ENID, Okla., May 8 /PRNewswire-FirstCall/ -- The Hiland companies,
Hiland Partners, LP (NASDAQ:HLND) and Hiland Holdings GP, LP
(NASDAQ:HPGP) today announced a new organic growth project in the
Bakken in North Dakota, an expansion of its Wordford Shale
gathering system and results for the first quarter of 2008. North
Dakota Bakken Agreement Hiland Partners, LP today announced the
signing of an agreement with Continental Resources, Inc. ("CLR") to
construct and operate gathering pipelines and related facilities in
the Bakken Shale play in northwestern North Dakota. With the
signing of this agreement, CRI has dedicated approximately 129,000
gross acres to the Partnership. CRI currently has 10 rigs working
in the Bakken play with 13 expected by the end of 2008. The initial
term of the agreement is 10 years and grants the Partnership the
right to process natural gas and share in the sales proceeds of the
natural gas liquids and residue gas. In addition, the Partnership
will receive certain fixed fees for treating the natural gas. The
Partnership plans to make an initial capital investment of
approximately $10 million by the end of 2007 and totaling up to $27
million over the next three years to build processing and treating
facilities and install field gathering, compression and associated
equipment. The new system will be designed to provide low-pressure
and highly reliable gathering, compression, dehydration, treating
and processing services. The expected startup of the initial phase
of the project should occur no later than the second quarter of
2009. The Partnership's Board of Directors, as well as the
Partnership's Conflicts Committee, consisting of the Partnership's
independent directors, has approved the agreement. Woodford Shale
Expansion Hiland Partners, LP today announced the accelerated
expansion of its Woodford Shale gathering system. The Woodford
Shale gathering system is currently averaging close to its maximum
capacity of 25,000 Mcf/d. Recent CRI drilling success in the
Woodford Shale has caused Hiland to expand the system's capacity to
over 65,000 Mcf/d by the end of the third quarter of 2008. Hiland
expects capital expenditures of approximately $10 million to
complete the expansion. "We are excited about expanding our
presence in the Bakken with the new North Dakota plant and
gathering system," said Joseph L. Griffin, President and Chief
Executive Officer. "We continue to build upon the success we have
experienced with our existing Bakken plant in Montana. In addition
to the Bakken and Arkoma Woodford, Hiland looks forward to
potential growth opportunities in recently announced emerging
unconventional resource and shale plays CRI is developing,
including the Atoka and Woodford plays in western Oklahoma and the
Texas Panhandle, the Haynesville Shale, the Marcellus Shale and the
Huron Shale." Hiland Partners, LP Financial Results Hiland
Partners, LP reported net income for the three months ended March
31, 2008 of $1.3 million compared to net income of $2.2 million for
the three months ended March 31, 2007, a decrease of 39%. This
decrease is primarily due to additional operations and maintenance,
depreciation, general and administrative and interest expenses
incurred, offset by increased midstream segment margin associated
with our organic growth projects, including (i) the construction of
the Woodford Shale gathering system, which commenced production in
April 2007, (ii) the major expansion at the Badlands gathering
system, including the nitrogen rejection plant, which became
operational in August 2007, and (iii) the continued development of
the Bakken gathering system. Net income was also impacted by
approximately $2.3 million as a result of the Badlands nitrogen
rejection plant being taken out of service due to equipment failure
during the three months ended March 31, 2008. Net loss per limited
partner unit-basic for the first quarter of 2008 was $(0.05) per
unit compared to net income of $0.15 per unit in the corresponding
quarter in 2007. Weighted average limited partner units outstanding
for the three months ended March 31, 2008 was 9.4 million units
compared to 9.3 million units for the three months ended March 31,
2007. EBITDA (EBITDA is defined as net income plus interest
expense, provisions for income taxes and depreciation, amortization
and accretion expense) for the three months ended March 31, 2008
was $13.9 million compared to $11.1 million for the three months
ended March 31, 2007, an increase of 25%. A reconciliation of
EBITDA, a non-GAAP financial measure, to net income, the most
directly comparable GAAP financial measure, is provided within the
financial tables of this press release. Total segment margin for
the three months ended March 31, 2008 was $22.9 million compared to
$17.4 million for the three months ended March 31, 2007, an
increase of 32%. A reconciliation of total segment margin, a
non-GAAP financial measure, to net income, the most directly
comparable GAAP financial measure, is provided within the financial
tables of this press release. The increases in EBITDA and total
segment margin are primarily attributable to favorable gross
processing spreads, significantly higher average realized natural
gas and natural gas liquids (NGL) prices and the increased sales
volume as a result of our organic growth projects, including (i)
the Woodford Shale gathering system, which commenced production in
April 2007, (ii) the major expansion at the Badlands gathering
system, including the nitrogen rejection plant, which became
operational in August 2007, and (iii) the continued development of
the Bakken gathering system. The increases in EBITDA and segment
margin were offset by approximately $2.3 million of forgone EBITDA
and segment margin as a result of the Badlands nitrogen rejection
plant being taken out of service due to equipment failure during
the three months ended March 31, 2008 and a $0.8 million increase
in general and administrative expenses for the three months ended
March 31, 2008 compared to the three months ended March 31, 2007,
primarily as the result of increased unit based compensation, the
timing of executive annual cash bonuses and additional staffing.
Non-cash expenses incurred during the first quarter of 2008 that
were not added back in determining EBITDA include non-cash loss on
derivative transactions of $0.4 million and non-cash compensation
expense of $0.4 million. The Partnership reported distributable
cash flow ("DCF") of $10.8 million for the three months ended March
31, 2008, compared to $8.5 million for the three months ended March
31, 2007, an increase of 27%. As a Master Limited Partnership, cash
distributions to limited partners are largely determined based on
DCF. A reconciliation of DCF, a non-GAAP financial measure, to net
income, the most directly comparable GAAP financial measure, is
provided within the financial tables of this press release. On
April 25, 2008, Hiland Partners, LP announced an increase in its
cash distribution for the first quarter of 2008. The declared
quarterly distributions on Hiland Partners, LP's common and
subordinated units increased to $0.8275 per unit (an annualized
rate of $3.31 per unit) from $0.7950 per unit (an annualized rate
of $3.18 per unit) for the fourth quarter of 2007. This represents
a 4.1% increase over the prior quarter and a 16.1% increase over
the distribution for the same quarter of the prior year. This
distribution will be paid on May 14, 2008 to unitholders of record
on May 5, 2008. Hiland Holdings GP, LP Financial Results Hiland
Holdings GP, LP reported quarterly net income for the three months
ended March 31, 2008 of $0.8 million ($0.04 per limited partner
unit-basic) compared to net income of $0.7 million ($0.03 per
limited partner unit-basic) for the three months ended March 31,
2007. Net income before minority interest was $0.6 million in the
three months ended March 31, 2008 compared to $1.3 million in the
three months ended March 31, 2007. Hiland Holdings GP, LP's share
of distributions from Hiland Partners, LP, including distributions
on its 5,381,471 limited partner units, its two percent general
partner interest, and the incentive distributions rights, will be
approximately $6.4 million for the first quarter of 2008. On April
25, 2008, Hiland Holdings GP, LP, announced an increase in its cash
distribution for the first quarter of 2008. The declared quarterly
distributions on the Partnership's units were increased to $0.28
per unit (an annualized rate of $1.12 per unit) from $0.255 per
unit (an annualized rate of $1.02 per unit) for the fourth quarter
of 2007. This represents a 9.8% increase over the prior quarter and
a 34.9% increase over the distribution for the same quarter of the
prior year. The distribution will be paid on May 19, 2008 to
unitholders of record on May 5, 2008. Conference Call Information
Hiland has scheduled a conference call for 10:00 am Central Time,
Friday, May 9, 2008, to discuss the 2008 first quarter results. To
participate in the call, dial 1.888.396.2298 and participant
passcode 92002423, or access it live over the Internet at
http://www.hilandpartners.com/, on the "Investor Relations" section
of the Partnership's website. 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 the
United States of America ("GAAP"). Our non-GAAP financial measures
should not be considered as alternatives to GAAP measures such as
net income, operating income or any other GAAP measure of liquidity
or financial performance. About the Hiland Companies Hiland
Partners, LP is a publicly traded midstream energy partnership
engaged in gathering, compressing, dehydrating, treating,
processing and marketing natural gas, and fractionating, or
separating, 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 the United States. Hiland Partners, LP's
midstream assets consist of fourteen natural gas gathering systems
with approximately 2,030 miles of gathering pipelines, five natural
gas processing plants, seven natural gas treating facilities and
three NGL fractionation facilities. The Partnership's compression
assets consist of two air compression facilities and a water
injection plant. Hiland Holdings GP, LP owns the two percent
general partner interest, 1,301,471 common units and 4,080,000
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. -
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 March 31, ----------------------------- 2008 2007
------------- ------------- (unaudited, in thousands) Total Segment
Margin Data: Midstream revenues $90,274 $59,849 Midstream purchases
68,618 43,615 ------------- ------------- Midstream segment margin
21,656 16,234 Compression revenues (A) 1,205 1,205 -------------
------------- Total segment margin (B) $22,861 $17,439
============= ============= Summary of Operations Data: Midstream
revenues $90,274 $59,849 Compression revenues 1,205 1,205
------------- ------------- Total revenues 91,479 61,054 Midstream
purchases (exclusive of items shown separately below) 68,618 43,615
Operations and maintenance 6,769 4,970 Depreciation, amortization
and accretion 8,929 6,741 General and administrative 2,301 1,515
------------- ------------- Total operating costs and expenses
86,617 56,841 ------------- ------------- Operating income 4,862
4,213 Other income (expense) (3,535) (2,051) -------------
------------- Net income 1,327 2,162 Add: Depreciation,
amortization and accretion 8,929 6,741 Amortization of deferred
loan costs 134 88 Interest expense 3,501 2,086 -------------
------------- EBITDA (C) $13,891 $11,077 =============
============= Non-cash (gain) loss on derivative transactions $401
($69) Non-cash unit based compensation expense $371 $178
Distributable cash flow (D) $10,808 $8,498 Maintenance capital
expenditures $528 $619 Expansion capital expenditures 7,602 15,919
------------- ------------- Total capital expenditures $8,130
$16,538 ============= ============= Operating Data: Inlet natural
gas (Mcf/d) 227,431 200,088 Natural gas sales (MMBtu/d) 85,773
74,521 NGL sales (Bbls/d) 5,272 3,986 Average realized natural gas
sales price ($/MMBtu) $7.33 $6.19 Average realized NGL sales price
($/gallon) $1.40 $0.94 March 31, December 31, 2008 2007
------------- ------------- (unaudited) Balance Sheet Data (at
period end): Property and equipment, at cost, net $319,911 $319,320
Total assets $415,908 $410,473 Long-term debt, net of current
maturities $234,952 $226,104 Net equity $131,941 $139,167 (A)
Compression revenues and compression segment margin are the same.
There are no compression purchases associated with the compression
segment. (B) Reconciliation of total segment margin to operating
income: Three Months Ended March 31, -----------------------------
2008 2007 ------------- ------------- (unaudited, in thousands)
Reconciliation of Total Segment Margin to Operating Income
Operating income $4,862 $4,213 Add: Operations and maintenance
expenses 6,769 4,970 Depreciation, amortization and accretion 8,929
6,741 General and administrative expenses 2,301 1,515 -------------
------------- Total segment margin $22,861 $17,439 =============
============= We view total segment margin, a non-GAAP financial
measure, as an important performance measure of the core
profitability of our operations. 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. (C) 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 measure 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. (D)
Reconciliation of distributable cash flow to net income: Three
Months Ended March 31, ----------------------------- 2008 2007
------------- ------------- (unaudited, in thousands)
Reconciliation of Distributable Cash Flow to Net Income Net income
$1,327 $2,162 Add: Depreciation, amortization and accretion 8,929
6,741 Amortization of deferred loan costs 134 88 Interest expense
3,501 2,086 Non-cash loss (gain) on derivatives transactions 401
(69) Non-cash compensation expense 371 178 -------------
------------- Adjusted EBITDA 14,663 11,186 Less: Cash interest
expense 3,220 2,069 Maintenance capital expenditures 528 619
Payments on capital lease obligations 107 - -------------
------------- Distributable cash flow $10,808 $8,498 =============
============= 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. 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 March 31, ----------------------------- 2008
2007 ------------- ------------- (unaudited, in thousands) Total
Segment Margin Data: Midstream revenues $90,274 $59,849 Midstream
purchases 68,618 43,615 ------------- ------------- Midstream
segment margin 21,656 16,234 Compression revenues (A) 1,205 1,205
------------- ------------- Total segment margin (B) $22,861
$17,439 ============= ============= Summary of Operations Data:
Midstream revenues $90,274 $59,849 Compression revenues 1,205 1,205
------------- ------------- Total revenues 91,479 61,054 Midstream
purchases (exclusive of items shown separately below) 68,618 43,615
Operations and maintenance 6,769 4,970 Depreciation, amortization
and accretion 9,216 7,028 General and administrative 2,684 2,045
------------- ------------- Total operating costs and expenses
87,287 57,658 ------------- ------------- Operating income 4,192
3,396 Other income (expense) (3,558) (2,074) -------------
------------- Income before minority interest in loss (income) of
Hiland Partners, LP 634 1,322 Minority interest in loss (income) of
Hiland Partners, LP 206 (574) ------------- ------------- Net
income $840 $748 ============= ============= March 31, December 31,
2008 2007 ------------- ------------- (unaudited) Balance Sheet
Data (at period end): Property and equipment, at cost, net $323,552
$323,073 Total assets $425,671 $420,286 Long-term debt, net of
current maturities $235,307 $226,459 Minority interests $123,856
$126,409 Net equity $17,233 $22,135 (A) Compression revenues and
compression segment margin are the same. There are no compression
purchases associated with the compression segment. (B)
Reconciliation of total segment margin to operating income: Three
Months Ended March 31, ----------------------------- 2008 2007
------------- ------------- (unaudited, in thousands)
Reconciliation of Total Segment Margin to Operating Income
Operating income $4,192 $3,396 Add: Operations and maintenance
expenses 6,769 4,970 Depreciation, amortization and accretion 9,216
7,028 General and administrative expenses 2,684 2,045 -------------
------------- Total segment margin $22,861 $17,439 =============
============= We view total segment margin, a non-GAAP financial
measure, as an important performance measure of the core
profitability of our operations. 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. DATASOURCE: Hiland Partners, LP; Hiland
Holdings GP, LP CONTACT: Matthew S. Harrison, Vice President and
CFO of Hiland Partners, LP, +1-580-242-6040 Web site:
http://www.hilandpartners.com/
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