UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d)
of the
Security Exchange Act of 1934
Date of
report (Date of earliest event reported): April 27, 2009
DUNCAN
ENERGY PARTNERS L.P.
(Exact
Name of Registrant as Specified in Its Charter)
|
Delaware
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1-33266
|
20-5639997
|
|
(State
or Other Jurisdiction of
Incorporation
or Organization)
|
(Commission
File
Number)
|
(I.R.S.
Employer
Identification
No.)
|
|
1100
Louisiana, 10th
Floor
Houston,
Texas 77002
(Address
of Principal Executive Offices, including Zip Code)
|
|
(713)
381-6500
(Registrant’s
Telephone Number, including Area
Code)
|
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, Duncan Energy
Partners L.P. (“Duncan Energy Partners”) issued a press release announcing its
financial and operating results for the three months ended March 31, 2009 and
held a joint webcast conference call with Enterprise Products Partners L.P.
(“Enterprise Products Partners”) 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 Duncan
Energy Partners’ website at www.deplp.com for 90
days.
Unless the context requires otherwise,
references to “we,” “us,” “our,” or “Duncan Energy Partners” within the context
of this Current Report refer to the consolidated business and operations of
Duncan Energy Partners L.P. References to “Parent” and “EPO” refer to
Enterprise Products Operating LLC, which is the primary operating subsidiary of
Enterprise Products Partners.
Basis
of Presentation
Effective
February 1, 2007, Duncan Energy Partners acquired controlling ownership
interests in five midstream energy companies (the “DEP I Midstream Businesses”)
from EPO in a dropdown transaction. The DEP I Midstream Businesses
consist of (i) Mont Belvieu Caverns, LLC (“Mont Belvieu Caverns”); (ii) Acadian
Gas, LLC (“Acadian Gas”); (iii) Enterprise Lou-Tex Propylene Pipeline L.P.
(“Lou-Tex Propylene”), including its general partner; (iv) Sabine Propylene
Pipeline L.P. (“Sabine Propylene”), including its general partner; and (v) South
Texas NGL Pipelines, LLC (“South Texas NGL”).
On
December 8, 2008, Duncan Energy Partners entered into a Purchase and Sale
Agreement (the “DEP II Purchase Agreement”) with EPO and Enterprise GTM Holdings
L.P. (“Enterprise GTM,” a wholly owned subsidiary of EPO). Pursuant
to the DEP II Purchase Agreement, DEP OLP acquired 100% of the membership
interests in Enterprise Holding III, LLC (“Enterprise III”) from Enterprise GTM,
thereby acquiring a 66% general partner interest in Enterprise GC, L.P.
(“Enterprise GC”), a 51% general partner interest in Enterprise Intrastate L.P.
(“Enterprise Intrastate”) and a 51% membership interest in Enterprise Texas
Pipeline LLC (“Enterprise Texas”). Collectively, we refer to
Enterprise GC, Enterprise Intrastate and Enterprise Texas as the “DEP II
Midstream Businesses.” EPO was the sponsor of this second dropdown
transaction.
Prior to
the dropdown of controlling ownership interests in the DEP I and DEP II
Midstream Businesses to Duncan Energy Partners, EPO owned these businesses and
directed their respective activities for all periods presented (to the extent
such businesses were in existence during such periods). Each of the
dropdown transactions was accounted for at EPO’s historical costs as a
reorganization of entities under common control in a manner similar to a pooling
of interests. On a standalone basis, Duncan Energy Partners did not
own any assets prior to February 1, 2007.
References
to the “former owners” of the DEP I and DEP II Midstream Businesses represent
the ownership of EPO in these businesses prior to the related dropdown
transactions. References to “Duncan Energy Partners” mean the
registrant and its consolidated subsidiaries since February 2007.
For additional information regarding
the DEP I and DEP II dropdown transactions as well as the recast of our
historical financial information in connection with the DEP II dropdown
transaction, please read Note 1 of the Notes to Consolidated Financial
Statements included under Item 8 of our Annual Report on Form 10-K for the year
ended December 31, 2008.
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 Parent 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 Parent interest); and (ii) elimination of
“Parent interest in income of subsidiaries” amounts as a deduction in deriving
net income or loss and, as a result, that net income or loss be allocated
between
1
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 the attached 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 Parent (i.e., the noncontrolling interest) receiving the same amounts as
they did previously.
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 and
distributable cash flow. 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
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) gains and
losses from asset sales and related transactions; and (iii) general and
administrative expenses. Gross operating margin is exclusive of other
income and expense transactions, provision for income taxes, extraordinary
charges, cumulative effect of changes in accounting principles 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 any intersegment and intrasegment
transactions. In accordance with GAAP, intercompany accounts and
transactions are eliminated in consolidation.
We
include equity earnings from Evangeline in our measurement of segment gross
operating margin and operating income. Our equity investment in
Evangeline is a vital component of our business strategy and important to the
operations of Acadian Gas. 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. Evangeline’s operations complement those of Acadian
Gas.
Distributable
cash flow. Distributable cash flow available to the limited
partners of Duncan Energy Partners is a useful non-GAAP measure of liquidity
that approximates the amount of cash flow that Duncan Energy Partners could pay
its unitholders each period before any reserves established by its general
partner, DEP Holdings, LLC, for general partnership needs. On a 100%
basis, we define distributable cash flow as 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 cash distributions received from Evangeline, if any, less
equity earnings from Evangeline;
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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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2
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§
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the
addition of losses or subtraction of gains relating to the sale of assets
and related transactions;
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§
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the
addition of cash proceeds from the sale of assets and related
transactions;
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§
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the
addition of losses or subtraction of gains on the monetization of
derivative instruments recorded in accumulated other comprehensive income
(loss), if any, less related amortization of such amounts to earnings;
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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Distributable
cash flow available to the limited partners of Duncan Energy Partners is
determined by reducing distributable cash flow (on a 100% basis, as defined
above) for amounts paid (i) by our operating businesses to (a) the Parent with
respect to its financial interests in the DEP I and DEP II Midstream Businesses
and (b) the related party former owners of such businesses with respect to
periods prior to the dropdown transactions, and (ii) to the general partner of
Duncan Energy Partners.
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.
Item
9.01. Financial Statements and Exhibits.
(d) Exhibits.
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Exhibit
Number
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Exhibit
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99.1
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Duncan
Energy 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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DUNCAN
ENERGY PARTNERS L.P.
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||
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By:
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DEP
Holdings, LLC, as 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
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and
Principal Accounting Officer
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||
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of
DEP Holdings, 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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Duncan
Energy Partners L.P. press release dated April 27,
2009.
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5
Exhibit
99.1
P.O. Box
4324
Houston,
TX 77210
(713)
381-6500
Duncan
Energy Partners Reports 50 Percent Increase in
Earnings
for the First Quarter 2009
Houston,
Texas (April 27, 2009) – Duncan Energy Partners L.P. (NYSE: DEP) today
announced a 50% increase in earnings for the first quarter of 2009 compared
to the first quarter of 2008. Net income attributable to Duncan
Energy Partners was $19.9 million, or $0.34 per common unit on a fully
diluted basis, for the first quarter of 2009 versus $13.3 million, or $0.29
per common unit on a fully diluted basis, for the first quarter of
2008. See “Basis of Presentation” section of this press release for
information regarding (1) the recast of our prior period financial information
in connection with the December 2008 drop down transaction involving
affiliates of Enterprise Products Partners L.P. (“Enterprise”) (NYSE: EPD),
and (2) recent accounting guidance relating to noncontrolling
interest.
Distributable
cash flow increased 231 percent to $29.5 million for the first quarter of 2009
compared to $8.9 million for the first quarter of 2008. The increase
is primarily due to $21.6 million in distributions the partnership earned from
the midstream businesses it acquired in December 2008 in connection with the
drop down transaction with Enterprise. On April 15, 2009, the Board of Directors
of Duncan Energy Partners’ general partner declared an increase in the quarterly
cash distribution rate paid to partners to $0.43 per common unit with respect to
the first quarter of 2009. This represents a 4.9 percent increase
over the $0.41 per unit 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 our common
unitholders. Distributable cash flow is a non-generally accepted
accounting principle (or “non-GAAP”) financial measure that is defined and
reconciled later in this press release to its most directly comparable U.S.
generally accepted accounting principle (“GAAP”) financial measure, which is net
cash flows provided by operating activities.
“We are
pleased to report another quarter of strong cash flow, a substantial portion of
which was generated from the assets acquired in the December 2008 drop down
transaction with Enterprise Products Partners,” said Richard H. Bachmann,
president and chief executive officer of the general partner of Duncan Energy
Partners. “As a result of the increased distributable cash
flow this quarter, we were able to raise the quarterly cash distribution rate
for the second consecutive quarter while still providing a solid 1.2
times coverage of the cash distributions to be paid to our
partners. We look forward to these businesses continuing to perform
well this year to support further increases in the quarterly cash
distributions,” continued Bachmann.
Review of Segment Quarterly
Performance
Since
Duncan Energy Partners consolidates the financial results of its operating
subsidiaries, the following discussion of segment results reports
gross operating margin and volumes on a 100 percent basis, even though
the partnership owns less than 100 percent of these businesses. Gross operating
margin is a non-GAAP financial measure that is defined and reconciled later in
this press release to its most directly comparable GAAP financial measure, which
is operating income.
Natural Gas Pipelines &
Services – Gross operating margin for the first quarter of 2009 was $38.8
million compared to $40.8 million for the first quarter of 2008. The
Wilson natural gas storage facility and the Texas Intrastate pipeline together
reported a $1.1 million increase in gross operating margin due to higher storage
reservation fees and increased transportation volumes and fees. This
improvement was more than offset by a $3.4 million decrease in gross operating
margin from the partnership’s Acadian gas pipeline system primarily due to
lower sales margins and approximately $0.5 million of expenses for
hurricane-related property damage repairs in the first quarter
2009.
Total
natural gas volumes through our natural gas pipelines increased 13 percent to
5.1 trillion British thermal units per day (“TBtus/d”) in the first quarter of
2009 from 4.5 TBtus/d in the first quarter of 2008.
NGL Pipelines & Services – Gross
operating margin for the first quarter of 2009 was $20.8 million compared to
$22.7 million for the first quarter of 2008. Net of operational
measurement gains and losses associated with the partnership’s Mont Belvieu NGL
and petrochemical storage facility that are allocated to Enterprise through
noncontrolling interest, gross operating margin was $22.1 million for the first
quarter of 2009 compared to $21.9 million for the first quarter of
2008. Contributing to the quarter-to-quarter increase were higher
storage revenues due to increased reservation and excess throughput storage fees
and increased storage volumes.
NGL
transportation volumes decreased to 115,000 barrels per day (“BPD”) in the
first quarter of 2009 from 137,000 BPD in the first quarter of
2008. NGL fractionation volumes were 79,000 BPD this
quarter compared to 82,000 BPD in the same quarter of 2008.
Petrochemical Services – Gross
operating margin for the first quarter of 2009 decreased to $2.5 million from
$2.9 million reported in the first quarter of 2008, primarily due to reduced
transportation volumes on the Lou-Tex propylene pipeline. Total
petrochemical transportation volumes averaged 22,000 BPD for the first quarter
of 2009 versus 40,000 BPD for the first quarter of 2008.
Capitalization
Total
debt principal outstanding at March 31, 2009 was approximately $470 million,
which includes a $282 million borrowing by Duncan Energy Partners under a
three-year bank term loan used to fund the cash portion of consideration Duncan
Energy Partners paid to Enterprise in the December 2008 drop down
transaction. At March 31, 2009, Duncan Energy Partners had total
liquidity of approximately $133 million including unrestricted cash and
availability under the partnership’s $300 million revolving credit
facility.
Basis of Presentation of
Financial Information
In
February 2007, Duncan Energy Partners acquired controlling ownership interests
in five midstream energy companies (the “DEP I Midstream Businesses”) from
Enterprise Products Operating LLC (“EPO,” the principle operating subsidiary of
Enterprise Products Partners L.P.) in a drop down
transaction. In December 2008, Duncan Energy Partners acquired
controlling ownership interests in three additional midstream energy companies
(the “DEP II Midstream Businesses”) from EPO in a second drop down
transaction. Duncan Energy Partners, Enterprise and EPO are
affiliates under common control of Mr. Dan L. Duncan, the Group Co-Chairman and
controlling shareholder of EPCO, Inc.
Prior to the drop down of
controlling ownership interests in the DEP I and DEP II Midstream Businesses to
Duncan Energy Partners, EPO owned these businesses and directed their respective
activities for all periods presented (to the extent such businesses were in
existence during such periods). Each of the drop down
transactions was accounted for at EPO’s historical costs as a reorganization of
entities under common control in a manner similar to a pooling of
interests. On a standalone basis, Duncan Energy Partners did not own
any assets prior to February 2007.
References
to the “former owners” of the DEP I and DEP II Midstream Businesses represent
the ownership of EPO in these businesses prior to the related drop down
transactions. References to “Duncan Energy Partners” mean the
partnership and its consolidated subsidiaries since February 2007.
For additional information regarding
the DEP I and DEP II drop down transactions, as well as the recast of our
historical financial information in connection with the DEP II drop down
transaction, please read Note 1 of the Notes to Consolidated Financial
Statements included under Item 8 of our Annual Report on Form 10-K for the year
ended December 31, 2008.
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 Parent 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 Parent interest); and (ii) elimination of “Parent interest
in income of subsidiaries” 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 Parent (i.e., the noncontrolling interest) receiving the same amounts as
they did previously.
Use of Non-GAAP Financial
Measures
This press release includes the
non-GAAP financial measures of gross operating margin and distributable cash
flow. The tables accompanying this press release provide
reconciliations of these non-GAAP financial measures to their most directly
comparable financial measures calculated and presented in accordance with
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. 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
(i) depreciation, amortization and accretion expense; (ii) gains and
losses from asset sales and related transactions; and (iii) general and
administrative expenses. Gross operating margin is exclusive of other
income and expense transactions, provision for income taxes, extraordinary
charges, cumulative effect of changes in accounting principles 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 any intersegment and intrasegment
transactions. In accordance with GAAP, intercompany accounts and
transactions are eliminated in consolidation.
We
include equity earnings from Evangeline in our measurement of segment gross
operating margin and operating income. Our equity investment in
Evangeline is a vital component of our business strategy and important to the
operations of Acadian Gas. 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. Evangeline’s operations complement those of Acadian
Gas.
Distributable
cash flow. Distributable cash flow available to the limited
partners of Duncan Energy Partners is a useful non-GAAP measure of liquidity
that approximates the amount of cash flow that Duncan Energy Partners could pay
its unitholders each period before any reserves established by DEP GP for
general partnership needs. On a 100% basis, we define distributable
cash flow as net income or loss adjusted for:
|
§
|
the
addition of depreciation, amortization and accretion
expense;
|
|
§
|
the
addition of cash distributions received from Evangeline, if any, less
equity earnings from Evangeline;
|
|
§
|
the
subtraction of sustaining capital expenditures and cash payments to settle
asset retirement obligations;
|
|
§
|
the
addition of losses or subtraction of gains relating to the sale of assets
and related transactions;
|
|
§
|
the
addition of cash proceeds from the sale of assets and related
transactions;
|
|
§
|
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;
and
|
|
§
|
the
addition or subtraction of other miscellaneous non-cash amounts (as
applicable) that affect net income or loss for the
period.
|
Distributable cash flow available to
the limited partners of Duncan Energy Partners is determined by reducing
distributable cash flow (on a 100% basis, as defined above) for amounts paid (i)
by our operating businesses to (a) the Parent with respect to its financial
interests in the DEP I and DEP II Midstream Businesses and (b) the related party
former owners of such businesses with respect to periods prior to the
drop down transactions, and (ii) to the general partner of Duncan Energy
Partners.
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.
First Quarter 2009 Earnings
Conference
Call
Management
for Duncan Energy Partners will discuss first quarter results during the
Enterprise Products Partners L.P. earnings conference call with analysts and
investors scheduled for 9 a.m. CDT today. The call will be broadcast
live over the Internet and may be accessed by visiting the partnership's website
at www.deplp.com.
Company Information and Use
of Forward Looking Statements
Duncan
Energy Partners is a publicly traded partnership that provides midstream energy
services, including gathering, transportation, marketing and storage of natural
gas, in addition to NGL fractionation (or separation), transportation and
storage and petrochemical transportation and storage. Duncan Energy
Partners owns interests in assets located primarily in Texas and Louisiana,
including interests in approximately 9,200 miles of natural gas pipelines with a
transportation capacity aggregating approximately 6.8 billion cubic feet (“Bcf”)
per day; more than 1,600 miles of NGL and petrochemical pipelines featuring
access to the world’s largest fractionation complex at Mont Belvieu, Texas; two
NGL fractionation facilities located in south Texas; approximately 18 million
barrels (“MMBbls”) of leased NGL storage capacity; 8.5 Bcf of leased natural gas
storage capacity; and 33 underground salt dome caverns with more than 100 MMBbls
of NGL storage capacity at Mont Belvieu. Duncan Energy Partners L.P.
is managed by its general partner, DEP Holdings, LLC, which is wholly-owned by a
subsidiary of Enterprise Products Partners L.P. Additional information about
Duncan Energy Partners is available online.
This
news release includes forward-looking statements. Except for the
historical information contained herein, the matters discussed in this news
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 Duncan Energy 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.
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|
Contacts:
|
Randy Burkhalter, Investor
Relations, (713) 381-6812, www.deplp.com
|
|
|
Rick
Rainey, Media Relations, (713)
381-3635
|
###
Exhibit
A
Duncan
Energy Partners L.P.
Statements
of Consolidated Operations – UNAUDITED
For
the Three Months Ended March 31, 2009 and 2008
(Dollars
in millions, except per unit amounts)
|
Three
Months Ended March 31,
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||||||||
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2009
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2008
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|||||||
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Revenue
|
$ | 256.8 | $ | 363.6 | ||||
|
Costs and
expenses:
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||||||||
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Operating
costs and expenses
|
239.4 | 337.5 | ||||||
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General
and administrative costs
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2.8 | 5.2 | ||||||
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Total
costs and expenses
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242.2 | 342.7 | ||||||
|
Equity in income of
Evangeline
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0.2 | 0.2 | ||||||
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Operating
income
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14.8 | 21.1 | ||||||
|
Other income
(expense):
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||||||||
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Interest
expense
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(3.8 | ) | (2.8 | ) | ||||
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Interest
income
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0.1 | 0.1 | ||||||
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Total
other expense
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(3.7 | ) | (2.7 | ) | ||||
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Income before
provision for income taxes
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11.1 | 18.4 | ||||||
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Provision
for income taxes
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(0.1 | ) | 0.5 | |||||
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Net
income
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11.0 | 18.9 | ||||||
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Net loss (income)
attributable to noncontrolling
interest:
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||||||||
|
DEP
I Midstream Businesses - Parent
|
(1.6 | ) | (5.6 | ) | ||||
|
DEP
II Midstream Businesses - Parent
|
10.5 | -- | ||||||
|
Total
net loss (income) attributable to noncontrolling interest
|
8.9 | (5.6 | ) | |||||
|
Net income
attributable to Duncan
Energy Partners L.P.
|
$ | 19.9 | $ | 13.3 | ||||
|
Allocation of net
income
attributable to Duncan Energy Partners L.P.:
|
||||||||
|
Duncan
Energy Partners L.P.:
|
||||||||
|
Limited
partners
|
$ | 19.8 | $ | 5.9 | ||||
|
General
partner
|
$ | 0.1 | $ | 0.1 | ||||
|
Former
owner of DEP II Midstream Businesses
|
$ | -- | $ | 7.3 | ||||
|
Per unit data (fully
diluted):
|
||||||||
|
Net
income per unit
|
$ | 0.34 | $ | 0.29 | ||||
|
Average
LP units outstanding (in millions)
|
57.7 | 20.3 | ||||||
|
Other financial
data:
|
||||||||
|
Net
cash flows provided by operating activities
|
$ | 19.8 | $ | 40.9 | ||||
|
Cash
used in investing activities
|
$ | 115.0 | $ | 236.4 | ||||
|
Cash
provided by financing activities
|
$ | 104.0 | $ | 207.4 | ||||
|
Distributable
cash flow (see Exhibit C)
|
$ | 29.5 | $ | 8.9 | ||||
|
Depreciation,
amortization and accretion (100% basis)
|
$ | 45.0 | $ | 40.2 | ||||
|
Total
debt principal outstanding at end of period
|
$ | 470.3 | $ | 188.0 | ||||
Exhibit
B
Duncan
Energy Partners L.P.
Selected
Financial & Operating Data - UNAUDITED
For
the Three Months Ended March 31, 2009 and 2008
(Dollars
in millions, operating data as noted)
|
Three
Months Ended March 31,
|
||||||||
|
2009
|
2008
|
|||||||
|
Gross operating margin
by segment:
|
||||||||
|
Natural
Gas Pipelines & Services
|
$ | 38.8 | $ | 40.8 | ||||
|
NGL
Pipelines & Services
|
20.8 | 22.7 | ||||||
|
Petrochemical
Services
|
2.5 | 2.9 | ||||||
|
Total
gross operating margin
|
62.1 | 66.4 | ||||||
|
Adjustments
to reconcile non-GAAP gross operating
|
||||||||
|
margin
to GAAP operating income:
|
||||||||
|
Depreciation,
amortization and accretion in operating
|
||||||||
|
costs
and expenses
|
(44.6 | ) | (40.1 | ) | ||||
|
Gain
from asset sales and related transactions
|
0.1 | -- | ||||||
|
General
and administrative costs
|
(2.8 | ) | (5.2 | ) | ||||
|
Operating
income
|
$ | 14.8 | $ | 21.1 | ||||
|
Selected operating
data:
|
||||||||
|
Natural
Gas Pipelines & Services, net:
|
||||||||
|
Natural
gas throughput volumes (BBtus/d)
|
5,089 | 4,511 | ||||||
|
NGL
Pipelines & Services:
|
||||||||
|
Pipeline
throughput volumes (MBPD)
|
115 | 137 | ||||||
|
Fractionation
volumes (MBPD)
|
79 | 82 | ||||||
|
Petrochemical
Services:
|
||||||||
|
Petrochemical
throughput volumes (MBPD)
|
22 | 40 | ||||||
|
Calculation of net
loss (income) attributable to noncontrolling interest:
|
||||||||
|
DEP
I Midstream Businesses - Parent:
|
||||||||
|
Mont
Belvieu Caverns
|
$ | 0.3 | $ | (2.4 | ) | |||
|
Acadian
Gas
|
(0.2 | ) | (1.2 | ) | ||||
|
Lou-Tex
Propylene
|
(0.3 | ) | (0.6 | ) | ||||
|
Sabine
Propylene
|
(0.3 | ) | (0.1 | ) | ||||
|
South
Texas NGL
|
(1.1 | ) | (1.3 | ) | ||||
|
Total
DEP I Midstream Businesses - Parent
|
$ | (1.6 | ) | $ | (5.6 | ) | ||
|
DEP
II Midstream Businesses - Parent:
|
||||||||
|
Enterprise Texas
|
$ | 6.5 | $ | -- | ||||
|
Enterprise
GC
|
2.3 | -- | ||||||
|
Enterprise
Intrastate
|
1.7 | -- | ||||||
|
Total
DEP II Midstream Businesses - Parent
|
$ | 10.5 | $ | -- | ||||
|
Total
net loss (income) attributable to noncontrolling interest
|
$ | 8.9 | $ | (5.6 | ) | |||
Exhibit
C
Duncan
Energy Partners L.P.
Calculation
of Distributable Cash Flow (“DCF”) - UNAUDITED
For
the Three Months Ended March 31, 2009 and 2008
(Dollars
in millions)
|
Three
Months
|
Three
Months
|
|||||||||||||||
|
Ended
March 31, 2009
|
Ended
March 31, 2008
|
|||||||||||||||
|
Net
income
|
$ | 11.0 | $ | 18.9 | ||||||||||||
|
Adjustments to derive
DCF before
payments to Parent and former owners:
|
||||||||||||||||
|
Depreciation,
amortization and accretion
|
45.0 | 40.2 | ||||||||||||||
|
Deferred
income tax expense
|
(0.2 | ) | (0.7 | ) | ||||||||||||
|
Equity
in income of Evangeline
|
(0.2 | ) | (0.2 | ) | ||||||||||||
|
Gain
from asset sales and related transactions
|
(0.1 | ) | -- | |||||||||||||
|
Proceeds
from asset sales and related transactions
|
0.1 | -- | ||||||||||||||
|
Changes
in fair value of financial instruments
|
(0.1 | ) | -- | |||||||||||||
|
Sustaining
capital expenditures:
|
||||||||||||||||
|
DEP
I Midstream Businesses
|
(2.5 | ) | (3.3 | ) | ||||||||||||
|
DEP
II Midstream Businesses
|
(7.9 | ) | (5.9 | ) | ||||||||||||
|
Other
sustaining capital expenditures
|
(0.1 | ) | -- | |||||||||||||
|
Accrued
repair costs related to Hurricanes Ike and Gustav
|
0.1 | -- | ||||||||||||||
|
Cash
expenditures for asset abandonment activities
|
-- | (4.6 | ) | |||||||||||||
|
Subtotal Distributable
Cash Flow (100% basis)
|
45.1 | 44.4 | ||||||||||||||
|
Contributions by
(distributions to) noncontrolling
interest - Parent
by DEP I Midstream
Businesses:
|
||||||||||||||||
|
DCF
of DEP I Midstream Businesses
|
$ | 16.6 | $ | 19.2 | ||||||||||||
|
Adjustment
for net operational measurement gains/losses
|
||||||||||||||||
|
contributed
by (distributed to) noncontrolling interest -
Parent
|
1.3 | 1.3 | (0.8 | ) | (0.8 | ) | ||||||||||
|
Adjusted
DCF of DEP I Midstream Businesses
|
$ | 17.9 | $ | 18.4 | ||||||||||||
|
Parent
34% share of Adjusted DCF
|
$ | (6.0 | ) | (6.0 | ) | $ | (6.3 | ) | (6.3 | ) | ||||||
|
Contributions by
(distributions to) noncontrolling
interest - Parent
by DEP II Midstream
Businesses:
|
||||||||||||||||
|
Enterprise
GC
|
$ | (1.8 | ) | |||||||||||||
|
Enterprise
Intrastate
|
(0.3 | ) | ||||||||||||||
|
Enterprise Texas
|
(8.8 | ) | ||||||||||||||
|
Parent
share of distributions
|
$ | (10.9 | ) | (10.9 | ) | |||||||||||
|
Distributions to EPO
(as former owner) by DEP II Midstream Businesses
for
|
||||||||||||||||
|
periods prior to DEP
II dropdown transaction (pre-December 8, 2008)
|
-- | (28.4 | ) | |||||||||||||
|
Distributable cash
flow
|
$ | 29.5 | $ | 8.9 | ||||||||||||
Exhibit
D
Duncan
Energy Partners L.P.
Reconciliation
of DCF to Net Cash Flows Provided by Operating Activities -
UNAUDITED
For
the Three Months Ended March 31, 2009 and 2008
(Dollars
in millions)
|
Three
Months Ended March 31,
|
||||||||
|
2009
|
2008
|
|||||||
|
Distributable cash
flow
|
$ | 29.5 | $ | 8.9 | ||||
|
Adjustments
to distributable cash flow to derive net cash flows provided
by
|
||||||||
|
operating
activities (add or subtract as indicated by sign of
number):
|
||||||||
|
Proceeds
from asset sales and related transactions
|
(0.1 | ) | -- | |||||
|
Sustaining
capital expenditures:
|
||||||||
|
DEP
I Midstream Businesses
|
2.5 | 3.3 | ||||||
|
DEP
II Midstream Businesses
|
7.9 | 5.9 | ||||||
|
Other
sustaining capital expenditures
|
0.1 | -- | ||||||
|
Noncontrolling
interest share of distributable cash flow
of
operating subsidiaries:
|
||||||||
|
DEP
I Midstream Businesses - Parent
|
4.7 | 7.1 | ||||||
|
DEP
II Midstream Businesses - Parent
|
10.9 | -- | ||||||
|
Distributable
cash flow of DEP II Midstream Businesses allocated to EPO
|
||||||||
|
(as
former owner) for periods prior to December 8, 2008
|
-- | 28.4 | ||||||
|
Cash
expenditures for asset abandonment activities
|
-- | 4.6 | ||||||
|
Accrued
repair costs related to Hurricanes Ike and Gustav
|
(0.1 | ) | -- | |||||
|
Net
effect of changes in operating accounts
|
(35.6 | ) | (17.3 | ) | ||||
|
Net cash flows
provided by operating activities
|
$ | 19.8 | $ | 40.9 | ||||