Constellation Energy Partners Reports Fourth Quarter and Full Year 2013 Results

  Constellation Energy Partners Reports Fourth Quarter and Full Year 2013
  Results

  *CEP’s total production levels essentially unchanged year-on-year with oil
    production up 84% in 2013
  *Oil production provided 51% of CEP’s total revenue from sales in 2013
  *CEP’s 2014 forecast calls for capital spending of between $20.0 million
    and $22.0 million, with drilling aimed at oil potential in the company’s
    asset base

Business Wire

HOUSTON -- March 25, 2014

Constellation Energy Partners LLC (NYSE MKT: CEP) today reported fourth
quarter and full year 2013 results, which exclude results for the Robinson’s
Bend Field assets divested by the company in a transaction that closed in Feb.
2013.

The company produced 387 MBOE during the fourth quarter 2013 for average net
production of 4,201 BOE per day for the quarter, which was up 15% from the
third quarter 2013. For the full year 2013, the company produced 1,365 MBOE,
which is essentially unchanged from full year 2012 production from continuing
operations. Net oil production for the fourth quarter 2013, which accounted
for approximately 17% of the company’s total production during the quarter,
was 730 barrels per day, which is up 6% from the third quarter 2013. Net oil
production for the full year 2013 was 606 barrels per day, which is an
increase of approximately 84% compared to full year 2012 results from
continuing operations.

Revenue totaled $11.5 million during the fourth quarter and $44.1 million for
the full year 2013. Included in total revenue for the full year 2013 is
revenue from sales of $42.5 million, of which approximately 49% was from
natural gas sales and 51% was from oil sales. During 2012, approximately 57%
of the company’s sales revenue from continuing operations was from natural gas
sales and 43% was from oil sales. The balance of the company’s full year 2013
total revenue came from hedge settlements ($15.8 million), services provided
to third parties ($3.1 million), and losses on mark-to-market activities
($17.3 million), which is a non-cash item.

Operating costs, which include lease operating expenses, production taxes and
general and administrative expenses, net of certain non-cash items, averaged
$44.31 per BOE in the fourth quarter 2013. Adjusting for charges recorded in
connection with the PostRock Litigation, operating costs averaged $23.51 per
BOE in the fourth quarter 2013. For the full year 2013, excluding employee
severance charges in the first and second quarters of 2013 and charges
recorded in connection with the PostRock Litigation in the fourth quarter of
2013, which are “non-recurring items,” operating costs averaged $24.69 per
BOE, which is down 4% compared to operating costs for continuing operations in
full year 2012.

Adjusted EBITDA for the fourth quarter 2013 was approximately $45,000. For the
full year 2013, Adjusted EBITDA was $17.5 million, down approximately 7%
compared to full year 2012. Adjusting for the non-recurring items noted above,
Adjusted EBITDA for the full year 2013 was $26.4 million, which is a 41%
improvement when compared to results from continuing operations for the full
year 2012.

On a GAAP basis, the company recorded a net loss of $13.1 million for the
fourth quarter 2013 and a net loss from continuing operations of $25.9 million
for the full year 2013.

During the fourth quarter 2013 the company completed 20 net wells and
recompletions using $3.1 million in cash flow from operations. For the full
year 2013, the company completed 79 net wells and recompletions with capital
spending of $15.7 million. The company finished 2013 with 6 net wells and
recompletions in progress. Drilling activities in 2013 focused on oil
potential in the company’s existing asset base as well as capital efficient
recompletions.

“Last year was a pivotal year for us,” said Stephen R. Brunner, President and
Chief Executive Officer of Constellation Energy Partners. “In 2013, we
deleveraged the balance sheet, amended our credit facility, increased oil
production and reserves, and acquired assets along the Gulf Coast with an eye
toward meaningful cost savings, business development, and growth opportunities
for many years to come. While our successful efforts were met with some new
headwinds late in the year, we responded to these challenges head-on with the
goal of positioning the company for future growth. We believe 2014 provides us
with excellent opportunities to enhance unitholder value, which is always our
top priority.”

Reserve-Based Credit Facility

Borrowings outstanding under the company’s reserve-based credit facility
currently total $50.7 million, leaving the company with $4.3 million in
borrowing capacity at the company’s current borrowing base of $55.0 million.
The next borrowing base redetermination under the company’s reserve-based
credit facility is scheduled to begin at the end of the first quarter 2014,
with the result of that process expected in the second quarter 2014.

The company had $4.9 million in cash and cash equivalents as of Dec. 31, 2013.

Financial Outlook for 2013

The company forecasts capital spending of between $20.0 million and $22.0
million in 2014. Of this amount, $23.0 million is maintenance capital.

Net production is forecast to range between 1,346 MBOE and 1,552 MBOE for
2014, with operating costs forecast to range between $33.3 million and $37.3
million for the year.

For 2014, the company has hedged approximately 6.4 Bcfe of its natural gas
production at an effective NYMEX fixed price of $5.75 per Mcfe with
Mid-Continent basis hedges on 4.4 Bcfe of this amount at an average
differential of $0.39 per Mcfe. The company also has hedges in place on
approximately 222 MBbl of its oil production at a fixed price of $94.70 per
barrel. The company’s 2014 hedges provide price certainty on approximately 77%
of the company’s 2014 midpoint oil production forecast and 94% of the
company’s 2014 midpoint natural gas production forecast.

Additional detail on the company’s 2014 forecast can be found in the tables
included with this news release.

Conference Call Information

The company will host a conference call at 8:30 a.m. (CDT) on Wednesday, March
26, 2014 to discuss fourth quarter and full year 2013 results.

To participate in the conference call, analysts, investors, media and the
public in the U.S. may dial (800) 857-0653 shortly before 8:30 a.m. (CDT). The
international phone number is (773) 799-3268. The conference password is
PARTNERS.

A replay will be available beginning approximately one hour after the end of
the call by dialing (866) 498-1470 or (203) 369-1790 (international). A live
audio webcast of the conference call, presentation slides and the earnings
release will be available on Constellation Energy Partners’ Web site
(www.constellationenergypartners.com) under the Investor Relations page. The
call will also be recorded and archived on the site.

About the Company

Constellation Energy Partners LLC is a limited liability company focused on
the acquisition, development and production of oil and natural gas properties,
as well as related midstream assets.

Non-GAAP Measures

We present Adjusted EBITDA in addition to our reported net income (loss) in
accordance with GAAP. Adjusted EBITDA is a non-GAAP financial measure that is
defined as net income (loss) adjusted by interest (income) expense, net;
depreciation, depletion and amortization; write-off of deferred financing
fees; asset impairments; accretion expense; (gain) loss on sale of assets;
(gain) loss from equity investment; unit-based compensation programs; (gain)
loss from mark-to-market activities; and gain (loss) on discontinued
operations.

Adjusted EBITDA is used as a quantitative standard by our management and by
external users of our financial statements such as investors, research
analysts and others to assess the financial performance of our assets without
regard to financing methods, capital structure or historical cost basis; the
ability of our assets to generate cash sufficient to pay interest costs and
support our indebtedness; and our operating performance and return on capital
as compared to those of other companies in our industry, without regard to
financing or capital structure. Adjusted EBITDA is not intended to represent
cash flows for the period, nor is it presented as a substitute for net income,
operating income, cash flows from operating activities or any other measure of
financial performance or liquidity presented in accordance with GAAP.

Forward-Looking Statements

We make statements in this news release that are considered forward-looking
statements within the meaning of the Securities Act of 1933, as amended, and
the Securities Exchange Act of 1934, as amended. These forward-looking
statements are largely based on our expectations, which reflect estimates and
assumptions made by our management. These estimates and assumptions reflect
our best judgment based on currently known market conditions and other
factors. Although we believe such estimates and assumptions to be reasonable,
they are inherently uncertain and involve a number of risks and uncertainties
that are beyond our control. In addition, management's assumptions about
future events may prove to be inaccurate. Management cautions all readers that
the forward-looking statements contained in this news release are not
guarantees of future performance, and we cannot assure you that such
statements will be realized or the forward-looking events and circumstances
will occur. Actual results may differ materially from those anticipated or
implied in the forward-looking statements due to factors listed in the "Risk
Factors" section in our SEC filings and elsewhere in those filings. All
forward-looking statements speak only as of the date of this news release. We
do not intend to publicly update or revise any forward-looking statements as a
result of new information, future events or otherwise. These cautionary
statements qualify all forward-looking statements attributable to us or
persons acting on our behalf.


Constellation Energy Partners LLC
Operating Statistics
                                                             
                  Three Months Ended Dec. 31,       Twelve Months Ended Dec.
                                                    31,
                  2013              2012           2013             2012
Net Production
in MBOE and
MMcfe:
Total
production           387               339             1,365            1,368
(MBOE)
Average daily
production           4,201             3,689           3,739            3,738
(BOE/day)
                                                                      
Total
production           2,319             2,028           8,188            8,205
(MMcfe)
Average daily
production           25,207            22,043          22,433           22,418
(Mcfe/day)
                                                                      
Average Net
Sales Price per
BOE and Mcfe:
BOE Net
realized price,   $  33.76      (a)  $ 25.11    (a) $  32.32      (a) $ 21.58
including
hedges
BOE Net
realized price,   $  44.30      (b)  $ 39.18    (b) $  43.90      (b) $ 39.43
excluding
hedges
                                                                      
Mcfe Net
realized price,   $  7.38       (a)  $ 6.57     (a) $  7.32       (a) $ 6.57
including
hedges
Mcfe Net
realized price,   $  5.63       (b)  $ 4.21     (b) $  5.39       (b) $ 3.60
excluding
hedges
                                                                      
(a) Excludes
impact of
mark-to-market
gains (losses)
and net cost of
sales.
(b) Excludes
all hedges, the
impact of
mark-to-market
gains (losses)
and net cost of
sales.
                                                                      
Net Wells
Drilled and          18                22              64               50
Completed
Net                  2                 16              15               50
Recompletions
Developmental        -                 -               -                -
Dry Holes
Net Wells and
Net                  6                 18              6                18
Recompletions
in Progress

                                                                   
Constellation Energy Partners LLC
Condensed Consolidated Statements of Operations
                                                        
                   Three Months Ended Dec. 31,           Twelve Months Ended Dec. 31,
                   2013               2012               2013               2012
                   ($ in thousands)                      ($ in thousands)
                                                                            
Oil and gas        $ 17,455           $ 13,690           $ 61,358           $ 55,233
sales
Gain/(Loss)
from                (5,997     )      (253       )      (17,281    )      (8,706     )
mark-to-market
activities
Total revenues       11,458             13,437             44,077             46,527
                                                                            
Operating
expenses:
Lease
operating            5,526              4,684              18,858             19,411
expenses
Cost of sales        333                376                1,455              1,299
Production           761                505                2,601              1,646
taxes
General and          11,058             4,192              22,214             15,747
administrative
(Gain)/Loss on       (4         )       7                  4                  7
sale of assets
Depreciation,
depletion and        3,916              4,654              18,972             11,732
amortization
Asset                2,357              2                  2,357              109
impairments
Accretion           110              114              519              459        
expense
Total
operating            24,057             14,534             66,980             50,410
expenses
                                                                            
Other
expenses:
Interest
(income)             514                1,143              3,150              5,733
expense, net
Other (income)       (47        )       (40        )       (196       )       (154       )
expense
                                                                         
Total expenses       24,524             15,637             69,934             55,989
                                                                            
Income (loss)
from                 (13,066    )       (2,200     )       (25,857    )       (9,462     )
continuing
operations
Gain/(Loss)
from                -                (74,055    )      (2,686     )      (77,081    )
discontinued
operations
Net income         $ (13,066    )     $ (76,255    )     $ (28,543    )     $ (86,543    )
(loss)
                                                                            
Adjusted           $ 45              $ 4,307           $ 17,475          $ 18,781     
EBITDA
                                                                            
Loss per unit
Loss from
continuing
operations per
unit
Class A units
- Basic and        $ (0.16      )     $ (0.09      )     $ (0.55      )     $ (0.39      )
diluted
Class B units
- Basic and        $ (0.45      )     $ (0.09      )     $ (1.01      )     $ (0.39      )
diluted
Discontinued
operations per
unit
Class A units
- Basic and        $ -                $ (3.06      )     $ (0.06      )     $ (3.19      )
diluted
Class B units
- Basic and        $ -                $ (3.06      )     $ (0.10      )     $ (3.19      )
diluted
Net loss per
unit
Class A units
- Basic and        $ (0.16      )     $ (3.15      )     $ (0.61      )     $ (3.58      )
diluted
Class B units
- Basic and        $ (0.45      )     $ (3.15      )     $ (1.11      )     $ (3.58      )
diluted
Weighted
Average Units
Outstanding
Class A units
- Basic and          1,615,017          483,412            933,613            483,564
diluted
Class B units
- Basic and          28,457,577         23,687,625         25,210,106         23,687,946
diluted

                                                              
Constellation Energy Partners LLC
Condensed Consolidated Balance Sheets
                                                                    
                                                     Dec. 31,        Dec. 31,
                                                     2013            2012
                                                     ($ in thousands)
                                                                     
Current assets                                       $ 23,260        $ 26,848
Current assets from discontinued operations            -               1,886
Oil and natural gas properties, net of
accumulated
depreciation, depletion and amortization               144,995         120,122
Other assets                                           6,278           11,793
Long-term assets from discontinued operations         -              67,373
Total assets                                         $ 174,533       $ 228,022
                                                                     
Current liabilities, including short-term debt       $ 14,017        $ 59,595
Current liabilities from discontinued                  -               1,578
operations
Long-term debt                                         50,700          34,000
Other long-term liabilities                            10,911          8,891
Other long-term liabilities from discontinued         -              7,692
operations
Total liabilities                                      75,628          111,756
Commitments and Contengencies                          -               -
Common members' equity                                 98,905          116,266
Accumulated other comprehensive income                -              -
Total members' equity                                 98,905         116,266
Total liabilities and members' equity                $ 174,533       $ 228,022

                                                             
Constellation Energy Partners LLC
Reconciliation of Net Income (Loss) to
Adjusted EBITDA
                                                              
                     Three Months Ended Dec. 31,   Twelve Months Ended Dec.
                                                   31,
                     2013            2012          2013            2012
                     ($ in thousands)              ($ in thousands)
                                                                   
Reconciliation
of Net Income
(Loss) to
Adjusted EBITDA:
Net income           $  (13,066  )   $ (76,255 )   $  (28,543  )   $ (86,543 )
(loss)
Add:
Interest
(income)                514            1,143          3,150          5,733
expense, net
Depreciation,
depletion and           3,916          4,654          18,972         11,732
amortization
Asset                   2,357          2              2,357          109
impairments
Accretion               110            114            519            459
expense
(Gain)/Loss on          (4       )     7              4              7
sale of assets
Unit-based
compensation            221            334            1,049          1,497
programs
(Gain)/Loss from
mark-to-market          5,997          253            17,281         8,706
activities
(Gain)/Loss from
discontinued           -            74,055       2,686        77,081  
operations
Adjusted             $  45          $ 4,307      $  17,475      $ 18,781  
EBITDA^(1)
                                                                   
                                                              
                     Three Months Ended Sep. 30,   Nine Months Ended Sep. 30,
                     2013            2012          2013            2012
                     ($ in thousands)              ($ in thousands)
                                                                   
Reconciliation
of Net Income
(Loss) to
Adjusted EBITDA:
Net income           $  (3,257   )   $ (11,163 )   $  (15,477  )   $ (10,288 )
(loss)
Add:
Interest
(income)                420            1,534          2,636          4,590
expense, net
Depreciation,
depletion and           5,491          2,373          15,056         7,078
amortization
Asset                   -              -              -              107
impairments
Accretion               163            116            409            345
expense
(Gain)/Loss on          31             -              8              -
sale of assets
Unit-based
compensation            219            498            828            1,163
programs
(Gain)/Loss from
mark-to-market          4,345          10,158         11,284         8,453
activities
(Gain)/Loss from
discontinued           -            894          2,686        3,026   
operations
Adjusted             $  7,412       $ 4,410      $  17,430      $ 14,474  
EBITDA^(1)

(1) Our Adjusted EBITDA should not be considered as an alternative to net
income, operating income, cash flows from operating activities or any other
measure of financial performance or liquidity presented in accordance with
GAAP. Our Adjusted EBITDA excludes some, but not all, items that affect net
income and operating income and these measures may vary among other companies.
Therefore, our Adjusted EBITDA may not be comparable to similarly titled
measures of other companies.

We define Adjusted EBITDA as net income (loss) plus:
-- interest (income) expense, net;
-- depreciation, depletion and amortization;
-- write-off of deferred financing fees;
-- asset impairments;
-- accretion expense;
-- (gain) loss on sale of assets;
-- (gain) loss from equity investment;
-- unit-based compensation programs;
-- (gain) loss from mark-to-market activities; and
-- gain (loss) on discontinued operations.


Constellation Energy Partners LLC
2014 Forecast
                                                        
Forecast Component                                      2014 Forecast
                                                               
Total Capital Spending                                         $20.0 MM –
                                                               $22.0 MM
                                                               
Total Net Production                                           1,346 MBOE –
                                                               1,552 MBOE
                                                               
Production Mix:                  Oil                           270,000 –
                                                               305,000 Bbls
                                 Liquids                       26,000 – 30,000
                                                               Bbls
                                 Natural Gas                   6.3 – 7.3 Bcf
                                                               
Sales Revenue (Excludes          Oil & Liquids / Natural       55% / 45%
Hedges)                          Gas
                                                               
WTI Hedges                       Oil                           222 MBbl at
                                                               $94.70 per Bbl
                                                               
NYMEX Hedges                     Natural Gas                   6.4 Bcfe at
                                                               $5.75 per Mcfe
                                                               
                                 Mid-Con Basis – Natural       4.4 Bcfe at
Basis Only Hedges                Gas                           ($0.39) per
                                                               Mcfe
                                                               
Hedges as a % of Oil                                           77%
Production^(1)
                                                               
Hedges as a % of Natural                                       94%
Gas Production^(1)
                                                               
Pricing Assumptions:             Oil Marketing/Basis           $0.75
                                 ($/Bbl)
                                 Natural Gas Liquids (%        45%
                                 WTI)
                                 Natural Gas Basis             ($0.26)
                                 ($/Mcf)
                                 Natural Gas Gathering         ($0.43)
                                 ($/Mcf)
                                                               
Operating Costs:                 LOE^(2)                       $19.0 MM –
                                                               $21.0 MM
                                 Production Taxes              $2.7 MM – $3.3
                                                               MM
                                 G&A – Corporate and           $11.6 MM –
                                 Field Level^(2)               $13.0 MM
                                 Total                         $33.3 MM –
                                                               $37.3 MM
                                                               
Margin from Third Party                                        $1.4 MM – $1.9
Sales/Services                                                 MM
                                                               
Adjusted EBITDA^(2)                                            $26.7 MM –
                                                               $29.9 MM
                                                               
Interest Expense                                               $2.0 MM
                                                               
Maintenance Capital                                            $23.0 MM
                                                               

(1) Calculated at the mid-point of the range of production provided in CEP’s
2014 Forecast.
                          
(2) Excludes unit-based compensation program expenses, which is a non-cash
item.
                                                      
(3) We are unable to reconcile our forecast range of Adjusted EBITDA to GAAP
net income (loss) or operating income (loss) because we do not predict the
future impact of adjustments to net income (loss), such as (gains) losses from
mark-to-market activities and equity investments or asset impairments due to
the difficulty of doing so, and we are unable to address the probable
significance of the unavailable reconciliation, in significant part due to
ranges in our forecast impacted by changes in oil and natural gas prices and
reserves which affect certain reconciliation items.

Contact:

Constellation Energy Partners LLC
Investor Contact:
Charles C. Ward, (877) 847-0009
General Inquiries: (877) 847-0008
www.constellationenergypartners.com
 
Press spacebar to pause and continue. Press esc to stop.