RICE ENERGY INC CANONSBURG, Pa., Aug. 2, 2017 /PRNewswire/ -- Rice Midstream Partners LP (NYSE: RMP) ("RMP" or the "Partnership") today reported second quarter 2017 financial and operating results. Highlights include:
-- Gathering throughput averaged 1,360 MDth/d, a 10% increase from first
quarter 2017
-- Freshwater delivery volumes were 424 MMGal, a 16% increase over first
quarter 2017
-- Net income attributable to limited partners of $42.5 million, or $0.42
per unit
-- Adjusted EBITDA((1)) of $55.6 million, a 14% increase relative to first
quarter 2017
-- Distributable cash flow ("DCF")((1)) of $49.3 million, resulting in DCF
coverage ratio((1)) of 1.68x
-- Raised second quarter distribution to $0.2711 per common unit, an
increase of 21% over the second quarter 2016
-- Exited the quarter with low leverage((1)) of 1.1x
-- Increased acreage dedication by approximately 15,000 acres consisting of
approximately 12,000 acres through Rice Energy's announced Greene
County, Pennsylvania land acquisition and approximately 3,000 acres
through Rice Energy's organic leasing program
Commenting on the results, Daniel J. Rice IV, Chief Executive Officer, said, "We are pleased with our strong second quarter results, as gathering throughput continued to increase as a result of our sponsor's solid execution. Furthermore, we substantially increased our water volumes due to completing wells ahead of schedule. Our strong financial position allows for continued successful development across our increased footprint in Appalachia."
1. Please see Supplemental "Non-GAAP
Financial Measures" for a description
of Adjusted EBITDA, distributable cash
flow, DCF coverage ratio and related
reconciliations to the comparable GAAP
financial measures. Leverage is
defined as the ratio of net debt to
last twelve months Adjusted EBITDA.
2017 Capital Budget Update
Based on results through the first half of 2017, we are updating our 2017 gathering and compression budget to reflect capital projects trending below prior expectations. We expect to invest $235 million in Washington and Greene counties, a reduction of 8% from our prior $255 million gathering and compression capital budget. Our $60 million water services budget is unchanged.
Proposed Merger of Rice Energy with EQT Corporation
In light of Rice Energy's previously announced merger with EQT, Rice Energy and RMP have discontinued providing guidance and long-term outlook information regarding results of operations and distribution growth through 2023. In addition, investors are cautioned not to rely on historical forward-looking statements regarding guidance and long-term outlook information, which forward-looking statements spoke only as of the date provided and were subject to the specific risks and uncertainties that accompanied such forward-looking statements.
In order to provide more clarity to our investors, we are providing the following analysis to demonstrate the impact of the elimination of the drop down opportunities for RMP on its previously published (and now discontinued) long-term outlook. Based upon Rice Energy's previously published development plan, the elimination of future drop down transactions would have resulted in an outlook that would have targeted 20% distribution growth, DCF coverage of approximately 1.4x and leverage of less than 2.5x through 2019.
As mentioned above, a significant number of factors that are outside of our control will ultimately determine the long-term distributions of RMP including, among other things, the development program to be adopted by EQT. As such, investors are cautioned that the above analysis should not be construed as guidance or relied upon as an expectation that such levels will be achieved.
Second Quarter 2017 Results
(in thousands, except volumes) Three Months Ended Six Months Ended
June 30, 2017 June 30, 2017
------------- -------------
Operating volumes (MDth/d)
Gathering volumes
Affiliate 1,144 1,074
Third-party 216 224
--- ---
Total 1,360 1,298
Compression volumes
Affiliate 676 635
Third-party 216 224
--- ---
Total 892 859
Water services assets (MMGal)
Pennsylvania Water 149 373
Ohio Water 275 416
--- ---
Total 424 789
Operating revenues
Gathering $40,313 $76,533
Compression $6,270 $12,052
Water $25,794 $46,542
------- -------
Total $72,377 $135,127
Total operating expenses $25,363 $47,517
Operating income $47,014 $87,610
Net income attributable to limited
partners $42,469 $78,845
Net income per limited partner unit:
Common units (basic and diluted) $0.42 $0.77
Subordinated units (basic and diluted) $0.42 $0.77
Adjusted EBITDA(1) $55,615 $104,377
DCF(1) $49,306 $91,750
DCF coverage ratio(1) 1.68 1.60
Capital expenditures (in millions)
Gas gathering and compression $40 $69
Water services assets $1 $4
Financial position (in millions) As of June 30, 2017
-------------------
Liquidity $656
Cash and cash equivalents $12
Revolving credit facility $206
Leverage(1) 1.1x
Second quarter gathering throughput averaged 1,360 MDth/d, consisting of 1,144 MDth/d affiliate volumes and 216 MDth/d third party volumes. Increases in Adjusted EBITDA((1)) to $55.6 million and DCF((1)) to $49.3 million were driven by accelerated sponsor well completion activity and operational efficiencies.
As of June 30, 2017, RMP's concentrated gathering and compression acreage dedication in the Marcellus Shale core covered approximately 221,000 acres in Washington and Greene Counties with approximately 29,000 acres dedicated from high quality, third party customers.
1. Please see Supplemental "Non-GAAP
Financial Measures" for a description
of Adjusted EBITDA, distributable cash
flow, DCF coverage ratio and related
reconciliations to the comparable GAAP
financial measures. Leverage is
defined as the ratio of net debt to
last twelve months Adjusted EBITDA.
Quarterly Cash Distribution
On July 21, 2017, we declared a quarterly distribution of $0.2711 per unit for the second quarter 2017, an increase of $0.0103 per unit, or 4%, relative to first quarter 2017. The distribution will be payable on August 17, 2017 to unitholders of record as of August 8, 2017.
Conference Call
RMP will host a conference call on August 3, 2017 at 10:30 a.m. Eastern Time (9:30 a.m. Central Time) to discuss second quarter 2017 results. The conference format will only include prepared remarks, given the restrictions related to discussing Rice Energy's signed merger agreement with EQT.
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 3, 2017 at 10:00 a.m. Eastern Time (9:00 a.m. Central Time) to discuss second quarter 2017 results, and we encourage RMP investors to listen-in. The conference format will only include prepared remarks, given the restrictions related to discussing the signed merger agreement with EQT.
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.
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, Rice Energy's targeted production growth and other operational results, the terms, timing and completion of any acquisitions or divestitures, 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.
This release does not constitute an offer to buy or sell or the solicitation of an offer to buy or sell any securities or a solicitation of any vote or approval. This communication relates to a proposed business combination between EQT Corporation ("EQT") and Rice.
In connection with the proposed transaction, EQT has filed with the Securities and Exchange Commission (the "SEC") a registration statement on Form S-4 on July 27, 2017, that includes a joint proxy statement of EQT and Rice and also constitutes a prospectus of EQT. Each of EQT and Rice also plan to file other relevant documents with the SEC regarding the proposed transactions. No offering of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the U.S. Securities Act of 1933, as amended. The definitive joint proxy statement/prospectus(es) for EQT and/or Rice will be mailed to shareholders of EQT and/or Rice, as applicable.
INVESTORS AND SECURITY HOLDERS OF EQT AND RICE ARE URGED TO READ THE PROXY STATEMENT(S), REGISTRATION STATEMENT(S), PROXY STATEMENT/PROSPECTUS AND OTHER DOCUMENTS THAT MAY BE FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY IF AND WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION.
Investors and security holders will be able to obtain free copies of these documents (if and when available) and other documents containing important information about EQT and Rice, once such documents are filed with the SEC through the website maintained by the SEC at www.sec.gov. Copies of the documents filed with the SEC by EQT will be available free of charge on EQT's website at www.eqt.com or by directing a request to Investor Relations, EQT Corporation, EQT Plaza, 625 Liberty Avenue, Pittsburgh, Pennsylvania 15222-3111, Tel. No. (412) 553-5700. Copies of the documents filed with the SEC by Rice will be available free of charge on Rice's website at www.riceenergy.com or by directing a request to Investor Relations, Rice Energy Inc., 2200 Rice Drive, Canonsburg, Pennsylvania 15317, Tel. No. (724) 271-7200.
EQT, Rice and certain of their respective directors and executive officers may be deemed to be participants in the solicitation of proxies in respect of the proposed transaction. Information about the directors and executive officers of Rice is set forth in Rice's proxy statement for its 2017 annual meeting of shareholders, which was filed with the SEC on April 17, 2017. Information about the directors and executive officers of EQT is set forth in its proxy statement for its 2017 annual meeting, which was filed with the SEC on March 6, 2017. These documents may be obtained free of charge from the sources indicated above.
Other information regarding the participants in the proxy solicitations and a description of their direct and indirect interests, by security holdings or otherwise, will be contained in the joint proxy statement/prospectus and other relevant materials to be filed with the SEC when such materials become available. Investors should read the joint proxy statement/prospectus carefully when it becomes available before making any voting or investment decisions. You may obtain free copies of these documents from EQT or Rice using the sources indicated above.
Rice Midstream Partners LP
Statements of Operations
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
(in thousands, except unit data) 2017 2016 2017 2016
---- ---- ---- ----
Operating revenues:
Affiliate $62,474 $32,622 $115,271 $77,007
Third-party 9,903 13,925 19,856 24,083
Total operating revenues 72,377 46,547 135,127 101,090
Operating expenses:
Operation and maintenance expense 9,701 4,187 17,880 12,733
Equity compensation expense 128 1,134 260 2,119
General and administrative expense 7,071 4,607 12,778 8,363
Depreciation expense 7,543 6,855 15,164 12,225
Acquisition costs 494 - 494 73
Amortization of intangible assets 406 403 808 811
Other expense 20 361 133 149
--- --- --- ---
Total operating expenses 25,363 17,547 47,517 36,473
------ ------ ------ ------
Operating income 47,014 29,000 87,610 64,617
Other income 30 - 41 -
Interest expense (1,934) (920) (3,877) (1,967)
Amortization of deferred finance
costs (1,050) (144) (2,099) (288)
Net income $44,060 $27,936 $81,675 $62,362
======= ======= ======= =======
Calculation of limited partner
interest in net income:
Net income $44,060 $27,936 $81,675 $62,362
Less: General partner interest in net
income attributable to incentive
distribution rights 1,591 113 2,830 113
----- --- ----- ---
Net income attributable to limited
partners $42,469 $27,823 $78,845 $62,249
======= ======= ======= =======
Weighted average limited partner
units (in millions)
Common units (basic and diluted) 73.5 44.5 73.5 43.3
Subordinated units (basic and
diluted) 28.8 28.8 28.8 28.8
Net income attributable to RMP per
limited partner unit
Common units (basic and diluted) $0.42 $0.38 $0.77 $0.86
Subordinated units (basic and
diluted) $0.42 $0.38 $0.77 $0.87
Adjusted EBITDA (1) $55,615 $37,753 $104,377 $79,994
Distributable cash flow (2) $49,306 $34,033 $91,750 $72,427
Quarterly distribution per unit $0.2711 $0.2235 $0.5319 $0.4335
Distributions declared:
Limited partner units - Public $19,938 $11,714 $39,111 $20,568
Limited partner units - GP Holdings 7,796 6,427 15,296 12,466
Incentive distribution rights -
General Partner 1,591 113 2,830 113
----- ---
Total distributions declared $29,325 $18,254 $57,237 $33,147
DCF coverage ratio (3) 1.68 1.86 1.60 2.19
1. 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."
2. We define distributable cash flow as
Adjusted EBITDA less interest
expense and estimated maintenance
capital expenditures. Please read
Supplemental "Non-GAAP Financial
Measures."
3. 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) 2017 2016 2017 2016
---- ---- ---- ----
Gathering volumes (MDth/d):
Affiliate 1,144 678 1,074 648
Third-party 216 256 224 237
--- --- --- ---
Total gathering volumes 1,360 934 1,298 885
Compression volumes (MDth/d):
Affiliate 676 329 635 169
Third-party 216 235 224 189
Total compression volumes 892 564 859 358
Operating results:
Operating revenues:
Affiliate $37,067 $19,058 $69,116 $36,364
Third-party 9,515 10,978 19,468 20,472
Total operating revenues 46,582 30,036 88,584 56,836
Operating expenses:
Operation and maintenance
expense 3,504 1,360 6,233 3,152
Equity compensation expense 108 915 222 1,656
General and administrative
expense 5,967 3,767 10,804 6,721
Depreciation expense 3,237 2,685 6,507 4,620
Acquisition costs 494 - 494 73
Amortization of intangible
assets 406 403 808 811
Other expense - 361 113 149
Total operating expenses 13,716 9,491 25,181 17,182
Operating income $32,866 $20,545 $63,403 $39,654
Water Services Segment
Three Months Ended Six Months Ended
June 30, June 30,
(in thousands) 2017 2016 2017 2016
---- ---- ---- ----
Water services volumes
(MMGal):
Affiliate 408 220 773 665
Third-party 16 115 16 132
--- --- --- ---
Total water services volumes 424 335 789 797
Operating results:
Operating revenues:
Affiliate $25,407 $13,564 $46,155 $40,643
Third-party 387 2,947 387 3,611
Total operating revenues 25,794 16,511 46,542 44,254
Operating expenses:
Operation and maintenance
expense 6,197 2,827 11,647 9,581
Equity compensation expense 20 219 38 463
General and administrative
expense 1,104 840 1,974 1,642
Depreciation expense 4,306 4,170 8,657 7,605
Other operating expense 20 - 20 -
---
Total operating expenses 11,647 8,056 22,336 19,291
Operating income $14,147 $8,455 $24,206 $24,963
Rice Midstream Partners LP
Supplemental Non-GAAP Financial Measures
(Unaudited)
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 define Adjusted EBITDA as net income (loss) before interest expense, depreciation expense, amortization of intangible assets, non-cash equity 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. 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.
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 measure most directly comparable to Adjusted EBITDA and distributable cash flow is net income. Our non-GAAP financial measures of Adjusted EBITDA and distributable cash flow should not be considered as alternatives to GAAP net income. Each of Adjusted EBITDA and distributable cash flow has important limitations as an analytical tool because they exclude some but not all items that affect net income. 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, 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.
(in
thousands) Three Months Ended Twelve Months Ended
June 30, 2017 June 30, 2017
------------- -------------
Reconciliation
of Net
Income
to
Adjusted
EBITDA
and
DCF:
Net
income $44,060 $140,923
Interest
expense 1,934 5,841
Acquisition
costs 494 546
Depreciation
expense 7,543 28,109
Amortization
of
intangible
assets 406 1,631
Non-
cash
equity
compensation
expense 128 1,014
Amortization
of
deferred
finance
costs 1,050 3,290
Adjusted
EBITDA $55,615 $181,354
======= ========
Adjusted
EBITDA $55,615 $181,354
Cash
interest
expense (1,934) (5,841)
Estimated
maintenance
capital
expenditures (4,375) (14,350)
------ -------
Distributable
cash
flow $49,306 $161,163
======= ========
Total
distributions
declared $29,325 $108,367
DCF
coverage
ratio 1.68 1.49
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SOURCE Rice Midstream Partners LP
