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Donnerstag, 03.11.2016 22:25 von PR Newswire | Aufrufe: 42

Summit Midstream Partners, LP Reports Third Quarter 2016 Financial Results

Zeitungsständer (Symbolbild). © AdrianHancu / iStock Editorial / Getty Images Plus / Getty Images

PR Newswire

THE WOODLANDS, Texas, Nov. 3, 2016

THE WOODLANDS, Texas, Nov. 3, 2016 /PRNewswire/ -- Summit Midstream Partners, LP (NYSE: SMLP) announced today its financial and operating results for the three and nine months ended September 30, 2016. SMLP reported net income of $2.0 million for the third quarter of 2016 compared to net income of $3.5 million for the prior-year period. Net cash provided by operations totaled $37.2 million in the third quarter of 2016 compared to $33.1 million in the prior-year period. Adjusted EBITDA totaled $76.5 million and distributable cash flow totaled $55.6 million for the third quarter of 2016 compared to $43.5 million and $26.6 million, respectively, for the prior-year period.

Natural gas volume throughput averaged 1,572 million cubic feet per day ("MMcf/d") in the third quarter of 2016, an increase of 8.7% compared to 1,446 MMcf/d in the prior-year period, and an increase of 4.0% compared to 1,512 MMcf/d in the second quarter of 2016. Crude oil and produced water volume throughput in the third quarter of 2016 averaged 92.2 Mbbl/d, an increase of 35.2% compared to 68.2 Mbbl/d in the prior-year period, and an increase of 7.2% compared to 86.0 Mbbl/d in the second quarter of 2016. All volume throughput metrics exclude SMLP's proportionate share of volume throughput from our 40% ownership interest in Ohio Gathering.

Steve Newby, President and Chief Executive Officer, commented, "SMLP generated strong financial results in the third quarter of 2016 due to increasing volumes, and corresponding segment adjusted EBITDA, primarily driven by our Summit Utica and Williston operations. We also experienced strong sequential quarterly volume growth in our Piceance/DJ Basins segment as the recent increase in activity levels from our customer base is starting to show up in our results. The third quarter financial results also benefitted from a continued company-wide focus to control costs and optimize operations. The 2016 Drop Down assets continue to perform in-line with our original 2016 adjusted EBITDA expectations of approximately $80 million.

We are also encouraged by the recent trend of upstream M&A that is occurring across several of our operating assets. During the third quarter, TOTAL S.A. announced its intention to acquire Chesapeake Energy's Barnett acreage. We are excited to have a new, well-capitalized customer anchor this system. We expect that this trend will lead to an increased level of drilling and completion activity.

Our strong financial performance in the third quarter of 2016 resulted in a quarterly distribution coverage ratio of 1.25x, which includes the impact of our September 2016 primary offering of 5.5 million common SMLP units. This offering, which generated net proceeds of $126.1 million, allowed us to reduce debt and further strengthen our balance sheet. Given our strong third quarter and year-to-date performance, we expect our 2016 adjusted EBITDA to be at or above the top end of our 2016 adjusted EBITDA guidance range of $270.0 million to $290.0 million."

SMLP reported a net loss of $52.2 million for the first nine months of 2016 compared to a net loss of $1.3 million for the prior-year period. Net cash provided by operations totaled $168.7 million in the first nine months of 2016, compared to $138.1 million in the prior-year period. SMLP reported adjusted EBITDA of $218.9 million and distributable cash flow of $158.1 million for the first nine months of 2016, compared to $167.0 million and $114.2 million, respectively, for the prior-year period. Natural gas volume throughput averaged 1,536 MMcf/d for the first nine months of 2016 compared to 1,533 MMcf/d in the prior-year period. Crude oil and produced water volume throughput averaged 91.0 Mbbl/d in the first nine months of 2016 compared to 61.5 Mbbl/d in the prior-year period.

SMLP's financial results for the nine months ended September 30, 2016 and 2015 and the three months ended September 30, 2015 include the historical financial results from (i) its May 2015 acquisition from Summit Investments of the Polar and Divide system (the "Polar and Divide Drop Down"), and (ii) its March 2016 acquisition from Summit Investments of substantially all of (a) Summit Utica, Meadowlark Midstream and Tioga Midstream, and (b) Summit Investments' 40.0% ownership interest in each of Ohio Gathering and Ohio Condensate (collectively, "Ohio Gathering") (the "2016 Drop Down"). Because of the common control aspects of the acquired assets, the Polar and Divide Drop Down and the 2016 Drop Down were each deemed a transaction between entities under common control and, as such, have been accounted for on an "as-if pooled" basis for all periods in which common control existed.

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Third Quarter 2016 Segment Results

Utica Shale

The Utica Shale reportable segment includes our ownership interest in Ohio Gathering, a natural gas gathering system in service and under development spanning the condensate, liquids-rich and dry gas windows of the Utica Shale in Harrison, Guernsey, Noble, Belmont and Monroe counties in southeastern Ohio. Segment adjusted EBITDA for the Utica Shale includes our proportional share of adjusted EBITDA from Ohio Gathering, based on a one-month lag.

The Utica Shale reportable segment also includes Summit Utica, our wholly owned natural gas gathering system currently in service and under development in Belmont and Monroe counties in southeastern Ohio. Summit Utica gathers and delivers dry natural gas to interconnections with a third-party intrastate pipeline.

Segment adjusted EBITDA for the third quarter of 2016 totaled $17.0 million, up 54.5% from $11.0 million in the prior-year period, primarily due to higher volume throughput across the Ohio Gathering and Summit Utica systems, partially offset by declining stabilization revenue at Ohio Condensate. Volume throughput on the Ohio Gathering system, which is based on a one-month lag, averaged 800 MMcf/d in the third quarter of 2016 compared to 718 MMcf/d in the prior-year period and 937 MMcf/d in the second quarter of 2016. We anticipate recent well completions from certain of our Ohio Gathering customers in August 2016 to partially offset the sequential quarterly volume decline experienced in the third quarter of 2016. Volume throughput on the Summit Utica system averaged 234 MMcf/d in the third quarter of 2016 compared to 42 MMcf/d in the prior-year period and 167 MMcf/d in the second quarter of 2016. Volume throughput for the third quarter of 2016 increased due to our continued buildout of the Summit Utica gathering system and our connection of 10 wells during the first half of 2016 and 8 wells during the third quarter of 2016. SMLP completed the third dehydration station on the Summit Utica system in the third quarter of 2016, which increased total system capacity to 450 MMcf/d, and enabled an increase in volumes across the system. We expect to add compression capacity to these dehydration stations, as needed, over the next two years, offering our customers an incremental service, with associated incremental fees.

Williston Basin

The Bison Midstream, Polar and Divide, and Tioga Midstream systems provide our midstream services for the Williston Basin reportable segment. Bison Midstream gathers associated natural gas from pad sites located in Mountrail and Burke counties in North Dakota and delivers to third-party pipelines serving a third-party processing plant in Channahon, Illinois. The Polar and Divide system gathers crude oil from pad sites located in Williams and Divide counties in North Dakota and delivers to the COLT and Basin Transload rail terminals, as well as third-party pipeline infrastructure. SMLP executed an interconnect agreement in the third quarter of 2016 to connect into the Dakota Access Pipeline, which will provide our Polar and Divide customers access to new markets. The Polar and Divide system also gathers and delivers produced water to various third-party disposal wells in the region. Tioga Midstream is a crude oil, produced water, and associated natural gas gathering system in Williams County, North Dakota. All crude oil and natural gas gathered on the Tioga Midstream system is delivered to third-party pipelines, and all produced water is delivered to third-party disposal wells.

Segment adjusted EBITDA for the Williston Basin segment totaled $21.8 million for the third quarter of 2016 compared to ($5.8) million the prior-year period, primarily due to a $20.0 million environmental remediation expense that we recognized in the prior-year period associated with a produced water pipeline that became part of the Polar and Divide system in conjunction with the 2016 Drop Down transaction. Higher liquids and natural gas volumes, together with fees associated with the commencement of the Stampede Lateral, which was placed into service in the first quarter of 2016, also contributed to the Williston Basin's segment results in the third quarter of 2016.

Liquids volumes averaged 92.2 Mbbl/d in the third quarter of 2016, an increase of 35.2% over the prior-year period and an increase of 7.2% compared to the second quarter of 2016. Liquids volumes were positively impacted by producers completing 28 drilled but uncompleted ("DUC") wells across our gathering footprint during the third quarter of 2016. We expect that our customers will continue to turn their inventory of DUCs to sales over the next several quarters.

Compared to the third quarter of 2015, associated natural gas volumes increased 4.3% to 24 MMcf/d in the third quarter of 2016, driven by increased volumes associated with the development of the Tioga Midstream system throughout 2015 and into 2016.

Piceance/DJ Basins

The Grand River and the Niobrara Gathering & Processing systems provide our midstream services for the Piceance/DJ Basins reportable segment. These systems provide natural gas gathering and processing services for producers operating in the Piceance Basin located in western Colorado and eastern Utah and in the Denver-Julesburg ("DJ") Basin located in northeastern Colorado.

Segment adjusted EBITDA totaled $28.1 million for the third quarter of 2016, an increase of 7.3% from $26.2 million in the prior-year period. Third quarter 2016 volume throughput averaged 591 MMcf/d, a decrease of 1.3% from 599 MMcf/d in the prior-year period and an increase of 4.8% from 564 MMcf/d in the second quarter of 2016. Volume declines, primarily from our anchor customer's continued suspension of drilling activities in the basin and the resulting natural declines from existing production, were offset by the commissioning of 46 new wells during the quarter, primarily from three of our privately held single-basin focused customers. These customers are actively drilling and completing wells across our footprint, and the third quarter of 2016 represents the first quarter sequential quarterly increase in volume throughput on this segment since the fourth quarter of 2015.

The impact of our anchor customer's volume declines was partially offset by higher minimum volume commitment ("MVC") shortfall payment adjustments associated with certain of our customers' gas gathering agreements. Lower commodity prices in the third quarter of 2016, compared to the prior-year period, also negatively impacted the margins we earned from our Grand River percent-of-proceeds contracts and condensate revenue.

Barnett Shale

The DFW Midstream system provides our midstream services for the Barnett Shale reportable segment. This system gathers and delivers low-pressure natural gas received from pad sites, primarily located in southeastern Tarrant County, Texas, to downstream intrastate pipelines serving various natural gas hubs in the region.

Segment adjusted EBITDA for the Barnett Shale segment totaled $13.1 million for the third quarter of 2016, flat with the prior-year period primarily due to lower gathering revenue, offset by lower operating expenses and higher natural gas sales associated with our fuel retainage gas which offsets the power costs related to our electric drive compression. Volume throughput of 305 MMcf/d in the third quarter of 2016 was down 6.2% compared to the prior-year average of 325 MMcf/d and down 10.6% from 341 MMcf/d in the second quarter of 2016. Volumes in the second quarter of 2016 benefitted from the initial production related to a customer's commissioning of an 11-well pad site. Third quarter 2016 volumes were negatively impacted by the annual shutdown of the DFW Midstream system, which occurred in September 2016 vs. October in 2015, as well as the temporary shutting-in of wells on existing pad sites to allow our customers to drill and complete new wells. These activities impacted average daily volumes by an estimated 7 MMcf/d during the quarter. A customer on the DFW Midstream system has six DUCs on an existing pad site in our service area that are in the process of being completed; we expect to see production from these DUCs in the fourth quarter of 2016.

Marcellus Shale

The Mountaineer Midstream system provides our midstream services for the Marcellus Shale reportable segment. This system gathers high-pressure natural gas received from upstream pipeline interconnections with Antero Midstream Partners, LP and Crestwood Equity Partners LP. Natural gas on the Mountaineer Midstream system is delivered to the Sherwood Processing Complex located in Doddridge County, West Virginia.

Segment adjusted EBITDA for the Marcellus Shale segment totaled $5.1 million for the third quarter of 2016, down 11.2% from $5.8 million in the prior-year period. Volume throughput for this segment averaged 418 MMcf/d in the third quarter of 2016, an 8.5% decrease from 457 MMcf/d in the prior-year period, and an increase of 0.5% from the 416 MMcf/d in the second quarter of 2016. Lower volumes in the third quarter of 2016 continue to result from our customer's decision to defer the completion of an estimated 29 DUCs identified behind the Mountaineer Midstream system. We expect that the completion of these wells will continue to be deferred until 2017.

The following table presents average daily throughput by reportable segment:

	Three months ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015

Average daily throughput (MMcf/d) (1):
Utica Shale (2)		234		42		178		24
Williston Basin	24		23		24		22
Piceance/DJ Basins	591		599		576		611
Barnett Shale	305		325		329		361
Marcellus Shale	418		457		429		515
Aggregate average daily throughput	1,572		1,446		1,536		1,533

Average daily throughput (Mbbl/d) (1):
Williston Basin	92.2		68.2		91.0		61.5
Aggregate average daily throughput	92.2		68.2		91.0		61.5



(1)	Prior periods have been recast to include the incremental historical volumes from the 2016 Drop Down.
(2)	Exclusive of volume throughput for Ohio Gathering.

MVC Shortfall Payments

SMLP billed its customers $5.7 million in the third quarter of 2016 related to MVCs. For those customers that do not have credit banking mechanisms in their gathering agreements, or have no ability to use MVC shortfall payments as credits, the MVC shortfall payments are accounted for as gathering revenue in the period that they are earned. For the third quarter of 2016, SMLP recognized $4.8 million of gathering revenue associated with MVC shortfall payments from certain customers in the Marcellus Shale, Piceance/DJ Basins, and Barnett Shale reportable segments.

MVC shortfall payment adjustments in the third quarter of 2016 totaled $11.5 million and included $0.8 million of deferred revenue related to MVC shortfall payments and $10.7 million related to MVC shortfall payment adjustments from certain customers in the Piceance/DJ Basins, Williston Basin, and Barnett Shale reportable segments.

SMLP's MVC shortfall payment mechanisms contributed $16.4 million of adjusted EBITDA in the third quarter of 2016.

Three months ended September 30, 2016

MVC

billings

Gathering

revenue

Adjustments
to MVC
shortfall

payments

Net impact
to adjusted
EBITDA

(In thousands)

Net change in deferred revenue related to MVC shortfall payments:

Utica Shale

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