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| NGLS > SEC Filings for NGLS > Form 10-Q on 9-Nov-2009 | All Recent SEC Filings |
9-Nov-2009
Quarterly Report
The following discussion analyzes our financial condition and results of operations. You should read the following discussion of our financial condition and results of operations in conjunction with our consolidated financial statements and notes included elsewhere in this Quarterly Report and in our consolidated financial statements and notes thereto included in our Annual Report.
Overview
We are a Delaware limited partnership formed by Targa to own, operate, acquire and develop a diversified portfolio of complementary midstream energy assets. Our business operations consist of natural gas gathering and processing, and the fractionating, storing, terminalling, transporting, distributing and marketing of natural gas liquids ("NGLs").
We are owned 98% by our limited partners and 2% by our general partner, Targa Resources GP LLC, an indirect, wholly-owned subsidiary of Targa. In addition, Targa owns 20,055,846 common units, representing a 31.9% limited partner interest in us, through its indirect wholly-owned subsidiaries, Targa GP Inc. and Targa LP Inc. Our common units are publicly traded on The NASDAQ Stock Market LLC under the symbol "NGLS."
Our Operations
Our gathering and processing assets are located primarily in the Fort Worth Basin in North Texas, the Permian Basin in West Texas and the onshore region of the Louisiana Gulf Coast. Our NGL logistics and marketing assets are located primarily at Mont Belvieu and Galena Park near Houston, Texas and in Lake Charles, Louisiana, with terminals and transportation assets across the United States.
We conduct our business operations through two divisions and report our results of operations under four segments: our Natural Gas Gathering and Processing division, is a single segment consisting of our natural gas gathering and processing facilities, as well as certain fractionation capability integrated within those facilities; and the NGL Logistics and Marketing division, which consists of three segments: Logistics Assets, NGL Distribution and Marketing and Wholesale Marketing.
Change in Basis of Presentation
As discussed in Note 4 to the accompanying consolidated financial statements, as a result of our acquisition of the Downstream Business, certain 2008 financial information has been reclassified so that the basis of presentation is consistent with that of the 2009 financial information.
Recent Developments
Under the terms of our amended and restated partnership agreement, all 11,528,231 subordinated units converted to common units on a one-for-one basis on May 19, 2009. The conversion had no impact upon our calculation of earnings per unit since the subordinated units were included in the basic and diluted earnings per unit calculation.
On July 6, 2009, we completed the private placement under Rule 144A and Regulation S of the Securities Act of 1933 of $250 million in aggregate principal amount of 11¼% senior notes due 2017. The 11¼% Notes were issued at 94.973% of the face amount, resulting in gross proceeds of $237.4 million. Proceeds were used to repay borrowings under our credit facility.
On July 29, 2009, we executed a Commitment Increase Supplement to our existing senior secured credit facility. The Commitment Increase Supplement increased the commitments under our credit facility by $127.5 million, bringing the total commitments to $977.5 million. We may request additional commitments under our credit facility of up to $22.5 million.
On August 12, 2009, we completed a unit offering under our shelf registration statement of 6.9 million common units representing limited partner interests in us at a price of $15.70 per common unit. Net proceeds of the offering were $105.3 million, after deducting underwriting discounts, commissions and estimated offering expenses, and including the general partner's proportionate capital contribution of $2.2 million. We used a portion of the proceeds to repay $103.5 million of outstanding borrowings under our senior secured revolving credit facility.
On September 24, 2009, we acquired Targa's interests in Targa Downstream GP LLC, Targa LSNG GP LLC, Targa Downstream LP and Targa LSNG LP, collectively these interests are referred to as the "Downstream Business", for $530 million. Consideration to Targa comprised $397.5 million in cash and the issuance to Targa of 174,033 general partner units and 8,527,615 common units.
On October 19, 2009, we announced a cash distribution of $0.5175 per unit on our outstanding common units. The distribution will be paid on November 13, 2009 to unitholders of record on November 4, 2009, for the three months ended September 30, 2009. The total distribution to be paid is $35.2 million, with $21.5 million to be paid to our non-affiliated common unitholders and $10.4 million, $0.7 million and $2.6 million to be paid to Targa for its common unit ownership, general partner interest and incentive distribution rights.
Recently Issued Pronouncements
See Note 3 of the Notes to Consolidated Financial Statements included in Item 1 of this Quarterly Report.
Results of Operations
The following table and discussion relate to the three and nine months ended
September 30, 2009 and 2008 and is a summary of our results of operations for
the periods then ended:
Three Months Ended Nine Months Ended September
September 30, 30,
2009 2008 2009 2008
(In millions, except operating and price data)
Revenues $ 1,003.8 $ 2,214.9 $ 2,822.3 $ 6,414.6
Product purchases 874.2 2,110.5 2,459.3 5,985.5
Operating expenses 47.5 68.3 142.1 197.7
Depreciation and amortization expense 25.6 24.4 75.5 72.8
General and administrative expense 17.1 19.1 55.5 57.4
Casualty loss adjustment - - (0.8 ) -
Gain on sale of assets - - - (4.4 )
Income (loss) from operations 39.4 (7.4 ) 90.7 105.6
Interest expense, net (29.8 ) (25.4 ) (78.8 ) (71.6 )
Other income (expense) 1.0 (4.7 ) 3.6 (2.5 )
Income tax (expense) benefit 0.2 (0.6 ) (0.8 ) (1.8 )
Net income (loss) 10.8 (38.1 ) 14.7 29.7
Less: Net income attributable to
noncontrolling interest 0.8 0.2 1.1 0.1
Net income (loss) attributable to Targa
Resources Partners LP $ 10.0 $ (38.3 ) $ 13.6 $ 29.6
Financial and operating data:
Financial data:
Operating margin (1) $ 82.1 $ 36.1 $ 220.9 $ 231.4
Adjusted EBITDA (2) 69.1 22.5 201.8 186.7
Distributable cash flow (3) 51.5 1.0 158.6 132.4
Operating data:
Gathering throughput, MMcf/d (4) 490.2 438.3 465.2 455.0
Plant natural gas inlet, MMcf/d (5)(6) 464.1 415.8 442.5 430.8
Gross NGL production, MBbl/d 43.5 41.3 43.1 43.2
Natural gas sales, BBtu/d (6) 414.9 404.4 383.0 410.9
NGL sales, MBbl/d 262.7 282.5 278.6 290.2
Condensate sales, MBbl/d 2.6 2.4 2.8 2.4
Average realized prices:
Natural Gas, $/MMBtu 3.49 9.42 3.83 9.29
NGL, $/gal 0.81 1.66 0.71 1.56
Condensate, $/Bbl 71.25 103.87 55.84 103.75
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(1) Operating margin is revenues less product purchases and operating expense.
See "Non-GAAP
Financial Measures."
(2) Adjusted EBITDA is net income before interest, income taxes, depreciation
and amortization and
non-cash gain or loss related to derivative instruments. See "Non-GAAP Financial
Measures."
(3) Distributable Cash Flow is net income plus depreciation and amortization and
deferred taxes,
adjusted for losses on mark-to-market derivative contracts, less maintenance
capital expenditures.
See "Non-GAAP Financial Measures."
(4) Gathering throughput represents the volume of natural gas gathered and
passed through natural gas
gathering pipelines from connections to producing wells and central delivery points.
(5) Plant natural gas inlet represents the volume of natural gas passing through the meter located at the
inlet of a natural gas processing plant.
(6) Plant inlet volumes include producer take-in-kind, while natural gas sales
exclude producer
take-in-kind volumes.
Three Months Ended September 30, 2009 Compared to Three Months Ended September 30, 2008
Revenues decreased by $1,211.1 million, or 55%, for 2009 compared to 2008. The decrease is primarily due to:
· a decrease attributable to commodity prices of $1,099.2 million; comprising decreases in natural gas, NGL and condensate revenues of $226.4 million, $865.1 million, and $7.7 million; and
· a decrease attributable to commodity sales volumes of $116.1 million; comprising decrease in NGL revenues of $127.0 million, partially offset by increases in natural gas and condensate revenues of $9.1 million and $1.8 million; offset by
· an increase in other revenues of $4.2 million, primarily from miscellaneous processing activities.
Average realized price for natural gas decreased by $5.93 per MMBtu, or 63%, for 2009 compared to 2008. Average realized price for NGLs decreased by $0.85 per gallon, or 51%, for 2009 compared to 2008. Our average realized price for condensate decreased by $32.62 per barrel, or 31%, for 2009 compared to 2008.
Natural gas sales volumes increased by 10.5 BBtu/d, or 3%, for 2009 compared to 2008. The increase in natural gas sales was primarily the result of increased demand by our industrial customers and increased sales under third party contracts. Our NGL sales volumes decreased by 19.8 MBbl/d, or 7%, for 2009 compared to for 2008. Condensate sales volumes increased by 0.2 MBbl/d, or 8%, for 2009 compared for 2008. For information regarding the period to period changes in our commodity sales volumes, see "-Results of Operations-By Segment."
Product purchases decreased by $1,236.3 million, or 59%, for 2009 compared to 2008. The decrease in product purchases reflects lower commodity prices. See "-Results of Operations-By Segment" for a detailed explanation of the components of the decrease.
Operating expenses decreased by $20.8 million, or 30%, for 2009 compared to 2008. The decrease in operating expenses primarily resulted from lower fuel, utility, equipment rental/maintenance, and barge fees related to lower volumes and decreased fuel and utility rates.
Depreciation and amortization expense increased by $1.2 million, or 5%, for 2009 compared to 2008. The increase was due to additions to property, plant and equipment.
General and administrative expenses decreased by $2.0 million, or 10%, for 2009 compared to 2008. This was primarily due to a reduction in allocated general and administrative expenses, offset by the timing of and increases to compensation and benefit expenses as well as increases in property insurance and outside professional services. For additional information regarding our allocation of general and administrative costs, see "Item 13. Certain Relationships and Related Transactions, and Director Independence-Omnibus Agreement" in our Annual Report.
Interest expense increased by $4.4 million, or 17%, for 2009 compared to 2008. The increase was primarily attributable to the issuance of our 11¼ % Senior Unsecured Notes in July, 2009.
Other income (expense) increased by $5.7 million compared to 2008. The increase was primarily due to a $4.9 million hurricane-related casualty loss provision recorded during 2008, a $1.5 million loss on debt repurchases recorded during 2009 and a $1.5 million change in gain (loss) on mark-to-market derivatives, from a $1.0 million loss during 2008 to a $0.6 million gain during 2009.
Nine Months Ended September 30, 2009 Compared to Nine Months Ended September 30, 2008
Revenues decreased by $3,592.3 million, or 56%, for 2009 compared to 2008. The decrease was primarily due to:
· a decrease attributable to commodity prices of $3,302.1 million; comprising decreases in natural gas, NGL and condensate revenues of $570.0 million, $2,695.7 million, and $36.4 million; and
· a decrease attributable to commodity sales volumes of $290.5 million; comprising decrease in natural gas and NGL revenues of $74.6 million and $226.4 million, partially offset by increases in condensate revenues of $10.5 million; offset by
· an increase in other revenues of $0.3 million, primarily from miscellaneous processing activities.
Average realized price for natural gas decreased by $5.46 per MMBtu, or 59%, for 2009 compared to 2008. Average realized price for NGLs decreased by $0.85 per gallon, or 54%, for 2009 compared to 2008. Average realized price for condensate decreased by $47.91 per barrel, or 46%, for 2009 compared to 2008.
Natural gas sales volumes decreased by 27.9 BBtu/d, or 7%, for 2009 compared to 2008. The decrease in natural gas sales was primarily the result of a decrease in purchases from affiliates for resale and a decrease in demand by our industrial customers. Our NGL sales volumes decreased by 11.6 MBbl/d, or 4%, for 2009 compared to 2008. Condensate sales volumes increased by 0.4 MBbl/d, or 17%, for 2009 compared to 2008. For information regarding the period to period changes in our commodity sales volumes, see "-Results of Operations-By Segment."
Product purchases decreased by $3,526.2 million, or 59%, for 2009 compared to 2008. The decrease in product purchases reflects lower commodity pricing and purchases of wellhead volumes.
Operating expenses decreased by $55.6 million, or 28%, for 2009 compared to 2008. The decrease in operating expenses was primarily the result of a decrease in system maintenance expenses.
General and administrative expenses decreased by $1.9 million, or 3%, for 2009 compared to 2008. This was primarily due to a decrease in allocated general and administrative expenses, offset by the timing of and increases to compensation and benefit expenses and increased outside professional services. For additional information regarding our allocation of general and administrative costs, see "Item 13. Certain Relationships and Related Transactions, and Director Independence -Omnibus Agreement" in our Annual Report.
Depreciation and amortization expense increased by $2.7 million, or 4%, for 2009 compared to 2008. The increase was due to additions to property, plant and equipment.
Interest expense increased by $7.2 million, or 10%, for 2009 compared to 2008. The increase was primarily attributable to the issuance of the 11¼ % Senior Unsecured Notes in July, 2009.
Other income (expense) increased by $6.1 million compared to 2008. The increase was primarily due to a $4.9 million hurricane-related casualty loss provision recorded during 2008, a $1.5 million loss on debt repurchases recorded during 2009 and a $1.5 million change in gain (loss) on mark-to-market derivatives, from a $1.0 million loss during 2008 to a $0.6 million gain during 2009.
Results of Operations-By Segment
Segment operating financial results and operating statistics include the effects of intersegment transactions. These intersegment transactions have been eliminated from the consolidated presentation. For all operating statistics presented, the numerator is the total volumes or sales for the period and the denominator is the number of calendar days for the period.
Natural Gas Gathering and Processing Segment
The following table provides summary financial data regarding results of
operations in our Natural Gas Gathering and Processing segment for the periods
indicated:
Three Months Nine Months
Ended September 30, Ended September 30,
2009 2008 2009 2008
($ in millions)
Revenues $ 273.1 $ 578.6 $ 752.8 $ 1,721.4
Product purchases (212.6 ) (512.5 ) (592.8 ) (1,509.8 )
Operating expenses (14.3 ) (15.5 ) (39.0 ) (42.7 )
Operating margin (1) $ 46.2 $ 50.6 $ 121.0 $ 168.9
Operating statistics:
Gathering throughput, MMcf/d
LOU System 213.4 178.1 183.1 189.4
SAOU System 98.5 99.0 99.9 98.7
North Texas System 178.3 161.2 182.2 166.9
490.2 438.3 465.2 455.0
Plant natural gas inlet, MMcf/d
LOU System 199.4 168.5 174.2 178.8
SAOU System 92.0 91.3 92.1 91.2
North Texas System 172.7 156.0 176.2 160.8
464.1 415.8 442.5 430.8
Gross NGL production, MBbl/d
LOU System 9.0 9.2 8.5 10.1
SAOU System 14.0 14.1 14.2 14.2
North Texas System 20.5 18.0 20.4 18.9
43.5 41.3 43.1 43.2
Natural gas sales, BBtu/d 414.9 404.4 383.0 410.9
NGL sales, MBbl/d 40.6 37.4 39.2 38.2
Condensate sales, MBbl/d 2.6 3.3 3.0 3.6
Average realized prices:
Natural gas, $/MMBtu 3.49 9.42 3.83 9.29
NGL, $/gal 0.73 1.46 0.64 1.40
Condensate, $/Bbl 71.25 95.58 54.00 92.72
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(1) See "Non-GAAP Financial Measures" included in this Item 2.
Three Months Ended September 30, 2009 Compared to Three Months Ended September 30, 2008
Revenues decreased by $305.6 million, or 53%, for 2009 compared to 2008. The decrease was primarily due to:
· a decrease attributable to commodity prices of $325.2 million, comprising decreases in natural gas, NGL and condensate revenues of $226.4 million, $93.1 million and $5.7 million; partially offset by
· an increase attributable to commodity sales volume of $20.9 million comprising increases in natural gas and condensate revenues of $9.1 million and $19.1 million, partially offset by a decrease in NGL revenues of $7.3 million; and
· a decrease in other revenues of $1.3 million, primarily from miscellaneous processing activities.
Average realized price for natural gas decreased by $5.93 per MMBtu, or 63%, for 2009 compared to 2008. Average realized price for NGLs decreased by $0.73 per gallon, or 50%, for 2009 compared to 2008. Average realized price for condensate decreased by $24.33 per Bbl, or 25%, for 2009 compared to 2008.
Natural gas sales volumes increased by 10.5 BBtu/d, or 3%, for 2009 compared to 2008. NGL sales volumes increased by 3.2 MBbl/d, or 9%, for 2009 compared to 2008. Condensate sales volumes decreased by 0.7 MBbl/d, or 21%, for 2009 compared to 2008. The increase in natural gas sales volumes was primarily the result of an increase in demand from our industrial customers and increased sales under third party contracts.
Product purchases decreased by $299.9 million, or 59%, for the 2009 compared to 2008. The decrease in product purchases reflects lower commodity pricing and purchases of wellhead volumes.
Operating expenses decreased $1.2 million, or 8%, for 2009 compared to 2008. The decrease in operating expenses was primarily the result of a decrease in compensation and benefit costs, system maintenance, chemicals and lubricants expenses and utility expenses, partially offset by an increase in ad valorem taxes.
Nine Months Ended September 30, 2009 Compared to Nine Months Ended September 30, 2008
Revenues decreased by $968.6 million, or 56%, for 2009 compared to 2008. The decrease was primarily due to:
· a decrease attributable to commodity prices of $893.1 million, comprising decreases in natural gas, NGL and condensate revenues of $570.0 million, $290.8 million and $32.2 million;
· a decrease attributable to commodity sales volume of $74.5 million comprising decreases in natural gas and condensate revenues of $74.6 million and $16.4 million, partially offset by increases in NGL revenues of $16.5 million; and
· a decrease in other revenues of $1.0 million, primarily from miscellaneous processing activities.
Average realized price for natural gas decreased by $5.46 per MMBtu, or 59%, for 2009 compared to 2008. Average realized price for NGLs decreased by $0.76 per gallon, or 54%, for 2009 compared to 2008. Average realized price for condensate decreased by $38.72 per Bbl, or 42%, for 2009 compared to 2008.
Natural gas sales volumes decreased by 27.9 BBtu/d, or 7%, for 2009 compared to 2008. Our NGL sales volumes increased by 1.0 MBbl/d, or 3%, for 2009 compared to 2008. Condensate sales volumes decreased by 0.7 MBbl/d, or 21%, for 2009 compared to 2008. The decrease in natural gas sales was primarily the result of a decrease in purchases from affiliates.
Product purchases decreased by $917.0 million, or 61%, for 2009 compared to 2008. The decrease in product purchases reflects lower commodity pricing and purchases of wellhead volumes.
Operating expenses decreased $3.7 million, or 9%, for 2009 compared to for 2008. The decrease was primarily the result of a decrease in compensation and benefit costs, system maintenance expenses, utility expenses, chemical and lubricant expenses.
Logistics Assets Segment
The following table provides summary financial data regarding results of
operations of our Logistics Assets segment for the periods indicated:
Three Months Nine Months
Ended September 30, Ended September 30,
2009 2008 2009 2008
($ in millions)
Revenues from services $ 55.1 $ 65.5 $ 152.9 $ 181.8
Other revenues (1) (0.1 ) 0.1 2.0 0.6
55.0 65.6 154.9 182.4
Operating expenses (29.9 ) (49.8 ) (97.7 ) (147.9 )
Operating margin (2) $ 25.1 $ 15.8 $ 57.2 $ 34.5
Equity in earnings of GCF $ 1.4 $ 1.1 $ 3.2 $ 3.0
Operating statistics:
Fractionation volumes, MBbl/d 225.9 207.1 215.4 219.3
Treating volumes, MBbl/d (3) 27.5 20.4 18.5 19.0
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(1) Includes business interruption insurance revenue of $0 and $1.9 million for the three and nine months ended September 30, 2009, and $0 and $0.4 million for the three and nine months ended September 30, 2008.
(2) See "Non-GAAP Financial Measures" included in this Item 2.
(3) Consists of the volumes treated in our low sulfur natural gasoline unit.
Three Months Ended September 30, 2009 Compared to Three Months Ended September 30, 2008
Revenues from services (fractionation, terminalling and storage, transportation and treating) decreased by $10.4 million, or 16%, for 2009 compared to 2008. Although fractionation and treating volumes increased, revenue decreased as the fuel component of the related fees was lower due to lower natural gas prices which also lowered operating expense.
Operating expenses decreased by $19.9 million, or 40%, for 2009 compared to 2008. The decrease was due to lower fuel, utility, equipment rental/maintenance, and barge fees related to lower volumes and decreased fuel and utility rates.
Nine Months Ended September 30, 2009 Compared to Nine Months Ended September 30, 2008
Revenues from services (fractionation, terminalling and storage, transportation and treating) decreased by $28.9 million, or 16%, for 2009 compared to 2008. The decrease was primarily due to decreased fractionation and terminalling and storage volumes as a result of damage to certain of our and third party Gulf Coast processing, pipeline and production facilities from Hurricane Ike as well as a lower fuel component of the fractionation fees. In addition, truck and barge volumes were lower for 2009 due to decreased mixed butanes and wholesale activity.
Operating expenses decreased by $50.2 million, or 34%, for 2009 compared to 2008. The decrease was due to lower fuel, utility, equipment rental/maintenance, and barge fees related to lower volumes and decreased fuel and utility rates.
NGL Distribution and Marketing Services Segment
The following table provides summary financial data regarding results of
operations of our NGL Distribution and Marketing Services segment for the
periods indicated:
Three Months Nine Months
Ended September 30, Ended September 30,
. . .
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