UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d)
of the
Securities Exchange Act of 1934
Date of
Report (Date of earliest event reported): July 24, 2008
ENTERPRISE
PRODUCTS PARTNERS L.P.
(Exact
name of registrant as specified in its charter)
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Delaware
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1-14323
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76-0568219
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(State
or Other Jurisdiction of
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(Commission
File Number)
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(I.R.S.
Employer
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Incorporation
or Organization)
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Identification
No.)
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1100
Louisiana, 10th
Floor, Houston, Texas
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77002
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(Address
of Principal Executive Offices)
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(Zip
Code)
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Registrant’s
Telephone Number, including Area Code: (713) 381-6500
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
¨ Written communications
pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material
pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
¨ Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
Item
2.02. Results of Operations and Financial Condition.
On July
24, 2008, Enterprise Products Partners L.P. (“Enterprise”) issued a press release
announcing its financial and operating results for the three and six months
ended June 30, 2008 and 2007, and held a webcast conference call discussing
those results. A copy of the earnings press release is furnished as
Exhibit 99.1 to this Current Report, which is hereby incorporated by reference
into this Item 2.02. The webcast conference call will be archived and
available for replay on Enterprise’s website at www.epplp.com
for 90 days.
Unless the context
requires otherwise, references to “we,” “us,” “our,” or “Enterprise” within the
context of this Current Report refer to the consolidated business and operations
of Enterprise Products Partners L.P. References to “EPCO” refer to
EPCO, Inc., a private company affiliate of Enterprise and its ultimate parent
company. References to “DEP” or “Duncan Energy Partners” refer to
Duncan Energy Partners, L.P., a consolidated subsidiary of
Enterprise.
Use
of Non-GAAP financial measures
The press
release and related conference call discussion include the non-generally
accepted accounting principle (“non-GAAP”) financial measures of gross operating
margin, distributable cash flow and EBITDA. The press release
provides reconciliations of these non-GAAP financial measures to their most
directly comparable financial measure calculated and presented in accordance
with U.S. generally accepted accounting principles (“GAAP”). Our
non-GAAP financial measures should not be considered as alternatives to GAAP
measures such as net income, operating income, net cash flows provided by
operating activities or any other GAAP measure of liquidity or financial
performance.
Gross
operating margin. We evaluate segment performance based on
the non-GAAP
financial measure of gross operating margin. Gross operating margin
(either in total or by individual segment) is an important performance measure
of the core profitability of our operations. This measure forms the
basis of our internal financial reporting and is used by senior management in
deciding how to allocate capital resources among business
segments. We believe that investors benefit from having access to the
same financial measures that senior management uses in evaluating segment
results. The GAAP measure most directly comparable to total
segment gross operating margin is operating
income.
We define total segment gross operating margin as operating income before: (i) depreciation, amortization and accretion expense; (ii) operating lease expenses for which we do not have the payment obligation; (iii) gains and losses on the sale of assets; and (iv) general and administrative costs. Gross operating margin is exclusive of other income and expense transactions, provision for income taxes, minority interest, cumulative effect of changes in accounting principles and extraordinary charges. Gross operating margin by segment is calculated by subtracting segment operating costs and expenses (net of the adjustments noted above) from segment revenues, with both segment totals before the elimination of intercompany transactions. In accordance with GAAP, intercompany accounts and transactions are eliminated in consolidation.
We include
earnings from equity method unconsolidated affiliates in our measurement of
segment gross operating margin. Our equity investments with industry
partners are a vital component of our business strategy. They are a
means by which we conduct our operations to align our interests with those of
our customers, which may be a supplier of raw materials or a consumer of
finished products. This method of operation enables us to achieve
favorable economies of scale relative to the level of investment and
business risk assumed versus what we could accomplish on a stand-alone
basis. Many of these businesses perform supporting or
complementary roles to our other business operations.
Distributable
cash flow. We define distributable cash flow, which we view as
a non-GAAP measure of liquidity, is net income or loss adjusted
for:
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§
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the
addition of depreciation, amortization and accretion
expense;
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§
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the
addition of operating lease expenses for which we do not have the payment
obligation;
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§
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the
addition of cash distributions received from unconsolidated affiliates,
less equity in the earnings of such unconsolidated
affiliates;
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§
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the
subtraction of sustaining capital expenditures and cash payments to settle
asset retirement obligations;
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1
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§
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the
addition of losses or subtraction of gains relating to the sale of
assets;
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§
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the
addition of cash proceeds from the sale of assets or return of investment
from unconsolidated affiliates;
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§
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the
addition of losses or subtraction of gains on the monetization of
financial instruments recorded in accumulated other comprehensive income,
if any, less related amortization of such amount to
earnings;
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§
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the
addition of transition support payments received from El Paso Corporation
related to the merger of GulfTerra Energy Partners, L.P. with a wholly
owned subsidiary of ours in September 2004 (such payments ceased in the
third quarter of 2007);
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§
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the
addition of minority interest expense associated with the public
unitholders of Duncan Energy Partners, less related cash distributions to
be paid to such holders with respect to the period of
calculation;
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§
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the
addition or subtraction of other miscellaneous non-cash amounts (as
applicable) that affect net income or loss for the
period.
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Sustaining
capital expenditures are capital expenditures (as defined by GAAP) resulting
from improvements to and major renewals of existing assets.
Senior
management compares the distributable cash flow we generate to the cash
distributions we expect to pay our partners. Using this data, management
computes our distribution coverage ratio. Distributable cash flow 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, in turn, is based on the amount of cash
distributions a partnership pays to a unitholder. The GAAP measure
most directly comparable to distributable cash flow is cash flow from operating
activities.
EBITDA. We
define EBITDA as net income or loss before interest expense, provision for
income taxes and depreciation, accretion and amortization
expense. EBITDA is commonly used as a supplemental financial measure
by senior management and by external users of our financial statements, such as
investors, commercial banks, research analysts and rating agencies, to
assess:
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§
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the
financial performance of our assets without regard to financing methods,
capital structures or historical cost
basis;
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the
ability of our assets to generate sufficient cash to meet debt service
requirements; and
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the
viability of projects and the overall rates of return on alternative
investment opportunities.
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Since EBITDA excludes some, but not
all, items that affect net income or loss and because these measures may vary
among other companies, the EBITDA data presented in our press release may not be
comparable to similarly titled measures of other companies. The
GAAP measure most directly comparable to EBITDA is cash flow from operating
activities.
Item
9.01. Financial Statements and Exhibits.
(d) Exhibits.
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Exhibit
No.
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Description
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99.1
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Enterprise
Products Partners L.P. press release dated July 24,
2008.
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2
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this Report to be signed on its behalf by the undersigned hereunto
duly authorized.
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ENTERPRISE
PRODUCTS PARTNERS L.P.
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By:
Enterprise Products GP, LLC,
its
General Partner
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Date:
July 24, 2008
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By:
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/s/
Michael J. Knesek
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Name:
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Michael
J. Knesek
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Title:
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Senior
Vice President, Controller and Principal
Accounting
Officer of Enterprise Products GP,
LLC
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3
Exhibit
Index
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Exhibit
No.
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Description
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99.1
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Enterprise
Products Partners L.P. press release dated July 24,
2008.
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4
Exhibit
99.1
Enterprise
Products Partners L.P.
P.O.
Box 4324
Houston,
TX 77210
(713)
381-6500
Enterprise
Reports Record Results for Second Quarter 2008
Houston,
Texas (Thursday, July 24, 2008) – Enterprise Products Partners
L.P. (NYSE: “EPD”) today announced its financial results for the
three and six months ended June 30, 2008. The partnership reported an
85 percent increase in net income to $263 million, or $0.52 per unit on a fully
diluted basis, for the second quarter of 2008 compared to net income of $142
million, or $0.26 per unit on a fully diluted basis, for the second quarter of
2007.
Distributable cash flow increased 18
percent to $347 million in the second quarter of 2008 from $294 million in the
same quarter of 2007. Excluding gains and losses associated with
activities to manage interest rate risk for both periods, distributable cash
flow increased 49 percent to $375 million for the second quarter of 2008
compared to $251 million for the second quarter of last year. On July
16, 2008, the board of directors of Enterprise’s general partner approved an
increase in the partnership’s quarterly cash distribution rate to $0.515 per
unit with respect to the second quarter of 2008. This represents a
6.7 percent increase over the $0.4825 per unit rate that was paid with respect
to the second quarter of last year. Distributable cash flow for the
second quarter of 2008 provided 1.4 times coverage of the cash distribution to
be paid to limited partners. The partnership retained approximately
$86 million of distributable cash flow during the second quarter of 2008
bringing the total amount of distributable cash flow retained for 2008 to $212
million. This cash is available to reinvest in growth capital
projects, to reduce debt and to limit the need to issue additional
equity. Distributable cash flow is a non-generally accepted
accounting principle (“non-GAAP”) financial measure that is defined and
reconciled later in this press release to its most directly comparable GAAP
financial measure, net cash flows provided by operating activities.
“Enterprise posted another exceptional
quarter,” said Michael A. Creel, president and chief executive officer of
Enterprise. “The second quarter highlights the benefits of our large
and diversified asset position across the midstream energy value
chain. We had strong demand for our services from both producers and
consumers of natural gas, NGLs and crude oil. Cash flow and volume
contributions from new assets and expansions as well as solid year-over-year
performance from other assets resulted in record gross operating margin, EBITDA
and net income. Enterprise’s pipeline assets transported in excess of
2 million barrels per day of NGLs, crude oil and petrochemicals and 8.5 trillion
Btus per day of natural gas for the third consecutive quarter.”
“Each of our business segments reported
increases in gross operating margin which generated a 43 percent increase in
total gross operating margin for the second quarter to a record $534 million
compared to the second quarter of last year. This growth was
primarily driven by our natural gas processing and pipeline assets and our NGL
pipeline assets. Most notable about the strength of the second
quarter and underscoring the benefits of our geographic and business
diversification was the fact that second quarter 2008 gross operating margin
exceeded that of the first quarter of 2008 by $12 million despite downtime and
repair expense associated with our Independence project and Pioneer natural gas
processing plant, which downtime and repairs resulted in a $52 million decrease
in gross operating margin for the second quarter. Repairs to
Independence were completed in June and to Pioneer in April and both facilities
have returned to normal operations,” stated Creel.
“During the second half of 2008, three
large capital growth projects are scheduled to be completed: the expansion of
our Meeker natural gas processing plant and the completion of the Exxon central
treating facility in the growing Piceance basin and the Sherman Extension
expansion to our Texas Intrastate natural gas pipeline system serving the
prolific Barnett Shale area. We retained approximately 25 percent of
our distributable cash flow during the second quarter of 2008 to manage our
financial flexibility as we execute our capital growth program. We
balanced this retention of cash with increasing the cash distribution rate to
our limited partners by 6.7 percent over the second quarter of last year,” said
Creel.
Revenue for the second quarter of 2008
increased 50 percent to a record $6.3 billion from $4.2 billion in the same
quarter of 2007. Gross operating margin increased to a record $534
million for the second quarter of this year from $373 million for the second
quarter of last year. Operating income was $374 million for the
second quarter of 2008, a 75 percent increase over the $215 million of operating
income for the same quarter of 2007. Earnings before interest, taxes,
depreciation and amortization (“EBITDA”) for the second quarter of 2008
increased 51 percent to a record $506 million from $335 million
1
for the
second quarter of 2007. Gross operating margin and EBITDA are
non-GAAP financial measures that are defined and reconciled later in this press
release to their most directly comparable GAAP financial measures.
Review of Segment
Performance for the Second Quarter of 2008
NGL Pipelines & Services –
Gross operating margin for the NGL Pipelines and Services segment increased 52
percent to $318 million for the second quarter of 2008 compared to $209 million
for the same quarter of 2007. The second quarter of 2007 included $20
million of proceeds from recoveries under business interruption
insurance.
Enterprise’s natural gas processing
business recorded gross operating margin of $196 million for the second quarter
of 2008, a 92 percent increase from $102 million in the second quarter of 2007,
excluding $13 million of recoveries from business interruption insurance in
2007. This business benefited from strong natural gas processing
margins and increases in volumes from both the addition of two new natural gas
processing plants as well as performance from the partnership’s existing South
Texas and Chaco plants. Approximately $74 million of this increase
was attributable to the results of the Meeker and Pioneer natural gas processing
plants that began operations in the fourth quarter of 2007 and first quarter of
2008, respectively. Pioneer was out of service for approximately 24
days during the second quarter of 2008 for repairs. This downtime
reduced gross operating margin for the facility by approximately $9
million. Equity NGL production, the NGLs that Enterprise earns and
takes title to as a result of providing processing services, increased 66
percent to 111 thousand barrels per day (“MBPD”) for the second quarter of 2008
from 67 MBPD for the same quarter in 2007. This increase was largely
due to equity NGL production associated with the Meeker and Pioneer
plants. Natural gas volumes processed under fee-based contracts
increased 13 percent to approximately 2.7 billion cubic feet per day (“Bcfd”)
this quarter from 2.4 Bcfd in the second quarter of 2007.
Gross operating margin from the
partnership’s NGL pipeline and storage business increased 42 percent to $94
million in the second quarter of 2008 compared to $66 million in the second
quarter of 2007, excluding $2 million of recoveries from business interruption
insurance in 2007. This increase was primarily attributable to a $29
million increase in gross operating margin from the Mid-America and Seminole
pipelines generated by a 114 MBPD increase in NGL volumes and benefits from
certain acquisition-related settlements. Total volumes associated
with the NGL pipeline and storage business for the second quarter of 2008 were
1.8 million barrels per day compared to 1.7 million barrels per day for the same
quarter last year.
Gross operating margin from
Enterprise’s NGL fractionation business was $27 million in the second quarter of
2008 versus $21 million reported for the same quarter of 2007, excluding $5
million of recoveries from business interruption insurance in
2007. Gross operating margin and volumes for this business were
higher because of the addition of the Hobbs fractionator and partially offset by
a decrease in gross operating margin due to lower volumes at the partnership’s
Norco fractionator. NGL fractionation volumes for the second quarter
of this year increased 21 percent or 77 MBPD, to 447 MBPD from 370 MBPD recorded
in the second quarter of last year. The volume increase was
principally due to the addition of the Hobbs fractionator that went into service
during the third quarter of 2007 and associated volumes of 78 MBPD for the
second quarter of 2008.
Onshore Natural Gas Pipelines &
Services – Enterprise’s Onshore Natural Gas Pipelines and Services
segment reported a 48 percent increase in gross operating margin to $123 million
for the second quarter of 2008 compared to $83 million for the second quarter of
last year.
Gross operating margin for the
partnership’s onshore natural gas pipeline business increased 49 percent to $115
million for the second quarter of this year from $77 million reported for the
second quarter of 2007. The San Juan system reported an $18 million
increase in gross operating margin on higher revenues from transportation fees
indexed to natural gas prices and from NGL and condensate sales. The
Texas Intrastate natural gas pipeline system reported a $9 million increase in
gross operating margin from a 0.5 trillion British thermal units per day
(“TBtud”) increase in volume and from higher average transportation and
reservation fees. The Acadian Gas and Jonah Gas Gathering pipeline
systems reported increases in gross operating margin of $5 million and $4
million, respectively. Total onshore natural gas transportation
volumes increased 17 percent to a record 7.4 TBtud for the second quarter of
2008 versus 6.3 TBtud in the same quarter of 2007.
Gross operating margin from the
partnership’s natural gas storage business was $8 million for the second quarter
of 2008 compared to $6 million for the same quarter in 2007. This
increase was primarily attributable to Petal, which benefited from new storage
capacity being placed into service in the third quarter of 2007.
Offshore Pipelines &
Services – Gross operating margin for the Offshore Pipelines and Services
segment increased to $35 million in the second quarter of 2008 from $31 million
in the same quarter of 2007. The Independence project
reported
2
gross
operating margin of $12 million. The Independence project’s gross
operating margin for the second quarter of 2008 was adversely impacted by
approximately $14 million for expenses and $29 million for reduced revenues as a
result of 66 days of either downtime or operating at significantly lower volumes
while repairs were being made to a flange at the top of the pipeline’s
flexjoint. Operations at the platform and pipeline were suspended
from April 8 and resumed at lower rates on June 3 before resuming normal rates
on June 14, 2008. Gross operating margin for the second quarter of
2007 included $1 million of proceeds from business interruption
insurance.
The offshore platform services business
reported gross operating margin of $32 million for the second quarter of 2008
compared to $27 million for the same quarter of 2007. The
Independence Hub platform reported a $6 million increase in gross operating
margin to $19 million. Contributions from the Independence Hub were
partially offset by a $2 million decrease from the Falcon platform on lower
demand revenues due to the expiration of the period that demand fees were
applicable. For the second quarter of 2008, Enterprise’s offshore
platform natural gas processing volume increased 87 percent to 353 million cubic
feet per day while crude oil processing volumes decreased 22 percent to 22 MBPD
compared to the same quarter last year.
Gross operating margin from
Enterprise’s offshore natural gas pipeline business decreased $15 million to a
loss of $11 million for the second quarter of this year compared to a positive
$4 million in the second quarter of 2007, excluding $1 million of recoveries
from business interruption insurance in 2007. This loss was largely
due to downtime at the Independence Trail pipeline including $14 million of
repair expense. The Viosca Knoll, Phoenix and Neptune systems
reported lower gross operating margin due to producers shutting in wells for
workovers and pipeline repairs. Transportation volumes for the
offshore natural gas pipeline business were 1.2 TBtud in the second quarter of
2008 compared to 1.3 TBtud in the same quarter of 2007.
Enterprise’s offshore oil pipeline
business recorded gross operating margin of $15 million for the second quarter
of 2008 compared to a loss of $1 million for the second quarter of
2007. This increase is primarily due to Enterprise’s 50 percent
ownership interest in the Cameron Highway Oil Pipeline system, which benefited
from a 119 percent increase in transportation volumes and the retirement of
project finance debt in the second quarter of 2007. Cameron Highway
reported net transportation volumes of 97 MBPD for the second quarter of 2008
compared to 45 MBPD for the same period last year. Overall, offshore
oil pipeline transportation volumes for the second quarter of 2008 increased 23
percent to 216 MBPD from 175 MBPD for the same quarter of 2007.
Petrochemical Services – Gross
operating margin for the Petrochemical Services segment increased 16 percent to
$58 million in the second quarter of 2008 from $50 million in the same quarter
of 2007.
Enterprise’s butane isomerization
business reported a 41 percent increase in gross operating margin to $31 million
in the second quarter of 2008 compared to $22 million in the same period last
year on continuing strong demand for high-purity isobutane and higher revenues
from sales of NGL by-products. Butane isomerization volumes were 89
MBPD for both the second quarter of 2008 and the second quarter of
2007.
The partnership’s propylene
fractionation and petrochemical pipeline business earned $18 million of gross
operating margin during the second quarter of 2008 versus $14 million in the
same quarter of 2007. This increase was primarily due to higher
propylene fractionation and transportation volumes. Propylene
fractionation volumes were 61 MBPD for the second quarter of 2008 compared to 55
MBPD for the same quarter of last year. Petrochemical pipeline
transportation volumes were 119 MBPD during the second quarter of 2008 compared
to 103 MBPD in the second quarter of 2007.
Enterprise’s octane enhancement
business reported gross operating margin of $9 million in the second quarter of
2008 compared to $14 million in the second quarter of 2007. Octane
enhancement production was 11 MBPD for the second quarter of 2008 compared to 10
MBPD for the second quarter of last year.
Capitalization – Total debt
principal outstanding at June 30, 2008 was approximately $7.7 billion, including
$1.25 billion of junior subordinated notes to which the debt rating agencies
ascribe, on average, approximately 58 percent equity
content. Enterprise’s consolidated debt also included $208 million of
debt of Duncan Energy Partners L.P. (“DEP”) for which Enterprise does not have
the payment obligation. Enterprise had total liquidity of
approximately $1.3 billion at June 30, 2008, which included availability under
the partnership’s $1.75 billion, five-year credit facility and unrestricted
cash.
Total capital spending in the second
quarter of 2008, net of contributions in aid of construction, was approximately
$468 million. This includes $44 million of sustaining capital
expenditures and $22 million of investments in unconsolidated
affiliates.
3
Interest expense for the second quarter
of 2008 was $96 million on an average debt balance of $7.6 billion compared to
interest expense of $71 million in the second quarter of 2007 which had an
average debt balance of $5.9 billion. The increase in the average
debt balance between the two periods was primarily due to debt incurred to fund
the partnership’s capital investment program.
Today,
Enterprise will host a conference call to discuss second quarter
earnings. The call will be broadcast live over the Internet at 9 a.m.
Central Daylight Time and may be accessed by visiting the company’s website at
www.epplp.com.
Use of Non-GAAP Financial
Measures
This
press release and accompanying schedules include the non-GAAP financial measures
of gross operating margin, EBITDA 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 U.S. generally accepted
accounting principles (“GAAP”). Our non-GAAP financial measures
should not be considered as alternatives to GAAP measures such as net income,
operating income, net cash flows provided by operating activities or any other
GAAP measure of liquidity or financial performance.
Gross
operating margin. We evaluate segment performance based on the
non-GAAP financial measure of gross operating margin. Gross operating
margin (either in total or by individual segment) is an important performance
measure of the core profitability of our operations. This measure
forms the basis of our internal financial reporting and is used by senior
management in deciding how to allocate capital resources among business
segments. We believe that investors benefit from having access to the
same financial measures that our management uses in evaluating segment
results. The GAAP measure most directly comparable to total
segment gross operating margin is operating income.
We define
total segment gross operating margin as operating income before: (1)
depreciation, amortization and accretion expense; (2) operating lease expenses
for which we do not have the payment obligation; (3) gains and losses on the
sale of assets; and (4) general and administrative costs. Gross
operating margin is exclusive of other income and expense transactions,
provision for income taxes, minority interest, cumulative effect of changes in
accounting principles and extraordinary charges. Gross
operating margin by segment is calculated by subtracting segment operating costs
and expenses (net of the adjustments noted above) from segment revenues, with
both segment totals before the elimination of intercompany
transactions. In accordance with GAAP, intercompany accounts and
transactions are eliminated in consolidation.
We
include earnings from equity method unconsolidated affiliates in our measurement
of segment gross operating margin. Our equity investments with
industry partners are a vital component of our business
strategy. They are a means by which we conduct our operations to
align our interests with those of our customers and/or
suppliers. This method of operation also enables us to achieve
favorable economies of scale relative to the level of investment and business
risk assumed versus what we could accomplish on a stand-alone
basis. Many of these businesses perform supporting or
complementary roles to our other business operations.
EBITDA. We
define EBITDA as net income or loss plus interest expense, provision for income
taxes and depreciation and amortization and accretion expense. EBITDA
is commonly used as a supplemental financial measure by management and by
external users of financial statements, such as investors, commercial banks,
research analysts and rating agencies, to assess: (1) the financial performance
of our assets without regard to financing methods, capital structures or
historical cost basis; (2) the ability of our assets to generate cash sufficient
to pay interest cost and support our indebtedness; (3) our operating performance
and return on capital as compared to those of other companies in the midstream
energy industry, without regard to financing and capital structure; and (4) the
viability of projects and the overall rates of return on alternative investment
opportunities. Because EBITDA excludes some, but not all, items that
affect net income or loss and because these measures may vary among other
companies, the EBITDA data presented in this press release may not be comparable
to similarly titled measures of other companies. The GAAP
measure most directly comparable to EBITDA is net cash flows provided by
operating activities.
Distributable
cash flow. We define distributable cash flow as net income or
loss before: (1) depreciation, amortization and accretion expense; (2) operating
lease expenses for which we do not have the payment obligation; (3) cash
distributions received from unconsolidated affiliates less equity in the
earnings of such unconsolidated affiliates; (4) the subtraction of sustaining
capital expenditures; (5) the addition of losses or subtraction of gains
relating to the sale of assets; (6) cash proceeds from the sale of assets or
return of investment from unconsolidated affiliates; (7) gains or losses on
monetization of financial instruments less related amortization of such amount
to earnings, if any; (8) transition support payments received
4
from El
Paso Corporation related to the GulfTerra merger; (9) minority interest expense
associated with the public unitholders of DEP less related distributions to be
paid to such holders with respect to the period of calculation; (10) the
addition of losses or subtraction of gains relating to other miscellaneous
non-cash amounts affecting net income for the period; and (11) the subtraction
of cash expenditures for asset abandonment activities. Sustaining capital
expenditures are capital expenditures (as defined by GAAP) resulting from
improvements to and major renewals of existing assets. Distributable
cash flow is a significant liquidity metric used by our senior management to
compare basic cash flows generated by us to the cash distributions we expect to
pay our partners. Using this metric, our management can quickly
compute the coverage ratio of estimated cash flows to planned cash
distributions.
Distributable
cash flow is also 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 we are generating cash flows at a level that can
sustain or support an increase in our quarterly cash
distributions. Distributable cash flow 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 in turn is based on the amount of cash distributions a partnership
can pay to a unitholder). The GAAP measure most directly
comparable to distributable cash flow is net cash flows provided by operating
activities.
Company Information and Use
of Forward Looking Statements
Enterprise
Products Partners L.P. is one of the largest publicly traded partnerships with
an enterprise value of approximately $20 billion, and is a leading North
American provider of midstream energy services to producers and consumers of
natural gas, NGLs, crude oil and petrochemicals. Enterprise
transports natural gas, NGLs, crude oil and petrochemical products through
approximately 35,000 miles of onshore and offshore
pipelines. Services include natural gas gathering, processing,
transportation and storage; NGL fractionation (or separation), transportation,
storage and import and export terminaling; crude oil transportation; offshore
production platform services; and petrochemical transportation and
services. For more information, visit Enterprise on the web at www.epplp.com. Enterprise
Products Partners L.P. is managed by its general partner, Enterprise Products
GP, LLC, which is wholly-owned by Enterprise GP Holdings L.P. (NYSE:
EPE). For more information on Enterprise GP Holdings L.P., visit its
website at www.enterprisegp.com.
This
press release contains various forward-looking statements and information that
are based on Enterprise’s beliefs and those of its general partner, as well as
assumptions made by and information currently available to
Enterprise. When used in this press release, words such as
“anticipate,” “project,” “expect,” “plan,” “goal,” “forecast,” “intend,”
“could,” “believe,” “may,” and similar expressions and statements regarding the
plans and objectives of Enterprise for future operations, are intended to
identify forward-looking statements. Although Enterprise and its
general partner believe that such expectations reflected in such forward-looking
statements are reasonable, neither Enterprise nor its general partner can give
assurances that such expectations will prove to be correct. Such statements are
subject to a variety of risks, uncertainties and assumptions. If one
or more of these risks or uncertainties materialize, or if underlying
assumptions prove incorrect, Enterprise’s actual results may vary materially
from those Enterprise anticipated, estimated, projected or
expected. Among the key risk factors that may have a direct bearing
on Enterprise’s results of operations and financial condition are:
|
·
|
fluctuations
in oil, natural gas and NGL prices and production due to weather and other
natural and economic forces;
|
|
·
|
the
effects of our debt level on its future financial and operating
flexibility;
|
|
·
|
a
reduction in demand for our products by the petrochemical, refining or
heating industries;
|
|
·
|
a
decline in the volumes of NGLs delivered by our
facilities;
|
|
·
|
the
failure of its credit risk management efforts to adequately protect us
against customer non-payment;
|
|
·
|
terrorist
attacks aimed at our facilities;
and
|
|
·
|
the
failure to successfully integrate our operations with companies we may
acquire in the future, if any.
|
Enterprise
has no obligation to publicly update or revise any forward-looking statement,
whether as a result of new information, future events or otherwise.
Contacts: Randy Burkhalter, Vice President,
Investor Relations, (713) 381-6812, www.epplp.com
Rick Rainey, Director, Media Relations, (713) 381-3635
###
5
|
Enterprise
Products Partners L.P.
|
Exhibit
A
|
|||||||||||||||
|
Condensed
Statement of Consolidated Operations - UNAUDITED
|
||||||||||||||||
|
For
the Three and Six Months Ended June 30, 2008 and 2007
|
||||||||||||||||
|
($
in 000s, except per unit amounts)
|
||||||||||||||||
|
For
the Three Months
|
For
the Six Months
|
|||||||||||||||
|
Ended
June 30,
|
Ended
June 30,
|
|||||||||||||||
|
2008
|
2007
|
2008
|
2007
|
|||||||||||||
|
Revenue
|
$ | 6,339,615 | $ | 4,212,806 | $ | 12,024,150 | $ | 7,535,660 | ||||||||
|
Costs and
expenses:
|
||||||||||||||||
|
Operating
costs and expenses
|
5,959,938 | 3,960,672 | 11,271,128 | 7,085,151 | ||||||||||||
|
General
and administrative costs
|
23,976 | 31,361 | 45,181 | 47,991 | ||||||||||||
|
Total
costs and expenses
|
5,983,914 | 3,992,033 | 11,316,309 | 7,133,142 | ||||||||||||
|
Equity in earnings of
unconsolidated affiliates
|
18,569 | (6,211 | ) | 33,161 | (32 | ) | ||||||||||
|
Operating
income
|
374,270 | 214,562 | 741,002 | 402,486 | ||||||||||||
|
Other income
(expense):
|
||||||||||||||||
|
Interest
expense
|
(95,809 | ) | (71,275 | ) | (187,755 | ) | (134,633 | ) | ||||||||
|
Other,
net
|
671 | 2,747 | 1,562 | 4,675 | ||||||||||||
|
Total
other expense
|
(95,138 | ) | (68,528 | ) | (186,193 | ) | (129,958 | ) | ||||||||
|
Income before
provision for income taxes and minority interest
|
279,132 | 146,034 | 554,809 | 272,528 | ||||||||||||
|
Provision
for income taxes
|
(6,926 | ) | 1,860 | (10,583 | ) | (6,928 | ) | |||||||||
|
Income before minority
interest
|
272,206 | 147,894 | 544,226 | 265,600 | ||||||||||||
|
Minority
interest
|
(8,936 | ) | (5,740 | ) | (21,347 | ) | (11,401 | ) | ||||||||
|
Net
income
|
$ | 263,270 | $ | 142,154 | $ | 522,879 | $ | 254,199 | ||||||||
|
Net income
allocation:
|
||||||||||||||||
|
Limited
partners’ interest in net income
|
$ | 227,707 | $ | 113,527 | $ | 452,869 | $ | 198,576 | ||||||||
|
General
partner interest in net income
|
$ | 35,563 | $ | 28,627 | $ | 70,010 | $ | 55,623 | ||||||||
|
Per unit data (fully
diluted):
|
||||||||||||||||
|
Net
income per unit (1)
|
$ | 0.52 | $ | 0.26 | $ | 1.03 | $ | 0.46 | ||||||||
|
Average
LP units outstanding (in 000s)
|
436,852 | 434,127 | 436,400 | 433,701 | ||||||||||||
|
Other financial
data:
|
||||||||||||||||
|
Net
cash flows provided by operating activities
|
$ | 431,643 | $ | 131,298 | $ | 696,708 | $ | 552,049 | ||||||||
|
Cash
used in investing activities
|
$ | 463,479 | $ | 772,266 | $ | 1,032,048 | $ | 1,387,187 | ||||||||
|
Net Cash
provided (used in) by financing activities
|
$ | (9,410 | ) | $ | 645,146 | $ | 320,202 | $ | 876,272 | |||||||
|
Distributable
cash flow
|
$ | 347,329 | $ | 293,526 | $ | 730,094 | $ | 515,511 | ||||||||
|
EBITDA
|
$ | 505,551 | $ | 335,392 | $ | 996,609 | $ | 640,672 | ||||||||
|
Depreciation,
amortization and accretion
|
$ | 138,304 | $ | 123,892 | $ | 274,280 | $ | 245,113 | ||||||||
|
Distributions
received from unconsolidated affiliates
|
$ | 27,434 | $ | 18,079 | $ | 56,010 | $ | 35,026 | ||||||||
|
Total
debt principal outstanding at end of period
|
$ | 7,749,500 | $ | 6,313,949 | $ | 7,749,500 | $ | 6,313,949 | ||||||||
|
Capital
spending:
|
||||||||||||||||
|
Capital
expenditures, net of contributions in aid of
|
||||||||||||||||
|
construction
costs, for property, plant and equipment
|
$ | 446,549 | $ | 505,803 | $ | 1,063,812 | $ | 1,080,693 | ||||||||
|
Cash
used for business combinations,
|
||||||||||||||||
|
net
of cash received
|
-- | 473 | 1 | 785 | ||||||||||||
|
Investments
in unconsolidated affiliates
|
21,720 | 255,625 | 29,152 | 294,598 | ||||||||||||
|
Total
|
$ | 468,269 | $ | 761,901 | $ | 1,092,965 | $ | 1,376,076 | ||||||||
|
(1)
For
purposes of computing basic and diluted earnings per unit, in periods
when our aggregate net income exceeds the
aggregate distributions for such periods, an increased amount of earnings
is allocated to EPGP in applying Emerging Issues Task Force
Issue (“EITF’) No. 03-6, "Participating Securities and the Two-Class
Method under FASB Statement No. 128" ("EITF 03-6"). Historically, our
distributions to owners have exceeded earnings and as a result EITF 03-6
had no effect on our earnings per unit calculations. Pro forma net
income available to our limited partners’ for the three and six months
ended June 30, 2008 was $226,264 and $449,696, respectively. Pro
forma net income available to our general partner for the three and six
months ended June 30, 2008 was $37,006 and $73,183,
respectively. Additional earnings allocated to our general partner
for earnings per unit calculations were $1,443 and $3,173, respectively,
for the three and six months ended June 30, 2008.
|
||||||||||||||||
6
|
Exhibit
B
|
||||||||||||||||
|
Condensed
Operating Data - UNAUDITED
|
||||||||||||||||
|
For
the Three and Six Months Ended June 30, 2008 and 2007
|
||||||||||||||||
|
($
in 000s)
|
||||||||||||||||
|
For
the Three Months
|
For
the Six Months
|
|||||||||||||||
|
Ended
June 30,
|
Ended
June 30,
|
|||||||||||||||
|
2008
|
2007
|
2008
|
2007
|
|||||||||||||
|
Gross operating margin
by segment:
|
||||||||||||||||
|
NGL
Pipelines & Services
|
$ | 317,649 | $ | 208,805 | $ | 607,391 | $ | 399,499 | ||||||||
|
Onshore
Natural Gas Pipelines & Services
|
123,172 | 83,163 | 233,077 | 159,678 | ||||||||||||
|
Offshore
Pipelines & Services
|
35,317 | 31,046 | 116,888 | 50,753 | ||||||||||||
|
Petrochemical
Services
|
58,219 | 50,334 | 99,222 | 87,917 | ||||||||||||
|
Total
non-GAAP gross operating margin
|
$ | 534,357 | $ | 373,348 | $ | 1,056,578 | $ | 697,847 | ||||||||
|
Adjustments
to reconcile non-GAAP gross operating
|
||||||||||||||||
|
margin
to GAAP operating income:
|
||||||||||||||||
|
Depreciation,
amortization and accretion in operating
|
||||||||||||||||
|
costs
and expenses
|
(136,262 | ) | (121,161 | ) | (270,184 | ) | (240,653 | ) | ||||||||
|
Operating
lease expense paid by EPCO in operating
|
||||||||||||||||
|
costs
and expenses
|
(526 | ) | (527 | ) | (1,053 | ) | (1,053 | ) | ||||||||
|
Gain
(loss) on sale of assets in operating costs and expenses
|
677 | (5,737 | ) | 842 | (5,664 | ) | ||||||||||
|
General
and administrative costs
|
(23,976 | ) | (31,361 | ) | (45,181 | ) | (47,991 | ) | ||||||||
|
Operating
income per GAAP
|
$ | 374,270 | $ | 214,562 | $ | 741,002 | $ | 402,486 | ||||||||
|
Selected operating
data: (1)
|
||||||||||||||||
|
NGL
Pipelines & Services, net:
|
||||||||||||||||
|
NGL
transportation volumes (MBPD)
|
1,776 | 1,696 | 1,803 | 1,652 | ||||||||||||
|
NGL
fractionation volumes (MBPD)
|
447 | 370 | 435 | 361 | ||||||||||||
|
Equity
NGL production (MBPD)
|
111 | 67 | 107 | 68 | ||||||||||||
|
Fee-based
natural gas processing (MMcf/d)
|
2,677 | 2,405 | 2,673 | 2,403 | ||||||||||||
|
Onshore
Natural Gas Pipelines & Services, net:
|
||||||||||||||||
|
Natural
gas transportation volumes (BBtus/d)
|
7,381 | 6,325 | 7,181 | 6,206 | ||||||||||||
|
Offshore
Pipelines & Services, net:
|
||||||||||||||||
|
Natural
gas transportation volumes (BBtus/d)
|
1,170 | 1,314 | 1,553 | 1,348 | ||||||||||||
|
Crude
oil transportation volumes (MBPD)
|
216 | 175 | 211 | 164 | ||||||||||||
|
Platform
gas processing (MMcf/d)
|
353 | 188 | 591 | 175 | ||||||||||||
|
Platform
oil processing (MBPD)
|
22 | 28 | 21 | 24 | ||||||||||||
|
Petrochemical
Services, net:
|
||||||||||||||||
|
Butane
isomerization volumes (MBPD)
|
89 | 89 | 92 | 92 | ||||||||||||
|
Propylene
fractionation volumes (MBPD)
|
61 | 55 | 60 | 58 | ||||||||||||
|
Octane
additive production volumes (MBPD)
|
11 | 10 | 9 | 8 | ||||||||||||
|
Petrochemical
transportation volumes (MBPD)
|
119 | 103 | 117 | 102 | ||||||||||||
|
Total,
net:
|
||||||||||||||||
|
NGL,
crude oil and petrochemical transportation volumes (MBPD)
|
2,111 | 1,974 | 2,131 | 1,918 | ||||||||||||
|
Natural
gas transportation volumes (BBtus/d)
|
8,551 | 7,639 | 8,734 | 7,554 | ||||||||||||
|
Equivalent
transportation volumes (MBPD) (2)
|
4,361 | 3,984 | 4,429 | 3,906 | ||||||||||||
|
(1)
Operating
rates are net of third party ownership interests and include volumes for
newly constructed assets from the related in-service dates and for
recently purchased assets from the related acquisition dates.
(2)
Reflects
equivalent energy volumes where 3.8 MMBtus of natural gas are equivalent
to one barrel of NGLs.
|
||||||||||||||||
7
|
Enterprise
Products Partners L.P.
|
Exhibit
C
|
|||||||||||||||
|
Reconciliation
of Unaudited GAAP Financial Measures to Our Non-GAAP Financial
Measures
|
||||||||||||||||
|
Distributable
Cash Flow
|
||||||||||||||||
|
For
the Three and Six Months Ended June 30, 2008 and 2007
|
||||||||||||||||
|
($
in 000s)
|
||||||||||||||||
|
For
the Three Months
|
For
the Six Months
|
|||||||||||||||
|
Ended
June 30,
|
Ended
June 30,
|
|||||||||||||||
|
2008
|
2007
|
2008
|
2007
|
|||||||||||||
|
Reconciliation of
non-GAAP "Distributable cash flow" to GAAP "Net
|
||||||||||||||||
|
income" and GAAP "Net
cash flows provided by operating activities"
|
||||||||||||||||
|
Net
income
|
$ | 263,270 | $ | 142,154 | $ | 522,879 | $ | 254,199 | ||||||||
|
Adjustments
to derive Distributable cash flow
|
||||||||||||||||
|
(add
or subtract as indicated by sign of number):
|
||||||||||||||||
|
Amortization
in interest expense
|
(1,242 | ) | 69 | (1,112 | ) | 201 | ||||||||||
|
Depreciation,
amortization and accretion in costs and expenses
|
139,546 | 123,823 | 275,392 | 244,912 | ||||||||||||
|
Operating
lease expense paid by EPCO
|
526 | 527 | 1,053 | 1,053 | ||||||||||||
|
Deferred
income tax expense
|
3,442 | 2,492 | 2,529 | 4,088 | ||||||||||||
|
Monetization
of interest rate hedging financial instruments
|
(28,395 | ) | 42,269 | (22,144 | ) | 42,269 | ||||||||||
|
Amortization
of net gains related to monetization of financial
instruments
|
(1,593 | ) | (1,056 | ) | (3,183 | ) | (2,021 | ) | ||||||||
|
Equity
in earnings of unconsolidated affiliates
|
(18,569 | ) | 6,211 | (33,161 | ) | 32 | ||||||||||
|
Distributions
received from unconsolidated affiliates
|
27,434 | 18,079 | 56,010 | 35,026 | ||||||||||||
|
Loss
(gain) on sale of assets
|
(687 | ) | 5,737 | (852 | ) | 5,664 | ||||||||||
|
Proceeds
from sale of assets
|
395 | 924 | 514 | 1,015 | ||||||||||||
|
Sustaining
capital expenditures
|
(43,631 | ) | (47,600 | ) | (68,643 | ) | (73,111 | ) | ||||||||
|
Changes
in fair market value of financial instruments
|
8,918 | (406 | ) | 9,580 | (302 | ) | ||||||||||
|
Minority
interest expense – DEP public unitholders
|
4,766 | 3,283 | 9,119 | 6,114 | ||||||||||||
|
Distribution
to be paid to DEP public unitholders with respect to
period
|
(6,279 | ) | (5,980 | ) | (12,409 | ) | (9,628 | ) | ||||||||
|
Cash
expenditures for asset abandonment activities
|
(572 | ) | -- | (5,478 | ) | -- | ||||||||||
|
El
Paso transition support payments
|
-- | 3,000 | -- | 6,000 | ||||||||||||
|
Distributable
cash flow
|
347,329 | 293,526 | 730,094 | 515,511 | ||||||||||||
|
Adjustments
to Distributable cash flow to derive Net cash flows provided
by
|
||||||||||||||||
|
operating
activities (add or subtract as indicated by sign of
number):
|
||||||||||||||||
|
Monetization
of interest rate hedging financial instruments
|
28,395 | (42,269 | ) | 22,144 | (42,269 | ) | ||||||||||
|
Amortization
of net gains related to monetization of financial
instruments
|
1,593 | 1,056 | 3,183 | 2,021 | ||||||||||||
|
Proceeds
from sale of assets
|
(395 | ) | (924 | ) | (514 | ) | (1,015 | ) | ||||||||
|
Sustaining
capital expenditures
|
43,631 | 47,600 | 68,643 | 73,111 | ||||||||||||
|
El
Paso transition support payments
|
-- | (3,000 | ) | -- | (6,000 | ) | ||||||||||
|
Minority
interest
|
8,936 | 5,740 | 21,347 | 11,401 | ||||||||||||
|
Minority
interest expense – DEP public unitholders
|
(4,766 | ) | (3,283 | ) | (9,119 | ) | (6,114 | ) | ||||||||
|
Cash
expenditures for asset abandonment activities
|
572 | -- | 5,478 | -- | ||||||||||||
|
Effect
of pension settlement recognition
|
-- | -- | (114 | ) | -- | |||||||||||
|
Distribution
to be paid to DEP public unitholders with respect to
period
|
6,279 | 5,980 | 12,409 | 9,628 | ||||||||||||
|
Net
effect of changes in operating accounts
|
69 | (173,128 | ) | (156,843 | ) | (4,225 | ) | |||||||||
|
Net
cash flows provided by operating activities
|
$ | 431,643 | $ | 131,298 | $ | 696,708 | $ | 552,049 | ||||||||
8
|
Enterprise
Products Partners L.P.
|
Exhibit
D
|
|||||||||||||||
|
Reconciliation
of Unaudited GAAP Financial Measures to Our Non-GAAP Financial
Measures
|
||||||||||||||||
|
EBITDA
|
||||||||||||||||
|
For
the Three and Six Months Ended June 30, 2008 and 2007
|
||||||||||||||||
|
($
in 000s)
|
||||||||||||||||
|
For
the Three Months
|
For
the Six Months
|
|||||||||||||||
|
Ended
June 30,
|
Ended
June 30,
|
|||||||||||||||
|
2008
|
2007
|
2008
|
2007
|
|||||||||||||
|
Reconciliation of
non-GAAP "EBITDA" to GAAP "Net income" and
|
||||||||||||||||
|
GAAP "Net cash flows
provided by operating activities"
|
||||||||||||||||
|
Net
income
|
$ | 263,270 | $ | 142,154 | $ | 522,879 | $ | 254,199 | ||||||||
|
Additions
to net income to derive EBITDA:
|
||||||||||||||||
|
Interest
expense (including related amortization)
|
95,809 | 71,275 | 187,755 | 134,633 | ||||||||||||
|
Provision
for income taxes
|
6,926 | (1,860 | ) | 10,583 | 6,928 | |||||||||||
|
Depreciation,
amortization and accretion in costs and expenses
|
139,546 | 123,823 | 275,392 | 244,912 | ||||||||||||
|
EBITDA
|
505,551 | 335,392 | 996,609 | 640,672 | ||||||||||||
|
Adjustments
to EBITDA to derive net cash flows provided by operating
|
||||||||||||||||
|
activities
(add or subtract as indicated by sign of number):
|
||||||||||||||||
|
Interest
expense
|
(95,809 | ) | (71,275 | ) | (187,755 | ) | (134,633 | ) | ||||||||
|
Provision
for income taxes
|
(6,926 | ) | 1,860 | (10,583 | ) | (6,928 | ) | |||||||||
|
Equity
in earnings of unconsolidated affiliates
|
(18,569 | ) | 6,211 | (33,161 | ) | 32 | ||||||||||
|
Amortization
in interest expense
|
(1,242 | ) | 69 | (1,112 | ) | 201 | ||||||||||
|
Deferred
income tax expense
|
3,442 | 2,492 | 2,529 | 4,088 | ||||||||||||
|
Distributions
received from unconsolidated affiliates
|
27,434 | 18,079 | 56,010 | 35,026 | ||||||||||||
|
Operating
lease expense paid by EPCO
|
526 | 527 | 1,053 | 1,053 | ||||||||||||
|
Minority
interest
|
8,936 | 5,740 | 21,347 | 11,401 | ||||||||||||
|
Loss
(gain) on sale of assets
|
(687 | ) | 5,737 | (852 | ) | 5,664 | ||||||||||
|
Changes
in fair market value of financial instruments
|
8,918 | (406 | ) | 9,580 | (302 | ) | ||||||||||
|
Effect
of pension settlement recognition
|
-- | -- | (114 | ) | -- | |||||||||||
|
Net
effect of changes in operating accounts
|
69 | (173,128 | ) | (156,843 | ) | (4,225 | ) | |||||||||
|
Net
cash flows provided by operating activities
|
$ | 431,643 | $ | 131,298 | $ | 696,708 | $ | 552,049 | ||||||||
9