El Paso Corp : El Paso Pipeline Partners Reports First Quarter 2012 Results
05/03/2012| 09:48am US/Eastern
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HOUSTON, TX, May 03, 2012 (MARKETWIRE via COMTEX) --El Paso
Pipeline Partners, L.P. (NYSE: EPB) is reporting today first
quarter 2012 financial and operational results for the
partnership.
First Quarter 2012 Highlights:
-- $0.54 earnings per common unit
-- $170 million distributable cash flow, a 12 percent increase from first
quarter 2011
-- $246 million adjusted earnings before interest, taxes, depreciation
and amortization (Adjusted EBITDA), up 7 percent from 2011 levels
-- Raised quarterly cash distributions to $0.51 per common unit, an 11
percent increase from first quarter 2011
"We've started the year with another quarter of good
results," said Jim Yardley, president and chief
executive officer of the general partner of El Paso Pipeline
Partners. "The partnership continues to grow; as a
result, we raised the quarterly distributions to our
unitholders for the 16th consecutive time, something
we've done every quarter since our initial public
offering (IPO) in November 2007."
A summary of financial results for the quarters ended March
31, 2012 and 2011 is as follows:
Quarters Ended
Financial Results March 31,
--------------------
($ in millions, except per-unit amount) 2012 2011
--------------------
Operating revenues $ 363 $ 366
Operating expenses
Operation and maintenance 95 92
Depreciation and amortization 43 41
Taxes, other than income 19 17
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Operating income 206 216
Earnings from unconsolidated affiliates 3 4
Other income, net 2 2
Interest and debt expense, net (69) (59)
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Net income 142 163
Net income attributable to noncontrolling interests (7) (48)
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Net income attributable to EPB $ 135 $ 115
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Net income attributable to limited partners $ 111 $ 103
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Net income attributable to EPB per common unit -
basic and diluted $ 0.54 $ 0.57
Weighted average common units outstanding 206 180
Financial Results The partnership's first quarter
financial results reflect the benefits of acquisitions during
2011 and the completion of the first two phases of the
Southern Natural Gas (SNG) South System III Expansion.
Acquisitions included an aggregate 40 percent additional
interest in SNG in March and June 2011 and an additional 28
percent interest in Colorado Interstate Gas (CIG) in June
2011. The benefits of acquisitions and expansions were
partially offset by nonrenewal and restructuring of expiring
contracts.
Net income attributable to limited partners continues to
grow; as the partnership reported $111 million for the first
quarter of 2012, which is an 8 percent jump from the same
2011 period. However, earnings per common unit were slightly
lower than a year ago due to higher general partner
distributions and an increase in weighted average units
outstanding.
Adjusted EBITDA grew 7 percent to $246 million, while
distributable cash flow was up 12 percent to $170 million.
Adjusted EBITDA and distributable cash flow were higher as a
result of the acquisition of 15 percent of SNG and 28 percent
of CIG in June 2011 and the expansion projects referenced
above. Also contributing to the increase was lower
maintenance capital costs, as a result of project timing,
which was partially offset by higher interest expenses.
Distribution coverage remained strong at 1.3 for the first
quarter of 2012.
Interest and Debt Expense For the first quarter 2012,
interest and debt expense increased $10 million from the same
period in 2011. The higher interest expense is due to higher
average debt outstanding that was used to fund acquisitions
and organic expansion projects. The increase was also
attributable to the 2011 debt issuance of $500 million by the
partnership and $300 million by SNG. Partially offsetting the
debt issuances was a lower average balance outstanding under
the revolving credit facility.
Quarterly Cash Distribution Increase On April 20, 2012, the
partnership announced an increase to its quarterly cash
distribution for the first quarter 2012 to $0.51 per unit,
which is an 11 percent increase from the distribution for the
first quarter 2011. The distribution, which will be paid on
May 15, 2012, continues the partnership's successful
track record of increasing its cash distribution every
quarter since its IPO in November 2007.
Pipeline Throughput Pipeline throughput volumes for the first
quarter 2012 increased 5 percent compared with the same
period in 2011. The increase was primarily due to higher
volumes on Wyoming Interstate Company and increased power
generation on SNG, partially offset by lower demand on CIG
due to mild winter weather along the Front Range of the
Rockies. Throughput volumes, however, have minimal impact on
near-term financial results, as more than 90 percent of the
partnership's revenues are derived by fixed reservation
charges.
Capital Expenditures During the first quarter 2012, the
partnership invested $17 million of growth capital, primarily
for Phase III of SNG's South System III expansion, which
is expected to be placed in service in June 2012. Once
completed, this three-phase expansion will have increased
SNG's system capacity by 10 percent. Maintenance capital
expenditures for the first quarter 2012 totaled $9 million
which was lower during the first quarter as a result of
project timing.
Offer to Purchase Assets From El Paso Corporation On April
18, the partnership announced that it received a proposal
from El Paso Corporation (NYSE: EP) to purchase the remaining
14 percent of CIG and all of Cheyenne Plains Investment
Company, L.L.C., which owns Cheyenne Plains Gas Pipeline
Company, L.L.C. The Board of Directors of EPB's general
partner has formed a committee made up of independent
directors to review the proposal. Following the
committee's review, the proposal must also be approved by
EPB's general partner's full Board of Directors. If
approved, the transaction is expected to close
contemporaneously with Kinder Morgan, Inc.'s (NYSE: KMI)
acquisition of El Paso Corporation and be immediately
accretive to distributable cash flow.
The partnership's financial statements are available in
the Investors section of its web site at
www.eppipelinepartners.com. The partnership's March 31,
2012 Form 10-Q will be filed with the Securities and Exchange
Commission (SEC) and will be available on the
partnership's website. Copies of all documents filed with
the SEC, including the partnership's financial
statements, are also available, free of charge, by calling
(888) 287-3228.
El Paso Pipeline Partners, L.P. is a Delaware limited
partnership formed by El Paso Corporation to own and operate
natural gas transportation pipelines and storage assets. El
Paso Corporation owns a 42 percent limited partner interest,
and the 2 percent general partner interest in the
partnership. El Paso Pipeline Partners, L.P. owns Wyoming
Interstate Company, L.L.C. (WIC), Southern LNG Company,
L.L.C. (SLNG), Elba Express Company, L.L.C. (Elba Express),
Southern Natural Gas Company, L.L.C. (SNG), and an 86 percent
interest in Colorado Interstate Gas Company, L.L.C. (CIG).
WIC and CIG are interstate pipeline systems serving the Rocky
Mountain region, SLNG owns the Elba Island LNG storage and
regasification terminal near Savannah, Georgia, and both Elba
Express and SNG are interstate pipeline systems serving the
southeastern region of the United States.
Disclosure of Non-GAAP Financial Measures The SEC's
Regulation G applies to any public disclosure or release of
material information that includes a non-GAAP financial
measure. In the event of such a disclosure or release,
Regulation G requires (i) the presentation of the most
directly comparable financial measure calculated and
presented in accordance with GAAP and (ii) a reconciliation
of the differences between the non-GAAP financial measure
presented and the most directly comparable financial measure
calculated and presented in accordance with GAAP. The
required presentations and reconciliations are attached, or
included in the body of this release. Additional detail
regarding non-GAAP financial measures can be reviewed in El
Paso Pipeline Partners' Financial and Operational
Reporting Package, which will be posted at
www.eppipelinepartners.com in the Investors section.
We use the non-GAAP financial measure Distributable Cash Flow
as it provides important information relating to the
relationship between our financial operating performance and
our cash distribution capability. Additionally, we use
Distributable Cash Flow in setting forward expectations and
in communications with our board of directors of our general
partner. We define Distributable Cash Flow as Adjusted EBITDA
less cash interest expense, net, maintenance capital
expenditures and adjusted for other income and expenses, net,
which primarily includes deferred revenue, allowance for
equity funds used during construction, and other non-cash
items.
We use earnings before interest and taxes, or EBIT, as a
measure to assess the operating results and effectiveness of
our business, which consists of consolidated operations as
well as investments in unconsolidated affiliates. We believe
EBIT is useful to investors as it provides them with the same
measure used by El Paso to evaluate our performance and it
enables them to evaluate our operating results without regard
to our financing methods or capital structure. We define the
non-GAAP financial measure EBIT as net income adjusted for
interest and debt expense, net, and net income attributable
to noncontrolling interest.
Adjusted EBITDA is defined as net income adjusted for (i)
interest and debt expense, net of interest income, (ii)
depreciation and amortization expense, (iii) the
partnership's share of distributions declared by
unconsolidated affiliates for the applicable period, (iv)
earnings from unconsolidated affiliates, and (v)
distributions declared by majority-owned subsidiaries to El
Paso Corporation for the applicable period.
We believe that the non-GAAP financial measures described
above are also useful to investors because these measurements
are used by many companies in the industry as a measurement
of operating and financial performance and are commonly
employed by financial analysts and others to evaluate the
operating and financial performance of the partnership and to
compare it with the performance of other publicly traded
partnerships within the industry. These non-GAAP financial
measures may not be comparable to similarly titled measures
used by other companies and should not be used as a
substitute for net income, earnings per unit, operating
income, cash flow from operating activities or other measures
of financial performance presented in accordance with GAAP.
Furthermore, these non-GAAP measures should not be viewed as
indicative of the actual amount of cash that we have
available for distributions or that we plan to distribute for
a given period, nor should they be equated to available cash
as defined in our partnership agreement.
Quarters Ended
Non-GAAP Reconciliation Schedule March 31,
--------------------
($ millions) 2012 2011
--------------------
Net income $ 142 $ 163
Net income attributable to noncontrolling interest (7) (48)
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Net income attributable to EPB $ 135 $ 115
Add: Interest and debt expense, net 69 59
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Earnings before interest expense and income taxes
(EBIT) 204 174
Add: Depreciation and amortization 43 41
Distributions declared by unconsolidated affiliates 3 5
Net income attributable to noncontrolling interest 7 48
Less: Earnings from unconsolidated affiliates (3) (4)
Distributions declared by majority-owned
subsidiaries to El Paso Corporation(1) (8) (34)
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Adjusted EBITDA $ 246 $ 230
Less: Cash interest expense, net (66) (57)
Maintenance capital expenditures (9) (20)
Other, net(2) (1) (1)
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Distributable cash flow $ 170 $ 152
======== ========
(1) In 1Q 2012, declared distributions include $8 million
from CIG. In 1Q 2011, declared distributions include $22
million from CIG and $12 million from SNG (2) Includes
deferred revenue and certain non-cash items such as AFUDC
equity and other items
Cautionary Statement Regarding Forward-Looking Statements
This release includes forward-looking statements and
projections, made in reliance on the safe harbor provisions
of the Private Securities Litigation Reform Act of 1995. El
Paso Pipeline Partners has made every reasonable effort to
ensure that the information and assumptions on which these
statements and projections are based are current, reasonable,
and complete. However, a variety of factors could cause
actual results to differ materially from the projections,
anticipated results or other expectations expressed in this
release, including, without limitation, our ability to
complete any asset purchases from El Paso Corporation;
volatility in, and access to capital markets, the ability to
obtain necessary governmental approvals for proposed pipeline
projects and to successfully construct such projects on a
timely basis and within estimated costs; operating hazards,
natural disasters, weather-related delays, casualty losses
and other matters beyond our control; the risks associated
with contracting and recontracting of transportation
commitments; regulatory uncertainties associated with
pipeline rate cases; actions taken by customers, third-party
operators, processors and transporters; conditions in
geographic regions or markets served by El Paso Pipeline
Partners and its affiliates and equity investees or where its
operations and affiliates are located; the effects of
existing and future laws and governmental regulations;
competitive conditions in our industry; changes in the
availability and cost of capital; and other factors described
in El Paso Pipeline Partners' (and its affiliates')
Securities and Exchange Commission filings. While these
statements and projections are made in good faith, El Paso
Pipeline Partners and its management cannot guarantee that
anticipated future results will be achieved. Reference must
be made to those filings for additional important factors
that may affect actual results. El Paso Pipeline Partners
assumes no obligation to publicly update or revise any
forward-looking statements made herein or any other
forward-looking statements made, whether as a result of new
information, future events, or otherwise.
Contacts:
Investor & Media Relations
Bruce Connery
Vice President
(713) 420-5855
Media Relations
Bill Baerg
Manager
(713) 420-2906
SOURCE: El Paso Pipeline Partners
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