Tallgrass Energy Announces Fourth Quarter & Full Year 2017 Results and 2018 Guidance

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Record 2017 Net Income of $434.0 million and Adjusted EBITDA of $678.0 million
Exceptional Distribution Coverage of 1.47 times resulting in $195.6 million of Retained Cash
Conservative Financial Leverage of 3.0 times Debt to Adjusted EBITDA

LEAWOOD, Kan.--(BUSINESS WIRE)-- Tallgrass Energy Partners, LP (NYSE: TEP) ("TEP") and Tallgrass Energy GP, LP (NYSE: TEGP) ("TEGP"), collectively referred to as Tallgrass Energy, today reported financial and operating results for the fourth quarter of 2017.

"Tallgrass Energy delivered another outstanding year in 2017, meeting the high-end of the Adjusted EBITDA, DCF and distribution coverage guidance we provided in February of 2017 while growing distributions in excess of 18 and 32 percent at TEP and TEGP respectively. In addition, we maintained a conservative and flexible balance sheet at TEP," said Tallgrass Energy President and CEO David G. Dehaemers Jr. "We steadily grew TEP through continued drop-down transactions, organic projects and third-party acquisitions. We believe Tallgrass is well positioned for another strong year in 2018 due to our stable cash flows and the attractive growth project opportunities we see ahead."

Fourth Quarter Distributions

Tallgrass Energy Partners, LP

As previously announced, the board of directors of TEP's general partner declared a quarterly cash distribution of $0.965 per common unit for the fourth quarter of 2017. This quarterly distribution represents $3.86 on an annualized basis, a sequential increase of 2.1 percent from the third quarter 2017 distribution and an increase of 18.4 percent from the fourth quarter 2016 distribution. The quarterly distribution will be paid on Wednesday, Feb. 14, 2018, to unitholders of record as of the close of business on Wednesday, Jan. 31, 2018.

Tallgrass Energy GP, LP

Also, as previously announced, the board of directors of TEGP's general partner declared a quarterly cash distribution of $0.3675 per Class A share for the fourth quarter of 2017. This quarterly distribution represents $1.47 per Class A share on an annualized basis, a sequential increase of 3.5 percent from the third quarter 2017 distribution and an increase of 32.4 percent from the fourth quarter 2016 distribution. The quarterly distribution will be paid on Wednesday, Feb. 14, 2018, to Class A shareholders of record as of the close of business on Wednesday, Jan. 31, 2018.

Tallgrass Energy Partners, LP, Summary Financial Information⁽¹⁾

	Three Months Ended December 31,									Year Ended December 31,
(in thousands, except coverage and per unit data)	2017			2016			As Reported in 2016			2017			2016			As Reported in 2016

Net income attributable to partners	$	89,115		$	70,264		$	66,677		$	433,990		$	270,524		$	263,529
Add:
Interest expense, net	26,277			13,049			13,049			83,542			40,688			40,688
Depreciation and amortization expense⁽²⁾	24,561			21,638			21,062			92,455			88,122			85,971
Distributions from unconsolidated investments	77,116			25,134			24,440			306,626			78,568			75,900
Non-cash loss related to derivative instruments⁽²⁾	1,895			6,938			6,938			226			1,547			1,547
Non-cash compensation expense⁽³⁾	3,573			1,510			1,510			8,660			5,780			5,780
Loss (gain) from disposal of assets⁽²⁾	665			—			—			(654		)	1,849			1,849
Less:
Equity in earnings of unconsolidated investments	(49,989		)	(17,036		)	(16,393		)	(237,110		)	(54,531		)	(51,780		)
Gain on remeasurement of unconsolidated investment	—			—			—			(9,728		)	—			—
Adjusted EBITDA⁽⁴⁾	$	173,213		$	121,497		$	117,283		$	678,007		$	432,547		$	423,484
Add:
Deficiency payments received, net⁽²⁾	543						8,604			27,182						33,496
Less:
Cash interest cost	(25,108		)				(11,927		)	(79,081		)				(37,110		)
Maintenance capital expenditures, net	(7,076		)				(4,238		)	(14,822		)				(11,323		)
Distributable Cash Flow⁽⁴⁾	141,572						109,722			611,286						408,547
Less:
Distributions	(111,014		)				(88,159		)	(415,716		)				(321,953		)
Amounts in excess of distributions⁽⁵⁾	$	30,558					$	21,563		$	195,570					$	86,594
Distribution coverage	1.28		x				1.24		x	1.47		x				1.27		x

Common units outstanding⁽⁶⁾	73,200						72,139			73,200						72,139
Distribution per common unit	$	0.9650					$	0.8150		$	3.6700					$	3.0700


⁽¹⁾			The financial results for all periods presented in the table include the applicable results of operations of Tallgrass Terminals, LLC and Tallgrass NatGas Operator, LLC, which were acquired by TEP effective Jan. 1, 2017, except for the period under the column "As Reported in 2016."
⁽²⁾			Net of noncontrolling interest.
⁽³⁾			Represents TEP's portion of non-cash compensation expense related to Equity Participation Units, excluding amounts allocated to Tallgrass Development, LP.
⁽⁴⁾			Adjusted EBITDA and distributable cash flow are non-GAAP measures. For additional detail see "Non-GAAP Measures" below.
⁽⁵⁾			Cumulative distribution coverage from TEP's IPO in May 2013 through Dec. 31, 2017, is $328.0 million and the cumulative distribution coverage ratio is 1.31x.
⁽⁶⁾			Common units represent the number of units as of the date of record for the fourth quarter distributions in both 2017 and 2016.

Tallgrass Energy Financial Outlook and Guidance

Tallgrass Energy expects its Adjusted EBITDA to be $755 - $835 million and maintenance capital expenditures of $20 - $30 million for the year ending Dec. 31, 2018. Additionally, management expects distribution growth of 7 - 10 percent for TEP and 37 - 40 percent for TEGP if they were to each remain standalone entities for all of 2018.

Tallgrass Energy Adjusted EBITDA includes the Adjusted EBITDA for the assets owned by TEP as of Dec. 31, 2017, the additional 2 percent of Pony Express (acquired by TEP effective Feb. 1) and the distributions attributable to the additional 25.01 percent membership interest in REX (acquired by Tallgrass Equity on Feb. 7). Tallgrass Energy Adjusted EBITDA does not include our estimate of approximately $15 - $25 million of shipper deficiency payments that would be included in Distributable Cash Flow. Adjusted EBITDA is a non-GAAP measure. For additional detail see "Non-GAAP Measures" below. For reconciliations of Tallgrass Energy Adjusted EBITDA for prior years, please refer to the "Webcasts & Presentations" section of the TEP investor relations site at www.tallgrassenergy.com.

Conference Call

Please join Tallgrass Energy for a conference call and webcast to discuss fourth quarter 2017 results at 3:30 p.m. Central Time on Tuesday, Feb. 13, 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 Reconciliations

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 or incremental barrels shipped during the period. As such, we have also provided alternative reconciliations of Adjusted EBITDA and Distributable Cash Flow that illustrate the impact of these items. These alternative reconciliations are also non-GAAP Measures. Management believes this information provides investors useful information regarding the impact of these items on our current results as well as the potential impact on future results.

Alternative Reconciliation of Adjusted EBITDA

	Three Months Ended December 31,		Year Ended December 31,
(in thousands)	2017		2017

Adjusted EBITDA	$	173,213	$	678,007
Add:
Volumetric deficiency payments received, net⁽¹⁾	543		27,182
Alternative Adjusted EBITDA⁽²⁾	$	173,756	$	705,189


⁽¹⁾		Cumulative net volumetric deficiency balance at Dec. 31, 2017, is $88.4 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.

Alternative Reconciliation of Distributable Cash Flow and Distribution Coverage

	Three Months Ended December 31,			Year Ended December 31,
(in thousands, except coverage)	2017			2017

Distributable Cash Flow	$	141,572		$	611,286
Add:
Cash flow impact of reduction in accumulated incremental volumes⁽¹⁾	8,318			8,558
Alternative Distributable Cash Flow⁽²⁾	149,890			619,844
Less:
Distributions	(111,014		)	(415,716		)
Amounts in excess of distributions	$	38,876		$	204,128
Alternative distribution coverage⁽²⁾	1.35		x	1.49		x


⁽¹⁾		Accumulated incremental volume balance at Dec. 31, 2017, is $1.5 million.
⁽²⁾		Alternative Distributable Cash Flow and alternative distribution coverage show the impact of a reduction in accumulated incremental volumes. Incremental volumes (volumes shipped in excess of firm committed volumes) increase distributable cash flow during periods when shipped. Conversely, previously shipped incremental volumes reduce distributable cash flow during periods when they are utilized by a shipper to meet current period firm committed volumes, thereby reducing an accumulated incremental volume balance.

Tallgrass Energy Partners, LP Segment Overview⁽¹⁾⁽²⁾
The fourth quarter 2017 comparative results by segment are summarized below:


	Three Months Ended December 31,									Year Ended December 31,
	2017			2016			As Reported in 2016			2017			2016			As Reported in 2016
	(in thousands)
Natural Gas Transportation
Operating income	$	17,524		$	16,262		$	14,889		$	67,434		$	56,135		$	49,907
Add:
Depreciation and amortization expense	4,812			4,743			4,743			19,181			20,976			20,976
Distributions from unconsolidated investment	77,116			24,440			24,440			304,663			75,900			75,900
Other income, net	425			456			456			1,232			1,723			1,723
Less:
Non-cash (gain) loss related to derivative instruments	—			(74		)	(74		)	(116		)	116			116
Segment Adjusted EBITDA	$	99,877		$	45,827		$	44,454		$	392,394		$	154,850		$	148,622

	Three Months Ended December 31,									Year Ended December 31,
	2017			2016						2017			2016
	(in thousands)
Crude Oil Transportation
Operating income	$	44,708		$	56,165					$	190,170		$	215,784
Add:
Depreciation and amortization expense⁽³⁾	17,499			13,188						57,172			52,464
Less:
Adjusted EBITDA attributable to noncontrolling interests	(909		)	(1,118		)				(3,804		)	(4,288		)
Non-cash loss (gain) related to derivative instruments	—			424						(432		)	431
Segment Adjusted EBITDA	$	61,298		$	68,659					$	243,106		$	264,391

	Three Months Ended December 31,									Year Ended December 31,
	2017			2016			As Reported in 2016			2017			2016			As Reported in 2016
	(in thousands)
Gathering, Processing & Terminalling
Operating income (loss)	$	12,525		$	3,726		$	2,155		$	33,453		$	(903	)	$	1,081
Add:
Depreciation and amortization expense⁽³⁾	2,250			3,707			3,131			16,102			14,682			12,531
Non-cash loss (gain) related to derivative instruments	1,895			(291		)	(291		)	2,659			(291		)	(291		)
Distributions from unconsolidated investment	—			694			—			1,963			2,668			—
Other income	—			—			—			142			—			—
Less:
Loss (gain) from disposal of assets⁽²⁾	665			—						(654		)	1,849			1,849
Adjusted EBITDA attributable to noncontrolling interests	(2,349		)	(12		)	(12		)	(2,695		)	(77		)	(77		)
Segment Adjusted EBITDA	$	14,986		$	7,824		$	4,983		$	50,970		$	17,928		$	15,093


⁽¹⁾		The financial results for the Natural Gas Transportation and Gathering, Processing & Terminalling segments for the three and 12 months ended Dec. 31, 2016, have been recast to reflect the results of operations of NatGas and Terminals, respectively, which TEP acquired effective Jan. 1, 2017. The financial results for the Natural Gas Transportation and Gathering, Processing & Terminalling segments for the three and 12 months ended Dec. 31, 2016, under the column "As Reported in 2016," does not include NatGas and Terminals's results of operations.
⁽²⁾		Segment reporting does not include corporate general and administrative costs or intersegment eliminations.
⁽³⁾		Net of noncontrolling interest.

Supplemental 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. TEP's consolidated Adjusted EBITDA, as shown above, includes TEP's membership interest in REX. The table below is a reconciliation of REX's Adjusted EBITDA and Distributable Cash Flow for the three and 12 months ended Dec. 31, 2017 and 2016, 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 December 31,						Year Ended December 31,
	2017			2016			2017			2016
	(in thousands)
Rockies Express Pipeline LLC
Net income	$	86,819		$	51,636		$	458,004		$	278,483
Add:
Interest expense, net	41,976			38,866			167,955			158,560
Depreciation and amortization expense	54,830			53,460			218,390			204,291
Adjusted EBITDA	183,625			143,962			844,349			641,334
Less:
Cash interest cost	(41,142		)	(38,032		)	(164,618		)	(155,224		)
Maintenance capital expenditures	(3,518		)	(7,993		)	(12,844		)	(13,871		)
Distributable Cash Flow	$	138,965		$	97,937		$	666,887		$	472,239

Distributions to Members	$	(154,256	)	$	(97,760	)	$	(669,869	)	$	(471,648	)
Contributions from Members	$	19,583		$	58,244		$	91,977		$	304,999

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 December 31,						Year Ended December 31,
	2017			2016			2017			2016

TEP distributions to Tallgrass Equity⁽¹⁾
General partner interest	$	1,251		$	1,008		$	4,696		$	3,725
Incentive Distribution Rights	39,125			28,358			143,051			99,423
20 million TEP common units owned by Tallgrass Equity	19,300			16,300			73,400			61,400
Total TEP distributions to Tallgrass Equity	59,676			45,666			221,147			164,548
Less:
Cash interest expense attributable to Tallgrass Equity	(1,415		)	(1,158		)	(5,334		)	(4,480		)
Cash general and administrative expenses attributable to Tallgrass Equity	(500		)	(500		)	(2,000		)	(2,000		)
Cash available for distribution by Tallgrass Equity	57,761			44,008			213,813			158,068
Distributions to Class A (TEGP)	21,346			16,116			78,551			50,359
Distributions to Class B (Exchange Right Holders)	36,439			27,515			134,106			106,085
Total cash distributions by Tallgrass Equity	$	57,785		$	43,631		$	212,657		$	156,444
TEGP
Distributions from Tallgrass Equity	$	21,346		$	16,116		$	78,551		$	50,359
Less:
Distributions to Class A shareholders	(21,346		)	(16,116		)	(78,551		)	(50,359		)
Amounts in excess of distributions	—			—			—			—
Distribution coverage	1.00		x	1.00		x	1.00		x	1.00		x

Class A shares outstanding	58,085			58,075			58,085			58,075
Distribution per Class A share	$	0.3675		$	0.2775		$	1.3525		$	0.9950


⁽¹⁾		The three and 12 month periods ended Dec. 31, 2017, and Dec. 31, 2016, include distributions received by Tallgrass Equity from TEP's distribution for the quarters ended Dec. 31, 2017, and Dec. 31, 2016, respectively.

Tallgrass Energy GP, LP Deferred Tax Asset Adjustment

TEGP is a limited partnership that has previously elected to be treated as a corporation for federal income tax purposes. As a result of the Dec. 22, 2017, passage of the legislation originally introduced as the Tax Cuts and Jobs Act, TEGP re-assessed the valuation of its deferred tax asset as of Dec. 31, 2017. TEGP recorded in the fourth quarter of 2017 a non-cash deferred income tax expense of $183.5 million. $172.9 million of this deferred tax expense is the remeasurement of the deferred tax asset as a result of the reduced federal income tax rate from 35 percent to 21 percent effective on Jan. 1, 2018. After the remeasurement and as of Dec. 31, 2017, TEGP has a deferred tax asset of $313.0 million which is the expected tax benefit of available future deductions that offset future taxable income. It is currently expected that no cash taxes will be paid by TEGP for a period estimated to exceed 10 years.

Annual Report

TEP and TEGP will file their 2017 Annual Reports on Form 10-K with the Securities and Exchange Commission ("SEC") on Feb. 13, 2018. A copy of the reports will be available for viewing through a link on the Tallgrass Energy website at www.tallgrassenergy.com or on the SEC's website at www.sec.gov.

TEP unitholders and TEGP shareholders may request a hard copy of the applicable Annual Report on Form 10-K (including complete audited financial statements) free of charge. Requests should be communicated in writing to either Tallgrass Energy Partners, LP for TEP unitholders or Tallgrass Energy GP, LP for TEGP shareholders; Attention: Investor Relations, 4200 W. 115th Street, Suite 350, Leawood, KS 66211.

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.

TEP is unable to project net cash provided by operating activities or net income attributable to partners to provide the related reconciliation of projected Adjusted EBITDA to the most comparable financial measures calculated in accordance with GAAP, because the impact of changes in operating assets and liabilities and the volume and timing of deficiency payments received and utilized from our customers are out of our control and cannot be reasonably predicted. TEP provides a range for the forecasts of Adjusted EBITDA to allow for the variability in the timing of cash receipts and disbursements, customer utilization of our assets, and maintenance capital spending and the impact on the related reconciling items, many of which interplay with each other. The timing of maintenance capital expenditures is volatile as it depends on weather, regulatory approvals, contractor availability, system performance and various other items. Therefore, the reconciliation of projected Adjusted EBITDA to projected net cash provided by operating activities and net income attributable to partners is not available without unreasonable effort.

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 the belief that TEP will have a strong year in 2018 due to stable cash flows and attractive growth project opportunities, the Tallgrass Energy Financial Outlook and Guidance and that TEGP will not pay cash taxes for a period estimated to exceed 10 years. 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.

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), and privately held Tallgrass Development, LP. 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
CONSOLIDATED BALANCE SHEETS

	December 31, 2017			December 31, 2016
	(in thousands)
ASSETS
Current Assets:
Cash and cash equivalents	$	1,809		$	1,873
Accounts receivable, net	119,955			59,536
Gas imbalances	1,990			1,597
Inventories	21,609			13,093
Derivative assets	—			10,967
Prepayments and other current assets	11,175			7,628
Total Current Assets	156,538			94,694
Property, plant and equipment, net	2,394,337			2,079,232
Goodwill	404,838			343,288
Intangible assets, net	97,731			93,522
Unconsolidated investments	909,531			475,625
Deferred financing costs, net	11,684			4,815
Deferred charges and other assets	2,694			11,037
Total Assets	$	3,977,353		$	3,102,213
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable	$	98,882		$	24,122
Accounts payable to related parties	5,461			5,935
Gas imbalances	1,663			1,239
Derivative liabilities	2,368			556
Accrued taxes	19,272			16,996
Accrued liabilities	35,659			16,702
Deferred revenue	88,471			60,757
Other current liabilities	7,171			6,446
Total Current Liabilities	258,947			132,753
Long-term debt, net	2,146,993			1,407,981
Other long-term liabilities and deferred credits	18,965			7,063
Total Long-term Liabilities	2,165,958			1,415,044
Commitments and Contingencies
Equity:
Predecessor Equity	—			82,295
Limited partners (73,199,753 and 72,485,954 common units issued and outstanding at December 31, 2017 and 2016, respectively)	2,109,316			2,070,495
General partner (834,391 units issued and outstanding at December 31, 2017 and 2016)	(625,537		)	(632,339		)
Total Partners' Equity	1,483,779			1,520,451
Noncontrolling interests	68,669			33,965
Total Equity	1,552,448			1,554,416
Total Liabilities and Equity	$	3,977,353		$	3,102,213

TALLGRASS ENERGY PARTNERS, LP
CONSOLIDATED STATEMENTS OF INCOME

	Three Months Ended December 31,						Year Ended December 31,
	2017			2016			2017			2016
	(in thousands, except per unit amounts)
Revenues:
Crude oil transportation services	$	85,367		$	95,668		$	345,733		$	374,949
Natural gas transportation services	30,994			30,556			122,364			119,962
Sales of natural gas, NGLs, and crude oil	37,989			25,880			108,503			77,123
Processing and other revenues	20,416			10,107			79,298			39,628
Total Revenues	174,766			162,211			655,898			611,662
Operating Costs and Expenses:
Cost of sales	32,473			23,805			91,213			71,650
Cost of transportation services	7,401			11,723			46,200			47,669
Operations and maintenance	16,500			12,696			62,069			55,070
Depreciation and amortization	23,524			21,173			90,800			86,247
General and administrative	18,934			13,877			63,296			55,102
Taxes, other than income taxes	7,033			5,107			28,832			25,400
Contract termination	—			—			—			8,061
Loss (gain) on disposal of assets	665			—			(599		)	1,849
Total Operating Costs and Expenses	106,530			88,381			381,811			351,048
Operating Income	68,236			73,830			274,087			260,614
Other Income (Expense):
Interest expense, net	(26,277		)	(13,049		)	(83,542		)	(40,688		)
Unrealized gain (loss) on derivative instrument	—			(6,879		)	1,885			(1,291		)
Gain on remeasurement of unconsolidated investment	—			—			9,728			—
Equity in earnings of unconsolidated investments	49,989			17,036			237,110			54,531
Other income, net	425			456			1,221			1,723
Total Other Income (Expense)	24,137			(2,436		)	166,402			14,275
Net income	92,373			71,394			440,489			274,889
Net income attributable to noncontrolling interests	(3,258		)	(1,130		)	(6,499		)	(4,365		)
Net income attributable to partners	$	89,115		$	70,264		$	433,990		$	270,524
Allocation of income to the limited partners:
Net income attributable to partners	$	89,115		$	70,264		$	433,990		$	270,524
Predecessor operations interest in net income	—			(3,587		)	—			(6,995		)
General partner interest in net income	(40,130		)	(29,118		)	(147,823		)	(102,465		)
Net income available to common unitholders	48,985			37,559			286,167			161,064
Basic net income per common unit	$	0.67		$	0.52		$	3.93		$	2.26
Diluted net income per common unit	$	0.67		$	0.51		$	3.90		$	2.23
Basic average number of common units outstanding	73,194			72,530			72,876			71,150
Diluted average number of common units outstanding	73,599			73,548			73,458			72,107

TALLGRASS ENERGY PARTNERS, LP
CONSOLIDATED STATEMENTS OF CASH FLOWS

	Year Ended December 31,
	2017			2016
	(in thousands)
Cash Flows from Operating Activities:
Net income	$	440,489		$	274,889
Adjustments to reconcile net income to net cash flows provided by operating activities:
Depreciation and amortization	98,064			93,605
Equity in earnings of unconsolidated investments	(237,110		)	(54,531		)
Distributions from unconsolidated investments	237,192			54,449
Gain on remeasurement of unconsolidated investment	(9,728		)	—
Other noncash items, net	8,988			9,519
Changes in components of working capital:
Accounts receivable and other	(57,937		)	2,818
Accounts payable and accrued liabilities	85,071			10,502
Deferred revenue	27,283			33,815
Other current assets and liabilities	(10,542		)	(5,578		)
Other operating, net	(2,709		)	95
Net Cash Provided by Operating Activities	579,061			419,583
Cash Flows from Investing Activities:
Acquisition of Rockies Express membership interest	(400,000		)	(436,022		)
Capital expenditures	(145,144		)	(84,491		)
Acquisition of Terminals and NatGas	(140,000		)	—
Acquisition of Douglas Gathering System	(128,526		)	—
Distributions from unconsolidated investment in excess of cumulative earnings	69,434			24,120
Acquisition of Deeprock Development	(57,202		)	—
Contributions to unconsolidated investments	(45,948		)	(50,076		)
Acquisition of PRB Crude System	(36,030		)	—
Acquisition of Pony Express membership interest	—			(49,118		)
Other investing, net	(15,125		)	48
Net Cash Used in Investing Activities	(898,541		)	(595,539		)
Cash Flows from Financing Activities:
Proceeds from issuance of long-term debt	1,103,750			400,000
Distributions to unitholders	(392,861		)	(292,834		)
(Repayments) borrowings under revolving credit facility, net	(354,000		)	262,000
Proceeds from public offering, net of offering costs	112,420			337,671
Partial exercise of call option	(72,381		)	(204,634		)
Repurchase of common units from TD	(35,335		)	—
Payments for deferred financing costs	(22,250		)	(10,251		)
Acquisition of Pony Express membership interest	—			(425,882		)
Proceeds from private placement, net of offering costs	—			90,009
Other financing, net	(19,927		)	20,139
Net Cash Provided by Financing Activities	319,416			176,218
Net Change in Cash and Cash Equivalents	(64		)	262
Cash and Cash Equivalents, beginning of period	1,873			1,611
Cash and Cash Equivalents, end of period	$	1,809		$	1,873

Supplemental Disclosures:
Cash payments for interest, net	$	(67,360	)	$	(29,754	)
Schedule of Noncash Investing and Financing Activities:
Increase in accrual for payment of property, plant and equipment	$	8,975		$	—
Common units issued as partial consideration to acquire additional 9% membership interest in Deeprock Development	$	6,617		$	—

Tallgrass Energy GP, LP Financial Statements

TALLGRASS ENERGY GP, LP
CONSOLIDATING BALANCE SHEETS

	December 31, 2017							December 31, 2016
	TEP		Consolidating Adjustments⁽¹⁾			TEGP		TEP		Consolidating Adjustments⁽¹⁾			TEGP
	(in thousands)							(in thousands)
ASSETS
Current Assets:
Cash and cash equivalents	$	1,809	$	784		$	2,593	$	1,873	$	586		$	2,459
Accounts receivable, net	119,955		—			119,955		59,536		—			59,536
Gas imbalances	1,990		—			1,990		1,597		—			1,597
Inventories	21,609		—			21,609		13,093		—			13,093
Derivative assets	—		—			—		10,967		—			10,967
Prepayments and other current assets	11,175		—			11,175		7,628		—			7,628
Total Current Assets	156,538		784			157,322		94,694		586			95,280
Property, plant and equipment, net	2,394,337		—			2,394,337		2,079,232		—			2,079,232
Goodwill	404,838		—			404,838		343,288		—			343,288
Intangible assets, net	97,731		—			97,731		93,522		—			93,522
Unconsolidated investments	909,531		—			909,531		475,625		—			475,625
Deferred financing costs, net	11,684		879			12,563		4,815		1,227			6,042
Deferred tax asset	—		312,997			312,997		—		521,454			521,454
Deferred charges and other assets	2,694		—			2,694		11,037		—			11,037
Total Assets	$	3,977,353	$	314,660		$	4,292,013	$	3,102,213	$	523,267		$	3,625,480
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable	$	98,882	$	—		$	98,882	$	24,122	$	327		$	24,449
Accounts payable to related parties	5,461		(119		)	5,342		5,935		(111		)	5,824
Gas imbalances	1,663		—			1,663		1,239		—			1,239
Derivative liabilities	2,368		—			2,368		556		—			556
Accrued taxes	19,272		—			19,272		16,996		—			16,996
Accrued liabilities	35,659		48			35,707		16,702		53			16,755
Deferred revenue	88,471		—			88,471		60,757		—			60,757
Other current liabilities	7,171		—			7,171		6,446		—			6,446
Total Current Liabilities	258,947		(71		)	258,876		132,753		269			133,022
Long-term debt, net	2,146,993		146,000			2,292,993		1,407,981		148,000			1,555,981
Other long-term liabilities and deferred credits	18,965		—			18,965		7,063		—			7,063
Total Long-term Liabilities	2,165,958		146,000			2,311,958		1,415,044		148,000			1,563,044
Equity:
Total Partners' Equity	1,483,779		(1,435,166		)	48,613		1,520,451		(1,187,189		)	333,262
Noncontrolling interests	68,669		1,603,897			1,672,566		33,965		1,562,187			1,596,152
Total Equity	1,552,448		168,731			1,721,179		1,554,416		374,998			1,929,414
Total Liabilities and Equity	$	3,977,353	$	314,660		$	4,292,013	$	3,102,213	$	523,267		$	3,625,480


⁽¹⁾		Represents the aggregate consolidating adjustments necessary to produce consolidated financial statements for TEGP.

TALLGRASS ENERGY GP, LP
CONSOLIDATING STATEMENTS OF INCOME

	Three Months Ended December 31, 2017									Three Months Ended December 31, 2016
	TEP			Consolidating Adjustments⁽¹⁾			TEGP			TEP			Consolidating Adjustments⁽¹⁾			TEGP
	(in thousands)									(in thousands)
Revenues:
Crude oil transportation services	$	85,367		$	—		$	85,367		$	95,668		$	—		$	95,668
Natural gas transportation services	30,994			—			30,994			30,556			—			30,556
Sales of natural gas, NGLs, and crude oil	37,989			—			37,989			25,880			—			25,880
Processing and other revenues	20,416			—			20,416			10,107			—			10,107
Total Revenues	174,766			—			174,766			162,211			—			162,211
Operating Costs and Expenses:
Cost of sales	32,473			—			32,473			23,805			—			23,805
Cost of transportation services	7,401			—			7,401			11,723			—			11,723
Operations and maintenance	16,500			—			16,500			12,696			—			12,696
Depreciation and amortization	23,524			—			23,524			21,173			—			21,173
General and administrative	18,934			562			19,496			13,877			558			14,435
Taxes, other than income taxes	7,033			—			7,033			5,107			—			5,107
Loss on disposal of assets	665			—			665			—			—			—
Total Operating Costs and Expenses	106,530			562			107,092			88,381			558			88,939
Operating Income	68,236			(562		)	67,674			73,830			(558		)	73,272
Other Income (Expense):
Interest expense, net	(26,277		)	(1,532		)	(27,809		)	(13,049		)	(1,277		)	(14,326		)
Unrealized gain (loss) on derivative instrument	—			—			—			(6,879		)	—			(6,879		)
Equity in earnings of unconsolidated investments	49,989			—			49,989			17,036			—			17,036
Other income, net	425			—			425			456			—			456
Total Other Income (Expense)	24,137			(1,532		)	22,605			(2,436		)	(1,277		)	(3,713		)
Net income before tax	92,373			(2,094		)	90,279			71,394			(1,835		)	69,559
Deferred income tax expense	—			(183,476		)	(183,476		)	—			(4,949		)	(4,949		)
Net income	92,373			(185,570		)	(93,197		)	71,394			(6,784		)	64,610
Net income attributable to noncontrolling interests	(3,258		)	(68,922		)	(72,180		)	(1,130		)	(51,177		)	(52,307		)
Net income (loss) attributable to TEGP	$	89,115		$	(254,492	)	$	(165,377	)	$	70,264		$	(57,961	)	$	12,303

Allocation of income:
Net (loss) income attributable to TEGP							$	(165,377	)							$	12,303
Predecessor operations interest in net income							—									(3,587		)
Net (loss) income attributable to TEGP, excluding predecessor operations interest							(165,377		)							8,716
Basic net (loss) income per Class A share							$	(2.85	)							$	0.17
Diluted net (loss) income per Class A share							$	(2.85	)							$	0.17
Basic average number of Class A shares outstanding							58,079									52,225
Diluted average number of Class A shares outstanding							58,079									52,286


⁽¹⁾		Represents the aggregate consolidating adjustments necessary to produce consolidated financial statements for TEGP.

	Year Ended December 31, 2017									Year Ended December 31, 2016
	TEP			Consolidating Adjustments⁽¹⁾			TEGP			TEP			Consolidating Adjustments⁽¹⁾			TEGP
	(in thousands)									(in thousands)
Revenues:
Crude oil transportation services	$	345,733		$	—		$	345,733		$	374,949		$	—		$	374,949
Natural gas transportation services	122,364			—			122,364			119,962			—			119,962
Sales of natural gas, NGLs, and crude oil	108,503			—			108,503			77,123			—			77,123
Processing and other revenues	79,298			—			79,298			39,628			—			39,628
Total Revenues	655,898			—			655,898			611,662			—			611,662
Operating Costs and Expenses:
Cost of sales	91,213			—			91,213			71,650			—			71,650
Cost of transportation services	46,200			—			46,200			47,669			—			47,669
Operations and maintenance	62,069			—			62,069			55,070			—			55,070
Depreciation and amortization	90,800			—			90,800			86,247			—			86,247
General and administrative	63,296			2,240			65,536			55,102			2,196			57,298
Taxes, other than income taxes	28,832			—			28,832			25,400			—			25,400
Contract termination	—			—			—			8,061			—			8,061
(Gain) loss on disposal of assets	(599		)	—			(599		)	1,849			—			1,849
Total Operating Costs and Expenses	381,811			2,240			384,051			351,048			2,196			353,244
Operating Income	274,087			(2,240		)	271,847			260,614			(2,196		)	258,418
Other Income (Expense):
Interest expense, net	(83,542		)	(5,806		)	(89,348		)	(40,688		)	(4,913		)	(45,601		)
Unrealized gain (loss) on derivative instrument	1,885			—			1,885			(1,291		)	—			(1,291		)
Equity in earnings of unconsolidated investments	237,110			—			237,110			54,531			—			54,531
Gain on remeasurement of unconsolidated investment	9,728			—			9,728			—			—			—
Other income, net	1,221			—			1,221			1,723			—			1,723
Total Other Income (Expense)	166,402			(5,806		)	160,596			14,275			(4,913		)	9,362
Net income before tax	440,489			(8,046		)	432,443			274,889			(7,109		)	267,780
Deferred income tax expense	—			(208,458		)	(208,458		)	—			(17,741		)	(17,741		)
Net income	440,489			(216,504		)	223,985			274,889			(24,850		)	250,039
Net income attributable to noncontrolling interests	(6,499		)	(346,215		)	(352,714		)	(4,365		)	(211,885		)	(216,250		)
Net income (loss) attributable to TEGP	$	433,990		$	(562,719	)	$	(128,729	)	$	270,524		$	(236,735	)	$	33,789

Allocation of income:
Net (loss) income attributable to TEGP							$	(128,729	)							$	33,789
Predecessor operations interest in net income							—									(6,995		)
Net (loss) income attributable to TEGP, excluding predecessor operations interest							(128,729		)							26,794
Basic net (loss) income per Class A share							$	(2.22	)							$	0.55
Diluted net (loss) income per Class A share							$	(2.22	)							$	0.55
Basic average number of Class A shares outstanding							58,076									48,856
Diluted average number of Class A shares outstanding							58,076									48,889


⁽¹⁾		Represents the aggregate consolidating adjustments necessary to produce consolidated financial statements for TEGP.

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Tallgrass Energy Partners, LP
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Source: Tallgrass Energy Partners, LP

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Tallgrass Energy Announces Fourth Quarter & Full Year 2017 Results and 2018 Guidance