EPL Epl Oil & Gas

Energy Partners, Ltd. ("EPL") (NYSE:EPL) today announced that for the second quarter of 2005, revenues reached $106.2 million, a new record high for the company, while net income available to common stockholders was $18.1 million, or $0.45 per diluted share. The Company also said that its Board had recently approved an increase in the 2005 capital budget to approximately $305 million, a 15% increase over the previous capital budget of $265 million. Compared to the second quarter of 2004, revenues rose 41% from $75.1 million and net income available to common stockholders rose 31% from $13.8 million. Cash flow from operating activities in the most recent quarter was $75.1 million, a 56% increase from $48.0 million in the second quarter last year. Discretionary cash flow, which is cash flow from operating activity before changes in working capital and exploration expense, rose to $77.2 million, a 44% increase from $53.7 million in the same quarter last year (see reconciliation of discretionary cash flow in table). Both cash flow from operations and discretionary cash flow in the most recent quarter were record highs for EPL. The Company said that its record results on a number of metrics reflect success in bringing new production on line in a strong commodity price environment. Offsetting the record levels of revenue and cash flow were higher exploration expense associated with the Company's expanded exploratory program and increased industry operating costs associated with drilling and production activities. Production volumes in the second quarter averaged 27,126 barrels of oil equivalent (Boe) per day, rising 18% from 22,920 Boe per day in the second quarter last year. Natural gas production in the second quarter of 2005 averaged 99.9 million cubic feet (Mmcf) per day and oil averaged 10,469 barrels per day. Compared to the second quarter of 2004, natural gas production in the second quarter of 2005 was up 15% and oil production was up 24%. Price realizations for natural gas in the quarter were $6.88 per thousand cubic feet (Mcf), a 10% increase from $6.26 per Mcf in the same quarter last year. Oil price realizations in the quarter averaged $45.80 per barrel, up 38% from $33.20 per barrel in the second quarter of 2004. All commodity prices are stated net of hedging. EPL maintains a complete schedule of its hedging positions on its website, www.eplweb.com, in the Investor Relations section. Richard A. Bachmann, EPL's Chairman and CEO, commented, "We are pleased to report another strong quarter this morning, with record levels for production, revenue, and cash flow. While exploration expense was higher than in past quarters, more than anything else this reflects the increased scale and pace of our exploratory operations in 2005. With the increased capital budget that our Board recently approved, we expect that we will drill over 50 exploratory wells in 2005, and we are still on track to deliver on our guidance of 25% to 35% production growth over 2004." For the six months ended June 30, 2005, net income available to common stockholders was $37.5 million, or $0.95 per diluted share. This figure represents an 84% increase from net income available to common stockholders in the same period of 2004, which was $20.4 million, or $0.58 per diluted share. Discretionary cash flow for the first two quarters of 2005 totaled $147.4 million, up 55% from $94.8 million in the same period a year ago. (See reconciliation of discretionary cash flow in table.) Cash flow from operating activities in the first six months of 2005 was $144.5 million, more than double the total of $68.7 million in the same period of 2004. For the first six months of 2005, exploration and development expenditures totaled $165.2 million including lease sale acquisition costs. At the most recent Board meeting, the Company's directors approved an increase in the 2005 capital budget to approximately $305 million, excluding acquisitions. This revised capital budget represents a 60% increase over the 2004 capital budget of $190 million, with the most recent increase directed in part to completion of early 2005 exploratory successes as well as increased industry costs. The Company said it expects to fully fund its expanded capital program from internally generated cash flow. EPL has also spent an additional $172.1 million on acquisitions year to date. On June 30, 2005, cash stood at $5.7 million, long term debt totaled $222.2 million, and the Company's debt to capitalization was 38%. EPL also said that it had $78 million of remaining capacity available under its current bank facility. Operational Highlights For the year to date, EPL has drilled a total of 34 exploratory wells, with 20 offshore and 14 onshore in south Louisiana. The Company has had a total of 14 discoveries offshore and 10 onshore, for an overall exploratory success rate of 71%. EPL currently has exploratory tests ongoing at five locations, two onshore and three offshore. The three offshore exploratory wells currently underway are at Eugene Island 4, West Cameron 98, and West Delta 52. Also in the second quarter, EPL was awarded leases on 21 of 22 blocks on which the Company submitted the high bid at the 2005 Central Gulf Lease Sale. Bachmann continued, "With 24 discoveries in 34 exploratory tests year to date, we are ahead of the curve to complete our 2005 exploratory program. We have already drilled more wells in 2005 than we did in all of 2004, and at the same time we are near our historical success rate. Looking ahead to the third and fourth quarters, we are particularly focused on ramping up production as we are scheduled to bring on a number of new wells. While Tropical Storm Cindy and Hurricane Dennis did force us to delay some production in July, our production is near record levels now and we are poised for our results in the second half of 2005 to be even better than the first." Conference Call EPL has scheduled a conference call to review second quarter 2005 results for August 8, 2005 at 8:30 A.M. central time. On the call, management will discuss operational and financial results and also provide an update on guidance for 2005. To participate in the EPL conference call, callers in the United States and Canada can dial (877) 612-5303 and international callers can dial (706) 634-0487. The Conference I.D. for callers is 7879962. The call will be available for replay beginning two hours after the call is completed through midnight of August 13, 2005. For callers in the United States and Canada, the toll-free number for the replay is (800) 642-1687. For international callers the number is (706) 645-9291. The Conference I.D. for all callers to access the replay is 7879962. The conference call will be webcast live as well as for on-demand listening at the Company's web site, www.eplweb.com. Listeners may access the call through the "Conference Calls" link in the Investor Relations section of the site. The call will also be available through the CCBN Investor Network. Founded in 1998, EPL is an independent oil and natural gas exploration and production company based in New Orleans, Louisiana. The Company's operations are focused along the U. S. Gulf Coast, both onshore in south Louisiana and offshore in the shallow to moderate depth waters of the Gulf of Mexico Shelf. Any statements made in this news release, other than those of historical fact, about an action, event or development, which the Company hopes, believes or anticipates may or will occur in the future, are "forward-looking statements" under U. S. securities laws. Such statements are subject to various assumptions, risks and uncertainties, which are specifically described in our Annual Report on Form 10-K for fiscal year ended December 31, 2004 filed with the Securities and Exchange Commission. Forward-looking statements are not guarantees of future performance or an assurance that the Company's current assumptions and projections are valid. Actual results may differ materially from those projected. -0- *T ENERGY PARTNERS, LTD. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited) Three Months Ended Six Months Ended June 30, June 30, ------------------ ------------------ 2005 2004 2005 2004 -------- -------- -------- -------- Revenues: Oil and natural gas $106,230 $ 74,977 $203,683 $138,396 Other (74) 90 (49) 143 -------- -------- -------- -------- 106,156 75,067 203,634 138,539 -------- -------- -------- -------- Costs and expenses: Lease operating 14,114 9,720 26,557 19,359 Transportation expense 345 82 505 217 Taxes, other than on earnings 2,658 2,078 5,422 4,320 Exploration expenditures and dry hole costs 18,872 7,467 29,627 16,932 Depreciation, depletion and amortization 27,639 22,215 53,152 40,952 General and administrative: Stock-based compensation 1,874 662 3,757 1,519 Other general and administrative 8,288 6,434 16,305 13,750 -------- -------- -------- -------- Total costs and expenses 73,790 48,658 135,325 97,049 -------- -------- -------- -------- Income from operations 32,366 26,409 68,309 41,490 -------- -------- -------- -------- Other income (expense): Interest income 110 221 295 463 Interest expense (4,335) (3,586) (8,383) (7,160) -------- -------- -------- -------- (4,225) (3,365) (8,088) (6,697) -------- -------- -------- -------- Income before income taxes 28,141 23,044 60,221 34,793 Income taxes (10,091) (8,388) (21,750) (12,691) -------- -------- -------- -------- Net income 18,050 14,656 38,471 22,102 Less dividends earned on preferred stock and accretion of discount - (821) (944) (1,750) -------- -------- -------- -------- Net income available to common stockholders $ 18,050 $ 13,835 $ 37,527 $ 20,352 ======== ======== ======== ======== Basic earnings per share $ 0.48 $ 0.42 $ 1.03 $ 0.62 ======== ======== ======== ======== Diluted earnings per share $ 0.45 $ 0.38 $ 0.95 $ 0.58 ======== ======== ======== ======== Weighted average common shares used in computing earnings per share: Basic 37,558 32,913 36,299 32,667 Incremental common shares 2,968 5,437 4,121 5,461 -------- -------- -------- -------- Diluted 40,526 38,350 40,420 38,128 ======== ======== ======== ======== ENERGY PARTNERS, LTD. CONSOLIDATED STATEMENTS OF NET CASH PROVIDED BY OPERATING ACTIVITIES (In thousands) (Unaudited) Three Months Ended Six Months Ended June 30, June 30, -------- --------- -------- --------- 2005 2004 2005 2004 -------- -------- -------- -------- Cash flows from operating activities: Net income $ 18,050 $ 14,656 $ 38,471 $ 22,102 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion and amortization 27,639 22,215 53,152 40,952 Loss on disposition of oil and natural gas assets - - 92 - Non-cash compensation 1,924 662 3,807 1,568 Deferred income taxes 10,091 8,385 21,400 12,688 Exploration expenditures 16,604 5,462 21,332 13,272 Amortization of deferred financing costs 250 228 497 457 Other 379 51 379 104 Changes in operating assets and liabilities: Trade accounts receivable (5,737) (6,212) (8,420) (15,653) Other receivables (4,819) - (4,900) (4,857) Prepaid expenses (5,224) (3,016) (3,942) (3,423) Other assets (310) (576) (1,602) (489) Accounts payable and accrued expenses 16,246 6,509 24,398 2,524 Other liabilities (3) (340) (131) (587) -------- -------- -------- -------- Net cash provided by operating activities $ 75,090 $ 48,024 $144,533 $ 68,658 ======== ======== ======== ======== Reconciliation of discretionary cash flow: Net cash provided by operating activities 75,090 48,024 144,533 68,658 Changes in working capital (153) 3,635 (5,403) 22,485 Non-cash exploration expenditures (16,604) (5,462) (21,332) (13,272) Total exploration expenditures 18,872 7,467 29,627 16,932 -------- -------- -------- -------- Discretionary cash flow $ 77,205 $ 53,664 $147,425 $ 94,803 ======== ======== ======== ======== *T The table above reconciles discretionary cash flow to net cash provided by operating activities. Discretionary cash flow is defined as cash flow from operations before changes in working capital and exploration expenditures. Discretionary cash flow is widely accepted as a financial indicator of an oil and natural gas company's ability to generate cash which is used to internally fund exploration and development activities, pay dividends and service debt. Discretionary cash flow is presented based on management's belief that this non-GAAP financial measure is useful information to investors because it is widely used by professional research analysts in the valuation, comparison, rating and investment recommendations of companies within the oil and natural gas exploration and production industry. Many investors use the published research of these analysts in making their investment decisions. Discretionary cash flow is not a measure of financial performance under GAAP and should not be considered as an alternative to cash flows from operating activities, as defined by GAAP, or as a measure of liquidity, or an alternative to net income. Investors should be cautioned that discretionary cash flow as reported by us may not be comparable in all instances to discretionary cash flow as reported by other companies. -0- *T ENERGY PARTNERS, LTD. SELECTED PRODUCTION, PRICING AND OPERATIONAL STATISTICS (Unaudited) Three Months Ended Six Months Ended June 30, June 30, -------- --------- -------- --------- 2005 2004 2005 2004 -------- -------- -------- -------- PRODUCTION AND PRICING ---------------------- Net Production (per day): Oil (Bbls) 10,469 8,411 10,225 8,200 Natural gas (Mcf) 99,941 87,054 98,067 82,094 Total (Boe) 27,126 22,920 26,570 21,882 Oil and Natural Gas Revenues (in thousands): Oil $ 43,637 $ 25,412 $ 84,656 $ 48,583 Natural gas 62,593 49,565 119,027 89,813 Total 106,230 74,977 203,683 138,396 Average Sales Prices (1): Oil (per Bbl) $ 45.80 $ 33.20 $ 45.74 $ 32.55 Natural gas (per Mcf) 6.88 6.26 6.71 6.01 Average (per Boe) 43.03 35.95 42.35 34.75 OPERATIONAL STATISTICS ---------------------- Average Costs (per Boe): Lease operating expense $ 5.72 $ 4.66 $ 5.52 $ 4.86 Taxes, other than on earnings 1.08 1.00 1.13 1.08 Depreciation, depletion and amortization 11.20 10.65 11.05 10.28 (1) Prices are net of hedging transactions which had the following impact: -- Reduced natural gas price realizations by none and $0.01 per Mcf for the second quarter of 2005 and 2004, respectively; and -- Reduced oil price realizations by $1.74 and $3.40 per barrel for the second quarter of 2005 and 2004, respectively. -- Reduced natural gas price realizations by none and $0.04 per Mcf for the first half of 2005 and 2004, respectively; and -- Reduced oil price realizations by $1.46 and $2.54 per barrel for the first half of 2005 and 2004, respectively. ENERGY PARTNERS, LTD. CONSOLIDATED BALANCE SHEETS (In thousands, except share data) June 30, December 31, 2005 2004 ------------ ------------ (Unaudited) ASSETS ------ Current assets: Cash and cash equivalents $ 5,694 $ 93,537 Trade accounts receivable 67,761 59,341 Other receivables 10,500 5,600 Deferred tax asset 3,203 1,906 Prepaid expenses 6,227 2,285 ------------ ------------ Total current assets 93,385 162,669 Property and equipment, at cost under the successful efforts method of accounting for oil and natural gas properties 1,082,137 769,331 Less accumulated depreciation, depletion and amortization (356,710) (304,997) ------------ ------------ Net property and equipment 725,427 464,334 Other assets 13,920 15,970 Deferred financing costs -- net of accumulated amortization 4,584 4,705 ------------ ------------ $ 837,316 $ 647,678 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ Current liabilities: Accounts payable $ 38,122 $ 21,255 Accrued expenses 86,667 59,387 Fair value of commodity derivative instruments 6,771 1,749 Current maturities of long-term debt 164 108 ------------ ------------ Total current liabilities 131,724 82,499 Long-term debt 222,000 150,109 Deferred income taxes 72,132 53,686 Asset retirement obligation 49,631 45,064 Other 5,135 1,271 ------------ ------------ 480,622 332,629 Stockholders' equity: Preferred stock, $1 par value, authorized 1,700,000 shares; issued and outstanding: 2005 - no shares; 2004 - 344,399 shares. Aggregate liquidation value: 2004 - $34,440 - 33,504 Common stock, par value $0.01 per share. Authorized 50,000,000 shares; issued and outstanding: 2005 - 41,095,780 shares; 2004 - 36,618,084 shares 412 367 Additional paid-in capital 339,736 296,460 Accumulated other comprehensive loss (6,764) (1,119) Retained earnings 80,742 43,215 Treasury stock, at cost. 2005 -- 3,474,208 shares; 2004 -- 3,480,441 shares (57,432) (57,378) ------------ ------------ Total stockholders' equity 356,694 315,049 Commitments and contingencies ------------ ------------ $ 837,316 $ 647,678 ============ ============ *T