Exhibit 99.1
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| | | | News Release General Inquiries: (877) 847-0008 www.constellationenergypartners.com |
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| Investor Contact: | | Charles C. Ward |
| | | (877) 847-0009 |
Constellation Energy Partners Reports
First Quarter 2012 Results
| | • | | CEP completes 17 net wells and recompletions in the first quarter 2012 with an additional 38 net wells and recompletions in-progress |
| | • | | Drilling efforts continue to target oil opportunities available in CEP’s existing asset base |
| | • | | CEP management reaffirms its capital plans for 2012 |
HOUSTON—(BUSINESS WIRE)—May 10, 2012—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.
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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.
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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.
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Constellation Energy Partners LLC
Operating Statistics
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| | | 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 | |
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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) |
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(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. | |
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Net Wells Drilled and Completed | | | 5 | | | | 5 | |
Net Recompletions | | | 12 | | | | 15 | |
Developmental Dry Holes | | | — | | | | 1 | |
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Constellation Energy Partners LLC
Condensed Consolidated Statements of Operations
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| | | 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 | ) |
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Total revenues | | | 23,760 | | | | 15,804 | |
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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 | |
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Total operating expenses | | | 16,353 | | | | 19,162 | |
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Other expenses: | | | | | | | | |
Interest (income) expense, net | | | 1,619 | | | | 1,852 | |
Other (income) expense | | | (97 | ) | | | (58 | ) |
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Total expenses | | | 17,875 | | | | 20,956 | |
Net income (loss) | | $ | 5,885 | | | $ | (5,152 | ) |
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Adjusted EBITDA | | $ | 5,907 | | | $ | 13,475 | |
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EPU—Basic | | $ | 0.24 | | | $ | (0.21 | ) |
EPU—Basic Units Outstanding | | | 24,186,724 | | | | 24,309,448 | |
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EPU—Diluted | | $ | 0.24 | | | $ | (0.21 | ) |
EPU—Diluted Units Outstanding | | | 24,186,724 | | | | 24,309,448 | |
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Constellation Energy Partners LLC
Condensed Consolidated Balance Sheets
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| | | Mar. 31, | | | Dec. 31, | |
| | | 2012 | | | 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 | |
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Total assets | | $ | 337,347 | | | $ | 334,306 | |
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Current liabilities | | $ | 11,878 | | | $ | 14,554 | |
Debt | | | 98,400 | | | | 98,400 | |
Other long-term liabilities | | | 14,855 | | | | 14,432 | |
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Total liabilities | | | 125,133 | | | | 127,386 | |
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Common members’ equity | | | 207,472 | | | | 201,483 | |
Accumulated other comprehensive income | | | 4,742 | | | | 5,437 | |
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Total members’ equity | | | 212,214 | | | | 206,920 | |
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Total liabilities and members’ equity | | $ | 337,347 | | | $ | 334,306 | |
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Constellation Energy Partners LLC
Reconciliation of Net Income (Loss) to Adjusted EBITDA
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| | | 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 | |
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Adjusted EBITDA (1) | | $ | 5,907 | | | $ | 13,475 | |
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| | | 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 | ) |
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Adjusted EBITDA (1),(2) | | $ | 13,841 | | | $ | 11,672 | | | $ | 96,596 | | | $ | 54,125 | |
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| (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:
| Ÿ | interest (income) expense, net; |
| Ÿ | depreciation, depletion and amortization; |
| Ÿ | write-off of deferred financing fees; |
| Ÿ | (gain) loss on sale of assets; |
| Ÿ | (gain) loss from equity investment; |
| Ÿ | unit-based compensation programs; |
| Ÿ | (gain) loss from mark-to-market activities; and |
| Ÿ | 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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