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This excerpt taken from the XTXI 10-Q filed May 8, 2009. Overview
Crosstex Energy, Inc. is a Delaware corporation formed on
April 28, 2000 to engage in the gathering, transmission,
treating, processing and marketing of natural gas and natural
gas liquids (NGLs) through its subsidiaries. On July 12,
2002, we formed Crosstex Energy, L.P., a Delaware limited
partnership, to acquire indirectly substantially all of the
assets, liabilities and operations of its predecessor, Crosstex
Energy Services, Ltd. Our assets consist almost exclusively of
partnership interests in Crosstex Energy, L.P., a publicly
traded limited partnership engaged in the gathering,
transmission, treating, processing and marketing of natural gas
and NGLs. These partnership interests consist of
(i) 16,414,830 common units, representing approximately
33.0% of the limited partner interests in Crosstex Energy, L.P.,
and (ii) 100% ownership interest in Crosstex Energy GP,
L.P., the general partner of Crosstex Energy, L.P., which owns a
2.0% general partner interest and all of the incentive
distribution rights in Crosstex Energy, L.P.
Since we control the general partner interest in the
Partnership, we reflect our ownership interest in the
Partnership on a consolidated basis, which means that our
financial results are combined with the Partnership’s
financial results and the results of our other subsidiaries. We
have no separate operating activities apart from those conducted
by the Partnership, and our cash flows consist almost
exclusively of distributions from the Partnership on the
partnership interests we own. Our consolidated results of
operations are derived from the results of operations of the
Partnership and also include our gains on the issuance of units
in the Partnership, deferred taxes, interest income (expense)
and general and administrative expenses not reflected in the
Partnership’s results of operation. Accordingly, the
discussion of our financial position and results of operations
in this “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” primarily
reflects the operating activities and results of operations of
the Partnership.
The Partnership has two industry segments, Midstream and
Treating, with a geographic focus in the north Texas Barnett
Shale area and in Louisiana. The Partnership’s Midstream
division focuses on the gathering, processing, transmission and
marketing of natural gas and natural gas liquids (NGLs), as well
as providing certain producer services, while the Treating
division focuses on the removal of contaminants from natural gas
and NGLs to meet pipeline quality specifications. For the three
months ended March 31, 2009, 82.7% of the
Partnership’s gross margin was generated in the Midstream
division, with the balance in the Treating division. The
Partnership focuses on gross margin to manage its operations
because its operations is generally to purchase and resell
natural gas for a margin, or to gather, process, transport,
market or treat natural gas and NGLs for a fee. The Partnership
buys and sells most of its natural gas at a fixed relationship
to the relevant index price so margins are not significantly
affected by changes in natural gas prices. In addition, the
Partnership receives certain fees for processing based on a
percentage of the liquids produced and enters into hedge
contracts for its expected share of liquids produced to protect
margins from changes in liquid prices.
The Partnership’s Midstream segment margins are determined
primarily by the volumes of natural gas gathered, transported,
purchased and sold through its pipeline systems, processed at
its processing facilities and the volumes of NGLs handled at its
fractionation facilities. Treating segment margins are largely a
function of the number and size of treating plants in operation
as well as fees earned for removing impurities at a non-operated
processing plant. The Partnership Midstream segment generates
revenues from five primary sources:
Table of Contents
With respect to the Partnership’s Midstream services, the
Partnership generally gathers or transports gas owned by others
through its facilities for a fee, or buys natural gas from a
producer, plant or shipper at either a fixed discount to a
market index or a percentage of the market index, then transport
and resell the natural gas. In purchase/sale transactions, the
resale price is generally based on the same index price at which
the gas was purchased, and, if the Partnership is to be
profitable, at a smaller discount or larger premium to the index
than was purchased. The Partnership attempts to execute all
purchases and sales substantially concurrently, or enters into a
future delivery obligation, thereby establishing the basis for
the margin the Partnership will receive for each natural gas
transaction. Gathering and transportation margins related to a
percentage of the index price can be adversely affected by
declines in the price of natural gas.
The Partnership also realizes gross margins in its Midstream
segment from processing services primarily through three
different contract arrangements: processing margins (margin),
percentage of liquids (POL) or fee based. Under a margin
contract arrangement the gross margins are higher during periods
of high liquid prices relative to natural gas prices. Gross
margin results under a POL contract are impacted only by the
value of the liquids produced. Under fee based contracts margins
are driven by throughput volume.
The Partnership generates treating revenues under three
arrangements:
Operating expenses are costs directly associated with the
operations of a particular asset. Among the most significant of
these costs are those associated with direct labor and
supervision and associated transportation and communication
costs, property insurance, ad valorem taxes, repair and
maintenance expenses, measurement and utilities. These costs are
normally fairly stable across broad volume ranges, and
therefore, do not normally decrease or increase significantly in
the short term with decreases or increases in the volume of gas
moved through the asset.
This excerpt taken from the XTXI 10-Q filed Nov 10, 2008. Overview
Crosstex Energy, Inc. is a Delaware corporation formed on
April 28, 2000 to engage in the gathering, transmission,
treating, processing and marketing of natural gas and natural
gas liquids (NGLs), through its subsidiaries. On July 12,
2002, we formed Crosstex Energy, L.P., a Delaware limited
partnership, to acquire indirectly substantially all of the
assets, liabilities and operations of its predecessor, Crosstex
Energy Services, Ltd. Our assets consist almost exclusively of
partnership interests in Crosstex Energy, L.P., a publicly
traded limited partnership engaged in the gathering,
transmission, treating, processing and marketing of natural gas
and NGLs. These partnership interests consist of
(i) 16,414,830 common units, representing approximately
35.0% of the limited partner interests in Crosstex Energy, L.P.,
and (ii) 100% ownership interest in Crosstex Energy GP,
L.P., the general partner of Crosstex Energy, L.P., which owns a
2.0% general partner interest and all of the incentive
distribution rights in Crosstex Energy, L.P.
Since we control the general partner interest in the
Partnership, we reflect our ownership interest in the
Partnership on a consolidated basis, which means that our
financial results are combined with the Partnership’s
financial results and the results of our other subsidiaries. The
interest owned by non-controlling partners’ share of income
is reflected as an expense in our results of operations. We have
no separate operating activities apart from those conducted by
the Partnership, and our cash flows consist almost exclusively
of distributions from the Partnership on the partnership
interests we own. Our consolidated results of operations are
derived from the results of operations of the Partnership and
also include our gains on the issuance of units in the
Partnership, deferred taxes, interest of non-controlling
partners in the Partnership’s net income, interest income
(expense) and general and administrative expenses not reflected
in the Partnership’s results of operation. Accordingly, the
discussion of our financial position and results of operations
in this “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” primarily
reflects the operating activities and results of operations of
the Partnership.
The Partnership has two industry segments, Midstream and
Treating, with a geographic focus along the Texas gulf coast, in
the north Texas Barnett Shale area and in Mississippi and
Louisiana. The Partnership’s Midstream division focuses on
the gathering, processing, transmission and marketing of natural
gas and NGLs, as well as providing certain producer services,
while the Treating division focuses on the removal of
contaminants from natural gas and NGLs to meet pipeline quality
specifications. For the nine months ended September 30,
2008, 89% of the Partnership’s gross margin was generated
in the Midstream division, with the balance in the Treating
division. The Partnership focuses on gross margin to manage its
operations because its business is generally to purchase and
resell natural gas for a margin, or to gather, process,
transport, market or treat natural gas or NGLs for a fee. The
Partnership buys and sells most of its natural gas at a fixed
relationship to the relevant index price so margins are not
significantly affected by changes in natural gas prices. In
addition, the Partnership receives certain fees for processing
based on a percentage of the liquids produced and enters into
hedge contracts for its expected share of liquids produced to
protect margins from changes in liquid prices. As explained
under “Commodity Price Risk” below, the Partnership
enters into financial instruments to reduce volatility in gross
margin due to price fluctuations.
The Partnership’s Midstream segment margins are determined
primarily by the volumes of natural gas gathered, transported,
purchased and sold through its pipeline systems, processed at
its processing facilities and the volumes of NGLs handled at its
fractionation facilities. Treating segment margins are largely a
function of the number and size of treating plants as well as
fees earned for removing impurities at a non-operated processing
plant. The Partnership generates revenues from five primary
sources:
Table of Contents
The bulk of the Partnership’s operating profits have
historically been derived from the margins it realizes for
gathering and transporting natural gas through its pipeline
systems. Generally, the Partnership buys gas from a producer,
plant, or transporter at either a fixed discount to a market
index or a percentage of the market index. The Partnership then
transports and resells the gas. The resale price is generally
based on the same index price at which the gas was purchased,
and, if the Partnership is to be profitable, at a smaller
discount or larger premium to the index than it was purchased.
The Partnership attempts to execute all purchases and sales
substantially concurrently, or it enters into a future delivery
obligation, thereby establishing the basis for the margin it
will receive for each natural gas transaction. The
Partnership’s gathering and transportation margins related
to a percentage of the index price can be adversely affected by
declines in the price of natural gas. See “Commodity Price
Risk” below for a discussion of how it manages its business
to reduce the impact of price volatility.
Processing revenues are generally based on either a percentage
of the liquids volume recovered, or a margin based on the value
of liquids recovered less the reduced energy value in the
remaining gas after the liquids are removed, or a fixed fee per
unit processed. Fractionation and marketing fees are generally a
fixed per unit of products.
The Partnership generates treating revenues under three
arrangements:
Operating expenses are costs directly associated with the
operations of a particular asset. Among the most significant of
these costs are those associated with direct labor and
supervision and associated transportation and communication
costs, property insurance, ad valorem taxes, repair and
maintenance expenses, measurement and utilities. These costs are
normally fairly stable across broad volume ranges, and therefore
do not normally decrease or increase significantly in the short
term with decreases or increases in the volume of gas moved
through the asset.
This excerpt taken from the XTXI 10-Q filed Aug 8, 2008. Overview
Crosstex Energy, Inc. is a Delaware corporation formed on
April 28, 2000 to engage in the gathering, transmission,
treating, processing and marketing of natural gas and NGLs
through its subsidiaries. On July 12, 2002, we formed
Crosstex Energy, L.P., a Delaware limited partnership, to
acquire indirectly substantially all of the assets, liabilities
and operations of its predecessor, Crosstex Energy Services,
Ltd. Our assets consist almost exclusively of partnership
interests in Crosstex Energy, L.P., a publicly traded limited
partnership engaged in the gathering, transmission, treating,
processing and marketing of natural gas and NGLs. These
partnership interests consist of (i) 16,414,830 common
units, representing approximately 33.7% of the limited partner
interests in Crosstex Energy, L.P., and (ii) 100% ownership
interest in Crosstex Energy GP, L.P., the general partner of
Crosstex Energy, L.P., which owns a 2.0% general partner
interest and all of the incentive distribution rights in
Crosstex Energy, L.P.
Since we control the general partner interest in the
Partnership, we reflect our ownership interest in the
Partnership on a consolidated basis, which means that our
financial results are combined with the Partnership’s
financial results and the results of our other subsidiaries. The
interest owned by non-controlling partners’ share of income
is reflected as an expense in our results of operations. We have
no separate operating activities apart from those conducted by
the Partnership, and our cash flows consist almost exclusively
of distributions from the Partnership on the partnership
interests we own. Our consolidated results of operations are
derived from the results of operations of the Partnership and
also include our gains on the issuance of units in the
Partnership, deferred taxes, interest of non-controlling
partners in the Partnership’s net income, interest income
(expense) and general and administrative expenses not reflected
in the Partnership’s results of operation. Accordingly, the
discussion of our financial position and results of operations
in this “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” primarily
reflects the operating activities and results of operations of
the Partnership.
The Partnership has two industry segments, Midstream and
Treating, with a geographic focus along the Texas gulf coast, in
the north Texas Barnett Shale area and in Mississippi and
Louisiana. The Partnership’s Midstream division focuses on
the gathering, processing, transmission and marketing of natural
gas and natural gas liquids (NGLs), as well as providing certain
producer services, while the Treating division focuses on the
removal of contaminants from natural gas and NGLs to meet
pipeline quality specifications. For the six months ended
June 30, 2008, 87% of the Partnership’s gross margin
was generated in the Midstream division, with the balance in the
Treating division. The Partnership focuses on gross margin to
manage its business because its business is generally to
purchase and resell natural gas for a margin, or to gather,
process, transport, market or treat natural gas or NGLs for a
fee. The Partnership buys and sells most of its natural gas at a
fixed relationship to the relevant index price so margins are
not significantly affected by changes in natural gas prices. In
addition, the Partnership receives certain fees for processing
based on a percentage of the liquids produced and enters into
hedge contracts for its expected share of liquids produced to
protect margins from changes in liquid prices. As explained
under “Commodity Price Risk” below, the Partnership
enters into financial instruments to reduce volatility in gross
margin due to price fluctuations.
The Partnership’s Midstream segment margins are determined
primarily by the volumes of natural gas gathered, transported,
purchased and sold through its pipeline systems, processed at
its processing facilities and the volumes of NGLs handled at its
fractionation facilities. Treating segment margins are largely a
function of the number and size of treating plants as well as
fees earned for removing impurities at a non-operated processing
plant. The Partnership generates revenues from five primary
sources:
The bulk of the Partnership’s operating profits have
historically been derived from the margins it realizes for
gathering and transporting natural gas through its pipeline
systems. Generally, the Partnership buys gas from a producer,
plant, or transporter at either a fixed discount to a market
index or a percentage of the market index. The Partnership then
transports and resells the gas. The resale price is generally
based on the same index price at which the gas was purchased,
and, if the Partnership is to be profitable, at a smaller
discount or larger premium to the index than it was purchased.
The Partnership attempts to execute all purchases and sales
substantially concurrently, or it enters into a future delivery
obligation, thereby establishing the basis for the margin it
will receive for each natural gas transaction. The
Partnership’s gathering and transportation margins related
to a percentage of the index price can be adversely affected by
declines in the price of natural gas. See “Commodity Price
Risk” below for a discussion of how it manages its business
to reduce the impact of price volatility.
Processing revenues are generally based on either a percentage
of the liquids volume recovered, or a margin based on the value
of liquids recovered less the reduced energy value in the
remaining gas after the liquids are removed, or a fixed fee per
unit processed. Fractionation and marketing fees are generally a
fixed fee per unit of products.
The Partnership generates treating revenues under three
arrangements:
Operating expenses are costs directly associated with the
operations of a particular asset. Among the most significant of
these costs are those associated with direct labor and
supervision and associated transportation and communication
costs, property insurance, ad valorem taxes, repair and
maintenance expenses, measurement and utilities. These costs are
normally fairly stable across broad volume ranges, and therefore
do not normally decrease or increase significantly in the short
term with decreases or increases in the volume of gas moved
through the asset.
This excerpt taken from the XTXI 10-Q filed May 9, 2008. Overview
Crosstex Energy, Inc. is a Delaware corporation formed on
April 28, 2000 to engage in the gathering, transmission,
treating, processing and marketing of natural gas and NGLs
through its subsidiaries. On July 12, 2002, we formed
Crosstex Energy, L.P., a Delaware limited partnership, to
acquire indirectly substantially all of the assets, liabilities
and operations of its predecessor, Crosstex Energy Services,
Ltd. Our assets consist almost exclusively of partnership
interests in Crosstex Energy, L.P., a publicly traded limited
partnership engaged in the gathering, transmission, treating,
processing and marketing of natural gas and NGLs. These
partnership interests consist of (i) 16,414,830 common
units, representing approximately 36% of the limited partner
interests in Crosstex Energy, L.P., and (ii) 100% ownership
interest in Crosstex Energy GP, L.P., the general partner of
Crosstex Energy, L.P., which owns a 2.0% general partner
interest and all of the incentive distribution rights in
Crosstex Energy, L.P.
Since we control the general partner interest in the
Partnership, we reflect our ownership interest in the
Partnership on a consolidated basis, which means that our
financial results are combined with the Partnership’s
financial results and the results of our other subsidiaries. The
interest owned by non-controlling partners’ share of income
is reflected as an expense in our results of operations. We have
no separate operating activities apart from those conducted by
the Partnership, and our cash flows consist almost exclusively
of distributions from the Partnership on the partnership
interests we own. Our consolidated results of operations are
derived from the results of operations of the Partnership and
also include our gains on the issuance of units in the
Partnership, deferred taxes, interest of non-controlling
partners in the Partnership’s net income, interest income
(expense) and general and administrative expenses not reflected
in the Partnership’s results of operation. Accordingly, the
discussion of our financial position and results of operations
in this “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” primarily
reflects the operating activities and results of operations of
the Partnership.
The Partnership has two industry segments, Midstream and
Treating, with a geographic focus along the Texas gulf coast, in
the north Texas Barnett Shale area and in Mississippi and
Louisiana. The Partnership’s Midstream division focuses on
the gathering, processing, transmission and marketing of natural
gas and natural gas liquids (NGLs), as well as providing certain
producer services, while the Treating division focuses on the
removal of contaminants from natural gas and NGLs to meet
pipeline quality specifications. For the three months ended
March 31, 2008, 87% of the Partnership’s gross margin
was generated in the Midstream division, with the balance in the
Treating division. The Partnership focuses on gross margin to
manage its business because its business is generally to
purchase and resell natural gas for a margin, or to gather,
process, transport, market or treat natural gas or NGLs for a
fee. The Partnership buys and sells most of its natural gas at a
fixed relationship to the relevant index price so margins are
not significantly affected by changes in natural gas prices. In
addition, the Partnership receives certain fees for processing
based on a percentage of the liquids produced and enters into
hedge contracts for its expected share of liquids produced to
protect margins from changes in liquid prices. As explained
under “Commodity Price Risk” below, it enters into
financial instruments to reduce volatility in gross margin due
to price fluctuations.
The Partnership’s Midstream segment margins are determined
primarily by the volumes of natural gas gathered, transported,
purchased and sold through its pipeline systems, processed at
its processing facilities and the volumes of NGLs handled at its
fractionation facilities. Treating segment margins are largely a
function of the number and size of treating plants in operation
as well as fees earned for removing impurities at a non-operated
processing plant. The Partnership generates revenues from five
primary sources:
The bulk of the Partnership’s operating profits have
historically been derived from the margins it realizes for
gathering and transporting natural gas through its pipeline
systems. Generally, the Partnership buys gas from a producer,
plant, or transporter at either a fixed discount to a market
index or a percentage of the market index. The Partnership then
transports and resells the gas. The resale price is generally
based on the same index price at which the gas was purchased,
and, if the Partnership is to be profitable, at a smaller
discount or larger premium to the index than it was purchased.
The Partnership attempts to execute all purchases and sales
substantially concurrently, or it enters into a future delivery
obligation, thereby establishing the basis for the margin it
will receive for each natural gas transaction. The
Partnership’s gathering and transportation margins related
to a percentage of the index price can be adversely affected by
declines in the price of natural gas. See “Commodity Price
Risk” below for a discussion of how it manages its business
to reduce the impact of price volatility.
Processing revenues are generally based on either a percentage
of the liquids volume recovered, or a margin based on the value
of liquids recovered less the reduced energy value in the
remaining gas after the liquids are removed, or a fixed fee per
unit processed. Fractionation and marketing fees are generally
fixed per unit of product.
The Partnership generates treating revenues under three
arrangements:
Operating expenses are costs directly associated with the
operations of a particular asset. Among the most significant of
these costs are those associated with direct labor and
supervision and associated transportation and communication
costs, property insurance, ad valorem taxes, repair and
maintenance expenses, measurement and utilities. These costs are
normally fairly stable across broad volume ranges, and
therefore, do not normally decrease or increase significantly in
the short term with decreases or increases in the volume of gas
moved through the asset.
This excerpt taken from the XTXI 10-K filed Feb 29, 2008. Overview
Crosstex Energy, Inc. is a Delaware corporation formed on
April 28, 2000 to engage in the gathering, transmission,
treating, processing and marketing of natural gas and NGLs
through its subsidiaries. On July 12, 2002, we formed
Crosstex Energy, L.P., a Delaware limited partnership, to
acquire indirectly substantially all of the assets, liabilities
and operations of its predecessor, Crosstex Energy Services,
Ltd. Our assets consist almost exclusively of partnership
interests in Crosstex Energy, L.P., a publicly traded limited
partnership engaged in the gathering, transmission, treating,
processing and marketing of natural gas and NGLs. These
partnership interests consist of (i) 16,414,830 common
units, representing approximately 36% of the limited partner
interests in Crosstex Energy, L.P., and (ii) 100% ownership
interest in Crosstex Energy GP, L.P., the general partner of
Crosstex Energy, L.P., which owns a 2.0% general partner
interest and all of the incentive distribution rights in
Crosstex Energy, L.P.
31
Table of Contents
Our cash flows consist almost exclusively of distributions from
the Partnership on the partnership interests we own. The
Partnership is required by its partnership agreement to
distribute all its cash on hand at the end of each quarter, less
reserves established by its general partner in its sole
discretion to provide for the proper conduct of the
Partnership’s business or to provide for future
distributions.
The incentive distribution rights entitle us to receive an
increasing percentage of cash distributed by the Partnership as
certain target distribution levels are reached. Specifically,
they entitle us to receive 13.0% of all cash distributed in a
quarter after each unit has received $0.25 for that quarter,
23.0% of all cash distributed after each unit has received
$0.3125 for that quarter, and 48.0% of all cash distributed
after each unit has received $0.375 for that quarter.
Distributions by the Partnership have increased from $0.25 per
unit for the quarter ended March 31, 2003 (its first full
quarter of operation after its initial public offering) to $0.61
per unit for the quarter ended December 31, 2007. As a
result, our distributions from the Partnership pursuant to our
ownership of common units and subordinated units (excluding
senior subordinated series C units) have increased from
$2.5 million for the quarter ended March 31, 2003 to
$6.1 million for the quarter ended December 31, 2007;
our distributions pursuant to our 2% general partner interest
have increased from $74,000 to $0.5 million; and our
distributions pursuant to our incentive distribution rights have
increased from zero to $7.3 million. The senior
subordinated series C units were not entitled to receive
distributions until they converted to common units in February
2008. As a result, we have increased our dividend from $0.10 per
share for the quarter ended March 31, 2004 (giving effect
to the three-for-one stock split on December 15,
2006) to $0.26 per share for the quarter ended
December 31, 2007.
Since we control the general partner interest in the
Partnership, we reflect our ownership interest in the
Partnership on a consolidated basis, which means that our
financial results are combined with the Partnership’s
financial results and the results of our other subsidiaries. The
interest owned by non-controlling partners’ share of income
is reflected as an expense in our results of operations. We have
no separate operating activities apart from those conducted by
the Partnership, and our cash flows consist almost exclusively
of distributions from the Partnership on the partnership
interests we own. Our consolidated results of operations are
derived from the results of operations of the Partnership and
also include our gains on the issuance of units in the
Partnership, deferred taxes, interest of non-controlling
partners in the Partnership’s net income, interest income
(expense) and general and administrative expenses not reflected
in the Partnership’s results of operation. Accordingly, the
discussion of our financial position and results of operations
in this “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” primarily
reflects the operating activities and results of operations of
the Partnership.
The Partnership has two industry segments, Midstream and
Treating, with a geographic focus in north Texas, in south
Texas, in Louisiana and in Mississippi. The Partnership’s
Midstream division focuses on the gathering, processing,
transmission and marketing of natural gas and NGLs, as well as
providing certain producer services, while the Treating division
focuses on the removal of contaminants from natural gas and NGLs
to meet pipeline quality specifications. For the year ended
December 31, 2007, 85% of the Partnership’s gross
margin was generated in the Midstream division, with the balance
in the Treating division. The Partnership focuses on gross
margin to manage its business because its business is generally
to purchase and resell natural gas for a margin, or to gather,
process, transport, market or treat natural gas or NGLs for a
fee. The Partnership buys and sells most of its natural gas at a
fixed relationship to the relevant index price so margins are
not significantly affected by changes in natural gas prices. As
explained under “Commodity Price Risk” below, it
enters into financial instruments to reduce volatility in gross
margin due to price fluctuations.
During the past five years, the Partnership has grown
significantly as a result of construction and acquisition of
gathering and transmission pipelines and treating and processing
plants. From January 1, 2003 through December 31,
2007, it has invested over $2.1 billion to develop or
acquire new assets. The purchased assets were acquired from
numerous sellers at different periods and were accounted for
under the purchase method of accounting. Accordingly, the
results of operations for such acquisitions are included in our
financial statements only from the applicable date of the
acquisition. As a consequence, the historical results of
operations for the periods presented may not be comparable.
The Partnership’s Midstream segment margins are determined
primarily by the volumes of natural gas gathered, transported,
purchased and sold through its pipeline systems, processed at
its processing facilities and the
Table of Contents
volumes of NGLs handled at its fractionation facilities.
Treating segment margins are largely a function of the number
and size of treating plants as well as fees earned for removing
impurities from NGLs at a non-operated processing plant. The
Partnership generates revenues from six primary sources:
The bulk of the Partnership’s operating profits has
historically derived from the margins it realizes for gathering
and transporting natural gas and NGLs through its pipeline
systems. Generally, the Partnership gathers and transports gas
owned by others through its facilities for a fee, or it buys gas
from a producer, plant, or transporter at either a fixed
discount to a market index or a percentage of the market index,
then transports and resells the gas. In the Partnership’s
purchase/sale transactions, the resale price is generally based
on the same index price at which the gas was purchased, and, if
the Partnership is to be profitable, at a smaller discount or
larger premium to the index than it was purchased. The
Partnership attempts to execute all purchases and sales
substantially concurrently, or it enters into a future delivery
obligation, thereby establishing the basis for the margin it
will receive for each natural gas transaction. The
Partnership’s gathering and transportation margins related
to a percentage of the index price can be adversely affected by
declines in the price of natural gas. See “Commodity Price
Risk” below for a discussion of how it manages its business
to reduce the impact of price volatility.
Processing and fractionation revenues are largely fee based.
Processing fees are largely based on either a percentage of the
liquids volume recovered, or a fixed fee per unit processed.
Fractionation and marketing fees are generally fixed per unit of
product.
The Partnership generates treating revenues under three
arrangements:
Operating expenses are costs directly associated with the
operations of a particular asset. Among the most significant of
these costs are those associated with direct labor and
supervision and associated transportation and communication
costs, property insurance, ad valorem taxes, repair and
maintenance expenses, measurement and utilities. These costs are
normally fairly stable across broad volume ranges, and
therefore, do not normally decrease or increase significantly in
the short term with decreases or increases in the volume of gas
moved through the asset.
This excerpt taken from the XTXI 10-Q filed Nov 8, 2007. Overview
Crosstex Energy, Inc. is a Delaware corporation formed on
April 28, 2000 to engage in the gathering, transmission,
treating, processing and marketing of natural gas and natural
gas liquids (NGLs) through its subsidiaries. On July 12,
2002, we formed Crosstex Energy, L.P., a Delaware limited
partnership (the Partnership), to acquire indirectly
substantially all of the assets, liabilities and operations of
its predecessor, Crosstex Energy Services, Ltd. Our assets
consist almost exclusively of partnership interests in the
Partnership, a publicly traded limited partnership engaged in
the gathering, transmission, treating, processing and marketing
of natural gas and NGLs. These partnership interests consist of
(i) 5,332,000 common units, 4,668,000 subordinated units
and 6,414,830 senior subordinated series C units,
representing approximately 38% of the limited partner interests
in the Partnership, and (ii) 100% ownership interest in
Crosstex Energy GP, L.P., the general partner of the
Partnership, which owns a 2.0% general partner interest and all
of the incentive distribution rights in the Partnership.
Since we control the general partner interest in the
Partnership, we reflect our ownership interest in the
Partnership on a consolidated basis, which means that our
financial results are combined with the Partnership’s
financial results and the results of our other subsidiaries. The
interest owned by non-controlling partners’ share of income
is reflected as an expense in our results of operations. We have
no separate operating activities apart from those conducted by
the Partnership, and our cash flows consist almost exclusively
of distributions from the Partnership on the partnership
interests we own. Our consolidated results of operations are
derived from the results of operations of the Partnership and
also include our gains on the issuance of units in the
Partnership, deferred taxes, interest of non-controlling
partners in the Partnership’s net income, interest income
(expense) and general and administrative expenses not reflected
in the Partnership’s results of operation. Accordingly, the
discussion of our financial position and results of operations
in this “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” primarily
reflects the operating activities and results of operations of
the Partnership.
The Partnership has two industry segments, Midstream and
Treating, with a geographic focus along the Texas gulf coast, in
the north Texas Barnett Shale area and in Mississippi and
Louisiana. The Partnership’s Midstream division focuses on
the gathering, processing, transmission and marketing of natural
gas and NGLs, as well as providing certain producer services,
while the Treating division focuses on the removal of
contaminants from natural gas and NGLs to meet pipeline quality
specifications. For the nine months ended September 30,
2007, 84% of the Partnership’s gross margin was generated
in the Midstream division, with the balance in the Treating
division. The Partnership focuses on gross margin to manage its
operations because its business is generally to purchase and
resell natural gas for a margin, or to gather, process,
transport, market or treat natural gas or NGLs for a fee. The
Partnership buys and sells most of its natural gas at a fixed
relationship to the relevant index price so margins are not
significantly affected by changes in natural gas prices. As
explained under “Commodity Price Risk” below, it
enters into financial instruments to reduce volatility in gross
margin due to price fluctuations.
During the past five years, the Partnership has grown
significantly as a result of construction and acquisition of
gathering and transmission pipelines and treating and processing
plants. From January 1, 2003 through September 30,
2007, it has invested $2.1 billion to develop or acquire
new assets. The purchased assets were acquired from numerous
sellers at different periods and were accounted for under the
purchase method of accounting. Accordingly, the results of
operations for such acquisitions are included in our financial
statements only from the applicable date of the acquisition. As
a consequence, the historical results of operations for the
periods presented may not be comparable.
The Partnership’s Midstream segment margins are determined
primarily by the volumes of natural gas gathered, transported,
purchased and sold through its pipeline systems, processed at
its processing facilities and the volumes of natural gas liquids
handled at its fractionation facilities. Treating segment
margins are largely a function of the number and size of
treating plants as well as fees earned for removing impurities
at a non-operated processing plant. The Partnership generates
revenues from five primary sources:
Table of Contents
The bulk of the Partnership’s operating profits are derived
from the margins it realizes for purchasing and reselling
natural gas through its pipeline systems. Generally, the
Partnership buys gas from a producer, plant, or transporter at
either a fixed discount to a market index or a percentage of the
market index. The Partnership then transports and resells the
gas. The resale price is generally based on the same index price
at which the gas was purchased, and, if the Partnership is to be
profitable, at a smaller discount or larger premium to the index
than it was purchased. The Partnership attempts to execute all
purchases and sales substantially concurrently, or it enters
into a future delivery obligation, thereby establishing the
basis for the margin it will receive for each natural gas
transaction. The Partnership’s gathering and transportation
margins related to a percentage of the index price can be
adversely affected by declines in the price of natural gas. See
“Commodity Price Risk” below for a discussion of how
it manages its business to reduce the impact of price volatility.
Processing and fractionation revenues are largely fee based.
Processing fees are largely based on either a percentage of the
liquids volume recovered, or a fixed fee per unit processed.
Fractionation and marketing fees are generally fixed per unit of
product.
The Partnership generates treating revenues under three
arrangements:
Operating expenses are costs directly associated with the
operations of a particular asset. Among the most significant of
these costs are those associated with direct labor and
supervision and associated transportation and communication
costs, property insurance, ad valorem taxes, repair and
maintenance expenses, measurement and utilities. These costs are
normally fairly stable across broad volume ranges, and
therefore, do not normally decrease or increase significantly in
the short term with decreases or increases in the volume of gas
moved through the asset.
This excerpt taken from the XTXI 10-Q filed Aug 9, 2007. Overview
Crosstex Energy, Inc. is a Delaware corporation formed on
April 28, 2000 to engage in the gathering, transmission,
treating, processing and marketing of natural gas and natural
gas liquids (NGLs) through its subsidiaries. On July 12,
2002, we formed Crosstex Energy, L.P., a Delaware limited
partnership (the Partnership), to acquire indirectly
substantially all of the assets, liabilities and operations of
its predecessor, Crosstex Energy Services, Ltd. Our assets
consist almost exclusively of partnership interests in the
Partnership, a publicly traded limited partnership engaged in
the gathering, transmission, treating, processing and marketing
of natural gas and NGLs. These partnership interests consist of
(i) 5,332,000 common units, 4,668,000 subordinated units
and 6,414,830 senior subordinated series C units,
representing approximately 38% of the limited partner interests
in the Partnership, and (ii) 100% ownership interest in
Crosstex Energy GP, L.P., the general partner of the
Partnership, which owns a 2.0% general partner interest and all
of the incentive distribution rights in the Partnership.
Since we control the general partner interest in the
Partnership, we reflect our ownership interest in the
Partnership on a consolidated basis, which means that our
financial results are combined with the Partnership’s
financial results and the results of our other subsidiaries. The
interest owned by non-controlling partners’ share of income
is reflected as an expense in our results of operations. We have
no separate operating activities apart from those conducted by
the Partnership, and our cash flows consist almost exclusively
of distributions from the Partnership on the partnership
interests we own. Our consolidated results of operations are
derived from the results of operations of the Partnership and
also include our gains on the issuance of units in the
Partnership, deferred taxes, interest of non-controlling
partners in the Partnership’s net income, interest income
(expense) and general and administrative expenses not reflected
in the Partnership’s results of operation. Accordingly, the
discussion of our financial position and results of operations
in this “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” primarily
reflects the operating activities and results of operations of
the Partnership.
The Partnership has two industry segments, Midstream and
Treating, with a geographic focus along the Texas gulf coast, in
the north Texas Barnett Shale area and in Mississippi and
Louisiana. The Partnership’s Midstream division focuses on
the gathering, processing, transmission and marketing of natural
gas and NGLs, as well as providing certain producer services,
while the Treating division focuses on the removal of
contaminants from natural gas and NGLs to meet pipeline quality
specifications. For the six months ended June 30, 2007, 83%
of the Partnership’s gross margin was generated in the
Midstream division, with the balance in the Treating division.
The Partnership focuses on gross margin to manage its operations
because its business is generally to purchase and resell natural
gas for a margin, or to gather, process, transport, market or
treat natural gas or NGLs for a fee. The Partnership buys and
sells most of its natural gas at a fixed relationship to the
relevant index price so margins are not significantly affected
by changes in natural gas prices. As explained under
“Commodity Price Risk” below, it enters into financial
instruments to reduce volatility in gross margin due to price
fluctuations.
During the past five years, the Partnership has grown
significantly as a result of construction and acquisition of
gathering and transmission pipelines and treating and processing
plants. From January 1, 2002 through June 30, 2007, it
has invested over $2.0 billion to develop or acquire new
assets. The purchased assets were acquired from numerous sellers
at different periods and were accounted for under the purchase
method of accounting. Accordingly, the results of operations for
such acquisitions are included in our financial statements only
from the applicable date of the acquisition. As a consequence,
the historical results of operations for the periods presented
may not be comparable.
The Partnership’s Midstream segment margins are determined
primarily by the volumes of natural gas gathered, transported,
purchased and sold through its pipeline systems, processed at
its processing facilities and the volumes of natural gas liquids
handled at its fractionation facilities. Treating segment
margins are largely a function
Table of Contents
of the number and size of treating plants as well as fees earned
for removing impurities at a non-operated processing plant. The
Partnership generates revenues from five primary sources:
The bulk of the Partnership’s operating profits are derived
from the margins it realizes for purchasing and reselling
natural gas through its pipeline systems. Generally, the
Partnership buys gas from a producer, plant, or transporter at
either a fixed discount to a market index or a percentage of the
market index. The Partnership then transports and resells the
gas. The resale price is generally based on the same index price
at which the gas was purchased, and, if the Partnership is to be
profitable, at a smaller discount or larger premium to the index
than it was purchased. The Partnership attempts to execute all
purchases and sales substantially concurrently, or it enters
into a future delivery obligation, thereby establishing the
basis for the margin it will receive for each natural gas
transaction. The Partnership’s gathering and transportation
margins related to a percentage of the index price can be
adversely affected by declines in the price of natural gas. See
“Commodity Price Risk” below for a discussion of how
it manages its business to reduce the impact of price volatility.
Processing and fractionation revenues are largely fee based.
Processing fees are largely based on either a percentage of the
liquids volume recovered, or a fixed fee per unit processed.
Fractionation and marketing fees are generally fixed per unit of
product.
The Partnership generates treating revenues under three
arrangements:
Operating expenses are costs directly associated with the
operations of a particular asset. Among the most significant of
these costs are those associated with direct labor and
supervision and associated transportation and communication
costs, property insurance, ad valorem taxes, repair and
maintenance expenses, measurement and utilities. These costs are
normally fairly stable across broad volume ranges, and
therefore, do not normally decrease or increase significantly in
the short term with decreases or increases in the volume of gas
moved through the asset.
This excerpt taken from the XTXI 10-Q filed May 10, 2007. Overview
Crosstex Energy, Inc. is a Delaware corporation formed on
April 28, 2000 to engage in the gathering, transmission,
treating, processing and marketing of natural gas and NGLs
through its subsidiaries. On July 12, 2002, we formed
Crosstex Energy, L.P., a Delaware limited partnership (the
Partnership), to acquire indirectly substantially all of the
assets, liabilities and operations of its predecessor, Crosstex
Energy Services, Ltd. Our assets consist almost exclusively of
partnership interests in the partnership, a publicly traded
limited partnership engaged in the gathering, transmission,
treating, processing and marketing of natural gas and NGLs.
These partnership interests consist of (i) 5,332,000 common
units, 4,668,000 subordinated units and 6,414,830 senior
subordinated series C units, representing approximately 38%
of the limited partner interests in the partnership, and
(ii) 100% ownership interest in Crosstex Energy GP, L.P.,
the general partner of the partnership, which owns a 2.0%
general partner interest and all of the incentive distribution
rights in the partnership.
Since we control the general partner interest in the
Partnership, we reflect our ownership interest in the
Partnership on a consolidated basis, which means that our
financial results are combined with the Partnership’s
financial results and the results of our other subsidiaries. The
interest owned by non-controlling partners’ share of income
is reflected as an expense in our results of operations. We have
no separate operating activities apart from those conducted by
the Partnership, and our cash flows consist almost exclusively
of distributions from the Partnership on the partnership
interests we own. Our consolidated results of operations are
derived from the results of operations of the Partnership and
also include our gains on the issuance of units in the
Partnership, deferred taxes, interest of non-controlling
partners in the Partnership’s net income, interest income
(expense) and general and administrative expenses not reflected
in the Partnership’s results of operation. Accordingly, the
discussion of our financial position and results of operations
in this “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” primarily
reflects the operating activities and results of operations of
the Partnership.
The Partnership has two industry segments, Midstream and
Treating, with a geographic focus along the Texas gulf coast, in
the north Texas Barnett Shale area and in Mississippi and
Louisiana. The Partnership’s Midstream division focuses on
the gathering, processing, transmission and marketing of natural
gas and natural gas liquids (NGLs), as well as providing certain
producer services, while the Treating division focuses on the
removal of contaminants from natural gas and NGLs to meet
pipeline quality specifications. For the three months ended
March 31, 2007, 81% of the Partnership’s gross margin
was generated in the Midstream division, with the balance in the
Treating division. The Partnership focuses on gross margin to
manage its business because its business is generally to
purchase and resell natural gas for a margin, or to gather,
process, transport, market or treat natural gas or NGLs for a
fee. The Partnership buys and sells most of its natural gas at a
fixed relationship to the relevant index price so margins are
not significantly affected by changes in natural gas prices. As
explained under “Commodity Price Risk” below, it
enters into financial instruments to reduce volatility in gross
margin due to price fluctuations.
During the past five years, the Partnership has grown
significantly as a result of construction and acquisition of
gathering and transmission pipelines and treating and processing
plants. From January 1, 2002 through March 31, 2007,
it has invested over $1.8 billion to develop or acquire new
assets. The purchased assets were acquired from numerous sellers
at different periods and were accounted for under the purchase
method of accounting. Accordingly, the results of operations for
such acquisitions are included in our financial statements only
from the applicable date of the acquisition. As a consequence,
the historical results of operations for the periods presented
may not be comparable.
The Partnership’s Midstream segment margins are determined
primarily by the volumes of natural gas gathered, transported,
purchased and sold through its pipeline systems, processed at
its processing facilities and the volumes of natural gas liquids
handled at its fractionation facilities. Treating segment
margins are largely a function
Table of Contents
of the number and size of treating plants as well as fees earned
for removing impurities at a non-operated processing plant. The
Partnership generates revenues from five primary sources:
The bulk of the Partnership’s operating profits are derived
from the margins it realizes for purchasing and reselling
natural gas through its pipeline systems. Generally, the
Partnership buys gas from a producer, plant tailgate, or
transporter at either a fixed discount to a market index or a
percentage of the market index. The Partnership then transports
and resells the gas. The resale price is generally based on the
same index price at which the gas was purchased, and, if the
Partnership is to be profitable, at a smaller discount or larger
premium to the index than it was purchased. The Partnership
attempts to execute all purchases and sales substantially
concurrently, or it enters into a future delivery obligation,
thereby establishing the basis for the margin it will receive
for each natural gas transaction. The Partnership’s
gathering and transportation margins related to a percentage of
the index price can be adversely affected by declines in the
price of natural gas. See “Commodity Price Risk” below
for a discussion of how it manages its business to reduce the
impact of price volatility.
Processing and fractionation revenues are largely fee based.
Processing fees are largely based on either a percentage of the
liquids volume recovered, or a fixed fee per unit processed.
Fractionation and marketing fees are generally fixed per unit of
product.
The Partnership generates treating revenues under three
arrangements:
Operating expenses are costs directly associated with the
operations of a particular asset. Among the most significant of
these costs are those associated with direct labor and
supervision and associated transportation and communication
costs, property insurance, ad valorem taxes, repair and
maintenance expenses, measurement and utilities. These costs are
normally fairly stable across broad volume ranges, and
therefore, do not normally decrease or increase significantly in
the short term with decreases or increases in the volume of gas
moved through the asset.
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