Announces $53.4 Million Acquisition of Woodford Shale Asset from
Constellation Energy Group
BALTIMORE, Feb. 20 /PRNewswire-FirstCall/ -- Constellation Energy
Partners LLC (NYSE: CEP) today reported fourth quarter and full year 2007
solid results, and announced a $53.4 million dropdown acquisition of
interest in producing wells located in the Woodford Shale in Oklahoma from
an affiliate of its sponsor, Constellation Energy (NYSE: CEG).
The company produced 10,393 MMcfe for the full year 2007, up 124
percent from 2006 and resulting in adjusted EBITDA of $52.5 million, an
increase of 128 percent over 2006. Net income on a generally accepted
accounting principles (GAAP) basis for 2007 was $14.2 million. The company
produced 4,212 MMcfe for the fourth quarter of 2007, resulting in adjusted
EBITDA of $19.6 million and net income of $2.9 million on a GAAP basis.
The company expects 2008 adjusted EBITDA to range from $94 million to
$105 million, an increase of 79 percent to 100 percent over 2007 results.
Production in 2008 is expected to range from 17 Bcfe to 20 Bcfe, an
increase of 64 percent to 92 percent over 2007.
In addition, CEP announced it is acquiring from an affiliate of its
sponsor, Constellation Energy, non-operating interest in producing wells
located in the Woodford Shale in Oklahoma, a portion of the asset
originally acquired in 2004. Upon closing of the acquisition, which is
expected by the end of the first quarter and subject to customary purchase
price adjustments, CEP will obtain 13.1 Bcfe of proved developed producing
reserves with an estimated daily net production of 5.7 MMcfe. CEP intends
to finance the transaction with debt from its reserve-based lending
facility.
"We delivered solid results and achieved the core objectives we
identified at the start of the year," said Felix Dawson, chief executive
officer. "Performance was strong throughout the year in our Black Warrior
Basin asset, and through a trio of acquisitions in the Cherokee Basin, we
doubled net proved reserves and tripled production. We executed well in
2007, maintaining stable cash flows and delivered on our commitment to
increase distributions with a 22 percent increase announced in the fourth
quarter.
"Going forward, a key to driving the sustainability of our business
will be balancing acquisition driven growth and operational success, and
that will be a top priority in 2008," said Dawson. "The effort to expand
and strengthen our operational capabilities is well under way and we
anticipate it will allow us to increase efficiency, exploit the organic
growth potential of our Cherokee Basin assets and pursue consolidation
opportunities in both the Cherokee and Black Warrior Basins.
"The announcement of the dropdown acquisition of the Woodford Shale
asset highlights an important competitive advantage," Dawson said. "CEP has
grown its portfolio in multiple ways, through basin consolidation, coalbed
methane plays and now, a dropdown acquisition from our sponsor. This
demonstrated flexibility in acquisition approaches is an important
differentiator for CEP in the MLP sector. The ability to execute mutually
beneficial dropdown transactions was one of the main commercial concepts
considered when Constellation Energy formed CEP, and we think this
transaction highlights the benefits of that capability. In the future, as
Constellation Energy further develops its properties, we will look to make
other dropdown acquisitions.
"We begin 2008 with a strong foundation for portfolio growth and a
sharpened focus on our operations," Dawson said. "CEP continues to execute
well overall and we're in a good position to build on our past
accomplishments over the coming year."
Non-GAAP Measures
We present Adjusted EBITDA in addition to our reported net income in
accordance with GAAP. Adjusted EBITDA is a non-GAAP financial measure that
is defined as net income (loss) plus interest (income) expense;
depreciation, depletion and amortization; write-off of deferred financing
fees; impairment of long-lived assets; (gain) loss on sale of assets;
(gain) loss from equity investment; accretion of asset retirement
obligation; unrealized (gain) loss on natural gas derivatives; and realized
(gain) loss on cancelled natural gas derivatives.
Adjusted EBITDA is used by management to indicate (prior to the
establishment of any cash reserves by our board of managers) the cash
distributions we expect to pay our unitholders. Specifically, this
financial measure indicates to investors whether or not we are generating
cash flow at a level that can sustain or support an increase in our
quarterly distribution rates. Adjusted EBITDA is also used as a
quantitative standard by our management and by external users of our
financial statements such as investors, research analysts and others to
assess the financial performance of our assets without regard to financing
methods, capital structure or historical cost basis; the ability of our
assets to generate cash sufficient to pay interest costs and support our
indebtedness; and our operating performance and return on capital as
compared to those of other companies in our industry, without regard to
financing or capital structure. Adjusted EBITDA is not intended to
represent cash flows for the period, nor is it presented as a substitute
for net income, operating income, cash flows from operating activities or
any other measure of financial performance or liquidity presented in
accordance with GAAP.
SEC Filings
CEP intends to file its 2007 Form 10-K on or about February 28, 2008.
Forward-Looking Statements
We make statements in this news release that are considered forward-
looking statements within the meaning of the Securities Exchange Act of
1934. These forward-looking statements are largely based on our
expectations, which reflect estimates and assumptions made by our
management. These estimates and assumptions reflect our best judgment based
on currently known market conditions and other factors. Although we believe
such estimates and assumptions to be reasonable, they are inherently
uncertain and involve a number of risks and uncertainties that are beyond
our control. In addition, management's assumptions about future events may
prove to be inaccurate. Management cautions all readers that the
forward-looking statements contained in this news release are not
guarantees of future performance, and we cannot assure you that such
statements will be realized or the forward-looking events and circumstances
will occur. Actual results may differ materially from those anticipated or
implied in the forward-looking statements due to factors listed in the
"Risk Factors" section in our SEC filings and elsewhere in those filings.
All forward-looking statements speak only as of the date of this news
release. We do not intend to publicly update or revise any forward-looking
statements as a result of new information, future events or otherwise.
Conference Call Information
The company will host a conference call today at 10:00 a.m. (ET) to
review its financial results and discuss its business outlook for 2008.
To participate, analysts, investors, media and the public in the U.S.
may dial (888) 322-9245 shortly before 10:00 a.m. (ET). The international
phone number is (773) 756-0253. The conference password is PARTNERS.
A replay will be available approximately one hour after the end of the
call by dialing (888) 457-6652 or (203) 369-1301 (international). A live
audio webcast of the conference call, presentation slides and the earnings
press release will be available on the Investor Relations page of
Constellation Energy Partners' Web site
(http://www.constellationenergypartners.com). A webcast replay, as well as
a replay in downloadable MP3 format will also be available on the site
approximately one hour after the completion of the call.
Constellation Energy Partners LLC,
(http://www.constellationenergypartners.com), is a limited liability
company focused on the acquisition, development and exploitation of oil and
natural gas properties, as well as related midstream assets.
Constellation Energy Partners LLC
Operating Statistics
Three Months Ended Year Ended
December 31, December 31,
2007 2006 2007 2006
Net Production:
Total production (MMcfe) 4,212 1,250 10,393 4,641
Average daily production (Mcfe/day) 45,783 13,587 28,474 12,715
Average Sales Price per Mcfe:
Net realized price, including hedges $7.49(a) $8.61 $7.79(a) $7.95
Net realized price, excluding hedges $6.15 $6.78 $6.34 $7.43
(a) Excludes impact of mark-to-
market losses.
Net Proved Reserves:
Proved developed (Bcfe) 186.7 97.4
Proved undeveloped (Bcfe) 116.1 22.9
Total proved (Bcfe) 302.8 120.3
Net Wells Drilled and Completed 35 6 89 31
Net Recompletions - - 21 -
Constellation Energy Partners LLC
Condensed Consolidated Statements of Operations
Three Months Ended Year Ended
December 31, December 31,
2007 2006 2007 2006
($ in thousands) ($ in thousands)
Oil and gas sales $32,692 $10,763 $82,725 $36,917
(Loss) from mark-to-market
activities (4,091) - (6,856) -
Total Revenues $28,601 $10,763 $75,869 $36,917
Operating expenses:
Lease operating expenses 7,319 1,913 17,141 7,234
Cost of sales 1,132 - 1,788 -
Production taxes 1,511 443 3,646 1,783
General and administrative 3,051 1,128 9,109 4,573
Loss on sale of equipment - - 86 -
Depreciation, depletion
and amortization 10,027 1,457 23,190 7,444
Accretion expense 101 35 312 141
Total operating expenses 23,141 4,976 55,272 21,175
Other (income) expenses:
Interest (income) expense,
net 2,558 114 6,465 (247)
Other (income) (9) - (109) -
Total expenses 25,690 5,090 61,628 20,928
Net income $2,911 $5,673 $14,241 $15,989
Adjusted EBITDA $19,573 $7,106 $52,520 $23,025
EPS - Basic $0.13 $0.50 $0.87 $1.41
EPS - Basic Units
Outstanding 22,351,128 11,320,300 16,321,547 11,320,300
EPS - Diluted $0.13 $0.50 $0.87 $1.41
EPS - Diluted Units
Outstanding 22,353,691 11,320,300 16,325,508 11,320,300
Constellation Energy Partners LLC
Condensed Consolidated Balance Sheets
December 31, December 31,
2007 2006
($ in thousands)
Current assets $45,873 $26,087
Natural gas properties, net of
accumulated depreciation, depletion
and amortization 643,653 171,639
Other assets 17,129 5,971
Total assets $706,655 $203,697
Current liabilities $20,551 $9,007
Debt 153,000 22,000
Other long-term liabilities 16,702 2,730
Total liabilities 190,253 33,737
Class D Interests 7,000 8,000
Common members' equity 505,178 148,847
Accumulated other comprehensive income 4,224 13,113
Total members' equity 509,402 161,960
Total liabilities and members' equity $706,655 $203,697
Constellation Energy Partners LLC
Reconciliation of Net Income to Adjusted EBITDA
Three Months Ended Year Ended
December 31, December 31,
2007 2006 2007 2006
($ in thousands) ($ in thousands)
Reconciliation of Net Income to
Adjusted EBITDA:
Net income $2,911 $5,673 $14,241 $15,989
Add:
Interest expense/(income), net 2,558 114 6,465 (247)
Depreciation, depletion and
amortization 10,027 1,457 23,190 7,444
Accretion of asset retirement
obligation 101 35 312 141
Loss on sale of asset - - 86 -
Loss from mark-to-market activities 4,091 - 6,856 -
Long-term incentive plan 123 - 145 -
Unrealized (gain)/loss on natural gas
derivatives/hedge ineffectiveness (238) (173) 1,225 (302)
Adjusted EBITDA (1) $19,573 $7,106 $52,520 $23,025
Maintenance capital (2) 4,625 10,696
Drilling fund (1,500) (2,634)
Interest expense (cash) 3,345 5,935
Distributable Cash $13,103 $38,523
(1) Our Adjusted EBITDA should not be considered as an alternative to net
income, operating income, cash flows from operating activities or any
other measure of financial performance or liquidity presented in
accordance with GAAP. Our Adjusted EBITDA excludes some, but not all,
items that affect net income and operating income and these measures
may vary among other companies. Therefore, our Adjusted EBITDA may
not be comparable to similarly titled measures of other companies.
We define Adjusted EBITDA as net income (loss) plus:
-- interest (income) expense;
-- depreciation, depletion and amortization;
-- write-off of deferred financing fees;
-- impairment of long-lived;
-- (gain) loss on sale of assets;
-- (gain) loss from equity investment;
-- Long-term incentive plan;
-- accretion of asset retirement obligation;
-- unrealized (gain) loss on natural gas derivatives; and
-- realized loss (gain) on cancelled natural gas derivatives
(2) Maintenance capital expenditures are capital expenditures that we
expect to make on an ongoing basis to maintain our asset base
(including our undeveloped leasehold acreage) at a steady level over
the long term. These expenditures include the drilling and
completion of additional development wells to offset the expected
production decline during such period from our producing properties,
as well as additions to our inventory of unproved properties or proved
reserves required to maintain our asset base.
SOURCE Constellation Energy Partners LLC
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Related links:
http://www.constellationenergypartners.com
http://www.prnewswire.com/comp/084087.html /
CONTACT:
Media, Lawrence McDonnell, +1-410-470-7433,
or Investors, Tonya Cultice, +1-410-470-5619, both of
Constellation Energy Partners LLC
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