QEP Midstream Partners Reports First Quarter 2014 Financial And Operating Results

  QEP Midstream Partners Reports First Quarter 2014 Financial And Operating
                                   Results

PR Newswire

DENVER, May 7, 2014

DENVER, May 7, 2014 /PRNewswire/ --QEP Midstream Partners, LP (NYSE: QEPM)
("QEPM" or the "Partnership") today reported first quarter 2014 financial and
operating results. The Partnership reported net income of $11.7 million, or
$0.21 per limited partner unit (on a diluted basis). The Partnership generated
Adjusted EBITDA (a non-GAAP measure) of $19.4 million and distributable cash
flow (a non-GAAP measure) of $17.4 million for the first quarter 2014 which
represents 118% coverage of the first quarter 2014 distribution. Please see
the definitions of non-GAAP measures and the reconciliation to the most
comparable measures calculated in accordance with GAAP in the "Non-GAAP
Financial Measures" section of this press release.

QEP Midstream Partners, LP logo.

Additional Highlights

  oEntered into a Purchase and Sale Agreement with QEP Resources, Inc.
    ("QEP") to acquire a 40% interest in Green River Processing, LLC for $230
    million (the "Green River Acquisition")
  oIncreased our 2014 Adjusted EBITDA guidance to a range of $89 million and
    $93 million
  oIncreased our 2014 distributable cash flow guidance to a range of $72
    million to $78 million
  oIncreased our quarterly distribution to $0.27 per unit

"QEPM continued to deliver steady results in the first quarter," commented
Chuck Stanley, President, Chairman and Chief Executive Officer. "Although
first quarter volumes are typically weaker seasonally, the Partnership
increased its distribution by four percent compared to the prior quarter while
maintaining a robust 1.18x distribution coverage ratio. This marks the second
consecutive quarter of four percent distribution increases. Our commitment to
growing the partnership was demonstrated by the successful completion of our
initial post-IPO acquisition. We expect the Green River Acquisition will
enable us to continue to achieve distribution growth in coming quarters,"
concluded Stanley.

Operating Results

Results of operations during the first quarter 2014 were in line with company
expectations. Compared to the results for the first quarter 2013 for the
Partnership's Predecessor (see discussion below regarding Predecessor
Financial Information), gathering and transportation revenue and gathering
expense decreased. This is due to the lack of comparability of the results of
the Predecessor, which include results for assets that were not assigned to
the Partnership but were, instead, retained by the Predecessor.

Compared to the first quarter 2013, on a pro forma basis, gathering and
transportation revenue was down slightly while condensate sales increased by
$0.1 million. Natural gas gathering volumes in the first quarter 2014 declined
by 4% from the prior year due to declines in throughput on the Green River and
Vermillion systems, and 6% from the prior quarter, due to variances associated
with seasonality. Condensate sales revenue in the first quarter 2014 increased
5% from the prior year and 18% from the prior quarter. Condensate sales
volumes typically increase in the first half of the year as colder
temperatures cause liquids to condense out of the gas stream. First quarter
2014 deficiency revenue increased by $1.7 million to $2.9 million due to
higher deficiency payments related to the Williston Gathering System.

Operating expenses in the first quarter 2014 increased by 7% from the prior
year due primarily to higher gathering expense and increased general and
administrative expenses driven by costs of being a publicly traded
partnership, including expenses related to the 2013 audit.

Balance Sheet

As of March31, 2014, the Partnership had $20.3 million of cash and cash
equivalents and no borrowings on its $500 million revolving credit facility.

Capital Expenditures

Capital expenditures totaled $5.6 million for the Partnership during the three
months ended March31, 2014, which includes expansion capital of $1.4 million
and maintenance capital of $4.2 million. Expansion capital expenditures were
primarily attributable to a compressor upgrade project on the Vermillion
Gathering System and reimbursable well connects on the Williston Gathering
System. Maintenance capital expenditures include $3.3 million related to the
Green River Gathering System of which $2.3 million related to a compressor
maintenance overhaul project and $1.0 million related to a condensate pipeline
repair and replacement project. QEP reimbursedthe Partnership for the $1.0
million related to the condensate pipeline repair pursuant to an
indemnification provision in the Omnibus Agreement executed in connection with
the closing of the IPO. The remaining maintenance capital expenditures of $0.9
million primarily relate to compressor overhaul projects on the Vermillion
Gathering System.

2014 Guidance

The Partnership's guidance has been revised from the fourth quarter 2013
results update to reflect the impact of the Green River Acquisition for the
period July 1, 2014 to December 31, 2014. For 2014 the Partnership now
forecasts distributable cash flow in a range of $72 million to $78 million,
compared to $65 million to $70 million previously; Adjusted EBITDA of $89
million to $93 million, compared to $78 million to $83 million previously; and
total capital expenditures of $19 million to $23 million, an increase of $1
million from previous guidance, including expansion capital expenditures
related to the expansion of the Vermillion gathering system of $8 million to
$10 million (unchanged).

First Quarter 2014 Results Conference Call

QEPM's management will discuss first quarter 2014 results in a conference call
on Thursday, May 8, 2014, beginning at 11:00 a.m. EDT. The conference call
can be accessed at www.qepm.com. You may also participate in the conference
call by dialing (877) 407-4019 domestically or (201) 689-8337
internationally. Attendees should log in to the webcast or dial in
approximately 15 minutes prior to the call's start time. A replay of the
conference call will be available on the website and a telephone audio replay
will be available from May 8, 2014 to June 8, 2014, by calling (877) 660-6853
domestically or (201) 612-7415 internationally and then entering conference ID
# 13580523.

About QEP Midstream Partners, LP

QEP Midstream Partners, LP is a master limited partnership formed by QEP
Resources, Inc. (NYSE: QEP) to own, operate, acquire and develop midstream
energy assets. The Partnership provides midstream gathering services to QEP
and third-party companies in the Green River, Uinta and Williston basins.

Forward-Looking Statements

Disclosures in this press release contain certain forward-looking statements
within the meaning of the federal securities laws. Statements that do not
relate strictly to historical or current facts are forward-looking. These
statements contain words such as "possible," "if," "will" and "expect" and
involve risks and uncertainties including, among others that our business
plans may change as circumstances warrant. Such forward-looking statements
include statements regarding forecasted distributable cash flow, Adjusted
EBITDA and capital expenditures for the twelve months ending December 31, 2014
; growth of the Partnership and its distributable cash flow; increase in
condensate sales volumes in the first quarter; closing of the Green River
Acquisition; importance of non-GAAP financial measures; and pro forma
financial information, including adjustments to derive such information.
Factors that could cause QEPM's actual results to differ materially from the
results contemplated by such forward-looking statements include: changes in
general economic conditions; competitive conditions in QEPM's industry;
actions taken by third-party operators, processors and transporters; the
demand for oil and natural gas storage and transportation services; QEPM's
ability to successfully implement its business plan; its ability to complete
internal growth projects on time and on budget; the price and availability of
debt and equity financing; operating risks and hazards incidental to
transporting, storing and processing oil and natural gas, as applicable;
natural disasters, weather-related delays and casualty losses; impact of new
laws and regulations, including regulations regarding the use of hydraulic
fracture stimulation and the implementation of the Dodd-Frank Act; inability
to successfully integrate acquired assets; the outcome of litigation; and
other factors discussed in the Risk Factors section of the Partnership's
Annual Report on Form 10-K for the year endedDecember 31, 2013. Investors
should not place undue reliance on forward-looking statements as a prediction
of actual results. The Partnership undertakes no obligation to publicly
correct or update the forward-looking statements in this news release, in
other documents, or on the website to reflect future events or circumstances.
All such statements are expressly qualified by this cautionary statement.

Contact

Investors: Greg Bensen                 Media: Brent Rockwood
           Director, Investor Relations         Director, Communications
           303-405-6665                         303-672-6999



QEP MIDSTREAM PARTNERS, LP

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)
                                        Three Months Ended March 31,
                                        2014                  2013
                                        Successor             Predecessor
                                        (in millions, except per unit amounts)
Revenues
Gathering and transportation            $     28.9            $     36.6
Condensate sales                        2.1                   3.5
Total revenues                          31.0                  40.1
Operating expenses
Gathering expense                       6.4                   7.7
General and administrative              4.7                   5.7
Taxes other than income taxes           0.5                   0.3
Depreciation and amortization           7.8                   10.3
Total operating expenses                19.4                  24.0
Net loss from property sales            —                     (0.3)
Operating income                        11.6                  15.8
Income from unconsolidated affiliates   1.5                   1.3
Interest expense                        (0.6)                 (1.1)
Net income                              12.5                  16.0
Net income attributable to              (0.8)                 (0.6)
noncontrolling interest
Net income attributable to QEP          $     11.7            $     15.4
Midstream or Predecessor
Net income attributable to QEP Midstream per limited partner unit (basic and
diluted):
Common units                            $     0.21
Subordinated units                      $     0.21
Weighted-average limited partner units outstanding (basic and diluted):
Common units                            26.7
Subordinated units                      26.7

QEP MIDSTREAM PARTNERS, LP

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)
                                                  Three Months Ended March 31,
                                                  2014           2013
                                                  Successor      Predecessor
                                                  (in millions)
OPERATING ACTIVITIES
Net income                                        $   12.5       $    16.0
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization                     7.8            10.3
Equity-based compensation expense                 0.4            —
Income from unconsolidated affiliates             (1.5)          (1.3)
Distributions from unconsolidated affiliates      1.8            1.5
Amortization of debt issuance costs               0.2            —
Net loss from asset sales                         —              0.3
Changes in operating assets and liabilities       0.6            12.1
Net cash provided by operating activities         21.8           38.9
INVESTING ACTIVITIES
Property, plant and equipment                     (5.7)          (3.9)
Proceeds from sale of assets                      —              0.8
Net cash used in investing activities             (5.7)          (3.1)
FINANCING ACTIVITIES
Repayments of long-term debt (to related party)   —              (45.3)
Contributions from parent, net                    1.0            12.5
Distributions to unitholders                      (14.2)         —
Distribution to noncontrolling interest           (1.6)          (1.5)
Net cash used in financing activities             (14.8)         (34.3)
Change in cash and cash equivalents               1.3            1.5
Beginning cash and cash equivalents               19.0           1.4
Ending cash and cash equivalents                  $   20.3       $    2.9
Supplemental Disclosures:
Non-cash investing activities
Change in capital expenditure accrual balance     $   (0.1)      $    (1.7)

Non-GAAP Financial Measures

This press release, and the accompanying tables, includes financial measures
in accordance with U.S. generally accepted accounting principles ("GAAP"), as
well as non-GAAP financial measures, including Adjusted EBITDA and
Distributable Cash Flow. Management believes that the presentation of
Adjusted EBITDA and Distributable Cash Flow provides information useful to
investors in assessing QEPM's financial condition and results of operations.
Management defines Adjusted EBITDA as net income attributable to the
Partnership or Predecessor before depreciation and amortization, interest and
other income and expense, gains and losses from asset sales, deferred revenue
associated with minimum volume commitment payments and certain other non-cash
and/or non-recurring items. Management defines Distributable Cash Flow as
Adjusted EBITDA less net cash interest paid, maintenance capital expenditures
and cash adjustments related to equity method investments and non-controlling
interests, and other non-cash expenses. Distributable Cash Flow does not
reflect changes in working capital balances.

The GAAP measures most directly comparable to Adjusted EBITDA and
Distributable Cash Flow are net income and cash flow provided by operating
activities attributable to the Partnership or Predecessor. The tables below
include reconciliations of these non-GAAP financial measures to the nearest
GAAP financial measures.

                                       Three Months Ended March 31,
                                       2014                   2013
                                       Successor              Predecessor
                                       (in millions)
Unaudited Reconciliation of Net Income Attributable to QEP Midstream or
Predecessor to Adjusted EBITDA and Distributable Cash Flows
Net income attributable to QEP         $     11.7             $     15.4
Midstream or Predecessor
Interest expense                       0.6                    1.1
Depreciation and amortization          7.8                    10.3
Noncontrolling interest share of       (0.7)                  (0.7)
depreciation and amortization^(1)
Net loss from asset sales              —                      0.3
Adjusted EBITDA                        $     19.4             $     26.4
Cash interest paid                     (0.4)
Maintenance capital expenditures       (4.2)
Reimbursements for maintenance         1.0
capital expenditures
Cash adjustments for
non-controlling interest and equity    1.4
method investments
Non-cash equity-based compensation     0.2
expense
Distributable Cash Flow                $     17.4

                                                  Three Months Ended March 31,
                                                  2014           2013
                                                  Successor      Predecessor
                                                  (in millions)
Reconciliation of Net Cash Flows Provided by Operating Activities to Adjusted
EBITDA and Distributable Cash Flows
Net cash provided by operating activities         $   21.8       $    38.9
Noncontrolling interest share of depreciation     (0.7)          (0.7)
and amortization^(1)
Income from unconsolidated affiliates, net of     (0.3)          (0.2)
distributions from unconsolidated affiliates
Net income attributable to noncontrolling         (0.8)          (0.6)
interest
Interest expense                                  0.6            1.1
Working capital changes                           (0.6)          (12.1)
Amortization of deferred financing charges        (0.2)               —
Equity-based compensation expense                 (0.4)               —
Adjusted EBITDA                                   $   19.4       $    26.4
Cash interest paid                                (0.4)
Maintenance capital expenditures                  (4.2)
Reimbursements for maintenance capital            1.0
expenditures
Cash adjustments for non-controlling interest     1.4
and equity method investments
Non-cash equity-based compensation expense        0.2
Distributable Cash Flow                           $   17.4

(1) Represents the noncontrolling interest's 22% share of depreciation and
    amortization attributable to Rendezvous Gas Services.

Supplemental Pro Forma Disclosures

The discussion of our historic performance and financial condition is
presented for the Partnership (Successor), for the three months ended March
31, 2014, and for the Predecessor for the three months ended March 31, 2013.

As previously discussed, the historic financial information of the Predecessor
contained in this report relates to periods that ended prior to the completion
of the IPO, and includes results for both the properties conveyed to the
Partnership in connection with the IPO and properties retained by our
Predecessor. We believe that historical data limited to only the properties
conveyed to the Partnership in connection with the IPO, adjusted for
transactions that occurred as a result of the IPO, is relevant and meaningful,
enhances the discussion of the periods presented and is useful to the reader
to better understand trends in our operations. Therefore, we have also
included the results of operations for the three months ended March 31, 2013
on a pro forma basis.

The following pro forma financial data is for informational purposes only and
was derived from the Predecessor financial information adjusted to give effect
to events and circumstances that are directly attributed to the IPO
transaction as if it had occurred on January 1, 2013, that are factually
supportable and, with respect to the Consolidated Statement of Income, are
expected to have a continuing impact on the consolidated results. These
adjustments include: removing the results of the assets retained by the
Predecessor, consisting of the Uinta Basin Gathering System and general
support equipment; an adjustment to general and administrative expense for the
estimated incremental expenses that would have occurred as a result of
operating as a public company and the entry into the Omnibus Agreement
concurrent with the IPO; and an adjustment to interest expense to eliminate
the related party debt that was settled in conjunction with the IPO and to
estimate interest expense related to the Credit Facility entered into
following the IPO. The unaudited pro forma information should not be relied
upon as necessarily being indicative of the results that may be obtained in
the future.

QEP Midstream Partners, LP

Pro Forma Financial Data
                    Three Months
                    Ended March   Three Months Ended March 31, 2013
                    31, 2014
                                  Predecessor As  Pro Forma
                    Successor     Reported        Adjustments ^      Pro Forma
                                                  (3)
Revenues            (in millions, except operating and per unit amounts)
Gathering and       $   28.9      $    36.6       $   (7.6)          $  29.0
transportation
Condensate sales    2.1           3.5             (1.5)              2.0
Total revenues      31.0          40.1            (9.1)              31.0
Operating expenses
Gathering expense   6.4           7.7             (1.9)              5.8
General and         4.7           5.7             (1.2)         ^(4) 4.5
administrative
Taxes other than    0.5           0.3             (0.1)              0.2
income taxes
Depreciation and    7.8           10.3            (2.6)              7.7
amortization
Total operating     19.4          24.0            (5.8)              18.2
expenses
Net loss from       —             (0.3)           0.3                —
property sales
Operating income    11.6          15.8            (3.0)              12.8
Income from
unconsolidated      1.5           1.3             (0.7)              0.6
affiliates
Interest expense    (0.6)         (1.1)           0.5           ^(5) (0.6)
Net income          12.5          16.0            (3.2)              12.8
Net income
attributable to     (0.8)         (0.6)           —                  (0.6)
noncontrolling
interest
Net income
attributable to     $   11.7      $    15.4       $   (3.2)          $  12.2
QEP Midstream or
Predecessor
Operating
Statistics
Natural gas
throughput in
millions of MMBtu
Gathering and       69.8          90.6            (18.1)             72.5
transportation
Equity              5.2           3.3             (0.4)              2.9
interest^(1)
Total natural gas   75.0          93.9            (18.5)             75.4
throughput
Throughput
attributable to     (2.6)         (2.6)           —                  (2.6)
noncontrolling
interests^(2)
Total throughput
attributable to     72.4          91.3            (18.5)             72.8
QEP Midstream or
Predecessor
Crude oil and
condensate
gathering system    1,070.1       1,278.8         —                  1,278.8
throughput volumes
(in MBbls)
Water gathering     1,075.8       870.1           —                  870.1
volumes (in MBbls)
Condensate sales    25.0          42.7            (19.4)             23.3
volumes (in MBbls)
Price
Average gas
gathering and       $   0.31      $    0.34                          $  0.33
transportation fee
(per MMBtu)
Average oil and
condensate          $   2.36      $    2.02                          $  2.02
gathering fee (per
barrel)
Average water
gathering fee (per  $   1.85      $    1.80                          $  1.80
barrel)
Average condensate
sale price (per     $   85.25     $    82.99                         $  84.42
barrel)
Non-GAAP Measures
Adjusted EBITDA     $   19.4      $    26.4       $   (6.6)          $  19.8
^(6)
Distributable Cash  $   17.4
Flow ^(6)

    Includes our 50% share of gross volumes from Three Rivers Gathering and
(1) the Predecessor's 38% share of gross volumes from Uintah Basin Field
    Services.
(2) Includes the 22% noncontrolling interest in Rendezvous Gas Services.
(3) Pro forma adjustments reflect operating results related to assets retained
    by our Predecessor following the IPO, except as otherwise noted.
    The pro forma adjustment for general and administrative includes the
(4) estimated incremental expenses that would have occurred as a result of
    operating as a public company and the entry into the Omnibus Agreement
    concurrent with the IPO.
    The pro forma adjustment for interest expense reflects the elimination of
    historical interest expense due to QEP as the related party debt was
(5) settled concurrent with the IPO and includes the estimated interest
    expense related to the Credit Facility, which was entered in conjunction
    with the IPO, which includes amortization of deferred finance cost and
    commitment fees on the unused portion of the Credit Facility.
    Adjusted EBITDA and Distributable Cash Flow are non-GAAP financial
(6) measures. See "− Adjusted EBITDA and Distributable Cash Flow (Non-GAAP)"
    for definitions of these non-GAAP financial measures and reconciliations
    to the most directly comparable GAAP financial measures.



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SOURCE QEP Midstream Partners, LP

Website: http://www.qepm.com
 
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