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): April 27, 2009
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 April
27, 2009, Enterprise Products Partners L.P. (“Enterprise”) issued a press
release announcing its financial and operating results for the three months
ended March 31, 2009, 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
Our press
release and/or the webcast conference call discussion include the non-generally
accepted accounting principle (“non-GAAP”) financial measures of gross operating
margin, distributable cash flow and Adjusted EBITDA. The press
release provides reconciliations of these non-GAAP financial measures to their
most directly comparable financial measures 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 measure of financial
performance calculated and presented in accordance with GAAP. Our
non-GAAP financial measures may not be comparable to similarly-titled measures
of other companies because they may not calculate such measures in the same
manner as we do.
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 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: (i)
depreciation, amortization and accretion expense; (ii) operating lease expenses
for which we do not have the payment obligation; (iii) gains and losses from
asset sales and related transactions; and (iv) general and administrative
costs. Gross operating margin is exclusive of other income and
expense transactions, provision for income taxes, cumulative effect of changes
in accounting principles, extraordinary charges and earnings attributable to
noncontrolling interests. 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 equity earnings from 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 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 standalone
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, as net income or loss attributable to
Enterprise Products Partners L.P. 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 expense for which we do not have the payment
obligation;
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1
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§
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the
addition of cash distributions received from unconsolidated affiliates,
less equity earnings from 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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the
addition of losses or subtraction of gains relating to asset sales and
related transactions;
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the
addition of cash proceeds from asset sales, the return of an investment in
an unconsolidated affiliate or related
transactions;
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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
(loss), if any, less related amortization of such amounts to
earnings;
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§
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the
addition of net income attributable to the noncontrolling interest
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; and
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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. Such
expenditures serve to maintain existing operations but do not generate
additional revenues.
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 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 net cash flows provided by operating
activities.
Adjusted
EBITDA. We define Adjusted EBITDA as net income or loss
attributable to Enterprise Products Partners L.P. less equity earnings from
unconsolidated affiliates; plus distributions received from unconsolidated
affiliates, interest expense, provision for income taxes and depreciation,
amortization and accretion expense. Adjusted EBITDA is commonly used
as a supplemental financial measure by 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 cash sufficient to pay interest cost and
support our indebtedness; and
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the
viability of projects and the overall rates of return on alternative
investment opportunities.
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Since Adjusted EBITDA excludes some,
but not all, items that affect net income or loss attributable to Enterprise
Products Partners L.P. and because these measures may vary among other
companies, the Adjusted 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 Adjusted EBITDA is net cash flows provided
by operating activities.
2
Presentation
of Noncontrolling Interests in Consolidated Financial Statements
Effective
January 1, 2009, we adopted the provisions of Statement of Financial Accounting
Standards (“SFAS”) 160, Noncontrolling Interests in Consolidated Financial
Statements. SFAS 160 established accounting and reporting standards
for noncontrolling interests, which were previously identified as minority
interest in our financial statements. This new standard requires,
among other things, that (i) noncontrolling interests be presented as a
component of partners’ equity on our consolidated balance sheet (i.e.,
elimination of the “mezzanine” presentation previously used for minority
interest); and (ii) elimination of minority interest amounts as a deduction in
deriving net income or loss and, as a result, that net income or loss be
allocated between our unitholders and general partner on one hand and
noncontrolling interests on the other. Earnings per unit
amounts are not affected by these changes. The consolidated financial
statements accompanying the press release reflect our adoption of SFAS 160 and
the required presentation of noncontrolling interests.
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 April 27,
2009.
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3
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:
April 27, 2009
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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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4
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 April 27,
2009.
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5
Exhibit
99.1
Enterprise
Products Partners L.P.
P.O.
Box 4324
Houston,
TX 77210
(713)
381-6500
Enterprise
Reports Solid Operating Results for First Quarter 2009
Houston,
Texas (Monday, April 27, 2009) – Enterprise Products Partners
L.P. (NYSE: “EPD”) today announced its financial results for the
three months ended March 31, 2009.
Highlights:
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§
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For
the first quarter of 2009, Enterprise reported record gross operating
margin and Adjusted EBITDA despite continuing effects from 2008 Hurricanes
Gustav and Ike for estimated lost business of approximately $21
million;
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1st
Quarter
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2009
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||||||||||||
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1st
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Estimated
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1st
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||||||||||
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Quarter
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Hurricane
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Quarter
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$Millions,
except per unit
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2009
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Effects
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2008
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Operating
income
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$ | 372 | $ | (21 | ) | $ | 367 | |||||
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Gross
operating margin
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$ | 549 | $ | (21 | ) | $ | 522 | |||||
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Adjusted
EBITDA
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$ | 526 | $ | (21 | ) | $ | 505 | |||||
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Net
income
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$ | 237 | $ | (21 | ) | $ | 272 | |||||
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Net
income attributable to EPD
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$ | 225 | $ | (21 | ) | $ | 260 | |||||
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Earnings
per unit
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$ | 0.41 | $ | (0.05 | ) | $ | 0.51 | |||||
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§
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The
$27 million increase in gross operating margin was offset by a $20 million
increase in depreciation expense from new assets going into service; a $28
million increase in interest expense due primarily to an increase in the
average amount of debt outstanding; and an $11 million increase in
the provision for income
taxes;
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§
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Enterprise
increased its cash distribution rate applicable to the first quarter of
2009 to $0.5375 per unit, or $2.15 per unit on an annualized basis,
representing a 6 percent increase from the same quarter in 2008 and its
19th
consecutive quarterly increase and 28th
increase since its IPO in 1998;
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In
the first quarter of 2009, Enterprise reported distributable cash flow of
$343 million which provided 1.2 times coverage of the $0.5375 per unit
cash distribution declared for limited partners. Enterprise
retained approximately $56 million of distributable cash flow for the
first quarter of 2009. Distributable cash flow for the first
quarter of 2009 was negatively impacted by approximately $38 million for
hurricane effects;
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§
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NGL,
crude oil and petrochemical transportation volumes for the first quarter
of 2009 were a record 2.2 million barrels per day while total onshore and
offshore natural gas transportation volumes were a record 9.5 trillion
British thermal units per day (“TBtud”), representing increases of 1
percent and 7 percent, respectively, over the same quarter in
2008. Total onshore natural gas transportation volumes
increased 14 percent to a record 8.0 TBtud for the first quarter of 2009
versus 7.0 TBtud in the same quarter of 2008. Growth in natural
gas volumes was attributable to
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the Texas Intrastate,
Piceance Basin, Jonah, San Juan and Independence pipeline systems and the White
River hub;
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Enterprise
made $393 million of capital investments during the first quarter of 2009,
including $20 million of sustaining capital expenditures and $6 million of
investments in unconsolidated
affiliates;
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The
expansion of the Meeker natural gas processing plant and the Exxon central
treating facility in the Piceance Basin of Colorado began operations in
January 2009. In addition, the Sherman Extension expansion of
Enterprise’s Texas Intrastate natural gas pipeline system in the Barnett
Shale region began first deliveries to the Gulf Crossing pipeline in late
February 2009 and the Shenzi crude oil pipeline in the Gulf of Mexico
commenced commercial operations in April 2009;
and
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During
the first quarter, Enterprise received net proceeds of $306 million from
the issuance of new equity including $226 million from a public offering
and $81 million through the February 2009 reinvestment of distributions,
which included $62.5 million of reinvested distributions attributable to
units owned by affiliates of EPCO, Inc. At March 31, 2009,
Enterprise had liquidity (unrestricted cash and available capacity under
credit facilities) of approximately $940 million. EPCO and its
affiliates committed to reinvest an additional $75 million of
distributions associated with the May 2009
distribution.
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Review and Comment on First
Quarter 2009 Results
Enterprise
reported net income attributable to Enterprise Products Partners L.P. of $225
million, or $0.41 per unit on a fully diluted basis, for the first quarter of
2009 versus a record net income attributable to Enterprise Products Partners
L.P. of $260 million, or $0.51 per unit on a fully diluted basis, for the first
quarter of 2008. Net income for the first quarter of 2009 was
negatively impacted by approximately $21 million, or $0.05 per unit, due to
estimated lost business as a result of the continuing effects of Hurricanes
Gustav and Ike. For more information regarding net income
attributable to Enterprise Products Partners L.P., see Basis of Presentation -
SFAS 160 later in this press release.
The
partnership generated $343 million of distributable cash flow in the first
quarter of 2009 compared to a record $383 million in the same quarter of
2008. On April 15, 2009, the Board of Directors of Enterprise’s
general partner approved an increase in the partnership’s quarterly cash
distribution rate to $0.5375 per unit with respect to the first quarter of 2009,
representing a 6 percent increase over the $0.5075 per unit rate that was paid
with respect to the first quarter of 2008. Distributable cash flow
for the first quarter of 2009 provided 1.2 times coverage of the cash
distribution to be paid to limited partners. Enterprise retained $56
million of distributable cash flow in the first quarter of 2009, which is
available to reinvest in growth capital projects, to reduce debt, and to reduce
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
had a good start to 2009 in the first quarter,” said Michael A. Creel, president
and chief executive officer of Enterprise. “We reported record NGL,
crude oil and petrochemical pipeline transportation volumes of 2.2 million
barrels per day and record natural gas transportation volumes of 9.5 trillion
Btus per day supported by strong volumes from our existing assets and
contributions from recently constructed and acquired assets that have gone into
service. We generated record gross operating margin of $549 million
and record Adjusted EBITDA of $526 million as a result of this volume growth and
the performance of our natural gas processing business. Demand for
NGLs in the first quarter of 2009 exceeded our expectations as the result of
higher operating rates by the petrochemical industry following their massive
de-stocking of inventory in the fourth quarter of last year coupled with an
industry preference for NGLs as a feedstock over more expensive crude oil
derivatives. In addition, a colder than normal winter led to an
increase in the demand for propane. Based on this performance and new
sources of distributable cash flow that will be generated from major assets that
have recently gone into service, we elected to increase our quarterly cash
distribution rate by $0.0075 per unit while retaining $56 million, or 16
percent, of the partnership’s distributable cash flow for financial
flexibility.”
“During
the first quarter, we completed construction and commenced operations at four
major projects totaling $1.3 billion of capital investment. These
projects were the 1.1 billion cubic feet per day Sherman Extension expansion
of our Texas Intrastate natural gas pipeline system in the Barnett Shale, the
750 million cubic feet per day expansion of our Meeker natural gas processing
facility and the Exxon central treating facility in the Piceance Basin and the
230,000 barrel per day Shenzi crude oil pipeline in the Gulf of
Mexico. These assets are in the early stages of increasing volumes,
which for certain assets will continue over the remainder of the
year. In the second half of 2009, we expect to begin operations on
smaller expansions to our Piceance Basin and Texas Intrastate natural gas
pipeline systems,” stated Creel.
Revenue
for the first quarter of 2009 was $3.4 billion compared to $5.7 billion in the
same quarter of 2008 due primarily to lower commodity prices in the first
quarter of 2009. Enterprise’s revenues and certain operating costs
and expenses can fluctuate significantly based on the prices of natural gas and
NGLs without necessarily affecting gross operating margin and operating
income. Therefore, even though the partnership had lower revenues in
the first quarter of 2009, gross operating margin increased to $549 million for
the first quarter of 2009 from $522 million for the first quarter of last year
and operating income increased to $372 million for the first quarter of 2009
from $367 million of operating income for the same quarter of
2008. Adjusted earnings before interest, taxes, depreciation and
amortization (“Adjusted EBITDA”) for the first quarter of 2009 increased to $526
million from $505 million for the first quarter of 2008. Gross
operating margin and Adjusted 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 First Quarter of 2009
NGL Pipelines & Services –
Gross operating margin for the NGL Pipelines and Services segment increased 18
percent to $343 million for the first quarter of 2009 compared to $290 million
for the same quarter of 2008. Estimated lost business for this
segment in the first quarter of 2009 due to the continuing effects of the 2008
hurricanes was approximately $5 million.
Enterprise’s
natural gas processing business recorded gross operating margin of $195 million
for the first quarter of 2009, a 10 percent increase from $178 million in the
first quarter of 2008. Estimated lost business due to the hurricanes
for this business in the first quarter of 2009 was approximately $4
million. This business benefited from an increase in gross operating
margin from the Meeker and Pioneer natural gas processing plants, our hedging
activities and a 10 percent increase in equity NGL production from 104 thousand
barrels per day (“MBPD”) in the first quarter of 2008 to 114 MBPD in the first
quarter of 2009. The increase in equity NGL production, the NGLs that
Enterprise earns as a result of providing processing services, was primarily
attributable to higher volumes from the Pioneer natural gas processing plant
serving the Jonah/Pinedale fields, which began operations late in the first
quarter of last year. The increase in NGL volumes from Pioneer more
than offset lower equity NGL production in South Louisiana due to hurricane
effects.
Gross
operating margin from the partnership’s NGL pipeline and storage business
increased by 40 percent to $120 million in the first quarter of 2009 from $86
million in the first quarter of 2008 on a 119 MBPD, or 7 percent, increase in
transportation volumes between the two periods. The $34 million
increase in gross operating margin was primarily attributable to a $17 million
increase from the Mid-America, Seminole and Dixie pipelines on higher volumes
and lower fuel costs. Gross operating margin for the first quarter of
2009 increased by $6 million due to higher utilization of Enterprise’s NGL
import/export facilities on the Houston Ship Channel and the related Channel NGL
pipeline. The partnership also realized increases in gross operating
margin from its South Louisiana pipeline system and its NGL storage
facilities. Total volumes associated with the major NGL pipelines for
the first quarter of 2009 were a record 2.0 million barrels per day (“BPD”)
compared to 1.8 million BPD for the same quarter in 2008. The volume
increases were associated with the Dixie pipeline, the import/export facility
and related Channel pipeline and the Skelly-Belvieu pipeline in which Enterprise
acquired a 49 percent ownership interest in December 2008.
Gross
operating margin from Enterprise’s NGL fractionation business was $29 million in
the first quarter of 2009 versus $25 million reported for the same quarter of
2008. Gross operating margin for this business was higher primarily
due to reduced fuel costs at the partnership’s Mont Belvieu and Hobbs NGL
fractionators. Estimated lost business for the NGL fractionation
business in the first quarter of 2009 due to the hurricanes was approximately $1
million, which was primarily attributable to lower volumes at
Norco. NGL fractionation volumes
for the
first quarter of 2009 increased by 9 MBPD to 432 MBPD from 423 MBPD reported in
the first quarter of 2008.
Onshore Natural Gas Pipelines &
Services – Enterprise’s Onshore Natural Gas Pipelines and Services
segment reported gross operating margin of $116 million for the first quarter of
2009 compared to $110 million for the first quarter of
2008. Increases in gross operating margin from Enterprise’s natural
gas marketing, storage, Piceance Basin pipeline, White River hub, Texas
Intrastate pipeline and Jonah gas gathering businesses more than offset a $24
million decrease in gross operating margin from the San Juan gathering system,
which was due primarily to lower revenues from transportation fees indexed to
natural gas prices and lower proceeds from condensate sales. Total
onshore natural gas transportation volumes increased 14 percent to a record 8.0
TBtud for the first quarter of 2009 versus 7.0 TBtud in the same quarter of
2008.
Offshore Pipelines &
Services – Gross operating margin for the Offshore Pipelines and Services
segment decreased to $61 million in the first quarter of 2009 from $82 million
in the same quarter of 2008. Approximately $16 million of this
decrease was due to estimated lost business related to the effects of the
hurricanes. The Independence Hub platform and Trail pipeline reported
record aggregate gross operating margin of $56 million for the first quarter of
2009 compared to $54 million for the first quarter of 2008.
The
offshore platform services business reported gross operating margin of $39
million for the first quarter of 2009 compared to $44 million for the same
quarter in 2008. Estimated lost business for this activity in the
first quarter of 2009 due to the hurricanes was approximately $5
million. The Independence Hub platform reported a $1 million increase
in gross operating margin to $34 million. Contributions from the
Independence Hub were more than offset by lower demand revenues at the Falcon
platform and a decline in volumes at the Marco Polo platform due primarily to
disruptions caused by the hurricanes. For the first quarter of 2009,
Enterprise’s offshore platform natural gas processing volumes decreased 6
percent to 777 million cubic feet per day while crude oil processing volumes
decreased to 3 MBPD during the first quarter of 2009 from 21 MBPD for the same
quarter last year.
Gross
operating margin from Enterprise’s offshore natural gas pipeline business for
the first quarter of 2009 was $18 million compared to $26 million in the first
quarter of 2008. This $8 million decrease in gross operating margin
was principally attributable to lower transportation volumes as a result of
continuing effects of the 2008 hurricanes. Total estimated lost
business for the offshore natural gas pipeline business in the first quarter of
2009 due to the storms was approximately $3 million. Gross operating
margin on the Independence Trail pipeline increased 5 percent to $23 million on
a slight increase in volume to 922 million British thermal units per day
(“MMBtud”) compared to $22 million and 867 MMBtud in the first quarter of
2008. This increase was more than offset by lower gross operating
margin at the partnership’s other offshore natural gas pipelines due to the
downtime and upstream volume disruptions associated with the
storms. Transportation volumes for the offshore natural gas pipeline
business were 1.5 TBtud in the first quarter of 2009 compared to 1.9 TBtud in
the same quarter of 2008. In comparison to the fourth quarter of
2008, the partnership saw a 20 percent, or 0.3 TBtud, increase in natural gas
transportation volumes in the first quarter of 2009 as more production was
restored. HIOS returned to service in January 2009. The
Anaconda, Phoenix and Constitution pipelines did not have transportation volumes
in the first quarter of 2009 due to ongoing repairs to connecting
infrastructure.
Enterprise’s
offshore oil pipeline business recorded gross operating margin of $5 million for
the first quarter of 2009 compared to $12 million for the first quarter of 2008
on an 80 MBPD decrease in crude oil transportation volumes associated with the
hurricanes. Hurricane related estimated lost business in the first
quarter of 2009 was approximately $8 million. Offshore oil pipeline
transportation volumes for the first quarter of 2009 decreased to 126 MBPD from
206 MBPD for the same quarter of 2008. Restoration of crude oil
production was also apparent in the first quarter of 2009 with transportation
volumes increasing 16 percent, or 17 MBPD, from the fourth quarter of
2008.
Petrochemical Services – Gross
operating margin for the Petrochemical Services segment was $29 million in the
first quarter of 2009 compared to $41 million in the same quarter last
year.
Enterprise’s
butane isomerization business reported gross operating margin of $15 million in
the first quarter of 2009 versus $28 million in the same period of
2008. The decrease in gross operating margin was attributable to
lower revenues from sales of by-products and a 6 percent decrease in
volume. Isomerization volumes during the first quarter of 2009 were
90 MBPD compared to 96 MBPD in the first quarter of 2008.
The
partnership’s propylene fractionation and petrochemical pipeline business
reported a $7 million increase in gross operating margin to $22 million for the
first quarter of 2009 versus $15 million in the same quarter of
2008. Propylene fractionation volumes increased 17 percent to 68 MBPD
in the first quarter of 2009 compared to 58 MBPD for the same quarter of
2008. Petrochemical pipeline transportation volumes were 106 MBPD
during the first quarter of 2009 compared to 115 MBPD in the first quarter of
2008.
Enterprise’s
octane enhancement business reported a gross operating margin loss of $8 million
in the first quarter of 2009 compared to a loss of $2 million in the first
quarter of 2008. This loss was attributable to the seasonal nature of
this business associated with the demand for motor gasoline, prolonged downtime
following a scheduled turnaround and higher turnaround costs. Octane
enhancement production was 5 MBPD for the first quarter of 2009 compared to 7
MBPD for the first quarter of 2008.
Review of Current Status of
Enterprise-Operated Assets Still Impacted by Hurricanes
In the
wake of Hurricanes Gustav and Ike in 2008, Enterprise has a few offshore assets
that remain inactive or operating at reduced rates due to the ongoing repairs to
certain upstream or downstream facilities owned by third parties. The
Constitution oil and natural gas pipelines; the Marco Polo pipeline and
platform; and the Anaconda pipeline are expected to be either in limited service
or out of service through the second quarter of 2009 due to ongoing repairs
required to third party natural gas pipelines downstream of the Anaconda
pipeline.
We
currently estimate lost business from the continuing effects of the hurricanes
for the second quarter of 2009 to be in the range of $10 million to $15 million
without consideration of any future recoveries from business interruption
insurance, which will be reflected in income when received. Under
Enterprise’s business interruption insurance program, there are generally 60-day
and 75-day deductible periods with respect to wind storm damage to onshore and
offshore assets, respectively. Through March 31, 2009, we estimate
Enterprise’s potential claims under business interruption insurance to be
approximately $30 million.
Capitalization
Total
debt principal outstanding at March 31, 2009 was approximately $9.2 billion,
including $1.2 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 $470 million of
debt of Duncan Energy Partners L.P. (“DEP”) for which Enterprise does not have
the payment obligation. Enterprise had liquidity of approximately
$940 million at March 31, 2009, which included availability under the
partnership’s credit facilities and unrestricted cash.
Total
capital spending in the first quarter of 2009, net of contributions in aid of
construction, was approximately $393 million. This includes $20
million of sustaining capital expenditures and $6 million of investments in
unconsolidated affiliates. In the first quarter of 2009, Enterprise
incurred outlays for approximately 40 percent of its currently expected organic
growth capital budget for 2009.
Interest expense for the first quarter
of 2009 was $120 million on an average debt balance of $9.2 billion, compared to
interest expense of $92 million in the first quarter of 2008, which had an
average debt balance of $7.2 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.
Conference Call to Discuss
First Quarter
Earnings
Today,
Enterprise will host a conference call to discuss first quarter
earnings. The call will be broadcast live over the Internet at 9:00
a.m. CDT and may be accessed by visiting the company’s website at www.epplp.com.
Basis of Presentation - SFAS
160
Effective
January 1, 2009, we adopted the provisions of Statement of Financial Accounting
Standards (“SFAS”) 160, Noncontrolling Interests in
Consolidated Financial Statements. SFAS 160 established
accounting and reporting standards for noncontrolling interests, which were
previously identified as minority interest in our financial
statements. This new standard requires, among other things, that (i)
noncontrolling interests be presented
as a
component of partners’ equity on our consolidated balance sheet (i.e.,
elimination of the “mezzanine” presentation
previously used for minority interest); and (ii) elimination of minority
interest amounts as a deduction in deriving net income or loss and, as a result,
that net income or loss be allocated between our unitholders and general partner
on one hand and noncontrolling interests on the
other. Earnings per unit amounts are not affected by these
changes.
The consolidated financial statements
included in this press release reflect the changes required by SFAS
160. As a result, net income reported for the first quarter of 2008
in these financial statements is higher than that disclosed previously; however,
the allocation of such net income results in our unitholders, general partner
and noncontrolling interests (i.e., the former minority interest) receiving the
same amounts as they did previously.
Use of Non-GAAP Financial
Measures
This
press release and accompanying schedules include the non-GAAP financial measures
of gross operating margin, distributable cash flow and Adjusted
EBITDA. 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 measure of
financial performance calculated and presented in accordance with
GAAP. Our non-GAAP financial measures may not be comparable to
similarly-titled measures of other companies because they may not calculate such
measures in the same manner as we do.
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 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 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 from asset
sales and related transactions; and (4) general and administrative
costs. Gross operating margin is exclusive of other income and
expense transactions, provision for income taxes, cumulative effect of changes
in accounting principles, extraordinary charges and earnings attributable to
noncontrolling interests. 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 equity earnings from 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 standalone
basis. Many of these businesses perform supporting or complementary
roles to our other business operations.
Distributable
cash flow. We define distributable cash flow as net income or
loss attributable to Enterprise adjusted for: (1) the addition of depreciation,
amortization and accretion expense; (2) the addition of operating lease expense
for which we do not have the payment obligation; (3) the addition of cash
distributions received from unconsolidated affiliates less equity earnings from
unconsolidated affiliates; (4) the subtraction of sustaining capital
expenditures and cash payments to settle asset retirement obligations; (5) the
addition of losses or subtraction of gains from asset sales and related
transactions; (6) the addition of cash proceeds from asset sales, the return of
an investment in an unconsolidated affiliate or related transactions; (7) the
addition of losses or subtraction of gains on the monetization of financial
instruments recorded in accumulated other comprehensive income (loss), if any,
less related amortization of such amounts to earnings; (8) the addition of net
income attributable to the noncontrolling interest 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; and (9) the addition or
subtraction of other miscellaneous non-cash amounts (as applicable) that affect
net income or loss for the period.
Sustaining
capital expenditures are capital expenditures (as defined by GAAP) resulting
from improvements to and major renewals of existing assets. Such
expenditures serve to maintain existing operations but do not generate
additional revenues. Management compares the distributable cash flow
we generate to the cash distributions we expect to pay our
partners. Using this metric, management computes our distribution
coverage ratio.
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 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.
Adjusted
EBITDA. We
define Adjusted EBITDA as net income or loss attributable to Enterprise less
equity earnings from unconsolidated affiliates, plus distributions received from
unconsolidated affiliates, interest expense, provision for income taxes and
depreciation, amortization and accretion expense. Adjusted EBITDA is
commonly used as a supplemental financial measure by management and by external
users of our 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; and (3) the viability of projects
and the overall rates of return on alternative investment
opportunities. Since Adjusted EBITDA excludes some, but not all,
items that affect net income or loss attributable to Enterprise and because
these measures may vary among other companies, the Adjusted 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 Adjusted EBITDA 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 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 36,000 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 includes forward-looking statements. Except for the
historical information contained herein, the matters discussed in this press
release are forward-looking statements that involve certain risks and
uncertainties, such as the partnership’s expectations regarding future results,
capital expenditures, project completions, liquidity and financial market
conditions. These risks and uncertainties include, among other
things, insufficient cash from operations, market conditions, governmental
regulations and factors discussed in Enterprise Product Partners’ filings with
the U.S. Securities and Exchange Commission. If any of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual results or outcomes may vary materially from those
expected. The partnership disclaims any intention or obligation to
update publicly or reverse such statements, whether as a result of new
information, future events or otherwise.
Contacts: Randy
Burkhalter, Vice President, Investor Relations, (713) 381-6812,
Rick
Rainey, Director, Media Relations, (713) 381-3635
###
| Enterprise Products Partners L.P. |
Exhibit
A
|
|||||||
|
Condensed
Statements of Consolidated Operations - UNAUDITED
|
||||||||
|
($
in millions, except per unit amounts)
|
||||||||
|
Three
Months Ended March 31,
|
||||||||
|
2009
|
2008
|
|||||||
|
Revenues
|
$ | 3,423.1 | $ | 5,684.5 | ||||
|
Costs and
expenses:
|
||||||||
|
Operating
costs and expenses
|
3,041.3 | 5,311.2 | ||||||
|
General
and administrative costs
|
23.0 | 21.2 | ||||||
|
Total
costs and expenses
|
3,064.3 | 5,332.4 | ||||||
|
Equity in earnings of
unconsolidated affiliates
|
13.4 | 14.6 | ||||||
|
Operating
income
|
372.2 | 366.7 | ||||||
|
Other income
(expense):
|
- | |||||||
|
Interest
expense
|
(120.4 | ) | (91.9 | ) | ||||
|
Other,
net
|
0.7 | 0.9 | ||||||
|
Total
other expense
|
(119.7 | ) | (91.0 | ) | ||||
|
Income before
provision for income taxes
|
252.5 | 275.7 | ||||||
|
Provision
for income taxes
|
(15.2 | ) | (3.7 | ) | ||||
|
Net
income
|
237.3 | 272.0 | ||||||
|
Net
income attributable to noncontrolling interests
|
(12.0 | ) | (12.4 | ) | ||||
|
Net income
attributable to Enterprise Products Partners L.P.
|
$ | 225.3 | $ | 259.6 | ||||
|
Net income allocated
to:
|
||||||||
|
Limited
partners
|
$ | 186.3 | $ | 225.2 | ||||
|
General
partner
|
$ | 39.0 | $ | 34.4 | ||||
|
Per unit data (fully
diluted): (1)
|
||||||||
|
Earnings
per unit
|
$ | 0.41 | $ | 0.51 | ||||
|
Average
LP units outstanding (in millions)
|
452.7 | 435.9 | ||||||
|
Other financial
data:
|
||||||||
|
Net
cash flows provided by operating activities
|
$ | 218.1 | $ | 265.1 | ||||
|
Cash
used in investing activities
|
$ | 424.3 | $ | 568.6 | ||||
|
Cash
provided by financing activities
|
$ | 214.3 | $ | 329.6 | ||||
|
Distributable
cash flow
|
$ | 342.9 | $ | 382.8 | ||||
|
Adjusted
EBITDA
|
$ | 525.5 | $ | 505.0 | ||||
|
Depreciation,
amortization and accretion
|
$ | 154.1 | $ | 135.9 | ||||
|
Distributions
received from unconsolidated affiliates
|
$ | 22.9 | $ | 28.6 | ||||
|
Total
debt principal outstanding at end of period
|
$ | 9,248.5 | $ | 7,469.5 | ||||
|
Capital
spending:
|
||||||||
|
Capital
expenditures, net of contributions in aid of construction
costs, for property, plant and equipment
|
$ | 386.1 | $ | 617.3 | ||||
|
Investments
in unconsolidated affiliates
|
6.4 | 7.4 | ||||||
|
Total
capital spending
|
|
$ | 392.5 | $ | 624.7 | |||
|
(1)
For
purposes of computing diluted earnings per unit, we used the provisions of
Emerging Issues Task Force 07-4, Application of the Two-Class Method under
FASB Statement No. 128 to Master Limited
Partnerships.
|
||||||||
|
Enterprise
Products Partners L.P.
|
Exhibit
B
|
|||||||
|
Condensed
Operating Data – UNAUDITED
|
||||||||
|
($
in millions)
|
||||||||
|
Three
Months Ended March 31,
|
||||||||
|
2009
|
2008
|
|||||||
|
Gross operating margin
by segment:
|
||||||||
|
NGL
Pipelines & Services
|
$ | 342.8 | $ | 289.7 | ||||
|
Onshore
Natural Gas Pipelines & Services
|
116.0 | 109.9 | ||||||
|
Offshore
Pipelines & Services
|
61.3 | 81.6 | ||||||
|
Petrochemical
Services
|
28.6 | 41.0 | ||||||
|
Total
gross operating margin
|
548.7 | 522.2 | ||||||
|
Adjustments
to reconcile gross operating margin to
|
||||||||
|
operating
income:
|
||||||||
|
Depreciation,
amortization and accretion in operating
|
||||||||
|
costs
and expenses
|
(153.5 | ) | (133.9 | ) | ||||
|
Operating
lease expense paid by EPCO, Inc. in operating
|
||||||||
|
costs
and expenses
|
(0.2 | ) | (0.5 | ) | ||||
|
Gain
from asset sales and related transactions in
operating
costs and expenses
|
0.2 | 0.1 | ||||||
|
General
and administrative costs
|
(23.0 | ) | (21.2 | ) | ||||
|
Operating
income
|
$ | 372.2 | $ | 366.7 | ||||
|
Selected operating
data: (1)
|
||||||||
|
NGL
Pipelines & Services, net:
|
||||||||
|
NGL
transportation volumes (MBPD)
|
1,950 | 1,831 | ||||||
|
NGL
fractionation volumes (MBPD)
|
432 | 423 | ||||||
|
Equity
NGL production (MBPD)
|
114 | 104 | ||||||
|
Fee-based
natural gas processing (MMcf/d)
|
3,104 | 2,669 | ||||||
|
Onshore
Natural Gas Pipelines & Services, net:
|
||||||||
|
Natural
gas transportation volumes (BBtus/d)
|
7,981 | 6,981 | ||||||
|
Offshore
Pipelines & Services, net:
|
||||||||
|
Natural
gas transportation volumes (BBtus/d)
|
1,542 | 1,936 | ||||||
|
Crude
oil transportation volumes (MBPD)
|
126 | 206 | ||||||
|
Platform
natural gas processing (MMcf/d)
|
777 | 830 | ||||||
|
Platform
crude oil processing (MBPD)
|
3 | 21 | ||||||
|
Petrochemical
Services, net:
|
||||||||
|
Butane
isomerization volumes (MBPD)
|
90 | 96 | ||||||
|
Propylene
fractionation volumes (MBPD)
|
68 | 58 | ||||||
|
Octane
additive production volumes (MBPD)
|
5 | 7 | ||||||
|
Petrochemical
transportation volumes (MBPD)
|
106 | 115 | ||||||
|
Total,
net:
|
||||||||
|
NGL,
crude oil and petrochemical transportation volumes (MBPD)
|
2,182 | 2,152 | ||||||
|
Natural
gas transportation volumes (BBtus/d)
|
9,523 | 8,917 | ||||||
|
Equivalent
transportation volumes (MBPD) (2)
|
4,688 | 4,499 | ||||||
|
(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.
|
||||||||
|
Enterprise
Products Partners L.P.
|
Exhibit
C
|
|||||||
|
Reconciliation
of Unaudited GAAP Financial Measures to Non-GAAP Financial
Measures
|
||||||||
|
Distributable
Cash Flow
|
||||||||
|
($
in millions)
|
||||||||
|
Three
Months Ended March 31,
|
||||||||
|
2009
|
2008
|
|||||||
|
Reconciliation of
"Distributable cash flow" to "Net income
attributable
|
||||||||
|
to Enterprise Products
Partners L.P." and "Net cash flows provided by operating
activities"
|
||||||||
|
Net
income attributable to Enterprise Products Partners L.P.
|
$ | 225.3 | $ | 259.6 | ||||
|
Adjustments
to net income attributable to Enterprise Products Partners L.P.
to
derive
distributable cash flow:
|
||||||||
|
Amortization
in interest expense
|
(1.0 | ) | 0.1 | |||||
|
Depreciation,
amortization and accretion in costs and expenses
|
155.1 | 135.8 | ||||||
|
Operating
lease expense paid by EPCO, Inc.
|
0.2 | 0.5 | ||||||
|
Deferred
income tax expense
|
0.9 | (0.9 | ) | |||||
|
Monetization
of interest rate hedging derivative instruments
|
-- | 6.3 | ||||||
|
Amortization
of net gains related to monetization of derivative
instruments
|
(0.4 | ) | (1.6 | ) | ||||
|
Equity
in earnings of unconsolidated affiliates
|
(13.4 | ) | (14.6 | ) | ||||
|
Distributions
received from unconsolidated affiliates
|
22.9 | 28.6 | ||||||
|
Gain
from asset sales and related transactions
|
(0.2 | ) | (0.1 | ) | ||||
|
Proceeds
from asset sales and related transactions
|
0.3 | 0.1 | ||||||
|
Sustaining
capital expenditures
|
(20.0 | ) | (25.0 | ) | ||||
|
Changes
in fair market value of derivative instruments
|
(12.0 | ) | 0.7 | |||||
|
Net
income attributable to noncontrolling interest – DEP public
unitholders
|
5.1 | 4.3 | ||||||
|
Distribution
to be paid to DEP public unitholders with respect to
period
|
(6.4 | ) | (6.1 | ) | ||||
|
Proceeds
from property damage insurance claims
|
3.8 | -- | ||||||
|
Cash
expenditures for asset abandonment activities
|
(0.1 | ) | (4.9 | ) | ||||
|
Accrued
property damage repair costs related to Hurricanes Ike and
Gustav
|
(17.2 | ) | -- | |||||
|
Distributable
cash flow
|
342.9 | 382.8 | ||||||
|
Adjustments
to distributable cash flow to derive net cash flows provided
by
|
||||||||
|
operating
activities:
|
||||||||
|
Monetization
of interest rate hedging derivative instruments
|
-- | (6.3 | ) | |||||
|
Amortization
of net gains related to monetization of derivative
instruments
|
0.4 | 1.6 | ||||||
|
Proceeds
from asset sales and related transactions
|
(0.3 | ) | (0.1 | ) | ||||
|
Sustaining
capital expenditures
|
20.0 | 25.0 | ||||||
|
Net
income attributable to noncontrolling interests
|
12.0 | 12.4 | ||||||
|
Net
income attributable to noncontrolling interest – DEP public
unitholders
|
(5.1 | ) | (4.3 | ) | ||||
|
Distribution
to be paid to DEP public unitholders with respect to
period
|
6.4 | 6.1 | ||||||
|
Proceeds
from property damage insurance claims
|
(3.8 | ) | -- | |||||
|
Cash
expenditures for asset abandonment activities
|
0.1 | 4.9 | ||||||
|
Accrued
property damage repair costs related to Hurricanes Ike and
Gustav
|
17.2 | -- | ||||||
|
Effect
of pension settlement recognition
|
0.1 | (0.1 | ) | |||||
|
Net
effect of changes in operating accounts
|
(171.8 | ) | (156.9 | ) | ||||
|
Net
cash flows provided by operating activities
|
$ | 218.1 | $ | 265.1 | ||||
| Enterprise Products Partners L.P. |
Exhibit
D
|
|||||||
|
Reconciliation
of Unaudited GAAP Financial Measures to Non-GAAP Financial
Measures
|
||||||||
|
Adjusted
EBITDA
|
||||||||
|
($
in millions)
|
||||||||
|
Three
Months Ended March 31,
|
||||||||
|
2009
|
2008
|
|||||||
|
Reconciliation of
"Adjusted EBITDA" to "Net income attributable
|
||||||||
|
to Enterprise Products
Partners L.P.” and "Net cash flows provided by operating
activities"
|
||||||||
|
Net
income attributable to Enterprise Products Partners L.P.
|
$ | 225.3 | $ | 259.6 | ||||
|
Adjustments
to net income attributable Enterprise Products Partners L.P.
to
derive Adjusted EBITDA:
|
||||||||
|
Equity
in earnings of unconsolidated affiliates
|
(13.4 | ) | (14.6 | ) | ||||
|
Distributions
received from unconsolidated affiliates
|
22.9 | 28.6 | ||||||
|
Interest
expense (including related amortization)
|
120.4 | 91.9 | ||||||
|
Provision
for income taxes
|
15.2 | 3.7 | ||||||
|
Depreciation,
amortization and accretion in costs and expenses
|
155.1 | 135.8 | ||||||
|
Adjusted
EBITDA
|
525.5 | 505.0 | ||||||
|
Adjustments
to Adjusted EBITDA to derive net cash flows provided by
|
||||||||
|
operating
activities:
|
||||||||
|
Interest
expense
|
(120.4 | ) | (91.9 | ) | ||||
|
Provision
for income taxes
|
(15.2 | ) | (3.7 | ) | ||||
|
Amortization
in interest expense
|
(1.0 | ) | 0.1 | |||||
|
Deferred
income tax expense
|
0.9 | (0.9 | ) | |||||
|
Operating
lease expense paid by EPCO, Inc.
|
0.2 | 0.5 | ||||||
|
Net
income attributable to noncontrolling interests
|
12.0 | 12.4 | ||||||
|
Gain
from asset sales and related transactions
|
(0.2 | ) | (0.1 | ) | ||||
|
Changes
in fair market value of derivative instruments
|
(12.0 | ) | 0.7 | |||||
|
Effect
of pension settlement recognition
|
0.1 | (0.1 | ) | |||||
|
Net
effect of changes in operating accounts
|
(171.8 | ) | (156.9 | ) | ||||
|
Net
cash flows provided by operating activities
|
$ | 218.1 | $ | 265.1 | ||||