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Alta Mesa Announces Third Quarter 2013 Financial Results and Operational Update



Alta Mesa Announces Third Quarter 2013 Financial Results and Operational
Update

HOUSTON, Nov. 13, 2013 (GLOBE NEWSWIRE) -- Alta Mesa Holdings, LP announced
its financial results for the third quarter of 2013 and provided highlights of
its recent operations. A conference call to discuss these results is scheduled
for today at 3:30 p.m., Central time.

Financial and operational highlights of note for the third quarter of 2013
include the following:

  * Production totaled 1.5 Mmboe, or 16,400 BOE per day
  * Oil and liquids production up 25% from Q3-2012
  * Production mix moved to 54% oil and liquids, up from 46% in Q3-2012
  * EBITDAX totaled $56 million

EBITDAX

EBITDAX (a non-GAAP financial measure, defined below) for the third quarter of
2013 was $56.3 million, up 12% compared to $50.4 million for the third quarter
of 2012. The difference in EBITDAX between the two periods was due primarily
to increased oil and liquids production and improved realized commodity
prices, partially offset by increased general and administrative costs and
lease operating costs related to higher oil and liquids production. EBITDAX
for the fourth quarter of 2013 is expected to range between $58 and $62
million.

Production

Production volumes for the third quarter of 2013 totaled 1.5 million barrels
of oil equivalent ("Mmboe"), or an average of 16,400 barrels of oil equivalent
per day, up compared to 1.4 Mmboe or 15,200 barrels of oil equivalent per day
for the third quarter of 2012. The increase in production is, in part, a
result of the successful and continued development in the Eagle Ford Shale (up
55% from Q3-12), Sooner Trend and Weeks Island. The Company's total production
mix has moved to 54% oil and liquids for the third quarter of 2013 (46% in
3Q-12). Production for the fourth quarter of 2013 is expected to range between
16,500 and 18,000 BOE per day.

Revenue & Hedging

Oil and gas revenues for the third quarter of 2013 totaled $100.3 million, up
from oil and gas revenues of $86.9 million for the third quarter of 2012. The
variance between the two periods for oil and gas revenues was due primarily to
the progressive shift in the Company's production mix, which has moved to a
greater percentage of oil and liquids combined with increased production. Alta
Mesa actively manages a portfolio of financial swaps and options with the goal
of minimizing its upside price constraints and maximizing its downside price
protection. The results of this proactive hedging program are reflected in the
net realized gains received in the first nine months of 2013, which were $13.6
million. As of the end of the third quarter Alta Mesa has approximately 70% of
its forecasted PDP production hedged over the next five years at average
annual floor prices of $4.88 per MMbtu for natural gas and $92.13 per Bbl for
oil.

Lease Operating Expense

Total lease operating expense, inclusive of production and ad valorem taxes
and workover expenses, for the third quarter of 2013 was $29.6 million
compared to $29.3 million for the third quarter of 2012. The slight increase
in lease operating expense between the two periods was primarily due to an
increase in chemical usage, field services and rental equipment. Additionally,
production taxes were up because of the higher production revenues offset in
part by a decrease in ad valorem taxes.

Depreciation, Depletion and Amortization Expense

Depreciation, depletion and amortization expense for the third quarter of 2013
was $30.6 million compared to $27.1 million for the third quarter of 2012. On
a per unit basis, depreciation, depletion and amortization expense for the
third quarter of 2013 was $20.32 per BOE compared to $19.39 per BOE for the
third quarter of 2012.

General and Administrative Expenses

General and administrative expenses for the third quarter of 2013 were $13.4
million compared to $9.8 million for the third quarter of 2012. The increase
in general and administrative expenses between the two periods was primarily
the result of increased salary and benefits expense related to additional
personnel. Additionally, expenses for consulting services were up compared to
prior periods.

Net Income (Loss)

Net loss for the third quarter of 2013 was $25.7 million, compared to a net
loss of $80.9 million for the third quarter of 2012. The difference between
the two periods of $55.2 million was primarily due to a significant decline in
impairment expense and higher oil and liquids revenues partially offset by
higher interest expense, general and administrative expenses and exploration
expense.

Operational Highlights

Sooner Trend:

Alta Mesa owns working interests in five large production units (greater than
40,000 net acres) which are located in Kingfisher County in the Sooner Trend
field. Production in this area comes primarily from legacy water floods in the
Manning, Big Lime, and Oswego formations, and more recently from horizontal
drilling in the siliceous, naturally-fractured Mississippian Lime and Oswego
formations. The Company is in the early stages of an expanded horizontal
drilling program after several quarters of systematic evaluation and testing
of several productive formations to further define the multiple opportunities
in this area and how best to exploit them. The Company anticipates these
efforts will result in a material impact on both production and reserves.
Year-to-date, Alta Mesa has drilled, or is drilling, 14 horizontal wells in
Sooner Trend, two of which were spud in December 2012; of these, ten target
the Mississippian Lime, three target the Oswego, and one targets the Hunton
Lime. In the third quarter Alta Mesa completed two Mississippian Lime
horizontal wells and spud an additional three Mississippian Lime horizontal
wells that are expected to be completed in the fourth quarter. Net production
from our Sooner Trend properties was approximately 1,400 BOE per day for the
third quarter of 2013, up 40% compared to 1,000 BOE per day for the third
quarter of 2012.

Eagle Ford Shale:

Alta Mesa's Eagle Ford Shale assets are located in the liquids-rich area of
the play in Karnes County, Texas and are principally operated by Murphy Oil.
The Company's reserves and daily production have grown steadily since
development in this core area started over two years ago. Currently, Alta Mesa
has working interests in approximately 100 wells. During the third quarter, 14
Eagle Ford wells operated by Murphy were brought on production. Working
interest in these wells ranged between 1% and 21%. Six of the Murphy wells
were drilled from a single pad, on what Murphy describes as, 26-acre
spacing. Most previous development has been on 80 acre spacing and the Company
believes downspacing to 40 acres or less will add significant reserves to the
project area. Alta Mesa expects an additional ten wells to be placed on
production during the fourth quarter including five Murphy wells and five BHP
Billiton wells. Net production for the third quarter was approximately 3,400
BOE per day, which is a 55% increase compared to 2,200 in the third quarter of
last year.

South Louisiana:

The Company continues to develop its South Louisiana assets, the most
significant of which is the giant Weeks Island oil field located in Iberia
Parish, Louisiana. The Company completed four wells in the third quarter of
2013, with one additional well in progress at the end of the quarter, and one
developmental dry hole. Year-to-date, the Company has drilled and completed 12
wells and performed recompletions or successful workovers on another 12 wells.
Three wells are scheduled for drilling between now and the end of the year and
three wells are waiting to be placed on-line. At least one drilling rig is
being fully utilized continuously through the end of 2013 in addition to two
workover rigs operating in this field. The workover rigs are primarily
completing new wells and recompleting older wells to new producing zones.

On October 1, 2013, Alta Mesa increased its ownership in Weeks Island Field
with an acquisition from Stone Energy. The $45 million acquisition included
approximately 1.8 million BOE of proved reserves. This was principally
additional interest in wells and leases the Company already operated and also
included about 600 gross acres for properties in which it previously had no
working interest. Production from Weeks Island, net to the Company's interest,
was approximately 3,300 BOE per day for the third quarter of 2013, as compared
to 2,400 BOE per day for the third quarter of 2012.

Conference Call Information

Alta Mesa invites you to listen to its conference call, which will discuss its
financial and operational results, at 3:30 p.m., Central Time, on Wednesday,
November 13, 2013. If you wish to participate in this conference call, dial
877-300-8521 (toll free in US/Canada) or 412-317-6026 (for International
calls), five to ten minutes before the scheduled start time and reference
Conference ID # 10036725. A webcast of the call and any related materials will
be available on Alta Mesa's website at www.altamesa.net. Additionally, a
replay of the conference call will be available for one week following the
live broadcast by dialing 877-870-5176 (toll free in US/Canada) or
858-384-5517 (International calls), and referencing Conference ID # 10036725.

Alta Mesa Holdings, LP is a privately held company engaged primarily in
onshore oil and natural gas acquisition, exploitation, exploration and
production whose focus is to maximize the profitability of our assets in a
safe and environmentally sound manner. Alta Mesa seeks to maintain a portfolio
of lower risk properties in plays with known resources where it identifies a
large inventory of lower risk drilling, development, and enhanced recovery and
exploitation opportunities.  Alta Mesa maximizes the profitability of its
assets by focusing on sound engineering, enhanced geological techniques,
including 3-D seismic analysis, and proven drilling, stimulation, completion,
and production methods. Alta Mesa is headquartered in Houston, Texas.

Safe Harbor Statement and Disclaimer

This press release includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. All statements, other than
statements of historical fact, regarding Alta Mesa's strategy, future
operations, financial position, estimated revenues and losses, projected
costs, prospects, plans and objectives of management are forward-looking
statements. When used in this press release, the words "could", "should",
"will", "play", "believe", "anticipate", "intend", "estimate", "expect",
"project" and similar expressions are intended to identify forward-looking
statements, although not all forward-looking statements contain such
identifying words. These forward-looking statements are based on Alta Mesa's
current expectations and assumptions about future events and are based on
currently available information as to the outcome and timing of future events.
These forward-looking statements are based on management's current belief,
based on currently available information, as to the outcome and timing of
future events. Forward-looking statements may include statements about Alta
Mesa's: business strategy; reserves; financial strategy, liquidity and capital
required for our development program; realized oil and natural gas prices;
timing and amount of future production of oil and natural gas; hedging
strategy and results; future drilling plans; competition and government
regulations; marketing of oil and natural gas; leasehold or business
acquisitions; costs of developing our properties; general economic conditions;
credit markets; liquidity and access to capital; uncertainty regarding our
future operating results; and plans, objectives, expectations and intentions
contained in this press release that are not historical. Alta Mesa cautions
you that these forward-looking statements are subject to all of the risks and
uncertainties, most of which are difficult to predict and many of which are
beyond its control, incident to the exploration for and development and
production of oil and natural gas. These risks include, but are not limited
to, commodity price volatility, low prices for oil and/or natural gas, global
economic conditions, inflation, lack of availability of drilling and
production equipment and services, environmental risks, drilling and other
operating risks, regulatory changes, the uncertainty inherent in estimating
oil and natural gas reserves and in projecting future rates of production,
cash flow and access to capital, the timing of development expenditures, and
other risks. Reserve engineering is a process of estimating underground
accumulations of oil and natural gas that cannot be measured in an exact way.
The accuracy of any reserve estimate depends on the quality of available data,
the interpretation of such data and price and cost assumptions made by
reservoir engineers. In addition, the results of drilling, testing and
production activities may justify revisions of estimates that were made
previously. If significant, such revisions would change the schedule of any
further production and development drilling. Accordingly, reserve estimates
may differ significantly from the quantities of oil and natural gas that are
ultimately recovered. Should one or more of the risks or uncertainties
described in this press release occur, or should underlying assumptions prove
incorrect, Alta Mesa's actual results and plans could differ materially from
those expressed in any forward-looking statements. All forward-looking
statements, expressed or implied, included in this press release are expressly
qualified in their entirety by this cautionary statement. This cautionary
statement should also be considered in connection with any subsequent written
or oral forward-looking statements that Alta Mesa may issue. Except as
otherwise required by applicable law,  Alta Mesa disclaims any duty to update
any forward-looking statements, all of which are expressly qualified by the
statements in this section, to reflect events or circumstances after the date
of this press release.

 
Alta Mesa Holdings, LP and Subsidiaries
Consolidated Statements of Operations
(unaudited – dollars in thousands)
 
 
                                   Three Months Ended    Nine Months Ended
                                   September 30,         September 30,
                                   2013       2012       2013       2012
REVENUES                                                             
Oil                                $ 76,938    $ 57,285  $ 214,824  $ 160,069
Natural gas                         20,737     26,758     68,883     78,638
Natural gas liquids                 2,664      2,877      7,723      10,414
Other revenue (loss)                (48)       2,568      1,110      3,952
                                    100,291    89,488    292,540    253,073
Unrealized loss — oil and natural   (21,455)   (37,855)   (20,405)   (19,944)
gas derivative contracts
TOTAL REVENUES                      78,836     51,633    272,135    233,129
EXPENSES                                                             
Lease and plant operating expense   18,031     17,719     51,681     50,833
Production and ad valorem taxes     8,130      7,232      21,326     19,315
Workover expense                    3,428      4,318      12,013     8,254
Exploration expense                 13,508     9,480      22,374     13,543
Depreciation, depletion, and        30,667     27,147     83,547     76,161
amortization expense
Impairment expense                  2,072      46,472     28,618     50,934
Accretion expense                   460        458        1,352      1,339
Loss on sale of assets              1,077      —          2,267      —
General and administrative expense  13,378     9,812      32,139     30,195
TOTAL EXPENSES                      90,751    122,638    255,317    250,574
INCOME (LOSS) FROM OPERATIONS       (11,915)   (71,005)   16,818     (17,445)
OTHER INCOME (EXPENSE)                                               
Interest expense                    (13,845)   (9,922)    (40,794)   (29,510)
Interest income                     23         30         121        70
Litigation settlement               —          —          —          1,250
TOTAL OTHER INCOME (EXPENSE)        (13,822)   (9,892)    (40,673)   (28,190)
LOSS BEFORE STATE INCOME TAXES      (25,737)   (80,897)   (23,855)   (45,635)
PROVISION FOR STATE INCOME TAXES    —          —          —          —
NET LOSS                           $ (25,737) $ (80,897) $ (23,855) $ (45,635)

 
 
Alta Mesa Holdings, LP and Subsidiaries
Consolidated Balance Sheets
(dollars in thousands)
 
 
                                                    September 30, December 31,
                                                    2013          2012
                                                    (unaudited)    
ASSETS                                                             
CURRENT ASSETS                                                     
Cash and cash equivalents                           $ 6,865       $ 5,786
Restricted cash                                      —             2,305
Accounts receivable, net                             43,025        40,715
Other receivables                                    1,282         4,415
Prepaid expenses and other current assets            3,309         4,501
Derivative financial instruments                     10,256        21,360
TOTAL CURRENT ASSETS                                 64,737        79,082
PROPERTY AND EQUIPMENT                                             
Oil and natural gas properties, successful efforts   746,454       639,466
method, net
Other property and equipment, net                    8,724         16,031
TOTAL PROPERTY AND EQUIPMENT, NET                    755,178       655,497
OTHER ASSETS                                                       
Investment in Partnership — cost                     9,000         9,000
Deferred financing costs, net                        11,661        13,685
Derivative financial instruments                     6,915         14,066
Advances to operators                                3,926         9,416
Deposits and other assets                            1,804         1,686
TOTAL OTHER ASSETS                                   33,306        47,853
TOTAL ASSETS                                        $ 853,221     $ 782,432
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)                        
CURRENT LIABILITIES                                                
Accounts payable and accrued liabilities             $ 101,663    $ 112,684
Current portion, asset retirement obligations        2,519         64
Derivative financial instruments                     2,241         91
TOTAL CURRENT LIABILITIES                            106,423       112,839
LONG-TERM LIABILITIES                                              
Asset retirement obligations, net of current         47,855        48,529
portion
Long-term debt                                       703,741       601,858
Notes payable to founder                             23,027        22,123
Other long-term liabilities                          2,398         3,451
TOTAL LONG-TERM LIABILITIES                          777,021       675,961
TOTAL LIABILITIES                                    883,444       788,800
COMMITMENTS AND CONTINGENCIES (NOTE 9)                             
PARTNERS' CAPITAL (DEFICIT)                          (30,223)      (6,368)
TOTAL LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)   $ 853,221     $ 782,432

                                                                
 
 
Alta Mesa Holdings, LP and Subsidiaries
Consolidated Statement of Cash Flows
(unaudited - dollars in thousands)
 
                                                         Nine Months Ended
                                                         September 30,
                                                         2013       2012
CASH FLOWS FROM OPERATING ACTIVITIES:                                
Net loss                                                 $ (23,855) $ (45,635)
Adjustments to reconcile net loss to net cash provided               
by operating activities:
Depreciation, depletion, and amortization expense         83,547    76,161
Impairment expense                                        28,618    50,934
Accretion expense                                         1,352     1,339
Amortization of loan costs                                2,121     1,716
Amortization of debt discount                             383       195
Dry hole expense                                          13,700    6,010
Expired leases                                            223       —
Unrealized loss on derivatives                            20,405    18,644
Interest converted into debt                              904       907
Loss on sale of assets                                    2,267     —
Changes in assets and liabilities:                                   
Restricted cash                                           2,305      —
Accounts receivable                                       (2,310)   1,940
Other receivables                                         3,133     (1,350)
Prepaid expenses and other non-current assets             6,564     (3,987)
Settlement of asset retirement obligation                 (1,358)   (2,737)
Accounts payable, accrued liabilities, and other          9,231     13,714
long-term liabilities
NET CASH PROVIDED BY OPERATING ACTIVITIES                 147,230   117,851
CASH FLOWS FROM INVESTING ACTIVITIES:                                
Capital expenditures for property and equipment           (245,486) (152,125)
Acquisitions                                              (9,469)   (20,216)
Proceeds from sale of property                            7,401     —
NET CASH USED IN INVESTING ACTIVITIES                    (247,554)  (172,341)
CASH FLOWS FROM FINANCING ACTIVITIES:                                
Proceeds from long-term debt                              119,500   68,000
Repayments of long-term debt                              (18,000)  (10,000)
Additions to deferred financing costs                     (97)      (118)
NET CASH PROVIDED BY FINANCING ACTIVITIES                 101,403   57,882
NET INCREASE IN CASH AND CASH EQUIVALENTS                 1,079     3,392
CASH AND CASH EQUIVALENTS, beginning of period            5,786     2,630
CASH AND CASH EQUIVALENTS, end of period                 $ 6,865    $ 6,022
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION                     
Cash paid during the period for interest                 $ 26,696   $ 20,969
Cash paid during the period for state taxes              $ 18       $ 230
Change in asset retirement obligations                   $ 1,001    $ 1,476
Asset retirement obligations assumed, purchased          $ 169      $ 532
properties
Change in accruals or liabilities for capital            $ (20,686) $ 12,963
expenditures

Prices

Below is a table of average hedged and unhedged prices received by the
Company.

Hedged - Average Realized Prices Q3-2013 Q3-2012
Natural Gas (per Mcf)             $ 4.95  $ 5.93
Oil (per Bbl)                     102.73  100.79
Natural Gas Liquids (per Bbl)      43.08  36.50
Combined realized (per MBOE)      66.48   62.10
                                          
Unhedged – Average Prices        Q3-2012 Q3-2012
Natural Gas (per Mcf)             $ 3.77  $ 2.94
Oil (per Bbl)                     108.27  101.08
                                          

GAAP to Non-GAAP Reconciliation

Adjusted EBITDAX is a non-GAAP financial measure and as used herein represents
net income/(loss) before interest expense, exploration expense, depletion,
depreciation and amortization, impairment of oil and natural gas, accretion of
asset retirement obligations, tax expense, unrealized gain/loss on oil and
natural gas derivative contracts. Alta Mesa presents Adjusted EBITDAX because
it believes Adjusted EBITDAX is an important supplemental measure of its
performance that is frequently used by others in evaluating companies in its
industry. Adjusted EBITDAX is not a measurement of Alta Mesa's financial
performance under GAAP, and should not be considered as an alternative to net
income/(loss), operating income or any other performance measure derived in
accordance with GAAP or as an alternative to net cash provided by operating
activities as a measure of Alta Mesa's profitability or liquidity. Adjusted
EBITDAX has significant limitations, including that it does not reflect Alta
Mesa's cash requirements for capital expenditures, contractual commitments,
working capital or debt service. In addition, other companies may calculate
Adjusted EBITDAX differently than Alta Mesa does, limiting its usefulness as a
comparative measure.

The following table sets forth a reconciliation of net income as determined in
accordance with GAAP to Adjusted EBITDAX for the periods indicated:

(unaudited - dollars in thousands)
 
                                          Three Months Ended
                                          Sept 30,
                                           2013       2012
Net Income/(loss)                         $ (25,737) $ (80,897)
Adjustments to net income:                            
Provision for state income taxes          --            --
Interest expense                          13,845     9,922
Unrealized (gain)/loss - oil & gas hedges  21,455    37,855
Exploration expense                       13,508     9,480
Depreciation, depletion and amortization  30,667     27,147
Impairment expense                        2,072      46,472
Accretion expense                         460        458
Adjusted EBITDAX                          $ 56,270   $ 50,437

CONTACT: Lance L. Weaver (281) 943-5597 lweaver@altamesa.net

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