Southcross Energy Partners, L.P. Reports Third Quarter Results
DALLAS, Texas, Nov. 14, 2018 (GLOBE NEWSWIRE) -- Southcross Energy Partners, L.P. (NYSE: SXE) (“Southcross” or the “Partnership”) today announced third quarter financial and operating results.
Southcross’ net loss was $14.8 million for the quarter ended September 30, 2018, compared to a net loss of $19.1 million for the same period in the prior year and a net loss of $17.9 million for the quarter ended June 30, 2018. Adjusted EBITDA (as defined below) was $18.6 million for the quarter ended September 30, 2018, compared to $16.8 million for the same period in the prior year and $14.9 million for the quarter ended June 30, 2018.
Processed gas volumes during the quarter averaged 249 MMcf/d, an increase of 12% compared to 222 MMcf/d for the same period in the prior year and an increase of 6% compared to 234 MMcf/d for the quarter ended June 30, 2018.
On July 29, 2018, Southcross terminated the previously announced Agreement and Plan of Merger, dated as of October 31, 2017, with American Midstream Partners, LP (NYSE:AMID)(“AMID”) whereby AMID had proposed to merge Southcross into a wholly owned subsidiary of AMID. In addition, effective July 29, 2018, Southcross Holdings LP (“Southcross Holdings”) terminated the previously announced Contribution Agreement, dated as of October 31, 2017, with AMID as a result of a funding failure by AMID. Pursuant to the terms of the Contribution Agreement, because of the nature of the termination Southcross Holdings was entitled to receive a termination fee of $17 million. On August 1, 2018, AMID paid the $17 million termination fee, of which $4.2 million was contributed to the Partnership to reimburse the Partnership’s costs associated with this transaction.
On October 4, 2018, EPIC Midstream Holdings, LP (“EPIC”) and EPIC Y-Grade Holdings, LP, a subsidiary of EPIC, entered into a definitive equity purchase agreement with Southcross Holdings Borrower LP to acquire the Robstown fractionation facility, along with certain pipelines and other related assets. Under the terms of the agreement, EPIC would assume all of the NGL purchase and sale agreements associated with the Robstown fractionator, including those with the Partnership. Since these agreements would remain in place, Southcross does not expect this transaction to have a material effect on its ongoing financial position.
“In the third quarter, we worked to restore our financial and commercial performance that was hindered during the AMID transaction pendency period,” said James W. Swent III, Chairman, President and Chief Executive Officer of Southcross’ general partner. “I recently completed visits to most of our field sites and was impressed with the operational efficiencies of our assets and our employees’ continued focus on safe and reliable operations. Our modest growth in volumes this quarter is the result of continued strength in commodity prices and the improving commercial environment in the Eagle Ford.”
Capital Expenditures
For the quarter ended September 30, 2018, growth and maintenance capital expenditures were $2.1 million and were related primarily to management’s election to restart the Bonnie View fractionation facility.
Capital and Liquidity
As of September 30, 2018, Southcross had total outstanding debt of $529 million, including $83 million drawn under its revolving credit facility, in-line with total outstanding debt of $529 million as of June 30, 2018. At November 9, 2018, Southcross had more than $28 million in available liquidity.
Cash Distributions and Distributable Cash Flow
Distributable cash flow (as defined below) for the quarter ended September 30, 2018 was $8.3 million, compared to $6.4 million for the same period in the prior year and $4.7 million for the quarter ended June 30, 2018. The Partnership did not make a cash distribution for the quarter ended September 30, 2018 and is not allowed to make any cash distributions until the Partnership’s consolidated total leverage ratio, as defined under its credit agreement, is at or below 5.0x to 1. At September 30, 2018, the Partnership’s consolidated total leverage ratio was approximately 8.6x to 1 compared to approximately 9.1x to 1 for the quarter ended June 30, 2018. (See the accompanying reconciliation of all non-GAAP items at the end of this news release).
Consolidated Interest Coverage Ratio
On August 10, 2018, Southcross entered into the sixth amendment to the Third A&R Revolving Credit Agreement which, among other things, reduced the Consolidated Interest Coverage Ratio from 1.50 to 1.00 to 1.25 to 1.00 for the quarter ending on June 30, 2018. Southcross’ interest coverage for the quarter ended September 30, 2018 was 1.51 times coverage, in compliance with the required 1.50 times.
Conference Call Information
Southcross will hold a conference call on Wednesday, November 14, 2018, at 10:00 a.m. Central Time (11:00 a.m. Eastern Time) to discuss its third quarter 2018 financial and operating results as well as its future outlook. The call can be accessed live over the telephone by dialing (877) 705-6003 or, for international callers, (201) 493-6725. The replay of the call will be available shortly after the call and can be accessed by dialing (844) 512-2921 or, for international callers, (412) 317-6671. The passcode for the replay is 13685003. The replay of the call will be available for approximately two weeks following the call.
Interested parties may also listen to a simultaneous webcast of the call on Southcross’ website at www.southcrossenergy.com under the “Investors” section. A replay of the webcast will also be available for approximately two weeks following the call.
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.
This news release and accompanying statements may contain forward-looking statements. All statements that are not statements of historical facts, including statements regarding our future financial position, results, business strategy, guidance, distribution growth and plans and objectives of management for future operations, are forward-looking statements. We have used the words “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “should,” “will,” “would”, “potential,” and similar terms and phrases to identify forward-looking statements in this news release. Although we believe that the assumptions underlying our forward-looking statements are reasonable, any of these assumptions could be inaccurate, and, therefore, we cannot assure you that the forward-looking statements included herein will prove to be accurate. These forward-looking statements reflect our intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors, many of which are outside our control. Actual results and trends in the future may differ materially from those suggested or implied by the forward-looking statements depending on a variety of factors which are described in greater detail in our filings with the Securities and Exchange Commission (“SEC”). Please see our “Risk Factors” and other disclosures included in their Annual Report on Form 10-K for the year ended December 31, 2017 and in subsequently filed Forms 10-Q and 8-K. All future written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the previous statements. The forward-looking statements herein speak as of the date of this news release. Southcross undertakes no obligation to update any information contained herein or to publicly release the results of any revisions to any forward-looking statements that may be made to reflect events or circumstances that occur, or that we become aware of, after the date of this news release.
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, 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 across industry lines.
A reconciliation of these financial measures to the most comparable GAAP financial measures is contained in the accompanying schedule.
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