General | Quarterly / Earnings Reports | Third Quarter (3Q) Update | Capital Markets | Private Equity Activity
Enable Grows SCOOP, Anadarko Basin Infrastructure in 3Q
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Enable Midstream Partners, LP reported financial results for third quarter 2014.
Net income attributable to the Partnership was $139 million for third quarter 2014, an increase of $35 million, or 34 percent, compared to $104 million for third quarter 2013.
Adjusted EBITDA for third quarter 2014 was $231 million, an increase of $26 million, or 13 percent, compared to $205 million for third quarter 2013.
Distributable cash flow (DCF) for third quarter 2014 was $161 million, an increase of $27 million, or 20 percent, compared to $134 million for third quarter 2013.
Lynn Bourdon, the Partnership’s CEO, commented: "During the third quarter, we continued to execute on our growth plans. We added significant gathering infrastructure in the SCOOP and approved the construction of a new processing plant that will bring our total Anadarko processing capacity to over 1.8 billion cubic feet per day. We also added new producer acreage dedications in the SCOOP and extended contracts with Laclede, an 85-year customer of Enable Mississippi River Transmission (MRT)."
Business Highlights
Producers remain active within and near the Partnership’s footprint. Based on rig estimates from Drillinginfo, as of October 21, 2014, more than 400 rigs were active in the counties in which the Partnership operates or has announced plans to operate. The Partnership also continues to contract additional acreage dedications in the South Central Oklahoma Oil Province (SCOOP), with SCOOP-area acreage dedications now totaling approximately 1.1 million gross acres.
To accommodate increased rich gas production, the Partnership continues to invest in gathering and processing infrastructure. Through the third quarter of 2014, the Partnership has added almost 90,000 HP of compression in the SCOOP. The Partnership’s Bradley Plant remains on schedule for a first quarter 2015 start-up and a recently announced new 200 MMcf/d plant remains on schedule for a fourth quarter 2015 start-up.
In the transportation and storage segment, the Partnership extended MRT's firm transportation and storage contracts with Laclede Gas Company, MRT’s largest customer, through 2017 and 2018 at existing contract demand levels.
Key Operating Stats
Natural gas gathering volumes were 3.32 TBtu/d in the third quarter of 2014, a decrease of 5 percent compared to 3.48 TBtu/d for third quarter 2013. The decrease was due primarily to lower gathered volumes on the Ark-La-Tex and Arkoma systems, partially offset by higher gathered volumes on the Anadarko system reflecting increased production from the liquids-rich SCOOP play. Much of the decrease on the Ark-La-Tex and Arkoma systems is expected to be offset by payments under minimum volume commitment contracts.
Natural gas processed volumes were 1.60 TBtu/d in the third quarter of 2014, an increase of 7 percent compared to 1.49 TBtu/d for third quarter 2013. The increase was primarily related to processed volume growth on the Anadarko system, including growth from the SCOOP play.
Gross NGL production was 68.11 MBbl/d in the third quarter of 2014, an increase of 8 percent compared to 63.16 MBbl/d for third quarter 2013. The increase was primarily related to processed volume growth on the Anadarko system.
Crude oil gathered volumes were 4.51 MBbl/d in the third quarter of 2014. The Partnership’s first crude gathering system started initial operations in November 2013.
Interstate transportation firm contracted capacity was 7.50 Bcf/d in the third quarter of 2014, a decrease of less than 1 percent compared to 7.56 Bcf/d for third quarter 2013.
Intrastate transportation average deliveries were 1.66 TBtu/d in the third quarter of 2014, which was flat compared to 1.66 TBtu/d for third quarter 2013.
Quarterly Distribution
On Oct. 24, 2014, the board of directors of the Partnership’s general partner declared a quarterly cash distribution of $0.3025 per unit on all outstanding common and subordinated units for the quarter ended Sept. 30, 2014. The distribution represents an increase of approximately 2.5 percent over the prior quarter distribution on a full-quarter basis and will be paid Nov. 14, 2014, to unitholders of record at the close of business on Nov. 4, 2014.
Financial Performance
Gross margin was $364 million for third quarter 2014, an increase of $31 million compared to $333 million for third quarter 2013.
Gathering and processing gross margin was $222 million for third quarter 2014, an increase of $29 million compared to $193 million for third quarter 2013. The increase in gathering and processing gross margin was primarily a result of higher processed volumes on the Anadarko system.
Transportation and storage gross margin was $143 million for third quarter 2014, an increase of $2 million compared to $141 million for third quarter 2013. The increase in transportation and storage gross margin was primarily a result of system optimization and operational synergies offset by a decrease in storage demand fees.
Operation and maintenance expense was $128 million for third quarter 2014, an increase of $4 million compared to $124 million for third quarter 2013. The increase was primarily due to increased payroll expenses to support business growth offset by lower corporate service costs.
Depreciation and amortization expense was $69 million for third quarter 2014, an increase of $2 million compared to $67 million for third quarter 2013. The increase was primarily due to additional assets placed into service, including the McClure Plant and the Bakken crude oil gathering system.
Taxes other than income taxes were $14 million for third quarter 2014, a decrease of $1 million compared to $15 million for third quarter 2013. The decrease was primarily due to lower ad valorem tax assessments partially offset by new assets placed into service.
Interest expense was $20 million for third quarter 2014, an increase of $7 million compared to $13 million for third quarter 2013. The increase was primarily due to higher interest rates associated with the $1.65 billion of senior notes issued in May 2014 compared to the interest rates associated with the $1.3 billion in term loan facilities these notes were used to repay.
Capital expenditures were $248 million for third quarter 2014, compared to $197 million for third quarter 2013. Expansion capital expenditures were $205 million for third quarter 2014, compared to $143 million for third quarter 2013. Maintenance capital expenditures were $47 million for third quarter 2014, compared to $54 million for third quarter 2013.
Outlook
The Partnership reaffirms the previously announced adjusted EBITDA, DCF and per-unit distribution growth outlook for 2014 and 2015. See the Partnership’s second quarter 2014 earnings press release for other key factors and assumptions underlying its 2014 and 2015 outlook.
The Partnership’s expectations for its 2014 expansion capital expenditures have been updated and are shown in the table below. The Partnership’s expectations for expansion capital expenditures for 2015 through 2017 remain unchanged from the previously announced amounts in the Partnership’s second quarter 2014 earnings press release.