SOURCE: EV Energy Partners, L.P.

EV Energy Partners, L.P.

November 09, 2009 06:45 ET

EV Energy Partners Announces Third Quarter 2009 Results and Additional Commodity Price Hedges

HOUSTON, TX--(Marketwire - November 9, 2009) - EV Energy Partners, L.P. (NASDAQ: EVEP) today announced results for the third quarter 2009 and filed its Form 10-Q with the Securities and Exchange Commission.

Third Quarter 2009 Results

Adjusted EBITDA for the quarter was $33.6 million, a 22% increase over the third quarter of 2008 and a 2% increase versus the second quarter of 2009. Distributable Cash Flow for the quarter was $19.5 million, a 39% increase over the third quarter of 2008 and an 8% increase versus the second quarter of 2009. Adjusted EBITDA and Distributable Cash Flow are described in the attached table under "Non-GAAP Measures."

EVEP reported a net loss of $2.8 million, or ($0.23) per basic and diluted weighted average unit outstanding, for the third quarter of 2009. Included in net income were $16.6 million of non-cash net unrealized losses on commodity and interest rate derivatives and $0.9 million of non-cash equity compensation expense contained in general and administrative expenses. For the third quarter of 2008, net income was $204.1 million, or $13.02 per basic and diluted weighted average unit outstanding, which included $188.8 million of non-cash net unrealized gains on commodity derivatives and ($0.1) million of non-cash equity compensation expense contained in general and administrative expenses. For the second quarter of 2009, net loss was $31.6 million, or ($1.93) per basic and diluted weighted average unit outstanding, which included $44.5 million of non-cash net unrealized losses on commodity and interest rate derivatives and $0.7 million of non-cash equity compensation expense contained in general and administrative expenses.

The $16.6 million non-cash net unrealized losses on derivatives for the third quarter of 2009 was primarily due to the increase in future gas prices at September 30, 2009 as compared to those at June 30, 2009 and the effect of such price changes on EVEP's commodity price hedges which extend through August 2014.

For the quarter ended September 30, 2009, EVEP produced 4.3 Bcf of natural gas, 132 MBbls of crude oil and 180 MBbls of natural gas liquids, or 6.1 Bcfe. Third quarter 2009 production of 6.1 Bcfe represents a 30% increase over third quarter 2008 production of 4.7 Bcfe, primarily due to acquisitions made during 2008 and the third quarter of 2009. Third quarter 2009 production was 4% higher than second quarter 2009 production of 5.9 Bcfe, primarily due to acquisitions completed during the quarter.

John Walker, Chairman and CEO, stated about the quarter, "We are very pleased with our third quarter results. We successfully completed two Austin Chalk add-on acquisitions, announced an Appalachian Basin acquisition that we expect to close later this month, and successfully completed a 3.2 million common unit offering. In addition, our borrowing base was recently reaffirmed at $465 million. This year we have reduced our debt by $185 million, significantly increasing our liquidity and providing capacity for potential future acquisition financing."

Additional Commodity Hedge Positions

EVEP uses oil and natural gas commodity contracts to hedge a significant portion of its anticipated oil and natural gas production against the risk of commodity price volatility. Since the second quarter earnings press release dated August 10, 2009, EVEP has added the following commodity price hedge positions to its portfolio. A complete schedule of EVEP's updated commodity price hedge positions is included at the end of this release, including the hedges detailed below.

                                                 Swap            Swap
                                                Volume          Price
                                            --------------- ---------------
                                            (Mmmbtu/Mbbls)
Natural Gas
Houston Ship Channel
Sept - Dec 2009                                          74 $          4.09
2010                                                    193 $          5.45

Crude Oil
NYMEX
2013                                                  146.0 $         80.39
Jan - Aug 2014                                        194.4 $         82.28

Quarterly Report on Form 10-Q

EVEP's financial statements and related footnotes are available on our third quarter 2009 Form 10-Q, which was filed today and is available through the Investor Relations/SEC Filings section of the EVEP web site at http://www.evenergypartners.com.

Conference Call

As announced on November 3, 2009, EV Energy Partners, L.P. will host an investor conference call Monday, November 9, 2009 at 10:30am (Eastern Time). Investors interested in participating in the call may dial 480-629-9866 and ask for conference ID 4181671 at least 5 minutes prior to the start time, or may listen live over the internet through the Investor Relations section of the EVEP web site at http://www.evenergypartners.com.

EV Energy Partners, L.P., is a master limited partnership engaged in acquiring, producing and developing oil and gas properties. More information about EVEP is available on the internet at http://www.evenergypartners.com.

(code #: EVEP/G)

This press release may include "forward-looking statements" as defined by the Securities and Exchange Commission. All statements, other than statements of historical facts, included in this press release that address activities, events or developments that the partnership expects, believes or anticipates will or may occur in the future are forward-looking statements. These statements are based on certain assumptions made by EVEP based on its experience and perception of historical trends, current conditions, expected future developments and other factors it believes are appropriate in the circumstances. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of EVEP, which may cause our actual results to differ materially from those implied or expressed by the forward-looking statements. These include risks relating to financial performance and results, availability of sufficient cash flow to pay distributions and execute our business plan, prices and demand for natural gas and oil, our ability to replace reserves and efficiently develop our current reserves and other important factors that could cause actual results to differ materially from those projected as described in the EVEP's reports filed with the Securities and Exchange Commission.

Any forward-looking statement speaks only as of the date on which such statement is made and EVEP undertakes no obligation to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise.

Operating Statistics

                                 Three Months Ended     Nine Months Ended
                                    September 30,         September 30,
                                --------------------- ---------------------
                                   2009       2008       2009       2008
                                ---------- ---------- ---------- ----------
Production data:
Oil (MBbls)                            132        111        386        301
Natural gas liquids (MBbls)            180        127        580        386
Natural gas (MMcf)                   4,251      3,285     12,230     10,305
                                ---------- ---------- ---------- ----------
Net production (MMcfe)               6,123      4,710     18,026     14,423
Average sales price per unit
 (1):
Oil (Bbl)                       $    64.04 $   115.55 $    50.95 $   111.40
Natural gas liquids (Bbl)            32.35      68.41      27.84      65.63
Natural gas (Mcf)                     3.28       9.80       3.56       9.37
Mcfe                                  4.61      11.39       4.40      10.77

Average unit cost per Mcfe:
Production costs:
Lease operating expenses        $     1.70 $     2.51 $     1.72 $     2.12
Production taxes                      0.25       0.55       0.23       0.50
                                ---------- ---------- ---------- ----------
Total                                 1.95       3.06       1.95       2.62
Depreciation, depletion and
 amortization                         2.11       1.66       2.18       1.68
General and administrative
 expense                              0.74       0.60       0.71       0.68

(1) Prior to $20.6 and $(9.5) million of net realized commodity price
hedge gains (losses) for the three months ended September 30, 2009 and
September 30, 2008, respectively, and prior to $61.4 and ($23.9) million
of net realized commodity price hedge gains (losses) for the nine months
ended September 30, 2009 and September 30, 2008 respectively.




Unaudited Condensed Consolidated Balance Sheets
(in $ thousands)

                                      September 30, 2009 December 31, 2008
                                      ------------------ ------------------
              ASSETS
Current assets:
Cash and cash equivalents             $           25,365 $           41,628
Accounts receivable:
   Oil, natural gas and natural gas
    liquids revenues                              10,265             17,588
   Related party                                   6,134              1,463
   Other                                           1,270              3,278
Derivative asset                                  34,638             50,121
Prepaid expenses and other current
 assets                                              312              1,037
                                      ------------------ ------------------
Total current assets                              77,984            115,115

Oil and natural gas properties, net
 of accumulated depreciation,
 depletion and amortization;
 September 30, 2009, $109,234;
 December 31, 2008, $69,958                      753,214            765,243
Other property, net of accumulated
 depreciation and amortization;
 September 30, 2009, $311; December
 31, 2008, $284                                      152                180
Long-term derivative asset                        76,127             96,720
Other assets                                       4,612              2,737
                                      ------------------ ------------------
Total assets                          $          912,089 $          979,995
                                      ================== ==================

   LIABILITIES AND OWNERS' EQUITY
Current liabilities:
Accounts payable and accrued
 liabilities                          $           11,461 $           14,063
Deferred revenues                                      -              4,120
Derivative liability                                 375              2,115
                                      ------------------ ------------------
Total current liabilities                         11,836             20,298

Asset retirement obligations                      36,411             33,787
Long-term debt                                   292,000            467,000
Long-term derivative liability                        68                  -
Other Long-term liabilities                        1,866              1,426

Commitments and contingencies

Owners' equity                                   569,908            457,484
                                      ------------------ ------------------
Total liabilities and owners' equity  $          912,089 $          979,995
                                      ================== ==================





Unaudited Condensed Consolidated Statements of Operations
(in $ thousands, except per unit data)

                                 Three Months Ended     Nine Months Ended
                                    September 30,         September 30,
                                --------------------  --------------------
                                  2009       2008       2009       2008
                                ---------  ---------  ---------  ---------
Revenues:
Oil, natural gas and natural
 gas liquids revenues           $  28,198  $  53,672  $  79,361  $ 155,336
Gain on derivatives, net                -        563          -      1,225
Transportation and
 marketing-related revenues         1,351      3,169      6,401      9,649
                                ---------  ---------  ---------  ---------
Total revenues                     29,549     57,404     85,762    166,210
                                ---------  ---------  ---------  ---------
Operating costs and expenses:
Lease operating expenses           10,421     11,828     31,075     30,542
Cost of purchased natural gas         980      2,451      3,431      7,866
Production taxes                    1,500      2,593      4,143      7,221
Asset retirement obligations
 accretion expense                    494        381      1,508        987
Depreciation, depletion and
 amortization                      12,935      7,832     39,304     24,187
General and administrative
 expenses                           4,519      2,843     12,870      9,867
                                ---------  ---------  ---------  ---------
Total operating costs and
 expenses                          30,849     27,928     92,331     80,670
                                ---------  ---------  ---------  ---------
Operating (loss) income            (1,300)    29,476     (6,569)    85,540

Other (expense) income, net:
Realized gains (losses) on
 mark-to-market derivatives,
 net                               18,441    (10,389)    55,201    (24,767)
Unrealized (losses) gains on
 mark-to-market derivatives,
 net                              (16,572)   188,773    (34,404)    29,686
Interest expense                   (3,065)    (3,736)    (9,909)   (10,563)
Other (expense) income, net          (273)        90       (317)       252
                                ---------  ---------  ---------  ---------
Total other (expense) income,
 net                               (1,469)   174,738     10,571     (5,392)
                                ---------  ---------  ---------  ---------
(Loss) income before income
 taxes                             (2,769)   204,214      4,002     80,148
Income taxes                          (64)       (75)      (121)      (205)
                                ---------  ---------  ---------  ---------
Net (loss) income               $  (2,833) $ 204,139  $   3,881  $  79,943
                                =========  =========  =========  =========
General partner's interest in
 net (loss) income, including
 incentive distribution rights  $   1,916  $   5,419  $   5,099  $   4,588
                                =========  =========  =========  =========
Limited partners' interest in
 net (loss) income              $  (4,749) $ 198,720  $  (1,218) $  75,355
                                =========  =========  =========  =========

Net (loss) income per limited
 partner unit (basic and
 diluted)                       $   (0.23) $   13.02  $   (0.07) $    5.00

Weighted average limited
 partner units outstanding:
Common units (basic and
 diluted)                          17,190     12,168     14,715     11,976
Subordinated units (basic and
 diluted)                           3,100      3,100      3,100      3,100
Performance Units                     100          -         44          -



Unaudited Condensed Consolidated Statements of Cash Flows
(in $ thousands)
                                   Nine Months Ended    Nine Months Ended
                                  September 30, 2009   September 30, 2008
                                  -------------------  -------------------

Cash flows from operating
 activities:
Net income                        $             3,881  $            79,943
Adjustments to reconcile net
 income to net cash flows
 provided by operating
 activities:
Asset retirement obligations
 accretion expense                              1,508                  987
Depreciation, depletion and
 amortization                                  39,304               24,187
Equity-based compensation cost                  2,197                1,208
Amortization of deferred loan
 costs                                            662                  220
Unrealized losses (gains) on
 derivatives, net                              34,404              (30,911)
Other, net                                        350                    -
Changes in operating assets and
 liabilities:
   Accounts receivable                          6,096              (12,061)
   Prepaid expenses and other
    current assets                                327                  236
   Other assets                                    (1)                  (7)
   Accounts payable and accrued
    liabilities                                  (358)               4,115
   Deferred revenues                           (4,120)               3,710
   Other                                           35                    -
                                  -------------------  -------------------
Net cash flows provided by
 operating activities                          84,285               71,627
                                  -------------------  -------------------

Cash flows from investing
 activities:
Acquisitions of oil and natural
 gas properties                               (16,807)            (182,123)
Deposit on acquisition of oil and
 natural gas properties                        (2,500)                   -
Development of oil and natural
 gas properties                               (11,506)             (24,314)
                                  -------------------  -------------------
Net cash flows used in investing
 activities                                   (30,813)            (206,437)
                                  -------------------  -------------------
Cash flows from financing
 activities:
Debt borrowings                                     -              197,000
Repayment of debt borrowings                 (175,000)                   -
Deferred loan costs                               (36)              (1,227)
Proceeds from private equity
 offerings, net of underwriters
 discounts                                    149,038                    -
Offering costs                                   (435)                   -
Contributions from general
 partner                                        1,641                    -
Distributions to partners                     (44,943)             (31,602)
Distributions related to
 acquisitions                                                      (13,918)
                                  -------------------  -------------------
Net cash flows (used in) provided
 by financing activities                      (69,735)             150,253
                                  -------------------  -------------------

(Decrease) increase in cash and
 cash equivalents                             (16,263)              15,443
Cash and cash equivalents -
 beginning of period                           41,628               10,220
                                  -------------------  -------------------
Cash and cash equivalents - end
 of period                        $            25,365  $            25,663
                                  ===================  ===================

Non GAAP Measures

We define Adjusted EBITDA as net income (loss) plus income tax provision, interest expense, net, realized (gains) losses on interest rate swaps, depreciation, depletion and amortization, asset retirement obligation accretion expense, non-cash (gains) losses on derivatives, amortization of upfront premiums paid to enter into commodity price hedge agreements and non-cash equity compensation expense. Distributable Cash Flow is defined as Adjusted EBITDA less income tax provision, interest expense, net, realized (gains) losses on interest rate swaps, amortization of upfront premiums paid to enter into commodity price hedge agreements and estimated maintenance capital expenditures.

Adjusted EBITDA and Distributable Cash Flow are used by our management to provide additional information and metrics relative to the performance of our business, including (prior to the creation of any reserves) the cash available to pay distributions to our unitholders. These financial measures indicate to investors whether or not we are generating cash flow at a level that can sustain or support an increase in our quarterly distribution rates. Adjusted EBITDA and Distributable Cash Flow are also quantitative standards used throughout the investment community with respect to performance of publicly-traded partnerships. Adjusted EBITDA and Distributable Cash Flow should not be considered as alternatives to net income, operating income, cash flows from operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP. Adjusted EBITDA and Distributable Cash Flow exclude some, but not all, items that effect net income and operating income and these measures may vary among companies. Therefore, our Adjusted EBITDA and Distributable Cash Flow may not be comparable to similarly titled measures of other companies.

Reconciliation of Net Income to Adjusted EBITDA and Distributable Cash Flow
(in $ thousands)

                                 Three Months Ended     Nine Months Ended
                                    September 30,         September 30,
                                --------------------  --------------------
                                  2009       2008        2009      2008
                                ---------  ---------  ---------- ---------

Net (loss) income               ($  2,833) $ 204,139  $    3,881 $  79,943
Add:
Income taxes                           64         75         121       205
Interest expense, net               3,056      3,645       9,784    10,321
Realized losses on interest
 rate swaps                         2,177        857       6,151       857
Depreciation, depletion and
 amortization                      12,935      7,832      39,304    24,187
Asset retirement obligation
 accretion expense                    494        381       1,508       987
Non-cash losses (gains) on
 commodity derivatives             16,572   (189,336)     34,404   (30,911)
Amortization of premiums on
 derivatives                          209          -         399         -
Non-cash equity compensation
 expense                              897        (53)      2,197     1,208
                                ---------  ---------  ---------- ---------
Adjusted EBITDA                 $  33,571  $  27,540  $   97,749 $  86,797

Less:
Income taxes                           64         75         121       205
Interest expense, net               3,056      3,645       9,784    10,321
Realized losses on interest
 rate swaps                         2,177        857       6,151       857
Amortization of premiums on
 derivatives                          209          -         399         -
Estimated maintenance capital
 expenditures (1)                   8,572      8,950      27,012    27,405
                                ---------  ---------  ---------- ---------
Distributable Cash Flow         $  19,493  $  14,013  $   54,282 $  48,009

(1) Estimated maintenance capital expenditures are those expenditures
estimated to be necessary to maintain the production levels of our oil and
gas properties over the long term and the operating capacity of our other
assets over the long term.






Hedge Summary Table (as of 11/09/2009)

                  Swap       Swap    Collar   Collar  Collar   Put    Put
                  Volume    Price    Volume   Floor   Ceiling Volume Strike
                ---------- -------  --------- ------- ------- ------ ------
                (Mmmbtu/            (Mmmbtu/                 (Mmmbtu/
                  Mbbls)             Mbbls)                   Mbbls)
Natural Gas
4Q 2009
NYMEX                  828 $  8.05         92 $  7.50 $  8.80
NYMEX                                     368 $  7.75 $  9.15
NYMEX                                     184 $  8.00 $ 10.55
NYMEX                                                            460 $ 4.00
Dominion
 Appalachia            589 $  9.03
El Paso Permian        322 $  7.80
Houston Ship
 Channel               659 $  7.29
MichCon
 Citygate              460 $  8.27
2010
NYMEX                5,950 $  8.00        548 $  7.50 $ 10.00
Dominion
 Appalachia          2,044 $  8.65
El Paso Permian        913 $  7.68
Houston Ship
 Channel               553 $  5.78      1,278 $  7.25 $  9.55
MichCon
 Citygate            1,825 $  8.34
2011
NYMEX                5,585 $  8.18
Dominion
 Appalachia            913 $  8.69      1,095 $  9.00 $ 12.15
El Paso Permian        913 $  9.30
Houston Ship
 Channel                                1,278 $  8.25 $ 11.65
MichCon
 Citygate                               1,643 $  8.70 $ 11.85
2012
NYMEX                5,527 $  8.63
Dominion
 Appalachia                             1,830 $  8.95 $ 11.45
El Paso Permian        732 $  9.21
Houston Ship
 Channel                                1,098 $  8.25 $ 11.10
MichCon
 Citygate                               1,647 $  8.75 $ 11.05
2013
NYMEX                3,285 $  7.23
El Paso Permian      1,095 $  6.77
El Paso San
 Juan                1,095 $  6.66
Jan - Aug 2014
NYMEX                1,215 $  7.06
Crude Oil
 (NYMEX)
4Q 2009              162.7 $ 93.25       11.5 $ 62.00 $ 73.90
2010                 688.0 $ 89.81
2011                 219.0 $103.66      401.5 $110.00 $166.45
2012                 205.0 $104.05      366.0 $110.00 $170.85
2013                 511.0 $ 78.64
Jan - July 2014      106.0 $ 84.60
Jan - Aug 2014       194.4 $ 82.28
Interest Rate
 Swap
 Agreements:
                 Notional   Fixed   Floating
                  Amount     Rate     Rate
               (in $ mill)
October 2009 -
 July 2012      $      200   4.163% 1mo LIBOR
October 2009 -
 Sept 2012      $       40   2.145% 1mo LIBOR

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