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8-K - FORM 8-K - QR Energy, LP | h84190e8vk.htm |
Exhibit 99.1
QR Energy Announces Second Quarter 2011 Results and Outlook
HOUSTON,
TX (Marketwire August 15, 2011) QR Energy, LP (NYSE: QRE) announced today its
operating and financial results for the three months and six months ended June 30, 2011.
Highlights for the Second Quarter 2011
| June 30 daily exit rate of approximately 5,500 Boed compared to March 31 daily exit rate of approximately 5,400 Boed and December 31 daily exit rate of approximately 5,350 Boed; average production of 5,422 Boed in the first half of 2011 | ||
| Second quarter production of 5,368 Boe per day, composed of 60% liquids (oil and NGLs) from 5,473 Boe per day in the first quarter of 2011, a 2% decrease; however, excluding the impact of out-of-period accounting adjustments, normalized average production was 5,498 Boed, a 3% increase from 5,339 Boed in the first quarter of 2011 | ||
| LOE per Boe of $13.37, a 5% increase from $12.74 per Boe in the first quarter of 2011; LOE per Boe of $13.05 for the first six months of 2011 | ||
| Entered into derivative contracts that improved weighted-average oil hedge contract prices by 14% on average for the second half of 2011 through 2015 |
Chief Executive Officer Alan L. Smith commented, QR Energy produced solid results in the second
quarter. Our asset base is performing as expected; both our base production and capital projects
are providing the anticipated economic results. In the interest of offering stable cash flows to
our investors, we increased our hedge prices for oil in the second quarter. We also continue to
expand and develop our organization in preparation for future growth.
Results for the Second Quarter 2011
| Revenue was $31.7 million; realized sales prices excluding commodity derivatives were $93.41 per Bbl of oil, $4.70 per Mcf of natural gas and $54.25 per Bbl of NGLs |
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| Oil and natural gas were 75% hedged | ||
| Total production expenses were $8.8 million | ||
| GAAP G&A was $3.3 million | ||
| Net income was approximately $15.9 million | ||
| Adjusted EBITDA was $20.7 million | ||
| Maintenance capital expenditures for the quarter were $3.1 million; total capital expenditures were $8.4 million | ||
| Distributable Cash Flow totaled $14.4 million | ||
| Six-month Distribution Coverage Ratio of 1.1x |
Adjusted EBITDA, Distributable Cash Flow and Distribution Coverage Ratio are non-GAAP measures.
Please see the reconciliation to the most comparable measures calculated in accordance with GAAP in
the Non-GAAP Reconciliation section of this press release.
Cash Distribution
On August 12, 2011, QR Energy paid a cash distribution attributable to the second quarter of
2011 of $0.4125 per unit for all outstanding units. This represents an annualized distribution of
$1.65 per unit.
Commodity Derivative Transaction
Effective July 1, 2011, QR Energy modified its oil derivative contracts in order to increase
weighted-average future prices 14% from $85.55 to $97.78 on average for the second half of 2011
through 2015. The transaction cost was $40.7 million.
As of June 30, 2011, the notional volumes and prices of QR Energys commodity derivative contracts
were as follows:
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Crude Oil (NYMEX - WTI) | Natural Gas (NYMEX - Henry Hub) | |||||||||||||||||||||||||||
Weighted | Weighted | |||||||||||||||||||||||||||
Swaps | Average | Swaps | Average | Collars | Floor | Ceiling | ||||||||||||||||||||||
Term | Bbls/d | ($/Bbl) | MMBtu/d | ($/MMBtu) | MMBtu/d | ($/MMBtu) | ($/MMBtu) | |||||||||||||||||||||
7/1 12/31/2011 |
2,238 | $ | 96.40 | 9,045 | $ | 7.15 | | | | |||||||||||||||||||
2012 |
2,039 | $ | 98.50 | 8,192 | $ | 6.45 | | | | |||||||||||||||||||
2013 |
2,076 | $ | 98.50 | 7,474 | $ | 6.45 | | | | |||||||||||||||||||
2014 |
2,090 | $ | 97.75 | 7,544 | $ | 6.30 | 500 | $ | 5.00 | $ | 6.19 | |||||||||||||||||
2015 |
2,000 | $ | 97.10 | 3,398 | $ | 5.52 | 3,000 | $ | 5.00 | $ | 7.50 |
2011 Guidance
The 2011 guidance set forth below is subject to all cautionary statements and limitations
described below and under the Forward-Looking Statements section of this press release. In
addition, estimates for QR Energys future production volumes are based on, among other things,
assumptions of capital expenditure levels and the assumption that market demand and prices for oil
and natural gas will continue at levels that allow for economic production of these products. The
production, transportation and marketing of oil and natural gas are extremely complex and are
subject to disruption due to transportation and processing availability, mechanical failure, human
error, weather, and numerous other factors. Estimates are based on certain other assumptions, such
as well performance, which may vary significantly from QR Energys assumptions. Operating costs,
which include major maintenance costs, vary in response to changes in prices of services and
materials used in the operation of properties and the amount of maintenance required. Operating
costs, including taxes, utilities and service company costs move directionally with increases and
decreases in commodity prices and QR Energy cannot fully predict such future commodity prices or
operating costs. Capital expenditures are based on current expectations as to the level of capital
expenditures that will be justified based upon the other assumptions set forth below as well as
expectations about other operating and economic factors not set forth below. The guidance set forth
below does not constitute any form of guarantee, assurance or promise that the matters indicated
will actually be achieved. Rather, the guidance simply sets forth QR Energys best estimate today
for these matters. Estimates are based upon current expectations about the future and based upon
both stated and unstated assumptions. Actual conditions and assumptions may change over the course
of the year.
Based upon current estimates, QR Energy expects the following operating results for the third
quarter and full year of 2011:
3Q 2011 | Full Year 2011 | |||||||
Average net daily production (Boed) |
5,300 5,500 | 5,250 5,400 | ||||||
LOE and workover expenses (per Boe) |
$ | 12.50 $13.50 | $ | 12.50 $13.50 |
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Quarterly Report on Form 10-Q
QR Energys financial statements and related footnotes are available in the 10-Q for the
quarter ended June 30, 2011, which QR Energy filed with the Securities and Exchange Commission
today. The 10-Q is available on QR Energys Investor Relations website at
http://ir.qrenergylp.com or on the Securities and Exchange Commission website at
www.sec.gov.
Webcast and Conference Call
QR Energy will host a webcast and conference call today at 10 a.m. central time to discuss
these results.
Interested parties may join the webcast by visiting QR Energys Investor Relations website
http://ir.qrenergylp.com and clicking on the webcast link or the conference call by dialing (877)
440-5807 or (719) 325-4870 five minutes before the call begins and providing the passcode 9260460.
The webcast will be available on QR Energys Investor Relations website http://ir.qrenergylp.com
for 14 days following the call.
About QR Energy, LP
QR Energy, LP is a publicly traded partnership engaged in the acquisition, production and
development of onshore crude oil and natural gas properties in the United States. QR Energy is
headquartered in Houston, Texas. For more information, visit QR Energys website at
www.qrenergylp.com.
Forward-Looking Statements
This press release may contain forward-looking statements within the meaning of the federal
securities laws. QR Energy believes that its expectations and forecasts are based on
reasonable assumptions. No assurance, however, can be given that such expectations and forecasts
will prove to have been correct. A number of factors could cause actual results to differ
materially from the expectations and forecasts, anticipated results or other forward-looking
information expressed in this press release, including risks and uncertainties regarding future
results, capital expenditures, liquidity and financial market conditions, insufficient cash from
operations, adverse market conditions and governmental regulations. For a more complete list of
these risk factors, please read QR Energys filings with the Securities and Exchange Commission,
which are available on QR Energys Investor Relations website at http://ir.qrenergylp.com
or on the Securities and Exchange Commission website at www.sec.gov.
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Selected Operating Data (Unaudited)
Three months | Six months | |||||||
ended June 30, 2011 | ended June 30, 2011 | |||||||
Production: |
||||||||
Oil (MBbls) |
254 | 500 | ||||||
Natural gas (MMcf) |
1,167 | 2,420 | ||||||
NGLs (MBbls) |
40 | 78 | ||||||
Total production (MBoe) |
489 | 981 | ||||||
Production by area (Boed): |
||||||||
Permian Basin |
2,328 | 2,305 | ||||||
Ark-La-Tex |
1,769 | 1,823 | ||||||
Mid-Continent |
680 | 714 | ||||||
Gulf Coast |
591 | 580 | ||||||
Average daily production (Boed) |
5,368 | 5,422 | ||||||
Realized prices (excluding commodity
derivatives): |
||||||||
Oil ($/Bbl) |
$ | 93.41 | $ | 94.49 | ||||
Natural gas ($/Mcf) |
$ | 4.70 | $ | 4.44 | ||||
NGLs ($/Bbl) |
$ | 54.25 | $ | 50.77 | ||||
Average NYMEX prices: |
||||||||
Crude oil ($/Bbl) for the period |
$ | 102.34 | $ | 98.50 | ||||
Natural gas ($/Mcf) for the period |
$ | 4.38 | $ | 4.29 |
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Consolidated Statements of Operations (Unaudited)
Three months | Six months | |||||||
ended June 30, 2011 | ended June 30, 2011 | |||||||
(In thousands) | ||||||||
Revenues: |
||||||||
Oil sales |
$ | 23,726 | $ | 47,243 | ||||
Natural gas sales |
5,483 | 10,745 | ||||||
NGLs sales |
2,170 | 3,960 | ||||||
Processing and other |
274 | 472 | ||||||
Total Revenue |
$ | 31,653 | $ | 62,420 | ||||
Operating Expenses: |
||||||||
Lease operating expenses |
6,533 | 12,807 | ||||||
Production and other taxes |
2,155 | 4,133 | ||||||
Processing and transportation |
89 | 611 | ||||||
Total production expenses |
8,777 | 17,551 | ||||||
Depreciation, depletion and amortization |
8,636 | 17,211 | ||||||
Accretion of asset retirement obligations |
290 | 557 | ||||||
General and administrative and other |
3,344 | 6,777 | ||||||
Total operating expenses |
21,047 | 42,096 | ||||||
Operating income |
10,606 | 20,324 | ||||||
Other income (expense): |
||||||||
Realized losses on commodity derivative
instruments |
(42,161 | ) | (40,852 | ) | ||||
Unrealized gains on commodity derivative
instruments |
55,575 | 16,732 | ||||||
Interest expense |
(7,854 | ) | (9,530 | ) | ||||
Total other income (expense), net |
5,560 | (33,650 | ) | |||||
Income (loss) before income tax |
16,166 | (13,326 | ) | |||||
Income tax expense |
(235 | ) | (91 | ) | ||||
Net income (loss) |
$ | 15,931 | $ | (13,417 | ) | |||
Less: general partners interest in net
income (loss) |
$ | 16 | $ | (13 | ) | |||
Limited partners interest in net income (loss) |
$ | 15,915 | $ | (13,404 | ) | |||
Adjusted EBITDA1 |
$ | 20,672 | $ | 43,430 | ||||
Distributable Cash Flow1 |
$ | 14,382 | $ | 32,578 | ||||
Weighted average diluted units outstanding |
35,869 | 35,664 |
1 | Adjusted EBITDA and Distributable Cash Flow are non-GAAP financial measures. Please refer to the reconciliation at the end of this press release for their nearest comparable GAAP measures. |
Please see related footnotes in the 10-Q, as filed with the Securities and Exchange Commission.
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Consolidated Balance Sheet (Unaudited)
June 30, 2011 | ||||
(In thousands) | ||||
ASSETS |
||||
Current assets: |
||||
Total current assets |
$ | 34,385 | ||
Noncurrent assets: |
||||
Total property and equipment, net |
437,033 | |||
Derivative instruments |
9,719 | |||
Deferred taxes |
255 | |||
Deferred financing costs, net |
2,573 | |||
Total noncurrent assets |
449,580 | |||
Total assets |
$ | 483,965 | ||
LIABILITIES AND PARTNERS CAPITAL |
||||
Current liabilities: |
||||
Total current liabilities |
$ | 16,398 | ||
Noncurrent liabilities: |
||||
Long-term debt |
266,000 | |||
Derivative instruments |
6,658 | |||
Asset retirement obligations |
16,997 | |||
Total noncurrent liabilities |
289,655 | |||
Partners capital: |
||||
Total partners capital |
177,912 | |||
Total liabilities and partners capital |
$ | 483,965 | ||
Please see related footnotes in the 10-Q, as filed with the Securities and Exchange Commission.
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Non-GAAP Reconciliation
QR Energy defines Adjusted EBITDA as net income plus interest expense (including realized and
unrealized gains and losses on interest rate derivative contracts) unrealized losses on commodity
derivative contracts, depletion, depreciation and amortization, accretion of asset retirement
obligations, impairments, and general and administrative expenses that are allocated to us in
accordance with GAAP in excess of the administrative services fee paid by our general partner and
reimbursed by us, less interest income and unrealized gains on commodity derivative contracts.
QR Energy defines Distributable Cash Flow as Adjusted EBITDA less cash interest expense (including
realized gains and losses on interest rate derivative contracts) and maintenance capital
expenditures, the capital required to maintain QR Energys production for five years, on average.
QR Energy defines the Distribution Coverage Ratio as the ratio of Distributable Cash Flow per
outstanding unit (including subordinated units and general partner units) to the actual cash
distribution payable per outstanding unit.
Adjusted EBITDA, Distributable Cash Flow and the Distribution Coverage Ratio are used by management
of QR Energy to provide additional information related to the performance of QR Energys business,
such as information regarding the cash available to pay distributions to unitholders, and related
to its liquidity, such as the ability of its assets to generate cash sufficient to pay interest
expenses. In addition, Adjusted EBITDA, Distributable Cash Flow and the Distribution Coverage Ratio
are quantitative standards used by external users of our financial statements such as investors,
research analysts and others to assess QR Energys performance and liquidity without regard to
capital structure. Adjusted EBITDA, Distributable Cash Flow and the Distribution Coverage Ratio are
not presentations made in accordance with GAAP. Because Adjusted EBITDA, Distributable Cash Flow
and the Distribution Coverage Ratio exclude some, but not all, items that affect net income and are
defined differently by different companies in our industry, our definitions may not be comparable
to similarly titled measures of other companies. Adjusted EBITDA, Distributable Cash Flow and the
Distribution Coverage Ratio have important limitations as analytical tools, and you should not
consider them in isolation, or as a substitute for net income, operating income, cash flow from
operating activities or any other measure of financial performance or liquidity presented in
accordance with GAAP.
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Three months | Six months | ||||||||||
ended June 30, 2011 | ended June 30, 2011 | ||||||||||
(In thousands) | |||||||||||
Reconciliation of net income to Adjusted EBITDA, Distributable Cash Flow and Distribution Coverage Ratio: |
|||||||||||
Net gain (loss) |
$ | 15,931 | $ | (13,417 | ) | ||||||
Plus: |
|||||||||||
Unrealized gain on commodity derivative contracts |
(55,575 | ) | (16,732 | ) | |||||||
Loss on modification of derivative contracts |
40,745 | 40,745 | |||||||||
Depletion, depreciation and amortization |
8,636 | 17,211 | |||||||||
Accretion of asset retirement obligations |
290 | 557 | |||||||||
Interest expense |
7,854 | 9,530 | |||||||||
Income tax expense |
235 | 91 | |||||||||
General and administrative expense and other
in excess of administrative services fee |
2,556 | 5,445 | |||||||||
Adjusted EBITDA |
$ | 20,672 | $ | 43,430 | |||||||
Less: |
|||||||||||
Cash interest expense |
3,165 | 4,602 | |||||||||
Maintenance capital expenditures1 |
3,125 | 6,250 | |||||||||
Distributable Cash Flow2 |
$ | 14,382 | $ | 32,578 | |||||||
Cash distribution |
14,806 | 29,615 | |||||||||
Distribution Coverage Ratio |
1.0x | 1.1x |
1 | Maintenance capital expenditures are those needed on average to maintain production over a five-year period. | |
2 | Prior to any retained cash reserves established by QR Energys general partners board of directors. |
Investor Contacts:
Taylor B. Miele
Investor Relations Specialist
(713) 452-2990
Investor Relations Specialist
(713) 452-2990
Cedric W. Burgher
Chief Financial Officer
(713) 452-2200
Chief Financial Officer
(713) 452-2200
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