0001633651-18-000071.txt : 20181031 0001633651-18-000071.hdr.sgml : 20181031 20181031064916 ACCESSION NUMBER: 0001633651-18-000071 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20181031 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Regulation FD Disclosure ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20181031 DATE AS OF CHANGE: 20181031 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Tallgrass Energy, LP CENTRAL INDEX KEY: 0001633651 STANDARD INDUSTRIAL CLASSIFICATION: NATURAL GAS TRANSMISSION [4922] IRS NUMBER: 000000000 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-37365 FILM NUMBER: 181148646 BUSINESS ADDRESS: STREET 1: 4200 W. 115TH STREET, SUITE 350 CITY: LEAWOOD STATE: KS ZIP: 66211 BUSINESS PHONE: 913-928-6060 MAIL ADDRESS: STREET 1: 4200 W. 115TH STREET, SUITE 350 CITY: LEAWOOD STATE: KS ZIP: 66211 FORMER COMPANY: FORMER CONFORMED NAME: Tallgrass Energy GP, LP DATE OF NAME CHANGE: 20150211 8-K 1 tge2018930earningsrelease8.htm 8-K Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

Date of Report (date of earliest event reported): October 31, 2018

Tallgrass Energy, LP
(Exact name of registrant as specified in its charter)
Delaware
 
001-37365
 
47-3159268
(State or Other Jurisdiction of
Incorporation or Organization)
 
(Commission File
Number)
 
(I.R.S. Employer Identification No.)

4200 W. 115th Street, Suite 350
Leawood, Kansas
 
66211
(Address of Principal Executive Offices)
 
(Zip Code)

Registrant's telephone number, including area code: (913) 928-6060

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[  ]   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 the 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))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR 230.405) or Rule 12b-2 of the Securities Act of 1934 (17 CFR 240.12b-2).
Emerging growth company     ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨




Item 2.02.
Results of Operations and Financial Condition.
On October 31, 2018, Tallgrass Energy, LP ("TGE") issued a press release announcing third quarter 2018 earnings. A copy of the press release is attached hereto, furnished as Exhibit 99.1, and incorporated in this report by reference.
Item 7.01.
Regulation FD Disclosure.
The following materials will be posted to the TGE investor relations page of the Tallgrass Energy website on October 31, 2018:
•
The financial statements of Rockies Express Pipeline LLC as of September 30, 2018 and December 31, 2017, and for the three and nine months ended September 30, 2018 and 2017, together with management's discussion and analysis of financial condition and results of operations for Rockies Express Pipeline LLC located under the "News & Market Information/Webcasts & Presentations" section; and
•
The financial statements of Tallgrass Energy Partners, LP ("TEP") as of September 30, 2018 and December 31, 2017, and for the three and nine months ended September 30, 2018 and 2017, together with management's discussion and analysis of financial condition and results of operations for TEP located under the "Other Information/Tallgrass Energy Partners Noteholders" section.
Shareholders of TGE, TEP senior noteholders and other interested parties are invited to view these materials at www.tallgrassenergy.com.
In accordance with General Instruction B.2 to Form 8-K, the information provided under Item 2.02 and Item 7.01 and the information attached to this Current Report on Form 8-K as Exhibit 99.1 shall be deemed to be "furnished" and shall not be deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act except as expressly set forth by specific reference in such filing.
Item 9.01.
Financial Statements and Exhibits.
As previously disclosed in our Current Report on Form 8-K filed on July 2, 2018, effective June 30, 2018, TEP completed its merger (the "Merger") with Razor Merger Sub, LLC, a Delaware limited liability company ("Merger Sub"), with TEP surviving the Merger as a wholly owned subsidiary of Tallgrass Equity, LLC, a Delaware limited liability company ("Tallgrass Equity") and its subsidiaries, pursuant to an Agreement and Plan of Merger, dated as of March 26, 2018, by and among TGE, Tallgrass Equity, TEP, Merger Sub, and Tallgrass MLP GP, LLC, a Delaware limited liability company. Tallgrass Equity is a subsidiary of TGE.
The following financial statements are being filed herewith in connection with the Merger:
(b)    Pro Forma Financial Information
Unaudited pro forma condensed consolidated financial statements of TGE as of and for the nine months ended September 30, 2018, and the notes related thereto, are filed with this Form 8-K as Exhibit 99.2 and incorporated into this Item 9.01(b) by reference.
(d)    Exhibits




SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
 
TALLGRASS ENERGY, LP
 
 
 
 
 
 
By:
Tallgrass Energy GP, LLC
 
 
 
its general partner
 
 
 
 
 
 
 
 
 
 
 
Date:
October 31, 2018
By:
/s/ David G. Dehaemers, Jr.
 
 
 
 
David G. Dehaemers, Jr.
 
 
 
President and Chief Executive Officer



 EX-99.1 2 exhibit9912018930.htm EXHIBIT 99.1 Exhibit


Exhibit 99.1
Tallgrass Energy Reports Strong Third Quarter 2018 Results
•
Net Income, Adjusted EBITDA and Cash Available for Dividends of $59.6 million, $220.4 million and $183.0 million respectively
•
Cash Available for Dividends of $0.6500 per share, Declared Dividend of $0.5100 per share, resulting in dividend coverage of 1.28x
•
Tallgrass (BBB-/stable; BB+/positive; Ba2/stable) financial leverage of approximately 3.6x; REX (BBB-/stable; BBB-/stable; Ba1/stable) financial leverage of approximately 2.9x and proportionally consolidated (REX) financial leverage results in approximately 4.8x at TGE as of Sept. 30, 2018
•
REX continues to experience high capacity utilization with average daily long-haul throughput volumes in excess of 4.1 Bcf/d for the third quarter of 2018 with peak throughput of approximately 4.9 Bcf/d during the quarter
•
Pony Express continues to experience high capacity utilization with average daily long-haul throughput volumes of approximately 340,000 bbls/d during the third quarter of 2018; September 2018 and October 2018 (estimated) average daily throughput prorated at approximately 358,000 and 364,000 bbls/d respectively and nominations for November 2018 were in excess of 420,000 bbls/d
LEAWOOD, Kan.--(BUSINESS WIRE)--Oct. 31, 2018--Tallgrass Energy, LP (NYSE: TGE) ("TGE") today reported financial and operating results for the third quarter of 2018.
"Again this quarter our teams demonstrated a continued commitment to operating our assets safely and efficiently, delivering outstanding operating and financial results," said President and CEO David Dehaemers Jr. "We remain focused on improving our cost of capital and delivering projects that serve our customers and grow our business. Our recent announcements on the Powder River Gateway, the Seahorse Pipeline and the Plaquemines Liquids Terminal are examples of projects that will continue to develop the country’s midstream infrastructure, and from which our customers and shareholders will benefit."
Third Quarter Dividend
As previously announced, the board of directors of TGE's general partner declared a quarterly cash dividend of $0.5100 per Class A share for the third quarter of 2018. This quarterly dividend represents $2.04 per Class A share on an annualized basis, a sequential increase of 2.5 percent from the second quarter 2018 dividend and an increase of 43.7 percent from the third quarter 2017 dividend. The quarterly dividend will be paid on Nov. 14, 2018, to Class A shareholders of record as of the close of business on Oct. 31, 2018.

1


Tallgrass Energy, LP Summary Financial Information
 
Three Months Ended September 30, 2018
 
Nine Months Ended September 30, 2018
(in thousands, except coverage and per unit data)
As Reported(1)
 
Pro Forma(2)
 
As Reported(1)
 
 
 
 
 
 
Net income
$
118,712

 
$
330,989

 
$
342,726

Net income attributable to noncontrolling interests
(59,162
)
 
(170,001
)
 
(265,378
)
Net income attributable to TGE
$
59,550

 
$
160,988

 
$
77,348

Add:
 
 
 
 
 
Interest expense, net
34,019

 
95,062

 
57,208

Depreciation and amortization expense(3)
27,356

 
80,504

 
45,794

Distributions from unconsolidated investments
100,720

 
282,803

 
198,019

Deficiency payments, net(3)
3,468

 
14,592

 
7,205

Non-cash compensation expense(4)
2,767

 
6,770

 
4,738

Loss on debt retirement
2,245

 
2,245

 
2,245

Deferred income tax expense
11,997

 
47,235

 
35,498

Net income attributable to Exchange Right Holders
57,780

 
165,590

 
145,169

Less:
 
 
 
 
 
Equity in earnings of unconsolidated investments
(76,268
)
 
(222,857
)
 
(153,235
)
Gain on disposal of assets(3)
(279
)
 
(9,417
)
 
(3,388
)
Non-cash gain related to derivative instruments(3)
(2,993
)
 
(4,218
)
 
(3,306
)
Adjusted EBITDA(5)
$
220,362

 
$
619,297

 
$
413,295

Less:
 
 
 
 
 
Cash interest cost
(32,728
)
 
(91,292
)
 
(54,909
)
Maintenance capital expenditures, net(3)
(4,638
)
 
(15,189
)
 
(8,409
)
Cash Available for Dividends(5)
$
182,996

 
$
512,816

 
$
349,977

Less:
 
 
 
 
 
Dividends to Class A (TGE)
(79,717
)
 
(185,085
)
 
 
Dividends to Class B (Exchange Right Holders)
(63,183
)
 
(187,293
)
 
 
Distribution to TEP public unitholders
—

 
(46,391
)
 
 
Amounts in excess of dividends
$
40,096

 
$
94,047

 
 
Dividend coverage
1.28
x
 
1.22
x
 
 
 
 
 
 
 
 
Class A shares outstanding(6)
156,309

 
156,309

 
 
Class B shares outstanding(6)
123,888

 
123,888

 
 
Total Shares outstanding
280,197

 
280,197

 
 
 
 
 
 
 
 
Cash Available for Dividend per share
$
0.6500

 
$
1.8300

 
 
Dividend per share
$
0.5100

 
$
1.4950

 
 
(1) 
As reported amounts presented are based on actual Tallgrass Equity, LLC ("Tallgrass Equity") ownership in Tallgrass Energy Partners, LP ("TEP") net of noncontrolling interests associated with the TEP common units held by the public prior to the closing of the TEP Merger Transaction, which was effective June 30, 2018.
(2) Indicated amounts presented for the nine months ended Sept. 30, 2018, are on a pro forma basis (excluding dividend/distribution figures, dividend coverage figures and Class A and Class B shares outstanding) assuming that our combination transaction with TEP (the "TEP Merger Transaction") had closed on Jan. 1, 2018.
(3)  
Net of noncontrolling interest in operating assets.

2


(4)  
Represents TGE's portion of non-cash compensation expense related to Equity Participation Shares and TEP Equity Participation Units, excluding amounts allocated to Tallgrass Development, LP ("TD") prior to the merger of TD into Tallgrass Development Holdings, LLC, a wholly-owned subsidiary of Tallgrass Equity, on Feb. 7, 2018.
(5)  
Adjusted EBITDA and Cash Available for Dividends are non-GAAP measures. For additional detail see "Non-GAAP Measures" below.
(6) 
Class A and B shares represent the actual number of shares as of the dividend record date for the third quarter 2018.
Conference Call
Please join Tallgrass Energy for a conference call and webcast to discuss third quarter 2018 results at 3:30 p.m. Central Time on Wednesday, Oct. 31, 2018. 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.
Tallgrass Energy, LP Merger Adjusted Segment Overview(1) 
The following summary provides a reconciliation of the operating income and Segment Adjusted EBITDA for each of our reporting segments with the amounts adjusted for the impact of the TEP Merger Transaction, assuming it had closed on the first day of the period presented. Merger Adjusted Segment Adjusted EBITDA is a Non-GAAP Measure. For additional detail see "Non-GAAP Measures" below.
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
 
(in thousands)
Natural Gas Transportation
 
 
 
 
 
 
 
Operating income
$
17,372

 
$
17,016

 
$
53,638

 
$
49,910

Add:
 
 
 
 
 
 
 
Depreciation and amortization expense
4,861

 
4,794

 
14,539

 
14,369

Distributions from unconsolidated investment
98,503

 
138,132

 
278,142

 
227,547

Other income, net
697

 
455

 
2,251

 
807

Less:
 
 
 
 
 
 
 
Non-cash gain related to derivative instruments
—

 
—

 
—

 
(116
)
Merger Adjusted Segment Adjusted EBITDA(3)
$
121,433

 
$
160,397

 
$
348,570

 
$
292,517

 
 
 
 
 
 
 
 
Less:
 
 
 
 
 
 
 
Merger Adjustments
—

 
(91,732
)
 
(95,401
)
 
(158,981
)
Segment Adjusted EBITDA as Reported in 9/30/18 10Q
$
121,433

 
$
68,665

 
$
253,169

 
$
133,536

 
 
 
 
 
 
 
 

3


 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
 
(in thousands)
Crude Oil Transportation
 
 
 
 
 
 
 
Operating income
$
69,295

 
$
51,478

 
$
181,536

 
$
145,462

Add:
 
 
 
 
 
 
 
Depreciation and amortization expense(2)
13,627

 
13,027

 
40,499

 
39,673

Non-cash loss (gain) related to derivative instruments(2)
—

 
202

 
—

 
(432
)
Deficiency payments, net (2)
4,645

 
5,016

 
11,619

 
25,719

Less:
 
 
 
 
 
 
 
Adjusted EBITDA attributable to noncontrolling interests
—

 
(1,024
)
 
(350
)
 
(2,895
)
Merger Adjusted Segment Adjusted EBITDA(3)
$
87,567

 
$
68,699

 
$
233,304

 
$
207,527

 
 
 
 
 
 
 
 
Less:
 
 
 
 
 
 
 
Merger Adjustments
—

 
(31,274
)
 
(82,361
)
 
(101,743
)
Segment Adjusted EBITDA as Reported in 9/30/18 10Q
$
87,567

 
$
37,425

 
$
150,943

 
$
105,784

 
 
 
 
 
 
 
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
 
(in thousands)
Gathering, Processing & Terminalling
 
 
 
 
 
 
 
Operating income
$
9,680

 
$
9,045

 
$
38,707

 
$
20,928

Add:
 
 
 
 
 
 
 
Depreciation and amortization expense(2)
7,688

 
5,651

 
22,474

 
13,852

Non-cash (gain) loss related to derivative instruments
(2,993
)
 
486

 
(4,218
)
 
764

Gain on disposal of assets(2)
(279
)
 
—

 
(9,417
)
 
(1,319
)
Distributions from unconsolidated investments
2,217

 
696

 
4,661

 
1,963

Deficiency payments, net
(1,566
)
 
(2,728
)
 
1,811

 
920

Other income (expense), net
314

 
(1
)
 
314

 
142

Less:
 
 
 
 
 
 
 
Adjusted EBITDA attributable to noncontrolling interests
(1,382
)
 
(389
)
 
(4,061
)
 
(346
)
Merger Adjusted Segment Adjusted EBITDA(3)
$
13,679

 
$
12,760

 
$
50,271

 
$
36,904

 
 
 
 
 
 
 
 
Less:
 
 
 
 
 
 
 
Merger Adjustments
—

 
(14,147
)
 
(20,269
)
 
(26,457
)
Segment Adjusted EBITDA as Reported in 9/30/18 10Q
$
13,679

 
$
(1,387
)
 
$
30,002

 
$
10,447

(1)
Segment reporting does not include corporate general and administrative costs or intersegment eliminations.
(2)
Net of noncontrolling interest in operating assets.
(3)  
Represents Adjusted EBITDA which is a non-GAAP measure. For additional detail see "Non-GAAP Measures" below.


4


Rockies Express Pipeline LLC Summary Financial Information
TEP acquired a 25 percent interest in Rockies Express Pipeline LLC ("REX") effective May 6, 2016, and an additional 24.99 percent interest in REX effective March 31, 2017. Tallgrass Equity acquired a 25.01 percent interest in REX effective Feb. 7, 2018. The financial results of TGE subsequent to Feb. 7, 2018, include its aggregate 75 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 Sept. 30, 2018 and 2017, presented to provide additional information on REX's financial results. REX's Adjusted EBITDA and Distributable Cash Flow are non-GAAP measures. For additional detail see "Non-GAAP Measures" below.
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
 
(in thousands)
Rockies Express Pipeline LLC
 
 
 
 
 
 
 
Net income
$
90,709

 
$
233,990

 
$
270,339

 
$
371,185

Add:
 
 
 
 
 
 
 
Interest expense, net
34,079

 
42,102

 
117,532

 
125,979

Depreciation and amortization expense
54,832

 
54,761

 
164,656

 
163,560

Other non-cash loss
2,769

 
—

 
2,769

 
—

Less:
 
 
 
 
 
 
 
Change in contract asset
(15,575
)
 
—

 
(46,725
)
 
—

Adjusted EBITDA
166,814

 
330,853

 
508,571

 
660,724

Less:
 
 
 
 
 
 
 
Cash interest cost
(33,345
)
 
(41,267
)
 
(115,130
)
 
(123,476
)
Maintenance capital expenditures
(2,948
)
 
(2,386
)
 
(13,970
)
 
(9,326
)
Distributable Cash Flow
$
130,521

 
$
287,200

 
$
379,471

 
$
527,922

 
 
 
 
 
 
 
 
Distributions to Members
$
(131,358
)
 
$
(276,508
)
 
$
(385,906
)
 
$
(515,613
)
Contributions from Members
$
554,454

 
$
23,334

 
$
560,873

 
$
72,394

Financial Leverage(1)
2.94x

 
3.03x

 
2.94x

 
3.03x

(1) Calculated in accordance with the definitions in REX's revolving credit facility.

Tallgrass Energy, LP Financial Statements
TGE's financial statements for the quarter ended Sept. 30, 2018 will be available in TGE's quarterly report on Form 10-Q that is expected to be filed with the Securities and Exchange Commission on Wednesday, Oct. 31, 2018.
Non-GAAP Measures
Adjusted EBITDA, Cash Available for Dividends, and Distributable Cash Flow are non-GAAP supplemental financial measures that TGE 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 midstream infrastructure companies, 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 dividends to our shareholders;
•
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.

5


We believe that the presentation of Adjusted EBITDA, Cash Available for Dividends, and Distributable Cash Flow provides useful information to investors in assessing our financial condition and results of operations. Adjusted EBITDA, Cash Available for Dividends, 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, Cash Available for Dividends, and Distributable Cash Flow be considered alternatives to available cash or other definitions in our partnership agreement. Adjusted EBITDA, Cash Available for Dividends, 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, Cash Available for Dividends, and Distributable Cash Flow may be defined differently by other companies in our industry, our definition of Adjusted EBITDA, Cash Available for Dividends, 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 and deficiency payments received from or utilized by our customers. In addition, Adjusted EBITDA at Rockies Express excludes the impact of other non-cash gains or losses and includes the impact of the change in contract asset, which represents the cumulative amount by which the revenue recognized exceeds the actual cash collected from the customer. We also use Cash Available for Dividends and Distributable Cash Flow, which we generally define as Adjusted EBITDA, less cash interest costs, maintenance capital expenditures, distributions to noncontrolling interests in excess of earnings allocated to noncontrolling interests, and certain cash reserves permitted by our governing documents. Adjusted EBITDA and Cash Available for Dividends are both calculated and presented at the Tallgrass Equity level, before consideration of noncontrolling interest associated with the Exchange Right Holders or calculating distributions from Tallgrass Equity to us, on one hand, and to the Exchange Right Holders, on the other. We believe calculating these measures at Tallgrass Equity provides investors the most complete picture of our overall financial and operational results and provides a consistent metric for period over period comparisons that is not impacted by any future exercises by the Exchange Right Holders of the right to exchange TGE Class B Shares and Tallgrass Equity Units for an equal number of TGE Class A Shares (the "Exchange Right"), which does not have a dilutive effect on TGE's net income per share. For a reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measures, please see "Summary Financial Information" above.
In this press release we have also presented Merger Adjusted Segment Adjusted EBITDA for each of our reporting segments. We define Merger Adjusted Segment Adjusted EBITDA as Adjusted EBITDA for such segment as adjusted for the impact of the TEP Merger Transaction, assuming it had closed on the first day of the period presented. We believe that the presentation of this measure on a merger adjusted basis provides useful information to investors in assessing our financial condition and results of operations for each of our reporting segments because the accounting treatment of our ownership interests in TEP prior to the TEP Merger Transaction and the impact of non-controlling interests for the period was significantly impacted by the TEP Merger Transaction during the period but is not representative of the comparable measures during our historical periods. For a reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measures, please see "Tallgrass Energy, LP Merger Adjusted Segment Overview" above.

6


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 estimated average daily throughput on Pony Express for October 2018 and the feasibility, cost, execution, in-service timing, capabilities, and expected benefits of the Powder River Gateway, the Seahorse Pipeline and the Plaquemines Liquids Terminal projects. Forward-looking statements may also include the expectations of plans, strategies, objectives and growth and anticipated financial and operational performance of TGE and its subsidiaries, including: the ability to pursue expansions and other opportunities for incremental volumes; natural gas and crude oil production growth in TGE'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 TGE 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 TGE, which may cause actual results to differ materially from those implied or expressed by the forward-looking statements. These include risks relating to TGE's financial performance and results, availability of sufficient cash flow to pay dividends and execute its business plan, 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 TGE with the Securities and Exchange Commission. Any forward-looking statement applies only as of the date on which such statement is made and TGE does 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.
About Tallgrass Energy
Tallgrass Energy, LP (NYSE: TGE) is a growth-oriented midstream energy infrastructure company operating across 11 states with transportation, storage, terminal, water, gathering 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.


7


CONTACT:
Investor and Financial Inquiries
Nate Lien
(913) 928-6012
investor.relations@tallgrassenergylp.com

Media and Trade Inquiries
Phyllis Hammond
(303) 763-3568
phyllis.hammond@tallgrassenergylp.com



8
 EX-99.2 3 exhibit992tgeproforma20189.htm EXHIBIT 99.2 Exhibit


Exhibit 99.2

UNAUDITED TALLGRASS ENERGY, LP
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
References to "we", "us" or "our," and "TGE" refer to Tallgrass Energy, LP and its consolidated subsidiaries. TGE previously entered into a definitive Agreement and Plan of Merger, dated as of March 26, 2018 (the "Merger Agreement"), with Tallgrass Equity, Tallgrass Energy Partners, LP, a Delaware limited partnership ("TEP"), Tallgrass MLP GP, LLC, a Delaware limited liability company and the general partner of TEP ("TEP GP"), and Razor Merger Sub, LLC, a Delaware limited liability company. The merger transaction contemplated by the Merger Agreement (the "TEP Merger") was completed effective June 30, 2018, and as a result, 47,693,097 TEP common units held by the public were converted into the right to receive Class A shares of TGE at an exchange ratio of 2.0 Class A shares for each outstanding TEP common unit, TEP's incentive distribution rights were cancelled, TEP's common units are no longer publicly traded, and 100% of TEP's equity interests are now owned by Tallgrass Equity and its subsidiaries. The TEP Merger was accounted for as an acquisition of noncontrolling interest. Following consummation of the TEP Merger, TGE changed its name from "Tallgrass Energy GP, LP" to "Tallgrass Energy, LP" and began trading on the New York Stock Exchange under the ticker symbol "TGE" on July 2, 2018.
Because TGE controls TEP both before and after the TEP Merger, the changes in TGE's ownership interest in TEP will be accounted for as an equity transaction and no gain or loss will be recognized in TGE's consolidated statements of operations resulting from the TEP Merger. Since the TGE historical financial information includes the accounts of TEP, the historical financial information of TEP has not been shown separately.
The unaudited pro forma condensed consolidated financial statements present the impact of the TEP Merger on our results of operations. Because the TEP Merger was effective June 30, 2018, the unaudited condensed consolidated balance sheet as of September 30, 2018 as reported reflects the impact of the transaction. The unaudited pro forma condensed consolidated statement of operations for the nine months ended September 30, 2018 has been prepared based on certain pro forma adjustments to our condensed consolidated financial statements set forth in TGE’s Quarterly Report on Form 10-Q for the three months ended September 30, 2018 filed on October 31, 2018 with the Securities and Exchange Commission. The unaudited pro forma condensed consolidated financial statements are qualified in their entirety by reference to such historical consolidated financial statements and related notes contained therein. The unaudited pro forma condensed consolidated financial statements should be read in conjunction with the accompanying notes and with the historical consolidated financial statements and related notes thereto.
The unaudited pro forma condensed consolidated statement of operations for the nine months ended September 30, 2018 has been prepared as if the transaction occurred on January 1, 2018. The pro forma adjustments are based upon currently available information and certain estimates and assumptions; therefore, actual results may differ from the pro forma adjustments. Management believes, however, that the assumptions provide a reasonable basis for presenting the significant effects of the transaction and that the pro forma adjustments give appropriate effect to those assumptions and are properly applied in the unaudited pro forma condensed consolidated financial statements.
The unaudited pro forma condensed consolidated financial statements may not be indicative of the results that would have actually occurred if the transaction had taken place on January 1, 2018.





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TALLGRASS ENERGY, LP
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 2018
 
TGE Historical
 
Pro Forma Adjustments - TEP Merger
 
TGE Pro Forma
 
(in thousands)
ASSETS
 
Current assets
$
290,251

 
$
—

 
$
290,251

Property, plant and equipment, net
2,662,055

 
—

 
2,662,055

Unconsolidated investments
1,872,879

 
—

 
1,872,879

Deferred tax asset
291,886

 
—

 
291,886

Deferred charges and other assets
552,969

 
—

 
552,969

Total Assets
$
5,670,040

 
$
—

 
$
5,670,040

LIABILITIES AND PARTNERS’ EQUITY
 
 
 
 
 
Current liabilities
$
397,201

 
$
—

 
$
397,201

Long-term debt, net
3,033,674

 
—

 
3,033,674

Other long-term liabilities and deferred credits
20,117

 
—

 
20,117

Total Liabilities
3,450,992

 
—

 
3,450,992

 
 
 
 
 
 
Commitments and Contingencies
 
 
 
 
 
 
 
 
 
 
 
Equity:
 
 
 
 
 
Class A Shareholders
1,738,245

 
—

 
1,738,245

Class B Shareholders
—

 
—

 
—

Total Partners’ Equity
1,738,245

 
—

 
1,738,245

Noncontrolling interests
480,803

 
—

 
480,803

Total Equity
2,219,048

 
—

 
2,219,048

Total Liabilities and Equity
$
5,670,040

 
$
—

 
$
5,670,040



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TALLGRASS ENERGY, LP
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018
 
TGE Historical
 
Pro Forma Adjustments - TEP Merger
 
TGE Pro Forma
 
(in thousands, except per share amounts)
Revenues:
 
 
 
 
 
Crude oil transportation services
$
286,130

 
$
—

 
$
286,130

Natural gas transportation services
94,623

 
—

 
94,623

Sales of natural gas, NGLs, and crude oil
119,467

 
—

 
119,467

Processing and other revenues
72,783

 
—

 
72,783

Total Revenues
573,003

 
—

 
573,003

Operating Costs and Expenses:
 
 
 
 
 
Cost of sales
82,601

 
—

 
82,601

Cost of transportation services
35,672

 
—

 
35,672

Operations and maintenance
52,850

 
—

 
52,850

Depreciation and amortization
81,408

 
—

 
81,408

General and administrative
53,526

 
—

 
53,526

Taxes, other than income taxes
25,091

 
—

 
25,091

Gain on disposal of assets
(9,417
)
 
—

 
(9,417
)
Total Operating Costs and Expenses
321,731

 
—

 
321,731

Operating Income
251,272

 
—

 
251,272

Other Income (Expense):
 
 
 
 
 
Equity in earnings of unconsolidated investment
222,857

 
—

 
222,857

Interest expense, net
(95,062
)
 
—

 
(95,062
)
Other income, net
(843
)
 
—

 
(843
)
Total Other Income
126,952

 
—

 
126,952

Net income before tax
378,224

 
—

 
378,224

Deferred income tax expense
(35,498
)
 
(11,737
)
(a)
(47,235
)
Net income
342,726

 
(11,737
)
 
330,989

Net income attributable to noncontrolling interests
(265,378
)
 
95,377

(b)
(170,001
)
Net income attributable to TGE
$
77,348

 
$
83,640

 
$
160,988

Basic net income per TGE Class A share
$
0.85

 
 
 
$
1.05

Diluted net income per TGE Class A share
$
0.85

 
 
 
$
1.04

Basic average number of TGE Class A shares outstanding
91,183

 
62,769

(b)
153,952

Diluted average number of TGE Class A shares outstanding
92,661

 
62,250

(b)
154,911



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TALLGRASS ENERGY, LP
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Basis of Presentation
The unaudited pro forma condensed consolidated financial statements present the impact of the TEP Merger on our results of operations. Because the TEP Merger was effective June 30, 2018, the September 30, 2018 statement of financial position as reported reflects the impact of the transaction. The unaudited pro forma condensed consolidated statement of operations for the nine months ended September 30, 2018 has been prepared based on certain pro forma adjustments to our condensed consolidated financial statements set forth in TGE’s Quarterly Report on Form 10-Q for the three months ended September 30, 2018 expected to be filed on October 31, 2018 with the Securities and Exchange Commission.
The unaudited pro forma condensed consolidated financial statements are qualified in their entirety by reference to such historical consolidated financial statements and related notes contained therein. The unaudited pro forma condensed consolidated financial statements should be read in conjunction with the accompanying notes and with the historical consolidated financial statements and related notes thereto.
The pro forma adjustments are based upon currently available information and certain estimates and assumptions; therefore, actual results may differ from the pro forma adjustments. Management believes, however, that the assumptions provide a reasonable basis for presenting the significant effects of the acquisition and that the pro forma adjustments give appropriate effect to those assumptions and are properly applied in the unaudited pro forma condensed consolidated financial statements.
The unaudited pro forma condensed consolidated financial statements may not be indicative of the results that would have actually occurred if the transaction had taken place on January 1, 2018.
Note 2. Pro Forma Adjustments and Assumptions
(a)
Reflects the estimated impact of the pro forma adjustments on deferred tax expense based on our statutory income tax rate of 24.67% for the nine months ended September 30, 2018.
(b)
Reflects the acquisition and conversion of the 47,580,535 TEP common units to 2.0 TGE Class A shares per TEP Public Unit, or 95,161,070 TGE Class A shares, and related reallocation of net income attributable to TGE.
Note 3. Pro Forma Net Income Per TGE Class A Share
Basic net income per TGE Class A share is determined by dividing net income attributable to TGE by the weighted average number of outstanding TGE Class A shares during the period. TGE Class B shares do not share in the earnings of TGE. Accordingly, basic and diluted net income per TGE Class B share has not been presented.
Diluted net income per TGE Class A share is determined by dividing net income attributable to TGE by the weighted average number of outstanding diluted Class A shares during the period. For purposes of calculating diluted net income per TGE Class A share, we considered the impact of possible future exercises of the Exchange Right by the Exchange Right Holders on both net income attributable to TGE and the diluted weighted average number of TGE Class A shares outstanding. Pursuant to the TGE partnership agreement and the Tallgrass Equity limited liability company agreement, our capital structure and the capital structure of Tallgrass Equity will generally replicate one another in order to maintain the one-for-one exchange ratio between the Tallgrass Equity units and TGE Class B shares, on the one hand, and TGE Class A shares, on the other hand. As a result, the potential exchange of any TGE Class B shares does not have a dilutive effect on basic net income per TGE Class A share. The potential issuance of TGE Equity Participation Shares would have had a dilutive effect on the basic net income per TGE Class A share for the nine months ended September 30, 2018.

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