Crosstex Energy Inc. Reports Operating Results (10-K)
Crosstex Energy has a market cap of $673.8 million; its shares were traded at around $14.02 with and P/S ratio of 0.4. The dividend yield of Crosstex Energy stocks is 3.1%. Crosstex Energy had an annual average earning growth of 3.9% over the past 10 years.
Highlight of Business Operations:The Partnership is subject to significant risks due to fluctuations in commodity prices. The Partnership is directly exposed to these risks primarily in the gas processing component of its business. For the year ended December 31, 2011 approximately 10.7% of its total gross operating margin was generated under percent of liquids (POL) contracts. Under these contracts the Partnership receives a fee in the form of a percentage of the liquids recovered and the producer bears all the cost of the natural gas shrink. Accordingly, the Partnership's revenues under these contracts are directly impacted by the market price of NGLs.
The Partnership also realizes processing gross operating margins under processing margin (margin) contracts. For the year ended December 31, 2011 approximately 19.3% of the Partnership's total gross operating margin was generated under processing margin contracts. The Partnership has a number of processing margin contracts with the Partnership's Plaquemine, Gibson, Eunice, Bluewater, and Pelican processing plants. Under this type of contract, the Partnership pays the producer for the full amount of inlet gas to the plant, and it makes a margin based on the difference between the value of liquids recovered from the processed natural gas as compared to the value of the natural gas volumes lost ("shrink") and the cost of fuel used in processing. The shrink and fuel losses are referred to as plant thermal reduction or PTR. The Partnership's margins from these contracts can be greatly reduced or eliminated during periods of high natural gas prices relative to liquids prices.
In the past, the prices of natural gas and NGLs have been extremely volatile and the Partnership expects this volatility to continue. For example, prices of natural gas in 2011 were below the market price realized throughout most of 2010 while prices for oil and NGLs were higher than 2010 market prices. Crude oil prices (based on the New York Mercantile Exchange (the "NYMEX") futures daily close prices for the prompt month) in 2011 ranged from a low of $75.67 per Bbl in October 2011 to a high of $113.93 per Bbl in April 2011. Weighted average NGL prices in 2011 (based on the Oil Price Information Service (OPIS) Napoleonville daily average spot liquids prices) ranged from a low of $0.99 per gallon in February 2011 to a high of $1.35 per gallon in May 2011. Natural gas prices (based on Gas Daily Henry Hub closing prices) during 2011 ranged from a high of $4.92 per MMBtu in June 2011 to a low of $2.79 per MMBtu in November 2011.
The Partnership has a substantial amount of indebtedness. As of December 31, 2011, the Partnership had approximately $713.4 million of indebtedness outstanding primarily comprised of $725.0 million (including $11.6 million of original issue discount) of senior unsecured notes. As of December 31, 2011, there was $85.0 million of borrowing and $69.0 million in outstanding letters of credit, under the bank credit facility leaving approximately $331.0 million available for future borrowing based on a borrowing capacity of $485.0 million. Based on the January amendment to increase the credit facility borrowing capacity to $635.0 million and borrowings outstanding as of December 31, 2011, the Partnership's available borrowing would be $481.0 million.
recorded a loss of approximately $13.3 million on this contract, and the Partnership currently expects that it will record a loss of approximately $13.0 million to $17.0 million on this contract in 2012. 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. For additional information on this contract, please see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsOverview."
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