Southcross Energy announces Q4 and full-year 2014 results
On March 6, Southcross Energy Partners (ticker: SXE) announced fourth quarter and full-year 2014 financial and operational results. SXE’s adjusted EBITDA was $20.6 million for the three months ended December 31, 2014, compared to $14.0 million in Q4’13 and $11.3 million in Q3’14, according to the company’s press release.
The company’s adjusted EBITDA beat consensus estimates of $20.0 million, according to Wunderlich Securities, whose own estimate for Southcross’ Q4 was $19.0 million. “The beat was mainly driven by higher processing volumes and lower operating expenses versus our estimates, partially offset by lower NGL realizations,” said Abhishek Sinha of Wunderlich Securities. Adjusted EBITDA for full-year 2014 was $54.5 million, compared to $34.5 million adjusted EBITDA for 2013, representing a 58% increase year-over-year.
Processed gas volumes for fourth quarter averaged 515,046 MMBtu/d, an increase of 91% compared to 268,957 MMBtu/d during the same period in the prior year. Fractionated NGLs averaged 22.4 MBOPD, an increase of 36% compared to 16.4 MBOPD for the same period in the prior year.
Distributable cash flow for Q4’14 was $13.4 million, compared to $9.3 million for the same period in 2013. The company paid a cash distribution of $0.40 per common unit for Q4’14 and $0.3257 per unit for all Class B convertible units. Distributable cash flow for Q4’14 corresponds to SXE’s intended distribution coverage of 1.0x by Q1’15, including the distributions to be paid on the subordinated units. Management is aiming to maintain a minimum coverage of 1.0x throughout 2015.
Compared to 56 other midstream MLPs in EnerCom’s® MLP Weekly for the week ended March 6, 2015, SXE’s yield of 11.9% is well above the average yield of 6.5%. The high yield, along with SXE’s “scale and integrated platform,” are the main reasons Wunderlich has given the company a “BUY” rating.
Southcross Structure
Southcross Energy is a subsidiary of Southcross Holdings LP, which holds a 57% ownership in the partnership. In a conference call following the Q4’14 announcement, John Bonn, President and Chief Executive Officer, said: “We have a holdings parent entity with well over $1 billion in potential assets to drive down another partnership. We’re confident in our belief that we have created a solid platform and a path to distribution growth. Southcross today is a fully-integrated business, and we are already capitalizing on the operational and financial benefits that we anticipated from our transformative 2014 combination.”
Updated 2015 financial guidance
The company continues to expect to have its first drop down in 2015, and the method will be the main driver for accretive growth, management said SXE plans on receiving its first drop down and will rely on its holding company to take back the equity involved, which removes the need to access public markets for additional funding. Bonn explains: “With the depressed unit price… I think our holdings entity would be excited about taking equity at these kinds of levels in return for pushing some of the assets down in a drop-down type transaction.”SXE expects its adjusted EBITDA for the first quarter of 2015 will be approximately $17.5 to $19.5 million. This estimate reflects the approximate $2.0 million impact related to a facility fire that temporarily reduced processed gas volumes and increased operating expenses during January and February 2015. The plant is now processing 55 MMcf/d but is still below its full capacity of 135 MMcf/d The company also anticipates the need for a lower capex budget for 2015, targeting $25 to$30 million versus $115 million in 2014.
The company has $30 million drawn against its $200 million credit facility and has a total of $476 million in debt, which is within its current covenants (5.30x compared to 5.75x).
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Analyst Commentary
Baird 03.06.2015
SXE reports 4Q14 earnings; provides updated guidance (Bellamy). Southcross Energy Partners (SXE) reported 4Q14 EBITDA of $20.6MM, in line vs. our estimate of $20.5MM and 3% above the Street's consensus of $20.0MM. The Partnership reported distributable cash flow (DCF) of $13.4MM, which was 9% above our $12.3MM estimate. Additionally, SXE provided updated 1Q15 EBITDA guidance of $17.5-19.5MM, with the midpoint of $18.5MM being 6% above our $17.5MM estimate and 11% below the Street's consensus of $20.8MM.
Wunderlich Securities 03.09.2015
Southcross Energy Partners (SXE) reported 4Q14 EBITDA of $20.6mm, beating our and consensus estimates of $19.0mm and $20.0mm, respectively. The beat was mainly driven by higher processing volumes and lower operating expenses versus our estimates, partially offset by lower NGL realizations. The company expects to grow in 2015 despite a challenging commodity market; however, expectations for the pace of growth have moderated. SXE continues to expect to have its first drop down this year; and if commodities support, it also expects to raise its distributions. Post the TexStar acquisition, SXE’s footprint now enables it to execute bolt-on projects that are accretive and do not require significant capex. We believe SXE is now uniquely positioned as a result of its scale and integrated platform.
