Press Release

Tallgrass Energy Reports Strong Second Quarter 2017 Results

Company Release - 8/2/2017 4:05 PM ET

LEAWOOD, Kan.--(BUSINESS WIRE)-- Tallgrass Energy Partners, LP (NYSE: TEP) ("TEP") and Tallgrass Energy GP, LP (NYSE: TEGP) ("TEGP"), collectively referred to as Tallgrass Energy, today reported financial and operating results for the second quarter of 2017.

“Tallgrass Energy continued its track record of delivering outstanding financial results and strong distribution growth for the second quarter of 2017," said Tallgrass Energy President and CEO David G. Dehaemers Jr. "With our recently announced strategic acquisitions and organic growth projects in our backlog, we now expect to deliver at the high-end of our financial guidance for 2017."

Second Quarter Distributions

Tallgrass Energy Partners, LP

As previously announced, the board of directors of TEP's general partner declared a quarterly cash distribution of $0.925 per common unit for the second quarter of 2017. This quarterly distribution represents $3.70 on an annualized basis, a sequential increase of 10.8 percent from the first quarter 2017 distribution and an increase of 22.5 percent from the second quarter 2016 distribution. The quarterly distribution will be paid on Monday, Aug. 14, 2017, to unitholders of record as of the close of business on Friday, July 28, 2017.

The increase is consistent with management’s previously announced plan to recommend to the board of directors of its general partner increases in its second and third quarter 2017 distributions that will aggregate to at least $0.10 per unit (or $0.40 per unit on an annualized basis) over the first quarter 2017 distribution of $0.835. TEP acquired an approximate 25 percent membership interest in Rockies Express Pipeline LLC in March 2017.

Tallgrass Energy GP, LP

Also, as previously announced, the board of directors of TEGP's general partner declared a quarterly cash distribution of $0.3425 per Class A share for the second quarter of 2017. This quarterly distribution represents $1.37 per Class A share on an annualized basis, a sequential increase of 19.1 percent from the first quarter 2017 distribution and an increase of 39.8 percent from the second quarter 2016 distribution. The quarterly distribution will be paid on Monday, Aug. 14, 2017, to Class A shareholders of record as of the close of business on Friday, July 28, 2017.

Tallgrass Energy Partners, LP Summary Financial Information(1)

    Three Months Ended June 30,     Six Months Ended June 30,
(in thousands, except coverage and per unit data) 2017     2016    

As
Reported
in 2016

2017     2016    

As
Reported
in 2016

 
Net income attributable to partners $ 89,880 $ 88,160 $ 92,048 $ 160,785 $ 135,915 $ 136,118
Add:
Interest expense(2) 19,688 9,233 9,233 34,377 16,732 16,732
Depreciation and amortization expense(2) 22,555 22,354 21,840 44,422 44,836 43,807
Distributions from unconsolidated investments 59,863 30,338 29,656 90,682 30,972 29,656
Non-cash loss (gain) related to derivative instruments(2) 84 (18,791 ) (18,791 ) (2,357 ) (9,801 ) (9,801 )
Non-cash compensation expense (3) 1,494 1,469 1,469 2,952 2,635 2,635
Loss (gain) from disposal of assets 129 1,849 1,849 (1,319 ) 1,849 1,849
Less:
Equity in earnings of unconsolidated investments (42,741 ) (24,022 ) (23,321 ) (63,479 ) (24,731 ) (23,321 )
Adjusted EBITDA(4) $ 150,952   $ 110,590   $ 113,983   $ 266,063   $ 198,407   $ 197,675  
Add:
Deficiency payments received, net(2) 8,280 8,621 24,351 15,778
Less:
Cash interest cost (18,592 ) (8,412 ) (32,159 ) (15,233 )
Maintenance capital expenditures, net (3,994 ) (2,089 ) (4,057 ) (4,257 )
Distributable Cash Flow(4) 136,646 112,103 254,198 193,963
Less:
Distributions (105,199 ) (79,615 ) (196,565 ) (148,499 )
Amounts in excess of distributions(5) $ 31,447   $ 32,488   $ 57,633   $ 45,464  
Distribution coverage 1.30 x 1.41 x 1.29 x 1.31 x
 
Common units outstanding(6) 73,158 72,109 73,158 72,109
Distribution per common unit $ 0.9250 $ 0.7550 $ 1.7600 $ 1.4600
(1)   The financial results for all periods presented in the table include the applicable results of operations of Tallgrass Terminals, LLC and Tallgrass NatGas Operator, LLC, which were acquired by TEP effective Jan. 1, 2017, except for the period under the column "As Reported in 2016."
(2) Net of noncontrolling interest.
(3) Represents TEP's portion of non-cash compensation expense related to Equity Participation Units, excluding amounts allocated to Tallgrass Development, LP.
(4) Adjusted EBITDA and distributable cash flow are non-GAAP measures. For additional detail see "Non-GAAP Measures" below.
(5) Cumulative distribution coverage from TEP's IPO in May 2013 through June 30, 2017, is $190.0 million and the cumulative distribution coverage ratio is 1.23x.
(6) Common units represent the number of units as of the date of record for the second quarter distributions in both 2017 and 2016.
 

Strategic Acquisitions, Organic Growth Projects and Commercial Developments

Since TEP’s Q1 2017 earnings call on May 2, Tallgrass Energy has announced or completed acquisitions and growth projects of approximately $350 million and announced additional commercial developments.

  • Acquired natural gas gathering system in Powder River Basin from DCP
  • Acquired additional 49 percent interest in Deeprock Development terminal in Cushing, Okla.
  • Acquired 63 percent interest in freshwater facilities in Weld County, Colo.
  • Acquired Clarkelen water disposal facility in Powder River Basin
  • Received proportionate distribution from REX's receipt of $150 million cash settlement payment from Ultra Resources, Inc.
  • Successful REX open seasons for incremental 240,000 dekatherms per day of Zone 3 east-to-west transport
  • Successful Pony Express open season for Platteville Extension with binding transportation commitments of approximately 30,000 barrels per day
  • Announced agreement for new Pony Express refinery connection with CHS, Inc. near McPherson, Kan.
  • Announced agreement for new Pony Express supply connection and Tallgrass terminal near Natoma, Kan. and associated fifth common stream of crude oil for transport on Pony Express
  • Completed 117,000 barrels per day north Sterling, Colo. water infrastructure to service DJ/Niobrara customers -- largest high-density polyethylene (HDPE) pipeline project in the history of Colorado
  • Commissioned 10,000 dekatherm per day Fortigen demand lateral on Trailblazer -- 4,000 dekatherms per day contracted for 15 years

Conference Call

Please join Tallgrass Energy for a conference call and webcast to discuss second quarter 2017 results at 3:30 p.m. Central Time on Wednesday, Aug. 2, 2017. Interested parties may listen via a link posted on the Investor Relations section of our website and the replay will be available on our website for at least seven days following the live call.

Tallgrass Energy Partners, LP Alternative Reconciliations

Adjusted EBITDA and Distributable Cash Flow, as defined in "TEP's Non-GAAP Measures" below, may be impacted by the timing of cash payments received as a result of shipper deficiency payments received or utilized during the period or incremental barrels shipped during the period. As such, we have also provided alternative reconciliations of Adjusted EBITDA and Distributable Cash Flow that illustrate the impact of these items. These alternative reconciliations are also non-GAAP Measures. Management believes this information provides investors useful information regarding the impact of these items on our current results as well as the potential impact on future results.

Alternative Reconciliation of Adjusted EBITDA

   

Three Months Ended
June 30,

   

Six Months Ended
June 30,

(in thousands) 2017 2017
 
Adjusted EBITDA $ 150,952 $ 266,063
Add:
Deficiency payments received, net(1) 8,280   24,351
Alternative Adjusted EBITDA(2) $ 159,232   $ 290,414
(1)   Cumulative net deficiency balance at June 30, 2017, is $85.4 million.
(2) Alternative Adjusted EBITDA shows what TEP's Adjusted EBITDA would have been for the period presented if TEP included net deficiency payments from shippers' firm, take-or-pay contracts in calculating Adjusted EBITDA. TEP's reported distributable cash flow and distribution coverage would remain unchanged.
 

Alternative Reconciliation of Distributable Cash Flow and Distribution Coverage

   

Three Months Ended
June 30,

   

Six Months Ended
June 30,

(in thousands, except coverage) 2017 2017
 
Distributable Cash Flow $ 136,646 $ 254,198
Less:
Cash flow from incremental barrels shipped(1) (2,670 ) (5,500 )
Alternative Distributable Cash Flow(2) 133,976 248,698
Less:
Distributions (105,199 ) (196,565 )
Amounts in excess of distributions $ 28,777   $ 52,133  
Alternative distribution coverage(2) 1.27 x 1.27 x
(1)   Cumulative shipper incremental balance at June 30, 2017, is $24.1 million.
(2) Alternative distributable cash flow and alternative distribution coverage shown excludes the impact of cash flows from incremental barrels shipped on the Pony Express system, as incremental barrels shipped during current periods may reduce the shippers' firm commitment in future periods under their firm, take-or-pay contracts, thereby potentially reducing cash flows in those corresponding future periods. Under this alternative calculation, the cash flows received from incremental barrel shipments would be shown in the future periods in which the incremental barrels are utilized to reduce the shippers' firm commitment.
 

Tallgrass Energy Partners, LP Segment Overview(1)(2)

The second quarter 2017 comparative results by segment are summarized below:

    Three Months Ended June 30,     Six Months Ended June 30,
2017     2016    

As
Reported
in 2016

2017     2016    

As
Reported
in 2016

(in thousands)
Crude Oil Transportation & Logistics
Operating income $ 51,774 $ 47,145 $ 53,726 $ 96,489 $ 101,106 $ 106,392
Add:
Depreciation and amortization expense(3) 13,951 13,760 13,246 27,830 27,193 26,164
Distributions from unconsolidated investment 573 682 1,267 1,316
Other income, net 143 143
Less:
Adjusted EBITDA attributable to noncontrolling interests (1,000 ) (1,067 ) (1,067 ) (1,871 ) (2,110 ) (2,110 )
Non-cash loss (gain) related to derivative instruments(3) 16   (145 ) (145 ) (634 ) (145 ) (145 )
Segment Adjusted EBITDA $ 65,457   $ 60,375   $ 65,760   $ 123,224   $ 127,360   $ 130,301  
 
    Three Months Ended June 30,     Six Months Ended June 30,
2017     2016    

As
Reported
in 2016

2017     2016    

As
Reported
in 2016

(in thousands)
Natural Gas Transportation & Logistics
Operating income $ 14,726 $ 12,092 $ 10,100 $ 32,894 $ 24,437 $ 20,764
Add:
Depreciation and amortization expense 4,792 5,479 5,479 9,575 11,357 11,357
Distributions from unconsolidated investment 59,290 29,656 29,656 89,415 29,656 29,656
Non-cash loss (gain) related to derivative instruments 307 307 (116 ) 351 351
Other income, net 282   221   221   352   787   787
Segment Adjusted EBITDA $ 79,090   $ 47,755   $ 45,763   $ 132,120   $ 66,588   $ 62,915
 

Three Months Ended
June 30,

Six Months Ended
June 30,

2017 2016 2017 2016
(in thousands)
Processing & Logistics
Operating income (loss) $ 5,262 $ (1,372 ) $ 9,378 $ (1,194 )
Add:
Depreciation and amortization expense(3) 3,812 3,115 7,017 6,286
Non-cash loss related to derivative instruments 68 278
Loss (gain) on disposal of assets 129 1,849 (1,319 ) 1,849
Adjusted EBITDA attributable to noncontrolling interests 51   (43 ) 43   (41 )
Segment Adjusted EBITDA $ 9,322   $ 3,549   $ 15,397   $ 6,900  
(1)   The financial results for the Crude Oil Transportation and Logistics and Natural Gas Transportation & Logistics segments for the three and six months ended June 30, 2016, have been recast to reflect the results of operations of Terminals and NatGas, respectively, which TEP acquired effective January 1, 2017. The financial results for the Crude Oil Transportation and Logistics and Natural Gas Transportation & Logistics segments for the three and six months ended June 30, 2016, under the column "As Reported in 2016," does not include Terminals and NatGas's results of operations.
(2) Segment reporting does not include corporate general and administrative costs or intersegment eliminations.
(3) Net of noncontrolling interest.
 

TEP acquired a 25 percent interest in REX effective May 6, 2016, and an additional 24.99 percent interest in REX effective March 31, 2017. TEP's consolidated Adjusted EBITDA, as shown above, includes TEP's membership interest in REX. The table below is a reconciliation of REX's Adjusted EBITDA and Distributable Cash Flow for the three and six months ended June 30, 2017 and 2016, presented to provide additional information on REX's financial results. REX’s Adjusted EBITDA and Distributable Cash Flow are non-GAAP measures. For additional detail see "Non-GAAP Measures" below.

       
Three Months Ended June 30, Six Months Ended June 30,
2017     2016   2017     2016
(in thousands)
Net income $ 70,945 $ 112,728 $ 137,195 $ 192,663
Add:
Interest expense 42,051 39,840 83,877 80,385
Depreciation and amortization expense 54,608   50,163   108,799   100,499  
Adjusted EBITDA 167,604   202,731   329,871   373,547  
Less:
Cash interest cost (41,217 ) (39,114 ) (82,209 ) (78,888 )
Maintenance capital expenditures (3,359 ) (2,280 ) (6,940 ) (4,277 )
Distributable Cash Flow $ 123,028   $ 161,337   $ 240,722   $ 290,382  
 
Distributions to Members $ (118,604 ) $ (161,200 ) $ (239,105 ) $ (286,700 )
Contributions from Members $ 22,289 $ 87,600 $ 49,060 $ 162,500
 

Tallgrass Energy GP, LP Summary Financial Information

Information on distributions to Tallgrass Equity, LLC ("Tallgrass Equity"), TEGP and TEGP's Class A shareholders is shown below (in thousands, except coverage and per share data):

    Three Months Ended June 30,     Six Months Ended June 30,
2017     2016 2017     2016
 
TEP distributions to Tallgrass Equity(1)
General partner interest $ 1,186 $ 911 $ 2,226 $ 1,741
Incentive Distribution Rights 36,342 24,262 66,182 44,078
TEP common units owned by Tallgrass Equity 18,500   15,100   35,200   29,200  
Total TEP distributions to Tallgrass Equity 56,028 40,273 103,608 75,019
Less:
Cash interest expense attributable to Tallgrass Equity (1,308 ) (1,100 ) (2,517 ) (2,190 )
Cash general and administrative expenses attributable to Tallgrass Equity (500 ) (500 ) (1,000 ) (1,000 )
Cash available for distribution by Tallgrass Equity 54,220 38,673 100,091 71,829
Distributions to Class A (TEGP) 19,891 11,693 36,588 21,715
Distributions to Class B (Exchange Right Holders) 33,960   26,829   62,467   49,825  
Total cash distributions by Tallgrass Equity $ 53,851   $ 38,522   $ 99,055   $ 71,540  
TEGP
Distributions from Tallgrass Equity $ 19,891 $ 11,693 $ 36,588 $ 21,715
Less:
Distributions to Class A shareholders (19,891 ) (11,693 ) (36,588 ) (21,715 )
Amounts in excess of distributions     $   $  
Distribution coverage 1.00 x 1.00 x 1.00 x 1.00 x
 
Class A shares outstanding 58,075 47,725 58,075 47,725
Distribution per Class A share $ 0.3425 $ 0.2450 $ 0.6300 $ 0.4550
(1)   Represents distributions expected to be received by Tallgrass Equity from TEP on or about August 14, 2017, in connection with TEP's distribution for the quarter ended June 30, 2017.
 

Non-GAAP Measures

Adjusted EBITDA and Distributable Cash Flow are non-GAAP supplemental financial measures that TEP management and external users of our consolidated financial statements and financial statements of our subsidiaries and unconsolidated investments, such as industry analysts, investors, lenders and rating agencies, may use to assess:

• our operating performance as compared to other publicly traded partnerships in the midstream energy industry, without regard to historical cost basis or, in the case of Adjusted EBITDA, financing methods;

• the ability of our assets to generate sufficient cash flow to make distributions to our unitholders;

• our ability to incur and service debt and fund capital expenditures; and

• the viability of acquisitions and other capital expenditure projects and the returns on investment of various expansion and growth opportunities.

We believe that the presentation of Adjusted EBITDA and Distributable Cash Flow provides useful information to investors in assessing our financial condition and results of operations. Adjusted EBITDA and Distributable Cash Flow should not be considered alternatives to net income, operating income, net cash provided by operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP, nor should Adjusted EBITDA and Distributable Cash Flow be considered alternatives to available cash, operating surplus, distributions of available cash from operating surplus or other definitions in our partnership agreement. Adjusted EBITDA and Distributable Cash Flow have important limitations as analytical tools because they exclude some but not all items that affect net income and net cash provided by operating activities. Additionally, because Adjusted EBITDA and Distributable Cash Flow may be defined differently by other companies in our industry, our definition of Adjusted EBITDA and Distributable Cash Flow may not be comparable to similarly titled measures of other companies, thereby diminishing their utility.

We generally define Adjusted EBITDA as net income excluding the impact of interest, income taxes, depreciation and amortization, non-cash income or loss related to derivative instruments, non-cash long-term compensation expense, impairment losses, gains or losses on asset or business disposals or acquisitions, gains or losses on the repurchase, redemption or early retirement of debt, and earnings from unconsolidated investments, but including the impact of distributions from unconsolidated investments. We also use Distributable Cash Flow, which we generally define as Adjusted EBITDA, plus deficiency payments received from or utilized by our customers and preferred distributions received from Pony Express in excess of its distributable cash flow attributable to our net interest, less cash interest expense, maintenance capital expenditures, distributions to noncontrolling interests in excess of earnings allocated to noncontrolling interests, and certain cash reserves permitted by our partnership agreement. For a reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measures, please see "Summary Financial Information" above.

Cautionary Note Concerning Forward-Looking Statements

Disclosures in this press release contain “forward-looking statements.” All statements, other than statements of historical facts, included in this press release that address activities, events or developments that management expects, believes or anticipates will or may occur in the future are forward-looking statements. Without limiting the generality of the foregoing, forward-looking statements contained in this press release specifically include whether there will be any and, if so, the amount of, TEP's quarterly distribution increase for the third quarter of 2017 and whether TEP will be able to deliver the high-end of its financial guidance for 2017. Forward looking statements may also include the expectations of plans, strategies, objectives and growth and anticipated financial and operational performance of TEP, TEGP and their subsidiaries, including: the ability to pursue expansions and other opportunities for incremental volumes; natural gas and crude oil production growth in TEP's operating areas; expected future benefits of acquisitions or expansion projects; timing of anticipated spending on planned expenses and maintenance capital projects; and distribution rate and growth, including variability of quarterly distribution coverage. These statements are based on certain assumptions made by TEP and TEGP based on management’s experience and perception of historical trends, current conditions, anticipated future developments and other factors believed to be appropriate. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of TEP and TEGP, which may cause actual results to differ materially from those implied or expressed by the forward-looking statements. These include risks relating to TEP and TEGP’s financial performance and results, availability of sufficient cash flow to pay distributions and execute their business plans, the demand for natural gas storage, processing and transportation services and for crude oil transportation services, operating hazards, the effects of government regulation, tax position and other risks incidental to transporting, storing and processing natural gas or transporting crude oil and other important factors that could cause actual results to differ materially from those projected, including those set forth in reports filed by TEP and TEGP with the Securities and Exchange Commission. Any forward-looking statement applies only as of the date on which such statement is made and TEP and TEGP do not intend to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law.

About Tallgrass Energy

Tallgrass Energy is a family of companies that includes publicly traded partnerships Tallgrass Energy Partners, LP (NYSE: TEP) and Tallgrass Energy GP, LP (NYSE: TEGP), and privately held Tallgrass Development, LP. Operating across 10 states, Tallgrass is a growth-oriented midstream energy operator with transportation, storage, terminal and processing assets that serve some of the nation’s most prolific crude oil and natural gas basins.

To learn more, please visit our website at www.tallgrassenergy.com.

Tallgrass Energy Partners, LP Financial Statements

TALLGRASS ENERGY PARTNERS, LP

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

       
June 30, 2017 December 31, 2016
(in thousands)
ASSETS
Current Assets:
Cash and cash equivalents $ 240 $ 1,873
Accounts receivable, net 58,157 59,536
Gas imbalances 650 1,597
Inventories 11,241 13,093
Derivative assets 220 10,967
Prepayments and other current assets 7,153   7,628  
Total Current Assets 77,661 94,694
Property, plant and equipment, net 2,232,754 2,079,232
Goodwill 343,288 343,288
Intangible asset, net 93,258 93,522
Unconsolidated investments 936,939 475,625
Deferred financing costs, net 13,064 4,815
Deferred charges and other assets 11,362   11,037  
Total Assets $ 3,708,326   $ 3,102,213  
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable $ 24,227 $ 24,122
Accounts payable to related parties 5,895 5,935
Gas imbalances 1,281 1,239
Derivative liabilities 556
Accrued taxes 17,246 16,996
Accrued liabilities 18,647 16,702
Deferred revenue 85,566 60,757
Other current liabilities 5,292   6,446  
Total Current Liabilities 158,154 132,753
Long-term debt, net 2,087,568 1,407,981
Other long-term liabilities and deferred credits 17,200   7,063  
Total Long-term Liabilities 2,104,768 1,415,044
Commitments and Contingencies
Equity:
Predecessor Equity 82,295

Limited partners (73,028,843 and 72,485,954 common units issued and
outstanding at June 30, 2017 and December 31, 2016, respectively)

2,040,537 2,070,495

General partner (834,391 units issued and outstanding at June 30, 2017 and
December 31, 2016)

(628,985 ) (632,339 )
Total Partners' Equity 1,411,552 1,520,451
Noncontrolling interests 33,852   33,965  
Total Equity 1,445,404   1,554,416  
Total Liabilities and Equity $ 3,708,326   $ 3,102,213  
 
       

TALLGRASS ENERGY PARTNERS, LP

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

 
Three Months Ended June 30, Six Months Ended June 30,
2017     2016 2017     2016
(in thousands, except per unit amounts)
Revenues:
Crude oil transportation services $ 89,855 $ 93,322 $ 174,186 $ 187,894
Natural gas transportation services 29,429 28,682 61,114 57,962
Sales of natural gas, NGLs, and crude oil 22,918 16,830 38,299 30,756
Processing and other revenues 18,661   10,181   31,664   19,571  
Total Revenues 160,863   149,015   305,263   296,183  
Operating Costs and Expenses:
Cost of sales (exclusive of depreciation and amortization shown below) 19,386 15,958 31,756 29,526
Cost of transportation services (exclusive of depreciation and amortization shown below) 14,758 11,575 28,261 25,104
Operations and maintenance 15,254 14,270 28,157 27,228
Depreciation and amortization 22,091 21,890 43,494 43,897
General and administrative 14,774 14,322 28,437 27,812
Taxes, other than income taxes 6,912 5,783 15,138 13,433
Contract termination 8,061 8,061
Loss (gain) on disposal of assets 184   1,849   (1,264 ) 1,849  
Total Operating Costs and Expenses 93,359   93,708   173,979   176,910  
Operating Income 67,504   55,307   131,284   119,273  
Other Income (Expense):
Interest expense, net (19,688 ) (9,233 ) (34,377 ) (16,732 )
Unrealized gain on derivative instrument 18,953 1,885 10,007
Equity in earnings of unconsolidated investments 42,741 24,022 63,479 24,731
Other income, net 272   221   342   787  
Total Other Income (Expense) 23,325   33,963   31,329   18,793  
Net income 90,829 89,270 162,613 138,066
Net income attributable to noncontrolling interests (949 ) (1,110 ) (1,828 ) (2,151 )
Net income attributable to partners $ 89,880   $ 88,160   $ 160,785   $ 135,915  
Allocation of income to the limited partners:
Net income attributable to partners $ 89,880 $ 88,160 $ 160,785 $ 135,915
Predecessor operations interest in net loss 3,888 203
General partner interest in net income (37,301 ) (25,320 ) (67,884 ) (45,673 )
Net income available to common unitholders 52,579   66,728   92,901   90,445  
Basic net income per common unit $ 0.72   $ 0.93   $ 1.28   $ 1.30  
Diluted net income per common unit $ 0.72   $ 0.92   $ 1.27   $ 1.29  
Basic average number of common units outstanding 72,618 71,975 72,581 69,471
Diluted average number of common units outstanding 73,062 72,925 72,972 70,360
 
   

TALLGRASS ENERGY PARTNERS, LP

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 
Six Months Ended June 30,
2017     2016
(in thousands)
Cash Flows from Operating Activities:
Net income $ 162,613 $ 138,066
Adjustments to reconcile net income to net cash flows provided by operating activities:
Depreciation and amortization 47,702 47,106
Equity in earnings of unconsolidated investments (63,479 ) (24,731 )
Distributions from unconsolidated investments 63,374 24,636
Changes in components of working capital:
Accounts receivable and other 2,060 6,356
Accounts payable and accrued liabilities 3,520 6,155
Deferred revenue 24,593 16,174
Other current assets and liabilities 2,241 (1,837 )
Other operating, net (773 ) (6,418 )
Net Cash Provided by Operating Activities 241,851   205,507  
Cash Flows from Investing Activities:
Acquisition of Rockies Express membership interest (400,000 ) (436,022 )
Acquisition of Terminals and NatGas (140,000 )
Acquisition of Douglas Gathering System (128,526 )
Capital expenditures (53,995 ) (34,860 )
Distributions from unconsolidated investments in excess of cumulative earnings 27,308 6,335
Contributions to unconsolidated investments (17,835 ) (14,450 )
Acquisition of Pony Express membership interest (49,118 )
Other investing, net (13,986 ) 411  
Net Cash Used in Investing Activities (727,034 ) (527,704 )
Cash Flows from Financing Activities:
Proceeds from issuance of long-term debt 350,000
Borrowings under revolving credit facility, net 333,000 525,000
Distributions to unitholders (179,525 ) (127,924 )
Proceeds from public offering, net of offering costs 112,762 261,770
Partial exercise of call option (72,381 )
Repurchase of common units from TD (35,335 )
Acquisition of Pony Express membership interest (425,882 )
Proceeds from private placement, net of offering costs 90,009
Other financing, net (24,971 ) (444 )
Net Cash Provided by Financing Activities 483,550   322,529  
Net Change in Cash and Cash Equivalents (1,633 ) 332
Cash and Cash Equivalents, beginning of period 1,873   1,611  
Cash and Cash Equivalents, end of period $ 240   $ 1,943  
 

Tallgrass Energy GP, LP Financial Statements

TALLGRASS ENERGY GP, LP

CONDENSED CONSOLIDATING BALANCE SHEETS

(UNAUDITED)

       
June 30, 2017 December 31, 2016
TEP    

Consolidating
Adjustments (1)

    TEGP TEP    

Consolidating
Adjustments (1)

    TEGP
(in thousands) (in thousands)
ASSETS
Current Assets:
Cash and cash equivalents $ 240 $ 633 $ 873 $ 1,873 $ 586 $ 2,459
Accounts receivable, net 58,157 58,157 59,536 59,536
Gas imbalances 650 650 1,597 1,597
Inventories 11,241 11,241 13,093 13,093
Derivative assets 220 220 10,967 10,967
Prepayments and other current assets 7,153     7,153   7,628     7,628
Total Current Assets 77,661 633 78,294 94,694 586 95,280
Property, plant and equipment, net 2,232,754 2,232,754 2,079,232 2,079,232
Goodwill 343,288 343,288 343,288 343,288
Intangible asset, net 93,258 93,258 93,522 93,522
Unconsolidated investments 936,939 936,939 475,625 475,625
Deferred tax asset 509,114 509,114 521,454 521,454
Deferred financing costs, net 13,064 1,115 14,179 4,815 1,227 6,042
Deferred charges and other assets 11,362     11,362   11,037     11,037
Total Assets $ 3,708,326   $ 510,862   $ 4,219,188   $ 3,102,213   $ 523,267   $ 3,625,480
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable $ 24,227 $ $ 24,227 $ 24,122 $ 327 $ 24,449
Accounts payable to related parties 5,895 (117 ) 5,778 5,935 (111 ) 5,824
Gas imbalances 1,281 1,281 1,239 1,239
Derivative liabilities 556 556
Accrued taxes 17,246 17,246 16,996 16,996
Accrued liabilities 18,647 15 18,662 16,702 53 16,755
Deferred revenue 85,566 85,566 60,757 60,757
Other current liabilities 5,292     5,292   6,446     6,446
Total Current Liabilities 158,154 (102 ) 158,052 132,753 269 133,022
Long-term debt, net 2,087,568 147,000 2,234,568 1,407,981 148,000 1,555,981
Other long-term liabilities and deferred credits 17,200     17,200   7,063     7,063
Total Long-term Liabilities 2,104,768 147,000 2,251,768 1,415,044 148,000 1,563,044
Equity:
Total Partners' Equity 1,411,552 (1,174,328 ) 237,224 1,520,451 (1,187,189 ) 333,262
Noncontrolling interests 33,852   1,538,292   1,572,144   33,965   1,562,187   1,596,152
Total Equity 1,445,404   363,964   1,809,368   1,554,416   374,998   1,929,414
Total Liabilities and Equity $ 3,708,326   $ 510,862   $ 4,219,188   $ 3,102,213   $ 523,267   $ 3,625,480
(1)   Represents the aggregate consolidating adjustments necessary to produce consolidated financial statements for TEGP.
 
       

TALLGRASS ENERGY GP, LP

CONDENSED CONSOLIDATING STATEMENTS OF INCOME

(UNAUDITED)

 
Three Months Ended June 30, 2017 Three Months Ended June 30, 2016
TEP    

Consolidating
Adjustments (1)

    TEGP TEP    

Consolidating
Adjustments (1)

    TEGP
(in thousands) (in thousands)
Revenues:
Crude oil transportation services $ 89,855 $ $ 89,855 $ 93,322 $ $ 93,322
Natural gas transportation services 29,429 29,429 28,682 28,682
Sales of natural gas, NGLs, and crude oil 22,918 22,918 16,830 16,830
Processing and other revenues 18,661     18,661   10,181     10,181  
Total Revenues 160,863     160,863   149,015     149,015  
Operating Costs and Expenses:
Cost of sales (exclusive of depreciation and amortization shown below) 19,386 19,386 15,958 15,958
Cost of transportation services (exclusive of depreciation and amortization shown below) 14,758 14,758 11,575 11,575
Operations and maintenance 15,254 15,254 14,270 14,270
Depreciation and amortization 22,091 22,091 21,890 21,890
General and administrative 14,774 560 15,334 14,322 549 14,871
Taxes, other than income taxes 6,912 6,912 5,783 5,783
Contract termination 8,061 8,061
Loss on disposal of assets 184     184   1,849     1,849  
Total Operating Costs and Expenses 93,359   560   93,919   93,708   549   94,257  
Operating Income 67,504   (560 ) 66,944   55,307   (549 ) 54,758  
Other Income (Expense):
Interest expense, net (19,688 ) (1,426 ) (21,114 ) (9,233 ) (1,208 ) (10,441 )
Unrealized gain on derivative instrument 18,953 18,953
Equity in earnings of unconsolidated investments 42,741 42,741 24,022 24,022
Other income, net 272     272   221     221  
Total Other Income (Expense) 23,325   (1,426 ) 21,899   33,963   (1,208 ) 32,755  
Net income before tax 90,829 (1,986 ) 88,843 89,270 (1,757 ) 87,513
Deferred income tax expense   (9,676 ) (9,676 )   (6,792 ) (6,792 )
Net income 90,829 (11,662 ) 79,167 89,270 (8,549 ) 80,721
Net income attributable to noncontrolling interests (949 ) (69,465 ) (70,414 ) (1,110 ) (80,051 ) (81,161 )
Net income (loss) attributable to TEGP $ 89,880   $ (81,127 ) $ 8,753   $ 88,160   $ (88,600 ) $ (440 )
 
Allocation of income:
Net income (loss) attributable to TEGP $ 8,753 $ (440 )
Predecessor operations interest in net loss   3,888  
Net income attributable to TEGP, excluding predecessor operations interest 8,753   3,448  
Basic net income per Class A share $ 0.15   $ 0.07  
Diluted net income per Class A share $ 0.15   $ 0.07  
Basic average number of Class A shares outstanding 58,075 47,725
Diluted average number of Class A shares outstanding 58,192 47,734
(1)   Represents the aggregate consolidating adjustments necessary to produce consolidated financial statements for TEGP.
 
       

TALLGRASS ENERGY GP, LP

CONDENSED CONSOLIDATING STATEMENTS OF INCOME

(UNAUDITED)

 
Six Months Ended June 30, 2017 Six Months Ended June 30, 2016
TEP    

Consolidating
Adjustments (1)

    TEGP TEP    

Consolidating
Adjustments (1)

    TEGP
(in thousands) (in thousands)
Revenues:
Crude oil transportation services $ 174,186 $ $ 174,186 $ 187,894 $ $ 187,894
Natural gas transportation services 61,114 61,114 57,962 57,962
Sales of natural gas, NGLs, and crude oil 38,299 38,299 30,756 30,756
Processing and other revenues 31,664     31,664   19,571     19,571  
Total Revenues 305,263     305,263   296,183     296,183  
Operating Costs and Expenses:
Cost of sales (exclusive of depreciation and amortization shown below) 31,756 31,756 29,526 29,526
Cost of transportation services (exclusive of depreciation and amortization shown below) 28,261 28,261 25,104 25,104
Operations and maintenance 28,157 28,157 27,228 27,228
Depreciation and amortization 43,494 43,494 43,897 43,897
General and administrative 28,437 1,114 29,551 27,812 1,070 28,882
Taxes, other than income taxes 15,138 15,138 13,433 13,433
Contract termination 8,061 8,061
(Gain) loss on disposal of assets (1,264 )   (1,264 ) 1,849     1,849  
Total Operating Costs and Expenses 173,979   1,114   175,093   176,910   1,070   177,980  
Operating Income 131,284   (1,114 ) 130,170   119,273   (1,070 ) 118,203  
Other Income (Expense):
Interest expense, net (34,377 ) (2,754 ) (37,131 ) (16,732 ) (2,386 ) (19,118 )
Unrealized gain on derivative instrument 1,885 1,885 10,007 10,007
Equity in earnings of unconsolidated investments 63,479 63,479 24,731 24,731
Other income, net 342     342   787     787  
Total Other Income (Expense) 31,329   (2,754 ) 28,575   18,793   (2,386 ) 16,407  
Net income before tax 162,613 (3,868 ) 158,745 138,066 (3,456 ) 134,610
Deferred income tax expense   (12,340 ) (12,340 )   (9,583 ) (9,583 )
Net income 162,613 (16,208 ) 146,405 138,066 (13,039 ) 125,027
Net income attributable to noncontrolling interests (1,828 ) (123,795 ) (125,623 ) (2,151 ) (112,042 ) (114,193 )
Net income (loss) attributable to TEGP $ 160,785   $ (140,003 ) $ 20,782   $ 135,915   $ (125,081 ) $ 10,834  
 
Allocation of income:
Net income (loss) attributable to TEGP $ 20,782 $ 10,834
Predecessor operations interest in net loss   203  
Net income attributable to TEGP, excluding predecessor operations interest 20,782   11,037  
Basic net income per Class A share $ 0.36   $ 0.23  
Diluted net income per Class A share $ 0.36   $ 0.23  
Basic average number of Class A shares outstanding 58,075 47,725
Diluted average number of Class A shares outstanding 58,187 47,725
(1)   Represents the aggregate consolidating adjustments necessary to produce consolidated financial statements for TEGP.
 

Tallgrass Energy
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or
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Source: Tallgrass Energy