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Exhibit 99.1

 

LOGO

QR Energy Announces Third Quarter 2013 Results, Full-Year Outlook and Increased Borrowing Base to $950 Million

HOUSTON, TX—(Marketwired – November 6, 2013) – QR Energy, LP (“QRE” or “QR Energy”) (NYSE: QRE) announced today its operating and financial results for the third quarter of 2013 and provided fourth quarter and full-year guidance.

Highlights for the Third Quarter 2013

 

    Revenue was $126.0 million and Adjusted EBITDA was $69.0 million for the third quarter of 2013, up 20% and 13% from the second quarter of 2013, respectively

 

    Average production of 18,043 Boe per day, comprised of approximately 70% crude oil and natural gas liquids, in-line with stated guidance of 18,000 to 18,400 Boe per day, and up 5% from the second quarter of 2013

 

    Distributable Cash Flow was $35.0 million, an approximate 26% increase over the second quarter of 2013, resulting primarily from increased crude oil production and cash operating margins

 

    Distribution Coverage Ratio of 1.1x

 

    On August 6, 2013, QR Energy closed an acquisition of primarily oil properties located in East Texas (the “2013 East Texas Acquisition”) from a private seller for $107.3 million, subject to customary purchase price adjustments. The transaction is a bolt-on acquisition of mature, legacy properties contiguous with existing QR Energy assets in the East Texas oil field.

Note: Adjusted EBITDA, Distributable Cash Flow and Distribution Coverage Ratio are non-GAAP measures. Please see the definitions of these measures and the reconciliation to the most comparable measures calculated in accordance with GAAP in the “Non-GAAP Reconciliation” section of this press release.


Chief Executive Officer Alan L. Smith commented on the third quarter results, “Our team did a great job executing the game plan of maximizing performance from existing assets, managing costs and assimilating the 2013 East Texas Acquisition assets into our portfolio. The result of these efforts is evident in our increased distribution coverage ratio compared to the second quarter of 2013. For the remainder of the year, we will continue to enhance production by targeting low-risk, oil-weighted capital projects, remain focused on managing operating expenses, and actively pursue accretive acquisition opportunities that fit our investment criteria of lower decline assets.”

Results for the Third Quarter 2013

 

    Realized prices excluding commodity derivatives were $106.44 per barrel of oil, $3.48 per Mcf of natural gas and $38.02 per barrel of NGLs; Realized prices including commodity derivatives were $99.18 per barrel of oil and $5.87 per Mcf of natural gas

 

    Achieved stated production guidance despite a pipeline force majeure event in our Ark-La-Tex area which negatively impacted production from mid-August through mid-October by approximately 2.4 Mmcfe per day (400 Boe per day). The pipeline system is back in operation and is expected to have a minimal impact on fourth quarter cash flows.

 

    Oil and natural gas production was 83% hedged with average price floors of $98.55 per barrel of oil and $6.03 per mmbtu of natural gas; NGLs are not currently hedged

 

    Lease operating expenses were $21.59 per Boe, approximately $0.40 per Boe lower than the second quarter of 2013 as a result of operating efficiencies in the field and increased production

 

    Cash general and administrative expenses were $9.3 million

 

    Total capital expenditures were $24.8 million

Borrowing Base Increase

On October 15, 2013, QR Energy’s borrowing base was increased by its lenders from $900 million to $950 million. This increase was a result of the recent 2013 East Texas Acquisition in August 2013 and positive performance revisions in the first half of the year.

 

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As of November 1, 2013, QR Energy had $600 million outstanding under its revolving credit facility, not including $23.5 million of letters of credit outstanding, resulting in $326.5 million of borrowing availability. The next scheduled borrowing base redetermination under the Credit Agreement is May 1, 2014.

Cash Distribution

On November 14, 2013, QR Energy will pay a cash distribution attributable to the third quarter of 2013 of $0.4875 per unit for all outstanding common units. This represents an annualized distribution of $1.95 per common unit.

Guidance

The guidance set forth below is subject to all cautionary statements and limitations described below and under the “Forward-Looking Statements” section of this press release. In addition, estimates for QR Energy’s future production volumes are based on, among other things, assumptions of capital expenditure levels and the assumption that market demand and prices for oil and natural gas will continue at levels that allow for economic production of these products. The production, transportation and marketing of oil and natural gas are extremely complex and are subject to disruption due to transportation and processing availability, mechanical failure, human error, weather and numerous other factors. Estimates are based on certain other assumptions, such as well performance, which may vary significantly from QR Energy’s assumptions. Operating costs, which include major maintenance costs, vary in response to changes in prices of services and materials used in the operation of properties and the amount of maintenance required. Operating costs, including taxes, utilities and service company costs, move directionally with increases and decreases in commodity prices and QR Energy cannot fully predict such future commodity prices or operating costs. Capital expenditures are based on current expectations as to the level of capital expenditures that will be justified based upon the other assumptions set forth below as well as expectations about other operating and economic factors not set forth below. The guidance set forth below does not constitute any form of guarantee, assurance or promise that the matters indicated will actually be achieved. Rather, the guidance simply sets forth QR Energy’s best estimate today for these matters. Estimates are based upon current expectations about the future and based upon both stated and unstated assumptions. Actual conditions and assumptions may change over the course of the year.

 

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Based upon current estimates, QR Energy expects the following operating results for the fourth quarter and full year of 2013:

 

     4Q 2013      Full Year 2013  

Average net daily production (Boed)

     18,500 – 18,900         17,900 – 18,000   

LOE and workover expenses (per Boe)

   $ 20.50 – $22.50       $ 21.00 – $22.00   

Estimated maintenance capital expenditures ($ millions)

   $ 17.5       $ 68.8   

Estimated total capital expenditures ($ millions)

   $ 21       $ 97   

Cash general and Administrative expenses ($ millions)

   $ 9 – $10       $ 35 – $36   

Quarterly Report on Form 10-Q

QR Energy’s financial statements and related footnotes will be available in the 10-Q for the quarter ended September 30, 2013, which QR Energy will file with the Securities and Exchange Commission (“SEC”) today. The 10-Q will be available on QR Energy’s Investor Relations website at http://ir.qrenergylp.com or on the SEC website at www.sec.gov.

Webcast and Conference Call

QR Energy will host a webcast and conference call today at 9:00 a.m. central time to discuss these results.

Interested parties may join the webcast by visiting QR Energy’s Investor Relations website at http://ir.qrenergylp.com and clicking on the webcast link or the conference call by dialing (877) 861-4516 or (706) 679-6295 five minutes before the call begins and providing the conference ID 88061054.

The webcast will be available on QR Energy’s Investor Relations website at http://ir.qrenergylp.com for 14 days following the call and a telephonic replay will be available for 7 days following the call by dialing (855) 859-2056 or (404) 537-3406 and providing the conference ID 88061054.

About QR Energy, LP

QR Energy, LP is a publicly traded partnership engaged in the acquisition, production and development of onshore crude oil and natural gas properties in the United States. QR Energy is headquartered in Houston, Texas. For more information, visit QR Energy’s website at www.qrenergylp.com.

 

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Forward-Looking Statements

This press release may contain forward-looking statements within the meaning of federal securities laws. QR Energy believes that its expectations and forecasts are based on reasonable assumptions; however, no assurance can be given that such expectations and forecasts will prove to be correct. A number of factors could cause actual results to differ materially from the expectations and forecasts, anticipated results or other forward-looking information expressed in this press release, including risks and uncertainties regarding future results, capital expenditures, liquidity and financial market conditions, sufficiency of cash from operations, adverse market conditions and governmental regulations. For a more complete list of these risk factors, please read QR Energy’s filings with the SEC, which are available on QR Energy’s Investor Relations website at http://ir.qrenergylp.com or on the SEC website at www.sec.gov.

Commodity Derivatives

As of November 5, 2013, the notional volumes and prices of QR Energy’s commodity derivative contracts were as follows:

 

     Crude Oil                                                                   
                   Average             Floor      Ceiling      WTS/WTI      Avg. Discount  
            Swaps      Price      Collars      Price      Price      Basis Swaps      to NYMEX-WTI  

Term

   Index      Bbls/d      ($/Bbl)      Bbls/d      ($/Bbl)      ($/Bbl)      Bbl/d      ($/Bbl)  

Oct—Dec 2013

     WTI         8,282       $ 98.34         —           —           —           2,400         ($1.90

Oct—Dec 2013

     LLS         1,400       $ 99.51         —           —           —           —           —     

2014

     WTI         7,815       $ 95.65         425       $ 90.00       $ 106.50         2,400         ($2.10

2014

     LLS         1,900       $ 98.77         —           —           —           —           —     

2015

     WTI         7,356       $ 93.74         1,025       $ 90.00       $ 110.00         —           —     

2016

     WTI         6,293       $ 90.03         1,500       $ 80.00       $ 102.00         —           —     

2017

     WTI         5,547       $ 86.23         —           —           —           —           —     

Note: “WTI” is West Texas Intermediate crude oil; “LLS” is Louisiana Light Sweet crude oil; “WTS” is West Texas Sour crude oil.

 

     Natural Gas  
                   Average             Floor      Ceiling             Average      Basis      Avg. Discount  
            Swaps      Price      Collars      Price      Price      Puts      Price      Swaps      to NYMEX—HHub  

Term

   Index      MMBtu/d      ($/MMBtu)      MMBtu/d      ($/MMBtu)      ($/MMBtu)      MMBtu/d      ($/MMBtu)      MMBtu/d      ($/MMBtu)  

2013

     Henry Hub         30,337       $ 6.05         2,446       $ 6.50       $ 8.65         —           —           18,446         ($0.17

2014

     Henry Hub         26,622       $ 6.18         4,966       $ 5.74       $ 7.51         —           —           17,066         ($0.19

2015

     Henry Hub         7,191       $ 5.34         18,000       $ 5.00       $ 7.48         420       $ 4.00         14,400         ($0.19

2016

     Henry Hub         11,350       $ 4.27         630       $ 4.00       $ 5.55         11,350       $ 4.00         —           —     

2017

     Henry Hub         10,445       $ 4.47         595       $ 4.00       $ 6.15         10,445       $ 4.00         —           —     

 

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Selected Operating Data

 

     Three months ended      Three months ended      Nine months ended      Nine months ended  
     September 30, 2013      June 30, 2013      September 30, 2013      September 30, 2012  

Production data:

           

Oil (MBbls)

     992         872         2,777         2,251   

Natural gas (MMcf)

     2,977         2,823         8,776         10,331   

NGLs (MBbls)

     172         228         592         555   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total production (MBoe)

     1,660         1,571         4,832         4,528   

Production by area (Boed):

           

Permian Basin

     6,063         5,959         6,071         6,561   

Ark-La-Tex

     6,503         6,660         6,554         5,088   

Mid-Continent

     1,352         1,522         1,421         1,504   

Gulf Coast

     4,045         3,037         3,572         3,315   

Michigan

     80         86         82         58   
  

 

 

    

 

 

    

 

 

    

 

 

 

Average daily production (Boed)

     18,043         17,264         17,700         16,526   

Prices:

           

Average NYMEX:

           

Crude oil (per Bbl)

   $ 105.82       $ 94.14       $ 98.17       $ 96.16   

Natural gas (per Mcf)

   $ 3.55       $ 4.02       $ 3.69       $ 2.58   

Average realized including commodity derivatives:

           

Crude Oil (per Bbl)

   $ 99.18       $ 99.35       $ 98.73       $ 99.78   

Natural gas (per Mcf)

   $ 5.87       $ 6.40       $ 5.99       $ 5.54   

NGLs (per Bbl)

   $ 38.02       $ 32.37       $ 35.74       $ 46.12   

Average realized excluding commodity derivatives:

           

Crude oil (per Bbl)

   $ 106.44       $ 97.09       $ 100.23       $ 97.09   

Natural gas (per Mcf)

   $ 3.48       $ 4.46       $ 3.62       $ 2.67   

NGLs (per Bbl)

   $ 38.02       $ 32.37       $ 35.74       $ 46.12   

Please see the financial statements and related footnotes in QR Energy’s 10-Q, as filed with the SEC.

 

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Consolidated Statements of Operations

 

     Three months ended     Three months ended     Nine months ended     Nine months ended  
     September 30, 2013     June 30, 2013     September 30, 2013     September 30, 2012  
     (In thousands)  

Revenues:

  

Oil sales

   $ 105,586      $ 84,666      $ 278,327      $ 218,539   

Natural gas sales

     10,353        12,592        31,798        27,604   

NGLs sales

     6,539        7,380        21,159        25,596   

Disposal, processing and other

     3,529        792        5,039        2,849   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Revenue

     126,007        105,430        336,323        274,588   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating Expenses:

        

Lease operating expenses

     35,835        34,541        104,953        82,506   

Production and other taxes

     7,785        7,083        22,573        19,018   

Processing and transportation

     811        865        2,142        2,535   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total production expenses

     44,431        42,489        129,668        104,059   

Disposal and related expenses

     2,825        —          2,825        —     

Depreciation, depletion and amortization

     28,018        26,663        85,496        75,941   

Accretion of asset retirement obligations

     1,921        1,758        5,411        4,109   

General and administrative and other

     11,204        10,098        31,398        30,906   

Acquisition and transaction costs

     435        59        1,055        1,286   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     88,834        81,067        255,853        216,301   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     37,173        24,363        80,470        58,287   

Other income (expense):

        

Gain (loss) on commodity derivative contracts, net

     (45,377     49,523        (11,860     52,001   

Interest expense, net

     (14,624     (10,270     (35,947     (31,946

Other income, net

     1,373        —          1,373        —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other income (loss), net

     (58,628     39,253        (46,434     20,055   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

     (21,455     63,616        34,036        78,342   

Income tax expense

     (42     (2     (93     (528

Net income (loss)

   $ (21,497   $ 63,614      $ 33,943      $ 77,814   
  

 

 

   

 

 

   

 

 

   

 

 

 

Less: Net income attributable to noncontrolling interest

   $ 222      $ —        $ 222      $ —     

Net income (loss) attributable to QR Energy, LP

   $ (21,719   $ 63,614      $ 33,721      $ 77,814   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) per common unit

   $ (0.57   $ 0.89      $ 0.01      $ 0.49   

Adjusted EBITDA

   $ 68,991      $ 61,073      $ 193,368      $ 201,013   

Distributable Cash Flow

   $ 34,952      $ 27,813      $ 94,492      $ 113,225   

Note: Please see the financial statements and related footnotes in QR Energy’s 10-Q, as filed with the SEC. Adjusted EBITDA and Distributable Cash Flow are non-GAAP measures. Please see the definitions of these measures and the reconciliation to the most comparable measures calculated in accordance with GAAP in the “Non-GAAP Reconciliation” section of this press release.

 

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Consolidated Balance Sheet

 

     September 30, 2013  
     (In thousands)  
ASSETS   

Current assets:

  

Total current assets

   $ 119,881   

Noncurrent assets:

  

Total property and equipment, net

     1,575,808   

Derivative instruments

     63,070   

Other assets

     39,778   
  

 

 

 

Total noncurrent assets

     1,678,656   
  

 

 

 

Total assets

   $ 1,798,537   
  

 

 

 
LIABILITIES AND PARTNERS’ CAPITAL   

Current liabilities:

  

Total current liabilities

   $ 81,620   

Noncurrent liabilities:

  

Long-term debt

     896,464   

Derivative instruments

     9,247   

Asset retirement obligations

     140,853   

Other liabilities

     18,934   
  

 

 

 

Total noncurrent liabilities

     1,065,498   

Partners’ capital:

  

Total QR Energy, LP partners’ capital

     645,162   

Noncontrolling interest

     6,257   
  

 

 

 

Total liabilities and partners’ capital

   $ 1,798,537   
  

 

 

 

Note: Please see the financial statements and related footnotes in QR Energy’s 10-Q, as filed with the SEC.

Non-GAAP Reconciliation

QR Energy defines Adjusted EBITDA as net income from which it adds or subtract net interest expense (including gains and losses on interest rate derivative contracts), depreciation, depletion and amortization, accretion of asset retirement obligations, gains or losses due to effects of change in prices on natural gas imbalances, net gains or losses on commodity derivative contracts, net cash received or paid on the settlement of commodity derivative contracts, income tax expense or benefit, other income or expense, interest expense, impairments, non-

 

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cash general and administrative expense and acquisition and transaction costs, non-cash pension and postretirement expense or credit, and beginning with the third quarter 2013, noncontrolling interest amounts attributable to each of these items, which revert the calculation to the Adjusted EBITDA attributable QR Energy. Prior period results have been revised to conform to the current presentation.

QR Energy defines Distributable Cash Flow as Adjusted EBITDA less cash interest expense (including cash received or paid on interest rate derivative contracts), distributions on its preferred units, payments to its general partner in respect of its management incentive fee and estimated maintenance capital expenditures, which is calculated based on our estimate of the capital required to maintain QR Energy’s current production for five years, on average. This estimate is made at least annually and whenever an event occurs that is likely to result in a material adjustment to the amount of our maintenance capital expenditures, such as a major acquisition or the introduction of new governmental regulations that will impact our business.

QR Energy defines the Distribution Coverage Ratio for a given quarter as the ratio of Distributable Cash Flow per outstanding unit (including general partner units and Class B units and excluding preferred units) to the actual cash distribution payable per outstanding unit (including general partner units and Class B units and excluding preferred units). Holders of the preferred units may elect to convert the preferred units into common units at any time after October 3, 2013, or sooner upon QR Energy’s achievement of certain trading price criteria. Please see QR Energy’s 10-K for a more fulsome description of the terms of the preferred units.

Adjusted EBITDA, Distributable Cash Flow and the Distribution Coverage Ratio are used by management of QR Energy to provide additional information related to the performance of QR Energy’s business. Adjusted EBITDA provides information about the cash flow generated by our assets, without regard to financing methods or historical cost basis and the ability of our assets to generate sufficient cash to pay interest costs and support our indebtedness. Distributable Cash Flow and the Distribution Coverage Ratio provide information comparing cash flows generated by us to cash distributions we expect to pay to our unitholders and indicates to investors whether or not we are generating cash flow at a level that can sustain or support an increase in our quarterly distribution rates. In addition, Adjusted EBITDA, Distributable Cash Flow and the Distribution Coverage Ratio are quantitative standards used by external users of our financial statements such as investors, research analysts and others to assess QR Energy’s performance and liquidity without regard to capital structure. Adjusted EBITDA, Distributable Cash Flow and the Distribution Coverage Ratio are not presentations made in accordance with GAAP. Because Adjusted EBITDA, Distributable Cash Flow and the Distribution Coverage Ratio exclude some, but not all, items that affect net income and are defined differently by different companies in our industry, our definitions may not be comparable to similarly titled measures of other companies. Adjusted EBITDA,

 

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Distributable Cash Flow and the Distribution Coverage Ratio have important limitations as analytical tools, and you should not consider them in isolation, or as a substitute for net income, operating income, cash flow from operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP.

 

     Three months ended     Three months ended     Nine months ended     Nine months ended  
     September 30, 2013     June 30, 2013     September 30, 2013     September 30, 2012  
     (In thousands, except ratios)  

Reconciliation of net income to Adjusted EBITDA, Distributable Cash Flow and Distribution Coverage Ratio:

  

Net income

   $ (21,497   $ 63,614      $ 33,943      $ 77,814   

Plus:

        

Loss (gain) on commodity derivative contracts, net

     45,377        (49,523     11,860        (52,001

Cash received (paid) to settle commodity derivative contracts, net

     (85     7,435        16,660        35,668   

Loss (gain) on effect of change in prices on gas imbalances

     (137     (1,365     (576     73   

Depletion, depreciation and amortization

     28,018        26,663        85,496        75,941   

Accretion of asset retirement obligations

     1,921        1,758        5,411        4,109   

Interest expense

     14,624        10,270        35,947        31,946   

Other income

     (1,373     —          (1,373     —     

Income tax expense

     42        2        93        528   

Non-cash general and administrative expense and acquisition and transaction costs

     2,369        2,219        6,175        26,935   

Noncontrolling interest

     (268     —          (268     —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ 68,991      $ 61,073      $ 193,368      $ 201,013   

Less:

        

Cash interest expense

     (11,764     (11,494     (34,335     (24,417

Estimated maintenance capital expenditures (1)

     (17,334     (17,000     (51,334     (46,750

Distributions to preferred unitholders

     (3,500     (3,500     (10,500     (10,500

Management incentive fee

     (1,441     (1,266     (2,707     (6,121
  

 

 

   

 

 

   

 

 

   

 

 

 

Distributable Cash Flow (2)

   $ 34,952      $ 27,813      $ 94,492      $ 113,225   

Distributions to unitholders (other than holders of preferred units) (3)

   $ 31,970      $ 31,975        95,935        65,542   

Distribution Coverage Ratio

     1.1x        0.9x        1.0x        1.7x   

 

(1) Maintenance capital expenditures are those needed on average to maintain production over a five-year period.
(2) Prior to any retained cash reserves established by QR Energy’s general partner’s board of directors.
(3) Nine month 2012 distributions exclude $4.2 million related to our first quarter distribution on units issued in April 2012 because units were issued to fund an acquisition for which QRE had no revenue in 1Q12. The inclusion of the first quarter distribution on the units issued in April would have resulted in a Distribution Coverage Ratio of 1.1x for the nine months ended September 30, 2012.

Note: Please see the financial statements and related footnotes in QR Energy’s 10-Q, as filed with the SEC.

Investor Contacts:

Josh Wannarka

Director of Investor Relations

(713) 452-2990

Cedric W. Burgher

Chief Financial Officer

(713) 452-2200

 

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