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EX-99.1 - EX-99.1 - EP Energy LLCa12-27302_1ex99d1.htm

Exhibit 99.2

 

EP ENERGY LLC

Financial and Operational Reporting Package

Third Quarter 2012

 

Table of Contents

 

 

 

Page

 

 

 

Notes to Investors

 

1

 

 

 

Operating Results

 

 

Financial Highlights

 

2

Statements of Income

 

3

Average Daily Volumes, Realized Prices and Adjusted Cash Operating Costs Per-Unit

 

4

Derivative Schedule

 

5

 

 

 

Non-GAAP Reconciliations

 

 

Combined Earnings

 

6

Adjusted EBITDAX

 

7

Cash Operating Costs and Adjusted Cash Operating Costs

 

8

 

 

 

Glossary

 

9

 



 

NOTES TO INVESTORS

 

Cautionary Statement

 

This Financial and Operational Reporting Package (“Package”) includes summarized financial and other information about EP Energy LLC (“EP Energy” or the “Company”). The information in this Package is intended to provide highlights and should not be used as a substitute for financial information which is stated within the EP Energy financial statements filed with the SEC as an exhibit to our Current Report on Form 8-K dated November 16, 2012. Readers should refer to these EP Energy financial statements. In addition, the glossary contains certain definitions of measures used in this Package and in other presentations we provide. These definitions may not be the same as definitions used by other companies. This Package may contain information that is based on estimates. The Company has made every reasonable effort to ensure that the information and assumptions on which these estimates are based are current, reasonable, and complete. Factors that could cause actual results to differ materially from the estimates in this Package are changes in unaudited and/or unreviewed financial information and the effects of any changes in accounting rules and guidance, as well as other factors discussed in EP Energy’s financial statements. The financial data and statistics in this Package for Third Quarter 2012 reflect the operating results of EP Energy through September 30, 2012. Independent auditors have not audited any of the financials and operating statements. The Company assumes no obligation to publicly update or revise any information contained herein as a result of new information, future events, or otherwise.

 

Certain of the production information in this Package includes the production attributable to EP Energy’s 48.8 percent interest in Four Star Oil & Gas Company (“Four Star”). EP Energy’s Supplemental Oil and Gas disclosures, which are included in EP Energy’s prospectus dated October 22, 2012 (the “Prospectus”), which forms a part of the Company’s Registration Statement on Form S-4 (Registration No. 333-183815), reflect its proportionate share of the proved reserves of Four Star separate from its consolidated proved reserves. In addition, the proved reserves attributable to its proportionate share of Four Star represent estimates prepared by EP Energy and not those of Four Star. The Prospectus is available at epenergy.com.

 

Non-GAAP Financial Measures

 

The SEC’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. The required presentations and reconciliations are included in the body of this Package.

 

EP Energy believes that the non-GAAP financial measures described in the glossary are useful to investors because these measurements are used by many companies in the industry as a measure of operating and financial performance and are commonly employed by financial analysts and others to evaluate the operating and financial performance of the Company and to compare it with the performance of other companies within the industry. These non-GAAP financial measures may not be comparable to similarly titled measures used by other companies and should not be used as a substitute for net income (loss), operating cash flows or other measures of financial performance presented in accordance with GAAP.

 

1



 

EP ENERGY LLC

FINANCIAL HIGHLIGHTS

(unaudited)

 

 

 

2012

 

2011

 

Year-to-Date

 

 

 

Q1

 

Q2(1)

 

Q3

 

Q1

 

Q2

 

Q3

 

Q4

 

2012(1)

 

2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) ($ in millions)

 

15

 

13

 

(196

)

(18

)

170

 

61

 

49

 

(168

)

213

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDAX ($ in millions)

 

343

 

312

 

354

 

317

 

343

 

350

 

381

 

1,009

 

1,010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Cash Operating Costs ($/Mcfe)

 

1.74

 

4.19

 

2.23

 

1.85

 

1.75

 

1.82

 

1.76

 

2.72

 

1.80

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted Cash Operating Costs ($/Mcfe)

 

1.70

 

1.62

 

1.76

 

1.69

 

1.67

 

1.75

 

1.69

 

1.69

 

1.70

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation, depletion and amortization rate ($/Mcfe)

 

2.59

 

1.98

 

1.43

 

1.96

 

2.11

 

2.22

 

2.32

 

2.00

 

2.10

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equivalent Sales Volumes (MMcfe/d)(2)

 

908

 

905

 

865

 

821

 

823

 

827

 

880

 

892

 

823

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Oil and Condensate Sales Volumes (MBbls/d)(2)

 

23.4

 

23.6

 

28.1

 

14.1

 

15.6

 

17.2

 

22.3

 

25.1

 

15.7

 

 


(1)         Represents non-GAAP combined earnings for periods before and after the acquisition of EP Energy.  See reconciliation of combined earnings on page 6.

(2)         Includes our proportionate share of Four Star production volumes.

 

2



 

EP ENERGY LLC

STATEMENTS OF INCOME

($ in millions)

(unaudited)

 

 

 

2012

 

2011

 

Year-to-Date

 

 

 

Q1

 

Q2(1)

 

Q3

 

Q1

 

Q2

 

Q3

 

Q4

 

2012(1)

 

2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Oil and condensate

 

$

209

 

$

190

 

$

230

 

$

103

 

$

133

 

$

131

 

$

185

 

$

629

 

$

367

 

Natural gas

 

182

 

141

 

162

 

240

 

257

 

256

 

220

 

485

 

753

 

NGL

 

17

 

17

 

18

 

15

 

13

 

15

 

14

 

52

 

43

 

Financial derivatives

 

76

 

346

 

(181

)

(108

)

132

 

251

 

10

 

241

 

275

 

Total operating revenues

 

484

 

694

 

229

 

250

 

535

 

653

 

429

 

1,407

 

1,438

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Transportation costs

 

25

 

34

 

29

 

20

 

18

 

20

 

27

 

88

 

58

 

Lease operating expense

 

62

 

55

 

55

 

51

 

49

 

61

 

57

 

172

 

161

 

General and administrative expenses

 

44

 

240

 

85

 

50

 

48

 

46

 

56

 

369

 

144

 

Depreciation, depletion and amortization

 

201

 

152

 

107

 

134

 

146

 

157

 

175

 

460

 

437

 

Impairments and ceiling test charges (2)

 

62

 

1

 

 

 

 

158

 

 

63

 

158

 

Exploration expense (2)

 

 

6

 

21

 

 

 

 

 

27

 

 

Taxes other than income

 

28

 

29

 

27

 

25

 

24

 

21

 

21

 

84

 

70

 

Total operating expenses

 

422

 

517

 

324

 

280

 

285

 

463

 

336

 

1,263

 

1,028

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss)

 

62

 

177

 

(95

)

(30

)

250

 

190

 

93

 

144

 

410

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Loss) earnings from unconsolidated affiliates

 

(3

)

(3

)

(2

)

(2

)

1

 

(3

)

(3

)

(8

)

(4

)

Other income (expense)

 

1

 

(3

)

 

1

 

(1

)

(4

)

2

 

(2

)

(4

)

Loss on extinguishment of debt

 

 

 

(14

)

 

 

 

 

(14

)

 

Interest expense

 

(4

)

(63

)

(84

)

(3

)

(3

)

(4

)

(2

)

(151

)

(10

)

Income before income taxes

 

56

 

108

 

(195

)

(34

)

247

 

179

 

90

 

(31

)

392

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax expense (benefit)

 

41

 

95

 

1

 

(16

)

77

 

118

 

41

 

137

 

179

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

15

 

$

13

 

$

(196

)

$

(18

)

$

170

 

$

61

 

$

49

 

$

(168

)

$

213

 

 


(1)         Represents non-GAAP combined earnings for periods before and after the acquisition of EP Energy.  See reconciliation of combined earnings on page 6.

(2)         Reflects the use of the successful efforts method of accounting for oil and gas properties following the acquisition of EP Energy and the use of the full cost method of accounting prior to the acquisition.

 

3



 

EP ENERGY LLC

AVERAGE DAILY VOLUMES, REALIZED PRICES AND COSTS PER UNIT

 

 

 

 

2012

 

2011

 

Year-to-Date

 

 

 

Q1

 

Q2

 

Q3

 

Q1

 

Q2

 

Q3

 

Q4

 

2012

 

2011

 

Oil and Condensate Sales Volumes (MBbls/d)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Central

 

8.9

 

8.3

 

8.6

 

8.7

 

8.6

 

8.8

 

8.0

 

8.6

 

8.7

 

Eagle Ford

 

9.8

 

10.9

 

15.7

 

2.0

 

2.5

 

5.3

 

8.8

 

12.1

 

3.3

 

Southern

 

2.9

 

2.7

 

2.1

 

2.3

 

2.2

 

2.1

 

2.8

 

2.6

 

2.2

 

Brazil

 

1.0

 

1.0

 

1.0

 

0.2

 

1.5

 

0.2

 

1.9

 

1.0

 

0.7

 

Total Consolidated

 

22.6

 

22.9

 

27.4

 

13.2

 

14.8

 

16.4

 

21.5

 

24.3

 

14.9

 

Unconsolidated Affiliate (Four Star)

 

0.8

 

0.7

 

0.7

 

0.9

 

0.8

 

0.8

 

0.8

 

0.8

 

0.8

 

Total Combined

 

23.4

 

23.6

 

28.1

 

14.1

 

15.6

 

17.2

 

22.3

 

25.1

 

15.7

 

Natural Gas Sales Volumes (MMcf/d)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Central

 

549

 

547

 

505

 

509

 

526

 

516

 

548

 

534

 

517

 

Eagle Ford

 

16

 

19

 

25

 

4

 

5

 

12

 

13

 

20

 

7

 

Southern

 

93

 

88

 

57

 

117

 

98

 

94

 

87

 

79

 

103

 

Brazil

 

30

 

29

 

26

 

29

 

28

 

30

 

27

 

28

 

29

 

Total Consolidated

 

688

 

683

 

613

 

659

 

657

 

652

 

675

 

661

 

656

 

Unconsolidated Affiliate (Four Star)

 

43

 

43

 

41

 

47

 

47

 

45

 

45

 

43

 

46

 

Total Combined

 

731

 

726

 

654

 

706

 

704

 

697

 

720

 

704

 

702

 

NGL Sales Volumes (MBbls/d)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Central

 

0.7

 

0.6

 

0.5

 

0.1

 

0.1

 

0.1

 

 

0.6

 

0.1

 

Eagle Ford

 

1.5

 

2.2

 

3.2

 

0.4

 

0.3

 

0.6

 

0.9

 

2.3

 

0.5

 

Southern

 

2.4

 

2.0

 

2.0

 

2.8

 

2.3

 

2.2

 

2.0

 

2.2

 

2.4

 

Total Consolidated

 

4.6

 

4.8

 

5.7

 

3.3

 

2.7

 

2.9

 

2.9

 

5.1

 

3.0

 

Unconsolidated Affiliate (Four Star)

 

1.4

 

1.3

 

1.3

 

1.7

 

1.4

 

1.5

 

1.5

 

1.3

 

1.5

 

Total Combined

 

6.0

 

6.1

 

7.0

 

5.0

 

4.1

 

4.4

 

4.4

 

6.4

 

4.5

 

Equivalent Sales Volumes (MMcfe/d)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Central

 

606

 

601

 

560

 

561

 

578

 

569

 

596

 

589

 

569

 

Eagle Ford

 

84

 

98

 

138

 

19

 

22

 

48

 

71

 

107

 

29

 

Southern

 

125

 

116

 

81

 

147

 

125

 

119

 

116

 

107

 

131

 

Brazil

 

36

 

35

 

32

 

31

 

37

 

31

 

38

 

34

 

33

 

Total Consolidated

 

851

 

850

 

811

 

758

 

762

 

767

 

821

 

837

 

762

 

Unconsolidated Affiliate (Four Star)

 

57

 

55

 

54

 

63

 

61

 

60

 

59

 

55

 

61

 

Total Combined

 

908

 

905

 

865

 

821

 

823

 

827

 

880

 

892

 

823

 

Consolidated average realized prices

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Oil and condensate price on physical sales ($/Bbl)

 

$

101.81

 

$

90.92

 

$

91.21

 

$

86.27

 

$

98.46

 

$

86.73

 

$

93.24

 

$

94.39

 

$

90.50

 

Oil and condensate, including financial derivative cash settlements ($/Bbl) (1)

 

$

100.16

 

$

95.70

 

$

98.42

 

$

85.69

 

$

91.30

 

$

88.95

 

$

93.23

 

$

98.11

 

$

88.77

 

Natural gas price on physical sales ($/Mcf)

 

$

2.90

 

$

2.28

 

$

2.87

 

$

4.06

 

$

4.29

 

$

4.27

 

$

3.54

 

$

2.68

 

$

4.21

 

Natural gas, including financial derivative cash settlements ($/Mcf) (1)(2)

 

$

4.27

 

$

4.12

 

$

4.37

 

$

5.44

 

$

5.44

 

$

5.60

 

$

5.29

 

$

4.25

 

$

5.49

 

NGL price on physical sales ($/Bbl)

 

$

40.96

 

$

38.87

 

$

34.57

 

$

50.37

 

$

54.85

 

$

56.03

 

$

53.23

 

$

37.88

 

$

53.59

 

Consolidated average transportation costs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Oil and condensate ($/Bbl)

 

$

1.11

 

$

0.72

 

$

2.61

 

$

0.06

 

$

0.06

 

$

0.07

 

$

0.05

 

$

1.75

 

$

0.06

 

Natural gas ($/Mcf)

 

$

0.33

 

$

0.44

 

$

0.36

 

$

0.31

 

$

0.28

 

$

0.32

 

$

0.40

 

$

0.38

 

$

0.30

 

NGL ($/Bbl)

 

$

5.47

 

$

7.62

 

$

4.96

 

$

5.01

 

$

4.73

 

$

3.04

 

$

2.47

 

$

5.97

 

$

4.28

 

Consolidated average cash operating costs and adjusted cash operating costs ($/Mcfe)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lease operating expenses

 

$

0.81

 

$

0.70

 

$

0.74

 

$

0.74

 

$

0.71

 

$

0.87

 

$

0.74

 

$

0.75

 

$

0.77

 

Production taxes

 

0.32

 

0.33

 

0.34

 

0.32

 

0.31

 

0.27

 

0.24

 

0.33

 

0.30

 

General and administrative expenses

 

0.57

 

3.11

 

1.13

 

0.74

 

0.69

 

0.65

 

0.75

 

1.61

 

0.69

 

Taxes other than production and income taxes

 

0.04

 

0.05

 

0.02

 

0.05

 

0.04

 

0.03

 

0.03

 

0.03

 

0.04

 

Total cash operating costs

 

$

1.74

 

$

4.19

 

$

2.23

 

$

1.85

 

$

1.75

 

$

1.82

 

$

1.76

 

$

2.72

 

$

1.80

 

Transition/restructuring costs and non-cash equity based compensation expense (3)

 

(0.04

)

(2.57

)

(0.47

)

(0.16

)

(0.08

)

(0.07

)

(0.07

)

(1.03

)

(0.10

)

Total adjusted cash operating costs

 

$

1.70

 

$

1.62

 

$

1.76

 

$

1.69

 

$

1.67

 

$

1.75

 

$

1.69

 

$

1.69

 

$

1.70

 

Consolidated depreciation, depletion and amortization ($/Mcfe)

 

$

2.59

 

$

1.98

 

$

1.43

 

$

1.96

 

$

2.11

 

$

2.22

 

$

2.32

 

$

2.00

 

$

2.10

 

 


(1)         Amounts in the first, second and third quarter of 2012 include approximately $86 million, $116  million and $84  million for cash settlements related to natural gas contracts and approximately $(4) million, $10  million and $18 million for cash settlements related to crude oil contracts.  Amounts in the first, second, third and fourth quarters of 2011 include approximately $82 million, $68 million, $80 million and $108 million for cash settlements related to natural gas contracts and approximately $(1) million, $(9) million, $3 million and less than $(1) million in the first, second, third and fourth quarters for cash settlements related to crude oil contracts.

(2)         Cash proceeds on settlements do not reflect approximately $6 million for each period presented of cash option premiums paid in 2009 and 2010 for financial derivatives settled in each quarter of 2011.

(3)         A detail of these expenses is included in the reconciliation of Adjusted EBITDAX on page 7.

 

4



 

EP ENERGY LLC

HEDGE POSITION AS OF SEPTEMBER 30, 2012

 

 

 

2012

 

2013

 

2014

 

2015

 

Natural Gas

 

Notional
Volume
(TBtu)

 

Average
Hedge
Price

 

Notional
Volume
(TBtu)

 

Average
Hedge
Price

 

Notional
Volume
(TBtu)

 

Average
Hedge
Price

 

Notional
Volume
(TBtu)

 

Average
Hedge
Price

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed Price

 

51.4

 

$

4.47

 

152.4

 

$

3.55

 

74.3

 

$

3.97

 

23.7

 

$

4.16

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2012

 

2013

 

2014

 

2015

 

Crude Oil

 

Notional
Volume
(MMBbls)

 

Average
Hedge
Price

 

Notional
Volume
(MMBbls)

 

Average
Hedge
Price

 

Notional
Volume
(MMBbls)

 

Average
Hedge
Price

 

Notional
Volume
(MMBbls)

 

Average
Hedge
Price

 

Economic

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed Price

 

0.83

 

$

105.12

 

8.95

 

$

103.52

 

8.76

 

$

98.64

 

5.50

 

$

95.42

 

Collars - Ceiling

 

0.37

 

$

95.00

 

 

 

1.10

 

$

100.00

 

1.10

 

$

100.00

 

Three-Way Collars - Ceiling

 

1.45

 

$

114.16

 

5.85

 

$

106.20

 

2.92

 

$

103.76

 

 

 

Three-Way Collars - Floor(1)

 

1.45

 

$

92.54

 

5.85

 

$

92.58

 

2.92

 

$

95.00

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Avg Ceiling

 

2.64

 

$

108.66

 

14.80

 

$

104.58

 

12.78

 

$

99.93

 

6.60

 

$

96.18

 

Avg Floor

 

2.28

 

$

97.12

 

14.80

 

$

99.20

 

11.68

 

$

97.73

 

5.50

 

$

95.42

 

 


Note:  US Domestic positions are as of September 30, 2012 (Contract Months: October 2012 - Forward).

(1)         If market prices settle at or below $67.54, $71.25 and $75.00 for the years 2012, 2013 and 2014, respectively, our three way collars-floors effectively “lock-in” a cash settlement of the market price plus $25.00 per Bbl, $21.33 per Bbl and $20.00 per Bbl for 2012, 2013 and 2014, respectively.

 

5


 


 

EP ENERGY LLC

RECONCILIATION OF COMBINED EARNINGS

($ in millions)

(unaudited)

 

 

 

Q2 2012

 

YTD 2012

 

 

 

Successor

 

Predecessor

 

 

 

Successor

 

Predecessor

 

 

 

 

 

Quarter
ended June
30, 2012

 

April 1 to May
24, 2012

 

Combined(1)

 

March 23
(inception) to
September 30,
2012

 

January 1 to
May 24, 2012

 

Combined(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

Oil and condensate

 

$

77

 

$

113

 

$

190

 

$

307

 

$

322

 

$

629

 

Natural gas

 

61

 

80

 

141

 

223

 

262

 

485

 

NGL

 

5

 

12

 

17

 

23

 

29

 

52

 

Financial derivatives

 

57

 

289

 

346

 

(124

)

365

 

241

 

Total operating revenues

 

200

 

494

 

694

 

429

 

978

 

1,407

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

Transportation costs

 

14

 

20

 

34

 

43

 

45

 

88

 

Lease operating expense

 

21

 

34

 

55

 

76

 

96

 

172

 

General and administrative expenses

 

209

 

31

 

240

 

294

 

75

 

369

 

Depreciation, depletion and amortization

 

34

 

118

 

152

 

141

 

319

 

460

 

Impairments and ceiling test charges (2)

 

1

 

 

1

 

1

 

62

 

63

 

Exploration expense (2)

 

6

 

 

6

 

27

 

 

27

 

Taxes other than income

 

12

 

17

 

29

 

39

 

45

 

84

 

Total operating expenses

 

297

 

220

 

517

 

621

 

642

 

1,263

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating (loss) income

 

(97

)

274

 

177

 

(192

)

336

 

144

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from unconsolidated affiliates

 

(1

)

(2

)

(3

)

(3

)

(5

)

(8

)

Other income (expense)

 

1

 

(4

)

(3

)

1

 

(3

)

(2

)

Loss on extinguishment of debt

 

 

 

 

(14

)

 

(14

)

Interest expense

 

(53

)

(10

)

(63

)

(137

)

(14

)

(151

)

(Loss) income before income taxes

 

(150

)

258

 

108

 

(345

)

314

 

(31

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax expense

 

 

95

 

95

 

1

 

136

 

137

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income

 

$

(150

)

$

163

 

$

13

 

$

(346

)

$

178

 

$

(168

)

 


(1)         Represents non-GAAP combined earnings for periods before and after the acquisition of EP Energy.

(2)         Reflects the use of the successful efforts method of accounting for oil and gas properties following the acquisition of EP Energy and the use of the full cost method of accounting prior to the acquisition.

 

6


 


 

EP ENERGY LLC

RECONCILIATION OF ADJUSTED EBITDAX

($ in millions)

(unaudited)

 

 

 

2012

 

2011

 

Year-to-Date

 

 

 

Q1

 

Q2(1)

 

Q3

 

Q1

 

Q2

 

Q3

 

Q4

 

2012(1)

 

2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income

 

$

15

 

$

13

 

$

(196

)

$

(18

)

$

170

 

$

61

 

$

49

 

$

(168

)

$

213

 

Depreciation, depletion and amortization

 

201

 

152

 

107

 

134

 

146

 

157

 

175

 

460

 

437

 

Income tax expense (benefit)

 

41

 

95

 

1

 

(16

)

77

 

118

 

41

 

137

 

179

 

Interest expense, net of capitalized interest

 

4

 

63

 

84

 

3

 

3

 

4

 

2

 

151

 

10

 

Reported EBITDA

 

261

 

323

 

(4

)

103

 

396

 

340

 

267

 

580

 

839

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mark to market (gains) losses on financial derivatives

 

(76

)

(346

)

181

 

109

 

(132

)

(251

)

(10

)

(241

)

(274

)

Cash settlement proceeds from financial derivatives

 

82

 

126

 

102

 

81

 

59

 

83

 

108

 

310

 

223

 

Impairments and ceiling test charges

 

62

 

1

 

 

 

 

158

 

 

63

 

158

 

Dividends from unconsolidated affiliates

 

8

 

 

2

 

11

 

15

 

12

 

8

 

10

 

38

 

Loss (income) from unconsolidated affiliates

 

3

 

3

 

2

 

2

 

(1

)

3

 

3

 

8

 

4

 

Non-cash equity-based compensation expense

 

3

 

13

 

5

 

5

 

6

 

5

 

5

 

21

 

16

 

Transition and restructuring costs

 

 

183

 

25

 

6

 

 

 

 

208

 

6

 

Loss on extinguishment of debt

 

 

 

14

 

 

 

 

 

14

 

 

Advisory fee

 

 

3

 

6

 

 

 

 

 

9

 

 

Exploration expense

 

 

6

 

21

 

 

 

 

 

27

 

 

Adjusted EBITDAX (2)

 

$

343

 

$

312

 

$

354

 

$

317

 

$

343

 

$

350

 

$

381

 

$

1,009

 

$

1,010

 

 


(1)         Represents non-GAAP combined earnings for periods before and after the acquisition of EP Energy.

(2)         Amounts in the first, second and third quarters of 2012 include approximately $18 million, $13 million and $3 million of net EBITDA related to business divestitures.  Amounts in the first, second, third and fourth quarters of 2011 include approximately $45 million, $43 million, $29 million and $19 million of net EBITDA related to business divestitures.

 

7



 

EP ENERGY LLC

RECONCILIATION OF CASH OPERATING COSTS AND ADJUSTED CASH OPERATING COSTS

(unaudited)

 

 

 

Q1

 

Q2

 

Q3

 

Q4

 

Nine Months Ended

 

 

 

Total

 

Per-Unit

 

Total

 

Per-Unit

 

Total

 

Per-Unit

 

Total

 

Per-Unit

 

Total

 

Per-Unit

 

 

 

($ MM)

 

($/Mcfe)

 

($ MM)

 

($/Mcfe)

 

($ MM)

 

($/Mcfe)

 

($ MM)

 

($/Mcfe)

 

($ MM)

 

($/Mcfe)

 

2012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total operating expenses

 

$

422

 

$

5.45

 

$

517

 

$

6.69

 

$

324

 

$

4.34

 

 

 

 

 

$

1,263

 

$

5.50

 

Depreciation, depletion and amortization

 

(201

)

(2.59

)

(152

)

(1.98

)

(107

)

(1.43

)

 

 

 

 

(460

)

(2.00

)

Transportation costs

 

(25

)

(0.32

)

(34

)

(0.43

)

(29

)

(0.40

)

 

 

 

 

(88

)

(0.38

)

Exploration expense

 

 

 

(6

)

(0.08

)

(21

)

(0.28

)

 

 

 

 

(27

)

(0.12

)

Ceiling test charges and Impairments

 

(62

)

(0.80

)

(1

)

(0.01

)

 

 

 

 

 

 

(63

)

(0.28

)

Total cash operating costs and per-unit cash costs(1)

 

$

134

 

$

1.74

 

$

324

 

$

4.19

 

$

167

 

$

2.23

 

 

 

 

 

$

625

 

$

2.72

 

Transition/restructuring costs and non-cash equity based compensation expense (2) 

 

(3

)

(0.04

)

(199

)

(2.57

)

(36

)

(0.47

)

 

 

 

 

(238

)

(1.03

)

Total adjusted cash operating costs and per-unit adjusted cash costs(1)

 

$

131

 

$

1.70

 

$

125

 

$

1.62

 

$

131

 

$

1.76

 

 

 

$

 

$

387

 

$

1.69

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total equivalent volumes (MMcfe) (1)

 

 

 

77,465

 

 

 

77,353

 

 

 

74,620

 

 

 

 

 

 

 

229,438

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total operating expenses

 

$

280

 

$

4.11

 

$

285

 

$

4.12

 

$

463

 

$

6.56

 

$

336

 

$

4.45

 

$

1,028

 

$

4.94

 

Depreciation, depletion and amortization

 

(134

)

(1.96

)

(146

)

(2.11

)

(157

)

(2.22

)

(175

)

(2.32

)

(437

)

(2.10

)

Transportation costs

 

(20

)

(0.30

)

(18

)

(0.26

)

(20

)

(0.28

)

(27

)

(0.37

)

(58

)

(0.28

)

Ceiling test charges and Impairments

 

 

 

 

 

(158

)

(2.24

)

 

 

(158

)

(0.76

)

Total cash operating costs and per-unit cash costs(1)

 

$

126

 

$

1.85

 

$

121

 

$

1.75

 

$

128

 

$

1.82

 

$

134

 

$

1.76

 

$

375

 

$

1.80

 

Transition/restructuring charges and non-cash equity based compensation expense (2) 

 

(11

)

(0.16

)

(6

)

(0.08

)

(5

)

(0.07

)

(5

)

(0.07

)

(22

)

(0.10

)

Total adjusted cash operating costs and per-unit adjusted cash costs(1)

 

$

115

 

$

1.69

 

$

115

 

$

1.67

 

$

123

 

$

1.75

 

$

129

 

$

1.69

 

$

353

 

$

1.70

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total equivalent volumes (MMcfe) (1)

 

 

 

68,187

 

 

 

69,356

 

 

 

70,598

 

 

 

75,555

 

 

 

208,141

 

 


(1)         Excludes volumes and costs associated with equity investment in Four Star

(2)         Total amount in Q2 2012 includes $183 million for transition and restructuring costs associated with the acquisition of EP Energy, other transition/restructuring costs included are legal, severance, management fees and IT charges.

 

8



 

GLOSSARY

 

This contains a glossary of terms used in this Package as well as those used in other investor presentations and press releases. They are for reference only and may not be comparable to similarly titled measures used at other companies.

 

NON-GAAP FINANCIAL MEASURES

 

Historical financial results for the periods before and after the Acquisition on May 24, 2012, have been presented combined and have included a reconciliation to present them separately for the predecessor and successor in accordance with GAAP presentation.  We believe that reflecting this combined information, while non-GAAP, facilitates the most meaningful comparison and understanding of our operating performance in 2012 over the same period in the prior year.

 

Reported EBITDA and Adjusted EBITDAX

Reported EBITDA is defined as net income plus interest and debt expense, income taxes and depreciation, depletion and amortization. Adjusted EBITDAX is defined as Reported EBITDA, adjusted as applicable in the relevant period, for the net change in the fair value of derivatives (mark to market effects, net of cash settlements and premiums related to these derivatives), ceiling test charges or other impairments, adjustments to reflect cash distributions of the earnings from our unconsolidated affiliates, non-cash equity based compensation expenses, transition and restructuring costs we expect not to recur, advisory fees paid to our sponsors, exploration expenses and loss on extinguishment of debt.

 

We believe that the presentation of Reported EBITDA and Adjusted EBITDAX is important to provide management and investors with (i) additional information to evaluate our ability to service debt adjusting for items required or permitted in calculating covenant compliance under our debt agreements, (ii) an important supplemental indicator of the operational performance of our business, (iii) an additional criterion for evaluating our performance relative to our peers, (iv) additional information to measure our liquidity (before cash capital requirements and working capital needs) (v) and supplemental information to investors about certain material non-cash and/or other items that may not continue at the same level in the future.

 

Reported EBITDA and Adjusted EBITDAX 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 or as an alternative to net income, operating income, net cash provided by operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP. For example, our presentation of Reported EBITDA and Adjusted EBITDAX may not be comparable to similarly titled measures used by other companies in our industry. Furthermore, our presentation of Reported EBITDA and Adjusted EBITDAX 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 or non-recurring 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.

 

Cash Operating Costs and Adjusted Cash Operating Costs

We monitor cash operating costs required to produce our oil and natural gas production volumes. Cash operating costs is a non-GAAP measure calculated on a per Mcfe produced basis and includes total operating expenses less depreciation, depletion and amortization expense, ceiling test and other impairment charges, exploration expense, and transportation costs and costs of products. Adjusted cash operating costs reflects cash operating costs adjusted for non-recurring transition and restructuring costs, advisory fees paid to our sponsors and non-cash equity based compensation expense. We believe cash operating costs and adjusted cash operating costs per unit are valuable measures to provide management and investors reflecting operating performance and efficiency; however, these measures may not be comparable to similarly titled measures used by other companies and are subject to several of the same limitations as analytical tools as noted in the paragraphs above.

 

9



 

Per-unit lease operating expenses

We use per-unit lease operating expenses as a non-GAAP measure calculated on a per Mcfe basis equal to lease operating expenses divided by total equivalent production. The sum of lease operating expenses and production taxes equals production costs. The sum of cost of products, transportation costs, production costs, DD&A, G&A, ceiling test and other impairment charges and other operating expenses equals total operating expenses. It is a valuable measure of operating performance and efficiency.

 

10


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