Exhibit 99.1
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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.
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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.
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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.
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Contact:
Southcross Energy Partners, L.P.
Kristin Hodges, 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 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 | |