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TRANSCRIPT
2007 Annual Report
B U I L D I N G F O R T H E F U T U R E
Building
for the future. We began
2007 with a mindset that the
coming 12 months would be a
“BU I L DI N G yE aR.”
We wanted to strategically
position the company for the
future and continue to build on
the growth projects we
implemented in 2006.
C O N T I N U E D …
2 C R O S S T E X
’04 ’05 ’06 ’07
We changed the way we manage our business wi th the
introduct ion of our Asset Teams, who took
responsibility for our assets and looked for new
ways to enhance them and grow organically.
We added new teammates as we continued to
grow our company with the best and brightest
people in the business. We executed an organic
capital program of over $400 mil l ion as we
drove improved returns on invested capital.
We continued to increase distributions and
dividends from the Corporation, and set new
records for distributable cash flow in each of
the second, third and fourth quarters.
In a l l , we have made great progress. By
focus ing on execut ion , we have ach ieved
remarkable results in a relatively short t ime.
What may have seemed like a distant goal in
2006 is now reality.
We believe that what we’ve done is define
our future.
asset Teams Drive Growth Strategy
The key to our growth s t ra tegy and our
pursuit of excellence is our Asset Teams. We
bel ieve that this approach is a great way to
grow our business and to deliver results that
maximize value.
The Asset Team structure allows us to have
balanced growth across all our assets in North
Texas and Louis iana, a long the Gulf Coast
or wherever we do business. Asset Teams
work because they require members to be
owners who are accountable. Each asset is
run as a business. Frequent communication,
collaboration and teamwork are built in, and
we believe that this sort of team ownership is
crucial to the success of any of our assets.
Back in the early days of Crosstex, when
we had only a small set of assets, the entire
company was an asset team. Each person filled
a particular role to ensure the success of those
assets. Communication among our small group
X T E X & X T X IM a R K E TC a P I T a L I Z a T I O N
Dollars in millions
Crosstex Energy, L.P.XTEX
Crosstex Energy, Inc.XTXI
’04 ’05 ’06 ’07
C O N T I N U E D F R O M I N S I D E F R O N T C O V E R …
The asset Team structure allows us to have balanced growth wherever we do business.
$600 $500
$800
$1,500$1,700
$900
$1,600$1,400
Crosstex is committed to meeting future
transportation demand in North Texas.
C R O S S T E X 5
of employees was essential. The expertise of
each team member was vital in meeting the
needs of the assets.
Through the introduction of the Asset Team
s t ra tegy, we are s t r i v ing to dup l ica te the
ent repreneur ia l sp i r i t o f those ear ly days.
Each team comprises indiv iduals from four
primary disciplines, Corporate Development,
Engineer ing, Operat ions and Commercia l ,
each supported by various functional areas.
Because every individual takes ownership, we
can manage our assets effectively with a keen
eye on the bottom line.
The story of each Asset Team is now the
measuring stick by which we judge our success
as a company. For 2007, we believe that our
Asset Teams best tell the story of the past year.
North Texas – Barnett Shale Creating New Opportunities
North Texas continues to be an exciting area
of development for Crosstex. Our operations
in the area, including our North Texas Pipeline
(NTPL), North Texas gathering assets and the
Parker County processing facilities, continue
to perform well. The Barnett Shale play has
exceeded all expectations and proves why it is
the hottest natural gas play in the United States.
At the end of fourth quarter 2007, the basin was
producing approximately 3.0 Bcf/d, up from 1.8
Bcf/d at year-end 2006.
Cross te x i s commi t t ed to g row ing and
developing the necessary midstream infrastruc-
ture to meet future transportation demand in
N O R T H T E X a Sa S S E T T E a M
6 C R O S S T E X
North Texas. In February of 2008, our NTPL was
flowing over 360,000 MMBtu/d, and is quickly
approaching its capacity of 375,000 MMBtu/d.
Volumes on our North Texas gathering system
have more than tripled since mid-2006, averag-
ing over 400,000 MMBtu/d in Q4 2007 versus
115,000 MMBtu/d at the time of acquisition.
We have connected more than 280 wells to our
gathering systems, approximately 200 of them
in 2007. We began construction in Q3 of a new
$80 mill ion gas gathering system in Johnson
County, and began in September operating our
new 200 MMcf/d Silver Creek processing facil-
ity in Parker County.
Louisiana – Optimizing Our Systems
The cu r r en t g row th i n e xp l o r a t i on and
production activity in Louisiana has dovetailed
perfectly with the location of our assets, and we
have a full inventory of organic growth projects
to enhance our position.
On our 2,000-mile Crosstex LIG system, we
are consistently flowing at about 1 BBTu/d, and
increased drilling activity throughout Louisiana
is creat ing opportuni t ies for addit ional gas
supply. Our new 24-inch Red River Lateral
has created much-needed takeaway capacity
in northern Louisiana, where dri l l ing activity
continues at high levels. Our LIG processing
assets in Louisiana are essentially full, so we
are optimizing partnerships with our processing
assets in southern Louisiana to connect rich
onshore suppl ies to them through the LIG
system. In addition, we have connected new
Gulf of Mexico production to these assets.
Treating – Leading the Industry and Still Growing
Treating continues to be a vital operation for
Crosstex, contributing more than $34 mill ion
annually to our operating income. At the end of
Q4 2007, we had nearly 200 treating and dew
’03 ’04 ’05 ’06 ’07
X T E X & X T X IT R E a T I N G P L a N T S I N S E R V I C E
X T E X & X T X IG R O S S M a R G I N
Dollars in hundred thousands
’03 ’04 ’05 ’06 ’07
$62
50
75
105
190 190
$115
$163
$273
$384
C R O S S T E X L I Ga S S E T T E a M
C R O S S T E X 11
point control plants in service. Crosstex is the
industry leader in amine treating, and our dew
point control business has grown rapidly.
We cont inue to aggressively pursue new
business throughout our systems. We have
instal led two new amine plants at our Blue
Mound site in North Texas, and have agreed
to deals with a major Barnett Shale player for
dew point control units in the region. Treating
also continues to investigate new and emerging
business opportunities in the Fayetteville and
New Albany Shales.
South Texas – Better Serving Our Customers
Our 1,370 miles of South Texas pipeline run
through some of the most prolific gas-producing
areas in the region. We have cont inued to
improve and enhance exist ing operations in
the area to add value to our system. In 2007,
we made a firm commitment to growth in the
region by bringing on new people with extensive
experience and established relationships in the
area, and we are seeing the benefits.
In addition, we have completed enhancements
to our systems, including our Gregory 10-inch
loop line, which has facilitated new business
re la t ionsh ips in the reg ion . Th is upgrade
has al leviated bott lenecks into our Gregory
processing facility, increasing inlet capacity and
creating access to more prolific production near
the plant.
X T E X & X T X IM I L E S O F P I P E L I N E
’03 ’04 ’05 ’06 ’07
S O U T H L O U I S I a N a P R O C E S S I N G a S S E T T E a M
2,750
4,5004,900 5,100
5,400
We have continued to improve and enhance our
existing operations to add value to our system.
12 C R O S S T E X
Mississippi/alabama –Realizing Record Results
Crosstex operates the largest in t rastate
pipel ine in Mississ ippi , ut i l i z ing about 600
mi les of 8- to 20- inch l ines. Our assets in
Mississippi and Alabama continue to perform
above expectations, posting record financial
earnings and volumes in 2007. Increased drilling
activity in the area has generated new business
opportun i t ies across the region, inc luding
system expansion and amine treating facilities.
We are looping our Miss iss ippi System to
optimize and increase our pipeline capacity, and
we are planning connections to major interstate
pipelines in the area.
East Texas – Ramping Up To Meet Demand
East Texas dr i l l i ng ac t i v i t y had a ma jo r
resurgence in 2007, and Crosstex is ramping
up to meet the increased demand for services.
Our Har r i son Sys tem i s runn ing a t nea r-
maximum capacity of about 50 MMcf/d, and we
are looping the system to meet the increased
supply. Throughput capacity on the system is
anticipated to be 150 MMcf/d when the looping
is complete. We are also evaluating the addition
of a 100 MMcf/d cryogenic processing plant
and are installing two refrigeration units on the
system while awaiting the new cryogenic plant.
arkoma – Increasing Shale activity
Crosstex is excited about the growth of the
Woodford Shale in Oklahoma, and we feel that
our Arkoma System is ideally situated to take
advantage of increased activity. We’ve mobilized
our personnel and resources on the western end
of our system to meet the anticipated growth.
’03 ’04 ’05 ’06 ’07
X T E X & X T X IE M P L O y E EC O U N T
S O U T H T E X a Sa S S E T T E a M
190
320
500
600
700+
Our assets in Mississippi and alabama continue to perform above expectations, posting record financial earnings and volumes in 2007.
C R O S S T E X 1514 C R O S S T E X
In al l , 2007 was an extraordinary year for
Crosstex. In 2005 and 2006, we made the
largest acquisitions in the company’s history.
The year 2007 was about del iver ing on the
potential of these great new assets, serving as
a bridge that connects us from the foundation
set in 2006 to today. Our aggressive organic
growth strategy is paying dividends throughout
our company, inc lud ing the successes o f
our Red River Lateral in northern Louisiana
and our improvements to our Eunice plant in
southern Louisiana.
The pas t year has no t been w i thou t i t s
obs tac l es . Bu t we con t i nue t o mee t ou r
chal lenges through constant self-evaluation
and improvement: We’re strengthening our
organization from the bottom up. Our Asset
Team strategy has improved communication,
fostered employee ownership and given our
assets the attention they deserve. Our recruiting
and training programs are ensuring that we
find the best and the brightest, bring them to
Crosstex, and develop them into our future
leaders. Our corporate culture is unique in the
industry, and we believe that it will continue to
attract people to work at Crosstex and stay for
the course of their careers.
When 2007 began, it seemed to us that we
were enter ing a tunnel . We had just made
major investments to build for our future, but
we could not be certain of what was ahead.
The pinpoint of l ight at the end of the tunnel
fueled our opt imism. We see now that i t is
growing, and that the future for Crosstex is
brighter than ever.
I’m thankful to all of our team members for their
passion, perseverance and hard work that have
made Crosstex the company it is today. Without
their ownership and dedication, none of what we
have accomplished would have been possible.
I’m also thankful to you for your confidence
in Crosstex and for entrust ing us with your
investment. We will work tirelessly to continue to
earn your confidence in 2008 and beyond.
X T E XD I S T R I B U T a B L E C a S H F L O W
Dollars in millions
37.24
31.02
Equity Price Performance
B a R R y E . D a V I SP R E S I D E N T a n d C E O
$75
$70
$65
$60
$55
$50
$45
$40
$35
$30
$25
$20
$15
$10
$5
$0
12
.12
.02
4.1
.03
7.1
.03
10
.1.0
3
1.1
.04
4.1
.04
7.1
.04
10
.1.0
4
1.1
.05
4.1
.05
7.1
.05
10
.1.0
5
1.3
.06
4.3
.06
7.3
.06
10
.2.0
6
1.3
.07
3.3
0.0
7
6.2
9.0
7
9.2
8.0
7
12
.31
.07
Uni
t /
Sha
re P
rice
Crosstex Energy, LP Crosstex Energy, Inc.
8.8.05: $42.25Announced Agreement to Acquire El Paso Assets
5.2.06: $36.60Announced Agreement to Acquire Chief Midstream Assets
2.17.04: $24.50Acquired LIG System from AEP
6.30.03: $16.40Closed DEFS Acquisition
1.13.04: XTXI IPO at $6.50 per Share (Split Adjusted)
12.12.02: XTEX IPO at $10.00 per Unit (Split Adjusted)
Q2.04 Q4.04 Q2.05 Q4.05 Q2.06 Q4.06 Q2.07 Q4.07
$50.0
$37.5
$25.0
$12.5
$0
President’s Letter
B R y a N H . L a W R E N C E
Chairman of the Board
(XTXI, XTEX)
C E C I L E .M a R T I N , J R .
Director
(XTXI, XTEX)
R O B E R T F .M U R C H I S O N
Director
(XTXI, XTEX)
K y L E D .V a N N
Director
(XTEX)
R H y S J . B E S T
Director
(XTEX)
J a M E S C .C R a I N
Director
(XTXI, XTEX)
B a R R y E .D a V I S
Director, President
& CEO
(XTXI, XTEX)
L E L D O N E .E C H O L S
Director
(XTXI, XTEX)
S H E L D O N B .L U B a R
Director
(XTXI, XTEX)
J a C K M . L a F I E L DE x e c u t i v e V i c e P r e s i d e n t ,C o r p o r a t e D e v e l o p m e n t
B a R R y E . D a V I SP r e s i d e n t a n d C E O
W I L L I a M W . D a V I SE x e c u t i v e V i c e P r e s i d e n t a n d C F O
J O E a . D a V I SE x e c u t i v e V i c e P r e s i d e n t a n d G e n e r a l C o u n s e l
R O B E R T S . P U R G a S O NE x e c u t i v e V i c e P r e s i d e n t a n d C O O
UNITHOLDER & STOCKHOLDER INFORMATION
E X C H A N G E L I S T I N G
Crosstex Energy, Inc. common shares are listed on the
NASDAQ national market under the symbol XTXI.
Crosstex Energy, LP common units are listed on the
NASDAQ national market under the symbol XTEX.
T R A N S F E R A G E N T , U N I T H O L D E R
& S T O C K H O L D E R R E C O R D S
American Stock Transfer & Trust Company
59 Maiden Lane
Plaza Level
New York, NY 10038
212.936.5100
www.amstock.com
A U D I T O R S
KPMG LLP
I N V E S T O R I N F O R M A T I O N
Copies of annual reports, press releases and other
publications are available without charge from:
Crosstex Energy
Investor Relations
2501 Cedar Springs, Suite 100
Dallas, Texas 75201
214.953.9500
214.953.9501 FAX
W E B A D D R E S S
www.crosstexenergy.com
Refer to our web site for:
- Company News
- Earnings Calls Schedules
- Press Releases
- K-1 Information
- Distribution & Dividend Information
K-1s were mailed to unitholders in February 2008.
This Annual Report is distributed with the SEC Form 10-K for Crosstex Energy, Inc. and Crosstex Energy,
L.P., which are incorporated in this Annual Report by this reference. This Annual Report is subject to the
SEC Form 10-K reports, each of which includes a more complete description of each company’s business
and factors that may affect each company, specifically including those matters described in the section titled
“Risk Factors.” If the SEC Form 10-K reports are not included, copies are available at the Company’s web
site (www.crosstexenergy.com) or by contacting Crosstex’s Investor Relations Department.
Board of Directors
Executive Management Team (L-R)
2501 Cedar Spr ings , Su i t e 100 Da l l a s , Texas 75201 214 .953 .9500 www.cross t exenergy. com