RICE ENERGY INC CANONSBURG, Pa., Aug. 3, 2016 /PRNewswire/ -- Rice Midstream Partners LP (NYSE: RMP) ("RMP" or the "Partnership") today reported second quarter 2016 financial and operating results. Highlights to date include:
-- Average throughput of 934 MDth/d, a 43% increase over the prior year
quarter and a 12% increase relative to first quarter 2016
-- Net income of $27.9 million; net cash provided by operating activities
of $38.2 million
-- Adjusted EBITDA((1)) of $37.8 million, a 127% increase over the prior
year quarter and an 11% sequential quarter decrease due to anticipated
reduced water volumes from fewer wells completed by RMP customers
-- Distributable cash flow ("DCF")((1)) of $34.0 million, resulting in DCF
coverage ratio of 1.86x
-- Raised second quarter distribution to $0.2235 per common unit, an
increase of 17% over the prior year quarter and 6% relative to first
quarter 2016
-- Completed equity offering of 9.2 million units providing $164 million in
net proceeds
-- Exited the quarter with strong liquidity position of $465 million and an
unlevered balance sheet
-- Increased 2016 guidance to reflect increased expected 2016 throughput
and water services activity
-- Decreased 2016 capital budget to $140 million due to increased
compression savings
Commenting on the results, Daniel J. Rice IV, Chief Executive Officer, said, "Our strong results are a reflection of our top-tier assets in the most economic dry gas areas in the country that are supported by 100% fee-based contracts and high-quality customers. Throughput continues to increase as a result of our sponsor's solid execution and third party development ahead of schedule. This growth paired with continued operating and capital cost execution has led to another quarter with rapid distribution growth of 17% over the prior year quarter and 1.86 times distributable cash flow coverage. We believe RMP's unique mix of strong distribution growth with healthy coverage and an unlevered balance sheet will continue to create long-term value for unitholders."
1. Please see "Supplemental Non-GAAP
Financial Measures" for a
description of Adjusted EBITDA,
distributable cash flow and
related reconciliations to
comparable GAAP financial
measures.
Second Quarter 2016 Financial Results
Gathering volumes for the second quarter averaged 934 MDth/d, a 43% increase over the prior year quarter and a 12% increase relative to first quarter 2016, with 27% attributable to third-party volumes. Compression volumes for the second quarter averaged 564 MDth/d, an 872% increase over the prior year quarter and a 271% increase relative to first quarter 2016, with 42% attributable to third-party volumes. The significant increase in compression volumes was attributable to new compression capacity placed into service during the second quarter. Fresh water delivery volumes were 335 million gallons, or an average of 3.7 MMgal/d during the second quarter with 34% attributable to third-party volumes, a 106% increase over the prior year quarter and a 28% decrease relative to first quarter 2016. The anticipated sequential quarter decrease was due to timing of well completion activity by Rice Energy and third party customers in the quarter.
We reported operating revenues of $46.5 million, comprised of $30.0 million in revenues from our gathering and compression segment and $16.5 million in revenues from our water services segment. Operation and maintenance expense totaled $4.2 million, including $1.4 million for gathering and compression and $2.8 million for water services. We reported net income of $27.9 million, or $0.38 per limited partner unit. Adjusted EBITDA was $37.8 million and, after giving effect to $2.8 million of estimated maintenance capital expenditures and cash interest expense of $0.9 million, DCF was $34.0 million, resulting in a DCF coverage ratio of 1.86x.
During the second quarter 2016, we invested approximately $25 million of expansion capital including $23 million to develop gas gathering and compression assets and $2 million to develop our water services assets.
Year to Date 2016 Financial Results
Gathering volumes for the six month period ended June 30, 2016, averaged 885 MDth/d, a 46% increase over the prior year period with 27% attributable to third-party volumes. Compression volumes for the first six months of the year averaged 358 MDth/d, a 487% increase over the prior year period, with 53% attributable to third-party volumes. Fresh water delivery volumes were 797 million gallons, or an average of 4.4 MMgal/d during the six months ended June 30, 2016, a 129% increase over the prior year period with 17% attributable to third-party volumes.
We reported operating revenues of $101.1 million, comprised of $56.8 million in revenues from our gathering and compression segment and $44.3 million in revenues from our water services segment. Operation and maintenance expense totaled $12.8 million, including $3.2 million for gathering and compression and $9.6 million for water services. We reported net income of $62.4 million, or $0.86 per limited partner unit. Adjusted EBITDA was $80.0 million and, after giving effect to $5.6 million of estimated maintenance capital expenditures and cash interest expense of $2.0 million, DCF was $72.4 million resulting in a DCF coverage ratio of 2.19x.
During the first six months of 2016, we invested approximately $57 million of expansion capital including $53 million to develop gas gathering and compression assets and $4 million to develop our water services assets.
Average Daily
Throughput (MDth/d)
-------------------
Three Months Ended Six Months Ended
Gathering Assets June 30, 2016 June 30, 2016
------------- -------------
Affiliate 678 648
Third-party 256 237
---
Total 934 885
% Third-party 27% 27%
Average Daily
Compression Volume
(MDth/d)
--------
Three Months Ended Six Months Ended
Compression Assets June 30, 2016 June 30, 2016
------------- -------------
Affiliate 329 169
Third-party 235 189
Total 564 358
% Third-party 42% 53%
Average Daily Volumes
(MMgal/d)
---------
Three Months Ended Six Months Ended
Water Services Assets June 30, 2016 June 30, 2016
------------- -------------
Pennsylvania Water 0.8 1.5
Ohio Water 2.9 2.9
--- ---
Total 3.7 4.4
---
% Third-party 34% 17%
2016 Capital Budget and Guidance Update
We are unable to provide a projection of full-year 2016 net income and net cash provided by operating activities, the most comparable financial measures to Adjusted EBITDA and distributable cash flow, respectively, calculated in accordance with GAAP. We do not anticipate the changes in operating assets and liabilities to be material, but changes in depreciation expense, accounts receivable, accounts payable, accrued liabilities and deferred revenue could be significant, such that the amount of net cash provided by operating activities would vary substantially from the amount of projected Adjusted EBITDA and distributable cash flow. In addition, we are unable to project net income because this metric includes the impact of certain non-cash items that we are unable to project with any reasonable degree of accuracy without unreasonable effort. Please see the "Supplemental Non-GAAP Financial Measures" section of this news release.
As a result of continued strong throughput growth and increased water services activity, we are increasing our expected 2016 Adjusted EBITDA and distributable cash flow. In addition, we are lowering our 2016 capital budget to $140 million due to increased savings on compression.
2016 Capital Budget ($ in millions)
----------------------------------
Prior Updated
-------
Gas Gathering and Compression $140 $125
Water Services $10 $15
-------------- --- ---
Total RMP $150 $140
Estimated Maintenance Capital $11 $11
Prior Updated
----- -------
Cash G&A ($ in
millions) $15 $18 $18 $21
Adjusted EBITDA ($
in millions)
Gas Gathering and
Compression $85 - $90 $90 - $95
Water Services $25 - $30 $40 - $45
-------------- --- --- --- --- --- ---
Total Adjusted
EBITDA $110 - $120 $130 - $140
% Third Party 20% - 25% 20% - 25%
Distributable
Cash Flow ($ in
millions) $90 - $100 $110 - $120
Average DCF
Coverage Ratio 1.3x - 1.5x 1.5x - 1.6x
% Distribution
Growth 20% 20%
Financial Position and Liquidity
On May 9, 2016, we entered into an equity distribution agreement with a group of managers that established an at-the-market common unit offering program ("ATM program"), pursuant to which we may from time to time sell common units representing limited partner interests in the Partnership having an aggregate offering price of up to $100 million. During the second quarter 2016, we issued and sold 944,700 common units at an average price per unit of $17.21 through our ATM program. We intend to use the net proceeds of $16 million for general partnership purposes, including repayment of outstanding debt, acquisitions and capital expenditures.
In June 2016, we completed an underwritten public offering of 9,200,000 common units representing limited partner interests at a price to the public of $18.50 per common unit. The Partnership used a portion of the net proceeds of $164 million to repay outstanding debt and intends to use the remainder for general partnership purposes, including acquisitions and capital expenditures.
As of June 30, 2016, we had $450 million of availability on our revolving credit facility and $15 million of cash on hand, resulting in $465 million of total liquidity.
Quarterly Cash Distribution
On July 22, 2016, we declared a quarterly distribution of $0.2235 per unit for the second quarter 2016, an increase of $0.0135 per unit, or 6%, relative to first quarter 2016. The distribution will be payable on August 11, 2016 to unitholders of record as of August 2, 2016.
Conference Call
RMP will host a conference call on August 4, 2016 at 11:00 a.m. Eastern time (10:00 a.m. Central time) to discuss second quarter 2016 financial and operating results. To listen to a live audio webcast of the conference call, please visit RMP's website at www.ricemidstream.com. A replay of the conference call will be available following the call for two weeks and can be accessed from www.ricemidstream.com.
Rice Energy will host a conference call on August 4, 2016 at 9:30 a.m. Eastern time (8:30 a.m. Central time) to discuss second quarter 2016 financial and operating results and we encourage RMP investors to listen-in. To listen to a live audio webcast of the conference call, please visit Rice Energy's website at www.riceenergy.com. A replay of the conference call will be available for two weeks and can also be accessed from www.riceenergy.com.
Please visit www.ricemidstream.com to view a presentation containing second quarter 2016 information.
About Rice Midstream Partners
Rice Midstream Partners LP is a fee-based, growth-oriented limited partnership formed by Rice Energy Inc. (NYSE: RICE) to own, operate, develop and acquire midstream assets in the Appalachian basin. RMP provides midstream services to Rice Energy and third-party companies through its natural gas gathering, compression and water assets in the rapidly developing dry gas cores of the Marcellus and Utica Shales.
For more information, please visit www.ricemidstream.com.
Forward Looking Statements
This release includes forward-looking statements that are subject to a number of risks and uncertainties, many of which are beyond our control. All statements, other than historical facts included in this release, that address activities, events or developments that we expect or anticipate will or may occur in the future, including such things as, forecasted gathering volumes, revenues, Adjusted EBITDA, distribution growth, and distributable cash flow, the timing of completion of midstream projects, future capital expenditures (including the amount and nature thereof), business strategy and measures to implement strategy, competitive strengths, goals, expansion and growth of our business and operations, plans, market conditions, references to future success, references to intentions as to future matters and other such matters are forward-looking statements. All forward-looking statements speak only as of the date of this release. Although we believe that the plans, intentions and expectations reflected in or suggested by the forward-looking statements are reasonable, there is no assurance that these plans, intentions or expectations will be achieved. Therefore, actual outcomes and results could materially differ from what is expressed, implied or forecast in such statements.
We caution you that these forward-looking statements are subject to risks and uncertainties, most of which are difficult to predict and many of which are beyond our control, incident to our gathering and compression and water services businesses. These risks include, but are not limited to: commodity price volatility; inflation; environmental risks; regulatory changes; the uncertainty inherent in projecting future throughput volumes, cash flow and access to capital; and the timing of development expenditures of Rice Energy or our other customers. Information concerning these and other factors can be found in our filings with the Securities and Exchange Commission, including our Forms 10-K, 10-Q and 8-K. Consequently, all of the forward-looking statements made in this news release are qualified by these cautionary statements and there can be no assurances that the actual results or developments anticipated by us will be realized, or even if realized, that they will have the expected consequences to or effects on us, our business or operations. We have no intention, and disclaim any obligation, to update or revise any forward-looking statements, whether as a result of new information, future results or otherwise.
Rice Midstream Partners LP
Statements of Operations
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
(in thousands, except unit data) 2016 2015 2016 2015
---- ---- ---- ----
Operating revenues:
Affiliate $32,622 $24,482 $77,007 $48,342
Third-party 13,925 4,078 24,083 6,729
Total operating revenues 46,547 28,560 101,090 55,071
Operating expenses:
Operation and maintenance expense 4,187 2,703 12,733 5,607
Equity compensation expense (1) 1,134 1,146 2,119 2,211
General and administrative expense 4,607 3,056 8,363 6,185
Incentive unit expense (1) - 689 - 1,123
Depreciation expense 6,855 2,953 12,225 6,038
Acquisition costs - - 73 -
Amortization of intangible assets 403 408 811 816
Other expense 361 839 149 839
--- --- --- ---
Total operating expenses 17,547 11,794 36,473 22,819
------ ------ ------ ------
Operating income 29,000 16,766 64,617 32,252
Other income - - - 9
Interest expense (1) (920) (736) (1,967) (1,257)
Amortization of deferred finance
costs (144) (144) (288) (288)
Income before income taxes 27,936 15,886 62,362 30,716
Income tax expense - (2,096) - (4,002)
Net income $27,936 $13,790 $62,362 $26,714
======= ======= ======= =======
Calculation of limited partner
interest in net income:
Net income $27,936 $13,790 $62,362 $26,714
Less: Pre-acquisition net income
allocated to general partner - 1,458 - 5,314
Less: General partner interest in
net income attributable to
incentive distribution rights 113 - 113 -
--- --- --- ---
Net income attributable to limited
partners $27,823 $12,332 $62,249 $21,400
======= ======= ======= =======
Weighted average limited partner
units (in millions)
Common units (basic) 44.5 28.8 43.3 28.8
Common units (diluted) 44.8 28.8 43.6 28.8
Subordinated units (basic and
diluted) 28.8 28.8 28.8 28.8
Net income attributable to RMP per
limited partner unit (2)
Common units (basic) $0.38 $0.21 $0.86 $0.37
Common units (diluted) $0.38 $0.21 $0.86 $0.37
Subordinated units (basic and
diluted) $0.38 $0.21 $0.87 $0.37
Adjusted EBITDA (3) $37,753 $16,667 $79,994 $29,127
Distributable cash flow (4) $34,033 $15,090 $72,427 $26,036
Quarterly distribution per unit $0.2235 $0.1905 $0.4335 $0.3780
Distributions declared:
Limited Partner Units - Public $11,714 $5,477 $20,568 $10,868
Limited Partner Units - GP Holdings 6,427 5,478 12,466 10,870
General Partner 113 - 113 -
--- ---
Total distributions declared $18,254 $10,955 $33,147 $21,738
DCF coverage ratio (5) 1.86 1.38 2.19 1.20
1. Prior to their acquisition, the
Water Assets were allocated
incentive unit expense, equity
compensation expense and interest
expense initially recognized by
Rice Energy. These non-cash
charges are described in more
detail in Note 9 to the
consolidated financial statements
in our 10-Q.
2. Net income per limited partner
unit does not include results
attributable to the Water Assets
prior to their acquisition as
these results are not
attributable to our limited
partners.
3. We define Adjusted EBITDA as net
income (loss) before interest
expense, depreciation expense,
amortization expense, non-cash
equity compensation expense,
amortization of deferred
financing costs and other non-
recurring items. Please read
Supplemental "Non-GAAP Financial
Measures."
4. We define distributable cash flow
as Adjusted EBITDA less interest
expense, and estimated
maintenance capital expenditures.
Please read Supplemental "Non-
GAAP Financial Measures."
5. We define DCF coverage ratio as
distributable cash flow divided
by total distributions declared.
Please read Supplemental "Non-
GAAP Financial Measures."
Rice Midstream Partners LP
Segment Results of Operations
(Unaudited)
Gathering and Compression Segment
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
(in thousands) 2016 2015 2016 2015
---- ---- ---- ----
Gathering volumes: (MDth/d)
Affiliate 678 555 648 525
Third-party 256 100 237 82
--- --- --- ---
Total gathering volumes 934 655 885 607
Compression volumes: (MDth/d)
Affiliate 329 52 169 45
Third-party 235 6 189 16
Total compression volumes 564 58 358 61
Operating results:
Operating revenues:
Affiliate $19,058 $15,652 $36,364 $29,167
Third-party 10,978 4,078 20,472 6,729
Total operating revenues 30,036 19,730 56,836 35,896
Operating expenses:
Operation and maintenance
expense 1,360 877 3,152 2,257
Equity compensation expense 915 1,003 1,656 1,999
General and administrative
expense 3,767 2,185 6,721 4,516
Depreciation expense 2,685 1,486 4,620 2,934
Acquisition costs - - 73 -
Amortization of intangible
assets 403 408 811 816
Other expense 361 839 149 839
Total operating expenses 9,491 6,798 17,182 13,361
Operating income $20,545 $12,932 $39,654 $22,535
Water Services Segment
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
(in thousands) 2016 2015 2016 2015
---- ---- ---- ----
Water services volumes:
(MMgal)
Affiliate 220 163 665 348
Third-party 115 - 132 -
--- --- --- ---
Total water services
volumes 335 163 797 348
Operating results:
Operating revenues:
Affiliate $13,564 $8,830 $40,643 $19,175
Third-party 2,947 - 3,611 -
Total operating revenues 16,511 8,830 44,254 19,175
Operating expenses:
Operation and maintenance
expense 2,827 1,826 9,581 3,350
Equity compensation expense 219 143 463 212
General and administrative
expense 840 871 1,642 1,669
Incentive unit expense - 689 - 1,123
Depreciation expense 4,170 1,467 7,605 3,104
Total operating expenses 8,056 4,996 19,291 9,458
Operating income $8,455 $3,834 $24,963 $9,717
Rice Midstream Partners LP
Supplemental Non-GAAP Financial Measures
(Unaudited)
Adjusted EBITDA is a supplemental non-GAAP financial measure that is used by management and external users of our consolidated financial statements, such as securities analysts, investors and lenders. We define Adjusted EBITDA as net income (loss) before interest expense, depreciation expense, amortization expense, non-cash stock compensation expense, amortization of deferred financing costs and other non-recurring items. Adjusted EBITDA is not a measure of net income as determined by GAAP.
Distributable cash flow and DCF coverage ratio are supplemental non-GAAP financial measures that are used by management and external users of our consolidated financial statements, such as securities analysts, investors and lenders. We define distributable cash flow as Adjusted EBITDA less cash interest expense, and estimated maintenance capital expenditures. We define DCF coverage ratio as distributable cash flow divided by total distributions declared. Distributable cash flow does not reflect changes in working capital balances and is not a presentation made in accordance with GAAP.
Adjusted EBITDA, distributable cash flow and DCF coverage ratio are non-GAAP supplemental financial measures that management and external users of our consolidated financial statements, such as industry analysts, investors, lenders and rating agencies, may use to assess the financial performance of our assets, without regard to financing methods, capital structure or historical cost basis; our operating performance and return on capital as compared to other companies in the midstream energy sector, without regard to historical cost basis or, in the case of Adjusted EBITDA, financing or capital structure; our ability to incur and service debt and fund capital expenditures; the ability of our assets to generate sufficient cash flow to make distributions to our unitholders; 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 Adjusted EBITDA, distributable cash flow and DCF coverage ratio will provide useful information to investors in assessing our financial condition and results of operations. The GAAP measures most directly comparable to Adjusted EBITDA and distributable cash flow are net income and net cash provided by (used in) operating activities. Our non-GAAP financial measures of Adjusted EBITDA and distributable cash flow should not be considered as an alternative to GAAP net income or net cash provided by operating activities. Each of Adjusted EBITDA and distributable cash flow has important limitations as an analytical tool because it excludes some but not all items that affect net income and net cash provided by operating activities. You should not consider Adjusted EBITDA, distributable cash flow or DCF coverage ratio in isolation or as a substitute for analysis of our results as reported under GAAP. Because Adjusted EBITDA and distributable cash flow and DCF coverage ratio may be defined differently by other companies in our industry, our definitions of Adjusted EBITDA, distributable cash flow and DCF coverage ratio may not be comparable to similarly titled measures of other companies, thereby diminishing its utility.
We have not provided projected net income or net cash provided by operating activities or reconciliations of its projected Adjusted EBITDA and projected distributable cash flow to projected net income and projected net cash provided by operating activities, respectively, the most comparable financial measures calculated in accordance with GAAP. We are unable to project net cash provided by operating activities because this metric includes the impact of changes in operating assets and liabilities related to the timing of cash receipts and disbursements that may not relate to the period in which the operating activities occurred. We are unable to project these timing differences with any reasonable degree of accuracy to a specific day, three or more months in advance. Therefore, we are unable to provide projected net cash provided by operating activities, or the related reconciliation of projected distributable cash flow to projected net cash provided by operating activities. In addition, we are unable to project net income because this metric includes the impact of certain non-cash items such as depreciation expense that we are unable to project with any reasonable degree of accuracy without unreasonable effort. Therefore, we are unable to provide projected net income, or the related reconciliation of projected Adjusted EBITDA to projected net income.
Further, we do not provide guidance with respect to the intra-year timing of our capital spending, which impact debt and equity and equity earnings, among other items, that are reconciling items between Adjusted EBITDA and net income. The timing of capital expenditures is volatile as it depends on weather, regulatory approvals, contractor availability, system performance and various other items. We provide a range for the forecasts of Adjusted EBITDA and distributable cash flow to allow for the variability in the timing of spending and the impact on the related reconciling items, many of which interplay with each other. Therefore, the reconciliation of Adjusted EBITDA to projected net income is not available without unreasonable effort.
Three Months
Ended Six Months Ended
(in
thousands) June 30, 2016 June 30, 2016
------------- -------------
Reconciliation
of Net
Income
to
Adjusted
EBITDA
and
DCF:
Net
income $27,936 $62,362
Interest
expense 920 1,967
Acquisition
costs - 73
Depreciation
expense 6,855 12,225
Amortization
of
intangible
assets 403 811
Non-
cash
equity
compensation
expense 1,134 2,119
Amortization
of
deferred
finance
costs 144 288
Other
expense 361 149
Adjusted
EBITDA $37,753 $79,994
======= =======
Adjusted
EBITDA $37,753 $79,994
Cash
interest
expense (920) (1,967)
Estimated
maintenance
capital
expenditures (2,800) (5,600)
------ ------
Distributable
cash
flow $34,033 $72,427
======= =======
Total
distributions
declared $18,254 $33,147
DCF
coverage
ratio 1.86 2.19
Reconciliation
of
Adjusted
EBITDA
to
Cash:
Adjusted
EBITDA $37,753 $79,994
Interest
expense (920) (1,967)
Other
income (361) -
Acquisition
costs - (73)
Changes
in
operating
assets
and
liabilities 1,757 (3,290)
Net
cash
provided
by
operating
activities 38,229 74,664
Net
cash
used
in
investing
activities (38,776) (75,019)
Net
cash
provided
by
financing
activities 6,059 8,081
Net
increase
in
cash 5,512 7,726
Cash at
the
beginning
of the
period 9,811 7,597
Cash at
the
end of
the
period $15,323 $15,323
======= =======
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SOURCE Rice Midstream Partners LP
