EV Energy Partners, L.P.
EV Energy Partners, LP (Form: 8-K, Received: 11/09/2017 16:02:34)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

 

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported):    November 9, 2017

 

EV Energy Partners, L.P.

(Exact name of registrant as specified in charter)

 

Delaware

(State of Incorporation)

001-33024

(Commission File No.)

20-4745690

(I.R.S. Employer Identification No.)

 

1001 Fannin, Suite 800, Houston, Texas

(Address of Principal Executive Offices)

77002

(Zip Code)

 

Registrant’s telephone number, including area code: (713) 651-1144

  

 

 

(former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

  

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company   ¨    

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   ¨

 

 

  

 

 

 

Item 7.01 Regulation FD Disclosure.

 

The following information is being furnished pursuant to Item 7.01 “Regulation FD Disclosure.” This information shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

 

On November 9, 2017, the Partnership issued a press release announcing its third quarter 2017 results and operational update.  A copy of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated by reference.

 

Item 9.01 Financial Statements and Exhibits. (Information furnished in this Item 9.01 is furnished pursuant to Item 7.01.)

 

  (d) Exhibits.

 

  99.1 News Release of EV Energy Partners, L.P. dated November 9, 2017

   

 

 

 

  

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

  EV Energy Partners, L.P.
     
Dated: November 9, 2017 By: /s/ NICHOLAS BOBROWSKI 
    Nicholas Bobrowski  
   

Vice President and Chief Financial Officer of EV

Management LLC, general partner of EV Energy GP, L.P.,

general partner of EV Energy Partners, L.P.  

  

 

 

 

 

EXHIBIT INDEX

 

Exhibit No.   Description
     
99.1   News Release of EV Energy Partners, L.P. dated November 9, 2017

  

 

 

 

Exhibit 99.1

 

EV Energy Partners Announces Third Quarter 2017 Results and Operational Update

 

HOUSTON, November 9, 2017 (Globe Newswire) -- EV Energy Partners, L.P. (NASDAQ: EVEP) today announced results for the third quarter of 2017 and the filing of its Form 10-Q with the Securities and Exchange Commission. In addition, EVEP announced its borrowing base was reduced from $375 million to $325 million during its semi-annual borrowing base review. Further, the Company has provided an update on initial drilling results in multiple areas of focus and added commodity hedges to the portfolio.

 

Third Quarter 2017 Results

 

For the third quarter of 2017, EVEP reported a net loss of $17.9 million, or $(0.36) per basic and diluted weighted average limited partner unit outstanding, compared to a net loss of $25.2 million, or $(0.50) per basic and diluted weighted average limited partner unit outstanding, for the second quarter of 2017. For the third quarter of 2016, EVEP reported a net loss of $19.2 million, or $(0.38) per basic and diluted weighted average limited partner unit outstanding. Included in the 2017 third quarter net loss were the following items:

 

· $1.1 million of non-cash costs contained in general and administrative expenses,

· $0.9 million of gain on sales of oil and natural gas properties, and

· $0.9 million of non-cash losses on commodity and interest rate derivatives.

 

Production for the third quarter of 2017 was 10.3 Bcf of natural gas, 310 Mbbls of oil and 541 Mbbls of natural gas liquids (NGLs), or 167.1 million cubic feet equivalent per day (Mmcfe/day). This represents a 14 percent decrease from the third quarter of 2016 production of 195.3 Mmcfe/d and a three percent decrease from the second quarter of 2017 production of 171.9 Mmcfe/day. The decrease in production from the third 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. The decrease in production from the second quarter of 2017 was primarily due to timing on completion of wells in the 2017 drilling program.

 

Adjusted EBITDAX for the third quarter of 2017 was $17.0 million, a 35 percent decrease from the third quarter of 2016 and a 22 percent decrease from the second quarter of 2017. EVEP reported Distributable Cash Flow of $(1.1) million for the third quarter of 2017. The decreases in Adjusted EBITDAX and Distributable Cash Flow from the third quarter of 2016 were primarily attributable to decreased realized hedge gains, decreased natural gas and natural gas liquids production and higher operating expenses, partially offset by higher realized oil, natural gas and natural gas liquids prices. The decreases in Adjusted EBITDAX and Distributable Cash Flow from the second quarter of 2017 were primarily attributable to lower realized natural gas prices, higher lease operating and cash general and administrative expenses and decreased oil production, partially offset by realized hedge gains. 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

 

In October, the borrowing base under the Company’s credit facility decreased from $375 million to $325 million. As of November 7, 2017, EVEP had total debt of $606 million, which included $263 million outstanding under the credit facility and $343 million in outstanding Senior Notes due 2019. Liquidity from borrowing base capacity and cash on hand is currently over $65 million. EVEP’s next semi-annual borrowing base redetermination is scheduled for April 2018. 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.

 

Operations Update

 

In September, the Neva #2, an Austin Chalk well in Washington County,Texas, came online with a 24 hour initial production (IP) peak test of 2,529 barrels of oil equivalent per day (boe/d). The product mix was approximately 29 percent oil, 45 percent NGLs, and 26 percent natural gas.  The well was choked back due to pipeline constraints, but had a 30-day IP of 1,556 boe/d (19 percent oil, 27 percent NGLs, 54 percent natural gas).  EVEP’s working interest in the well is approximately 15 percent.  There are three additional Austin Chalk wells included in EVEP’s 2017 capital program.  One well has been drilled and completed and is scheduled to begin flowback this week.  Another well has been drilled and is awaiting completion, and the final well is currently being drilled. EVEP’s working interest ranges from 13 to 19 percent.

 

Additionally, 12 wells began flowback on EVEP’s Karnes County, Texas, properties in September. The average 30-day IP was 1,950 boe/d per well. The production mix was approximately 84 percent oil, 9 percent natural gas liquids, and 7 percent natural gas.  EVEP expects 13 additional wells to come online before the end of the year.  EVEP’s average working interest in these wells is approximately 4.5 percent. 

 

In the Barnett Shale, nine wells recently began flowback.  EVEP’s average working interest in the Barnett wells is approximately 31 percent.

 

 

 

 

Additional Commodity Hedges

 

EVEP entered into the following additional commodity hedges in November subsequent to its press release on August 9, 2017.  EVEP's current hedge position, including these new hedges, is presented at the end of this press release under Total Current Hedge Position.

 

        Swap     Swap  
Period   Index   Volume     Price  
Crude (MBbls):                    
Dec 2017 - Mar 2018   WTI     157.3     $ 57.40  
                     
Propane (MBbls):                    
Oct - Dec 2017   Mt Belvieu     55.2     $ 36.91  
Jan - Mar 2018   Mt Belvieu     117.0     $ 36.12  

 

Quarterly Report on Form 10-Q

 

EVEP’s financial statements and related footnotes are available in the third 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 October 17, 2017, EV Energy Partners, L.P. will host an investor conference call on November 9, 2017, at 9 a.m. Eastern Time (8 a.m. Central). Investors interested in participating in the call may dial 1-888-857-6931 (quote conference ID 4841275) 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   Nine Months Ended
    September 30,   September 30,
    2017    2016   2017    2016
Production data:                        
Oil (MBbls)      310       308       1,018       938 
Natural gas liquids (MBbls)      541       597       1,581       1,784 
Natural gas (MMcf)      10,263       12,535       30,869       38,304 
Net production (MMcfe)      15,373       17,965       46,460       54,637 
Average sales price per unit: (1)                        
Oil (Bbl)   $  45.03    $  40.40    $  45.34    $  36.82 
Natural gas liquids (Bbl)      21.27       14.23       20.15       14.09 
Natural gas (Mcf)      2.59       2.38       2.78       1.86 
Mcfe      3.38       2.82       3.52       2.39 
Average unit cost per Mcfe:                        
Production costs:                        
Lease operating expenses   $  1.73    $  1.42    $  1.65    $  1.47 
Production taxes      0.17       0.12       0.17       0.10 
Total      1.90       1.54       1.82       1.57 
Depreciation, depletion and amortization      1.41       1.76       1.51       1.67 
General and administrative expenses      0.51       0.47       0.47       0.46 

 

(1) Prior to $0.7 million and $10.1 million of net hedge gains on settlements of commodity derivatives for the three months ended September 30, 2017 and 2016, respectively, and $2.2 million of net hedge losses and $49.1 million of net hedge gains on settlements of commodity derivatives for the nine months ended September 30, 2017 and 2016, respectively.

 

 

 

 

Condensed Consolidated Balance Sheets

(In $ thousands, except number of units)

(Unaudited)

 

    September 30,   December 31,
    2017    2016
ASSETS            
Current assets:            
Cash and cash equivalents   $  13,910    $  5,557 
Accounts receivable:            
Oil, natural gas and natural gas liquids revenues      42,350       39,629 
Related party      -      745 
Other      1,071       2,451 
Derivative asset      743       201 
Other current assets      4,791       3,718 
Total current assets      62,865       52,301 
             
Oil and natural gas properties, net of accumulated depreciation, depletion and            
amortization; September 30, 2017, $1,162,695; December 31, 2016, $1,051,600      1,411,739       1,497,211 
Other property, net of accumulated depreciation and amortization;            
September 30, 2017, $1,037; December 31, 2016, $1,002      971       996 
Restricted cash      -      52,076 
Long-term derivative assets      193       -
Other assets      3,577       4,186 
Total assets   $  1,479,345    $  1,606,770 
             
LIABILITIES AND OWNERS’ EQUITY            
Current liabilities:            
Accounts payable and accrued liabilities:            
Third party   $  47,653    $  31,700 
Related party      4,481       5,797 
Derivative liability      586       21,679 
Total current liabilities      52,720       59,176 
             
Asset retirement obligations      161,371       180,241 
Long–term debt, net      596,397       606,948 
Long–term derivative liability      -      955 
Other long–term liabilities      1,040       1,043 
             
Commitments and contingencies            
             
Owners’ equity:            
Common unitholders – 49,368,869 units and 49,055,214 units issued and            
outstanding as of September 30, 2017 and December 31, 2016, respectively      687,380       776,158 
General partner interest      (19,563)      (17,751)
Total owners’ equity      667,817       758,407 
Total liabilities and owners’ equity   $  1,479,345    $  1,606,770 

 

 

 

 

Condensed Consolidated Statements of Operations

(In $ thousands, except per unit data)

(Unaudited)

 

    Three Months Ended   Nine Months Ended
    September 30,   September 30,
    2017    2016   2017    2016
Revenues:                        
Oil, natural gas and natural gas liquids revenues   $  52,022    $  50,750    $  163,745    $  130,854 
Transportation and marketing–related revenues      629       622       1,945       1,599 
Total revenues      52,651       51,372       165,690       132,453 
                         
Operating costs and expenses:                        
Lease operating expenses      26,608       25,571       76,782       80,532 
Cost of purchased natural gas      444       435       1,384       1,076 
Dry hole and exploration costs      135       294       190       1,195 
Production taxes      2,573       2,126       7,828       5,501 
Accretion expense on obligations      1,905       2,057       5,774       6,146 
Depreciation, depletion and amortization      21,710       31,639       70,221       91,492 
General and administrative expenses      7,912       8,514       21,631       24,862 
Impairment of oil and natural gas properties      32       687       68,016       3,371 
Gain on settlement of contract      -      -      -      (3,185)
Gain on sales of oil and natural gas properties      (876)      -      (911)      -
Total operating costs and expenses      60,443       71,323       250,915       210,990 
                         
Operating loss      (7,792)      (19,951)      (85,225)      (78,537)
                         
Other income (expense), net:                        
Gain (loss) on derivatives, net      (152)      8,559       20,588       (17,192)
Interest expense      (10,092)      (9,889)      (30,501)      (32,554)
Gain on early extinguishment of debt      -      -      -      47,695 
Other income, net      68       622       1,149       1,586 
Total other income (expense), net      (10,176)      (708)      (8,764)      (465)
                         
Loss before income taxes      (17,968)      (20,659)      (93,989)      (79,002)
                         
Income taxes      80       1,429       109       1,779 
                         
Net loss   $  (17,888)   $  (19,230)   $  (93,880)   $  (77,223)
                         
Basic and diluted earnings per limited partner unit:                        
Net loss   $  (0.36)   $  (0.38)   $  (1.86)   $  (1.54)
                         
Weighted average limited partner units outstanding                        
(basic and diluted)      49,369       49,055       49,353       49,046 

 

 

 

 

Condensed Consolidated Statements of Cash Flows

(In $ thousands)

(Unaudited)

 

    Nine Months Ended
    September 30,
    2017    2016
Cash flows from operating activities:            
Net loss   $  (93,880)   $  (77,223)
Adjustments to reconcile net loss to net cash flows provided by operating activities:            
Amortization of volumetric production payment liability      -      (3,070)
Accretion expense on obligations      5,774       6,146 
Depreciation, depletion and amortization      70,221       91,492 
Equity–based compensation cost      3,290       4,853 
Impairment of oil and natural gas properties      68,016       3,371 
Gain on sales of oil and natural gas properties      (911)      -
(Gain) loss on derivatives, net      (20,588)      17,192 
Cash settlements of matured derivative contracts      (2,196)      46,299 
Gain on early extinguishment of debt      -      (47,695)
Other      820       1,822 
Changes in operating assets and liabilities:            
Accounts receivable      1,681       (8,597)
Other current assets      (649)      (291)
Accounts payable and accrued liabilities      2,993       4,158 
Income taxes      -      (11,657)
Other, net      (235)      (277)
Net cash flows provided by operating activities         34,336       26,523 
             
Cash flows from investing activities:            
Acquisition of oil and natural gas properties      (61,400)      -
Additions to oil and natural gas properties      (9,344)      (14,266)
Proceeds from sale of oil and natural gas properties      3,639       2,420 
Cash settlements from acquired derivative contracts      -      2,823 
Restricted cash      52,076       -
Other      46       33 
Net cash flows used in investing activities      (14,983)      (8,990)
             
Cash flows from financing activities:            
Repayment of long-term debt borrowings      (28,000)      (41,000)
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      (11,000)      (31,967)
             
Increase (decrease) in cash and cash equivalents      8,353       (14,434)
Cash and cash equivalents – beginning of year      5,557       20,415 
Cash and cash equivalents – end of period   $  13,910    $  5,981 

 

 

 

 

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 on settlement of contract, gain on early extinguishment of debt, gain on sales of oil and natural gas properties, and other income, net. Distributable Cash Flow is defined as Adjusted EBITDAX less cash income taxes, cash interest expense, net, realized (gains) 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   Nine Months Ended
    Sep 30, 2017   Sep 30, 2016   Jun 30, 2017   Sep 30, 2017   Sep 30, 2016
                               
Net loss   $  (17,888)   $  (19,230)   $  (25,161)   $  (93,880)   $  (77,223)
                               
Add:                              
Income taxes      (80)      (1,429)      (66)      (109)      (1,779)
Interest expense, net      10,092       9,889       10,435       30,501       32,544 
Depreciation, depletion and amortization      21,710       31,639       21,531       70,221       91,492 
Accretion expense on obligations      1,905       2,057       1,870       5,774       6,146 
Amortization of VPP      -      (1,027)      -      -      (3,070)
(Gain) loss on derivatives, net      152       (8,559)      (6,511)      (20,588)      17,192 
Cash settlements of matured commodity                              
derivative contracts      684       10,117       (404)      (2,173)      49,122 
Non-cash equity-based compensation      1,086       1,889       1,019       3,290       4,853 
Impairment of oil and natural gas properties      32       687       18,397       68,016       3,371 
Non-cash oil inventory adjustment      -      -      424       424       123 
Dry hole and exploration costs      135       294       75       190       1,195 
Gain on settlement of contract      -      -      -      -      (3,185)
Gain on early extinguishment of debt      -      -      -      -      (47,695)
Gain on sales of oil and natural gas properties      (876)      -      -      (1,108)      -
Other income, net      -      (309)      (9)      -      (309)
Adjusted EBITDAX      16,952       26,018       21,600       60,558       72,777 
                               
Less:                              
Cash income taxes      -      (933)      -      -      (933)
Cash interest expense, net      9,633       9,566       9,647       28,780       29,950 
Realized (gains) losses on interest rate swaps      (49)      -      9       23       -
Estimated maintenance capital expenditures (1)      8,500       11,000       8,500       25,500       33,000 
Distributable Cash Flow   $  (1,131)   $  6,385    $  3,444    $  6,256    $  10,760 

 

(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 operation capacity of our other assets over the long term.

 

 

 

 

Total Current Hedge Position

  

        Swap   Swap   Collar   Collar   Collar
Period   Index   Volume   Price   Volume   Floor   Ceiling
Natural Gas (MmmBtus):                              
Oct - Dec 2017   NYMEX    8,280.0    $  3.07     2,760.0    $  2.75    $  3.27 
Jan - Mar 2018   NYMEX    4,500.0    $  3.46     -   $  -   $  -
                               
Crude (MBbls):                              
Oct - Nov 2017   WTI    61.0    $  52.85     -   $  -   $  -
Dec 2017   WTI    71.3    $  55.42     -   $  -   $  -
Jan - Mar 2018   WTI    117.0    $  57.40     -   $  -   $  -
                               
Ethane (MBbls):                              
Oct - Dec 2017   Mt Belvieu    128.8    $  11.66     -   $  -   $  -
                               
Propane (MBbls):                              
Oct - Dec 2017   Mt Belvieu    119.6    $  30.55     -   $  -   $  -
Jan - Mar 2018   Mt Belvieu    117.0    $  36.12     -   $  -   $  -

   

Period   Notional Amount   Fixed Rate
Interest Rate Swap Agreements:   ($ mil)    
Oct 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