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EV Energy Partners Announces First Quarter 2014 Results and Utica Midstream Expansion
HOUSTON, TX, May 12, 2014 /PRNewswire/ -- EV Energy Partners, L.P. (NASDAQ: EVEP) today announced results for the first quarter of 2014 and the filing of its Form 10-Q with the Securities and Exchange Commission. In addition, EVEP announced an expansion of the Utica East Ohio (“UEO”) midstream services complex in Ohio and provided an update of EVEP’s commodity hedge positions, which includes additional crude oil hedges entered into in March 2014, as presented at the end of this release.
Utica Midstream Expansion
UEO announced plans to increase its nameplate processing capacity to 1.0 billion cubic feet per day (Bcf/d), up from its current nameplate capacity of 800 million cubic feet per day (MMcf/d). UEO is a joint venture owned 49 percent by Access Midstream Partners, L.P., 30 percent by M3 Midstream LLC and 21 percent by EVEP.
Additional capacity is needed to meet new commitments from existing customers Chesapeake Energy Corporation, Total Gas & Power North America, EnerVest, Ltd., and new customer, American Energy - Utica, LLC, an affiliate of American Energy Partners, LP. UEO also will agree to provide gathering, compression and dehydration services for American Energy - Utica. The new long-term agreement between UEO and American Energy - Utica includes a 145,000-acre area of mutual interest, installation of 50 miles of gathering pipeline and compression services.
Plans for the UEO expansion include the construction of a second processing train at the Leesville, Ohio, facility and extension of an existing high-pressure pipeline from UEO’s Harrison Hub to Cardinal Gas Services’ (CGS) Archer Compression Facility in Harrison County. Additional services also are planned at Harrison Hub, including downstream liquids interconnects and expanded propane and butane storage.
First Quarter 2014 Results
Adjusted EBITDAX for the first quarter of 2014 was $56.1 million, a 15 percent increase over the first quarter of 2013, and a 4 percent increase over the fourth quarter of 2013. Distributable Cash Flow for the first quarter of 2014 was $28.6 million, a 31 percent increase over the first quarter of 2013 and a 7 percent increase over the fourth quarter of 2013. The increases in Adjusted EBITDAX and Distributable Cash Flow, which are described in the attached table under “Non-GAAP Measures,” are primarily due to increased production and increased EBITDAX from midstream investments.
Production for the first quarter of 2014 was 10.8 Bcf of natural gas, 265 MBbls of oil and 550 MBbls of natural gas liquids, or 174.7 MMcfe/day. This represents a 6 percent increase over first quarter 2013 production of 165.2 MMcfe/d and a 2 percent increase over fourth quarter 2013 production of 170.5 MMcfe/day. The increases in production are primarily due to drilling activity and acquisitions completed during the fourth quarter of 2013.
EVEP reported a net loss of $6.3 million, or $(0.14) per basic and diluted weighted average limited partner unit outstanding, for the first quarter of 2014. Included in net loss were the following items:
| · | $16.8 million of non-cash losses on commodity and interest rate derivatives, |
| · | $4.5 million of non-cash costs contained in general and administrative expenses, |
| · | $2.3 million of payroll tax related cash costs contained in general and administrative expenses associated with the annual vesting of phantom units during the first quarter which will not be incurred during the second through fourth quarters, |
| · | $1.5 million gain on the sale of oil and natural gas properties, and |
| · | $0.3 million of dry hole and exploration costs. |
For the fourth quarter of 2013, EVEP reported a net loss of $50.2 million, or $(1.06) per basic and diluted weighted average limited partner unit outstanding. 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.
"We are very pleased with our operational performance and results for the first quarter of 2014, as well as the continued ramp-up in our Utica midstream operations and planned future expansion at the UEO midstream services complex," said Mark Houser, President and CEO.
Quarterly Report on Form 10-Q
EVEP’s financial statements and related footnotes are available in the first quarter 2014 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 May 5, 2014, EV Energy Partners, L.P. will host an investor conference call on May 12, 2014, at 9 a.m. Eastern Time (8 a.m. Central). Investors interested in participating in the call may dial 1-877-941-6009 (quote conference ID 4682361) 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.
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)
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 and expansion plans, 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 (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 March 31, | ||||||||
| 2014 | 2013 | |||||||
| Production data: | ||||||||
| Oil (MBbls) | 265 | 263 | ||||||
| Natural gas liquids (MBbls) | 550 | 503 | ||||||
| Natural gas (MMcf) | 10,836 | 10,267 | ||||||
| Net production (MMcfe) | 15,725 | 14,864 | ||||||
| Average sales price per unit: (1) | ||||||||
| Oil (Bbl) | $ | 94.21 | $ | 93.47 | ||||
| Natural gas liquids (Bbl) | 33.49 | 30.38 | ||||||
| Natural gas (Mcf) | 4.68 | 3.20 | ||||||
| Mcfe | 5.98 | 4.89 | ||||||
| Average unit cost per Mcfe: | ||||||||
| Production costs: | ||||||||
| Lease operating expenses | $ | 1.61 | $ | 1.76 | ||||
| Production taxes | 0.22 | 0.20 | ||||||
| Total | 1.83 | 1.96 | ||||||
| Asset retirement obligations accretion expense | 0.08 | 0.09 | ||||||
| Depreciation, depletion and amortization | 1.67 | 2.07 | ||||||
| General and administrative expenses | 0.78 | 0.85 | ||||||
| (1) Prior to ($5.3) million and $12.3 million of net hedge (losses) gains and settlements on commodity derivatives for the three months ended March 31, 2014 and March 31, 2013, respectively. | ||||||||
| Condensed Consolidated Balance Sheets | ||||||||
| (In $ thousands, except number of units) | ||||||||
| (Unaudited) | ||||||||
| March 31, 2014 | December 31, 2013 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 9,515 | $ | 11,698 | ||||
| Accounts receivable: | ||||||||
| Oil, natural gas and natural gas liquids revenues | 48,350 | 37,661 | ||||||
| Related party | 8,166 | 2,873 | ||||||
| Other | 193 | 1,111 | ||||||
| Derivative asset | 5,640 | 13,543 | ||||||
| Other current assets | 5,789 | 6,916 | ||||||
| Assets held for sale | - | 8,012 | ||||||
| Total current assets | 77,653 | 81,814 | ||||||
| Oil and natural gas properties, net of accumulated | ||||||||
| depreciation, depletion and amortization; March 31, | ||||||||
| 2014, $595,947; December 31, 2013, $569,770 | 1,825,432 | 1,829,062 | ||||||
| Other property, net of accumulated depreciation | ||||||||
| and amortization; March 31, 2014, $796; | ||||||||
| December 31, 2013, $754 | 1,223 | 1,259 | ||||||
| Long–term derivative asset | 23,822 | 29,088 | ||||||
| Investments in unconsolidated affiliates | 301,221 | 254,978 | ||||||
| Other assets | 7,319 | 8,782 | ||||||
| Total assets | $ | 2,236,670 | $ | 2,204,983 | ||||
| LIABILITIES AND OWNERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued liabilities | $ | 49,679 | $ | 46,876 | ||||
| Derivative liability | 7,016 | 3,348 | ||||||
| Liabilities related to assets held for sale | - | 2,155 | ||||||
| Total current liabilities | 56,695 | 52,379 | ||||||
| Asset retirement obligations | 101,061 | 99,133 | ||||||
| Long–term debt | 1,046,319 | 980,297 | ||||||
| Other long–term liabilities | 959 | 1,241 | ||||||
| Commitments and contingencies | ||||||||
| Owners’ equity: | ||||||||
| Common unitholders - 48,572,019 units and | ||||||||
| 48,349,080 units issued and outstanding as of | ||||||||
| March 31, 2014 and December 31, 2013, | ||||||||
| respectively | 1,044,066 | 1,083,718 | ||||||
| General partner interest | (12,430 | ) | (11,785 | ) | ||||
| Total owners' equity | 1,031,636 | 1,071,933 | ||||||
| Total liabilities and owners' equity | $ | 2,236,670 | $ | 2,204,983 | ||||
| Condensed Consolidated Statements of Operations | ||||||||
| (In $ thousands, except per unit data) | ||||||||
| (Unaudited) | ||||||||
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2014 | 2013 | |||||||
| Revenues: | ||||||||
| Oil, natural gas and natural gas liquids revenues | $ | 94,074 | $ | 72,669 | ||||
| Transportation and marketing–related revenues | 1,265 | 1,033 | ||||||
| Total revenues | 95,339 | 73,702 | ||||||
| Operating costs and expenses: | ||||||||
| Lease operating expenses | 25,395 | 26,094 | ||||||
| Cost of purchased natural gas | 970 | 743 | ||||||
| Dry hole and exploration costs | 318 | 417 | ||||||
| Production taxes | 3,523 | 2,916 | ||||||
| Asset retirement obligations accretion expense | 1,187 | 1,354 | ||||||
| Depreciation, depletion and amortization | 26,212 | 30,833 | ||||||
| General and administrative expenses | 12,298 | 12,622 | ||||||
| Impairment of oil and natural gas properties | 252 | 5,169 | ||||||
| Gain on sales of oil and natural gas properties | (1,484 | ) | - | |||||
| Total operating costs and expenses | 68,671 | 80,148 | ||||||
| Operating income (loss) | 26,668 | (6,446 | ) | |||||
| Other (expense) income, net: | ||||||||
| Loss on derivatives, net | (22,995 | ) | (27,514 | ) | ||||
| Interest expense | (12,072 | ) | (12,829 | ) | ||||
| Other income, net | 54 | 187 | ||||||
| Total other expense, net | (35,013 | ) | (40,156 | ) | ||||
| Loss before income taxes and equity in income of unconsolidated affiliates | (8,345 | ) | (46,602 | ) | ||||
| Income taxes | 255 | (177 | ) | |||||
| Loss before equity in income of unconsolidated affiliates | (8,090 | ) | (46,779 | ) | ||||
| Equity in income of unconsolidated affiliates | 1,837 | 198 | ||||||
| Net loss | $ | (6,253 | ) | $ | (46,581 | ) | ||
| Net loss per limited partner unit: | ||||||||
| Basic | $ | (0.14 | ) | $ | (1.08 | ) | ||
| Diluted | $ | (0.14 | ) | $ | (1.08 | ) | ||
| Weighted average limited partner units outstanding: | ||||||||
| Basic | 48,537 | 42,556 | ||||||
| Diluted | 48,537 | 42,556 | ||||||
| Distributions declared per unit | $ | 0.772 | $ | 0.768 | ||||
| Condensed Consolidated Statements of Cash Flows | ||||||||
| (In $ thousands) | ||||||||
| (Unaudited) | Three Months Ended March 31, | |||||||
| 2014 | 2013 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | (6,253 | ) | $ | (46,581 | ) | ||
| Adjustments to reconcile net loss to net cash flows provided by operating activities: | ||||||||
| Asset retirement obligations accretion expense | 1,187 | 1,354 | ||||||
| Depreciation, depletion and amortization | 26,212 | 30,833 | ||||||
| Equity–based compensation cost | 4,503 | 4,485 | ||||||
| Impairment of oil and natural gas properties | 252 | 5,169 | ||||||
| Gain on sales of oil and natural gas properties | (1,484 | ) | - | |||||
| Loss on derivatives, net | 22,995 | 27,514 | ||||||
| Cash settlements of matured derivative contracts | (6,158 | ) | 11,439 | |||||
| Equity in income of unconsolidated affiliates | (1,837 | ) | (198 | ) | ||||
| Distributions from unconsolidated affiliates | - | 48 | ||||||
| Other | 176 | 644 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (15,064 | ) | (4,527 | ) | ||||
| Other current assets | (931 | ) | (27 | ) | ||||
| Accounts payable and accrued liabilities | 9,154 | 11,351 | ||||||
| Other, net | (120 | ) | (119 | ) | ||||
| Net cash flows provided by operating activities | 32,632 | 41,385 | ||||||
| Cash flows from investing activities: | ||||||||
| Final settlement of purchase price of oil and natural gas properties | - | 7,998 | ||||||
| Additions to oil and natural gas properties | (23,145 | ) | (21,136 | ) | ||||
| Prepaid drilling costs | (2,032 | ) | - | |||||
| Proceeds from sale of oil and natural gas properties | 7,315 | - | ||||||
| Investments in unconsolidated affiliates | (44,424 | ) | (68,345 | ) | ||||
| Distributions from unconsolidated affiliates | 18 | 23 | ||||||
| Net cash flows used in investing activities | (62,268 | ) | (81,460 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Long-term debt borrowings | 66,000 | 85,000 | ||||||
| Contributions from general partner | 154 | 334 | ||||||
| Distributions paid | (38,696 | ) | (33,838 | ) | ||||
| Other | (5 | ) | - | |||||
| Net cash flows provided by financing activities | 27,453 | 51,496 | ||||||
| (Decrease) increase in cash and cash equivalents | (2,183 | ) | 11,421 | |||||
| Cash and cash equivalents – beginning of period | 11,698 | 7,486 | ||||||
| Cash and cash equivalents – end of period | $ | 9,515 | $ | 18,907 | ||||
Non-GAAP Measures
We define Adjusted EBITDAX as net loss plus equity in income from unconsolidated affiliates, EBITDAX from unconsolidated affiliates, income taxes, interest expense, net, cash settlements of matured interest rate swaps, depreciation, depletion and amortization, asset retirement obligations accretion expense, 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, and gain on sales of oil and natural gas properties. 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 to Adjusted EBITDAX and Distributable Cash Flow | ||||||||
| (In $ thousands) | ||||||||
| (Unaudited) | ||||||||
| Three Months Ended March 31, | ||||||||
| 2014 | 2013 | |||||||
| Net loss | $ | (6,253 | ) | $ | (46,581 | ) | ||
| Add: | ||||||||
| Equity in income from unconsolidated affiliates | (1,837 | ) | (198 | ) | ||||
| EBITDAX from unconsolidated affiliates | 3,634 | 302 | ||||||
| Income taxes | (255 | ) | 177 | |||||
| Interest expense, net | 12,072 | 12,828 | ||||||
| Cash settlements of matured interest rate swaps | 877 | 865 | ||||||
| Depreciation, depletion and amortization | 26,212 | 30,833 | ||||||
| Asset retirement obligations accretion expense | 1,187 | 1,354 | ||||||
| Loss on derivatives, net | 22,995 | 27,514 | ||||||
| Cash settlements of matured derivative contracts | (6,158 | ) | 11,439 | |||||
| Non-cash equity compensation expense | 4,503 | 4,485 | ||||||
| Impairment of oil and natural gas properties | 252 | 5,169 | ||||||
| Non-cash inventory write down expense | 54 | - | ||||||
| Dry hole and exploration costs | 318 | 417 | ||||||
| Gain on sales of oil and natural gas properties | (1,484 | ) | - | |||||
| Adjusted EBITDAX | $ | 56,116 | $ | 48,604 | ||||
| Less: | ||||||||
| Cash income taxes | 27 | 44 | ||||||
| Cash interest expense, net | 11,467 | 12,226 | ||||||
| Realized losses on interest rate swaps | 877 | 865 | ||||||
| Estimated maintenance capital expenditures (1) | 15,176 | 13,581 | ||||||
| Distributable Cash Flow | $ | 28,570 | $ | 21,888 | ||||
| (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. |
| Summary of New Hedge Positions (since February 28, 2014) | ||||||||||||
| Period | Index | Swap Volume | Swap Price | |||||||||
| Crude | (MmmBtus/Mbbls) | |||||||||||
| 2015 | WTI | 365.0 | $ | 88.48 | ||||||||
| Hedge Summary Table (as of May 9, 2014) | ||||||||||||
| Swap | Swap | |||||||||||
| Period | Index | Volume | Price | |||||||||
| Natural Gas | (MmmBtus/Mbbls) | |||||||||||
| 2Q 2014 | NYMEX | 9,900.8 | $ | 4.72 | ||||||||
| 3Q 2014 | NYMEX | 10,009.6 | $ | 4.70 | ||||||||
| 4Q 2014 | NYMEX | 10,009.6 | $ | 4.66 | ||||||||
| 2015 | NYMEX | 36,317.5 | $ | 4.94 | ||||||||
| 2016 | NYMEX | 10,980.0 | $ | 4.17 | ||||||||
| Crude | ||||||||||||
| 2Q 2014 | WTI | 382.2 | $ | 89.78 | ||||||||
| 3Q 2014 | WTI | 380.3 | $ | 91.50 | ||||||||
| 4Q 2014 | WTI | 377.2 | $ | 93.73 | ||||||||
| 2015 | WTI | 1,095.0 | $ | 89.56 | ||||||||
| Interest Rate Swap Agreements | Notional Amount | Fixed Rate | ||||||||||
| (in $ mill) | ||||||||||||
| April 2014 - July 2015 | 110.0 | 3.315 | % | |||||||||
EV Energy Partners, L.P., Houston
Michael E. Mercer
713-651-1144
http://www.evenergypartners.com