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Duncan Energy Partners Reports Second Quarter 2011 Results

Second Quarter 2011 Earnings Conference Call

Management for Duncan Energy Partners will discuss second quarter results with analysts and investors in a combined conference call with Enterprise Products Partners L.P. scheduled for 9 a.m. CDT today. The call will be broadcast live over the Internet and may be accessed by visiting the Partnership’s website at www.deplp.com.

Company Information and Use of Forward-Looking Statements

Duncan Energy Partners L.P. is a publicly traded partnership that provides midstream energy services, including gathering, transportation, marketing and storage of natural gas; NGL fractionation, transportation and storage; petrochemical transportation and storage; and refined products storage. Duncan Energy Partners owns interests in assets located primarily in Texas and Louisiana, including interests in approximately 9,400 miles of natural gas pipelines with a transportation capacity aggregating approximately 7.8 billion cubic feet (“Bcf”) per day; approximately 1,770 miles of NGL and petrochemical pipelines featuring access to one of the world’s largest fractionation complexes at Mont Belvieu, Texas; two NGL fractionation facilities located in South Texas; approximately 17 million barrels (“MMBbls”) of leased NGL storage capacity; 8.1 Bcf of leased natural gas storage capacity; and 34 underground salt dome caverns with approximately 100 MMBbls of NGL, petrochemical and refined products storage capacity at Mont Belvieu. Duncan Energy Partners is managed by its general partner, DEP Holdings, LLC, which is an indirect wholly-owned subsidiary of Enterprise Products Partners L.P.

This press release includes forward-looking statements. Except for the historical information contained herein, the matters discussed in this news release are forward-looking statements that involve certain risks and uncertainties, such as the Partnership's expectations regarding future results, capital expenditures, project completions, liquidity and financial market conditions. These risks and uncertainties include, among other things, insufficient cash from operations, market conditions, governmental regulations and factors discussed in the Partnership's filings with the U.S. Securities and Exchange Commission. If any of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results or outcomes may vary materially from those expected. The Partnership disclaims any intention or obligation to update publicly or reverse such statements, whether as a result of new information, future events or otherwise.
 

Exhibit A
Duncan Energy Partners L.P.

Supplemental Standalone Financial Information – UNAUDITED

(Dollars in millions, except per unit amounts)
 

The following table summarizes the distributable cash flow (“DCF”) and related coverage ratio calculations for Duncan Energy Partners on a standalone basis. The line item captioned “Duncan Energy Partners L.P. standalone expenses, net of non-cash items” primarily represents accrued interest expense and general and administrative costs of the partnership itself, exclusive of any such amounts attributable to the DEP I and DEP II Midstream Businesses. We calculate the distribution coverage ratio by dividing “Distributable cash flow, net to limited partners” by the average number of distribution-bearing units outstanding and further by the declared distribution rate per unit for the period indicated.
 

In addition, the following table presents selected income statement and balance sheet data of Duncan Energy Partners L.P. on a standalone basis. Duncan Energy Partners L.P. currently has no operations apart from its investments in the DEP I and DEP II Midstream Businesses. For purposes of this presentation, we have listed amounts pertaining to the DEP I Midstream Businesses apart from those relating to the DEP II Midstream Businesses.
 
  Three Months Ended   Six Months Ended
June 30,   June 30,
2011   2010 2011   2010
Distributable cash flow summary:    
DEP share of the DCF attributable to the:
DEP I Midstream Businesses $ 14.1 $ 13.7 $ 25.2 $ 26.6
DEP II Midstream Businesses 22.5 22.0 45.0 44.1

Duncan Energy Partners L.P. standalone expenses, net of non-cash items
  (2.8 )     (2.9 )   (5.7 )     (5.9 )
Total Duncan Energy Partners L.P. distributable cash flow 33.8 32.8 64.5 64.8
Less: Distributions to our general partner   (0.2 )     (0.2 )   (0.4 )     (0.4 )
Distributable cash flow, net to limited partners $ 33.6     $ 32.6   $ 64.1     $ 64.4  
 
Average distribution-bearing units outstanding   57.8       57.7     57.8       57.7  
 
Distributable cash flow coverage:
Declared distribution rate per unit $ 0.4600 $ 0.4500 $ 0.9175 $ 0.8975

Distribution coverage ratio

1.26x

1.26x

1.21x

1.24x
 
Selected income statement information:
Equity earnings - DEP I Midstream Businesses $ 10.4 $ 11.7 $ 19.2 $ 22.0
Equity earnings - DEP II Midstream Businesses $ 15.7 $ 15.7 $ 29.8 $ 30.3
General and administrative costs $ 0.7 $ 0.9 $ 1.2 $ 1.5
Interest expense $ 2.9 $ 3.2 $ 6.0 $ 6.3
Net income attributable to Duncan Energy Partners L.P. $ 22.5 $ 23.3 $ 41.8 $ 44.5
Selected balance sheet information at each period end:
Investment in DEP I Midstream Businesses $ 1,222.0 $ 597.6 $ 1,222.0 $ 597.6
Investment in DEP II Midstream Businesses $ 662.5 $ 696.0 $ 662.5 $ 696.0
Total debt principal outstanding at end of period $ 1,149.8 $ 537.3 $ 1,149.8 $ 537.3
Partners’ equity $ 754.1 $ 760.4 $ 754.1 $ 760.4
 

Exhibit B

Duncan Energy Partners L.P.

Statements of Consolidated Operations – UNAUDITED

(Dollars in millions, except per unit amounts)
       
Three Months Ended Six Months Ended
June 30,   June 30,
2011   2010 2011   2010

Revenue

$

302.8
$ 265.2 $ 586.0 $ 555.8

Costs and expenses:
Operating costs and expenses 267.8 245.1 524.8 512.3
General and administrative costs   6.5       4.8     11.1       9.7  
Total costs and expenses   274.3       249.9     535.9       522.0  

Equity in income of Evangeline
  0.5       --     0.8       0.2  

Operating income
29.0 15.3 50.9 34.0

Other expense:
Interest expense   2.9       3.2     6.0       6.3  

Income before provision for income taxes
26.1 12.1 44.9 27.7
Provision for income taxes   (0.5 )     (0.3 )   (1.0 )     (0.2 )

Net income
25.6 11.8 43.9 27.5
Net loss (income) attributable to noncontrolling interest:
DEP I Midstream Businesses - Parent (5.6 ) (7.8 ) (3.1 ) (12.5 )
DEP II Midstream Businesses - Parent   2.5       19.3     1.0       29.5  
Total net loss (income) attributable to noncontrolling interest   (3.1 )     11.5     (2.1 )     17.0  

Net income attributable to Duncan Energy Partners
$ 22.5     $ 23.3   $ 41.8     $ 44.5  

Allocation of net income to Duncan Energy Partners:
Limited partners $ 22.3     $ 23.2   $ 41.5     $ 44.2  
General partner $ 0.2     $ 0.1   $ 0.3     $ 0.3  

Per unit data (fully diluted):
Earnings per unit $ 0.39     $ 0.40   $ 0.72     $ 0.77  
Average LP units outstanding (in millions)   57.8       57.7     57.8       57.7  
 

Other financial data:
Net cash flows provided by operating activities $ 76.4 $ 45.0 $ 132.3 $ 106.5
Net cash used in investing activities $ 516.6 $ 221.2 $ 842.9 $ 290.9
Net cash provided by financing activities $ 436.2 $ 175.8 $ 696.8 $ 201.8
Distributable cash flow (see Exhibit A) $ 33.8 $ 32.8 $ 64.5 $ 64.8
Depreciation, amortization and accretion (100% basis) $ 53.9 $ 52.3 $ 106.4 $ 100.5
Total debt principal outstanding at end of period $ 1,149.8 $ 537.3 $ 1,149.8 $ 537.3
 

Capital spending:

Capital expenditures, net of contributions in aid of construction costs, for property, plant and equipment
$ 516.4 $ 221.4 $ 843.0 $ 338.7
 

Exhibit C

Duncan Energy Partners L.P.

Selected Financial & Operating Data – UNAUDITED

(Dollars in millions, operating data as noted)
 
  Three Months Ended   Six Months Ended
June 30,   June 30,

2011
 

2010

2011
 

2010

Gross operating margin by segment:
   
Natural Gas Pipelines & Services

$

51.2
$ 37.1 $ 102.9 $ 79.6
NGL Pipelines & Services 33.0 31.6 57.3 58.5
Petrochemical Services   3.0       2.8     4.2       5.2  
Total gross operating margin 87.2 71.5 164.4 143.3

Adjustments to reconcile non-GAAP gross operating margin to GAAP operating income:
Amounts in operating costs and expenses:
Depreciation, amortization and accretion (52.0 ) (51.5 ) (102.9 ) (99.1 )
Gains from asset sales and related transactions 0.3 0.1 0.5 1.0
Non-cash asset impairment charges -- -- -- (1.5 )
General and administrative costs   (6.5 )     (4.8 )   (11.1 )     (9.7 )
Operating income $ 29.0     $ 15.3   $ 50.9     $ 34.0  
 

Selected operating data:
Natural Gas Pipelines & Services:
Natural gas throughput volumes, net (BBtus/d) 4,860 4,654 4,786 4,560
NGL Pipelines & Services:
Pipeline throughput volumes (MBPD) 134 112 131 116
Fractionation volumes (MBPD) 84 66 86 74
Petrochemical Services:
Propylene throughput volumes (MBPD) 35 37 30 34
 
Exhibit D
Duncan Energy Partners L.P.

Reconciliation of DCF to Net Cash Flows Provided by Operating Activities - UNAUDITED

(Dollars in millions)
 
  Three Months Ended   Six Months Ended
June 30,   June 30,
2011   2010 2011   2010

Total Duncan Energy Partners L.P. distributable cash flow

$

33.8
  $ 32.8 $ 64.5   $ 64.8

Adjustments to non-GAAP distributable cash flow to derive GAAP net cash flows provided by operating activities:
Proceeds from asset sales and related transactions 0.2 (0.3 ) (0.1 ) (2.3 )
Sustaining capital expenditures:
DEP I Midstream Businesses 5.3 5.3 11.1 9.7
DEP II Midstream Businesses 10.9 12.5 14.6 19.2
Other sustaining capital expenditures -- 0.1 -- 0.1

Noncontrolling interest share of distributable cash flow:
DEP I Midstream Businesses - Parent 9.1 10.6 9.5 18.1
DEP II Midstream Businesses - Parent 20.9 2.5 51.2 17.9
Cash expenditures for asset abandonment activities 0.2 0.5 0.2 0.5
Net effect of changes in operating accounts   (4.0 )     (19.0 )   (18.7 )     (21.5 )

Net cash flows provided by operating activities
$ 76.4     $ 45.0   $ 132.3     $ 106.5  

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