Regency Energy Partners LP - FORM 8-K/A - EX-99.1 - UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

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file	filename
8-K/A - AMENDMENT NO. 1 TO 8-K - Regency Energy Partners LP	d8ka.htm
EX-99.2 - AUDITED FINANCIAL STATEMENTS OF LDH ENERGY ASSET HOLDINGS LLC - Regency Energy Partners LP	dex992.htm
EX-23.1 - CONSENT OF INDEPENDENT AUDITORS - Regency Energy Partners LP	dex231.htm
EX-99.3 - UNAUDITED FINANCIAL STATEMENTS OF LDH ENERGY ASSET HOLDINGS LLC - Regency Energy Partners LP	dex993.htm

Exhibit 99.1

Unaudited Pro Forma Combined Financial Statements

On May 2, 2011, Lone Star NGL LLC (formerly known as ETP-Regency Midstream Holdings, LLC the “Joint Venture”), a newly formed joint venture owned 70 percent by Energy Transfer Partners, L.P. (“ETP”) and 30 percent by Regency Energy Partners LP (the “Partnership”), completed its acquisition of all of the membership interests in LDH Energy Asset Holdings LLC (“LDH”), a wholly owned subsidiary of Louis Dreyfus Highbridge Energy LLC, for $1,972,000,000 in cash, subject to customary post-closing purchase price adjustments (the “LDH Acquisition”). LDH’s coal assets were transferred out prior to the acquisition and were not purchased by the Joint Venture. The Partnership contributed $591,600,000 in cash to the Joint Venture in exchange for a 30 percent interest. The Partnership funded a portion of this capital contribution with the net proceeds from a private placement of 8,500,001 common units representing limited partner interests of $203,900,000. The remaining portion of the Partnership’s capital contribution to the Joint Venture of $387,700,000 was funded through borrowings under the Partnership’s revolving credit facility.

This unaudited pro forma combined financial information has been prepared to reflect the transactions described above.

The pro forma combined balance sheets reflect the transactions described above and the pro forma adjustments as though the purchase of the 30 percent interest in the Joint Venture occurred on December 31, 2010 and March 31, 2011, respectively, while the pro forma combined statements of operations reflect the transactions described above and the pro forma adjustments as though the purchase of the 30 percent interest in the Joint Venture occurred as of January 1, 2010 for the year ended December 31, 2010, and the three months ended March 31, 2011. The pro forma adjustments were prepared applying the rules established by the Securities and Exchange Commission in Article 11 of Regulation S-X.

The historical financial information included in the column entitled “Partnership” was derived from the audited financial statements included in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2010 and from the unaudited financial statements included in the Partnership’s Form 10-Q for the three months ended March 31, 2011.

The unaudited pro forma combined financial information is based on assumptions that the Partnership believes are reasonable under the circumstances and are intended for informational purposes only. Actual results may differ from the estimates and assumptions used. The unaudited pro forma combined financial information is not necessarily indicative of the financial results that would have occurred if these transactions had taken place on the dates indicated, nor are they indicative of future consolidated results.

Regency Energy Partners LP

Unaudited Pro Forma Combined Balance Sheet

December 31, 2010

(in thousands)


	Partnership			Pro Forma Adjustments			Pro Forma Combined
ASSETS
Current Assets:
Cash and cash equivalents	$	9,400		$	—		$	9,400
Trade accounts receivable, net of allowance		35,212			—			35,212
Accrued revenues		74,017			—			74,017
Related party receivables		32,342			—			32,342
Derivative assets		2,650			—			2,650
Other current assets		7,384			—			7,384

Total current assets		161,005			—			161,005

Property, Plant and Equipment:
Gathering and transmission systems		543,286			—			543,286
Compression equipment		812,428			—			812,428
Gas plants and buildings		185,741			—			185,741
Other property, plant and equipment		81,295			—			81,295
Construction-in-progress		97,439			—			97,439

Total property, plant and equipment		1,720,189			—			1,720,189
Less accumulated depreciation		(59,971	)		—			(59,971	)

Property, plant and equipment, net		1,660,218			—			1,660,218

Other Assets:
Investment in unconsolidated subsidiaries		1,351,256			591,600	a		1,942,856
Long-term derivative assets		23			—			23
Other, net of accumulated amortization of debt issuance costs		37,758			—			37,758

Total other assets		1,389,037			591,600			1,980,637

Intangible Assets and Goodwill:
Intangible assets, net of accumulated amortization		770,155			—			770,155
Goodwill		789,789			—			789,789

Total intangible assets and goodwill		1,559,944			—			1,559,944


TOTAL ASSETS	$	4,770,204		$	591,600		$	5,361,804


LIABILITIES & PARTNERS’ CAPITAL AND NONCONTROLLING INTEREST
Current Liabilities:
Trade accounts payable	$	50,208		$	—		$	50,208
Accrued cost of gas and liquids		80,756			—			80,756
Related party payables		3,338			—			3,338
Deferred revenues, including related party amounts		25,257			—			25,257
Derivative liabilities		13,172			—			13,172
Other current liabilities		23,419			—			23,419

Total current liabilities		196,150			—			196,150

Long-term derivative liabilities		61,127			—			61,127
Other long-term liabilities		6,521			—			6,521
Long-term debt, net		1,141,061			387,700	a		1,528,761

Commitments and contingencies

Series A convertible redeemable preferred units		70,943			—			70,943

Partners’ Capital and Noncontrolling Interest:
Common units		2,940,732			203,900	a		3,144,632
General partner interest		333,077			—			333,077
Accumulated other comprehensive loss		(11,099	)		—			(11,099	)

Total partners’ capital		3,262,710			203,900			3,466,610
Noncontrolling interest		31,692			—			31,692

Total partners’ capital and noncontrolling interest		3,294,402			203,900			3,498,302

TOTAL LIABILITIES AND PARTNERS’ CAPITAL AND NONCONTROLLING INTEREST	$	4,770,204		$	591,600		$	5,361,804

See accompanying notes to unaudited pro forma combined financial information

Regency Energy Partners LP

Unaudited Pro Forma Combined Balance Sheet

March 31, 2011

(in thousands)


	Partnership			Pro Forma Adjustments			Pro Forma Combined
ASSETS
Current Assets:
Cash and cash equivalents	$	24,724		$	—		$	24,724
Trade accounts receivable, net of allowance		30,388			—			30,388
Accrued revenues		69,279			—			69,279
Related party receivables		35,490			—			35,490
Derivative assets		1,559			—			1,559
Other current assets		9,499			—			9,499

Total current assets		170,939			—			170,939

Property, Plant and Equipment:
Gathering and transmission systems		551,318			—			551,318
Compression equipment		828,131			—			828,131
Gas plants and buildings		210,078			—			210,078
Other property, plant and equipment		104,419			—			104,419
Construction-in-progress		90,859			—			90,859

Total property, plant and equipment		1,784,805			—			1,784,805
Less accumulated depreciation		(92,171	)		—			(92,171	)

Property, plant and equipment, net		1,692,634			—			1,692,634

Other Assets:
Investment in unconsolidated subsidiaries		1,332,899			591,600	a		1,924,499
Long-term derivative assets		—			—			—
Other, net of accumulated amortization of debt issuance costs		35,523			—			35,523

Total other assets		1,368,422			591,600			1,960,022

Intangible Assets and Goodwill:
Intangible assets, net of accumulated amortization		762,837			—			762,837
Goodwill		789,789			—			789,789

Total intangible assets and goodwill		1,552,626			—			1,552,626


TOTAL ASSETS	$	4,784,621		$	591,600		$	5,376,221


LIABILITIES & PARTNERS’ CAPITAL AND NONCONTROLLING INTEREST
Current Liabilities:
Trade accounts payable	$	37,841		$	—		$	37,841
Accrued cost of gas and liquids		75,837			—			75,837
Related party payables		12,051			—			12,051
Deferred revenues, including related party amounts		18,653			—			18,653
Derivative liabilities		23,190			—			23,190
Other current liabilities		34,031			—			34,031

Total current liabilities		201,603			—			201,603

Long-term derivative liabilities		58,875			—			58,875
Other long-term liabilities		6,426			—			6,426
Long-term debt, net		1,215,839			387,700	a		1,603,539

Commitments and contingencies

Series A convertible redeemable preferred units		70,991			—			70,991

Partners’ Capital and Noncontrolling Interest:
Common units		2,891,594			203,900	a		3,095,494
General partner interest		332,036			—			332,036
Accumulated other comprehensive loss		(24,666	)		—			(24,666	)

Total partners’ capital		3,198,964			203,900			3,402,864
Noncontrolling interest		31,923			—			31,923

Total partners’ capital and noncontrolling interest		3,230,887			203,900			3,434,787


TOTAL LIABILITIES AND PARTNERS’ CAPITAL AND NONCONTROLLING INTEREST	$	4,784,621		$	591,600		$	5,376,221

See accompanying notes to unaudited pro forma combined financial information

Regency Energy Partners LP

Unaudited Pro Forma Combined Statement of Operations

For the Year Ended December 31, 2010

(in thousands except unit data and per unit data)


	Partnership
	Successor Period from Acquisition (May 26, 2010) to December 31, 2010			Predecessor Period from January 1, 2010 to May 25, 2010			Total of Successor and Predecessor Periods for the Twelve Months Ended December 31, 2010			Pro Forma Adjustments				Pro Forma Combined
REVENUES
Gas sales, including related party amounts	$	291,247		$	228,097		$	519,344		$	—			$	519,344
NGL sales, including related party amounts		238,076			152,803			390,879			—				390,879
Gathering, transportation and other fees, including related party amounts		178,769			114,526			293,295			—				293,295
Net realized and unrealized loss from derivatives		(7,866	)		(716	)		(8,582	)		—				(8,582	)
Other		16,387			10,340			26,727			—				26,727

Total revenues		716,613			505,050			1,221,663			—				1,221,663
OPERATING COSTS AND EXPENSES
Cost of sales, including related party amounts		504,327			357,778			862,105			—				862,105
Operation and maintenance		77,808			47,842			125,650			—				125,650
General and administrative, including related party amounts		43,739			37,212			80,951			—				80,951
Loss on asset sales, net		213			303			516			—				516
Depreciation and amortization		75,967			41,784			117,751			—				117,751

Total operating costs and expenses		702,054			484,919			1,186,973			—				1,186,973
OPERATING INCOME		14,559			20,131			34,690			—				34,690
Income from unconsolidated subsidiaries		53,493			15,872			69,365			15,961		b		85,326
Interest expense, net		(48,251	)		(34,541	)		(82,792	)		(15,004	)	c		(97,796	)
Loss on debt refinancing, net		(15,748	)		(1,780	)		(17,528	)						(17,528	)
Other income and deductions, net		(8,229	)		(3,897	)		(12,126	)		—				(12,126	)

LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES		(4,176	)		(4,215	)		(8,391	)		957				(7,434	)
Income tax expense		552			404			956			—				956

LOSS FROM CONTINUING OPERATIONS	$	(4,728	)	$	(4,619	)	$	(9,347	)	$	957			$	(8,390	)
Basic and diluted loss from continuing operations per unit:
Amount allocated to common units	$	(12,359	)	$	(8,966	)	$	(21,325	)					$	(20,647	)
Weighted average number of common units outstanding		130,619,554			92,788,319			115,463,773			8,500,001		d		123,963,774
Basic and diluted loss from continuing operations per common unit	$	(0.09	)	$	(0.10	)	$	(0.18	)					$	(0.17	)

See accompanying notes to unaudited pro forma condensed consolidated statement of operations

Regency Energy Partners LP

Unaudited Pro Forma Combined Statement of Operations

For the Three Months Ended March 31, 2011

(in thousands except unit data and per unit data)


	Partnership			Pro Forma Adjustments				Pro Forma Combined
REVENUES
Gas sales, including related party amounts	$	110,087		$	—			$	110,087
NGL sales, including related party amounts		118,251			—				118,251
Gathering, transportation and other fees, including related party amounts		81,836			—				81,836
Net realized and unrealized loss from derivatives		(1,714	)		—				(1,714	)
Other		8,792			—				8,792

Total revenues		317,252			—				317,252

OPERATING COSTS AND EXPENSES
Cost of sales, including related party amounts		216,261			—				216,261
Operation and maintenance		33,672			—				33,672
General and administrative, including related party amounts		18,997			—				18,997
Loss on asset sales, net		28			—				28
Depreciation and amortization		40,236			—				40,236

Total operating costs and expenses		309,194			—				309,194

OPERATING INCOME		8,058			—				8,058

Income from unconsolidated subsidiaries		23,808			5,244		b		29,052
Interest expense, net		(20,007	)		(3,005	)	c		(23,012	)
Other income and deductions, net		2,414			—				2,414

INCOME BEFORE INCOME TAXES		14,273			2,239				16,512
Income tax benefit		(32	)		—				(32	)

NET INCOME	$	14,305		$	2,239			$	16,544
Net income attributable to noncontrolling interest		(231	)		—				(231	)

NET INCOME ATTRIBUTABLE TO REGENCY ENERGY PARTNERS LP	$	14,074		$	2,239			$	16,313


Amounts attributable to Series A convertible redeemable preferred units		1,993							1,993
General partner’s interest, including IDR		1,292							1,386

Limited partners’ interest in net income	$	10,789						$	12,934


Basic and diluted income per unit:
Amount allocated to common units	$	10,789						$	12,934
Weighted average number of common units outstanding		137,304,783			8,500,001		d		145,804,784
Basic income per common unit	$	0.08						$	0.09
Diluted income per common unit	$	0.07						$	0.08

See accompanying notes to unaudited pro forma condensed consolidated statement of operations

Regency Energy Partners LP

Notes to Unaudited Pro Forma Combined Financial Information

The following notes discuss the columns presented and the entries made to the unaudited pro forma combined financial information.

Partnership

This column represents the historical audited consolidated balance sheet as of December 31, 2010 and related consolidated statement of operations of the Partnership for the periods from May 26, 2010 to December 31, 2010 (“Successor Period”) and from January 1, 2010 to May 25, 2010 (“Predecessor Period”), as reflected in the Partnership’s audited financial statements as reported in its Annual Report on Form 10-K for the year ended December 31, 2010; and the historical unaudited condensed consolidated balance sheet as of March 31, 2011 and related condensed consolidated statement of operations for the three months then ended, as reflected in the Partnership’s unaudited financial statements as reported in its Quarterly Report on Form 10-Q for the three months ended March 31, 2011.

Pro Forma Adjustments

a. Represents the purchase of a 30 percent interest in the Joint Venture for $591,600,000. The Partnership funded a portion of the purchase price with the net proceeds from a private placement of common units of $203,900,000. The remaining portion of the Partnership’s capital contribution to the Joint Venture of $387,700,000 was funded through borrowings under the Partnership’s revolving credit facility.

b. Represents the Partnership’s portion of the Joint Venture’s net income for the year ended December 31, 2010 and the three months ended March 31, 2011, adjusted for the portion of LDH not acquired by the Joint Venture as well as the additional depreciation and amortization expense resulting from the purchase price allocation. The Joint Venture acquired substantially all of the assets of LDH; therefore the Partnership included the audited financial statements of LDH for the three years ended December 31, 2010 in Exhibit 99.2. A reconciliation from LDH’s audited net income for the year ended December 31, 2010 and the unaudited net income for the three months ended March 31, 2011 to the pro forma net income associated with the assets acquired by the Joint Venture is presented below.


		Year Ended December 31, 2010			Three Months Ended March 31, 2011
		(in thousands)
LDH’s net income		$	90,586		$	26,225
Add (Deduct):	Net loss associated with the coal assets that were not acquired by the Joint Venture		500			100
	Additional depreciation and amortization expense as a result of purchase price allocation*		(37,882	)		(8,846	)

Pro forma net income associated with the assets that were acquired by the Joint Venture		$	53,204		$	17,479

The Partnership’s 30 percent equity income pro forma adjustment		$	15,961		$	5,244

*	Management of the Joint Venture engaged a third party valuation expert to undertake a detailed purchase price allocation and valuation study. The estimated additional depreciation and amortization expense is calculated based on the preliminary valuation result.

c. Represents the incremental interest expense incurred on the borrowings under the Partnership’s revolving credit facility that were used to fund a portion of the acquisition of the 30 percent interest in the Joint Venture. The Partnership utilized the weighted average rates of its revolving credit facility of 3.87 and 3.10 percent for the year ended December 31, 2010 and the three months ended March 31, 2011, respectively.

d. Represents the issuance of 8,500,001 common units.

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