Delaware | 001-32678 | 03-0567133 |
(State or other jurisdiction of incorporation) | (Commission File No.) | (IRS Employer Identification No.) |
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||
(Millions) | (Millions) | ||||||||||||
Net income (loss) attributable to partners | $ | 88 | $ | (22 | ) | $ | 189 | $ | 43 | ||||
Net cash provided by operating activities | $ | 216 | $ | 153 | $ | 360 | $ | 304 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||
(Millions) | (Millions) | ||||||||||||
Gathering and Processing segment: | |||||||||||||
Segment net income attributable to partners | $ | 141 | $ | 56 | $ | 293 | $ | 176 | |||||
Logistics and Marketing segment: | |||||||||||||
Segment net income attributable to partners | $ | 92 | $ | 76 | $ | 179 | $ | 170 |
(d) | Exhibits. |
Exhibit No. | Description | |
99.1 | Press Release dated August 7, 2017. |
DCP MIDSTREAM, LP | |||
By: | DCP MIDSTREAM GP, LP, | ||
its General Partner | |||
By: | DCP MIDSTREAM GP, LLC, | ||
its General Partner | |||
By: | /s/ Sean P. O'Brien | ||
Name: | Sean P. O'Brien | ||
Title: | Group Vice President and Chief Financial Officer |
Exhibit No. | Description | |
99.1 | Press Release dated August 7, 2017. |
• | Net income attributable to partners was $88 million and $189 million for the three and six months ended June 30, 2017, or $0.33 and $0.74 per basic and diluted limited partner unit, respectively. |
• | The Partnership reaffirmed its 2017 forecasted adjusted EBITDA and forecasted distributable cash flow guidance and tightened its outlook to between the low and midpoint of the guidance ranges to reflect the current commodity outlook for the second half of the year. |
• | Strong July performance, with record volumes in the DJ Basin, volume growth in the Eagle Ford and NGL pipelines and continued improvement in the Permian, setting the pace for improved second half of 2017. |
• | The Partnership is executing its 2017 and 2018 Sand Hills expansions from 280 thousand barrels per day (MBpd) to 450 MBpd, adding 60 plus percent capacity to Sand Hills by the third quarter 2018. |
• | The Partnership approved its eleventh plant in the DJ Basin, the 200 million cubic feet per day (MMcf/d) O'Connor 2 plant, and together with the 200 MMcf/d Mewbourn 3 plant that is under construction, will add 400 MMcf/d of processing capacity, up 45 plus percent, to approximately 1.2 billion cubic feet per day (Bcf/d). |
• | In June 2017, the Partnership sold its non-core Douglas system for approximately $129 million and recorded a gain of approximately $34 million. The assets were sold for a double-digit EBITDA multiple and the proceeds will be used to fund the Partnership's strategic lower multiple organic growth projects in its key basins. |
Three Months Ended | Six Months Ended | |||||||||||
June 30, | June 30, | |||||||||||
2017 | 2016 (2) | 2017 | 2016 (2) | |||||||||
(Unaudited) | ||||||||||||
(Millions, except per unit amounts) | ||||||||||||
Net income (loss) attributable to partners | $ | 88 | $ | (22 | ) | $ | 189 | $ | 43 | |||
Net income per limited partner unit - basic and diluted | $ | 0.33 | $ | 0.12 | $ | 0.74 | $ | 0.48 | ||||
Adjusted EBITDA(1) | $ | 216 | $ | 226 | $ | 461 | $ | 533 | ||||
Distributable cash flow(1) | $ | 119 | $ | ** | $ | 280 | $ | ** |
(1) | This press release includes the following financial measures not presented in accordance with U.S. generally accepted accounting principles, or GAAP: adjusted EBITDA, distributable cash flow, adjusted segment EBITDA, forecasted adjusted EBITDA and forecasted distributable cash flow. Each such non-GAAP financial measure is defined below under “Non-GAAP Financial Information”, and each is reconciled to its most directly comparable GAAP financial measures under “Reconciliation of Non-GAAP Financial Measures” in schedules at the end of this press release. |
(2) | Includes the DCP Midstream Business, which the Partnership acquired in January 2017 (the "Transaction"), retrospectively adjusted. Transfers of net assets between entities under common control are accounted for as if the transactions had occurred at the beginning of the period, and prior years are retrospectively adjusted to furnish comparative information similar to the pooling method. |
• | Adjusted EBITDA was $216 million and $461 million for the three and six months ended June 30, 2017, respectively. |
• | Distributable cash flow was $119 million and $280 million for the three and six months ended June 30, 2017, respectively. |
• | Distribution coverage ratio was 0.89 times and 1.04 times for the three and six months ended June 30, 2017, respectively, as adjusted for lower declared incentive distribution (IDR) rights payments to the Partnership's general partner of $20 million during each of the first and second quarters of 2017. See Distributions and IDR Giveback section for additional details. |
• | The 2017 Sand Hills natural gas liquids (NGL) pipeline capacity expansion to 365 MBpd to meet growth in the Permian Basin is underway and expected to be in service in the fourth quarter of 2017, for an estimated cost of $70 million, net to the Partnership's two-thirds interest. |
• | The 2018 Sand Hills expansion announced in May 2017 is progressing and is expected to further increase capacity by 85 MBpd to approximately 450 MBpd via partial looping of the pipeline and the addition of new pump stations. This expansion is expected to be in service in the third quarter of 2018, for an estimated cost of $300 million, net to the Partnership's two-thirds interest. |
• | The non-binding open season for the proposed Gulf Coast Express Pipeline Project closed on April 20, 2017, with bids exceeding the capacity offered. Kinder Morgan (KMI) and the Partnership continue to work with prospective shippers to obtain firm commitments. The proposed mostly 42-inch pipeline would transport over 1.8 Bcf/d of natural gas approximately 430 miles from the Waha area to Agua Dulce, Texas, providing an outlet for increased natural gas production from the Permian Basin to growing markets along the Texas Gulf Coast. The pipeline is expected to be in service in the second half of 2019, pending final shipper commitments. |
• | The Partnership approved the 200 MMcf/d O'Connor 2 plant, its eleventh plant in the DJ Basin. The O'Connor 2 plant and associated gathering infrastructure is expected to be in service in 2019 for an estimated cost of $350 million to $400 million. |
• | The Partnership has started construction of the 200 MMcf/d Mewbourn 3 plant and additional compression and gathering infrastructure. The plant and gathering infrastructure are expected to be in service in the fourth quarter of 2018 for an estimated cost of $395 million. |
• | The Partnership increased capacity in the DJ Basin by up to 40 MMcf/d in the second quarter of 2017 by placing additional field compression and plant bypass infrastructure in service. |
• | financial performance of the Partnership's assets without regard to financing methods, capital structure or historical cost basis; |
• | the Partnership's operating performance and return on capital as compared to those of other companies in the midstream energy industry, without regard to financing methods or capital structure; |
• | viability and performance of acquisitions and capital expenditure projects and the overall rates of return on investment opportunities; |
• | performance of the Partnership's business excluding non-cash commodity derivative gains or losses; and |
• | in the case of Adjusted EBITDA, the ability of the Partnership's assets to generate cash sufficient to pay interest costs, support its indebtedness, make cash distributions to its unitholders and general partner, and pay maintenance capital expenditures. |
Three Months Ended | Six Months Ended | |||||||||||||
June 30, | June 30, | |||||||||||||
2017 | 2016 (1) | 2017 | 2016 (1) | |||||||||||
(Millions, except per unit amounts) | ||||||||||||||
Sales of natural gas, NGLs and condensate | $ | 1,772 | $ | 1,491 | $ | 3,705 | $ | 2,785 | ||||||
Transportation, processing and other | 155 | 155 | 312 | 307 | ||||||||||
Trading and marketing gains (losses), net | 22 | (23 | ) | 53 | (5 | ) | ||||||||
Total operating revenues | 1,949 | 1,623 | 4,070 | 3,087 | ||||||||||
Purchases of natural gas and NGLs | (1,557 | ) | (1,294 | ) | (3,244 | ) | (2,429 | ) | ||||||
Operating and maintenance expense | (178 | ) | (166 | ) | (345 | ) | (345 | ) | ||||||
Depreciation and amortization expense | (94 | ) | (95 | ) | (188 | ) | (190 | ) | ||||||
General and administrative expense | (71 | ) | (61 | ) | (133 | ) | (123 | ) | ||||||
Gain (loss) on sale of assets, net | 34 | (6 | ) | 34 | (6 | ) | ||||||||
Restructuring costs | — | (8 | ) | — | (8 | ) | ||||||||
Other (expense) income | (5 | ) | (5 | ) | (15 | ) | 82 | |||||||
Total operating costs and expenses | (1,871 | ) | (1,635 | ) | (3,891 | ) | (3,019 | ) | ||||||
Operating income (loss) | 78 | (12 | ) | 179 | 68 | |||||||||
Interest expense, net | (73 | ) | (79 | ) | (146 | ) | (158 | ) | ||||||
Earnings from unconsolidated affiliates | 86 | 73 | 160 | 139 | ||||||||||
Income tax expense | (2 | ) | (3 | ) | (3 | ) | (5 | ) | ||||||
Net income attributable to noncontrolling interests | (1 | ) | (1 | ) | (1 | ) | (1 | ) | ||||||
Net income (loss) attributable to partners | 88 | (22 | ) | 189 | 43 | |||||||||
Net loss attributable to predecessor operations | — | 67 | — | 74 | ||||||||||
General partner's interest in net income | (41 | ) | (31 | ) | (83 | ) | (62 | ) | ||||||
Net income allocable to limited partners | $ | 47 | $ | 14 | $ | 106 | $ | 55 | ||||||
Net income per limited partner unit — basic and diluted | $ | 0.33 | $ | 0.12 | $ | 0.74 | $ | 0.48 | ||||||
Weighted-average limited partner units outstanding — basic and diluted | 143.3 | 114.7 | 143.3 | 114.7 |
June 30, | December 31, | |||||
2017 | 2016 (1) | |||||
(Millions) | ||||||
Cash and cash equivalents | $ | 251 | $ | 1 | ||
Other current assets | 814 | 993 | ||||
Property, plant and equipment, net | 8,950 | 9,069 | ||||
Other long-term assets | 3,555 | 3,548 | ||||
Total assets | $ | 13,570 | $ | 13,611 | ||
Current liabilities | $ | 935 | $ | 1,123 | ||
Current portion of long-term debt | 500 | 500 | ||||
Long-term debt | 4,710 | 4,907 | ||||
Other long-term liabilities | 226 | 228 | ||||
Partners' equity | 7,170 | 6,821 | ||||
Noncontrolling interests | 29 | 32 | ||||
Total liabilities and equity | $ | 13,570 | $ | 13,611 |
(1) | Includes the DCP Midstream Business, which the Partnership acquired in January 2017, retrospectively adjusted. Transfers of net assets between entities under common control are accounted for as if the transactions had occurred at the beginning of the period, and prior years are retrospectively adjusted to furnish comparative information similar to the pooling method. |
Three Months Ended | Six Months Ended | ||||||||||||
June 30, | June 30, | ||||||||||||
2017 | 2016 (1) | 2017 | 2016 (1) | ||||||||||
(Millions) | |||||||||||||
Reconciliation of Non-GAAP Financial Measures: | |||||||||||||
Net income (loss) attributable to partners | $ | 88 | $ | (22 | ) | $ | 189 | $ | 43 | ||||
Interest expense | 73 | 79 | 146 | 158 | |||||||||
Depreciation, amortization and income tax expense, net of noncontrolling interests | 96 | 98 | 191 | 195 | |||||||||
Distributions from unconsolidated affiliates, net of earnings | 15 | 16 | 17 | 37 | |||||||||
Other non-cash charges | 2 | 5 | 12 | 5 | |||||||||
(Gain) loss on sale of assets | (34 | ) | 6 | (34 | ) | 6 | |||||||
Non-cash commodity derivative mark-to-market | (24 | ) | 44 | (60 | ) | 89 | |||||||
Adjusted EBITDA | 216 | $ | 226 | 461 | $ | 533 | |||||||
Interest expense | (73 | ) | (146 | ) | |||||||||
Maintenance capital expenditures, net of noncontrolling interest portion and reimbursable projects | (29 | ) | (44 | ) | |||||||||
Other, net | 5 | 9 | |||||||||||
Distributable cash flow | $ | 119 | ** | $ | 280 | ** | |||||||
Net cash provided by operating activities | $ | 216 | $ | 153 | $ | 360 | $ | 304 | |||||
Interest expense | 73 | 79 | 146 | 158 | |||||||||
Net changes in operating assets and liabilities | (44 | ) | (50 | ) | 22 | (14 | ) | ||||||
Non-cash commodity derivative mark-to-market | (24 | ) | 44 | (60 | ) | 89 | |||||||
Other, net | (5 | ) | — | (7 | ) | (4 | ) | ||||||
Adjusted EBITDA | 216 | $ | 226 | 461 | $ | 533 | |||||||
Interest expense | (73 | ) | (146 | ) | |||||||||
Maintenance capital expenditures, net of noncontrolling interest portion and reimbursable projects | (29 | ) | (44 | ) | |||||||||
Other, net | 5 | 9 | |||||||||||
Distributable cash flow | $ | 119 | ** | $ | 280 | ** |
(1) | Includes the DCP Midstream Business, which the Partnership acquired in January 2017, retrospectively adjusted. Transfers of net assets between entities under common control are accounted for as if the transactions had occurred at the beginning of the period, and prior years are retrospectively adjusted to furnish comparative information similar to the pooling method. |
Three Months Ended | Six Months Ended | ||||||||||||
June 30, | June 30, | ||||||||||||
2017 | 2016 (1) | 2017 | 2016 (1) | ||||||||||
(Millions, except as indicated) | (Millions, except as indicated) | ||||||||||||
Gathering and Processing Segment: | |||||||||||||
Financial results: | |||||||||||||
Segment net income attributable to partners | $ | 141 | $ | 56 | $ | 293 | $ | 176 | |||||
Non-cash commodity derivative mark-to-market | (16 | ) | 29 | (47 | ) | 68 | |||||||
Depreciation and amortization expense, net of noncontrolling interest | 86 | 87 | 171 | 173 | |||||||||
(Gain) loss on sale of assets, net | (34 | ) | 6 | (34 | ) | 6 | |||||||
Distributions from unconsolidated affiliates, net of earnings | (1 | ) | 5 | 4 | 13 | ||||||||
Other charges | 3 | — | 3 | — | |||||||||
Adjusted segment EBITDA | $ | 179 | $ | 183 | $ | 390 | $ | 436 | |||||
Operating and financial data: | |||||||||||||
Natural gas wellhead (MMcf/d) | 4,483 | 5,255 | 4,532 | 5,343 | |||||||||
NGL gross production (MBpd) | 366 | 415 | 359 | 405 | |||||||||
Operating and maintenance expense | $ | 162 | $ | 151 | $ | 315 | $ | 312 | |||||
Logistics and Marketing Segment: | |||||||||||||
Financial results: | |||||||||||||
Segment net income attributable to partners | $ | 92 | $ | 76 | $ | 179 | $ | 170 | |||||
Depreciation and amortization expense | 3 | 4 | 7 | 8 | |||||||||
Distributions from unconsolidated affiliates, net of earnings | 16 | 11 | 13 | 24 | |||||||||
Other charges | — | — | 9 | — | |||||||||
Non-cash commodity derivative mark-to-market | (8 | ) | 15 | (13 | ) | 21 | |||||||
Adjusted segment EBITDA | $ | 103 | $ | 106 | $ | 195 | $ | 223 | |||||
Operating and financial data: | |||||||||||||
NGL pipelines throughput (MBpd) | 451 | 430 | 439 | 415 | |||||||||
Operating and maintenance expense | $ | 13 | $ | 10 | $ | 22 | $ | 20 |
(1) | Includes the DCP Midstream Business, which the Partnership acquired in January 2017, retrospectively adjusted. Transfers of net assets between entities under common control are accounted for as if the transactions had occurred at the beginning of the period, and prior years are retrospectively adjusted to furnish comparative information similar to the pooling method. |
Three Months Ended | Six Months Ended | |||||||
June 30, | June 30, | |||||||
2017 | 2017 | |||||||
(Millions, except as indicated) | ||||||||
Reconciliation of Non-GAAP Financial Measures: | ||||||||
Distributable cash flow | $ | 119 | $ | 280 | ||||
Distributions declared ** | $ | 134 | $ | 269 | ||||
Distribution coverage ratio - declared | 0.89 | x | 1.04 | x | ||||
Distributable cash flow | $ | 119 | $ | 280 | ||||
Distributions paid *** | $ | 135 | $ | 256 | ||||
Distribution coverage ratio - paid | 0.88 | x | 1.09 | x |
Twelve Months Ended | |||||||||
December 31, 2017 | |||||||||
Low | High | ||||||||
Forecast | Forecast | ||||||||
(Millions) | |||||||||
Reconciliation of Non-GAAP Measures: | |||||||||
Forecasted net income attributable to partners | $ | 165 | $ | 324 | |||||
Distributions from unconsolidated affiliates, net of earnings | 75 | 85 | |||||||
Interest expense, net of interest income | 288 | 288 | |||||||
Income taxes | 7 | 7 | |||||||
Depreciation and amortization, net of noncontrolling interests | 398 | 398 | |||||||
Non-cash commodity derivative mark-to-market | 7 | 8 | |||||||
Forecasted adjusted EBITDA | 940 | 1,110 | |||||||
Interest expense, net of interest income | (288) | (288) | |||||||
Maintenance capital expenditures, net of reimbursable projects | (100) | (145) | |||||||
Income taxes and other | (7) | (7) | |||||||
Forecasted distributable cash flow | $ | 545 | $ | 670 |
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