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Tallgrass Energy Announces Fourth Quarter & Full Year 2017 Results and 2018 Guidance

LEAWOOD, Kan.--(BUSINESS WIRE)--

Tallgrass Energy Partners, LP (TEP) ("TEP") and Tallgrass Energy GP, LP (TEGP) ("TEGP"), collectively referred to as Tallgrass Energy, today reported financial and operating results for the fourth quarter of 2017.

"Tallgrass Energy delivered another outstanding year in 2017, meeting the high-end of the Adjusted EBITDA, DCF and distribution coverage guidance we provided in February of 2017 while growing distributions in excess of 18 and 32 percent at TEP and TEGP respectively. In addition, we maintained a conservative and flexible balance sheet at TEP," said Tallgrass Energy President and CEO David G. Dehaemers Jr. "We steadily grew TEP through continued drop-down transactions, organic projects and third-party acquisitions. We believe Tallgrass is well positioned for another strong year in 2018 due to our stable cash flows and the attractive growth project opportunities we see ahead."

Fourth Quarter Distributions

Tallgrass Energy Partners, LP

As previously announced, the board of directors of TEP's general partner declared a quarterly cash distribution of $0.965 per common unit for the fourth quarter of 2017. This quarterly distribution represents $3.86 on an annualized basis, a sequential increase of 2.1 percent from the third quarter 2017 distribution and an increase of 18.4 percent from the fourth quarter 2016 distribution. The quarterly distribution will be paid on Wednesday, Feb. 14, 2018, to unitholders of record as of the close of business on Wednesday, Jan. 31, 2018.

Tallgrass Energy GP, LP

Also, as previously announced, the board of directors of TEGP's general partner declared a quarterly cash distribution of $0.3675 per Class A share for the fourth quarter of 2017. This quarterly distribution represents $1.47 per Class A share on an annualized basis, a sequential increase of 3.5 percent from the third quarter 2017 distribution and an increase of 32.4 percent from the fourth quarter 2016 distribution. The quarterly distribution will be paid on Wednesday, Feb. 14, 2018, to Class A shareholders of record as of the close of business on Wednesday, Jan. 31, 2018.

Tallgrass Energy Partners, LP, Summary Financial Information(1)

 
  Three Months Ended December 31,   Year Ended December 31,
(in thousands, except coverage and per unit data) 2017   2016  

As
Reported
in 2016

2017   2016  

As
Reported
in 2016

 
Net income attributable to partners $ 89,115 $ 70,264 $ 66,677 $ 433,990 $ 270,524 $ 263,529
Add:
Interest expense, net 26,277 13,049 13,049 83,542 40,688 40,688
Depreciation and amortization expense(2) 24,561 21,638 21,062 92,455 88,122 85,971
Distributions from unconsolidated investments 77,116 25,134 24,440 306,626 78,568 75,900
Non-cash loss related to derivative instruments(2) 1,895 6,938 6,938 226 1,547 1,547
Non-cash compensation expense(3) 3,573 1,510 1,510 8,660 5,780 5,780
Loss (gain) from disposal of assets(2) 665 (654 ) 1,849 1,849
Less:
Equity in earnings of unconsolidated investments (49,989 ) (17,036 ) (16,393 ) (237,110 ) (54,531 ) (51,780 )
Gain on remeasurement of unconsolidated investment       (9,728 )    
Adjusted EBITDA(4) $ 173,213   $ 121,497   $ 117,283   $ 678,007   $ 432,547   $ 423,484  
Add:
Deficiency payments received, net(2) 543 8,604 27,182 33,496
Less:
Cash interest cost (25,108 ) (11,927 ) (79,081 ) (37,110 )
Maintenance capital expenditures, net (7,076 ) (4,238 ) (14,822 ) (11,323 )
Distributable Cash Flow(4) 141,572 109,722 611,286 408,547
Less:
Distributions (111,014 ) (88,159 ) (415,716 ) (321,953 )
Amounts in excess of distributions(5) $ 30,558   $ 21,563   $ 195,570   $ 86,594  
Distribution coverage 1.28 x 1.24 x 1.47 x 1.27 x
 
Common units outstanding(6) 73,200 72,139 73,200 72,139
Distribution per common unit $ 0.9650 $ 0.8150 $ 3.6700 $ 3.0700
 
(1) The financial results for all periods presented in the table include the applicable results of operations of Tallgrass Terminals, LLC and Tallgrass NatGas Operator, LLC, which were acquired by TEP effective Jan. 1, 2017, except for the period under the column "As Reported in 2016."
(2) Net of noncontrolling interest.
(3) Represents TEP's portion of non-cash compensation expense related to Equity Participation Units, excluding amounts allocated to Tallgrass Development, LP.
(4) Adjusted EBITDA and distributable cash flow are non-GAAP measures. For additional detail see "Non-GAAP Measures" below.
(5) Cumulative distribution coverage from TEP's IPO in May 2013 through Dec. 31, 2017, is $328.0 million and the cumulative distribution coverage ratio is 1.31x.
(6) Common units represent the number of units as of the date of record for the fourth quarter distributions in both 2017 and 2016.
 

Tallgrass Energy Financial Outlook and Guidance

Tallgrass Energy expects its Adjusted EBITDA to be $755 - $835 million and maintenance capital expenditures of $20 - $30 million for the year ending Dec. 31, 2018. Additionally, management expects distribution growth of 7 - 10 percent for TEP and 37 - 40 percent for TEGP if they were to each remain standalone entities for all of 2018.

Tallgrass Energy Adjusted EBITDA includes the Adjusted EBITDA for the assets owned by TEP as of Dec. 31, 2017, the additional 2 percent of Pony Express (acquired by TEP effective Feb. 1) and the distributions attributable to the additional 25.01 percent membership interest in REX (acquired by Tallgrass Equity on Feb. 7). Tallgrass Energy Adjusted EBITDA does not include our estimate of approximately $15 - $25 million of shipper deficiency payments that would be included in Distributable Cash Flow. Adjusted EBITDA is a non-GAAP measure. For additional detail see "Non-GAAP Measures" below. For reconciliations of Tallgrass Energy Adjusted EBITDA for prior years, please refer to the "Webcasts & Presentations" section of the TEP investor relations site at www.tallgrassenergy.com.

Conference Call

Please join Tallgrass Energy for a conference call and webcast to discuss fourth quarter 2017 results at 3:30 p.m. Central Time on Tuesday, Feb. 13, 2018. Interested parties may listen via a link posted on the Investor Relations section of our website and the replay will be available on our website for at least seven days following the live call.

Tallgrass Energy Partners, LP Alternative Reconciliations

Adjusted EBITDA and Distributable Cash Flow, as defined in "TEP's Non-GAAP Measures" below, may be impacted by the timing of cash payments received as a result of shipper deficiency payments received or utilized during the period or incremental barrels shipped during the period. As such, we have also provided alternative reconciliations of Adjusted EBITDA and Distributable Cash Flow that illustrate the impact of these items. These alternative reconciliations are also non-GAAP Measures. Management believes this information provides investors useful information regarding the impact of these items on our current results as well as the potential impact on future results.

Alternative Reconciliation of Adjusted EBITDA

 
 

Three Months Ended
December 31,

 

Year Ended
December 31,

(in thousands) 2017 2017
 
Adjusted EBITDA $ 173,213 $ 678,007
Add:
Volumetric deficiency payments received, net(1) 543   27,182
Alternative Adjusted EBITDA(2) $ 173,756   $ 705,189
 
(1) Cumulative net volumetric deficiency balance at Dec. 31, 2017, is $88.4 million.
(2) Alternative Adjusted EBITDA shows what TEP's Adjusted EBITDA would have been for the period presented if TEP included net volumetric deficiency payments from shippers' firm, take-or-pay contracts in calculating Adjusted EBITDA. TEP's reported distributable cash flow and distribution coverage would remain unchanged.
 

Alternative Reconciliation of Distributable Cash Flow and Distribution Coverage

 
 

Three Months Ended
December 31,

 

Year Ended
December 31,

(in thousands, except coverage) 2017 2017
 
Distributable Cash Flow $ 141,572 $ 611,286
Add:
Cash flow impact of reduction in accumulated incremental volumes(1) 8,318   8,558  
Alternative Distributable Cash Flow(2) 149,890 619,844
Less:
Distributions (111,014 ) (415,716 )
Amounts in excess of distributions $ 38,876   $ 204,128  
Alternative distribution coverage(2) 1.35 x 1.49 x
 
(1) Accumulated incremental volume balance at Dec. 31, 2017, is $1.5 million.
(2) Alternative Distributable Cash Flow and alternative distribution coverage show the impact of a reduction in accumulated incremental volumes. Incremental volumes (volumes shipped in excess of firm committed volumes) increase distributable cash flow during periods when shipped. Conversely, previously shipped incremental volumes reduce distributable cash flow during periods when they are utilized by a shipper to meet current period firm committed volumes, thereby reducing an accumulated incremental volume balance.
 

Tallgrass Energy Partners, LP Segment Overview(1)(2)

The fourth quarter 2017 comparative results by segment are summarized below:

 

 
  Three Months Ended December 31,   Year Ended December 31,
2017   2016  

As
Reported
in 2016

2017   2016  

As
Reported
in 2016

(in thousands)
Natural Gas Transportation
Operating income $ 17,524 $ 16,262 $ 14,889 $ 67,434 $ 56,135 $ 49,907
Add:
Depreciation and amortization expense 4,812 4,743 4,743 19,181 20,976 20,976
Distributions from unconsolidated investment 77,116 24,440 24,440 304,663 75,900 75,900
Other income, net 425 456 456 1,232 1,723 1,723
Less:
Non-cash (gain) loss related to derivative instruments   (74 ) (74 ) (116 ) 116   116  
Segment Adjusted EBITDA $ 99,877   $ 45,827   $ 44,454   $ 392,394   $ 154,850   $ 148,622  
 

Three Months Ended
December 31,

 

Year Ended
December 31,

 
2017 2016 2017 2016
(in thousands)
Crude Oil Transportation
Operating income $ 44,708 $ 56,165 $ 190,170 $ 215,784
Add:
Depreciation and amortization expense(3) 17,499 13,188 57,172 52,464
Less:
Adjusted EBITDA attributable to noncontrolling interests (909 ) (1,118 ) (3,804 ) (4,288 )
Non-cash loss (gain) related to derivative instruments   424   (432 ) 431  
Segment Adjusted EBITDA $ 61,298   $ 68,659   $ 243,106   $ 264,391  
                   
Three Months Ended December 31, Year Ended December 31,
2017 2016

As
Reported
in 2016

2017 2016

As
Reported
in 2016

(in thousands)
Gathering, Processing & Terminalling
Operating income (loss) $ 12,525 $ 3,726 $ 2,155 $ 33,453 $ (903 ) $ 1,081
Add:
Depreciation and amortization expense(3) 2,250 3,707 3,131 16,102 14,682 12,531
Non-cash loss (gain) related to derivative instruments 1,895 (291 ) (291 ) 2,659 (291 ) (291 )
Distributions from unconsolidated investment 694 1,963 2,668
Other income 142
Less:
Loss (gain) from disposal of assets(2) 665 (654 ) 1,849 1,849
Adjusted EBITDA attributable to noncontrolling interests (2,349 ) (12 ) (12 ) (2,695 ) (77 ) (77 )
Segment Adjusted EBITDA $ 14,986   $ 7,824     $ 4,983   $ 50,970   $ 17,928   $ 15,093  
 
(1) The financial results for the Natural Gas Transportation and Gathering, Processing & Terminalling segments for the three and 12 months ended Dec. 31, 2016, have been recast to reflect the results of operations of NatGas and Terminals, respectively, which TEP acquired effective Jan. 1, 2017. The financial results for the Natural Gas Transportation and Gathering, Processing & Terminalling segments for the three and 12 months ended Dec. 31, 2016, under the column "As Reported in 2016," does not include NatGas and Terminals's results of operations.
(2) Segment reporting does not include corporate general and administrative costs or intersegment eliminations.
(3) Net of noncontrolling interest.
 

Supplemental Information

TEP acquired a 25 percent interest in Rockies Express Pipeline LLC ("REX") effective May 6, 2016, and an additional 24.99 percent interest in REX effective March 31, 2017. TEP's consolidated Adjusted EBITDA, as shown above, includes TEP's membership interest in REX. The table below is a reconciliation of REX's Adjusted EBITDA and Distributable Cash Flow for the three and 12 months ended Dec. 31, 2017 and 2016, presented to provide additional information on REX's financial results. REX’s Adjusted EBITDA and Distributable Cash Flow are non-GAAP measures. For additional detail see "Non-GAAP Measures" below.

 

Three Months Ended
December 31,

 

Year Ended
December 31,

2017   2016 2017   2016
(in thousands)
Rockies Express Pipeline LLC
Net income $ 86,819 $ 51,636 $ 458,004 $ 278,483
Add:
Interest expense, net 41,976 38,866 167,955 158,560
Depreciation and amortization expense 54,830   53,460   218,390   204,291  
Adjusted EBITDA 183,625   143,962   844,349   641,334  
Less:
Cash interest cost (41,142 ) (38,032 ) (164,618 ) (155,224 )
Maintenance capital expenditures (3,518 ) (7,993 ) (12,844 ) (13,871 )
Distributable Cash Flow $ 138,965   $ 97,937   $ 666,887   $ 472,239  
 
Distributions to Members $ (154,256 ) $ (97,760 ) $ (669,869 ) $ (471,648 )
Contributions from Members $ 19,583 $ 58,244 $ 91,977 $ 304,999
 

Tallgrass Energy GP, LP Summary Financial Information

Information on distributions to Tallgrass Equity, LLC ("Tallgrass Equity"), TEGP and TEGP's Class A shareholders is shown below (in thousands, except coverage and per share data):

       

Three Months Ended
December 31,

Year Ended
December 31,

2017 2016 2017 2016
 
TEP distributions to Tallgrass Equity(1)
General partner interest $ 1,251 $ 1,008 $ 4,696 $ 3,725
Incentive Distribution Rights 39,125 28,358 143,051 99,423
20 million TEP common units owned by Tallgrass Equity 19,300   16,300   73,400   61,400  
Total TEP distributions to Tallgrass Equity 59,676 45,666 221,147 164,548
Less:
Cash interest expense attributable to Tallgrass Equity (1,415 ) (1,158 ) (5,334 ) (4,480 )
Cash general and administrative expenses attributable to Tallgrass Equity (500 ) (500 ) (2,000 ) (2,000 )
Cash available for distribution by Tallgrass Equity 57,761 44,008 213,813 158,068
Distributions to Class A (TEGP) 21,346 16,116 78,551 50,359
Distributions to Class B (Exchange Right Holders) 36,439   27,515   134,106   106,085  
Total cash distributions by Tallgrass Equity $ 57,785   $ 43,631   $ 212,657   $ 156,444  
TEGP
Distributions from Tallgrass Equity $ 21,346 $ 16,116 $ 78,551 $ 50,359
Less:
Distributions to Class A shareholders (21,346 ) (16,116 ) (78,551 ) (50,359 )
Amounts in excess of distributions        
Distribution coverage 1.00 x 1.00 x 1.00 x 1.00 x
 
Class A shares outstanding 58,085 58,075 58,085 58,075
Distribution per Class A share $ 0.3675 $ 0.2775 $ 1.3525 $ 0.9950
 
(1) The three and 12 month periods ended Dec. 31, 2017, and Dec. 31, 2016, include distributions received by Tallgrass Equity from TEP's distribution for the quarters ended Dec. 31, 2017, and Dec. 31, 2016, respectively.
 

Tallgrass Energy GP, LP Deferred Tax Asset Adjustment

TEGP is a limited partnership that has previously elected to be treated as a corporation for federal income tax purposes. As a result of the Dec. 22, 2017, passage of the legislation originally introduced as the Tax Cuts and Jobs Act, TEGP re-assessed the valuation of its deferred tax asset as of Dec. 31, 2017. TEGP recorded in the fourth quarter of 2017 a non-cash deferred income tax expense of $183.5 million. $172.9 million of this deferred tax expense is the remeasurement of the deferred tax asset as a result of the reduced federal income tax rate from 35 percent to 21 percent effective on Jan. 1, 2018. After the remeasurement and as of Dec. 31, 2017, TEGP has a deferred tax asset of $313.0 million which is the expected tax benefit of available future deductions that offset future taxable income. It is currently expected that no cash taxes will be paid by TEGP for a period estimated to exceed 10 years.

Annual Report

TEP and TEGP will file their 2017 Annual Reports on Form 10-K with the Securities and Exchange Commission ("SEC") on Feb. 13, 2018. A copy of the reports will be available for viewing through a link on the Tallgrass Energy website at www.tallgrassenergy.com or on the SEC's website at www.sec.gov.

TEP unitholders and TEGP shareholders may request a hard copy of the applicable Annual Report on Form 10-K (including complete audited financial statements) free of charge. Requests should be communicated in writing to either Tallgrass Energy Partners, LP for TEP unitholders or Tallgrass Energy GP, LP for TEGP shareholders; Attention: Investor Relations, 4200 W. 115th Street, Suite 350, Leawood, KS 66211.

Non-GAAP Measures

Adjusted EBITDA and Distributable Cash Flow are non-GAAP supplemental financial measures that TEP management and external users of our consolidated financial statements and financial statements of our subsidiaries and unconsolidated investments, such as industry analysts, investors, lenders and rating agencies, may use to assess:

• our operating performance as compared to other publicly traded partnerships in the midstream energy industry, without regard to historical cost basis or, in the case of Adjusted EBITDA, financing methods;

• the ability of our assets to generate sufficient cash flow to make distributions to our unitholders;

• our ability to incur and service debt and fund capital expenditures; and

• the viability of acquisitions and other capital expenditure projects and the returns on investment of various expansion and growth opportunities.

We believe that the presentation of Adjusted EBITDA and Distributable Cash Flow provides useful information to investors in assessing our financial condition and results of operations. Adjusted EBITDA and Distributable Cash Flow should not be considered alternatives to net income, operating income, net cash provided by operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP, nor should Adjusted EBITDA and Distributable Cash Flow be considered alternatives to available cash, operating surplus, distributions of available cash from operating surplus or other definitions in our partnership agreement. Adjusted EBITDA and Distributable Cash Flow have important limitations as analytical tools because they exclude some but not all items that affect net income and net cash provided by operating activities. Additionally, because Adjusted EBITDA and Distributable Cash Flow may be defined differently by other companies in our industry, our definition of Adjusted EBITDA and Distributable Cash Flow may not be comparable to similarly titled measures of other companies, thereby diminishing their utility.

We generally define Adjusted EBITDA as net income excluding the impact of interest, income taxes, depreciation and amortization, non-cash income or loss related to derivative instruments, non-cash long-term compensation expense, impairment losses, gains or losses on asset or business disposals or acquisitions, gains or losses on the repurchase, redemption or early retirement of debt, and earnings from unconsolidated investments, but including the impact of distributions from unconsolidated investments. We also use Distributable Cash Flow, which we generally define as Adjusted EBITDA, plus deficiency payments received from or utilized by our customers, less cash interest costs, maintenance capital expenditures, distributions to noncontrolling interests in excess of earnings allocated to noncontrolling interests, and certain cash reserves permitted by our partnership agreement. For a reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measures, please see "Summary Financial Information" above.

TEP is unable to project net cash provided by operating activities or net income attributable to partners to provide the related reconciliation of projected Adjusted EBITDA to the most comparable financial measures calculated in accordance with GAAP, because the impact of changes in operating assets and liabilities and the volume and timing of deficiency payments received and utilized from our customers are out of our control and cannot be reasonably predicted. TEP provides a range for the forecasts of Adjusted EBITDA to allow for the variability in the timing of cash receipts and disbursements, customer utilization of our assets, and maintenance capital spending and the impact on the related reconciling items, many of which interplay with each other. The timing of maintenance capital expenditures is volatile as it depends on weather, regulatory approvals, contractor availability, system performance and various other items. Therefore, the reconciliation of projected Adjusted EBITDA to projected net cash provided by operating activities and net income attributable to partners is not available without unreasonable effort.

Cautionary Note Concerning Forward-Looking Statements

Disclosures in this press release contain “forward-looking statements.” All statements, other than statements of historical facts, included in this press release that address activities, events or developments that management expects, believes or anticipates will or may occur in the future are forward-looking statements. Without limiting the generality of the foregoing, forward-looking statements contained in this press release specifically include the belief that TEP will have a strong year in 2018 due to stable cash flows and attractive growth project opportunities, the Tallgrass Energy Financial Outlook and Guidance and that TEGP will not pay cash taxes for a period estimated to exceed 10 years. Forward looking statements may also include the expectations of plans, strategies, objectives and growth and anticipated financial and operational performance of TEP, TEGP and their subsidiaries, including: the ability to pursue expansions and other opportunities for incremental volumes; natural gas and crude oil production growth in TEP's operating areas; expected future benefits of acquisitions or expansion projects; timing of anticipated spending on planned expenses and maintenance capital projects; and distribution rate and growth, including variability of quarterly distribution coverage. These statements are based on certain assumptions made by TEP and TEGP based on management’s experience and perception of historical trends, current conditions, anticipated future developments and other factors believed to be appropriate. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of TEP and TEGP, which may cause actual results to differ materially from those implied or expressed by the forward-looking statements. These include risks relating to TEP and TEGP’s financial performance and results, availability of sufficient cash flow to pay distributions and execute their business plans, the demand for natural gas storage, processing and transportation services and for crude oil transportation services, operating hazards, the effects of government regulation, tax position and other risks incidental to transporting, storing and processing natural gas or transporting crude oil and other important factors that could cause actual results to differ materially from those projected, including those set forth in reports filed by TEP and TEGP with the Securities and Exchange Commission. Any forward-looking statement applies only as of the date on which such statement is made and TEP and TEGP do not intend to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law.

About Tallgrass Energy

Tallgrass Energy is a family of companies that includes publicly traded partnerships Tallgrass Energy Partners, LP (TEP) and Tallgrass Energy GP, LP (TEGP), and privately held Tallgrass Development, LP. Operating across 11 states, Tallgrass is a growth-oriented midstream energy operator with transportation, storage, terminal, water, gathering and processing assets that serve some of the nation’s most prolific crude oil and natural gas basins.

To learn more, please visit our website at www.tallgrassenergy.com.

Tallgrass Energy Partners, LP Financial Statements

 
TALLGRASS ENERGY PARTNERS, LP
CONSOLIDATED BALANCE SHEETS
 
  December 31, 2017   December 31, 2016
(in thousands)
ASSETS
Current Assets:
Cash and cash equivalents $ 1,809 $ 1,873
Accounts receivable, net 119,955 59,536
Gas imbalances 1,990 1,597
Inventories 21,609 13,093
Derivative assets 10,967
Prepayments and other current assets 11,175   7,628  
Total Current Assets 156,538 94,694
Property, plant and equipment, net 2,394,337 2,079,232
Goodwill 404,838 343,288
Intangible assets, net 97,731 93,522
Unconsolidated investments 909,531 475,625
Deferred financing costs, net 11,684 4,815
Deferred charges and other assets 2,694   11,037  
Total Assets $ 3,977,353   $ 3,102,213  
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable $ 98,882 $ 24,122
Accounts payable to related parties 5,461 5,935
Gas imbalances 1,663 1,239
Derivative liabilities 2,368 556
Accrued taxes 19,272 16,996
Accrued liabilities 35,659 16,702
Deferred revenue 88,471 60,757
Other current liabilities 7,171   6,446  
Total Current Liabilities 258,947 132,753
Long-term debt, net 2,146,993 1,407,981
Other long-term liabilities and deferred credits 18,965   7,063  
Total Long-term Liabilities 2,165,958 1,415,044
Commitments and Contingencies
Equity:
Predecessor Equity 82,295
Limited partners (73,199,753 and 72,485,954 common units issued and outstanding at December 31, 2017 and 2016, respectively) 2,109,316 2,070,495
General partner (834,391 units issued and outstanding at December 31, 2017 and 2016) (625,537 ) (632,339 )
Total Partners' Equity 1,483,779 1,520,451
Noncontrolling interests 68,669   33,965  
Total Equity 1,552,448   1,554,416  
Total Liabilities and Equity $ 3,977,353   $ 3,102,213  
 
TALLGRASS ENERGY PARTNERS, LP
CONSOLIDATED STATEMENTS OF INCOME
 
 

Three Months Ended
December 31,

 

Year Ended
December 31,

2017   2016 2017   2016
(in thousands, except per unit amounts)
Revenues:
Crude oil transportation services $ 85,367 $ 95,668 $ 345,733 $ 374,949
Natural gas transportation services 30,994 30,556 122,364 119,962
Sales of natural gas, NGLs, and crude oil 37,989 25,880 108,503 77,123
Processing and other revenues 20,416   10,107   79,298   39,628  
Total Revenues 174,766   162,211   655,898   611,662  
Operating Costs and Expenses:
Cost of sales 32,473 23,805 91,213 71,650
Cost of transportation services 7,401 11,723 46,200 47,669
Operations and maintenance 16,500 12,696 62,069 55,070
Depreciation and amortization 23,524 21,173 90,800 86,247
General and administrative 18,934 13,877 63,296 55,102
Taxes, other than income taxes 7,033 5,107 28,832 25,400
Contract termination 8,061
Loss (gain) on disposal of assets 665     (599 ) 1,849  
Total Operating Costs and Expenses 106,530   88,381   381,811   351,048  
Operating Income 68,236   73,830   274,087   260,614  
Other Income (Expense):
Interest expense, net (26,277 ) (13,049 ) (83,542 ) (40,688 )
Unrealized gain (loss) on derivative instrument (6,879 ) 1,885 (1,291 )
Gain on remeasurement of unconsolidated investment 9,728
Equity in earnings of unconsolidated investments 49,989 17,036 237,110 54,531
Other income, net 425   456   1,221   1,723  
Total Other Income (Expense) 24,137   (2,436 ) 166,402   14,275  
Net income 92,373 71,394 440,489 274,889
Net income attributable to noncontrolling interests (3,258 ) (1,130 ) (6,499 ) (4,365 )
Net income attributable to partners $ 89,115   $ 70,264   $ 433,990   $ 270,524  
Allocation of income to the limited partners:
Net income attributable to partners $ 89,115 $ 70,264 $ 433,990 $ 270,524
Predecessor operations interest in net income (3,587 ) (6,995 )
General partner interest in net income (40,130 ) (29,118 ) (147,823 ) (102,465 )
Net income available to common unitholders 48,985   37,559   286,167   161,064  
Basic net income per common unit $ 0.67   $ 0.52   $ 3.93   $ 2.26  
Diluted net income per common unit $ 0.67   $ 0.51   $ 3.90   $ 2.23  
Basic average number of common units outstanding 73,194 72,530 72,876 71,150
Diluted average number of common units outstanding 73,599 73,548 73,458 72,107
 
TALLGRASS ENERGY PARTNERS, LP
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
  Year Ended December 31,
2017   2016
(in thousands)
Cash Flows from Operating Activities:
Net income $ 440,489 $ 274,889
Adjustments to reconcile net income to net cash flows provided by operating activities:
Depreciation and amortization 98,064 93,605
Equity in earnings of unconsolidated investments (237,110 ) (54,531 )
Distributions from unconsolidated investments 237,192 54,449
Gain on remeasurement of unconsolidated investment (9,728 )
Other noncash items, net 8,988 9,519
Changes in components of working capital:
Accounts receivable and other (57,937 ) 2,818
Accounts payable and accrued liabilities 85,071 10,502
Deferred revenue 27,283 33,815
Other current assets and liabilities (10,542 ) (5,578 )
Other operating, net (2,709 ) 95  
Net Cash Provided by Operating Activities 579,061   419,583  
Cash Flows from Investing Activities:
Acquisition of Rockies Express membership interest (400,000 ) (436,022 )
Capital expenditures (145,144 ) (84,491 )
Acquisition of Terminals and NatGas (140,000 )
Acquisition of Douglas Gathering System (128,526 )
Distributions from unconsolidated investment in excess of cumulative earnings 69,434 24,120
Acquisition of Deeprock Development (57,202 )
Contributions to unconsolidated investments (45,948 ) (50,076 )
Acquisition of PRB Crude System (36,030 )
Acquisition of Pony Express membership interest (49,118 )
Other investing, net (15,125 ) 48  
Net Cash Used in Investing Activities (898,541 ) (595,539 )
Cash Flows from Financing Activities:
Proceeds from issuance of long-term debt 1,103,750 400,000
Distributions to unitholders (392,861 ) (292,834 )
(Repayments) borrowings under revolving credit facility, net (354,000 ) 262,000
Proceeds from public offering, net of offering costs 112,420 337,671
Partial exercise of call option (72,381 ) (204,634 )
Repurchase of common units from TD (35,335 )
Payments for deferred financing costs (22,250 ) (10,251 )
Acquisition of Pony Express membership interest (425,882 )
Proceeds from private placement, net of offering costs 90,009
Other financing, net (19,927 ) 20,139  
Net Cash Provided by Financing Activities 319,416   176,218  
Net Change in Cash and Cash Equivalents (64 ) 262
Cash and Cash Equivalents, beginning of period 1,873   1,611  
Cash and Cash Equivalents, end of period $ 1,809   $ 1,873  
 
Supplemental Disclosures:
Cash payments for interest, net $ (67,360 ) $ (29,754 )
Schedule of Noncash Investing and Financing Activities:
Increase in accrual for payment of property, plant and equipment $ 8,975 $
Common units issued as partial consideration to acquire additional 9% membership interest in Deeprock Development $ 6,617 $
 

Tallgrass Energy GP, LP Financial Statements

 
TALLGRASS ENERGY GP, LP
CONSOLIDATING BALANCE SHEETS
 
  December 31, 2017   December 31, 2016
TEP  

Consolidating
Adjustments(1)

  TEGP TEP  

Consolidating
Adjustments(1)

  TEGP
(in thousands) (in thousands)
ASSETS
Current Assets:
Cash and cash equivalents $ 1,809 $ 784 $ 2,593 $ 1,873 $ 586 $ 2,459
Accounts receivable, net 119,955 119,955 59,536 59,536
Gas imbalances 1,990 1,990 1,597 1,597
Inventories 21,609 21,609 13,093 13,093
Derivative assets 10,967 10,967
Prepayments and other current assets 11,175     11,175   7,628     7,628
Total Current Assets 156,538 784 157,322 94,694 586 95,280
Property, plant and equipment, net 2,394,337 2,394,337 2,079,232 2,079,232
Goodwill 404,838 404,838 343,288 343,288
Intangible assets, net 97,731 97,731 93,522 93,522
Unconsolidated investments 909,531 909,531 475,625 475,625
Deferred financing costs, net 11,684 879 12,563 4,815 1,227 6,042
Deferred tax asset 312,997 312,997 521,454 521,454
Deferred charges and other assets 2,694     2,694   11,037     11,037
Total Assets $ 3,977,353   $ 314,660   $ 4,292,013   $ 3,102,213   $ 523,267   $ 3,625,480
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable $ 98,882 $ $ 98,882 $ 24,122 $ 327 $ 24,449
Accounts payable to related parties 5,461 (119 ) 5,342 5,935 (111 ) 5,824
Gas imbalances 1,663 1,663 1,239 1,239
Derivative liabilities 2,368 2,368 556 556
Accrued taxes 19,272 19,272 16,996 16,996
Accrued liabilities 35,659 48 35,707 16,702 53 16,755
Deferred revenue 88,471 88,471 60,757 60,757
Other current liabilities 7,171     7,171   6,446     6,446
Total Current Liabilities 258,947 (71 ) 258,876 132,753 269 133,022
Long-term debt, net 2,146,993 146,000 2,292,993 1,407,981 148,000 1,555,981
Other long-term liabilities and deferred credits 18,965     18,965   7,063     7,063
Total Long-term Liabilities 2,165,958 146,000 2,311,958 1,415,044 148,000 1,563,044
Equity:
Total Partners' Equity 1,483,779 (1,435,166 ) 48,613 1,520,451 (1,187,189 ) 333,262
Noncontrolling interests 68,669   1,603,897   1,672,566   33,965   1,562,187   1,596,152
Total Equity 1,552,448   168,731   1,721,179   1,554,416   374,998   1,929,414
Total Liabilities and Equity $ 3,977,353   $ 314,660   $ 4,292,013   $ 3,102,213   $ 523,267   $ 3,625,480
 
(1)

Represents the aggregate consolidating adjustments necessary to produce consolidated financial statements for TEGP.

 
TALLGRASS ENERGY GP, LP
CONSOLIDATING STATEMENTS OF INCOME
 
  Three Months Ended December 31, 2017   Three Months Ended December 31, 2016
TEP  

Consolidating
Adjustments(1)

  TEGP TEP  

Consolidating
Adjustments(1)

  TEGP
(in thousands) (in thousands)
Revenues:
Crude oil transportation services $ 85,367 $ $ 85,367 $ 95,668 $ $ 95,668
Natural gas transportation services 30,994 30,994 30,556 30,556
Sales of natural gas, NGLs, and crude oil 37,989 37,989 25,880 25,880
Processing and other revenues 20,416     20,416   10,107     10,107  
Total Revenues 174,766     174,766   162,211     162,211  
Operating Costs and Expenses:
Cost of sales 32,473 32,473 23,805 23,805
Cost of transportation services 7,401 7,401 11,723 11,723
Operations and maintenance 16,500 16,500 12,696 12,696
Depreciation and amortization 23,524 23,524 21,173 21,173
General and administrative 18,934 562 19,496 13,877 558 14,435
Taxes, other than income taxes 7,033 7,033 5,107 5,107
Loss on disposal of assets 665     665        
Total Operating Costs and Expenses 106,530   562   107,092   88,381   558   88,939  
Operating Income 68,236   (562 ) 67,674   73,830   (558 ) 73,272  
Other Income (Expense):
Interest expense, net (26,277 ) (1,532 ) (27,809 ) (13,049 ) (1,277 ) (14,326 )
Unrealized gain (loss) on derivative instrument (6,879 ) (6,879 )
Equity in earnings of unconsolidated investments 49,989 49,989 17,036 17,036
Other income, net 425     425   456     456  
Total Other Income (Expense) 24,137   (1,532 ) 22,605   (2,436 ) (1,277 ) (3,713 )
Net income before tax 92,373 (2,094 ) 90,279 71,394 (1,835 ) 69,559
Deferred income tax expense   (183,476 ) (183,476 )   (4,949 ) (4,949 )
Net income 92,373 (185,570 ) (93,197 ) 71,394 (6,784 ) 64,610
Net income attributable to noncontrolling interests (3,258 ) (68,922 ) (72,180 ) (1,130 ) (51,177 ) (52,307 )
Net income (loss) attributable to TEGP $ 89,115   $ (254,492 ) $ (165,377 ) $ 70,264   $ (57,961 ) $ 12,303  
 
Allocation of income:
Net (loss) income attributable to TEGP $ (165,377 ) $ 12,303
Predecessor operations interest in net income   (3,587 )
Net (loss) income attributable to TEGP, excluding predecessor operations interest (165,377 ) 8,716  
Basic net (loss) income per Class A share $ (2.85 ) $ 0.17  
Diluted net (loss) income per Class A share $ (2.85 ) $ 0.17  
Basic average number of Class A shares outstanding 58,079 52,225
Diluted average number of Class A shares outstanding 58,079 52,286
 
(1) Represents the aggregate consolidating adjustments necessary to produce consolidated financial statements for TEGP.
 
  Year Ended December 31, 2017   Year Ended December 31, 2016
TEP  

Consolidating
Adjustments(1)

  TEGP TEP  

Consolidating
Adjustments(1)

  TEGP
(in thousands) (in thousands)
Revenues:
Crude oil transportation services $ 345,733 $ $ 345,733 $ 374,949 $ $ 374,949
Natural gas transportation services 122,364 122,364 119,962 119,962
Sales of natural gas, NGLs, and crude oil 108,503 108,503 77,123 77,123
Processing and other revenues 79,298     79,298   39,628     39,628  
Total Revenues 655,898     655,898   611,662     611,662  
Operating Costs and Expenses:
Cost of sales 91,213 91,213 71,650 71,650
Cost of transportation services 46,200 46,200 47,669 47,669
Operations and maintenance 62,069 62,069 55,070 55,070
Depreciation and amortization 90,800 90,800 86,247 86,247
General and administrative 63,296 2,240 65,536 55,102 2,196 57,298
Taxes, other than income taxes 28,832 28,832 25,400 25,400
Contract termination 8,061 8,061
(Gain) loss on disposal of assets (599 )   (599 ) 1,849     1,849  
Total Operating Costs and Expenses 381,811   2,240   384,051   351,048   2,196   353,244  
Operating Income 274,087   (2,240 ) 271,847   260,614   (2,196 ) 258,418  
Other Income (Expense):
Interest expense, net (83,542 ) (5,806 ) (89,348 ) (40,688 ) (4,913 ) (45,601 )
Unrealized gain (loss) on derivative instrument 1,885 1,885 (1,291 ) (1,291 )
Equity in earnings of unconsolidated investments 237,110 237,110 54,531 54,531
Gain on remeasurement of unconsolidated investment 9,728 9,728
Other income, net 1,221     1,221   1,723     1,723  
Total Other Income (Expense) 166,402   (5,806 ) 160,596   14,275   (4,913 ) 9,362  
Net income before tax 440,489 (8,046 ) 432,443 274,889 (7,109 ) 267,780
Deferred income tax expense   (208,458 ) (208,458 )   (17,741 ) (17,741 )
Net income 440,489 (216,504 ) 223,985 274,889 (24,850 ) 250,039
Net income attributable to noncontrolling interests (6,499 ) (346,215 ) (352,714 ) (4,365 ) (211,885 ) (216,250 )
Net income (loss) attributable to TEGP $ 433,990   $ (562,719 ) $ (128,729 ) $ 270,524   $ (236,735 ) $ 33,789  
 
Allocation of income:
Net (loss) income attributable to TEGP $ (128,729 ) $ 33,789
Predecessor operations interest in net income   (6,995 )
Net (loss) income attributable to TEGP, excluding predecessor operations interest (128,729 ) 26,794  
Basic net (loss) income per Class A share $ (2.22 ) $ 0.55  
Diluted net (loss) income per Class A share $ (2.22 ) $ 0.55  
Basic average number of Class A shares outstanding 58,076 48,856
Diluted average number of Class A shares outstanding 58,076 48,889
 
(1) Represents the aggregate consolidating adjustments necessary to produce consolidated financial statements for TEGP.
 

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