Crosstex Energy CEO Discusses Q3 2010 Results - Earnings Call Transcript
Crosstex Energy Inc. (
)
Q3 2010 Earnings Call
November 05, 2010 11:00 am ET
Executives
Jill McMillan - Director of Public and Industry Affairs
Barry Davis - President & CEO
Bill Davis - EVP & CFO
Analysts
Darren Horowitz - Raymond James
John Edwards - Morgan Keegan
Sharon Lui - Wells Fargo
Conor Ryan - Deutsche Bank
Presentation
Operator
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Good day, ladies and gentlemen, and welcome to the Q3 2010 Crosstex Energy, earnings conference call. My name is Michael and I will be your coordinator for today. At this time, all participants are in listen-only mode. We will be facilitating a question-and-answer session towards the end of today's conference. (Operator Instructions). As a reminder, this conference is being recorded for replay purposes.
I would now like to turn the presentation over to your host for today's conference, Ms. Jill McMillan, Director of Public and Industry Affairs. You may proceed.
Jill McMillan
Thank you, Michael, and good morning, everyone. Thank you for joining us today to discuss Crosstex's third quarter 2010 results. On the call today are Barry Davis, President and Chief Executive Officer; and Bill Davis, Executive Vice President and Chief Financial Officer.
Our third quarter 2010 earnings release was issued early this morning. For those of you who didn't receive a copy, it is available on our website at crosstexenergy.com. If you want to listen to a recording of today's call, you have 90 days to access the replay by phone or webcast on our website.
I will remind you that any statements that might include our expectations or predictions should be considered forward-looking statements within the meaning of the Federal Securities laws. Forward-looking statements are subject to a number of assumptions and uncertainties that may cause our actual results to differ materially from those expressed in these statements, and we undertake no obligation to update or revise any forward-looking statements. We encourage you to review the cautionary statements and other disclosures made in our SEC filings, specifically those under the heading Risk Factors.
I will now turn the call over to Barry Davis.
Barry Davis
Thank you, Jill, good morning and thank you all for joining us on the call today to discuss our third quarter 2010 results. First let me say that we are very pleased with our solid results and the great progress we continue to make. We are even more pleased about the recently announced resumption of our distribution and dividend.
We worked hard to be able to restore these payments for our investors which we believe strategically positions us for the future. Yes so everyone is aware the quarterly distribution on the partnerships common and preferred units will be $0.25 per unit payable November 12
th
to unit holders of record November 1 and the quarterly dividend on the cooperation's common stock will be $0.07 per share also payable November 12th, to stock holders of record November 1.
Distributions and dividends at these lap holes are within our conservative financial guidelines and allow us to continue to improve our leverage. During the third quarter we continue to improve our operations by maximizing cash flow from our existing assets. Reducing cost and increasing utilization. Adjusted EBITDA was $47.8 million for the third quarter 2010 up 16% from the third quarter 2009. Distributable cash flow increased 34% for the third quarter compared with the third quarter of 2009.
From macro perspective processing economics remains strong. Ethane which represents almost half of our NGL barrel remains the preferred feedstock for ethylene plants. Ethylene plant maintenance which was putting pressure on ethane prices has been completed resulting in a positive impact on the demand and prices for ethane. Natural gas prices have been trending down since June and hovered below $4 per MMbtu for the most of September.
Ample shales gas suppliers and lower industrial demand have restrained prices, potentially putting pressure on future drilling activity. The US gas drilling rig count as of the end of October was 965, up approximately 33% from about a year-ago.
As the gas rig count relates to our business, there has been a lot of public discussion about the number of rigs operating in the Barnett Shale in North Texas and the Haynesville Shale in North Louisiana. There are approximately 132 rigs running in the Haynesville, a slight decline from about a 140 rigs in early July.
In the Barnett, the rig count has been relatively steady also with only a slight decrease. The most recent count shows 78 rigs down from 80 in early July. Some reports have indicated that drilling might continue to slow down in the Barnett and the Haynesville. On this point and its impact to us, let me be very clear that we are somewhat insulated from a drilling retreat in both plays and here's why.
In the Barnett we have two substantial projects scheduled for completion in early 2011 that will expand our gathering system and add substantial long-term contracted supply. And in Haynesville, the total firm capacity of our 465,000 MMbtu per day on our north LIG system is currently fully contracted with an average life of five years. We are confident in the term outlook for these areas. Longer term we will continue to capitalize on our great asset positions in our three core operating areas in North Texas and Louisiana by identifying and investing in low cost, high return projects.
We continue to run our business consistent with our financial guidelines managing risk, improving leverage and the reliability of our cash flow. We have no significant near term debt maturities and a solid balance sheet with no outstanding debt on our revolver at the end of the third quarter.
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