DCP Midstream, LP Reports First Quarter 2017 Results
FIRST QUARTER 2017 SUMMARY RESULTS
Three Months Ended | ||||
March 31, | ||||
2017 | 2016 (2) | |||
(Unaudited) | ||||
(Millions, except per unit amounts) | ||||
Net income attributable to partners | $ | 101 | $ | 65 |
Net income per limited partner unit - basic and diluted | $ | 0.41 | $ | 0.36 |
Adjusted EBITDA(1) | $ | 245 | $ | 307 |
Distributable cash flow(1) | $ | 161 | $ | ** |
(1) This press release includes the following financial measures not presented in accordance with U.S. generally accepted accounting principles, or GAAP: adjusted EBITDA, distributable cash flow and adjusted segment EBITDA. Each such non-GAAP financial measure is defined below under “Non-GAAP Financial Information”, and each is reconciled to its most directly comparable GAAP financial measures under “Reconciliation of Non-GAAP Financial Measures” in schedules at the end of this press release.
(2) Includes the DCP Midstream Business, which the Partnership acquired in
** Distributable cash flow has not been calculated under the pooling method.
RECENT HIGHLIGHTS
- On
January 1, 2017 , the Partnership closed a transaction combining the assets and debt ofDCP Midstream, LLC (Midstream) with the Partnership (Transaction), creating one of the largest NGL producers and gas processors in the U.S. with an enterprise value of approximately$11 billion . The combined company was renamedDCP Midstream, LP and theNew York Stock Exchange stock ticker symbol was changed to “DCP”. - Net income attributable to partners was
$101 million for the three months ended March 31, 2017, or$0.41 per basic and diluted limited partner unit. - Distributable cash flow was
$161 million for the three months ended March 31, 2017, resulting in a 1.04 times distribution coverage ratio based on distributions declared for the first quarter of 2017. - Adjusted EBITDA was
$245 million in the first quarter of 2017. - During the first quarter of 2017, the following growth projects were underway:
$70 million capacity expansion project, net to our two-thirds interest, to 365,000 barrels per day (BPD) on Sand Hills NGL pipeline, expected to be in service in the fourth quarter of 2017, to meet growth in the Permian andDelaware basins.$70 million , net to our two-thirds interest, for multiple new supply connectors, throughout 2017, driving incremental volume growth on Sand Hills NGL pipeline form the Permian,Delaware and other regions.$395 million , 200 million cubic feet per day (MMcf/d) Mewbourn 3 plant and additional compression and gathering infrastructure in theDJ Basin , expected to be in service in the fourth quarter of 2018.$25 million additional field compression and plant bypass infrastructure in theDJ Basin that will add approximately 40 MMcf/d of incremental capacity in the third quarter of 2017.
- In
April 2017 ,Kinder Morgan and the Partnership, announced they signed a non-binding letter of intent regarding the Partnership's participation in the development of theGulf Coast Express Pipeline Project as a partner and shipper. The proposed pipeline would transport up to 1,700,000 dekatherms per day of natural gas from Waha toAgua Dulce, Texas , providing an outlet for increased natural gas production from thePermian Basin to growing markets along theTexas Gulf Coast . The 42-inch pipeline would traverse approximately 430 miles and is expected to be in service in the second half of 2019, pending shipper commitments.
CEO'S PERSPECTIVE
“We delivered a solid first quarter as the newly combined DCP. Our diversified asset portfolio provides us with clear line of sight to growth opportunities that extend our value chain as an integrated midstream service provider," said
DISTRIBUTION AND DISTRIBUTABLE CASH FLOW
On April 25, 2017, the Partnership announced a quarterly distribution of
The Partnership's distributable cash flow of
FIRST QUARTER 2017 OPERATING RESULTS BY BUSINESS SEGMENT
Gathering and Processing
Gathering and Processing Segment net income attributable to partners for the three months ended
Adjusted segment EBITDA decreased to
Logistics and Marketing
Logistics and Marketing Segment net income attributable to partners for the three months ended
Adjusted segment EBITDA decreased to
Other
Interest expense for the three months ended
CAPITALIZATION, LIQUIDITY AND FINANCING
At March 31, 2017 the Partnership had
In
During the first quarter of 2017, the Partnership did not issue any equity to the public. In conjunction with the Transaction, the Partnership issued 28,552,480 common units to
CAPITAL EXPENDITURES AND INVESTMENTS
During the three months ended
COMMODITY DERIVATIVE ACTIVITY
For the three months ended March 31, 2017, commodity derivative activity and total revenues included non-cash unrealized gains of
The objective of the Partnership's commodity risk management program is to protect downside risk in its distributable cash flow. We also manage commodity price risk related to our natural gas storage and pipeline assets through our commodity derivative program. The commercial activities related to our natural gas storage and pipeline assets primarily consist of locking in spreads associated with the purchase and sale of gas. The Partnership utilizes mark-to-market accounting treatment for its commodity derivative instruments. Mark-to-market accounting rules require companies to record currently in earnings the difference between their contracted future derivative settlement prices and the forward prices of the underlying commodities at the end of the accounting period. Revaluing the Partnership's commodity derivative instruments based on futures pricing at the end of the period creates assets or liabilities and associated non-cash gains or losses. Realized gains or losses from cash settlement of the derivative contracts occur monthly as the Partnership's physical commodity sales are realized or when the Partnership rebalances its portfolio. Non-cash gains or losses associated with the mark-to-market accounting treatment of the Partnership's commodity derivative instruments do not affect its distributable cash flow.
EARNINGS CALL
The Partnership will host a conference call webcast at
NON-GAAP FINANCIAL INFORMATION
This press release and the accompanying financial schedules include the following non-GAAP financial measures: adjusted EBITDA, adjusted segment EBITDA and distributable cash flow. The accompanying schedules provide reconciliations of these non-GAAP financial measures to their most directly comparable GAAP financial measures. The Partnership's non-GAAP financial measures should not be considered in isolation or as an alternative to its financial measures presented in accordance with GAAP, including operating revenues, net income or loss attributable to partners, net cash provided by or used in operating activities or any other measure of liquidity or financial performance presented in accordance with GAAP as a measure of operating performance, liquidity or ability to service debt obligations and make cash distributions to unitholders. The non-GAAP financial measures presented by us may not be comparable to similarly titled measures of other companies because they may not calculate their measures in the same manner.
We define Adjusted EBITDA as net income or loss attributable to partners adjusted for (i) distributions from unconsolidated affiliates, net of earnings (ii) depreciation and amortization expense, (iii) net interest expense, (iv) noncontrolling interest in depreciation and income tax expense, (v) unrealized gains and losses from commodity derivatives, (vi) income tax expense or benefit, (vii) impairment expense and (viii) certain other non-cash items. Adjusted EBITDA further excludes items of income or loss that we characterize as unrepresentative of our ongoing operations. Management believes these measures provide investors meaningful insight into results from ongoing operations.
The commodity derivative non-cash losses and gains result from the marking to market of certain financial derivatives used by us for risk management purposes that we do not account for under the hedge method of accounting. These non-cash losses or gains may or may not be realized in future periods when the derivative contracts are settled, due to fluctuating commodity prices.
Adjusted EBITDA is used as a supplemental liquidity and performance measure and adjusted segment EBITDA is used as a supplemental performance measure by the Partnership's management and by external users of its financial statements, such as investors, commercial banks, research analysts and others to assess:
- financial performance of the Partnership's assets without regard to financing methods, capital structure or historical cost basis;
- the Partnership's operating performance and return on capital as compared to those of other companies in the midstream energy industry, without regard to financing methods or capital structure;
- viability and performance of acquisitions and capital expenditure projects and the overall rates of return on investment opportunities;
- performance of the Partnership's business excluding non-cash commodity derivative gains or losses; and
- in the case of Adjusted EBITDA, the ability of the Partnership's assets to generate cash sufficient to pay interest costs, support its indebtedness, make cash distributions to its unitholders and general partner, and pay maintenance capital expenditures.
We define adjusted segment EBITDA for each segment as segment net income or loss attributable to partners adjusted for (i) distributions from unconsolidated affiliates, net of earnings (ii) depreciation and amortization expense, (iii) noncontrolling interest in depreciation and income tax expense, (iv) unrealized gains and losses from commodity derivatives, (v) impairment expense and (vi) certain other non-cash items for that segment.
We define distributable cash flow as adjusted EBITDA less maintenance capital expenditures, interest expense, the impact of minimum volume receipt for throughput commitments and certain other items.
Maintenance capital expenditures are cash expenditures made to maintain the Partnership's cash flows, operating capacity or earnings capacity. These expenditures add on to or improve capital assets owned, including certain system integrity, compliance and safety improvements. Maintenance capital expenditures also include certain well connects, and may include the acquisition or construction of new capital assets. Non-cash mark-to-market of derivative instruments is considered to be non-cash for the purpose of computing distributable cash flow because settlement will not occur until future periods, and will be impacted by future changes in commodity prices and interest rates. We compare the distributable cash flow we generate to the cash distributions we expect to pay and have paid to our partners. Using this metric, we compute our distribution coverage ratio. Distributable cash flow is used as a supplemental liquidity and performance measure by the Partnership's management and by external users of its financial statements, such as investors, commercial banks, research analysts and others, to assess the Partnership's ability to make cash distributions to its unitholders and its general partner.
ABOUT
CAUTIONARY STATEMENTS
This press release may contain or incorporate by reference forward-looking statements as defined under the federal securities laws regarding
The key risk factors that may have a direct bearing on the Partnership's results of operations and financial condition are described in detail in the "Risk Factors" section of the Partnership's most recently filed annual report and subsequently filed quarterly reports with the
DCP MIDSTREAM, LP FINANCIAL RESULTS AND SUMMARY BALANCE SHEET DATA (Unaudited) |
|||||||
Three Months Ended | |||||||
March 31, | |||||||
2017 | 2016 (1) | ||||||
(Millions, except per unit amounts) | |||||||
Sales of natural gas, NGLs and condensate | $ | 1,933 | $ | 1,294 | |||
Transportation, processing and other | 157 | 152 | |||||
Trading and marketing gains, net | 31 | 18 | |||||
Total operating revenues | 2,121 | 1,464 | |||||
Purchases of natural gas and NGLs | (1,687 | ) | (1,135 | ) | |||
Operating and maintenance expense | (167 | ) | (179 | ) | |||
Depreciation and amortization expense | (94 | ) | (95 | ) | |||
General and administrative expense | (62 | ) | (62 | ) | |||
Other (expense) income | (10 | ) | 87 | ||||
Total operating costs and expenses | (2,020 | ) | (1,384 | ) | |||
Operating income | 101 | 80 | |||||
Interest expense, net | (73 | ) | (79 | ) | |||
Earnings from unconsolidated affiliates | 74 | 66 | |||||
Income tax expense | (1 | ) | (2 | ) | |||
Net income attributable to partners | 101 | 65 | |||||
Net loss attributable to predecessor operations | — | 7 | |||||
General partner's interest in net income | (42 | ) | (31 | ) | |||
Net income allocable to limited partners | $ | 59 | $ | 41 | |||
Net income per limited partner unit — basic and diluted | $ | 0.41 | $ | 0.36 | |||
Weighted-average limited partner units outstanding — basic and diluted | 143.3 | 114.7 |
March 31, | December 31, | |||
2017 | 2016 (1) | |||
(Millions) | ||||
Cash and cash equivalents | $ | 176 | $ | 1 |
Other current assets | 804 | 993 | ||
Property, plant and equipment, net | 9,047 | 9,069 | ||
Other long-term assets | 3,552 | 3,548 | ||
Total assets | $ | 13,579 | $ | 13,611 |
Current liabilities | $ | 890 | $ | 1,123 |
Current portion of long-term debt | 500 | 500 | ||
Long-term debt | 4,709 | 4,907 | ||
Other long-term liabilities | 230 | 228 | ||
Partners' equity | 7,220 | 6,821 | ||
Noncontrolling interests | 30 | 32 | ||
Total liabilities and equity | $ | 13,579 | $ | 13,611 |
(1) Includes the DCP Midstream Business, which the Partnership acquired in
DCP MIDSTREAM, LP RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (Unaudited) |
|||||||
Three Months Ended | |||||||
March 31, | |||||||
2017 | 2016 (1) | ||||||
(Millions) | |||||||
Reconciliation of Non-GAAP Financial Measures: | |||||||
Net income attributable to partners | $ | 101 | $ | 65 | |||
Interest expense | 73 | 79 | |||||
Depreciation, amortization and income tax expense, net of noncontrolling interests | 95 | 97 | |||||
Distributions from unconsolidated affiliates, net of earnings | 2 | 21 | |||||
Other non-cash charges | 10 | — | |||||
Non-cash commodity derivative mark-to-market | (36 | ) | 45 | ||||
Adjusted EBITDA | 245 | $ | 307 | ||||
Interest expense | (73 | ) | |||||
Maintenance capital expenditures, net of noncontrolling interest portion and reimbursable projects | (15 | ) | |||||
Other, net | 4 | ||||||
Distributable cash flow | $ | 161 | ** | ||||
Net cash provided by operating activities | $ | 144 | $ | 151 | |||
Interest expense | 73 | 79 | |||||
Net changes in operating assets and liabilities | 66 | 36 | |||||
Non-cash commodity derivative mark-to-market | (36 | ) | 45 | ||||
Other, net | (2 | ) | (4 | ) | |||
Adjusted EBITDA | 245 | $ | 307 | ||||
Interest expense | (73 | ) | |||||
Maintenance capital expenditures, net of noncontrolling interest portion and reimbursable projects | (15 | ) | |||||
Other, net | 4 | ||||||
Distributable cash flow | $ | 161 | ** |
(1) Includes the DCP Midstream Business, which the Partnership acquired in
** Distributable cash flow has not been calculated under the pooling method.
DCP MIDSTREAM, LP RECONCILIATION OF NON-GAAP FINANCIAL MEASURES SEGMENT FINANCIAL RESULTS AND OPERATING DATA (Unaudited) |
|||||||
Three Months Ended | |||||||
March 31, | |||||||
2017 | 2016 (1) | ||||||
(Millions, except as indicated) | |||||||
Gathering and Processing Segment: | |||||||
Financial results: | |||||||
Segment net income attributable to partners | $ | 152 | $ | 120 | |||
Non-cash commodity derivative mark-to-market | (31 | ) | 39 | ||||
Depreciation and amortization expense | 85 | 86 | |||||
Distributions from unconsolidated affiliates, net of earnings | 5 | 8 | |||||
Adjusted segment EBITDA | $ | 211 | $ | 253 | |||
Operating and financial data: | |||||||
Natural gas wellhead (MMcf/d) | 4,580 | 5,431 | |||||
NGL gross production (MBbls/d) | 352 | 396 | |||||
Operating and maintenance expense | $ | 153 | $ | 161 | |||
Logistics and Marketing Segment: | |||||||
Financial results: | |||||||
Segment net income attributable to partners | $ | 87 | $ | 94 | |||
Depreciation and amortization expense | 4 | 4 | |||||
Distributions from unconsolidated affiliates, net of earnings | (3 | ) | 13 | ||||
Other charges | 9 | — | |||||
Non-cash commodity derivative mark-to-market | (5 | ) | 6 | ||||
Adjusted segment EBITDA | $ | 92 | $ | 117 | |||
Operating and financial data: | |||||||
NGL pipelines throughput (MBbls/d) | 427 | 399 | |||||
Operating and maintenance expense | $ | 9 | $ | 10 |
(1) Includes the DCP Midstream Business, which the Partnership acquired in
DCP MIDSTREAM, LP RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (Unaudited) |
|||
Three Months Ended | |||
March 31, | |||
2017 | |||
(Millions, except as indicated) | |||
Reconciliation of Non-GAAP Financial Measures: | |||
Distributable cash flow | $ | 161 | |
Distributions declared | $ | 155 | |
Distribution coverage ratio - declared | 1.04 | x | |
Distributable cash flow | $ | 161 | |
Distributions paid | $ | 121 | |
Distribution coverage ratio - paid | 1.33 | x |
Irene Lofland +1 303-605-1822