DCP Midstream Partners Reports Record Fourth Quarter 2014 Results
- Exceeded Distributable Cash Flow target for the year
- Reported best ever fourth quarter Adjusted EBITDA and Distributable Cash Flow
-
Declared 17th consecutive quarterly distribution increase, now at
$3.12 per unit annualized -
Discovery's Keathley Canyon connector now in service -
Approved fee-based
Grand Parkway gathering project in DJ basin - Announced new Panola NGL pipeline joint venture and expansion
FOURTH QUARTER AND YEAR TO DATE 2014 SUMMARY RESULTS
| Three Months Ended | Year Ended | |||||
| December 31, | December 31, | |||||
|
2014 (5) |
2013 (3) |
As Reported in 2013 |
2014 (3)(5) |
2013 (3)(4)(5) |
As Reported in 2013 (4)(5) |
|
| (Unaudited) | ||||||
| (Millions, except per unit amounts) | ||||||
| Net income attributable to partners(1) | $ 199 | $ 33 | $ 28 | $ 423 | $ 200 | $ 181 |
| Net income per limited partner unit - basic and diluted(1) | $ 1.48 | $ 0.09 | $ 0.09 | $ 2.84 | $ 1.34 | $ 1.34 |
| Adjusted EBITDA(2) | $ 139 | $ 110 | $ 104 | $ 536 | $ 386 | $ 365 |
| Adjusted net income attributable to partners(2) | $ 86 | $ 68 | $ 63 | $ 337 | $ 236 | $ 217 |
| Adjusted net income per limited partner unit(2) - basic and diluted | $ 0.49 | $ 0.49 | $ 0.49 | $ 2.04 | $ 1.80 | $ 1.80 |
| Distributable cash flow(2) | $ 112 | $ ** | $ 79 | $ 471 | $ ** | $ 296 |
(1) Includes non-cash commodity derivative mark-to-market gains of
(2) Denotes a financial measure not presented in accordance with U.S. generally accepted accounting principles, or GAAP. 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" below.
(3) Includes our
(4) Includes an 80 percent interest in the Eagle Ford system, of which 46.67 percent was acquired in
(5) The Partnership recognized
** Distributable cash flow has not been calculated under the pooling method.
2014 AND RECENT HIGHLIGHTS
-
Generated distributable cash flow of
$112 million , up 42 percent from$79 million in the fourth quarter 2013, and generated distributable cash flow of$471 million in 2014, up 59 percent from$296 million in 2013.
-
Exceeded the 2014 distributable cash flow target range of
$435 million to $450 million .
-
Reported adjusted EBITDA of
$139 million , up 26 percent from$110 million in the fourth quarter2013, and full year 2014 adjusted EBITDA of$536 million is up 39 percent from$386 million in 2013.
-
Increased distribution to
$0.78 per limited partner unit, or$3.12 per unit annualized, by 6.5 percent compared to the distribution declared in the fourth quarter 2013. This is the 17th consecutive distribution increase and the 27th increase since the Partnership's initial public offering in 2005.
-
In
February 2015 , theKeathley Canyon deepwater gas gathering pipeline system in our Discovery joint venture was placed into service. This project is primarily fee-based and is supported by long-term agreements from producers. DPM owns a 40 percent interest in Discovery and Williams owns the remaining 60 percent and is the operator.
-
Approved a fee-based low pressure gathering system project in the DJ basin, the
Grand Parkway gathering project, inFebruary 2015 . This approximately$55 million project is 100 percent fee based backed by commitments from producers. This low pressure gathering header system will lower field pressure, which will increase volumes and improve reliability of the system and is expected to be in-service by year-end 2015.
-
During the first quarter 2015, the Partnership entered into a joint venture in the
Panola Pipeline Company . The Panola pipeline is a 181-mile NGL pipeline fromCarthage toMont Belvieu, Texas .Enterprise Products Partners is the operator with a 55 percent ownership interest, with the remaining 45 percent interest divided evenly among the Partnership, an affiliate of Anadarko and MarkWest. The joint venture will install 60 miles of new pipeline, as well as pumps and other associated equipment as part of an expansion project designed to increase capacity by 50,000 barrels per day to approximately 100,000 barrels per day. Earnings from the joint venture and incremental capacity are expected to commence in the first quarter of 2016.
-
In
February 2015 , the Partnership had a ratings action, whereby one of the Partnership's three rating agencies lowered its debt rating to below investment grade. This action is not expected to have a material impact to the Partnership's ability to fund its operations or growth.
MANAGEMENT'S PERSPECTIVE
"The Partnership ended the year with strong fourth quarter and full year 2014 results, driven largely by volume growth on the new plants in our Eagle Ford and
CONSOLIDATED FINANCIAL RESULTS
Adjusted EBITDA for the three months ended
Adjusted EBITDA for the year ended
Consolidated results are shown using the pooling method of accounting, which includes results associated with
QUARTERLY CASH DISTRIBUTION
On January 29, 2015, the Partnership announced a quarterly distribution of
OPERATING RESULTS BY BUSINESS SEGMENT
Adjusted segment EBITDA increased to
NGL Logistics - Adjusted segment EBITDA increased to
Adjusted segment EBITDA increased to
Wholesale Propane Logistics - Adjusted segment EBITDA decreased to a loss of
Adjusted segment EBITDA decreased to
CORPORATE AND OTHER
Interest expense for the year ended
CAPITALIZATION
At December 31, 2014, the Partnership had
COMMODITY DERIVATIVE ACTIVITY
The objective of the Partnership's commodity risk management program is to protect downside risk in its distributable cash flow. We utilize mark-to-market accounting treatment for our 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 our 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 our physical commodity sales are realized or when we rebalance our portfolio. Non-cash gains or losses associated with the mark-to-market accounting treatment of our commodity derivative instruments do not affect our distributable cash flow.
For the three months ended
For the year ended
EARNINGS CALL
NON-GAAP FINANCIAL INFORMATION
This press release and the accompanying financial schedules include the following non-GAAP financial measures: distributable cash flow, adjusted EBITDA, adjusted segment EBITDA, adjusted net income attributable to partners, adjusted net income allocable to limited partners, and adjusted net income per limited partner unit. 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 distributable cash flow as net cash provided by or used in operating activities, less maintenance capital expenditures, net of reimbursable projects, plus or minus adjustments for non-cash mark-to-market of derivative instruments, proceeds from divestiture of assets, net income attributable to noncontrolling interests net of depreciation and income tax, net changes in operating assets and liabilities, and other adjustments to reconcile net cash provided by or used in operating activities. Historical distributable cash flow is calculated excluding the impact of retrospective adjustments related to any acquisitions presented under the pooling method. Maintenance capital expenditures are cash expenditures made to maintain our 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. 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.
We define adjusted EBITDA as net income or loss attributable to partners less interest income, noncontrolling interest in depreciation and income tax expense and non-cash commodity derivative gains, plus interest expense, income tax expense, depreciation and amortization expense and non-cash commodity derivative losses. 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. We define adjusted segment EBITDA for each segment as segment net income or loss attributable to partners less non-cash commodity derivative gains for that segment, plus depreciation and amortization expense and non-cash commodity derivative losses for that segment, adjusted for any noncontrolling interest on depreciation and amortization expense for that segment. The Partnership's adjusted EBITDA equals the sum of the adjusted segment EBITDA reported for each of its segments, plus general and administrative expense.
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 finance maintenance capital expenditures.
We define adjusted net income attributable to partners as net income attributable to partners, plus non-cash derivative losses, less non-cash derivative gains. Adjusted net income per limited partner unit is then calculated from adjusted net income attributable to partners. These non-cash derivative 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. Adjusted net income attributable to partners and adjusted net income per limited partner unit are provided to illustrate trends in income excluding these non-cash derivative losses or gains, which may or may not be realized in future periods when derivative contracts are settled, due to fluctuating commodity prices.
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 Partnership's annual and quarterly reports most recently filed with the
| DCP MIDSTREAM PARTNERS, LP | ||||||
| FINANCIAL RESULTS AND | ||||||
| SUMMARY BALANCE SHEET DATA | ||||||
| (Unaudited) | ||||||
| Three Months Ended | Year Ended | |||||
| December 31, | December 31, | |||||
| 2014 | 2013 |
As Reported in 2013 |
2014 | 2013 |
As Reported in 2013 |
|
| (Millions, except per unit amounts) | ||||||
| Sales of natural gas, propane, NGLs and condensate | $ 635 | $ 761 | $ 743 | $ 3,143 | $ 2,763 | $ 2,695 |
| Transportation, processing and other | 96 | 82 | 81 | 345 | 271 | 268 |
| Gains (losses) from commodity derivative activity, net | 150 | (22) | (22) | 154 | 17 | 17 |
| Total operating revenues | 881 | 821 | 802 | 3,642 | 3,051 | 2,980 |
| Purchases of natural gas, propane and NGLs | (574) | (667) | (655) | (2,795) | (2,426) | (2,381) |
| Operating and maintenance expense | (62) | (60) | (59) | (216) | (215) | (211) |
| Depreciation and amortization expense | (29) | (26) | (25) | (110) | (95) | (93) |
| General and administrative expense | (16) | (15) | (15) | (64) | (63) | (62) |
| Other expense | (2) | (5) | (5) | (3) | (8) | (8) |
| Total operating costs and expenses | (683) | (773) | (759) | (3,188) | (2,807) | (2,755) |
| Operating income | 198 | 48 | 43 | 454 | 244 | 225 |
| Interest expense | (22) | (12) | (12) | (86) | (52) | (52) |
| Earnings from unconsolidated affiliates | 27 | 10 | 10 | 75 | 33 | 33 |
| Income tax expense | -- | (6) | (6) | (6) | (8) | (8) |
| Net income attributable to noncontrolling interests | (4) | (7) | (7) | (14) | (17) | (17) |
| Net income attributable to partners | 199 | 33 | 28 | 423 | 200 | 181 |
| Net income attributable to predecessor operations | -- | (5) | -- | (6) | (25) | (6) |
| General partner's interest in net income | (31) | (20) | (20) | (114) | (70) | (70) |
| Net income allocable to limited partners | $ 168 | $ 8 | $ 8 | $ 303 | $ 105 | $ 105 |
| Net income per limited partner unit—basic and diluted | $ 1.48 | $ 0.09 | $ 0.09 | $ 2.84 | $ 1.34 | $ 1.34 |
| Weighted-average limited partner units outstanding—basic and diluted | 113.3 | 87.8 | 87.8 | 106.6 | 78.4 | 78.4 |
| As Reported | |||
| December 31, | December 31, | December 31, | |
| 2014 | 2013 | 2013 | |
| (Millions) | |||
| Cash and cash equivalents | $ 25 | $ 12 | $ 12 |
| Other current assets | 565 | 491 | 491 |
| Property, plant and equipment, net | 3,347 | 3,046 | 3,005 |
| Other long-term assets | 1,802 | 1,018 | 1,018 |
| Total assets | $ 5,739 | $ 4,567 | $ 4,526 |
| Current liabilities | $ 601 | $ 723 | $ 722 |
| Long-term debt | 2,061 | 1,590 | 1,590 |
| Other long-term liabilities | 51 | 41 | 41 |
| Partners' equity | 2,993 | 1,985 | 1,945 |
| Noncontrolling interests | 33 | 228 | 228 |
| Total liabilities and equity | $ 5,739 | $ 4,567 | $ 4,526 |
| DCP MIDSTREAM PARTNERS, LP | ||||||
| RECONCILIATION OF NON-GAAP FINANCIAL MEASURES | ||||||
| (Unaudited) | ||||||
| Three Months Ended | Year Ended | |||||
| December 31, | December 31, | |||||
| 2014 | 2013 |
As Reported in 2013 |
2014 | 2013 |
As Reported in 2013 |
|
| (Millions, except per unit amounts) | ||||||
| Reconciliation of Non-GAAP Financial Measures: | ||||||
| Net income attributable to partners | $ 199 | $ 33 | $ 28 | $ 423 | $ 200 | $ 181 |
| Interest expense | 22 | 12 | 12 | 86 | 52 | 52 |
| Depreciation, amortization and income tax expense, net of noncontrolling interests | 30 | 30 | 29 | 113 | 97 | 95 |
| Non-cash commodity derivative mark-to-market | (112) | 35 | 35 | (86) | 37 | 37 |
| Adjusted EBITDA | 139 | 110 | 104 | 536 | 386 | 365 |
| Interest expense | (22) | (12) | (12) | (86) | (52) | (52) |
| Depreciation, amortization and income tax expense, net of noncontrolling interests | (30) | (30) | (29) | (113) | (97) | (95) |
| Other | (1) | -- | -- | -- | (1) | (1) |
| Adjusted net income attributable to partners | 86 | $ 68 | 63 | 337 | $ 236 | 217 |
| Maintenance capital expenditures, net of noncontrolling interest portion and reimbursable projects | (14) | (7) | (38) | (23) | ||
| Distributions from unconsolidated affiliates, net of earnings | 8 | (3) | 45 | 6 | ||
| Depreciation and amortization, net of noncontrolling interests | 30 | 23 | 107 | 87 | ||
| Impact of minimum volume receipt for throughput commitment | (7) | (6) | -- | -- | ||
| Discontinued construction projects | 2 | 4 | 3 | 8 | ||
| Adjustment to remove impact of pooling | -- | -- | (6) | (6) | ||
| Other | 7 | 5 | 23 | 7 | ||
| Distributable cash flow(1) | $ 112 | $ 79 | $ 471 | $ 296 | ||
| Adjusted net income attributable to partners | $ 86 | $ 68 | $ 63 | $ 337 | $ 236 | $ 217 |
| Adjusted net income attributable to predecessor operations | -- | (5) | -- | (6) | (25) | (6) |
| Adjusted general partner's interest in net income | (31) | (20) | (20) | (114) | (70) | (70) |
| Adjusted net income allocable to limited partners | $ 55 | $ 43 | $ 43 | $ 217 | $ 141 | $ 141 |
| Adjusted net income per limited partner unit - basic and diluted | $ 0.49 | $ 0.49 | $ 0.49 | $ 2.04 | $ 1.80 | $ 1.80 |
| Net cash provided by operating activities | $ 89 | $ 66 | $ 60 | $ 524 | $ 345 | $ 324 |
| Interest expense | 22 | 12 | 12 | 86 | 52 | 52 |
| Distributions from unconsolidated affiliates, net of earnings | (8) | 3 | 3 | (45) | (6) | (6) |
| Net changes in operating assets and liabilities | 156 | 8 | 8 | 82 | (8) | (8) |
| Net income attributable to noncontrolling interests, net of depreciation and income tax | (4) | (9) | (9) | (17) | (23) | (23) |
| Discontinued construction projects | (2) | (4) | (4) | (3) | (8) | (8) |
| Non-cash commodity derivative mark-to-market | (112) | 35 | 35 | (86) | 37 | 37 |
| Other, net | (2) | (1) | (1) | (5) | (3) | (3) |
| Adjusted EBITDA | $ 139 | $ 110 | $ 104 | $ 536 | $ 386 | $ 365 |
| Interest expense | (22) | (12) | (86) | (52) | ||
| Maintenance capital expenditures, net of noncontrolling interest portion and reimbursable projects | (14) | (7) | (38) | (23) | ||
| Distributions from unconsolidated affiliates, net of earnings | 8 | (3) | 45 | 6 | ||
| Adjustment to remove impact of pooling | -- | -- | (6) | (6) | ||
| Discontinued construction projects | 2 | 4 | 3 | 8 | ||
| Other | (1) | (7) | 17 | (2) | ||
| Distributable cash flow(1) | $ 112 | $ 79 | $ 471 | $ 296 | ||
| (1) Distributable cash flow has not been calculated under the pooling method. | ||||||
| DCP MIDSTREAM PARTNERS, LP | ||||
| RECONCILIATION OF NON-GAAP FINANCIAL MEASURES | ||||
| SEGMENT FINANCIAL RESULTS AND OPERATING DATA | ||||
| (Unaudited) | ||||
| Three Months Ended | Year Ended | |||
| December 31, | December 31, | |||
| 2014 |
As Reported in 2013 |
2014 |
As Reported in 2013 |
|
| (Millions, except as indicated) | ||||
| Reconciliation of Non-GAAP Financial Measures: | ||||
| Distributable cash flow | $ 112 | $ 79 | $ 471 | $ 296 |
| Distributions declared | $ 120 | $ 86 | $ 454 | $ 309 |
| Distribution coverage ratio — declared | 0.93 x | 0.92 x | 1.04 x | 0.96 x |
| Distributable cash flow | $ 112 | $ 79 | $ 471 | $ 296 |
| Distributions paid | $ 117 | $ 82 | $ 420 | $ 277 |
| Distribution coverage ratio — paid | 0.96 x | 0.96 x | 1.12 x | 1.07 x |
| Three Months Ended | Year Ended | |||||
| December 31, | December 31, | |||||
| 2014 | 2013 |
As Reported in 2013 |
2014 | 2013 |
As Reported in 2013 |
|
| (Millions, except per unit amounts) | ||||||
| Natural Gas Services Segment: | ||||||
| Financial results: | ||||||
| Segment net income attributable to partners | $ 204 | $ 37 | $ 32 | $ 455 | $ 213 | $ 193 |
| Non-cash commodity derivative mark-to-market | (114) | 36 | 36 | (89) | 36 | 36 |
| Depreciation and amortization expense | 27 | 25 | 24 | 101 | 87 | 85 |
| Noncontrolling interests on depreciation and income tax | -- | (2) | (2) | (3) | (6) | (6) |
| Adjusted segment EBITDA | $ 117 | $ 96 | $ 90 | $ 464 | $ 330 | $ 308 |
| Operating and financial data: | ||||||
| Natural gas throughput (MMcf/d) | 2,700 | 2,345 | 2,308 | 2,604 | 2,307 | 2,270 |
| NGL gross production (Bbls/d) | 164,974 | 132,220 | 129,538 | 157,722 | 121,970 | 118,578 |
| Operating and maintenance expense | $ 57 | $ 53 | $ 52 | $ 189 | $ 184 | $ 180 |
| NGL Logistics Segment: | ||||||
| Financial results: | ||||||
| Segment net income attributable to partners | $ 37 | $ 18 | $ 18 | $ 119 | $ 79 | $ 79 |
| Depreciation and amortization expense | 2 | 1 | 1 | 7 | 6 | 6 |
| Adjusted segment EBITDA | $ 39 | $ 19 | $ 19 | $ 126 | $ 85 | $ 85 |
| Operating and financial data: | ||||||
| NGL pipelines throughput (Bbls/d) | 243,412 | 87,324 | 87,324 | 184,706 | 89,361 | 89,361 |
| Operating and maintenance expense | $ 3 | $ 3 | $ 3 | $ 16 | $ 16 | $ 16 |
| Wholesale Propane Logistics Segment: | ||||||
| Financial results: | ||||||
| Segment net (loss) income attributable to partners | $ (4) | $ 11 | $ 11 | $ 5 | $ 31 | $ 31 |
| Non-cash commodity derivative mark-to-market | 2 | (1) | (1) | 3 | 1 | 1 |
| Depreciation and amortization expense | -- | -- | -- | 2 | 2 | 2 |
| Adjusted segment EBITDA | $ (2) | $ 10 | $ 10 | $ 10 | $ 34 | $ 34 |
| Operating and financial data: | ||||||
| Propane sales volume (Bbls/d) | 19,428 | 22,007 | 22,007 | 18,335 | 19,553 | 19,553 |
| Operating and maintenance expense | $ 2 | $ 4 | $ 4 | $ 11 | $ 15 | $ 15 |
| DCP MIDSTREAM PARTNERS, LP | |||||
| RECONCILIATION OF NON-GAAP FINANCIAL MEASURES | |||||
| (Unaudited) | |||||
|
Twelve months ended December 31, |
|||||
| Q114 | Q214 | Q314 | Q414 | 2014 | |
| (Millions, except as indicated) | |||||
| Net income attributable to partners | $ 79 | $ 29 | $ 116 | $ 199 | $ 423 |
| Maintenance capital expenditures, net of noncontrolling interest portion and reimbursable projects | (6) | (11) | (7) | (14) | (38) |
| Depreciation and amortization expense, net of noncontrolling interests | 24 | 27 | 26 | 30 | 107 |
| Non-cash commodity derivative mark-to-market | 13 | 30 | (17) | (112) | (86) |
| Distributions from unconsolidated affiliates, net of earnings | 10 | 11 | 16 | 8 | 45 |
| Impact of minimum volume receipt for throughput commitment | 2 | 2 | 3 | (7) | -- |
| Discontinued construction projects | 1 | -- | -- | 2 | 3 |
| Adjustment to remove impact of pooling | (6) | -- | -- | -- | (6) |
| Other | 5 | 5 | 7 | 6 | 23 |
| Distributable cash flow | $ 122 | $ 93 | $ 144 | $ 112 | $ 471 |
| Distributions declared | $ 106 | $ 111 | $ 117 | $ 120 | $ 454 |
| Distribution coverage ratio — declared | 1.15x | 0.84x | 1.23x | 0.93x | 1.04x |
| Distributable cash flow | $ 122 | $ 93 | $ 144 | $ 112 | $ 471 |
| Distributions paid | $ 86 | $ 106 | $ 111 | $ 117 | $ 420 |
| Distribution coverage ratio — paid | 1.42x | 0.88x | 1.30x | 0.96x | 1.12x |
CONTACT: Investor Relations Contact:
Andrea Attel
Phone: 303-605-1741
Cell: 720-235-6433
