CONE Midstream Reports First Quarter Results

Company Release - 5/4/2017 6:45 AM ET

CANONSBURG, Pa., May 04, 2017 (GLOBE NEWSWIRE) -- CONE Midstream Partners LP (NYSE:CNNX) ("CONE Midstream" or the "Partnership") today reported financial and operational results for the three months ended March 31, 2017(1)  and confirmed 2017 financial guidance.

First Quarter Results

Highlights of first quarter 2017 results attributable to the Partnership as compared to the first quarter of 2016 include:(2)

  • Net income of $30.1 million as compared to $24.8 million
  • Average daily throughput volumes of 1,060 billion Btu per day (BBtu/d) as compared to 850 BBtu/d
  • Net cash provided by operating activities of $34.2 million as compared to $41.2 million
  • Adjusted EBITDA(3) of $35.2 million as compared to $27.7 million
  • Distributable cash flow (DCF)(3) of $30.3 million as compared to $24.6 million
  • Cash distribution coverage(3) of 1.61x on an as-declared basis

Management Comment

John T. Lewis, Chief Executive Officer of CONE Midstream GP LLC (the "General Partner"), commented, "We are pleased to report another solid quarter of financial and operational results for CNNX.  Net throughput volumes increased by 25% from the first quarter of 2016. With a full quarter’s contribution from the mid-November 2016 acquisition of the remaining 25% interest in the Anchor Systems, net income attributable to the Partnership, Adjusted EBITDA and distributable cash flow all increased by more than 20% as compared to the first quarter last year.

"We are also pleased to see the resumption of drilling on our acreage with the return of a rig during March," continued Mr. Lewis. "In addition, we look forward to welcoming a new shipper to the CONE system, as the buyer of Noble's Appalachian acreage takes over Noble's interest and acreage dedication."

Quarterly Distribution

As previously announced, the Board of Directors of the General Partner declared a quarterly cash distribution of $0.2821 per unit with respect to the first quarter of 2017.  The distribution payment will be made on May 15, 2017 to unitholders of record at the close of business on May 4, 2017. The distribution, which equates to an annual rate of $1.1284 per unit, represents an increase of 3.6% over the prior quarter and an increase of 15.1% over the distribution paid with respect to the first quarter of 2016.

Capital Investment and Resources

CONE Midstream's allocated first quarter 2017 share of investment in expansion projects was $6.3 million. Total expansion capital investment at the three development companies in which CONE Midstream holds controlling interests was $6.5 million. CONE Midstream's respective share of maintenance capital expenditures for the three development companies for the first quarter of 2017 was $3.9 million.  Maintenance capital expenditures in the aggregate for the development companies in which CONE Midstream holds controlling interests totaled $4.7 million.

As of March 31, 2017, CONE Midstream had outstanding borrowings of $162.0 million under its $250 million revolving credit facility and a cash balance of $6.0 million.

2017 Outlook

Based on current expectations, management today confirmed the Partnership’s previously announced 2017 financial guidance, indicating that full year 2017 results are currently projected to be at the top end of the previously announced ranges.  Management also confirmed that, based on currently available information, it does not expect CONSOL’s recently announced changes to its drilling plans and Noble Energy’s recently announced sale of its Appalachian acreage to have a material impact on the Partnership’s operating results for 2018.

CONE Midstream’s guidance is based on numerous assumptions about future events and conditions and, therefore, could vary materially from actual results. These estimates are meant to provide guidance only and are subject to revision for acquisitions or operating environment changes.

First Quarter Financial and Operational Results Conference Call

A conference call and webcast, during which management will discuss first quarter 2017 financial and operational results and 2017 guidance, is scheduled for May 4, 2017 at 11:00 a.m. Eastern Time. 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, www.conemidstream.com, or at  http://services.choruscall.com/links/cnnx170504.html. Participants who would like to ask questions may join the conference by phone at 888-349-0097 (international 1-412-902-0126) 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 http://services.choruscall.com/links/cnnx170504.html shortly after the conclusion of the conference call.  A telephonic replay will be available through May 18, 2017 by dialing 877-344-7529 (international: 412-317-0088) and using the conference playback number 10105448.

_____________

(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”).  The Partnership's current economic interests in the development companies are: 100% in the Anchor Systems, 5% in the Growth Systems, and 5% in the Additional Systems.  Because the Partnership owns a controlling interest in each of the three development companies, it fully consolidates their financial results. CONE Gathering is a midstream joint venture formed by CONSOL Energy Inc. and Noble Energy, Inc. that owns non-controlling interests in the Partnership’s development companies.

(2)  Effective November 16, 2016, the Partnership acquired the remaining 25% controlling interest in the Anchor Systems, which brought its controlling interest in that system to 100%.  As such, results for the first quarter 2017 include 100% of the Anchor Systems, and results for the first quarter 2016 include only 75% of the Anchor Systems.

(3)  Adjusted EBITDA and DCF are not measures that are recognized under accounting principles generally accepted in the U.S. (“GAAP”).  Definitions and reconciliations of these non-GAAP measures to GAAP reporting measures appear in the financial tables which follow. 

* * * * *

CONE Midstream Partners LP 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 serves a qualified notice to nominees as provided for under Treasury Regulation Section 1.1446-4(b).  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 non-U.S. 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 "will," "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. You should not place undue reliance on 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.  You should not place undue reliance on forward-looking statements.

Although forward-looking statements reflect our good faith beliefs at the time they are made, they involve known and unknown risks, uncertainties and other factors.  For more information concerning factors that could cause actual results to differ materially from those conveyed in the forward-looking statements, including, among others, that our business plans may change as circumstances warrant, please refer to the "Risk Factors" and "Forward-Looking Statements" sections of our Annual Report on Form 10-K and Quarterly Reports on Form 10-Q.  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
March 31,
 2017 2016
Revenue   
Gathering revenue — related party$58,958  $62,248 
Total Revenue58,958  62,248 
Expenses   
Operating expense — third party6,633  8,674 
Operating expense — related party7,628  8,344 
General and administrative expense — third party1,139  993 
General and administrative expense — related party2,936  1,684 
Pipe revaluation673   
Depreciation expense5,671  4,839 
Interest expense1,038  419 
Total Expense25,718  24,953 
Net Income33,240  37,295 
Less: Net income attributable to noncontrolling interest3,173  12,505 
Net Income Attributable to General and Limited Partner Ownership Interest in CONE Midstream Partners LP  $30,067  $24,790 
    
Calculation of Limited Partner Interest in Net Income:   
Net Income Attributable to General and Limited Partner Ownership Interest in CONE Midstream Partners LP$30,067  $24,790 
Less: General partner interest in net income, including incentive distribution rights1,129  496 
Limited partner interest in net income$28,938  $24,294 
    
Net income per Limited Partner unit - Basic$0.46  $0.42 
Net Income per Limited Partner unit - Diluted$0.45  $0.42 
    
Limited Partner units outstanding - Basic63,566  58,343 
Limited Partner unit outstanding - Diluted63,617  58,365 
    
Cash distributions declared per unit (*)$0.2821  $0.2450 
 
(*)  Represents the cash distributions declared during the month following the end of each respective quarterly period.


CONE MIDSTREAM PARTNERS LP
CONSOLIDATED BALANCE SHEETS
(in thousands, except number of units)
(unaudited)
 
 March 31,
 2017
 December 31,
 2016
ASSETS   
Current Assets:   
Cash$6,018  $6,421 
Receivables — related party22,892  22,434 
Other current assets2,408  2,181 
Total Current Assets31,318  31,036 
Property and Equipment:   
Property and equipment944,672  930,732 
Less — accumulated depreciation57,990  52,172 
Property and Equipment — Net886,682  878,560 
Other assets8,016  8,961 
TOTAL ASSETS$926,016  $918,557 
    
LIABILITIES AND EQUITY   
Current Liabilities:   
Accounts payable$18,109  $18,007 
Accounts payable — related party5,510  8,289 
Total Current Liabilities23,619  26,296 
Other Liabilities:   
Revolving credit facility162,000  167,000 
Total Liabilities185,619  193,296 
Partners' Capital:   
Common units (34,420,012 units issued and outstanding at March 31, 2017 and 34,363,371 units issued and outstanding at December 31, 2016)  424,526  418,352 
Subordinated units (29,163,121 units issued and outstanding at March 31, 2017 and December 31, 2016)(60,656) (65,986)
General partner interest(1,852) (2,311)
Partners' capital attributable to CONE Midstream Partners LP362,018  350,055 
Noncontrolling interest378,379  375,206 
Total Partners' Capital740,397  725,261 
TOTAL LIABILITIES AND PARTNERS' CAPITAL$926,016  $918,557 



CONE MIDSTREAM PARTNERS LP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 
  Three Months Ended
March 31,
 2017 2016
Cash Flows from Operating Activities:   
Net Income$33,240  $37,295 
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation expense and amortization of debt issuance costs5,713  4,880 
Unit-based compensation283  136 
Pipe revaluation673   
Other83  283 
Changes in assets and liabilities:   
Receivables — related party(458) 7,851 
Other current and non-current assets3  369 
Accounts payable(2,386) (9,471)
Accounts payable — related party(2,975) (163)
Net Cash Provided by Operating Activities34,176  41,180 
    
Cash Flows from Investing Activities:   
Capital expenditures(11,192) (24,386)
Net Cash Used in Investing Activities(11,192) (24,386)
    
Cash Flows from Financing Activities:   
Partner and noncontrolling interest holder activity28  10,823 
Quarterly distributions to unitholders(18,004) (14,061)
Net (payments on) proceeds from revolving credit facility(5,000) 500 
Vested units withheld for unitholders taxes(411)  
Net Cash Used In Financing Activities(23,387) (2,738)
    
Net (Decrease) Increase in Cash(403) 14,056 
Cash at Beginning of Period6,421  217 
Cash at End of Period$6,018  $14,273 


CONE MIDSTREAM PARTNERS LP
RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA AND DISTRIBUTABLE CASH FLOW

(in thousands)

Definition of Non-GAAP Financial Measures

EBITDA and Adjusted EBITDA

We define EBITDA as net income (loss) before net interest expense, depreciation and amortization, and Adjusted EBITDA as EBITDA adjusted for non-cash items which should not be included in the calculation of distributable cash flow. EBITDA and Adjusted EBITDA are used as supplemental financial measures 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 and Adjusted EBITDA provides information that is useful to investors in assessing our financial condition and results of operations. The GAAP measures most directly comparable to EBITDA and Adjusted EBITDA are net income and net cash provided by operating activities. EBITDA and Adjusted EBITDA should not be considered alternatives to net income, net cash provided by operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP.  EBITDA and Adjusted EBITDA exclude 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 and Adjusted EBITDA as presented herein may not be comparable to similarly titled measures of other companies.

Distributable Cash Flow

We define distributable cash flow as Adjusted EBITDA less net income attributable to noncontrolling interest, cash interest paid and maintenance capital expenditures, each net to the Partnership. 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 release 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 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 table presents a reconciliation of the non-GAAP measures of adjusted EBITDA and distributable cash flow to the most directly comparable GAAP financial measures of net income and net cash provided by operating activities.

  Three Months Ended
March 31,
(unaudited) 2017 2016
Net Income $33,240  $37,295 
Depreciation expense 5,671  4,839 
Interest expense 1,038  419 
EBITDA 39,949  42,553 
Non-cash unit-based compensation expense 283  136 
Pipe revaluation 673   
Adjusted EBITDA 40,905  42,689 
Less:    
Net income attributable to noncontrolling interest 3,173  12,505 
Depreciation expense attributable to noncontrolling interest 1,830  2,286 
Other expenses attributable to noncontrolling interest 82  189 
Pipe revaluation attributable to noncontrolling interest 639   
Adjusted EBITDA Attributable to General and Limited Partner Ownership Interest in CONE Midstream Partners LP     $35,181  $27,709 
Less:  cash interest paid, net 1,000  230 
Less:  ongoing maintenance capital expenditures, net of expected reimbursements 3,881  2,839 
Distributable Cash Flow $30,300  $24,640 
     
Net Cash Provided by Operating Activities $34,176  $41,180 
Interest expense 1,038  419 
Pipe revaluation 673   
Other, including changes in working capital 5,018  1,090 
Adjusted EBITDA 40,905  42,689 
Less:    
Net income attributable to noncontrolling interest 3,173  12,505 
Depreciation expense attributable to noncontrolling interest 1,830  2,286 
Other expense attributable to noncontrolling interest 82  189 
Pipe revaluation attributable to noncontrolling interest 639   
Adjusted EBITDA Attributable to General and Limited Partner Ownership Interest in CONE Midstream Partners LP $35,181  $27,709 
Less:  cash interest paid, net 1,000  230 
Less:  ongoing maintenance capital expenditures, net of expected reimbursements 3,881  2,839 
Distributable Cash Flow $30,300  $24,640 

The following table presents a reconciliation of the non-GAAP measures adjusted EBITDA and distributable cash flow by quarter and for the most recently completed twelve month period with the most directly comparable GAAP financial measures, which are net income and net cash provided by operating activities.

(unaudited) Q2 2016 Q3 2016 Q4 2016 Q1 2017 Twelve Months
Ended
March 31, 2017
Net Income $24,468  $36,381  $31,978  $33,240  $126,067 
Depreciation expense 5,152  5,392  5,818  5,671  22,033 
Interest expense 381  305  694  1,038  2,418 
EBITDA 30,001  42,078  38,490  39,949  150,518 
Non-cash unit-based compensation expense 219  222  198  283  922 
Pipe revaluation 10,083      673  10,756 
Adjusted EBITDA 40,303  42,300  38,688  40,905  162,196 
Less:          
Net income attributable to noncontrolling interest 1,251  12,750  7,130  3,173  24,304 
Depreciation expense attributable to noncontrolling interest 2,409  2,589  2,313  1,830  9,141 
Other expenses attributable to noncontrolling interest 127  205  100  82  514 
Pipe revaluation attributable to noncontrolling interest 9,579      639  10,218 
Adjusted EBITDA Attributable to General and Limited Partner Ownership Interest in CONE Midstream Partners LP $26,937  $26,756  $29,145  $35,181  $118,019 
Less:  cash interest paid, net 254  198  628  1,000  2,080 
Less:  ongoing maintenance capital expenditures, net of expected reimbursements 3,112  3,283  3,837  3,881  14,113 
Distributable Cash Flow $23,571  $23,275  $24,680  $30,300  $101,826 
           
Net Cash Provided by Operating Activities $41,777  $39,981  $37,151  $34,176  $153,085 
Interest expense 381  305  694  1,038  2,418 
Pipe revaluation 10,083      673  10,756 
Other, including changes in working capital (11,938) 2,014  843  5,018  (4,063)
Adjusted EBITDA 40,303  42,300  38,688  40,905  162,196 
Less:          
Net income attributable to noncontrolling interest 1,251  12,750  7,130  3,173  24,304 
Depreciation expense attributable to noncontrolling interest 2,409  2,589  2,313  1,830  9,141 
Other expenses attributable to noncontrolling interest 127  205  100  82  514 
Pipe revaluation attributable to noncontrolling interest 9,579      639  10,218 
Adjusted EBITDA Attributable to General and Limited Partner Ownership Interest in CONE Midstream Partners LP $26,937  $26,756  $29,145  $35,181  $118,019 
Less:  cash interest paid, net 254  198  628  1,000  2,080 
Less:  ongoing maintenance capital expenditures, net of expected reimbursements 3,112  3,283  3,837  3,881  14,113 
Distributable Cash Flow $23,571  $23,275  $24,680  $30,300  $101,826 
Distributions Declared $15,209  $15,827  $18,004  $18,842  $67,882 
Distribution Coverage Ratio - Declared 1.55x 1.47x 1.37x 1.61x 1.50x
           
Distributable Cash Flow $23,571  $23,275  $24,680  $30,300  $101,826 
Distributions Paid $14,591  $15,209  $15,827  $18,004  $63,631 
Distribution Coverage Ratio - Paid 1.62x 1.53x 1.56x 1.68x 1.60x


Development Companies Jointly Owned by CONE Midstream Partners LP
Operating Income Summary, Selected Operating Statistics and Capital Investment
(in thousands)
(unaudited)
 
 Three Months Ended March 31, 2017
  Development Company
 Anchor Growth Additional  TOTAL
Income Summary       
Revenue$49,539  $2,225  $7,194  $58,958 
Expenses19,639  2,278  3,801  25,718 
Net Income29,900  (53) 3,393  33,240 
Less: Net income attributable to noncontrolling interest  (50) 3,223  3,173 
Net Income Attributable to General and Limited Partner Ownership Interest in CONE Midstream Partners LP  $29,900  $(3) $170  $30,067 
        
Operating Statistics - Gathered Volumes       
Dry gas (BBtu/d)662  52  29  743 
Wet gas (BBtu/d)382  5  156  543 
Condensate (MMcfe/d)4    4  8 
Total Gathered Volumes1,048  57  189  1,294 
        
Total Volumes Net to CONE Midstream Partners LP1,048  3  9  1,060 
        
Capital Investment       
Maintenance capital$3,838  $227  $633  $4,698 
Expansion capital6,315  212  (33) 6,494 
Total Capital Investment$10,153  $439  $600  $11,192 
        
Capital Investment Net to CONE Midstream Partners LP       
Maintenance capital$3,838  $11  $32  $3,881 
Expansion capital6,315  11  (2) 6,324 
Total Capital Investment Net to CONE Midstream Partners LP$10,153  $22  $30  $10,205 


Development Companies Jointly Owned by CONE Midstream Partners LP
Operating Income Summary, Selected Operating Statistics and Capital Investment
(in thousands)
(unaudited)
 
 Three Months Ended March 31, 2016
  Development Company
 Anchor Growth Additional  TOTAL
Income Summary       
Revenue$50,290  $2,891  $9,067  $62,248 
Expenses17,539  1,954  5,460  24,953 
Net Income32,751  937  3,607  37,295 
Less: Net income attributable to noncontrolling interest8,188  890  3,427  12,505 
Net Income Attributable to General and Limited Partner Ownership Interest in CONE Midstream Partners LP  $24,563  $47  $180  $24,790 
        
Operating Statistics - Gathered Volumes       
Dry gas (BBtu/d)650  68  24  742 
Wet gas (BBtu/d)457  6  176  639 
Condensate (MMcfe/d)7    7  14 
Total Gathered Volumes1,114  74  207  1,395 
        
Total Volumes Net to CONE Midstream Partners LP836  4  10  850 
        
Capital Investment       
Maintenance capital$3,710  $69  $1,057  $4,836 
Expansion capital11,461    8,089  19,550 
Total Capital Investment$15,171  $69  $9,146  $24,386 
        
Capital Investment Net to CONE Midstream Partners LP       
Maintenance capital$2,783  $3  $53  $2,839 
Expansion capital8,596    404  9,000 
Total Capital Investment Net to CONE Midstream Partners LP$11,379  $3  $457  $11,839 

 

Contact: Stephen R. Milbourne
CONE Investor Relations
Phone:  724-485-4408
Email:  smilbourne@conemidstream.com

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Source: CONE Midstream Partners

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