CONE Midstream Reports Second Quarter Results

Aug 05, 2015, 08:00 ET from CONE Midstream Partners LP

CANONSBURG, Pa., Aug. 5, 2015 /PRNewswire/ -- CONE Midstream Partners LP (NYSE: CNNX) ("CONE Midstream" or the "Partnership") today reported financial and operational results for the three months ending June 30, 2015.(1)

Second Quarter Results

Highlights of second quarter 2015 results attributable to the Partnership include:

  • Net income of $14.9 million
  • Average daily throughput volumes of 568 billion Btu per day (BBtu/d)
  • EBITDA(2) of $17.0 million
  • Distributable cash flow (DCF)(2) of $14.8 million

Management Comment

"Continued volume growth, solid unit operating expenses, and disciplined cost control produced strong second quarter financial and operational results for CONE Midstream," said John T. Lewis, Chairman of the Board and Chief Executive Officer of CONE Midstream GP LLC (the "General Partner").  "We are pleased with our better-than projected results for the quarter, and anticipate continued volume growth from both new well connections and the impact of debottlenecking projects scheduled to come on line in the third and fourth quarters of 2015.

"Although the first year projections in the IPO prospectus did not include any increase in the quarterly cash distributions, in light of our actual performance to date and the outlook for the balance of this year and 2016, the Board felt it was appropriate to make an initial distribution increase earlier than originally anticipated.  The announced distribution of $0.22 per unit represents a quarterly increase of 3.5%.  This is our first increase, it's earlier than projected, and it should not be viewed as indicative of the rate of future distribution increases.  We remain committed to what we have communicated previously, which is to grow cash distributions at annual rate of between 15% and 20%."

Quarterly Distribution

As previously announced, the Board of Directors of the General Partner declared a quarterly cash distribution of  $0.22 per unit with respect to the second quarter of 2015.  The distribution payment will be made on August 14, 2015 to unitholders of record at the close of business on August 5, 2015. The distribution, which equates to an annual rate of $0.88 per unit, represents an increase of 3.5% over the prior quarter.

Capital Investment and Resources

CONE Midstream's allocated second quarter 2015 share of investment in expansion projects was $29.5 million. Total expansion capital investment at the three development companies in which CONE Midstream holds controlling interests was $72.8 million, with individual development company totals as follows:

  • Anchor Systems (Development Company 1): Expansion investments totaled approximately$36.9 million and were primarily expended for continued gathering system extensions to nine well pads in Greene and Washington Counties (PA), additional compression at McQuay and Majorsville Stations, along with pipeline expansion and an additional tap to relieve bottlenecks in the North Nineveh field.
  • Growth Systems (Development Company 2): Expansion investments totaled approximately$7.0 million and primarily were expended on land and permitting associated with future development in Harrison and Lewis Counties (WV).
  • Additional Systems (Development Company 3): Expansion investments totaled approximately$28.8 million for the continued construction of Shirley Station, construction of our Sherwood South gathering pipeline that connects the Oxford field in southern Doddridge County to MarkWest Sherwood, and additional pipeline construction in the Moundsville field and Allegheny County Airport project areas.

CONE Midstream's respective share of maintenance capital expenditures for the three development companies for the second quarter 2015 was $2.1 million.  Maintenance capital expenditures in the aggregate for the development companies in which CONE Midstream holds controlling interests totaled $3.6 million.

As of June 30, 2015,  CONE Midstream had outstanding borrowings of $23.0 million under its $250 million revolving credit facility.

Second Quarter Financial and Operational Results Conference Call

A conference call and webcast, during which management will discuss second quarter 2015 financial and operational results, is scheduled for August 5, 2015 at 11:00 a.m. Eastern Time. Reference material for  the call will be available on the "Events" page of our website, www.conemidstream.com, shortly before the start of the call. Prepared remarks by members of management will be followed by a question and answer period.  Interested parties may listen via webcast by using the link posted on the "Events" page of our website or at  www.webcaster4.com/Webcast/Page/998/9436. Participants who would like to ask questions may join the conference by phone at 888-349-0097 (international 412-902-0126) five to ten minutes prior to the scheduled start time (reference the CONE Midstream call).  An on-demand replay of the webcast will be also be available at  www.webcaster4.com/Webcast/Page/998/9436 shortly after the conclusion of the conference.  A telephonic replay will be available through August 13, 2015 by dialing 877-344-7529 (international: 412-317-0088) and using the conference playback number 10068783.

_______________

(1)  Unless otherwise indicated, the reporting measures included in this news release reflect the unallocated total activity of the three development companies jointly owned by the Partnership and CONE Gathering LLC ("CONE Gathering").  Because the Partnership owns a controlling interest in each of the three development companies, it fully consolidates their financial results. The Partnership's current financial interests in the development companies are: 75% in the Anchor Systems, 5% in the Growth Systems, and 5% in the Additional Systems.  CONE Gathering is a midstream joint venture formed by CONSOL Energy Inc. and Noble Energy, Inc. and owns non-controlling interests in the Partnership's development companies.

(2) EBITDA and DCF are not Generally Accepted Accounting Principles ("GAAP") measures.  Definitions and reconciliations of these non-GAAP measures to GAAP reporting measures appear in the financial tables which follow.

 

Contact:

Stephen R. Milbourne

CONE Investor Relations

Phone: 

724-485-4408

Email:   

smilbourne@conemidstream.com

 

* * * * *

CONE Midstream Partners is a master limited partnership formed by CONSOL Energy Inc. (NYSE: CNX)  and Noble Energy, Inc. (NYSE: NBL), referred to as our Sponsors, to own, operate, develop and acquire natural gas gathering and other midstream energy assets to service our Sponsors' production in the Marcellus Shale in Pennsylvania and West Virginia.  Our assets include natural gas gathering pipelines and compression and dehydration facilities, as well as condensate gathering, collection, separation and stabilization facilities. More information is available on our website www.conemidstream.com.

* * * * *

This press release is intended to be a qualified notice to nominees as provided for under Treasury Regulation Section 1.1446-4(b). Brokers and nominees should treat one hundred percent (100.0%) of  CONE Midstream's distributions to non-U.S. investors as being attributed to income that is effectively connected with a United States trade or business.  Accordingly, CONE Midstream's distributions to non-U.S. investors are subject to federal income tax withholding at the highest applicable effective tax rate.  Nominees, and not CONE Midstream, are treated as withholding agents responsible for withholding on the distributions received by them on behalf of foreign investors.

* * * * *

This press release contains forward-looking statements within the meaning of the federal securities laws.  Statements that are predictive in nature, that depend upon or refer to future events or conditions or that include the words "believe," "expect," "anticipate," "intend," "estimate" and other expressions that are predictions of or indicate future events and trends and that do not relate to historical matters identify forward-looking statements.  Forward-looking statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict, and there can be no assurance that actual outcomes and results will not differ materially from those expected by our management.  Factors that could cause our actual results to differ materially from the results contemplated by such forward-looking statements include, among others: the effects of changes in market prices of natural gas, NGLs and crude oil on our Sponsors' drilling and development plan on our dedicated acreage and the volumes of natural gas and condensate that are produced on our dedicated acreage; changes in our Sponsors' drilling and development plan in the Marcellus Shale; our Sponsors' ability to meet their drilling and development plan in the Marcellus Shale; the demand for natural gas and condensate gathering services; changes in general economic conditions; competitive conditions in our industry; actions taken by third-party operators, gatherers, processors and transporters; our ability to successfully implement our business plan; and our ability to complete internal growth projects on time and on budget. You should not place undue reliance on our forward-looking statements.  Although forward-looking statements reflect our good faith beliefs at the time they are made, forward-looking statements involve known and unknown risks, uncertainties and other factors, including the factors described under "Risk Factors" and "Forward-Looking Statements" in our Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, which may cause our actual results, performance or achievements to differ materially from anticipated future results, performance or achievements expressed or implied by such forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changed circumstances or otherwise, unless required by law.

 

CONE MIDSTREAM PARTNERS LP

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per unit data)

(unaudited)

Three Months Ended  June 30,

Six Months Ended  June 30,

2015

2014

2015

2014

Revenue

Gathering Revenue — Related Party

$

47,717

$

27,811

$

90,885

$

51,917

Total Revenue

47,717

27,811

90,885

51,917

Expenses

Operating Expense — Third Party

8,940

6,082

17,470

11,428

Operating Expense — Related Party

6,940

5,893

13,984

12,523

General and Administrative Expense — Third Party

1,223

8

2,565

829

General and Administrative Expense — Related Party

1,995

1,117

3,972

1,358

Depreciation Expense

3,667

1,679

6,661

3,297

Interest Expense

47

112

Total Expense

22,812

14,779

44,764

29,435

Net Income

24,905

13,032

46,121

22,482

Less: Net Income Attributable to Noncontrolling Interest

9,993

16,997

Net Income Attributable to General and Limited Partner Ownership

Interest in CONE Midstream Partners LP

$

14,912

$

13,032

$

29,124

$

22,482

Calculation of Limited Partner Interest in Net Income:

Net Income Attributable to General and Limited Partner Ownership Interest in CONE Midstream Partners LP (1)

$

14,912

$

13,032

$

29,124

$

22,482

Less: General Partner Interest in Net Income

298

N/A

582

N/A

Limited Partner Interest in Net Income

$

14,614

N/A

$

28,542

N/A

Net Income per Limited Partner Unit - Basic

$

0.25

N/A

$

0.49

N/A

Net Income per Limited Partner Unit - Diluted

$

0.25

N/A

$

0.49

N/A

Limited Partner Units Outstanding - Basic

58,326

N/A

58,326

N/A

Limited Partner Unit Outstanding - Diluted

58,364

N/A

58,365

N/A

Cash Distributions Declared per Unit (2)

$

0.2200

N/A

$

0.4325

N/A

(1)   Reflective of general and limited partner interest in net income since closing of the IPO. (2)   Represents the cash distributions declared related to the period presented.

CONE MIDSTREAM PARTNERS LP RECONCILIATION OF NET INCOME TO EBITDA AND DISTRIBUTABLE CASH FLOW (in thousands)

Definition of Non-GAAP Financial Measures

EBITDA

We define EBITDA as net income (loss) before income taxes, net interest expense, depreciation and amortization. EBITDA is used as a supplemental financial measure by management and by external users of our financial statements, such as investors, industry analysts, lenders and ratings agencies, to assess:

  • our operating performance as compared to those of other companies in the midstream energy industry, without regard to financing methods, historical cost basis or capital structure;
  • the ability of our assets to generate sufficient cash flow to make distributions to our partners;
  • our ability to incur and service debt and fund capital expenditures; and
  • the viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities.

We believe that the presentation of EBITDA provides information useful to investors in assessing our financial condition and results of operations. The GAAP measures most directly comparable to EBITDA are net income and net cash provided by operating activities. EBITDA should not be considered an alternative to net income, net cash provided by (used in) operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP. EBITDA excludes some, but not all, items that affect net income or net cash, and these measures may vary from those of other companies. As a result, EBITDA as presented below may not be comparable to similarly titled measures of other companies.

Distributable Cash Flow

We define distributable cash flow as EBITDA less net cash interest paid and maintenance capital expenditures. Distributable cash flow does not reflect changes in working capital balances.

Distributable cash flow is used as a supplemental financial measure by management and by external users of our financial statements, such as investors, industry analysts, lenders and ratings agencies, to assess:

  • the ability of our assets to generate cash sufficient to support our indebtedness and make future cash distributions to our unitholders; and
  • the attractiveness of capital projects and acquisitions and the overall rates of return on alternative investment opportunities.

We believe that the presentation of distributable cash flow in this report provides information useful to investors in assessing our financial condition and results of operations. The GAAP measures most directly comparable to distributable cash flow are net income and net cash provided by operating activities. Distributable cash flow should not be considered an alternative to net income, net cash provided by (used in) operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP. Distributable cash flow excludes some, but not all, items that affect net income or net cash, and these measures may vary from those of other companies. As a result, our distributable cash flow may not be comparable to similarly titled measures of other companies.

The following tables present a reconciliation of EBITDA to net income and net cash provided by operating activities, the most directly comparable GAAP financial measures, on a historical basis, for each of the periods indicated.

Three Months Ended  June 30,

Six Months Ended  June 30,

(unaudited)

2015

2014

2015

2014

Net Income

$

24,905

$

13,032

$

46,121

$

22,482

Add:

Interest Expense

47

112

Depreciation Expense

3,667

1,679

6,661

3,297

EBITDA

28,619

14,711

52,894

25,779

Less: Net Income Attributable to Noncontrolling Interest

9,993

16,997

Less:  Interest Expense Attributable to Noncontrolling Interest

14

33

Less:  Depreciation Expense Attributable to Noncontrolling Interest

1,659

2,825

EBITDA Attributable to General and Limited Partner Ownership Interest in CONE Midstream Partners LP

$

16,953

$

14,711

$

33,039

$

25,779

Less:  Ongoing Maintenance Capital Expenditures, Net of Expected Reimbursements

2,148

1,399

4,139

2,562

Distributable Cash Flow

$

14,805

$

13,312

$

28,900

$

23,217

Net Cash Provided by Operating Activities

$

50,254

$

17,897

$

60,460

$

38,632

Adjustments:

Less:  Interest Expense

47

112

Less:  Other, Including Changes in Working Capital

21,588

3,186

7,454

12,853

EBITDA

28,619

14,711

52,894

25,779

Less: Net Income Attributable to Noncontrolling Interest

9,993

16,997

Less:  Interest Expense Attributable to Noncontrolling Interest

14

33

Less:  Depreciation Expense Attributable to Noncontrolling Interest

1,659

2,825

EBITDA Attributable to General and Limited Partner Ownership Interest in CONE Midstream Partners LP

$

16,953

$

14,711

$

33,039

$

25,779

Less:  Ongoing Maintenance Capital Expenditures, Net of Expected Reimbursements

2,148

1,399

4,139

2,562

Distributable Cash Flow

$

14,805

$

13,312

$

28,900

$

23,217

 

QTD

QTD

QTD

December 31, 2014

March 31, 2015

June 30, 2015

(unaudited)

Distributable Cash Flow

$

14,844

$

14,114

$

14,805

Distributions Declared (1)

$

12,784

$

12,647

$

13,094

Distribution Coverage Ratio - Declared

1.16

x

1.12

x

1.13

x

Distributable Cash Flow

$

14,844

$

14,114

$

14,805

Distributions Paid

$

$

12,784

$

12,647

Distribution Coverage Ratio - Paid

1.10

x

1.17

x

(1) The Partnership's cash distribution for the period ended December 31, 2014 was $0.2148 per unit, which was prorated with respect to the period commencing on September 30, 2014 (the closing date of the Partnership's initial public offering) through December 31, 2014.  The prorated amount corresponds to the Partnership's minimum quarterly distribution of $0.2125 per unit, or $0.85 per unit on an annualized basis.

 

CONE MIDSTREAM PARTNERS LP

CONSOLIDATED BALANCE SHEETS

(in thousands, except number of units)

(unaudited)

June 30,  2015

December 31,  2014

ASSETS

Current Assets:

Cash

$

161

$

3,252

Receivables — Related Party

26,998

58,749

Inventory

16,632

Prepaid Expenses

757

1,280

Other Current Assets

164

164

Total Current Assets

44,712

63,445

Property and Equipment:

Property and Equipment

756,489

639,735

Less — Accumulated Depreciation

23,448

16,989

Property and Equipment — Net

733,041

622,746

Other Non-Current Assets

531

613

TOTAL ASSETS

$

778,284

$

686,804

LIABILITIES AND EQUITY

Current Liabilities:

Accounts Payable

$

63,955

$

70,635

Accounts Payable — Related Party

2,230

2,106

Total Current Liabilities

66,185

72,741

Other Liabilities:

Revolving Credit Facility

23,000

31,300

Total Liabilities

89,185

104,041

Partners' Capital:

Common Units (29,163,121 Units Issued and Outstanding at June 30, 2015 and

December 31, 2014)

391,614

389,612

Subordinated Units (29,163,121 Units Issued and Outstanding at June 30, 2015 and

December 31, 2014)

(90,475)

(92,285)

General Partner Interest

(3,699)

(3,772)

Partners' Capital Attributable to CONE Midstream Partners LP

297,440

293,555

Noncontrolling Interest

391,659

289,208

Total Partners' Capital

689,099

582,763

TOTAL LIABILITIES AND PARTNERS' CAPITAL

$

778,284

$

686,804

 

CONE MIDSTREAM PARTNERS LP

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

Three Months Ended  June 30, 2015

2015

2014

Cash Flows from Operating Activities:

Net Income

$

24,905

$

13,032

Adjustments to Reconcile Net Income to Net Cash Provided By Operating Activities:

Depreciation and Amortization

3,708

1,679

Unit Based Compensation

96

Changes in Operating Assets:

Receivables — Related Party

6,330

5,718

Inventory

2,240

Prepaid Expenses

310

Changes in Operating Liabilities:

Accounts Payable

12,051

(414)

Accounts Payable — Related Party

614

(2,118)

Net Cash Provided by Operating Activities

50,254

17,897

Cash Flows from Investing Activities:

Capital Expenditures

(76,363)

(70,936)

Net Cash Used in Investing Activities

(76,363)

(70,936)

Cash Flows from Financing Activities:

Partners' Investments

22,957

59,000

Distributions to Unitholders

(12,647)

Payment of Revolver

15,500

Net Cash Provided By Financing Activities

25,810

59,000

Net (Decrease) Increase in Cash

(299)

5,961

Cash at Beginning of Period

460

3,407

Cash at End of Period

$

161

$

9,368

 

Development Companies Jointly Owned by CONE Midstream Partners LP and CONE Gathering LLC

Operating Income Summary, Selected Operating Statistics and Capital Investment

(in thousands)

(unaudited)

Three Months Ended June 30, 2015

 Development Company

Anchor

Growth

Additional

 TOTAL

Income Summary

Revenue

$

35,351

$

3,913

$

8,453

$

47,717

Expenses

15,827

2,980

4,005

22,812

Net Income

19,524

933

4,448

24,905

Less: Net Income Attributable to Noncontrolling Interest

4,881

886

4,226

9,993

Net Income Attributable to General and Limited

Partner Ownership Interest in CONE Midstream

Partners LP

$

14,643

$

47

$

222

$

14,912

Operating Statistics - Gathered Volumes

Dry Gas (BBtu/d)

395

92

8

495

Wet Gas (BBtu/d)

334

11

163

508

Condensate (MMcfe/d)

9

14

23

Total Gathered Volumes

738

103

185

1,026

Total Volumes Net to CONE Midstream Partners LP

554

5

9

568

Capital Investment

Maintenance Capital

$

2,813

$

319

$

448

$

3,580

Expansion Capital

36,941

7,014

28,828

72,783

Total Capital Investment

$

39,754

$

7,333

$

29,276

$

76,363

Capital Investment Net to CONE Midstream Partners LP

Maintenance Capital

$

2,110

$

16

$

22

$

2,148

Expansion Capital

27,706

351

1,441

29,498

Total Capital Investment Net to CONE Midstream Partners LP

$

29,816

$

367

$

1,463

$

31,646

 

Development Companies Jointly Owned by CONE Midstream Partners LP and CONE Gathering LLC

Operating Income Summary, Selected Operating Statistics and Capital Investment

(in thousands)

(unaudited)

Three Months Ended June 30, 2014

 Development Company

Anchor

Growth

Additional

 TOTAL (1)

Income Summary

Revenue

$

25,212

$

2,211

$

$

27,423

Expenses

12,867

1,531

171

14,569

Net Income

12,345

680

(171)

12,854

Less: Net Income Attributable to Noncontrolling Interest

Net Income Attributable to General and Limited Partner Ownership Interest in CONE Midstream Partners LP

$

12,345

$

680

$

(171)

$

12,854

Operating Statistics - Gathered Volumes

Dry Gas (BBtu/d)

318

55

373

Wet Gas (BBtu/d)

214

214

Condensate (MMcfe/d)

Total Gathered Volumes

532

55

587

Total Volumes Net to CONE Midstream Partners LP

399

3

402

Capital Investment

Maintenance Capital

$

1,857

$

121

$

$

1,978

Expansion Capital

37,209

2,737

25,965

65,911

Total Capital Investment

$

39,066

$

2,858

$

25,965

$

67,889

Capital Investment Net to CONE Midstream Partners LP

Maintenance Capital

$

1,393

$

6

$

$

1,399

Expansion Capital

27,907

137

1,298

29,342

Total Capital Investment Net to CONE Midstream Partners LP

$

29,300

$

143

$

1,298

$

30,741

(1)  Total consists of the 100% activity of the three Development Companies (Anchor, Growth and Additional) which CONE Midstream Partners LP owns a controlling interest of 75%, 5% and 5%, respectively. Other systems that were part of the Predecessor, CONE Gathering LLC, that have been included in the Historical Financial statements as the Predecessor are excluded from the table above, as these systems are not included in the consolidated operations of the Partnership.

 

SOURCE CONE Midstream Partners LP



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http://www.conemidstream.com