UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d)
of the
Security Exchange Act of 1934
Date of
report (Date of earliest event reported): April 28, 2008
DUNCAN
ENERGY PARTNERS L.P.
(Exact
Name of Registrant as Specified in Its Charter)
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Delaware
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1-33266
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20-5639997
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(State
or Other Jurisdiction of
Incorporation
or Organization)
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(Commission
File
Number)
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(I.R.S.
Employer
Identification
No.)
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1100
Louisiana, 10th
Floor
Houston,
Texas 77002
(Address
of Principal Executive Offices, including Zip Code)
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(713)
381-6500
(Registrant’s
Telephone Number, including Area
Code)
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Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A.2. below):
¨ Written communications
pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material
pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
¨ Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
1
Item
2.02. Results of Operations and Financial Condition.
On April 28, 2008, Duncan Energy
Partners L.P. (“Duncan Energy Partners”) issued a press release announcing its
financial results for the three months ended March 31, 2008 and held a webcast
conference call discussing those results. A copy of the earnings
press release is furnished as Exhibit 99.1 to this report, which is hereby
incorporated by reference into this Item 2.02. The webcast conference
call will be available for replay on Duncan Energy Partners’ website at www.deplp.com. The
conference call will be archived on our website for 90 days.
Significant
Relationships Referenced in this Current Report on Form 8-K
Duncan Energy Partners did not own any
assets prior to February 5, 2007, which was the date it completed its initial
public offering of common units. The historical business and
operations of Duncan Energy Partners prior to February 5, 2007 are referred to
as “Duncan Energy Partners Predecessor” or the “Predecessor.” Unless the context
requires otherwise, references to “we,” “us,” “our,” “the Partnership” or
“Duncan Energy Partners” are intended to mean the business and operations of
Duncan Energy Partners L.P. and its consolidated subsidiaries since February 5,
2007.
References to “DEP GP” mean DEP Holdings,
LLC, which is our general partner.
References to “DEP Operating Partnership”
mean DEP Operating Partnership, L.P., which is a wholly owned subsidiary of
Duncan Energy Partners that conducts substantially all of its
business.
References to “Enterprise Products Partners”
mean Enterprise Products Partners L.P., which owns Enterprise Products Operating
LLC. Enterprise Products Partners is a publicly traded partnership,
the limited partner interests of which are listed on the New York Stock Exchange
(“NYSE”) under the ticker symbol “EPD.”
References to “EPO” mean Enterprise Products
Operating LLC, which is our Parent company, and its consolidated
subsidiaries. EPO owns the controlling interest in the
Partnership’s general partner, DEP GP, and is a significant owner of the
Partnership’s common units.
References to “TEPPCO” mean TEPPCO Partners,
L.P., a publicly traded affiliate, the limited partner interests of which are
listed on the NYSE under the ticker symbol “TPP.”
References to “TEPPCO GP” refer to Texas
Eastern Products Pipeline Company, LLC, which is the general partner of TEPPCO
and is wholly owned by Enterprise GP Holdings.
References to “Enterprise GP Holdings” mean
Enterprise GP Holdings L.P., which owns Enterprise Products GP and TEPPCO GP and
limited partner interests in Enterprise Products Partners and
TEPPCO.
References to “EPE Holdings” mean EPE
Holdings, LLC, which is the general partner of Enterprise GP
Holdings.
References to “EPCO” mean EPCO, Inc., which
is a related party affiliate to all of the foregoing named
entities.
All of the aforementioned entities are
affiliates and under common control of Dan L. Duncan, the Chairman and
controlling shareholder of EPCO.
2
As
generally used in the energy industry and in this press release and accompanying
exhibits, the identified terms have the following meanings:
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/d
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=
per day
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TBtu
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=
trillion British Thermal units
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BBtu
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=
billion British Thermal units
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MMBtu
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=
million British Thermal units
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MBPD
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=
thousand barrels per day
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Bcf
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=
billion cubic feet
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MMcf
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=
million cubic feet
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Mcf
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=
thousand cubic feet
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Basis
of Financial Statement Presentation
Except per unit amounts, dollar amounts
presented in the tabular data within this Current Report on Form 8-K are stated
in thousands of dollars.
The financial information and related
discussion included in the press release and this Current Report on Form
8-K that pertain to periods prior to our initial public offering
reflect the assets, liabilities and operations contributed to us by EPO at
the closing of our initial public offering on February 5, 2007. We refer to
these historical assets, liabilities and operations as the
assets, liabilities and operations of Duncan Energy Partners
Predecessor. We have elected February 1, 2007 as the effective
closing date for financial accounting and reporting purposes with respect to
Duncan Energy Partners Predecessor.
The financial information of Duncan
Energy Partners Predecessor reflects EPO’s historical ownership of these
assets, liabilities and operations. The principal business entities
included in the historical combined financial statements of Duncan Energy
Partners Predecessor are (on a 100% basis):
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§
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Mont
Belvieu Caverns, LLC (“Mont Belvieu
Caverns”);
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§
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Acadian
Gas, LLC (“Acadian
Gas”);
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§
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Enterprise
Lou-Tex Propylene Pipeline L.P. (“Lou-Tex Propylene”), including its
general partner;
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§
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Sabine
Propylene Pipeline L.P. (“Sabine
Propylene”), including its general partner;
and
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§
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South
Texas NGL Pipelines, LLC (“South Texas
NGL”).
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EPO contributed a 66% equity interest
in each of these five entities to us on February 5, 2007. EPO
retained the remaining 34% equity interests in each of these
subsidiaries.
We have presented our results of
operations following the completion of our initial public offering separately
from those of Duncan Energy Partners Predecessor. We acquired
substantially all of the assets and operations of the Predecessor that are
included in our consolidated financial statements. There were a
number of agreements and other items that went into effect at the time of our
initial public offering that affect the comparability of our current operating
results with the historical operating results of Duncan Energy Partners
Predecessor. These differences include:
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§
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The
fees Mont Belvieu Caverns charges EPO for underground storage services
increased as a result of new agreements executed in connection with our
initial public offering.
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§
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Following
our initial public offering, all storage well measurement gains and losses
are retained by EPO rather than being allocated to Mont Belvieu
Caverns.
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§
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Mont
Belvieu Caverns now makes a special allocation of its operational
measurement gains and losses to EPO, which results in such amounts not
impacting the net income or loss of Mont Belvieu
Caverns.
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3
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§
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Transportation
revenues recorded by Lou-Tex Propylene and Sabine Propylene decreased
after our initial public offering due to the assignment of certain
exchange agreements to us by EPO.
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Use
of Non-GAAP financial measures
Our press release and/or the conference
call discussions include the non-generally accepted accounting principle
(“non-GAAP”) financial measures of gross operating margin, distributable cash
flow and EBITDA. The press release provides reconciliations of these
non-GAAP financial measures to their most directly comparable financial measure
calculated and presented in accordance with U.S. generally accepted accounting
principles (“GAAP”). Our non-GAAP financial measures should not be
considered as alternatives to GAAP measures such as net income, operating
income, cash flow from operating activities or any other GAAP measure of
liquidity or financial performance.
Gross
operating margin. We evaluate segment performance based on the
non-GAAP financial measure of gross operating margin. Gross operating margin
(either in total or by individual segment) is an important performance measure
of the core profitability of our operations. This measure forms the
basis of our internal financial reporting and is used by senior management in
deciding how to allocate capital resources among business
segments. We believe that investors benefit from having access to the
same financial measures that our management uses in evaluating segment
results. The GAAP financial measure most directly comparable to total
segment gross operating margin is operating income. Our non-GAAP
financial measure of total segment gross operating margin should not be
considered as an alternative to GAAP operating income.
We define
total segment gross operating margin as consolidated operating income before
(i) depreciation, amortization and accretion expense; (ii) gains and
losses on the sale of assets; and (iii) general and administrative
expenses. Gross operating margin is exclusive of other income and
expense transactions, provision for income taxes, extraordinary charges and the
cumulative effect of changes in accounting principles. Gross
operating margin by segment is calculated by subtracting segment operating costs
and expenses (net of the adjustments noted above) from segment revenues, with
both segment totals before the elimination of any intersegment and intrasegment
transactions. In accordance with GAAP, intercompany accounts and
transactions are eliminated in consolidation.
We
include equity earnings from Evangeline in our measurement of segment gross
operating margin and operating income. Our equity investment in
Evangeline is a vital component of our business strategy and important to the
operations of Acadian Gas. This method of operation enables us to
achieve favorable economies of scale relative to the level of investment and
business risk assumed versus what we could accomplish on a stand-alone
basis. Evangeline’s operations compliment those of Acadian Gas. As
circumstances dictate, we may increase our ownership interest in Evangeline or
make other equity method investments.
Distributable
cash flow. We define distributable cash flow as net income or
loss plus:
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§
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depreciation,
amortization and accretion expense;
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§
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cash
distributions received from our unconsolidated affiliate, if any, less
equity in the earnings of such unconsolidated
affiliate;
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§
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the
subtraction of sustaining capital expenditures and cash payments to settle
asset retirement obligations;
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the
addition of losses or subtraction of gains relating to the sale of
assets;
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cash
proceeds from the sale of assets;
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§
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gains
or losses on monetization of financial instruments recorded in accumulated
other comprehensive income less related amortization of such amounts to
earnings; and
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§
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other
miscellaneous non-cash amounts affecting net income or loss for the
period; less,
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4
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§
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Parent
company interest in the above adjustments to net income or loss in
determining distributable cash
flow.
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Sustaining capital expenditures are
capital expenditures (as defined by GAAP) resulting from improvements to and
major renewals of existing assets. Distributable cash flow is a
significant liquidity metric used by our senior management to compare the basic
cash flows generated by us to the cash distributions we expect to pay our
partners. Using this metric, our 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 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 we are generating cash flows at a level that can
sustain or support an increase in our quarterly cash distribution
rate. Distributable cash flow 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 in turn
is based on the amount of cash distributions a partnership pays to a
unitholder). The GAAP measure most directly comparable to
distributable cash flow is cash flows from operating activities.
EBITDA. We
define EBITDA as net income or loss plus interest expense, provision for income
taxes and depreciation, accretion and amortization expense, with all amounts net
of the Parent company’s interest. EBITDA is commonly used as a
supplemental financial measure by management and external users of our financial
statements, such as investors, commercial banks, research analysts and rating
agencies, to assess:
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§
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the
financial performance of our assets without regard to financing methods,
capital structures or historical cost
basis;
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§
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the
ability of our assets to generate sufficient cash to meet debt service
requirements;
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§
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our
operating performance and return on capital as compared to those of other
companies in the midstream energy industry, without regard to financing
and capital structure; and
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§
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the
viability of projects and the overall rates of return on alternative
investment opportunities.
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Since EBITDA excludes some, but not
all, items that affect net income or loss and because these measures may vary
among other companies, the EBITDA data presented in our press release may not be
comparable to similarly titled measures of other companies. The
GAAP measure most directly comparable to EBITDA is cash flow from operating
activities.
5
Item
9.01. Financial
Statements and Exhibits.
(d) Exhibits.
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Exhibit
Number
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Exhibit
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99.1
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Duncan
Energy Partners L.P. press release dated April 28,
2008.
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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.
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DUNCAN
ENERGY PARTNERS L.P.
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By: DEP
Holdings, LLC, as general partner
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Date:
April 28, 2008
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By:
/s/ Michael J.
Knesek
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Name: Michael
J. Knesek
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Title:
Senior Vice President, Controller
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and
Principal Accounting Officer
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of
DEP Holdings, LLC
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6
Exhibit
Index
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Exhibit
No.
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Description
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99.1
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Duncan
Energy Partners L.P. press release dated April 28,
2008.
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7
Exhibit
99.1
P.O. Box
4324
Houston,
TX 77210
(713)
381-6500
Duncan
Energy Partners Reports First Quarter 2008 Results
Houston,
Texas (April 28, 2008) - Duncan Energy Partners L.P. (NYSE:DEP) today announced
its financial results for the three months ended March 31, 2008. The
partnership reported net income of $6.0 million for the first quarter of 2008,
or $0.29 per common unit on a fully diluted basis.
On April
15, 2008, the Board of Directors of DEP’s general partner declared a quarterly
cash distribution to partners of $0.41 per common unit, or $1.64 per unit on an
annualized basis, with respect to the first quarter of
2008. Distributable cash flow for the first quarter of 2008 was $8.9
million and provided 1.05 times coverage of the quarterly cash
distribution. Distributable cash flow is a non-generally accepted
accounting principle (“non-GAAP”) financial measure that is defined and
reconciled later in this press release to its most directly comparable GAAP
financial measure, net cash flows provided by operating activities.
“Our
partnership began 2008 by reporting its highest quarterly gross operating margin
since the IPO, with a strong performance from the Acadian gas pipeline system
and a solid contribution from its NGL and petrochemical storage business,” said
Richard H. Bachmann, president and chief executive officer of the general
partner of DEP. “We benefited from increased natural gas volumes and
sales margins on our Acadian pipeline system this quarter, as well as higher NGL
and petrochemical volumes on our NGL and propylene pipelines and storage
facilities. We are excited about the growth prospects for 2008 and
beyond as our commercial businesses consistently deliver strong results and cash
flow.”
The
partnership’s results of operations for 2007 are reported separately from those
of the predecessor of Duncan Energy Partners (“Duncan Energy Partners
Predecessor”) following the successful completion of its initial
public offering (“IPO”) on February 5, 2007. For financial reporting
purposes, the effective date of the IPO was February 1, 2007. There
are a number of agreements and other items that went into effect at the time of
DEP’s IPO that affect the comparability of its operating results with the
historical operating results of Duncan Energy Partners Predecessor. See
“Basis of Financial Information” within this release for a summary of these
differences.
Revenue
for the first quarter of 2008 increased 31 percent to $261.8 million from $200.5
million for the first quarter of 2007. Results for the first quarter
of 2007 are comprised of two months of operations for DEP since its IPO and one
month of operations by Duncan Energy
Partners
Predecessor. Gross operating margin for the first quarter of 2008 increased 12
percent to $24.2 million from $21.7 million for the first quarter 2007 as
reported by DEP and Duncan Energy Partners Predecessor. Earnings
before interest, taxes, depreciation, amortization and accretion (“EBITDA”) for
the first quarter of 2008 were $14.0 million. Gross operating margin
and EBITDA are non-GAAP financial measures that are defined and reconciled later
in this press release to their most directly comparable GAAP financial
measure.
Review of Segment Quarterly
Performance
The
results reported below reflect operations of DEP for the three months ended
March 31, 2008, compared to operations for the three months ended March 31,
2007. The results for the first quarter of 2007 are comprised of two months of
operating results by DEP since its IPO and one month of operations for
Duncan Energy Partners Predecessor.
DEP owns
a 66 percent equity interest in the assets described below, and Enterprise
Products Operating LLC (“EPO”) owns the remaining 34 percent equity
interest. EPO is a wholly-owned subsidiary of Enterprise Products
Partners, L.P. and owns the general partner of DEP. EPO’s interest in
DEP’s subsidiaries is accounted for as “Parent Interest” in a manner similar to
minority interest. However, from a gross operating margin standpoint,
the amounts shown are on a 100 percent basis before the deduction for Parent
Interest.
NGL & Petrochemical Storage
Services – This segment consists of 33 underground salt dome caverns
located at Mont Belvieu, Texas, with an underground storage capacity of
approximately 100 million barrels (“MMBbls”), and certain other related
assets. Gross operating margin for the first quarter of 2008
increased 20 percent to $10.2 million from $8.5 million in the first quarter of
2007. This increase was primarily attributable to the effect of
higher storage fees and increased volumes which were partially offset by
increased operating expenses.
Onshore Natural Gas Pipelines &
Services – This segment includes the Acadian intrastate natural gas
system that gathers, transports, stores and markets natural gas in south
Louisiana and has approximately 3 billion cubic feet (“Bcf”) of
natural gas storage capacity. Gross operating margin for the first
quarter of 2008 increased 77 percent to $6.2 million from $3.5 million as
reported in the first quarter of 2007. This increase was primarily
due to higher volumes and sales margins on the Acadian system. Total
natural gas volumes increased 10 percent to 710 British thermal units per day
(“BBtu/d”) in the first quarter this year from 647 BBtu/d in the first quarter
last year.
Petrochemical Pipeline
Services – This segment consists of two petrochemical
pipeline systems that transport propylene in Texas and
Louisiana. Gross operating margin decreased to $2.9 million in the
first quarter of 2008 from $4.9 million in the first quarter of
2007. Approximately $1.8 million of this decrease is attributable to
lower quarter-to-quarter tariff rates as a result of EPO assigning its third
party product exchange agreements to DEP in connection with its
IPO. Accordingly, the transportation fees DEP currently receives
for use of its Lou-Tex Propylene and Sabine Propylene Pipelines are less
than the fees received from EPO prior to February
2007. Petrochemical pipeline transportation volumes averaged
40,000
barrels
per day (“BPD”) for the first quarter of 2008, compared to an average of 36,000
BPD for the first quarter of 2007.
NGL Pipelines & Services
– This segment, which includes the partnership’s South Texas
NGL Pipeline System that became operational in January 2007, generated gross
operating margin of $4.9 million in the first quarter of 2008 and
2007. Natural gas liquid (“NGL”) transportation volumes averaged
72,000 BPD in the first quarter this year compared to 69,000 BPD in the first
quarter last year.
Capitalization
Total
debt principal outstanding was $188 million at March 31, 2008. DEP had total
liquidity of approximately $125 million from unrestricted cash and availability
under the partnership's $300 million credit facility.
Management
for DEP will discuss first quarter results during the Enterprise Products
Partners earnings conference call with analysts and investors scheduled for
9 a.m. CDT today. The call will be broadcast live over the Internet and may be
accessed by visiting the partnership's website at www.deplp.com.
Basis of Presentation of
Financial Information
We have
presented our results of operations following the completion of our IPO
separately from those pertaining to Duncan Energy Partners
Predecessor. We acquired substantially all of the assets and
operations of Duncan Energy Partners Predecessor that are included in our
consolidated financial statements. There are a number of agreements
and other items that went into effect at the time of our IPO that affect the
comparability of our current operating results with the historical operating
results of Duncan Energy Partners Predecessor. These
differences include:
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·
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the
fees we charge EPO for underground storage services at the facility owned
by Mont Belvieu Caverns, LLC (“Mont Belvieu Caverns”) increased to market
rates as a result of new agreements executed in connection with our
IPO;
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|
·
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all
storage well measurement gains and losses relating to Mont Belvieu
Caverns’ facility are now retained by
EPO;
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·
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Mont
Belvieu Caverns now makes a special allocation of operational measurement
gains and losses to EPO; and
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·
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the
transportation revenues recorded by Enterprise Lou-Tex Propylene Pipeline
L.P. and Sabine Propylene Pipeline L.P. decreased after our IPO due to the
assignment by EPO to us of certain exchange agreements and a corresponding
reduction in transportation tariff rates for the
pipelines.
|
This
press release and accompanying schedules include non-GAAP financial measures of
gross operating margin, distributable cash flow, and EBITDA. The
press release provides reconciliations of these non-GAAP financial measures to
their most directly comparable financial measure calculated and presented in
accordance with U.S. generally accepted accounting principles
(“GAAP”). Our non-GAAP financial measures should not be considered as
alternatives to GAAP measures such as net income, operating income, net cash
flows provided from operating activities or any other GAAP measure of liquidity
or financial performance.
Gross operating margin - We
evaluate segment performance based on the non-GAAP financial measure of gross
operating margin. Gross operating margin (either in total or by individual
segment) is an important performance measure of the core profitability of our
operations. This measure forms the basis of our internal financial
reporting and is used by senior management in deciding how to allocate capital
resources among business segments. We believe that investors benefit
from having access to the same financial measures that our management uses in
evaluating segment results. The GAAP measure most directly comparable
to total segment gross operating margin is operating income. Our
non-GAAP financial measure of total segment gross operating margin should not be
considered as an alternative to GAAP operating income.
We define
total (or combined) segment gross operating margin as operating income before:
(i) depreciation, amortization and accretion expense; (ii) gains and losses on
the sale of assets; and (iii) general and administrative costs. Gross
operating margin is exclusive of other income and expense transactions,
provision for income taxes, parent interest, extraordinary charges and the
cumulative effect of changes in accounting principles. Gross
operating margin by segment is calculated by subtracting segment operating costs
and expenses (net of the adjustments noted above) from segment revenues, with
both segment totals before the elimination of any intersegment and intrasegment
transactions. In accordance with GAAP, intercompany accounts and
transactions are eliminated in consolidation.
We
include equity earnings from Evangeline Gas Pipeline Company L.P. and Evangeline
Gas Corp. (collectively “Evangeline”) in our measurement of segment gross
operating margin and operating income. Our equity investment in
Evangeline is a vital component of our business strategy and important to the
operations of our Acadian natural gas system. This method of
operation enables us to achieve favorable economies of scale relative to the
level of investment and business risk assumed versus what we could accomplish on
a stand-alone basis. Evangeline performs complementary roles to the
other business operations of Acadian Gas, LLC (“Acadian Gas”). As circumstances
dictate, we may increase our ownership interest in Evangeline or make other
equity method investments.
Distributable cash flow - We
define distributable cash flow for Duncan Energy Partners as net income or loss
plus: (i) depreciation, amortization and accretion expense; (ii) cash
distributions received from our unconsolidated affiliate, if any, less equity in
the earnings of such unconsolidated affiliate; (iii) the subtraction of
sustaining capital expenditures; (iv) the addition of losses or subtraction of
gains relating to the sale of assets; (v) cash proceeds from the sale
of
assets;
(vi) gains or losses on monetization of financial instruments recorded in
accumulated other comprehensive income less related amortization of such amounts
to earnings; and (vii) other miscellaneous non-cash amounts affecting net income
or loss for the period less parent interest in the above adjustments to net
income or loss in deriving distributable cash flow. Sustaining
capital expenditures are capital expenditures (as defined by GAAP) resulting
from improvements to and major renewals of existing
assets. Distributable cash flow is a significant liquidity metric
used by our senior management to compare basic cash flows generated by us to the
cash distributions we expect to pay our partners. Using this metric,
our 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 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 we are generating cash flows at a level that can
sustain or support an increase in our quarterly cash
distribution. Distributable cash flow 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
in turn is based on the amount of cash distributions a partnership pays to a
unitholder). The GAAP measure most directly comparable to
distributable cash flow is net cash flows provided by operating
activities.
EBITDA - We define EBITDA as
net income or loss plus interest expense, provision for income taxes and
depreciation, accretion and amortization expense, with all amounts net of the
Parent Interest in subsidiary amounts. EBITDA is commonly used as a
supplemental financial measure by management and by external users of our
financial statements, such as investors, commercial banks, research analysts and
rating agencies, to assess: (i) the financial performance of our assets without
regard to financing methods, capital structures or historical cost basis; (ii)
the ability of our assets to generate cash sufficient to pay interest cost and
support our indebtedness; (iii) our operating performance and return on capital
as compared to those of other companies in the midstream energy industry,
without regard to financing and capital structure; and (iv) the viability of
projects and the overall rates of return on alternative investment
opportunities. Because EBITDA excludes some, but not all, items that
affect net income or loss and because these measures may vary among other
companies, the EBITDA data presented in the press release may not be comparable
to similarly titled measures of other companies. The GAAP
measure most directly comparable to EBITDA is net cash flows provided by
operating activities.
Company Information and Use
of Forward Looking Statements
Duncan
Energy Partners is a publicly traded partnership that provides midstream energy
services, including gathering, transportation, marketing and storage of natural
gas, in addition to transportation and storage of NGLs and petrochemicals.
Duncan Energy Partners' assets, primarily in the Gulf Coast region of Texas and
Louisiana, include interests in more than 1,000 miles of natural gas pipelines
with a transportation capacity of approximately 1 Bcf per day; nearly 600 miles
of NGL and petrochemical pipelines featuring access to the world’s largest
fractionation complex at Mont Belvieu, Texas; and 33 underground salt dome
caverns with approximately 100 MMBbls of NGL storage capacity.
This
press release contains various forward-looking statements and information that
are based on Duncan Energy Partners' beliefs and those of its general partner,
as well as assumptions made by and information currently available to Duncan
Energy Partners. When used in this press release, words such as "anticipate,"
"project," "expect," "plan," "goal," "forecast," "intend," "could," "believe,"
"may," and similar expressions and statements regarding the plans and objectives
of Duncan Energy Partners for future operations, are intended to identify
forward-looking statements. Although Duncan Energy Partners and its general
partner believe that such expectations reflected in such forward-looking
statements are reasonable, neither Duncan Energy Partners nor its general
partner can give assurances that such expectations will prove to be correct.
Such statements are subject to a variety of risks, uncertainties and
assumptions. If one or more of these risks or uncertainties materialize, or if
underlying assumptions prove incorrect, Duncan Energy Partners' actual results
may vary materially from those it anticipated, estimated, projected or expected.
Among the key risk factors that may have a direct bearing on Duncan Energy
Partners ' results of operations and financial condition are:
|
·
|
fluctuations
in oil, natural gas and NGL prices and production due to weather and other
natural and economic forces;
|
|
·
|
the
effects of the company's debt level on its future financial and operating
flexibility;
|
|
·
|
a
reduction in demand for its products by the petrochemical, refining or
heating industries;
|
|
·
|
a
decline in the volumes of NGLs delivered by its
facilities;
|
|
·
|
the
failure of its credit risk management efforts to adequately protect it
against customer non-payment;
|
|
·
|
terrorist
attacks aimed at its facilities;
and,
|
|
·
|
the
failure to successfully integrate our operations with companies, if any
that we may acquire in the future.
|
Duncan
Energy Partners has no obligation to publicly update or revise any
forward-looking statement, whether as a result of new information, future events
or otherwise.
|
Contacts:
|
Randy Burkhalter, Investor
Relations, (713) 381-6812, www.deplp.com
|
|
|
Rick
Rainey, Media Relations, (713)
381-3635
|
Exhibit
A
Duncan
Energy Partners L.P.
Statements
of Consolidated Operations – UNAUDITED
For
the Three Months Ended March 31, 2008, Two Months Ended March 31, 2007
and
One
Month Ended January 31, 2007
(Dollars
in thousands, except per unit amounts)
|
Duncan
Energy
|
||||||||||||
|
Duncan
Energy Partners
|
Partners
Predecessor
|
|||||||||||
|
For
the Three
|
For
the Two
|
For
the One
|
||||||||||
|
Months
Ended
|
Months
Ended
|
Month
Ended
|
||||||||||
|
March
31, 2008
|
March
31, 2007
|
January
31, 2007
|
||||||||||
|
Revenue
|
$ | 261,789 | $ | 133,874 | $ | 66,674 | ||||||
|
Costs and
expenses:
|
||||||||||||
|
Operating
costs and expenses
|
245,494 | 124,431 | 61,187 | |||||||||
|
General
and administrative
|
2,125 | 357 | 477 | |||||||||
|
Total
costs and expenses costs
|
247,619 | 124,788 | 61,664 | |||||||||
|
Equity in income of
unconsolidated affiliate
|
158 | 46 | 25 | |||||||||
|
Operating
income
|
14,328 | 9,132 | 5,035 | |||||||||
|
Other income
(expense):
|
||||||||||||
|
Interest
expense
|
(2,768 | ) | (1,131 | ) | -- | |||||||
|
Interest
income
|
100 | 144 | -- | |||||||||
|
Total
other income (expense)
|
(2,668 | ) | (987 | ) | -- | |||||||
|
Income before
provision for income taxes and parent interest
in
|
||||||||||||
|
income of
subsidiaries
|
11,660 | 8,145 | 5,035 | |||||||||
|
Provision
for income taxes
|
(12 | ) | (173 | ) | -- | |||||||
|
Income before parent
interest in income of subsidiaries
|
11,648 | 7,972 | 5,035 | |||||||||
|
Parent
interest in income of subsidiaries (see Exhibit
E)
|
(5,616 | ) | (4,049 | ) | -- | |||||||
|
Net
income
|
$ | 6,032 | $ | 3,923 | $ | 5,035 | ||||||
|
Allocation of net
income to:
|
||||||||||||
|
Limited
partners
|
$ | 5,911 | $ | 3,845 | n/a | |||||||
|
General
partner
|
$ | 121 | $ | 78 | n/a | |||||||
|
Per unit data (fully
diluted):
|
||||||||||||
|
Net
income per unit
|
$ | 0.29 | $ | 0.19 | n/a | |||||||
|
Average
LP units outstanding (in 000s)
|
20,302 | 20,302 | n/a | |||||||||
|
Other financial
data:
|
||||||||||||
|
Net
cash flows provided by (used in) operating activities
|
$ | 21,835 | $ | 48,696 | $ | (3,535 | ) | |||||
|
Net
cash used in investing activities
|
$ | 42,177 | $ | 48,375 | $ | 4,999 | ||||||
|
Net
cash provided by financing activities
|
$ | 32,220 | $ | 3,773 | $ | 8,534 | ||||||
|
Distributable
cash flow
|
$ | 8,890 | $ | 5,603 | n/a | |||||||
|
EBITDA
|
$ | 13,989 | $ | 8,148 | n/a | |||||||
|
Depreciation,
amortization and accretion (100% basis)
|
$ | 7,851 | $ | 4,536 | $ | 2,209 | ||||||
|
Total
debt principal outstanding at end of period
|
$ | 188,000 | $ | 169,000 | n/a | |||||||
|
Capital
spending (100% basis):
|
||||||||||||
|
Capital
expenditures, net of contributions in aid of construction
|
||||||||||||
|
costs,
for property, plant and equipment
|
$ | 41,909 | $ | 48,326 | $ | 4,999 | ||||||
|
Investments
in and advances from unconsolidated affiliate
|
268 | 51 | -- | |||||||||
|
Total
|
$ | 42,177 | $ | 48,377 | $ | 4,999 | ||||||
Exhibit B
Duncan
Energy Partners L.P.
Selected
Financial and Operating Data
For
the Three Months Ended March 31, 2008, Two Months Ended March 31, 2007
and
One
Month Ended January 31, 2007
(Dollars
in thousands, operating data as noted)
|
Duncan
Energy
|
||||||||||||
|
Duncan
Energy Partners
|
Partners
Predecessor
|
|||||||||||
|
For
the Three
|
For
the Two
|
For
the One
|
||||||||||
|
Months
Ended
|
Months
Ended
|
Month
Ended
|
||||||||||
|
March
31, 2008
|
March
31, 2007
|
January
31, 2007
|
||||||||||
|
Gross operating margin
by segment:
|
||||||||||||
|
NGL
and Petrochemical Storage Services
|
$ | 10,167 | $ | 6,680 | $ | 1,770 | ||||||
|
Onshore
Natural Gas Pipelines & Services
|
6,186 | 1,877 | 1,605 | |||||||||
|
Petrochemical
Pipeline Services
|
2,913 | 2,216 | 2,700 | |||||||||
|
NGL
Pipelines & Services
|
4,942 | 3,229 | 1,646 | |||||||||
|
Total
non-GAAP gross operating margin
|
24,208 | 14,002 | 7,721 | |||||||||
|
Adjustments
to reconcile non-GAAP gross operating
|
||||||||||||
|
margin
to GAAP operating income:
|
||||||||||||
|
Depreciation,
amortization and accretion in operating
|
||||||||||||
|
costs
and expenses
|
(7,755 | ) | (4,515 | ) | (2,209 | ) | ||||||
|
Gain
on sale of assets in operating costs and expenses
|
-- | 2 | -- | |||||||||
|
General
and administrative costs
|
(2,125 | ) | (357 | ) | (477 | ) | ||||||
|
Operating
income per GAAP
|
$ | 14,328 | $ | 9,132 | $ | 5,035 | ||||||
|
Selected operating
data:
|
||||||||||||
|
Onshore
Natural Gas Pipelines & Services, net:
|
||||||||||||
|
Natural
gas throughput volumes (BBtus/d)
|
710 | 618 | 701 | |||||||||
|
Petrochemical
Pipeline Services:
|
||||||||||||
|
Petrochemical
transportation volumes (MBPD)
|
40 | 35 | 37 | |||||||||
|
NGL
Pipelines & Services:
|
||||||||||||
|
NGL
transportation volumes (MBPD)
|
72 | 70 | 67 | |||||||||
Exhibit
C
Duncan
Energy Partners L.P.
Reconciliations
of Unaudited Non-GAAP Financial Measures to Our GAAP Financial Measures
–
Distributable
Cash Flow
For
the Three Months Ended March 31, 2008 and Two Months Ended March 31,
2007
(Dollars
in thousands)
The following table presents our
calculation of distributable cash flow for the periods indicated and reconciles
these amounts to net cash flows provided by operating activities for the same
periods.
|
For
the Three
|
For
the Two
|
|||||||
|
Months
Ended
|
Months
Ended
|
|||||||
|
March
31, 2008
|
March
31, 2007
|
|||||||
|
Net
income
|
$ | 6,032 | $ | 3,923 | ||||
|
Adjustments
to derive distributable cash flow
|
||||||||
|
(add
or subtract as indicated by sign of number):
|
||||||||
|
Amortization
in interest expense
|
32 | 21 | ||||||
|
Depreciation,
amortization and accretion in costs and expenses
|
7,819 | 4,515 | ||||||
|
Deferred
income tax expense
|
(21 | ) | (21 | ) | ||||
|
Equity
in income of unconsolidated affiliate
|
(158 | ) | (46 | ) | ||||
|
Gain
on sale of assets
|
-- | (2 | ) | |||||
|
Proceeds
from sale of assets
|
-- | 2 | ||||||
|
Sustaining
capital expenditures
|
(3,351 | ) | (1,921 | ) | ||||
|
Changes
in fair market value of financial instruments
|
10 | (2 | ) | |||||
|
Parent
34% interest in adjustments to determine distributable cash
flow
|
(1,473 | ) | (866 | ) | ||||
|
Distributable
cash flow
|
8,890 | 5,603 | ||||||
|
Adjustments
to distributable cash flow to derive net cash flows provided
by
|
||||||||
|
operating
activities (add or subtract as indicated by sign of
number):
|
||||||||
|
Proceeds
from sale of assets
|
-- | (2 | ) | |||||
|
Sustaining
capital expenditures
|
3,351 | 1,921 | ||||||
|
Parent
interest in income of subsidiaries
|
5,616 | 4,049 | ||||||
|
Parent
34% interest in adjustments to derive distributable cash flow (see
above)
|
1,473 | 866 | ||||||
|
Net
effect of changes in operating accounts
|
2,505 | 36,259 | ||||||
|
Net
cash flows provided by operating activities
|
$ | 21,835 | $ | 48,696 | ||||
Exhibit
D
Duncan
Energy Partners L.P.
Reconciliations
of Unaudited Non-GAAP Financial Measures to Our GAAP Financial Measures –
EBITDA
For
the Three Months Ended March 31, 2008 and Two Months Ended March 31,
2007
(Dollars
in thousands)
The following tables presents our
calculation of EBITDA for the periods indicated and reconciles these amounts to
net cash flows provided by operating activities for the same
periods.
|
For
the Three
|
For
the Two
|
|||||||
|
Months
Ended
|
Months
Ended
|
|||||||
|
March
31, 2008
|
March
31, 2007
|
|||||||
|
Net
income
|
$ | 6,032 | $ | 3,923 | ||||
|
Additions
to net income (net of Parent Interest in subsidiary
amounts)
|
||||||||
|
to
derive EBITDA:
|
||||||||
|
Interest
expense (including related amortization), net
|
2,767 | 1,131 | ||||||
|
Provision
for income taxes, net
|
8 | 115 | ||||||
|
Depreciation,
amortization and accretion in costs and expenses, net
|
5,182 | 2,979 | ||||||
|
EBITDA
|
13,989 | 8,148 | ||||||
|
Adjustments
to EBITDA to derive net cash flows provided by operating
|
||||||||
|
activities
(add or subtract as indicated by sign of number):
|
||||||||
|
Interest
expense, net
|
(2,767 | ) | (1,131 | ) | ||||
|
Provision
for income taxes, net
|
(8 | ) | (115 | ) | ||||
|
Depreciation,
amortization and accretion in costs and expenses not
|
||||||||
|
reflected
in EBITDA
|
2,637 | 1,536 | ||||||
|
Equity
in income of unconsolidated affiliate
|
(158 | ) | (46 | ) | ||||
|
Amortization
in interest expense
|
32 | 21 | ||||||
|
Deferred
income tax expense
|
(21 | ) | (21 | ) | ||||
|
Parent
interest in income of subsidiaries
|
5,616 | 4,049 | ||||||
|
Gain
on sale of assets
|
-- | (2 | ) | |||||
|
Changes
in fair market value of financial instruments
|
10 | (2 | ) | |||||
|
Net
effect of changes in operating accounts
|
2,505 | 36,259 | ||||||
|
Net
cash flows provided by operating activities
|
$ | 21,835 | $ | 48,696 | ||||
Exhibit
E
Duncan
Energy Partners L.P.
Parent
Interest Calculations
For
the Three Months Ended March 31, 2008 and Two Months Ended March 31,
2007
(Dollars
in thousands)
In connection with our initial
public offering in February 2007, Enterprise Products Operating LLC (“EPO”)
contributed a 66% equity interest in Mont Belvieu Caverns, Acadian Gas, Lou-Tex
Propylene, Sabine Propylene and South Texas NGL to us. EPO
retained the remaining 34% equity interest in each of these
entities. We account for EPO’s share of our subsidiaries’ net assets
and income as Parent interest in a manner similar to minority interest. The
following table presents our calculation of the Parent’s interest in the income
of our subsidiaries for the periods indicated:
|
For
The Three
|
For
the Two
|
|||||||||||||||
|
Months
Ended
|
Months
Ended
|
|||||||||||||||
|
March
31, 2008
|
March
31, 2007
|
|||||||||||||||
|
Net
income amounts:
|
||||||||||||||||
|
Mont
Belvieu Caverns’ net income (before special allocation of
|
||||||||||||||||
|
operational
measurement gains and losses)
|
$ |
5,547
|
$ |
4,554
|
||||||||||||
|
Deduct
operational measurement gain allocated to Parent
|
(824)
|
$ | 824 |
(1,327)
|
$ | 1,327 | ||||||||||
|
Remaining
Mont Belvieu Caverns’ net income to allocate to partners
|
4,723
|
3,227
|
||||||||||||||
|
Multiplied
by Parent 34% interest in remaining net income
|
x 34%
|
x 34%
|
||||||||||||||
|
Mont
Belvieu Caverns’ net income allocated to Parent
|
$ |
1,606
|
1,606 | $ |
1,097
|
1,097 | ||||||||||
|
Acadian
Gas net income multiplied by Parent 34% interest
|
1,213 | 217 | ||||||||||||||
|
Lou-Tex
Propylene net income multiplied by Parent 34% interest
|
618 | 505 | ||||||||||||||
|
Sabine
Propylene net income multiplied by Parent 34% interest
|
90 | 55 | ||||||||||||||
|
South
Texas NGL net income multiplied by Parent 34% interest
|
1,265 | 848 | ||||||||||||||
|
Parent
interest in income of subsidiaries
|
$ | 5,616 | $ | 4,049 | ||||||||||||