SOURCE: EV Energy Partners, L.P.

EV Energy Partners, L.P.

November 08, 2010 18:01 ET

EV Energy Partners Announces Third Quarter 2010 Results

HOUSTON, TX--(Marketwire - November 8, 2010) - EV Energy Partners, L.P. (NASDAQ: EVEP) today announced results for the third quarter 2010 and filed its Form 10-Q with the Securities and Exchange Commission.

Third Quarter 2010 Results

Adjusted EBITDAX for the quarter was $37.2 million, a 10.8% increase over the third quarter of 2009 and a 0.3% increase over the second quarter of 2010. Distributable Cash Flow for the quarter was $24.0 million, a 22.4% increase over the third quarter of 2009 and a 4.3% increase versus the second quarter of 2010. Adjusted EBITDAX and Distributable Cash Flow are described in the attached table under "Non-GAAP Measures."

For the quarter ended September 30, 2010, EVEP produced 4.8 Bcf of natural gas, 179 MBbls of crude oil and 181 MBbls of natural gas liquids, or 7.0 Bcfe. Third quarter 2010 production of 7.0 Bcfe represents a 13.9% increase over third quarter 2009 production of 6.1 Bcfe, primarily due to acquisitions made during the second half of 2009 and 2010. Third quarter 2010 production was 2.1% higher than second quarter 2010 production of 6.8 Bcfe.

EVEP reported net income of $58.1 million, or $1.88 and $1.87 per basic and diluted weighted average unit outstanding, respectively for the third quarter of 2010. Included in net income were $4.1 million of non-cash net unrealized gains on commodity and interest rate derivatives and $1.3 million of non-cash costs contained in general and administrative expenses. Also included in net income was a $36.8 million gain on sale of certain unproved acreage. For the third quarter of 2009, net loss was $2.8 million, or ($0.23) per basic and diluted weighted average unit outstanding, which included $16.6 million of non-cash net unrealized losses on commodity and interest rate derivatives and $0.9 million of non-cash costs contained in general and administrative expenses. For the second quarter of 2010, net income was $16.3 million, or $0.50 per basic and diluted weighted average unit outstanding, which included $2.2 million of non-cash net unrealized losses on commodity and interest rate derivatives, $1.0 million of non-cash costs contained in general and administrative expenses, $4.4 million gain on sale of certain unproved acreage and a $2.3 million non-cash charge to lease operating expenses related to oil in tanks purchased in connection with the Appalachian Basin acquisition closed in March 2010.

The $4.1 million non-cash net unrealized gains on derivatives for the third quarter of 2010 was primarily due to the decrease in future gas prices at September 30, 2010 as compared to those at June 30, 2010 offset by an increase in future oil prices, and the effect of such price changes on EVEP's commodity price hedges which extend through August 2014.

John Walker, Chairman and CEO, stated about the quarter, "EVEP has announced over $560 million of acquisitions in 2010. Quarter to quarter we were able to maintain our production levels and are currently focused on integrating our Mid-Continent region acquisition. With the recent announcement of our intention to acquire assets in the Barnett Shale, EVEP will have four core operating areas and substantial opportunities for growth in production and distributable cash flow."

Quarterly Report on Form 10-Q

EVEP's financial statements and related footnotes are available on our third quarter 2010 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, 2010, EV Energy Partners, L.P. will host an investor conference call Tuesday, November 9, 2010 at 9 am (Eastern Time). Investors interested in participating in the call may dial 480-629-9722 and ask for conference ID 4383308 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,
                                    ------------------- -------------------
                                      2010      2009      2010      2009
                                    --------- --------- --------- ---------
Production data:
Oil (MBbls)                               179       132       477       386
Natural gas liquids (MBbls)               181       180       541       580
Natural gas (MMcf)                      4,809     4,251    13,528    12,230
                                    --------- --------- --------- ---------
Net production (MMcfe)                  6,973     6,123    19,638    18,026
Average sales price per unit (1):
Oil (Bbl)                           $   71.11 $   64.04 $   72.75 $   50.95
Natural gas liquids (Bbl)               38.06     32.35     41.29     27.84
Natural gas (Mcf)                        4.34      3.28      4.55      3.56
Mcfe                                     5.81      4.61      6.04      4.40

Average unit cost per Mcfe:
Production costs:
Lease operating expenses            $    1.81 $    1.70 $    1.98 $    1.72
Production taxes                         0.27      0.25      0.29      0.23
                                    --------- --------- --------- ---------
Total                                    2.08      1.95      2.27      1.95

Asset retirement obligations
 accretion expense                       0.11      0.08      0.10      0.08
Depreciation, depletion and
 amortization                            1.87      2.11      1.96      2.18
General and administrative expense       0.86      0.74      0.84      0.71

(1) Prior to $15.5 and $20.6 million of net hedge gains for the three
months ended September 30, 2010 and September 30, 2009, respectively, and
prior to $41.6 and $61.4  million of net realized hedge gains for the nine
months ended September 30, 2010 and September 30, 2009 respectively.



Unaudited Condensed Consolidated Balance Sheets
($ in thousands)
                                                   September     December
                                                    30, 2010     31, 2009
                                                  -----------  -----------
                         ASSETS
Current assets:
 Cash and cash equivalents                        $    23,256  $    18,806
 Accounts receivable:
  Oil, natural gas and natural gas liquids
   revenues                                            15,819       14,599
  Related party                                         6,667        2,881
  Other                                                20,505        1,034
 Derivative asset                                      59,088       26,733
 Other current assets                                     859          625
                                                  -----------  -----------
  Total current assets                                126,194       64,678

Oil and natural gas properties, net of
 accumulated depreciation, depletion and
 amortization; Sept 30, 2010, $160,253; December
 31, 2009, $121,970.                                1,036,234      771,752
Other property, net of accumulated depreciation
 and amortization; September 30, 2010, $424;
 December 31, 2009, $319.                               1,613          742
Long-term derivative asset                             69,504       68,549
Other assets                                            1,580        1,984
                                                  -----------  -----------
Total assets                                      $ 1,235,125  $   907,705
                                                  ===========  ===========

           LIABILITIES AND OWNERS' EQUITY
Current liabilities:
 Accounts payable and accrued liabilities         $    14,955  $    10,310
 Derivative liability                                     788        1,543
                                                  -----------  -----------
Total current liabilities                              15,743       11,853

Asset retirement obligations                           69,071       42,533
Long-term debt                                        334,000      302,000
Long-term liabilities                                   2,017        3,212
Long-term derivative liability                            175          676

Commitments and contingencies

Owners' equity
 Common unitholders                                   816,083      548,160
 General partner interest                              (1,964)        (729)
                                                  -----------  -----------
  Total owners' equity                                814,119      547,431
                                                  -----------  -----------
Total liabilities and owners' equity              $ 1,235,125  $   907,705
                                                  ===========  ===========


Results of Operations
(in $ thousands, except per
 unit data)
                                 Three Months Ended     Nine Months Ended
                                    September 30,         September 30,
                                --------------------  --------------------
                                  2010       2009       2010       2009
                                ---------  ---------  ---------  ---------
Revenues:
Oil, natural gas and natural
 gas liquids revenues           $  40,527  $  28,198  $ 118,554  $  79,361
Transportation and
 marketing-related revenues         1,498      1,351      4,552      6,401
                                ---------  ---------  ---------  ---------
Total revenues                     42,025     29,549    123,106     85,762
                                ---------  ---------  ---------  ---------
Operating costs and expenses:
Lease operating expenses           12,640     10,421     38,941     31,075
Cost of purchased natural gas       1,132        980      3,447      3,431
Dry hole and exploration costs        235                   235
Production taxes                    1,876      1,500      5,676      4,143
Asset retirement obligations
 accretion expense                    770        494      2,044      1,508
Depreciation, depletion and
 amortization                      13,016     12,935     38,536     39,304
General and administrative
 expenses                           6,014      4,519     16,563     12,870
Gain on sales of oil and
 natural gas properties           (36,793)         -    (40,617)         -
                                ---------  ---------  ---------  ---------
Total operating costs and
 expenses                          (1,110)    30,849     64,825     92,331
                                ---------  ---------  ---------  ---------
Operating income (loss)            43,135     (1,300)    58,281     (6,569)

Other income (expense), net:
Realized gains on derivatives,
 net                               13,305     18,441     35,171     55,201
Unrealized gains (losses) on
 derivatives, net                   4,064    (16,572)    34,566    (34,404)
Interest expense                   (2,319)    (3,065)    (7,691)    (9,909)
Other income (expense), net            61       (273)       454       (317)
                                ---------  ---------  ---------  ---------
Total other income (expense),
 net                               15,111     (1,469)    62,500     10,571
                                ---------  ---------  ---------  ---------
Income (loss) before income
 taxes                             58,246     (2,769)   120,781      4,002
Income taxes                         (111)       (64)      (242)      (121)
                                ---------  ---------  ---------  ---------
Net income (loss)               $  58,135  $  (2,833) $ 120,539  $   3,881
                                =========  =========  =========  =========
General partner's interest in
 net income (loss), including
 incentive distribution rights  $   3,764  $   1,916  $   9,600  $   5,099
                                =========  =========  =========  =========
Limited partners' interest in
 net income (loss)              $  54,371  $  (4,749) $ 110,939  $  (1,218)
                                =========  =========  =========  =========

Net income (loss) per limited
 partner unit
Basic                           $    1.88  $   (0.23) $    4.07  $   (0.07)
Diluted                         $    1.87  $   (0.23) $    4.06  $   (0.07)

Weighted average limited
 partner units outstanding:
Basic                              28,935     20,390     27,257     17,859
Diluted                            29,025     20,390     27,309     17,859



Statement of Cash Flows
(in $ thousands)
                                                Nine Months   Nine Months
                                                    Ended         Ended
                                                  September     September
                                                  30, 2010      30, 2009
                                                ------------  ------------

Cash flows from operating activities:
   Net income                                   $    120,539  $      3,881
   Adjustments to reconcile net income to net
    cash flows provided by operating
    activities:
   Dry hole costs                                         69             -
   Asset retirement obligations accretion
    expense                                            2,044         1,508
   Depreciation, depletion and amortization           38,536        39,304
   Equity-based compensation cost                      3,414         2,197
   Gain on sales of oil and natural gas
    properties                                       (40,617)            -
   Unrealized losses (gains) on derivatives,
    net                                              (34,566)       34,404
   Amortization of deferred loan costs                   413           662
   Other, net                                            (38)          350
   Changes in operating assets and liabilities:
      Accounts receivable                             (5,028)        6,096
      Prepaid expenses and other current assets        2,514           327
      Other assets                                         -            (1)
      Accounts payable and accrued liabilities         2,649          (358)
      Deferred revenues                                    -        (4,120)
      Long-term liabilities                             (734)            -
      Other                                             (229)           35
                                                ------------  ------------
Net cash flows provided by operating activities       88,966        84,285
                                                ------------  ------------


Cash flows from investing activities:
   Acquisitions of oil and natural gas
    properties                                      (267,683)      (16,807)
   Deposit on acquisition of oil and natural
    gas properties                                         -        (2,500)
   Development of oil and natural gas
    properties                                       (16,219)      (11,506)
   Proceeds from sales of oil and natural gas
    properties                                        25,120             -
                                                ------------  ------------
Net cash flows used in investing activities         (258,782)      (30,813)
                                                ------------  ------------

Cash flows from financing activities:
   Long-term debt borrowings                         258,000             -
   Repayment of long-term debt borrowings           (226,000)     (175,000)
   Loan costs incurred                                    (8)          (36)
   Proceeds from private equity offerings, net
    of underwriters discounts                        204,965       149,038
   Offering costs                                       (277)         (435)
   Contributions from general partner                  4,267         1,641
   Distributions to partners                         (66,681)      (44,943)
                                                ------------  ------------
Net cash flows provided by (used in) financing
 activities                                          174,266       (69,735)
                                                ------------  ------------

Increase (decrease) in cash and cash
 equivalents                                           4,450       (16,263)
Cash and cash equivalents - beginning of period       18,806        41,628
                                                ------------  ------------
Cash and cash equivalents - end of period       $     23,256  $     25,365
                                                ------------  ------------

Non GAAP Measures

We define Adjusted EBITDAX as net income (loss) plus income taxes, interest expense, net, realized losses on interest rate swaps, depreciation, amortization of deferred loan costs, 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, non-cash equity compensation, (gain) on sales of oil and natural gas properties and dry hole and exploration costs. Distributable Cash Flow is defined as Adjusted EBITDAX less income taxes, cash interest expense, net, realized losses on interest rate swaps, amortization of upfront premiums paid to enter into commodity price hedge agreements and estimated maintenance capital expenditures.

Adjusted EBITDAX 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 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 effect 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     Nine Months Ended
                                    September 30,         September 30,
                                --------------------  ---------------------
                                  2010       2009       2010       2009
                                ---------  ---------  ---------  ----------

Net income (loss)               $  58,135  $  (2,833) $ 120,539  $    3,881
Add:
Income taxes                          111         64        242         121
Interest expense, net               2,312      3,056      7,652       9,784
Realized losses on interest
 rate swaps                         2,162      2,177      6,463       6,151
Depreciation, depletion and
 amortization                      13,016     12,935     38,536      39,304
Asset retirement obligation
 accretion expense                    770        494      2,044       1,508
Non-cash (gains) losses on
 commodity derivatives             (4,064)    16,572    (34,566)     34,404
Amortization of premiums on
 derivatives                            -        209          -         399
Non-cash equity compensation
 expense                            1,311        897      3,414       2,197
(Gain) on sales of oil and
 natural gas properties           (36,793)              (40,617)
Non-cash charges related to oil
 in tanks from 2009 and 2010
 Appalachian Basin acquisitions
 included in lease operating
 expense                                -          -      2,542           -
Dry hole and exploration costs        235          -        235           -
                                ---------  ---------  ---------  ----------
Adjusted EBITDAX                $  37,195  $  33,571  $ 106,484  $   97,749


Less:
Cash interest expense, net          2,174      2,920      7,238       9,122
Realized losses on interest
 rate swaps                         2,162      2,177      6,463       6,151
Income taxes                          111         64        242         121
Amortization of premiums on
 derivatives                            -        209          -         399
Estimated maintenance capital
 expenditures (1)                   8,716      8,572     25,130      27,012
                                ---------  ---------  ---------  ----------
Distributable Cash Flow (2)     $  24,032  $  19,629  $  67,411  $   54,944


(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.

(2) Total cash distributions related to the third quarter of 2010 payable
on November 12, 2010 to unitholders of record as of the close of business
on November 5, 2010, which include distributions to common unitholders and
to the general partner (including incentive distribution rights), were
$26.3 million.  This includes distributions on the 3.45 million common
units sold in the August 2010 public offering, proceeds of which were
subsequently utilized to partially fund the Mid-Continent region
acquisition, which did not close until the end of the third quarter.
Excluding the common units sold in August, 2010, total cash distributions
would have been $23.3 million.

Contact Information