related facilities for the transportation and processing of gas and oil in the
Gulf, including the second phase of the Poseidon Oil Pipeline, (iii) management
fees and other operating expenses and (iv) debt service on its outstanding debt.
In addition, Flextrend Development's future capital requirements will consist of
expenditures related to the continued development of the Garden Banks Block 72
and Garden Banks Block 117 leases.
For every full quarter since its inception, the Partnership has declared and
subsequently paid a cash distribution to holders of Preference Units and Common
Units in an amount equal to or exceeding the Minimum Quarterly Distribution of
$0.55 per Unit per quarter ($2.20 per Unit on an annualized basis). Commencing
in the third quarter of 1993, the Partnership increased the quarterly
distribution to $0.60 per Unit. Beginning with the quarter ending March 31,
1996, the Partnership increased the quarterly distribution to $0.65 per Unit.
For the quarter ending June 30, 1996, the Partnership increased the quarterly
distribution to $0.70 per Unit. For the quarter ending September 30, 1996, the
Partnership increased the quarterly distribution to $0.75 per Unit. This
distribution will be paid on November 14, 1996 to Unitholders of record as of
October 31, 1996. At the current distribution rate of $0.75 per Unit, the
Partnership anticipates making quarterly Partnership distributions of $9.5
million in respect of the Preference Units, Common Units and general partner
interest ($38.1 million on an annual basis). The Partnership believes that it
will be able to continue to pay at least the current quarterly distribution of
$0.75 per Preference Unit for the foreseeable future.
In February 1996, Poseidon LLC and Texaco Trading formed POPCO to construct,
own and operate the Poseidon Oil Pipeline. Pursuant to the terms of the
organizational documents, Poseidon LLC initially contributed assets, at net
book value, related to the construction of the initial phase of the Poseidon
Oil Pipeline as well as certain dedication agreements and Texaco Trading
initially contributed an equivalent amount of cash as well as its rights under
certain agreements. The Partnership has fully funded its portion of the
capital requirements of POPCO for the construction of the first phase of the
Poseidon Oil Pipeline. In July 1996, Marathon joined POPCO by contributing its
interest in 58 miles of nearby crude oil pipelines and dedicating its portion
of oil reserves attached to such pipelines to the Poseidon Oil Pipeline for
transportation. As a result, each of the Partnership and Texaco Trading now
owns a 36% interest in POPCO and Marathon owns the remaining 28% interest. The
Partnership anticipates that POPCO's future capital requirements, including
amounts necessary to complete the second phase of the system, will be funded by
borrowings under the POPCO Credit Facility.
On July 8, 1996, the Partnership and affiliates of Marathon and Shell announced
plans to build and operate an interstate natural gas pipeline system and a
connecting gathering system to serve growing production areas in the Green
Canyon area of the Gulf. The total cost of the two systems, including the
Manta Ray System currently owned by the Partnership, is approximately $270.0
million. The new jurisdictional interstate pipeline segment of the project, to
be named "Nautilus", will consist of a 30-inch line downstream from Ship Shoal
Block 207 connecting to the Exxon operated Garden City gas processing plant.
Upstream of the Ship Shoal 207 terminal, the Manta Ray System will be extended
into a broader gathering system that would serve shelf and deepwater production
around Ewing Bank Block 873 to the east and Green Canyon Block 65 to the west.
Marathon and Shell have significant deep water acreage positions in the area,
including the recently announced Troika field (Green Canyon Block 244), and
would provide the majority of the capital funding for the new construction. The
Partnership would provide some funding along with the contribution of Manta Ray
System. The consummation of this joint venture is subject to the negotiation
and execution of definitive documents.
The Partnership anticipates that capital expenditures in connection with the
maintenance and enhancement of the service capabilities of the Ewing Bank and
Green Canyon systems will aggregate approximately $0.5 million per year
although the actual level of these capital expenditures may change from time to