Crosstex Energy Reports Fourth-Quarter and Full-Year 2012 Results

Crosstex Energy Reports Fourth-Quarter and Full-Year 2012 Results

DALLAS--(BUSINESS WIRE)-- The Crosstex Energy companies, Crosstex Energy, L.P. (NAS: XTEX) (the Partnership) and Crosstex Energy, Inc. (NAS: XTXI) (the Corporation) today reported results for the fourth-quarter and full-year 2012.

Fourth-Quarter 2012 - Crosstex Energy, L.P. Financial Results


The Partnership realized adjusted EBITDA of $51.7 million and distributable cash flow of $26.7 million for the fourth quarter of 2012, compared with adjusted EBITDA of $54.6 million and distributable cash flow of $31.7 million for the fourth quarter of 2011. Adjusted EBITDA and distributable cash flow are non-GAAP financial measures and are explained in greater detail under "Non-GAAP Financial Information." There is a reconciliation of these non-GAAP measures to net loss in the tables at the end of this news release.

The Partnership posted a net loss of $24.5 million for the fourth quarter of 2012 compared with a net loss of $1.4 million for the fourth quarter of 2011. The increase in the net loss for the fourth quarter of 2012 was primarily the result of increased depreciation and amortization expense.

"We successfully executed our business plan in 2012. We accomplished our three primary objectives by achieving solid financial performance, enhancing scale and diversification with the acquisition of the Ohio River Valley assets, beginning construction of the Cajun Sibon I project, announcing the Cajun Sibon II project and exiting 2012 with strong year-over-year increases in our distribution and dividend rates," said Barry E. Davis, Crosstex President and Chief Executive Officer. "We have evolved into an integrated midstream energy solutions provider with $1 billion of major projects underway that will continue to increase our fee-based business and diversify our business across the natural gas, natural gas liquids and crude oil sectors. Looking ahead, I'm confident we have the right platform, the right opportunities and the right people to deliver growth and create value for our investors and customers."

The Partnership's fourth-quarter 2012 gross operating margin was $104.0 million, a $6.2 million increase over the fourth quarter of 2011. The improvement was primarily due to the Partnership's July 2012 acquisition of assets in the Ohio River Valley, throughput on the Partnership's Permian Basin systems, increased natural gas liquids (NGL) fractionation and marketing activity and growth in south Louisiana crude oil terminal activity. Gross operating margin is a non-GAAP financial measure and is explained in greater detail under "Non-GAAP Financial Information." The Crosstex Energy, L.P. Summary Financial Data table of this news release may be used to reconcile this non-GAAP measure to operating income.

The Partnership reports results by operating segment principally based on regions served. Reportable segments consist of the natural gas gathering, processing and transmission operations in the Barnett Shale in north Texas and in the Permian Basin in west Texas (NTX); the pipelines and processing plants in Louisiana (LIG); the south Louisiana processing and NGL assets, including NGL fractionation and marketing activities (PNGL) and rail, truck, pipeline and barge facilities in the Ohio River Valley (ORV). Each business segment's contribution to the fourth-quarter 2012 gross operating margin compared with the fourth-quarter 2011, and the factors affecting those contributions, are described below:

  • The ORV segment contributed $13.4 million of gross operating margin during the fourth quarter of 2012. Gross operating margin for crude oil and condensate handling and brine handling and disposal were $8.7 million and $4.6 million, respectively.
  • The PNGL segment's gross operating margin of $20.2 million represents a decline of $2.4 million that was primarily the result of a weaker processing environment partially offset by increased NGL marketing and fractionation and crude oil terminal activity.
  • The LIG segment contributed gross operating margin of $24.3 million, a decrease of $9.3 million. The decline was primarily the result of a weaker processing environment and the impact of the slurry-filled sinkhole which formed in August 2012 near Bayou Corne, Louisiana.
  • The NTX segment's gross operating margin rose $3.3 million to $46.1 million primarily due to the addition of gas processing facilities in the Permian Basin during the first quarter of 2012 and higher processing volumes in north Texas partially offset by greater losses on a certain long-term delivery contract.

The Partnership's fourth-quarter 2012 operating expenses were $37.0 million, an increase of $6.3 million, or 21 percent, over the fourth quarter of 2011. This increase was primarily due to the addition of ORV operating costs. General and administrative expenses rose $2.2 million, or 15 percent, versus the fourth quarter of 2011 largely due to increased headcount and expenses related to the ORV acquisition and evaluation expenses related to other potential acquisitions. Depreciation and amortization expense for the fourth quarter of 2012 rose $20.0 million, or 62 percent, compared with the fourth quarter of 2011. The increase was primarily the result of accelerated depreciation and amortization related to the Sabine gas processing plant, depreciation and amortization of the ORV assets and depreciation on additions in the Permian Basin. Interest expense rose to $22.6 million for the fourth quarter of 2012 from $19.3 million for the fourth quarter of 2011 primarily as a result of interest on the 7.125% senior unsecured notes due 2022 which were issued in May 2012.

The net loss per limited partner common unit was $0.51 for the fourth quarter of 2012 compared with a net loss of $0.12 per limited partner common unit for the fourth quarter of 2011.

Full-Year 2012 - Crosstex Energy, L.P. Financial Results

The Partnership realized adjusted EBITDA of $214.1 million and distributable cash flow of $112.8 million for 2012 compared with adjusted EBITDA of $214.0 million and distributable cash flow of $121.3 million for 2011. The Partnership reported a net loss of $40.1 million for 2012, compared with a net loss of $2.3 million for 2011. The increase in net loss was primarily the result of increased depreciation and amortization expenses in 2012.

The Partnership's 2012 gross operating margin increased to $393.8 million from $375.2 million for 2011. The improvement was primarily due to the acquisition of the ORV assets in July 2012, the contribution of the Partnership's Permian Basin assets that became operational during the first quarter of 2012, increased NGL fractionation and marketing activity and growth in south Louisiana crude oil terminal activity. Each business segment's contribution to the 2012 increase and the factors affecting those contributions are described below:

  • The ORV segment contributed $25.7 million of gross operating margin during the second half of 2012. Crude oil and condensate and brine handling and disposal gross operating margins were $17.2 million and $8.5 million, respectively.
  • The PNGL segment contributed $74.0 million gross operating margin, a decline of $1.5 million, primarily due to the impact of a weaker processing environment partially offset by an increase in NGL marketing and fractionation activity.
  • The LIG segment's gross operating margin contribution of $108.7 million represents a decline of $21.1 million. The decline was primarily the result of a weaker processing environment and the impact of the slurry-filled sinkhole which formed in August 2012 near Bayou Corne, Louisiana.
  • The NTX segment's gross operating margin contribution was $185.4 million, an increase of $15.5 million. The increase was primarily due to a full year's impact of the two gathering system expansion projects that were completed in 2011 and the addition of the gas processing facilities in the Permian Basin that commenced operations in 2012, partially offset by higher losses on a certain long-term delivery contract.

The Partnership's operating expenses increased $19.1 million in 2012, or 17 percent, to $130.9 million primarily due to the addition of ORV operating costs. General and administrative expenses in 2012 rose $8.5 million over 2011 largely due to higher professional fees and services costs related to the acquisition of the ORV assets and evaluation expenses related to other potential acquisitions. Depreciation and amortization expense increased $36.9 million in 2012 compared with 2011 primarily due to accelerated depreciation and amortization related to the Sabine gas processing plant, depreciation and amortization on the ORV assets and depreciation on additions in the Permian. Interest expense increased to $86.5 million in 2012 from $79.2 million in 2011 primarily due to interest on the 7.125% senior unsecured notes due 2022 which were issued in May 2012.

The net loss per limited partner common unit was $1.01 in 2012 compared with a net loss of $0.38 per limited partner common unit in 2011.

Fourth-Quarter and Full-Year 2012 - Crosstex Energy, Inc. Financial Results

The Corporation reported a $5.7 million net loss for the fourth quarter of 2012 compared with a net loss of $1.8 million for the fourth quarter of 2011. The net loss for 2012 was $12.5 million compared with a net loss of $6.0 million for 2011.

The Corporation had $2.8 million of cash on hand and no debt at the end of 2012.

Crosstex to Hold Earnings Conference Call on March 1, 2013

The Partnership and the Corporation will hold a conference call to discuss fourth-quarter and full-year 2012 financial results on Friday, March 1, 2013 at 10:00 a.m. Central time (11:00 a.m. Eastern time). The dial-in number for the call is 1-888-680-0893. Callers outside the United States should dial 1-617-213-4859. The passcode is 34047688 for all callers. Investors are advised to dial in to the call at least 10 minutes prior to the call time to register. Participants may preregister for the call at https://www.theconferencingservice.com/prereg/key.process?key=PA739HXYG. Preregistrants will be issued a pin number to use when dialing in to the live call, which will provide quick access to the conference by bypassing the operator upon connection. Interested parties also can access the live webcast of the call on the Investors page of Crosstex's website at www.crosstexenergy.com.

After the conference call, a replay can be accessed until May 30, 2013, by dialing 1-888-286-8010. International callers should dial 1-617-801-6888 for a replay. The passcode for all callers listening to the replay is 45687967. Interested parties also can visit the Investors page of Crosstex's website to listen to a replay of the call.

About the Crosstex Energy Companies

Crosstex Energy, L.P. (NAS: XTEX) is an integrated midstream energy partnership headquartered in Dallas that offers diversified, tailored customer solutions spanning the energy value chain with services and infrastructure that link energy production with consumption. XTEX operates approximately 3,500 miles of natural gas, natural gas liquids and oil pipelines, 10 natural gas processing plants and four fractionators, as well as barge and rail terminals, product storage facilities, brine water disposal wells and an extensive truck fleet. XTEX has the right platform, the right opportunities and the right people to pursue its growth-focused business strategy.

Crosstex Energy, Inc. (NAS: XTXI) owns combined general and limited partner interests of approximately 19 percent and the incentive distribution rights of Crosstex Energy, L.P.

Additional information about the Crosstex companies can be found at www.crosstexenergy.com.

Non-GAAP Financial Information

This press release contains non-generally accepted accounting principle financial measures that the Partnership refers to as gross operating margin, adjusted EBITDA and distributable cash flow. Gross operating margin is defined as revenue minus the cost of purchased gas and NGL. Adjusted EBITDA is defined as net income (loss) plus interest expense, provision for income taxes and depreciation and amortization expense, impairments, stock-based compensation, loss on extinguishment of debt, (gain) loss on noncash derivatives, transaction costs associated with successful transactions, non-controlling interest and certain severance and exit expenses, and accrued expense of a legal judgment under appeal, less gain on sale of property and equity in the earnings of a limited liability company. Distributable cash flow is defined as earnings before certain noncash charges and the gain on the sale of assets less maintenance capital expenditures. The amounts included in the calculation of these measures are computed in accordance with generally accepted accounting principles (GAAP) with the exception of maintenance capital expenditures. Maintenance capital expenditures are capital expenditures made to replace partially or fully depreciated assets in order to maintain the existing operating capacity of the assets and to extend their useful lives.

The Partnership believes these measures are useful to investors because they may provide users of this financial information with meaningful comparisons between current results and prior-reported results and a meaningful measure of the Partnership's cash flow after it has satisfied the capital and related requirements of its operations.

Gross operating margin, adjusted EBITDA and distributable cash flow, as defined above, are not measures of financial performance or liquidity under GAAP. They should not be considered in isolation or as an indicator of the Partnership's performance. Furthermore, they should not be seen as measures of liquidity or a substitute for metrics prepared in accordance with GAAP. A reconciliation of these measures to net loss is included among the following tables.

This press release contains forward-looking statements within the meaning of the federal securities laws. These statements are based on certain assumptions made by the Partnership and the Corporation based upon management's experience and perception of historical trends, current conditions, expected future developments and other factors the Partnership and the Corporation believe are appropriate in the circumstances. These statements include, but are not limited to, statements with respect to the Partnership's and the Corporation's guidance and future outlook, distribution and dividend guidelines and future estimates and results of operations. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Partnership and the Corporation, which may cause the Partnership's and the Corporation's actual results to differ materially from those implied or expressed by the forward-looking statements. These risks include the following: (1) the Partnership's profitability is dependent upon prices and market demand for natural gas, NGL, condensate and crude oil; (2) the Partnership's substantial indebtedness could limit its flexibility and adversely affect its financial health; (3) the Partnership may not be able to obtain funding, which would impair its ability to grow; (4) the Partnership and the Corporation do not have diversified assets; (5) the Partnership may not be successful in balancing its purchases and sales; (6) drilling levels may decrease due to deterioration in the credit and commodity markets; (7) the Partnership's credit risk management efforts may fail to adequately protect against customer nonpayment; (8) the amount of natural gas, NGL, condensate and crude oil transported may decline as a result of reduced drilling by producers, competition for supplies, reserve declines and reduction in demand from key customers and markets; (9) the level of the Partnership's processing, fractionation, crude oil handling and brine disposal operations may decline for similar reasons; (10) major project construction delays beyond the control of the Partnership; (11) operational, regulatory and other asset-related risks, including weather conditions such as hurricanes, exist because a significant portion of the Partnership's assets are located in southern Louisiana; (12) the Partnership's use of derivative financial instruments does not eliminate its exposure to fluctuations in commodity prices and interest rates; and (13) other factors discussed in the Partnership's and the Corporation's Annual Reports on Form 10-K for the year ended December 31, 2011, the Partnership's and the Corporation's Annual Reports on Form 10-K for the year ended December 31, 2012 when they are available, and other filings with the Securities and Exchange Commission. The Partnership and the Corporation have no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

 
 
CROSSTEX ENERGY, L.P.
Summary Financial Data
(All amounts in thousands except per unit numbers)
         
Three Months Ended Years Ended
December 31, December 31,
2012   2011 2012   2011
Unaudited
 
Midstream revenues $ 525,980 $ 480,939 $ 1,655,851 $ 2,013,942
Purchased gas, NGL and crude oil   422,023     383,127     1,262,093     1,638,777  
Gross operating margin 103,957 97,812 393,758 375,165
 
Operating costs and expenses:
Operating expenses 36,954 30,695 130,882 111,778
General and administrative 16,910 14,690 61,308 52,801
(Gain) loss on sale of property 53 (53 ) (342 ) 264
Loss on derivatives 2,983 2,256 1,006 7,776
Depreciation and amortization   52,120     32,084     162,226     125,284  
Total operating costs and expenses 109,020 79,672 355,080 297,903
 
Operating income (loss) (5,063 ) 18,140 38,678 77,262
 
Interest expense, net of interest income (22,589 ) (19,282 ) (86,521 ) (79,233 )
Equity in earnings of limited liability company 1,740 - 3,250 -
Other income   589     50     5,053     707  
Total other expense   (20,260 )   (19,232 )   (78,218 )   (78,526 )

Loss before non-controlling interest and income taxes

(25,323 ) (1,092 ) (39,540 ) (1,264 )
Income tax provision   782     (228 )   (725 )   (1,126 )
Net loss $ (24,541 ) $ (1,320 ) $ (40,265 ) $ (2,390 )

Less: Net income (loss) attributable to the non-controlling interest

  -     81     (163 )   (48 )
Net loss attributable to Crosstex Energy, L.P. $ (24,541 ) $ (1,401 ) $ (40,102 ) $ (2,342 )

Preferred interest in net income attributable to Crosstex Energy, L.P.

$ 5,433   $ 4,706   $ 20,779   $ 18,088  
General partner interest in net loss $ (114 ) $ (23 ) $ (534 ) $ (732 )
Limited partners' interest in net loss $ (29,860 ) $ (6,084 ) $ (60,347 ) $ (19,698 )
 
Net loss per limited partners' unit:
Basic and diluted common unit $ (0.51 ) $ (0.12 ) $ (1.01 ) $ (0.38 )
Weighted average limited partners' units outstanding:
Basic and diluted common units   65,300     50,672     58,935     50,590  
 
 
CROSSTEX ENERGY, L.P.
Reconciliation of Net Loss to Adjusted EBITDA and Distributable Cash Flow
(All amounts in thousands except ratios and per unit amounts)
         
Three Months Ended Years Ended
December 31, December 31,
2012 2011 2012 2011
 
Net loss attributable to Crosstex Energy, L.P. $ (24,541 ) $ (1,401 ) $ (40,102 ) $ (2,342 )
Depreciation and amortization 52,120 32,084 162,226 125,284
Stock-based compensation 1,710 1,803 9,207 7,308
Interest expense, net 22,589 19,282 86,521 79,233
(Gain) loss on sale of property 53 (53 ) (342 ) 264
Noncash derivatives, taxes and other (1) (2)   (243 )   2,930     (3,421 )   4,281  
Adjusted EBITDA 51,688 54,645 214,089 214,028
 
Interest expense (22,267 ) (19,344 ) (86,244 ) (78,156 )
Cash taxes and other cash expenses 141 (510 ) (1,373 ) (1,964 )
Maintenance capital expenditures   (2,845 )   (3,138 )   (13,645 )   (12,597 )
Distributable cash flow $ 26,717   $ 31,653   $ 112,827   $ 121,311  
Cash distribution declared $ 27,805 $ 22,462 $ 102,036 $ 85,343
Distribution coverage 0.96x 1.41x 1.11x 1.42x
 
Distributions declared per limited partner unit $ 0.33   $ 0.32   $ 1.32   $ 1.23  
Distributions declared per preferred unit $ 0.33  

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