UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: October 19, 2001
(Date of Earliest Event Reported: August 30, 2000)
Commission File Number 1-11680
----------
EL PASO ENERGY PARTNERS, L.P.
(Exact Name of Registrant as Specified in its Charter)
Delaware 76-0396023
(State of Other Jurisdiction) (I.R.S. Employer
of Incorporation or Organization) Identification No.)
El Paso Building
1001 Louisiana Street
Houston, Texas 77002
(Address of Principal Executive Offices)
(Zip Code)
Registrant's Telephone Number, Including Area Code: (713) 420-2600
Item 5. OTHER EVENTS
We are providing the accompanying unaudited pro forma condensed
consolidated and combined financial statements to reflect the following
transactions as if we completed them as of January 1, 2000:
o our acquisition of the remaining 50% interest in Deepwater Holdings,
L.L.C., and our acquisition of the Chaco cryogenic natural gas
processing plant;
o our acquisition of the Crystal natural gas storage business and the
natural gas liquids transportation and fractionation assets;
o our sale of several Gulf of Mexico assets; and
o our issuance of 5,627,070 common units, which includes 1,477,070
common units to be purchased by our general partner.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
(b) Pro forma financial statements
The following unaudited pro forma condensed consolidated and combined
financial statements as of and for the six months ended June 30, 2001, and for
the year ended December 31, 2000, have been prepared based on the historical
consolidated balance sheet and the historical consolidated statements of
operations of El Paso Energy Partners, L.P. and subsidiaries. The Unaudited Pro
Forma Condensed Consolidated and Combined Statements of Operations give effect
to the transactions identified below as if they had occurred on January 1, 2000.
The Unaudited Pro Forma Condensed Consolidated and Combined Balance Sheet gives
effect to the transactions as if they occurred on June 30, 2001.
The unaudited pro forma condensed consolidated and combined financial
statements are not necessarily indicative of our consolidated financial position
or results of operations that might have occurred had the transactions been
completed at the beginning of the earliest period presented, nor do they
necessarily indicate our consolidated operating results and financial position
for any future period.
The accompanying Notes to the Unaudited Pro Forma Condensed
Consolidated and Combined Financial Statements explain the assumptions used in
preparing the financial information. Accounting policy differences were not
material and, accordingly, adjustments have not been included in these
statements.
The unaudited pro forma financial information gives effect to the following
transactions:
(1) The acquisition in October 2001 of the remaining 50% equity interest that we
did not already own in Deepwater Holdings. High Island Offshore System and the
East Breaks natural gas gathering system became indirect wholly-owned assets
through this transaction. The total purchase price was approximately $85
million, consisting of $30 million cash and $55 million of assumed indebtedness.
(2) The acquisition in October 2001 of title to and other interests in the
Chaco cryogenic natural gas processing plant for approximately $198.5 million.
The total purchase price was composed of:
o A payment of $77.0 million to acquire the Chaco plant from the bank
group that provided the financing for the construction of the facility;
and
o A payment of $121.5 million to El Paso Field Services, L.P., an El Paso
Corporation affiliate, in connection with the execution of a 20-year
agreement relating to the processing capacity of the Chaco plant and
dedication of natural gas gathered by El Paso Field Services.
(3) The acquisition in August 2000 of the salt dome natural gas storage
business of Crystal Gas Storage, Inc., from a subsidiary of El Paso Corporation,
in exchange for $170 million of Series B 10% Cumulative Redeemable Preference
Units. Our historical consolidated financial statements include the accounts
and results of operations of Crystal from the purchase date.
(4) The $133 million acquisition in February 2001 of the South Texas natural gas
liquids transportation and fractionation (T&F) assets from a subsidiary of El
Paso Corporation. Our historical consolidated financial statements include the
accounts and results of operations of the T&F assets from the purchase date.
(5) The exclusion of the (i) results of operations of, and losses on the
disposition of Deepwater Holdings' interests in the Stingray and UTOS systems,
and the West Cameron Dehydration facility, (ii) results of operations and losses
on disposition of our interests in Nautilus, Manta Ray Offshore, Nemo, Green
Canyon and Tarpon as well as interest in two offshore platforms, and (iii)
income we recognized from the payments from El Paso Corporation.
(6) The issuance of 4,150,000 common units, which will be sold on a firm
commitment basis, in October 2001. In connection with this offering of common
units, our General Partner has elected to exercise its antidilution right under
our partnership agreement and will purchase an additional 1,477,070 common
units. We will use the net cash proceeds of approximately $226 million, which
included a contribution from our general partner of $2.2 million to maintain its
one percent contribution requirement, to redeem a portion of our Series B
preference units and to reduce indebtedness under our revolving credit facility.
For purposes of this proforma presentation, we have assumed that any
underwriters' over-allotment is not exercised.
1
EL PASO ENERGY PARTNERS, L.P.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED AND COMBINED BALANCE SHEET
AS OF JUNE 30, 2001
(IN THOUSANDS)
Pro Forma Acquisition
Adjustments
El Paso Energy Deepwater ---------------------------- Pro Forma
Partners, L.P. Holdings, L.L.C. Deepwater Chaco Financing Combined
Historical Historical(A) Holdings, L.L.C. Plant Adjustments(G) Pro Forma
-------------- ---------------- ---------------- ------- -------------- ----------
ASSETS
Current assets
Cash and cash equivalents $ 32,385 $ 749 $ 30,000 (B) $ 77,000 (E) $ 225,666 $ 33,134
(30,000)(B) (77,000)(E) (225,666)
110,000 (C) 121,500 (F)
(110,000)(C) (121,500)(F)
Accounts receivable, net 30,526 8,204 38,730
Other current assets 10,752 2 10,754
-------------- ------------- -------------- -------- ---------- ----------
Total current assets 73,663 8,955 -- -- -- 82,618
Property, plant and equipment, net 798,026 156,969 14,739(D) 77,000(E) 1,046,734
Intangible assets 121,500(F) 121,500
Investments in unconsolidated
affiliates 73,796 30,000 (B) 37,536
(66,260)(D)
Other noncurrent assets 32,699 2,388 35,087
-------------- ------------- -------------- --------- ---------- ----------
Total assets $ 978,184 $ 168,312 $ (21,521) $198,500 $ -- $1,323,475
============== ============= ============== ========= ========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities
Accounts payable $ 10,590 $ 6,791 $ -- $ -- $ -- $ 17,381
Other current liabilities 11,206 -- 11,206
-------------- ------------- -------------- --------- ---------- ----------
Total current liabilities 21,796 6,791 -- -- -- 28,587
Revolving credit facility 60,000 110,000 30,000 (B) 77,000(E) (175,666) 222,834
110,000 (C) 121,500(F)
(110,000)(C)
Project financing 95,000 95,000
Long-term debt 425,000 425,000
Other noncurrent liabilities 12,121 12,121
-------------- ------------- -------------- --------- ---------- ----------
Total liabilities 613,917 116,791 30,000 198,500 (175,666) 783,542
-------------- ------------- -------------- --------- ---------- ----------
Partners' capital 364,267 51,521 (51,521)(D) 223,432 539,933
2,234
(50,000)
-------------- ------------- -------------- --------- ---------- ----------
Total liabilities and partners'
capital $ 978,184 $ 168,312 $ (21,521) $198,500 $ -- $1,323,475
============== ============= ============== ========= ========== ==========
2
EL PASO ENERGY PARTNERS, L.P.
UNAUDITED PRO FORMA CONDENSED AND COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2001
(IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)
Pro Forma Acquisition
Deepwater Adjustments
El Paso Energy Deepwater Holdings, L.L.C. ---------------------
Partners, L.P. Holdings, L.L.C. Divestitures Deepwater
Historical Historical(A) Adjustments Holdings, L.L.C.
-------------- ---------------- ---------------- ---------------------
Operating revenues $ 99,489 $ 28,040 $ (2,726)(H) $ --
-------------- -------------- -------------- --------------
Operating expenses
Purchased natural gas costs 33,764
Operations and maintenance, net 15,509 8,640 (658)(H)
Depreciation, depletion and amortization 20,295 5,632 (323)(H) 246(J)
-------------- -------------- -------------- --------------
69,568 14,272 (981) 246
-------------- -------------- -------------- --------------
Operating income (loss) 29,921 13,768 (1,745) (246)
Other income (344) 9,933(K)
Earnings (loss) from unconsolidated affiliates (11,251) (21,044) 21,044(H)
Net loss on sale of assets 26,357 28
Other income (loss) -------------- -------------- -------------- --------------
14,762 (21,016) 21,044 9,933
-------------- -------------- -------------- --------------
Income before interest, taxes and other charges 44,683 (7,248) 19,299 9,687
-------------- -------------- -------------- --------------
Interest and debt expense 19,766 4,807 3,962 (L)
(4,807)(C)
Income tax expense (benefit)
Minority interest 100
-------------- -------------- -------------- --------------
19,866 4,807 -- (845)
-------------- -------------- -------------- --------------
Net income (loss) 24,817 (12,055) 19,299 10,532
-------------- -------------- -------------- --------------
Net income (loss) allocated to
General Partner 10,599
Net income (loss) allocated to
Series B unitholders 8,786
-------------- -------------- -------------- --------------
Net income (loss) allocated to
limited partners $ 5,432 $ (12,055) $ 19,299 $ 10,532
============== ============== ============== ==============
Basic and diluted net income
per unit $ 0.16
==============
Weighted average number of
units outstanding 33,270
==============
Pro Forma
Acquisition Other Gulf
Adjustments of Mexico
----------- Pro Forma Asset Pro Forma
Chaco T&F Asset Divestiture Financing Combined
Plant Adjustments Adjustments Adjustments Pro Forma
----------- ----------- ----------- ----------- -----------
Operating revenues $ 17,785(M) $ 5,042(S) $ -- $ 147,630
---------- ---------- --------- ---------- ----------
Operating expenses
Purchased natural gas costs 33,764
Operations and maintenance, net 3,650(M) 1,368(S) 28,509
Depreciation, depletion and amortization 4,963(M) 750(S) 31,563
---------- ---------- --------- ---------- ----------
8,613 2,118 -- 93,836
---------- ---------- --------- ---------- ----------
Operating income (loss) 9,172 2,924 53,794
Other income 9,589
Earnings (loss) from unconsolidated affiliates --
Net loss on sale of assets 11,251 (U) 881
Other income (loss) (25,504)(U)
---------- ---------- ---------- ---------- ----------
-- -- (14,253) -- 10,470
---------- ---------- --------- ---------- ----------
Income before interest, taxes and other charges 9,172 2,924 (14,253) -- 64,264
---------- ---------- --------- ---------- ----------
Interest and debt expense 5,618(N) 1,702(T) (4,981)(W) 26,067
Income tax expense (benefit) --
Minority interest 100
---------- ---------- --------- ---------- ----------
5,618 1,702 (4,981) 26,167
---------- ---------- --------- ---------- ----------
Net income (loss) 3,554 1,222 (14,253) 4,981 38,097
---------- ---------- --------- ---------- ----------
Net income (loss) allocated to
General Partner 2,154 (X) 12,753
Net income (loss) allocated to
Series B unitholders (2,171)(Y) 6,615
---------- ---------- --------- ---------- ----------
Net income (loss) allocated to
limited partners $ 3,554 $ 1,222 (14,253) $ 4,998 $ 18,729
========== ========== ========= ========== ==========
Basic and diluted net income
per unit $ 0.48
==========
Weighted average number of
units outstanding 5,627 38,897
========== ==========
3
EL PASO ENERGY PARTNERS, L.P.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED AND COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2000
(IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)
Pro Forma Acquisition
Deepwater Adjustments
El Paso Energy Deepwater Holdings, L.L.C. ---------------------------------
Partners, L.P. Holdings, L.L.C. Divestitures Deepwater Chaco
Historical Historical(A) Adjustments Holdings, L.L.C. Plant
-------------- ---------------- ---------------- ---------------- --------------
Operating revenues $ 112,415 $ 67,122 $ (27,252)(H) $ -- $ 35,569(M)
-------------- -------------- -------------- -------------- --------------
Operating expenses
Purchased natural gas costs 28,842
Operations and maintenance, net 13,779 25,279 (7,774)(H) 7,300(M)
Depreciation, depletion and
amortization 27,743 18,138 (9,312)(H) 491 (J) 9,925(M)
-------------- -------------- -------------- -------------- --------------
70,364 43,417 (17,086) 491 17,225
-------------- -------------- -------------- -------------- --------------
Operating income (loss) 42,051 23,705 (10,166) (491) 18,344(M)
-------------- -------------- -------------- -------------- --------------
Other income
Earnings (loss) from unconsolidated
affiliates 22,931 (5,049)(H) (2,221)(K)
Other income (loss) 2,377 532 (146)(H)
-------------- -------------- -------------- -------------- --------------
25,308 532 (5,195) (2,221) --
-------------- -------------- -------------- -------------- --------------
Income before interest, income taxes
and other charges 67,359 24,237 (15,361) (2,712) 18,344(M)
-------------- -------------- -------------- -------------- --------------
Interest and debt expense 47,072 10,711 (3,472)(I) 7,924 (L) 11,235(N)
(5,929)(C)
Income tax benefit (305)
Minority interest 95
-------------- -------------- -------------- -------------- --------------
46,862 10,711 (3,472) 1,995 11,235
-------------- -------------- -------------- -------------- --------------
Net income (loss) 20,497 13,526 (11,889) (4,707) 7,109
-------------- -------------- -------------- -------------- --------------
Net income (loss) allocated to
General Partner 15,578
Net income (loss) allocated to
Series B unitholders 5,668
-------------- -------------- -------------- -------------- --------------
Net income (loss) allocated to
limited partners $ (749) $ 13,526 $ (11,889) $ (4,707) $ 7,109
============== ============== ============== ============== ==============
Basic and diluted net income (loss)
per unit $ (0.03)
==============
Weighted average number of
units outstanding 29,077
==============
Other Gulf of
Pro Forma Pro Forma Mexico Asset Pro Forma
Crystal T&F Asset Divestiture Financing Combined
Adjustments Adjustments Adjustments Adjustments Pro Forma
-------------- -------------- -------------- -------------- --------------
Operating revenues $ 10,528 (O) $ 33,550(S) $ (2,954)(U) $ -- $ 228,978
-------------- -------------- -------------- -------------- --------------
Operating expenses
Purchased natural gas costs 28,842
Operations and maintenance, net 4,754 (O) 8,007(S) (1,552)(U) 49,793
Depreciation, depletion and
amortization 2,683 (O) 3,465(S) (7,585)(U) 46,461
913 (P)
-------------- -------------- -------------- -------------- --------------
8,350 11,472 (9,137) -- 125,096
-------------- -------------- -------------- -------------- --------------
Operating income (loss) 2,178 22,078 6,183 -- 103,882
-------------- -------------- -------------- -------------- --------------
Other income
Earnings (loss) from unconsolidated
affiliates (2,922)(U) 12,739
Other income (loss) 151 (O) (200)(U) 2,714
-------------- -------------- -------------- -------------- --------------
151 -- (3,122) -- 15,453
-------------- -------------- -------------- -------------- --------------
Income before interest, income taxes
and other charges 2,329 22,078 3,061 -- 119,335
-------------- -------------- -------------- -------------- --------------
Interest and debt expense 636 (O) 10,214(T) (2,890)(U) (9,962)(W) 56,735
(494)(Q) (8,310)(V)
Income tax benefit 305 (U) --
Minority interest 2 (U) 97
-------------- -------------- -------------- -------------- --------------
142 10,214 (10,893) (9,962) 56,832
-------------- -------------- -------------- -------------- --------------
Net income (loss) 2,187 11,864 13,954 9,962 62,503
-------------- -------------- -------------- -------------- --------------
Net income (loss) allocated to
General Partner 5,625 (X) 21,203
Net income (loss) allocated to
Series B unitholders 11,332 (R) (4,700)(Y) 12,300
-------------- -------------- -------------- -------------- --------------
Net income (loss) allocated to
limited partners $ (9,145) $ 11,864 $ 13,954 $ 9,037 $ 29,000
============== ============== ============== ============== ==============
Basic and diluted net income (loss)
per unit $ 0.84
==============
Weighted average number of
units outstanding 5,627 34,704
============== ==============
4
NOTES TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS
A This column represents the historical Deepwater Holdings, L.L.C. consolidated
balance sheet and statements of operations.
B To record the borrowings under our credit facility and our acquisition of the
additional interest in Deepwater Holdings.
C To record (i) the repayment of Deepwater Holdings' credit facility funded by
borrowings under our revolving credit facility (ii) the elimination of the
historical interest expense for the 6 months ended June 30, 2001 related to
Deepwater Holdings' credit facility and (iii) the reduction of interest
expense for the year ended December 31, 2000 based on the credit facility's
interest rate at June 30, 2001, which was approximately 5.39%. A change in
the rate of 0.125% would impact our annual results of operations by
approximately $0.1 million.
D To record the eliminating and consolidating entries related to our investment
in Deepwater Holdings, as follows:
(In thousands)
Our investment in Deepwater Holdings at June 30, 2001 $ 36,260
Cash portion of the acquisition of the additional Deepwater
Holdings' interest 30,000
--------------
Our total investment balance in Deepwater Holdings eliminated as a
result of this acquisition 66,260
Elimination of Deepwater Holdings' equity balance (51,521)
--------------
Excess purchase price assigned to property, plant and equipment $ 14,739
==============
E To record the acquisition of the Chaco plant for approximately $77 million
funded by borrowings under our revolving credit facility.
F To record the payment of $121.5 million in connection with the execution of a
twenty year agreement with El Paso Field Services, L.P., relating to
processing capacity of the Chaco plant and dedication of natural gas gathered
by El Paso Field Services.
G This column records the effect of (i) the sale of 5,627,070 common units
(including the sale of 1,477,070 common units to our general partner) at
$41.50 per unit based on the closing price on October 16, 2001, (ii) the
contribution from our general partner to maintain its 1% interest and (iii)
the application of such proceeds to pay fees and expenses related to the
offering, redeem $50 million of our Series B preference units and temporarily
reduce borrowings under our revolving credit facility, as follows:
(In thousands)
Proceeds from unit offering $ 233,523
Fees and expenses related to sale of units (10,091)
--------------
Net proceeds from unit offering 223,432
General partner's contribution 2,234
--------------
Net proceeds $ 225,666
==============
Use of proceeds
Redemption of Series B preference units $ 50,000
Reduction of credit facility 175,666
--------------
Net proceeds $ 225,666
==============
H To eliminate the results of operations of Stingray, UTOS, and West Cameron
Dehydration facility, our associated equity earnings from these assets, and
the effect of the non-recurring loss related to the sales of these assets.
These assets were sold pursuant to a Federal Trade Commission order related
to El Paso Corporation.
I To record the reduction in interest expense as a result of applying net
proceeds of $54 million from the sale of Stingray, UTOS, and West Cameron
Dehydration to pay down Deepwater Holdings' credit facility. This amount was
calculated based on the interest rate on Deepwater Holdings' credit facility
at March 31, 2001, which was approximately 6.43%. A change in the rate of
0.125% would impact our annual results of operations by approximately $0.1
million.
J To record depreciation expense associated with the allocation of the excess
purchase price assigned to Deepwater Holdings' property, plant and equipment
relating to our acquisition of the additional interest in Deepwater Holdings.
Such property, plant and equipment will be depreciated on a straight line
basis over the remaining useful lives of the assets which approximates 30
years.
K To eliminate our remaining equity earnings in Deepwater Holdings.
L To record the increase in interest expense due to additional borrowings of
$140.0 million under our revolving credit facility to fund the acquisition of
El Paso Corporation's 50% interest in Deepwater Holdings and to reduce
Deepwater Holdings' credit facility. The amount was calculated based on the
interest rate on our revolving credit facility at June 30, 2001, which was
approximately 5.66%. A change in the rate of 0.125% would impact our annual
results of operations by approximately $0.2 million.
M To record the results of operations of the Chaco plant. In connection with
the acquisition of this asset, we secured a fixed rate processing agreement
from El Paso Field Services, an affiliate of our General Partner, to process
natural gas for the next twenty years. Our pro forma processing revenues are
based on the contract price assuming average historical daily volumes. We
have also entered into a lease agreement with El Paso Field Services, under
which we will receive annual lease payments of $5 million. Also, we estimate
that we will incur operating expenses related to the Chaco plant of
approximately $7.3 million per year. Our depreciation and amortization
estimate is based on the total cost of the plant and processing agreement of
$198.5 million assuming a remaining 20 year life.
N To record the increase in interest expense due to additional borrowings under
our revolving credit facility to fund the acquisition of the Chaco plant for
$198.5 million. The amount was calculated based on the interest rate on our
revolving credit facility at June 30, 2001, which was approximately 5.66%. A
change in the rate of 0.125% would impact our annual results of operations by
approximately $0.3 million.
O To record the results of operations of the Crystal assets acquired.
P To record the additional depreciation expense associated with the allocation
of the purchase price to Crystal's natural gas storage facilities. These
facilities will be depreciated on a straight-line basis over their remaining
useful lives which approximates 30 years.
Q To record the reduction in interest expense due to the redemption of
Crystal's 8.12% secured guaranteed notes that were not assumed by us.
R To record the income allocated to the Series B unitholders.
S To record the results of operations of the transportation and fractionation
assets acquired.
T To record the increase in interest expense related to our additional
borrowings under our revolving credit facility to fund the acquisition of the
NGL transportation and fractionation assets for $133 million. This amount was
calculated based on the interest rate on our revolving credit facility at
March 31, 2001, which was approximately 7.68%. A change in the rate of 0.125%
would impact our annual results of operations by approximately $0.2 million.
U To eliminate the results of operations of Nautilus, Manta Ray Offshore, NEMO,
Green Canyon and Tarpon and the effect of the non-recurring items, related to
the losses on the sales of these assets and the $25.5 million additional
consideration received from El Paso Corporation. These assets were sold
pursuant to a Federal Trade Commission order related to El Paso Corporation.
V To record the reduction in interest expense as a result of applying the
net proceeds of approximately $108.2 million from the Gulf of Mexico assets
sold to pay down our revolving credit facility. The amount was calculated
based on the interest rate on our credit facility at March 31, 2001, which
was approximately 7.68%. A change in the rate of 0.125% would impact our
annual results of operations by approximately $0.1 million.
W To record the reduction in interest expense as a result of applying the net
proceeds from the unit offering of approximately $176 million, to reduce our
borrowings under our revolving credit facility. This amount was calculated
based on the interest rate on our credit facility at June 30, 2001, which was
approximately 5.66%. A change in the rate of 0.125% would impact our annual
results of operations by approximately $0.2 million.
X To adjust the income allocated to our General Partner as a result of the
issuance of common units described above. The General Partner's income
allocation is a function of total distributions to the common unit holders.
As the number of common units increase, total distributions to common unit
holders increase, and; therefore, the General Partner's income allocation
increases. This allocation increase assumes the newly issued shares were
outstanding for all periods presented.
Y To reflect the reduction in the allocation of income to Series B unitholders
due to the redemption of approximately $50 million of the Series B preference
units.
5
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
EL PASO ENERGY PARTNERS, L.P.,
/s/ D. MARK LELAND
-------------------------------------
D. Mark Leland
Senior Vice President and Controller
Date: October 19, 2001
