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EX-99.1 - EXHIBIT 99.1 - Duncan Energy Partners L.P. | exhibit99_1.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d)
of the
Security Exchange Act of 1934
Date of
report (Date of earliest event reported): February 1, 2010
DUNCAN
ENERGY PARTNERS L.P.
(Exact
Name of Registrant as Specified in Its Charter)
Delaware
|
1-33266
|
20-5639997
|
(State
or Other Jurisdiction of
Incorporation
or Organization)
|
(Commission
File
Number)
|
(I.R.S.
Employer
Identification
No.)
|
1100
Louisiana Street, 10th
Floor
Houston,
Texas 77002
(Address
of Principal Executive Offices, including Zip Code)
|
(713)
381-6500
(Registrant’s
Telephone Number, including Area
Code)
|
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))
Item
2.02. Results of Operations and Financial Condition.
On February 1, 2010, Duncan Energy
Partners L.P. (“Duncan Energy Partners”) issued a press release announcing its
financial and operating results for the three and twelve months ended December
31, 2009 and held a joint webcast conference call with Enterprise Products
Partners L.P. (“Enterprise Products Partners”) discussing those
results. A copy of the earnings press release is furnished as Exhibit
99.1 to this Current Report, which is hereby incorporated by reference into this
Item 2.02. The webcast conference call will be archived and available
for replay on Duncan Energy Partners’ website at www.deplp.com for 90
days.
Unless
the context requires otherwise, references to “we,” “us,” “our,” “Duncan Energy
Partners” or the “Partnership” within the context of this Current Report refer
to the business and operations of Duncan Energy Partners L.P. and its
consolidated subsidiaries. References to “Parent” and “EPO” refer to
Enterprise Products Operating LLC, which is the primary operating subsidiary of
Enterprise Products Partners.
Basis
of Presentation
Effective
February 1, 2007, Duncan Energy Partners acquired controlling ownership
interests in five midstream energy companies (the “DEP I Midstream Businesses”)
from EPO in a dropdown transaction. The DEP I Midstream Businesses
consist of (i) Mont Belvieu Caverns, LLC (“Mont Belvieu Caverns”); (ii) Acadian
Gas, LLC (“Acadian Gas”); (iii) Enterprise Lou-Tex Propylene Pipeline L.P.
(“Lou-Tex Propylene”), including its general partner; (iv) Sabine Propylene
Pipeline L.P. (“Sabine Propylene”), including its general partner; and (v) South
Texas NGL Pipelines, LLC (“South Texas NGL”).
On
December 8, 2008, Duncan Energy Partners entered into a Purchase and Sale
Agreement (the “DEP II Purchase Agreement”) with EPO and Enterprise GTM Holdings
L.P. (“Enterprise GTM,” a wholly owned subsidiary of EPO). Pursuant
to the DEP II Purchase Agreement, DEP Operating Partnership L.P. (“DEP OLP”)
acquired 100% of the membership interests in Enterprise Holding III, LLC
(“Enterprise III”) from Enterprise GTM, thereby acquiring a 66% general partner
interest in Enterprise GC, L.P. (“Enterprise GC”), a 51% general partner
interest in Enterprise Intrastate L.P. (“Enterprise Intrastate”) and a 51%
membership interest in Enterprise Texas Pipeline LLC (“Enterprise
Texas”). Collectively, we refer to Enterprise GC, Enterprise
Intrastate and Enterprise Texas as the “DEP II Midstream
Businesses.” EPO was the sponsor of this second dropdown
transaction.
Prior to
the dropdown of controlling ownership interests in the DEP I and DEP II
Midstream Businesses to Duncan Energy Partners, EPO owned these businesses and
directed their respective activities for all periods presented (to the extent
such businesses were in existence during such periods). Each of the
dropdown transactions was accounted for at EPO’s historical costs as a
reorganization of entities under common control in a manner similar to a pooling
of interests.
References
to the “former owners” of the DEP I and DEP II Midstream Businesses represent
the ownership of EPO in these businesses prior to the related dropdown
transactions. References to “Duncan Energy Partners” mean the
registrant and its consolidated subsidiaries since February 2007.
To assist
investors and other users of our financial statements, our press release
includes selected financial information on a standalone basis apart from that of
our consolidated Partnership. A key difference between the
supplemental selected standalone financial information and our general purpose
consolidated financial statements is that the DEP I and DEP II Midstream
Businesses are viewed as investments and presented as unconsolidated
affiliates. Accordingly, the net income of the DEP I and DEP II
Midstream Businesses attributable to the Partnership on a standalone basis is
reflected as equity earnings. In accordance with U.S. generally
accepted accounting principles (“GAAP”), we eliminate such equity earnings in
the preparation of our general purpose consolidated financial
statements.
Use
of Non-GAAP financial measures
Our press release and/or the webcast
conference call discussion include the non-generally accepted accounting
principle (“non-GAAP”) financial measures of gross operating margin and
distributable cash flow. The press release provides reconciliations
of these non-GAAP financial measures to their most directly
comparable
1
financial
measures calculated and presented in accordance with GAAP. Our
non-GAAP financial measures should not be considered as alternatives to GAAP
measures such as net income, operating income, net cash flows provided by
operating activities or any other measure of financial performance or liquidity
calculated and presented in accordance with GAAP. Our non-GAAP
financial measures may not be comparable to similarly-titled measures of other
companies because they may not calculate such measures in the same manner as we
do.
Gross
operating margin. We evaluate segment performance based on the
non-GAAP financial measure of gross operating margin. Gross operating
margin (either in total or by individual segment) is an important performance
measure of the core profitability of our operations. This measure
forms the basis of our internal financial reporting and is used by management in
deciding how to allocate capital resources among business
segments. We believe that investors benefit from having access to the
same financial measures that management uses in evaluating segment
results. The GAAP financial measure most directly comparable to total
segment gross operating margin is operating income.
We define
total segment gross operating margin as operating income before:
(i) depreciation, amortization and accretion expense; (ii) non-cash
consolidated asset impairment charges; (iii) gains and losses from asset
sales and related transactions; and (iv) general and administrative
costs. Gross operating margin by segment is calculated by subtracting
segment operating costs and expenses (net of the adjustments noted above) from
segment revenues, with both segment totals before the elimination of any
intersegment and intrasegment transactions. In accordance with GAAP,
intercompany accounts and transactions are eliminated in
consolidation. Gross operating margin is exclusive of other income
and expense transactions, provision for income taxes, extraordinary charges and
the cumulative effect of changes in accounting principles. Gross
operating margin is presented on a 100% basis before the allocation of earnings
to noncontrolling interests.
Distributable
cash flow. The Partnership’s distributable cash flow is a
useful non-GAAP measure of liquidity that approximates the amount of cash that
Duncan Energy Partners could pay its partners each period. We define
the partnership’s distributable cash flow as the sum of its share of the
distributable cash flow of each of the DEP I and DEP II Midstream Businesses,
less any standalone expenses of the Partnership such as interest expense and
general and administrative costs (net of non-cash items).
In general, we define the distributable
cash flow of our operating subsidiaries as their net income or loss adjusted
for:
§
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the
addition of depreciation, amortization and accretion
expense;
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§
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the
addition of cash distributions received from Evangeline, if any, less
equity earnings;
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§
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the
subtraction of sustaining capital expenditures and cash payments to settle
asset retirement obligations;
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§
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the
addition of losses or subtraction of gains relating to asset sales and
related transactions;
|
§
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the
addition of cash proceeds from asset sales and related
transactions;
|
§
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the
addition of losses or subtraction of gains from the monetization of
financial instruments recorded in accumulated other comprehensive income
(loss), if any, less related amortization of such amounts to earnings;
and
|
§
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the
addition or subtraction of other miscellaneous non-cash amounts (as
applicable) that affect net income or loss for the
period.
|
Sustaining capital expenditures are
capital expenditures (as defined by GAAP) resulting from improvements to and
major renewals of existing assets. Such expenditures do not generate
additional revenues.
Management compares our distributable
cash flow to the cash distributions we expect to pay our
partners. Using this data, management computes our distribution
coverage ratio. Distributable cash flow is also a quantitative
standard used by the investment community with respect to publicly traded
partnerships because the value of a partnership unit is in part measured by its
yield, which is based on the amount of cash distributions a partnership pays to
a unitholder. The GAAP measure most directly comparable to
distributable cash flow is net cash flows provided by operating
activities.
2
Item
9.01. Financial Statements and
Exhibits.
(d) Exhibits.
Exhibit
Number
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Exhibit
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99.1
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Duncan
Energy Partners L.P. press release dated February 1,
2010.
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3
SIGNATURES
Pursuant to the requirements of the
Securities Exchange Act of 1934, the registrant has duly caused this Current
Report to be signed on its behalf by the undersigned hereunto duly
authorized.
DUNCAN
ENERGY PARTNERS L.P.
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By:
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DEP
Holdings, LLC, as general partner
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Date:
February 1, 2010
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By:
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/s/
Michael J. Knesek
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Name:
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Michael
J. Knesek
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Title:
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Senior
Vice President, Controller
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|
and
Principal Accounting Officer
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of
DEP Holdings, LLC
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4
Exhibit
Index
Exhibit No.
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Description
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99.1
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Duncan
Energy Partners L.P. press release dated February 1,
2010.
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5