SOURCE: EV Energy Partners, L.P.

EV Energy Partners, L.P.

August 09, 2012 17:06 ET

EV Energy Partners Announces Second Quarter 2012 Results

HOUSTON, TX--(Marketwire - Aug 9, 2012) - EV Energy Partners, L.P. (NASDAQ: EVEP) today announced results for the second quarter 2012 and filed its Form 10-Q with the Securities and Exchange Commission. 

Second Quarter 2012 Results

Adjusted EBITDAX for the quarter was $66.1 million, a 20 percent increase over the second quarter of 2011 and a 3 percent increase versus the first quarter of 2012. Distributable Cash Flow for the quarter was $34.5 million, a 4 percent increase over the second quarter of 2011 and flat versus the first quarter of 2012. The increases over the second quarter of 2011 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 2011.

Production for the second quarter of 2012 was 10.7 Bcf of natural gas, 282 MBbls of oil and 403 MBbls of natural gas liquids, or 14.8 Bcfe. This represents a 47 percent increase from second quarter 2011 production of 10.1 Bcfe, primarily due to acquisitions completed during 2011, and a 2 percent increase from the first quarter 2012 production of 14.5 Bcfe.

For the second quarter of 2012, EVEP reported net income of $15.0 million, or $0.35 and $0.34 per basic and diluted weighted average limited partner unit outstanding, respectively. Included in net income were $15.5 million of unrealized gains on commodity and interest rate derivatives, $0.7 million of non-cash realized losses related to derivatives acquired in a December 2010 acquisition that settled during the quarter, a $0.5 million non-cash charge to lease operating expense related to oil in tanks purchased in connection with 2011 acquisitions, $1.7 million of dry hole and exploration costs, a $16.3 million impairment charge, $0.4 million of non-cash deferred income taxes and $3.8 million of non-cash costs contained in general and administrative expenses. Also contained in general and administrative expenses were $0.6 million of acquisition related due diligence, transaction and transition costs.

The $16.3 million impairment charge was primarily to write down certain oil and natural gas properties to their fair value due to the effects of declining natural gas prices on expected future net cash flows.

The $15.5 million unrealized gain on derivatives for the second quarter of 2012 was due to the decrease in future oil and natural gas liquids prices, partially offset by the increase in future natural gas prices that occurred from March 31, 2012 to June 30, 2012 and the effect of such price changes on the mark-to-market valuation of EVEP's outstanding commodity derivatives which extend through December 2015.

For the second quarter of 2011, EVEP reported net income of $39.2 million, or $1.03 per basic and diluted weighted average limited partner unit outstanding. Included in net income were $17.4 million of unrealized gains on commodity and interest rate derivatives and $1.7 million of non-cash costs contained in general and administrative expenses. General and administrative expenses also included $0.2 million of acquisition related due diligence and transaction costs. Also included in net income was a $5.1 million impairment charge primarily related to non-core assets sold during the quarter and a $3.3 million non-cash realized gain on derivatives related to term extensions on certain interest rate swaps and to derivatives acquired in conjunction with a 2010 property acquisition. For the first quarter of 2012, EVEP reported net income of $28.6 million, or $0.69 per basic and diluted weighted average limited partner unit outstanding. Included in net income were $11.7 million of unrealized gains on commodity and interest rate derivatives, $0.6 million of non-cash realized losses related to derivatives acquired in a December 2010 acquisition that settled during the quarter, a $1.2 million non-cash charge to lease operating expense related to oil in tanks purchased in connection with 2011 acquisitions, $2.2 million of dry hole and exploration costs, a $0.6 million impairment charge primarily related to non-core assets sold during the quarter, $0.6 million of non-cash deferred income taxes and $4.3 million of non-cash costs contained in general and administrative expenses. Also contained in general and administrative expenses were $1.8 million of costs associated with the annual vesting of phantom units during the first quarter and $0.2 million of acquisition related due diligence and transaction costs.

Mark Houser, President and CEO, said, "For the second quarter, we achieved good results from our existing base business, which we would expect to continue for the second half of the year. We launched our Utica Shale monetization process at the end of the second quarter and are moving forward as planned. In addition, we have drilled and completed three operated wells in which EVEP owns a working interest. The Frank 2H well in the oil window in Stark County was brought on line and flowed at an initial unassisted rate of 515 BOE per day with a very high liquids content. Approximately forty percent of the equivalent production is light crude oil and forty percent is NGL's. We expect production to increase once standard artificial lift equipment is installed and the well is tied in to sales. The Habrun well in the oil window in Stark County and the Cairns well in the wet gas window in Carroll County are still in the dissipation period."

Quarterly Report on Form 10-Q
EVEP's financial statements and related footnotes are available on our second quarter 2012 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 July 31, 2012, EV Energy Partners, L.P. will host an investor conference call at 10 a.m. EDT Friday, Aug. 10, 2012. Investors interested in participating in the call may dial (480) 629-9867 (conference ID 4557221) 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 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
June 30,
  Six Months Ended
June 30,
  2012   2011   2012   2011
Production data:                      
  Oil (MBbls)   282     241     567     449
  Natural gas liquids (MBbls)   403     272     826     542
  Natural gas (MMcf)   10,722     6,999     20,985     14,003
  Net production (MMcfe)   14,828     10,080     29,341     19,951
Average sales price per unit : (1)                      
  Oil (Bbl) $ 90.74   $ 98.63   $ 95.43   $ 94.58
  Natural gas liquids (Bbl)   34.48     54.80     40.59     51.45
  Natural gas (Mcf)   2.18     4.20     2.48     4.10
  Mcfe   4.23     6.76     4.76     6.40
Average unit cost per Mcfe:                      
  Production costs:                      
    Lease operating expenses (2) $ 1.68   $ 1.78   $ 1.82   $ 1.77
    Production taxes   0.17     0.31     0.20     0.29
    Total   1.85     2.09     2.02     2.06
Asset retirement obligations accretion expense   0.08     0.10     0.08     0.10
Depreciation, depletion and amortization   1.91     1.83     1.81     1.80
General and administrative expenses   0.68     0.71     0.76     0.79
                       
(1) Prior to $36.3 and $12.8 million of net hedge gains and settlements on commodity derivatives for the three months ended June 30, 2012 and June 30, 2011, respectively and $62.3 and $30.0 million for the six months ended June 30, 2012 and June 30, 2011.
(2) Lease operating expenses for the three and six months ended June 30, 2012 contains $0.5 million ($0.04 per Mcfe) and $1.7 million ($0.06 per Mcfe) respectively of non-cash charges related to oil in tanks purchased in connection with 2011 acquisitions.
 
 
 
Condensed Consolidated Balance Sheets          
(in $ thousands)          
(unaudited)           
           
  June 30,
2012
    December 31,
2011
 
ASSETS              
Current assets:              
  Cash and cash equivalents $ 29,632     $ 30,312  
  Accounts receivable:              
    Oil, natural gas and natural gas liquids revenues   29,630       36,926  
    Other   3,530       459  
  Derivative asset   89,604       81,772  
  Other current assets   1,910       3,084  
  Assets held for sale   69       6,597  
    Total current assets   154,375       159,150  
               
Oil and natural gas properties, net of accumulated depreciation, depletion and amortization; June 30, 2012, $313,199; December 31, 2011, $244,092   1,807,512       1,768,529  
Other property, net of accumulated depreciation and amortization; June 30, 2012, $526; December 31, 2011, $447   1,356       1,345  
Long-term derivative asset   75,088       57,643  
Other assets   23,684       16,557  
Total assets $ 2,062,015     $ 2,003,224  
               
               
LIABILITIES AND OWNERS' EQUITY              
Current liabilities:              
  Accounts payable and accrued liabilities:              
    Third party $ 45,910     $ 34,705  
    Related party   1,389       870  
  Derivative liability   -       618  
  Liabilities held for sale   -       602  
    Total current liabilities   47,299       36,795  
               
Asset retirement obligations   94,879       90,803  
Long-term debt   739,184       953,023  
Long-term liabilities   1,879       2,564  
               
Commitments and contingencies              
               
Owners' equity:              
  Common unitholders - 38,447,350 units and 34,173,650 units issued and outstanding as of June 30, 2012 and December 31, 2011, respectively   1,190,712       935,425  
  Class B unitholders - 3,873,357 units issued and outstanding as of June 30, 2012 and December 31, 2011   (1,649 )     232  
  General partner interest   (10,289 )     (15,618 )
    Total owners' equity   1,178,774       920,039  
Total liabilities and owners' equity $ 2,062,015     $ 2,003,224  
               
               
               
Condensed Consolidated Statements of Operations                    
(in $ thousands, except per unit data)                      
(unaudited)                       
                       
  Three Months Ended
June 30,
    Six Months Ended
June 30,
 
  2012     2011     2012     2011  
Revenues:                              
  Oil, natural gas and natural gas liquids revenues $ 62,793     $ 68,109     $ 139,594     $ 127,730  
  Transportation and marketing-related revenues   759       1,484       1,689       2,885  
    Total revenues   63,552       69,593       141,283       130,615  
                               
Operating costs and expenses:                              
  Lease operating expenses   24,850       17,949       53,450       35,311  
  Cost of purchased natural gas   501       1,120       1,146       2,170  
  Dry hole and exploration costs   1,682       441       3,855       844  
  Production taxes   2,525       3,119       5,807       5,770  
  Asset retirement obligations accretion expense   1,220       970       2,428       1,936  
  Depreciation, depletion and amortization   28,395       18,443       52,986       36,007  
  General and administrative expenses   10,149       7,132       22,266       15,725  
  Impairment of oil and natural gas properties   16,264       5,078       16,899       6,666  
    Total operating costs and expenses   85,586       54,252       158,837       104,429  
                               
Operating (loss) income   (22,034 )     15,341       (17,554 )     26,186  
                               
Other income (expense), net:                              
  Realized gains on derivatives, net   34,603       14,242       58,793       27,784  
  Unrealized gains (losses) on derivatives, net   15,537       17,422       27,198       (35,633 )
  Interest expense   (12,595 )     (8,124 )     (23,679 )     (13,283 )
  Other (expense) income, net   (30 )     313       (26 )     233  
    Total other income (expense), net   37,515       23,853       62,286       (20,899 )
                               
Income before income taxes and equity in losses of unconsolidated affiliates   15,481       39,194       44,732       5,287  
Income taxes   (439 )     (31 )     (1,097 )     (113 )
Income before equity in losses of unconsolidated affiliates   15,042       39,163       43,635       5,174  
Equity in losses of unconsolidated affiliates   (86 )     -       (86 )     -  
Net income $ 14,956     $ 39,163     $ 43,549     $ 5,174  
General partner's interest in net income, including incentive distribution rights $ 299     $ 3,728     $ 871     $ 5,982  
Limited partners' interest net income (loss) $ 14,657     $ 35,435     $ 42,678     $ (808 )
Net income (loss) per limited partner unit:                              
  Basic $ 0.35     $ 1.03     $ 1.03     $ (0.02 )
  Diluted $ 0.34     $ 1.03     $ 1.02     $ (0.02 )
Weighted average limited partner units outstanding:                              
  Basic   42,452       34,294       41,446       33,002  
  Diluted   42,678       34,534       41,739       33,002  
                               
Distributions declared per unit $ 0.765     $ 0.761     $ 1.529     $ 1.521  
                               
                               
                               

Non-GAAP Measures

We define Adjusted EBITDAX as net 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 realized losses on commodity derivatives, unrealized (gains) losses on derivatives, non-cash equity compensation, impairments of oil and natural gas properties, write down of oil inventory, and dry hole and exploration costs. Distributable Cash Flow is defined as Adjusted EBITDAX less cash 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
June 30,
    Six Months Ended
June 30,
 
  2012     2011     2012     2011  
                               
Net income $ 14,956     $ 39,163     $ 43,549     $ 5,174  
Add:                              
Income taxes   439       31       1,097       113  
Interest expense, net   12,589       8,118       23,666       13,272  
Realized losses on interest rate swaps   1,043       1,828       2,159       3,967  
Depreciation, depletion and amortization   28,395       18,443       52,986       36,007  
Asset retirement obligations accretion expense   1,220       970       2,428       1,936  
Non-cash realized losses (gains) on derivatives   720       (3,279 )     1,304       (1,784 )
Unrealized (gains) losses on derivatives   (15,537 )     (17,422 )     (27,198 )     35,633  
Non-cash equity compensation expense   3,815       1,739       8,096       3,877  
Impairment of oil and natural gas properties   16,264       5,078       16,899       6,666  
Non-cash inventory write down expense   527       -       1,729       -  
Dry hole and exploration costs   1,682       441       3,855       844  
Adjusted EBITDAX $ 66,113     $ 55,110     $ 130,570     $ 105,705  
                               
                               
Less:                              
Cash income taxes   49       31       126       113  
Cash interest expense, net   11,993       7,600       22,491       12,535  
Realized losses on interest rate swaps   1,043       1,828       2,159       3,967  
Estimated maintenance capital expenditures (1)   18,535       12,600       36,297       24,446  
Distributable Cash Flow $ 34,493     $ 33,051     $ 69,497     $ 64,644  
                               
                               
(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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