DALLAS, Dec. 20, 2016 /PRNewswire/ -- The EnLink
Midstream companies (EnLink or EnLink Midstream), EnLink Midstream
Partners, LP (NYSE: ENLK) and EnLink Midstream, LLC (NYSE:
ENLC), announced new non-core divestiture transactions that
strengthen the company's balance sheet and an expansion project
that reinforces its position in the STACK, one of the nation's top
oil and gas producing basins.
Announcement Highlights:
- EnLink will receive $275 million
from combined non-core asset sales. EnLink entered into a
definitive agreement to divest its approximately 31 percent common
ownership interest in Howard Midstream Energy Partners, LLC (HEP)
and, separately, closed a transaction to sell approximately 140
miles of natural gas transportation pipeline in North Texas (North Texas Pipeline).
- Proceeds from these non-core asset sales and planned 2017
estimated at-the-market equity issuances are expected to fund a
majority of the equity portion of EnLink's 2017 capital expenditure
requirements, including the upcoming $250
million installment payment related to the acquisition of
certain Tall Oak Midstream, LLC subsidiaries.
- In response to exceptional producer activity and well results
in the STACK, EnLink is proceeding with the development of Chisholm
III, a new 200 million cubic feet per day (MMcf/d) processing
expansion of its existing Central
Oklahoma system that is expected to be operational by
year-end 2017.
"These non-core divestitures are an extension of our strategy to
strengthen our investment-grade balance sheet, consolidate around
our core, and provide additional flexibility to strategically
reinvest capital in key growth projects," said Barry E. Davis, EnLink Chairman and Chief
Executive Officer. "The Chisholm III expansion project solidifies
EnLink's presence as one of the top midstream providers in the
STACK, an area that continues to outperform, and underscores our
strategy of positioning ourselves in the top regions with
extraordinary growth potential."
EnLink to Invest Non-Core Divestiture Proceeds in Core Growth
Areas
EnLink agreed to monetize its approximately 31
percent common ownership interest in HEP for net proceeds of
approximately $190 million. Alberta
Investment Management Corp. (AIMCo) and management will acquire a
common ownership stake in HEP as a result of EnLink's divestiture,
which follows AIMCo's preferred investment in HEP in August 2016.
In a separate transaction, EnLink simultaneously signed and
closed an agreement today to sell its North Texas Pipeline assets
in the Barnett Shale to Atmos Energy Corp. EnLink maintains
capacity on the pipeline at competitive rates and at levels
sufficient to support its current and expected
operations.
The net proceeds of $275 million
from the transactions represent a multiple of approximately 16
times the non-core assets' aggregate projected 2017 adjusted EBITDA
contributions of $17 million to
EnLink. These non-core assets are expected to provide adjusted
EBITDA contributions of approximately $25
million for 2016. A reduction from 2016 to 2017 is due
primarily to AIMCo's investment in preferred equity of HEP in
August 2016. Adjusted EBITDA is a
non-GAAP measure and is explained in greater detail under "Non-GAAP
Financial Information."
Net proceeds from these non-core asset divestitures, along with
planned at-the-market equity issuances, will fund the majority of
expected equity needs for EnLink's 2017 capital expenditures
program, which includes $100 million
of investment to complete the Chisholm III facility and the first
installment payment of $250 million
related to the January 2016
acquisitions of certain subsidiaries of Tall Oak Midstream,
LLC.
The HEP transaction is expected to close during the first
quarter of 2017, subject to customary closing conditions, including
regulatory approvals.
Producer Demand Driving Growth in the STACK
Due to
robust producer customer activity in the STACK and the continuation
of successful well results from EnLink's dedicated acreage, the
company will invest approximately $100
million in 2017 to construct the new 200 MMcf/d Chisholm III
plant, which is expected to be operational by year-end 2017.
Upon completion of the Chisholm III expansion, EnLink's
Central Oklahoma processing
capacity will total approximately one billion cubic feet per day,
which represents nearly a three-fold increase from the 350 MMcf/d
of capacity operated in 2015, and makes EnLink one of the largest
gas processors in the STACK. EnLink's Central Oklahoma platform is underwritten by
long-term, fee-based contracts from major producers.
EnLink's incremental processing capacity will also generate
meaningful increases in natural gas liquids (NGLs) produced from
the Central Oklahoma platform,
which will in turn be transported on the company's Cajun-Sibon
pipeline. The NGL output increases are expected to benefit the
entirety of the company's Louisiana NGL footprint and current
estimates project that throughput on Cajun-Sibon will reach
capacity in the second quarter of 2017.
About the EnLink Midstream Companies
EnLink Midstream is publicly traded through two
entities: EnLink Midstream, LLC (NYSE: ENLC), the
publicly traded general partner entity, and EnLink Midstream
Partners, LP (NYSE: ENLK), the master limited partnership
entity. EnLink Midstream is a leading, integrated midstream company
with a diverse geographic footprint and a strong financial
foundation, delivering tailored customer solutions for sustainable
growth.
EnLink Midstream's assets are located in many of North
America's premier oil and gas regions, including Oklahoma's Midcontinent, the Permian
Basin, and the Gulf Coast region. Based in Dallas,
Texas, EnLink Midstream's assets
include approximately 11,000 miles of gathering and transportation
pipelines, 21 processing plants with approximately 4.4 billion
cubic feet per day of processing capacity, seven fractionators with
approximately 260,000 barrels per day of fractionation capacity, as
well as barge and rail terminals, product storage facilities,
purchase and marketing capabilities, brine disposal wells, an
extensive crude oil trucking fleet, and an equity investment in a
private midstream company.
Additional information about the EnLink companies can be found
at www.EnLink.com.
Additional Transaction Details
EnLink expects to
report pre-tax losses in the fourth quarter of 2016 associated with
the sale of non-core assets in the range of $35 to $40 million. The losses are largely
related to the increases in carrying values due to fair market
valuation adjustments at the time of EnLink's formation in
March 2014. For tax purposes, an
aggregate gain of approximately $150
million will be realized at the closings of the
transactions. The majority of the tax gains are expected to be
allocated to ENLK unitholders on a pro-rata basis as part of the
fiscal 2017 Schedule K-1 process, with a small portion expected to
be allocated during 2016.
Forward-Looking Statements
This press release contains forward-looking statements within the
meaning of the federal securities laws. These statements are based
on certain assumptions made by ENLK and the ENLC based upon
management's experience and perception of historical trends,
current conditions, expected future developments and other factors
ENLK and ENLC believe are appropriate in the circumstances. These
statements include, but are not limited to, statements about the
expansion project's characteristics, the expansion project's
customers, forecasts regarding asset capacity, project costs and
timing for becoming operational for the project discussed above,
the completion of the transactions described above, future
financial projections, future operating results, objectives,
expectations and intentions that are not historical facts. Such
statements are subject to a number of assumptions, risks and
uncertainties, many of which are beyond the control of ENLK and
ENLC, which may cause ENLK's and ENLC's actual results to differ
materially from those implied or expressed by the forward-looking
statements. These risks include, but are not limited to, the
failure to consummate the transactions, the risk that the expansion
project is not completed on time or at all, the risk that the
expansion project costs more than expected, regulatory, economic
and market conditions and other risks discussed in ENLK's and
ENLC's filings with the Securities and Exchange Commission. ENLK
and ENLC have no obligation to publicly update or revise any
forward-looking statement, whether as a result of new information,
future events or otherwise.
Non-GAAP Financial Information
This press release
contains a non-generally accepted accounting principle financial
measure that we refer to as adjusted EBITDA. We define adjusted
EBITDA as net income (loss) plus interest expense, provision for
income taxes, depreciation and amortization expense, impairment
expense, unit-based compensation, (gain) loss on non-cash
derivatives, (gain) loss on disposition of assets, successful
transaction costs, accretion expense associated with asset
retirement obligations, reimbursed employee costs, non-cash rent
and distributions from unconsolidated affiliate investments less
payments under onerous performance obligations, non-controlling
interest, ENLC's interest in the adjusted EBITDA of Midstream
Holdings prior to the EnLink Midstream Holdings, LP ("Midstream
Holdings") drop downs and income (loss) from unconsolidated
affiliate investments. Growth capital expenditures generally
include capital expenditures made for acquisitions or capital
improvements that we expect will increase our asset base, operating
income or operating capacity over the long-term. Adjusted EBITDA of
Midstream Holdings is defined as Midstream Holdings' net income
plus taxes, depreciation and amortization and distributions from
unconsolidated affiliate investments less income from
unconsolidated affiliate investments.
ENLK and ENLC believe this measure is useful to investors
because it may provide users of this financial information with
meaningful comparisons between current results and prior-reported
results and a meaningful measure of ENLK's and ENLC's cash flow
after it has satisfied the capital and related requirements of its
operations. In addition, adjusted EBITDA achievement is a
primary metric used in ENLK's credit facility and short-term
incentive program for compensating its employees.
Adjusted EBITDA, as defined above, is not a measure of financial
performance or liquidity under GAAP. It should not be considered in
isolation or as an indicator of ENLK's and ENLC's performance.
Furthermore, it should not be seen as a substitute for metrics
prepared in accordance with GAAP. See ENLK's and ENLC's filings
with the SEC for more information.
EnLink Midstream does not provide reconciliations of GAAP
financial measures on a forward-looking basis because the companies
are unable to predict with reasonable certainty impairments,
depreciation and amortization, gains and losses on derivative
activities and acquisition-related expenses without unreasonable
effort. These items are uncertain, depend on various factors, and
could be material to EnLink Midstream's results computed in
accordance with GAAP.
Investor Contact: Kate
Walsh, Vice President of Investor Relations, 214-721-9696,
kate.walsh@enlink.com
Media Contact: Jill
McMillan, Vice President of Public & Industry Affairs,
214-721-9271, jill.mcmillan@enlink.com
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