Exhibit 99.1
EPL Announces Third Quarter 2006 Results
and Provides Operational Update
NEW ORLEANS--(BUSINESS WIRE)--Nov. 6, 2006--Energy Partners, Ltd.
("EPL" or the "Company") (NYSE:EPL) today announced financial results
for the third quarter of 2006. EPL reported a net loss to common
stockholders of $25.2 million for the third quarter of 2006 compared
to net income available to common stockholders of $6.5 million for the
third quarter of 2005. Net loss per diluted share for the third
quarter 2006 was $0.66 compared to net income per diluted share of
$0.16 in the same quarter a year ago.
The Company said the net loss for the quarter was primarily
attributed to a total of $54.7 million of pre-tax costs associated
with the termination of the proposed merger with Stone Energy
Corporation ("Stone") (NYSE: SGY) and the unsolicited offer by ATS
Inc. ("ATS"), a wholly-owned subsidiary of Woodside Petroleum, Ltd.
(ASX: WPL) to acquire EPL. The costs related to the terminated merger
agreement with Stone totaled $46.5 million, of which $43.5 million
related to the fee advanced by the Company to Plains Exploration and
Production Company on behalf of Stone to terminate their merger
agreement, while increased legal and financial advisory costs
amounting to $8.2 million were associated with the unsolicited ATS
offer. The combination of these items reduced net income per share by
$0.91 on an after-tax basis.
Financial Results
Revenue for the third quarter of 2006 was $107.5 million, a 17%
increase over third quarter 2005 revenues of $92.0 million.
Discretionary cash flow, which is cash flow from operating activities
before changes in working capital and exploration expense was $22.7
million, compared to $62.8 million in the third quarter last year.
(See reconciliation of discretionary cash flow schedule in the
tables.) Cash flow from operating activities in the third quarter of
2006 was $10.5 million versus $109.1 million in the same quarter a
year ago.
Compared to the same period a year ago, EPL benefited from higher
production volumes, record high oil prices and strong natural gas
prices during the third quarter of 2006, as well as $8.3 million in
claims accrued under the Company's business interruption insurance
coverage. The quarter also benefited from a significant decrease in
exploration expense which totaled $12.1 million compared to $19.6
million and $22.8 million in the first two quarters of 2006,
respectively. The Company said lower exploration expense in the
quarter was the result of reduced dry hole costs from a continuing
high success rate in EPL's 2006 exploratory drilling program. These
benefits were offset by the increase in general and administrative
expenses to $68.5 million in the third quarter of 2006 which included
the merger termination and unsolicited offer expenses from $10.2
million in the third quarter of 2005.
Production for the third quarter of 2006 averaged 25,421 barrels
of oil equivalent (Boe) per day, up 32% from 19,292 Boe per day in the
third quarter of 2005. Third quarter 2006 production volumes were up
significantly compared to the third quarter of 2005 due to new wells
coming on line and hurricane related shut-in production that reduced
third quarter 2005 volumes. Natural gas production in the third
quarter of 2006 averaged 104.0 million cubic feet (Mmcf) per day, up
37% from 75.9 Mmcf per day in the third quarter of 2005. Oil
production in the most recent quarter averaged 8,092 barrels per day,
a 22% rise from the average of 6,642 barrels per day in the third
quarter of 2005. The Company said that current production capability
is approximately 30,000 Boe per day.
Oil price realizations for the third quarter of 2006 reached a
record high, averaging $65.57 per barrel, which was a 32% increase
from $49.55 per barrel in the same period a year ago. Natural gas
price realizations in the quarter averaged $6.12 per thousand cubic
feet (Mcf), down $2.72 per Mcf from the third 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 nine months ended September 30, 2006, net income available
to common stockholders was $2.1 million, or $0.05 per diluted share.
In the same period of 2005, net income available to common
stockholders was $44.0 million, or $1.11 per diluted share.
Discretionary cash flow for the first three quarters of 2006 totaled
$214.1 million, essentially flat with $210.3 million in the same
period a year ago. (See reconciliation of discretionary cash flow in
table.) Cash flow from operating activities in the first nine months
of 2006 was $185.4 million, versus the total of $253.7 million in the
same period of 2005.
For the first nine months of 2006, the Company said capital
expenditures for exploration and development activities totaled $311.4
million. The Board of Directors recently approved an increase in EPL's
2006 capital budget for exploration and development activities to
$400.0 million, up from $360.0 million. The capital budget increase
was due to additional capital requirements for the development portion
of the budget resulting from this year's exploratory successes and the
capital required to bring many of those wells on line. Supplemental
capital was also required to fund two workovers and costs associated
with one development well.
As of September 30, 2006, the Company had cash on hand of $8.0
million, total debt of $320.0 million, and a debt to total
capitalization ratio of 43%. The Company also had $55.0 million of
remaining capacity available under its bank facility as of September
30, 2006, which has a borrowing base of $225.0 million.
Richard A. Bachmann, EPL's Chairman and CEO, commented, "Our third
quarter financial results were clearly overshadowed by the expenses we
incurred in conjunction with the terminated Stone transaction and the
unsolicited offer from Woodside. Looking past those items, our
production volumes met our expectations and our costs and expenses
were at or below the low side of our guidance. Looking ahead to the
fourth quarter, production volumes are rising and cash flow for the
balance of this year looks strong. On a further positive note, we
recently increased our 2006 budget in large part to fund development
costs associated with drilling successes we have had year-to-date."
Operational Highlights
Year to Date Exploratory Results
Since the Company's last earnings conference call in early August,
the Company has announced four discoveries in four tests including
three wells on the Shelf and one well onshore South Louisiana. The
Company announced today that a moderate risk, moderate potential
onshore South Louisiana exploratory well, Four Rivers, in which the
Company held a 33% working interest, was determined to be a dry hole.
The Company recognized dry hole expense of $1.6 million in the third
quarter of 2006 in connection with the well. For the year to date, the
Company has drilled a total of 16 discoveries out of 22 exploratory
tests in the Gulf of Mexico and onshore in the Gulf Coast region,
including two discoveries in the deepwater Gulf of Mexico, for a
success rate of 73% to date.
Current Operations
The Company is currently drilling one exploratory well, Raton
South, a moderate risk, high potential deepwater exploration well in
Mississippi Canyon 292. The Raton South well is the third deepwater
well for the Company since the February announcement of its entry into
the deepwater Gulf of Mexico through an agreement to acquire a 25%
working interest in 23 undeveloped leases with 13 identified prospects
from Noble Energy, Inc. The Company plans to commence eight additional
exploratory tests before the end of the year, one of which is the
onshore high risk, high potential Barracuda prospect in Terrebonne
Parish.
The Company also said that production through the permanent
platform in the South Timbalier (ST) 41/42 area commenced on September
22, 2006. All ST 41/42 area production is currently flowing through
the facility, with the flexibility to take production through the
facilities in EPL's adjacent ST 26 field.
Richard A. Bachmann concluded, "With 16 discoveries in 22
exploratory tests year-to-date, one operation underway, and eight
wells left to commence drilling, we are very pleased with our
exploratory pace and success to date. While we are engaged in the
strategic alternatives process, we have not lost our operational
focus. We are very excited that the installation of the permanent
platform in the ST 41/42 area is completed, and went so smoothly.
Current production capability is approximately 30,000 Boe/day, as we
successfully brought on a number of recent drill wells and workovers
during the first part of the fourth quarter."
Conference Call Information
EPL has scheduled a conference call to review third quarter 2006
results on November 6, 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 the balance of 2006. 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 9607657.
The call will be available for replay beginning two hours after
the call is completed through midnight of November 11, 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 9607657.
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
This press release contains forward-looking information regarding
EPL 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 expects, believes or
anticipates will or may occur in the future are forward-looking
statements. These include statements regarding:
-- reserve and production estimates,
-- oil and gas prices,
-- the impact of derivative positions,
-- production expense estimates,
-- cash flow estimates,
-- future financial performance,
-- planned capital expenditures,
-- the completion of any transaction; and
-- other matters that are discussed in EPL's filings with the
Securities and Exchange Commission (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 filings with the SEC, including Form 10-K for
the year ended December 31, 2005, and Form 10-Q for the quarter ended
September 30, 2006 to be filed shortly, for a discussion of these
risks.
EPL HAS FILED A CONSENT REVOCATION STATEMENT WITH THE SECURITIES
AND EXCHANGE COMMISSION IN RESPONSE TO WOODSIDE AND ATS' CONSENT
SOLICITATION TO REMOVE EPL'S BOARD OF DIRECTORS. INVESTORS AND
SECURITY HOLDERS ARE URGED TO READ CAREFULLY THE CONSENT REVOCATION
STATEMENT BECAUSE IT CONTAINS IMPORTANT INFORMATION REGARDING EPL, THE
ATS OFFER AND THE CONSENT SOLICITATION. THE CONSENT REVOCATION
STATEMENT HAS BEEN SENT TO SECURITY HOLDERS OF EPL SEEKING REVOCATION
OF ANY CONSENTS GIVEN TO ATS OR WOODSIDE.
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. Investors
and security holders are urged to read the consent revocation
statement and the other relevant materials when they become available
before making any decision with respect to the consent solicitation.
EPL and its officers and directors may be deemed to be
participants in the solicitation of proxies from the stockholders of
EPL in opposition to the ATS consent solicitation. Information about
the officers and directors of EPL and their direct or indirect
interests, by security holdings or otherwise, in the consent
solicitation is set forth in the consent revocation statement.
ENERGY PARTNERS, LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
2006 2005 2006 2005
-------- ------- -------- --------
Revenues:
Oil and natural gas $107,390 $91,977 $337,594 $295,660
Other 101 72 322 344
-------- ------- -------- --------
107,491 92,049 337,916 296,004
-------- ------- -------- --------
Costs and expenses:
Lease operating 15,230 14,163 44,716 40,720
Transportation expense 727 288 1,538 793
Taxes, other than on earnings 5,762 2,836 10,948 8,258
Exploration expenditures, dry
hole costs and impairments 12,112 23,313 54,491 52,940
Depreciation, depletion and
amortization 45,639 26,278 142,416 79,430
General and administrative 68,457 10,221 93,194 30,283
Other expense 667 - 2,544 321
-------- ------- -------- --------
Total costs and expenses 148,594 77,099 349,847 212,745
-------- ------- -------- --------
Business interruption recovery 8,293 - 31,576 -
Income (loss) from operations (32,810) 14,950 19,645 83,259
-------- ------- -------- --------
Other income (expense):
Interest income 328 223 1,080 518
Interest expense (6,907) (4,929) (17,190) (13,312)
-------- ------- -------- --------
(6,579) (4,706) (16,110) (12,794)
-------- ------- -------- --------
Income (loss) before income taxes (39,389) 10,244 3,535 70,465
Income taxes 14,147 (3,724) (1,389) (25,474)
-------- ------- -------- --------
Net income (loss) (25,242) 6,520 2,146 44,991
Less dividends earned on
preferred stock and accretion of
discount - - - (944)
-------- ------- -------- --------
Net income (loss) available to
common stockholders $(25,242)$ 6,520 $ 2,146 $ 44,047
======== ======= ======== ========
Basic earnings per share $ (0.66)$ 0.17 $ 0.06 $ 1.20
======== ======= ======== ========
Diluted earnings per share $ (0.66)$ 0.16 $ 0.05 $ 1.11
======== ======= ======== ========
Weighted average common shares
used in computing earnings per
share:
Basic 38,414 37,779 38,254 36,798
Incremental common shares - 3,166 2,229 3,812
-------- ------- -------- --------
Diluted 38,414 40,945 40,483 40,610
======== ======= ======== ========
ENERGY PARTNERS, LTD.
CONSOLIDATED STATEMENTS OF NET CASH PROVIDED BY
OPERATING ACTIVITIES
(In thousands)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
2006 2005 2006 2005
--------- -------- --------- --------
Cash flows from operating
activities:
Net income (loss) $ (25,242)$ 6,520 $ 2,146 $ 44,991
Adjustments to reconcile net
income (loss) to net cash
provided by operating
activities:
Depreciation, depletion and
amortization 45,639 26,278 142,416 79,430
Loss on disposition of oil
and natural gas assets 667 - 3,497 92
Non-cash compensation 3,054 2,460 7,968 6,267
Deferred income taxes (14,147) 3,727 1,672 25,128
Exploration expenditures 9,252 19,876 42,108 41,208
Amortization of deferred
financing costs 211 249 704 746
Other 400 295 1,195 674
Changes in operating assets
and liabilities:
Trade accounts receivable 5,668 22,007 3,972 13,587
Other receivables (19,921) (1,922) (44,077) (6,822)
Prepaid expenses 411 1,766 1,379 (2,176)
Other assets 370 (129) 702 (1,731)
Accounts payable and
accrued expenses 4,474 27,994 22,576 52,391
Other liabilities (382) 17 (874) (114)
--------- -------- --------- --------
Net cash provided by operating
activities $ 10,454 $109,138 $ 185,384 $253,671
========= ======== ========= ========
Reconciliation of discretionary
cash flow:
Net cash provided by
operating activities 10,454 109,138 185,384 253,671
Changes in working capital 9,380 (49,733) 16,322 (55,136)
Non-cash exploration
expenditures (9,252) (19,876) (42,108) (41,208)
Total exploration
expenditures 12,112 23,313 54,491 52,940
--------- -------- --------- --------
Discretionary cash flow $ 22,694 $ 62,842 $ 214,089 $210,267
========= ======== ========= ========
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 Nine Months Ended
September 30, September 30,
------------------ ------------------
2006 2005 2006 2005
--------- -------- -------- ---------
PRODUCTION AND PRICING
- -------------------------------
Net Production (per day):
Oil (Bbls) 8,092 6,642 7,824 9,017
Natural gas (Mcf) 103,975 75,899 106,162 90,596
Total (Boe) 25,421 19,292 25,518 24,116
Oil and Natural Gas Revenues
(in thousands):
Oil $ 48,814 $ 30,279 $133,048 $ 114,935
Natural gas 58,576 61,698 204,546 180,725
Total 107,390 91,977 337,594 295,660
Average Sales Prices:
Oil (per Bbl) $ 65.57 $ 49.55 $ 62.29 $ 46.69
Natural gas (per Mcf) 6.12 8.84 7.06 7.31
Average (per Boe) 45.92 51.82 48.46 44.91
Impact of hedging:
Oil (per Bbl) $ - $ (5.76) $ - $ (2.53)
Natural gas (per Mcf) - (0.01) (0.03) -
OPERATIONAL STATISTICS
- -------------------------------
Average Costs (per Boe):
Lease operating expense $ 6.51 $ 7.98 $ 6.42 $ 6.19
Taxes, other than on earnings 2.46 1.60 1.57 1.25
Depreciation, depletion and
amortization 19.51 14.81 20.44 12.06
ENERGY PARTNERS, LTD.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
September 30, December 31,
2006 2005
------------- ------------
(Unaudited)
ASSETS
- ----------
Current assets:
Cash and cash equivalents $ 8,048 $ 6,789
Trade accounts receivable 74,355 78,326
Other receivables 93,380 49,303
Deferred tax asset 1,409 5,582
Prepaid expenses 1,800 3,179
------------- ------------
Total current assets 178,992 143,179
Property and equipment, at cost under the
successful efforts method of accounting
for oil and natural gas properties 1,450,975 1,189,078
Less accumulated depreciation, depletion
and amortization (554,111) (418,347)
------------- ------------
Net property and equipment 896,864 770,731
Other assets 12,608 13,284
Deferred financing costs -- net of
accumulated amortization 4,143 4,091
------------- ------------
$ 1,092,607 $ 931,285
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
- -------------------------------------------
Current liabilities:
Accounts payable $ 54,090 $ 28,810
Accrued expenses 136,852 108,087
Fair value of commodity derivative
instruments 1,613 9,875
Current maturities of long-term debt - 109
------------- ------------
Total current liabilities 192,555 146,881
Long-term debt 320,000 235,000
Deferred income taxes 91,154 87,559
Asset retirement obligation 65,603 56,039
Other 2,641 11,213
------------- ------------
671,953 536,692
Stockholders' equity:
Common stock 420 415
Additional paid-in capital 361,942 348,863
Accumulated other comprehensive loss (1,780) (12,619)
Retained earnings 117,512 115,366
Treasury stock, at cost. (57,440) (57,432)
------------- ------------
Total stockholders' equity 420,654 394,593
Commitments and contingencies
------------- ------------
$ 1,092,607 $ 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 or Jeremy Jacobs, 212-355-4449