Exhibit 99.1
News Release |
General Inquiries: (877) 847-0008 |
www.constellationenergypartners.com |
Investor Contact: | Charles C. Ward | |
(877) 847-0009 |
Constellation Energy Partners
Reports First Quarter 2010 Results
HOUSTON—(BUSINESS WIRE)—May 7, 2010—Constellation Energy Partners LLC (NYSE Arca: CEP) today reported first quarter 2010 results.
The company produced 3,860 MMcfe for the first quarter 2010 for average daily net production of 42.9 MMcfe. Operating costs, which include lease operating expenses, production taxes and general and administrative expenses, net of certain non-cash items, averaged $3.55 per Mcfe during the quarter.
On a GAAP basis, the company reported net income of $18.1 million for the first quarter 2010. Adjusted EBITDA for the quarter was $14.9 million.
“Overall, this was another good quarter for us,” said Stephen R. Brunner, President and Chief Executive Officer of Constellation Energy Partners. “Our assets performed in line with our expectations and 2010 business plan.”
Liquidity Update
The company announced last week that its borrowing base was reaffirmed by its lenders at $205 million. The company’s borrowing base is scheduled for semi-annual redetermination again in the fourth quarter of 2010.
Outstanding debt under the company’s credit facility currently totals $185 million, leaving the company with $20 million in available borrowing capacity. The company had a cash balance of $8.4 million as of Mar. 31, 2010.
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Financial Outlook for 2010
The company announced earlier this year that it anticipates total capital spending for 2010 to range between $10 million and $12 million. “At this level of capital spending, we expect to complete approximately 25 net wells, which will consist of a mix of horizontal, vertical and recompletion wells,” said Brunner. “We expect to spend substantially all of our capital in the Cherokee Basin, with the bulk of our drilling activity completed in the second and third quarters of this year.”
Net production is forecast to range between 14.5 and 15.5 Bcfe for 2010, with operating costs expected to range between $52 million and $56 million for the year.
The company entered 2010 with approximately 9.5 Bcfe of its 2010 Mid-Continent production hedged at an average price of $7.49 per Mcfe and an additional 2.4 Bcfe of its remaining production hedged at an average price of $8.21 per Mcfe. Included in these totals for 2010 are hedges on 6.9 Bcfe of the company’s Mid-Continent production for the balance of the year at an average price of $7.46 per Mcfe and an additional 1.9 Bcfe of production for the balance of the year at an average price of $8.17 per Mcfe. The remainder of the company’s production for 2010 is subject to market conditions and pricing.
During the first quarter 2009, the company discontinued hedge accounting on all existing commodity derivatives and now accounts for derivatives using the mark-to-market accounting method. As a result, the company will recognize all future changes in the fair value of its derivatives as gains and losses in earnings.
Distribution Outlook
The company previously announced that it expects distributions will remain suspended through the fourth quarter of 2010 and until after such time that debt levels are reduced and market conditions again warrant resumption of capital spending at maintenance levels.
Management will continue to evaluate the company’s quarterly distribution, taking into account debt levels, liquidity, the provisions of the company’s credit and operating agreements, and business plans. All distributions are subject to approval by the company’s Board of Managers.
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Conference Call Information
The company will host a conference call at 8:30 a.m. (CDT) on Friday, May 7, 2010 to discuss first quarter 2010 results.
To participate in the conference call, analysts, investors, media and the public in the U.S. may dial (888) 810-6805 shortly before 8:30 a.m. (CDT). The international phone number is (517) 308-9398. The conference password is PARTNERS.
A replay will be available beginning approximately one hour after the end of the call by dialing (866) 481-6892 or (203) 369-1571 (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 2010 Form 10-Q on or about May 7, 2010.
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) adjusted by interest (income) expense; depreciation, depletion and amortization; write-off of deferred financing fees; impairment of long-lived assets; accretion of asset retirement obligation; (gain) loss on sale of assets; exploration costs; (gain) loss from equity investment; unit-based compensation programs; unrealized (gain) loss on derivatives; and realized (gain) loss on cancelled derivatives.
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.
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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 and 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. These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf.
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PRESS RELEASE
Constellation Energy Partners LLC
Operating Statistics
Three Months Ended Mar. 31, | ||||||||
2010 | 2009 | |||||||
Net Production: | ||||||||
Total production (MMcfe) | 3,860 | 4,364 | ||||||
Average daily production (Mcfe/day) | 42,889 | 48,489 | ||||||
Average Net Sales Price per Mcfe: | ||||||||
Net realized price, including hedges | $ | 7.37 | (a) | $ | 7.34 | (a) | ||
Net realized price, excluding hedges | $ | 5.40 | (b) | $ | 3.96 | (b) |
(a) | Excludes impact of mark-to-market losses and net of cost of sales. |
(b) | Excludes all hedges, the impact of mark-to-market losses and net of cost of sales. |
Net Wells Drilled and Completed | — | 30 | ||
Net Recompletions | — | 16 | ||
Developmental Dry Holes | — | 1 |
Constellation Energy Partners LLC
Condensed Consolidated Statements of Operations
Three Months Ended Mar. 31, | ||||||||
2010 | 2009 | |||||||
($ in thousands) | ||||||||
Oil and gas sales | $ | 29,237 | $ | 32,862 | ||||
Gain/(Loss) from mark-to-market activities | 35,281 | 19,331 | ||||||
Total Revenues | 64,518 | 52,193 | ||||||
Operating expenses: | ||||||||
Lease operating expenses | 7,963 | 8,785 | ||||||
Cost of sales | 772 | 832 | ||||||
Production taxes | 1,125 | 970 | ||||||
General and administrative | 5,062 | 5,233 | ||||||
Exploration costs | 223 | 103 | ||||||
(Gain)/Loss on sale of equipment | (8 | ) | 17 | |||||
Depreciation, depletion and amortization | 27,248 | 14,434 | ||||||
Accretion expense | 207 | 102 | ||||||
Total operating expenses | 42,592 | 30,476 | ||||||
Other expenses: | ||||||||
Interest (income) expense, net | 4,056 | 2,841 | ||||||
Other (income) expense | (188 | ) | (57 | ) | ||||
Total expenses | 46,460 | 33,260 | ||||||
Net income (loss) | $ | 18,058 | $ | 18,933 | ||||
Adjusted EBITDA | $ | 14,940 | $ | 17,434 | ||||
EPS - Basic | $ | 0.75 | $ | 0.85 | ||||
EPS - Basic Units Outstanding | 24,002,372 | 22,386,063 | ||||||
EPS - Diluted | $ | 0.75 | $ | 0.85 | ||||
EPS - Diluted Units Outstanding | 24,002,372 | 22,386,063 |
Constellation Energy Partners LLC
Condensed Consolidated Balance Sheets
Mar. 31, 2010 | Dec. 31, 2009 | |||||
($ in thousands) | ||||||
Current assets | $ | 57,233 | $ | 45,265 | ||
Natural gas properties, net of accumulated depreciation, depletion and amortization | 586,694 | 612,625 | ||||
Other assets | 65,285 | 50,427 | ||||
Total assets | $ | 709,212 | $ | 708,317 | ||
Current liabilities | $ | 14,283 | $ | 16,484 | ||
Debt | 185,000 | 195,000 | ||||
Other long-term liabilities | 12,318 | 12,129 | ||||
Total liabilities | 211,601 | 223,613 | ||||
Class D Interests | 6,667 | 6,667 | ||||
Common members’ equity | 467,864 | 449,670 | ||||
Accumulated other comprehensive income | 23,080 | 28,367 | ||||
Total members’ equity | 490,944 | 478,037 | ||||
Total liabilities and members’ equity | $ | 709,212 | $ | 708,317 | ||
Constellation Energy Partners LLC
Reconciliation of Net Income to Adjusted EBITDA
Three Months Ended Mar. 31, | ||||||||
2010 | 2009 | |||||||
($ in thousands) | ||||||||
Reconciliation of Net Income to Adjusted EBITDA: | ||||||||
Net income | $ | 18,058 | $ | 18,933 | ||||
Add: | ||||||||
Interest expense/(income), net | 4,056 | 2,841 | ||||||
Depreciation, depletion and amortization | 27,248 | 14,434 | ||||||
Accretion of asset retirement obligation | 207 | 102 | ||||||
(Gain)/Loss on sale of asset | (8 | ) | 17 | |||||
Exploration costs | 223 | 103 | ||||||
Loss from mark-to-market activities | (35,281 | ) | (19,331 | ) | ||||
Unit-based compensation programs | 437 | 68 | ||||||
Unrealized (gain)/loss on natural gas derivatives/hedge ineffectiveness | — | 267 | ||||||
Adjusted EBITDA (1) | $ | 14,940 | $ | 17,434 | ||||
Three Months Ended Dec. 31, | Twelve Months Ended Dec. 31, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
($ in thousands) | ($ in thousands) | |||||||||||||||
Reconciliation of Net Income to Adjusted EBITDA: | ||||||||||||||||
Net income | $ | (2,111 | ) | $ | (12,382 | ) | $ | (9,023 | ) | $ | 7,268 | |||||
Add: | ||||||||||||||||
Interest expense/(income), net | 6,584 | 3,221 | 16,303 | 11,817 | ||||||||||||
Depreciation, depletion and amortization | 28,202 | 45,579 | 76,286 | 77,919 | ||||||||||||
Accretion of asset retirement obligation | 139 | 104 | 406 | 411 | ||||||||||||
(Gain)/Loss on sale of asset | (14 | ) | (5 | ) | — | (301 | ) | |||||||||
Exploration costs | 373 | 172 | 855 | 414 | ||||||||||||
Loss from mark-to-market activities | (18,581 | ) | (17,389 | ) | (19,410 | ) | (21,376 | ) | ||||||||
Unit-based compensation programs | 1,020 | 49 | 1,308 | 322 | ||||||||||||
Unrealized (gain)/loss on natural gas derivatives/hedge ineffectiveness | — | (1,162 | ) | 267 | (1,189 | ) | ||||||||||
Adjusted EBITDA (1) | $ | 15,612 | $ | 18,187 | $ | 66,992 | $ | 75,285 | ||||||||
(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 assets; |
• | (gain) loss on sale of assets; |
• | exploration costs; |
• | (gain) loss from equity investment; |
• | unit-based compensation programs; |
• | accretion of asset retirement obligation; |
• | unrealized (gain) loss on derivatives; and |
• | realized loss (gain) on cancelled derivatives. |