EnLink Midstream Reports Fourth Quarter and Full-Year 2016 Results, Reaffirms 2017 Guidance, and Provides Operational Update

DALLAS, Feb. 14, 2017 /PRNewswire/ -- The EnLink Midstream companies (EnLink), EnLink Midstream Partners, LP (NYSE: ENLK) (the Partnership or ENLK) and EnLink Midstream, LLC (NYSE: ENLC) (the General Partner or ENLC), today reported financial results for the fourth quarter and full-year 2016, reaffirmed guidance outlook for full-year 2017, and provided an operational update.

Highlights:

• ENLK reported a net loss of approximately $565 million for the year ended December 31, 2016. ENLK achieved approximately $775 million of adjusted EBITDA net to ENLK for the same period, exceeding guidance for the year. Adjusted EBITDA is a non-GAAP measure and is explained in greater detail under "Non-GAAP Financial Information."
• ENLC reported a net loss of $460 million for the year ended December 31, 2016. ENLC achieved approximately $202 million of cash available for distribution for the same period, which was in-line with guidance. Cash available for distribution is a non-GAAP measure and is explained in greater detail under "Non-GAAP Financial Information."
• EnLink announced commercial success in the prolific Delaware Basin with the addition of a long-term, fee-based contract with a large, investment-grade producer who is very active in the region. Related to this new business, EnLink announced the acceleration of the Lobo II processing facility expansion, from its current 60 million cubic feet per day (MMcf/d) capacity to 120 MMcf/d of capacity, which is expected to be operational during the second quarter of 2017. The volume commitments associated with the new contract are expected to utilize the majority of the expanded capacity.
• EnLink also recently announced gas gathering and processing commercial successes in the STACK with the signing of a contract with Newfield Exploration Co. and the formation of a joint venture with Kinder Morgan Inc. EnLink continues to expand and deepen key relationships in the STACK.

"In 2016, we performed well and are proud of the accomplishments achieved during a volatile and challenging commodity environment," said Barry E. Davis, Chairman and Chief Executive Officer of EnLink.  "The team focused on executing our strategic growth plan and we are stronger today due to the progress made this year. We delivered on financial and operational priorities, and exited the year on track.

"We are seeing favorable developments on our asset footprint, as producers increase investments, accelerate drilling programs and experience higher well productivity.  We expect the momentum of producer activity to continue throughout 2017, and our current plan remains to exit the year with an annual adjusted EBITDA run-rate net to ENLK between $925 million and $950 million, which represents approximately 20 percent growth compared to 2016's adjusted EBITDA."

EnLink Midstream Partners, LP:  Fourth Quarter and Full-Year 2016 Financial Results

• The Partnership reported a net loss attributable to ENLK of $29 million for the fourth quarter of 2016, and $565 million for the full-year 2016. The full-year 2016 net loss was primarily due to a non-cash expense of $566 million related to impairments. Comparatively, the Partnership reported a net loss of $714 million for the fourth quarter of 2015, and a net loss of $1.4 billion for full-year 2015. The full-year 2015 net losses were again primarily due to non-cash expenses related to impairments.
• The Partnership achieved $195 million of adjusted EBITDA net to ENLK for the fourth quarter of 2016 and $775 million for the full-year 2016. Adjusted EBITDA net to ENLK was $186 million for the fourth quarter of 2015, and $678 million for the full-year 2015.
• The Partnership achieved net cash provided by operating activities of $153 million for the fourth quarter of 2016, and $663 million for the full-year 2016. Comparatively, net cash provided by operating activities of $138 million was reported for the fourth quarter of 2015, with full year 2015 results being $646 million.
• Distributable cash flow attributable to ENLK was $146 million for the fourth quarter of 2016 and $607 million for the full-year 2016. Comparatively, distributable cash flow was $149 million for the fourth quarter of 2015, and $529 million for the full-year 2015. Distributable cash flow is a non-GAAP measure and is explained in greater detail under "Non-GAAP Financial Information."
• Growth capital expenditures net to ENLK for full-year 2016 were $465 million, slightly above the midpoint of the guidance range of $425 million to $490 million. ENLK 2017 growth capital expenditures guidance net to ENLK is still expected to be in the range of $505 million to $645 million.

EnLink Midstream, LLC:   Fourth Quarter and Full-Year 2016 Financial Results

• The General Partner reported a net loss attributable to ENLC of $4 million for the fourth quarter of 2016 and a 2016 full-year net loss of $460 million. Comparatively, ENLC reported a net loss of $195 million in the fourth quarter of 2015, and a net loss of $355 million for full-year 2015. As previously mentioned, the net losses are primarily due to non-cash expenses related to impairments.
• The General Partner's cash available for distribution was $52 million for the fourth quarter of 2016, and $202 million for the full year 2016. Comparatively, cash available for distribution was $48 million in the fourth quarter of 2015, and $199 million for the full-year 2015.

ENLK 2017 Full-Year Guidance Reaffirmed

• Full-year 2017 net income midpoint for ENLK is projected to be $100 million and adjusted EBITDA midpoint net to ENLK is projected to be $850 million. Year-over-year growth in excess of 10 percent is forecasted related to annual adjusted EBITDA midpoint guidance from 2016 to 2017. EnLink's 2017 guidance reflects a reduction to adjusted EBITDA related to announced non-core asset sales.
• Distributable cash flow for 2017 is projected to range from $590 million to $650 million, and ENLK is projected to exit 2017 with a distribution coverage ratio in excess of 1.0, assuming flat distributions throughout 2017. EnLink expects to continue to build excess coverage during 2017, supporting the potential to resume distribution growth during 2018.
• ENLK's debt to adjusted EBITDA ratio for 2017 is projected to be in the range of 3.75 to 4.0, with no near-term debt maturities. EnLink is committed to maintaining a strong liquidity position with ample revolver capacity.
• Growth capital expenditures funded solely by ENLK continue to be projected to range from $505 million to $645 million for 2017. A mid-single-digit adjusted EBITDA multiple is projected to be achieved from 2017 organic capital investments. Total growth capital expenditures are projected to range from $610 million to $770 million, including contributions from joint venture partners and ENLC of approximately $105 million to $125 million. Growth capital expenditure ranges exclude the $250 million installment payment related to the acquisition in January 2016 which was paid in January 2017.
• Proceeds from planned and completed asset sales and at-the-market equity issuances are expected to generate sufficient capital for the equity-funded portion of ENLK's 2017 growth capital program.

ENLC Full-Year 2017 Financial Guidance Reaffirmed

• Full-year 2017 net income midpoint for ENLC is projected to be $75 million and cash available for distribution midpoint for ENLC is projected to be $220 million.
• ENLC's distribution coverage ratio for 2017 is projected to be in the range of 1.1 to 1.2. Flat distributions are expected throughout 2017, with the potential for distribution growth resumption as excess coverage reaches the high end of the projected range. Management is considering the potential to recommend the resumption of distribution growth at ENLC before resuming growth at ENLK in light of excess coverage at ENLC.
• Growth capital expenditures for ENLC's interest in Central Oklahoma assets is expected to range from $60 million to $70 million for 2017, with a mid-single-digit adjusted EBITDA multiple projected to be achieved from 2017 organic projects.
• Cash income taxes are projected to be approximately $5 million per year for each of 2017, 2018 and 2019.

The foregoing guidance information assumes a West Texas Intermediate Crude Oil (WTI) price range of $40 per barrel (bbl) to $60/bbl, with an average price of $50/bbl.  Guidance for 2017 also assumes a Henry Hub price range of $2.50 per million British Thermal Units ($/MMBtu) to $3.75/MMBtu, with an average price of $3/MMBtu.  Net income, adjusted EBITDA, and cash available for distribution ranges are based on commodity price movement as well as business opportunities and risks.   The foregoing guidance information for 2017 is projected, and accordingly, remains subject to changes that could be significant.  See the section titled "Forward-Looking Statements" of this press release.

Operational Update:

• Central Oklahoma:
  • Throughout 2017, EnLink plans to increase gas processing capacity in Central Oklahoma at the Chisholm complex by 400 MMcf/d. EnLink's previously announced Chisholm II plant is expected to be operational in the second quarter of 2017, and the Chisholm III plant is expected to be operational by the end of 2017. Once the expansions are completed, EnLink will operate approximately 1 billion cubic feet per day of processing capacity in Central Oklahoma, and will continue to be one of the largest gas processing providers in the STACK. Central Oklahoma is EnLink's fastest growing core area, and is expected to become EnLink's largest operating region.
• Delaware Basin:
  • The Partnership formed a strategic joint venture with NGP during 2016. The first joint project was the completion of phase one of the Lobo II footprint expansion, which included the installation of a cryogenic natural gas processing facility with capacity of 60 MMcf/d and approximately 80 miles of natural gas and liquids gathering pipeline infrastructure in Loving County, Texas, and Lea and Eddy counties, New Mexico.
  • EnLink recently announced commercial success in the Delaware Basin with the signing of an additional long-term, fee-based contract with a large investment-grade producer who is very active in the region. The new business has accelerated the timing of phase two of the Lobo II footprint expansion, which includes increasing processing capacity from 60 MMcf/d to 120 MMcf/d. The volume commitments associated with this new contract are expected to utilize the majority of the expanded processing capacity. Phase two is now underway, and the additional capacity is expected to be operational during the second quarter of 2017. Once the expansion is complete, EnLink will operate a total of 155 MMcf/d of processing capacity in the Delaware Basin.
• Midland Basin:
  • EnLink's natural gas system is located in the core of the Midland Basin, and the company completed a cost-effective gas processing expansion in 2016, which created approximately 30 to 40 percent of additional capacity to support volume growth as incremental drilling activity continues throughout 2017. EnLink also has the majority of infrastructure in place to cost effectively expand the Riptide gas processing facility by an additional 100 MMcf/d as volumes continue to grow.
  • The Partnership announced plans in 2016 to construct a new crude oil gathering system in the Midland Basin called the Greater Chickadee crude oil gathering project. The project is progressing very well and has expanded in scope due to the addition of new customers, volumes and dedicated acreage. The initial phase of the Greater Chickadee project became operational in early November 2016, and full-service is on-track to be operational during first quarter 2017.
• Louisiana:
  • Record volumes were achieved on the Partnership's Louisiana gas system during the second half of 2016, as demand across the footprint was strong and the Partnership continued to enhance operational capacity and capture new business.
  • EnLink's natural gas liquids (NGL) system experienced short-term weakness in volume throughout 2016. However, this weakness, is expected to reverse in early 2017, as NGL output increases on the Partnership's Central Oklahoma system. It is expected that throughput on the Partnership's Cajun-Sibon pipeline should reach capacity in the second quarter of 2017, coinciding with the expansion of the Chisholm complex, which is expected to benefit the entirety of the company's Louisiana NGL footprint.
• Barnett Shale:
  • Devon recently announced initial capital investment increases during 2017 related to their Barnett Shale operations, and plans to invest up to $50 million of capital in the Barnett to optimize base production and further de-risk future development activity. Devon announced that its initial investment will focus on horizontal refrac activity and the initiation of a drilling pilot of five to 10 wells. Devon also noted that additional capital could be allocated to the Barnett in 2017 as these projects have the potential to deliver highly competitive returns.
  • During 2016, gathering volume declines were slightly above expectations, and averaged 8 percent. As forecasted for the mature basin, volumes declines will continue during 2017, and the projected reduction for gathering and transmission volumes is around 10 percent when comparing 2016 to 2017, and normalizing for the North Texas Pipeline sale. EnLink is currently evaluating the benefit that Devon's announced investment plans will have on volume uplift in the near to mid-term, however, cash flows from the asset base are expected to remain stable for 2017 due to the minimum volume commitments in place. Devon's announcement of new investment activity is an encouraging step forward to the potential redevelopment of the legacy field.

Fourth Quarter, Full-Year 2016 Results and 2017 Guidance Call Details

The General Partner and the Partnership will hold a conference call to discuss fourth quarter and full-year 2016 financial results and 2017 guidance information on Wednesday, February 15, 2017, at 9 a.m. Central Time (10 a.m. Eastern Time).  The dial-in number for the call is 1-855-656-0924. Callers outside the United States should dial 1-412-542-4172. Participants can also preregister for the conference call by navigating to http://dpregister.com/10098998 where they will receive their dial-in information upon completion of their preregistration. Interested parties can access an archived replay of the call on the Investors page of EnLink's website at www.EnLink.com.

About the EnLink Midstream Companies

EnLink provides integrated midstream services across natural gas, crude oil, condensate, and NGL commodities.  EnLink operates in several top U.S. basins and is strategically focused on the core growth areas of the Permian's Midland and Delaware basins, Oklahoma's Midcontinent, and Louisiana's Gulf Coast. Headquartered in Dallas, EnLink is publicly traded through EnLink Midstream, LLC (NYSE: ENLC), the General Partner, and EnLink Midstream Partners, LP (NYSE: ENLK), the Master Limited Partnership. Visit www.EnLink.com for more information on how EnLink connects energy to life.

Non-GAAP Financial Information

This press release contains non-generally accepted accounting principle financial measures that we refer to as adjusted EBITDA, distributable cash flow, gross operating margin, and the General Partner's cash available for distribution. 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, the General Partner's interest in the adjusted EBITDA of Midstream Holdings prior to the Midstream Holdings drop downs and income (loss) from unconsolidated affiliate investments. We define distributable cash flow as adjusted EBITDA (defined above), net to the Partnership, less interest expense (excluding amortization of the Tall Oak acquisition installment payable discount), adjustments for the mandatorily redeemable non-controlling interest, interest rate swaps, cash taxes and other, and maintenance capital expenditures. We define gross operating margin, as revenues less cost of sales. The General Partner's cash available for distribution is defined as net income (loss) of the General Partner less the net income (loss) of the Partnership, which is consolidated into the General Partner's net income (loss), plus the General Partner's share of distributions from the Partnership, the General Partner's share of EnLink Oklahoma T.O. depreciation expense, the General Partner's deferred income tax expense, the General Partner's interest in the adjusted EBITDA of Midstream Holdings prior to the Midstream Holdings drop downs, the General Partner's corporate goodwill impairment and the General Partner's acquisition transaction costs attributable to its share of the EnLink Oklahoma T.O. acquisition, and less the General Partner's interest in maintenance capital expenditures of Midstream Holdings prior to the Midstream Holdings drop downs.

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. EnLink Oklahoma T.O.'s adjusted EBITDA means EnLink Oklahoma T.O.'s net income plus depreciation and amortization.

The Partnership's coverage ratio is calculated by dividing distributable cash flow by distributions paid to the General Partner and the unitholders. The General Partner's coverage ratio is calculated by dividing cash available for distribution by distributions paid by the General Partner.  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.  Maintenance capital expenditures are capital expenditures made to replace partially or fully depreciated assets in order to maintain the existing operating capacity of the assets and to extend their useful lives.

The Partnership and General Partner believe these measures are useful to investors because they may provide users of this financial information with meaningful comparisons between current results and prior-reported results and a meaningful measure of the Partnership's and the General Partner'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 the Partnership's credit facility and short-term incentive program for compensating its employees.

Gross operating margin, adjusted EBITDA, distributable cash flow, and cash available for distribution, as defined above, are not measures of financial performance or liquidity under GAAP. They should not be considered in isolation or as an indicator of the Partnership's and the General Partner's performance. Furthermore, they should not be seen as a substitute for metrics prepared in accordance with GAAP. Reconciliations of these measures to their most directly comparable GAAP measures are included in the following tables.  See ENLK's and ENLC's filings with the Securities and Exchange Commission for more information.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the federal securities laws. Although these statements reflect the current views, assumptions and expectations of our management, the matters addressed herein involve certain assumptions, risks and uncertainties that could cause actual activities, performance, outcomes and results to differ materially from those indicated. Such forward-looking statements include, but are not limited to, statements about guidance, projected or forecasted financial and operating results, operational results of our customers, results in certain basins, future rig count information, objectives, project timing, expectations and intentions and other statements that are not historical facts. Factors that could result in such differences or otherwise materially affect our financial condition, results of operations and cash flows include, without limitation,(a) the dependence on Devon for a substantial portion of the natural gas that we gather, process and transport, (b) developments that materially and adversely affect Devon or our other customers, (c) adverse developments in the midstream business may reduce our ability to make distributions, (d) our vulnerability to having a significant portion of our operations concentrated in the Barnett Shale, (e) the amount of hydrocarbons transported in our gathering and transmission lines and the level of our processing and fractionation operations, (f) impairments to goodwill, long-lived assets and equity method investments, (g) our ability to balance our purchases and sales, (h) fluctuations in oil, natural gas and NGL prices, (i) construction risks in our major development projects, (j) reductions in our credit ratings, (k) our debt levels and restrictions contained in our debt documents, (l) our ability to consummate future acquisitions, successfully integrate any acquired businesses, realize any cost savings and other synergies from any acquisition, (m) changes in the availability and cost of capital, (n) competitive conditions in our industry and their impact on our ability to connect hydrocarbon supplies to our assets, (o) operating hazards, natural disasters, weather-related delays, casualty losses and other matters beyond our control, (p) a failure in our computing systems or a cyber-attack on our systems, and (q) the effects of existing and future laws and governmental regulations, including environmental and climate change requirements and other uncertainties. These and other applicable uncertainties, factors and risks are described more fully in EnLink Midstream Partners, LP's and EnLink Midstream, LLC's filings with the Securities and Exchange Commission, including EnLink Midstream Partners, LP's and EnLink Midstream, LLC's Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. Neither EnLink Midstream Partners, LP nor EnLink Midstream, LLC assumes any obligation to update any forward-looking statements.

The assumptions and estimates underlying the forecasted financial information included in the guidance information in this press release are inherently uncertain and, though considered reasonable by the EnLink Midstream management team as of the date of its preparation, are subject to a wide variety of significant business, economic, and competitive risks and uncertainties that could cause actual results to differ materially from those contained in the forecasted financial information. Accordingly, there can be no assurance that the forecasted results are indicative of EnLink Midstream's future performance or that actual results will not differ materially from those presented in the forecasted financial information. Inclusion of the forecasted financial information in this press release should not be regarded as a representation by any person that the results contained in the forecasted financial information will be achieved.

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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