Hiland Reports Fourth Quarter and Full-Year 2008 Results
Hiland Partners, LP Financial Results
Hiland Partners, LP reported net income for the three months ended
Adjusted EBITDA (adjusted EBITDA is defined as net income plus interest expense, provisions for income taxes, and depreciation, amortization and accretion expense, and adjusted for significant non-cash and non-recurring items) for the three months ended
For the year ended
Adjusted EBITDA for the year ended
The Partnership reported distributable cash flow (“DCF”) of
On
In making its distribution decision, the Partnership’s Board of Directors considered the impact of lower commodity prices on cash flow for the fourth quarter of 2008 and on the outlook for future projected cash flow. The Board of Directors also considered future required levels of capital expenditures and the level of the Partnership’s outstanding indebtedness under its senior secured revolving credit facility relative to such projections. If commodity prices do not significantly improve above the current forward prices for 2009, the Partnership may be in violation of the maximum consolidated funded debt to EBITDA ratio contained in the Partnership’s senior secured revolving credit facility as early as the end of the second quarter of 2009, unless the ratio is amended, the Partnership’s debt is restructured or the Partnership receives an infusion of equity capital.
On
It is anticipated that the conflicts committee of the board of directors of the general partner of each of Hiland Partners and Hiland Holdings will consider the proposals. In reviewing the proposals, each conflicts committee has retained its own financial advisers and legal counsel to assist in its work. The board of directors of the general partner of each of Hiland Partners and Hiland Holdings caution the unitholders of Hiland Partners and Hiland Holdings respectively, and others considering trading in the securities of Hiland Partners and Hiland Holdings, that each conflicts committee of the board of directors is reviewing its respective proposal and no decisions have been made by either conflicts committee of either board of directors with respect to the response of either Hiland Partners or Hiland Holdings to the proposals. There can be no assurance that any agreement will be executed or that any transaction will be approved or consummated.
Hiland Holdings GP, LP Financial Results
Hiland Holdings GP, LP reported net income for the three months ended
For the year ended
Hiland Holdings GP, LP’s share of distributions from Hiland Partners, LP, including distributions on its 2,321,471 common units, its 3,060,000 subordinated units, its two percent general partner interest, and the incentive distributions rights, was approximately
“The fourth quarter of 2008 was marked by the deepening global economic crisis and a steep decline in commodity prices. Despite record inlet natural gas volumes, our cash flow for the fourth quarter of 2008 was adversely affected by the sharp deterioration in commodity prices and the resulting impact on natural gas processing margins,” said
Conference Call Information
Hiland has scheduled a conference call for
During this conference call, Hiland management will only address the fourth quarter and full-year 2008 results and will not address the “Going Private” proposals submitted to the Boards of Directors of both Hiland entities on
Use of Non-GAAP Financial Measures
This press release and the accompanying schedules include the non-generally accepted accounting principles (“non-GAAP”) financial measures of EBITDA, adjusted EBITDA, total segment margin and distributable cash flow. The accompanying schedules provide reconciliations of these non-GAAP financial measures to their most directly comparable financial measure calculated and presented in accordance with accounting principles generally accepted in
About the Hiland Companies
Hiland Partners, LP is a publicly traded midstream energy partnership engaged in purchasing, gathering, compressing, dehydrating, treating, processing and marketing of natural gas, and fractionating, or separating, and marketing of natural gas liquids, or NGLs. The Partnership also provides air compression and water injection services for use in oil and gas secondary recovery operations. The Partnership’s operations are primarily located in the Mid-Continent and Rocky Mountain regions of
Hiland Holdings GP, LP owns the two percent general partner interest, 2,321,471 common units and 3,060,000 subordinated units in Hiland Partners, LP, and the incentive distribution rights of Hiland Partners, LP.
This press release may include certain statements concerning expectations for the future that are forward-looking statements. Such forward-looking statements are subject to a variety of known and unknown risks, uncertainties, and other factors that are difficult to predict and many of which are beyond management’s control. An extensive list of factors that can affect future results are discussed in the Partnership’s Annual Report on Form 10-K and other documents filed from time to time with the Securities and Exchange Commission. The Partnership undertakes no obligation to update or revise any forward-looking statements to reflect new information or events.
Contacts: Derek Gipson, Director - Business Development
and Investor Relations
Hiland Partners, LP
(580) 242-6040
- tables to follow -
Other Financial and Operating Data
Hiland Partners, LP - Results of Operations
Set forth in the table below is financial and operating data for Hiland
Partners, LP.
Three Months Ended Year Ended
December 31, December 31,
---------------- ----------------
2008 2007 2008 2007
------ ------ ------ ------
(unaudited, (unaudited,
in thousands) in thousands)
Total Segment Margin Data:
Midstream revenues $64,122 $81,533 $383,180 $273,224
Midstream purchases 38,014 57,892 276,600 195,212
------ ------ ------ ------
Midstream segment margin 26,108 23,641 106,580 78,012
Compression revenues (A) 1,204 1,204 4,819 4,819
------ ------ ------ ------
Total segment margin $27,312 $24,845 $111,399 $82,831
====== ====== ====== ======
Summary of Operations Data:
Midstream revenues $64,122 $81,533 $383,180 $273,224
Compression revenues 1,204 1,204 4,819 4,819
------ ------ ------ ------
Total revenues 65,326 82,737 387,999 278,043
Midstream purchases (exclusive
of items shown separately
below) 38,014 57,892 276,600 195,212
Operations and maintenance 8,325 7,171 30,526 23,279
Depreciation, amortization and
accretion 9,850 8,493 37,502 29,855
Bad debt - - 304 -
General and administrative 2,330 2,479 8,753 7,587
------ ------ ------ ------
Total operating costs and
expenses 58,519 76,035 353,685 255,933
------ ------ ------ ------
Operating income 6,807 6,702 34,314 22,110
Other income (expense) (3,820) (3,831) (13,867) (11,326)
------ ------ ------ ------
Net income $2,987 $2,871 $20,447 $10,784
====== ====== ====== ======
Maintenance capital expenditures $1,313 $914 $5,994 $3,423
Expansion capital expenditures 19,010 16,721 52,275 87,530
------ ------ ------ ------
Total capital expenditures $20,323 $17,635 $58,269 $90,953
====== ====== ====== ======
Operating Data:
Inlet natural gas (Mcf/d) 275,222 229,608 252,670 215,551
Natural gas sales (MMBtu/d) 94,769 85,872 90,910 80,731
NGL sales (Bbls/d) 6,386 5,754 5,920 4,696
Average realized natural gas
sales price ($/MMBtu) $4.17 $5.66 $7.00 $5.75
Average realized NGL sales
price ($/gallon) $0.78 $1.43 $1.33 $1.18
December 31,
--------------
2008 2007
------ ------
(in thousands)
(unaudited)
Balance Sheet Data (at period end):
Property and equipment, at cost, net $345,855 $319,320
Total assets $426,139 $410,473
Long-term debt, net of current maturities $256,466 $226,104
Net equity $133,156 $139,167
A) Compression revenues and compression segment margin are the same.
There are no compression purchases associated with the compression
segment.
Reconciliation of total segment margin to operating income:
Three Months Ended Dec. 31, Year Ended Dec. 31,
--------------------------- -------------------
2008 2007 2008 2007
------ ------ ------ ------
(unaudited, in thousands) (unaudited, in thousands)
Reconciliation of
Total Segment Margin
to Operating Income
Operating income $6,807 $6,702 $34,314 $22,110
Add:
Operations and maintenance
expenses 8,325 7,171 30,526 23,279
Depreciation, amortization
and accretion 9,850 8,493 37,502 29,855
Bad debt expense - - 304 -
General and administrative
expenses 2,330 2,479 8,753 7,587
------ ------ ------ ------
Total segment margin $27,312 $24,845 $111,399 $82,831
====== ====== ====== ======
We view total segment margin, a non-GAAP financial measure, as an important performance measure of the core profitability of our operations because it is directly related to our volumes and commodity price changes. We review total segment margin monthly for consistency and trend analysis. We define midstream segment margin as midstream revenue less midstream purchases. Midstream purchases include the following costs and expenses: cost of natural gas and NGLs purchased by us from third parties, cost of natural gas and NGLs purchased by us from affiliates, and the cost of crude oil purchased by us from third parties. We define compression segment margin as the revenue derived from our compression segment. Our total segment margin may not be comparable to similarly titled measures of other entities, as other entities may not calculate total segment margin in the same manner we do.
Reconciliation of adjusted EBITDA to net income:
Three Months Ended Dec. 31, Year Ended Dec. 31,
--------------------------- -------------------
2008 2007 2008 2007
------ ------ ------ ------
(unaudited, in thousands) (unaudited, in thousands)
Reconciliation of adjusted
EBITDA to Net Income
Net income $2,987 $2,871 $20,447 $10,784
Add:
Depreciation, amortization
and accretion 9,850 8,493 37,502 29,855
Amortization of deferred
loan costs 148 120 574 410
Interest expense 3,751 3,827 13,639 11,346
------ ------ ------ ------
EBITDA $16,736 $15,311 72,162 52,395
Add:
Non-cash unrealized loss
(gain) on derivatives (3,296) 137 (6,981) (373)
Non-cash unit-based
compensation expense 379 361 1,538 951
Bad debt expense - - 304 -
------ ------ ------ ------
Adjusted EBITDA $13,819 $15,809 $67,023 $52,973
====== ====== ====== ======
We define EBITDA, a non-GAAP financial measure, as net income plus interest expense, provisions for income taxes and depreciation, amortization and accretion expense. EBITDA is used as a supplemental financial measure by our management and by external users of our financial statements such as investors, commercial banks, research analysts and others to assess: (1) the financial performance of our assets without regard to financial methods, capital structure or historical cost basis; (2) the ability of our assets to generate cash sufficient to pay interest costs and support our indebtedness; (3) our operating performance and return on capital as compared to those of other companies in the midstream energy sector, without regard to financing or structure; and (4) the viability of acquisitions and capital expenditure projects and the overall rates of return on alternative investment opportunities. EBITDA is also a financial measurement that, with certain negotiated adjustments, is reported to our banks and is used as a gauge for compliance with our financial covenants under our credit facility. EBITDA should not be considered as an alternative to net income, operating income, cash flows from operating activities or any other measures of financial performance presented in accordance with GAAP. Our EBITDA may not be comparable to EBITDA of similarly titled measures of other entities, as other entities may not calculate EBITDA in the same manner as we do.
We define adjusted EBITDA, a non-GAAP financial measure, as net income plus interest expense, provisions for income taxes and depreciation, amortization and accretion expense, adjusted for significant non-cash and non-recurring items. Adjusted EBITDA is used as a supplemental financial measure by our management and by external users of our financial statements such as investors, commercial banks, research analysts and others to assess: (1) the financial performance of our assets without regard to financial methods, capital structure or historical cost basis; (2) the ability of our assets to generate cash sufficient to pay interest costs and support our indebtedness; (3) our operating performance and return on capital as compared to those of other companies in the midstream energy sector, without regard to financing or structure; and (4) the viability of acquisitions and capital expenditure projects and the overall rates of return on alternative investment opportunities. Adjusted EBITDA is also a financial measurement that, with certain negotiated adjustments, is reported to our banks and is used as a gauge for compliance with our financial covenants under our credit facility. Adjusted EBITDA should not be considered as an alternative to net income, operating income, cash flows from operating activities or any other measures of financial performance presented in accordance with GAAP. Our adjusted EBITDA may not be comparable to adjusted EBITDA of similarly titled measures of other entities, as other entities may not calculate adjusted EBITDA in the same manner as we do.
Reconciliation of distributable cash flow to net income:
Three Months Ended Dec. 31, Year Ended Dec. 31,
--------------------------- -------------------
2008 2007 2008 2007
------ ------ ------ ------
(unaudited, in thousands) (unaudited, in thousands)
Reconciliation of
Distributable Cash Flow
to Net Income
Net income $2,987 $2,871 $20,447 $10,784
Add:
Depreciation, amortization
and accretion 9,850 8,493 37,502 29,855
Amortization of deferred
loan costs 148 120 574 410
Interest expense 3,751 3,827 13,639 11,346
------ ------ ------ ------
EBITDA $16,736 $15,311 72,162 52,395
Add:
Non-cash unrealized loss
(gain) on derivatives (3,296) 137 (6,981) (373)
Non-cash unit-based
compensation expense 379 361 1,538 951
Bad debt expense - - 304 -
------ ------ ------ ------
Adjusted EBITDA $13,819 $15,809 $67,023 $52,973
Less:
Cash interest expense 3,723 3,862 13,430 11,332
Maintenance capital
expenditures 1,313 914 5,994 3,423
Payments on capital
lease obligations 165 118 534 296
Bad debt expense - - 304 -
------ ------ ------ ------
Distributable cash flow $8,618 $10,915 $46,761 $37,922
====== ====== ====== ======
We view distributable cash flow, a non-GAAP financial measure, as an important performance measure used by senior management to compare basic cash flows generated by the Partnership (prior to the establishment of any retained cash reserves by the Board of Directors) to the cash distributions expected to be paid to unitholders. Using this metric, 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 unitholders since it serves as an indicator of the Partnership’s success in providing a cash return on investment. The financial measure indicates to investors whether or not the Partnership is generating cash flow at a level that can sustain or support an increase in quarterly distribution rates. Distributable cash flow is also a quantitative standard used throughout the investment community with respect to publicly-traded partnerships because the value of such an entity generally is related to the amount of cash distributions the entity can pay to its unitholders. The GAAP financial measure most directly comparable to distributable cash flow is net income. Our distributable cash flow may not be comparable to similarly titled measures of other entities, as other entities may not calculate distributable cash flow in the same manner we do.
Other Financial and Operating Data
Hiland Holdings GP, LP - Results of Operations
Set forth in the table below is financial and operating data for Hiland Holdings GP, LP.
Three Months Ended Year Ended
December 31, December 31,
---------------- ----------------
2008 2007 2008 2007
------ ------ ------ ------
(unaudited, (unaudited,
in thousands) in thousands)
Total Segment Margin Data:
Midstream revenues $64,122 $81,533 $383,180 $273,224
Midstream purchases 38,014 57,892 276,600 195,212
------ ------ ------ ------
Midstream segment margin 26,108 23,641 106,580 78,012
Compression revenues (A) 1,204 1,204 4,819 4,819
------ ------ ------ ------
Total segment margin $27,312 $24,845 $111,399 $82,831
====== ====== ====== ======
Summary of Operations Data:
Midstream revenues $64,122 $81,533 $383,180 $273,224
Compression revenues 1,204 1,204 4,819 4,819
------ ------ ------ ------
Total revenues 65,326 82,737 387,999 278,043
Midstream purchases (exclusive
of items shown separately
below) 38,014 57,892 276,600 195,212
Operations and maintenance 8,325 7,171 30,526 23,279
Depreciation, amortization
and accretion 10,137 8,780 38,650 31,002
Bad debt - - 304 -
General and administrative 2,722 2,938 10,337 9,321
------ ------ ------ ------
Total operating costs and
expenses 59,198 76,781 356,417 258,814
------ ------ ------ ------
Operating income 6,128 5,956 31,582 19,229
Other income (expense) (3,848) (3,855) (13,980) (11,425)
------ ------ ------ ------
Income before minority interest
in income of Hiland
Partners, LP 2,280 2,101 17,602 7,804
Minority interest in income of
Hiland Partners, LP (1,500) (558) (5,902) (2,638)
------ ------ ------ ------
Net income $780 $1,543 $11,700 $5,166
====== ====== ====== ======
December 31,
--------------
2008 2007
------ ------
(in thousands)
(unaudited)
Balance Sheet Data (at period end):
Property and equipment, at cost, net $349,159 $323,073
Total assets $435,560 $420,286
Long-term debt, net of current maturities $256,466 $226,459
Minority interests $125,851 $126,409
Net equity $15,497 $22,135
(A) Compression revenues and compression segment margin are the same.
There are no compression purchases associated with the compression
segment.
Reconciliation of total segment margin to operating income:
Three Months Ended Dec. 31, Year Ended Dec. 31,
--------------------------- -------------------
2008 2007 2008 2007
------ ------ ------ ------
(unaudited, in thousands) (unaudited, in thousands)
Reconciliation of Total
Segment Margin to
Operating Income
Operating income $6,128 $5,956 $31,582 $19,229
Add:
Operations and maintenance
expenses 8,325 7,171 30,526 23,279
Depreciation, amortization
and accretion 10,137 8,780 38,650 31,002
Bad debt expense - - 304 -
General and administrative
expenses 2,722 2,938 10,337 9,321
------ ------ ------ ------
Total segment margin $27,312 $24,845 $111,399 $82,831
====== ====== ====== ======
We view total segment margin, a non-GAAP financial measure, as an important performance measure of the core profitability of our operations because it is directly related to our volumes and commodity price changes. We review total segment margin monthly for consistency and trend analysis. We define midstream segment margin as midstream revenue less midstream purchases. Midstream purchases include the following costs and expenses: cost of natural gas and NGLs purchased by us from third parties, cost of natural gas and NGLs purchased by us from affiliates, and cost of crude oil purchased by us from third parties. We define compression segment margin as the revenue derived from our compression segment. Our total segment margin may not be comparable to similarly titled measures of other entities, as other entities may not calculate total segment margin in the same manner we do.
SOURCE Hiland Partners, LP; Hiland Holdings GP, LP