Interest income and other totaled $0.7 million for the six months ended June
30, 1996 as compared with $0.3 million for the six months ended June 30, 1995.
The increase in interest income is primarily due to accrued interest of $0.5
million related to the $7.5 million that was added to the Payout Amount in
connection with restructuring the demand charges payable to the Partnership
from Tatham Offshore. Interest and other financing costs, net of capitalized
interest, for the six months ended June 30, 1996 totaled $0.6 million as
compared with $0.3 million for the six months ended June 30, 1995. Interest
and fees associated with the Partnership's credit facilities of $8.5 million
were capitalized in connection with construction projects and drilling
activities in progress during the six months ended June 30, 1996.
Net income for the six months ended June 30, 1996 totaled $20.1 million as
compared with $11.1 million for the six months ended June 30, 1995 as a result
of the items discussed above. Net income per Unit for the six months ended June
30, 1996 totaled $1.63 per Unit as compared with $0.90 per Unit for the six
months ended June 30, 1995.
LIQUIDITY AND CAPITAL RESOURCES
Sources of Cash. The Partnership intends to satisfy its capital requirements
and other working capital needs primarily from cash on hand, cash from
continuing operations and borrowings under the Partnership Credit Facility.
Net cash provided by operating activities for the six months ended June 30,
1996 totaled $5.1 million. At June 30, 1996, the Partnership had cash and cash
equivalents of $5.5 million.
Cash from continuing operations is derived from (i) payments for transporting
gas through the 100% owned pipelines, (ii) cash distributions from the
Stingray, HIOS, UTOS and Viosca Knoll partnerships and from POPCO and West
Cameron Dehy, (iii) platform access and processing fees and (iv) the sale of
oil and gas attributable to the Partnership's interest in certain producing
Stingray, HIOS, UTOS and Viosca Knoll are partnerships and POPCO and West
Cameron Dehy are limited liability companies in which the Partnership owns an
interest. The Partnership's cash flows from operations will be affected by the
ability of such entities to make distributions. Distributions from such
entities are also subject to the discretion of their respective management
committees. Further, each of Stingray and POPCO is party to a credit agreement
under which it has outstanding obligations that may restrict the payments of
distributions to its owners. In December 1995, Stingray amended an existing
term loan agreement to provide for aggregate outstanding borrowings of up to
$29.0 million in principal amount. The agreement requires the payment of
principal by Stingray of $1.45 million per quarter. As of June 30, 1996,
interest accrued at the rate of approximately 6.4% per annum and is payable
quarterly. As of June 30, 1996, Stingray had $27.55 million outstanding under
its term loan agreement.
In April 1996, POPCO entered into a revolving credit facility (the "POPCO
Credit Facility") with a group of commercial banks to provide up to $150.0
million for the construction of the second phase of the Poseidon Oil Pipeline
and for other working capital needs of POPCO. As of June 30, 1996, POPCO had
$40.0 million outstanding under the POPCO Credit Facility bearing interest at
6.7% per annum. POPCO's ability to borrow money under the facility is subject
to certain customary terms and conditions, including borrowing base
limitations. The POPCO Credit Facility is secured by a substantial portion of
POPCO's assets and matures on April 30, 2001.
Flextrend Development has initiated production from the each of the Assigned
Properties. The Viosca Knoll Block 817 lease is currently producing a total of
approximately 90 MMcf of gas per day when platform drilling activities permit.
Flextrend Development owns a 75% working interest in this property, subject to
certain reversionary interests. The Garden Banks Block 72 lease, which began
producing in May