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 2010.
Second-Quarter 2010 – Crosstex Energy, L.P. Financial
Results
The Partnership realized adjusted EBITDA of $45.2 million and
distributable cash flow of $22.8 million for the second quarter of
2010, compared with adjusted EBITDA of $40.4 million and
distributable cash flow of $13.2 million for the second 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’s net loss of $2.5 million for the second
quarter of 2010 was a $7.8 million improvement over the $10.3
million net loss for the second quarter of 2009. The net loss for
the second quarter of 2009 included income of $4.6 million from
discontinued operations.
“The results from the second quarter are strong and we continue
to grow the business around our core assets,” said Barry E. Davis,
Crosstex President and Chief Executive Officer. “Based on the great
results to date and our outlook for the remainder of the year, we
are updating our distribution guidance to advise that we anticipate
restoring our distributions and dividends at the end of the third
quarter – a quarter earlier than our original plan. Restoring the
distribution is the last step of our recovery and repositions
Crosstex for the future.”
The Partnership’s second-quarter 2010 gross margin of $84.0
million increased $4.9 million, or six percent, over the second
quarter of 2009. The overall increase was primarily due to the
continuation of a favorable gas processing environment, an improved
fee structure and increased activity in the natural gas liquids
(NGL) marketing business and growth on our gathering and
transmission systems.
The Partnership now reports results on the following business
segments: the natural gas gathering, processing and transmission
operations located in north Texas (NTX); the pipelines and
processing plants located in Louisiana (LIG); and processing and
NGL assets in southern Louisiana (PNGL). Gas and NGL marketing
activities primarily are associated with the PNGL segment where
they are included for segment reporting purposes. Operating
activity for assets sold in the comparative periods that were not
considered discontinued operations is shown in the corporate
segment. The business segments’ contributions to the second-quarter
2010 margin increase compared to the second-quarter 2009, and the
factors affecting those contributions, are described below:
- The NTX segment’s gross margin
declined by $1.6 million, primarily the result of lower gathering
volumes for the second quarter of 2010 due to the renegotiation of
a key producer contract, which reduced gathering volumes and
increased transmission volumes, as well as certain producers’
decisions to direct low-margin volumes elsewhere. The recently
announced expansions and additions of supply to the Partnership’s
north Texas gathering system should increase volumes significantly
in 2011.
- The LIG segment’s gross margin
rose $5.1 million. The increase was primarily due to growth in firm
transport margin and volumes on the northern part of the system,
which more than offset the impact of reduced arbitrage volumes
during the past year.
- The PNGL segment’s gross margin
increased by $2.6 million due to improved NGL marketing activity
and higher plant inlet volumes.
- The corporate segment’s gross
margin, which included the 2009 margins for assets that were sold
and not considered discontinued operations, decreased by $1.2
million due to the sale of the Arkoma and east Texas assets.
The Partnership’s operating expenses for the second quarter of
2010 declined $2.4 million, or nine percent, compared with the
second quarter of 2009, and general and administrative expenses
decreased $2.0 million, or 15 percent, compared with the second
quarter of 2009 due to continued efficiency gains. Depreciation and
amortization expense decreased $4.1 million for the second quarter
of 2010 compared with the second quarter of 2009 due to the
extension of the useful lives of various assets which resulted from
a study completed in late 2009. Interest expense decreased to $20.0
million for the second quarter of 2010 from $21.7 million for the
second quarter of 2009 due to reductions in debt outstanding beyond
the amount associated with asset sales.
The net loss per limited partner common unit for the second
quarter of 2010 was $0.08 compared with a net loss of $0.19 per
common unit for the second quarter of 2009. The 2010 loss per
limited partner common unit was impacted by the allocation of $3.1
million of net income to the Partnership’s preferred units issued
in January 2010 related to distributions paid on these units. The
preferred units are entitled to a preferential quarterly
distribution that will be the greater of $0.2125 per unit or the
amount of the quarterly distribution paid to common unitholders.
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 preferred
distribution in cash for the second-quarter 2010 is consistent with
its financial guidelines, which call for no cash distributions to
be paid 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 payment date for
the distribution will be August 13, 2010.
Second-Quarter 2010 – Crosstex Energy, Inc. Financial
Results
The Corporation reported a net loss of $2.2 million for the
second quarter of 2010 compared with a net loss of $3.1 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
$3.2 million for the second quarter of 2010, compared with a loss
of $15.2 million for the second 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 Updates 2010 Distribution and Dividend
Guidance
The Partnership and the Corporation are providing updated 2010
distribution and dividend guidance to reflect continued positive
results since the original guidance was issued in March 2010. The
Partnership’s financial guidelines, which govern its considerations
as to the timing and amount of any future distribution payments,
include achieving a ratio of total debt to adjusted EBITDA of less
than 4.5 to 1 (pro forma for the payment of any distribution),
sufficient coverage of any distribution from cash flow so the
Partnership can continue to move toward its leverage goal of less
than 4.0 to 1, and a positive outlook for its business. Assuming
the previously announced range of adjusted EBITDA and distributable
cash flow guidance, the Partnership now expects it will generate
sufficient distributable cash flow to distribute $0.25 per unit for
the third quarter of 2010, payable in November 2010, with strong
coverage from cash flows. Assuming the receipt of distributions
from the Partnership at this level, the Corporation expects it
could pay a dividend of $0.07 per share for the third quarter of
2010. The payment and amount of any distributions and
dividends will be subject to approval by the Boards of Directors of
the Partnership and the Corporation and to economic conditions and
other factors existing at the time of determination.
Crosstex to Hold Earnings Conference Call Today
The Partnership and the Corporation will hold their quarterly
conference call to discuss second-quarter 2010 results today,
August 6, at 10:00 a.m. Central time (11:00 a.m. Eastern time). The
dial-in number for the call is 1-888-713-4216. Callers outside the
United States should dial 1-617-213-4868. The passcode for all
callers is 67285920. Investors are advised to dial in to the call
and register at least 10 minutes prior to the call time.
Participants may preregister for the call at
https://www.theconferencingservice.com/prereg/key.process?key=PFV8FUM8X.
Preregistrants will be issued a pin number to use when dialing in
to the live call, which will provide quick access to the conference
call 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
November 5, 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 61213022. 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.
CROSSTEX ENERGY, L.P.Selected Financial Data(All
amounts in thousands except per unit numbers)
Three Months EndedJune 30 Six Months
EndedJune 30 2010 2009 2010
2009 (Unaudited) (Unaudited) Revenues
Midstream $ 399,529 $ 347,820 $ 831,981 $ 700,257 Gas and NGL
marketing activities 3,437 1,435
5,777 2,156 Total revenues 402,966 349,255
837,758 702,413 Purchased gas 318,956
270,174 672,553 554,386
Gross margin 84,010 79,081 165,205 148,027 Operating costs
and expenses: Operating expenses 25,424 27,827 51,889 55,706
General and administrative 11,704 13,712 24,393 27,565 (Gain) loss
on sale of property 564 284 (13,779 ) (544 ) (Gain) loss on
derivatives 1,594 (715 ) 5,290 (5,051 ) Impairments 313 - 1,311 -
Depreciation and amortization 26,820 30,911
53,912 59,670 Total operating
costs and expenses 66,419 72,019 123,016 137,346 Operating
income 17,591 7,062 42,189 10,681 Interest expense, net of
interest income (19,998 ) (21,723 ) (46,853 ) (39,257 ) Loss on
extinguishment of debt - - (14,713 ) (4,669 ) Other income
23 217 205 166
Total other income (expense) (19,975 ) (21,506 ) (61,361 ) (43,760
)
Loss from continuing operations
before non-controlling interest and income taxes
(2,384 ) (14,444 ) (19,172 ) (33,079 ) Income tax provision
(74 ) (455 ) (649 ) (876 ) Loss from
continuing operations, net of tax (2,458 ) (14,899 ) (19,821 )
(33,955 ) Income from discontinued operations, net of tax - 4,590 -
8,340 Gain on sale of discontinued operations, net of tax -
- Net loss (2,458 )
(10,309 ) (19,821 ) (25,615 )
Less: Net income (loss) from
continuing operations attributable to the non-controlling
interest
10 9 (25 ) 41 Net
loss attributable to Crosstex Energy, L.P. $ (2,468 ) $ (10,318 ) $
(19,796 ) $ (25,656 )
Preferred interest in net income
attributable to Crosstex Energy, L.P.
$ 3,125 $ - $ 6,250 $ -
Beneficial conversion feature
attributable to preferred units
$ - $ - $ 22,279 $ - General partner
interest in net loss $ (1,279 ) $ (951 ) $ (2,775 ) $ (1,891 )
Limited partners' interest in net
loss attributable to Crosstex Energy, L.P.
$ (4,314 ) $ (9,367 ) $ (45,550 ) $ (23,765 )
Net loss attributable to Crosstex
Energy, L.P. per limited partners' unit:
Basic and diluted common unit $ (0.08 ) $ (0.19 ) $ (0.89 ) $ (1.22
) Basic and diluted senior subordinated series D unit $ - $
- $ - $ 8.85
Weighted average basic and diluted
limited partners’ common units outstanding
49,781 49,039 49,734
47,189 Series A convertible preferred units
outstanding 14,706 - 14,706
-
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 EndedJune 30 Six Months EndedJune
30 2010 2009 2010 2009
(Unaudited) (Unaudited) Net loss attributable to
Crosstex Energy, L.P. $ (2,468 ) $ (10,318 ) $ (19,796 ) $ (25,656
) Depreciation, amortization and impairments (1) 27,060 30,837
55,077 59,524 Stock-based compensation 2,714 2,317 5,245 3,922
Interest expense, net 19,998 21,723 46,853 39,257 Loss on
extinguishment of debt - - 14,713 4,669 (Gain) loss on sale of
property 564 284 (13,779 ) (544 ) Discontinued operations - (4,590
) - (8,340 ) Noncash derivatives, taxes and other (2,705 )
151 632 1,875 Adjusted
EBITDA from continuing operations 45,163 40,404 88,945 74,707
Interest expense (2) (19,998 ) (24,758 ) (43,203 ) (42,674 )
Cash taxes and other cash expenses (199 ) (580 ) (899 ) (1,293 )
Maintenance capital expenditures (2,149 ) (1,893 )
(4,321 ) (3,362 ) Distributable cash flow from
continuing operations $ 22,817 $ 13,173 $ 40,522
$ 27,378 (1) Excludes minority interest share
of depreciation and amortization of $73 thousand and $146 thousand
for the three months and six months ended June 30, 2010,
respectively, and $74 thousand and $145 thousand for the three
months and six months ended June 30, 2009, respectively. (2)
Excludes $678 thousand of debt issuance cost amortization and $894
thousand of senior secured note make-whole and call premium
paid-in-kind interest resulting from repayment of such notes from
the proceeds of the preferred unit sale and an asset sale, for the
six months ended June 30, 2010.
CROSSTEX ENERGY,
L.P.Operating Data
Three Months EndedJune 30 Six Months
EndedJune 30 2010 2009 2010
2009 Pipeline Throughput (MMBtu/d) LIG
887,000 925,000 901,000 910,000 NTX - Gathering 731,000 827,000
738,000 812,000 NTX - Transmission 344,000 323,000 340,000 313,000
Corporate - 32,000 - 35,000
Total Gathering and Transmission
Volume 1,962,000 2,107,000 1,979,000 2,070,000
Natural Gas Processed (MMBtu/d) PNGL 854,000 686,000 891,000
661,000 LIG 286,000 268,000 285,000 259,000 NTX 207,000 235,000
203,000 228,000
Total Gas Volumes Processed 1,347,000
1,189,000 1,379,000 1,148,000 Realized weighted average
Natural Gas Liquids price ($/gallon) 0.98 0.71 1.03 0.69 Actual
weighted average Natural Gas Liquids to Gas ratio 261% 223% 247%
217%
Commercial Services Volume (MMBtu/d) 49,000
57,000 50,000 83,000
North Texas Gathering (1) Wells
connected 21 17 58 61 (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 EndedJune 30 Six Months
EndedJune 30 2010 2009 2010
2009 (Unaudited) (Unaudited) Revenues
Midstream $ 399,529 $ 347,820 $ 831,981 $ 700,257 Gas and NGL
marketing activities 3,437 1,435
5,777 2,156 Total revenues 402,966
349,255 837,758 702,413 Purchased gas 318,956
270,174 672,553 554,386
Gross margin 84,010 79,081 165,205 148,027 Operating
costs and expenses: Operating expenses 25,424 27,827 51,889 55,706
General and administrative 12,455 14,465 25,936 28,965 (Gain) loss
on sale of property 564 284 (13,779 ) (544 ) (Gain) loss on
derivatives 1,594 (715 ) 5,290 (5,051 ) Impairments 313 - 1,311 -
Depreciation and amortization 26,840 30,929
53,950 59,706 Total operating
costs and expenses 67,190 72,790 124,597 138,782 Operating
income 16,820 6,291 40,608 9,245 Interest expense, net of
interest income (19,995 ) (21,723 ) (46,850 ) (39,257 ) Loss on
extinguishment of debt - - (14,713 ) (4,669 ) Other income
23 231 205 209
Total other income (expense) (19,972 ) (21,492 ) (61,358 ) (43,717
) Loss from continuing operations before income taxes (3,152
) (15,201 ) (20,750 ) (34,472 ) Income tax (provision) benefit from
continuing operations 1,204 1,986
3,789 (55 ) Loss from continuing operations,
net of tax (1,948 ) (13,215 ) (16,961 ) (34,527 ) Income from
discontinued operations, net of tax - 3,906
- 7,171 Net loss (1,948 )
(9,309 ) (16,961 ) (27,356 )
Less: Interest of non-controlling
partners in the Partnership's net income (loss):
Interest of non-controlling
partners in the Partnership's continuing operations
233 (8,973 ) (9,378 ) (20,621 )
Interest of non-controlling
partners in the Partnership's discontinued operations
- 2,750 - 5,193
Total interest of non-controlling partners in the
Partnership 233 (6,223 ) (9,378 )
(15,428 ) Net loss attributable to Crosstex Energy, Inc. $
(2,181 ) $ (3,086 ) $ (7,583 ) $ (11,928 ) Net loss per common
share: Basic and diluted $ (0.05 ) $ (0.07 ) $ (0.16 ) $ (0.25 )
Weighted average shares outstanding: Basic and diluted
46,598 46,458 46,571
46,449
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