Southcross Energy Partners, L.P. (SXE)

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Southcross Energy Partners LP (SXE)

Q1 2013 Earnings Call

May 8, 2013 11:00 AM ET

Executives

Michael Anderson – SVP and CFO

David Biegler – Chairman, President and CEO

Analysts

Edward Rowe – Raymond James

Selman Akyol – Stifel Nicolaus

James Bardowski – Sidoti & Company

Presentation

Operator

Good morning and welcome to the Southcross Energy Partners, First Quarter, 2013 Financial and Operating Results Call.

As a reminder, today’s call is being recorded and your participation implies consent to such recording.

At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation.

With that, I will turn the call over to Mr. Michael Anderson, Senior Vice President and Chief Financial Officer. Thank you, sir. You may begin.

Michael Anderson

Thank you, and good morning. We appreciate you joining us for the Southcross Energy, first quarter, 2013 financial and operating results conference call. With me today, is David Biegler our Chairman, President and Chief Executive Officer. And before we begin, I would like to remind all participants that our comments today may include forward-looking statements.

It should be noted that a variety of factors could cause the partnership’s actual results to differ materially from the anticipated results or expectations expressed in these forward-looking statements.

For a complete discussion of these risks, we encourage you to read the partnership’s earnings release and our documents on file with the SEC.

Today’s call may also contain certain non-GAAP financial measures. You can refer to the press release we issued this morning for important disclosures regarding such measures and their reconciliations.

You can also obtain a copy of our press release in the investor relations tab of our website at southcrossenergy.com.

And with those opening remarks, I will now hand the call over to David Biegler. David?

David Biegler

Thank you, Michael. I will start with some comments on our first quarter results and then move through our operating highlights and our current outlook on the business.

Because our last earnings call was on six weeks ago, today’s call will be relatively brief.

To start off, our first quarter adjusted EBITDA of $4.5 million was in line with the $4 million to $6 million range we provided on our last earnings call.

As we indicated on our last call, results in the quarter were negatively affected by start up expenses at our Bonnie View fractionator, cost related to the establishment of public accounting reporting processes and the effects of the Gregory plant fire.

Now, we move to the current move which is decidedly better. First of all, the first quarter is behind us and we believe the second quarter will show significant improvement.

The issues that have negatively affected our business over the past few quarters, are either result, or at least having a greatly diminished effect on the business.

Southcross is in a far stronger position today than a few months ago.

Since our last earnings call, we completed a bank credit amendment and completed an agreement for the injection into the partnership of $40 million in additional equity capital.

We completed these capital activities over the span of about two weeks, well ahead of our promised schedule.

We believe we have the necessary capital for the continued organic growth of our business, and have the financial flexibility that will allow us to focus on operating and growing our business.

It is important to note that during this recent financing process, Charlesbank, or sponsor was supporting of a business. Both Charlesbank and our management team continue to believe strongly in our business and in our outlook.

Second, I’ll move on to our operating highlights. First and foremost, our assets are now largely up and running. During the first quarter, we completed the expansion of the Bonnie View fractionators. And in April, we resumed operations at our Gregory processing and NGL fractionation facility.

We are now consistently producing purity NGL products that meet customer specifications. And effective May 1, we began selling the major part of our propane butane and gasoline under new contracts with improved pricing.

As we mentioned in our last call, we’ve been expanding our downstream gas and NGL business with increased opportunities and new customers such as the new NGL contracts that started just last week.

We are optimistic about our NGL and residue gas business and believe we will see increased volumes and profitability this year.

The continued expansion and development of petrochemical facilities and growth of both NGL and natural gas export facilities in the Corpus Christi area should continue to create opportunities for well-positioned companies such as Southcross.

Next, I’d like to discuss our outlook on the business.

The Eagle Ford remains one of the most active place in the country as reiterated by many analysts and producers including recent comments made by many of them regarding their first quarter performance and outlook.

Final data from the Texas Railroad Commission for 2012 Eagle Ford gas productions, which is an important data point for us, indicated average daily gas production of 1.9 billion cubic feet per day, a 58% gain over the 2011 production of 1.2 billion cubic feet per day.

The pace of growth is amazing considering production was almost non-existent in 2009.

The value of midstream assets in the Eagle Ford has responded to this increase and continues to be validated by transactions such as the recent announcement by Atlas Pipeline Partners of the $1 billion acquisition of TEAK Midstream.

Read the rest of this transcript for free on seekingalpha.com