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 first-quarter
2010.
First-Quarter 2010 – Crosstex Energy, L.P. Financial
Results
The Partnership realized adjusted EBITDA of $43.8 million and
distributable cash flow of $17.7 million for the first quarter of
2010, compared with adjusted EBITDA of $34.3 million and
distributable cash flow of $14.2 million for the first quarter of
2009. Adjusted EBITDA and distributable cash flow are non-GAAP
financial measures and are explained in greater detail under
“Non-GAAP Financial Information.” There is a reconciliation of
these non-GAAP measures to net loss in the tables at the end of
this news release.
The Partnership reported a net loss of $17.3 million for the
first quarter of 2010, compared with a net loss of $15.3 million
for the first quarter of 2009. The first quarter 2010 net loss
included a loss of $14.7 million on the extinguishment of debt and
a $14.3 million gain on sale of property, while first quarter 2009
included a $4.7 million loss on the extinguishment of debt and $3.8
million of income from discontinued operations.
“We are pleased with our solid first-quarter results and are
making great progress this year as we focus on the disciplined
execution of our plan,” said Barry E. Davis, Crosstex President and
Chief Executive Officer. “We are optimizing results from our core
assets while investing in high-return projects. We believe Crosstex
is strategically positioned for performance and long-term
growth.”
The Partnership’s gross margin of $81.2 million for the first
quarter of 2010 increased $12.3 million, or 18 percent, compared
with the first quarter of 2009. Improvements of $11.5 million in
the natural gas processing and liquids marketing businesses
resulted from increased plant inlet volumes and higher natural gas
liquids (NGL) prices. Gross margin from the Partnership’s gathering
and transmission business increased $2.9 million, the result of
continued volume growth on the Partnership’s LIG system from the
Haynesville Shale gas play. This increase was partially offset by
reduced gathering volumes in north Texas. In addition, the Arkoma
and east Texas assets, which were sold and not included in
discontinued operations, created a negative margin variance of $2.1
million between the periods. First-quarter 2010 north Texas volumes
declined from the fourth quarter of 2009 primarily due to a
compressor outage on the Partnership’s north Johnson County
system.
The Partnership’s operating expenses for the first quarter of
2010 declined $1.4 million, or five percent, compared with the
first quarter of 2009, and general and administrative expenses
decreased $1.2 million, or eight percent, compared with the first
quarter of 2009. Depreciation and amortization expense decreased
$1.7 million for the first quarter of 2010 compared with the first
quarter of 2009 due to the extension of the useful lives of various
assets. Interest expense rose to $26.9 million for the first
quarter of 2010 from $17.5 million for the first quarter of 2009.
This was primarily the result of increased borrowing rates and
amortization of costs from the February 2009 amendments to the
credit facility and senior secured notes and the 2010
refinancing.
The net loss per limited partner common unit for the first
quarter of 2010 was $0.81 compared with a net loss of $1.06 per
common unit for the first quarter of 2009. The 2010 loss per
limited partner common unit was impacted by the allocation of $22.3
million of net income to the Partnership’s preferred units, and the
2009 loss per limited partner common unit was impacted by the
allocation of $34.3 million of net income to the Partnership’s
Senior Subordinated Series D Units. These allocations relate to
Beneficial Conversion Features (BCF) under accounting guidance. The
preferred units were issued in January 2010 and the Senior
Subordinated Series D Units were issued in March 2007 at discounts
to the market price of the common units when these units were
issued. The BCF allocation is a noncash item equal to the discount
to the common unit market price that is treated in the same way as
a cash distribution for earnings per unit calculations. The BCF
related to the preferred units, which are convertible into common
units at any time at the option of the preferred unitholder, was
recognized upon their issuance in the first quarter of 2010. The
BCF related to the Senior Subordinated Series D Units, which had a
contingency feature related to their conversion into common units,
was recognized when these units converted to common units in the
first quarter of 2009.
The preferred units discussed above are entitled to a
preferential quarterly distribution of $0.2125 per unit. Such
quarterly distribution may be paid in cash, in additional preferred
units issued in kind or any combination thereof, provided that the
distribution may not be paid in additional preferred units if the
Partnership pays a cash distribution on common units. The
Partnership has determined that payment of the $0.2125 distribution
in cash for the first quarter of 2010 will be consistent with its
financial guidelines, which call for no cash distributions unless
the ratio of total debt to adjusted EBITDA is less than 4.5 to 1.0,
pro forma for any distribution. Therefore, the Partnership has
elected to pay the distribution on the preferred units of
approximately $3.1 million in cash. The record date for the
distribution will be May 10, 2010, and the payment date will be May
14, 2010.
First-Quarter 2010 – Crosstex Energy, Inc. Financial
Results
The Corporation reported a net loss of $5.4 million for the
first quarter of 2010 compared with a net loss of $8.8 million for
the comparable period in 2009. The Corporation’s loss from
continuing operations before income taxes (which includes interest
of non-controlling partners in the net loss of the Partnership) was
$17.6 million for the first quarter of 2010, compared with a loss
of $19.3 million for the first quarter of 2009.
In accordance with U.S. accounting standards, the Partnership
and Corporation classified certain assets, liabilities, and results
of their operations as discontinued operations for the 2009
accounting periods presented. Included in this release are tables
of selected financial data where amounts have been reclassified as
discontinued operations for the 2009 periods presented.
Crosstex to Hold Earnings Conference Call Today
The Partnership and the Corporation will hold their quarterly
conference call to discuss first-quarter 2010 results today, May 7,
at 10:00 a.m. Central time (11:00 a.m. Eastern time). The dial-in
number for the call is 1-888-679-8038. Callers outside the United
States should dial 1-617-213-4850. The passcode is 67779930 for all
callers. Investors are advised to dial in to the call at least 10
minutes prior to the call time to register. Participants may
preregister for the call at
https://www.theconferencingservice.com/prereg/key.process?key=PBNRX4XCB.
Preregistrants will be issued a pin number to use when dialing in
to the live call, which will provide quick access to the conference
by bypassing the operator upon connection. Interested parties also
can access a live Web cast of the call on the Investors page of
Crosstex’s Web site at www.crosstexenergy.com.
After the conference call, a replay can be accessed until August
6, 2010 by dialing 1-888-286-8010. International callers should
dial 1-617-801-6888 for a replay. The passcode for all callers
listening to the replay is 86087991. 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 approximately 3,300 miles of
pipeline, nine processing plants and three fractionators. The
Partnership currently provides services for 3.2 billion cubic feet
of natural gas per day, or approximately six percent of marketed
U.S. daily production.
Crosstex Energy, Inc. owns the two percent general partner
interest, a 25 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 non-generally accepted accounting
principle financial measures that the Partnership refers to as
adjusted EBITDA and distributable cash flow. Adjusted EBITDA is
defined as earnings before interest, income taxes, depreciation and
amortization, impairments, loss on extinguishment of debt,
stock-based compensation, noncash derivative items, gain on the
sale of assets and other miscellaneous noncash items. Distributable
cash flow is defined as earnings before certain noncash charges and
the gain on the sale of assets less maintenance capital
expenditures. 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. Maintenance capital expenditures are capital
expenditures made to replace partially or fully depreciated assets
in order to maintain the existing operating capacity of the assets
and to extend their useful lives.
The Partnership believes these measures are useful to investors
because they 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.
Adjusted EBITDA and distributable cash flow are not measures of
financial performance or liquidity under GAAP. They should not be
considered in isolation or as an indicator of the Partnership’s
performance. Furthermore, they should not be seen as measures of
liquidity or a substitute for metrics prepared in accordance with
GAAP. A reconciliation of these measures to net loss is included
among the following tables.
This press release contains forward-looking statements within
the meaning of the federal securities laws. These statements are
based on certain assumptions made by the Partnership and the
Corporation based upon management’s experience and perception of
historical trends, current conditions, expected future developments
and other factors the Partnership and the Corporation believe are
appropriate in the circumstances. These statements include, but are
not limited to, statements with respect to the Partnership’s and
the Corporation’s guidance and future outlook, distribution and
dividend guidelines and future estimates, financing plans,
financial condition, liquidity and results of operations. Such
statements are subject to a number of assumptions, risks and
uncertainties, many of which are beyond the control of the
Partnership and the Corporation, which may cause the Partnership’s
and the Corporation’s actual results to differ materially from
those implied or expressed by the forward-looking statements. These
risks include the following: (1) the Partnership’s profitability is
dependent upon prices and market demand for natural gas and NGLs;
(2) the Partnership’s substantial indebtedness could limit its
flexibility and adversely affect its financial health; (3) the
Partnership may not be able to obtain funding due to the
deterioration of the credit and capital markets and current
economic conditions; (4) the Partnership and the Corporation do not
have diversified assets; (5) drilling levels may decrease due to
deterioration in the credit and commodity markets; (6) the
Partnership’s credit risk management efforts may fail to adequately
protect against customer nonpayment; (7) the Partnership’s use of
derivative financial instruments does not eliminate its exposure to
fluctuations in commodity prices and interest rates; (8) the
Partnership may not be successful in balancing its purchases and
sales; (9) the amount of natural gas transported in the
Partnership’s gathering and transmission lines may decline as a
result of reduced drilling by producers, competition for supplies,
reserve declines and reduction in demand from key customers and
markets; (10) the level of the Partnership’s processing operations
may decline for similar reasons; (11) operational, regulatory and
other asset-related risks, including weather conditions such as
hurricanes, exist because a significant portion of the
Partnership’s assets are located in southern Louisiana; and (12)
other factors discussed in the Partnership’s and the Corporation’s
Annual Reports on Form 10-K for the year ended December 31, 2009,
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 March 31 2010
2009 (Unaudited) Revenues
Midstream $ 432,452 $ 352,437 Gas and NGL marketing activities
2,340 721 Total revenues 434,792
353,158 Purchased gas 353,597 284,212
Gross margin 81,195 68,946 Operating expenses 26,465
27,879 General and administrative 12,689 13,853 Gain on sale of
property (14,343 ) (828 ) (Gain) loss on derivatives 3,696 (4,336 )
Impairments 998 - Depreciation and amortization 27,092
28,759 Total operating costs and expenses
56,597 65,327 Operating income 24,598 3,619 Interest
expense, net of interest income (26,855 ) (17,534 ) Loss on
extinguishment of debt (14,713 ) (4,669 ) Other income (expense)
182 (51 ) Total other income (expense) (41,386
) (22,254 ) Loss from continuing operations before non-controlling
interest and income taxes (16,788 ) (18,635 ) Income tax provision
(575 ) (421 ) Loss from continuing operations (17,363
) (19,056 ) Income from discontinued operations, net of tax
- 3,750 Net loss (17,363 )
(15,306 )
Less: Net income (loss) from
continuing operations attributable to the non-controlling
interest
(35 ) 32 Net loss attributable to Crosstex
Energy, L.P. $ (17,328 ) $ (15,338 )
Preferred interest in net income
attributable to Crosstex Energy, L.P.
$ 3,125 $ -
Beneficial conversion feature
attributable to preferred units
$ 22,279 $ - General partner interest in net
loss $ (1,496 ) $ (940 )
Limited partners' interest in net
loss attributable to Crosstex Energy, L.P.
$ (41,236 ) $ (14,398 ) Net income (loss) attributable to
Crosstex Energy, L.P. per limited partners' unit:
Basic and diluted common unit $ (0.81 ) $ (1.06 ) Basic and
diluted senior subordinated series D unit $ - $ 8.85
Weighted average basic and diluted
limited partners’ common units outstanding
49,739 45,318
CROSSTEX ENERGY, L.P. Reconciliation of Net Loss to
Adjusted EBITDA and Distributable Cash Flow (All amounts in
thousands except those included in footnotes)
Three
Months Ended March 31 2010
2009 (Unaudited) Net loss attributable to
Crosstex Energy, L.P. $ (17,328 ) $ (15,338 ) Depreciation,
amortization and impairments (1) 28,017 28,688 Stock-based
compensation 2,532 1,606 Interest expense, net 26,855 17,534 Loss
on extinguishment of debt 14,713 4,669 Gain on sale of property
(14,343 ) (828 ) Discontinued operations - (3,750 ) Noncash
derivatives, taxes and other 3,337 1,724
Adjusted EBITDA from continuing operations 43,783 34,305
Interest (2) (23,205 ) (17,916 ) Cash taxes and other (699 )
(713 ) Maintenance capital expenditures (2,172 )
(1,469 ) Distributable cash flow from continuing operations $
17,707 $ 14,207 (1 ) Excludes minority
interest share of depreciation and amortization of $73 thousand for
the three months ended March 31, 2010, and $71 thousand for the
three months ended March 31, 2009. (2 ) Excludes $678
thousand of debt issuance cost amortization and $894 thousand of
senior secured note make-whole and call premium paid-in-kind
interest resulting from repayment of such notes from the proceeds
of the preferred unit sale and an asset sale, for the three months
ended March 31, 2010.
CROSSTEX ENERGY,
L.P. Operating Data Three Months
Ended March 31 2010 2009
Pipeline Throughput (MMBtu/d) LIG Pipeline
& Marketing 916,000 894,000 North Texas - Gathering 745,000
796,000 North Texas - Transmission 337,000 303,000 Other Midstream
- 38,000
Total Gathering and Transmission
Volume 1,998,000 2,031,000
Natural Gas Processed
(MMBtu/d) South Louisiana 909,000 627,000 LIG System 284,000
250,000 North Texas 200,000 221,000
Total Gas
Volumes Processed 1,393,000 1,098,000 Realized weighted
average Natural Gas Liquids price ($/gallon) 1.08 0.66 Actual
weighted average Natural Gas Liquids to Gas ratio 236 % 152 %
Commercial Services Volume (MMBtu/d) 57,000 110,000
North Texas Gathering (1) Wells connected 37 44
(1 ) North Texas Gathering wells connected are
as of the last day of the period and include Centralized Delivery
Point ("CDP") connections where Crosstex connects multiple wells at
a single meter station.
CROSSTEX ENERGY, INC.
Selected Financial Data (All amounts in thousands except per
share numbers)
Three Months Ended
March 31 2010 2009
(Unaudited) Revenues Midstream $ 432,452 $ 352,437 Gas and
NGL marketing activities 2,340 721
Total revenues 434,792 353,158 Purchased gas 353,597
284,212 Gross margin 81,195 68,946
Operating expenses 26,465 27,879 General and administrative
13,481 14,500 Gain on sale of property (14,343 ) (828 ) (Gain) loss
on derivatives 3,696 (4,336 ) Impairments 998 - Depreciation and
amortization 27,110 28,777 Total
operating costs and expenses 57,407 65,992 Operating income
23,788 2,954 Interest expense, net of interest income
(26,855 ) (17,534 ) Loss on extinguishment of debt (14,713 ) (4,669
) Other income (expense) 182 (22 ) Total other
income (expense) (41,386 ) (22,225 ) Loss from continuing
operations before income taxes (17,598 ) (19,271 ) Income tax
(provision) benefit from continuing operations 2,585
(2,041 ) Loss from continuing operations, net of tax (15,013
) (21,312 ) Income from discontinued operations, net of tax
- 3,265 Net loss (15,013 ) (18,047 )
Less: Interest of non-controlling
partners in the Partnership's net loss
(9,611 ) (9,205 ) Net loss attributable to Crosstex
Energy, Inc. $ (5,402 ) $ (8,842 ) Net loss per common share: Basic
and diluted $ (0.11 ) $ (0.19 ) Weighted average shares
outstanding: Basic and diluted 46,575 46,439
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