HOUSTON, March 14, 2019 /PRNewswire/ -- EP Energy
Corporation (NYSE: EPE) today reported 2018 financial and
operational results for the company.
2018 Key Results:
- Net Loss of $1,003 million
including $1,103 million non-cash
impairment charge
- Adjusted EBITDAX of $813
million
- 80.7 thousand barrels of oil equivalent per day (MBoe/d),
including 45.8 thousand barrels of oil production per day
(MBbls/d)
- $984 million of oil and gas
expenditures, including acquisitions and other capital of
$340 million
- $644 million of adjusted oil and
gas expenditures
- 136 completed (based on wells fracture stimulated or frac'd)
gross wells
- Capital efficiency improvements in all basins
- Drilled and completed company's first ever horizontal wells in
Northeastern Utah
- Expanded Eagle Ford net acreage footprint by approximately
30%
- Proved reserves of 325 million barrels of oil equivalent
(MMBoe) which includes reducing our PUD development timeframe from
five years to three years which was a negative 64 MMBoe impact
2018 Operating and Financial Performance
Below is a summary of fourth quarter 2018 results compared to
the fourth quarter 2017 and full year 2018 results compared to
2017:
|
4Q'17
|
4Q'18
|
4Q'18 vs.
4Q'17
|
|
2017
|
2018
|
2018 vs
2017
|
Oil Production
(MBbls/d)
|
43.6
|
44.3
|
+ 2%
|
|
46.1
|
45.8
|
- 1%
|
Equivalent Production
(MBoe/d)
|
80.6
|
79.5
|
- 1%
|
|
82.3
|
80.7
|
- 2%
|
Percent Oil
(%)
|
54
|
56
|
+ 3%
|
|
56
|
57
|
+ 1%
|
LOE per Unit
($/Boe)
|
5.60
|
4.84
|
- 14%
|
|
5.42
|
5.35
|
- 1%
|
Adjusted LOE per Unit
($/Boe)1,2
|
5.60
|
4.83
|
- 14%
|
|
5.42
|
5.28
|
- 3%
|
Lease Operating
Expense ($MM)
|
42
|
35
|
- 15%
|
|
163
|
158
|
- 4%
|
Adjusted Lease
Operating Expense ($MM)1,2
|
42
|
35
|
- 16%
|
|
163
|
156
|
- 4%
|
G&A expense per
Unit ($/Boe)3
|
1.35
|
2.86
|
+112%
|
|
2.69
|
3.03
|
+ 13%
|
Adjusted G&A
expense per Unit ($/Boe)1
|
2.05
|
1.99
|
- 3%
|
|
2.62
|
2.24
|
- 15%
|
Net (Loss)
($MM)
|
(72)
|
(919)
|
- 1,176%
|
|
(194)
|
(1,003)
|
- 417%
|
Hedge Settlements
($MM)
|
7
|
9
|
-29%
|
|
93
|
(25)
|
- 215%
|
Adjusted EBITDAX
($MM)1
|
181
|
195
|
+ 8%
|
|
691
|
813
|
+ 18%
|
Oil and Gas
Expenditures ($MM)
|
145
|
107
|
- 26%
|
|
587
|
984
|
+ 68%
|
Adjusted Oil and Gas
Expenditures (excl. Acquisitions and Other )
($MM)1
|
145
|
99
|
- 32%
|
|
558
|
644
|
+ 15%
|
|
|
1
|
See Disclosure of
Non-GAAP Financial Measures for applicable definitions and
reconciliations to GAAP terms.
|
2
|
Does not include less
than $1 million and approximately $2 million or $0.01 per Boe
and $0.07 per Boe for the quarter and year
ended December 31, 2018 of adjustments
under a joint venture agreement.
|
3
|
Includes
approximately $33 million reduction from LTI forfeitures for the
quarter and year ended December 31, 2017.
|
Fourth Quarter 2018
For the quarter ended December 31,
2018, EP Energy reported a $3.70 diluted net loss per share and $0.13 adjusted loss per share. The reported net
loss for the fourth quarter of 2018 was $919
million, versus a $72 million
net loss in the same 2017 period, which is primarily due to
non-cash impairment charges. Adjusted EBITDAX for the fourth
quarter 2018 was $195 million, up
from $181 million in the fourth
quarter of 2017, due to higher oil volumes, lower cash costs and
higher realized pricing on oil physical sales.
The company ended the year with fourth quarter operating
expenses of $1,328 million, up from
$217 million in the fourth quarter of
2017 due to non-cash impairment charges in 2018. Adjusted
cash operating costs were $89 million
for the fourth quarter 2018, down from $101
million in the same 2017 period. Adjusted cash operating
costs were $12.16 per barrel of oil
equivalent (Boe) for the fourth quarter 2018, down from
$13.65 per Boe in the same 2017
period mainly due to lower lease operating costs.
Capital expenditures in the fourth quarter 2018 were
$107 million, down from $145 million in the same period 2017, primarily
due to decreased drilling activity in the Permian in 2018.
Capital expenditures for each area during the fourth quarter of
2018 were approximately $83 million
in the Eagle Ford, $22 million in
Northeastern Utah, and
$2 million in Permian. In the
fourth quarter 2018, the company completed 27 gross wells, 22 of
which were in the Eagle Ford and 5 in NEU.
Full Year 2018
For the year ended December 31, 2018, EP Energy reported a
$4.05 diluted net loss per share and
$0.25 adjusted loss per share.
Reported net loss was $1,003 million
for the year 2018, compared to a $194
million net loss in the same 2017 period, which includes
approximately $1,103 million asset
impairment charges related to the Permian in 2018. Adjusted
EBITDAX for the year 2018 was $813
million, up from $691 million
in 2017 due primarily to lower lease operating expenses, lower
adjusted general and administrative expenses, and higher realized
pricing on oil and NGL volumes in 2018.
Total operating expenses for the year ended December 31,
2018 were $2,039 million, up from
$927 million in the same 2017
period. The difference was driven by non-cash impairment
charges of $1,103 million related to
the company's Permian assets in 2018. Adjusted cash operating
costs were $406 million for the year
2018, down from $427 million in the
same 2017 period. Adjusted cash operating costs per unit were
$13.77 per Boe for the year 2018,
down from $14.23 per Boe in the same
2017 period primarily due to lower lease operating expenses, lower
transportation costs, and lower adjusted general and administrative
expense in 2018.
Adjusted oil and gas expenditures in 2018 were $644 million, up from $558
million in the same period 2017. In 2018, the company
spent $425 million in Eagle Ford
(excluding $315 million of
acquisition capital), $99 million in
the Permian (excluding $23 million in
capital adjustments under a joint venture agreement) and
$120 million in Northeastern Utah (excluding $2 million in acquisition capital). In 2018, the
company completed 136 gross wells, which was approximately 13 less
than EP Energy completed in 2017. In 2018, the company
completed 85 wells in the Eagle Ford, 24 wells in the Permian, and
27 wells in Northeastern Utah. In
addition the company ended the year with 29 DUC's.
Note: See Disclosure of Non-GAAP Financial Measures section
of this release for applicable definitions and reconciliations to
GAAP terms.
Financial Position and Liquidity
At December 31, 2018, EP Energy's
balance sheet included $4.4 billion
of total debt and approximately $27
million of cash and cash equivalents. As of
December 31, 2018, the company had
$537 million of total liquidity. The
company also repurchased $84 million
of unsecured notes during the year at a discount. In 2019 the
company repurchased an additional $50
million of its unsecured notes at a discount as of
February 28, 2019.
Operations Update
For the year ended December 31, 2018, average daily
production was 80.7 MBoe/d, including 45.8 MBbls/d of oil.
Fourth quarter 2018 average daily production was 79.5 MBoe/d,
including 44.3 MBbls/d of oil. During the fourth quarter of 2018,
the company completed (frac'd) 27 gross wells (13 net). The
decrease in the fourth quarter of 2018 production is due to lower
net completions in the second half of 2018.
Northeastern Utah
(NEU)
EP Energy's assets in Northeastern
Utah averaged approximately 17.0 MBoe/d during the fourth
quarter of 2018, which included 11.5 MBbls/d of oil while also
completing five gross wells (2 net). The company's focus in 2018 in
NEU was horizontal well development and recompletion activity.
During 2018 EP Energy successfully completed the company's first
ever horizontal wells in the basin. In the first quarter of 2019,
the company expects to average one operated rig focused on
horizontal drilling while bringing four gross wells (two net) to
sales.
Eagle Ford
EP Energy's assets in Eagle Ford averaged approximately 37.3
MBoe/d during the fourth quarter of 2018, which included 24.7
MBbls/d of oil while also completing 22 gross wells (11 net).
During 2018 the company expanded its footprint by almost 30% in the
Eagle Ford through A&D activity. The company expects to average
three operated rigs and one completion crew while bringing
approximately 13 gross wells (8 net ) to sales in the first quarter
of 2019.
Permian
EP Energy's assets in the Permian basin averaged approximately
25.2 MBoe/d per day during the fourth quarter of 2018, which
included 8.1 MBbls/d of oil. The company will not have any rigs or
completion crews in the first quarter of 2019 in the Permian.
Hedge Program Update
In 2018, EP Energy realized negative $25
million from settlements on financial derivatives. At
year-end 2018, the mark-to-market value of the company's hedge
positions was approximately $114
million.
A summary of the company's 2019 and 2020 hedge positions is
listed below:
|
2019
|
|
2020
|
Total Fixed Price
Hedges
|
|
|
|
Oil volumes
(MMBbls)
|
13.7
|
|
|
11.7
|
|
Average ceiling price
($/Bbl)
|
$
|
66.41
|
|
|
$
|
65.11
|
|
Average floor price
($/Bbl)
|
$
|
55.93
|
|
|
$
|
55.90
|
|
|
|
|
|
Natural gas volumes
(TBtu)
|
25.6
|
|
|
—
|
|
Average ceiling
prices ($/MMBtu)
|
$
|
3.72
|
|
|
$
|
—
|
|
Average floor prices
($/MMBtu)
|
$
|
2.86
|
|
|
$
|
—
|
|
|
Note: Positions
are as of March 13, 2019 (Contract months: January 2019 -
Forward)
|
The table includes
WTI three-way collars of 12.1 MMBbls and 11.7 MMBbls in 2019 and
2020, respectively, and WTI collars of 1.6 MMBbls in
2019.
|
2018 Proved Reserves
Ryder Scott, who was engaged in
prior years to solely audit year-end reserves estimates, prepared
the reserves estimates on EP Energy's behalf in 2018. EP Energy's
proved oil and natural gas reserves were 325 MMBoe as
of December 31, 2018, a 17 percent decrease compared to
proved reserves at December 31, 2017
of 392 MMBoe. Our PUD reserves at December
31, 2018 reflect the effects of adjusting our PUD bookings
methodology from a five-year to a three-year timeframe as a result
of the current economic price environment, a lower projected
capital budget in 2019, and our available liquidity and access to
the capital markets. Our December 31,
2018 PUD reserves are 64 MMBoe lower as a result of this
change. Proved developed reserves increased ten percent from 205
MMBoe in 2017 to 234 MMBoe in 2018. In 2018, total proved
reserves were 72 percent proved developed and 70 percent
liquids.
The SEC first-day-of-the-month 12-month average prices for
reserves as of December 31, 2018 were
$65.56 per Bbl for oil and
$3.10 per MMBtu for natural gas, up
from $51.34 per Bbl for oil and
$2.98 per MMBtu for natural gas in
the prior 12-month period.
First Quarter 2019 Outlook
Given the uncertainty of commodity prices, EP Energy has elected
to provide quarterly guidance updates. Production in first quarter
2019 is impacted by reduced net completion count over 4Q'18 and
1Q'19. First quarter 2019 capital expenditures is impacted by the
build in DUC inventory.
The company has provided production and capital guidance for the
first quarter of 2019 below:
|
|
1Q'19
|
|
|
|
Oil production
(MBbls/d)
|
|
38 - 39
|
Total production
(MBoe/d)
|
|
72 - 73
|
|
|
|
Oil & Gas
Expenditures ($ million)
|
|
$160 -
$170
|
Eagle
Ford
|
|
~85%
|
Permian
|
|
~0%
|
NEU
|
|
~15%
|
|
|
|
Average gross
drilling rigs
|
|
|
Eagle
Ford
|
|
3
|
Permian
|
|
—
|
NEU
|
|
1
|
Gross completions
(based on fracture stimulated or frac'd)
|
|
~17
|
Ending drilled but
uncompleted inventory
|
|
~45
|
|
|
|
Operating
Costs
|
|
|
Lease operating
expense ($MM)
|
|
$38 - $41
|
Lease operating
expense ($/Boe)
|
|
$6.00 -
$6.50
|
G&A expense
($/Boe)
|
|
$2.75 -
$3.15
|
Adjusted G&A
expense ($/Boe)1
|
|
$2.20 -
$2.60
|
Transportation and
commodity purchases ($/Boe)
|
|
$3.75 -
$4.05
|
Taxes, other than
income ($/Boe)2
|
|
$1.80 -
$1.95
|
DD&A
($/Boe)
|
|
$14.50 -
$15.50
|
|
|
1
|
Adjusted G&A
represents G&A expense less approximately $0.55 - $0.55 per Boe
of non-cash compensation expense.
|
2
|
Severance taxes are
based on $55/Bbl WTI.
|
Webcast Information
EP Energy has scheduled a webcast at 10 a.m. Eastern Time,
9 a.m. Central Time, on March
15, to discuss its fourth quarter and full year financial
and operational results. The webcast may be accessed online
through the company's website at epenergy.com in the Investor
Center. Materials to be discussed during the webcast will be
available in the Investor Center one hour prior to the
webcast. A limited number of telephone lines will be
available to participants by dialing 888-317-6003 (conference ID#
4069531) 10 minutes prior to the start of the webcast. A
replay of the webcast will be available through April 15, 2019 on the company's website in the
Investor Center or by dialing 877-344-7529 (conference ID#
10129100).
About EP Energy
The EP Energy team is driven to deliver superior returns for our
investors by developing the oil and natural gas that feeds
America's growing energy needs. The company focuses on enhancing
the value of its high quality asset portfolio, increasing capital
efficiency, maintaining financial flexibility, and pursuing
accretive acquisitions and divestitures. EP Energy is working
to set the standard for efficient development of hydrocarbons in
the U.S. Learn more at epenergy.com.
The following table provides the company's production results,
average realized prices, results of operations and certain non-GAAP
financial measures for the periods presented. See Disclosure
of Non-GAAP Financial Measures for applicable definitions and
reconciliations to GAAP terms.
|
Quarter ended
December 31,
|
|
Year ended
December 31,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Oil Sales Volumes
(MBbls/d)
|
|
|
|
|
|
|
|
Eagle Ford
|
24.7
|
|
|
19.4
|
|
|
25.0
|
|
|
22.4
|
|
NEU
|
11.5
|
|
|
12.2
|
|
|
11.7
|
|
|
12.3
|
|
Permian
|
8.1
|
|
|
12.0
|
|
|
9.1
|
|
|
11.4
|
|
Total Oil Sales
Volumes
|
44.3
|
|
|
43.6
|
|
|
45.8
|
|
|
46.1
|
|
Natural Gas Sales
Volumes (MMcf/d)
|
|
|
|
|
|
|
|
Eagle Ford
|
36
|
|
|
32
|
|
|
36
|
|
|
39
|
|
NEU
|
33
|
|
|
34
|
|
|
32
|
|
|
33
|
|
Permian
|
53
|
|
|
64
|
|
|
55
|
|
|
55
|
|
Total Natural Gas
Sales Volumes
|
122
|
|
|
130
|
|
|
123
|
|
|
127
|
|
NGLs Sales Volumes
(MBbls/d)
|
|
|
|
|
|
|
|
Eagle Ford
|
6.6
|
|
|
5.9
|
|
|
6.1
|
|
|
6.8
|
|
NEU
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Permian
|
8.3
|
|
|
9.4
|
|
|
8.2
|
|
|
8.2
|
|
Total NGLs Sales
Volumes
|
14.9
|
|
|
15.3
|
|
|
14.3
|
|
|
15.0
|
|
Equivalent Sales
Volumes (MBoe/d)
|
|
|
|
|
|
|
|
Eagle Ford
|
37.3
|
|
|
30.6
|
|
|
37.1
|
|
|
35.7
|
|
NEU
|
17.0
|
|
|
17.9
|
|
|
17.1
|
|
|
17.9
|
|
Permian
|
25.2
|
|
|
32.1
|
|
|
26.5
|
|
|
28.7
|
|
Total Equivalent Sales
Volumes
|
79.5
|
|
|
80.6
|
|
|
80.7
|
|
|
82.3
|
|
|
|
|
|
|
|
|
|
Net loss ($ in
millions)
|
(919)
|
|
|
(72)
|
|
|
(1,003)
|
|
|
(194)
|
|
Adjusted EBITDAX ($
in millions)
|
195
|
|
|
181
|
|
|
813
|
|
|
691
|
|
Basic and diluted net
loss per common share ($)
|
(3.70)
|
|
|
(0.29)
|
|
|
(4.05)
|
|
|
(0.79)
|
|
Adjusted EPS
($)
|
(0.13)
|
|
|
(0.07)
|
|
|
(0.25)
|
|
|
(0.39)
|
|
Oil and Gas
Expenditures ($ in millions)(1)
|
107
|
|
|
145
|
|
|
984
|
|
|
587
|
|
Adjusted Oil and Gas
Expenditures ($ in millions)
|
99
|
|
|
145
|
|
|
644
|
|
|
558
|
|
Total Operating
Expenses ($/Boe)
|
181.47
|
|
|
29.16
|
|
|
69.25
|
|
|
30.86
|
|
Adjusted Cash
Operating Costs ($/Boe)
|
12.16
|
|
|
13.65
|
|
|
13.77
|
|
|
14.23
|
|
Depreciation,
depletion and amortization rate ($/Boe)
|
17.90
|
|
|
16.01
|
|
|
17.23
|
|
|
16.22
|
|
Average realized
prices(2)
|
|
|
|
|
|
|
|
Oil price on physical
sales ($/Bbl)
|
55.31
|
|
|
54.13
|
|
|
62.34
|
|
|
48.23
|
|
Oil, including
financial derivatives ($/Bbl)(3)
|
56.71
|
|
|
55.70
|
|
|
60.37
|
|
|
53.50
|
|
Natural gas price on
physical sales ($/Mcf)
|
1.76
|
|
|
2.14
|
|
|
1.66
|
|
|
2.32
|
|
Natural gas, including
financial derivatives ($/Mcf)(3)
|
2.16
|
|
|
2.44
|
|
|
1.96
|
|
|
2.47
|
|
NGLs price on physical
sales ($/Bbl)
|
20.29
|
|
|
22.72
|
|
|
22.88
|
|
|
18.87
|
|
NGLs, including
financial derivatives ($Bbl)(3)
|
19.51
|
|
|
20.98
|
|
|
21.79
|
|
|
18.46
|
|
______________________________________________
|
(1)
|
The quarter and year
ended December 31, 2018 includes $8 million and $340 million,
respectively, of acquisition capital and capital adjustments under
a joint venture agreement. The year ended December 31, 2017
includes $29 million of acquisition capital.
|
(2)
|
Oil and natural gas
prices on physical sales reflect operating revenues for oil and
natural gas reduced by oil and natural gas purchases associated
with managing our physical sales.
|
(3)
|
Prices per unit are
calculated using total financial derivative cash
settlements.
|
EP ENERGY
CORPORATION
|
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
|
(In
millions)
|
(Unaudited)
|
|
|
Quarter ended
December 31,
|
|
Year ended
December 31,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Operating
revenues
|
|
|
|
|
|
|
|
Oil
|
$
|
225
|
|
|
$
|
217
|
|
|
$
|
1,045
|
|
|
$
|
812
|
|
Natural
gas
|
20
|
|
|
26
|
|
|
75
|
|
|
110
|
|
NGLs
|
28
|
|
|
32
|
|
|
120
|
|
|
103
|
|
Financial
derivatives
|
206
|
|
|
(51)
|
|
|
84
|
|
|
41
|
|
Total operating
revenues
|
479
|
|
|
224
|
|
|
1,324
|
|
|
1,066
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
Oil and natural gas
purchases
|
—
|
|
|
—
|
|
|
3
|
|
|
2
|
|
Transportation
costs
|
24
|
|
|
29
|
|
|
100
|
|
|
115
|
|
Lease operating
expense
|
35
|
|
|
42
|
|
|
158
|
|
|
163
|
|
General and
administrative
|
21
|
|
|
10
|
|
|
89
|
|
|
81
|
|
Depreciation,
depletion and amortization
|
131
|
|
|
119
|
|
|
507
|
|
|
487
|
|
Gain on sale of
assets
|
(2)
|
|
|
—
|
|
|
(3)
|
|
|
—
|
|
Impairment
charges
|
1,103
|
|
|
—
|
|
|
1,103
|
|
|
2
|
|
Exploration and other
expense
|
2
|
|
|
2
|
|
|
5
|
|
|
12
|
|
Taxes, other than
income taxes
|
14
|
|
|
15
|
|
|
77
|
|
|
65
|
|
Total operating
expenses
|
1,328
|
|
|
217
|
|
|
2,039
|
|
|
927
|
|
|
|
|
|
|
|
|
|
Operating (loss)
income
|
(849)
|
|
|
7
|
|
|
(715)
|
|
|
139
|
|
|
|
|
|
|
|
|
|
Other
income
|
2
|
|
|
—
|
|
|
4
|
|
|
—
|
|
Gain (loss) on
extinguishment/modification of debt
|
25
|
|
|
—
|
|
|
73
|
|
|
(16)
|
|
Interest
expense
|
(97)
|
|
|
(81)
|
|
|
(365)
|
|
|
(326)
|
|
Loss before income
taxes
|
(919)
|
|
|
(74)
|
|
|
(1,003)
|
|
|
(203)
|
|
Income tax
benefit
|
—
|
|
|
2
|
|
|
—
|
|
|
9
|
|
Net loss
|
$
|
(919)
|
|
|
$
|
(72)
|
|
|
$
|
(1,003)
|
|
|
$
|
(194)
|
|
EP ENERGY
CORPORATION
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
(In
millions)
|
(Unaudited)
|
|
|
December 31,
2018
|
|
December 31,
2017
|
ASSETS
|
|
|
|
Current
assets(1)
|
$
|
385
|
|
|
$
|
466
|
|
Property, plant and
equipment, net(2)
|
3,774
|
|
|
4,422
|
|
Other non-current
assets
|
22
|
|
|
12
|
|
Total
assets
|
$
|
4,181
|
|
|
$
|
4,900
|
|
|
|
|
|
LIABILITIES AND EQUITY
|
|
|
|
Current
liabilities
|
$
|
440
|
|
|
$
|
448
|
|
Long-term debt, net
of debt issue costs
|
4,285
|
|
|
4,022
|
|
Other non-current
liabilities
|
4,340
|
|
|
4,060
|
|
Total stockholders'
equity
|
(599)
|
|
|
392
|
|
Total liabilities and
equity
|
$
|
4,181
|
|
|
$
|
4,900
|
|
_____________________________________________
|
(1)
|
Balance as of
December 31, 2017 includes $172 million of assets held for
sale.
|
(2)
|
Balance is net of
accumulated depreciation, depletion and amortization of $3,651
million and $3,179 million as of December 31, 2018 and
December 31, 2017, respectively.
|
EP ENERGY
CORPORATION
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(In
millions)
|
(Unaudited)
|
|
|
Year
ended December 31,
|
|
2018
|
|
2017
|
Net loss
|
$
|
(1,003)
|
|
|
$
|
(194)
|
|
Adjustments to
reconcile net loss to net cash provided by operating
activities
|
|
|
|
Non-cash
expenses
|
1,564
|
|
|
505
|
|
Asset and liability
changes
|
(139)
|
|
|
64
|
|
Net cash provided by
operating activities
|
422
|
|
|
375
|
|
Net cash used in
investing activities
|
(790)
|
|
|
(577)
|
|
Net cash provided by
financing activities
|
350
|
|
|
227
|
|
|
|
|
|
Change in cash, cash
equivalents and restricted cash
|
(18)
|
|
|
25
|
|
|
|
|
|
Cash, cash
equivalents and restricted cash - beginning of period
|
45
|
|
|
20
|
|
Cash, cash
equivalents and restricted cash - end of period
|
$
|
27
|
|
|
$
|
45
|
|
Disclosure of Non-GAAP Financial Measures
The Securities and Exchange Commission's Regulation G applies to
any public disclosure or release of material information that
includes a non-GAAP financial measure. In the event of such a
disclosure or release, Regulation G requires (i) the
presentation of the most directly comparable financial measure
calculated and presented in accordance with GAAP and (ii) a
reconciliation of the differences between the non-GAAP financial
measure presented and the most directly comparable financial
measure calculated and presented in accordance with GAAP.
Non-GAAP Terms
Adjusted EPS is defined as diluted earnings per share adjusted
for certain items that EP Energy considers to be significant to
understanding our underlying performance for a given period.
Adjusted EPS is useful in analyzing the company's ongoing earnings
potential and understanding certain significant items impacting the
comparability of EP Energy's results. Adjusted EPS is
calculated as net income (loss) per common share adjusted for the
impact of financial derivatives (mark-to-market effects of
financial derivatives, net of cash settlements and cash premiums
related to these derivatives), gains and losses on
extinguishment/modification of debt, gains and/or losses on sale of
assets, impairment charges, other costs that affect comparability,
including transition, severance and other costs and changes in the
valuation allowance on deferred tax assets.
Below is a reconciliation of consolidated diluted net income
(loss) per share to Adjusted EPS:
|
Quarter ended December 31, 2018
|
|
Pre-Tax
|
|
After-Tax
|
|
Diluted EPS(1)
|
|
($ in millions, except earnings per share amounts)
|
Net loss
|
|
|
$
|
(919)
|
|
|
$
|
(3.70)
|
|
|
|
|
|
|
|
Adjustments(2)
|
|
|
|
|
|
Impact of financial
derivatives(3)
|
$
|
(197)
|
|
|
$
|
(153)
|
|
|
$
|
(0.62)
|
|
Transition, severance
and other costs
|
2
|
|
|
2
|
|
|
$
|
0.01
|
|
Gain on
extinguishment/modification of debt
|
(25)
|
|
|
(19)
|
|
|
$
|
0.01
|
|
Gain on sale of
assets
|
(2)
|
|
|
(2)
|
|
|
(0.01)
|
|
Impairment
charges
|
1,103
|
|
|
859
|
|
|
3.46
|
|
Valuation allowance
on deferred tax assets
|
|
|
200
|
|
|
0.81
|
|
Total
adjustments
|
$
|
881
|
|
|
$
|
887
|
|
|
$
|
3.57
|
|
|
|
|
|
|
|
Adjusted
EPS
|
|
|
|
|
$
|
(0.13)
|
|
|
|
|
|
|
|
Diluted weighted
average shares
|
|
|
|
|
249
|
|
|
|
|
Year ended December 31, 2018
|
|
Pre-Tax
|
|
After-Tax
|
|
Diluted EPS(1)
|
|
($ in millions, except earnings per share amounts)
|
Net loss
|
|
|
$
|
(1,003)
|
|
|
$
|
(4.05)
|
|
|
|
|
|
|
|
Adjustments(2)
|
|
|
|
|
|
Impact of financial
derivatives(3)
|
$
|
(109)
|
|
|
$
|
(85)
|
|
|
$
|
(0.34)
|
|
Transition, severance
and other costs
|
9
|
|
|
7
|
|
|
0.03
|
|
Gain on
extinguishment/modification of debt
|
(73)
|
|
|
(57)
|
|
|
(0.23)
|
|
Gain on sale of
assets
|
(2)
|
|
|
(2)
|
|
|
(0.01)
|
|
Impairment
charges
|
1,103
|
|
|
859
|
|
|
3.47
|
|
Valuation allowance
on deferred tax assets
|
|
|
218
|
|
|
$
|
0.88
|
|
Total
adjustments
|
$
|
928
|
|
|
$
|
940
|
|
|
$
|
3.80
|
|
|
|
|
|
|
|
Adjusted
EPS
|
|
|
|
|
$
|
(0.25)
|
|
|
|
|
|
|
|
Diluted weighted
average shares
|
|
|
|
|
248
|
|
___________________________________________________
|
(1)
|
Diluted per share
amounts are based on actual amounts rather than the rounded totals
presented.
|
(2)
|
All individual
adjustments for all periods presented assume a statutory federal
and blended state tax rate, as well as any other income tax effects
specifically attributable to that item.
|
(3)
|
Represents
mark-to-market impact net of cash settlements and cash premiums
related to financial derivatives. There were no cash premiums
received or paid for the periods presented.
|
EBITDAX is defined as net income (loss) plus interest and debt
expense, income taxes, depreciation, depletion and amortization and
exploration expense. Adjusted EBITDAX is defined as EBITDAX,
adjusted as applicable in the relevant period for the net change in
the fair value of derivatives (mark-to-market effects of financial
derivatives, net of cash settlements and cash premiums related to
these derivatives), the non-cash portion of compensation expense
(which represents non-cash compensation expense under our long-term
incentive programs adjusted for cash payments made under these
plans), transition, severance and other costs that affect
comparability, fees paid to Sponsors, gains and losses on
extinguishment/modification of debt, gains and/or losses on sale of
assets and impairment charges.
Below is a reconciliation of our consolidated net income (loss)
to EBITDAX and Adjusted EBITDAX:
|
Quarter ended
December 31,
|
|
Year ended
December 31,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
($ in millions, except equivalent volumes and per unit)
|
Net loss
|
$
|
(919)
|
|
|
$
|
(72)
|
|
|
$
|
(1,003)
|
|
|
$
|
(194)
|
|
Income tax
benefit
|
—
|
|
|
(2)
|
|
|
—
|
|
|
(9)
|
|
Interest expense, net
of capitalized interest
|
97
|
|
|
81
|
|
|
365
|
|
|
326
|
|
Depreciation,
depletion and amortization
|
131
|
|
|
119
|
|
|
507
|
|
|
487
|
|
Exploration
expense
|
1
|
|
|
2
|
|
|
4
|
|
|
9
|
|
EBITDAX
|
(690)
|
|
|
128
|
|
|
(127)
|
|
|
619
|
|
Mark-to-market on
financial derivatives(1)
|
(206)
|
|
|
51
|
|
|
(84)
|
|
|
(41)
|
|
Cash settlements and
cash premiums on financial derivatives(2)
|
9
|
|
|
7
|
|
|
(25)
|
|
|
93
|
|
Non-cash portion of
compensation expense(3)
|
4
|
|
|
(29)
|
|
|
13
|
|
|
(22)
|
|
Transition, severance
and other costs(4)
|
2
|
|
|
19
|
|
|
9
|
|
|
19
|
|
Fees paid to
Sponsors(5)
|
—
|
|
|
5
|
|
|
—
|
|
|
5
|
|
Gain on sale of
assets
|
(2)
|
|
|
—
|
|
|
(3)
|
|
|
—
|
|
(Gain) loss on
extinguishment/modification of debt
|
(25)
|
|
|
—
|
|
|
(73)
|
|
|
16
|
|
Impairment
charges
|
1,103
|
|
|
—
|
|
|
1,103
|
|
|
2
|
|
Adjusted
EBITDAX
|
$
|
195
|
|
|
$
|
181
|
|
|
$
|
813
|
|
|
$
|
691
|
|
_____________________________________________________
|
(1)
|
Represents the income
statement impact of financial derivatives.
|
(2)
|
Represents actual
cash settlements related to financial derivatives. There were no
cash premiums received or paid for the periods
presented.
|
(3)
|
Non-cash portion of
compensation expense represents compensation expense (net of
forfeitures) under long-term incentive programs adjusted for cash
payments made under these plans.
|
(4)
|
Reflects transition
and severance costs related to workforce reductions.
|
(5)
|
Represents fees paid
in connection with the release of members of the new leadership
team from a portfolio company of funds managed by Apollo Global
Management LLC and payment of certain legal expenses.
|
Adjusted cash operating costs is a non-GAAP measure that is
defined as total operating expenses, excluding depreciation,
depletion and amortization expense, exploration expense, impairment
charges, gains/losses on sale of assets, the non-cash portion of
compensation expense (which represents compensation expense under
our long-term incentive programs adjusted for cash payments made
under these plans) and transition, severance and other costs that
affect comparability. We use this measure to describe the
costs required to directly or indirectly operate our existing
assets and produce and sell our oil and natural gas, including the
costs associated with the delivery and purchases and sales of
produced commodities. Accordingly, we exclude depreciation,
depletion, and amortization and impairment charges as such costs
are non-cash in nature. We exclude exploration expense from our
measure as it is substantially non-cash in nature and is not
related to the costs to operate our existing assets. Similarly,
gains and losses on the sale of assets are excluded as they are
unrelated to our existing assets. We exclude the non-cash portion
of compensation expense as well as transition, severance and other
costs that affect comparability, as we believe such adjustments
allow investors to evaluate our costs against others in our
industry and this item can vary across companies due to different
ownership structures, compensation objectives or the occurrence of
transactions.
Below is a reconciliation of our GAAP operating expenses to
non-GAAP adjusted cash operating costs:
|
Quarter Ended
December 31,
|
|
2018
|
|
2017
|
|
Total
($MM)
|
|
Per Unit
($/Boe)(1)
|
|
Total
($MM)
|
|
Per Unit
($/Boe)(1)
|
Oil and natural gas
purchases
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Transportation
costs
|
24
|
|
|
3.32
|
|
|
29
|
|
|
3.92
|
|
Lease operating
expense
|
35
|
|
|
4.84
|
|
|
42
|
|
|
5.60
|
|
General and
administrative
|
21
|
|
|
2.86
|
|
|
10
|
|
|
1.35
|
|
Depreciation,
depletion and amortization
|
131
|
|
|
17.90
|
|
|
119
|
|
|
16.01
|
|
Gain on sale of
assets
|
(2)
|
|
|
(0.31)
|
|
|
—
|
|
|
—
|
|
Impairment
charges
|
1,103
|
|
|
150.70
|
|
|
—
|
|
|
—
|
|
Exploration and other
expense
|
2
|
|
|
0.29
|
|
|
2
|
|
|
0.20
|
|
Taxes, other than
income taxes
|
14
|
|
|
1.87
|
|
|
15
|
|
|
2.08
|
|
Total operating
expenses
|
$
|
1,328
|
|
|
$
|
181.47
|
|
|
$
|
217
|
|
|
$
|
29.16
|
|
Adjustments:
|
|
|
|
|
|
|
|
Depreciation,
depletion and amortization
|
$
|
(131)
|
|
|
$
|
(17.90)
|
|
|
$
|
(119)
|
|
|
$
|
(16.01)
|
|
Impairment
charges
|
(1,103)
|
|
|
(150.70)
|
|
|
—
|
|
|
—
|
|
Exploration
expense
|
(1)
|
|
|
(0.15)
|
|
|
(2)
|
|
|
(0.20)
|
|
Gain on sale of
assets
|
2
|
|
|
0.31
|
|
|
—
|
|
|
—
|
|
Non-cash portion of
compensation expense(2)
|
(4)
|
|
|
(0.56)
|
|
|
29
|
|
|
3.95
|
|
Transition, severance
and other costs(2)
|
(2)
|
|
|
(0.31)
|
|
|
(19)
|
|
|
(2.56)
|
|
Fees paid to
Sponsors(2)
|
—
|
|
|
—
|
|
|
(5)
|
|
|
(0.18)
|
|
Adjusted cash
operating costs and per unit adjusted cash costs
|
$
|
89
|
|
|
$
|
12.16
|
|
|
$
|
101
|
|
|
$
|
13.65
|
|
|
|
|
|
|
|
|
|
Total consolidated
equivalent volumes (MBoe)
|
|
|
7,318
|
|
|
|
|
7,412
|
|
|
|
|
Year Ended
December 31,
|
|
2018
|
|
2017
|
|
Total
($MM)
|
|
Per-Unit
($/Boe)(1)
|
|
Total
($MM)
|
|
Per-Unit
($/Boe)(1)
|
Oil and natural gas
purchases
|
$
|
3
|
|
|
$
|
0.10
|
|
|
$
|
2
|
|
|
$
|
0.07
|
|
Transportation
costs
|
100
|
|
|
3.41
|
|
|
115
|
|
|
3.83
|
|
Lease operating
expense
|
158
|
|
|
5.35
|
|
|
163
|
|
|
5.42
|
|
General and
administrative
|
89
|
|
|
3.03
|
|
|
81
|
|
|
2.69
|
|
Depreciation,
depletion and amortization
|
507
|
|
|
17.23
|
|
|
487
|
|
|
16.22
|
|
Gain on sale of
assets
|
(3)
|
|
|
(0.13)
|
|
|
—
|
|
|
—
|
|
Impairment
charges
|
1,103
|
|
|
37.47
|
|
|
2
|
|
|
0.04
|
|
Exploration and other
expense
|
5
|
|
|
0.18
|
|
|
12
|
|
|
0.40
|
|
Taxes, other than
income taxes
|
77
|
|
|
2.61
|
|
|
65
|
|
|
2.19
|
|
Total operating
expenses
|
$
|
2,039
|
|
|
$
|
69.25
|
|
|
$
|
927
|
|
|
$
|
30.86
|
|
Adjustments:
|
|
|
|
|
|
|
|
Depreciation,
depletion and amortization
|
$
|
(507)
|
|
|
$
|
(17.23)
|
|
|
$
|
(487)
|
|
|
$
|
(16.22)
|
|
Impairment
charges
|
(1,103)
|
|
|
(37.47)
|
|
|
(2)
|
|
|
(0.04)
|
|
Gain on sale of
assets
|
3
|
|
|
0.13
|
|
|
—
|
|
|
—
|
|
Exploration
expense
|
(4)
|
|
|
(0.12)
|
|
|
(9)
|
|
|
(0.30)
|
|
Non-cash portion of
compensation expense(2)
|
(13)
|
|
|
(0.47)
|
|
|
22
|
|
|
0.75
|
|
Transition,
restructuring and other costs(2)
|
(9)
|
|
|
(0.32)
|
|
|
(19)
|
|
|
(0.64)
|
|
Fees paid to
Sponsors(2)
|
—
|
|
|
—
|
|
|
(5)
|
|
|
(0.18)
|
|
Adjusted cash
operating costs and per-unit adjusted cash costs
|
$
|
406
|
|
|
$
|
13.77
|
|
|
$
|
427
|
|
|
$
|
14.23
|
|
|
|
|
|
|
|
|
|
Total consolidated
equivalent volumes (MBoe)
|
|
|
29,439
|
|
|
|
|
30,024
|
|
_______________________________________________________________
|
(1)
|
Per unit costs are
based on actual amounts rather than the rounded totals
presented.
|
(2)
|
Amounts are excluded
in the calculation of adjusted general and administrative
expense.
|
Adjusted general and administrative expenses are defined as
general and administrative expenses excluding the non-cash portion
of compensation expense which represents compensation expense (net
of forfeitures) under our long-term incentive programs adjusted for
cash payments under these plans and transition, severance and other
costs. Adjusted cash general and administrative expense are defined
as Adjusted general and administrative expenses including
capitalized labor.
Below is a reconciliation of our GAAP general and administrative
expense to non-GAAP adjusted general and administrative expense and
non-GAAP adjusted cash general and administrative expense:
|
Actuals
|
|
|
|
Year ended
December 31,
|
|
1Q 2019
Estimate
|
|
2018
|
|
2017
|
|
Low
|
|
High
|
|
Total
|
|
($/Boe)
|
|
Total
|
|
($/Boe)
|
|
($/Boe)
|
|
($/Boe)
|
|
($ in millions,
except per Boe costs)
|
GAAP general and
administrative expense
|
$
|
89
|
|
|
$
|
3.03
|
|
|
$
|
81
|
|
|
$
|
2.69
|
|
|
$
|
2.75
|
|
|
$
|
3.15
|
|
Less non-cash
compensation expense
|
(13)
|
|
|
(0.47)
|
|
|
22
|
|
|
0.75
|
|
|
(0.55)
|
|
|
(0.55)
|
|
Less transition,
severance and other costs
|
(9)
|
|
|
(0.32)
|
|
|
(19)
|
|
|
(0.64)
|
|
|
—
|
|
|
—
|
|
Less fees paid to
Sponsors
|
—
|
|
|
—
|
|
|
(5)
|
|
|
(0.18)
|
|
|
—
|
|
|
—
|
|
Adjusted general and
administrative expense
|
$
|
67
|
|
|
$
|
2.24
|
|
|
$
|
79
|
|
|
$
|
2.62
|
|
|
$
|
2.20
|
|
|
$
|
2.60
|
|
Capitalized
labor
|
14
|
|
|
0.49
|
|
|
23
|
|
|
0.77
|
|
|
|
|
|
Adjusted cash general
and administrative expense
|
$
|
81
|
|
|
$
|
2.73
|
|
|
$
|
102
|
|
|
$
|
3.39
|
|
|
|
|
|
_______________________________________________________
|
(1)
|
Per unit costs are
based on actual total amounts rather than the rounded totals
presented.
|
Net Debt is a non-GAAP measure defined as long-term debt less
cash and cash equivalents. At December 31,
2018, the company's net debt was approximately $4.4 billion (total debt $4,438 million less cash and cash equivalents of
approximately $27 million). At
December 31, 2017, the company's net
debt was approximately $4.1 billion
(total debt of approximately $4,093
million less cash and cash equivalents of approximately
$27 million).
EBITDAX and Adjusted EBITDAX are used by management and we
believe provide investors with additional information (i) to
evaluate our ability to service debt adjusting for items required
or permitted in calculating covenant compliance under our debt
agreements, (ii) to provide an important supplemental
indicator of the operational performance of our business without
regard to financing methods and capital structure, (iii) for
evaluating our performance relative to our peers, (iv) to
measure our liquidity (before cash capital requirements and working
capital needs) and (v) to provide supplemental information
about certain material non-cash and/or other items that may not
continue at the same level in the future. Adjusted Cash Operating
Costs ($ and per unit) and Adjusted Lease Operating Expense ($ and
per unit) are used by management as a performance measure, and we
believe provides investors valuable information related to our
operating performance and our operating efficiency relative to
other industry participants and comparatively over time across our
historical results. Adjusted General and Administrative
expense, Adjusted Cash General and Administrative expense and
related per unit measures as well as Adjusted Oil and Gas
Expenditures are used by management and investors as additional
information as noted above. Net Debt is used by management for
analysis of the company's financial position and/or liquidity. In
addition, the company believes that these measures are widely used
by professional research analysts and others in the valuation,
comparison and investment recommendations of companies in the oil
and gas exploration and production industry.
Adjusted EPS, EBITDAX, Adjusted EBITDAX, Adjusted Cash Operating
Costs, Adjusted Oil and Gas Expenditures, Adjusted Lease Operating
Expense, Adjusted General and Administrative expense, Adjusted Cash
General and Administrative expense and Net Debt have limitations as
analytical tools and should not be considered in isolation or as a
substitute for analysis of our results as reported under
U.S. GAAP. Adjusted EPS should not be used as an alternative
to earnings (loss) per share or other measure of financial
performance presented in accordance with GAAP. EBITDAX and Adjusted
EBITDAX should not be used as an alternative to net income (loss),
operating income (loss), operating cash flows or other measures of
financial performance or liquidity presented in accordance with
GAAP. Adjusted Cash Operating Costs and Adjusted Lease Operating
Expense should not be used as an alternative to operating expenses,
operating cash flows or other measures of financial performance or
liquidity presented in accordance with GAAP. Adjusted General and
Administrative expense and Adjusted Cash General and Administrative
expense should not be used as an alternative to GAAP general and
administrative expense. Adjusted Oil and Gas Expenditures should
not be used as an alternative to operating, investing and/or
financing cash flows, oil and gas capital expenditures or other
measures of liquidity presented in accordance with GAAP. Our
presentation of Adjusted EPS, EBITDAX, Adjusted EBITDAX, Adjusted
Cash Operating Costs, Adjusted Lease Operating Expense, Adjusted
Oil and Gas Expenditures, Adjusted General and Administrative
expense, Adjusted Cash General and Administrative expense and Net
Debt may not be comparable to similarly titled measures used by
other companies in our industry. Furthermore, our presentation of
Adjusted EPS, EBITDAX, Adjusted EBITDAX, Adjusted Cash Operating
Costs, Adjusted Lease Operating Expense, Adjusted Oil and Gas
Expenditures, Adjusted General and Administrative expense, Adjusted
Cash General and Administrative expense and Net Debt should not be
construed as an inference that our future results will be
unaffected by the items noted above or what we believe to be other
unusual items, or that in the future we may not incur expenses that
are the same as or similar to some of the adjustments in this
presentation.
Cautionary Statement Regarding Forward-Looking
Statements
This release includes certain forward-looking statements and
projections of EP Energy. We have made every reasonable effort to
ensure that the information and assumptions on which these
statements and projections are based are current, reasonable, and
complete. However, a variety of factors could cause actual results
to differ materially from the projections, anticipated results or
other expectations expressed, including, without limitation, the
volatility of and potential for sustained low oil, natural gas and
NGL prices; the supply and demand for oil, natural gas and
NGLs; the company's ability to meet production volume
targets; changes in commodity prices and basis differentials for
oil and natural gas; the uncertainty of estimating proved reserves
and unproved resources; the ability to develop proved undeveloped
reserves; the future level of operating and capital costs; the
availability and cost of financing to fund future exploration and
production operations; the success of drilling programs with regard
to proved undeveloped reserves and unproved resources; the
company's ability to comply with the covenants in various financing
documents; the company's ability to generate sufficient cash flow
to meet its debt obligations and commitments; the possibility that
the company may not be able to continue as a going concern
beginning in May 2020 if it is not
successful in obtaining the necessary additional liquidity and/or
if commodity prices do not appreciably increase; the company's
limited ability to borrow under existing debt agreements to fund
its operations; the company's ability to generate sufficient cash
flow to meet it's debt obligations and commitments; the company's
ability to obtain necessary governmental approvals for proposed
E&P projects and to successfully construct and operate such
projects; actions by the credit rating agencies, including
potential downgrades; credit and performance risk of our lenders,
trading counterparties, customers, vendors, suppliers and third
party operators; general economic and weather conditions in
geographic regions or markets served by the company, or where
operations of the company are located, including the risk of a
global recession and negative impact on oil and natural gas demand;
the uncertainties associated with governmental regulation,
including any potential changes in federal and state tax laws and
regulations; competition; and other factors described in the
company's Securities and Exchange Commission filings. While the
company makes these statements and projections in good faith,
neither the company nor its management can guarantee that
anticipated future results will be achieved. Reference must be made
to those filings for additional important factors that may affect
actual results. EP Energy assumes no obligation to publicly update
or revise any forward-looking statements made herein or any other
forward-looking statements made by EP Energy, whether as a result
of new information, future events, or otherwise.
Contact
Investor and Media
Relations
Jordan Strauss
713-997-6791
jordan.strauss@epenergy.com
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SOURCE EP Energy Corporation