þ
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934
|
|
For
the quarterly period ended June 30,
2008
|
o
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934
|
|
For
the transition period from
____________ to
____________
|
DELAWARE
|
16-1731691
|
(State
or other jurisdiction of incorporation or organization)
|
(I.R.S.
Employer Identification No.)
|
1700
PACIFIC AVENUE, SUITE 2900
|
|
DALLAS,
TX
|
75201
|
(Address
of principal executive offices)
|
(Zip
Code)
|
(214)
750-1771
|
|
(Registrant’s
telephone number, including area code)
|
|
NONE
|
|
(Former
name, former address and former fiscal year, if changed since last
report.)
|
Page
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PART
I — FINANCIAL INFORMATION
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1
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17
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26
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27
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PART
II — OTHER INFORMATION
|
|
27
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27
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|
27
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|
27
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|
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|
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|
|
|
|
|
|
|
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Name
|
Definition
or Description
|
|
ASC
|
ASC
Hugoton LLC, an affiliate of GECC
|
|
Bbls/d
|
Barrels
per day
|
|
Bcf
|
One
billion cubic feet
|
|
Bcf/d
|
One
billion cubic feet per day
|
|
BTU
|
A
unit of energy needed to raise the temperature of one pound of water by
one degree Fahrenheit
|
|
CDM
|
CDM
Resource Management LLC
|
|
CERCLA
|
Comprehensive
Environmental Response, Compensation and Liability Act
|
|
DOT
|
U.S.
Department of Transportation
|
|
EIA
|
Energy
Information Administration
|
|
EnergyOne
|
FrontStreet
EnergyOne LLC
|
|
El
Paso
|
El
Paso Field Services, LP
|
|
EPA
|
Environmental
Protection Agency
|
|
FASB
|
Financial
Accounting Standards Board
|
|
FERC
|
Federal
Energy Regulatory Commission
|
|
FrontStreet
|
FrontStreet
Hugoton LLC
|
|
GAAP
|
Accounting
principles generally accepted in the United States
|
|
GE
|
General
Electric Company
|
|
GE
EFS
|
General
Electric Energy Financial Services, a unit of GECC, combined with Regency
GP Acquirer LP and Regency LP Acquirer LP
|
|
GECC
|
General
Electric Capital Corporation, an indirect wholly owned subsidiary of
GE
|
|
General
Partner
|
Regency
GP LP, the general partner of the Partnership, or Regency GP LLC, the
general partner of Regency GP LP, which effectively manages the business
and affairs of the Partnership
|
|
GSTC
|
Gulf
States Transmission Corporation
|
|
HLPSA
|
Hazardous
Liquid Pipeline Safety Act
|
|
IRS
|
Internal
Revenue Service
|
|
LIBOR
|
London
Interbank Offered Rate
|
|
MMbtu
|
One
million BTUs
|
|
MMbtu/d
|
One
million BTUs per day
|
|
MMcf
|
One
million cubic feet
|
|
MMcf/d
|
One
million cubic feet per day
|
|
MQD
|
Minimum
Quarterly Distribution
|
|
Nexus
|
Nexus
Gas Holdings, LLC
|
|
NOE
|
Notice
of Enforcement
|
|
NGA
|
Natural
Gas Act of 1938
|
|
NGLs
|
Natural
gas liquids
|
|
NGPA
|
Natural
Gas Policy Act of 1978
|
|
NGPSA
|
Natural
Gas Pipeline Safety Act of 1968, as amended
|
|
NPDES
|
National
Pollutant Discharge Elimination System
|
|
Nasdaq
|
Nasdaq
Stock Market, LLC
|
|
NYMEX
|
New
York Mercantile Exchange
|
|
OSHA
|
Occupational
Safety and Health Act
|
|
Partnership
|
Regency
Energy Partners LP
|
|
Pueblo
|
Pueblo
Midstream Gas Corporation
|
|
RCRA
|
Resource
Conservation and Recovery Act
|
|
RGS
|
Regency
Gas Services LLC
|
|
RIGS
|
Regency
Intrastate Gas LLC
|
|
SEC
|
Securities
and Exchange Commission
|
|
SFAS
|
Statement
of Financial Accounting Standard
|
|
Sonat
|
Southern
Natural Gas Company
|
|
TCEQ
|
Texas
Commission on Environmental Quality
|
|
Tcf
|
One
trillion cubic feet
|
|
Tcf/d
|
One
trillion cubic feet per day
|
|
TRRC
|
Texas
Railroad Commission
|
·
|
changes
in laws and regulations impacting the midstream and compression sectors of
the natural gas industry;
|
·
|
the
level of creditworthiness of our counterparties and
customers;
|
·
|
our
ability to access the debt and equity markets;
|
·
|
our
use of derivative financial instruments to hedge commodity and interest
rate risks;
|
·
|
the
amount of collateral required to be posted from time to time in our
transactions;
|
·
|
changes
in commodity prices, interest rates, demand for our
services;
|
·
|
weather
and other natural phenomena;
|
·
|
industry
changes including the impact of consolidations and changes in
competition;
|
·
|
our
ability to obtain required approvals for construction or modernization of
our facilities and the timing of operations of such facilities;
and
|
·
|
the
effect of accounting pronouncements issued periodically by accounting
standard setting boards.
|
Regency
Energy Partners LP
|
||||||||
Condensed
Consolidated Balance Sheets
|
||||||||
(in
thousands except unit data)
|
||||||||
June
30, 2008
|
December
31, 2007*
|
|||||||
(Unaudited)
|
||||||||
ASSETS
|
||||||||
Current
Assets:
|
||||||||
Cash
and cash equivalents
|
$ | 29,985 | $ | 32,971 | ||||
Restricted
cash
|
10,050 | 6,029 | ||||||
Trade
accounts receivable, net of allowance of $242 in 2008 and $61 in
2007
|
29,303 | 16,487 | ||||||
Accrued
revenues
|
200,078 | 117,622 | ||||||
Related
party receivables
|
493 | 61 | ||||||
Assets
from risk management activities
|
9,305 | - | ||||||
Other
current assets
|
9,637 | 6,723 | ||||||
Total
current assets
|
288,851 | 179,893 | ||||||
Property,
plant and equipment
|
||||||||
Gas
plants and buildings
|
138,688 | 134,300 | ||||||
Gathering
and transmission systems
|
1,291,859 | 780,761 | ||||||
Other
property, plant and equipment
|
149,127 | 105,399 | ||||||
Construction-in-progress
|
113,731 | 33,552 | ||||||
Total
property, plant and equipment
|
1,693,405 | 1,054,012 | ||||||
Less
accumulated depreciation
|
(181,480 | ) | (140,903 | ) | ||||
Property,
plant and equipment, net
|
1,511,925 | 913,109 | ||||||
Other
Assets:
|
||||||||
Intangible
assets, net of accumulated amortization of $15,216 in 2008 and $8,929 in
2007
|
209,098 | 77,804 | ||||||
Long-term
assets from risk management activities
|
9,362 | - | ||||||
Other,
net of accumulated amortization of debt issuance costs of $3,869 in 2008
and $2,488 in 2007
|
18,075 | 13,529 | ||||||
Goodwill
|
265,784 | 94,075 | ||||||
Total
other assets
|
502,319 | 185,408 | ||||||
TOTAL
ASSETS
|
$ | 2,303,095 | $ | 1,278,410 | ||||
LIABILITIES
& PARTNERS' CAPITAL
|
||||||||
Current
Liabilities:
|
||||||||
Trade
accounts payable
|
$ | 65,583 | $ | 48,904 | ||||
Accrued
cost of gas and liquids
|
162,420 | 96,026 | ||||||
Related
party payables
|
- | 50 | ||||||
Escrow
payable
|
10,050 | 6,029 | ||||||
Liabilities
from risk management activities
|
76,016 | 37,852 | ||||||
Other
current liabilities
|
24,711 | 9,397 | ||||||
Total
current liabilities
|
338,780 | 198,258 | ||||||
Long-term
liabilities from risk management activities
|
40,461 | 15,073 | ||||||
Other
long-term liabilities
|
15,963 | 15,393 | ||||||
Long-term
debt
|
1,162,500 | 481,500 | ||||||
Minority
interest in consolidated subsidiary
|
7,464 | 4,893 | ||||||
Commitments
and contingencies
|
||||||||
Partners'
Capital:
|
||||||||
Common
units (46,602,000 and 41,283,079 units authorized; 45,769,948 and
40,514,895 units issued and outstanding at June 30, 2008 and December 31,
2007)
|
562,458 | 490,351 | ||||||
Class
D common units (7,276,506 units authorized, issued and outstanding at June
30, 2008)
|
223,015 | - | ||||||
Class
E common units (4,701,034 units authorized, issued and outstanding at
December 31, 2007)
|
- | 92,962 | ||||||
Subordinated
units (19,103,896 units authorized, issued and outstanding at June 30,
2008 and December 31, 2007)
|
(3,716 | ) | 7,019 | |||||
General
partner interest
|
18,798 | 11,286 | ||||||
Accumulated
other comprehensive loss
|
(62,628 | ) | (38,325 | ) | ||||
Total
partners' capital
|
737,927 | 563,293 | ||||||
TOTAL
LIABILITIES AND PARTNERS' CAPITAL
|
$ | 2,303,095 | $ | 1,278,410 | ||||
See
accompanying notes to condensed consolidated financial
statements
|
||||||||
*
Recast to reflect an acquisition accounted for in a manner similar to a
pooling of interests.
|
Regency
Energy Partners LP
|
||||||||||||||||
Condensed
Consolidated Statements of Operations
|
||||||||||||||||
Unaudited
|
||||||||||||||||
(in
thousands except unit data and per unit data)
|
||||||||||||||||
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
June
30, 2008
|
June
30, 2007 *
|
June
30, 2008
|
June
30, 2007 *
|
|||||||||||||
REVENUES
|
||||||||||||||||
Gas
sales
|
$ | 362,769 | $ | 195,870 | $ | 599,462 | $ | 363,253 | ||||||||
NGL
sales
|
126,521 | 83,236 | 235,020 | 146,777 | ||||||||||||
Gathering,
transportation and other fees, including related party amounts of $935,
$431, $1,926 and $784
|
70,175 | 19,196 | 132,161 | 39,074 | ||||||||||||
Net
realized and unrealized loss from risk management
activities
|
(32,760 | ) | (2,625 | ) | (46,417 | ) | (2,710 | ) | ||||||||
Other
|
20,000 | 7,153 | 31,714 | 12,862 | ||||||||||||
Total
revenues
|
546,705 | 302,830 | 951,940 | 559,256 | ||||||||||||
OPERATING
COSTS AND EXPENSES
|
||||||||||||||||
Cost
of sales, including related party amounts of $844, $7,755, $1,247 and
$13,173
|
446,687 | 249,760 | 760,276 | 461,698 | ||||||||||||
Operation
and maintenance
|
32,516 | 11,972 | 61,361 | 22,897 | ||||||||||||
General
and administrative
|
13,925 | 19,093 | 24,809 | 25,944 | ||||||||||||
Loss
on asset sales, net
|
442 | 532 | 468 | 2,339 | ||||||||||||
Management
services termination fee
|
- | - | 3,888 | - | ||||||||||||
Transaction
expenses
|
147 | - | 534 | - | ||||||||||||
Depreciation
and amortization
|
26,476 | 12,703 | 48,216 | 24,130 | ||||||||||||
Total
operating costs and expenses
|
520,193 | 294,060 | 899,552 | 537,008 | ||||||||||||
OPERATING
INCOME
|
26,512 | 8,770 | 52,388 | 22,248 | ||||||||||||
Interest
expense, net
|
(16,782 | ) | (15,961 | ) | (32,188 | ) | (30,846 | ) | ||||||||
Other
income and deductions, net
|
132 | 170 | 332 | 282 | ||||||||||||
Minority
interest
|
69 | (17 | ) | (3 | ) | (17 | ) | |||||||||
INCOME
(LOSS) BEFORE INCOME TAXES
|
9,931 | (7,038 | ) | 20,529 | (8,333 | ) | ||||||||||
Income
tax expense (benefit)
|
(41 | ) | 225 | 209 | 225 | |||||||||||
NET
INCOME (LOSS)
|
$ | 9,972 | $ | (7,263 | ) | $ | 20,320 | $ | (8,558 | ) | ||||||
General
partner's interest in current period net income (loss), including
IDR
|
336 | (152 | ) | 1,069 | (177 | ) | ||||||||||
Beneficial
conversion feature for Class C common units
|
- | - | - | 1,385 | ||||||||||||
Beneficial
conversion feature for Class D common units
|
1,866 | - | 3,425 | - | ||||||||||||
Limited
partners' interest in net income (loss)
|
$ | 7,770 | $ | (7,111 | ) | $ | 15,826 | $ | (9,766 | ) | ||||||
Basic
and diluted earnings per unit:
|
||||||||||||||||
Amount
allocated to common and subordinated units
|
$ | 7,770 | $ | (7,425 | ) | $ | 15,826 | $ | (10,080 | ) | ||||||
Weighted
average number of common and subordinated units
outstanding
|
62,174,317 | 47,151,689 | 60,701,912 | 44,767,568 | ||||||||||||
Income
(loss) per common and subordinated unit
|
$ | 0.12 | $ | (0.16 | ) | $ | 0.26 | $ | (0.23 | ) | ||||||
Distributions
per unit
|
$ | 0.42 | $ | 0.38 | $ | 0.82 | $ | 0.75 | ||||||||
Amount
allocated to Class B common units
|
$ | - | $ | - | $ | - | $ | - | ||||||||
Weighted
average number of Class B common units outstanding
|
- | - | - | 1,314,733 | ||||||||||||
Income
per Class B common unit
|
$ | - | $ | - | $ | - | $ | - | ||||||||
Distributions
per unit
|
$ | - | $ | - | $ | - | $ | - | ||||||||
Amount
allocated to Class C common units
|
$ | - | $ | - | $ | - | $ | 1,385 | ||||||||
Total
number of Class C common units outstanding
|
- | - | - | 2,857,143 | ||||||||||||
Income
per Class C common unit due to beneficial conversion
feature
|
$ | - | $ | - | $ | - | $ | 0.48 | ||||||||
Distributions
per unit
|
$ | - | $ | - | $ | - | $ | - | ||||||||
Amount
allocated to Class D common units
|
$ | 1,866 | $ | - | $ | 3,425 | $ | - | ||||||||
Total
number of Class D common units outstanding
|
7,276,506 | - | 7,276,506 | - | ||||||||||||
Income
per Class D common unit due to beneficial conversion
feature
|
$ | 0.26 | $ | - | $ | 0.47 | $ | - | ||||||||
Distributions
per unit
|
$ | - | $ | - | $ | - | $ | - | ||||||||
Amount
allocated to Class E common units
|
$ | - | $ | 314 | $ | - | $ | 314 | ||||||||
Total
number of Class E common units outstanding
|
4,701,034 | 4,701,034 | 4,701,034 | 4,701,034 | ||||||||||||
Income
per Class E common unit
|
$ | - | $ | 0.07 | $ | - | $ | 0.07 | ||||||||
Distributions
per unit
|
$ | - | $ | 0.24 | $ | - | $ | 0.24 | ||||||||
See
accompanying notes to condensed consolidated financial
statements
|
||||||||||||||||
*
Recast to reflect an acquisition accounted for in a manner similar to a
pooling of interests.
|
Regency
Energy Partners LP
|
||||||||||||||||
Condensed
Consolidated Statements of Comprehensive Loss
|
||||||||||||||||
Unaudited
|
||||||||||||||||
(in
thousands)
|
||||||||||||||||
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
June
30, 2008
|
June
30, 2007 *
|
June
30, 2008
|
June
30, 2007 *
|
|||||||||||||
Net
income (loss)
|
$ | 9,972 | $ | (7,263 | ) | $ | 20,320 | $ | (8,558 | ) | ||||||
Hedging
amounts reclassified to earnings
|
15,166 | 2,870 | 25,602 | 2,816 | ||||||||||||
Net
change in fair value of cash flow hedges
|
(47,071 | ) | (8,933 | ) | (49,905 | ) | (21,378 | ) | ||||||||
Comprehensive
loss
|
$ | (21,933 | ) | $ | (13,326 | ) | $ | (3,983 | ) | $ | (27,120 | ) | ||||
See
accompanying notes to condensed consolidated financial
statements
|
||||||||||||||||
*
Recast to reflect an acquisition accounted for in a manner similar to a
pooling of interests.
|
Regency
Energy Partners LP
|
||||||||
Condensed
Consolidated Statements of Cash Flows
|
||||||||
Unaudited
|
||||||||
(in
thousands)
|
||||||||
Six
Months Ended
|
||||||||
June
30, 2008
|
June
30, 2007 *
|
|||||||
OPERATING
ACTIVITIES
|
||||||||
Net
income (loss)
|
$ | 20,320 | $ | (8,558 | ) | |||
Adjustments
to reconcile net income (loss) to net cash flows provided by operating
activities:
|
||||||||
Depreciation
and amortization, including debt issuance cost
amortization
|
49,598 | 24,823 | ||||||
Equity
income and minority interest in earnings
|
- | (26 | ) | |||||
Risk
management portfolio valuation changes
|
20,582 | (591 | ) | |||||
Loss
on asset sales
|
468 | 2,340 | ||||||
Unit
based compensation expenses
|
1,839 | 14,085 | ||||||
Cash
flow changes in current assets and liabilities:
|
||||||||
Trade
accounts receivable and accrued revenues
|
(72,784 | ) | (17,653 | ) | ||||
Other
current assets
|
(2,914 | ) | 365 | |||||
Trade
accounts payable, accrued cost of gas and liquids, and accrued
liabilities
|
53,088 | 18,350 | ||||||
Other
current liabilities
|
15,314 | (41 | ) | |||||
Other
assets and liabilities
|
1,423 | (498 | ) | |||||
Net
cash flows provided by operating activities
|
86,934 | 32,596 | ||||||
INVESTING
ACTIVITIES
|
||||||||
Capital
expenditures
|
(148,888 | ) | (65,911 | ) | ||||
Acquisitions
|
(577,345 | ) | (35,228 | ) | ||||
Acquisition
of investment in unconsolidated subsidiary, net of $100
cash
|
- | (5,000 | ) | |||||
Proceeds
from asset sales
|
580 | 10,396 | ||||||
Net
cash flows used in investing activities
|
(725,653 | ) | (95,743 | ) | ||||
FINANCING
ACTIVITIES
|
||||||||
Net
borrowings under revolving credit facilities
|
681,000 | 114,230 | ||||||
Partner
contributions
|
7,663 | 6,244 | ||||||
Partner
distributions
|
(52,317 | ) | (34,309 | ) | ||||
Proceeds
from option exercises
|
2,700 | - | ||||||
Debt
issuance costs
|
(3,313 | ) | - | |||||
Net
cash flows provided by financing activities
|
635,733 | 86,165 | ||||||
Net
increase (decrease) in cash and cash equivalents
|
(2,986 | ) | 23,018 | |||||
Cash
and cash equivalents at beginning of period
|
32,971 | 11,932 | ||||||
Cash
and cash equivalents at end of period
|
$ | 29,985 | $ | 34,950 | ||||
Supplemental
cash flow information
|
||||||||
Interest
paid, net of amounts capitalized
|
$ | 28,222 | $ | 29,996 | ||||
Income
taxes paid
|
564 | - | ||||||
Non-cash
capital expenditures in accounts payable
|
17,907 | 11,943 | ||||||
Non-cash
capital expenditures for consolidation of investment in previously
unconsolidated subsidiary
|
- | 5,650 | ||||||
Non-cash
capital expenditure upon entering into a capital lease
obligation
|
- | 3,000 | ||||||
Issuance
of common units for an acquisition
|
219,590 | 19,724 | ||||||
See
accompanying notes to condensed consolidated financial
statements
|
||||||||
*
Recast to reflect an acquisition accounted for in a manner similar to a
pooling of interests.
|
Regency
Energy Partners LP
|
||||||||||||||||||||||||||||||||||||||||||||
Condensed
Consolidated Statements of Partners' Capital
|
||||||||||||||||||||||||||||||||||||||||||||
Unaudited
|
||||||||||||||||||||||||||||||||||||||||||||
(in
thousands except unit data)
|
||||||||||||||||||||||||||||||||||||||||||||
Units
|
||||||||||||||||||||||||||||||||||||||||||||
Common
|
Class
D
|
Class
E
|
Subordinated
|
Common
Unitholders
|
Class
D Unitholders
|
Class
E Unitholders
|
Subordinated
Unitholders
|
General
Partner Interest
|
Accumulated
Other Comprehensive Loss
|
Total
|
||||||||||||||||||||||||||||||||||
Balance
- December 31, 2007 *
|
40,514,895 | - | 4,701,034 | 19,103,896 | $ | 490,351 | $ | - | $ | 92,962 | $ | 7,019 | $ | 11,286 | $ | (38,325 | ) | $ | 563,293 | |||||||||||||||||||||||||
Issuance
of Class D common units
|
- | 7,276,506 | - | - | - | 219,590 | - | - | - | - | 219,590 | |||||||||||||||||||||||||||||||||
Issuance
of restricted common units and option exercises, net of
forfeitures
|
554,019 | - | - | - | 2,700 | - | - | - | - | - | 2,700 | |||||||||||||||||||||||||||||||||
Working
capital adjustment on FrontStreet
|
- | - | - | - | - | - | (858 | ) | - | - | - | (858 | ) | |||||||||||||||||||||||||||||||
Conversion
of Class E common units
|
4,701,034 | (4,701,034 | ) | 92,104 | - | (92,104 | ) | - | - | - | - | |||||||||||||||||||||||||||||||||
Unit
based compensation expenses
|
- | - | - | - | 1,839 | - | - | - | - | - | 1,839 | |||||||||||||||||||||||||||||||||
General
partner contributions
|
- | - | - | - | - | - | - | - | 7,663 | - | 7,663 | |||||||||||||||||||||||||||||||||
Partner
distributions
|
- | - | - | - | (35,432 | ) | - | - | (15,665 | ) | (1,220 | ) | - | (52,317 | ) | |||||||||||||||||||||||||||||
Net
income
|
- | - | - | - | 10,896 | 3,425 | - | 4,930 | 1,069 | - | 20,320 | |||||||||||||||||||||||||||||||||
Net
hedging amounts reclassified to earnings
|
- | - | - | - | - | - | - | - | - | 25,602 | 25,602 | |||||||||||||||||||||||||||||||||
Net
change in fair value of cash flow hedges
|
- | - | - | - | - | - | - | - | - | (49,905 | ) | (49,905 | ) | |||||||||||||||||||||||||||||||
Balance
- June 30, 2008
|
45,769,948 | 7,276,506 | - | 19,103,896 | $ | 562,458 | $ | 223,015 | $ | - | $ | (3,716 | ) | $ | 18,798 | $ | (62,628 | ) | $ | 737,927 | ||||||||||||||||||||||||
See
accompanying notes to condensed consolidated financial
statements
|
||||||||||||||||||||||||||||||||||||||||||||
*Recast
to reflect an acquisition accounted for in a manner similar to a pooling
of interests.
|
At
June 18, 2007
|
||||
(in
thousands)
|
||||
Current
assets
|
$ | 8,840 | ||
Property,
plant and equipment
|
91,556 | |||
Total
assets acquired
|
100,396 | |||
Current
liabilities
|
(12,556 | ) | ||
Net
book value of assets acquired
|
$ | 87,840 |
Permits
and Licenses
|
Customer
Contracts
|
Trade
Names
|
Total
|
|||||||||||||
(in
thousands)
|
||||||||||||||||
Balance
at December 31,2007
|
$ | 9,368 | $ | 68,436 | $ | - | $ | 77,804 | ||||||||
Additions
|
- | 102,480 | 35,100 | 137,580 | ||||||||||||
Disposals
|
- | - | - | - | ||||||||||||
Amortization
|
(393 | ) | (4,811 | ) | (1,082 | ) | (6,286 | ) | ||||||||
Balance
at June 30, 2008
|
$ | 8,975 | $ | 166,105 | $ | 34,018 | $ | 209,098 |
Year
ending December 31,
|
Total
|
|||
(in
thousands)
|
||||
2008
(remaining)
|
$ | 6,911 | ||
2009
|
12,358 | |||
2010
|
12,264 | |||
2011
|
10,950 | |||
2012
|
10,713 |
For
the Three Months Ended June 30, 2008
|
For
the Six Months Ended June 30, 2008
|
|||||||||||||||||||||||
Income
(Numerator)
|
Units
(Denominator)
|
Per-Unit
Amount
|
Income
(Numerator)
|
Units
(Denominator)
|
Per-Unit
Amount
|
|||||||||||||||||||
(in
thousands except unit and per unit data)
|
||||||||||||||||||||||||
Basic
Earnings per Unit
|
||||||||||||||||||||||||
Limited
partner's interest in net income
|
$ | 7,770 | 62,174,317 | $ | 0.12 | $ | 15,826 | 60,701,912 | $ | 0.26 | ||||||||||||||
Effect
of Dilutive Securities
|
||||||||||||||||||||||||
Common
unit options
|
- | 98,665 | - | 149,186 | ||||||||||||||||||||
Diluted
Earnings per Unit
|
$ | 7,770 | 62,272,982 | $ | 0.12 | $ | 15,826 | 60,851,098 | $ | 0.26 |
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
June
30, 2008
|
June
30, 2007
|
June
30, 2008
|
June
30, 2007
|
|||||||||||||
Restricted
common units
|
713,925 | 355,000 | 713,925 | 355,000 | ||||||||||||
Common
unit options
|
- | 868,568 | - | 868,568 | ||||||||||||
Class
D common units
|
7,276,506 | - | 7,276,506 | - |
At
January 15, 2008
|
||||
(in
thousands)
|
||||
Current
assets
|
$ | 19,463 | ||
Other
assets
|
4,547 | |||
Gas
plants and buildings
|
1,528 | |||
Gathering
and transmission systems
|
421,160 | |||
Other
property, plant and equipment
|
2,728 | |||
Construction-in-progress
|
36,385 | |||
Identifiable
intangible assets
|
80,480 | |||
Goodwill
|
164,522 | |||
Assets
acquired
|
730,813 | |||
Current
liabilities
|
(31,054 | ) | ||
Other
liabilities
|
(57 | ) | ||
Net
assets acquired
|
$ | 699,702 |
At
March 25, 2008
|
||||
(in
thousands)
|
||||
Current
assets
|
$ | 3,457 | ||
Buildings
|
13 | |||
Gathering
and transmission systems
|
16,960 | |||
Other
property, plant and equipment
|
4,440 | |||
Identifiable
intangible assets
|
57,100 | |||
Goodwill
|
7,187 | |||
Assets
acquired
|
89,157 | |||
Current
liabilities
|
(671 | ) | ||
Net
assets acquired
|
$ | 88,486 |
Pro
Forma Results for the
|
||||||||||||||||
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
June
30, 2008
|
June
30, 2007
|
June
30, 2008
|
June
30, 2007
|
|||||||||||||
(in
thousands except unit and per unit data)
|
||||||||||||||||
Revenue
|
$ | 546,705 | $ | 333,353 | $ | 959,147 | $ | 630,529 | ||||||||
Net
income (loss)
|
$ | 9,972 | $ | (4,643 | ) | $ | 22,134 | $ | (1,157 | ) | ||||||
Less:
|
||||||||||||||||
General
partner's interest in current period net income (loss), including
IDR
|
336 | (92 | ) | 1,068 | (29 | ) | ||||||||||
Beneficial
conversion feature for Class C common units
|
- | - | - | 1,385 | ||||||||||||
Beneficial
conversion feature for Class D common units
|
1,866 | - | 3,425 | - | ||||||||||||
Limited
partners' interest in net income (loss)
|
$ | 7,770 | $ | (4,551 | ) | $ | 17,641 | $ | (2,513 | ) | ||||||
Basic
and Diluted earnings per unit:
|
||||||||||||||||
Amount
allocated to common and subordinated units
|
$ | 7,770 | $ | (4,865 | ) | $ | 17,641 | $ | (2,827 | ) | ||||||
Weighted
average number of common and subordinated units
outstanding
|
62,174,317 | 47,151,689 | 60,701,912 | 44,767,568 | ||||||||||||
Income
(loss) per common and subordinated unit
|
$ | 0.12 | $ | (0.10 | ) | $ | 0.29 | $ | (0.06 | ) | ||||||
Distributions
per unit
|
$ | 0.42 | $ | 0.38 | $ | 0.82 | $ | 0.75 | ||||||||
Amount
allocated to Class B common units
|
$ | - | $ | - | $ | - | $ | - | ||||||||
Weighted
average number of Class B common units outstanding
|
- | - | - | 1,314,733 | ||||||||||||
Income
per Class B common unit
|
$ | - | $ | - | $ | - | $ | - | ||||||||
Distributions
per unit
|
$ | - | $ | - | $ | - | $ | - | ||||||||
Amount
allocated to Class C common units
|
$ | - | $ | - | $ | - | $ | 1,385 | ||||||||
Total
number of Class C common units outstanding
|
- | - | - | 2,857,143 | ||||||||||||
Income
per Class C common unit due to beneficial conversion
feature
|
$ | - | $ | - | $ | - | $ | 0.48 | ||||||||
Distributions
per unit
|
$ | - | $ | - | $ | - | $ | - | ||||||||
Amount
allocated to Class D common units
|
$ | 1,866 | $ | - | $ | 3,425 | $ | - | ||||||||
Total
number of Class D common units outstanding
|
7,276,506 | - | 7,276,506 | - | ||||||||||||
Income
per Class D common unit due to beneficial conversion
feature
|
$ | 0.26 | $ | - | $ | 0.47 | $ | - | ||||||||
Distributions
per unit
|
$ | - | $ | - | $ | - | $ | - | ||||||||
Amount
allocated to Class E common units
|
$ | - | $ | 314 | $ | - | $ | 314 | ||||||||
Total number
of Class E common units outstanding
|
4,701,034 | 4,701,034 | 4,701,034 | 4,701,034 | ||||||||||||
Income
per Class E common unit
|
$ | - | $ | 0.07 | $ | - | $ | 0.07 | ||||||||
Distributions
per unit
|
$ | - | $ | 0.24 | $ | - | $ | 0.24 |
June
30, 2008
|
December
31, 2007
|
|||||||
(in
thousands)
|
||||||||
Senior
notes
|
$ | 357,500 | $ | 357,500 | ||||
Revolving
loans
|
805,000 | 124,000 | ||||||
Total
|
1,162,500 | 481,500 | ||||||
Less:
current portion
|
- | - | ||||||
Long-term
debt
|
$ | 1,162,500 | $ | 481,500 | ||||
Availability
under revolving credit facility:
|
||||||||
Total
credit facility limit
|
$ | 900,000 | $ | 500,000 | ||||
Revolving
loans
|
(805,000 | ) | (124,000 | ) | ||||
Letters
of credit
|
(27,257 | ) | (27,263 | ) | ||||
Total
available
|
$ | 67,743 | $ | 348,737 |
Condensed
Consolidating Balance Sheets
|
||||||||||||||||
June
30, 2008
|
||||||||||||||||
Unaudited
|
||||||||||||||||
Guarantors
|
Non
Guarantors
|
Elimination
|
Consolidated
|
|||||||||||||
ASSETS
|
(in
thousands)
|
|||||||||||||||
Total
current assets
|
$ | 276,169 | $ | 12,682 | $ | - | $ | 288,851 | ||||||||
Property,
plant and equipment, net
|
1,417,382 | 94,543 | - | 1,511,925 | ||||||||||||
Total
other assets
|
502,319 | - | - | 502,319 | ||||||||||||
TOTAL
ASSETS
|
$ | 2,195,870 | $ | 107,225 | $ | - | $ | 2,303,095 | ||||||||
LIABILITIES
& PARTNERS' CAPITAL
|
||||||||||||||||
Total
current liabilities
|
$ | 336,492 | $ | 2,288 | $ | - | $ | 338,780 | ||||||||
Long-term
liabilities from risk management activities
|
40,461 | - | - | 40,461 | ||||||||||||
Other
long-term liabilities
|
15,963 | - | - | 15,963 | ||||||||||||
Long-term
debt
|
1,162,500 | - | - | 1,162,500 | ||||||||||||
Minority
interest
|
7,464 | - | 7,464 | |||||||||||||
Partners'
capital
|
632,990 | 104,937 | - | 737,927 | ||||||||||||
TOTAL
LIABILITIES & PARTNERS' CAPITAL
|
$ | 2,195,870 | $ | 107,225 | $ | - | $ | 2,303,095 |
Condensed
Consolidating Statements of Operations
|
||||||||||||||||
For
the Six Months Ended June 30, 2008
|
||||||||||||||||
Unaudited
|
||||||||||||||||
Guarantors
|
Non
Guarantors
|
Elimination
|
Consolidated
|
|||||||||||||
(in
thousands)
|
||||||||||||||||
Total
revenues
|
$ | 928,544 | $ | 23,396 | $ | - | $ | 951,940 | ||||||||
Total
operating costs and expenses
|
880,291 | 19,261 | - | 899,552 | ||||||||||||
OPERATING
INCOME
|
48,253 | 4,135 | - | 52,388 | ||||||||||||
Interest
expense, net
|
(32,188 | ) | - | - | (32,188 | ) | ||||||||||
Other
income and deductions, net
|
357 | (25 | ) | - | 332 | |||||||||||
Minority
interest
|
(3 | ) | - | - | (3 | ) | ||||||||||
INCOME
BEFORE INCOME TAXES
|
16,419 | 4,110 | - | 20,529 | ||||||||||||
Income
tax expense
|
209 | - | - | 209 | ||||||||||||
NET
INCOME
|
$ | 16,210 | $ | 4,110 | $ | - | $ | 20,320 |
Condensed
Consolidating Statements of Cash Flow
|
||||||||||||||||
For
the Six Months Ended June 30, 2008
|
||||||||||||||||
Unaudited
|
||||||||||||||||
Guarantors
|
Non
Guarantors
|
Elimination
|
Consolidated
|
|||||||||||||
(in
thousands)
|
||||||||||||||||
Net
cash flows provided by (used in) operating activities
|
$ | 89,683 | $ | (2,749 | ) | $ | - | $ | 86,934 | |||||||
Net
cash flows provided by (used in) investing activities
|
(728,053 | ) | (2,400 | ) | - | (725,653 | ) | |||||||||
Net
cash flows provided by financing activities
|
635,733 | - | - | 635,733 |
·
|
firm
service: reservation fee of $4.5625 per MMBtu monthly ($0.15 per MMBtu
daily) and commodity fee of $0.05 per MMBtu and
|
·
|
interruptible
service: $0.20 per MMBtu.
|
Gathering
and Processing
|
Transportation
|
Contract
Compression
|
Corporate
|
Eliminations
|
Total
|
|||||||||||||||||||
(in
thousands)
|
||||||||||||||||||||||||
External
Revenue
|
||||||||||||||||||||||||
For
the three months ended June 30, 2008
|
$ | 338,705 | $ | 175,413 | $ | 32,587 | $ | - | $ | - | $ | 546,705 | ||||||||||||
For
the three months ended June 30, 2007
|
213,961 | 88,869 | - | - | - | 302,830 | ||||||||||||||||||
For
the six months ended June 30, 2008
|
600,290 | 293,796 | 57,854 | - | - | 951,940 | ||||||||||||||||||
For
the six months ended June 30, 2007
|
391,078 | 168,178 | - | - | - | 559,256 | ||||||||||||||||||
Intersegment
Revenue
|
||||||||||||||||||||||||
For
the three months ended June 30, 2008
|
- | 51,982 | $ | 164 | - | (52,146 | ) | - | ||||||||||||||||
For
the three months ended June 30, 2007
|
- | 33,183 | - | - | (33,183 | ) | - | |||||||||||||||||
For
the six months ended June 30, 2008
|
- | 82,666 | 282 | - | (82,948 | ) | - | |||||||||||||||||
For
the six months ended June 30, 2007
|
- | 48,001 | - | - | (48,001 | ) | - | |||||||||||||||||
Cost
of Sales
|
||||||||||||||||||||||||
For
the three months ended June 30, 2008
|
292,216 | 203,591 | 2,907 | - | (52,027 | ) | 446,687 | |||||||||||||||||
For
the three months ended June 30, 2007
|
174,260 | 108,683 | - | - | (33,183 | ) | 249,760 | |||||||||||||||||
For
the six months ended June 30, 2008
|
499,794 | 337,965 | 5,272 | - | (82,755 | ) | 760,276 | |||||||||||||||||
For
the six months ended June 30, 2007
|
321,202 | 188,497 | - | - | (48,001 | ) | 461,698 | |||||||||||||||||
Segment
Margin
|
||||||||||||||||||||||||
For
the three months ended June 30, 2008
|
46,489 | 23,804 | 29,844 | - | (119 | ) | 100,018 | |||||||||||||||||
For
the three months ended June 30, 2007
|
39,701 | 13,369 | - | - | - | 53,070 | ||||||||||||||||||
For
the six months ended June 30, 2008
|
100,496 | 38,497 | 52,864 | - | (193 | ) | 191,664 | |||||||||||||||||
For
the six months ended June 30, 2007
|
69,876 | 27,682 | - | - | - | 97,558 | ||||||||||||||||||
Operation
and Maintenance
|
||||||||||||||||||||||||
For
the three months ended June 30, 2008
|
19,408 | 1,462 | 11,389 | 402 | (145 | ) | 32,516 | |||||||||||||||||
For
the three months ended June 30, 2007
|
10,483 | 1,489 | - | - | - | 11,972 | ||||||||||||||||||
For
the six months ended June 30, 2008
|
38,035 | 2,859 | 20,234 | 401 | (168 | ) | 61,361 | |||||||||||||||||
For
the six months ended June 30, 2007
|
19,598 | 3,299 | - | - | - | 22,897 | ||||||||||||||||||
Depreciation
and Amortization
|
||||||||||||||||||||||||
For
the three months ended June 30, 2008
|
15,246 | 3,496 | 7,479 | 255 | - | 26,476 | ||||||||||||||||||
For
the three months ended June 30, 2007
|
9,042 | 3,358 | - | 303 | - | 12,703 | ||||||||||||||||||
For
the six months ended June 30, 2008
|
27,916 | 6,986 | 12,833 | 481 | - | 48,216 | ||||||||||||||||||
For
the six months ended June 30, 2007
|
16,928 | 6,607 | - | 595 | - | 24,130 | ||||||||||||||||||
Assets
|
||||||||||||||||||||||||
June
30, 2008
|
1,079,548 | 363,559 | 785,489 | 74,499 | - | 2,303,095 | ||||||||||||||||||
December
31, 2007
|
886,477 | 329,862 | - | 62,071 | - | 1,278,410 | ||||||||||||||||||
Goodwill
|
||||||||||||||||||||||||
June
30, 2008
|
67,019 | 34,243 | 164,522 | - | - | 265,784 | ||||||||||||||||||
December
31, 2007
|
59,832 | 34,243 | - | - | - | 94,075 | ||||||||||||||||||
Expenditures
for Long-Lived Assets
|
||||||||||||||||||||||||
For
the six months ended June 30, 2008
|
79,219 | 499 | 68,230 | 940 | - | 148,888 | ||||||||||||||||||
For
the six months ended June 30, 2007
|
60,701 | 4,800 | - | 410 | - | 65,911 |
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
June
30, 2008
|
June
30, 2007
|
June
30, 2008
|
June
30, 2007
|
|||||||||||||
(in
thousands)
|
||||||||||||||||
Net
income (loss)
|
$ | 9,972 | $ | (7,263 | ) | $ | 20,320 | $ | (8,558 | ) | ||||||
Add
(deduct):
|
||||||||||||||||
Operation
and maintenance
|
32,516 | 11,972 | 61,361 | 22,897 | ||||||||||||
General
and administrative
|
13,925 | 19,093 | 24,809 | 25,944 | ||||||||||||
Loss
on assets sales, net
|
442 | 532 | 468 | 2,339 | ||||||||||||
Management
services termination fee
|
- | - | 3,888 | - | ||||||||||||
Transaction
expenses
|
147 | - | 534 | - | ||||||||||||
Depreciation
and amortization
|
26,476 | 12,703 | 48,216 | 24,130 | ||||||||||||
Interest
expense, net
|
16,782 | 15,961 | 32,188 | 30,846 | ||||||||||||
Other
income and deductions, net
|
(132 | ) | (170 | ) | (332 | ) | (282 | ) | ||||||||
Minority
interest
|
(69 | ) | 17 | 3 | 17 | |||||||||||
Income
tax expense (benefit)
|
(41 | ) | 225 | 209 | 225 | |||||||||||
Total
segment margin
|
$ | 100,018 | $ | 53,070 | $ | 191,664 | $ | 97,558 |
Common
Unit Options
|
Units
|
Weighted
Average Exercise Price
|
Weighted
Average Contractual Term (Years)
|
Aggregate
Intrinsic Value * (in thousands)
|
||||||||||||
Outstanding
at beginning of period
|
738,668 | $ | 21.05 | |||||||||||||
Granted
|
- | - | ||||||||||||||
Exercised
|
(236,800 | ) | 20.57 | $ | 886 | |||||||||||
Forfeited
or expired
|
(10,700 | ) | 21.85 | |||||||||||||
Outstanding
at end of period
|
491,168 | 21.26 | 7.77 | 1,499 | ||||||||||||
Exercisable
at end of period
|
491,168 | 21.26 | 1,499 |
Restricted
(Non-Vested) Units
|
Units
|
Weighted
Average Grant Date Fair Value
|
||||||
Outstanding
at beginning of period
|
397,500 | $ | 31.62 | |||||
Granted
|
427,300 | 28.56 | ||||||
Vested
|
(76,375 | ) | 31.58 | |||||
Forfeited
or expired
|
(34,500 | ) | 31.58 | |||||
Outstanding
at end of period
|
713,925 | 29.80 |
·
|
Level
1 — unadjusted quoted prices for identical assets or liabilities in active
markets accessible by us;
|
·
|
Level
2 — inputs that are observable in the marketplace other than those inputs
classified as Level 1; and
|
·
|
Level
3 — inputs that are unobservable in the marketplace and significant to the
valuation.
|
·
|
firm
service: reservation fee of $4.5625 per MMBtu monthly ($0.15 per MMBtu
daily) and commodity fee of $0.05 per MMBtu and
|
·
|
interruptible
service: $0.20 per MMBtu.
|
·
|
Gathering and
Processing: We provide “wellhead-to-market” services to
producers of natural gas, which include transporting raw natural gas from
the wellhead through gathering systems, processing raw natural gas to
separate NGLs from the raw natural gas and selling or delivering the
pipeline-quality natural gas and NGLs to various markets and pipeline
systems;
|
·
|
Transportation: We
deliver natural gas from northwest Louisiana to more favorable markets in
northeast Louisiana through our 320-mile Regency Intrastate Pipeline
system; and
|
·
|
Contract
Compression: We provide customers with turn-key natural
gas compression services to maximize their natural gas and crude oil
production, throughput, and cash flow. Our integrated solutions
include a comprehensive assessment of a customer’s natural gas contract
compression needs and the design and installation of a compression system
that addresses those particular needs. We are responsible for
the installation and ongoing operation, service, and repair of our
compression units, which we modify as necessary to adapt to our customers’
changing operating conditions.
|
·
|
financial
performance of our assets without regard to financing methods, capital
structure or historical cost basis;
|
·
|
the
ability of our assets to generate cash sufficient to pay interest costs,
support our indebtedness and make cash distributions to our unitholders
and general partners;
|
·
|
our
operating performance and return on capital as compared to those of other
companies in the midstream energy sector, without regard to financing or
capital structure; and
|
·
|
the
viability of acquisitions and capital expenditure projects and the overall
rates of return on alternative investment
opportunities.
|
Six
Months Ended
|
||||||||
June
30, 2008
|
June
30, 2007
|
|||||||
(in
thousands)
|
||||||||
Net
cash flows provided by operating activities
|
$ | 86,934 | $ | 32,596 | ||||
Add
(deduct):
|
||||||||
Depreciation
and amortization
|
(49,598 | ) | (24,823 | ) | ||||
Equity
income and minority interest in earnings
|
- | 26 | ||||||
Risk
management portfolio valuation changes
|
(20,582 | ) | 591 | |||||
Loss
on assets sales
|
(468 | ) | (2,340 | ) | ||||
Unit
based compensation expenses
|
(1,839 | ) | (14,085 | ) | ||||
Changes
in current assets and liabilities:
|
||||||||
Trade
accounts receivables and accrued revenues
|
72,784 | 17,653 | ||||||
Other
current assets
|
2,914 | (365 | ) | |||||
Trade
accounts payable, accrued cost of gas and liquids, and accrued
liabilities
|
(53,088 | ) | (18,350 | ) | ||||
Other
current liabilities
|
(15,314 | ) | 41 | |||||
Other
assets and liablities
|
(1,423 | ) | 498 | |||||
Net
income
|
$ | 20,320 | $ | (8,558 | ) | |||
Add:
|
||||||||
Interest
expense, net
|
32,188 | 30,846 | ||||||
Depreciation
and amortization
|
48,216 | 24,130 | ||||||
Income
tax expense
|
209 | 225 | ||||||
EBITDA
|
$ | 100,933 | $ | 46,643 |
Three
Months Ended
|
||||||||||||||||
June
30, 2008
|
June
30, 2007
|
Change
|
Percent
|
|||||||||||||
(in
thousands except percentages and volume data)
|
||||||||||||||||
Revenues
|
$ | 546,705 | $ | 302,830 | $ | 243,875 | 81 | % | ||||||||
Cost
of sales
|
446,687 | 249,760 | 196,927 | 79 | ||||||||||||
Total
segment margin (1)
|
100,018 | 53,070 | 46,948 | 88 | ||||||||||||
Operation
and maintenance
|
32,516 | 11,972 | 20,544 | 172 | ||||||||||||
General
and administrative
|
13,925 | 19,093 | (5,168 | ) | 27 | |||||||||||
Loss
on asset sales, net
|
442 | 532 | (90 | ) | 17 | |||||||||||
Transaction
expenses
|
147 | - | 147 | N/M | ||||||||||||
Depreciation
and amortization
|
26,476 | 12,703 | 13,773 | 108 | ||||||||||||
Operating
income
|
26,512 | 8,770 | 17,742 | 202 | ||||||||||||
Interest
expense, net
|
(16,782 | ) | (15,961 | ) | (821 | ) | 5 | |||||||||
Other
income and deductions, net
|
132 | 170 | (38 | ) | 22 | |||||||||||
Minority
interest
|
69 | (17 | ) | 86 | 506 | |||||||||||
Income
tax expense (benefit)
|
(41 | ) | 225 | (266 | ) | 118 | ||||||||||
Net
income (loss)
|
$ | 9,972 | $ | (7,263 | ) | $ | 17,235 | 237 | % | |||||||
System
inlet volumes (MMbtu/d) (2)
|
1,519,790 | 1,232,343 | 287,446 | 23 | ||||||||||||
Revenue
generating horsepower (3)
|
669,804 | - | - | N/A |
Three
Months Ended
|
||||||||||||||||
June
30, 2008
|
June
30, 2007
|
Change
|
Percent
|
|||||||||||||
(in
thousands except percentage and volume data)
|
||||||||||||||||
Segment
Financial and Operating Data:
|
||||||||||||||||
Gathering
and Processing Segment
|
||||||||||||||||
Financial
data:
|
||||||||||||||||
Segment
margin (1)
|
$ | 46,489 | $ | 39,701 | $ | 6,788 | 17 | % | ||||||||
Operation
and maintenance
|
19,408 | 10,483 | 8,925 | 85 | ||||||||||||
Operating
data:
|
||||||||||||||||
Throughput
(MMbtu/d) (2)
|
995,922 | 769,613 | 226,309 | 29 | ||||||||||||
NGL
gross production (Bbls/d)
|
22,526 | 20,967 | 1,559 | 7 | ||||||||||||
Transportation
Segment
|
||||||||||||||||
Financial
data:
|
||||||||||||||||
Segment
margin (1)
|
$ | 23,804 | $ | 13,369 | $ | 10,435 | 78 | |||||||||
Operation
and maintenance
|
1,462 | 1,489 | (27 | ) | 2 | |||||||||||
Operating
data:
|
||||||||||||||||
Throughput
(MMbtu/d) (2)
|
793,339 | 777,927 | 15,412 | 2 | ||||||||||||
Contract
Compression Segment
|
||||||||||||||||
Financial
data:
|
||||||||||||||||
Segment
margin (1)
|
$ | 29,844 | $ | - | $ | 29,844 | N/A | |||||||||
Operation
and maintenance
|
11,389 | - | $ | 11,389 | N/A |
For
the Period Ended
|
||||||||
March
31, 2008
|
June
30, 2008
|
|||||||
Revenue
generating horsepower
|
615,852 | 669,804 | ||||||
Revenue
generating units
|
725 | 789 | ||||||
Average
horsepower
|
849 | 849 |
For
the Period Ended June
30, 2008
|
||||||||||||||
Percentage
of
|
||||||||||||||
Revenue
|
Revenue
Generating
|
Number
of
|
||||||||||||
Horsepower
Range
|
Generating
Horsepower
|
Horsepower
|
Units
|
|||||||||||
0-499 | 50,878 | 8 | % | 306 | ||||||||||
500-999 | 73,936 | 11 | % | 119 | ||||||||||
1,000 | + | 544,990 | 81 | % | 364 | |||||||||
669,804 | 100 | % | 789 |
·
|
an
increase in operation and maintenance expense of $20,544,000 primarily due
to operation and maintenance expenses related to our CDM and FrontStreet
acquisitions and increased contractor and employee-related expenses in the
gathering and processing segment;
|
·
|
an
increase in depreciation and amortization expense of $13,773,000 primarily
due to our CDM, FrontStreet and Nexus acquisitions and organic growth
projects; and
|
·
|
an
increase in general and administrative expenses of $6,760,000 primarily
due to our CDM acquisition and increased employee-related expenses,
excluding the $11,928,000 charge to the Partnership's long-term incentive
plan in the three months ended June 30,
2007.
|
·
|
$9,917,000
from the operations of our FrontStreet assets;
|
·
|
$7,407,000
from organic growth projects in south Texas;
|
·
|
$2,630,000
from the operations of our Nexus assets;
|
·
|
$2,419,000
from increased sulfur prices;
|
·
|
$2,124,000
from increased throughput volumes in north Louisiana;
|
·
|
$(17,183,000)
from non-cash changes in the value of certain risk management contracts;
and
|
·
|
$(526,000)
from various other sources.
|
·
|
$8,143,000
from increased operational efficiencies coupled with increased commodity
prices;
|
·
|
$1,553,000
from increased throughput volumes;
|
·
|
$1,396,000
in increased margins associated with our limited marketing function;
and
|
·
|
$(657,000)
from non-cash changes in the value of certain risk management
contracts.
|
·
|
$11,389,000
related to our contract compression business acquired in January
2008;
|
·
|
$5,180,000
related to our FrontStreet assets, primarily contractor expense from the
three months ended June 30, 2008 versus twelve days in
2007;
|
·
|
$2,019,000
increase in employee-related expenses primarily in the gathering and
processing segment due to hiring new employees, salary increases and an
increase in the bonus accrual resulting from operational and financial
results exceeding our budgeted results;
|
·
|
$828,000
increase in contractor expense in the gathering and processing segment
related primarily to assets acquired in 2007, which are operated by a
third party;
|
·
|
$553,000
increase in utility expenses primarily in the gathering and processing
segment due to higher prices; and
|
·
|
$309,000
increase in rental expense primarily related to our Nexus acquisition in
March 2008 in the gathering and processing
segment.
|
·
|
$4,163,000
related to our contract compression assets acquired January
2008;
|
·
|
$2,344,000
increase in employee-related expenses primarily due to an increase in the
bonus accrual resulting from operational and financial results exceeding
our budgeted results; and
|
·
|
$264,000
increase in professional and consulting service fees related to
recruitment services, and performance under consulting service agreements
with two former executives.
|
·
|
$7,479,000
related to our contract compression business acquired in January
2008;
|
·
|
$3,301,000
related to our FrontStreet assets;
|
·
|
$1,994,000
related to various organic growth projects completed since June 2007
primarily in the gathering and processing segment; and
|
·
|
$999,000
related to our Nexus acquisition in March
2008.
|
Six
Months Ended
|
||||||||||||||||
June
30, 2008
|
June
30, 2007
|
Change
|
Percent
|
|||||||||||||
(in
thousands except percentages and volume data)
|
||||||||||||||||
Revenues
|
$ | 951,940 | $ | 559,256 | $ | 392,684 | 70 | % | ||||||||
Cost
of sales
|
760,276 | 461,698 | 298,578 | 65 | ||||||||||||
Total
segment margin (1)
|
191,664 | 97,558 | 94,106 | 96 | ||||||||||||
Operation
and maintenance
|
61,361 | 22,897 | 38,464 | 168 | ||||||||||||
General
and administrative
|
24,809 | 25,944 | (1,135 | ) | 4 | |||||||||||
Loss
on asset sales, net
|
468 | 2,339 | (1,871 | ) | 80 | |||||||||||
Management
service termination fee
|
3,888 | - | 3,888 | N/M | ||||||||||||
Transaction
expenses
|
534 | - | 534 | N/M | ||||||||||||
Depreciation
and amortization
|
48,216 | 24,130 | 24,086 | 100 | ||||||||||||
Operating
income
|
52,388 | 22,248 | 30,140 | 135 | ||||||||||||
Interest
expense, net
|
(32,188 | ) | (30,846 | ) | (1,342 | ) | 4 | |||||||||
Other
income and deductions, net
|
332 | 282 | 50 | 18 | ||||||||||||
Minority
interest
|
(3 | ) | (17 | ) | 14 | 82 | ||||||||||
Income
tax expense
|
209 | 225 | (16 | ) | 7 | |||||||||||
Net
income (loss)
|
$ | 20,320 | $ | (8,558 | ) | $ | 28,878 | 337 | % | |||||||
System
inlet volumes (MMbtu/d) (2)
|
1,448,173 | 1,183,366 | 264,807 | 22 | ||||||||||||
Revenue
generating horsepower (3)
|
669,804 | - | - | N/A |
Six
Months Ended
|
||||||||||||||||
June
30, 2008
|
June
30, 2007
|
Change
|
Percent
|
|||||||||||||
(in
thousands except percentages and volume data)
|
||||||||||||||||
Segment
Financial and Operating Data:
|
||||||||||||||||
Gathering
and Processing Segment
|
||||||||||||||||
Financial
data:
|
||||||||||||||||
Segment
margin (1)
|
$ | 100,496 | $ | 69,876 | $ | 30,620 | 44 | % | ||||||||
Operation
and maintenance
|
38,035 | 19,598 | 18,437 | 94 | ||||||||||||
Operating
data:
|
||||||||||||||||
Throughput
(MMbtu/d) (2)
|
956,248 | 749,527 | 206,721 | 28 | ||||||||||||
NGL
gross production (Bbls/d)
|
22,796 | 20,510 | 2,286 | 11 | ||||||||||||
Transportation
Segment
|
||||||||||||||||
Financial
data:
|
||||||||||||||||
Segment
margin (1)
|
$ | 38,497 | $ | 27,682 | $ | 10,815 | 39 | |||||||||
Operation
and maintenance
|
2,859 | 3,299 | (440 | ) | 13 | |||||||||||
Operating
data:
|
||||||||||||||||
Throughput
(MMbtu/d) (2)
|
762,673 | 741,395 | 21,278 | 3 | ||||||||||||
Contract
Compression Segment
|
||||||||||||||||
Financial
data:
|
||||||||||||||||
Segment
margin (1)
|
$ | 52,864 | $ | - | $ | 52,864 | N/A | |||||||||
Operation
and maintenance
|
20,234 | - | $ | 20,234 | N/A |
·
|
an
increase in operation and maintenance expense of $38,464,000 primarily due
to operation and maintenance expenses related to our CDM and FrontStreet
acquisitions and increased contractor and employee-related expenses in the
gathering and processing segment;
|
·
|
an
increase in depreciation and amortization expense of $24,086,000 due to
our CDM, FrontStreet, Nexus and Pueblo acquisitions and organic growth
projects;
|
·
|
an
increase in general and administrative expenses of $10,793,000 primarily
due to our CDM acquisition and increased employee-related expenses,
excluding the $11,928,000 charge to the Partnership’s long-term incentive
plan in the three months ended June 30, 2007; and
|
·
|
a
payment in the six months ended June 30, 2008 of a management contract
services termination fee of $3,888,000 related to the acquisition of
FrontStreet.
|
·
|
$22,104,000
from the operations of our FrontStreet assets;
|
·
|
$13,907,000
from organic growth projects in south Texas;
|
·
|
$4,397,000
from various other sources in the segment;
|
·
|
$3,644,000
from increased throughput volumes in north Louisiana;
|
·
|
$3,385,000
from increased sulfur prices;
|
·
|
$2,791,000
from the operation of the Nexus assets acquired in March 2008;
and
|
·
|
$(19,608,000)
from non-cash changes in the value of certain risk management
contracts.
|
·
|
$7,134,000
from increased operational efficiencies coupled with increased commodity
prices;
|
·
|
$2,665,000
from increased throughput volumes;
|
·
|
$1,673,000
in increased margins associated with our limited marketing function;
and
|
·
|
$(657,000)
from non-cash changes in the value of certain risk management
contracts.
|
·
|
$20,234,000
related to our contract compression business acquired in January
2008;
|
·
|
$12,026,000
related to our FrontStreet assets, primarily contractor expense from the
six months ended June 30, 2008 versus 12 days in 2007;
|
·
|
$2,594,000
increase in employee expenses in the gathering and processing segment due
to hiring new employees, salary increases and an increase in the bonus
accrual resulting from operational and financial results exceeding our
budgeted results;
|
·
|
$1,686,000
increase in contractor expense in the gathering and processing segment
related primarily to assets acquired in 2007, which are operated by a
third party;
|
·
|
$1,844,000
increase in various operation and maintenance expenses primarily in the
gathering and processing segment;
|
·
|
$707,000
increase in utility expenses in the gathering and processing segment due
to higher prices; and was partially offset by
|
·
|
$627,000
loss related to an unplanned outage expense in the six months ended June
30, 2007.
|
·
|
$7,603,000
related to our contract compression business acquired in January
2008;
|
·
|
$2,494,000
increase in employee related expenses due to hiring new employees, salary
increases and an increase in the bonus accrual resulting from operational
and financial results exceeding our budgeted results;
and
|
·
|
$696,000
increase in various other general and administrative
expenses.
|
·
|
$12,833,000
related to our contract compression assets acquired January
2008;
|
·
|
$5,686,000
related to our FrontStreet assets;
|
·
|
$3,981,000
related to various organic projects completed since the June 2007,
primarily in the gathering and processing segment;
|
·
|
$999,000
related to our Nexus acquisition in March 2008; and
|
·
|
$587,000
related to our Pueblo acquisition in April
2007.
|
·
|
Level
1 — unadjusted quoted prices for identical assets or liabilities in active
markets accessible by us;
|
·
|
Level
2 — inputs that are observable in the marketplace other than those inputs
classified as Level 1; and
|
·
|
Level
3 — inputs that are unobservable in the marketplace and significant to the
valuation.
|
·
|
cash
generated from operations;
|
·
|
borrowings
under our credit facility;
|
·
|
debt
offerings; and
|
·
|
issuance
of additional partnership units.
|
·
|
an
increase in net risk management liabilities of
$28,859,000;
|
·
|
an
increase in other current liabilities of $15,314,000 primarily resulting
from deferred revenues from our contract compression segment, increased
accrued interest associated with higher borrowing levels on our revolving
credit facility, increased property tax accruals and increased pipeline
imbalance accruals primarily in the transportation segment;
and
|
·
|
partially
offsetting these decreases in working capital was an increase in net
accounts receivable and payable of $12,681,000 primarily driven by
increased total segment margin and the timing of cash receipts and
payments.
|
·
|
Growth
capital expenditures, which are made to acquire additional assets to
increase our business, to expand and upgrade existing systems and
facilities or to construct or acquire similar systems or facilities;
or
|
·
|
Maintenance
capital expenditures, which are made to replace partially or fully
depreciated assets, to maintain the existing operating capacity of our
assets and to extend their useful lives or to maintain existing system
volumes and related cash flows.
|
·
|
$62,900,000
for the fabrication of new compression packages and ancillary assets for
our contract compression segment;
|
·
|
$17,732,000
for constructing 20 miles of 10 inch diameter pipeline, which connects the
Fashing Processing Plant to our Tilden Processing Plant in south Texas and
for reconfiguring our Tilden Processing Plant. These projects
were substantially complete in the three months ended June 30,
2008;
|
·
|
$9,492,000
for construction of pipeline, compression and treating facilities related
to a joint venture in south Texas;
|
·
|
$6,238,000
for constructing 40 miles of 10 inch diameter pipeline and compression
facilities in west Texas to be completed in the second half of
2008;
|
·
|
$6,113,000
for the installation of gathering and compression facilities in south
Texas; and
|
·
|
$5,626,000
for additional processing, compression and gathering facilities in north
Louisiana.
|
·
|
$122,000,000
for expansion of our transportation system;
|
·
|
$14,000,000
for construction of pipeline, compression and treating facilities related
to a joint venture in south Texas;
|
·
|
$18,500,000
for constructing 40 miles of 10 inch diameter pipeline and compression
facilities in west Texas to be completed in the second half of 2008;
and
|
·
|
$18,000,000
for constructing 20 miles of 10 inch diameter pipeline, which connects the
Fashing Processing Plant to our Tilden Processing Plant in south Texas and
for reconfiguring our Tilden Processing Plant. These projects
were substantially complete in the three months ended June 30,
2008.
|
Payment
Period
|
||||||||||||||||||||
Contractual
Cash Obligations
|
Total
|
2008
|
2009-2010
|
2011-2012
|
Thereafter
|
|||||||||||||||
(in
thousands)
|
||||||||||||||||||||
Long-term
debt (including interest) (1)
|
$ | 1,427,746 | $ | 31,062 | $ | 124,248 | $ | 884,995 | $ | 387,441 | ||||||||||
Purchase
obligations
|
138,006 | 118,099 | 19,907 | - | - | |||||||||||||||
Total
(2) (3)
|
$ | 1,565,752 | $ | 149,161 | $ | 144,155 | $ | 884,995 | $ | 387,441 |
2008
|
2009
|
2010
|
||||||||||
NGLs
|
94 | % | 86 | % | 30 | % | ||||||
Condensate
|
67 | % | 67 | % | 67 | % |
Period
|
Underlying
|
Notional
Volume/Amount
|
We
Pay
|
We
Receive
|
Fair
Value Asset/(Liablity)
|
||||||||||||||
(in
thousands)
|
|||||||||||||||||||
July
2008-December 2009
|
Ethane
|
1,075 |
(MBbls)
|
Index
|
$ | 0.58-$0.80 |
($/gallon)
|
$ | (13,513 | ) | |||||||||
July
2008-December 2010
|
Propane
|
939 |
(MBbls)
|
Index
|
$ | 0.93-$1.5325 |
($/gallon)
|
(23,099 | ) | ||||||||||
January
2009-December 2010
|
Iso
Butane
|
404 |
(MBbls)
|
Index
|
$ | 1.685-$1.915 |
($/gallon)
|
(2,689 | ) | ||||||||||
July
2008-December 2010
|
Normal
Butane
|
212 |
(MBbls)
|
Index
|
$ | 1.12-1.895 |
($/gallon)
|
(16,197 | ) | ||||||||||
July
2008-December 2010
|
Natural
Gasoline
|
393 |
(MBbls)
|
Index
|
$ | 1.41-$2.53 |
($/gallon)
|
(18,348 | ) | ||||||||||
July
2008-December 2010
|
West
Texas Intermediate Crude
|
594 |
(MBbls)
|
Index
|
$ | 68.17-$121.30 |
($/Bbl)
|
(28,989 | ) | ||||||||||
July
2008-March 2010
|
Interest
Rate
|
$ | 300,000,000 | 2.40% |
One-month
|
LIBOR
|
4,077 | ||||||||||||
Credit
risk adjustment
|
948 | ||||||||||||||||||
Total Fair Value | $ | (97,810 | ) |
REGENCY ENERGY PARTNERS
LP
|
||
By:
Regency GP LP, its general partner
|
||
By:
Regency GP LLC, its general partner
|
||
August
8, 2008
|
/s/
Lawrence B. Connors
|
|
Lawrence
B. Connors
|
||
Senior
Vice President, Finance and Chief Accounting Officer (Duly Authorized
Officer)
|