EV Energy Partners Announces Third Quarter 2015 Results; Distribution and Guidance Updates

Nov 09, 2015, 06:35 ET from EV Energy Partners, L.P.

HOUSTON, Nov. 9, 2015 /PRNewswire/ -- EV Energy Partners, L.P. (NASDAQ: EVEP) today announced results for the third quarter of 2015 and the filing of its Form 10-Q with the Securities and Exchange Commission.  Additionally, EVEP has provided an update on distributions and fourth quarter 2015 guidance.

Third Quarter 2015 Results

Adjusted EBITDAX for the third quarter of 2015 was $43.8 million, a 29 percent decrease from the third quarter of 2014 and an 18 percent decrease from the second quarter of 2015.  Distributable Cash Flow for the third quarter of 2015 was $20.1 million, a 37 percent decrease from the third quarter of 2014 and a 23 percent decrease from the second quarter of 2015.  The decreases in Adjusted EBITDAX and Distributable Cash Flow are primarily due to the sale of our Utica midstream interests, lower production and lower realized commodity prices, partially offset by decreased operating costs and expenses.  Adjusted EBITDAX and Distributable Cash Flow are Non-GAAP financial measures and are described in the attached table under "Non-GAAP Measures."

Production for the third quarter of 2015 was 9.7 Bcf of natural gas, 212 Mbbls of oil and 526 Mbbls of natural gas liquids, or 153.8 Mmcfe/day.  This represents a 13 percent decrease from third quarter 2014 production of 175.8 Mmcfe/d and a 6 percent decrease from second quarter 2015 production of 162.8 Mmcfe/day. Third quarter production was primarily impacted by adjustments from prior periods, timing of certain well completions and natural decline.

EVEP reported a net loss of $9.8 million, or $(0.20) per basic and diluted weighted average limited partner unit outstanding, for the third quarter of 2015. Included in net loss were the following items:

  • $15.8 million of impairment charges 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;
  • $1.2 million of non-cash gains on commodity derivatives;
  • $2.3 million of non-cash costs contained in general and administrative expenses;
  • $0.5 million of cash due diligence and other transaction costs for the acquisitions completed on October 1st contained in general and administrative expenses; and
  • $1.0 million of dry hole and exploration costs.

For the second quarter of 2015, EVEP reported net income of $164.1 million, or $3.25 per basic and diluted weighted average limited partner unit outstanding, which included the sale of our Utica midstream interests.  For the third quarter of 2014, EVEP reported net income of $42.6 million, or $0.85 per basic and diluted weighted average limited partner unit outstanding.

Distribution Update

As EVEP moves forward into 2016, both the volumes and swap prices of its natural gas and crude oil hedges decline from 2015 levels.  In addition, there has been a prolonged downturn in commodity prices over the past year, including the deterioration in future strip prices for crude oil, natural gas, and natural gas liquids.  Due to these factors, EVEP expects that its distributable cash flow, beginning in 2016, will be below levels necessary to maintain a $0.50 per unit quarterly distribution, absent a significant, near-term rebound in commodity prices.  Management believes it is important to maintain a strong liquidity position during times of low commodity prices until there is more certainty and visibility on the timing and extent of a rebound in commodity prices. Therefore, over the next several months, as the budgeting process for 2016 is completed, EVEP will address its future quarterly distribution levels and policies to align future distributions with projected distributable cash flow. EVEP expects to provide additional information on future quarterly distribution levels by its next distribution announcement date in late January.

"In early October, we closed on our previously announced acquisitions and amended our credit facility, which included an increase in our borrowing base to $625 million.  The acquisitions increase our production and reserves by over 30 percent and leave the Partnership with over $425 million of liquidity, which we believe is very important during this period of depressed commodity prices.  While we expect higher commodity prices over time, our goal is to maintain liquidity and flexibility to manage through the current commodity price environment, including addressing appropriate future quarterly distribution levels through this downturn," commented Mr. Michael Mercer, President and CEO.

Fourth Quarter 2015 Guidance Update

With the closing of the previously announced acquisitions on October 1, updated fourth quarter guidance ranges including the acquisitions are as follows:    

 

($ in millions)

4Q15

Net Production

Natural Gas (Mmcf)

13,140

-

13,680

Crude Oil (Mbbls)

355

-

370

Natural Gas Liquids (Mbbls)

660

-

685

Total Mmcfe

19,230

-

20,010

Average Daily Production (Mmcfe/d)

209

-

218

Net Transportation Margin

$0.2

-

$0.3

Average Price Differential vs NYMEX

Natural Gas ($/Mcf)

$0.39

-

$0.49

Crude Oil ($/Bbl)

$3.00

-

$5.00

NGL (% of NYMEX Crude Oil)

26%

30%

Expenses

Operating Expenses:

LOE and other

$30.0

-

$34.0

Production Taxes (as % of revenue)

4.0%

-

5.0%

General and administrative expense

$5.9

-

$7.4

E&P Capital Expenditures

$10.0

-

$11.0

 

Quarterly Report on Form 10-Q

EVEP's financial statements and related footnotes are available in the third quarter 2015 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 and Webcast

As announced on October 29, 2015, EV Energy Partners, L.P. will host an investor conference call on November 9, 2015, at 9 a.m. Eastern Time (8 a.m. Central).  Investors interested in participating in the call may dial 1-888-632-5023 (quote conference ID 672346) 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://ir.evenergypartners.com/events.cfm

About EV Energy Partners, L.P.

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)

Logo - http://photos.prnewswire.com/prnh/20130415/DA94198LOGO

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 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, 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 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

September 30,

Nine Months Ended

September 30,

2015

2014

2015

2014

Production data:

Oil (Mbbls)

212

270

690

790

Natural gas liquids (Mbbls)

526

593

1,671

1,714

Natural gas (Mmcf)

9,720

11,000

30,326

32,798

Net production (Mmcfe)

14,147

16,172

44,491

47,817

Average sales price per unit: (1)

Oil (Bbl)

$ 41.27

$ 93.73

$ 46.19

95.54

Natural gas liquids (Bbl)

11.93

29.30

14.11

$ 31.00

Natural gas (Mcf)

2.32

3.71

2.38

4.18

Mcfe

2.66

5.16

2.87

5.56

Average unit cost per Mcfe:

Production costs:

Lease operating expenses

$ 1.59

$ 1.64

$ 1.57

$ 1.63

Production taxes

0.10

0.19

0.11

0.20

Total

1.69

1.83

1.68

1.83

Asset retirement obligations accretion expense

0.08

0.08

0.08

0.08

Depreciation, depletion and amortization

1.66

1.59

1.68

1.61

General and administrative expenses

0.61

0.60

0.66

0.73

(1) Prior to $35.9 million and $4.3 million of net hedge gains (losses) on settlements of commodity derivatives for the three months ended September 30, 2015 and September 30, 2014, respectively, and $100.1 million and ($5.5) million for the nine months ended September 30, 2015 and September 30, 2014, respectively.

 

 

Condensed Consolidated Balance Sheets

(In $ thousands, except number of units)

(Unaudited)

September 30, 2015

December 31, 2014

ASSETS

Current assets:

Cash and cash equivalents

$ 39,861

$ 8,255

Accounts receivable:

Oil, natural gas and natural gas liquids revenues

19,488

32,758

Related party

-

1,043

Other

5,019

4,570

Derivative asset

71,406

113,044

Other current assets

1,108

2,000

Assets held for sale

-

315,173

Total current assets

136,882

476,843

Oil and natural gas properties, net of accumulated 

depreciation, depletion and amortization; September 30,

 2015, $926,744; December 31, 2014, $778,679

1,552,097

1,710,925

Other property, net of accumulated depreciation 

and amortization; September 30, 2015, $926; 

December 31, 2014, $898

1,087

1,141

Restricted cash

-

33,768

Long–term derivative asset

15,323

20,647

Other assets

32,839

5,879

Total assets

$ 1,738,228

$ 2,249,203

LIABILITIES AND OWNERS' EQUITY

Current liabilities:

Accounts payable and accrued liabilities:

Third party

$ 45,106

$ 47,878

Related party

2,226

-

Total current liabilities

47,332

47,878

Asset retirement obligations

98,249

103,832

Long–term debt

499,472

1,030,391

Other long–term liabilities

477

989

Commitments and contingencies

Owners' equity:

Common unitholders - 48,871,399 units and 

48,572,019 units issued and outstanding as of 

September 30, 2015 and December 31, 2014, 

respectively

1,103,771

1,077,826

General partner interest

(11,073)

(11,713)

Total owners' equity

1,092,698

1,066,113

Total liabilities and owners' equity

$ 1,738,228

$ 2,249,203

 

 

Condensed Consolidated Statements of Operations

(In $ thousands, except per unit data)

(Unaudited)

Three Months Ended September 30,

Nine Months Ended September 30,

2015

2014

2015

2014

Revenues:

Oil, natural gas and natural gas liquids revenues

$ 37,587

$ 83,440

$ 127,734

$ 265,639

Transportation and marketing–related revenues

734

1,091

2,285

3,591

Total revenues

38,321

84,531

130,019

269,230

Operating costs and expenses: 

Lease operating expenses

22,509

26,579

69,833

78,002

Cost of purchased natural gas

510

813

1,588

2,725

Dry hole and exploration costs

1,034

3,972

1,720

5,943

Production taxes

1,357

3,034

4,708

9,514

Asset retirement obligations accretion expense 

1,134

1,244

3,548

3,634

Depreciation, depletion and amortization

23,485

25,723

74,718

76,961

General and administrative expenses

8,609

9,688

28,968

34,735

Impairment of oil and natural gas properties

15,787

946

122,244

2,267

Gain on sales of oil and natural gas properties

-

-

(531)

(1,484)

Total operating costs and expenses

74,425

71,999

306,796

212,297

Operating (loss) income

(36,104)

12,532

(176,777)

56,933

Other income (expense), net:

Gain (loss) on derivatives, net

37,042

37,548

51,406

(3,264)

Interest expense

(11,043)

(13,676)

(38,279)

(38,193)

Other income, net

206

76

51

456

Total other income (expense), net 

26,205

23,948

13,178

(41,001)

(Loss) income from continuing operations before income taxes

(9,899)

36,480

(163,599)

15,932

Income taxes

61

(157)

684

176

(Loss) income from continuing operations

(9,838)

36,323

(162,915)

16,108

Income from discontinued operations

-

6,297

255,512

11,236

Net (loss) income

($ 9,838)

$ 42,620

$ 92,597

$ 27,344

Basic and diluted earnings per limited partner unit:

(Loss) income from continuing operations

($ 0.20)

$ 0.72

($ 3.29)

$ 0.29

Income from discontinued operations

-

$ 0.13

$ 5.12

$ 0.23

Net (loss) income

($ 0.20)

$ 0.85

$ 1.83

$ 0.52

Weighted average limited partner units outstanding (basic and diluted)

48,871

48,572

48,846

48,561

Distributions declared per unit

$ 0.500

$ 0.774

$ 1.500

$ 2.319

 

 

Condensed Consolidated Statements of Cash Flows

(In $ thousands)

(Unaudited)

Nine Months Ended  September 30,

2015

2014

Cash flows from operating activities:

Net income

$ 92,597

$ 27,344

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

Income from discontinued operations

(255,512)

(11,236)

Asset retirement obligations accretion expense

3,548

3,634

Depreciation, depletion and amortization

74,718

76,961

Equity–based compensation cost

9,635

15,345

Impairment of oil and natural gas properties

122,244

2,267

Gain on sales of oil and natural gas properties

(531)

(1,484)

(Gain) loss on derivatives, net

(51,406)

3,264

Cash settlements of matured derivative contracts

98,368

(8,170)

Other

288

5,527

Changes in operating assets and liabilities:

Accounts receivable

13,864

(7,077)

Other current assets

894

(833)

Accounts payable and accrued liabilities

10,610

12,360

Other, net

(120)

(733)

Net cash flows provided by operating activities from continuing operations

119,197

117,169

Net cash flows used in operating activities from discontinued operations

(372)

-

Net cash flows provided by operating activities    

118,825

117,169

Cash flows from investing activities:

Additions to oil and natural gas properties 

(58,687)

(73,356)

Deposit on acquisition of oil and natural gas properties

(25,900)

-

Prepaid drilling costs

-

(2,501)

Proceeds from sale of oil and natural gas properties

1,439

7,365

Restricted cash

33,768

-

Other

48

52

Net cash flows used in investing activities from continuing operations

(49,332)

(68,440)

Net cash flows provided by (used in) investing activities from discontinued operations

572,160

(105,200)

Net cash flows provided by (used in) investing activities

522,828

(173,640)

Cash flows from financing activities:

Repayment of long-term debt borrowings

(561,000)

-

Long-term debt borrowings

30,000

172,000

Loan costs incurred

(3,400)

-

Contributions from general partner

91

154

Distributions paid

(75,738)

(116,172)

Other

-

(5)

Net cash flows (used in) provided by financing activities

(610,047)

55,977

Increase (decrease) in cash and cash equivalents

31,606

(494)

Cash and cash equivalents – beginning of period

8,255

11,698

Cash and cash equivalents – end of period

$ 39,861

$ 11,204

 

Non-GAAP Measures

We define Adjusted EBITDAX as net (loss) income 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, asset retirement obligations accretion expense, (gain) loss on derivatives, net, cash settlements of matured derivative contracts, non-cash equity compensation expense, 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, and loss on sale of investment in unconsolidated affiliates, 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 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 (Loss) Income to Adjusted EBITDAX and Distributable Cash Flow

(In $ thousands)

(Unaudited)

Three Months Ended  September 30,

Nine Months Ended  September 30,

2015

2014

2015

2014

Net (loss) income

($ 9,838)

$ 42,620

$ 92,597

$ 27,344

Add:

Income from discontinued operations

-

(6,297)

(255,512)

(11,236)

EBITDAX from discontinued operations

-

8,804

15,941

17,766

Income taxes

(61)

157

(684)

(176)

Interest expense, net

11,032

13,676

38,264

38,192

Cash settlements of matured interest rate swaps

-

878

1,736

2,635

Depreciation, depletion and amortization

23,485

25,723

74,718

76,961

Asset retirement obligations accretion expense

1,134

1,244

3,548

3,634

(Gain) loss on derivatives, net

(37,042)

(37,548)

(51,406)

3,264

Cash settlements of matured derivative contracts

35,891

3,386

98,368

(8,170)

Non-cash equity compensation expense

2,341

4,287

9,635

15,345

Impairment of oil and natural gas properties

15,787

946

122,244

2,267

Non-cash inventory write down expense

-

-

149

53

Dry hole and exploration costs

1,034

3,972

1,720

5,943

Gain on sales of oil and natural gas properties

-

-

(531)

(1,484)

Loss on sale of investment in unconsolidated affiliates, contained in Other income, net

-

-

358

-

Adjusted EBITDAX

$ 43,763

$ 61,848

$ 151,145

$ 172,338

Less:

Cash income taxes

-

283

-

282

Cash interest expense, net

10,631

13,069

37,240

36,374

Realized losses on interest rate swaps

-

878

1,736

2,635

Estimated maintenance capital expenditures (1)

13,000

15,440

39,797

45,888

Distributable Cash Flow

$ 20,132

$ 32,178

$ 72,372

$ 87,159

(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.

 

 

Hedge Summary as of November 9, 2015

 Swap 

 Swap 

Period

Index

 Volume 

 Price 

Natural Gas (Mmmbtus)

4Q 2015

NYMEX

11,362.0

$4.65

2016

NYMEX

39,894.0

$3.57

2017

NYMEX

21,900.0

$3.24

Crude (Mbbls)

4Q 2015

WTI

357.7

$89.61

2016

WTI

366.0

$90.14

Propane (Mbbls)

4Q 2015

Mt Belvieu

119.6

$24.98

Ethane (Mbbls)

2016

Mt Belvieu

0.9

$9.14

Period

Index

 Put Volume 

 Floor Price 

Ethane (Mbbls)

4Q 2015

Mt Belvieu

2.3

$10.50

Interest Rate Swap Agreements

 Notional Amount 

Fixed Rate

 (in $ mill) 

2017

100.0

1.039%

2018 - September 2020

100.0

1.795%

 

EV Energy Partners, L.P., Houston Nicholas Bobrowski 713-651-1144 http://www.evenergypartners.com

SOURCE EV Energy Partners, L.P.



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