The Crosstex Energy companies, Crosstex Energy, L.P.
(NASDAQ:XTEX) (the Partnership) and Crosstex Energy, Inc.
(NASDAQ:XTXI) (the Corporation), today reported results for the
third-quarter 2011.
Third-Quarter 2011 Compared with Third-Quarter 2010 –
Crosstex Energy, L.P. Financial Results
The Partnership realized adjusted EBITDA of $50.1 million and
distributable cash flow of $25.8 million for the third quarter of
2011, compared with adjusted EBITDA of $47.8 million and
distributable cash flow of $22.6 million for the third quarter of
2010. 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 income (loss) in the tables at the
end of this news release.
The Partnership reported a net loss of $2.7 million for the
third quarter of 2011 versus a net loss of $3.7 million for the
third quarter of 2010.
“We completed a solid quarter with year over year growth despite
several operational challenges which impacted our results,” said
Barry E. Davis, Crosstex President and Chief Executive Officer.
“We’ve taken strategic steps to enter into three new operating
areas with projects that complement and expand upon our existing
operations. We are confident that we can deliver long-term
sustainable growth and shareholder value through successful
execution of our strategy.”
The Partnership’s third-quarter 2011 gross operating margin of
$91.0 million increased $7.4 million above gross operating margin
for the third quarter of 2010. The increase was due to a favorable
processing environment and higher gathering and processing volumes
in north Texas in the current quarter. Gross operating margin 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 operating income in the tables at the end of
this news release.
The Partnership reports results by operating segment principally
based on regions served. Reportable segments consist of the natural
gas gathering, processing and transmission operations in the
Barnett Shale in north Texas and in the Permian Basin in west Texas
(NTX); the pipelines and processing plants in Louisiana (LIG); and
the south Louisiana processing and natural gas liquids (NGL)
assets, including NGL fractionation and marketing activities
(PNGL).
Each business segment’s contribution to the increase in the
third-quarter 2011 gross operating margin as compared to the
third-quarter 2010, and the factors affecting those contributions,
are described below:
- The LIG segment’s gross operating
margin increased $4.0 million, primarily the result of the
continued strength of the processing environment.
- The NTX segment’s gross operating
margin improved by $3.6 million. The positive impact of increased
gathering and transmission volumes, higher processed volumes and
the favorable processing environment was partially offset by
increased losses on a certain long-term delivery contract for the
third quarter of 2011.
- The PNGL segment’s gross operating
margin declined $0.2 million. Increased plant processing margins
were offset by reduced margins from NGL fractionation and marketing
activity during the quarter.
The Partnership’s third-quarter 2011 operating expenses of $28.1
million rose $1.7 million, or six percent, from the third quarter
of 2010. The increase was primarily the result of higher labor and
benefit expenses. General and administrative expenses rose $2.4
million, or 21 percent, versus the third quarter of 2010 largely
due to higher labor and benefit expenses and professional fees and
services costs in addition to increased bad debt expense related to
uncollectible gathering fees related to a particular customer.
Depreciation and amortization expense for the third quarter of 2011
rose $3.7 million, or 13 percent, compared with the third quarter
of 2010 primarily due to increased amortization of intangibles.
Interest expense decreased to $19.5 million for the third quarter
of 2011 from $20.3 million for the third quarter of 2010 primarily
due to lower senior note interest and amortization of debt issue
costs.
The net loss per limited partner common unit for the third
quarter of 2011 was $0.14 compared with a net loss of $0.13 per
common unit for the third quarter of 2010.
Third-Quarter 2011 Compared with Second-Quarter 2011 –
Crosstex Energy, L.P. Financial Results
The Partnership’s adjusted EBITDA was $50.1 million for the
third quarter of 2011 and distributable cash flow was $25.8
million, declines of $5.3 million and $7.1 million, respectively,
versus the second quarter of 2011. The declines were primarily the
result of a $5.6 million decrease in gross operating margin to
$91.0 million versus the second-quarter 2011 gross operating margin
of $96.6 million. The major contributors to the gross operating
margin decline were within the PNGL segment. These included
decreased volumes at the Pelican gas processing plant due to
rerouting of a Gulf of Mexico pipeline connection; a decline in
volumes at the Blue Water processing plant because the plant was
idled for repairs during the quarter; a reduction in volumes
processed at the Eunice processing plant due to increased levels of
CO2 in the processing stream; and the reduction in NGL
fractionation and marketing margins caused by these reductions in
processed volumes. The Partnership anticipates these issues will be
resolved during the first quarter of 2012.
Third-Quarter 2011 Compared with Third-Quarter 2010 –
Crosstex Energy, Inc. Financial Results
The Corporation reported a net loss of $1.6 million for the
third quarter of 2011 compared with a net loss of $2.0 million for
the third quarter of 2010.
On a stand-alone basis, the Corporation had cash on hand of
approximately $5.5 million and no debt as of the end of the third
quarter of 2011.
Crosstex to Hold Earnings Conference Call Today
The Partnership and the Corporation will hold their quarterly
conference call to discuss third-quarter 2011 results today,
November 4, at 10:00 a.m. Central time (11:00 a.m. Eastern
time).
The dial-in number for the call is 1-888-713-4217. Callers
outside the United States should dial 1-617-213-4869. The passcode
is 88577827 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=PPHEE3A6J.
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 the live webcast of the call on the Investors page of
Crosstex’s website at www.crosstexenergy.com.
After the conference call, a replay can be accessed until
February 27, 2012, 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 16850448. Interested parties
also can visit the Investors page of Crosstex’s website 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
gross operating margin, adjusted EBITDA and distributable cash
flow. Gross operating margin is defined as revenue minus the cost
of purchased gas and NGLs. Adjusted EBITDA is defined as net income
plus interest expense, provision for income taxes, depreciation and
amortization expense, impairments, stock-based compensation, loss
on extinguishment of debt, (gain) loss on noncash derivatives,
transaction costs associated with successful transactions and
minority interest; less gain on sale of property. 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.
Gross operating margin, adjusted EBITDA and distributable cash
flow, as defined above, 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 income (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 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 which would impair
its ability to grow; (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, 2010,
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 amounts)
Three Months Ended
Nine Months Ended September 30, September 30,
2011 2010 2011 2010 (Unaudited)
(Unaudited) Midstream revenues $ 517,498 $ 454,735 $
1,533,003 $ 1,365,441 Purchased gas and NGLs 426,539
371,072 1,255,650 1,116,573
Gross operating margin 90,959 83,663 277,353 248,868
Operating costs and expenses: Operating expenses 28,126
26,476 81,083 78,365 General and administrative 13,712 11,277
38,111 35,669 (Gain) loss on sale of property 397 (588 ) 317
(14,367 ) Loss on derivatives 563 1,582 5,520 6,872 Impairments - -
- 1,311 Depreciation and amortization 31,912
28,185 93,200 82,097 Total
operating costs and expenses 74,710 66,932 218,231 189,947
Operating income 16,249 16,731 59,122 58,921 Interest
expense, net of interest income (19,507 ) (20,334 ) (59,952 )
(67,188 ) Loss on extinguishment of debt - - - (14,713 ) Other
income 786 109 656
314 Total other income (expense) (18,721 ) (20,225 ) (59,296
) (81,587 )
Loss before non-controlling interest and
income taxes
(2,472 ) (3,494 ) (174 ) (22,666 ) Income tax provision (287
) (161 ) (898 ) (809 ) Net loss (2,759
) (3,655 ) (1,072 ) (23,475 )
Less: Net income (loss) attributable to
the non-controlling interest
(23 ) 13 (130 ) (11 ) Net loss
attributable to Crosstex Energy, L.P. $ (2,736 ) $ (3,668 ) $ (942
) $ (23,464 )
Preferred interest in net income
attributable to Crosstex Energy, L.P.
$ 4,558 $ 3,676 $ 13,382 $ 9,926
Beneficial conversion feature attributable
to preferred units
$ - $ - $ - $ 22,279 General partner
interest in net income (loss) $ (76 ) $ (820 ) $ (709 ) $ (3,596 )
Limited partners' interest in net income
(loss) attributable to Crosstex Energy, L.P.
$ (7,218 ) $ (6,524 ) $ (13,615 ) $ (52,073 )
Net income (loss) attributable to Crosstex
Energy, L.P. per limited partner’s unit:
Basic and diluted common unit $ (0.14 ) $ (0.13 ) (0.26 )
(1.02 ) Weighted average limited partners' units
outstanding: Basic and diluted common units 50,650
50,142 50,562 49,872
Series A convertible preferred units outstanding 14,706
14,706 14,706 14,706
CROSSTEX ENERGY, L.P. Reconciliation of Net
Income (Loss) to Adjusted EBITDA and Distributable Cash Flow
(All amounts in thousands except ratios and per unit amounts)
Three
Months Ended Nine Months Ended September 30,
September 30, 2011 2010 2011
2010 (Unaudited) (Unaudited) Net loss
attributable to Crosstex Energy, L.P. $ (2,736 ) $ (3,668 ) $ (942
) $ (23,464 ) Depreciation, amortization and impairments 31,912
28,185 93,200 83,408 Stock-based compensation 1,509 1,860 5,504
7,106 Interest expense, net 19,507 20,334 59,952 67,188 Loss on
extinguishment of debt - - - 14,713 (Gain) loss on sale of property
397 (588 ) 317 (14,367 ) Noncash derivatives, taxes and other
(537 ) 1,647 1,351 2,133
Adjusted EBITDA 50,052 47,770 159,382 136,717
Interest expense (1) (19,569 ) (20,334 ) (58,813 ) (63,538 ) Cash
taxes and other cash expenses (2) (412 ) (285 ) (1,274 ) (1,184 )
Maintenance capital expenditures (4,264 ) (4,555 )
(9,460 ) (8,876 ) Distributable cash flow $ 25,807
$ 22,596 $ 89,834 $ 63,119 Actual
distribution (common and preferred) $ 21,602 $ 16,832 $ 62,881 $
23,082 Distribution coverage 1.19 1.34 1.43 2.73
Distributions declared per limited partner unit $ 0.31 $
0.25 $ 0.91 $ 0.25 Distributions declared per
preferred unit $ 0.31 $ 0.25 $ 0.91 $ 0.68
(1) 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 nine months ended September 30, 2010. (2)
Excludes $100 thousand and $418 thousand of startup expenses
related to successfully transacted growth projects for the three
months and nine months ended September 30, 2011, respectively.
CROSSTEX ENERGY, L.P. Operating Data
Three Months
Ended Nine Months Ended September 30,
September 30, 2011 2010 2011
2010 Pipeline Throughput (MMBtu/d) LIG 859,000
883,000 907,000 895,000 NTX - Gathering 779,000 736,000 769,000
737,000 NTX - Transmission 342,000 344,000 351,000
342,000
Total Gathering and Transmission
Volume 1,980,000 1,963,000 2,027,000 1,974,000
Natural Gas Processed (MMBtu/d) PNGL 699,000 878,000 837,000
886,000 LIG 236,000 284,000 244,000 285,000 NTX 258,000
224,000 248,000 210,000
Total Gas Volumes
Processed 1,193,000 1,386,000 1,329,000 1,381,000
Commercial Services Volume (MMBtu/d) 252,000 123,000 212,000
73,000
NGLs Fractionated (Gal/d) 987,000 972,000
1,088,000 934,000
Realized weighted average
Natural Gas Liquids price ($/gallon) 1.41 0.93 1.28 0.99 Actual
weighted average Natural Gas Liquids-to-Gas price ratio 371 % 237 %
344 % 245 %
North Texas Gathering (1) Wells connected
22 26 94 84 (1) North Texas Gathering wells connected are as
of the last day of the period and include Centralized Delivery
Point ("CDP") connections where the Partnership connects multiple
wells at a single meter station.
CROSSTEX ENERGY,
INC. Selected Financial Data (All amounts in thousands
except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30, 2011 2010
2011 2010 (Unaudited) (Unaudited)
Midstream revenues $ 517,498 $ 454,735 $ 1,533,003 $
1,365,441 Purchased gas and NGLs 426,539
371,072 1,255,650 1,116,573
Gross operating margin 90,959 83,663 277,353 248,868
Operating costs and expenses: Operating expenses 28,126 26,476
81,083 78,365 General and administrative 14,331 11,964 40,084
37,900 (Gain) loss on sale of property 397 (588 ) 317 (14,367 )
Loss on derivatives 563 1,582 5,520 6,872 Impairments - - - 1,311
Depreciation and amortization 31,930 28,203
93,257 82,153 Total operating
costs and expenses 75,347 67,637 220,261 192,234 Operating
income 15,612 16,026 57,092 56,634 Interest expense, net of
interest income (19,506 ) (20,334 ) (59,946 ) (67,184 ) Loss on
extinguishment of debt - - - (14,713 ) Other income 786
109 656 314 Total
other income (expense) (18,720 ) (20,225 ) (59,290 ) (81,583 )
Loss before non-controlling interest and
income taxes
(3,108 ) (4,199 ) (2,198 ) (24,949 ) Income tax benefit
1,156 1,536 2,054 5,325
Net loss (1,952 ) (2,663 ) (144 ) (19,624 )
Less: Net loss attributable to the
non-controlling Interest
(364 ) (683 ) 4,054 (10,061 )
Net loss attributable to Crosstex Energy, Inc. $ (1,588 ) $ (1,980
) $ (4,198 ) $ (9,563 ) Net loss per common share: Basic and
diluted $ (0.04 ) $ (0.04 ) $ (0.09 ) $ (0.20 ) Weighted average
shares outstanding: Basic and diluted 47,191
46,887 47,136 46,677 Dividends
declared per common share $ 0.10 $ 0.07 $ 0.29
$ 0.07
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