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Analyzing ACMP's first quarter earnings and key growth drivers

Part 2
Analyzing ACMP's first quarter earnings and key growth drivers (Part 2 of 8)

Access Midstream Partners’ earnings analysis for Q1 2014

ACMP’s revenue report for 1Q14

Access Midstream Partners (ACMP) released its financial information for 1Q14 on April 29, 2014. The company recorded total revenues of $277.1 million for 1Q14, down 15.5% from $328.1 million revenues recorded in 4Q13. Operating expenses and depreciation & amortization expenses increased by 3.7% and 6.1%, respectively, during reported quarter over the quarter-ago period. Operating income decreased by more than 50% to $62.3 million during 1Q14 from $126.5 million recorded in the last quarter of 2013. Net income reduced by 68.0% to $41.4 million in 1Q14 compared to the quarter-ago figure of $130.8 million. Net income per common unit fell to $0.15 from $0.47 recorded in 4Q13.

Quarterly throughputEnlarge Graph

Throughput for the 2014 first quarter totaled 344.5 billion cubic feet of natural gas, or 3.83 billion cubic feet per day, an increase of 7.9% from 4Q13 throughput of 3.69 billion cubic feet per day. In 1Q14, throughput at the Barnett Shale decreased due to decrease in drilling activity. The company, however, expects to make up for the shortfall in revenues from lower throughput in the last quarter of 2014 as a result of contractual minimum volume commitment. The minimum volume commitment is measured annually and the associated revenue is recognized in the fourth quarter of each year.

Similarly, in the Haynesville Shale region, throughput decreased due to lower drilling activity by Chesapeake (CHK). Operating expense increased in 1Q14 primarily as a result of an increase in ad valorem taxes of due to higher capital expenditure at Barnett Shale region, higher compression and compensation costs, and higher operating cost at Utica shale region. Interest expense also increased by 15.5% due to interest expense on the 2024 Notes issued in March 2014, which increased ACMP’s interest burden.

Revenues in both periods exclude revenues attributable to ACMP’s equity investments in unconsolidated affiliates. If ACMP’s proportional share of revenue from equity investments was included, revenue for the 2014 first quarter would have totaled $356.0 million or an increase of 8.5% over 4Q13.

J. Mike Stice, Access Midstream Partners’ Chief Executive Officer, commented, “Our financial results in the first quarter once again exceeded expectations and reflect the continued strong execution of our organic growth plan. Our business model and commitment to execution continue to generate predictable financial results creating outstanding returns for our investors. The bolt on acquisition of compression assets completed during the first quarter provides additional opportunities for future growth and is just one example of the type of potential new growth opportunities within our current areas of operation. We continue to pursue a number of similar opportunities that would leverage our best-in-class business model and our expansive operating footprint to further enhance our already leading growth profile.”

DistributionsEnlarge Graph

On April 28, 2014, ACMP declared a cash distribution of $0.575 per common unit, or $2.30 per unit annualized, for 1Q14. This amounts to a distribution yield of 3.8% for the share price of $59.43, as on May 1, 2014. The distributable cash flow for 1Q14 was $179.4 million with distribution coverage ratio of 1.38x. In comparison, distributable cash flow for 4Q13 was $180.3 million. The first quarter cash distribution represents an increase of 23.0% compared to the 1Q13, and increase of 3.6% compared 4Q13.

Access Midstream Partners, L.P. (ACMP) is a master limited partnership operating in the midstream energy space. Williams Companies (WMB) and Global Infrastructure Partners jointly own ACMP’s general partnership. The majority of ACMP’s revenues come from Chesapeake Energy (CHK). ACMP is part of the Alerian MLP ETF (AMLP) and Chesapeake is part of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP).

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