Enterprise Products Partners L.P.

SEC Filings

10-Q
GULFTERRA ENERGY PARTNERS L P filed this Form 10-Q on 08/09/2004
Entire Document
 
<PAGE>
 
NATURAL GAS PIPELINES AND PLANTS
 

<Table>
<Caption>
                                                      QUARTER ENDED
                                                        JUNE 30,         SIX MONTHS ENDED JUNE 30,
                                                   -------------------   -------------------------
                                                     2004       2003        2004          2003
                                                   --------   --------   -----------   -----------
                                                         (IN THOUSANDS, EXCEPT FOR VOLUMES)
<S>                                                <C>        <C>        <C>           <C>
Natural gas pipelines and plants revenue.........  $183,021   $199,547    $ 364,557     $ 396,774
Cost of natural gas and other products...........   (59,914)   (86,123)    (123,860)     (175,919)
                                                   --------   --------    ---------     ---------
Natural gas pipelines and plants margin..........   123,107    113,424      240,697       220,855
Operating expenses excluding depreciation,
  depletion, and amortization....................   (39,990)   (36,123)     (76,404)      (66,569)
Other income and cash distributions from
  unconsolidated affiliates in excess of
  earnings(1)....................................       787      1,038        1,624         1,855
Minority interest................................        --         47           --            80
                                                   --------   --------    ---------     ---------
Performance cash flows...........................  $ 83,904   $ 78,386    $ 165,917     $ 156,221
                                                   ========   ========    =========     =========
Volumes (MDth/d)
  Texas Intrastate...............................     3,298      3,407        3,254         3,380
  San Juan Gathering.............................     1,255      1,241        1,251         1,186
  Permian Basin Gathering........................       312        349          303           334
  HIOS...........................................       815        707          779           729
  Falcon Nest Pipeline(2)........................       280        197          276           114
  Viosca Knoll Gathering.........................       658        672          649           680
  Other natural gas pipelines....................       593        470          558           493
  Processing plants..............................       739        781          730           796
                                                   --------   --------    ---------     ---------
     Total volumes...............................     7,950      7,824        7,800         7,712
                                                   ========   ========    =========     =========
</Table>

 
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(1) Earnings from unconsolidated affiliates for the quarters ended June 30, 2004
    and 2003, were $584 thousand and $626 thousand. Earnings from unconsolidated
    affiliates for the six months ended June 30, 2004 and 2003, were $1,118
    thousand and $1,255 thousand.
 
(2) The Falcon Nest pipeline was placed in service in March 2003.
 
     We provide natural gas gathering and transportation services for a fee.
Agreements with some customers of our pipelines and plants require that we
purchase natural gas from them at the wellhead for an index price less an amount
that compensates us for gathering services, after which we sell the natural gas
into the open market at points on our system at the same index price.
Accordingly, under these agreements, our operating revenues and costs of natural
gas and other products are impacted equally by changes in energy commodity
prices, thus our margin for these agreements reflects only the fee we received
for gathering services. At our Indian Basin processing facility, our revenues
reflect the gross sales of NGL attributable to our ownership percentage.
Included in our cost of natural gas and other products is the payment to the
producers for the NGL we marketed on their behalf. For these reasons, we feel
that gross margin (revenue less cost of natural gas and other products) provides
a more accurate and meaningful basis for analyzing operating results for this
segment.
 
     During the latter half of 2002, we experienced a significant unfavorable
variance between the fuel usage on HIOS and the fuel collected from our
customers for our use. This was primarily associated with an unexplained
increase in our fuel use which was not contemporaneously collected from our
customers. We initially believed a series of events may have contributed to this
variance, including two major storms that hit the Gulf Coast Region (and these
assets) in late September and early October 2002. We conducted a thorough review
of our operations and were unable to determine the exact cause of the increase
in fuel use. The fuel use has since returned to historical levels. As of June
30, 2004, we have recorded gross fuel differences of approximately $7.5 million,
which we included in other non-current assets on our balance sheet. In the
future, we expect to have an opportunity to file for collection of the fuel
differences. However, at this time we are not able to determine what amount, if
any, may be collectible from our customers. Any amounts we are unable to resolve
or collect from our customers will negatively impact the future results of our
natural gas pipelines and plants segment.
 
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