EP Energy LLC - FORM 8-K - EX-99.1

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8-K - 8-K - EP Energy LLC	a13-6215_18k.htm

Exhibit 99.1

Financial and Operational Reporting Package Fourth Quarter 2012

EP ENERGY LLC

Financial and Operational Reporting Package

Fourth Quarter 2012

Table of Contents

	Page
Notes to Investors	1

Operating Results
Financial Highlights	2
Statements of Income	3
Average Daily Volumes, Realized Prices and Adjusted Cash Operating Costs Per-Unit	4
Derivative Schedule	5

Non-GAAP Reconciliations
Combined Earnings	6
Adjusted EBITDAX	7
Cash Operating Costs and Adjusted Cash Operating Costs	8

Glossary	9

NOTES TO INVESTORS

Cautionary Statement

This Financial and Operational Reporting Package (“Package”) includes summarized financial and other information about EP Energy LLC (“EP Energy” or the “Company”). The information in this Package is intended to provide highlights and should not be used as a substitute for financial information in EP Energy’s filings with the Securities and Exchange Commission (‘SEC’). Readers should refer to those filings. In addition, the glossary contains certain definitions of measures used in this Package and in other presentations we provide. These definitions may not be the same as definitions used by other companies. This Package may contain information that is based on estimates. The Company has made every reasonable effort to ensure that the information and assumptions on which these estimates are based are current, reasonable, and complete. Factors that could cause actual results to differ materially from the estimates in this Package are changes in unaudited and/or unreviewed financial information and the effects of any changes in accounting rules and guidance, as well as other factors discussed in EP Energy’s financial statements. The financial data and statistics in this Package for Fourth Quarter 2012 reflect the operating results of EP Energy through December 31, 2012. Independent auditors have not audited this Package. The Company assumes no obligation to publicly update or revise any information contained herein as a result of new information, future events, or otherwise.

Certain of the production information in this Package includes the production attributable to EP Energy’s 48.8 percent interest in Four Star Oil & Gas Company (“Four Star”). EP Energy’s Supplemental Oil and Gas disclosures, which are included in EP Energy’s 2012 Annual Report on Form 10-K, reflect its proportionate share of the proved reserves of Four Star separate from its consolidated proved reserves. In addition, the proved reserves attributable to its proportionate share of Four Star represent estimates prepared by EP Energy and not those of Four Star.

Non-GAAP Financial Measures

The SEC’s Regulation G applies to any public disclosure or release of material information that includes a non-GAAP financial measure. In the event of such a disclosure or release, Regulation G requires (i) the presentation of the most directly comparable financial measure calculated and presented in accordance with GAAP and (ii) a reconciliation of the differences between the non-GAAP financial measure presented and the most directly comparable financial measure calculated and presented in accordance with GAAP. The required presentations and reconciliations are included in the body of this Package.

EP Energy believes that the non-GAAP financial measures described in the glossary are useful to investors because these measurements are used by many companies in the industry as a measure of operating and financial performance and are commonly employed by financial analysts and others to evaluate the operating and financial performance of the Company and to compare it with the performance of other companies within the industry. These non-GAAP financial measures may not be comparable to similarly titled measures used by other companies and should not be used as a substitute for net income (loss), operating cash flows or other measures of financial performance presented in accordance with GAAP.

EP ENERGY LLC

FINANCIAL HIGHLIGHTS

(unaudited)

	2012					2011					Year-to-Date
	Q1	Q2(1)	Q3		Q4	Q1		Q2	Q3	Q4	2012(1)		2011

Net income (loss) ($ in millions)	15	13	(196	)	91	(18	)	170	61	49	(77	)	262

Adjusted EBITDAX ($ in millions)	343	312	354		378	317		343	350	381	1,387		1,391

Average Cash Operating Costs ($/Mcfe)	1.74	4.19	2.23		2.32	1.85		1.75	1.82	1.76	2.63		1.79

Adjusted Cash Operating Costs ($/Mcfe)	1.70	1.62	1.76		1.88	1.69		1.67	1.75	1.69	1.74		1.69

Depreciation, depletion and amortization rate ($/Mcfe)	2.59	1.98	1.43		1.76	1.96		2.11	2.22	2.32	1.95		2.16

Equivalent Sales Volumes (MMcfe/d)(2)	908	905	865		841	821		823	827	880	880		838

Oil and Condensate Sales Volumes (MBbls/d)(2)	23.4	23.6	28.1		32.1	14.1		15.6	17.2	22.3	26.8		17.3

(1) Represents non-GAAP combined earnings for periods before and after the acquisition of EP Energy. See reconciliation of combined earnings on page 6.

(2) Includes our proportionate share of Four Star production volumes.

EP ENERGY LLC

STATEMENTS OF INCOME

($ in millions)

(unaudited)

	2012												2011												Year-to-Date
	Q1			Q2(1)			Q3			Q4			Q1			Q2			Q3			Q4			2012(1)			2011

Operating revenues
Oil and condensate	$	209		$	190		$	230		$	260		$	103		$	133		$	131		$	185		$	889		$	552
Natural gas	182			141			162			178			240			257			256			220			663			973
NGL	17			17			18			18			15			13			15			14			70			57
Financial derivatives	76			346			(181		)	62			(108		)	132			251			10			303			285
Total operating revenues	484			694			229			518			250			535			653			429			1,925			1,867

Operating expenses
Transportation costs	25			34			29			30			20			18			20			27			118			85
Lease operating expense	62			55			55			60			51			49			61			56			232			217
General and administrative expenses	44			240			85			85			50			48			46			57			454			201
Depreciation, depletion and amortization (2)	201			152			107			127			134			146			157			175			587			612
Impairments and ceiling test charges (2)	62			1			—			—			—			—			158			—			63			158
Exploration expense (2)	—			6			21			25			—			—			—			—			52			—
Taxes other than income	28			29			27			22			25			24			21			21			106			91
Total operating expenses	422			517			324			349			280			285			463			336			1,612			1,364

Operating income (loss)	62			177			(95		)	169			(30		)	250			190			93			313			503
																												—
(Loss) earnings from unconsolidated affiliates	(3		)	(3		)	(2		)	2			(2		)	1			(3		)	(3		)	(6		)	(7		)
Other income (expense)	1			(3		)	—			2			1			(1		)	(4		)	2			—			(2		)
Loss on extinguishment of debt	—			—			(14		)	—			—			—			—			—			(14		)	—
Interest expense	(4		)	(63		)	(84		)	(81		)	(3		)	(3		)	(4		)	(2		)	(232		)	(12		)
Income (loss) before income taxes	56			108			(195		)	92			(34		)	247			179			90			61			482

Income tax expense (benefit)	41			95			1			1			(16		)	77			118			41			138			220

Net income (loss)	$	15		$	13		$	(196	)	$	91		$	(18	)	$	170		$	61		$	49		$	(77	)	$	262

(1) Represents non-GAAP combined earnings for periods before and after the acquisition of EP Energy. See reconciliation of combined earnings on page 6.

(2) Reflects the use of the successful efforts method of accounting for oil and gas properties following the acquisition of EP Energy and the use of the full cost method of accounting prior to the acquisition.

EP ENERGY LLC

AVERAGE DAILY VOLUMES, REALIZED PRICES AND ADJUSTED CASH OPERATING COSTS PER UNIT

	2012(1)												2011												Year-to-Date
	Q1			Q2(1)			Q3			Q4			Q1			Q2			Q3			Q4			2012(1)			2011
Oil and Condensate Sales Volumes (MBbls/d)
Central	8.9			8.3			8.6			9.3			8.7			8.6			8.8			8.0			8.8			8.5
Eagle Ford	9.8			10.9			15.7			18.5			2.0			2.5			5.3			8.8			13.7			4.7
Southern	2.9			2.7			2.1			2.1			2.3			2.2			2.1			2.8			2.5			2.3
Brazil	1.0			1.0			1.0			1.4			0.2			1.5			0.2			1.9			1.1			1.0
Total Consolidated	22.6			22.9			27.4			31.3			13.2			14.8			16.4			21.5			26.1			16.5
Unconsolidated Affiliate (Four Star)	0.8			0.7			0.7			0.8			0.9			0.8			0.8			0.8			0.7			0.8
Total Combined	23.4			23.6			28.1			32.1			14.1			15.6			17.2			22.3			26.8			17.3
Natural Gas Sales Volumes (MMcf/d)
Central	549			547			505			454			509			526			516			548			514			524
Eagle Ford	16			19			25			32			4			5			12			13			23			8
Southern	93			88			57			52			117			98			94			87			72			100
Brazil	30			29			26			27			29			28			30			27			28			29
Total Consolidated	688			683			613			565			659			657			652			675			637			661
Unconsolidated Affiliate (Four Star)	43			43			41			42			47			47			45			45			42			46
Total Combined	731			726			654			607			706			704			697			720			679			707
NGL Sales Volumes (MBbls/d)
Central	0.7			0.6			0.5			0.5			0.1			0.1			0.1			—			0.6			—
Eagle Ford	1.5			2.2			3.2			3.3			0.4			0.3			0.6			0.9			2.5			0.6
Southern	2.4			2.0			2.0			1.9			2.8			2.3			2.2			2.0			2.1			2.3
Total Consolidated	4.6			4.8			5.7			5.7			3.3			2.7			2.9			2.9			5.2			2.9
Unconsolidated Affiliate (Four Star)	1.4			1.3			1.3			1.3			1.7			1.4			1.5			1.5			1.3			1.5
Total Combined	6.0			6.1			7.0			7.0			5.0			4.1			4.4			4.4			6.5			4.4
Equivalent Sales Volumes (MMcfe/d)
Central	606			601			560			513			561			578			569			596			570			576
Eagle Ford	84			98			138			162			19			22			48			71			121			40
Southern	125			116			81			76			147			125			119			116			99			127
Brazil	36			35			32			35			31			37			31			38			35			34
Total Consolidated	851			850			811			786			758			762			767			821			825			777
Unconsolidated Affiliate (Four Star)	57			55			54			55			63			61			60			59			55			61
Total Combined	908			905			865			841			821			823			827			880			880			838
Consolidated average realized prices
Oil and condensate price on physical sales ($/Bbl)	$	101.81		$	90.92		$	91.21		$	90.60		$	86.27		$	98.46		$	86.73		$	93.24		$	93.25		$	91.40
Oil and condensate, including financial derivative cash settlements ($/Bbl) (2)	$	100.16		$	95.70		$	98.42		$	97.65		$	85.69		$	91.30		$	88.95		$	93.23		$	97.97		$	90.23
Natural gas price on physical sales ($/Mcf)	$	2.90		$	2.28		$	2.87		$	3.43		$	4.06		$	4.29		$	4.27		$	3.54		$	2.84		$	4.04
Natural gas, including financial derivative cash settlements ($/Mcf) (2)(3)	$	4.27		$	4.12		$	4.37		$	4.48		$	5.44		$	5.44		$	5.60		$	5.29		$	4.30		$	5.44
NGL price on physical sales ($/Bbl)	$	40.96		$	38.87		$	34.57		$	34.51		$	50.37		$	54.85		$	56.03		$	53.23		$	36.96		$	53.50
Consolidated average transportation costs
Oil and condensate ($/Bbl)	$	1.11		$	0.72		$	2.61		$	2.00		$	0.06		$	0.06		$	0.07		$	0.05		$	1.82		$	0.06
Natural gas ($/Mcf)	$	0.33		$	0.44		$	0.36		$	0.42		$	0.31		$	0.28		$	0.32		$	0.40		$	0.39		$	0.33
NGL ($/Bbl)	$	5.47		$	7.62		$	4.96		$	3.95		$	5.01		$	4.73		$	3.04		$	2.47		$	5.41		$	3.83
Consolidated average cash operating costs and adjusted cash operating costs ($/Mcfe)
Lease operating expenses	$	0.81		$	0.70		$	0.74		$	0.83		$	0.74		$	0.71		$	0.87		$	0.74		$	0.77		$	0.77
Production taxes	0.32			0.33			0.34			0.28			0.32			0.31			0.27			0.24			0.32			0.28
General and administrative expenses	0.57			3.11			1.13			1.18			0.74			0.69			0.65			0.75			1.50			0.70
Taxes other than production and income taxes	0.04			0.05			0.02			0.03			0.05			0.04			0.03			0.03			0.04			0.04
Total cash operating costs	$	1.74		$	4.19		$	2.23		$	2.32		$	1.85		$	1.75		$	1.82		$	1.76		$	2.63		$	1.79
Transition/restructuring costs and equity based compensation expense (4)	(0.04		)	(2.57		)	(0.47		)	(0.44		)	(0.16		)	(0.08		)	(0.07		)	(0.07		)	(0.89		)	(0.10		)
Total adjusted cash operating costs	$	1.70		$	1.62		$	1.76		$	1.88		$	1.69		$	1.67		$	1.75		$	1.69		$	1.74		$	1.69
Consolidated depreciation, depletion and amortization rate ($/Mcfe)	$	2.59		$	1.98		$	1.43		$	1.76		$	1.96		$	2.11		$	2.22		$	2.32		$	1.95		$	2.16

(1) Represents non-GAAP combined results for the periods before and after the acquisition of EP Energy.

(2) Amounts in the first, second, third and fourth quarter of 2012 include approximately $86 million, $116 million, $84 million and $54 million for cash settlements related to natural gas contracts and approximately $(4) million, $10 million, $18 million and $21 million for cash settlements related to crude oil contracts. Amounts in the first, second, third and fourth quarters of 2011 include approximately $82 million, $68 million, $80 million and $108 million for cash settlements related to natural gas contracts and approximately $(1) million, $(9) million, $3 million and less than $(1) million in the first, second, third and fourth quarters for cash settlements related to crude oil contracts.

(3) Cash proceeds on settlements do not reflect approximately $6 million for each period presented of cash option premiums paid in 2009 and 2010 for financial derivatives settled in each quarter of 2011.

(4) A detail of these expenses is included in the reconciliation of Adjusted EBITDAX on page 7.

EP ENERGY LLC

DERIVATIVE SCHEDULE AS OF DECEMBER 31, 2012

	2013			2014			2015
Natural Gas	Notional Volume (TBtu)	Average Hedge Price		Notional Volume (TBtu)	Average Hedge Price		Notional Volume (TBtu)	Average Hedge Price

Fixed Price	153.3	$	3.55	88.9	$	4.02	32.9	$	4.23
Written Calls - Ceiling	0.6	$	3.70	—	—		—	—

Avg Ceiling	153.9	$	3.55	88.9	$	4.02	32.9	$	4.23
Avg Floor	153.3	$	3.55	88.9	$	4.02	32.9	$	4.23

	2013			2014			2015
Crude Oil	Notional Volume (MMBbls)	Average Hedge Price		Notional Volume (MMBbls)	Average Hedge Price		Notional Volume (MMBbls)	Average Hedge Price
Economic
Fixed Price	8.95	$	103.52	8.76	$	98.64	5.50	$	95.42
Collars - Ceiling	0.06	97.50		1.10	$	100.00	1.10	$	100.00
Three-Way Collars - Ceiling	5.85	$	106.20	2.92	$	103.76	—	—
Three-Way Collars - Floor(1)	5.85	$	92.58	2.92	$	95.00	—	—

Avg Ceiling	14.86	$	104.55	12.78	$	99.93	6.60	$	96.18
Avg Floor	14.80	$	99.20	11.68	$	97.73	5.50	$	95.42

Note: US Domestic positions are as of December 31, 2012 (Contract Months: January 2013 - Forward).

(1) If market prices settle at or below $71.25 and $75.00 for the years 2013 and 2014, respectively, our three way collars-floors effectively “lock-in” a cash settlement of the market price plus $21.33 per Bbl and $20.00 per Bbl for 2013 and 2014, respectively.

EP ENERGY LLC

RECONCILIATION OF COMBINED EARNINGS

($ in millions)

(unaudited)

	Q2 2012									YTD 2012
	Successor			Predecessor						Successor			Predecessor
	April 1 to June 30, 2012			April 1 to May 24, 2012			Combined(1)			March 23 (inception) to December 31, 2012			January 1 to May 24, 2012			Combined(1)

Operating revenues
Oil and condensate	$	77		$	113		$	190		$	567		$	322		$	889
Natural gas	61			80			141			401			262			663
NGL	5			12			17			41			29			70
Financial derivatives	57			289			346			(62		)	365			303
Total operating revenues	200			494			694			947			978			1,925

Operating expenses
Transportation costs	14			20			34			73			45			118
Lease operating expense	21			34			55			136			96			232
General and administrative expenses	209			31			240			379			75			454
Depreciation, depletion and amortization (2)	34			118			152			268			319			587
Impairments and ceiling test charges (2)	1			—			1			1			62			63
Exploration expense (2)	6			—			6			52			—			52
Taxes other than income	12			17			29			61			45			106
Total operating expenses	297			220			517			970			642			1,612

Operating (loss) income	(97		)	274			177			(23		)	336			313

Loss from unconsolidated affiliates	(1		)	(2		)	(3		)	(1		)	(5		)	(6		)
Other income (expense)	1			(4		)	(3		)	3			(3		)	—
Loss on extinguishment of debt	—			—			—			(14		)	—			(14		)
Interest expense	(53		)	(10		)	(63		)	(218		)	(14		)	(232		)
(Loss) income before income taxes	(150		)	258			108			(253		)	314			61

Income tax expense	—			95			95			2			136			138

Net (loss) income	$	(150	)	$	163		$	13		$	(255	)	$	178		$	(77	)

(1) Represents non-GAAP combined earnings for periods before and after the acquisition of EP Energy.

EP ENERGY LLC

RECONCILIATION OF ADJUSTED EBITDAX

($ in millions)

(unaudited)

	2012												2011												Year-to-Date
	Q1			Q2(1)			Q3			Q4			Q1			Q2			Q3			Q4			2012(1)			2011

Net (loss) income	$	15		$	13		$	(196	)	$	91		$	(18	)	$	170		$	61		$	49		$	(77	)	$	262
Depreciation, depletion and amortization	201			152			107			127			134			146			157			175			587			612
Income tax expense (benefit)	41			95			1			1			(16		)	77			118			41			138			220
Interest expense	4			63			84			81			3			3			4			2			232			12
Exploration expense	—			6			21			25			—			—			—			—			52			—
Reported EBITDAX	261			329			17			325			103			396			340			267			932			1,106

Mark to market (gains) losses on financial derivatives	(76		)	(346		)	181			(62		)	109			(132		)	(251		)	(10		)	(303		)	(284		)
Cash settlement proceeds from financial derivatives	82			126			102			75			81			59			83			108			385			331
Impairments and ceiling test charges	62			1			—			—			—			—			158			—			63			158
Dividends from unconsolidated affiliates	8			—			2			11			11			15			12			8			21			46
Loss (income) from unconsolidated affiliates	3			3			2			(2		)	2			(1		)	3			3			6			7
Equity-based compensation expense	3			13			5			11			5			6			5			5			32			21
Transition and restructuring costs	—			183			25			13			6			—			—			—			221			6
Loss on extinguishment of debt	—			—			14			—			—			—			—			—			14			—
Advisory fee	—			3			6			7			—			—			—			—			16			—
Adjusted EBITDAX (2)	$	343		$	312		$	354		$	378		$	317		$	343		$	350		$	381		$	1,387		$	1,391

(1) Represents non-GAAP combined earnings for periods before and after the acquisition of EP Energy.

(2) Amounts in the first, second, third and fourth quarters of 2012 include approximately $18 million, $13 million, $3 million and zero of net EBITDA related to business divestitures. Amounts in the first, second, third and fourth quarters of 2011 include approximately $45 million, $43 million, $29 million and $19 million of net EBITDA related to business divestitures.

EP ENERGY LLC

RECONCILIATION OF CASH OPERATING COSTS AND ADJUSTED CASH OPERATING COSTS

(unaudited)

	Q1						Q2						Q3						Q4						Twelve Months Ended
	Total			Per-Unit			Total			Per-Unit			Total			Per-Unit			Total			Per-Unit			Total			Per-Unit
	($ MM)			($/Mcfe)			($ MM)			($/Mcfe)			($ MM)			($/Mcfe)			($ MM)			($/Mcfe)			($ MM)			($/Mcfe)
2012
Total operating expenses	$	422		$	5.45		$	517		$	6.69		$	324		$	4.34		$	349		$	4.83		$	1,612		$	5.34
Depreciation, depletion and amortization	(201		)	(2.59		)	(152		)	(1.98		)	(107		)	(1.43		)	(127		)	(1.76		)	(587		)	(1.95		)
Transportation costs	(25		)	(0.32		)	(34		)	(0.43		)	(29		)	(0.40		)	(30		)	(0.41		)	(118		)	(0.39		)
Exploration expense	—			—			(6		)	(0.08		)	(21		)	(0.28		)	(25		)	(0.34		)	(52		)	(0.17		)
Ceiling test charges and Impairments	(62		)	(0.80		)	(1		)	(0.01		)	—			—			—			—			(63		)	(0.20		)
Total cash operating costs and per-unit cash costs (1)	$	134		$	1.74		$	324		$	4.19		$	167		$	2.23		$	167		$	2.32		$	792		$	2.63
Transition/restructuring costs and equity based compensation expense (2)	(3		)	(0.04		)	(199		)	(2.57		)	(36		)	(0.47		)	(31		)	(0.44		)	(269		)	(0.89		)
Total adjusted cash operating costs and per-unit adjusted cash costs (1)	$	131		$	1.70		$	125		$	1.62		$	131		$	1.76		$	136		$	1.88		$	523		$	1.74

Total equivalent volumes (MMcfe) (1)				77,465						77,353						74,620						72,346						301,784

2011

Total operating expenses	$	280		$	4.11		$	285		$	4.12		$	463		$	6.56		$	336		$	4.45		$	1,364		$	4.81
Depreciation, depletion and amortization	(134		)	(1.96		)	(146		)	(2.11		)	(157		)	(2.22		)	(175		)	(2.32		)	(612		)	(2.16		)
Transportation costs	(20		)	(0.30		)	(18		)	(0.26		)	(20		)	(0.28		)	(27		)	(0.37		)	(85		)	(0.30		)
Ceiling test charges and Impairments	—			—			—			—			(158		)	(2.24		)	—			—			(158		)	(0.56		)
Total cash operating costs and per-unit cash costs (1)	$	126		$	1.85		$	121		$	1.75		$	128		$	1.82		$	134		$	1.76		$	509		$	1.79
Transition/restructuring costs and equity based compensation expense (2)	(11		)	(0.16		)	(6		)	(0.08		)	(5		)	(0.07		)	(5		)	(0.07		)	(27		)	(0.10		)
Total adjusted cash operating costs and per-unit adjusted cash costs (1)	$	115		$	1.69		$	115		$	1.67		$	123		$	1.75		$	129		$	1.69		$	482		$	1.69

Total equivalent volumes (MMcfe) (1)				68,187						69,356						70,598						75,555						283,696

(1) Excludes volumes and costs associated with equity investment in Four Star.

(2) Total amount for the twelve months ended December 31, 2012 include $221 million for transition and restructuring costs associated with the acquisition of EP Energy, $16 million of advisory fees paid to Sponsors, and $32 million of equity based compensation expense.

GLOSSARY

This contains a glossary of terms used in this Package as well as those used in other investor presentations and press releases. They are for reference only and may not be comparable to similarly titled measures used at other companies.

NON-GAAP FINANCIAL MEASURES

Historical financial results for the periods before and after the Acquisition on May 24, 2012, have been presented combined and have included a reconciliation to present them separately for the predecessor and successor in accordance with GAAP presentation. We believe that reflecting this combined information, while non-GAAP, facilitates the most meaningful comparison and understanding of our operating performance in 2012 over the same period in the prior year.

Reported EBITDAX and Adjusted EBITDAX

Reported EBITDAX is defined as net income plus interest and debt expense, income taxes, depreciation, depletion and amortization and exploration expense. Adjusted EBITDAX is defined as Reported EBITDAX, adjusted as applicable in the relevant period, for the net change in the fair value of derivatives (mark to market effects, net of cash settlements and premiums related to these derivatives), ceiling test charges or other impairments, adjustments to reflect cash distributions of the earnings from our unconsolidated affiliates, equity based compensation expenses, transition and restructuring costs we expect not to recur, losses or gains on extinguishment of debt and advisory fees paid to our sponsors.

We believe that the presentation of Reported EBITDAX and Adjusted EBITDAX is important to provide management and investors with (i) additional information to evaluate our ability to service debt, adjusting for items required or permitted in calculating covenant compliance under our debt agreements, (ii) an important supplemental indicator of the operational performance of our business, (iii) an additional criterion for evaluating our performance relative to our peers, (iv) additional information to measure our liquidity (before cash capital requirements and working capital needs) (v) and supplemental information to investors about certain material non-cash and/or other items that may not continue at the same level in the future.

Reported EBITDAX and Adjusted EBITDAX have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of our results as reported under U.S. GAAP or as an alternative to net income, operating income, net cash provided by operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP. For example, our presentation of Reported EBITDAX and Adjusted EBITDAX may not be comparable to similarly titled measures used by other companies in our industry. Furthermore, our presentation of Reported EBITDAX and Adjusted EBITDAX should not be construed as an inference that our future results will be unaffected by the items noted above or what we believe to be other unusual or non-recurring items or that in the future we may not incur expenses that are the same as or similar to some of the adjustments in this presentation.

Cash Operating Costs and Adjusted Cash Operating Costs

We monitor cash operating costs required to produce our oil and natural gas. Cash operating costs is a non-GAAP measure calculated on a per Mcfe produced basis and includes total operating expenses less depreciation, depletion and amortization expense, ceiling test and impairment charges, exploration expense, and transportation costs and costs of products. Adjusted cash operating costs is a non-GAAP measure and is defined as cash operating costs less transition and restructuring costs and equity based compensation expense. We believe cash operating costs and adjusted cash operating costs per unit are valuable measures to provide management and investors reflecting operating performance and efficiency; however, these measures may not be comparable to similarly titled measures used by other companies and are subject to several of the same limitations as analytical tools as noted in the paragraphs above.

Per-unit lease operating expenses

We use per-unit lease operating expenses as a non-GAAP measure calculated on a per Mcfe basis equal to lease operating expenses divided by total equivalent production. The sum of lease operating expenses and production taxes equals production costs. The sum of cost of products, transportation costs, production costs, DD&A, G&A, ceiling test and other impairment charges and other operating expenses equals total operating expenses. It is a valuable measure of operating performance and efficiency.

Attached files

EP Energy LLC Reports

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