Form 8-K Midcoast Energy Partners For: Apr 29

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

 

 

Date of report (Date of earliest event reported): April 29, 2015

 

 

MIDCOAST ENERGY PARTNERS, L.P.

(Exact Name of Registrant as Specified in Charter)

 

 

 

DELAWARE		1-36175		61-1714064
(State or Other Jurisdiction of Incorporation)		(Commission File Number)		(IRS Employer Identification No.)

1100 LOUISIANA, SUITE 3300, HOUSTON, TEXAS 77002

(Address of Principal Executive Offices) (Zip Code)

(713) 821-2000

(Registrant’s telephone number, including area code)

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

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Item 2.02. Results of Operations and Financial Condition.

Midcoast Energy Partners, L.P., referred to herein as “we” or “our,” issued a press release on April 29, 2015 announcing its financial results for the three month period ended March 31, 2015, which is attached hereto as Exhibit 99.1. As noted in the press release, a copy of our unaudited condensed consolidated financial statements for the three month period ended March 31, 2015 is available on our website at www.midcoastpartners.com and is attached hereto as Exhibit 99.2. This information is not deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not incorporated by reference into any registration statements filed under the Securities Act of 1933, as amended.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits

Reference is made to the “Index of Exhibits” following the signature page, which is hereby incorporated into this Item.

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned there unto duly authorized.

 

				MIDCOAST ENERGY PARTNERS, L.P. (Registrant)
				By:		Midcoast Holdings, L.L.C.
						its General Partner
Date: April 29, 2015				By:		/s/ Noor Kaissi
						Noor Kaissi Controller (Duly Authorized Officer)

 

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Index of Exhibits

 

Exhibit Number		Description
99.1		Press release of Midcoast Energy Partners, L.P., dated April 29, 2015 reporting financial results for the three month period ended March 31, 2015
99.2		Unaudited condensed consolidated financial statements of Midcoast Energy Partners, L.P. for the three month period ended March 31, 2015

 

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Exhibit 99.1

 

NEWS RELEASE

Midcoast Energy Partners, L.P. Declares Distribution Increase and Reports Earnings for First Quarter 2015

HOUSTON — (April 29, 2015) - Midcoast Energy Partners, L.P. (NYSE: MEP) (“Midcoast Partners” or “the Partnership”) announced today that the board of directors of its general partner has declared a quarterly cash distribution of $0.3475 per unit, or $1.39 per unit on an annualized basis on all of its outstanding common and subordinated units, for the quarter ended March 31, 2015. The approved distribution represents increases of 1.5 percent over the previous quarter’s distribution and an 11.2 percent increase compared to the first quarter of 2014. The distribution is payable on May 15, 2015, to unitholders of record at the close of business on May 8, 2015.

FIRST QUARTER HIGHLIGHTS

 

•

Reported first quarter adjusted EBITDA and distributable cash flow of $24.4 and $18.6 million, respectively; distribution coverage of 1.16x.

 

•

Announced fourth consecutive quarterly cash distribution increase, representing an 11.2 percent increase compared to the first quarter of 2014.

 

•

Announced updated 2015 financial outlook: reductions in producer drilling programs expected to result in lower full year 2015 system volumes.

 

•

Execution of plan to reduce annual operating and administrative costs by over $50 million proceeding ahead of schedule.

 

•

Secured new business opportunities with low-risk, highly certain revenue commercial structures: enhances basin diversification in the Eaglebine and Mississippi Lime plays.

“Midcoast Energy Partners delivered solid financial results in the first quarter, realizing the benefits of the constructive actions we announced at the end of 2014 to strengthen our business. We have made meaningful progress on our plan to realign the Partnership’s cost structure and reduce annual operating and administrative costs by over $50 million. Next, we continue to advance our strategic initiatives of extending our asset footprint and securing accretive growth backed by low-risk, demand-based commercial structures. We are excited about the Eaglebine transactions we announced during the quarter and prospective growth opportunities to complement our entry into this emerging shale play,” said C. Gregory Harper, president for the Partnership.

“While the Partnership’s first quarter financial performance was strong and we are pleased with the progress on our strategic initiatives, low commodity market fundamentals are expected to continue to impact our industry in the near to medium term. Commensurate with the announced reductions in the drilling programs of our natural gas producer customers, we expect volume reductions on our natural gas and NGL systems to materialize through the balance of this year. As such, we are revising our previously communicated 2015 financial guidance. Actions are well underway to strengthen our underlying midstream business to navigate the current commodity price environment and position the Partnership to respond as commodity fundamentals improve. Our commitment to deliver sustainable value and growth to our unitholders over the long-term remains steadfast,” noted Harper.

 

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Updated 2015 Financial Guidance – Based on current commodity market fundamentals and assuming that a drop down opportunity of additional interests in Midcoast Operating, L.P. from its sponsor Enbridge Energy Partners, L.P. in 2015 may not occur under current market conditions, MEP expects full year 2015 adjusted EBITDA and distributable cash flow to be between $80 to $95 million and $50 to $65 million, respectively.

COMPARATIVE EARNINGS STATEMENT

The financial results for the three months ended March 31, 2015 for Midcoast Partners are presented on a consolidated basis. On July 1, 2014, we acquired an additional 12.6 percent interest in Midcoast Operating, L.P. (“Midcoast Operating”). Beginning July 1, 2014, we own a 51.6 percent controlling interest in Midcoast Operating, and for three months ended March 31, 2015, we consolidated the results of operations of Midcoast Operating and recorded a 48.4 percent non-controlling interest deduction for Enbridge Energy Partner, L.P.’s (“EEP”) retained interest in Midcoast Operating.

COMPARATIVE EARNINGS STATEMENT

 

		Three months ended
		March 31,
(unaudited, dollars in millions except per unit amounts)		2015				2014
Operating revenue		$	873.5			$	1,646.9
Operating expenses:
Cost of natural gas and natural gas liquids			779.1				1,488.7
Operating and maintenance			63.4				81.7
General and administrative			21.0				27.2
Depreciation and amortization			38.3				37.0
Operating income (loss)			(28.3	)			12.3
Interest expense			6.7				3.3
Other income (expense)			5.7				(1.3	)
Income (loss) before income tax expense			(29.3	)			7.7
Income tax expense			0.8				1.0
Net income (loss)			(30.1	)			6.7
Less: Net income (loss) attributable to noncontrolling interest			(10.1	)			6.3
Net income (loss) attributable to general and limited partner ownership interest in Midcoast Energy Partners, L.P.		$	(20.0	)		$	0.4
Net income (loss) attributable to limited partners		$	(19.6	)		$	0.4
Weighted average limited partner units (millions)			45.2				45.2
Net income (loss) per limited partner unit (dollars)		$	(0.43	)		$	0.01

 

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COMPARISON OF QUARTERLY RESULTS

Following are explanations for significant changes in Midcoast Operating’s financial results, comparing the three month period ended March 31, 2015 with the same periods of 2014. The comparison refers to adjusted operating income, which excludes the effect of non-cash and nonrecurring items (see Non-GAAP Reconciliations section below).

 

Midcoast Operating		Three months ended
Adjusted Operating Income		March 31,
(unaudited, dollars in millions)		2015				2014
Gathering, Processing and Transportation		$	6.9			$	(6.2	)
Logistics and Marketing			0.2				12.9
Adjusted operating income			7.1				6.7
MEP Corporate			(1.7	)			—
Adjusted operating income		$	5.4			$	6.7

Gathering, Processing and Transportation – First quarter adjusted operating results for the Gathering, Processing and Transportation segment were $13.1 million higher than the same period of 2014. The increase in adjusted operating income was predominantly attributable to higher natural gas system volumes, as prior year volumes were impacted by freeze-offs due to unusual extreme weather conditions in our Anadarko and North Texas asset regions. In addition, lower operating and administrative costs attributable to workforce reductions and other cost savings measures enacted in December of 2014 contributed to higher current period operating income.

 

Midcoast Operating		Three months ended
Gathering, Processing and Transportation Throughput		March 31,
(MMBtu per day)		2015				2014
East Texas			1,007,000				971,000
Anadarko			831,000				824,000
North Texas			287,000				272,000
Total			2,125,000				2,067,000
NGL Production
(Barrels per day)		2015				2014
Total System Production			81,046				80,899

Logistics and Marketing – First quarter adjusted operating income for the Logistics and Marketing segment was $12.7 million lower than the same period of 2014. The decrease in adjusted operating income was predominantly attributable to lower seasonal optimization opportunities in our natural gas marketing business due to tighter natural gas basis differentials than prior year.

MANAGEMENT REVIEW OF QUARTERLY RESULTS

Midcoast Partners will review its financial results for the quarter ended March 31, 2015 in a live Internet presentation, commencing at 8:30 a.m. Eastern Time on Thursday, April 30, 2015. Interested parties may watch the live webcast at the link provided below. A replay will be available shortly afterward. Presentation slides and condensed financial statements will also be available on the Partnership’s website at the link below.

MEP Events and Presentations:

http://www.midcoastpartners.com/Investor-Relations/Events-and-Presentations/

Webcast link: http://edge.media-server.com/m/p/zpd4tbik

The audio portion of the live presentation will be accessible by telephone at (855) 757-8879 (Passcode: 24933325) and can be replayed until May 14, 2015 by calling (855) 859-2056 (Passcode: 24933325). An audio replay will also be available for download in MP3 format from either of the website addresses above.

 

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NON-GAAP RECONCILIATIONS

Adjusted net income and adjusted operating income for the principal business segments are provided to illustrate trends in income excluding derivative fair value losses and gains and other nonrecurring items that affect earnings. The derivative non-cash losses and gains result from marking to market certain financial derivatives used by the Partnership for hedging purposes that do not qualify for hedge accounting treatment in accordance with the authoritative accounting guidance as prescribed under generally accepted accounting principles in the United States.

 

Midcoast Energy Partners		Three months ended
Adjusted Earnings		March 31,
(unaudited; dollars in millions except per unit amounts)		2015				2014
Net income (loss) attributable to general and limited partner ownership interests in Midcoast Energy Partners, L.P.		$	(20.0	)		$	0.4
Noncash derivative fair value losses (gains)
-Gathering, Processing and Transportation			8.2				(0.1	)
-Logistics and Marketing			9.9				(1.7	)
Make-up rights adjustment			(0.3	)			0.8
Option premium amortization			(0.7	)			(0.3	)
Adjusted net loss		$	(2.9	)		$	(0.9	)
Adjusted net loss attributable to limited partners		$	(2.8	)		$	(0.9	)
Weighted average units (millions)			45.2				45.2
Adjusted net loss per limited partner unit (dollars)		$	(0.06	)		$	(0.02	)

 

Midcoast Operating		Three months ended
Gathering, Processing and Transportation		March 31,
(unaudited; dollars in millions)		2015				2014 (1)
Operating loss		$	(7.6	)		$	(4.9	)
Noncash derivative fair value losses (gains)			15.9				(0.3	)
Option premium amortization			(1.4	)			(1.0	)
Adjusted operating income (loss)		$	6.9			$	(6.2	)

 

(1)	Prior year adjusted operating loss was revised to reclassify make-up rights adjustment to other income.

 

Midcoast Operating		Three months ended
Logistics and Marketing		March 31,
(unaudited; dollars in millions)		2015				2014
Operating income (loss)		$	(19.0	)		$	17.2
Noncash derivative fair value losses (gains)			19.2				(4.3	)
Adjusted operating income		$	0.2			$	12.9

 

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Adjusted EBITDA

Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) is used as a supplemental financial measurement to assess liquidity and the ability to generate cash sufficient to pay interest costs and make cash distributions to unitholders. The following reconciliation of net cash provided by operating activities to adjusted EBITDA is provided because EBITDA is not a financial measure recognized under generally accepted accounting principles. The table also references “MOLP Adjusted EBITDA, inclusive of other cash items”, representing total cash flow generated by Midcoast Operating.

 

Midcoast Operating		Three months ended
Adjusted EBITDA		March 31,
(unaudited; dollars in millions)		2015				2014
Net cash provided by operating activities		$	168.2			$	213.8
Changes in operating assets and liabilities, net of cash acquired			(124.0	)			(170.8	)
Income tax expense			0.8				1.0
Interest expense			6.7				3.3
Option premium amortization			(1.4	)			(1.0	)
Other			(1.5	)			(1.0	)
Adjusted EBITDA attributable to EEP retained interest			(24.4	)			(28.4	)
Adjusted EBITDA attributable to MEP (1)			24.4				16.9
Adjusted EBITDA attributable to EEP retained interest			24.4				28.4
Other			1.7				1.2
Adjusted EBITDA attributable to MOLP (1)		$	50.5			$	46.5
G&A abatement			6.3				6.3
Texas Express distributions in excess of equity earnings			3.0				—
MOLP adjusted EBITDA, inclusive of other cash items (1)		$	59.8			$	52.8

 

(1)	Adjusted EBITDA attributable to MEP is inclusive of public partnership expenses. However, Adjusted EBITDA attributable to MOLP is not inclusive of public partnership expenses attributable to MEP.

 

Midcoast Partners		Three months ended
Adjusted EBITDA		March 31,
(unaudited; dollars in millions)		2015				2014
Net cash provided by operating activities		$	168.2			$	213.8
Changes in operating assets and liabilities, net of cash acquired			(124.0	)			(170.8	)
Income tax expense			0.8				1.0
Interest expense			6.7				3.3
Option premium amortization			(1.4	)			(1.0	)
Other			(1.5	)			(1.0	)
Adjusted EBITDA attributable to EEP retained interest			(24.4	)			(28.4	)
Adjusted EBITDA attributable to MEP			24.4				16.9
Maintenance capital expenditures			(3.1	)			(4.9	)
Income tax expense (1)			(0.8	)			(0.1	)
Interest expense (1)			(6.7	)			(2.0	)
G&A abatement			3.3				2.4
Texas Express distribution in excess of equity earnings			1.5				—
Distributable cash flow		$	18.6			$	12.3

 

(1)	Effective for the three month period ended March 31, 2015, distributable cash flow will reflect the accrued amounts for interest and taxes. Prior periods reflected such amounts on a cash basis.

 

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About Midcoast Energy Partners, L.P.

Midcoast Energy Partners, L.P. (NYSE: MEP), is a limited partnership formed by EEP to serve as EEP’s primary vehicle for owning and growing its natural gas and natural gas liquids (NGLs) midstream business in the United States. Our assets consist of a 51.6 percent controlling interest in Midcoast Operating, L.P., a Texas limited partnership that owns a network of natural gas and NGL gathering and transportation systems, natural gas processing and treating facilities and NGL fractionation facilities primarily located in Texas and Oklahoma. Midcoast Operating also owns and operates natural gas, condensate and NGL logistics and marketing assets that primarily support its gathering, processing and transportation business. Through our ownership of Midcoast Operating’s general partner, we control, manage and operate these systems.

EEP owns 100 percent of Midcoast Holdings, LLC, the general partner of Midcoast Partners and holds an approximate 54 percent interest in Midcoast Partners. EEP owns and operates a diversified portfolio of crude oil and, through Midcoast Partners, natural gas transportation systems in the United States. Its principal crude oil system is the largest pipeline transporter of growing oil production from western Canada and the North Dakota Bakken formation. EEP is recognized by Forbes as one of the 100 Most Trustworthy Companies in America.

Forward Looking Statements

This presentation includes forward-looking statements, which are statements that frequently use words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “intend,” “may,” “plan,” “position,” “projection,” “should,” “strategy,” “opportunity,” “target,” “will” and similar words. Although we believe that such forward-looking statements are reasonable based on currently available information, such statements involve risks, uncertainties and assumptions and are not guarantees of performance. Future actions, conditions or events and future results of operations may differ materially from those expressed in these forward-looking statements. Many of the factors that will determine these results are beyond the ability of Midcoast Energy Partners, L.P. (the “Partnership”) to control or predict. The Partnership’s forward looking statements are subject to risks and uncertainties pertaining to operating performance, regulatory parameters, project approval and support, weather, economic conditions, interest rates and commodity prices, including but not limited to the following specific factors that could cause actual results to differ from those in the forward-looking statements: (1) changes in the demand for or the supply of, forecast data for, and price trends related to natural gas, natural gas liquids and crude oil and the response by natural gas and crude oil producers to changes in any of these factors; (2) the Partnership’s ability to successfully complete and finance expansion projects; (3) the effects of competition, in particular, by other pipeline and gathering systems, as well as other processing and treating plants; (4) shut-downs or cutbacks at the Partnership’s facilities or refineries, petrochemical plants, utilities or other businesses for which the Partnership transports products or to whom the Partnership sells products; (5) hazards and operating risks that may not be covered fully by insurance; (6) changes in or challenges to the Partnership’s rates; (7) changes in laws or regulations to which the Partnership is subject, including compliance with environmental and operational safety regulations that may increase costs of system integrity testing and maintenance; and (8) cost overruns and delays on construction projects resulting from numerous factors.

Forward-looking statements regarding “drop-down” opportunities are further qualified by the fact that Enbridge Energy Partners, L.P. is under no obligation to offer to sell us additional interests in Midcoast Operating, L.P., and we are under no obligation to buy any such additional interests. As a result, we do not know when or if any such additional interests will be purchased.

Except to the extent required by law, we assume no obligation to publically update or revise any forward looking statements, whether as a result of new information, future events or otherwise. In addition to the risks listed above, other risks include those detailed from time to time in the Partnership’s Securities and Exchange Commission, or SEC, reports, including, without limitation, in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2014 and any subsequently filed Quarterly Report on Form 10-Q, or Current Report on Form 8-K, which filings are available to the public at the SEC’s website (www.sec.gov).

 

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FOR FURTHER INFORMATION PLEASE CONTACT:

 

Sanjay Lad, CFA		Terri Larson, APR
Investment Community		Media
Toll-free: (855) MEP-7222 or (855) 637-7222		Telephone: (877) 496-8142
E-mail: [email protected]		E-mail: [email protected]

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Exhibit 99.2

MIDCOAST ENERGY PARTNERS, L.P.

CONSOLIDATED STATEMENTS OF INCOME

 

		For the three-month period ended March 31,
		2015				2014
		(unaudited; in millions, except per unit amounts)
Operating revenues:
Operating revenue		$	851.7			$	1,589.7
Operating revenue - affiliate			21.8				57.2
			873.5				1,646.9
Operating expenses:
Cost of natural gas and natural gas liquids			761.2				1,458.5
Cost of natural gas and natural gas liquids - affiliate			17.9				30.2
Operating and maintenance			38.2				54.6
Operating and maintenance - affiliate			25.2				27.1
General and administrative			1.9				1.9
General and administrative - affiliate			19.1				25.3
Depreciation and amortization			38.3				37.0
			901.8				1,634.6
Operating income (loss)			(28.3	)			12.3
Interest expense, net			6.7				3.3
Equity in earnings (loss) of joint ventures			5.7				(1.2	)
Other loss			—				(0.1	)
Income (loss) before income tax expense			(29.3	)			7.7
Income tax expense			0.8				1.0
Net income (loss)			(30.1	)			6.7
Less: Net income (loss) attributable to noncontrolling interest			(10.1	)			6.3
Net income (loss) attributable to general and limited partner ownership interest in Midcoast Energy Partners, L.P.		$	(20.0	)		$	0.4
Net income (loss) attributable to limited partner ownership interest		$	(19.6	)		$	0.4
Net income (loss) per limited partner unit (basic and diluted)		$	(0.43	)		$	0.01
Weighted average limited partner units outstanding			45.2				45.2

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MIDCOAST ENERGY PARTNERS, L.P.

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

		For the three-month period ended March 31,
		2015				2014
		(unaudited; in millions)
Cash provided by operating activities:
Net income (loss)		$	(30.1	)		$	6.7
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization			38.3				37.0
Derivative fair value net (gains) losses			35.1				(4.6	)
Inventory market price adjustments			4.6				1.5
Distributions from investment in joint ventures			5.7				1.6
Equity (earnings) loss from investment in joint ventures			(5.7	)			1.3
Other			0.7				1.0
Changes in operating assets and liabilities, net of acquisitions:
Receivables, trade and other			(11.6	)			3.5
Due from General Partner and affiliates			44.4				616.3
Accrued receivables			184.9				59.2
Inventory			48.2				26.2
Current and long-term other assets			(12.1	)			(4.8	)
Due to General Partner and affiliates			4.8				(478.3	)
Accounts payable and other			(9.3	)			(42.3	)
Accrued purchases			(115.9	)			(2.4	)
Interest payable			(4.1	)			0.5
Property and other taxes payable			(9.7	)			(8.6	)
Net cash provided by operating activities			168.2				213.8
Cash used in investing activities:
Additions to property, plant and equipment			(56.1	)			(55.5	)
Changes in restricted cash			(2.7	)			47.5
Asset acquisitions			(44.1	)			—
Investment in joint ventures			(1.9	)			(7.3	)
Distributions from investment in joint ventures in excess of cumulative earnings			2.4				—
Other			(0.6	)			—
Net cash used in investing activities			(103.0	)			(15.3	)
Cash used in financing activities:
Net repayments under credit facility			(45.0	)			(85.0	)
Distributions to partners			(15.8	)			(7.7	)
Contributions from noncontrolling interest			20.7				39.7
Distributions to noncontrolling interest			(19.8	)			(37.4	)
Net cash used in financing activities			(59.9	)			(90.4	)
Net increase in cash and cash equivalents			5.3				108.1
Cash and cash equivalents at beginning of year			—				4.9
Cash and cash equivalents at end of period		$	5.3			$	113.0

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MIDCOAST ENERGY PARTNERS, L.P.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

 

		March 31, 2015				December 31, 2014
		(unaudited; in millions)
ASSETS
Current assets:
Cash and cash equivalents		$	5.3			$	—
Restricted cash			63.5				42.8
Receivables, trade and other, net of allowance for doubtful accounts of $1.8 million at March 31, 2015 and December 31, 2014			27.2				15.6
Due from General Partner and affiliates			7.6				49.7
Accrued receivables			44.7				229.6
Inventory			28.7				81.5
Other current assets			158.7				178.1
			335.7				597.3
Property, plant and equipment, net			4,232.4				4,159.7
Goodwill			226.5				226.5
Intangible assets, net			277.9				247.7
Equity investment in joint ventures			380.1				380.6
Other assets, net			127.0				142.3
Total assets		$	5,579.6			$	5,754.1
LIABILITIES AND PARTNERS’ CAPITAL
Current liabilities:
Due to General Partner and affiliates		$	39.6			$	41.1
Accounts payable and other			114.4				113.8
Accrued purchases			253.8				375.2
Property and other taxes payable			11.2				20.9
Interest payable			0.9				5.0
			419.9				556.0
Long-term debt			715.0				760.0
Other long-term liabilities			48.5				41.5
Total liabilities			1,183.4				1,357.5
Commitments and contingencies
Partners’ capital:
Class A common units (22,610,056 authorized and issued at March 31, 2015 and December 31, 2014)			616.7				634.2
Subordinated units (22,610,056 authorized and issued at March 31, 2015 and December 31, 2014)			1,156.5				1,174.0
General Partner units (922,859 authorized and issued at March 31, 2015 and December 31, 2014)			47.0				47.8
Accumulated other comprehensive income			10.1				11.6
Total Midcoast Energy Partners, L.P. partners’ capital			1,830.3				1,867.6
Noncontrolling interest			2,565.9				2,529.0
Total partners’ capital			4,396.2				4,396.6
		$	5,579.6			$	5,754.1

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NET INCOME PER LIMITED PARTNER AND GENERAL PARTNER INTEREST

We allocate our net income among our General Partner and limited partners using the two-class method. Under the two-class method, we allocate our net income to our limited partners, our General Partner and the holders of our incentive distribution rights, or IDRs, in accordance with the terms of our partnership agreement. We also allocate any earnings in excess of distributions to our limited partners, our General Partner and the holders of the IDRs in accordance with the terms of our partnership agreement. We allocate any distributions in excess of earnings for the period to our General Partner and our limited partners based on their respective proportionate ownership interests in us, after taking into account distributions to be paid with respect to the IDRs, as set forth in our partnership agreement.

 

Distribution Targets		Portion of Quarterly Distribution Per Unit		Percentage Distributed to Limited Partners				Percentage Distributed to General Partner
Minimum Quarterly Distribution		Up to $0.3125			98	%			2	%
First Target Distribution		> $0.3125 to $0.359375			98	%			2	%
Second Target Distribution		> $0.359375 to $0.390625			85	%			15	%
Third Target Distribution		> $0.390625 to $0.468750			75	%			25	%
Over Third Target Distribution		In excess of $0.468750			50	%			50	%

We determined basic and diluted net income (loss) per limited partner unit as follows:

 

		For the three-month period ended March 31,
		2015				2014
		(in millions, except per unit amounts)
Net income (loss)		$	(30.1	)		$	6.7
Less: Net income (loss) attributable to noncontrolling interest			(10.1	)			6.3
Net income (loss) attributable to general and limited partner interests in Midcoast Energy Partners, L.P.			(20.0	)			0.4
Less distributions:
Total distributed earnings to our General Partner			(0.3	)			(0.3	)
Total distributed earnings to our limited partners			(15.7	)			(14.1	)
Total distributed earnings			(16.0	)			(14.4	)
Overdistributed earnings		$	(36.0	)		$	(14.0	)
Weighted average limited partner units outstanding			45.2				45.2
Basic and diluted earnings per unit:
Distributed earnings per limited partner unit (1)		$	0.35			$	0.31
Overdistributed earnings per limited partner unit (2)			(0.78	)			(0.30	)
Net income (loss) per limited partner unit (basic and diluted)		$	(0.43	)		$	0.01

 

(1)	Represents the total distributed earnings to limited partners divided by the weighted average number of limited partner interests outstanding for the period.

(2)

Represents the limited partners’ share (98%) of distributions in excess of earnings divided by the weighted average number of limited partner interests outstanding for the period and underdistributed earnings allocated to the limited partners based on the distribution waterfall that is outlined in our partnership agreement.

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SEGMENT INFORMATION

Our business is divided into operating segments, defined as components of the enterprise, about which financial information is available and evaluated regularly by our Chief Operating Decision Maker, collectively comprised of our senior management, in deciding how resources are allocated and performance is assessed.

Each of our reportable segments is a business unit that offers different services and products that are managed separately, since each business segment requires different operating strategies. We conduct our business through two distinct reporting segments:

 

•

Gathering, Processing, and Transportation; and

 

•

Logistics and Marketing.

The following tables present certain financial information relating to our business segments and corporate activities:

 

				As of and for the three-month period ended March 31, 2015
				Gathering, Processing and Transportation				Logistics and Marketing				Corporate (1)				Total
				(in millions)
Total revenue				$	385.4			$	765.3			$	—			$	1,150.7
Less: Intersegment revenue					267.3				9.9				—				277.2
Operating revenue					118.1				755.4				—				873.5
Cost of natural gas and natural gas liquids					21.9				757.2				—				779.1
Segment gross margin					96.2				(1.8	)			—				94.4
Operating and maintenance					50.8				12.6				—				63.4
General and administrative					16.3				3.0				1.7				21.0
Depreciation and amortization					36.7				1.6				—				38.3
					103.8				17.2				1.7				122.7
Operating loss					(7.6	)			(19.0	)			(1.7	)			(28.3	)
Interest expense, net					—				—				6.7				6.7
Other income					5.7	(2)			—				—				5.7
Loss before income tax expense					(1.9	)			(19.0	)			(8.4	)			(29.3	)
Income tax expense					—				—				0.8				0.8
Net loss					(1.9	)			(19.0	)			(9.2	)			(30.1	)
Less: Net loss attributable to:
Noncontrolling interest					—				—				(10.1	)			(10.1	)
Net income (loss) attributable to general and limited partner ownership interests in Midcoast Energy Partners, L.P.				$	(1.9	)		$	(19.0	)		$	0.9			$	(20.0	)
Total assets				$	5,226.2	(3)		$	236.9			$	116.5			$	5,579.6
Capital expenditures (excluding acquisitions)				$	54.8			$	0.7			$	0.1			$	55.6

 

(1)	Corporate consists of interest expense, interest income, noncontrolling interest and other costs such as income taxes, which are not allocated to the business segments.

(2)	Other income for our Gathering, Processing and Transportation segment includes our long-term equity investment in the Texas Express NGL system.

(3)	Totals assets for our Gathering, Processing and Transportation segment includes $380.1 million for our long-term equity investment in the Texas Express NGL system.

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				As of and for the three-month period ended March 31, 2014
				Gathering, Processing and Transportation				Logistics and Marketing				Corporate (1)				Total
				(in millions)
Total revenue				$	725.0			$	1,473.0			$	—			$	2,198.0
Less: Intersegment revenue					521.7				29.4				—				551.1
Operating revenue					203.3				1,443.6				—				1,646.9
Cost of natural gas and natural gas liquids					84.8				1,403.9				—				1,488.7
Segment gross margin					118.5				39.7				—				158.2
Operating and maintenance					64.4				17.3				—				81.7
General and administrative					24.0				3.2				—				27.2
Depreciation and amortization					35.0				2.0				—				37.0
					123.4				22.5				—				145.9
Operating income (loss)					(4.9	)			17.2				—				12.3
Interest expense, net					—				—				3.3				3.3
Other expense					(1.2	)(2)			—				(0.1	)			(1.3	)
Income (loss) before income tax expense					(6.1	)			17.2				(3.4	)			7.7
Income tax expense					—				—				1.0				1.0
Net income (loss)					(6.1	)			17.2				(4.4	)			6.7
Less: Net income attributable to:
Noncontrolling interest					—				—				6.3				6.3
Net income (loss) attributable to general and limited partner ownership interests in Midcoast Energy Partners, L.P.				$	(6.1	)		$	17.2			$	(10.7	)		$	0.4
Total assets				$	4,901.7	(3)		$	311.1			$	216.7			$	5,429.5
Capital expenditures (excluding acquisitions)				$	47.8			$	2.3			$	5.3			$	55.4

 

(1)	Corporate consists of interest expense, interest income, noncontrolling interest and other costs such as income taxes, which are not allocated to the business segments.

(2)	Other expense for our Gathering, Processing and Transportation segment includes our long-term equity investment in the Texas Express NGL system.

(3)	Totals assets for our Gathering, Processing and Transportation segment includes $375.7 million for our long-term equity investment in the Texas Express NGL system.

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