News Column

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, 2013December 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,
 201320122011
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,
 201320122011
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 ThousandsYears Ended December 31,
 201320122011
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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Source: Marlin Midstream Partners, LP


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