Crosstex Energy L.P. Ltd. Partnership In (XTEX, Financial) filed Quarterly Report for the period ended 2010-09-30.
Crosstex Energy L.p. Ltd. Partnership In has a market cap of $704.5 million; its shares were traded at around $14.35 with and P/S ratio of 0.5. XTEX is in the portfolios of Glenn Greenberg of Brave Warrior Capital, Inc., Whitney Tilson of T2 Partners Management, LP, Jim Simons of Renaissance Technologies LLC.
· Sale of Preferred Units. On January 19, 2010, we issued approximately $125.0 million of Series A Convertible Preferred Units to an affiliate of Blackstone/GSO Capital Solutions for net proceeds of $120.8 million. Crosstex Energy, GP, L.P. made a general partner contribution of $2.6 million in connection with the issuance to maintain its 2% general partner interest. The 14,705,882 preferred units are convertible by the holders thereof at any time into common units on a one-for-one basis, subject to certain adjustments in the event of certain dilutive issuances of common units. We have the right to force conversion of the preferred units after three years if (i) the daily volume-weighted average trading price of our common units is greater than $12.75 per unit for 20 out of the trailing 30 trading days ending on two trading days before the date on which we deliver notice of such conversion and (ii) the average daily trading volume of common units must have exceeded 250,000 common units for 20 out of the trailing 30 trading days ending on two trading days before the date on which we deliver notice of such conversion. The preferred units are not redeemable. They are entitled to a quarterly distribution that is the greater of $0.2125 per unit or the amount of the quarterly distribution per unit paid to common unitholders, subject to certain adjustments. Such quarterly distribution may be paid in cash, in additional preferred units issued in kind or any combination thereof, provided that the distribution may not be paid in additional preferred units if we pay a cash distribution on common units. The first and second quarterly preferred unit distributions of $3.1 million were paid in cash in May 2010 and August 2010. In October 2010, we declared a third quarter preferred unit distribution of $3.7 million, equivalent to the $0.25 per unit declared for the common units, to be paid in cash in November 2010.
· Issuance of Senior Unsecured Notes. On February 10, 2010, we issued $725.0 million in aggregate principal amount of 8.875% senior unsecured notes due 2018 at an issue price of 97.907% to yield 9.25% to maturity, including the original issue discount (OID). Net proceeds from the sale of the notes of $689.7 million (net of transaction costs and OID), together with borrowings under our new credit facility discussed below, were used to repay in full amounts outstanding under our old bank credit facility and senior secured notes and to pay related fees, costs and expenses, including the settlement of interest rate swaps associated with our old credit facility. The notes are unsecured and unconditionally guaranteed on a senior basis by certain of our direct and indirect subsidiaries, including substantially all of our current subsidiaries. Interest payments are due semi-annually in arrears starting in August 2010. We have the option to redeem all or a portion of the notes at any time on or after February 15, 2014, at the specified redemption prices. Prior to February 15, 2014, we may redeem the notes, in whole or in part, at a make-whole redemption price. In addition, we may redeem up to 35.0% of the notes prior to February 15, 2013 with the cash proceeds from certain equity offerings.
We also completed the sale of our east Texas assets for $39.8 million in January 2010 and recognized a $14.0 million gain on disposition.
In addition to recapitalizing our business, we are focusing on the performance and growth of our existing assets while evaluating future strategic acquisitions and selective construction and expansion opportunities. We continue our initiatives to maximize utilization of our assets by improving operations and reducing operating costs. We also entered into a 10-year firm transportation agreement in June 2010 with a major Barnett Shale producer for an additional 50 MMcf/d of natural gas on our gathering system in north Texas. We are constructing a compressor station on an existing gathering line at an estimated cost of less than $10.0 million to accommodate such transportation requirements. The project is scheduled to be completed and operational in the first quarter of 2011. The annual cash flow from the agreement is expected to be approximately $8.0 million. We are also expanding our natural gas gathering system in the Barnett Shale with a $25.0 million 15-mile pipeline project. The project is supported by volumetric commitments from a major gas producer and is expected to have throughput of approximately 100 Bcf of gas during the first four years of operation. The project is scheduled to be completed in the first quarter of 2011.
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Crosstex Energy L.p. Ltd. Partnership In has a market cap of $704.5 million; its shares were traded at around $14.35 with and P/S ratio of 0.5. XTEX is in the portfolios of Glenn Greenberg of Brave Warrior Capital, Inc., Whitney Tilson of T2 Partners Management, LP, Jim Simons of Renaissance Technologies LLC.
Highlight of Business Operations:
We generally gather or transport gas owned by others through our facilities for a fee, or we buy natural gas from a producer, plant or shipper at either a fixed discount to a market index or a percentage of the market index, then transport and resell the natural gas at the market index. We attempt to execute all purchases and sales substantially concurrently, or we enter into a future delivery obligation, thereby establishing the basis for the margin we will receive for each natural gas transaction. We are also party to certain long-term gas sales commitments that we satisfy through supplies purchased under long-term gas purchase agreements. When we enter into those arrangements, our sales obligations generally match our purchase obligations. However, over time the supplies that we have under contract may decline due to reduced drilling or other causes and we may be required to satisfy the sales obligations by buying additional gas at prices that may exceed the prices received under the sales commitments. In our purchase/sale transactions, the resale price is generally based on the same index at which the gas was purchased. However, we have certain purchase/sale transactions in which the purchase price is based on a production-area index and the sales price is based on a market-area index, and we capture the difference in the indices (also referred to as basis spread), less the transportation expenses from the two areas, as our margin. Changes in the basis spread can increase or decrease our margins. For example, we are a party to a contract with a term to 2019 to supply approximately 150 MMBtu/d of gas. We buy the gas for this contract on several different production-area indices into our north Texas pipeline and sell the gas into a different market area index. For the three and nine months ended September 30, 2010, we have recorded a loss of approximately $2.3 million and $5.4 million, respectively, on this contract due to the basis differentials between the various market prices and supply reductions, which may be more or less in future periods depending on market conditions. Reduced supplies and narrower basis spreads in recent periods have increased the losses on this contract, and greater losses on this contract could occur in future periods if these conditions persist or become worse.· Sale of Preferred Units. On January 19, 2010, we issued approximately $125.0 million of Series A Convertible Preferred Units to an affiliate of Blackstone/GSO Capital Solutions for net proceeds of $120.8 million. Crosstex Energy, GP, L.P. made a general partner contribution of $2.6 million in connection with the issuance to maintain its 2% general partner interest. The 14,705,882 preferred units are convertible by the holders thereof at any time into common units on a one-for-one basis, subject to certain adjustments in the event of certain dilutive issuances of common units. We have the right to force conversion of the preferred units after three years if (i) the daily volume-weighted average trading price of our common units is greater than $12.75 per unit for 20 out of the trailing 30 trading days ending on two trading days before the date on which we deliver notice of such conversion and (ii) the average daily trading volume of common units must have exceeded 250,000 common units for 20 out of the trailing 30 trading days ending on two trading days before the date on which we deliver notice of such conversion. The preferred units are not redeemable. They are entitled to a quarterly distribution that is the greater of $0.2125 per unit or the amount of the quarterly distribution per unit paid to common unitholders, subject to certain adjustments. Such quarterly distribution may be paid in cash, in additional preferred units issued in kind or any combination thereof, provided that the distribution may not be paid in additional preferred units if we pay a cash distribution on common units. The first and second quarterly preferred unit distributions of $3.1 million were paid in cash in May 2010 and August 2010. In October 2010, we declared a third quarter preferred unit distribution of $3.7 million, equivalent to the $0.25 per unit declared for the common units, to be paid in cash in November 2010.
· Issuance of Senior Unsecured Notes. On February 10, 2010, we issued $725.0 million in aggregate principal amount of 8.875% senior unsecured notes due 2018 at an issue price of 97.907% to yield 9.25% to maturity, including the original issue discount (OID). Net proceeds from the sale of the notes of $689.7 million (net of transaction costs and OID), together with borrowings under our new credit facility discussed below, were used to repay in full amounts outstanding under our old bank credit facility and senior secured notes and to pay related fees, costs and expenses, including the settlement of interest rate swaps associated with our old credit facility. The notes are unsecured and unconditionally guaranteed on a senior basis by certain of our direct and indirect subsidiaries, including substantially all of our current subsidiaries. Interest payments are due semi-annually in arrears starting in August 2010. We have the option to redeem all or a portion of the notes at any time on or after February 15, 2014, at the specified redemption prices. Prior to February 15, 2014, we may redeem the notes, in whole or in part, at a make-whole redemption price. In addition, we may redeem up to 35.0% of the notes prior to February 15, 2013 with the cash proceeds from certain equity offerings.
We also completed the sale of our east Texas assets for $39.8 million in January 2010 and recognized a $14.0 million gain on disposition.
In addition to recapitalizing our business, we are focusing on the performance and growth of our existing assets while evaluating future strategic acquisitions and selective construction and expansion opportunities. We continue our initiatives to maximize utilization of our assets by improving operations and reducing operating costs. We also entered into a 10-year firm transportation agreement in June 2010 with a major Barnett Shale producer for an additional 50 MMcf/d of natural gas on our gathering system in north Texas. We are constructing a compressor station on an existing gathering line at an estimated cost of less than $10.0 million to accommodate such transportation requirements. The project is scheduled to be completed and operational in the first quarter of 2011. The annual cash flow from the agreement is expected to be approximately $8.0 million. We are also expanding our natural gas gathering system in the Barnett Shale with a $25.0 million 15-mile pipeline project. The project is supported by volumetric commitments from a major gas producer and is expected to have throughput of approximately 100 Bcf of gas during the first four years of operation. The project is scheduled to be completed in the first quarter of 2011.
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