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Sanchez Midstream Partners Reports Third-Quarter 2019 Financial Results


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Source: Sanchez Midstream Partners LP

HOUSTON, Nov. 12, 2019 (GLOBE NEWSWIRE) — Sanchez Midstream Partners LP (NYSE American: SNMP) (“SNMP” or the “Partnership”) today reported third-quarter 2019 results. Highlights from the report include:

  • Third-quarter 2019 net loss of $6.8 million, compared to net income of $3.9 million for second-quarter 2019 and net income of $0.4 million for third-quarter 2018;
  • Third-quarter 2019 Adjusted EBITDA (a non-GAAP financial measure) of $17.4 million, compared to Adjusted EBITDA of $17.5 million for second-quarter 2019 and $18.4 million for third-quarter 2018; and
  • The Partnership has reduced debt by $28 million (15.2 percent) since Sept. 30, 2018.

FINANCIAL RESULTS
The Partnership’s third-quarter 2019 revenues totaled $20.9 million, of which $15.9 million came from the midstream activities of Western Catarina Midstream and the Seco Pipeline. The balance of the Partnership’s third-quarter 2019 revenues came from production activities ($4.1 million, which includes a gain on hedge settlements of $0.3 million) and a gain on mark-to-market activities (approximately $1.0 million), which is a non-cash item.

Earnings from Carnero G&P LLC (the “Carnero JV”) totaled $0.8 million for third-quarter 2019. The Partnership received a cash distribution of approximately $4.9 million from the Carnero JV in November 2019 related to third-quarter 2019 activity.

On a GAAP basis, the Partnership reported a net loss of $6.8 million for third-quarter 2019, compared to net income of $3.9 million for second-quarter 2019 and net income of $0.4 million for third-quarter 2018.

Adjusted EBITDA was approximately $17.4 million for third-quarter 2019, compared to Adjusted EBITDA of $17.5 million for second-quarter 2019 and $18.4 million for third-quarter 2018. Adjusted EBITDA is a non-GAAP financial measure that is defined below and reconciled in a table included with this press release.

LIQUIDITY AND CREDIT FACILITY UPDATE
The Partnership had approximately $4.6 million in cash and cash equivalents as of Sept. 30, 2019.

As of Sept. 30, 2019, the Partnership had $162.0 million in debt outstanding under its credit facility, which has a current borrowing base of $282.0 million and an elected commitment amount of $210.0 million. The Partnership made principal payments totaling $6.0 million in October 2019, resulting in $156.0 million in debt outstanding under the credit facility as of Nov. 12, 2019.

Since Sept. 30, 2018, the Partnership has reduced its debt outstanding by $28.0 million (15.2 percent), from $184.0 million to $156.0 million.

COMMON UNITS
The Partnership had 20,088,015 common units issued and outstanding as of Nov. 12, 2019.

CLASS C DISTRIBUTIONS
As required by the Third Amended and Restated Agreement of Limited Partnership of the Partnership, if a quarterly distribution on the Partnership’s Class C preferred units cannot be paid in cash, it must be paid 100 percent in Class C Preferred PIK Units.  Accordingly, on Oct. 30, 2019 the Partnership declared a third-quarter 2019 distribution to the holders of its Class C preferred units consisting of 1,007,820 Class C Preferred PIK Units payable on Nov. 29, 2019 to holders of record on Nov. 20, 2019.

ABOUT THE PARTNERSHIP
Sanchez Midstream Partners LP (NYSE American: SNMP) is a growth-oriented publicly-traded limited partnership focused on the acquisition, development, ownership and operation of midstream and other energy-related assets in North America. The Partnership has ownership stakes in oil and natural gas gathering systems, natural gas pipelines and natural gas processing facilities, all located in the Western Eagle Ford in South Texas.

ADDITIONAL INFORMATION
Additional information about SNMP can be found in our documents on file with the SEC which are available on our website at www.sanchezmidstream.com and on the SEC’s website at www.sec.gov.

NON-GAAP FINANCIAL MEASURES
To supplement our financial results and guidance presented in accordance with U.S. generally accepted accounting principles (GAAP), we use Adjusted EBITDA, a non-GAAP financial measure, in this press release. We believe that non-GAAP financial measures are helpful in understanding our past financial performance and potential future results, particularly in light of the effect of various transactions affected by us. We define Adjusted EBITDA as net income (loss) adjusted by: (i) interest (income) expense, net, which includes interest expense, interest expense net (gain) loss on interest rate derivative contracts, and interest (income); (ii) income tax expense (benefit); (iii) depreciation, depletion and amortization; (iv) asset impairments; (v) accretion expense; (vi) (gain) loss on sale of assets; (vii) unit-based compensation expense; (viii) unit-based asset management fees; (ix) distributions in excess of equity earnings; (x) (gain) loss on mark-to-market activities; (xi) commodity derivatives settled early; (xii) (gain) loss on embedded derivatives; and (xiii) acquisition and divestiture costs.

Adjusted EBITDA is used as a quantitative standard by our management and by external users of our financial statements such as investors, research analysts, our lenders and others to assess: (i) the financial performance of our assets without regard to financing methods, capital structure or historical cost basis; (ii) the ability of our assets to generate cash sufficient to pay interest costs and support our indebtedness; and (iii) our operating performance and return on capital as compared to those of other companies in our industry, without regard to financing or capital structure.

We believe that the presentation of Adjusted EBITDA provides useful information to investors in assessing our financial condition and results of operations. The GAAP measure most directly comparable to Adjusted EBITDA is net income (loss). Our non-GAAP financial measure of Adjusted EBITDA should not be considered as an alternative to GAAP net income (loss). Adjusted EBITDA has important limitations as an analytical tool because it excludes some but not all items that affect net income (loss). Adjusted EBITDA should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. Because Adjusted EBITDA may be defined differently by other companies in our industry, our definition of Adjusted EBITDA may not be comparable to similarly titled measures of other companies, thereby diminishing its utility.

For a reconciliation of Adjusted EBITDA to net income (loss), the most comparable GAAP financial metric, please see the tables below.

FORWARD-LOOKING STATEMENTS
This press release contains, and the officers and representatives of the Partnership and its general partner may from time to time make, statements that are considered “forward–looking statements” as defined by the SEC. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control, which may include statements about our business strategy; the ability of our customers to meet their drilling and development plans on a timely basis, or at all, and perform under gathering, processing and other agreements; our financing strategy; our acquisition strategy; our ability to make, maintain and grow distributions; our future operating results; the ability of our partners to perform under our joint ventures and partnerships; our future capital expenditures; and our plans, objectives, expectations, forecasts, outlook and intentions. All of these types of statements, other than statements of historical fact included in this press release, are forward-looking statements. In some cases, forward-looking statements can be identified by terminology such as “may,” “could,” “should,” “expect,” “plan,” “project,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “pursue,” “target,” “continue,” the negative of such terms or other comparable terminology.

The forward-looking statements contained in this press release are largely based on our expectations, which reflect estimates and assumptions made by the management of our general partner. These estimates and assumptions reflect our best judgment based on currently known market conditions and other factors. Although we believe such estimates and assumptions to be reasonable, they are inherently uncertain and involve a number of risks and uncertainties that are beyond our control. In addition, management’s assumptions about future events may prove to be inaccurate. Important factors that could cause our actual results to differ materially from the expectations listed in the forward-looking statements include, among others: our ability to successfully execute our business, acquisition and financing strategies; the ability of our customers to meet their drilling and development plans on a timely basis, or at all, and perform under gathering, processing and other agreements; the creditworthiness and performance of our counterparties, including financial institutions, operating partners, customers and other counterparties; our ability to grow enterprise value; the ability of our partners to perform under our joint ventures and partnerships; the availability, proximity and capacity of, and costs associated with, gathering, processing, compression and transportation facilities; our ability to utilize the services, personnel and other assets of the sole member of our general partner (“Manager”) pursuant to a services agreement; Manager’s ability to retain personnel to perform its obligations under its shared services agreement with Sanchez Oil & Gas Corporation; our ability to access the credit and capital markets to obtain financing on terms we deem acceptable, if at all, and to otherwise satisfy our capital expenditure requirements; the timing and extent of changes in prices for, and demand for, natural gas, natural gas liquids and oil; our ability to successfully execute our hedging strategy and the resulting realized prices therefrom; the accuracy of reserve estimates, which by their nature involve the exercise of professional judgment and may, therefore, be imprecise; and other factors described in our most recent Annual Report on Form 10-K and any updates to those risk factors set forth in our Quarterly Reports on Form 10-Q or Current Reports on Form 8-K. Our filings with the SEC are available on our website at www.sanchezmidstream.com and on the SEC’s website at www.sec.gov. Management cautions all readers that the forward-looking statements contained in this press release are not guarantees of future performance, and we cannot assure any reader that such statements will be realized or the forward-looking events and circumstances will occur. Actual results may differ materially from those anticipated or implied in forward-looking statements. The forward-looking statements speak only as of the date made, and other than as required by law, we do not intend to publicly update or revise any forward-looking statements as a result of new information, future events or otherwise. These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf.

PARTNERSHIP CONTACT
Charles C. Ward
Chief Financial Officer
[email protected]
(877) 847-0009

General Inquiries:  (713) 783-8000
www.sanchezmidstream.com

Sanchez Midstream Partners LP
Operating Statistics
Three Months Ended Nine Months Ended
September 30,  September 30, 
2019 2018 2019 2018
Gathering and Transportation Throughput:
Seco Pipeline
  Natural gas (MMcf) 1,475 692 12,381
Western Catarina Midstream
  Oil (MBbls) 890 1,180 3,224 3,301
  Oil (MBbls/d) 10 13 12 12
  Natural gas (MMcf) 11,249 14,271 37,952 42,070
  Natural gas (MMcf/d) 122 155 139 154
Net Production in MBoe:
Total production (MBoe) 85 98 236 357
Average daily production (Boe/d) 924 1,065 864 1,308
Average Sales Price per Boe:
Net realized price, including hedges (1) $ 48.32 $ 53.60 $ 49.72 $ 47.34
Net realized price, excluding hedges (2) $ 44.81 $ 59.72 $ 46.89 $ 51.11
(1) Excludes impact of mark-to-market gains (losses).
(2) Excludes the impact of all hedging gains (losses).

 

Sanchez Midstream Partners LP
Condensed Consolidated Statements of Operations
Three Months Three Months
Three Months Ended Ended Ended Nine Months Ended
September 30,  March 31, June 30, September 30,
2019 2018 2019 2019 2019 2018
($ in thousands, except per unit amounts)
Oil, liquids, and gas sales $ 4,107 $ 5,853 $ 4,384 $ 3,242 $ 11,733 $ 18,245
Gathering and transportation sales 1,720 1,582 1,683 1,702 5,105 4,931
Gathering and transportation lease revenues 14,135 13,148 16,257 15,969 46,361 38,634
Gain (loss) on mark-to-market activities 954 (2,431 ) (4,834 ) 942 (2,938 ) (8,083 )
  Total revenues 20,916 18,152 17,490 21,855 60,261 53,727
Operating expenses:
  Lease operating expenses 2,105 1,905 1,715 2,065 5,885 5,883
  Transportation operating expenses 2,752 3,061 2,676 3,048 8,476 8,979
  Production taxes 165 292 183 141 489 901
  General and administrative 4,317 5,109 4,749 4,171 13,237 17,193
  Unit-based compensation expense 271 155 635 175 1,081 2,940
Gain on sale of assets (238 ) (2,626 )
  Depreciation, depletion and amortization 6,441 6,507 6,429 6,174 19,044 19,680
  Accretion expense 132 123 133 126 391 372
  Total operating expenses 16,183 16,914 16,520 15,900 48,603 53,322
Other (income) expense:
  Interest expense, net 12,141 2,786 2,786 2,814 17,741 8,165
  Earnings from equity investments (780 ) (2,313 ) (1,442 ) (791 ) (3,013 ) (9,696 )
  Other (income) expense (31 ) 352 (46 ) (21 ) (98 ) 1,876
  Total expenses, net 27,513 17,739 17,818 17,902 63,233 53,667
Income (loss) before income taxes (6,597 ) 413 (328 ) 3,953 (2,972 ) 60
Income tax expense 213 46 76 335
Net income (loss) (6,810 ) 413 (374 ) 3,877 (3,307 ) 60
Less:
Preferred unit paid-in-kind distributions (3,804 ) (10,605 ) (14,409 ) (3,500 )
Preferred unit distributions (8,838 ) (8,838 ) (8,838 ) (24,588 )
Preferred unit amortization (266 ) (608 ) (697 ) (745 ) (1,708 ) (1,707 )
Deemed distribution 103,773 103,773
Net income (loss) attributable to common unitholders – Basic 92,893 (9,033 ) (9,909 ) (7,473 ) 75,511 (29,735 )
Mark-to-market on warrant 3,097 3,097
Net income (loss) attributable to common unitholders – Diluted 95,990 (9,033 ) (9,909 ) (7,473 ) 78,608 (29,735 )
Adjusted EBITDA (1) $ 17,404 $ 18,355 $ 18,554 $ 17,519 $ 53,477 $ 54,534
Net income (loss) per unit
Common units – Basic $ 4.99 $ (0.59 ) $ (0.73 ) $ (0.42 ) $ 4.31 $ (1.97 )
Common units – Diluted $ 4.54 $ (0.59 ) $ (0.73 ) $ (0.42 ) $ 4.13 $ (1.97 )
Weighted Average Units Outstanding
Common units – Basic 18,617,385 15,398,453 16,173,858 17,684,563 17,500,886 15,114,671
Common units -Diluted 21,141,065 15,398,453 16,173,858 17,684,563 19,011,877 15,114,671
(1) Adjusted EBITDA is a non-GAAP financial measure. For more information, see the NON-GAAP FINANCIAL MEASURES section of this press release.

 

Sanchez Midstream Partners LP
Condensed Consolidated Balance Sheets
September 30,  December 31, 
2019 2018
($ in thousands)
Current assets $ 14,054 $ 13,886
Midstream and production assets, net 190,214 198,334
Other assets 254,457 274,465
  Total assets $ 458,725 $ 486,685
Current liabilities $ 10,269 $ 10,809
Current liabilities – short-term debt, net of debt issuance costs 161,245
Long-term debt, net of debt issuance costs 178,582
Class C preferred units 262,113
Other long-term liabilities 13,333 12,057
  Total liabilities 446,960 201,448
Mezzanine equity 349,857
Partners’ capital (deficit) 11,765 (64,620 )
Total partners’ capital (deficit) 11,765 (64,620 )
  Total liabilities and partners’ capital $ 458,725 $ 486,685

 

Sanchez Midstream Partners LP
Reconciliation of Net Income (Loss) to Adjusted EBITDA
Three Months Three Months
Three Months Ended Ended Ended Nine Months Ended
September 30,  March 31, June 30, September 30,
2019 2018 2019 2019 2019 2018
($ in thousands)
Net income (loss) $ (6,810 ) $ 413 $ (374 ) $ 3,877 $ (3,307 ) $ 60
Adjusted by:
  Interest expense, net 12,141 2,786 2,786 2,814 17,741 8,165
  Income tax expense 213 46 76 335
  Depreciation, depletion and amortization 6,441 6,507 6,429 6,174 19,044 19,680
  Accretion expense 132 123 133 126 391 372
  Gain on sale of assets (238 ) (2,626 )
  Unit-based compensation expense 271 155 635 175 1,081 2,940
  Unit-based asset management fees 1,922 2,365 2,032 1,839 5,793 7,291
  Distributions in excess of equity earnings 4,079 4,061 2,064 3,412 9,555 8,258
  (Gain) loss on mark-to-market activities (985 ) 2,183 4,803 (974 ) 2,844 8,614
  Acquisition and divestiture costs 1,780
Adjusted EBITDA (1) $ 17,404 $ 18,355 $ 18,554 $ 17,519 $ 53,477 $ 54,534
(1) Adjusted EBITDA and cash available for distribution are non-GAAP financial measures. For more information, see the NON-GAAP FINANCIAL MEASURES section of this press release.

 



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