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, 2016

 

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))

  

 

 

 

Item 7.01Regulation 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, 2016, the Partnership issued a press release announcing its third quarter 2016 results and additional commodity hedges.  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 9.01Financial 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, 2016

  

 

 

 

  

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, 2016 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, 2016

 

 

 

Exhibit 99.1

 

EV Energy Partners Announces Third Quarter 2016 Results and Additional Commodity Hedges

 

HOUSTON, November 9, 2016 /GlobeNewswire/ -- 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:

 

·$1.9 million of non-cash costs contained in general and administrative expenses,

 

·$1.6 million of non-cash losses on commodity and interest rate derivatives,

 

·$1.4 million income tax refund associated with one of our partnerships,

 

·$0.7 million of impairment charges related to the write down of certain oil and natural gas properties primarily due to a change in development plans, and

 

·$0.3 million of dry hole and exploration costs.

 

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 
Period  Index  Volume   Price   Volume   Floor   Ceiling 
Natural Gas (Mmmbtus)                       
Oct - Dec 2016  NYMEX   11,316   $3.42                
2017  NYMEX   32,850   $3.07    10,950   $2.75   $3.27 
                             
Crude (Mbbls)                            
Oct - Dec 2016  WTI   230   $65.99    138   $45.00   $54.05 
2017  WTI   365   $52.85                
                             
Ethane (Mbbls)                            
Oct - Dec 2016  Mt Belvieu   0.9   $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