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CONE Midstream Reports Third Quarter Results and Increases Guidance

CANONSBURG, Pa., Nov. 04, 2016 (GLOBE NEWSWIRE) -- CONE Midstream Partners LP (NYSE:CNNX) ("CONE Midstream" or the "Partnership") today reported financial and operational results for the three months ended September 30, 2016.(1) The Partnership also increased guidance for full year 2016 financial results.

Third Quarter Results

Highlights of third quarter 2016 results attributable to the Partnership as compared to the third quarter of 2015 include:

  • Net income of $23.6 million as compared to $19.7 million
  • Average daily throughput volumes of 840 billion Btu per day (BBtu/d) as compared to 642 BBtu/d
  • Net cash provided by operating activities of $40.0 million as compared to $38.8 million
  • Adjusted EBITDA(2) of $26.8 million as compared to $21.9 million
  • Distributable cash flow (DCF)(2) of $23.3 million as compared to $19.5 million
  • Cash distribution coverage of 1.47x on an as declared basis

Management Comment

John T. Lewis, Chairman of the Board and Chief Executive Officer of CONE Midstream GP LLC (the "General Partner"), commented, "It is a pleasure to report another strong quarter of financial and operational results for CNNX. Net throughput volumes increased by 31% from the third quarter of 2015. Net income attributable to the Partnership, Adjusted EBITDA and distributable cash flow all increased by approximately 20% as compared to third quarter last year. As anticipated, we were free-cash-flow positive again during the quarter, with net cash provided by operating activities exceeding our total capital investments and cash distribution payments, which allowed us to again reduce the balance drawn on our revolving credit facility. Our debt-to-Adjusted EBITDA ratio at the end of the quarter was 0.38x.

Mr. Lewis further noted that, "Based on our solid performance for the first nine months and our current outlook for the remainder of the year, we have increased our guidance for our full year 2016 results."

Quarterly Distribution

As previously announced, the Board of Directors of the General Partner declared a quarterly cash distribution of $0.263 per unit with respect to the third quarter of 2016. The distribution payment will be made on November 14, 2016 to unitholders of record at the close of business on November 4, 2016. The distribution, which equates to an annual rate of $1.052 per unit, represents an increase of 3.5% over the prior quarter and an increase of 15.4% over the distribution paid with respect to the third quarter of 2015.

Capital Investment and Resources

CONE Midstream's allocated third quarter 2016 share of investment in expansion projects was $0.5 million. Total expansion capital investment at the three development companies in which CONE Midstream holds controlling interests was $1.4 million. CONE Midstream's respective share of maintenance capital expenditures for the three development companies for the third quarter of 2016 was $3.3 million. Maintenance capital expenditures in the aggregate for the development companies in which CONE Midstream holds controlling interests totaled $5.3 million.

As of September 30, 2016, CONE Midstream had outstanding borrowings of $41.0 million under its $250 million revolving credit facility and a cash balance of $4.2 million.

2016 Guidance Update

Based on current expectations, management is providing the following updated guidance for 2016. Full year 2016 Adjusted EBITDA attributable to the Partnership, previously projected to be in the range of $96 - $106 million, is now expected to be in the range of $103 - $108 million. Full year distributable cash flow attributable to the Partnership, previously projected to be in the range of $82 - $92 million, is now expected to be in the range of $89 - $94 million. CONE Midstream’s financial 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.

Third Quarter Financial and Operational Results Conference Call

A conference call and webcast, during which management will discuss third quarter 2016 financial and operational results, is scheduled for November 4, 2016 at 10:00 a.m. Eastern Time. Reference material for the call will be available on the "Events" page of our website, www.conemidstream.com, shortly before the start of the call. 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 or at http://services.choruscall.com/links/cnnx161104.html. Participants who would like to ask questions may join the conference by phone at 888-317-6016 (international 412-317-6016) 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/cnnx161104.html shortly after the conclusion of the conference call. A telephonic replay will be available through November 11, 2016 by dialing 877-344-7529 (international: 412-317-0088) and using the conference playback number 10093760.

_____________

(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”). Because the Partnership owns a controlling interest in each of the three development companies, it fully consolidates their financial results. The Partnership's current economic interests in the development companies are: 75% in the Anchor Systems, 5% in the Growth Systems, and 5% in the Additional Systems. CONE Gathering is a midstream joint venture formed by CONSOL Energy Inc. and Noble Energy, Inc. and owns non-controlling interests in the Partnership’s development companies.

(2) 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 is intended to be a qualified notice to nominees as provided for under Treasury Regulation Section 1.1446-4(b). Brokers and 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 foreign 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 "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. 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. Factors that could cause our actual results to differ materially from the results contemplated by such forward-looking statements include, among others: the effects of changes in market prices of natural gas, NGLs and crude oil on our Sponsors’ drilling and development plan on our dedicated acreage and the volumes of natural gas and condensate that are produced on our dedicated acreage; changes in our Sponsors’ drilling and development plan in the Marcellus Shale and Utica Shale; our Sponsors’ ability to meet their drilling and development plan in the Marcellus Shale and Utica Shale; the demand for natural gas and condensate gathering services; changes in general economic conditions; competitive conditions in our industry; actions taken by third-party operators, gatherers, processors and transporters; our ability to successfully implement our business plan; and our ability to complete internal growth projects on time and on budget. You should not place undue reliance on our forward-looking statements. Although forward-looking statements reflect our good faith beliefs at the time they are made, forward-looking statements involve known and unknown risks, uncertainties and other factors, including the factors described under “Risk Factors” and “Forward-Looking Statements” in our Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, which may cause our actual results, performance or achievements to differ materially from anticipated future results, performance or achievements expressed or implied by such forward-looking statements. 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
September 30,
Nine Months Ended
September 30,
2016 2015 2016 2015
Revenue
Gathering revenue — related party$60,729 $53,753 $181,384 $144,638
Total Revenue60,729 53,753 181,384 144,638
Expenses
Operating expense — third party7,769 4,736 24,322 22,205
Operating expense — related party7,209 8,095 22,631 22,079
General and administrative expense — third party1,049 968 3,196 3,533
General and administrative expense — related party2,624 2,413 6,521 6,385
Pipe revaluation 10,083
Depreciation expense5,392 3,769 15,384 10,430
Interest expense305 158 1,105 270
Total Expense24,348 20,139 83,242 64,902
Net Income36,381 33,614 98,142 79,736
Less: Net income attributable to noncontrolling interest12,750 13,957 26,505 30,954
Net Income Attributable to General and Limited Partner Ownership Interest in CONE Midstream Partners LP$23,631 $19,657 $71,637 $48,782
Calculation of Limited Partner Interest in Net Income:
Net Income Attributable to General and Limited Partner Ownership Interest in CONE Midstream Partners LP$23,631 $19,657 $71,637 $48,782
Less: General partner interest in net income473 393 1,433 976
Limited partner interest in net income$23,158 $19,264 $70,204 $47,806
Net income per Limited Partner unit - Basic$0.40 $0.33 $1.20 $0.82
Net Income per Limited Partner unit - Diluted$0.40 $0.33 $1.20 $0.82
Limited Partner units outstanding - Basic58,343 58,326 58,343 58,326
Limited Partner unit outstanding - Diluted58,431 58,333 58,410 58,331
Cash distributions declared per unit (*)$0.2630 $0.2280 $0.7620 $0.6605
(*) Represents the cash distributions declared during the month following the respective quarterly reporting period ends.



CONE MIDSTREAM PARTNERS LP
CONSOLIDATED BALANCE SHEETS
(in thousands, except number of units)
(unaudited)

September 30,
2016
December 31,
2015
ASSETS
Current Assets:
Cash$4,196 $217
Receivables — related party20,287 36,418
Inventory 18,916
Other current assets1,431 2,037
Total Current Assets25,914 57,588
Property and Equipment:
Property and equipment922,498 897,918
Less — accumulated depreciation46,698 31,609
Property and Equipment — Net875,800 866,309
Other assets9,001 528
TOTAL ASSETS$910,715 $924,425
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable$19,124 $46,155
Accounts payable — related party1,680 1,628
Total Current Liabilities20,804 47,783
Other Liabilities:
Revolving credit facility41,000 73,500
Total Liabilities61,804 121,283
Partners' Capital:
Common units (29,180,217 units issued and outstanding at September 30, 2016 and 29,163,121 units issued and outstanding at December 31, 2015)413,610 399,399
Subordinated units (29,163,121 units issued and outstanding at September 30, 2016 and December 31, 2015)(69,248) (82,900)
General partner interest(2,921) (3,389)
Partners' capital attributable to CONE Midstream Partners LP341,441 313,110
Noncontrolling interest507,470 490,032
Total Partners' Capital848,911 803,142
TOTAL LIABILITIES AND PARTNERS' CAPITAL$910,715 $924,425


CONE MIDSTREAM PARTNERS LP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)

Three Months Ended
September 30,
2016 2015
Cash Flows from Operating Activities:
Net Income$36,381 $33,614
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense and amortization of debt issuance costs5,434 3,810
Unit-based compensation222 118
Other429
Changes in assets and liabilities:
Receivables — related party(2,874) (10,894)
Other current and non-current assets(216) (62)
Accounts payable572 7,853
Accounts payable — related party33 4,369
Net Cash Provided by Operating Activities39,981 38,808
Cash Flows from Investing Activities:
Capital expenditures(6,742) (94,781)
Proceeds from sale of long-lived assets237
Net Cash Used in Investing Activities(6,505) (94,781)
Cash Flows from Financing Activities:
Partner and noncontrolling interest holder activity(13,167) 36,611
Distributions to unitholders(15,209) (13,094)
Net (payment) proceeds on revolver(6,000) 33,500
Net Cash (Used In) Provided By Financing Activities(34,376) 57,017
Net (Decrease) Increase in Cash(900) 1,044
Cash at Beginning of Period5,096 161
Cash at End of Period$4,196 $1,205


CONE MIDSTREAM PARTNERS LP
RECONCILIATION OF NET INCOME TO EBITDA AND DISTRIBUTABLE CASH FLOW
(in thousands)

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 an alternative to net income, net cash provided by (used in) 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 below 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, net cash interest paid and maintenance capital expenditures. 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 report 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 EBITDA, 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
September 30,
Nine Months Ended
September 30,
(unaudited) 2016 2015 2016 2015
Net Income $36,381 $33,614 $98,142 $79,736
Depreciation expense 5,392 3,769 15,384 10,430
Interest expense 305 158 1,105 270
EBITDA 42,078 37,541 114,631 90,436
Non-cash unit-based compensation expense 222 118 577 310
Pipe revaluation 10,083
Adjusted EBITDA 42,300 37,659 125,291 90,746
Less:
Net income attributable to noncontrolling interest 12,750 13,957 26,505 30,954
Depreciation expense attributable to noncontrolling interest 2,589 1,728 7,283 4,553
Other expenses attributable to noncontrolling interest 205 63 521 97
Pipe revaluation attributable to noncontrolling interest 9,579
Adjusted EBITDA Attributable to General and Limited Partner Ownership Interest in CONE Midstream Partners LP $26,756 $21,911 $81,403 $55,142
Less: cash interest paid, net 198 95 682 173
Less: ongoing maintenance capital expenditures, net of expected reimbursements 3,283 2,291 9,234 6,430
Distributable Cash Flow $23,275 $19,525 $71,487 $48,539
Net Cash Provided by Operating Activities $39,981 $38,808 $122,938 $99,268
Interest expense 305 158 1,105 270
Pipe revaluation 10,083
Other, including changes in working capital 2,014 (1,307) (8,835) (8,792)
Adjusted EBITDA 42,300 37,659 125,291 90,746
Less:
Net income attributable to noncontrolling interest 12,750 13,957 26,505 30,954
Depreciation expense attributable to noncontrolling interest 2,589 1,728 7,283 4,553
Other expense attributable to noncontrolling interest 205 63 521 97
Pipe revaluation attributable to noncontrolling interest 9,579
Adjusted EBITDA Attributable to General and Limited Partner Ownership Interest in CONE Midstream Partners LP $26,756 $21,911 $81,403 $55,142
Less: cash interest paid, net 198 95 682 173
Less: ongoing maintenance capital expenditures, net of expected reimbursements 3,283 2,291 9,234 6,430
Distributable Cash Flow $23,275 $19,525 $71,487 $48,539


The following table presents a reconciliation of the non-GAAP measures EBITDA, 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) Q4 2015 Q1 2016 Q2 2016 Q3 2016 Twelve
Months
Ended
September
30, 2016
Net Income $35,796 $37,295 $24,468 $36,381 $133,940
Depreciation expense 4,623 4,839 5,152 5,392 20,006
Interest expense 565 419 381 305 1,670
EBITDA 40,984 42,553 30,001 42,078 155,616
Non-cash unit-based compensation expense 92 136 219 222 669
Pipe revaluation 10,083 10,083
Adjusted EBITDA 41,076 42,689 40,303 42,300 166,368
Less:
Net income attributable to noncontrolling interest 13,330 12,505 1,251 12,750 39,836
Depreciation expense attributable to noncontrolling interest 2,246 2,286 2,409 2,589 9,530
Other expenses attributable to noncontrolling interest 331 189 127 205 852
Pipe revaluation attributable to noncontrolling interest 9,579 9,579
Adjusted EBITDA Attributable to General and Limited Partner Ownership Interest in CONE Midstream Partners LP $25,169 $27,709 $26,937 $26,756 $106,571
Less: cash interest paid, net 234 230 254 198 916
Less: ongoing maintenance capital expenditures, net of expected reimbursements 2,554 2,839 3,112 3,283 11,788
Distributable Cash Flow $22,381 $24,640 $23,571 $23,275 $93,867
Net Cash Provided by Operating Activities $16,749 $41,180 $41,777 $39,981 $139,687
Interest expense 565 419 381 305 1,670
Pipe revaluation 10,083 10,083
Other, including changes in working capital 23,762 1,090 (11,938) 2,014 14,928
Adjusted EBITDA 41,076 42,689 40,303 42,300 166,368
Less:
Net income attributable to noncontrolling interest 13,330 12,505 1,251 12,750 39,836
Depreciation expense attributable to noncontrolling interest 2,246 2,286 2,409 2,589 9,530
Other expenses attributable to noncontrolling interest 331 189 127 205 852
Pipe revaluation attributable to noncontrolling interest 9,579 9,579
Adjusted EBITDA Attributable to General and Limited Partner Ownership Interest in CONE Midstream Partners LP $25,169 $27,709 $26,937 $26,756 $106,571
Less: cash interest paid, net 234 230 254 198 916
Less: ongoing maintenance capital expenditures, net of expected reimbursements 2,554 2,839 3,112 3,283 11,788
Distributable Cash Flow $22,381 $24,640 $23,571 $23,275 $93,867
Distributions Declared $14,062 $14,591 $15,209 $15,827 $59,689
Distribution Coverage Ratio - Declared 1.59x 1.69x 1.55x 1.47x 1.57x
Distributable Cash Flow $22,381 $24,640 $23,571 $23,275 $93,867
Distributions Paid $13,570 $14,062 $14,591 $15,209 $57,432
Distribution Coverage Ratio - Paid 1.65x 1.75x 1.62x 1.53x 1.63x


Development Companies Jointly Owned by CONE Midstream Partners LP
Operating Income Summary, Selected Operating Statistics and Capital Investment
(in thousands)
(unaudited)

Three Months Ended September 30, 2016
Development Company
Anchor Growth Additional TOTAL
Income Summary
Revenue$50,005 $2,587 $8,137 $60,729
Expenses18,846 1,475 4,027 24,348
Net Income31,159 1,112 4,110 36,381
Less: Net income attributable to noncontrolling interest7,790 1,055 3,905 12,750
Net Income Attributable to General and Limited Partner Ownership Interest in CONE Midstream Partners LP$23,369 $57 $205 $23,631
Operating Statistics - Gathered Volumes
Dry gas (BBtu/d)767 61 14 842
Wet gas (BBtu/d)331 5 177 513
Condensate (MMcfe/d)4 5 9
Total Gathered Volumes1,102 66 196 1,364
Total Volumes Net to CONE Midstream Partners LP827 3 10 840
Capital Investment
Maintenance capital$4,308 $465 $568 $5,341
Expansion capital560 841 1,401
Total Capital Investment$4,868 $465 $1,409 $6,742
Capital Investment Net to CONE Midstream Partners LP
Maintenance capital$3,231 $23 $29 $3,283
Expansion capital420 42 462
Total Capital Investment Net to CONE Midstream Partners LP$3,651 $23 $71 $3,745


Development Companies Jointly Owned by CONE Midstream Partners LP
Operating Income Summary, Selected Operating Statistics and Capital Investment
(in thousands)
(unaudited)

Three Months Ended September 30, 2015
Development Company
Anchor Growth Additional TOTAL
Income Summary
Revenue$40,327 $3,467 $9,959 $53,753
Expenses14,647 1,881 3,611 20,139
Net Income25,680 1,586 6,348 33,614
Less: Net income attributable to noncontrolling interest6,420 1,506 6,031 13,957
Net Income Attributable to General and Limited Partner Ownership Interest in CONE Midstream Partners LP$19,260 $80 $317 $19,657
Operating Statistics - Gathered Volumes
Dry gas (BBtu/d)480 82 6 568
Wet gas (BBtu/d)348 10 207 565
Condensate (MMcfe/d)7 16 23
Total Gathered Volumes835 92 229 1,156
Total Volumes Net to CONE Midstream Partners LP626 5 11 642
Capital Investment
Maintenance capital$2,990 $346 $628 $3,964
Expansion capital45,108 2,202 43,507 90,817
Total Capital Investment$48,098 $2,548 $44,135 $94,781
Capital Investment Net to CONE Midstream Partners LP
Maintenance capital$2,243 $17 $31 $2,291
Expansion capital33,831 110 2,175 36,116
Total Capital Investment Net to CONE Midstream Partners LP$36,074 $127 $2,206 $38,407

________________ CONTACT: Stephen R. Milbourne CONE Investor Relations 724-485-4408 smilbourne@conemidstream.com

Source:CONE Midstream Partners