Chesapeake Midstream Partners, L.P. (NYSE:CHKM) today announced
financial results for the 2011 first quarter. Net income for the
quarter totaled $38.8 million, an increase of $3.9 million, or 11%,
versus the 2010 first quarter. Net income available to limited
partners for the 2011 first quarter was $38.0 million, or $0.27 per
limited partner unit. The Partnership’s adjusted ebitda for the
2011 first quarter was $72.1 million, up $14.1 million, or 24%,
from 2010 first quarter adjusted ebitda of $58.0 million.
Distributable cash flow (DCF) totaled $52.0 million, an increase of
$12.6 million, or 32%, compared to the 2010 first quarter. Adjusted
DCF for the 2011 first quarter was $57.2 million. Financial terms
are defined on pages two and three of this release.
Total throughput for the 2011 first quarter was 180.7 billion
cubic feet (bcf) of natural gas, or 2.01 bcf per day, an increase
of 31% from 2010 first quarter throughput of 1.53 bcf per day. The
Springridge gathering system in the Haynesville Shale, acquired in
December 2010, is delivering on its growth potential. Springridge
volume of 0.49 bcf per day in the 2011 first quarter increased 18%
compared to the daily average for the 2010 fourth quarter. Revenue
for the 2011 first quarter was $123.5 million, an increase of $28.1
million, or 29%, from 2010 first quarter revenue of $95.4
million.
The Partnership connected 155 new wells to its gathering systems
during the 2011 first quarter, an increase of 85% compared to the
2010 first quarter and an increase of 23% compared to the 2010
fourth quarter. The Partnership invested approximately $106.5
million in capital expenditures during the 2011 first quarter,
including maintenance capital expenditures of approximately $18.5
million.
Partnership Declares Cash
Distribution
On April 26, 2011, the Board of Directors of the Partnership’s
general partner declared a quarterly cash distribution of $0.35 per
unit for the 2011 first quarter, a $0.0125, or 4%, increase over
the 2010 fourth quarter. The distribution will be paid on May 13,
2011 to unitholders of record at the close of business on May 6,
2011. Adjusted DCF for the 2011 first quarter was $57.2 million,
which provided distribution coverage of 1.16 times the amount
required for the Partnership to fund the distribution to both the
general and limited partners.
Management Comments
J. Mike Stice, Chesapeake Midstream Partners’ Chief Executive
Officer, commented, “We have delivered another strong quarter for
investors. Our Springridge system is performing well with volumes
up 18% quarter over quarter. The continued business growth allows
us to deliver a $0.35 per unit distribution, up 4% from the 2010
fourth quarter. This $0.0125 increase in our distribution is
another example of the stable, growing cash flows generated by our
business model and our commitment to our unitholders.”
Senior Notes Offering
On April 19, 2011, the Partnership closed the offering of $350
million of senior notes due 2021. The notes bear interest at 5.875%
per annum and the Partnership used part of the net proceeds to
repay borrowings outstanding under its revolving credit facility
and will use the remainder for general Partnership purposes.
Following the closing of the offering, the Partnership had over
$800 million of liquidity.
Conference Call Information
A conference call to discuss this release of financial results
has been scheduled for Wednesday morning, May 11, 2011 at 9:00 a.m.
EDT. The telephone number to access the conference call is
719-325-2249 or toll-free 888-437-9364. The passcode
for the call is 1885876. We encourage those who would like
to participate in the call to dial the access number between 8:50
and 9:00 a.m. EST. For those unable to participate in the
conference call, a replay will be available for audio playback from
12:00 p.m. EDT on May 11, 2011 through 12:00 p.m. EDT on May 25,
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 1885876. 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 and 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 or 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 it’s
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.
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
March 31,
2011
Three Months Ended
March 31,
2010
Revenues, including revenue from
affiliates(1)
$ 123,529 $ 95,386
Operating Expenses Operating
expenses, including expenses from affiliates 42,561 30,693
Depreciation and amortization expense 31,758 21,950 General and
administrative expense, including expenses from affiliates 8,946
6,736 Gain on sale of assets (60 ) (30 ) Total
operating expenses 83,205 59,349
Operating income 40,324 36,037
Other Income (Expense)
Interest expense (620 ) (611 ) Other income 42 2
Income before income tax expense 39,746 35,428 Income tax
expense (970 ) (514 ) Net income $ 38,776 $
34,914
Limited partner interest in net income Net
income $ 38,776 n/a Less general partner interest in net income
(776 ) n/a Limited partner interest in net
income $ 38,000 n/a Net income per limited partner
unit – basic and diluted
Common units
$ 0.27 n/a Subordinated units $ 0.27 n/a Weighted average
limited partner units outstanding used for net income per unit
calculation – basic
and diluted (in thousands)
Common units 69,219 n/a Subordinated units 69,076 n/a
(1) In the event either Chesapeake Energy Corporation
(“Chesapeake”) or Total E&P USA, Inc. (“Total”), as applicable,
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 applicable 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
March 31,
2011
As of
December 31,
2010
Assets Total current assets $ 62,411 $ 131,487
Property, plant and equipment Gathering systems 2,653,523 2,544,053
Other fixed assets 43,882 41,125 Less: Accumulated depreciation
(386,056 ) (358,269 ) Total property, plant
and equipment, net 2,311,349 2,226,909
Intangible assets 167,046 172,481 Deferred loan costs, net
14,221 15,039 Total assets $ 2,555,027 $ 2,545,916
Liabilities and Partners’ Capital Total
current liabilities $ 116,800 $ 97,991 Long-term liabilities
Revolving bank credit facility 249,200 249,100 Other liabilities
4,304 4,257 Total long-term liabilities
253,504 253,357 Partners’ capital Partners' capital
2,184,723 2,194,568 Total capital
2,184,723 2,194,568 Total liabilities and partners’
capital $ 2,555,027 $ 2,545,916
CHESAPEAKE
MIDSTREAM PARTNERS, L.P. CONDENSED CONSOLIDATED STATEMENT OF
CASH FLOWS ($ in thousands) (unaudited)
Three Months Ended
March 31,
2011
Three Months Ended
March 31,
2010
Cash flows from operating activities Net income $ 38,776 $
34,914 Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization 31,758 21,950
Gain on sale of assets (60 ) (30 ) Other non-cash items 244 (988 )
Changes in assets and liabilities Decrease in accounts receivable
50,277 120,362 Decrease (increase) in other assets 1,001 (226 )
Increase in accounts payable 13,924 3,655 Increase (decrease) in
accrued liabilities 1,349 (61,312 ) Net cash
provided by operating activities 137,269 118,325
Cash flows from investing activities Additions to
property, plant and equipment (106,521 ) (39,451 ) Proceeds from
sale of assets 211 53 Net cash used in
investing activities (106,310 ) (39,398 )
Cash flows from financing activities Proceeds from long-term
debt borrowings 134,200 84,400 Payments on long-term debt
borrowings (134,100 ) (128,500 ) Distribution to unit holders
(47,581 ) –- Initial public offering costs (1,280 ) –- Distribution
to partners –- (19,500 ) Contribution from predecessor –- 177 Other
adjustments 4 –- Net cash used in financing
activities (48,757 ) (63,423 )
Net increase (decrease) in cash and cash
equivalents
(17,798 ) 15,504
Cash and cash equivalents Beginning
of period 17,816 3 End of period $ 18 $ 15,507
CHESAPEAKE MIDSTREAM PARTNERS, L.P.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES ($ in
thousands) (unaudited)
Three Months Ended
March 31,
2011
Three Months Ended
March 31,
2010
Net income $ 38,776 $ 34,914
Adjusted
for: Interest expense 620 611 Income tax expense 970 514
Depreciation and amortization expense 31,758 21,950 (Gain) loss on
sale of assets (60 ) (30 )
Adjusted
EBITDA $ 72,064 $ 57,959
Cash provided by operating
activities $ 137,269 $ 118,325
Adjusted for:
Changes in assets and liabilities (66,551 ) (62,479 ) Maintenance
capital expenditures (18,500 ) (17,500 ) Other non-cash items
(244 ) 988
Distributable cash flow
51,974 39,334
Adjusted for: Implied minimum volume
commitment 5,268 17,176
Adjusted
distributable cash flow $ 57,242 $ 56,510
Cash
distribution Limited partner units ($0.35 x 138,161,160 units)
$ 48,356 $ n/a General partner units ($0.35 x 2,819,606 units)
987 n/a
Total cash distribution $
49,343 $ n/a
Distribution coverage ratio 1.16
n/a
CHESAPEAKE MIDSTREAM PARTNERS,
L.P. OPERATING STATISTICS (unaudited)
Three Months Ended Three Months Ended March
31, March 31, 2011 2010 Barnett
Shale Wells connected during period 90 53 Total wells connected
1,925 1,726 Throughput, bcf per day 0.970 0.979 Approximate miles
of pipe at end of period 802 700 Gas compression (horsepower) at
end of period 140,210 133,015
Haynesville
Shale Wells connected during period 19
–-
Total wells connected 183 –- Throughput, bcf per day 0.494 –-
Approximate miles of pipe at end of period 226 –- Gas compression
(horsepower) at end of period 21,970 –-
Mid-Continent Wells connected during period 46 31 Total
wells connected 2,402
2,230
Throughput, bcf per day 0.544 0.551 Approximate miles of pipe at
end of period 2,358 2,100 Gas compression (horsepower) at end of
period 86,134 85,504
Total Wells connected
during period 155 84 Total wells connected 4,510 3,956 Throughput,
bcf per day 2.008 1.530 Approximate miles of pipe at end of period
3,386 2,800 Gas compression (horsepower) at end of period 248,314
218,519
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