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Marlin Midstream Partners, LP Reports Fourth Quarter 2013 Financial Results

(February 26, 2014)

HOUSTON, Feb. 26, 2014 (GLOBE NEWSWIRE) -- Marlin Midstream Partners, LP (Nasdaq:FISH), a Delaware limited partnership ("Marlin" or "the Partnership"), today announced financial results for the fourth quarter ended December 31, 2013.



Financial statements for the fourth quarter of 2013 reflect the first full three-month period of Marlin's post-IPO operations which include both the midstream natural gas business segment and the crude oil logistics business segment. For the fourth quarter of 2013, net income totaled $4.4 million, $0.25 per common unit, and adjusted EBITDA1 was $8.5 million. Distributable cash flow1 for the fourth quarter of 2013 was $7.6 million resulting in a coverage ratio1 of 1.23x for the period.



"Our fourth quarter results reflect outstanding performance from a gross margin, operating expense control and distributable cash flow perspective," said Chairman and CEO W. Keith Maxwell III. "As a fee-based MLP, we are differentiated by our strong distribution coverage as well as our extremely low leverage which gives us the financial flexibility to pursue disciplined growth. We are actively evaluating commercially viable opportunities to grow the Partnership through near-term asset dropdowns from our sponsor NuDevco Partners, LLC and its subsidiaries."


Summary Fourth Quarter 2013 Financial Results




For the fourth quarter ended December 31, 2013, Marlin reported gross margin of $13.8 million compared to gross margin of $9.2 million, for the fourth quarter of 2012. The gross margin increase is attributable to the new crude oil logistics business segment and related contracts as well as the new gathering and processing contract entered into with Associated Energy Services, LP ("AES") at the closing of the IPO.



For the midstream natural gas gathering and processing segment, gross margin was $10.3 million for the fourth quarter ended December 31, 2013. This compares to gathering and processing segment gross margin of $9.2 million for the fourth quarter ended December 31, 2012.



For the crude oil logistics segment, gross margin was $3.5 million for the fourth quarter ended December 31, 2013. Marlin's crude oil logistics assets became fully operational at July 31, 2013. As such, there are no material results of operations or material assets related to this segment for the periods prior to Marlin's IPO on July 31, 2013.



On January 21, 2014, the board of directors of Marlin's general partner declared a quarterly cash distribution of $0.35 per unit to its partners for the fourth quarter ended December 31, 2013. This distribution represents Marlin's full minimum quarterly distribution for the first whole quarter following the closing of the Partnership's IPO. The quarterly distribution was paid on February 7, 2014 to unitholders of record as of February 3, 2014.



1 Please see the tables at the end of this press release for a reconciliation of non-GAAP to GAAP measures and calculation of the coverage ratio.



For the twelve months ended December 31, 2013 and 2012, Marlin incurred a total of $2.3 million and $2.0 million, respectively, for maintenance capital expenditures and incurred a total of $11.0 million and $9.0 million, respectively, for expansion capital expenditures. Additionally, at of the end of the fourth quarter of 2013, the Partnership had $4.0 million drawn on a $50.0 million credit facility which has the flexibility to be increased up to $150.0 million.



Conference Call and Webcast



Marlin will host a conference call to discuss fourth quarter 2013 results at 12:00 p.m. CT (1:00 p.m. ET) on Thursday, February 27, 2014.



Interested parties can listen to a live webcast of the call from the Events & Presentations page of the Marlin Investor Relations website at http://investor.marlinmidstream.com/events.cfm. An archived replay of the webcast will be available for 12 months following the live presentation.



The call can be accessed live over the telephone by dialing 1-877-941-0843, or 1-480-629-9866 for international callers. The passcode for the call is 4668495. A telephonic replay of the call will be available through March 6, 2014 and can be accessed by dialing 1-800-406-7325, or 1-303-590-3030 for international callers, with conference ID number 4668495.



About Marlin



Marlin is a fee-based, growth oriented Delaware limited partnership formed to develop, own, operate and acquire midstream energy assets. Marlin currently provides natural gas gathering, transportation, treating and processing services, NGL transportation services and crude oil transloading services. Headquartered in Houston, Texas, Marlin's assets include two related natural gas processing facilities located in Panola County, Texas, a natural gas processing facility located in Tyler County, Texas, two natural gas gathering systems connected to its Panola County processing facilities, two NGL transportation pipelines that connect its Panola County and Tyler County processing facilities to third party NGL pipelines and two crude oil transloading facilities containing five crude oil transloaders.



www.marlinmidstream.com



Forward-Looking Statements



This press release may contain forward-looking statements concerning Marlin's operations, economic performance and financial condition. These statements can be identified by the use of forward-looking terminology including "may," "will," "believe," "expect," "anticipate," "estimate," "continue," or other similar words. These statements discuss future expectations, contain projections of results of operations or financial condition or include other "forward-looking" information. Although Marlin believes that the expectations reflected in such forward-looking statements are reasonable, the Partnership can give no assurance that such expectations will be realized.



These forward-looking statements involve risks and uncertainties. Important factors that could cause actual results to differ materially from expectations include, but are not limited to, the following risks and uncertainties:




  • the volume of natural gas we gather and process and the volume of NGLs we transport;


  • the volume of crude oil that we transload;


  • the level of production of crude oil and natural gas and the resultant market prices of crude oil, natural gas and NGLs;


  • the level of competition from other midstream natural gas companies and crude oil logistics companies in our geographic markets;


  • the level of our operating expenses;


  • regulatory action affecting the supply of, or demand for, crude oil or natural gas, the transportation rates we can charge on our pipelines, how we contract for services, our existing contracts, our operating costs or our operating flexibility;


  • capacity charges and volumetric fees that we pay for NGL fractionation services;


  • realized pricing impacts on our revenues and expenses that are directly subject to commodity price exposure;


  • the creditworthiness and performance of our customers, suppliers and contract counterparties, and any material nonpayment or non-performance by one or more of these parties;


  • damage to pipelines, facilities, plants, related equipment and surrounding properties caused by hurricanes, earthquakes, floods, fires, severe weather, explosions and other natural disasters and acts of terrorism including damage to third party pipelines or facilities upon which we rely for transportation services;


  • outages at the processing or fractionation facilities owned by us or third parties caused by mechanical failure and maintenance, construction and other similar activities;


  • leaks or accidental releases of products or other materials into the environment, whether as a result of human error or otherwise;


  • the level and timing of our expansion capital expenditures and our maintenance capital expenditures;


  • the cost of acquisitions, if any;


  • the level of our general and administrative expenses, including reimbursements to our general partner and its affiliates for services provided to us;


  • our debt service requirements and other liabilities;


  • fluctuations in our working capital needs;


  • our ability to borrow funds and access capital markets;


  • restrictions contained in our debt agreements;


  • the amount of cash reserves established by our general partner;


  • other business risks affecting our cash levels; and


  • other factors discussed below and elsewhere in "Risk Factors" in our Prospectus.



Such risks and uncertainties could cause actual results to differ materially from those contained in any forward-looking statement. Except as required by law, Marlin undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.



Gross Margin, Adjusted EBITDA and Distributable Cash Flow



Marlin uses gross margin, or revenues less cost of revenues, as the primary performance measure. Gross margin represents our profitability with minimal exposure to commodity price fluctuations, which we believe are not significant components of our operations. Marlin also uses adjusted EBITDA to analyze its performance and defines it as net income (loss) before interest expense (net of amounts capitalized) or interest income, Texas margin tax, non-cash equity based compensation, depreciation expense and any gain/loss from interest rate derivatives. Although Marlin has not quantified distributable cash flow on a historical basis, after the closing of the IPO Marlin intends to compute and present this measure, defined as adjusted EBITDA plus interest income, less cash paid for interest expense, Texas margin tax, and maintenance capital expenditures.



Gross margin, adjusted EBITDA and distributable cash flow are non-GAAP supplemental financial measures that management and external users of Marlin's condensed consolidated and combined financial statements, such as industry analysts, investors, commercial banks and others, may use to assess:




  • the financial performance of Marlin's assets without regard to financing methods, capital structure or historical cost basis;


  • the ability of Marlin's assets to generate earnings sufficient to support the decision to make cash distributions to the unitholders and our general partner;


  • the ability to fund capital expenditures and incur and service debt;


  • Marlin's operating performance and return on capital as compared to those of other companies in the midstream energy sector, without regard to financing or capital structure; and


  • the attractiveness of capital projects and acquisitions and the overall rates of return on alternative investment opportunities.



Marlin's partnership agreement requires that, within 45 days after the end of each quarter, all of Marlin's available cash be distributed to unitholders of record on the applicable record date.



Note Regarding Non-GAAP Financial Measures



Gross margin, adjusted EBITDA, and distributable cash flow are not financial measures presented in accordance with GAAP. Marlin believes that the presentation of these non-GAAP financial measures will provide useful information to investors in assessing Marlin's financial condition and results of operations. The GAAP measure most directly comparable to gross margin is operating income. The GAAP measure most directly comparable to adjusted EBITDA and distributable cash flow is net income. These measures should not be considered as an alternative to operating income, net income, or any other measure of financial performance presented in accordance with GAAP. Each of these non-GAAP financial measures has important limitations as an analytical tool because it excludes some but not all items that affect net income. You should not consider these non-GAAP financial measures in isolation or as a substitute for analysis of Marlin's results as reported under GAAP. Additionally, because each of these non-GAAP financial measures may be defined differently by other companies in the industry, Marlin's definition of them may not be comparable to similarly titled measures of other companies, thereby diminishing their utility.








































































































































































































MARLIN MIDSTREAM PARTNERS, LP

CONSOLIDATED AND COMBINED BALANCE SHEETS

(in thousands, except unit amounts)

 

 

 

 

December 31, 2013

December 31, 2012

 

 

 

ASSETS

 

 

CURRENT ASSETS

 

 

Cash and cash equivalents

 $ 3,157

 $ 5,555

Accounts receivable

2,969

6,722

Accounts receivable—affiliates

3,632

96

Inventory

321

294

Prepaid assets

330

95

Other current assets

285

836

Total current assets

10,694

13,598

PROPERTY, PLANT AND EQUIPMENT, NET

162,548

165,139

OTHER ASSETS

900

2,059

TOTAL ASSETS

 $ 174,142

 $ 180,796

LIABILITIES AND PARTNERS' CAPITAL AND MEMBER'S EQUITY

 

 

CURRENT LIABILITIES

 

 

Accounts payable

 $ 2,791

 $ 1,900

Accrued liabilities

2,131

1,319

Accounts payable—affiliates

1,552

4,034

Long-term incentive plan payable - affiliates

2,752


Fair value of derivative liabilities


72

Current portion of long-term debt


6,250

Total current liabilities

9,226

13,575

LONG-TERM LIABILITIES

 

 

Accounts payable—affiliates


14,692

Long-term incentive plan payable - affiliates

291


Deferred income taxes

75


Long-term debt

4,000

120,250

Total liabilities

13,592

148,517

PARTNERS' CAPITAL AND MEMBER'S EQUITY

 

 

Member's equity


32,279

Common units (8,724,545 issued and outstanding at December 31, 2013)

142,587


Subordinated units (8,724,545 issued and outstanding at December 31, 2013)

17,258


General partner units (356,104 issued and outstanding at December 31, 2013)

705


Total partners' capital and member's equity

160,550

32,279

TOTAL LIABILITIES AND PARTNERS' CAPITAL AND MEMBER'S EQUITY

 $ 174,142

 $ 180,796






















































































































































































































































 

MARLIN MIDSTREAM PARTNERS, LP

CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS AND

COMPREHENSIVE INCOME (LOSS)

(in thousands, except per unit amounts)

 

 

 

 

 

For the year ending December 31,

 

2013

2012

2011

REVENUES:

 

 

 

Natural gas, NGLs and condensate revenue

 $ 15,792

 $ 34,708

 $ 55,558

Gathering, processing, transloading and other revenue

24,053

16,087

10,006

Gathering, processing, transloading and other revenue—affiliates

13,015

254

254

Total Revenues

52,860

51,049

65,818

OPERATING EXPENSES:

 

 

 

Cost of natural gas, NGLs and condensate revenue

8,484

13,355

11,449

Cost of natural gas, NGLs and condensate revenue—affiliates

5,515

7,668

17,407

Operation and maintenance

12,401

15,035

12,031

Operation and maintenance—affiliates

3,490

793

327

General and administrative

3,699

3,045

3,260

General and administrative—affiliates

4,187

1,021

907

Property and other taxes

1,216

893

490

Depreciation expense

8,197

7,689

5,365

Loss on disposals of equipment



217

Total operating expenses

47,189

49,499

51,453

Operating income

5,671

1,550

14,365

Interest expense, net of amounts capitalized

(4,349)

(4,927)

(3,733)

Interest and other income


23

20

Loss on interest rate swap

(48)

(851)

(2,176)

Net income (loss) before tax

1,274

(4,205)

8,476

Texas margin tax expense

88

101

(65)

Net income (loss)

1,186

(4,306)

8,541

Other comprehensive income (loss)

 

 

 

Deferred gain from cash flow hedges


689

122

Reclassification of deferred gain from cash flow hedges into net income


(752)

(59)

Comprehensive income (loss)

 $ 1,186

 $ (4,369)

 $ 8,604

 

 

 

 

Net income (post-IPO, August 1, 2013 to December 31, 2013)

 $ 7,190

 

 

Less: general partner interest in net income

 $ (144)

 

 

Limited partner interest in net income

 $ 7,046

 

 

 

 

 

 

Net income per limited partner unit - basic

 $ 0.40

 

 

Net income per limited partner common unit - diluted

 $ 0.39

 

 

Net income per limited subordinated unit - diluted

 $ 0.40

 

 



































































































































































































































































































 

MARLIN MIDSTREAM PARTNERS, LP

CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS 

(in thousands)

 

 

 

 

 

Years Ended December 31,

 

2013

2012

2011

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

Net income (loss)

 $ 1,186

 $ (4,306)

 $ 8,541

Adjustments to reconcile net loss to net cash flows provided by operating activities:

 

 

 

Loss on disposal



217

Depreciation expense

8,197

7,689

5,365

Amortization of deferred financing costs

1,269

542

367

Equity-based compensation

3,012



Deferred income taxes

75



Unrealized gain (loss) on derivatives

(57)

(4,196)

291

Unrealized Gain (loss) on derivatives—affiliates


(344)

344

Changes in assets and liabilities:

 

 

 

(Increase) Decrease in accounts receivable

3,752

(480)

(1,087)

(Increase) decrease in accounts receivable—affiliates

(3,526)

1,267

884

(Increase) decrease in inventory

(28)

132

(252)

(Increase) decrease in prepaid assets

(235)

(36)

63

(Increase) decrease in other current assets

3

236

(135)

(Increase) decrease in other assets

51

(679)

175

Increase (decrease) in accounts payable

120

(108)

496

Increase (decrease) in accrued liabilities

813

1,192

(445)

Increase in long-term incentive plan payable

32



Increase (decrease) in accounts payable—affiliates

(5,488)

10,305

1,278

Net cash provided by operating activities

9,176

11,214

16,102

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

Purchases of property, plant and equipment

(12,710)

(12,445)

(25,658)

Net cash used in investing activities

(12,710)

(12,445)

(25,658)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

Member Capital contributions

3,574

4,287


Borrowing of long-term debt

36,500

126,500

130,000

Repayments on long-term debt

(159,000)

(123,500)

(120,809)

Payment of deferred financing costs

(1,141)

(932)

(1,094)

Distributions

(4,126)



Proceeds from IPO, net of underwriting discount and other costs

125,329



Net cash provided by financing activities

1,136

6,355

8,097

NET INCREASE IN CASH AND CASH EQUIVALENTS

(2,398)

5,124

(1,459)

CASH AND CASH EQUIVALENTS—Beginning of Period

5,555

431

1,890

CASH AND CASH EQUIVALENTS—End of Period

 $ 3,157

 $ 5,555

 $ 431

Supplemental Cash Flow Information:

 

 

 

Cash paid for interest

 $ 3,448

 $ 4,296

 $ 4,619

Accrual of construction-in-progress and capital expenditures

 $ 1,407

 $ 635

 $ 1,977

Cash paid for income taxes

 $ 40

 $ 67

 $ 6

Contribution of property from sole member

$ — 

 $ 87

$ — 

Net assets contributed to NuDevco Midstream Development, LLC

 $ 9,385

$ — 

$ — 

Intercompany accounts payable assigned to NuDevco Midstream Development, LLC

 $ 11,692

$ — 

$ — 


SEGMENT INFORMATION



The Partnership's revenues are derived from two operating segments: gathering and processing, and crude oil logistics.   These segments, along with our corporate segment, are monitored separately by management for performance and are consistent with internal financial reporting. These segments have been identified based on the differing products and services, regulatory environment, and expertise required for their respective operations. 



The following table presents financial information by segment:





























































































































Year ended December 31, 2013

 

 

 

 

 

 

 

 

 

In Thousands

Gathering &

Processing

Crude Oil

Logistics

Corporate and

Consolidation

Marlin Midstream

Partners, LP

Total Revenues

 $ 47,052

 $ 5,808

$ —

 $ 52,860

 

 

 

 

 

Cost of revenues

13,999



13,999

Operation and maintenance

14,424

613

854

15,891

General and administrative



7,886

7,886

Other operating expenses

9,390

23


9,413

Total operating expenses

37,813

636

8,740

47,189

Operating income

9,239

5,172

(8,740)

5,671

 

 

 

 

 

Interest expense, net of amounts capitalized



(4,349)

(4,349)

Loss on interest rate swap



(48)

(48)

Net income (loss) before tax

9,239

5,172

(13,137)

1,274

Income tax expense



88

88

Net income

 $ 9,239

 $ 5,172

 $ (13,225)

 $ 1,186


KEY PERFORMANCE METRICS



Management uses a variety of financial and operating metrics to analyze performance. These metrics are significant factors in assessing the results of operations and profitability and include: (i) gross margin; (ii) volume commitments and throughput volumes (including gathering, plant, and transloader throughput); (iii) operation and maintenance expenses; (iv) adjusted EBITDA; and (v) distributable cash flow.




















































In Thousands, except volume data

Years Ended December 31,

 

2013

2012

2011

Gross Margin

 $ 38,861

 $ 30,026

 $ 36,962

Gas volumes (MMcf/d) (2)

219

 

 

Transloading volumes (Bbls/d) (2)

18,980

 

 

Adjusted EBITDA

 $ 16,880

 $ 9,262

 $ 19,750

Distributable Cash Flow (1)

12,982

 

 

(1) We will distribute available cash within 45 days after the end of the quarter, beginning with the quarter ending September 30, 2013. For the three months ended September 30, 2013, distributable cash is prorated from our IPO on July 31, 2013 through September 30, 2013.

(2) Volumes reflect the minimum volume commitment under our fee-based contracts or actual throughput, whichever is greater, for the post-IPO period.


Gross margin is calculated as follows:






































































In Thousands

Years Ended December 31,

 

2013

2012

2011

Total operating income

 $ 5,671

 $ 1,550

 $ 14,365

Operation and maintenance

12,401

15,035

12,031

Operation and maintenance-affiliates

3,490

793

327

General and administrative

3,699

3,045

3,260

General and administrative-affiliates

4,187

1,021

907

Property and other taxes

1,216

893

490

Depreciation expense

8,197

7,689

5,365

Loss on disposals of equipment



217

Gross Margin

 $ 38,861

 $ 30,026

 $ 36,962


Adjusted EBITDA is calculated as follows:


























































In Thousands

Years Ended December 31,

 

2013

2012

2011

Net income (loss)

 $ 1,186

 $ (4,306)

 $ 8,541

Interest expense, net of amounts capitalized

4,349

4,927

3,733

Texas margin tax expense

88

101

(65)

Equity based compensation

3,012



Loss on interest rate swap

48

851

2,176

Depreciation expense

8,197

7,689

5,365

Adjusted EBITDA

 $ 16,880

 $ 9,262

 $ 19,750


Distributable cash flow subsequent to the IPO is calculated as follows:






























































Distributable cash flow for the period from July 31, 2013 to December 31, 2013:

 

In Thousands

 

Net income post IPO

 $ 7,190

Add:

 

Equity based compensation

3,012

Interest expense, net of amounts capitalized

352

Depreciation expense

3,425

Income tax

60

Adjusted EBITDA

14,039

Less:

 

Maintenance capital expenditures

(782)

Cash interest expense

(215)

Texas margin tax

(60)

Distributable cash flow

 $ 12,982

CONTACT: Investor Contact:

Financial Profiles, Inc.
Kristen McNally, (206) 623-2233
FISH@finprofiles.com



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