EX-99.1 2 exhibit99193016.htm EXHIBIT 99.1 Exhibit


Exhibit 99.1
Tallgrass Energy Announces Strong Third Quarter 2016 Results and Operational Updates
LEAWOOD, Kan.--(BUSINESS WIRE)--November 2, 2016--Tallgrass Energy Partners, LP (NYSE: TEP) ("TEP") and Tallgrass Energy GP, LP (NYSE: TEGP) ("TEGP"), collectively referred to as Tallgrass Energy, today reported financial and operating results for the third quarter of 2016.
“Tallgrass Energy delivered another excellent quarter underpinned by stable performance in our segments and a full quarter of a 25 percent interest in REX at TEP. All contributed to another consecutive increase in distributions at TEP and TEGP," said Tallgrass Energy President and CEO David G. Dehaemers, Jr. "TEP's inaugural senior notes offering marks another milestone towards achieving an investment grade capital structure. Moving forward we look ahead to the in-service of REX's Capacity Enhancement Project. TEP is well-positioned to conclude an outstanding 2016 and to continue delivering top-tier distribution growth in 2017."
Third Quarter Distributions
Tallgrass Energy Partners, LP
As previously announced, the board of directors of TEP's general partner declared a quarterly cash distribution of $0.795 per common unit for the third quarter of 2016. This quarterly distribution represents $3.18 on an annualized basis, a sequential increase of 5.3 percent from the second quarter 2016 distribution and an increase of 32.5 percent from the third quarter 2015 distribution. The quarterly distribution will be paid on Monday, Nov. 14, 2016, to unitholders of record as of the close of business on Monday, Oct. 31, 2016.
Tallgrass Energy GP, LP
Also, as previously announced, the board of directors of TEGP's general partner declared a quarterly cash distribution of $0.2625 per Class A share for the third quarter of 2016. This quarterly distribution represents $1.05 per Class A share on an annualized basis, a sequential increase of 7.1 percent from the second quarter 2016 distribution and an increase of 82.3 percent from the third quarter 2015 distribution. The quarterly distribution will be paid on Monday, Nov. 14, 2016, to Class A shareholders of record as of the close of business on Monday, Oct. 31, 2016.
TEP Senior Notes Offering
On Sept. 1, 2016, TEP along with Tallgrass Energy Finance Corp., a subsidiary of TEP, closed an offering of $400 million in aggregate principal amount of 5.50 percent senior unsecured notes due 2024. TEP used the net proceeds of the offering to repay outstanding borrowings under its existing senior secured revolving credit facility, which will provide additional liquidity and flexibility as TEP continues to execute its business plan. As of Nov. 2, 2016, TEP has approximately $750 million of availability under its revolving credit facility.
REX Commercial and Operational Updates
During the third quarter Rockies Express Pipeline LLC ("REX") signed a precedent agreement with Citizens Gas, a local distribution company in Indianapolis, Ind., for 20 million cubic feet a day on its Zone 3 Capacity Enhancement Project. The agreement is for 15 years at a rate comparable to other precedent agreements REX has signed on the project. In addition, REX has recently signed a precedent agreement for the remaining 50 million cubic feet a day. The project's design capacity of 800 million cubic feet a day is now completely sold out for 15 years at an average rate of approximately $0.50. With this important milestone complete, REX’s commercial team has turned its efforts to additional demand and west-end opportunities.
In addition to these positive contractual developments, REX averaged 1.3 billion cubic feet a day of west-to-east flows and 1.8 billion cubic feet a day of east-to-west flows during the third quarter for total average flows of 3.1 billion cubic feet a day. These data points illustrate the strong demand for takeaway capacity in the Marcellus/Utica and the continuing demand for Rockies takeaway capacity.
REX continues to pursue breach of contract claims against Ultra Petroleum and Berry Petroleum, two former REX customers currently undergoing restructuring via bankruptcy.  While the amount and timing of any potential recovery on these claims remains unclear, any recovery, if realized, would provide additional cash available for distribution to TEP unitholders or debt repayment.





Organizational Enhancements
To concentrate Tallgrass Energy’s commercial development efforts and continue to focus on developing relationships with, and solutions for, our customers across all of our assets, Matthew Sheehy has been named Senior Vice President and Chief Commercial Officer at Tallgrass Energy, reporting to William R. Moler, our Chief Operating Officer. Mr. Sheehy has been instrumental in executing Tallgrass Energy's vision to transform REX into a bi-directional header system through the Seneca Lateral, East-to-West and Capacity Enhancement projects and valuable customer contracts. As part of the transition, Crystal Heter will serve as the Vice President and General Manager of REX. Ms. Heter, a chemical engineer, started her career as an engineering intern with predecessor companies and moved up through both the technical and commercial sides of the business. She is an accomplished leader at Tallgrass Energy and possesses a deep knowledge of REX, its customers and the markets it serves.
Tallgrass Energy Partners, LP Summary Financial Information(1) 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
(in thousands, except coverage and per unit data)
2016
 
2015
 
2016
 
2015
 
 
 
 
 
 
 
 
Net income attributable to partners
$
60,734

 
$
42,679

 
$
196,852

 
$
119,897

Add:
 
 
 
 
 
 
 
Interest expense(2)
10,907

 
3,872

 
27,639

 
11,205

Depreciation and amortization expense(2)
21,102

 
18,826

 
64,909

 
57,661

Distributions from unconsolidated investment
21,804

 
—

 
51,460

 
—

Non-cash loss (gain) related to derivative instruments(2)
4,410

 
(259
)
 
(5,391
)
 
(218
)
Non-cash compensation expense
1,635

 
734

 
4,270

 
3,988

Non-cash loss from disposal of assets
—

 
—

 
1,849

 
4,483

Less:
 
 
 
 
 
 
 
Equity in earnings of unconsolidated investment
(12,066
)
 
—

 
(35,387
)
 
—

Non-cash loss allocated to noncontrolling interest
—

 
—

 
—

 
(9,377
)
Adjusted EBITDA
$
108,526

 
$
65,852

 
$
306,201

 
$
187,639

Add:
 
 
 
 
 
 
 
Deficiency payments received, net
9,114

 
8,342

 
24,892

 
12,050

Less:
 
 
 
 
 
 
 
Cash interest cost
(9,950
)
 
(3,518
)
 
(25,183
)
 
(10,031
)
Maintenance capital expenditures, net
(2,828
)
 
(4,659
)
 
(7,085
)
 
(9,237
)
Distributions to noncontrolling interest in excess of earnings
—

 
(11,520
)
 
—

 
(22,517
)
Distributable Cash Flow
104,862

 
54,497

 
298,825

 
157,904

Less:
 
 
 
 
 
 
 
Distributions
(85,295
)
 
(48,574
)
 
(233,794
)
 
(133,540
)
Amounts in excess of distributions(3)
$
19,567

 
$
5,923

 
$
65,031

 
$
24,364

Distribution coverage
1.23
x
 
1.12
x
 
1.28
x
 
1.18
x
 
 
 
 
 
 
 
 
Common units outstanding(4)
72,115

 
60,578

 
72,115

 
60,578

Distribution per common unit
$
0.7950

 
$
0.6000

 
$
2.2550

 
$
1.7000

(1) 
The acquisitions of an additional 33.3 percent and 31.3 percent membership interest in Tallgrass Pony Express Pipeline, LLC (“Pony Express”) effective March 1, 2015, and January 1, 2016, respectively, are presented prospectively from the dates of acquisition, and as a result, financial information for periods prior to March 1, 2015, and January 1, 2016, have not been recast to reflect the additional 33.3 percent and 31.3 percent membership interests.
(2) 
Net of noncontrolling interest.
(3) Cumulative distribution coverage from TEP's IPO in May 2013 through September 30, 2016, is $110.8 million and the cumulative distribution coverage ratio is 1.20x.
(4) 
Common units represent the number of units as of the date of record for the third quarter distributions in both 2016 and 2015.




Tallgrass Energy Partners, LP Alternative Reconciliations
Adjusted EBITDA and/or Distributable Cash Flow, as defined in "Non-GAAP Measures" below, may be impacted by the timing of cash payments received as a result of shipper deficiency payments received or utilized during the period or incremental barrels shipped during the period. As such, we have also provided alternative reconciliations of Adjusted EBITDA and Distributable Cash Flow that illustrate the impact of these items. Management believes this information provides investors useful information regarding the impact of these items on our current results as well as the potential impact on future results.
Alternative Reconciliation of Adjusted EBITDA
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
(in thousands)
2016
 
2016
 
 
 
 
Adjusted EBITDA
$
108,526

 
$
306,201

Add:
 
 
 
Deficiency payments received, net(1)
9,114

 
24,892

Alternative Adjusted EBITDA(2)
$
117,640

 
$
331,093


(1) Cumulative net deficiency balance at September 30, 2016, is $51.9 million.
(2) 
Alternative Adjusted EBITDA shows what TEP's Adjusted EBITDA would have been for the periods presented if TEP included net deficiency payments from shippers' firm, take-or-pay contracts in calculating Adjusted EBITDA.  TEP's reported distributable cash flow and distribution coverage would remain unchanged.

Alternative Reconciliation of Distributable Cash Flow and Distribution Coverage
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
(in thousands, except coverage)
2016
 
2016

 
 
 
Distributable Cash Flow
$
104,862

 
$
298,825

Less:
 
 
 
Cash flow from incremental barrels shipped(1)
(2,723
)
 
(18,033
)
Alternative Distributable Cash Flow(2)
102,139

 
280,792

Less:
 
 
 
Distributions
(85,295
)
 
(233,794
)
Amounts in excess of distributions
$
16,844

 
$
46,998

Alternative distribution coverage(2)
1.20
x
 
1.20
x

(1) Cumulative shipper incremental balance at September 30, 2016, is $20.3 million.
(2) 
Alternative distributable cash flow and alternative distribution coverage shown excludes the impact of cash flows from incremental barrels shipped on the Pony Express system, as incremental barrels shipped during current periods may reduce the shippers' firm commitment in future periods under their firm, take-or-pay contracts, thereby potentially reducing cash flows in those corresponding future periods. Under this alternative calculation, the cash flows received from incremental barrel shipments would be shown in the future periods in which the incremental barrels are utilized to reduce the shippers' firm commitment.




Tallgrass Energy Partners, LP Segment Overview(1) 
The third quarter 2016 comparative results by segment are summarized below:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2016
 
2015
 
2016
 
2015
 
(in thousands)
Crude Oil Transportation & Logistics
 
 
 
 
 
 
 
Operating income
$
53,227

 
$
44,069

 
$
159,619

 
$
103,857

Add:
 
 
 
 
 
 
 
Depreciation and amortization expense(2)
13,112

 
10,323

 
39,276

 
30,752

Adjusted EBITDA attributable to noncontrolling interests
(1,060
)
 
(6,866
)
 
(3,170
)
 
(5,880
)
Non-cash loss related to derivative instruments(2)
152

 
—

 
7

 
—

Less:
 
 
 
 
 
 
 
Non-cash loss allocated to noncontrolling interest
—

 
—

 
—

 
(9,377
)
Segment Adjusted EBITDA
$
65,431

 
$
47,526

 
$
195,732

 
$
119,352

 
 
 
 
 
 
 
 
Average daily throughput (BBls/d)(3)
276,138

 
252,540

 
284,512

 
218,697

 
 
 
 
 
 
 
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2016
 
2015
 
2016
 
2015
 
(in thousands)
Natural Gas Transportation & Logistics
 
 
 
 
 
 
 
Operating income
$
14,254

 
$
10,499

 
$
35,018

 
$
32,989

Add:
 
 
 
 
 
 
 
Depreciation and amortization expense
4,876

 
5,241

 
16,233

 
17,066

Distributions from unconsolidated investment(4)
21,804

 
—

 
51,460

 
—

Non-cash (gain) loss related to derivative instruments
(161
)
 
(259
)
 
190

 
(218
)
Other income, net
480

 
502

 
1,267

 
1,983

Segment Adjusted EBITDA
$
41,253

 
$
15,983

 
$
104,168

 
$
51,820

 
 
 
 
 
 
 
 
TIGT and Trailblazer average firm contracted volumes (MMcf/d)
1,440

 
1,506

 
1,464

 
1,543

 
 
 
 
 
 
 
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2016
 
2015
 
2016
 
2015
 
(in thousands)
Processing & Logistics
 
 
 
 
 
 
 
Operating income (loss)
$
120

 
$
(212
)
 
$
(1,074
)
 
$
4,508

Add:
 
 
 
 
 
 
 
Depreciation and amortization expense(2)
3,114

 
3,262

 
9,400

 
9,843

Non-cash loss from disposal of assets
—

 
—

 
1,849

 
4,483

Adjusted EBITDA attributable to noncontrolling interests
(24
)
 
(4
)
 
(65
)
 
7

Segment Adjusted EBITDA
$
3,210

 
$
3,046

 
$
10,110

 
$
18,841

 
 
 
 
 
 
 
 
Natural gas processing inlet volumes (MMcf/d)
103

 
110

 
102

 
128





(1) Segment reporting does not include corporate general and administrative costs or intersegment eliminations.
(2) Net of noncontrolling interest.
(3) Approximate average daily throughput for the three and nine months ended September 30, 2015 is reflective of the volumetric ramp up due to commercial in-service of the Pony Express System beginning in October 2014 and delays in the construction and expansion efforts of third-party pipelines with which Pony Express shares joint tariffs.
(4) Represents the distributions TEP received from REX for the third quarter of 2016 and from May 6, 2016, the date of TEP's acquisition, through September 30, 2016, respectively.

TEP acquired a 25 percent interest in REX effective May 6, 2016. TEP's consolidated Adjusted EBITDA, as shown above, includes TEP's 25 percent membership interest in REX. The table below is a reconciliation of REX's Adjusted EBITDA and Distributable Cash Flow for the three and nine months ended September 30, 2016 and 2015, presented to provide additional information on REX's financial results.
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2016
 
2015
 
2016
 
2015
 
(in thousands)
Net income
$
34,184

 
$
78,626

 
$
226,847

 
$
170,779

Add:
 
 
 
 
 
 
 
Interest expense
39,309

 
41,143

 
119,694

 
129,030

Depreciation and amortization expense
50,332

 
49,972

 
150,831

 
149,057

Adjusted EBITDA
123,825

 
169,741

 
497,372

 
448,866

Less:
 
 
 
 
 
 
 
Cash interest cost
(38,304
)
 
(40,212
)
 
(117,192
)
 
(126,476
)
Maintenance capital expenditures
(1,601
)
 
(3,246
)
 
(5,878
)
 
(7,063
)
Distributable Cash Flow
$
83,920

 
$
126,283

 
$
374,302

 
$
315,327

 
 
 
 
 
 
 
 
Distributions to Members
$
(87,219
)
 
$
(126,035
)
 
$
(373,888
)
 
$
(320,186
)
Contributions from Members
$
84,260

 
$
85,697

 
$
246,755

 
$
668,357

 
 
 
 
 
 
 
 
Average firm contracted volumes (MMcf/d)
3,324

 
3,140

 
3,376

 
2,591





Tallgrass Energy GP, LP Summary Financial Information
Information on distributions to Tallgrass Equity, LLC ("Tallgrass Equity"), TEGP and TEGP's Class A shareholders is shown below (in thousands, except coverage and per share data):
 
 
 
 
 
Nine Months Ended September 30, 2016
 
Period from May 12, 2015 (IPO) through September 30, 2015
 
Three Months Ended September 30,
 
 
 
2016
 
2015
 
 
 
 
 
 
 
 
 
 
TEP distributions to Tallgrass Equity(1)
 
 
 
 
 
 
 
General partner interest
$
976

 
$
660

 
$
2,717

 
$
1,287

Incentive Distribution Rights
26,987

 
11,567

 
71,065

 
21,985

TEP common units owned by Tallgrass Equity
15,900

 
12,000

 
45,100

 
23,600

Total TEP distributions to Tallgrass Equity
43,863

 
24,227

 
118,882

 
46,872

Less:
 
 
 
 
 
 
 
Cash interest expense attributable to Tallgrass Equity
(1,132
)
 
(1,020
)
 
(3,322
)
 
(1,565
)
Cash general and administrative expenses attributable to Tallgrass Equity
(500
)
 
(500
)
 
(1,500
)
 
(750
)
Cash available for distribution by Tallgrass Equity
42,231

 
22,707

 
114,060

 
44,557

Distributions to predecessor owners of pre-IPO available cash(2)
—

 
—

 
—

 
10,202

Distributions to Class A (TEGP)
12,528

 
6,872

 
34,243

 
10,356

Distributions to Class B (Exchange Right Holders)
28,745

 
15,769

 
78,570

 
23,763

Total cash distributions by Tallgrass Equity
$
41,273

 
$
22,641

 
$
112,813

 
$
44,321

TEGP
 
 
 
 
 
 
 
Distributions from Tallgrass Equity
$
12,528

 
$
6,872

 
$
34,243

 
$
10,356

Less:
 
 
 
 
 
 
 
Distributions to Class A shareholders
(12,528
)
 
(6,872
)
 
(34,243
)
 
(10,356
)
Amounts in excess of distributions
—

 
—

 
$
—

 
$
—

Distribution coverage
1.00
x
 
1.00
x
 
1.00
x
 
1.00
x
 
 
 
 
 
 
 
 
Class A shares outstanding
47,725

 
47,725

 
47,725

 
47,725

Distribution per Class A share
$
0.2625

 
$
0.1440

 
$
0.7175

 
$
0.2170


(1)  
Represents distributions expected to be received by Tallgrass Equity from TEP on or about November 14, 2016, in connection with TEP's distribution for the quarter ended September 30, 2016.
(2)  
Represents distributions received by Tallgrass Equity from TEP and Tallgrass MLP GP, LLC related to periods prior to the closing of TEGP’s initial public offering on May 12, 2015, which were paid to Tallgrass Development and the predecessor owners of Tallgrass Equity.
Conference Call
Please join Tallgrass Energy for a conference call and webcast to discuss third quarter 2016 results at 3:30 p.m. Central Time on Wednesday, November 2, 2016. Interested parties may listen via a link posted on the Investor Relations section of our website and the replay will be available on our website for at least seven days following the live call.




TEP's Non-GAAP Measures
Adjusted EBITDA and Distributable Cash Flow are non-GAAP supplemental financial measures that TEP management and external users of our consolidated financial statements and financial statements of our subsidiaries and unconsolidated investments, such as industry analysts, investors, lenders and rating agencies, may use to assess:
•
our operating performance as compared to other publicly traded partnerships in the midstream energy industry, without regard to historical cost basis or, in the case of Adjusted EBITDA, financing methods;
•
the ability of our assets to generate sufficient cash flow to make distributions to our unitholders;
•
our ability to incur and service debt and fund capital expenditures; and
•
the viability of acquisitions and other capital expenditure projects and the returns on investment of various expansion and growth opportunities.
We believe that the presentation of Adjusted EBITDA and Distributable Cash Flow provides useful information to investors in assessing our financial condition and results of operations. Adjusted EBITDA and Distributable Cash Flow should not be considered alternatives to net income, operating income, net cash provided by operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP, nor should Adjusted EBITDA and Distributable Cash Flow be considered alternatives to available cash, operating surplus, distributions of available cash from operating surplus or other definitions in our partnership agreement. Adjusted EBITDA and Distributable Cash Flow have important limitations as analytical tools because they exclude some but not all items that affect net income and net cash provided by operating activities. Additionally, because Adjusted EBITDA and Distributable Cash Flow may be defined differently by other companies in our industry, our definition of Adjusted EBITDA and Distributable Cash Flow may not be comparable to similarly titled measures of other companies, thereby diminishing their utility.
We generally define Adjusted EBITDA as net income excluding the impact of interest, income taxes, depreciation and amortization, non-cash income or loss related to derivative instruments, non-cash long-term compensation expense, impairment losses, gains or losses on asset or business disposals or acquisitions, gains or losses on the repurchase, redemption or early retirement of debt, and earnings from unconsolidated investments, but including the impact of distributions from unconsolidated investments. We also use Distributable Cash Flow, which we generally define as Adjusted EBITDA, plus deficiency payments received from or utilized by our customers and preferred distributions received from Pony Express in excess of its distributable cash flow attributable to our net interest, less cash interest expense, maintenance capital expenditures, distributions to noncontrolling interests in excess of earnings allocated to noncontrolling interests, and certain cash reserves permitted by our partnership agreement. For a reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measures, please see "Summary Financial Information" above.
Cautionary Note Concerning Forward-Looking Statements
Disclosures in this press release contain “forward-looking statements.” All statements, other than statements of historical facts, included in this press release that address activities, events or developments that management expects, believes or anticipates will or may occur in the future are forward-looking statements. Without limiting the generality of the foregoing, forward-looking statements contained in this press release specifically include TEP’s and TEGP’s expected performance into year-end 2016 and for 2017, the execution by REX of a precedent agreement for 50 million cubic feet a day and any potential breach of contract recoveries from Ultra Petroleum and Berry Petroleum. Forward looking statements may also include the expectations of plans, strategies, objectives and growth and anticipated financial and operational performance of TEP, TEGP and their subsidiaries, including: the ability to pursue expansions and other opportunities for incremental volumes; natural gas and crude oil production growth in TEP's operating areas; expected future benefits of acquisitions or expansion projects; timing of anticipated spending on planned expenses and maintenance capital projects; and distribution rate and growth, including variability of quarterly distribution coverage. These statements are based on certain assumptions made by TEP and TEGP based on management’s experience and perception of historical trends, current conditions, anticipated future developments and other factors believed to be appropriate. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of TEP and TEGP, which may cause actual results to differ materially from those implied or expressed by the forward-looking statements. These include risks relating to TEP and TEGP’s financial performance and results, availability of sufficient cash flow to pay distributions and execute their business plans, the demand for natural gas storage, processing and transportation services and for crude oil transportation services, operating hazards, the effects of government regulation, tax position and other risks incidental to transporting, storing and processing natural gas or transporting crude oil and other important factors that could cause actual results to differ materially from those projected, including those set forth in reports filed by TEP and TEGP with the Securities and Exchange Commission. Any forward-looking statement applies only as of the date on which such statement is made and TEP and TEGP do not intend to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law.




Tallgrass Energy Partners, LP Financial Statements
TALLGRASS ENERGY PARTNERS, LP
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
 
September 30, 2016
 
December 31, 2015
 
(in thousands)
ASSETS
 
Current Assets:
 
 
 
Cash and cash equivalents
$
417

 
$
1,611

Accounts receivable, net
53,085

 
57,757

Gas imbalances
890

 
1,227

Inventories
13,375

 
13,793

Derivative assets at fair value
25,690

 
—

Prepayments and other current assets
3,838

 
2,835

Total Current Assets
97,295

 
77,223

Property, plant and equipment, net
2,003,532

 
2,025,018

Goodwill
343,288

 
343,288

Intangible asset, net
94,280

 
96,546

Unconsolidated investment
455,401

 
—

Deferred financing costs, net
5,676

 
5,105

Deferred charges and other assets
10,816

 
14,894

Total Assets
$
3,010,288

 
$
2,562,074

LIABILITIES AND EQUITY
 
 
 
Current Liabilities:
 
 
 
Accounts payable
$
17,046

 
$
22,218

Accounts payable to related parties
6,207

 
7,852

Gas imbalances
1,117

 
1,605

Derivative liabilities at fair value
197

 
—

Accrued taxes
20,676

 
13,844

Accrued liabilities
10,214

 
10,019

Deferred revenue
52,138

 
26,511

Other current liabilities
6,725

 
6,880

Total Current Liabilities
114,320

 
88,929

Long-term debt, net
1,398,003

 
753,000

Other long-term liabilities and deferred credits
7,341

 
5,143

Total Long-term Liabilities
1,405,344

 
758,143

Commitments and Contingencies
 
 
 
Equity:
 
 
 
Common unitholders (72,738,251 and 60,644,232 units issued and outstanding at September 30, 2016 and December 31, 2015, respectively)
2,094,821

 
1,618,766

General partner (834,391 units issued and outstanding at September 30, 2016 and December 31, 2015)
(637,945
)
 
(348,841
)
Total Partners' Equity
1,456,876

 
1,269,925

Noncontrolling interests
$
33,748

 
$
445,077

Total Equity
$
1,490,624

 
$
1,715,002

Total Liabilities and Equity
$
3,010,288

 
$
2,562,074





TALLGRASS ENERGY PARTNERS, LP
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2016
 
2015
 
2016
 
2015
 
(in thousands, except per unit amounts)
Revenues:
 
 
 
 
 
 
 
Crude oil transportation services
$
91,387

 
$
81,928

 
$
279,281

 
$
206,331

Natural gas transportation services
31,444

 
29,431

 
89,406

 
90,620

Sales of natural gas, NGLs, and crude oil
20,758

 
20,252

 
51,514

 
62,132

Processing and other revenues
8,536

 
6,557

 
24,260

 
26,730

Total Revenues
152,125

 
138,168

 
444,461

 
385,813

Operating Costs and Expenses:
 
 
 
 
 
 
 
Cost of sales (exclusive of depreciation and amortization shown below)
18,590

 
18,186

 
48,116

 
54,959

Cost of transportation services (exclusive of depreciation and amortization shown below)
13,528

 
14,862

 
43,924

 
39,069

Operations and maintenance
14,714

 
14,071

 
41,055

 
36,054

Depreciation and amortization
20,831

 
20,802

 
64,099

 
61,762

General and administrative
13,147

 
11,807

 
40,072

 
37,947

Taxes, other than income taxes
6,717

 
5,521

 
19,862

 
16,547

Loss on disposal of assets
—

 
—

 
1,849

 
4,483

Total Operating Costs and Expenses
87,527

 
85,249

 
258,977

 
250,821

Operating Income
64,598

 
52,919

 
185,484

 
134,992

Other Income (Expense):
 
 
 
 
 
 
 
Interest expense, net
(10,907
)
 
(3,871
)
 
(27,639
)
 
(11,204
)
Unrealized (loss) gain on derivative instrument
(4,419
)
 
—

 
5,588

 
—

Equity in earnings of unconsolidated investment
12,066

 
—

 
35,387

 
—

Other income, net
480

 
502

 
1,267

 
1,983

Total Other (Expense) Income
(2,780
)
 
(3,369
)
 
14,603

 
(9,221
)
Net income
61,818

 
49,550

 
200,087

 
125,771

Net income attributable to noncontrolling interests
(1,084
)
 
(6,871
)
 
(3,235
)
 
(5,874
)
Net income attributable to partners
$
60,734

 
$
42,679

 
$
196,852

 
$
119,897

Allocation of income to the limited partners:
 
 
 
 
 
 
 
Net income attributable to partners
$
60,734

 
$
42,679

 
$
196,852

 
$
119,897

General partner interest in net income
(27,674
)
 
(12,146
)
 
(73,347
)
 
(30,614
)
Common and subordinated unitholders' interest in net income
33,060

 
30,533

 
123,505

 
89,283

Basic net income per common and subordinated unit
$
0.45

 
$
0.50

 
$
1.75

 
$
1.54

Diluted net income per common and subordinated unit
$
0.45

 
$
0.50

 
$
1.73

 
$
1.52

Basic average number of common and subordinated units outstanding
73,089

 
60,576

 
70,686

 
57,917

Diluted average number of common and subordinated units outstanding
74,063

 
61,536

 
71,590

 
58,884





TALLGRASS ENERGY PARTNERS, LP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 
Nine Months Ended September 30,
 
2016
 
2015
 
(in thousands)
Cash Flows from Operating Activities:
 
 
 
Net income
$
200,087

 
$
125,771

Adjustments to reconcile net income to net cash flows provided by operating activities:
 
 
 
Depreciation and amortization
68,693

 
64,624

Equity in earnings of unconsolidated investment
(35,387
)
 
—

Distributions from unconsolidated investment
35,387

 
—

Noncash compensation expense
4,270

 
3,988

Noncash change in fair value of derivative financial instruments
(5,391
)
 
(218
)
Loss on disposal of assets
1,849

 
4,483

Changes in components of working capital:
 
 
 
Accounts receivable and other
7,924

 
(11,538
)
Inventories
(867
)
 
(5,265
)
Accounts payable and accrued liabilities
4,827

 
6,786

Deferred revenue
25,303

 
13,995

Other operating, net
(779
)
 
(5,142
)
Net Cash Provided by Operating Activities
305,916

 
197,484

Cash Flows from Investing Activities:
 
 
 
Capital expenditures
(45,252
)
 
(65,146
)
Acquisition of unconsolidated affiliate
(436,022
)
 
—

Acquisition of Pony Express membership interest
(49,118
)
 
(700,000
)
Contributions to unconsolidated investment
(35,452
)
 
—

Distributions from unconsolidated investment in excess of cumulative earnings
16,073

 
—

Other investing, net
205

 
(4,625
)
Net Cash Used in Investing Activities
(549,566
)
 
(769,771
)
Cash Flows from Financing Activities:
 
 
 
Acquisition of Pony Express membership interest
(425,882
)
 
—

Proceeds from issuance of long-term debt
400,000

 
—

Proceeds from public offering, net of offering costs
290,474

 
551,243

Borrowings under revolving credit facility, net
252,000

 
137,000

Distributions to unitholders
(207,539
)
 
(113,260
)
Partial exercise of call option
(151,434
)
 
—

Proceeds from private placement, net of offering costs
90,009

 
—

Contributions from noncontrolling interests
8,700

 
19,303

Other financing, net
(13,872
)
 
(4,161
)
Net Cash Provided by Financing Activities
242,456

 
590,125

Net Change in Cash and Cash Equivalents
(1,194
)
 
17,838

Cash and Cash Equivalents, beginning of period
1,611

 
867

Cash and Cash Equivalents, end of period
$
417

 
$
18,705





Tallgrass Energy GP, LP Financial Statements
TALLGRASS ENERGY GP, LP
CONDENSED CONSOLIDATING BALANCE SHEETS 
(UNAUDITED)
 
September 30, 2016
 
December 31, 2015
 
TEP
 
Consolidating Adjustments (1)
 
TEGP
 
TEP
 
Consolidating Adjustments (1)
 
TEGP
 
(in thousands)
 
(in thousands)
ASSETS
 
 
 
 
 
 
 
 
 
 
 
Current Assets:
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
417

 
$
942

 
$
1,359

 
$
1,611

 
$
623

 
$
2,234

Accounts receivable, net
53,085

 
—

 
53,085

 
57,757

 
—

 
57,757

Gas imbalances
890

 
—

 
890

 
1,227

 
—

 
1,227

Inventories
13,375

 
—

 
13,375

 
13,793

 
—

 
13,793

Derivative asset at fair value
25,690

 
—

 
25,690

 
—

 
—

 
—

Prepayments and other current assets
3,838

 
—

 
3,838

 
2,835

 
—

 
2,835

Total Current Assets
97,295

 
942

 
98,237

 
77,223

 
623

 
77,846

Property, plant and equipment, net
2,003,532

 
—

 
2,003,532

 
2,025,018

 
—

 
2,025,018

Goodwill
343,288

 
—

 
343,288

 
343,288

 
—

 
343,288

Intangible asset, net
94,280

 
—

 
94,280

 
96,546

 
—

 
96,546

Unconsolidated investment
455,401

 
—

 
455,401

 
 
 
 
 
 
Deferred tax asset
—

 
439,638

 
439,638

 
—

 
452,430

 
452,430

Deferred financing costs, net
5,676

 
1,338

 
7,014

 
5,105

 
1,533

 
6,638

Deferred charges and other assets
10,816

 
—

 
10,816

 
14,894

 
—

 
14,894

Total Assets
$
3,010,288

 
$
441,918

 
$
3,452,206

 
$
2,562,074

 
$
454,586

 
$
3,016,660

LIABILITIES AND EQUITY
 
 
 
 
 
 
 
 
 
 
 
Current Liabilities:
 
 
 
 
 
 
 
 
 
 
 
Accounts payable
$
17,046

 
$
—

 
$
17,046

 
$
22,218

 
$
—

 
$
22,218

Accounts payable to related parties
6,207

 
(110
)
 
6,097

 
7,852

 
(97
)
 
7,755

Gas imbalances
1,117

 
—

 
1,117

 
1,605

 
—

 
1,605

Derivative liabilities at fair value
197

 
—

 
197

 
—

 
—

 
—

Accrued taxes
20,676

 
—

 
20,676

 
13,844

 
—

 
13,844

Accrued liabilities
10,214

 
59

 
10,273

 
10,019

 
187

 
10,206

Deferred revenue
52,138

 
—

 
52,138

 
26,511

 
—

 
26,511

Other current liabilities
6,725

 
—

 
6,725

 
6,880

 
—

 
6,880

Total Current Liabilities
114,320

 
(51
)
 
114,269

 
88,929

 
90

 
89,019

Long-term debt, net
1,398,003

 
148,000

 
1,546,003

 
753,000

 
148,000

 
901,000

Other long-term liabilities and deferred credits
7,341

 
—

 
7,341

 
5,143

 
—

 
5,143

Total Long-term Liabilities
1,405,344

 
148,000

 
1,553,344

 
758,143

 
148,000

 
906,143

Equity:
 
 
 
 
 
 
 
 
 
 
 
Total Partners' Equity
1,456,876

 
(1,288,818
)
 
168,058

 
1,269,925

 
(847,615
)
 
422,310

Noncontrolling interests
33,748

 
1,582,787

 
1,616,535

 
445,077

 
1,154,111

 
1,599,188

Total Equity
$
1,490,624

 
$
293,969

 
$
1,784,593

 
$
1,715,002

 
$
306,496

 
$
2,021,498

Total Liabilities and Equity
$
3,010,288

 
$
441,918

 
$
3,452,206

 
$
2,562,074

 
$
454,586

 
$
3,016,660

(1) 
Represents the aggregate consolidating adjustments necessary to produce consolidated financial statements for TEGP.




TALLGRASS ENERGY GP, LP
CONDENSED CONSOLIDATING STATEMENTS OF INCOME
(UNAUDITED)
 
Three Months Ended September 30, 2016
 
Three Months Ended September 30, 2015
 
TEP
 
Consolidating Adjustments (1)
 
TEGP
 
TEP
 
Consolidating Adjustments (1)
 
TEGP
 
(in thousands)
 
(in thousands)
Revenues:
 
 
 
 
 
 
 
 
 
 
 
Crude oil transportation services
$
91,387

 
$
—

 
$
91,387

 
$
81,928

 
$
—

 
$
81,928

Natural gas transportation services
31,444

 
—

 
31,444

 
29,431

 
—

 
29,431

Sales of natural gas, NGLs, and crude oil
20,758

 
—

 
20,758

 
20,252

 
—

 
20,252

Processing and other revenues
8,536

 
—

 
8,536

 
6,557

 
—

 
6,557

Total Revenues
152,125

 
—

 
152,125

 
138,168

 
—

 
138,168

Operating Costs and Expenses:
 
 
 
 
 
 
 
 
 
 
 
Cost of sales (exclusive of depreciation and amortization shown below)
18,590

 
—

 
18,590

 
18,186

 
—

 
18,186

Cost of transportation services (exclusive of depreciation and amortization shown below)
13,528

 
—

 
13,528

 
14,862

 
—

 
14,862

Operations and maintenance
14,714

 
—

 
14,714

 
14,071

 
—

 
14,071

Depreciation and amortization
20,831

 
—

 
20,831

 
20,802

 
—

 
20,802

General and administrative
13,147

 
568

 
13,715

 
11,807

 
514

 
12,321

Taxes, other than income taxes
6,717

 
—

 
6,717

 
5,521

 
—

 
5,521

Total Operating Costs and Expenses
87,527

 
568

 
88,095

 
85,249

 
514

 
85,763

Operating Income
64,598

 
(568
)
 
64,030

 
52,919

 
(514
)
 
52,405

Other Income (Expense):
 
 
 
 
 
 
 
 
 
 
 
Interest expense, net
(10,907
)
 
(1,250
)
 
(12,157
)
 
(3,871
)
 
(1,111
)
 
(4,982
)
Unrealized (loss) gain on derivative instrument
(4,419
)
 
—

 
(4,419
)
 
—

 
—

 
—

Equity in earnings of unconsolidated investment
12,066

 
—

 
12,066

 
—

 
—

 
—

Other income, net
480

 
—

 
480

 
502

 
—

 
502

Total Other (Expense) Income
(2,780
)
 
(1,250
)
 
(4,030
)
 
(3,369
)
 
(1,111
)
 
(4,480
)
Net income before tax
61,818

 
(1,818
)
 
60,000

 
49,550

 
(1,625
)
 
47,925

Current income tax expense
—

 
—

 
—

 
—

 
—

 
—

Deferred income tax expense
—

 
(3,209
)
 
(3,209
)
 
—

 
(1,828
)
 
(1,828
)
Net income
61,818

 
(5,027
)
 
56,791

 
49,550

 
(3,453
)
 
46,097

Net income attributable to noncontrolling interests
(1,084
)
 
(48,666
)
 
(49,750
)
 
(6,871
)
 
(34,803
)
 
(41,674
)
Net income attributable to TEGP
$
60,734

 
$
(53,693
)
 
$
7,041

 
$
42,679

 
$
(38,256
)
 
$
4,423

Basic net income per Class A share
 
 
 
 
$
0.15

 
 
 
 
 
$
0.09

Diluted net income per Class A share
 
 
 
 
$
0.15

 
 
 
 
 
$
0.09

Basic average number of Class A shares outstanding
 
 
 
 
47,725

 
 
 
 
 
47,725

Diluted average number of Class A shares outstanding
 
 
 
 
47,775

 
 
 
 
 
47,808

(1) 
Represents the aggregate consolidating adjustments necessary to produce consolidated financial statements for TEGP.




 
Nine Months Ended September 30, 2016
 
Nine Months Ended September 30, 2015
 
TEP
 
Consolidating Adjustments (1)
 
TEGP
 
TEP
 
Consolidating Adjustments (1)
 
TEGP
 
(in thousands)
 
(in thousands)
Revenues:
 
 
 
 
 
 
 
 
 
 
 
Crude oil transportation services
$
279,281

 
$
—

 
$
279,281

 
$
206,331

 
$
—

 
$
206,331

Natural gas transportation services
89,406

 
—

 
89,406

 
90,620

 
—

 
90,620

Sales of natural gas, NGLs, and crude oil
51,514

 
—

 
51,514

 
62,132

 
—

 
62,132

Processing and other revenues
24,260

 
—

 
24,260

 
26,730

 
—

 
26,730

Total Revenues
444,461

 
—

 
444,461

 
385,813

 
—

 
385,813

Operating Costs and Expenses:
 
 
 
 
 
 
 
 
 
 
 
Cost of sales (exclusive of depreciation and amortization shown below)
48,116

 
—

 
48,116

 
54,959

 
—

 
54,959

Cost of transportation services (exclusive of depreciation and amortization shown below)
43,924

 
—

 
43,924

 
39,069

 
—

 
39,069

Operations and maintenance
41,055

 
—

 
41,055

 
36,054

 
—

 
36,054

Depreciation and amortization
64,099

 
—

 
64,099

 
61,762

 
—

 
61,762

General and administrative
40,072

 
1,638

 
41,710

 
37,947

 
764

 
38,711

Taxes, other than income taxes
19,862

 
—

 
19,862

 
16,547

 
—

 
16,547

Loss on disposal of assets
1,849

 
—

 
1,849

 
4,483

 
—

 
4,483

Total Operating Costs and Expenses
258,977

 
1,638

 
260,615

 
250,821

 
764

 
251,585

Operating Income
185,484

 
(1,638
)
 
183,846

 
134,992

 
(764
)
 
134,228

Other Income (Expense):
 
 
 
 
 
 
 
 
 
 
 
Interest expense, net
(27,639
)
 
(3,636
)
 
(31,275
)
 
(11,204
)
 
(1,697
)
 
(12,901
)
Unrealized (loss) gain on derivative instrument
5,588

 
—

 
5,588

 
—

 
—

 
—

Equity in earnings of unconsolidated investment
35,387

 
—

 
35,387

 
—

 
—

 
—

Other income, net
1,267

 
—

 
1,267

 
1,983

 
—

 
1,983

Total Other (Expense) Income
14,603

 
(3,636
)
 
10,967

 
(9,221
)
 
(1,697
)
 
(10,918
)
Net income before tax
200,087

 
(5,274
)
 
194,813

 
125,771

 
(2,461
)
 
123,310

Deferred income tax expense
—

 
(12,792
)
 
(12,792
)
 
—

 
(3,600
)
 
(3,600
)
Net income
200,087

 
(18,066
)
 
182,021

 
125,771

 
(6,061
)
 
119,710

Net income attributable to noncontrolling interests
(3,235
)
 
(160,708
)
 
(163,943
)
 
(5,874
)
 
(99,557
)
 
(105,431
)
Net income attributable to TEGP
$
196,852

 
$
(178,774
)
 
$
18,078

 
$
119,897

 
$
(105,618
)
 
$
14,279





Allocation of income for the six months ended September 30, 2015:
 
 
 
 
 
 
 
 
 
 
 
Net income attributable to TEGP from the beginning of the period to May 11, 2015
 
 
 
 
 
 
 
 
 
 
$
7,393

Net income attributable to TEGP from May 12, 2015 to September 30, 2015
 
 
 
 
 
 
 
 
 
 
6,886

Basic net income per Class A share
 
 
 
 
$
0.38

 
 
 
 
 
$
0.14

Diluted net income per Class A share
 
 
 
 
$
0.38

 
 
 
 
 
$
0.14

Basic average number of Class A shares outstanding
 
 
 
 
47,725

 
 
 
 
 
47,725

Diluted average number of Class A shares outstanding
 
 
 
 
47,740

 
 
 
 
 
47,812

(1) 
Represents the aggregate consolidating adjustments necessary to produce consolidated financial statements for TEGP.




About Tallgrass Energy
Tallgrass Energy is a family of companies that includes publicly traded partnerships Tallgrass Energy Partners, LP (NYSE: TEP) and Tallgrass Energy GP, LP (NYSE: TEGP), and privately held Tallgrass Development, LP. Operating across 10 states, Tallgrass is a growth-oriented midstream energy operator with transportation, storage, terminal and processing assets that serve some of the nation’s most prolific crude oil and natural gas basins.
To learn more, please visit our website at www.tallgrassenergy.com.
CONTACT:
Investor and Financial Inquiries
Nate Lien
(913) 928-6012
investor.relations@tallgrassenergylp.com

Media and Trade Inquiries
Phyllis Hammond
(913) 928-6014
media.relations@tallgrassenergylp.com