ENID, Okla., Nov. 6 /PRNewswire-FirstCall/ -- The Hiland companies,
Hiland Partners, LP (NASDAQ:HLND) and Hiland Holdings GP, LP
(NASDAQ:HPGP) today announced results for the third quarter of
2008. Hiland Partners, LP Financial Results Hiland Partners, LP
reported net income for the three months ended September 30, 2008
of $18.6 million compared to net income of $3.3 million for the
three months ended September 30, 2007. Net income per limited
partner unit-basic for the third quarter of 2008 was $1.71 per unit
compared to net income of $0.22 per unit in the corresponding
quarter in 2007. Weighted average limited partner units outstanding
were 9.3 million units for the three months ended September 30,
2008 and September 30, 2007. Adjusted net income, which adjusts for
significant non-recurring and non-cash items as disclosed below,
was $5.6 million for the three months ended September 30, 2008
compared to $3.2 million for the three months ended September 30,
2007. For the three and nine months ended September 30, 2008,
adjusted net income includes adjustments related to bad debt
expense recorded and subsequently reversed as a result of the
bankruptcy of SemGroup, L.P., a purchaser of natural gas liquids
and condensate primarily at our Bakken and Badlands plants and
gathering systems (see the header "SemGroup Payment" below for more
discussion on this topic), and an unrealized gain related to a
non-qualifying mark-to-market cash flow hedge for forecasted
natural gas sales in 2010. A reconciliation of adjusted net income,
a non-GAAP financial measure, to net income, the most directly
comparable GAAP financial measure, is provided within the financial
tables of this press release. The increase in adjusted net income
for the three months ended September 30, 2008 compared to the three
months ended September 30, 2007 is primarily due to increased total
segment margin associated with favorable gross processing spreads,
significantly higher average realized natural gas and natural gas
liquids prices, volume growth at the Woodford Shale gathering
system and volume growth at the expanded Badlands gathering system,
including the nitrogen rejection plant which commenced operations
in August 2007, offset by increased operations and maintenance,
general and administrative, depreciation and interest expenses.
Adjusted EBITDA (adjusted EBITDA is defined as net income plus
interest expense, provisions for income taxes, and depreciation,
amortization and accretion expense, and adjusted for significant
non-cash and non-recurring items) for the three months ended
September 30, 2008 was $18.6 million compared to $14.0 million for
the three months ended September 30, 2007, an increase of 33%. A
reconciliation of adjusted EBITDA, a non-GAAP financial measure, to
net income, the most directly comparable GAAP financial measure, is
provided within the financial tables of this press release. Total
segment margin for the three months ended September 30, 2008 was
$33.9 million compared to $21.8 million for the three months ended
September 30, 2007, an increase of 55%. A reconciliation of total
segment margin, a non-GAAP financial measure, to operating income,
the most directly comparable GAAP financial measure, is provided
within the financial tables of this press release. The increases in
adjusted EBITDA and total segment margin are primarily attributable
to favorable gross processing spreads, significantly higher average
realized natural gas and natural gas liquids prices, volume growth
at the Woodford Shale gathering system and volume growth at the
expanded Badlands gathering system, including the nitrogen
rejection plant which commenced operations in August 2007. The
increase in total segment margin was also attributable to an
unrealized gain of approximately $5.5 million related to a
non-qualifying mark-to-market cash flow hedge for forecasted
natural gas sales in 2010. For the nine months ended September 30,
2008, Hiland Partners, LP reported net income of $17.5 million
compared to net income of $7.9 million for the nine months ended
September 30, 2007. Net income per limited partner unit-basic for
the nine months ended September 30, 2008 was $1.17 per unit
compared to net income of $0.53 per unit for the nine months ended
September 30, 2007. Weighted average limited partner units
outstanding were 9.3 million units for the nine months ended
September 30, 2008 and September 30, 2007. Adjusted net income for
the nine months ended September 30, 2008 was $15.2 million compared
to $8.0 million for the nine months ended September 30, 2007. The
increase in adjusted net income for the nine months ended September
30, 2008 compared to the nine months ended September 30, 2007 is
primarily due to increased total segment margin associated with
favorable gross processing spreads, significantly higher average
realized natural gas and natural gas liquids prices, volume growth
at the Woodford Shale gathering system which commenced operation in
April 2007 and volume growth at the expanded Badlands gathering
system, including the nitrogen rejection plant which commenced
operations in August 2007, offset by approximately $2.3 million as
a result of the Badlands nitrogen rejection plant being temporarily
taken out of service due to equipment failure in the first quarter
of 2008 and increased operations and maintenance, depreciation,
general and administrative and interest expenses. Adjusted EBITDA
for the nine months ended September 30, 2008 was $53.2 million
compared to $37.2 million for the nine months ended September 30,
2007, an increase of 43%. Total segment margin for the nine months
ended September 30, 2008 was $84.1 million compared to $58.0
million for the nine months ended September 30, 2007, an increase
of 45%. The increases in adjusted EBITDA and total segment margin
are primarily attributable to favorable gross processing spreads,
significantly higher average realized natural gas and natural gas
liquids prices, volume growth at the Woodford Shale gathering
system which commenced operation in April 2007 and volume growth at
the expanded Badlands gathering system, including the nitrogen
rejection plant which commenced operations in August 2007. The
increases in adjusted EBITDA and total segment margin were offset
by approximately $2.3 million as a result of the Badlands nitrogen
rejection plant being temporarily taken out of service due to
equipment failure in the first quarter of 2008. The increase in
total segment margin was also attributable to an unrealized gain of
approximately $3.6 million related to a non-qualifying
mark-to-market cash flow hedge for forecasted natural gas sales in
2010. The Partnership reported distributable cash flow ("DCF") of
$21.2 million for the three months ended September 30, 2008,
compared to $9.8 million for the three months ended September 30,
2007, an increase of 118%. As a Master Limited Partnership, cash
distributions to limited partners are largely determined based on
DCF. A reconciliation of DCF, a non-GAAP financial measure, to net
income, the most directly comparable GAAP financial measure, is
provided within the financial tables of this press release. On
October 24, 2008, Hiland Partners, LP announced an increase in its
cash distribution for the third quarter of 2008. The declared
quarterly distributions on Hiland Partners, LP's common and
subordinated units increased to $0.88 per unit (an annualized rate
of $3.52 per unit) from $0.8625 per unit (an annualized rate of
$3.45 per unit) for the second quarter of 2008. This represents a
2.0% increase over the prior quarter and a 16.6% increase over the
distribution for the same quarter of the prior year. This
distribution will be paid on November 14, 2008 to unitholders of
record on November 4, 2008. Hiland Holdings GP, LP Financial
Results Hiland Holdings GP, LP reported net income for the three
months ended September 30, 2008 of $11.2 million ($0.52 per limited
partner unit-basic) compared to net income of $1.7 million ($0.08
per limited partner unit-basic) for the three months ended
September 30, 2007. Weighted average limited partner units
outstanding were 21.6 million for the three months ended September
30, 2008 and September 30, 2007. Net income before minority
interest was $18.0 million in the three months ended September 30,
2008 compared to net income before minority interest of $2.6
million in the three months ended September 30, 2007. The increases
in net income and net income before minority interest for the three
months ended September 30, 2008 compared to the three months ended
September 30, 2007 is primarily due to the reversal of
approximately $7.8 million of the $8.1 million allowance for
doubtful accounts and bad debt expense previously recorded in the
second quarter of 2008 (see the header "SemGroup Payment" below for
more discussion on this topic), increased non-cash gain on
derivative transactions, increased total segment margin associated
with favorable gross processing spreads, significantly higher
average realized natural gas and natural gas liquids prices, volume
growth at the Woodford Shale gathering system and volume growth at
the expanded Badlands gathering system, including the nitrogen
rejection plant which commenced operations in August 2007, offset
by increased operations and maintenance, general and
administrative, depreciation and interest expenses. For the nine
months ended September 30, 2008, Hiland Holdings GP, LP reported
net income of $10.9 million ($0.51 per limited partner unit-basic)
compared to net income of $3.6 million ($0.17 per limited partner
unit-basic) for the nine months ended September 30, 2007. Weighted
average limited partner units outstanding were 21.6 million for the
nine months ended September 30, 2008 and September 30, 2007. Net
income before minority interest was $15.3 million in the nine
months ended September 30, 2008 compared to net income before
minority interest of $5.7 million in the nine months ended
September 30, 2007. The increases in net income and net income
before minority interest for the nine months ended September 30,
2008 compared to the nine months ended September 30, 2007 is
primarily due to increased non-cash gain on derivative
transactions, increased total segment margin associated with
favorable gross processing spreads, significantly higher average
realized natural gas and natural gas liquids prices, volume growth
at the Woodford Shale gathering system which commenced operation in
April 2007 and volume growth at the expanded Badlands gathering
system, including the nitrogen rejection plant which commenced
operations in August 2007, offset by approximately $2.3 million as
a result of the Badlands nitrogen rejection plant being temporarily
taken out of service due to equipment failure in the first quarter
of 2008 and increased operations and maintenance, depreciation,
general and administrative and interest expenses. Hiland Holdings
GP, LP's share of distributions from Hiland Partners, LP, including
distributions on its 2,321,471 common units, its 3,060,000
subordinated units, its two percent general partner interest, and
the incentive distributions rights, will be approximately $7.2
million for the third quarter of 2008. On October 24, 2008, Hiland
Holdings GP, LP announced an increase in its cash distribution for
the third quarter of 2008. The declared quarterly distributions on
the Partnership's units were increased to $0.3175 per unit (an
annualized rate of $1.27 per unit) from $0.3050 per unit (an
annualized rate of $1.22 per unit) for the third quarter of 2008.
This represents a 4.1% increase over the prior quarter and a 38.0%
increase over the distribution for the same quarter of the prior
year. The distribution will be paid on November 19, 2008 to
unitholders of record on November 4, 2008. "I am pleased with the
third quarter financial and operating results given the challenges
presented by this economic climate," said Joseph L. Griffin,
Hiland's President and Chief Executive Officer. "We will release
2009 guidance later this year. Hiland currently has adequate
capital resources to fund its announced expansion projects and
ongoing system expansions without having to access the debt or
equity markets." SemGroup Payment On July 22, 2008, SemGroup, L.P.
and certain subsidiaries filed voluntary petitions for
reorganization under Chapter 11 of the U.S. Bankruptcy Code.
Affiliates of SemGroup, L.P. purchase our natural gas liquids and
condensate, primarily at our Bakken and Badlands plants and
gathering systems. During the second quarter 2008, we established
an allowance for doubtful accounts and bad debt expense of
approximately $8.1 million for related product sales through June
30, 2008. On October 20, 2008, the United States Bankruptcy Court
for the District of Delaware entered an order approving the
assumption of a Natural Gas Liquids Marketing Agreement (the
"SemStream Agreement") between SemStream, L.P., an affiliate of
SemGroup, L.P., and us relating to the sale of natural gas liquids
and condensate at our Bakken and Badlands plants and gathering
systems. As a result of the assumption, and in accordance with the
order, on October 21, 2008, SemStream paid $12.1 million to us,
representing amounts owed to us from SemStream for June and July
2008 product sales under the SemStream Agreement. The assumption of
the SemStream Agreement restores us and SemStream, L.P. to our
pre-bankruptcy contractual relationship. Our third quarter results
of operations reflect a reversal of approximately $7.8 million of
the $8.1 million allowance for doubtful accounts and bad debt
expense previously recorded in the second quarter of 2008. After
receipt of the October 21 payment, our total pre-petition credit
exposure to SemGroup, related to condensate sales to SemCrude, LLC,
and outside of the SemStream Agreement, is approximately $0.3
million, which we have reserved as of September 30, 2008.
Conference Call Information Hiland has scheduled a conference call
for 10:00 am Central Time, Friday, November 7, 2008, to discuss the
2008 third quarter results. To participate in the call, dial
1.888.396.2298 and participant passcode 92002423, or access it live
over the Internet at http://www.hilandpartners.com/, on the
"Investor Relations" section of the Partnership's website. Use of
Non-GAAP Financial Measures This press release and the accompanying
schedules include the non-generally accepted accounting principles
("non-GAAP") financial measures of adjusted net income, EBITDA,
adjusted EBITDA, total segment margin and distributable cash flow.
The accompanying schedules provide reconciliations of these
non-GAAP financial measures to their most directly comparable
financial measure calculated and presented in accordance with
accounting principles generally accepted in the United States of
America ("GAAP"). Our non-GAAP financial measures should not be
considered as alternatives to GAAP measures such as net income,
operating income or any other GAAP measure of liquidity or
financial performance. About the Hiland Companies Hiland Partners,
LP is a publicly traded midstream energy partnership engaged in
purchasing, gathering, compressing, dehydrating, treating,
processing and marketing of natural gas, and fractionating, or
separating, and marketing of natural gas liquids, or NGLs. The
Partnership also provides air compression and water injection
services for use in oil and gas secondary recovery operations. The
Partnership's operations are primarily located in the Mid-Continent
and Rocky Mountain regions of the United States. Hiland Partners,
LP's midstream assets consist of fourteen natural gas gathering
systems with approximately 2,087 miles of gathering pipelines, five
natural gas processing plants, seven natural gas treating
facilities and three NGL fractionation facilities. The
Partnership's compression assets consist of two air compression
facilities and a water injection plant. Hiland Holdings GP, LP owns
the two percent general partner interest, 2,321,471 common units
and 3,060,000 subordinated units in Hiland Partners, LP, and the
incentive distribution rights of Hiland Partners, LP. This press
release may include certain statements concerning expectations for
the future that are forward-looking statements. Such
forward-looking statements are subject to a variety of known and
unknown risks, uncertainties, and other factors that are difficult
to predict and many of which are beyond management's control. An
extensive list of factors that can affect future results are
discussed in the Partnership's Annual Report on Form 10-K and other
documents filed from time to time with the Securities and Exchange
Commission. The Partnership undertakes no obligation to update or
revise any forward-looking statements to reflect new information or
events. - tables to follow - Other Financial and Operating Data
Hiland Partners, LP - Results of Operations Set forth in the table
below is financial and operating data for Hiland Partners, LP.
Three Months Ended Nine Months Ended September 30, September 30,
------------------------- ------------------------- 2008 2007 2008
2007 ------------ ------------ ------------ ------------
(unaudited, in thousands) (unaudited, in thousands) Total Segment
Margin Data: Midstream revenues $114,548 $66,431 $319,058 $191,691
Midstream purchases 81,895 45,789 238,586 137,320 Midstream segment
------------ ------------ ------------ ------------ margin 32,653
20,642 80,472 54,371 Compression revenues (A) 1,205 1,205 3,615
3,615 ------------ ------------ ------------ ------------ Total
segment margin $33,858 $21,847 $84,087 $57,986 ============
============ ============ ============ Summary of Operations Data:
Midstream revenues $114,548 $66,431 $319,058 $191,691 Compression
revenues 1,205 1,205 3,615 3,615 ------------ ------------
------------ ------------ Total revenues 115,753 67,636 322,673
195,306 Midstream purchases (exclusive of items shown separately
below) 81,895 45,789 238,586 137,320 Operations and maintenance
7,881 6,157 22,201 16,108 Depreciation, amortization and accretion
9,554 7,583 27,652 21,362 Bad debt (7,799) - 304 - General and
administrative 2,259 1,715 6,423 5,108 ------------ ------------
------------ ------------ Total operating costs and expenses 93,790
61,244 295,166 179,898 ------------ ------------ ------------
------------ Operating income 21,963 6,392 27,507 15,408 Other
income (expense) (3,322) (3,138) (10,047) (7,495) ------------
------------ ------------ ------------ Net income $18,641 $3,254
$17,460 $7,913 ============ ============ ============ ============
Maintenance capital expenditures $1,737 $973 $4,681 $2,509
Expansion capital expenditures 17,841 29,051 33,265 70,809 Total
capital ------------ ------------ ------------ ------------
expenditures $19,578 $30,024 $37,946 $73,818 ============
============ ============ ============ Operating Data: Inlet
natural gas (Mcf/d) 261,345 219,544 245,098 210,878 Natural gas
sales (MMBtu/d) 95,889 84,281 89,615 78,998 NGL sales (Bbls/d)
6,036 4,721 5,763 4,340 Average realized natural gas sales price
($/MMBtu) $7.57 $5.20 $8.00 $5.78 Average realized NGL sales price
($/gallon) $1.55 $1.16 $1.53 $1.07 September 30, December 31, 2008
2007 ------------ ------------ (unaudited) Balance Sheet Data (at
period end): Property and equipment, at cost, net $333,900 $319,320
Total assets $444,031 $410,473 Long-term debt, net of current
maturities $266,633 $226,104 Net equity $139,045 $139,167 (A)
Compression revenues and compression segment margin are the same.
There are no compression purchases associated with the compression
segment. Reconciliation of adjusted net income to net income: Three
Months Ended Nine Months Ended Sept. 30, Sept. 30,
------------------------- ------------------------- 2008 2007 2008
2007 ------------ ------------ ------------ ------------
(unaudited, in thousands) (unaudited, in thousands) Reconciliation
of Adjusted Net Income to Net Income Net income $18,641 $3,254
$17,460 $7,913 Non-cash loss (gain) on derivative transactions
(5,620) (338) (3,685) (510) Non-cash compensation expense 396 244
1,159 589 Bad debt expense (SemGroup, L.P.) (7,799) - 304 -
------------ ------------ ------------ ------------ Adjusted net
income $5,618 $3,160 $15,238 $7,992 ============ ============
============ ============ Adjusted net income, a non-GAAP financial
measure, is calculated as net income adjusted for significant
non-cash and non-recurring items. Adjusted net income is used as a
supplemental financial measure by our management and by external
users of our financial statements such as investors, commercial
banks, research analysts and others in evaluating performance
relative to peers and prior reporting periods. Adjusted net income
should not be considered as an alternative to net income or any
other measures of financial performance presented in accordance
with GAAP. Our adjusted net income may not be comparable to
adjusted net income or similarly titled measures of other entities,
as other entities may not calculate adjusted net income in the same
manner as we do. Reconciliation of total segment margin to
operating income: Three Months Ended Nine Months Ended Sept. 30,
Sept. 30, ------------------------- ------------------------- 2008
2007 2008 2007 ------------ ------------ ------------ ------------
(unaudited, in thousands) (unaudited, in thousands) Reconciliation
of Total Segment Margin to Operating Income Operating income
$21,963 $6,392 $27,507 $15,408 Add: Operations and maintenance
expenses 7,881 6,157 22,201 16,108 Depreciation, amortization and
accretion 9,554 7,583 27,652 21,362 Bad debt expense (SemGroup,
L.P.) (7,799) - 304 - General and administrative expenses 2,259
1,715 6,423 5,108 ------------ ------------ ------------
------------ Total segment margin $33,858 $21,847 $84,087 $57,986
============ ============ ============ ============ We view total
segment margin, a non-GAAP financial measure, as an important
performance measure of the core profitability of our operations
because it is directly related to our volumes and commodity price
changes. We review total segment margin monthly for consistency and
trend analysis. We define midstream segment margin as midstream
revenue less midstream purchases. Midstream purchases include the
following costs and expenses: cost of natural gas and NGLs
purchased by us from third parties, cost of natural gas and NGLs
purchased by us from affiliates, and the cost of crude oil
purchased by us from third parties. We define compression segment
margin as the revenue derived from our compression segment. Our
total segment margin may not be comparable to similarly titled
measures of other entities, as other entities may not calculate
total segment margin in the same manner we do. Reconciliation of
adjusted EBITDA to net income: Three Months Ended Nine Months Ended
Sept. 30, Sept. 30, -------------------------
------------------------- 2008 2007 2008 2007 ------------
------------ ------------ ------------ (unaudited, in thousands)
(unaudited, in thousands) Reconciliation of adjusted EBITDA to Net
Income Net income $18,641 $3,254 $17,460 $7,913 Add: Depreciation,
amortization and accretion 9,554 7,583 27,652 21,362 Amortization
of deferred loan costs 147 114 426 290 Interest expense 3,271 3,126
9,888 7,519 ------------ ------------ ------------ ------------
EBITDA $31,613 $14,077 55,426 37,084 Add: Non-cash loss (gain) on
derivative transactions (5,620) (338) (3,685) (510) Non-cash
compensation expense 396 244 1,159 589 Bad debt expense (SemGroup,
L.P.) (7,799) - 304 - ------------ ------------ ------------
------------ Adjusted EBITDA $18,590 $13,983 $53,204 $37,163
============ ============ ============ ============ We define
EBITDA, a non-GAAP financial measure, as net income plus interest
expense, provisions for income taxes and depreciation, amortization
and accretion expense. EBITDA is used as a supplemental financial
measure by our management and by external users of our financial
statements such as investors, commercial banks, research analysts
and others to assess: (1) the financial performance of our assets
without regard to financial methods, capital structure or
historical cost basis; (2) the ability of our assets to generate
cash sufficient to pay interest costs and support our indebtedness;
(3) our operating performance and return on capital as compared to
those of other companies in the midstream energy sector, without
regard to financing or structure; and (4) the viability of
acquisitions and capital expenditure projects and the overall rates
of return on alternative investment opportunities. EBITDA is also a
financial measurement that, with certain negotiated adjustments, is
reported to our banks and is used as a gauge for compliance with
our financial covenants under our credit facility. EBITDA should
not be considered as an alternative to net income, operating
income, cash flows from operating activities or any other measures
of financial performance presented in accordance with GAAP. Our
EBITDA may not be comparable to EBITDA of similarly titled measures
of other entities, as other entities may not calculate EBITDA in
the same manner as we do. We define adjusted EBITDA, a non-GAAP
financial measure, as net income plus interest expense, provisions
for income taxes and depreciation, amortization and accretion
expense, adjusted for significant non-cash and non-recurring items.
Adjusted EBITDA is used as a supplemental financial measure by our
management and by external users of our financial statements such
as investors, commercial banks, research analysts and others to
assess: (1) the financial performance of our assets without regard
to financial methods, capital structure or historical cost basis;
(2) the ability of our assets to generate cash sufficient to pay
interest costs and support our indebtedness; (3) our operating
performance and return on capital as compared to those of other
companies in the midstream energy sector, without regard to
financing or structure; and (4) the viability of acquisitions and
capital expenditure projects and the overall rates of return on
alternative investment opportunities. Adjusted EBITDA is also a
financial measurement that, with certain negotiated adjustments, is
reported to our banks and is used as a gauge for compliance with
our financial covenants under our credit facility. Adjusted EBITDA
should not be considered as an alternative to net income, operating
income, cash flows from operating activities or any other measures
of financial performance presented in accordance with GAAP. Our
adjusted EBITDA may not be comparable to adjusted EBITDA of
similarly titled measures of other entities, as other entities may
not calculate adjusted EBITDA in the same manner as we do.
Reconciliation of distributable cash flow to net income: Three
Months Ended Nine Months Ended Sept. 30, Sept. 30,
------------------------- ------------------------- 2008 2007 2008
2007 ------------ ------------ ------------ ------------
(unaudited, in thousands) (unaudited, in thousands) Reconciliation
of Distributable Cash Flow to Net Income Net income $18,641 $3,254
$17,460 $7,913 Add: Depreciation, amortization and accretion 9,554
7,583 27,652 21,362 Amortization of deferred loan costs 147 114 426
290 Interest expense 3,271 3,126 9,888 7,519 ------------
------------ ------------ ------------ EBITDA $31,613 $14,077
55,426 37,084 Add: Non-cash loss (gain) on derivative transactions
(5,620) (338) (3,685) (510) Non-cash compensation expense 396 244
1,159 589 Bad debt expense (SemGroup, L.P.) (7,799) - 304 -
------------ ------------ ------------ ------------ Adjusted EBITDA
$18,590 $13,983 $53,204 $37,163 Less: Cash interest expense 3,291
3,082 9,707 7,470 Maintenance capital expenditures 1,737 973 4,681
2,509 Payments on capital lease obligations 134 178 369 178 Bad
debt expense (SemGroup, L.P.) (7,799) - 304 - ------------
------------ ------------ ------------ Distributable cash flow
$21,227 $9,750 $38,143 $27,006 ============ ============
============ ============ We view distributable cash flow, a
non-GAAP financial measure, as an important performance measure
used by senior management to compare basic cash flows generated by
the Partnership (prior to the establishment of any retained cash
reserves by the Board of Directors) to the cash distributions
expected to be paid to unitholders. Using this metric, management
can compute the coverage ratio of estimated cash flows to planned
cash distributions. Distributable cash flow is also an important
non-GAAP financial measure for unitholders since it serves as an
indicator of the Partnership's success in providing a cash return
on investment. The financial measure indicates to investors whether
or not the Partnership is generating cash flow at a level that can
sustain or support an increase in quarterly distribution rates.
Distributable cash flow is also a quantitative standard used
throughout the investment community with respect to publicly-traded
partnerships because the value of such an entity generally is
related to the amount of cash distributions the entity can pay to
its unitholders. The GAAP financial measure most directly
comparable to distributable cash flow is net income. Our
distributable cash flow may not be comparable to similarly titled
measures of other entities, as other entities may not calculate
distributable cash flow in the same manner we do. Other Financial
and Operating Data Hiland Holdings GP, LP - Results of Operations
Set forth in the table below is financial and operating data for
Hiland Holdings GP, LP. Three Months Ended Nine Months Ended Sept.
30, Sept. 30, ------------------------- -------------------------
2008 2007 2008 2007 ------------ ------------ ------------
------------ (unaudited, in thousands) (unaudited, in thousands)
Total Segment Margin Data: Midstream revenues $114,548 $66,431
$319,058 $191,691 Midstream purchases 81,895 45,789 238,586 137,320
Midstream segment ------------ ------------ ------------
------------ margin 32,653 20,642 80,472 54,371 Compression
revenues (A) 1,205 1,205 3,615 3,615 Total segment ------------
------------ ------------ ------------ margin (B) $33,858 $21,847
$84,087 $57,986 ============ ============ ============ ============
Summary of Operations Data: Midstream revenues $114,548 $66,431
$319,058 $191,691 Compression revenues 1,205 1,205 3,615 3,615
------------ ------------ ------------ ------------ Total revenues
115,753 67,636 322,673 195,306 Midstream purchases (exclusive of
items shown separately below) 81,895 45,789 238,586 137,320
Operations and maintenance 7,881 6,157 22,201 16,108 Depreciation,
amortization and accretion 9,842 7,870 28,513 22,222 Bad debt
(7,799) - 304 - General and administrative 2,597 2,054 7,615 6,383
------------ ------------ ------------ ------------ Total operating
costs and expenses 94,416 61,870 297,219 182,033 ------------
------------ ------------ ------------ Operating income 21,337
5,766 25,454 13,273 Other income (expense) (3,349) (3,164) (10,132)
(7,570) ------------ ------------ ------------ ------------ Income
before minority interest in income of Hiland Partners, LP 17,988
2,602 15,322 5,703 Minority interest in income of Hiland Partners,
LP (6,800) (867) (4,402) (2,080) ------------ ------------
------------ ------------ Net income $11,188 $1,735 $10,920 $3,623
============ ============ ============ ============ Sept. 30,
December 31, 2008 2007 ------------ ------------ (unaudited)
Balance Sheet Data (at period end): Property and equipment, at
cost, net $337,316 $323,073 Total assets $453,417 $420,286
Long-term debt, net of current maturities $266,633 $226,459
Minority interests $126,912 $126,409 Net equity $20,644 $22,135 (A)
Compression revenues and compression segment margin are the same.
There are no compression purchases associated with the compression
segment. (B) Reconciliation of total segment margin to operating
income: Three Months Ended Nine Months Ended Sept. 30, Sept. 30,
------------------------- ------------------------- 2008 2007 2008
2007 ------------ ------------ ------------ ------------
(unaudited, in thousands) (unaudited, in thousands) Reconciliation
of Total Segment Margin to Operating Income Operating income
$21,337 $5,766 $25,454 $13,273 Add: Operations and maintenance
expenses 7,881 6,157 22,201 16,108 Depreciation, amortization and
accretion 9,842 7,870 28,513 22,222 Bad debt expense (7,799) - 304
- General and administrative expenses 2,597 2,054 7,615 6,383
------------ ------------ ------------ ------------ Total segment
margin $33,858 $21,847 $84,087 $57,986 ============ ============
============ ============ We view total segment margin, a non-GAAP
financial measure, as an important performance measure of the core
profitability of our operations because it is directly related to
our volumes and commodity price changes. We review total segment
margin monthly for consistency and trend analysis. We define
midstream segment margin as midstream revenue less midstream
purchases. Midstream purchases include the following costs and
expenses: cost of natural gas and NGLs purchased by us from third
parties, cost of natural gas and NGLs purchased by us from
affiliates, and cost of crude oil purchased by us from third
parties. We define compression segment margin as the revenue
derived from our compression segment. Our total segment margin may
not be comparable to similarly titled measures of other entities,
as other entities may not calculate total segment margin in the
same manner we do. DATASOURCE: Hiland Partners, LP; Hiland Holdings
GP, LP CONTACT: Derek Gipson, Director - Business Development and
Investor Relations of Hiland Partners, LP, +1-580-242-6040 Web
site: http://www.hilandpartners.com/
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