Constellation Energy Partners LLC (NYSE Amex: CEP) today
reported first quarter 2012 results.
The company produced 3,226 MMcfe during the first quarter for
average daily net production of 35.5 MMcfe for the quarter. Net oil
production for the first quarter was 324 barrels per day, or
approximately 29.5 thousand barrels in total, which represents an
increase of approximately 3% over the prior quarter’s total oil
production.
Revenue of $23.8 million for the first quarter 2012 includes
revenue from sales of $10.2 million, of which approximately 69% was
from natural gas sales and 31% was from oil sales. The balance of
the company’s first quarter 2012 revenue came from hedge
settlements ($6.1 million), services provided to third parties
($0.9 million), and gains on mark-to-market activities ($6.6
million), which is a non-cash item.
Operating costs, which include lease operating expenses,
production taxes and general and administrative expenses, net of
certain non-cash items, averaged $3.40 per Mcfe for the first
quarter 2012, which is a 3% improvement versus the first quarter of
2011.
Adjusted EBITDA for the first quarter 2012 was $5.9 million. On
a GAAP basis, the company recorded net income of $5.9 million for
the quarter.
The company completed 17 net wells and recompletions using $2.7
million in cash flow from operations during the first quarter 2012.
Drilling activities in 2012 continue to focus on oil potential in
the company’s existing asset base as well as capital efficient
recompletions. The company finished the first quarter of 2012 with
38 net wells and recompletions in progress.
“We made solid progress on executing this year’s plan to add oil
production during the first quarter,” said Stephen R. Brunner,
President and Chief Executive Officer of Constellation Energy
Partners. “Based on the results of our drilling efforts and our
available inventory of oil opportunities, we continue to pursue our
capital plan for 2012. We anticipate that this plan will enable us
to further diversify our production and revenue mix, thereby
increasing the contribution of oil production to our financial
results this year.”
Distribution Outlook
The decision to reinstate any future quarterly distributions
will consider, among other things, the company’s outstanding
borrowings under the reserve-based credit facility and cash
reserves that are set by the company’s board of managers for the
proper conduct of its business. All distributions are subject to
approval by the company's board of managers.
Financial Outlook for 2012
The company forecasts capital spending of between $15.0 million
and $19.0 million in 2012. Of this amount, $15.0 million is
maintenance capital.
Net production is forecast to range between 13.3 and 14.1 Bcfe
for 2012, with operating costs forecast to range between $42.5
million and $46.0 million for the year.
With additional hedges added in March 2012, the company has
hedged approximately 78% of the midpoint of its production
forecast, including hedges for the balance of 2012 on 5.0 Bcfe of
our Mid-Continent natural gas production at an average price,
including basis, of $4.73 per Mcfe, 3.0 Bcfe of our remaining
natural gas production at an average price of $5.27 per Mcfe, and
67 MBbl of our oil production at an average price of $103.38 per
barrel.
Additional detail on the company’s 2012 forecast can be found in
the tables included with the company’s fourth quarter and full year
2011 news release dated Feb. 29, 2012.
Conference Call Information
The company will host a conference call at 8:30 a.m. (CDT) on
Thursday, May 10, 2012 to discuss first quarter 2012 results.
To participate in the conference call, analysts, investors,
media and the public in the U.S. may dial (800) 857-0653 shortly
before 8:30 a.m. (CDT). The international phone number is (773)
799-3268. The conference password is PARTNERS.
A replay will be available beginning approximately one hour
after the end of the call by dialing (866) 360-7726 or (203)
369-0178 (international). A live audio webcast of the conference
call, presentation slides and the earnings release will be
available on Constellation Energy Partners’ Web site
(www.constellationenergypartners.com) under the Investor Relations
page. The call will also be recorded and archived on the site.
About the Company
Constellation Energy Partners LLC is a limited liability company
focused on the acquisition, development and production of oil and
natural gas properties, as well as related midstream assets.
SEC Filings
The company intends to file its first quarter 2012 Form 10-Q on
or about May 10, 2012.
Non-GAAP Measures
We present Adjusted EBITDA in addition to our reported net
income (loss) in accordance with GAAP. Adjusted EBITDA is a
non-GAAP financial measure that is defined as net income (loss)
adjusted by interest (income) expense, net; depreciation, depletion
and amortization; write-off of deferred financing fees; asset
impairments; accretion expense; (gain) loss on sale of assets;
exploration costs; (gain) loss from equity investment; unit-based
compensation programs; (gain) loss from mark-to-market activities;
and unrealized (gain) loss on derivatives/hedge
ineffectiveness.
Adjusted EBITDA is used as a quantitative standard by our
management and by external users of our financial statements such
as investors, research analysts and others to assess the financial
performance of our assets without regard to financing methods,
capital structure or historical cost basis; the ability of our
assets to generate cash sufficient to pay interest costs and
support our indebtedness; and our operating performance and return
on capital as compared to those of other companies in our industry,
without regard to financing or capital structure. Adjusted EBITDA
is not intended to represent cash flows for the period, nor is it
presented as a substitute for net income, operating income, cash
flows from operating activities or any other measure of financial
performance or liquidity presented in accordance with GAAP.
Forward-Looking Statements
We make statements in this news release that are considered
forward-looking statements within the meaning of the Securities Act
of 1933, as amended, and the Securities Exchange Act of 1934, as
amended. These forward-looking statements are largely based on our
expectations, which reflect estimates and assumptions made by our
management. These estimates and assumptions reflect our best
judgment based on currently known market conditions and other
factors. Although we believe such estimates and assumptions to be
reasonable, they are inherently uncertain and involve a number of
risks and uncertainties that are beyond our control. In addition,
management's assumptions about future events may prove to be
inaccurate. Management cautions all readers that the
forward-looking statements contained in this news release are not
guarantees of future performance, and we cannot assure you that
such statements will be realized or the forward-looking events and
circumstances will occur. Actual results may differ materially from
those anticipated or implied in the forward-looking statements due
to factors listed in the "Risk Factors" section in our SEC filings
and elsewhere in those filings. All forward-looking statements
speak only as of the date of this news release. We do not intend to
publicly update or revise any forward-looking statements as a
result of new information, future events or otherwise. These
cautionary statements qualify all forward-looking statements
attributable to us or persons acting on our behalf.
Constellation Energy Partners LLCOperating
Statistics Three Months Ended Mar.
31, 2012 2011 Net Production: Total
production (MMcfe) 3,226 3,424 Average daily production (Mcfe/day)
35,451 38,044
Average Net Sales Price per Mcfe: Net
realized price, including hedges $5.20
(a)
$7.42 (a) Net realized price, excluding hedges $3.32
(b)
$4.34 (b) (a) Excludes impact of mark-to-market gains
(losses) and net cost of sales. (b) Excludes all hedges, the impact
of mark-to-market gains (losses) and net cost of sales.
Net Wells Drilled and Completed 5 5
Net Recompletions
12 15
Developmental Dry Holes -- 1
Constellation Energy Partners LLCCondensed
Consolidated Statements of Operations
Three Months Ended Mar. 31, 2012 2011
($ in thousands) Oil and gas sales $ 17,158 $ 25,913
Gain/(Loss) from mark-to-market activities 6,602
(10,109 ) Total revenues 23,760 15,804 Operating
expenses: Lease operating expenses 6,761 7,420 Cost of sales 385
519 Production taxes 548 771 General and administrative 3,941 4,223
Exploration costs - 131 (Gain)/Loss on sale of assets 4 7
Depreciation, depletion and amortization 4,416 5,865 Asset
impairments 107 - Accretion expense 191 226
Total operating expenses 16,353 19,162 Other
expenses: Interest (income) expense, net 1,619 1,852 Other (income)
expense (97 ) (58 ) Total expenses 17,875 20,956
Net income (loss) $ 5,885 $ (5,152 )
Adjusted EBITDA $ 5,907 $ 13,475 EPU - Basic
$0.24
($0.21 ) EPU - Basic Units Outstanding 24,186,724 24,309,448
EPU - Diluted
$0.24
($0.21 ) EPU - Diluted Units Outstanding 24,186,724 24,309,448
Constellation
Energy Partners LLCCondensed Consolidated Balance Sheets
Mar. 31, 2012
Dec. 31, 2011
($ in thousands) Current assets $ 47,931 $ 45,096 Oil
and natural gas properties, net of accumulated depreciation,
depletion and amortization 264,707 266,085 Other assets
24,709 23,125 Total assets $ 337,347 $ 334,306
Current liabilities $ 11,878 $ 14,554 Debt 98,400 98,400 Other
long-term liabilities 14,855 14,432 Total liabilities
125,133 127,386 Common members' equity 207,472 201,483
Accumulated other comprehensive income 4,742 5,437
Total members' equity 212,214 206,920 Total
liabilities and members' equity $ 337,347 $ 334,306
Constellation Energy
Partners LLC Reconciliation of Net Income (Loss) to
Adjusted EBITDA Three Months
Ended Mar. 31, 2012 2011 ($ in thousands)
Reconciliation of Net Income (Loss) to Adjusted
EBITDA: Net income (loss) $ 5,885 $ (5,152 ) Add: Interest
(income) expense, net 1,619 1,852 Depreciation, depletion and
amortization 4,416 5,865 Asset impairments 107 - Accretion expense
191 226 (Gain)/Loss on sale of assets 4 7 Exploration costs - 131
Unit-based compensation programs 287 437 (Gain)/Loss from
mark-to-market activities (6,602 ) 10,109
Adjusted EBITDA (1) $ 5,907 $ 13,475
Three Months
Ended Dec. 31, Twelve Months Ended Dec. 31, 2011
2010 2011 2010 ($ in thousands) ($
in thousands) Reconciliation of Net Income (Loss)
to Adjusted EBITDA: Net income (loss) $ 15,127 $ (6,753
) $ 19,586 $ (276,910 ) Add: Interest (income) expense, net 1,186
815 10,116 11,953 Depreciation, depletion and amortization 4,518
5,665 22,139 85,263 Asset impairments 1,000 1,521 2,935 272,487
Accretion expense 227 205 907 822 (Gain)/Loss on sale of assets (10
) (5 ) 19 (18 ) Exploration costs - 29 131 760 Unit-based
compensation programs 317 444 1,341 1,849 (Gain)/Loss from
mark-to-market activities (8,524 ) 9,751
39,422 (42,081 ) Adjusted EBITDA (1),(2) $ 13,841
$ 11,672 $ 96,596 $ 54,125 (1) Our
Adjusted EBITDA should not be considered as an alternative to net
income, operating income, cash flows from operating activities or
any other measure of financial performance or liquidity presented
in accordance with
GAAP. Our Adjusted EBITDA excludes some,
but not all, items that affect net income and operating income
and
these measures may vary among other companies. Therefore, our
Adjusted EBITDA may not be comparable to similarly titled measures
of other companies. We define Adjusted EBITDA as net income
(loss) plus: -- interest (income) expense, net; -- depreciation,
depletion and amortization; -- write-off of deferred financing
fees; -- asset impairments; -- accretion expense; -- (gain) loss on
sale of assets; -- exploration costs; -- (gain) loss from equity
investment; -- unit-based compensation programs; -- (gain) loss
from mark-to-market activities; and -- unrealized (gain) loss on
derivatives/hedge ineffectiveness. (2) Results for the
twelve months ended Dec. 31, 2011 include $41.3 million in hedge
settlements related to the company’s June 2011 hedge restructuring.
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