Are changes in the treatment of carried interest going to adversely affect midstream energy companies?

Pipeline partnerships have caught the threat early, and it’s an outside shot at best.

But the expansion of the private equity markets, coupled with congressional Democrats’ desire to find new revenue sources, may give energy master limited partnerships (MLPs) unwanted attention.

What the industry needs to keep off the table is Section 7704 of the tax code, which allows a publicly traded partnership to be taxed as a partnership if 90% of its income comes from mineral or natural resource activities.

Calgary-based Inter Pipeline Fund, a petroleum transportation, bulk liquid storage and natural gas liquids extraction company, recorded a second quarter net loss of $207.9 million (U.S. $197.3 million), down from a net income of C$30.8 million in the second quarter of 2006.

Inter Pipeline explained the loss as the result of Canada's enactment of Bill C-52 Budget Implementation Act which forced it to record C$236.2 million of non-cash future income tax expense.

Continued expansion of its north Texas area gathering efforts, plus expanding operations in Louisiana and Mississippi helped push Crosstex Energy’s net income to $2.9 million in the second quarter of 2007.

The company reported a net loss of $2.3 million for the same period a year ago.

Philadelphia-based Atlas America Inc., an oil and gas producer working primarily in Montana’s Antrim Shale and the Appalachian Basin, filed for an extension of time to file its June 30, 2007 Form 10-Q with the Securities and Exchange Commission (SEC) and says it has not determined whether the late filing will result in adjustments to any of its previously filed financial statements.

The company says it needs the time to evaluate the application of Staff Accounting Bulletin No. 51, Accounting by the Parent in Consolidation for Sales of Stock by a Subsidiary, with regard to equity transactions of its subsidiaries in prior years.

Denver-based MarkWest Energy Partners saw second quarter 2007 net income drop 4% compared to the same period a year ago.

Net income for 2Q 2007 was $8.3 million, compared to $14.1 million of 2Q 2006, the company reported. Net income for the first six months of 2007 also fell compared to the first six months of 2006, from $28 to $13 million, a difference of 54%.

Calgary’s AltaGas Income Trust, a natural gas gatherer, processor and transporter, recorded second quarter 2007 earnings before interest, taxes, depreciation and amortization at C$43.1 million, up 15% from the same period last year when the company recorded earnings at C$37.4 million.

For the entire first half of the year, AltaGas booked earnings of C$84.3 million, up slightly from the C$83.4 million a year ago.

Enterprise Products Partners announced Tuesday that it has completed the construction of and started up its Hobbs NGL fractionator, located in Gaines County, Texas.

Kilgore, Texas-based Martin Midstream Partners reported that its second quarter net income was up 13% versus the second quarter of 2006 – to 5.9 million – despite a $0.3 million negative impact the company took after a non-cash mark-to-market adjustment on derivatives.

Revenues for the second quarter were $162.3 million compared to $133.1 million for the second quarter of 2006.

Frac spread margins fell significantly last week as natural gas prices jumped on Tropical Storm Dean but NGL prices saw a slight decline (see Boxscore, below).

At Mont Belvieu, the margin on fractionating a typical NGL barrel was down 14%. The value of the barrel in mmBtus was 3% less than the week before.

At Conway, the margin on the barrel was down 21%, while the value of the NGL barrel itself in mmBtus was off 6%.