Review of First Quarter 2013 (1)
- Average daily production increased 13% to 92.9 MMcfe for the first quarter of 2013, compared to 82.4 MMcfe for the first quarter of 2012. The increase was primarily attributable to third party acquisitions that closed in May and September 2012 and were not included in first quarter 2012 results, partially offset by temporary downtime on MEMP's California assets for 26 days in January to allow for maintenance and inspection services.
- Crude oil, natural gas and NGLs sales, excluding commodity derivatives settlements, were $44.0 million in the first quarter of 2013, compared to $43.3 million in the first quarter of 2012. On a Mcfe basis, crude oil, natural gas and NGLs represented 13%, 68% and 19%, respectively, of sales volumes. On a revenue basis, crude oil, natural gas and NGLs sales represented 42%, 38% and 20%, respectively, of total oil and natural gas revenues.
- Average realized prices, excluding commodity derivatives settlements:
|Three Months Ended March 31,||1Q 2013||1Q 2012||% Increase/(Decrease)|
|Oil (per Bbl)||$ 104.94||$ 108.17||(3)|
|Natural gas (per Mcf)||$ 2.95||$ 2.78||6|
|NGL (per Bbl)||$ 32.74||$ 51.98||(37)|
|Total per (Mcfe)||$ 5.27||$ 5.77||(9)|
- Averaged realized prices, including commodity derivatives settlements, were $5.95 per Mcfe in the first quarter of 2013, compared to $6.92 per Mcfe in the first quarter of 2012.
- Adjusted EBITDA was $30.0 million for the first quarter of 2013, compared to $31.9 million for the first quarter of 2012. The decrease was due to temporary downtime on MEMP's California assets for 26 days in January to allow for maintenance and inspection services, which was offset by increased production volumes from MEMP's third party acquisitions.
- Distributable cash flow (2) for the first quarter of 2013 was $18.6 million, or $0.53 per weighted-average unit, providing a coverage ratio of 0.82x. The lower DCF coverage was due to temporary downtime on MEMP's California assets for 26 days in January to allow for maintenance and inspection services.
- Total lease operating expenses were $1.57 per Mcfe in the first quarter of 2013, compared to $1.74 per Mcfe in the first quarter of 2012.
- General and administrative expenses ("G&A") were $4.8 million, or $0.57 per Mcfe, for the first quarter of 2013 compared to $4.4 million, or $0.58 per Mcfe, for the first quarter of 2012. The $4.8 million included $0.4 million and $0.2 million, respectively, of non-cash unit-based compensation expense and acquisition related costs.
- Cash settlements received on commodity derivatives during the first quarter of 2013 were $5.7 million, or $0.68 per Mcfe, compared to $8.6 million received during the first quarter of 2012, with the decrease attributable to higher market prices for natural gas contributing to lower hedge settlements. Total hedged production in the first quarter of 2013 was 6.9 Bcfe or 82% of first quarter production of 8.4 Bcfe, at an average hedge price of $6.96 per Mcfe. MEMP reported an unrealized loss of $16.4 million on its commodity derivatives portfolio in the first quarter of 2013 compared to an unrealized gain of $14.5 million in the first quarter of 2012.
- Net interest expense was $5.0 million during the first quarter of 2013 including $0.5 million of unrealized gains on interest rate swaps and $2.0 million of non-cash amortization and write-offs of deferred financing fees.
- Total capital expenditures for the first quarter of 2013 were $22.1 million. Total maintenance capital expenditures for the first quarter were $7.8 million.
During the three months ended March 31, 2013, MEMP acquired certain oil and natural gas producing properties in East Texas and North Louisiana from Memorial Resource Development LLC for approximately $200.0 million. Acquisition highlights include:
- December 2012 average daily production of approximately 21 MMcfe (66% natural gas and 34% liquids);
- Third-party estimated proved reserves of approximately 162 Bcfe at the time of acquisition;
- Proved reserve to production ratio of 21 years; and
- High operating margins and moderate capital expenditure requirements.
Hedging UpdateConsistent with its hedging policy, MEMP strengthened its overall hedge program and executed additional hedges on a portion of its expected oil and natural gas volumes through 2018. MEMP has entered into natural gas, crude oil and NGL derivatives contracts covering the period from April 1, 2013 through December 2018, consisting of swaps and collars. MEMP's hedging policy is designed to reduce the impact to cash flows from commodity price and interest rate volatility.
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