Exhibit 99.1
EPL Announces Record Fourth Quarter and
Year End Results for 2005 and Entry into Deepwater
NEW ORLEANS--(BUSINESS WIRE)--Feb. 24, 2006--Energy Partners, Ltd.
(NYSE:EPL):
-- Record High Production in 2005
-- Record Annual Revenue, Cash Flow, and Net Income
-- All-In Reserve Replacement of 167%
Energy Partners, Ltd. ("EPL") this morning reported financial and
operational results for the fourth quarter of 2005 and the full year,
including year end 2005 proved reserves and reserve replacement. For
the fourth quarter of 2005, net income available to common
stockholders was $28.1 million, or $0.69 per diluted share, up 102%
from $13.9 million, or $0.37 per diluted share, in the fourth quarter
of 2004. For the year 2005, net income available to common
stockholders was $72.2 million, or $1.79 per diluted share, a 68%
increase from net income in 2004 of $43.0 million, or $1.20 per
diluted share. Net income for both the quarter and the year were
record highs for the Company.
Discretionary cash flow, which is cash flow from operations before
changes in working capital and exploration expenditures, totaled $98.6
million in the fourth quarter of 2005, a 68% increase over $58.8
million in the fourth quarter last year. For the full year,
discretionary cash flow rose 51% to $308.8 million from $205.1 million
in 2004 (see reconciliation of discretionary cash flow in appendix).
Cash flow from operations in the most recent quarter was $16.3
million, compared to $40.2 million in the fourth quarter of 2004. Cash
flow from operations for 2005 totaled $270.0 million, rising 64% from
$165.1 million in 2004.
In the fourth quarter of 2005, which was significantly affected by
shut ins due to tropical weather, production averaged 18,583 barrels
of oil-equivalent (Boe) per day, compared to 22,374 Boe per day in the
fourth quarter of 2004. Natural gas production in the fourth quarter
of 2005 averaged 82.0 million cubic feet per day and oil production
averaged 4,916 barrels per day.
Production for 2005 averaged 22,722 Boe per day, a slight increase
over the 2004 average of 22,346 Boe per day. Natural gas production
averaged 88.4 million cubic feet per day in 2005, and oil production
averaged 7,984 barrels per day.
Price realizations, all of which are stated net of hedging impact,
averaged $45.16 per barrel for oil in the fourth quarter and $11.39
per thousand cubic feet (Mcf) of natural gas, compared to $39.85 per
barrel and $6.66 per Mcf in the fourth quarter last year. For 2005,
oil price realizations averaged $46.45 per barrel and natural gas
averaged $8.26 per Mcf compared to $35.01 per barrel and $6.11 per Mcf
in 2004.
Fourth quarter 2005 results benefited from strong commodity prices
and $20.6 million in claims accrued under the Company's business
interruption insurance coverage. Offsetting the effects of the
insurance claims and record revenue in the quarter were higher than
expected exploration expense, including $20.8 million in dry hole
costs, and $8.0 million in impairments of certain properties.
Additionally, general and administrative expenses were $12.4 million
in the quarter, which was higher than expected due to additional
insurance costs, relocation of offices back to New Orleans, and a
legal reserve associated with a contract dispute.
The annual amounts for production, net income, cash flow, and
revenues all represent record highs for the Company. The record annual
financial results were primarily due to record production in the first
half of the year along with a relatively quick recovery from the
impact of tropical weather in the second half of the year, all during
a period of high commodity prices.
At year end 2005, cash stood at $6.8 million and total debt stood
at $235.1 million. Debt to capitalization was 37%.
Richard A. Bachmann, EPL's Chairman and CEO, commented, "It is a
great tribute to our staff that in a year when Gulf producers had to
contend with Katrina, Rita, and a raft of other tropical storms, we
were still able to increase production over 2004 levels. In addition,
despite all the difficulties that we experienced as a Company and as
individuals, we were still able to deliver annual results with record
highs on a number of financial metrics. We now have 100% of our New
Orleans-based staff back in our offices in New Orleans. We are excited
about our 2006 drilling program, which is off to a great start."
Reserve Replacement and Costs
EPL's proved reserves at year end 2005 stood at 31.5 million
barrels of oil and 166.9 billion cubic feet of gas, or 59.3 million
Boe, up 10% from 53.7 million Boe at year end 2004. In 2005, the
Company replaced 167% of its reserves at an average cost of $34.55 per
barrel, based on total finding, development, and acquisition costs
(see reconciliation in appendix). EPL acquired 12.7 million Boe in
2005 at an aggregate cost of $171.4 million and added 5.2 million Boe
from its exploration and development program in 2005 at an aggregate
cost of $307.4 million. The Company recorded 4.0 million Boe in
negative revisions to its proved reserves in 2005, reflecting positive
revisions from year end 2004 reserves and 5.4 million Boe in negative
revisions associated with its onshore south Louisiana acquisition in
January 2005. Despite good exploratory results in south Louisiana, the
negative revisions primarily resulted from poor development drilling
results and the impact of those results on underlying reserves. All of
the Company's reserve figures are based upon third party engineering
estimates by Ryder Scott Company, L.P. and Netherland, Sewell &
Associates, Inc.
Bachmann continued, "Our success with the drill bit in 2005 was
clearly below our historical track record and also below our
expectations. We have made some changes in our program which we expect
will get us back closer to the levels we saw in 2003 and 2004. Those
changes, coupled with the exceptional quality of our 2006 drilling
program, are designed to return us to the growth and value creation
through the drill bit that has been the hallmark of this Company."
Operational Highlights
EPL drilled 44 exploratory wells in 2005 and posted 28
discoveries, for an overall exploratory success rate of 64%. The
Company had 16 discoveries in 28 wells offshore and 12 discoveries in
16 wells onshore. A table of EPL's 2005 offshore exploratory wells is
available in appendix.
In addition to exploratory drilling, EPL drilled 11 development
wells and completed 33 workovers and recompletions in 2005.
The Company was also active in a number of state and federal lease
sales in 2005, adding more than 110,000 gross acres in the year. Year
end undeveloped gross acres stood at 231,547, an 102% increase over
the year end 2004 undeveloped acreage of 114,431. Total gross acreage
at year end 2005 was 440,326 acres.
Deepwater
EPL recently finalized an agreement to acquire a 25% working
interest in 23 undeveloped leases in the deepwater Gulf of Mexico from
Noble Energy, Inc. (NYSE:NBL). The agreement calls for a minimum of
two exploratory wells in 2006, one of which is currently drilling,
Mississippi Canyon 204 #1, located in 3,400 feet of water targeting
the Redrock prospect. EPL holds a 25% working interest in the well,
which is presently at an intermediate casing point, and has the option
to participate with a 25% working interest in all of the 13 currently
identified prospects on the 23 leases.
Current Operations
EPL recently drilled its second exploratory discovery of 2006, the
East Cameron 268 #1. EPL holds a 50% working interest in the well,
which is operated by Callon Petroleum Co., (NYSE:CPE). Year to date in
2006, EPL has two discoveries in two exploratory tests.
The Company currently has four exploratory wells underway: South
Pass 26 #1 at East Bay testing the high potential Denali prospect,
which is expected to reach total depth in four to eight weeks, at 40%
working interest, Mississippi Canyon 204 #1 testing the Redrock
prospect at 25% working interest, West Cameron 3 #1 at 25% working
interest and West Cameron 202 #1 at 25% working interest. The Company
expects to drill at least 24 exploratory wells offshore in 2006 along
with at least eight exploratory wells onshore. EPL's capital budget
for 2006 is currently set at $360 million, which includes
approximately $40 million for deepwater lease acquisition, seismic,
and exploration. The 2006 exploration and development program is
expected to be funded entirely through internally generated cash flow.
The Company does not budget for acquisitions. During the month of
February, production has been as high as 25,000 Boe per day, and the
Company expects essentially all its productive capacity to be online
by the end of the second quarter.
Bachmann concluded, "While the storm season of 2005 prevented us
from delivering the growth last year that we projected, we will soon
have essentially all production restored, and that puts us in an
excellent position for 25% to 35% projected production growth in 2006.
We feel we have one of our most exciting exploratory portfolios ever
in front of us in 2006, even before considering the potential impact
of our Denali prospect. As difficult as 2005 was for us, the employees
of EPL are demonstrating an enduring enthusiasm going into 2006 that I
believe will deliver great returns for the Company and its
shareholders in the year ahead."
EPL has scheduled a conference call to review fourth quarter and
year end 2005 results this morning , February 24, 2006, at 8:00 A.M.
central time. 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
5144909.
The call will be available for replay beginning two hours after
the call is completed through midnight of March 1. 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 5144909.
The conference call will be webcast live as well as for on-demand
listening at the Company's web site, www.eplweb.com. Listeners may
access the call through the "Conference Calls" link in the Investor
Relations section of the site. The call will also be available through
the CCBN Investor Network.
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 Gulf of Mexico.
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, 2004 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.
Appendix - 2005 Offshore Exploratory Wells
Lease Well Number Result EPL Working Interest
----- ----------- ------ --------------------
South Pass 40 #2 Oil and gas 100%
Vermilion 237 #1 Gas 100%
East Cameron 346 #A-12 Dry 25%
West Cameron 242 #1 Dry 75%
South Marsh Island 109 #A-5 Gas 27%
West Delta 53 #1 Gas 67%
Eugene Island 277 #5 Gas 67%
South Timbalier 41 #3 Oil and Gas 60%
Eugene Island 277 #A-2 ST Oil and Gas 50%
Eugene Island 27 #2 Gas 100%
Galveston 341-S #1 Gas 50%
West Delta 51 #1 Dry 100%
West Cameron 31 #1 Dry 45%
East Cameron 111 #1 Gas 50%
South Timbalier 23 CM-19 ST Oil 27%
Eugene Island 247 #J-3 ST Gas 98%
Eugene Island 141 #1 Gas 20%
South Pass 40 #1 Gas 40%
West Cameron 479 #1 Dry 50%
West Cameron 455 #1 Dry 50%
West Delta 52 #1 Dry 100%
West Cameron 98 #3 Dry 25%
High Island 19 #1 Dry 50%
Eugene Island 4 #1 Dry 50%
South Timbalier 42 #1 Oil 60%
South Pass 29 #1 Dry 100%
South Pass 39 #1 Dry 100%
South Timbalier 23 #CC-6 ST Oil 27%
ENERGY PARTNERS, LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, except per share data)
Three Months Ended Years Ended
December 31, December 31,
------------------ ------------------
2005 2004 2005 2004
-------- ------- --------- --------
(Unaudited) (Unaudited)
Revenues:
Oil and natural gas $106,345 $ 82,138 $402,005 $294,531
Other 919 416 942 679
-------- -------- -------- --------
107,264 82,554 402,947 295,210
-------- -------- -------- --------
Costs and expenses:
Lease operating 9,711 10,419 50,431 40,328
Transportation expense 258 13 1,051 289
Taxes, other than on earnings 2,114 2,814 10,372 9,263
Exploration expenditures, dry
hole costs and impairments 29,904 9,005 82,844 35,935
Depreciation, depletion and
amortization 24,219 26,092 103,649 92,353
General and administrative:
Stock-based compensation 550 496 6,767 3,050
Other general and
administrative 12,372 7,518 36,438 27,924
-------- -------- -------- --------
Total costs and expenses 79,128 56,357 291,552 209,142
-------- -------- -------- --------
Business interruption recovery 20,632 - 20,632 -
Income from operations 48,768 26,197 132,027 86,068
-------- -------- -------- --------
Other income (expense):
Interest income 263 434 781 1,219
Interest expense (4,809) (3,593) (18,121) (14,355)
-------- -------- -------- --------
(4,546) (3,159) (17,340) (13,136)
-------- -------- -------- --------
Income before income taxes 44,222 23,038 114,687 72,932
Income taxes (16,118) (8,293) (41,592) (26,516)
-------- -------- -------- --------
Net income 28,104 14,745 73,095 46,416
Less dividends earned on
preferred stock and accretion
of discount - (826) (944) (3,399)
-------- -------- -------- --------
Net income available to common
stockholders $ 28,104 $ 13,919 $ 72,151 $ 43,017
======== ======== ======== ========
Earnings per share:
Basic earnings per share $ 0.74 $ 0.42 $ 1.94 $ 1.31
======== ======== ======== ========
Diluted earnings per share $ 0.69 $ 0.37 $ 1.79 $ 1.20
======== ======== ======== ========
Weighted average common shares
used in computing
income per share:
Basic 37,984 33,075 37,097 32,861
Incremental common shares 2,877 6,360 3,662 5,788
-------- -------- -------- --------
Diluted 40,861 39,435 40,759 38,649
======== ======== ======== ========
ENERGY PARTNERS, LTD.
CONSOLIDATED STATEMENTS OF NET CASH PROVIDED BY
OPERATING ACTIVITIES
(In Thousands)
Three Months Ended Years Ended
December 31, December 31,
------------------ ------------------
2005 2004 2005 2004
-------- -------- --------- --------
(Unaudited) (Unaudited)
Cash flows from operating
activities:
Net income $ 28,104 $ 14,745 $ 73,095 $ 46,416
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation, depletion
and amortization 24,219 26,092 103,649 92,353
Gain on sale of oil and
natural gas assets (869) (282) (777) (282)
Stock-based compensation 550 496 6,817 3,100
Deferred income taxes 16,114 8,293 41,242 26,365
Exploration expenditures 28,718 7,190 69,926 26,730
Amortization of deferred
financing costs 249 226 995 907
Other 292 189 966 293
Changes in operating assets
and liabilities:
Trade accounts receivable (32,572) (19,332) (18,985) (24,931)
Other receivables (36,881) 1,651 (43,703) (5,600)
Prepaid expenses 1,282 928 (894) (179)
Other assets (607) (3,840) (2,338) (4,522)
Accounts payable and
accrued expenses (12,318) 3,522 40,073 6,180
Other liabilities 17 309 (97) (1,756)
-------- -------- -------- --------
Net cash provided by operating
activities $ 16,298 $ 40,187 $269,969 $165,074
======== ======== ======== ========
Reconciliation of
discretionary cash flow:
Net cash provided by
operating activities 16,298 40,187 269,969 165,074
Changes in working capital 81,079 16,762 25,944 30,808
Non-cash exploration
expenditures (28,718) (7,190) (69,926) (26,730)
Total exploration
expenditures 29,904 9,005 82,844 35,935
-------- -------- -------- --------
Discretionary cash flow $ 98,563 $ 58,764 $308,831 $205,087
======== ======== ======== ========
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 analysts 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 Ended Years Ended
December 31, December 31,
------------------ ---------------
2005 2004 2005 2004
------ ------- ------ ------
PRODUCTION AND PRICING
- ----------------------
Net Production (per day):
Oil (Bbls) 4,916 9,348 7,984 8,663
Natural gas (Mcf) 82,001 78,156 88,430 82,098
Total (Boe) 18,583 22,374 22,722 22,346
Oil and Natural Gas Revenues (in
thousands):
Oil $20,423 $34,269 $135,359 $111,006
Natural gas 85,922 47,869 266,646 183,525
Total 106,345 82,138 402,005 294,531
Average Sales Prices (1):
Oil (per Bbl) $ 45.16 $ 39.85 $ 46.45 $ 35.01
Natural gas (per Mcf) 11.39 6.66 8.26 6.11
Average (per Boe) 62.20 39.90 48.47 36.01
OPERATIONAL STATISTICS
- ----------------------
Average Costs (per Boe):
Lease operating expense $ 5.68 $ 5.06 $ 6.08 $ 4.93
Taxes, other than on earnings 1.24 1.37 1.25 1.13
Depreciation, depletion and
amortization 14.17 12.68 12.50 11.29
(1) Prices are net of hedging transactions which had the following
impact:
- Reduced natural gas price realizations by $1.03 and $0.09 per Mcf
for the fourth quarter of 2005 and 2004, respectively;
- Reduced oil price realizations by $6.50 and $6.68 per barrel for
the fourth quarter of 2005 and 2004, respectively;
- Reduced natural gas price realizations by $0.24 and $0.04 per Mcf
for the years ended December 31, 2005 and 2004, respectively; and
- Reduced oil price realizations by $3.15 and $4.40 per barrel for
the years ended December 31, 2005 and 2004, respectively.
ENERGY PARTNERS, LTD.
CONSOLIDATED BALANCE SHEETS
(In Thousands, except share data)
December 31, December 31,
2005 2004
------------ ------------
(Unaudited)
ASSETS
- ------
Current assets:
Cash and cash equivalents $ 6,789 $ 93,537
Trade accounts receivable -- net of
allowance for doubtful accounts 78,326 59,341
Other receivables 49,303 5,600
Deferred tax asset 5,582 1,906
Prepaid expenses 3,179 2,285
------------ ------------
Total current assets 143,179 162,669
Property and equipment, at cost under the
successful efforts method of accounting
for oil and natural gas properties 1,189,078 769,331
Less accumulated depreciation, depletion
and amortization (418,347) (304,997)
------------ ------------
Net property and equipment 770,731 464,334
Other assets 13,284 15,970
Deferred financing costs -- net of
accumulated amortization 4,091 4,705
------------ ------------
$ 931,285 $ 647,678
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Accounts payable $ 28,810 $ 21,255
Accrued expenses 108,087 59,387
Fair value of commodity derivative
instruments 9,875 1,749
Current maturities of long-term debt 109 108
------------ ------------
Total current liabilities 146,881 82,499
Long-term debt 235,000 150,109
Deferred income taxes 87,559 53,686
Asset retirement obligation 56,039 45,064
Other 11,213 1,271
------------ ------------
536,692 332,629
Stockholders' equity:
Preferred stock, $1 par value,
authorized 1,700,000 shares; issued and
outstanding: 2005 - no shares;
2004 - 344,399 shares.
Aggregate liquidation value:
2004 - $34,440 - 33,504
Common stock, par value $0.01 per share.
Authorized 50,000,000 shares; issued
and outstanding: 2005 - 41,468,093
shares; 2004 - 36,618,084 shares 415 367
Additional paid-in capital 348,863 296,460
Accumulated other comprehensive loss (12,619) (1,119)
Retained earnings 115,366 43,215
Treasury stock, at cost. 2005 - 3,474,208
and 2004 - 3,480,441 shares (57,432) (57,378)
------------ ------------
Total stockholders' equity 394,593 315,049
Commitments and contingencies
------------ ------------
$ 931,285 $ 647,678
============ ============
ENERGY PARTNERS, LTD.
SUPPLEMENTAL OIL & GAS DISCLOSURE
(Unaudited)
Crude Oil Natural Gas Equivalents
(Mbbl) (Mmcf) (Mboe)
--------- ----------- -----------
Proved developed and
undeveloped reserves:
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
Purchases of reserves
in place 3,949 52,690 12,731
Extensions, discoveries
and other additions 1,086 24,490 5,168
Revisions 587 (27,789) (4,045)
Production (2,914) (32,277) (8,294)
----------- ----------- -----------
December 31, 2005 31,478 166,949 59,303
Proved developed reserves:
December 31, 2003 22,306 71,531 34,228
December 31, 2004 24,737 102,760 41,864
December 31, 2005 25,646 103,627 42,917
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):
2005 2004 2003
----------- ----------- -----------
Business combinations
Proved properties $ 142,025 $ 2,166 $ 850
Unproved properties 29,333 - -
----------- ----------- -----------
Total business combinations 171,358 2,166 850
Lease acquisitions 27,622 6,551 6,030
Exploration 171,859 113,278 60,170
Development 107,910 72,235 45,682
----------- ----------- -----------
Total finding and
development costs 307,391 192,064 111,882
----------- ----------- -----------
Total finding,
development and
acquisition costs 478,749 194,230 112,732
----------- ----------- -----------
Asset retirement liabilities
incurred 7,151 3,686 812
Asset retirement revisions (247) (189) 2,519
----------- ----------- -----------
Total cost incurred $ 485,653 $ 197,727 $ 116,063
Acquisition costs in 2003 and 2004 and $0.9 million in 2005 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