EV Energy Partners, L.P.
Nov 9, 2016
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EV Energy Partners Announces Third Quarter 2016 Results and Additional Commodity Hedges

HOUSTON, Nov. 09, 2016 (GLOBE NEWSWIRE) -- EV Energy Partners, L.P. (NASDAQ:EVEP) today announced results for the third quarter of 2016 and the filing of its Form 10-Q with the Securities and Exchange Commission.  In addition, EVEP has entered into additional commodity hedge positions.

Third Quarter 2016 Results

For the third quarter 2016, EVEP reported a net loss of $19.2 million, or $(0.38) per basic and diluted weighted average limited partner unit outstanding compared to a net loss of $29.0 million, or $(0.58) per basic and diluted weighted average limited partner unit outstanding for the second quarter of 2016.  Included in net loss for the third quarter of 2016 were the following items:

For the third quarter of 2015, EVEP reported a net loss of $9.8 million, or $(0.20) per basic and diluted weighted average limited partner unit outstanding.

Production for the third quarter of 2016 was 12.5 Bcf of natural gas, 308 Mbbls of oil and 597 Mbbls of natural gas liquids, or 195.3 million cubic feet equivalent per day (Mmcfe/day).  This represents a three percent decrease from second quarter of 2016 production of 201.5 Mmcfe/day and a 27 percent increase over the third quarter of 2015 production of 153.8 Mmcfe/day.  The decrease from the second quarter of 2016 was due to the reduction in drilling activity, and the increase over the third quarter of 2015 was primarily due to the addition of producing properties acquired on October 1, 2015.

Adjusted EBITDAX for the third quarter of 2016 was $26.0 million, a two percent decrease from the second quarter of 2016 Adjusted EBITDAX of $26.5 million and a 41 percent decrease from the third quarter of 2015 Adjusted EBITDAX of $43.8 million.  Distributable Cash Flow for the third quarter of 2016 was $6.4 million compared to $5.5 million for the second quarter of 2016 and $20.1 million for the third quarter of 2015.  The increase in Distributable Cash Flow from the second quarter of 2016 was primarily attributable to a tax refund for one of the partnerships we operate.  The decreases in Adjusted EBITDAX and Distributable Cash Flow from the third quarter of 2015 were primarily attributable to lower realized hedge gains and lower realized oil prices, partially offset by the addition of producing properties acquired on October 1, 2015 and higher realized natural gas and natural gas liquids prices.  Adjusted EBITDAX and Distributable Cash Flow are Non-GAAP financial measures and are described in the attached table under "Non-GAAP Measures."

"Reducing leverage and operating costs continues to be our focus, and we are pleased with our progress this year.  As announced last week, we completed our fall borrowing base redetermination and appreciate the continued support from our bank group in reaffirming our borrowing base of $450 million.  We currently have $281 million drawn on our credit facility and have over $177 million of liquidity between balance sheet cash and available borrowing base capacity.  We believe this is a sufficient amount of capital to meet all of our near term needs," said Michael Mercer, President and CEO.

Additional Commodity Hedges

EVEP has recently entered into the following additional commodity hedges since its press release on August 9, 2016.  EVEP's current hedge position, including these new hedges, is presented at the end of this press release under Total Hedge Position.

                 
      Swap  Swap   Collar   Collar Collar
 
 Period Index  Volume  Price   Volume   Floor Ceiling 
 Crude (Mbbls)               
 Oct - Dec 2016 WTI  138 $49.90 138 $45.00 $54.05 
 2017 WTI 365 $52.85         
                 

Quarterly Report on Form 10-Q

EVEP's financial statements and related footnotes are available on our third quarter 2016 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 October 20, 2016, EV Energy Partners, L.P. will host an investor conference call on November 9, 2016, at 9 a.m. Eastern Time (8 a.m. Central).  Investors interested in participating in the call may dial 1-888-708-5690 (quote conference ID 6002278) 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, 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 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 Securities and Exchange Commission.  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
September 30,
 Nine Months Ended
September 30,
 
    2016   2015   2016   2015  
 Production data:         
 Oil (Mbbls)    308     212     938     690  
 Natural gas liquids (Mbbls)    597     526     1,784     1,671  
 Natural gas (Mmcf)    12,535     9,720     38,304     30,326  
 Net production (Mmcfe)  17,965   14,147   54,637   44,491  
 Average sales price per unit: (1)         
 Oil (Bbl) $40.40  $41.27  $36.82  $46.19  
 Natural gas liquids (Bbl)  14.23   11.93   14.09   14.11  
 Natural gas (Mcf)  2.38   2.32   1.86   2.38  
  Mcfe  2.82   2.66   2.39   2.87  
 Average unit cost per Mcfe:         
 Production costs:         
 Lease operating expenses $1.42  $1.59  $1.47  $1.57  
 Production taxes  0.12   0.10   0.10   0.11  
 Total  1.54   1.69   1.57   1.68  
 Depreciation, depletion and amortization  1.76   1.66   1.67   1.68  
 General and administrative expenses  0.47   0.61   0.46   0.66   
           
 (1) Prior to $10.1 million and $35.9 million of net hedge gains on settlements of commodity
derivatives for the three months ended September 30, 2016 and September 30, 2015,
respectively, and $49.1 million and $100.1 million for the nine months ended September 30,
2016 and September 30, 2015, respectively.
 
           


Condensed Consolidated Balance Sheets     
(In $ thousands, except number of units)     
(Unaudited)     
  September 30, 2016  December 31, 2015 
ASSETS     
      
Current assets:     
Cash and cash equivalents $5,981  $20,415  
Accounts receivable:     
Oil, natural gas and natural gas liquids revenues  37,803   24,285  
Other  2,216   7,137  
Derivative asset  10,043   60,662  
Other current assets  3,226   3,057  
Total current assets  59,269    115,556  
      
Oil and natural gas properties, net of accumulated      
depreciation, depletion and amortization; September 30,     
 2016, $1,062,990; December 31, 2015, $971,499  1,701,279   1,790,455  
Other property, net of accumulated depreciation      
and amortization; September 30, 2016, $994     
December 31, 2015, $970  1,010   1,019  
Long-term derivative asset  464   10,741  
Other assets  4,354   5,831  
Total assets $1,766,376  $1,923,602  
       
      
LIABILITIES AND OWNERS' EQUITY     
      
Current liabilities:     
Accounts payable and accrued liabilities:     
Third party $40,278  $43,135  
Related party  5,224     5,952  
Income taxes    -     11,657  
Derivative liability  2,362     -  
Total current liabilities  47,864   60,744  
      
Asset retirement obligations  178,058   174,003  
Long-term debt, net  613,799   688,614  
Long-term derivative liability  3,056     -  
Other long-term liabilities  1,278   1,682  
      
Commitments and contingencies     
      
Owners' equity:     
Common unitholders - 49,055,214 units and      
48,871,399 units issued and outstanding as of      
September 30, 2016 and December 31, 2015, respectively  936,793   1,011,509  
General partner interest  (14,472)  (12,950) 
Total owners' equity  922,321   998,559  
Total liabilities and owners' equity $1,766,376  $1,923,602  
      


Condensed Consolidated Statements of Operations         
(In $ thousands, except per unit data)          
(Unaudited)         
  
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
    
   2016   2015   2016   2015  
Revenues:         
Oil, natural gas and natural gas liquids revenues $50,750  $37,587  $130,854  $127,734  
Transportation and marketing-related revenues  622   734   1,599   2,285  
Total revenues  51,372   38,321   132,453   130,019  
           
Operating costs and expenses:          
Lease operating expenses  25,571   22,509   80,532   69,833  
Cost of purchased natural gas  435    510   1,076   1,588  
Dry hole and exploration costs  294   1,034   1,195   1,720  
Production taxes  2,126   1,357   5,501    4,708  
Accretion expense on obligations  2,057   1,134   6,146   3,548  
Depreciation, depletion and amortization  31,639   23,485   91,492   74,718  
General and administrative expenses  8,514   8,609   24,862   28,968  
Impairment of oil and natural gas properties  687   15,787   3,371    122,244  
Gain on settlement of contract    -     -   (3,185)    -  
Gain on sales of oil and natural gas properties    -     -     -   (531) 
Total operating costs and expenses  71,323   74,425   210,990   306,796  
          
Operating loss  (19,951)  (36,104)  (78,537)  (176,777) 
          
Other income (expense), net:         
Gain (loss) on derivatives, net  8,559   37,042   (17,192)  51,406  
Interest expense  (9,889)  (11,043)  (32,554)  (38,279) 
Gain on early extinguishment of debt     -     -   47,695     -  
Other income, net    622   206     1,586   51  
Total other income (expense), net    (708)  26,205   (465)  13,178  
          
Loss from continuing operations before income taxes  (20,659)  (9,899)  (79,002)  (163,599) 
Income taxes  1,429     61   1,779   684  
Loss from continuing operations  (19,230)  (9,838)  (77,223)  (162,915) 
Income from discontinued operations    -     -     -     255,512  
Net income (loss) $(19,230) $(9,838) $(77,223) $92,597  
          
Basic and diluted earnings per limited partner unit:         
Loss from continuing operations $(0.38) $(0.20) $(1.54) $(3.29) 
Income from discontinued operations    -     -     -   5.12  
Net income (loss) $(0.38) $(0.20)  $(1.54) $1.83  
          
Weighted average limited partner units outstanding (basic and diluted)  49,055   48,871   49,046   48,846  
           
Distributions declared per unit $  -  $0.50  $  -  $1.50  
          


Condensed Consolidated Statements of Cash Flows     
(In $ thousands)     
(Unaudited) 
Nine Months Ended
September 30,
 
   
   2016   2015  
Cash flows from operating activities:     
Net income (loss) $(77,223) $92,597  
Adjustments to reconcile net income (loss) to net cash flows provided by operating activities:     
Income from discontinued operations    -   (255,512) 
Amortization of volumetric production payment liability  (3,070)    -  
Accretion expense on obligations  6,146     3,548  
Depreciation, depletion and amortization  91,492   74,718  
Equity-based compensation cost  4,853   9,635  
Impairment of oil and natural gas properties  3,371   122,244  
Gain on sales of oil and natural gas properties    -   (531)  
Loss (gain) on derivatives, net  17,192   (51,406) 
Cash settlements of matured derivative contracts  46,299   98,368  
Gain on early extinguishment of debt  (47,695)    -  
Other  1,822   288  
Changes in operating assets and liabilities:     
Accounts receivable  (8,597)  13,864  
Other current assets  (291)  894  
Accounts payable and accrued liabilities  4,158   10,610  
Income taxes  (11,657)    -  
Other, net  (277)    (120) 
Net cash flows provided by operating activities from continuing operations  26,523   119,197  
Net cash flows used in operating activities from discontinued operations    -   (372) 
Net cash flows provided by operating activities  26,523   118,825  
      
Cash flows from investing activities:     
Additions to oil and natural gas properties   (14,266)  (58,687) 
Deposit on acquisition of oil and natural gas properties    -   (25,900) 
Proceeds from sale of oil and natural gas properties  2,420   1,439  
Cash settlements from acquired derivative contracts  2,823     -  
Restricted cash    -   33,768  
Other  33   48  
Net cash flows used in investing activities from continuing operations  (8,990)  (49,332) 
Net cash flows provided by investing activities from discontinued operations    -   572,160  
Net cash flows (used in) provided by investing activities  (8,990 )  522,828  
      
Cash flows from financing activities:      
Repayment of long-term debt borrowings  (41,000)  (561,000) 
Long-term debt borrowings  48,000   30,000  
Redemption of Senior Notes due 2019  (34,978)    -  
Loan costs incurred    (121)  (3,400) 
Contributions from general partner    -   91  
Distributions paid  (3,868)  (75,738) 
Net cash flows used in financing activities  (31,967)  (610,047) 
      
Increase (decrease) in cash and cash equivalents  (14,434)  31,606  
Cash and cash equivalents - beginning of period  20,415   8,255  
Cash and cash equivalents - end of period $5,981  $39,861  
      

Non-GAAP Measures

We define Adjusted EBITDAX as net income (loss) plus income from discontinued operations, EBITDAX from discontinued operations, income taxes, interest expense, net, cash settlements of matured interest rate swaps, depreciation, depletion and amortization, accretion expense on obligations, amortization of volumetric production payment (VPP), (gain) loss on derivatives, net, cash settlements of matured derivative contracts, non-cash equity-based compensation, impairment of oil and natural gas properties,  non-cash inventory write down expense, dry hole and exploration costs, gain on sales of oil and natural gas properties, gain on settlement of contract, gain on early extinguishment of debt, and (gain) loss on sale of investment, contained in Other income, net.  Distributable Cash Flow is defined as Adjusted EBITDAX less cash income taxes, 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 Income (Loss) to Adjusted EBITDAX and Distributable Cash Flow     
(In $ thousands)           
(Unaudited)            
  Three Months Ended Nine Months Ended 
    
  Sep 30, 2016 Sep 30, 2015 Jun 30, 2016 Sep 30, 2016 Sep 30, 2015 
             
Net income (loss) $(19,230)  $(9,838) $(28,993) $(77,223) $92,597  
            
Add:           
Income from discontinued operations    -     -     -     -   (255,512) 
EBITDAX from discontinued operations    -     -     -     -   15,941  
Income taxes  (1,429)  (61)  (191)  (1,779)  (684) 
Interest expense, net  9,889   11,032   11,840   32,544   38,264   
Cash settlements of matured interest rate swaps    -     -     -     -   1,736  
Depreciation, depletion and amortization  31,639   23,485   31,648   91,492   74,718  
Accretion expense on obligations  2,057   1,134   2,049   6,146   3,548  
Amortization of VPP  (1,027)    -   (1,023)  (3,070)    -  
(Gain) loss on derivatives, net  (8,559)  (37,042)   35,585   17,192   (51,406) 
Cash settlements of matured derivative contracts  10,117   35,891   19,180   49,122   98,368  
Non-cash equity-based compensation  1,889   2,341   1,364   4,853   9,635   
Impairment of oil and natural gas properties  687   15,787   1,997   3,371    122,244  
Non-cash inventory write down expense    -     -     -   123   149  
Dry hole and exploration costs  294   1,034   771   1,195   1,720  
Gain on sales of oil and natural gas properties    -     -     -     -   (531) 
Gain on settlement of contract    -     -     -   (3,185)    -  
Gain on early extinguishment of debt    -     -     (47,695)  (47,695)    -  
(Gain) loss on sale of investment, contained in Other income, net    (309)    -     -     (309)  358  
Adjusted EBITDAX $26,018  $43,763  $26,532  $72,777  $151,145  
            
Less:           
Cash income taxes  (933)    -     -   (933)    -  
Cash interest expense, net  9,566   10,631   9,984   29,950   37,240  
Realized losses on interest rate swaps    -     -     -     -   1,736  
Estimated maintenance capital expenditures (1)  11,000   13,000   11,000   33,000   39,797  
Distributable Cash Flow $6,385  $20,132  $5,548   $10,760  $72,372  
            
(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 Hedge Position

EV Energy Partners' total hedge position as of November 9, 2016, including the recent additional hedges mentioned above, is as follows:

               
    Swap   Swap    Collar    Collar  Collar 
 PeriodIndex Volume   Price    Volume    Floor   Ceiling 
 Natural Gas (Mmmbtus)             
 Oct - Dec 2016NYMEX11,316 $3.42         
 2017NYMEX32,850 $3.07 10,950 $2.75 $3.27 
               
 Crude (Mbbls)              
 Oct - Dec 2016WTI230 $65.99 138 $45.00 $54.05 
 2017WTI365 $52.85         
                
 Ethane (Mbbls)             
 Oct - Dec 2016Mt Belvieu0.9 $9.14         
                
    Notional Amount  Fixed Rate         
 Interest Rate Swap Agreements ($ mill)             
 Jan 2017 - 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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