Chesapeake Midstream Partners, L.P. (NYSE:CHKM) today announced
financial results for the 2011 second quarter. Net income for the
quarter totaled $41.1 million, an increase of $4.1 million, or 11%,
versus the 2010 second quarter. Net income available to limited
partners for the 2011 second quarter was $40.3 million, or $0.29
per limited partner unit. The Partnership’s adjusted ebitda for the
2011 second quarter was $79.3 million, up $17.8 million, or 29%,
from the 2010 second quarter. Distributable cash flow (DCF) totaled
$58.0 million, an increase of $15.0 million, or 35%, compared to
the 2010 second quarter. Adjusted ebitda and DCF are defined on
pages three and four of this release.
Total throughput for the 2011 second quarter was 195.5 billion
cubic feet (bcf) of natural gas, or 2.15 bcf per day, an increase
of 33% from 2010 second quarter throughput of 1.62 bcf per day. A
key driver of the volume increase was throughput from the
Haynesville Springridge gas gathering system acquired in December
2010. Partnership revenue for the 2011 second quarter was $133.2
million, an increase of $32.0 million, or 32%, from 2010 second
quarter revenue of $101.2 million.
The Partnership connected 143 new wells to its gathering systems
during the 2011 second quarter, an increase of 49% compared to the
2010 second quarter. Capital expenditures during the 2011 second
quarter totaled approximately $109.7 million, including maintenance
capital expenditures of approximately $18.5 million.
Partnership Increases Cash
Distribution
On July 26, 2011, the Board of Directors of the Partnership’s
general partner declared a quarterly cash distribution of $0.3625
per unit for the 2011 second quarter, a $0.0125, or 3.6%, increase
over the 2011 first quarter. The distribution will be paid on
August 12, 2011 to unitholders of record at the close of business
on August 5, 2011. DCF for the 2011 second quarter of $58.0 million
provided distribution coverage of 1.13 times the amount required
for the Partnership to fund the distribution to both the general
and limited partners.
Partnership Updates 2011 Financial
Outlook
The Partnership’s projection of ebitda for the 12 months ending
December 31, 2011 remains unchanged at $332 million. The ebitda
projection includes a range of revenue associated with minimum
volume commitments of between $10 million and $20 million. The
revenue associated with minimum volume commitments will not be
recognized until the fourth quarter of 2011. The Partnership is
revising its estimate of growth capital expenditures for 2011 to
$366 million from $256 million while the estimate of maintenance
capital expenditures of $74 million remains unchanged. The increase
in projected growth capital expenditures is the result of
adjustments to timing of projects. The scope of the Partnership’s
anticipated construction program remains unchanged.
Management Comments
J. Mike Stice, Chesapeake Midstream Partners’ Chief Executive
Officer, commented, “I am extremely proud of our performance in
2011. Our construction teams have delivered a 66% increase in well
connects year to date, while at the same time achieving an
exceptional safety performance record. Our execution on both fronts
has been outstanding. This strong operational performance is the
basis for meeting our financial objectives and allowing for another
distribution increase in the second quarter.”
Credit Facility Amendment
On June 10, 2011, the Partnership completed an amendment to its
existing credit facility. As amended, the credit facility provides
up to $800 million of borrowing capacity, an increase of $50
million. The maturity date was extended one year and will now
mature in June 2016. The amended credit agreement also provides for
other favorable term modifications, including improved borrowing
rates and fees. The amended credit facility is an important aspect
of the Partnership’s ability to maintain financial flexibility.
Conference Call Information
A conference call to discuss this release of financial results
has been scheduled for Wednesday morning, August 10, 2011 at 9:00
a.m. EDT. The telephone number to access the conference call is
719-457-2630 or toll-free 888-401-4685. The passcode
for the call is 7566669. We encourage those who would like
to participate in the call to dial the access number between 8:50
and 9:00 a.m. EDT. For those unable to participate in the
conference call, a replay will be available for audio playback from
12:00 p.m. EDT on August 10, 2011 through 12:00 p.m. EDT on August
24, 2011. The number to access the conference call replay is
719-457-0820 or toll-free 888-203-1112. The passcode
for the replay is 7566669. The conference call will also be
webcast live on the Internet and can be accessed by going to the
Partnership’s website at www.chkm.com in the "Events" subsection of
the "Investors" section of the website. An archive of the
conference call webcast will also be available on the website.
Use of Non-GAAP Financial Measures
This press release and accompanying schedules include the
non-GAAP financial measures of adjusted ebitda, DCF and adjusted
DCF. The accompanying schedules provide reconciliations of these
non-GAAP financial measures to their most directly comparable
financial measure calculated and presented in accordance with GAAP.
Non-GAAP financial measures should not be considered as an
alternative to GAAP measures such as net income, net cash provided
by operating activities or any other measure of liquidity or
financial performance calculated and presented in accordance with
GAAP. Investors should not consider adjusted ebitda, DCF or
adjusted DCF in isolation or as a substitute for analysis of the
Partnership’s results as reported under GAAP. Because these
non-GAAP financial measures may be defined differently by other
companies in our industry, the Partnership’s definition of adjusted
ebitda, DCF and adjusted DCF may not be comparable to similarly
titled measures of other companies, thereby diminishing their
utility.
Adjusted Ebitda. The Partnership defines adjusted ebitda as net
income (loss) before income tax expense, interest expense,
depreciation and amortization expense and certain other items
management believes affect the comparability of operating results.
Adjusted ebitda is a non-GAAP financial measure that management and
external users of our consolidated financial statements, such as
industry analysts, investors, lenders and rating agencies, may use
to assess:
- The Partnership’s operating performance
as compared to other publicly traded partnerships in the midstream
energy industry, without regard to capital structure, historical
cost basis or financing methods;
- The Partnership’s ability to incur and
service debt and fund capital expenditures;
- The ability of the Partnership’s assets
to generate sufficient cash flow to make distributions to
unitholders; and
- The viability of acquisitions and other
capital expenditure projects and the returns on investment of
various investment opportunities.
Management believes it is appropriate to exclude certain items
from ebitda because management believes these items affect the
comparability of operating results. The Partnership believes that
the presentation of adjusted ebitda in this press release provides
information useful to investors in assessing its financial
condition and results of operations. The GAAP measure most directly
comparable to adjusted ebitda is net income.
Distributable Cash Flow. The Partnership defines DCF as adjusted
ebitda attributable to the Partnership adjusted for:
- Addition of interest income;
- Subtraction of net cash paid for
interest expense;
- Subtraction of maintenance capital
expenditures; and
- Subtraction of income taxes.
Management compares the DCF the Partnership generates to the
cash distributions it expects to pay its partners. Using this
metric, management computes a distribution coverage ratio. DCF is
an important non-GAAP financial measure for our limited partners
since it serves as an indicator of our success in providing a cash
return on investment. Specifically, this financial measure
indicates to investors whether or not the Partnership is generating
cash flows at a level that can sustain or support an increase in
its quarterly cash distributions. DCF is also a quantitative
standard used by the investment community with respect to publicly
traded partnerships because the value of a partnership unit is in
part measured by its yield, which is based on the amount of cash
distributions a partnership can pay to a unitholder. The GAAP
measure most directly comparable to DCF is net cash provided by
operating activities.
Adjusted Distributable Cash Flow. The Partnership includes the
quarterly impact of contractual minimum volume commitments that are
not recognized until the fourth quarter of each year in its
calculation of adjusted DCF for the purpose of calculating the
distribution coverage ratio.
This press release includes forward-looking statements.
Forward-looking statements give our current expectations or
forecasts of future events. They include but are not limited to
throughput volumes, revenues, net income, adjusted ebitda and
distributable cash flow, as well as other statements concerning our
business strategy and plans and objectives for future operations.
We caution you not to place undue reliance on our forward-looking
statements, which speak only as of the date of this release, and we
undertake no obligations to update this information. Although we
believe the expectations and forecasts reflected in these and other
forward-looking statements are reasonable, we can give no assurance
they will prove to be correct. They can be affected by inaccurate
assumptions or by known or unknown risks and uncertainties. Factors
that could cause actual results to differ materially from expected
results are described under “Risk Factors” in our 2010 Annual
Report on Form 10-K.
Chesapeake Midstream Partners, L.P. is one of the industry’s
largest midstream master limited partnerships and owns, operates,
develops and acquires natural gas gathering systems and other
midstream energy assets. Headquartered in Oklahoma City, the
Partnership's operations are focused on the Barnett Shale,
Haynesville Shale and Mid-Continent regions of the U.S. The
Partnership’s common units are listed on the New York Stock
Exchange under the symbol CHKM. Further information is
available at www.chkm.com, where the Partnership routinely
posts announcements, updates, events, investor information and
presentations and all recent press releases.
CHESAPEAKE MIDSTREAM PARTNERS,
L.P.
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
($ in thousands, except per unit
data)
(unaudited)
Three Months
Ended
June 30,
2011
Three Months Ended
June 30,
2010
Six Months Ended
June 30,
2011
Six Months Ended
June 30,
2010
Revenues, including revenue from
affiliates (1)
$ 133,217 $ 101,239 $ 256,746 $ 196,625
Operating
Expenses Operating expenses, including expenses from affiliates
44,284 32,385 86,845 63,078 Depreciation and amortization expense
32,747 22,102 63,685 42,712 General and administrative expense,
including expenses from affiliates 9,659 7,387 18,605 14,123 Other
operating (income) expense 923 (37 ) 863
(67 ) Total operating expenses 87,613
61,837 169,998 119,846 Operating income 45,604
39,402 86,748 76,779
Other Income (Expense) Interest
expense (3,837 ) (1,866 ) (5,277 ) (3,817 ) Other income 42
40 84 42 Income before income tax
expense 41,809 37,576 81,555 73,004 Income tax expense 726
559 1,696 1,073 Net income $ 41,083 $
37,017 $ 79,859 $ 71,931
Limited partner interest in net
income Net income $ 41,083 $ N/A 79,859 N/A Less general
partner interest in net income (820 ) N/A
(1,596 ) N/A Limited partner interest in net income $
40,263 $ N/A 78,263 N/A Net income per limited
partner unit – basic and diluted Common units $ 0.29 $ N/A 0.56 N/A
Subordinated units $ 0.29 $ N/A 0.56 N/A
Weighted average limited partner units
outstanding used for net income per unit calculation – basic and
diluted (in thousands)
Common units 69,224 N/A 69,222 N/A Subordinated units 69,076 N/A
69,076 N/A
(1) In the event either Chesapeake Energy Corporation
(“Chesapeake”) or Total E&P USA, Inc. (“Total”) does not meet
its minimum volume commitment to the Partnership in the Barnett
Shale or Haynesville Shale regions, as applicable, under the
applicable gas gathering agreement for specified annual periods,
Chesapeake or Total, as applicable, is obligated to pay the
Partnership a fee equal to the applicable fee for each mcf by which
the party’s minimum volume commitment for the year exceeds the
actual volumes gathered on the Partnership’s systems. The
Partnership recognizes any associated revenue in the fourth
quarter.
CHESAPEAKE MIDSTREAM PARTNERS,
L.P.
CONDENSED CONSOLIDATED BALANCE
SHEETS
($ in thousands)
(unaudited)
As of
June 30,
2011
As of
December 31,
2010
Assets Total current assets $ 60,114 $ 131,487
Property, plant and equipment Gathering systems 2,765,571 2,544,053
Other fixed assets 46,027 41,125 Less: Accumulated depreciation
(414,608 ) (358,269 ) Total property, plant
and equipment, net 2,396,990 2,226,909
Intangible assets 164,223 172,481 Deferred loan costs, net
22,088 15,039 Total assets $ 2,643,415 $ 2,545,916
Liabilities and Partners’ Capital Total
current liabilities $ 112,353 $ 97,991 Long-term liabilities
Long term debt 350,000 249,100 Other liabilities 4,352
4,257 Total long-term liabilities 354,352
253,357 Partners’ capital Partners' capital
2,176,710 2,194,568 Total partners’ capital
2,176,710 2,194,568 Total liabilities and partners’
capital $ 2,643,415 $ 2,545,916
CHESAPEAKE MIDSTREAM PARTNERS,
L.P.
CONDENSED CONSOLIDATED STATEMENT OF
CASH FLOWS
($ in thousands)
(unaudited)
Six MonthsEnded
June 30,
2011
Six MonthsEnded
June 30,
2010
Cash flows from operating activities Net income $ 79,859 $
71,931 Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization 63,685 42,712
Other non-cash items 3,771 2,571 Changes in assets and liabilities
Decrease in accounts receivable 54,543 130,888 Decrease (increase)
in other assets 1,004 (1,603 ) Increase in accounts payable 1,117
6,310 Increase (decrease) in accrued liabilities 2,009
(55,400 ) Net cash provided by operating activities
205,988 197,409
Cash flows from investing
activities Additions to property, plant and equipment (216,251
) (97,448 ) Proceeds from sale of assets 1,318 2,168
Net cash used in investing activities (214,933 )
(95,280 )
Cash flows from financing activities
Proceeds from credit facility borrowings 184,400 233,800 Payments
on credit facility borrowings (433,500 ) (166,600 ) Proceeds from
issuance of senior notes, net of offering costs 343,000 –-
Distribution to unitholders (96,921 ) –- Initial public offering
costs (1,280 ) –- Debt issuance costs (2,583 ) –- Distribution to
partners –- (169,500 ) Contribution from predecessor –- 177 Other
adjustments 4 –- Net cash used in financing
activities (6,880 ) (102,123 )
Net increase (decrease) in cash and cash
equivalents
(15,825 ) 6
Cash and cash equivalents Beginning of
period 17,816 3 End of period $ 1,991 $ 9
CHESAPEAKE MIDSTREAM PARTNERS,
L.P.
RECONCILIATION OF NON-GAAP FINANCIAL
MEASURES
($ in thousands)
(unaudited)
Three MonthsEnded
June 30,
2011
Three MonthsEnded
June 30,
2010
Six MonthsEnded
June 30,
2011
Six MonthsEnded
June 30,
2010
Net Income $ 41,083 $ 37,017 $ 79,859 $ 71,931
Adjusted for: Interest expense 3,837 1,866 5,277
3,817 Income tax expense 726 559 1,696 1,073 Depreciation and
amortization expense 32,747 22,102 63,685 42,712 (Gain) Loss on
sale of assets 923 (37 ) 863 (67 )
Adjusted EBITDA $ 79,316 $ 61,507 $ 151,380 $ 119,466
Cash provided by operating activities $ 68,719
79,084 205,988 197,409
Adjusted for: Changes in
assets and liabilities 7,878 (18,688 ) (58,673 ) (80,195 )
Maintenance capital expenditures (18,500 ) (17,500 ) (37,000 )
(35,000 ) Other non-cash items (127 ) 26 (371
) 42
Distributable cash flow 57,970
42,922 109,944 82,256
Adjusted
for: Implied minimum volume commitment –- 14,219
5,268 31,395
Adjusted distributable cash
flow $ 57,970 $ 57,141 $ 115,212 $ 113,651
Cash
distribution Limited partner units ($0.3625 x 138,161,160
units) $ 50,084 General partner units ($0.3625 x 2,819,606 units)
1,022
Total cash distribution $ 51,106
Distribution coverage ratio 1.13
CHESAPEAKE MIDSTREAM PARTNERS,
L.P.
OPERATING STATISTICS
(unaudited)
Three MonthsEnded
June 30,
2011
Three MonthsEnded
June 30,
2010
Six MonthsEnded
June 30,
2011
Six MonthsEnded
June 30,
2010
Barnett Shale Wells connected
during period 81 67 171 120 Total wells connected 2,006 1,685 2,006
1,685 Throughput, bcf per day 1.044 1.059 1.007 1.019 Approximate
miles of pipe at end of period 824 700 824 700 Gas compression
(horsepower) at end of period 137,210 136,565 137,210 136,565
Haynesville Shale Wells connected during
period 18 –- 37 –- Total wells connected 201 –- 201 –- Throughput,
bcf per day 0.563 –- 0.529 –- Approximate miles of pipe at end of
period 241 –- 241 –- Gas compression (horsepower) at end of period
21,970 –- 21,970 –-
Mid-Continent Wells
connected during period 44 29 90 60 Total wells connected 2,446
2,259 2,446 2,259 Throughput, bcf per day 0.541 0.565 0.543 0.558
Approximate miles of pipe at end of period 2,385 2,200 2,385 2,200
Gas compression (horsepower) at end of period 94,129 84,455 94,129
84,455
Total Wells connected during period 143
96 298 180 Total wells connected 4,653 3,944 4,653 3,944
Throughput, bcf per day 2.148 1.624 2.078 1.577 Approximate miles
of pipe at end of period 3,450 2,900 3,450 2,900 Gas compression
(horsepower) at end of period 253,979 221,020 253,979 221,020
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