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Page 1: Morgan Keegan MLP Conference May 18th, 2010/media/Files/E/... · We Navigated the Storm . $0 $2 $4 $6 $8 $10 $12. Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09

Morgan Keegan MLP Conference

May 18th, 20101

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Forward Looking StatementsThis presentation contains forward looking statements within the meaning of the federal securities laws. Forward looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions. The future results of Crosstex Energy, L.P. and its affiliates (collectively known as “Crosstex”) may differ materially from those expressed in the forward‐looking statements contained throughout this presentation and in documents filed with the SEC. Many of the factors that will determine these results are beyond Crosstex’s ability to control or predict. These statements are necessarily based upon various assumptions involving judgments with respect to the future, including, among others, the ability to achieve synergies and revenue growth; national, international, regional and local economic, competitive and regulatory conditions and developments; technological developments; capital markets conditions; inflation rates; interest rates; the political and economic stability of oil producing nations; energy markets; weather conditions; business and regulatory or legal decisions; the pace of deregulation of retail natural gas and electricity; the timing and success of business development efforts; and other uncertainties. You are cautioned not to put undue reliance on any forward looking statement. Crosstex has no obligation to publicly update or revise any forward looking statement, whether as a result of new information, future events or otherwise. 

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Strategically Positioned for Performance and Growth

Well positioned assets

Lean organization

Financially strong

Poised to take advantage of the macro environment

Focused on long‐term growth

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We Navigated the Storm

$0

$2

$4

$6

$8

$10

$12

Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10

Crosstex announces saleof South Texas and 

Miss./Ala. assets for $220 MM

Crosstex announces sale of Treating 

assets for $266 MM

Crosstex announces $125MM  of Equity from GSO/Blackstone

Crosstex Energy LP (XTEX)

Crosstex announces acquisition of 

Intracoastal and sale of ETX assets

Crosstex completes long term re‐financing  ($725 MM bonds & $425 

MM Credit Facility)

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Midstream energy services company focused 

on full value chain

Assets strategically located in key producing 

areas and market regions

Focus on Barnett and Haynesville shale plays

Focused Midstream Company Diversity of Services

Over 3,300 miles of natural gas gathering 

and transmission pipeline

9 natural gas processing plants

2 fractionators

Over 400 miles of NGL pipeline

2.4 MM barrels of NGL storage capacity

Wellhead

Gathering, Dehydration & Compression

Processing , Conditioning & Treating

Transmission Lines

NGL Transportation & Fractionation

Natural Gas Consumers

NGL Markets

We Span the Value Chain

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Crosstex Energy GP, L.P.

Public/OtherShareholders

100%

Public Unitholders

51%

2% GP Interest100% IDRs

Crosstex Energy, Inc.(NASDAQ:  XTXI)

Directors / Executive   Officers

87% 13%

2%

25%

Crosstex Energy Services, L.P.

All Assets and Operations

Crosstex Energy, L.P.(NASDAQ: XTEX)

22%

GSO Crosstex 

Holdings

6

Crosstex Corporate Structure

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Strategically Positioned Assets North Texas 

~780 miles of pipeline3 processing plants

LIG ~2,100 miles of pipeline2 processing plants

Processing & NGLs  ~440 miles of NGL pipeline

4 processing plants2 fractionation facilities

$113 $80 

$23 2009 Operated Income ($MM)

NTX LIG PNGL

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Strategically Positioned Organizationally

Successful execution has created momentum

Lean, focused organization

Front line management focused on continued execution

Significant acquisition and organic growth experience

Board of directors provides strong support

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Strategically Positioned Financially

Strong balance sheet

Disciplined financial guidelines

Continue to de‐leverage, de‐risk Business

Use highly predictable cash flows to set distributions

Allocate capital to high‐return projects

9

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Wide gas to crude relationship is expected to continue

EIA predicts demand will grow from 53 Bcf/d in 2010 to 70 

Bcf/d in 2025

Unconventional gas basins will fill this gap

Shift in supply will drive need for new infrastructure

XTEX is well positioned to take advantage of this trend

Strategically Positioned for the Macro Environment

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Source: Modified from Morgan Stanley Jan. 13, 2010 E&P Research Report * NYMEX Henry Hub as of 05/04/10

Shales will Provide Significant Opportunities

11

$3.50 $3.50 $3.50$3.70

$3.90 $4.00$4.20

$5.00$5.40

$7.00

$2.0 

$3.0 

$4.0 

$5.0 

$6.0 

$7.0 

$8.0 Deep Bossier (E. Texas)

Granite Wash (Horizontal)

Haynesville

Fayetteville (2.6 Bcf)

Marcellus

Woodford (Anadarko)

Barnett (Core/Tier 1)

Eagleford

Powder River (CBM

)

Piceance (Highlands)

* Current 2010/2011 NYMEX Strip NYMEX Prices Needed to Achieve 10% IRR 

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Macro environment will provide opportunities

Capitalize on strategic positions around core assets

Focus on high‐return projects

Continue to reduce risk in the business

Disciplined financial guidelines will guide growth

Clear path to restoring distributions and dividends

Strategically Positioned for Long-Term Growth

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North Texas

13

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Well Positioned Assets (current capacity) :

NTPL – 375 MMcfd

NTX Gathering Assets – 1 Bcfd +

Azle plant – 50 MMcfd

Goforth plant – 30 MMcfd

Silvercreek plant – 200 MMcfd

North Texas Gathering SystemsNorth Texas Pipeline

Processing Plant

NTX: Strategically Positioned in the Barnett Shale

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NTX: Operating Income 2007 - 2010

Note:  2010 represents mid‐point of guidance 15

$‐

$20,000,000 

$40,000,000 

$60,000,000 

$80,000,000 

$100,000,000 

$120,000,000 

$140,000,000 

2007 2008 2009 2010

NTX G&T Op Income NTX Processing Op Income

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Diverse Customer Base

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NSAI’s Barnett Shale Volume Projections

17Source: Netherland, Sewell & Associates, Inc.

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Majors have moved into the Barnett Shale

NSAI study projects that over 50% of future production will occur 

within 3 miles of our existing infrastructure

To date over 12,000 successful wells have been drilled

14,000 additional locations to drill 

~85% of Crosstex dedicated acres are in Core/Tier 1

Major infrastructure already in place to provide service for base case 

volumes18

NTX: Strategically Positioned for Long-Term Growth

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LIG

19

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LIG: Strategically Located Assets

LIG System NGL System Processing Plant

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Well Positioned Assets (current capacity) :

LIG – 1Bcfd+

Gibson Plant – 145 MMcfd

Plaquemine Plant – 225 MMcfd

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LIG: Operating Income 2007 - 2010

Note:  2010 represents mid‐point of guidance 21

$‐

$10,000,000 

$20,000,000 

$30,000,000 

$40,000,000 

$50,000,000 

$60,000,000 

$70,000,000 

$80,000,000 

$90,000,000 

2007 2008 2009 2010

LIG Mktg. & Transport Op Income LIG Processing Op Income

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Diverse Customer Base

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Haynesville Provides Abundant Near- Term Opportunities

Haynesville ProjectsCapacity MMcf/d Contract

In Service Total  Contracted  Term

N. LIG Contracted Projects

Red River Project Q3 2007 240  240  7 yr

North LIG Expansion Phase I Q4 2008 35  35  10 yr

North LIG Expansion Phase II Q2 2009 100  100  10 yr

Black Lake Interconnect Phase III – Part I Q4 2009 35  35 3 yr

Red River Amine Unit (120 MMcf/d Capacity)           Q4 2009                         3yr

Black Lake Interconnect Phase III – Part II  Q2 2010 25  25 1.5 yr

LIG Phase IV Expansion‐ Part I Q3 2010 30  30 5 yr

Total Contracted  465 465

Current Expansion Project –

Partial System Loop; Phase IV Expansion Part II Q4 2010 est 115 Working 

All Projects 580  465  23

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Franchise position

Exceptional connectivity to interstate markets

Access to river market on S. LIG 

All N. LIG volumes are firm transport

Highly attractive inventory of growth projects

LIG: Strategically Positioned for Long-Term Growth

24

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Processing and NGL’s

25

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PNGL: Strategically Located Assets

LIG System

NGL System

Processing Plant

Intracoastal 26

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PNGL: Operating Income 2007 - 2010

Note:  2010 represents mid‐point of guidance 27

$‐

$5,000,000 

$10,000,000 

$15,000,000 

$20,000,000 

$25,000,000 

$30,000,000 

$35,000,000 

$40,000,000 

$45,000,000 

2007 2008 2009 2010

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Diverse Customer Base

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PNGL: Strategically Positioned for Long-Term Growth

Favorable processing environment

Improved GOM drilling and recent lease sales encouraging

Potential consolidation opportunities

Fractionation capacity constraints

Recent Acquisitions:

₋ Eunice⁻ Intracoastal pipelineIncreased rich gas production creates opportunities

29

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Financial Overview

30

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Summary Operating IncomeOperating Income ($ MM) 2008 2009 2010 (3)

North Texas $103 $113 $111

LIG $82 $80 $74

PNGL (1) $12 $23 $35

Shared Operating Exp. & Other ($14) ($14) ($13)

Total Continuing Operations $183 $202 $207(4)

Discontinued Operations(2) $91 $50 $0

Total $274 $252 $207

(1)   Includes impact of  Eunice lease  buy‐out in 2009 and Intracoastal acquisition‐‐ $2 MM impact in 2009 and $13 MM impact in 2010

(2) Includes contributions from sold assets (STX, Miss, Ala, Treating, Seminole interest, Arkoma, and ETX)

(3) 2010 represents mid‐point of guidance

(4) 2010 continuing operations includes ~$8MM in LC Fee’s that are re‐classed as interest expense 31

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Gross Margin By Contract Type Ex Discontinued Ops 2008-2010

32

58%

10%

17%

15%

2008

G& T Fee POL Proc Margin

66%

12%

13%

9%

2009

G& T Fee POL Proc Margin

71%

16%

11%2%

2010

G& T Fee POL Proc Margin

Non‐commodity based margins have increased from ~68% in 2008 to ~87% in 2010

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Growth & Maintenance Capital

Historical and Projected Growth Capital Expenditures($ in millions)

Historical and Projected Maintenance Capital Expenditures($ in millions)

Crosstex has significantly scaled back growth capital spending

⁻ Focused on execution of projects within the operating footprint

⁻ Scalable nature of current asset base generates high‐return projects

Low maintenance requirements on existing assets

33

$404 

$259 

$136 

$25 $‐

$100 

$200 

$300 

$400 

$500 

2007 2008 2009 2010

$11 

$18 

$11 

$15 

$‐

$4 

$8 

$12 

$16 

$20 

2007 2008 2009 2010

*

*

* Represents low end of 2010 guidance

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Total Year 2010Low High

Net income $                  (41) $                  (10)

Depreciation and amortization 113  113 

Stock‐based compensation 6  6 

LOC Fees & Interest 80  79 

Taxes and other 2  2 

Adjusted EBITDA $                 160  $                 190 

Taxes and other $                    (3) $                    (3)

LOC Fees & Interest $                  (80) $                  (79)

Maintenance capital expenditures $                  (15) $                  (12)

Distributable cash flow $                   62  $                   96 

Growth Capital $                   25  $                   30 

Key Assumptions for Forecast

Weighted Average Liquids Price ($/gallon) $                0.80  $                1.09 

Crude ($/Bbl) $              69.37  $              94.52 

Natural Gas ($/MMBtu) $                6.00  $                5.00 

Natural Gas Liquids to Gas Ratio 149.9% 245.0%

XTEX Distribution per Unit $                0.30 

XTXI Dividends per Share $                0.10 34

Guidance for 2010

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Maintain a conservative capital structure and leverage ratios

Maintain adequate liquidity

Fund organic growth and strategic opportunities with internal 

cash flows and a balanced mix of debt and equity 

Maintain a balanced contract mix and an active commodity 

price hedging program

Conservative Financial Guidelines

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Strategically Positioned Financially

Strong balance sheet

Disciplined financial guidelines

Continue to de‐leverage, de‐risk Business

Use highly predictable cash flows to set distributions

Allocate capital to high‐return projects

Clear path to restoring dividends and distribution 

36

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Q & A

37

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Appendix

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39 39

Reconciliation to Net IncomeNet Income to DCF Reconciliation: Years Ended($ in millions) December 31

2009 2008(Unaudited)

Net income (loss) attributable to Crosstex Energy, L.P. $                   104  $                     11 Depreciation, amortization and impairments (1) 132  163 Stock‐based compensation 9  11 Interest expense, net (2) 130  105 Loss on extinguishment of debt 5  ‐Gain on sale of property (184) (51)Taxes and other 8  6 

Adjusted EBITDA 204  245 ‐ ‐

Interest (2)(3)(4) (121) (83)Cash taxes and other (5) (3) (3)Maintenance capital expenditures (11) (18)Distributable cash flow $                     68  $                   141 

(1) Excludes minority interest share of depreciation and amortization of $290 and $286K for the year ended 2009 and the year ended 2008 respectively. Includes depreciation, amortization and impairments related to discontinued operations of $10.7 and $26.4 million for the year ended 2009 and the year ended 2008 respectively.

(2) Includes interest expense allocated to discontinued operations of  $34.9 and $30.0 million for the  year ended 2009 and the year ended 2008, respectively.

(3) Excludes $4.3 million of debt issuance cost amortization, and $5.2 million of senior secured note make‐whole and call premium paid‐in‐kind interest resulting from repayment of such notes from the proceeds of asset sales, for the year ended 2009.

(4) Excludes noncash interest rate swap mark to market of  ($797K) for the year ended 2009, and  $22.1 million for the year ended 2008. 

(5)Includes Seminole Adjustment of $39 million for the year ended 2008.