Exhibit 99.1
HILAND PARTNERS, LP REPORTS FOURTH QUARTER RESULTS
AND ANNOUNCES EXPANSION PROJECTS
ENID, Okla., Feb. 21 /PRNewswire-FirstCall/ -- Hiland Partners, LP (Nasdaq:
HLND) (the "Partnership") today reported quarterly net income for the three
months ended December 31, 2005 of $4.1 million ($0.50 per limited partner unit)
compared to net income of $2.3 million for the three months ended December 31,
2004, an increase of 81%. 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 December 31, 2005 was $9.6 million
compared to $3.6 million for the three months ended December 31, 2004, an
increase of 165%. Total segment margin for the three months ended December 31,
2005 was $12.8 million compared to $5.3 million for the three months ended
December 31, 2004, an increase of 140%. The increases are primarily attributable
to higher average realized natural gas and NGL sales prices and the inclusion of
the results of operations from the assets contributed to us by Hiland Partners,
LLC (the Worland gathering system and compression assets) as part of our initial
public offering on February 15, 2005 and the acquisition of Hiland Partners, LLC
(the Bakken gathering system) effective September 1, 2005.
For the year ended December 31, 2005, the Partnership reported net income of
$10.3 million compared to net income of $4.9 million for the year ended December
31, 2004, an increase of 110%. EBITDA for the year ended December 31, 2005 was
$23.9 million compared to $9.8 million for the year ended December 31, 2004, an
increase of 143%. Total segment margin for the year ended December 31, 2005 was
$33.5 million compared to $15.8 million for the year ended December 31, 2004, an
increase of 113%. The increases are primarily attributable to higher average
realized natural gas and NGL sales prices and the inclusion of the results of
operations from the assets contributed to us by Hiland Partners, LLC (the
Worland gathering system and compression assets) as part of our initial public
offering on February 15, 2005 and the acquisition of Hiland Partners, LLC (the
Bakken gathering system) effective September 1, 2005.
Our results of operations for the year ended December 31, 2005 include the
financial results of Continental Gas, Inc. (our predecessor) through February
14, 2005. Our financial results also include the results of operations of Hiland
Partners, LP for the period from February 15, 2005, the date Hiland Partners, LP
commenced operations, and the acquisition of the membership interests of Hiland
Partners, LLC effective on September 1, 2005. Our financial results for the
three months ended and year ended December 31, 2004 represent the financial
results of Continental Gas, Inc. (our predecessor). As a result, our results of
operations are not comparable on a period-to- period basis.
For the period from February 15, 2005 (inception of our operations) to
December 31, 2005, the Partnership reported net income of $9.8 million ($1.33
per limited partner unit) and EBITDA of $22.7 million.
On December 2, 2005, the Partnership entered into additional hedges on
natural gas. The following table provides information about the most recent
derivative instruments:
Monthly
Volume Price
Natural Gas Swaps (MMBtu) ($/MMBtu)
----------------------------- ------- ---------
May 2006 - December 2006 95,000 $ 9.01
January 2007 - October 2007 95,000 $ 8.12
In addition to the derivative instruments noted above, on December 6, 2005,
the Partnership entered into a forward sales contract to sell approximately
50,000 MMBtu of natural gas per month from January 2007 through December 2007
with weighted average fixed prices per MMBtu of $9.13.
On January 24, 2006, the Partnership announced an approximate 22% increase
in its cash distribution for the fourth quarter of 2005. The declared quarterly
distributions on the Partnership's common and subordinated units increased from
$0.5125 per unit (an annualized rate of $2.05 per unit) for the third quarter of
2005, to $0.625 per unit (an annualized rate of $2.50 per unit) for the fourth
quarter of 2005. This distribution was paid on February 14, 2006 to unitholders
of record on February 3, 2006.
"We are pleased with our fourth quarter and year-end results, which include
a full quarter of operations attributable to our Bakken acquisition," said Randy
Moeder, President and Chief Executive Officer of Hiland Partners, LP. "In only
our first year as a public partnership, we increased our distributions to
unitholders by 39%, completed the Bakken acquisition and announced the Badlands
expansion project. Both the Bakken acquisition and the Badlands expansion
project will allow the Partnership significant opportunities for organic growth
well beyond 2007. Through the use of financial hedges and forward sales
contracts and with the fixed fee component of the new Badlands Agreement with
Continental Resources, Inc., we have significantly reduced the overall impact of
lower commodity prices to the Partnership. For the 2006 and 2007 period,
approximately 50% and 75%, respectively, of the Partnership's gross margin are
hedged or subject to fixed fee arrangements."
Badlands Gathering Project:
On February 1, 2006, the Partnership entered into a 5-year definitive
purchase agreement with a producer to build additional compression facilities
and to expand our existing gas gathering system into South Dakota. The gathering
project, which is targeted for completion in the 2nd quarter of 2006, is
expected to cost approximately $3.0 million, which the Partnership expects to
fund using its existing bank credit facility. Once completed and operational,
the Partnership expects the gathering project to generate approximately $1.6
million of EBITDA over the first twelve months of operation.
Roman Nose Gas Plant Project:
The Partnership intends to construct a 25 million cubic feet per day natural
gas processing facility along our existing Matli Gas Gathering System. This
facility will process the existing gas supply on our Matli system and will
provide additional plant processing capacity for increased system volumes. The
expansion project, which is targeted for completion in the 3rd quarter of 2006,
is expected to cost approximately $2.8 million, which the Partnership expects to
fund using its existing bank credit facility. Once completed and operational,
the Partnership expects the expansion project to generate approximately $1.7
million of EBITDA during the first full year of operation.
"These additional organic growth opportunities in our core area of
operations provide attractive cash flows to the Partnership at very reasonable
multiples," said Randy Moeder, President and Chief Executive Officer of Hiland
Partners, LP.
Conference Call Information
The Partnership has scheduled a conference call for 10:00am Central Standard
Time, Wednesday, February 22, 2006, to discuss the 2005 fourth quarter results
and the additional 2006 organic growth projects mentioned above. To participate
in the call, dial 1.888.396.2298 and participant passcode 92002423, or access it
live over the Internet at http://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"). The accompanying
schedules do not include reconciliations for our expected EBITDA from the
Badlands Gathering Project and the Roman Nose Gas Plant Project because it is
impracticable, in this situation, to reconcile EBITDA to net income for the
forecasted period. 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 Hiland Partners, LP
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 eight
natural gas gathering systems with approximately 1,140 miles of gathering
pipelines, five natural gas processing plants, three natural gas treating
facilities and three NGL fractionation facilities. The Partnership's compression
assets consist of two air compression facilities and a water injection plant.
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.
Other Financial and Operating Data
Results of Operations
Set forth in the table below is financial and operating data for Continental
Gas, Inc. (predecessor) and Hiland Partners, LP for the periods indicated.
Three Months Ended December 31,
---------------------------------
2005 2004
--------------- ---------------
(Unaudited)
Hiland
Partners, LP Predecessor(A)
--------------- ---------------
(in thousands)
Total Segment Margin Data:
Midstream revenues $ 67,090 $ 28,010
Midstream purchases 55,541 22,686
--------------- ---------------
Midstream segment margin 11,549 5,324
Compression revenues(B) 1,205 -
--------------- ---------------
Total segment margin (C) $ 12,754 $ 5,324
=============== ===============
Summary of Operations Data:
Midstream revenues $ 67,090 $ 28,010
Compression revenues 1,205 -
--------------- ---------------
Total revenues 68,295 28,010
Operating costs and expenses:
Midstream purchases (exclusive of items
shown separately below) 55,541 22,686
Operations and maintenance expenses 2,277 1,309
Depreciation and amortization expenses 4,187 1,124
Gain on asset sales - (4)
General and administrative expenses 931 402
--------------- ---------------
Total operating costs and expenses 62,936 25,517
--------------- ---------------
Operating income 5,359 2,493
Other income (expense) (1,221) (203)
--------------- ---------------
Income from continuing operations 4,138 2,290
Discontinued operations - 1
--------------- ---------------
Net income 4,138 2,291
Add:
Depreciation, amortization and accretion 4,187 1,124
Amortization of deferred loan costs 124 26
Interest expense 1,176 194
--------------- ---------------
EBITDA (D) $ 9,625 $ 3,635
=============== ===============
Maintenance capital expenditures $ 763 $ 450
Expansion capital expenditures 6,856 -
--------------- ---------------
Total capital expenditures $ 7,619 $ 450
=============== ===============
Operating Data (unaudited):
Natural gas sales (MMBtu/d) 59,122 39,613
NGL sales (Bbls/d) 3,163 1,250
Year Ended December 31,
----------------------------------------------------------------
2005 2004
--------------------------------- ----------------------------
(Unaudited)
Hiland
Partners, LP(E) Predecessor(A) Total Predecessor(A)
--------------- --------------- ---------- ---------------
(in thousands)
Total Segment Margin Data:
Midstream revenues $ 150,571 $ 11,813 $ 162,384 $ 98,296
Midstream purchases 123,342 9,747 133,089 82,532
--------------- --------------- ---------- ---------------
Midstream segment margin 27,229 2,066 29,295 15,764
Compression revenues(B) 4,217 - 4,217 -
--------------- --------------- ---------- ---------------
Total segment margin(C) $ 31,446 $ 2,066 $ 33,512 $ 15,764
=============== =============== ========== ===============
Summary of Operations Data:
Midstream revenues $ 150,571 $ 11,813 $ 162,384 $ 98,296
Compression revenues 4,217 - 4,217 -
--------------- --------------- ---------- ---------------
Total revenues 154,788 11,813 166,601 98,296
Operating costs and expenses:
Midstream purchases (exclusive
of items shown separately below) 123,342 9,747 133,089 82,532
Operations and maintenance
expenses 6,579 780 7,359 4,933
Depreciation and amortization
expenses 10,600 512 11,112 4,127
Gain on asset sales - - - (19)
General and administrative
expenses 2,304 166 2,470 1,082
--------------- --------------- ---------- ---------------
Total operating costs
and expenses 142,825 11,205 154,030 92,655
--------------- --------------- ---------- ---------------
Operating income 11,963 608 12,571 5,641
Other income (expense) (2,119) (115) (2,234) (764)
--------------- --------------- ---------- ---------------
Income from continuing operations 9,844 493 10,337 4,877
Discontinued operations - - - 35
--------------- --------------- ---------- ---------------
Net income 9,844 493 10,337 4,912
Add:
Depreciation, amortization
and accretion 10,600 512 11,112 4,127
Amortization of deferred
loan costs 471 13 484 102
Interest expense 1,834 108 1,942 702
--------------- --------------- ---------- ---------------
EBITDA (D) $ 22,749 $ 1,126 $ 23,875 $ 9,843
=============== =============== ========== ===============
Maintenance capital
expenditures $ 1,988 $ 237 $ 2,225 $ 1,693
Expansion capital
expenditures 72,953 - 72,953 3,474
Discontinued operations - - - 159
--------------- --------------- ---------- ---------------
Total capital
expenditures $ 74,941 $ 237 $ 75,178 $ 5,326
=============== =============== ========== ===============
Operating Data (unaudited):
Natural gas sales (MMBtu/d) 48,509 37,052 47,096 40,560
NGL sales (Bbls/d) 2,077 1,206 1,965 1,133
(A) Amounts presented in the Predecessor column include only the activity
of Continental Gas, Inc. for the period prior to the formation of
Hiland Partners, LP on February 15, 2005.
(B) Compression revenues and compression segment margin are the same.
There are no compression purchases associated with the compression
segment.
(C) Reconciliation of total segment margin to operating income:
Three Months Ended December 31,
-----------------------------------
2005 2004
---------------- ----------------
(Unaudited)
Hiland
Partners, LP Predecessor (A)
---------------- ----------------
(in thousands)
Operating income $ 5,359 $ 2,493
Add:
Operations and maintenance expenses 2,277 1,309
Depreciation and amortization expenses 4,187 1,124
Gain on asset sales - (4)
General and administrative expenses 931 402
---------------- ----------------
Total segment margin $ 12,754 $ 5,324
================ ================
Year Ended December 31,
-------------------------------------------------------------------
2005 2004
----------------------------------- -----------------------------
(Unaudited)
Hiland
Partners, LP (E) Predecessor(A) Total Predecessor(A)
---------------- ---------------- ---------- ----------------
(in thousands)
Operating income $ 11,963 $ 608 $ 12,571 $ 5,641
Add:
Operations and
maintenance expenses 6,579 780 7,359 4,933
Depreciation and
amortization expenses 10,600 512 11,112 4,127
Gain on asset sales - - - (19)
General and administrative
expenses 2,304 166 2,470 1,082
---------------- ---------------- ---------- ----------------
Total segment margin $ 31,446 $ 2,066 $ 33,512 $ 15,764
================ ================ ========== ================
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.
(D) 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
an alternative to net income, operating income, cash flows from
operating activities or any other measure 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.
(E) Amounts presented in the Hiland Partners, LP column include only the
activity for the period beginning on February 15, 2005. These amounts
include the operations of the Worland gathering system and compression
assets acquired from Hiland Partners, LLC at the completion of our
initial public offering and the operations of the Bakken gathering
system assets acquired effective September 1, 2005.
SOURCE Hiland Partners, LP
-0- 02/21/2006
/CONTACT: Ken Maples, Vice President and CFO of Hiland Partners, LP,
+1-580-242-6040 /
/Web site: http://www.hilandpartners.com /
(HLND)