American Midstream Partners, LP Press Release dated August 13, 2012




			
	



	  	Exhibit 10.1

 FOR IMMEDIATE RELEASE: 
 American Midstream Partners Reports 
 Financial Results for the Second
Quarter 2012 
 DENVER, CO – August 13, 2012 – American Midstream Partners, LP (NYSE: AMID) today
reported financial results for the three and six months ended June 30, 2012. Gross margin for the second quarter of 2012 was $12.7 million, an increase of $2.1 million, or approximately 20%, compared to $10.6 million in the prior year period.
For the six months ended June 30, 2012, gross margin was $26.8 million compared to $23.0 million in the prior year period, an increase of $3.8 million, or nearly 17%. The increase in gross margin for the three and six months ended June 30,
2012, was primarily due to the 50% non-operated interest in the Burns Point processing plant acquired in the fourth quarter of 2011, and higher revenues associated with reimbursable projects in the Transmission and Gathering and Processing segments.
The increase was partially offset by lower gross margin at processing plants owned by the Partnership due to lower realized NGL and natural gas prices and lower throughput volumes on several assets in the Gathering and Processing segment.

 Adjusted EBITDA for the three and six months ended June 30, 2012, was $4.4 million and $10.6 million, respectively,
compared to $4.6 million and $11.4 million for the same periods in 2011. The decrease in Adjusted EBITDA is primarily due to costs incurred to pursue strategic development initiatives and costs associated with being a publicly traded company.

 The Partnership reported net income for the three and six months ended June 30, 2012, of $2.3 million and $4.0 million,
respectively, compared to losses of $4.2 million and $7.7 million for the same periods in 2011. Net income includes non-cash gains and losses associated with the change in fair value of derivative instruments of $3.2 million and $3.5 million for the
three and six months ended June 30, 2012, respectively, and $2.6 and $(0.9) million for the same periods in 2011. 

Distributable cash flow (DCF) for the three and six months ended June 30, 2012, was $2.4 million and $6.8 million, respectively. DCF
for the three and six months ended June 30, 2012, represents distribution coverage of 61 percent and 85 percent, respectively. The second quarter 2012 distribution of $4.0 million, or $0.4325 per common unit and subordinated unit, will be paid
on August 14, 2012, to unitholders of record of August 7, 2012. 
 The Partnership’s acquisition of the 87.4%
interest in the Chatom processing and fractionation plant in Washington County, Alabama, closed on July 2, 2012, and accordingly, the Partnership’s financial results for the three and six months ended June 30, 2012, do not include
Chatom. 







 “We are pleased that our assets performed in line with our expectations in the first
half of 2012 during a volatile commodity price environment,” commented Brian Bierbach, President and Chief Executive Officer. “Although our cost structure was higher in the second quarter due to ongoing investments in business development
activities, regulatory requirements associated with being a first-year public company, and expenses related to the Chatom acquisition, we are positioning American Midstream to deliver long-term, sustainable distribution growth. We are executing our
growth plan by pursuing several avenues for long-term, sustainable growth, including M&A, organic growth, and development projects. We are excited about the recent addition of the Chatom processing and fractionation facility and have seen
significant interest as we market fractionation and NGL services to producers in the region.” 
 “Our focus on
development opportunities is beginning to yield results with our announcement today of a letter of intent to develop a gathering and processing system for a new producer customer in East Texas. In addition, we are actively pursuing several other
development projects in our gathering and processing segment that will establish new asset platforms in liquids-rich production plays. In our transmission segment, low natural gas prices are driving industrial markets to locate new facilities near
our assets and we are pursuing projects to expand our pipelines to serve these new markets. We hope to announce several of these development opportunities in the coming months. Looking ahead, our asset platform, coupled with the significant number
of opportunities we see in each area of our growth plan, put American Midstream in a good position to deliver strong returns for our unitholders.” 
 SEGMENT PERFORMANCE 
 Gathering and Processing – The Gathering
and Processing segment includes natural gas transportation and gathering, natural gas processing and treating, and selling or delivering natural gas and natural gas liquids (NGLs) to various markets and pipeline systems. 

Gross margin for the Gathering and Processing segment was $9.0 million and $18.5 million for the three and six months ended June 30,
2012, compared to $7.9 million and $16.2 million for the same periods in the prior year. The increase in gross margin was primarily due to the 50% non-operated interest in the Burns Point processing plant and higher revenues associated with
reimbursable projects, offset by lower realized NGL prices and lower throughput volumes primarily on the Quivira and Offshore Texas systems. 
 Natural gas throughput volumes increased to 344.0 million cubic feet per day (MMcf/d) and 355.6 MMcf/d for the three and six months ended June 30, 2012, respectively, compared to 231.3 MMcf/d
and 237.0 MMcf/d for the same periods in the prior year. Processed NGLs averaged 50.7 thousand gallons per day (Mgal/d) and 51.1 Mgal/d for the three and six months ended June 30, 2012, respectively, compared to 47.9 Mgal/d and 51.5 Mgal/d
for the same periods in 2011. The increase in throughput volumes and processed NGLs was primarily due to the 50% non-operated interest in the Burns Point processing plant, offset in part, by lower NGL production at the Bazor Ridge gathering and
processing facility. 
 Transmission – The Transmission segment transports and delivers natural gas from producing
wells, receipt points, or pipeline interconnects. Gross margin for the Transportation segment was $3.6 million and $8.4 million for the three and six months ended June 30, 2012, respectively, compared to $2.7 million and $6.8 million for the
same periods in 2011. This increase was primarily due to higher revenues from reimbursable projects. 







 Total natural gas throughput volumes averaged 407.8 MMcf/d and 400.6 MMcf/d for the three
and six months ended June 30, 2012, respectively, compared to 314.1 MMcf/d and 379.7 MMcf/d for the same periods in the prior year. The increase was primarily a result of higher demand on the Bamagas system and new production on a section of
the Midla system. 
 BALANCE SHEET 
 During the second quarter of 2012, the Partnership amended its senior secured revolving credit facility to increase the borrowing capacity from $100 million to $200 million. The material terms and
conditions of the senior secured revolving credit facility, including pricing, maturity, and covenants, remain unchanged. The credit facility matures in August 2016. 
 CAPITAL EXPENDITURES 
 Capital expenditures, including maintenance and
expansion capital expenditures, for the three and six months ended June 30, 2012, were approximately $1.4 million and $2.4 million, respectively. 
 Conference Call 
 American Midstream will host a conference call and webcast
to discuss its second quarter 2012 financial results on Tuesday, August 14, 2012, at 12:00 p.m. Eastern Time. The call may be accessed live at the investor relations section of the American Midstream website at www.AmericanMidstream.com. The
call may also be accessed by dialing 800-901-5217 for domestic users or 617-786-2964 for international users. The passcode for both phone numbers is 26419118. 
 A replay of the audio webcast will be available shortly after the call on American Midstream’s website. A telephonic replay will be available through September 15, 2012, by dialing 888-286-8010
for domestic users or 617-801-6888 for international users. The passcode for both phone numbers is 38875834. 
 Non-GAAP
Financial Measures 
 This press release, and the accompanying tables, includes financial measures in accordance with U.S.
generally accepted accounting principles, or GAAP, as well as non-GAAP financial measures, including “Adjusted EBITDA,” “gross margin” and “distributable cash flow.” The tables attached to this
press release include reconciliations of these non-GAAP financial measures to the nearest GAAP financial measures. In addition an “Explanation of Non-GAAP Financial Measures” is set forth in Appendix A attached to this press release.

 About American Midstream Partners 
 Denver-based American Midstream Partners is a growth-oriented limited partnership formed to own, operate, develop and acquire a diversified portfolio of natural gas midstream energy assets. The company
provides midstream services in the Gulf Coast and Southeast regions of the United States. For more information about American Midstream Partners, visit www.AmericanMidstream.com. 







 Forward Looking Statements 

This press release includes forward-looking statements. These statements relate to, among other things, projections of operational
volumetrics and improvements, growth projects, cash flows and capital expenditures. We have used the words “anticipate”, “believe”, “could”, “estimate”, “expect”, “intend”, “may”,
“plan”, “predict”, “project”, “should”, “will”, “potential” and similar terms and phrases to identify forward-looking statements in this press release. Although we believe the assumptions
upon which these forward-looking statements are based are reasonable, any of these assumptions could prove to be inaccurate and the forward-looking statements based on these assumptions could be incorrect. Our operations involve risks and
uncertainties, many of which are outside our control, and any one of which, or a combination of which, could materially affect our results of operations and whether the forward-looking statements ultimately prove to be correct. Actual results and
trends in the future may differ materially from those suggested or implied by the forward-looking statements depending on a variety of factors which are described in greater detail in our filings with the SEC. Please see our Risk Factor disclosures
included in Annual Report on Form 10-K for the year ended December 31, 2011 filed on March 19, 2012 and our Quarterly Report on Form 10-Q filed on August 13, 2012. All future written and oral forward-looking statements attributable to
us or persons acting on our behalf are expressly qualified in their entirety by the previous statements. We undertake no obligation to update any information contained herein or to publicly release the results of any revisions to any forward-looking
statements that may be made to reflect events or circumstances that occur, or that we become aware of, after the date of this press release. 







 American Midstream Partners, LP and Subsidiaries 

Condensed Consolidated Balance Sheets 
 (Unaudited)) 
  

									
	 	  	June 30,
2012	 	  	December 31,
2011	 
	 Assets
	  	 	(in thousands)	  
	 Current assets
	  				  			
	 Cash and cash equivalents
	  	$	1,038	  	  	$	871	  
	 Accounts receivable
	  	 	1,273	  	  	 	1,218	  
	 Unbilled revenue
	  	 	14,089	  	  	 	19,745	  
	 Risk management assets
	  	 	2,721	  	  	 	456	  
	 Funds held in escrow
	  	 	5,500	  	  	 	—  	  
	 Other current assets
	  	 	3,196	  	  	 	3,323	  
		  	  
	  
	 	  	  
	  
	 
	 Total current assets
	  	 	27,817	  	  	 	25,613	  
	 Property, plant and equipment, net
	  	 	161,525	  	  	 	170,231	  
	 Risk management assets - long term
	  	 	594	  	  	 	—  	  
	 Other assets, net
	  	 	4,448	  	  	 	3,707	  
		  	  
	  
	 	  	  
	  
	 
	 Total assets
	  	$	194,384	  	  	$	199,551	  
		  	  
	  
	 	  	  
	  
	 
			
	 Liabilities and Partners’ Capital
	  				  			
	 Current liabilities
	  				  			
	 Accounts payable
	  	$	743	  	  	$	837	  
	 Accrued gas purchases
	  	 	9,451	  	  	 	14,715	  
	 Risk management liabilities
	  	 	—  	  	  	 	635	  
	 Accrued expenses and other current liabilities
	  	 	5,317	  	  	 	7,086	  
		  	  
	  
	 	  	  
	  
	 
	 Total current liabilities
	  	 	15,511	  	  	 	23,273	  
	 Other liabilities
	  	 	8,490	  	  	 	8,612	  
	 Long-term debt
	  	 	72,260	  	  	 	66,270	  
		  	  
	  
	 	  	  
	  
	 
	 Total liabilities
	  	 	96,261	  	  	 	98,155	  
		  	  
	  
	 	  	  
	  
	 
	 Commitments and contingencies
	  				  			
	 Partners’ capital
	  				  			
	 General partner interest (185 and 185 thousand units issued and outstanding as of June 30, 2012 and December 31,
2011, respectively)
	  	 	1,360	  	  	 	1,091	  
	 Limited partner interest (9,108 and 9,087 thousand units issued and outstanding as of June 30, 2012 and December 31,
2011, respectively)
	  	 	96,331	  	  	 	99,890	  
	 Accumulated other comprehensive income
	  	 	432	  	  	 	415	  
		  	  
	  
	 	  	  
	  
	 
	 Total partners’ capital
	  	 	98,123	  	  	 	101,396	  
		  	  
	  
	 	  	  
	  
	 
	 Total liabilities and partners’ capital
	  	$	194,384	  	  	$	199,551	  
		  	  
	  
	 	  	  
	  
	 








 American Midstream Partners, LP and Subsidiaries 

Condensed Consolidated Statements of Operations 
 (Unaudited) 
  

																	
	 	  	Three Months Ended
June 30,	 	 	Six Months Ended
June 30,	 
	 	  	2012	 	 	2011	 	 	2012	 	 	2011	 
	 	  	(in thousands, except for per unit amounts)	 
	 Revenue
	  	$	42,889	  	 	$	66,030	  	 	$	90,278	  	 	$	133,369	  
	 Realized gain (loss) on early termination of commodity derivatives
	  	 	—  	  	 	 	(2,998	) 	 	 	—  	  	 	 	(2,998	) 
	 Unrealized gain (loss) on commodity derivatives
	  	 	3,171	  	 	 	2,602	  	 	 	3,494	  	 	 	(972	) 
		  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Total revenue
	  	 	46,060	  	 	 	65,634	  	 	 	93,772	  	 	 	129,399	  
		  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Operating expenses:
	  				 				 				 			
	 Purchases of natural gas, NGLs and condensate
	  	 	30,239	  	 	 	55,413	  	 	 	63,449	  	 	 	110,366	  
	 Direct operating expenses
	  	 	3,527	  	 	 	3,105	  	 	 	6,767	  	 	 	6,163	  
	 Selling, general and administrative expenses
	  	 	3,668	  	 	 	2,670	  	 	 	6,997	  	 	 	4,871	  
	 Transaction expenses
	  	 	—  	  	 	 	(7	) 	 	 	—  	  	 	 	281	  
	 Equity compensation expense
	  	 	467	  	 	 	2,184	  	 	 	798	  	 	 	2,658	  
	 Depreciation and accretion expense
	  	 	5,124	  	 	 	5,170	  	 	 	10,283	  	 	 	10,207	  
	 (Gain) loss on sale of assets, net
	  	 	(117	) 	 	 	—  	  	 	 	(122	) 	 	 	—  	  
		  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Total operating expenses
	  	 	42,908	  	 	 	68,535	  	 	 	88,172	  	 	 	134,546	  
		  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Operating income (loss)
	  	 	3,152	  	 	 	(2,901	) 	 	 	5,600	  	 	 	(5,147	) 
	 Other income (expenses):
	  				 				 				 			
	 Interest expense
	  	 	(825	) 	 	 	(1,281	) 	 	 	(1,582	) 	 	 	(2,545	) 
		  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Net income (loss)
	  	$	2,327	  	 	$	(4,182	) 	 	$	4,018	  	 	$	(7,692	) 
		  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 General partner’s interest in net income (loss)
	  	$	46	  	 	$	(84	) 	 	$	80	  	 	$	(154	) 
		  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Limited partners’ interest in net income (loss)
	  	$	2,281	  	 	$	(4,098	) 	 	$	3,938	  	 	$	(7,538	) 
		  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Limited partners’ net income (loss) per unit (basic)
	  	$	0.25	  	 	$	(0.74	) 	 	$	0.43	  	 	$	(1.36	) 
		  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Weighted average number of units used in computation of limited partners’ net income (loss) per unit (basic)
	  	 	9,107	  	 	 	5,525	  	 	 	9,100	  	 	 	5,546	  
		  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Limited partners’ net income (loss) per unit (diluted)
	  	$	0.25	  	 	$	(0.74	) 	 	$	0.43	  	 	$	(1.36	) 
		  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Weighted average number of units used in computation of limited partners’ net income (loss) per unit
(diluted)
	  	 	9,276	  	 	 	5,525	  	 	 	9,263	  	 	 	5,546	  
		  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 








 American Midstream Partners, LP and Subsidiaries 

Condensed Consolidated Statements of Cash Flows 
 (Unaudited) 
  

									
	 	  	Six Months Ended
June 30,	 
	 	  	2012	 	 	2011	 
	 	  	(in thousands)	 
	 Cash flows from operating activities
	  				 			
	 Net income (loss)
	  	$	4,018	  	 	$	(7,692	) 
	 Adjustments to reconcile net income (loss) to net cash provided (used) in operating activities:
	  				 			
	 Depreciation and accretion expense
	  	 	10,283	  	 	 	10,207	  
	 Amortization of deferred financing costs
	  	 	284	  	 	 	389	  
	 Unrealized (gain) loss on derivative contracts
	  	 	(3,494	) 	 	 	972	  
	 Unit based compensation
	  	 	798	  	 	 	905	  
	 OPEB plan net periodic (benefit) cost
	  	 	(41	) 	 	 	—  	  
	 (Gain) loss on sale of assets
	  	 	(122	) 	 	 	—  	  
	 Changes in operating assets and liabilities:
	  				 			
	 Accounts receivable
	  	 	(55	) 	 	 	(760	) 
	 Unbilled revenue
	  	 	5,656	  	 	 	847	  
	 Risk management assets
	  	 	—  	  	 	 	(670	) 
	 Other current assets
	  	 	1,013	  	 	 	(418	) 
	 Other assets, net
	  	 	(41	) 	 	 	19	  
	 Accounts payable
	  	 	(160	) 	 	 	(267	) 
	 Accrued gas purchases
	  	 	(5,264	) 	 	 	762	  
	 Accrued expenses and other current liabilities
	  	 	(1,769	) 	 	 	1,614	  
	 Other liabilities
	  	 	(135	) 	 	 	(138	) 
		  	  
	  
	 	 	  
	  
	 
	 Net cash provided (used) in operating activities
	  	 	10,971	  	 	 	5,770	  
		  	  
	  
	 	 	  
	  
	 
	 Cash flows from investing activities
	  				 			
	 Additions to property, plant and equipment
	  	 	(2,384	) 	 	 	(2,382	) 
	 Proceeds from disposals of property, plant and equipment
	  	 	122	  	 	 	—  	  
	 Funds held in escrow
	  	 	(5,500	) 	 	 	—  	  
		  	  
	  
	 	 	  
	  
	 
	 Net cash provided (used) in investing activities
	  	 	(7,762	) 	 	 	(2,382	) 
		  	  
	  
	 	 	  
	  
	 
	 Cash flows from financing activities
	  				 			
	 Unit holder contributions
	  	 	13	  	 	 	—  	  
	 Unit holder distributions
	  	 	(8,031	) 	 	 	(7,338	) 
	 LTIP tax netting unit repurchase
	  	 	(88	) 	 	 	—  	  
	 Payments on other loan
	  	 	—  	  	 	 	(381	) 
	 Deferred debt issuance costs
	  	 	(926	) 	 	 	—  	  
	 Payments on long-term debt
	  	 	(25,350	) 	 	 	(36,070	) 
	 Borrowings on long-term debt
	  	 	31,340	  	 	 	40,400	  
		  	  
	  
	 	 	  
	  
	 
	 Net cash provided (used) in financing activities
	  	 	(3,042	) 	 	 	(3,389	) 
		  	  
	  
	 	 	  
	  
	 
	 Net increase (decrease) in cash and cash equivalents
	  	 	167	  	 	 	(1	) 
	 Cash and cash equivalents
	  				 			
	 Beginning of period
	  	 	871	  	 	 	63	  
		  	  
	  
	 	 	  
	  
	 
	 End of period
	  	$	1,038	  	 	$	62	  
		  	  
	  
	 	 	  
	  
	 
			
	 Supplemental cash flow information
	  				 			
	 Interest payments
	  	$	1,043	  	 	$	2,327	  
		  	  
	  
	 	 	  
	  
	 
	 Supplemental non-cash information
	  				 			
	 Increase (decrease) in accrued property, plant and equipment
	  	$	66	  	 	$	474	  
		  	  
	  
	 	 	  
	  
	 
	 Receivable for reimbursable construction in progress projects
	  	$	610	  	 	 	—  	  
		  	  
	  
	 	 	  
	  
	 








 American Midstream Partners, LP and Subsidiaries 

Reconciliation of Net Income to Adjusted EBITDA 
  

																	
	 	  	Three Months Ended
June 
30,	 	 	Six Months Ended
June 
30,	 
	 	  	2012	 	 	2011	 	 	2012	 	 	2011	 
	 	  	(in thousands)	 
	 Reconciliation of Adjusted EBITDA to Net Income (Loss)
	  				 				 				 			
	 Net income
	  	$	2,327	  	 	$	(4,182	) 	 	$	4,018	  	 	$	(7,692	) 
	 Add:
	  				 				 				 			
	 Depreciation and accretion expense
	  	 	5,124	  	 	 	5,170	  	 	 	10,283	  	 	 	10,207	  
	 Interest expense
	  	 	825	  	 	 	1,281	  	 	 	1,582	  	 	 	2,545	  
	 Realized gain (loss) on early termination of commodity derivatives
	  	 	—  	  	 	 	2,998	  	 	 	—  	  	 	 	2,998	  
	 Unrealized (gain) loss on commodity derivatives
	  	 	(3,171	) 	 	 	(2,602	) 	 	 	(3,494	) 	 	 	972	  
	 Non-cash equity compensation expense
	  	 	467	  	 	 	570	  	 	 	798	  	 	 	905	  
	 Special distribution to holders of LTIP phantom units
	  	 	—  	  	 	 	1,624	  	 	 	—  	  	 	 	1,624	  
	 Transaction expenses
	  	 	—  	  	 	 	(7	) 	 	 	—  	  	 	 	281	  
	 Deduct:
	  				 				 				 			
	 COMA income
	  	 	955	  	 	 	157	  	 	 	2,161	  	 	 	252	  
	 Straight-line amortization of put costs (1)
	  	 	111	  	 	 	111	  	 	 	223	  	 	 	185	  
	 OPEB plan net periodic benefit (cost)
	  	 	20	  	 	 	—  	  	 	 	41	  	 	 	—  	  
	 Gain (loss) on sale of assets, net
	  	 	117	  	 	 	—  	  	 	 	122	  	 	 	—  	  
		  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 
	 Adjusted EBITDA
	  	$	4,369	  	 	$	4,584	  	 	$	10,640	  	 	$	11,403	  
		  	  
	  
	 	 	  
	  
	 	 	  
	  
	 	 	  
	  
	 

  

	(1)	Amounts noted represent the straight-line amortization of the cost of commodity put contracts over the life of the contract. 


Reconciliation of Adjusted EBITDA to Distributable Cash Flow 

 

																	
	 	  	Three Months Ended
June 
30,	 	  	Six Months Ended
June 
30,	 
	 	  	2012	 	  	2011	 	  	2012	 	  	2011	 
	 	  	(in thousands)	 
	 Reconciliation of Adjusted EBITDA to Distributable Cash Flow
	  	$	4,369	  	  	$	4,584	  	  	$	10,640	  	  	$	11,403	  
					
	 Deduct:
	  				  				  				  			
	 Cash interest expense (1)
	  	$	682	  	  	$	1,089	  	  	$	1,298	  	  	$	2,156	  
	 Normalized maintenance capital (2)
	  	 	875	  	  	 	750	  	  	 	1,750	  	  	 	1,500	  
	 Normalized integrity management (3)
	  	 	375	  	  	 	375	  	  	 	750	  	  	 	750	  
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 
	 Distributable Cash Flow
	  	$	2,437	  	  	$	2,370	  	  	$	6,842	  	  	$	6,997	  
		  	  
	  
	 	  	  
	  
	 	  	  
	  
	 	  	  
	  
	 

  

	(1)	Excludes amortization of debt issuance costs and mark-to-market adjustments related to interest rate derivatives. 


 

	(2)	Amounts noted represent estimated annual maintenance capital expenditures of $3.5 million which is what we expect to be required to maintain our assets over the long
term. 

  

	(3)	Amounts noted represent average estimated integrity management costs over the seven year mandatory testing cycle. 








 Segment Financial Information 

 

																									
	 	  	Three Months
Ended
June 30,	 
	 	  	2012	 	 	2011	 
	 	  	Gathering
and
Processing	 	  	Transmission	 	  	Total	 	 	Gathering
and
Processing	 	 	Transmission	 	  	Total	 
	 	  	(in thousands)	 
	 Revenue
	  	$	31,620	  	  	$	11,269	  	  	$	42,889	  	 	$	49,111	  	 	$	16,919	  	  	$	66,030	  
	 Segment gross margin (a)
	  	 	9,045	  	  	 	3,605	  	  	 	12,650	  	 	 	7,926	  	 	 	2,691	  	  	 	10,617	  
	 Realized gain (loss) on early termination of commodity derivatives (b)
	  	 	—  	  	  	 	—  	  	  	 	—  	  	 	 	(2,998	) 	 	 	—  	  	  	 	(2,998	) 
	 Unrealized gain (loss) on commodity derivatives (b)
	  	 	3,171	  	  	 	—  	  	  	 	3,171	  	 	 	2,602	  	 	 	—  	  	  	 	2,602	  
	 Direct operating expenses
	  	 	2,402	  	  	 	1,125	  	  	 	3,527	  	 	 	1,684	  	 	 	1,421	  	  	 	3,105	  
	 Selling, general and administrative expenses
	  				  				  	 	3,668	  	 				 				  	 	2,670	  
	 Transaction expenses
	  				  				  	 	—  	  	 				 				  	 	(7	) 
	 Equity compensation expense
	  				  				  	 	467	  	 				 				  	 	2,184	  
	 Depreciation and accretion expense
	  				  				  	 	5,124	  	 				 				  	 	5,170	  
	 (Gain) loss on sale of assets, net
	  				  				  	 	(117	) 	 				 				  	 	—  	  
	 Interest expense
	  				  				  	 	825	  	 				 				  	 	1,281	  
	 Net income (loss)
	  				  				  	$	2,327	  	 				 				  	$	(4,182	) 
		
	 	  	Six Months Ended
June
30,	 
	 	  	2012	 	 	2011	 
	 	  	Gathering
and
Processing	 	  	Transmission	 	  	Total	 	 	Gathering
and
Processing	 	 	Transmission	 	  	Total	 
	 	  	(in thousands)	 
	 Revenue
	  	$	65,871	  	  	$	24,407	  	  	$	90,278	  	 	$	97,269	  	 	$	36,100	  	  	$	133,369	  
	 Segment gross margin (a)
	  	 	18,463	  	  	 	8,366	  	  	 	26,829	  	 	 	16,167	  	 	 	6,836	  	  	 	23,003	  
	 Realized gain (loss) on early termination of commodity derivatives (b)
	  	 	—  	  	  	 	—  	  	  	 	—  	  	 	 	(2,998	) 	 	 	—  	  	  	 	(2,998	) 
	 Unrealized gain (loss) on commodity derivatives (b)
	  	 	3,494	  	  	 	—  	  	  	 	3,494	  	 	 	(972	) 	 	 	—  	  	  	 	(972	) 
	 Direct operating expenses
	  	 	4,559	  	  	 	2,208	  	  	 	6,767	  	 	 	3,633	  	 	 	2,530	  	  	 	6,163	  
	 Selling, general and administrative expenses
	  				  				  	 	6,997	  	 				 				  	 	4,871	  
	 Transaction expenses
	  				  				  	 	—  	  	 				 				  	 	281	  
	 Equity compensation expense
	  				  				  	 	798	  	 				 				  	 	2,658	  
	 Depreciation and accretion expense
	  				  				  	 	10,283	  	 				 				  	 	10,207	  
	 (Gain) loss on sale of assets, net
	  				  				  	 	(122	) 	 				 				  	 	—  	  
	 Interest expense
	  				  				  	 	1,582	  	 				 				  	 	2,545	  
	 Net income (loss)
	  				  				  	$	4,018	  	 				 				  	$	(7,692	) 

  

	(a)	Segment gross margin for our Gathering and Processing segment consists of total revenue less purchases of natural gas, NGLs and condensate. Segment gross margin for our
Transmission segment consists of total revenue less purchases of natural gas. Gross margin consists of the sum of the segment gross margin for each segment. As an indicator of our operating performance, gross margin should not be considered an
alternative to, or more meaningful than, net income or cash flow from operations as determined in accordance with GAAP. Our gross margin may not be comparable to a similarly titled measure of another company because other entities may not calculate
gross margin in the same manner. 

  

	(b)	Effective January 1, 2011, we changed our segment gross margin measure to exclude unrealized non cash mark-to-market adjustments related to our commodity
derivatives. For the three and six months ended June 30, 2011, $2.6 million and $(1.0) million, respectively, in unrealized gains (losses) were excluded from our Gathering and Processing segment gross margin. Effective April 1,
2011 we changed our segment gross margin measure to exclude realized gain (loss) on early termination of commodity derivatives. For the three and six months ended June 30, 2011, $(3.0) million in unrealized gains (losses) were excluded
from our Gathering and Processing segment gross margin. 








 Appendix A 
 Note About Non-GAAP Financial Measures 
 Adjusted EBITDA,
distributable cash flow, and gross margin are all non-GAAP financial measures. Each has important limitations as an analytical tool because it excludes some, but not all, items that affect the most directly comparable GAAP financial measures.
Management compensates for the limitations of these non-GAAP measures as analytical tools by reviewing the comparable GAAP measures, understanding the differences between the measures and incorporating these data points into management’s
decision-making process. 
 You should not consider any of Adjusted EBITDA, distributable cash flow, or gross margin in
isolation or as a substitute for analysis of our results as reported under GAAP. Because Adjusted EBITDA, distributable cash flow, and gross margin may be defined differently by other companies in our industry, our definitions of these non-GAAP
financial measures may not be comparable to similarly titled measures of other companies, thereby diminishing their utility. 

Adjusted EBITDA is a measure used by our management and by external users of our financial statements such as investors, commercial
banks, research analysts and others, to assess: 
  

	 	•	 	 the financial performance of our assets without regard to financing methods, capital structure or historical cost basis; 



 

	 	•	 	 the ability of our assets to generate cash sufficient to support our indebtedness and make cash distributions to our unitholders and general partner;



  

	 	•	 	 our operating performance and return on capital as compared to those of other companies in the midstream energy sector, without regard to financing or
capital structure; and 


  

	 	•	 	 the attractiveness of capital projects and acquisitions and the overall rates of return on alternative investment opportunities.



 We define adjusted EBITDA as net income, plus interest expense, income tax expense, depreciation expense,
certain non-cash charges such as non-cash equity compensation, unrealized losses on commodity derivative contracts and selected charges that are unusual or non-recurring, less interest income, income tax benefit, unrealized gains on commodity
derivative contracts, construction, operating and maintenance agreement (“COMA”) income, amortization of commodity put purchase costs and selected gains that are unusual or nonrecurring. The GAAP measure most directly comparable to
adjusted EBITDA is net income. 
 Distributable cash flow is a significant performance metric used by us and by external users
of our financial statements, such as investors, commercial banks and research analysts, to compare basic cash flows generated by us to the cash distributions we expect to pay our unitholders. Using this metric, management and external users of our
financial statements can quickly compute the coverage ratio of estimated cash flows to planned cash distributions. Distributable cash flow is also an important financial measure for our unitholders since it serves as an indicator of our success in
providing a cash return on investment. Specifically, this financial measure indicates to investors whether we are generating cash flow at a level that can sustain or support an increase in our quarterly distribution rates. Distributable cash flow is
also a quantitative standard used throughout the investment community with respect to publicly traded partnerships and limited liability companies because the value of a unit of such an entity is generally determined by the unit’s yield (which
in turn is based on the amount of cash distributions the entity pays to a unitholder). Distributable cash flow will not reflect changes in working capital balances. 







 We define distributable cash flow as adjusted EBITDA plus interest income, less cash paid
for interest expense, integrity management costs and maintenance capital expenditures. The GAAP measure most directly comparable to distributable cash flow is net cash flows from operating activities. 

Gross margin and segment gross margin are metrics that we use to evaluate our performance. We define segment gross margin in our
Gathering and Processing segment as revenue generated from gathering and processing operations less the cost of natural gas, NGLs and condensate purchased. Revenue includes revenue generated from fixed fees associated with the gathering and treating
of natural gas and from the sale of natural gas, NGLs and condensate resulting from gathering and processing activities under fixed-margin and percent-of-proceeds arrangements. The cost of natural gas, NGLs and condensate includes volumes of natural
gas, NGLs and condensate remitted back to producers pursuant to percent-of-proceeds arrangements and the cost of natural gas purchased for our own account, including pursuant to fixed-margin arrangements. 

We define segment gross margin in our Transmission segment as revenue generated from firm and interruptible transportation agreements and
fixed-margin arrangements, plus other related fees, less the cost of natural gas purchased in connection with fixed-margin arrangements. 
 We define gross margin as the sum of our segment gross margin for our Gathering and Processing and Transportation segments. 
 Effective January 1, 2011, we changed our gross margin and segment gross margin measure to exclude unrealized mark-to-market adjustments related to our commodity derivatives.