UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 1, 2018
Legacy Reserves LP
(Exact name of registrant as specified in its charter)
Delaware | 1-33249 | 16-1751069 | ||
(State or other jurisdiction of incorporation) |
(Commission File Number) | (I.R.S. Employer Identification No.) |
303 W. Wall, Suite 1800 Midland, Texas (Address of principal executive offices) |
79701 (Zip Code) |
Registrant’s telephone number, including area code: (432) 689-5200
NOT APPLICABLE
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Item 2.02. | Results of Operations and Financial Condition. |
On August 1, 2018, Legacy Reserves LP (the “Partnership”) issued a press release, a copy of which is attached hereto as Exhibit 99.1 and is incorporated herein by reference.
The information in this report, including the Exhibit attached hereto, shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, or the Exchange Act, except as specifically identified therein as being incorporated by reference.
Item 9.01. | Financial Statements and Exhibits. |
(d) | Exhibits |
Exhibit No. | Description | |
99.1 | Press Release, dated August 1, 2018. |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Legacy Reserves LP | |||
Date: August 1, 2018 | By: | /s/ Dan G. LeRoy | |
Dan G. LeRoy | |||
Vice President, General Counsel and Secretary |
Legacy Reserves LP Announces Second Quarter 2018 Results
MIDLAND, Texas, Aug. 1, 2018 /PRNewswire/ -- Legacy Reserves LP ("Legacy") (NASDAQ:LGCY) today announced second quarter results for 2018 including the following highlights:
Paul T. Horne, Chairman of the Board and Chief Executive Officer of Legacy's general partner, commented, "I am really proud of the strong results reported by all of our business units this quarter. Our business development and land teams created significant potential value by completing several complicated trades involving a puzzle of 11 tracts across the Permian Basin and many counterparties. Our team fit those pieces together in an optimized fashion that substantially improves the projected economics of some of our core inventory. Our operations team continues to find ways to improve leasehold economics by leveraging our longstanding Permian position. We remain committed to our lease-wide development approach, focused on maximizing return on investment, production, reserves and cash flow and we look forward to continuing this program as we transition to a C-Corp."
Dan Westcott, President and Chief Financial Officer of Legacy's general partner, commented, "Our team continues to execute and we are glad to report oil production growth that drives growth in EBITDA. While we have limited control over the widening of our oil differentials that occurred this quarter due to the widening of Mid-Cush basis, we are happy that we have hedged most of that exposure in 2018 and a bit of it in 2019. We gained good momentum in the field this quarter, and when combined with our expanded Permian Basin footprint, we believe we are well-positioned for success and are excited to realize Legacy's transition to becoming a growth-oriented development company."
LEGACY RESERVES LP | |||||||||||||||
SELECTED FINANCIAL AND OPERATING DATA | |||||||||||||||
|
|
|
| ||||||||||||
| Three Months Ended
|
| Six Months Ended
| ||||||||||||
|
| ||||||||||||||
| 2018 |
| 2017 |
| 2018 |
| 2017 | ||||||||
|
| ||||||||||||||
| (In thousands, except per unit data) | ||||||||||||||
Revenues: |
|
|
|
|
|
|
| ||||||||
Oil sales | $ | 99,799 |
|
| $ | 46,096 |
|
| $ | 193,210 |
|
| $ | 95,238 |
|
Natural gas liquids (NGL) sales | 5,735 |
|
| 4,921 |
|
| 13,131 |
|
| 9,971 |
| ||||
Natural gas sales | 33,747 |
|
| 41,830 |
|
| 70,419 |
|
| 87,185 |
| ||||
Total revenue | $ | 139,281 |
|
| $ | 92,847 |
|
| $ | 276,760 |
|
| $ | 192,394 |
|
Expenses: |
|
|
|
|
|
|
| ||||||||
Oil and natural gas production, excluding ad valorem taxes | $ | 46,882 |
|
| $ | 42,262 |
|
| $ | 92,467 |
|
| $ | 91,490 |
|
Ad valorem taxes | 2,549 |
|
| 2,540 |
|
| 4,931 |
|
| 4,529 |
| ||||
Total oil and natural gas production | $ | 49,431 |
|
| $ | 44,802 |
|
| $ | 97,398 |
|
| $ | 96,019 |
|
Production and other taxes | $ | 7,658 |
|
| $ | 4,145 |
|
| $ | 14,984 |
|
| $ | 8,304 |
|
General and administrative, excluding transaction costs and LTIP | $ | 8,003 |
|
| $ | 7,046 |
|
| $ | 17,505 |
|
| $ | 15,669 |
|
Transaction costs | 1,607 |
|
| 52 |
|
| 3,389 |
|
| 84 |
| ||||
LTIP expense | 12,886 |
|
| 1,483 |
|
| 25,692 |
|
| 3,380 |
| ||||
Total general and administrative | $ | 22,496 |
|
| $ | 8,581 |
|
| $ | 46,586 |
|
| $ | 19,133 |
|
Depletion, depreciation, amortization and accretion | $ | 38,139 |
|
| $ | 27,689 |
|
| $ | 74,686 |
|
| $ | 56,485 |
|
Commodity derivative cash settlements: |
|
|
|
|
|
|
| ||||||||
Oil derivative cash settlements (paid) received | $ | (6,309) |
|
| $ | 3,559 |
|
| $ | (11,203) |
|
| $ | 6,698 |
|
Natural gas derivative cash settlements received | $ | 3,895 |
|
| $ | 3,012 |
|
| $ | 5,994 |
|
| $ | 4,109 |
|
Production: |
|
|
|
|
|
|
| ||||||||
Oil (MBbls) | 1,629 |
|
| 1,044 |
|
| 3,176 |
|
| 2,081 |
| ||||
Natural gas liquids (MGal) | 11,332 |
|
| 8,514 |
|
| 20,576 |
|
| 16,167 |
| ||||
Natural gas (MMcf) | 14,555 |
|
| 15,604 |
|
| 28,835 |
|
| 31,196 |
| ||||
Total (MBoe) | 4,325 |
|
| 3,847 |
|
| 8,472 |
|
| 7,665 |
| ||||
Average daily production (Boe/d) | 47,527 |
|
| 42,275 |
|
| 46,807 |
|
| 42,348 |
| ||||
Average sales price per unit (excluding derivative cash settlements): |
|
|
|
|
|
|
| ||||||||
Oil price (per Bbl) | $ | 61.26 |
|
| $ | 44.15 |
|
| $ | 60.83 |
|
| $ | 45.77 |
|
Natural gas liquids price (per Gal) | $ | 0.51 |
|
| $ | 0.58 |
|
| $ | 0.64 |
|
| $ | 0.62 |
|
Natural gas price (per Mcf) | $ | 2.32 |
|
| $ | 2.68 |
|
| $ | 2.44 |
|
| $ | 2.79 |
|
Combined (per Boe) | $ | 32.20 |
|
| $ | 24.13 |
|
| $ | 32.67 |
|
| $ | 25.10 |
|
Average sales price per unit (including derivative cash settlements): |
|
|
|
|
|
|
| ||||||||
Oil price (per Bbl) | $ | 57.39 |
|
| $ | 47.56 |
|
| $ | 57.31 |
|
| $ | 48.98 |
|
Natural gas liquids price (per Gal) | $ | 0.51 |
|
| $ | 0.58 |
|
| $ | 0.64 |
|
| $ | 0.62 |
|
Natural gas price (per Mcf) | $ | 2.59 |
|
| $ | 2.87 |
|
| $ | 2.65 |
|
| $ | 2.93 |
|
Combined (per Boe) | $ | 31.65 |
|
| $ | 25.84 |
|
| $ | 32.05 |
|
| $ | 26.51 |
|
Average WTI oil spot price (per Bbl) | $ | 68.07 |
|
| $ | 48.10 |
|
| $ | 65.55 |
|
| $ | 49.85 |
|
Average Henry Hub natural gas index price (per MMbtu) | $ | 2.85 |
|
| $ | 3.08 |
|
| $ | 2.96 |
|
| $ | 3.05 |
|
Average unit costs per Boe: |
|
|
|
|
|
|
| ||||||||
Oil and natural gas production, excluding ad valorem taxes | $ | 10.84 |
|
| $ | 10.99 |
|
| $ | 10.91 |
|
| $ | 11.94 |
|
Ad valorem taxes | $ | 0.59 |
|
| $ | 0.66 |
|
| $ | 0.58 |
|
| $ | 0.59 |
|
Production and other taxes | $ | 1.77 |
|
| $ | 1.08 |
|
| $ | 1.77 |
|
| $ | 1.08 |
|
General and administrative excluding transaction costs and LTIP | $ | 1.85 |
|
| $ | 1.83 |
|
| $ | 2.07 |
|
| $ | 2.04 |
|
Total general and administrative | $ | 5.20 |
|
| $ | 2.23 |
|
| $ | 5.50 |
|
| $ | 2.50 |
|
Depletion, depreciation, amortization and accretion | $ | 8.82 |
|
| $ | 7.20 |
|
| $ | 8.82 |
|
| $ | 7.37 |
|
Financial and Operating Results - Three-Month Period Ended June 30, 2018 Compared to Three-Month Period Ended June 30, 2017
Financial and Operating Results - Six-Month Period Ended June 30, 2018 Compared to Six-Month Period Ended June 30, 2017
Commodity Derivative Contracts
We enter into oil and natural gas derivative contracts to help mitigate the risk of changing commodity prices. As of July 31, 2018, we had entered into derivative agreements to receive average prices as summarized below.
NYMEX WTI Crude Oil Swaps:
Time Period |
| Volumes (Bbls) |
| Average Price per
|
| Price Range per Bbl | |||
July-December 2018 |
| 1,527,200 |
|
| $54.76 |
| $51.20 | - | $63.68 |
2019 |
| 2,190,000 |
|
| $58.88 |
| $57.15 | - | $61.20 |
NYMEX WTI Crude Oil Costless Collars. At an annual WTI market price of $40.00, $50.00 and $65.00, the summary positions below would result in a net price of $47.06, $50.00 and $60.29, respectively for 2018.
|
|
|
| Average Long |
| Average Short |
Time Period |
| Volumes (Bbls) |
| Put Price per Bbl |
| Call Price per Bbl |
July-December 2018 |
| 782,000 |
| $47.06 |
| $60.29 |
NYMEX WTI Crude Oil Enhanced Swaps. At an annual average WTI market price of $40.00, $50.00 and $65.00, the summary positions below would result in a net price of $65.50, $65.50 and $73.50, respectively for 2018.
|
|
|
| Average Long Put |
| Average Short Put |
| Average Swap | |
Time Period |
| Volumes (Bbls) |
| Price per Bbl |
| Price per Bbl |
| Price per Bbl | |
July-December 2018 |
| 64,400 |
|
| $57.00 |
| $82.00 |
| $90.50 |
Midland-to-Cushing WTI Crude Oil Differential Swaps:
Time Period |
| Volumes (Bbls) |
| Average Price per
|
| Price Range per Bbl | |||
July-December 2018 |
| 2,024,000 |
|
| $(1.13) |
| $(1.25) | - | $(0.80) |
2019 |
| 730,000 |
|
| $(1.15) |
| $(1.15) |
NYMEX Natural Gas Swaps (Henry Hub):
|
|
|
| Average |
| Price Range per | |||
Time Period |
| Volumes (MMBtu) |
| Price per MMBtu |
| MMBtu | |||
July-December 2018 |
| 18,160,000 |
|
| $3.23 |
| $3.04 | - | $3.39 |
2019 |
| 25,800,000 |
|
| $3.36 |
| $3.29 | - | $3.39 |
Location and quality differentials attributable to our properties are not reflected in the above prices. The agreements provide for monthly settlement based on the difference between the agreement fixed price and the actual reference oil and natural gas index prices.
Quarterly Report on Form 10-Q
Financial results contained herein are preliminary and subject to the final, unaudited financial statements and related footnotes included in Legacy's Form 10-Q which will be filed on or about August 7, 2018.
Credit Agreement Waiver
On July 31, 2018, the lenders for our credit agreement agreed to waive our compliance with the ratio of consolidated current assets to consolidated current liabilities covenant contained in the credit agreement for the fiscal quarter ended June 30, 2018.
Conference Call
As announced on July 18, 2018, Legacy will host an investor conference call to discuss Legacy's results on Thursday, August 2, 2018 at 9:00 a.m. (Central Time). Those wishing to participate in the conference call should dial 877-870-4263. A replay of the call will be available through Thursday, August 9, 2018, by dialing 877-344-7529 and entering replay code 10122434. Those wishing to listen to the live or archived webcast via the Internet should go to the Investor Relations tab of our website at www.LegacyLP.com. Following our prepared remarks, we will be pleased to answer questions from securities analysts and institutional portfolio managers and analysts; the complete call is open to all other interested parties on a listen-only basis.
About Legacy Reserves LP
Legacy Reserves LP is a master limited partnership headquartered in Midland, Texas, focused on the development of oil and natural gas properties primarily located in the Permian Basin, East Texas, Rocky Mountain and Mid-Continent regions of the United States. Additional information is available at www.LegacyLP.com.
Additional Information for Holders of Legacy Units and Where to Find It
Although Legacy has suspended distributions to both the 8% Series A and Series B Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units (the "Preferred Units"), such distributions continue to accrue. Pursuant to the terms of Legacy's partnership agreement, Legacy is required to pay or set aside for payment all accrued but unpaid distributions with respect to the Preferred Units prior to or contemporaneously with making any distribution with respect to Legacy's units. Accruals of distributions on the Preferred Units are treated for tax purposes as guaranteed payments for the use of capital that will generally be taxable to the holders of such Preferred Units as ordinary income even in the absence of contemporaneous distributions.
In addition, Legacy's unitholders, just like unitholders of other master limited partnerships, are allocated taxable income irrespective of cash distributions paid. Because Legacy's unitholders are treated as partners that are allocated a share of Legacy's taxable income irrespective of the amount of cash, if any, distributed by Legacy, unitholders will be required to pay federal income taxes and, in some cases, state and local income taxes on their share of Legacy's taxable income, including its taxable income associated with cancellation of debt ("COD income") or a disposition of property by Legacy, even if they receive no cash distributions from Legacy. As of January 21, 2016, Legacy has suspended all cash distributions to unitholders and holders of the Preferred Units. Legacy may engage in transactions to de-lever the Partnership and manage its liquidity that may result in the allocation of income and gain to its unitholders without a corresponding cash distribution. For example, if Legacy sells assets and uses the proceeds to repay existing debt or fund capital or operating expenditures, Legacy's unitholders may be allocated taxable income and gain resulting from the sale without receiving a cash distribution. Further, if Legacy engages in debt exchanges, debt repurchases, or modifications of its existing debt, these or similar transactions could result in "cancellation of indebtedness" or COD income being allocated to Legacy's unitholders as taxable income. For tax purposes, Legacy repurchased $187 million of its 6.625% Senior Notes at $0.70 per $1.00 principal amount on December 31, 2017. Unitholders will be allocated gain and income from asset sales and COD income and may owe income tax as a result of such allocations notwithstanding the fact that Legacy has suspended cash distributions to its unitholders. The ultimate effect of any such allocations will depend on the unitholder's individual tax position with respect to its units. Unitholders are encouraged to consult their tax advisors with respect to the consequences of potential transactions that may result in income and gain to unitholders.
Additionally, if Legacy's unitholders, just like unitholders of other master limited partnerships, sell any of their units, they will recognize gain or loss equal to the difference between the amount realized and their tax basis in those units. Prior distributions to unitholders that in the aggregate exceeded the cumulative net taxable income they were allocated for a unit decreased the tax basis in that unit, and will, in effect, become taxable income to Legacy's unitholders if the unit is sold at a price greater than their tax basis in that unit, even if the price received is less than original cost. A substantial portion of the amount realized, whether or not representing gain, may be ordinary income to Legacy's unitholders due to the potential recapture items, including depreciation, depletion and intangible drilling.
In connection with the proposed transaction that will transition Legacy from an MLP to a C-Corp (the "Transaction"), Legacy Reserves Inc. ("New Legacy") has filed with the U.S. Securities and Exchange Commission (the "SEC") a registration statement on Form S-4, which includes a preliminary proxy statement of Legacy and a preliminary prospectus of New Legacy (the "proxy statement/prospectus") which Legacy plans to mail to its unitholders to solicit approval for the merger.
INVESTORS AND UNITHOLDERS ARE URGED TO READ THE PROXY STATEMENT/PROSPECTUS AND OTHER RELEVANT DOCUMENTS FILED OR TO BE FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT LEGACY AND NEW LEGACY, AS WELL AS THE TRANSACTION AND RELATED MATTERS.
This press release does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offering of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the U.S. Securities Act of 1933, as amended.
A free copy of the proxy statement/prospectus and other filings containing information about Legacy and New Legacy may be obtained at the SEC's Internet site at www.sec.gov. In addition, the documents filed with the SEC by Legacy and New Legacy may be obtained free of charge by directing such request to: Legacy Reserves LP, Attention: Investor Relations, at 303 W. Wall, Suite 1800, Midland, Texas 79701 or emailing IR@legacylp.com or calling 855-534-5200. These documents may also be obtained for free from Legacy's investor relations website at https://www.legacylp.com/investor-relations.
Legacy and its general partner's directors, executive officers, other members of management and employees may be deemed to be participants in the solicitation of proxies from Legacy's unitholders in respect of the Transaction described in the proxy statement/prospectus. Information regarding the directors and executive officers of Legacy's general partner is contained in Legacy's public filings with the SEC, including its definitive proxy statement on Form DEF 14A filed with the SEC on April 6, 2018.
A more complete description is available in the registration statement and the proxy statement/prospectus.
Cautionary Statement Relevant to Forward-Looking Information
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, including, without limitation, statements regarding the expected benefits of the Transaction to Legacy and its unitholders, final court approval of the Settlement Agreement, the anticipated completion of the Transaction or the timing thereof, the expected future growth, dividends, distributions of the reorganized company, and plans and objectives of management for future operations. All statements, other than statements of historical facts, included in this press release that address activities, events or developments that Legacy expects, believes or anticipates will or may occur in the future, are forward-looking statements. Words such as "anticipates," "expects," "intends," "plans," "targets," "projects," "believes," "seeks," "schedules," "estimated," and similar expressions are intended to identify such forward-looking statements. These forward-looking statements rely on a number of assumptions concerning future events and are subject to a number of uncertainties, factors and risks, many of which are outside the control of Legacy, which could cause results to differ materially from those expected by management of Legacy. Such risks and uncertainties include, but are not limited to, realized oil and natural gas prices; production volumes, lease operating expenses, general and administrative costs and finding and development costs; future operating results; and the factors set forth under the heading "Risk Factors" in Legacy's filings with the SEC, including its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. The reader should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Unless legally required, Legacy undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.
LEGACY RESERVES LP | |||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||||||
(UNAUDITED) | |||||||||||||||
|
|
|
| ||||||||||||
| Three Months Ended |
| Six Months Ended | ||||||||||||
| June 30, |
| June 30, | ||||||||||||
| 2018 |
| 2017 |
| 2018 |
| 2017 | ||||||||
|
| ||||||||||||||
| (In thousands, except per unit data) | ||||||||||||||
Revenues: |
|
|
|
|
|
|
| ||||||||
Oil sales | $ | 99,799 |
|
| $ | 46,096 |
|
| $ | 193,210 |
|
| $ | 95,238 |
|
Natural gas liquids (NGL) sales | 5,735 |
|
| 4,921 |
|
| 13,131 |
|
| 9,971 |
| ||||
Natural gas sales | 33,747 |
|
| 41,830 |
|
| 70,419 |
|
| 87,185 |
| ||||
Total revenues | 139,281 |
|
| 92,847 |
|
| 276,760 |
|
| 192,394 |
| ||||
|
|
|
|
|
|
|
| ||||||||
Expenses: |
|
|
|
|
|
|
| ||||||||
Oil and natural gas production | 49,431 |
|
| 44,802 |
|
| 97,398 |
|
| 96,019 |
| ||||
Production and other taxes | 7,658 |
|
| 4,145 |
|
| 14,984 |
|
| 8,304 |
| ||||
General and administrative | 22,496 |
|
| 8,581 |
|
| 46,586 |
|
| 19,133 |
| ||||
Depletion, depreciation, amortization and accretion | 38,139 |
|
| 27,689 |
|
| 74,686 |
|
| 56,485 |
| ||||
Impairment of long-lived assets | 35,381 |
|
| 1,821 |
|
| 35,381 |
|
| 9,883 |
| ||||
(Gains) losses on disposal of assets | (1,145) |
|
| 11,049 |
|
| (21,540) |
|
| 5,525 |
| ||||
Total expenses | 151,960 |
|
| 98,087 |
|
| 247,495 |
|
| 195,349 |
| ||||
|
|
|
|
|
|
|
| ||||||||
Operating (loss) income | (12,679) |
|
| (5,240) |
|
| 29,265 |
|
| (2,955) |
| ||||
|
|
|
|
|
|
|
| ||||||||
Other income (expense): |
|
|
|
|
|
|
| ||||||||
Interest income | 3 |
|
| 8 |
|
| 15 |
|
| 9 |
| ||||
Interest expense | (28,589) |
|
| (20,614) |
|
| (55,957) |
|
| (40,747) |
| ||||
Gain on extinguishment of debt | — |
|
| — |
|
| 51,693 |
|
| — |
| ||||
Equity in income of equity method investees | 3 |
|
| 1 |
|
| 20 |
|
| 12 |
| ||||
Net gains (losses) on commodity derivatives | (9,315) |
|
| 14,516 |
|
| (11,019) |
|
| 49,185 |
| ||||
Other | (2) |
|
| 402 |
|
| 273 |
|
| 362 |
| ||||
Income (loss) before income taxes | (50,579) |
|
| (10,927) |
|
| 14,290 |
|
| 5,866 |
| ||||
Income tax expense | (130) |
|
| (150) |
|
| (617) |
|
| (571) |
| ||||
Net income (loss) | $ | (50,709) |
|
| $ | (11,077) |
|
| $ | 13,673 |
|
| $ | 5,295 |
|
Distributions to preferred unitholders | (4,750) |
|
| (4,750) |
|
| (9,500) |
|
| (9,500) |
| ||||
Net income (loss) attributable to unitholders | $ | (55,459) |
|
| $ | (15,827) |
|
| $ | 4,173 |
|
| $ | (4,205) |
|
|
|
|
|
|
|
|
| ||||||||
Income (loss) per unit - basic & diluted | $ | (0.72) |
|
| $ | (0.22) |
|
| $ | 0.05 |
|
| $ | (0.06) |
|
Weighted average number of units used in computing net income (loss) per unit - |
|
|
|
|
|
|
| ||||||||
Basic | 76,725 |
|
| 72,354 |
|
| 76,539 |
|
| 72,229 |
| ||||
Diluted | 76,725 |
|
| 72,354 |
|
| 77,433 |
|
| 72,229 |
|
LEGACY RESERVES LP | ||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
(UNAUDITED) | ||||||||
| ||||||||
ASSETS | ||||||||
|
| June 30,
|
| December 31,
| ||||
|
| (In thousands) | ||||||
Current assets: |
|
|
|
| ||||
Cash |
| $ | 5,948 |
|
| $ | 1,246 |
|
Accounts receivable, net: |
|
|
|
| ||||
Oil and natural gas |
| 57,676 |
|
| 62,755 |
| ||
Joint interest owners |
| 16,515 |
|
| 27,420 |
| ||
Other |
| 6 |
|
| 2 |
| ||
Fair value of derivatives |
| 28,046 |
|
| 13,424 |
| ||
Prepaid expenses and other current assets |
| 10,457 |
|
| 7,757 |
| ||
Total current assets |
| 118,648 |
|
| 112,604 |
| ||
Oil and natural gas properties using the successful efforts method, at cost: |
|
|
|
| ||||
Proved properties |
| 3,497,220 |
|
| 3,529,971 |
| ||
Unproved properties |
| 31,661 |
|
| 28,023 |
| ||
Accumulated depletion, depreciation, amortization and impairment |
| (2,157,542) |
|
| (2,204,638) |
| ||
|
| 1,371,339 |
|
| 1,353,356 |
| ||
Other property and equipment, net of accumulated depreciation and amortization of $11,971 and $11,467, respectively |
| 2,532 |
|
| 2,961 |
| ||
Operating rights, net of amortization of $5,944 and $5,765, respectively |
| 1,072 |
|
| 1,251 |
| ||
Fair value of derivatives |
| 9,968 |
|
| 14,099 |
| ||
Other assets |
| 6,991 |
|
| 8,811 |
| ||
Total assets |
| $ | 1,510,550 |
|
| $ | 1,493,082 |
|
LIABILITIES AND PARTNERS' DEFICIT | ||||||||
Current liabilities: |
|
|
|
| ||||
Current debt, net |
| $ | 505,222 |
|
| $ | — |
|
Accounts payable |
| 6,626 |
|
| 13,093 |
| ||
Accrued oil and natural gas liabilities |
| 119,086 |
|
| 81,318 |
| ||
Fair value of derivatives |
| 27,740 |
|
| 18,013 |
| ||
Asset retirement obligation |
| 3,214 |
|
| 3,214 |
| ||
Other |
| 46,538 |
|
| 29,172 |
| ||
Total current liabilities |
| 708,426 |
|
| 144,810 |
| ||
Long-term debt, net |
| 784,753 |
|
| 1,346,769 |
| ||
Asset retirement obligation |
| 261,031 |
|
| 271,472 |
| ||
Fair value of derivatives |
| 6,682 |
|
| 1,075 |
| ||
Other long-term liabilities |
| 643 |
|
| 643 |
| ||
Total liabilities |
| 1,761,535 |
|
| 1,764,769 |
| ||
Commitments and contingencies |
|
|
|
| ||||
Partners' deficit |
|
|
|
| ||||
Series A Preferred equity - 2,300,000 units issued and outstanding at June 30, 2018 and December 31, 2017 |
| 55,192 |
|
| 55,192 |
| ||
Series B Preferred equity - 7,200,000 units issued and outstanding at June 30, 2018 and December 31, 2017 |
| 174,261 |
|
| 174,261 |
| ||
Incentive distribution equity - 100,000 units issued and outstanding at June 30, 2018 and December 31, 2017 |
| 30,814 |
|
| 30,814 |
| ||
Limited partners' deficit - 76,793,940 and 72,594,620 units issued and outstanding at June 30, 2018 and December 31, 2017, respectively |
| (511,095) |
|
| (531,794) |
| ||
General partner's deficit (approximately 0.02%) |
| (157) |
|
| (160) |
| ||
Total partners' deficit |
| (250,985) |
|
| (271,687) |
| ||
Total liabilities and partners' deficit |
| $ | 1,510,550 |
|
| $ | 1,493,082 |
|
Non-GAAP Financial Measures
"Adjusted EBITDA" is a non-generally accepted accounting principles ("non-GAAP") measure which may be used periodically by management when discussing our financial results with investors and analysts. The following presents a reconciliation of this non-GAAP financial measure to its nearest comparable generally accepted accounting principles ("GAAP") measure.
Adjusted EBITDA is presented as management believes it provides additional information concerning the performance of our business and is used by investors and financial analysts to analyze and compare our current operating and financial performance relative to past performance and such performances relative to that of other publicly traded partnerships in the industry. Adjusted EBITDA may not be comparable to similarly titled measures of other publicly traded limited partnerships or limited liability companies because all companies may not calculate such measures in the same manner.
Certain factors impacting Adjusted EBITDA may be viewed as temporary, one-time in nature, or being offset by reserves from past performance or near-term future performance. Financial results are also driven by various factors that do not typically occur evenly throughout the year that are difficult to predict, including rig availability, weather, well performance, the timing of drilling and completions and near-term commodity price changes.
"Adjusted EBITDA" should not be considered as an alternative to GAAP measures, such as net income, operating income, cash flow from operating activities, or any other GAAP measure of financial performance.
The following table presents a reconciliation of our consolidated net income (loss) to Adjusted EBITDA:
| Three Months Ended |
| Six Months Ended | ||||||||||||
| June 30, |
| June 30, | ||||||||||||
| 2018 |
| 2017 |
| 2018 |
| 2017 | ||||||||
| (In thousands) | ||||||||||||||
Net income (loss) | $ | (50,709) |
|
| $ | (11,077) |
|
| $ | 13,673 |
|
| $ | 5,295 |
|
Plus: |
|
|
|
|
|
|
| ||||||||
Interest expense | 28,589 |
|
| 20,614 |
|
| 55,957 |
|
| 40,747 |
| ||||
Gain on extinguishment of debt | — |
|
| — |
|
| (51,693) |
|
| — |
| ||||
Income tax expense | 130 |
|
| 150 |
|
| 617 |
|
| 571 |
| ||||
Depletion, depreciation, amortization and accretion | 38,139 |
|
| 27,689 |
|
| 74,686 |
|
| 56,485 |
| ||||
Impairment of long-lived assets | 35,381 |
|
| 1,821 |
|
| 35,381 |
|
| 9,883 |
| ||||
(Gain) loss on disposal of assets | (1,145) |
|
| 11,049 |
|
| (21,540) |
|
| 5,525 |
| ||||
Equity in income of equity method investees | (3) |
|
| (1) |
|
| (20) |
|
| (12) |
| ||||
Unit-based compensation expense | 12,886 |
|
| 1,483 |
|
| 25,692 |
|
| 3,380 |
| ||||
Minimum payments received in excess of overriding royalty interest earned(1) | 334 |
|
| 470 |
|
| 856 |
|
| 915 |
| ||||
Net (gains) losses on commodity derivatives | 9,315 |
|
| (14,516) |
|
| 11,019 |
|
| (49,185) |
| ||||
Net cash settlements (paid) received on commodity derivatives | (2,414) |
|
| 6,571 |
|
| (5,209) |
|
| 10,807 |
| ||||
Transaction costs | 1,607 |
|
| 52 |
|
| 3,389 |
|
| 84 |
| ||||
Adjusted EBITDA | $ | 72,110 |
|
| $ | 44,305 |
|
| $ | 142,808 |
|
| $ | 84,495 |
|
|
|
(1) | Minimum payments received in excess of overriding royalties earned under a contractual agreement expiring December 31, 2019. The remaining amount of the minimum payments is recognized in net income. |
CONTACT: | Legacy Reserves LP |
| Dan Westcott |
| President and Chief Financial Officer |
| (432) 689-5200 |