Press Release
For the year ended
"As we look forward, we continue to monitor the impact of lower crude oil, NGL and natural gas prices on our customers' capital expenditure budgets and ultimately, on our volumes and cash flows. SMLP's primarily fee-based contract portfolio includes a high level of contracted and growing MVCs that limit our direct commodity price exposure. Based upon 2015 pricing of
"Our strong balance sheet and large inventory of potential drop down assets at Summit Investments provides us with visible and attractive distribution growth in 2015 and over the long term. We remain committed to our strategy to acquire assets from Summit Investments, at a rate of
SMLP's financial results for the fourth quarter and full year of 2014 were impacted by several charges in the fourth quarter of 2014 including:
- a
$54.2 million noncash goodwill impairment related to the Bison Midstream system; - a
$5.5 million noncash long-lived asset impairment associated with a DFW Midstream compressor station project that was terminated and replaced with a pipeline looping project.
Marcellus Shale Segment
The Mountaineer Midstream gathering system provides SMLP's midstream services for the
The Bison Midstream gathering system provides SMLP's midstream services for the
SMLP acquired the Bison Midstream system from Summit Investments in
Barnett Shale Segment
The DFW Midstream gathering system provides SMLP's midstream services for the
Piceance Basin Segment
The Legacy Grand River and Red Rock Gathering systems provide SMLP's midstream services for the
Three months ended December 31, |
Year ended December 31, |
|||||||||||
2014 |
2013 |
2014 |
2013 |
|||||||||
Average daily throughput (MMcf/d): |
||||||||||||
Marcellus Shale (1) |
459 |
197 |
382 |
87 |
||||||||
Williston Basin (2) |
22 |
14 |
18 |
14 |
||||||||
Barnett Shale |
372 |
370 |
358 |
391 |
||||||||
Piceance Basin |
638 |
642 |
660 |
646 |
||||||||
Total average daily throughput |
1,491 |
1,223 |
1,418 |
1,138 |
(1) |
Mountaineer Midstream was acquired by SMLP on June 21, 2013. For the period beginning with SMLP's ownership through December 31, 2013, average throughput was 165 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 December 31, 2013, average throughput was 16 MMcf/d. |
MVC Shortfall Payments
SMLP billed its customers
Three months ended December 31, 2014 |
||||||||||||||||
MVC billings |
Gathering revenue |
Adjustments to MVC shortfall payments |
Net impact to adjusted EBITDA |
|||||||||||||
(In thousands) |
||||||||||||||||
Net change in deferred revenue: |
||||||||||||||||
Marcellus Shale |
$ |
— |
$ |
— |
$ |
— |
$ |
— |
||||||||
Williston Basin |
10,592 |
— |
10,592 |
10,592 |
||||||||||||
Barnett Shale |
— |
— |
(233) |
(233) |
||||||||||||
Piceance Basin |
3,756 |
— |
3,514 |
3,514 |
||||||||||||
Total net change in deferred revenue |
$ |
14,348 |
$ |
— |
$ |
13,873 |
$ |
13,873 |
||||||||
MVC shortfall payment adjustments: |
||||||||||||||||
Marcellus Shale |
$ |
— |
$ |
— |
$ |
— |
$ |
— |
||||||||
Williston Basin |
— |
— |
(7,918) |
(7,918) |
||||||||||||
Barnett Shale |
367 |
367 |
457 |
824 |
||||||||||||
Piceance Basin |
19,139 |
19,139 |
(13,657) |
5,482 |
||||||||||||
Total MVC shortfall payment adjustments |
$ |
19,506 |
$ |
19,506 |
$ |
(21,118) |
$ |
(1,612) |
||||||||
Total |
$ |
33,854 |
$ |
19,506 |
$ |
(7,245) |
$ |
12,261 |
Year ended December 31, 2014 |
||||||||||||||||
MVC billings |
Gathering revenue |
Adjustments to MVC shortfall payments |
Net impact to adjusted EBITDA |
|||||||||||||
(In thousands) |
||||||||||||||||
Net change in deferred revenue: |
||||||||||||||||
Marcellus Shale |
$ |
— |
$ |
— |
$ |
— |
$ |
— |
||||||||
Williston Basin |
10,743 |
— |
10,743 |
10,743 |
||||||||||||
Barnett Shale |
2,609 |
1,525 |
821 |
2,346 |
||||||||||||
Piceance Basin |
14,813 |
— |
14,813 |
14,813 |
||||||||||||
Total net change in deferred revenue |
$ |
28,165 |
$ |
1,525 |
$ |
26,377 |
$ |
27,902 |
||||||||
MVC shortfall payment adjustments: |
||||||||||||||||
Marcellus Shale |
$ |
1,742 |
$ |
1,742 |
$ |
— |
$ |
1,742 |
||||||||
Williston Basin |
— |
— |
— |
— |
||||||||||||
Barnett Shale |
495 |
495 |
(193) |
302 |
||||||||||||
Piceance Basin |
20,462 |
20,462 |
381 |
20,843 |
||||||||||||
Total MVC shortfall payment adjustments |
$ |
22,699 |
$ |
22,699 |
$ |
188 |
$ |
22,887 |
||||||||
Total |
$ |
50,864 |
$ |
24,224 |
$ |
26,565 |
$ |
50,789 |
Capital Expenditures
For the three months ended
Development activities during the fourth quarter of 2014 were related primarily to the ongoing expansion of compression capacity on the Bison Midstream system and pipeline construction projects to connect new receipt points on the Grand River, Bison Midstream and DFW Midstream systems.
Capital & Liquidity
As of
Revised 2015 Financial Guidance
Commodity prices have decreased by approximately 30% to 50% since SMLP announced its 2015 guidance in early November 2014. As a result, SMLP is revising its 2015 adjusted EBITDA guidance from
SMLP's revised 2015 financial guidance excludes the effect of any third party acquisitions or potential drop down transactions with Summit Investments. SMLP is reaffirming its expectation of completing
Quarterly Distribution
On
Fourth Quarter & Full Year 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 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 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 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 and Acquisitions
With respect to drop down transactions and third-party acquisitions, SMLP's historical results of operations may not be comparable to its future results of operations for the reasons described below:
- SMLP acquired Red Rock Gathering from a subsidiary of Summit Investments in
March 2014 . SMLP accounted for the Red Rock Drop Down on an "as-if pooled" basis because the transaction was executed by entities under common control. As such, SMLP's consolidated financial statements reflect Summit Investments' fair value purchase accounting and the results of operations of Red Rock Gathering sinceOctober 23, 2012 as if SMLP had owned and operated during the common control period; - SMLP acquired Bison Midstream from a subsidiary of Summit Investments in
June 2013 . SMLP accounted for the Bison Drop Down on an "as-if pooled" basis because the transaction was executed by entities under common control. As such, SMLP's consolidated financial statements reflect Summit Investments' fair value purchase accounting and the results of operations of Bison Midstream sinceFebruary 16, 2013 as if SMLP had owned and operated during the common control period; - SMLP's consolidated financial statements reflect the results of operations of Mountaineer Midstream since
June 22, 2013 .
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 by our Current Report on Form 8-K filed with the
SUMMIT MIDSTREAM PARTNERS, LP AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS |
|||||||
December 31, |
|||||||
2014 |
2013 |
||||||
(In thousands) |
|||||||
Assets |
|||||||
Current assets: |
|||||||
Cash and cash equivalents |
$ |
26,428 |
$ |
20,357 |
|||
Accounts receivable |
83,612 |
67,877 |
|||||
Other current assets |
3,289 |
4,741 |
|||||
Total current assets |
113,329 |
92,975 |
|||||
Property, plant and equipment, net |
1,235,652 |
1,158,081 |
|||||
Intangible assets, net |
466,866 |
502,177 |
|||||
Goodwill |
61,689 |
115,888 |
|||||
Other noncurrent assets |
17,338 |
14,618 |
|||||
Total assets |
$ |
1,894,874 |
$ |
1,883,739 |
|||
Liabilities and Partners' Capital |
|||||||
Current liabilities: |
|||||||
Trade accounts payable |
$ |
12,852 |
$ |
25,117 |
|||
Due to affiliate |
2,711 |
653 |
|||||
Deferred revenue |
2,377 |
1,555 |
|||||
Ad valorem taxes payable |
8,717 |
8,375 |
|||||
Accrued interest |
18,858 |
12,144 |
|||||
Other current liabilities |
11,939 |
11,729 |
|||||
Total current liabilities |
57,454 |
59,573 |
|||||
Long-term debt |
808,000 |
586,000 |
|||||
Noncurrent liability, net |
5,577 |
6,374 |
|||||
Deferred revenue |
55,239 |
29,683 |
|||||
Other noncurrent liabilities |
1,715 |
372 |
|||||
Total liabilities |
927,985 |
682,002 |
|||||
Common limited partner capital |
649,060 |
566,532 |
|||||
Subordinated limited partner capital |
293,153 |
379,287 |
|||||
General partner interests |
24,676 |
23,324 |
|||||
Summit Investments' equity in contributed subsidiaries |
— |
232,594 |
|||||
Total partners' capital |
966,889 |
1,201,737 |
|||||
Total liabilities and partners' capital |
$ |
1,894,874 |
$ |
1,883,739 |
SUMMIT MIDSTREAM PARTNERS, LP AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS |
|||||||||||||||
Three months ended December 31, |
Year ended December 31, |
||||||||||||||
2014 |
2013 |
2014 |
2013 |
||||||||||||
(In thousands, except per-unit amounts) |
|||||||||||||||
Revenues: |
|||||||||||||||
Gathering services and other fees |
$ |
74,554 |
$ |
57,262 |
$ |
235,033 |
$ |
205,346 |
|||||||
Natural gas, NGLs and condensate sales and other |
20,355 |
26,431 |
96,597 |
88,606 |
|||||||||||
Amortization of favorable and unfavorable contracts |
(251) |
(238) |
(944) |
(1,032) |
|||||||||||
Total revenues |
94,658 |
83,455 |
330,686 |
292,920 |
|||||||||||
Costs and expenses: |
|||||||||||||||
Cost of natural gas and NGLs |
12,004 |
9,016 |
58,094 |
44,233 |
|||||||||||
Operation and maintenance |
18,765 |
17,358 |
76,272 |
72,465 |
|||||||||||
General and administrative |
9,103 |
7,624 |
34,017 |
30,105 |
|||||||||||
Transaction costs |
55 |
221 |
730 |
2,841 |
|||||||||||
Depreciation and amortization |
21,832 |
20,761 |
82,990 |
69,962 |
|||||||||||
Loss on asset sales, net |
436 |
— |
442 |
113 |
|||||||||||
Goodwill impairment |
54,199 |
— |
54,199 |
— |
|||||||||||
Long-lived asset impairment |
5,505 |
— |
5,505 |
— |
|||||||||||
Total costs and expenses |
121,899 |
54,980 |
312,249 |
219,719 |
|||||||||||
Other income |
1,186 |
2 |
1,189 |
5 |
|||||||||||
Interest expense |
(11,655) |
(7,333) |
(40,159) |
(19,173) |
|||||||||||
(Loss) income before income taxes |
(37,710) |
21,144 |
(20,533) |
54,033 |
|||||||||||
Income tax benefit (expense) |
24 |
(150) |
(631) |
(729) |
|||||||||||
Net (loss) income |
$ |
(37,686) |
$ |
20,994 |
$ |
(21,164) |
$ |
53,304 |
|||||||
Less: net income attributable to Summit Investments |
— |
4,649 |
2,828 |
9,720 |
|||||||||||
Net (loss) income attributable to SMLP |
(37,686) |
16,345 |
(23,992) |
43,584 |
|||||||||||
Less: net (loss) income attributable to general partner, including IDRs |
689 |
490 |
3,125 |
1,035 |
|||||||||||
Net (loss) income attributable to limited partners |
$ |
(38,375) |
$ |
15,855 |
$ |
(27,117) |
$ |
42,549 |
|||||||
(Loss) earnings per limited partner unit: |
|||||||||||||||
Common unit – basic |
$ |
(0.65) |
$ |
0.30 |
$ |
(0.49) |
$ |
0.86 |
|||||||
Common unit – diluted |
$ |
(0.65) |
$ |
0.29 |
$ |
(0.49) |
$ |
0.86 |
|||||||
Subordinated unit – basic and diluted |
$ |
(0.65) |
$ |
0.30 |
$ |
(0.44) |
$ |
0.79 |
|||||||
Weighted-average limited partner units outstanding: |
|||||||||||||||
Common units – basic |
34,425 |
29,080 |
33,311 |
26,951 |
|||||||||||
Common units – diluted |
34,425 |
29,259 |
33,311 |
27,101 |
|||||||||||
Subordinated units – basic and diluted |
24,410 |
24,410 |
24,410 |
24,410 |
SUMMIT MIDSTREAM PARTNERS, LP AND SUBSIDIARIES UNAUDITED OTHER FINANCIAL AND OPERATING DATA |
|||||||||||||||
Three months ended December 31, |
Year ended December 31, |
||||||||||||||
2014 |
2013 |
2014 |
2013 |
||||||||||||
(Dollars in thousands) |
|||||||||||||||
Other financial data: |
|||||||||||||||
EBITDA (1) |
$ |
(3,973) |
$ |
49,474 |
$ |
103,556 |
$ |
144,195 |
|||||||
Adjusted EBITDA (1) |
48,934 |
46,940 |
193,778 |
164,839 |
|||||||||||
Capital expenditures |
24,179 |
34,180 |
128,325 |
109,376 |
|||||||||||
Acquisitions of gathering systems (2) |
— |
— |
315,872 |
458,914 |
|||||||||||
Distributable cash flow (1) |
35,616 |
34,937 |
139,611 |
128,141 |
|||||||||||
Adjusted distributable cash flow |
35,148 |
35,158 |
140,711 |
130,982 |
|||||||||||
Distributions declared |
35,093 |
26,366 |
130,951 |
96,137 |
|||||||||||
Distribution coverage ratio (3) |
1.00x |
* |
1.07x |
* |
|||||||||||
Operating data: |
|||||||||||||||
Miles of pipeline (end of period) |
2,348 |
2,283 |
2,348 |
2,283 |
|||||||||||
Aggregate average throughput (MMcf/d) |
1,491 |
1,223 |
1,418 |
1,138 |
|||||||||||
* Not considered meaningful |
(1) Includes transaction costs. These unusual expenses are settled in cash. |
(2) Reflects cash paid and value of units issued, if any, to fund acquisitions. |
(3) Distribution coverage ratio calculation for the three months ended December 31, 2014 is based on distributions in respect of the fourth quarter of 2014. Distribution coverage ratio calculation for the year ended December 31, 2014 is based on distributions in respect of the first, second, third and fourth quarters of 2014. |
SUMMIT MIDSTREAM PARTNERS, LP AND SUBSIDIARIES UNAUDITED RECONCILIATIONS TO NON-GAAP FINANCIAL MEASURES |
|||||||||||||||
Three months ended December 31, |
Year ended December 31, |
||||||||||||||
2014 |
2013 |
2014 |
2013 |
||||||||||||
(Dollars in thousands) |
|||||||||||||||
Reconciliations of Net Income to EBITDA, Adjusted EBITDA, Distributable Cash Flow and Adjusted Distributable Cash Flow: |
|||||||||||||||
Net (loss) income |
$ |
(37,686) |
$ |
20,994 |
$ |
(21,164) |
$ |
53,304 |
|||||||
Add: |
|||||||||||||||
Interest expense |
11,655 |
7,333 |
40,159 |
19,173 |
|||||||||||
Income tax (benefit) expense |
(24) |
150 |
631 |
729 |
|||||||||||
Depreciation and amortization |
21,832 |
20,761 |
82,990 |
69,962 |
|||||||||||
Amortization of favorable and unfavorable contracts |
251 |
238 |
944 |
1,032 |
|||||||||||
Less: |
|||||||||||||||
Interest income |
1 |
2 |
4 |
5 |
|||||||||||
EBITDA |
$ |
(3,973) |
$ |
49,474 |
$ |
103,556 |
$ |
144,195 |
|||||||
Add: |
|||||||||||||||
Adjustments related to MVC shortfall payments (1) |
(7,245) |
(3,686) |
26,565 |
17,025 |
|||||||||||
Unit-based compensation |
1,197 |
1,152 |
4,696 |
3,506 |
|||||||||||
Loss on asset sales, net |
436 |
— |
442 |
113 |
|||||||||||
Goodwill impairment (2) |
54,199 |
— |
54,199 |
— |
|||||||||||
Long-lived asset impairment (3) |
5,505 |
— |
5,505 |
— |
|||||||||||
Less: |
|||||||||||||||
Impact of purchase price adjustment (4) |
1,185 |
— |
1,185 |
— |
|||||||||||
Adjusted EBITDA |
$ |
48,934 |
$ |
46,940 |
$ |
193,778 |
$ |
164,839 |
|||||||
Add: |
|||||||||||||||
Cash interest received |
1 |
2 |
4 |
5 |
|||||||||||
Less: |
|||||||||||||||
Cash interest paid |
1,745 |
2,468 |
31,524 |
9,016 |
|||||||||||
Senior notes interest (5) |
9,750 |
5,625 |
6,733 |
12,125 |
|||||||||||
Cash taxes paid |
— |
— |
— |
660 |
|||||||||||
Maintenance capital expenditures |
1,824 |
3,912 |
15,914 |
14,902 |
|||||||||||
Distributable cash flow |
$ |
35,616 |
$ |
34,937 |
$ |
139,611 |
$ |
128,141 |
|||||||
Add: |
|||||||||||||||
Transaction costs |
55 |
221 |
730 |
2,841 |
|||||||||||
Regulatory compliance costs (6) |
898 |
— |
1,536 |
— |
|||||||||||
Less: |
|||||||||||||||
Ad valorem tax adjustment (7) |
255 |
— |
— |
— |
|||||||||||
Write off of working capital adjustment (8) |
1,166 |
— |
1,166 |
— |
|||||||||||
Adjusted distributable cash flow |
$ |
35,148 |
$ |
35,158 |
$ |
140,711 |
$ |
130,982 |
|||||||
Distributions declared |
$ |
35,093 |
$ |
26,366 |
$ |
130,951 |
$ |
96,137 |
|||||||
Distribution coverage ratio |
1.00x |
* |
1.07x |
* |
* Not considered meaningful |
(1) 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. |
(2) In connection with the decline in commodity prices during the fourth quarter of 2014, we reevaluated the carrying value, including goodwill, of the Bison Midstream gathering system and recognized a goodwill impairment for the decline in the fair value of the underlying reporting unit relative to its carrying value. |
(3) During the fourth quarter of 2014, we reviewed certain property, plant and equipment balances associated with a DFW Midstream compressor station project that was terminated and replaced with a pipeline looping project. As a result, we wrote off approximately $5.5 million of costs. The impact of this write off is reflected in long-lived asset impairment. |
(4) During the fourth quarter of 2014, we identified and wrote off certain balances previously recognized in connection with the purchase accounting for the Legacy Grand River system. This write off was recognized as a $1.2 million increase to other income. |
(5) 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. |
(6) 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 beyond 2014. |
(7) 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. |
(8) 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. |
SUMMIT MIDSTREAM PARTNERS, LP AND SUBSIDIARIES UNAUDITED RECONCILIATION OF SEGMENT ADJUSTED EBITDA TO ADJUSTED EBITDA |
|||||||||||||||
Three months ended December 31, |
Year ended December 31, |
||||||||||||||
2014 |
2013 |
2014 |
2013 |
||||||||||||
(In thousands) |
|||||||||||||||
Segment adjusted EBITDA: |
|||||||||||||||
Marcellus Shale |
$ |
4,264 |
$ |
3,332 |
$ |
15,940 |
$ |
6,333 |
|||||||
Williston Basin |
5,822 |
4,501 |
20,422 |
16,865 |
|||||||||||
Barnett Shale |
14,920 |
16,171 |
60,528 |
69,473 |
|||||||||||
Piceance Basin |
27,458 |
24,661 |
107,953 |
80,941 |
|||||||||||
Total reportable segment adjusted EBITDA |
52,464 |
48,665 |
204,843 |
173,612 |
|||||||||||
Allocated corporate expenses |
(3,530) |
(1,725) |
(11,065) |
(8,773) |
|||||||||||
Adjusted EBITDA |
$ |
48,934 |
$ |
46,940 |
$ |
193,778 |
$ |
164,839 |
Logo - http://photos.prnewswire.com/prnh/20120927/MM82470LOGO
To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/summit-midstream-partners-lp-reports-fourth-quarter-and-full-year-2014-financial-results--revises-2015-financial-guidance-300042519.html
SOURCE
Marc Stratton, Vice President and Treasurer, 214-242-1966, ir@summitmidstream.com