Southcross Energy Partners, L.P. - FORM 8-K - EX-99.1 - EXHIBIT - May 7, 2014

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8-K - 8-K - Southcross Energy Partners, L.P.form8-kxearningsreleaseq12.htm



                                    

NEWS RELEASE                 
Southcross Energy             1700 Pacific Avenue, Suite 2900, Dallas, Texas 75201, 214-979-3720

Southcross Energy Partners, L.P. Reports First Quarter 2014
Financial and Operating Results

DALLAS, Texas, May 7, 2014 - Southcross Energy Partners, L.P. (NYSE: SXE) (“Southcross” or the “Partnership”) today announced first quarter 2014 financial and operating results.
First Quarter 2014 Highlights

•
Adjusted EBITDA in the quarter of $12.5 million, slightly above the Partnership’s prior guidance
•
Acquired pipeline assets near Corpus Christi, Texas that are expected to be accretive to distributable cash flow in 2014
•
Commenced construction of the Webb Pipeline to extend Southcross’ rich gas system to the western region of the Eagle Ford
•
Completed a follow-on equity offering of 9.2 million units with net proceeds of approximately $144.7 million
•
Exercised an option under Southcross’ credit agreement to revert the facility size, borrowing rates and certain financial covenants back to their original terms

First Quarter Results

Southcross’ Adjusted EBITDA (as defined below) was $12.5 million for the three month period ended March 31, 2014, compared to $4.5 million for the same period in the prior year.

“First quarter 2014 results were in line with our expectations” said David Biegler, Chairman and Chief Executive Officer of Southcross’ general partner. “As we move forward, we are focused on expanding our pipeline system and capturing new gas supply. Our Webb Pipeline construction is ongoing and when completed will reinforce our position as a key midstream link between the prolific Eagle Ford area of rich gas production and the growing Corpus Christi market for natural gas and natural gas liquids.”
 
Gross operating margin (as defined below) totaled $27.2 million for the three month period ended March 31, 2014, compared to $18.9 million for the same period in the prior year. Net loss was $1.3 million for the three month period ended March 31, 2014, compared to $6.4 million for the same period in the prior year.

Processed gas volumes averaged 246,422 MMBtu/d during the three month period ended March 31, 2014, an increase of 3% compared to 239,757 MMBtu/d during the same period in the prior year. NGLs sold during the three month period ended March 31, 2014 averaged 14,329 barrels per day, an increase of 41% compared to 10,152 barrels per day for the same period in the prior year. Processed gas volumes during the three month period ended March 31, 2014, were approximately 8% less than fourth quarter 2013 volumes and sales volumes of NGLs were approximately 13% lower than fourth quarter 2013 volumes as a result of a previously-disclosed third party contract transporting our rich gas volumes that was not renewed during the quarter.


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Capital Expenditures

Growth capital expenditures for the three month period ended March 31, 2014 included spending for our Webb Pipeline and totaled $9.7 million, compared to $48.5 million for the same period in the prior year.

Capital and Liquidity

On February 5, 2014, Southcross completed a public equity offering of 9,200,000 additional common units and received a corresponding capital contribution from its general partner to maintain its 2.0% interest. The net proceeds from the public offering were $144.7 million, which Southcross used to reduce its outstanding debt. As of March 31, 2014, Southcross had $170.9 million in outstanding debt. Southcross was in compliance with all of its debt covenants as of March 31, 2014.

Cash Distributions and Distributable Cash Flow

On April 25, 2014, Southcross announced that it would pay on May 15, 2014 to all unitholders of record on May 9, 2014 a cash distribution of $0.40 per common unit for the three month period ended March 31, 2014. Southcross also announced that it would pay on May 15, 2014, to all Series A convertible preferred unitholders of record on May 9, 2014, a distribution of $0.40 per unit, paid in-kind in the form of additional Series A convertible preferred units.

Distributable cash flow for the three month period ended March 31, 2014 was $8.5 million, compared to $2.0 million for the same period in the prior year.
Conference Call Information

Southcross will hold a conference call on Wednesday, May 7, 2014, at 10:00 a.m. Central Time (11:00 a.m. Eastern Time) to discuss its first quarter 2014 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 13581342. 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 2,800 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.

Forward-Looking Statements

This press release includes certain statements concerning expectations for the future that are forward-looking within the meaning of the federal securities laws. 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 Southcross believes the expectations and forecasts reflected in these and other forward-looking statements are reasonable, Southcross can give no assurance they will prove to be correct. Forward-looking statements contain

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known and unknown risks and uncertainties (many of which are difficult to predict and beyond management’s control) that may cause Southcross’ actual results in future periods to differ materially from anticipated or projected results. An extensive list of specific material risks and uncertainties affecting Southcross is contained in its Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on March 5, 2014 and in other documents and reports filed from time to time with the SEC. Any forward-looking statements in this press release are made as of the date hereof 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 and unrealized gains/losses on derivative contracts, major litigation net of recoveries, transaction expense, revenue deferral adjustment and selected charges 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. 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. 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 paid for interest (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 Donnally, 214-979-3720
Investor Relations
investorrelations@southcrossenergy.com


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SOUTHCROSS ENERGY PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except for per unit data)
(Unaudited)
 
 
Three Months Ended March 31,
 
2014
 
2013
Revenues
$
213,591

 
$
144,250

Expenses:
 

 
 
Cost of natural gas and liquids sold
186,403

 
125,388

Operations and maintenance
10,861

 
9,889

Depreciation and amortization
8,528

 
7,249

General and administrative
6,103

 
6,041

Loss on asset disposal
4

 
—

Total expenses
211,899

 
148,567

 
 
 
 
Income (loss) from operations
1,692

 
(4,317
)
Interest expense
(2,973
)
 
(2,047
)
Loss before income tax expense
(1,281
)
 
(6,364
)
Income tax expense
(8
)
 
(18
)
Net loss
(1,289
)
 
(6,382
)
Series A convertible preferred unit in-kind distribution
(534
)
 
—

Series A preferred unit valuation adjustment to maximum redemption value
33

 
—

Net loss attributable to partners
(1,790
)
 
(6,382
)
 
 
 
 
General partner's interest in net loss
(26
)
 
(128
)
Limited partners' interest in net loss
$
(1,764
)
 
$
(6,254
)
 
 

 
 
Basic and diluted earnings per unit
 
 
 
Net loss allocated to limited partner common units
$
(1,045
)
 
$
(3,127
)
Weighted average number of limited partner common units outstanding
18,285,220

 
12,213,713

Loss per common unit
$
(0.06
)
 
$
(0.26
)
 
 
 
 
Net loss allocated to limited partner subordinated units
$
(719
)
 
$
(3,127
)
Weighted average number of limited partner subordinated units outstanding
12,213,713

 
12,213,713

Loss per subordinated unit
$
(0.06
)
 
$
(0.26
)

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SOUTHCROSS ENERGY PARTNERS, L.P.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except for unit data)
(Unaudited)
 
 
March 31, 2014
 
December 31, 2013
ASSETS
 

 
 

Current assets:
 

 
 

Cash and cash equivalents
$
4,434

 
$
3,349

Trade accounts receivable
65,876

 
57,669

Prepaid expenses
1,893

 
3,061

Other current assets
5,493

 
5,105

Total current assets
77,696

 
69,184

 
 
 
 
Property, plant and equipment, net
617,162

 
575,795

Intangible assets, net
1,554

 
1,568

Other assets
5,612

 
5,768

Total assets
$
702,024

 
$
652,315

 
 
 
 
LIABILITIES, PREFERRED UNITS AND PARTNERS' CAPITAL
 
 
 

Current liabilities:
 
 
 

Accounts payable and accrued liabilities
$
74,517

 
$
62,451

Other current liabilities
5,804

 
5,344

Total current liabilities
80,321

 
67,795

 
 
 
 
Long-term debt
170,850

 
267,300

Other non-current liabilities
2,081

 
1,692

Total liabilities
253,252

 
336,787

 
 
 
 
Commitments and contingencies
 
 
 
 
 
 
 
Series A convertible preferred units (1,800,886 and 1,769,915 units issued and outstanding as of March 31, 2014 and December 31, 2013, respectively)
41,005

 
40,504

 
 
 
 
Partners' capital:
 

 
 
Common units (23,163,713 and 13,963,713 units authorized; 21,454,119 and 12,253,985 units outstanding as of March 31, 2014 and December 31, 2013, respectively)
304,586

 
169,141

Subordinated units (12,213,713 units authorized and outstanding as of March 31, 2014 and December 31, 2013)
94,120

 
99,726

General Partner interest
9,167

 
6,367

Accumulated other comprehensive loss
(106
)
 
(210
)
Total partners' capital
407,767

 
275,024

Total liabilities, preferred units and partners' capital
$
702,024

 
$
652,315


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SOUTHCROSS ENERGY PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
 
Three Months Ended March 31,
 
2014
 
2013
Cash flows from operating activities:

 

Net loss
$
(1,289
)
 
$
(6,382
)
Adjustments to reconcile net loss to net cash provided by operating activities:

 

Depreciation and amortization
8,528

 
7,249

Unit-based compensation
529

 
408

Amortization of deferred financing costs
337

 
267

Loss on asset disposal
4

 
—

Unrealized gain on financial instruments
(32
)
 
—

Other, net
14

 
—

Changes in operating assets and liabilities:

 

Trade accounts receivable
(7,477
)
 
8,648

Prepaid expenses and other current assets
813

 
1,199

Other non-current assets
(25
)
 
(13
)
Accounts payable and accrued liabilities
13,694

 
(11,725
)
Other liabilities
(920
)
 
(1,362
)
Net cash provided by (used in) operating activities
14,176

 
(1,711
)
Cash flows from investing activities:

 

Capital expenditures
(11,087
)
 
(49,203
)
Expenditures for assets subject to property damage claims, net of insurance proceeds and deductibles
(693
)
 
(2,825
)
Assets acquired
(38,636
)
 
—

Net cash used in investing activities
(50,416
)
 
(52,028
)
Cash flows from financing activities:

 

Proceeds from issuance of common units, net
144,715

 
—

Borrowings under our credit agreements
62,000

 
55,000

Repayments under our credit agreements
(158,450
)
 
—

Payments on capital lease obligations
(143
)
 
—

Financing costs
(156
)
 
(519
)
Contributions from general partner
3,115

 
—

Payments of distributions and distribution equivalent rights
(13,755
)
 
(5,982
)
LTIP tax withholdings on vested units
(1
)
 
—

Net cash provided by financing activities
37,325

 
48,499

Net (decrease) increase in cash and cash equivalents
1,085

 
(5,240
)
Cash and cash equivalents — Beginning of period
3,349

 
7,490

Cash and cash equivalents — End of period
$
4,434

 
$
2,250



6


SOUTHCROSS ENERGY PARTNERS, L.P.
SELECTED FINANCIAL AND OPERATIONAL DATA
(In thousands)
(Unaudited)

 
Three months ended
 
March 31,
 
2014
 
2013
Financial data:
 

 
 

Adjusted EBITDA
$
12,497

 
$
4,541

Gross operating margin
 
27,188

 
 
18,862

 
 
 
 
 
 
Maintenance capital expenditures
 
1,363

 
 
708

Growth capital expenditures
 
9,724

 
 
48,495

 
 
 
 
 
 
Distributable cash flow
 
8,511

 
 
2,035

Cash distributions declared
 
13,761

 
 
9,973

 
 
 
 
 
 
Operating data:
 
 
 
 
 
Average throughput volumes of natural gas (MMBtu/d) (1)
 
665,339

 
 
634,838

Average volume of processed gas (MMBtu/d)
 
246,422

 
 
239,757

Average volume of NGLs sold (Bbls/d)
 
14,329

 
 
10,152

 
 
 
 
 
 
Realized prices on natural gas volumes sold ($/MMBtu)
$
5.07

 
$
3.44

Realized prices on NGL volumes sold ($/gallon)
 
0.96

 
 
0.84


(1) Current and historical average throughput volumes of natural gas per day include sales, transportation, fuel and shrink volumes. Historical average throughput volumes of natural gas per day presented previously was based on sales and transportation volume only.  


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SOUTHCROSS ENERGY PARTNERS, L.P.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(In thousands)
(Unaudited)

 
Three months ended
 
March 31,
 
2014
 
2013
Reconciliation of gross operating margin to net loss:
 

 
 

Gross operating margin
$
27,188

 
$
18,862

Deduct:
 

 
 

Income tax expense
 
(8
)
 
 
(18
)
Interest expense
 
(2,973
)
 
 
(2,047
)
Loss on sale of assets
 
(4
)
 
 
—

General and administrative expense
 
(6,103
)
 
 
(6,041
)
Depreciation and amortization expense
 
(8,528
)
 
 
(7,249
)
Operations and maintenance expense
 
(10,861
)
 
 
(9,889
)
Net loss
$
(1,289
)
 
$
(6,382
)
 
 
 
 
 
 
 
Three months ended
 
March 31,
 
2014
 
2013
Reconciliation of net loss to Adjusted EBITDA and distributable cash flow:
 

 
 

Net loss
$
(1,289
)
 
$
(6,382
)
Add (deduct):
 

 
 

Depreciation and amortization expense
 
8,528

 
 
7,249

Interest expense
 
2,973

 
 
2,047

Income tax expense
 
8

 
 
18

Unrealized gain
 
(32
)
 
 
—

Revenue deferral adjustment
 
1,182

 
 
—

Unit-based compensation
 
529

 
 
408

Loss on asset disposal
 
4

 
 
—

Major litigation costs, net of recoveries
 
273

 
 
—

Transaction expenses for acquisition
 
303

 
 
—

Other, net
 
18

 
 
—

Expenses associated with significant items
 
—

 
 
1,201

Adjusted EBITDA
$
12,497

 
$
4,541

Cash interest, net of capitalized costs
 
(2,615
)
 
 
(1,780
)
Income tax expense
 
(8
)
 
 
(18
)
Maintenance capital expenditures
 
(1,363
)
 
 
(708
)
Distributable cash flow
$
8,511

 
$
2,035



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Southcross Energy Partners, L.P. Reports