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Memorial Production Partners LP Announces First Quarter 2013 Results, Updated Commodity Hedge Positions And Updated 2013 Guidance

Adjusted EBITDA. MEMP defines Adjusted EBITDA as net income or loss, plus interest expense; net operating cash flow from acquisitions and divestitures, effective date through closing date; income tax expense; depreciation, depletion and amortization; impairment of goodwill and long-lived assets; accretion of asset retirement obligations; unrealized losses on commodity derivative contracts; losses on sale of assets; unit-based compensation expenses; exploration costs; acquisition related costs; amortization of investment premium; and other non-routine items, less interest income; income tax benefit; unrealized gains on commodity derivative contracts; gains on sale of assets and other non-routine items. Adjusted EBITDA is used as a supplemental financial measure by management and external users of MEMP's financial statements, such as investors, research analysts and rating agencies, to assess: (1) MEMP's operating performance as compared to that of other companies and partnerships in MEMP's industry without regard to financing methods, capital structure or historical cost basis; (2) the ability of its assets to generate cash sufficient to pay interest, support MEMP's indebtedness and make distributions on its units; and (3) the viability of projects and the overall rates of return on alternative investment opportunities. Management also uses Adjusted EBITDA to evaluate actual cash flow available to pay distributions to MEMP's unitholders, develop existing reserves or acquire additional oil and natural gas properties. Since Adjusted EBITDA excludes some, but not all, items that affect net income or loss and because these measures may vary among other companies, the Adjusted EBITDA data presented in this press release may not be comparable to similarly titled measures of other companies. The GAAP measure most directly comparable to Adjusted EBITDA is net cash flows provided by operating activities.

Distributable Cash Flow. MEMP defines distributable cash flow as Adjusted EBITDA, less cash income taxes; cash interest expense; and estimated maintenance capital expenditures. Management compares the distributable cash flow MEMP generates to the cash distributions it expects to pay MEMP's partners. Using this metric, management computes MEMP's distribution coverage ratio. Distributable cash flow is an important non-GAAP financial measure for MEMP's limited partners since it serves as an indicator of MEMP's success in providing a cash return on investment. Specifically, this financial measure indicates to investors whether or not MEMP is generating cash flows at a level that can sustain or support an increase in its quarterly cash distributions. Distributable cash flow is also a quantitative standard used by the investment community with respect to publicly traded partnerships because the value of a partnership unit is, in part, measured by its yield, which is based on the amount of cash distributions a partnership can pay to a unitholder. The GAAP measure most directly comparable to distributable cash flow is net cash flows provided by operating activities.

Selected Operating and Financial Data (Tables)
 
Memorial Production Partners LP    
Selected Financial Data – Unaudited    
Statement of Operations Data Three Months Ended
(In thousands, except per unit data) March 31,
  2013 2012
Revenues:    
Oil & natural gas sales $ 44,035 $ 43,289
Pipeline tariff income 305 334
Other income -- 110
Total revenues $ 44,340 $ 43,733
     
Costs and expenses:    
Lease operating 13,098 13,085
Pipeline operating 470 734
Exploration costs 95 --
Production and ad valorem taxes 2,287 2,481
Depreciation, depletion, and amortization 13,155 11,130
General and administrative 4,787 4,376
Accretion of asset retirement obligations 998 943
Realized gain on commodity derivative instruments (5,694) (8,628)
Unrealized loss (gain) on commodity derivative instruments 16,356 (14,532)
Other, net -- 125
Total costs and expenses 45,552 9,714
Operating income (1,212) 34,019
Other income (expense):    
Interest expense, net (5,033) (2,509)
Amortization of investment premium -- (121)
Total other income (expense) (5,033) (2,630)
Income (loss) before income taxes (6,245) 31,389
Income tax benefit -- (183)
Net income (6,245) 31,206
Net income (loss) attributable to previous owners (1,219) 10,403
Net income (loss) attributable to noncontrolling interest (4) (91)
Net income attributable to partners $ (5,022) $ 20,894
     
Allocation of net income attributable to partners:    
Limited partners $ (5,017) $ 20,873
General partner $ (5) $ 21
     
Earnings per unit:    
Basic and diluted earnings per limited partner unit $ (0.14) $ 0.94
     
Cash distribution declared per unit $ 0.5125 $ 0.4800
     
Weighted average number of limited partner units outstanding 35,054 22,185
     
Oil and natural gas revenue:    
Oil sales $ 18,424 $ 21,121
NGL sales 8,857 6,699
Natural gas sales 16,754 15,469
Total oil and natural gas revenue $ 44,035 $  43,289
     
Production volumes:    
Oil (MBbls) 176 195
NGLs (MBbls) 270 129
Natural gas (MMcf) 5,686 5,555
Total (MMcfe) 8,363 7,500
Average net production (MMcfe/d) 92.9 82.4
     
Average sales price (excluding commodity derivatives):    
Oil (per Bbl) $ 104.94 $ 108.17
NGL (per Bbl) $ 32.74 $ 51.98
Natural gas (per Mcf) $ 2.95 $ 2.78
Total per (Mcfe) $ 5.27 $ 5.77
     
Average unit costs per Mcfe:    
Lease operating expense $ 1.57 $ 1.74
Production and ad valorem taxes $ 0.27 $ 0.33
General and administrative expenses $ 0.57 $ 0.58
Depletion, depreciation, and amortization $ 1.57 $ 1.48
     
     
Selected Financial Data – Unaudited    
Balance Sheet Data    
(In thousands)    
  March 31, 2013 December 31, 2012
Balance Sheet Data:    
Total current assets $ 43,775 $ 60,133 
Oil and natural gas properties, net 871,340 862,368
Total assets 997,601 1,006,190
Total current liabilities 28,540 20,962
Long-term debt 408,000 460,300
Total liabilities 524,431 571,226
Total partners' equity 467,913 429,703
Total non-controlling interest 5,257 5,261
         
         
Memorial Production Partners LP        
Reconciliation of Unaudited GAAP        
Financial Measures to Non-GAAP        
Financial Measures        
Adjusted EBITDA Three Months Ended Twelve Months Ended Twelve Months Ended
(In thousands) March 31, March 31, December 31,
  2013 2012 2013 2012
Calculation of Adjusted EBITDA:        
Net income $ (6,245) $ 31,206 $ 834 $ 38,285
Interest expense, net 5,033 2,509 17,567 15,043
Amortization of investment premium -- 121 73 194
Exploration costs 95 -- 649 554
Income tax expense -- 183 102 285
Impairment of proved oil and gas properties -- -- -- --
Depreciation, depletion and amortization 13,155 11,130 51,415 49,390
Accretion of asset retirement obligations 998 943 3,810 3,755
Unrealized (gains) losses on commodity derivative instruments 16,356 (14,532)  51,499  20,611
Acquisition related expenses 215 113 3,392 3,290
Unit-based compensation expense 422 248 1,597 1,423
Gain on sale of properties -- -- (426) (426)
Net operating cash flows from acquisitions, effective date through closing date -- --  5,808  5,808
Adjusted EBITDA $ 30,029 $ 31,921    $ 136,320    $ 138,212
         
Reconciliation of Net Cash from Operating Activities to Adjusted EBITDA:        
Net cash provided by operating activities $ 28,145 $ 31,722 $ 114,323 $ 117,900
Changes in working capital (1,880) (1,797) (91) (8)
Interest expense, net 5,033 2,509 17,567 15,043
Unrealized (loss) gain on interest rate swaps 538 (349) (2,311) (3,198)
Amortization of deferred financing fees (2,022) (277) (3,171) (1,426)
Exploration costs recorded as operating activities -- --  518  518
Acquisition related expenses 215 113 3,392 3,290
Current income tax expense (benefit) -- -- 285 285
Net operating cash flows from acquisitions, effective date through closing date -- --  5,808  5,808
Adjusted EBITDA $ 30,029 $ 31,921 $ 136,320 $ 138,212
         
         
Memorial Production Partners LP        
Reconciliation of Unaudited GAAP Financial    
Measures to Non-GAAP Financial Measures    
Distributable Cash Flow Three Months Ended Twelve Months Ended Twelve Months Ended
(In thousands) March 31, March 31, December 31,
  2013 2012 2013 2012
Calculation of Adjusted EBITDA:        
Net income (loss) $ (6,245) $ 31,206 $ 834 $ 38,285
Interest expense, net 5,033 2,509 17,567 15,043
Amortization of investment premium -- 121 73 194
Exploration costs 95 -- 649 554
Income tax expense -- 183 102 285
Impairment of proved oil and gas properties -- -- -- --
Depreciation, depletion and amortization 13,155 11,130 51,415 49,390
Accretion of asset retirement obligations 998 943 3,810 3,755
Unrealized (gains) losses on commodity derivative instruments 16,356 (14,532)  51,499  20,611
Acquisition related expenses 215 113 3,392 3,290
Unit-based compensation expense 422 248 1,597 1,423
Gain on sale of properties -- -- (426) (426)
Net operating cash flows from acquisitions, effective date through closing date -- --  5,808  5,808
Adjusted EBITDA  30,029 31,921 136,320 138,212
Less: Cash interest expense 3,674 957 9,065 6,348
Less: Estimated Maintenance Capital Expenditures 7,788 2,288 20,249 14,749
Less: Adjusted EBITDA prior to effective date -- 17,700 35,900 53,600
Distributable cash flow $ 18,567 $ 10,976 $ 71,106 $ 63,515
         
Cash distribution $ 22,607 $ 10,668 $ 61,791 $ 49,851
         
Distribution coverage ratio 0.82x 1.03x 1.15x 1.27x
         

2013 Adjusted EBITDA Guidance Reconciliation Table

  Memorial Production Partners LP  
Reconciliation of Unaudited GAAP Financial Measures to Non-GAAP Financial Measures
2013 Adjusted EBITDA Guidance    
(In millions) Low High
  For Year Ended For Year Ended
  December 31, 2013 December 31, 2013
   
Calculation of Adjusted EBITDA:    
Net income $ 71 $ 75
Interest expense 24 24
Net operating cash flow from acquisitions, effective date through closing date -- --
Depletion, depreciation, and amortization 59 59
Adjusted EBITDA $ 154 $ 158
     
     
Reconciliation of Net Cash From Operating Activities to Adjusted EBITDA:    
Net cash provided by operating activities $ 130 $ 134
Changes in working capital -- --
Net operating cash flow from acquisitions, effective date through closing date -- --
Interest expense 24 24
Adjusted EBITDA $ 154 $ 158
CONTACT: Memorial Production Partners LP
         Ronnetta Eaton - Manager, Investor Relations
         (713) 588-8350
         ir@memorialpp.com

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