Chesapeake Midstream Partners, L.P. Reports Financial Results for the 2011 Fourth Quarter and Full Year
Chesapeake Midstream Partners, L.P. (NYSE:CHKM) today announced financial results for the 2011 fourth quarter and full year. The Partnership’s 2011 fourth quarter net income totaled $66.3 million, down $23.6 million from the 2010 fourth quarter.
- (1888PressRelease) February 29, 2012 - Adjusted ebitda for the 2011 fourth quarter was $110.0 million, down $5.6 million, or 4.8%, from 2010 fourth quarter adjusted ebitda of $115.6 million. The fourth quarter results include revenue associated with minimum volume commitments (MVC) of $17.4 million in 2011 as compared to $56.8 million in 2010. Annual revenue from MVC is recognized in the fourth quarter of each year. After eliminating the MVC impact in each period, fourth quarter adjusted ebitda was up 57.5% and net income was up 47.8%.
The Partnership’s 2011 full year net income was $194.3 million, down $0.9 million, or 0.5%, compared to 2010 full year net income of $195.2 million. Adjusted ebitda for the 2011 full year was $349.5 million, an increase of $55.5 million, or 18.9%, compared to 2010 adjusted ebitda of $294.0 million.
Adjusted distributable cash flow (DCF) for the 2011 fourth quarter totaled $78.9 million, an increase of $30.0 million, or 61.3%, compared to the 2010 fourth quarter and resulted in a coverage ratio of 1.34. DCF for the 2011 full year was $262.0 million and resulted in a full year coverage ratio of 1.23. Financial terms are defined on pages three and four of this release.
Throughput for the 2011 fourth quarter totaled 213.4 billion cubic feet (bcf) of natural gas, or 2.32 bcf per day, an increase of 41.5% from 2010 fourth quarter throughput of 1.64 bcf per day. For the 2011 full year, total throughput was 794.3 bcf of natural gas, or 2.18 bcf per day, an increase of 36.3% from 2010 full year throughput of 1.60 bcf per day. The increases in throughput were driven by the Haynesville Springridge gas gathering system acquired in December 2010 and strong well-connect performance in the Barnett Shale region. The Partnership connected 166 new wells to its gathering systems during the 2011 fourth quarter, an increase of 31.7% compared to the 2010 fourth quarter, resulting in the most well connects for any quarter during 2011. For the 2011 full year, the Partnership connected 610 wells to its systems, an increase of 42.9% compared to 2010.
Partnership revenue for the 2011 fourth quarter was $169.1 million, an increase of $6.6 million, or 4.1%, compared to 2010 fourth quarter revenue of $162.5 million. After eliminating revenue related to MVC in each period, fourth quarter revenue was up 43.5%. For the 2011 full year, Partnership revenue was $565.9 million, an increase of $106.7 million or 23.2%, compared to 2010 full year revenue of $459.2 million.
Capital expenditures during the 2011 fourth quarter totaled $92.2 million, including maintenance capital expenditures of $18.5 million. Capital expenditures for the 2011 full year totaled $418.8 million, including maintenance capital expenditures of $74.0 million.
Partnership Completes Acquisition
On December 29, 2011, the Partnership closed its second significant acquisition, acquiring 100% of Chesapeake’s interest in Appalachia Midstream Services which owns an average 47% of the 10 gas gathering systems in the Marcellus Shale consisting of approximately 200 miles of gathering pipeline in West Virginia and Pennsylvania. At the end of 2011, total gross throughput for these systems was just over 1.0 bcf per day. The acquisition broadens the Partnership’s operating footprint, increases its basin and customer diversification, increases its exposure to liquids-rich plays and provides access to the Marcellus Shale, the largest and most profitable gas shale in North America.
Partnership Increases Cash Distribution
On January 27, 2012, the Board of Directors of the Partnership’s general partner declared a quarterly cash distribution of $0.39 per unit for the 2011 fourth quarter, a $0.0525, or 15.6%, increase over the 2010 fourth quarter distribution and a $0.015, or 4.0%, increase over the 2011 third quarter distribution. The distribution was paid on February 14, 2012 to unitholders of record at the close of business on February 7, 2012. Adjusted DCF for the 2011 fourth quarter of $78.9 million provided distribution coverage of 1.34 times the amount required for the Partnership to fund the distribution to both the general and limited partners.
Outlook for 2012 Unchanged
The Partnership is projecting ebitda for the twelve months ending December 31, 2012 to be $475 million with expansion capital expenditures of $660 million and maintenance capital expenditures of $74 million.
Management Comments
J. Mike Stice, Chesapeake Midstream Partners’ Chief Executive Officer, commented, “I’m pleased to report results exceeding expectations for the 2011 fourth quarter and full year. Our business model is performing exactly as anticipated. With the Marcellus assets now in our portfolio, we are well positioned to continue delivering steady, growing cash flows for investors. After recent announcements of curtailments by producers in dry gas plays, we conducted a thorough review of our business plans and are confident in affirming our outlook for 2012. This is a testament to the resiliency of our low risk business model and related contractual protections.”
Conference Call Information
A conference call to discuss this release of financial results has been scheduled for Wednesday, February 29, 2012 at 9:00 a.m. EST. The telephone number to access the conference call is 719-325-4835 or toll-free 877-545-1403. The passcode for the call is 3415504. We encourage those who would like to participate in the call to dial the access number between 8:50 and 9:00 a.m. EST. For those unable to participate in the conference call, a replay will be available for audio playback from 12:00 p.m. EST on February 29, 2012 through 12:00 p.m. EDT on March 14, 2012. The number to access the conference call replay is 719-457-0820 or toll-free 888-203-1112. The passcode for the replay is 3415504. The conference call will also be webcast live on the Internet and can be accessed by going to the Partnership’s website at www.chkm.com in the "Events" subsection of the "Investors" section of the website. An archive of the conference call webcast will also be available on the website.
Use of Non-GAAP Financial Measures
This press release and accompanying schedules include the non-GAAP financial measures of adjusted ebitda, DCF and adjusted DCF. The accompanying schedules provide reconciliations of these non-GAAP financial measures to their most directly comparable financial measures calculated and presented in accordance with GAAP. Non-GAAP financial measures should not be considered as an alternative to GAAP measures such as net income, net cash provided by operating activities or any other measure of liquidity or financial performance calculated and presented in accordance with GAAP. Investors should not consider adjusted ebitda, DCF or adjusted DCF in isolation or as a substitute for analysis of the Partnership’s results as reported under GAAP. Because these non-GAAP financial measures may be defined differently by other companies in our industry, the Partnership’s definition of adjusted ebitda, DCF and adjusted DCF may not be comparable to similarly titled measures of other companies, thereby diminishing their utility.
Adjusted Ebitda. The Partnership agreement defines adjusted ebitda as net income (loss) before income tax expense, interest expense, depreciation and amortization expense and certain other items management believes affect the comparability of operating results. Adjusted ebitda is a non-GAAP financial measure that management and external users of our consolidated financial statements, such as industry analysts, investors, lenders and rating agencies, may use to assess:
The Partnership’s operating performance as compared to other publicly traded partnerships in the midstream energy industry, without regard to capital structure, historical cost basis or financing methods;
The Partnership’s ability to incur and service debt and fund capital expenditures;
The ability of the Partnership’s assets to generate sufficient cash flow to make distributions to unitholders; and
The viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities.
Management believes it is appropriate to exclude certain items from ebitda because management believes these items affect the comparability of operating results. The Partnership believes that the presentation of adjusted ebitda in this press release provides information useful to investors in assessing its financial condition and results of operations. The GAAP measure most directly comparable to adjusted ebitda is net income.
Distributable Cash Flow. The Partnership agreement defines DCF as adjusted ebitda attributable to the Partnership adjusted for:
Addition of interest income;
Subtraction of net cash paid for interest expense;
Subtraction of maintenance capital expenditures; and
Subtraction of income taxes.
Management compares the DCF the Partnership generates to the cash distributions it expects to pay its partners. Using this metric, management computes a distribution coverage ratio. DCF is an important non-GAAP financial measure for our limited partners since it serves as an indicator of our success in providing a cash return on investment. Specifically, this financial measure indicates to investors whether or not the Partnership is generating cash flows at a level that can sustain or support an increase in its quarterly cash distributions. DCF is also a quantitative standard used by the investment community with respect to publicly traded partnerships because the value of a partnership unit is in part measured by its yield, which is based on the amount of cash distributions a partnership can pay to a unitholder. The GAAP measure most directly comparable to DCF is net cash provided by operating activities.
Adjusted Distributable Cash Flow. The Partnership includes the quarterly impact of contractual minimum volume commitments that are not recognized until the fourth quarter of each year in its calculation of adjusted DCF for the purpose of calculating the distribution coverage ratio.
Chesapeake Midstream Partners, L.P. (NYSE:CHKM) is the industry’s largest gathering and processing master limited partnership as measured by throughput volume and owns, operates, develops and acquires natural gas gathering systems and other midstream energy assets. Headquartered in Oklahoma City, the Partnership's operations are focused on the Barnett Shale, Haynesville Shale, Marcellus Shale and Mid-Continent regions of the U.S. The Partnership’s common units are listed on the New York Stock Exchange under the symbol CHKM. Further information is available at www.chkm.com, where the Partnership routinely posts announcements, updates, events, investor information and presentations and all recent press releases.
Investor Contact:
Dave Shiels, CFO, 405-935-6224
dave.shiels ( @ ) chk dot com
or
Media Contact:
Michael Kehs, 405-935-2560
michael.kehs ( @ ) chk dot com
or
Jim Gipson, 405-935-1310
jim.gipson ( @ ) chk dot com
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