COPANO ENERGY, L.L.C. 
By HOUSTON, Feb. 28, 2013 /PRNewswire/ -- Copano Energy, L.L.C. (NASDAQ: CPNO) today announced its financial results for the three months and year ended December 31, 2012 and its updated 2013 guidance.
Fourth Quarter 2012 Highlights:
-- Total distributable cash flow of $46.2 million, a 9% increase from the
fourth quarter of 2011
-- Total segment gross margin of $74.3 million, a 20% increase from the
prior year period
-- Adjusted EBITDA of $60.9 million, a 6% increase from the prior year
period
-- Volumes gathered from the Eagle Ford Shale play averaged 644,000
MMBtu/d, a 104% increase from the prior year period
-- Texas segment natural gas liquids (NGL) production of over 56,000
Bbls/d, a 67% increase from the prior year period
2013 Guidance Update:
-- Adjusted EBITDA and Total Distributable Cash Flow unchanged from
previous guidance
-- Common unit distribution to remain at $0.575 per quarter due to merger
agreement with Kinder Morgan Energy Partners (KMP)
-- Expansion capital expenditures to increase to $400 to $450 million
compared to previous guidance of $250 to $300 million primarily due to
addition of the DK pipeline loop, a 65-mile, $100 million project to
loop the DK pipeline from DeWitt County to Copano's Houston Central
complex, as well as other new capital projects in Texas and Oklahoma
"Our fourth quarter results demonstrate the momentum of our operations and success of our Eagle Ford strategy, and provided an excellent finish to an exciting and eventful 2012," said R. Bruce Northcutt, Copano's President and Chief Executive Officer.
"Our recently announced transaction with Kinder Morgan Energy Partners positions Copano to continue executing on our strategy as part of a larger, more diversified company. We look forward to completing the transaction and moving ahead as part of KMP, which we expect to occur in the third quarter of 2013," Northcutt added.
Fourth Quarter Financial Results
Total distributable cash flow was $46.2 million, a 9% increase from the fourth quarter of 2011, and a 19% decrease from the third quarter of 2012. The decrease from the third quarter of 2012 was primarily due to the one-time gain on the sale of the Lake Charles processing plant in the third quarter. The increase from the prior-year period was primarily due to increased throughput from the Eagle Ford Shale. These benefits were partially offset by lower NGL prices and higher operating expenses. Fourth-quarter 2012 total distributable cash flow represents 100% coverage of the fourth-quarter distribution of $0.575 per unit, based on common units outstanding on the distribution record date.
Revenue for the fourth quarter of 2012 increased 12% from the fourth quarter of 2011 to $396.8 million, and increased 8% from the third quarter of 2012. Total segment gross margin increased 20% from the fourth quarter of 2011 to $74.3 million, and decreased 1% compared to the third quarter of 2012. Adjusted EBITDA increased 6% from the fourth quarter of 2011 to $60.9 million, and decreased 17% from the third quarter of 2012. The decrease in Adjusted EBITDA from the third quarter of 2012 was primarily a result of the one-time gain on the sale of the Lake Charles processing plant in the third quarter. Net loss to common units was $50.7 million for the fourth quarter of 2012 compared to a net loss of $1.2 million for the fourth quarter of 2011. The net loss in the fourth quarter of 2012 includes a $66.3 million non-cash impairment charge related to Copano's investments in Bighorn Gas Gathering and Fort Union Gas Gathering.
Corporate and other activities, which include Copano's commodity risk management efforts, resulted in a loss of $1.2 million for the fourth quarter of 2012, consisting of $5.7 million in non-cash amortization expense and $1.5 million of unrealized losses on commodity derivative instruments, offset by $6.0 million of net cash settlements received. Corporate and other activities for the fourth quarter of 2011 resulted in a $12.5 million loss consisting of $7.5 million of non-cash amortization expense, $2.9 million of net cash settlements paid and $2.1 million of unrealized mark-to-market losses on commodity derivative instruments. Corporate and other activities for the third quarter of 2012 resulted in a $3.7 million loss consisting of $5.9 million of non-cash amortization expense and $2.6 million of unrealized losses on commodity derivative instruments, offset by $4.8 million of net cash settlements received.
Total distributable cash flow, total segment gross margin, adjusted EBITDA and segment gross margin are non-GAAP financial measures, which are reconciled to their most directly comparable GAAP measures at the end of this news release. Please read "Use of Non-GAAP Financial Measures" beginning on page 7 of this news release.
Current Expansion Projects Update
-- Copano's first 400 MMcf/d cryogenic expansion at its Houston Central
complex is mechanically complete, and final preparations are underway
for a projected in-service date late in the first quarter of 2013.
Additionally, Formosa's fractionation expansion at its Point Comfort
facility is underway and is expected to be in service in the second
quarter of 2013. Copano will have 37,500 Bbls/d of fractionation
capacity at Formosa's facility when the expansion is complete.
-- An EPA permit application has been submitted and the public review and
comment period recently ended for the second 400 MMcf/d cryogenic
expansion at Houston Central. The 2014 cryogenic expansion is supported
by long-term, fee-based capacity commitments with major producers. When
the second cryogenic expansion is complete, Copano will have a total of
1 Bcf/d of highly efficient cryogenic processing capacity at its Houston
Central complex.
-- Construction on the 65-mile southwest extension of Copano's wholly-owned
DK pipeline into McMullen County, Texas is nearing completion, and is
expected to begin service in the first quarter of 2013.
-- Copano has approved a project to loop approximately 65 miles of its DK
pipeline from DeWitt County to the Houston Central complex, along the
same path as the existing DK pipeline. The project is expected to begin
service in the fourth quarter of 2013 and is projected to cost
approximately $100 million. The addition of the loop line creates a fuel
reduction by reallocation of compression and provides increased pipeline
capacity to serve the processing plant expansions at Houston Central.
The project is supported by long-term, fee-based capacity commitments.
-- Copano, along with its joint venture partner, Magellan Midstream
Partners, continues to make progress on the Double Eagle pipeline. The
Three Rivers Terminal and the mainline between Three Rivers and the
Magellan Terminal in Corpus Christi will be placed in service in March
2013. The eastern leg of the pipeline from Three Rivers to Karnes
County is expected to be complete in March 2013 and the western leg from
Three Rivers to Gardendale is scheduled to be complete by the third
quarter of 2013.
-- In Oklahoma, Copano has completed construction of a pipeline connecting
Copano's Osage and Stroud systems in order to deliver rich Mississippi
Lime gas gathered on the Osage system to the Paden processing plant,
providing processing and nitrogen rejection services to producers in the
Mississippi Lime.
-- In the Woodbine Shale play in Texas, Copano has leased and is installing
a 10 MMcf/d refrigeration unit, which is expected to begin processing
gas early in the second quarter of 2013.
Fourth Quarter Operating Results by Segment
Texas
Segment gross margin for Texas increased 12% from the fourth quarter of 2011 to $54.6 million. The increase from the prior year period was primarily a result of volume growth from the Eagle Ford Shale, partially offset by a decline in leaner gas volumes at the Houston Central complex, which were displaced to accommodate richer Eagle Ford Gathering fee-based gas volumes.
During the fourth quarter of 2012, Texas segment service throughput volumes averaged 814,684 MMBtu/d of natural gas and were relatively unchanged when compared to the fourth quarter of 2011. The Texas segment gathered an average of 518,355 MMBtu/d of natural gas, also were relatively unchanged when compared to the fourth quarter of 2011. Volumes processed at Copano's plants and third-party plants in Texas averaged 755,395 MMBtu/d during the fourth quarter of 2012, an increase of 5% over the fourth quarter of 2011, primarily due to higher volumes processed at the Houston Central complex, partially offset by the volume impact of the sale of the Lake Charles plant in the third quarter of 2012. Fourth-quarter NGL production averaged 56,434 Bbls/d at Copano-owned plants and third-party plants, an increase of 67% from the fourth quarter of 2011, reflecting a substantial increase in the NGL content of volumes and higher recovery rates at the Houston Central complex, and increased volumes at the Saint Jo plant in the north Barnett Shale Combo play in north Texas.
Eagle Ford Gathering, Copano's unconsolidated joint venture with Kinder Morgan, provided gathering services for an average of 406,425 MMBtu/d during the fourth quarter of 2012. Texas segment gross margin results do not include the financial results and volumes associated with Copano's interest in Eagle Ford Gathering, which is accounted for under the equity method of accounting and shown in Copano's financial statements under "Equity in loss (earnings) from unconsolidated affiliates." For the fourth quarter of 2012, equity earnings and distributions from Eagle Ford Gathering totaled $13.8 million and $8.3 million, respectively.
Oklahoma
Segment gross margin for Oklahoma was $21.2 million for the fourth quarter of 2012, a decrease of 17% compared to the fourth quarter of last year. The year-over-year decrease was due primarily to lower NGL and natural gas prices, which resulted in a 16% decrease in realized margins on service throughput compared to the fourth quarter of 2011.
The Oklahoma segment gathered an average of 303,645 MMBtu/d of natural gas, a decrease of 1% compared to the fourth quarter of 2011, due primarily to lower lean gas volumes from the Woodford Shale. Volumes processed at wholly owned and third-party plants in Oklahoma increased 2% compared to the fourth quarter of 2011, averaging 162,057 MMBtu/d. Fourth-quarter NGL production at wholly owned and third-party plants averaged 16,390 Bbls/d, a decrease of 6% from the fourth quarter of 2011 primarily due to some of Copano's plants operating in ethane rejection during the fourth quarter of 2012.
Rocky Mountains
Segment gross margin for the Rocky Mountains segment was a loss of $0.2 million in the fourth quarter of 2012 compared to a gain of $0.4 million for the fourth quarter of 2011. Rocky Mountains segment gross margin results do not include the financial results and volumes associated with Copano's interest in Bighorn and Fort Union, which are accounted for under the equity method of accounting and shown in Copano's financial statements under "Equity in loss (earnings) from unconsolidated affiliates."
Average pipeline throughput for Bighorn and Fort Union on a combined basis increased 7% to 675,662 MMBtu/d in the fourth quarter of 2012 as compared to 630,843 MMBtu/d in the fourth quarter of 2011. The volume increase is due primarily to producers increasing volumes on Fort Union to access downstream markets; however, because Fort Union has firm volume commitments from these producers, the increase did not have a material impact on Copano's equity earnings or distributions. For the fourth quarter of 2012, combined equity losses for Bighorn and Fort Union totaled $61.2 million, which included a $66.3 million non-cash impairment charge, compared to equity earnings of $3.7 million for the same period in 2011. The fourth quarter of 2012 non-cash impairment charge was primarily the result of a decline in forecasted future volumes after a major producer in the region disclosed that some of their current and future production was being abandoned. Combined distributions from Bighorn and Fort Union totaled $4.4 million in the fourth quarter of 2012 compared to $5.8 million in the fourth quarter of the previous year.
Year End Financial Results
Revenue for 2012 increased 5% to $1.4 billion compared to $1.3 billion in 2011. Operating segment gross margin increased 1% to $293.7 million in 2012 compared to $292.2 million for 2011. Total segment gross margin increased 14% to $287.1 million for 2012 compared to $252.6 million for 2011. Adjusted EBITDA for 2012 was $242.6 million compared to $211.3 million for 2011. Net loss was $139.0 million for 2012 compared to a net loss of $156.3 million for 2011. Net loss for 2012 includes a $215.0 million non-cash impairment charge relating to Copano's Rocky Mountains assets. Net loss for 2011 includes a loss on the refinancing of unsecured debt of $18.2 million, a $170.0 million non-cash impairment charge relating to Copano's Rocky Mountains assets and a $3.4 million non-cash impairment charge relating to assets in south Texas.
Net loss to common units for 2012 after deducting $36.1 million of in-kind preferred unit distributions totaled $175.1 million, or $2.39 per unit on a diluted basis, compared to a net loss to common units for 2011 of $189.0 million, or $2.86 per unit on a diluted basis, for 2011. Weighted average diluted units outstanding totaled 73.2 million for 2012 as compared to 66.2 million for 2011.
Cash Distributions
On January 10, 2013, Copano announced its fourth quarter 2012 cash distribution of $0.575 per unit, or $2.30 per unit on an annualized basis, which was paid on February 14, 2013 to common unitholders of record at the close of business on January 31, 2013. This distribution is unchanged from the third quarter of 2012.
Updates to 2013 Guidance
Copano announced today the following updates to its forecast for certain financial items for 2013:
($ in millions) Calendar 2013
-------------
Original Revised
Adjusted EBITDA $300 to $330 No Change
Total distributable cash flow $220 to $240 No Change
Common unit distribution growth
rate target (1) 7% to 9% 0% (2)
Quarterly common unit distribution
coverage target 100% to 115% 110% to 120% (2)
Fee-based margin (3) 55% to 60% 60% to 65%
Capital expenditures:
Expansion $250 to $300 $400 to $450 (4)
Maintenance $13 to $18 $18 to $23
(1) Based on
annualized
fourth quarter
2013 declared
distribution
(2) Assumes
consummation
of Copano's
merger with
Kinder Morgan
in 2013;
pursuant to
the merger
agreement,
Copano is
restricted
from
increasing its
quarterly
distribution
above $0.575
per unit
(3) Represents fee-
based
component of
Copano's total
segment gross
margin and its
share of gross
margin from
unconsolidated
affiliates
(4) Increase
primarily due
to addition of
the $100
million DK
pipeline loop
project as
well as other
new capital
projects in
Texas and
Oklahoma
Use of Non-GAAP Financial Measures
This news release and the accompanying schedules include non-generally accepted accounting principles, or non-GAAP, financial measures of total distributable cash flow, total segment gross margin, adjusted EBITDA and segment gross margin. The accompanying 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. Copano's non-GAAP financial measures may not be comparable to similarly titled measures of other companies, who may not calculate their measures in the same manner.
Copano's management team uses non-GAAP financial measures to evaluate its core profitability and to assess the financial performance of its assets. Subject to the limitations expressed above, Copano believes that investors and other market participants benefit from access to the various financial measures that its management uses in evaluating its performance because it allows them to independently evaluate Copano's performance with the same information used by management.
Copano Energy, L.L.C. is a midstream natural gas company with operations in Texas, Oklahoma and Wyoming. For more information, please visit http://www.copano.com.
This news release includes "forward-looking statements," as defined by the Securities and Exchange Commission. Statements that address activities or events that Copano believes will or may occur in the future are forward-looking statements. These statements include, but are not limited to, statements about future producer activity and Copano's total distributable cash flow and distribution coverage. These statements are based on management's experience and perception of historical trends, current conditions, expected future developments and other factors management believes are reasonable. Important factors that could cause actual results to differ materially from those in forward-looking statements include the following risks and uncertainties, many of which are beyond Copano's control: the volatility of prices and market demand for natural gas, crude oil, condensate and NGLs, and for products derived from these commodities; Copano's ability to continue to connect new sources of natural gas, crude oil and condensate, and the NGL content of new gas supplies; the ability of key producers to continue to drill and successfully complete and connect new natural gas and condensate volumes and such producers' performance under their contracts with Copano; Copano's ability to attract and retain key customers and contract with new customers, and such customers' performance under their contracts with Copano; Copano's ability to access or construct new pipeline capacity, gas processing and NGL fractionation and transportation capacity; the availability of local, intrastate and interstate transportation systems, trucks and other facilities and services for condensate, natural gas and NGLs; Copano's ability (and the ability of its third-party service providers) to meet in-service dates, cost expectations and operating performance standards for construction projects; Copano's ability to successfully integrate any acquired asset or operations; Copano's ability to access its revolving credit facility and to obtain additional financing on acceptable terms; the effectiveness of Copano's hedging program; general economic conditions; force majeure events such as the loss of a market or facility downtime; the effects of government regulations and policies; Copano's ability to complete the proposed merger with Kinder Morgan; and other financial, operational and legal risks and uncertainties detailed from time to time in Copano's quarterly and annual reports filed with the Securities and Exchange Commission. Copano does not undertake to update any forward-looking statement except as provided by law.
Contacts: Carl A. Luna, SVP and CFO
Copano Energy, L.L.C.
713-621-9547
Jack Lascar/jlascar@dennardlascar.com
Anne Pearson/apearson@dennardlascar.com
Dennard-Lascar Associates / 713-529-6600
-financial statements follow -
COPANO ENERGY, L.L.C. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended December 31, Year Ended December 31,
------------------------------- -----------------------
2012 2011 2012 2011
---- ---- ---- ----
(In thousands, except per unit information)
Revenue:
Natural gas
sales $106,521 $104,188 $360,340 $452,726
Natural gas
liquids sales 225,485 201,934 814,916 723,063
Transportation,
compression and
processing fees 59,876 38,925 192,270 121,631
Condensate and
other 4,914 10,504 50,194 47,803
Total revenue 396,796 355,551 1,417,720 1,345,223
------- ------- --------- ---------
Costs and expenses:
Cost of natural
gas and
natural gas
liquids(1) 316,046 288,437 1,105,415 1,068,423
Transportation
(1) 6,414 5,023 25,199 24,225
Operations and
maintenance 21,772 18,373 77,943 65,326
Depreciation
and
amortization 19,695 18,013 77,104 69,156
Impairment 742 3,409 29,486 8,409
General and
administrative 11,709 14,150 50,648 48,680
Taxes other
than income 1,933 1,101 7,392 5,130
Equity in loss
(earnings)
from
unconsolidated
affiliates 47,355 (13,257) 137,088 145,324
Gain on sale of
operating
assets (225) - (9,941) -
Total costs and expenses 425,441 335,249 1,500,334 1,434,673
------- ------- --------- ---------
Operating (loss) income (28,645) 20,302 (82,614) (89,450)
Other income (expense):
Interest and
other income 16 29 586 60
Loss on
refinancing of
unsecured debt - - - (18,233)
Interest and
other
financing
costs (12,441) (12,737) (55,264) (47,187)
(Loss) income before income taxes (41,070) 7,594 (137,292) (154,810)
Provision for income taxes (272) (341) (1,678) (1,502)
---- ---- ------ ------
Net (loss) income (41,342) 7,253 (138,970) (156,312)
Preferred unit distributions (9,366) (8,486) (36,117) (32,721)
------ ------
Net loss to common units $(50,708) $(1,233) $(175,087) $(189,033)
======== ======= ========= =========
Basic and diluted net loss to common units $(0.66) $(0.02) $(2.39) $(2.86)
====== ====== ====== ======
Weighted average number of common units -basic and
diluted 77,210 66,303 73,225 66,169
====== ====== ====== ======
_________
(1) Exclusive of operations and maintenance and depreciation, amortization and
impairment shown separately below.
COPANO ENERGY, L.L.C. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
-----------------------
2012 2011
---- ----
Cash Flows From Operating Activities: (In thousands)
Net loss $(138,970) $(156,312)
Adjustments to
reconcile net loss
to net cash
provided by
operating
activities:
Depreciation and
amortization 77,104 69,156
Impairment 29,486 8,409
Amortization of
debt issue costs 3,999 3,764
Equity in loss
from
unconsolidated
affiliates 137,088 145,324
Distributions
from
unconsolidated
affiliates 43,031 31,623
Gain on sale of
operating assets (9,941) -
Loss on
refinancing of
unsecured debt - 18,233
Non-cash gain on
risk management
activities, net (2,996) (3,523)
Equity-based
compensation 8,195 11,558
Deferred tax
provision 295 317
Other non-cash
items, net 4,870 162
Changes in assets
and liabilities:
Accounts
receivable (6,725) (19,475)
Prepayments
and other
current
assets (441) 245
Risk
management
activities 10,627 18,343
Accounts
payable (6,999) 29,812
Other current
liabilities 202 (6,404)
Net cash provided by
operating activities 148,825 151,232
------- -------
Cash Flows From Investing Activities:
Additions to
property, plant and
equipment (322,251) (218,929)
Additions to
intangible assets (10,389) (20,698)
Acquisitions - (16,084)
Investments in
unconsolidated
affiliates (72,313) (121,967)
Distributions from
unconsolidated
affiliates 4,443 3,848
Escrow cash - 8
Proceeds from sale
of assets 24,124 260
Other, net 2,492 (2,752)
Net cash used in investing
activities (373,894) (376,314)
-------- --------
Cash Flows From Financing Activities:
Proceeds from long-
term debt 530,375 825,000
Repayment of long-
term debt (523,000) (422,665)
Retirement of
unsecured debt - (14,572)
Deferred financing
costs (3,540) (15,783)
Distributions to
unitholders (171,586) (153,062)
Proceeds from public
offering of common
units, net of
underwriting
discounts and
commissions 405,355 -
Equity offering
costs (15,910) (5)
Proceeds from option
exercises 1,331 3,201
Net cash provided by
financing activities 223,025 222,114
------- -------
Net decrease in cash and cash equivalents (2,044) (2,968)
Cash and cash equivalents, beginning of year 56,962 59,930
Cash and cash equivalents, end of year $54,918 $56,962
======= =======
COPANO ENERGY, L.L.C. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
December 31,
------------
2012 2011
---- ----
(In thousands, except unit
information)
ASSETS
Current assets:
Cash and cash
equivalents $54,918 $56,962
Accounts
receivable, net 126,909 119,193
Risk management
assets 16,183 4,322
Prepayments and
other current
assets 5,555 5,114
Total current assets 203,565 185,591
------- -------
Property, plant and equipment, net 1,372,509 1,103,699
Intangible assets, net 162,071 192,425
Investments in unconsolidated affiliates 431,447 544,687
Escrow cash 1,848 1,848
Risk management assets 1,881 6,452
Other assets, net 26,843 29,895
------ ------
Total assets $2,200,164 $2,064,597
========== ==========
LIABILITIES AND MEMBERS' CAPITAL
Current liabilities:
Accounts payable $162,147 $155,921
Accrued capital
expenditures 11,306 7,033
Accrued interest 11,089 8,686
Accrued tax
liability 1,551 1,182
Risk management
liabilities - 3,565
Other current
liabilities 20,034 15,007
Total current liabilities 206,127 191,394
------- -------
Long term debt (includes $3,124 and $0 bond premium as of
December 31,
2012 and 2011,
respectively) 1,001,649 994,525
Deferred tax liability 2,494 2,199
Risk management and other noncurrent liabilities 9,618 4,581
Commitments and contingencies
Members' capital:
Series A
convertible
preferred
units, no par
value,
12,897,029
units and
11,684,074
units
issued and outstanding as of
December 31, 2012 and 2011,
respectively 285,168 285,168
Common units, no
par value,
78,966,408
units and
66,341,458
units issued
and
outstanding as of December 31,
2012 and 2011, respectively 1,555,468 1,164,853
Paid in capital 72,916 62,277
Accumulated deficit (935,482) (624,121)
Accumulated other comprehensive income (loss) 2,206 (16,279)
----- -------
980,276 871,898
------- -------
Total liabilities and members'
capital $2,200,164 $2,064,597
========== ==========
COPANO ENERGY, L.L.C. AND SUBSIDIARIES
UNAUDITED RESULTS OF OPERATIONS
Three Months Ended December 31, Year Ended December 31,
------------------------------- -----------------------
2012 2011 2012 2011
---- ---- ---- ----
($ in thousands)
Total segment gross margin(1) $74,336 $62,091 $287,106 $252,575
Operations and maintenance expenses 21,772 18,373 77,943 65,326
Depreciation and amortization 19,695 18,013 77,104 69,156
Impairment 742 3,409 29,486 8,409
General and administrative expenses 11,709 14,150 50,648 48,680
Taxes other than income 1,933 1,101 7,392 5,130
Equity in loss (earnings) from unconsolidated affiliates(2)(3) 47,355 (13,257) 137,088 145,324
Gain on sale of operating assets (225) - (9,941) -
---- --- ------ ---
Operating (loss) income(2)(3) (28,645) 20,302 (82,614) (89,450)
Loss on refinancing of unsecured debt - - - (18,233)
Interest and other financing costs, net (12,425) (12,708) (54,678) (47,127)
Provision for income taxes (272) (341) (1,678) (1,502)
---- ---- ------ ------
Net (loss) income (41,342) 7,253 (138,970) (156,312)
Preferred unit distributions (9,366) (8,486) (36,117) (32,721)
Net loss to common units $(50,709) $(1,233) $(175,087) $(189,033)
======== ======= ========= =========
Total segment gross margin:
Texas $54,646 $48,752 $204,324 $184,437
Oklahoma 21,150 25,457 88,468 $105,080
Rocky Mountains(4) (237) 396 932 $2,641
Segment gross margin 75,559 74,605 293,724 292,158
Corporate and other(5) (1,223) (12,514) (6,618) $(39,583)
Total segment gross margin(1) $74,336 $62,091 $287,106 $252,575
======= ======= ======== ========
Segment gross margin per unit:
Texas:
Service throughput ($/MMBtu) $0.73 $0.65 $0.62 $0.70
Oklahoma:
Service throughput ($/MMBtu) $0.76 $0.90 $0.77 $1.00
Volumes:
Texas: (6)
Service throughput (MMBtu/d)(7)(8) 814,684 818,343 895,212 726,944
Pipeline throughput (MMBtu/d) 518,355 517,439 552,078 456,686
Plant inlet volumes (MMBtu/d)(8) 755,395 718,696 811,813 639,194
NGLs produced (Bbls/d)(8) 56,434 33,770 48,802 28,736
Oklahoma:(9)
Service throughput (MMBtu/d)(7)(8) 303,645 307,346 315,029 287,408
Plant inlet volumes (MMBtu/d)(8) 162,057 159,344 158,754 155,675
NGLs produced (Bbls/d) 16,390 17,471 16,644 17,498
Capital Expenditures:
Maintenance capital
expenditures $2,869 $2,379 $10,853 $13,490
Expansion capital
expenditures 88,693 56,227 348,487 259,803
Total capital expenditures $91,562 $58,606 $359,340 $273,293
======= ======= ======== ========
Operations and maintenance expenses:
Texas $13,911 $11,284 $47,352 $38,099
Oklahoma 7,742 7,039 30,334 26,982
Rocky Mountains 119 50 257 245
Total operations and maintenance expenses $21,772 $18,373 $77,943 $65,326
======= ======= ======= =======
(1) Total segment
gross margin
is a non-GAAP
financial
measure.
Please read
Unaudited Non-
GAAP Financial
Measures" for
a
reconciliation
of total
segment gross
margin to its
most directly
comparable
GAAP measure
of operating
income.
(2) During the
three months
ended March
31, 2012 and
December 31,
2012, Copano
recorded a
$120 million
and $66.3
million non-
cash
impairment
charge,
respectively,
relating to
its
investments in
Bighorn and
Fort Union.
(3) The following
table
summarizes the
results and
volumes
associated
with Copano's
unconsolidated
affiliates ($
in thousands):
Three Months Ended December 31,
2012 2011
---- ----
Volume Equity (Earnings)/Loss Volume Equity (Earnings)/Loss
------ ---------------------- ------ ----------------------
Eagle Ford Gathering $(13,837) $(9,240)
Pipeline throughput (MMBtu/d) 406,425 145,551
NGLs produced(a) (Bbls/d) 17,450 6,735
Liberty Pipeline Group (Bbls/d) 27,558 131 4,946 211
Webb Duval(b) (MMBtu/d) 48,437 15 61,411 (111)
Southern Dome (411) (393)
Plant inlet (MMBtu/d) 12,095 10,287
NGLs produced (Bbls/d) 417 358
Bighorn and Fort Union(c) (MMBtu/d) 675,662 61,186 630,843 (3,710)
Year Ended December 31,
2012 2011
---- ----
Volume Equity (Earnings)/Loss Volume Equity (Earnings)/Loss
------ ---------------------- ------ ----------------------
Eagle Ford Gathering $(34,919) $(11,218)
Pipeline throughput(d) (MMBtu/d) 296,965 46,456
NGLs produced (Bbls/d) 12,528 1,698
Liberty Pipeline Group(e) (Bbls/d) 22,029 442 1,876 270
Webb Duval(b) (MMBtu/d) 56,732 (240) 51,907 146
Southern Dome (1,104) (2,415)
Plant inlet (MMBtu/d) 9,961 11,292
NGLs produced (Bbls/d) 351 403
Bighorn and Fort Union(c) (MMBtu/d) 726,026 172,926 604,261 158,592
(a) Net of NGLs produced at Copano's
Houston Central complex.
(b) Net of intercompany volumes.
(c) Changes in pipeline throughput at
Fort Union did not have a material
impact on gross margin because
Fort Union received payments for
additional volumes under long-
term contractual commitments in
each of the periods indicated.
(d) For year ended December 31, 2011,
the volume has been recast from
110,827 MMBtu/d, as previously
stated, to show daily flow
averaged over the 365 days instead
of the 153 days of physical flow.
(e) For the year ended December 31,
2011, the volume has been recast
from 4,597 Bbls/d, as previously
stated, to show daily flow
averaged over the 365 days instead
of the 149 days of physical flow.
(4) Rocky Mountains segment gross margin
includes results from producer
services, including volumes
purchased for resale, volumes
gathered under firm capacity
gathering agreements with Fort
Union, volumes transported using
Copano's firm capacity agreements
with Wyoming Interstate Gas Company
and compressor rental services
provided to Bighorn.
(5) Corporate and other includes results
attributable to Copano's commodity
risk management activities.
(6) Plant inlet volumes and NGLs
produced represent total volumes
processed and produced by the Texas
segment at all plants, including
plants owned by the Texas segment
and plants owned by third parties.
(7) "Service throughput" means the
volume of natural gas delivered to
Copano's 100%-owned processing
plants by third-party pipelines
plus Copano's "pipeline
throughput," which is the volume of
natural gas transported or gathered
through Copano's pipelines.
(8) Volumes for the three months and
year ended December 31, 2011 have
been recast from the following
results to reflect daily flow
averaged over the 92 and 365 day
periods instead of the actual days
of physical flow.
Three Months Ended Year Ended
December 31, 2011 December 31, 2011
----------------- -----------------
Texas
Service throughput
(MMBtu/d) 844,469 795,497
Plant inlet volumes
(MMBtu/d) 803,282 758,588
NGLs produced (Bbls/
d) 33,951 29,147
Oklahoma
Service throughput
(MMBtu/d) N/A 291,532
Plant inlet volumes
(MMBtu/d) N/A 160,406
(9) Plant inlet volumes and NGLs
produced represent total
volumes processed and
produced by the Oklahoma
segment at all plants,
including plants owned by
the Oklahoma segment and
plants owned by third
parties.
COPANO ENERGY, L.L.C. AND SUBSIDIARIES
UNAUDITED NON-GAAP FINANCIAL MEASURES
Three Months Ended Three Months
Ended
September 30,
2012 Year Ended December 31,
December 31,
------------
2012 2011 2012 2011
---- ---- ---- ----
(In thousands)
Reconciliation of total segment gross margin to operating (loss)
income:
Operating (loss) income $(28,645) $20,302 $43,185 $(82,614) $(89,450)
Add: Operations and
maintenance
expenses 21,772 18,373 19,242 77,943 65,326
Depreciation and
amortization 19,695 18,013 19,259 77,104 69,156
Impairment 742 3,409 - 29,486 8,409
General and
administrative
expenses 11,709 14,150 13,697 50,648 48,680
Taxes other than
income 1,933 1,101 1,983 7,392 5,130
Equity in loss
(earnings) from
unconsolidated
affiliates 47,355 (13,257) (12,558) 137,088 145,324
Gain on sale of
operating
assets (225) - (9,716) (9,941) -
Total segment gross margin $74,336 $62,091 $75,092 $287,106 $252,575
======= ======= ======= ======== ========
Reconciliation of EBITDA, adjusted EBITDA and total distributable
cash
flow to net (loss)
income:
Net (loss) income $(41,342) $7,253 $28,925 $(138,970) $(156,312)
Add: Depreciation and
amortization 19,695 18,013 19,259 77,104 69,156
Interest and
other financing
costs 12,441 12,737 13,797 55,264 47,187
Provision for
income taxes 272 341 474 1,678 1,502
--- --- --- ----- -----
EBITDA (8,934) 38,344 62,455 (4,924) (38,467)
Add: Amortization of
commodity
derivative
options 5,755 7,448 5,924 21,757 29,517
Distributions
from
unconsolidated
affiliates 12,967 15,142 11,994 47,475 35,471
Loss on
refinancing of
unsecured debt - - - - 18,233
Equity-based
compensation 2,999 4,081 3,223 10,574 13,265
Equity in loss
(earnings) from
unconsolidated
affiliates 47,355 (13,257) (12,558) 137,088 145,324
Unrealized loss
(gain) from
commodity risk
management
activities 1,485 2,145 2,583 (333) (550)
Impairment 742 3,409 - 29,486 8,409
Other non-cash
operating items (1,433) 390 (591) 1,461 118
------ --- ---- ----- ---
Adjusted EBITDA 60,936 57,702 73,030 242,584 211,320
Less: Cash interest
and other
financing costs (11,652) (12,772) (13,745) (54,178) (46,395)
Provision for
income taxes
and other (217) (278) (419) (1,383) (1,207)
Maintenance
capital
expenditures (2,869) (2,379) (1,743) (10,853) (13,490)
Total distributable cash flow (1) $46,198 $42,273 $57,123 $176,170 $150,228
======= ======= ======= ======== ========
Actual quarterly distribution $46,108 $42,064
=== ======= =======
Total distributable cash flow coverage 100% 101%
=== ===
__________
(1) Prior to any retained cash reserves established by Copano's Board of Directors.
SOURCE Copano Energy, L.L.C.
