EV Energy Partners Announces Third Quarter 2016 Results And Additional Commodity Hedges

HOUSTON, Nov. 09, 2016 (GLOBE NEWSWIRE) -- EV Energy Partners, L.P. (NASDAQ:EVEP) today announced results for the third quarter of 2016 and the filing of its Form 10-Q with the Securities and Exchange Commission.  In addition, EVEP has entered into additional commodity hedge positions.

Third Quarter 2016 Results

For the third quarter 2016, EVEP reported a net loss of $19.2 million, or $(0.38) per basic and diluted weighted average limited partner unit outstanding compared to a net loss of $29.0 million, or $(0.58) per basic and diluted weighted average limited partner unit outstanding for the second quarter of 2016.  Included in net loss for the third quarter of 2016 were the following items:
  • $1.9 million of non-cash costs contained in general and administrative expenses,
  • $1.6 million of non-cash losses on commodity and interest rate derivatives,
  • $1.4 million income tax refund associated with one of our partnerships,
  • $0.7 million of impairment charges related to the write down of certain oil and natural gas properties primarily due to a change in development plans, and
  • $0.3 million of dry hole and exploration costs.

For the third quarter of 2015, EVEP reported a net loss of $9.8 million, or $(0.20) per basic and diluted weighted average limited partner unit outstanding.

Production for the third quarter of 2016 was 12.5 Bcf of natural gas, 308 Mbbls of oil and 597 Mbbls of natural gas liquids, or 195.3 million cubic feet equivalent per day (Mmcfe/day).  This represents a three percent decrease from second quarter of 2016 production of 201.5 Mmcfe/day and a 27 percent increase over the third quarter of 2015 production of 153.8 Mmcfe/day.  The decrease from the second quarter of 2016 was due to the reduction in drilling activity, and the increase over the third quarter of 2015 was primarily due to the addition of producing properties acquired on October 1, 2015.

Adjusted EBITDAX for the third quarter of 2016 was $26.0 million, a two percent decrease from the second quarter of 2016 Adjusted EBITDAX of $26.5 million and a 41 percent decrease from the third quarter of 2015 Adjusted EBITDAX of $43.8 million.  Distributable Cash Flow for the third quarter of 2016 was $6.4 million compared to $5.5 million for the second quarter of 2016 and $20.1 million for the third quarter of 2015.  The increase in Distributable Cash Flow from the second quarter of 2016 was primarily attributable to a tax refund for one of the partnerships we operate.  The decreases in Adjusted EBITDAX and Distributable Cash Flow from the third quarter of 2015 were primarily attributable to lower realized hedge gains and lower realized oil prices, partially offset by the addition of producing properties acquired on October 1, 2015 and higher realized natural gas and natural gas liquids prices.  Adjusted EBITDAX and Distributable Cash Flow are Non-GAAP financial measures and are described in the attached table under "Non-GAAP Measures."

"Reducing leverage and operating costs continues to be our focus, and we are pleased with our progress this year.  As announced last week, we completed our fall borrowing base redetermination and appreciate the continued support from our bank group in reaffirming our borrowing base of $450 million.  We currently have $281 million drawn on our credit facility and have over $177 million of liquidity between balance sheet cash and available borrowing base capacity.  We believe this is a sufficient amount of capital to meet all of our near term needs," said Michael Mercer, President and CEO.

Additional Commodity Hedges

EVEP has recently entered into the following additional commodity hedges since its press release on August 9, 2016.  EVEP's current hedge position, including these new hedges, is presented at the end of this press release under Total Hedge Position.
                                 
            Swap     Swap     Collar     Collar   Collar  
  Period   Index     Volume     Price     Volume     Floor   Ceiling  
  Crude (Mbbls)                              
  Oct - Dec 2016   WTI   138   $ 49.90   138   $ 45.00   $ 54.05  
  2017   WTI   365   $ 52.85                  
                                 

Quarterly Report on Form 10-Q

EVEP's financial statements and related footnotes are available on our third quarter 2016 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 October 20, 2016, EV Energy Partners, L.P. will host an investor conference call on November 9, 2016, at 9 a.m. Eastern Time (8 a.m. Central).  Investors interested in participating in the call may dial 1-888-708-5690 (quote conference ID 6002278) 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://www.evenergypartners.com. 

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)

Forward Looking Statements

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, future plans, our reserve quantities and the present value of our reserves, estimates of maintenance capital and production amounts 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 EVEP. These statements are based on certain assumptions made by EVEP based on its experience and perception of historical trends, current conditions, expected future developments and other factors it believes are appropriate in the circumstances.  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, exploration and development activities, the availability and cost of financing, the returns on our capital investments and acquisition strategies, the availability of sufficient cash flow to 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 EVEP with the Securities and Exchange Commission.  You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release.  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 EndedSeptember 30,   Nine Months EndedSeptember 30,  
        2016       2015       2016       2015    
  Production data:                  
  Oil (Mbbls)       308         212         938         690    
  Natural gas liquids (Mbbls)       597         526         1,784         1,671    
  Natural gas (Mmcf)       12,535         9,720         38,304         30,326    
  Net production (Mmcfe)     17,965       14,147       54,637       44,491    
  Average sales price per unit: (1)                  
  Oil (Bbl)   $ 40.40     $ 41.27     $ 36.82     $ 46.19    
  Natural gas liquids (Bbl)     14.23       11.93       14.09       14.11    
  Natural gas (Mcf)     2.38       2.32       1.86       2.38    
  Mcfe     2.82       2.66       2.39       2.87    
  Average unit cost per Mcfe:                  
  Production costs:                  
  Lease operating expenses   $ 1.42     $ 1.59     $ 1.47     $ 1.57    
  Production taxes     0.12       0.10       0.10       0.11    
  Total     1.54       1.69       1.57       1.68    
  Depreciation, depletion and amortization     1.76       1.66       1.67       1.68    
  General and administrative expenses     0.47       0.61       0.46       0.66    
                     
  (1) Prior to $10.1 million and $35.9 million of net hedge gains on settlements of commodityderivatives for the three months ended September 30, 2016 and September 30, 2015,respectively, and $49.1 million and $100.1 million for the nine months ended September 30,2016 and September 30, 2015, respectively.  
                     

Condensed Consolidated Balance Sheets          
(In $ thousands, except number of units)          
(Unaudited)          
    September 30, 2016   December 31, 2015  
ASSETS          
           
Current assets:          
Cash and cash equivalents   $ 5,981     $ 20,415    
Accounts receivable:          
Oil, natural gas and natural gas liquids revenues     37,803       24,285    
Other     2,216       7,137    
Derivative asset     10,043       60,662    
Other current assets     3,226       3,057    
Total current assets     59,269       115,556    
           
Oil and natural gas properties, net of accumulated           
depreciation, depletion and amortization; September 30,          
 2016, $1,062,990; December 31, 2015, $971,499     1,701,279       1,790,455    
Other property, net of accumulated depreciation           
and amortization; September 30, 2016, $994;           
December 31, 2015, $970     1,010       1,019    
Long-term derivative asset     464       10,741    
Other assets     4,354       5,831    
Total assets   $ 1,766,376     $ 1,923,602    
           
           
LIABILITIES AND OWNERS' EQUITY          
           
Current liabilities:          
Accounts payable and accrued liabilities:          
Third party   $ 40,278     $ 43,135    
Related party     5,224         5,952    
Income taxes       -         11,657    
Derivative liability     2,362         -    
Total current liabilities     47,864       60,744    
           
Asset retirement obligations     178,058       174,003    
Long-term debt, net     613,799       688,614    
Long-term derivative liability     3,056         -    
Other long-term liabilities     1,278       1,682    
           
Commitments and contingencies          
           
Owners' equity:          
Common unitholders - 49,055,214 units and           
48,871,399 units issued and outstanding as of           
September 30, 2016 and December 31, 2015, respectively     936,793       1,011,509    
General partner interest     (14,472 )     (12,950 )  
Total owners' equity     922,321       998,559    
Total liabilities and owners' equity   $ 1,766,376     $ 1,923,602    
           

Condensed Consolidated Statements of Operations                  
(In $ thousands, except per unit data)                  
(Unaudited)                  
    Three Months Ended September 30,   Nine Months Ended September 30,  
       
      2016       2015       2016       2015    
Revenues:                  
Oil, natural gas and natural gas liquids revenues   $ 50,750     $ 37,587     $ 130,854     $ 127,734    
Transportation and marketing-related revenues     622       734       1,599       2,285    
Total revenues     51,372       38,321       132,453       130,019    
                   
Operating costs and expenses:                   
Lease operating expenses     25,571       22,509       80,532       69,833    
Cost of purchased natural gas     435       510       1,076       1,588    
Dry hole and exploration costs     294       1,034       1,195       1,720    
Production taxes     2,126       1,357       5,501       4,708    
Accretion expense on obligations     2,057       1,134       6,146       3,548    
Depreciation, depletion and amortization     31,639       23,485       91,492       74,718    
General and administrative expenses     8,514       8,609       24,862       28,968    
Impairment of oil and natural gas properties     687       15,787       3,371       122,244    
Gain on settlement of contract       -         -       (3,185 )       -    
Gain on sales of oil and natural gas properties       -         -         -       (531 )  
Total operating costs and expenses     71,323       74,425       210,990       306,796    
                   
Operating loss     (19,951 )     (36,104 )     (78,537 )     (176,777 )  
                   
Other income (expense), net:                  
Gain (loss) on derivatives, net     8,559       37,042       (17,192 )     51,406    
Interest expense     (9,889 )     (11,043 )     (32,554 )     (38,279 )  
Gain on early extinguishment of debt       -         -       47,695         -    
Other income, net       622       206         1,586       51    
Total other income (expense), net      (708 )     26,205       (465 )     13,178    
                   
Loss from continuing operations before income taxes     (20,659 )     (9,899 )     (79,002 )     (163,599 )  
Income taxes     1,429         61       1,779       684    
Loss from continuing operations     (19,230 )     (9,838 )     (77,223 )     (162,915 )  
Income from discontinued operations       -         -         -         255,512    
Net income (loss)   $ (19,230 )   $ (9,838 )   $ (77,223 )   $ 92,597    
                   
Basic and diluted earnings per limited partner unit:                  
Loss from continuing operations   $ (0.38 )   $ (0.20 )   $ (1.54 )   $ (3.29 )  
Income from discontinued operations       -         -         -       5.12    
Net income (loss)   $ (0.38 )   $ (0.20 )   $ (1.54 )   $ 1.83    
                   
Weighted average limited partner units outstanding (basic and diluted)     49,055       48,871       49,046       48,846    
                   
Distributions declared per unit   $   -     $ 0.50     $   -     $ 1.50    
                   

Condensed Consolidated Statements of Cash Flows          
(In $ thousands)          
(Unaudited)   Nine Months Ended September 30,  
     
      2016       2015    
Cash flows from operating activities:          
Net income (loss)   $ (77,223 )   $ 92,597    
Adjustments to reconcile net income (loss) to net cash flows provided by operating activities:          
Income from discontinued operations       -       (255,512 )  
Amortization of volumetric production payment liability     (3,070 )       -    
Accretion expense on obligations     6,146         3,548    
Depreciation, depletion and amortization     91,492       74,718    
Equity-based compensation cost     4,853       9,635    
Impairment of oil and natural gas properties     3,371       122,244    
Gain on sales of oil and natural gas properties       -       (531 )  
Loss (gain) on derivatives, net     17,192       (51,406 )  
Cash settlements of matured derivative contracts     46,299       98,368    
Gain on early extinguishment of debt     (47,695 )       -    
Other     1,822       288    
Changes in operating assets and liabilities:          
Accounts receivable     (8,597 )     13,864    
Other current assets     (291 )     894    
Accounts payable and accrued liabilities     4,158       10,610    
Income taxes     (11,657 )       -    
Other, net     (277 )       (120 )  
Net cash flows provided by operating activities from continuing operations     26,523       119,197    
Net cash flows used in operating activities from discontinued operations       -       (372 )  
Net cash flows provided by operating activities     26,523       118,825    
           
Cash flows from investing activities:          
Additions to oil and natural gas properties      (14,266 )     (58,687 )  
Deposit on acquisition of oil and natural gas properties       -       (25,900 )  
Proceeds from sale of oil and natural gas properties     2,420       1,439    
Cash settlements from acquired derivative contracts     2,823         -    
Restricted cash       -       33,768    
Other     33       48    
Net cash flows used in investing activities from continuing operations     (8,990 )     (49,332 )  
Net cash flows provided by investing activities from discontinued operations       -       572,160    
Net cash flows (used in) provided by investing activities     (8,990 )     522,828    
           
Cash flows from financing activities:          
Repayment of long-term debt borrowings     (41,000 )     (561,000 )  
Long-term debt borrowings     48,000       30,000    
Redemption of Senior Notes due 2019     (34,978 )       -    
Loan costs incurred       (121 )     (3,400 )  
Contributions from general partner       -       91    
Distributions paid     (3,868 )     (75,738 )  
Net cash flows used in financing activities     (31,967 )     (610,047 )  
           
Increase (decrease) in cash and cash equivalents     (14,434 )     31,606    
Cash and cash equivalents - beginning of period     20,415       8,255    
Cash and cash equivalents - end of period   $ 5,981     $ 39,861    
           

Non-GAAP Measures

We define Adjusted EBITDAX as net income (loss) plus income from discontinued operations, EBITDAX from discontinued operations, income taxes, interest expense, net, cash settlements of matured interest rate swaps, depreciation, depletion and amortization, accretion expense on obligations, amortization of volumetric production payment (VPP), (gain) loss on derivatives, net, cash settlements of matured derivative contracts, non-cash equity-based compensation, impairment of oil and natural gas properties,  non-cash inventory write down expense, dry hole and exploration costs, gain on sales of oil and natural gas properties, gain on settlement of contract, gain on early extinguishment of debt, and (gain) loss on sale of investment, contained in Other income, net.  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 quarterly distributions.  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 Income (Loss) to Adjusted EBITDAX and Distributable Cash Flow          
(In $ thousands)                      
(Unaudited)                      
    Three Months Ended   Nine Months Ended  
       
    Sep 30, 2016   Sep 30, 2015   Jun 30, 2016   Sep 30, 2016   Sep 30, 2015  
                       
Net income (loss)   $ (19,230 )   $ (9,838 )   $ (28,993 )   $ (77,223 )   $ 92,597    
                       
Add:                      
Income from discontinued operations       -         -         -         -       (255,512 )  
EBITDAX from discontinued operations       -         -         -         -       15,941    
Income taxes     (1,429 )     (61 )     (191 )     (1,779 )     (684 )  
Interest expense, net     9,889       11,032       11,840       32,544       38,264    
Cash settlements of matured interest rate swaps       -         -         -         -       1,736    
Depreciation, depletion and amortization     31,639       23,485       31,648       91,492       74,718    
Accretion expense on obligations     2,057       1,134       2,049       6,146       3,548    
Amortization of VPP     (1,027 )       -       (1,023 )     (3,070 )       -    
(Gain) loss on derivatives, net     (8,559 )     (37,042 )     35,585       17,192       (51,406 )  
Cash settlements of matured derivative contracts     10,117       35,891       19,180       49,122       98,368    
Non-cash equity-based compensation     1,889       2,341       1,364       4,853       9,635    
Impairment of oil and natural gas properties     687       15,787       1,997       3,371       122,244    
Non-cash inventory write down expense       -         -         -       123       149    
Dry hole and exploration costs     294       1,034       771       1,195       1,720    
Gain on sales of oil and natural gas properties       -         -         -         -       (531 )  
Gain on settlement of contract       -         -         -       (3,185 )       -    
Gain on early extinguishment of debt       -         -         (47,695 )     (47,695 )       -    
(Gain) loss on sale of investment, contained in Other income, net       (309 )       -         -         (309 )     358    
Adjusted EBITDAX   $ 26,018     $ 43,763     $ 26,532     $ 72,777     $ 151,145    
                       
Less:                      
Cash income taxes     (933 )       -         -       (933 )       -    
Cash interest expense, net     9,566       10,631       9,984       29,950       37,240    
Realized losses on interest rate swaps       -         -         -         -       1,736    
Estimated maintenance capital expenditures (1)     11,000       13,000       11,000       33,000       39,797    
Distributable Cash Flow   $ 6,385     $ 20,132     $ 5,548     $ 10,760     $ 72,372    
                       
(1) Estimated maintenance capital expenditures are those expenditures estimated to be necessary to maintain the production levels ofour oil and gas properties over the long term and the operating capacity of our other assets over the long term.  
                       

Total Hedge Position

EV Energy Partners' total hedge position as of November 9, 2016, including the recent additional hedges mentioned above, is as follows:
                             
        Swap       Swap       Collar       Collar     Collar  
  Period Index   Volume       Price       Volume       Floor     Ceiling  
  Natural Gas (Mmmbtus)                          
  Oct - Dec 2016 NYMEX 11,316   $ 3.42                  
  2017 NYMEX 32,850   $ 3.07   10,950   $ 2.75   $ 3.27  
                             
  Crude (Mbbls)                          
  Oct - Dec 2016 WTI 230   $ 65.99   138   $ 45.00   $ 54.05  
  2017 WTI 365   $ 52.85                  
                             
  Ethane (Mbbls)                          
  Oct - Dec 2016 Mt Belvieu 0.9   $ 9.14                  
                             
        Notional Amount     Fixed Rate                  
  Interest Rate Swap Agreements   ($ mill)                        
  Jan 2017 - Dec 2017   100     1.039 %                  
  Jan 2018 - Sep 2020   100     1.795 %                  

 

 

EV Energy Partners, L.P., HoustonNicholas Bobrowski713-651-1144http://www.evenergypartners.com

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