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): February 1, 2010
DUNCAN
ENERGY PARTNERS L.P.
(Exact
Name of Registrant as Specified in Its Charter)
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Delaware
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1-33266
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20-5639997
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(State
or Other Jurisdiction of
Incorporation
or Organization)
|
(Commission
File
Number)
|
(I.R.S.
Employer
Identification
No.)
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|
1100
Louisiana Street, 10th
Floor
Houston,
Texas 77002
(Address
of Principal Executive Offices, including Zip Code)
|
|
(713)
381-6500
(Registrant’s
Telephone Number, including Area
Code)
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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 February 1, 2010, Duncan Energy
Partners L.P. (“Duncan Energy Partners”) issued a press release announcing its
financial and operating results for the three and twelve months ended December
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,” “Duncan Energy
Partners” or the “Partnership” within the context of this Current Report refer
to the business and operations of Duncan Energy Partners L.P. and its
consolidated subsidiaries. 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 Operating Partnership L.P. (“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.
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.
To assist
investors and other users of our financial statements, our press release
includes selected financial information on a standalone basis apart from that of
our consolidated Partnership. A key difference between the
supplemental selected standalone financial information and our general purpose
consolidated financial statements is that the DEP I and DEP II Midstream
Businesses are viewed as investments and presented as unconsolidated
affiliates. Accordingly, the net income of the DEP I and DEP II
Midstream Businesses attributable to the Partnership on a standalone basis is
reflected as equity earnings. In accordance with U.S. generally
accepted accounting principles (“GAAP”), we eliminate such equity earnings in
the preparation of our general purpose consolidated financial
statements.
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
1
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 measure of financial performance or liquidity
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 financial 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) non-cash
consolidated asset impairment charges; (iii) gains and losses from asset
sales and related transactions; and (iv) general and administrative
costs. 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. Gross operating margin is exclusive of other income
and expense transactions, provision for income taxes, extraordinary charges and
the cumulative effect of changes in accounting principles. Gross
operating margin is presented on a 100% basis before the allocation of earnings
to noncontrolling interests.
Distributable
cash flow. The Partnership’s distributable cash flow is a
useful non-GAAP measure of liquidity that approximates the amount of cash that
Duncan Energy Partners could pay its partners each period. We define
the partnership’s distributable cash flow as the sum of its share of the
distributable cash flow of each of the DEP I and DEP II Midstream Businesses,
less any standalone expenses of the Partnership such as interest expense and
general and administrative costs (net of non-cash items).
In general, we define the distributable
cash flow of our operating subsidiaries as their 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;
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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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§
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the
addition of losses or subtraction of gains relating to asset sales and
related transactions;
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§
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the
addition of cash proceeds from asset sales and related
transactions;
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§
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the
addition of losses or subtraction of gains from the monetization of
financial 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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Sustaining capital expenditures are
capital expenditures (as defined by GAAP) resulting from improvements to and
major renewals of existing assets. Such expenditures do not generate
additional revenues.
Management compares our distributable
cash flow 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.
2
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 February 1,
2010.
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3
SIGNATURES
Pursuant to the requirements of the
Securities Exchange Act of 1934, the registrant has duly caused this Current
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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By:
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DEP
Holdings, LLC, as general partner
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Date:
February 1, 2010
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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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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 February 1,
2010.
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5
Exhibit
99.1
P.O. Box 4324
Houston,
TX 77210
(713)
381-6500
Duncan
Energy Partners Reports Increased Net Income
For
Fourth Quarter 2009
Houston, Texas (February 1,
2010) – Duncan Energy Partners L.P. (NYSE: DEP) today announced its
financial and operating results for the three months and year ended December 31,
2009. Net income attributable to Duncan Energy Partners for the
fourth quarter of 2009 was $23.2 million, or $0.40 per common unit on a
fully diluted basis, compared to $10.7 million, or $0.39 per common unit on a
fully diluted basis, for the fourth quarter of
2008. Approximately $9.2 million of the increase was
attributable to the DEP II Midstream Businesses, which were acquired on December
8, 2008. Net income attributable to Duncan Energy Partners for
the year 2009 was $91.1 million, or $1.57 per common unit on a fully diluted
basis, compared to $47.9 million, or $1.22 per common unit on a fully diluted
basis, for the year 2008.
The
partnership’s share of distributable cash flow from its operating subsidiaries
increased to $34.5 million for the fourth quarter of 2009 from $15.6 million for
the fourth quarter of 2008. The DEP II Midstream Businesses
contributed $21.6 million of distributable cash flow for the fourth quarter of
2009, and accounted for $16 million of the increase in distributable cash flow
compared to the fourth quarter of 2008. Based on Duncan
Energy’s preferred return for 2010, the partnership expects to receive at least
$22 million from the DEP II Midstream Businesses for each calendar quarter in
2010.
On
January 12, 2010, the Board of Directors of Duncan Energy’s general partner
declared an increase in the partnership’s quarterly cash distribution rate with
respect to the fourth quarter of 2009 to $0.445 per common unit, or $1.78 per
unit on an annualized basis. This represents the partnership’s fifth
consecutive quarterly distribution increase and a 4.1 percent increase over the
$0.4275 per unit that was paid with respect to the fourth quarter of
2008. The partnership’s share of distributable cash flow for the
fourth quarter of 2009 provides 1.3 times coverage of the cash distribution to
be paid on February 5, 2010 to its partners of record on January 29,
2010. Distributable cash flow for 2009 was a record $130.9 million
and provided 1.3 times coverage of the distributions declared with respect to
2009. This compares to distributable cash flow of $42.9 million reported for
2008. Distributable cash flow is a non-generally accepted accounting
principle (“non-GAAP”) financial liquidity measure that is defined and
reconciled later in this press release to its most directly comparable U.S. GAAP
financial measure, which is net cash flows provided by operating
activities.
“Our
partnership posted solid results this quarter supported by a strong performance
from all of our businesses,” said Richard H. Bachmann, president and chief
executive officer of the general partner of Duncan Energy Partners
L.P. “Higher transportation and storage fees contributed to the 17
percent increase in our gross operating margin for the fourth quarter of 2009
compared to the fourth quarter of 2008. Furthermore, the cash flow
generated from the DEP II Midstream Businesses led to record distributable cash
flow for the partnership in 2009. Both of these events enabled us to
increase the cash distributions declared with respect to 2009 by 4.3 percent
over those declared for 2008, exceeding our stated goal at the beginning of 2009
of 3 percent year-over-year distribution growth,” Bachmann
continued. “Anticipated continued strong performance from our
existing businesses, coupled with the new Haynesville pipeline extension of our
Acadian intrastate pipeline system, which is expected to be in service in third
quarter of 2011, should support future increases in cash distributions to our
partners for the foreseeable future, while providing solid coverage from
distributable cash flow.”
1
Review of Segment Quarterly
Performance
Since
Duncan Energy Partners consolidates the financial results of its controlled
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 performance 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 fourth quarter of 2009
increased 16 percent to $38.7 million compared to $33.3 million for the fourth
quarter of 2008. Gross operating margin for the Texas Intrastate
System for the fourth quarter of 2009 was $3.4 million higher than that recorded
for the fourth quarter of 2008. This quarter-to-quarter increase is primarily
due to higher firm capacity reservation fees attributable to the Sherman
Extension pipeline of $15.3 million, partially offset by a $12.7 million
decrease in revenues from lower firm and interruptible transportation volumes on
other parts of the Texas Intrastate System. Increased natural gas
sales margins on the Acadian Pipeline System and higher firm storage reservation
fees from the partnership’s Wilson natural gas storage facility combined for a
$2.6 million increase in gross operating margin for the fourth quarter of 2009
versus the fourth quarter of 2008.
Total
natural gas throughput volumes averaged 4.4 trillion British thermal units per
day (“TBtus/d”) in the fourth quarter of 2009 compared to 4.9 TBtus/d in the
fourth quarter of 2008.
NGL Pipelines & Services –
Gross operating margin for the fourth quarter of 2009 increased to $30.1 million
from $25.2 million for the fourth 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 increased to $30.0 million for
the fourth quarter of 2009 from $28.2 million for the fourth quarter of
2008. The quarter-to-quarter increase in gross operating
margin was primarily due to higher storage revenues attributable to increased
storage fees and volumes.
NGL
transportation volumes decreased to 110 thousand barrels per day (“MBPD”)
in the fourth quarter of 2009 from 124 MBPD in the fourth quarter of
2008. NGL fractionation volumes also decreased this quarter
to 77 MBPD from 81 MBPD in the fourth quarter of 2008.
Petrochemical Services – Gross
operating margin for the fourth quarter of 2009 increased to $2.6 million from
$2.3 million reported in the fourth quarter of 2008, primarily due to increased
transportation volumes on the Lou-Tex propylene pipeline. Total
petrochemical transportation volumes averaged 34 MBPD for the fourth quarter of
2009 versus 25 MBPD for the fourth quarter of 2008.
Capitalization
Total
debt principal outstanding at December 31, 2009 was approximately $457
million. At December 31, 2009, Duncan Energy Partners had total
liquidity of approximately $120 million, including 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 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 Enterprise
in a second drop down transaction. Duncan Energy Partners and
Enterprise are affiliates under common control of Mr. Dan L. Duncan, the
Co-Chairman and controlling shareholder of Enterprise Products Company (formerly
EPCO, Inc.).
Prior to the drop down of controlling
ownership interests in the DEP I and DEP II Midstream Businesses to Duncan
Energy Partners, Enterprise owned these businesses and directed their respective
activities. Each of the
2
drop down
transactions was accounted for at Enterprise’s historical costs as a
reorganization of entities under common control in a manner similar to a pooling
of interests.
References
to the “former owners” of the DEP I and DEP II Midstream Businesses in the
accompanying financial statements represent the ownership interests of
Enterprise 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.
To assist
investors and other users of our financial statements, Exhibit A to this press
release includes selected financial information of Duncan Energy Partners L.P.
on a standalone basis apart from that of our consolidated partnership financial
information. A key difference between the supplemental selected
standalone financial information and our general purpose consolidated financial
statements is that the DEP I and DEP II Midstream Businesses are viewed as
investments and presented as unconsolidated affiliates by Duncan Energy Partners
L.P. on a standalone basis.
Use of Non-GAAP Financial
Measures
This press release includes the
non-GAAP financial measures of gross operating margin and distributable cash
flow. The exhibits 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 financial
performance or liquidity. 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 financial 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) non-cash
consolidated asset impairment charges; (iii) gains and losses from asset
sales and related transactions; and (iv) general and administrative
costs. 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. Gross operating margin is exclusive of other income
and expense transactions, provision for income taxes, extraordinary charges and
the cumulative effect of changes in accounting principles. Gross
operating margin is presented on a 100 percent basis before the allocation of
earnings to noncontrolling interests.
Distributable
cash flow. The partnership’s distributable cash flow is a
useful non-GAAP measure of liquidity that approximates the amount of cash that
Duncan Energy Partners could pay its partners each period. We define
the partnership’s distributable cash flow
as the sum of its share of the distributable cash flow of each of the DEP I and
DEP II Midstream Businesses, less any standalone expenses of the partnership
such as interest expense and general and administrative costs (net of non-cash
items).
In general, we define the distributable
cash flow of our operating subsidiaries as their net income or loss adjusted
for:
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§
|
the
addition of depreciation, amortization and accretion
expense;
|
|
§
|
the
addition of cash distributions received from Evangeline, if any, less
equity earnings;
|
|
§
|
the
subtraction of sustaining capital expenditures and cash payments to settle
asset retirement obligations;
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3
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§
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the
addition of losses or subtraction of gains relating to asset sales and
related transactions;
|
|
§
|
the
addition of cash proceeds from asset sales and related
transactions;
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|
§
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the
addition of losses or subtraction of gains from the monetization of
financial 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.
|
Sustaining capital expenditures are
capital expenditures (as defined by GAAP) resulting from improvements to and
major renewals of existing assets. Such expenditures do not generate
additional revenues.
Management compares our distributable
cash flow 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.
Fourth Quarter 2009 Earnings
Conference Call
Management
for Duncan Energy Partners will discuss fourth quarter 2009 results with
analysts and investors during a joint Duncan Energy Partners and Enterprise
earnings conference call scheduled for 8 a.m. CT 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 7.8 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; 8.1 Bcf of leased natural gas
storage capacity; and 34 underground salt dome caverns with more than 100 MMBbls
of NGL storage capacity at Mont Belvieu. Duncan Energy Partners is
managed by its general partner, DEP Holdings, LLC, which is a wholly-owned
subsidiary of Enterprise. Additional information about Duncan Energy
Partners is available online at www.deplp.com.
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 the partnership’s 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:
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Randy Burkhalter, Investor
Relations, (713) 381-6812
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Rick
Rainey, Media Relations, (713)
381-3635
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###
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4
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Exhibit
A
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Duncan
Energy Partners L.P.
Supplemental
Standalone Financial Information - UNAUDITED
For
the Three and Twelve Months Ended December 31, 2009 and 2008
(Amounts
in millions, except per unit amounts)
The following table summarizes the
distributable cash flow (“DCF”) and related coverage ratio calculations for
Duncan Energy Partners on a standalone (i.e., non-consolidated)
basis. The line item captioned “Duncan Energy Partners L.P.
standalone expenses, net of non-cash items” primarily represents accrued
interest expense and general and administrative costs of the partnership itself,
exclusive of any such amounts attributed to its operating subsidiaries (i.e.,
the DEP I and DEP II Midstream Businesses). We calculate the
distribution coverage ratio by dividing “Distributable cash flow, net to limited
partners” by the average number of distribution-bearing units outstanding, and
further by the declared distribution rate per unit for the period
indicated.
In addition, the following table
presents selected income statement and balance sheet data of Duncan Energy
Partners L.P. on a standalone basis. Duncan Energy Partners L.P.
currently has no operations apart from its investments in the DEP I and DEP II
Midstream Businesses. For purposes of this presentation, we have
listed amounts pertaining to the DEP I Midstream Businesses apart from those
relating to the DEP II Midstream Businesses.
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Three
Months Ended
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Twelve
Months Ended
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||||||||||||||
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December
31,
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December
31,
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||||||||||||||
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2009
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2008
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2009
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2008
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||||||||||||
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Distributable
Cash Flow Summary:
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|||||||||||||||
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DEP
share of the DCF attributable to the:
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|||||||||||||||
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DEP
I Midstream Businesses
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$ | 15.6 | $ | 14.5 | $ | 56.4 | $ | 50.6 | |||||||
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DEP
II Midstream Businesses
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21.6 | 5.6 |
(a)
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86.5 | 5.6 | ||||||||||
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Duncan
Energy Partners L.P. standalone expenses, net of non-cash
items
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(2.7 | ) | (4.5 | ) | (12.0 | ) | (13.3 | ) | |||||||
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Total
Duncan Energy Partners L.P. distributable cash flow
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34.5 | 15.6 | 130.9 | 42.9 | |||||||||||
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Less: Distributions
to our general partner
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(0.2 | ) | (0.2 | ) | (0.7 | ) | (0.7 | ) | |||||||
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Distributable
cash flow, net to limited partners
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$ | 34.3 | $ | 15.4 | $ | 130.2 | $ | 42.2 | |||||||
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Average
distribution-bearing units outstanding
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57.7 | 30.0 | 57.7 | 22.8 | |||||||||||
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Distributable
cash flow coverage:
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|||||||||||||||
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Declared
distribution rate per unit
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$ | 0.4450 | $ | 0.4275 | $ | 1.7500 | $ | 1.6775 | |||||||
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Distribution
coverage ratio
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1.34x | 1.20x | 1.29x | 1.10x | |||||||||||
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Selected
income statement information:
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|||||||||||||||
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Equity
earnings - DEP I Midstream Businesses
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$ | 12.7 | $ | 11.7 | $ | 44.9 | $ | 37.2 | |||||||
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Equity
earnings - DEP II Midstream Businesses
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$ | 13.7 | $ | 4.5 |
(a)
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$ | 60.1 | $ | 4.5 | ||||||
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General
and administrative costs
|
$ | 0.1 | $ | 0.6 | $ | 0.4 | $ | 1.4 | |||||||
|
Interest
expense
|
$ | 3.1 | $ | 3.7 | $ | 13.5 | $ | 12.0 | |||||||
|
Net
income attributable to Duncan Energy Partners L.P. (b)
|
$ | 23.2 | $ | 11.9 | $ | 91.1 | $ | 28.3 | |||||||
|
Selected
balance sheet information at each period end:
|
|||||||||||||||
|
Investment
in DEP I Midstream Businesses
|
$ | 510.2 | $ | 512.7 | $ | 510.2 | $ | 512.7 | |||||||
|
Investment
in DEP II Midstream Businesses
|
$ | 709.7 | $ | 730.5 | $ | 709.7 | $ | 730.5 | |||||||
|
Long-term
debt
|
$ | 457.3 | $ | 484.3 | $ | 457.3 | $ | 484.3 | |||||||
|
Partners’
equity
|
$ | 761.4 | $ | 752.8 | $ | 761.4 | $ | 752.8 | |||||||
|
(a) Amounts
represent the 24-day period from December 8, 2008 to December 31,
2008. The DEP II drop down transaction occurred on December 8,
2008.
(b) Amounts
presented for the 2008 periods exclude net income attributable to the
related party former owner of the DEP II Midstream
Businesses.
|
|||||||||||||||
5
Exhibit
B
Duncan
Energy Partners L.P.
Statements
of Consolidated Operations – UNAUDITED
For
the Three and Twelve Months Ended December 31, 2009 and 2008
(Dollars
in millions, except per unit amounts)
|
Three
Months
|
Twelve
Months
|
|||||||||||||||
|
Ended
December 31,
|
Ended
December 31,
|
|||||||||||||||
|
2009
|
2008
|
2009
|
2008
|
|||||||||||||
|
Revenue
|
$ | 251.2 | $ | 323.5 | $ | 979.3 | $ | 1,598.1 | ||||||||
|
Costs and expenses:
|
||||||||||||||||
|
Operating
costs and expenses
|
232.6 | 307.2 | 908.3 | 1,512.8 | ||||||||||||
|
General
and administrative costs
|
2.4 | 4.2 | 11.2 | 18.3 | ||||||||||||
|
Total costs and expenses
|
235.0 | 311.4 | 919.5 | 1,531.1 | ||||||||||||
|
Equity in income of
Evangeline
|
0.1 | 0.2 | 1.1 | 0.9 | ||||||||||||
|
Operating income
|
16.3 | 12.3 | 60.9 | 67.9 | ||||||||||||
|
Other income (expense):
|
||||||||||||||||
|
Interest
expense
|
(3.4 | ) | (3.7 | ) | (14.0 | ) | (12.0 | ) | ||||||||
|
Interest
income
|
0.1 | 0.1 | 0.2 | 0.5 | ||||||||||||
|
Total other expense
|
(3.3 | ) | (3.6 | ) | (13.8 | ) | (11.5 | ) | ||||||||
|
Income before provision for income
taxes
|
13.0 | 8.7 | 47.1 | 56.4 | ||||||||||||
|
Provision
for income taxes
|
(0.5 | ) | -- | (1.3 | ) | (1.1 | ) | |||||||||
|
Net income
|
12.5 | 8.7 | 45.8 | 55.3 | ||||||||||||
|
Net
loss (income) attributable to noncontrolling interest:
|
||||||||||||||||
|
DEP
I Midstream Businesses - Parent
|
(5.0 | ) | (2.0 | ) | (15.3 | ) | (11.4 | ) | ||||||||
|
DEP
II Midstream Businesses - Parent
|
15.7 | 4.0 | 60.6 | 4.0 | ||||||||||||
|
Total net loss (income) attributable to noncontrolling
interest
|
10.7 | 2.0 | 45.3 | (7.4 | ) | |||||||||||
|
Net income attributable to Duncan Energy
Partners
|
$ | 23.2 | $ | 10.7 | $ | 91.1 | $ | 47.9 | ||||||||
|
Allocation of net income to Duncan Energy
Partners:
|
||||||||||||||||
|
Duncan
Energy Partners L.P.:
|
||||||||||||||||
|
Limited partners
|
$ | 23.1 | $ | 11.7 | $ | 90.5 | $ | 27.8 | ||||||||
|
General partner
|
$ | 0.1 | $ | 0.2 | $ | 0.6 | $ | 0.5 | ||||||||
|
Former
owner of DEP II Midstream Businesses
|
$ | (1.2 | ) | $ | 19.6 | |||||||||||
|
Per unit data (fully
diluted):
|
||||||||||||||||
|
Earnings
per unit
|
$ | 0.40 | $ | 0.39 | $ | 1.57 | $ | 1.22 | ||||||||
|
Average
LP units outstanding (in millions)
|
57.7 | 30.0 | 57.7 | 22.8 | ||||||||||||
|
Other financial data:
|
||||||||||||||||
|
Net
cash flows provided by operating activities
|
$ | 18.7 | $ | 106.0 | $ | 156.0 | $ | 220.1 | ||||||||
|
Net
cash used in investing activities
|
$ | 81.0 | $ | 201.3 | $ | 383.2 | $ | 748.8 | ||||||||
|
Net
cash provided by financing activities
|
$ | 34.3 | $ | 95.4 | $ | 218.1 | $ | 539.5 | ||||||||
|
Distributable
cash flow (see Exhibit A)
|
$ | 34.5 | $ | 15.6 | $ | 130.9 | $ | 42.9 | ||||||||
|
Depreciation,
amortization and accretion (100% basis)
|
$ | 49.2 | $ | 43.4 | $ | 188.3 | $ | 167.8 | ||||||||
|
Total
debt principal outstanding at end of period
|
$ | 457.3 | $ | 484.3 | $ | 457.3 | $ | 484.3 | ||||||||
6
Exhibit
C
Duncan
Energy Partners L.P.
Selected
Financial & Operating Data – UNAUDITED
For
the Three and Twelve Months Ended December 31, 2009 and 2008
(Dollars
in millions, operating data as noted)
|
Three
Months
|
Twelve
Months
|
|||||||||||||||
|
Ended
December 31,
|
Ended
December 31,
|
|||||||||||||||
|
2009
|
2008
|
2009
|
2008
|
|||||||||||||
|
Gross operating margin by
segment:
|
||||||||||||||||
|
Natural Gas Pipelines & Services
|
$ | 38.7 | $ | 33.3 | $ | 148.2 | $ | 159.0 | ||||||||
|
NGL Pipelines & Services
|
30.1 | 25.2 | 103.4 | 82.9 | ||||||||||||
|
Petrochemical Services
|
2.6 | 2.3 | 10.5 | 11.1 | ||||||||||||
|
Total
gross operating margin
|
$ | 71.4 | $ | 60.8 | $ | 262.1 | $ | 253.0 | ||||||||
|
Adjustments
to reconcile non-GAAP gross operating
|
||||||||||||||||
|
margin to GAAP operating income:
|
||||||||||||||||
|
Amounts in operating costs and expenses:
|
||||||||||||||||
|
Depreciation, amortization and accretion
|
(48.6 | ) | (43.7 | ) | (186.3 | ) | (167.3 | ) | ||||||||
|
Gain (loss) from asset sales and related transactions
|
0.1 | (0.6 | ) | 0.5 | 0.5 | |||||||||||
|
Non-cash asset impairment charges
|
(4.2 | ) | -- | (4.2 | ) | -- | ||||||||||
|
General and administrative costs
|
(2.4 | ) | (4.2 | ) | (11.2 | ) | (18.3 | ) | ||||||||
|
Operating
income
|
$ | 16.3 | $ | 12.3 | $ | 60.9 | $ | 67.9 | ||||||||
|
Selected operating data:
|
||||||||||||||||
|
Natural
Gas Pipelines & Services, net:
|
||||||||||||||||
|
Natural gas throughput volumes (BBtus/d)
|
4,398 | 4,932 | 4,658 | 4,730 | ||||||||||||
|
NGL
Pipelines & Services:
|
||||||||||||||||
|
Pipeline throughput volumes (MBPD)
|
110 | 124 | 109 | 126 | ||||||||||||
|
Fractionation volumes (MBPD)
|
77 | 81 | 77 | 80 | ||||||||||||
|
Petrochemical
Services:
|
||||||||||||||||
|
Petrochemical transportation volumes (MBPD)
|
34 | 25 | 30 | 35 | ||||||||||||
|
Components of net loss (income)
attributable to noncontrolling
interest:
|
||||||||||||||||
|
DEP I Midstream Businesses - Parent:
|
||||||||||||||||
|
Mont Belvieu Caverns
|
$ | (3.3 | ) | $ | 0.1 | $ | (6.5 | ) | $ | (0.1 | ) | |||||
|
Acadian Gas
|
(0.4 | ) | -- | (2.7 | ) | (3.6 | ) | |||||||||
|
Lou-Tex Propylene
|
(0.5 | ) | (0.4 | ) | (1.8 | ) | (2.2 | ) | ||||||||
|
Sabine Propylene
|
-- | (0.1 | ) | (0.5 | ) | (0.4 | ) | |||||||||
|
South Texas NGL
|
(0.8 | ) | (1.6 | ) | (3.8 | ) | (5.1 | ) | ||||||||
|
Total DEP I Midstream Businesses - Parent
|
(5.0 | ) | (2.0 | ) | (15.3 | ) | (11.4 | ) | ||||||||
|
DEP II Midstream Businesses - Parent:
|
||||||||||||||||
|
Enterprise
Texas
|
9.3 | 3.4 | 42.4 | 3.4 | ||||||||||||
|
Enterprise Intrastate
|
2.3 | 0.9 | 7.5 | 0.9 | ||||||||||||
|
Enterprise GC
|
4.1 | (0.3 | ) | 10.7 | (0.3 | ) | ||||||||||
|
Total DEP II Midstream Businesses - Parent
|
15.7 | 4.0 | 60.6 | 4.0 | ||||||||||||
|
Total net loss (income) attributable to noncontrolling
interest
|
$ | 10.7 | $ | 2.0 | $ | 45.3 | $ | (7.4 | ) | |||||||
7
Exhibit
D
Duncan
Energy Partners L.P.
Reconciliation
of DCF to Net Cash Flows Provided by Operating Activities -
UNAUDITED
For
the Three and Twelve Months Ended December 31, 2009 and 2008
(Dollars
in millions)
|
Three
Months Ended
|
Twelve
Months Ended
|
|||||||||||||||
|
December
31,
|
December
31,
|
|||||||||||||||
|
2009
|
2008
|
2009
|
2008
|
|||||||||||||
|
Total
Duncan Energy Partners L.P. distributable cash flow
|
$ | 34.5 | $ | 15.6 | $ | 130.9 | $ | 42.9 | ||||||||
|
Adjustments
to non-GAAP distributable cash flow to derive GAAP net cash
flows
|
||||||||||||||||
|
provided
by operating activities (add or subtract as indicated by sign of
number):
|
||||||||||||||||
|
Proceeds from asset sales and related transactions
|
-- | (0.3 | ) | (0.9 | ) | (0.9 | ) | |||||||||
|
Sustaining capital expenditures:
|
||||||||||||||||
|
DEP I Midstream Businesses
|
3.4 | 3.5 | 13.5 | 12.6 | ||||||||||||
|
DEP II Midstream Businesses
|
7.9 | 12.0 | 34.7 | 41.4 | ||||||||||||
|
Other sustaining capital expenditures
|
0.1 | 0.2 | 0.2 | 0.2 | ||||||||||||
|
Noncontrolling interest share of distributable cash
flow:
|
||||||||||||||||
|
DEP I Midstream Businesses - Parent
|
8.2 | 4.3 | 27.4 | 19.2 | ||||||||||||
|
DEP II Midstream Businesses - Parent
|
11.1 | (0.2 | ) | 29.8 | (0.2 | ) | ||||||||||
|
Distributable cash flow of DEP II Midstream Businesses allocated to
EPO
|
||||||||||||||||
|
(as
former owner) for periods prior to December 8, 2008
|
-- | 16.5 | -- | 101.7 | ||||||||||||
|
Cash payments to settle asset retirement obligations
|
0.6 | -- | 0.6 | 5.3 | ||||||||||||
|
Hurricane Ike and Gustav property damage repair accruals and cash paid,
net
|
-- | 0.6 | 0.3 | (0.3 | ) | |||||||||||
|
Net effect of changes in operating accounts
|
(47.1 | ) | 53.8 | (80.5 | ) | (1.8 | ) | |||||||||
|
Net
cash flows provided by operating activities
|
$ | 18.7 | $ | 106.0 | $ | 156.0 | $ | 220.1 | ||||||||
8