UGI ENERGY SERVICES, LLC
AND SUBSIDIARIES
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
and MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
for the three and six months ended March 31, 2024 and 2023
(Unaudited)
UGI ENERGY SERVICES, LLC AND SUBSIDIARIES
TABLE OF CONTENTS
Pages | |
Glossary of Terms and Abbreviations | |
Financial Statements (unaudited): | |
Condensed Consolidated Balance Sheets as of March 31, 2024, September 30, 2023 and March 31, 2023 | |
Condensed Consolidated Statements of Comprehensive Income for the three and six months ended | |
March 31, 2024 and 2023 | |
Condensed Consolidated Statements of Cash Flows for the six months ended March 31, 2024 and 2023 | |
Condensed Consolidated Statements of Changes in Member's Equity for the six months ended March 31, | |
2024 and 2023 | |
Notes to Condensed Consolidated Financial Statements | |
Management's Discussion and Analysis of Financial Condition and Results of Operations | 18 |
UGI ENERGY SERVICES, LLC AND SUBSIDIARIES
GLOSSARY OF TERMS AND ABBREVIATIONS
Terms and abbreviations used in this document are defined below:
UGI Energy Services and Related Entities
AmeriGas - AmeriGas Propane, L.P., an indirect wholly-owned subsidiary of UGI
Aurum Renewables - Aurum Renewables LLC
Company - UGI Energy Services, LLC and its consolidated subsidiaries collectively
Energy Services - UGI Energy Services, LLC, a wholly-owned subsidiary of Enterprises, or collectively, UGI Energy Services, LLC and its consolidated subsidiaries
Enterprises - UGI Enterprises, LLC, a wholly-owned subsidiary of UGI
MBL Bioenergy - MBL Bioenergy, LLC, a joint venture partnership with the sole purpose of developing RNG projects in South Dakota.
Pine Run - Pine Run Gathering, LLC
UGI - UGI Corporation
UGI Utilities - UGI Utilities, Inc., a wholly-owned subsidiary of UGI comprising PA Gas Utility and Electric Utility UGID - UGI Development Company, a wholly-owned subsidiary of Energy Services
Other Terms and Abbreviations
2023 Annual Report - Energy Services' Annual Report for the fiscal year ended September 30, 2023 2023 six-monthperiod - Six months ended March 31, 2023
2023 three-monthperiod - Three months ended March 31, 2023 2024 six-monthperiod - Six months ended March 31, 2023
2024 three-monthperiod - Three months ended March 31, 2024 AOCI - Accumulated Other Comprehensive Income (Loss) ASC - Accounting Standards Codification
ASC 606 - ASC 606, "Revenue from Contracts with Customers"
ASU - Accounting Standards Update
Energy Services Amended Term Loan Credit Agreement - Energy Services Term Loan Credit Agreement, as amended on February 23, 2023 with a final maturity of February 2030
UGI Energy Services Credit Agreement - Revolving credit agreement entered into by Energy Services on March 6, 2020, as amended, scheduled to expire in March 2025.
Energy Services Term Loan Credit Agreement - A seven-year senior secured term loan agreement entered into on August 13, 2019 by Energy Services, referred to as the "Energy Services Amended Term Loan Credit Agreement" after its amendment on February 23, 2023
FASB - Financial Accounting Standards Board
FERC - Federal Energy Regulatory Commission
Fiscal 2021 - The fiscal year ended September 30, 2021
3
UGI ENERGY SERVICES, LLC AND SUBSIDIARIES
Fiscal 2022 - The fiscal year ended September 30, 2022
Fiscal 2023 - The fiscal year ended September 30, 2023
Fiscal 2024 - The fiscal year ending September 30, 2024
GAAP - U.S. generally accepted accounting principles
ICE - Intercontinental Exchange
LNG - Liquefied natural gas
NPNS - Normal purchase and normal sale
NYMEX - New York Mercantile Exchange
Receivables Facility - A receivables purchase facility of Energy Services with an issuer of receivables-backed commercial paper
RNG - Renewable natural gas
SCAA - Storage Contract Administrative Agreement
U.S. - United States of America
USD - U.S. dollar
4
UGI ENERGY SERVICES, LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Millions of dollars)
March 31, | September 30, | March 31, | ||||||
2024 | 2023 | 2023 | ||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 24 | $ | 28 | $ | 41 | ||
Restricted cash | 21 | 42 | 28 | |||||
Accounts receivable (less allowances for doubtful accounts of $2, $2 and | 174 | 136 | 231 | |||||
$2, respectively) | ||||||||
Inventories | 23 | 25 | 19 | |||||
Derivative instruments | 8 | 6 | 13 | |||||
Prepaid expenses and other current assets | 32 | 59 | 112 | |||||
Total current assets | 282 | 296 | 444 | |||||
Property, plant and equipment (less accumulated depreciation of $471, | 1,981 | 1,969 | 1,913 | |||||
$432 and $397, respectively) | ||||||||
Goodwill | 337 | 337 | 337 | |||||
Intangible assets, net | 227 | 236 | 241 | |||||
Derivative instruments | 4 | 6 | 4 | |||||
Investments in equity method investees | 305 | 264 | 189 | |||||
Other assets | 43 | 43 | 45 | |||||
Total assets | $ | 3,179 | $ | 3,151 | $ | 3,173 | ||
LIABILITIES AND MEMBER'S EQUITY | ||||||||
Current liabilities: | ||||||||
Current maturities of long-term debt | $ | 8 | $ | 12 | $ | 11 | ||
Short-term borrowings | 36 | 103 | 15 | |||||
Accounts payable | 84 | 99 | 133 | |||||
Derivative instruments | 17 | 17 | 26 | |||||
Other current liabilities | 50 | 29 | 53 | |||||
Total current liabilities | 195 | 260 | 238 | |||||
Long-term debt | 809 | 808 | 813 | |||||
Deferred income taxes | 261 | 275 | 220 | |||||
Derivative instruments | 22 | 23 | 30 | |||||
Other noncurrent liabilities | 23 | 40 | 44 | |||||
Total liabilities | 1,310 | 1,406 | 1,345 | |||||
Member's equity | 1,869 | 1,745 | 1,828 | |||||
Total liabilities and member's equity | $ | 3,179 | $ | 3,151 | $ | 3,173 | ||
See accompanying notes to condensed consolidated financial statements.
5
UGI ENERGY SERVICES, LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(Millions of dollars)
Three Months Ended | Six Months Ended | ||||||||||
March 31, | March 31, | ||||||||||
2024 | 2023 | 2024 | 2023 | ||||||||
Revenues | $ | 483 | $ | 642 | $ | 878 | $ | 1,313 | |||
Costs and expenses: | |||||||||||
Cost of sales (excluding depreciation and amortization shown below) | 242 | 557 | 528 | 1,254 | |||||||
Operating and administrative expenses | 29 | 34 | 60 | 63 | |||||||
Depreciation and amortization | 22 | 22 | 44 | 43 | |||||||
Other operating (income) loss, net | (2) | (2) | 1 | (3) | |||||||
291 | 611 | 633 | 1,357 | ||||||||
Operating income (loss) | 192 | 31 | 245 | (44) | |||||||
Income from equity method investees | 2 | 2 | 5 | 3 | |||||||
Other non-operating loss | - | (1) | - | (1) | |||||||
Interest expense | (9) | (11) | (20) | (22) | |||||||
Income (loss) before income taxes | 185 | 21 | 230 | (64) | |||||||
Income tax (expense) benefit | (29) | 89 | (20) | 96 | |||||||
Net income | $ | 156 | $ | 110 | $ | 210 | $ | 32 | |||
Other comprehensive income (loss): | |||||||||||
Net gains (losses) on derivative instruments (net of tax of $(3), $6, $1 and | $ | 9 | $ | (13) | $ | (1) | $ | (11) | |||
$5, respectively) | |||||||||||
Reclassifications of net gains on derivative instruments (net of tax of $2, $1, | (5) | (3) | (10) | (5) | |||||||
$4 and $2, respectively) | |||||||||||
Other comprehensive income (loss) | 4 | (16) | (11) | (16) | |||||||
Comprehensive income | $ | 160 | $ | 94 | $ | 199 | $ | 16 | |||
See accompanying notes to condensed consolidated financial statements.
6
UGI ENERGY SERVICES, LLC AND SUBSIDIARIES | |||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||
(Unaudited) | |||||
(Millions of dollars) | |||||
Six Months Ended | |||||
March 31, | |||||
2024 | 2023 | ||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||
Net income | $ | 210 | $ | 32 | |
Adjustments to reconcile net income to net cash provided by operating activities: | |||||
Depreciation and amortization | 44 | 43 | |||
Deferred income tax benefit, net | (3) | (49) | |||
Changes in unrealized gains and losses on derivative instruments | 5 | 255 | |||
Settlement of interest rate swap | - | 32 | |||
Amortization of interest rate swap settlement | (11) | - | |||
Income from equity method investees | (5) | (3) | |||
Other, net | (7) | (3) | |||
Net change in: | |||||
Accounts receivable | (38) | (6) | |||
Inventories | 2 | 40 | |||
Accounts payable | (14) | (90) | |||
Derivative instruments collateral deposits paid | (8) | (158) | |||
Other current assets | 28 | (49) | |||
Other current liabilities | 16 | 4 | |||
Net cash provided by operating activities | 219 | 48 | |||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||
Expenditures for property, plant and equipment | (55) | (33) | |||
Investments in equity method investees | (43) | (56) | |||
Net cash used by investing activities | (98) | (89) | |||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||
Distributions paid | (75) | (125) | |||
Receivables Facility net (repayments) borrowings | (10) | 15 | |||
Decrease in short-term borrowings | (57) | - | |||
Issuances of long-term debt, net of discount and issuance costs | - | 791 | |||
Repayments of long-term debt and finance leases | (4) | (676) | |||
Net cash (used) provided by financing activities | (146) | 5 | |||
Cash, cash equivalents and restricted cash decrease | $ | (25) | $ | (36) | |
CASH, CASH EQUIVALENTS AND RESTRICTED CASH: | |||||
End of period | $ | 45 | $ | 69 | |
Beginning of period | 70 | 105 | |||
Cash, cash equivalents and restricted cash decrease | $ | (25) | $ | (36) | |
See accompanying notes to condensed consolidated financial statements.
7
UGI ENERGY SERVICES, LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN MEMBER'S EQUITY
(Unaudited) | |||
(Millions of dollars) | |||
Member's Equity | |||
Balance at September 30, 2023 | $ | 1,745 | |
Net income | 210 | ||
Cash distributions | (75) | ||
Other comprehensive loss | (11) | ||
Balance at March 31, 2024 | $ | 1,869 | |
Member's Equity | |||
Balance at September 30, 2022 | $ | 1,937 | |
Net income | 32 | ||
Cash distributions | (125) | ||
Other comprehensive loss | (16) | ||
Balance at March 31, 2023 | $ | 1,828 | |
See accompanying notes to condensed consolidated financial statements.
8
UGI Energy Services, LLC and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Millions of dollars, except where indicated otherwise)
Note 1 - Nature of Operations
Energy Services is a Pennsylvania limited liability company and a wholly-owned subsidiary of Enterprises. Enterprises is a wholly-owned subsidiary of UGI. Energy Services is a sole member limited liability company with Enterprises owning 100% of the membership interest.
Energy Services conducts, directly and through subsidiaries and affiliates, energy marketing, including RNG, midstream transmission, LNG storage, natural gas gathering and processing, natural gas and RNG production, electricity generation and energy services businesses primarily in the eastern region of the U.S., eastern Ohio, the panhandle of West Virginia and California. UGID owns electricity generation facilities principally located in Pennsylvania. Energy Services and its subsidiaries' storage, LNG and portions of its midstream transmission operations are subject to regulation by the FERC.
Note 2 - Summary of Significant Accounting Policies
The accompanying condensed consolidated financial statements are unaudited and have been prepared in accordance with GAAP. They include all adjustments that we consider necessary for a fair statement of the results for the interim periods presented. Such adjustments consisted only of normal recurring items unless otherwise disclosed. The September 30, 2023, Condensed Consolidated Balance Sheet was derived from audited financial statements but does not include all footnote disclosures from the annual financial statements.
These financial statements should be read in conjunction with the financial statements and related notes included in the Company's 2023 Annual Report. Due to the seasonal nature of our businesses, the results of operations for interim periods are not necessarily indicative of the results to be expected for a full year.
Restricted Cash. Restricted cash principally represents those cash balances in our commodity futures brokerage accounts that are restricted from withdrawal. The following table provides a reconciliation of the total cash, cash equivalents and restricted cash reported on the Condensed Consolidated Balance Sheets to the corresponding amounts reported on the Condensed Consolidated Statements of Cash Flows.
March 31, | March 31, | |||||
2024 | 2023 | |||||
Cash and cash equivalents | $ | 24 | $ | 41 | ||
Restricted cash | 21 | 28 | ||||
Cash, cash equivalents and restricted cash | $ | 45 | $ | 69 | ||
Derivative Instruments. Derivative instruments are reported on the Condensed Consolidated Balance Sheets at their fair values, unless the NPNS exception is elected. The accounting for changes in fair value depends upon the purpose of the derivative instrument or if it qualifies and is designated as a hedge for accounting purposes.
Certain of our derivative instruments qualify and are designated as cash flow hedges. For cash flow hedges, changes in the fair values of the derivative instruments are recorded in AOCI, to the extent effective at offsetting changes in the hedged item, until earnings are affected by the hedged item. We discontinue cash flow hedge accounting if occurrence of the forecasted transaction is determined to be no longer probable. Hedge accounting is also discontinued for derivatives that cease to be highly effective. We do not designate our commodity derivative instruments as hedges under GAAP. Changes in the fair values of these derivative instruments are reflected in net income. Cash flows from derivative instruments are included in cash flows from operating activities on the Condensed Consolidated Statements of Cash Flows.
For a more detailed description of the derivative instruments we use, our accounting for derivatives, our objectives for using them and other information see Note 7.
Use of Estimates. The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and costs. These estimates are based on management's knowledge of current events, historical experience and various other assumptions that are believed to be reasonable under the circumstances. Accordingly, actual results may be different from these estimates and assumptions.
9
UGI Energy Services, LLC and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Millions of dollars, except where indicated otherwise)
Subsequent Events. Management has evaluated the impact of subsequent events through May 3, 2024, the date these condensed consolidated financial statements were issued, and the effects, if any, of such evaluation have been reflected in the condensed consolidated financial statements and related disclosures.
Note 3 - Accounting Changes
Accounting Standard Not Yet Adopted.
Improvements to Income Tax Disclosures. In December 2023, the FASB issued ASU 2023-09, "Improvements to Income Tax Disclosures (Topic 740)" which requires entities to disclose, among other items, disaggregated information about a reporting entity's effective tax rate reconciliation and income taxes paid. This new guidance is effective for the Company for annual periods beginning October 1, 2025 (Fiscal 2026). Early adoption is permitted. The amendments in this ASU may be adopted using the prospective or retrospective methods. The Company is in the process of assessing the impact on its financial statements and determining the transition method and the period in which the new guidance will be adopted.
Note 4 - Revenue from Contracts with Customers
The Company recognizes revenue when control of promised goods or services is transferred to customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services. See Note 3 in the Company's 2023 Annual Report for additional information on our revenues from contracts with customers.
Revenue Disaggregation | ||||||||||||
The following table presents our disaggregated revenues: | ||||||||||||
Three Months Ended | Six Months Ended | |||||||||||
March 31, | March 31, | |||||||||||
Revenues from contracts with customers: | 2024 | 2023 | 2024 | 2023 | ||||||||
Energy Marketing | $ | 332 | $ | 498 | $ | 604 | $ | 1,035 | ||||
Midstream: | ||||||||||||
Pipeline | 65 | 66 | 130 | 131 | ||||||||
Peaking | 77 | 68 | 122 | 124 | ||||||||
Other | 4 | 4 | 7 | 7 | ||||||||
Electricity Generation | 6 | 2 | 14 | 10 | ||||||||
Total revenues from contracts with customers | 484 | 638 | 877 | 1,307 | ||||||||
Other revenues (a) | (1) | 4 | 1 | 6 | ||||||||
Total revenues | $ | 483 | $ | 642 | $ | 878 | $ | 1,313 | ||||
- Represents revenues from certain gathering assets and gains and (losses) on commodity derivative instruments not associated with current-period transactions that are not within the scope of ASC 606 and are accounted for in accordance with other GAAP.
Contract Balances
The timing of revenue recognition may differ from the timing of invoicing to customers or cash receipts. Contract assets represent our right to consideration after the performance obligations have been satisfied when such right is conditioned on something other than the passage of time. Contract assets were not material for all periods presented. Substantially all of our receivables are unconditional rights to consideration and are included in "Accounts receivable" on the Condensed Consolidated Balance Sheets. Amounts billed are generally due within the following month.
Contract liabilities arise when payment from a customer is received before the performance obligations have been satisfied and represent the Company's obligations to transfer goods or services to a customer for which we have received consideration. The
10
Attachments
- Original Link
- Original Document
- Permalink
Disclaimer
UGI Corporation published this content on 03 May 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 03 May 2024 20:48:31 UTC.