Duncan Energy announced a 50% raise in earnings for the first quarter of 2009 compared to the year-ago quarter.
Distributable cash flow rose 231% to $29.5 million for the first quarter of 2009 compared to $8.9 million for the year-ago quarter. The raise is mainly because of $21.6 million in distributions the partnership earned from the midstream businesses it acquired in December 2008 in connection with the drop down transaction with Enterprise. On April 15, 2009, the board of Duncan Energy’s general partner declared an increase in the quarterly cash distribution rate paid to partners to $0.43 per common unit regarding the first quarter of 2009. This represents a 4.9% raise above the $0.41 per unit that was paid with respect to the year-ago quarter. Distributable cash flow for the first quarter of 2009 provided 1.2 times coverage of the cash distribution to be paid to our common unitholders.
“We are pleased to report another quarter of strong cash flow, a substantial portion of which was generated from the assets acquired in the December 2008 drop down transaction with Enterprise Products Partners,” said Richard H. Bachmann, president and chief executive officer of the general partner of Duncan Energy. “As a result of the increased distributable cash flow this quarter, we were able to raise the quarterly cash distribution rate for the second consecutive quarter while still providing a solid 1.2 times coverage of the cash distributions to be paid to our partners. We look forward to these businesses continuing to perform well this year to support further increases in the quarterly cash distributions,” continued Bachmann.
Review of Segment Quarterly Performance
Natural Gas Pipelines & Services – Gross operating margin for the first quarter of 2009 was $38.8 million compared to $40.8 million for the year-ago quarter. The Wilson natural gas storage facility and the Texas Intrastate pipeline together reported a $1.1 million raise in gross operating margin due to higher storage reservation fees and increased transportation volumes and fees. This improvement was more than counterbalanced by a $3.4 million decline in gross operating margin from the partnership’s Acadian gas pipeline system mainly due to lower sales margins and about $0.5 million of expenses for hurricane-related property damage repairs in the first quarter 2009.
Total natural gas volumes through Duncan Energy’s natural gas pipelines rose 13% to 5.1 trillion British thermal units per day (TBtus/d) in the first quarter of 2009 from 4.5 TBtus/d in the year-ago quarter.
NGL Pipelines & Services – Gross operating margin for the first quarter of 2009 was $20.8 million compared to $22.7 million for the year-ago quarter. Net of operational measurement gains and losses related with the partnership’s Mont Belvieu NGL and petrochemical storage facility that are allocated to enterprise through noncontrolling interest, gross operating margin was $22.1 million for the first quarter of 2009 compared to $21.9 million for the year-ago quarter. Contributing to the quarter-to-quarter raise were higher storage revenues due to increased reservation and excess throughput storage fees and increased storage volumes.
NGL transportation volumes reduced to 115,000 barrels per day (BPD) in the first quarter of 2009 from 137,000 BPD in the year-ago quarter. NGL fractionation volumes were 79,000 BPD this quarter compared to 82,000 BPD in the same quarter of 2008.
Petrochemical Services – Gross operating margin for the first quarter of 2009 declined to $2.5 million from $2.9 million reported in the year-ago quarter, mainly due to reduced transportation volumes on the Lou-Tex propylene pipeline. Total petrochemical transportation volumes averaged 22,000 BPD for the first quarter of 2009 against 40,000 BPD for the year-ago quarter.
Capitalization
Total debt principal outstanding at March 31, 2009 was about $470 million, which comprises of $282 million borrowing by the company under a three-year bank term loan used to fund the cash portion of consideration Duncan Energy paid to Enterprise in the December 2008 drop down transaction. At March 31, 2009, the company had total liquidity of about $133 million including unrestricted cash and availability under the partnership’s $300 million revolving credit facility.
