EV Energy Partners, L.P.
Aug 9, 2017
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EV Energy Partners Announces Second Quarter 2017 Results

HOUSTON, Aug. 09, 2017 (GLOBE NEWSWIRE) -- EV Energy Partners, L.P. (NASDAQ:EVEP) today announced results for the second quarter of 2017 and the filing of its Form 10-Q with the Securities and Exchange Commission

Second Quarter 2017 Results

For the second quarter of 2017, EVEP reported a net loss of $25.2 million, or $(0.50) per basic and diluted weighted average limited partner unit outstanding, compared to a net loss of $50.8 million, or $(1.01) per basic and diluted weighted average limited partner unit outstanding, for the first quarter of 2017.  Included in the second quarter of 2017 net loss were the following items:

For the second quarter of 2016, EVEP reported a net loss of $29.0 million, or $(0.58) per basic and diluted weighted average limited partner unit outstanding.

Production for the second quarter of 2017 was 10.2 Bcf of natural gas, 372 Mbbls of oil and 528 Mbbls of natural gas liquids, or 171.9 million cubic feet equivalent per day (Mmcfe/day). This represents a 15 percent decrease from the second quarter of 2016 production of 201.5 Mmcfe/d and is flat to the first quarter of 2017 production of 171.6 Mmcfe/day.  The decrease from the second quarter of 2016 was primarily due to significantly lower drilling activity in 2016 and the divestiture of producing properties completed on December 1, 2016, partially offset by the addition of Karnes County, TX, producing properties acquired on January 31, 2017.

Adjusted EBITDAX for the second quarter of 2017 was $21.6 million, a 19 percent decrease from the second quarter of 2016 and a 2 percent decrease from the first quarter of 2017.  Distributable Cash Flow for the second quarter of 2017 was $3.4 million, a 38 percent decrease from the second quarter of 2016 and a 13 percent decrease from the first quarter of 2017.  The decreases in Adjusted EBITDAX and Distributable Cash Flow from the second quarter of 2016 were primarily attributable to realized hedge losses compared to prior year period hedge gains and decreased natural gas and natural gas liquids production, partially offset by higher realized oil, natural gas and natural gas liquids prices and increased oil production.  The decreases in Adjusted EBITDAX and Distributable Cash Flow from the first quarter of 2017 were primarily attributable to lower realized oil and natural gas liquids prices and higher lease operating and cash general and administrative expenses, partially offset by lower realized hedge losses.  Adjusted EBITDAX and Distributable Cash Flow are Non-GAAP financial measures and are described in the attached table under "Non-GAAP Measures."

Credit Facility and Liquidity Update

As of August 7, 2017, EVEP had total debt of $597 million, which included $254 million outstanding under the credit facility and $343 million in outstanding Senior Notes due 2019.  The current borrowing base under the credit facility is $375 million.  Liquidity from borrowing base capacity and cash on hand is currently over $120 million.  EVEP's next semi-annual borrowing base redetermination is scheduled for October 2017.  For more information regarding EVEP's debt and liquidity, please review EVEP's Quarterly Report on Form 10-Q filed today with the Securities and Exchange Commission.

"Second quarter results were in-line with guidance.  There are two rigs running on our Karnes County, TX properties (5.8 percent interest), one rig running in the Barnett (31 percent interest) and one rig running in the Austin Chalk (15 to 25 percent interest).  While wells are currently being turned inline, the full production impact is not expected to be realized until the fourth quarter.  Given current commodity pricing and our previously provided guidance, we expect to fully fund our 2017 capital budget out of cash flow from operations," said Michael Mercer, President and CEO.

Quarterly Report on Form 10-Q

EVEP's financial statements and related footnotes are available in the second quarter 2017 Form 10-Q, which was filed today and is available through the Investor Relations/SEC Filings section of the EVEP website at http://www.evenergypartners.com.

Conference Call

As announced on July 20, 2017, EV Energy Partners, L.P. will host an investor conference call on August 9, 2017, at 9 a.m. Eastern Time (8 a.m. Central).  Investors interested in participating in the call may dial 1-877-723-9521 (quote conference ID 1160639) at least 5 minutes prior to the start time, or may listen live over the Internet through the Investor Relations section of the EVEP website at http://www.evenergypartners.com

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

(code #: EVEP/G)

Forward Looking Statements

This press release may include statements that are not historical facts which are "forward-looking statements" within the meaning of the U.S. Private Securities Litigation Reform Act of 1995.  These statements include information about future plans, liquidity, our reserve quantities and the present value of our reserves, estimates of maintenance capital and production amounts, and other statements which include words such as "anticipates," "plans," "projects," "expects," "intends," "believes," "should," and similar expressions of forward-looking information.  Forward-looking statements are inherently uncertain and necessarily involve risks that may affect the business prospects and performance of EVEP. 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.  Actual results may differ materially from those contained in the press release.  Such risks and uncertainties include, but are not limited to, changes in commodity prices, changes in reserve estimates, requirements and actions of purchasers of properties, exploration and development activities, the availability and cost of financing, the returns on our capital investments and acquisition strategies, the availability of sufficient cash flow to pay distributions and execute our business plan and general economic conditions.  Additional information on risks and uncertainties that could affect our business prospects and performance are provided in the most recent reports of EVEP with the SEC.  You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. All forward-looking statements included in this press release are expressly qualified in their entirety by the foregoing cautionary statements.

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,
 
    2017  2016  2017  2016 
 Production data:         
 Oil (Mbbls)  372  313  707  630 
 Natural gas liquids (Mbbls)  528  585  1,039  1,187 
 Natural gas (Mmcf)  10,241  12,951  20,607  25,769 
 Net production (Mmcfe)  15,640  18,341  31,087  36,672 
 Average sales price per unit: (1)         
 Oil (Bbl) $44.06 $41.08 $45.48 $35.06 
 Natural gas liquids (Bbl)  18.26  15.89  19.57  14.03 
 Natural gas (Mcf)  2.87  1.56  2.87  1.60 
 Mcfe   3.54  2.31  3.59  2.18 
 Average unit cost per Mcfe:         
 Production costs:          
 Lease operating expenses $1.68 $1.42 $1.61 $1.50 
 Production taxes  0.16  0.09  0.17  0.09 
 Total  1.84  1.51  1.78  1.59 
 Depreciation, depletion and amortization  1.38  1.73  1.56  1.63 
 General and administrative expenses  0.45  0.43  0.44  0.45 
           
 (1) Prior to $0.4 million of net hedge losses and $19.2 million of net hedge gains on settlements of commodity derivatives for the three months ended June 30, 2017 and 2016, respectively, and $2.9 million of net hedge losses and $39.0 million of net hedge gains on settlements of commodity derivatives for the six months ended June 30, 2017 and 2016, respectively. 


Condensed Consolidated Balance Sheets    
(In $ thousands, except number of units)    
(Unaudited)    
  June 30, 2017 December 31, 2016
ASSETS    
     
Current assets:    
Cash and cash equivalents $3,552  $5,557 
Accounts receivable:    
Oil, natural gas and natural gas liquids revenues  44,762   39,629 
Related party  7,152   745 
Other   1,046   2,451 
Derivative asset  1,993   201 
Other current assets  3,295    3,718 
Total current assets  61,800   52,301 
     
Oil and natural gas properties, net of accumulated    
depreciation, depletion and amortization; June 30,    
2017, $1,140,993; December 31, 2016, $1,051,600  1,422,425   1,497,211 
Other property, net of accumulated depreciation    
and amortization; June 30, 2017, $1,024;    
December 31, 2016, $1,002  984   996 
Restricted cash  -   52,076 
Other assets  4,134   4,186 
Total assets $1,489,343  $1,606,770 
     
     
LIABILITIES AND OWNERS' EQUITY    
     
Current liabilities:    
Accounts payable and accrued liabilities:    
Third party  $39,709  $31,700 
Related party  -   5,797 
Derivative liability  754   21,679 
Total current liabilities  40,463   59,176 
     
Asset retirement obligations  159,641   180,241 
Long-term debt, net  603,245   606,948 
Long-term derivative liability  3   955 
Other long-term liabilities  1,372   1,043 
     
Commitments and contingencies    
     
Owners' equity:    
Common unitholders - 49,368,869 units and    
49,055,214 units issued and outstanding as of    
June 30, 2017 and December 31, 2016, respectively  703,846   776,158 
General partner interest  (19,227)   (17,751) 
Total owners' equity  684,619   758,407 
Total liabilities and owners' equity $1,489,343  $1,606,770 
     


Condensed Consolidated Statements of Operations        
(In $ thousands, except per unit data)        
(Unaudited)                
  Three Months Ended
June 30 ,

 Six Months Ended
June 30,

   2017   2016   2017   2016 
Revenues:        
Oil, natural gas and natural gas liquids revenues $55,404  $42,365  $111,723   $80,104 
Transportation and marketing-related revenues  648   466   1,316    977 
Total revenues  56,052   42,831   113,039   81,081 
         
Operating costs and expenses:        
Lease operating expenses  26,235   26,046   50,174   54,961 
Cost of purchased natural gas  460   305   940   641 
Dry hole and exploration costs  75   771   55   901 
Production taxes  2,496    1,704   5,255   3,375 
Accretion expense on obligations  1,870   2,049   3,869   4,089 
Depreciation, depletion and amortization  21,531   31,648   48,511   59,853 
General and administrative expenses  7,023   7,970   13,719   16,348 
Impairment of oil and natural gas properties  18,397   1,997   67,984   2,684 
Gain on settlement of contract    -     -     -     (3,185) 
Gain on sales of oil and natural gas properties    (9)     -     (35)     - 
Total operating costs and expenses  78,078   72,490   190,472   139,667 
         
Operating loss  (22,026)   (29,659)   (77,433)   (58,586) 
         
Other income (expense), net:        
Gain (loss) on derivatives, net  6,511   (35,585)   20,740   (25,751) 
Interest expense  (10,435)   (11,844)   (20,409)   (22,665) 
Gain on early extinguishment of debt    -   47,695     -   47,695 
Other income, net     723   209     1,081   964 
Total other income (expense), net  (3,201)   475   1,412   243 
         
Loss before income taxes  (25,227)   (29,184)   (76,021)   (58,343) 
Income taxes  66     191   29     350 
Net loss $(25,161)  $(28,993)  $(75,992)  $(57,993) 
         
Basic and diluted earnings per limited partner unit:        
Net loss $(0.50)  $(0.58)  $(1.51)  $(1.16) 
          
Weighted average limited partner units outstanding (basic and diluted)  49,369   49,055   49,345   49,041 
         


Condensed Consolidated Statements of Cash Flows     
(In $ thousands)     
(Unaudited) Six Months Ended
June 30,

 
   2017   2016   
Cash flows from operating activities:     
Net loss $(75,992)  $(57,993)  
Adjustments to reconcile net loss to net cash flows provided by operating activities:     
Amortization of volumetric production payment liability    -   (2,043)  
Accretion expense on obligations  3,869   4,089  
Depreciation, depletion and amortization  48,511   59,853  
Equity-based compensation cost  2,204   2,964  
Impairment of oil and natural gas properties  67,984   2,684  
Gain on sales of oil and natural gas properties  (35)     -  
(Gain) loss on derivatives, net  (20,740)   25,751  
Cash settlements of matured derivative contracts  (2,929)   36,506  
Gain on early extinguishment of debt    -   (47,695)  
Other  523   1,760  
Changes in operating assets and liabilities:     
Accounts receivable  (7,859)   (1,835)  
Other current assets   847   (259)  
Accounts payable and accrued liabilities  (5,967)   2,510  
Income taxes    -   (11,657)  
Other, net  (217)   (201)  
Net cash flows provided by operating activities  10,199   14,434  
      
Cash flows from investing activities:     
Acquisition of oil and natural gas properties    (58,651)     -  
Additions to oil and natural gas properties  (3,635)   (12,988)  
Proceeds from sale of oil and natural gas properties    1,989   2,420  
Cash settlements from acquired derivative contracts    -   2,499  
Restricted cash  52,076     -  
Other  17   33  
Net cash flows used in investing activities  (8,204)   (8,036)  
      
Cash flows from financing activities:     
Repayment of long-term debt borrowings  (21,000)   (33,000)  
Long-term debt borrowings  17,000   48,000  
Redemption of Senior Notes due 2019    -   (34,978)  
Loan costs incurred    -   (121)  
Distributions paid    -   (3,868)  
Net cash flows used in financing activities  (4,000)   (23,967)  
      
Decrease in cash and cash equivalents  (2,005)   (17,569)  
Cash and cash equivalents - beginning of period  5,557   20,415  
Cash and cash equivalents - end of period $3,552  $2,846  
      

Non-GAAP Measures

We define Adjusted EBITDAX as net loss plus income taxes, interest expense, net, depreciation, depletion and amortization, accretion expense on obligations, amortization of volumetric production payment (VPP), (gain) loss on derivatives, net, cash settlements of matured commodity derivative contracts, non-cash equity-based compensation, impairment of oil and natural gas properties, non-cash oil inventory adjustment, dry hole and exploration costs, (gain) loss on settlement of contract, (gain) loss on sales of oil and natural gas properties, (gain) loss on early extinguishment of debt, and other income, net.  Distributable Cash Flow is defined as Adjusted EBITDAX less 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.  We believe these financial measures may indicate to investors whether or not we are generating cash flow at a level that can sustain or support quarterly distributions.  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 Loss to Adjusted EBITDAX and Distributable Cash Flow      
(In $ thousands)           
(Unaudited)                    
  Three Months Ended
 Six Months Ended
  Jun 30, 2017 Jun 30, 2016 Mar 31, 2017 Jun 30, 2017 Jun 30, 2016
           
Net loss $(25,161)  $(28,993)  $(50,831)  $(75,992)  $(57,993) 
            
Add:           
Income taxes  (66)   (191)   37   (29)   (350) 
Interest expense, net  10,435   11,840   9,974   20,409   22,655 
Depreciation, depletion and amortization  21,531   31,648   26,980   48,511   59,853 
Accretion expense on obligations  1,870   2,049   1,999   3,869    4,089 
Amortization of VPP  -   (1,023)   -   -   (2,043) 
(Gain) loss on derivatives, net  (6,511)   35,585   (14,229)   (20,740)   25,751 
Cash settlements of matured commodity derivative contracts  (404)    19,180   (2,454)   (2,858)   39,005 
Non-cash equity-based compensation  1,019   1,364   1,185   2,204   2,964 
Impairment of oil and natural gas properties  18,397   1,997   49,587   67,984   2,684 
Non-cash oil inventory adjustment  424   -   -   424   123 
Dry hole and exploration costs  75   771   (20)   55   901 
Gain on settlement of contract  -   -   -   -   (3,185) 
Gain on early extinguishment of debt  -   (47,695)   -   -   (47,695) 
Other income, net  (9)   -   (223)   (232)   - 
Adjusted EBITDAX $21,600  $26,532  $22,005  $43,605  $46,759 
           
Less:          
Cash interest expense, net  9,647   9,984    9,500   19,147   20,383 
Realized losses on interest rate swaps  9   -    63   72   - 
Estimated maintenance capital expenditures (1)  8,500   11,000   8,500   17,000   22,000 
Distributable Cash Flow $3,444  $5,548  $3,942  $7,386  $4,376 
           
(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.
 

Total Current Hedge Position

   Swap  Swap   Collar    Collar    Collar 
PeriodIndexVolume Price VolumeFloorCeiling
Natural Gas (Mmmbtus)      
Jul - Dec 2017NYMEX16,560$3.07 5,520$2.75$3.27
Jan - Mar 2018NYMEX4,500$3.46    
       
Crude (Mbbls)      
Jul - Dec 2017WTI184$52.85    
       
Ethane (Mbbls)      
Jul - Dec 2017Mt Belvieu257.6 $11.66    
       
Propane (Mbbls)      
Jul - Dec 2017Mt Belvieu128.8$25.10    
       
  Notional Amount Fixed Rate   
Interest Rate Swap Agreements ($ mill)     
Jul - Dec 2017 100 1.039%    
Jan 2018 - Sep 2020 100 1.795%    


EV Energy Partners, L.P., Houston

Nicholas Bobrowski

713-651-1144

http://www.evenergypartners.com

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Source: EV Energy Partners, L.P.

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