Chesapeake Midstream Partners, L.P. (NYSE:CHKM) today announced
financial results for the 2012 first quarter. The Partnership’s
2012 first quarter net income totaled $52.4 million, an increase of
$13.6 million, or 35.1%, from the 2011 first quarter. Adjusted
ebitda for the 2012 first quarter was $118.4 million, up $46.3
million, or 64.2%, from 2011 first quarter adjusted ebitda of $72.1
million. The Partnership’s adjusted distributable cash flow (DCF)
for the 2012 first quarter totaled $84.4 million, an increase of
$27.2 million, or 47.6%, compared to the 2011 first quarter and
resulted in a coverage ratio of 1.37. Partnership revenue for the
2012 first quarter was $154.7 million, an increase of $31.2
million, or 25.3%, compared to 2011 first quarter revenue of $123.5
million. Financial terms are defined on pages two through four of
this release.
Throughput for the 2012 first quarter totaled 255.0 billion
cubic feet (bcf) of natural gas, or 2.80 bcf per day, an increase
of 39.3% from 2011 first quarter throughput of 2.01 bcf per day.
The increase was driven by throughput from gas gathering systems in
the Marcellus Shale acquired in December 2011 as well as increased
throughput in the Barnett Shale. The Partnership connected 197 new
wells to its gathering systems during the 2012 first quarter, an
increase of 27.1% compared to the 2011 first quarter.
Capital expenditures during the 2012 first quarter totaled
$161.9 million, including maintenance capital expenditures of $18.5
million. With the expected increase in Marcellus capital spending,
the Partnership is on track to meet the current capital expenditure
outlook of $734 million for 2012.
Partnership Increases Cash
Distribution
On April 27, 2012, the Board of Directors of the Partnership’s
general partner declared a quarterly cash distribution of $0.405
per unit for the 2012 first quarter, a $0.055, or 15.7%, increase
over the 2011 first quarter distribution and a $0.015, or 3.8%,
increase over the 2011 fourth quarter distribution. The
distribution will be paid on May 15, 2012 to unitholders of record
at the close of business on May 8, 2012. Adjusted DCF for the 2012
first quarter of $84.4 million provided distribution coverage of
1.37 times the amount required for the Partnership to fund the
distribution to both the general and limited partners.
Outlook for 2012 Unchanged
The Partnership is projecting ebitda for the twelve months
ending December 31, 2012 to be $475 million with expansion capital
expenditures of $660 million and maintenance capital expenditures
of $74 million.
Management Comments
J. Mike Stice, Chesapeake Midstream Partners’ Chief Executive
Officer, commented, “I’m once again pleased to report financial
results exceeding consensus expectations for the quarter. This
strong performance was led by the Marcellus assets added to our
portfolio last December. Across the business, our commitment to a
low-risk contractual structure continues to deliver predictable
cash flows with strong, consistent growth despite the challenging
commodity price environment. After this impressive first quarter
performance, I am even more confident in affirming our outlook for
2012. We believe that our combination of low-risk contracts, strong
balance sheet and unique access to growth offers the most
attractive risk-adjusted return in the industry.”
Senior Notes Offering
On January 11, 2012, the Partnership closed the offering of $750
million of senior notes due 2022. The notes bear interest at 6.125%
per annum. The Partnership used part of the net proceeds to repay
borrowings outstanding under its revolving credit facility and used
the remainder for general Partnership purposes.
Conference Call Information
A conference call to discuss this release of financial results
has been scheduled for Wednesday, May 9, 2012 at 9:00 a.m. EDT. The
telephone number to access the conference call is
719-325-4815 or toll-free 877-545-1409. The passcode
for the call is 8233842. We encourage those who would like
to participate in the call to dial the access number between 8:50
and 9:00 a.m. EDT. For those unable to participate in the
conference call, a replay will be available for audio playback from
12:00 p.m. EDT on May 9, 2012 through 12:00 p.m. EDT on May 23,
2012. The number to access the conference call replay is
719-457-0820 or toll-free 888-203-1112. The passcode
for the replay is 8233842. The conference call will also be
webcast live on the Internet and can be accessed by going to the
Partnership’s website at www.chkm.com in the "Events" subsection of
the "Investors" section of the website. An archive of the
conference call webcast will also be available on the website.
Use of Non-GAAP Financial Measures
This press release and accompanying schedules include the
non-GAAP financial measures of adjusted ebitda, DCF and adjusted
DCF. The accompanying schedules provide reconciliations of these
non-GAAP financial measures to their most directly comparable
financial measures calculated and presented in accordance with
GAAP. Non-GAAP financial measures should not be considered as an
alternative to GAAP measures such as net income, net cash provided
by operating activities or any other measure of liquidity or
financial performance calculated and presented in accordance with
GAAP. Investors should not consider adjusted ebitda, DCF or
adjusted DCF in isolation or as a substitute for analysis of the
Partnership’s results as reported under GAAP. Because these
non-GAAP financial measures may be defined differently by other
companies in our industry, the Partnership’s definition of adjusted
ebitda, DCF and adjusted DCF may not be comparable to similarly
titled measures of other companies, thereby diminishing their
utility.
Adjusted Ebitda. The Partnership agreement defines adjusted
ebitda as net income (loss) before income tax expense, interest
expense, depreciation and amortization expense and certain other
items management believes affect the comparability of operating
results. Adjusted ebitda is a non-GAAP financial measure that
management and external users of our consolidated financial
statements, such as industry analysts, investors, lenders and
rating agencies, may use to assess:
- The Partnership’s operating performance
as compared to other publicly traded partnerships in the midstream
energy industry, without regard to capital structure, historical
cost basis or financing methods;
- The Partnership’s ability to incur and
service debt and fund capital expenditures;
- The ability of the Partnership’s assets
to generate sufficient cash flow to make distributions to
unitholders; and
- The viability of acquisitions and other
capital expenditure projects and the returns on investment of
various investment opportunities.
Management believes it is appropriate to exclude certain items
from ebitda because management believes these items affect the
comparability of operating results. The Partnership believes that
the presentation of adjusted ebitda in this press release provides
information useful to investors in assessing its financial
condition and results of operations. The GAAP measure most directly
comparable to adjusted ebitda is net income.
Distributable Cash Flow. The Partnership agreement defines DCF
as adjusted ebitda attributable to the Partnership adjusted
for:
- Addition of interest income;
- Subtraction of net cash paid for
interest expense;
- Subtraction of maintenance capital
expenditures; and
- Subtraction of income taxes.
Management compares the DCF the Partnership generates to the
cash distributions it expects to pay its partners. Using this
metric, management computes a distribution coverage ratio. DCF is
an important non-GAAP financial measure for our limited partners
since it serves as an indicator of our success in providing a cash
return on investment. Specifically, this financial measure
indicates to investors whether or not the Partnership is generating
cash flows at a level that can sustain or support an increase in
its quarterly cash distributions. DCF is also a quantitative
standard used by the investment community with respect to publicly
traded partnerships because the value of a partnership unit is in
part measured by its yield, which is based on the amount of cash
distributions a partnership can pay to a unitholder. The GAAP
measure most directly comparable to DCF is net cash provided by
operating activities.
Adjusted Distributable Cash Flow. The Partnership includes the
quarterly impact of contractual minimum volume commitments that are
not recognized until the fourth quarter of each year in its
calculation of adjusted DCF for the purpose of calculating the
distribution coverage ratio.
Chesapeake Midstream Partners, L.P. (NYSE:CHKM) is the
industry’s largest gathering and processing master limited
partnership as measured by throughput volume and owns, operates,
develops and acquires natural gas gathering systems and other
midstream energy assets. Headquartered in Oklahoma City, the
Partnership's operations are focused on the Barnett Shale,
Haynesville Shale, Marcellus Shale and Mid-Continent regions of the
U.S. The Partnership’s common units are listed on the New
York Stock Exchange under the symbol CHKM. Further
information is available at www.chkm.com where the Partnership
routinely posts announcements, updates, events, investor
information and presentations and all recent press
releases.
This press release includes forward-looking statements.
Forward-looking statements give our current expectations or
forecasts of future events. They include but are not limited to
distributions, throughput volumes, revenues, net income, capital
expenditures, adjusted ebitda and distributable cash flow, as well
as other statements concerning our business strategy and plans and
objectives for future operations. We caution you not to place undue
reliance on our forward-looking statements, which speak only as of
the date of this release, and we undertake no obligations to update
this information. Although we believe the expectations and
forecasts reflected in these and other forward-looking statements
are reasonable, we can give no assurance they will prove to be
correct. They can be affected by inaccurate assumptions or by known
or unknown risks and uncertainties. Factors that could cause actual
results to differ materially from expected results are described
under “Risk Factors” in our 2011 Annual Report on Form 10-K.
CHESAPEAKE MIDSTREAM PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS ($ in
thousands, except per unit data) (unaudited)
Three Months Ended March 31,
2012 2011
Revenues, including revenues from affiliates (1) $
154,674 $ 123,529
Operating Expenses Operating
expenses, including expenses from affiliates 48,682 42,561
Depreciation and amortization expense 38,438 30,938
General and administrative expense,
including expenses from affiliates
11,478 8,946 Other operating income (45 ) (60 )
Total operating expenses 98,553 82,385
Operating income 56,121 41,144
Other income
(expense) Income from unconsolidated affiliates 12,987 —
Interest expense (15,958 ) (1,440 ) Other income 55
42 Income before income tax expense 53,205
39,746 Income tax expense 839 970
Net income $ 52,366 $ 38,776
Limited
partner interest in net income Net income 52,366 38,776 Less
general partner interest in net income (1,429 ) (776
) Limited partner interest in net income 50,937
38,000 Net income per limited partner
unit – basic and diluted Common units 0.34 0.27 Subordinated units
0.34 0.27 Weighted average limited partner units outstanding
used for net income per unit calculation – basic and diluted (in
thousands) Common units 79,276 69,219 Subordinated units 69,076
69,076
(1) If either Chesapeake Energy Corporation (“Chesapeake”) or
Total E&P USA, Inc. (“Total”) does not meet its minimum volume
commitment to the Partnership in the Barnett Shale region or
Chesapeake does not meet its minimum volume commitment in the
Haynesville Shale region under the relevant gas gathering agreement
for specified annual periods, Chesapeake or Total is obligated to
pay the Partnership a fee equal to the applicable fee for each mcf
by which the applicable party’s minimum volume commitment for the
year exceeds the actual volumes gathered on the Partnership’s
systems. Should payments be due under the minimum volume commitment
with respect to any year, the Partnership recognizes the associated
revenue in the fourth quarter of that year.
CHESAPEAKE MIDSTREAM PARTNERS, L.P.
CONDENSED CONSOLIDATED BALANCE SHEETS ($ in
thousands) (unaudited) As of
As of March 31, December 31,
2012 2011 Assets Total current assets $
117,237 $ 88,188 Property, plant and equipment
Gathering systems 3,023,296 2,954,868 Other fixed assets 59,437
53,611 Less: Accumulated depreciation (515,686 )
(480,555 ) Total property, plant and equipment, net
2,567,047 2,527,924 Investment in
unconsolidated affiliates 943,109 886,558 Intangible assets, net
155,796 158,621 Deferred loan costs, net 34,297
21,947 Total assets $ 3,817,486 $
3,683,238
Liabilities and Partners’ Capital
Total current liabilities $ 157,414 $ 143,094
Long-term liabilities Long-term debt 1,188,000 1,062,900
Other liabilities 4,778 4,099
Total long-term liabilities 1,192,778
1,066,999 Total partners’ capital 2,467,294
2,473,145 Total liabilities and
partners’ capital $ 3,817,486 $ 3,683,238
CHESAPEAKE MIDSTREAM PARTNERS, L.P. CONDENSED
CONSOLIDATED STATEMENT OF CASH FLOWS ($ in thousands)
(unaudited) Three Months Ended
March 31, 2012
2011 Cash flows from operating activities Net
income $ 52,366 $ 38,776 Adjustments to reconcile net income to net
cash provided by operating activities: Depreciation and
amortization 38,438 30,938 Income from unconsolidated affiliates
(12,987 ) — Other non-cash items 1,932 1,004 Changes in assets and
liabilities (Increase) decrease in accounts receivable (33,058 )
50,277 (Increase) decrease in other assets (1,694 ) 1,001 Increase
(decrease) in accounts payable (7,832 ) 13,924 Increase in accrued
liabilities 30,050 1,349 Net
cash provided by operating activities 67,215
137,269
Cash flows from investing activities
Additions to property, plant and equipment (80,593 ) (106,521 )
Investment in unconsolidated affiliate (45,276 ) — Proceeds from
sale of assets 421 211 Net cash
used in investing activities (125,448 ) (106,310 )
Cash flows from financing activities Proceeds from
credit facility borrowings 245,600 134,200 Payments on credit
facility borrowings (870,500 ) (134,100 ) Issuance of senior notes
750,000 — Distribution to unitholders (58,932 ) (47,581 ) Initial
public offering costs — (1,280 ) Debt issuance costs (13,653 ) —
Other adjustments 5,721 4 Net
cash provided by (used in) financing activities 58,236
(48,757 )
Net increase (decrease) in cash and cash
equivalents
3 (17,798 )
Cash and cash equivalents Beginning of
period 22 17,816 End of period $
25 $ 18
CHESAPEAKE MIDSTREAM
PARTNERS, L.P. RECONCILIATION OF NON-GAAP FINANCIAL
MEASURES ($ in thousands) (unaudited)
Three Months Ended March 31,
2012 2011
Net Income $ 52,366 $ 38,776
Adjusted for:
Interest expense 15,958 1,440 Income tax expense 839 970
Depreciation and amortization expense 38,438 30,938 Other (45 ) (60
) Income from unconsolidated affiliates (12,987 ) — EBITDA from
unconsolidated affiliates(1) 23,860 —
Adjusted EBITDA $ 118,429 $ 72,064
Adjusted for: Maintenance capital expenditures
(18,500 ) (18,500 ) Cash portion of interest expense (14,655 ) (620
) Income tax expense (839 ) (970 )
Distributable cash flow 84,435 51,974
Adjusted for: Implied minimum volume
commitment — 5,268
Adjusted
distributable cash flow $ 84,435 $ 57,242
Cash provided by operating activities $ 67,215 $
137,269
Adjusted for: Change in assets and
liabilities 12,534 (66,551 ) Interest expense 15,958 1,440 Income
tax expense 839 970 Other non-cash items (1,977 ) (1,064 ) EBITDA
from unconsolidated affiliates(1) 23,860 —
Adjusted EBITDA $ 118,429 $ 72,064
Adjusted for: Maintenance capital expenditures
(18,500 ) (18,500 ) Cash portion of interest expense (14,655 ) (620
) Income tax expense (839 ) (970 )
Distributable cash flow 84,435 51,974
Adjusted for: Implied minimum volume
commitment — 5,268
Adjusted
distributable cash flow $ 84,435 $ 57,242
Cash distribution Limited partner units ($0.405 x
147,976,736 units) $ 59,931 General partner interest 1,612
Total cash distribution $ 61,543
Distribution coverage ratio 1.37
(1) Marcellus’ EBITDA from unconsolidated
affiliates is calculated as follows:
Net Income $ 12,987 $ —
Adjusted for:
Depreciation and amortization expense 10,901 — Other (28 )
—
EBITDA from unconsolidated
affiliates $ 23,860 $ — Marcellus
overhead allocation (2,600 ) — Chesapeake guaranty payment —
—
Adjusted EBITDA from
unconsolidated affiliates $ 21,260 $ —
CHESAPEAKE MIDSTREAM PARTNERS, L.P.
OPERATING STATISTICS (unaudited)
Three Months Ended March 31, 2012
2011 Barnett Shale Wells connected
during period 66 90 Total wells connected 2,285 1,925 Throughput,
bcf per day 1.279 0.970 Approximate miles of pipe at end of period
888 802 Gas compression (horsepower) at end of period 161,115
140,210
Haynesville Shale Wells connected
during period 2 19 Total wells connected 222 183 Throughput, bcf
per day 0.415 0.494 Approximate miles of pipe at end of period 257
226 Gas compression (horsepower) at end of period 23,745 21,970
Marcellus Shale Wells connected during period
68 — Total wells connected 349 — Throughput, bcf per day(1) 0.574 —
Approximate miles of pipe at end of period 281 — Gas compression
(horsepower) at end of period 43,930 —
Mid-Continent Wells connected during period 61 46 Total
wells connected 2,587 2,402 Throughput, bcf per day 0.534 0.544
Approximate miles of pipe at end of period 2,527 2,358 Gas
compression (horsepower) at end of period 96,161 86,134
Total Wells connected during period 197 155 Total
wells connected 5,443 4,510 Throughput, bcf per day(1) 2.802 2.008
Approximate miles of pipe at end of period 3,953 3,386 Gas
compression (horsepower) at end of period 324,951 248,314
(1) Throughput in the Marcellus Shale region represents the net
throughput allocated to the Partnership’s interest. Total gross
Marcellus Shale system throughput was 1.210 bcf per day for the
three months ended March 31, 2012.
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