Announces $53.4 Million Acquisition of Woodford Shale Asset from
Constellation Energy Group BALTIMORE, Feb. 20
/PRNewswire-FirstCall/ -- Constellation Energy Partners LLC
(NYSE:CEP) today reported fourth quarter and full year 2007 solid
results, and announced a $53.4 million dropdown acquisition of
interest in producing wells located in the Woodford Shale in
Oklahoma from an affiliate of its sponsor, Constellation Energy
(NYSE:CEG). The company produced 10,393 MMcfe for the full year
2007, up 124 percent from 2006 and resulting in adjusted EBITDA of
$52.5 million, an increase of 128 percent over 2006. Net income on
a generally accepted accounting principles (GAAP) basis for 2007
was $14.2 million. The company produced 4,212 MMcfe for the fourth
quarter of 2007, resulting in adjusted EBITDA of $19.6 million and
net income of $2.9 million on a GAAP basis. The company expects
2008 adjusted EBITDA to range from $94 million to $105 million, an
increase of 79 percent to 100 percent over 2007 results. Production
in 2008 is expected to range from 17 Bcfe to 20 Bcfe, an increase
of 64 percent to 92 percent over 2007. In addition, CEP announced
it is acquiring from an affiliate of its sponsor, Constellation
Energy, non-operating interest in producing wells located in the
Woodford Shale in Oklahoma, a portion of the asset originally
acquired in 2004. Upon closing of the acquisition, which is
expected by the end of the first quarter and subject to customary
purchase price adjustments, CEP will obtain 13.1 Bcfe of proved
developed producing reserves with an estimated daily net production
of 5.7 MMcfe. CEP intends to finance the transaction with debt from
its reserve-based lending facility. "We delivered solid results and
achieved the core objectives we identified at the start of the
year," said Felix Dawson, chief executive officer. "Performance was
strong throughout the year in our Black Warrior Basin asset, and
through a trio of acquisitions in the Cherokee Basin, we doubled
net proved reserves and tripled production. We executed well in
2007, maintaining stable cash flows and delivered on our commitment
to increase distributions with a 22 percent increase announced in
the fourth quarter. "Going forward, a key to driving the
sustainability of our business will be balancing acquisition driven
growth and operational success, and that will be a top priority in
2008," said Dawson. "The effort to expand and strengthen our
operational capabilities is well under way and we anticipate it
will allow us to increase efficiency, exploit the organic growth
potential of our Cherokee Basin assets and pursue consolidation
opportunities in both the Cherokee and Black Warrior Basins. "The
announcement of the dropdown acquisition of the Woodford Shale
asset highlights an important competitive advantage," Dawson said.
"CEP has grown its portfolio in multiple ways, through basin
consolidation, coalbed methane plays and now, a dropdown
acquisition from our sponsor. This demonstrated flexibility in
acquisition approaches is an important differentiator for CEP in
the MLP sector. The ability to execute mutually beneficial dropdown
transactions was one of the main commercial concepts considered
when Constellation Energy formed CEP, and we think this transaction
highlights the benefits of that capability. In the future, as
Constellation Energy further develops its properties, we will look
to make other dropdown acquisitions. "We begin 2008 with a strong
foundation for portfolio growth and a sharpened focus on our
operations," Dawson said. "CEP continues to execute well overall
and we're in a good position to build on our past accomplishments
over the coming year." Non-GAAP Measures We present Adjusted EBITDA
in addition to our reported net income in accordance with GAAP.
Adjusted EBITDA is a non-GAAP financial measure that is defined as
net income (loss) plus interest (income) expense; depreciation,
depletion and amortization; write-off of deferred financing fees;
impairment of long-lived assets; (gain) loss on sale of assets;
(gain) loss from equity investment; accretion of asset retirement
obligation; unrealized (gain) loss on natural gas derivatives; and
realized (gain) loss on cancelled natural gas derivatives. Adjusted
EBITDA is used by management to indicate (prior to the
establishment of any cash reserves by our board of managers) the
cash distributions we expect to pay our unitholders. Specifically,
this financial measure indicates 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 EBITDA is
also 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. SEC Filings CEP
intends to file its 2007 Form 10-K on or about February 28, 2008.
Forward-Looking Statements We make statements in this news release
that are considered forward- looking statements within the meaning
of the Securities Exchange Act of 1934. 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. Conference Call Information The company will
host a conference call today at 10:00 a.m. (ET) to review its
financial results and discuss its business outlook for 2008. To
participate, analysts, investors, media and the public in the U.S.
may dial (888) 322-9245 shortly before 10:00 a.m. (ET). The
international phone number is (773) 756-0253. The conference
password is PARTNERS. A replay will be available approximately one
hour after the end of the call by dialing (888) 457-6652 or (203)
369-1301 (international). A live audio webcast of the conference
call, presentation slides and the earnings press release will be
available on the Investor Relations page of Constellation Energy
Partners' Web site (http://www.constellationenergypartners.com/). A
webcast replay, as well as a replay in downloadable MP3 format will
also be available on the site approximately one hour after the
completion of the call. Constellation Energy Partners LLC,
(http://www.constellationenergypartners.com/), is a limited
liability company focused on the acquisition, development and
exploitation of oil and natural gas properties, as well as related
midstream assets. Constellation Energy Partners LLC Operating
Statistics Three Months Ended Year Ended December 31, December 31,
2007 2006 2007 2006 Net Production: Total production (MMcfe) 4,212
1,250 10,393 4,641 Average daily production (Mcfe/day) 45,783
13,587 28,474 12,715 Average Sales Price per Mcfe: Net realized
price, including hedges $7.49(a) $8.61 $7.79(a) $7.95 Net realized
price, excluding hedges $6.15 $6.78 $6.34 $7.43 (a) Excludes impact
of mark-to- market losses. Net Proved Reserves: Proved developed
(Bcfe) 186.7 97.4 Proved undeveloped (Bcfe) 116.1 22.9 Total proved
(Bcfe) 302.8 120.3 Net Wells Drilled and Completed 35 6 89 31 Net
Recompletions - - 21 - Constellation Energy Partners LLC Condensed
Consolidated Statements of Operations Three Months Ended Year Ended
December 31, December 31, 2007 2006 2007 2006 ($ in thousands) ($
in thousands) Oil and gas sales $32,692 $10,763 $82,725 $36,917
(Loss) from mark-to-market activities (4,091) - (6,856) - Total
Revenues $28,601 $10,763 $75,869 $36,917 Operating expenses: Lease
operating expenses 7,319 1,913 17,141 7,234 Cost of sales 1,132 -
1,788 - Production taxes 1,511 443 3,646 1,783 General and
administrative 3,051 1,128 9,109 4,573 Loss on sale of equipment -
- 86 - Depreciation, depletion and amortization 10,027 1,457 23,190
7,444 Accretion expense 101 35 312 141 Total operating expenses
23,141 4,976 55,272 21,175 Other (income) expenses: Interest
(income) expense, net 2,558 114 6,465 (247) Other (income) (9) -
(109) - Total expenses 25,690 5,090 61,628 20,928 Net income $2,911
$5,673 $14,241 $15,989 Adjusted EBITDA $19,573 $7,106 $52,520
$23,025 EPS - Basic $0.13 $0.50 $0.87 $1.41 EPS - Basic Units
Outstanding 22,351,128 11,320,300 16,321,547 11,320,300 EPS -
Diluted $0.13 $0.50 $0.87 $1.41 EPS - Diluted Units Outstanding
22,353,691 11,320,300 16,325,508 11,320,300 Constellation Energy
Partners LLC Condensed Consolidated Balance Sheets December 31,
December 31, 2007 2006 ($ in thousands) Current assets $45,873
$26,087 Natural gas properties, net of accumulated depreciation,
depletion and amortization 643,653 171,639 Other assets 17,129
5,971 Total assets $706,655 $203,697 Current liabilities $20,551
$9,007 Debt 153,000 22,000 Other long-term liabilities 16,702 2,730
Total liabilities 190,253 33,737 Class D Interests 7,000 8,000
Common members' equity 505,178 148,847 Accumulated other
comprehensive income 4,224 13,113 Total members' equity 509,402
161,960 Total liabilities and members' equity $706,655 $203,697
Constellation Energy Partners LLC Reconciliation of Net Income to
Adjusted EBITDA Three Months Ended Year Ended December 31, December
31, 2007 2006 2007 2006 ($ in thousands) ($ in thousands)
Reconciliation of Net Income to Adjusted EBITDA: Net income $2,911
$5,673 $14,241 $15,989 Add: Interest expense/(income), net 2,558
114 6,465 (247) Depreciation, depletion and amortization 10,027
1,457 23,190 7,444 Accretion of asset retirement obligation 101 35
312 141 Loss on sale of asset - - 86 - Loss from mark-to-market
activities 4,091 - 6,856 - Long-term incentive plan 123 - 145 -
Unrealized (gain)/loss on natural gas derivatives/hedge
ineffectiveness (238) (173) 1,225 (302) Adjusted EBITDA (1) $19,573
$7,106 $52,520 $23,025 Maintenance capital (2) 4,625 10,696
Drilling fund (1,500) (2,634) Interest expense (cash) 3,345 5,935
Distributable Cash $13,103 $38,523 (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; -- depreciation, depletion and amortization; --
write-off of deferred financing fees; -- impairment of long-lived;
-- (gain) loss on sale of assets; -- (gain) loss from equity
investment; -- Long-term incentive plan; -- accretion of asset
retirement obligation; -- unrealized (gain) loss on natural gas
derivatives; and -- realized loss (gain) on cancelled natural gas
derivatives (2) Maintenance capital expenditures are capital
expenditures that we expect to make on an ongoing basis to maintain
our asset base (including our undeveloped leasehold acreage) at a
steady level over the long term. These expenditures include the
drilling and completion of additional development wells to offset
the expected production decline during such period from our
producing properties, as well as additions to our inventory of
unproved properties or proved reserves required to maintain our
asset base. DATASOURCE: Constellation Energy Partners LLC CONTACT:
Media, Lawrence McDonnell, +1-410-470-7433, or Investors, Tonya
Cultice, +1-410-470-5619, both of Constellation Energy Partners LLC
Web site: http://www.constellationenergypartners.com/ Company News
On-Call: http://www.prnewswire.com/comp/084087.html
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