TEPPCO PARTNERS, L.P. REPORTS FIRST QUARTER RESULTS
HOUSTON – TEPPCO Partners, L.P. (NYSE:TPP) today reported net income for first quarter 2004 of $40.4 million, or $0.46 per unit, compared with net income of $33.9 million, or $0.43 per unit for first quarter 2003. Net income per Limited Partner and Class B units for 2004 reflects 9.2 million units issued subsequent to first quarter 2003, including 3.9 million units issued in April 2003 to repurchase the outstanding Class B units.
The weighted average number of units outstanding at first quarter 2004 was 63 million, compared with 57.7 million at first quarter 2003. Earnings before interest, taxes, depreciation and amortization (EBITDA) was $92.8 million for first quarter 2004, compared with $87 million in first quarter 2003.
"We are pleased with our overall results for the first quarter, with solid gains in both net income and EBITDA in comparison to the prior year quarter," said Barry R. Pearl, president and chief executive officer of the general partner of TEPPCO. "Our upstream segment had a particularly strong quarter, primarily due to the benefits of our recent purchase of assets from Genesis Pipeline Texas, L.P. and increased volumes on Seaway Crude Pipeline.
"Our downstream segment had strong revenues from both our refined products and propane businesses, which were essentially offset by higher pipeline integrity costs. Our midstream segment benefited from increased volumes on the Jonah Gas Gathering System, resulting from our recent Phase III expansion, offsetting the impact of reduced volumes on the Val Verde Gas Gathering System," continued Pearl.
"We remain confident in achieving results within our previously stated EBITDA and earnings per unit ranges for 2004 of $340 million to $370 million and $1.55 to $1.85 per unit, respectively," added Pearl.
OPERATING RESULTS BY BUSINESS SEGMENT
Operating income for the upstream segment was $10 million for first quarter 2004, compared with $3.6 million for first quarter 2003. Crude oil margins and operating revenues increased $5.5 million, primarily due to increased marketing volumes from the integration of the Genesis assets acquired in November 2003 into the South Texas System, a crude oil inventory settlement, and increased transportation volumes on the Basin System and at the Cushing, Okla., terminal. Operating expenses decreased $0.8 million due to lower environmental expenses and customer inventory imbalance settlements in 2003.
Equity earnings from the investment in Seaway Crude Pipeline were $6.9 million, compared with $5 million for first quarter 2003. The increase in equity earnings was due to increased long-haul volumes and gains on inventory sales. Long-haul volumes on Seaway averaged 232,000 barrels per day in the 2004 quarter, compared with 150,000 barrels per day in the 2003 quarter.
Operating income for the midstream segment was $18.2 million for first quarter 2004, compared with $18.4 million for first quarter 2003. The decrease was due to lower coal bed methane volumes on the Val Verde System and higher expenses for gas imbalances, labor and maintenance costs. These income decreases were partially offset by increased gathering and processing revenues resulting from the expansion of the Jonah System and construction of the Pioneer Plant, which were completed in fourth quarter 2003, and lower contract amortization expenses.
Downstream operating income was $25.7 million for first quarter 2004, compared with $29.3 million for first quarter 2003. The decrease was due primarily to pipeline integrity management expense, an increase in depreciation expense and lower LPG volumes, partially offset by increased refined products transportation volumes and increased revenue from inventory fees.
The equity loss from unconsolidated investments totaled $1.3 million for both the first quarter 2004 and first quarter 2003. The equity loss from our ownership interest in Centennial Pipeline was $3.9 million in first quarter 2004, compared to $3.2 million in first quarter 2003, due to the acquisition of the additional 16.7 percent ownership interest in February 2003 and higher pipeline cleaning expenses, partially offset by increased transportation volumes. Equity earnings from our interest in Mont Belvieu Storage Partners, L.P., totaled $2.6 million in first quarter 2004, compared to $1.9 million in first quarter 2003. The increase was due to increased storage fees and lower operating expenses.
First quarter 2004 interest expense – net was $19.6 million, including capitalized interest of $0.9 million. Interest expense – net was $21.3 million for first quarter 2003, including capitalized interest of $0.6 million. The decrease in interest expense resulted from lower principal balances and lower expense on an interest rate swap in first quarter 2004.
NON-GAAP FINANCIAL MEASURES
The Financial Highlights table accompanying this earnings release and other disclosures herein include references to EBITDA, which may be viewed as a non-GAAP (Generally Accepted Accounting Principles) measure under the rules of the Securities and Exchange Commission (SEC). We define EBITDA as net income plus interest expense – net, depreciation and amortization, and a pro rata portion, based on our equity ownership, of the interest expense and depreciation and amortization of each of our joint ventures. We have included EBITDA as a supplemental disclosure because we believe EBITDA is used by our investors as a supplemental financial measure in the evaluation of our business. A reconciliation of EBITDA to net income is provided in the Financial Highlights table.
We believe EBITDA provides useful information regarding the performance of our assets without regard to financing methods, capital structures or historical costs basis. EBITDA should not be considered as an alternative to net income as an indicator of our operating performance or as a measure of liquidity, including as an alternative to cash flows from operating activities or other cash flow data calculated in accordance with GAAP. Our EBITDA may not be comparable to EBITDA of other entities because other entities may not calculate EBITDA in the same manner as we do.
Information in the accompanying Operating Data table includes margin of the upstream segment, which may be viewed as a non-GAAP financial measure under the rules of the SEC. Margin is calculated as revenues generated from the sale of crude oil and lubrication oil, and transportation of crude oil, less the costs of purchases of crude oil and lubrication oil. We believe margin is a more meaningful measure of financial performance than operating revenues and operating expenses due to the significant fluctuations in revenues and expenses caused by variations in the level of marketing activity and prices for products marketed. A reconciliation of margin to operating revenues and operating expenses is provided in the Operating Data table accompanying this earnings release.
TEPPCO will host a conference call related to earnings performance at 8 a.m. CT on Tuesday, April 27, 2004. Interested parties may listen via the Internet, live or on a replay basis at www.teppco.com or by dialing 800/659-8296. Please call in five to 10 minutes prior to the scheduled start time.
An audio replay of the conference call will also be available for seven days by dialing 800/252-6030. A replay and transcript will also be available by accessing the company’s Web site at www.teppco.com.
TEPPCO Partners, L.P. is a publicly traded master limited partnership,
which conducts business through various subsidiary operating companies.
TEPPCO owns and operates one of the largest common carrier pipelines
of refined petroleum products and liquefied petroleum gases in the United
States; owns and operates petrochemical and natural gas liquid pipelines;
is engaged in crude oil transportation, storage, gathering and marketing;
owns and operates natural gas gathering systems; and owns 50-percent
interests in Seaway Crude Pipeline Company, Centennial Pipeline LLC,
and Mont Belvieu Storage Partners, L.P., and an undivided ownership
interest in the Basin Pipeline. Texas Eastern Products Pipeline Company,
LLC, an indirect wholly owned subsidiary of Duke Energy Field Services,
LLC, is the general partner of TEPPCO Partners, L.P. For more information,
visit TEPPCO’s Web site at www.teppco.com.