HOUSTON, TX — (Marketwire) — 03/01/13 — EV Energy Partners, L.P. (NASDAQ: EVEP) today announced results for the fourth quarter and full year 2012 and the filing of its Form 10-K with the Securities and Exchange Commission. In addition, EVEP announced its 2012 year end proved reserves, 2013 guidance and an update of its commodity hedge positions.
Adjusted EBITDAX and distributable cash flow for 2012 were $267.5 million and $142.4 million, increases of 26 percent and 13 percent, respectively, over 2011. The increases in Adjusted EBITDAX and Distributable Cash Flow are primarily due to the two Barnett Shale acquisitions made in 2011. Adjusted EBITDAX and distributable cash flow are described in the attached table under “Non-GAAP Measures”.
Production for 2012 was 42.5 Bcf of natural gas, 1,110 MBbls of oil and 1,742 MBbls of natural gas liquids, or 59.6 billion cubic feet equivalents (Bcfe). This represents a 45 percent increase over 2011 production of 41.2 Bcfe, primarily due to acquisitions in 2011.
For 2012, EVEP reported a net loss of $16.3 million, or $(0.38) per basic and diluted weighted average limited partner unit outstanding. Included in net loss were $48.3 million of unrealized losses on commodity and interest rate derivatives, $3.9 million of non-cash realized losses on commodity and interest rate derivatives, a $1.7 million non-cash charge to lease operating expense related to oil in tanks purchased in connection with 2011 acquisitions, $6.8 million of dry hole and exploration costs, $0.8 million of non-cash deferred income taxes, $16.4 million of non-cash costs contained in general and administrative expenses, and $1.0 million of due diligence and other transaction costs for acquisitions. Also recognized in 2012 were $34.5 million of impairment charges primarily related to the write-down of certain oil and natural gas properties to their fair value due to the effects of declining natural gas prices on expected future net cash flows.
For 2011, EVEP reported net income of $102.6 million, or $2.71 and $2.68 per basic and diluted weighted average limited partner unit outstanding, respectively. Included in net income were $35.5 million of unrealized gains on commodity and interest rate derivatives, $0.6 million of non-cash realized losses on commodity and interest rate derivatives and $9.8 million of non-cash costs contained in general and administrative expenses. Also contained in general and administrative expenses were approximately $2.9 million of due diligence and other transaction costs for acquisitions. Other expenses incurred include $12.1 million of dry hole and exploration costs and $11.0 million of impairment costs related to divestitures of non-core oil and natural gas properties and assets held for sale. Also recognized, during 2011, was a $4.0 million gain on sale of assets related to Utica Shale acreage in an agreement with Total and Chesapeake.
Adjusted EBITDAX for the fourth quarter of 2012 was $69.6 million, a 28 percent increase over the fourth quarter of 2011 and a 3 percent increase over the third quarter of 2012. Distributable cash flow for the fourth quarter of 2012 was $37.9 million, a 23 percent increase over the fourth quarter of 2011 and a 7 percent increase over the third quarter of 2012.
Production for the fourth quarter of 2012 was 10.8 Bcf of natural gas, 277 MBbls of oil and 476 MBbls of natural gas liquids, or 15.3 Bcfe. This represents a 38 percent increase over fourth quarter 2011 production of 11.1 Bcfe and a 2 percent increase over third quarter 2012 production of 15.0. The increases in production are primarily due to acquisitions completed during the fourth quarter of 2011.
EVEP reported a net loss of $9.9 million, or $(0.23) per basic and diluted weighted average limited partner unit outstanding, for the fourth quarter of 2012. Included in net loss were $9.6 million of unrealized losses on commodity and interest rate derivatives, $1.2 million of non-cash realized losses on commodity and interest rate derivatives, $1.1 million of dry hole and exploration costs and $4.0 million of non-cash costs contained in general and administrative expenses. Also recognized during the fourth quarter were $16.7 million of impairment charges primarily related to the write-down of certain oil and natural gas properties to their fair value due to the effects of declining natural gas prices on expected future net cash flows.
For the fourth quarter of 2011, EVEP reported net income of $9.7 million, or $0.27 per basic and diluted weighted average limited partner unit outstanding. Included in net income were $2.3 million of unrealized gains on commodity and interest rate derivatives, $1.1 million of non-cash realized losses on commodity and interest rate derivatives, $10.5 million of dry hole and exploration costs, $4.4 million of impairment costs primarily related to assets held for sale, a $4.0 million gain on the sale of assets related to Utica Shale acreage in an agreement with Total and Chesapeake and $3.2 million of non-cash costs contained in general and administrative expenses. Also contained in general and administrative expenses were approximately $2.3 million of due diligence and other transaction costs for acquisitions completed during the quarter.
For the third quarter of 2012, EVEP reported a net loss of $50.0 million, or $(1.15) per basic and diluted weighted average limited partner unit outstanding. Included in net loss were $65.9 million of unrealized losses on commodity and interest rate derivatives, $1.4 million of non-cash realized losses related to commodity and interest rate derivatives, $1.8 million of dry hole and exploration costs, $0.9 million of impairment charges, $(0.2) million of non-cash deferred income tax benefit and $4.3 million of non-cash costs contained in general and administrative expenses.
“We had a solid year of performance in our base assets in 2012, and made initial investments in two exciting Utica Shale midstream projects,” said John B. Walker, Executive Chairman. “While it is clearly taking longer than we expected, we remain in substantive negotiations with potential purchasers on a majority of our Utica Shale acreage, and will announce deals as agreements are signed.”
EVEP–s year end 2012 estimated net proved reserves were 904.7 Bcfe, a 21 percent decrease over year end 2011 estimated net proved reserves, primarily due to the significant decline in natural gas and natural gas liquids pricing year over year. Approximately 67 percent of these reserves were natural gas, 24 percent were natural gas liquids and 9 percent were oil. In addition, 76 percent were categorized as proved developed.
At December 31, 2012, the present value of future net pre-tax cash flows discounted at 10 percent was $874.3 million and the standardized measure of estimated net proved reserves was $866.9 million. Standardized measure is the present value of estimated future net revenues to be generated from the production of proved reserves, determined in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”), without giving effect to non-property related expenses such as certain general and administrative expenses, debt service and future federal income tax expenses or to depreciation, depletion and amortization and discounted using an annual discount rate of 10 percent. Standardized measure includes future obligations under the Texas gross margin tax, but it does not include future federal income tax expenses because EVEP is a partnership and is not subject to federal income taxes.
The prices used in determining estimated net proved reserves at December 31, 2012 were $94.71 per Bbl of oil and $2.76 per MMBtu of natural gas as compared to $96.19 per Bbl of oil and $4.12 per MMBtu of natural gas at December 31, 2011. The decrease in oil and natural gas prices from 2011 to 2012 had a significant impact on EVEP–s estimated net proved reserves at December 31, 2012. This change caused reserves to decrease by 270 Bcfe, or approximately 24 percent. Had the commodity prices used in calculating year end 2012 proved reserves been the same as those in effect at December 31, 2011, EVEP–s estimated net proved reserves at December 31, 2012 would have increased by approximately 3 percent over those at December 31, 2011. The reserve replacement ratio, on a price-neutral basis, was 151 percent of 2012 production.
While the monetization process for a portion of EVEP–s net working interest acreage in the Utica is on-going, EVEP is making a significant investment in two Utica midstream projects, Utica East Ohio Midstream (UEO) and Cardinal Gas Services (CGS). During the fourth quarter, EVEP increased its ownership from eight percent to 21 percent in UEO, a high-pressure gathering, processing and fractionation system which will have 800 MMcf/d of wet gas processing capacity and 135 MBbls/d of natural gas liquids fractionation capacity, and onsite working storage of approximately 870 MBbls once completed. EVEP also owns nine percent of CGS, a low-pressure gathering system currently in service and with significant further expansion underway in eastern Ohio. The Partnership estimates that its share of total net capital for these two midstream projects will be $335 to $395 million through 2016 with $230 to $250 million budgeted to be spent in 2013. Once both systems are complete and fully utilized, EVEP expects these investments to generate $50 to $70 million of EBITDAX per year and to be accretive to distributable cash flow per unit.
EVEP–s financial statements and related footnotes are available on our 2012 Form 10-K, which was filed today and is available through the Investor Relations/SEC Filings section of the EVEP website at .
Also available for download on our website by March 7, 2012 will be unitholders– Schedule K-1–s for the tax year 2012. For any questions regarding their Schedule K-1, unitholders are invited to call the Tax Package Support helpline at 1-800-973-7551.
As announced on February 22, 2012, EV Energy Partners, L.P. will host an investor conference call on March 1, 2013, at 9 a.m. Eastern Time (8 a.m. Central). Investors interested in participating in the call may dial (480) 629-9818 (quote conference ID 4600344) 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 . Interested investors also may access the accompanying slide presentation to be available on our website, also in the Investor Relations section under Presentation & Event Schedule.
EV Energy Partners, L.P. is a master limited partnership engaged in acquiring, producing and developing oil and gas properties. More information about EVEP is available on the Internet at .
(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, future plans 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.
We define Adjusted EBITDAX as net (loss) income plus income taxes, interest expense, net, realized losses on interest rate swaps, depreciation, depletion and amortization, asset retirement obligations accretion expense, non-cash realized losses on derivatives, unrealized losses (gains) on derivatives, non-cash equity compensation, impairment of oil and natural gas properties, gain on sales of oil and natural gas properties, non-cash inventory write down expense, and dry hole and exploration costs. Distributable Cash Flow is defined as Adjusted EBITDAX less income 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. These financial measures 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.
EV Energy Partners, L.P., Houston
Michael E. Mercer
713-651-1144