Nov. 4, 2009 (GlobeNewswire) --
HOUSTON, Nov. 4, 2009 (GLOBE NEWSWIRE) -- Targa Resources Partners LP ("Targa Resources Partners" or the "Partnership") (Nasdaq:NGLS) today reported third quarter 2009 net income attributable to Targa Resources Partners of $10.0 million or $0.23 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 $69.1 million for the third quarter of 2009.
Distributable cash flow for the quarter was $51.5 million which corresponds to distribution coverage of approximately 1.46 times for the 62.9 million total units outstanding on September 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 excited to have closed the acquisition of the Downstream Business during the third quarter, and are pleased with the Partnership's very solid third quarter results. We currently expect the Downstream Business to generate 2009 Adjusted EBITDA that exceeds our guidance range of $80 to $85 million. Furthermore, our total gathering and processing volumes continue to perform above last year's levels," said Rene Joyce, Chief Executive Officer of the Partnership's general partner and of Targa Resources, Inc. ("Targa").
On October 19, 2009, the Partnership announced a cash distribution of 51.75c per common unit, or $2.07 per unit on an annualized basis, for the third quarter of 2009. The cash distribution will be paid November 13, 2009 on all outstanding common units to holders of record as of the close of business on November 4, 2009.
Acquisition of the Downstream Business
On September 24, 2009 the Partnership acquired Targa's 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 included 25% of the transaction value in newly issued common and general partner units of the Partnership. The remaining 75% of the transaction value, or approximately $397.5 million, was funded in cash through borrowings under the Partnership's senior secured revolving credit facility.
With the closing of the acquisition of the Downstream Business, and in accordance with the accounting treatment for entities under common control, the results of operations of the Partnership now include the historical results of the Downstream Business for all periods presented.
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- --------------------
2009 2008 2009 2008
--------- --------- --------- ---------
(In millions, except operating and price data)
Revenues $ 1,003.8 $ 2,214.9 $ 2,822.3 $ 6,414.6
Product purchases 874.2 2,110.5 2,459.3 5,985.5
Operating expenses 47.5 68.3 142.1 197.7
Depreciation and
amortization
expense 25.6 24.4 75.5 72.8
General and
administrative
expense 17.1 19.1 55.5 57.4
Casualty loss
adjustment -- -- (0.8) --
Gain on sale of
assets -- -- -- (4.4)
--------- --------- --------- ---------
Income from
operations 39.4 (7.4) 90.7 105.6
Interest expense,
net (29.8) (25.4) (78.8) (71.6)
Income tax (expense)
benefit 0.2 (0.6) (0.8) (1.8)
Other 1.0 (4.7) 3.6 (2.5)
--------- --------- --------- ---------
Net income (loss) 10.8 (38.1) 14.7 29.7
Less: Net income to
noncontrolling
interest 0.8 0.2 1.1 0.1
--------- --------- --------- ---------
Net income (loss) to
Targa Resources
Partners LP $ 10.0 $ (38.3) $ 13.6 $ 29.6
========= ========= ========= =========
Net loss
attributable to
predecessor
operations $ (4.2) $ (52.9) $ (2.4) $ (38.2)
Net income
attributable to
general partner 2.8 0.3 6.8 5.5
Net income allocable
to limited partners 11.4 14.4 9.2 62.3
Basic and diluted
net income per
limited partner
unit $ 0.23 $ 0.31 $ 0.19 $ 1.35
Financial data:
Operating margin $ 82.1 $ 36.1 $ 220.9 $ 231.4
Adjusted EBITDA 69.1 22.5 201.8 186.7
Distributable cash
flow 51.5 1.0 158.6 132.4
Operating data:
Gathering
throughput, MMcf/d 490.2 438.3 465.2 455.0
Plant natural gas
inlet, MMcf/d 464.1 415.8 442.5 430.8
Gross NGL
production, MBbl/d 43.5 41.3 43.1 43.2
Natural gas sales,
BBtu/d 414.9 404.4 383.0 410.9
NGL sales, MBbl/d 262.7 282.5 278.6 290.2
Condensate sales,
MBbl/d 2.6 2.4 2.8 2.4
Average realized
prices:
Natural gas, $/MMBtu 3.49 9.42 3.83 9.29
NGLs, $/gal 0.81 1.66 0.71 1.56
Condensate, $/ Bbl 71.25 103.87 55.84 103.75
Review of Third Quarter Results
Net income attributable to Targa Resources Partners for the third quarter of 2009 was $10.0 million, or $0.23 per diluted limited partner unit, compared to a loss of $38.3 million, or $0.31 per diluted limited partner unit for the third quarter of 2008. Income for the third quarter of 2008 was negatively impacted by inventory lower of cost or market adjustments, hurricane casualty losses and mark-to-market derivative losses of $31.6 million, $4.9 million and $1.0 million, respectively. Adjusted EBITDA was $69.1 million for the third quarter of 2009 compared to $22.6 million for the 2008 quarter.
Revenues decreased by $1,211.1 million, or 55%, to $1,003.8 million for 2009 compared to $2,214.9 million for 2008, driven primarily by lower commodity prices. Operating margin was $82.1 million for the third quarter of 2009 compared to $36.1 million for the third quarter of 2008.
The Partnership's average realized prices for natural gas, NGL and condensate decreased by 63%, 51% and 31% for 2009 compared to 2008.
Natural gas sales volumes for 2009 increased by 10.5 BBtu/d, or 3% compared to 2008. The increase in natural gas sales was primarily the result of increased demand by the Partnership's industrial customers and increased sales under third party contracts. NGL sales volumes decreased by 19.8 MBbl/d, or 7% and condensate sales volumes increased by 0.2 MBbl/d, or 8% for the same periods. For information regarding the period to period changes in the Partnership's commodity sales volumes, see "Review of Segment Performance."
General and administrative expenses decreased by $2.0 million, or 10% compared to 2008. The decrease was primarily due to a reduction in allocated general and administrative expenses, offset by the timing of and increases to compensation and benefit expenses as well as increases in property insurance and outside professional services.
Interest expense increased by $4.4 million, or 17%, for 2009 compared to 2008. The increase was primarily due to the issuance of the 11.25% senior unsecured notes, offset partially by lower overall interest rates.
Review of Nine Months Results
Net income attributable to Targa Resources Partners was $13.6 million for the first nine months of 2009 compared to $29.6 million for the first nine months of 2008. Adjusted EBITDA was $201.8 million for the first nine months of 2009 compared to $186.8 million for the 2008 period.
Revenues were $2,822.3 million for the first nine months of 2009, 56% lower than revenues of $6,414.6 million for the first nine months of 2008, driven primarily by lower prices for natural gas, NGL and condensate and lower natural gas and NGL sales volumes.
The Partnership's average realized prices for natural gas, NGL and condensate decreased by 59%, 54%, and 46% for 2009 compared to 2008.
Natural gas sales volumes for the first nine months of 2009 decreased by 27.9 BBtu/d, or 7% compared to 2008. The decrease in natural gas sales was primarily the result of a decrease in purchases from affiliates for resale and a decrease in demand by the Partnership's industrial customers. NGL sales volumes decreased by 11.6 MBbl/d, or 4% and condensate sales volumes increased by 0.4 MBbl/d, or 17%, for the same periods. For information regarding the period to period changes in our commodity sales volumes, see "Review of Segment Performance."
General and administrative expenses decreased by $1.9 million, or 3%, to $55.5 million for 2009 compared to $57.4 million for 2008. The decrease was primarily due to a decrease in allocated general and administrative expenses, offset by the timing of and increases to compensation and benefit expenses and increased outside professional services.
Interest expense increased by $7.2 million, or 10%, for 2009 compared to 2008. The increase was primarily due to the issuance of the 11.25% senior unsecured notes.
Review of Segment Performance
The following discussion of segment performance includes inter-segment revenues. The Partnership views segment operating margin as an important performance measure of the core profitability of its operations. This measure is a key component of internal financial reporting and is reviewed for consistency and trend analysis. The generally accepted accounting principles ("GAAP") measure most directly comparable to segment operating margin is net income. Operating margin is a non-GAAP financial measure that is defined later in this release.
Natural Gas Gathering and Processing Segment
The Natural Gas Gathering and Processing segment consists of the gathering of natural gas produced from oil and gas wells and processing this raw natural gas into merchantable natural gas by extracting natural gas liquids and removing impurities.
The following table provides summary data regarding results of operations of this segment for the periods indicated:
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- --------------------
2009 2008 2009 2008
--------- -------- -------- ----------
($ in millions)
Revenues $ 273.1 $ 578.6 $ 752.8 $ 1,721.4
Product purchases (212.6) (512.5) (592.8) (1,509.8)
Operating expenses (14.3) (15.5) (39.0) (42.7)
----- ----- ----- -----
Operating margin $ 46.2 $ 50.6 $ 121.0 $ 168.9
===== ===== ===== =====
Operating statistics:
Gathering throughput,
MMcf/d
LOU System 213.4 178.1 183.1 189.4
SAOU System 98.5 99.0 99.9 98.7
North Texas System 178.3 161.2 182.2 166.9
----- ----- ----- -----
490.2 438.3 465.2 455.0
===== ===== ===== =====
Plant natural gas
inlet, MMcf/d
LOU System 199.4 168.5 174.2 178.8
SAOU System 92.0 91.2 92.1 91.2
North Texas System 172.7 156.0 176.2 160.8
----- ----- ----- -----
464.1 415.8 442.5 430.8
===== ===== ===== =====
Gross NGL production,
MBbl/d
LOU System 9.0 9.2 8.5 10.1
SAOU System 14.0 14.1 14.2 14.2
North Texas System 20.5 18.0 20.4 18.9
----- ----- ----- -----
43.5 41.3 43.1 43.2
===== ===== ===== =====
Natural gas sales,
BBtu/d 414.9 404.4 383.0 410.9
NGL sales, MBbl/d 40.6 37.4 39.2 38.2
Condensate sales,
MBbl/d 2.6 3.3 3.0 3.6
Average realized
prices:
Natural gas, $/MMBtu 3.49 9.42 3.83 9.29
NGLs, $/gal 0.73 1.46 0.64 1.40
Condensate, $/Bbl 71.25 95.58 54.00 92.72
Review of Third Quarter Results
Revenues decreased by $305.5 million, or 53%, to $273.1 million for the third quarter of 2009 compared to $578.6 million for the third quarter of 2008. The decrease was primarily due to:
* a decrease attributable to commodity prices of $325.2 million,
comprising decreases in natural gas, NGL and condensate revenues
of $226.4 million, $93.1 million and $5.7 million;
* an increase attributable to commodity sales volume of $20.9
million comprising increases in natural gas and condensate
revenues of $9.1 million and $19.1 million, partially offset by a
decrease in NGL revenues of $7.3 million; and
* a decrease in other revenues of $1.2 million, primarily from
miscellaneous processing activities.
The average realized price for natural gas, NGL and condensate decreased by 63%, 50%, and 25%, for 2009 compared to 2008.
Natural gas sales volumes increased by 10.5 BBtu/d, or 3%, for 2009 compared to 2008. The increase in natural gas sales volumes was primarily the result of an increase in demand from the Partnership's industrial customers and increased sales under third party contracts. NGL sales volumes increased by 3.2 MBbl/d, or 9% and condensate sales volumes decreased by 0.7 MBbl/d, or 21%, for the same periods.
Product purchases decreased by $299.9 million, or 59% compared to 2008. The decrease in product purchase cost reflects lower commodity pricing and purchases of wellhead volumes.
Operating expenses for 2009 decreased by $1.2 million, or 8% compared to 2008. The decrease in operating expenses was primarily the result of a decrease in compensation and benefit costs, system maintenance expenses, chemicals and lubricants expenses and utility expenses, partially offset by an increase in ad valorem taxes.
Review of Nine Month Results
Revenues decreased by $968.6 million, or 56%, for 2009 compared to 2008. The decrease was primarily due to:
* a decrease attributable to commodity prices of $893.1 million,
comprising decreases in natural gas, NGL and condensate revenues
of $570.0 million, $290.8 million and $32.2 million;
* a decrease attributable to commodity sales volume of $74.5
million comprising decreases in natural gas and condensate
revenues of $74.6 million and $16.4 million, partially offset by
an increase in NGL revenues of $16.5 million; and
* a decrease in other revenues of $1.0 million, primarily from
miscellaneous processing activities.
Average realized price for natural gas, NGL and condensate decreased by 59%, 54%, and 42%, for 2009 compared to 2008.
Natural gas sales volumes decreased by 27.9 BBtu/d, or 7%, for 2009 compared to 2008. The decrease in natural gas sales was primarily the result of a decrease in purchases from affiliates. NGL sales volumes increased by 1.0 MBbl/d, or 3%, for 2009 compared to 2008. Condensate sales volumes decreased by 0.6 MBbl/d, or 17%, for 2009 compared to 2008.
Product purchases for 2009 decreased by $917.0 million, or 61% compared to 2008. The decrease in product cost reflects lower commodity pricing and purchases of wellhead volumes.
Operating expenses for 2009 decreased $3.7 million, or 9% compared to 2008.
