EV Energy Partners Announces First Agreement to Sell Utica Shale Acres and Reports Second Quarter 2013 Results

Company also announces opening of Utica East Ohio midstream facilities and amendment of credit facility

Aug 09, 2013, 06:43 ET from EV Energy Partners, LP

HOUSTON, Aug. 9, 2013 /PRNewswire/ -- EV Energy Partners, L.P., (Nasdaq: EVEP) today announced that it, along with certain institutional partnerships managed by EnerVest, Ltd., has signed an agreement to divest certain acreage in Ohio's Utica Shale for $284.3 million to an undisclosed buyer.  The total acreage associated with this sale includes 22,535 acres in Guernsey, Harrison and Noble counties.  Of that total, EVEP is selling 4,345 acres for approximately $56 million, net to its ownership interest.  EVEP will retain its overriding royalty interests in these acres.  The transaction is expected to close by the end of the third quarter and is subject to customary closing conditions and purchase price adjustments.  

A map depicting the acreage location is available on the Investor Relations page under Presentations on the EVEP website at http://www.evenergypartners.com.  As previously disclosed, Jefferies LLC is advising EVEP as it continues to market its Utica acreage. 

"This is a good first step in our revised Utica acreage sale process," said John B. Walker, EVEP Chairman.  "The value of this sale averages $12,900 per acre.  We look forward to announcing additional deals as they occur."

In addition to the acreage sale, EVEP is pleased to announce the opening of the Utica East Ohio (UEO) midstream facilities, which started processing gas in July.  The facility is processing more than 85 mmcf/d of wet gas, has a capacity of 200 mmcf/d, and throughput is expected to increase steadily over the next few weeks as additional wells are turned in line.  With UEO and other processing facilities now available, more Utica wells are being turned in line, which is increasing the flow of gas through the Cardinal Gas gathering system. Increased volumes and cash flow are anticipated for the rest of this year and into 2014.

Recently, EVEP entered into an amendment to its credit facility to change the senior secured debt to EBITDAX ratio to be no greater than 3.5 to 1 through March 30, 2015 and to include certain updates related to the Dodd-Frank Act eligibility requirements for guarantors of hedging transactions.

Second Quarter 2013 Results

EVEP also announced results for the second quarter 2013 and filed its Form 10-Q with the Securities and Exchange Commission. 

Adjusted EBITDAX for the quarter was $52.6 million, a 9 percent increase over the first quarter of 2013 and a 20 percent decrease from the second quarter of 2012.  Distributable Cash Flow for the quarter was $26.1 million, a 20 percent increase over the first quarter of 2013 and a 24 percent decrease from the second quarter of 2012.  The changes in Adjusted EBITDAX and Distributable Cash Flow, which are described in the attached table under "Non-GAAP Measures," are primarily attributable to the decreases in realized gains in commodity derivatives and in sales price per unit of natural gas liquids, partially offset by an increase in natural gas production.

Production for the second quarter of 2013 was 11.1 Bcf of natural gas, 245 MBbls of crude oil and 526 MBbls of natural gas liquids, or 172.3 Mmcfe/day.  This represents a 4 percent increase over the first quarter 2013 production of 165.2 Mmcfe/day and a 6 percent increase over second quarter 2012 production of 162.9 Mmcfe/day.

For the second quarter of 2013, EVEP reported a net income of $32.9 million, or $0.74 per basic and diluted weighted average limited partner unit outstanding.  Included in net income were:

  • $30.3 million of unrealized gains on commodity and interest rate derivatives,
  • $0.5 million of non-cash realized losses related to terminated interest rate swaps,
  • $0.9 million of dry hole and exploration costs,
  • $2.8 million of non-cash leasehold impairment charges,
  • $0.2 million of non-cash deferred income taxes, and
  • $4.3 million of non-cash costs contained in general and administrative expenses. 

For the first quarter of 2013, EVEP reported a net loss of $46.6 million, or $(1.08) per basic and diluted weighted average limited partner unit outstanding.  For the second quarter of 2012, EVEP reported net income of $15.0 million, or $0.35 and $0.34 per basic and diluted weighted average limited partner unit outstanding, respectively.

Mark Houser, President and CEO, said, "Our base business is running strong, and UEO is coming online as scheduled. We are pleased with our first Utica acreage sale and are gaining traction on other potential sales as we continue our marketing process."

Quarterly Report on Form 10-Q

EVEP's financial statements and related footnotes are available on our second quarter 2013 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 31, 2013, EV Energy Partners, L.P. will host an investor conference call Friday, August 9, 2013 at 9 a.m. EDT.  Investors interested in participating in the call may dial (877) 941-9205 (quote conference ID 4634241) at least five 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 gas properties. More information about EVEP is available at http://www.evenergypartners.com.

(code #: EVEP/G)

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 the sale of our Utica Shale assets, our midstream investments, future plans 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 EV Energy Partners, L.P. 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 (including the Utica Shale), changes in the metrics and procedures used to value midstream assets, exploration and development activities in the Utica Shale and elsewhere, 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 EV Energy Partners with the Securities and Exchange Commission. 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,

2013

2012

2013

2012

Production data:

Oil (MBbls)

245

282

508

567

Natural gas liquids (MBbls)

526

403

1,029

826

Natural gas (MMcf)

11,057

10,722

21,324

20,985

Net production (MMcfe)

15,683

14,828

30,547

29,341

Average sales price per unit: (1)

Oil (Bbl)

$ 92.56

$ 90.74

$ 93.03

$ 95.43

Natural gas liquids (Bbl)

28.83

34.48

29.59

40.59

Natural gas (Mcf)

3.84

2.18

3.53

2.48

Mcfe

5.12

4.23

5.01

4.76

Average unit cost per Mcfe:

Production costs:

   Lease operating expenses (2)

$ 1.67

$ 1.68

$ 1.71

$ 1.82

   Production taxes

0.19

0.17

0.19

0.20

   Total

1.86

1.85

1.90

2.02

Asset retirement obligations accretion expense

0.08

0.08

0.08

0.08

Depreciation, depletion and amortization

1.76

1.91

1.92

1.81

General and administrative expenses

0.58

0.68

0.71

0.76

(1) Prior to $5.8 million and $36.3 million of net hedge gains and settlements on commodity derivatives for the three months ended June 30, 2013 and June 30, 2012, respectively and $18.1 and $62.3 for the six months ended June 30, 2013 and June 30, 2012.

(2) Lease operating expenses for the three and six months ended June 30, 2012 contains $0.5 million ($0.04 per Mcfe) and $1.7 million ($0.06 per Mcfe), respectively of non-cash charges related to oil in tanks purchased in connection with 2011 acquisitions.

 

Condensed Consolidated Balance Sheets

(In $ thousands, except number of units)

(Unaudited)

June 30, 2013

December 31, 2012

ASSETS

Current assets:

Cash and cash equivalents

$ 8,277

$ 7,486

Accounts receivable:

   Oil, natural gas and natural gas liquids revenues

37,927

34,909

   Related party

5,002

1,422

   Other

1,740

11,263

Derivative asset

31,251

40,771

Other current assets

4,051

1,750

   Total current assets

88,248

97,601

Oil and natural gas properties, net of accumulated depreciation, depletion and amortization; June 30, 2013, $447,641; December 31, 2012, $389,206

1,862,710

1,875,890

Other property, net of accumulated depreciation and amortization; June 30, 2013, $675; December 31, 2012, $598

1,295

1,325

Long–term derivative asset

46,204

45,839

Investments in unconsolidated affiliates

153,187

34,545

Other assets

9,048

10,214

Total assets

$ 2,160,692

$ 2,065,414

LIABILITIES AND OWNERS' EQUITY

Current liabilities - Accounts payable and accrued liabilities

$ 44,814

$ 40,171

Asset retirement obligations

105,266

102,707

Long–term debt

1,019,256

859,218

Other long–term liabilities

1,680

3,494

Commitments and contingencies

Owners' equity:

Common unitholders - 42,599,080 units and 42,320,707 units issued and outstanding as of June 30, 2013 and December 31, 2012, respectively

1,003,131

1,072,175

General partner interest

(13,455)

(12,351)

   Total owners' equity

989,676

1,059,824

Total liabilities and owners' equity

$ 2,160,692

$ 2,065,414

 

Condensed Consolidated Statements of Operations

(In $ thousands, except per unit data)

(Unaudited)

Three Months Ended June 30,

Six Months Ended June 30,

2013

2012

2013

2012

Revenues:

Oil, natural gas and natural gas liquids revenues

$ 80,332

$ 62,793

$ 153,001

$ 139,594

Transportation and marketing–related revenues

1,270

759

2,303

1,689

   Total revenues

81,602

63,552

155,304

141,283

Operating costs and expenses: 

Lease operating expenses

26,217

24,850

52,311

53,450

Cost of purchased natural gas

951

501

1,694

1,146

Dry hole and exploration costs

902

1,682

1,319

3,855

Production taxes

2,924

2,525

5,840

5,807

Asset retirement obligations accretion expense 

1,205

1,220

2,559

2,428

Depreciation, depletion and amortization

27,670

28,395

58,503

52,986

General and administrative expenses

9,121

10,149

21,743

22,266

Impairment of oil and natural gas properties

2,829

16,264

7,998

16,899

   Total operating costs and expenses

71,819

85,586

151,967

158,837

Operating income (loss) 

9,783

(22,034)

3,337

(17,554)

Other income (expense), net:

Realized gains on derivatives, net

4,461

34,603

15,220

58,793

Unrealized gains (losses) on derivatives, net

30,286

15,537

(7,987)

27,198

Interest expense

(11,604)

(12,595)

(24,433)

(23,679)

Other income (expense), net

55

(30)

242

(26)

   Total other income (expense), net 

23,198

37,515

(16,958)

62,286

Income (loss) before income taxes and equity in income (losses) of unconsolidated affiliates

32,981

15,481

(13,621)

44,732

Income taxes

(216)

(439)

(393)

(1,097)

Income (loss) before equity in income (losses) of unconsolidated affiliates

32,765

15,042

(14,014)

43,635

Equity in income (losses) of unconsolidated affiliates

89

(86)

287

(86)

Net income (loss)

$ 32,854

$ 14,956

($ 13,727)

$ 43,549

Net income (loss) per limited partner unit:

Basic

$ 0.74

$ 0.35

($ 0.34)

$ 1.03

Diluted

$ 0.74

$ 0.34

($ 0.34)

$ 1.02

Weighted average limited partner units outstanding:

Basic

42,599

42,452

42,578

41,446

Diluted

42,659

42,678

42,578

41,739

Distributions declared per unit

$ 0.769

$ 0.765

$ 1.537

$ 1.529

 

Condensed Consolidated Statements of Cash Flows

(In $ thousands)

(Unaudited)

Six Months Ended June 30,

2013

2012

Cash flows from operating activities:

Net (loss) income

($ 13,727)

$ 43,549

Adjustments to reconcile net (loss) income to net cash flows provided by operating activities:

   Asset retirement obligations accretion expense

2,559

2,428

   Depreciation, depletion and amortization

58,503

52,986

   Equity–based compensation cost

8,783

8,096

   Impairment of oil and natural gas properties

7,998

16,899

   Non-cash derivative activity

9,155

(27,198)

   Equity in (income) losses of unconsolidated affiliates

(287)

86

   Distributions from unconsolidated affiliates

62

-

   Other

1,411

3,948

   Changes in operating assets and liabilities:

         Accounts receivable

(5,044)

4,225

         Other current assets

(2,300)

365

         Accounts payable and accrued liabilities

3,494

9,758

         Other, net

(200)

(2,102)

Net cash flows provided by operating activities

70,407

113,040

Cash flows from investing activities:

Acquisitions of oil and natural gas properties

-

(35,728)

Final settlement of purchase price of oil and natural gas properties

7,998

-

Additions to oil and natural gas properties 

(51,808)

(62,566)

Proceeds from sale of oil and natural gas properties

-

5,489

Investments in unconsolidated affiliates

(118,446)

(11,947)

Distributions from unconsolidated affiliates

27

-

Settlements from acquired derivatives

-

3,676

Net cash flows used in investing activities

(162,229)

(101,076)

Cash flows from financing activities:

Long-term debt borrowings

160,000

40,000

Repayment of long-term debt borrowings

-

(460,000)

Proceeds from debt offering

-

206,000

Loan costs incurred

-

(4,078)

Proceeds from public equity offering

-

262,833

Offering costs

-

(304)

Contributions from general partner

334

5,714

Distributions paid

(67,721)

(62,809)

Net cash flows provided by (used in) financing activities

92,613

(12,644)

Increase (decrease) in cash and cash equivalents

791

(680)

Cash and cash equivalents – beginning of period

7,486

30,312

Cash and cash equivalents – end of period

$ 8,277

$ 29,632

 

Non-GAAP Measures

We define Adjusted EBITDAX as net income (loss) plus income taxes, interest expense, net, realized losses on interest rate swaps, depreciation, depletion and amortization, asset retirement obligations accretion expense, non-cash realized losses on derivatives, unrealized (gains) losses on derivatives, non-cash equity compensation expense, impairment of oil and natural gas properties, non-cash inventory write down expense, and dry hole and exploration costs. 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. These financial measures indicate to investors whether or not we are generating cash flow at a level that can sustain or support an increase in our quarterly distribution rates. 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 to Adjusted EBITDAX and Distributable Cash Flow

(In $ thousands)

(Unaudited)

Three Months Ended June 30,

Six Months Ended June 30,

2013

2012

2013

2012

Net income (loss)

$ 32,854

$ 14,956

($ 13,727)

$ 43,549

Add:

Income taxes

216

439

393

1,097

Interest expense, net

11,603

12,589

24,431

23,666

Realized losses on interest rate swaps

867

1,043

1,732

2,159

Depreciation, depletion and amortization

27,670

28,395

58,503

52,986

Asset retirement obligations accretion expense

1,205

1,220

2,559

2,428

Non-cash realized losses on derivatives

488

720

1,168

1,304

Unrealized (gains) losses on derivatives

(30,286)

(15,537)

7,987

(27,198)

Non-cash equity compensation expense

4,297

3,815

8,783

8,096

Impairment of oil and natural gas properties

2,829

16,264

7,998

16,899

Non-cash inventory write down expense

-

527

-

1,729

Dry hole and exploration costs

902

1,682

1,319

3,855

Adjusted EBITDAX

$ 52,645

$ 66,113

$ 101,145

$ 130,570

Less:

Cash income taxes

(20)

49

24

126

Cash interest expense, net

11,001

11,993

23,277

22,491

Realized losses on interest rate swaps

867

1,043

1,732

2,159

Estimated maintenance capital expenditures (1)

14,741

18,535

28,321

36,297

Distributable Cash Flow

$ 26,057

$ 34,493

$ 47,792

$ 69,497

(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.

(Logo: http://photos.prnewswire.com/prnh/20130415/DA94198LOGO)

EV Energy Partners, L.P., Houston Michael E. Mercer 713-651-1144 http://www.evenergypartners.com

 

SOURCE EV Energy Partners, LP