MEP Midcoast Energy Partners, L.P. Common Units Representing Limited Partner Interests (delisted)

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549 

 

 

AMENDMENT NO. 1 TO CURRENT REPORT ON FORM 8-K

 

FORM 8-K/A

 

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

 

 

Date of report (Date of earliest event reported): July 29, 2015

 

 

MIDCOAST ENERGY PARTNERS, L.P.

(Exact Name of Registrant as Specified in Charter)

 

DELAWARE	1-36175	61-1714064
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

1100 LOUISIANA, SUITE 3300, HOUSTON, TEXAS 77002

(Address of Principal Executive Offices) (Zip Code)

 

(713) 821-2000

(Registrant’s telephone number, including area code)

 

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

EXPLANATORY NOTE

 

We are amending our Current Report on Form 8-K filed with the Securities and Exchange Commission on July 29, 2015 to amend Exhibit 99.2 to correct the balance sheet resulting from reclassifications between accrued purchases and accrued receivables for the three months ended June 30, 2015 in the unaudited consolidated financial statements of Midcoast Energy Partners, L.P. The amended Exhibit 99.2 is attached hereto and the information therein is available on our website at www.midcoastpartners.com. This information is not deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 and is not incorporated by reference into any Securities Act registration statements.

 

Item 9.01. Financial Statements and Exhibits.

 

(d) Exhibits

 

Reference is made to the “Index of Exhibits” following the signature page, which is hereby incorporated into this Item.

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned there unto duly authorized.

 

		MIDCOAST ENERGY PARTNERS, L.P. (Registrant)
		By:	Midcoast Holdings, L.L.C.
			its General Partner
Date: July 30, 2015		By:	/s/ Noor Kaissi
			Noor Kaissi Controller (Duly Authorized Officer)

 

 

Index of Exhibits

Exhibit Number	Description
99.2	Unaudited condensed consolidated financial statements of Midcoast Energy Partners, L.P. for the three and six month periods ended June 30, 2015

 

  

Exhibit 99.2

 

MIDCOAST ENERGY PARTNERS, L.P.

CONSOLIDATED STATEMENTS OF INCOME

 

		For the three months								For the six months
		ended June 30,								ended June 30,
		2015				2014				2015				2014
		(unaudited; in millions, except per unit amounts)
Operating revenues:
Operating revenue		$	751.6			$	1,329.9			$	1,603.3			$	2,919.6
Operating revenue - affiliate			28.5				66.9				50.3				124.1
			780.1				1,396.8				1,653.6				3,043.7
Operating expenses:
Cost of natural gas and natural gas liquids			647.5				1,221.4				1,408.7				2,679.9
Cost of natural gas and natural gas liquids - affiliate			23.1				38.4				41.0				68.6
Operating and maintenance			44.7				56.6				82.9				111.2
Operating and maintenance - affiliate			24.8				27.6				50.0				54.7
General and administrative			1.1				1.6				3.0				3.5
General and administrative - affiliate			17.8				20.0				36.9				45.3
Goodwill impairment			226.5				-				226.5				-
Asset impairment			12.3				-				12.3				-
Depreciation and amortization			40.8				36.8				79.1				73.8
			1,038.6				1,402.4				1,940.4				3,037.0
Operating income (loss)			(258.5	)			(5.6	)			(286.8	)			6.7
Interest expense, net			7.2				2.8				13.9				6.1
Equity in earnings of joint ventures			5.9				2.3				11.6				1.0
Other income			0.2				0.1				0.2				0.1
Income (loss) before income tax expense (benefit)			(259.6	)			(6.0	)			(288.9	)			1.7
Income tax expense (benefit)			(3.1	)			0.8				(2.3	)			1.8
Net loss			(256.5	)			(6.8	)			(286.6	)			(0.1	)
Less: Net income (loss) attributable to noncontrolling interest			(120.0	)			(2.2	)			(130.1	)			4.1
Net loss attributable to general and limited partner ownership
interest in Midcoast Energy Partners, L.P.		$	(136.5	)		$	(4.6	)		$	(156.5	)		$	(4.2	)
Net loss attributable to limited partner ownership interest		$	(133.7	)		$	(4.5	)		$	(153.3	)		$	(4.1	)
Net loss per limited partner unit (basic and diluted)		$	(2.96	)		$	(0.09	)		$	(3.39	)		$	(0.09	)
Weighted average limited partner units outstanding			45.2				45.2				45.2				45.2

 

 

MIDCOAST ENERGY PARTNERS, L.P.

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

		For the six months
		ended June 30,
		2015				2014
		(unaudited; in millions)
Cash provided by operating activities:
Net loss		$	(286.6	)		$	(0.1	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization			79.1				73.8
Goodwill impairment			226.5				-
Derivative fair value net losses			59.6				6.2
Inventory market price adjustments			5.3				3.3
Asset impairment			12.3				-
Distributions from investment in joint ventures			11.6				1.0
Equity earnings from investment in joint ventures			(11.6	)			(1.0	)
Deferred income taxes			(3.0	)			0.9
Other			1.2				2.1
Changes in operating assets and liabilities, net of acquisitions:
Receivables, trade and other			14.7				18.1
Due from General Partner and affiliates			46.0				622.0
Accrued receivables			147.8				58.8
Inventory			(10.6	)			(68.1	)
Current and long-term other assets			(21.2	)			(5.5	)
Due to General Partner and affiliates			8.7				(484.2	)
Accounts payable and other			(21.2	)			(51.5	)
Environmental liabilities			-				0.2
Accrued purchases			(116.7	)			1.4
Interest payable			-				0.5
Property and other taxes payable			(2.7	)			(1.6	)
Net cash provided by operating activities			139.2				176.3
Cash used in investing activities:
Additions to property, plant and equipment			(110.0	)			(110.3	)
Changes in restricted cash			29.1				49.0
Acquisitions			(44.0	)			-
Investment in joint ventures			(2.5	)			(28.1	)
Distributions from investment in joint ventures in excess of cumulative earnings			6.7				17.7
Other			(0.7	)			-
Net cash used in investing activities			(121.4	)			(71.7	)
Cash provided by financing activities:
Net borrowings under credit facility			50.0				140.0
Distributions to partners			(31.8	)			(22.1	)
Contributions from noncontrolling interest			37.3				69.8
Distributions to noncontrolling interest			(45.8	)			(61.2	)
Net cash provided by financing activities			9.7				126.5
Net increase in cash and cash equivalents			27.5				231.1
Cash and cash equivalents at beginning of year			-				4.9
Cash and cash equivalents at end of period		$	27.5			$	236.0

 

 

MIDCOAST ENERGY PARTNERS, L.P.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

 

		June 30,				December 31,
		2015				2014
ASSETS		(unaudited; in millions)
Current assets:
Cash and cash equivalents		$	27.5			$	-
Restricted cash			29.7				42.8
Receivables, trade and other, net of allowance for doubtful accounts of $1.5 million
and $1.8 million, respectively, at June 30, 2015 and December 31, 2014			0.6				15.6
Due from General Partner and affiliates			8.3				49.7
Accrued receivables			81.8				229.6
Inventory			86.8				81.5
Other current assets			154.9				178.1
			389.6				597.3
Property, plant and equipment, net			4,218.4				4,159.7
Goodwill			-				226.5
Intangible assets, net			280.9				247.7
Equity investment in joint ventures			376.2				380.6
Other assets, net			100.3				142.3
Total assets		$	5,365.4			$	5,754.1
LIABILITIES AND PARTNERS’ CAPITAL
Current liabilities:
Due to General Partner and affiliates		$	37.3			$	41.1
Accounts payable and other			83.3				113.8
Accrued purchases			258.5				375.2
Property and other taxes payable			18.2				20.9
Interest payable			5.0				5.0
			402.3				556.0
Long-term debt			810.0				760.0
Other long-term liabilities			40.7				41.5
Total liabilities			1,253.0				1,357.5
Commitments and contingencies
Partners’ capital:
Class A common units (22,610,056 authorized and issued at June 30, 2015 and
December 31,2014)			541.9				634.2
Subordinated units (22,610,056 authorized and issued at June 30, 2015 and
December 31, 2014)			1,081.7				1,174.0
General Partner units (922,859 authorized and issued at June 30, 2015 and
December 31, 2014)			44.1				47.8
Accumulated other comprehensive income			6.0				11.6
Total Midcoast Energy Partners, L.P. partners’ capital			1,673.7				1,867.6
Noncontrolling interest			2,438.7				2,529.0
Total partners’ capital			4,112.4				4,396.6
		$	5,365.4			$	5,754.1

 

 

NET INCOME PER LIMITED PARTNER AND GENERAL PARTNER INTEREST

 

We allocate our net income among our General Partner and limited partners using the two-class method. Under the two-class method, we allocate our net income to our limited partners, our General Partner and the holders of our IDRs in accordance with the terms of our partnership agreement. We also allocate any earnings in excess of distributions to our limited partners, our General Partner and the holders of the IDRs in accordance with the terms of our partnership agreement. We allocate any distributions in excess of earnings for the period to our General Partner and our limited partners based on their respective proportionate ownership interests in us, after taking into account distributions to be paid with respect to the IDRs, as set forth in our partnership agreement.

 

Distribution Targets		Portion of Quarterly Distribution Per Unit		Percentage Distributed to Limited Partners		Percentage Distributed to General Partner
Minimum Quarterly Distribution		Up to $0.3125		98%		2%
First Target Distribution		> $0.3125 to $0.359375		98%		2%
Second Target Distribution		> $0.359375 to $0.390625		85%		15%
Third Target Distribution		> $0.390625 to $0.468750		75%		25%
Over Third Target Distribution		In excess of $0.468750		50%		50%

 

  We determined basic and diluted net income (loss) per limited partner unit as follows:

                                

		For the three months								For the six months
		ended June 30,								ended June 30,
		2015				2014				2015				2014
		(in millions, except per unit amounts)
Net loss		$	(256.5	)		$	(6.8	)		$	(286.6	)		$	(0.1	)
Less: Net income (loss) attributable to noncontrolling interest			(120.0	)			(2.2	)			(130.1	)			4.1
Net loss attributable to general and limited partner
interests in Midcoast Energy Partners, L.P.			(136.5	)			(4.6	)			(156.5	)			(4.2	)
Less distributions:
Total distributed earnings to our General Partner			(0.3	)			(0.3	)			(0.6	)			(0.6	)
Total distributed earnings to our limited partners			(16.0	)			(14.7	)			(31.7	)			(28.8	)
Total distributed earnings			(16.3	)			(15.0	)			(32.3	)			(29.4	)
Overdistributed earnings		$	(152.8	)		$	(19.6	)		$	(188.8	)		$	(33.6	)
Weighted average limited partner units outstanding			45.2				45.2				45.2				45.2
Basic and diluted earnings per unit:
Distributed earnings per limited partner unit (1)		$	0.35			$	0.33			$	0.70			$	0.64
Overdistributed earnings per limited partner unit (2)			(3.31	)			(0.42	)			(4.09	)			(0.73	)
Net loss per limited partner unit (basic and diluted)		$	(2.96	)		$	(0.09	)		$	(3.39	)		$	(0.09	)

 

(1)

Represents the total distributed earnings to limited partners divided by the weighted average number of limited partner interests outstanding for the period.

(2)

Represents the limited partners' share (98%) of distributions in excess of earnings divided by the weighted average number of limited partner interests outstanding for the period and underdistributed earnings allocated to the limited partners based on the distribution waterfall that is outlined in our partnership agreement.

 

 

SEGMENT INFORMATION

 

Our business is divided into operating segments, defined as components of the enterprise, about which financial information is available and evaluated regularly by our Chief Operating Decision Maker, collectively comprised of our senior management, in deciding how resources are allocated and performance is assessed.

 

Each of our reportable segments is a business unit that offers different services and products that are managed separately, since each business segment requires different operating strategies. We conduct our business through two distinct reporting segments:

 

•

Gathering, Processing and Transportation; and

•

Logistics and Marketing.

 

The following tables present certain financial information relating to our business segments and corporate activities:

 

		For the three months ended June 30, 2015
		Gathering, Processing and Transportation				Logistics and Marketing				Corporate (1)				Total
		(in millions)
Total revenue		$	401.4			$	689.2			$	-			$	1,090.6
Less: Intersegment revenue			295.3				15.2				-				310.5
Operating revenue			106.1				674.0				-				780.1
Cost of natural gas and natural gas liquids			19.9				650.7				-				670.6
Segment gross margin			86.2				23.3				-				109.5
Operating and maintenance			55.0				14.3				0.2				69.5
General and administrative			15.0				3.0				0.9				18.9
Goodwill impairment			206.1				20.4				-				226.5
Asset impairment			-				12.3				-				12.3
Depreciation and amortization			38.2				2.6				-				40.8
			314.3				52.6				1.1				368.0
Operating loss			(228.1	)			(29.3	)			(1.1	)			(258.5	)
Interest expense, net			-				-				7.2				7.2
Other income			5.9	(2)			-				0.2				6.1
Loss before income tax benefit			(222.2	)			(29.3	)			(8.1	)			(259.6	)
Income tax benefit			-				-				(3.1	)			(3.1	)
Net loss		$	(222.2	)		$	(29.3	)		$	(5.0	)		$	(256.5	)
Less: Net loss attributable to noncontrolling interest			-				-				(120.0	)			(120.0	)
Net income (loss) attributable to general and limited partner
ownership interests in Midcoast Energy Partners, L.P.		$	(222.2	)		$	(29.3	)		$	115.0			$	(136.5	)

 

(1)

Corporate consists of interest expense, interest income, noncontrolling interest and other costs such as income taxes, which are not allocated to the business segments.

(2)

Other income for our Gathering, Processing and Transportation segment includes our equity investment in the Texas Express NGL system.

 

 

		For the three months ended June 30, 2014
		Gathering, Processing and Transportation				Logistics and Marketing				Corporate (1)				Total
		(in millions)
Total revenue		$	694.0			$	1,255.8			$	-			$	1,949.8
Less: Intersegment revenue			524.6				28.4				-				553.0
Operating revenue			169.4				1,227.4				-				1,396.8
Cost of natural gas and natural gas liquids			50.1				1,209.7				-				1,259.8
Segment gross margin			119.3				17.7				-				137.0
Operating and maintenance			67.2				16.8				0.2				84.2
General and administrative			17.1				2.5				2.0				21.6
Depreciation and amortization			34.9				1.9				-				36.8
			119.2				21.2				2.2				142.6
Operating income (loss)			0.1				(3.5	)			(2.2	)			(5.6	)
Interest expense, net			-				-				2.8				2.8
Other income			2.3	(2)			-				0.1				2.4
Income (loss) before income tax expense			2.4				(3.5	)			(4.9	)			(6.0	)
Income tax expense			-				-				0.8				0.8
Net income (loss)			2.4				(3.5	)			(5.7	)			(6.8	)
Less: Net loss attributable to noncontrolling interest			-				-				(2.2	)			(2.2	)
Net income (loss) attributable to general and limited partner
ownership interests in Midcoast Energy Partners, L.P.		$	2.4			$	(3.5	)		$	(3.5	)		$	(4.6	)

 

(1)

Corporate consists of interest expense, interest income, noncontrolling interest and other costs such as income taxes, which are not allocated to the business segments.

(2)

Other income for our Gathering, Processing and Transportation segment includes our equity investment in the Texas Express NGL system.

 

 

		As of and for the six months ended June 30, 2015
		Gathering, Processing and Transportation				Logistics and Marketing				Corporate (1)				Total
		(in millions)
Total revenue		$	786.8			$	1,454.5			$	-			$	2,241.3
Less: Intersegment revenue			562.6				25.1				-				587.7
Operating revenue			224.2				1,429.4				-				1,653.6
Cost of natural gas and natural gas liquids			41.8				1,407.9				-				1,449.7
Segment gross margin			182.4				21.5				-				203.9
Operating and maintenance			105.8				26.9				0.2				132.9
General and administrative			31.3				6.0				2.6				39.9
Goodwill impairment			206.1				20.4				-				226.5
Asset impairment			-				12.3				-				12.3
Depreciation and amortization			74.9				4.2				-				79.1
			418.1				69.8				2.8				490.7
Operating loss			(235.7	)			(48.3	)			(2.8	)			(286.8	)
Interest expense, net			-				-				13.9				13.9
Other income			11.6	(2)			-				0.2				11.8
Loss before income tax benefit			(224.1	)			(48.3	)			(16.5	)			(288.9	)
Income tax benefit			-				-				(2.3	)			(2.3	)
Net loss			(224.1	)			(48.3	)			(14.2	)			(286.6	)
Less: Net loss attributable to noncontrolling interest			-				-				(130.1	)			(130.1	)
Net income (loss) attributable to general and limited partner
ownership interests in Midcoast Energy Partners, L.P.		$	(224.1	)		$	(48.3	)		$	115.9			$	(156.5	)
Total assets		$	4,973.1	(3)		$	289.7			$	102.6			$	5,365.4
Capital expenditures (excluding acquisitions)		$	101.2			$	3.0			$	0.1			$	104.3

 

(1)

Corporate consists of interest expense, interest income, noncontrolling interest and other costs such as income taxes, which are not allocated to the business segments.

(2)

Other income for our Gathering, Processing and Transportation segment includes our equity investment in the Texas Express NGL system.

(3)

Totals assets for our Gathering, Processing and Transportation segment includes $376.2 million for our equity investment in the Texas Express NGL system.

 

 

		As of and for the six months ended June 30, 2014
		Gathering, Processing and Transportation				Logistics and Marketing				Corporate (1)				Total
		(in millions)
Total revenue		$	1,419.0			$	2,728.8			$	-			$	4,147.8
Less: Intersegment revenue			1,046.3				57.8				-				1,104.1
Operating revenue			372.7				2,671.0				-				3,043.7
Cost of natural gas and natural gas liquids			134.9				2,613.6				-				2,748.5
Segment gross margin			237.8				57.4				-				295.2
Operating and maintenance			131.6				34.1				0.2				165.9
General and administrative			41.1				5.7				2.0				48.8
Depreciation and amortization			69.9				3.9				-				73.8
			242.6				43.7				2.2				288.5
Operating income (loss)			(4.8	)			13.7				(2.2	)			6.7
Interest expense, net			-				-				6.1				6.1
Other income			1.1	(2)			-				-				1.1
Income (loss) before income tax expense			(3.7	)			13.7				(8.3	)			1.7
Income tax expense			-				-				1.8				1.8
Net income (loss)			(3.7	)			13.7				(10.1	)			(0.1	)
Less: Net income attributable to noncontrolling interest			-				-				4.1				4.1
Net income (loss) attributable to general and limited partner
ownership interests in Midcoast Energy Partners, L.P.		$	(3.7	)		$	13.7			$	(14.2	)		$	(4.2	)
Total assets		$	4,917.7	(3)		$	394.0			$	330.1			$	5,641.8
Capital expenditures (excluding acquisitions)		$	99.9			$	5.1			$	1.6			$	106.6

 

(1)

Corporate consists of interest expense, interest income, noncontrolling interest and other costs such as income taxes, which are not allocated to the business segments.

(2)

Other income for our Gathering, Processing and Transportation segment includes our equity investment in the Texas Express NGL system.

(3)

Totals assets for our Gathering, Processing and Transportation segment includes $381.6 million for our equity investment in the Texas Express NGL system.