Marlin Midstream Partners, LP (FISH)

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Marlin Midstream Partners, LP Reports Fourth Quarter and Full Year 2014 Financial Results & 2015 Guidance

8:28 AM ET 3/10/15 | GlobeNewswire

Marlin Midstream Partners, LP (Nasdaq:FISH) ("Marlin"), announced financial results for the fourth quarter and full year 2014.

Full Year 2014 Highlights

-- Adjusted EBITDA for full year 2014 increased 103% over full year 2013 to $34.2 million

-- Distributable Cash Flow for full year 2014 increased 144% over 2013 to $31.6 million

-- Marlin paid its fourth quarter distribution of $0.365, or $1.46 annually, on February 11, 2015

-- The annualized fourth quarter distribution was an increase of 4% from 2013, and the distribution coverage ratio was 1.22x for full year 2014

Adjusted EBITDA for the fourth quarter 2014 was $7.7 million, a decrease of $0.8 million, compared to adjusted EBITDA of $8.5 million for the fourth quarter 2013. For full year 2014, adjusted EBITDA was $34.2 million compared to adjusted EBITDA of $16.9 million for full year 2013. The decrease in adjusted EBITDA for the fourth quarter 2014 was primarily due to lower gross margin from our gathering and processing segment as a result of reduced liquids recoveries and higher general and administrative costs, partially offset by higher gross margin from our logistics segment and lower operations and maintenance costs. The increase in adjusted EBITDA for full year 2014 was due to higher gross margin in both gathering and processing and logistics segments offset by an increase in general and administrative costs as we continued to invest in our business.

Distributable cash flow ("DCF") for the fourth quarter 2014 was $7.1 million, or $0.40 per limited partner unit, a decrease of $0.5 million compared to DCF of $7.6 million for the fourth quarter 2013. For the full year 2014, DCF was $31.6 million, or $1.79 per limited partner unit, compared to DCF of $13.0 million for the period from July 31, 2013 to December 31, 2013, the first applicable periods in which distributions were paid. Marlin declared and paid a cash distribution for the fourth quarter 2014 in the amount of $0.365 per unit, or $1.46 annually, which is a 4% increase over the annualized fourth quarter 2013. The distribution coverage ratio for the fourth quarter 2014 and full year 2014 was 1.08x and 1.22x, respectively.

Reconciliations of the non-GAAP financial measures adjusted EBITDA and DCF to net income, the most directly comparable GAAP financial measure, are provided at the end of this press release.

Net income was $4.5 million for the fourth quarter 2014 compared to net income of $4.4 million for the fourth quarter 2013. Net income was $22.1 million for full year 2014 compared to net income of $1.2 million for full year 2013.

Business Highlights

Sale of General Partner Interest and Contribution of Legacy Gathering System

On February 27, 2015, Marlin announced the successful completion of the contribution of the Legacy gathering system from Azure Midstream Energy, LLC ("Azure") for $162.5 million in consideration. In separate transactions, Azure acquired (i) 100% of Marlin Midstream GP, LLC, Marlin's general partner, (ii) 90% of Marlin Midstream GP, LLC's incentive distribution rights in Marlin, and (iii) an option to acquire 20% of NuDevco Midstream Development, LLC's ("NuDevco") 10.7 million limited partnership units in Marlin.

The transformative combination of Azure's substantial dropdown inventory, as well as Azure's contribution of its Legacy gathering system into Marlin's existing midstream assets creates a diverse platform of midstream services and establishes Marlin as one of the largest gathering and processing systems in the horizontal Cotton Valley play in east Texas and north Louisiana. Marlin is now comprised of 723 miles of high-and-low pressure gathering lines, 260 MMcf/d of processing capacity, 20,000 BBls/d of NGL takeaway capacity, and three crude oil transloading facilities.

Marlin's new President and Chief Executive Officer, I.J. "Chip" Berthelot, II, said, "We are excited to complete the transaction between Azure and Marlin. We are in the midst of executing on integration of the companies and combining Marlin's new and efficient processing assets with Legacy's expansive gathering footprint." Mr. Berthelot continued, "The enhanced scale of the new MLP will allow us to pursue both cost and commercial synergies at a faster pace and more competitively, thus maximizing greater value from the combined assets."

Additional Financial and Operating Highlights

Upon closing of the transactions, Marlin extended its Transloading Services Agreements and the minimum volume commitments associated with its Transloading Services Agreement with Associated Energy Services, LP ("AES"), an affiliated party. These services agreements are extended until February 27, 2020, or five years from the date of the amendment. In addition, effective October 1, 2014, AES elected to increase its minimum volume commitment under our fee-based gas gathering and processing agreement to 100 MMcf/d from 80 MMcf/d.

Marlin completed construction of its Longtail pipeline in March 2014 and the common inlet header between the Panola 1 and Panola 2 Processing Plants in May 2014 for a total combined cost of $5.2 million. The combined projects created greater margin optimization by maximizing value of inlet gas for processing.

Segment Results

Gathering & Processing Segment

Gross margin for the gathering and processing segment for the fourth quarter 2014 was $9.4 million, a decrease of $0.9 compared to gross margin of $10.3 million for the fourth quarter 2013. Gross margin for the gathering and processing segment for full year 2014 was $42.6 million, an increase of $9.5 million compared to gross margin of $33.1 million for full year 2013. Gas volumes processed were 185 MMcf/d and 203 MMcf/d for the fourth quarter 2014 and full year 2014, respectively, compared to 218 MMcf/d and 219 MMcf/d for the prior year periods, respectively.

Logistics Segment

Gross margin for the logistics segment for the fourth quarter 2014 was $4.2 million, an increase of $0.7 million compared to gross margin of $3.5 million for the fourth quarter 2013. Gross margin for the logistics segment for full year 2014 was $15.3 million, an increase of $9.5 million compared to gross margin of $5.8 million for full year 2013. Logistics segment provided 22,567 BBls/d and 20,473 BBls/d in transloading services during the fourth quarter 2014 and full year 2014, respectively, compared to 18,980 BBls/d and 18,980 BBls/d in the prior year periods, respectively.

Capital Management

On February 27, 2015, Marlin entered into a restructured and expanded credit facility that provides for enhanced liquidity and improved access to capital for accretive development and acquisition opportunities. The new $250 million revolving credit facility includes a syndicate of nine banks led by Wells Fargo Bank, N.A. as administrative agent with Wells Fargo Securities, LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated, and SG Americas Securities, LLC as joint lead arrangers and has a maturity date of February 27, 2018.

As of December 31, 2014, Marlin had availability of $39.0 million and outstanding borrowings of $11.0 million associated with its existing revolving credit facility. As of December 31, 2014, Marlin had cash and cash equivalents of $2.6 million.

Capital expenditures for full year 2014 were $8.5 million, of which $1.4 million were related to maintenance capital expenditures and $7.1 million were related to expansion capital expenditures.

2015 Financial Guidance

The following projections for 2015 are based on management's current estimates and assumptions including producer and customer forecasts and are subject to risks and uncertainties. Please see the "Forward Looking Statements" at the end of the press release.

Marlin is targeting 2015 DCF of $1.65 - $1.80 per unit, an 18% increase from the mid-point range. We expect to realize a financial impact from the synergies of approximately $3.0 million to $5.0 million by the end of 2015. The savings are expected to be realized through the alignment of assets to maximize commercial and operating efficiencies, and corporate expense consolidation. Marlin's 2015 financial guidance excludes the effect of any potential third party acquisitions or drop down transactions with Azure.

View data
MARLIN MIDSTREAM PARTNERS, LP SELECTED BALANCE SHEET DATA (Unaudited) (In Thousands, except unit amounts) December 31, 2014 2013 Selected Balance Sheet Data: Cash and cash equivalents $ 2,603 $ 3,157 Total assets 171,838 174,142 Long term debt 11,000 4,000 Total partners' capital 154,430 160,550 Marlin Midstream Partners, LP Partners' Capital: Limited partner units outstanding 17,703,793 17,449,090

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MARLIN MIDSTREAM PARTNERS, LP SELECTED STATEMENTS OF OPERATIONS DATA (Unaudited) (In Thousands, except per unit amounts) Quarter Ended December 31, Year Ended December 31, 2014 2013 2014 2013 Total Operating Revenues $ 16,746 $ 16,108 $ 75,228 $ 52,860 Cost of natural gas, NGLs and condensate revenue 3,138 2,312 17,348 13,999 Operation and maintenance 3,782 3,895 16,231 16,253 General and administrative 2,120 1,432 7,358 5,728 Non-cash equity based compensation expense 442 1,728 1,963 3,012 Depreciation expense 2,249 2,105 8,817 8,197 Loss on disposals of equipment -- -- 60 -- Total Operating Expenses 11,731 11,472 51,777 47,189 Operating income 5,015 4,636 23,451 5,671 Interest expense, net of amounts capitalized and loss on derivatives 217 178 766 4,397 Net income before tax 4,798 4,458 22,685 1,274 Income tax expense 278 53 553 88 Net income $ 4,520 $ 4,405 $ 22,132 $ 1,186 Net income $ 4,520 $ 4,405 $ 22,132 $ 7,190 Less: East New Mexico Dropdown net income prior to acquisition -- -- (160) -- Less: general partner interest in net income (90) (88) (435) (144) Limited partner interest in net income $ 4,430 $ 4,317 $ 21,537 $ 7,046 Net income per limited partner unit - basic $ 0.25 $ 0.24 $ 1.23 $ 0.40 Net income per limited partner unit - diluted $ 0.25 $ 0.24 $ 1.21 $ 0.39

The following table presents a reconciliation of the non-GAAP financial measure of adjusted EBITDA and distributable cash flow to the GAAP financial measure of net income.

View data
For the period Quarter Ended Years Ended from July 31, December 31, December 31, 2013 to December 31 2014 2013 2014 2013 2013 (Unaudited) (In Thousands) Net income $ 4,520 $ 4,405 $ 22,132 $ 1,186 $ 7,190 Interest expense, net of amounts capitalized and gain/loss on interest rate derivatives 217 178 766 4,397 352 Income tax expense 278 53 553 88 60 Non-cash equity based compensation 442 1,728 1,963 3,012 3,012 Depreciation expense 2,249 2,105 8,817 8,197 3,425 Adjusted EBITDA $ 7,706 $ 8,469 $ 34,231 $ 16,880 $ 14,039 Less: Maintenance capital expenditures (183) (649) (1,384) (782) Cash interest expense (158) (130) (510) (215) Income tax expense (278) (53) (553) (60) Other -- -- (160) -- Distributable cash flow $ 7,087 $ 7,637 $ 31,624 $ 12,982 DCF per limited partner unit $ 0.40 $ 0.44 $ 1.79 $ 0.74 Distributions to limited partners $ 6,462 $ 6,107 $ 25,514 $ 10,121 Distributions per limited partner unit $ 0.365 $ 0.350 $ 1.44 $ 0.58 Distribution coverage ratio 1.08x 1.23x 1.22x 1.26x

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MARLIN MIDSTREAM PARTNERS, LP SELECTED OPERATING SEGMENT DATA (Unaudited) (In Thousands) Quarter Ended December 31, Year Ended December 31, 2014 2013 2014 2013 Gathering and Processing Segment Revenues $ 12,523 $ 12,617 $ 59,926 $ 47,052 Cost of revenues 3,138 2,312 17,348 13,999 Gross Margin 9,385 10,305 42,578 33,053 Operating expenses 5,334 5,562 22,925 23,814 Gas volumes (MMcf/d) 185 218 203 219 Logistics Segment Revenues $ 4,222 $ 3,492 $ 15,302 $ 5,808 Gross Margin 4,222 3,492 15,302 5,808 Operating expenses 695 73 2,183 636 Transloading volumes (BBls/d) 22,567 18,980 20,473 18,980

Fourth Quarter and Full Year 2014 Conference Call and Webcast

Marlin will host a conference call to discuss fourth quarter and full year 2014 results at 10:00 am CT (11:00 am ET) on March 10, 2015.

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 1-877-815-2357, 1-330-968-0354 for international callers. The conference ID for the call is 98877911. A telephonic replay of the call will be available for 7 days and can be accessed by dialing 1-855-859-2056 or 1-404-537-3406 for international callers, with conference ID number 98877911.

About Marlin Midstream Partners, LP

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 Dallas, Texas, Marlin's assets include 723 miles of gathering lines in the horizontal Cotton Valley plays located in east Texas and north Louisiana, two natural gas processing facilities located in Panola County, Texas, a natural gas processing facility located in Tyler County, Texas, two NGL transportation pipelines that connect its Panola County and Tyler County processing facilities to third party NGL pipelines and three crude oil transloading facilities containing six crude oil transloaders.

www.marlinmidstream.com

About Azure Midstream Energy, LLC

Azure is a midstream company with a focus on owning, operating, developing and acquiring midstream energy infrastructure in core producing areas in the United States. Azure owns 100% of Marlin Midstream GP, LLC, Marlin's general partner, and 90% of the incentive distribution rights in Marlin. In addition to its ownership of Marlin, Azure provides natural gas gathering, compression, treating and processing services in north Louisiana and east Texas in the prolific Haynesville and Bossier Shale formations.

www.azuremidstream.com

Use of Non-GAAP Financial Measures

We report financial results in accordance with U.S. generally accepted accounting principles ("GAAP"). We also present adjusted EBITDA and distributable cash flow each of which are non-GAAP financial measures. We define gross margin as total revenues less cost of natural gas, NGLs and condensate revenues. We define adjusted EBITDA as net income (loss) before interest expense (net of amounts capitalized) or interest income, plus income tax expense, depreciation expense, equity based compensation expense, gains or losses on derivative instruments and certain non-recurring expenses. We define distributable cash flow as adjusted EBITDA plus cash interest income, less cash interest paid and maintenance capital expenditures. Our definitions of these non-GAAP financial measures may differ from the definitions of similar measures used by other companies. Management uses these non- GAAP financial measures in making financial, operating and planning decisions and in evaluating our financial performance. Furthermore, management believes that these non-GAAP financial measures may provide users with additional meaningful comparisons between current results and results of prior periods as they are expected to be reflective of our core ongoing business. These measures have limitations, and investors should not consider them in isolation or as a substitute for analysis of our results as reported under GAAP. Reconciliations of GAAP to non-GAAP financial measures are attached to this release.

Forward-Looking Statements

This press release contains forward-looking statements. These forward-looking statements are identified as any statement that does not relate strictly to historical or current facts. In particular, statements, express or implied, concerning future actions, conditions or events, future operating results or the ability to generate revenues, income or cash flow or to make distributions are forward-looking statements. The forward-looking statements in this press release include statements regarding Marlin and its affiliates, including statements about (1) the benefits of the recent transactions described herein, including Marlin's ability to successfully make future acquisitions, to maintain or increase future distributions, and to capitalize on certain commercial and operational synergies, (2) future expectations and projections of results of operations or financial condition and (3) the anticipated financial performance of Marlin for the fiscal year 2015. Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions. Future actions, conditions or events and future results of operations of Marlin may differ materially from those expressed in these forward-looking statements. Many of the factors that will determine these results are beyond Marlin's ability to control or predict. These statements are necessarily based upon various assumptions involving judgments with respect to the future, including, among others, conditions in the capital and credit markets; the ability to achieve synergies and revenue growth; national, international, regional and local economic, competitive and regulatory conditions and developments; technological developments; inflation rates; interest rates; the political and economic stability of oil producing nations; energy markets; commodity prices; weather conditions; environmental conditions; business and regulatory or legal decisions; the timing and success of business development efforts; terrorism; and other uncertainties. In addition, an extensive list of specific material risks and uncertainties affecting Marlin is contained in its 2013 Annual Report on Form 10-K, as amended, and in our other public filings and press releases. There is no assurance that any of the actions, events or results of the forward-looking statements will occur, or if any of them do, what impact they will have on Marlin's results of operations or financial condition. Because of these uncertainties, you are cautioned not to put undue reliance on any forward-looking statement.

CONTACT: Investor Contact:
Marlin Midstream Partners, LP
Eric T. Kalamaras - Chief Financial Officer
[phone]

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