Press Release
For the nine months ended
SMLP's financial and operating results retrospectively include financial and operating results from assets that were previously dropped down from Summit Investments including, (i) Bison Midstream since
Volume throughput on the Mountaineer Midstream system averaged 416 MMcf/d in the third quarter of 2014, up 208.1% over the third quarter of 2013 and up 13.7% over the second quarter of 2014. Volume growth was primarily due to a continuation of active drilling by our anchor customer,
During the third quarter of 2014, the Zinnia Loop project was commissioned and throughput capacity on the Mountaineer Midstream system was increased to 1,050 MMcf/d. Volumes are expected to continue to grow throughout the balance of 2014 as new Antero wells are connected by third parties upstream of the Mountaineer Midstream system and as processing capacity at
Volume throughput on the Bison Midstream system averaged 21 MMcf/d in the third quarter of 2014, up 23.5% over the third quarter of 2013 and up 40.0% over the second quarter of 2014. Volume growth resulted from the connection of new pad sites and the utilization of recently installed compression assets. We expect volume growth to continue throughout the balance of 2014 as new pad sites, particularly for
Volume throughput on the DFW Midstream system averaged 361 MMcf/d in the third quarter of 2014, which was down 5.2% from the third quarter of 2013, but increased by 3.1% from the second quarter of 2014. This was the second consecutive quarter since the beginning of 2013 that the DFW Midstream system has experienced sequential quarterly volume throughput growth. Given current drilling and completion activity, coupled with producer plans in the service area, DFW Midstream volume throughput is expected to continue to increase throughout the balance of 2014.
On
Volume throughput on the Grand River system averaged 667 MMcf/d in the third quarter of 2014, up 3.7% over the third quarter of 2013, but 0.7% lower than the second quarter of 2014. Volume throughput continues to increase on the legacy
The Grand River system continues to benefit from its natural gas gathering agreements, which include minimum volume commitments ("MVCs") that increase in both rate and volume commitment over the next few years and largely mitigate the financial impact associated with declining volumes from certain customers. Lower volume throughput from certain Grand River customers during the third quarter of 2014 translated into larger MVC shortfall payments, thereby minimizing the impact on adjusted EBITDA.
Volume Throughput By System |
|||||||||||||||||
QTD Period Ended |
YTD Period Ended |
||||||||||||||||
(MMcf/d) |
2014 |
2013 |
2014 |
2013 |
|||||||||||||
Average Daily Throughput: |
|||||||||||||||||
Mountaineer Midstream (1) |
416 |
135 |
357 |
50 |
|||||||||||||
Bison Midstream (2) |
21 |
17 |
16 |
14 |
|||||||||||||
DFW Midstream |
361 |
381 |
353 |
398 |
|||||||||||||
Grand River (3) |
667 |
643 |
667 |
647 |
|||||||||||||
Total Average Daily Throughput: |
1,465 |
1,176 |
1,393 |
1,109 |
|||||||||||||
(1) |
Mountaineer Midstream was acquired by SMLP on June 21, 2013. For the period beginning with SMLP's ownership through September 30, 2013, average throughput was 134 MMcf/d. |
(2) |
Bison Midstream was acquired from an affiliate of Summit Investments in June 2013 and includes results for all periods in which common control existed, beginning in February 2013. For the period beginning with Summit Investments' ownership through September 30, 2013, average throughput was 17 MMcf/d. |
(3) |
Includes volume throughput from the legacy Red Rock system. The Red Rock assets were acquired by Grand River Gathering from an affiliate of Summit Investments in March 2014. The Grand River system includes the financial and operational results associated with the Red Rock assets for all periods during which common control existed, beginning in October 2012. |
MVC Shortfall Payments
Adjusted EBITDA in the third quarter of 2014 was positively impacted by
Three Months Ended September 30, 2014 |
|||||||||||||||||||
(In Millions) |
MVC |
Gathering |
Adjustments |
Net Impact |
|||||||||||||||
Net Change in Deferred Revenue: |
|||||||||||||||||||
Mountaineer Midstream |
$ |
— |
$ |
— |
$ |
— |
$ |
— |
|||||||||||
Bison Midstream |
— |
— |
— |
— |
|||||||||||||||
DFW Midstream |
— |
— |
— |
— |
|||||||||||||||
Grand River |
4.0 |
— |
4.0 |
4.0 |
|||||||||||||||
Total |
$ |
4.0 |
$ |
— |
$ |
4.0 |
$ |
4.0 |
|||||||||||
MVC Shortfall Payment Adjustments: |
|||||||||||||||||||
Mountaineer Midstream |
$ |
0.1 |
$ |
0.1 |
$ |
— |
$ |
0.1 |
|||||||||||
Bison Midstream |
— |
— |
2.7 |
2.7 |
|||||||||||||||
DFW Midstream |
— |
— |
0.3 |
0.3 |
|||||||||||||||
Grand River |
0.8 |
0.8 |
4.2 |
5.0 |
|||||||||||||||
Total |
$ |
0.9 |
$ |
0.9 |
$ |
7.2 |
$ |
8.1 |
|||||||||||
TOTAL |
$ |
4.9 |
$ |
0.9 |
$ |
11.2 |
$ |
12.1 |
|||||||||||
SMLP billed its customers
Certain of our natural gas gathering agreements do not have credit banking mechanisms and as such, the MVC shortfall payments from these customers are accounted for as gathering revenue in the period that they are earned. For the third quarter of 2014, we recognized
Capital Expenditures
For the three months ended
Growth capital expenditures during the third quarter of 2014 were primarily related to the construction of various pipeline and compressor expansion projects across SMLP's gathering systems, including the completion of the Zinnia Loop project, which was commissioned on
Capital & Liquidity
As of
During the third quarter of 2014, SMLP's wholly owned subsidiary,
2014 & 2015 SMLP Financial Guidance
With three quarters of financial performance realized, SMLP is narrowing its 2014 adjusted EBITDA guidance to a new range of
SMLP's 2015 financial guidance excludes the effect of any future acquisitions or potential drop down transactions from Summit Investments. SMLP is providing 2015 adjusted EBITDA guidance of
Quarterly Distribution
On
This is SMLP's eighth consecutive quarterly per-unit distribution increase. It represents an increase of
Third Quarter 2014 Earnings Call Information
SMLP will host a conference call at
A replay of the conference call will be available until
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 unit-based compensation, adjustments related to MVC shortfall payments and loss on asset sales, less gain on asset sales. We define distributable cash flow as adjusted EBITDA plus cash interest income, less cash interest paid, senior notes interest, cash taxes paid and maintenance capital expenditures. We define adjusted distributable cash flow as distributable cash flow plus or minus other non-cash 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.
About
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
About
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. An extensive list of specific material risks and uncertainties affecting SMLP is contained in its 2013 Annual Report on Form 10-K as updated and superseded by our Current Report on Form 8-K filed with the
SUMMIT MIDSTREAM PARTNERS, LP AND SUBSIDIARIES |
|||||||
CONDENSED CONSOLIDATED BALANCE SHEETS |
|||||||
September 30, 2014 |
December 31, 2013 |
||||||
(In thousands) |
|||||||
Assets |
|||||||
Current assets: |
|||||||
Cash and cash equivalents |
$ |
14,133 |
$ |
20,357 |
|||
Accounts receivable |
49,337 |
67,877 |
|||||
Other current assets |
3,771 |
4,741 |
|||||
Total current assets |
67,241 |
92,975 |
|||||
Property, plant and equipment, net |
1,235,100 |
1,158,081 |
|||||
Intangible assets, net: |
|||||||
Favorable gas gathering contracts |
16,575 |
17,880 |
|||||
Contract intangibles |
358,949 |
383,306 |
|||||
Rights-of-way |
100,810 |
100,991 |
|||||
Total intangible assets, net |
476,334 |
502,177 |
|||||
Goodwill |
115,888 |
115,888 |
|||||
Other noncurrent assets |
18,092 |
14,618 |
|||||
Total assets |
$ |
1,912,655 |
$ |
1,883,739 |
|||
Liabilities and Partners' Capital |
|||||||
Current liabilities: |
|||||||
Trade accounts payable |
$ |
17,176 |
$ |
25,117 |
|||
Due to affiliate |
425 |
653 |
|||||
Deferred revenue |
2,609 |
1,555 |
|||||
Ad valorem taxes payable |
6,602 |
8,375 |
|||||
Accrued interest |
9,108 |
12,144 |
|||||
Other current liabilities |
13,202 |
11,729 |
|||||
Total current liabilities |
49,122 |
59,573 |
|||||
Long-term debt |
775,000 |
586,000 |
|||||
Noncurrent liability, net |
5,762 |
6,374 |
|||||
Deferred revenue |
41,134 |
29,683 |
|||||
Other noncurrent liabilities |
1,723 |
372 |
|||||
Total liabilities |
872,741 |
682,002 |
|||||
Common limited partner capital |
690,661 |
566,532 |
|||||
Subordinated limited partner capital |
323,455 |
379,287 |
|||||
General partner interests |
25,798 |
23,324 |
|||||
Summit Investments' equity in contributed subsidiaries |
— |
232,594 |
|||||
Total partners' capital |
1,039,914 |
1,201,737 |
|||||
Total liabilities and partners' capital |
$ |
1,912,655 |
$ |
1,883,739 |
SUMMIT MIDSTREAM PARTNERS, LP AND SUBSIDIARIES |
|||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS |
|||||||||||||||
Three months ended |
Nine months ended |
||||||||||||||
2014 |
2013 |
2014 |
2013 |
||||||||||||
(In thousands, except per-unit and unit amounts) |
|||||||||||||||
Revenues: |
|||||||||||||||
Gathering services and other fees |
$ |
55,577 |
$ |
54,195 |
$ |
160,479 |
$ |
148,084 |
|||||||
Natural gas, NGLs and condensate sales and other |
23,696 |
22,087 |
76,242 |
62,175 |
|||||||||||
Amortization of favorable and unfavorable contracts |
(243) |
(263) |
(693) |
(794) |
|||||||||||
Total revenues |
79,030 |
76,019 |
236,028 |
209,465 |
|||||||||||
Costs and expenses: |
|||||||||||||||
Cost of natural gas and NGLs |
14,430 |
13,814 |
46,090 |
35,217 |
|||||||||||
Operation and maintenance |
18,467 |
19,156 |
57,507 |
55,107 |
|||||||||||
General and administrative |
8,337 |
7,508 |
24,914 |
22,481 |
|||||||||||
Transaction costs |
62 |
148 |
675 |
2,620 |
|||||||||||
Depreciation and amortization |
21,036 |
18,487 |
61,158 |
49,201 |
|||||||||||
Total costs and expenses |
62,332 |
59,113 |
190,344 |
164,626 |
|||||||||||
Other income (expense) |
1 |
(112) |
(3) |
(110) |
|||||||||||
Interest expense |
(10,558) |
(6,937) |
(28,504) |
(11,840) |
|||||||||||
Income before income taxes |
6,141 |
9,857 |
17,177 |
32,889 |
|||||||||||
Income tax expense |
(28) |
(177) |
(655) |
(579) |
|||||||||||
Net income |
$ |
6,113 |
$ |
9,680 |
$ |
16,522 |
$ |
32,310 |
|||||||
Less: net income attributable to Summit Investments |
— |
2,989 |
2,828 |
5,071 |
|||||||||||
Net income attributable to SMLP |
6,113 |
6,691 |
13,694 |
27,239 |
|||||||||||
Less: net income attributable to general partner, including IDRs |
1,204 |
134 |
2,436 |
545 |
|||||||||||
Net income attributable to limited partners |
$ |
4,909 |
$ |
6,557 |
$ |
11,258 |
$ |
26,694 |
|||||||
Earnings per limited partner unit: |
|||||||||||||||
Common unit – basic |
$ |
0.08 |
$ |
0.12 |
$ |
0.22 |
$ |
0.57 |
|||||||
Common unit – diluted |
$ |
0.08 |
$ |
0.12 |
$ |
0.22 |
$ |
0.57 |
|||||||
Subordinated unit – basic and diluted |
$ |
0.08 |
$ |
0.12 |
$ |
0.17 |
$ |
0.48 |
|||||||
Weighted-average limited partner units outstanding: |
|||||||||||||||
Common units – basic |
34,423,751 |
29,074,743 |
32,935,759 |
26,234,042 |
|||||||||||
Common units – diluted |
34,658,169 |
29,227,041 |
33,143,656 |
26,352,234 |
|||||||||||
Subordinated units – basic and diluted |
24,409,850 |
24,409,850 |
24,409,850 |
24,409,850 |
SUMMIT MIDSTREAM PARTNERS, LP AND SUBSIDIARIES |
|||||||||||||||
OTHER FINANCIAL AND OPERATING DATA |
|||||||||||||||
Three months ended |
Nine months ended |
||||||||||||||
2014 |
2013 |
2014 |
2013 |
||||||||||||
(Dollars in thousands) |
|||||||||||||||
Other financial data: |
|||||||||||||||
EBITDA (1) |
$ |
37,977 |
$ |
35,543 |
$ |
107,529 |
$ |
94,721 |
|||||||
Adjusted EBITDA (1) |
50,272 |
44,275 |
144,844 |
117,899 |
|||||||||||
Capital expenditures |
40,810 |
25,554 |
104,146 |
75,196 |
|||||||||||
Acquisitions of gathering systems (2) |
10,872 |
— |
315,872 |
458,914 |
|||||||||||
Distributable cash flow |
35,595 |
32,964 |
103,995 |
93,204 |
|||||||||||
Adjusted distributable cash flow |
35,036 |
33,112 |
105,308 |
95,824 |
|||||||||||
Distributions declared (3) |
33,522 |
25,108 |
95,858 |
69,771 |
|||||||||||
Distribution coverage ratio (4) |
1.05x |
* |
1.10x |
* |
|||||||||||
Operating data: |
|||||||||||||||
Miles of pipeline (end of period) |
2,344 |
2,265 |
2,344 |
2,265 |
|||||||||||
Aggregate average throughput (MMcf/d) |
1,465 |
1,176 |
1,393 |
1,109 |
__________
* Not considered meaningful |
|
(1) |
Includes transaction costs. These unusual and non-recurring expenses are settled in cash. |
(2) |
Reflects cash paid and value of units issued, if any, to fund acquisitions. |
(3) |
For the three months ended September 30, 2014, reflects quarterly cash distributions of $0.54 per unit in respect of the third quarter of 2014 that will be paid November 14, 2014. For the three months ended September 30, 2013, reflects quarterly cash distributions of $0.46 per unit in respect of the third quarter of 2013 that was paid November 14, 2013. For the nine months ended September 30, 2014, reflects year-to-date quarterly cash distributions of $1.56 per unit in respect of the first, second and third quarters. For the nine months ended September 30, 2013, reflects year-to-date quarterly cash distributions of $1.315 per unit in respect of the first, second and third quarters. |
(4) |
Distribution coverage ratio calculation for the three months ended September 30, 2014 is based on distributions in respect of the third quarter of 2014. Distribution coverage ratio calculation for the nine months ended September 30, 2014 is based on distributions in respect of the first, second and third quarters of 2014. |
SUMMIT MIDSTREAM PARTNERS, LP AND SUBSIDIARIES |
|||||||||||||||
UNAUDITED RECONCILIATIONS TO NON-GAAP FINANCIAL MEASURES |
|||||||||||||||
Three months ended |
Nine months ended |
||||||||||||||
2014 |
2013 |
2014 |
2013 |
||||||||||||
(Dollars in thousands) |
|||||||||||||||
Reconciliations of Net Income to EBITDA, Adjusted EBITDA, Distributable Cash Flow and Adjusted Distributable Cash Flow: |
|||||||||||||||
Net income (1) |
$ |
6,113 |
$ |
9,680 |
$ |
16,522 |
$ |
32,310 |
|||||||
Add: |
|||||||||||||||
Interest expense |
10,558 |
6,937 |
28,504 |
11,840 |
|||||||||||
Income tax expense |
28 |
177 |
655 |
579 |
|||||||||||
Depreciation and amortization |
21,036 |
18,487 |
61,158 |
49,201 |
|||||||||||
Amortization of favorable and unfavorable contracts (2) |
243 |
263 |
693 |
794 |
|||||||||||
Less: |
|||||||||||||||
Interest income |
1 |
1 |
3 |
3 |
|||||||||||
EBITDA (1) |
$ |
37,977 |
$ |
35,543 |
$ |
107,529 |
$ |
94,721 |
|||||||
Add: |
|||||||||||||||
Unit-based compensation |
1,075 |
952 |
3,499 |
2,354 |
|||||||||||
Adjustments related to MVC shortfall payments (3) |
11,220 |
7,667 |
33,810 |
20,711 |
|||||||||||
Loss on asset sales |
— |
113 |
6 |
113 |
|||||||||||
Adjusted EBITDA (1) |
$ |
50,272 |
$ |
44,275 |
$ |
144,844 |
$ |
117,899 |
|||||||
Add: |
|||||||||||||||
Interest income |
1 |
1 |
3 |
3 |
|||||||||||
Less: |
|||||||||||||||
Cash interest paid |
12,626 |
2,534 |
29,779 |
6,548 |
|||||||||||
Senior notes interest (4) |
(2,142) |
5,625 |
(3,017) |
6,500 |
|||||||||||
Cash taxes paid |
— |
— |
— |
660 |
|||||||||||
Maintenance capital expenditures |
4,194 |
3,153 |
14,090 |
10,990 |
|||||||||||
Distributable cash flow |
$ |
35,595 |
$ |
32,964 |
$ |
103,995 |
$ |
93,204 |
|||||||
Add: |
|||||||||||||||
Transaction costs (1) |
62 |
148 |
675 |
2,620 |
|||||||||||
Regulatory compliance costs (5) |
461 |
— |
638 |
— |
|||||||||||
Less: |
|||||||||||||||
Ad valorem tax adjustment (6) |
1,082 |
— |
— |
— |
|||||||||||
Adjusted distributable cash flow |
$ |
35,036 |
$ |
33,112 |
$ |
105,308 |
$ |
95,824 |
|||||||
Distributions declared (7) |
$ |
33,522 |
$ |
25,108 |
$ |
95,858 |
$ |
69,771 |
|||||||
Distribution coverage ratio |
1.05x |
* |
1.10x |
* |
__________
* Not considered meaningful |
|
(1) |
Includes transaction costs. These unusual and non-recurring expenses are settled in cash. |
(2) |
The amortization of favorable and unfavorable contracts relates to gas gathering agreements that were deemed to be above or below market at the acquisition of the DFW Midstream system. We amortize these contracts on a units-of-production basis over the life of the applicable contract. The life of the contract is the period over which the contract is expected to contribute directly or indirectly to our future cash flows. |
(3) |
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 future expected annual MVC shortfall payments. |
(4) |
Senior notes interest 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. |
(5) |
We incurred expenses associated with our obligations under Section 404 of the Sarbanes-Oxley Act of 2002 and our adoption of the 2013 Internal Control–Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO 2013"). The substantial majority of these first-year COSO 2013 expenses are not expected to be incurred beyond 2014. |
(6) |
In the third 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 $1.1 million for the three months ended September 30, 2014. |
(7) |
For the three months ended September 30, 2014, reflects quarterly cash distributions of $0.54 per unit in respect of the third quarter of 2014 that will be paid November 14, 2014. For the three months ended September 30, 2013, reflects quarterly cash distributions of $0.46 per unit in respect of the third quarter of 2013 that was paid November 14, 2013. For the nine months ended September 30, 2014, reflects year-to-date quarterly cash distributions of $1.56 per unit in respect of the first, second and third quarters. For the nine months ended September 30, 2013, reflects year-to-date quarterly cash distributions of $1.315 per unit in respect of the first, second and third quarters. |
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SOURCE
Marc Stratton, Vice President and Treasurer, 214-242-1966, ir@summitmidstream.com