Hiland Reports Second Quarter Results
Enid, Oklahoma - August 8, 2007 - The Hiland companies, Hiland Partners, LP
(NASDAQ: HLND) and Hiland Holdings GP, LP (NASDAQ: HPGP) today reported results
for the second quarter of 2007.
Hiland Partners, LP Financial Results
Hiland Partners, LP reported quarterly net income for the three months ended
June 30, 2007 of $2.5 million compared to net income of $3.8 million for the
three months ended June 30, 2006. This decrease is primarily due to additional
depreciation expense and interest expense incurred as a result of the
acquisition of the Kinta Area gathering assets effective May 1, 2006 and
interest expense related to borrowings for our organic growth projects, offset
by increased sales volume from our Kinta Area, Bakken and Eagle Chief gathering
systems. Net income per limited partner unit-basic for the second quarter of
2007 was $0.16 per unit compared to net income of $0.37 per unit in the
corresponding quarter in 2006. Weighted average limited partner units
outstanding for the three months ended June 30, 2007 was 9.3 million units
compared to 8.9 million units for the three months ended June 30, 2006. EBITDA
(EBITDA is defined as net income plus interest expense, provisions for income
taxes and depreciation, amortization and accretion expense) for the three months
ended June 30, 2007 was $11.9 million compared to $10.8 million for the three
months ended June 30, 2006, an increase of 11%. Total segment margin for the
three months ended June 30, 2007 was $18.7 million compared to $15.9 million for
the three months ended June 30, 2006, an increase of 18%. The increases in
EBITDA and total segment margin are primarily attributable to the inclusion of
the results of operations from the acquisition of the Kinta Area gathering
assets effective May 1, 2006 and increased activity from our Bakken and Eagle
Chief gathering systems.
For the six-month period ended June 30, 2007, Hiland Partners, LP reported net
income of $4.7 million compared to net income of $7.4 million for the six months
ended June 30, 2006. This decrease is primarily due to additional depreciation
expense and interest expense incurred as a result of the acquisition of the
Kinta Area gathering assets effective May 1, 2006 and interest expense related
to borrowings for our organic growth projects, offset by increased sales volume
from our Kinta Area, Bakken and Eagle Chief gathering systems. Net income per
limited partner unit-basic for the six months ended June 30, 2007 decreased to
$0.31 per unit from net income of $0.75 per unit in the corresponding period in
2006. Weighted average limited partner units outstanding for the six months
ended June 30, 2007 was 9.3 million units compared to 8.7 million units for the
six months ended June 30, 2006. EBITDA for the six months ended June 30, 2007
was $23.0 million compared to $19.1 million for the six months ended June 30,
2006, an increase of 20%. Total segment margin for the six months ended June 30,
2007 was $36.1 million compared to $27.8 million for the six months ended June
30, 2006, an increase of 30%. The increases in EBITDA and total segment margin
are primarily attributable to the inclusion of the results of operations from
the acquisition of the Kinta Area gathering assets effective May 1, 2006 and
increased activity from our Bakken and Eagle Chief gathering systems.
"We have recently completed our organic projects in the Rockies with the
start-up of our new Badlands Plant in North Dakota and completion of our Bakken
frac train and rail spur project in Montana." said Joe Griffin, Chief Executive
Officer and President. "We have also recently secured very strong natural gas
liquids prices through 2008 from financial hedges that we placed in July. The
completion of these projects along with the further development of our Woodford
Shale project and our financial hedges should translate into very strong EBITDA
growth for the Partnership into the future."
On July 25, 2007, Hiland Partners, LP announced an increase in its cash
distribution for the second quarter of 2007. The declared quarterly
distributions on Hiland Partners, LP's common and subordinated units were
increased to $0.7325 per unit (an annualized rate of $2.93 per unit) from
$0.7125 per unit (an annualized rate of $2.85 per unit) for the first quarter of
2007. This distribution will be paid on August 14, 2007 to unitholders of record
on August 8, 2007.
Hiland Holdings GP, LP Financial Results
Hiland Holdings GP, LP reported quarterly net income for the three months ended
June 30, 2007 of $1.1 million ($0.05 per limited partner unit-basic) compared to
net income of $0.2 million for the three months ended June 30, 2006 (includes
its predecessor, Hiland Partners GP, LLC). Hiland Holdings GP, LP commenced
operations September 25, 2006 upon successful completion of its initial public
offering and the concurrent contribution of certain interests from its
predecessor entity and its contributing parties. Net income before minority
interest was $1.8 million in the second quarter of 2007 compared to $3.2 million
in the second quarter of 2006. The decrease in net income before minority
interest is primarily due to additional depreciation expense and interest
expense incurred as a result of the acquisition of the Kinta Area gathering
assets effective May 1, 2006 and interest expense related to borrowings for
organic growth projects, offset by increased sales volume from the Kinta Area,
Bakken and Eagle Chief gathering systems.
Hiland Holdings GP, LP reported net income of $1.9 million for the six months
ended June 30, 2007 ($0.09 per limited partner unit-basic) compared to net
income of $0.6 million for the comparable period in 2006. Net income before
minority interest was $3.1 million for the six months ended June 30, 2007
compared to $6.8 million for the six months ended June 30, 2006. The decrease in
net income before minority interest is primarily due to additional depreciation
expense and interest expense incurred as a result of the acquisition of the
Kinta Area gathering assets effective May 1, 2006 and interest expense related
to borrowings for organic growth projects, offset by increased sales volume from
the Kinta Area, Bakken and Eagle Chief gathering systems.
Hiland Holdings GP, LP's share of distributions from Hiland Partners, LP,
including distributions on its 5,381,471 limited partner units, its two percent
general partner interest, and the incentive distributions rights, will be
approximately $5.0 million for the second quarter of 2007. On July 25, 2007,
Hiland Holdings GP, LP, announced an increase in its cash distribution for the
second quarter of 2007. The declared quarterly distributions on the
Partnership's units were increased to $0.22 per unit (an annualized rate of
$0.88 per unit) from $0.2075 per unit (an annualized rate of $0.83 per unit).
The distribution will be paid on August 17, 2007 to unitholders of record on
August 8, 2007.
Conference Call Information
Hiland has scheduled a conference call for 10:00am Central Time, Thursday,
August 9, 2007, to discuss the 2007 second quarter results. To participate in
the call, dial 1.888.396.2298 and participant passcode 92002423, or access it
live over the Internet at www.hilandpartners.com, on the "investor relations"
section of the Partnership's website.
Use of Non-GAAP Financial Measures
This press release and the accompanying schedules include the non-generally
accepted accounting principles ("non-GAAP") financial measures of EBITDA and
total segment margin. The accompanying schedules provide reconciliations of
these non-GAAP financial measures to their most directly comparable financial
measure calculated and presented in accordance with accounting principles
generally accepted in the United States of America ("GAAP"). Our non-GAAP
financial measures should not be considered as alternatives to GAAP measures
such as net income, operating income or any other GAAP measure of liquidity or
financial performance.
About the Hiland Companies
Hiland Partners, LP is a publicly traded midstream energy partnership engaged in
gathering, compressing, dehydrating, treating, processing and marketing natural
gas, and fractionating, or separating, natural gas liquids, or NGLs. The
Partnership also provides air compression and water injection services for use
in oil and gas secondary recovery operations. The Partnership's operations are
primarily located in the Mid-Continent and Rocky Mountain regions of the United
States. Hiland Partners, LP's midstream assets consist of 13 natural gas
gathering systems with approximately 1,930 miles of gathering pipelines, five
natural gas processing plants, seven natural gas treating facilities and four
NGL fractionation facilities. The Partnership's compression assets consist of
two air compression facilities and a water injection plant.
Hiland Holdings GP, LP owns the two percent general partner interest, 1,301,471
common units and 4,080,000 subordinated units in Hiland Partners, LP, and the
incentive distribution rights of Hiland Partners, LP.
This press release may include certain statements concerning expectations for
the future that are forward-looking statements. Such forward-looking statements
are subject to a variety of known and unknown risks, uncertainties, and other
factors that are difficult to predict and many of which are beyond management's
control. An extensive list of factors that can affect future results are
discussed in the Partnership's Annual Report on Form 10-K and other documents
filed from time to time with the Securities and Exchange Commission. The
Partnership undertakes no obligation to update or revise any forward-looking
statements to reflect new information or events.
Contacts: Ken Maples, Vice President and CFO
Hiland Partners, LP
(580) 242-6040
- -- tables to follow --
Other Financial and Operating Data
Hiland Partners, LP - Results of Operations
Set forth in the table below is financial and operating data for Hiland
Partners, LP
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------- -------------------------------
2007 2006 2007 2006
-------------- -------------- -------------- --------------
Total Segment Margin Data:
Midstream revenues $ 65,411 $ 51,534 $ 125,259 $ 103,738
Midstream purchases 47,916 36,821 91,531 78,356
-------------- -------------- -------------- --------------
Midstream segment margin 17,495 14,713 33,728 25,382
Compression revenues (A) 1,205 1,205 2,410 2,410
-------------- -------------- -------------- --------------
Total segment margin (B) $ 18,700 $ 15,918 $ 36,138 $ 27,792
============== ============== ============== ==============
Summary of Operations Data:
Midstream revenues $ 65,411 $ 51,534 $ 125,259 $ 103,738
Compression revenues 1,205 1,205 2,410 2,410
-------------- -------------- -------------- --------------
Total revenues 66,616 52,739 127,669 106,148
Midstream purchases
(exclusive of items
shown separately below) 47,916 36,821 91,531 78,356
Operations and maintenance 4,980 3,998 9,950 6,571
Depreciation, amortization
and accretion 7,039 5,498 13,779 9,635
General and administrative 1,879 1,248 3,394 2,278
-------------- -------------- -------------- --------------
Total operating costs and
expenses 61,814 47,565 118,654 96,840
-------------- -------------- -------------- --------------
Operating income 4,802 5,174 9,015 9,308
Other income (expense) (2,306) (1,356) (4,357) (1,940)
-------------- -------------- -------------- --------------
Net income 2,496 3,818 4,658 7,368
Add:
Depreciation, amortization
and accretion 7,039 5,498 13,779 9,635
Amortization of deferred
loan costs 88 109 176 233
Interest expense 2,307 1,325 4,393 1,860
-------------- -------------- -------------- --------------
EBITDA (C) $ 11,930 $ 10,750 $ 23,006 $ 19,096
============== ============== ============== ==============
Non cash realized (gain)
loss on derivatives $ (102) $ (82) $ (171) $ (164)
Non cash unit based
compensation expense $ 168 $ 111 $ 345 $ 218
Maintenance capital
expenditures $ 917 $ 1,023 $ 1,536 $ 1,715
Expansion capital
expenditures 25,840 117,858 41,758 128,344
Total capital expenditures $ 26,757 $ 118,881 $ 43,294 $ 130,059
Operating Data:
Natural gas sales
(MMBTU/d) 78,085 65,090 76,313 62,374
NGL sales (Bbls/d) 4,304 3,285 4,146 3,265
Natural gas gathered
(MMBtu/d) (D) 128,529 87,385 124,671 43,934
June 30, December 31,
2007 2006
------------- -------------
Balance Sheet Data (at period end):
Property and equipment, at cost, net $ 285,544 $ 252,801
Total assets $ 372,887 $ 343,816
Long-term debt, net of current maturities $ 177,564 $ 147,064
Net equity $ 155,975 $ 167,746
(A) Compression revenues and compression segment margin are the same. There are
no compression purchases associated with the compression segment.
(B) Reconciliation of total segment margin to operating income:
Three Months Ended June 30, Six Months Ended June 30,
------------------------------- -------------------------------
2007 2006 2007 2006
-------------- -------------- -------------- --------------
(in thousands) (in thousands)
Reconciliation of Total Segment Margin
to Operating Income
Operating income $ 4,802 $ 5,174 $ 9,015 $ 9,308
Add:
Operations and maintenance expenses 4,980 3,998 9,950 6,571
Depreciation, amortization and accretion 7,039 5,498 13,779 9,635
General and administrative expenses 1,879 1,248 3,394 2,278
-------------- -------------- -------------- --------------
Total segment margin $ 18,700 $ 15,918 $ 36,138 $ 27,792
============== ============== ============== ==============
We view total segment margin, a non-GAAP financial measure, as an important
performance measure of the core profitability of our operations. We review total
segment margin monthly for consistency and trend analysis. We define midstream
segment margin as midstream revenue less midstream purchases. Midstream
purchases include the following costs and expenses: cost of natural gas and NGLs
purchased by us from third parties, cost of natural gas and NGLs purchased by us
from affiliates, and cost of crude oil purchased by us from third parties. We
define compression segment margin as the revenue derived from our compression
segment.
(C) We define EBITDA, a non-GAAP financial measure, as net income plus interest
expense, provisions for income taxes and depreciation, amortization and
accretion expense. EBITDA is used as a supplemental financial measure by our
management and by external users of our financial statements such as investors,
commercial banks, research analysts and others to assess: (1) the financial
performance of our assets without regard to financial methods, capital structure
or historical cost basis; (2) the ability of our assets to generate cash
sufficient to pay interest costs and support our indebtedness; (3) our operating
performance and return on capital as compared to those of other companies in the
midstream energy sector, without regard to financing or structure; and (4) the
viability of acquisitions and capital expenditure projects and the overall rates
of return on alternative investment opportunities. EBITDA is also a financial
measurement that, with certain negotiated adjustments, is reported to our banks
and is used as a gauge for compliance with our financial covenants under our
credit facility. EBITDA should not be considered as an alternative to net
income, operating income, cash flows from operating activities or any other
measures of financial performance presented in accordance with GAAP. Our EBITDA
may not be comparable to EBITDA of similarly titled measures of other entities,
as other entities may not calculate EBITDA in the same manner as we do.
(D) Natural gas gathered for fee (MMBtu/d) represents natural gas volumes
gathered associated with the Kinta Area gas gathering assets we acquired on May
1, 2006 in which we do not take title to the gas.
Hiland Holdings GP, LP - Results of Operations
Set forth in the table below is financial and operating data for Hiland
Holdings GP, LP
Hiland Hiland
Hiland Partners Hiland Partners
Holdings GP, LLC Holdings GP, LLC
GP, LP (Predecessor) GP, LP (Predecessor)
-------------- -------------- -------------- --------------
Three Months Ended June 30, Six Months Ended June 30,
-------------------------------- --------------------------------
2007 2006 2007 2006
-------------- -------------- -------------- --------------
(unaudited, in thousands) (unaudited, in thousands)
Total Segment Margin Data:
Midstream revenues $ 65,411 $ 51,534 $ 125,259 $ 103,738
Midstream purchases 47,916 36,821 91,531 78,356
-------------- -------------- -------------- --------------
Midstream segment margin 17,495 14,713 33,728 25,382
Compression revenues (A) 1,205 1,205 2,410 2,410
-------------- -------------- -------------- --------------
Total segment margin (B) $ 18,700 $ 15,918 $ 36,138 $ 27,792
============== ============== ============== ==============
Summary of Operations Data:
Midstream revenues $ 65,411 $ 51,534 $ 125,259 $ 103,738
Compression revenues 1,205 1,205 2,410 2,410
-------------- -------------- -------------- --------------
Total revenues 66,616 52,739 127,669 106,148
Midstream purchases (exclusive of items shown 1
separately below) 47,916 36,82 91,531 78,356
Operations and maintenance 4,980 3,998 9,950 6,571
Depreciation, amortization and accretion 7,326 5,657 14,352 9,794
General and administrative 2,285 1,259 4,330 2,298
-------------- -------------- -------------- --------------
Total operating costs and expenses 62,507 47,735 120,163 97,019
-------------- -------------- -------------- --------------
Operating income 4,109 5,004 7,506 9,129
Other income (expense) (2,331) (1,758) (4,406) (2,341)
-------------- -------------- -------------- --------------
Income before minority interest in Hiland Partners, LP 1,778 3,246 3,100 6,788
Minority interest in income of Hiland Partners, LP (639) (3,062) (1,213) (6,226)
-------------- -------------- -------------- --------------
Net income $ 1,139 $ 184 $ 1,887 $ 562
============== ============== ============== ==============
June 30, December 31,
2007 2006
Balance Sheet Data (at period end):
Property and equipment, at cost, net $ 289,521 $ 257,003
Total assets $ 383,617 $ 355,198
Long-term debt, net of current maturities $ 177,919 $ 147,318
Minority interests $ 133,163 $ 137,302
Net equity $ 32,858 $ 41,157
(A) Compression revenues and compression segment margin are the same. There are
no compression purchases associated with the compression segment.
(B) Reconciliation of total segment margin to operating income:
Hiland Hiland
Hiland Partners Hiland Partners
Holdings GP, LLC Holdings GP, LLC
GP, LP (Predecessor) GP, LP (Predecessor)
-------------- -------------- -------------- --------------
Three Months Ended June 30, Six Months Ended June 30,
-------------------------------- --------------------------------
2007 2006 2007 2006
-------------- -------------- -------------- --------------
(unaudited, in thousands) (unaudited, in thousands)
Reconciliation of Total Segment Margin to
Operating Income
Operating income $ 4,109 $ 5,004 $ 7,506 $ 9,129
Add:
Operations and maintenance expenses 4,980 3,998 9,950 6,571
Depreciation, amortization and accretion 7,326 5,657 14,352 9,794
General and administrative expenses 2,285 1,259 4,330 2,298
-------------- -------------- -------------- --------------
Total segment margin $ 18,700 $ 15,918 $ 36,138 $ 27,792
============== ============== ============== ==============
We view total segment margin, a non-GAAP financial measure, as an important
performance measure of the core profitability of our operations. We review total
segment margin monthly for consistency and trend analysis. We define midstream
segment margin as midstream revenue less midstream purchases. Midstream
purchases include the following costs and expenses: cost of natural gas and NGLs
purchased by us from third parties, cost of natural gas and NGLs purchased by us
from affiliates, and cost of crude oil purchased by us from third parties. We
define compression segment margin as the revenue derived from our compression
segment.