DCP Midstream Reports Fourth Quarter and Full Year Results and Announces 2019 Guidance

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DENVER, Feb. 11, 2019 (GLOBE NEWSWIRE) -- DCP Midstream, LP (NYSE: DCP), or DCP, today reported its financial results for the fourth quarter and year ended December 31, 2018, and announced its 2019 guidance.

(1)   This press release includes the following financial measures not presented in accordance with U.S. generally accepted accounting principles, or GAAP: adjusted EBITDA, distributable cash flow and adjusted segment EBITDA. Each such non-GAAP financial measure is defined below under “Non-GAAP Financial Information”, and each is reconciled to its most directly comparable GAAP financial measure under “Reconciliation of Non-GAAP Financial Measures” in schedules at the end of this press release.

“We delivered strong 2018 results, including exceeding our guidance for distributable cash flow, distribution coverage, and bank leverage, while successfully executing our long term capital allocation strategy,” said Wouter van Kempen, chairman, president, and CEO. “Our proactive approach to optimizing our operations and balancing our value chain continues to produce strong financial results, better service for our customers, and record industry safety performance. We are stepping into 2019 on solid ground with a balanced portfolio, focus on fiscal discipline, and growing cashflows.”

(1)   This press release includes the following financial measures not presented in accordance with U.S. generally accepted accounting principles, or GAAP: adjusted EBITDA, distributable cash flow, forecasted adjusted EBITDA and forecasted distributable cash flow. Each such non-GAAP financial measure is defined below under “Non-GAAP Financial Information”, and each is reconciled to its most directly comparable GAAP financial measure under “Reconciliation of Non-GAAP Financial Measures” in schedules at the end of this press release.

DCP estimates the following 2019 annualized commodity sensitivities, including the effects of hedging:

DCP's 2019 guidance expectations include the following assumptions:

On January 23, 2019, DCP announced a quarterly common unit distribution of $0.78 per limited partner unit. DCP generated distributable cash flow of $138 million and $684 million for the quarter and year ended December 31, 2018, respectively. Distributions declared were $154 million for the fourth quarter of 2018 and $618 million for the year ended December 31, 2018, resulting in a distribution coverage ratio of 0.90 and 1.11 times for the quarter and year ended December 31, 2018, respectively.

Logistics and Marketing Segment net income attributable to partners for the three months ended December 31, 2018 and 2017 was $152 million and $88 million, respectively.Adjusted segment EBITDA increased to $148 million for the three months ended December 31, 2018, from $114 million for the three months ended December 31, 2017, reflecting higher equity earnings and distributions driven by increasing volumes on Sand Hills and Southern Hills, and higher gas marketing margins associated with Guadalupe, partially offset by losses from realized cash settlements related to DCP's commodity derivative program and impacts of the Sand Hills third party line strike.

Gathering and Processing Segment net income attributable to partners for the three months ended December 31, 2018 and 2017 was $89 million and $132 million, respectively.

Adjusted segment EBITDA decreased to $170 million for the three months ended December 31, 2018, from $252 million for the three months ended December 31, 2017, reflecting increased operating costs associated with higher reliability and maintenance spending, lower distributions from Discovery, and lower Permian results including impacts of the Sand Hills third party line strike. These decreases were partially offset by DJ Basin growth and higher margins in the Midcontinent.

DCP has two credit facilities with up to $1.6 billion of total capacity.  Proceeds from these facilities can be used for working capital requirements and other general partnership purposes including growth and acquisitions.

On January 18, 2019, DCP issued $325 million of additional aggregate principal amount to our existing $500 million 5.375% Senior Notes due July 2025. The proceeds will be used for general partnership purposes including the funding of capital expenditures and repayment of outstanding indebtedness under the Credit Agreement.

As of December 31, 2018, DCP had $5,326 million of total consolidated principal debt outstanding, including $525 million of current maturities. The total debt outstanding includes $550 million of junior subordinated notes which are excluded from debt pursuant to DCP's Credit Agreement leverage ratio calculation.  For the year ended December 31, 2018, DCP's leverage ratio was approximately 3.8 times. The effective interest rate on DCP's overall debt position, as of December 31, 2018, was 5.2%.

In October, 2018, DCP issued 4,400,000 of 7.950% Series C Preferred Units, at a price of $25 per unit. DCP used the net proceeds of $106 million from this issuance for general partnership purposes, including funding capital expenditures and the repayment of outstanding indebtedness under the Credit Agreement.

During the three months and year ended December 31, 2018, DCP had expansion capital expenditures and equity investments totaling $226 million and $856 million, respectively, and maintenance capital expenditures totaling $30 million and $99 million, respectively.

DCP will host a conference call webcast tomorrow, February 12, at 11:00 a.m. ET, to discuss its fourth quarter and full year 2018 earnings and 2019 guidance. The live audio webcast of the conference call and presentation slides can be accessed through the Investors section on the DCP website at www.dcpmidstream.com and the conference call can be accessed by dialing (844) 233-0113 in the United States or (574) 990-1008 outside the United States. The conference confirmation number is 8359947. An audio webcast replay, presentation slides and transcript will also be available by accessing the Investors section on the DCP website at www.dcpmidstream.com.

This press release and the accompanying financial schedules include the following non-GAAP financial measures: adjusted EBITDA, distributable cash flow and adjusted segment EBITDA, forecasted adjusted EBITDA and forecasted distributable cash flow. The accompanying schedules provide reconciliations of these non-GAAP financial measures to their most directly comparable GAAP financial measures. DCP's non-GAAP financial measures should not be considered in isolation or as an alternative to its financial measures presented in accordance with GAAP, including operating revenues, net income or loss attributable to partners, net cash provided by or used in operating activities or any other measure of liquidity or financial performance presented in accordance with GAAP as a measure of operating performance, liquidity or ability to service debt obligations and make cash distributions to unitholders. The non-GAAP financial measures presented by DCP may not be comparable to similarly titled measures of other companies because they may not calculate their measures in the same manner.

DCP defines adjusted EBITDA as net income or loss attributable to partners adjusted for (i) distributions from unconsolidated affiliates, net of earnings, (ii) depreciation and amortization expense, (iii) net interest expense, (iv) noncontrolling interest in depreciation and income tax expense, (v) unrealized gains and losses from commodity derivatives, (vi) income tax expense or benefit, (vii) impairment expense and (viii) certain other non-cash items. Adjusted EBITDA further excludes items of income or loss that we characterize as unrepresentative of our ongoing operations.

The commodity derivative non-cash losses and gains result from the marking to market of certain financial derivatives used by us for risk management purposes that we do not account for under the hedge method of accounting. These non-cash losses or gains may or may not be realized in future periods when the derivative contracts are settled, due to fluctuating commodity prices.

Adjusted EBITDA is used as a supplemental liquidity and performance measure and adjusted segment EBITDA is used as a supplemental performance measure by DCP's management and by external users of its financial statements, such as investors, commercial banks, research analysts and others to assess:

DCP defines adjusted segment EBITDA for each segment as segment net income or loss attributable to partners adjusted for (i) distributions from unconsolidated affiliates, net of earnings, (ii) depreciation and amortization expense, (iii) net interest expense, (iv) noncontrolling interest in depreciation and income tax expense, (v) unrealized gains and losses from commodity derivatives, (vi) income tax expense or benefit, (vii) impairment expense and (viii) certain other non-cash items. Adjusted segment EBITDA further excludes items of income or loss that we characterize as unrepresentative of our ongoing operations for that segment.

DCP defines distributable cash flow as adjusted EBITDA less maintenance capital expenditures, net of reimbursable projects, interest expense, cumulative cash distributions earned by the Series A, Series B and Series C Preferred Units (collectively the "Preferred Limited Partnership Units") and certain other items.

Maintenance capital expenditures are cash expenditures made to maintain DCP's cash flows, operating capacity or earnings capacity. These expenditures add on to or improve capital assets owned, including certain system integrity, compliance and safety improvements. Maintenance capital expenditures also include certain well connects, and may include the acquisition or construction of new capital assets. Income attributable to preferred units represent cash distributions earned by the Preferred Limited Partnership Units.  Cash distributions to be paid to the holders of the Preferred Limited Partnership Units, assuming a distribution is declared by DCP's board of directors, are not available to common unit holders. Non-cash mark-to-market of derivative instruments is considered to be non-cash for the purpose of computing distributable cash flow because settlement will not occur until future periods, and will be impacted by future changes in commodity prices and interest rates. DCP compares the distributable cash flow it generates to the cash distributions it expects to pay to its partners. Using this metric, DCP computes its distribution coverage ratio. Distributable cash flow is used as a supplemental liquidity and performance measure by DCP's management and by external users of its financial statements, such as investors, commercial banks, research analysts and others, to assess DCP's ability to make cash distributions to its unitholders and its general partner.

DCP Midstream, LP (NYSE: DCP) is a Fortune 500 midstream master limited partnership headquartered in Denver, Colorado, with a diversified portfolio of gathering, processing, logistics and marketing assets. DCP is one of the largest natural gas liquids producers and marketers and one of the largest natural gas processors in the U.S. The owner of DCP’s general partner is a joint venture between Enbridge and Phillips 66. For more information, visit the DCP Midstream, LP website at www.dcpmidstream.com.

Investors or Analysts:

Irene Lofland, 303-605-1822

*** Represents cumulative cash distributions earned by the Series A, B and C Preferred Units, assuming distributions are declared by DCP's board of directors.

**  There were no IDR givebacks reflected in distributions declared for the three and twelve months ended December 31, 2018.

*** Distributions paid reflect the payment of $40 million of IDR givebacks previously withheld during the three months ended March 31, 2018.

*** Represents cumulative cash distributions earned by the Series A, B and C Preferred Units, assuming distributions are declared by DCP's board of directors.

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Globe Newswire: 21:15 GMT Monday 11th February 2019

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