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Sanchez Midstream Partners Reports Third-Quarter 2019 Financial Results

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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
ir@sanchezmidstream.com
(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.