CONE Midstream Reports Third Quarter Results and Increases Guidance
CANONSBURG, Pa., Nov. 04, 2016 (GLOBE NEWSWIRE) -- CONE Midstream Partners LP (NYSE:CNNX) ("CONE Midstream" or the "Partnership") today reported financial and operational results for the three months ended September 30, 2016.(1) The Partnership also increased guidance for full year 2016 financial results.
Third Quarter Results
Highlights of third quarter 2016 results attributable to the Partnership as compared to the third quarter of 2015 include:
Net income of $23.6 million as compared to $19.7 million
Average daily throughput volumes of 840 billion Btu per day (BBtu/d) as compared to 642 BBtu/d
Net cash provided by operating activities of $40.0 million as compared to $38.8 million
Adjusted EBITDA(2) of $26.8 million as compared to $21.9 million
Distributable cash flow (DCF)(2) of $23.3 million as compared to $19.5 million
Cash distribution coverage of 1.47x on an as declared basis
Management Comment
John T. Lewis, Chairman of the Board and Chief Executive Officer of CONE Midstream GP LLC (the "General Partner"), commented, "It is a pleasure to report another strong quarter of financial and operational results for CNNX. Net throughput volumes increased by 31% from the third quarter of 2015. Net income attributable to the Partnership, Adjusted EBITDA and distributable cash flow all increased by approximately 20% as compared to third quarter last year. As anticipated, we were free-cash-flow positive again during the quarter, with net cash provided by operating activities exceeding our total capital investments and cash distribution payments, which allowed us to again reduce the balance drawn on our revolving credit facility. Our debt-to-Adjusted EBITDA ratio at the end of the quarter was 0.38x.
Mr. Lewis further noted that, "Based on our solid performance for the first nine months and our current outlook for the remainder of the year, we have increased our guidance for our full year 2016 results."
Quarterly Distribution
As previously announced, the Board of Directors of the General Partner declared a quarterly cash distribution of $0.263 per unit with respect to the third quarter of 2016. The distribution payment will be made on November 14, 2016 to unitholders of record at the close of business on November 4, 2016. The distribution, which equates to an annual rate of $1.052 per unit, represents an increase of 3.5% over the prior quarter and an increase of 15.4% over the distribution paid with respect to the third quarter of 2015.
Capital Investment and Resources
CONE Midstream's allocated third quarter 2016 share of investment in expansion projects was $0.5 million. Total expansion capital investment at the three development companies in which CONE Midstream holds controlling interests was $1.4 million. CONE Midstream's respective share of maintenance capital expenditures for the three development companies for the third quarter of 2016 was $3.3 million. Maintenance capital expenditures in the aggregate for the development companies in which CONE Midstream holds controlling interests totaled $5.3 million.
As of September 30, 2016, CONE Midstream had outstanding borrowings of $41.0 million under its $250 million revolving credit facility and a cash balance of $4.2 million.
2016 Guidance Update
Based on current expectations, management is providing the following updated guidance for 2016. Full year 2016 Adjusted EBITDA attributable to the Partnership, previously projected to be in the range of $96 - $106 million, is now expected to be in the range of $103 - $108 million. Full year distributable cash flow attributable to the Partnership, previously projected to be in the range of $82 - $92 million, is now expected to be in the range of $89 - $94 million. CONE Midstream’s financial guidance is based on numerous assumptions about future events and conditions and, therefore, could vary materially from actual results. These estimates are meant to provide guidance only and are subject to revision for acquisitions or operating environment changes.
Third Quarter Financial and Operational Results Conference Call
A conference call and webcast, during which management will discuss third quarter 2016 financial and operational results, is scheduled for November 4, 2016 at 10:00 a.m. Eastern Time. Reference material for the call will be available on the "Events" page of our website, www.conemidstream.com, shortly before the start of the call. Prepared remarks by members of management will be followed by a question and answer period. Interested parties may listen via webcast by using the link posted on the "Events" page of our website or at http://services.choruscall.com/links/cnnx161104.html. Participants who would like to ask questions may join the conference by phone at 888-317-6016 (international 412-317-6016) five to ten minutes prior to the scheduled start time (reference the CONE Midstream call). An on-demand replay of the webcast will be also be available at http://services.choruscall.com/links/cnnx161104.html shortly after the conclusion of the conference call. A telephonic replay will be available through November 11, 2016 by dialing 877-344-7529 (international: 412-317-0088) and using the conference playback number 10093760.
_____________
(1) Unless otherwise indicated, the reporting measures included in this news release reflect the unallocated total activity of the three development companies jointly owned by the Partnership and CONE Gathering LLC (“CONE Gathering”). Because the Partnership owns a controlling interest in each of the three development companies, it fully consolidates their financial results. The Partnership's current economic interests in the development companies are: 75% in the Anchor Systems, 5% in the Growth Systems, and 5% in the Additional Systems. CONE Gathering is a midstream joint venture formed by CONSOL Energy Inc. and Noble Energy, Inc. and owns non-controlling interests in the Partnership’s development companies.
(2) Adjusted EBITDA and DCF are not measures that are recognized under accounting principles generally accepted in the U.S. (“GAAP”). Definitions and reconciliations of these non-GAAP measures to GAAP reporting measures appear in the financial tables which follow.
* * * * *
CONE Midstream Partners LP is a master limited partnership formed by CONSOL Energy Inc. (NYSE:CNX) and Noble Energy, Inc. (NYSE:NBL), referred to as our Sponsors, to own, operate, develop and acquire natural gas gathering and other midstream energy assets to service our Sponsors' production in the Marcellus Shale in Pennsylvania and West Virginia. Our assets include natural gas gathering pipelines and compression and dehydration facilities, as well as condensate gathering, collection, separation and stabilization facilities. More information is available on our website www.conemidstream.com.
* * * * *
This press release is intended to be a qualified notice to nominees as provided for under Treasury Regulation Section 1.1446-4(b). Brokers and nominees should treat one hundred percent (100.0%) of CONE Midstream’s distributions to non-U.S. investors as being attributed to income that is effectively connected with a United States trade or business. Accordingly, CONE Midstream's distributions to non-U.S. investors are subject to federal income tax withholding at the highest applicable effective tax rate. Nominees, and not CONE Midstream, are treated as withholding agents responsible for withholding on the distributions received by them on behalf of foreign investors.
* * * * *
This press release contains forward-looking statements within the meaning of the federal securities laws. Statements that are predictive in nature, that depend upon or refer to future events or conditions or that include the words "believe," "expect," "anticipate," "intend," "estimate" and other expressions that are predictions of or indicate future events and trends and that do not relate to historical matters identify forward-looking statements. Forward-looking statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict, and there can be no assurance that actual outcomes and results will not differ materially from those expected by our management. Factors that could cause our actual results to differ materially from the results contemplated by such forward-looking statements include, among others: the effects of changes in market prices of natural gas, NGLs and crude oil on our Sponsors’ drilling and development plan on our dedicated acreage and the volumes of natural gas and condensate that are produced on our dedicated acreage; changes in our Sponsors’ drilling and development plan in the Marcellus Shale and Utica Shale; our Sponsors’ ability to meet their drilling and development plan in the Marcellus Shale and Utica Shale; the demand for natural gas and condensate gathering services; changes in general economic conditions; competitive conditions in our industry; actions taken by third-party operators, gatherers, processors and transporters; our ability to successfully implement our business plan; and our ability to complete internal growth projects on time and on budget. You should not place undue reliance on our forward-looking statements. Although forward-looking statements reflect our good faith beliefs at the time they are made, forward-looking statements involve known and unknown risks, uncertainties and other factors, including the factors described under “Risk Factors” and “Forward-Looking Statements” in our Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, which may cause our actual results, performance or achievements to differ materially from anticipated future results, performance or achievements expressed or implied by such forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changed circumstances or otherwise, unless required by law.
CONE MIDSTREAM PARTNERS LP CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per unit data) (unaudited)
Three Months Ended September 30,
Nine Months Ended September 30,
2016
2015
2016
2015
Revenue
Gathering revenue — related party
$
60,729
$
53,753
$
181,384
$
144,638
Total Revenue
60,729
53,753
181,384
144,638
Expenses
Operating expense — third party
7,769
4,736
24,322
22,205
Operating expense — related party
7,209
8,095
22,631
22,079
General and administrative expense — third party
1,049
968
3,196
3,533
General and administrative expense — related party
2,624
2,413
6,521
6,385
Pipe revaluation
—
—
10,083
—
Depreciation expense
5,392
3,769
15,384
10,430
Interest expense
305
158
1,105
270
Total Expense
24,348
20,139
83,242
64,902
Net Income
36,381
33,614
98,142
79,736
Less: Net income attributable to noncontrolling interest
12,750
13,957
26,505
30,954
Net Income Attributable to General and Limited Partner Ownership Interest in CONE Midstream Partners LP
$
23,631
$
19,657
$
71,637
$
48,782
Calculation of Limited Partner Interest in Net Income:
Net Income Attributable to General and Limited Partner Ownership Interest in CONE Midstream Partners LP
$
23,631
$
19,657
$
71,637
$
48,782
Less: General partner interest in net income
473
393
1,433
976
Limited partner interest in net income
$
23,158
$
19,264
$
70,204
$
47,806
Net income per Limited Partner unit - Basic
$
0.40
$
0.33
$
1.20
$
0.82
Net Income per Limited Partner unit - Diluted
$
0.40
$
0.33
$
1.20
$
0.82
Limited Partner units outstanding - Basic
58,343
58,326
58,343
58,326
Limited Partner unit outstanding - Diluted
58,431
58,333
58,410
58,331
Cash distributions declared per unit (*)
$
0.2630
$
0.2280
$
0.7620
$
0.6605
(*) Represents the cash distributions declared during the month following the respective quarterly reporting period ends.
CONE MIDSTREAM PARTNERS LP CONSOLIDATED BALANCE SHEETS (in thousands, except number of units) (unaudited)
September 30, 2016
December 31, 2015
ASSETS
Current Assets:
Cash
$
4,196
$
217
Receivables — related party
20,287
36,418
Inventory
—
18,916
Other current assets
1,431
2,037
Total Current Assets
25,914
57,588
Property and Equipment:
Property and equipment
922,498
897,918
Less — accumulated depreciation
46,698
31,609
Property and Equipment — Net
875,800
866,309
Other assets
9,001
528
TOTAL ASSETS
$
910,715
$
924,425
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable
$
19,124
$
46,155
Accounts payable — related party
1,680
1,628
Total Current Liabilities
20,804
47,783
Other Liabilities:
Revolving credit facility
41,000
73,500
Total Liabilities
61,804
121,283
Partners' Capital:
Common units (29,180,217 units issued and outstanding at September 30, 2016 and 29,163,121 units issued and outstanding at December 31, 2015)
413,610
399,399
Subordinated units (29,163,121 units issued and outstanding at September 30, 2016 and December 31, 2015)
(69,248
)
(82,900
)
General partner interest
(2,921
)
(3,389
)
Partners' capital attributable to CONE Midstream Partners LP
341,441
313,110
Noncontrolling interest
507,470
490,032
Total Partners' Capital
848,911
803,142
TOTAL LIABILITIES AND PARTNERS' CAPITAL
$
910,715
$
924,425
CONE MIDSTREAM PARTNERS LP CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited)
Three Months Ended
September 30,
2016
2015
Cash Flows from Operating Activities:
Net Income
$
36,381
$
33,614
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense and amortization of debt issuance costs
5,434
3,810
Unit-based compensation
222
118
Other
429
—
Changes in assets and liabilities:
Receivables — related party
(2,874
)
(10,894
)
Other current and non-current assets
(216
)
(62
)
Accounts payable
572
7,853
Accounts payable — related party
33
4,369
Net Cash Provided by Operating Activities
39,981
38,808
Cash Flows from Investing Activities:
Capital expenditures
(6,742
)
(94,781
)
Proceeds from sale of long-lived assets
237
—
Net Cash Used in Investing Activities
(6,505
)
(94,781
)
Cash Flows from Financing Activities:
Partner and noncontrolling interest holder activity
(13,167
)
36,611
Distributions to unitholders
(15,209
)
(13,094
)
Net (payment) proceeds on revolver
(6,000
)
33,500
Net Cash (Used In) Provided By Financing Activities
(34,376
)
57,017
Net (Decrease) Increase in Cash
(900
)
1,044
Cash at Beginning of Period
5,096
161
Cash at End of Period
$
4,196
$
1,205
CONE MIDSTREAM PARTNERS LP RECONCILIATION OF NET INCOME TO EBITDA AND DISTRIBUTABLE CASH FLOW (in thousands)
Non-GAAP Financial Measures
EBITDA and Adjusted EBITDA
We define EBITDA as net income (loss) before net interest expense, depreciation and amortization, and Adjusted EBITDA as EBITDA adjusted for non-cash items which should not be included in the calculation of distributable cash flow. EBITDA and Adjusted EBITDA are used as supplemental financial measures by management and by external users of our financial statements, such as investors, industry analysts, lenders and ratings agencies, to assess:
our operating performance as compared to those of other companies in the midstream energy industry, without regard to financing methods, historical cost basis or capital structure;
the ability of our assets to generate sufficient cash flow to make distributions to our partners;
our ability to incur and service debt and fund capital expenditures; and
the viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities.
We believe that the presentation of EBITDA and Adjusted EBITDA provides information that is useful to investors in assessing our financial condition and results of operations. The GAAP measures most directly comparable to EBITDA and Adjusted EBITDA are net income and net cash provided by operating activities. EBITDA and Adjusted EBITDA should not be considered an alternative to net income, net cash provided by (used in) operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP. EBITDA and Adjusted EBITDA exclude some, but not all, items that affect net income or net cash, and these measures may vary from those of other companies. As a result, EBITDA and Adjusted EBITDA as presented below may not be comparable to similarly titled measures of other companies.
Distributable Cash Flow
We define distributable cash flow as Adjusted EBITDA less net income attributable to noncontrolling interest, net cash interest paid and maintenance capital expenditures. Distributable cash flow does not reflect changes in working capital balances.
Distributable cash flow is used as a supplemental financial measure by management and by external users of our financial statements, such as investors, industry analysts, lenders and ratings agencies, 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.
We believe that the presentation of distributable cash flow in this report provides information useful to investors in assessing our financial condition and results of operations. The GAAP measures most directly comparable to distributable cash flow are net income and net cash provided by operating activities. Distributable cash flow should not be considered an alternative to net income, net cash provided by operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP. Distributable cash flow excludes some, but not all, items that affect net income or net cash, and these measures may vary from those of other companies. As a result, our distributable cash flow may not be comparable to similarly titled measures of other companies.
The following table presents a reconciliation of the non-GAAP measures of EBITDA, Adjusted EBITDA and distributable cash flow to the most directly comparable GAAP financial measures of net income and net cash provided by operating activities.
Three Months Ended September 30,
Nine Months Ended September 30,
(unaudited)
2016
2015
2016
2015
Net Income
$
36,381
$
33,614
$
98,142
$
79,736
Depreciation expense
5,392
3,769
15,384
10,430
Interest expense
305
158
1,105
270
EBITDA
42,078
37,541
114,631
90,436
Non-cash unit-based compensation expense
222
118
577
310
Pipe revaluation
—
—
10,083
—
Adjusted EBITDA
42,300
37,659
125,291
90,746
Less:
Net income attributable to noncontrolling interest
12,750
13,957
26,505
30,954
Depreciation expense attributable to noncontrolling interest
2,589
1,728
7,283
4,553
Other expenses attributable to noncontrolling interest
205
63
521
97
Pipe revaluation attributable to noncontrolling interest
—
—
9,579
—
Adjusted EBITDA Attributable to General and Limited Partner Ownership Interest in CONE Midstream Partners LP
$
26,756
$
21,911
$
81,403
$
55,142
Less: cash interest paid, net
198
95
682
173
Less: ongoing maintenance capital expenditures, net of expected reimbursements
3,283
2,291
9,234
6,430
Distributable Cash Flow
$
23,275
$
19,525
$
71,487
$
48,539
Net Cash Provided by Operating Activities
$
39,981
$
38,808
$
122,938
$
99,268
Interest expense
305
158
1,105
270
Pipe revaluation
—
—
10,083
—
Other, including changes in working capital
2,014
(1,307
)
(8,835
)
(8,792
)
Adjusted EBITDA
42,300
37,659
125,291
90,746
Less:
Net income attributable to noncontrolling interest
12,750
13,957
26,505
30,954
Depreciation expense attributable to noncontrolling interest
2,589
1,728
7,283
4,553
Other expense attributable to noncontrolling interest
205
63
521
97
Pipe revaluation attributable to noncontrolling interest
—
—
9,579
—
Adjusted EBITDA Attributable to General and Limited Partner Ownership Interest in CONE Midstream Partners LP
$
26,756
$
21,911
$
81,403
$
55,142
Less: cash interest paid, net
198
95
682
173
Less: ongoing maintenance capital expenditures, net of expected reimbursements
3,283
2,291
9,234
6,430
Distributable Cash Flow
$
23,275
$
19,525
$
71,487
$
48,539
The following table presents a reconciliation of the non-GAAP measures EBITDA, Adjusted EBITDA and distributable cash flow by quarter and for the most recently completed twelve month period with the most directly comparable GAAP financial measures, which are net income and net cash provided by operating activities.
(unaudited)
Q4 2015
Q1 2016
Q2 2016
Q3 2016
Twelve Months Ended September 30, 2016
Net Income
$
35,796
$
37,295
$
24,468
$
36,381
$
133,940
Depreciation expense
4,623
4,839
5,152
5,392
20,006
Interest expense
565
419
381
305
1,670
EBITDA
40,984
42,553
30,001
42,078
155,616
Non-cash unit-based compensation expense
92
136
219
222
669
Pipe revaluation
—
—
10,083
—
10,083
Adjusted EBITDA
41,076
42,689
40,303
42,300
166,368
Less:
Net income attributable to noncontrolling interest
13,330
12,505
1,251
12,750
39,836
Depreciation expense attributable to noncontrolling interest
2,246
2,286
2,409
2,589
9,530
Other expenses attributable to noncontrolling interest
331
189
127
205
852
Pipe revaluation attributable to noncontrolling interest
—
—
9,579
—
9,579
Adjusted EBITDA Attributable to General and Limited Partner Ownership Interest in CONE Midstream Partners LP
$
25,169
$
27,709
$
26,937
$
26,756
$
106,571
Less: cash interest paid, net
234
230
254
198
916
Less: ongoing maintenance capital expenditures, net of expected reimbursements
2,554
2,839
3,112
3,283
11,788
Distributable Cash Flow
$
22,381
$
24,640
$
23,571
$
23,275
$
93,867
Net Cash Provided by Operating Activities
$
16,749
$
41,180
$
41,777
$
39,981
$
139,687
Interest expense
565
419
381
305
1,670
Pipe revaluation
—
—
10,083
—
10,083
Other, including changes in working capital
23,762
1,090
(11,938
)
2,014
14,928
Adjusted EBITDA
41,076
42,689
40,303
42,300
166,368
Less:
Net income attributable to noncontrolling interest
13,330
12,505
1,251
12,750
39,836
Depreciation expense attributable to noncontrolling interest
2,246
2,286
2,409
2,589
9,530
Other expenses attributable to noncontrolling interest
331
189
127
205
852
Pipe revaluation attributable to noncontrolling interest
—
—
9,579
—
9,579
Adjusted EBITDA Attributable to General and Limited Partner Ownership Interest in CONE Midstream Partners LP
$
25,169
$
27,709
$
26,937
$
26,756
$
106,571
Less: cash interest paid, net
234
230
254
198
916
Less: ongoing maintenance capital expenditures, net of expected reimbursements
2,554
2,839
3,112
3,283
11,788
Distributable Cash Flow
$
22,381
$
24,640
$
23,571
$
23,275
$
93,867
Distributions Declared
$
14,062
$
14,591
$
15,209
$
15,827
$
59,689
Distribution Coverage Ratio - Declared
1.59
x
1.69
x
1.55
x
1.47
x
1.57
x
Distributable Cash Flow
$
22,381
$
24,640
$
23,571
$
23,275
$
93,867
Distributions Paid
$
13,570
$
14,062
$
14,591
$
15,209
$
57,432
Distribution Coverage Ratio - Paid
1.65
x
1.75
x
1.62
x
1.53
x
1.63
x
Development Companies Jointly Owned by CONE Midstream Partners LP Operating Income Summary, Selected Operating Statistics and Capital Investment (in thousands) (unaudited)
Three Months Ended September 30, 2016
Development Company
Anchor
Growth
Additional
TOTAL
Income Summary
Revenue
$
50,005
$
2,587
$
8,137
$
60,729
Expenses
18,846
1,475
4,027
24,348
Net Income
31,159
1,112
4,110
36,381
Less: Net income attributable to noncontrolling interest
7,790
1,055
3,905
12,750
Net Income Attributable to General and Limited Partner Ownership Interest in CONE Midstream Partners LP
$
23,369
$
57
$
205
$
23,631
Operating Statistics - Gathered Volumes
Dry gas (BBtu/d)
767
61
14
842
Wet gas (BBtu/d)
331
5
177
513
Condensate (MMcfe/d)
4
—
5
9
Total Gathered Volumes
1,102
66
196
1,364
Total Volumes Net to CONE Midstream Partners LP
827
3
10
840
Capital Investment
Maintenance capital
$
4,308
$
465
$
568
$
5,341
Expansion capital
560
—
841
1,401
Total Capital Investment
$
4,868
$
465
$
1,409
$
6,742
Capital Investment Net to CONE Midstream Partners LP
Maintenance capital
$
3,231
$
23
$
29
$
3,283
Expansion capital
420
—
42
462
Total Capital Investment Net to CONE Midstream Partners LP
$
3,651
$
23
$
71
$
3,745
Development Companies Jointly Owned by CONE Midstream Partners LP Operating Income Summary, Selected Operating Statistics and Capital Investment (in thousands) (unaudited)
Three Months Ended September 30, 2015
Development Company
Anchor
Growth
Additional
TOTAL
Income Summary
Revenue
$
40,327
$
3,467
$
9,959
$
53,753
Expenses
14,647
1,881
3,611
20,139
Net Income
25,680
1,586
6,348
33,614
Less: Net income attributable to noncontrolling interest
6,420
1,506
6,031
13,957
Net Income Attributable to General and Limited Partner Ownership Interest in CONE Midstream Partners LP
$
19,260
$
80
$
317
$
19,657
Operating Statistics - Gathered Volumes
Dry gas (BBtu/d)
480
82
6
568
Wet gas (BBtu/d)
348
10
207
565
Condensate (MMcfe/d)
7
—
16
23
Total Gathered Volumes
835
92
229
1,156
Total Volumes Net to CONE Midstream Partners LP
626
5
11
642
Capital Investment
Maintenance capital
$
2,990
$
346
$
628
$
3,964
Expansion capital
45,108
2,202
43,507
90,817
Total Capital Investment
$
48,098
$
2,548
$
44,135
$
94,781
Capital Investment Net to CONE Midstream Partners LP
Maintenance capital
$
2,243
$
17
$
31
$
2,291
Expansion capital
33,831
110
2,175
36,116
Total Capital Investment Net to CONE Midstream Partners LP
$
36,074
$
127
$
2,206
$
38,407
________________
CONTACT:
Stephen R. Milbourne
CONE Investor Relations
724-485-4408
smilbourne@conemidstream.com
Source: GlobeNewswire
(November 4, 2016 - 6:45 AM EDT)