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 fourth-quarter and
full-year 2006. Fourth-Quarter 2006 � Crosstex Energy, L.P.
Financial Results The Partnership�s distributable cash flow in the
fourth quarter of 2006 was $22.0 million, or 3.24 times the amount
required to cover its minimum quarterly distribution of $0.25 per
unit and 1.06 times the amount required to cover its current
distribution of $0.56 per unit. Distributable cash flow in the
quarter benefited from a $3.9 million sale of idle equipment.
Distributable cash flow was $22.2 million in the fourth 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. The
Partnership�s gross margin increased 30 percent to $73.3 million in
the fourth quarter of 2006 from $56.4 million in the corresponding
2005 period. Gross margin from the Midstream business segment rose
$11.5 million, or 25 percent, to $57.1 million. The improvement was
primarily due to a $10.4 million contribution to gross margin in
the fourth-quarter from the Partnership�s North Texas Pipeline and
related processing facilities that began operations in the second
quarter of 2006 and the North Texas gathering systems acquired in
June 2006 from Chief Holdings LLC. Higher volumes on the Louisiana
Intrastate Gas system also contributed to the increase. Gross
margin from the Treating business segment rose $5.4 million, or 50
percent, to $16.2 million in the fourth quarter of 2006. The
increase was attributable to dramatic growth in the number of
treating plants in service and a nonrecurring $1.5 million revenue
adjustment related to contractual fee escalations at the
nonoperated Seminole plant. There were 160 treating plants in
service at the end of the fourth quarter of 2006 versus 112 plants
in service at the end of the fourth quarter of 2005. �The year 2006
was one of tremendous growth for Crosstex. Our distributable cash
flow and gross margin were strong despite continued operational
issues in South Louisiana,� said Barry E. Davis, Crosstex President
and Chief Executive Officer. �Our experienced, talented employees
expanded our footprint in the fast-developing Barnett Shale play
with the construction and subsequent operation of our North Texas
Pipeline and the strategic acquisition of Chief�s midstream assets.
These achievements position Crosstex as one of the key midstream
players in the Barnett. The extraordinary level of activity in the
Barnett continues to exceed our expectations, and we expect our
investment in the region to result in exceptional growth in 2007
and for many years to come. In addition, in 2006 we made two
significant Treating acquisitions, expanding our industry-leading
position in the amine-plant rental business. �Our South Louisiana
Processing assets, or SLP, remain a challenge for us due to a
reduction in production in the Gulf of Mexico after the 2005
hurricanes,� Davis continued. �As we have mentioned before, we have
a team that is taking immediate action to improve the SLP business,
headed by Bob Purgason, Crosstex�s Chief Operating Officer. We
believe we will see improvement from these efforts during the
second half of 2007.� The Partnership reported a net loss of $4.9
million in the fourth quarter of 2006, compared with net income of
$10.5 million in the fourth-quarter 2005. Depreciation and
amortization expense increased $10.6 million in the fourth-quarter
2006 compared with the fourth-quarter 2005 due primarily to the
Chief acquisition and the North Texas Pipeline that were not in
service in the fourth-quarter 2005. The Partnership incurred a
large depreciation charge on these assets, which are at an early
stage of cash-flow development. Additionally, the fourth-quarter of
2005 benefited from strong margins on the SLP assets. Operating
expenses were $28.1 million in the fourth quarter of 2006, compared
with $19.1 million in the fourth-quarter 2005. The increase was
primarily associated with new assets in service during 2006.
General and administrative expenses in the fourth-quarter 2006 rose
to $11.9 million from $10.4 million in the fourth-quarter 2005. The
higher amount was related to staffing increases from the Chief
assets acquisition and associated build out; other construction
activity, including the North Texas Pipeline and North Louisiana
pipeline expansion projects; and a greater number of treating
plants in service. Interest expense rose to $15.6 million in the
fourth quarter of 2006 from $6.4 million in the fourth quarter of
2005 due to increased debt from acquisition and development
activities. The net loss per limited partner unit in the fourth
quarter of 2006 was $0.34 per unit versus net income of $0.33 per
unit in the fourth quarter of 2005. The loss per limited partner
unit was impacted by the preferential allocation of net income to
the general partner of $4.3 million in the fourth quarter of 2006,
which represented the general partner�s incentive distribution
rights less certain stock-based compensation costs. This allocation
increased the limited partners� share of the net loss to $9.2
million in the quarter. Full-Year 2006 � Crosstex Energy, L.P.
Financial Results Distributable cash flow in 2006 was $81.9
million, or 3.02 times the amount required to cover the minimum
quarterly distribution and 1.02 times the amount required to cover
the Partnership�s distributions of $80.0 million. Distributable
cash flow in 2006 increased 27 percent from distributable cash flow
in 2005 of $64.6 million. Gross margin in 2006 rose 68 percent to
$272.5 million from $162.5 million, primarily due to acquisitions,
higher system throughput and a favorable processing environment for
natural gas liquids. The Midstream segment contributed $92.1
million to the increase, and Treating margins improved $17.9
million year over year. In 2006, the Partnership reported a net
loss of $4.2 million, compared with net income of $19.2 million in
2005. Depreciation and amortization expense increased $46.7
million, the result of additional Chief assets in service, the SLP
acquisition, the North Texas Pipeline start-up and a greater number
of treating plants in operation. Operating expenses increased to
$101.0 million in 2006 from $56.7 million in 2005 primarily due to
the new assets in service during 2006. General and administrative
expenses in 2006 increased to $45.7 million from $32.7 million in
2005. The higher amount was related to staffing increases from the
Chief assets acquisition and associated build out; other
construction activity, including the North Texas Pipeline and North
Louisiana pipeline expansion projects; a greater number of treating
plants in service; and the SLP acquisition. Interest expense rose
to $51.2 million in 2006 from $15.4 million in 2005 due to
increased debt from acquisitions and construction. The loss per
limited partner unit was impacted by the preferential allocation of
net income to the general partner of $16.5 million in 2006, which
represented the general partner�s incentive distribution rights
less certain stock-based compensation costs. This allocation
increased the limited partners� share of the net loss to $20.6
million for the year, or $0.81 per unit. Fourth-Quarter 2006 �
Crosstex Energy, Inc. Financial Results The Corporation reported
net income of $0.5 million for the fourth quarter of 2006, compared
with net income of $45.1 million for the comparable period in 2005.
The Corporation�s net loss before gain on issuance of partnership
units, income taxes and interest of noncontrolling partners in the
net income of the Partnership was $5.4 million in the fourth
quarter of 2006, compared with net income of $10.3 million in the
fourth quarter of 2005. The net income in fourth-quarter 2005 was
attributable to a noncash net gain after income tax impact on
issuance of Partnership units of $37.6 million related to the
Partnership�s offering of 6.6 million units during the quarter. The
Corporation�s share of Partnership distributions, including
distributions on the Corporation�s 10 million participating limited
partner units, its two percent general partner interest and the
incentive distribution rights, was $11.5 million in the fourth
quarter of 2006. Its share of Partnership distributions in the
fourth quarter of 2005 was $9.4 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 $11.1
million in the third quarter of 2006. Full-Year 2006 � Crosstex
Energy, Inc. Financial Results The Corporation reported net income
of $16.5 million for 2006, compared with net income of $49.1
million for the comparable period in 2005. The Corporation�s net
loss before gain on issuance of partnership units, income taxes and
interest of noncontrolling partners in the net income of the
Partnership was $4.6 million in 2006, compared with net income of
$18.8 million in 2005. The net income in 2006 included a noncash
net gain after income tax impact of $10.8 million from issuance of
Partnership units related to the conversion of Partnership Series A
Subordinated units to 1.5 million common units during the year. Net
income in 2005 included a similar net gain after income tax impact
of $37.6 million related to the Partnership�s offering of 6.6
million units during the year. The Corporation�s share of
Partnership distributions, including distributions on the
Corporation�s 10 million participating limited partner units, its
two percent general partner interest and the incentive distribution
rights, was $43.8 million in 2006. Its share of Partnership
distributions in 2005 was $31.0 million. Crosstex Provides
Preliminary 2007 Guidance �2006 began a transitional period for us
that will continue through 2007. In 2006, the Partnership spent
nearly $900 million to initiate major organic growth projects. In
2007, we estimate that we will spend another $250 million to expand
these projects. Most of the cash-flow benefit from these sizable
capital investments will occur after 2007,� said Davis. �During
each quarter in 2007 and thereafter, we expect dramatic growth in
cash flows from the North Texas Gathering assets, the North Texas
Pipeline and the Parker County processing facilities. The North
Louisiana pipeline expansion, which should be operational at the
end of the first quarter, also will contribute to cash flow.
Although we are cautiously optimistic about the opportunity to
enhance performance of the SLP facilities during the second half of
2007, we have not assumed this improvement in our guidance.� The
Partnership estimates a 2007 net loss of $2 million to $17 million
and distributable cash flow of $83 to $95 million. Total
maintenance capital expenditures are expected to be $11 million to
$14 million in 2007, an increase of $5 million to $8 million from
2006. This increase in maintenance capital reflects the expectation
that expenditures that were planned but not spent in 2006 will
occur in 2007. The internal charge for the cost of the natural gas
liquids puts purchased in conjunction with the SLP acquisition will
increase to $9 million in 2007. This will not be charged to
distributable cash flow in 2008 and beyond. The Partnership
currently expects to pay total distributions in 2007 between $2.24
and $2.34 per unit, or a 3% to 7% increase over 2006. The
Corporation would receive total distributions of $44 million to $50
million from the Partnership based on that range. The Corporation
anticipates direct cash expenses associated with its operations
outside the Partnership of approximately $2 million. In addition,
the Corporation anticipates that it will incur only nominal
current-year income tax expense due to tax loss carryforwards and
other tax benefits that it expects to use in 2007. The Corporation
also will continue to build its cash balances during the year.
Therefore, the Corporation expects to pay dividends in the range of
$0.88 to $0.98 per share in 2007, or a 9% to 21% increase over
2006. �As we go through this transition in 2007, we anticipate that
the rate of growth of our dividends and distributions may slow
temporarily,� Davis continued. �This is directly attributable to
the impact of the 2005 hurricanes on our SLP assets and the fact
that our major capital programs in 2006 and 2007 are in the early
stages of making cash-flow contributions, which we expect to build
over time.� The company plans to disclose more detailed guidance
prior to its March 30, 2007, analyst meeting in Dallas, Texas.
Preliminary Guidance for 2007 Reconciliation of Net Income (Loss)
to Distributable Cash Flow (In millions) Range Low High (A) � Net
Income (Loss) $ (17) $ (2) Interest 78� 73� Depreciation and
Amortization 108� 108� Stock Based Compensation 12� 12� Adjusted
Cash Flow 181� 191� � Interest (78) (73) Amortization of Put
Premiums (9) (9) Maintenance Capital Expenditures (11) (14)
Distributable Cash Flow $ 83� $ 95� � (A) Assumes the repayment of
$100 million of debt in 2007 to reduce interest expense. Crosstex
to Hold Earnings Conference Call Today The Partnership and the
Corporation will hold their quarterly conference call to discuss
fourth-quarter and full-year 2006 results today, March 1, at 10:00
a.m. Central Time (11:00 p.m. Eastern Time). The dial-in number for
the call is 1-866-761-0748, and the passcode is �Crosstex.� Callers
outside the United States should dial 1-617-614-2706, and the
passcode is �Crosstex.� A live Web cast of the call can be accessed
on the Investors page of Crosstex Energy�s Web site at
www.crosstexenergy.com. A replay of the call can be accessed for 30
days by dialing 888-286-8010, passcode 40752106. International
callers should dial 1-617-801-6888, passcode 40752106, for a
replay. Interested parties also can visit the Investors page of
Crosstex�s Web site to listen to a replay of the call. 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, and
approximately 160 natural gas amine-treating plants in service and
approximately 35 dew point control plants. Crosstex currently
provides services for over 3.0 Bcf/day of natural gas, or
approximately 6.0 percent of marketed U.S. daily production based
on August 2006 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 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 noncash charges, less maintenance capital expenditures and
amortization of costs of certain derivatives (puts) plus proceeds
from the 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,� �expect� 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-Ks for the year ended December 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 Data (All amounts in thousands except per unit
numbers) � Three Months Ended Years Ended December 31, December 31,
2006� 2005� 2006� 2005� Revenues Midstream $ 705,838� $1,054,544�
$3,073,069� $2,982,874� Treating 18,327� 14,542� 66,225� 48,606�
Profit from Energy Trading Activities 580� 411� 2,510� 1,568�
724,745� 1,069,497� 3,141,804� 3,033,048� � Cost of Gas Midstream
649,351� 1,009,405� 2,859,815� 2,860,823� Treating 2,104� 3,710�
9,463� 9,706� 651,455� 1,013,115� 2,869,278� 2,870,529� � Gross
Margin 73,290� 56,382� 272,526� 162,519� � Operating Expenses
28,117� 19,138� 100,991� 56,736� General and Administrative 11,942�
10,360� 45,694� 32,697� (Gain) Loss on Derivatives 240� (3,711)
(1,599) 9,968� Gain on Sale of Property (2,131) (341) (2,108)
(8,138) Depreciation and Amortization 24,548� 13,890� 82,731�
36,024� Total 62,716� 39,336� 225,709� 127,287� � Operating Income
10,574� 17,046� 46,817� 35,232� � Interest Expense and Other
(15,575) (6,432) (51,244) (15,375) Net Income (Loss) before
Minority Interest and Taxes (5,001) 10,614� (4,427) 19,857� �
Minority Interest in Subsidiary (8) (110) (231) (441) Income Tax
Provision (Benefit) 134� (40) (222) (216) � Net Income (Loss)
before Cumulative Effect of Accounting Change (4,875) 10,464�
(4,880) 19,200� � Cumulative Effect of Accounting Change -� -� 689�
-� Net Income (Loss) $ (4,875) $ 10,464� $ (4,191) $ 19,200�
General Partner Share of Net Income (Loss) $ 4,275� $ 3,435� $
16,456� $ 8,652� � Limited Partners Share of Net Income (Loss) $
(9,150) $ 7,029� $ (20,647) $ 10,548� � Net Income (Loss) per
Limited Partners' Unit before Accounting Change: Basic $ (0.34) $
0.33� $ (0.81) $ 0.56� � Diluted $ (0.34) $ 0.30� $ (0.81) $ 0.51�
� Weighted Average Limited Partners� Units Outstanding: � � Basic
26,614� 21,554� 26,337� 19,006� � Diluted 26,614� 23,809� 26,337�
20,527� CROSSTEX ENERGY, L.P. Reconciliation of Net Income (Loss)
to Distributable Cash Flow (All amounts in thousands except ratios
and distributions per unit) � Three Months Ended Years Ended
December 31, December 31, 2006� 2005� 2006� 2005� � Net Income
(Loss) $ (4,875) $ 10,464� $ (4,191) $ 19,200� Depreciation and
Amortization (1) 24,477� 13,820� 82,444� 35,751� Stock-based
Compensation 2,348� 1,398� 8,557� 4,057� Gain on Sale of Idle
Property (2,240) (342) (2,108) (8,138) Proceeds from Sale of Idle
Property 3,862� -� 4,645� 9,313� Financial Derivatives
Mark-to-Market 1,319� (2,304) 3,255� 9,243� Cumulative Effect of
Accounting Change -� -� (689) -� Deferred Tax (Benefit) Expense
(147) 501� 490� 216� Cash Flow 24,744� 23,537� 92,403� 69,642� �
Amortization of Put Premiums (1,450) -� (4,442) -� Maintenance
Capital Expenditures (1,318) (1,319) (6,044) (5,046) Distributable
Cash Flow $ 21,976� $ 22,218� $ 81,917� $ 64,596� Minimum Quarterly
Distribution (MQD) $ 6,790� $ 6,379� $ 27,136� $ 25,515�
Distributable Cash Flow/MQD 3.24� 3.48� 3.02� 2.53� Actual
Distribution $ 20,813� $ 16,913� $ 79,980� $ 50,050� Distribution
Coverage 1.06� 1.31� 1.02� 1.29� � Distributions per Limited
Partner Unit $ 0.56� $ 0.51� $ 2.18� $ 1.93� � (1) Excludes
minority interest share of depreciation and amortization of $72,000
and $287,000 for the three months and year ended December 31, 2006,
respectively, and $70,000 and $272,000 for the three months and
year ended December 31, 2005, respectively. CROSSTEX ENERGY, L.P.
Operating Data � � Three Months Ended Years Ended December 31,
December 31, 2006� � 2005� 2006� � 2005� � Pipeline Throughput
(MMBtu/d) South Texas 426,000� 516,000� 461,000� 479,000� LIG
Pipeline & Marketing 746,000� 593,000� 693,000� 601,000� North
Texas 159,000� -� 115,000� (1) -� Other Midstream 183,000� �
154,000� 181,000� � 142,000� Total Gathering & Transmission
Volume 1,514,000� 1,263,000� 1,450,000� 1,222,000� � Natural Gas
Processed (MMBtu/d) 1,927,000� 1,729,000� 1,938,000� 1,825,000� �
Commercial Services Volume (MMBtu/d) 97,000� 144,000� 138,000�
175,000� � Treating Plants in Service (2) 160� 112� 160� 112� � (1)
North Texas first date of service was April 1, 2006. Average daily
throughput for the year ended December 31, 2006, is from the first
service date through December 31, 2006. � (2) Treating Plants in
Service represents plants in service on the last day of the period.
CROSSTEX ENERGY, INC. Selected Financial Data (All amounts in
thousands except per share numbers) � Three Months Ended Years
Ended December 31, December 31, 2006� 2005� 2006� 2005� Revenues
Midstream $ 705,838� $ 1,054,544� $ 3,073,069� $2,982,874� Treating
18,327� 14,542� 66,225� 48,606� Profit from Energy Trading
Activities 580� 411� 2,510� 1,568� 724,745� 1,069,497� 3,141,804�
3,033,048� Cost of Gas Midstream 649,351� 1,009,405� 2,859,815�
2,860,823� Treating 2,104� 3,710� 9,463� 9,706� 651,455� 1,013,115�
2,869,278� 2,870,529� � Gross Margin 73,290� 56,382� 272,526�
162,519� � Operating Expenses 28,129� 19,155� 101,036� 56,768�
General and Administrative 12,352� 10,850� 47,707� 34,145� (Gain)
Loss on Derivatives 240� (3,711) (1,599) 9,968� Gain on Sale of
Property (2,131) (341) (2,108) (8,138) Depreciation and
Amortization 24,567� 13,901� 82,792� 36,070� Total 63,157� 39,854�
227,828� 128,813� � Operating Income 10,133� 16,528� 44,698�
33,706� � Interest Expense and Other (15,496) (6,273) (49,277)
(14,941) Income (Loss) before Gain on Issuance of Partnership
Units, Income Taxes and Interest of Noncontrolling Partners in the
Partnership's Net Income (5,363) 10,255� (4,579) 18,765� Income Tax
Provision (Benefit) 124� (27,519) (11,118) (30,047) Gain on
Issuance of Units of the Partnership -� 65,070� 18,955� 65,070�
Interest of Noncontrolling Partners in the Partnership's Net
(Income) Loss 5,704� (2,743) 13,027� (4,652) Net Income before
Cumulative Effect of Accounting Change 465� 45,063� 16,285� 49,136�
Cumulative Effect of Accounting Change -� -� 170� -� Net Income $
465� $ 45,063� $ 16,455� $ 49,136� � Net Income per Common Share
Before Accounting Change: � Basic Earnings per Common Share $ 0.01�
$ 1.18� $ 0.39� $ 1.29� � Diluted Earnings per Common Share $ 0.01�
$ 1.16� $ 0.42� $ 1.26� � Weighted Average Shares Outstanding: �
Basic 45,941� 38,280� 42,168� 37,956� � Diluted 46,534� 38,946�
38,871� 38,871� � Dividends per Common Share $ 0.22� $ 0.19� $
0.84� $ 0.56�
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