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):    August 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 August 9, 2017, the Partnership issued a press release announcing its second quarter 2017 results.  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.

 

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

 

 

 

 

 

 

 

Exhibit 99.1

 

EV Energy Partners Announces Second Quarter 2017 Results

 

HOUSTON, August 9, 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:

 

·$18.4 million of impairment charges primarily related to the write-down of certain oil and natural gas properties due to the effects of commodity prices on expected future net cash flows,

·$6.9 million of non-cash gains on commodity and interest rate derivatives, and

·$1.0 million of non-cash costs contained in general and administrative expenses.

 

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
Period Index Volume     Price   Volume   Floor   Ceiling
Natural Gas (Mmmbtus)                                
Jul - Dec 2017 NYMEX   16,560     $3.07     5,520     $2.75     $3.27
Jan - Mar 2018 NYMEX   4,500     $3.46                  
                                 
Crude (Mbbls)                                
Jul - Dec 2017 WTI   184     $52.85                  
                                 
Ethane (Mbbls)                                
Jul - Dec 2017 Mt Belvieu   257.6     $11.66                  
                                 
Propane (Mbbls)                                
Jul - Dec 2017 Mt Belvieu   128.8     $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