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 (Date of earliest event reported): February 24, 2009
DCP
MIDSTREAM PARTNERS, LP
(Exact
name of registrant as specified in its charter)
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DELAWARE
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001-32678
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03-0567133
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(State
or other jurisdiction of
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(Commission
File Number)
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(IRS
Employer
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incorporation)
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Identification
No.)
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370
17th Street, Suite 2775
Denver,
Colorado 80202
(Address
of principal executive offices) (Zip Code)
Registrant’s
telephone number, including area code (303) 633-2900
(Former
name or former address, if changed since last report.)
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:
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£
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Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
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£
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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£
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
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£
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
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Item
1.01 Entry into a Material Definitive Agreement.
On February 24, 2009, DCP
Midstream Partners, LP (the “Partnership”) entered into a Contribution Agreement
(the “Contribution Agreement”) with DCP Midstream, LLC (“DCP LLC”) and two of
its wholly-owned subsidiaries, DCP LP Holdings, LLC (“Holdings”) and DCP
Midstream GP, LP (“DCP GP” and, collectively with DCP LLC and Holdings, “DCP”).
Pursuant to the Contribution Agreement, DCP will contribute limited liability
company interests representing an additional 25.1% interest in DCP East Texas
Holdings, LLC (“East Texas”) to the Partnership in exchange for the issuance of
3.5 million Class D Units (as defined below) of the Partnership as described
below in further detail (the “Transaction”). The closing of the Transaction is
subject to satisfaction of standard closing conditions for this type of
transaction, including termination of any waiting period under applicable
antitrust laws. The Transaction is expected to close in April, 2009, subject to
extension by Holdings for up to 45 days for the purpose of repairing or
replacing to the reasonable satisfaction of the Partnership any assets destroyed
or damaged by certain casualty losses as defined in the Contribution
Agreement.
As mentioned above, at the closing of
the Transaction the Partnership will issue an aggregate of 3.5 million Class D
Units representing limited partnership interests in the Partnership (the “Class
D Units”) to Holdings and DCP GP, pursuant to an amendment to the Partnership’s
Second Amended and Restated Agreement of Limited Partnership (the “Partnership
Agreement”). The Class D Units will not be entitled to receive
distributions of Available Cash (as defined in the Partnership Agreement) with
respect to any record date declared therefor prior to May 18, 2009, and will be
entitled to receive distributions of Available Cash with respect to any record
date declared therefor on or after May 18, 2009 and before August 17, 2009
only with respect to the actual number of days during the second fiscal quarter
of the Partnership that the Class D Units are issued and outstanding. The
Class D Units will otherwise generally have the same rights as the
Partnership’s outstanding common units, and they will convert into the
Partnership’s common units on a one-to-one basis on August 17, 2009. The
Class D Units will be issued at closing in a private placement with Holdings and
DCP GP in reliance upon an exemption from the registration requirements of the
Securities Act of 1933, as amended, pursuant to Section 4(2) thereof and the
safe harbor provided by Rule 506 of Regulation D promulgated
thereunder.
DCP LLC currently owns directly or
indirectly (i) 100% of DCP Midstream GP, LLC, the general partner of DCP GP,
which is the Partnership’s general partner, (ii) 100% of Holdings, and (iii)
100% of DCP GP. Accordingly, the conflicts committee of DCP GP’s Board of
Directors recommended approval of the Transaction. The conflicts committee, a
committee of independent members of DCP GP’s Board of Directors, retained
independent legal and financial advisors to assist it in evaluating and
negotiating the Transaction. In recommending approval of the Transaction, the
conflicts committee based its decision in part on an opinion from the
independent financial advisor that the consideration to be paid by the
Partnership is fair, from a financial point of view, to the Partnership and its
unitholders.
The foregoing description of the
Contribution Agreement is not complete and is qualified in its entirety by
reference to the complete terms of the Contribution Agreement, which is expected
to be filed as an exhibit to the Partnership’s Form 10-K to be filed for its
fiscal year ended December 31, 2008. Investors and other interested
parties are urged to read the full text of the Contribution Agreement when it
becomes available.
Item 2.02 Results of Operations and
Financial Condition.
On
February 25, 2009, the Partnership announced its financial results for the
fourth quarter of 2008 and year end results for 2008 pursuant to a press
release. A copy of the press release is furnished as Exhibit 99.1 to this
Current Report on Form 8-K, and is incorporated herein by
reference.
In
accordance with General Instruction B.2 of Form 8-K, the press release shall not
be deemed “filed” for the purpose of Section 18 of the Exchange Act of 1934, as
amended, or otherwise subject to the liabilities of that section, nor shall such
information and Exhibit be deemed incorporated by reference into any filing
under the Securities Act of 1933 or Exchange Act of 1934, each as amended,
except as shall be expressly set forth by specific reference in such
filing.
Item
3.02 Unregistered Sales of Equity Securities
The information required under this
Item 3.02 regarding the Class D Units is incorporated herein by reference to the
relevant information provided under Item 1.01.
2
Item
7.01 Regulation FD Disclosure
On February 25, 2009, the Partnership
included in its press release announcing its financial results for the fourth
quarter and year ended December 31, 2008 an announcement regarding the execution
of the Contribution Agreement. A copy of the press release is furnished as
Exhibit 99.1 to this Current Report on Form 8-K, and is incorporated herein by
reference.
Item 9.01 Financial Statements and
Exhibits.
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(d)
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Exhibits.
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Exhibit Number
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Description
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Exhibit
99.1
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Press
Release dated February 25,
2009
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3
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.
| DCP MIDSTREAM PARTNERS, LP | |||
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By:
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DCP MIDSTREAM GP, LP | ||
| its General Partner | |||
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By:
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DCP MIDSTREAM GP, LLC | ||
| its General Partner | |||
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By:
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/s/ Michael S. Richards | ||
| Name: Michael S. Richards | |||
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Title:
Vice President, General Counsel and Secretary
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February
25, 2009
4
EXHIBIT
INDEX
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Exhibit Number
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Description
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Exhibit
99.1
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Press
Release dated February 25,
2009
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5
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February
25, 2009
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MEDIA
AND INVESTOR RELATIONS CONTACT:
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Karen
L. Taylor
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Phone:
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303/633-2913
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24-Hour:
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303/809-9160
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DCP
MIDSTREAM PARTNERS REPORTS
FOURTH
QUARTER AND YEAR END 2008 RESULTS
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Signed Acquisition Agreement to
Acquire Additional 25.1 Percent Interest in East Texas Joint Venture from
DCP Midstream
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Discovery and Wyoming Systems
Returning to Full Service
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DENVER –
DCP Midstream Partners, LP (NYSE: DPM), or the Partnership, today reported
financial results for the three and twelve months ended December 31,
2008.
FOURTH
QUARTER AND YEAR END HIGHLIGHTS
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Three
Months Ended
December
31,
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Year
Ended
December
31,
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2008
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2007
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2008
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2007
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(unaudited)
(Millions,
except per unit amounts)
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Net
income (loss)
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$ | 141.3 | $ | (39.9 | ) | $ | 128.2 | $ | (15.8 | ) | ||||||
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Net
income (loss) per unit
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$ | 2.77 | $ | (1.69 | ) | $ | 3.29 | $ | (1.05 | ) | ||||||
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Adjusted
EBITDA
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$ | 13.6 | $ | 37.7 | $ | 90.4 | $ | 110.3 | ||||||||
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Adjusted
net (loss) income
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$ | (4.3 | ) | $ | 21.3 | $ | 27.2 | $ | 65.3 | |||||||
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Adjusted
net (loss) income per unit
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$ | (0.25 | ) | $ | 0.81 | $ | 0.61 | $ | 2.86 | |||||||
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Distributable
cash flow
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$ | 12.9 | $ | 24.9 | $ | 80.3 | $ | 86.4 | ||||||||
Adjusted
EBITDA was $13.6 million for the three months ended December 31, 2008, as
compared to $37.7 million for the same period in 2007. The decrease for the
fourth quarter was primarily due to the impact of hurricane Ike, a non-cash
write down of inventory for our wholesale propane business and lower commodity
prices, partially offset by earnings from our Michigan
acquisition. Adjusted EBITDA for 2008 was $90.4 million compared to
$110.3 million for 2007. The decrease for the year is primarily due
to the impact of hurricanes Gustav and Ike and non-cash write downs of inventory
for our wholesale propane business, partially offset by acquisitions closed
during 2007 and 2008.
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Adjusted
EBITDA, adjusted net income or loss and adjusted net income or loss per unit,
which are non-generally accepted accounting principles (“non-GAAP”) financial
measures, eliminate the impact of non-cash mark-to-market gains and losses which
arise from valuing certain of the Partnership’s derivative transactions. Each
are explained in greater detail under “Non-GAAP Financial Information” below and
are reconciled to their most comparable GAAP financial measures, in
“Reconciliation of Non-GAAP Measures” below.
DISTRIBUTION
AND DISTRIBUTABLE CASH FLOW
On
February 13, 2009, the Partnership paid a quarterly distribution of $0.60 per
limited partner unit. Distributable cash flow was $12.9 million for
the three months ended December 31, 2008. For the twelve months ended
December 31, 2008, our distributable cash flow of $80.3 million provided 1.0
times the amount required to cover our total distribution. In addition to the
impacts affecting adjusted EBITDA from the hurricanes, non-cash write down of
propane inventory and lower commodity prices, distributable cash flow was
impacted by the maintenance capital related to the pipeline integrity and system
enhancements on our Wyoming system. Distributions for our 40 percent
interest in Discovery are paid one quarter in arrears. As a result,
distributable cash flow for the fourth quarter and the year ended December 31,
2008, was only impacted by third quarter operating results related to the
hurricanes.
Distributable
cash flow, which is a non-GAAP financial measure, is explained in greater detail
under “Non-GAAP Financial Information” below and is reconciled from net income
or loss and from net cash provided by or used in operating activities, its most
comparable GAAP financial measures, in “Reconciliation of Non-GAAP Measures”
below. Non-cash gains or losses associated with the mark-to-market
accounting treatment of our commodity derivative instruments do not affect our
distributable cash flow.
CEO
PERSPECTIVE
“We
remain focused on the fundamentals of our business,” said Mark Borer, president
and CEO of the Partnership. “During the fourth quarter we laid out a
plan to support our distribution, reinforced by the strength of our diverse
portfolio of assets, our multi-year commodity hedging program, and strong
commitment to our long term success by the owner of our general partner, DCP
Midstream. As part of our plan, DCP Midstream will drop down an
additional 25.1 percent interest in our East Texas joint venture in
April.”
“Operationally,
we are pleased to report our new Michigan gas gathering, treating and
transportation assets are performing according to our expectations, contributing
fee-based revenues to our cash flow,” continued Borer. “The majority
of volumes on our Discovery offshore pipeline and Wyoming system are currently
flowing and we expect the remainder to return upon completion of all repairs in
early March.”
ACQUISITION
AGREEMENT FOR 25.1 PERCENT INTEREST IN EAST TEXAS JOINT VENTURE FROM DCP
MIDSTREAM
The
Partnership announced today it has signed an acquisition agreement to acquire an
additional 25.1 percent interest in DCP East Texas Holdings, LLC from DCP
Midstream. The transaction, which is expected to close in April, will
be fully financed through the issuance of Partnership units to DCP
Midstream. Upon closing, the Partnership will own 50.1 percent of the
joint venture, with DCP Midstream owning the remaining interest.
Transaction
Details
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DCP
Midstream will contribute a 25.1 percent interest in exchange for 3.5
million Class D units. The Class D units will automatically convert into
Common Units in August 2009 and will not be eligible to receive a
distribution until the second quarter distribution payable in August
2009.
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DCP
Midstream has agreed to provide a fixed price natural gas liquids (NGL)
hedge by NGL component for the period of April 2009 to March 2010 for the
acquired interest.
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The
additional interest, including the NGL hedge, is expected to generate
approximately $15 million of adjusted EBITDA during the first twelve
months.
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“This
transaction will be immediately accretive and provides us with an attractive
source of long term cash flows in a dynamic area where we see promise for
continued growth from the emerging Haynesville Shale play,” said Mark Borer.
“Moreover, this transaction underscores DCP Midstream’s long term commitment to
the Partnership.”
The East
Texas joint venture includes a 780 million cubic feet per day (MMcfd) processing
complex, approximately 900 miles of gathering pipelines, 25,000 horsepower of
compression, and the Carthage Hub, a key exchange point for the purchase and
sale of residue gas with aggregate delivery capacity of 1.5 billion cubic feet
per day.
ASSETS
RETURNING TO FULL SERVICE
Remaining
volumes on our Discovery offshore gathering system are expected to be returned
in early March. Discovery’s offshore gathering system had been
damaged by hurricane Ike in September 2008 when an 18-inch lateral was severed
from its connection to the 30-inch mainline in 250 feet of water. Repairs were
completed on the 30-inch mainline in January, restoring approximately 150 MMcfd
to the system. With the completion of the 18-inch lateral repairs,
the remaining approximately 30 MMcfd of volume will be restored.
The final
phase of the pipeline integrity and system enhancement project on our Wyoming
gas gathering system is on schedule to be completed in early March, returning
the system to full service. As previously announced, volumes were
curtailed in the second quarter of 2008 following pipeline integrity
testing. The second phase of the project was completed in early
January, returning approximately 80 percent of the system capacity to
service. The system upgrade project was conducted to assure pipeline
integrity, improve system reliability and reduce operating costs.
OPERATING
RESULTS BY BUSINESS SEGMENT
Natural Gas Services —
Adjusted segment gross margin increased $5.2 million to $34.0 million for the
three months ended December 31, 2008, from $28.8 million for the same period in
2007, primarily due to growth from our Michigan acquisition and at our Collbran
asset, partially offset by lower commodity prices.
Adjusted
segment gross margin increased $12.8 million to $107.3 million for the year
ended December 31, 2008, from $94.5 million for the same period in 2007,
primarily due to growth from acquisitions closed in 2007 and 2008, partially
offset by hedge settlements for East Texas and Discovery for the first nine
months of 2008 and curtailed volumes on our Douglas system in Wyoming during
pipeline integrity and system enhancement work.
Equity
earnings representing our 25 percent interest in East Texas and 40 percent
interest in Discovery represented a loss of $4.3 million for the three months
ended December 31, 2008, as compared to earnings of $16.1 million for the same
period in 2007. Decreased earnings were primarily due to Discovery’s
hurricane-related outage and the impact of decreased commodity prices on our
margins. Hedge settlements related to our commodity derivatives on our equity
investments are included in adjusted segment gross margin.
Equity
earnings were $33.5 million for the year ended December 31, 2008, as compared to
$38.7 million for the same period in 2007. Decreased earnings were primarily the
result of Discovery’s hurricane-related outage.
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Wholesale Propane Logistics —
Adjusted segment gross margin was a loss of $0.6 million for the three months
ended December 31, 2008 as compared to adjusted segment gross margin of $10.3
million for the same period in 2007. Adjusted segment gross margin was $8.6
million for the year ended December 31, 2008 and $28.3 million for the year
ended December 31, 2007. For the three months and year ended December 31, 2008,
we recorded non-cash adjustments reducing adjusted segment gross margin by
approximately $11.9 million and $15.1 million, respectively, as compared to the
same periods in 2007, to reflect inventory carrying costs at the lower of cost
or market price. The inventory write downs are generally recovered at
the time of the sale of the inventory. We estimate approximately half
of the 2008 write downs were recovered through the sale of inventory in
2008.
NGL Logistics — Segment gross
margin was $1.7 million for the three months ended December 31, 2008, as
compared to segment gross margin of $1.2 million for the same period in 2007,
primarily due to increased throughput volumes on the Wilbreeze pipeline,
partially offset by lower throughput volumes on the Seabreeze
pipeline. Segment gross margin was $7.1 million for the year ended
December 31, 2008, and $4.9 million for the year ended December 31, 2007,
primarily due to increased throughput volumes.
Segment
gross margin and adjusted segment gross margin, which are non-GAAP financial
measures, are explained in greater detail under “Non-GAAP Financial Information”
below and are reconciled from segment net (loss) income, their most comparable
GAAP financial measure, in “Reconciliation of Non-GAAP Measures”
below.
CORPORATE
AND OTHER
General
and administrative expense decreased by $2.3 million for the three months and
$2.6 million for the year ended December 31, 2008, primarily due to decreased
compensation and benefits expenses and acquisition related costs.
Depreciation
and amortization expense increased for the three months and year ended December
31, 2008, as compared to the same periods in 2007, primarily as a result of
acquisitions in 2007 and 2008.
Net
interest expense increased for the three months and year ended December 31,
2008, as compared to the same periods in 2007, primarily due to acquisitions in
2007 and 2008, partially offset by lower average interest rates.
COMMODITY
DERIVATIVE ACTIVITY
We
utilize mark-to-market accounting treatment for our commodity derivative
instruments. Mark-to-market accounting rules require companies to record
currently in earnings the difference between their contracted future derivative
settlement prices and the forward prices of the underlying commodities at the
end of the accounting period. Revaluing our commodity derivative instruments
based on futures pricing at the end of the period creates an asset or liability
and associated non-cash gain or loss. Realized gains or losses from cash
settlement of the derivative contracts occur monthly as our physical commodity
sales are realized or when we rebalance our portfolio.
Due
primarily to a large decrease in forward crude oil and natural gas prices in the
fourth quarter of 2008, we recorded a non-cash gain associated with our
commodity derivative instruments of $146.0 million, as compared to a non-cash
loss of $61.2 million for the fourth quarter of 2007. For the year ended
December 31, 2008, we recorded a non-cash gain of $101.6 million, as compared to
a non-cash loss of $81.1 million for same period in 2007. While our
earnings will continue to fluctuate as a result of the volatility in the
commodity markets, our derivative contracts help to stabilize distributable cash
flows.
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CAPITALIZATION
Our
credit facility of $825 million is comprised of a revolver and term loan that
mature in June 2012. At December 31, 2008, we had $596.5 million
outstanding under our revolver. We also had $60 million of term loan
outstanding, fully secured by $60 million of restricted investments serving as
collateral. Due to the fully secured status of the term loan, balances
outstanding are netted from total long-term debt to calculate our leverage
ratio. Our leverage ratio pursuant to our credit facility for the
quarter ended December 31, 2008, was approximately 3.9x.
Our
liquidity is comprised of available capacity under our revolver and the
collateral securing our term loan that may be used to fund organic capital
expenditures or acquisitions. Our available liquidity at December 31,
2008, was $228 million.
We
mitigate a substantial portion of our interest rate risk with interest rate
swaps which reduce our exposure to market rate fluctuations by converting
variable interest rates to fixed interest rates. As of December 31, 2008, we had
$575 million of our revolver debt converted to fixed rates through June
2012. Our weighted average cost of debt under our revolving credit
facility as of December 31, 2008, was 4.5 percent.
OTHER
We are
currently in litigation with El Paso E&P Company concerning a commercial
dispute involving our Minden, Louisiana processing plant. Some of El
Paso’s claims date back to a time period which is prior to our
ownership. This litigation is currently in trial before a jury in
Harris County, Texas. The outcome of this trial may occur soon and we
will provide an update upon that occurrence. Nevertheless, we dispute
El Paso’s claim and we will continue to vigorously defend ourselves in this
action.
EARNINGS
CALL
DCP
Midstream Partners will hold a conference call to discuss fourth quarter and
year end results on Thursday, February 26, 2009, at 11 a.m. ET. The dial-in
number for the call is 800-860-2442 in the United States or 412-858-4600 outside
the United States. A live Webcast of the call can be accessed on the investor
information page of DCP Midstream Partners’ Web site at http://www.dcppartners.com.
The call will be available for replay until April 24, 2009, by dialing
877-344-7529, in the United States or 412-317-0088 outside the United States.
The passcode is 426824. A replay and transcript of the broadcast will also be
available on the Partnership’s Web site.
NON-GAAP
FINANCIAL INFORMATION
This
press release and the accompanying financial schedules include the non-GAAP
financial measures of distributable cash flow, EBITDA, adjusted EBITDA, adjusted
net income or loss, adjusted net income or loss per unit, gross margin, segment
gross margin and adjusted segment gross margin. The accompanying schedules
provide reconciliations of these non-GAAP financial measures to their most
directly comparable financial measures calculated and presented in accordance
with accounting principles generally accepted in the United States of America,
or GAAP. Our non-GAAP financial measures should not be considered an alternative
to, or more meaningful than, net income or loss, operating income, cash flows
from operating activities or any other measure of liquidity or financial
performance presented in accordance with GAAP as measures of operating
performance, liquidity or ability to service debt obligations and make cash
distributions to unitholders. Our distributable cash flow, EBITDA, adjusted
EBITDA, adjusted net income or loss, adjusted net income or loss per unit, gross
margin, segment gross margin and adjusted segment gross margin may not be
comparable to a similarly titled measure of another company because other
entities may not calculate these measures in the same manner.
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We define
distributable cash flow as net cash provided by or used in operating activities,
less maintenance capital expenditures, net of reimbursable projects, plus or
minus adjustments for non-cash mark-to-market of derivative instruments,
proceeds from divestiture of assets, non-controlling interest on depreciation,
net changes in operating assets and liabilities, and other adjustments to
reconcile net cash provided by or used in operating activities. Maintenance
capital expenditures are capital expenditures made where we add on to or improve
capital assets owned, or acquire or construct new capital assets, if such
expenditures are made to maintain, including over the long term, our operating
capacity. Non-cash mark-to-market of derivative instruments is considered to be
non-cash for the purpose of computing distributable cash flow because settlement
will not occur until future periods, and will be impacted by future changes in
commodity prices. Distributable cash flow is used as a supplemental liquidity
measure by our management and by external users of our financial statements,
such as investors, commercial banks, research analysts and others, to assess our
ability to make cash distributions to our unitholders and our general
partner.
We define
EBITDA (earnings before interest, taxes, depreciation and amortization) as net
income or loss less interest income, plus interest expense, income tax expense
and depreciation and amortization expense. We define adjusted EBITDA as EBITDA
plus non-cash commodity derivative losses, less non-cash commodity derivative
gains. These non-cash losses and gains result from the marking to market of
certain financial derivatives used by the Partnership for risk management
purposes that we do not account for under the hedge method of accounting. These
non-cash losses or gains may or may not be realized in future periods when the
derivative contracts are settled, due to fluctuating commodity
prices.
EBITDA
and adjusted EBITDA are used as supplemental liquidity and performance measures
by our management and by external users of our financial statements, such as
investors, commercial banks, research analysts and others, to
assess:
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the
ability of our assets to generate cash sufficient to pay interest costs,
support our indebtedness, make cash distributions to our unitholders and
general partner, and finance maintenance
expenditures;
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financial
performance of our assets without regard to financing methods, capital
structure or historical cost basis;
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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
methods or capital structure; and
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viability
of acquisitions and capital expenditure projects and the overall rates of
return on alternative investment
opportunities.
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We define
adjusted net income or loss as net income or loss, plus non-cash derivative
losses, less non-cash derivative gains. These non-cash derivative losses and
gains result from the marking to market of certain financial derivatives used by
the Partnership for risk management purposes that we do not account for under
the hedge method of accounting. Adjusted net income or loss is provided to
illustrate trends in income excluding these non-cash derivative losses or gains,
which may or may not be realized in future periods when derivative contracts are
settled, due to fluctuating commodity prices.
We define
gross margin as total operating revenues less purchases of natural gas, propane
and NGLs, and we define segment gross margin for each segment as total operating
revenues for that segment less commodity purchases for that segment. Our gross
margin equals the sum of our segment gross margins. We define adjusted segment
gross margin as segment gross margin plus non-cash derivative losses, less
non-cash derivative gains for that segment. Gross margin, segment gross margin
and adjusted segment gross margin are primary performance measures used by
management, as these measures represent the results of product sales and
purchases, a key component of our operations.
DCP Midstream Partners, LP
(NYSE: DPM) is a midstream master limited partnership that gathers, processes,
transports and markets natural gas and natural gas liquids and is a leading
wholesale distributor of propane. DCP Midstream Partners, LP is managed
by its general partner, DCP Midstream GP, LLC, which is wholly owned by DCP
Midstream, LLC, a joint venture between Spectra Energy and ConocoPhillips. For
more information, visit the DCP Midstream Partners, LP Web site at http://www.dcppartners.com.
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This
press release may contain or incorporate by reference forward-looking statements
as defined under the federal securities laws regarding DCP Midstream Partners,
LP, including projections, estimates, forecasts, plans and objectives. Although
management believes that expectations reflected in such forward-looking
statements are reasonable, no assurance can be given that such expectations will
prove to be correct. In addition, these statements are subject to certain risks,
uncertainties and other assumptions that are difficult to predict and may be
beyond our control. If one or more of these risks or uncertainties materialize,
or if underlying assumptions prove incorrect, the Partnership’s actual results
may vary materially from what management anticipated, estimated, projected or
expected. Among the key risk factors that may have a direct bearing on the
Partnership’s results of operations and financial condition are:
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the extent of changes in
commodity prices, our ability to effectively limit a portion of the
adverse impact of potential changes in prices through derivative financial
instruments, and the potential impact of price on natural gas drilling,
demand for our services, and the volume of NGLs and condensate
extracted;
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general economic, market and
business conditions;
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the level and success of
natural gas drilling around our assets, and our ability to connect
supplies to our gathering and processing systems in light of
competition;
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|
our ability to grow through
acquisitions, contributions from affiliates or organic growth projects,
and the successful integration and future performance of such
assets;
|
|
|
·
|
our ability to access the debt
and equity markets;
|
|
|
·
|
our ability to purchase
propane from our principal suppliers for our wholesale propane logistics
business;
|
|
|
·
|
the credit worthiness of
counterparties to our transactions; and
|
|
|
·
|
the amount of collateral we
may be required to post from time to time in our
transactions.
|
Investors
are encouraged to closely consider the disclosures and risk factors contained in
the Partnership’s annual and quarterly reports filed from time to time with the
Securities and Exchange Commission. The Partnership undertakes no obligation to
publicly update or revise any forward-looking statements, whether as a result of
new information, future events or otherwise. Information contained in this press
release is unaudited, and is subject to change.
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more -
7
FINANCIAL
RESULTS AND
SUMMARY
BALANCE SHEET DATA
(Unaudited)
|
Three
Months Ended
December
31,
|
Year
Ended
December
31,
|
|||||||||||||||
|
2008
|
2007
|
2008
|
2007
|
|||||||||||||
|
(Millions,
except per unit amounts)
|
||||||||||||||||
|
Sales
of natural gas, propane, NGLs and condensate
|
$ | 203.9 | $ | 321.5 | $ | 1,156.3 | $ | 925.8 | ||||||||
|
Transportation,
processing and other
|
17.5 | 11.4 | 57.2 | 35.1 | ||||||||||||
|
Gains
(losses) from commodity derivative activity, net
|
154.0 | (66.5 | ) | 72.3 | (87.6 | ) | ||||||||||
|
Total
operating revenues
|
375.4 | 266.4 | 1,285.8 | 873.3 | ||||||||||||
|
Purchases
of natural gas, propane and NGLs
|
194.3 | 287.3 | 1,061.2 | 826.7 | ||||||||||||
|
Gross
margin
|
181.1 | (20.9 | ) | 224.6 | 46.6 | |||||||||||
|
Operating
and maintenance expense
|
(11.2 | ) | (11.1 | ) | (43.0 | ) | (32.1 | ) | ||||||||
|
General
and administrative expense
|
(4.7 | ) | (7.0 | ) | (21.5 | ) | (24.1 | ) | ||||||||
|
Other
|
—
|
— | 1.5 | — | ||||||||||||
|
(Losses)
earnings from equity method investments
|
(4.4 | ) | 15.7 | 34.3 | 39.3 | |||||||||||
|
Non-controlling
interest in income
|
(1.2 | ) | (0.2 | ) | (3.9 | ) | (0.5 | ) | ||||||||
|
EBITDA
|
159.6 | (23.5 | ) | 192.0 | 29.2 | |||||||||||
|
Depreciation
and amortization expense
|
(10.2 | ) | (8.6 | ) | (36.5 | ) | (24.4 | ) | ||||||||
|
Interest
income
|
0.5 | 1.6 | 5.6 | 5.3 | ||||||||||||
|
Interest
expense
|
(8.5 | ) | (9.3 | ) | (32.8 | ) | (25.8 | ) | ||||||||
|
Income
tax expense
|
(0.1 | ) | (0.1 | ) | (0.1 | ) | (0.1 | ) | ||||||||
|
Net
income (loss)
|
$ | 141.3 | $ | (39.9 | ) | $ | 128.2 | $ | (15.8 | ) | ||||||
|
Less:
|
||||||||||||||||
|
Net
income attributable to predecessor operations
|
— | — | — | (3.6 | ) | |||||||||||
|
General
partner interest in net income or net loss
|
(4.8 | ) | (0.7 | ) | (11.9 | ) | (2.2 | ) | ||||||||
|
Net
income (loss) allocable to limited partners
|
$ | 136.5 | $ | (40.6 | ) | $ | 116.3 | $ | (21.6 | ) | ||||||
|
Net
income (loss) per limited partner unit—basic and diluted
|
$ | 2.77 | $ | (1.69 | ) | $ | 3.29 | $ | (1.05 | ) | ||||||
|
Weighted-average
limited partner units outstanding—basic and diluted
|
28.2 | 24.0 | 27.4 | 20.5 | ||||||||||||
|
December
31,
2008
|
December
31,
2007
|
|||||||
|
(Millions)
|
||||||||
|
Cash
and cash equivalents
|
$ | 48.0 | $ | 24.5 | ||||
|
Other
current assets
|
117.2 | 194.0 | ||||||
|
Restricted
investments (a)
|
60.2 | 100.5 | ||||||
|
Property,
plant and equipment, net
|
629.3 | 500.7 | ||||||
|
Other
assets
|
325.3 | 301.0 | ||||||
|
Total
assets
|
$ | 1,180.0 | $ | 1,120.7 | ||||
|
Current
liabilities
|
$ | 122.3 | $ | 219.6 | ||||
|
Long-term
debt (a)
|
656.5 | 630.0 | ||||||
|
Other
liabilities
|
34.9 | 75.8 | ||||||
|
Non-controlling
interests
|
34.7 | 26.9 | ||||||
|
Total
partners’ equity
|
331.6 | 168.4 | ||||||
|
Total
liabilities and partners’ equity
|
$ | 1,180.0 | $ | 1,120.7 | ||||
|
(a)
|
Long-term
debt includes $60.0 million and $100.0 million outstanding on the term
loan portion of our credit facility as of December 31, 2008 and 2007,
respectively. These amounts are fully secured by restricted
investments.
|
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more -
8
DCP
MIDSTREAM PARTNERS, LP
RECONCILIATION
OF NON-GAAP MEASURES
(Unaudited)
|
Three
Months Ended
December
31,
|
Year
Ended
December
31,
|
|||||||||||||||
|
2008
|
2007
|
2008
|
2007
|
|||||||||||||
|
(Millions,
except per unit amounts)
|
||||||||||||||||
|
Reconciliation
of Non-GAAP Measures:
|
||||||||||||||||
|
Net
income (loss)
|
$ | 141.3 | $ | (39.9 | ) | $ | 128.2 | $ | (15.8 | ) | ||||||
|
Interest
income
|
(0.5 | ) | (1.6 | ) | (5.6 | ) | (5.3 | ) | ||||||||
|
Interest
expense
|
8.5 | 9.3 | 32.8 | 25.8 | ||||||||||||
|
Depreciation
and amortization expense
|
10.2 | 8.6 | 36.5 | 24.4 | ||||||||||||
|
Income
tax expense
|
0.1 | 0.1 | 0.1 | 0.1 | ||||||||||||
|
EBITDA
|
159.6 | (23.5 | ) | 192.0 | 29.2 | |||||||||||
|
Non-cash
commodity derivative mark-to-market
|
(146.0 | ) | 61.2 | (101.6 | ) | 81.1 | ||||||||||
|
Adjusted
EBITDA
|
13.6 | 37.7 | 90.4 | 110.3 | ||||||||||||
|
Interest
income
|
0.5 | 1.6 | 5.6 | 5.3 | ||||||||||||
|
Interest
expense
|
(8.5 | ) | (9.3 | ) | (32.8 | ) | (25.8 | ) | ||||||||
|
Depreciation
and amortization expense
|
(10.2 | ) | (8.6 | ) | (36.5 | ) | (24.4 | ) | ||||||||
|
Income
tax expense
|
(0.1 | ) | (0.1 | ) | (0.1 | ) | (0.1 | ) | ||||||||
|
Non-cash
interest rate derivative mark-to-market
|
0.4 | — | 0.6 | — | ||||||||||||
|
Adjusted
net (loss) income
|
(4.3 | ) | 21.3 | 27.2 | 65.3 | |||||||||||
|
Maintenance
capital expenditures, net of reimbursable projects
|
(7.5 | ) | (0.9 | ) | (11.0 | ) | (2.6 | ) | ||||||||
|
Earnings
from equity method investments, net of distributions
|
14.4 | (3.9 | ) | 25.6 | (0.4 | ) | ||||||||||
|
Depreciation
and amortization expense
|
10.2 | 8.6 | 36.5 | 24.4 | ||||||||||||
|
Proceeds
from divestiture of assets
|
0.4 | — | 2.9 | — | ||||||||||||
|
Non-controlling
interest on depreciation
|
(0.3 | ) | (0.2 | ) | (0.9 | ) | (0.3 | ) | ||||||||
|
Distributable
cash flow
|
$ | 12.9 | $ | 24.9 | $ | 80.3 | $ | 86.4 | ||||||||
|
Adjusted
net (loss) income
|
$ | (4.3 | ) | $ | 21.3 | $ | 27.2 | $ | 65.3 | |||||||
|
Less:
|
||||||||||||||||
|
Net
income attributable to predecessor operations
|
— | — | — | (3.6 | ) | |||||||||||
|
General
partner interest in net income or net loss
|
(2.8 | ) | (1.7 | ) | (10.6 | ) | (3.1 | ) | ||||||||
|
Adjusted
net (loss) income allocable to limited partners
|
$ | (7.1 | ) | $ | 19.6 | $ | 16.6 | $ | 58.6 | |||||||
|
Adjusted
net (loss) income per unit
|
$ | (0.25 | ) | $ | 0.81 | $ | 0.61 | $ | 2.86 | |||||||
|
Net
cash provided by (used in) operating activities
|
$ | 46.8 | $ | (0.7 | ) | $ | 101.5 | $ | 65.4 | |||||||
|
Interest
income
|
(0.5 | ) | (1.6 | ) | (5.6 | ) | (5.3 | ) | ||||||||
|
Interest
expense
|
8.5 | 9.3 | 32.8 | 25.8 | ||||||||||||
|
Earnings
from equity method investments, net of distributions
|
(14.4 | ) | 3.9 | (25.6 | ) | 0.4 | ||||||||||
|
Income
tax expense
|
0.1 | 0.1 | 0.1 | 0.1 | ||||||||||||
|
Net
changes in operating assets and liabilities
|
120.5 | (33.8 | ) | 92.3 | (56.9 | ) | ||||||||||
|
Other,
net
|
(1.4 | ) | (0.7 | ) | (3.5 | ) | (0.3 | ) | ||||||||
|
EBITDA
|
159.6 | (23.5 | ) | 192.0 | 29.2 | |||||||||||
|
Non-cash
commodity derivative mark-to-market
|
(146.0 | ) | 61.2 | (101.6 | ) | 81.1 | ||||||||||
|
Adjusted
EBITDA
|
13.6 | 37.7 | 90.4 | 110.3 | ||||||||||||
|
Interest
income
|
0.5 | 1.6 | 5.6 | 5.3 | ||||||||||||
|
Interest
expense
|
(8.5 | ) | (9.3 | ) | (32.8 | ) | (25.8 | ) | ||||||||
|
Income
tax expense
|
(0.1 | ) | (0.1 | ) | (0.1 | ) | (0.1 | ) | ||||||||
|
Maintenance
capital expenditures, net of reimbursable projects
|
(7.5 | ) | (0.9 | ) | (11.0 | ) | (2.6 | ) | ||||||||
|
Earnings
from equity method investments, net of distributions
|
14.4 | (3.9 | ) | 25.6 | (0.4 | ) | ||||||||||
|
Proceeds
from divestiture of assets
|
0.4 | — | 2.9 | — | ||||||||||||
|
Non-cash
interest rate derivative mark-to-market
|
0.4 | — | 0.6 | — | ||||||||||||
|
Non-controlling
interest on depreciation
|
(0.3 | ) | (0.2 | ) | (0.9 | ) | (0.3 | ) | ||||||||
|
Distributable
cash flow
|
$ | 12.9 | $ | 24.9 | $ | 80.3 | $ | 86.4 | ||||||||
-
more -
9
DCP
MIDSTREAM PARTNERS, LP
SEGMENT
FINANCIAL RESULTS AND OPERATING DATA
AND
RECONCILIATION OF NON-GAAP MEASURES
(Unaudited)
|
Three
Months Ended
December
31,
|
Year
Ended
December
31,
|
|||||||||||||||
|
2008
|
2007
|
2008
|
2007
|
|||||||||||||
|
(Millions,
except as indicated)
|
||||||||||||||||
|
Natural
Gas Services Segment:
|
||||||||||||||||
|
Financial
results:
|
||||||||||||||||
|
Segment
net income (loss)
|
$ | 156.9 | $ | (31.3 | ) | $ | 170.2 | $ | 11.6 | |||||||
|
Operating
and maintenance expense
|
8.4 | 8.3 | 32.1 | 20.9 | ||||||||||||
|
Depreciation
and amortization expense
|
9.5 | 7.8 | 33.8 | 21.9 | ||||||||||||
|
Losses
(earnings) from equity method investments
|
4.3 | (16.1 | ) | (33.5 | ) | (38.7 | ) | |||||||||
|
Non-controlling
interest in income
|
1.2 | 0.2 | 3.9 | 0.5 | ||||||||||||
|
Segment
gross margin
|
180.3 | (31.1 | ) | 206.5 | 16.2 | |||||||||||
|
Non-cash
derivative mark-to-market
|
(146.3 | ) | 59.9 | (99.2 | ) | 78.3 | ||||||||||
|
Adjusted
segment gross margin
|
$ | 34.0 | $ | 28.8 | $ | 107.3 | $ | 94.5 | ||||||||
|
Operating
data:
|
||||||||||||||||
|
Natural
gas throughput (MMcf/d)
|
954 | 820 | 838 | 756 | ||||||||||||
|
NGL
gross production (Bbls/d)
|
15,911 | 25,237 | 20,659 | 22,122 | ||||||||||||
|
Wholesale
Propane Logistics Segment:
|
||||||||||||||||
|
Financial
results:
|
||||||||||||||||
|
Segment
net (loss) income
|
$ | (3.9 | ) | $ | 6.0 | $ | 1.3 | $ | 14.0 | |||||||
|
Operating
and maintenance expense
|
2.6 | 2.6 | 9.9 | 10.4 | ||||||||||||
|
Depreciation
and amortization expense
|
0.4 | 0.4 | 1.3 | 1.1 | ||||||||||||
|
Other
|
— | — | (1.5 | ) | — | |||||||||||
|
Segment
gross margin
|
(0.9 | ) | 9.0 | 11.0 | 25.5 | |||||||||||
|
Non-cash
derivative mark-to-market
|
0.3 | 1.3 | (2.4 | ) | 2.8 | |||||||||||
|
Adjusted
segment gross margin
|
$ | (0.6 | ) | $ | 10.3 | $ | 8.6 | $ | 28.3 | |||||||
|
Operating
data:
|
||||||||||||||||
|
Propane
sales volume (Bbls/d)
|
24,411 | 26,575 | 21,053 | 22,798 | ||||||||||||
|
NGL
Logistics Segment:
|
||||||||||||||||
|
Financial
results:
|
||||||||||||||||
|
Segment
net income
|
$ | 1.1 | $ | 0.2 | $ | 5.5 | $ | 3.3 | ||||||||
|
Operating
and maintenance expense
|
0.2 | 0.2 | 1.0 | 0.8 | ||||||||||||
|
Depreciation
and amortization expense
|
0.3 | 0.4 | 1.4 | 1.4 | ||||||||||||
|
Losses
(earnings) from equity method investments
|
0.1 | 0.4 | (0.8 | ) | (0.6 | ) | ||||||||||
|
Segment
gross margin
|
$ | 1.7 | $ | 1.2 | $ | 7.1 | $ | 4.9 | ||||||||
|
Operating
data:
|
||||||||||||||||
|
NGL
pipelines throughput (Bbls/d)
|
27,583 | 29,172 | 31,407 | 28,961 | ||||||||||||
10