Tallgrass Energy Partners, LP (TEP)

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Tallgrass Energy Partners (TEP)

Q2 2013 Results - Earnings Call Transcript

August 7, 2013 17:00 PM ET

Executives

Nate Lien - IR

David Dehaemers - President and Chief Executive Officer;

Bill Moler - Executive Vice President and Chief Operating Officer and

Gary Brauchle - Executive Vice President and Chief Financial Officer and Treasurer

Analysts

Ethan Bellamy - Robert W. Baird

Presentation

Operator

Welcome to the Tallgrass Energy Partners quarterly investor conference call. My name is Jennifer and I will be your operator for today’s call. At this time, all participants are in a listen-only mode. A question-and-answer session will be conducted after the presentation. Please note that the conference is being recorded.

I would now turn the call over to Nate Lien. Sir, you may begin.

Nate Lien

Thank you, Jennifer. Good afternoon everyone. We appreciate you joining us today as we discussed our results for the second quarter of 2013 which released today through our press release and Form 10-Q. joining me on the call this afternoon are David Dehaemers, Tallgrass’s President and Chief Executive Officer; Bill Moler, Tallgrass’s Executive Vice President and Chief Operating Officer and Gary Brauchle, Tallgrass’s Executive Vice President and Chief Financial Officer and Treasurer.

Before turning the call over to David, let me remind you that this event is being recorded and the replay will be available for a limited time on our website. Additionally, our comments today will include forward-looking statements and estimates. These forward-looking comments are subject to various risks and uncertainties and reflect management’s views as of August 7, 2013.

Please refer to our filings with the SEC which are available on our website including our registration statement on Form S-1 and our quarterly report on Form 10-Q for the three and six months ended June 30, 2013. We will provide a discussion of factors that may cause actual results to differ from management’s projections, forecast, estimates and expectations. And please note that except for the extent required by law, Tallgrass undertake no obligation to update any forward-looking statements.

With that, let me turn the call over to David for his opening remarks.

David Dehaemers

Hello, everybody and thanks for joining us today to discuss TEP second quarter which as you know is the initial quarter for which we are proud to pay our first distribution. I will remind you that we declared and we’ll pay a pro rata distribution because we IPOed in the middle of the quarter which was May 17.

As we deal with the first quarter results some of the amounts that we have disclosed and talk to you are presented to give you an understanding of what TEP would have produced that if it had been public for the entire quarter and with that I’ll talk about TEP as a whole. TEP produced the net loss of $11.7 million and adjusted EBITDA of $16 million in the second quarter, while Gary will explain the non-cash nature of the net loss which is really attributable to really extinguishment of some debt cost that we had when we IPOed.

I have remind you that we will take you through the pro forma DCF and coverage GAAPs as well and let remind you that although we have a true midstream business here, it is not totally linear and so we will have some additional timings things that we will talk to you about. Our gas transportation storage segment or TIGT produced adjusted EBITDA of $11 million in Q2 and when comparing the sequential quarters in 2013, you will find that primary driver for the $1.2 million decrease from Q1 to Q2 is O&M expenses.

Again, you may recall last quarter Gary mentioned, that we have an expectation of slightly higher O&M expenses for the remaining of 2013 and this is really kind of timing matter relative to our spend. Talking for a minute more broadly about TIGT, we have also set our teams focused on connecting all the (inaudible) than we can and working with our customers to penetrate the market as much as we can.

We're working hard to renew not only our current contracts but as also pursuing new incremental opportunities in volumes and with that I am proud of our team for delivering key storage renewal that we talk, not only the key storage renewal that we talked to you about last quarter but also a couple of incremental volume opportunities that we put in the bag.

Here is 30 seconds on those. For an attractive cost of capital spend on the west end of TIGT, we secured three new customers for three-year contracts that over 80,000 Dth/day, firm transportation commitments on TIGT. Those will start later this year beginning of next. Current estimates of this show that we should produce somewhere in the neighborhood of $2 million of annual EBITDA from these new agreements.

In addition to that, the team has also delivered another opportunity for 7.5 Dth/day a day. This agreement is pretty small but again I use all these as an example to show you the types of things that we're trying to do that are incremental to TIGT system.

Turning now to processing segment or TMID, progress Midstream. As we call it, TMID generated adjusted EBITDA of $5.2 million, which is down about $1.6 million compared to first quarter, while our plants operated essentially at capacity at least contractually capacity and are slightly up from last quarter. We told you expected the segment EBITDA to be lower, which it is basically on the back of lower NGL prices etcetera as well as the OEM timing spend that Gary and I talk to you about last quarter.

Read the rest of this transcript for free on seekingalpha.com