Niska Gas Storage Partners (NKA) 10-Q 2014 Q2 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2013

OR

o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from              to              

Commission file number 001-34733

Niska Gas Storage Partners LLC

(Exact name of registrant as specified in its charter)

Delaware	27-1855740
(State or other jurisdiction of	(IRS Employer
incorporation or organization)	Identification number)
1001 Fannin Street, Suite 2500
Houston, TX	77002
(Address of principal executive offices)	(Zip Code)

(281) 404-1890

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of  1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x   No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x  No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o	Accelerated filer x	Non-accelerated filer o	Smaller reporting company o
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o  No x

As of October 31, 2013, there were 34,904,962 Common Units outstanding.

Cautionary Statement Regarding Forward-Looking Information

This report contains information that may constitute “forward-looking statements.” Generally, the words “believe,” “expect,” “intend,” “estimate,” “anticipate,” “project,” “will” and similar expressions identify forward-looking statements, which generally are not historical in nature. All statements that address operating performance, events or developments that we expect or anticipate will occur in the future—including statements relating to general views about future operating results—are forward-looking statements. Management believes that these forward-looking statements are reasonable as and when made. However, caution should be taken not to place undue reliance on any such forward-looking statements because such statements speak only as of the date when made. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. In addition, forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our historical experience and our present expectations or projections. These risks and uncertainties include changes in general economic conditions, competitive conditions in our industry, actions taken by third-party operators, processors and transporters, changes in the availability and cost of capital, operating hazards, natural disasters, weather-related delays, casualty losses and other matters beyond our control, the effects of existing and future laws and governmental regulations, the effects of future litigation, and certain factors described in Part II, “Item 1A. Risk Factors” and elsewhere in this report and in our Annual Report on Form 10-K for the fiscal year ended March 31, 2013, and those described  from time to time in our future reports filed with the Securities and Exchange Commission.

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TABLE OF CONTENTS

		Page
	PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)	1
	Consolidated Statements of Earnings (Loss) and Comprehensive Income (Loss) for the Three and Six Months Ended September 30, 2013 and 2012	1
	Consolidated Balance Sheets as of September 30, 2013 and March 31, 2013	2
	Consolidated Statements of Cash Flows for the Six Months Ended September 30, 2013 and 2012	3
	Consolidated Statements of Changes in Members’ Equity for the Six Months Ended September 30, 2013 and 2012	4
	Notes to Unaudited Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	30
Item 4.	Controls and Procedures	30
	PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	31
Item 1A.	Risk Factors	31
Item 6.	Exhibits	32

ii

PART I—FINANCIAL INFORMATION

Item 1.  Financial Statements (unaudited)

Niska Gas Storage Partners LLC

Consolidated Statements of Earnings (Loss) and Comprehensive Income (Loss)

(in thousands of U.S. dollars, except for per unit amounts)

(Unaudited)

	Three Months Ended						Six Months Ended
	September 30,						September 30,
	2013			2012			2013			2012
Revenues:
Fee-based revenue	$	33,197		$	40,998		$	64,667		$	78,059
Optimization, net	3,666			(16,453		)	29,384			(56,301		)
	36,863			24,545			94,051			21,758
Expenses (income):
Operating	8,877			8,826			19,321			16,920
General and administrative	9,515			8,077			20,804			17,915
Depreciation and amortization	10,298			13,242			20,631			25,065
Interest	16,397			16,672			32,603			33,180
Loss on extinguishment of debt	—			—			—			599
Foreign exchange (gains) losses	(410		)	(149		)	447			(336		)
Other (income) expense	(17		)	(8		)	374			(185		)
LOSS BEFORE INCOME TAXES	(7,797		)	(22,115		)	(129		)	(71,400		)
Income tax expense (benefit)	48			(6,718		)	(252		)	(18,658		)
NET EARNINGS (LOSS) AND COMPREHENSIVE INCOME (LOSS)	$	(7,845	)	$	(15,397	)	$	123		$	(52,742	)
Net earnings (loss) allocated to:
Managing Member	$	(154	)	$	(305	)	$	4		$	(1,044	)
Common unitholders	$	(7,691	)	$	(7,622	)	$	119		$	(26,109	)
Subordinated unitholder (Notes 1 and 6)	$	—		$	(7,470	)	$	—		$	(25,589	)
Earnings (loss) per unit allocated to common unitholders
- basic and diluted	$	(0.22	)	$	(0.22	)	$	—		$	(0.76	)
Earnings (loss) per unit allocated to subordinated unitholders
- basic and diluted (Notes 1 and 6)	$	—		$	(0.22	)	$	—		$	(0.76	)

(See Notes to Unaudited Consolidated Financial Statements)

1

Niska Gas Storage Partners LLC

Consolidated Balance Sheets

(in thousands of U.S. dollars)

(Unaudited)

	September 30,		March 31,
	2013		2013
ASSETS
Current assets
Cash and cash equivalents	$	8,189	$	10,610
Margin deposits	21,972		18,474
Trade receivables	999		2,702
Accrued receivables	22,280		106,726
Natural gas inventory	175,160		83,416
Prepaid expenses and other current assets	3,125		4,688
Short-term risk management assets	27,208		21,159
	258,933		247,775
Long-term assets
Property, plant and equipment, net of accumulated depreciation	903,677		918,061
Goodwill	245,604		245,604
Long-term natural gas inventory	15,264		15,264
Intangible assets, net of accumulated amortization	69,032		73,998
Deferred charges, net of accumulated amortization	12,749		14,420
Other assets	2,703		2,677
Long-term risk management assets	6,521		6,593
	1,255,550		1,276,617
TOTAL	$	1,514,483	$	1,524,392
LIABILITIES AND MEMBERS’ EQUITY
Current liabilities
Revolving credit facility	$	60,500	$	65,000
Current portion of obligations under capital lease	1,279		1,259
Trade payables	1,146		1,048
Current portion of deferred taxes	14,304		14,303
Deferred revenue	375		568
Accrued liabilities	57,174		39,840
Short-term risk management liabilities	19,000		20,005
	153,778		142,023
Long-term liabilities
Long-term risk management liabilities	5,071		4,574
Asset retirement obligations	2,001		2,007
Other long-term liabilities	1,385		1,461
Deferred income taxes	120,691		120,935
Obligations under capital lease	11,581		12,225
Long-term debt	643,790		643,790
	938,297		927,015
Members’ equity
Common units	300,987		321,642
Subordinated units (Notes 1 and 6)	—		265,877
Managing Member’s interest	275,199		9,858
	576,186		597,377
Commitments and contingencies (Note 2)
TOTAL	$	1,514,483	$	1,524,392

(See Notes to Unaudited Consolidated Financial Statements)

2

Niska Gas Storage Partners LLC

Consolidated Statements of Cash Flows

(in thousands of U.S. dollars)

(Unaudited)

	Six Months Ended
	September 30,
	2013			2012
Operating Activities
Net earnings (loss)	$	123		$	(52,742	)
Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:
Unrealized foreign exchange losses (gains)	370			(105		)
Deferred income tax benefit	(252		)	(18,652		)
Unrealized risk management (gains) losses	(6,486		)	79,856
Depreciation and amortization	20,631			25,065
Deferred charges amortization	1,670			1,743
Loss on extinguishment of debt	—			599
Write-down of inventory	—			22,281
Changes in non-cash working capital	8,817			(28,802		)
Net cash provided by operating activities	24,873			29,243
Investing Activities
Property, plant and equipment expenditures	(915		)	(26,292		)
Proceeds on sale of assets	—			2,200
Net cash used in investing activities	(915		)	(24,092		)
Financing Activities
Proceeds from revolver drawings	227,000			176,948
Revolver payments	(231,500		)	(161,948		)
Payment of deferred financing costs	—			(3,127		)
Proceeds from obligations under capital lease	—			712
Repayments of obligations under capital lease	(625		)	—
Distributions to Unitholders	(21,313		)	(22,727		)
Net cash used in financing activities	(26,438		)	(10,142		)
Effect of translation on foreign currency cash and cash equivalents	59			148
Net decrease in cash and cash equivalents	(2,421		)	(4,843		)
Cash and cash equivalents, beginning of period	10,610			13,342
Cash and cash equivalents, end of period	$	8,189		$	8,499

Supplemental cash flow disclosures (Note 11)

(See Notes to Unaudited Consolidated Financial Statements)

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Niska Gas Storage Partners LLC

Consolidated Statements of Changes in Members’ Equity

(in thousands of U.S. dollars)

(Unaudited)

							Managing
	Common			Subordinated			Member
	Units			Units			Interest			Total
Balance, April 1, 2012	$	391,585		$	287,105		$	11,700		$	690,390
Net loss	(26,109		)	(25,589		)	(1,044		)	(52,742		)
Distributions to unitholders	(23,762		)	370			(473		)	(23,865		)
Balance, September 30, 2012	$	341,714		$	261,886		$	10,183		$	613,783
Balance, April 1, 2013	$	321,642		$	265,877		$	9,858		$	597,377
Cancellation of subordinated units	—			(265,877		)	265,877			—
Net income	119			—			4			123
Distributions to unitholders	(26,721		)	—			(540		)	(27,261		)
Issuance of common units	5,947			—			—			5,947
Balance, September 30, 2013	$	300,987		$	—		$	275,199		$	576,186

(See Notes to Unaudited Consolidated Financial Statements)

4

Niska Gas Storage Partners LLC

Notes to Unaudited Consolidated Financial Statements

(Tabular amounts expressed in thousands of U.S. dollars unless otherwise noted)

1. Organization and Basis of Presentation

Organization

Niska Gas Storage Partners LLC (“Niska Partners” or the “Company”) is a publicly-traded Delaware limited liability company (NYSE:NKA) which independently owns and/or operates natural gas storage assets in North America. The Company operates the Countess and Suffield gas storage facilities (collectively, the AECO Hub™) in Alberta, Canada and the Wild Goose and Salt Plains gas storage facilities in California and Oklahoma, respectively. Each of these facilities markets natural gas storage services in addition to optimizing storage capacity with its own proprietary gas purchases.

On April 2, 2013, Niska Partners completed an equity restructuring with affiliates of Carlyle/Riverstone Global Energy and Power Fund II, L.P. and Carlyle/Riverstone Global Energy and Power Fund III, L.P. (collectively the “Carlyle/Riverstone Funds”).  In the restructuring, all of the Company’s 33.8 million subordinated units and previous incentive distribution rights (all of which were owned by the Carlyle/Riverstone Funds) were combined into and restructured as a new class of incentive distribution rights (“new IDRs”).  The equity restructuring, which did not require any further consents or approvals, was effective as of the same day.  The transaction was unanimously approved by the Company’s Board of Directors on the unanimous approval and recommendation of its Conflicts Committee, which is composed solely of independent directors.

The restructuring permanently eliminated all of the Company’s subordinated units and previous incentive distribution rights in return for the new IDRs.  Prior to completion of the restructuring, the Company would have been required to pay the full minimum quarterly distribution of $0.35 per unit on the subordinated units (requiring additional distributions of approximately $12 million per quarter) prior to increasing the quarterly distribution on common units. Quarterly distributions on the subordinated units had not been paid since the quarter ended September 30, 2011.

The new IDRs entitle the Carlyle/Riverstone Funds to receive 48% of any quarterly cash distributions after Niska Partners’ common unit holders have received the full minimum quarterly distribution ($0.35 per unit) for each quarter plus any arrearages from prior quarters (of which there are currently none).  The previous incentive distribution rights entitled the Carlyle/Riverstone Funds to receive increasing percentages (ranging from 13% to 48%) of incremental cash distributions after the unit holders (both common and subordinated) exceeded quarterly distributions ranging from $0.4025 per unit to $0.5250 per unit.  In addition, for a period of five years, and provided that the Carlyle/Riverstone Funds continue to own a majority of both the managing member and the new IDRs, the Carlyle/Riverstone Funds will be deemed to own 33.8 million “Notional Subordinated Units” in connection with votes to remove and replace the managing member.  These Notional Subordinated Units are not entitled to distributions, but preserve the Carlyle/Riverstone Fund’s voting rights with respect to removal of the managing member.

At September 30, 2013, Niska Partners had 34,904,962 common units outstanding. Of this amount, 17,404,962 common units are owned by the Carlyle/Riverstone Funds, along with a 1.96% Managing Member’s interest in the Company and all of the Company’s new IDRs. Including all of the common units owned by the Carlyle/Riverstone Funds, along with the 1.96% Managing Member’s interest, the Carlyle/Riverstone Funds have a 50.85% ownership interest in the Company, excluding the IDRs, which are a variable interest. The remaining 17,500,000 common units, representing a 49.15% ownership interest in the Company excluding the IDRs, are owned by the public.

Basis of Presentation

The accounting  policies applied in these unaudited interim financial statements are consistent with the policies applied in the consolidated financial statements of Niska Partners and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2013.

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Niska Gas Storage Partners LLC

Notes to Unaudited Consolidated Financial Statements (continued)

(Tabular amounts expressed in thousands of U.S. dollars unless otherwise noted)

1. Organization and Basis of Presentation (continued)

In the opinion of management, the accompanying consolidated financial statements of Niska Partners, which are unaudited except for the balance sheet at March 31, 2013 which is derived from audited financial statements, include all adjustments necessary to present fairly Niska Partners’ financial position as of September 30, 2013, the results of Niska Partners’ operations for the three and six months ended September 30, 2013 and 2012, along with its cash flows for the six months ended September 30, 2013 and 2012. The results of operations for the three and six months ended September 30, 2013 are not necessarily representative of the results to be expected for the full fiscal year ending March 31, 2014.  The optimization of proprietary gas purchases is seasonal with the majority of the revenues and costs associated with the physical sale of proprietary gas generally occurring during the third and fourth fiscal quarters, when demand for natural gas is typically the strongest.

Pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”), the unaudited consolidated financial statements do not include all of the information and notes normally included with financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). These consolidated financial statements should be read in conjunction with the consolidated financial statements of Niska Partners and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2013.

2. Commitments and Contingencies

Commitments

Niska Partners has entered into non-cancelable operating leases for office space, land use rights at its operating facilities, storage capacity at other facilities, equipment, and vehicles used in its operations. The remaining lease terms expire between December 2013 and August 2056 and require the payment of taxes, insurance and maintenance by the lessee.

Contingencies

Niska Partners and its subsidiaries are subject to various legal proceedings and actions arising in the normal course of business. While the outcome of such legal proceedings and actions cannot be predicted with certainty, it is the view of management that the resolution of such proceedings and actions will not have a material impact on Niska Partners’ unaudited consolidated financial position or results of operations.

3. Debt

Niska Partners’ debt obligations consist of the following:

	September 30,			March 31,
	2013			2013
Senior Notes due 2018	$	643,790		$	643,790
Revolving credit facility	60,500			65,000
Total	704,290			708,790
Less portion classified as current	(60,500		)	(65,000		)
	$	643,790		$	643,790

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Niska Gas Storage Partners LLC

Notes to Unaudited Consolidated Financial Statements (continued)

(Tabular amounts expressed in thousands of U.S. dollars unless otherwise noted)

3. Debt (continued)

Senior Notes

Interest on the Senior Notes is payable semi-annually on March 15 and September 15 at a rate of 8.875% per annum. The Senior Notes will mature on March 15, 2018. No principal payments on the Senior Notes are required prior to maturity except in certain instances of default. As at September 30, 2013, the estimated fair value of the Senior Notes was $674.7 million (March 31, 2013 - $669.5 million).

The indenture governing the Senior Notes limits Niska Partners’ ability to incur new debt or to pay distributions in respect of, repurchase or pay dividends on its membership interests (or other capital stock) or make other restricted payments. The limitations will apply differently depending on a fixed charge coverage ratio, which is defined as the ratio of cash flow (which is defined in the indenture in a manner substantially consistent with consolidated earnings before interest, taxes, depreciation and amortization (“EBITDA”)) to fixed charges, each as defined in the indenture governing the Senior Notes, and measured for the preceding four fiscal quarters.

Under this limitation the indenture would have permitted the Company to distribute approximately $252.7 million as at September 30, 2013.

If the fixed charge coverage ratio is not less than 2.0 to 1.0 (after giving pro forma effect to the incurrence of the additional debt obligations), Niska Partners is generally permitted to incur additional debt obligations beyond the Senior Notes and its $400 million Credit Agreement (discussed below).

If the fixed charge coverage ratio is not less than 1.75 to 1.0, Niska Partners is permitted to make restricted payments if the aggregate restricted payments since the date of the closing of its IPO, excluding certain types or amounts of permitted payments, are less than the sum (which the Company refers to as the restricted payment basket) of a number of items including, most importantly:

·operating surplus (defined similarly to the definition in the Company’s operating agreement) calculated as of the end of its preceding fiscal quarter; and

·the aggregate net cash proceeds received as a capital contribution or from the issuance of equity interests.

If the fixed charge coverage ratio is less than 1.75 to 1.0, Niska Partners is permitted to make restricted payments if the aggregate restricted payments constituting distributions in respect of Niska Partners’ equity interests since the date of the closing of its IPO, excluding certain types or amounts of permitted payments, are less than the sum (which the Company refers to as the restricted payment basket) of a number of items including, most importantly:

·$75.0 million; and

·the aggregate net cash proceeds received as a capital contribution or from the issuance of equity interests, again including the net cash proceeds from the IPO, reduced by the amount distributed before the IPO.

The indenture does not prohibit certain types or amounts of restricted payments, including a general basket of $75.0 million of restricted payments.

7

Niska Gas Storage Partners LLC

Notes to Unaudited Consolidated Financial Statements (continued)

(Tabular amounts expressed in thousands of U.S. dollars unless otherwise noted)

3. Debt (continued)

At September 30, 2013, the fixed charge coverage ratio was 2.1 to 1.0 and Niska Partners was permitted to pay the distribution described in Note 13. When the ratio declines below 2.0 to 1.0 the Company is restricted in its ability to issue new debt.

$400 Million Credit Agreement

Niska Partners, through its subsidiaries, Niska Gas Storage US, LLC and AECO Gas Storage Partnership, has senior secured asset-based revolving credit facilities, consisting of a U.S. revolving credit facility and a Canadian revolving credit facility (the “Credit Facilities” or the “$400 million Credit Agreement”). Each revolving credit facility matures on June 29, 2016.

As at September 30, 2013, $60.5 million in borrowings, with a weighted average interest rate of 3.94% (March 31, 2013 — $65.0 million of borrowings had a weighted average interest rate of 3.69%), were outstanding under the Credit Facilities. Amounts committed in support of letters of credit totaled $34.8 million at September 30, 2013 (March 31, 2013 - $3.3 million). Any borrowings under the $400 million Credit Agreement are classified as current.

The credit agreement provides that Niska Partners may borrow only up to the lesser of the level of the then current borrowing base or the committed maximum borrowing capacity, which is currently $400.0 million. As of September 30, 2013, the borrowing base collateral totaled $388.5 million.

The $400 million Credit Agreement contains limitations on Niska Partners’ ability to incur additional debt or to pay distributions in respect of, repurchase or pay dividends on its membership interests (or other capital stock) or make other restricted payments. These limitations are similar to those contained in the indenture governing the Senior Notes, but contain certain substantive differences.  As a result of these differences, the limitations on restricted payments contained in the Credit Agreement should be less restrictive than the limitations contained in the indenture.  As of September 30, 2013, Niska Partners was in compliance with all covenant requirements under the Senior Notes and the $400 million Credit Agreement.

Niska Partners has no independent assets or operations other than its investments in its subsidiaries. Both the Senior Notes and the $400 million Credit Agreement have been jointly and severally guaranteed by Niska Partners and substantially all of its subsidiaries. Niska Partners’ subsidiaries have no significant restrictions on their ability to pay distributions or make loans to Niska Partners, which are prepared and measured on a consolidated basis, and have no restricted assets as of September 30, 2013.

4. Risk Management Activities and Financial Instruments

Risk Management Overview

Niska Partners has exposure to commodity price, foreign currency, counterparty credit, interest rate, and liquidity risk. Risk management activities are tailored to the risks they are designed to mitigate.

Commodity Price Risk

As a result of its natural gas inventory, Niska Partners is exposed to risks associated with changes in price when buying and selling natural gas across future time periods. To manage these risks and reduce variability of cash flows, the Company utilizes a combination of financial and physical derivative contracts, including forwards, futures, swaps and option contracts. The use of these contracts is subject to the Company’s risk management policies. These contracts have not been treated as hedges for financial reporting purposes and therefore changes in fair value are recorded directly in earnings.

8

Niska Gas Storage Partners LLC

Notes to Unaudited Consolidated Financial Statements (continued)

(Tabular amounts expressed in thousands of U.S. dollars unless otherwise noted)

4. Risk Management Activities and Financial Instruments (continued)

Forward contracts and futures contracts are agreements to purchase or sell a specific financial instrument or quantity of natural gas at a specified price and date in the future. Niska Partners enters into forward contracts and futures contracts to mitigate the impact of changes in natural gas prices. In addition to cash settlement, exchange traded futures may also be settled by the physical delivery of natural gas.

Swap contracts are agreements between two parties to exchange streams of payments over time according to specified terms. Swap contracts require receipt of payment for the notional quantity of the commodity based on the difference between a fixed price and the market price on the settlement date. Niska Partners enters into commodity swaps to mitigate the impact of changes in natural gas prices.

Option contracts are contractual agreements to convey the right, but not the obligation, for the purchaser of the option to buy or sell a specific physical or notional amount of a commodity at a fixed price, either at a fixed date or at any time within a specified period. Niska Partners enters into option agreements to mitigate the impact of changes in natural gas prices.

To limit its exposure to changes in commodity prices, Niska Partners enters into purchases and sales of natural gas inventory and concurrently matches the volumes in these transactions with offsetting derivative contracts. To comply with its internal risk management policies, Niska Partners is required to limit its exposure of unmatched volumes of proprietary current natural gas inventory to an aggregate overall limit of 8.0 billion cubic feet (“Bcf”). At September 30, 2013, 54.2 Bcf of natural gas inventory was offset with financial contracts, representing 100% of total current inventory. Non-cycling working gas, which is included in long-term inventory, and fuel gas used for operating the facilities are excluded from the coverage requirement. Total volumes of long-term inventory and fuel gas at September 30, 2013 are 3.4 Bcf and 0.0 Bcf, respectively. As of September 30, 2013 and March 31, 2013, the volumes of inventories which were economically hedged using each type of contract were:

	September 30,		March 31,
	2013		2013
Forwards	0.8	Bcf	1.6	Bcf
Futures	54.5	Bcf	14.1	Bcf
Swaps	—		10.0	Bcf
Options	—		—
	55.3	Bcf	25.7	Bcf

Counterparty Credit Risk

Niska Partners is exposed to counterparty credit risk on its trade and accrued accounts receivable and risk management assets. Counterparty credit risk is the risk of financial loss to the Company if a customer fails to perform its contractual obligations. Niska Partners engages in transactions for the purchase and sale of products and services with major companies in the energy industry and with industrial, commercial, residential and municipal energy consumers.  Credit risk associated with trade accounts receivable is mitigated by the high percentage of investment grade customers, collateral support of receivables and Niska Partners’ ability to take ownership of customer owned natural gas stored in its facilities in the event of non-payment.  For the six months ended September 30, 2013 and 2012, no trade receivables were deemed to be uncollectible. It is management’s opinion that no allowance for doubtful accounts is required at September 30, 2013 or March 31, 2013 on accrued and trade accounts receivable.

9

Niska Gas Storage Partners LLC

Notes to Unaudited Consolidated Financial Statements (continued)

(Tabular amounts expressed in thousands of U.S. dollars unless otherwise noted)

4. Risk Management Activities and Financial Instruments (continued)

The Company analyzes the financial condition of counterparties prior to entering into an agreement. Credit limits are established and monitored on an ongoing basis. Management believes, based on its credit policies, that the Company’s financial position, results of operations and cash flows will not be materially affected as a result of non-performance by any single counterparty. Credit risk is assessed prior to transacting with any counterparty and each counterparty is required to maintain an investment grade rating, provide a parental guarantee from an investment grade parent, or provide an alternative method of financial assurance (letter of credit, cash, etc) to support proposed transactions. In addition, the Company’s tariffs contain provisions that permit it to take title to a customer’s inventory should the customer’s account remain unpaid for an extended period of time. Although the Company relies on a few counterparties for a significant portion of its revenues, one counterparty making up 35.3% of gross revenues for the six months ended September 30, 2013 is a physical natural gas clearing and settlement facility that requires counterparties to post margin deposits equal to 125% of their net position, which reduces the risk of default.

Exchange traded futures and options comprise approximately 68.7% of Niska Partners’ commodity risk management assets at September 30, 2013. These exchange traded contracts have minimal credit exposure as the exchanges guarantee that every contract will be margined on a daily basis. In the event of any default, Niska Partners’ account on the exchange would be absorbed by other clearing members. Because every member posts an initial margin, the exchange can protect the exchange members if or when a clearing member defaults.

Niska Partners further manages credit exposure by entering into master netting agreements for the majority of non-retail contracts. These master netting agreements provide the Company, in the event of default, the right to offset the counterparty’s rights and obligations.

Interest Rate Risk

Niska Partners assesses interest rate risk by continually identifying and monitoring changes in interest rate exposures that may adversely impact expected future cash flows. At September 30, 2013, Niska Partners was only exposed to interest rate risk resulting from the variable rates associated with its $400 million Credit Agreement of which $60.5 million was drawn at September 30, 2013.

Liquidity Risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. Niska Partners continues to manage its liquidity risk by ensuring sufficient cash and credit facilities are available to meet its operating and capital expenditure obligations when due, under both normal and stressed conditions.

10

Niska Gas Storage Partners LLC

Notes to Unaudited Consolidated Financial Statements (continued)

(Tabular amounts expressed in thousands of U.S. dollars unless otherwise noted)

4. Risk Management Activities and Financial Instruments (continued)

Foreign Currency Risk

Foreign currency risk is created by fluctuations in foreign exchange rates. As Niska Partners conducts a portion of its activities in Canadian dollars, earnings and cash flows are subject to currency fluctuations. The performance of the Canadian dollar relative to the U.S. dollar could positively or negatively affect earnings. Niska Partners is exposed to cash flow risk to the extent that Canadian currency outflows do not match inflows. The Company enters into currency swaps to mitigate the impact of changes in foreign exchange rates. The notional value of currency swaps at September 30, 2013 was $42.0 million (March 31, 2013 - $84.0 million). These contracts expire on various dates between October 1, 2013 and June 1, 2016. Niska Partners has not elected hedge accounting treatment, therefore, changes in fair value are recorded directly in earnings.

The following tables show the fair values of Niska Partners’ risk management assets and liabilities at September 30, 2013 and March 31, 2013:

	Energy			Currency
September 30, 2013	Contracts			Contracts			Total
Short-term risk management assets	$	27,076		$	132		$	27,208
Long-term risk management assets	6,426			95			6,521
Short-term risk management liabilities	(18,869		)	(131		)	(19,000		)
Long-term risk management liabilities	(5,071		)	—			(5,071		)
	$	9,562		$	96		$	9,658

	Energy			Currency
March 31, 2013	Contracts			Contracts			Total
Short-term risk management assets	$	20,383		$	776		$	21,159
Long-term risk management assets	6,593			—			6,593
Short-term risk management liabilities	(19,792		)	(213		)	(20,005		)
Long-term risk management liabilities	(4,477		)	(97		)	(4,574		)
	$	2,707		$	466		$	3,173

11

Niska Gas Storage Partners LLC

Notes to Unaudited Consolidated Financial Statements (continued)

(Tabular amounts expressed in thousands of U.S. dollars unless otherwise noted)

4. Risk Management Activities and Financial Instruments (continued)

Information about the Company’s risk management assets and liabilities that had netting or rights of offset arrangements are as follows:

September 30, 2013	Gross Amounts Recognized		Gross Amounts Offset in the Balance Sheet			Net Amounts Presented in  the Balance  Sheet		Margin  Deposits not  Offset in the  Balance Sheet			Net Amounts
Assets
Commodity derivatives	$	116,883	$	(83,380	)	$	33,503	$	(22,944	)	$	10,559
Currency derivatives	273		(47		)	226		(226		)	—
Total assets	117,156		(83,427		)	33,729		(23,170		)	10,559
Liabilities
Commodity derivatives	107,320		(83,380		)	23,940		(16,433		)	7,507
Currency derivatives	178		(47		)	131		(131		)	—
Total liabilities	107,498		(83,427		)	24,071		(16,564		)	7,507
Net	$	9,658	$	—		$	9,658	$	(6,606	)	$	3,052

March 31, 2013	Gross Amounts Recognized		Gross Amounts Offset in the  Balance Sheet			Net Amounts Presented in the Balance  Sheet		Margin  Deposits not  Offset in the  Balance Sheet			Net Amounts
Assets
Commodity derivatives	$	88,682	$	(61,706	)	$	26,976	$	(15,030	)	$	11,946
Currency derivatives	881		(105		)	776		(776		)	—
Total assets	89,563		(61,811		)	27,752		(15,806		)	11,946
Liabilities
Commodity derivatives	85,975		(61,706		)	24,269		(16,861		)	7,408
Currency derivatives	415		(105		)	310		(164		)	146
Total liabilities	86,390		(61,811		)	24,579		(17,025		)	7,554
Net	$	3,173	$	—		$	3,173	$	1,219		$	4,392

12

Niska Gas Storage Partners LLC

Notes to Unaudited Consolidated Financial Statements (continued)

(Tabular amounts expressed in thousands of U.S. dollars unless otherwise noted)

4. Risk Management Activities and Financial Instruments (continued)

The Company expects to recognize risk management assets and liabilities outstanding at September 30, 2013 into net earnings and comprehensive income in the fiscal periods as follows:

	Energy		Currency
	Contracts		Contracts			Total
Fiscal year ending March 31, 2014	$	5,141	$	(13	)	$	5,128
Fiscal year ending March 31, 2015	3,870		40			3,910
Fiscal year ending March 31, 2016	307		44			351
Thereafter	244		25			269
	$	9,562	$	96		$	9,658

Net realized and unrealized optimization gains and losses from the settlement of risk management contracts are summarized as follows:

	Three Months Ended						Six Months Ended
	September 30,						September 30,
	2013			2012			2013			2012
Energy contracts
Realized	$	14,032		$	2,882		$	7,690		$	31,435
Unrealized	(12,234		)	(26,513		)	6,856			(79,131		)
Currency contracts
Realized	132			(439		)	1,596			12
Unrealized	(1,398		)	(2,178		)	(370		)	(748		)
	$	532		$	(26,248	)	$	15,772		$	(48,432	)

5. Fair Value Measurements

The carrying amount of cash and cash equivalents, margin deposits, trade receivables, accrued receivables, trade payables, and accrued liabilities reported on the unaudited consolidated balance sheet approximate fair value. The fair value of debt is the estimated amount the Company would have to pay to transfer its debt, including any premium or discount attributable to the difference between the stated interest rate and market rate of interest at the balance sheet date. Fair values are based on valuations of similar debt at the balance sheet date and supported by observable market transactions when available. See Note 3 for disclosures regarding the fair value of debt.

13

Niska Gas Storage Partners LLC

Notes to Unaudited Consolidated Financial Statements (continued)

(Tabular amounts expressed in thousands of U.S. dollars unless otherwise noted)

5. Fair Value Measurements (continued)

Fair values have been determined as follows for Niska Partners financial assets and liabilities that were accounted for at fair value on a recurring basis:

September 30, 2013	Level 1		Level 2		Level 3		Total
Assets
Commodity derivatives	$	—	$	33,503	$	—	$	33,503
Currency derivatives	—		226		—		226
Total assets	—		33,729		—		33,729
Liabilities
Commodity derivatives	—		23,940		—		23,940
Currency derivatives	—		131		—		131
Total liabilities	—		24,071		—		24,071
Net	$	—	$	9,658	$	—	$	9,658

March 31, 2013	Level 1		Level 2		Level 3		Total
Assets
Commodity derivatives	$	—	$	26,976	$	—	$	26,976
Currency derivatives	—		776		—		776
Total assets	—		27,752		—		27,752
Liabilities
Commodity derivatives	—		24,269		—		24,269
Currency derivatives	—		310		—		310
Total liabilities	—		24,579		—		24,579
Net	$	—	$	3,173	$	—	$	3,173

The Company’s financial assets and liabilities recorded at fair value on a recurring basis have been categorized as Level 2.  The determination of the fair value of assets and liabilities for Level 2 valuations is generally based on a market approach.  The key inputs used in Niska Partners’ valuation models include transaction-specific details such as notional volumes, contract prices, and contract terms as well as forward market prices and basis differentials for natural gas obtained from third-party service providers (typically the New York Mercantile Exchange, or NYMEX).  There were no changes in Niska Partners’ approach to determining fair value and there were no transfers out of Level 2 during the periods ended September 30, 2013 and March 31, 2013.

14

Niska Gas Storage Partners LLC

Notes to Unaudited Consolidated Financial Statements (continued)

(Tabular amounts expressed in thousands of U.S. dollars unless otherwise noted)

6. Members’ Equity

Equity restructuring

As described in Note 1, the Company completed an equity restructuring on April 2, 2013 to eliminate its subordinated units and previous IDRs in exchange for new IDRs. This was accounted for as an exchange of equity between the subordinated unit holder and the Managing Member.

Distribution Reinvestment Plan

Niska Partners filed a registration statement with the SEC to authorize the issuance of up to 7,500,000 common units in connection with a distribution reinvestment plan (“DRIP”).  The DRIP provides unitholders of record and beneficial owners of common units a voluntary means by which unitholders can increase the number of common units owned by reinvesting the quarterly cash distributions unitholders would otherwise receive in the purchase of additional common units.  This registration statement became effective on July 31, 2013. Common units purchased under the DRIP will come from the Company’s authorized but unissued common units or from common units purchased on the open market.

During the three months ended September 30, 2013, the Carlyle/Riverstone Funds elected to participate in the DRIP and were issued 412,717 common units in lieu of receiving cash distributions of $5.9 million.

Phantom Unit Performance Plan (the “PUPP”)

Effective April 1, 2011, the Company maintains a compensatory PUPP plan (“the Plan”) to provide long-term incentive compensation for certain employees and directors and to align their economic interest with those of common unitholders.

A Phantom Unit is a notional unit granted under the PUPP that represents the right to receive a cash payment equal to the fair market value of a unit of the Company’s common units, following the satisfaction of certain time periods and/or certain performance criteria. Phantom Units are granted unvested and subject to both time and performance conditions.  The default time period over which a Phantom Unit vests is three years from the date of grant. The performance measure is based upon total unitholder return (“TUR”) metrics compared to such metrics of a select group of peer companies. The TUR metrics are calculated based on the Company’s percentile ranking during the applicable performance period compared to the peer group.  Provided that the Company has satisfied its minimum quarterly distribution targets for the underlying units, the Phantom Units will vest variably according to the Company’s performance relative to its peer group.

The plan was amended effective April 1, 2012. The performance measure for Phantom Units granted after that date is based on TUR metrics compared to such metrics of a select group of peer companies. The TUR metrics are calculated based on the Company’s percentile ranking during the applicable performance period compared to a peer group. Provided that the Company has satisfied its minimum quarterly distribution targets for the common units, the Phantom Units will vest variably according to the Company’s performance relative to its peer group.

During the six months ended September 30, 2013, Phantom Units totaling 270,042 were granted at a weighted average price of $12.68.  During the six months ended September 30, 2012, Phantom Units totaling 695,349 were granted at a weighted average price of $9.99.

The Plan is administered by the Compensation Committee of the Board of Directors.  The Plan permits the grant of unit awards, restricted units, phantom units, unit options, unit appreciation rights, other unit-based awards, distribution equivalent rights and substitution awards covering an aggregate of 3,380,474 units. As of September 30, 2013, 1,724,175 units (March 31, 2013 - 2,045,693 units) were available for grant.

15

Niska Gas Storage Partners LLC

Notes to Unaudited Consolidated Financial Statements (continued)

(Tabular amounts expressed in thousands of U.S. dollars unless otherwise noted)

6. Members’ Equity (Continued)

The following is a reconciliation of Phantom Units Outstanding as of September 30, 2013:

	Number of Time- Based Units		Number of Performance-Based  Units		Total Units
Balance at March 31, 2013	624,518		307,489		932,007
Granted	135,021		135,021		270,042
Vested and paid	(61,498	)	(61,498	)	(122,996	)
Forfeited	(21,752	)	(21,752	)	(43,504	)
Distribution equivalent rights	33,274		18,202		51,476
Balance at September 30, 2013	709,563		377,462		1,087,025

Unit-based compensation costs for the three and six months ended September 30, 2013 were $2.3 million and $5.6 million respectively ($2.0 million and $3.7 million for the three and six months ended September 30, 2012, respectively).

Earnings per unit:

Niska Partners uses the two-class method for allocating earnings per unit. The two-class method requires the determination of net income allocated to member interests as shown below. Net income for the three and six months ended September 30, 2013, after the allocation to Managing Member’s interest, was only attributable to common unitholders as a result of cancellation of the Company’s subordinated units at the beginning of the current fiscal year. The cancellation of subordinated units has not impacted the prior-period calculation of earnings per unit.

	Three Months Ended						Six Months Ended
	September 30,						September 30,
	2013			2012			2013			2012
Numerator:
Net earnings (loss) attributable to Niska Partners	$	(7,845	)	$	(15,397	)	$	123		$	(52,742	)
Less:
Managing Member’s interest	154			305			(4		)	1,044
Net earnings (loss) attributable to common and subordinated unitholders	$	(7,691	)	$	(15,092	)	$	119		$	(51,698	)
Denominator:
Basic:
Weighted average units outstanding	34,698,604			68,296,990			34,595,988			68,296,990
Diluted:
Weighted average units outstanding	34,698,604			68,296,990			34,595,988			68,296,990
Earnings (loss) per unit:									��
Basic	$	(0.22	)	$	(0.22	)	$	—		$	(0.76	)
Diluted	$	(0.22	)	$	(0.22	)	$	—		$	(0.76	)

16

Niska Gas Storage Partners LLC

Notes to Unaudited Consolidated Financial Statements (continued)

(Tabular amounts expressed in thousands of U.S. dollars unless otherwise noted)

7. Revenues

Niska Partners’ fee-based revenue consists of the following:

	Three Months Ended				Six Months Ended
	September 30,				September 30,
	2013		2012		2013		2012
Long-term contract revenue	$	20,287	$	28,129	$	40,883	$	55,791
Short-term contract revenue	12,910		12,869		23,784		22,268
Total	$	33,197	$	40,998	$	64,667	$	78,059

Optimization, net consists of the following:

	Three Months Ended						Six Months Ended
	September 30,						September 30,
	2013			2012			2013		2012
Realized optimization revenue, net	$	17,298		$	12,238		$	22,898	$	45,859
Unrealized risk management (losses) gains	(13,632		)	(28,691		)	6,486		(79,879		)
Write-down of inventory	—			—			—		(22,281		)
Total	$	3,666		$	(16,453	)	$	29,384	$	(56,301	)

8. Income Taxes

Income taxes included in the consolidated financial statements were as follows:

	Three Months Ended						Six Months Ended
	September 30,						September 30,
	2013			2012			2013			2012
Income tax expense (benefit)	$	48		$	(6,718	)	$	(252	)	$	(18,658	)
Effective income tax rate	-1		%	30		%	195		%	26		%

Income tax benefit was $0.3 million for the six months ended September 30, 2013 compared to a benefit of $18.7 million in the same period of the prior year. The income tax benefit in the current period is due mainly to the recognition of losses in certain taxable Canadian entities.

The effective tax rate for the three and six months ended September 30, 2013 and 2012 differs from the U.S. statutory federal rate of 35% primarily due to the recognition of losses in some entities.

17

Niska Gas Storage Partners LLC

Notes to Unaudited Consolidated Financial Statements (continued)

(Tabular amounts expressed in thousands of U.S. dollars unless otherwise noted)

9. Accrued Liabilities

Niska Partners’ accrued liabilities consist of the following:

	September 30,		March 31,
	2013		2013
Accrued gas purchases	$	33,134	$	14,213
Employee-related accruals	14,147		13,836
Accrued interest	3,137		2,845
Other accrued liabilities	6,756		8,946
	$	57,174	$	39,840

10. Changes in Non-Cash Working Capital

Changes in non-cash working capital for the six months ended September 30, 2013 and 2012 consists of the following:

	Six Months Ended
	September 30,
	2013			2012
Margin deposits	$	(3,498	)	$	(30,730	)
Trade receivables	1,670			1,126
Accrued receivables	83,937			19,694
Natural gas inventory	(91,744		)	6,865
Prepaid expenses and other current assets	1,563			(17,291		)
Other assets	(63		)	—
Trade payables	110			(202		)
Accrued liabilities	17,109			2,611
Deferred revenue	(193		)	(10,875		)
Other long-term liabilities	(74		)	—
Total	$	8,817		$	(28,802	)

During the six months ended September 30, 2012, changes in non-cash working capital included the receipt of proceeds of $14.2 million (September 30, 2013 - $ nil) from sales of cushion gas. The Company included such proceeds in cash flows from operations since the predominant source of cash flows for natural gas purchases and sales are operating in nature.

18

Niska Gas Storage Partners LLC

Notes to Unaudited Consolidated Financial Statements (continued)

(Tabular amounts expressed in thousands of U.S. dollars unless otherwise noted)

11. Supplemental Cash Flow Disclosures

	Six Months Ended
	September 30,
	2013			2012
Interest paid	$	30,641		$	34,489
Taxes paid (recovered)	$	6		$	(7	)
Interest capitalized	$	—		$	2,786
Non-cash (decrease) increase in working capital related to property, plant and equipment expenditures	$	(324	)	$	4,606
Non-cash earnings distribution and reinvestment	$	5,947		$	—

12. Segment Disclosures

The Company’s process for the identification of reportable segments involves examining the nature of services offered, the types of customer contracts entered into and the nature of the economic and regulatory environment.

Niska Partners operates along functional lines in its commercial, engineering, and operations teams for operations in Alberta, Northern California, and the U.S. Mid-continent.  All functional lines and facilities offer the same services: fee-based revenue, and optimization. The Company has a small marketing business which is an extension of the Company’s proprietary optimization activities. Proprietary optimization activities occur when the Company purchases, stores and sells natural gas for its own account in order to utilize or optimize storage capacity that is not contracted or available to third-party customers. All services are delivered using reservoir storage.  The Company measures profitability consistently along all functional lines based on revenues and earnings before interest, taxes, depreciation and amortization, and unrealized risk management gains and losses.  The Company has aggregated its operating segments into one reportable segment as at September 30, 2013 and March 31, 2013 and for each of the three months and six months period ended September 30, 2013 and 2012.

Information pertaining to the Company’s short-term and long-term contract services and net optimization revenues is presented in the consolidated statements of earnings and comprehensive income.  All facilities have the same types of customers: major companies in the energy industry, industrial, commercial, and local distribution companies, and municipal energy consumers.

19

Niska Gas Storage Partners LLC

Notes to Unaudited Consolidated Financial Statements (continued)

(Tabular amounts expressed in thousands of U.S. dollars unless otherwise noted)

12. Segment Disclosures (Continued)

The following tables summarize the net revenues and long-lived assets by geographic area:

	Three Months Ended						Six Months Ended
	September 30,						September 30,
	2013			2012			2013		2012
Net realized revenues
U.S.	$	11,282		$	18,817		$	19,775	$	30,736
Canada	39,213			34,419			67,790		70,902
Net unrealized revenues
U.S.	(6,146		)	(12,716		)	6,308		(28,093		)
Canada	(7,486		)	(15,975		)	178		(51,787		)
Inter-entity
U.S.	—			—			—		—
Canada	—			—			—		—
	$	36,863		$	24,545		$	94,051	$	21,758

	September 30,		March 31,
	2013		2013
Long-lived assets (at period end)
U.S.	$	404,082	$	411,420
Canada	844,947		858,604
	$	1,249,029	$	1,270,024

13. Subsequent Events

Distributions

On October 30, 2013, the Board of Directors of Niska Partners approved a distribution of $0.35 per common unit, payable on November 21, 2013 to unitholders of record on November 13, 2013. The total distribution is expected to be approximately $12.5 million.

20

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following information should be read in conjunction with our unaudited consolidated financial statements and accompanying notes included in this report. The following information and such unaudited consolidated financial statements should also be read in conjunction with the consolidated financial statements and related notes, management’s discussion and analysis of financial condition and results of operations and other information included our Annual Report on Form 10-K for the fiscal year ended March 31, 2013.

Overview of Critical Accounting Policies and Estimates

The process of preparing financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”) requires estimates and judgments to be made regarding certain items and transactions. It is possible that materially different amounts could be recorded if these estimates and judgments change or if the actual results differ from these estimates and judgments. Our most critical accounting estimates, which involve the judgment of our management, were fully disclosed in our Annual Report on Form 10-K for the fiscal year ended March 31, 2013 and remained unchanged as of September 30, 2013.

Overview of Our Business

We operate the Countess and Suffield gas storage facilities (collectively, the AECO HubTM) in Alberta, Canada, and the Wild Goose and Salt Plains gas storage facilities in California and Oklahoma, respectively. Niska Partners markets gas storage services of working gas capacity in addition to optimizing storage capacity with its own proprietary gas purchases at each of these facilities. We also operate a natural gas marketing business which is an extension of our propriety optimization activities in Canada.

We earn revenues by leasing storage on a long-term firm (“LTF”) contract basis for which we receive monthly reservation fees for fixed amounts of storage, leasing storage on a short-term firm (“STF”) contract basis, where customers inject and withdraw specified amounts of gas and pay fees on specific dates, and optimization, where we purchase and sell gas on an economically hedged basis in order to improve facility utilization at margins higher than those from third-party contracts. Proprietary optimization activities occur when the Company purchases and sells natural gas for its own account. Our revenues related to our marketing business are included in proprietary optimization activities.

The Company has a total of 250.5 billion cubic feet (“Bcf”) of working gas capacity among its facilities, including 8.5 Bcf leased from a third-party pipeline company.

We have aggregated all of our activities in one reportable operating segment for financial reporting purposes. Our consolidated financial statements are prepared in accordance with GAAP.

Factors that Impact Our Business

There have been no material changes in the disclosure made in our Annual Report on Form 10-K for the fiscal year ended March 31, 2013 regarding this matter.

21

Results of Operations

A summary of financial data for each of the three and six months ended September 30, 2013 and 2012 is as follows:

	Three Months Ended						Six Months Ended
	September 30,						September 30,
	2013			2012			2013			2012
	(unaudited)						(unaudited)
Consolidated Statement of Earnings (Loss) and Comprehensive Income (Loss) Data:
Revenues:
Fee-based revenue	$	33,197		$	40,998		$	64,667		$	78,059
Optimization, net	3,666			(16,453		)	29,384			(56,301		)
	36,863			24,545			94,051			21,758
Expenses (income):
Operating	8,877			8,826			19,321			16,920
General and administrative	9,515			8,077			20,804			17,915
Depreciation and amortization	10,298			13,242			20,631			25,065
Interest	16,397			16,672			32,603			33,180
Loss on extinguishment of debt	—			—			—			599
Foreign exchange (gains) losses	(410		)	(149		)	447			(336		)
Other (income) expense	(17		)	(8		)	374			(185		)
Loss before income taxes	(7,797		)	(22,115		)	(129		)	(71,400		)
Income tax expense (benefit)	48			(6,718		)	(252		)	(18,658		)
Net earnings (loss) and comprehensive income (loss)	$	(7,845	)	$	(15,397	)	$	123		$	(52,742	)
Reconciliation of Adjusted EBITDA and Cash Available for Distribution to Net Earnings (Loss)
Net earnings (loss)	$	(7,845	)	$	(15,397	)	$	123		$	(52,742	)
Add/(deduct):
Interest expense	16,397			16,672			32,603			33,180
Income tax expense (benefit)	48			(6,718		)	(252		)	(18,658		)
Depreciation and amortization	10,298			13,242			20,631			25,065
Unrealized risk management losses (gains)	13,632			28,691			(6,486		)	79,856
Loss on extinguishment of debt	—			—			—			599
Foreign exchange (gains) losses	(410		)	(149		)	447			(336		)
Other (income) expense	(17		)	(8		)	374			(185		)
Write-down of inventory	—			—			—			22,281
Adjusted EBITDA	32,103			36,333			47,440			89,060
Less:
Cash interest expense, net	15,562			15,865			30,933			31,459
Income taxes paid (recovered)	6			—			6			(7		)
Maintenance capital expenditures	902			914			959			914
Other (income) expense	(17		)	(8		)	374			(185		)
Cash Available for Distribution	$	15,650		$	19,562		$	15,168		$	56,879

22

Non-GAAP Financial Measures

Adjusted EBITDA and Cash Available for Distribution

We use the non-GAAP financial measures Adjusted EBITDA and Cash Available for Distribution in this report. A reconciliation of Adjusted EBITDA and Cash Available for Distribution to net earnings, the most directly comparable financial measure as calculated and presented in accordance with GAAP, is shown above.

We define Adjusted EBITDA as net earnings before interest, income taxes, depreciation and amortization, unrealized risk management gains and losses, loss on extinguishment of debt, foreign exchange gains and losses, inventory impairment write-downs, gains and losses on asset dispositions, asset impairments and other income. We believe the adjustments for other income are similar in nature to the traditional adjustments to net earnings used to calculate EBITDA and adjustment for these items results in an appropriate representation of this financial measure. Cash Available for Distribution is defined 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. Adjusted EBITDA and Cash Available for Distribution are used as supplemental financial measures by our management and by external users of our financial statements, such as commercial banks and ratings agencies, to assess:

·the financial performance of our assets, operations and return on capital without regard to financing methods, capital structure or historical cost basis;

·the ability of our assets to generate cash sufficient to pay interest on our indebtedness and make distributions to our 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 non-GAAP financial measures of Adjusted EBITDA and Cash Available for Distribution should not be considered as alternatives to net earnings. Adjusted EBITDA and Cash Available for Distribution are not presentations made in accordance with GAAP and have important limitations as analytical tools. Neither Adjusted EBITDA nor Cash Available for Distribution should be considered in isolation or as a substitute for analysis of our results as reported under GAAP. Because Adjusted EBITDA and Cash Available for Distribution exclude some, but not all, items that affect net earnings and are defined differently by different companies, our definition of Adjusted EBITDA and Cash Available for Distribution may not be comparable to similarly titled measures of other companies.

We recognize that the usefulness of Adjusted EBITDA as an evaluative tool may have certain limitations, including:

·Adjusted EBITDA does not include interest expense. Because we have borrowed money in order to finance our operations, interest expense is a necessary element of our costs and impacts our ability to generate profits and cash flows. Therefore, any measure that excludes interest expense may have material limitations;

·Adjusted EBITDA does not include depreciation and amortization expense. Because we use capital assets, depreciation and amortization expense is a necessary element of our costs and ability to generate profits. Therefore, any measure that excludes depreciation and amortization expense may have material limitations;

·Adjusted EBITDA does not include provision for income taxes. Because the payment of income taxes is a necessary element of our costs, any measure that excludes income tax expense may have material limitations;

·Adjusted EBITDA does not reflect cash expenditures or future requirements for capital expenditures or contractual commitments;

·Adjusted EBITDA does not reflect changes in, or cash requirements for, working capital needs; and

·Adjusted EBITDA does not allow us to analyze the effect of certain recurring and non-recurring items that materially affect our net earnings or loss.

Similarly, Cash Available for Distribution has certain limitations because it accounts for some, but not all, of the above limitations.

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Revenues

Revenues include fee-based revenue and optimization revenue, net. Fee-based revenue consists of long-term contracts for storage fees that are generated when we lease storage capacity on a term basis and short-term fees associated with specified injections and withdrawals of natural gas. Optimization revenue results from the purchase of natural gas inventory and its forward sale to future periods through financial and physical energy trading contracts, with our facilities being used to store the inventory between acquisition and disposition of the natural gas inventory.

Revenues for the three and six months ended September 30, 2013 and 2012, respectively, consisted of the following:

	Three Months Ended						Six Months Ended
	September 30,						September 30,
	2013			2012			2013		2012
	(unaudited)						(unaudited)
Long-term contract revenue	$	20,287		$	28,129		$	40,883	$	55,791
Short-term contract revenue	12,910			12,869			23,784		22,268
Fee-based revenue	33,197			40,998			64,667		78,059
Realized optimization, net	17,298			12,238			22,898		45,859
Unrealized risk management (losses) gains	(13,632		)	(28,691		)	6,486		(79,879		)
Write-down of inventory	—			—			—		(22,281		)
Optimization revenue, net	$	3,666		$	(16,453	)	$	29,384	$	(56,301	)

Changes in revenue in the quarter were primarily attributable to the following:

Long-term contract revenue.  LTF revenues for the three months ended September 30, 2013 declined by $7.8 million (28%) compared to the three months ended September 30, 2012. LTF revenues for the six months ended September 30, 2013 declined by $14.9 million (27%) compared to the same period last year. This decline was due in part to our decision to allocate 22 Bcf less storage capacity to this strategy than in the previous year. In addition, lower average rates for LTF contracts were obtained in the three months ended September 30, 2013 compared to the three months ended September 30, 2012.

Short-term contract revenue.  STF revenues for the three months ended September 30, 2013 did not change significantly when compared to the three months ended September 30, 2012. STF revenues for the six months ended September 30, 2013 increased by $1.5 million (7%) compared to the same period last year. These increases resulted from more capacity being utilized for this strategy compared to the respective period in the prior year.

Optimization Revenues.  Optimization revenues for the three months ended September 30, 2013 increased to $3.7 million from net losses of $16.5 million in fiscal 2013.  Optimization revenues for the six months ended September 30, 2013 increased to $29.4 million from net losses of $56.3 million in fiscal 2013. When evaluating the performance of our optimization business, we focus on our realized optimization margins, excluding the impact of unrealized economic hedging gains and losses and inventory write-downs. For financial reporting purposes, our net optimization revenues include the impact of unrealized economic hedging gains and losses and inventory write-downs, which cause our reported revenues to fluctuate from period to period. However, because all inventory is economically hedged, any inventory write-downs are offset by hedging gains and any unrealized hedging losses are offset by realized gains from the sale of physical inventory. The components of optimization revenues are as follows:

·Realized Optimization Revenue, net. Net realized optimization revenue of $17.3 million in the current quarter increased by $5.1 million from $12.2 million in the second quarter of the previous year. Net realized optimization revenue for the six months ended September 30, 2013 of $22.9 million decreased by $22.9 million from $45.9 million in fiscal 2013. This increase for the three months ended September 30, 2013 resulted from higher realized gains on financial hedges compared to the same period last year, as well as incremental gains realized from short-term spread opportunities at our Canadian facilities. The timing of financial hedge realizations last year resulted in a decrease for the six months ended September 30, 2013 compared to the six months ended September 30, 2012. During the first two quarters of the prior year, we realized substantial gains on financial hedges for proprietary inventories that had been positioned for sale in spring and early summer. 

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The three and six month periods ended September 30, 2013 also included $2.1 million and $4.6 million in optimization revenue related to our marketing business, compared to $2.4 million and $5.0 million realized during the three and six month periods ended September 30, 2012.

·Unrealized Risk Management Gains (Losses).   Unrealized risk management losses in the three month period ended September 30, 2013 resulted from decreases in the value of financial hedges as a result of natural gas prices increasing relative to average sales contract prices in future months, as well as the realization of significant amounts of previously unrealized gains.  Unrealized risk management gains in the six month period ended September 30, 2013 resulted from increases in the value of financial hedges as a result of natural gas prices decreasing relative to average sales contract prices in future months. In the prior year, unrealized risk management losses for the three and six month periods ended September 30, 2012 resulted from decreases in the value of financial hedges due to increases in natural gas prices relative to the average sales contract prices for the three month period, as well as the realization during the period of significant amounts of previously unrealized gains. The three and six month periods ended September 30, 2013 also included $3.5 million in unrealized risk management gains and $0.2 million of unrealized risk management losses related to our marketing business, compared to $3.3 million and $3.9 million in unrealized risk management gains during the three month period ended September 30, 2012.

·Write-Down of Inventory. During the fourth quarter of fiscal 2012, near-term prices of natural gas fell dramatically. This reduction increased the value of our economic hedges and decreased the value of the proprietary optimization inventory underlying those hedges. Concurrently, the steepening of the forward curve at that time as noted above encouraged us to realize incremental revenues through the repositioning of inventory deliveries from the fourth quarter of fiscal 2012 into future periods in fiscal 2013 or beyond. Natural gas prices continued to fall during the first quarter of fiscal 2013. Consequently, the market value of our inventories fell below the carrying cost by the end of the first quarter and we wrote down our proprietary inventories by $22.3 million to the lower of cost or market value. No write-down of inventory occurred in the current fiscal year.

Operating Expenses

Operating expenses for the three and six months ended September 30, 2013 and 2012 consisted of the following:

	Three Months Ended				Six Months Ended
	September 30,				September 30,
	2013		2012		2013		2012
	(unaudited)				(unaudited)
Lease costs and property taxes	$	3,583	$	3,466	$	7,208	$	7,014
Fuel and electricity	1,953		1,763		5,504		3,668
Salaries and benefits	1,882		1,983		3,703		3,416
Maintenance	776		789		1,601		1,438
General operating costs	683		825		1,305		1,384
Total operating expenses	$	8,877	$	8,826	$	19,321	$	16,920

Operating expenses for the three months ended September 30, 2013 increased by $0.1 million (1%) compared to the three months ended September 30, 2012.  Operating expenses for the six months ended September 30, 2013 increased by $2.4 million (14%) compared to the six months ended September 30, 2012.  A 57% increase in cycled volumes during the first quarter of the current fiscal year resulted in increased fuel and power consumption, combined with high power prices led to an increase of $1.8 million in fuel and electricity costs compared to the same six month period in the prior year.

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General and Administrative Expenses

General and administrative expenses for the three and six months ended September 30, 2013 and 2012 consisted of the following:

	Three Months Ended				Six Months Ended
	September 30,				September 30,
	2013		2012		2013		2012
	(unaudited)				(unaudited)
Compensation costs	$	6,856	$	5,720	$	13,933	$	11,591
General costs, including office and information technology costs	805		901		2,013		2,240
Legal, audit and regulatory costs	1,854		1,456		4,858		4,084
Total general and administrative expenses	$	9,515	$	8,077	$	20,804	$	17,915

General and administrative expenses for the three months ended September 30, 2013 increased by $1.4 million (18%) compared to the three months ended September 30, 2012.  General and administrative expenses for the six months ended September 30, 2013 increased by $2.9 million (16%) compared to the six months ended September 30, 2012.  In both instances, compensation costs increased principally as a result of higher incentive compensation accruals primarily related to long-term compensation plans.

Depreciation and Amortization Expense

Depreciation and amortization expense for the three months ended September 30, 2013 decreased by $2.9 million (22%) compared to the three months ended September 30, 2012. Depreciation and amortization expense for the six months ended September 30, 2013 decreased by $4.4 million (18%) compared to the same period last year. The decreases were primarily attributable to a reduction in cushion gas migration at one of our facilities, offset by additional depreciation from equipment purchased as part of our capacity expansion at our Wild Goose Facility.

Interest Expense

Interest expense for the three and six months ended September 30, 2013 and 2012 consisted of the following:

	Three Months Ended					Six Months Ended
	September 30,					September 30,
	2013		2012			2013		2012
	(unaudited)					(unaudited)
Interest on senior notes	$	14,284	$	14,284		$	28,568	$	28,568
Interest on revolving credit facility	1,143		2,563			1,948		5,124
Amortization of deferred charges	835		835			1,670		1,743
Other interest	135		154			417		531
	16,397		17,836			32,603		35,966
Less: Capitalized interest	—		(1,164		)	—		(2,786		)
Total interest expenses	$	16,397	$	16,672		$	32,603	$	33,180

Interest expense for the three months ended September 30, 2013 decreased by $0.3 million (2%) compared to the three months ended September 30, 2012. Interest expense for the six months ended September 30, 2013 decreased by $0.6 million (2%) compared to the same period last year.  Reduced interest expense from lower rates on our credit facilities coupled with reduced utilization were offset by the absence of capitalized interest.

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Loss on Extinguishment of Debt

We amended and restated our $400 million Credit agreement on June 29, 2012.  The write-off of a portion of deferred financing costs associated with the prior agreement resulted in a loss on debt extinguishment of $0.6 million last year.

Income Taxes

Income taxes for the three and six month periods ended September 30, 2013 reflect the recognition of tax effects in certain Canadian entities.

The effective tax rate for the three and six months ended September 30, 2013 differs from the U.S. statutory federal rate of 35% primarily due to the recognition of losses in taxable entities which have a lower statutory rate.

Liquidity and Capital Resources

Sources and Uses of Liquidity

Our primary short-term liquidity needs are to pay interest and principal payments under our $400 million Credit Agreement and interest payments on our 8.875% Senior Notes due 2018 (the “Senior Notes”), to fund our operating expenses and maintenance capital expenditures, to pay for the acquisition of proprietary optimization inventory along with associated margin requirements and to pay quarterly distributions, to the extent declared by our board of directors.  We fund these expenditures through a combination of cash on hand, cash from operations and borrowings under our $400 million Credit Agreement.

Our medium-term and long-term liquidity needs primarily relate to potential debt repurchases, organic expansion opportunities and asset acquisitions. We expect to finance the cost of any expansion projects and acquisitions from borrowings under our existing and possible future credit facilities or a mix of borrowings and additional equity offerings as well as cash on hand and cash from operations.

Our principal debt covenant is our fixed charge coverage ratio (“FCCR”), which is included in both our $400 million Credit Agreement and the indenture on our Senior Notes. When our FCCR, which is calculated on a trailing-twelve month basis by dividing Adjusted EBITDA (defined substantially the same as presented herein) by fixed charges (which are measured as interest expense plus the amount of interest capitalized, but giving pro forma credit for the all of the previous twelve months for certain debt purchases and acquisitions), is less than 2.0 to 1.0, we are restricted in our ability to issue new debt. However, this restriction does not impact our ability to access our existing $400 million Credit Facility, or to amend, extend or replace that facility. When our FCCR is below 1.75 to 1.0, we are restricted in our ability to pay distributions. At September 30, 2013, our FCCR was 2.1 to 1.0. If our fixed charge coverage ratio were to fall below 1.75 to 1.0, we would be permitted thereafter to pay $75 million of distributions. This $75 million amount is cumulative for all periods that our FCCR is below 1.75 to 1.0. The appropriateness and amount of distributions are determined by our board of directors on a quarterly basis.

In order to enhance our financial flexibility, in June 2012 we amended and restated our $400 million Credit Agreement.  The new agreement is substantially the same as the prior agreement, except that the maturity has been extended from March 5, 2014 to June 29, 2016, and pricing has been improved due to a more favorable pricing grid based on leverage levels and the elimination of a floor of 150 basis points on LIBOR-based borrowings.  At September 30, 2013, we had $60.5 million in borrowings, $34.8 million committed in support of letters of credit and $304.7 million of unutilized capacity related to our credit facility.

We believe that our existing sources of liquidity described above will be sufficient to fund our short-term liquidity needs through the upcoming twelve month period.  Funding of material acquisitions and longer-term liquidity needs will depend on the availability and cost of capital in the debt and equity markets, as well as compliance with our debt covenants.   Accordingly, the availability of any such potential funding on economic terms is uncertain.

Management does not believe that the operation of its existing business is impacted by the availability of capital for expansion projects or acquisitions.

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Cash Flows from Operations and Investing Activities

The following table summarizes our sources and uses of cash for the six months ended September 30, 2013 and 2012, respectively:

	Six Months Ended
	September 30,
	2013			2012
	(unaudited)
Operating Activities:
Net earnings (loss)	$	123		$	(52,742	)
Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:
Unrealized foreign exchange losses (gains)	370			(105		)
Deferred income tax benefit	(252		)	(18,652		)
Unrealized risk management (gains) losses	(6,486		)	79,856
Depreciation and amortization	20,631			25,065
Deferred charges amortization	1,670			1,743
Loss on extinguishment of debt	—			599
Write-down of inventory	—			22,281
Changes in non-cash working capital	8,817			(28,802		)
Net cash provided by operating activities	24,873			29,243
Net cash used in investing activities	(915		)	(24,092		)
Net cash used in financing activities	(26,438		)	(10,142		)
Effect of translation of foreign currency on cash and cash equivalents	59			148
Net Decrease in Cash and Cash Equivalents	$	(2,421	)	$	(4,843	)

The variability in net cash provided by operating activities is primarily due to fluctuating market conditions that exist in any particular fiscal period, which impacts the margins and fees under each of our LTF, STF and optimization activities and impacts our decision to buy or sell significant volumes of inventory or hold existing inventories over a fiscal period end and sell them in the future if there is an economic incentive to do so.

During the six months ended September 30, 2013, we realized a decrease in cash from operations compared to the six months ended September 30, 2012.  This decrease resulted principally from the purchase proprietary inventory which was offset by the collection in April 2013 of accounts receivable generated in March 2013.

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Changes in non-cash working capital consisted of the following:

	Six Months Ended
	September 30,
	2013			2012
	(unaudited)
Margin deposits	$	(3,498	)	$	(30,730	)
Trade receivables	1,670			1,126
Accrued receivables	83,937			19,694
Natural gas inventory	(91,744		)	6,865
Prepaid expenses and other current assets	1,563			(17,291		)
Other assets	(63		)	—
Trade payables	110			(202		)
Accrued liabilities	17,109			2,611
Deferred revenue	(193		)	(10,875		)
Other long-term liabilities	(74		)	—
Net changes in non-cash working capital	$	8,817		$	(28,802	)

As noted above, working capital can change significantly from period to period and is primarily affected by timing differences between the purchase and sale of natural gas inventory, including margin requirements and cash settlement on related risk management instruments, and the timing of collections from our customers. Non-cash working capital increased by $8.8 million compared to a decrease of $28.8 million in the same period of the prior year.

Investing Activities

Substantially all of our cash used for investing activities consisted of capital expenditures in each of the six months ended September 30, 2013 and 2012. Capital expenditures in each six month period consisted of the following:

	Six Months Ended
	September 30,
	2013			2012
	(unaudited)
Maintenance capital	$	959		$	914
Expansion capital	280			20,772
Total capital expenditures	1,239			21,686
Change in accrued capital expenditures	(324		)	4,606
Proceeds from sale of assets	—			(2,200		)
Net cash used in investing activities	$	915		$	24,092

Maintenance capital expenditures are capital expenditures made to replace partially or fully depreciated assets, to maintain the existing operating capacity of our assets and to extend their useful lives. Expansion capital expenditures are made to acquire additional assets to grow our business, to expand and upgrade our facilities and to acquire similar operations or facilities. During the six months ended September 30, 2012, we spent a total of $20.8 million on expansion capital, the majority of which related to a project at our Wild Goose facility. The project was completed and put into service during fiscal 2013, leading to a significant reduction in expansion capital in fiscal 2014.

Under our current plan, we expect to continue to spend between approximately $1.0 million and $2.0 million per year for maintenance capital expenditures to maintain the integrity of our storage facilities and ensure the reliable injection, storage and withdrawal of natural gas for our customers. Expansion capital for the balance of fiscal 2014 is expected to be less than $10.0 million and relates principally to enhancing existing capacity and developing new projects.

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In fiscal 2014, we received approval from the California Public Utilities Commission to add 25 Bcf of capacity at our Wild Goose facility from 50 Bcf to 75 Bcf. Because most of the equipment required to support this expansion had been purchased and installed previously, costs required to complete this current expansion are not significant. The current expansion is now in service.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

There were no material changes to the disclosures made in our Annual Report on Form 10-K for the fiscal year ended March 31, 2013 regarding this matter.

At September 30, 2013, 54.2 Bcf of natural gas inventory was economically hedged, representing 100% of our total current inventory. Because inventory is recorded at the lower of cost or market, not fair value, if the price of natural gas increased by $1.00 per Mcf the value of inventory would increase by $54.2 million, the fair value or mark-to-market value of our economic hedges would decrease by $54.2 million, and the impact due to the non-economically hedged position would be $ nil. Similarly, if the price of natural gas declined by $1.00 per Mcf, the value of inventory would decrease by $54.2 million while the fair value of our economic hedges would increase by $54.2 million and the impact due to the non-economically hedged position would be $ nil. Long-term inventory and fuel gas used for operating our facilities are not offset. Total volumes of long-term inventory and fuel gas at September 30, 2013 are 3.4 Bcf and 0.0 Bcf, respectively.

At September 30, 2013, we were exposed to interest rate risk resulting from the variable rates associated with our $400 million Credit Agreement. A balance of $60.5 million was drawn on the Credit Facilities at September 30, 2013.  The interest rate applicable on the Credit Facilities is subject to change based on certain ratios and the magnitude of our drawings on the facility.  At September 30, 2013, a one percent increase or decrease in interest rates would have an impact of approximately $0.6 million on our interest expense.

Item 4.  Controls and Procedures

Disclosure Controls and Procedures

Our principal executive officer (“CEO”) and principal financial officer (“CFO”) undertook an evaluation of our disclosure controls and procedures as of the end of the period covered by this report. The CEO and the CFO have concluded that our controls and procedures were effective as of September 30, 2013. For purposes of this section, the term “disclosure controls and procedures” means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. However, a controls system cannot provide absolute assurance that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) that occurred during our last fiscal quarter that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

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PART II—OTHER INFORMATION

Item 1.  Legal Proceedings

For information on legal proceedings, see Part 1, Item 1, Financial Statements, Note 2, “Commitments and Contingencies” in the Notes to Unaudited Consolidated Financial Statements included in this quarterly report, which is incorporated into this item by reference.

Item 1A.  Risk Factors

There have been no material changes from the risk factors described previously in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2013, filed on June 7, 2013.

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Item 6.  Exhibits

Exhibit Number		Description
3.1	—	Certificate of formation of Niska Gas Storage Partners LLC (incorporated by reference to Exhibit 3.1 of Amendment No. 2 to the Company’s registration statement on Form S-1 (Registration No. 333-165007) filed on April 15, 2010).
3.2	—	Amendment No. 1 to the First Amended and Restated Operating Agreement of Niska Gas Storage Partners LLC dated April 2, 2013 (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed on April 3, 2013).
3.3	—	Second Amended and Restated Operating Agreement of Niska Gas Storage Partners LLC dated April 2, 2013 (incorporated by reference to Exhibit 3.2 of the Company’s Current Report on Form 8-K filed on April 3, 2013).
31.1*	—	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.
31.2*	—	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.
32.1**	—	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**	—	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*	—	XBRL Instance Document.
101.SCH*	—	XBRL Taxonomy Extension Schema Document.
101.CAL*	—	XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB*	—	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE*	—	XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF*	—	Taxonomy Extension Definition Linkbase Document.

*Filed herewith.

**Furnished herewith.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	NISKA GAS STORAGE PARTNERS LLC
Date: November 1, 2013	By:	/s/ VANCE E. POWERS
		Vance E. Powers
		Chief Financial Officer
		(Principal Accounting Officer)

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