EX-99.1 3 a12-28766_1ex99d1.htm EX-99.1

Exhibit 99.1

 

ITEM 6.                   SELECTED FINANCIAL DATA.

 

The selected consolidated financial data presented as of December 31, 2011 and for the period from November 16 to December 31, 2011 is derived from our audited financial statements. The selected financial data for the period from January 1, 2011 to November 15, 2011 and as of and for the years ended December 31, 2010, 2009, 2008 and 2007 are derived from the audited financial statements of our predecessor. See “Basis of presentation” included under Note 2 to our “Consolidated and Combined Financial Statements” contained in this Form 8-K for information regarding the retrospective adjustment of our financial information for the period from November 16 to December 31, 2011 for entities under common control in connection with our acquisition of certain properties in the Permian Basin region of New Mexico and onshore Gulf Coast region of Texas from Fund I (the “Transferred Properties”). The selected financial data should be read in conjunction with “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Item 8. Financial Statements and Supplementary Data,” both contained herein. The following table shows selected financial data of the Partnership and our predecessor for the periods and as of the dates indicated.

 


 

 

 

Partnership

 

 

Predecessor

 

 

 

November 16 to

 

 

January 1 to

 

Year Ended

 

Year Ended

 

Year Ended

 

Year Ended

 

 

 

December 31,

 

 

November 15,

 

December 31,

 

December 31,

 

December 31,

 

December 31,

 

(in thousands)

 

2011

 

 

2011

 

2010

 

2009

 

2008

 

2007

 

Statement of Operations Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Oil sales

 

$

8,259

 

 

$

59,605

 

$

52,670

 

$

34,604

 

$

58,852

 

$

5,722

 

Natural gas sales

 

3,642

 

 

35,883

 

48,088

 

33,798

 

100,378

 

19,714

 

Natural gas liquids sales

 

1,829

 

 

14,500

 

14,748

 

10,617

 

20,393

 

367

 

Realized gain (loss) on commodity derivative instruments

 

4,015

 

 

9,353

 

48,029

 

70,902

 

(2,676

)

3,622

 

Unrealized gain (loss) on commodity derivative instruments

 

6,664

 

 

12,674

 

(23,964

)

(62,375

)

117,757

 

(13,019

)

Other income

 

—

 

 

159

 

116

 

24

 

18

 

—

 

Total revenues

 

24,409

 

 

132,174

 

139,687

 

87,570

 

294,722

 

16,406

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lease operating expenses

 

2,780

 

 

21,391

 

23,804

 

19,066

 

18,781

 

5,587

 

Production and ad valorem taxes

 

976

 

 

7,763

 

9,320

 

6,731

 

13,899

 

1,956

 

Depletion and depreciation

 

5,061

 

 

37,206

 

55,828

 

56,349

 

79,477

 

11,886

 

Impairment of oil and gas properties

 

—

 

 

16,765

 

11,712

 

—

 

121,561

 

—

 

Accretion expense

 

175

 

 

1,290

 

1,366

 

1,255

 

691

 

121

 

(Gain) loss on settlement of asset retirement obligations

 

—

 

 

496

 

(209

)

(1,570

)

250

 

—

 

Management fees

 

—

 

 

5,435

 

6,104

 

8,500

 

8,500

 

8,521

 

General and administrative expenses

 

1,749

 

 

5,149

 

5,293

 

2,408

 

2,493

 

1,086

 

Total operating expenses

 

10,741

 

 

95,495

 

113,218

 

92,739

 

245,652

 

29,157

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss)

 

13,668

 

 

36,679

 

26,469

 

(5,169

)

49,070

 

(12,751

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense), net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

—

 

 

1

 

17

 

87

 

623

 

542

 

Interest expense

 

(604

)

 

(919

)

(3,223

)

(1,274

)

(2,131

)

(792

)

Realized loss on interest rate derivative instruments

 

—

 

 

(574

)

(649

)

(457

)

(71

)

—

 

Unrealized gain (loss) on interest rate derivative instruments

 

—

 

 

441

 

(248

)

95

 

(709

)

—

 

Other income (expense), net

 

(604

)

 

(1,051

)

(4,103

)

(1,549

)

(2,288

)

(250

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) before taxes

 

13,064

 

 

35,628

 

22,366

 

(6,718

)

46,782

 

(13,001

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax benefit (expense)

 

(48

)

 

76

 

(32

)

622

 

(971

)

—

 

Net income (loss)

 

$

13,016

 

 

$

35,704

 

$

22,334

 

$

(6,096

)

$

45,811

 

$

(13,001

)

Net income attributable to predecessor operations

 

(866

)

 

 

 

 

 

 

 

 

 

 

 

Net income available to unitholders

 

$

12,150

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General partner’s interest in net income

 

$

12

 

 

 

 

 

 

 

 

 

 

 

 

Limited partners’ interest in net income

 

$

12,138

 

 

 

 

 

 

 

 

 

 

 

 

Net income per limited partner unit (basic and diluted)

 

$

0.54

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of limited partner units outstanding (basic and diluted)

 

22,418

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Financial Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

$

12,271

 

 

$

79,762

 

$

119,130

 

$

113,240

 

$

133,292

 

$

12,275

 

 


 

 

 

Partnership

 

 

Predecessor

 

 

 

November 16 to

 

 

January 1 to

 

Year Ended

 

Year Ended

 

Year Ended

 

Year Ended

 

 

 

December 31,

 

 

November 15,

 

December 31,

 

December 31,

 

December 31,

 

December 31,

 

(in thousands)

 

2011

 

 

2011

 

2010

 

2009

 

2008

 

2007

 

Cash Flow Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash provided by operating activities

 

$

4,191

 

 

$

84,027

 

$

121,269

 

$

108,148

 

$

139,236

 

$

(6,437

)

Net cash used in investing activities

 

$

(755

)

 

$

(44,891

)

$

(125,846

)

$

(25,129

)

$

(217,986

)

$

(237,865

)

Net cash provided by (used in) financing activities

 

$

(1,923

)

 

$

(38,000

)

$

1,505

 

$

(118,151

)

$

117,758

 

$

224,479

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance Sheet Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Working capital

 

$

23,124

 

 

(1)

 

$

33,209

 

$

57,466

 

$

113,846

 

$

26,657

 

Total assets

 

521,014

 

 

(1)

 

504,622

 

465,691

 

593,866

 

416,436

 

Total debt

 

155,800

 

 

(1)

 

27,251

 

24,150

 

32,250

 

11,100

 

Unitholders’ Equity/Partners’ capital

 

333,429

 

 

(1)

 

426,733

 

405,646

 

521,784

 

379,244

 

 

(1)                                  These balance sheet amounts are not presented as they are not included in the predecessor’s financial statements included in “Item 8. Financial Statements and Supplementary Data.

 

Non-GAAP Financial Measures

 

We include in this report the non-GAAP financial measures Adjusted EBITDA and Distributable Cash Flow and provide reconciliations of these items to net income and net cash provided by operating activities, our most directly comparable financial performance and liquidity measures calculated and presented in accordance with GAAP. We define Adjusted EBITDA as net income (loss):

 

·                  Plus:

·                  Income tax expense (benefit);

·                  Interest expense-net, including realized and unrealized losses on interest rate derivative contracts;

·                  Depletion and depreciation;

·                  Accretion of asset retirement obligations;

·                  Gain (loss) on settlement of asset retirement obligations;

·                  Unrealized losses on commodity derivative contracts;

·                  Impairment of oil and natural gas properties; and

·                  Other non-recurring items that we deem appropriate.

 

·                  Less:

·                  Interest income;

·                  Unrealized gains on commodity derivative contracts; and

·                  Other non-recurring items that we deem appropriate.

 

We define Distributable Cash Flow as Adjusted EBITDA less income tax expense; cash interest expense, net; realized losses on interest rate swaps; and estimated maintenance capital expenditures.

 

Adjusted EBITDA and Distributable Cash Flow are used as supplemental financial measures by our management and by external users of our financial statements, such as investors, commercial banks and others, to assess:

 

·                  our operating performance as compared to that of other companies and partnerships in our industry, without regard to financing methods, capital structure or historical cost basis;

·                  the ability of our assets to generate sufficient cash flow to make distributions to our unitholders; and

·                  our ability to incur and service debt and fund capital expenditures.

 

Adjusted EBITDA and Distributable Cash Flow should not be considered an alternative to net income, operating income, cash flow from operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP. Our Adjusted EBITDA and Distributable Cash Flow may not be comparable to similarly titled measures of another company because all companies may not calculate Adjusted EBITDA or Distributable Cash Flow in the same manner. The following table presents a reconciliation of Adjusted EBITDA to

 


 

net income and net cash provided by operating activities, our most directly comparable GAAP financial performance and liquidity measures, for each of the periods indicated.

 

Reconciliation of Adjusted EBITDA to Net Income

 

 

 

Partnership

 

 

Predecessor

 

 

 

November 16 to

 

 

January 1 to

 

Year Ended

 

Year Ended

 

Year Ended

 

Year Ended

 

 

 

December 31,

 

 

November 15,

 

December 31,

 

December 31,

 

December 31,

 

December 31,

 

(in thousands)

 

2011

 

 

2011

 

2010

 

2009

 

2008

 

2007

 

Net income (loss)

 

$

13,016

 

 

$

35,704

 

$

22,334

 

$

(6,096

)

$

45,811

 

$

(13,001

)

Income tax expense (benefit)

 

48

 

 

(76

)

32

 

(622

)

971

 

—

 

Interest expense-net, including realized and unrealized losses on interest rate derivative instruments

 

604

 

 

1,052

 

4,120

 

1,636

 

2,911

 

792

 

Depletion and depreciation

 

5,061

 

 

37,206

 

55,828

 

56,349

 

79,477

 

11,886

 

Accretion of asset retirement obligations

 

175

 

 

1,290

 

1,366

 

1,255

 

691

 

121

 

Amortization of equity awards

 

31

 

 

—

 

—

 

—

 

—

 

—

 

Gain (loss) on settlement of asset retirement obligations

 

—

 

 

496

 

(209

)

(1,570

)

250

 

—

 

Unrealized losses on commodity derivative instruments

 

—

 

 

—

 

23,964

 

62,375

 

—

 

13,019

 

Impairment of oil and natural gas properties

 

—

 

 

16,765

 

11,712

 

—

 

121,561

 

—

 

Interest income

 

—

 

 

(1

)

(17

)

(87

)

(623

)

(542

)

Unrealized gain on commodity derivative instruments

 

(6,664

)

 

(12,674

)

—

 

—

 

(117,757

)

—

 

Adjusted EBITDA

 

$

12,271

 

 

$

79,762

 

$

119,130

 

$

113,240

 

$

133,292

 

$

12,275

 

 

Reconciliation of Adjusted EBITDA to Net Cash Provided by Operating Activities

 

 

 

Partnership

 

 

Predecessor

 

 

 

November 16 to

 

 

January 1 to

 

Year Ended

 

Year Ended

 

Year Ended

 

Year Ended

 

 

 

December 31,

 

 

November 15,

 

December 31,

 

December 31,

 

December 31,

 

December 31,

 

(in thousands)

 

2011

 

 

2011

 

2010

 

2009

 

2008

 

2007

 

Net cash provided by (used in) operating activities

 

$

4,191

 

 

$

84,027

 

$

121,269

 

$

108,148

 

$

139,236

 

$

(6,437

)

Change in working capital

 

7,478

 

 

(5,622

)

(5,888

)

4,187

 

(8,443

)

18,499

 

Interest expense-net

 

554

 

 

1,433

 

3,717

 

1,527

 

1,528

 

213

 

Income tax expense (benefit)

 

48

 

 

(76

)

32

 

(622

)

971

 

—

 

Adjusted EBITDA

 

$

12,271

 

 

$

79,762

 

$

119,130

 

$

113,240

 

$

133,292

 

$

12,275

 

 

Distributable Cash Flow

 

The following table presents a reconciliation of Distributable Cash Flow to Adjusted EBITDA for the period from November 16 to December 31, 2011. Adjusted EBITDA is reconciled to net income and net cash provided by operating activities, our most directly comparable GAAP performance and liquidity measures, above.

 

Adjusted EBITDA

 

$

12,271

 

Income tax expense

 

(48

)

Cash interest expense

 

—

 

Estimated maintenance capital (1)

 

(2,625

)

Distributable Cash Flow

 

$

9,598

 

 

(1)         Estimated annual maintenance capital was $21 million for 2011 after adjustment for the retrospective adjustment of our financial information.  Amount represents pro-rated capital for the 46 day period from November 16 to December 31, 2011.