DCP Midstream Partners Reports Third Quarter 2015 Results
- Reported Adjusted EBITDA of
$167 million , up 12 percent from the third quarter of 2014 - Generated Distributable Cash Flow of
$146 million , resulting in a distribution coverage ratio of 1.21 times in the third quarter of 2015 - Declared quarterly distribution of
$0.78 per unit, or$3.12 per unit annualized
THIRD QUARTER 2015 SUMMARY RESULTS
Three Months Ended | Nine Months Ended | |||||||||||
September 30, | September 30, | |||||||||||
2015 | 2014 | 2015 | 2014(2) | |||||||||
(Unaudited) | ||||||||||||
(Millions, except per unit amounts) | ||||||||||||
Net income attributable to partners | $ | 71 | $ | 116 | $ | 138 | $ | 224 | ||||
Net income per limited partner unit - basic and diluted | $ | 0.35 | $ | 0.77 | $ | 0.39 | $ | 1.29 | ||||
Adjusted EBITDA(1) | $ | 167 | $ | 149 | $ | 479 | $ | 397 | ||||
Adjusted net income attributable to partners(1) | $ | 112 | $ | 100 | $ | 326 | $ | 251 | ||||
Adjusted net income per limited partner unit(1) - basic and diluted | $ | 0.71 | $ | 0.63 | $ | 2.03 | $ | 1.55 | ||||
Distributable cash flow(1) | $ | 146 | $ | 144 | $ | 427 | $ | 359 |
(1) 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.
(2) Includes the
HIGHLIGHTS
- Reported adjusted EBITDA of
$167 million in the third quarter of 2015, up 12 percent from$149 million in the third quarter of 2014. - Generated distributable cash flow of
$146 million in the third quarter of 2015, up from$144 million in the third quarter of 2014, resulting in a distribution coverage ratio of 1.21 times in the third quarter of 2015. Excluding a one-time distribution and proceeds from asset sales totaling$12 million in the third quarter of 2014, distributable cash flow grew by approximately 11 percent. - On
October 30, 2015 ,DCP Midstream, LLC , the owner of the Partnership's General Partner, closed on an agreement with Phillips 66 and Spectra Energy under which Phillips 66 contributed$1.5 billion in cash and Spectra Energy contributed all of its interests in the Sand Hills and Southern Hills NGL pipelines toDCP Midstream, LLC , respectively, as capital contributions. - The Partnership remains on track to achieve its 2015 adjusted EBITDA and distributable cash flow targets.
"The transaction
DISTRIBUTION AND DISTRIBUTABLE CASH FLOW
On October 27, 2015, the Partnership announced a quarterly distribution of
The Partnership's distributable cash flow of
THIRD QUARTER 2015 OPERATING RESULTS BY BUSINESS SEGMENT
Adjusted segment EBITDA increased to
NGL Logistics
Adjusted segment EBITDA increased to
Wholesale Propane Logistics
Adjusted segment EBITDA increased to
Corporate and Other
Interest expense for the three months ended
During the three months ended
CAPITALIZATION, LIQUIDITY AND FINANCING
At September 30, 2015, the Partnership had
CAPITAL EXPENDITURES AND INVESTMENTS
The Partnership anticipates 2015 expansion capital of approximately
During the nine months ended
COMMODITY DERIVATIVE ACTIVITY
The objective of the Partnership's commodity risk management program is to protect downside risk in its distributable cash flow. 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.
For the three and nine months 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 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. 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, non-cash commodity derivative gains, plus interest expense, income tax expense, depreciation and amortization expense, non-cash commodity derivative losses, and certain other non-cash charges. 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 plus or minus adjustments for non-cash mark-to-market of commodity derivative instruments for that segment, plus depreciation and amortization expense, and certain other non-cash charges for that segment, adjusted for any noncontrolling interest portion of depreciation, amortization and income tax 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 and certain other non-cash charges, less non-cash derivative gains. Adjusted net income per limited partner unit is then calculated from adjusted net income attributable to partners. Non-cash derivative losses and gains result from the marking to market of certain financial derivatives used by the Partnership for risk management purposes that are not accounted 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 “Risk Factors” section of the Partnership's 2014 Annual Report on Form 10-K filed with the
DCP MIDSTREAM PARTNERS, LP | ||||||||||||||
FINANCIAL RESULTS AND | ||||||||||||||
SUMMARY BALANCE SHEET DATA | ||||||||||||||
(Unaudited) | ||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||
September 30, | September 30, | |||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||
(Millions, except per unit amounts) | ||||||||||||||
Sales of natural gas, propane, NGLs and condensate | $ | 324 | $ | 741 | $ | 1,146 | $ | 2,508 | ||||||
Transportation, processing and other | 97 | 86 | 260 | 249 | ||||||||||
Gains from commodity derivative activity, net | 44 | 41 | 57 | 4 | ||||||||||
Total operating revenues | 465 | 868 | 1,463 | 2,761 | ||||||||||
Purchases of natural gas, propane and NGLs | (281 | ) | (660 | ) | (989 | ) | (2,221 | ) | ||||||
Operating and maintenance expense | (58 | ) | (53 | ) | (156 | ) | (154 | ) | ||||||
Depreciation and amortization expense | (30 | ) | (27 | ) | (88 | ) | (81 | ) | ||||||
General and administrative expense | (21 | ) | (17 | ) | (64 | ) | (48 | ) | ||||||
Goodwill impairment | (33 | ) | — | (82 | ) | — | ||||||||
Other income (expense) | 1 | — | — | (1 | ) | |||||||||
Total operating costs and expenses | (422 | ) | (757 | ) | (1,379 | ) | (2,505 | ) | ||||||
Operating income | 43 | 111 | 84 | 256 | ||||||||||
Interest expense | (25 | ) | (22 | ) | (69 | ) | (64 | ) | ||||||
Earnings from unconsolidated affiliates | 54 | 29 | 121 | 48 | ||||||||||
Income tax (expense) benefit | — | (2 | ) | 3 | (6 | ) | ||||||||
Net income attributable to noncontrolling interests | (1 | ) | — | (1 | ) | (10 | ) | |||||||
Net income attributable to partners | 71 | 116 | 138 | 224 |
||||||||||
Net income attributable to predecessor operations | — | — | — | (6 | ) | |||||||||
General partner's interest in net income | (31 | ) | (30 | ) | (93 | ) | (83 | ) | ||||||
Net income allocable to limited partners | $ | 40 | $ | 86 | $ | 45 | $ | 135 | ||||||
Net income per limited partner unit — basic and diluted | $ | 0.35 | $ | 0.77 | $ | 0.39 | $ | 1.29 | ||||||
Weighted-average limited partner units outstanding — basic and diluted | 114.7 | 111.0 | 114.6 | 104.3 |
September 30, | December 31, | |||||
2015 | 2014 | |||||
(Millions) | ||||||
Cash and cash equivalents | $ | 1 | $ | 25 | ||
Other current assets | 367 | 565 | ||||
Property, plant and equipment, net | 3,483 | 3,347 | ||||
Other long-term assets | 1,718 | 1,802 | ||||
Total assets | $ | 5,569 | $ | 5,739 | ||
Current liabilities | $ | 510 | $ | 601 | ||
Long-term debt | 2,179 | 2,061 | ||||
Other long-term liabilities | 48 | 51 | ||||
Partners' equity | 2,802 | 2,993 | ||||
Noncontrolling interests | 30 | 33 | ||||
Total liabilities and equity | $ | 5,569 | $ | 5,739 |
DCP MIDSTREAM PARTNERS, LP | |||||||||||||
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES | |||||||||||||
(Unaudited) | |||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||
September 30, | September 30, | ||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||
(Millions, except per unit amounts) | |||||||||||||
Reconciliation of Non-GAAP Financial Measures: | |||||||||||||
Net income attributable to partners | $ | 71 | $ | 116 | $ | 138 | $ | 224 | |||||
Interest expense | 25 | 22 | 69 | 64 | |||||||||
Depreciation, amortization and income tax expense, net of noncontrolling interests | 30 | 28 | 85 | 83 | |||||||||
Goodwill impairment | 33 | — | 82 | — | |||||||||
Non-cash commodity derivative mark-to-market | 8 | (17 | ) | 105 | 26 | ||||||||
Adjusted EBITDA | 167 | 149 | 479 | 397 | |||||||||
Interest expense | (25 | ) | (22 | ) | (69 | ) | (64 | ) | |||||
Depreciation, amortization and income tax expense, net of noncontrolling interests | (30 | ) | (28 | ) | (85 | ) | (83 | ) | |||||
Other | — | 1 | 1 | 1 | |||||||||
Adjusted net income attributable to partners | 112 | 100 | 326 | 251 | |||||||||
Maintenance capital expenditures, net of noncontrolling interest portion and reimbursable projects | (5 | ) | (7 | ) | (20 | ) | (24 | ) | |||||
Distributions from unconsolidated affiliates, net of earnings | 3 | 16 | 23 | 37 | |||||||||
Depreciation and amortization, net of noncontrolling interests | 30 | 26 | 88 | 77 | |||||||||
Impact of minimum volume receipt for throughput commitment | 4 | 3 | 9 | 7 | |||||||||
Discontinued construction projects | — | — | 1 | 1 | |||||||||
Adjustment to remove impact of pooling | — | — | — | (6 | ) | ||||||||
Other | 2 | 6 | — | 16 | |||||||||
Distributable cash flow | $ | 146 | $ | 144 | $ | 427 | $ | 359 | |||||
Adjusted net income attributable to partners | $ | 112 | $ | 100 | $ | 326 | $ | 251 | |||||
Adjusted net income attributable to predecessor operations | — | — | — | (6 | ) | ||||||||
Adjusted general partner's interest in net income | (31 | ) | (30 | ) | (93 | ) | (83 | ) | |||||
Adjusted net income allocable to limited partners | $ | 81 | $ | 70 | $ | 233 | $ | 162 | |||||
Adjusted net income per limited partner unit - basic and diluted | $ | 0.71 | $ | 0.63 | $ | 2.03 | $ | 1.55 | |||||
Net cash provided by operating activities | $ | 143 | $ | 135 | $ | 493 | $ | 435 | |||||
Interest expense | 25 | 22 | 69 | 64 | |||||||||
Distributions from unconsolidated affiliates, net of earnings | (3 | ) | (16 | ) | (23 | ) | (37 | ) | |||||
Net changes in operating assets and liabilities | (3 | ) | 26 | (157 | ) | (74 | ) | ||||||
Net income attributable to noncontrolling interests, net of depreciation and income tax | (1 | ) | (1 | ) | (2 | ) | (13 | ) | |||||
Discontinued construction projects | — | — | (1 | ) | (1 | ) | |||||||
Non-cash commodity derivative mark-to-market | 8 | (17 | ) | 105 | 26 | ||||||||
Other, net | (2 | ) | — | (5 | ) | (3 | ) | ||||||
Adjusted EBITDA | $ | 167 | $ | 149 | $ | 479 | $ | 397 | |||||
Interest expense | (25 | ) | (22 | ) | (69 | ) | (64 | ) | |||||
Maintenance capital expenditures, net of noncontrolling interest portion and reimbursable projects | (5 | ) | (7 | ) | (20 | ) | (24 | ) | |||||
Distributions from unconsolidated affiliates, net of earnings | 3 | 16 | 23 | 37 | |||||||||
Adjustment to remove impact of pooling | — | — | — | (6 | ) | ||||||||
Discontinued construction projects | — | — | 1 | 1 | |||||||||
Other | 6 | 8 | 13 | 18 | |||||||||
Distributable cash flow | $ | 146 | $ | 144 | $ | 427 | $ | 359 |
DCP MIDSTREAM PARTNERS, LP | |||||||||||||
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES | |||||||||||||
SEGMENT FINANCIAL RESULTS AND OPERATING DATA | |||||||||||||
(Unaudited) | |||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||
September 30, | September 30, | ||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||
(Millions, except as indicated) | |||||||||||||
Natural Gas Services Segment: | |||||||||||||
Financial results: | |||||||||||||
Segment net income attributable to partners | $ | 66 | $ | 121 | $ | 110 | $ | 251 | |||||
Non-cash commodity derivative mark-to-market | 8 | (17 | ) | 108 | 25 | ||||||||
Depreciation and amortization expense | 27 | 24 | 80 | 74 | |||||||||
Goodwill impairment | 33 | — | 82 | — | |||||||||
Noncontrolling interest portion of depreciation and income tax | — | (1 | ) | (1 | ) | (3 | ) | ||||||
Adjusted segment EBITDA | $ | 134 | $ | 127 | $ | 379 | $ | 347 | |||||
Operating and financial data: | |||||||||||||
Natural gas throughput (MMcf/d) | 2,842 | 2,769 | 2,717 | 2,573 | |||||||||
NGL gross production (Bbls/d) | 171,152 | 170,523 | 159,666 | 155,304 | |||||||||
Operating and maintenance expense | $ | 51 | $ | 45 | $ | 134 | $ | 132 | |||||
NGL Logistics Segment: | |||||||||||||
Financial results: | |||||||||||||
Segment net income attributable to partners | $ | 46 | $ | 36 | $ | 124 | $ | 82 | |||||
Depreciation and amortization expense | 2 | 2 | 6 | 5 | |||||||||
Adjusted segment EBITDA | $ | 48 | $ | 38 | $ | 130 | $ | 87 | |||||
Operating and financial data: | |||||||||||||
NGL pipelines throughput (Bbls/d) | 272,624 | 227,892 | 260,208 | 165,138 | |||||||||
NGL fractionator throughput (Bbls/d) | 58,467 | 71,877 | 55,501 | 59,464 | |||||||||
Operating and maintenance expense | $ | 5 | $ | 5 | $ | 15 | $ | 13 | |||||
Wholesale Propane Logistics Segment: | |||||||||||||
Financial results: | |||||||||||||
Segment net income attributable to partners | $ | 5 | $ | — | $ | 34 | $ | 9 | |||||
Non-cash commodity derivative mark-to-market | — | — | (3 | ) | 1 | ||||||||
Depreciation and amortization expense | 1 | 1 | 2 | 2 | |||||||||
Adjusted segment EBITDA | $ | 6 | $ | 1 | $ | 33 | $ | 12 | |||||
Operating and financial data: | |||||||||||||
Propane sales volume (Bbls/d) | 7,957 | 9,543 | 16,330 | 17,971 | |||||||||
Operating and maintenance expense | $ | 2 | $ | 3 | $ | 7 | $ | 9 |
DCP MIDSTREAM PARTNERS, LP | ||||||||||||||||
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES | ||||||||||||||||
(Unaudited) | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
(Millions, except as indicated) | ||||||||||||||||
Reconciliation of Non-GAAP Financial Measures: | ||||||||||||||||
Distributable cash flow | $ | 146 | $ | 144 | $ | 427 | $ | 359 | ||||||||
Distributions declared | $ | 120 | $ | 117 | $ | 362 | $ | 334 | ||||||||
Distribution coverage ratio - declared | 1.22 | x | 1.23 | x | 1.18 | x | 1.07 | x | ||||||||
Distributable cash flow | $ | 146 | $ | 144 | $ | 427 | $ | 359 | ||||||||
Distributions paid | $ | 121 | $ | 111 | $ | 362 | $ | 303 | ||||||||
Distribution coverage ratio - paid | 1.21 | x | 1.30 | x | 1.18 | x | 1.18 | x |
Q414 | Q115 | Q215 | Q315 | Twelve months ended September 30, 2015 |
||||||||||||
(Millions, except as indicated) | ||||||||||||||||
Reconciliation of Non-GAAP Financial Measures: | ||||||||||||||||
Net income (loss) attributable to partners | $ | 199 | $ | 69 | $ | (2 | ) | $ | 71 | $ | 337 | |||||
Maintenance capital expenditures, net of noncontrolling interest portion and reimbursable projects | (14 | ) | (7 | ) | (8 | ) | (5 | ) | (34 | ) | ||||||
Depreciation and amortization expense, net of noncontrolling interests | 30 | 28 | 30 | 30 | 118 | |||||||||||
Non-cash commodity derivative mark-to-market | (112 | ) | 42 | 55 | 8 | (7 | ) | |||||||||
Distributions from unconsolidated affiliates, net of earnings | 8 | 3 | 17 | 3 | 31 | |||||||||||
Goodwill impairment | — | — | 49 | 33 | 82 | |||||||||||
Impact of minimum volume receipt for throughput commitment | (7 | ) | 3 | 2 | 4 | 2 | ||||||||||
Discontinued construction projects | 2 | — | 1 | — | 3 | |||||||||||
Other | 6 | 2 | (3 | ) | 2 | 7 | ||||||||||
Distributable cash flow | $ | 112 | $ | 140 | $ | 141 | $ | 146 | $ | 539 | ||||||
Distributions declared | $ | 120 | $ | 121 | $ | 121 | $ | 120 | $ | 482 | ||||||
Distribution coverage ratio - declared | 0.93x | 1.16x | 1.17x | 1.22x | 1.12x | |||||||||||
Distributable cash flow | $ | 112 | $ | 140 | $ | 141 | $ | 146 | $ | 539 | ||||||
Distributions paid | $ | 117 | $ | 120 | $ | 121 | $ | 121 | $ | 479 | ||||||
Distribution coverage ratio - paid | 0.96x | 1.17x | 1.17x | 1.21x | 1.13x |
Investor Relations Contact:Andrea Attel Phone:303-605-1741 Cell: 720-235-6433 www.dcppartners.com