Regency Energy Partners LP's CEO Discusses Q4 2011 Results - Earnings Call Transcript

Regency Energy Partners LP (RGP)

Q4 2011 Earnings Call

February 16, 2012 11:00 am ET

Executives

Shannon A. Ming - Senior Vice President of Finance and Investor Relations - Regency Gp Llc

Michael J. Bradley - Chief Executive Officer of Regency Gp Llc and President of Regency Gp Llc

Thomas E. Long - Chief Financial Officer of Regency Gp Llc and Executive Vice President of Regency Gp Llc

Analysts

Ethan H. Bellamy - Robert W. Baird & Co. Incorporated, Research Division

Heejung Ryoo - Barclays Capital, Research Division

Cathleen King - BofA Merrill Lynch, Research Division

Scott Fogleman - Morgan Keegan & Company, Inc., Research Division

Avi Feinberg - Morningstar Inc., Research Division

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2011 Regency Energy Partners LP Conference Call. My name is Stephanie and I'll be your coordinator for today. [Operator Instructions] I would now like to turn the presentation over to your host for today, Shannon Ming, Senior Vice President of Finance and Investor Relations. Please proceed.

Shannon A. Ming

Good morning, everyone, and welcome to our call today. We will cover Regency's performance for the fourth quarter and full year 2011. Presenting will be Mike Bradley, President and Chief Executive Officer; and Tom Long, our Chief Financial Officer. In addition, Jim Holotik, our Chief Commercial Officer is also available for Q&A. Following our prepared remarks, Regency will open the call to participants for questions. You may access the earnings release and presentation news on today's call through Regency's website at regencyenergy.com. Our call is being recorded and is also being broadcast live over the Internet on the Regency corporate website. An archive of the webcast and presentation will be available on the website following today's call. Also please note, we plan to file our 10-K on February 22. Slide 2 of the presentation describes our use of forward-looking statements and lists some of the risk factors that may affect actual results. Also included in the appendix of the presentation today are various non-GAAP measures that have been reconciled to the comparable GAAP measures.

Before we turn to today's presentation, we would like to say a brief word about Regency's 2012 Annual Investor Day. It will be held at the Crescent Hotel in Dallas on March 28. At this event, we will provide an in-depth look at our operations and discuss our growth opportunities. We hope that you'll be able to join us. If you're interested in attending, the invitation is posted to the homepage of our website. Please RSVP by e-mailing ir@regencygas.com or call us at (214) 840-5477.

With that, I'll turn the call over to Mike.

Michael J. Bradley

Thanks, Shannon, and good morning, and thank you for joining us today. I'm very pleased to say that Regency generated strong results for both the fourth quarter and the full year during, which we continue to grow our adjusted EBITDA, saw a significant increase in volumes in our Gathering and Processing segment and increased our distribution from an annualized rate of $1.78 in 2010 to $1.84 in 2011. 2011 was a significant and transformational year for Regency during which, we added a major NGL logistics platform with our acquisition of a 30% interest in the Lone Star Joint Venture. And as a result, we have a much larger scale and more diverse platform of services to offer our customers going forward.

Additionally, our footprint within the major liquid-rich plays like the Eagle Ford Shale in South Texas and the Permian Bone Spring formation in West Texas have created tremendous growth opportunities. This footprint, coupled with the addition of the Lone Star assets, enables us to provide producers with a complete range of services from wellhead all the way to fractionation and NGL storage in Mont Belvieu, one of the largest NGL storage, distribution and trading complexes in North America.

We have announced and plan to spend over $1 billion in organic growth capital over the next 18 months primarily in liquid-rich regions. These large-scale growth projects as well as the strategic location of our assets and active and emerging plays position Regency for additional growth over the next several years. We are very excited about the potential we see for Regency. I would like to briefly discuss our opportunities by business segment.

Starting with Gathering and Processing, in 2012, we expect a total Gathering and Processing throughput to increase 25% to 30% over year-end 2011, primarily driven by growth in the Eagle Ford Shale and the Permian Bone Springs regions. In West Texas, it produces our targeting the liquids-rich plays and we have seen rig counts increase 35% from the fourth quarter of 2010 to the fourth quarter of 2011.

We recently announced the Ranch Joint Venture for which Regency will construct and operate a new "100 million cubic feet a day cryogenic processing" facility and a new refrigeration plant in the Bone Spring and Avalon Shale formations. Our 2 partners are subsidiaries of Chesapeake and Anadarko. The refrigeration plant is expected to go into service in the second quarter of 2012 and the cryogenic processing plant is expected to go into service by the end of 2012.

This joint venture increases Regency's footprint in the Bone Spring area, while also creating expansion opportunities around our Waha facility. In South Texas, we continue to see increasing producer activity in the Eagle Ford Shale, where rig counts have increased 47% from year-end 2010 to year-end 2011. Construction on our $450 million Eagle Ford expansion is underway and approximately 185 million cubic feet a day flowed in the fourth quarter versus approximately 110 million cubic feet a day in the third quarter. Additional volumes will be phased in as the project is completed with all capital expected to be deployed by early 2014.

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