Access Midstream Partners, L.P. Reports Financial Results For The 2012 Second Quarter

ACCESS MIDSTREAM PARTNERS, L.P., (NYSE:ACMP), formerly Chesapeake Midstream Partners, L.P., today announced financial results for the 2012 second quarter. The Partnership’s 2012 second quarter net income totaled $51.6 million, an increase of $10.5 million, or 25.5%, from the 2011 second quarter. Adjusted ebitda for the 2012 second quarter was $120.9 million, up $41.6 million, or 52.5%, from 2011 second quarter adjusted ebitda of $79.3 million. The Partnership’s distributable cash flow (DCF) for the 2012 second quarter totaled $87.3 million, an increase of $29.3 million, or 50.5%, compared to the 2011 second quarter and resulted in a coverage ratio of 1.36. Partnership revenue for the 2012 second quarter was $149.3 million, an increase of $16.1 million, or 12.1%, compared to 2011 second quarter revenue of $133.2 million. Revenue for the 2012 second quarter excludes the Partnership’s Marcellus revenue as this ownership interest is accounted for as an unconsolidated equity investment. Financial terms are defined on pages two and three of this release.

Throughput for the 2012 second quarter totaled 261.0 billion cubic feet (bcf) of natural gas, or 2.87 bcf per day, an increase of 33.5% from 2011 second quarter throughput of 2.15 bcf per day. The increase was driven by throughput from gas gathering systems in the Marcellus Shale acquired in December 2011 as well as increased throughput in the Barnett Shale. The Partnership connected 179 new wells to its gathering systems during the 2012 second quarter, an increase of 25.2% compared to the 2011 second quarter.

Capital expenditures during the 2012 second quarter totaled $154.2 million, including maintenance capital expenditures of $18.5 million. With the expected increase in Marcellus capital spending, the Partnership is on track to meet the current capital expenditure outlook of $734 million for 2012.

Partnership Increases Cash Distribution

On July 27, 2012, the Board of Directors of the Partnership’s general partner declared a quarterly cash distribution of $0.42 per unit for the 2012 second quarter, a $0.0575, or 15.9%, increase over the 2011 second quarter distribution and a $0.015, or 3.7%, increase over the 2012 first quarter distribution. The distribution will be paid on August 14, 2012 to unitholders of record at the close of business on August 7, 2012. DCF for the 2012 second quarter of $87.3 million provided distribution coverage of 1.36 times the amount required for the Partnership to fund the distribution to both the general and limited partners.

Management Comments

J. Mike Stice, Access Midstream Partners’ Chief Executive Officer, commented, “While the Partnership’s name and ownership structure have changed, our commitment to executing on our best-in-class business model while maintaining a conservative balance sheet and investment grade credit metrics remains unchanged. The strong operating and financial results in the 2012 second quarter are further evidence of the Partnership’s ability to produce consistent results for our investors. This quarter continued to show the strong organic growth within our existing footprint. This sustained exposure to the most prolific unconventional plays in North America will be an important competitive advantage for many years to come.”

Conference Call Information

A conference call to discuss this release of financial results has been scheduled for Wednesday, August 8, 2012 at 9:00 a.m. EDT. The telephone number to access the conference call is 719-325-4813 or toll-free 877-681-3377. The passcode for the call is 4772466. We encourage those who would like to participate in the call to dial the access number between 8:50 and 9:00 a.m. EDT. For those unable to participate in the conference call, a replay will be available for audio playback from 12:00 p.m. EDT on August 8, 2012 through 12:00 p.m. EDT on August 22, 2012. The number to access the conference call replay is 719-457-0820 or toll-free 888-203-1112. The passcode for the replay is 4772466. The conference call will also be webcast live on the Internet and can be accessed by going to the Partnership’s website at www.accessmidstream.com in the "Events" subsection of the "Investors" section of the website. An archive of the conference call webcast will also be available on the website.

Use of Non-GAAP Financial Measures

This press release and accompanying schedules include the non-GAAP financial measures of adjusted ebitda, DCF and adjusted DCF. The accompanying schedules provide reconciliations of these non-GAAP financial measures to their most directly comparable financial measures calculated and presented in accordance with GAAP. Non-GAAP financial measures should not be considered as an alternative to GAAP measures such as net income, net cash provided by operating activities or any other measure of liquidity or financial performance calculated and presented in accordance with GAAP. Investors should not consider adjusted ebitda, DCF or adjusted DCF in isolation or as a substitute for analysis of the Partnership’s results as reported under GAAP. Because these non-GAAP financial measures may be defined differently by other companies in our industry, the Partnership’s definition of adjusted ebitda, DCF and adjusted DCF may not be comparable to similarly titled measures of other companies, thereby diminishing their utility.

Adjusted Ebitda. The Partnership agreement defines adjusted ebitda as net income (loss) before income tax expense, interest expense, depreciation and amortization expense and certain other items management believes affect the comparability of operating results. Adjusted ebitda is a non-GAAP financial measure that management and external users of our consolidated financial statements, such as industry analysts, investors, lenders and rating agencies, may use to assess:

  • The Partnership’s operating performance as compared to other publicly traded partnerships in the midstream energy industry, without regard to capital structure, historical cost basis or financing methods;
  • The Partnership’s ability to incur and service debt and fund capital expenditures;
  • The ability of the Partnership’s assets to generate sufficient cash flow to make distributions to unitholders; and
  • The viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities.

Management believes it is appropriate to exclude certain items from ebitda because management believes these items affect the comparability of operating results. The Partnership believes that the presentation of adjusted ebitda in this press release provides information useful to investors in assessing its financial condition and results of operations. The GAAP measure most directly comparable to adjusted ebitda is net income.

Distributable Cash Flow. The Partnership agreement defines DCF as adjusted ebitda attributable to the Partnership adjusted for:
  • Addition of interest income;
  • Subtraction of net cash paid for interest expense;
  • Subtraction of maintenance capital expenditures; and
  • Subtraction of income taxes.

Management compares the DCF the Partnership generates to the cash distributions it expects to pay its partners. Using this metric, management computes a distribution coverage ratio. DCF is an important non-GAAP financial measure for our limited partners since it serves as an indicator of our success in providing a cash return on investment. Specifically, this financial measure indicates to investors whether or not the Partnership is generating cash flows at a level that can sustain or support an increase in its quarterly cash distributions. DCF is also a quantitative standard used by the investment community with respect to publicly traded partnerships because the value of a partnership unit is in part measured by its yield, which is based on the amount of cash distributions a partnership can pay to a unitholder. The GAAP measure most directly comparable to DCF is net cash provided by operating activities.

Adjusted Distributable Cash Flow. The Partnership includes the quarterly impact of contractual minimum volume commitments that are not recognized until the fourth quarter of each year in its calculation of adjusted DCF for the purpose of calculating the distribution coverage ratio.

Access Midstream Partners, L.P. (NYSE:ACMP) is the industry’s largest gathering and processing master limited partnership as measured by throughput volume and owns, operates, develops and acquires natural gas gathering systems and other midstream energy assets. Headquartered in Oklahoma City, the Partnership's operations are focused on the Barnett Shale, Haynesville Shale, Marcellus Shale and Mid-Continent regions of the U.S. The Partnership’s common units are listed on the New York Stock Exchange under the symbol ACMP. Further information is available at www.accessmidstream.com where the Partnership routinely posts announcements, updates, events, investor information and presentations and all recent press releases.

This press release includes forward-looking statements. Forward-looking statements give our current expectations or forecasts of future events. They include but are not limited to our business strategy and plans and objectives for future operations as well as our future financial and operating results. We caution you not to place undue reliance on our forward-looking statements, which speak only as of the date of this release, and we undertake no obligations to update this information. Although we believe the expectations and forecasts reflected in these and other forward-looking statements are reasonable, we can give no assurance they will prove to be correct. They can be affected by inaccurate assumptions or by known or unknown risks and uncertainties. Factors that could cause actual results to differ materially from expected results are described under “Risk Factors” in our 2011 Annual Report on Form 10-K.
 
 
Access Midstream Partners, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
($ in thousands, except per unit data)
(unaudited)
 
    Three Months Ended
June 30,
  2012         2011  
Revenues, including revenues from affiliates (1) $ 149,332 $ 133,217
 
Operating expenses
Operating expenses, including expenses from affiliates 44,731 44,284
Depreciation and amortization expense 40,722 32,747

General and administrative expense, including expenses from affiliates
11,565 9,659
Other operating expense   240     923  
 
Total operating expenses   97,258     87,613  
 
Operating income 52,074 45,604
 
Other income (expense)
Income from unconsolidated affiliates 15,971
Interest expense (15,636 ) (3,837 )
Other income   4     42  
 
Income before income tax expense 52,413 41,809
Income tax expense   807     726  
 
Net income $ 51,606   $ 41,083  
 
Limited partner interest in net income
 
Net income 51,606 41,083
Less general partner interest in net income   (1,752 )   (820 )
 
Limited partner interest in net income   49,854     40,263  
 
Net income per limited partner unit – basic and diluted
Common units 0.34 0.29
Subordinated units 0.34 0.29
 
Weighted average limited partner units outstanding used for net income per unit calculation – basic and diluted (in thousands)
Common units 79,278 69,224
Subordinated units 69,076 69,076
(1)   Excludes revenue from Marcellus assets of $34.1 million for the three months ended June 30, 2012 that is included in Income from Unconsolidated Affiliates.
 
 
Access Midstream Partners, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
($ in thousands, except per unit data)
(unaudited)
 
    Six Months Ended
June 30,
  2012         2011  
Revenues, including revenues from affiliates (1) $ 304,006 $ 256,746
 
Operating expenses
Operating expenses, including expenses from affiliates 93,413 86,845
Depreciation and amortization expense 79,160 63,685

General and administrative expense, including expenses from affiliates
23,043 18,605
Other operating expense   195     863  
 
Total operating expenses   195,811     169,998  
 
Operating income 108,195 86,748
 
Other income (expense)
Income from unconsolidated affiliates 28,958
Interest expense (31,594 ) (5,277 )
Other income   59     84  
 
Income before income tax expense 105,618 81,555
Income tax expense   1,646     1,696  
 
Net income $ 103,972   $ 79,859  
 
Limited partner interest in net income
 
Net income 103,972 79,859
Less general partner interest in net income   (3,181 )   (1,596 )
 
Limited partner interest in net income   100,791     78,263  
 
Net income per limited partner unit – basic and diluted
Common units 0.68 0.56
Subordinated units 0.68 0.56
 
Weighted average limited partner units outstanding used for net income per unit calculation – basic and diluted (in thousands)
Common units 79,277 69,222
Subordinated units 69,076 69,076
(1)   Excludes revenue from Marcellus assets of $63.3 million for the six months ended June 30, 2012 that is included in Income from Unconsolidated Affiliates.
 
 
Access Midstream Partners, L.P.
CONDENSED CONSOLIDATED BALANCE SHEETS
($ in thousands)
(unaudited)
 
    As of     As of
June 30, December 31,
  2012     2011  
Assets
 
Total current assets $ 126,243   $ 88,188  
 
Property, plant and equipment
Gathering systems 3,035,010 2,954,868
Other fixed assets 62,052 53,611
Less: Accumulated depreciation   (519,590 )   (480,555 )
 
Total property, plant and equipment, net   2,577,472     2,527,924  
 
Investment in unconsolidated affiliates 956,925 886,558
Intangible assets, net 152,970 158,621
Deferred loan costs, net   33,202     21,947  
 
Total assets $ 3,846,812   $ 3,683,238  
 
Liabilities and Partners’ Capital
 
Total current liabilities $ 135,506   $ 143,094  
 
Long-term liabilities
Long-term debt 1,248,700 1,062,900
Other liabilities   5,073     4,099  
 
Total long-term liabilities   1,253,773     1,066,999  
 
Total partners’ capital   2,457,533     2,473,145  
 
Total liabilities and partners’ capital $ 3,846,812   $ 3,683,238  
 
 
Access Midstream Partners, L.P.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
($ in thousands)
(unaudited)
 
    Six Months Ended
June 30,
  2012         2011  
Cash flows from operating activities
Net income $ 103,972 $ 79,859
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 79,160 63,685
Income from unconsolidated affiliates (28,958 )
Other non-cash items 3,709 3,771
Changes in assets and liabilities
(Increase) decrease in accounts receivable (27,017 ) 54,543
(Increase) decrease in other assets (1,649 ) 1,004
Increase (decrease) in accounts payable (11,742 ) 4,129
Increase (decrease) in accrued liabilities   18,923     (1,003 )
 
Net cash provided by operating activities   136,398     205,988  
 
Cash flows from investing activities
Additions to property, plant and equipment (140,921 ) (216,251 )
Proceeds from sale of assets 5,599 1,318
Investments in unconsolidated affiliates   (43,153 )    
 
Net cash used in investing activities   (178,475 )   (214,933 )
 
Cash flows from financing activities
Proceeds from long-term debt borrowings 519,900 184,400
Payments on long-term debt borrowings (1,084,100 ) (433,500 )
Proceeds from issuance of senior notes 750,000 350,000
Debt issuance costs (13,874 ) (9,583 )
Distribution to unitholders (120,475 ) (96,921 )
Initial public offering costs (1,280 )
Other adjustments   5,722     4  
 
Net cash provided by financing activities   57,173     (6,880 )
 

Net increase (decrease) in cash and cash equivalents
15,096 (15,825 )
 
Cash and cash equivalents
Beginning of period   22     17,816  
 
End of period $ 15,118   $ 1,991  
 
 
Access Midstream Partners, L.P.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
($ in thousands)
(unaudited)
 
    Three Months Ended
June 30,
  2012         2011  
 
Net Income $ 51,606 $ 41,083
 
Adjusted for:
Interest expense 15,636 3,837
Income tax expense 807 726
Depreciation and amortization expense 40,722 32,747
Other 240 923
Income from unconsolidated affiliates (15,971 )
EBITDA from unconsolidated affiliates (1)   27,858      
 
Adjusted EBITDA $ 120,898   $ 79,316  
 
Adjusted for:
Maintenance capital expenditures (18,500 ) (18,500 )
Cash portion of interest expense (14,312 ) (2,120 )
Income tax expense   (807 )   (726 )
 
Distributable cash flow   87,279     57,970  
 
Adjusted for:
Implied minimum volume commitment        
 
Adjusted distributable cash flow $ 87,279   $ 57,970  
 
 
Cash provided by operating activities $ 69,183 $ 68,719
 
Adjusted for:
Change in assets and liabilities 8,951 7,878
Interest expense 15,636 3,837
Income tax expense 807 726
Other non-cash items (1,537 ) (1,844 )
EBITDA from unconsolidated affiliates (1)   27,858      
 
Adjusted EBITDA $ 120,898   $ 79,316  
 
Adjusted for:
Maintenance capital expenditures (18,500 ) (18,500 )
Cash portion of interest expense (14,312 ) (2,120 )
Income tax expense   (807 )   (726 )
 
Distributable cash flow   87,279     57,970  
 
Adjusted for:
Implied minimum volume commitment        
 
Adjusted distributable cash flow $ 87,279   $ 57,970  
 
Cash distribution

Limited partner units

2012: ($0.42 x 147,998,610 units); 2011: ($0.3625 x 138,161,160 units)
$ 62,159 $ 50,084
General partner interest   2,005     1,022  
 
Total cash distribution $ 64,164   $ 51,106  
 
Distribution coverage ratio   1.36     1.13  
 

(1) EBITDA from unconsolidated affiliates is calculated as follows:
Net Income $ 15,971 $
 
Adjusted for:
Depreciation and amortization expense   11,887      
 
EBITDA from unconsolidated affiliates $ 27,858   $  
 
Marcellus overhead allocation (2,600 )
Chesapeake guaranty payment        
 
EBITDA reconciled to CHK commitment $ 25,258   $  
 
 
Access Midstream Partners, L.P.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
($ in thousands)
(unaudited)
 
    Six Months Ended
June 30,
  2012         2011  
 
Net Income $ 103,972 $ 79,859
 
Adjusted for:
Interest expense 31,594 5,277
Income tax expense 1,646 1,696
Depreciation and amortization expense 79,160 63,685
Other 195 863
Income from unconsolidated affiliates (28,958 )
EBITDA from unconsolidated affiliates (1)   51,718      
 
Adjusted EBITDA $ 239,327   $ 151,380  
 
Adjusted for:
Maintenance capital expenditures (37,000 ) (37,000 )
Cash portion of interest expense (28,967 ) (2,740 )
Income tax expense   (1,646 )   (1,696 )
 
Distributable cash flow   171,714     109,944  
 
Adjusted for:
Implied minimum volume commitment       5,268  
 
Adjusted distributable cash flow $ 171,714   $ 115,212  
 
 
Cash provided by operating activities $ 136,398 $ 205,988
 
Adjusted for:
Change in assets and liabilities 21,485 (58,673 )
Interest expense 31,594 5,277
Income tax expense 1,646 1,696
Other non-cash items (3,514 ) (2,908 )
EBITDA from unconsolidated affiliates (1)   51,718      
 
Adjusted EBITDA $ 239,327   $ 151,380  
 
Adjusted for:
Maintenance capital expenditures (37,000 ) (37,000 )
Cash portion of interest expense (28,967 ) (2,740 )
Income tax expense   (1,646 )   (1,696 )
 
Distributable cash flow   171,714     109,944  
 
Adjusted for:
Implied minimum volume commitment       5,268  
 
Adjusted distributable cash flow $ 171,714   $ 115,212  
 

(1) EBITDA from unconsolidated affiliates is calculated as follows:
Net Income $ 28,958 $
 
Adjusted for:
Depreciation and amortization expense 22,788
Other   (28 )    
 
EBITDA from unconsolidated affiliates $ 51,718   $  
 
Marcellus overhead allocation (5,200 )
Chesapeake guaranty payment        
 
EBITDA reconciled to CHK commitment $ 46,518   $  
 
 
Access Midstream Partners, L.P.
OPERATING STATISTICS
(unaudited)
 
    Three Months Ended
June 30,
2012     2011
 
Barnett Shale
Wells connected during period 63 81
Total wells connected 2,348 2,006
Throughput, bcf per day 1.261 1.044
Approximate miles of pipe at end of period 843 824
Gas compression (horsepower) at end of period 161,115 137,210
 
 
Haynesville Shale
Wells connected during period 18
Total wells connected 222 201
Throughput, bcf per day 0.349 0.563
Approximate miles of pipe at end of period 261 241
Gas compression (horsepower) at end of period 23,745 21,970
 
 
Marcellus Shale
Wells connected during period 47
Total wells connected 396
Throughput, bcf per day (1) 0.679
Approximate miles of pipe at end of period 364
Gas compression (horsepower) at end of period 50,950
 
 
Mid-Continent
Wells connected during period 69 44
Total wells connected 2,656 2,446
Throughput, bcf per day 0.579 0.541
Approximate miles of pipe at end of period 2,528 2,385
Gas compression (horsepower) at end of period 93,404 94,799
 
 
Total
Wells connected during period 179 143
Total wells connected 5,622 4,653
Throughput, bcf per day (1) 2.868 2.148
Approximate miles of pipe at end of period 3,996 3,450
Gas compression (horsepower) at end of period 329,214 253,979

(1)
  Throughput in the Marcellus Shale region represents the net throughput allocated to the Partnership’s interest. Total gross Marcellus Shale system throughput was 1.484 bcf per day for the three months ended June 30, 2012.
 
 
Access Midstream Partners, L.P.
OPERATING STATISTICS
(unaudited)
 
    Six Months Ended
June 30,
2012     2011
 
Barnett Shale
Wells connected during period 129 171
Total wells connected 2,348 2,006
Throughput, bcf per day 1.270 1.007
Approximate miles of pipe at end of period 843 824
Gas compression (horsepower) at end of period 161,115 137,210
 
 
Haynesville Shale
Wells connected during period 2 37
Total wells connected 222 201
Throughput, bcf per day 0.383 0.528
Approximate miles of pipe at end of period 261 241
Gas compression (horsepower) at end of period 23,745 21,970
 
 
Marcellus Shale
Wells connected during period 115
Total wells connected 396
Throughput, bcf per day (1) 0.626
Approximate miles of pipe at end of period 364
Gas compression (horsepower) at end of period 50,950
 
 
Mid-Continent
Wells connected during period 130 90
Total wells connected 2,656 2,446
Throughput, bcf per day 0.557 0.543
Approximate miles of pipe at end of period 2,528 2,385
Gas compression (horsepower) at end of period 93,404 94,799
 
 
Total
Wells connected during period 376 298
Total wells connected 5,622 4,653
Throughput, bcf per day (1) 2.836 2.078
Approximate miles of pipe at end of period 3,996 3,450
Gas compression (horsepower) at end of period 329,214 253,979

(1)
  Throughput in the Marcellus Shale region represents the net throughput allocated to the Partnership’s interest. Total gross Marcellus Shale system throughput was 1.347 bcf per day for the six months ended June 30, 2012.

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