LRR Energy, L.P. Announces First Quarter 2013 Results Business Wire HOUSTON -- May 1, 2013 LRR Energy, L.P. (NYSE:LRE) (“LRR Energy” or the “Partnership”) announced today its operating and financial results for the three months ended March 31, 2013. Selected Financial and Operating Information LRR Energy’s financial statements for the previous period have been recast to include all closed acquisitions through March 31, 2013 from Lime Rock Resources since its initial public offering, as the acquisitions are considered between entities under common control. A summary of selected financial and operating information follows. For consolidated financial statements for the period ended March 31, 2013, please see the accompanying tables on pages 7-9. Three Months Ended March 31, 2013 (unaudited) (in thousands) Oil, natural gas and natural gas $ 21,613 liquids sales Realized gain on commodity derivative $ 4,105 instruments Unrealized loss on commodity derivative $ (10,029 ) instruments Total revenues $ 15,758 Lease operating expense $ 6,213 Production and ad valorem taxes $ 1,693 General and administrative expense $ 3,299 Interest expense $ 2,265 Net loss $ (7,450 ) Net loss per limited partner unit $ (0.32 ) Capital expenditures $ 3,824 Adjusted EBITDA ^(1) $ 14,944 Distributable cash flow ^(1) $ 8,010 Cash Distribution - common unitholders $ 9,384 ^(2) Cash Distribution - all unitholders $ 12,637 ^(2) Distribution coverage ratio - common 0.85x unitholders ^(1) Distribution coverage ratio - all 0.63x unitholders ^(1) ^(1) Non-GAAP financial measure. See reconciliation of non-GAAP financial measures beginning on page 10. ^(2) Includes $1.8 million of distributions related to common units sold in the March 2013 equity offering. Three Months Ended March 31, 2013 Average net production (Boe/d) 5,900 Average unit costs per Boe: Lease operating expense $ 11.71 Production and ad valorem taxes $ 3.19 General and administrative expense $ 6.22 LRR Energy’s average daily production of 5,900 Boe/d for the quarter was negatively impacted by the items below which resulted in lower production of approximately 500 Boe/d. The Partnership estimates that its average net production for April 2013 will be approximately 6,500 Boe/d. At the Red Lake field, the third party gas processor required LRR Energy to flare approximately 75 Boe/d due to plant capacity constraints and compressor issues during the quarter. LRR Energy is currently flaring approximately 60 Boe/d due to plant capacity limits and expects that it will continue to flare at this level until the gas plant is expanded, which the Partnership expects will occur during the fourth quarter of 2013. Delays in LRR Energy’s recompletion program at the Red Lake field during the quarter resulted in lower production of approximately 42 Boe/d. The Partnership expects the delayed projects to be completed during the second quarter. The Putnam field experienced weather related shut-ins of approximately 67 Boe/d for the quarter. The Putnam field has resumed normal operations. Production at the Pecos Slope field was curtailed by approximately 1.8 MMcf/d (300 Boe/d) during the quarter due to the previously disclosed high nitrogen content of the produced natural gas (1.0 MMcf/d or 167 Boe/d) and a compressor failure (0.8 MMcf/d or 133 Boe/d). The compressor resumed service on February 18, 2013. The current nitrogen content curtailment is approximately 1.0 MMcf/d (167 Boe/d), and LRR Energy expects it to remain at this level until the field-wide nitrogen rejection facility is installed, which it expects will occur in late 2013. A well at the New Years Ridge field had a tubing failure resulting in curtailed production of approximately 150 Mcfe/d (25 Boe/d) during the quarter. The well is back in service. The actual timing and amount of resumed production related to the items above may differ from these estimates. In addition to lower realized production, LRR Energy’s financial results for the quarter were materially impacted by a higher Midland to Cushing oil differential. The differential averaged $7.88 per barrel for the quarter compared to the full year 2011 and 2012 average differential of $2.30 per barrel. The Partnership estimated the impact of the higher differential (compared to the 2011 and 2012 average differential) on revenue and Adjusted EBITDA for the quarter to be approximately $0.8 million. In February 2013, LRR Energy executed Midland to Cushing oil basis swaps for March 2013 through December 2014 on the majority of its expected production that it expects will be impacted by the differential. The average hedged differential per barrel prices are $1.25 and $1.00 for 2013 and 2014, respectively. The differential for May 2013 settled at $0.17 per barrel. LRR Energy’s distribution coverage was further impacted by the timing of the March equity offering and the closing of the April Acquisition (as defined below). The majority of the net proceeds of the March equity offering were used to fund the April Acquisition. Because the equity offering closed prior to the first quarter distribution record date, the Partnership will pay distributions of approximately $1.8 million on the units that were issued in the March equity offering. Since the April Acquisition closed on April 1, 2013, the first quarter financial results have not been recasted for the April Acquisition. Recent Events On April 1, 2013, LRR Energy closed its previously announced acquisition of oil and natural gas properties in the Mid-Continent region in Oklahoma and crude oil hedges from its sponsor, Lime Rock Resources (the “April Acquisition”), for a purchase price of $38.2 million, subject to customary purchase price adjustments. The Partnership funded the acquisition with the net proceeds from the equity offering it completed in March 2013 in which it raised approximately $59.6 million after deducting underwriting discounts and estimated offering expenses. In April 2013, LRR Energy’s senior secured revolving credit facility lending group reaffirmed its borrowing base of $250 million. As of April 30, 2013, the Partnership had $185 million of outstanding borrowings under its revolving credit facility and $50 million of outstanding borrowings under its term loan. LRR Energy currently has $65 million of available borrowing capacity under its revolving credit facility which management believes provides ample financial flexibility to execute its 2013 capital program and distribution strategy. On April 17, 2013, LRR Energy announced that the Board of Directors of its general partner declared an increased cash distribution for the first quarter of 2013 of $0.4825 per outstanding unit, or $1.93 on an annualized basis. The distribution will be paid on May 15, 2013 to all unitholders of record as of the close of business on May 1, 2013. 2013 Guidance LRR Energy has revised its full year 2013 guidance to reflect the April Acquisition and the delays in production as noted above. Based on current estimates, and assuming no future acquisitions, the Partnership’s full year 2013 guidance is as follows: 2013 Guidance Daily Production (Boe/d) 6,250 - 6,550 LOE ($/Boe) $10.50 - $11.00 Capital Expenditures ($MM) Maintenance $20.3 Growth and other 9.7 Total $30.0 The guidance above sets forth management’s best estimate based on current and anticipated market conditions and other factors. While management believes that these estimates and assumptions are reasonable, they are inherently uncertain and are subject to, among other things, significant business, economic, regulatory, environmental and competitive risks and uncertainties that could cause actual results to differ materially from those management anticipates, as set forth under “Forward-Looking Statements.” Commodity Derivative Contracts As of March 31, 2013, LRR Energy had the following outstanding derivative contracts. Index 2013 2014 2015 2016 2017 Natural gas positions Price swaps NYMEX-HH 5,642,670 6,077,016 5,500,236 5,433,888 5,045,760 (MMBTUs) Weighted average $ 5.09 $ 5.53 $ 5.72 $ 4.29 $ 4.61 price Basis swaps NYMEX 5,584,726 5,876,098 5,326,559 2,877,047 - (MMBTUs) Weighted average $ (0.1363 ) $ (0.1521 ) $ (0.1661 ) $ (0.1115 ) $ - price Puts NYMEX-HH 122,625 - - - - (MMBTUs) Strike $ 3.00 $ - $ - $ - $ - price Oil positions Price swaps NYMEX-WTI 496,216 550,357 420,381 397,488 198,744 (BBLs) Weighted average $ 95.20 $ 95.81 $ 94.72 $ 86.02 $ 85.75 price Basis swaps NYMEX-WTI 372,590 410,400 - - - (BBLs) Weighted average $ (1.25 ) $ (1.00 ) $ - $ - $ - price NGL positions Price Mont swaps Belvieu 167,402 105,214 - - - (BBLs) Weighted average $ 41.95 $ 35.35 $ - $ - $ - price Subsequent to March 31, 2013, as part of the April Acquisition, LRR Energy acquired the following commodity hedges. Index 2013 2014 Oil positions Price swaps (BBLs) NYMEX-WTI 38,250 30,000 Weighted average price $ 102.75 $ 98.20 Quarterly Report on Form 10-Q LRR Energy expects to file its Quarterly Report on Form 10-Q with the Securities and Exchange Commission no later than May 10, 2013. The 10-Q will be available on the Investor Relations page of LRR Energy’s website www.lrrenergy.com or from the Securities and Exchange Commission website www.sec.gov. Webcast and Conference Call LRR Energy will host a webcast and conference call on Thursday, May 2, 2013, at 10:00 a.m. EDT (9:00 a.m. CDT) to discuss these results. Interested parties are invited to participate in the call by dialing 1-877-493-8071 (conference ID: 39257761). It is recommended that participants dial in approximately 10 minutes prior to the start of the conference call. Participants may access the webcast from LRR Energy’s website, www.lrrenergy.com, under the tab for "Investor Relations." A telephonic replay will be available after the call through May 20, 2013. Participants may access this replay by dialing 1-800-585-8367 (conference ID: 39257761). About LRR Energy, L.P. LRR Energy is a Delaware limited partnership formed in April 2011 by affiliates of Lime Rock Resources to operate, acquire, exploit and develop producing oil and natural gas properties in North America. LRR Energy's properties are located in the Permian Basin region in West Texas and southeast New Mexico, the Mid-Continent region in Oklahoma and East Texas and the Gulf Coast region in Texas. Forward-Looking Statements This press release includes "forward-looking statements" — that is, statements related to future events. Forward-looking statements are based on the current expectations of LRR Energy and include any statement that does not directly relate to a current or historical fact. In this context, forward-looking statements often address expected future business, operational and financial performance, and often contain words such as "may," "predict," "pursue," "expect," "estimate," "project," "plan," "believe," "intend," "achievable," "anticipate," "target," "continue," "potential," "should," "could" and other similar words. Actual results and future events could differ materially from those anticipated or implied in such statements. Forward-looking statements involve certain risks and uncertainties, and ultimately may not prove to be accurate. These risks and uncertainties include, among other things, a decline in oil, natural gas or NGL prices, the risk and uncertainties involved in producing oil and natural gas, competition in the oil and natural gas industry, governmental regulations and other factors. Actual results could differ materially from those anticipated or implied in the forward-looking statements due to the factors described under the captions "Risk Factors" in LRR Energy's Annual Report on Form 10-K for the year ended December 31, 2012 and LRR Energy's subsequent filings with the SEC. All forward-looking statements speak only as of the date of this press release. LRR Energy does not intend to update or revise any forward-looking statements as a result of new information, future events or otherwise. All forward-looking statements are qualified in their entirety by this cautionary statement. LRR Energy, L.P. Selected Operating Data (unaudited) Three Months Ended March 31, 2013 2012 Production: Oil (MBbls) 164 169 Natural gas (MMcf) 1,774 2,150 NGLs (MBbls) 71 66 Total (MBoe) 531 593 Average net production (Boe/d) 5,900 6,516 Average sales price: Oil (per Bbl): Sales price $ 81.92 $ 97.98 Effect of realized commodity derivative 1.45 (0.25 ) instruments Realized sales price $ 83.37 $ 97.73 Natural gas (per Mcf): Sales price $ 3.36 $ 2.71 Effect of realized commodity derivative 1.99 2.46 instruments Realized sales price $ 5.35 $ 5.17 NGLs (per Bbl): Sales price $ 31.25 $ 48.97 Effect of realized commodity derivative 4.77 0.09 instruments Realized sales price $ 36.02 $ 49.06 Average unit costs per Boe: Lease operating expenses $ 11.71 $ 11.03 Production and ad valorem taxes $ 3.19 $ 2.90 General and administrative expenses $ 6.22 $ 5.36 Depletion and depreciation $ 17.74 $ 16.83 LRR Energy, L.P. Consolidated Condensed Statement of Operations (in thousands, except per unit amounts) (unaudited) Three Months Ended March 31, 2013 2012 Revenues: Oil sales $ 13,435 $ 16,558 Natural gas sales 5,959 5,828 Natural gas liquids sales 2,219 3,232 Realized gain on commodity derivative 4,105 5,248 instruments Unrealized loss on commodity derivative (10,029 ) (271 ) instruments Other income 69 3 Total revenues 15,758 30,598 Operating Expenses: Lease operating expense 6,213 6,544 Production and ad valorem taxes 1,693 1,720 Depletion and depreciation 9,416 9,983 Impairment of oil and natural gas properties - 3,093 Accretion expense 457 373 Gain on settlement of asset retirement (25 ) (98 ) obligations General and administrative expense 3,299 3,183 Total operating expenses 21,053 24,798 Operating income (loss) (5,295 ) 5,800 Other income (expense), net Interest expense (2,265 ) (1,128 ) Realized loss on interest rate derivative (174 ) (33 ) instruments Unrealized gain on interest rate derivative 289 805 instruments Other income (expense), net (2,150 ) (356 ) Income (loss) before taxes (7,445 ) 5,444 Income tax expense (5 ) (126 ) Net income (loss) (7,450 ) 5,318 Net income attributable to predecessor - (1,469 ) operations Net income (loss) available to unitholders $ (7,450 ) $ 3,849 Computation of net income (loss) per limited partner unit: General partners’ interest in net income $ (7 ) $ 4 (loss) Limited partners’ interest in net income $ (7,443 ) $ 3,845 (loss) Net income (loss) per limited partner unit $ (0.32 ) $ 0.17 (basic and diluted) Weighted average number of limited partner 22,923 22,421 units outstanding LRR Energy, L.P. Consolidated Condensed Statement of Cash Flows (in thousands) (unaudited) Three Months Ended March 31, 2013 2012 CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ (7,450 ) $ 5,318 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depletion and depreciation 9,416 9,983 Impairment of oil and natural gas - 3,093 properties Unrealized (gain) loss on derivative 9,740 (534 ) instruments, net Accretion expense 457 373 Amortization of equity awards 115 69 Amortization of derivative contracts 247 - Amortization of deferred financing costs 82 74 and other Gain on settlement of asset retirement (25 ) (98 ) obligations Changes in operating assets and liabilities: Change in receivables (437 ) 3,977 Change in prepaid expenses 29 (334 ) Change in accrued liabilities and deferred 2,457 (427 ) tax liabilities Change in amounts due to/from affiliates (4,777 ) (1,201 ) Net cash provided by operating activities 9,854 20,293 CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of oil and natural gas - (1,624 ) properties Development of oil and natural gas (3,824 ) (4,747 ) properties Expenditures for other property and - (16 ) equipment Net cash used in investing activities (3,824 ) (6,387 ) CASH FLOWS FROM FINANCING ACTIVITIES Borrowings under revolving credit facility 29,000 - Principal payments on revolving credit (22,000 ) - facility Equity offering, net of expenses 59,583 - Distribution to Fund I (22,086 ) - Contribution to Fund I - (3,403 ) Distributions (10,785 ) (5,213 ) Net cash provided by (used in) financing 33,712 (8,616 ) activities NET INCREASE IN CASH AND CASH EQUIVALENTS 39,742 5,290 CASH AND CASH EQUIVALENTS, BEGINNING OF 3,467 1,513 PERIOD CASH AND CASH EQUIVALENTS, END OF PERIOD $ 43,209 $ 6,803 Supplemental disclosure of non-cash items to reconcile investing and financing activities Property and equipment: Change in accrued capital costs $ 3,885 $ (2,590 ) Asset retirement obligations (167 ) (81 ) LRR Energy, L.P. Consolidated Condensed Balance Sheet (in thousands, except unit amounts) (unaudited) March 31, 2013 December 31, 2012 ASSETS Current assets: Cash and cash equivalents $ 43,209 $ 3,467 Accounts receivable 7,687 7,250 Commodity derivative instruments 10,342 16,134 Due from affiliates 2,800 - Prepaid expenses 719 748 Total current assets 64,757 27,599 Property and equipment (successful 808,442 800,624 efforts method) Accumulated depletion, depreciation (330,794 ) (321,377 ) and impairment Total property and equipment, net 477,648 479,247 Commodity derivative instruments 17,377 19,821 Deferred financing costs, net of 1,454 1,559 accumulated amortization TOTAL ASSETS $ 561,236 $ 528,226 LIABILITIES AND UNITHOLDERS’ EQUITY Current liabilities: Accrued liabilities $ 3,892 $ 1,415 Accrued capital cost 6,246 2,361 Due to affiliates - 1,977 Commodity derivative instruments 3,373 1,671 Interest rate derivative 605 659 instruments Asset retirement obligations 423 500 Total current liabilities 14,539 8,583 Long-term liabilities: Commodity derivative instruments 1,189 874 Interest rate derivative 3,291 3,526 instruments Term loan 50,000 50,000 Revolving credit facility 185,000 178,000 Asset retirement obligations 33,232 32,615 Deferred tax liabilities 100 120 Total long-term liabilities 272,812 265,135 Total liabilities 287,351 273,718 Unitholders’ Equity: Predecessors’ capital - 24,673 General partner (22,400 units issued and outstanding as of March 380 396 31, 2013 and December 31, 2012) Public common unitholders (17,598,939 units issued and outstanding as of March 31, 2013 235,996 169,919 and 10,676,742 units issued and outstanding as of December 31, 2012) Affiliated common unitholders (1,849,600 units issued and outstanding as of March 31, 2013 7,911 25,563 and 5,049,600 units issued and outstanding as of December 31, 2012) Subordinated unitholders (6,720,000 units issued and outstanding as of 29,598 33,957 March 31, 2013 and December 31, 2012) Total Unitholders’ Equity 273,885 254,508 TOTAL LIABILITIES AND UNITHOLDERS’ $ 561,236 $ 528,226 EQUITY LRR Energy, L.P. Non-GAAP Reconciliation (in thousands) (unaudited) LRR Energy defines Adjusted EBITDA as net income (loss) plus income tax expense (benefit); interest expense-net, including realized and unrealized losses on interest rate derivative contracts; depletion and depreciation; accretion of asset retirement obligations; amortization of equity awards; (gain) loss on settlement of asset retirement obligations; unrealized losses on commodity derivative contracts; amortization of derivative contracts; impairment of oil and natural gas properties; less interest income; unrealized gains on commodity derivative contracts and other non-recurring items that the Partnership deems appropriate. Distributable Cash Flow is defined as Adjusted EBITDA less income tax expense; cash interest expense; and estimated maintenance capital expenditures. Distribution Coverage Ratio-common unitholders is defined as the ratio of Distributable Cash Flow to the total quarterly distribution payable on all of the Partnership’s outstanding common units. Distribution Coverage Ratio-all unitholders is defined as the ratio of Distributable Cash Flow to the total quarterly distribution payable on all of the Partnership’s outstanding common, subordinated and general partner units. Adjusted EBITDA, Distributable Cash Flow and the Distribution Coverage Ratio-common and all unitholders are used as supplemental financial measures by LRR Energy’s management and by external users of its financial statements, such as investors, commercial banks and others, to assess the Partnership’s operating performance as compared to that of other companies and partnerships in the industry, without regard to financing methods, capital structure or historical cost basis and the ability of its assets to generate sufficient cash flow to make distributions to the Partnership’s unitholders. LRR Energy’s management believes that Adjusted EBITDA, Distributable Cash Flow and the Distribution Coverage Ratio-common and all unitholders are useful to investors because these measures are used by many partnerships in the industry as measures of operating and financial performance and are commonly employed by financial analysts and others to evaluate our operating and financial performance from period to period and to compare it with the performance of other publicly traded partnerships within the industry. Adjusted EBITDA, Distributable Cash Flow and the Distribution Coverage Ratio-common and all unitholders should not be considered alternatives to net income, operating income, cash flow from operating activities or any other measures of financial performance presented in accordance with GAAP. LRR Energy’s Adjusted EBITDA, Distributable Cash Flow and Distribution Coverage Ratio-common and all unitholders may not be comparable to similarly titled measures of another company because all companies may not calculate Adjusted EBITDA, Distributable Cash Flow or the Distribution Coverage Ratio-common and all unitholders in the same manner. The following table presents a reconciliation of Adjusted EBITDA to net income, the Partnership’s most directly comparable GAAP financial performance measure, for the three months ended March 31, 2013 and 2012. Three Months Ended March 31, 2013 2012 (in thousands) Net income (loss) $ (7,450 ) $ 5,318 Income tax expense 5 126 Interest expense-net 2,150 356 Depletion and depreciation 9,416 9,983 Accretion of asset retirement obligations 457 373 Amortization of equity awards 115 69 Gain on settlement of asset retirement (25 ) (98 ) obligations Unrealized losses on commodity derivative 10,029 271 instruments Amortization of derivative contracts 247 - Impairment of oil and natural gas - 3,093 Interest income - - Unrealized gain on commodity derivative - - instruments Adjusted EBITDA $ 14,944 $ 19,491 LRR Energy, L.P. Non-GAAP Reconciliation (continued) (in thousands) (unaudited) The following table presents a reconciliation of Distributable Cash Flow and the Distribution Coverage Ratio-common and all unitholders to Adjusted EBITDA for the three months ended March 31, 2013 and 2012. Adjusted EBITDA is reconciled to net income, the Partnership’s most directly comparable GAAP financial performance measure, above. Three Months Ended March 31, 2013 2012 (in thousands) Adjusted EBITDA $ 14,944 $ 19,491 Income tax expense (5 ) (126 ) Cash interest expense (2,129 ) (1,410 ) Estimated maintenance capital (4,800 ) (4,800 ) ^(1) Distributable Cash Flow $ 8,010 $ 13,155 Cash Distribution - common 9,384 ^(2) 7,462 unitholders Cash Distribution - all 12,637 ^(2) 10,664 unitholders Distribution coverage ratio - 0.85x 1.76x common unitholders ^(1) Distribution coverage ratio - 0.63x 1.23x all unitholders ^(1) ^(1) Amount represents pro-rated for the period. ^(2) Includes $1.8 million of distributions related to common units sold in the March 2013 equity offering. Contact: LRR Energy, L.P. Todd Hassen, 713-292-9534 Director of Finance email@example.com or Jaime Casas, 713-345-2126 Chief Financial Officer firstname.lastname@example.org
LRR Energy, L.P. Announces First Quarter 2013 Results
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