Today, DCP Midstream, LP (NYSE: DCP) reported its financial results
for the three months ended March 31, 2020.
HIGHLIGHTS
- Net loss attributable to partners of $550 million for the three
months ended March 31, 2020, inclusive of $807 million of
asset impairments.
- Distributable cash flow (DCF) of $220 million for the
three months ended March 31, 2020.
- Adjusted EBITDA of $321 million for the three months ended
March 31, 2020.
- First quarter 2020 Logistics and Marketing Adjusted EBITDA
increased approximately 14% from first quarter 2019, driven by
increased margin from Gulf Coast Express, NGL marketing, and Sand
Hills.
- Increased overall NGL throughput from the fourth quarter of
2019 to the first quarter of 2020 by 13%, including an approximate
26% increase on Southern Hills, driven by full quarter of volumes
from the DJ Basin extension via White Cliffs.
- Implemented a 50% distribution reduction, 75% growth capital
reduction, $90 million cost reduction, and $40 million sustaining
capital reduction from 2020 guidance.
- Executed a total of $46 million in cost savings and $17 million
of sustaining capital savings in the first quarter 2020, compared
to the fourth quarter of 2019.
- Exited the first quarter with approximately $600 million of
liquidity.
- Placed the expansions of Front Range to a capacity of 260
MBbls/d and Texas Express to a capacity of 370 MBbls/d into
service.
- Withdrawing 2020 guidance, providing revised 2020 outlook for
select metrics.
FIRST QUARTER 2020 SUMMARY FINANCIAL
RESULTS
|
Three Months
Ended |
March
31, |
|
2020 |
|
2019 |
|
(Unaudited) |
|
(Millions, except per unit amounts) |
|
|
|
|
Net (loss) income attributable
to partners |
$ |
(550 |
) |
|
|
$ |
75 |
|
Net (loss) income per limited
partner unit - basic and diluted |
$ |
(2.71 |
) |
|
|
$ |
0.14 |
|
Adjusted EBITDA(1) |
$ |
321 |
|
|
|
$ |
326 |
|
Distributable cash
flow(1) |
$ |
220 |
|
|
|
$ |
224 |
|
(1) This press release includes the following
financial measures not presented in accordance with U.S. generally
accepted accounting principles, or GAAP: adjusted EBITDA,
distributable cash flow and adjusted segment EBITDA. Each such
non-GAAP financial measure is defined below under “Non-GAAP
Financial Information”, and each is reconciled to its most directly
comparable GAAP financial measure under “Reconciliation of Non-GAAP
Financial Measures” in schedules at the end of this press
release.
CEO'S PERSPECTIVE
“Our primary focus continues to be the health and safety of our
people and our operations as we execute our pandemic response plan
during this unprecedented and dynamic environment," said Wouter van
Kempen, chairman, president, and CEO. “Our team delivered a very
strong first quarter as a result of early and decisive actions
focused on cost and capital reductions, and our commitment to
operational excellence. We are prepared for the remainder of the
year to be challenging for our industry, and we remain confident in
our ability to navigate this environment while maintaining our
culture, and safe and reliable operations."
GROWTH UPDATE
Logistics and Marketing Growth
- DCP exercised an increased 50% ownership option for the
Cheyenne Connector in October. The pipeline is expected to be in
service in the second quarter 2020.
- Front Range’s expansion to a capacity of 260 MBbls/d and Texas
Express’ expansion to a capacity of 370 MBbls/d were placed into
service.
Gathering and Processing Growth
- DCP is adding up to 225 MMcf/d of incremental DJ Basin
processing capacity by mid-2020 via a capital efficient offload
agreement.
COMMON UNIT DISTRIBUTIONS
On April 21, 2020, DCP announced a quarterly common unit
distribution of $0.39 per limited partner unit. This
distribution represents a 50% reduction from the previous
quarter.
DCP generated distributable cash flow of $220 million for
the three months ended March 31, 2020. Distributions declared
were $81 million for the first quarter of 2020.
FIRST QUARTER 2020 OPERATING RESULTS BY BUSINESS
SEGMENT
Logistics and Marketing
Logistics and Marketing Segment net income attributable to
partners for the three months ended March 31, 2020 and 2019 was
$236 million and $147 million, respectively.
Adjusted segment EBITDA increased to $208 million for the three
months ended March 31, 2020, from $183 million for the three months
ended March 31, 2019, reflecting higher equity earnings and
distributions driven by Gulf Coast Express volumes, favorable NGL
marketing margins, and higher Permian volumes on Sand Hills,
partially offset by decreased Southern Hills volumes, lower
earnings from Guadalupe, and the sale of our wholesale propane
business.
Gathering and Processing
Gathering and Processing Segment net (loss) income attributable
to partners for the three months ended March 31, 2020 and 2019 was
$(645) million and $67 million, respectively.
Adjusted segment EBITDA decreased to $168 million for the three
months ended March 31, 2020, from $205 million for the three months
ended March 31, 2019, reflecting sustained lower commodity prices,
lower margins in the South region and volume declines in the
Midcontinent region, partially offset by lower operating costs,
increased volumes in the Permian, and DJ Basin growth.
CAPITALIZATION, LIQUIDITY, AND FINANCING
Credit Facilities and Debt
DCP has two credit facilities with up to $1.75 billion of total
capacity. Proceeds from these facilities can be used for
working capital requirements and other general partnership purposes
including growth and acquisitions.
- DCP has a $1.4 billion senior unsecured revolving credit
agreement, or the Credit Agreement, that matures on
December 9, 2024. As of March 31, 2020, total available
capacity under the Credit Agreement was $586 million net of $800
million of outstanding borrowings and $14 million of letters of
credit.
- DCP has an accounts receivable securitization facility that
provides up to $350 million of borrowing capacity that matures
August 12, 2022. As of March 31, 2020, DCP had
$350 million of outstanding borrowings under the accounts
receivable securitization facility.
As of March 31, 2020, DCP had $5,925 million of total
consolidated principal debt outstanding, with the next maturity not
until September 2021. The total debt outstanding includes $550
million of junior subordinated notes which are excluded from
debt pursuant to DCP's Credit Agreement leverage ratio calculation.
For the three months ended March 31, 2020, DCP's leverage
ratio was 4.1 times. The effective interest rate on DCP's overall
debt position, as of March 31, 2020, was 4.86%.
CAPITAL EXPENDITURES AND INVESTMENTS
During the three months ended March 31, 2020, DCP had
expansion capital expenditures and equity investments totaling
$89 million, and sustaining capital expenditures totaling
$10 million, respectively.
EARNINGS CALL
DCP will host a conference call webcast tomorrow, May 7, 2020,
at 11:00 a.m. ET, to discuss its first quarter earnings. The live
audio webcast of the conference call and presentation slides can be
accessed through the Investors section on the DCP website at
www.dcpmidstream.com and the conference call can be accessed by
dialing (844) 233-0113 in the United States or (574) 990-1008
outside the United States. The conference confirmation number is
5152804. An audio webcast replay, presentation slides and
transcript will also be available by accessing the Investors
section on the DCP website.
NON-GAAP FINANCIAL INFORMATION
This press release and the accompanying financial schedules
include the following non-GAAP financial measures: adjusted EBITDA,
distributable cash flow and adjusted segment EBITDA. The
accompanying schedules provide reconciliations of these non-GAAP
financial measures to their most directly comparable GAAP financial
measures. DCP's non-GAAP financial measures should not be
considered in isolation or as an alternative to its financial
measures presented in accordance with GAAP, including operating
revenues, net income or loss attributable to partners, net cash
provided by or used in operating activities or any other measure of
liquidity or financial performance presented in accordance with
GAAP as a measure of operating performance, liquidity or ability to
service debt obligations and make cash distributions to
unitholders. The non-GAAP financial measures presented by DCP may
not be comparable to similarly titled measures of other companies
because they may not calculate their measures in the same
manner.
DCP defines adjusted EBITDA as net income or loss attributable
to partners adjusted for (i) distributions from unconsolidated
affiliates, net of earnings, (ii) depreciation and amortization
expense, (iii) net interest expense, (iv) noncontrolling interest
in depreciation and income tax expense, (v) unrealized gains and
losses from commodity derivatives, (vi) income tax expense or
benefit, (vii) impairment expense and (viii) certain other non-cash
items. Adjusted EBITDA further excludes items of income or loss
that we characterize as unrepresentative of our ongoing operations.
Management believes these measures provide investors meaningful
insight into results from ongoing operations.
The commodity derivative non-cash losses and gains result from
the marking to market of certain financial derivatives used by us
for risk management purposes that we do not account for under the
hedge method of accounting. These non-cash losses or gains may or
may not be realized in future periods when the derivative contracts
are settled, due to fluctuating commodity prices.
Adjusted EBITDA is used as a supplemental liquidity and
performance measure and adjusted segment EBITDA is used as a
supplemental performance measure by DCP's management and by
external users of its financial statements, such as investors,
commercial banks, research analysts and others to assess:
- financial performance of DCP's assets without regard to
financing methods, capital structure or historical cost basis;
- DCP's operating performance and return on capital as compared
to those of other companies in the midstream energy industry,
without regard to financing methods or capital structure;
- viability and performance of acquisitions and capital
expenditure projects and the overall rates of return on investment
opportunities;
- performance of DCP's business excluding non-cash commodity
derivative gains or losses; and
- in the case of Adjusted EBITDA, the ability of DCP's assets to
generate cash sufficient to pay interest costs, support its
indebtedness, make cash distributions to its unitholders and pay
sustaining capital expenditures.
DCP defines adjusted segment EBITDA for each segment as segment
net income or loss attributable to partners adjusted for (i)
distributions from unconsolidated affiliates, net of earnings, (ii)
depreciation and amortization expense, (iii) net interest expense,
(iv) noncontrolling interest in depreciation and income tax
expense, (v) unrealized gains and losses from commodity
derivatives, (vi) income tax expense or benefit, (vii) impairment
expense and (viii) certain other non-cash items. Adjusted segment
EBITDA further excludes items of income or loss that we
characterize as unrepresentative of our ongoing operations for that
segment for that segment.
DCP defines distributable cash flow as adjusted EBITDA less
sustaining capital expenditures, net of reimbursable projects,
interest expense, cumulative cash distributions earned by the
Series A, Series B and Series C Preferred Units (collectively the
"Preferred Limited Partnership Units") and certain other items.
Sustaining capital expenditures are cash expenditures made to
maintain DCP's cash flows, operating capacity or earnings capacity.
These expenditures add on to or improve capital assets owned,
including certain system integrity, compliance and safety
improvements. Sustaining capital expenditures also include certain
well connects, and may include the acquisition or construction of
new capital assets. Income attributable to preferred units
represent cash distributions earned by the Preferred Limited
Partnership Units. Cash distributions to be paid to the
holders of the Preferred Limited Partnership Units, assuming a
distribution is declared by DCP's board of directors, are not
available to common unit holders. Non-cash mark-to-market of
derivative instruments is considered to be non-cash for the purpose
of computing distributable cash flow because settlement will not
occur until future periods, and will be impacted by future changes
in commodity prices and interest rates. DCP compares the
distributable cash flow it generates to the cash distributions it
expects to pay to its partners. Distributable cash flow is used as
a supplemental liquidity and performance measure by DCP's
management and by external users of its financial statements, such
as investors, commercial banks, research analysts and others, to
assess DCP's ability to make cash distributions to its
unitholders.
ABOUT DCP MIDSTREAM, LP
DCP Midstream, LP (NYSE: DCP) is a Fortune 500 midstream master
limited partnership headquartered in Denver, Colorado, with a
diversified portfolio of gathering, processing, logistics and
marketing assets. DCP is one of the largest natural gas liquids
producers and marketers, and one of the largest natural gas
processors in the U.S. The owner of DCP’s general partner is a
joint venture between Enbridge and Phillips 66. For more
information, visit the DCP Midstream, LP website at
www.dcpmidstream.com.
CAUTIONARY STATEMENTS
This press release may contain or incorporate by reference
forward-looking statements as defined under the federal securities
laws regarding DCP Midstream, LP, including projections, estimates,
forecasts, plans and objectives. Although management believes that
expectations reflected in such forward-looking statements are
reasonable, no assurance can be given that such expectations will
prove to be correct. In addition, these statements are subject to
certain risks, uncertainties and other assumptions that are
difficult to predict and may be beyond DCP's control. If any of
these risks or uncertainties materialize, or if underlying
assumptions prove incorrect, DCP's actual results may vary
materially from what management forecasted, anticipated, estimated,
projected or expected.
The key risk factors that may have a direct bearing on DCP's
results of operations and financial condition are described in
detail in the "Risk Factors" section of DCP's most recently filed
annual report and subsequently filed quarterly reports with the
Securities and Exchange Commission. Investors are encouraged to
closely consider the disclosures and risk factors contained in
DCP's annual and quarterly reports filed from time to time with the
Securities and Exchange Commission. The forward looking statements
contained herein speak as of the date of this announcement. DCP
undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise, except as required by applicable
securities laws. Information contained in this press release is
unaudited and subject to change.
Investors or Analysts:Sarah
Sandbergscsandberg@dcpmidstream.com303-605-1626
DCP MIDSTREAM,
LPFINANCIAL RESULTS ANDSUMMARY
FINANCIAL DATA(Unaudited)
|
|
Three Months
Ended |
|
|
March
31, |
|
|
2020 |
|
2019 |
|
|
(Millions, except per unit amounts) |
Sales of natural gas, NGLs and condensate |
|
$ |
1,393 |
|
|
|
$ |
2,111 |
|
|
Transportation, processing and other |
|
112 |
|
|
|
115 |
|
|
Trading and marketing gains (losses), net |
|
152 |
|
|
|
(27 |
) |
|
Total operating revenues |
|
1,657 |
|
|
|
2,199 |
|
|
Purchases and related costs |
|
(1,146 |
) |
|
|
(1,804 |
) |
|
Operating and maintenance expense |
|
(153 |
) |
|
|
(178 |
) |
|
Depreciation and amortization expense |
|
(99 |
) |
|
|
(103 |
) |
|
General and administrative expense |
|
(56 |
) |
|
|
(67 |
) |
|
Asset impairments |
|
(746 |
) |
|
|
— |
|
|
Loss on sale of assets |
|
— |
|
|
|
(9 |
) |
|
Other expense, net |
|
(3 |
) |
|
|
(5 |
) |
|
Total operating costs and expenses |
|
(2,203 |
) |
|
|
(2,166 |
) |
|
Operating (loss) income |
|
(546 |
) |
|
|
33 |
|
|
Interest expense, net |
|
(78 |
) |
|
|
(69 |
) |
|
Earnings from unconsolidated affiliates |
|
76 |
|
|
|
113 |
|
|
Income tax expense |
|
(1 |
) |
|
|
(1 |
) |
|
Net income attributable to noncontrolling interests |
|
(1 |
) |
|
|
(1 |
) |
|
Net (loss) income attributable to partners |
|
(550 |
) |
|
|
75 |
|
|
Series A preferred partner's interest in net income |
|
(9 |
) |
|
|
(9 |
) |
|
Series B preferred partner's interest in net income |
|
(3 |
) |
|
|
(3 |
) |
|
Series C preferred partner's interest in net income |
|
(2 |
) |
|
|
(2 |
) |
|
General partner's interest in net income |
|
— |
|
|
|
(41 |
) |
|
Net (loss) income allocable to limited partners |
|
$ |
(564 |
) |
|
|
$ |
20 |
|
|
|
|
|
|
|
Net (loss) income per limited partner unit — basic and
diluted |
|
$ |
(2.71 |
) |
|
|
$ |
0.14 |
|
|
|
|
|
|
|
Weighted-average limited
partner units outstanding — basic and diluted |
|
208.3 |
|
|
|
143.3 |
|
|
|
|
March
31, |
|
December
31, |
|
2020 |
|
2019 |
|
|
(Millions) |
Cash and cash equivalents |
|
$ |
18 |
|
|
$ |
1 |
|
Other current assets |
|
940 |
|
|
1,079 |
|
Property, plant and equipment, net |
|
8,180 |
|
|
8,811 |
|
Other long-term assets |
|
4,050 |
|
|
4,236 |
|
Total assets |
|
$ |
13,188 |
|
|
$ |
14,127 |
|
|
|
|
|
|
Current liabilities |
|
$ |
963 |
|
|
$ |
1,190 |
|
Current debt |
|
3 |
|
|
603 |
|
Long-term debt |
|
5,921 |
|
|
5,321 |
|
Other long-term liabilities |
|
385 |
|
|
380 |
|
Partners' equity |
|
5,888 |
|
|
6,605 |
|
Noncontrolling interests |
|
28 |
|
|
28 |
|
Total liabilities and equity |
|
$ |
13,188 |
|
|
$ |
14,127 |
|
DCP MIDSTREAM,
LPRECONCILIATION OF NON-GAAP FINANCIAL
MEASURES(Unaudited)
|
Three Months
Ended |
March
31, |
|
2020 |
|
2019 |
|
(Millions) |
Reconciliation of Non-GAAP Financial
Measures: |
|
|
|
Net (loss) income attributable to partners |
$ |
(550 |
) |
|
|
$ |
75 |
|
|
Interest expense, net |
78 |
|
|
|
69 |
|
|
Depreciation, amortization and income tax expense, net of
noncontrolling interests |
100 |
|
|
|
103 |
|
|
Distributions from unconsolidated affiliates, net of earnings |
77 |
|
|
|
11 |
|
|
Asset impairments |
746 |
|
|
|
— |
|
|
Other non-cash charges |
4 |
|
|
|
5 |
|
|
Loss on sale of assets |
— |
|
|
|
9 |
|
|
Non-cash commodity derivative mark-to-market |
(134 |
) |
|
|
54 |
|
|
Adjusted EBITDA |
321 |
|
|
|
326 |
|
|
Interest expense, net |
(78 |
) |
|
|
(69 |
) |
|
Sustaining capital expenditures, net of noncontrolling interest
portion and reimbursable projects |
(10 |
) |
|
|
(20 |
) |
|
Preferred unit distributions *** |
(14 |
) |
|
|
(14 |
) |
|
Other, net |
1 |
|
|
|
1 |
|
|
Distributable cash flow |
$ |
220 |
|
|
|
$ |
224 |
|
|
|
|
|
|
Net cash provided by operating activities |
$ |
314 |
|
|
|
$ |
317 |
|
|
Interest expense, net |
78 |
|
|
|
69 |
|
|
Net changes in operating assets and liabilities |
76 |
|
|
|
(112 |
) |
|
Non-cash commodity derivative mark-to-market |
(134 |
) |
|
|
54 |
|
|
Other, net |
(13 |
) |
|
|
(2 |
) |
|
Adjusted EBITDA |
321 |
|
|
|
326 |
|
|
Interest expense, net |
(78 |
) |
|
|
(69 |
) |
|
Sustaining capital expenditures, net of noncontrolling interest
portion and reimbursable projects |
(10 |
) |
|
|
(20 |
) |
|
Preferred unit distributions *** |
(14 |
) |
|
|
(14 |
) |
|
Other, net |
1 |
|
|
|
1 |
|
|
Distributable cash flow |
$ |
220 |
|
|
|
$ |
224 |
|
|
*** Represents cumulative cash distributions earned by the
Series A, B and C Preferred Units, assuming distributions are
declared by DCP's board of directors.
DCP MIDSTREAM,
LPRECONCILIATION OF NON-GAAP FINANCIAL
MEASURESSEGMENT FINANCIAL RESULTS AND OPERATING
DATA (Unaudited)
|
Three Months
Ended |
|
March
31, |
|
2020 |
|
2019 |
|
(Millions, except as indicated) |
Logistics and Marketing Segment: |
|
|
|
Financial results: |
|
|
|
Segment net income attributable to partners |
$ |
236 |
|
|
|
$ |
147 |
|
Non-cash commodity derivative mark-to-market |
(42 |
) |
|
|
18 |
|
Depreciation and amortization expense |
3 |
|
|
|
3 |
|
Distributions from unconsolidated affiliates, net of earnings |
10 |
|
|
|
6 |
|
Loss on sale of assets |
— |
|
|
|
9 |
|
Other charges |
1 |
|
|
|
— |
|
Adjusted segment EBITDA |
$ |
208 |
|
|
|
$ |
183 |
|
|
|
|
|
Operating and financial data: |
|
|
|
NGL pipelines throughput (MBbls/d) |
677 |
|
|
|
668 |
|
NGL fractionator throughput (MBbls/d) |
58 |
|
|
|
64 |
|
Operating and maintenance expense |
$ |
7 |
|
|
|
$ |
9 |
|
|
|
|
|
Gathering and Processing Segment: |
|
|
|
Financial results: |
|
|
|
Segment net (loss) income attributable to partners |
$ |
(645 |
) |
|
|
$ |
67 |
|
Non-cash commodity derivative mark-to-market |
(92 |
) |
|
|
36 |
|
Depreciation and amortization expense, net of noncontrolling
interest |
89 |
|
|
|
92 |
|
Asset impairments |
746 |
|
|
|
— |
|
Distributions from unconsolidated affiliates, net of losses |
67 |
|
|
|
5 |
|
Other charges |
3 |
|
|
|
5 |
|
Adjusted segment EBITDA |
$ |
168 |
|
|
|
$ |
205 |
|
|
|
|
|
Operating and financial data: |
|
|
|
Natural gas wellhead (MMcf/d) |
4,940 |
|
|
|
4,938 |
|
NGL gross production (MBbls/d) |
404 |
|
|
|
436 |
|
Operating and maintenance expense |
$ |
142 |
|
|
|
$ |
165 |
|
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