Copano Energy Reports Third Quarter 2012 Results

Nov 07, 2012, 16:10 ET from Copano Energy, L.L.C.

HOUSTON, Nov. 7, 2012 /PRNewswire/ -- Copano Energy, L.L.C. (NASDAQ: CPNO) today announced its financial results for the three months ended September 30, 2012.

Third Quarter 2012 Highlights:

  • Fee-based Texas segment rich natural gas volumes drive third quarter performance
  • Total distributable cash flow of $57.1 million, a 55% increase from third quarter 2011
  • Total segment gross margin of $75.1 million, a 16% increase from the prior year period
  • Adjusted EBITDA of $73.0 million, a 41% increase from the prior year period
  • Volumes gathered from the Eagle Ford Shale play averaged 567,000 MMBtu/d, a 248% increase from the prior year period
  • Texas segment NGL production of over 54,000 Bbls/d, a 75% increase from third quarter 2011

"Our third quarter results highlight our strengthening operational performance and continued progress in executing on our Eagle Ford strategy," said R. Bruce Northcutt, Copano's President and Chief Executive Officer. "Despite lower NGL prices compared to the second quarter of this year, fee-based volumes from the Eagle Ford have continued to grow, delivering strong gross margins for our Texas business segment.

"Our organic growth projects in the play remain on track and we look forward to the positive impact they will have on total distributable cash flow as our Eagle Ford strategy continues to develop," Northcutt added.

Third Quarter Financial Results

Total distributable cash flow was $57.1 million, a 55% increase from the third quarter of 2011, and a 45% increase from the second quarter of 2012.  The increase from the prior-year period was primarily due to:

  • increased throughput from the Eagle Ford Shale, north Barnett Shale Combo and Woodford Shale plays, and
  • a $9.7 million gain related to the sale of the Lake Charles plant in Louisiana.

These benefits were partially offset by lower natural gas liquids (NGL) prices and higher interest and operating expenses.

Third-quarter 2012 total distributable cash flow represents 124% coverage of the third-quarter distribution of $0.575 per unit, based on common units outstanding on the distribution record date, which included an additional 6,526,078 common units issued in our equity offering that closed in late October 2012.  Excluding the gain on the sale of the Lake Charles plant, third-quarter 2012 total distributable cash flow coverage was approximately 103%.  Excluding the newly issued units and the gain on sale of the Lake Charles plant, third-quarter 2012 total distributable cash flow coverage was approximately 112%.

Revenue for the third quarter of 2012 increased 4% from the third quarter of 2011 to $366.4 million, and 15% from the second quarter of 2012.  Total segment gross margin increased 16% from the third quarter of 2011 to $75.1 million, and 3% from the second quarter of 2012.  Adjusted EBITDA increased 41% from the third quarter of 2011 to $73.0 million, and 25% from the second quarter of 2012.  Net income to common units was $19.8 million for the third quarter of 2012 compared to net loss of $166.0 million for the third quarter of 2011.

Corporate and other activities, which include Copano's commodity risk management efforts, resulted in a loss of $3.7 million for the third quarter of 2012, consisting of $5.9 million in non-cash amortization expense and $2.6 million of unrealized losses on commodity derivative instruments, offset by $4.8 million of net cash settlements received.  Corporate and other activities resulted in a $8.0 million loss for the third quarter of 2011 consisting of $7.4 million of non-cash amortization expense and $2.9 million of net cash settlements paid, offset by $2.3 million of unrealized gain on commodity derivative instruments.  Corporate and other activities resulted in a $3.4 million gain for the second quarter of 2012 consisting of $3.4 million of net cash settlements received and $5.0 million of unrealized gains on commodity derivative instruments, offset by $5.0 million of non-cash amortization expense.

Total distributable cash flow, total segment gross margin, adjusted EBITDA and segment gross margin are non-GAAP financial measures, which are reconciled to their most directly comparable GAAP measures at the end of this news release.  Please read "Use of Non-GAAP Financial Measures" beginning on page 5 of this news release.

Third Quarter Operating Results by Segment

Texas

Segment gross margin for Texas increased 24% from the third quarter of 2011 to $55.2 million, and increased 12% from the second quarter of 2012.  The increase from the prior year was primarily a result of volume growth from the Eagle Ford Shale and north Barnett Shale Combo plays, partially offset by a decline in leaner gas volumes at the Houston Central complex, which were displaced to accommodate richer Eagle Ford Gathering fee-based gas volumes.

During the third quarter of 2012, Texas segment service throughput volumes averaged 897,601 MMBtu/d of natural gas, an increase of 17% from the third quarter of 2011.  The Texas segment gathered an average of 557,457 MMBtu/d of natural gas, an increase of 20% over the third quarter of 2011, primarily due to increased volumes from the Eagle Ford Shale and north Barnett Shale Combo plays.  Volumes processed at Copano's plants and third-party plants in Texas averaged 824,196 MMBtu/d during the third quarter of 2012, an increase of 20% over the third quarter of 2011 primarily due to increased volumes from the north Barnett Shale Combo play and at the Lake Charles plant.  Third-quarter NGL production averaged 54,142 Bbls/d at Copano-owned plants and third-party plants, an increase of 75% from the third quarter of 2011, reflecting a substantial increase in the NGL content of volumes at the Houston Central complex, and increased volumes at the Saint Jo plant in the north Barnett Shale Combo play.

Eagle Ford Gathering, Copano's unconsolidated joint venture with Kinder Morgan, has been in full service since December 2011 and provided gathering services for an average of 319,919 MMBtu/d during the third quarter of 2012.  Texas segment gross margin results do not include the financial results and volumes associated with Copano's interest in Eagle Ford Gathering, which is accounted for under the equity method of accounting and shown in Copano's financial statements under "Equity in (earnings) loss from unconsolidated affiliates." For the third quarter of 2012, equity earnings and distributions from Eagle Ford Gathering totaled $9.2 million and $6.3 million, respectively.

Oklahoma

Segment gross margin for Oklahoma was $22.9 million for the third quarter of 2012, a decrease of 18% compared to the third quarter of last year and an increase of 14% from the second quarter of 2012.  The year-over-year decrease was due primarily to lower NGL and natural gas prices, which resulted in a 24% decrease in realized margins on service throughput compared to the third quarter of 2011 ($0.80 per MMBtu in 2012 compared to $1.05 per MMBtu in 2011).  This decrease was partially offset by an increase in service throughput attributable to lean gas volume growth from the Woodford Shale play.

The Oklahoma segment gathered an average of 313,414 MMBtu/d of natural gas, an increase of 9% compared to the third quarter of 2011, due primarily to lean gas from the Woodford Shale area, which increased 20% compared to the third quarter of 2011.  Volumes processed at wholly owned and third-party plants in Oklahoma were flat compared to the third quarter of 2011, averaging 157,775 MMBtu/d.  Third-quarter NGL production at Copano-owned plants and third-party plants averaged 16,207 Bbls/d, a decrease of 7% from the third quarter of 2011.

Rocky Mountains

Segment gross margin for the Rocky Mountains segment totaled $0.6 million in the third quarter of 2012 compared to $0.4 million for the third quarter of 2011 and $0.2 million for the second quarter of 2012.  Rocky Mountains segment gross margin results do not include the financial results and volumes associated with Copano's interest in Bighorn Gas Gathering and Fort Union Gas Gathering, which are accounted for under the equity method of accounting and shown in Copano's financial statements under "Equity in (earnings) loss from unconsolidated affiliates."

Average pipeline throughput for Bighorn and Fort Union on a combined basis increased 4% to 694,961 MMBtu/d in the third quarter of 2012 as compared to 670,543 MMBtu/d in the third quarter of 2011.  The volume increase is due primarily to producers increasing volumes on Fort Union to access downstream markets; however, because Fort Union has firm volume commitments from these producers, the increase did not have a material impact on Copano's equity earnings or distributions.  For the third quarter of 2012, combined equity earnings for Bighorn and Fort Union totaled $3.0 million compared to equity losses of $164.1 million for the same period in 2011, which included a $165.0 million impairment in 2011. Combined distributions from Bighorn and Fort Union totaled $5.1 million in the third quarter of 2012 compared to $5.0 million in the third quarter of last year.

Cash Distributions

On October 10, 2012, Copano announced its third quarter 2012 cash distribution of $0.575 per unit, or $2.30 per unit on an annualized basis, which will be paid on November 8, 2012 to common unitholders of record at the close of business on October 31, 2012.  This distribution is unchanged from the second quarter of 2012.

Conference Call Information

Copano will hold a conference call on November 8, 2012 at 10:00 a.m. Eastern Time (9:00 a.m. Central Time) to discuss its third quarter 2012 financial results.  To participate in the call, dial (480) 629-9643 and ask for the Copano call at least 10 minutes prior to the start time, or access it live over the internet at http://www.copano.com on the "Investor Overview" page of the "Investor Relations" section of Copano's website.

A replay of the audio webcast will be available shortly after the call on Copano's website.  A telephonic replay will be available through November 15, 2012 by calling (303) 590-3030 and using the pass code 4570334#.

Use of Non-GAAP Financial Measures

This news release and the accompanying schedules include non-generally accepted accounting principles, or non-GAAP, financial measures of total distributable cash flow, total segment gross margin, adjusted EBITDA and segment gross margin.  The accompanying schedules provide reconciliations of these non-GAAP financial measures to their most directly comparable financial measures calculated and presented in accordance with accounting principles generally accepted in the United States, or GAAP. Non-GAAP financial measures should not be considered as alternatives to GAAP measures such as net income (loss), operating income (loss), cash flows from operating activities or any other GAAP measure of liquidity or financial performance.  Copano's non-GAAP financial measures may not be comparable to similarly titled measures of other companies, who may not calculate their measures in the same manner.

Copano's management team uses non-GAAP financial measures to evaluate its core profitability and to assess the financial performance of its assets.  Subject to the limitations expressed above, Copano believes that investors and other market participants benefit from access to the various financial measures that its management uses in evaluating its performance because it allows them to independently evaluate Copano's performance with the same information used by management.

Copano Energy, L.L.C. is a midstream natural gas company with operations in Texas, Oklahoma and Wyoming.  For more information, please visit http://www.copano.com.

This press release includes "forward-looking statements," as defined by the Securities and Exchange Commission.  Statements that address activities or events that Copano believes will or may occur in the future are forward-looking statements.  These statements include, but are not limited to, statements about future producer activity and Copano's total distributable cash flow and distribution coverage.  These statements are based on management's experience and perception of historical trends, current conditions, expected future developments and other factors management believes are reasonable.  Important factors that could cause actual results to differ materially from those in forward-looking statements include the following risks and uncertainties, many of which are beyond Copano's control: the volatility of prices and market demand for natural gas and natural gas liquids; Copano's ability to continue to connect new sources of natural gas, crude oil and condensate, and the NGL content of new gas supplies; the impact on volumes and resulting cash flow of technological, economic and other uncertainties inherent in estimating future production; producers' ability to drill and successfully complete and connect new natural gas supplies; Copano's ability to attract and retain key customers; performance by producers, customers and service providers under their contracts with Copano; the availability of downstream transportation and other facilities for natural gas and NGLs; operational risks affecting the performance of Copano or third-party processing, fractionation plants and other facilities; Copano's ability to access or construct new processing, fractionation and transportation capacity; higher construction costs or project delays due to inflation, limited availability of required resources, or the effects of operational, legal or other uncertainties; general economic conditions; the effects of government regulations and policies; and other financial, operational and legal risks and uncertainties detailed from time to time in Copano's quarterly and annual reports filed with the Securities and Exchange Commission.  Copano does not undertake to update any forward-looking statement except as provided by law.

Contacts:

Carl A. Luna, SVP and CFO

Copano Energy, L.L.C.

713-621-9547

 

Jack Lascar / jlascar@drg-l.com

Anne Pearson/ apearson@drg-l.com

DRG&L/ 713-529-6600

financial statements follow –

 

COPANO ENERGY, L.L.C. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended

September 30,

Nine Months Ended

September 30,

2012

2011

2012

2011

(In thousands, except per unit information)

Revenue:

Natural gas sales 

$

97,614

$

120,815

$

253,819

$

348,538

Natural gas liquids sales 

205,464

191,370

589,431

521,129

Transportation, compression and processing fees 

49,314

30,337

132,394

82,706

Condensate and other 

14,001

11,169

45,280

37,299

Total revenue 

366,393

353,691

1,020,924

989,672

Costs and expenses:

Cost of natural gas and natural gas liquids(1)

284,936

281,858

789,369

779,986

Transportation(1)

6,365

6,991

18,785

19,202

Operations and maintenance 

19,242

16,091

56,171

46,953

Depreciation and amortization

19,259

16,911

57,409

51,143

Impairment

-

5,000

28,744

5,000

General and administrative 

13,697

10,031

38,939

34,530

Taxes other than income 

1,983

1,502

5,459

4,029

Equity in (earnings) loss from unconsolidated affiliates 

(12,558)

161,589

89,733

158,581

Gain on sale of operating assets

(9,716)

-

(9,716)

-

Total costs and expenses 

323,208

499,973

1,074,893

1,099,424

Operating income (loss)

43,185

(146,282)

(53,969)

(109,752)

Other income (expense):

Interest and other income 

11

16

570

31

Loss on refinancing of unsecured debt 

-

-

-

(18,233)

Interest and other financing costs 

(13,797)

(11,080)

(42,823)

(34,450)

Income (loss) before income taxes

29,399

(157,346)

(96,222)

(162,404)

Provision for income taxes 

(474)

(390)

(1,406)

(1,161)

Net income (loss)

28,925

(157,736)

(97,628)

(163,565)

Preferred unit distributions

(9,138)

(8,279)

(26,751)

(24,235)

Net income (loss) to common units

$

19,787

$

(166,015)

$

(124,379)

$

(187,800)

Basic net income (loss) per common unit:

Net income (loss) per common unit

$

0.27

$

(2.51)

$

(1.73)

$

(2.84)

Weighted average number of common units 

72,395

66,246

71,887

66,125

Diluted net income (loss) per common unit:

Net income (loss) per common unit

$

0.23

$

(2.51)

$

(1.73)

$

(2.84)

Weighted average number of common units 

85,682

66,246

71,887

66,125

Distributions declared per common unit

$

0.575

$

0.575

$

1.725

$

1.725

(1) Exclusive of operations and maintenance, depreciation and amortization and impairment shown separately below.

 

COPANO ENERGY, L.L.C. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended September 30,

2012

2011

Cash Flows From Operating Activities:

(In thousands)

Net loss

$

(97,628)

$

(163,565)

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization

57,409

51,143

Impairment

28,744

5,000

Amortization of debt issue costs

2,987

2,855

Equity in loss from unconsolidated affiliates

89,733

158,581

Distributions from unconsolidated affiliates

31,229

17,961

Gain on sale of operating assets

(9,716)

-

Loss on refinancing of unsecured debt

-

18,233

Non-cash gain on risk management activities, net 

(4,327)

(4,723)

Equity-based compensation

5,246

7,445

Deferred tax provision

240

253

Other non-cash items

5,196

(86)

Changes in assets and liabilities, net of acquisitions:

-

-

Accounts receivable

8,032

(11,132)

Prepayments and other current assets

1,861

(2,952)

Risk management activities

8,135

11,353

Accounts payable

(24,371)

17,459

Other current liabilities

21,010

14,964

Net cash provided by operating activities

123,780

122,789

Cash Flows From Investing Activities:

Additions to property, plant and equipment

(247,179)

(175,323)

Additions to intangible assets

(6,869)

(5,316)

Acquisitions

-

(16,084)

Investments in unconsolidated affiliates

(60,677)

(105,111)

Distributions from unconsolidated affiliates

3,279

2,368

Escrow cash

-

6

Proceeds from sale of assets

23,850

248

Other

2,604

98

Net cash used in investing activities 

(284,992)

(299,114)

Cash Flows From Financing Activities:

Proceeds from long-term debt

420,375

725,000

Repayment of long-term debt

(322,000)

(412,665)

Payments of premiums and expenses on redemption of unsecured debt

-

(14,572)

Deferred financing costs

(3,539)

(15,743)

Distributions to unitholders

(126,090)

(114,834)

Proceeds from public offering of common units, net of underwriting discounts

and commissions of $7,590

188,083

-

Equity offering costs

(379)

(4)

Proceeds from option exercises 

1,284

2,747

Net cash provided by financing activities

157,734

169,929

Net decrease in cash and cash equivalents

(3,478)

(6,396)

Cash and cash equivalents, beginning of year

56,962

59,930

Cash and cash equivalents, end of period

$

53,484

$

53,534

 

COPANO ENERGY, L.L.C. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED BALANCE SHEETS

September 30,

December 31,

2012

2011

 (In thousands, except unit information)

ASSETS

Current assets:

Cash and cash equivalents 

$

53,484

$

56,962

Accounts receivable, net

112,165

119,193

Risk management assets 

16,420

4,322

Prepayments and other current assets 

3,254

5,114

Total current assets 

185,323

185,591

Property, plant and equipment, net 

1,301,813

1,103,699

Intangible assets, net 

161,652

192,425

Investments in unconsolidated affiliates 

480,118

544,687

Escrow cash 

1,848

1,848

Risk management assets 

6,941

6,452

Other assets, net 

28,163

29,895

Total assets 

$

2,165,858

$

2,064,597

LIABILITIES AND MEMBERS' CAPITAL

Current liabilities:

Accounts payable

$

137,232

$

155,921

Accrued capital expenditures

9,841

7,033

Accrued interest 

25,022

8,686

Accrued tax liability 

1,148

1,182

Risk management liabilities 

1,512

3,565

Other current liabilities 

22,974

15,007

Total current liabilities 

197,729

191,394

Long term debt (includes $3,194 and $0 bond premium as of September 30, 2012 and December 31, 2011, respectively) 

1,092,719

994,525

Deferred tax liability 

2,440

2,199

Other noncurrent liabilities 

9,893

4,581

Commitments and contingencies

Members' capital:

Series A convertible preferred units, no par value, 12,582,468 units and 11,684,074 units issued and outstanding as of September 30, 2012 and

December 31, 2011, respectively  

285,168

285,168

Common units, no par value, 72,411,407 units and 66,341,458 units issued and outstanding as of September 30, 2012 and December 31, 2011, respectively  

1,353,900

1,164,853

Paid in capital 

69,966

62,277

Accumulated deficit 

(848,066)

(624,121)

Accumulated other comprehensive income (loss)

2,109

(16,279)

863,077

871,898

Total liabilities and members' capital 

$

2,165,858

$

2,064,597

 

COPANO ENERGY, L.L.C. AND SUBSIDIARIES

UNAUDITED RESULTS OF OPERATIONS

Three Months Ended September 30,

Nine Months Ended September 30,

2012

2011

2012

2011

($ In thousands)

Total segment gross margin(1)

$

75,092

$

64,842

$

212,770

$

190,484

Operations and maintenance expenses

19,242

16,091

56,171

46,953

Depreciation and amortization

19,259

16,911

57,409

51,143

Impairment

-

5,000

28,744

5,000

General and administrative expenses 

13,697

10,031

38,939

34,530

Taxes other than income 

1,983

1,502

5,459

4,029

Equity in (earnings) loss from unconsolidated affiliates(2)(3)

(12,558)

161,589

89,733

158,581

Gain on sale of operating assets

(9,716)

-

(9,716)

-

Operating income (loss)

43,185

(146,282)

(53,969)

(109,752)

Loss on refinancing of unsecured debt 

-

-

-

(18,233)

Interest and other financing costs, net 

(13,786)

(11,064)

(42,253)

(34,419)

Provision for income taxes 

(474)

(390)

(1,406)

(1,161)

Net income (loss)

28,925

(157,736)

(97,628)

(163,565)

Preferred unit distributions

(9,138)

(8,279)

(26,751)

(24,235)

Net income (loss) to common units

$

19,787

$

(166,015)

$

(124,379)

$

(187,800)

Basic net income (loss) per common unit

$

0.27

$

(2.51)

$

(1.73)

$

(2.84)

Weighted average number of common units - basic

72,395

66,246

71,887

66,125

Diluted net income (loss) per common unit

$

0.23

$

(2.51)

$

(1.73)

$

(2.84)

Weighted average number of common units - diluted

85,682

66,246

71,887

66,125

Total segment gross margin:

Texas 

$

55,236

$

44,540

$

149,678

$

135,685

Oklahoma

22,948

27,876

67,318

79,623

Rocky Mountains(4)

624

432

1,169

2,245

Segment gross margin

78,808

72,848

218,165

217,553

Corporate and other(5)

(3,716)

(8,006)

(5,395)

(27,069)

Total segment gross margin(1)

$

75,092

$

64,842

$

212,770

$

190,484

Segment gross margin per unit:

Texas:

Service throughput ($/MMBtu)

$

0.67

$

0.63

$

0.59

$

0.71

Oklahoma:

Service throughput ($/MMBtu)

$

0.80

$

1.05

$

0.77

$

1.04

Volumes:

Texas:(6)

Service throughput (MMBtu/d)(7)

897,601

765,744

922,256

694,802

Pipeline throughput (MMBtu/d) 

557,457

463,321

563,404

436,210

Plant inlet volumes (MMBtu/d) 

824,196

686,398

830,755

612,405

NGLs produced (Bbls/d) 

54,142

30,904

46,239

27,040

Oklahoma:(8)

Service throughput (MMBtu/d)(7)

313,414

288,440

318,851

280,689

Plant inlet volumes (MMBtu/d) 

157,775

158,070

157,645

154,439

NGLs produced (Bbls/d) 

16,207

17,453

16,729

16,945

Capital Expenditures:

Maintenance capital expenditures 

$

1,743

$

3,510

$

7,984

$

11,111

Expansion capital expenditures 

95,869

82,675

259,794

203,576

Total capital expenditures 

$

97,612

$

86,185

$

267,778

$

214,687

Operations and maintenance expenses:

Texas 

$

11,548

$

9,082

$

33,441

$

26,815

Oklahoma

7,649

6,930

22,592

19,943

Rocky Mountains 

45

79

138

195

Total operations and maintenance expenses

$

19,242

$

16,091

$

56,171

$

46,953

(1)

Total segment gross margin is a non-GAAP financial measure.  Please read Unaudited Non-GAAP Financial Measures" for a reconciliation of total segment gross margin to its most directly comparable GAAP measure of operating income.           

(2)

During the three months ended March 31, 2012, Copano recorded a $120 million non-cash impairment charge relating to its investments in Bighorn and Fort Union.

(3)

The following table summarizes the results and volumes associated with Copano's unconsolidated affiliates ($ in thousands):

Three Months Ended September 30,

2012

2011

Volume

Equity (Earnings)/Loss

Volume

Equity (Earnings)/Loss

Eagle Ford Gathering

$ (9,174)

$  (2,016)

     Pipeline throughput(a)

(MMBtu/d)

319,919

38,652

     NGLs produced(b)

(Bbls/d)

12,526

Liberty Pipeline Group(c)

(Bbls/d)

25,083

37

2,635

59

Webb Duval(d)

(MMBtu/d)

53,483

(65)

48,628

73

Southern Dome

(291)

(652)

     Plant inlet

(MMBtu/d)

10,354

11,970

     NGLs produced

(Bbls/d)

375

429

Bighorn and Fort Union(e)

(MMBtu/d)

694,961

(2,970)

670,543

164,136

Nine Months Ended September 30,

2012

2011

Volume

Equity (Earnings)/Loss

Volume

Equity (Earnings)/Loss

Eagle Ford Gathering

$ (21,082)

$ (1,978)

     Pipeline throughput(a)

(MMBtu/d)

260,212

13,026

     NGLs produced(a)

(Bbls/d)

10,875

Liberty Pipeline Group(c)

(Bbls/d)

20,172

311

888

60

Webb Duval(b)

(MMBtu/d)

59,517

(255)

48,705

257

Southern Dome

(692)

(2,023)

     Plant inlet

(MMBtu/d)

9,245

11,630

     NGLs produced

(Bbls/d)

329

418

Bighorn and Fort Union(e)

(MMBtu/d)

742,937

111,740

595,302

162,302

(a)

For the three and nine months ended September 30, 2011, the volume has been recast from 58,295 (MMBtu/d), as previously stated, to show daily flow averaged over the 92 days and 273 days of the three and nine month periods, respectively, instead of the 63 days of physical flow.

(b)

Net of NGLs produced at Copano's Houston Central complex.

(c)

For the three and nine months ended September 30, 2011, the volume has been recast from 4,252 (MMBtu/d), as previously stated, to show daily flow averaged over the 92 days and 273 days of the three and nine month periods, respectively, instead of the 57 days of physical flow.

(d)  

Net of intercompany volumes.

(e)

Changes in pipeline throughput at Fort Union did not have a material impact on gross margin because Fort Union received payments for additional volumes under long-term contractual commitments in each of the periods indicated.

(4)

Rocky Mountains segment gross margin includes results from producer services, including volumes purchased for resale, volumes gathered under firm capacity gathering agreements with Fort Union, volumes transported using Copano's firm capacity agreements with Wyoming Interstate Gas Company and compressor rental services provided to Bighorn. 

(5)

Corporate and other includes results attributable to Copano's commodity risk management activities.

(6)

Plant inlet volumes and NGLs produced represent total volumes processed and produced by the Texas segment at all plants, including plants owned by the Texas segment and plants owned by third parties. 

(7)

"Service throughput" means the volume of natural gas delivered to Copano's 100%-owned processing plants by third-party pipelines plus Copano's "pipeline throughput," which is the volume of natural gas transported or gathered through Copano's pipelines.

(8)

Plant inlet volumes and NGLs produced represent total volumes processed and produced by the Oklahoma segment at all plants, including plants owned by the Oklahoma segment and plants owned by third parties. 

COPANO ENERGY, L.L.C. AND SUBSIDIARIES

UNAUDITED NON-GAAP FINANCIAL MEASURES

Three Months Ended

September 30,

Nine Months Ended September 30,

2012

2011

2012

2011

Reconciliation of total segment gross margin to operating income (loss):

(In thousands)

Operating income (loss)

$

43,185

$

(146,282)

$

(53,969)

$

(109,752)

Add:  Operations and maintenance expenses 

19,242

16,091

56,171

46,953

Depreciation and amortization

19,259

16,911

57,409

51,143

Impairment

-

5,000

28,744

5,000

General and administrative expenses 

13,697

10,031

38,939

34,530

Taxes other than income 

1,983

1,502

5,459

4,029

Equity in (earnings) loss from unconsolidated affiliates

(12,558)

161,589

89,733

158,581

Gain on sale of operating assets

(9,716)

-

(9,716)

-

Total segment gross margin 

$

75,092

$

64,842

$

212,770

$

190,484

Reconciliation of EBITDA, adjusted EBITDA and total distributable cash flow to net income (loss):

Net income (loss)

$

28,925

$

(157,736)

$

(97,628)

$

(163,565)

Add:  Depreciation and amortization

19,259

16,911

57,409

51,143

Interest and other financing costs 

13,797

11,080

42,823

34,450

Provision for income taxes 

474

390

1,406

1,161

EBITDA 

62,455

(129,355)

4,010

(76,811)

Add:  Amortization of commodity derivative options 

5,924

7,442

16,002

22,069

Distributions from unconsolidated affiliates 

11,994

6,757

34,508

20,329

Loss on refinancing of unsecured debt

-

-

-

18,233

Equity-based compensation 

3,223

2,093

7,575

9,184

Equity in (earnings) loss from unconsolidated affiliates 

(12,558)

161,589

89,733

158,581

Unrealized loss (gain) from commodity risk management activities

2,583

(2,332)

(1,818)

(2,695)

Impairment

-

5,000

28,744

5,000

Other non-cash operating items

(591)

576

2,894

(272)

Adjusted EBITDA 

73,030

51,770

181,648

153,618

Less:  Interest expense

(13,745)

(11,029)

(42,526)

(33,623)

Current income tax expense and other

(419)

(305)

(1,166)

(929)

Maintenance capital expenditures 

(1,743)

(3,510)

(7,984)

(11,111)

Total distributable cash flow 

$

57,123

$

36,926

$

129,972

$

107,955

Actual quarterly distribution

$

46,087

$

38,705

Total distributable cash flow coverage 

124%

95%

 

 

SOURCE Copano Energy, L.L.C.



RELATED LINKS

http://www.copano.com