Delaware
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1-33249
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16-1751069
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(State or other jurisdiction of
incorporation)
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(Commission
File Number)
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(IRS Employer
Identification No.)
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303 W. WALL ST, SUITE 1400
MIDLAND, TX |
79701
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(Address of principal executive offices)
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(Zip Code)
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Item 2.02. Results of Operations and Financial Condition.
On October 30, 2012, the Registrant 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.
Legacy Reserves LP
By: Legacy Reserves GP, LLC,
its general partner
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October 30, 2012
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/s/ JAMES DANIEL WESTCOTT
James Daniel Westcott
Executive Vice President and Chief Financial Officer
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EXHIBIT 99.1
MIDLAND, Texas, Oct. 30, 2012 (GLOBE NEWSWIRE) -- Legacy Reserves LP ("Legacy") (Nasdaq:LGCY) today announced its third quarter results for 2012.
A summary of selected financial information follows. For consolidated financial statements, please see accompanying tables.
Three Months Ended |
Nine Months Ended September 30, |
|||||||
September 30, 2012 |
June 30, 2012 |
2012 | 2011 | |||||
(dollars in millions) | ||||||||
Production (Boe/d) | 14,772 | 14,297 | 14,504 | 12,842 | ||||
Revenue | $84.2 | $79.2 | $256.0 | $250.0 | ||||
Commodity derivative cash settlements received (paid) | $6.1 | ($2.0) | $2.0 | ($3.8) | ||||
Expenses | $75.2 | $75.3 | $208.2 | $170.4 | ||||
Operating income | $9.0 | $3.9 | $47.8 | $79.6 | ||||
Unrealized gains (losses) on commodity derivatives | ($33.3) | $86.4 | $32.1 | $71.5 | ||||
Net income (loss) | ($23.6) | $82.9 | $66.8 | $130.6 | ||||
Adjusted EBITDA (*) | $49.3 | $40.7 | $145.2 | $148.3 | ||||
Development capital expenditures | $19.6 | $16.7 | $48.5 | $52.1 | ||||
Distributable Cash Flow (*) | $23.4 | $19.1 | $78.9 | $79.1 | ||||
* Non-GAAP financial measure. Please see Adjusted EBITDA and Distributable Cash Flow table at the end of this press release for a reconciliation of these measures to their nearest comparable GAAP measure. |
Highlights of the third quarter of 2012 compared to the second quarter of 2012 include the following:
Cary Brown, Chairman, President and Chief Executive Officer of Legacy Reserves GP, LLC, the general partner of Legacy, commented: "Legacy posted strong financial and operational results in the third quarter with record production as we benefitted from our strong acquisitions efforts and our ongoing capital program. Although our production expenses were higher than anticipated due to several remedial workovers and other non-recurring expenses, our internal line item analysis indicates little to no cost inflation in our recurring production expenses, and we kept our other cash expenses in line. These factors along with improved oil differentials and positive hedging settlements of $6.1 million allowed us to generate Adjusted EBITDA of $49.3 million, an increase of 21% over the second quarter. On the development front, we invested $19.6 million in capital projects and remain encouraged by our oil-weighted drilling efforts on our operated Wolfberry and Bone Spring locations and non-operated projects. We also increased our 2012 development capital expenditures budget from $62 million to $66 million, and believe this incremental $4 million will generate organic growth supporting future cash distributions to our unitholders. For the quarter, we reported approximately $23.4 million or $0.49 per unit of distributable cash flow, covering our $0.565 quarterly distribution per unit by 0.87 times. Our capital expenditures on high-quality development opportunities in the third quarter amounted to roughly 40% of our Adjusted EBITDA, which was significantly higher than our historical investment rate and thus negatively impacted our distributable cash flow and coverage ratio for the quarter, as we (unlike our peers) deduct all of our development capital when calculating our distributable cash flow. Assuming we had invested 30% of our Adjusted EBITDA in development capital expenditures, our coverage ratio would have been approximately 1.04 times."
"We are encouraged about our pipeline of potential acquisitions in the Permian Basin and other core areas, which is as strong as it has been in the Company's history. Based on our strong financial and operational results, our pipeline of potential acquisitions and our positive outlook into the fourth quarter of 2012 and calendar year 2013, we increased our quarterly distribution for the eighth consecutive quarter to $0.565 per unit which will be paid on November 14, 2012. On a year-over-year basis, we have increased our quarterly distribution by 3.7%."
Dan Westcott, Executive Vice President and Chief Financial Officer, commented, "We are very pleased with our third quarter results, as we increased our production to record levels, produced strong financial results, continued to invest in attractive oil drilling projects, and closed additional accretive acquisitions. On October 1, our 14-member bank group redetermined our borrowing base at $600 million. As of October 30, we have a debt balance of $462 million, leaving us with approximately $138 million of current availability under our credit agreement. With support from our banks and strong public equity and debt capital markets, we are confident in our ability to finance future potential acquisitions."
Commodity Derivatives Contracts
We have entered into the following oil and natural gas derivatives contracts, including swaps, collars and three-way collars, to help mitigate the risk of changing commodity prices. As of October 30, 2012, we had entered into derivatives agreements to receive average NYMEX West Texas Intermediate oil and WAHA, ANR-Oklahoma, and CIG-Rockies natural gas prices as summarized in the following tables:
Crude Oil (WTI):
Calendar Year | Volumes (Bbls) |
Average Price per Bbl |
Price Range per Bbl |
October-December 2012 | 583,570 | $89.64 | $67.72 - $109.20 |
2013 | 1,571,443 | $90.34 | $80.10 - $108.65 |
2014 | 901,014 | $92.89 | $87.50 - $103.75 |
2015 | 362,851 | $93.73 | $90.50 - $100.20 |
2016 | 45,600 | $94.53 | $91.00 - $99.85 |
We have also entered into multiple NYMEX West Texas Intermediate crude oil derivative three-way collar contracts. Each contract combines a long put, a short put and a short call. The use of the short put allows us to buy a put and sell a call at higher prices, thus establishing a higher ceiling and limiting our exposure to future settlement payments while also restricting our downside risk. If the market price is below the long put fixed price but above the short put fixed price, a three-way collar allows us to settle for the long put fixed price. A three-way collar also allows us to settle for WTI market plus the spread between the short put and the long put in a case where the market price has fallen below the short put fixed price. In regards to our three-way collar contracts, if the market price has fallen below the short put fixed price, we would receive the WTI market price plus either $25 or $30 per barrel, depending on the contract. The following table summarizes the three-way oil collar contracts currently in place as of October 30, 2012:
Calendar Year | Volumes (Bbls) |
Average Short Put Price |
Average Long Put Price |
Average Short Call Price |
October-December 2012 | 110,400 | $68.13 | $95.00 | $113.54 |
2013 | 795,670 | $66.24 | $91.92 | $112.25 |
2014 | 1,226,130 | $65.64 | $90.86 | $113.29 |
2015 | 1,126,000 | $65.43 | $90.43 | $114.76 |
2016 | 438,300 | $64.78 | $89.78 | $110.54 |
2017 | 72,400 | $60.00 | $85.00 | $104.20 |
Additionally, we have entered into a costless collar for NYMEX WTI crude oil with the following attributes:
Calendar Year | Volumes (Bbls) |
Floor Price |
Ceiling Price |
October-December 2012 | 16,400 | $ 120.00 | $ 156.30 |
Natural Gas (WAHA, ANR-Oklahoma, and CIG-Rockies hubs):
Calendar Year | Volumes (MMBtu) |
Average Price per MMBtu |
Price Range per MMBtu |
October-December 2012 | 1,644,610 | $5.11 | $2.46 - $8.70 |
2013 | 5,790,654 | $4.76 | $3.23 - $6.89 |
2014 | 4,251,254 | $4.65 | $3.61 - $6.47 |
2015 | 1,339,300 | $5.65 | $5.14 - $5.82 |
2016 | 219,200 | $5.30 | $5.30 |
We have entered into a costless collar for WAHA natural gas with the following attributes:
Calendar Year | Volumes (MMBtu) |
Floor Price |
Ceiling Price |
October-December 2012 | 90,000 | $ 4.00 | $ 5.45 |
Location and quality differentials attributable to our properties are not reflected in the above prices. The agreements provide for a 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
The consolidated financial statements and related footnotes will be available in our September 30, 2012 Form 10-Q.
Conference Call
As announced on October 25, 2012, Legacy will host an investor conference call to discuss Legacy's results on Wednesday, October 31, 2012 at 9:00 a.m. (Central Time). Investors may access the conference call by dialing (877) 266-0479. A replay of the call will be available through Sunday, November 4, 2012, by dialing (855) 859-2056 or (404) 537-3406 and entering replay code 47056291. 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 investors and interested parties on a listen-only basis.
About Legacy Reserves LP
Legacy Reserves LP is an independent oil and natural gas limited partnership headquartered in Midland, Texas, focused on the acquisition and development of oil and natural gas properties primarily located in the Permian Basin, Mid-Continent and Rocky Mountain regions of the United States. Additional information is available at www.LegacyLP.com.
The Legacy Reserves logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=3201
Cautionary Statement Relevant to Forward-Looking Information
This press release contains forward-looking statements relating to our operations that are based on management's current expectations, estimates and projections about its operations. 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 statements are not guarantees of future performance and are subject to certain risks, uncertainties and other factors, some of which are beyond our control and are difficult to predict. Among the important factors that could cause actual results to differ materially from those in the forward-looking statements are: 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 our annual and quarterly reports filed with the SEC. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements. 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 | Nine Months Ended | |||
September 30, | June 30, | September 30, | ||
2012 | 2012 | 2012 | 2011 | |
(In thousands, except per unit data) | ||||
Revenues: | ||||
Oil sales | $ 70,173 | $ 65,787 | $ 212,097 | $ 196,220 |
Natural gas liquids (NGL) sales | 3,492 | 3,524 | 10,742 | 13,896 |
Natural gas sales | 10,531 | 9,851 | 33,166 | 39,858 |
Total revenues | 84,196 | 79,162 | 256,005 | 249,974 |
Expenses: | ||||
Oil and natural gas production | 30,728 | 26,406 | 82,023 | 71,304 |
Production and other taxes | 5,137 | 4,687 | 15,040 | 15,101 |
General and administrative | 6,993 | 5,161 | 18,604 | 14,630 |
Depletion, depreciation, amortization and accretion | 24,833 | 25,370 | 73,042 | 64,152 |
Impairment of long-lived assets | 7,277 | 13,978 | 22,556 | 5,869 |
(Gain) loss on disposal of assets | 260 | (313) | (3,064) | (680) |
Total expenses | 75,228 | 75,289 | 208,201 | 170,376 |
Operating income | 8,968 | 3,873 | 47,804 | 79,598 |
Other income (expense): | ||||
Interest income | 3 | 4 | 11 | 12 |
Interest expense | (5,285) | (4,636) | (14,256) | (15,633) |
Equity in income of partnership | 30 | 32 | 87 | 107 |
Realized and unrealized net gains (losses) on commodity derivatives | (27,177) | 84,350 | 34,084 | 67,753 |
Other | (51) | (68) | (87) | (55) |
Income (loss) before income taxes | (23,512) | 83,555 | 67,643 | 131,782 |
Income tax expense | (54) | (613) | (878) | (1,198) |
Net income (loss) | $ (23,566) | $ 82,942 | $ 66,765 | $ 130,584 |
Income (loss) per unit -- basic and diluted | $ (0.49) | $ 1.73 | $ 1.40 | $ 3.00 |
Weighted average number of units used in computing net income (loss) per unit -- | ||||
Basic | 47,869 | 47,850 | 47,840 | 43,560 |
Diluted | 47,869 | 47,850 | 47,840 | 43,572 |
LEGACY RESERVES LP | |
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED) | |
(dollars in thousands) | |
September 30, 2012 |
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ASSETS | |
Current assets: | |
Cash and cash equivalents | $ 4,366 |
Accounts receivable, net: | |
Oil and natural gas | 35,161 |
Joint interest owners | 13,322 |
Other | 394 |
Fair value of derivatives | 9,633 |
Prepaid expenses and other current assets | 4,144 |
Total current assets | 67,020 |
Oil and natural gas properties, at cost: | |
Proved oil and natural gas properties using the successful efforts method of accounting | 1,544,197 |
Unproved properties | 28,746 |
Accumulated depletion, depreciation, amortization and impairment | (531,184) |
1,041,759 | |
Other property and equipment, net of accumulated depreciation and amortization of $4,306 | 2,726 |
Deposits on pending acquisitions | 930 |
Operating rights, net of amortization of $3,407 | 3,610 |
Fair value of derivatives | 19,950 |
Other assets, net of amortization of $7,480 | 5,930 |
Investment in equity method investee | 369 |
Total assets | $ 1,142,294 |
LIABILITIES AND UNITHOLDERS' EQUITY | |
Current liabilities: | |
Accounts payable | $ 6,224 |
Accrued oil and natural gas liabilities | 52,262 |
Fair value of derivatives | 9,024 |
Asset retirement obligation | 22,158 |
Other | 8,596 |
Total current liabilities | 98,264 |
Long-term debt | 452,000 |
Asset retirement obligation | 105,490 |
Fair value of derivatives | 7,932 |
Other long-term liabilities | 1,628 |
Total liabilities | 665,314 |
Commitments and contingencies | |
Unitholders' equity: | |
Limited partners' equity - 47,868,942 units issued and outstanding | 476,883 |
General partner's equity (approximately 0.04%) | 97 |
Total unitholders' equity | 476,980 |
Total liabilities and unitholders' equity | $ 1,142,294 |
LEGACY RESERVES LP | ||||
SELECTED FINANCIAL AND OPERATING DATA | ||||
Three Months Ended | Nine Months Ended | |||
September 30, | June 30, | September 30, | ||
2012 | 2012 | 2012 | 2011 | |
(In thousands, except per unit data) | ||||
Revenues: | ||||
Oil sales | $ 70,173 | $ 65,787 | $ 212,097 | $ 196,220 |
Natural gas liquids sales | 3,492 | 3,524 | 10,742 | 13,896 |
Natural gas sales | 10,531 | 9,851 | 33,166 | 39,858 |
Total revenues | $ 84,196 | $ 79,162 | $ 256,005 | $ 249,974 |
Expenses: | ||||
Oil and natural gas production | $ 28,207 | $ 23,877 | $ 75,067 | $ 64,572 |
Ad valorem taxes | $ 2,521 | $ 2,529 | $ 6,956 | $ 6,732 |
Total oil and natural gas production including ad valorem taxes | $ 30,728 | $ 26,406 | $ 82,023 | $ 71,304 |
Production and other taxes | $ 5,137 | $ 4,687 | $ 15,040 | $ 15,101 |
General and administrative | $ 6,993 | $ 5,161 | $ 18,604 | $ 14,630 |
Depletion, depreciation, amortization and accretion | $ 24,833 | $ 25,370 | $ 73,042 | $ 64,152 |
Realized commodity derivative settlements: | ||||
Realized gains (losses) on oil derivatives | $ 2,108 | $ (6,855) | $ (10,949) | $ (11,849) |
Realized gains on natural gas derivatives | $ 4,000 | $ 4,817 | $ 12,967 | $ 8,084 |
Production: | ||||
Oil (MBbls) | 840 | 790 | 2,418 | 2,190 |
Natural gas liquids (MGal) | 3,821 | 3,626 | 10,938 | 10,509 |
Natural gas (MMcf) | 2,571 | 2,545 | 7,774 | 6,397 |
Total (MBoe) | 1,359 | 1,301 | 3,974 | 3,506 |
Average daily production (Boe/d) | 14,772 | 14,297 | 14,504 | 12,842 |
Average sales price per unit (excluding commodity derivatives): | ||||
Oil price (per Bbl) | $ 83.54 | $ 83.27 | $ 87.72 | $ 89.60 |
Natural gas liquids price (per Gal) | $ 0.91 | $ 0.97 | $ 0.98 | $ 1.32 |
Natural gas price (per Mcf) | $ 4.10 | $ 3.87 | $ 4.27 | $ 6.23 |
Combined (per Boe) | $ 61.95 | $ 60.85 | $ 64.42 | $ 71.30 |
Average sales price per unit (including realized commodity derivative gains/losses): | ||||
Oil price (per Bbl) | $ 86.05 | $ 74.60 | $ 83.19 | $ 84.19 |
Natural gas liquids price (per Gal) | $ 0.91 | $ 0.97 | $ 0.98 | $ 1.32 |
Natural gas price (per Mcf) | $ 5.65 | $ 5.76 | $ 5.93 | $ 7.49 |
Combined (per Boe) | $ 66.45 | $ 59.28 | $ 64.93 | $ 70.23 |
NYMEX oil index prices per Bbl: | ||||
Beginning of Period | $ 84.96 | $ 103.02 | $ 98.83 | $ 91.38 |
End of Period | $ 92.19 | $ 84.96 | $ 92.19 | $ 79.20 |
NYMEX natural gas index prices per Mcf: | ||||
Beginning of Period | $ 2.82 | $ 2.13 | $ 2.99 | $ 4.41 |
End of Period | $ 3.32 | $ 2.82 | $ 3.32 | $ 3.67 |
Average unit costs per Boe: | ||||
Oil and natural gas production | $ 20.76 | $ 18.35 | $ 18.89 | $ 18.42 |
Ad valorem taxes | $ 1.86 | $ 1.94 | $ 1.75 | $ 1.92 |
Production and other taxes | $ 3.78 | $ 3.60 | $ 3.78 | $ 4.31 |
General and administrative | $ 5.15 | $ 3.97 | $ 4.68 | $ 4.17 |
Depletion, depreciation, amortization and accretion | $ 18.27 | $ 19.50 | $ 18.38 | $ 18.30 |
Non-GAAP Financial Measures
This press release, the financial tables and other supplemental information include "Adjusted EBITDA" and "Distributable Cash Flow", both of which are non-generally accepted accounting principles ("non-GAAP") measures which may be used periodically by management when discussing our financial results with investors and analysts. The following presents a reconciliation of each of these non-GAAP financial measures to their nearest comparable generally accepted accounting principles ("GAAP") measure. All such information is also available on our website under the Investor Relations link.
Adjusted EBITDA and Distributable Cash Flow are presented as management believes they provide additional information and metrics relative to the performance of our business, such as the cash distributions we expect to pay to our unitholders. Management believes that both Adjusted EBITDA and Distributable Cash Flow are useful to investors because these measures are used by many companies in the industry as measures of operating and financial performance, and are commonly employed by financial analysts and others to evaluate the operating and financial performance of the Partnership from period to period and to compare it with the performance of other publicly traded partnerships within the industry. Adjusted EBITDA and Distributable Cash Flow may not be comparable to a similarly titled measure of other publicly traded limited partnerships or limited liability companies because all companies may not calculate Adjusted EBITDA in the same manner.
"Adjusted EBITDA" and "Distributable Cash Flow" should not be considered as alternatives to GAAP measures, such as net income, operating income, cash flow from operating activities, or any other GAAP measure of financial performance.
Adjusted EBITDA is defined as net income (loss) plus:
Distributable Cash Flow is defined as Adjusted EBITDA less:
The following table presents a reconciliation of our consolidated net income (loss) to Adjusted EBITDA and Distributable Cash Flow:
Three Months Ended | Nine Months Ended | |||||||
September 30, | June 30, | September 30, | ||||||
2012 | 2012 | 2012 | 2011 | |||||
(dollars in thousands) | ||||||||
Net income (loss) | $ (23,566) | $ 82,942 | $ 66,765 | $ 130,584 | ||||
Plus: | ||||||||
Interest expense | 5,285 | 4,636 | 14,256 | 15,633 | ||||
Income tax expense | 54 | 613 | 878 | 1,198 | ||||
Depletion, depreciation, amortization and accretion | 24,833 | 25,370 | 73,042 | 64,152 | ||||
Impairment of long-lived assets | 7,277 | 13,978 | 22,556 | 5,869 | ||||
Gain on sale of assets | (9) | (349) | (3,846) | -- | ||||
Equity in income of partnership | (30) | (32) | (87) | (107) | ||||
Unit-based compensation expense (benefit) | 2,138 | (24) | 3,670 | 2,446 | ||||
Unrealized (gains) losses on oil and natural gas derivatives | 33,285 | (86,388) | (32,066) | (71,518) | ||||
Adjusted EBITDA | $ 49,267 | $ 40,746 | $ 145,168 | $ 148,257 | ||||
Less: | ||||||||
Cash interest expense | 5,283 | 4,859 | 14,396 | 14,182 | ||||
Cash settlements of LTIP unit awards | 990 | 112 | 3,371 | 2,855 | ||||
Development capital expenditures | 19,565 | 16,693 | 48,457 | 52,127 | ||||
Distributable Cash Flow | $ 23,429 | $ 19,082 | $ 78,944 | $ 79,093 |
CONTACT: Legacy Reserves LP Dan Westcott Executive Vice President and Chief Financial Officer 432-689-5200