Memorial Production Partners LP (NASDAQ:MEMP) announced today its
operating and financial results for the three months ended June 30,
2016. In addition, MEMP provided an update of its commodity
hedge positions along with updated 2016 guidance.
Key Highlights
- Net Cash Provided by Operating Activities of $79.0 million for
the second quarter of 2016
- Adjusted EBITDA(1) of $84.1 million for the second quarter of
2016
- Reduced debt outstanding by $197 million since year-end 2015
including a $113 million reduction in borrowings under MEMP’s
revolving credit facility and a $84 million reduction in senior
notes
- Revolver availability of approximately $200 million, as of July
29, 2016
- Lease operating expenses of $1.39 per Mcfe, or $29.4 million,
in the second quarter of 2016
- Closed divestitures on properties in the Permian and non-core
Rockies for a total of approximately $55.3 million, subject to
customary post-closing adjustments
- Strong commodity hedge portfolio with 92% of current expected
total production hedged in 2016, 81% in 2017, 74% in 2018 and 57%
in 2019
- Mark-to-market hedge book value of approximately $524 million
as of July 29, 2016
- Closed the transaction acquiring Memorial Production Partners
GP LLC (“MEMP GP”), the general partner of MEMP, for $0.75 million
in cash from Memorial Resource Development Corp.
- On July 27, 2016, announced second quarter distribution of
$0.03 per unit, the same distribution paid for the first quarter
2016.
“We are pleased to have delivered a strong
operational quarter while also making material progress in meeting
our goals of reducing MEMP’s outstanding debt and generating free
cash,” said John Weinzierl, Chairman and Chief Executive Officer of
MEMP GP. “Our focus on operational efficiencies was reflected
in a 30% year-over-year reduction in operating costs as measured by
LOE/Mcfe, which is also reflected in MEMP’s updated guidance for
full year 2016. Further, MEMP used free cash generated from
operations and proceeds from its recently completed Permian and
non-core Rockies divestitures to repurchase $84 million of its
senior notes and to reduce its revolver balance by $113 million
from year-end.”
Review of Second Quarter
2016
- Average daily production decreased 5% to 231.5 MMcfe for the
second quarter 2016, compared to 243.3 MMcfe for the first quarter
2016, primarily due to a scaled back development program, a planned
maintenance turnaround of MEMP’s Bairoil facility, and the loss of
volumes attributable to the divestiture of Permian
assets.
- Crude oil, natural gas and NGLs sales, excluding commodity
derivatives settlements, were $67.8 million in the second quarter
of 2016, compared to $60.6 million in the first quarter of
2016. On an Mcfe basis, crude oil, natural gas and NGLs
represented 27%, 56% and 17%, respectively, of sales volumes.
On a revenue basis, crude oil, natural gas and NGLs sales
represented 54%, 34% and 12%, respectively, of total oil and
natural gas revenues.
- Average realized prices, excluding commodity derivatives
settlements:
|
|
|
|
|
|
|
Q2 2016 |
Q1 2016 |
% Increase/(Decrease) |
Oil (per Bbl) |
|
$ |
38.73 |
|
$ |
27.89 |
|
|
39 |
|
Natural gas (per
Mcf) |
|
|
1.94 |
|
|
2.01 |
|
|
(3 |
) |
NGL (per Bbl) |
|
|
13.45 |
|
|
10.94 |
|
|
23 |
|
Total (per
Mcfe) |
|
$ |
3.22 |
|
$ |
2.74 |
|
|
18 |
|
|
|
|
|
|
- Averaged realized prices, including commodity derivatives
settlements, were $6.43 per Mcfe in the second quarter of 2016,
compared to $6.36 per Mcfe in the first quarter of 2016.
- Net Cash Provided by Operating Activities increased to $79.0
million for the second quarter of 2016 from $77.0 million in the
first quarter of 2016, primarily due to lower cash operating
expenses.
- Adjusted EBITDA(1) increased to $84.1 million for the second
quarter of 2016 from $81.3 million for the first quarter of 2016.
The increase was primarily due to lower operating expenses.
- Distributable cash flow(1) available to limited partners was
$44.9 million for the second quarter of 2016, compared to $29.1
million for the first quarter of 2016.
- Total lease operating expenses decreased 18% to $29.4 million
in the second quarter of 2016 compared to $35.7 million in the
first quarter of 2016. The decrease was primarily due to further
service provider cost discounts, optimization of compression
facilities in East Texas, prudent management of discretional
activities such as well workovers, better than expected performance
of the saltwater disposal system in East Texas, and the sale of the
Permian assets in June. On a per unit basis, despite the
lower production rate in the second quarter, total lease operating
expenses decreased 14% to $1.39 per Mcfe in the second quarter of
2016 compared to $1.61 per Mcfe in the first quarter of 2016.
- Total gathering, processing and transportation fees were $0.42
per Mcfe in the second quarter of 2016 and in line with the $0.42
per Mcfe in the first quarter of 2016.
- Taxes other than income were $0.17 per Mcfe in the second
quarter of 2016 compared to $0.18 per Mcfe in the first quarter of
2016.
- General and administrative expenses ("G&A") were $15.2
million for the second quarter of 2016 compared to $13.5 million
for the first quarter of 2016. The increase in G&A was largely
attributable to a non-cash recognition of $1.6 million in
non-recurring bad debt expense primarily related to the
divestitures in the Permian and Rockies regions. The $15.2 million
also included $2.7 million of non-cash unit-based compensation
expense, compared to $2.6 million in the first quarter of
2016.
- Losses of $124.6 million on commodity derivatives were recorded
during the second quarter of 2016, which included a $106.9 million
gain on cash settlements received on expired or terminated
positions. This compared to total gains of $51.7 million
recorded during the first quarter of 2016, which included $80.2
million of cash settlements received on expired positions.
Total hedged production in the second quarter of 2016 was 20.3
Bcfe, or 96% of second quarter production of 21.1 Bcfe, at an
average hedge price of $7.21 per Mcfe.
- Net interest expense was $32.1 million during the second
quarter of 2016, including $1.9 million of non-cash amortization of
deferred financing fees and accretion of senior notes
discount.
- Total capital expenditures for the second quarter of 2016 were
$10.4 million.
Divestitures Update
MEMP recently closed non-core divestitures in
the Permian and Rockies for aggregate proceeds of approximately
$55.3 million, subject to customary post-closing adjustments.
Total proved reserves as of December 31, 2015 associated with these
divestitures was 44.1 Bcfe (47% oil, 48% natural gas and 5% NGLs)
and average net daily production was 17.9 MMcfe/d for the first
three months of 2016. Proceeds from these transactions were
used to pay down a portion of the amount outstanding under MEMP’s
revolving credit facility.
The Permian divestiture, which represented a
complete exit of the basin for MEMP, closed on June 14, 2016 for
approximately $37.2 million, subject to customary post-closing
adjustments, and included assets with total proved reserves of 18.6
Bcfe (99% oil, 1% gas) and average net daily production of 7.3
MMcfe/d. The Rockies divestitures closed in July 2016 for
approximately $18.1 million, subject to customary post-closing
adjustments, and included assets in Wyoming and Colorado with total
proved reserves of 25.5 Bcfe (9% oil, 82% natural gas and 9% NGLs)
and average net daily production of 10.6 MMcfe/d.
Hedging Update
Consistent with its hedging policy, MEMP has
entered into natural gas, crude oil and NGL derivatives contracts
covering the period from 2016 through December 2019. MEMP's
hedging policy is designed to reduce the impact to cash flows from
commodity price and interest rate volatility.
The following table reflects the volumes of
MEMP’s expected production covered by commodity derivative
contracts and the average fixed or floor prices at which that
production is hedged. Targeted average net production
estimate represents the mid-point of the annual production range in
MEMP’s updated 2016 full year guidance.
|
Hedge Summary
(1) |
|
|
|
|
Year Ending December 31, |
|
|
|
|
2016 (2) |
|
2017 |
|
|
2018 |
|
|
2019 |
|
|
|
|
|
|
|
|
|
Natural Gas Derivative Contracts: |
|
|
|
|
Total weighted-average fixed/floor price |
$ |
4.14 |
|
$ |
4.06 |
|
$ |
4.18 |
|
$ |
4.31 |
|
Percent of expected 2016 production hedged |
|
99 |
% |
|
93 |
% |
|
85 |
% |
|
78 |
% |
|
|
|
|
|
|
|
|
Crude Oil Derivative
Contracts(3): |
|
|
|
|
Total weighted-average fixed/floor price |
$ |
65.85 |
|
$ |
85.00 |
|
$ |
83.74 |
|
$ |
85.52 |
|
Percent of expected 2016 production hedged |
|
77 |
% |
|
96 |
% |
|
99 |
% |
|
51 |
% |
|
|
|
|
|
|
|
|
Natural Gas Liquids Derivative
Contracts: |
|
|
|
Total weighted-average fixed/floor price |
$ |
34.01 |
|
$ |
37.55 |
|
|
– |
|
|
– |
|
Percent of expected 2016 production hedged |
|
97 |
% |
|
22 |
% |
|
– |
|
|
– |
|
|
|
|
|
|
|
|
|
Total Derivative Contracts: |
|
|
|
|
|
Total weighted-average fixed/floor price |
$ |
6.04 |
|
$ |
7.54 |
|
$ |
7.89 |
|
$ |
6.84 |
|
Percent of expected 2016 production hedged |
|
92 |
% |
|
81 |
% |
|
74 |
% |
|
57 |
% |
(1) Updated hedge schedule as of August 3, 2016 |
|
|
|
|
(2) Represents July to December 2016 |
|
|
|
|
(3) 2016 price and volumes include $40 crude oil puts
purchased on 60,000 bbls/month with deferred premiums
averaging $0.86 / bbl |
|
Since the last hedging update on May 5, 2016,
MEMP has liquidated certain crude oil and NGL hedges for the period
July 2016 – December 2016 and utilized the proceeds to buy back
senior notes. Subsequent to these transactions, MEMP
partially re-hedged the oil volumes with swaps and puts for the
period July 2016 – December 2016. The swap contracts were
executed at strip pricing and cover approximately 2,000
Bbls/d. The put contracts are at a floor price of $40.00 and
also cover approximately 2,000 Bbls/d. In addition, basis hedges
related to the divested properties in 2016 and 2017 have been
terminated and settled.
Financial Update
As of July 29, 2016, MEMP had total debt of $1.8
billion, which included $1.1 billion of senior notes and $723
million under its revolving credit facility. The borrowing
base on the revolving credit facility is $925 million with
available borrowing capacity of $200 million (including $2.1
million in letters of credit).
During the second quarter, MEMP retired
approximately $84.2 million in aggregate principal amount of senior
notes for total consideration of $41.5 million, which included $1.0
million of accrued interest, at a repurchase price of approximately
48% of par value. This was partially funded by $1.6 million
from sales of common units under MEMP’s at-the-market
program. The balance of $39.8 million in senior notes
repurchases was funded through the monetization of 2016 oil and NGL
hedges.
MEMP’s total debt outstanding as of each of the
respective dates are as follows:
|
|
|
|
|
|
|
(Amounts in $000s) |
|
12/31/2015 |
|
6/30/2016 |
|
7/29/2016 |
|
|
|
|
|
|
|
Credit Facility due
2018 |
|
$ |
836,000 |
|
|
$ |
739,358 |
|
|
$ |
723,000 |
|
7.625% Senior Notes due
2021 |
|
|
700,000 |
|
|
|
647,787 |
|
|
|
647,787 |
|
6.875% Senior Notes due
2022 |
|
|
496,990 |
|
|
|
464,965 |
|
|
|
464,965 |
|
Total Debt
Outstanding |
|
$ |
2,032,990 |
|
|
$ |
1,852,110 |
|
|
$ |
1,835,752 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2016, MEMP was in compliance with
the financial covenants under its revolving credit facility.
These covenants include a first lien coverage test of 3.25x, an
interest coverage ratio of 2.5x and a current ratio of
1.0x.
Updated 2016 Guidance (1)
The updated 2016 guidance included in this press
release is subject to the cautionary statements and limitations
described under the "Forward-Looking Statements" caption at the end
of this press release. MEMP’s updated 2016 guidance is based
on its current expectations regarding capital expenditure levels
and on the assumption that market demand and prices for oil and
natural gas will continue at levels that allow for economic
production of these products. It reflects the impact of forecasted
capital spending as well as the impact of the oil and natural gas
producing properties divested through today. A summary of the
guidance, assuming no additional divestitures or acquisitions, is
presented below:
|
|
|
2016 FY Guidance |
|
August 3, 2016 |
|
Low |
|
High |
|
|
|
|
Net Average
Daily Production |
|
|
|
Oil (MBbls/d) |
|
10.1 |
|
- |
|
10.9 |
|
NGL (MBbls/d) |
|
6.4 |
|
- |
|
6.9 |
|
Natural Gas (MMcf/d) |
|
116 |
|
- |
|
124 |
|
Total (MMcfe/d) |
|
215 |
|
- |
|
230 |
|
|
|
|
|
Commodity Price
Differential / Realizations (Unhedged) |
|
|
|
Crude Oil Differential ($ /
Bbl) |
$ |
6.00 |
|
- |
$ |
6.75 |
|
NGL Realized Price (% of WTI
NYMEX) |
|
32 |
% |
- |
|
36 |
% |
Natural Gas Realized Price (% of
NYMEX to Henry Hub) |
|
96 |
% |
- |
|
100 |
% |
|
|
|
|
Gathering,
Processing and Transportation Costs |
|
|
|
Crude Oil ($ / Bbl) |
$ |
0.20 |
|
- |
$ |
0.25 |
|
NGL ($ / Bbl) |
$ |
3.05 |
|
- |
$ |
3.20 |
|
Natural Gas ($ / Mcf) |
$ |
0.50 |
|
- |
$ |
0.60 |
|
|
|
|
|
Average
Costs |
|
|
|
Lease Operating ($ / Mcfe) |
$ |
1.55 |
|
- |
$ |
1.65 |
|
Taxes (% of Revenue) (2) |
|
6.0 |
% |
- |
|
6.5 |
% |
Cash General and Administrative ($
/ Mcfe) |
$ |
0.45 |
|
- |
$ |
0.50 |
|
|
|
|
|
Net Cash
Provided by Operating Activities (3) |
$ |
202 |
|
|
|
|
|
Adjusted EBITDA
($MM) (4) |
$ |
305 |
|
- |
$ |
320 |
|
Cash Interest Expense ($MM) |
$ |
108 |
|
- |
$ |
113 |
|
Capital Expenditures ($MM) (5) |
$ |
55 |
|
- |
$ |
65 |
|
Distributable
Cash Flow ($MM) (4) (5) |
$ |
137 |
|
- |
$ |
147 |
|
|
|
|
|
|
|
|
|
(1) Guidance based on NYMEX strip pricing as of
July 29, 2016; Average prices of $41.54 / Bbl for crude oil and
$2.51 / Mcf for natural gas for 2016
(2) Includes production, ad valorem and
franchise taxes
(3) Assumes no changes in working capital
(4) Adjusted EBITDA and Distributable Cash Flow
are non-GAAP financial measures. Please see “Use of Non-GAAP
Financial Measures” for a description of Adjusted EBITDA and
Distributable Cash Flow and the reconciliation to the most
comparable GAAP financial measure
(5) On June 1, 2016 MEMP acquired its general
partner from Memorial Resource Development Corp. In connection with
that acquisition, the MEMP general partner interest was converted
into a non-economic interest and the MEMP incentive distribution
rights (“IDRs”) were cancelled. Prior to that acquisition, MEMP’s
calculation of quarterly distributions required the calculation of
Operating Surplus under the MEMP partnership agreement, which
required the use of “estimated maintenance capital expenditures”
for such calculation. Accordingly, in previous periods MEMP used
estimated maintenance capital expenditures to calculate
Distributable Cash Flow for each period. Beginning with its
acquisition of its general partner and cancellation of the IDRs,
Operating Surplus is no longer relevant to the calculation of
distributions. Accordingly, MEMP no longer uses estimated
maintenance capital expenditures to calculate Distributable Cash
Flow. In addition, in the current commodity price environment all
of MEMP’s capital expenditures are maintenance capital
expenditures. Accordingly, MEMP presents Distributable Cash Flow as
using capital expenditures rather than estimated maintenance
capital expenditures in such calculation. Distributable Cash Flow
has been recalculated for the historical periods presented in this
press release for consistency.
These estimates reflect management’s best
judgment based on current expectations about the future and
anticipated market conditions based upon both stated and unstated
assumptions and other factors. Although management believes
such estimates and assumptions to be reasonable, they are
inherently uncertain and involve a number of risks that are beyond
MEMP’s control. Actual conditions and assumptions may change
over the course of the year.
Second Quarter 2016 Cash
Distribution
As announced on July 27, 2016, the board of
directors of MEMP’s general partner approved and declared a cash
distribution of $0.03 per unit for the second quarter of
2016. This distribution represents an annualized amount of
$0.12 per unit and will be paid on August 12, 2016 to unitholders
of record as of the close of business on August 5, 2016.
Quarterly Report on Form
10-Q
MEMP’s financial statements and related
footnotes will be available in its Quarterly Report on Form 10-Q
for the quarter ended June 30, 2016, which MEMP expects to file
with the SEC on or before August 9, 2016.
Conference Call
MEMP will host an investor conference call today
at 10:00 a.m. Central Time to discuss these operating and financial
results. Interested parties may join the webcast by visiting
MEMP's website www.memorialpp.com and clicking on the webcast link
or by dialing (844) 735-9435 at least 15 minutes before the call
begins and providing the Conference ID: 52712193. The webcast
and a telephonic replay will be available for seven days following
the call and may be accessed by visiting MEMP’s website
www.memorialpp.com or by dialing (855) 859-2056 and providing the
Conference ID: 52712193.
A presentation containing supplemental
information regarding full year 2016 guidance and current
developments has been posted to MEMP’s website
www.memorialpp.com.
(1) Adjusted EBITDA and Distributable Cash Flow
are non-GAAP financial measures. Please see the reconciliation to
the most comparable measure calculated in accordance with GAAP in
the "Use of Non-GAAP Financial Measures" section of this press
release.
About Memorial Production Partners
LP
Memorial Production Partners LP is a publicly
traded partnership engaged in the acquisition, production and
development of oil and natural gas properties in the United
States. MEMP’s properties consist of mature, legacy oil and
natural gas fields. MEMP is headquartered in Houston,
Texas. For more information, visit www.memorialpp.com.
Forward-Looking Statements
This press release includes “forward-looking
statements.” All statements, other than statements of historical
facts, included in this press release that address activities,
events or developments that MEMP expects, believes or anticipates
will or may occur in the future are forward-looking statements.
Terminology such as “will,” “would,” “should,” “could,” “expect,”
“anticipate,” “plan,” “project,” “intend,” “estimate,” “believe,”
“target,” “continue,” “potential,” the negative of such terms or
other comparable terminology are intended to identify
forward-looking statements. These statements include, but are
not limited to, statements about MEMP's future capital expenditures
(including the amount and nature thereof), expectations regarding
cash flows, distributions and distribution rates, and expectations
of plans, goals, strategies (including measures to implement
strategies), objectives and anticipated financial and operating
results of MEMP, including as to production, lease operating
expenses, hedging activities, commodity price realizations, capital
expenditure levels and other guidance. These statements are
based on certain assumptions made by MEMP based on its experience
and perception of historical trends, current conditions, expected
future developments and other factors it believes are appropriate
in the circumstances, but such assumptions may prove to be
inaccurate. Such statements are also subject to a number of risks
and uncertainties, many of which are beyond the control of MEMP,
which may cause MEMP’s actual results to differ materially from
those implied or expressed by the forward-looking statements.
These include risks and uncertainties relating to, among other
things, the uncertainty inherent in the development and production
of oil, natural gas and natural gas liquids and in estimating
reserves; drilling activities; volatility in the prices for, oil,
natural gas and natural gas liquids, including a further or
extended decline in commodity prices; potential difficulties in the
marketing of oil, natural gas and natural gas liquids; competition
in the oil and natural gas industry; potential failure or shortages
of, or increased costs for, drilling and production equipment and
supply materials for production; risks related to acquisitions,
including MEMP’s ability to integrate acquired properties; risks
related to MEMP’s ability to generate sufficient cash flow to pay
distributions, to make payments on its debt obligations and to
execute its business plan; MEMP’s ability to access funds on
acceptable terms, if at all, because of the terms and conditions
governing MEMP’s indebtedness or otherwise; and the risk that
MEMP’s hedging strategy may be ineffective or may reduce its
income. Please read MEMP’s filings with the Securities and Exchange
Commission (“SEC”), including “Risk Factors” in MEMP’s Annual
Report on Form 10-K, and if applicable, MEMP’s Quarterly Reports on
Form 10-Q and Current Reports on Form 8-K, which are available on
MEMP’s Investor Relations website at
http://investor.memorialpp.com/sec.cfm or on the SEC’s website
at http://www.sec.gov, for a discussion of risks and uncertainties
that could cause actual results to differ from those in such
forward-looking statements. You are cautioned not to place
undue reliance on these forward-looking statements, which speak
only as of the date of this press release. All forward-looking
statements in this press release are qualified in their entirety by
these cautionary statements. Except as required by law, MEMP
undertakes no obligation and does not intend to update or revise
any forward-looking statements, whether as a result of new
information, future results or otherwise.
Use of Non-GAAP Financial
Measures
This press release and accompanying schedules
include the non-GAAP financial measures of Adjusted EBITDA and
Distributable Cash Flow. The accompanying schedules provide a
reconciliation of these non-GAAP financial measures to their most
directly comparable financial measure calculated and presented in
accordance with GAAP. MEMP’s non-GAAP financial measures should not
be considered as alternatives to GAAP measures such as net income,
operating income, net cash flows provided by operating activities
or any other measure of financial performance calculated and
presented in accordance with GAAP. MEMP’s non-GAAP financial
measures may not be comparable to similarly-titled measures of
other companies because they may not calculate such measures in the
same manner as MEMP does.
Adjusted EBITDA. MEMP defines
Adjusted EBITDA as net income or loss, plus interest expense;
income tax expense; depreciation, depletion and amortization;
impairment of goodwill and long-lived assets; accretion of asset
retirement obligations; losses on commodity derivative instruments;
cash settlements received on expired commodity derivative
instruments; losses on sale of assets; unit-based compensation
expenses; exploration costs; acquisition and divestiture related
costs; bad debt expense; and other non-routine items, less interest
income; gain on extinguishment of debt; income tax benefit; gains
on commodity derivative instruments; cash settlements paid on
expired commodity derivative instruments; gains on sale of assets
and other, net; and other non-routine items. Adjusted EBITDA is
commonly used as a supplemental financial measure by management and
external users of MEMP’s financial statements, such as investors,
research analysts and rating agencies, to assess: (1) its operating
performance as compared to other companies and partnerships in
MEMP’s industry without regard to financing methods, capital
structures or historical cost basis; (2) the ability of its assets
to generate cash sufficient to pay interest, support MEMP’s
indebtedness and make distributions on its units; and (3) the
viability of projects and the overall rates of return on
alternative investment opportunities. Since Adjusted EBITDA
excludes some, but not all, items that affect net income or loss
and because these measures may vary among other companies, the
Adjusted EBITDA data presented in this press release may not be
comparable to similarly titled measures of other companies. The
GAAP measure most directly comparable to Adjusted EBITDA is net
cash provided by operating activities.
Distributable Cash Flow.
MEMP defines distributable cash flow as Adjusted EBITDA, less cash
income taxes; cash interest expense; and total capital
expenditures. Management compares the distributable cash flow
MEMP generates to the cash distributions it expects to pay MEMP’s
partners. Using this metric, management computes MEMP’s
distribution coverage ratio. Distributable cash flow is an
important non-GAAP financial measure for MEMP’s limited partners
since it serves as an indicator of MEMP’s success in providing a
cash return on investment. Specifically, this financial measure
indicates to investors whether or not MEMP is generating cash flows
at a level that can sustain or support an increase in its quarterly
cash distributions. Distributable cash flow is also a quantitative
standard used by the investment community with respect to publicly
traded partnerships because the value of a partnership unit is, in
part, measured by its yield, which is based on the amount of cash
distributions a partnership can pay to a unitholder. The GAAP
measure most directly comparable to distributable cash flow is net
cash provided by operating activities. On June 1, 2016 MEMP
acquired its general partner from Memorial Resource Development
Corp. In connection with that acquisition, the MEMP general partner
interest was converted into a non-economic interest and the MEMP
incentive distribution rights (“IDRs”) were cancelled. Prior to
that acquisition, MEMP’s calculation of quarterly distributions
required the calculation of Operating Surplus under the MEMP
partnership agreement, which required the use of “estimated
maintenance capital expenditures” for such calculation.
Accordingly, in previous periods MEMP used estimated maintenance
capital expenditures to calculate Distributable Cash Flow for each
period. Beginning with its acquisition of its general partner and
cancellation of the IDRs, Operating Surplus is no longer relevant
to the calculation of distributions. Accordingly, MEMP no longer
uses estimated maintenance capital expenditures to calculate
Distributable Cash Flow. In addition, in the current commodity
price environment all of MEMP’s capital expenditures are
maintenance capital expenditures. Accordingly, MEMP presents
Distributable Cash Flow as using capital expenditures rather than
estimated maintenance capital expenditures in such calculation.
Distributable Cash Flow has been recalculated for the historical
periods presented in this press release for consistency.
Selected Operating and Financial Data
(Tables)
Selected Operating and Financial Data
(Tables) |
|
|
|
|
|
|
|
|
|
|
Memorial Production Partners LP |
|
|
|
|
Selected Financial Data - Unaudited |
|
|
|
|
Statements of Operations Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended |
|
(Amounts in
$000s, except per unit data) |
|
6/30/2016 |
|
3/31/2016 |
|
|
|
|
|
|
|
|
Revenues: |
|
|
|
|
|
|
Oil & natural gas
sales |
|
$ |
67,780 |
|
|
$ |
60,623 |
|
|
|
Pipeline tariff income
and other |
|
|
286 |
|
|
|
243 |
|
|
|
Total
revenues |
|
|
68,066 |
|
|
|
60,866 |
|
|
|
|
|
|
|
|
|
Costs and
Expenses: |
|
|
|
|
|
|
Lease operating |
|
|
29,354 |
|
|
|
35,696 |
|
|
|
Gathering, processing
& transportation |
|
|
8,823 |
|
|
|
9,209 |
|
|
|
Exploration |
|
|
15 |
|
|
|
122 |
|
|
|
Taxes other than
income |
|
|
3,485 |
|
|
|
4,008 |
|
|
|
Depreciation, depletion
and amortization |
|
|
44,413 |
|
|
|
44,429 |
|
|
|
Impairment of proved
oil and natural gas properties |
|
|
- |
|
|
|
8,342 |
|
|
|
General and
administrative |
|
|
15,246 |
|
|
|
13,524 |
|
|
|
Accretion of asset
retirement obligations |
|
|
2,712 |
|
|
|
2,707 |
|
|
|
(Gain) loss on
commodity derivative instruments |
|
|
124,580 |
|
|
|
(51,745 |
) |
|
|
Gain on sale of
properties |
|
|
(3,539 |
) |
|
|
(96 |
) |
|
|
Other, net |
|
|
(52 |
) |
|
|
119 |
|
|
|
Total costs and
expenses |
|
|
225,037 |
|
|
|
66,315 |
|
|
|
|
|
|
|
|
|
|
Operating income
(loss) |
|
|
(156,971 |
) |
|
|
(5,449 |
) |
|
|
|
|
|
|
|
|
Other
Income (Expense): |
|
|
|
|
|
|
Interest expense,
net |
|
|
(32,143 |
) |
|
|
(32,552 |
) |
|
|
Other income
(expense) |
|
|
- |
|
|
|
- |
|
|
|
Gain on extinguishment
of debt |
|
|
41,664 |
|
|
|
- |
|
|
|
Total other income
(expense) |
|
|
9,521 |
|
|
|
(32,552 |
) |
|
|
|
|
|
|
|
|
|
Income (loss) before
income taxes |
|
|
(147,450 |
) |
|
|
(38,001 |
) |
|
Income tax
benefit (expense) |
|
|
(100 |
) |
|
|
(96 |
) |
|
|
Net income (loss) |
|
$ |
(147,550 |
) |
|
$ |
(38,097 |
) |
|
|
Net income (loss)
attributable to noncontrolling interest |
|
$ |
- |
|
|
$ |
- |
|
|
|
Net income (loss)
attributable to Memorial Production Partners LP |
|
$ |
(147,550 |
) |
|
$ |
(38,097 |
) |
|
|
|
|
|
|
|
|
Allocation
of Net Income (Loss) to: |
|
|
|
|
|
|
Net income (loss)
attributable to Memorial Production Partners LP |
|
|
(147,550 |
) |
|
|
(38,097 |
) |
|
|
Net (income) loss
allocated to general partner |
|
|
128 |
|
|
|
40 |
|
|
|
Limited partners'
interest in net income (loss) |
|
$ |
(147,422 |
) |
|
$ |
(38,057 |
) |
|
|
|
|
|
|
|
|
Earnings
per unit: |
|
|
|
|
|
|
Basic and diluted
earnings per limited partner unit |
|
$ |
(1.78 |
) |
|
$ |
(0.46 |
) |
|
|
|
|
|
|
|
|
Cash
distribution declared per unit |
|
$ |
0.03 |
|
|
$ |
0.03 |
|
|
|
|
|
|
|
|
|
Weighted
average number of limited partner units outstanding |
|
|
83,007 |
|
|
|
82,935 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil
and natural gas revenue: |
|
|
|
|
|
|
Oil sales |
|
$ |
36,973 |
|
|
$ |
29,777 |
|
|
|
NGL sales |
|
|
7,928 |
|
|
|
7,255 |
|
|
|
Natural gas sales |
|
|
22,879 |
|
|
|
23,591 |
|
|
|
Total oil and
natural gas revenue |
|
$ |
67,780 |
|
|
$ |
60,623 |
|
|
|
|
|
|
|
|
|
Production volumes: |
|
|
|
|
|
|
Oil (MBbls) |
|
|
954 |
|
|
|
1,068 |
|
|
|
NGLs (MBbls) |
|
|
590 |
|
|
|
663 |
|
|
|
Natural gas (MMcf) |
|
|
11,799 |
|
|
|
11,753 |
|
|
|
Total
(MMcfe) |
|
|
21,063 |
|
|
|
22,138 |
|
|
|
Average net
production (MMcfe) |
|
|
231.5 |
|
|
|
243.3 |
|
|
|
|
|
|
|
|
|
Average sales price (excluding commodity
derivatives): |
|
|
|
|
|
|
Oil (per Bbl) |
|
$ |
38.73 |
|
|
$ |
27.89 |
|
|
|
NGL (per Bbl) |
|
$ |
13.45 |
|
|
$ |
10.94 |
|
|
|
Natural gas (per
Mcf) |
|
$ |
1.94 |
|
|
$ |
2.01 |
|
|
|
Total (per
Mcfe) |
|
$ |
3.22 |
|
|
$ |
2.74 |
|
|
|
|
|
|
|
|
|
Average unit costs per Mcfe: |
|
|
|
|
|
|
Lease operating
expense |
|
$ |
1.39 |
|
|
$ |
1.61 |
|
|
|
Gathering, processing
and transportation |
|
$ |
0.42 |
|
|
$ |
0.42 |
|
|
|
Taxes other than
income |
|
$ |
0.17 |
|
|
$ |
0.18 |
|
|
|
General and
administrative expenses |
|
$ |
0.72 |
|
|
$ |
0.61 |
|
|
|
Depletion,
depreciation, and amortization |
|
$ |
2.11 |
|
|
$ |
2.01 |
|
|
|
|
|
|
|
|
Selected Financial Data -
Unaudited |
|
|
|
|
Balance Sheet Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2016 |
|
|
Total current
assets |
|
$ |
198,619 |
|
|
|
|
|
Oil and natural gas
properties, net |
|
|
1,820,243 |
|
|
|
|
|
Total assets |
|
|
2,540,083 |
|
|
|
|
|
Total current
liabilities |
|
|
90,869 |
|
|
|
|
|
Long-term debt |
|
|
1,824,604 |
|
|
|
|
|
Total liabilities |
|
|
2,085,840 |
|
|
|
|
|
Total partners'
equity |
|
|
454,243 |
|
|
|
|
|
|
|
|
|
|
Selected Financial Data -
Unaudited |
|
|
|
|
Statements of Cash Flows Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended |
|
|
|
|
6/30/2016 |
3/31/2016 |
|
|
Net cash provided by
operating activities |
|
$ |
78,966 |
|
|
$ |
77,006 |
|
|
|
Net cash provided by
(used in) investing activities |
|
|
14,301 |
|
|
|
(24,443 |
) |
|
|
Net cash provided by
(used in) financing activities |
|
|
(94,103 |
) |
|
|
(52,326 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected Operating and Financial Data
(Tables) |
|
|
|
|
Reconciliation of Unaudited GAAP Financial Measures to
Non-GAAP Financial Measures |
Adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended |
|
|
|
|
6/30/2016 |
3/31/2016 |
|
|
|
|
|
|
|
|
Reconciliation of Adjusted EBITDA to Net Income
(Loss): |
|
|
|
|
|
|
Net income (loss) |
|
$ |
(147,550 |
) |
|
$ |
(38,097 |
) |
|
|
Interest expense,
net |
|
|
32,143 |
|
|
|
32,552 |
|
|
|
Gain on extinguishment
of debt |
|
|
(41,664 |
) |
|
|
- |
|
|
|
Income tax expense
(benefit) |
|
|
100 |
|
|
|
96 |
|
|
|
Depreciation, depletion
and amortization |
|
|
44,413 |
|
|
|
44,429 |
|
|
|
Impairment of oil and
gas properties |
|
|
- |
|
|
|
8,342 |
|
|
|
Accretion of asset
retirement obligations |
|
|
2,712 |
|
|
|
2,707 |
|
|
|
(Gains) losses on
commodity derivative instruments |
|
|
124,580 |
|
|
|
(51,745 |
) |
|
|
Cash settlements
received (paid) on expired commodity derivatives |
|
|
67,638 |
|
|
|
80,221 |
|
|
|
Acquisition and
divestiture related expenses |
|
|
927 |
|
|
|
86 |
|
|
|
Unit-based compensation
expense |
|
|
2,731 |
|
|
|
2,568 |
|
|
|
Exploration |
|
|
15 |
|
|
|
122 |
|
|
|
Gain on sale of
properties |
|
|
(3,539 |
) |
|
|
(96 |
) |
|
|
(Gain) loss on
settlement of AROs |
|
|
(52 |
) |
|
|
121 |
|
|
|
Bad debt expense |
|
|
1,601 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA |
|
$ |
84,055 |
|
|
$ |
81,306 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Adjusted EBITDA and Distributable
Cash Flow to |
|
|
|
|
|
Net Cash Provided by Operating
Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by
operating activities |
|
$ |
78,966 |
|
|
$ |
77,006 |
|
|
|
Changes in working
capital |
|
|
14,341 |
|
|
|
(24,268 |
) |
|
|
Interest expense,
net |
|
|
32,143 |
|
|
|
32,552 |
|
|
|
Gain (loss) on interest
rate swaps |
|
|
(1,844 |
) |
|
|
(3,682 |
) |
|
|
Cash settlements paid
(received) on interest rate swaps |
|
|
513 |
|
|
|
530 |
|
|
|
Cash settlements
received on terminated derivatives |
|
|
(39,299 |
) |
|
|
- |
|
|
|
Amortization of
deferred financing fees |
|
|
(1,348 |
) |
|
|
(1,202 |
) |
|
|
Accretion of senior
notes discount |
|
|
(596 |
) |
|
|
(605 |
) |
|
|
Acquisition and
divestiture related expenses |
|
|
927 |
|
|
|
86 |
|
|
|
Exploration |
|
|
15 |
|
|
|
122 |
|
|
|
Plugging and
abandonment costs |
|
|
201 |
|
|
|
736 |
|
|
|
Current income tax
expense (benefit) - current portion |
|
|
36 |
|
|
|
31 |
|
|
|
Adjusted EBITDA |
|
$ |
84,055 |
|
|
$ |
81,306 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected Operating and Financial Data
(Tables) |
|
|
|
|
Reconciliation of Unaudited GAAP Financial Measures to
Non-GAAP Financial Measures |
Distributable Cash Flow |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended |
|
|
|
|
6/30/2016 |
|
3/31/2016 |
|
|
Net income (loss) |
|
$ |
(147,550 |
) |
|
$ |
(38,097 |
) |
|
|
Interest expense,
net |
|
|
32,143 |
|
|
|
32,552 |
|
|
|
Gain on extinguishment
of debt |
|
|
(41,664 |
) |
|
|
- |
|
|
|
Income tax expense
(benefit) |
|
|
100 |
|
|
|
96 |
|
|
|
Depreciation, depletion
and amortization |
|
|
44,413 |
|
|
|
44,429 |
|
|
|
Impairment of oil and
gas properties |
|
|
- |
|
|
|
8,342 |
|
|
|
Accretion of asset
retirement obligations |
|
|
2,712 |
|
|
|
2,707 |
|
|
|
(Gains) losses on
commodity derivative instruments |
|
|
124,580 |
|
|
|
(51,745 |
) |
|
|
Cash settlements
received (paid) on expired commodity derivatives |
|
|
67,638 |
|
|
|
80,221 |
|
|
|
Acquisition and
divestiture related expenses |
|
|
927 |
|
|
|
86 |
|
|
|
Unit-based compensation
expense |
|
|
2,731 |
|
|
|
2,568 |
|
|
|
Exploration |
|
|
15 |
|
|
|
122 |
|
|
|
Gain on sale of
properties |
|
|
(3,539 |
) |
|
|
(96 |
) |
|
|
(Gain) loss on
settlement of AROs |
|
|
(52 |
) |
|
|
121 |
|
|
|
Bad debt expense |
|
|
1,601 |
|
|
|
- |
|
|
|
Adjusted
EBITDA |
|
$ |
84,055 |
|
|
$ |
81,306 |
|
|
|
Less: Cash
interest expense |
|
|
28,726 |
|
|
|
27,775 |
|
|
|
Less: Capital
expenditures |
|
|
10,406 |
|
|
|
24,467 |
|
|
|
Total Distributable
cash flow |
|
$ |
44,923 |
|
|
$ |
29,064 |
|
|
|
Less: Distribution to
GP |
|
|
- |
|
|
|
3 |
|
|
|
Distributable cash flow
available to Limited Partners |
|
$ |
44,923 |
|
|
$ |
29,061 |
|
|
|
|
|
|
|
|
|
|
Cash distribution to
limited partners |
|
$ |
2,505 |
|
|
$ |
2,487 |
|
|
|
|
|
|
|
|
|
|
Distribution coverage
ratio |
|
17.94x |
|
11.69x |
|
|
|
|
|
|
|
2016 Adjusted EBITDA and Distributable Cash Flow
Guidance Reconciliation Table |
|
|
Mid-Point |
|
|
For Year Ended |
|
(in
millions) |
12/31/2016 |
|
|
|
|
Calculation of
Adjusted EBITDA: |
|
|
Net income |
$ |
30 |
|
|
Interest expense |
|
111 |
|
|
Depletion,
depreciation, and amortization |
|
172 |
|
|
Adjusted EBITDA |
$ |
313 |
|
|
|
|
|
Reconciliation
of Net Cash Provided by Operating Activities to Adjusted
EBITDA: |
|
|
Net cash provided by
operating activities |
$ |
202 |
|
|
Changes in working
capital |
|
- |
|
|
Interest expense |
|
111 |
|
|
Adjusted EBITDA |
$ |
313 |
|
|
|
|
|
Reconciliation
of Adjusted EBITDA to Distributable Cash Flow: |
|
|
Adjusted EBITDA |
$ |
313 |
|
|
Cash Interest
Expense |
|
(111 |
) |
|
Capital
expenditures |
|
(60 |
) |
|
Distributable Cash
Flow |
$ |
142 |
|
|
Contacts
Memorial Production Partners LP
Bobby Stillwell – Chief Financial Officer
(713) 588-8347
ir@memorialpp.com
Memorial Production Partners LP
Martyn Willsher – Treasurer
(713) 588-8346
ir@memorialpp.com
Memorial Production Partners Lp (MM) (NASDAQ:MEMP)
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