Eagle Rock Energy Takes Major Hits in Fourth-Quarter, Full-Year 2009

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Researched by Industrial Info Resources (Sugar Land, Texas)--Energy company Eagle Rock Energy Partners LP (NASDAQ:EROC) (Houston, Texas) reported net income losses and declines in revenue for fourth-quarter and full-year 2009, although the company stressed that much of this could be attributed to one-time losses on commodity derivatives and debt payments. Eagle Rock reported a net income loss of $68.65 million for the fourth quarter, compared to an income gain of $54.8 million in the same period 2008, and a loss of $171.26 million for the full year, compared to a gain of $87.52 million in 2008.

Total revenues for the quarter were $151.41 million, a 69.97% decline year-over-year, and $610.46 million for the year, a 58.7% decrease from 2008. Eagle Rock stresses the result from using adjusted EBITDA, which is the net income before interest, income taxes, depreciation, amortization, losses from discontinued operations, losses from acquisitions and dispositions, and costs from restructuring, impairment and plant closings, among other expenses. Using this method, income for the quarter was $51.43 million, a 19.63% decline year-over-year, and $188.53 million for the year, a 24.05% decrease from 2008.

In regards to declines in revenue from Eagle Rock's midstream operations, the company cited lower natural-gas liquid (NGL) and condensate pricing, as well as lower NGL equity production in the Texas Panhandle and eastern Texas, when compared to 2008. For the upstream and mineral operations, the company cited lower prices for oil, natural gas, NGLs and sulfur. For the fourth quarter in particular, Eagle Rock pointed to a decline in production volumes due to in Alabama and eastern Texas, the latter due to unplanned plant maintenance, and unrealized commodity derivative losses in the minerals business.

"Throughout 2009, the volatility and subsequent fall in natural gas prices had a negative impact on the drilling plans of our producer customers," said Joseph Mills, the chairman and chief executive officer of Eagle Rock, in a conference call.

Total costs and expenses improved overall, totaling $214.13 million for the quarter, a 48.37% decrease year-over-year, and $754.43 million for the year, a 43.4% decrease from 2008.

Revenues from Eagle Rock's major segments were as follows:

• Natural gas, NGL, condensate, oil and sulfur sales stood at $185.12 million for the quarter, a 17.73% decline year-over-year, and $653.71 million for the year, a 47.02% decrease from 2008.
• Gathering, compression, processing and treating fees totaled $10.43 million for the quarter, a 6.26% decline year-over-year. However, the fees totaled $45.48 million for the year, a 16.99% increase from 2008.
• Minerals and royalty income totaled $4.92 million for the quarter, a 41.34% decline year-over-year, and $15.71 million for the year, a 63.46% decrease from 2008.

Eagle Rock is upbeat about 2010. The company foresees growth opportunities in core areas such as drilling.

"We are more optimistic today than we have been, and we are seeing continued improved drilling activity and results by our producer customers, especially in the prolific Granite Wash play in the Texas Panhandle, plus the Austin Chalk and Haynesville Shale plays in East Texas," Mills said.

Industrial Info is tracking the $1.5 million maintenance turnaround at the Big Escambia Creek Natural Gas Treating Plant in Atmore, Alabama, that is being performed by Escambia Operating Company LLC, which is a subsidiary of Eagle Rock. The turnaround involves inspections and repairs to three-phase separators; condensers; heat exchangers; a 300-ton-per-day, three-stage Claus sulfur recovery unit; four 97 million-British-thermal-unit-per-hour boilers; a condensate stabilizer; and lube-oil consoles, among other units. For more information, visit Industrial Info's North American Industrial Database.

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