Exhibit 99.1
Niska Gas Storage Partners LLC Announces Second Quarter Results and Provides Update on Operations and Guidance
Announces No Change to Common Unit Distribution and Suspension of Subordinated Unit Distributions
HOUSTON, TEXAS - November 3, 2011 - Niska Gas Storage Partners LLC (NYSE:NKA) (“Niska”) reported today financial results for its fiscal quarter ended September 30, 2011. The Company also provided revised guidance for the remainder of the fiscal year ending March 31, 2012. Consistent with this revised guidance, Niska announced a distribution of $0.35 per common unit and a suspension of the distribution on its subordinated units. The Company does not expect to change the distribution on Niska’s common units. The Company also announced other steps to better position itself for current market conditions, while maintaining the opportunity to capitalize on a future recovery in the natural gas storage market.
Financial Results
Adjusted EBITDA for the second quarter of fiscal 2012 was $30.2 million, compared to $39.2 million for the second quarter of fiscal 2011. Adjusted EBITDA for the six months ended September 30, 2011 was $68.8 million compared to $74.5 million for the same period last year. Cash Available for Distribution was $11.2 million for the second quarter of fiscal 2012 and $31.9 million for the first half of fiscal year 2012, compared to $20.1 million and $37.4 million respectively, for the same periods last year. Net earnings for the quarter and six months ended September 30, 2011 were $27.6 million and $32.2 million, compared to $31.4 and $32.0 million respectively, for the same periods last year.
Operations and Outlook
Simon Dupéré, Interim Chief Executive Officer, said: “We continue to successfully execute our operating plan. During the latest quarter, we placed in service an additional two billion cubic feet (“Bcf”) of storage at our AECO Hub(TM) and were able to inject an incremental 15 Bcf at our Wild Goose facility. We expect this additional 15 Bcf of storage to become available to customers in April 2012 and that total expansion capital expenditures will be approximately $65 - $75 million for fiscal 2012.”
“Despite strong operations and the successful execution of our expansion projects, we anticipate weaker financial results for the full fiscal year ending March 31, 2012, due to continued deterioration in market conditions. While softer market conditions had a small unfavorable effect on our second quarter results, we expect continued low seasonal storage spreads, combined with reduced volatility, to have a more pronounced negative impact on our financial results through the third and fourth quarters. Extreme heat across most of the consuming United States combined with the continued refilling of natural gas storage inventories after a colder winter strengthened near-term demand for natural gas. At the same time, actual and anticipated increases in natural gas production dampened winter prices along with natural gas price volatility. Accordingly, we have revised our estimates of Adjusted EBITDA for fiscal year 2012 downward to $120 - $130 million, Cash Available for Distribution of $46 - $56 million and net income of $3 — 13 million, compared to our August 2011 estimates of Adjusted EBITDA of $145 million, Cash Available for Distribution of $70 million and net income of $27 million.”
During the quarter, Niska pursued a number of opportunities to further improve its financial flexibility and return on equity. As a result of management’s revised outlook for the remainder of the fiscal year, Niska determined that as much as $200 million currently invested in hedged proprietary inventories as part of Niska’s optimization activities will be sold to provide additional storage capacity for third-party contracts. The additional liquidity will provide proceeds for Niska to invest in higher return opportunities. Separately, the Company repurchased approximately $30.7 million principal amount of its 8.875% Senior Notes due 2018 (the “Senior Notes”), using $11 million of proceeds reinvested by Carlyle/Riverstone Global Energy and Power Fund III, L.P. and Carlyle/Riverstone Global Energy and Power Fund II, L.P. and affiliated entities (together, the “Carlyle/Riverstone Funds”) from their August 2011 distributions, along with Niska’s cash on hand.
Mr. Dupéré continued, “Given the outlook for continued weak market conditions, we are taking the steps described above to better position the company for the future and to provide increased returns for our unitholders. Looking forward, we continue to be confident in the long-term fundamentals of natural gas storage. Growing natural gas demand combined with potentially increased volatility driven by various factors such as coal-to-gas fuel switching in power generation, announced coal-fired power plant retirements and LNG export projects along with alternative energy initiatives will increase the need for natural gas storage. The strategic location of our assets, enhanced liquidity and the continued strong support of our sponsor will allow us to capitalize on the eventual strengthening of the gas storage market.”
Distributions
Niska today announced a cash distribution of $0.35 per common unit. The distribution will be payable on Thursday, November 17, 2011 to common unitholders of record at the close of business on Monday, November 14, 2011. This distribution represents the minimum quarterly distribution of $0.35 per unit, or $1.40 per common unit on an annualized basis, as set forth in Niska`s operating agreement. The distribution rate is unchanged from the preceding quarter. In light of the Company’s reduced earnings outlook, Niska’s board of directors, including the representatives of the Carlyle/Riverstone Funds, has determined that it is prudent to suspend payment of distributions on Niska’s subordinated units, all of which are owned by the Carlyle/Riverstone Funds. Based on the revised outlook discussed above, Niska expects to generate Cash Available for Distribution of approximately 0.9 to 1.1 times its annual common unit distribution.
Earnings Call
Niska will host a conference call with members of its executive management on Thursday, November 3, 2011, at 10:00 a.m. Eastern Time. Interested parties may access the call via Niska’s website at www.niskapartners.com. A webcast is also available on the Thomson Reuters Street Events network at www.earnings.com.
If you are unable to participate in the webcast, you may access the live conference call by dialing the following numbers:
North America: | 1-866-383-8008 |
International: | 1-617-597-5341 |
Access Code: | 50142247 |
A telephonic replay can be accessed until midnight, November 10, 2011 at the following numbers:
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North America: | 1-888-286-8010 |
International: | 1-617-801-6888 |
Access Code: | 75206379 |
In addition, an electronic replay and PDF transcript will be available on Niska’s website in the Investor Center section under the Presentations and Webcasts tab.
About Niska
Niska is the largest independent owner and operator of natural gas storage in North America, with strategically located assets in key natural gas producing and consuming regions. Niska owns and operates three facilities, including the AECO Hub(TM) in Alberta, Canada; Wild Goose in California; and Salt Plains in Oklahoma. Niska also contracts gas storage capacity on the Natural Gas Pipeline Company of America system. In total, Niska owns or contracts approximately 206.5 Bcf of gas storage capacity.
Forward Looking Statements
This press release includes “forward-looking statements” - that is, statements related to future, not past, events. Forward-looking statements are based on current expectations and include any statement that does not directly relate to a current or historical fact. In this context, forward-looking statements often address our expected future business and financial performance, and often contain words such as “anticipate,” “believe,” “intend,” “expect,” “plan,” “will” or other similar words. Our estimates of future Adjusted EBITDA and net income, as well as our expectation regarding expansion capital expenditures for our fiscal year, are forward-looking statements. These forward-looking statements involve certain risks and uncertainties that ultimately may not prove to be accurate. Among these risks and uncertainties are (1) changes in general economic conditions; (2) our level of exposure to the market value of natural gas storage services could adversely affect our revenues and cash available to make distributions; (3) competitive conditions in our industry; (4) actions taken by third-party operators, processors and transporters; (5) changes in the availability and cost of capital; (6) operating hazards, natural disasters, weather-related delays, casualty losses and other matters beyond our control; (7) the effects of existing and future laws and governmental regulations; (8) the effects of future litigation; and (9) other factors and uncertainties inherent in the development and operation of natural gas storage facilities. Other factors that are not described that are unknown or unpredictable could also have a material adverse effect on future results. For further discussion of risks and uncertainties, you should refer to Niska’s filings with the United States Securities and Exchange Commission. Actual results and future events could differ materially from those anticipated in such statements. Niska undertakes no obligation, and does not intend, to update these forward-looking statements to reflect events or circumstances occurring after this press release. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. All forward-looking statements are qualified in their entirety by this cautionary statement.
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Non-GAAP Financial Measures
Niska uses and discloses the financial measures “Adjusted EBITDA” and “Cash Available for Distribution” in this press release. Niska defines Adjusted EBITDA as net earnings before interest, income taxes, depreciation and amortization, unrealized risk management gains and losses, foreign exchange gains and losses, unrealized inventory impairment write-downs, gains and losses on asset dispositions, asset impairments and other income. Niska defines Cash Available for Distribution as Adjusted EBITDA reduced by interest expense (excluding amortization of deferred financing costs and the effects of unrealized gains or losses on interest rate swaps), income taxes paid, maintenance capital expenditures and other income. Niska’s Adjusted EBITDA and Cash Available for Distribution are not presentations made in accordance with Generally Accepted Accounting Principles in the United States (“GAAP”). Niska’s management utilizes Adjusted EBITDA and Cash Available for Distribution as key performance measures in order to assess:
· the financial performance of Niska’s assets, operations and return on capital without regard to financing methods, capital structure or historical cost basis;
· the ability of Niska’s assets to generate cash sufficient to pay interest on its indebtedness and make distributions to its equity holders;
· repeatable operating performance that is not distorted by non-recurring items or market volatility; and
· the viability of acquisitions and capital expenditure projects.
The GAAP measure most directly comparable to Adjusted EBITDA and Cash Available for Distribution is net earnings. For a reconciliation of Adjusted EBITDA to net earnings, please see the schedule provided in the attached pages.
Niska believes that investors benefit from having access to the same financial measures used by Niska’s management. Further, Niska believes that these measures are useful to investors because they are one of the bases for comparing Niska’s operating performance with that of other companies with similar
operations, although Niska’s measures may not be directly comparable to similar measures used by other companies.
Contact
Niska Gas Storage Partners LLC
Investor Relations:
Brandon Tran or Vance Powers
(403) 513-8600
NISKA GAS STORAGE PARTNERS LLC
CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)
(in thousands of U.S. dollars)
(unaudited)
| | Three Months Ended | | Six Months Ended | |
| | September 30, | | September 30, | |
| | 2011 | | 2010 | | 2011 | | 2010 | |
| | | | | | | | | |
REVENUES | | | | | | | | | |
Long-term contract | | $ | 29,495 | | $ | 28,394 | | $ | 59,075 | | $ | 58,018 | |
Short-term contract | | 5,739 | | 9,547 | | 11,305 | | 17,776 | |
Optimization, net | | 40,425 | | 39,895 | | 51,044 | | 43,686 | |
Total revenue | | 75,659 | | 77,836 | | 121,424 | | 119,480 | |
| | | | | | | | | |
EXPENSES (INCOME) | | | | | | | | | |
Operating | | 14,351 | | 10,115 | | 25,179 | | 21,271 | �� |
General and administrative | | 7,324 | | 7,754 | | 14,467 | | 15,272 | |
Depreciation and amortization | | 10,807 | | 13,244 | | 20,807 | | 23,340 | |
Interest | | 19,370 | | 19,412 | | 38,022 | | 38,167 | |
Loss on extinguishment of debt | | 883 | | — | | 883 | | — | |
Foreign exchange losses (gains) | | 389 | | (96 | ) | 382 | | 29 | |
Other income | | (22 | ) | (12 | ) | (40 | ) | (24 | ) |
| | 53,102 | | 50,417 | | 99,700 | | 98,055 | |
| | | | | | | | | |
EARNINGS BEFORE INCOME TAXES | | 22,557 | | 27,419 | | 21,724 | | 21,425 | |
| | | | | | | | | |
Income tax benefit | | (5,032 | ) | (4,018 | ) | (10,492 | ) | (10,547 | ) |
| | | | | | | | | |
NET EARNINGS AND COMPREHENSIVE INCOME | | $ | 27,589 | | $ | 31,437 | | $ | 32,216 | | $ | 31,972 | |
Less: | | | | | | | | | |
Net earnings prior to initial public offering on May 17, 2010 | | — | | — | | — | | 36,234 | |
Net earnings (loss) subsequent to initial public offering on May 17, 2010 | | $ | 27,589 | | $ | 31,437 | | $ | 32,216 | | $ | (4,262 | ) |
| | | | | | | | | |
Net earnings (loss) subsequent to initial public offering allocated to: | | | | | | | | | |
Managing member | | $ | 545 | | $ | 1,105 | | $ | 636 | | $ | 392 | |
Common unitholders | | $ | 13,681 | | $ | 15,166 | | $ | 15,949 | | $ | (2,327 | ) |
Subordinated unitholder | | $ | 13,363 | | $ | 15,166 | | $ | 15,631 | | $ | (2,327 | ) |
| | | | | | | | | |
Earnings (loss) per unit allocated to common unitholders — basic and diluted | | $ | 0.40 | | $ | 0.45 | | $ | 0.47 | | $ | (0.07 | ) |
| | | | | | | | | |
Earnings (loss) per unit allocated to subordinated unitholders — basic and diluted | | $ | 0.40 | | $ | 0.45 | | $ | 0.47 | | $ | 0.07 | ) |
NISKA GAS STORAGE PARTNERS LLC
SELECTED FINANCIAL DATA AND NON-GAAP RECONCILIATIONS
(in thousands of U.S. dollars, except capacity amounts)
(unaudited)
| | Three Months Ended | | Six Months Ended | |
| | September 30, | | September 30, | |
| | 2011 | | 2010 | | 2011 | | 2010 | |
| | | | | | | | | |
Reconciliation of Net Earnings to Adjusted EBITDA and Cash Available for Distribution: | | | | | | | | | |
| | | | | | | | | |
Net earnings | | $ | 27,589 | | $ | 31,437 | | $ | 32,216 | | $ | 31,972 | |
Add (deduct): | | | | | | | | | |
Interest expense | | 19,370 | | 19,412 | | 38,022 | | 38,167 | |
Income tax benefit | | (5,032 | ) | (4,018 | ) | (10,492 | ) | (10,547 | ) |
Depreciation and amortization | | 10,807 | | 13,244 | | 20,807 | | 23,340 | |
Unrealized risk management gains | | (23,792 | ) | (20,721 | ) | (12,972 | ) | (8,450 | ) |
Loss on extinguishment of debt | | 883 | | — | | 883 | | — | |
Foreign exchange losses (gains) | | 389 | | (96 | ) | 382 | | 29 | |
Other income | | (22 | ) | (12 | ) | (40 | ) | (24 | ) |
Adjusted EBITDA | | $ | 30,192 | | $ | 39,246 | | $ | 68,806 | | $ | 74,487 | |
Less: | | | | | | | | | |
Cash interest expense, net | | 18,350 | | 18,303 | | 35,976 | | 36,095 | |
Income taxes paid | | 469 | | 222 | | 755 | | 287 | |
Maintenance capital expenditures | | 159 | | 622 | | 162 | | 724 | |
Other income | | (22 | ) | (12 | ) | (40 | ) | (24 | ) |
Cash available for distribution | | $ | 11,236 | | $ | 20,111 | | $ | 31,953 | | $ | 37,405 | |
| | | | | | | | | |
Revenue: | | | | | | | | | |
Long-term contract | | $ | 29,495 | | $ | 28,394 | | $ | 59,075 | | $ | 58,018 | |
Short-term contract | | 5,739 | | 9,547 | | 11,305 | | 17,776 | |
Proprietary optimization: | | | | | | | | | |
Realized optimization | | 16,633 | | 19,174 | | 38,072 | | 35,236 | |
Unrealized risk management losses | | 23,792 | | 20,721 | | 12,972 | | 8,450 | |
Total | | $ | 75,659 | | $ | 77,836 | | $ | 121,424 | | $ | 119,480 | |
| | | | | | | | | |
Total realized revenues | | $ | 51,867 | | $ | 57,115 | | $ | 108,452 | | $ | 111,030 | |
| | | | | | | | | |
Capital expenditures: | | | | | | | | | |
Maintenance | | $ | 159 | | $ | 622 | | $ | 162 | | $ | 724 | |
Expansion and cost reduction | | 16,767 | | 4,574 | | 27,686 | | 14,435 | |
Total | | $ | 16,926 | | $ | 5,196 | | $ | 27,848 | | $ | 15,159 | |
| | | | | | | | | |
Operating data: | | | | | | | | | |
Effective working gas capacity (Bcf) | | 206.5 | | 204.5 | | 206.5 | | 204.5 | |
| | September 30, | | March 31, | |
Selected Balance Sheet data | | 2011 | | 2011 | |
| | (unaudited) | |
| | | | | |
Cash and cash equivalents | | $ | 26,679 | | $ | 117,742 | |
Borrowings under revolving credit facility | | $ | 89,000 | | $ | — | |
Total debt excluding revolving credit facility | | $ | 769,340 | | $ | 800,000 | |
Members’ equity | | $ | 908,747 | | $ | 916,973 | |
NISKA GAS STORAGE PARTNERS LLC
ESTIMATED FINANCIAL DATA AND NON-GAAP RECONCILIATIONS
(in thousands of U.S. dollars)
(unaudited)
| | Estimated for the | |
| | Fiscal Year Ended | |
| | March 31, 2012 | |
| | Low Estimate | | High Estimate | |
| | | | | |
Reconciliation of Estimated Net Earnings to Adjusted EBITDA and Cash Available for Distribution: | | | | | |
| | | | | |
Net earnings | | $ | 2,671 | | $ | 12,671 | |
Add (deduct): | | | | | |
Interest expense | | 75,680 | | 75,680 | |
Income tax benefit | | (9,000 | ) | (9,000 | ) |
Depreciation and amortization | | 39,877 | | 39,877 | |
Unrealized risk management losses | | 10,820 | | 10,820 | |
Other income | | (25 | ) | (25 | ) |
Adjusted EBITDA | | 120,023 | | 130,023 | |
Less: | | | | | |
Cash interest expense, net | | 72,180 | | 72,180 | |
Income taxes paid | | 300 | | 300 | |
Maintenance capital expenditures | | 1,700 | | 1,700 | |
Other income | | 25 | | 25 | |
Cash available for distribution | | $ | 45,818 | | $ | 55,818 | |
| | | | | |
Estimated Cash Distributions (1) | | $ | 49,252 | | $ | 49,252 | |
| | | | | |
Ratio of Cash Available for Distribution to Estimated Cash Distributions | | 0.9 | | 1.1 | |
Note (1): Represents four times the quarterly distributions paid with respect to common units outstanding on November 2, 2011 along with the associated Managing Member distributions. Amounts do not include any associated withholding taxes payable on any distributions funded from Canadian operations.
