Exhibit 99.1
EPL Announces Fourth Quarter 2004 and Full Year 2004 Results
NEW ORLEANS--(BUSINESS WIRE)--Feb. 15, 2005--Energy Partners, Ltd.
(NYSE:EPL):
-- Record High Annual Production, Net Income and Discretionary
Cash Flow
-- Extensions, Discoveries and Other Additions Replaced 176% of
Production
-- 80% Exploratory Drilling Success Rate
Energy Partners, Ltd. ("EPL") (NYSE:EPL) today announced financial
and operational results for the fourth quarter of 2004 as well as for
the full year 2004. Net income available to common stockholders for
the fourth quarter 2004 was $13.9 million, or $0.37 per diluted share,
compared to net income available to common stockholders of $3.9
million, or $0.12 per diluted share, in the same quarter a year ago.
Discretionary cash flow, which is cash flow from operating
activities before changes in working capital and exploration
expenditures, also increased, rising 52% to $58.8 million from $38.6
million in the fourth quarter of 2003 (see reconciliation of
discretionary cash flow schedule in the tables). Cash flow from
operating activities for the fourth quarter of 2004 was $40.2 million,
up from $35.1 million in the fourth quarter of 2003.
The Company said its record quarterly revenue and strong quarterly
earnings and cash flow were primarily attributable to its efforts in
maintaining high production volumes combined with high commodity
prices and rigorous control of lease operating costs. Several factors
partially offset these benefits, including tropical storm and weather
related production downtime, higher depreciation, depletion and
amortization expenses and an active exploratory drilling program.
For the full year 2004, net income available to common
stockholders reached a record $43.0 million, or $1.20 per diluted
share, a 45% increase from last year's record net income available to
common stockholders of $29.7 million, or $0.93 per diluted share.
Earnings for 2003 included a one-time after-tax benefit of $2.3
million, or $0.06 per diluted share, related to the cumulative effect
of a change in accounting principle as a result of the adoption of
Financial Accounting Standards Board Statement No. 143, "Accounting
for Asset Retirement Obligations", which became effective January 1,
2003.
For the full year 2004, discretionary cash flow increased by 37%,
reaching $205.1 million in 2004 compared to $150.2 million in 2003
(see reconciliation of discretionary cash flow schedule in the
tables). Cash flow from operating activities totaled $165.1 million, a
21% increase from the 2003 figure of $136.7 million. Higher production
volumes and continued strength in commodity prices were the primary
factors leading to increased earnings and cash flow in 2004.
Reserve Replacement and Finding and Development Costs
At year-end 2004, proved reserves grew to 53.7 million barrels of
oil equivalent ("Mmboe"), an increase of 8% from 49.8 Mmboe at
year-end 2003. The recent acquisition of south Louisiana properties by
EPL closed on January 20, 2005 and its impact is not included in EPL's
year-end 2004 reserves. On a barrel of oil equivalent ("Boe") basis,
EPL's reserves at year-end 2004 were 46% natural gas and 54% oil, and
78% were classified as proved developed. EPL's proved reserves are
based upon third party engineering reports prepared by Netherland,
Sewell & Associates, Inc. and Ryder Scott Company, L.P.
In 2004, extensions, discoveries and other additions to EPL's
proved reserves totaled 14.4 Mmboe, which is equal to 176% of 2004
production. Revisions to previous estimates, related primarily to
disappointing development drilling results, reduced proved reserves by
2.3 Mmboe. Including the impact of these revisions, the Company
replaced 148% of 2004 production.
EPL's finding and development costs in 2004 were $15.86 per Boe.
In the last three years, EPL has averaged 181% annual reserve
replacement at a cost of $12.36 per Boe. For the same three-year
period, EPL's reserve replacement through the drill bit and revisions
averaged 137% at a cost of $12.29 per Boe, and reserve replacement
through acquisitions averaged 44% at a cost of $12.60 per Boe.
Richard A. Bachmann, EPL's Chairman, President and CEO, remarked,
"2004 was another record year for EPL, both operationally and
financially. While production in the fourth quarter was reduced by
storms and other weather-related issues and delays, we were still
within our revised guidance for the quarter and finished off the year
with record production on an annual basis. Our financial performance
followed suit, setting new records for revenue, net income, and
discretionary cash flow in 2004."
Bachmann continued, "2004 also marked the Company's best
performance yet in our exploration program. Replacing 176% of
production with the drill bit represents tremendous value creation for
our shareholders. While drilling and oil field service costs continue
to rise in response to an increase in industry drilling activity
levels, we are continuing to work diligently to efficiently deploy our
capital. In the current commodity price environment, we are still a
long way from scaling back our activity level."
Fourth Quarter 2004 Production and Prices
Production in the fourth quarter 2004 averaged 22,374 Boe per day.
Production levels in the quarter were impacted by tropical storm and
weather related downtime along with a two month delay in production
start up of the second and third wells at South Timbalier 41. Natural
gas production averaged 78.2 million cubic feet ("Mmcf") per day
compared to 84.2 Mmcf in the fourth quarter of 2003. Oil production
averaged 9,348 barrels ("Bbls") per day, a rise of 9% from the fourth
quarter 2003 level of 8,571 Bbls per day. A small amount of production
remains shut-in awaiting repair of storm damage. Production was
initiated from the second and third wells at South Timbalier 41 in
early January 2005, and company-wide production is currently averaging
just under 28,000 Boe per day.
In the fourth quarter of 2004, EPL realized average prices of
$6.66 per thousand cubic feet ("Mcf") of natural gas and $39.85 per
barrel of oil, net of hedging. These prices represent a 37% increase
in the average natural gas price and 42% increase in the average oil
price from the fourth quarter 2003. EPL maintains detailed information
on its hedging program on its web site, www.eplweb.com.
Full Year 2004 Production and Prices
EPL achieved record high annual production of 22,346 Boe per day
in 2004, a 6% increase from the 2003 average of 21,077 Boe per day.
Natural gas production rose 4% from 2003 levels to average 82.1 Mmcf
per day in 2004. Oil production rose 9%, averaging 8,663 Bbls per day
in 2004 compared to 7,978 Bbls per day in 2003.
Net of the impact of hedging, the average realized natural gas
price for 2004 was $6.11 per Mcf, an 18% increase from the 2003
average realized natural gas price of $5.16. Oil price realizations
rose to $35.01 per barrel for 2004, net of hedging, a 25% increase
compared to the 2003 average realized oil price of $28.02.
Capital Expenditures
Expenditures for exploration and development totaled $192.1
million for the full year 2004. For 2005, the Company has set a
capital budget of $240 million, which includes anticipated spending on
the recently acquired south Louisiana properties. EPL expects the risk
allocation of the 2005 budget to match its historic allocation, with
approximately 60% of the budget earmarked for development and low risk
exploitation, 25% for moderate risk exploration, and 15% for higher
risk, higher potential exploration. The Company does not budget for
acquisitions.
At year end 2004, EPL's long-term debt totaled $150.2 million
while cash and cash equivalents totaled $93.5 million. Its debt to
total capitalization ratio was 32%, excluding the impact of the cash
on the balance sheet as of the end of the year. Pro forma for the
Company's acquisition that closed on January 20, 2005, total debt
stood at $210.2 million, cash stood at $12.5 million, and the debt to
capitalization ratio was 40%.
2004 Operational Highlights
In 2004 EPL successfully drilled 20 of 25 exploratory wells for an
80% exploratory success rate. The Company also drilled 6 development
wells of which 4 were successful and completed 17 well workovers and
recompletions successfully. A table summarizing the 2004 exploratory
drilling program follows.
Water Well EPL
Well Depth Depth Working
Block / Prospect Number (ft.) (ft.) Result Interest
- ----------------------------------------------------------------------
High Island 55L #5 45 8,109 Oil 35%
South Timbalier 180 #A-7 160 10,627 Gas 100%
East Bay - Peregrine
(South Pass 27) #98 ST 40 10,840 Oil and Gas 100%
Eugene Island 277 #A-3 160 14,510 Oil and Gas 50%
East Cameron 161 #A-3 86 7,900 Gas 100%
West White Lake #1 8 18,500 Dry 50%
South Timbalier 41 #2 60 16,450 Oil and Gas 60%
High Island 56L #1 45 8,220 Gas 35%
Eugene Island 242 #J-4 156 6,615 Gas 100%
High Island A 6 #5 60 12,400 Gas 17%
East Buck Point #1 8 17,200 Dry 25%
East Bay - Pinnacle
(South Pass 27) #92 26 11,000 Oil and Gas 100%
East Cameron 43 #1 46 13,300 Dry 44%
West Cameron 204 #1 55 10,075 Dry 50%
Matagorda Island 640 #1 104 8,300 Gas 50%
South Timbalier 46 #2 70 17,850 Gas 100%
South Timbalier 41 #A-2 68 17,300 Oil and Gas 60%
Matagorda Island 639 #1 110 8,500 Gas 50%
Vermilion 73 #1 25 11,000 Dry 50%
North Padre Island 913 #1 155 8,300 Gas 50%
Galveston 227 #1 50 9,250 Gas 50%
South Marsh Island 192 #A-2 402 13,364 Oil and Gas 17%
Eugene Island 277 #4 160 11,613 Gas 50%
South Marsh Island 109 #A-4 189 10,668 Gas 27%
South Timbalier 41 #4 70 17,400 Oil and Gas 60%
Of the 2004 exploratory successes, 8 were onstream before year-end
2004, 4 are expected to be online in the first half of 2005, and the
remaining 8 are expected in the second half of 2005.
Bachmann added, "Once again we maintained an 80% success rate in
our drilling program in 2004. We are particularly pleased with our
consistent track record over the last several years in reinvesting our
growing cash flow into successful new exploration projects. That
repeatability has been the key to our growth, and we believe we have
the prospect portfolio and generating capacity to sustain that success
rate into the future."
Bachmann continued, "Even though 2004 ended up as the best and
busiest year in EPL's history, we believe that 2005 holds even greater
potential to grow and transform the Company. We will continue to focus
on the U. S. Gulf Coast, both offshore and onshore. We believe that
the Shelf holds tremendous potential, as evidenced by our South
Timbalier 41 field discovery. In our new core area in south Louisiana,
we have already drilled two successful wells and we have rigs on three
additional locations. For 2005, we expect to drill more wells offshore
than we did in 2004, and our south Louisiana drilling program will be
incremental to our organic growth offshore."
Conference Call
EPL has scheduled a conference call to discuss quarterly and
year-end results for today, February 15, at 8:30 a.m. Central Time. On
the call, management will discuss operational and financial results
and also provide an update on guidance for 2005.
To participate in the EPL conference call, callers in the United
States and Canada can dial (877) 612-5303 and international callers
can dial (706) 634-0487. The Conference I.D. for callers is 3512776.
The call will be available for replay beginning two hours after
the call is completed through midnight of February 20, 2005. For
callers in the United States and Canada, the toll-free number for the
replay is (800) 642-1687. For international callers the number is
(706) 645-9291. The Conference I.D. for all callers to access the
replay is 3512776.
Analyst Day
EPL will host an analyst's day on February 23, 2005 to review 2004
results and preview 2005 activities. Attendance is directed to sell
side analysts and buy side analysts and portfolio managers. Interested
parties are encouraged to contact the Company for further details. The
audio portion of the presentation will be webcast live as well as for
on-demand listening on the Company's website, www.eplweb.com.
Founded in 1998, EPL is an independent oil and natural gas
exploration and production company based in New Orleans, Louisiana.
The Company's operations are focused along the U. S. Gulf Coast, both
onshore in south Louisiana and offshore in the shallow to moderate
depth waters of the Gulf of Mexico Shelf.
Any statements made in this news release, other than those of
historical fact, about an action, event or development, which
the Company hopes, believes or anticipates may or will occur
in the future, are "forward-looking statements" under U. S.
securities laws. Such statements are subject to various
assumptions, risks and uncertainties, which are specifically
described in our Annual Report on Form 10-K for fiscal year
ended December 31, 2003 filed with the Securities and Exchange
Commission. Forward-looking statements are not guarantees of
future performance or an assurance that the Company's current
assumptions and projections are valid. Actual results may
differ materially from those projected.
ENERGY PARTNERS, LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, except per share data)
Three Months Ended Years Ended
December 31, December 31,
------------------ -------------------
2004 2003 2004 2003
-------- -------- -------- --------
(Unaudited) (Unaudited)
Revenues:
Oil and natural gas $ 82,138 $59,792 $ 294,531 $229,703
Other 416 60 679 484
---------- ------- ---------- --------
82,554 59,852 295,210 230,187
---------- ------- ---------- --------
Costs and expenses:
Lease operating 10,432 8,578 40,617 36,693
Taxes, other than on earnings 2,814 1,731 9,263 7,650
Exploration expenditures and
dry hole costs 9,005 8,118 35,935 17,353
Depreciation, depletion and
amortization 26,092 22,482 92,353 81,927
General and administrative:
Stock-based compensation 496 466 3,050 1,285
Other general and
administrative 7,518 7,555 27,924 26,719
---------- ------- ---------- --------
Total costs and expenses 56,357 48,930 209,142 171,627
---------- ------- ---------- --------
Income from operations 26,197 10,922 86,068 58,560
---------- ------- ---------- --------
Other income (expense):
Interest income 434 201 1,219 380
Interest expense (3,593) (3,625) (14,355) (10,174)
---------- ------- ---------- --------
(3,159) (3,424) (13,136) (9,794)
---------- ------- ---------- --------
Income before income taxes and
cumulative effect of change in
accounting principle 23,038 7,498 72,932 48,766
Income taxes (8,293) (2,718) (26,516) (17,784)
---------- ------- ---------- --------
Income before cumulative
effect of change
in accounting principle 14,745 4,780 46,416 30,982
Cumulative effect of change in
accounting principle,
net of income taxes of $1,276 - - - 2,268
---------- ------- ---------- --------
Net income 14,745 4,780 46,416 33,250
Less dividends earned on
preferred stock and accretion
of discount (826) (854) (3,399) (3,545)
---------- ------- ---------- --------
Net income available to
common stockholders $ 13,919 $ 3,926 $ 43,017 $ 29,705
========== ======= ========== ========
Earnings per share:
Basic:
Before cumulative effect of
change in accounting
principle $ 0.42 $ 0.12 $ 1.31 $ 0.89
Cumulative effect of change
in accounting principle $ - $ - $ - $ 0.07
---------- ------- ---------- --------
Basic earnings per share $ 0.42 $ 0.12 $ 1.31 $ 0.96
========== ======= ========== ========
Diluted:
Before cumulative effect of
change in accounting
principle $ 0.37 $ 0.12 $ 1.20 $ 0.87
Cumulative effect of change
in accounting principle $ - $ - $ - $ 0.06
---------- ------- ---------- --------
Diluted earnings per share $ 0.37 $ 0.12 $ 1.20 $ 0.93
========== ======= ========== ========
Weighted average common shares
used in computing income
per share:
Basic 33,075 32,185 32,861 30,822
Incremental common shares 6,360 5,182 5,788 4,753
---------- ------- ---------- --------
Diluted 39,435 37,367 38,649 35,575
========== ======= ========== ========
ENERGY PARTNERS, LTD.
CONSOLIDATED STATEMENTS OF NET CASH PROVIDED BY OPERATING ACTIVITIES
(In Thousands)
Three Months Ended Years Ended
December 31, December 31,
------------------ -------------------
2004 2003 2004 2003
-------- -------- -------- --------
(Unaudited) (Unaudited)
Cash flows from operating
activities:
Net income $ 14,745 $ 4,780 $ 46,416 $ 33,250
Adjustments to reconcile net
income to net cash
provided by operating
activities:
Cumulative effect of
change in accounting
principle,
net of tax - - - (2,268)
Depreciation, depletion
and amortization 26,092 22,482 92,353 81,927
Gain on sale of oil and
natural gas assets (282) - (282) (207)
Stock-based compensation 496 466 3,100 1,285
Deferred income taxes 8,293 2,442 26,365 17,708
Exploration expenditures 7,190 6,690 26,730 12,810
Amortization of deferred
financing costs 226 232 907 902
Other 189 38 293 271
Changes in operating assets
and liabilities:
Trade accounts receivable (19,332) (5,164) (24,931) (9,490)
Other receivables 1,651 - (5,600) -
Prepaid expenses 928 (225) (179) (239)
Other assets (3,840) (424) (4,522) (3,112)
Accounts payable and
accrued expenses 3,522 4,047 6,180 4,814
Other liabilities 309 (286) (1,756) (949)
----------- ------- ----------- --------
Net cash provided by
operating activities $ 40,187 $35,078 $ 165,074 $136,702
=========== ======= =========== ========
Reconciliation of
discretionary cash flow:
Net cash provided by
operating activities 40,187 35,078 165,074 136,702
Changes in working capital 16,762 2,052 30,808 8,976
Non-cash exploration
expenditures (7,190) (6,690) (26,730) (12,810)
Total exploration
expenditures 9,005 8,118 35,935 17,353
----------- ------- ----------- --------
Discretionary cash flow $ 58,764 $38,558 $ 205,087 $150,221
=========== ======= =========== ========
The table above reconciles discretionary cash flow to net cash
provided by operating activities. Discretionary cash flow is
defined as cash flow from operations before changes in working
capital and exploration expenditures. Discretionary cash flow
is widely accepted as a financial indicator of an oil and
natural gas company's ability to generate cash which is used
to internally fund exploration and development activities, pay
dividends and service debt. Discretionary cash flow is
presented based on management's belief that this non-GAAP
financial measure is useful information to investors because
it is widely used by professional research anaylsts in the
valuation, comparison, rating and investment recommendations
of companies within the oil and natural gas exploration and
production industry. Many investors use the published research
of these analysts in making their investment decisions.
Discretionary cash flow is not a measure of financial
performance under GAAP and should not be considered as an
alternative to cash flows from operating activities, as
defined by GAAP, or as a measure of liquidity, or an
alternative to net income. Investors should be cautioned that
discretionary cash flow as reported by us may not be
comparable in all instances to discretionary cash flow as
reported by other companies.
ENERGY PARTNERS, LTD.
SELECTED PRODUCTION, PRICING AND OPERATIONAL STATISTICS
(Unaudited)
Three Months Years
Ended Ended
December 31, December 31,
--------------- -----------------
2004 2003 2004 2003
------- ------- -------- --------
PRODUCTION AND PRICING
- -----------------------
Net Production (per day):
Oil (Bbls) 9,348 8,571 8,663 7,978
Natural gas (Mcf) 78,156 84,228 82,098 78,596
Total (Boe) 22,374 22,609 22,346 21,077
Oil and Natural Gas Revenues
(in thousands):
Oil $34,269 $22,158 $111,006 $ 81,599
Natural gas 47,869 37,634 183,525 148,104
Total 82,138 59,792 294,531 229,703
Average Sales Prices (1):
Oil (per Bbl) $ 39.85 $ 28.10 $ 35.01 $ 28.02
Natural gas (per Mcf) 6.66 4.86 6.11 5.16
Average (per Boe) 39.90 28.75 36.01 29.86
OPERATIONAL STATISTICS
- ----------------------
Average Costs (per Boe):
Lease operating expense $ 5.07 $ 4.12 $ 4.97 $ 4.77
Taxes, other than on earnings 1.37 0.83 1.13 0.99
Depreciation, depletion and
amortization 12.68 10.81 11.29 10.65
(1) Prices are net of hedging transactions which had the following
impact:
-- Reduced natural gas price realizations by $0.09 per Mcf for
the fourth quarter of 2004 and did not impact natural gas
price realizations in the fourth quarter of 2003;
-- Reduced oil price realizations by $6.68 and $1.87 per barrel
for the fourth quarter of 2004 and 2003, respectively;
-- Reduced natural gas price realizations by $0.04 and $0.23 per
Mcf for the years ended December 31, 2004 and 2003,
respectively; and
-- Reduced oil price realizations by $4.40 and $1.67 per barrel
for the years ended December 31, 2004 and 2003, respectively.
ENERGY PARTNERS, LTD.
CONSOLIDATED BALANCE SHEETS
(In Thousands, except share data)
December 31, December 31,
2004 2003
----------- -----------
(Unaudited)
ASSETS
- -------
Current assets:
Cash and cash equivalents $ 93,537 $ 104,392
Trade accounts receivable --
net of allowance for
doubtful accounts 59,341 35,315
Other receivables 5,600 -
Deferred tax asset 1,906 2,939
Prepaid expenses 2,285 2,106
----------- ---------
Total current assets 162,669 144,752
Property and equipment, at cost under
the successful efforts method of
accounting for oil and natural gas
properties 769,331 598,101
Less accumulated depreciation, depletion
and amortization (304,997) (210,013)
----------- ---------
Net property and equipment 464,334 388,088
Other assets 15,970 6,575
Deferred financing costs --
net of accumulated amortization 4,705 4,766
----------- ---------
$ 647,678 $ 544,181
=========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Accounts payable $ 21,255 $ 14,650
Accrued expenses 59,387 42,487
Fair value of commodity derivative
instruments 1,749 3,814
Current maturities of long-term debt 108 99
----------- ---------
Total current liabilities 82,499 61,050
Long-term debt 150,109 150,317
Deferred income taxes 53,686 29,584
Asset retirement obligation 45,064 40,577
Other 1,271 1,168
----------- ---------
332,629 282,696
Stockholders' equity:
Preferred stock, $1 par value, authorized
1,700,000 shares; issued and outstanding:
2004 - 344,399 shares; 2003 - 368,076
shares. Aggregate liquidation value:
2004 - $34,440; 2003 $36,808 33,504 34,894
Common stock, par value $0.01 per share.
Authorized 50,000,000 shares; issued and
outstanding: 2004 - 33,137,643 shares;
2003 - 32,241,981 shares 367 323
Additional paid-in capital 296,460 228,511
Accumulated other comprehensive loss (1,119) (2,441)
Retained earnings 43,215 198
Treasury stock, at cost. 2004 - 3,480,441
shares; 2003 - no shares (57,378) -
----------- ---------
Total stockholders' equity 315,049 261,485
Commitments and contingencies
----------- ---------
$ 647,678 $ 544,181
=========== =========
ENERGY PARTNERS, LTD.
SUPPLEMENTAL OIL & GAS DISCLOSURE
(Unaudited)
Crude Natural
Oil Gas Equivalents
(Mbbl) (Mmcf) (Mboe)
-------- -------- -----------
Proved developed and undeveloped reserves:
December 31, 2001 25,462 61,797 35,762
Purchases of reserves
in place 223 57,728 9,844
Extensions, discoveries
and other additions 2,117 32,492 7,532
Revisions 1,525 (5,295) 643
Production (2,974) (19,765) (6,268)
-------- -------- -----------
December 31, 2002 26,353 126,957 47,513
Extensions, discoveries
and other additions 2,275 40,270 8,987
Revisions 1,698 (4,135) 1,008
Production (2,912) (28,688) (7,693)
-------- -------- -----------
December 31, 2003 27,414 134,404 49,815
Extensions, discoveries
and other additions 3,232 67,049 14,407
Revisions 1,295 (21,570) (2,300)
Production (3,171) (30,048) (8,179)
-------- -------- -----------
December 31, 2004 28,770 149,835 53,743
Proved developed reserves:
December 31, 2002 21,070 70,014 32,739
December 31, 2003 22,306 71,531 34,228
December 31, 2004 24,737 102,760 41,864
Costs incurred for oil and natural gas property acquisition,
exploration and development activities for the three-years ended
December 31 are as follows (in Thousands):
2004 2003 2002
-------- -------- -----------
Business combinations
Proved properties $ 2,166 $ 850 $ 116,415
Unproved properties - - 7,616
-------- -------- -----------
Total business combinations 2,166 850 124,031
Lease acquisitions 6,551 6,030 1,922
Exploration 113,278 60,170 27,083
Development 72,235 45,682 39,061
-------- -------- -----------
Total finding and
development costs 192,064 111,882 68,066
-------- -------- -----------
Total finding,
development and
acquisition costs 194,230 112,732 192,097
-------- -------- -----------
Asset retirement liabilities incurred 3,686 812 -
Asset retirement revisions (189) 2,519 -
-------- -------- -----------
Total cost incurred $197,727 $116,063 $ 192,097
Acquisition costs in 2003 and 2004 relate to the contingent
consideration payments made to former Hall-Houston
shareholders.
CONTACT: Energy Partners, Ltd., New Orleans
Charles A. Meade, 504-799-4814
or
Al Petrie, 504-799-1953
www.eplweb.com