HOUSTON, Nov. 12, 2008 (GLOBE NEWSWIRE) -- Targa Resources Partners LP ("Targa Resources Partners" or the "Partnership") (Nasdaq:NGLS) today reported third quarter 2008 net income of $14.7 million (which includes a $9.4 million non-cash hedge loss, a $1.0 million loss related to Lehman hedges, $0.2 million in other hedge amortization and an estimated $2.2 million impact due to Hurricane Gustav and Ike disruptions), or $0.31 per diluted limited partner unit as compared to net income of $14.4 million, or $0.12 per diluted limited partner unit for the third quarter of 2007. The Partnership reported earnings before interest, income taxes, depreciation and amortization and non-cash income or loss related to derivative instruments ("Adjusted EBITDA") of $55.0 million for the third quarter of 2008 compared to Adjusted EBITDA of $48.2 million for the third quarter of 2007.
Distributable cash flow for the third quarter of 2008 was $37.7 million which corresponds to distribution coverage of 1.4 times for the 47.1 million total units outstanding on September 30, 2008 (see the section of this release entitled "Non-GAAP Financial Measures" for a discussion of Adjusted EBITDA, operating margin and distributable cash flow, and reconciliations of such measures to the comparable GAAP measures).
"Third quarter results reflect the impact of discrete events and non-cash items. Excluding those items, third quarter results were largely in line with second quarter results, but these results occurred in a drastically different commodity price environment than we are in today. Going forward, we believe that our healthy coverage ratio, strong liquidity and hedge program will enable us to weather commodity price volatility and the strained credit market environment. Based on completed and approved projects and support from current producer drilling programs, we believe 2009 volumes will be at or above 2008 levels. Obviously, projected commodity prices and producer activities in our areas of operations must be closely monitored for impacts to our 2009 business plan and we will continue to execute with a focus on operating cost control and discipline regarding capital expenditures," said Rene Joyce, Chief Executive Officer of the Partnership's general partner and of Targa Resources, Inc. ("Targa").
On October 24, 2008, the Partnership announced a cash distribution of 51.75 cents per common and subordinated unit, or $2.07 per unit on an annualized basis, for the third quarter of 2008. This cash distribution will be paid November 14, 2008 on all outstanding common and subordinated units to holders of record as of the close of business on November 4, 2008. The distribution reflects an increase of approximately 1% over the previous quarter's distribution and approximately 53% over the distribution for the third quarter of 2007.
For the first nine months of 2008, Adjusted EBITDA rose 23% to $163.1 million, compared with $132.7 million in the same period a year ago. Distributable cash flow for the nine months ended September 30, 2008 increased 35% to $118.2 million from $87.3 million in the same period a year ago. Both metrics were driven primarily by favorable increases in both gathering throughput and plant inlet volumes and natural gas, NGL, and condensate prices.
Three Months Ended Nine Months Ended
September 30, September 30,
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2008 2007 2008 2007
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(In millions)
Revenues $ 578.7 $ 405.0 $ 1,721.3 $ 1,187.4
Product purchases 512.4 337.8 1,509.8 1,004.0
Operating expense,
excluding DD&A 15.4 12.7 42.7 36.7
Depreciation and
amortization expense 18.6 18.0 55.2 53.6
General and
administrative expense 5.3 6.5 16.2 14.5
Casualty loss 0.2 -- 0.2 --
Gain on sale of assets -- -- (0.1) (0.3)
-------- -------- --------- ---------
Income from operations 26.8 30.0 97.3 78.9
Interest expense, net (10.7) (5.1) (27.4) (12.9)
Interest expense,
allocated from Parent -- (2.8) -- (19.0)
Loss on mark-to-market
derivative instruments (1.0) (7.4) (1.0) (28.4)
Deferred income tax
expense (0.4) (0.3) (1.1) (1.0)
-------- -------- --------- ---------
Net income $ 14.7 $ 14.4 $ 67.8 $ 17.6
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Financial data:
Operating margin $ 50.9 $ 54.5 $ 168.8 $ 146.7
Adjusted EBITDA 55.0 48.2 163.1 132.7
Distributable cash flow 37.7 35.8 118.2 87.3
Operating data:
Gathering throughput,
MMcf/d 438.3 464.3 455.0 447.7
Plant natural gas inlet,
MMcf/d 415.9 445.1 430.8 423.5
Gross NGL production,
MBbl/d 41.3 43.9 43.2 42.1
Natural gas sales,
BBtu/d 404.4 414.8 410.9 403.3
NGL sales, MBbl/d 37.4 37.5 38.2 35.7
Condensate sales, MBbl/d 3.3 3.7 3.6 3.6
Average realized prices:
Natural gas, $/MMBtu
Average realized sales
price 9.47 5.87 9.31 6.61
Impact of hedging (0.05) 0.09 (0.02) 0.08
-------- -------- --------- ---------
Average realized price 9.42 5.96 9.29 6.69
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NGLs, $/gal
Average realized sales
price 1.47 1.06 1.41 0.95
Impact of hedging (0.11) (0.02) (0.10) (0.01)
-------- -------- --------- ---------
Average realized price 1.36 1.04 1.31 0.94
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Condensate, $/ Bbl
Average realized sales
price 103.38 69.05 98.86 60.09
Impact of hedging (5.59) (0.31) (4.12) 0.78
-------- -------- --------- ---------
Average realized price 97.79 68.74 94.74 60.87
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Review of Third Quarter Results
Net income for the three months ended September 30, 2008 was $14.7 million, up from $14.4 million for the three months ended September 30, 2007. The increase in net income was attributable to higher commodity prices partially offset by higher operating expenses and higher interest expense during the 2008 period. Net income for the three months ended September 30, 2008 also includes a $9.4 million non-cash hedge loss, a $1.0 million loss related to Lehman hedges, $0.2 million in other hedge amortization and an estimated $2.2 million impact due to the hurricanes. The third quarter of 2007 includes a $7.4 million loss on mark-to-market derivative contracts related to the SAOU and LOU Systems that was recognized during the period prior to the acquisition of these businesses by the Partnership.
Revenues increased $173.7 million, or 43%, to $578.7 million for the third quarter of 2008 from $405.0 million for the third quarter of 2007, driven by higher prices for natural gas, NGL and condensate. The benefit of higher prices was partially offset by the impact of lower sales volumes, mainly the result of processing plant disruptions and lower industrial sales primarily due to the impact of the hurricanes.
Gathering throughput (the volume of natural gas gathered and passed through natural gas gathering pipelines) for the third quarter of 2008 decreased by 26.0 MMcf/d, or 6%, to 438.3 MMcf/d compared to 464.3 MMcf/d for the same period in 2007. Plant natural gas inlet volume (the volume of natural gas passing through the meter located at the inlet of a processing plant) was 7% lower at 415.4 MMcf/d for the third quarter of 2008 compared to 445.1 MMcf/d for the same period in 2007 due primarily to the impact of the hurricanes.
Gross NGL production of 41.3 MBbl/d for the third quarter of 2008 was 6% lower than gross NGL production of 43.9 MBbl/d for the third quarter of 2007. Natural gas sales volumes decreased 3% to 404.4 BBtu/d in the third quarter of 2008 compared to 414.8 BBtu/d during the third quarter of 2007. NGL sales of 37.4 MBbl/d for the third quarter of 2008 were less than 1% lower than the 37.5 MBbl/d sold during the third quarter of 2007. These volume decreases were due primarily to the impact of the hurricanes offset by the purchase of raw NGL mix for fractionation at Gillis.
The average realized natural gas price increased by $3.46 per MMBtu, or 58%, to $9.42 per MMBtu for the third quarter of 2008 compared to $5.96 per MMBtu for the same period in 2007. The average realized price for NGLs increased by $0.32 per gallon, or 31%, to $1.36 per gallon for the third quarter of 2008 compared to $1.04 per gallon for the same period in 2007. The average realized price for condensate increased by $29.05 per barrel, or 42%, to $97.79 per barrel for the third quarter of 2008 compared to $68.74 per barrel for the third quarter of 2007. All of the average realized prices reflect the impact of our hedging program.
Review of Nine Month Results
Net income for the first nine months of 2008 was $67.8 million compared to $17.6 million for the same period of 2007. The increase in net income was attributable to higher commodity prices and higher inlet volumes partially offset by higher operating expenses and higher general and administrative expenses for the 2008 period. The nine months ended September 30, 2008 also includes a $10.1 million non-cash hedge loss, a $1.0 million loss related to Lehman hedges, and $0.5 million of other hedge amortization as well as an estimated $2.2 million impact due to the hurricanes. In addition, the first nine months of 2007 includes a $28.4 million loss on mark-to-market derivative contracts related to the SAOU and LOU Systems that was recognized during the period prior to the acquisition of these businesses by the Partnership.
For the first nine months of 2008, gathering throughput was 455.0 MMcf/d, 2% higher than 447.7 MMcf/d for the same period in 2007. Plant natural gas inlet volume was 430.8 MMcf/d for the first nine months of 2008, 2% higher than 423.5 MMcf/d for the same period in 2007.
Gross NGL production of 43.2 MBbl/d for the first nine months of 2008 was 3% higher than gross NGL production of 42.1 MBbl/d for the first nine months of 2007. Natural gas sales volumes increased 2% to 410.9 BBtu/d for the first nine months of 2008 as compared to 403.3 BBtu/d for the same period in 2007. NGL sales of 38.2 MBbl/d for the first nine months of 2008 were 7% higher than NGL sales of 35.7 MBbl/d for the same period in 2007. The increase was primarily due to increased NGL recoveries from higher inlet volumes and decreased NGL take-in-kind volumes.
The average realized natural gas price increased by $2.60 per MMBtu, or 39%, to $9.29 per MMBtu for the first nine months of 2008, from $6.69 per MMBtu for the first nine months of 2007. The average realized price for NGLs increased by $0.37 per gallon, or 39%, to $1.31 per gallon for the first nine months of 2008 compared to $0.94 per gallon for the first nine months of 2007. The average realized price for condensate increased by $33.87 per barrel, or 56%, to $94.74 per barrel for the first nine months of 2008 compared to $60.87 per barrel for the first nine months of 2007. All of the average realized prices reflect the impact of our hedging program.
Capitalization / Liquidity Update
As of September 30, 2008, we had approximately $425.3 million in capacity available under our senior secured credit facility, after giving effect to outstanding borrowings of $390 million and the issuance of $34.7 million of letters of credit. Our senior secured credit facility allows us to request increases in the commitments under the facility by up to $150 million.
On October 16, 2008, we requested a $100 million funding under our senior secured credit facility to increase our cash on hand in the face of significant deterioration in the credit markets. Lehman Brothers Commercial Bank, a lender under our senior secured credit facility, defaulted on its portion of the borrowing request resulting in an actual funding of $97.8 million.
