BALTIMORE, April 3, 2008 /PRNewswire-FirstCall/ -- Constellation Energy
Partners LLC (NYSE Arca: CEP) today announced that it has closed its
previously announced acquisition of non-operating interest in producing
wells located in the Woodford Shale in Oklahoma from an affiliate of its
sponsor, Constellation Energy (NYSE: CEG), for a purchase price of $53.4
million, subject to post-closing purchase price adjustments. The
acquisition was fully funded with debt from the company's revolving credit
facility.
"This transaction is another demonstration of our commitment to our
acquisition growth strategy and distribution stability," said Stephen
Brunner, chief executive officer of Constellation Energy Partners. "The
Woodford Shale provides us with a foothold in an up-and-coming geographic
area and access to low-risk production with limited exposure to increased
capital commitments, operating expenses and resource demands. By purchasing
100 percent proved developed producing wells we have further solidified our
expected cash flows."
The company also announced revisions to its reserve based lending
facility and borrowing base, effective March 28, 2008. The company's new
borrowing base is $240 million, with the capacity to expand to $265 million
upon consideration of the Woodford Shale asset.
"Our ability to fund the acquisition through debt while maintaining a
strong coverage ratio demonstrates our continued focus on maintaining
financial flexibility," said Charles Ward, chief financial officer of
Constellation Energy Partners. "We were able to execute an acquisition
during difficult market conditions. By increasing our borrowing base at the
time of the acquisition rather than when the asset base permits, we were
able to proactively manage our costs to avoid the burden of fees and
unnecessary carrying charges for unutilized funds."
The company anticipates an additional expansion to the borrowing base
during the second quarter 2008.
Operational Highlights
-- Non-operating interest in 83 producing wells located in Coal and Hughes
Counties in Oklahoma.
-- 100 percent proved developed producing.
-- Estimated proved reserves of 13.1 Bcfe (non-SEC reserve estimates.
internally calculated from third-party volume projections, as of Dec.
31, 2007 assuming a basis-adjusted price of $6.706 / MMbtu).
-- Current net production is estimated at approximately 4.9 million cubic
feet per day.
-- Average gross working interest of approximately 11.5 percent.
-- Average net revenue interest of approximately 9.2 percent.
-- 90 percent of the wells are operated by affiliates of Devon Energy Co.
and Newfield Exploration Co., remaining wells are operated by three
additional companies.
-- Average annual decline rate for these reserves estimated at 7 to 8
percent over 10 years.
Financial Highlights
-- Acquisition is expected to be immediately accretive to distributable
cash flow per unit, beginning April 1, 2008.
-- Net daily production forecast
-- 2008 estimate (based on April 1, 2008 to Dec. 31, 2008) -- 1,100 to
1,150 MMcfe.
-- 2009 estimate -- 1,100 to 1,150 MMcfe.
-- Adjusted EBITDA impact
-- 2008 estimate (based on April 1, 2008 to Dec. 31, 2008) -- $8.5 to
$8.9 million.
-- 2009 estimate -- $8.5 to $8.9 million.
-- Projected maintenance capital expenditures of $2.0 to $2.5 million for
2008 (based on April 1, 2008 to Dec. 31, 2008). Production declines in
the Woodford Shale asset should be offset by increased production from
capital expenditures in the Cherokee Basin.
-- Cash flow stability expected to be achieved by hedging through 2011.
Hedges were implemented at acquisition announcement using a credit
guarantee from the company's sponsor, Constellation Energy.
-- Funding cost (cost of debt) at the time of the transaction is a
floating rate of less than 5 percent per annum.
Portfolio Impact
-- Management expects to recommend to the board of managers maintaining a
cash distribution of $0.5625 per outstanding common unit and Class A
unit for the quarter ended March 31, 2008, or $2.25 per unit on an
annualized basis. The distribution level is anticipated as a result of
the impacts of drilling delays encountered during 2007 associated with
weather and integration delays in the Cherokee Basin and pending the
outcome of the arbitration relating to the termination of the Torch
Energy Royalty Trust. Management will continue to evaluate distribution
levels on a quarterly basis taking into consideration overall portfolio
performance, acquisition integration and market outlook. All changes
in distributions are subject to approval by the company's board of
managers.
-- Portfolio reserve life decreases by one year to approximately 17 years
with the addition of the Woodford asset.
Non-GAAP Measures
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.
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.
Constellation Energy Partners LLC
(http://www.constellationenergypartners.com) is a limited liability company
focused on the acquisition, development and production of oil and natural
gas properties, as well as related midstream assets.
On Feb. 20, 2008, the Company entered into natural gas swaps with BNP
Paribas and Societe Generale. These derivatives were primarily fixed-price
swaps for Centerpoint Energy Gas Transmission, East Index. Effective March
31, 2008, the derivatives were designated as cash flow hedges.
The positions are as follows:
For the quarter ended (in MMBtu)
March 31, June 30, Sept 30,
Weighted Weighted Weighted
Volume Average $ Volume Average $ Volume Average $
2008 120,000 $8.293 400,000 $8.357 360,000 $8.293
2009 225,000 $8.113 227,500 $8.113 230,000 $8.113
2010 180,000 $7.908 180,000 $7.908 180,000 $7.908
2011 180,000 $7.928 180,000 $7.928 180,000 $7.928
Dec 31, Total
Weighted Weighted
Volume Average $ Volume Average $
2008 360,000 $8.293 1,240,000 $8.313
2009 230,000 $8.113 912,500 $8.113
2010 180,000 $7.908 720,000 $7.908
2011 180,000 $7.928 720,000 $7.928
3,592,500
SOURCE Constellation Energy Partners LLC
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Related links:
http://www.constellation.com
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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