(Source: Business Wire)
Energy Partners, Ltd. ("EPL" or the "Company") (NYSE:EPL) today reported
financial and operational results for the period ended September 30,
2009, reflecting the reorganization accounting rules applied in
connection with its emergence from bankruptcy on September 21, 2009
pursuant to its plan of reorganization (the "Plan"). EPL reported net
income of $29.4 million for the third quarter of 2009. Results for the
third quarter of 2009 included expenses of $11.6 million from
reorganization items, a loss on discharge of debt of $2.7 million, and
fresh-start adjustments totaling a gain of $57.1 million. Without these
adjustments, the reported net income of $29.4 million would have been a
net loss of $13.4 million.
Gary C. Hanna, the Company's CEO, stated, "I am very encouraged with our
progress since I came on board with the new EPL. This third quarter 2009
reporting period marks the end of the incurrence of the substantial
costs of the reorganization, and we can now start to see the positive
effects of our recapitalized balance sheet going forward."
Hanna continued, "Our near term focus on realigning our cost structure,
converting our core proved non-producing oil assets to cash flow and
internalizing plugging and abandonment expertise is being aggressively
implemented. As we continue the portfolio review process, we will high
grade our internal opportunities while remaining opportunistic to
strategic options made available with our increased financial
flexibility and improved capital structure. With that said, we will
strive to maintain a healthy balance sheet and will be disciplined in
our capital allocation. I look forward to working with our dedicated
team to achieve our goals."
Effects of Reorganization
Highlights of the Company's reorganization under the Plan include the
following:
The Plan provided for, among other things, reducing EPL's outstanding
indebtedness by converting its $455 million of senior unsecured notes
and unpaid interest thereon into approximately 95% of the new EPL
common stock issued pursuant to the Plan.
As a part of the consummation of the Plan, the Company entered into a
three-year senior secured credit facility (the "Credit Facility")
comprised of a $45 million revolver and a $25 million one-year
amortizing term loan. The Credit Facility provides for an initial
borrowing base of $70 million, which is reduced ratably with repayment
of the term loan. The Company also issued Senior Subordinated Secured
PIK Notes due 2014 (the "Notes") in principal amount of approximately
$61 million. The Company's outstanding indebtedness under the Credit
Facility and from the issuance of the Notes totaled approximately $111
million immediately following consummation of the Plan.
EPL has delivered to the Minerals Management Service ("MMS") all
necessary surety bonds in support of decommissioning obligations on
certain federal leases in the Gulf of Mexico, and production shut-in
from the leases in the Company's East Bay field by a prior March 2009
MMS order recommenced on September 23, 2009.
A new five-member Board of Directors was appointed pursuant to the
Plan, and Gary C. Hanna was appointed by the Board as Chief Executive
Officer.
Pursuant to the Plan, EPL issued approximately 40 million shares of
new common stock to its former noteholders and stockholders, which on
September 23, 2009 began trading on the New York Stock Exchange under
the ticker symbol "EPL."
The Company's balance sheet reflects fresh-start accounting treatment
as of September 30, 2009.
Fresh-Start Accounting
On September 30, 2009, the Company implemented fresh-start accounting
and reporting in accordance with financial reporting requirements for
entities in bankruptcy reorganization. Under fresh-start accounting, the
Company was required to re-value its assets and liabilities based upon
their estimated fair market values as of September 30, 2009.
The allocation of the reorganization value to the Company's assets was
determined based on financial projections that the Company and its
advisors developed which were used to calculate the estimated fair
values of the Company's assets as of September 30, 2009. Under
reorganization accounting, a new entity is deemed created for financial
reporting purposes. References to "Successor Company" refer to the
Company on and after September 30, 2009, and references to "Predecessor
Company" relate to the Company prior to the effects of the
reorganization. As a result of implementing reorganization accounting,
the financial statements for the Successor Company are not comparable to
the Predecessor Company.
Application of reorganization accounting resulted in estimated fair
value adjustments totaling a $57.1 million increase to net income due to
changes in the carrying amounts of EPL's property and equipment and
asset retirement obligations. The estimated fair value of EPL's property
and equipment, primarily proved oil and natural gas reserves, exceeded
the Predecessor Company's book value by $31.3 million. Additionally, the
estimated fair value of EPL's asset retirement obligations was less than
the Predecessor Company's book value by $25.8 million.
The Predecessor Company also recorded a $2.7 million loss on the
discharge of the $455 million of senior unsecured notes and unpaid
interest which were converted into approximately 95% of the new EPL
common stock issued pursuant to the Plan. Further, the Predecessor
Company's equity accounts, after consideration of the adjustments
described above, were eliminated. EPL's new equity at September 30,
2009, totaling $500.9 million, represents the approximately 40 million
shares of new EPL common stock issued pursuant to the Plan.
Predecessor Company Third Quarter 2009 Results
As noted above, the Predecessor Company reported net income of $29.4
million for the third quarter of 2009. Results for the third quarter of
2009 included expenses of $11.6 million from reorganization items, a
loss on discharge of debt of $2.7 million, and fresh-start adjustments
totaling a gain of $57.1 million. Without these adjustments, the
reported net income of $29.4 million would have been a net loss of $13.4
million.
Revenue for the third quarter of 2009 was $46.1 million versus $94.7
million in the same period a year ago. Discretionary cash flow, which is
cash flow from operating activities before changes in working capital
and exploration expenses, was $13.4 million and EBITDAX was $21.6
million for the third quarter of 2009 (see reconciliation of
discretionary cash flow and EBITDAX in the tables). Cash flow from
operating activities in the third quarter of 2009 was $5.2 million,
compared with $80.5 million in the same quarter a year ago.
Production for the third quarter of 2009 averaged 14,830 barrels of oil
equivalent ("Boe") per day. Natural gas production averaged 59.0 million
cubic feet ("Mmcf") per day and oil production averaged 4,992 barrels of
oil per day. Third quarter 2009 production volumes were higher than
third quarter 2008 production volumes of 12,263 Boe per day. Price
realizations, all of which are stated before the impact of derivative
instruments, averaged $61.77 per barrel for oil and $3.26 per thousand
cubic feet ("Mcf") of natural gas in the third quarter of 2009, compared
to $114.61 per barrel and $10.22 per Mcf in the third quarter of 2008.
Third quarter 2009 production increased 21% over the third quarter of
2008 as a result of the contribution of deepwater production in
Mississippi Canyon 248 beginning in November 2008 and the restoration of
substantially all storm related shut-in production from the third
quarter 2008 occurrences of Hurricanes Gustav and Ike. Production
declined in the third quarter 2009 versus the second quarter 2009,
primarily as a result of gas declines in the Company's Western offshore
area. Lower lease operating expenses and general and administrative
expenses were also realized in the third quarter 2009 versus both the
same period a year ago and the second quarter of 2009 as a direct result
of material cost reductions associated with the Company's restructuring.
The cost reductions include company personnel, third party contractors
and consultants combined with lower service industry costs. These
impacts were offset by reduced revenues in the quarter as a result of a
60% decrease in average realized prices on a barrel of oil equivalent
basis compared to a year ago.
For the nine months ended September 30, 2009, the Predecessor Company
reported a net loss of $36.1 million. This compares to net income of
$40.8 million in the same period of 2008. Discretionary cash flow and
EBITDAX for the first nine months of 2009 totaled $36.4 million and
$62.6 million, respectively (see reconciliation of discretionary cash
flow and EBITDAX in tables). Cash flow from operating activities in the
first nine months of 2009 was $14.4 million, compared to $199.9 million
in the same period of 2008.
For the first nine months of 2009, capital expenditures for exploration
and development activities totaled approximately $5 million, and for
full year are projected to total approximately $10 million. In addition,
expenses from plugging and abandonment and other decommissioning
operations for 2009 are estimated to total approximately $24 million, of
which approximately $22 million was incurred in the first nine months of
2009.
As of September 30, 2009, the Successor Company had unrestricted cash on
hand of $43.9 million and $22 million of restricted cash and total
outstanding debt of $111 million. The Successor Company had $25 million
of outstanding debt on the revolving portion of its Credit Facility at
the end of the third quarter, with another $20 million of borrowing
capacity available. The Company will undergo its first borrowing base
redetermination beginning in December 2009. As previously announced, EPL
has completed a commodity risk management program that has met the
conditions of the hedging requirements under the Company's Credit
Facility with the purchase of crude oil floors and the placement of swap
contracts that cover the period from October 2009 to December 2011. The
complete schedule of the Company's current hedging program can be found
on the Company's website at www.eplweb.com
in the Investor Relations section.
Hanna continued, "Our overall investment approach going forward into
2010 will be conservative and protective of the balance sheet. We plan
to manage capital expenditures prudently in a concerted effort to stay
well below our expected cash flow, initially concentrating on arresting
production decline. We will also continue to focus on controlling our
cash operating costs. These combined efforts should enable us to build
liquidity."
Fourth Quarter 2009 Guidance
ESTIMATED PRODUCTION & SWAP HEDGE VOLUMES
Swap % Volume
Contract Swap
Net Production (per day): Volume Contracted
Oil (Bbls)((1)) 4,700 - 5,200 954 18-20%
Natural gas (Mcf) 45,000-50,000 0 0%
Total (Boe) 12,500-13,500 954 7-8%
ESTIMATED DIFFERENTIALS
WTI ($/Bbl) $ (1.50)
Henry Hub ($/Mcf) $ (0.10)
ESTIMATED EXPENSES (in Millions, unless otherwise noted)
Lease Operating (including energy insurance)
Base Loe $ 10.4-11.4
Energy Insurance 2.6
$ 13.0-14.0
General & Administrative ((2)) $ 3.5-4.5
Taxes, other than on earnings (% of revenue) 2%-4%
Exploration Expense $ 0.4-3.0
DD&A ($/Boe) 21.00-25.00
Interest Expense
Non-Cash (interest and accretion of OID on PIK Notes) $ 3.8
Cash 0.6-0.8
Total $ 4.4-4.6
Tax Rate (%) 34-37%
CAPITAL EXPENDITURES
Exploration & Development $ 2.5-5.0
Plugging and Abandonment & Decommissing work 2.0
$ 4.5-7.0
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(1) Natural gas liquids included in oil volume and are estimated at ~300-500 Bbls per day.
(2) Includes non-cash stock based compensation expense of approximately $0.5 million in 4Q09 and excludes energy insurance historically carried in G&A.
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Conference Call Information
EPL has scheduled a conference call for today, November 9, 2009 at 9:30
A.M. Central Time/10:30 A.M. Eastern Time to review results for the
third quarter and the first nine months of 2009. On the call, management
will discuss operational and financial results including the
implementation of "fresh-start" accounting, as well as provide further
details on the fourth quarter guidance given above. To participate in
the EPL conference call, callers in the United States and Canada can
dial (866) 845-8624 and international callers can dial (706) 634-0487.
The Conference I.D. for callers is 38818011.
The call will be available for replay beginning two hours after the call
is completed through midnight of November 23, 2009. 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.
