DALLAS, Aug. 9 /PRNewswire-FirstCall/ -- The Crosstex Energy
companies, Crosstex Energy, L.P. (NASDAQ:XTEX) (the Partnership)
and Crosstex Energy, Inc. (NASDAQ:XTXI) (the Corporation) today
reported earnings for the second quarter of 2006. Crosstex Energy,
L.P. Financial Results The Partnership reported a net loss of $2.3
million in the second quarter of 2006, compared with net income of
$4.5 million in the second quarter of 2005. Results for the second
quarter of 2006 include a $4.1 million non-cash mark-to-market
valuation of derivative financial instruments during the quarter.
In the second quarter of 2005, there was no significant gain or
loss related to the valuation of derivative financial instruments.
The net loss per limited partner unit in the second quarter of 2006
was $0.23 per unit versus net income of $0.17 per unit in the
corresponding quarter of 2005. The loss per limited partner unit
was impacted by the preferential allocation of net income to the
general partner of $3.9 million in the second quarter of 2006,
which represented the general partner's incentive distribution
rights less certain stock-based compensation costs. This allocation
increased the loss allocated to the limited partners to $6.1
million. The Partnership's Distributable Cash Flow in the second
quarter of 2006 was $20.1 million, or 2.97 times the amount
required to cover its Minimum Quarterly Distribution of $0.25 per
unit and 1.02 times the amount required to cover its distribution
of $0.54 per unit. Distributable Cash Flow was $13.4 million in the
second quarter of 2005. Distributable Cash Flow is a non-GAAP
financial measure and is explained in greater detail under
"Non-GAAP Financial Information." There is a reconciliation of this
non-GAAP measure to net income in the tables at the end of this
news release. "We have completed another successful quarter,
achieving Distributable Cash Flow levels consistent with our
previous guidance, despite facing some significant challenges.
Natural-gas volumes moving into our South Louisiana processing
assets are below our expectations, as the industry continues to
struggle in its effort to recover from 2005's hurricanes," said
Barry E. Davis, President and Chief Executive Officer. "In
addition, we renegotiated our North Texas Pipeline contracts with
our largest customer to increase commitment levels beginning in the
fourth quarter of this year in exchange for lowering transport fees
until then. This negatively impacted margins during the second
quarter but assured us of higher future commitments." "Improved gas
volumes and margins for several of our other pipelines and
significantly increased volumes in our Louisiana Intrastate Gas
processing plants offset these challenges," added Mr. Davis. "These
offsetting positive factors, along with strong processing margins,
allowed us to again increase dividend and distribution payouts."
"Volumes on the North Texas system will continue to ramp up during
the third and fourth quarters of 2006 and into 2007, which we
anticipate will lead to increases in Distributable Cash Flow in
2006 and beyond. In addition, the build out of the recently
acquired Chief midstream assets, the expansion of our Parker County
processing plants, the construction of our North Louisiana
expansion, and a number of other smaller projects are progressing
on schedule. These will be strong drivers of Distributable Cash
Flow growth in 2007, consistent with our previous guidance." The
Partnership's gross margin increased 91 percent to $66.2 million in
the second quarter of 2006 from $34.6 million in the corresponding
2005 period. Gross margin from the Midstream business segment rose
$27.0 million, or 107 percent, to $52.3 million. The increase was
due to improved processing economics and growth in processed
volumes of 305 percent. This volume growth was the result of the
November 2005 acquisition of South Louisiana processing assets from
El Paso Corporation and significantly higher throughput in our
Louisiana Intrastate Gas processing plants. Additionally, the
Partnership completed construction of its North Texas Pipeline and
began transporting gas from the Barnett Shale in April 2006. Gross
margin from the Treating business segment rose $4.6 million, or 49
percent, to $13.9 million in the second quarter of 2006. The
increase was attributable to dramatic growth in the number of
treating plants in service. There were 160 treating plants in
service at the end of the second quarter of 2006 versus 100 at the
end of the second quarter of 2005. Crosstex Energy, Inc. Financial
Results The Corporation reported net income of $1.6 million for the
second quarter of 2006, compared with net income of $1.7 million
for the comparable period in 2005. The Corporation's loss before
income taxes and interest of non- controlling partners in the net
loss of the Partnership was $0.9 million in the second quarter of
2006, compared with income of $4.4 million in the second quarter of
2005. The Corporation's share of distributions, including
distributions on its 10 million participating limited partner
units, its two percent general partner interest, and the incentive
distribution rights, was $10.8 million in the second quarter of
2006. Its share of the distribution in the second quarter of 2005
was $7.1 million. The recently announced increase in the
Partnership's distribution of $0.01 per unit raised the
Corporation's share of distributions by $0.4 million from $10.4
million in the first quarter of 2006 to $10.8 million in the second
quarter of 2006. In conjunction with the acquisition of Chief
midstream assets by the Partnership, the Corporation issued 2.55
million shares of common stock in a private placement in June 2006.
Proceeds of $180 million from the private placement were used to
purchase 6.41 million senior subordinated series C units from the
Partnership to finance a portion of the acquisition. The acquired
units are not currently entitled to distributions from the
Partnership. The senior subordinated series C units will convert to
common units on February 16, 2008, at which time they will
participate in future distributions from the Partnership. In
addition to purchasing the senior subordinated series C units, the
Corporation contributed $9.0 million to maintain its two percent
general partnership interest in the Partnership. After making that
contribution and receiving an additional $1.6 million in the sale
of its claim in the Enron bankruptcy, its cash balance was
approximately $8.5 million. Earnings Call The Partnership and the
Corporation will hold their quarterly conference call to discuss
second quarter results today, August 9, at 11:00 a.m. Central Time
(12:00 p.m. Eastern Time). The dial-in number for the call is
866-700-7173, and the passcode is "Crosstex." A live Webcast of the
call can be accessed on the investor relations page of Crosstex
Energy's Web site at http://www.crosstexenergy.com/ . The call will
also be available for replay for 30 days by dialing 888-286-8010,
passcode 44277069, or by going to the investor relations events
page of Crosstex Energy's Web site. About the Crosstex Energy
Companies Crosstex Energy, L.P., a midstream natural gas company
headquartered in Dallas, operates over 5,000 miles of pipeline, 12
processing plants, four fractionators, approximately 160 natural
gas amine treating plants and 25 dew point control plants. Crosstex
currently provides services for over 3.0 Bcf/day of natural gas, or
approximately 6 percent of marketed U.S. daily production based on
August 2005 Department of Energy data. Crosstex Energy, Inc. owns
the two percent general partner interest, a 42 percent limited
partner interest, and the incentive distribution rights of Crosstex
Energy, L.P. Additional information about the Crosstex companies
can be found at http://www.crosstexenergy.com/ . Non-GAAP Financial
Information This press release contains a non-generally accepted
accounting principle financial measure that we refer to as
Distributable Cash Flow. Distributable Cash Flow includes earnings
before non-cash charges, less maintenance capital expenditures and
amortization of costs of certain derivatives plus, in the prior
period, a cash deposit securing the contracted sale of idle
equipment. The amounts included in the calculation of these
measures are computed in accordance with generally accepted
accounting principles (GAAP), with the exception of maintenance
capital expenditures and the amortization of put premiums.
Maintenance capital expenditures are capital expenditures made to
replace partially or fully depreciated assets in order to maintain
the existing operating capacity of our assets and to extend their
useful lives. The puts were acquired to hedge the future price of
certain natural gas liquids. The net cost of the puts is being
amortized against Distributable Cash Flow over their life. We
believe this measure is useful to investors because it may provide
users of this financial information with meaningful comparisons
between current results and prior reported results and a meaningful
measure of the Partnership's cash flow after it has satisfied the
capital and related requirements of its operations. Distributable
Cash Flow is not a measure of financial performance or liquidity
under GAAP. It should not be considered in isolation or as an
indicator of the Partnership's performance. Furthermore, it should
not be seen as a measure of liquidity or a substitute for metrics
prepared in accordance with GAAP. Our reconciliation of this
measure to net income is included among the following tables. This
press release contains forward-looking statements identified by the
use of words such as "forecast," "anticipate" and "estimate." These
statements are based on currently available information and
assumptions and expectations that the Partnership and the
Corporation believe are reasonable. However, the Partnership's and
the Corporation's assumptions and expectations are subject to a
wide range of business risks, so they can give no assurance that
actual performance will fall within the forecast ranges. Among the
key risks that may bear directly on the Partnership's and the
Corporation's results of operations and financial condition are:
(1) the amount of natural gas transported in the Partnership's
gathering and transmission lines may decline as a result of
competition for supplies, reserve declines and reduction in demand
from key customers and markets; (2) the level of the Partnership's
processing and treating operations may decline for similar reasons;
(3) fluctuations in natural gas and NGL prices may occur due to
weather and other natural and economic forces; (4) there may be a
failure to successfully integrate new acquisitions; (5) the
Partnership's credit risk management efforts may fail to adequately
protect against customer nonpayment; (6) the Partnership may not
adequately address construction and operating risks and (7) other
factors discussed in the Partnership's and the Corporation's Form
10-K's for the year ended December 31, 2005, Form 10-Q's for the
quarter ended March 31, 2006, and other filings with the Securities
and Exchange Commission. The Partnership and the Corporation have
no obligation to publicly update or revise any forward- looking
statement, whether as a result of new information, future events,
or otherwise. (Tables follow) CROSSTEX ENERGY, L.P. Selected
Financial & Operating Data (All amounts in thousands except per
unit numbers) Three Months Ended Six Months Ended June 30, June 30,
2006 2005 2006 2005 Revenues Midstream $727,865 $619,432 $1,529,996
$1,158,996 Treating 15,983 11,040 30,549 20,947 Profit from Energy
Trading Activities 807 333 1,230 851 744,655 630,805 1,561,775
1,180,794 Cost of Gas Midstream 676,370 594,482 1,431,938 1,110,898
Treating 2,056 1,711 4,489 3,204 678,426 596,193 1,436,427
1,114,102 Gross Margin 66,229 34,612 125,348 66,692 Operating
Expenses 22,840 12,178 44,801 23,722 General and Administrative
10,919 7,750 22,275 14,211 (Gain) Loss on Derivatives 3,925 (66)
1,766 407 Gain on Sale of Property (160) (120) (109) (164)
Depreciation and Amortization 18,708 7,370 35,758 14,306 Total
56,232 27,112 104,491 52,482 Operating Income 9,997 7,500 20,857
14,210 Interest Expense and Other (11,891) (2,874) (20,402) (6,213)
Net Income Before Minority Interest and Taxes (1,894) 4,626 455
7,997 Minority Interest in Subsidiary (101) (88) (182) (225) Income
Tax Provision (264) (54) (298) (108) Net Income before Cumulative
Effect of Accounting Change (2,259) 4,484 (25) 7,664 Cumulative
Effect of Accounting Change --- --- 689 --- Net Income $(2,259)
$4,484 $664 $7,664 General Partner Share of Net Income $3,890
$1,205 $8,056 $3,226 Limited Partners Share of Net Income $(6,149)
$3,279 $(7,392) $4,438 Net Income per Limited Partners' Unit Before
Accounting Change: Basic $(0.23) $0.18 $(0.31) $0.25 Diluted
$(0.23) $0.17 $(0.31) $0.24 Weighted Average Limited Partners'
Units Outstanding: Basic 26,572 18,124 26,064 18,111 Diluted 26,572
18,880 26,064 18,819 CROSSTEX ENERGY, L.P. Reconciliation of Net
Income to Distributable Cash Flow (All amounts in thousands except
ratios) Three Months Ended Six Months Ended June 30, June 30, 2006
2005 2006 2005 Net Income (loss) $(2,259) $4,484 $664 $7,664
Depreciation and Amortization (A) 18,637 7,301 35,616 14,175
Stock-Based Compensation 2,238 1,240 3,883 1,516 Gain (Loss) on
Sale of Property --- (120) --- (164) Proceeds from Sale of Property
(B) --- 1,920 --- 3,913 Financial Derivatives Mark-to-Market 4,069
--- 4,293 --- Cumulative Effect of Acctg. Change --- --- (689) ---
Deferred Tax Expense (benefit) 236 (95) 291 (190) Cash Flow 22,921
14,730 44,058 26,914 Amortization of Put Premiums (1,065) ---
(1,687) --- Maintenance Capital Expenditures (1,710) (1,375)
(2,729) (2,489) Distributable Cash Flow $20,146 $13,355 $39,642
$24,425 Minimum Quarterly Distribution (MQD) $6,785 $4,628 $13,558
$9,247 Distributable Cash Flow/MQD 2.97 2.89 2.92 2.64 Actual
Distribution $19,724 $10,920 $38,893 $21,457 Distribution Coverage
1.02 1.22 1.02 1.14 Distributions per Limited Partner Unit $0.54
$0.47 $1.07 $0.93 (A) Excludes minority interest share of
depreciation and amortization of $72,000 and $143,000 for the three
and six months ended June 30, 2006, respectively and $69,000 and
$131,000 for the three months and six months ended June 30, 2005.
(B) The 2005 periods include a deposit from the contracted sale of
equipment. CROSSTEX ENERGY, L.P. Operating Data Three Months Ended
Six Months Ended June 30, June 30, 2006 2005 2006 2005 Pipeline
Throughput (MMBtu/d) South Texas 461,000 439,000 427,000 438,000
LIG Pipeline & Marketing 698,000 612,000 645,000 616,000 North
Texas (A) 60,000 --- 60,000 --- Other Midstream 175,000 114,000
165,000 121,000 Total Gathering & Transmission Volume 1,394,000
1,165,000 1,297,000 1,175,000 Natural Gas Processed MMBtu/d
1,970,000 (B) 486,000 1,870,000 (B) 448,000 Commercial Services
Volume (MMBtu/d) 173,000 194,000 182,000 185,000 Treating Plants in
Service (C) 160 100 160 100 (A) The North Texas Pipeline was placed
in service April 1, 2006. Volumes for the six months ended June 30,
2006 are only for the period the pipeline was in service. (B)
Includes South Louisiana Processing volumes after November 1, 2005.
(C) Plants in Service represents plants in service on the last day
of the quarter. CROSSTEX ENERGY, INC. Selected Financial &
Operating Data (All amounts in thousands except per share numbers)
Three Months Ended Six Months Ended June 30, June 30, 2006 2005
2006 2005 Revenues Midstream $727,865 $619,432 $1,529,996
$1,158,996 Treating 15,983 11,040 30,549 20,947 Profit from Energy
Trading Activities 807 333 1,230 851 744,655 630,805 1,561,775
1,180,794 Cost of Gas Midstream 676,370 594,482 1,431,938 1,110,898
Treating 2,056 1,711 4,489 3,204 678,426 596,193 1,436,427
1,114,102 Gross Margin 66,229 34,612 125,348 66,692 Operating
Expenses 22,856 12,183 44,826 23,731 General and Administrative
11,545 8,144 23,377 14,824 (Gain) Loss on Derivatives 3,925 (66)
1,766 407 Gain on Sale of Property (160) (120) (109) (164)
Depreciation and Amortization 18,720 7,384 35,789 14,330 Total
56,886 27,525 105,649 53,128 Operating Income 9,343 7,087 19,699
13,564 Interest Expense and Other (10,198) (2,737) (18,599) (5,999)
Income Before Income Taxes and Interest of Non-controlling Partners
in the Partnership's Net Income (855) 4,350 1,100 7,565 Income Tax
Provision 1,238 1,047 10,572 2,034 Gain on Issuance of Units of the
Partnership --- --- (18,955) --- Interest of Non-controlling
Partners in the Partnership's Net Income (Loss) (3,734) 1,557
(4,821) 2,213 Net Income Before Cumulative effect of Change in
Accounting Principle 1,641 1,746 14,304 3,318 Cumulative effect of
Change in Accounting --- --- 170 --- Net Income $1,641 $1,746
$14,474 $3,318 Net Income per Common Share Before Accounting
Change: Basic Earnings per Common Share $0.13 $0.14 $1.12 $0.26
Diluted Earnings per Common Share $0.13 $0.14 $1.11 $0.26 Weighted
Average Shares Outstanding: Basic 12,791 12,736 12,777 12,542
Diluted 12,954 12,878 12,930 12,929 Dividends Per Common Share
$0.62 $0.43 $1.22 $0.84 DATASOURCE: Crosstex Energy, Inc.; Crosstex
Energy, L.P. CONTACT: investors, William W. Davis, Executive V.P.
and Chief Financial Officer of Crosstex Energy, Inc.,
+1-214-953-9500; or media, Jill McMillan, Public Relations
Specialist, +1-214-721-9271, for Crosstex Energy, Inc. and Crosstex
Energy, L.P. Web site: http://www.crosstexenergy.com/
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