Attached files
| file | filename |
|---|---|
| 8-K/A - 8-K/A RED ROCK CLOSING - Summit Midstream Partners, LP | redrockclosing8-ka.htm |
| EX-99.1 - RED ROCK 2013 AUDIT - Summit Midstream Partners, LP | ex991redrock2013auditedfs.htm |
| EX-23.1 - DELOITTE & TOUCHE CONSENT - Summit Midstream Partners, LP | ex231redrockconsent.htm |
EXHIBIT 99.2
SUMMIT MIDSTREAM PARTNERS, LP
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
AS OF DECEMBER 31, 2013 AND FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012
Throughout this report, when we use the terms "we," "us," "SMLP," or "the Partnership" we are referring to Summit Midstream Partners, LP, the partnership itself or to Summit Midstream Partners, LP and its subsidiaries collectively as the context requires.
Set forth below are our unaudited pro forma condensed combined financial statements as of December 31, 2013 and for the years ended December 31, 2013 and 2012 which reflect the acquisition of Red Rock Gathering Company, LLC ("Red Rock Gathering") and its subsidiary by SMLP on March 18, 2014 (the "Red Rock Drop Down"), from Summit Midstream Partners Holdings, LLC (“SMP Holdings”). Concurrent with the acquisition, SMLP contributed its interest in Red Rock Gathering to Summit Midstream Holdings, LLC ("Summit Holdings"), a wholly owned subsidiary of SMLP, which in turn contributed its interest to Grand River Gathering, LLC, its wholly owned subsidiary.
The unaudited pro forma condensed combined balance sheet as of December 31, 2013 and the unaudited pro forma condensed combined statement of operations for the year ended December 31, 2013 were derived from SMLP's audited consolidated financial statements and the audited consolidated financial statements of Red Rock Gathering as of and for the year ended December 31, 2013. The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2012 was derived from SMLP's audited consolidated financial statements for the year ended December 31, 2012 and the historical consolidated financial statements of Red Rock Gathering for the year ended December 31, 2012, which previously were included in the audited consolidated financial statements of Summit Midstream Partners, LLC, ("Summit Investments"), the parent of SMP Holdings.
The unaudited pro forma condensed combined balance sheet reflects the Red Rock Drop Down as if such transaction closed as of December 31, 2013 and the unaudited pro forma condensed combined statements of operations reflect the Red Rock Drop Down as if such transaction had occurred as of October 23, 2012, the date that Red Rock Gathering was acquired by SMLP's ultimate parent. Descriptions of the adjustments for the Red Rock Drop Down are presented in the notes to the unaudited pro forma condensed combined financial statements. The unaudited pro forma condensed combined financial statements and accompanying notes should be read in conjunction with SMLP's historical financial statements filed with the Securities and Exchange Commission (the "SEC"). The unaudited pro forma condensed combined financial statements and accompanying notes should also be read in conjunction with Red Rock's historical financial statements as filed with the SEC as Exhibit 99.1 to this Amendment No. 1 to SMLP's Current Report on Form 8-K.
The unaudited pro forma condensed combined balance sheet and the unaudited pro forma condensed combined statements of operations were derived by adjusting the historical financial statements of each entity based on currently available information and, therefore, the actual adjustments may differ materially from the pro forma adjustments. Because the Red Rock Drop Down was executed between entities under common control, we will be accounting for it on an “as if pooled” basis for all periods in which common control existed. Common control began on October 23, 2012 concurrent with the acquisition of Red Rock Gathering by Summit Investments. This unaudited condensed combined financial information does not present any pro forma effects for the period prior to Red Rock Gathering's October 23, 2012 acquisition by Summit Investments. In March 2013, Summit Investments contributed its 100% ownership in Red Rock Gathering to SMP Holdings in exchange for a continuing 100% interest in SMP Holdings. The assets acquired and liabilities assumed by SMLP in the Red Rock Drop Down have been reflected at historical cost.
The unaudited pro forma condensed combined financial statements do not purport to present our financial position or the results of operations had the Red Rock Drop Down actually been completed as of the dates indicated. The unaudited pro forma condensed combined financial statements do not purport to present our financial position or results of operations had SMLP's March 2014 primary offering of 5.3 million common units and Summit Holdings' March 2014 draw of $102.6 million on its revolving credit facility been completed at an earlier date. Further, these unaudited pro forma condensed combined financial statements (i) do not reflect the effects of any cost savings or other synergies that may be achieved as a result of this transaction, (ii) are based on assumptions that we believe are reasonable under the circumstances, and (iii) are intended for informational purposes only. Moreover, the statements do not project our financial position or results of operations for any future date or period.
1
EXHIBIT 99.2
SUMMIT MIDSTREAM PARTNERS, LP AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
DECEMBER 31, 2013
Historical | |||||||||||||||
Summit Midstream Partners, LP | Red Rock Gathering Company, LLC | Pro forma adjustments | Summit Midstream Partners, LP pro forma | ||||||||||||
(In thousands) | |||||||||||||||
Assets | |||||||||||||||
Current assets: | |||||||||||||||
Cash and cash equivalents | $ | 18,764 | $ | 1,593 | $ | 202,447 | (a) | $ | 20,357 | ||||||
102,553 | (b) | ||||||||||||||
(305,000 | ) | (c) | |||||||||||||
Accounts receivable | 54,256 | 13,621 | — | 67,877 | |||||||||||
Other assets | 3,089 | 1,652 | — | 4,741 | |||||||||||
Total current assets | 76,109 | 16,866 | — | 92,975 | |||||||||||
Property, plant and equipment, net | 980,341 | 177,740 | — | 1,158,081 | |||||||||||
Intangible assets, net | 452,994 | 49,183 | — | 502,177 | |||||||||||
Goodwill | 115,888 | — | — | 115,888 | |||||||||||
Other noncurrent assets | 14,583 | 35 | — | 14,618 | |||||||||||
Total assets | $ | 1,639,915 | $ | 243,824 | $ | — | $ | 1,883,739 | |||||||
Liabilities and Partners' Capital and Membership Interests | |||||||||||||||
Current liabilities: | |||||||||||||||
Trade accounts payable | $ | 18,132 | $ | 6,985 | $ | — | $ | 25,117 | |||||||
Due to affiliate | 653 | — | — | 653 | |||||||||||
Deferred revenue | 1,555 | — | — | 1,555 | |||||||||||
Ad valorem taxes payable | 6,804 | 1,571 | — | 8,375 | |||||||||||
Accrued interest | 12,144 | — | — | 12,144 | |||||||||||
Accrued expenses | — | 1,440 | — | 1,440 | |||||||||||
Other current liabilities | 9,055 | 1,234 | 550 | (c) | 10,839 | ||||||||||
Total current liabilities | 48,343 | 11,230 | 550 | 60,123 | |||||||||||
Long-term debt | 586,000 | — | 102,553 | (b) | 688,553 | ||||||||||
Noncurrent liability, net | 6,374 | — | — | 6,374 | |||||||||||
Deferred revenue | 29,683 | — | — | 29,683 | |||||||||||
Other noncurrent liabilities | 372 | — | — | 372 | |||||||||||
Total liabilities | 670,772 | 11,230 | 103,103 | 785,105 | |||||||||||
Commitments and contingencies | |||||||||||||||
Common limited partner capital | 566,532 | — | 198,392 | (a) | 723,113 | ||||||||||
(315 | ) | (c) | |||||||||||||
(41,496 | ) | (d) | |||||||||||||
Subordinated limited partner capital | 379,287 | — | (224 | ) | (c) | 349,601 | |||||||||
(29,462 | ) | (d) | |||||||||||||
General partner interests | 23,324 | — | 4,055 | (a) | 25,920 | ||||||||||
(11 | ) | (c) | |||||||||||||
(1,448 | ) | (d) | |||||||||||||
Membership interests | — | 232,594 | (232,594 | ) | (d) | — | |||||||||
Total partners' capital and membership interests | 969,143 | 232,594 | (103,103 | ) | 1,098,634 | ||||||||||
Total liabilities and partners' capital and membership interests | $ | 1,639,915 | $ | 243,824 | $ | — | $ | 1,883,739 | |||||||
The accompanying notes are an integral part of these unaudited pro forma condensed combined financial statements.
2
EXHIBIT 99.2
SUMMIT MIDSTREAM PARTNERS, LP AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2013
Historical | ||||||||||||||||
Summit Midstream Partners, LP | Red Rock Gathering Company, LLC | Pro forma adjustments | Summit Midstream Partners, LP pro forma | |||||||||||||
(In thousands, except per-unit and unit amounts) | ||||||||||||||||
Revenues: | ||||||||||||||||
Gathering services and other fees | $ | 174,506 | $ | 30,840 | $ | — | $ | 205,346 | ||||||||
Natural gas, NGL and condensate sales and other | 69,332 | 19,274 | — | 88,606 | ||||||||||||
Amortization of favorable and unfavorable contracts | (1,032 | ) | — | — | (1,032 | ) | ||||||||||
Total revenues | 242,806 | 50,114 | — | 292,920 | ||||||||||||
Costs and expenses: | ||||||||||||||||
Operation and maintenance | 59,972 | 12,493 | — | 72,465 | ||||||||||||
Cost of natural gas and NGL | 31,036 | 13,197 | — | 44,233 | ||||||||||||
General and administrative | 24,558 | 5,547 | — | 30,105 | ||||||||||||
Transaction costs | 2,770 | 71 | — | 2,841 | ||||||||||||
Depreciation and amortization | 60,824 | 9,138 | — | 69,962 | ||||||||||||
Total costs and expenses | 179,160 | 40,446 | — | 219,606 | ||||||||||||
Other expense | (108 | ) | — | — | (108 | ) | ||||||||||
Interest expense | (19,173 | ) | — | (2,521 | ) | (b) | (21,694 | ) | ||||||||
Income before income taxes | 44,365 | 9,668 | (2,521 | ) | 51,512 | |||||||||||
Income tax expense | (729 | ) | — | — | (729 | ) | ||||||||||
Net income | $ | 43,636 | $ | 9,668 | $ | (2,521 | ) | $ | 50,783 | |||||||
Less: net income attributable to SMP Holdings | 52 | — | 52 | |||||||||||||
Net income attributable to SMLP | 43,584 | 7,147 | 50,731 | |||||||||||||
Less: net income attributable to general partner, including IDRs | 1,035 | 159 | 1,194 | |||||||||||||
Net income attributable to limited partners | $ | 42,549 | $ | 6,988 | $ | 49,537 | ||||||||||
Earnings per common unit – basic | $ | 0.86 | $ | 0.89 | ||||||||||||
Earnings per common unit – diluted | $ | 0.86 | $ | 0.88 | ||||||||||||
Earnings per subordinated unit – basic and diluted | $ | 0.79 | $ | 0.86 | ||||||||||||
Weighted-average common units outstanding – basic | 26,951,346 | 32,251,346 | (e) | |||||||||||||
Weighted-average common units outstanding – diluted | 27,101,479 | 32,401,479 | (f) | |||||||||||||
Weighted-average subordinated units outstanding – basic and diluted | 24,409,850 | 24,409,850 | ||||||||||||||
The accompanying notes are an integral part of these unaudited pro forma condensed combined financial statements.
3
EXHIBIT 99.2
SUMMIT MIDSTREAM PARTNERS, LP AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2012
Historical | ||||||||||||||||
Summit Midstream Partners, LP | Red Rock Gathering Company, LLC | Pro forma adjustments | Summit Midstream Partners, LP pro forma | |||||||||||||
(In thousands, except per-unit and unit amounts) | ||||||||||||||||
Revenues: | ||||||||||||||||
Gathering services and other fees | $ | 149,371 | $ | 4,768 | $ | — | $ | 154,139 | ||||||||
Natural gas, NGL and condensate sales and other | 16,320 | 4,156 | — | 20,476 | ||||||||||||
Amortization of favorable and unfavorable contracts | (192 | ) | — | — | (192 | ) | ||||||||||
Total revenues | 165,499 | 8,924 | — | 174,423 | ||||||||||||
Costs and expenses: | ||||||||||||||||
Operation and maintenance | 51,658 | 3,224 | — | 54,882 | ||||||||||||
Cost of natural gas and NGL | — | 2,224 | — | 2,224 | ||||||||||||
General and administrative | 21,357 | 825 | — | 22,182 | ||||||||||||
Transaction costs | 2,020 | 5 | — | 2,025 | ||||||||||||
Depreciation and amortization | 35,299 | 1,375 | — | 36,674 | ||||||||||||
Total costs and expenses | 110,334 | 7,653 | — | 117,987 | ||||||||||||
Other income | 9 | — | — | 9 | ||||||||||||
Interest expense | (12,766 | ) | — | (385 | ) | (g) | (13,151 | ) | ||||||||
Income before income taxes | 42,408 | 1,271 | (385 | ) | 43,294 | |||||||||||
Income tax expense | (682 | ) | — | — | (682 | ) | ||||||||||
Net income | $ | 41,726 | $ | 1,271 | $ | (385 | ) | $ | 42,612 | |||||||
Less: net income attributable to the pre-IPO period | 24,112 | — | 24,112 | |||||||||||||
Net income attributable to SMLP | 17,614 | 886 | 18,500 | |||||||||||||
Less: net income attributable to general partner | 352 | 17 | 369 | |||||||||||||
Net income attributable to limited partners | $ | 17,262 | $ | 869 | $ | 18,131 | ||||||||||
Earnings per common unit – basic | $ | 0.35 | $ | 0.36 | ||||||||||||
Earnings per common unit – diluted | $ | 0.35 | $ | 0.35 | ||||||||||||
Earnings per subordinated unit – basic and diluted | $ | 0.35 | $ | 0.33 | ||||||||||||
Weighted-average common units outstanding – basic | 24,412,427 | 27,926,557 | (h) | |||||||||||||
Weighted-average common units outstanding – diluted | 24,543,985 | 28,058,115 | (i) | |||||||||||||
Weighted-average subordinated units outstanding – basic and diluted | 24,409,850 | 24,409,850 | ||||||||||||||
The accompanying notes are an integral part of these unaudited pro forma condensed combined financial statements.
4
EXHIBIT 99.2
SUMMIT MIDSTREAM PARTNERS, LP AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
AS OF DECEMBER 31, 2013 AND FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012
Pro forma adjustments
(a) On March 17, 2014, SMLP closed closed an underwritten public offering of 5,300,000 common limited partner units. Net proceeds from the offering totaled $202.4 million and were used to partially fund the purchase of Red Rock Gathering. Concurrent with and as a result of the offering, SMLP's general partner made an additional capital contribution to increase its general partner interest to 2%.
(b) SMP Holdings borrowed $102.6 million under its revolving credit facility to fund the remaining balance of the purchase price of Red Rock Gathering. The unaudited pro forma condensed combined statement of operations impact reflects incremental interest expense on related borrowings based on a rate of 2.98% for the first quarter of 2013, 2.71% for the second and third quarters of 2013 and 3.43% for the fourth quarter of 2013 (i.e. the historical average rate for borrowings under our revolving credit facility) and assumes that the interest expense impact of the additional outstanding balance is partially offset by a reduction in the 0.50% commitment fee for the same principal amount.
(c) Reflects the total purchase price for SMLP's acquisition of 100% of the membership interests of Red Rock Gathering of $305.0 million, calculated as follows (in thousands):
Aggregate cash purchase price to SMP Holdings | $ | 305,000 | |
Direct acquisition costs | 550 | ||
Total Red Rock Acquisition purchase price | $ | 305,550 | |
Direct acquisition costs of $550,000 have been accrued as of December 31, 2013 but have not been given pro forma effect in the unaudited pro forma condensed combined statement of operations.
(d) Reflects partner's capital distribution to SMP Holdings for the consideration paid by SMLP for Red Rock in excess of the contribution of assets from SMP Holdings (in thousands):
Borrowings under revolving credit facility | $ | 102,553 | |||||
Net cash received from primary offering | 202,447 | ||||||
Total cash consideration paid by SMLP for Red Rock | $ | 305,000 | |||||
Less: SMP Holdings' membership interests in Red Rock | 232,594 | ||||||
SMLP distribution for cash consideration in excess of assets contributed | $ | 72,406 | |||||
Allocation of distribution: | |||||||
Common limited partner interest | $ | (41,496 | ) | ||||
Subordinated limited partner interest | (29,462 | ) | |||||
General partner interest | (1,448 | ) | |||||
Partners' capital allocation | $ | (72,406 | ) | ||||
The general partner interest allocation was calculated based on a 2% general partner interest in the distribution of consideration paid by SMLP in excess of assets contributed by SMP Holdings. Common and subordinated limited partner interests allocations were calculated as their respective percentages of total limited partner capital as of December 31, 2013 applied to the balance of the distribution to SMP Holdings after giving effect to the general partner allocation.
(e) The pro forma basic weighted-average number of common units outstanding for the year ended December 31, 2013 was calculated as follows:
Basic weighted-average number of SMLP common units outstanding—as reported | 26,951,346 | |
Adjustment for impact of SMLP common units issued to partially fund the Red Rock Acquisition | 5,300,000 | |
Pro forma basic weighted-average number of SMLP common units outstanding | 32,251,346 | |
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EXHIBIT 99.2
(f) The pro forma diluted weighted-average number of common units outstanding for the year ended December 31, 2013 was calculated as follows:
Diluted weighted-average number of SMLP common units outstanding—as reported | 27,101,479 | |
Adjustment for impact of SMLP common units issued to partially fund the Red Rock Acquisition | 5,300,000 | |
Pro forma diluted weighted-average number of SMLP common units outstanding | 32,401,479 | |
(g) Reflects incremental interest expense on borrowings of $102.6 million based on a rate of 2.75% for the two months that Red Rock Gathering was owned under common control in the fourth quarter of 2012 (i.e. the historical average rate for borrowings under our revolving credit facility) and assumes that the interest expense impact of the additional outstanding balance is partially offset by a reduction in the 0.50% commitment fee for the same principal amount.
(h) The pro forma basic weighted-average number of common units outstanding for the year ended December 31, 2012 was calculated as follows:
Basic weighted-average number of SMLP common units outstanding—as reported | 24,412,427 | |
Adjustment for impact of SMLP common units issued to partially fund the Red Rock Acquisition | 3,514,130 | |
Pro forma basic weighted-average number of SMLP common units outstanding | 27,926,557 | |
(i) The pro forma diluted weighted-average number of common units outstanding for the year ended December 31, 2012 was calculated as follows:
Diluted weighted-average number of SMLP common units outstanding—as reported | 24,543,985 | |
Adjustment for impact of SMLP common units issued to partially fund the Red Rock Acquisition | 3,514,130 | |
Pro forma diluted weighted-average number of SMLP common units outstanding | 28,058,115 | |
6