The Hiland companies, Hiland Partners, LP (NASDAQ:HLND) (the
"Partnership") and Hiland Holdings GP, LP (NASDAQ:HPGP) today
announced results for the third quarter of 2009. Hiland Partners,
LP Financial Results Hiland Partners, LP reported net income (loss)
for the three months ended September 30, 2009 of $(19.5) million
compared to net income (loss) of $18.6 million for the three months
ended September 30, 2008. Net income (loss) per limited partners'
unit-basic for the third quarter of 2009 was $(2.05) per unit
compared to net income (loss) of $1.71 per unit in the
corresponding quarter in 2008. Weighted average limited partner
units outstanding were 9.4 million units for the three months ended
September 30, 2009 and 9.3 million units for the three months ended
September 30, 2008. Net income (loss) for the three months ended
September 30, 2009 includes a $20.5 million non-cash property
impairment charge related to the Partnership's Kinta Area gathering
system. Net income (loss) for the three months ended September 30,
2009, excluding the non-cash property impairment charge was $1.0
million or $0.11 per limited partners' unit-basic. Adjusted EBITDA
(adjusted EBITDA is defined as net income (loss) plus interest
expense, provisions for income taxes, depreciation, amortization
and accretion expense, non-cash property impairments, and adjusted
for significant non-cash and non-recurring items) for the three
months ended September 30, 2009 was $15.5 million compared to $18.6
million for the three months ended September 30, 2008, a decrease
of 17%. A reconciliation of adjusted EBITDA, a non-GAAP financial
measure, to net income (loss), the most directly comparable GAAP
financial measure, is provided within the financial tables of this
press release. Total segment margin for the three months ended
September 30, 2009 was $24.6 million compared to $33.9 million for
the three months ended September 30, 2008, a decrease of 27%. A
reconciliation of total segment margin, a non-GAAP financial
measure, to operating income (loss), the most directly comparable
GAAP financial measure, is provided within the financial tables of
this press release. The decreases in adjusted EBITDA and total
segment margin are primarily due to unfavorable gross processing
spreads, significantly lower average realized natural gas and NGL
prices, an overall decrease in natural gas sales volumes, offset by
an overall increase in NGL sales volumes. The decrease in total
segment margin was partially offset by gains on closed/settled
derivative transactions and unrealized non-cash gains on open
derivative transactions for the three months ended September 30,
2009 totaling $2.2 million compared to net losses of $1.4 million
on closed/settled derivative transactions and unrealized non-cash
losses on open derivative transactions for the three months ended
September 30, 2008, offset by an unrealized non-cash gain of $5.6
million related to a non-qualifying mark-to-market cash flow hedge
for forecasted sales in 2010. Hiland Partners, LP reported net
income (loss) for the nine months ended September 30, 2009 of
$(23.4) million compared to net income (loss) of $17.5 million for
the nine months ended September 30, 2008. Net income (loss) per
limited partners' unit-basic for the nine months ended September
30, 2009 was $(2.45) per unit compared to net income (loss) of
$1.17 per unit for the nine months ended September 30, 2008.
Weighted average limited partner units outstanding were 9.4 million
units for the nine months ended September 30, 2009 and 9.3 million
units for the nine months ended September 30, 2008. Net income
(loss) for the nine months ended September 30, 2009, excluding
non-cash property impairment charges of $21.5 million was $(2.0)
million or $(0.21) per limited partners' unit-basic. Adjusted
EBITDA for the nine months ended September 30, 2009 was $43.5
million compared to $53.2 million for the nine months ended
September 30, 2008, a decrease of 18%. Total segment margin for the
nine months ended September 30, 2009 was $68.8 million compared to
$84.1 million for the nine months ended September 30, 2008, a
decrease of 18%. The decreases in adjusted EBITDA and total segment
margin are primarily due to unfavorable gross processing spreads,
significantly lower average realized natural gas and NGL prices, an
overall decrease in natural gas sales volumes, offset by an overall
increase in NGL sales volumes, and additionally offset by
approximately $2.3 million of foregone margin as a result of the
nitrogen rejection plant at the Badlands gathering system being
taken out of service due to equipment failure during the three
months ended March 31, 2008. The decrease in adjusted EBITDA was
also partially offset by $3.2 million of net proceeds from the
early settlement of derivative assets. The decrease in total
segment margin was also partially offset by gains on closed/settled
derivative transactions and unrealized non-cash gains on open
derivative transactions for the nine months ended September 30,
2009 totaling $7.1 million compared to net losses of $6.4 million
on closed/settled derivative transactions and unrealized non-cash
losses on open derivative transactions for the nine months ended
September 30, 2008, offset by an unrealized non-cash gain of $3.6
million related to a non-qualifying mark-to-market cash flow hedge
for forecasted sales in 2010. The Partnership reported
distributable cash flow ("DCF") of $10.5 million for the three
months ended September 30, 2009, compared to $21.2 million for the
three months ended September 30, 2008, a decrease of 50%. The
decrease is primarily attributable to unfavorable gross processing
spreads, significantly lower average realized natural gas and NGL
prices, an overall decrease in volumes and $7.8 million of bad debt
expense reversed during the three months ended September 30, 2008
partially offset by lower cash interest expense and maintenance
capital expenditures. A reconciliation of DCF, a non-GAAP financial
measure, to net income, the most directly comparable GAAP financial
measure, is provided within the financial tables of this press
release. Hiland Partners, LP has suspended quarterly cash
distributions on common and subordinated units beginning with the
first quarter distribution of 2009 due to the impact of lower
commodity prices and reduced drilling activity on its current and
projected throughput volumes, midstream segment margins and cash
flows combined with future required levels of capital expenditures
and the outstanding indebtedness under Hiland Partners, LP's senior
secured revolving credit facility (the "credit facility"). Under
the terms of Hiland Partners, LP's partnership agreement, the
common units carry an arrearage of $1.35 per unit, representing the
minimum quarterly distribution to common units for the first three
quarters of 2009 that must be paid before the Partnership can make
distributions to the subordinated units. Hiland Partners' credit
facility requires the Partnership to meet certain financial tests,
including a maximum consolidated funded debt to EBITDA covenant
ratio. If commodity prices and inlet natural gas volumes do not
improve above the current forward prices and expected inlet natural
gas volumes for the fourth quarter of 2009, the Partnership could
be in violation of the maximum consolidated funded debt to EBITDA
covenant ratio as early as December 31, 2009, unless this ratio is
amended, the Partnership receives an infusion of equity capital,
the Partnership's debt is restructured or the Partnership is able
to monetize "in-the-money" hedge positions. Management is
continuing discussions with certain lenders under the credit
facility as to ways to address a potential covenant violation.
While no potential solution has been agreed to, the Partnership
expects that any solution will require the assessment of fees and
increased rates, the infusion of additional equity capital or the
incurrence of subordinated indebtedness by the Partnership and the
suspension of distributions for a certain period of time. There can
be no assurance that any such agreement will be reached with the
lenders, that any required equity or debt financing will be
available to the Partnership, or that the Partnership will have
sufficient "in-the-money" hedges to monetize to address the maximum
consolidated funded debt to EBITDA covenant ratio. As of September
30, 2009, Hiland Partners had $253.1 million outstanding under the
credit facility and was in compliance with its financial covenants.
Also at September 30, 2009, Hiland Partners' EBITDA to interest
expense ratio was 4.93 to 1.0 and the Partnership's consolidated
funded debt to EBITDA covenant ratio was 4.50 to 1.0. The maximum
consolidated funded debt to EBITDA covenant ratio under the credit
facility is 4.0 to 1.0 as of the last day of any fiscal quarter;
provided that in the event that the Partnership makes certain
permitted acquisitions or capital expenditures, this ratio may be
increased to 4.75 to 1.0 for the three fiscal quarters following
the quarter in which such permitted acquisition or capital
expenditure occurs. The Partnership met the permitted capital
expenditure requirements for the four quarter period ended March
31, 2009 and elected to increase the ratio to 4.75 to 1.0 on March
31, 2009 for the quarters ended March 31, 2009, June 30, 2009 and
September 30, 2009. The maximum consolidated funded debt to EBITDA
covenant ratio will revert back to 4.0 to 1.0 for the quarter ended
December 31, 2009. Hiland Holdings GP, LP Financial Results Hiland
Holdings GP, LP reported limited partners' interest in net income
(loss) for the three months ended September 30, 2009 of $(12.4)
million or $(0.57) per limited partners' unit-basic compared to
limited partners' interest in net income (loss) of $11.2 million or
$0.52 per limited partners' unit-basic for the three months ended
September 30, 2008. Weighted average limited partner units
outstanding were 21.6 million for the three months ended September
30, 2009 and September 30, 2008. Net income (loss) was $(20.5)
million in the three months ended September 30, 2009 compared to
net income (loss) of $18.0 million in the three months ended
September 30, 2008. For the nine months ended September 30, 2009,
Hiland Holdings GP, LP reported limited partners' interest in net
income (loss) of $(17.8) million or $(0.82) per limited partners'
unit-basic compared to limited partners' interest in net income
(loss) of $10.9 million or $0.51 per limited partners' unit-basic
for the nine months ended September 30, 2008. Weighted average
limited partner units outstanding were 21.6 million for the nine
months ended September 30, 2009 and September 30, 2008. Net income
(loss) was $(27.6) million in the nine months ended September 30,
2009 compared to net income (loss) of $15.3 million in the nine
months ended September 30, 2008. Hiland Holdings GP, LP has
suspended quarterly cash distributions on its common units
beginning with the first quarter of 2009 resulting from the
quarterly distribution suspension announced by Hiland Partners, LP.
Hiland Holdings' sole cash generating assets are its two percent
general partner interest, 2,321,471 common units and 3,060,000
subordinated units in Hiland Partners, LP, and the incentive
distribution rights in Hiland Partners, LP. As mentioned above,
under the terms of the Hiland Partners, LP partnership agreement,
the Hiland Partners, LP common units carry an arrearage of $1.35
per unit, representing the minimum quarterly distribution to the
Hiland Partners, LP common units for the first three quarters of
2009 that must be paid before Hiland Partners, LP can make
distributions to the Hiland Partners, LP subordinated units. Hiland
Holdings GP, LP owns 3,060,000 of the Hiland Partners, LP
subordinated units which will not receive a cash distribution until
the distribution arrearage to the Hiland Partners, LP common units
is paid. A number of the areas in which Hiland Partners, LP
operates have experienced significant declines in drilling activity
as a result of this year's decline in natural gas and crude oil
prices as compared to last year. Excluding its North Dakota Bakken
gathering system, which commenced operations in April 2009, the
Partnership connected 26 wells during the first nine months of 2009
as compared to 83 wells connected during the same period in 2008, a
69% decrease. At the North Dakota Bakken gathering system, Hiland
Partners connected 41 wells during the nine months ended September
30, 2009. As of today, there are two rigs drilling along Hiland
Partners, LP's dedicated acreage company wide, both of which are
located at our North Dakota Bakken gathering system. The
Partnership anticipates that the dedicated rig count will increase
during the remainder of 2009 and into 2010. While the Partnership
anticipates continued exploration and production activities in the
areas in which it operates, albeit at depressed levels,
fluctuations in energy prices can greatly affect production rates
and investments by third parties in the development of natural gas
and crude oil reserves. Drilling activity generally decreases as
natural gas and crude oil prices decrease. The Partnership has no
control over the level of drilling activity in the areas of its
operations. "We are extremely pleased that natural gas liquids
prices improved in the third quarter from levels in the first half
of 2009," said Joseph L. Griffin, Hiland's President and Chief
Executive Officer. "The improved natural gas liquids price and
fractionation spread environment helped mitigate the inlet natural
gas volume declines we experienced in the third quarter of 2009,
particularly in the Mid-Continent. Currently, I expect overall
declines in inlet natural gas volumes to continue as current
drilling activity in our Mid-Continent service territories remains
weak," added Griffin. Conference Call Information Hiland has
scheduled a conference call for 10:00 am Central Time, Friday,
November 6, 2009, to discuss the 2009 third quarter results. To
participate in the call, dial 1.888.396.2298 and participant
passcode 92002423, or access it live over the Internet at
http://www.hilandpartners.com/, on the "Investor Relations" section
of the Partnership's website. During this conference call, Hiland
management will only address the third quarter 2009 results and
will not address the Hiland Partners and Hiland Holdings mergers.
Use of Non-GAAP Financial Measures This press release and the
accompanying schedules include the non-generally accepted
accounting principles ("non-GAAP") financial measures of EBITDA,
adjusted EBITDA, total segment margin and distributable cash flow.
The accompanying schedules provide reconciliations of these
non-GAAP financial measures to their most directly comparable
financial measure calculated and presented in accordance with
accounting principles generally accepted in the United States of
America ("GAAP"). Our non-GAAP financial measures should not be
considered as alternatives to GAAP measures such as net income,
operating income or any other GAAP measure of liquidity or
financial performance. About the Hiland Companies Hiland Partners,
LP is a publicly traded midstream energy partnership engaged in
purchasing, gathering, compressing, dehydrating, treating,
processing and marketing of natural gas, and fractionating, or
separating, and marketing of natural gas liquids, or NGLs. Hiland
Partners, LP also provides air compression and water injection
services for use in oil and gas secondary recovery operations.
Hiland Partners, LP's operations are primarily located in the
Mid-Continent and Rocky Mountain regions of the United States.
Hiland Partners, LP's midstream assets consist of fifteen natural
gas gathering systems with approximately 2,160 miles of gathering
pipelines, six natural gas processing plants, seven natural gas
treating facilities and three NGL fractionation facilities. Hiland
Partners, LP's compression assets consist of two air compression
facilities and a water injection plant. Hiland Holdings GP, LP owns
the two percent general partner interest, 2,321,471 common units
and 3,060,000 subordinated units in Hiland Partners, LP, and the
incentive distribution rights of Hiland Partners, LP.
Forward-Looking Statements This press release includes certain
statements concerning expectations for the future that are
forward-looking statements. Such forward-looking statements are
subject to a variety of known and unknown risks, uncertainties, and
other factors that are difficult to predict and many of which are
beyond management's control. An extensive list of factors that can
affect future results are discussed in the Partnership's Annual
Report on Form 10-K and other documents filed from time to time
with the Securities and Exchange Commission. Any such forward
looking statements are made as of the date of this press release
and the Partnership undertakes no obligation to update or revise
any such forward-looking statements to reflect new information or
events. - tables to follow - Other Financial and Operating Data
Hiland Partners, LP - Results of Operations Set forth in the table
below is financial and operating data for Hiland Partners, LP.
Three Months Ended Nine Months Ended September 30, September 30,
------------------- --------------------- 2009 2008 2009 2008
------- -------- -------- -------- (unaudited, in (unaudited, in
thousands) thousands) Total Segment Margin Data: Midstream revenues
$53,641 $114,548 $153,658 $319,058 Midstream purchases 30,266
81,895 88,481 238,586 ------- -------- -------- -------- Midstream
segment margin 23,375 32,653 65,177 80,472 Compression revenues (A)
1,205 1,205 3,615 3,615 ------- -------- -------- -------- Total
segment margin (B) $24,580 $33,858 $68,792 $84,087 ========
======== ======== ======== Summary of Operations Data: Midstream
revenues $53,641 $114,548 $153,658 $319,058 Compression revenues
1,205 1,205 3,615 3,615 ------- -------- -------- -------- Total
revenues 54,846 115,753 157,273 322,673 Midstream purchases
(exclusive of items shown separately below) 30,266 81,895 88,481
238,856 Operations and maintenance 7,736 7,881 23,216 22,201
Depreciation, amortization and accretion 10,472 9,554 30,981 27,652
Property impairments 20,500 - 21,450 - Bad debt - (7,799) - 304
General and administrative 2,579 2,259 8,458 6,423 ------- --------
-------- -------- Total operating costs and expenses 71,553 93,790
172,586 295,166 ------- -------- -------- -------- Operating income
(loss) (16,707) 21,963 (15,313) 27,507 Other income (expense)
(2,841) (3,322) (8,096) (10,047) ------- -------- -------- --------
Net income (loss) $(19,548) $18,641 $(23,409) $17,460 ========
======== ======== ======== Maintenance capital expenditures $1,270
$1,737 $4,127 $4,681 Expansion capital expenditures 2,954 17,841
19,286 33,265 ------- -------- -------- -------- Total capital
expenditures $4,224 $19,578 $23,413 $37,946 ======== ========
======== ======== Operating Data: Inlet natural gas (Mcf/d) 257,950
261,345 268,937 245,098 Natural gas sales (MMBtu/d) 86,979 95,889
88,703 89,615 NGL sales (Bbls/d) 7,115 6,036 7,141 5,763 Average
realized natural gas sales price ($/MMBtu) $3.25 $7.57 $3.32 $8.00
Average realized NGL sales price ($/gallon) $0.76 $1.55 $0.67 $1.53
September 30, December 31, 2009 2008 ------------- ------------ (in
thousands) (unaudited) Balance Sheet Data (at period end): Property
and equipment, at cost, net $322,681 $345,855 Total assets $381,861
$426,139 Long-term debt, net of current maturities $256,934
$256,466 Total partners' equity $100,247 $133,156 (A) Compression
revenues and compression segment margin are the same. There are no
compression purchases associated with the compression segment. (B)
Reconciliation of total segment margin to operating income (loss):
Three Months Ended Nine Months Ended Sept. 30, Sept. 30,
------------------ ------------------- 2009 2008 2009 2008 -------
------- ------- ------- (unaudited, in (unaudited, in thousands)
thousands) Reconciliation of Total Segment Margin to Operating
Income (Loss) Operating income (loss) $(16,707) $21,963 $(15,313)
$27,507 Add: Operations and maintenance expenses 7,736 7,881 23,216
22,201 Depreciation, amortization and accretion 10,472 9,554 30,981
27,652 Property impairments 20,500 - 21,450 - Bad debt expense -
(7,799) - 304 General and administrative expenses 2,579 2,259 8,458
6,423 ------- ------- ------- ------- Total segment margin $24,580
$33,858 $68,792 $84,087 ======= ======= ======= ======= We view
total segment margin, a non-GAAP financial measure, as an important
performance measure of the core profitability of our operations
because it is directly related to our volumes and commodity price
changes. We review total segment margin monthly for consistency and
trend analysis. We define midstream segment margin as midstream
revenue less midstream purchases. Midstream purchases include the
following costs and expenses: cost of natural gas and NGLs
purchased by us from third parties, cost of natural gas and NGLs
purchased by us from affiliates, and the cost of crude oil
purchased by us from third parties. We define compression segment
margin as the revenue derived from our compression segment. Our
total segment margin may not be comparable to similarly titled
measures of other entities, as other entities may not calculate
total segment margin in the same manner we do. Reconciliation of
adjusted EBITDA to net income (loss): Three Months Ended Nine
Months Ended Sept. 30, Sept. 30, ------------------
------------------- 2009 2008 2009 2008 ------- ------- -------
------- (unaudited, in (unaudited, in thousands) thousands)
Reconciliation of adjusted EBITDA to Net Income (Loss) Net income
(loss) $(19,548) $18,641 $(23,409) $17,460 Add: Depreciation,
amortization and accretion 10,472 9,554 30,981 27,652 Property
impairments 20,500 - 21,450 - Amortization of deferred loan costs
149 147 448 426 Interest expense 2,702 3,271 7,739 9,888 -------
------- ------- ------- EBITDA $14,275 $31,613 $37,209 55,426 Add:
Non-cash unrealized loss (gain) on derivatives 252 (5,620) 131
(3,685) Non-cash unit-based compensation expense 236 396 837 1,159
Bad debt expense - (7,799) - 304 Proceeds from settlement of
derivative assets - - 3,155 - Going private transaction costs 748 -
2,126 - ------- ------- ------- ------- Adjusted EBITDA $15,511
$18,590 $43,458 $53,204 ======= ======= ======= ======= We define
EBITDA, a non-GAAP financial measure, as net income (loss) plus
interest expense, provisions for income taxes and depreciation,
amortization and accretion expense. EBITDA is used as a
supplemental financial measure by our management and by external
users of our financial statements such as investors, commercial
banks, research analysts and others to assess: (1) the financial
performance of our assets without regard to financial methods,
capital structure or historical cost basis; (2) the ability of our
assets to generate cash sufficient to pay interest costs and
support our indebtedness; (3) our operating performance and return
on capital as compared to those of other companies in the midstream
energy sector, without regard to financing or structure; and (4)
the viability of acquisitions and capital expenditure projects and
the overall rates of return on alternative investment
opportunities. EBITDA is also a financial measure that, with
certain negotiated adjustments, is reported to our banks and is
used as a gauge for compliance with our financial covenants under
our credit facility. EBITDA should not be considered as an
alternative to net income (loss), operating income, cash flows from
operating activities or any other measures of financial performance
presented in accordance with GAAP. Our EBITDA may not be comparable
to EBITDA of similarly titled measures of other entities, as other
entities may not calculate EBITDA in the same manner as we do. We
define adjusted EBITDA, a non-GAAP financial measure, as net income
(loss) plus interest expense, provisions for income taxes and
depreciation, amortization and accretion expense, non-cash property
impairments and adjusted for significant non-cash and non-recurring
items. Adjusted EBITDA is used as a supplemental financial measure
by our management and by external users of our financial statements
such as investors, commercial banks, research analysts and others
to assess: (1) the financial performance of our assets without
regard to financial methods, capital structure or historical cost
basis; (2) the ability of our assets to generate cash sufficient to
pay interest costs and support our indebtedness; (3) our operating
performance and return on capital as compared to those of other
companies in the midstream energy sector, without regard to
financing or structure; and (4) the viability of acquisitions and
capital expenditure projects and the overall rates of return on
alternative investment opportunities. Adjusted EBITDA is also a
financial measurement that, with certain negotiated adjustments, is
reported to our banks and is used as a gauge for compliance with
our financial covenants under our credit facility. Adjusted EBITDA
should not be considered as an alternative to net income (loss),
operating income, cash flows from operating activities or any other
measures of financial performance presented in accordance with
GAAP. Our adjusted EBITDA may not be comparable to adjusted EBITDA
of similarly titled measures of other entities, as other entities
may not calculate adjusted EBITDA in the same manner as we do.
Reconciliation of distributable cash flow to net income (loss):
Three Months Ended Nine Months Ended Sept. 30, Sept. 30,
-------------------- ------------------- 2009 2008 2009 2008
------- ------- ------- ------- (unaudited, in (unaudited, in
thousands) thousands) Reconciliation of Distributable Cash Flow to
Net Income (Loss) Net income (loss) $(19,548) $18,641 $(23,409)
$17,460 Add: Depreciation, amortization and accretion 10,472 9,554
30,981 27,652 Property impairments 20,500 - 21,450 - Amortization
of deferred loan costs 149 147 448 426 Interest expense 2,702 3,271
7,739 9,888 ------- ------- ------- ------- EBITDA $14,275 $31,613
$37,209 55,426 Add: Non-cash unrealized loss (gain) on derivatives
252 (5,620) 131 (3,685) Non-cash unit-based compensation expense
236 396 837 1,159 Bad debt expense - (7,799) - 304 Proceeds from
settlement of derivative assets - - 3,155 - Going private
transaction costs 748 - 2,126 - ------- ------- ------- -------
Adjusted EBITDA $15,511 $18,590 $43,458 $53,204 Less: Cash interest
expense 2,744 3,291 7,923 9,707 Maintenance capital expenditures
1,270 1,737 4,127 4,681 Payments on capital lease obligations 210
134 560 369 Bad debt expense - (7,799) - 304 Going private
transaction costs 748 - 2,126 - ------- ------- ------- -------
Distributable cash flow $10,539 $21,227 $28,722 $38,143 =======
======= ======= ======= We view distributable cash flow, a non-GAAP
financial measure, as an important performance measure used by
senior management to compare basic cash flows generated by the
Partnership (prior to the establishment of any retained cash
reserves by the Board of Directors) to the cash distributions
expected to be paid to unitholders. Using this metric, management
can compute the coverage ratio of estimated cash flows to planned
cash distributions. Distributable cash flow is also an important
non-GAAP financial measure for unitholders since it serves as an
indicator of the Partnership's success in providing a cash return
on investment. The financial measure indicates to investors whether
or not the Partnership is generating cash flow at a level that can
sustain or support an increase in quarterly distribution rates.
Distributable cash flow is also a quantitative standard used
throughout the investment community with respect to publicly-traded
master limited partnerships because the value of such an entity
generally is related to the amount of cash distributions the entity
can pay to its unitholders. The GAAP financial measure most
directly comparable to distributable cash flow is net income
(loss). Our distributable cash flow may not be comparable to
similarly titled measures of other entities, as other entities may
not calculate distributable cash flow in the same manner we do.
Other Financial and Operating Data Hiland Holdings GP, LP - Results
of Operations Set forth in the table below is financial and
operating data for Hiland Holdings GP, LP. Three Months Ended Nine
Months Ended Sept. 30, Sept. 30, --------------------
------------------ 2009 2008 2009 2008 -------- ------- --------
------- (unaudited, in (unaudited, in thousands) thousands) Total
Segment Margin Data: Midstream revenues $53,641 $114,548 $153,658
$319,058 Midstream purchases 30,266 81,895 88,481 238,586 --------
------- -------- ------- Midstream segment margin 23,375 32,653
65,177 80,472 Compression revenues (A) 1,205 1,205 3,615 3,615
-------- ------- -------- ------- Total segment margin (B) $24,580
$33,858 $68,792 $84,087 ======== ======= ======== ======= Summary
of Operations Data: Midstream revenues $53,641 $114,548 $153,658
$319,058 Compression revenues 1,205 1,205 3,615 3,615 --------
------- -------- ------- Total revenues 54,846 115,753 157,273
322,673 Midstream purchases (exclusive of items shown separately
below) 30,266 81,895 88,481 238,586 Operations and maintenance
7,736 7,881 23,216 22,201 Depreciation, amortization and accretion
10,758 9,842 31,841 28,513 Property impairments 20,500 - 21,450 -
Bad debt - (7,799) - 304 General and administrative 3,217 2,597
11,649 7,615 -------- ------- -------- ------- Total operating
costs and expenses 72,477 94,416 176,637 297,219 -------- -------
-------- ------- Operating income (loss) (17,631) 21,337 (19,364)
25,454 Other income (expense) (2,900) (3,349) (8,211) (10,132)
-------- ------- -------- ------- Net income (loss) (20,351) 17,988
(27,575) 15,322 Less: Noncontrolling partners' interest in income
(loss) of Hiland Partners (8,152) 6,800 (9,762) 4,402 --------
------- -------- ------- Limited partners' interest in net income
(loss) $(12,379) $11,188 $(17,813) $10,920 ======== =======
======== ======= Sept. 30, December 31, 2009 2008 ---------
------------ (in thousands) (unaudited) Balance Sheet Data (at
period end): Property and equipment, at cost, net $325,649 $349,159
Total assets $389,593 $435,560 Long-term debt, net of current
maturities $256,934 $256,466 Noncontrolling partners' interest in
Hiland Partners $112,692 $125,851 Total partners' equity $104,730
$141,348 (A) Compression revenues and compression segment margin
are the same. There are no compression purchases associated with
the compression segment. (B) Reconciliation of total segment margin
to operating income (loss): Three Months Ended Nine Months Ended
Sept. 30, Sept. 30, ------------------ ------------------ 2009 2008
2009 2008 ------- ------- ------- ------- (unaudited, in
(unaudited, in thousands) thousands) Reconciliation of Total
Segment Margin to Operating Income (Loss) Operating income (loss)
$(17,631) $21,337 $(19,364) $25,454 Add: Operations and maintenance
expenses 7,736 7,881 23,216 22,201 Depreciation, amortization and
accretion 10,758 9,842 31,841 28,513 Property impairments 20,500 -
21,450 - Bad debt expense - (7,799) - 304 General and
administrative expenses 3,217 2,597 11,649 7,615 ------- -------
------- ------- Total segment margin $24,580 $33,858 $68,792
$84,087 ======= ======= ======= ======= We view total segment
margin, a non-GAAP financial measure, as an important performance
measure of the core profitability of our operations because it is
directly related to our volumes and commodity price changes. We
review total segment margin monthly for consistency and trend
analysis. We define midstream segment margin as midstream revenue
less midstream purchases. Midstream purchases include the following
costs and expenses: cost of natural gas and NGLs purchased by us
from third parties, cost of natural gas and NGLs purchased by us
from affiliates, and cost of crude oil purchased by us from third
parties. We define compression segment margin as the revenue
derived from our compression segment. Our total segment margin may
not be comparable to similarly titled measures of other entities,
as other entities may not calculate total segment margin in the
same manner we do. DATASOURCE: Hiland Partners, LP; Hiland Holdings
GP, LP CONTACT: Derek Gipson, Director - Business Development and
Investor Relations of Hiland Partners, LP, +1-580-242-6040 Web
Site: http://www.hilandpartners.com/
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