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EV Energy Partners Announces Third Quarter 2012 Results

HOUSTON, TX--(Marketwire - Nov 8, 2012) - EV Energy Partners, L.P. (NASDAQ: EVEP) today announced results for the third quarter 2012 and filed its Form 10-Q with the Securities and Exchange Commission.

Third Quarter 2012 Results

Adjusted EBITDAX for the quarter was $67.3 million, a 29 percent increase over the third quarter of 2011 and a 2 percent increase versus the second quarter of 2012. Distributable Cash Flow for the quarter was $35.3 million, a 15 percent increase over the third quarter of 2011 and a 2 percent increase versus the second quarter of 2012. The increase in Adjusted EBITDAX and Distributable Cash Flow over the third quarter of 2011 was primarily due to production from Barnett Shale properties acquired during the fourth quarter of 2011. The descriptions of Adjusted EBITDAX and Distributable Cash Flow can be found in the attached table under "Non-GAAP Measures."

Production for the third quarter of 2012 was 10.8 Bcf of natural gas, 266 MBbls of oil and 440 MBbls of natural gas liquids, or 15 Bcfe. This represents a 49 percent increase from third quarter 2011 production of 10.1 Bcfe, primarily due to Barnett Shale properties acquired during the fourth quarter of 2011, and a 1 percent increase from the second quarter 2012 production of 14.8 Bcfe.

For the third quarter of 2012, EVEP reported a net loss of $50 million, or $(1.15) per basic and diluted weighted average limited partner unit outstanding. Included in net loss were $65.9 million of unrealized losses on commodity and interest rate derivatives, $1.4 million of non-cash realized losses related to derivatives acquired in a December 2010 acquisition that settled during the quarter, $1.8 million of dry hole and exploration costs, $0.9 million of impairment charges, $(0.2) million of non-cash deferred income tax benefit and $4.3 million of non-cash costs contained in general and administrative expenses.

The $65.9 million unrealized loss on derivatives for the third quarter of 2012 was due to the increase in future oil, natural gas and natural gas liquids prices that occurred from June 30, 2012 to September 30, 2012 and the effect of such price changes on the mark-to-market valuation of EVEP's outstanding commodity derivatives which extend through December 2015.

For the third quarter of 2011, EVEP reported net income of $87.8 million, or $2.42 and $2.40 per basic and diluted weighted average limited partner unit outstanding, respectively. Included in net income were $68.8 million of non-cash net unrealized gains on commodity and interest rate derivatives, $1.3 million of non-cash realized losses on commodity derivatives acquired in a December 2010 acquisition that settled during the quarter, $2.7 million of non-cash costs contained in general and administrative expenses and $0.2 million of acquisition related due diligence and other related transaction costs.

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. Included in net income were $15.5 million of unrealized gains on commodity and interest rate derivatives, $0.7 million of non-cash realized losses related to derivatives acquired in a December 2010 acquisition that settled during the quarter, a $0.5 million non-cash charge to lease operating expense related to oil in tanks purchased in connection with 2011 acquisitions, $1.7 million of dry hole and exploration costs, a $16.3 million impairment charge, $0.4 million of non-cash deferred income taxes and $3.8 million of non-cash costs contained in general and administrative expenses. Also contained in general and administrative expenses were $0.6 million of acquisition related due diligence and other related transaction costs.

Mark Houser, President and CEO, said, "We are very pleased with our Barnett Shale operations and continue to see production growth through the drill bit while effectively managing our per unit operating costs throughout the rest of the business. Our major focus this quarter however, has been and will continue to be on managing our Utica Shale acreage monetization process."

Quarterly Report on Form 10-Q

EVEP's financial statements and related footnotes are available on our third quarter 2012 Form 10-Q, which was filed today and is available through the Investor Relations/SEC Filings section of the EVEP web site at http://www.evenergypartners.com.

Conference Call

As announced on October 29, 2012, EV Energy Partners, L.P. will host an investor conference call at 10 a.m. EST November 9, 2012. Investors interested in participating in the call may dial (480) 629-9818 (conference ID 4573495) at least 5 minutes prior to the start time, or may listen live over the internet through the investor relations section of the EVEP web site 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 "forward-looking statements" as defined by the Securities and Exchange Commission. All statements, other than statements of historical facts, included in this press release that address activities, events or developments that the partnership expects, believes or anticipates will or may occur in the future are forward-looking statements. 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. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of EVEP, which may cause our actual results to differ materially from those implied or expressed by the forward-looking statements. These include risks relating to financial performance and results, availability of sufficient cash flow to pay distributions and execute our business plan, prices and demand for natural gas and oil, our ability to replace reserves and efficiently develop our current reserves and other important factors that could cause actual results to differ materially from those projected as described in the EVEP's reports filed with the Securities and Exchange Commission.

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,

2012

2011

2012

2011

Production data:

Oil (MBbls)

266

207

832

656

Natural gas liquids (MBbls)

440

285

1,266

827

Natural gas (MMcf)

10,772

7,141

31,757

21,144

Net production (MMcfe)

15,008

10,091

44,349

30,043

Average sales price per unit : (1)

Oil (Bbl)

$

89.83

$

84.76

$

93.64

$

91.48

Natural gas liquids (Bbl)

32.07

55.16

37.63

52.73

Natural gas (Mcf)

2.76

4.16

2.57

4.12

Mcfe

4.51

6.24

4.68

6.35

Average unit cost per Mcfe:

Production costs:

Lease operating expenses (2)

$

1.65

$

1.91

$

1.76

$

1.82

Production taxes

0.17

0.26

0.19

0.28

Total

1.82

2.17

1.95

2.10

Asset retirement obligations accretion expense

0.09

0.09

0.08

0.10

Depreciation, depletion and amortization

1.88

1.81

1.83

1.81

General and administrative expenses

0.69

0.81

0.73

0.79

(1)

Prior to $32.3 and $16.3 million of net hedge gains and settlements on commodity derivatives for the three months ended September 30, 2012 and September 30, 2011, respectively and $94.5 and $46.3 million for the nine months ended September 30, 2012 and September 30, 2011.

(2)

Lease operating expenses for the nine months ended September 30, 2012 contain $1.7 million ($0.04 per Mcfe) 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)

September 30, 2012

December 31, 2011

ASSETS

Current assets:

Cash and cash equivalents

$

10,964

$

30,312

Accounts receivable:

Oil, natural gas and natural gas liquids revenues

32,000

36,926

Other

2,247

459

Derivative asset

49,330

81,772

Other current assets

1,621

3,084

Assets held for sale

-

6,597

Total current assets

96,162

159,150

Oil and natural gas properties, net of accumulated depreciation, depletion and amortization; September 30, 2012, $341,298; December 31, 2011, $244,092


1,900,300


1,768,529

Other property, net of accumulated depreciation and amortization; September 30, 2012, $568; December 31, 2011, $447


1,341


1,345

Long-term derivative asset

48,162

57,643

Other assets

30,549

16,557

Total assets

$

2,076,514

$

2,003,224

LIABILITIES AND OWNERS' EQUITY

Current liabilities:

Accounts payable and accrued liabilities:

Third party

$

48,986

$

34,705

Related party

400

870

Derivative liability

-

618

Liabilities held for sale

-

602

Total current liabilities

49,386

36,795

Asset retirement obligations

105,705

90,803

Long-term debt

819,201

953,023

Long-term liabilities

2,961

2,564

Long-term derivative liability

84

-

Commitments and contingencies

Owners' equity:

Common unitholders - 38,447,350 units and 34,173,650 units issued and outstanding as of September 30, 2012 and December 31, 2011, respectively


1,120,241


935,425

Class B unitholders - 3,873,357 units issued and outstanding as of September 30, 2012 and December 31, 2011


(9,114

)


232

General partner interest

(11,950

)

(15,618

)

Total owners' equity

1,099,177

920,039

Total liabilities and owners' equity

$

2,076,514

$

2,003,224

Condensed Consolidated Statements of Operations

(in $ thousands, except per unit data)

(unaudited)

Three Months Ended September 30,

Nine Months Ended September 30,

2012

2011

2012

2011

Revenues:

Oil, natural gas and natural gas liquids revenues

$

67,747

$

62,961

$

207,341

$

190,691

Transportation and marketing-related revenues

954

1,428

2,643

4,313

Total revenues

68,701

64,389

209,984

195,004

Operating costs and expenses:

Lease operating expenses

24,821

19,284

78,271

54,595

Cost of purchased natural gas

662

1,072

1,808

3,242

Dry hole and exploration costs

1,809

768

5,664

1,612

Production taxes

2,587

2,645

8,394

8,415

Asset retirement obligations accretion expense

1,335

920

3,763

2,856

Depreciation, depletion and amortization

28,141

18,225

81,127

54,232

General and administrative expenses

10,296

8,126

32,562

23,851

Impairment of oil and natural gas properties

853

(48

)

17,752

6,618

Total operating costs and expenses

70,504

50,992

229,341

155,421

Operating (loss) income

(1,803

)

13,397

(19,357

)

39,583

Other (expense) income, net:

Realized gains on derivatives, net

29,835

13,914

88,628

41,698

Unrealized (losses) gains on derivatives, net

(65,870

)

68,845

(38,672

)

33,212

Interest expense

(12,808

)

(8,172

)

(36,487

)

(21,455

)

Other income (expense), net

408

(125

)

382

108

Total other (expense) income, net

(48,435

)

74,462

13,851

53,563

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

(50,238

)

87,859

(5,506

)

93,146

Income taxes

193

(51

)

(904

)

(164

)

(Loss) income before equity in income (losses) of unconsolidated affiliates

(50,045

)

87,808

(6,410

)

92,982

Equity in income (losses) of unconsolidated affiliates

26

-

(60

)

-

Net (loss) income

$

(50,019

)

$

87,808

$

(6,470

)

$

92,982

General partner's interest in net (loss) income, including incentive distribution rights

$

(1,000

)

$

4,711

$

(129

)

$

10,693

Limited partners' interest net (loss) income

$

(49,019

)

$

83,097

$

(6,341

)

$

82,289

Net (loss) income per limited partner unit:

Basic

$

(1.15

)

$

2.42

$

(0.15

)

$

2.46

Diluted

$

(1.15

)

$

2.40

$

(0.15

)

$

2.44

Weighted average limited partner units outstanding:

Basic

42,452

34,317

41,784

33,445

Diluted

42,452

34,623

41,784

33,710

Distributions declared per unit

$

0.766

$

0.762

$

2.295

$

2.283

Condensed Consolidated Statements of Cash Flows

(in $ thousands)

(unaudited)

Nine Months Ended September 30,

2012

2011

Cash flows from operating activities:

Net (loss) income

$

(6,470

)

$

92,982

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

Asset retirement obligations accretion expense

3,763

2,856

Depreciation, depletion and amortization

81,127

54,232

Equity-based compensation cost

12,390

6,613

Impairment of oil and natural gas properties

17,752

6,618

Noncash derivative activity

39,395

(37,893

)

Equity in losses of unconsolidated affiliates

60

-

Other, net

4,698

1,484

Changes in operating assets and liabilities:

Accounts receivable

3,138

(7,935

)

Other current assets

656

(308

)

Accounts payable and accrued liabilities

20,479

15,952

Other, net

(1,955

)

(600

)

Net cash flows provided by operating activities

175,033

134,001

Cash flows from investing activities:

Acquisitions of oil and natural gas properties

(118,925

)

(35,647

)

Additions to oil and natural gas properties

(100,392

)

(52,936

)

Investments in unconsolidated affiliates

(18,998

)

-

Deposit on acquisition of oil and natural gas properties

-

(7,700

)

Proceeds from sale of oil and natural gas properties

5,522

9,666

Settlements from acquired derivatives

4,166

4,443

Net cash flows used in investing activities

(228,627

)

(82,174

)

Cash flows from financing activities:

Long-term debt borrowings

120,000

30,000

Repayment of long-term debt borrowings

(460,000

)

(436,500

)

Proceeds from debt offering

206,000

292,500

Loan costs paid

(4,152

)

(6,355

)

Proceeds from public equity offering

262,833

147,108

Offering costs

(304

)

(333

)

Contributions from general partner

5,714

3,191

Distributions paid

(95,845

)

(85,514

)

Distribution related to acquisition

-

(1,717

)

Net cash flows provided by (used in) financing activities

34,246

(57,620

)

Decrease in cash and cash equivalents

(19,348

)

(5,793

)

Cash and cash equivalents - beginning of period

30,312

23,127

Cash and cash equivalents - end of period

$

10,964

$

17,334

Non-GAAP Measures

We define Adjusted EBITDAX as net (loss) income plus income tax provision, interest expense, net, realized losses on interest rate swaps, depreciation, depletion and amortization, asset retirement obligations accretion expense, non-cash realized losses (gains) on derivatives, unrealized losses (gains) on derivatives, non-cash equity compensation, 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 tax provision, 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 September 30,

Nine Months Ended September 30,

2012

2011

2012

2011

Net (loss) income

$

(50,019

)

$

87,808

$

(6,470

)

$

92,982

Add:

Income taxes

(193

)

51

904

164

Interest expense, net

12,802

8,168

36,469

21,441

Realized losses on interest rate swaps

1,013

1,108

3,172

5,075

Depreciation, depletion and amortization

28,141

18,225

81,127

54,232

Asset retirement obligations accretion expense

1,335

920

3,763

2,856

Non-cash realized losses (gains) on derivatives

1,413

1,299

2,717

(485

)

Unrealized losses (gains) on derivatives

65,870

(68,845

)

38,672

(33,212

)

Non-cash equity compensation expense

4,294

2,736

12,390

6,613

Impairment of oil and natural gas properties

853

(48

)

17,752

6,618

Non-cash inventory write down expense

-

-

1,729

-

Dry hole and exploration costs

1,809

768

5,664

1,612

Adjusted EBITDAX

$

67,318

$

52,190

$

197,889

$

157,896

Less:

Cash income taxes

37

51

164

164

Cash interest expense, net

12,200

7,640

34,691

20,176

Realized losses on interest rate swaps

1,013

1,108

3,172

5,075

Estimated maintenance capital expenditures (1)

18,760

12,614

55,436

37,060

Distributable Cash Flow

$

35,308

$

30,777

$

104,426

$

95,421

(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.