|
|
|
382
|
|
Williston
Basin
|
19
|
|
|
22
|
|
|
|
18
|
|
|
18
|
|
Barnett
Shale
|
325
|
|
|
372
|
|
|
|
352
|
|
|
358
|
|
Piceance
Basin
|
598
|
|
|
638
|
|
|
|
602
|
|
|
660
|
|
Aggregate average
daily throughput
|
1,308
|
|
|
1,491
|
|
|
|
1,449
|
|
|
1,418
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average daily
throughput (Mbbl/d):
|
|
|
|
|
|
|
|
|
|
|
|
|
Williston
Basin
|
65.9
|
|
|
47.1
|
|
|
|
55.0
|
|
|
33.6
|
|
Average daily
throughput
|
65.9
|
|
|
47.1
|
|
|
|
55.0
|
|
|
33.6
|
|
Fourth Quarter 2015 Goodwill Impairments
In connection with (i) increased market volatility, (ii) the
decrease in market values of comparable companies, (iii) the
continued trend of falling commodity prices and (iv) the
finalization of our annual financial and operating plans which took
into account changes resulting from ongoing contract negotiations
and expected levels of drilling activity, we concluded that a
triggering event occurred during the fourth quarter of 2015
requiring that we test the goodwill associated with our
Grand River and Polar and
Divide reporting units. Our
analysis indicated that the carrying values for Grand River and Polar and Divide exceeded their estimated fair
values. Further analysis indicated that all of the goodwill
related to Grand River and Polar
and Divide was impaired. As
such, SMLP recognized a noncash goodwill impairment of $45.5 million for Grand
River and a noncash goodwill impairment of $203.4 million for Polar and Divide.
MVC Shortfall Payments
SMLP billed its customers $41.5
million in the fourth quarter of 2015 because those
customers did not meet their MVCs. For those customers that
do not have credit banking mechanisms in their gathering
agreements, or have no ability to use MVC shortfall payments as
credits, the MVC shortfall payments from these customers are
accounted for as gathering revenue in the period that they are
earned.
For the fourth quarter of 2015, SMLP recognized $28.4 million of gathering revenue associated
with MVC shortfall payments from certain customers in the Marcellus
Shale, Piceance Basin, and Barnett Shale segments. MVC
shortfall payment adjustments in the fourth quarter of 2015 totaled
($13.8) million and included
$13.2 million of deferred revenue
related to MVC shortfall payments and ($27.0) million was adjustments related to MVC
shortfall payment adjustments from certain customers in the
Piceance Basin, Williston Basin,
and Barnett Shale segments.
The net impact of SMLP's MVC shortfall payment mechanisms
increased adjusted EBITDA by $14.5
million in the fourth quarter of 2015.
|
Three months ended
December 31, 2015
|
|
MVC
billings
|
|
|
Gathering
revenue
|
|
Adjustments
to
MVC
shortfall
payments
|
|
Net
impact
to adjusted
EBITDA
|
|
(In
thousands)
|
Net change in
deferred revenue related to MVC shortfall payments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Marcellus
Shale
|
$
|
—
|
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Williston
Basin
|
11,897
|
|
|
|
—
|
|
|
11,897
|
|
|
11,897
|
|
Barnett
Shale
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Piceance
Basin
|
3,999
|
|
|
|
2,743
|
|
|
1,256
|
|
|
3,999
|
|
Total net
change
|
$
|
15,896
|
|
|
|
$
|
2,743
|
|
|
$
|
13,153
|
|
|
$
|
15,896
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MVC shortfall
payment adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Marcellus
Shale
|
$
|
852
|
|
|
|
$
|
852
|
|
|
$
|
—
|
|
|
$
|
852
|
|
Williston
Basin
|
—
|
|
|
|
—
|
|
|
(8,997)
|
|
|
(8,997)
|
|
Barnett
Shale
|
624
|
|
|
|
624
|
|
|
(267)
|
|
|
357
|
|
Piceance
Basin
|
24,146
|
|
|
|
24,146
|
|
|
(17,705)
|
|
|
6,441
|
|
Total MVC shortfall
payment adjustments
|
$
|
25,622
|
|
|
|
$
|
25,622
|
|
|
$
|
(26,968)
|
|
|
$
|
(1,347)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
$
|
41,518
|
|
|
|
$
|
28,365
|
|
|
$
|
(13,816)
|
|
|
$
|
14,549
|
|
|
|
|
|
Twelve months
ended December 31, 2015
|
|
MVC
billings
|
|
|
Gathering
revenue
|
|
Adjustments
to
MVC
shortfall
payments
|
|
Net
impact
to adjusted
EBITDA
|
|
(In
thousands)
|
Net change in
deferred revenue related to MVC shortfall payments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Marcellus
Shale
|
$
|
—
|
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Williston
Basin
|
11,897
|
|
|
|
27
|
|
|
11,870
|
|
|
11,897
|
|
Barnett
Shale
|
677
|
|
|
|
2,377
|
|
|
(1,700)
|
|
|
677
|
|
Piceance
Basin
|
15,508
|
|
|
|
37,131
|
|
|
(21,623)
|
|
|
15,508
|
|
Total net
change
|
$
|
28,082
|
|
|
|
$
|
39,535
|
|
|
$
|
(11,453)
|
|
|
$
|
28,082
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MVC shortfall
payment adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Marcellus
Shale
|
$
|
3,237
|
|
|
|
$
|
3,237
|
|
|
$
|
—
|
|
|
$
|
3,237
|
|
Williston
Basin
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Barnett
Shale
|
1,142
|
|
|
|
1,142
|
|
|
(482)
|
|
|
660
|
|
Piceance
Basin
|
25,704
|
|
|
|
25,704
|
|
|
33
|
|
|
25,737
|
|
Total MVC shortfall
payment adjustments
|
$
|
30,083
|
|
|
|
$
|
30,083
|
|
|
$
|
(449)
|
|
|
$
|
29,634
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
$
|
58,165
|
|
|
|
$
|
69,618
|
|
|
$
|
(11,902)
|
|
|
$
|
57,716
|
|
Capital Expenditures
For the three months ended December 31,
2015, SMLP recorded total capital expenditures of
$28.8 million, including
approximately $2.8 million of
maintenance capital expenditures. Development activities
during the fourth quarter of 2015 were related primarily to the
ongoing expansion of the Bakken liquids system, including the
Stampede Lateral, which was placed into service at the end of 2015.
Capital & Liquidity
As of December 31, 2015, SMLP had
total liquidity (undrawn borrowing capacity under its $700.0 million revolving credit facility) of
$356.0 million. Based upon the
terms of SMLP's revolving credit facility and total outstanding
debt of $944.8 million, total
leverage (net debt divided by EBITDA) was 4.23 to 1 as of
December 31, 2015.
SMLP is amending and upsizing its revolving credit facility in
connection with the 2016 Drop Down. This amendment and
$550.0 million increase in
commitments will close concurrent with the Initial Close of the
2016 Drop Down. SMLP's total borrowing capacity will increase
from $700.0 million to $1.25 billion, a new investment basket will be
added allowing SMLP to repurchase up to $100.0 million of its outstanding senior
unsecured notes, and various amendments will be approved to
facilitate the 2016 Drop Down. The pricing grid will not
change, and the maturity of the revolving credit facility remains
November 1, 2018.
Pro forma for the closing of the revolving credit facility
amendment and increased commitments, we expect to have available
liquidity under the revolving credit facility of approximately
$540.0 million.
Quarterly Distribution
On January 21, 2016, the board of
directors of SMLP's general partner declared a quarterly cash
distribution of $0.575 per unit on
all outstanding common and subordinated units, or $2.30 per unit on an annualized basis, for the
quarter ended December 31,
2015. This distribution was paid on February 12, 2016 to unitholders of record as of
the close of business on February 5,
2016. This distribution represents an increase of
$0.015 per unit, or 2.7%, over the
distribution paid in respect of the fourth quarter of 2014 and is
flat to the $0.575 per unit
distribution paid in respect of the third quarter of 2015.
Recent Conversion of SMLP Subordinated Units to Common
Units
SMLP has complied with the required financial tests under its
partnership agreement and accordingly, on February 16, 2016, all of SMLP's 24,409,850
subordinated units were converted, on a one-for-one basis, into
common units. The conversion of the subordinated units into common
units does not impact the amount of outstanding limited partner
units nor does it impact the amount of cash distributions paid by
SMLP. Following conversion, Summit Investments beneficially
owns 29,854,581 common units. As of February 16, 2016, an affiliate of Energy Capital
Partners II, LP, owns an additional 2,184,186 common units in SMLP,
which it has acquired in connection with its $100.0 million open market unit purchase program
announced in December 2015.
Fourth Quarter 2015 Earnings Call Information
SMLP will host a conference call at 10:00
a.m. Eastern on Friday, February 26,
2016, to discuss its quarterly operating and financial
results. Interested parties may participate in the call by
dialing 847-585-4405 or toll-free 888-771-4371 and entering the
passcode 41827549. The conference call will also be webcast
live and can be accessed through the Investors section of SMLP's
website at www.summitmidstream.com.
A replay of the conference call will be available until
March 11, 2016 at 11:59 p.m. Eastern and can be accessed by dialing
888-843-7419 and entering the replay passcode 41827549. An
archive of the conference call will also be available on SMLP's
website.
Upcoming Investor Conferences
SMLP will participate in the Morgan Stanley MLP/Diversified
Natural Gas, Utilities & Clean Tech Conference on Tuesday, March 1, 2016 and the Barclays Select
Series: MLP Corporate Access Day on Wednesday, March 2, 2016. Both conferences
are being held in New York, New
York. The presentation materials associated with these events
will be accessible through the Investors section of SMLP's website
at www.summitmidstream.com prior to the beginning of each of the
conferences.
Use of Non-GAAP Financial Measures
We report financial results in accordance with U.S. generally
accepted accounting principles ("GAAP"). We also present EBITDA,
adjusted EBITDA, distributable cash flow and adjusted distributable
cash flow. We define EBITDA as net income, plus interest expense,
income tax expense, and depreciation and amortization, less
interest income and income tax benefit. We define adjusted
EBITDA as EBITDA plus adjustments related to MVC shortfall
payments, impairments and other noncash expenses or losses, less
other noncash income or gains. We define distributable cash
flow as adjusted EBITDA plus cash interest received, less cash
interest paid, senior notes interest adjustment, cash taxes paid
and maintenance capital expenditures. We define adjusted
distributable cash flow as distributable cash flow plus or minus
other unusual or non-recurring expenses or income. Our definitions
of these non-GAAP financial measures may differ from the
definitions of similar measures used by other companies.
Management uses these non-GAAP financial measures in making
financial, operating and planning decisions and in evaluating our
financial performance. Furthermore, management believes that these
non-GAAP financial measures may provide users with additional
meaningful comparisons between current results and results of prior
periods as they are expected to be reflective of our core ongoing
business. These measures have limitations, and investors should not
consider them in isolation or as a substitute for analysis of our
results as reported under GAAP. Reconciliations of GAAP to
non-GAAP financial measures are attached to this release.
Comparability Related to Drop Down Transactions
With respect to drop down transactions, SMLP's historical
results of operations may not be comparable to its future results
of operations. In May 2015,
SMLP acquired the assets comprising the Polar and Divide system from two subsidiaries of Summit
Investments. In March 2014,
SMLP acquired Red Rock Gathering from a subsidiary of Summit
Investments. SMLP accounted for both the Polar and Divide
Drop Down and the Red Rock Drop Down on an "as-if pooled" basis
because these transactions were executed by entities under common
control. As such, SMLP's consolidated financial statements
reflect Summit Investments' fair value purchase accounting,
historical cost of construction, and the results of operations of
(i) Polar and Divide since
February 15, 2013 and (ii) Red Rock
Gathering since October 23, 2012, as
if SMLP had owned and operated both Polar and Divide and Red Rock Gathering during the
common control period.
About Summit Midstream Partners, LP
SMLP is a growth-oriented limited partnership focused on
developing, owning and operating midstream energy infrastructure
assets that are strategically located in the core producing areas
of unconventional resource basins, primarily shale formations, in
the continental United States.
SMLP currently provides natural gas, crude oil and produced water
gathering services pursuant to primarily long-term and fee-based
gathering and processing agreements with customers and
counterparties in four unconventional resource basins: (i) the
Appalachian Basin, which includes the Marcellus Shale formation in
northern West Virginia; (ii) the
Williston Basin, which includes
the Bakken and Three Forks shale formations in northwestern
North Dakota; (iii) the
Fort Worth Basin, which includes
the Barnett Shale formation in north-central Texas; and (iv) the Piceance Basin, which
includes the Mesaverde formation as well as the Mancos and Niobrara shale formations in western
Colorado and eastern Utah. SMLP owns and operates more than 2,700
miles of pipeline and is headquartered in The Woodlands, Texas with regional corporate
offices in Denver, Colorado and
Atlanta, Georgia.
About Summit Investments
As of February 16, 2016, Summit
Investments beneficially owned a 44.9% limited partner interest in
SMLP and indirectly owns and controls the general partner of SMLP,
Summit Midstream GP, LLC, which has sole responsibility for
conducting the business and managing the operations of SMLP. Summit
Investments owns, operates and is developing various natural gas,
crude oil and produced water-related midstream energy
infrastructure assets in the Utica Shale in southeastern
Ohio, the Bakken Shale in
northwestern North Dakota, and the
DJ Basin in northeastern Colorado.
Summit Investments also owns a 40% interest in a joint venture that
is developing natural gas gathering and condensate stabilization
infrastructure in the Utica Shale in southeastern Ohio. Summit Investments is a privately held
company controlled by Energy Capital Partners II, LLC, and certain
of its affiliates. As of February 16,
2016, an affiliate of Energy Capital Partners II, LLC
directly owned a 3.3% limited partner interest in SMLP.
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
contain known and unknown risks and uncertainties (many of which
are difficult to predict and beyond management's control) that may
cause SMLP's actual results in future periods to differ materially
from anticipated or projected results. Forward-looking
statements in this press release include statements regarding the
necessity of accessing the debt and equity capital markets,
financial guidance with respect to distribution coverage ratios,
adjusted EBITDA, expected commodity prices and distributable cash
flow, and the expected amount of the Deferred Payment. An
extensive list of specific material risks and uncertainties
affecting SMLP is contained in its 2014 Annual Report on Form 10-K
as updated and superseded by our Current Report on Form 8-K filed
with the Securities and Exchange Commission on September 11, 2015 and as amended and updated
from time to time. Any forward-looking statements in this press
release are made as of the date of this press release, and SMLP
undertakes no obligation to update or revise any forward-looking
statements to reflect new information or events.
SUMMIT MIDSTREAM
PARTNERS, LP AND SUBSIDIARIES
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
|
December
31,
|
|
2015
|
|
2014
|
|
(In
thousands)
|
Assets
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
|
19,411
|
|
|
$
|
26,504
|
|
Accounts receivable,
net
|
84,022
|
|
|
89,201
|
|
Other current
assets
|
3,210
|
|
|
3,517
|
|
Total current
assets
|
106,643
|
|
|
119,222
|
|
Property, plant and
equipment, net
|
1,463,802
|
|
|
1,414,350
|
|
Intangible assets,
net
|
438,093
|
|
|
477,734
|
|
Goodwill
|
16,211
|
|
|
265,062
|
|
Other noncurrent
assets
|
15,782
|
|
|
17,353
|
|
Total
assets
|
$
|
2,040,531
|
|
|
$
|
2,293,721
|
|
|
|
|
|
Liabilities and
Partners' Capital
|
|
|
|
Current
liabilities:
|
|
|
|
Trade accounts
payable
|
$
|
18,971
|
|
|
$
|
24,855
|
|
Due to
affiliate
|
1,149
|
|
|
2,711
|
|
Deferred
revenue
|
677
|
|
|
2,377
|
|
Ad valorem taxes
payable
|
9,890
|
|
|
9,118
|
|
Accrued
interest
|
17,483
|
|
|
18,858
|
|
Other current
liabilities
|
11,464
|
|
|
13,550
|
|
Total current
liabilities
|
59,634
|
|
|
71,469
|
|
Long-term
debt
|
944,000
|
|
|
808,000
|
|
Deferred
revenue
|
45,486
|
|
|
55,239
|
|
Other noncurrent
liabilities
|
7,169
|
|
|
7,292
|
|
Total
liabilities
|
1,056,289
|
|
|
942,000
|
|
|
|
|
|
Common limited
partner capital
|
744,977
|
|
|
649,060
|
|
Subordinated limited
partner capital
|
213,631
|
|
|
293,153
|
|
General partner
interests
|
25,634
|
|
|
24,676
|
|
Summit Investments'
equity in contributed subsidiaries
|
—
|
|
|
384,832
|
|
Total partners'
capital
|
984,242
|
|
|
1,351,721
|
|
Total liabilities and
partners' capital
|
$
|
2,040,531
|
|
|
$
|
2,293,721
|
|
SUMMIT MIDSTREAM
PARTNERS, LP AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
|
Three months
ended
December 31,
|
|
Year
ended December
31,
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
(In thousands,
except per-unit amounts)
|
Revenues:
|
|
|
|
|
|
|
|
Gathering services and
related fees
|
$
|
88,744
|
|
|
$
|
81,586
|
|
|
$
|
310,829
|
|
|
$
|
255,211
|
|
Natural gas, NGLs and
condensate sales
|
8,789
|
|
|
20,117
|
|
|
42,079
|
|
|
97,094
|
|
Other
revenues
|
5,068
|
|
|
6,526
|
|
|
18,411
|
|
|
20,398
|
|
Total
revenues
|
102,601
|
|
|
108,229
|
|
|
371,319
|
|
|
372,703
|
|
Costs and
expenses:
|
|
|
|
|
|
|
|
Cost of natural gas
and NGLs
|
6,424
|
|
|
15,775
|
|
|
31,398
|
|
|
72,415
|
|
Operation and
maintenance
|
21,566
|
|
|
22,459
|
|
|
87,285
|
|
|
88,927
|
|
General and
administrative
|
8,798
|
|
|
10,142
|
|
|
36,544
|
|
|
38,269
|
|
Transaction
costs
|
76
|
|
|
55
|
|
|
790
|
|
|
730
|
|
Depreciation and
amortization
|
24,344
|
|
|
23,331
|
|
|
96,189
|
|
|
87,349
|
|
Loss (gain) on asset sales, net
|
42
|
|
|
436
|
|
|
(172)
|
|
|
442
|
|
Long-lived asset
impairment
|
1,609
|
|
|
5,505
|
|
|
9,305
|
|
|
5,505
|
|
Goodwill
impairment
|
248,851
|
|
|
54,199
|
|
|
248,851
|
|
|
54,199
|
|
Total costs and
expenses
|
311,710
|
|
|
131,902
|
|
|
510,190
|
|
|
347,836
|
|
Other
income
|
—
|
|
|
1,186
|
|
|
2
|
|
|
1,189
|
|
Interest
expense
|
(12,283)
|
|
|
(11,655)
|
|
|
(48,616)
|
|
|
(40,159)
|
|
Loss before income
taxes
|
(221,392)
|
|
|
(34,142)
|
|
|
(187,485)
|
|
|
(14,103)
|
|
Income tax benefit
(expense)
|
924
|
|
|
24
|
|
|
676
|
|
|
(631)
|
|
Net loss
|
$
|
(220,468)
|
|
|
$
|
(34,118)
|
|
|
$
|
(186,809)
|
|
|
$
|
(14,734)
|
|
Less net income
attributable to Summit Investments
|
—
|
|
|
3,568
|
|
|
5,403
|
|
|
9,258
|
|
Net loss attributable
to SMLP
|
(220,468)
|
|
|
(37,686)
|
|
|
(192,212)
|
|
|
(23,992)
|
|
Less net loss
attributable to general partner, including IDRs
|
(2,469)
|
|
|
689
|
|
|
3,398
|
|
|
3,125
|
|
Net loss attributable
to limited partners
|
$
|
(217,999)
|
|
|
$
|
(38,375)
|
|
|
$
|
(195,610)
|
|
|
$
|
(27,117)
|
|
|
|
|
|
|
|
|
|
Loss per limited
partner unit:
|
|
|
|
|
|
|
|
Common unit –
basic
|
$
|
(3.28)
|
|
|
$
|
(0.65)
|
|
|
$
|
(3.20)
|
|
|
$
|
(0.49)
|
|
Common unit –
diluted
|
$
|
(3.28)
|
|
|
$
|
(0.65)
|
|
|
$
|
(3.20)
|
|
|
$
|
(0.49)
|
|
Subordinated unit –
basic and diluted
|
$
|
(3.28)
|
|
|
$
|
(0.65)
|
|
|
$
|
(2.88)
|
|
|
$
|
(0.44)
|
|
|
|
|
|
|
|
|
|
Weighted-average
limited partner units outstanding:
|
|
|
|
|
|
|
|
Common units –
basic
|
42,063
|
|
|
34,425
|
|
|
39,217
|
|
|
33,311
|
|
Common units –
diluted
|
42,063
|
|
|
34,425
|
|
|
39,217
|
|
|
33,311
|
|
Subordinated units –
basic and diluted
|
24,410
|
|
|
24,410
|
|
|
24,410
|
|
|
24,410
|
|
SUMMIT MIDSTREAM
PARTNERS, LP AND SUBSIDIARIES
OTHER FINANCIAL
AND OPERATING DATA
|
|
|
Three months
ended
December 31,
|
|
Year
ended December
31,
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
(Dollars in
thousands)
|
Other financial
data:
|
|
|
|
|
|
|
|
EBITDA (1)
|
$
|
(184,627)
|
|
|
$
|
1,094
|
|
|
$
|
(41,896)
|
|
|
$
|
114,345
|
|
Adjusted EBITDA
(1)
|
$
|
53,279
|
|
|
$
|
54,086
|
|
|
$
|
210,445
|
|
|
$
|
204,907
|
|
Capital
expenditures
|
$
|
28,817
|
|
|
$
|
66,115
|
|
|
$
|
118,107
|
|
|
$
|
220,820
|
|
Acquisitions of
gathering systems (2)
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
288,618
|
|
|
$
|
315,872
|
|
Distributable cash
flow (1)
|
$
|
38,265
|
|
|
$
|
40,844
|
|
|
$
|
153,373
|
|
|
$
|
150,318
|
|
Adjusted
distributable cash flow
|
$
|
38,341
|
|
|
$
|
40,376
|
|
|
$
|
154,266
|
|
|
$
|
151,418
|
|
Distributions
declared
|
$
|
40,977
|
|
|
$
|
35,093
|
|
|
$
|
157,960
|
|
|
$
|
130,951
|
|
Distribution coverage
ratio (3)
|
0.94x
|
|
|
*
|
|
|
*
|
|
|
*
|
|
|
|
|
|
|
|
|
|
Operating
data:
|
|
|
|
|
|
|
|
Aggregate average
throughput – gas (MMcf/d)
|
1,308
|
|
|
1,491
|
|
|
1,449
|
|
|
1,418
|
|
Average throughput –
liquids (Mbbl/d)
|
65.9
|
|
|
47.1
|
|
|
55.0
|
|
|
33.6
|
|
__________
|
* Not considered
meaningful
|
(1) Includes
transaction costs. These unusual expenses are settled in
cash.
|
(2) Reflects
consideration paid, including working capital and capital
expenditure adjustments paid (received), to fund acquisitions
and/or drop downs.
|
(3) Distribution coverage ratio calculation for the three
months ended December 31, 2015 is based on distributions in respect
of the fourth quarter of 2015. Represents the ratio of adjusted
distributable cash flow to distributions declared. Due to the
common control nature of drop down transactions and to the extent
that common control existed during a given reporting period,
quarter-to-date and year-to-date results are reported on an as-if
pooled basis with no adjustment to distributions declared. As
such, we only present the current quarter's distribution coverage
ratio when a drop down, and its funding, impacts adjusted
distributable cash flow and distributions declared.
|
SUMMIT MIDSTREAM
PARTNERS, LP AND SUBSIDIARIES
UNAUDITED
RECONCILIATIONS TO NON-GAAP FINANCIAL MEASURES
|
|
|
Three months
ended
December 31,
|
|
Year
ended December
31,
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
(Dollars in
thousands)
|
Reconciliations of
Net Loss to EBITDA, Adjusted EBITDA, Distributable Cash Flow and
Adjusted Distributable Cash Flow:
|
|
|
|
|
|
|
|
Net loss
|
$
|
(220,468)
|
|
|
$
|
(34,118)
|
|
|
$
|
(186,809)
|
|
|
$
|
(14,734)
|
|
Add:
|
|
|
|
|
|
|
|
Interest
expense
|
12,283
|
|
|
11,655
|
|
|
48,616
|
|
|
40,159
|
|
Income tax
expense
|
—
|
|
|
—
|
|
|
—
|
|
|
631
|
|
Depreciation and
amortization (1)
|
24,482
|
|
|
23,582
|
|
|
96,975
|
|
|
88,293
|
|
Less:
|
|
|
|
|
|
|
|
Interest
income
|
—
|
|
|
1
|
|
|
2
|
|
|
4
|
|
Income tax
benefit
|
924
|
|
|
24
|
|
|
676
|
|
|
—
|
|
EBITDA
|
$
|
(184,627)
|
|
|
$
|
1,094
|
|
|
$
|
(41,896)
|
|
|
$
|
114,345
|
|
Add:
|
|
|
|
|
|
|
|
Adjustments related to
MVC shortfall payments (2)
|
(13,816)
|
|
|
(7,245)
|
|
|
(11,902)
|
|
|
26,565
|
|
Unit-based
compensation
|
1,220
|
|
|
1,282
|
|
|
6,259
|
|
|
5,036
|
|
Loss on asset
sales
|
42
|
|
|
436
|
|
|
42
|
|
|
442
|
|
Long-lived asset
impairment
|
1,609
|
|
|
5,505
|
|
|
9,305
|
|
|
5,505
|
|
Goodwill
impairment
|
248,851
|
|
|
54,199
|
|
|
248,851
|
|
|
54,199
|
|
Less:
|
|
|
|
|
|
|
|
Gain on asset
sales
|
—
|
|
|
—
|
|
|
214
|
|
|
—
|
|
Impact of purchase
price adjustment
|
—
|
|
|
1,185
|
|
|
—
|
|
|
1,185
|
|
Adjusted
EBITDA
|
$
|
53,279
|
|
|
$
|
54,086
|
|
|
$
|
210,445
|
|
|
$
|
204,907
|
|
Add cash interest
received
|
—
|
|
|
1
|
|
|
2
|
|
|
4
|
|
Less:
|
|
|
|
|
|
|
|
Cash interest
paid
|
2,513
|
|
|
1,745
|
|
|
48,947
|
|
|
31,524
|
|
Senior notes interest
adjustment (3)
|
9,750
|
|
|
9,750
|
|
|
(1,421)
|
|
|
6,733
|
|
Maintenance capital
expenditures
|
2,751
|
|
|
1,748
|
|
|
9,548
|
|
|
16,336
|
|
Distributable cash
flow
|
$
|
38,265
|
|
|
$
|
40,844
|
|
|
$
|
153,373
|
|
|
$
|
150,318
|
|
Add:
|
|
|
|
|
|
|
|
Transaction
costs
|
76
|
|
|
55
|
|
|
790
|
|
|
730
|
|
Regulatory compliance
costs (4)
|
—
|
|
|
898
|
|
|
103
|
|
|
1,536
|
|
Less:
|
|
|
|
|
|
|
|
Ad valorem tax
adjustment (5)
|
—
|
|
|
255
|
|
|
—
|
|
|
—
|
|
Write off of working
capital adjustment (6)
|
—
|
|
|
1,166
|
|
|
—
|
|
|
1,166
|
|
Adjusted distributable
cash flow
|
$
|
38,341
|
|
|
$
|
40,376
|
|
|
$
|
154,266
|
|
|
$
|
151,418
|
|
|
|
|
|
|
|
|
|
Distributions
declared
|
$
|
40,977
|
|
|
$
|
35,093
|
|
|
$
|
157,960
|
|
|
$
|
130,951
|
|
|
|
|
|
|
|
|
|
Distribution coverage
ratio (7)
|
0.94x
|
|
|
*
|
|
|
*
|
|
|
*
|
|
__________
|
* Not considered
meaningful
|
(1) Includes
amortization of favorable and unfavorable gas gathering contracts
reported in other revenues.
|
(2) Adjustments related to MVC shortfall payments account
for (i) the net increases or decreases in deferred revenue for MVC
shortfall payments and (ii) our inclusion of expected annual MVC
shortfall payments.
|
(3) Senior
notes interest adjustment represents the net of interest expense
accrued and paid during the period. Interest on the $300.0 million
5.5% senior notes is paid in cash semi-annually in arrears on
February 15 and August 15 until maturity in August 2022. Interest
on the $300.0 million 7.5% senior notes is paid in cash
semi-annually in arrears on January 1 and July 1 until maturity in
July 2021.
|
(4) We
incurred expenses associated with our adoption of the 2013 Internal
Control-Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission ("COSO 2013"). These
first-year COSO 2013 expenses are not expected to be incurred
subsequent to completion of the 2014 integrated audit.
|
(5) In the
fourth quarter of 2014, we adjusted our estimate for ad valorem
property taxes for 2014. This adjustment resulted in a reduction to
property tax expense of $0.3 million for the three months ended
December 31, 2014.
|
(6) During
the fourth quarter of 2014, we identified and wrote off the balance
associated with a working capital adjustment received after the
purchase accounting measurement period closed for Summit
Investments' acquisition of Red Rock Gathering. This write off was
recognized as a $1.2 million increase to gathering services and
other fees.
|
(7) Distribution coverage ratio calculation for the three
months ended December 31, 2015 is based on distributions in respect
of the fourth quarter of 2015. Represents the ratio of adjusted
distributable cash flow to distributions declared. Due to the
common control nature of drop down transactions and to the extent
that common control existed during a given reporting period,
quarter-to-date and year-to-date results are reported on an as-if
pooled basis with no adjustment to distributions declared. As
such, we only present the current quarter's distribution coverage
ratio when a drop down, and its funding, impacts adjusted
distributable cash flow and distributions declared.
|
SUMMIT MIDSTREAM
PARTNERS, LP AND SUBSIDIARIES
UNAUDITED
RECONCILIATION OF REPORTABLE SEGMENT ADJUSTED EBITDA
TO ADJUSTED
EBITDA
|
|
|
Three months
ended
December 31,
|
|
Year
ended December
31,
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
(In
thousands)
|
Reportable segment
adjusted EBITDA:
|
|
|
|
|
|
|
|
Marcellus
Shale
|
$
|
4,722
|
|
|
$
|
4,264
|
|
|
$
|
23,214
|
|
|
$
|
15,940
|
|
Williston
Basin
|
14,574
|
|
|
10,974
|
|
|
47,010
|
|
|
31,551
|
|
Barnett
Shale
|
14,082
|
|
|
14,920
|
|
|
59,526
|
|
|
60,528
|
|
Piceance
Basin
|
26,040
|
|
|
27,458
|
|
|
104,467
|
|
|
107,953
|
|
Total reportable
segment adjusted EBITDA
|
59,418
|
|
|
57,616
|
|
|
234,217
|
|
|
215,972
|
|
Allocated corporate
expenses
|
(6,139)
|
|
|
(3,530)
|
|
|
(23,772)
|
|
|
(11,065)
|
|
Adjusted
EBITDA
|
$
|
53,279
|
|
|
$
|
54,086
|
|
|
$
|
210,445
|
|
|
$
|
204,907
|
|
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SOURCE Summit Midstream Partners, LP