Atlas Pipeline Partners (APL) announced 2Q12 results, reporting distributable cash flow of $32.8 million versus $29.9 million the prior year and $35.2 million in 2Q11. Recurring adjusted earnings before interest, taxes, depreciation and amortization (or EBITDA) totaled $49.0 million compared to $43.5 million the prior year and $51.1 million in 1Q12.
As previously announced, the partnership left its quarterly distribution per unit (DPU) at $0.56, unchanged from 1Q but up from $0.47 the prior year.
Processed volumes continue to increase; in 2Q, they increased 8% from 1Q to 682 million cubic feet per day (MMcf/d). All plants are currently running at capacity, with the exception of its most recent edition at Velma. It is running at two-thirds capacity or 40 MMcf/d. Furthermore, volumes bypassing its Western Oklahoma plant total 115 MMcf/d.
Capital expenditure for the year continues to be robust at $320 million to $350 million and not only includes the recently added Velma plant, the 200 MMcf plant in Western Oklahoma (3Q), but down payments on the 200 MMcf/day plant in West Texas due to come online in 1Q13. The incremental capacity should lead to distributable cash flow growth.
As of June 30, APL had a total of $709 million of long-term debt compared to the prior quarter of $609 million of debt. Debt to total capital was approximately 36%. The partnership is projected to invest approximately $320 million to $350 million in FY12 as it completes its previously announced capital projects and has incurred $175 million year to date. The partnership invested $81 million in growth projects during 2Q.
APL should be able to continue to invest in its business without accessing the capital markets through 2012, as the partnership has total liquidity of $270 million, including cash on hand and capacity on its revolving credit facility.
Paul Forward, CFA
Natural Resource Partners’ (NRP) coal royalty revenues of $62.9 million were in line with our estimate of $63.1 million and above 1Q12 coal royalties of $60.0 million. Royalty revenues per ton averaged $5.25/ton in 2Q12 versus our estimate of $5.06/ton and 1Q12’s average of $4.95/ton. NRP benefited from strong performance in Southern Appalachia, driven by Cliffs Natural Resources’ Oak Grove longwall mine, which posted its strongest quarterly output since 2Q03.
Revenues other than coal royalties of $27.8 million were well ahead of our $22.8 million estimate. The main difference was $3.8 million in revenues from the sale of a right of way to the West Virginia Department of Highways for highway construction; cash from this sale will be received in 3Q12. Aggregates production in 2Q12 was 1.4 million tons vs. our estimate of 1.4 million tons, and aggregates royalty revenues of $1.7 million were approximately in line with our estimate of $1.8 million.
During 2Q12, NRP invested $26.7 million in acquisitions of oil and gas reserves located in Oklahoma and funded the final payment of $0.5 million associated with remaining obligations on a previously announced acquisition.
NRP ended 2Q12 with $122.0 million cash on its balance sheet and $227 million available on its credit facility ($73 million outstanding). NRP will fund the final payment on its acquisition of coal reserves at the Hillsboro mine in the Illinois Basin for $40 million during 3Q12. The Hillsboro longwall, operated by the Cline Group, is expected to begin operation in August and should help increase NRP’s volumes in this region.
Following [Penn Virginia’s Aug. 1 earnings] release, we have revised our 2012 CFPS/EPS (cash flow per share/earnings per share) estimates from $3.87/($1.00) to $3.89/($0.75).