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8-K - CURRENT REPORT OF MATERIAL EVENTS OR CORPORATE CHANGES - Southcross Energy Partners, L.P.a13-18136_18k.htm

Exhibit 99.1

 

 

NEWS RELEASE

Southcross Energy

1700 Pacific Avenue, Suite 2900, Dallas, Texas 75201, 214-979-3700

 

Southcross Energy Partners, L.P. Reports Second Quarter 2013

Financial and Operating Results

 

DALLAS, Texas, August 7, 2013 — Southcross Energy Partners, L.P. (NYSE: SXE) (“Southcross” or the “Partnership”) today announced second quarter 2013 financial and operating results.

 

Second Quarter 2013 Highlights

 

·                  Natural gas liquids (“NGL”) production of 10,740 barrels per day, an increase of 6% from the first quarter of 2013

·                  Processed natural gas volumes of 217,315 million BTU per day (“MMBtu/d”), a decrease of 9% from the first quarter of 2013

·                  Improved performance at our Bonnie View fractionator which produced 99% on-specification products versus 69% in the first quarter of 2013

·                  Commenced new NGL sales contracts on May 1, 2013 that improved realized NGL sales prices

·                  Completed construction of a new rich gas pipeline and new propane pipeline

·                  Commenced construction of an additional pipeline to connect rich gas under a new gas supply contract expected to start in the fourth quarter of 2013

 

Second Quarter Results

 

Southcross’ Adjusted EBITDA (as defined below) was $6.2 million for the three month period ended June 30, 2013, compared to $7.3 million for the same period in the prior year. Adjusted EBITDA for the second quarter of 2013 was impacted negatively by approximately $2.3 million due to plant downtime and unusual expenses related to decommissioning costs for an abandoned facility and other items.

 

“Our EBITDA progression continues to improve as we produce more on-specification products and sell NGLs under our new, higher-priced contracts,” said David Biegler, Chairman, President and Chief Executive Officer of Southcross’ general partner. “The recent addition of new gas supply, expansion of our pipeline system and strong drilling activity of producers on our gathering systems provide us with confidence in our growth. We continue to be encouraged by our progress in solidifying growth projects that would add significant gas supply volumes and further develop our downstream liquids and residue gas marketing businesses.”

 

Gross operating margin (as defined below) totaled $21.3 million for the three month period ended June 30, 2013, compared to $18.7 million for the same period in the prior year. Net (loss)/ income (before deemed distributions on preferred units) was $(6.2) million for the three month period ended June 30, 2013, compared to $1.9 million for the same period in the prior year.

 

During the three month period ended June 30, 2013, total gas volumes averaged 545,093 MMBtu/d, a decrease of 5% compared to 571,884 MMBtu/d during the same period in the prior year. Processed gas volumes averaged 217,315 MMBtu/d during the three month period ended June 30, 2013, an increase of 4% over the 208,658 MMBtu/d for the same period in the prior year. NGL production for the three month period ended June 30, 2013 averaged 10,740 barrels per day, an increase of 19% from the 9,013 barrels per day for the same period in the prior year, reflecting an increase in liquids-rich gas volumes from the Eagle Ford.

 

1



 

Capital Expenditures

 

For the three month period ended June 30, 2013, capital additions to property, plant and equipment were $13.9 million.

 

Cash Distributions

 

On July 29, 2013, Southcross announced that it would pay on August 14, 2013 to all unitholders of record on August 9, 2013, a cash distribution of $0.40 per common unit for the three month period ended June 30, 2013. Southcross also announced that it would pay on August 14, 2013 to all preferred unitholders of record on August 9, 2013, a distribution paid in-kind in the form of additional convertible preferred units at a rate of $0.40 per unit. The distribution will be pro-rated from April 12, 2013 or May 15, 2013, depending on the date a holder’s Series A convertible preferred units were issued.

 

Updated Fourth Quarter 2013 Guidance

 

Southcross is narrowing its financial guidance and expects that its Adjusted EBITDA for the fourth quarter of 2013 will range from $14 million to $16 million compared to its prior guidance range of $14 million to $17 million.

 

The guidance above sets forth management’s best estimate based on current and anticipated market conditions and other factors. While we believe that these estimates and assumptions are reasonable, they are inherently uncertain and are subject to, among other things, significant business, economic, regulatory, environmental and competitive risks and uncertainties that could cause actual results to differ materially from those that we anticipate, as set forth under “Forward-Looking Statements.”

 

Conference Call Information

 

Southcross will hold a conference call on Wednesday, August 7, 2013, at 10:00 a.m. Central Time (11:00 a.m. Eastern Time) to discuss its second quarter 2013 financial and operating results. 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 (877) 870-5176 or, for international callers, (858) 384-5517. The passcode for the replay is 418916. The replay of the conference 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 three gas processing plants, two fractionation plants and approximately 2,740 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.

 

2



 

Forward-Looking Statements

 

This press release includes certain statements concerning expectations for the future that are forward-looking and made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. 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.” Although we believe the expectations and forecasts reflected in these and other forward-looking statements are reasonable, we 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 our actual results in future periods to differ materially from anticipated or projected results. Examples include discussion of our new NGL contracts, new gas supply contracts and our fourth quarter 2013 Adjusted EBITDA guidance. An extensive list of the specific risks and uncertainties affecting us is contained in our 2012 Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on April 15, 2013 and other documents filed from time to time with the SEC. Any forward-looking statements in this press release are made as of the date of this press release 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, gross operating margin and distributable cash flow. We define Adjusted EBITDA as net income, plus interest expense, income tax expense, depreciation and amortization expense, certain non-cash charges such as non-cash equity compensation, unrealized losses on commodity derivative contracts and selected charges and transaction costs that are unusual or non-recurring, less interest income, income tax benefit, unrealized gains on commodity derivative contracts and selected gains that are unusual or non-recurring. We define gross operating margin as the sum of contract revenues less the cost of natural gas and NGLs sold. We define distributable cash flow as Adjusted EBITDA plus interest income, less cash interest expense (net of capitalized costs), income tax expense and maintenance capital expenditures.

 

We believe that the presentation of these non-GAAP financial measures will provide useful information to investors in assessing our results of operations. Reconciliations of Adjusted EBITDA, gross operating margin and distributable cash flow to their most directly comparable GAAP measure are included in this press release. 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 it excludes some but not all items that affect the most directly comparable GAAP financial measure. You should not consider any of Adjusted EBITDA, gross operating margin or distributable cash flow in isolation or as a substitute for analysis of our results as reported under GAAP. Because Adjusted EBITDA, gross operating margin 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.

 

###

 

Contact:

Southcross Energy Partners, L.P.

Kristin Hodges, 214-979-3720

Investor Relations

investorrelations@southcrossenergy.com

 

3



 

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,

 

 

 

2013

 

2012

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$

154,703

 

$

105,701

 

$

298,954

 

$

226,319

 

Expenses:

 

 

 

 

 

 

 

 

 

Cost of natural gas and liquids sold

 

133,407

 

87,002

 

258,795

 

186,204

 

Operations and maintenance

 

10,284

 

8,381

 

20,173

 

15,579

 

Depreciation and amortization

 

8,261

 

3,674

 

15,510

 

7,338

 

General and administrative

 

5,582

 

3,202

 

11,623

 

5,636

 

Total expenses

 

157,534

 

102,259

 

306,101

 

214,757

 

 

 

 

 

 

 

 

 

 

 

(Loss) income from operations

 

(2,831

)

3,442

 

(7,147

)

11,562

 

Interest expense, net

 

(3,101

)

(1,332

)

(5,148

)

(3,131

)

(Loss) income before income tax expense

 

(5,932

)

2,110

 

(12,295

)

8,431

 

Income tax expense

 

(260

)

(171

)

(279

)

(256

)

Net (loss) income

 

$

(6,192

)

$

1,939

 

$

(12,574

)

$

8,175

 

Series A preferred unit distribution

 

(560

)

 

 

(560

)

 

 

Series A preferred unit valuation adjustment to maximum value assuming change in control premium

 

(4,666

)

 

 

(4,666

)

 

 

Net loss attributable to partners

 

(11,418

)

 

 

(17,800

)

 

 

 

 

 

 

 

 

 

 

 

 

General partner’s interest in net loss

 

(124

)

 

 

(252

)

 

 

Limited partners’ interest in net loss

 

$

(11,294

)

 

 

$

(17,548

)

 

 

 

 

 

 

 

 

 

 

 

 

Less deemed dividends on:

 

 

 

 

 

 

 

 

 

Redeemable preferred units

 

 

 

(777

)

 

 

(1,519

)

Series B redeemable preferred units

 

 

 

(1,592

)

 

 

(1,784

)

Series C redeemable preferred units

 

 

 

(59

)

 

 

(59

)

Preferred units

 

 

 

(3,840

)

 

 

(7,586

)

Net loss attributable to Southcross Energy LLC common unitholders

 

 

 

$

(4,329

)

 

 

$

(2,773

)

 

 

 

 

 

 

 

 

 

 

Basic and diluted loss per unit:

 

 

 

 

 

 

 

 

 

Net loss per limited partner common unit

 

$

(0.65

)

 

 

$

(0.91

)

 

 

Net loss per limited partner subordinated unit

 

$

(0.27

)

 

 

$

(0.53

)

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted net loss per Southcross Energy LLC common unit

 

 

 

$

(3.58

)

 

 

$

(2.28

)

 



 

SOUTHCROSS ENERGY PARTNERS, L.P.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except for unit data)

(Unaudited)

 

 

 

June 30,

 

December 31,

 

 

 

2013

 

2012

 

ASSETS

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

1,981

 

$

7,490

 

Trade accounts receivable

 

48,645

 

50,994

 

Prepaid expenses

 

1,076

 

1,762

 

Other current assets

 

3,486

 

1,001

 

Total current assets

 

55,188

 

61,247

 

 

 

 

 

 

 

Property, plant and equipment, net

 

576,498

 

550,603

 

Intangible assets, net

 

1,596

 

1,624

 

Other assets

 

6,643

 

5,131

 

Total assets

 

$

639,925

 

$

618,605

 

 

 

 

 

 

 

LIABILITIES AND PARTNERS’ CAPITAL

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable and accrued liabilities

 

$

60,390

 

$

96,801

 

Other current liabilities

 

3,281

 

3,586

 

Total current liabilities

 

63,671

 

100,387

 

 

 

 

 

 

 

Long-term debt

 

236,500

 

191,000

 

Other non-current liabilities

 

1,317

 

751

 

Total liabilities

 

301,488

 

292,138

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

Series A convertible preferred units (1,715,000 units issued and outstanding as of June 30, 2013)

 

44,061

 

 

 

 

 

 

 

 

Partners’ capital:

 

 

 

 

 

Common units (12,222,692 and 12,213,713 units issued and outstanding as of June 30, 2013 and December 31, 2012, respectively)

 

176,138

 

194,365

 

Subordinated units (12,213,713 units issued and outstanding as of June 30, 2013 and December 31, 2012)

 

111,694

 

125,951

 

General Partner interest

 

6,857

 

6,628

 

Accumulated other comprehensive loss

 

(313

)

(477

)

Total partners’ capital

 

294,376

 

326,467

 

Total liabilities and partners’ capital

 

$

639,925

 

$

618,605

 

 



 

SOUTHCROSS ENERGY PARTNERS, L.P.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

Six Months Ended June 30,

 

 

 

2013

 

2012

 

Cash flows from operating activities:

 

 

 

 

 

Net (loss) income

 

$

(12,574

)

$

8,175

 

Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:

 

 

 

 

 

Depreciation and amortization

 

15,510

 

7,338

 

Unit-based compensation

 

1,093

 

146

 

Amortization of deferred financing costs

 

602

 

624

 

Unrealized loss

 

 

222

 

Other, net

 

19

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

Trade accounts receivable

 

2,349

 

10,772

 

Prepaid expenses and other

 

823

 

617

 

Other non-current assets

 

(69

)

(1,217

)

Accounts payable and accrued liabilities

 

(7,123

)

(13,212

)

Interest Payable

 

 

(1

)

Other liabilities

 

(966

)

(1,220

)

Net cash provided by (used in) operating activities

 

(336

)

12,244

 

Cash flows from investing activities:

 

 

 

 

 

Capital expenditures

 

(69,449

)

(71,603

)

Expenditures related to repairs of fire damage

 

(2,622

)

 

Other

 

24

 

 

Net cash used in investing activities

 

(72,047

)

(71,603

)

Cash flows from financing activities:

 

 

 

 

 

Borrowings under our credit agreements

 

85,500

 

45,500

 

Repayments under our credit agreements

 

(40,000

)

(39,245

)

Payments on capital lease obligations

 

(261

)

 

Financing costs

 

(2,045

)

(2,514

)

Proceeds from issuance of Series A convertible preferred units, net of issuance costs

 

38,835

 

 

Contributions from general partner

 

800

 

 

Repurchase and retirement of Southcross Energy LLC common units

 

 

(15,300

)

Proceeds from issuance of Southcross Energy LLC Series B redeemable preferred units

 

 

42,800

 

Proceeds from issuance of Southcross Energy LLC Series C redeemable preferred units

 

 

30,000

 

Distribution to partners

 

(15,955

)

 

Net cash provided by financing activities

 

66,874

 

61,241

 

 

 

 

 

 

 

Net (decrease) increase in cash and cash equivalents

 

(5,509

)

1,882

 

Cash and cash equivalents — Beginning of period

 

7,490

 

1,412

 

Cash and cash equivalents — End of period

 

$

1,981

 

$

3,294

 

 



 

SOUTHCROSS ENERGY PARTNERS, L.P.

SELECTED FINANCIAL AND OPERATIONAL DATA

(In thousands, except for operational data)

(Unaudited)

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

 

2013

 

2012

 

2013

 

2012

 

Adjusted EBITDA

 

$

6,247

 

$

7,262

 

$

10,789

 

$

19,046

 

Gross operating margin

 

$

21,296

 

$

18,699

 

$

40,159

 

$

40,115

 

 

 

 

 

 

 

 

 

 

 

Maintenance capital expenditures

 

$

635

 

$

1,388

 

$

1,345

 

$

1,736

 

Expansion capital expenditures

 

$

19,604

 

$

31,302

 

$

68,104

 

$

69,867

 

 

 

 

 

 

 

 

 

 

 

Distributable cash flow

 

$

2,607

 

$

4,808

 

$

4,641

 

$

14,869

 

Cash distributions declared

 

$

9,986

 

$

 

$

19,959

 

$

 

 

 

 

 

 

 

 

 

 

 

Operating data:

 

 

 

 

 

 

 

 

 

Average throughput of gas (MMBtu/d)

 

545,093

 

571,884

 

569,592

 

576,404

 

Average volume of processed gas (MMBtu/d)

 

217,315

 

208,658

 

228,474

 

210,679

 

Average volume of NGLs sold (Bbls/d)

 

10,740

 

9,013

 

10,448

 

9,093

 

 

 

 

 

 

 

 

 

 

 

Realized prices on natural gas volumes sold ($/MMBtu)

 

$

4.19

 

$

2.30

 

$

3.80

 

$

2.48

 

Realized prices on NGL volumes sold ($/gal)

 

$

0.82

 

$

0.89

 

$

0.83

 

$

0.98

 

 



 

SOUTHCROSS ENERGY PARTNERS, L.P.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(In thousands)

(Unaudited)

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

 

2013

 

2012

 

2013

 

2012

 

Reconciliation of gross operating margin to net (loss) income:

 

 

 

 

 

 

 

 

 

Gross operating margin

 

$

21,296

 

$

18,699

 

$

40,159

 

$

40,115

 

(Deduct):

 

 

 

 

 

 

 

 

 

Income tax expense

 

(260

)

(171

)

(279

)

(256

)

Interest expense

 

(3,101

)

(1,332

)

(5,148

)

(3,131

)

General and administrative expense

 

(5,582

)

(3,202

)

(11,623

)

(5,636

)

Depreciation and amortization expense

 

(8,261

)

(3,674

)

(15,510

)

(7,338

)

Operations and maintenance expense

 

(10,284

)

(8,381

)

(20,173

)

(15,579

)

Net (loss) income

 

$

(6,192

)

$

1,939

 

$

(12,574

)

$

8,175

 

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

 

2013

 

2012

 

2013

 

2012

 

Reconciliation of net (loss) income to Adjusted EBITDA and distributable cash flow:

 

 

 

 

 

 

 

 

 

Net (loss) income

 

$

(6,192

)

$

1,939

 

$

(12,574

)

$

8,175

 

Add:

 

 

 

 

 

 

 

 

 

Depreciation and amortization expense

 

8,261

 

3,674

 

15,510

 

7,338

 

Interest expense, net

 

3,101

 

1,332

 

5,148

 

3,131

 

Unit-based compensation

 

685

 

146

 

1,093

 

146

 

Income tax expense

 

260

 

171

 

279

 

256

 

Other, net

 

19

 

 

19

 

 

Expenses associated with significant items

 

113

 

 

1,314

 

 

Adjusted EBITDA

 

$

6,247

 

$

7,262

 

$

10,789

 

$

19,046

 

(Deduct):

 

 

 

 

 

 

 

 

 

Cash interest, net of capitalized costs

 

(2,745

)

(895

)

(4,524

)

(2,185

)

Income tax expense

 

(260

)

(171

)

(279

)

(256

)

Maintenance capital expenditures

 

(635

)

(1,388

)

(1,345

)

(1,736

)

Distributable cash flow

 

$

2,607

 

$

4,808

 

$

4,641

 

$

14,869