- Announces Strong Performance on 2008 Program
- Reaffirms Adjusted EBITDA, Production and Capital Forecast
HOUSTON, May 8 /PRNewswire-FirstCall/ -- Constellation Energy Partners
LLC (NYSE: CEP) today reported first quarter results, announced strong
performance on its 2008 program for newly drilled wells and recompletions,
and reaffirmed the Adjusted EBITDA, net production, and capital spending
forecast for 2008.
The company produced 4,043 MMcfe for the first quarter, up 230 percent
from first quarter 2007, resulting in Adjusted EBITDA of $17.5 million, an
increase of 142 percent over first quarter 2007. Net income on a generally
accepted accounting principles (GAAP) basis for first quarter 2008 was $2.5
million, up 9 percent from first quarter 2007.
During the first quarter, the company worked on 97 wells and
recompletions out of the 200 to 230 planned for its 2008 program. The
company completed 29 wells and 11 recompletions. An additional 57 wells and
recompletions were in progress, which are expected to flow to sales by the
end of the third quarter.
"Our program performance for the first quarter was very strong. We
completed the 2008 program in the Black Warrior Basin and have now turned
our focus to preparing for 2009," said Stephen Brunner, chief executive
officer of Constellation Energy Partners. "Our efforts in the Cherokee
Basin were equally as impressive considering the extreme inclement winter
weather and subsequent recovery efforts, which delayed our program at the
beginning of the year. Our ability to bring production back to pre-storm
levels is a significant achievement. Our activities in the first quarter
establish a solid foundation for the remainder of the year."
The company reaffirmed the 2008 Adjusted EBITDA forecast range of $94
million to $105 million, an increase of 79 percent to 100 percent over 2007
results. The company also reaffirmed the 2008 net production forecast range
of 17 Bcfe to 20 Bcfe and forecast capital spending of $44.5 million.
The company revised the 2008 Operating Expense forecast range to $54.5
million to $57.5 million, up from the original forecast range of $47.5
million to $57.5 million. The revision was driven by higher than expected
one-time Lease Operating Expenses (LOE) related to field realignment, the
extreme impact of last winter's weather and subsequent recovery costs, and
an accumulation of other smaller charges such as the true up for the
Newfield transition services agreement. The company estimates LOE for the
remainder of the year will return to an estimated run rate of $1.90 to
$2.10 per Mcfe.
"Our first quarter performance has positioned us well to achieve our
full year forecast for Adjusted EBITDA, net production and capital spending
and we are comfortable that our new operating expense forecast is both
appropriate and achievable," said Brunner.
"As we look to the remainder of the year, we are optimistic about our
efforts to drive cash flow stability through our producing asset base and
hedging program. We also are targeting potential additional value through
horizontal drilling, operational efficiencies and partnership
opportunities. We are progressing well with each of these areas and believe
our efforts will further enhance cash flow stability and drive future
value."
Non-GAAP Measures
We present Adjusted EBITDA and Distributable Cash Flow 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;
long-term incentive plan expense; accretion of asset retirement obligation;
unrealized (gain) loss on natural gas derivatives; and realized (gain) loss
on cancelled natural gas derivatives. Distributable Cash Flow is defined as
Adjusted EBITDA less maintenance capital expenditures and cash interest
expense. 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.
Adjusted EBITDA and Distributable Cash Flow are 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, these financial measures indicate 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 and
Distributable Cash Flow are also used as quantitative standards 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 and Distributable Cash Flow are not intended to
represent cash flows for the period, nor are they 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. We also provide our earnings forecast in terms of
Adjusted EBITDA. We are unable to reconcile our forecast to GAAP net income
or operating income because we do not predict the future impact of
adjustments to net income (loss), such as (gains) losses on gas derivatives
and equity investments or asset impairments, due to the difficulty of doing
so.
SEC Filings
CEP intends to file its Form 10-Q for the quarter ended March 31, 2008,
on or about May 9, 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 9:00 a.m. (CDT). 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) 375-1053 or (203) 369-0293 (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 March 31,
2008 2007
Net Production:
Total production (MMcfe) 4,043 1,227
Average daily production (Mcfe/day) 44,429 13,633
Average Net Sales Price per Mcfe:
Net realized price, including hedges $7.73 (a) $9.22 (a)
Net realized price, excluding hedges $7.62 $6.97
(a) Excludes impact of mark-to-market
losses and net of cost of sales.
Net Wells Drilled and Completed 29 8
Net Recompletions 11 -
Constellation Energy Partners LLC
Condensed Consolidated Statements of Operations
Three Months Ended March 31,
2008 2007
($ in thousands)
Oil and gas sales $32,388 $11,307
Gain/(Loss) from mark-to-market
activities (2,956) (2,782)
Total Revenues $29,432 $8,525
Operating expenses:
Lease operating expenses 9,064 1,595
Cost of sales 1,148 -
Production taxes 1,665 459
General and administrative 3,335 1,619
(Gain)/Loss on sale of equipment (211) 95
Depreciation, depletion and
amortization 9,533 1,959
Accretion expense 101 36
Total operating expenses 24,635 5,763
Other expenses:
Interest (income) expense, net 2,319 508
Other (income) expense 14 -
Total expenses 26,968 6,271
Net income (loss) $2,464 $2,254
Adjusted EBITDA $17,511 $7,237
EPS - Basic $0.11 $0.20
EPS - Basic Units Outstanding 22,347,682 11,320,300
EPS - Diluted $0.11 $0.20
EPS - Diluted Units Outstanding 22,351,672 11,320,300
Constellation Energy Partners LLC
Condensed Consolidated Balance Sheets
March 31, December 31,
2008 2007
($ in thousands)
Current assets $40,756 $45,873
Natural gas properties, net of
accumulated depreciation, depletion and
amortization 695,083 643,653
Other assets 15,321 17,129
Total assets $751,160 $706,655
Current liabilities $48,572 $20,551
Debt 212,000 153,000
Other long-term liabilities 32,779 16,702
Total liabilities 293,351 190,253
Class D Interests 6,667 7,000
Common members' equity 495,167 505,178
Accumulated other comprehensive income (44,025) 4,224
Total members' equity 451,142 509,402
Total liabilities and members' equity $751,160 $706,655
Constellation Energy Partners LLC
Reconciliation of Net Income to Adjusted EBITDA to Distributable Cash
Three Months Ended March 31,
2008 2007
($ in thousands)
Net income $2,464 $2,254
Add:
Interest expense/(income), net 2,319 508
Depreciation, depletion and amortization 9,533 1,959
Accretion of asset retirement obligation 101 36
(Gain)/Loss on sale of asset (211) 95
Loss from mark-to-market activities 2,956 2,782
Long-term incentive plan 98 -
Unrealized (gain)/loss on natural gas
derivatives/hedge ineffectiveness 251 (397)
Adjusted EBITDA (1) $17,511 $7,237
Maintenance capital (2) 6,750 1,238
Drilling fund (1,500) -
Interest expense (cash) 3,500 424
Distributable Cash $8,761 $5,575
(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 assets;
-- (gain) loss on sale of assets;
-- (gain) loss from equity investment;
-- long-term incentive plan expense;
-- 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
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Media, Lawrence McDonnell, +1-410-470-7433;
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