HOUSTON, Aug. 6 /PRNewswire-FirstCall/ -- Copano Energy, L.L.C. today announced its financial results for the three months ended June 30, 2008.
"We are pleased that the continued favorable supply and commodity price environment enabled Copano to achieve substantial year-over-year and sequential increases in net income, Adjusted EBITDA and distributable cash flow," said John Eckel, Chairman and Chief Executive Officer of Copano.
Second Quarter Financial Results
Revenue for the second quarter of 2008 increased 78% to $501.3 million compared with $281.7 million for the second quarter of 2007. Copano's operating segment gross margin increased 70% to $89.6 million compared to $52.6 million in the second quarter of 2007. Total segment gross margin, which includes costs associated with Copano's hedging program of $17.5 million, increased 55% to $72.1 million for the second quarter of 2008 from $46.4 million for the second quarter of 2007. Net income increased by 74% to $23.2 million, or $0.40 per unit on a diluted basis, for the second quarter of 2008 compared to net income of $13.3 million, or $0.31 per unit on a diluted basis, for the second quarter of 2007. Weighted average diluted units outstanding totaled approximately 58.0 million for the second quarter of 2008 and approximately 43.5 million for the same period in 2007.
Adjusted EBITDA for the second quarter of 2008 increased 95% to $58.0 million compared with $29.7 million for the second quarter of 2007. Adjusted EBITDA means earnings before interest, taxes, depreciation and amortization, and is adjusted to include Copano's share of depreciation, amortization and interest costs attributable to its unconsolidated affiliates. Distributable cash flow for the second quarter of 2008 (prior to any cash reserves established by Copano's Board) rose 72% to $43.1 million compared to $25.0 million for the second quarter of 2007. Second quarter 2008 distributable cash flow represents 160% coverage of the second quarter 2008 distribution of $0.56 per unit, based on total common units outstanding on August 1, 2008, the distribution record date. Adjusted EBITDA for the second quarter of 2008 includes $5.6 million in depreciation, amortization and interest costs attributable to Copano's ownership in unconsolidated affiliates. Non-cash expenses incurred during the second quarter of 2008 that were not added back in determining Adjusted EBITDA include amortization expense of $8.5 million related to the option component of Copano's commodity derivatives and mark-to-market charges on undesignated economic hedges, net of ineffectiveness gains, of approximately $2.3 million incurred with respect to Copano's commodity derivatives. The mark-to-market charges reduced Adjusted EBITDA but were added back in the determination of distributable cash flow.
Segment gross margin, total segment gross margin, EBITDA, Adjusted 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.
Second Quarter Operating Results by Segment
Copano manages its business in three geographical operating segments: Oklahoma, Texas and Rocky Mountains. The Oklahoma segment provides natural gas midstream services in central and east Oklahoma, including the Oklahoma natural gas activities acquired as part of the Cimmarron Gathering, LP acquisition in May 2007, and also includes a crude oil pipeline located in south Oklahoma and north Texas. The Texas segment provides natural gas gathering, processing, treating, conditioning and related NGL transportation in south Texas and operates north Texas natural gas gathering systems acquired as part of the Cimmarron acquisition. The Texas segment also includes the Lake Charles processing plant acquired in October 2007 as part of Cantera Natural Gas, LLC acquisition. The Rocky Mountains segment was established following the Cantera acquisition and operates in Wyoming's Powder River Basin. The Rocky Mountains segment includes Copano's 51.0% and 37.04% managing member interests in Bighorn Gas Gathering, L.L.C. and Fort Union Gas Gathering, L.L.C., respectively, and its producer services business utilizing firm gathering and transportation agreements.
Oklahoma
During the second quarter of 2008, segment gross margin for the Oklahoma segment increased 79% to $47.9 million compared to $26.8 million for the second quarter of 2007. The increase in segment gross margin resulted primarily from increased pipeline and processing volumes and increases in commodity prices compared to the prior year period.
The Oklahoma segment gathered an average of 228,941 MMBtu/d of natural gas, processed an average of 155,430 MMBtu/d of natural gas and produced an average of 15,465 Bbls/d of NGLs at its plants and third-party plants during the second quarter of 2008, representing increases of 15%, 8% and 9%, respectively, compared to the second quarter of 2007. During the second quarter of 2007, the Oklahoma segment gathered an average of 199,563 MMBtu/d, processed an average of 144,323 MMBtu/d and produced an average of 14,149 Bbls/d of NGLs.
Texas
Segment gross margin for the Texas segment increased approximately 57% in the second quarter of 2008 to $40.5 million compared to $25.8 million for the second quarter of 2007. The increase in segment gross margin resulted primarily from increased pipeline and processing volumes and increases in natural gas liquids prices compared to the prior year period.
During the second quarter of 2008, the Texas segment provided gathering, transportation and processing services for an average of 700,545 MMBtu/d of natural gas compared with 650,798 MMBtu/d for the second quarter of 2007, an increase of 8%. The Texas segment gathered an average of 313,523 MMBtu/d of natural gas, processed an average of 629,334 MMBtu/d of natural gas and produced an average of 17,721 Bbls/d of NGLs at its plants and third-party plants during the second quarter of 2008, representing increases of 7% and 9% for gathering and processing, respectively, and a 2% decrease in production of NGLs as compared to the second quarter of 2007. During the second quarter of 2007, the Texas segment gathered an average of 292,518 MMBtu/d, processed an average of 577,715 MMBtu/d and produced an average of 18,078 Bbls/d of NGLs.
Rocky Mountains
Segment gross margin attributable to the producer services business in Copano's Rocky Mountains segment was $1.2 million for the second quarter of 2008. For the second quarter of 2008, producer services throughput averaged 229,513 MMBtu/d, which represents volumes purchased for resale, volumes gathered utilizing firm capacity gathering agreements with Fort Union and volumes transported under firm capacity transportation agreements with Wyoming Interstate Gas Company (WIC), or using additional capacity that we obtain on WIC. The Rocky Mountains segment results and volumes do not include the results and volumes associated with Copano's interests in Bighorn and Fort Union, which are accounted for under the equity method of accounting. For the second quarter of 2008, average pipeline throughput for Bighorn and Fort Union totaled 217,373 MMBtu/d and 727,688 MMBtu/d, respectively.
Corporate and Other
Corporate and other primarily consists of results attributable to Copano's commodity risk management portfolio. Total segment gross margin includes a loss of $17.5 million for the second quarter of 2008 for corporate and other compared to a loss of $6.1 million in the second quarter of 2007. The loss for the second quarter of 2008 includes $6.7 million of cash settlements paid with respect to expired commodity derivatives, $8.5 million of non-cash amortization expense related to the option component of Copano's commodity derivatives, which has not been added back in the determination of distributable cash flow or Adjusted EBITDA, and $2.3 million of unrealized losses related to non-cash mark-to-market charges on undesignated economic hedges, net of ineffectiveness gains, for Copano's commodity derivatives, which were added back in determining distributable cash flow but not in determining Adjusted EBITDA. Corporate and other for the second quarter of 2007 included $5.2 million of non-cash amortization expense related to the option component of Copano's commodity derivatives and $1.8 million of unrealized losses related to mark-to-market charges on undesignated economic hedges reduced by $0.9 million of cash settlements received with respect to expired commodity derivatives. In its risk management portfolio, Copano acquires multi-year commodity options and amortizes the premium paid over the term of each option contract.
Year-to-Date Financial Results
Revenue for the first six months of 2008 increased 83% to $903.0 million compared with $492.7 million for the same period of last year. Net income increased by 71% to $37.7 million, or $0.65 per unit on a diluted basis, for the six months ended June 30, 2008 compared to net income of $22.0 million, or $0.52 per unit on a diluted basis, for the six months ended June 30, 2007. Weighted average diluted units outstanding totaled approximately 58.0 million for the six months ended June 30, 2008 and approximately 41.2 million for the same period in 2007. Total segment gross margin increased 57% to $133.4 million for the six months ended June 30, 2008 from $84.8 million for the six months ended June 30, 2007. Total segment gross margin includes a loss of $35.3 million for the six months ended June 30, 2008 comprised of $12.5 million of cash settlements paid with respect to expired commodity derivatives, $16.0 million of non-cash amortization expense related to the option component of Copano's commodity derivatives and $6.8 million of non-cash mark-to-market charges on undesignated economic hedges, net of ineffective gains. Total segment gross margin for the six months ended June 30, 2007 includes a loss of $8.9 million comprised of $3.2 million of cash settlements received on expired commodity derivatives reduced by $10.3 million of non-cash amortization expense related to the option component of Copano's commodity derivatives and $1.8 million of unrealized losses related to mark-to-market charges on undesignated economic hedges.
Adjusted EBITDA increased 95% to $103.8 million for the six months ended June 30, 2008 compared with $53.2 million for the same period in 2007. Distributable cash flow increased 64% to $77.1 million for the six months ended June 30, 2008 compared to $47.0 million for same period of last year. Segment gross margin, total segment gross margin, EBITDA, Adjusted 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.
Cash Distributions
On July 16, 2008, Copano announced a second quarter 2008 cash distribution of $0.56 per unit, or $2.24 per unit on an annualized basis, for all of its outstanding common units. This distribution, which represents the 14th consecutive increase since Copano's IPO, will be paid on August 14, 2008 to common unitholders of record at the close of business on August 1, 2008.
Conference Call Information
Copano will hold a conference call to discuss its second quarter 2008 financial results and recent developments on Thursday, August 7 at 10:00 a.m. Eastern Time (9:00 a.m. Central Time). To participate in the call, dial (303) 262-2138 and ask for the Copano Energy call 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. Please visit the website at least 10 minutes prior to the call to register and download any necessary audio software.
A replay of the audio webcast will be available shortly after the call on Copano's website. Additionally, a telephonic replay will be available through August 14, 2008 by calling (303) 590-3000 and using the pass code 11117433#.
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 segment gross margin, total segment gross margin, EBITDA, Adjusted 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. Copano uses non-GAAP financial measures as measures of its core profitability or to assess the financial performance of its assets. Copano believes that investors benefit from having access to the same financial measures that its management uses in evaluating Copano's liquidity position or financial performance.
With respect to a Copano operating segment, segment gross margin is defined as segment 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, cost of crude oil purchased from third parties, costs paid to third parties to transport volumes and costs paid to affiliates to transport volumes. Total segment gross margin is the sum of the operating segment gross margins and the results of Copano's risk management activities that are included in Corporate and other. Copano views total 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 operating segments. The GAAP measure most directly comparable to total segment gross margin is operating income.
Copano defines EBITDA as net income plus interest and other financing costs, provision for income taxes and depreciation and amortization expense. EBITDA is a financial measure that, with certain negotiated adjustments, is reported to Copano'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 liquidity or 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 Copano does. Copano has reconciled EBITDA to net income and cash flows from operating activities.
Because a portion of Copano's net income (loss) is attributable to equity earnings (loss) from its unconsolidated affiliates, including Bighorn, Fort Union, Webb Duval and Southern Dome, Copano calculates Adjusted EBITDA to reflect the depreciation and amortization expense and interest costs embedded in the equity in earnings (loss) from these unconsolidated affiliates. Specifically, Adjusted EBITDA is determined by adding to EBITDA (i) the amortization expense attributable to the difference between Copano's carried investment in each unconsolidated affiliate and the underlying equity in its net assets, (ii) the portion of each unconsolidated affiliate's depreciation and amortization expense which is proportional to Copano's ownership interest in that unconsolidated affiliate and (iii) the portion of each unconsolidated affiliate's interest and other financing costs which is proportional to Copano's ownership interest in that unconsolidated affiliate. EBITDA or Adjusted EBITDA is used as a supplemental financial measure by external users of Copano's financial statements such as investors, commercial banks and research analysts, and Adjusted EBITDA is used by Copano's management, 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.
Distributable cash flow is defined as net income plus: (i) depreciation and amortization expense; (ii) cash distributions received from investments in unconsolidated affiliates and equity losses from such unconsolidated affiliates; (iii) provision for deferred income taxes; (iv) the subtraction of maintenance capital expenditures; (v) the subtraction of equity in the earnings of unconsolidated affiliates; and (vi) the addition of losses or subtraction of gains relating to other miscellaneous non-cash amounts affecting net income for the period. Prior to the first quarter of 2008, reimbursements by our pre-IPO investors of certain general and administrative expenses in excess of the "G&A Cap" defined in our limited liability company agreement were also included in distributable cash flow. The G&A Cap expired at the end of 2007; therefore Copano no longer includes such reimbursements in distributable cash flow. Maintenance capital expenditures represent capital expenditures employed to replace partially or fully depreciated assets to maintain the existing operating capacity of Copano'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 Copano (prior to any cash reserves established 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 Copano's success in providing a cash return on investment. Specifically, this financial measure indicates to investors whether or not Copano 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 generally is related to the amount of cash distributions the entity can pay to its unitholders. 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 operations in Oklahoma, Texas, Wyoming and Louisiana.
This news release may include "forward-looking statements" as defined by the Securities and Exchange Commission. These statements reflect certain assumptions 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 Copano's control, which may cause the Copano'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 Copano, key customers reducing the volume of natural gas and natural gas liquids they purchase from Copano, 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 Copano'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 Copano's Securities and Exchange Commission filings.
- financial statements to follow - COPANO ENERGY, L.L.C. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended Six Months Ended June 30, June 30, 2008 2007 2008 2007 (In thousands, except per unit information) Revenue: Natural gas sales $235,000 $140,052 $415,887 $251,329 Natural gas liquids sales 179,031 116,025 333,112 203,912 Crude oil sales 57,183 14,220 98,365 14,220 Transportation, compression and processing fees 16,442 4,192 29,124 8,440 Condensate and other 13,622 7,231 26,538 14,807 Total revenue 501,278 281,720 903,026 492,708 Costs and expenses: Cost of natural gas and natural gas liquids 369,766 220,460 667,234 392,236 Cost of crude oil purchases 56,021 13,610 95,863 13,610 Transportation 3,416 1,218 6,537 2,104 Operations and maintenance 13,065 9,675 24,895 18,173 Depreciation and amortization 12,767 9,825 24,337 18,295 General and administrative 10,936 7,700 22,786 15,216 Taxes other than income 729 1,029 1,470 1,556 Equity in earnings from unconsolidated affiliates (4,788) (754) (5,184) (1,618) Total costs and expenses 461,912 262,763 837,938 459,572 Operating income 39,366 18,957 65,088 33,136 Interest and other income 278 705 734 1,325 Interest and other financing costs (16,077) (6,179) (27,469) (11,372) Income before income taxes 23,567 13,483 38,353 23,089 Provision for income taxes (365) (175) (649) (1,079) Net income $23,202 $13,308 $37,704 $22,010 Basic net income per common unit: Net income $0.49 $0.31 $0.79 $0.53 Weighted average number of common units 47,672 42,748 47,524 40,556 Diluted net income per common unit: Net income $0.40 $0.31 $0.65 $0.52 Weighted average number of common units 58,010 43,475 57,967 41,199 COPANO ENERGY, L.L.C. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Six Months Ended June 30, 2008 2007 (In thousands) Cash Flows From Operating Activities: Net income $37,704 $22,010 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 24,337 18,295 Amortization of debt issue costs 1,619 615 Equity in earnings from unconsolidated affiliates (5,184) (1,618) Distributions from unconsolidated affiliates 11,718 2,111 Equity-based compensation 1,808 1,327 Deferred tax provision 253 917 Other noncash items (85) (20) Changes in assets and liabilities, net of acquisitions: Accounts receivable (44,258) (16,019) Prepayments and other current assets 753 1,315 Risk management activities (28,465) (18,994) Accounts payable 62,605 24,115 Other current liabilities 15,180 6,837 Net cash provided by operating activities 77,985 40,891 Cash Flows From Investing Activities: Additions to property, plant and equipment (76,995) (40,627) Additions to intangible assets (3,849) (1,763) Acquisitions (77) (55,327) Investment in unconsolidated affiliates (18,809) - Distributions from unconsolidated affiliates 877 381 Other (2,701) 103 Net cash used in investing activities (101,554) (97,233) Cash Flows From Financing Activities: Proceeds from long-term debt 364,000 94,000 Repayments of long-term debt (314,000) - Repayment of short-term notes payable - (1,116) Deferred financing costs (6,350) (608) Distributions to unitholders (49,585) (34,690) Capital contributions from pre-IPO investors 4,103 5,054 Equity offering costs (47) (481) Proceeds from option exercises 524 585 Net cash (used in) provided by financing activities (1,355) 62,744 Net (decrease) increase in cash and cash equivalents (24,924) 6,402 Cash and cash equivalents, beginning of year 72,665 39,484 Cash and cash equivalents, end of period $47,741 $45,886 COPANO ENERGY, L.L.C. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited) As of June 30, December 31, 2008 2007 ($ in thousands) ASSETS Current assets: Cash and cash equivalents $47,741 $72,665 Accounts receivable, net 172,080 127,534 Risk management assets 7,308 3,289 Prepayments and other current assets 3,128 3,881 Total current assets 230,257 207,369 Property, plant and equipment, net 761,568 694,727 Intangible assets, net 199,116 200,546 Investment in unconsolidated affiliates 643,835 632,725 Risk management assets 30,968 10,598 Other assets, net 34,207 23,118 Total assets $1,899,951 $1,769,083 LIABILITIES AND MEMBERS' CAPITAL Current liabilities: Accounts payable $220,132 $147,046 Accrued interest 12,942 11,319 Accrued tax liability 388 3,919 Risk management liabilities 39,856 27,710 Other current liabilities 20,068 12,931 Total current liabilities 293,386 202,925 Long-term debt (includes $739 and $773 bond premium as of June 30, 2008 and December 31, 2007, respectively) 680,739 630,773 Deferred tax provision 1,484 1,231 Risk management and other noncurrent liabilities 56,306 40,018 Members' capital: Common units, no par value, 47,820,105 and 47,366,048 units issued and outstanding as of June 30, 2008 and December 31, 2007, respectively 675,606 661,585 Class C units, no par value, 789,705 units and 1,184,557 units issued and outstanding as of June 30, 2008 and December 31, 2007, respectively 26,995 40,492 Class D units, no par value, 3,245,817 units issued and outstanding as of June 30, 2008 and December 31, 2007 112,454 112,454 Class E units, no par value, 5,598,839 units issued and outstanding as of June 30, 2008 and December 31, 2007 175,634 175,634 Paid-in capital 29,684 23,773 Accumulated deficit (20,003) (7,867) Other comprehensive loss (132,334) (111,935) 868,036 894,136 Total liabilities and members' capital $1,899,951 $1,769,083 COPANO ENERGY, L.L.C. AND SUBSIDIARIES OPERATING STATISTICS (Unaudited) Three Months Ended Six Months Ended June 30, June 30, 2008 2007 2008 2007 ($ in thousands) Total segment gross margin (1) $72,075 $46,432 $133,392 $84,758 Operations and maintenance expenses 13,065 9,675 24,895 18,173 Depreciation and amortization 12,767 9,825 24,337 18,295 General and administrative expenses 10,936 7,700 22,786 15,216 Taxes other than income 729 1,029 1,470 1,556 Equity in earnings from unconsolidated affiliates (4,788) (754) (5,184) (1,618) Operating income 39,366 18,957 65,088 33,136 Interest and other financing costs, net (15,799) (5,474) (26,735) (10,047) Provision for income taxes (365) (175) (649) (1,079) Net income $23,202 $13,308 $37,704 $22,010 Total segment gross margin: Oklahoma $47,852 $26,781 $84,422 $48,182 Texas 40,499 25,779 82,075 45,438 Rocky Mountains 1,218 - 2,181 - Segment gross margin 89,569 52,560 168,678 93,620 Corporate and other(2) (17,494) (6,128) (35,286) (8,861) Total segment gross margin (1) $72,075 $46,432 $133,392 $84,759 Segment gross margin per unit: Oklahoma: Service throughput ($/MMBtu) (3) $2.30 $1.48 $2.06 $1.39 Texas Service throughput ($/MMBtu) $0.64 $0.44 $0.65 $0.39 Rocky Mountains: Producer services throughput ($/MMBtu)(4) $0.05 $- $0.06 $- Volumes: Oklahoma:(3) (5) Service throughput (MMBtu/d) 228,941 199,563 225,474 194,437 Plant inlet throughput (MMBtu/d) 155,430 144,323 153,020 140,444 NGLs produced (Bbls/d) 15,465 14,149 15,004 13,354 Crude oil service volumes (Bbls/d) 5,074 3,400 4,854 3,400 Texas: (6) (7) Service throughput (MMBtu/d) 700,545 650,798 697,844 653,875 Pipeline throughput (MMBtu/d) 313,523 292,518 320,761 294,892 Plant inlet volumes (MMBtu/d) 629,334 577,715 617,034 583,336 NGLs produced (Bbls/d) 17,721 18,078 17,902 17,698 Rocky Mountains: Producer services throughput (MMBtu/d) (4) 229,513 - 228,117 - Capital Expenditures: Maintenance capital expenditures $3,094 $3,092 $6,153 $4,463 Expansion capital expenditures 52,044 129,216 82,665 148,169 Total capital expenditures $55,138 $132,308 $88,818 $152,632 Operations and maintenance expenses: Oklahoma $6,100 $4,853 $12,026 $9,223 Texas 7,017 4,823 12,869 8,951 Rocky Mountains (52) - - - Total operations and maintenance expenses $13,065 $9,676 $24,895 $18,174
(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) Corporate and other includes results attributable to Copano's commodity risk management activities.
(3) Excludes volumes associated with our interest in Southern Dome. For the three months ended June 30, 2008, plant inlet volumes for Southern Dome averaged 9,116 MMBtu/d and NGLs produced averaged 325 Bbls/d. For the three months ended June 30, 2007, plant inlet volumes for Southern Dome averaged 4,664 MMBtu/d and NGLs produced averaged 200 Bbls/d. For the six months ended June 30, 2008, plant inlet volumes for Southern Dome averaged 9,970 MMBtu/d and NGLs produced averaged 386 Bbls/d. For the six months ended June 30, 2007, plant inlet volumes for Southern Dome averaged 5,126 MMBtu/d and NGLs produced averaged 202 Bbls/d.
(4) Producers services throughput represents volumes purchased for resale, volumes gathered utilizing firm capacity gathering agreements with Fort Union and volumes transported under firm capacity transportation agreements with WIC or using additional capacity that we obtain on WIC. Excludes results and volumes associated with our interests in Bighorn and Fort Union. Volumes transported by Bighorn and Fort Union were 217,373 MMBtu/d and 727,688 MMBtu/d, respectively, for the three months ended June 30, 2008. Volumes transported by Bighorn and Fort Union were 217,699 MMBtu/d and 701,498 MMBtu/d, respectively, for the six months ended June 30, 2008.
(5) Plant inlet volumes and NGLs produced represent total volumes processed and produced by the Oklahoma segment at all plants, including plants owned by the Oklahoma segment and plants owned by third parties. Plant inlet volumes averaged 114,720 MMBtu/d and NGLs produced averaged 11,986 Bbls/d for the three months ended June 30, 2008 for plants owned by the Oklahoma segment. Plant inlet volumes averaged 88,730 MMBtu/d and NGLs produced averaged 9,109 Bbls/d for the three months ended June 30, 2007 for plants owned by the Oklahoma segment. Plant inlet volumes averaged 106,995 MMBtu/d and NGLs produced averaged 10,990 Bbls/d for the six months ended June 30, 2008 for plants owned by the Oklahoma segment. Plant inlet volumes averaged 87,153 MMBtu/d and NGLs produced averaged 8,753 Bbls/d for the six months ended June 30, 2007 for plants owned by the Oklahoma segment.
(6) Excludes volumes associated with Copano's interest in Webb/Duval Gatherers. Gross volumes transported by Webb/Duval Gatherers were 94,022 MMBtu/d and 107,565 MMBtu/d, net of intercompany volumes, for the three months ended June 30, 2008 and 2007, respectively. Gross volumes transported by Webb/Duval Gatherers were 87,580 MMBtu/d and 105,479 MMBtu/d, net of intercompany volumes, for the six months ended June 30, 2008 and 2007, respectively.
(7) Plant inlet volumes and NGLs produced represent total volumes processed and produced by the Texas segment at all plants, including plants owned by the Texas segment and plants owned by third parties. Plant inlet volumes averaged 607,339 MMBtu/d and NGLs produced averaged 15,961 Bbls/d for the three months ended June 30, 2008 for plants owned by the Texas segment. Plant inlet throughput averaged 561,354 MMBtu/d and NGLs produced averaged 16,724 Bbls/d for the three months ended June 30, 2007 for plants owned by the Texas segment. Plant inlet volumes averaged 594,195 MMBtu/d and NGLs produced averaged 16,168 Bbls/d for the six months ended June 30, 2008 for plants owned by the Texas segment. Plant inlet throughput averaged 566,975 MMBtu/d and NGLs produced averaged 16,344 Bbls/d for the six months ended June 30, 2007 for plants owned by the Texas segment.
Non-GAAP Financial Measures
The following table presents a reconciliation of the non-GAAP financial measures of (i) total segment gross margin (which consists of the sum of individual segment gross margins and corporate and other) to the GAAP financial measure of operating income, (ii) EBITDA and Adjusted EBITDA to the GAAP financial measures of net income and cash flows from operating activities and (iii) distributable cash flow to the GAAP financial measure of net income for each of the periods indicated (in thousands).
Three Months Ended Six Months Ended June 30, June 30, 2008 2007 2008 2007 Reconciliation of total segment gross margin to operating income: Operating income $39,366 $18,957 $65,088 $33,136 Add: Operations and maintenance expenses 13,065 9,675 24,895 18,173 Depreciation and amortization 12,767 9,825 24,337 18,295 General and administrative expenses 10,936 7,700 22,786 15,216 Taxes other than income 729 1,029 1,470 1,556 Equity in earnings from unconsolidated affiliates (4,788) (754) (5,184) (1,618) Total segment gross margin $72,075 $46,432 $133,392 $84,758 Reconciliation of EBITDA and Adjusted EBITDA to net income: Net income $23,202 $13,308 $37,704 $22,010 Add: Depreciation and amortization 12,767 9,825 24,337 18,295 Interest and other financing costs 16,077 6,179 27,469 11,372 Provision for income taxes 365 175 649 1,079 EBITDA 52,411 29,487 90,159 52,756 Add: Amortization of difference between the carried investment and the underlying equity in net assets of equity investments 4,602 (3) 9,201 (6) Add: Copano's share of depreciation and amortization included in equity in earnings from unconsolidated affiliates 1,319 247 2,588 494 Add: % of equity method investment interest and other financing costs (333) - 1,837 - Adjusted EBITDA $57,999 $29,731 $103,785 $53,244 Reconciliation of EBITDA and Adjusted EBITDA to cash flows from operating activities: Cash flow provided by operating activities $58,807 $16,901 $77,985 $40,891 Add: Cash paid for interest and other financing costs 15,226 5,873 25,850 10,756 Equity in earnings from unconsolidated affiliates 4,788 754 5,184 1,618 Distributions from unconsolidated affiliates (7,442) (2,111) (11,718) (2,111) Risk management activities 11,225 21,609 28,465 18,994 Increase in working capital and other (30,193) (13,539) (35,607) (17,392) EBITDA 52,411 29,487 90,159 52,756 Add: Amortization of difference between the carried investment and the underlying equity in net assets of equity investments 4,602 (3) 9,201 (6) Add: Copano's share of depreciation and amortization included in equity in earnings from unconsolidated affiliates 1,319 247 2,588 494 Add: % of equity method investment interest and other financing costs (333) - 1,837 - Adjusted EBITDA $57,999 $29,731 $103,785 $53,244 Reconciliation of net income to distributable cash flow: Net income $23,202 $13,308 $37,704 $22,010 Add: Depreciation and amortization 12,767 9,825 24,337 18,295 Amortization of debt issue costs 851 306 1,619 615 Equity-based compensation 1,023 686 1,992 1,327 G&A reimbursement from pre-IPO unitholders - 2,116 - 5,516 Distributions from unconsolidated affiliates 7,543 708 12,595 2,492 Unrealized losses on derivatives 5,528 1,766 10,001 1,927 Deferred taxes and other 106 89 167 897 Less: Equity in earnings from unconsolidated affiliates (4,788) (754) (5,184) (1,618) Maintenance capital expenditures (3,094) (3,092) (6,153) (4,463) Distributable cash flow(1) $43,138 $24,958 $77,078 $46,998 Actual quarterly distribution ("AQD") $26,952 $18,739 Distributable cash flow coverage of AQD 160% 133%
(1) Prior to any retained cash reserves established by Copano's Board of Directors.
Contacts: Matt Assiff, SVP & CFO
Copano Energy, L.L.C.
713-621-9547
Jack Lascar /
