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Tallgrass Energy Partners and Tallgrass Energy GP Report Strong Fourth Quarter 2015 Results and 2016 Guidance

Company Release - 02/17/2016 04:40:00

LEAWOOD, Kan.--(BUSINESS WIRE)-- Tallgrass Energy Partners, LP (NYSE: TEP) ("TEP") and Tallgrass Energy GP, LP (NYSE: TEGP) ("TEGP") today reported financial and operating results for the fourth quarter of 2015. TEP and TEGP are collectively referred to as Tallgrass Energy.

“Strong performance at TEP and TEGP continues to define Tallgrass Energy as top-tier midstream partnerships despite headwinds in the energy industry," said Tallgrass Energy President and CEO David G. Dehaemers Jr. “Tallgrass is poised for another strong year in 2016 thanks in large part to three significant events: the closing of the accretive acquisition of an additional 31.3 percent interest in Pony Express; our healthy fourth quarter of 2015 distribution increases; and the recent upsize of TEP's revolving credit facility."

"As we look ahead to the coming year, TEP expects to derive in excess of 95 percent of its cash flow from firm, fee-based payments and we do not anticipate a need to access the debt or equity capital markets in order to fund known capital expenditures," Dehaemers added. "Since inception, we have positioned TEP and its balance sheet to withstand the recent volatility in the energy markets.”

Fourth Quarter Distributions

Tallgrass Energy Partners, LP

As previously announced, the board of directors of TEP's general partner declared a quarterly cash distribution to partners of $0.64 per common unit for the fourth quarter of 2015. This quarterly distribution represents $2.56 on an annualized basis and an increase of 32.0 percent from the fourth quarter of 2014. The quarterly distribution was paid on Friday, February 12, 2016, to unitholders of record as of the close of business on Friday, January 29, 2016.

Tallgrass Energy GP, LP

Also previously announced, the board of directors of TEGP's general partner declared a quarterly cash distribution to Class A shareholders of $0.173 per Class A share for the fourth quarter of 2015. This quarterly distribution represents $0.692 per Class A share on an annualized basis, a sequential increase of 20.1 percent from the third quarter of 2015 and an increase of 30.2 percent from the first distribution following TEGP's IPO in May 2015. The fourth quarter 2015 cash distributions received by Tallgrass Equity from TEP are 103.0 percent higher than the comparable distributions Tallgrass Equity and its affiliates received from TEP in the fourth quarter of 2014, which was prior to the TEGP initial public offering. The quarterly distribution was paid on Friday, February 12, 2016, to Class A shareholders of record as of the close of business on Friday, January 29, 2016.

TEP Financial Outlook and Guidance

TEP expects distributable cash flow of $285 - $305 million and distribution coverage of 1.05 - 1.15x, for the year ended December 31, 2016. Additionally, TEP affirms its prior distribution growth guidance of a minimum average compounded annual distribution growth rate of at least 20 percent for 2015 - 2017.

TEGP Distribution Outlook and Guidance

For 2016 TEGP expects its cash distributions to Class A shareholders to grow at approximately two times the distribution growth rate of TEP’s cash distributions. For example, if TEP’s cash distribution per unit for the fourth quarter of 2016 grows by approximately 20 percent as compared to TEP’s cash distribution per unit for the fourth quarter of 2015, TEGP would expect approximately 40 percent growth in cash distributions to Class A shareholders when comparing the same quarters.

Tallgrass Energy Partners, LP

Summary Financial Information(1)

   

Three Months Ended
December 31,

   

Year Ended
December 31,

(in thousands, except coverage and per unit data) 2015     2014 2015     2014
 
Net income attributable to partners $ 40,649 $ 26,828 $ 160,546 $ 70,681
Add:
Interest expense, net of noncontrolling interest 4,312 2,800 15,517 7,648
Depreciation and amortization expense, net of noncontrolling interest 17,868 19,143 75,529 45,389
Loss on extinguishment of debt 226 226
Non-cash loss (gain) related to derivative instruments 218 (44 ) (184 )
Non-cash compensation expense 1,115 1,412 5,103 5,136
Non-cash loss from asset sales 312 4,795
Distributions from unconsolidated investment 1,464
Less:
Non-cash loss allocated to noncontrolling interest (10,151 ) (9,377 ) (10,151 )
Gain on remeasurement of unconsolidated investment (9,388 )

Equity in earnings of unconsolidated investment

      (717 )

Adjusted EBITDA

$ 64,700   $ 39,988   $ 252,339   $ 109,878  
Add:

Pony Express preferred distributions in excess of distributable
cash flow attributable to Pony Express

5,429
Pony Express deficiency payments received, net 4,461 5,378 16,511 5,378
Less:
Cash interest cost (3,715 ) (2,391 ) (13,746 ) (6,266 )
Maintenance capital expenditures (2,886 ) (2,259 ) (12,123 ) (9,913 )
Distributions to noncontrolling interest in excess of earnings 38 (5,361 ) (22,479 ) (5,361 )
Cash flow attributable to predecessor operations       (3,086 )
Distributable cash flow (DCF) 62,598 35,355 220,502 96,059
Less:
Distributions (59,040 ) (28,294 ) (192,580 ) (83,329 )
Amounts in excess of distributions $ 3,558   $ 7,061   $ 27,922   $ 12,730  
Distribution coverage(2) 1.06 x 1.25 x 1.14 x 1.15 x
 

Pro Forma Distribution coverage, excluding $5,625,000 paid in
February as a result of units issued in January 2016(3)

1.17x 1.18x
 
Common and subordinated units outstanding(4) 67,162 49,034 67,162 49,034
Distribution per common unit $ 0.6400 $ 0.4850 $ 2.3400 $ 1.6000
(1)  

The financial results for all periods presented in the table include the applicable results of operations of Trailblazer Pipeline Company LLC, which was acquired by TEP effective April 1, 2014, and our 33.3 percent membership interest in Tallgrass Pony Express Pipeline, LLC (“Pony Express”), which was acquired by TEP effective September 1, 2014. The acquisition of an additional 33.3 percent membership interest in Pony Express effective March 1, 2015, is presented prospectively from the date of acquisition, and as a result, financial information for periods prior to March 1, 2015, have not been recast to reflect the additional 33.3 percent membership interest.

 
(2)

Distribution coverage for the year ended December 31, 2014, includes the impact of the distributions associated with the 8.05 million units issued on July 25, 2014. Excluding the impact of the distributions paid as a result of the 8.05 million units, coverage would have been 1.20x for the year ended December 31, 2014.

 
(3)

The following table contains the calculation of distribution coverage excluding the impact of $5,625,000 in distributions that were paid on February 12, 2016 as a result of the issuance of 6.52 million common units to Tallgrass Development, LP on January 4, 2016.

 
(in thousands)    

Three Months
Ended
December 31,
2015

     

Year Ended
December 31,
2015

Distributable cash flow (DCF) $ 62,598 $ 220,502
Less:

Distributions excluding $5,625,000 paid in February as a result of units issued in
January 2016

(53,415) (186,955)

Amounts in excess of distributions excluding $5,625,000 paid in February as a result of
units issued in January 2016

9,183 33,547

Distribution coverage, excluding $5,625,000 paid in February as a result of units issued in
January 2016

1.17x 1.18x
(4)  

Common and subordinated units outstanding represent the number of units as of the date of record for the fourth quarter distributions in both 2014 and 2015. All subordinated units converted into common units on February 17, 2015.

 

Pro Forma Reconciliation of Adjusted EBITDA

The following shows what TEP’s Adjusted EBITDA would have been for the periods presented if TEP included net deficiency payments from shippers' firm, take-or-pay contracts in calculating Adjusted EBITDA. TEP's reported DCF and distribution coverage would remain unchanged.

       

Three Months Ended
December 31,

Year Ended
December 31,

(in thousands) 2015     2014 2015     2014
 
Adjusted EBITDA $ 64,700 $ 39,988 $ 252,339 $ 109,878
Add:
Pony Express deficiency payments received, net 4,461   5,378   16,511   5,378
Pro Forma Adjusted EBITDA $ 69,161   $ 45,366   $ 268,850   $ 115,256
 

Segment Overview

The fourth quarter 2015 results by segment are summarized below:

       

Three Months Ended
December 31,

Year Ended
December 31,

2015     2014 2015     2014
(in thousands)
Crude Oil Transportation & Logistics
Operating income $ 55,610 $ 5,937 $ 159,467 $ 3,601
Add:
Depreciation and amortization expense, net of noncontrolling interest 8,607 9,796 39,359 10,553
Adjusted EBITDA attributable to noncontrolling interests (18,365 ) 10,151 (24,245 ) 11,708
Less:
Non-cash loss allocated to noncontrolling interest   (10,151 ) (9,377 ) (10,151 )
Segment Adjusted EBITDA $ 45,852   $ 15,733   $ 165,204   $ 15,711  
 

Three Months Ended
December 31,

Year Ended
December 31,

2015 2014 2015 2014
(in thousands)
Natural Gas Transportation & Logistics
Operating income $ 8,813 $ 8,812 $ 41,802 $ 40,887
Add:
Depreciation and amortization expense 5,861 6,043 22,927 23,788
Non-cash loss (gain) related to derivative instruments 218 (44 ) (184 )
Other income 656   702   2,639   3,102  
Segment Adjusted EBITDA $ 15,548   $ 15,513   $ 67,368   $ 67,593  
 

Three Months Ended
December 31,

Year Ended
December 31,

2015 2014 2015 2014
(in thousands)
Processing & Logistics
Operating income $ 220 $ 6,118 $ 4,728 $ 20,577
Add:
Depreciation and amortization expense, net of noncontrolling interest 3,400 3,304 13,243 11,048
Non-cash loss from asset sales 312 4,795
Distributions from unconsolidated investment 1,464
Adjusted EBITDA attributable to noncontrolling interests (27 ) (55 ) (20 )  
Segment Adjusted EBITDA $ 3,905   $ 9,367   $ 22,746   $ 33,089  

The segment reporting in the table above does not include corporate general and administrative costs or intersegment eliminations.

The Crude Oil Transportation & Logistics segment Adjusted EBITDA was $45.9 million for the fourth quarter of 2015, representing an increase of $30.1 million as compared to the fourth quarter of 2014. The increase was primarily due to the operating results of the Pony Express mainline and the lateral in Northeast Colorado, which were placed into commercial service in October 2014 and April 2015, respectively. TEP received distributable cash flow from Pony Express of $49.8 million for its 66.7 percent membership interest for the fourth quarter of 2015, representing an increase of $6.1 million as compared to the $43.7 million it received for the third quarter of 2015. The increase is primarily attributable to certain shippers transporting volumes in excess of their minimum commitments during the fourth quarter of 2015. Average daily throughput for the fourth quarter of 2015 was approximately 288 kbbls/d as compared to approximately 253 kbbls/d for the third quarter of 2015.

Adjusted EBITDA in the Natural Gas Transportation & Logistics segment for the fourth quarter of 2015 was $15.5 million, which was comparable to the results from the fourth quarter of 2014. When comparing the Natural Gas Transportation & Logistics segment's Adjusted EBITDA for the fourth quarter of 2015 to its $16.0 million of Adjusted EBITDA for the third quarter of 2015, the slight decrease of $0.5 million is primarily attributable to higher operating costs. Firm contracted transportation capacity was 1,464 MMcf/d for the fourth quarter of 2015, representing a decrease of 86 MMcf/d compared to the 1,550 MMcf/d for the fourth quarter of 2014.

The Processing & Logistics segment generated Adjusted EBITDA of $3.9 million for the fourth quarter of 2015, representing a decrease of $5.5 million as compared to the fourth quarter of 2014. The decrease is due to lower average inlet volumes. When comparing the Adjusted EBITDA for the fourth quarter of 2015 to the $3.0 million of Adjusted EBITDA for the third quarter of 2015, the increase of $0.9 million is due to lower operating costs in the fourth quarter as a result of the planned plant downtime for annual maintenance which occurred during the third quarter of 2015. Approximate average inlet volumes at the processing facilities were 104 MMcf/day for the fourth quarter of 2015 as compared to 168 MMcf/day for the fourth quarter of 2014.

Tallgrass Energy GP, LP

Summary Financial Information

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

   

Three Months Ended
December 31, 2015

     

Period from May 12,
2015 (IPO) through
December 31, 2015

 
 
TEP distributions to Tallgrass Equity:
General partner interest $ 724 $ 2,011
IDRs 15,332 37,317
TEP common units owned by Tallgrass Equity 12,800   36,400  
Total TEP distributions to Tallgrass Equity 28,856 75,728
Less:
Cash interest expense attributable to Tallgrass Equity (1,034 ) (2,599 )
General and administrative expenses attributable to Tallgrass Equity (500 ) (1,250 )
Cash available for distribution by Tallgrass Equity 27,322 71,879
Distributions to predecessor owners of pre-IPO available cash(1) 10,202
Distributions to Class A (TEGP) 8,257 18,613
Distributions to Class B (Exchange Right Holders) 18,944   42,707  
Total cash distributions by Tallgrass Equity 27,201 71,522
TEGP:
Distributions received from Tallgrass Equity 8,257 18,613
Less:
Distributions to Class A shareholders (8,257 ) (18,613 )
Amounts in excess of distributions    
Distribution coverage

1.00x

1.00x
 
Class A shares outstanding 47,725 47,725
Distribution per Class A share $ 0.173 $ 0.390
(1)  

Distributions received by Tallgrass Equity from TEP and TEP GP for periods prior to the closing of TEGP’s initial public offering on May 12, 2015. These distributions were paid to Tallgrass Development, LP and the predecessor owners of Tallgrass Equity.

 

Tallgrass Development Purchase Program

TEP and TEGP announced today that the Board of Directors of Tallgrass Energy Holdings, LLC, the sole member of TEGP’s general partner and the general partner of Tallgrass Development, LP (“TD”), has authorized an equity purchase program under which TD may initially purchase up to an aggregate of $100 million of the outstanding Class A shares of TEGP or the outstanding common units of TEP. TD may purchase Class A shares or Common Units from time to time on the open market or in negotiated purchases. The timing and amounts of any such purchases will be subject to market conditions and other factors, and will be in accordance with applicable securities laws and other legal requirements. The purchase plan does not obligate TD to acquire any specific number of Class A shares or Common Units and may be discontinued at any time.

Conference Call

Please join Tallgrass Energy for a conference call and webcast to discuss fourth quarter 2015 results at 4 p.m. Central Time on Wednesday, February 17, 2016. 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.

Annual Report

TEP and TEGP are filing their 2015 Annual Reports on Form 10-K with the Securities and Exchange Commission ("SEC") on February 17, 2016. A copy of the reports will be available for viewing through a link on the Tallgrass Energy website at www.tallgrassenergy.com or on the SEC's website at www.sec.gov.

TEP unitholders and TEGP shareholders may request a hard copy of the applicable Annual Report on Form 10-K (including complete audited financial statements) free of charge. Requests should be communicated in writing to either Tallgrass Energy Partners, LP for TEP unitholders or Tallgrass Energy GP, LP for TEGP shareholders; Attention: Investor Relations; 4200 W. 115th Street, Suite 350, Leawood, KS 66211.

Tax Considerations

This release is intended to be a qualified notice to nominees and brokers under Treasury Regulation Sections 1.1446-4(b)(4) and (d). All of TEP’s distributions to foreign investors are attributable to income that is effectively connected with a United States trade or business. Accordingly, TEP’s distributions to foreign investors are subject to federal income tax withholding at the highest effective tax rate.

About Tallgrass Energy Partners, LP

Tallgrass Energy Partners, LP (NYSE: TEP) is a publicly traded, growth-oriented limited partnership formed to own, operate, acquire and develop midstream energy assets in North America. TEP currently provides crude oil transportation to customers in Wyoming, Colorado, and the surrounding regions through Pony Express, which owns the Pony Express System, a crude oil pipeline commencing in Guernsey, Wyoming and terminating in Cushing, Oklahoma that includes a lateral in northeast Colorado that commences in Weld County, Colorado, and interconnects with the pipeline just east of Sterling, Colorado. It provides natural gas transportation and storage services for customers in the Rocky Mountain and Midwest regions of the United States through the Tallgrass Interstate Gas Transmission system, a FERC-regulated natural gas transportation and storage system located in Colorado, Kansas, Missouri, Nebraska and Wyoming, and the Trailblazer Pipeline system, a FERC-regulated natural gas pipeline system extending from the Colorado and Wyoming border to Beatrice, Nebraska. TEP provides services for customers in Wyoming at the Casper and Douglas natural gas processing facilities and the West Frenchie Draw natural gas treating facility, and NGL transportation services in Northeast Colorado. TEP also performs water business services in Colorado and Texas through BNN Water Solutions, LLC. TEP’s operations are strategically located in and provide services to certain key United States hydrocarbon basins, including the Denver-Julesburg, Powder River, Wind River, Permian and Hugoton-Anadarko Basins and the Niobrara, Mississippi Lime, Eagle Ford and Bakken shale formations.

About Tallgrass Energy GP, LP

Tallgrass Energy GP, LP (NYSE: TEGP) is a limited partnership that has elected to be treated as a corporation for U.S. federal income tax purposes. TEGP owns a controlling membership interest in Tallgrass Equity, LLC through its role as the sole managing member. Tallgrass Equity, LLC owns, both directly and through its ownership of the general partner of TEP, all of TEP's incentive distribution rights, 100 percent of the general partner interest in TEP and 20,000,000 TEP Common Units.

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

TEP's 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, 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, cash from operations 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 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 define distributable cash flow as Adjusted EBITDA, plus preferred distributions received from Pony Express in excess of its distributable cash flow attributable to our net interest and adjusted for deficiency payments received from or utilized by Pony Express shippers, less cash interest expense, maintenance capital expenditures, distributions to noncontrolling interests in excess of earnings allocated to noncontrolling interests, and 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 TEP's and TEGP's 2016 financial outlook and guidance, TEP's and TEGP's expected average distribution growth rate in future periods, the percentage of cash flow expected to be comprised of firm, fee-based payments in 2016, the accretion and other financial benefits associated with TEP's acquisition of 31.3 percent of Pony Express on January 1, 2016 and the ability of TEP and TEGP to withstand market volatility. 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.

Tallgrass Energy Partners, LP Financial Statements

TALLGRASS ENERGY PARTNERS, LP

CONSOLIDATED BALANCE SHEETS

       
December 31, 2015     December 31, 2014
(in thousands)
ASSETS
Current Assets:
Cash and cash equivalents $ 1,611 $ 867
Accounts receivable, net 57,742 39,768
Receivable from related parties 15 73,393
Gas imbalances 1,227 2,442
Inventories 13,793 13,045
Prepayments and other current assets 2,835   2,766  
Total Current Assets 77,223 132,281
Property, plant and equipment, net 2,025,018 1,853,081
Goodwill 343,288 343,288
Intangible asset, net 96,546 104,538
Deferred financing costs, net 5,105 5,528
Deferred charges and other assets 14,894   18,481  
Total Assets $ 2,562,074   $ 2,457,197  
LIABILITIES AND PARTNERS’ EQUITY
Current Liabilities:
Accounts payable $ 22,218 $ 62,329
Accounts payable to related parties 7,852 3,915
Gas imbalances 1,605 3,611
Accrued taxes 13,844 3,989
Accrued liabilities 10,019 9,384
Deferred revenue 26,511 5,468
Other current liabilities 6,880   7,872  
Total Current Liabilities 88,929 96,568
Long-term debt 753,000 559,000
Other long-term liabilities and deferred credits 5,143   6,478  
Total Long-term Liabilities 758,143 565,478
Commitments and Contingencies
Equity:

Common unitholders (60,644,232 and 32,834,105 units issued and outstanding
at December 31, 2015 and 2014, respectively)

1,618,766 800,333

Subordinated unitholder (0 and 16,200,000 units issued and outstanding at
December 31, 2015 and 2014)

274,133

General partner (834,391 units issued and outstanding at December 31, 2015
and 2014, respectively)

(348,841 ) (35,743 )
Total Partners’ Equity 1,269,925 1,038,723
Noncontrolling interests $ 445,077   $ 756,428  
Total Equity $ 1,715,002   $ 1,795,151  
Total Liabilities and Equity $ 2,562,074   $ 2,457,197  
 
       

TALLGRASS ENERGY PARTNERS, LP

CONSOLIDATED STATEMENTS OF INCOME

 

Three Months Ended
December 31,

Year Ended
December 31,

2015     2014     2015     2014
(in thousands, except per unit amounts)
Revenues:        
Crude oil transportation services $ 94,105 $ 28,343 $ 300,436 $ 28,343
Natural gas transportation services 29,275 31,315 119,895 126,733
Sales of natural gas, NGLs, and crude oil 20,001 39,362 82,133 181,249
Processing and other revenues 7,003   10,484   33,733   35,231  
Total Revenues 150,384   109,504   536,197   371,556  
Operating Costs and Expenses:

Cost of sales (exclusive of depreciation and amortization
shown below)

20,326 36,358 75,285 167,545

Cost of transportation services (exclusive of depreciation
and amortization shown below)

14,528 10,375 53,597 24,109
Operations and maintenance 13,084 11,548 49,138 39,577
Depreciation and amortization 21,714 19,143 83,476 47,048
General and administrative 12,248 11,939 50,195 33,160
Taxes, other than income taxes 5,249 1,312 21,796 6,704
Loss on sale of assets 312     4,795    
Total Operating Costs and Expenses 87,461   90,675   338,282   318,143  
Operating Income 62,923   18,829   197,915   53,413  
Other (Expense) Income:
Interest expense, net (4,310 ) (2,801 ) (15,514 ) (7,292 )
Gain on remeasurement of unconsolidated investment 9,388
Loss on extinguishment of debt (226 ) (226 )
Equity in earnings of unconsolidated investment 717
Other income, net 656   703   2,639   3,103  
Total Other (Expense) Income (3,880 ) (2,098 ) (13,101 ) 5,916  
Net income 59,043 16,731 184,814 59,329
Net (income) loss attributable to noncontrolling interests (18,394 ) 10,096   (24,268 ) 11,352  
Net income attributable to partners $ 40,649   $ 26,827   $ 160,546   $ 70,681  
Allocation of income to the limited partners:
Net income attributable to partners $ 40,649 $ 26,827 $ 160,546 $ 70,681
Predecessor operations interest in net income (1,508 )
General partner interest in net income (15,864 ) (4,485 ) (46,478 ) (7,399 )
Common and subordinated unitholders' interest in net income 24,785   22,342   114,068   61,774  
Basic net income per common and subordinated unit $ 0.41   $ 0.46   $ 1.95   $ 1.39  
Diluted net income per common and subordinated unit $ 0.40   $ 0.45   $ 1.91   $ 1.36  
Basic average number of common and subordinated units outstanding 60,615 49,022 58,597 44,346
Diluted average number of common and subordinated units outstanding 61,502 50,174 59,575 45,394
 
   

TALLGRASS ENERGY PARTNERS, LP

CONSOLIDATED STATEMENTS OF CASH FLOWS

 
Year Ended December 31,
2015     2014
(in thousands)
Cash Flows from Operating Activities:
Net income $ 184,814 $ 59,329
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation and amortization 87,367 49,041
Gain on remeasurement of unconsolidated investment (9,388 )
Loss on extinguishment of debt 226
Noncash compensation expense 5,103 5,136
Loss on sale of assets 4,795
Changes in components of working capital:
Accounts receivable and other (15,605 ) (348 )
Gas imbalances (757 ) 1,504
Inventories (5,169 ) (8,367 )
Accounts payable and accrued liabilities 9,799 (21,787 )
Deferred revenue 20,612 6,619
Other operating, net (1,889 ) (2,295 )
Net Cash Provided by Operating Activities 289,296   79,444  
Cash Flows from Investing Activities:
Capital expenditures (65,387 ) (665,650 )
Issuance of related party loan (270,000 )
Acquisition of Western (75,000 )
Acquisition of Trailblazer (150,000 )
Acquisition of additional equity interests in Water Solutions (7,600 )
Acquisition of Pony Express membership interest (700,000 ) (27,000 )
Other investing, net (4,883 ) 17,521  
Net Cash Used in Investing Activities (845,270 ) (1,102,729 )
Cash Flows from Financing Activities:
Distributions to unitholders (161,834 ) (68,117 )
Distributions to noncontrolling interests (25,136 )
Contribution from TD 27,488
Borrowings under revolving credit facility, net 194,000 424,000
Proceeds from public offering, net of offering costs 554,084 320,385
Contributions from Predecessor Entities, net 312,125
Other financing, net (4,396 ) 8,271  
Net Cash Provided by Financing Activities 556,718   1,024,152  
Net Change in Cash and Cash Equivalents 744 867
Cash and Cash Equivalents, beginning of period 867    
Cash and Cash Equivalents, end of period $ 1,611   $ 867  
 

Tallgrass Energy GP, LP Financial Statements

TALLGRASS ENERGY GP, LP

CONSOLIDATING BALANCE SHEETS

       
December 31, 2015 December 31, 2014
TEP    

Consolidating
Adjustments(1)

    TEGP TEP    

Consolidating
Adjustments(1)

    TEGP
(in thousands) (in thousands)
ASSETS
Current Assets:
Cash and cash equivalents $ 1,611 $ 623 $ 2,234 $ 867 $ $ 867
Accounts receivable, net 57,742 57,742 39,768 39,768
Receivable from related parties 15 15 73,393 73,393
Gas imbalances 1,227 1,227 2,442 2,442
Inventories 13,793 13,793 13,045 13,045
 
Prepayments and other current assets 2,835     2,835   2,766     2,766
Total Current Assets 77,223 623 77,846 132,281 132,281
Property, plant and equipment, net 2,025,018 2,025,018 1,853,081 1,853,081
Goodwill 343,288 343,288 343,288 343,288
Intangible asset, net 96,546 96,546 104,538 104,538
Deferred financing costs, net 5,105 1,533 6,638 5,528 5,528
Deferred tax asset 452,430 452,430
Deferred charges and other assets 14,894     14,894   18,481     18,481
Total Assets $ 2,562,074   $ 454,586   $ 3,016,660   $ 2,457,197   $   $ 2,457,197
LIABILITIES AND PARTNERS’ EQUITY
Current Liabilities:
Accounts payable $ 22,218 $ $ 22,218 $ 62,329 $ $ 62,329
Accounts payable to related parties 7,852 (97 ) 7,755 3,915 3,915
Gas imbalances 1,605 1,605 3,611 3,611
Accrued taxes 13,844 13,844 3,989 3,989
Accrued liabilities 10,019 187 10,206 9,384 9,384
Deferred revenue 26,511 26,511 5,468 5,468
Other current liabilities 6,880     6,880   7,872     7,872
Total Current Liabilities 88,929 90 89,019 96,568 96,568
Long-term debt 753,000 148,000 901,000 559,000 559,000
Other long-term liabilities and deferred credits 5,143     5,143   6,478     6,478
Total Long-term Liabilities 758,143 148,000 906,143 565,478 565,478
Equity:
Total Partners’ Equity 1,269,925 (847,615 ) 422,310 1,038,723 (891,857 ) 146,866
Noncontrolling interests 445,077   1,154,111   1,599,188   756,428   891,857   1,648,285
Total Equity $ 1,715,002   $ 306,496   $ 2,021,498   $ 1,795,151   $   $ 1,795,151
Total Liabilities and Equity $ 2,562,074   $ 454,586   $ 3,016,660   $ 2,457,197   $   $ 2,457,197

(1)Represents the aggregate consolidating adjustments necessary to produce consolidated financial statements for TEGP.

       

TALLGRASS ENERGY GP, LP

CONSOLIDATING STATEMENTS OF INCOME

 
Three Months Ended December 31, 2015 Three Months Ended December 31, 2014
TEP    

Consolidating
Adjustments(1)

    TEGP TEP  

Consolidating
Adjustments(1)

    TEGP
(in thousands) (in thousands)
Revenues:
Crude oil transportation services $ 94,105 $ $ 94,105 $ 28,343 $ $ 28,343
Natural gas transportation services 29,275 29,275 31,315 31,315
Sales of natural gas, NGLs, and crude oil 20,001 20,001 39,362 39,362
Processing and other revenues 7,003     7,003   10,484     10,484  
Total Revenues 150,384     150,384   109,504     109,504  
Operating Costs and Expenses:
Cost of sales (exclusive of depreciation and amortization shown below) 20,326 20,326 36,358 36,358
Cost of transportation services (exclusive of depreciation and amortization shown below) 14,528 14,528 10,375 10,375
Operations and maintenance 13,084 13,084 11,548 11,548
Depreciation and amortization 21,714 21,714 19,143 19,143
General and administrative 12,248 520 12,768 11,939 11,939
Taxes, other than income taxes 5,249 5,249 1,312 1,312
Loss on sale of assets 312     312        
Total Operating Costs and Expenses 87,461   520   87,981   90,675     90,675  
Operating Income 62,923   (520 ) 62,403   18,829     18,829  
Other (Expense) Income:
Interest expense, net (4,310 ) (1,119 ) (5,429 ) (2,801 ) (2,801 )
Loss on extinguishment of debt (226 ) (226 )
Equity in earnings of unconsolidated investment
Other income, net 656     656   703     703  
Total Other (Expense) Income (3,880 ) (1,119 ) (4,999 ) (2,098 )   (2,098 )
Net income before tax 59,043 (1,639 ) 57,404 16,731 16,731
Deferred income tax benefit   10,877   10,877        
Net income 59,043 9,238 68,281 16,731 16,731
less: Net (income) loss attributable to noncontrolling interests (18,394 ) (32,210 ) (50,604 ) 10,096   (22,614 ) (12,518 )
Net income attributable to TEGP $ 40,649   $ (22,972 ) $ 17,677   $ 26,827   $ (22,614 ) $ 4,213  
Basic net income per Class A share $ 0.37  
Diluted net income per Class A share $ 0.37  
Basic average number of Class A shares outstanding 47,725
Diluted average number of Class A shares outstanding 47,725

(1)Represents the aggregate consolidating adjustments necessary to produce consolidated financial statements for TEGP.

       

TALLGRASS ENERGY GP, LP

CONSOLIDATING STATEMENTS OF INCOME

 
Year Ended December 31, 2015 Year Ended December 31, 2014
TEP    

Consolidating
Adjustments(1)

    TEGP TEP    

Consolidating
Adjustments(1)

    TEGP
(in thousands) (in thousands)
Revenues:
Crude oil transportation services $ 300,436 $ $ 300,436 $ 28,343 $ $ 28,343
Natural gas transportation services 119,895 119,895 126,733 126,733
Sales of natural gas, NGLs, and crude oil 82,133 82,133 181,249 181,249
Processing and other revenues 33,733     33,733   35,231     35,231  
Total Revenues 536,197     536,197   371,556     371,556  
Operating Costs and Expenses:
Cost of sales (exclusive of depreciation and amortization shown below) 75,285 75,285 167,545 167,545
Cost of transportation services (exclusive of depreciation and amortization shown below) 53,597 53,597 24,109 24,109
Operations and maintenance 49,138 49,138 39,577 39,577
Depreciation and amortization 83,476 83,476 47,048 47,048
General and administrative 50,195 1,284 51,479 33,160 33,160
Taxes, other than income taxes 21,796 21,796 6,704 6,704
Loss on sale of assets 4,795     4,795        
Total Operating Costs and Expenses 338,282   1,284   339,566   318,143     318,143  
Operating Income 197,915   (1,284 ) 196,631   53,413     53,413  
Other (Expense) Income:
Interest expense, net (15,514 ) (2,816 ) (18,330 ) (7,292 ) (7,292 )
Gain on remeasurement of unconsolidated investment 9,388 9,388
Loss on extinguishment of debt (226 ) (226 )
Equity in earnings of unconsolidated investment 717 717
Other income, net 2,639     2,639   3,103     3,103  
Total Other (Expense) Income (13,101 ) (2,816 ) (15,917 ) 5,916     5,916  
Net income before tax 184,814 (4,100 ) 180,714 59,329 59,329
Deferred income tax benefit   7,277   7,277        
Net income 184,814 3,177 187,991 59,329 59,329
less: Net (income) loss attributable to noncontrolling interests (24,268 ) (131,767 ) (156,035 ) 11,352   (59,767 ) (48,415 )
Net income attributable to TEGP $ 160,546 $ (128,590 ) $ 31,956 $ 70,681 $ (59,767 ) $ 10,914
Allocation of income:
Net income attributable to TEGP from the beginning of the period to May 11, 2015 $ 7,393  
Net income attributable to TEGP from May 12, 2015 to December 31, 2015 24,563  
Basic net income per Class A share $ 0.51  
Diluted net income per Class A share $ 0.51  
Basic average number of Class A shares outstanding 47,725
Diluted average number of Class A shares outstanding 47,808

(1)Represents the aggregate consolidating adjustments necessary to produce consolidated financial statements for TEGP.

Tallgrass Energy
Investor and Financial Inquiries:
Nate Lien, 913-928-6012
investor.relations@tallgrassenergylp.com
or
Media and Trade Inquiries:
Phyllis Hammond, 913-928-6014
media.relations@tallgrassenergylp.com

Source: Tallgrass Energy