Eagle Rock Energy Partners, L.P. Reports Second Quarter 2008 Results; Adjusted EBITDA of $57.5 million, Up 9.0% from $52.8 Million in the First Quarter
HOUSTON--(Business Wire)--
Eagle Rock Energy Partners, L.P. ("Eagle Rock" or the
"Partnership") (NASDAQ GS: EROC) today announced its financial results
for the three and six months ended June 30, 2008.
Highlights:
The Partnership highlighted the following achievements for the
second quarter of 2008 as compared to the first quarter of 2008:
-- Increased Adjusted EBITDA by 9.0% to $57.5 million from $52.8
million
-- Increased quarterly distribution rate to $0.41 per unit from
$0.40 per unit while maintaining a 122% coverage on all
outstanding units (excluding non-recurring items)
-- Increased daily gathering volumes in the midstream business by
4.5% to 414 MMcf/d from 396 MMcf/d
-- Completed the upstream acquisition of Stanolind Oil and Gas
Corp. on April 30, 2008 (two months contribution to second
quarter of 2008 earnings)
The following are significant achievements for the second quarter
of 2008 as compared to the second quarter of 2007:
-- Increased Adjusted EBITDA by 160% to $57.5 million from $22.2
million
-- Increased quarterly distribution rate by 13.1% to $0.41 per
common unit from $0.3625 per common unit
-- Increased Revenues (excluding unrealized, non-cash,
mark-to-market commodity derivative losses) by 118%, to $442.5
million from $203.2 million
-- Increased daily gathering volumes in the midstream business by
22.8%, to 414 MMcf/d from 337 MMcf/d
For the second quarter of 2008, the Partnership reported
(excluding unrealized, non-cash, mark-to-market commodity derivative
losses) $442.5 million in revenues versus $203.2 million for the
second quarter of 2007 and $358.6 million for the first quarter of
2008.
Adjusted EBITDA (see "Use of Non-GAAP Financial Measures" below)
for the second quarter of 2008 was $57.5 million as compared to $22.2
million in the same quarter of 2007 and $52.8 million in the first
quarter of 2008. The dramatic 160% improvement in Adjusted EBITDA in
the second quarter of 2008 over the second quarter of 2007 is a direct
result of the transformation that has occurred in the Partnership over
the last year. This transformation was driven by the introduction of
the Upstream and Minerals segments to our business and the significant
improvements in the Partnership's Midstream segments related to the
Laser acquisition and the Red Deer and Tyler County Pipeline Extension
organic growth projects. A strong commodity price environment has also
favorably impacted the Partnership's results during this period.
However, these gains in operating performance were partially offset by
a $4.9 million increase in general and administrative expenses in the
second quarter of 2008, as compared to the second quarter of 2007.
This increase in G&A expenses is primarily due to the growth in our
number of employees, which accompanied the growth of our asset base,
and increased outside professional fees and other expenses associated
with our public partnership status.
The increase in Adjusted EBITDA reported in the second quarter of
2008 over the first quarter of 2008 reflects higher realized prices,
an increase in gathering volumes in the midstream business, and
increased production in the minerals business. Upstream volumes were
lower as compared to first quarter of 2008 due to a shut-in and
curtailed production in the Big Escambia Creek ("BEC") field as a
result of our scheduled turnaround of the facility in April and damage
that was sustained at the treating facility in May due to a lightning
strike. The reduction in upstream volumes was partially offset by two
strong months of production contributed by the Permian assets acquired
in the Stanolind acquisition and higher realized sulfur prices. Eagle
Rock believes the BEC treating facility turnaround and the lightning
strike negatively impacted Adjusted EBITDA for the second quarter of
2008 by $8 million to $9 million.
Distributable Cash Flow (see "Use of Non-GAAP Financial Measures"
below) for the second quarter of 2008 (prior to any cash reserves
established by Eagle Rock's Board and excluding non-recurring items)
totaled $36.7 million compared to $38.7 million for the first quarter
of 2008, a decrease of 5.1%. The decrease in Distributable Cash Flow
is primarily related to increased maintenance capital expenditures
related to increased well connections in the midstream business, the
BEC treating facility turnaround and an increase in well recompletions
and workovers in the upstream business, which were partially offset by
an increase in Adjusted EBITDA. In the second quarter of 2008,
Distributable Cash Flow (excluding non-recurring items) represents
122% coverage of the announced second quarter of 2008 distribution of
$0.41 per unit based on total units outstanding.
In July 2008, Eagle Rock partially exercised the accordion feature
under its revolving credit facility to increase its aggregate
commitments by $100 million to a total of $900 million in commitments.
The partial exercise of the accordion is to provide additional
financial resources as part of Eagle Rock's growth strategy.
Chairman and Chief Executive Officer Joseph A. Mills said, "Eagle
Rock continues to deliver record cash flows for the benefit of our
unitholders while maintaining strong performance levels. Our
diversified asset base once again delivered strong financial results
and operating performance. Our midstream business experienced a 4.5%
improvement in its gathering volumes compared to the first quarter of
2008 driven largely by continued drilling activity in our East Texas /
Louisiana segment. Our minerals business continues to deliver strong,
steadily improving results as it enjoyed continued leasing and
drilling activity across the mineral holdings, as well as increases in
both realized prices and volumes. Our upstream business experienced a
reduction in volumes as compared to the first quarter of 2008 due to
downtime experienced at our BEC field. This reduction in volumes was
related to the previously-announced, scheduled turnaround of our BEC
treating facility in April and curtailed production in late May and
early June related to a direct lightning strike sustained by the
facility. We have made all necessary repairs and the facility has been
operating at normal levels since mid-June. Offsetting the reduced
volumes at our BEC field has been the favorable commodity price
environment, as well as the strong performance of the recently
acquired Stanolind assets in the Permian Basin of Texas. With a full
quarter of Stanolind's operations and normalized operations across all
of our assets, we expect to recommend a further increase to our third
quarter 2008 distribution to our Board of Directors."
Unit Distributions
The Partnership recently announced another increase in its cash
unit distribution. The next distribution, which will be paid August
14, 2008, to all holders of record as of August 8, 2008, will be paid
at the rate of $0.41 per unit, or a $1.64 per unit annualized rate.
Net Income (Loss)
The Partnership also reported a net loss for the second quarter of
2008 of $227.0 million versus a net loss of $23.8 million in the
second quarter of 2007 and a net loss of $28.3 million in the first
quarter of 2008. Included in the net loss for the second quarter of
2008 were $242.6 million of unrealized, non-cash, mark-to-market
derivative losses versus $22.3 million in the second quarter of 2007
and $46.7 million in the first quarter of 2008. Also affecting our
second quarter of 2008 net loss is the recording of a $6.2 million bad
debt reserve against receivables associated with the bankruptcy of
SemGroup, L.P. and certain related subsidiaries disclosed in our press
release issued on July 30, 2008.
Mark-to-Market Accounting and Derivative Collateral
The Partnership does not designate its derivatives as "hedges" for
accounting purposes but utilizes mark-to-market accounting for its
derivatives. Mark-to-market accounting requires the changes in the
fair value of derivatives, both positive and negative, to be included
in the statement of operations for the respective periods. All of the
Partnership's derivatives have been entered into by the Partnership in
order to reduce the Partnership's underlying exposure to commodity
prices and interest rates. The Partnership does not speculate on
commodity prices or interest rates, as it anticipates having, based on
its forecasts, the physical volumes and debt outstanding to support
its outstanding commodity and interest rate derivatives, respectively.
Substantially all of the Partnership's counterparties to its
derivatives are participating lenders in its revolving credit facility
and have their outstanding debt commitment and derivative exposure
collateralized pursuant to the revolving credit facility. The
Partnership does not have any exposure to "margin calls" on its
derivative instruments while its counterparties are participating
lenders in its revolving credit facility.
Conference Call
Eagle Rock will hold a conference call to discuss its second
quarter financial results and recent developments on Wednesday, August
6, 2008, at 9 a.m. Central Time (10 a.m. Eastern Time).
Interested parties may listen live over the Internet or via
telephone. To listen live over the Internet, log on to the
Partnership's Web site at www.eaglerockenergy.com. To participate by
telephone, the call in number is 888-713-4214, confirmation code
40471280. Investors are advised to dial into the call at least 15
minutes prior to the call to register. Participants may pre-register
for the call by using the following link to pre-register and view
important information about this conference call. Pre-registering is
not mandatory but is recommended as it will provide you immediate
entry to the call and will facilitate the timely start of the call.
Pre-registration only takes a few moments and you may pre-register at
any time, including up to and after the call start. To pre-register,
please click
https://www.theconferencingservice.com/prereg/key.process?key=
PDLYW7C7J. (Due to its length, this URL may need to be copied/pasted
into your internet browser's address field. Remove the extra space if
one exists.) An audio replay of the conference call will also be
available for seven days by dialing 888-286-8010, confirmation code
61605687. In addition, a replay of the audio webcast will be available
by accessing the Partnership's website after the call is concluded.
The Partnership is a growth-oriented master limited partnership
engaged in three businesses: a) midstream, which includes (i)
gathering, compressing, treating, processing, transporting and selling
natural gas, and (ii) fractionating and transporting natural gas
liquids; b) upstream, which includes acquiring, exploiting,
developing, and producing crude oil and natural gas interests; and c)
minerals, which includes acquiring and managing fee minerals and
royalty interests. Its corporate office is located in Houston, Texas.
Use of Non-GAAP Financial Measures
This news release and the accompanying schedules include the
non-generally accepted accounting principles, or non-GAAP, financial
measures of Adjusted EBITDA and Distributable Cash Flow. The
accompanying non-GAAP financial measures schedules (after the
financial schedules) provide reconciliations of these non-GAAP
financial measures to their most directly comparable financial
measures calculated and presented in accordance with accounting
principles generally accepted in the United States, or GAAP. Non-GAAP
financial measures should not be considered as alternatives to GAAP
measures such as net income (loss), operating income (loss), cash
flows from operating activities or any other GAAP measure of liquidity
or financial performance. Eagle Rock uses non-GAAP financial measures
as measures of its core profitability or to assess the financial
performance of its assets. Eagle Rock believes that investors benefit
from having access to the same financial measures that its management
uses in evaluating performance.
Eagle Rock defines Adjusted EBITDA as net income (loss) plus or
(minus) income tax provision (benefit), interest-net (including
realized interest rate risk management instruments and other expense),
depreciation, depletion and amortization expense, impairment expense,
other operating expense, other non-cash operating and general and
administrative expenses (including non-cash compensation related to
our equity-based compensation program), unrealized (gains) losses on
commodity and interest rate risk management related instruments and
other (income). Adjusted EBITDA is used as a supplemental financial
measure by external users of Eagle Rock's financial statements such as
investors, commercial banks and research analysts. Adjusted EBITDA is
useful in determining our ability to sustain or increase
distributions. By excluding unrealized derivative gains (losses), a
non-cash, mark-to-market benefit (charge) which represents the change
in fair market value of our executed derivative instruments and is
independent of our assets' performance or cash flow generating
ability, we believe Adjusted EBITDA reflects more accurately our
ability to generate cash sufficient to pay interest costs, support our
level of indebtedness, make cash distributions to our unitholders and
general partner and finance our maintenance capital expenditures. We
further believe that Adjusted EBITDA also describes more accurately
the underlying performance of our operating assets by isolating the
performance of our operating assets from the impact of an unrealized,
non-cash measure designed to describe the fluctuating inherent value
of a financial asset. Similarly, by excluding the impact of
non-recurring discontinued operations, Adjusted EBITDA provides users
of our financial statements a more accurate picture of our current
assets' cash generation ability, independently from that of assets
which are no longer a part of our operations. Eagle Rock's Adjusted
EBITDA definition may not be comparable to Adjusted EBITDA or
similarly titled measures of other entities, as other entities may not
calculate Adjusted EBITDA in the same manner as Eagle Rock. Eagle Rock
has reconciled Adjusted EBITDA to net income (loss).
Distributable Cash Flow is defined as Adjusted EBITDA minus: (i)
maintenance capital expenditures; (ii) cash interest expense; (iii)
cash income taxes; and (iv) the addition of losses or subtraction of
gains relating to other miscellaneous non-cash amounts affecting net
income (loss) for the period. Maintenance capital expenditures
represent: a) in our midstream business, capital expenditures employed
to replace partially or fully depreciated assets to maintain the
existing operating capacity of the Partnership's assets and to extend
their useful lives, or other capital expenditures that are incurred in
maintaining existing system volumes and related cash flows, including
well connect expenditures; and b) in our upstream business, capital
expenditures employed to partially or fully replace production volumes
in order to maintain existing volumes and related cash flows.
Distributable Cash Flow is a significant performance metric used by
senior management to compare basic cash flows generated by the
Partnership (prior to the establishment of any retained cash reserves
by its Board of Directors) to the cash distributions expected to be
paid to unitholders. Using this metric, management can quickly compute
the coverage ratio of estimated cash flows to planned cash
distributions. Distributable Cash Flow is also an important non-GAAP
financial measure for unitholders since it serves as an indicator of
the Partnership's success in providing a cash return on investment.
Specifically, this financial measure indicates to investors whether or
not the Partnership is generating cash flow at a level that can
sustain or support an increase in quarterly distribution rates.
Distributable Cash Flow is also a quantitative standard used
throughout the investment community with respect to publicly-traded
partnerships and limited liability companies because the value of a
unit of such an entity generally is related to the amount of cash
distributions the entity can pay to its unitholders. The GAAP measure
most directly comparable to Distributable Cash Flow is net income
(loss).
This news release may include "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended.
All statements, other than statements of historical facts, included in
this press release that address activities, events or developments
that the Partnership expects, believes or anticipates will or may
occur in the future are forward-looking statements. These statements
are based on certain assumptions made by the Partnership based on its
experience and perception of historical trends, current conditions,
expected future developments and other factors it believes are
appropriate under the circumstances. Such statements are subject to a
number of assumptions, risks and uncertainties, many of which are
beyond the control of the Partnership, which may cause the
Partnership's actual results to differ materially from those implied
or expressed by the forward-looking statements. For a detailed list of
the Partnership's risk factors, please consult the Partnership's Form
10-K, filed with the Securities and Exchange Commission for the year
ended December 31, 2007.
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Eagle Rock Energy Partners, L.P.
Consolidated Statements of Operations
($ in thousands)
(unaudited)
Three
Three Months Six Months Months
Ended June 30, Ended June 30, Ended
-------------------- --------------------
March 31,
2008 2007 2008 2007 2008
---------- --------- ---------- --------- ---------
REVENUE:
Natural gas,
natural gas
liquids,
condensate, oil
and sulfur sales $ 451,769 $191,621 $ 808,788 $301,742 $357,019
Gathering,
compression and
processing fees 8,085 6,883 15,228 11,166 7,143
Minerals and
royalty income 10,255 3,192 17,213 3,192 6,958
Unrealized
commodity
derivative
losses (256,265) (28,757) (289,337) (39,398) (33,072)
Realized
commodity
derivative gains
(losses) (27,708) 1,502 (40,283) 4,501 (12,575)
Other income 122 - 182 - 60
---------- --------- ---------- --------- ---------
Total Revenue 186,258 174,441 511,791 281,203 325,533
COSTS AND
EXPENSES:
Cost of natural
gas and natural
gas liquids 353,558 164,364 629,389 255,000 275,831
Operations and
maintenance 17,731 11,396 33,297 19,320 15,566
Taxes other than
income 5,263 728 9,610 1,430 4,347
General and
administrative 10,026 5,171 21,268 9,391 11,242
Other operating 6,214 - 6,214 1,711 -
Impairment - - - - -
Depreciation,
depletion and
amortization 26,457 14,149 52,202 25,779 25,745
---------- --------- ---------- --------- ---------
Total Costs and
Expenses 419,249 195,808 751,980 312,631 332,731
OPERATING LOSS (232,991) (21,367) (240,189) (31,428) (7,198)
Other Income
(Expense):
Interest income 160 176 461 300 301
Other income 886 91 2,433 91 1,547
Interest expense,
net (6,974) (8,519) (16,078) (16,399) (9,104)
Unrealized
interest rate
derivative gains
(losses) 13,689 6,485 29 4,874 (13,660)
Realized interest
rate derivative
gains (losses) (2,444) 318 (2,545) 534 (101)
Other expense (232) (711) (447) (1,003) (215)
---------- --------- ---------- --------- ---------
Total Other
Income
(Expense) 5,085 (2,160) (16,147) (11,603) (21,232)
LOSS BEFORE INCOME
TAXES (227,906) (23,527) (256,336) (43,031) (28,430)
Income tax
(benefit)
provision (886) 256 (988) 420 (102)
---------- --------- ---------- --------- ---------
NET LOSS $(227,020) $(23,783) $(255,348) $(43,451) $(28,328)
========== ========= ========== ========= =========
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Eagle Rock Energy Partners, L.P.
Consolidated Balance Sheets
($ in thousands)
(unaudited)
June 30, December 31,
2008 2007
----------- ------------
Assets
Current assets:
Cash and cash equivalents $ 64,586 $ 68,552
Accounts receivable 186,182 135,633
Risk management assets 4,528 -
Prepayments and other current assets 5,603 3,992
----------- ------------
260,899 208,177
Property plant and equipment - net 1,315,440 1,207,130
Intangible assets - net 145,634 153,948
Goodwill 30,513 29,527
Other assets 12,497 11,145
----------- ------------
Total assets $1,764,983 $ 1,609,927
=========== ============
Liabilities and Members' Equity
Current liabilities:
Accounts payable $ 203,699 $ 132,485
Due to affiliate 21,069 16,964
Accrued liabilities 16,893 9,776
Taxes payable 316 723
Risk management liabilities 164,006 33,089
----------- ------------
405,983 193,037
Long-term debt 623,000 567,069
Asset retirement obligations 16,773 11,337
Deferred tax liability 43,585 17,516
Risk management liabilities 259,985 94,200
Members' equity
Common unit holders 398,886 617,563
Subordinated unit holders 23,556 112,360
General partner (6,785) (3,155)
----------- ------------
415,657 726,768
----------- ------------
Total Liabilities and Members' Equity $1,764,983 $ 1,609,927
=========== ============
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Eagle Rock Energy Partners, L.P.
Midstream Segment
Operating Income
($ in thousands)
(unaudited)
Three Months Six Months Ended Three
Ended Months
June 30, June 30, Ended
----------------- -----------------
March 31,
2008 2007 2008 2007 2008
-------- -------- -------- -------- ---------
Panhandle
Revenues:
Sales of natural gas,
NGLs, oil and
condensate $180,987 $107,884 $334,842 $200,664 $ 153,855
Gathering and treating
services 2,524 2,206 4,993 4,342 2,469
-------- -------- -------- -------- ---------
Total revenues 183,511 110,090 339,835 205,006 156,324
Cost of natural gas and
natural gas liquids 140,282 86,057 260,400 161,704 120,118
Operating costs and
expenses:
Operations and
maintenance 8,715 8,661 16,463 16,005 7,748
Depreciation,
depletion and
amortization 10,894 9,983 21,603 19,765 10,709
-------- -------- -------- -------- ---------
Total operating
costs and expenses 19,609 18,644 38,066 35,770 18,457
-------- -------- -------- -------- ---------
Operating income $ 23,620 $ 5,389 $ 41,369 $ 7,532 $ 17,749
======== ======== ======== ======== =========
East Texas/Louisiana (1)
Revenues:
Sales of natural gas,
NGLs, oil and
condensate $ 93,176 $ 33,853 $160,135 $ 51,194 $ 66,959
Gathering and treating
services 4,700 3,785 8,148 5,932 3,448
-------- -------- -------- -------- ---------
Total revenues 97,876 37,638 168,283 57,126 70,407
Cost of natural gas and
natural gas liquids 83,911 29,105 143,930 44,094 60,019
Operating costs and
expenses:
Operations and
maintenance 3,837 2,877 7,317 4,159 3,480
Depreciation,
depletion and
amortization 2,988 2,056 5,857 3,731 2,869
-------- -------- -------- -------- ---------
Total operating
costs and expenses 6,825 4,933 13,174 7,890 6,349
-------- -------- -------- -------- ---------
Operating income $ 7,140 $ 3,600 $ 11,179 $ 5,142 $ 4,039
======== ======== ======== ======== =========
South Texas (1)
Revenues:
Sales of natural gas,
NGLs, oil and
condensate $131,794 $ 49,884 229,033 $ 49,884 $ 97,239
Gathering and treating
services 861 892 2,087 892 1,226
Other - - 2 - 2
-------- -------- -------- -------- ---------
Total revenues 132,655 50,776 231,122 50,776 98,467
Cost of natural gas and
natural gas liquids 129,365 49,202 225,059 49,202 95,694
Operating costs and
expenses:
Operations and
maintenance 574 294 1,227 294 653
Depreciation,
depletion and
amortization 934 379 1,873 379 939
-------- -------- -------- -------- ---------
Total operating
costs and expenses 1,508 673 3,100 673 1,592
-------- -------- -------- -------- ---------
Operating income $ 1,782 $ 901 $ 2,963 $ 901 $ 1,181
======== ======== ======== ======== =========
------------------------
(1) Includes operations related to the Laser Acquisition starting on
May 3, 2007.
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Eagle Rock Energy Partners, L.P.
Segment Summary
Operating Income
($ in thousands)
(unaudited)
Three Months Ended Six Months Ended Three
Months
June 30, June 30, Ended
-------------------- --------------------
March 31,
2008 2007 2008 2007 2008
---------- --------- ---------- --------- ---------
Midstream
Revenues:
Sales of natural
gas, NGLs, oil
and condensate $ 405,957 $191,621 $ 724,010 $301,742 $318,053
Gathering and
treating
services 8,085 6,883 15,228 11,166 7,143
Other - - 2 - 2
---------- --------- ---------- --------- ---------
Total revenues 414,042 198,504 739,240 312,908 325,198
Cost of natural
gas and natural
gas liquids 353,558 164,364 629,389 255,000 275,831
---------- --------- ---------- --------- ---------
Segment gross
profit 60,484 34,140 109,851 57,908 49,367
Operating costs
and expenses:
Operations and
maintenance 13,126 11,832 25,007 20,458 11,881
Depletion,
depreciation
and
amortization 14,816 12,418 29,333 23,875 14,517
---------- --------- ---------- --------- ---------
Total
operating
costs and
expenses 27,942 24,250 54,340 44,333 26,398
---------- --------- ---------- --------- ---------
Operating income $ 32,542 $ 9,890 $ 55,511 $ 13,575 $ 22,969
========== ========= ========== ========= =========
Upstream (1)
Revenues:
Oil and
condensate $ 21,126 $ - $ 39,459 $ - $ 18,333
Natural gas 9,431 - 16,557 - 7,126
NGLs 8,155 - 16,295 - 8,140
Sulfur 7,100 - 12,467 - 5,367
Other 122 180 58
---------- --------- ---------- --------- ---------
Total revenues 45,934 - 84,958 - 39,024
---------- --------- ---------- --------- ---------
Operating costs
and expenses:
Operations and
maintenance 9,386 - 16,975 - 7,589
Depreciation,
depletion and
amortization 9,914 - 18,339 - 8,425
---------- --------- ---------- --------- ---------
Total
operating
costs and
expenses 19,300 - 35,314 - 16,014
---------- --------- ---------- --------- ---------
Operating income $ 26,634 $ - $ 49,644 $ - $ 23,010
========== ========= ========== ========= =========
Minerals (2)
Revenues:
Oil and
condensate $ 4,732 $ 1,533 $ 8,099 $ 1,533 $ 3,367
Natural gas 3,565 1,490 5,774 1,490 2,209
NGLs 411 98 646 98 235
Lease bonus,
rentals and
other 1,547 71 2,694 71 1,147
---------- --------- ---------- --------- ---------
Total revenues 10,255 3,192 17,213 3,192 6,958
---------- --------- ---------- --------- ---------
Operating costs
and expenses:
Operations and
maintenance 482 292 925 292 443
Depreciation,
depletion and
amortization 1,528 1,532 4,139 1,532 2,611
---------- --------- ---------- --------- ---------
Total
operating
costs and
expenses 2,010 1,824 5,064 1,824 3,054
---------- --------- ---------- --------- ---------
Operating income $ 8,245 $ 1,368 $ 12,149 $ 1,368 $ 3,904
========== ========= ========== ========= =========
Corporate
Revenues:
Realized
commodity
derivative
gains (losses) $ (27,708) $ 1,502 $ (40,283) $ 4,501 $(12,575)
Unrealized
commodity
derivative
losses (256,265) (28,757) (289,337) (39,398) (33,072)
-------------------- -------------------- ---------
Total revenues (283,973) (27,255) (329,620) (34,897) (45,647)
General and
administrative 10,026 5,171 21,268 9,391 11,242
Depreciation,
depletion and
amortization 199 199 391 372 192
Other operating
expense 6,214 - 6,214 1,711 -
---------- --------- ---------- --------- ---------
Operating income $(300,412) $(32,625) $(357,493) $(46,371) $(57,081)
========== ========= ========== ========= =========
------------------
(1) Includes operations from the EAC and Redman acquisitions beginning
on August 1, 2007 and from the Stanolind acquisition beginning on May
1, 2008.
(2) Includes operations from the Montierra acquisition beginning on
May 1, 2007 and from the MacLondon acquisition starting July 1, 2007.
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Eagle Rock Energy Partners, L.P.
Consolidated Segment Summary
($ in thousands)
(unaudited)
Three Months Ended Six Months Ended Three
Months
June 30, June 30, Ended
-------------------- --------------------
March 31,
2008 2007 2008 2007 2008
---------- --------- ---------- --------- ---------
Total
Revenues:
Sales of natural
gas, NGLs, oil,
condensate and
sulfur $ 451,769 $191,621 $ 808,788 $301,742 $357,019
Gathering and
treating
services 8,085 6,883 15,228 11,166 7,143
Minerals and
royalty income 10,255 3,192 17,213 3,192 6,958
Unrealized
commodity
derivative
losses (256,265) (28,757) (289,337) (39,398) (33,072)
Realized
commodity
derivative
gains (losses) (27,708) 1,502 (40,283) 4,501 (12,575)
Other 122 - 182 - 60
---------- --------- ---------- --------- ---------
Total revenues 186,258 174,441 511,791 281,203 325,533
---------- --------- ---------- --------- ---------
Cost of natural
gas and natural
gas liquids 353,558 164,364 629,389 255,000 275,831
Costs and
expenses:
Operating 17,731 11,396 33,297 19,320 15,566
Taxes other than
income 5,263 728 9,610 1,430 4,347
General and
administrative 10,026 5,171 21,268 9,391 11,242
Other expense 6,214 - 6,214 1,711 -
Depreciation,
depletion and
amortization 26,457 14,149 52,202 25,779 25,745
---------- --------- ---------- --------- ---------
Total costs
and expenses 65,691 31,444 122,591 57,631 56,900
---------- --------- ---------- --------- ---------
Operating loss (232,991) (21,367) (240,189) (31,428) (7,198)
Other income
(expense):
Interest income 160 176 461 300 301
Other income 886 91 2,433 91 1,547
Interest expense (6,974) (8,519) (16,078) (16,399) (9,104)
Unrealized
interest rate
derivative
gains (losses) 13,689 6,485 29 4,874 (13,660)
Realized
interest rate
derivative
gains (losses) (2,444) 318 (2,545) 534 (101)
Other income
(expense) (232) (711) (447) (1,003) (215)
---------- --------- ---------- --------- ---------
Total other
income
(expense) 5,085 (2,160) (16,147) (11,603) (21,232)
---------- --------- ---------- --------- ---------
Loss before income
taxes (227,906) (23,527) (256,336) (43,031) (28,430)
Income tax
(benefit)
provision (886) 256 (988) 420 (102)
---------- --------- ---------- --------- ---------
Net loss $(227,020) $(23,783) $(255,348) $(43,451) $(28,328)
========== ========= ========== ========= =========
Adjusted EBITDA $ 57,504 $ 22,159 $ 110,282 $ 36,252 $ 52,778
========== ========= ========== ========= =========
*T
-0-
*T
Eagle Rock Energy Partners, L.P.
Midstream Operations Information
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------- -------------------------
2008 2007 2008 2007
------------ ------------ ------------ ------------
Gas gathering
volumes -
(Average Mcf/d)
Texas Panhandle 149,881 138,032 152,225 138,544
East
Texas/Louisiana 179,744 131,535 171,824 111,519
South Texas 84,514 67,574 81,312 33,787
------------ ------------ ------------ ------------
Total 414,139 337,141 405,361 283,850
============ ============ ============ ============
NGLs and
condensate - (Net
equity gallons)
Texas Panhandle 19,650,791 21,641,964 41,535,043 41,634,155
East
Texas/Louisiana 6,624,451 4,823,502 11,928,049 7,930,684
South Texas 377,706 155,904 827,568 155,904
------------ ------------ ------------ ------------
Total 26,652,948 26,621,370 54,290,660 49,720,743
============ ============ ============ ============
Natural gas short
position -
(Average MMBtu/d)
Texas Panhandle (4,974) (9,320) (6,112) (7,919)
East
Texas/Louisiana 1,543 668 958 1,664
South Texas 500 333 500 167
------------ ------------ ------------ ------------
Total (2,931) (8,319) (4,654) (6,088)
============ ============ ============ ============
Average realized
NGL price - per
gallon
Texas Panhandle $ 1.78 $ 1.19 $ 1.63 $ 0.93
East
Texas/Louisiana $ 1.40 $ 0.97 $ 1.33 $ 0.94
South Texas $ 1.73 $ 1.51 $ 1.74 $ 1.51
Weighted average $ 1.65 $ 1.14 $ 1.53 $ 1.05
Average realized
condensate price
- per Bbl
Texas Panhandle $ 117.93 $ 54.43 $ 104.15 $ 50.27
East
Texas/Louisiana $ 116.33 $ 72.82 $ 111.37 $ 62.04
South Texas $ 123.16 $ 62.17 $ 105.12 $ 62.17
Weighted average $ 117.99 $ 55.65 $ 104.76 $ 51.08
Average realized
natural gas price
- per MMbtu
Texas Panhandle $ 9.44 $ 6.64 $ 8.42 $ 6.39
East
Texas/Louisiana $ 12.32 $ 7.24 $ 10.67 $ 7.04
South Texas $ 10.88 $ 6.62 $ 9.67 $ 6.62
Weighted average $ 10.57 $ 6.64 $ 9.32 $ 6.73
Three Months
Ended
March 31, 2008
---------------
Gas gathering volumes - (Average Mcf/d)
Texas Panhandle 154,570
East Texas/Louisiana 163,817
South Texas 78,075
---------------
Total 396,462
===============
NGLs and condensate - (Net equity gallons)
Texas Panhandle 21,884,252
East Texas/Louisiana 5,303,598
South Texas 449,862
---------------
Total 27,637,712
===============
Natural gas short position - (Average MMBtu/d)
Texas Panhandle (7,263)
East Texas/Louisiana 367
South Texas 500
---------------
Total (6,396)
===============
Average realized NGL price - per gallon
Texas Panhandle $ 1.50
East Texas/Louisiana $ 1.25
South Texas $ 2.05
Weighted average $ 1.42
Average realized condensate price - per Bbl
Texas Panhandle $ 90.80
East Texas/Louisiana $ 102.59
South Texas $ 90.18
Weighted average $ 91.44
Average realized natural gas price - per MMbtu
Texas Panhandle $ 7.41
East Texas/Louisiana $ 8.61
South Texas $ 8.24
Weighted average $ 7.95
*T
-0-
*T
Eagle Rock Energy Partners, L.P.
Upstream and Minerals Operations Information
(unaudited)
Three Months Ended Six Months Ended Three
Months
June 30, June 30, Ended
------------------- -------------------
March 31,
2008 2007 2008 2007 2008
---------- -------- ---------- -------- ----------
Upstream
Production:
Oil and
condensate (Bbl) 184,511 N/A 385,916 N/A 201,405
Gas (Mcf) 873,093 N/A 1,715,290 N/A 842,197
NGLs (Bbl) 118,644 N/A 246,097 N/A 127,453
Total Mcfe 2,692,023 N/A 5,507,368 N/A 2,815,345
Sulfur (Long ton) 19,724 N/A 45,956 N/A 26,232
Realized prices,
excluding
derivatives:
Oil and
condensate (per
Bbl) $ 114.50 N/A $ 102.25 N/A $ 91.03
Gas (per Mcf) $ 10.80 N/A $ 9.65 N/A $ 8.46
NGLs (per Bbl) $ 68.74 N/A $ 66.21 N/A $ 63.87
Sulfur (per Long
ton) $ 359.97 N/A $ 271.28 N/A $ 204.60
Operating
statistics:
Operating costs
per Mcfe (incl
production
taxes) $ 3.49 N/A $ 3.08 N/A $ 2.70
Operating Income
per Mcfe $ 9.89 N/A $ 9.01 N/A $ 8.17
Drilling program
(gross wells):
Development wells 6 N/A 12 N/A 6
Completions 6 N/A 12 N/A 6
Workovers 1 N/A 1 N/A -
Recompletions 3 N/A 7 N/A 4
Minerals
Production:
Oil and
condensate (Bbl) 40,907 24,412 78,740 24,412 37,833
Gas (Mcf) 339,518 172,212 655,474 172,212 315,956
NGLs (Bbl) 6,215 2,895 10,400 2,895 4,185
Total Mcfe 622,250 336,054 1,129,400 336,054 568,064
Realized prices,
excluding
derivatives:
Oil and
condensate (per
Bbl) $ 115.68 $ 62.80 $ 102.86 $ 62.80 $ 89.00
Gas (per Mcf) $ 10.50 $ 8.65 $ 8.81 $ 8.65 $ 6.99
NGLs (per Bbl) $ 66.13 $ 33.85 $ 62.12 $ 33.85 $ 56.15
*T
Non-GAAP Financial Measures
The following tables present a reconciliation of the non-GAAP
financial measures of (i) Adjusted EBITDA to the GAAP financial
measure of net income (loss) and (ii) Distributable Cash Flow to the
GAAP financial measure of net income (loss) for each of the periods
indicated.
-0-
*T
Eagle Rock Energy Partners, L.P.
GAAP to Non-GAAP Reconciliations
($ in thousands)
(unaudited)
Net loss to
adjusted EBITDA
Three Months Ended Six Months Ended Three
Months
June 30, June 30, Ended
-------------------- --------------------
March 31,
2008 2007 2008 2007 2008
---------- --------- ---------- --------- ---------
Net loss, as
reported $(227,020) $(23,783) $(255,348) $(43,451) $(28,328)
Depreciation,
depletion and
amortization
expense 26,457 14,149 52,202 25,779 25,745
Risk management
interest related
instruments-
unrealized (13,689) (6,485) (29) (4,874) 13,660
Risk management
commodity related
instruments-
unrealized 256,265 28,757 289,337 39,398 33,072
Non-recurring
operating items
(1) 6,214 - 6,214 1,711 -
Restricted units
non-cash
amortization
expense 1,559 620 2,718 792 1,159
Income tax
provision
(benefit) (886) 256 (988) 420 (102)
Interest - net
including
realized risk
management
instruments and
other expense 9,490 8,736 18,609 16,568 9,119
Other income (886) (91) (2,433) (91) (1,547)
---------- --------- ---------- --------- ---------
Adjusted EBITDA $ 57,504 $ 22,159 $ 110,282 $ 36,252 $ 52,778
========== ========= ========== ========= =========
Net loss to
distributable
cash flow
Net loss, as
reported $(227,020) $(23,783) $(255,348) $(43,451) $(28,328)
Depreciation,
depletion and
amortization
expense 26,457 14,149 52,202 25,779 25,745
Risk management
interest related
instruments-
unrealized (13,689) (6,485) (29) (4,874) 13,660
Risk management
commodity related
instruments-
unrealized 256,265 28,757 289,337 39,398 33,072
Capital
expenditures-
maintenance
related (11,152) (4,574) (16,012) (6,728) (4,860)
Restricted units
non-cash
amortization
expense 1,559 620 2,718 792 1,159
Income tax
provision
(benefit) (886) 256 (988) 420 (102)
Other income (886) (91) (2,433) (91) (1,547)
Cash income taxes (166) (174) (304) (175) (138)
---------- --------- ---------- --------- ---------
Distributable
cash flow $ 30,482 $ 8,675 $ 69,143 $ 11,070 $ 38,661
========== ========= ========== ========= =========
Distributable
cash flow
excluding non-
recurring
items (2) $ 36,696 $ 8,675 $ 75,357 $ 12,781 $ 38,661
========== ========= ========== ========= =========
------------------
(1) Includes the SemGroup bad debt expense for the three and six
months ended June 30, 2008 and a settlement of arbitration for $1.4
million and severance to a former executive of $0.3 million for the
six months ended June 30, 2007.
(2) Represents distributable cash flows ("DCF") adjusted to exclude
the non-recurring operating items in footnote (1) above. This
presentation allows for the trend analysis of DCF with the exclusion
of non-recurring items.
*T
Eagle Rock Energy Partners, L.P.
Elizabeth Wilkinson, 281-408-1329 (Investor Relations)
Copyright Business Wire 2008
