PAA Natural Gas Storage, L.P. (NYSE: PNG) reported third-quarter
2013 results as summarized below:
Summary Financial
Information(1)
(in millions, except per unit data)
Three Months EndedSeptember
30,
Nine Months EndedSeptember
30,
2013 2012
% Change 2013 2012
% Change Net income $ 12.1 $ 17.9
(32.2)% $ 46.7 $ 50.9 (8.3)%
Net income per diluted
limited partner unit (2) $ 0.16 $ 0.24 (33.3)% $ 0.62 $
0.69 (10.1)%
EBITDA $ 24.5
$ 29.3 (16.6)% $ 83.6
$ 84.1 (0.6)%
Three Months EndedSeptember
30,
Nine Months EndedSeptember
30,
2013 2012
% Change 2013 2012
% Change Adjusted net income $ 15.0 $
18.3 (17.8)% $ 52.6 $ 54.0 (2.7)%
Adjusted net income per
diluted limited partner unit (2) $ 0.20 $ 0.25 (20.0)% $
0.70 $ 0.73 (4.1)%
Adjusted EBITDA
$ 27.3 $ 29.7 (8.0)% $ 89.5
$ 87.2 2.6 %
Distribution declared
for the period (2) $ 0.3575
$ 0.3575 - (1) The Partnership’s
reported results include the impact of items that affect
comparability between reporting periods. The impact of these items
is excluded from adjusted results. See the section of this release
entitled “Non-GAAP Financial Measures, Segment Financial Measures
and Selected Items Impacting Comparability” and the tables attached
hereto for information regarding selected items that the
Partnership believes impact comparability between reporting
periods, as well as for information regarding non-GAAP financial
measures (such as adjusted EBITDA) and their reconciliation to the
most directly comparable GAAP measures. (2) Series B subordinated
units are not entitled to cash distributions unless and until they
convert to Series A subordinated units or common units, which
conversion is contingent on our meeting both certain distribution
levels and certain in-service operational tests at our Pine Prairie
facility. As a result, the Series B subordinated units are not
included in the calculation of basic or diluted net income per unit
amounts.
The following table summarizes selected financial data for the
third quarter and first nine months of 2013:
Summary of
Selected Financial Data:
(in thousands)
Three Months EndedSeptember
30,
Nine Months EndedSeptember
30,
2013 2012 2013 2012
Revenues Firm storage services $ 35,463 $ 36,364 $ 107,020 $
105,646 Hub services and merchant storage (1) 19,346 28,176 188,290
166,268 Other 658 1,587 4,648 3,076
Total revenues 55,467 66,127 299,958 274,990
Storage-related costs (2) (22,675) (29,184) (189,984) (167,549)
Field operating costs (3,372) (2,974) (10,625) (9,030) General and
administrative expenses (4,959) (4,641) (15,713) (14,304) Other
income / (expense), net (8) (5) (23) 12
EBITDA $ 24,453 $ 29,323 $ 83,613 $ 84,119 Selected
items impacting comparability 2,893 388 5,872
3,076
Adjusted EBITDA $ 27,346 $ 29,711 $ 89,485 $
87,195
(1) Includes
revenues associated with sales of natural gas through commercial
marketing activities. (2) Includes costs associated with sales of
natural gas through commercial marketing activities.
Third-quarter 2013 adjusted EBITDA decreased 8.0% from
comparable 2012 results. This decrease is primarily related to the
timing of market opportunities in 2013 as compared to 2012. During
2013, market conditions facilitated the realization of merchant
storage revenues to a greater extent during the first half of 2013,
whereas during 2012 merchant storage revenues were realized more
predominately during the latter half of the year.
The Partnership’s common units and Series A subordinated units
outstanding as of September 30, 2013 totaled 73.1 million. An
additional 13.5 million Series B subordinated units (which are not
currently entitled to receive distributions) are outstanding and do
not convert to Series A subordinated units unless certain
performance conditions are met.
As of September 30, 2013, the Partnership had total debt
outstanding of approximately $550 million, long-term debt of
approximately $503 million, and committed liquidity of
approximately $198 million. $200 million of the Partnership’s debt
is owed to Plains All American Pipeline, L.P.
The Partnership will hold a joint conference call with Plains
All American Pipeline, L.P. (“PAA”) on November 5, 2013 (see
details below).
Conference Call
The Partnership’s joint conference call with PAA will be held at
11 a.m. EST on Tuesday, November 5, 2013. The following items will
be addressed:
- The Partnership’s third-quarter 2013
performance;
- Capitalization and liquidity; and
- Status of pending merger with PAA.
Conference Call Access Instructions
To access the Internet webcast of the conference call, please go
to the Partnership’s website at www.pnglp.com, select “Investor
Relations,” and then select “Conference Calls.” Following the live
webcast, the call will be archived for a period of sixty (60) days
on the Partnership’s website.
Alternatively, access to the live conference call is available
by dialing toll free (877) 531-2988. International callers should
dial (612) 332-0228. No password is required. The slide
presentation accompanying the conference call will be available a
few minutes prior to the call under the “Conference Call Summaries”
portion of the “Conference Calls” tab of the “Investor Relations”
section of the PNG website at www.pnglp.com.
Telephonic Replay Instructions
To listen to a telephonic replay of the conference call, please
dial (800) 475-6701 or (320) 365-3844 for international callers and
enter replay access code 303548. The replay will be available
beginning Tuesday, November 5, 2013, at approximately
1:00 p.m. EST and will continue until 12:59 a.m. EST on
December 6, 2013.
Non-GAAP Financial Measures, Segment Financial Measures and
Selected Items Impacting Comparability
To supplement our financial information presented in accordance
with GAAP, management uses adjusted EBITDA and distributable cash
flow in its evaluation of past performance and prospects for the
future. Management believes that the presentation of such
additional financial measures provides useful information to
investors regarding our financial condition and results of
operations because these measures, when used in conjunction with
related GAAP financial measures, (i) provide additional
information about our core operations and ability to generate and
distribute cash flow, (ii) provide investors with the
financial analytical framework upon which management bases
financial, operational, compensation and planning decisions and
(iii) present measurements that investors, rating agencies and
debt holders have indicated are useful in assessing us and our
results of operations. Adjusted EBITDA and/or distributable cash
flow may exclude, for example, the impact of unique and infrequent
items, items outside of management’s control and/or items that are
not indicative of our core operating results and business outlook,
which we define as “selected items impacting comparability.” We
consider an understanding of these selected items impacting
comparability to be material to our evaluation of our operating
results and prospects.
Although we present selected items that we consider in
evaluating our performance, you should also be aware that the items
presented do not represent all items that affect comparability
between the periods presented. Variations in our operating results
are also caused by changes in volumes, prices, mechanical
interruptions, acquisitions and numerous other factors. These types
of variations are not fully identified and discussed in this
release, but will be discussed, as applicable, in management's
discussion and analysis of operating results in our Quarterly
Report on Form 10-Q.
Adjusted EBITDA and other non-GAAP financial measures are
reconciled to net income, the most comparable GAAP measure, for the
periods presented in the tables attached to this release, and
should be viewed in addition to, and not in lieu of, our
consolidated financial statements and notes thereto. In addition,
the Partnership maintains on its website (www.pnglp.com) a
reconciliation of adjusted EBITDA and certain commonly used
non-GAAP financial information to the most comparable GAAP
measures. To access the information, investors should click on the
"Investor Relations" link on the Partnership's home page and then
the "Non-GAAP Reconciliations" link on the Investor Relations
page.
Forward Looking Statements
Except for the historical information contained herein, the
matters discussed in this release are forward-looking statements
that involve certain risks and uncertainties that could cause
actual results to differ materially from results anticipated in the
forward looking statements. These risks and uncertainties include,
among other things, factors affecting demand for natural gas
storage services and the rates we are able to charge for such
services, including the balance between the supply of and demand
for natural gas, the number of customers competing to acquire such
services and the availability of alternatives to the services we
offer; our ability to maintain or replace expiring storage
contracts, or enter into new storage contracts, in either case at
attractive rates and on otherwise favorable terms; a continuation
of reduced volatility and/or lower spreads in natural gas markets
for an extended period of time; factors affecting our ability to
realize revenues from hub services and merchant storage
transactions involving uncontracted or unutilized capacity at our
facilities; operational, geologic or other factors that affect the
timing or amount of crude oil and other liquid hydrocarbons that we
are able to produce in conjunction with the operation of our
Bluewater facility; the occurrence of a natural disaster,
catastrophe, terrorist attack or other event, including attacks on
our electronic and computer systems; market or other factors that
affect the prices we are able to realize for crude oil and other
liquid hydrocarbons produced in conjunction with the operation of
our Bluewater facility; our ability to obtain and/or maintain all
permits, approvals and authorizations that are necessary to conduct
our business and execute our capital projects; the impact of
operational, geologic and commercial factors that could result in
an inability on our part to satisfy our contractual commitments and
obligations, including the impact of equipment performance, cavern
operating pressures and cavern temperature variances, salt creep
and subsurface conditions or events; risks related to the
ownership, development and operation of natural gas storage
facilities, including the risk of explosions at our facilities;
failure to implement or execute planned internal growth projects on
a timely basis and within targeted cost projections; the
effectiveness of our risk management activities; the effects of
competition; interruptions in service and fluctuations in tariffs
or volumes on third-party pipelines; general economic, market or
business conditions and the amplification of other risks caused by
volatile financial markets, capital constraints and pervasive
liquidity concerns; the successful integration and future
performance of acquired assets or businesses; our ability to obtain
debt or equity financing on satisfactory terms to fund additional
acquisitions, expansion projects, working capital requirements and
the repayment or refinancing of indebtedness; the impact of current
and future laws, rulings, governmental regulations, accounting
standards and statements and related interpretations; shortages or
cost increases of supplies, materials or labor; weather
interference with business operations or project construction; our
ability to receive open credit from our suppliers and trade
counterparties; continued creditworthiness of, and performance by,
our counterparties, including financial institutions and trading
companies with which we do business; the availability of, and our
ability to consummate, acquisition or combination opportunities;
the operations or financial performance of assets or businesses
that we acquire; environmental liabilities or events that are not
covered by an indemnity, insurance or existing reserves; increased
costs or unavailability of insurance; fluctuations in the debt and
equity markets, including the price of our units at the time of
vesting under our long-term incentive plan; and other factors and
uncertainties inherent in the ownership, development and operation
of natural gas storage facilities discussed in the Partnership’s
filings with the Securities and Exchange Commission.
PAA Natural Gas Storage, L.P. is a publicly traded master
limited partnership engaged in the development, acquisition,
operation and commercial management of natural gas storage
facilities. The Partnership currently owns and operates three
natural gas storage facilities located in Louisiana, Mississippi
and Michigan. The Partnership’s general partner, as well as the
majority of the Partnership’s limited partner interests, is owned
by Plains All American Pipeline, L.P. PNG is headquartered in
Houston, TX.
PAA NATURAL GAS STORAGE, L.P. AND SUBSIDIARIES FINANCIAL
SUMMARY (unaudited)
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per unit data)
Three Months EndedSeptember
30,
Nine Months EndedSeptember
30,
2013 2012 2013 2012
REVENUES (1) $ 55,467 $ 66,127 $ 299,958 $ 274,990
COSTS AND EXPENSES: Storage-related costs (2) 22,675 29,184
189,984 167,549 Field operating costs 3,372 2,974 10,625 9,030
General and administrative expenses 4,959 4,641 15,713 14,304
Depreciation, depletion and amortization 9,693 9,461
29,177 27,855 Total costs and expenses 40,699
46,260 245,499 218,738 Operating income 14,768
19,867 54,459 56,252
OTHER INCOME / (EXPENSE): Interest
expense, net of capitalized interest (2,624) (1,973) (7,752)
(5,350) Other income / (expense), net (8) (5)
(23) 12
Net income $ 12,136 $ 17,889 $ 46,684 $
50,914
CALCULATION OF LIMITED PARTNER NET INCOME: Net
income $ 12,136 $ 17,889 $ 46,684 $ 50,914 General partner's
incentive distribution (228) (222) (682) (666) General partner's 2%
ownership interest (238) (353) (920)
(1,005) Net income available to limited partners 11,670 17,314
45,082 49,243 Undistributed earnings allocated and distributions to
participating securities(3) (149) (83) (464)
(248)
Net income available to limited partners
in accordance with application of the two-class method for MLPs
$ 11,521 $ 17,231 $ 44,618 $ 48,995 Basic weighted average
number of limited partner units outstanding (4) 73,086 71,136
72,223 71,131 Effect of dilutive securities: Weighted average LTIP
units 315 117 276 117 Weighted average
number of diluted limited partner units outstanding (4)
73,401 71,253 72,499 71,248 Net income
per basic limited partner unit (4) $ 0.16 $ 0.24 $ 0.62 $ 0.69 Net
income per diluted limited partner unit (4) $ 0.16 $ 0.24 $ 0.62 $
0.69
ADJUSTED
RESULTS
(In thousands, except per unit data)
Three Months EndedSeptember
30,
Nine Months EndedSeptember
30,
2013 2012 2013 2012 Adjusted net
income $ 15,029 $ 18,277 $ 52,556 $ 53,990 Adjusted net income per
diluted limited partner unit (4) $ 0.20 $ 0.25 $
0.70
$ 0.73 Adjusted EBITDA $ 27,346 $ 29,711 $ 89,485 $ 87,195
(1) Includes revenues associated
with sales of natural gas through commercial marketing activities.
(2) Includes costs associated with sales of natural gas through
commercial marketing activities. (3) Participating securities
consist of LTIP awards containing vested distribution equivalent
rights which entitle the grantee to a cash payment equal to the
cash distribution paid on our outstanding common units. (4) The
calculation includes common units and Series A subordinated units.
Series B subordinated units are not entitled to cash distributions
unless and until they convert to Series A subordinated units or
common units, which conversion is contingent on our meeting both
certain distribution levels and certain in-service operational
tests at our Pine Prairie facility. As a result, the Series B
subordinated units are not included in the calculation of basic or
diluted net income per unit amounts.
PAA NATURAL GAS STORAGE, L.P. AND
SUBSIDIARIES FINANCIAL SUMMARY (unaudited)
OPERATING
DATA
(in thousands, except capacity and operating metric
data)
Three Months EndedSeptember
30,
Nine Months EndedSeptember
30,
2013 2012 2013 2012 Net revenue
margin (1)(2) $ 34,582 $ 36,315 $ 111,955 $ 107,369 Field operating
costs / G&A / Other (7,236) (6,604)
(22,470) (20,174) Adjusted EBITDA $ 27,346 $ 29,711 $ 89,485
$ 87,195
Average working storage capacity
(Bcf) 97 89 96 82
Monthly
Operating Metrics ($/Mcf): Net revenue margin (1)(2) $ 0.12 $
0.14 $ 0.13 $ 0.15 Field operating costs / G&A / Other
(0.03) (0.03) (0.03) (0.03) Adjusted EBITDA $
0.09 $ 0.11 $ 0.10 $ 0.12
(1)
Net revenue margin equals revenues minus storage-related costs.
(2) Excludes the impact of mark-to-market of open derivative
positions.
PAA NATURAL
GAS STORAGE, L.P. AND SUBSIDIARIES FINANCIAL SUMMARY
(unaudited)
CONDENSED BALANCE
SHEET DATA
(in thousands)
September 30, December 31, 2013
2012 ASSETS Current assets $ 82,233 $ 94,393 Property
and equipment, net 1,327,241 1,313,918 Base gas 60,912 54,091
Goodwill, intangibles and other assets, net 393,162
406,667
Total assets $ 1,863,548
$ 1,869,069 LIABILITIES AND PARTNERS'
CAPITAL Current liabilities $ 77,939 $ 104,336 Note payable to
PAA 200,000 200,000 Long-term debt under credit agreements 303,263
305,385 Other long-term liabilities 9,351 8,406 Total
liabilities 590,553 618,127 Total partners' capital
1,272,995 1,250,942
Total liabilities and
partners' capital $ 1,863,548 $
1,869,069
CREDIT
RATIO
Long-term debt / Total long-term book capitalization(1) 28% 29%
(1)
Total long-term book capitalization is the sum of PNG’s long-term
debt and total partners' capital.
PAA NATURAL GAS
STORAGE, L.P. AND SUBSIDIARIES FINANCIAL SUMMARY
(unaudited)
SELECTED ITEMS
IMPACTING COMPARABILITY
(in thousands, except per unit data)
Three Months EndedSeptember
30,
Nine Months EndedSeptember
30,
2013 2012 2013 2012 Selected Items
Impacting Comparability - Income / (Expense): Equity-indexed
compensation expense $ (388 ) $ (1,016 ) $ (3,176 ) $ (3,148 )
Merger proposal evaluation costs (1) (715 ) - (715 ) -
Gains/(losses) from derivative activities (2) (1,790 )
628 (1,981 ) 72 Selected items
impacting comparability $ (2,893 ) $ (388 ) $ (5,872 ) $ (3,076 )
Selected items impacting comparability $ (2,893 ) $ (388 ) $
(5,872 ) $ (3,076 ) Less: GP 2% share of selected items impacting
comparability 58 8 117
62 LP 98% share of selected items impacting
comparability $ (2,835 ) $ (380 ) $ (5,755 ) $ (3,014 )
Impact to net income per basic limited partner unit (3) $ (0.04 ) $
(0.01 ) $ (0.08 ) $ (0.04 ) Impact to net income per diluted
limited partner unit (3) $ (0.04 ) $ (0.01 ) $ (0.08 ) $ (0.04 )
(1) Costs associated with
evaluating the now pending merger with a subsidiary of Plains All
American Pipeline.
(2) Includes gains and losses resulting
from certain derivative instruments that are related to underlying
activities in future periods or the reversal of gains and losses
adjusted for in prior periods to match underlying activities which
occur in the current period.
(3) The calculation includes common units and Series A subordinated
units. Series B subordinated units are not entitled to cash
distributions unless and until they convert to Series A
subordinated units or common units, which conversion is contingent
on our meeting both certain distribution levels and certain
in-service operational tests at our Pine Prairie facility. As a
result, the Series B subordinated units are not included in the
calculation of basic or diluted net income per unit amounts.
PAA NATURAL GAS STORAGE, L.P. AND SUBSIDIARIES FINANCIAL
SUMMARY (unaudited)
FINANCIAL DATA
RECONCILIATIONS
(in thousands, except per unit data)
Three Months EndedSeptember
30,
Nine Months EndedSeptember
30,
2013 2012 2013 2012 Distributable
cash flow ("DCF") Net Income $ 12,136 $ 17,889 $ 46,684 $
50,914 Depreciation, depletion and amortization 9,693 9,461 29,177
27,855 Equity-indexed compensation expense, net of cash payments
357 1,141 2,235 2,595 Maintenance capital expenditures (122) (84)
(339) (457) Merger proposal evaluation costs (1) 715 - 715 -
(Gains)/losses from derivative activities (2) 1,790
(628) 1,981 (72)
DCF $ 24,569
$ 27,779 $ 80,453 $
80,835
Three Months EndedSeptember
30,
Nine Months EndedSeptember
30,
2013 2012 2013 2012 Net income and
earnings per limited partner unit excluding selected items
impacting comparability: Net Income $
12,136 $ 17,889 $ 46,684
$ 50,914 Selected items impacting comparability
2,893 388 5,872 3,076
Adjusted Net
Income $ 15,029 $ 18,277 $
52,556 $ 53,990 Depreciation, depletion
and amortization $ 9,693 $ 9,461 $ 29,177 $ 27,855 Interest
expense, net of capitalized interest 2,624 1,973
7,752 5,350
Adjusted EBITDA $
27,346 $ 29,711 $ 89,485
$ 87,195 Selected items impacting
comparability (2,893) (388) (5,872)
(3,076)
EBITDA $ 24,453 $ 29,323
$ 83,613 $ 84,119 Net income
available to limited partners in accordance with application of the
two-class method for MLPs $ 11,521 $ 17,231 $ 44,618 $ 48,995
Limited partners' 98% of selected items impacting comparability
2,835 380 5,755 3,014 Adjusted limited
partners' net income $ 14,356 $ 17,611 $ 50,373 $ 52,009
Adjusted net income per basic limited partner unit (3) $ 0.20 $
0.25 $ 0.70 $ 0.73 Adjusted net income per diluted limited
partner unit (3) $ 0.20 $ 0.25 $
0.70
$ 0.73 Basic weighted average units outstanding (3)
73,086 71,136 72,223 71,131 Diluted
weighted average units outstanding (3) 73,401 71,253
72,499 71,248
(1) Costs associated with evaluating the now pending merger
with a subsidiary of Plains All American Pipeline.
(2) Includes gains and losses resulting
from certain derivative instruments that are related to underlying
activities in future periods or the reversal of gains and losses
adjusted for in prior periods to match underlying activities which
occur in the current period.
(3) The calculation includes common units and Series A subordinated
units. Series B subordinated units are not entitled to cash
distributions unless and until they convert to Series A
subordinated units or common units, which conversion is contingent
on our meeting both certain distribution levels and certain
in-service operational tests at our Pine Prairie facility. As a
result, the Series B subordinated units are not included in the
calculation of basic or diluted net income per unit amounts.
PAA Natural Gas Storage, L.P.Roy I. Lamoreaux, 713-646-4222 or
800-564-3036Director, Investor RelationsorAl Swanson,
800-564-3036Executive Vice President, CFO
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