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| 8-K - 8-K - Tallgrass Energy, LP | tegp2017630earningsrelease.htm |
Exhibit 99.1
Tallgrass Energy Reports Strong Second Quarter 2017 Results
LEAWOOD, Kan.--(BUSINESS WIRE)--August 2, 2017--Tallgrass Energy Partners, LP (NYSE: TEP) ("TEP") and Tallgrass Energy GP, LP (NYSE: TEGP) ("TEGP"), collectively referred to as Tallgrass Energy, today reported financial and operating results for the second quarter of 2017.
“Tallgrass Energy continued its track record of delivering outstanding financial results and strong distribution growth for the second quarter of 2017," said Tallgrass Energy President and CEO David G. Dehaemers Jr. "With our recently announced strategic acquisitions and organic growth projects in our backlog, we now expect to deliver at the high-end of our financial guidance for 2017."
Second Quarter Distributions
Tallgrass Energy Partners, LP
As previously announced, the board of directors of TEP's general partner declared a quarterly cash distribution of $0.925 per common unit for the second quarter of 2017. This quarterly distribution represents $3.70 on an annualized basis, a sequential increase of 10.8 percent from the first quarter 2017 distribution and an increase of 22.5 percent from the second quarter 2016 distribution. The quarterly distribution will be paid on Monday, Aug. 14, 2017, to unitholders of record as of the close of business on Friday, July 28, 2017.
The increase is consistent with management’s previously announced plan to recommend to the board of directors of its general partner increases in its second and third quarter 2017 distributions that will aggregate to at least $0.10 per unit (or $0.40 per unit on an annualized basis) over the first quarter 2017 distribution of $0.835. TEP acquired an approximate 25 percent membership interest in Rockies Express Pipeline LLC in March 2017.
Tallgrass Energy GP, LP
Also, as previously announced, the board of directors of TEGP's general partner declared a quarterly cash distribution of $0.3425 per Class A share for the second quarter of 2017. This quarterly distribution represents $1.37 per Class A share on an annualized basis, a sequential increase of 19.1 percent from the first quarter 2017 distribution and an increase of 39.8 percent from the second quarter 2016 distribution. The quarterly distribution will be paid on Monday, Aug. 14, 2017, to Class A shareholders of record as of the close of business on Friday, July 28, 2017.
1
Tallgrass Energy Partners, LP Summary Financial Information(1)
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
(in thousands, except coverage and per unit data) | 2017 | 2016 | As Reported in 2016 | 2017 | 2016 | As Reported in 2016 | |||||||||||||||||
Net income attributable to partners | $ | 89,880 | $ | 88,160 | $ | 92,048 | $ | 160,785 | $ | 135,915 | $ | 136,118 | |||||||||||
Add: | |||||||||||||||||||||||
Interest expense(2) | 19,688 | 9,233 | 9,233 | 34,377 | 16,732 | 16,732 | |||||||||||||||||
Depreciation and amortization expense(2) | 22,555 | 22,354 | 21,840 | 44,422 | 44,836 | 43,807 | |||||||||||||||||
Distributions from unconsolidated investments | 59,863 | 30,338 | 29,656 | 90,682 | 30,972 | 29,656 | |||||||||||||||||
Non-cash loss (gain) related to derivative instruments(2) | 84 | (18,791 | ) | (18,791 | ) | (2,357 | ) | (9,801 | ) | (9,801 | ) | ||||||||||||
Non-cash compensation expense (3) | 1,494 | 1,469 | 1,469 | 2,952 | 2,635 | 2,635 | |||||||||||||||||
Loss (gain) from disposal of assets | 129 | 1,849 | 1,849 | (1,319 | ) | 1,849 | 1,849 | ||||||||||||||||
Less: | |||||||||||||||||||||||
Equity in earnings of unconsolidated investments | (42,741 | ) | (24,022 | ) | (23,321 | ) | (63,479 | ) | (24,731 | ) | (23,321 | ) | |||||||||||
Adjusted EBITDA(4) | $ | 150,952 | $ | 110,590 | $ | 113,983 | $ | 266,063 | $ | 198,407 | $ | 197,675 | |||||||||||
Add: | |||||||||||||||||||||||
Deficiency payments received, net(2) | 8,280 | 8,621 | 24,351 | 15,778 | |||||||||||||||||||
Less: | |||||||||||||||||||||||
Cash interest cost | (18,592 | ) | (8,412 | ) | (32,159 | ) | (15,233 | ) | |||||||||||||||
Maintenance capital expenditures, net | (3,994 | ) | (2,089 | ) | (4,057 | ) | (4,257 | ) | |||||||||||||||
Distributable Cash Flow(4) | 136,646 | 112,103 | 254,198 | 193,963 | |||||||||||||||||||
Less: | |||||||||||||||||||||||
Distributions | (105,199 | ) | (79,615 | ) | (196,565 | ) | (148,499 | ) | |||||||||||||||
Amounts in excess of distributions(5) | $ | 31,447 | $ | 32,488 | $ | 57,633 | $ | 45,464 | |||||||||||||||
Distribution coverage | 1.30 | x | 1.41 | x | 1.29 | x | 1.31 | x | |||||||||||||||
Common units outstanding(6) | 73,158 | 72,109 | 73,158 | 72,109 | |||||||||||||||||||
Distribution per common unit | $ | 0.9250 | $ | 0.7550 | $ | 1.7600 | $ | 1.4600 | |||||||||||||||
(1) | The financial results for all periods presented in the table include the applicable results of operations of Tallgrass Terminals, LLC and Tallgrass NatGas Operator, LLC, which were acquired by TEP effective Jan. 1, 2017, except for the period under the column "As Reported in 2016." |
(2) | Net of noncontrolling interest. |
(3) Represents TEP's portion of non-cash compensation expense related to Equity Participation Units, excluding amounts allocated to Tallgrass Development, LP.
(4) Adjusted EBITDA and distributable cash flow are non-GAAP measures. For additional detail see "Non-GAAP Measures" below.
(5) Cumulative distribution coverage from TEP's IPO in May 2013 through June 30, 2017, is $190.0 million and the cumulative distribution coverage ratio is 1.23x.
(6) | Common units represent the number of units as of the date of record for the second quarter distributions in both 2017 and 2016. |
2
Strategic Acquisitions, Organic Growth Projects and Commercial Developments
Since TEP’s Q1 2017 earnings call on May 2, Tallgrass Energy has announced or completed acquisitions and growth projects of approximately $350 million and announced additional commercial developments.
• | Acquired natural gas gathering system in Powder River Basin from DCP |
• | Acquired additional 49 percent interest in Deeprock Development terminal in Cushing, Okla. |
• | Acquired 63 percent interest in freshwater facilities in Weld County, Colo. |
• | Acquired Clarkelen water disposal facility in Powder River Basin |
• | Received proportionate distribution from REX's receipt of $150 million cash settlement payment from Ultra Resources, Inc. |
• | Successful REX open seasons for incremental 240,000 dekatherms per day of Zone 3 east-to-west transport |
• | Successful Pony Express open season for Platteville Extension with binding transportation commitments of approximately 30,000 barrels per day |
• | Announced agreement for new Pony Express refinery connection with CHS, Inc. near McPherson, Kan. |
• | Announced agreement for new Pony Express supply connection and Tallgrass terminal near Natoma, Kan. and associated fifth common stream of crude oil for transport on Pony Express |
• | Completed 117,000 barrels per day north Sterling, Colo. water infrastructure to service DJ/Niobrara customers -- largest high-density polyethylene (HDPE) pipeline project in the history of Colorado |
• | Commissioned 10,000 dekatherm per day Fortigen demand lateral on Trailblazer -- 4,000 dekatherms per day contracted for 15 years |
Conference Call
Please join Tallgrass Energy for a conference call and webcast to discuss second quarter 2017 results at 3:30 p.m. Central Time on Wednesday, Aug. 2, 2017. Interested parties may listen via a link posted on the Investor Relations section of our website and the replay will be available on our website for at least seven days following the live call.
Tallgrass Energy Partners, LP Alternative Reconciliations
Adjusted EBITDA and Distributable Cash Flow, as defined in "TEP's Non-GAAP Measures" below, may be impacted by the timing of cash payments received as a result of shipper deficiency payments received or utilized during the period or incremental barrels shipped during the period. As such, we have also provided alternative reconciliations of Adjusted EBITDA and Distributable Cash Flow that illustrate the impact of these items. These alternative reconciliations are also non-GAAP Measures. Management believes this information provides investors useful information regarding the impact of these items on our current results as well as the potential impact on future results.
Alternative Reconciliation of Adjusted EBITDA
Three Months Ended June 30, | Six Months Ended June 30, | ||||||
(in thousands) | 2017 | 2017 | |||||
Adjusted EBITDA | $ | 150,952 | $ | 266,063 | |||
Add: | |||||||
Deficiency payments received, net(1) | 8,280 | 24,351 | |||||
Alternative Adjusted EBITDA(2) | $ | 159,232 | $ | 290,414 | |||
(1) Cumulative net deficiency balance at June 30, 2017, is $85.4 million.
(2) | Alternative Adjusted EBITDA shows what TEP's Adjusted EBITDA would have been for the period presented if TEP included net deficiency payments from shippers' firm, take-or-pay contracts in calculating Adjusted EBITDA. TEP's reported distributable cash flow and distribution coverage would remain unchanged. |
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Alternative Reconciliation of Distributable Cash Flow and Distribution Coverage
Three Months Ended June 30, | Six Months Ended June 30, | ||||||
(in thousands, except coverage) | 2017 | 2017 | |||||
Distributable Cash Flow | $ | 136,646 | $ | 254,198 | |||
Less: | |||||||
Cash flow from incremental barrels shipped(1) | (2,670 | ) | (5,500 | ) | |||
Alternative Distributable Cash Flow(2) | 133,976 | 248,698 | |||||
Less: | |||||||
Distributions | (105,199 | ) | (196,565 | ) | |||
Amounts in excess of distributions | $ | 28,777 | $ | 52,133 | |||
Alternative distribution coverage(2) | 1.27 | x | 1.27 | x | |||
(1) Cumulative shipper incremental balance at June 30, 2017, is $24.1 million.
(2) | Alternative distributable cash flow and alternative distribution coverage shown excludes the impact of cash flows from incremental barrels shipped on the Pony Express system, as incremental barrels shipped during current periods may reduce the shippers' firm commitment in future periods under their firm, take-or-pay contracts, thereby potentially reducing cash flows in those corresponding future periods. Under this alternative calculation, the cash flows received from incremental barrel shipments would be shown in the future periods in which the incremental barrels are utilized to reduce the shippers' firm commitment. |
Tallgrass Energy Partners, LP Segment Overview(1)(2)
The second quarter 2017 comparative results by segment are summarized below:
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
2017 | 2016 | As Reported in 2016 | 2017 | 2016 | As Reported in 2016 | ||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
Crude Oil Transportation & Logistics | |||||||||||||||||||||||
Operating income | $ | 51,774 | $ | 47,145 | $ | 53,726 | $ | 96,489 | $ | 101,106 | $ | 106,392 | |||||||||||
Add: | |||||||||||||||||||||||
Depreciation and amortization expense(3) | 13,951 | 13,760 | 13,246 | 27,830 | 27,193 | 26,164 | |||||||||||||||||
Distributions from unconsolidated investment | 573 | 682 | — | 1,267 | 1,316 | — | |||||||||||||||||
Other income, net | 143 | — | — | 143 | — | — | |||||||||||||||||
Less: | |||||||||||||||||||||||
Adjusted EBITDA attributable to noncontrolling interests | (1,000 | ) | (1,067 | ) | (1,067 | ) | (1,871 | ) | (2,110 | ) | (2,110 | ) | |||||||||||
Non-cash loss (gain) related to derivative instruments(3) | 16 | (145 | ) | (145 | ) | (634 | ) | (145 | ) | (145 | ) | ||||||||||||
Segment Adjusted EBITDA | $ | 65,457 | $ | 60,375 | $ | 65,760 | $ | 123,224 | $ | 127,360 | $ | 130,301 | |||||||||||
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Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
2017 | 2016 | As Reported in 2016 | 2017 | 2016 | As Reported in 2016 | ||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
Natural Gas Transportation & Logistics | |||||||||||||||||||||||
Operating income | $ | 14,726 | $ | 12,092 | $ | 10,100 | $ | 32,894 | $ | 24,437 | $ | 20,764 | |||||||||||
Add: | |||||||||||||||||||||||
Depreciation and amortization expense | 4,792 | 5,479 | 5,479 | 9,575 | 11,357 | 11,357 | |||||||||||||||||
Distributions from unconsolidated investment | 59,290 | 29,656 | 29,656 | 89,415 | 29,656 | 29,656 | |||||||||||||||||
Non-cash loss (gain) related to derivative instruments | — | 307 | 307 | (116 | ) | 351 | 351 | ||||||||||||||||
Other income, net | 282 | 221 | 221 | 352 | 787 | 787 | |||||||||||||||||
Segment Adjusted EBITDA | $ | 79,090 | $ | 47,755 | $ | 45,763 | $ | 132,120 | $ | 66,588 | $ | 62,915 | |||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
Processing & Logistics | |||||||||||||||||||||||
Operating income (loss) | $ | 5,262 | $ | (1,372 | ) | $ | 9,378 | $ | (1,194 | ) | |||||||||||||
Add: | |||||||||||||||||||||||
Depreciation and amortization expense(3) | 3,812 | 3,115 | 7,017 | 6,286 | |||||||||||||||||||
Non-cash loss related to derivative instruments | 68 | — | 278 | — | |||||||||||||||||||
Loss (gain) on disposal of assets | 129 | 1,849 | (1,319 | ) | 1,849 | ||||||||||||||||||
Adjusted EBITDA attributable to noncontrolling interests | 51 | (43 | ) | 43 | (41 | ) | |||||||||||||||||
Segment Adjusted EBITDA | $ | 9,322 | $ | 3,549 | $ | 15,397 | $ | 6,900 | |||||||||||||||
(1) The financial results for the Crude Oil Transportation and Logistics and Natural Gas Transportation & Logistics segments for the three and six months ended June 30, 2016, have been recast to reflect the results of operations of Terminals and NatGas, respectively, which TEP acquired effective January 1, 2017. The financial results for the Crude Oil Transportation and Logistics and Natural Gas Transportation & Logistics segments for the three and six months ended June 30, 2016, under the column "As Reported in 2016," does not include Terminals and NatGas's results of operations.
(2) Segment reporting does not include corporate general and administrative costs or intersegment eliminations.
(3) Net of noncontrolling interest.
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TEP acquired a 25 percent interest in REX effective May 6, 2016, and an additional 24.99 percent interest in REX effective March 31, 2017. TEP's consolidated Adjusted EBITDA, as shown above, includes TEP's membership interest in REX. The table below is a reconciliation of REX's Adjusted EBITDA and Distributable Cash Flow for the three and six months ended June 30, 2017 and 2016, presented to provide additional information on REX's financial results. REX’s Adjusted EBITDA and Distributable Cash Flow are non-GAAP measures. For additional detail see "Non-GAAP Measures" below.
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
(in thousands) | |||||||||||||||
Net income | $ | 70,945 | $ | 112,728 | $ | 137,195 | $ | 192,663 | |||||||
Add: | |||||||||||||||
Interest expense | 42,051 | 39,840 | 83,877 | 80,385 | |||||||||||
Depreciation and amortization expense | 54,608 | 50,163 | 108,799 | 100,499 | |||||||||||
Adjusted EBITDA | 167,604 | 202,731 | 329,871 | 373,547 | |||||||||||
Less: | |||||||||||||||
Cash interest cost | (41,217 | ) | (39,114 | ) | (82,209 | ) | (78,888 | ) | |||||||
Maintenance capital expenditures | (3,359 | ) | (2,280 | ) | (6,940 | ) | (4,277 | ) | |||||||
Distributable Cash Flow | $ | 123,028 | $ | 161,337 | $ | 240,722 | $ | 290,382 | |||||||
Distributions to Members | $ | (118,604 | ) | $ | (161,200 | ) | $ | (239,105 | ) | $ | (286,700 | ) | |||
Contributions from Members | $ | 22,289 | $ | 87,600 | $ | 49,060 | $ | 162,500 | |||||||
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Tallgrass Energy GP, LP Summary Financial Information
Information on distributions to Tallgrass Equity, LLC ("Tallgrass Equity"), TEGP and TEGP's Class A shareholders is shown below (in thousands, except coverage and per share data):
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
TEP distributions to Tallgrass Equity(1) | |||||||||||||||
General partner interest | $ | 1,186 | $ | 911 | $ | 2,226 | $ | 1,741 | |||||||
Incentive Distribution Rights | 36,342 | 24,262 | 66,182 | 44,078 | |||||||||||
TEP common units owned by Tallgrass Equity | 18,500 | 15,100 | 35,200 | 29,200 | |||||||||||
Total TEP distributions to Tallgrass Equity | 56,028 | 40,273 | 103,608 | 75,019 | |||||||||||
Less: | |||||||||||||||
Cash interest expense attributable to Tallgrass Equity | (1,308 | ) | (1,100 | ) | (2,517 | ) | (2,190 | ) | |||||||
Cash general and administrative expenses attributable to Tallgrass Equity | (500 | ) | (500 | ) | (1,000 | ) | (1,000 | ) | |||||||
Cash available for distribution by Tallgrass Equity | 54,220 | 38,673 | 100,091 | 71,829 | |||||||||||
Distributions to Class A (TEGP) | 19,891 | 11,693 | 36,588 | 21,715 | |||||||||||
Distributions to Class B (Exchange Right Holders) | 33,960 | 26,829 | 62,467 | 49,825 | |||||||||||
Total cash distributions by Tallgrass Equity | $ | 53,851 | $ | 38,522 | $ | 99,055 | $ | 71,540 | |||||||
TEGP | |||||||||||||||
Distributions from Tallgrass Equity | $ | 19,891 | $ | 11,693 | $ | 36,588 | $ | 21,715 | |||||||
Less: | |||||||||||||||
Distributions to Class A shareholders | (19,891 | ) | (11,693 | ) | (36,588 | ) | (21,715 | ) | |||||||
Amounts in excess of distributions | — | — | $ | — | $ | — | |||||||||
Distribution coverage | 1.00 | x | 1.00 | x | 1.00 | x | 1.00 | x | |||||||
Class A shares outstanding | 58,075 | 47,725 | 58,075 | 47,725 | |||||||||||
Distribution per Class A share | $ | 0.3425 | $ | 0.2450 | $ | 0.6300 | $ | 0.4550 | |||||||
(1) | Represents distributions expected to be received by Tallgrass Equity from TEP on or about August 14, 2017, in connection with TEP's distribution for the quarter ended June 30, 2017. |
Non-GAAP Measures
Adjusted EBITDA and Distributable Cash Flow are non-GAAP supplemental financial measures that TEP management and external users of our consolidated financial statements and financial statements of our subsidiaries and unconsolidated investments, such as industry analysts, investors, lenders and rating agencies, may use to assess:
• | our operating performance as compared to other publicly traded partnerships in the midstream energy industry, without regard to historical cost basis or, in the case of Adjusted EBITDA, financing methods; |
• | the ability of our assets to generate sufficient cash flow to make distributions to our unitholders; |
• | our ability to incur and service debt and fund capital expenditures; and |
• | the viability of acquisitions and other capital expenditure projects and the returns on investment of various expansion and growth opportunities. |
7
We believe that the presentation of Adjusted EBITDA and Distributable Cash Flow provides useful information to investors in assessing our financial condition and results of operations. Adjusted EBITDA and Distributable Cash Flow should not be considered alternatives to net income, operating income, net cash provided by operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP, nor should Adjusted EBITDA and Distributable Cash Flow be considered alternatives to available cash, operating surplus, distributions of available cash from operating surplus or other definitions in our partnership agreement. Adjusted EBITDA and Distributable Cash Flow have important limitations as analytical tools because they exclude some but not all items that affect net income and net cash provided by operating activities. Additionally, because Adjusted EBITDA and Distributable Cash Flow may be defined differently by other companies in our industry, our definition of Adjusted EBITDA and Distributable Cash Flow may not be comparable to similarly titled measures of other companies, thereby diminishing their utility.
We generally define Adjusted EBITDA as net income excluding the impact of interest, income taxes, depreciation and amortization, non-cash income or loss related to derivative instruments, non-cash long-term compensation expense, impairment losses, gains or losses on asset or business disposals or acquisitions, gains or losses on the repurchase, redemption or early retirement of debt, and earnings from unconsolidated investments, but including the impact of distributions from unconsolidated investments. We also use Distributable Cash Flow, which we generally define as Adjusted EBITDA, plus deficiency payments received from or utilized by our customers and preferred distributions received from Pony Express in excess of its distributable cash flow attributable to our net interest, less cash interest expense, maintenance capital expenditures, distributions to noncontrolling interests in excess of earnings allocated to noncontrolling interests, and certain cash reserves permitted by our partnership agreement. For a reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measures, please see "Summary Financial Information" above.
Cautionary Note Concerning Forward-Looking Statements
Disclosures in this press release contain “forward-looking statements.” All statements, other than statements of historical facts, included in this press release that address activities, events or developments that management expects, believes or anticipates will or may occur in the future are forward-looking statements. Without limiting the generality of the foregoing, forward-looking statements contained in this press release specifically include whether there will be any and, if so, the amount of, TEP's quarterly distribution increase for the third quarter of 2017 and whether TEP will be able to deliver the high-end of its financial guidance for 2017. Forward looking statements may also include the expectations of plans, strategies, objectives and growth and anticipated financial and operational performance of TEP, TEGP and their subsidiaries, including: the ability to pursue expansions and other opportunities for incremental volumes; natural gas and crude oil production growth in TEP's operating areas; expected future benefits of acquisitions or expansion projects; timing of anticipated spending on planned expenses and maintenance capital projects; and distribution rate and growth, including variability of quarterly distribution coverage. These statements are based on certain assumptions made by TEP and TEGP based on management’s experience and perception of historical trends, current conditions, anticipated future developments and other factors believed to be appropriate. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of TEP and TEGP, which may cause actual results to differ materially from those implied or expressed by the forward-looking statements. These include risks relating to TEP and TEGP’s financial performance and results, availability of sufficient cash flow to pay distributions and execute their business plans, the demand for natural gas storage, processing and transportation services and for crude oil transportation services, operating hazards, the effects of government regulation, tax position and other risks incidental to transporting, storing and processing natural gas or transporting crude oil and other important factors that could cause actual results to differ materially from those projected, including those set forth in reports filed by TEP and TEGP with the Securities and Exchange Commission. Any forward-looking statement applies only as of the date on which such statement is made and TEP and TEGP do not intend to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law.
8
About Tallgrass Energy
Tallgrass Energy is a family of companies that includes publicly traded partnerships Tallgrass Energy Partners, LP (NYSE: TEP) and Tallgrass Energy GP, LP (NYSE: TEGP), and privately held Tallgrass Development, LP. Operating across 10 states, Tallgrass is a growth-oriented midstream energy operator with transportation, storage, terminal and processing assets that serve some of the nation’s most prolific crude oil and natural gas basins.
To learn more, please visit our website at www.tallgrassenergy.com.
CONTACT:
Investor and Financial Inquiries
Nate Lien
(913) 928-6012
investor.relations@tallgrassenergylp.com
Media and Trade Inquiries
Phyllis Hammond
(303) 763-3568
media.relations@tallgrassenergylp.com
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Tallgrass Energy Partners, LP Financial Statements
TALLGRASS ENERGY PARTNERS, LP
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
June 30, 2017 | December 31, 2016 | ||||||
(in thousands) | |||||||
ASSETS | |||||||
Current Assets: | |||||||
Cash and cash equivalents | $ | 240 | $ | 1,873 | |||
Accounts receivable, net | 58,157 | 59,536 | |||||
Gas imbalances | 650 | 1,597 | |||||
Inventories | 11,241 | 13,093 | |||||
Derivative assets | 220 | 10,967 | |||||
Prepayments and other current assets | 7,153 | 7,628 | |||||
Total Current Assets | 77,661 | 94,694 | |||||
Property, plant and equipment, net | 2,232,754 | 2,079,232 | |||||
Goodwill | 343,288 | 343,288 | |||||
Intangible asset, net | 93,258 | 93,522 | |||||
Unconsolidated investments | 936,939 | 475,625 | |||||
Deferred financing costs, net | 13,064 | 4,815 | |||||
Deferred charges and other assets | 11,362 | 11,037 | |||||
Total Assets | $ | 3,708,326 | $ | 3,102,213 | |||
LIABILITIES AND EQUITY | |||||||
Current Liabilities: | |||||||
Accounts payable | $ | 24,227 | $ | 24,122 | |||
Accounts payable to related parties | 5,895 | 5,935 | |||||
Gas imbalances | 1,281 | 1,239 | |||||
Derivative liabilities | — | 556 | |||||
Accrued taxes | 17,246 | 16,996 | |||||
Accrued liabilities | 18,647 | 16,702 | |||||
Deferred revenue | 85,566 | 60,757 | |||||
Other current liabilities | 5,292 | 6,446 | |||||
Total Current Liabilities | 158,154 | 132,753 | |||||
Long-term debt, net | 2,087,568 | 1,407,981 | |||||
Other long-term liabilities and deferred credits | 17,200 | 7,063 | |||||
Total Long-term Liabilities | 2,104,768 | 1,415,044 | |||||
Commitments and Contingencies | |||||||
Equity: | |||||||
Predecessor Equity | — | 82,295 | |||||
Limited partners (73,028,843 and 72,485,954 common units issued and outstanding at June 30, 2017 and December 31, 2016, respectively) | 2,040,537 | 2,070,495 | |||||
General partner (834,391 units issued and outstanding at June 30, 2017 and December 31, 2016) | (628,985 | ) | (632,339 | ) | |||
Total Partners' Equity | 1,411,552 | 1,520,451 | |||||
Noncontrolling interests | 33,852 | 33,965 | |||||
Total Equity | 1,445,404 | 1,554,416 | |||||
Total Liabilities and Equity | $ | 3,708,326 | $ | 3,102,213 | |||
10
TALLGRASS ENERGY PARTNERS, LP
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
(in thousands, except per unit amounts) | |||||||||||||||
Revenues: | |||||||||||||||
Crude oil transportation services | $ | 89,855 | $ | 93,322 | $ | 174,186 | $ | 187,894 | |||||||
Natural gas transportation services | 29,429 | 28,682 | 61,114 | 57,962 | |||||||||||
Sales of natural gas, NGLs, and crude oil | 22,918 | 16,830 | 38,299 | 30,756 | |||||||||||
Processing and other revenues | 18,661 | 10,181 | 31,664 | 19,571 | |||||||||||
Total Revenues | 160,863 | 149,015 | 305,263 | 296,183 | |||||||||||
Operating Costs and Expenses: | |||||||||||||||
Cost of sales (exclusive of depreciation and amortization shown below) | 19,386 | 15,958 | 31,756 | 29,526 | |||||||||||
Cost of transportation services (exclusive of depreciation and amortization shown below) | 14,758 | 11,575 | 28,261 | 25,104 | |||||||||||
Operations and maintenance | 15,254 | 14,270 | 28,157 | 27,228 | |||||||||||
Depreciation and amortization | 22,091 | 21,890 | 43,494 | 43,897 | |||||||||||
General and administrative | 14,774 | 14,322 | 28,437 | 27,812 | |||||||||||
Taxes, other than income taxes | 6,912 | 5,783 | 15,138 | 13,433 | |||||||||||
Contract termination | — | 8,061 | — | 8,061 | |||||||||||
Loss (gain) on disposal of assets | 184 | 1,849 | (1,264 | ) | 1,849 | ||||||||||
Total Operating Costs and Expenses | 93,359 | 93,708 | 173,979 | 176,910 | |||||||||||
Operating Income | 67,504 | 55,307 | 131,284 | 119,273 | |||||||||||
Other Income (Expense): | |||||||||||||||
Interest expense, net | (19,688 | ) | (9,233 | ) | (34,377 | ) | (16,732 | ) | |||||||
Unrealized gain on derivative instrument | — | 18,953 | 1,885 | 10,007 | |||||||||||
Equity in earnings of unconsolidated investments | 42,741 | 24,022 | 63,479 | 24,731 | |||||||||||
Other income, net | 272 | 221 | 342 | 787 | |||||||||||
Total Other Income (Expense) | 23,325 | 33,963 | 31,329 | 18,793 | |||||||||||
Net income | 90,829 | 89,270 | 162,613 | 138,066 | |||||||||||
Net income attributable to noncontrolling interests | (949 | ) | (1,110 | ) | (1,828 | ) | (2,151 | ) | |||||||
Net income attributable to partners | $ | 89,880 | $ | 88,160 | $ | 160,785 | $ | 135,915 | |||||||
Allocation of income to the limited partners: | |||||||||||||||
Net income attributable to partners | $ | 89,880 | $ | 88,160 | $ | 160,785 | $ | 135,915 | |||||||
Predecessor operations interest in net loss | — | 3,888 | — | 203 | |||||||||||
General partner interest in net income | (37,301 | ) | (25,320 | ) | (67,884 | ) | (45,673 | ) | |||||||
Net income available to common unitholders | 52,579 | 66,728 | 92,901 | 90,445 | |||||||||||
Basic net income per common unit | $ | 0.72 | $ | 0.93 | $ | 1.28 | $ | 1.30 | |||||||
Diluted net income per common unit | $ | 0.72 | $ | 0.92 | $ | 1.27 | $ | 1.29 | |||||||
Basic average number of common units outstanding | 72,618 | 71,975 | 72,581 | 69,471 | |||||||||||
Diluted average number of common units outstanding | 73,062 | 72,925 | 72,972 | 70,360 | |||||||||||
11
TALLGRASS ENERGY PARTNERS, LP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended June 30, | |||||||
2017 | 2016 | ||||||
(in thousands) | |||||||
Cash Flows from Operating Activities: | |||||||
Net income | $ | 162,613 | $ | 138,066 | |||
Adjustments to reconcile net income to net cash flows provided by operating activities: | |||||||
Depreciation and amortization | 47,702 | 47,106 | |||||
Equity in earnings of unconsolidated investments | (63,479 | ) | (24,731 | ) | |||
Distributions from unconsolidated investments | 63,374 | 24,636 | |||||
Changes in components of working capital: | |||||||
Accounts receivable and other | 2,060 | 6,356 | |||||
Accounts payable and accrued liabilities | 3,520 | 6,155 | |||||
Deferred revenue | 24,593 | 16,174 | |||||
Other current assets and liabilities | 2,241 | (1,837 | ) | ||||
Other operating, net | (773 | ) | (6,418 | ) | |||
Net Cash Provided by Operating Activities | 241,851 | 205,507 | |||||
Cash Flows from Investing Activities: | |||||||
Acquisition of Rockies Express membership interest | (400,000 | ) | (436,022 | ) | |||
Acquisition of Terminals and NatGas | (140,000 | ) | — | ||||
Acquisition of Douglas Gathering System | (128,526 | ) | — | ||||
Capital expenditures | (53,995 | ) | (34,860 | ) | |||
Distributions from unconsolidated investments in excess of cumulative earnings | 27,308 | 6,335 | |||||
Contributions to unconsolidated investments | (17,835 | ) | (14,450 | ) | |||
Acquisition of Pony Express membership interest | — | (49,118 | ) | ||||
Other investing, net | (13,986 | ) | 411 | ||||
Net Cash Used in Investing Activities | (727,034 | ) | (527,704 | ) | |||
Cash Flows from Financing Activities: | |||||||
Proceeds from issuance of long-term debt | 350,000 | — | |||||
Borrowings under revolving credit facility, net | 333,000 | 525,000 | |||||
Distributions to unitholders | (179,525 | ) | (127,924 | ) | |||
Proceeds from public offering, net of offering costs | 112,762 | 261,770 | |||||
Partial exercise of call option | (72,381 | ) | — | ||||
Repurchase of common units from TD | (35,335 | ) | — | ||||
Acquisition of Pony Express membership interest | — | (425,882 | ) | ||||
Proceeds from private placement, net of offering costs | — | 90,009 | |||||
Other financing, net | (24,971 | ) | (444 | ) | |||
Net Cash Provided by Financing Activities | 483,550 | 322,529 | |||||
Net Change in Cash and Cash Equivalents | (1,633 | ) | 332 | ||||
Cash and Cash Equivalents, beginning of period | 1,873 | 1,611 | |||||
Cash and Cash Equivalents, end of period | $ | 240 | $ | 1,943 | |||
12
Tallgrass Energy GP, LP Financial Statements
TALLGRASS ENERGY GP, LP
CONDENSED CONSOLIDATING BALANCE SHEETS
(UNAUDITED)
June 30, 2017 | December 31, 2016 | ||||||||||||||||||||||
TEP | Consolidating Adjustments (1) | TEGP | TEP | Consolidating Adjustments (1) | TEGP | ||||||||||||||||||
(in thousands) | (in thousands) | ||||||||||||||||||||||
ASSETS | |||||||||||||||||||||||
Current Assets: | |||||||||||||||||||||||
Cash and cash equivalents | $ | 240 | $ | 633 | $ | 873 | $ | 1,873 | $ | 586 | $ | 2,459 | |||||||||||
Accounts receivable, net | 58,157 | — | 58,157 | 59,536 | — | 59,536 | |||||||||||||||||
Gas imbalances | 650 | — | 650 | 1,597 | — | 1,597 | |||||||||||||||||
Inventories | 11,241 | — | 11,241 | 13,093 | — | 13,093 | |||||||||||||||||
Derivative assets | 220 | — | 220 | 10,967 | — | 10,967 | |||||||||||||||||
Prepayments and other current assets | 7,153 | — | 7,153 | 7,628 | — | 7,628 | |||||||||||||||||
Total Current Assets | 77,661 | 633 | 78,294 | 94,694 | 586 | 95,280 | |||||||||||||||||
Property, plant and equipment, net | 2,232,754 | — | 2,232,754 | 2,079,232 | — | 2,079,232 | |||||||||||||||||
Goodwill | 343,288 | — | 343,288 | 343,288 | — | 343,288 | |||||||||||||||||
Intangible asset, net | 93,258 | — | 93,258 | 93,522 | — | 93,522 | |||||||||||||||||
Unconsolidated investments | 936,939 | — | 936,939 | 475,625 | — | 475,625 | |||||||||||||||||
Deferred tax asset | — | 509,114 | 509,114 | — | 521,454 | 521,454 | |||||||||||||||||
Deferred financing costs, net | 13,064 | 1,115 | 14,179 | 4,815 | 1,227 | 6,042 | |||||||||||||||||
Deferred charges and other assets | 11,362 | — | 11,362 | 11,037 | — | 11,037 | |||||||||||||||||
Total Assets | $ | 3,708,326 | $ | 510,862 | $ | 4,219,188 | $ | 3,102,213 | $ | 523,267 | $ | 3,625,480 | |||||||||||
LIABILITIES AND EQUITY | |||||||||||||||||||||||
Current Liabilities: | |||||||||||||||||||||||
Accounts payable | $ | 24,227 | $ | — | $ | 24,227 | $ | 24,122 | $ | 327 | $ | 24,449 | |||||||||||
Accounts payable to related parties | 5,895 | (117 | ) | 5,778 | 5,935 | (111 | ) | 5,824 | |||||||||||||||
Gas imbalances | 1,281 | — | 1,281 | 1,239 | — | 1,239 | |||||||||||||||||
Derivative liabilities | — | — | — | 556 | — | 556 | |||||||||||||||||
Accrued taxes | 17,246 | — | 17,246 | 16,996 | — | 16,996 | |||||||||||||||||
Accrued liabilities | 18,647 | 15 | 18,662 | 16,702 | 53 | 16,755 | |||||||||||||||||
Deferred revenue | 85,566 | — | 85,566 | 60,757 | — | 60,757 | |||||||||||||||||
Other current liabilities | 5,292 | — | 5,292 | 6,446 | — | 6,446 | |||||||||||||||||
Total Current Liabilities | 158,154 | (102 | ) | 158,052 | 132,753 | 269 | 133,022 | ||||||||||||||||
Long-term debt, net | 2,087,568 | 147,000 | 2,234,568 | 1,407,981 | 148,000 | 1,555,981 | |||||||||||||||||
Other long-term liabilities and deferred credits | 17,200 | — | 17,200 | 7,063 | — | 7,063 | |||||||||||||||||
Total Long-term Liabilities | 2,104,768 | 147,000 | 2,251,768 | 1,415,044 | 148,000 | 1,563,044 | |||||||||||||||||
Equity: | |||||||||||||||||||||||
Total Partners' Equity | 1,411,552 | (1,174,328 | ) | 237,224 | 1,520,451 | (1,187,189 | ) | 333,262 | |||||||||||||||
Noncontrolling interests | 33,852 | 1,538,292 | 1,572,144 | 33,965 | 1,562,187 | 1,596,152 | |||||||||||||||||
Total Equity | 1,445,404 | 363,964 | 1,809,368 | 1,554,416 | 374,998 | 1,929,414 | |||||||||||||||||
Total Liabilities and Equity | $ | 3,708,326 | $ | 510,862 | $ | 4,219,188 | $ | 3,102,213 | $ | 523,267 | $ | 3,625,480 | |||||||||||
(1) | Represents the aggregate consolidating adjustments necessary to produce consolidated financial statements for TEGP. |
13
TALLGRASS ENERGY GP, LP
CONDENSED CONSOLIDATING STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended June 30, 2017 | Three Months Ended June 30, 2016 | ||||||||||||||||||||||
TEP | Consolidating Adjustments (1) | TEGP | TEP | Consolidating Adjustments (1) | TEGP | ||||||||||||||||||
(in thousands) | (in thousands) | ||||||||||||||||||||||
Revenues: | |||||||||||||||||||||||
Crude oil transportation services | $ | 89,855 | $ | — | $ | 89,855 | $ | 93,322 | $ | — | $ | 93,322 | |||||||||||
Natural gas transportation services | 29,429 | — | 29,429 | 28,682 | — | 28,682 | |||||||||||||||||
Sales of natural gas, NGLs, and crude oil | 22,918 | — | 22,918 | 16,830 | — | 16,830 | |||||||||||||||||
Processing and other revenues | 18,661 | — | 18,661 | 10,181 | — | 10,181 | |||||||||||||||||
Total Revenues | 160,863 | — | 160,863 | 149,015 | — | 149,015 | |||||||||||||||||
Operating Costs and Expenses: | |||||||||||||||||||||||
Cost of sales (exclusive of depreciation and amortization shown below) | 19,386 | — | 19,386 | 15,958 | — | 15,958 | |||||||||||||||||
Cost of transportation services (exclusive of depreciation and amortization shown below) | 14,758 | — | 14,758 | 11,575 | — | 11,575 | |||||||||||||||||
Operations and maintenance | 15,254 | — | 15,254 | 14,270 | — | 14,270 | |||||||||||||||||
Depreciation and amortization | 22,091 | — | 22,091 | 21,890 | — | 21,890 | |||||||||||||||||
General and administrative | 14,774 | 560 | 15,334 | 14,322 | 549 | 14,871 | |||||||||||||||||
Taxes, other than income taxes | 6,912 | — | 6,912 | 5,783 | — | 5,783 | |||||||||||||||||
Contract termination | — | — | — | 8,061 | 8,061 | ||||||||||||||||||
Loss on disposal of assets | 184 | — | 184 | 1,849 | — | 1,849 | |||||||||||||||||
Total Operating Costs and Expenses | 93,359 | 560 | 93,919 | 93,708 | 549 | 94,257 | |||||||||||||||||
Operating Income | 67,504 | (560 | ) | 66,944 | 55,307 | (549 | ) | 54,758 | |||||||||||||||
Other Income (Expense): | |||||||||||||||||||||||
Interest expense, net | (19,688 | ) | (1,426 | ) | (21,114 | ) | (9,233 | ) | (1,208 | ) | (10,441 | ) | |||||||||||
Unrealized gain on derivative instrument | — | — | — | 18,953 | — | 18,953 | |||||||||||||||||
Equity in earnings of unconsolidated investments | 42,741 | — | 42,741 | 24,022 | — | 24,022 | |||||||||||||||||
Other income, net | 272 | — | 272 | 221 | — | 221 | |||||||||||||||||
Total Other Income (Expense) | 23,325 | (1,426 | ) | 21,899 | 33,963 | (1,208 | ) | 32,755 | |||||||||||||||
Net income before tax | 90,829 | (1,986 | ) | 88,843 | 89,270 | (1,757 | ) | 87,513 | |||||||||||||||
Deferred income tax expense | — | (9,676 | ) | (9,676 | ) | — | (6,792 | ) | (6,792 | ) | |||||||||||||
Net income | 90,829 | (11,662 | ) | 79,167 | 89,270 | (8,549 | ) | 80,721 | |||||||||||||||
Net income attributable to noncontrolling interests | (949 | ) | (69,465 | ) | (70,414 | ) | (1,110 | ) | (80,051 | ) | (81,161 | ) | |||||||||||
Net income (loss) attributable to TEGP | $ | 89,880 | $ | (81,127 | ) | $ | 8,753 | $ | 88,160 | $ | (88,600 | ) | $ | (440 | ) | ||||||||
14
Allocation of income: | |||||||||||||||||||||||
Net income (loss) attributable to TEGP | $ | 8,753 | $ | (440 | ) | ||||||||||||||||||
Predecessor operations interest in net loss | — | 3,888 | |||||||||||||||||||||
Net income attributable to TEGP, excluding predecessor operations interest | 8,753 | 3,448 | |||||||||||||||||||||
Basic net income per Class A share | $ | 0.15 | $ | 0.07 | |||||||||||||||||||
Diluted net income per Class A share | $ | 0.15 | $ | 0.07 | |||||||||||||||||||
Basic average number of Class A shares outstanding | 58,075 | 47,725 | |||||||||||||||||||||
Diluted average number of Class A shares outstanding | 58,192 | 47,734 | |||||||||||||||||||||
(1) | Represents the aggregate consolidating adjustments necessary to produce consolidated financial statements for TEGP. |
15
TALLGRASS ENERGY GP, LP
CONDENSED CONSOLIDATING STATEMENTS OF INCOME
(UNAUDITED)
Six Months Ended June 30, 2017 | Six Months Ended June 30, 2016 | ||||||||||||||||||||||
TEP | Consolidating Adjustments (1) | TEGP | TEP | Consolidating Adjustments (1) | TEGP | ||||||||||||||||||
(in thousands) | (in thousands) | ||||||||||||||||||||||
Revenues: | |||||||||||||||||||||||
Crude oil transportation services | $ | 174,186 | $ | — | $ | 174,186 | $ | 187,894 | $ | — | $ | 187,894 | |||||||||||
Natural gas transportation services | 61,114 | — | 61,114 | 57,962 | — | 57,962 | |||||||||||||||||
Sales of natural gas, NGLs, and crude oil | 38,299 | — | 38,299 | 30,756 | — | 30,756 | |||||||||||||||||
Processing and other revenues | 31,664 | — | 31,664 | 19,571 | — | 19,571 | |||||||||||||||||
Total Revenues | 305,263 | — | 305,263 | 296,183 | — | 296,183 | |||||||||||||||||
Operating Costs and Expenses: | |||||||||||||||||||||||
Cost of sales (exclusive of depreciation and amortization shown below) | 31,756 | — | 31,756 | 29,526 | — | 29,526 | |||||||||||||||||
Cost of transportation services (exclusive of depreciation and amortization shown below) | 28,261 | — | 28,261 | 25,104 | — | 25,104 | |||||||||||||||||
Operations and maintenance | 28,157 | — | 28,157 | 27,228 | — | 27,228 | |||||||||||||||||
Depreciation and amortization | 43,494 | — | 43,494 | 43,897 | — | 43,897 | |||||||||||||||||
General and administrative | 28,437 | 1,114 | 29,551 | 27,812 | 1,070 | 28,882 | |||||||||||||||||
Taxes, other than income taxes | 15,138 | — | 15,138 | 13,433 | — | 13,433 | |||||||||||||||||
Contract termination | — | — | — | 8,061 | — | 8,061 | |||||||||||||||||
(Gain) loss on disposal of assets | (1,264 | ) | — | (1,264 | ) | 1,849 | — | 1,849 | |||||||||||||||
Total Operating Costs and Expenses | 173,979 | 1,114 | 175,093 | 176,910 | 1,070 | 177,980 | |||||||||||||||||
Operating Income | 131,284 | (1,114 | ) | 130,170 | 119,273 | (1,070 | ) | 118,203 | |||||||||||||||
Other Income (Expense): | |||||||||||||||||||||||
Interest expense, net | (34,377 | ) | (2,754 | ) | (37,131 | ) | (16,732 | ) | (2,386 | ) | (19,118 | ) | |||||||||||
Unrealized gain on derivative instrument | 1,885 | — | 1,885 | 10,007 | — | 10,007 | |||||||||||||||||
Equity in earnings of unconsolidated investments | 63,479 | — | 63,479 | 24,731 | — | 24,731 | |||||||||||||||||
Other income, net | 342 | — | 342 | 787 | — | 787 | |||||||||||||||||
Total Other Income (Expense) | 31,329 | (2,754 | ) | 28,575 | 18,793 | (2,386 | ) | 16,407 | |||||||||||||||
Net income before tax | 162,613 | (3,868 | ) | 158,745 | 138,066 | (3,456 | ) | 134,610 | |||||||||||||||
Deferred income tax expense | — | (12,340 | ) | (12,340 | ) | — | (9,583 | ) | (9,583 | ) | |||||||||||||
Net income | 162,613 | (16,208 | ) | 146,405 | 138,066 | (13,039 | ) | 125,027 | |||||||||||||||
Net income attributable to noncontrolling interests | (1,828 | ) | (123,795 | ) | (125,623 | ) | (2,151 | ) | (112,042 | ) | (114,193 | ) | |||||||||||
Net income (loss) attributable to TEGP | $ | 160,785 | $ | (140,003 | ) | $ | 20,782 | $ | 135,915 | $ | (125,081 | ) | $ | 10,834 | |||||||||
16
Allocation of income: | |||||||||||||||||||||||
Net income (loss) attributable to TEGP | $ | 20,782 | $ | 10,834 | |||||||||||||||||||
Predecessor operations interest in net loss | — | 203 | |||||||||||||||||||||
Net income attributable to TEGP, excluding predecessor operations interest | 20,782 | 11,037 | |||||||||||||||||||||
Basic net income per Class A share | $ | 0.36 | $ | 0.23 | |||||||||||||||||||
Diluted net income per Class A share | $ | 0.36 | $ | 0.23 | |||||||||||||||||||
Basic average number of Class A shares outstanding | 58,075 | 47,725 | |||||||||||||||||||||
Diluted average number of Class A shares outstanding | 58,187 | 47,725 | |||||||||||||||||||||
(1) | Represents the aggregate consolidating adjustments necessary to produce consolidated financial statements for TEGP. |
17