DCP Midstream Partners (DPM)

Q1 2010 Earnings Call

May 7, 2010 10:00 a.m. ET

Executives

Mike Richards - Vice President and General Counsel

Mark Borer - President and Chief Executive Officer

Angela Minas - Vice President and Chief Financial Officer

Analysts

Rebecca Followill – Tudor Pickering & Co.

Andrew Gundlach – ASB

Jeremy Tenney [ph].

Presentation

Operator

Good morning, and welcome to the DCP Midstream Partners First Quarter 2010 Earnings Conference Call. All participants will be in a listen-only-mode. (Operator Instructions) After today's presentation there will be an opportunity for you to ask questions. Please note that today's event is being recorded.

At this time, I'd like to turn the conference call over to Mr. Mike Richards, Vice President and General Counsel. Mr. Richard, please go ahead.

Mike Richards

Thank you, Jamie [ph]. Good morning, and welcome to the DCP Midstream Partners first quarter 2010 earnings release conference call. As always we want to thank you for your interest in the partnership. Today you will hear from Mark Borer, President and Chief Executive Officer, and Angela Minas, Vice President and Chief Financial Officer. Before turning it over to Mark I will mention a couple of items.

First, all of the slides we will be talking from today are available on our website at www.dcppartners.com in PDF format. You may access them by clicking on the investor page and then the webcast icon.

Next, I will like to remind you that our discussion today may contain forward-looking statements. Actual results may differ due to certain risk factors that affect our business. Please review the second slide in the deck that describes our use of forward-looking statements and lists some of the risk factors that may affect actual results. For a complete listing of the risk factors that may impact our business results please review our Form 10-K for the year ended December 31, 2009, as filed with the SEC on March 11, 2010 and updated through subsequent SEC filings.

In addition, during our discussion we will use various non-GAAP measures, including distributable cash flow, adjusted EBITDA and adjusted segment EBITDA. These measures are reconciled to the nearest GAAP measures and schedules provided on our website. We ask that you review that information as well.

And finally, a note about the presentation of our earnings, in April 2009 the partnership completed the acquisition of additional 25.1% interest in DCP East Texas Holdings, LLC or East Texas, from DCP Midstream, LLC. Prior to this transaction, the partnership owned a 25% interest, which was accounted for under the equity method. Subsequent to this transaction, the partnership owns a 50.1% interest in East Texas and accounts for East Texas as a consolidated subsidiary.

The results of operations presented today include the historical consolidated results of East Texas for all periods presented. For comparison purposes, we have also included our 2009 historical results as reported in 2009 when our partnership -- ownership interest in East Texas was 25%.

And now, I will turn it over to Mark Borer.

Mark Borer

Thanks, Mike. Good morning, everyone, and thanks for joining us today for discussion of our fist quarter results. We are continue to experience improvement in the business environment and we are off to a solid start 2010. As you saw on our press release last evening, we reported first quarter results, which were inline that 2010 DCF forecast we provided on our last earnings call.

On slide three, you’ll see our agenda for this morning. I will begin some highlights of the quarter and we will then provide an operational update Angela will follow with the financial overview of the quarter. We will then close with our outlook in summary.

We are optimistic about emerging growth opportunities and believe we are favorably positioned as we move through 2010 and beyond.

Turning to Slide 4, let's discuss some highlights for the quarter. We generated distributable cash flow of $31.7 million for the quarter, providing a distribution coverage ratio of 1.3 times. Improvement in the business environment along with opportunities in the market has enabled us to continue to execute on our growth objectives.

In January, we committed $40 million to a strategic investment for the DCP Enterprise in the Denver-Julesburg Basin or DJ Basin. This was comprised of 22 million acquisition of the Wattenberg fee-based NGL pipeline and related $18 million expansion capital project.

2010, is the integration year for both the Michigan gathering and treating system we have acquired in November 2009, as well as our January 2010 Wattenberg pipeline acquisitions. This recent acquisitions are each very complementary to our asset base, provide a 100% fee-based margins and improved our competitive positions.

In summary, we are off to a good start in delivering on our 2010 business plans commitments.

We will now turn to Slide 5. I will provide the brief operational updates, starting first with our natural gas service segments. As indicates again this quarter we view our diverse geographic footprint as a strong positive, as it provides us with access to multiple resource plays, contract types, and customers.

Excluding the recent Michigan acquisition gas throughput volumes have been held firm [ph] and was virtually flat on a sequential quarter based. In the second quarter of 2009 gas throughput volumes have been down a modest 2%. Our rig count activity is still considerably below 2008 levels. We are beginning experience a modest recovery from the lows we experienced in the second quarter of 2009. With the exception of the weather related operating challenges that East Texas Northern Louisiana, which occurred during the quarter which I’ll discuss more in a moment.

Read the rest of this transcript for free on seekingalpha.com

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