TEP Tallgrass Energy Partners, LP Common Units Representing Limited Partner Interests (delisted)

• $340 million of strategic acquisitions and organic growth projects announced during the quarter
• Healthy distribution coverage of 1.30x at TEP
• Conservative financial leverage of approximately 3.1x at TEP

Tallgrass Energy Partners, LP (NYSE: TEP) ("TEP") and Tallgrass Energy GP, LP (NYSE: TEGP) ("TEGP") today reported financial and operating results for the first quarter of 2018.

“Tallgrass Energy once again delivered the strong quarterly financial results that our unitholders and shareholders have come to expect,” said President and CEO David Dehaemers Jr. “These results were driven by consistent performance in our Natural Gas and Crude Oil transportation segments and continued growth in our Gathering, Processing and Terminalling segment, all of which led to our 19th and 11th consecutive distribution increases at TEP and TEGP, respectively.

"Our team remains focused on growing Tallgrass through strategic acquisitions and organically developed growth projects that will continue to expand our assets and footprint," added Dehaemers. "In addition, our team is also focused on completing TEGP’s pending acquisition of the publicly held TEP units that will result in a single unified public company, Tallgrass Energy, LP or TGE. We believe this streamlined entity, with shareholders receiving dividends and 1099s, will attract wider and more cost-effective capital investment to enhance shareholder returns on our commercial growth plans."

First Quarter Distributions

Tallgrass Energy Partners, LP

As previously announced, the board of directors of TEP's general partner declared a quarterly cash distribution of $0.975 per common unit for the first quarter of 2018. This quarterly distribution represents $3.90 on an annualized basis, a sequential increase of 1.0 percent from the fourth quarter 2017 distribution and an increase of 16.8 percent from the first quarter 2017 distribution. The quarterly distribution will be paid on May 15, 2018, to unitholders of record as of the close of business on April 30, 2018.

Tallgrass Energy GP, LP

Also, as previously announced, the board of directors of TEGP's general partner declared a quarterly cash dividend of $0.4875 per Class A share for the first quarter of 2018. This quarterly dividend represents $1.95 per Class A share on an annualized basis, a sequential increase of 32.7 percent from the fourth quarter 2017 dividend and an increase of 69.6 percent from the first quarter 2017 dividend. The quarterly dividend will be paid on May 15, 2018, to Class A shareholders of record as of the close of business on April 30, 2018.

Tallgrass Energy Partners, LP Summary Financial Information

    Three Months Ended March 31, (in thousands, except coverage and per unit data) 2018     2017   Net income attributable to partners $ 107,884 $ 70,905 Add: Interest expense, net 28,184 14,689 Depreciation and amortization expense(1) 25,854 21,867 Distributions from unconsolidated investments 65,857 30,819 Non-cash compensation expense(2) 2,755 1,458 Less: Equity in earnings of unconsolidated investments (53,406 ) (20,738 ) Gain on disposal of assets (9,417 ) (1,448 ) Non-cash gain related to derivative instruments(1) (2,674 ) (2,441 ) Adjusted EBITDA(3) $ 165,037   $ 115,111   Add: Deficiency payments received, net(1) 11,195 16,071 Less: Cash interest cost (27,001 ) (13,567 ) Maintenance capital expenditures, net (3,030 ) (63 ) Distributable Cash Flow(3) 146,201 117,552 Less: Distributions (112,453 ) (91,366 ) Amounts in excess of distributions(4) $ 33,748   $ 26,186   Distribution coverage 1.30 x 1.29 x   Common units outstanding(5) 73,200 72,438 Distribution per common unit $ 0.9750 $ 0.8350 (1)  

Net of noncontrolling interest.

(2)

Represents TEP's portion of non-cash compensation expense related to Equity Participation Units, excluding amounts allocated to Tallgrass Development, LP.

(3)

Adjusted EBITDA and Distributable Cash Flow are non-GAAP measures. For additional detail see "Non-GAAP Measures" below.

(4)

Cumulative distribution coverage from TEP's IPO in May 2013 through March 31, 2018, is $361.7 million and the cumulative distribution coverage ratio is 1.31x.

(5)

Common units represent the number of units as of the date of record for the first quarter distributions in both 2018 and 2017.

 

Conference Call

Please join Tallgrass Energy for a conference call and webcast to discuss first quarter 2018 results at 3:30 p.m. Central Time on Thursday, May 3, 2018. Interested parties may listen via a link posted on the Investor Relations section of our website and the replay will be available on our website for at least seven days following the live call.

Tallgrass Energy Partners, LP Alternative Reconciliation

Adjusted EBITDA and Distributable Cash Flow, as defined in "TEP's Non-GAAP Measures" below, may be impacted by the timing of cash payments received as a result of shipper deficiency payments received or utilized during the period. As such, we have also provided an alternative reconciliation of Adjusted EBITDA that illustrates the impact of this item. This alternative reconciliation is also a non-GAAP Measure. Management believes this information provides investors useful information regarding the impact of this item on our current results as well as the potential impact on future results.

Alternative Reconciliation of Adjusted EBITDA

   

Three Months EndedMarch 31,

(in thousands) 2018   Adjusted EBITDA $ 165,037 Add: Volumetric deficiency payments received, net(1) 11,195 Alternative Adjusted EBITDA(2) $ 176,232 (1)  

Cumulative net volumetric deficiency balance at March 31, 2018, is $99.6 million.

(2)

Alternative Adjusted EBITDA shows what TEP's Adjusted EBITDA would have been for the period presented if TEP included net volumetric deficiency payments from shippers' firm, take-or-pay contracts in calculating Adjusted EBITDA. TEP's reported distributable cash flow and distribution coverage would remain unchanged.

 

Tallgrass Energy Partners, LP Segment Overview(1)

The first quarter 2018 comparative results by segment are summarized below:

    Three Months Ended March 31, 2018     2017 (in thousands) Natural Gas Transportation Operating income $ 19,384 $ 18,168 Add: Depreciation and amortization expense 4,827 4,783 Distributions from unconsolidated investment 65,857 30,125 Other income, net 451 70 Less: Non-cash gain related to derivative instruments —   (116 ) Segment Adjusted EBITDA $ 90,519   $ 53,030     Three Months Ended March 31, 2018 2017 (in thousands) Crude Oil Transportation Operating income $ 46,527 $ 43,725 Add: Depreciation and amortization expense(2) 13,279 13,287 Less: Adjusted EBITDA attributable to noncontrolling interests (350 ) (871 ) Non-cash gain related to derivative instruments(2) —   (650 ) Segment Adjusted EBITDA $ 59,456   $ 55,491     Three Months Ended March 31, 2018 2017 (in thousands) Gathering, Processing & Terminalling Operating income $ 23,305 $ 5,106 Add: Depreciation and amortization expense(2) 7,112 3,797 Non-cash (gain) loss related to derivative instruments (2,674 ) 210 Distributions from unconsolidated investment — 694 Less: Gain on disposal of assets (9,417 ) (1,448 ) Adjusted EBITDA attributable to noncontrolling interests (1,411 ) (8 ) Segment Adjusted EBITDA $ 16,915   $ 8,351   (1)  

Segment reporting does not include corporate general and administrative costs or intersegment eliminations.

(2)

Net of noncontrolling interest.

 

Tallgrass Energy GP, LP Summary Financial Information

Information on distributions to Tallgrass Equity, LLC ("Tallgrass Equity"), TEGP and TEGP's Class A shareholders is shown below (in thousands, except coverage and per share data):

    Three Months Ended March 31, 2018     2017   Distributions to Tallgrass Equity TEP General partner interest(1) $ 1,267 $ 1,040 TEP Incentive Distribution Rights(1) 39,816 29,840 TEP common units owned by Tallgrass Equity (25.6 million and 20 million at March 31, 2018 and March 31, 2017, respectively)(1) 24,979 16,700 Distributions from REX 21,976   —   Total distributions to Tallgrass Equity 88,038 47,580 Less: Cash interest expense attributable to Tallgrass Equity (1,459 ) (1,209 ) Cash general and administrative expenses attributable to Tallgrass Equity(2) (2,000 ) (500 ) Cash available for distribution by Tallgrass Equity 84,579 45,871 Distributions to Class A (TEGP) 28,316 16,697 Distributions to Class B (Exchange Right Holders) 61,771   28,507   Total cash distributions by Tallgrass Equity $ 90,087   $ 45,204   TEGP Distributions from Tallgrass Equity $ 28,316 $ 16,697 Less: Distributions to Class A shareholders (28,316 ) (16,697 ) Amounts in excess of distributions $ —   $ —   Distribution coverage 1.00 x 1.00 x   Class A shares outstanding 58,085 58,075 Distribution per Class A share $ 0.4875 $ 0.2875 (1)  

The three-month periods ended March 31, 2018, and March 31, 2017, include distributions expected to be received or received by Tallgrass Equity from TEP's distribution for the quarters ended March 31, 2018, and March 31, 2017, respectively.

(2)

General and administrative expenses for the quarter ended March 31, 2018, include $1.5 million in expenses attributable to the TEGP Merger Agreement and Tallgrass Equity's acquisition of an additional 25.01% membership interest in Rockies Express and additional TEP common units.

 

Rockies Express Pipeline LLC Summary Financial Information

TEP acquired a 25 percent interest in Rockies Express Pipeline LLC ("REX") effective May 6, 2016, and an additional 24.99 percent interest in REX effective March 31, 2017. Tallgrass Equity, LLC ("Tallgrass Equity") acquired a 25.01 percent interest in REX effective February 7, 2018. The financial results of TEP and Tallgrass Equity include their respective membership interests in REX. The table below is a reconciliation of REX's Adjusted EBITDA and Distributable Cash Flow for the three months ended March 31, 2018 and 2017, presented to provide additional information on REX's financial results. REX’s Adjusted EBITDA and Distributable Cash Flow are non-GAAP measures. For additional detail see "Non-GAAP Measures" below.

    Three Months Ended March 31, 2018     2017 (in thousands) Rockies Express Pipeline LLC Net income $ 90,968 $ 66,250 Add: Interest expense, net 41,970 41,826 Depreciation and amortization expense 54,862   54,191   Adjusted EBITDA 187,800   162,267   Less: Cash interest cost (41,136 ) (40,992 ) Change in contract asset (15,575 ) — Maintenance capital expenditures (3,796 ) (3,581 ) Distributable Cash Flow $ 127,293   $ 117,694     Distributions to Members $ (131,740 ) $ (120,501 ) Contributions from Members $ 4,728 $ 26,771  

Merger Transaction

In connection with the merger agreement announced on March 26, 2018, pursuant to which TEGP will acquire the TEP common units held by the public in a share-for-unit merger transaction that is taxable for U.S. federal income purposes at a ratio of 2.0 TEGP Class A shares for each outstanding TEP common unit, TEGP filed a registration statement on Form S-4 with the Securities and Exchange Commission (“SEC”) that includes a preliminary proxy statement for TEP unitholders. The registration statement has not yet been declared effective, although we anticipate that such registration statement will be declared effective and TEP will mail the definitive proxy statement to its unitholders in the coming weeks.

TEP has scheduled a special meeting of its unitholders to vote on the merger agreement and the transactions related thereto on June 26, 2018, at 10 a.m., Central Time, at the Hilton Garden Inn, 5800 College Boulevard, Overland Park, Kan. 66211. All holders of TEP common units as of the close of business on May 18, 2018, will be entitled to vote at such special meeting.

Non-GAAP Measures

Adjusted EBITDA and Distributable Cash Flow are non-GAAP supplemental financial measures that TEP management and external users of our consolidated financial statements and financial statements of our subsidiaries and unconsolidated investments, such as industry analysts, investors, lenders and rating agencies, may use to assess:

• our operating performance as compared to other publicly traded partnerships in the midstream energy industry, without regard to historical cost basis or, in the case of Adjusted EBITDA, financing methods;
• the ability of our assets to generate sufficient cash flow to make distributions to our unitholders;
• our ability to incur and service debt and fund capital expenditures; and
• the viability of acquisitions and other capital expenditure projects and the returns on investment of various expansion and growth opportunities.

We believe that the presentation of Adjusted EBITDA and Distributable Cash Flow provides useful information to investors in assessing our financial condition and results of operations. Adjusted EBITDA and Distributable Cash Flow should not be considered alternatives to net income, operating income, net cash provided by operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP, nor should Adjusted EBITDA and Distributable Cash Flow be considered alternatives to available cash, operating surplus, distributions of available cash from operating surplus or other definitions in our partnership agreement. Adjusted EBITDA and Distributable Cash Flow have important limitations as analytical tools because they exclude some but not all items that affect net income and net cash provided by operating activities. Additionally, because Adjusted EBITDA and Distributable Cash Flow may be defined differently by other companies in our industry, our definition of Adjusted EBITDA and Distributable Cash Flow may not be comparable to similarly titled measures of other companies, thereby diminishing their utility.

We generally define Adjusted EBITDA as net income excluding the impact of interest, income taxes, depreciation and amortization, non-cash income or loss related to derivative instruments, non-cash long-term compensation expense, impairment losses, gains or losses on asset or business disposals or acquisitions, gains or losses on the repurchase, redemption or early retirement of debt, and earnings from unconsolidated investments, but including the impact of distributions from unconsolidated investments. We also use Distributable Cash Flow, which we generally define as Adjusted EBITDA, plus deficiency payments received from or utilized by our customers, less cash interest costs, maintenance capital expenditures, distributions to noncontrolling interests in excess of earnings allocated to noncontrolling interests, and certain cash reserves permitted by our partnership agreement. For a reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measures, please see "Summary Financial Information" above.

Additional Information and Where to Find it

In connection with the transactions referred to in this material, TEGP filed a registration statement on Form S-4 with the SEC that includes a preliminary proxy statement for TEP unitholders. The registration statement has not yet been declared effective. After the registration statement is declared effective, TEP will mail the definitive proxy statement to its unitholders. This material is not a substitute for the joint proxy statement/prospectus or registration statement or for any other document that TEGP or TEP may file with the SEC and send to TEGP’s and/or TEP’s shareholders or unitholders in connection with the proposed transactions.

INVESTORS AND SECURITY HOLDERS OF TEGP AND TEP ARE URGED TO READ THE PROXY STATEMENT/PROSPECTUS AND OTHER DOCUMENTS FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION.

This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval.

Investors and security holders will be able to obtain free copies of the proxy statement/prospectus and other documents filed with the SEC by TEGP or TEP through the website maintained by the SEC at http://www.sec.gov. Copies of the documents filed with the SEC by TEGP and TEP will be available free of charge on TEGP’s and TEP’s website at www.tallgrassenergylp.com, in the “Investor Relations” tab near the top of the page, or by contacting TEGP’s and TEP’s Investor Relations Department at 913-928-6012.

Participants in the Solicitation

TEGP and TEP and their respective general partner’s directors and executive officers may be considered participants in the solicitation of proxies with respect to the proposed transactions under the rules of the SEC. Information about the directors and executive officers of TEGP’s general partner may be found in its 2017 Form 10-K filed with the SEC on Feb. 13, 2018, and any subsequent statements of changes in beneficial ownership filed with the SEC. Information about the directors and executive officers of TEP may be found in its 2017 Form 10-K filed with the SEC on Feb. 13, 2018, and any subsequent statements of changes in beneficial ownership filed with the SEC. These documents can be obtained free of charge from the sources indicated above. Additional information regarding the participants in the proxy solicitations and a description of their direct and indirect interests, by security holdings or otherwise, will also be included in any proxy statement and other relevant materials to be filed with the SEC when they become available.

Cautionary Note Concerning Forward-Looking Statements

Disclosures in this press release contain “forward-looking statements.” All statements, other than statements of historical facts, included in this press release that address activities, events or developments that management expects, believes or anticipates will or may occur in the future are forward-looking statements. Without limiting the generality of the foregoing, forward-looking statements contained in this press release specifically include whether the registration statement on Form S-4 TEGP filed with the SEC will be declared effective and the pending acquisition of TEP by TEGP will close and, if the transaction closes, whether it will attract wider and more cost-effective capital investments or enhance shareholder returns on our commercial growth plans. Forward looking statements may also include the expectations of plans, strategies, objectives and growth and anticipated financial and operational performance of TEP, TEGP and their subsidiaries, including: the ability to pursue expansions and other opportunities for incremental volumes; natural gas and crude oil production growth in TEP's operating areas; expected future benefits of acquisitions or expansion projects; timing of anticipated spending on planned expenses and maintenance capital projects; and distribution rate and growth, including variability of quarterly distribution coverage. These statements are based on certain assumptions made by TEP and TEGP based on management’s experience and perception of historical trends, current conditions, anticipated future developments and other factors believed to be appropriate. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of TEP and TEGP, which may cause actual results to differ materially from those implied or expressed by the forward-looking statements. These include risks relating to TEP and TEGP’s financial performance and results, availability of sufficient cash flow to pay distributions and execute their business plans, the demand for natural gas storage, processing and transportation services and for crude oil transportation services, operating hazards, the effects of government regulation, tax position and other risks incidental to transporting, storing and processing natural gas or transporting crude oil and other important factors that could cause actual results to differ materially from those projected, including those set forth in reports filed by TEP and TEGP with the Securities and Exchange Commission. Any forward-looking statement applies only as of the date on which such statement is made and TEP and TEGP do not intend to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law.

Tax Considerations

This release is intended to be a qualified notice to nominees and brokers under Treasury Regulation Sections 1.1446-4(b)(4) and (d). All of TEP’s distributions to foreign investors are attributable to income that is effectively connected with a United States trade or business. Accordingly, TEP’s distributions to foreign investors are subject to federal income tax withholding at the highest effective tax rate.

About Tallgrass Energy

Tallgrass Energy is a family of companies that includes publicly traded partnerships Tallgrass Energy Partners, LP (NYSE: TEP) and Tallgrass Energy GP, LP (NYSE: TEGP). Operating across 11 states, Tallgrass is a growth-oriented midstream energy operator with transportation, storage, terminal, water, gathering and processing assets that serve some of the nation’s most prolific crude oil and natural gas basins.

To learn more, please visit our website at www.tallgrassenergy.com.

Tallgrass Energy Partners, LP Financial Statements

TALLGRASS ENERGY PARTNERS, LP

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

        March 31, 2018 December 31, 2017 (in thousands) ASSETS Current Assets: Cash and cash equivalents $ 4,065 $ 1,809 Accounts receivable, net 131,401 118,615 Receivable from related parties 4,472 1,340 Gas imbalances 822 1,990 Inventories 32,147 21,609 Derivative assets 306 — Prepayments and other current assets 10,946   11,175   Total Current Assets 184,159 156,538 Property, plant and equipment, net 2,498,715 2,394,337 Goodwill 404,838 404,838 Intangible assets, net 136,554 97,731 Unconsolidated investments 950,587 909,531 Deferred financing costs, net 11,008 11,684 Deferred charges and other assets 5,018   2,694   Total Assets $ 4,190,879   $ 3,977,353   LIABILITIES AND EQUITY Current Liabilities: Accounts payable $ 119,932 $ 98,882 Accounts payable to related parties 64 5,461 Gas imbalances 1,616 1,663 Derivative liabilities — 2,368 Accrued taxes 24,181 19,272 Accrued liabilities 36,894 35,659 Deferred revenue 99,922 88,471 Other current liabilities 7,816   7,171   Total Current Liabilities 290,425 258,947 Long-term debt, net 2,302,014 2,146,993 Other long-term liabilities and deferred credits 19,628   18,965   Total Long-term Liabilities 2,321,642 2,165,958 Commitments and Contingencies Equity: Limited partners (73,199,753 common units outstanding at March 31, 2018 and December 31, 2017) 2,152,036 2,109,316 General partner (834,391 units outstanding at March 31, 2018 and December 31, 2017) (640,536 ) (625,537 ) Total Partners' Equity 1,511,500 1,483,779 Noncontrolling interests 67,312   68,669   Total Equity 1,578,812   1,552,448   Total Liabilities and Equity $ 4,190,879   $ 3,977,353        

TALLGRASS ENERGY PARTNERS, LP

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

  Three Months Ended March 31, 2018     2017 (in thousands, except per unit amounts) Revenues: Crude oil transportation services $ 84,738 $ 84,331 Natural gas transportation services 32,196 31,685 Sales of natural gas, NGLs, and crude oil 38,145 15,381 Processing and other revenues 24,015   13,003   Total Revenues 179,094   144,400   Operating Costs and Expenses: Cost of sales 26,351 12,370 Cost of transportation services 10,420 13,503 Operations and maintenance 16,399 12,903 Depreciation and amortization 26,123 21,403 General and administrative 16,367 13,663 Taxes, other than income taxes 8,879 8,226 Gain on disposal of assets (9,417 ) (1,448 ) Total Operating Costs and Expenses 95,122   80,620   Operating Income 83,972   63,780   Other Income (Expense): Equity in earnings of unconsolidated investments 53,406 20,738 Interest expense, net (28,184 ) (14,689 ) Other income, net 451   1,955   Total Other Income (Expense) 25,673   8,004   Net income 109,645 71,784 Net income attributable to noncontrolling interests (1,761 ) (879 ) Net income attributable to partners $ 107,884   $ 70,905   Allocation of income to the limited partners: Net income attributable to partners $ 107,884 $ 70,905 General partner interest in net income (41,032 ) (30,583 ) Net income available to common unitholders 66,852   40,322   Basic net income per common unit $ 0.91   $ 0.56   Diluted net income per common unit $ 0.91   $ 0.55   Basic average number of common units outstanding 73,200 72,544 Diluted average number of common units outstanding 73,675 73,580      

TALLGRASS ENERGY PARTNERS, LP

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

  Three Months Ended March 31, 2018     2017 (in thousands) Cash Flows from Operating Activities: Net income $ 109,645 $ 71,784 Adjustments to reconcile net income to net cash flows provided by operating activities: Depreciation and amortization 27,502 23,575 Equity in earnings of unconsolidated investments (53,406 ) (20,738 ) Distributions from unconsolidated investments 52,064 20,740 Gain on disposal of assets (9,417 ) (1,448 ) Other noncash items, net 148 (1,674 ) Changes in components of working capital: Accounts receivable and other (12,015 ) 2,450 Accounts payable and accrued liabilities 14,775 (5,691 ) Deferred revenue 10,750 16,202 Other current assets and liabilities (1,596 ) (819 ) Other operating, net 108   (140 ) Net Cash Provided by Operating Activities 138,558   104,241   Cash Flows from Investing Activities: Acquisition of BNN North Dakota, net of cash acquired (95,000 ) — Capital expenditures (58,760 ) (26,769 ) Sale of Tallgrass Crude Gathering 50,046 — Acquisition of 38% membership interest in Deeprock North (19,500 ) — Distributions from unconsolidated investments in excess of cumulative earnings 13,793 10,079 Acquisition of Rockies Express membership interest — (400,000 ) Acquisition of Terminals and NatGas — (140,000 ) Other investing, net (19,616 ) (5,352 ) Net Cash Used in Investing Activities (129,037 ) (562,042 ) Cash Flows from Financing Activities: Borrowings under revolving credit facility, net 155,000 552,000 Distributions to unitholders (111,014 ) (88,159 ) Acquisition of Pony Express membership interest (50,000 ) — Proceeds from public offering, net of offering costs — 99,373 Partial exercise of call option — (72,381 ) Repurchase of common units from TD — (35,335 ) Other financing, net (1,251 ) 1,628   Net Cash (Used in) Provided by Financing Activities (7,265 ) 457,126   Net Change in Cash and Cash Equivalents 2,256 (675 ) Cash and Cash Equivalents, beginning of period 1,809     1,873   Cash and Cash Equivalents, end of period $ 4,065     $ 1,198   Schedule of Noncash Investing and Financing Activities: Contribution of 38% membership interest in Deeprock North to Deeprock Development $ (19,500 ) $ — Issuance of noncontrolling interests in Deeprock Development in exchange for 62% membership interest in Deeprock North $ (31,843 ) $ — Increase in accrual for payment of property, plant and equipment $ 1,336 $ —          

TALLGRASS ENERGY GP, LP

CONDENSED CONSOLIDATING BALANCE SHEETS

(UNAUDITED)

  March 31, 2018 December 31, 2017 TEP    

ConsolidatingAdjustments (1)

    TEGP TEP    

ConsolidatingAdjustments (1)

    TEGP (in thousands) (in thousands) ASSETS Current Assets: Cash and cash equivalents $ 4,065 $ 190 $ 4,255 $ 1,809 $ 784 $ 2,593 Accounts receivable, net 131,401 — 131,401 118,615 — 118,615 Receivable from related parties 4,472 — 4,472 1,340 — 1,340 Gas imbalances 822 — 822 1,990 — 1,990 Inventories 32,147 — 32,147 21,609 — 21,609 Derivative assets 306 — 306 — — — Prepayments and other current assets 10,946   74   11,020   11,175   —   11,175 Total Current Assets 184,159 264 184,423 156,538 784 157,322 Property, plant and equipment, net 2,498,715 — 2,498,715 2,394,337 — 2,394,337 Goodwill 404,838 — 404,838 404,838 — 404,838 Intangible assets, net 136,554 — 136,554 97,731 — 97,731 Unconsolidated investments 950,587 495,452 1,446,039 909,531 — 909,531 Deferred tax asset — 306,304 306,304 — 312,997 312,997 Deferred financing costs, net 11,008 761 11,769 11,684 879 12,563 Deferred charges and other assets 5,018   —   5,018   2,694   —   2,694 Total Assets $ 4,190,879   $ 802,781   $ 4,993,660   $ 3,977,353   $ 314,660   $ 4,292,013 LIABILITIES AND EQUITY Current Liabilities: Accounts payable $ 119,932 $ 1,440 $ 121,372 $ 98,882 $ — $ 98,882 Accounts payable to related parties 64 (64 ) — 5,461 (119 ) 5,342 Gas imbalances 1,616 — 1,616 1,663 — 1,663 Derivative liabilities — — — 2,368 — 2,368 Accrued taxes 24,181 — 24,181 19,272 — 19,272 Accrued liabilities 36,894 134 37,028 35,659 48 35,707 Deferred revenue 99,922 — 99,922 88,471 — 88,471 Other current liabilities 7,816   —   7,816   7,171   —   7,171 Total Current Liabilities 290,425 1,510 291,935 258,947 (71 ) 258,876 Long-term debt, net 2,302,014 124,000 2,426,014 2,146,993 146,000 2,292,993 Other long-term liabilities and deferred credits 19,628   —   19,628   18,965   —   18,965 Total Long-term Liabilities 2,321,642 124,000 2,445,642 2,165,958 146,000 2,311,958 Equity: Total Partners' Equity 1,511,500 (1,495,885 ) 15,615 1,483,779 (1,435,166 ) 48,613 Noncontrolling interests 67,312   2,173,156   2,240,468   68,669   1,603,897   1,672,566 Total Equity 1,578,812   677,271   2,256,083   1,552,448   168,731   1,721,179 Total Liabilities and Equity $ 4,190,879   $ 802,781   $ 4,993,660   $ 3,977,353   $ 314,660   $ 4,292,013 (1)   Represents the aggregate consolidating adjustments necessary to produce consolidated financial statements for TEGP.          

TALLGRASS ENERGY GP, LP

CONDENSED CONSOLIDATING STATEMENTS OF INCOME

(UNAUDITED)

  Three Months Ended March 31, 2018 Three Months Ended March 31, 2017 TEP    

ConsolidatingAdjustments (1)

    TEGP TEP    

ConsolidatingAdjustments (1)

    TEGP (in thousands) (in thousands) Revenues: Crude oil transportation services $ 84,738 $ — $ 84,738 $ 84,331 $ — $ 84,331 Natural gas transportation services 32,196 — 32,196 31,685 — 31,685 Sales of natural gas, NGLs, and crude oil 38,145 — 38,145 15,381 — 15,381 Processing and other revenues 24,015   —   24,015   13,003   —   13,003   Total Revenues 179,094   —   179,094   144,400   —   144,400   Operating Costs and Expenses: Cost of sales 26,351 — 26,351 12,370 — 12,370 Cost of transportation services 10,420 — 10,420 13,503 — 13,503 Operations and maintenance 16,399 — 16,399 12,903 — 12,903 Depreciation and amortization 26,123 — 26,123 21,403 — 21,403 General and administrative 16,367 2,059 18,426 13,663 554 14,217 Taxes, other than income taxes 8,879 — 8,879 8,226 — 8,226 Gain on disposal of assets (9,417 ) —   (9,417 ) (1,448 ) —   (1,448 ) Total Operating Costs and Expenses 95,122   2,059   97,181   80,620   554   81,174   Operating Income 83,972   (2,059 ) 81,913   63,780   (554 ) 63,226   Other Income (Expense): Equity in earnings of unconsolidated investments 53,406 14,996 68,402 20,738 — 20,738 Interest expense, net (28,184 ) (1,577 ) (29,761 ) (14,689 ) (1,328 ) (16,017 ) Other income, net 451   —   451   1,955   —   1,955   Total Other Income (Expense) 25,673   13,419   39,092   8,004   (1,328 ) 6,676   Net income before tax 109,645 11,360 121,005 71,784 (1,882 ) 69,902 Deferred income tax expense —   (6,692 ) (6,692 ) —   (2,664 ) (2,664 ) Net income 109,645 4,668 114,313 71,784 (4,546 ) 67,238 Net income attributable to noncontrolling interests (1,761 ) (95,817 ) (97,578 ) (879 ) (54,330 ) (55,209 ) Net income attributable to TEGP $ 107,884   $ (91,149 ) $ 16,735   $ 70,905   $ (58,876 ) $ 12,029   Allocation of income: Net income attributable to TEGP $ 16,735   $ 12,029   Basic net income per Class A share $ 0.29   $ 0.21   Diluted net income per Class A share $ 0.29   $ 0.21   Basic average number of Class A shares outstanding 58,085 58,075 Diluted average number of Class A shares outstanding 58,210 58,165 (1)   Represents the aggregate consolidating adjustments necessary to produce consolidated financial statements for TEGP.  

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Tallgrass EnergyInvestor and Financial InquiriesNate Lien, 913-928-6012investor.relations@tallgrassenergylp.comorMedia and Trade InquiriesPhyllis Hammond, 303-763-3568phyllis.hammond@tallgrassenergylp.com