(Source: PrimeNewswire)
HOUSTON, Aug. 6, 2009 (GLOBE NEWSWIRE) -- Targa Resources Partners LP ("Targa Resources Partners" or the "Partnership") (Nasdaq:NGLS) today reported second quarter 2009 net income of $6.6 million (which includes an $11.2 million non-cash hedge loss) or $0.10 per diluted limited partner unit as compared to second quarter 2008 net income of $28.2 million or $0.54 per diluted limited partner unit. The Partnership reported earnings before interest, income taxes, depreciation and amortization and non-cash income or loss related to derivative instruments ("Adjusted EBITDA") of $46.9 million for the second quarter of 2009 compared to Adjusted EBITDA of $55.4 million for the second quarter of 2008.
Distributable cash flow for the second quarter of 2009 was $35.6 million which corresponds to distribution coverage of approximately 1.35 times for the 47.2 million total units outstanding on June 30, 2009 (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).
"We are pleased with our second quarter operating and financial performance which was driven by higher sequential volumes, improvements in crude and NGL prices and results of our cost control efforts. We still expect to close the previously announced acquisition of the Downstream Business in the third quarter. Combined second quarter 2009 operating margin for the Logistics Assets, NGL Distribution and Marketing and Wholesale Marketing segments was $35.4 million which does not include $1.7 million of equity earnings from Gulf Coast Fractionators. We believe the powerful combination of this strategic asset platform, substantial distribution support and the maximum equity consideration permitted under Targa's financing agreements underscores Targa's commitment to the Partnership's long term success" said Rene Joyce, Chief Executive Officer of the Partnership's general partner and of Targa Resources, Inc. ("Targa").
On July 20, 2009, the Partnership announced a cash distribution of 51.75c per common unit, or $2.07 per unit on an annualized basis, for the second quarter of 2009. This cash distribution will be paid August 14, 2009 on all outstanding common units to holders of record as of the close of business on August 5, 2009.
Review of Second Quarter Results
Net income for the second quarter of 2009 was $6.6 million compared to $28.2 million of net income for the 2008 period. The decrease in net income was primarily attributable to an $11.2 million non-cash hedge loss compared to a $0.5 million non-cash hedge loss for the comparable period in 2008. The decrease in net income was also impacted by lower commodity prices and higher depreciation, G&A and interest expenses, partially offset by lower operating expenses.
Revenues decreased $389.9 million, or 62%, to $240.7 million for the second quarter of 2009 from $630.5 million for the second quarter of 2008, driven primarily by lower prices for natural gas, NGL and condensate.
Gathering throughput for the second quarter of 2009 increased 2% to 475.3 MMcf/d compared to 463.9 MMcf/d for the same period in 2008. Plant natural gas inlet volume (the volume of natural gas passing through the meters located at the inlets of our processing plants) was 4% higher at 454.7 MMcf/d for the second quarter of 2009 compared to 439.0 MMcf/d for the same period in 2008. These increases resulted primarily from increases at our North Texas and SAOU Systems due to higher producer volumes from new well completions, partially offset by lower volumes at our LOU system. At our LOU System, lower producer volumes were offset by discretionary volumes, including startup of a new source during the second quarter.
Gross NGL production of 44.2 MBbl/d for the second quarter of 2009 was 1% higher than gross NGL production of 43.7 MBbl/d for the second quarter of 2008. NGL sales of 39.8 MBbl/d for the second quarter of 2009 were 2% higher than sales of 39.1 MBbl/d during the second quarter of 2008. The increase in NGL sales is primarily due to higher plant volumes. Natural gas sales volumes decreased 8% to 378.3 BBtu/d in the second quarter of 2009 compared to 410.0 BBtu/d during the second quarter of 2008. The decrease in natural gas sales is primarily the result of a decrease in purchases from affiliates for resale.
The average realized natural gas price decreased by $6.92 per MMBtu, or 66%, to $3.55 per MMBtu for the second quarter of 2009 compared to $10.47 per MMBtu for the same period in 2008. The average realized price for NGLs decreased by $0.69 per gallon, or 51%, to $0.66 per gallon for the second quarter of 2009 compared to $1.35 per gallon for the same period in 2008. The average realized price for condensate decreased by $47.71 per barrel, or 47%, to $53.40 per barrel for the second quarter of 2009 compared to $101.11 per barrel for the second quarter of 2008. Realized prices reflect the impact of our hedging program.
Review of Six Month Results
Net income for the first six months of 2009 was $4.4 million compared to net income of $53.1 million for the first six months of 2008. Non-cash hedge losses reduced net income by $29.7 million for the first six months of 2009 compared to $1.0 million for the 2008 period. Net income was also negatively impacted by lower commodity prices and higher depreciation, G&A and interest expenses, partially offset by lower operating expenses.
Revenues were $479.7 million for the first six months of 2009, 58% lower than revenues of $1,142.6 million for the first six months of 2008, driven primarily by lower prices for natural gas, NGL and condensate and lower natural gas and condensate sales volumes.
Gathering throughput for the first six months of 2009 decreased by 2% to 452.5 MMcf/d compared to 463.5 MMcf/d for the 2008 period. Plant natural gas inlet was 431.6 MMcf/d for first half of 2009, 2% lower than the 2008 period. Gross NGL production of 42.9 MBbl/d for the first six months of 2009 was 3% lower than gross NGL production of 44.1 MBbl/d for the first six months of 2008. These decreases result primarily from the impact of lower producer and discretionary volumes at our LOU system, somewhat offset by increases at our North Texas and SAOU systems as well as startup of a new discretionary volume source at LOU during the second quarter.
Natural gas sales volumes decreased 11% to 366.8 BBtu/d for the first half of 2009 as compared to 414.2 BBtu/d for the year earlier period. The decrease in natural gas sales is primarily the result of a decrease in demand by our industrial customers and a decrease in purchases from affiliates for resale. NGL sales volumes were 38.5 MBbl/d for the first six months of 2009, unchanged from the 2008 period. Condensate sales volumes decreased by 0.5 MBbl/d, or 14%, to 3.2 MBbl/d for the first half of 2009.
The average realized natural gas price decreased by $5.19 per MMBtu, or 56%, to $4.03 per MMBtu for the second quarter of 2009 compared to $9.22 per MMBtu for the same period in 2008. The average realized price for NGLs decreased by $0.68 per gallon, or 53%, to $0.61 per gallon for the second quarter of 2009 compared to $1.29 per gallon for the same period in 2008. The average realized price for condensate decreased by $46.40 per barrel, or 50%, to $46.98 per barrel for the second quarter of 2009 compared to $93.38 per barrel for the second quarter of 2008. Realized prices reflect the impact of our hedging program.
Three Months Six Months Ended June 30, Ended June 30, ------------------ ------------------ 2009 2008 2009 2008 -------- -------- -------- -------- (In millions) Revenues $ 240.7 $ 630.5 $ 479.7 $1,142.6 Product purchases 185.6 555.2 380.1 997.3 Operating expense, excluding DD&A 11.9 14.7 24.8 27.3 Depreciation and amortization expense 19.0 18.4 37.9 36.7 General and administrative expense 7.6 5.7 12.9 10.9 Gain on asset sales -- -- -- (0.1) -------- -------- -------- -------- Income from operations 16.6 36.5 24.0 70.5 Interest expense, net (9.8) (8.0) (19.7) (16.7) Deferred income tax expense (0.3) (0.3) (0.6) (0.7) Other 0.1 -- 0.7 -- -------- -------- -------- -------- Net income $ 6.6 $ 28.2 $ 4.4 $ 53.1 ======== ======== ======== ======== Financial data: Operating margin $43.2 $ 60.6 $ 74.8 $ 118.0 Adjusted EBITDA 46.9 55.4 92.3 108.2 Distributable cash flow 35.6 40.5 69.1 80.6 Operating data: Gathering throughput, MMcf/d LOU System 189.5 194.2 167.7 195.2 SAOU System 99.4 99.2 100.6 98.5 North Texas System 186.4 170.5 184.2 169.8 -------- -------- -------- -------- 475.3 463.9 452.5 463.5 ======== ======== ======== ======== Plant natural gas inlet, MMcf/d LOU System 181.9 182.9 161.4 184.0 SAOU System 93.0 91.9 92.2 91.1 North Texas System 179.8 164.2 178.0 163.3 -------- -------- -------- -------- 454.7 439.0 431.6 438.4 ======== ======== ======== ======== Gross NGL production, MBbl/d LOU System 9.0 10.2 8.3 10.5 SAOU System 14.3 14.4 14.3 14.3 North Texas System 20.9 19.1 20.3 19.3 -------- -------- -------- -------- 44.2 43.7 42.9 44.1 ======== ======== ======== ======== Natural gas sales, BBtu/d 378.3 410.0 366.8 414.2 NGL sales, MBbl/d 39.8 39.1 38.5 38.5 Condensate sales, MBbl/d 3.1 3.7 3.2 3.7 Average realized prices: Natural gas, $/MMBtu 3.55 10.47 4.03 9.22 NGLs, $/gal 0.66 1.35 0.61 1.29 Condensate, $/ Bbl 53.40 101.11 46.98 93.38
Acquisition of the Downstream Business
On July 27, 2009 the Partnership agreed to acquire Targa Resources, Inc.'s ("Targa") natural gas liquids business (the "Downstream Business") for aggregate consideration of $530 million, subject to certain adjustments. As part of the transaction, Targa agreed to provide distribution support to the Partnership in the form of a reduction in the reimbursement of allocated general and administrative expense if necessary for a 1.0 times distribution coverage ratio, calculated using the current distribution rate of $0.5175 per limited partner unit and subject to maximum support of $8 million in any quarter. The distribution support will be in effect for the nine quarter period beginning with the fourth quarter of 2009 and continuing through the fourth quarter of 2011.
Consideration to Targa will include 25% of the transaction value in newly issued common and general partner units of the Partnership, the maximum equity component permitted under Targa's financing agreements. The equity will consist of 8,527,615 common units and 174,033 general partner units valued at $15.227 per unit (calculated using the volume weighted average trading price for the 10-day period through and including July 17, 2009). Pro forma for the transaction, Targa will own 20,055,846 common units (35.9%) and 1,117,141 general partner units (2%). The remaining 75% of the transaction value, or approximately $397.5 million, will be in cash, funded through borrowings under the Partnership's senior secured revolving credit facility.
For the full year ending December 31, 2009, the Downstream Business is expected to generate Adjusted EBITDA of approximately $80 to $85 million (see the section of this release entitled "Non-GAAP Financial Measures" for a discussion of Adjusted EBITDA and reconciliations of such measures to the comparable GAAP measures). We estimate maintenance capital expenditures associated with the Downstream Business will be approximately $10 million and $5 million for the twelve and four month period ending December 31, 2009, respectively.
The transaction, which is subject to standard closing conditions, including the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act") is anticipated to close in the third quarter of this year.
