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Crosstex Energy, L.P. (XTEX)

Q4 2009 Earnings Call Transcript

March 1, 2010 11:00 am ET

Executives

Jill McMillan – Director, Public and Industry Affairs

Barry Davis – Chairman, President and CEO

Bill Davis – EVP and CFO

Analysts

Darren Horowitz – Raymond James

Sharon Lui – Wells Fargo

John Edwards – Morgan Keegan

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the fourth quarter 2009 Crosstex Energy earnings conference call. My name is Genaida, and I’ll be your operator for today. At this time, all participants are in listen-only mode. Later we will conduct a question-and-answer session. (Operator instructions) As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Ms. Jill McMillan of Crosstex Energy. Please proceed.

Jill McMillan

Thank you, Genaida. Good morning, everyone. Thank you for joining us today to discuss Crosstex’s fourth quarter and full year 2009 results. On the call today are Barry Davis, President and Chief Executive Officer; and Bill Davis, Executive Vice President and Chief Financial Officer.

Our fourth quarter and full year 2009 earnings release was issued early this morning. For those of you who didn’t receive a copy, it is available on our website at crosstexenergy.com. If you want to listen to a recording of today’s call, you have 90 days to access the replay by phone or webcast on our website. I will remind you that any statements that might include our expectations or predictions should be considered forward-looking statements within the meaning of the Federal Securities laws.

Forward-looking statements are subject to a number of assumptions and uncertainties that may cause our actual results to differ materially from those expressed in these statements. And we undertake no obligation to update or revise any forward-looking statements. We encourage you to review the cautionary statements and other disclosures made in our SEC filings, specifically those listed under the heading Risk Factors.

I will now turn the call over to Barry Davis.

Barry Davis

Thank you, Jill. Good morning and thank you all for joining us on the call today to discuss our fourth quarter and full year 2009 results. I’m extremely pleased with our results and with the progress we’ve made in 2009. This was truly a transformational year for Crosstex, as we successfully execute our plan to increase liquidity, improve profitability, and reduce debt, which has repositioned us for long-term success as began 2010.

Over the past year, we sold non-core assets, which improved our overall business focus and strengthened our balance sheet by reducing leverage. In January, we sold our East Texas assets, our remaining non-core properties for $40 million. This brings the proceeds from our asset sales to over $600 million, which were achieved in an average EBITDA multiple of over eight times in an extremely difficult market.

We improved our risk profile through the sale of assets with high commodity exposure, increasing fee-based contracts, and continuing to hedge our remaining commodity risk. We strengthened our cash flows by cutting costs and maximizing operating efficiencies. We invested in high return, low risk projects around our strategically located assets in North Texas and Louisiana, where we see continuing opportunities for incremental growth.

We completed a $125 million convertible preferred unit offering with Blackstone/GSO and believe Blackstone/GSO’s investment is a strong vote of confidence in us and our future. We are pleased to have them as a partner and look forward to a long-term working relationship with them.

And finally, just a few weeks ago, we completed the private placement of $725 million of senior unsecured notes and closed a new $420 million senior secured revolving credit facility with a four-year term. This successful recapitalization allowed us to repay all of our previously outstanding borrowings and create a long-term financial structure with greater financial flexibility.

Today Crosstex is a leaner, more efficient and focused company. As we look to 2010, we will continue to capitalize on high return, low cost opportunities around our Barnett and Haynesville Shale assets, which are located in the heart of these plays. We recently executed contracts for the first 30 million cubic feet a day of our Phase IV Red River expansion. I will talk more about this opportunity in the operational update.

We will also continue to reduce leverage and manage our business according to conservative financial guidelines. We will continue to take advantage of near-term processing and NGL opportunities in South Louisiana. We will continue to efficiently manage our risk profile while enhancing our operational efficiencies and optimizing results. And lastly, we will continue to evaluate emerging shale plays to capitalize our core competencies learned in the Barnett and Haynesville shales to analyze which would be the best fit for Crosstex beyond 2010.

As markets recover and natural gas drilling rebounds in 2010, we will look to capitalize on strategic growth projects. In North Texas, major and large independent producers are increasing their focus on the Barnett Shale as a proven long live and viable shale play. We believe this is a strong vote of confidence in the future of the Barnett. As I’m sure you are aware, these include Exxon’s proposed acquisition of XTO, Total’s purchase of an interest in Chesapeake’s assets, Quicksilver’s alliance with ENI, and Devon’s planned sale of international and offshore properties and increased focus on the Barnett.

In Louisiana, we continue to see drilling increase at a steady rate in the Haynesville Shale where producers large and small are rapidly increasing their activity. The current increase in activity and the continued optimism about the future of Haynesville are good news for Crosstex and we believe the entire play is an outstanding growth opportunity for us.

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