Form 8-K PennTex Midstream Partne For: Aug 07

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August 7, 2015 7:36 AM EDT


 
 
 
 
 
 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 8-K
 
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
Date of Report (Date of earliest event reported): August 5, 2015


PennTex Midstream Partners, LP
(Exact name of registrant as specified in its charter)
 
Delaware
 
 001-37412 
 
47-1669563
(State or other jurisdiction of
incorporation or organization)
 
(Commission File Number)
 
(I.R.S. Employer
Identification Number)
 
11931 Wickchester Lane, Suite 300
Houston, Texas 77043
(Address of principal executive offices)
 
Registrant’s telephone number, including area code: 832-456-4000
 
Not Applicable.
(Former name or former address, if changed since last report.)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
 
o    Written Communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
o    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
o           Pre-Commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
o           Pre-Commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))







 
 
 
 
 





 
Item 1.01     Entry into a Material Definitive Agreement.
On August 5, 2015, PennTex North Louisiana, LLC (“PennTex Operating”), a wholly-owned subsidiary of PennTex Midstream Partners, LP (the “Partnership”), entered into Amendment No. 2 (the “GPA Amendment”) to the Amended and Restated Gas Processing Agreement, dated April 14, 2015, between PennTex Operating and MRD Operating LLC (“MRD Operating”), a wholly-owned subsidiary of Memorial Resource Development Corp. (as amended to date, including by the GPA Amendment, the “Processing Agreement”).
Under the terms of the Processing Agreement, MRD Operating has agreed to deliver a daily minimum volume (the “MVC”) of gas to PennTex Operating for processing. The MVC is currently 115,000 million Btu (“MMBtu”) per day and increases to 345,000 MMBtu per day following the completion of PennTex Operating’s Mt. Olive processing plant. MRD Operating is required to pay PennTex Operating a deficiency payment based on the firm fixed-commitment fee of $0.435 per MMBtu with respect to a quarterly period if MRD Operating’s cumulative MVC as of the end of such period exceeds the sum of (i) the cumulative volumes processed under the Processing Agreement as of the end of such period plus (ii) volumes corresponding to deficiency payments paid by MRD Operating prior to such quarterly period. MRD Operating may utilize deficiency payments as a credit against processing fees that would otherwise be owed to PennTex Operating only after and to the extent that MRD Operating has delivered the total MVC under the Processing Agreement within the initial 15-year term of the Processing Agreement. Additionally, all volumes delivered by MRD Operating in excess of the MVC in a quarterly period will reduce, on a one-for-one basis, the cumulative MVC used to calculate deficiency payments for future quarterly periods.
MRD Operating conducted significant field work in the Terryville Complex beginning in late June 2015. As a result of such activities, MRD Operating’s processing volumes in June 2015 were below the cumulative MVC for the initial one-month quarterly period under the Processing Agreement, which began on June 1, 2015 (the first day of the month after PennTex Operating’s Lincoln Parish processing plant was placed in service) and ended June 30, 2015, and MRD Operating made a corresponding deficiency payment of approximately $0.5 million to PennTex Operating for such period.
Pursuant to the GPA Amendment, MRD Operating may use the June 2015 deficiency payment to offset processing fees owed to PennTex Operating for corresponding volumes of gas processed during the third and fourth quarters of 2015 in excess of a specified threshold for each quarter. The specified threshold for the third quarter is 161,000 MMBtu per day (on an average basis), which corresponds to the forecast throughput volumes reflected in the final prospectus filed with the Securities and Exchange Commission on June 3, 2015 relating to the Partnership’s initial public offering of common units, and the specified threshold for the fourth quarter is the then-applicable MVC, which the Partnership expects to be 345,000 MMBtu per day (on an average basis) following the anticipated completion of the Mt. Olive processing plant in September 2015. Additionally, pursuant to the GPA Amendment, to the extent that MRD Operating does not use the June 2015 deficiency payment to offset processing fees in the third or fourth quarters of 2015, the June 2015 deficiency payment will expire at the end of the fourth quarter of 2015 and may not be used as a credit for any future processing fees owed by MRD Operating.

Item 2.02     Results of Operations and Financial Condition.
On August 7, 2015, the Partnership issued a press release announcing the Partnership’s results of operations for the second quarter of 2015. The press release is included as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated by reference herein in its entirety.
The information included in this Item 2.02 of Current Report on Form 8-K, including the attached Exhibit 99.1, shall be deemed to be “furnished” and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act except as expressly set forth by specific reference in such filing.
 
Item 9.01      Financial Statements and Exhibits.

(d)     Exhibits 
Exhibit No.
 
Description
99.1
 
Press release dated August 7, 2015 issued by PennTex Midstream Partners, LP





SIGNATURE
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
 
PennTex Midstream Partners, LP
 
 
 
 
 
 
 
 
By:
PennTex Midstream GP, LLC
 
 
 
its General Partner
 
 
 
 
Dated:
August 7, 2015
By:
/s/ Steven R. Jones
 
 
Name:
Steven R. Jones
 
 
Title:
Executive Vice President and Chief Financial Officer
 
 
 
 





EXHIBIT INDEX
Exhibit Number
 
Description
99.1*
 
Press release dated August 7, 2015 issued by PennTex Midstream Partners, LP
 
 
 
* Furnished herewith
    
        




Exhibit 99.1

                                    
NEWS RELEASE

PennTex Midstream Partners, LP Reports Second Quarter 2015 Results

HOUSTON, TX, August 7, 2015 /GLOBE NEWSWIRE/ -- PennTex Midstream Partners, LP (NASDAQ: PTXP) (the “Partnership”) today reported second quarter 2015 financial and operational results.

Highlights for the quarter include:

•
Completed $225 million initial public offering of 11,250,000 common units at a price of $20.00 per common unit (the “IPO”)
•
Completed the Lincoln Parish plant, a 200 MMcf per day design-capacity cryogenic natural gas processing plant, and related natural gas gathering and residue gas transportation pipelines
•
Adjusted EBITDA(1) of $1.1 million for the 22-day post-IPO period
•
Distributable cash flow of $1.0 million for the 22-day post-IPO period
•
Initial pro-rated distribution of $0.0665 per unit

Commenting on the results, Thomas F. Karam, Chairman and Chief Executive Officer, said, “We are pleased with the success of our IPO. We have the right team, a strong asset base, solid alignment of interest with our anchor customer, strong contracts and substantial liquidity. We will continue to focus on successful execution of our projects to serve the rapidly growing production in the Terryville Complex in North Louisiana.”

Second Quarter 2015 Results

Operating revenues for the second quarter were $2.7 million and total operating expenses were $6.8 million, resulting in a net loss of $4.2 million. For the 22 day period from the closing of the IPO through June 30, 2015, the Partnership reported a net loss of $0.6 million, or $0.01 per unit. Adjusted EBITDA for the second quarter was $0.3 million, and Adjusted EBITDA for the 22-day post-IPO period was $1.1 million.

Operational Update

The Partnership’s Lincoln Parish plant and related natural gas gathering and residue gas transportation pipelines commenced operations on May 15, 2015, and the Lincoln Parish plant is currently running at its design capacity of 200 MMcf per day. Management anticipates that the Partnership’s second processing plant, the Mt. Olive plant, and the related NGL and residue gas pipelines will be completed in September 2015. The Mt. Olive plant, a 200 MMcf per day design-capacity cryogenic natural gas processing plant, will increase the Partnership’s natural gas processing capacity to 400 MMcf per day and the related pipelines will add capacity to transport NGLs and incremental volumes of residue gas.




Initial Public Offering Highlights

On June 9, 2015, the Partnership completed its initial public offering of 11,250,000 common units at an offering price of $20.00 per common unit, resulting in net proceeds of approximately $211 million. The underwriters subsequently partially exercised their over-allotment option for an additional 644,462 common units, resulting in additional net proceeds of approximately $12 million.

Financial Position and Liquidity

As of June 30, 2015, the Partnership had $13.9 million in cash on hand, outstanding borrowings of $83.5 million under the Partnership’s $275 million revolving credit facility and an additional $64.6 million of availability under the revolving credit facility, for total liquidity of approximately $78.5 million.

Initial Quarterly Cash Distribution

On July 23, 2015, the Partnership declared an initial quarterly distribution of $0.0665 per unit relating to the second quarter of 2015. The distribution reflects the minimum quarterly distribution of $0.2750 per unit, or $1.10 per unit on an annualized basis, pro-rated for the 22-day period from the IPO to the quarter end.


(1)
Please see “Supplemental Non-GAAP Financial Measures” for a description and reconciliation of Adjusted EBITDA and distributable cash flow.

Conference Call

The Partnership will host a conference call today, August 7, 2015, at 9:00 a.m. Eastern time (8:00 a.m. Central time) to discuss second quarter 2015 financial and operating results. To listen to a live audio webcast of the conference call, please visit the Partnership’s website at www.penntex.com. A replay of the conference call will be available following the call and can be accessed from www.penntex.com.

An updated presentation is available for download on our website (www.penntex.com).

About PennTex Midstream Partners, LP

PennTex Midstream Partners, LP is a growth-oriented master limited partnership focused on owning, operating, acquiring and developing midstream energy infrastructure assets in North America. PTXP provides natural gas gathering and processing and residue gas and natural gas liquids transportation services to producers in the Terryville Complex in northern Louisiana. For more information, visit www.penntex.com.

For further information, please direct all inquiries to:

Investor Relations:
Andrejka Bernatova
Vice President, Finance and Investor Relations
Telephone: (832) 456-4000

Media:
Chris Staffel



Vice President, Administration
Telephone: (832) 456-4005

Cautionary Note

Disclosures in this press release contain certain forward-looking statements within the meaning of the federal securities laws. Statements that do not relate strictly to historical or current facts are forward-looking. These statements contain words such as “will” and “anticipate” and involve risks and uncertainties including, among others that our business plans may change as circumstances warrant and securities of the Partnership may not ultimately be offered to the public because of general market conditions or other factors. Accordingly, readers should not place undue reliance on forward-looking statements as a prediction of actual results. For more information concerning factors that could cause actual results to differ materially from those conveyed in the forward-looking statements, please refer to the “Risk Factors” section of the prospectus included in the registration statement on Form S-1, filed by the Partnership with the U.S. Securities and Exchange Commission and declared effective on June 3, 2015. Except as otherwise required by applicable law, the Partnership undertakes no obligation to publicly update or revise any such forward-looking statements to reflect events or circumstances that occur, or of which the Partnership becomes aware, after the date hereof.




PENNTEX MIDSTREAM PARTNERS, LP
UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except per unit amounts)

 
 
For the Three Months
 
For the Six Months Ended June 30, 2015
 
For the period from March 17, 2014 (inception) through June 30, 2014
 
 
Ended June 30,
 
 
 
 
2015
 
2014
 
 
 
 
 
 
 
 
 
 
 
Revenues
 
$
2,696
 
 
 
$
—
 
 
 
$
2,924
 
 
 
$
—
 
 
 
 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
 
General and administrative expense
 
2,679
 
 
 
1,259
 
 
 
4,933
 
 
 
1,384
 
 
Operating and maintenance expense
 
808
 
 
 
—
 
 
 
1,460
 
 
 
—
 
 
Depreciation and amortization expense
 
740
 
 
 
—
 
 
 
1,057
 
 
 
—
 
 
Impairment of surplus assets
 
2,483
 
 
 
—
 
 
 
2,483
 
 
 
—
 
 
Taxes other than income taxes
 
68
 
 
 
—
 
 
 
137
 
 
 
—
 
 
Total operating expenses
 
6,778
 
 
 
1,259
 
 
 
10,070
 
 
 
1,384
 
 
Operating income (loss)
 
(4,082
)
 
 
(1,259
)
 
 
(7,146
)
 
 
(1,384
)
 
Interest expense, net
 
(88
)
 
 
—
 
 
 
(88
)
 
 
—
 
 
Net income (loss)
 
(4,170
)
 
 
 
$
(1,259
)
 
 
(7,234
)
 
 
 
$
(1,384
)
 
Less: Predecessor loss prior to the Offering on June 9, 2015
 
(3,620
)
 
 
 
 
(6,684
)
 
 
 
Limited partners’ interest in net loss subsequent to the Offering on June 9, 2015
 
 
$
(550
)
 
 
 
 
 
$
(550
)
 
 
 
 
 
 
 
 
 
 
 
 
Earnings (loss) per common unit
 
 
$
(0.01
)
 
 
 
$
—

 
 
 
$
(0.01
)
 
 
 
$
—

 
Weighted average common and common equivalent units outstanding:
 
20,000,000
 
 
 
—
 
 
 
20,000,000
 
 
 
—
 
 





PENNTEX MIDSTREAM PARTNERS, LP
SUPPLEMENTAL NON-GAAP FINANCIAL MEASURES
(in thousands)
(Unaudited)
Adjusted EBITDA and distributable cash flow are supplemental non-GAAP financial measures that are used by the Partnership’s management and external users of our consolidated financial statements, such as securities analysts, investors and lenders. Adjusted EBITDA is defined as net income (loss), plus interest expense, income taxes, depreciation and amortization, changes in deferred revenues, equity-based compensation expense, non-cash general and administrative costs, non-cash loss (income) related to derivative instruments and gain (loss) and impairments on long-term assets. Distributable cash flow is defined as Adjusted EBITDA, less cash interest expense, net of interest income, cash tax expense and maintenance capital expenditures. Adjusted EBITDA and distributable cash flow are not measures of net income as determined by GAAP.
 
 
For the Three Months
 
For the Six Months Ended June 30, 2015
 
For the period from March 17, 2014 (inception) through June 30, 2014
 
 
Ended June 30,
 
 
 
 
2015
 
2014
 
 
Net Income (Loss)
 
 
$
(4,170
)
 
 
 
$
(1,259
)
 
 
 
$
(7,234
)
 
 
 
$
(1,384
)
 
Interest expense
 
88
 
 
 
—
 
 
 
88
 
 
 
—
 
 
Depreciation and amortization
 
740
 
 
 
—
 
 
 
1,057
 
 
 
—
 
 
Changes in deferred revenue
 
528
 
 
 
—
 
 
 
528
 
 
 
—
 
 
Equity-based compensation expense
 
231
 
 
 
—
 
 
 
231
 
 
 
—
 
 
Non-cash contribution for general and administrative costs
 
408
 
 
 
—
 
 
 
408
 
 
 
—
 
 
Asset impairment
 
2,483
 
 
 
—
 
 
 
2,483
 
 
 
—
 
 
Adjusted EBITDA
 
 
$
308

 
 
 
$
(1,259
)
 
 
 
$
(2,439
)
 
 
 
$
(1,384
)
 
 
 
 
 
 
 
 
 
 
Reconciliation of Adjusted EBITDA for the three months ended June 30, 2015 to Adjusted EBITDA and distributable cash flow subsequent to the IPO (June 9, 2015 through June 30, 2015):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA for the three months ended June 30, 2015
 
$
308
 
 
 
 
 
 
 
 
Less:
 
 
 
 
 
 
 
 
Predecessor Adjusted EBITDA prior to the IPO
 
(747
)
 
 
 
 
 
 
 
Adjusted EBITDA subsequent to the IPO (June 9, 2015 through June 30, 2015)
 
1,055
 
 
 
 
 
 
 
 
Less:
 
 
 
 
 
 
 
 
Cash interest expense
 
35
 
 
 
 
 
 
 
 
Cash tax expense
 
—
 
 
 
 
 
 
 
 
Maintenance capital expenditures
 
3
 
 
 
 
 
 
 
 
Distributable Cash Flow subsequent to the IPO (June 9, 2015 through June 30, 2015)
 
1,017
 
 
 
 
 
 
 
 
Less:
 
 
 
 
 
 
 
 
Distributions and distribution equivalents
 
2,702
 
 
 
 
 
 
 
 
Borrowings to fund distributions
 
$
(1,685
)
 
 
 
 
 
 
 

SOURCE: PennTex Midstream Partners, LP




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