SOURCE: EV Energy Partners, L.P.

EV Energy Partners, L.P.

May 09, 2011 19:57 ET

EV Energy Partners Announces First Quarter 2011 Results and Updated Guidance and Commodity Hedge Positions

HOUSTON, TX--(Marketwire - May 9, 2011) - EV Energy Partners, L.P. (NASDAQ: EVEP) today announced results for the first quarter 2011 and filed its Form 10-Q with the Securities and Exchange Commission. In addition, EVEP announced updated guidance for the second through fourth quarters of 2011 and provided a summary of new commodity price hedge positions.

First Quarter 2011 Results

Adjusted EBITDAX for the quarter was $50.6 million, a 57 percent increase over the first quarter of 2010 and a 22 percent increase versus the fourth quarter of 2010. Distributable Cash Flow for the quarter was $31.6 million, a 56 percent increase over the first quarter of 2010 and an 18 percent increase versus the fourth quarter of 2010. The increases in Adjusted EBITDAX and Distributable Cash Flow, which are described in the attached table under "Non-GAAP Measures," are primarily due to acquisitions completed during 2010.

For the quarter ended March 31, 2011, EVEP produced 7.0 Bcf of natural gas, 208 MBbls of crude oil and 270 MBbls of natural gas liquids, or 9.9 Bcfe. This represents a 69 percent increase from first quarter 2010 production of 5.8 Bcfe and a 19 percent increase from the fourth quarter 2010 production of 8.3 Bcfe, primarily due to acquisitions completed during 2010.

EVEP reported a net loss of $34.0 million, or ($1.14) per basic and diluted weighted average limited partner unit outstanding, for the first quarter of 2011. Included in net loss were $54.6 million of non-cash net unrealized losses on commodity and interest rate derivatives and $2.1 million of non-cash costs contained in general and administrative expenses. General and administrative expenses also included $0.3 million of acquisition-related due diligence and other related transaction costs and $1.0 million of costs related to the annual vesting of phantom units during the first quarter of 2011. Also included in net loss was a $1.6 million impairment charge relating to a recent divestiture of non-core oil and natural gas properties. For the first quarter of 2010, net income was $46.1 million, or $1.68 per basic and diluted weighted average limited partner unit outstanding, which included $32.7 million of non-cash net unrealized gains on commodity and interest rate derivatives and $1.1 million of non-cash costs contained in general and administrative expenses. For the fourth quarter of 2010, net loss was $14.5 million, or ($0.55) per basic and diluted weighted average limited partner unit outstanding, which included $31.6 million of non-cash net unrealized losses on commodity and interest rate derivatives and $1.6 million of non-cash costs contained in general and administrative expenses. Also contained in general and administrative expenses for the fourth quarter were approximately $0.4 million of due diligence and other transaction costs related to our acquisitions completed during the quarter.

The $54.6 million non-cash net unrealized loss on derivatives for the first quarter of 2011 was primarily due to the increase in future commodity prices that occurred from January 1, 2011 to March 31, 2011 and the effect of such increased prices on the mark-to-market valuation of EVEP's outstanding commodity derivatives which now extend through December 2015.

John Walker, Chairman and CEO, said, "During the first quarter of 2011 we raised $442 million in net proceeds through a common unit offering and our inaugural senior notes offering, which was met with strong demand and upsized to $300 million. The proceeds from these offerings were used to repay debt incurred under our revolving credit facility to fund our December 2010 Barnett Shale acquisition. In addition, during April we entered into a $1 billion, five year Second Amended and Restated Credit Agreement under which we currently have over $400 million of liquidity. These financings put EVEP in a position of strength to continue to execute on its strategy of growth through accretive acquisitions."

Updated 2011 Guidance

The following table presents updated guidance for the second through fourth quarters of 2011, which includes a slight reduction in production estimates. In addition, lease operating expenses and natural gas and NGL price differentials have been revised to account for the treatment of certain gathering, transportation and processing expenses associated with the Barnett Shale acquisition which were presented as a product price reduction under the previous guidance rather than as lease operating expense.

                        2nd Qtr 2011      3rd Qtr 2011      4th Qtr 2011
                      ----------------  ----------------  ----------------
Net Production:
  Natural Gas (MMcf)   6,875  -  7,525   7,200  -  8,000   7,475  -  8,275
  Crude Oil (MBbls)      215  -    245     220  -    250     215  -    245
  Natural Gas Liquids
   (MBbls)               270  -    300     280  -    320     285  -    330
Total Mmcfe            9,785  - 10,795  10,200  - 11,420  10,475  - 11,725

Average Daily
 Production (Mmcfe/d)  107.5  -  118.6   110.9  -  124.1   113.9  -  127.4

Average Price
 Differential vs
 NYMEX
  Natural Gas (% of
   NYMEX Natural Gas)     95% -     99%     94% -     98%     94% -     98%
  Crude Oil (% of
   NYMEX Crude Oil)       93% -     97%     93% -     97%     93% -     97%
  Natural Gas Liquids
   (% of NYMEX Crude
   Oil)                   45% -     51%     45% -     51%     45% -     51%

  Transportation
   Margin ($ thous) (a)   350  -    400     350  -    400     350  -    400

Expenses:
Operating Expenses:
  LOE and other ($
   thous)             17,100  - 18,900  17,600  - 19,400  17,800  - 19,600
  Production Taxes
   (as % of revenue)     4.4% -    4.8%    4.4% -    4.8%    4.4% -    4.8%

General and
 administrative
 expense ($ thous)
 (b)                   4,500  -  5,500   4,500  -  5,500   4,500  -  5,500

Capital Expenditures
 ($ thous) (c)        17,000  - 21,000  23,000  - 29,000  12,000  - 16,000


(a) Represents estimated transportation and marketing-related revenues
    less cost of purchased natural gas.
(b) Excludes non-cash general and administrative expense, of which non-cash
    unit based compensation is a part, also excludes any amounts for future
    acquisition related due diligence and transaction costs.
(c) Represents estimates for drilling and related capital expenditures.
    Does not include any amounts for acquisitions of oil and gas
    properties.

New Commodity Price Hedge Positions

Since the end of the first quarter 2011, EVEP has entered into the following additional natural gas hedge positions.

                                                          Swap      Swap
Period                                          Index    Volume     Price
                                              --------- --------- ---------
                                                        (Mmmbtu/
                                                          Mbbls)
Natural Gas
Sept 14 - Dec 14                                  NYMEX       610 $    5.74

2014                                              NYMEX     5,475 $    5.73

2015                                              NYMEX     7,300 $    6.09

Quarterly Report on Form 10-Q

EVEP's financial statements and related footnotes are available on our first quarter 2011 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 May 4, 2011, EV Energy Partners, L.P. will host an investor conference call Tuesday, May 10, 2011 at 9 a.m. (Eastern Time). Investors interested in participating in the call may dial (480) 629-9821 (quote conference ID 4439591) 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 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
                                                             March 31,
                                                        -------------------
                                                          2011      2010
                                                        --------- ---------
Production data:
  Oil (MBbls)                                                 208       126
  Natural gas liquids (MBbls)                                 270       182
  Natural gas (MMcf)                                        7,004     3,985
  Net production (MMcfe)                                    9,871     5,833
Average sales price per unit: (1)
  Oil (Bbl)                                             $   89.88 $   74.46
  Natural gas liquids (Bbl)                                 48.06     45.54
  Natural gas (Mcf)                                          3.99      5.25
  Mcfe                                                       6.04      6.62
Average unit cost per Mcfe:
  Production costs:
    Lease operating expenses (2)                        $    1.76 $    1.96
    Production taxes                                         0.27      0.36
                                                        --------- ---------
    Total                                                    2.03      2.32
Asset retirement obligations accretion expense               0.10      0.09
Depreciation, depletion and amortization                     1.78      2.07
General and administrative expenses                          0.87      0.81

(1) Prior to $17.2 and $10.1 million of net commodity hedge gains for the
    three months ended March 31, 2011 and March 31, 2010, respectively.
(2) Lease operating expenses for the three months ended March 31, 2010
    contains $0.2 million ($0.04 per mcfe) of non-cash inventory write
    downs related to the Appalachian Basin acquisition closed during the
    fourth quarter of 2009.



Condensed Consolidated Balance Sheets (Unaudited)
(In $ thousands, except number of units)


                                        March 31, 2011   December 31, 2010
                                      -----------------  -----------------
               ASSETS
Current assets:
  Cash and cash equivalents           $          29,485  $          23,127
  Accounts receivable:
    Oil, natural gas and natural gas
     liquids revenues                            33,249             27,742
    Related party                                 3,032                  -
    Other                                         3,500                441
  Derivative asset                               40,091             55,100
  Other current assets                            1,329              1,158
                                      -----------------  -----------------
    Total current assets                        110,686            107,568
Oil and natural gas properties, net
 of accumulated depreciation,
 depletion and amortization; March
 31, 2011, $193,892; December 31,
 2010, $176,897                              1,318,780          1,324,240
Other property, net of accumulated
 depreciation and amortization;
 March 31, 2011, $500; December 31,
 2010, $465                                       1,531              1,567
Long-term derivative asset                       29,922             51,497
Other assets                                      2,380              1,885
                                      -----------------  -----------------
Total assets                          $       1,463,299  $       1,486,757
                                      =================  =================

    LIABILITIES AND OWNERS' EQUITY
Current liabilities:
  Accounts payable and accrued
   liabilities
    Third party                       $          24,873  $          20,678
    Related party                                     -                182
  Derivative liability                            3,337              1,943
                                      -----------------  -----------------
    Total current liabilities                    28,210             22,803

Asset retirement obligations                     68,997             67,175
Long-term debt                                  480,018            619,000
Long-term liabilities                               463              3,048
Long-term derivative liability                   17,357                784

Commitments and contingencies

Owners' equity:
  Common unitholders - 34,173,650
   units and 30,510,313 units issued
   and outstanding as of March 31,
   2011 and December 31, 2010,
   respectively                                 874,281            779,327
  General partner interest                       (6,027)            (5,380)
                                      -----------------  -----------------
    Total owners' equity                        868,254            773,947
                                      -----------------  -----------------
Total liabilities and owners' equity  $       1,463,299  $       1,486,757
                                      =================  =================


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


                                                       Three Months Ended
                                                            March 31,
                                                      --------------------
                                                        2011       2010
                                                      ---------  ---------
Revenues:
  Oil, natural gas and natural gas liquids revenues   $  59,621  $  38,596
  Transportation and marketing-related revenues           1,401      1,578
                                                      ---------  ---------
    Total revenues                                       61,022     40,174
                                                      ---------  ---------
Operating costs and expenses:
  Lease operating expenses                               17,362     11,432
  Cost of purchased natural gas                           1,050      1,220
  Dry hole and exploration costs                            403          -
  Production taxes                                        2,651      2,127
  Asset retirement obligations accretion expense            966        510
  Depreciation, depletion and amortization               17,564     12,084
  General and administrative expenses                     8,593      4,724
  Impairment of oil and natural gas properties            1,588          -
  Loss on sale of oil and natural gas properties              -        564
                                                      ---------  ---------
    Total operating costs and expenses                   50,177     32,661
                                                      ---------  ---------
Operating income                                         10,845      7,513
Other (expense) income, net:
  Realized gains on derivatives, net                     15,038      7,965
  Unrealized (losses) gains on derivatives, net         (54,551)    32,660
  Interest expense                                       (5,159)    (2,103)
  Other (expense) income, net                               (80)       141
                                                      ---------  ---------
    Total other (expense) income, net                   (44,752)    38,663
                                                      ---------  ---------
(Loss) income before income taxes                       (33,907)    46,176
Income taxes                                                (82)       (52)
                                                      ---------  ---------
Net (loss) income                                     ($ 33,989) $  46,124
                                                      =========  =========
General partner's interest in net (loss) income,
 including incentive distribution rights              $   2,254  $   3,212
                                                      =========  =========
Limited partners' interest in net (loss) income       ($ 36,243) $  42,912
                                                      =========  =========
Net (loss) income per limited partner unit:
  Basic                                               ($   1.14) $    1.68
                                                      =========  =========
  Diluted                                             ($   1.14) $    1.68
                                                      =========  =========
Weighted average limited partner units outstanding:
  Basic                                                  31,696     25,587
                                                      =========  =========
  Diluted                                                31,696     25,615
                                                      =========  =========

Distributions declared per unit                       $   0.760  $   0.756
                                                      =========  =========


Condensed Consolidated Statements of Cash Flows (Unaudited)
(In $ thousands)

                                                       Three Months Ended
                                                            March 31,
                                                      --------------------
                                                        2011       2010
                                                      ---------  ---------
Cash flows from operating activities:
  Net (loss) income                                   ($ 33,989) $  46,124
  Adjustments to reconcile net (loss) income to net
   cash flows provided by operating activities:
    Dry hole costs                                            2          -
    Asset retirement obligations accretion expense          966        510
    Depreciation, depletion and amortization             17,564     12,084
    Equity-based compensation cost                        2,137      1,066
    Impairment of oil and natural gas properties          1,588          -
    Loss on sale of oil and natural gas properties            -        564
    Unrealized loss (gain) on derivatives, net           54,551    (32,660)
    Amortization of discount on long-term debt               18          -
    Amortization of deferred loan costs                     201        137
    Other                                                    54         (4)
    Changes in operating assets and liabilities:
      Accounts receivable                                (8,738)    (4,746)
      Other current assets                                 (171)       209
      Accounts payable and accrued liabilities            1,857        643
      Long-term liabilities                                   -       (733)
      Other, net                                           (154)       (39)
                                                      ---------  ---------
Net cash flows provided by operating activities          35,886     23,155
                                                      ---------  ---------
Cash flows from investing activities:
  Acquisition of oil and natural gas properties               -   (137,898)
  Development of oil and natural gas properties         (13,407)    (2,411)
  Proceeds from sale of oil and natural gas
   properties                                                 -         82
                                                      ---------  ---------
Net cash flows used in investing activities             (13,407)  (140,227)
                                                      ---------  ---------
Cash flows from financing activities:
  Long-term debt borrowings                                   -    138,000
  Repayments of long-term debt borrowings              (431,500)   (95,000)
  Proceeds from debt offering                           292,500          -
  Loan costs incurred                                      (695)         -
  Proceeds from equity offering                         147,108     92,770
  Offering costs                                           (248)       (97)
  Contributions from general partner                      3,191      1,977
  Distributions paid                                    (26,477)   (20,221)
                                                      ---------  ---------
Net cash flows (used in) provided by financing
 activities                                             (16,121)   117,429
                                                      ---------  ---------

Increase in cash and cash equivalents                     6,358        357
Cash and cash equivalents - beginning of period          23,127     18,806
                                                      ---------  ---------
Cash and cash equivalents - end of period             $  29,485  $  19,163
                                                      =========  =========

Non-GAAP Measures

We define Adjusted EBITDAX as net (loss) income plus income tax provision, interest expense, net, realized losses on interest rate swaps, depreciation, depletion and amortization, asset retirement obligation accretion expense, non-cash losses (gains) on derivatives, net, non-cash equity compensation, impairment of oil and natural gas properties, loss on sale of oil and natural gas properties, write down of crude oil inventory, and dry hole and exploration costs. Distributable Cash Flow is defined as Adjusted EBITDAX less income tax provision, cash interest expense, net, realized losses on interest rate swaps and estimated maintenance capital expenditures.

Adjusted EBITDAX and Distributable Cash Flow are used by our management to provide additional information and statistics 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 EBITDAX and Distributable Cash Flow are also quantitative standards used throughout the investment community with respect to performance of publicly-traded partnerships. Adjusted EBITDAX 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 EBITDAX and Distributable Cash Flow exclude some, but not all, items that affect net income and operating income and these measures may vary among companies. Therefore, our Adjusted EBITDAX and Distributable Cash Flow may not be comparable to similarly titled measures of other companies.

Reconciliation of Net Income to Adjusted EBITDAX and Distributable Cash
Flow
(In $ thousands)


                                                       Three Months Ended
                                                            March 31,
                                                      --------------------
                                                        2011       2010
                                                      ---------  ---------

Net (loss) income                                     ($ 33,989) $  46,124
Add:
Income taxes                                                 82         52
Interest expense, net                                     5,154      2,075
Realized losses on interest rate swaps                    2,139      2,158
Depreciation, depletion and amortization                 17,564     12,084
Asset retirement obligation accretion expense               966        510
Non-cash losses (gains) on derivatives, net              54,551    (32,660)
Non-cash equity compensation expense                      2,137      1,066
Impairment of oil and natural gas properties              1,588          -
Loss on sale of oil and natural gas properties                -        564
Non-cash inventory expense from 2009 Appalachian
 Basin acquisition included in lease operating
 expense                                                      -        240
Dry hole and exploration costs                              403          -
                                                      ---------  ---------
Adjusted EBITDAX                                         50,595     32,213
Less:
Income taxes                                                 82         52
Cash interest expense, net                                4,935      1,938
Realized losses on interest rate swaps                    2,139      2,158
Estimated maintenance capital expenditures (1)           11,846      7,875
                                                      ---------  ---------
Distributable Cash Flow                               $  31,593  $  20,190
                                                      =========  =========

(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.

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