XTXI Crosstex Energy, Inc. (MM)

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 2007. Second-Quarter 2007 -- Crosstex Energy, L.P. Financial Results The Partnership reported net income of $2.9 million in the second quarter of 2007, compared with a net loss of $2.3 million in the second quarter of 2006. The Partnership�s distributable cash flow in the second quarter of 2007 was $26.2 million, or 3.8 times the amount required to cover its minimum quarterly distribution of $0.25 per unit and 1.21 times the amount required to cover its recently increased quarterly distribution of $0.57 per unit. Distributable cash flow in the second-quarter 2007 increased $6.2 million, or 31 percent over distributable cash flow of $20.0 million in the second quarter of 2006. 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 are very pleased with our results and the momentum that we have developed in the second quarter. During the quarter, we saw continued strong growth in our core North Texas area in the Barnett Shale play where major gas producers have confirmed better-than-expected results and plans for continued aggressive drilling plans. During the second quarter, there were 70 well connections to our gathering systems. As a result, Crosstex�s gathered volumes have more than doubled in North Texas since the Chief acquisition only a year ago -- right on track with our expectations,� said Barry E. Davis, Crosstex President and Chief Executive Officer. �And we are on schedule to more than triple our gas processing capacity next quarter in the Barnett Shale. �During the second quarter, we also completed a 72-mile expansion of our Louisiana Intrastate Gas system, which performed on plan during the quarter. Current system throughput is more than one million MMBtu per day, a record flow rate since our ownership of the pipeline. Drilling is solid throughout our entire Louisiana system, and we have numerous opportunities to add attractive packages of wellhead supply,� added Davis. Second-quarter 2007 gross margin was $89.6 million, compared with $66.2 million in the corresponding 2006 period, a 35 percent increase. Gross margin from the Midstream segment rose 43 percent to $75.6 million in the second quarter of 2007 versus gross margin of $52.8 million for the year-ago quarter. The improvement was driven largely by higher volumes from the Partnership�s North Texas gathering and transportation assets and from the expansion of the Partnership�s Louisiana Intrastate Gas system that began operations in April 2007. Gross margin from the Treating segment increased five percent to $14.0 million, compared with a gross margin of $13.4 million for the second quarter of 2006 due to a greater number of plants in service. The Partnership had 195 treating and dew point control plants in service at the end of the second-quarter 2007 versus 178 plants in service at the end of second-quarter 2006. Operating expenses were $30.0 million in the second quarter of 2007, compared with $22.8 million in the second-quarter 2006. The increase was related to the June 2006 acquisition and subsequent expansion of the Chief gathering assets in the Barnett Shale formation in North Texas and the completion of the Louisiana Intrastate Gas system expansion in April 2007. In the second quarter of 2007, general and administrative expenses rose to $14.8 million from $10.9 million in the year-ago quarter primarily due to staff additions to support the company�s expanding asset base. Interest expense was $18.6 million in the second quarter of 2007 versus $11.9 million in the year-ago quarter due to increased debt for growth activities. The net loss per limited partner unit in the second-quarter 2007 was $0.06 per unit versus a net loss of $0.23 per unit in the corresponding quarter of 2006. The loss per limited partner unit was impacted by the $4.5 million preferential allocation of net income to the general partner in the second quarter of 2007, which represented the general partner�s incentive distribution rights less certain stock-based compensation costs. This allocation reduced the limited partners� share of net income to a net loss of $1.6 million in the quarter. Second-Quarter 2007 -- Crosstex Energy, Inc. Financial Results The Corporation reported net income of $2.2 million for the second quarter of 2007, compared with net income of $1.6 million for the comparable period in 2006. The Corporation�s net income before income taxes and interest of noncontrolling partners in the net income of the Partnership was $2.5 million in the second quarter of 2007, compared with a net loss of $0.9 million in the second quarter of 2006. The Corporation�s share of Partnership distributions, including distributions on its 10 million participating limited partner units, its two percent general partner interest, and the incentive distribution rights, was $11.9 million in the second quarter of 2007. Its share of Partnership distributions in the second quarter of 2006 was $10.8 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 $11.5 million in the first quarter of 2007 to $11.9 million in the second quarter of 2007. Crosstex to Hold Earnings Conference Call Today The Partnership and the Corporation will hold their quarterly conference call to discuss second-quarter 2007 results today, August 9, at 10:00 a.m. Central Time (11:00 p.m. Eastern Time). The dial-in number for the call is 1-800-320-2978, and the passcode is �Crosstex.� Callers outside the United States should dial 1-617-614-4923, 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. International callers should dial 1-617-801-6888 for a replay. The passcode for all callers listening to the replay is 88276841. 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 200 natural gas amine-treating plants and dew point control plants. Crosstex currently provides services for over 3.5 Bcf/day of natural gas, or approximately 7.0 percent of marketed U.S. daily production. Crosstex Energy, Inc. owns the two percent general partner interest, a 38 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). 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-K�s 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. 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, 2007 2006 2007 2006 (Unaudited) Revenues Midstream $ 984,669 $ 728,398 $ 1,794,467 $ 1,530,965 Treating 16,256 15,450 32,607 29,580 Profit from Energy Trading Activities � 991 � � 807 � � 1,594 � � 1,230 � 1,001,916 744,655 1,828,668 1,561,775 � Cost of Gas Midstream 910,061 676,370 1,661,943 1,432,821 Treating � 2,257 � � 2,056 � � 4,591 � � 4,489 � 912,318 678,426 1,666,534 1,437,310 � Gross Margin 89,598 66,229 162,134 124,465 � Operating Expenses 29,956 22,840 57,313 44,801 General and Administrative 14,849 10,919 26,882 22,275 Gain on Sale of Property (971 ) (160 ) (1,821 ) (109 ) (Gain) Loss on Derivatives (1,280 ) 3,925 (4,494 ) 1,766 Depreciation and Amortization � 25,509 � � 18,708 � � 50,495 � � 35,758 � Total 68,063 56,232 128,375 104,491 � Operating Income 21,535 9,997 33,759 19,974 � Interest Expense and Other � (18,402 ) � (11,891 ) � (35,679 ) � (20,402 ) Net Income (Loss) before Minority Interest and Taxes 3,133 (1,894 ) (1,920 ) (428 ) � Minority Interest in Subsidiary (30 ) (101 ) (50 ) (182 ) Income Tax Provision � (215 ) � (264 ) � (419 ) � (298 ) Income (Loss) before Cumulative Effect of Accounting Change � 2,888 � � (2,259 ) � (2,389 ) � (908 ) � Cumulative Effect of Accounting Change � - � � - � � - � � 689 � Net Income (Loss) $ 2,888 � $ (2,259 ) $ (2,389 ) $ (219 ) General Partner Share of Net Income (Loss) $ 4,538 � $ 3,890 � $ 8,707 � $ 8,038 � Limited Partners' Share of Net Income (Loss) $ (1,650 ) $ (6,149 ) $ (11,096 ) $ (8,257 ) � Net Income (Loss) per Limited Partners' Unit after Accounting Change: � � Basic and Diluted Common Unit $ (0.06 ) $ (0.23 ) $ (0.42 ) $ (0.62 ) Basic and Diluted Senior Subordinated A Unit $ - � $ - � $ - � $ 5.31 � � Weighted Average Limited Partners� Units Outstanding: � � Basic and Diluted Common Units � 26,685 � � 26,572 � � 26,664 � � 26,064 � Basic and Diluted Senior Subordinated A Units � - � � - � � - � � 1,495 � � CROSSTEX ENERGY, L.P. Reconciliation of Net Income to Distributable Cash Flow (All amounts in thousands except ratios and distributions per unit) � Three Months Ended Six Months Ended June 30, June 30, 2007 2006 2007 2006 (Unaudited) (Unaudited) Net Income (Loss) $ 2,888 $ (2,259 ) $ (2,389 ) $ (219 ) Depreciation and Amortization (1) 25,437 18,637 50,351 35,615 Stock-based Compensation 2,852 2,238 5,086 3,883 Financial Derivatives Mark-to-Market 59 4,069 (2,022 ) 4,293 Cumulative Effect of Accounting Change - - - (689 ) Other � 45 � � 236 � � 89 � � 291 � Cash Flow 31,281 22,921 51,115 43,174 � Amortization of Put Premiums (2,517 ) (1,065 ) (3,468 ) (1,687 ) Maintenance Capital Expenditures � (2,597 ) � (1,710 ) � (3,629 ) � (2,729 ) Distributable Cash Flow $ 26,167 � $ 20,146 � $ 44,018 � $ 38,758 � Minimum Quarterly Distribution (MQD) $ 6,897 $ 6,785 $ 13,695 $ 13,558 Distributable Cash Flow/MQD 3.79 2.97 3.21 2.86 Actual Distribution $ 21,683 $ 19,724 $ 42,522 $ 38,893 Distribution Coverage 1.21 1.02 1.04 1.00 � Distributions per Limited Partner Unit $ 0.57 � $ 0.54 � $ 1.13 � $ 1.07 � � (1) Excludes minority interest share of depreciation and amortization of $72,000 and $144,000 for the three and six months ended June 30, 2007, respectively, and $72,000 and $143,000 for the three months and six months ended June 30, 2006, respectively. � CROSSTEX ENERGY, L.P. Operating Data � � Three Months Ended Six Months Ended June 30, June 30, 2007 2006 2007 2006 � Pipeline Throughput (MMBtu/d) South Texas 511,000 476,000 496,000 484,000 LIG Pipeline and Marketing 950,000 698,000 903,000 652,000 North Texas - Gathering 288,000 13,000 264,000 13,000 North Texas - Transmission 266,000 47,000 186,000 47,000 Other Midstream 186,000 175,000 179,000 171,000 Total Gathering and Transmission Volume 2,201,000 1,409,000 2,028,000 1,367,000 � Natural Gas Processed (MMBtu/d) South Louisiana 1,466,000 1,486,000 1,430,000 1,427,000 LIG System 320,000 364,000 319,000 331,000 South Texas 143,000 111,000 138,000 108,000 North Texas 92,000 9,000 78,000 4,000 Total Gas Volumes Processed 2,021,000 1,970,000 1,965,000 1,870,000 � Commercial Services Volume (MMBtu/d) 100,000 173,000 95,000 192,000 � North Texas Gathering (1) Wells Connected 70 - 105 - � Treating Plants and Dew Point Control Plants in Service (2) 195 178 195 178 � (1) North Texas Gathering assets were acquired June 29, 2006. (2) Treating Plants and Dew Point Control Plants in Service represents plants in service on the last day of the period. � 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, 2007 2006 2007 2006 (Unaudited) Revenues Midstream $ 984,669 $ 728,398 $ 1,794,467 $ 1,530,965 Treating 16,256 15,450 32,607 29,580 Profit from Energy Trading Activities � 991 � � 807 � � 1,594 � � 1,230 � 1,001,916 744,655 1,828,668 1,561,775 � Cost of Gas Midstream 910,061 676,370 1,661,943 1,431,938 Treating � 2,257 � � 2,056 � � 4,591 � � 4,489 � 912,318 678,426 1,666,534 1,436,427 � Gross Margin 89,598 66,229 162,134 125,348 � Operating Expenses 29,965 22,856 57,329 44,826 General and Administrative 15,537 11,545 28,189 23,377 Gain on Sale of Property (971 ) (160 ) (1,821 ) (109 ) (Gain) Loss on Derivatives (1,280 ) 3,925 (4,494 ) 1,766 Depreciation and Amortization � 25,521 � � 18,720 � � 50,518 � � 35,789 � Total 68,772 56,886 129,721 105,649 � Operating Income 20,826 9,343 32,413 19,699 � Interest Expense and Other � (18,297 ) � (10,198 ) � (35,436 ) � (18,599 ) Income (Loss) before Gain on Issuance of Partnership Units, Income Taxes and Interest of Noncontrolling Partners in the Partnership's Net Loss � � 2,529 (855 ) (3,023 ) 1,100 Gain on Issuance of Units of the Partnership - - - 18,955 Income Tax Provision (1,338 ) (1,238 ) (1,593 ) (10,572 ) Interest of Noncontrolling Partners in the Partnership's Net Loss � 1,002 � � 3,734 � � 6,883 � � 4,821 � Net Income before Cumulative Effect of Accounting Change � 2,193 � � 1,641 � � 2,267 � � 14,304 � Cumulative Effect of Accounting Change � - � � - � � - � � 170 � Net Income $ 2,193 � $ 1,641 � $ 2,267 � $ 14,474 � � Net Income per Common Share after Accounting Change: � � Basic Earnings per Common Share $ 0.05 � $ 0.04 � $ 0.05 � $ 0.38 � � Diluted Earnings per Common Share $ 0.05 � $ 0.04 � $ 0.05 � $ 0.37 � � Weighted Average Shares Outstanding: � Basic � 45,977 � � 38,373 � � 45,970 � � 38,331 � � Diluted � 46,576 � � 38,862 � � 46,565 � � 38,790 � � Dividends per Common Share $ 0.23 � $ 0.21 � $ 0.45 � $ 0.41 �