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 $0.51 per common unit,
an 11 percent increase from first quarter 2011
"We've started the year with another quarter of good results,"
said Jim Yardley, president and chief executive officer of the
general partner of El Paso Pipeline Partners. "The partnership
continues to grow; as a result, we raised the quarterly
distributions to our unitholders for the 16th consecutive time,
something we've done every quarter since our initial public
offering (IPO) in November 2007."
A summary of financial results for the quarters ended March 31,
2012 and 2011 is as follows:
Quarters Ended
Financial Results March 31,
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($ in millions, except per-unit amount) 2012 2011
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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,
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($ millions) 2012 2011
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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
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(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
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