Southcross Energy Partners Reports Third Quarter Results

Announced Date :  Nov 13, 2017


Southcross Energy Partners, L.P. (“Southcross,” the “Partnership,” or “SXE”) has announced third quarter financial and operating results.
Southcross’ net loss was $19.1 million for the quarter ended September 30, 2017, compared to $32.6 million for the same period in the prior year and $15.9 million for the quarter ended June 30, 2017. Adjusted EBITDA (as defined below) was $16.8 million for the quarter ended September 30, 2017, compared to $14.8 million for the same period in the prior year and $17.1 million for the quarter ended June 30, 2017. A normalized third quarter Adjusted EBITDA, adjusting for the impact of Hurricane Harvey and the one-time receipt of $1.1 million in business interruption insurance proceeds related to a 2016 event, would have been an estimated $18.2 million.

Processed gas volumes during the quarter averaged 222 MMcf/d, a decrease of 26% compared to 299 MMcf/d for the same period in the prior year and a decrease of 17% compared to 267 MMcf/d for the quarter ended June 30, 2017. This decrease was due primarily to the impact of Hurricane Harvey and the shut-down of the Conroe facility in the fourth quarter of 2016. Excluding the impact of Harvey, processed gas volumes would have been an estimated 270 MMcf/d during the quarter ended September 30, 2017, a 1% increase compared to the prior quarter.

Capital Expenditures

For the quarter ended September 30, 2017, growth and maintenance capital expenditures were $4.1 million and were related primarily to the installation of a new gas gathering pipeline in Mississippi and required safety and reliability upgrades. Southcross continues to expect that net capital expenditures for full-year 2017, including growth and maintenance expenditures, will be in the range of $18 million to $20 million and will be limited to projects with contractually committed volumes, along with recurring maintenance spending.

Liquidity and Distributable Cash Flow

As of September 30, 2017, Southcross had total outstanding debt of $532 million, including $99 million under its revolving credit facility, as compared to total outstanding debt of $547 million as of June 30, 2017.

Distributable cash flow (as defined below) for the quarter ended September 30, 2017 was $6.4 million, compared to $5.9 million for the same period in the prior year and $8.0 million for the quarter ended June 30, 2017. The Partnership did not make a cash distribution for the quarter ended September 30, 2017 and is restricted from making cash distributions until the Partnership’s consolidated total leverage ratio, as defined under its credit agreement, is at or below 5.0x to 1. At September 30, 2017, the consolidated total leverage ratio was approximately 7.8x to 1. 

Merger with American Midstream Partners LP

On November 1, 2017 we announced that Southcross Holdings, LP (“Southcross Holdings”) had entered into a Contribution Agreement and the Partnership had entered into a Merger Agreement with American Midstream Partners L.P. (“AMID”) We view these agreements as a combined set of opportunities for investors of both Southcross entities to participate in a more diverse, sustainably capitalized company.

At the effective time of the merger, each publicly held common unit of the Partnership issued and outstanding or deemed issued and outstanding as of immediately prior to the effective time, will be converted into the right to receive 0.160 of an AMID Common Unit.  These registered units will be listed on the New York Stock Exchange and will offer the opportunity for immediate cash distributions with strong coverage.  All of the consideration to be received by Southcross Holdings pursuant to the Contribution Agreement, including cash distributions paid on any securities, will be subject to placement in escrow, locked up pursuant to a lockup agreement, and/or subject to other restrictions until the later of the passage of certain time periods or the resolution of certain outstanding uncertainties and indemnities.    

As discussed in our periodic filings, on December 29, 2016, we received a waiver from the lenders under our Third Amended and Restated Revolving Credit Agreement for all events of default arising from failure to comply with the consolidated total leverage ratio debt covenant.  This covenant waiver expires on March 31, 2019, at which point we anticipate that significant additional equity will be required by SXE in order to meet the covenant requirement.  Absent this additional equity, all of the debt at SXE and all of the debt at Southcross Holdings will become immediately due and payable.  A benefit of the proposed transactions with AMID is that under the terms of the Contribution Agreement and the Merger Agreement all of the SXE revolver and term loan debt, as well as all debt outstanding at Southcross Holdings, is required to be repaid in full at the closing of the transactions contemplated thereby.

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