EXHIBIT 99.1
Legacy Reserves LP Announces Second Quarter 2008 Results
MIDLAND, Texas, Aug. 6, 2008 (PRIME NEWSWIRE) -- Legacy Reserves LP ("Legacy") (Nasdaq:LGCY) today announced second quarter results for 2008. This unaudited financial information is preliminary and is subject to adjustments in connection with the final unaudited financial statements to be released on or about August 8, 2008 within Legacy's Quarterly Report on Form 10-Q.
A summary of selected financial information follows. For condensed consolidated financial statements, please see accompanying tables.
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Three Months Ended Six Months Ended
------------------ -----------------
June 30, March 31, June 30,
------------------- -----------------
2008 2008 2008 2007
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(dollars in millions)
Production (Boe/d) 7,363 6,813 7,088 4,099
Revenue $66.6 $48.8 $115.4 $38.7
Expenses $31.9 $24.8 $56.6 $30.5
Operating income $34.8 $24.0 $58.8 $8.2
Unrealized loss on commodity
swaps ($201.3) ($34.0) ($235.4) ($17.5)
Net Loss ($175.8) ($21.1) ($196.9) ($6.9)
Adjusted EBITDA (*) $31.5 $27.2 $58.7 $25.8
Distributable Cash Flow (*) $25.3 $22.3 $47.7 $16.8
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(*) See "Non-GAAP Financial Measures" on the last page.
Highlights of the second quarter of 2008 compared to the first quarter of 2008:
* Production increased 8% to 7,363 Boe per day from 6,813 Boe per
day.
* Adjusted EBITDA increased 16% to $31.5 million from $27.2 million.
* Distributable cash flow increased 13% to $25.3 million from $22.3
million.
* The net loss of $175.8 million was impacted by $201.3 million of
unrealized losses on oil, natural gas liquids ("NGL") and natural
gas swaps, compared to a net loss of $21.1 million in the first
quarter of 2008, which included unrealized losses on oil and
natural gas swaps of $34.0 million.
* Closed $107.2 million of acquisitions in the second quarter of
2008 compared to $29.6 million in the first quarter.
Comparisons of six months ended June 30, 2008 to the six months ended June 30, 2007:
* Production increased 73% to 7,088 Boe per day in 2008 from 4,099
in 2007.
* Adjusted EBITDA more than doubled to $58.7 million from $25.8
million in 2007.
* Distributable cash flow increased 2.8 times to $47.7 million from
$16.8 million.
Cary Brown, Chairman and Chief Executive Officer of Legacy Reserves GP, LLC, the general partner of Legacy, said, "We had another strong quarter in acquisitions, production growth, and oil and gas prices. Over the past year our revenues have tripled, increasing our operating income six fold to $34.8 million in the second quarter of 2008 from $5.2 million in the second quarter of 2007. These results enabled us to increase our distribution 3 cents compared to the prior quarter, our fifth consecutive quarterly increase."
Acquisition Update
During the second quarter, Legacy acquired approximately $107.2 million of properties with proved reserves of 6,167 MBoe, 83% of which is proved developed producing ("PDP"). These acquisitions added 1,074 Boe per day of production, 70% of which is oil and NGLs. Subsequent to the end of the second quarter, we closed an additional $14.6 million of acquisitions containing 808 MBoe of proved reserves (100% PDP), 129 Boe per day of production, 100% of which is oil. Year to date, Legacy has acquired approximately $156 million of properties in 11 transactions with proved reserves totaling 9,159 MBoe, 87% of which is PDP, and 1,592 Boe per day of production, of which 72% is oil and NGLs.
Development Capital Budget Increased to $28.6 Million
Due to increases in Legacy's cash flow from property acquisitions, higher commodity prices and production performance, Legacy's Board of Directors approved an increase to the 2008 development capital budget to $28.6 million from $21.0 million to pursue identified growth projects.
Financial and Operating Results
Legacy was formed in October 2005 to own and operate the oil and natural gas properties it acquired from its Founding Investors in connection with the closing of a private equity offering on March 15, 2006 ("Formation Transaction"). Legacy completed its Initial Public Offering on January 18, 2007. The information discussed below is contained in operational data and financial statements at the end of this release.
SECOND QUARTER 2008 RESULTS COMPARED TO FIRST QUARTER 2008
Comparisons are made of the second quarter ended June 30, 2008 to the first quarter ended March 31, 2008, as it presents relevant sequential growth in performance measures and reflects the results of our acquisitions.
Adjusted EBITDA
Adjusted EBITDA totaled $31.5 million in the second quarter of 2008 compared to $27.2 million in the first quarter of 2008. The increase is attributable to our acquisition of oil and natural gas properties for an approximate aggregate purchase price of $107.2 million in the second quarter of 2008, our ongoing development program and higher oil, NGL, and natural gas prices discussed below. (See "Non-GAAP Financial Measures" and the associated table for a discussion of management's use of Adjusted EBITDA in this release and a reconciliation of Legacy's consolidated net loss to Adjusted EBITDA.)
Distributable Cash Flow
Distributable cash flow totaled $25.3 million in the second quarter of 2008 compared to $22.3 million in the first quarter. The increase is primarily attributable to higher commodity prices and increased oil, NGL and natural gas production volumes in the second quarter of 2008 compared to the first quarter. (See "Non-GAAP Financial Measures" and the associated table for a discussion of management's use of Distributable Cash Flow in this release and a reconciliation of Legacy's consolidated net loss to Distributable Cash Flow.)
Production
Net oil, NGL and natural gas production increased to 7,363 Boe per day for the second quarter of 2008 from 6,813 Boe per day in the first quarter. Our production increase of 8% over the first quarter resulted from a combination of our acquisition of oil and natural gas properties and our ongoing development program.
Commodity Derivatives
Due to higher product prices in the period, we had a cash loss on commodity swap settlements of $15.1 million in the second quarter 2008 compared to a cash loss of $6.8 million in the first quarter of 2008. We swapped 68% of our produced oil, NGL and natural gas volumes in the second quarter 2008 and 70% in the first quarter.
Legacy enters into derivatives transactions with unaffiliated third parties with respect to oil, NGL and natural gas prices to achieve more predictable cash flows and to reduce its exposure to short-term fluctuations in oil, NGL and natural gas prices. These derivatives instruments are accounted for in accordance with SFAS No. 133 - Accounting for Derivative Instruments and Hedging Activities. These instruments are intended to mitigate a portion of Legacy's price risk and may be considered hedged for economic purposes but Legacy has chosen not to designate them as cash flow hedges for accounting purposes. Therefore, all derivatives instruments are recorded on the balance sheet at fair value which requires us to mark our future derivatives positions to market each quarter resulting in unrealized gains or losses which impact reported net income. Unrealized gains or losses represent current period mark-to-market adjustments for commodity derivatives which will be settled in future periods. Unrealized gains or l osses result in a non-cash impact on earnings and do not affect our ability to make our expected cash distributions. However, sustained or increased oil, NGL and natural gas prices will result in cash losses on our commodity derivative instruments. The majority of our derivatives instruments now in place are in the form of swaps of floating prices for fixed prices paid by the counterparty. In June, Legacy entered into a costless collar which hedged approximately 200 Boe per day from January 2009 through December 2012 with a $120.00 put and $156.30 call. If NYMEX WTI oil prices remain between $120.00 and $156.30 per barrel at the expiration of a given monthly contract, no cash settlement is due. If prices close below $120.00, Legacy is paid by the counterparty, if above $156.30, Legacy pays the counterparty.
Revenue and Commodity Prices
Oil, NGL and natural gas sales for the second and first quarters of 2008 were $66.6 and $48.8 million, respectively. An 8% increase in sales volumes and a 26% increase per Boe in realized prices accounted for the increased revenue.
Oil and natural gas prices increased in the second quarter of 2008. Realized oil prices for the second and first quarters of 2008 averaged $122.32 and $95.12 per barrel, respectively. Including the effect of cash losses on settled oil swaps, oil prices were $90.52 and $77.76 per barrel in the second and first quarters of 2008, respectively. Realized natural gas prices were $10.82 and $8.73 per Mcf for the second and first quarters of 2008, respectively. Including the effect of cash gains on settled natural gas swaps, natural gas prices were $9.58 and $9.23 per Mcf for the same periods.
For the three months ended June 30, 2008, oil, NGL and natural gas derivative contracts, all of which are in the form of swaps, covered approximately 68% of Legacy's production at a weighted average NYMEX West Texas Intermediate ("WTI") oil price of $71.82 per barrel and $7.89 per MMBtu, which is a combination of NYMEX Henry Hub, Waha (West Texas) and ANR-Oklahoma indexes. Legacy's realized prices are less than NYMEX WTI and Henry Hub natural gas due to quality and location differentials. The vast majority of Legacy's gas is sold on contracts that are based upon or more closely reflect Waha and ANR-OK indexes than Henry Hub. One Mcf of natural gas produced and sold equals approximately one MMBtu of swapped natural gas volume after the natural gas is processed and NGLs are recovered at a plant.
Costs
Production costs and ad valorem taxes, excluding severance taxes, for the second quarter of 2008 increased to $20.17 per Boe from $15.37 per Boe for the first quarter of 2008. The increase was a result of higher oil and natural gas prices, which have an effect on certain production costs, such as electricity used to lift oil and fluids and chemicals used to treat wells.
General and administrative ("G&A") expenses increased during the second quarter 2008 to $5.52 per Boe from $4.87 per Boe in the first quarter due to growth in employee headcount and seasonal professional services including accounting and legal fees. When non-cash employee compensation is excluded, G&A expense was $3.57 per Boe for the three months ended June 30, 2008 and $4.64 per Boe for the three months ended March 31, 2008.
Depletion, Depreciation and Amortization ("DD&A")
Depletion, depreciation and amortization expense remained relatively constant, increasing to $15.71 per Boe in the second quarter 2008 from $15.51 per Boe in the first quarter.
Net Loss
Net loss for the second quarter of 2008 was $175.8 million, which was unfavorably impacted by $201.3 million of net unrealized losses on the fair value of our future commodity swaps. In the first quarter we recorded a net loss of $21.1 million, which was unfavorably impacted by $34.0 million of net unrealized losses on our future commodity swaps. Excluding the unrealized losses on commodity swaps, our net income would have been $25.5 million and $12.9 million in the second and first quarters, respectively, of 2008.
SIX MONTHS ENDED JUNE 30, 2008 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 2007
Adjusted EBITDA
Adjusted EBITDA increased to $58.7 million for the six months ended June 30, 2008, from $25.8 million for the six months ended June 30, 2007. The increase is attributable to our oil and natural gas property acquisitions, to our development program and higher oil, NGL and natural gas prices discussed below.
Distributable Cash Flow
Distributable cash flow increased to $47.7 million for the six months ended June 30, 2008, from $16.8 million for the six months ended June 30, 2007. The increase is attributable to our oil and natural gas property acquisitions, our development program and higher oil, NGL and natural gas prices discussed below.
Production
Net oil, NGL and natural gas production averaged 7,088 Boe per day in the first half of 2008, an increase from 4,099 Boe per day in the first half of 2007. Our production increase of 73% is primarily due to our acquisitions of oil and natural gas properties and secondarily from our development program.
Revenues and Realized Prices
For the six months ended June 30, 2008 and 2007, oil, NGL and natural gas sales were $115.4 million and $38.7 million, respectively.
For the six months ended June 30, 2008 and 2007, average realized oil prices, excluding oil derivative contract settlements, were $109.02 and $57.79 per barrel, respectively. Including the effects of realized gains and losses on our oil swaps, realized oil prices were $84.28 and $61.87 per barrel for the same periods. For the six-months ended June 30, 2008 and 2007, realized natural gas prices averaged $9.85 and $6.54 per Mcf, respectively. Including the effects of our natural gas swaps, realized natural gas prices were $9.42 and $7.93 per Mcf for 2008 and 2007, respectively. The stated results are inclusive of natural gas basis swaps that we use to improve the effectiveness of our natural gas swaps.
For the six months ended June 30, 2008, oil, NGL and natural gas derivative contracts, all of which are in the form of swaps, covered approximately 69% of Legacy's production at a weighted average NYMEX WTI oil price of $71.00 per barrel and $8.25 per MMBtu, which is a combination of NYMEX Henry Hub, Waha (West Texas) and ANR-Oklahoma indexes. Legacy's realized prices are less than NYMEX WTI and Henry Hub natural gas due to quality and location differentials. One Mcf of natural gas produced and sold equals approximately one MMBtu of swapped natural gas volumes after the natural gas is processed and NGLs are recovered at a plant.
Costs
For the six months ended June 30, 2008 and 2007, production costs and ad valorem taxes, excluding production severance taxes, increased to $17.86 per Boe from $14.59 per Boe. The increase in production costs per Boe is primarily related to higher cost, non-operated properties acquired in the third quarter 2007 as well as increases in costs related to higher oil and natural gas prices, such as electricity required to power artificial lift equipment and pumps used in the production of oil.
G&A expenses for the six months ended June 30, 2008 and 2007, decreased to $5.20 per Boe from $6.19 per Boe, reflecting the cost of our IPO in January of 2007, particularly related to additional professional service fees and professional employee requirements. When excluding our non-cash employee compensation, G&A expense was $4.09 per Boe for the six months ended June 30, 2008 and $4.83 per Boe for the six months ended June 30, 2007.
Depletion, Depreciation and Amortization ("DD&A")
DD&A expense for the six months ended June 30, 2008 decreased to $15.61 per Boe from $16.32 per Boe in the six months ended June 30, 2007. Our DD&A expense per Boe decreased due to the additional reserves added by our recent acquisitions at reserve replacement costs below our 2007 DD&A rates which were impacted by our March 2006 Formation Transaction. Under the successful efforts method of accounting, Legacy calculates DD&A on an individual producing field basis. Changes in reserve estimates and in the timing and amount of abandonment cost estimates as well as changes in the timing and amount of development projects of one or two fields can cause variations in the aggregate DD&A rate.
Net Loss
Net loss for the six months ended June 30, 2008 was $196.9 million, which was unfavorably impacted by $235.3 million of net unrealized losses on the fair value of our future commodity swaps. For the six months ended June 30, 2007, we recorded a net loss of $6.9 million, which was unfavorably impacted by $17.5 million of net unrealized losses on our commodity swap positions. For the six months ended June 30, 2008, we had $21.9 million of cash losses on swap settlements, compared to $3.8 million of cash gains on swap settlements for the six months ended June 30, 2007.
Commodity Derivatives
We have entered into the following fixed price swaps for oil and natural gas to help mitigate the risk of commodity price volatility. As of August 4, 2008, we had entered into swap agreements to receive average NYMEX WTI oil and Henry Hub, Waha and ANR-Oklahoma natural gas prices as summarized below starting with July, 2008 through December, 2012:
WTI:
Annual Average Price
Calendar Year Volumes (Bbls) Price per Bbl Range per Bbl
------------- --------------- ------------- ----------------
2008 646,579 $ 74.19 $62.25 - $101.47
2009 1,343,613 $ 79.99 $61.05 - $140.00
2010 1,261,045 $ 79.47 $60.15 - $140.00
2011 1,025,840 $ 85.42 $67.33 - $140.00
2012 750,000 $ 76.85 $67.72 - $101.47
Natural Gas:
Annual Average Price
Calendar Year Volumes (MMBtu) Price per MMBtu Range per MMBtu
------------- --------------- --------------- ---------------
2008 1,589,437 $ 8.05 $6.85 - $9.10
2009 2,924,042 $ 8.06 $6.85 - $10.18
2010 2,610,359 $ 7.85 $6.85 - $9.73
2011 1,908,616 $ 8.00 $6.85 - $8.70
2012 1,371,036 $ 8.01 $6.85 - $8.70
Additionally, we have entered into a costless collar for NYMEX WTI
with the following attributes:
Annual Average Price
Calendar Year Volumes (Bbl) Put ($/Bbl) Call ($/Bbl)
------------- ------------- ----------- -------------
2009 75,400 $ 120.00 $ 156.30
2010 71,800 $ 120.00 $ 156.30
2011 68,300 $ 120.00 $ 156.30
2012 65,100 $ 120.00 $ 156.30
Location and quality differentials attributable to our properties are not reflected in the above prices. The agreements provide for monthly settlement based on the difference between the agreement fixed price and the actual reference oil and natural gas index prices.
We have entered into basis swaps to receive floating NYMEX prices less a fixed basis differential and pay prices based on the floating Waha index, a natural gas hub in West Texas. The prices that we receive for our Permian Basin natural gas sales follow Waha more closely than NYMEX Henry Hub natural gas. The basis swaps thereby provide a better correlation between our natural gas sales and the settlement payments on our natural gas swaps. The following table summarizes, for the periods indicated, our NYMEX basis swaps currently in place for production months July, 2008 through December, 2010:
Annual Basis
Calendar Year Volumes (MMBtu) Differential per MMBtu
------------- --------------- ----------------------
2008 711,000 ($0.84)
2009 1,320,000 ($0.68)
2010 1,200,000 ($0.57)
On March 30, 2007 and September 7, 2007, we entered into NGL swaps to hedge the impact of volatility in the spot prices of NGLs. The commodity prices covered by these swaps are the spot prices for ethane, propane, iso-butane, normal butane and natural gasoline reported on the Mont Belvieu, Non-Tet OPIS exchange. We entered into these swaps to offset cash flow volatility from the NGL sales from our interests in the East Binger (Marchand) Unit in Caddo County, Oklahoma, and our Texas Panhandle properties. The following table summarizes, for the periods indicated, our Mont Belvieu, Non-Tet OPIS NGL swaps currently in place for production months July, 2008 through December, 2009.
Annual Average Price
Calendar Year Volumes (Gal) Price per Gal Range per Gal
------------- ------------- ------------- -------------
2008 3,145,380 $ 1.28 $0.66 - $1.62
2009 2,265,480 $ 1.15 $1.15
Quarterly Report on Form 10-Q
The condensed consolidated financial statements and related footnotes will be available in our June 30, 2008 Form 10-Q, which will be filed on or about August 8, 2008.
Conference Call
As announced on July 31, 2008, Legacy Reserves LP will host an investor conference call to discuss Legacy's results on Thursday, August 7, 2008 at 3:00 p.m. (Central Time). Investors may access the conference call by dialing 877-675-4750. A replay of the call will be available through Monday, August 11, 2008, by dialing 719-457-0820 or 888-203-1112 and entering replay code 8747746, or by going to the Investor Relations tab of Legacy's website (www.LegacyLP.com). We will take live questions from securities analysts and institutional portfolio managers. The complete call is open to all other interested parties on a listen-only basis.
About Legacy Reserves LP
We are an independent oil and natural gas limited partnership headquartered in Midland, Texas, and are focused on the acquisition and development of oil and natural gas properties primarily located in the Permian Basin and Mid-Continent regions of the United States. Additional information is available at www.LegacyLP.com.
The Legacy Reserves logo is available at http://www.primenewswire.com/newsroom/prs/?pkgid=3201
Cautionary Statement Relevant to Forward-Looking Information
This press release contains forward-looking statements relating to our operations that are based on management's current expectations, estimates and projections about its operations. Words such as "anticipates," "expects," "intends," "plans," "targets," "projects," "believes," "seeks," "schedules," "estimated," and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and other factors, some of which are beyond our control and are difficult to predict. Among the important factors that could cause actual results to differ materially from those in the forward-looking statements are realized oil and natural gas prices; production volumes, lease operating expenses, general and administrative costs and finding and development costs; future operating results and the factors set forth under the heading "Risk Factors" in our 2007 Annual Report on Form 10-K filed March 14, 2008 (File No. 0 01-33249). Therefore, actual outcomes and results may differ materially from what is expressed in such forward-looking statements. The reader should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Unless legally required, Legacy undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.
LEGACY RESERVES LP
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- --------------------
2008 2007 2008 2007
--------- --------- --------- ---------
(In thousands, except per unit data)
Revenues:
Oil sales $ 48,439 $ 16,654 $ 84,488 $ 28,954
Natural gas liquid sales 4,781 1,072 8,283 1,177
Natural gas sales 13,389 5,010 22,625 8,536
--------- --------- --------- ---------
Total revenues 66,609 22,736 115,396 38,667
--------- --------- --------- ---------
Expenses:
Oil and natural gas
production 13,515 6,088 23,042 10,828
Production and other taxes 4,089 1,481 6,558 2,475
General and administrative 3,696 2,769 6,714 4,595
Depletion, depreciation,
amortization and
accretion 10,523 6,811 20,140 12,106
Impairment of long-lived
assets 4 190 108 280
(Gain) loss on disposal of
assets 26 231 75 231
--------- --------- --------- ---------
Total expenses 31,853 17,570 56,637 30,515
--------- --------- --------- ---------
Operating income 34,756 5,166 58,759 8,152
Other income (expense):
Interest income 15 47 71 151
Interest expense (Notes 2,
6 and 7) 1,212 (893) (2,966) (1,518)
Equity in income of
partnerships 45 11 87 11
Realized gain (loss) on
oil, NGL and natural gas
swaps (15,142) 1,362 (21,908) 3,827
Unrealized loss on oil,
NGL and natural gas swaps
(Notes 6 and 7) (201,326) (7,855) (235,352) (17,543)
Other (3) -- (19) 1
--------- --------- --------- ---------
Loss before income taxes (180,443) (2,162) (201,328) (6,919)
Income taxes (297) -- (507) --
Net loss from continuing
operations (180,740) (2,162) (201,835) (6,919)
Gain on sale of
discontinued operation 4,954 -- 4,954 --
Net loss $(175,786) $ (2,162) $(196,881) $ (6,919)
========= ========= ========= =========
Net loss from continuing
operations per unit -
basic and diluted $ (5.90) $ (0.08) $ (6.70) $ (0.27)
========= ========= ========= =========
Gain on discontinued
operation per unit -
basic and diluted $ 0.16 $ -- $ 0.16 $ --
========= ========= ========= =========
Net loss per unit -
basic and diluted $ (5.74) $ (0.08) $ (6.53) $ (0.27)
========= ========= ========= =========
Weighted average number
of units used in
computing net loss per
unit - basic and diluted 30,608 25,920 30,141 25,224
--------- --------- --------- ---------
LEGACY RESERVES LP
CONSOLIDATED BALANCE SHEET (UNAUDITED)
(dollars in thousands)
June 30,
2008
---------
ASSETS
Current assets:
Cash and cash equivalents $ 7,237
Accounts receivable, net:
Oil and natural gas 30,624
Joint interest owners 4,850
Affiliated entities and other 55
Fair value of derivatives 20
Prepaid expenses and other current assets 3,376
---------
Total current assets 46,162
---------
Oil and natural gas properties, at cost:
Proved oil and natural gas properties, using the
successful efforts method of accounting 663,136
Unproved properties 78
Accumulated depletion, depreciation and amortization (90,289)
---------
572,925
---------
Other property and equipment, net 1,847
Operating rights, net 5,872
Fair value of derivatives 1,676
Other assets, net 1,076
Investment in equity method investee 92
---------
Total assets $ 629,650
=========
LIABILITIES AND UNITHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,304
Accrued oil and natural gas liabilities 17,572
Fair value of derivatives 100,684
Asset retirement obligation 1,333
Other 5,028
---------
Total current liabilities 125,921
Long-term debt 206,000
Fair value of derivatives 218,714
Asset retirement obligation 21,411
Other long-term liabilities 171
---------
Total liabilities 572,217
---------
Commitments and contingencies
Unitholders' equity:
Limited partners' equity - 31,036,799 units issued and
outstanding at June 30, 2008 57,500
General partner's equity (67)
---------
Total unitholders' equity 57,433
---------
Total liabilities and unitholders' equity $ 629,650
=========
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ------------------
2008 2007 2008 2007
-------- -------- -------- --------
(In thousands, except per unit data)
Revenues:
Oil sales $ 48,439 $ 16,654 $ 84,488 $ 28,954
Natural gas liquid sales 4,781 1,072 8,283 1,177
Natural gas sales 13,389 5,010 22,625 8,536
-------- -------- -------- --------
Total revenue $ 66,609 $ 22,736 $115,396 $ 38,667
======== ======== ======== ========
Expenses:
Oil and natural gas
production $ 13,515 $ 6,088 $ 23,042 $ 10,828
Production and other taxes $ 4,089 $ 1,481 $ 6,558 $ 2,475
General and administrative $ 3,696 $ 2,769 $ 6,714 $ 4,595
Depletion, depreciation,
amortization and accretion $ 10,523 $ 6,811 $ 20,140 $ 12,106
Realized swap settlements
Realized gain (loss) on oil
swaps $(12,595) $ 843 $(19,173) $ 2,045
Realized loss on natural gas
liquid swaps $ (1,012) $ (41) $ (1,733) $ (42)
Realized gain (loss) on
natural gas swaps $ (1,535) $ 560 $ (1,002) $ 1,824
Production:
Oil - barrels 396 273 775 501
Natural gas liquids - gallons 2,821 856 5,543 959
Natural gas - Mcf 1,238 718 2,296 1,306
Total (MBoe) 670 413 1,290 742
Average daily production
(Boe/d) 7,363 4,538 7,088 4,099
Average sales price per unit:
Oil price per barrel $ 122.32 $ 61.00 $ 109.02 $ 57.79
Natural gas liquid price per
gallon $ 1.69 $ 1.25 $ 1.49 $ 1.23
Natural gas price per Mcf $ 10.82 $ 6.98 $ 9.85 $ 6.54
Combined (per Boe) $ 99.42 $ 55.05 $ 89.45 $ 52.11
Average sales price per unit
(including realized swap
settlements):
Oil price per barrel $ 90.52 $ 64.09 $ 84.28 $ 61.87
Natural gas liquid price per
gallon $ 1.34 $ 1.20 $ 1.18 $ 1.18
Natural gas price per Mcf $ 9.58 $ 7.76 $ 9.42 $ 7.93
Combined (per Boe) $ 76.82 $ 58.35 $ 72.47 $ 57.27
NYMEX oil index prices per
barrel:
Beginning of Period $ 101.58 $ 65.87 $ 95.98 $ 61.05
End of Period $ 140.00 $ 70.68 $ 140.00 $ 70.68
NYMEX gas index prices per Mcf:
Beginning of Period $ 10.10 $ 7.73 $ 7.48 $ 6.30
End of Period $ 13.35 $ 6.77 $ 13.35 $ 6.77
Average unit costs per Boe:
Production costs, excluding
production and other taxes $ 20.17 $ 14.74 $ 17.86 $ 14.59
Production and other taxes $ 6.10 $ 3.59 $ 5.08 $ 3.34
General and administrative $ 5.52 $ 6.70 $ 5.20 $ 6.19
Depletion, depreciation,
amortization and accretion $ 15.71 $ 16.49 $ 15.61 $ 16.32
Non-GAAP Financial Measures
This press release, the financial tables and other supplemental information, including the reconciliation of "Adjusted EBITDA" and "Distributable Cash Flow", both of which are non-generally accepted accounting principles ("non-GAAP") measures to their nearest comparable generally accepted accounting principles ("GAAP") measure, may be used periodically by management when discussing our financial results with investors and analysts. All such information is also available on our website under the Investor Relations link.
"Adjusted EBITDA" and "Distributable Cash Flow" should not be considered as alternatives to GAAP measures, such as net income, operating income or any other GAAP measure of liquidity or financial performance.
Adjusted EBITDA is defined in our revolving credit facility as net income (loss) plus:
* Interest expense;
* Income taxes;
* Depletion, depreciation, amortization and accretion;
* Impairment of long-lived assets;
* (Gain) loss on sale of partnership investment;
* (Gain) loss on disposal of assets;
* Unit-based compensation expense arising from equity-based awards;
* Equity in (income) loss of partnerships;
* Cash settlements of unit options; and
* Unrealized (gain) loss on oil and natural gas swaps.
Distributable Cash Flow is defined as Adjusted EBITDA less:
* Cash interest expense; and
* Development capital expenditures.
Adjusted EBITDA and Distributable Cash Flow are presented as management believes they provide additional information and metrics relative to the performance of our business, such as the cash distributions we expect to pay to our unitholders, as well as our ability to meet our debt covenant compliance tests. Management believes that these financial measures indicate to investors whether or not cash flow is being generated at a level that can sustain or support an increase in our quarterly distribution rates. Adjusted EBITDA and Distributable Cash Flow may not be comparable to a similarly titled measure of other publicly traded limited partnerships or limited liability companies because all companies may not calculate Adjusted EBITDA in the same manner.
The following table presents a reconciliation of our consolidated net loss to Adjusted EBITDA and Distributable Cash Flow:
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Three Months Ended Six Months Ended
-------------------- --------------------
June 30, June 30,
-------------------- --------------------
2008 2007 2008 2007
--------- --------- --------- ---------
dollars in thousands
Net Loss $(175,786) $ (2,162) $(196,881) $ (6,919)
Plus:
Interest expense (1,212) 893 2,966 1,518
Income taxes 297 -- 507 --
Depletion, depreciation,
amortization and
accretion 10,523 6,811 20,140 12,106
Impairment of long-lived
assets 4 190 108 280
(Gain) loss on sale of
assets (4,942) 231 (4,942) 231
Compensation expense on
options and restricted
units 1,338 864 1,477 1,012
Unrealized (gain) loss
on oil and natural gas
swaps 201,326 7,855 235,352 17,543
--------- --------- --------- ---------
Adjusted EBITDA $ 31,548 $ 14,682 $ 58,727 $ 25,771
========= ========= ========= =========
Less:
Cash interest expense 1,787 189 3,664 962
Cash settlement of unit
options 34 -- 34 --
Development capital
expenditures 4,388 4,276 7,377 7,976
--------- --------- --------- ---------
Distributable Cash Flow $ 25,339 $ 10,217 $ 47,652 $ 16,833
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CONTACT: Legacy Reserves LP
Steven H. Pruett, President and Chief Financial Officer
432-689-5200
