ORGANIZATION AND FORMATION OF THE PARTNERSHIP | 9 Months Ended |
Sep. 30, 2013 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
ORGANIZATION AND FORMATION OF THE PARTNERSHIP | ORGANIZATION AND FORMATION OF THE PARTNERSHIP |
Organization |
Marlin Midstream Partners, LP (the "Partnership") is a midstream energy company that offers (i) natural gas gathering, compression, dehydration, treating, processing, and hydrocarbon dew-point control and transportation services to producers, marketers and third-party pipeline companies, and (ii) crude oil transloading services to Associated Energy Services, LP ("AES"), an affiliate of the Partnership. |
The Partnership is a Delaware limited partnership, formed in April 2013 by NuDevco Partners, LLC and its affiliates (“NuDevco”). NuDevco, a sole member limited liability company formed on August 27, 2010 under the Texas Limited Liability Company Act (“TLLCA”), is an affiliate of Spark Energy Ventures, LLC (“SEV”), a sole member limited liability company formed on October 8, 2007 under the TLLCA. NuDevco and SEV are both wholly owned by W. Keith Maxwell III. SEV was the sole member of Marlin Midstream, LLC and its subsidiaries ("Marlin Midstream"), and Mr. Maxwell was the sole member of Marlin Logistics, LLC prior to the closing of the Partnership's initial public offering of 6,875,000 common units representing a 38.6% limited partner interest in the Partnership on July 31, 2013 ("IPO") as discussed below. Concurrently, with the closing of the IPO, the Partnership also executed a new credit facility as discussed below. |
In connection with the closing of the IPO, SEV contributed all of its interest in Marlin Midstream to the Partnership, and Mr. Maxwell contributed all of his interest in Marlin Logistics, LLC ("Marlin Logistics") to the Partnership, through a series of transfers of interest in entities all under the common control of Mr. Maxwell in exchange for wholly owned subsidiaries of NuDevco receiving common units and all of the Partnership’s subordinated units and incentive distribution rights. The contribution of entities, as discussed above, to the Partnership is not considered a business combination accounted for under the purchase method, as it was a transfer of assets and operations under common control and, accordingly, balances were transferred at their historical cost. The Partnership's historical condensed combined financial statements prior to the IPO are prepared using Marlin Midstream's and Marlin Logistics' historical basis in the assets and liabilities, and include all revenues, costs, assets and liabilities attributed to these entities for the periods presented. The Partnership's financial statements subsequent to the IPO are prepared on a consolidated basis. |
The Partnership’s general partner, Marlin Midstream GP, LLC manages the Partnership’s activities subject to the terms and conditions specified in the Partnership’s partnership agreement. The Partnership’s general partner is owned by NuDevco Midstream Development, LLC ("NuDevco Midstream Development"), an indirect wholly owned subsidiary of NuDevco. The operations of the general partner, in its capacity as general partner, are managed by its board of directors. Actions by the general partner that are made in its individual capacity will be made by NuDevco Midstream Development as the sole member of the Partnership's general partner and not by the board of directors of the general partner. The partnership's general partner will not be elected by the Partnership's unitholders and will not be subject to re-election on a regular basis in the future. The officers of the general partner will manage the day-to-day affairs of the Partnership's business. |
Marlin Midstream was formed November 26, 2002 as a sole member limited liability company under the TLLCA. Marlin Midstream is a midstream energy company offering the following midstream services: natural gas gathering, compression, dehydration, treating, processing and hydrocarbon dew-point control and transportation services to producers, third-party pipeline companies and marketers. |
Marlin Logistics, formerly known as FuelCo Energy, LLC, was formed August 26, 2010 as a sole member limited liability company under the TLLCA. Marlin Logistics is a crude oil logistics company that offers crude oil transloading services. |
As a company with less than $1.0 billion in revenues during its last fiscal year, the Partnership qualifies as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other regulatory requirements for up to five years that are otherwise applicable generally to public companies, such as no requirement to provide selected financial data in their annual reports for any period prior to the earliest audited period presented in connection with their first registration statement under the Securities Act or the Exchange Act that became effective. |
The Partnership will remain an emerging growth company for five years unless, prior to that time, annual revenues total more than $1.0 billion, have a market value for the common units held by non-affiliates of more than $700 million as of June 30 of the year a determination is made whether the Partnership deemed to be a “large accelerated filer,” as defined in Rule 12b-2 promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or issue more than $1.0 billion of non-convertible debt over a three-year period. |
As a result of our election to avail ourselves of certain provisions of the JOBS Act, the information that we provide may be different than what you may receive from other public companies in which you hold an equity interest. |
|
Initial Public Offering of Marlin Midstream Partners, LP |
On July 31, 2013, the Partnership completed the IPO of 6,875,000 common units, representing a 38.6% limited partner interest, to the public for $20.00 per common unit, less an underwriting discount of $1.20 per common unit. After the closing of the IPO, substantially all the Partnership's gross margin is generated under fee-based commercial agreements, the substantial majority of which have minimum volume commitments. |
Net proceeds to the Partnership from the IPO were $125.3 million, after underwriting discount, structuring fees and other direct IPO costs. Using those proceeds, the Partnership repaid its existing credit facility of approximately $121.9 million and the outstanding revolving credit facility of approximately $10.0 million, and settled its existing interest rate swap liability of approximately $0.1 million. |
At the consummation of the IPO, the amount of common, subordinated, and general partner units is summarized in the table below: |
|
| | | |
| Number of units | Limited Partner |
|
| at July 31, 2013 | Interest |
|
Publicly held common units | 6,875,000 | | 38.60% |
|
Common units held by NuDevco | 1,849,545 | | 10.40% |
|
Subordinated units held by NuDevco | 8,724,545 | | 49.00% |
|
General partner units | 356,104 | | 2.00% |
|
Total | 17,805,194 | | 100.00% |
|
There have been no subsequent issuances of common units. |
Our Fee-Based Commercial Agreements |
Prior to the IPO, the Partnership generated revenues primarily under keep-whole and other commodity-based gathering and processing agreements with third parties and its affiliates. At the closing of the IPO, the Partnership terminated the existing commodity-based gas gathering and processing agreement with AES, assigned to AES all of the remaining keep-whole and other commodity-based gathering and processing agreements with third party customers and entered into a new three-year fee-based gathering and processing agreement with AES with a minimum volume commitment and annual inflation adjustments. |
Following the closing of the IPO, the Partnership has multiple fee-based commercial agreements in place with Anadarko Petroleum Corporation (“Anadarko”) and AES, substantially all of which include minimum volume commitments and annual inflation adjustments that will initially be the source of a substantial portion of the Partnership's revenues. |
The following table summarizes certain information regarding our fee-based commercial agreements with Anadarko and AES following the closing of the IPO: |
|
|
| | | |
| Current Term | Renewal | Minimum Volume |
Expiration | Commitment |
Anadarko Panola County Agreement I | July 31, 2015 | Year-to-year | Yes |
Anadarko Panola County Agreement II | March 31, 2019 | Month-to-month | Yes |
AES Panola County Agreement | Three years | Year-to-year | 80 MMcf/d |
Anadarko Tyler County Agreement | October 31, 2015 | Year-to-year | No |
AES Wildcat Skid Transloading Agreement | Three years | Year-to-year | 7,600 Bbls/d |
AES Big Horn Skid Transloading Agreement | Three years | Year-to-year | 7,600 Bbls/d |
AES Master Ladder Transloading Agreement (1) | Three years | Year-to-year | 3,780 Bbls/d |
(1) At the closing of the IPO, the Partnership operated three ladder transloaders: one located at the Big Horn facility and two located at the Wildcat Facility. The total minimum volume commitment at the Big Horn facility is 8,860 Bbls/d and the total minimum volume commitment at the Wildcat facility is 10,120 Bbls/d. |
|
Credit Facility |
Concurrently with the closing of the IPO, the Partnership entered into a new $50.0 million senior secured revolving credit facility, which matures on July 31, 2017. If no event of default has occurred, the Partnership has the right, subject to approval by the administrative agent and certain lenders, to increase the borrowing capacity under the revolving credit facility to up to $150.0 million. The new revolving credit facility is available to fund expansions, acquisitions and working capital requirements for operations and general corporate purposes. At the closing of the IPO, the Partnership borrowed $25.0 million under the new revolving credit facility. At September 30, 2013, $8.5 million was outstanding under the new revolving credit facility. |
At our election, interest will be generally determined by reference to: |
| | | |
• | the Eurodollar rate plus an applicable margin between 3.0% and 3.75% per annum (based upon the prevailing senior secured leverage ratio); or | | |
| | | |
• | the alternate base rate plus an applicable margin between 2.0% and 2.75% per annum (based upon the prevailing senior secured leverage ratio). The alternate base rate is equal to the highest of Société Générale's prime rate, the federal funds rate plus 0.5% per annum or the reference Eurodollar rate plus 1.0%. | | |
Our new revolving credit facility is secured by the capital stock of our present and future subsidiaries, all of our and our subsidiaries' present and future property and assets (real and personal), control agreements relating to our and our subsidiaries' bank accounts and other instruments, investment property, general intangibles and contract rights, including rights under any agreements with AES or Anadarko. |
Our new revolving credit facility also contains covenants that, among other things, require us to maintain specified ratios or conditions. We must maintain a consolidated senior secured leverage ratio, consisting of consolidated indebtedness under our new revolving credit facility to consolidated EBITDA of not more than 4.0 to 1.0, as of the last day of each fiscal quarter. In addition, we must maintain a consolidated interest coverage ratio, consisting of our consolidated EBITDA minus capital expenditures to our consolidated interest expense, letter of credit fees and commitment fees of not less than 2.5 to 1.0, as of the last day of each fiscal quarter. |
In addition, our new revolving credit facility contains affirmative covenants that are customary for credit facilities of this type. The covenants will include delivery of financial statements and other information (including any filings made with the SEC), maintenance of property and insurance, payment of taxes and obligations, material compliance with laws, inspection of property, books and records and audits, use of proceeds, payments to bank blocked accounts, notice of defaults and certain other customary matters. See also Note 6. |
Other Transactions in Connection with the Consummation of the IPO: |
On July 31, 2013, in connection with the closing of the IPO, the following transactions occurred: |
| | | |
• | the Partnership's general partner maintained its 2.0% general partner interest, and all of the Partnership's incentive distribution rights were issued to Marlin IDR Holdings, LLC; | | |
| | | |
• | the Partnership issued 1,849,545 common units and 8,724,545 subordinated units to NuDevco Midstream Development for the contributions by SEV and Mr. Maxwell, representing a 49.0% limited partner interest in the Partnership; | | |
| | | |
• | the Partnership transferred to affiliates of NuDevco (i) the Partnership's 50% interest in a CO2 processing facility located in Monell, Wyoming, (ii) certain transloading assets and purchase commitments owned by Marlin Logistics that are not currently under a service contract, (iii) certain property, plant and equipment and other equipment not yet in service and (iv) certain other immaterial contracts; | | |
| | | |
• | NuDevco assumed $11.7 million of the non-current accounts payable balance owed by Marlin Midstream to affiliates of SEV and Marlin Midstream was released from such obligations; and | | |
| | | |
• | the Partnership entered into an omnibus agreement with the general partner and its affiliates that addresses (i) the management and administrative services to be provided by NuDevco to the Partnership and the corresponding fees and expense reimbursements to be paid to NuDevco in connection therewith, (ii) the indemnification obligations between NuDevco and the Partnership for environmental and other liabilities and the operation of assets and (iii) the Partnership's right of first offer on certain of NuDevco Midstream Development's midstream energy assets. | | |