Exhibit 99.1
EPL Announces Second Quarter 2006 Results and Provides Update on Operations and
Stone Energy Acquisition; Second Quarter Highlights Include Record Highs for
Production and Revenue and 71% Exploratory Success Rate Year-to-Date
NEW ORLEANS--(BUSINESS WIRE)--Aug. 9, 2006--Energy Partners, Ltd.
(EPL or the Company) (NYSE:EPL) today announced financial results for
the second quarter of 2006 and provided an update on operations and
its pending acquisition of Stone Energy Corporation (Stone)
(NYSE:SGY). Net income available to common stockholders was $12.6
million for the second quarter of 2006 compared to $18.1 million for
the second quarter of 2005. Net income per diluted share for the
second quarter 2006 was $0.31 compared to $0.45 per diluted share in
the same quarter a year ago. In its operational update, EPL disclosed
that it has recently drilled a discovery well at East Cameron 46,
bringing its year-to-date exploratory success rate to 71%. For the
year to date, the Company has drilled 12 discoveries out of 17
exploratory tests in the Gulf of Mexico and onshore in the Gulf Coast
region, including two discoveries in the deepwater Gulf of Mexico. The
Company also reported a new record high average production level of
28,117 barrels of oil equivalent (Boe) per day and a new record high
for revenue of $121.2 million for the second quarter of 2006.
Stone Acquisition Update
The acquisition of Stone was announced on June 23, 2006 and is
expected to close early in the fourth quarter. The Company noted that
EPL and Stone filed a preliminary joint proxy statement with the
Securities and Exchange Commission (SEC) on July 21, 2006 and received
clearances under the Hart-Scott-Rodino Antitrust Improvements Act
(HSR) on July 25, 2006. The Company confirmed its intention to reduce
its leverage through the repayment of acquisition related debt in an
amount approximating $700 million by the end of 2008. The reduction is
expected to come from a combination of excess cash flow and proceeds
from the disposition of non strategic properties. The Company stated
that it intends to hedge up to 80% of the projected combined
production for 2007 and 2008, implemented through a coordinated
establishment of positions with Stone to provide significant downside
protection and substantial upside participation to the market.
Richard A. Bachmann, EPL's Chairman and CEO, commented, "Our
second quarter results reflect record levels for production and
revenue and near record levels for cash flow, along with the
challenges we face with equipment constraints and costs in the Gulf of
Mexico. We remain on track to deliver the annual production growth
target of 28,000 to 30,000 Boe per day we set for ourselves earlier
this year."
Bachmann continued, "We are also very pleased with the progress we
are making toward our acquisition of Stone which we expect to close
early in this year's fourth quarter. We have thus far received HSR
clearance and have made our initial filings with the SEC. We intend to
continue to fast track the completion of the transaction to combine
our companies as quickly as possible and achieve the synergies and
cost savings we have previously outlined as well as pursue a number of
exciting exploitation and exploration opportunities on our combined
portfolio."
Financial Results
Revenue for the second quarter of 2006 rose to $121.2 million, a
new record high for the Company and a 14% increase over second quarter
2005 revenues of $106.4 million. Discretionary cash flow, which is
cash flow from operating activities before changes in working capital
and exploration expenses, rose to $98.5 million, up 28% from $77.2
million in the second quarter last year. (See reconciliation of
discretionary cash flow schedule in the tables.) Cash flow from
operating activities in the second quarter of 2006 was $111.1 million
compared with $75.1 million in the same quarter a year ago,
representing a 48% increase.
EPL benefited from increased production volumes, record oil prices
and strong natural gas prices during the second quarter of 2006, as
well as $10.6 million in claims accrued under the Company's business
interruption insurance coverage. These benefits were reduced in the
second quarter by increased lease operating expenses due to
non-routine workover expenses and costs associated with hurricane
related repairs not covered by insurance. In addition, the Company
said higher exploration expenses in the quarter were the result of dry
hole costs, as well as significant seismic expenditures and lease
expiration write-offs. The Company said depreciation, depletion and
amortization (DD&A) expenses per Boe, which had increased to $22.78
per Boe in the first quarter of 2006 from prior periods, declined to
$19.40 in the second quarter of 2006.
Production for the second quarter of 2006 averaged 28,117 Boe per
day, a new record high for the Company, up 22% from 22,991 Boe per day
in the first quarter of 2006, and up 4% from 27,126 Boe per day in the
second quarter of 2005. Natural gas production in the second quarter
of 2006 averaged 119.6 million cubic feet (Mmcf) per day, also a new
record high for EPL, a 26% rise from 94.8 Mmcf per day in the first
quarter of 2006. Oil production in the most recent quarter averaged
8,187 barrels per day, a 14% rise from the average of 7,185 Boe per
day in the first quarter of this year. Second quarter 2006 production
volumes were up compared to the first quarter of 2006 due to new wells
coming on line and hurricane related shut-in production continuing to
be restored. The Company estimated it has approximately 1,100 Boe per
day of hurricane shut-in production remaining, the majority of which
should be restored during the latter part of the third quarter.
Oil price realizations for the second quarter of 2006 averaged
$61.72 per barrel, a 35% increase from $45.80 per barrel in the same
period a year ago. Natural gas price realizations in the quarter
averaged $6.90 per thousand cubic feet (Mcf), remaining essentially
flat as compared to $6.88 per Mcf in the second quarter of 2005. All
commodity prices are stated net of hedging impact. The Company
maintains a complete and regularly updated schedule of hedging
positions under "Hedging" in the Investor Relations section of the
Company's web site, www.eplweb.com.
For the six months ended June 30, 2006, net income available to
common stockholders was $27.4 million, or $0.68 per diluted share.
This represents a 27% decrease from $37.5 million, or $0.95 per
diluted share in the same period of 2005. Discretionary cash flow for
the first two quarters of 2006 totaled $191.4 million, up 30% from
$147.4 million in the same period a year ago. (See reconciliation of
discretionary cash flow in table.) Cash flow from operating activities
in the first six months of 2006 was $174.9 million, up 21% from the
total of $144.5 million in the same period of 2005.
For the first six months of 2006, the Company said capital
expenditures for exploration and development activities totaled $207.7
million. The Company continues to anticipate that its 2006 capital
budget for exploration and development activities will total
approximately $360.0 million, which is expected to be funded from
internally generated cash flow and does not include any costs
associated with the pending acquisition of Stone. In addition, the
Company has spent $43.5 million in acquisition costs related to the
merger agreement with Stone, which is the full amount of the break-up
fee paid to Plains Exploration and Production Company (Plains) on
behalf of Stone to terminate the merger agreement between Plains and
Stone.
As of June 30, 2006, the Company had cash on hand of $12.9
million, total debt of $270.0 million, and a debt to total
capitalization ratio of 38%. The Company also had $105 million of
remaining capacity available under its current bank facility, which
was extended in early June to May 2011 with the redetermined borrowing
base of $225 million, up from $150 million.
Operational Highlights
Federal Lease Sale
EPL has been awarded a total of 10 leases from the 11 blocks on
which the Company submitted the high bid at the March 2006 Central
Gulf of Mexico Lease Sale. The successful bids represent approximately
48,000 gross acres, including two deepwater tracts as well as eight
other areas on the Gulf of Mexico Shelf. EPL's share of the lease
bonuses for the successful high bids totaled $7.0 million.
Gulf of Mexico and Onshore
The Company today announced a new discovery on the Shelf, the East
Cameron 46 A-6st well. The moderate risk, moderate potential well,
drilled to a total depth of 8,800 feet and encountered high quality
natural gas pay in a single interval. The A-6st well is expected to be
on line in the third quarter of 2006. Newfield Exploration Company
(NYSE: NFX), the operator, holds a 75% working interest in the well
and EPL holds the remaining 25%. The Company also stated that an
onshore South Louisiana exploratory well at Bay Batiste in which the
Company held a 25% working interest was determined to be a dry hole.
For the year-to-date, the Company has drilled 12 discoveries out of 17
exploratory tests with eight discoveries located on the Shelf in the
Gulf of Mexico, two onshore in the Gulf Coast region, and two in the
deepwater Gulf of Mexico, for an overall success rate of 71%.
The Company also said Thomas D. DeBrock has been named Vice
President of Exploration. Mr. DeBrock previously was the Company's
Exploration Manager in New Orleans and has been in the industry for
over 21 years and an employee of EPL since its founding.
Current Operations
The Company is currently drilling two exploratory wells: a high
risk, high potential Lakeside prospect onshore in Cameron Parish and a
moderate risk, moderate potential East Cameron 109 #5 well on the
Shelf. In addition, the Company said today that it plans to commence
the drilling of ten more exploratory wells before the end of year,
four of which are high potential. These totals include a deepwater
delineation well in Mississippi Canyon 292, scheduled to begin in
September or October, 2006. This moderate risk, high potential well is
the third deepwater well for the Company since the February
announcement of its entry into the deepwater Gulf of Mexico with an
agreement to acquire a 25% working interest in 23 undeveloped leases
with 13 identified prospects from Noble Energy, Inc.
The Company also said that the installation of the permanent
platform in the South Timbalier (ST) 41/42 area is underway, which
should allow first production through the platform by early September
2006. The Company plans to bring on the ST 42#1, a 2005 discovery, and
the recent ST 42#2 discovery concurrent with the start up of
production through the new permanent platform. This will bring the
total number of producing wells in the ST 41/42 area to seven, with
plans to flow the wells through the permanent platform and through the
facilities in EPL's adjacent ST 26 field in which the Company holds a
100% interest.
Richard A. Bachmann concluded, "With 12 discoveries in 17
exploratory tests year-to-date, two operations underway, and ten wells
left to commence drilling, we are very pleased with our exploratory
pace to date. While we have worked hard over the last several weeks to
expedite the completion of the Stone acquisition, we have not lost our
operational focus. We are very excited that the installation of the
permanent platform in the South Timbalier 41/42 area is well underway,
and are looking forward to ramping up production in that area. We are
also scheduled to bring on a number of new wells, including recent
drill wells, workover program wells, and development wells, which will
have a very positive impact on our production in the fourth quarter of
this year. We believe we are well positioned to meet our annual
production guidance of 28,000 to 30,000 Boe per day."
Conference Call Information
EPL has scheduled a conference call to review second quarter 2006
results for today, August 9, 2006 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 2006 and the progress of the
merger with Stone. 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 3313134.
The call will be available for replay beginning two hours after
the call is completed through midnight of August 14, 2006. 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
3313134.
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.
Forward Looking Statements & Additional Information
This press release contains forward-looking information regarding
EPL and Stone that is intended to be covered by the safe harbor
"forward-looking statements" provided by the Private Securities
Litigation Reform Act of 1995. All statements included in this press
release that address activities, events or developments that EPL or
Stone expects, believes or anticipates will or may occur in the future
are forward-looking statements. These include statements regarding:
-- completion of the proposed merger,
-- effective integration of the two companies,
-- reserve and production estimates,
-- oil and natural gas prices,
-- the impact of derivative positions,
-- production expense estimates,
-- cash flow estimates,
-- future financial performance,
-- planned capital expenditures, and
-- other matters that are discussed in EPL's and Stone's filings
with the SEC.
These statements are based on current expectations and projections
about future events and involve known and unknown risks,
uncertainties, and other factors that may cause actual results and
performance to be materially different from any future results or
performance expressed or implied by these forward-looking statements.
Please refer to EPL's and Stone's filings with the SEC, including each
company's Form 10-K for the year ended December 31, 2005, for a
discussion of these risks.
EPL AND STONE HAVE FILED A PRELIMINARY JOINT PROXY
STATEMENT/PROSPECTUS AND OTHER DOCUMENTS WITH THE SECURITIES AND
EXCHANGE COMMISSION. INVESTORS AND SECURITY HOLDERS ARE URGED TO READ
CAREFULLY THE DEFINITIVE JOINT PROXY STATEMENT/PROSPECTUS WHEN IT
BECOMES AVAILABLE BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION
REGARDING EPL, STONE AND THE ACQUISITION. A DEFINITIVE JOINT PROXY
STATEMENT/PROSPECTUS WILL BE SENT TO SECURITY HOLDERS OF EPL AND STONE
SEEKING THEIR APPROVAL OF THE ACQUISITION.
The documents filed with the SEC by EPL may be obtained free of
charge from EPL's website at www.eplweb.com or by directing a request
to: Energy Partners, Ltd., 201 St. Charles Avenue, Suite 3400, New
Orleans, Louisiana 70170, Attn: Secretary, (504) 569- 1875. In
addition, the documents filed with the SEC by Stone may be obtained
free of charge from Stone's website at www.stoneenergy.com or by
directing a request to: Stone Energy Corporation, 625 E. Kaliste
Saloom Road, Lafayette, Louisiana 70508, Attn: Kenneth Beer, (337)
237-0410. Investors and security holders are urged to read the joint
proxy statement/prospectus and the other relevant materials when they
become available before making any voting or investment decision with
respect to the proposed acquisition.
EPL, Stone and their respective executive officers and directors
may be deemed to be participants in the solicitation of proxies from
the stockholders of EPL and Stone in favor of the acquisition.
Information about the executive officers and directors of EPL and
their direct or indirect interests, by security holdings or otherwise,
in the acquisition will be set forth in the proxy statement/prospectus
relating to the acquisition when it becomes available. Information
about the executive officers and directors of Stone and their direct
or indirect interests, by security holdings or otherwise, in the
acquisition will be set forth in the proxy statement/prospectus
relating to the acquisition when it becomes available.
ENERGY PARTNERS, LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -------------------
2006 2005 2006 2005
-------- -------- -------- --------
Revenues:
Oil and natural gas $121,080 $106,230 $230,204 $203,683
Other 154 154 221 272
-------- -------- -------- --------
121,234 106,384 230,425 203,955
-------- -------- -------- --------
Costs and expenses:
Lease operating 17,121 14,114 29,486 26,557
Transportation expense 563 345 811 505
Taxes, other than on earnings 2,191 2,658 5,186 5,422
Exploration expenditures, dry
hole costs and impairments 22,783 18,872 42,379 29,627
Depreciation, depletion and
amortization 49,632 27,639 96,777 53,152
General and administrative 12,281 10,162 24,737 20,062
Other expense 2,804 228 1,877 321
-------- -------- -------- --------
Total costs and
expenses 107,375 74,018 201,253 135,646
-------- -------- -------- --------
Business interruption recovery 10,594 - 23,283 -
Income from operations 24,453 32,366 52,455 68,309
-------- -------- -------- --------
Other income (expense):
Interest income 473 110 752 295
Interest expense (5,199) (4,335) (10,283) (8,383)
-------- -------- -------- --------
(4,726) (4,225) (9,531) (8,088)
-------- -------- -------- --------
Income before income taxes 19,727 28,141 42,924 60,221
Income taxes (7,142) (10,091) (15,536) (21,750)
-------- -------- -------- --------
Net income 12,585 18,050 27,388 38,471
Less dividends earned on
preferred stock and accretion
of discount - - - (944)
-------- -------- -------- --------
Net income available to common
stockholders $ 12,585 $ 18,050 $ 27,388 $ 37,527
======== ======== ======== ========
Basic earnings per share $ 0.33 $ 0.48 $ 0.72 $ 1.03
======== ======== ======== ========
Diluted earnings per share $ 0.31 $ 0.45 $ 0.68 $ 0.95
======== ======== ======== ========
Weighted average common shares
used in computing earnings per
share:
Basic 38,315 37,558 38,185 36,299
Incremental common shares 2,253 2,968 2,323 4,121
-------- -------- -------- --------
Diluted 40,568 40,526 40,508 40,420
======== ======== ======== ========
ENERGY PARTNERS, LTD.
CONSOLIDATED STATEMENTS OF NET CASH PROVIDED BY
OPERATING ACTIVITIES
(In thousands)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ------------------
2006 2005 2006 2005
-------- -------- -------- --------
Cash flows from operating
activities:
Net income $ 12,585 $ 18,050 $ 27,388 $ 38,471
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation, depletion
and amortization 49,632 27,639 96,777 53,152
Loss on disposition of
oil and natural gas
assets 2,830 - 2,830 92
Non-cash compensation 2,799 1,924 4,914 3,807
Deferred income taxes 7,142 10,091 15,819 21,401
Exploration expenditures 18,888 16,604 32,856 21,332
Amortization of deferred
financing costs 244 250 493 497
Other 501 379 795 379
Changes in operating assets
and liabilities:
Trade accounts
receivable (13,077) (5,737) (1,696) (8,420)
Other receivables (11,553) (4,819) (24,156) (4,900)
Prepaid expenses (1,156) (5,224) 968 (3,942)
Other assets (518) (310) 332 (1,602)
Accounts payable and
accrued expenses 43,132 16,246 18,102 24,397
Other liabilities (389) (3) (492) (131)
-------- -------- -------- --------
Net cash provided by operating
activities $111,060 $ 75,090 $174,930 $144,533
======== ======== ======== ========
Reconciliation of
discretionary cash flow:
Net cash provided by
operating activities 111,060 75,090 174,930 144,533
Changes in working
capital (16,439) (153) 6,942 (5,403)
Non-cash exploration
expenditures (18,888) (16,604) (32,856) (21,332)
Total exploration
expenditures 22,783 18,872 42,379 29,627
-------- -------- -------- --------
Discretionary cash flow $ 98,516 $ 77,205 $191,395 $147,425
======== ======== ======== ========
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 Six Months Ended
June 30, June 30,
------------------ ------------------
2006 2005 2006 2005
-------- -------- -------- --------
PRODUCTION AND PRICING
- -----------------------
Net Production (per day):
Oil (Bbls) 8,187 10,469 7,689 10,225
Natural gas (Mcf) 119,578 99,941 107,274 98,067
Total (Boe) 28,117 27,126 25,568 26,570
Oil and Natural Gas Revenues
(in thousands):
Oil $ 45,981 $ 43,637 $ 84,234 $ 84,656
Natural gas 75,099 62,593 145,970 119,027
Total 121,080 106,230 230,204 203,683
Average Sales Prices:
Oil (per Bbl) $ 61.72 $ 45.80 $ 60.53 $ 45.74
Natural gas (per Mcf) 6.90 6.88 7.52 6.71
Average (per Boe) 47.32 43.03 49.74 42.35
Impact of hedging:
Oil (per Bbl) $ - $ (1.74) $ - $ (1.46)
Natural gas (per Mcf) - - (0.05) -
OPERATIONAL STATISTICS
- ----------------------
Average Costs (per Boe):
Lease operating expense $ 6.69 $ 5.72 $ 6.37 $ 5.52
Taxes, other than on earnings 0.86 1.08 1.12 1.13
Depreciation, depletion and
amortization 19.40 11.20 20.91 11.05
ENERGY PARTNERS, LTD.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
June 30, December 31,
2006 2005
------------ ------------
(Unaudited)
ASSETS
- -------
Current assets:
Cash and cash equivalents $ 12,879 $ 6,789
Trade accounts receivable 80,022 78,326
Other receivables 73,459 49,303
Deferred tax asset 2,291 5,582
Prepaid expenses 2,211 3,179
------------ ------------
Total current assets 170,862 143,179
Property and equipment, at cost under the
successful efforts method of accounting
for oil and natural gas properties 1,354,727 1,189,078
Less accumulated depreciation, depletion
and amortization (508,538) (418,347)
------------ ------------
Net property and equipment 846,189 770,731
Other assets 55,452 13,284
Deferred financing costs -- net of
accumulated amortization 5,225 4,091
------------ ------------
$ 1,077,728 $ 931,285
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
- -------------------------------------
Current liabilities:
Accounts payable $ 56,425 $ 28,810
Accrued expenses 137,797 108,087
Fair value of commodity derivative
instruments 4,333 9,875
Current maturities of long-term debt - 109
------------ ------------
Total current liabilities 198,555 146,881
Long-term debt 270,000 235,000
Deferred income taxes 104,411 87,559
Asset retirement obligation 60,831 56,039
Other 4,860 11,213
------------ ------------
638,657 536,692
Stockholders' equity:
Common stock 420 415
Additional paid-in capital 358,265 348,863
Accumulated other comprehensive loss (4,929) (12,619)
Retained earnings 142,755 115,366
Treasury stock, at cost (57,440) (57,432)
------------ ------------
Total stockholders' equity 439,071 394,593
Commitments and contingencies
------------ ------------
$ 1,077,728 $ 931,285
============ ============
CONTACT: Investors:
Energy Partners, Ltd.
T.J. Thom, 504-799-4830
or
Al Petrie, 504-799-1953
or
Media:
Joele Frank, Wilkinson Brimmer Katcher
Eden Abrahams/Steve Frankel, 212-355-4449