Attached files
| file | filename |
|---|---|
| 8-K - 8-K - Midcoast Energy Partners, L.P. | d874790d8k.htm |
| EX-99.1 - EX-99.1 - Midcoast Energy Partners, L.P. | d874790dex991.htm |
Exhibit 99.2
MIDCOAST ENERGY PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF INCOME
| For the year ended December 31, | ||||||||||||
| 2014 | 2013 | 2012 | ||||||||||
| (unaudited; in millions, except per unit amounts) | ||||||||||||
| Operating revenues: |
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| Operating revenue |
$ | 5,688.2 | $ | 5,380.5 | $ | 4,961.7 | ||||||
| Operating revenue - affiliate |
206.1 | 213.1 | 396.2 | |||||||||
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| 5,894.3 | 5,593.6 | 5,357.9 | ||||||||||
| Operating expenses: |
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| Cost of natural gas and natural gas liquids |
5,026.7 | 4,817.5 | 4,294.6 | |||||||||
| Cost of natural gas and natural gas liquids - affiliate |
119.2 | 119.6 | 289.5 | |||||||||
| Operating and maintenance |
234.8 | 242.2 | 252.2 | |||||||||
| Operating and maintenance - affiliate |
104.7 | 108.1 | 110.1 | |||||||||
| General and administrative |
8.7 | — | 7.9 | |||||||||
| General and administrative - affiliate |
96.1 | 98.2 | 97.2 | |||||||||
| Depreciation and amortization |
151.4 | 142.9 | 135.0 | |||||||||
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| 5,741.6 | 5,528.5 | 5,186.5 | ||||||||||
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| Operating income |
152.7 | 65.1 | 171.4 | |||||||||
| Interest expense, net |
16.7 | 1.7 | — | |||||||||
| Equity in earnings of joint ventures |
13.2 | (1.0 | ) | — | ||||||||
| Other loss |
(0.3 | ) | (0.2 | ) | (0.1 | ) | ||||||
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| Income before income tax expense |
148.9 | 62.2 | 171.3 | |||||||||
| Income tax expense |
4.6 | 8.3 | 3.8 | |||||||||
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| Net income |
$ | 144.3 | $ | 53.9 | $ | 167.5 | ||||||
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| Less: Predecessor income prior to initial public offering (from January 1, 2013 through November 12, 2013) |
56.3 | |||||||||||
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| Net loss subsequent to initial public offering to Midcoast Energy Partners, L.P. (from November 13, 2013 through December 13, 2013) |
(2.4 | ) | ||||||||||
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| Less: Net income (loss) attributable to noncontrolling interest |
80.2 | (0.6 | ) | |||||||||
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| Net income (loss) attributable to general and limited partner ownership interest in Midcoast Energy Partners, L.P. |
$ | 64.1 | $ | (1.8 | ) | |||||||
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| Net income attributable to limited partner ownership interest |
$ | 62.8 | $ | 19.7 | $ | 64.0 | ||||||
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| Net income per limited partner unit (basic and diluted) |
$ | 1.39 | $ | 0.68 | $ | 2.40 | ||||||
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| Weighted average limited partner units outstanding |
45.2 | 29.2 | 26.7 | |||||||||
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| Cash distributions paid per limited partner unit outstanding |
$ | 1.14 | $ | — | $ | — | ||||||
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MIDCOAST ENERGY PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
| For the year ended December 31, | ||||||||||||
| 2014 | 2013 | 2012 | ||||||||||
| (unaudited; in millions) | ||||||||||||
| Cash provided by operating activities: |
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| Net income |
$ | 144.3 | $ | 53.9 | $ | 167.5 | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
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| Depreciation and amortization |
151.4 | 142.9 | 135.0 | |||||||||
| Derivative fair value net (gains) losses |
(158.4 | ) | 3.0 | (1.2 | ) | |||||||
| Inventory market price adjustments |
11.4 | 3.4 | 9.8 | |||||||||
| Asset impairment charges |
15.6 | — | — | |||||||||
| Distributions from investment in joint ventures |
12.2 | — | — | |||||||||
| Equity loss (earnings) from investment in joint ventures |
(13.2 | ) | 1.0 | — | ||||||||
| Deferred income taxes |
3.1 | 7.3 | 0.1 | |||||||||
| Other |
1.7 | 0.3 | 3.5 | |||||||||
| Changes in operating assets and liabilities, net of acquisitions: |
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| Receivables, trade and other |
33.2 | 7.9 | 67.8 | |||||||||
| Due from General Partner and affiliates |
608.6 | (633.9 | ) | 4.5 | ||||||||
| Accrued receivables |
(47.4 | ) | 295.6 | (68.2 | ) | |||||||
| Inventory |
(4.9 | ) | (12.2 | ) | 12.0 | |||||||
| Current and long-term other assets |
(23.9 | ) | (14.3 | ) | (4.5 | ) | ||||||
| Due to General Partner and affiliates |
(468.2 | ) | 522.8 | 17.9 | ||||||||
| Accounts payable and other |
(21.2 | ) | 34.6 | 2.1 | ||||||||
| Accrued purchases |
(90.5 | ) | 4.9 | 6.4 | ||||||||
| Interest payable |
4.7 | 0.3 | — | |||||||||
| Property and other taxes payable |
1.1 | 3.4 | — | |||||||||
| Settlement of interest rate derivatives |
(0.5 | ) | — | — | ||||||||
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| Net cash provided by operating activities |
159.1 | 420.9 | 352.7 | |||||||||
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| Cash used in investing activities: |
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| Additions to property, plant and equipment |
(237.7 | ) | (273.4 | ) | (451.7 | ) | ||||||
| Changes in restricted cash |
18.7 | (61.5 | ) | — | ||||||||
| Asset acquisitions |
(0.2 | ) | (0.9 | ) | — | |||||||
| Proceeds from the sale of net assets |
— | 5.0 | 9.2 | |||||||||
| Investment in joint ventures |
(36.7 | ) | (188.6 | ) | (168.5 | ) | ||||||
| Distributions from investment in joint ventures in excess of cumulative earnings |
27.8 | — | — | |||||||||
| Other |
(3.2 | ) | (2.9 | ) | (3.5 | ) | ||||||
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| Net cash used in investing activities |
(231.3 | ) | (522.3 | ) | (614.5 | ) | ||||||
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| Cash provided by financing activities: |
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| Proceeds from long-term debt, net of discounts |
398.1 | — | — | |||||||||
| Net borrowings under credit facility |
25.0 | 335.0 | — | |||||||||
| Debt origination fees |
— | (3.0 | ) | — | ||||||||
| Net proceeds from unit issuances |
— | 354.9 | — | |||||||||
| Acquisition of noncontrolling interest in subsidiary |
(350.0 | ) | — | — | ||||||||
| Contributions from Predecessor partner interests |
— | 341.9 | 564.0 | |||||||||
| Contribution from noncontrolling interest |
142.8 | — | — | |||||||||
| Distributions to Predecessor partner interests |
— | (247.7 | ) | (302.2 | ) | |||||||
| Distributions to partners |
(52.7 | ) | — | — | ||||||||
| Distributions to noncontrolling interest |
(95.9 | ) | — | — | ||||||||
| Distribution to EEP for net assets contributed |
— | (674.8 | ) | — | ||||||||
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| Net cash provided by financing activities |
67.3 | 106.3 | 261.8 | |||||||||
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| Net increase in cash and cash equivalents |
(4.9 | ) | 4.9 | — | ||||||||
| Cash and cash equivalents at beginning of year |
4.9 | — | — | |||||||||
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| Cash and cash equivalents at end of period |
$ | — | $ | 4.9 | $ | — | ||||||
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MIDCOAST ENERGY PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
| December 31, | ||||||||
| 2014 | 2013 | |||||||
| (unaudited; in millions) | ||||||||
| ASSETS | ||||||||
| Current assets: |
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| Cash and cash equivalents |
$ | — | $ | 4.9 | ||||
| Restricted cash |
42.8 | 61.5 | ||||||
| Receivables, trade and other, net of allowance for doubtful accounts of $1.8 million in 2014 and $0.5 million in 2013 |
15.6 | 50.3 | ||||||
| Due from General Partner and affiliates |
49.7 | 654.8 | ||||||
| Accrued receivables |
229.6 | 182.2 | ||||||
| Inventory |
81.5 | 88.0 | ||||||
| Other current assets |
178.1 | 19.1 | ||||||
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| 597.3 | 1,060.8 | |||||||
| Property, plant and equipment, net |
4,159.7 | 4,082.3 | ||||||
| Goodwill |
226.5 | 226.5 | ||||||
| Intangible assets, net |
247.7 | 255.0 | ||||||
| Equity investment in joint ventures |
380.6 | 371.3 | ||||||
| Other assets, net |
142.3 | 40.5 | ||||||
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| $ | 5,754.1 | $ | 6,036.4 | |||||
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| LIABILITIES AND PARTNERS’ CAPITAL | ||||||||
| Current liabilities: |
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| Due to General Partner and affiliates |
$ | 41.1 | $ | 534.3 | ||||
| Accounts payable and other |
113.8 | 114.4 | ||||||
| Accrued purchases |
375.2 | 463.3 | ||||||
| Property and other taxes payable |
20.9 | 19.8 | ||||||
| Interest payable |
5.0 | 0.3 | ||||||
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| 556.0 | 1,132.1 | |||||||
| Long-term debt |
760.0 | 335.0 | ||||||
| Other long-term liabilities |
41.5 | 16.6 | ||||||
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| 1,357.5 | 1,483.7 | |||||||
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| Commitments and contingencies |
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| Partners’ capital: |
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| Class A common units (22,610,056 authorized and issued at December 31, 2014 and 2013) |
634.2 | 495.3 | ||||||
| Subordinated units (22,610,056 authorized and issued at December 31, 2014 and 2013) |
1,174.0 | 1,035.1 | ||||||
| General Partner units (922,859 authorized and issued at December 31, 2014 and 2013) |
47.8 | 42.2 | ||||||
| Accumulated other comprehensive income (loss) |
11.6 | (3.1 | ) | |||||
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| Total Midcoast Energy Partners, L.P. partners’ capital |
1,867.6 | 1,569.5 | ||||||
| Noncontrolling interest |
2,529.0 | 2,983.2 | ||||||
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| Total partners’ capital |
4,396.6 | 4,552.7 | ||||||
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| $ | 5,754.1 | $ | 6,036.4 | |||||
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NET INCOME PER LIMITED PARTNER AND GENERAL PARTNER INTEREST
We allocate our net income among our General Partner and limited partners using the two-class method. Under the two-class method, we allocate our net income to our limited partners, our General Partner and the holders of our incentive distribution rights, or IDRs, in accordance with the terms of our partnership agreement. We also allocate any earnings in excess of distributions to our limited partners, our General Partner and the holders of the IDRs in accordance with the terms of our partnership agreement. We allocate any distributions in excess of earnings for the period to our General Partner and our limited partners based on their respective proportionate ownership interests in us, after taking into account distributions to be paid with respect to the IDRs, as set forth in our partnership agreement.
| Distribution Targets |
Portion of Quarterly Distribution Per Unit |
Percentage Distributed Partners |
Percentage Distributed to General Partner | |||
| Minimum Quarterly Distribution |
Up to $0.3125 | 98% | 2% | |||
| First Target Distribution |
> $0.3125 to $0.359375 | 98% | 2% | |||
| Second Target Distribution |
> $0.359375 to $0.390625 | 85% | 15% | |||
| Third Target Distribution |
> $0.390625 to $0.468750 | 75% | 25% | |||
| Over Third Target Distribution |
In excess of $0.468750 | 50% | 50% |
We determined basic and diluted net income per limited partner unit as follows:
| For the year ended December 31, | ||||||||||||
| 2014 | 2013(1) | 2012(1) | ||||||||||
| (unaudited; in millions, except per unit amounts) |
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| Net income |
$ | 144.3 | $ | 53.9 | $ | 167.5 | ||||||
| Less: Net income attributable to noncontrolling interest |
80.2 | 33.7 | 102.2 | |||||||||
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| Net income attributable to general and limited partner interests in Midcoast Energy Partners, L.P. |
64.1 | 20.2 | 65.3 | |||||||||
| Less distributions: |
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| Total distributed earnings to our General Partner |
1.2 | 0.8 | 0.7 | |||||||||
| Total distributed earnings to our limited partners |
59.6 | 36.5 | 33.4 | |||||||||
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| Total distributed earnings |
60.8 | 37.3 | 34.1 | |||||||||
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| Underdistributed (Overdistributed) earnings |
$ | 3.3 | $ | (17.1 | ) | $ | 31.2 | |||||
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| Weighted average limited partner units outstanding |
45.2 | 29.2 | 26.7 | |||||||||
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| Basic and diluted earnings per unit: |
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| Distributed earnings per limited partner unit (2) |
$ | 1.32 | $ | 1.25 | $ | 1.25 | ||||||
| Underdistributed (Overdistributed) earnings per limited partner unit (3) |
0.07 | (0.57 | ) | 1.15 | ||||||||
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| Net income per limited partner unit (basic and diluted) |
$ | 1.39 | $ | 0.68 | $ | 2.40 | ||||||
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| (1) | Represents calculation retrospectively reflecting the affiliate capitalization of MEP consisting of 4.1 million MEP Class A common units, 22.6 million MEP subordinated units and MEP general partner interest upon the transfer of a controlling ownership, including limited partner and general partner interest, in Midcoast Operating. The noncontrolling interest reflects the 61% retained by EEP. |
| (2) | Represents the total distributed earnings to limited partners divided by the weighted average number of limited partner interests outstanding for the period. |
| (3) | Represents the limited partners’ share (98%) of distributions in excess of earnings divided by the weighted average number of limited partner interests outstanding for the period and underdistributed earnings allocated to the limited partners based on the distribution waterfall that is outlined in our partnership agreement. |
SEGMENT INFORMATION
Our business is divided into operating segments, defined as components of the enterprise, about which financial information is available and evaluated regularly by our Chief Operating Decision Maker, collectively comprised of our senior management, in deciding how resources are allocated and performance is assessed.
Each of our reportable segments is a business unit that offers different services and products that are managed separately, since each business segment requires different operating strategies. We conduct our business through two distinct reporting segments:
| • | Gathering, Processing, and Transportation; and |
| • | Logistics and Marketing. |
The following tables present certain financial information relating to our business segments and corporate activities:
| As of and for the year ended December 31, 2014 | ||||||||||||||||
| Gathering, Processing and Transportation |
Logistics and Marketing |
Corporate(1) | Total | |||||||||||||
| (unaudited; in millions) | ||||||||||||||||
| Total revenue |
$ | 2,611.2 | $ | 5,329.8 | $ | — | $ | 7,941.0 | ||||||||
| Less: Intersegment revenue |
1,963.9 | 82.8 | — | 2,046.7 | ||||||||||||
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| Operating revenue |
647.3 | 5,247.0 | — | 5,894.3 | ||||||||||||
| Cost of natural gas and natural gas liquids |
27.1 | 5,118.8 | — | 5,145.9 | ||||||||||||
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| Segment gross margin |
620.2 | 128.2 | — | 748.4 | ||||||||||||
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| Operating and maintenance |
276.2 | 62.9 | 0.4 | 339.5 | ||||||||||||
| General and administrative |
87.1 | 12.4 | 5.3 | 104.8 | ||||||||||||
| Depreciation and amortization |
142.0 | 9.4 | — | 151.4 | ||||||||||||
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| 505.3 | 84.7 | 5.7 | 595.7 | |||||||||||||
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| Operating income (loss) |
114.9 | 43.5 | (5.7 | ) | 152.7 | |||||||||||
| Interest expense, net |
— | — | 16.7 | 16.7 | ||||||||||||
| Other income |
12.9 | (2) | — | — | 12.9 | |||||||||||
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| Income (loss) before income tax expense |
127.8 | 43.5 | (22.4 | ) | 148.9 | |||||||||||
| Income tax expense |
— | — | 4.6 | 4.6 | ||||||||||||
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| Net income (loss) |
127.8 | 43.5 | (27.0 | ) | 144.3 | |||||||||||
| Less: Net income attributable to: |
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| Noncontrolling interest |
— | — | 80.2 | 80.2 | ||||||||||||
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| Net income (loss) attributable to general and limited partner ownership interests in Midcoast Energy Partners, L.P. |
$ | 127.8 | $ | 43.5 | $ | (107.2 | ) | $ | 64.1 | |||||||
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| Total assets |
$ | 5,205.4 | (3) | $ | 460.3 | $ | 88.4 | $ | 5,754.1 | |||||||
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| Capital expenditures (excluding acquisitions) |
$ | 213.4 | $ | 16.6 | $ | 6.0 | $ | 236.0 | ||||||||
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| (1) | Corporate consists of interest expense, interest income, noncontrolling interest and other costs such as income taxes, which are not allocated to the business segments. |
| (2) | Other income for our Gathering, Processing and Transportation segment includes our long-term equity investment in the Texas Express NGL system which began recognizing operating costs during the fourth quarter of 2013. |
| (3) | Total assets for our Gathering, Processing and Transportation segment includes $380.6 million for our long-term equity investment in the Texas Express NGL system. |
| As of and for the year ended December 31, 2013 | ||||||||||||||||
| Gathering, Processing and Transportation |
Logistics and Marketing |
Corporate(1) | Total | |||||||||||||
| (unaudited; in millions) | ||||||||||||||||
| Total revenue |
$ | 2,689.8 | $ | 4,963.7 | $ | — | $ | 7,653.5 | ||||||||
| Less: Intersegment revenue |
1,960.8 | 99.1 | — | 2,059.9 | ||||||||||||
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| Operating revenue |
729.0 | 4,864.6 | — | 5,593.6 | ||||||||||||
| Cost of natural gas and natural gas liquids |
157.6 | 4,779.5 | — | 4,937.1 | ||||||||||||
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| Segment gross margin |
571.4 | 85.1 | — | 656.5 | ||||||||||||
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| Operating and maintenance |
278.9 | 71.4 | — | 350.3 | ||||||||||||
| General and administrative |
86.6 | 11.6 | — | 98.2 | ||||||||||||
| Depreciation and amortization |
135.7 | 7.2 | — | 142.9 | ||||||||||||
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| 501.2 | 90.2 | — | 591.4 | |||||||||||||
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| Operating income (loss) |
70.2 | (5.1 | ) | — | 65.1 | |||||||||||
| Interest expense |
— | — | 1.7 | 1.7 | ||||||||||||
| Other income (expense) |
(1.5 | )(2) | — | 0.3 | (3.2 | ) | ||||||||||
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| Income before income tax expense |
68.7 | (5.1 | ) | (1.4 | ) | 62.2 | ||||||||||
| Income tax expense |
— | — | 8.3 | 8.3 | ||||||||||||
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| Net income (loss) |
68.7 | (5.1 | ) | (9.7 | ) | 53.9 | ||||||||||
| Less: Net income attributable to noncontrolling interest |
— | — | (0.6 | ) | (0.6 | ) | ||||||||||
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| Net income (loss) attributable to general and limited partner ownership interests in Midcoast Energy Partners, L.P. |
$ | 68.7 | $ | (5.1 | ) | $ | (9.1 | ) | $ | 54.5 | ||||||
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| Total assets |
$ | 4,962.1 | (3) | $ | 591.4 | $ | 482.9 | $ | 6,033.4 | |||||||
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| Capital expenditures (excluding acquisitions) |
$ | 233.8 | $ | 17.5 | $ | 18.8 | $ | 270.1 | ||||||||
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| (1) | Corporate consists of interest expense, interest income, noncontrolling interest and other costs such as income taxes, which are not allocated to the business segments. |
| (2) | Other income (expense) for our Gathering, Processing and Transportation segment includes our long-term equity investment in the Texas Express NGL system which began recognizing operating costs during the fourth quarter of 2013 |
| (3) | Total assets for our gathering, processing and transportation segment includes $371.3 million for our long-term equity investment in the Texas Express NGL system. |