PAA Natural Gas Storage Reports Fourth-Quarter and Full-Year 2012 Results
HOUSTON--(BUSINESS WIRE)--
PAA Natural Gas Storage, L.P. (NYSE: PNG)
today reported net income of $22.4 million, or $0.30 per diluted limited
partner unit, for the fourth quarter of 2012 and net income of $73.3
million, or $0.99 per diluted limited partner unit, for the full year of
2012. Net income for the fourth quarter of 2011 was $22.0 million, or
$0.30 per diluted limited partner unit, and net income for the full year
of 2011 was $59.7 million, or $0.85 per diluted limited partner unit.
The Partnership reported earnings before interest, taxes, depreciation,
depletion and amortization (“EBITDA”) of $34.4 million and $118.6
million for the fourth quarter and full year of 2012, respectively.
EBITDA for the fourth quarter and full year of 2011 was $32.6 million
and $98.8 million, respectively.
The Partnership’s reported results include items that affect
comparability between reporting periods. These items are excluded from
adjusted results, as further described in the following tables.
Accordingly, the Partnership’s fourth-quarter 2012 adjusted net income,
adjusted net income per diluted limited partner unit and adjusted EBITDA
were $23.2 million, $0.31 and $35.2 million, respectively. The
comparable amounts for the fourth quarter of 2011 were $22.8 million,
$0.31 and $33.4 million, respectively. The Partnership’s adjusted net
income, adjusted net income per diluted limited partner unit and
adjusted EBITDA for the full year of 2012 were $77.2 million, $1.04 and
$122.4 million, respectively. The comparable amounts for the full year
of 2011 were $68.2 million, $0.97 and $107.2 million, respectively. (See
the section of this release entitled “Non-GAAP and Segment Financial
Measures” and the tables included with this press release for a
presentation of adjusted EBITDA, other non-GAAP financial measures and
reconciliations of such measures to the comparable GAAP measures.)
“PNG delivered solid fourth-quarter and full-year results reporting
adjusted EBITDA above the midpoint of our guidance, marking the tenth
consecutive quarter since our IPO in May 2010 of delivering results in
line with or ahead of guidance. This performance, particularly during
challenging market conditions, highlights our disciplined business
strategy, strategically located assets, and high percentage of
contracted fee-based storage revenue, in addition to solid execution by
PNG’s employees,” said Dean Liollio, President of PAA Natural Gas
Storage.
“Our 2013 guidance incorporates the benefit of our low-cost storage
capacity expansions at Southern Pines and Pine Prairie, which are
expected to largely offset the adverse impact from recontracting
capacity that was contracted at higher prices several years ago during
more favorable market conditions. Furthermore, PNG entered 2013 with
$168 million in committed liquidity and remains well positioned to
finance its ongoing capacity expansion activities.”
The following tables present certain selected financial information for
the applicable periods (amounts in thousands):
Three Months Ended December 31,
Year Ended December 31,
2012
2011
2012
2011
Revenues
Firm storage services
$
38,164
$
36,106
$
143,810
$
136,181
Hub services and merchant storage (1)
73,695
121,585
239,963
202,837
Other
814
1,155
3,890
3,946
Total revenues
112,673
158,846
387,663
342,964
Storage-related costs (2)
(70,053
)
(119,359
)
(237,602
)
(210,016
)
Field operating costs
(3,338
)
(2,549
)
(12,368
)
(11,621
)
General and administrative expenses (3)
(4,844
)
(4,373
)
(19,148
)
(22,566
)
Other income / (expense), net
(7
)
(5
)
5
5
EBITDA
$
34,431
$
32,560
$
118,550
$
98,766
Selected items impacting comparability
777
804
3,853
8,463
Adjusted EBITDA
$
35,208
$
33,364
$
122,403
$
107,229
Reconciliation to net income:
Depreciation, depletion and amortization
(9,691
)
(9,112
)
(37,546
)
(33,714
)
Interest expense, net of capitalized interest
(2,351
)
(1,409
)
(7,701
)
(5,354
)
Adjusted Net Income
$
23,166
$
22,843
$
77,156
$
68,161
Selected items impacting comparability
(777
)
(804
)
(3,853
)
(8,463
)
Net income
$
22,389
$
22,039
$
73,303
$
59,698
(1) Includes revenues associated with sales of natural gas through
commercial marketing activities.
(2) Includes costs associated with natural gas sold through
commercial marketing activities.
(3) Includes equity compensation expense for all periods presented.
The year ended December 31, 2011 includes approximately $4 million
of acquisition-related costs.
Fourth-quarter 2012 adjusted EBITDA increased by approximately 6% over
the prior-year period. This increase was primarily the result of storage
capacity expansions as well as increased hub services and merchant
storage net revenues, partially offset by higher field operating costs
and general and administrative expenses. Full-year 2012 adjusted EBITDA
increased by approximately 14% over the prior year. This increase was
primarily driven by storage capacity expansions, increased hub services
and merchant storage net revenues and the full-period benefit of the
Southern Pines acquisition.
The following table highlights the selected items that the Partnership
believes impact comparability of financial results between reporting
periods (amounts in thousands, except per unit amounts):
Three Months Ended
December 31,
Year Ended
December 31,
Selected Items Impacting Comparability - Income / (Expense):
2012
2011
2012
2011
Equity compensation expense
$
(832
)
$
(707
)
$
(3,980
)
$
(4,046
)
Acquisition-related expense
-
-
-
(4,055
)
Mark-to-market of open derivative positions
55
(97
)
127
138
Insurance deductible related to property damage
-
-
-
(500
)
Selected items impacting comparability
$
(777
)
$
(804
)
$
(3,853
)
$
(8,463
)
Selected items impacting comparability
$
(777
)
$
(804
)
$
(3,853
)
$
(8,463
)
Less: GP 2% portion of selected items impacting comparability
16
16
77
169
LP 98% portion of selected items impacting comparability
$
(761
)
$
(788
)
$
(3,776
)
$
(8,294
)
Impact to basic net income per limited partner unit (1)
$
(0.01
)
$
(0.01
)
$
(0.05
)
$
(0.12
)
Impact to diluted net income per limited partner unit (1)
$
(0.01
)
$
(0.01
)
$
(0.05
)
$
(0.12
)
(1) The calculation includes common units and Series A subordinated
units. Series B subordinated units are not entitled to cash
distributions unless and until they convert to Series A subordinated
units or common units, which conversion is contingent on our meeting
both certain distribution levels and certain in-service operational
tests at our Pine Prairie facility. As a result, the Series B
subordinated units are not included in the calculation of basic or
diluted net income per unit amounts.
The Partnership’s common units and Series A subordinated units
outstanding as of December 31, 2012 totaled 71.1 million. An additional
13.5 million Series B subordinated units (which are not currently
entitled to receive distributions) are outstanding and do not convert to
Series A subordinated units unless certain performance conditions are
met. At December 31, 2012, the Partnership had long-term debt of
approximately $505 million and a long-term debt-to-total capitalization
ratio of 29%.
The Partnership has announced a quarterly distribution of $0.3575 per
unit ($1.43 per unit on an annualized basis) payable February 14, 2013
on its outstanding common units and Series A subordinated units.
Non-GAAP and Segment Financial Measures
Adjusted EBITDA is presented because it is the primary measure used by
management to evaluate segment performance and because we believe it
provides additional information with respect to both the performance of
our fundamental business activities as well as our ability to meet our
future debt service, capital expenditures and working capital
requirements. We also believe that adjusted EBITDA is used to assess our
operating performance compared to other publicly traded partnerships in
the midstream energy industry, without regard to financing methods,
capital structure or historical cost basis. In addition, we present
selected items that impact the comparability of our operating results as
additional information that may be helpful to your understanding of our
financial results. We consider an understanding of these selected items
impacting comparability to be material to our evaluation of our
operating results and prospects. Although we present selected items that
we consider in evaluating our performance, you should also be aware that
the items presented do not represent all items that affect comparability
between the periods presented. Variations in our operating results are
also caused by changes in volumes, prices, mechanical interruptions,
acquisitions and numerous other factors. These types of variations are
not fully identified and discussed in this release, but will be
discussed, as applicable, in management's discussion and analysis of
operating results in our Annual Report on Form 10-K.
A reconciliation of adjusted EBITDA to net income for the periods
presented is included in the tables of this release. In addition, the
Partnership maintains on its website (www.pnglp.com)
a reconciliation of Adjusted EBITDA and certain commonly used non-GAAP
financial information to the most comparable GAAP measures. To access
the information, investors should click on the "Investor Relations" link
on the Partnership's home page and then the "Non-GAAP Reconciliations"
link on the Investor Relations page.
Conference Call
The Partnership will host a joint conference call with Plains All
American Pipeline, L.P. at 10 a.m. CST on Thursday, February 7, 2013 to
discuss the following items:
1. The Partnership's fourth-quarter and full-year 2012 performance;
2. The status of major expansion projects;
3. Capitalization and liquidity;
4. Financial and operating guidance for the first quarter and full year
of 2013; and
5. The Partnership’s outlook for the future.
Prior to its February 7th conference call, the Partnership
will furnish a current report on Form 8-K, which will include material
in this press release and financial and operational guidance for the
first-quarter and full year of 2013. A copy of the Form 8-K will be
available on the Partnership’s website at www.pnglp.com.
Webcast Instructions
To access the Internet webcast, please go to the Partnership’s website
at www.pnglp.com,
choose “Investor Relations,” and then choose “Conference Calls.”
Following the live webcast, the call will be archived for a period of
sixty (60) days on the Partnership’s website.
Alternatively, dial (800) 288-8967 to access the live conference call.
International callers should dial (612) 332-0636. No password is
required. Access to the slide presentation accompanying the conference
call is available a few minutes prior to the call under the “Conference
Call Summaries” portion of the “Conference Calls” tab of the Investor
Relations section of the Partnership's website at www.pnglp.com.
Telephonic Replay Instructions
To listen to a telephonic replay of the conference call, please dial
(800) 475-6701, or, for international callers, (320) 365-3844, and use
the following replay access code: 277242. The replay will be available
beginning Thursday, February 7, 2013, at approximately noon CST and
continue until 11:59 p.m. CST Friday, March 7, 2013.
Forward Looking Statements
Except for the historical information contained herein, the matters
discussed in this release are forward-looking statements that involve
certain risks and uncertainties that could cause actual results or
outcomes to differ materially from results or outcomes anticipated in
the forward looking statements. These risks and uncertainties include,
among other things, a continuation of reduced volatility and/or lower
spreads in natural gas markets for an extended period of time; factors
affecting demand for natural gas storage services and the rates we are
able to charge for such services, including the balance between the
supply of and the demand for natural gas; our ability to maintain or
replace expiring storage contracts, or enter into new storage contracts,
in either case at attractive rates and on otherwise favorable terms;
factors affecting our ability to realize revenues from hub services and
merchant storage transactions involving uncontracted or unutilized
capacity at our facilities; operational, geologic or other factors that
affect the timing or amount of crude oil and other liquid hydrocarbons
that we are able to produce in conjunction with the operation of our
Bluewater facility; the occurrence of a natural disaster, catastrophe,
terrorist attack, or other event, including attacks on electronic and
computer systems; market or other factors that affect the prices we are
able to realize for crude oil and other liquid hydrocarbons produced in
conjunction with the operation of our Bluewater facility; our ability to
obtain and/or maintain all permits, approvals and authorizations that
are necessary to conduct our business and execute our capital projects;
the impact of operational, geologic and commercial factors that could
result in an inability on our part to satisfy our contractual
commitments and obligations, including the impact of equipment
performance, cavern operating pressures and cavern temperature
variances, salt creep and subsurface conditions or events; risks related
to the ownership, development and operation of natural gas storage
facilities; failure to implement or execute planned internal growth
projects on a timely basis and within targeted cost projections; the
effectiveness of our risk management activities; the effects of
competition; interruptions in service and fluctuations in tariffs or
volumes on third-party pipelines; general economic, market or business
conditions and the amplification of other risks caused by volatile
financial markets, capital constraints and pervasive liquidity concerns;
the successful integration and future performance of acquired assets or
businesses; our ability to obtain debt or equity financing on
satisfactory terms to fund additional acquisitions, expansion projects,
working capital requirements and the repayment or refinancing of
indebtedness; the impact of current and future laws, rulings,
governmental regulations, accounting standards and statements and
related interpretations; shortages or cost increases of supplies,
materials or labor; weather interference with business operations or
project construction; our ability to receive open credit from our
suppliers and trade counterparties; continued creditworthiness of, and
performance by, our counterparties, including financial institutions and
trading companies with which we do business; the availability of, and
our ability to consummate, acquisition or combination opportunities; the
operations or financial performance of assets or businesses that we
acquire; environmental liabilities or events that are not covered by an
indemnity, insurance or existing reserves; increased costs or
unavailability of insurance; fluctuations in the debt and equity
markets, including the price of our units at the time of vesting under
our long-term incentive plan; and other factors and uncertainties
inherent in the ownership, development and operation of natural gas
storage facilities discussed in the Partnership’s filings with the
Securities and Exchange Commission.
PAA Natural Gas Storage, L.P. is a publicly traded master limited
partnership engaged in the development, acquisition, operation and
commercial management of natural gas storage facilities. The Partnership
currently owns and operates three natural gas storage facilities located
in Louisiana, Mississippi and Michigan. The Partnership’s general
partner, as well as the majority of the Partnership’s limited partner
interests, is owned by Plains All American Pipeline, L.P. PNG is
headquartered in Houston, TX.
PAA NATURAL GAS STORAGE, L.P. AND SUBSIDIARIES
FINANCIAL SUMMARY (unaudited)
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per unit data)
Three Months Ended
December 31,
Year Ended December 31,
2012
2011
2012
2011
REVENUES (1)
$
112,673
$
158,846
$
387,663
$
342,964
COSTS AND EXPENSES:
Storage-related costs (2)
70,053
119,359
237,602
210,016
Field operating costs
3,338
2,549
12,368
11,621
General and administrative expenses (3)
4,844
4,373
19,148
22,566
Depreciation, depletion and amortization
9,691
9,112
37,546
33,714
Total costs and expenses
87,926
135,393
306,664
277,917
Operating income
24,747
23,453
80,999
65,047
OTHER INCOME / (EXPENSE):
Interest expense, net of capitalized interest:
(2,351
)
(1,409
)
(7,701
)
(5,354
)
Other income / (expense), net
(7
)
(5
)
5
5
Net income
$
22,389
$
22,039
$
73,303
$
59,698
CALCULATION OF LIMITED PARTNER NET INCOME:
Net Income
$
22,389
$
22,039
$
73,303
$
59,698
Less: General partner interest in net income
665
658
2,337
1,793
Less: Amounts attributable to participating securities (4)
207
-
455
-
Limited partner interest in net income
$
21,517
$
21,381
$
70,511
$
57,905
Net income per limited partner unit - basic (5)
$
0.30
$
0.30
$
0.99
$
0.85
Net income per limited partner unit - diluted (5)
$
0.30
$
0.30
$
0.99
$
0.85
Weighted average limited partner units outstanding - basic (5)
71,139
71,128
71,133
68,250
Weighted average limited partner units outstanding - diluted (5)
71,267
71,140
71,253
68,267
OPERATING DATA
(In thousands, except capacity and operating metric data)
Three Months Ended
December 31,
Year Ended December 31,
2012
2011
2012
2011
Net revenue margin (6)(7)
$
42,565
$
39,584
$
149,934
$
132,810
Field operating costs / G&A / Other
(7,357
)
(6,220
)
(27,531
)
(25,581
)
Adjusted EBITDA
$
35,208
$
33,364
$
122,403
$
107,229
Average working storage capacity (Bcf)
93
76
84
71
Monthly Operating Metrics ($/Mcf):
Net revenue margin (6)(7)
$
0.15
$
0.17
$
0.15
$
0.16
Field operating costs / G&A / Other
(0.03
)
(0.03
)
(0.03
)
(0.03
)
Adjusted EBITDA
$
0.12
$
0.14
$
0.12
$
0.13
(1) Includes revenues associated with sales of natural gas through
commercial marketing activities.
(2) Includes costs associated with natural gas sold through
commercial marketing activities.
(3) Includes equity compensation expense for all periods
presented. The year ended December 31, 2011 includes approximately
$4 million of acquisition-related costs incurred during the first
quarter of 2011.
(4) Participating securities consist of LTIP awards containing
vested distribution equivalent rights which entitle the grantee to a
cash payment equal to the cash distribution paid on our outstanding
common units.
(5) The calculation includes common units and Series A subordinated
units. Series B subordinated units are not entitled to cash
distributions unless and until they convert to Series A subordinated
units or common units, which conversion is contingent on our meeting
both certain distribution levels and certain in-service operational
tests at our Pine Prairie facility. As a result, the Series B
subordinated units are not included in the calculation of basic or
diluted net income per unit amounts.
(6) Net revenue margin equals revenues minus storage-related costs.
(7) Excludes the impact of mark-to-market of open derivative
positions.
PAA NATURAL GAS STORAGE, L.P. AND SUBSIDIARIES
FINANCIAL SUMMARY (unaudited)
CONDENSED CONSOLIDATED BALANCE SHEET DATA
(In thousands)
December 31,
December 31,
2012
2011
ASSETS
Current assets
$
94,393
$
93,955
Property and equipment, net
1,313,918
1,280,413
Base gas
54,091
48,432
Goodwill, intangibles and other assets, net
406,667
427,199
Total assets
$
1,869,069
$
1,849,999
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities
$
104,336
$
110,172
Note payable to PAA
200,000
200,000
Long-term debt under credit agreements
305,385
253,508
Other long-term liabilities
8,406
693
Total liabilities
618,127
564,373
Total partners' capital
1,250,942
1,285,626
Total liabilities and partners' capital
$
1,869,069
$
1,849,999
PAA NATURAL GAS STORAGE, L.P. AND SUBSIDIARIES
FINANCIAL SUMMARY (unaudited)
COMPUTATION OF BASIC AND DILUTED EARNINGS
PER LIMITED PARTNER UNIT
(In thousands, except per unit data)
Three Months Ended December 31,
Year Ended December 31,
2012
2011
2012
2011
Numerator for basic and diluted earnings per limited partner unit:
Net Income
$
22,389
$
22,039
$
73,303
$
59,698
Less: General partner's incentive distribution
222
222
888
611
Less: General partner 2% ownership interest
443
436
1,449
1,182
Less: Amounts attributable to participating securities (1)
207
-
455
-
Net income available to limited partners
$
21,517
$
21,381
$
70,511
$
57,905
Denominator:
Basic weighted average number of limited partner units outstanding (2)
71,139
71,128
71,133
68,250
Effect of dilutive securities:
Weighted average LTIP units
128
12
120
17
Diluted weighted average number of limited partner units outstanding (2)
71,267
71,140
71,253
68,267
Basic net income per limited partner unit (2)
$
0.30
$
0.30
$
0.99
$
0.85
Diluted net income per limited partner unit (2)
$
0.30
$
0.30
$
0.99
$
0.85
(1) Participating securities consist of LTIP awards containing
vested distribution equivalent rights which entitle the grantee to a
cash payment equal to the cash distribution paid on our outstanding
common units.
(2) The calculation includes common units and Series A subordinated
units. Series B subordinated units are not entitled to cash
distributions unless and until they convert to Series A subordinated
units or common units, which conversion is contingent on our meeting
both certain distribution levels and certain in-service operational
tests at our Pine Prairie facility. As a result, the Series B
subordinated units are not included in the calculation of basic or
diluted net income per unit amounts.
PAA NATURAL GAS STORAGE, L.P. AND SUBSIDIARIES
FINANCIAL SUMMARY (unaudited)
FINANCIAL DATA RECONCILIATIONS
(In thousands, except per unit data)
Three Months Ended December 31,
Year Ended December 31,
2012
2011
2012
2011
Distributable cash flow ("DCF")
Net Income
$
22,389
$
22,039
$
73,303
$
59,698
Depreciation, depletion and amortization
9,691
9,112
37,546
33,714
Equity compensation expense, net of cash payments
706
661
3,301
3,383
Maintenance capital expenditures
(166
)
(532
)
(623
)
(798
)
Mark-to-market on open derivative positions
(55
)
97
(127
)
(138
)
Acquisition-related expense
-
-
-
4,055
DCF
$
32,565
$
31,377
$
113,400
$
99,914
Three Months Ended December 31,
Year Ended December 31,
Net income and earnings per limited partner unit excluding
selected items impacting comparability:
2012
2011
2012
2011
Net Income
$
22,389
$
22,039
$
73,303
$
59,698
Selected items impacting comparability
777
804
3,853
8,463
Adjusted Net Income
$
23,166
$
22,843
$
77,156
$
68,161
Net income available to limited partners in accordance with
application of the two-class method for MLPs
$
21,517
$
21,381
$
70,511
$
57,905
Limited partners' 98% of selected items impacting comparability
761
788
3,776
8,294
Adjusted limited partners' net income
$
22,278
$
22,169
$
74,287
$
66,199
Adjusted basic net income per limited partner unit (1)
$
0.31
$
0.31
$
1.04
$
0.97
Adjusted diluted net income per limited partner unit (1)
$
0.31
$
0.31
$
1.04
$
0.97
Basic weighted average units outstanding (1)
71,139
71,128
71,133
68,250
Diluted weighted average units outstanding (1)
71,267
71,140
71,253
68,267
(1) The calculation includes common units and Series A subordinated
units. Series B subordinated units are not entitled to cash
distributions unless and until they convert to Series A subordinated
units or common units, which conversion is contingent on our meeting
both certain distribution levels and certain in-service operational
tests at our Pine Prairie facility. As a result, the Series B
subordinated units are not included in the calculation of basic or
diluted net income per unit amounts.
PAA Natural Gas Storage, L.P. Roy I. Lamoreaux, 713-646-4222 –
800/564-3036 Director, Investor Relations Al Swanson,
800-564-3036 Executive Vice President, CFO
Press Release $PNG PAA Natural Gas Storage, L.P.
HOUSTON--(BUSINESS WIRE)-- PAA Natural Gas Storage, L.P. (NYSE: PNG) today reported net income of $22.4 million, or $0.30 per diluted limited partner unit, for the fourth quarter of 2012 and net income of $73.3 million, or $0.99 per diluted limited partner unit, for the full year of 2012. Net income for the fourth quarter of 2011 was $22.0 million, or $0.30 per diluted limited partner unit, and net income for the full year of 2011 was $59.7 million, or $0.85 per diluted limited partner unit.
The Partnership reported earnings before interest, taxes, depreciation, depletion and amortization (“EBITDA”) of $34.4 million and $118.6 million for the fourth quarter and full year of 2012, respectively. EBITDA for the fourth quarter and full year of 2011 was $32.6 million and $98.8 million, respectively.
The Partnership’s reported results include items that affect comparability between reporting periods. These items are excluded from adjusted results, as further described in the following tables. Accordingly, the Partnership’s fourth-quarter 2012 adjusted net income, adjusted net income per diluted limited partner unit and adjusted EBITDA were $23.2 million, $0.31 and $35.2 million, respectively. The comparable amounts for the fourth quarter of 2011 were $22.8 million, $0.31 and $33.4 million, respectively. The Partnership’s adjusted net income, adjusted net income per diluted limited partner unit and adjusted EBITDA for the full year of 2012 were $77.2 million, $1.04 and $122.4 million, respectively. The comparable amounts for the full year of 2011 were $68.2 million, $0.97 and $107.2 million, respectively. (See the section of this release entitled “Non-GAAP and Segment Financial Measures” and the tables included with this press release for a presentation of adjusted EBITDA, other non-GAAP financial measures and reconciliations of such measures to the comparable GAAP measures.)
“PNG delivered solid fourth-quarter and full-year results reporting adjusted EBITDA above the midpoint of our guidance, marking the tenth consecutive quarter since our IPO in May 2010 of delivering results in line with or ahead of guidance. This performance, particularly during challenging market conditions, highlights our disciplined business strategy, strategically located assets, and high percentage of contracted fee-based storage revenue, in addition to solid execution by PNG’s employees,” said Dean Liollio, President of PAA Natural Gas Storage.
“Our 2013 guidance incorporates the benefit of our low-cost storage capacity expansions at Southern Pines and Pine Prairie, which are expected to largely offset the adverse impact from recontracting capacity that was contracted at higher prices several years ago during more favorable market conditions. Furthermore, PNG entered 2013 with $168 million in committed liquidity and remains well positioned to finance its ongoing capacity expansion activities.”
The following tables present certain selected financial information for the applicable periods (amounts in thousands):
Three Months Ended
December 31,
Year Ended
December 31,
Fourth-quarter 2012 adjusted EBITDA increased by approximately 6% over the prior-year period. This increase was primarily the result of storage capacity expansions as well as increased hub services and merchant storage net revenues, partially offset by higher field operating costs and general and administrative expenses. Full-year 2012 adjusted EBITDA increased by approximately 14% over the prior year. This increase was primarily driven by storage capacity expansions, increased hub services and merchant storage net revenues and the full-period benefit of the Southern Pines acquisition.
The following table highlights the selected items that the Partnership believes impact comparability of financial results between reporting periods (amounts in thousands, except per unit amounts):
December 31,
December 31,
Selected Items Impacting Comparability - Income / (Expense):
2012
Acquisition-related expense
Mark-to-market of open derivative positions
Insurance deductible related to property damage
Selected items impacting comparability
Less: GP 2% portion of selected items impacting comparability
LP 98% portion of selected items impacting comparability
Impact to basic net income per limited partner unit (1)
(0.05
Impact to diluted net income per limited partner unit (1)
The Partnership’s common units and Series A subordinated units outstanding as of December 31, 2012 totaled 71.1 million. An additional 13.5 million Series B subordinated units (which are not currently entitled to receive distributions) are outstanding and do not convert to Series A subordinated units unless certain performance conditions are met. At December 31, 2012, the Partnership had long-term debt of approximately $505 million and a long-term debt-to-total capitalization ratio of 29%.
The Partnership has announced a quarterly distribution of $0.3575 per unit ($1.43 per unit on an annualized basis) payable February 14, 2013 on its outstanding common units and Series A subordinated units.
Non-GAAP and Segment Financial Measures
Adjusted EBITDA is presented because it is the primary measure used by management to evaluate segment performance and because we believe it provides additional information with respect to both the performance of our fundamental business activities as well as our ability to meet our future debt service, capital expenditures and working capital requirements. We also believe that adjusted EBITDA is used to assess our operating performance compared to other publicly traded partnerships in the midstream energy industry, without regard to financing methods, capital structure or historical cost basis. In addition, we present selected items that impact the comparability of our operating results as additional information that may be helpful to your understanding of our financial results. We consider an understanding of these selected items impacting comparability to be material to our evaluation of our operating results and prospects. Although we present selected items that we consider in evaluating our performance, you should also be aware that the items presented do not represent all items that affect comparability between the periods presented. Variations in our operating results are also caused by changes in volumes, prices, mechanical interruptions, acquisitions and numerous other factors. These types of variations are not fully identified and discussed in this release, but will be discussed, as applicable, in management's discussion and analysis of operating results in our Annual Report on Form 10-K.
A reconciliation of adjusted EBITDA to net income for the periods presented is included in the tables of this release. In addition, the Partnership maintains on its website (www.pnglp.com) a reconciliation of Adjusted EBITDA and certain commonly used non-GAAP financial information to the most comparable GAAP measures. To access the information, investors should click on the "Investor Relations" link on the Partnership's home page and then the "Non-GAAP Reconciliations" link on the Investor Relations page.
Conference Call
The Partnership will host a joint conference call with Plains All American Pipeline, L.P. at 10 a.m. CST on Thursday, February 7, 2013 to discuss the following items:
1. The Partnership's fourth-quarter and full-year 2012 performance;
2. The status of major expansion projects;
3. Capitalization and liquidity;
4. Financial and operating guidance for the first quarter and full year of 2013; and
5. The Partnership’s outlook for the future.
Prior to its February 7th conference call, the Partnership will furnish a current report on Form 8-K, which will include material in this press release and financial and operational guidance for the first-quarter and full year of 2013. A copy of the Form 8-K will be available on the Partnership’s website at www.pnglp.com.
Webcast Instructions
To access the Internet webcast, please go to the Partnership’s website at www.pnglp.com, choose “Investor Relations,” and then choose “Conference Calls.” Following the live webcast, the call will be archived for a period of sixty (60) days on the Partnership’s website.
Alternatively, dial (800) 288-8967 to access the live conference call. International callers should dial (612) 332-0636. No password is required. Access to the slide presentation accompanying the conference call is available a few minutes prior to the call under the “Conference Call Summaries” portion of the “Conference Calls” tab of the Investor Relations section of the Partnership's website at www.pnglp.com.
Telephonic Replay Instructions
To listen to a telephonic replay of the conference call, please dial (800) 475-6701, or, for international callers, (320) 365-3844, and use the following replay access code: 277242. The replay will be available beginning Thursday, February 7, 2013, at approximately noon CST and continue until 11:59 p.m. CST Friday, March 7, 2013.
Forward Looking Statements
Except for the historical information contained herein, the matters discussed in this release are forward-looking statements that involve certain risks and uncertainties that could cause actual results or outcomes to differ materially from results or outcomes anticipated in the forward looking statements. These risks and uncertainties include, among other things, a continuation of reduced volatility and/or lower spreads in natural gas markets for an extended period of time; factors affecting demand for natural gas storage services and the rates we are able to charge for such services, including the balance between the supply of and the demand for natural gas; our ability to maintain or replace expiring storage contracts, or enter into new storage contracts, in either case at attractive rates and on otherwise favorable terms; factors affecting our ability to realize revenues from hub services and merchant storage transactions involving uncontracted or unutilized capacity at our facilities; operational, geologic or other factors that affect the timing or amount of crude oil and other liquid hydrocarbons that we are able to produce in conjunction with the operation of our Bluewater facility; the occurrence of a natural disaster, catastrophe, terrorist attack, or other event, including attacks on electronic and computer systems; market or other factors that affect the prices we are able to realize for crude oil and other liquid hydrocarbons produced in conjunction with the operation of our Bluewater facility; our ability to obtain and/or maintain all permits, approvals and authorizations that are necessary to conduct our business and execute our capital projects; the impact of operational, geologic and commercial factors that could result in an inability on our part to satisfy our contractual commitments and obligations, including the impact of equipment performance, cavern operating pressures and cavern temperature variances, salt creep and subsurface conditions or events; risks related to the ownership, development and operation of natural gas storage facilities; failure to implement or execute planned internal growth projects on a timely basis and within targeted cost projections; the effectiveness of our risk management activities; the effects of competition; interruptions in service and fluctuations in tariffs or volumes on third-party pipelines; general economic, market or business conditions and the amplification of other risks caused by volatile financial markets, capital constraints and pervasive liquidity concerns; the successful integration and future performance of acquired assets or businesses; our ability to obtain debt or equity financing on satisfactory terms to fund additional acquisitions, expansion projects, working capital requirements and the repayment or refinancing of indebtedness; the impact of current and future laws, rulings, governmental regulations, accounting standards and statements and related interpretations; shortages or cost increases of supplies, materials or labor; weather interference with business operations or project construction; our ability to receive open credit from our suppliers and trade counterparties; continued creditworthiness of, and performance by, our counterparties, including financial institutions and trading companies with which we do business; the availability of, and our ability to consummate, acquisition or combination opportunities; the operations or financial performance of assets or businesses that we acquire; environmental liabilities or events that are not covered by an indemnity, insurance or existing reserves; increased costs or unavailability of insurance; fluctuations in the debt and equity markets, including the price of our units at the time of vesting under our long-term incentive plan; and other factors and uncertainties inherent in the ownership, development and operation of natural gas storage facilities discussed in the Partnership’s filings with the Securities and Exchange Commission.
PAA Natural Gas Storage, L.P. is a publicly traded master limited partnership engaged in the development, acquisition, operation and commercial management of natural gas storage facilities. The Partnership currently owns and operates three natural gas storage facilities located in Louisiana, Mississippi and Michigan. The Partnership’s general partner, as well as the majority of the Partnership’s limited partner interests, is owned by Plains All American Pipeline, L.P. PNG is headquartered in Houston, TX.
CONSOLIDATED STATEMENTS OF OPERATIONS
December 31,
Year Ended
December 31,
207
455
21,517
70,511
December 31,
Year Ended
December 31,
(3) Includes equity compensation expense for all periods presented. The year ended December 31, 2011 includes approximately $4 million of acquisition-related costs incurred during the first quarter of 2011.
CONDENSED CONSOLIDATED BALANCE SHEET DATA
COMPUTATION OF BASIC AND DILUTED EARNINGS PER LIMITED PARTNER UNIT
Three Months Ended
December 31,
Year Ended
December 31,
207
455
21,517
70,511
FINANCIAL DATA RECONCILIATIONS
Three Months Ended
December 31,
Year Ended
December 31,
Three Months Ended
December 31,
Year Ended
December 31,
Net income and earnings per limited partner unit excluding selected items impacting comparability:
21,517
70,511
22,278
74,287
1.04
PAA Natural Gas Storage, L.P.
Roy I. Lamoreaux, 713-646-4222 – 800/564-3036
Director, Investor Relations
Al Swanson, 800-564-3036
Executive Vice President, CFO
Source: PAA Natural Gas Storage, L.P.