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Southcross Energy Partners, L.P. Reports Second Quarter Results

DALLAS, Aug. 09, 2017 (GLOBE NEWSWIRE) -- Southcross Energy Partners, L.P. (NYSE:SXE) (“Southcross” or the “Partnership”) today announced second quarter financial and operating results. 

Southcross’ net loss was $15.9 million for the quarter ended June 30, 2017, compared to $7.4 million for the same period in the prior year and $15.4 million for the quarter ended March 31, 2017. Adjusted EBITDA (as defined below) was $17.1 million for the quarter ended June 30, 2017, compared to $15.6 million for the same period in the prior year and $18.0 million for the quarter ended March 31, 2017. Adjusted EBITDA for the second quarter was 5% lower than the prior quarter due to normal seasonal variations at our Mississippi and Alabama assets. This was partially offset by lower companywide general and administrative expenses resulting from cost savings initiatives.

Processed gas volumes during the quarter averaged 267 MMcf/d, a decrease of 16% compared to 319 MMcf/d for the same period in the prior year and an increase of 4% compared to 256 MMcf/d for the quarter ended March 31, 2017. The quarter-over-quarter increase reflects improved rig count activity in our core areas.

Capital Expenditures

For the quarter ended June 30, 2017, growth and maintenance capital expenditures were $6.1 million and were related primarily to the installation of a new gas gathering pipeline in Mississippi and required safety and reliability upgrades. Southcross continues to expect that net capital expenditures for full-year 2017, including growth and maintenance expenditures, will be in the range of $15 million to $20 million and will be limited to projects with contractually committed volumes, along with recurring maintenance spending.

Capital and Liquidity

As of June 30, 2017, Southcross had total outstanding debt of $547 million, including $113 million under its revolving credit facility, as compared to total outstanding debt of $560 million as of December 31, 2016.  

Cash Distributions and Distributable Cash Flow

Distributable cash flow (as defined below) for the quarter ended June 30, 2017 was $8.0 million, compared to $6.7 million for the same period in the prior year and $8.9 million for the quarter ended March 31, 2017. The Partnership did not make a cash distribution for the quarter ended June 30, 2017 and is restricted from making cash distributions until the Partnership’s consolidated total leverage ratio, as defined under its credit agreement, is at or below 5.0x to 1.

About Southcross Energy Partners, L.P.

Southcross Energy Partners, L.P. is a master limited partnership that provides natural gas gathering, processing, treating, compression and transportation services and NGL fractionation and transportation services. It also sources, purchases, transports and sells natural gas and NGLs. Its assets are located in South Texas, Mississippi and Alabama and include two gas processing plants, one fractionation plant and approximately 3,100 miles of pipeline. The South Texas assets are located in or near the Eagle Ford shale region. Southcross is headquartered in Dallas, Texas. Visit www.southcrossenergy.com for more information.

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 include, without limitation, any statement that may project, indicate or imply future results, events, performance or achievements, and may contain the words “expect,” “intend,” “plan,” “anticipate,” “estimate,” “believe,” “will be,” “will continue,” “will likely result,” and similar expressions, or future conditional verbs such as “may,” “will,” “should,” “would” and “could.” Without limiting the generality of the foregoing, forward-looking statements contained in this press release specifically include: the expectations, plans, strategies, objectives and growth of Southcross; and anticipated capital expenditures and Adjusted EBITDA.    Although Southcross believes the expectations and forecasts reflected in these and other forward-looking statements are reasonable, Southcross can give no assurance they will prove to be correct. 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 Southcross’ actual results in future periods to differ materially from anticipated or projected results. An extensive list of specific material risks and uncertainties affecting Southcross is described in reports filed with the Securities and Exchange Commission, including its Annual Report on Form 10-K and in subsequent reports, which are available through the SEC’s  EDGAR system at www.sec.gov and on our website.  Any forward-looking statements in this press release are made as of the date hereof and Southcross undertakes no obligation to update or revise any forward-looking statements to reflect new information or events.

Use of Non-GAAP Financial Measures

We report our financial results in accordance with accounting principles generally accepted in the United States, or GAAP. We also present the non-GAAP financial measures of Adjusted EBITDA and distributable cash flow.

We define Adjusted EBITDA as net income/loss, plus interest expense, income tax expense, depreciation and amortization expense, equity in losses of joint venture investments, certain non-cash charges (such as non-cash unit-based compensation, impairments, loss on extinguishment of debt and unrealized losses on derivative contracts), major litigation costs net of recoveries, transaction-related costs, revenue deferral adjustment, loss on sale of assets, severance expense and selected charges that are unusual or non-recurring; less interest income, income tax benefit, unrealized gains on derivative contracts, equity in earnings of joint venture investments, gain on sale of assets and selected gains that are unusual or non-recurring. Adjusted EBITDA should not be considered an alternative to net income, operating cash flow or any other measure of financial performance presented in accordance with GAAP.

Adjusted EBITDA is a key metric used in measuring our compliance with our financial covenants under our debt agreements and is used as a supplemental measure by our management and by external users of our financial statements, such as investors, commercial banks, research analysts and others, to assess the ability of our assets to generate cash sufficient to support our indebtedness and make future cash distributions; operating performance and return on capital as compared to those of other companies in the midstream energy sector, without regard to financing or capital structure; and the attractiveness of capital projects and acquisitions and the overall rates of return on investment opportunities.

We define distributable cash flow as Adjusted EBITDA, plus interest income and income tax benefit, less cash paid for interest (net of capitalized costs), income tax expense and maintenance capital expenditures. We use distributable cash flow to analyze our liquidity. Distributable cash flow does not reflect changes in working capital balances. Distributable cash flow is used to assess the ability of our assets to generate cash sufficient to support our indebtedness and make future cash distributions to our unitholders; and the attractiveness of capital projects and acquisitions and the overall rates of return on alternative investment opportunities.

Adjusted EBITDA and distributable cash flow are not financial measures presented in accordance with GAAP. We believe that the presentation of these non-GAAP financial measures provides useful information to investors in assessing our financial condition, results of operations and cash flows from operations. Reconciliations of Adjusted EBITDA and distributable cash flow to their most directly comparable GAAP measure are included in this press release. Net income and net cash provided by operating activities are the GAAP measures most directly comparable to Adjusted EBITDA. The GAAP measure most directly comparable to distributable cash flow is net cash provided by operating activities. Our non-GAAP financial measures should not be considered as alternatives to the most directly comparable GAAP financial measure. Each of these non-GAAP financial measures has important limitations as an analytical tool because each excludes some but not all items that affect the most directly comparable GAAP financial measure. You should not consider Adjusted EBITDA or distributable cash flow in isolation or as a substitute for analysis of our results as reported under GAAP. Because Adjusted EBITDA and distributable cash flow may be defined differently by other companies in our industry, our definitions of these non-GAAP financial measures may not be comparable to similarly titled measures of other companies, thereby diminishing their utility.

 
SOUTHCROSS ENERGY PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except for per unit data)
(Unaudited)
 
    Three Months Ended June 30,   Six Months Ended June 30,
    2017   2016   2017   2016
Revenues:                
Revenues   $ 127,970     $ 100,141     $ 242,357     $ 195,596  
Revenues - affiliates   40,308     24,561     81,079     48,832  
Total revenues   168,278     124,702     323,436     244,428  
                 
Expenses:                
Cost of natural gas and liquids sold   132,948     85,619     251,639     165,066  
Operations and maintenance   15,195     19,615     29,501     36,393  
Depreciation and amortization   18,302     18,908     36,152     37,449  
General and administrative   4,863     8,162     13,059     16,048  
Impairment of assets           649      
Gain on sale of assets   (129 )   (12,576 )   (191 )   (12,576 )
Total expenses   171,179     119,728     330,809     242,380  
                 
Income (loss) from operations   (2,901 )   4,974     (7,373 )   2,048  
Other income (expense):                
Equity in losses of joint venture investments   (3,331 )   (3,534 )   (6,647 )   (6,963 )
Interest expense   (9,636 )   (8,833 )   (18,739 )   (18,003 )
Gain on insurance proceeds           1,508      
Total other expense   (12,967 )   (12,367 )   (23,878 )   (24,966 )
Loss before income tax benefit (expense)   (15,868 )   (7,393 )   (31,251 )   (22,918 )
Income tax benefit (expense)   (2 )   (3 )   (2 )   3  
Net loss   $ (15,870 )   $ (7,396 )   $ (31,253 )   $ (22,915 )
General partner unit in-kind distribution   (22 )   (26 )   (30 )   (26 )
Net loss attributable to partners   $ (15,892 )   $ (7,422 )   $ (31,283 )   $ (22,941 )
                 
Earnings per unit                
Net loss allocated to limited partner common units   $ (9,648 )   $ (3,953 )   $ (19,020 )   $ (11,782 )
Weighted average number of limited partner common units outstanding   48,538   33,921   48,530   31,183
Basic and diluted loss per common unit   $ (0.20 )   $ (0.12 )   $ (0.39 )   $ (0.38 )
                 
Net loss allocated to limited partner subordinated units   $ (2,426 )   $ (1,423 )   $ (4,786 )   $ (4,613 )
Weighted average number of limited partner subordinated units outstanding   12,214   12,214   12,214   12,214
Basic and diluted loss per subordinated unit   $ (0.20 )   $ (0.12 )   $ (0.39 )   $ (0.38 )
                                 


 
SOUTHCROSS ENERGY PARTNERS, L.P.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except for unit data)
(Unaudited)
         
    June 30, 2017   December 31, 2016
ASSETS        
Current assets:        
Cash and cash equivalents   $ 17,221     $ 21,226  
Trade accounts receivable   34,586     51,894  
Accounts receivable - affiliates   26,344     7,976  
Prepaid expenses   1,911     2,751  
Other current assets   2,091     4,343  
Total current assets   82,153     88,190  
         
Property, plant and equipment, net   943,651     971,286  
Investments in joint ventures   117,678     124,096  
Other assets   2,428     2,504  
Total assets   $ 1,145,910     $ 1,186,076  
         
LIABILITIES AND PARTNERS' CAPITAL        
Current liabilities:        
Accounts payable and accrued liabilities   $ 48,865     $ 50,639  
Accounts payable - affiliates   249     524  
Current portion of long-term debt   4,256     4,500  
Other current liabilities   11,428     10,976  
Total current liabilities   64,798     66,639  
         
Long-term debt   532,655     543,872  
Other non-current liabilities   13,522     11,936  
Total liabilities   610,975     622,447  
         
Commitments and contingencies        
         
Partners' capital:        
Common units (48,538,451 and 48,502,090 units outstanding as of June 30, 2017 and December 31, 2016, respectively)   237,504     255,124  
Class B Convertible units (17,709,865 and 17,105,875 units issued and outstanding as of June 30, 2017 and December 31, 2016)   273,142     278,508  
Subordinated units (12,213,713 units issued and outstanding as of June 30, 2017 and December 31, 2016)   14,163     19,240  
General partner interest   10,126     10,757  
Total partners' capital   534,935     563,629  
Total liabilities and partners' capital   $ 1,145,910     $ 1,186,076  
                 


 
SOUTHCROSS ENERGY PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
     
    Six Months Ended June 30,
    2017   2016
Cash flows from operating activities:        
Net loss   $ (31,253 )   $ (22,915 )
Adjustments to reconcile net loss to net cash provided by operating activities:        
Depreciation and amortization   36,152     37,449  
Unit-based compensation   414     1,706  
Amortization of deferred financing costs, original issuance discount and PIK interest   1,830     1,904  
Gain on sale of assets   (191 )   (12,576 )
Unrealized gain on financial instruments   (19 )   (55 )
Equity in losses of joint venture investments   6,647     6,963  
Distribution from joint venture investment       390  
Impairment of assets   649      
Gain on insurance proceeds   (1,508 )    
Other, net   (348 )   (184 )
Changes in operating assets and liabilities:        
Trade accounts receivable, including affiliates   638     44,409  
Prepaid expenses and other current assets   1,459     1,502  
Deposits paid to suppliers       (3,837 )
Other non-current assets   65      
Accounts payable and accrued expenses, including affiliates   (684 )   (27,808 )
Other liabilities   (2,567 )   3,000  
Net cash provided by operating activities   11,284     29,948  
Cash flows from investing activities:        
Capital expenditures   (12,936 )   (12,479 )
Aid in construction payment receipts   6,644     45  
Insurance proceeds from property damage claims, net of expenditures   2,000     125  
Net proceeds from sales of assets   2,794     20,402  
Investment contributions to joint venture investments   (230 )   (5,287 )
Net cash provided by (used in) investing activities   (1,728 )   2,806  
Cash flows from financing activities:        
Borrowings under our credit facility       3,110  
Repayments under our credit facility   (10,000 )   (54,250 )
Repayments under our term loan agreement   (3,225 )   (2,250 )
Payments on capital lease obligations   (247 )   (204 )
Financing costs   (44 )   (86 )
Tax withholdings on unit-based compensation vested units   (45 )   (57 )
Borrowing of senior unsecured paid in-kind notes       14,000  
Repayment of senior unsecured paid in-kind notes and paid in-kind interest       (14,260 )
Valley Wells operating expense cap adjustment       2,637  
Common unit issuances to Holdings for equity contributions       11,884  
Interest on receivable due from Holdings       233  
Net cash used in financing activities   (13,561 )   (39,243 )
         
Net decrease in cash and cash equivalents   (4,005 )   (6,489 )
Cash and cash equivalents — Beginning of period   21,226     11,348  
Cash and cash equivalents — End of period   $ 17,221     $ 4,859  
                 


SOUTHCROSS ENERGY PARTNERS, L.P.
SELECTED FINANCIAL AND OPERATIONAL DATA
(In thousands, except for operating data)
(Unaudited)
         
    Three Months Ended June 30,   Six Months Ended June 30,
    2017   2016   2017   2016
Financial data:                
Adjusted EBITDA   $ 17,070     $ 15,599     $ 35,088     $ 36,295  
                 
Maintenance capital expenditures   $ 248     $ 836     $ 928     $ 3,112  
Growth capital expenditures   5,823     6,124     12,008     9,322  
                 
Distributable cash flow   $ 7,993     $ 6,714     $ 16,912     $ 15,024  
                 
Operating data:                
Average volume of processed gas (MMcf/d)   267     319     262     331  
Average volume of NGLs produced (Bbls/d)   32,945     35,912     32,092     37,771  
Average daily throughput Mississippi/Alabama (MMcf/d)   166     147     167     151  
                 
Realized prices on natural gas volumes ($/Mcf)   $ 3.22     $ 1.88     $ 3.28     $ 1.90  
Realized prices on NGL volumes ($/gal)   0.65     0.30     0.62     0.33  
                         


 
SOUTHCROSS ENERGY PARTNERS, L.P.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(In thousands)
(Unaudited)
 
  Three Months Ended June 30,   Six Months Ended June 30,
  2017   2016   2017   2016
Net cash provided by operating activities $ 11,094     $ 47,119     $ 11,284     $ 29,948    
Add (deduct):              
Depreciation and amortization (18,302 )   (18,908 )   (36,152 )   (37,449 )  
Unit-based compensation (157 )   (725 )   (414 )   (1,706 )  
Amortization of deferred financing costs, original issuance discount and PIK interest (879 )   (831 )   (1,830 )   (1,904 )  
Gain on sale of assets 129     12,576     191     12,576    
Unrealized gain on financial instruments 2     85     19     55    
Equity in losses of joint venture investments (3,331 )   (3,534 )   (6,647 )   (6,963 )  
Distribution from joint venture investment             (390 )  
Impairment of assets         (649 )      
Gain on insurance proceeds         1,508        
Other, net 63     62     348     184    
Changes in operating assets and liabilities:              
Trade accounts receivable, including affiliates 10,619     (35,310 )   (638 )   (44,409 )  
Prepaid expenses and other current assets (2,089 )   (329 )   (1,459 )   (1,502 )  
Other non-current assets (4 )   (280 )   (65 )      
Accounts payable and accrued expenses, including affiliates (11,415 )   9,145     684     27,808    
Deposits paid to suppliers     (11,463 )       3,837    
Other liabilities (1,600 )   (5,003 )   2,567     (3,000 )  
Net loss $ (15,870 )   $ (7,396 )   $ (31,253 )   $ (22,915 )  
Add (deduct):              
Depreciation and amortization $ 18,302     $ 18,908     $ 36,152     $ 37,449    
Interest expense 9,636     8,833     18,739     18,003    
Gain on insurance proceeds         (1,508 )      
Income tax (benefit) expense 2     3     2     (3 )  
Impairment of assets         649        
Gain on sale of assets (129 )   (12,576 )   (191 )   (12,576 )  
Revenue deferral adjustment 754     754     1,508     1,508    
Unit-based compensation 157     725     414     1,706    
Major litigation costs, net of recoveries 116     118     149     243    
Equity in losses of joint venture investments 3,331     3,534     6,647     6,963    
Severance expense 414     16     2,748     16    
Retention bonus funded by Holdings     898         1,796    
Valley Wells' operating expense cap adjustment     1,415         2,406    
Fees related to Equity Cure Agreement     67         577    
Distribution from joint venture investment             390    
Expenses related to shut-down of Conroe processing plant and conversion of Gregory processing plant 313         607        
Other, net 44     300     425     732    
Adjusted EBITDA $ 17,070     $ 15,599     $ 35,088     $ 36,295    
Cash interest, net of capitalized costs (8,827 )   (8,046 )   (17,246 )   (18,162 )  
Income tax benefit (expense) (2 )   (3 )   (2 )   3    
Maintenance capital expenditures (248 )   (836 )   (928 )   (3,112 )  
Distributable cash flow $ 7,993     $ 6,714     $ 16,912     $ 15,024    
                                 

Contact:
Southcross Energy Partners, L.P.                                 
Mallory Biegler, 214-979-3720
Investor Relations
investorrelations@southcrossenergy.com

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