HOUSTON, Nov. 6 /PRNewswire-FirstCall/ -- Copano Energy, L.L.C. today announced its financial results for the three and nine months ended September 30, 2007.
"We are pleased that year-over-year growth in throughput volumes on our Mid-Continent and our wholly-owned Texas Gulf Coast pipelines enabled us to achieve increased distributable cash flow, despite significantly higher non-cash expenses related to Copano's hedging program," said John Eckel, Chairman and Chief Executive Officer of Copano.
Third Quarter Financial Results
Revenue for the third quarter of 2007 increased 27% to $293.1 million compared with $231.3 million for the third quarter of last year. Net income decreased by 12% to $19.7 million, or $0.44 per unit on a diluted basis, for the third quarter of 2007 compared to net income of $22.3 million, or $0.60 per unit on a diluted basis (as retroactively adjusted to reflect the two-for-one unit split of Copano's common units effective March 30, 2007), for the third quarter of 2006. The decline in net income is the result of a $3.8 million increase in non-cash amortization expense and mark-to-market charges related to the company's hedging program in the third quarter of 2007 compared to the third quarter of 2006. Gross margin for Copano's operating segments, excluding the Corporate segment, increased 10% compared to the third quarter 2006. Total segment gross margin, which includes the results of Copano's hedging program, slightly decreased to $55.9 million in the third quarter of 2007 from $56.0 million in the third quarter of 2006. Weighted average diluted units outstanding totaled approximately 44.2 million for the three months ended September 30, 2007 and approximately 36.9 million for the same period in 2006 (as retroactively adjusted to reflect the two-for-one split of Copano's common units effective March 30, 2007).
Earnings before interest, taxes, depreciation and amortization, or EBITDA, for the third quarter of 2007 were $36.8 million compared with $40.0 million for the third quarter of 2006. Distributable cash flow for the third quarter of 2007 (prior to any retained cash reserves established by Copano's Board) totaled $32.1 million compared to $29.9 million for the third quarter of 2006, an increase of 7%. Third quarter 2007 distributable cash flow represents 160% coverage of the increased third quarter 2007 distribution of $0.47 per unit based on the number of common units outstanding and eligible for distribution on November 1, 2007, the distribution record date. Copano recorded non-cash amortization expense related to commodity derivatives of $5.7 million, which has not been added back in the determination of distributable cash flow or EBITDA. In addition, non-cash mark-to-market charges of approximately $0.8 million, including ineffectiveness of $0.1 million, were incurred for certain commodity hedges. These mark-to-market charges reduced EBITDA but were added back in the determination of distributable cash flow.
Total segment gross margin, EBITDA and distributable cash flow are non-GAAP financial measures that are defined and reconciled to the most directly comparable GAAP measures at the end of this news release.
Third Quarter Operating Results by Business Segment Mid-Continent Operations
During the third quarter of 2007, gross margin for the Mid-Continent Operations segment totaled $31.2 million, including $2.9 million attributable to Cimmarron Gathering (which was acquired on May 1, 2007), from $27.9 million for the third quarter of 2006, an increase of 12%. The increase in gross margin resulted primarily from a 26% increase in natural gas liquids, or NGLs produced, a 26% increase in plant inlet throughput and a 23% increase in pipeline throughput in the third quarter of 2007. The acquisition of Cimmarron Gathering accounted for 53% of the increase in NGLs produced, 61% of the increase in plant inlet throughput and 54% of the increase in pipeline throughput for this segment. NGLs produced at the Paden processing plant increased 21% during the third quarter of 2007 as compared to the same period in 2006.
The Mid-Continent Operations segment gathered or transported an average of 227,099 MMBtu/d of natural gas on its pipelines (including an average of 23,121 MMBtu/d of natural gas per day on Cimmarron's pipelines). This segment processed an average of 166,175 MMBtu/d of natural gas and produced an average of 16,058 barrels per day of NGLs at its plants and third-party plants during the third quarter of 2007. During the third quarter of 2006, the Mid-Continent segment gathered or transported an average of 184,247 MMBtu/d of natural gas on its pipelines, processed an average of 131,501 MMBtu/d of natural gas and produced an average of 12,717 barrels per day of NGLs at its plants and third-party plants. Cimmarron Gathering's throughput on its crude oil system averaged 3,574 barrels per day for the period from July 1, 2007 through September 30, 2007.
Texas Gulf Coast Pipelines
Gross margin for the Texas Gulf Coast Pipelines segment in the third quarter of 2007 decreased approximately 3% to $11.2 million compared to $11.5 million in the third quarter of 2006. The decrease resulted from lower unit margins during the third quarter of 2007 which were partially offset by a 5% increase in pipeline throughput volumes on Copano's wholly-owned pipelines as compared to the prior-year period.
During the third quarter of 2007, the Texas Gulf Coast Pipelines segment gathered or transported an average of 363,964 MMBtu/d of natural gas on its pipelines, which included 277,083 MMBtu/d of natural gas on its wholly-owned pipelines and 86,881 MMBtu/d on the majority-owned Webb/Duval Gathering System, net of intercompany volumes. During the third quarter of 2006, this segment gathered and transported an average of 381,751 MMBtu/d of natural gas on its pipelines, which included 262,986 MMBtu/d of natural gas on its wholly-owned pipelines and 118,765 MMBtu/d on the Webb/Duval Gathering System, net of intercompany volumes.
Texas Gulf Coast Processing
Gross margin for the Texas Gulf Coast Processing segment in the third quarter of 2007 increased approximately 15% to $19.4 million compared to $16.9 million in the third quarter 2006. The increase primarily resulted from a 12% increase in plant NGL production in the third quarter of 2007 as compared to the third quarter of 2006. The Houston Central Processing Plant produced an average of 16,402 barrels per day of NGLs during the third quarter of 2007 compared to an average of 14,673 barrels per day produced during the third quarter of 2006.
During the third quarter of 2007, the Texas Gulf Coast Processing segment processed an average of 520,341 MMBtu/d of natural gas compared with 531,069 MMBtu/d during the third quarter of 2006. Volumes originating from the Texas Gulf Coast Pipelines segment and delivered to the plant were up approximately 8% from the third quarter of last year and natural gas delivered to the plant and originated from sources other than the Texas Gulf Coast Pipelines segment decreased approximately 10% from the third quarter of 2006.
Corporate
The Corporate segment includes the results attributable to Copano's commodity risk management portfolio. Gross margin for the Corporate segment in the third quarter of 2007 was a loss of $6.0 million compared to a loss of $0.3 million in the third quarter of 2006. The Corporate segment gross margin loss for the third quarter of 2007 includes $0.5 million of cash settlements on expired commodity derivatives reduced by $5.7 million of non-cash amortization expense related to commodity derivatives, which has not been added back in the determination of distributable cash flow or EBITDA, and $0.8 million of unrealized losses, including ineffectiveness of $0.1 million, related to the non-cash mark-to-market charges for certain commodity hedges, which are not added back in the determination of EBITDA but are added back in the determination of distributable cash flow. The Corporate segment gross margin for the third quarter of 2006 included $2.4 million of cash settlements received on expired commodity derivatives reduced by $2.7 million of amortization expense related to commodity derivatives, which were not added back in the determination of distributable cash flow or EBITDA. The $3.8 million increase in non-cash amortization expense and mark-to-market charges in the third quarter of 2007 compared to the third quarter of 2006 is the result of the additional costs related to commodity hedges acquired in the fourth quarter of 2006 and the second quarter of 2007.
Year-To-Date Financial Results
Revenue increased 20% to $785.8 million compared with $654.9 million in the same nine-month period of last year. Net income decreased by 14% to $41.7 million, or $0.96 per unit on a diluted basis, for the nine months ended September 30, 2007 compared to net income of $48.6 million, or $1.32 per unit on a diluted basis (as retroactively adjusted to reflect the two-for-one unit split of Copano's common units effective March 30, 2007), for the nine months ended September 30, 2006. Total segment gross margin decreased slightly to $140.6 million for the nine months ended September 30, 2007 from $140.7 million for the nine months ended September 30, 2006. The Corporate segment gross margin loss of $14.8 million for the nine months ended 2007 reflects $3.8 million of cash settlements on expired commodity derivatives offset by $16.0 million of non-cash amortization expense related to commodity derivatives and $2.6 million of mark-to-market charges and unrealized losses related to the ineffective portion of Copano's hedges. Weighted average diluted units outstanding totaled approximately 43.6 million for the nine months ended September 30, 2007 and approximately 36.8 million for the same period in 2006 (as retroactively adjusted to reflect the two-for-one split of Copano's common units effective March 30, 2007).
EBITDA for the nine months ended September 30, 2007 was $89.6 million compared with $97.6 million for the nine months ended September 30, 2006. Total segment gross margin and EBITDA are non-GAAP financial measures that are defined and reconciled to the most directly comparable GAAP measures at the end of this news release.
Unit Distributions
On October 17, 2007, Copano announced a third quarter 2007 cash distribution of $0.47 per unit, or $1.88 per unit on an annualized basis, for all of its outstanding common units that are eligible for distributions. This distribution will be paid on November 14, 2007 to holders of record of eligible common units at the close of business on November 1, 2007.
Conference Call
Copano will hold a conference call to discuss its third quarter 2007 financial results and recent developments on Wednesday, November 7 at 10:00 a.m. Eastern Time (9:00 a.m. Central Time). To participate in the call, dial (303) 262-2175 and ask for the Copano Energy call at least 10 minutes prior to the start time, or access it live over the internet at http://www.copanoenergy.com/ on the "Investor Overview" page of the "Investor Relations" section of Copano's website. To listen to the live call on the web, please visit the website at least 15 minutes prior to the call to register and download any necessary audio software.
An archive of the audio webcast will be available shortly after the call for 90 days on Copano's website. Additionally, a telephonic replay will be available through November 14 by calling (303) 590-3000 and using the pass code 11099851.
Use of Non-GAAP Financial Measures
This news release and the accompanying schedules include the non-generally accepted accounting principles, or non-GAAP, financial measures of total segment gross margin, EBITDA and distributable cash flow. The accompanying schedules provide reconciliations of these non-GAAP financial measures to their most directly comparable financial measures calculated and presented in accordance with accounting principles generally accepted in the United States, or GAAP. Non-GAAP financial measures should not be considered as alternatives to GAAP measures such as net income, operating income, cash flows from operating activities or any other GAAP measure of liquidity or financial performance. The Company uses non-GAAP financial measures as measures of its core profitability or to assess the financial performance of its assets. The Company believes that investors benefit from having access to the same financial measures that its management uses in evaluating performance.
Total segment gross margin is defined as revenue less cost of sales. Cost of sales includes the following costs and expenses: cost of natural gas and NGLs purchased from third parties, cost of natural gas and NGLs purchased from affiliates, costs paid to third parties to transport volumes and costs paid to affiliates to transport volumes. Total segment gross margin consists of the sum of the individual segment gross margins. The Company views segment gross margin as an important performance measure of the core profitability of its operations. This measure is a key component of internal financial reporting and is used by senior management in deciding how to allocate capital resources among business segments. The GAAP measure most directly comparable to total segment gross margin is operating income.
Copano defines EBITDA as net income plus interest expense, provision for income taxes and depreciation and amortization expense. EBITDA is used as a supplemental financial measure by management and by external users of Copano's financial statements such as investors, commercial banks, research analysts and others, to assess:
-- the financial performance of Copano's assets without regard to financing methods, capital structure or historical cost basis; -- the ability of Copano's assets to generate cash sufficient to pay interest costs and support indebtedness; -- Copano's operating performance and return on capital as compared to those of other companies in the midstream energy sector, without regard to financing or capital structure; and -- the viability of acquisitions and capital expenditure projects and the overall rates of return on alternative investment opportunities.
EBITDA is also a financial measure that, with certain negotiated adjustments, is reported to the Company's lenders and is used to compute financial covenants under its credit facility. EBITDA should not be considered an alternative to net income, operating income, cash flows from operating activities or any other measure of financial performance presented in accordance with GAAP. Copano's EBITDA may not be comparable to EBITDA or similarly titled measures of other entities, as other entities may not calculate EBITDA in the same manner as the Company does. Copano has reconciled EBITDA to net income and cash flows from operating activities.
Distributable cash flow is defined as net income plus: (1) depreciation and amortization expense; (2) cash distributions received from investments in unconsolidated affiliates and equity losses from such unconsolidated affiliates; (3) reimbursements by pre-IPO unitholders of certain general and administrative expenses in excess of the "G&A Cap" provided under the Company's limited liability company agreement; (4) provision for deferred income taxes; (5) the subtraction of maintenance capital expenditures; (6) the subtraction of equity in the earnings of unconsolidated affiliates; and (7) the addition of losses or subtraction of gains relating to other miscellaneous non-cash amounts affecting net income for the period. Maintenance capital expenditures represent capital expenditures employed to replace partially or fully depreciated assets to maintain the existing operating capacity of the Company's assets and to extend their useful lives, or other capital expenditures that are incurred in maintaining existing system volumes and related cash flows. Distributable cash flow is a significant performance metric used by senior management to compare basic cash flows generated by the Company (prior to the establishment of any retained cash reserves by its Board of Directors) to the cash distributions expected to be paid to unitholders. Using this metric, management can quickly compute the coverage ratio of estimated cash flows to planned cash distributions. Distributable cash flow is also an important non-GAAP financial measure for unitholders since it serves as an indicator of the Company's success in providing a cash return on investment. Specifically, this financial measure indicates to investors whether or not the Company is generating cash flow at a level that can sustain or support an increase in quarterly distribution rates. Distributable cash flow is also a quantitative standard used throughout the investment community with respect to publicly-traded partnerships and limited liability companies because the value of a unit of such an entity is generally determined by the unit's yield (which in turn is based on the amount of cash distributions the entity can pay to a unitholder). The GAAP measure most directly comparable to distributable cash flow is net income.
Houston-based Copano Energy, L.L.C. is a midstream natural gas company with natural gas gathering, intrastate pipeline and natural gas processing assets in Oklahoma, Texas and Wyoming.
This news release may include "forward-looking statements" as defined by the Securities and Exchange Commission. These statements are based on certain assumptions made by the Company based on management's experience and perception of historical trends, current conditions, expected future developments and other factors it believes are appropriate in the circumstances. These statements include, but are not limited to, statements with respect to future distributions. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company, which may cause the Company's actual results to differ materially from those implied or expressed by the forward-looking statements. These risks include an inability to obtain new sources of natural gas supplies, the loss of key producers that supply natural gas to the Company, key customers reducing the volume of natural gas and natural gas liquids they purchase from the Company, a decline in the price and market demand for natural gas and natural gas liquids, the incurrence of significant costs and liabilities in the future resulting from the Company's failure to comply with new or existing environmental regulations or an accidental release of hazardous substances into the environment and other factors detailed in the Company's Securities and Exchange Commission filings.
- tables to follow - COPANO ENERGY, L.L.C. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, 2007 2006 2007 2006 (in thousands, except per unit information) Revenue: Natural gas sales $124,091 $114,624 $375,420 $346,430 Natural gas liquids sales 132,835 106,534 336,748 277,536 Transportation, compression and processing fees 3,880 3,919 12,320 11,174 Condensate and other 32,270 6,234 61,298 19,758 Total revenue 293,076 231,311 785,786 654,898 Costs and expenses: Cost of natural gas and natural gas liquids 235,952 174,525 641,799 512,003 Transportation 1,239 814 3,342 2,241 Operations and maintenance 10,525 8,519 28,700 23,527 Depreciation and amortization 10,130 8,182 28,426 23,657 General and administrative 8,615 8,108 23,831 19,919 Taxes other than income 1,010 622 2,566 1,610 Equity in (earnings) loss from unconsolidated affiliates (401) (549) (2,019) (644) Total costs and expenses 267,070 200,221 726,645 582,313 Operating income 26,006 31,090 59,141 72,585 Interest and other income 706 718 2,032 1,310 Interest and other financing costs (6,943) (9,525) (18,314) (25,312) Income before income taxes 19,769 22,283 42,859 48,583 Provision for income taxes (102) - (1,182) - Net income $19,667 $22,283 $41,677 $48,583 Basic net income per common unit: Net income(1) $0.46 $0.61 $1.00 $1.33 Weighted average number of common units(1) 42,330 29,393 41,154 29,357 Diluted net income per common unit: Net income(1) $0.44 $0.60 $0.96 $1.32 Weighted average number of common units(1) 44,233 36,863 43,606 36,767 (1) Net income per common unit and the weighted average number of common units for the three and nine months ended September 30, 2006 have been retroactively adjusted to reflect a two-for-one split of Copano's common units effective March 30, 2007. COPANO ENERGY, L.L.C. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Nine Months Ended September 30, 2007 2006 (in thousands) Cash Flows From Operating Activities: Net income $41,677 $48,583 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 28,426 23,657 Amortization of debt issue costs 921 3,524 Equity in earnings from unconsolidated affiliates (2,019) (644) Distributions from unconsolidated affiliates 2,888 - Equity-based compensation 2,180 1,315 Deferred tax provision 898 - Other noncash items (98) 94 Changes in assets and liabilities, net of acquisitions: Accounts receivable (12,135) 19,765 Prepayments and other current assets (562) 1,661 Risk management activities (19,137) 6,914 Accounts payable 13,200 (7,447) Other current liabilities 12,099 (795) Net cash provided by operating activities 68,338 96,627 Cash Flows From Investing Activities: Additions to property, plant and equipment (57,247) (30,148) Additions to intangible assets (2,604) (308) Acquisitions (55,471) (9,074) Investment in unconsolidated affiliate - (11,053) Distributions from unconsolidated affiliates 375 - Other (990) (504) Net cash used in investing activities (115,937) (51,087) Cash Flows From Financing Activities: Repayments of long-term debt - (376,500) Proceeds from long-term debt 104,000 353,500 Repayment of short-term notes payable (1,494) (1,477) Deferred financing costs (608) (7,013) Distributions to unitholders (53,441) (33,277) Capital contributions from pre-IPO investors 7,169 4,006 Proceeds from private placement of common units - 25,000 Equity offering costs (515) (640) Proceeds from option exercises 850 199 Net cash provided by (used in) financing activities 55,961 (36,202) Net increase in cash and cash equivalents 8,362 9,338 Cash and cash equivalents, beginning of year 39,484 25,297 Cash and cash equivalents, end of period $47,846 $34,635 COPANO ENERGY, L.L.C. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited) As of September 30, December 31, 2007 2006 ($ in thousands) ASSETS Current assets: Cash and cash equivalents $47,846 $39,484 Accounts receivable, net 90,486 67,095 Risk management assets 5,734 13,973 Prepayments and other current assets 4,121 3,166 Total current assets 148,187 123,718 Property, plant and equipment, net 665,052 566,927 Intangible assets, net 138,699 93,372 Investment in unconsolidated affiliates 17,982 19,378 Risk management assets 16,043 23,826 Other assets, net 13,975 11,837 Total assets $999,938 $839,058 LIABILITIES AND MEMBERS' CAPITAL Current liabilities: Accounts payable $117,908 $91,668 Notes payable - 1,495 Risk management liabilities 12,498 944 Other current liabilities 14,347 11,615 Total current liabilities 144,753 105,722 Long-term debt 359,000 255,000 Deferred tax provision 898 - Risk management and other noncurrent liabilities 18,260 5,750 Members' capital: Common units, no par value, 42,357,653 and 35,190,590 units issued and outstanding as of September 30, 2007 and December 31, 2006(1), respectively 491,978 480,797 Class C units, no par value, 1,579,409 units and 0 units issued and outstanding as of September 30, 2007 and December 31, 2006, respectively 54,000 - Subordinated units, no par value, 7,038,252 units outstanding as of December 31, 2006(1) - 10,379 Paid-in capital 19,934 10,585 Accumulated (deficit) earnings (9,053) 2,918 Other comprehensive loss (79,832) (32,093) 477,027 472,586 Total liabilities and members' capital $999,938 $839,058 (1) Units outstanding have been retroactively adjusted to reflect a two-for-one split effective March 30, 2007. COPANO ENERGY, L.L.C. AND SUBSIDIARIES OPERATING STATISTICS (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, 2007 2006 2007 2006 ($ in thousands) Total segment gross margin(1) $55,885 $55,972 $140,645 $140,654 Operations and maintenance expenses 10,525 8,519 28,700 23,527 Depreciation and amortization 10,130 8,182 28,426 23,657 General and administrative expenses 8,615 8,108 23,831 19,919 Taxes other than income 1,010 622 2,566 1,610 Equity in (earnings) loss from unconsolidated affiliates (401) (549) (2,019) (644) Operating income 26,006 31,090 59,141 72,585 Interest and other financing costs, net (6,237) (8,807) (16,282) (24,002) Provision for income taxes (102) - (1,182) - Net income $19,667 $22,283 $41,677 $48,583 Segment gross margin: Mid-Continent Operations $31,230 $27,869 $80,518 $72,036 Texas Gulf Coast Pipelines(2) 11,215 11,503 30,699 29,387 Texas Gulf Coast Processing 19,437 16,934 44,285 38,906 Corporate(3) (5,997) (334) (14,857) 325 Total segment gross margin(1) $55,885 $55,972 $140,645 $140,654 Segment gross margin per unit: Mid-Continent Operations: Pipeline throughput ($/MMBtu)(4) $1.49 $1.64 $1.42 $1.51 Plant inlet throughput ($/MMBtu)(4) $2.04 $2.30 $1.95 $2.15 NGLs produced ($/Bbl)(4) $21.14 $23.82 $20.41 $22.99 Texas Gulf Coast Pipelines ($/MMBtu)(2) $0.44 $0.48 $0.41 $0.44 Texas Gulf Coast Processing: Inlet throughput ($/MMBtu)(5) $0.41 $0.35 $0.29 $0.28 NGLs produced ($/Bbl)(5) $12.88 $12.54 $9.91 $9.86 Volumes: Mid-Continent Operations: Pipeline throughput (MMBtu/d)(4) 227,099 184,247 207,572 174,772 Plant inlet throughput (MMBtu/d)(4) 166,175 131,501 151,131 122,628 NGLs produced (Bbls/d)(4) 16,058 12,717 14,452 11,475 Texas Gulf Coast Pipelines - throughput (MMBtu/d)(2) 277,083 262,986 277,477 246,212 Texas Gulf Coast Processing: Inlet throughput (MMBtu/d) 520,341 531,069 551,260 513,567 NGLs produced (Bbls/d) 16,402 14,673 16,364 14,446 Capital Expenditures: Maintenance capital expenditures $2,735 $3,394 $7,198 $7,320 Expansion capital expenditures 15,806 19,232 163,976 35,630 Total capital expenditures $18,541 $22,626 $171,174 $42,950 Operations and maintenance expenses: Mid-Continent Operations $6,287 $4,466 $15,801 $12,382 Texas Gulf Coast Pipelines 2,086 1,634 6,503 5,163 Texas Gulf Coast Processing 2,152 2,419 6,396 5,982 Total operations and maintenance expenses $10,525 $8,519 $28,700 $23,527 (1) Total segment gross margin is a non-GAAP financial measure. For a reconciliation of total segment gross margin to its most directly comparable GAAP measure, please read "Non-GAAP Financial Measures." (2) Excludes results and volumes associated with Copano's interest in Webb/Duval Gatherers. Gross volumes transported by Webb/Duval Gatherers were 86,881 MMBtu/d and 118,765 MMBtu/d, net of intercompany volumes, for the three months ended September 30, 2007 and 2006, respectively. Gross volumes transported by Webb/Duval Gatherers were 99,212 MMBtu/d and 116,429 MMBtu/d, net of intercompany volumes, for the nine months ended September 30, 2007 and 2006, respectively. (3) The Corporate segment gross margin includes results attributable to Copano's commodity risk management activities. (4) Segment gross margin per unit amounts for the Mid-Continent Operations segment represent the segment gross margin divided by the pipeline throughput, inlet throughput or NGLs produced, as appropriate. Plant inlet throughput and NGLs produced represent total volumes processed and produced by the Mid-Continent Operations segment at all plants, including plants owned by the Mid-Continent Operations segment and plants owned by third parties. Plant inlet throughput averaged 97,013 MMBtu/d and NGLs produced averaged 10,110 barrels per day for the three months ended September 30, 2007 for plants owned by the Mid-Continent Operations segment. Plant inlet throughput averaged 86,848 MMBtu/d and NGLs produced averaged 8,672 barrels per day for the three months ended September 30, 2006 for plants owned by the Mid-Continent Operations segment. Plant inlet throughput averaged 90,476 MMBtu/d and NGLs produced averaged 9,210 barrels per day for the nine months ended September 30, 2007 for plants owned by the Mid-Continent Operations segment. Plant inlet throughput averaged 80,140 MMBtu/d and NGLs produced averaged 7,746 barrels per day for the nine months ended September 30, 2006 for plants owned by the Mid-Continent Operations segment. This data excludes results and volumes associated with Copano's interest in Southern Dome. (5) Represents the Texas Gulf Coast Processing segment gross margin divided by the total inlet throughput or NGLs produced, as appropriate. Non-GAAP Financial Measures
The following table presents a reconciliation of the non-GAAP financial measures of (1) total segment gross margin (which consists of the sum of individual segment gross margins) to the GAAP financial measure of operating income, (2) EBITDA to the GAAP financial measures of net income and cash flows from operating activities and (3) distributable cash flow to the GAAP financial measure of net income for each of the periods indicated (in thousands).
Three Months Ended Nine Months Ended
September 30, September 30,
2007 2006 2007 2006
Reconciliation of total
segment gross margin to
operating income:
Operating income $26,006 $31,090 $59,141 $72,585
Add: Operations and
maintenance expenses 10,525 8,519 28,700 23,527
Depreciation and
amortization 10,130 8,182 28,426 23,657
General and
administrative
expenses 8,615 8,108 23,831 19,919
Taxes other than income 1,010 622 2,566 1,610
Equity in (earnings)
loss from
unconsolidated
affiliates (401) (549) (2,019) (644)
Total segment gross margin $55,885 $55,972 $140,645 $140,654
Reconciliation of EBITDA to
net income:
Net income $19,667 $22,283 $41,677 $48,583
Add: Depreciation and
amortization 10,130 8,182 28,426 23,657
Interest and other
financing costs 6,943 9,525 18,314 25,312
Provision for income
taxes 102 - 1,182 -
EBITDA $36,842 $39,990 $89,599 $97,552
Reconciliation of EBITDA to
cash flows from operating
activities:
Cash flow provided by
operating activities $27,447 $36,690 $68,338 $96,627
Add: Cash paid for interest
and other financing
costs 6,636 7,389 17,393 21,788
Equity in earnings (loss)
from unconsolidated
affiliates 401 549 2,019 644
Distributions from
unconsolidated
affiliates (777) - (2,888) -
Risk management
activities 143 (4,054) 19,137 (6,914)
Increase in working
capital and other 2,992 (584) (14,400) (14,593)
EBITDA $36,842 $39,990 $89,599 $97,552
Reconciliation of net income
to distributable cash flow:
Net income $19,667 $22,283 $41,677 $48,583
Add: Depreciation and
amortization 10,130 8,182 28,426 23,657
Amortization of debt
issue costs 306 2,136 921 3,524
Equity-based compensation 853 579 2,180 1,315
G&A reimbursement from
pre-IPO unitholders 2,796 600 8,311 3,226
Distributions from
unconsolidated affiliates 771 - 3,263 -
Unrealized losses on
derivatives 847 63 2,775 264
Deferred taxes and other (96) 11 800 94
Less: Equity in (earnings)
loss from unconsolidated
affiliates (401) (549) (2,019) (644)
Maintenance capital
expenditures (2,735) (3,394) (7,198) (7,320)
Distributable cash flow(1) $32,138 $29,911 $79,136 $72,699
Actual quarterly distribution
("AQD") (2)(3) $20,067 $13,785
Distributable cash flow
coverage of AQD(3) 160% 217%
(1) Prior to any retained cash reserves established by Copano's Board of
Directors.
(2) The prior year distribution rate has been retroactively adjusted to
reflect the two-for-one split of Copano's common units effective
March 30, 2007.
(3) Reflects actual quarterly distribution of $0.47 per unit for the three
months ended September 30, 2007 and $0.375 per unit for the three
months ended September 30, 2006 (as retroactively adjusted to reflect
the two-for-one split of Copano's common units effective
March 30, 2007).
Contacts: Matt Assiff, SVP & CFO
Copano Energy, L.L.C.
713-621-9547
Jack Lascar /
