New Source Energy Partners Reports Second Quarter 2015 Results; Revises Guidance

OKLAHOMA CITY, Aug. 10, 2015 /PRNewswire/ -- New Source Energy Partners L.P., a Delaware limited partnership (NYSE: NSLP) (the "Partnership" or "New Source"), today announced financial and operating results for the quarter ended June 30, 2015.

Second Quarter and Year to Date 2015 Results Summary

  • Total revenue of approximately $24.1 million in the second quarter 2015 and approximately $62.2 million for the six months ended June 30, 2015
  • Adjusted EBITDA of approximately $6.0 million in the second quarter 2015 and approximately $12.1 million for the six months ended June 30, 2015
  • Distributable Cash Flow ("DCF") of approximately $4.9 million in the second quarter 2015 and approximately $8.8 million for the six months ended June 30, 2015
  • Impairment of oil and natural gas properties of $32.9 million in the second quarter of 2015 and $76.0 million for the six months ended June 30, 2015
  • Impairment of Oilfield Services goodwill and intangible assets of $66.8 million in the second quarter of 2015 and the six months ended June 30, 2015

Management Commentary

"In the second quarter, the Partnership continued to feel the effects of the depressed commodity price environment across both our E&P and OFS segments," said Kristian Kos, Chairman and CEO.  "We expect these conditions to persist in the back half of 2015.  While our distribution coverage ratio for the second quarter would have been over one times covered, the Board of Directors made the decision to suspend the Partnership's quarterly cash distribution on its common units.  Despite the negative effect to the price of our common units, we believe the decision to suspend the distribution was prudent, given what could be an extended downturn in the industry.  Our management team continues to work to reduce costs and explore financing strategies, including potentially monetizing a portion of our OFS business, with a view toward higher commodity prices in 2016."

Exploration and Production Operational Results

The following table reflects production, pricing and cost for the Exploration and Production ("E&P") division for the periods presented below.


Three Months Ended


Six Months Ended


June

 30,


March

31,


June

30,

June 30,


2015


2015


2014


2015


2014

Production volumes:










Oil (Bbls)

36,083



37,561



43,625



73,644



84,306


Natural gas (Mcf)

531,216



736,758



927,828



1,267,974



1,916,044


NGLs (Bbls)

172,722



189,689



241,695



362,411



447,278


Total production volumes (Boe)

297,341



350,043



439,958



647,384



850,925


Average daily volumes (Boe)

3,267



3,889



4,835



3,577



4,701












Average price:










Oil (per Bbl)

$

45.67



$

45.05



$

100.91



$

45.35



$

99.02


Natural gas (per Mcf)

2.64



2.50



4.15



2.56



4.81


NGL (per Bbl)

13.13



15.98



35.03



14.62



40.25


Total, excluding derivatives (per Boe)

17.89



18.76



38.00



18.36



41.80


Cash received (paid) on derivative settlements (per Boe) (1)

7.15



6.68



(2.24)



6.90



(4.01)


Total, including derivatives (per Boe)

$

25.04



$

25.44



$

35.76



$

25.26



$

37.79












Average production costs (per Boe)

$

12.81



$

11.58



$

10.26



$

12.15



$

10.60


Average production tax (per Boe)

$

0.95



$

0.89



$

1.80



$

0.92



$

1.96





(1)

Excludes cash received on settlement of derivative contracts prior to their contractual maturity.

Derivative Position

We utilize fixed price swaps, collars and put options as part of our strategy to hedge the variability of oil, natural gas, and NGL prices.   In the second quarter of 2015, we monetized certain of our derivative contracts for the periods October 2015 through December 2015 and calendar year 2016.  Additional information on our derivatives is available on our website, www.newsource.com, under the Investors tab. The following table reflects the Partnership's percentage of production hedged through 2016.


Oil

Natural Gas

NGL(1)

Total

2015

82%

67%

6%

42%

2016

59%

58%

—%

30%






(1)

The Partnership's 2015 NGL hedges represent Pentane only from June to September.

Credit Facility

In the second quarter of 2015, our borrowing base on our senior secured revolving credit facility was lowered from $90.0 million to $60.0 million based on our estimated oil, natural gas and NGL reserves using commodity pricing reflective of the current market conditions.  On May 29, 2015, the borrowing base was reduced further to $57.0 million in response to the settlement of a portion of our derivative contracts prior to their contractual maturity. Additionally, we anticipate that the borrowing base will be reduced at the October 2015 redetermination due to continued declines in oil, natural gas and NGL prices and the resulting impact on our reserves. As of June 30, 2015, the Partnership had $49.0 million outstanding under the credit facility.

Going Concern

The Partnership's financial statements have been prepared assuming that it will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. As a result of the substantial drop in oil, natural gas and NGL prices, our revenue, profitability and cash flow have been significantly affected. Additionally, the Partnership has violated debt covenants on certain of its oilfield service related debt, which results in this debt being classified as current and could require us to have to pay amounts outstanding sooner than anticipated based on the original maturity. While we are evaluating strategic alternatives, there can be no assurance that the Partnership will be successful in these efforts or that it will have sufficient funds to cover its operational and financial obligations over the next twelve months, which raises substantial doubt as to its ability to continue as a going concern.

Oilfield Services Results

Adjusted EBITDA for the Oilfield Services ("OFS") division was approximately $0.9 million in the second quarter of 2015 compared to approximately $3.8 million in the first quarter of 2015.  Revenue was approximately $18.8 million for the second quarter of 2015 with an average weekly rig count of 557 compared to approximately $31.6 million in the first quarter of 2015 with an average weekly rig count of 867.  The decline in revenue and adjusted EBITDA reflects the continued reduction in drilling activity as a result of lower commodity prices and the discounts we have offered our customers in the first half of 2015.

"The continuation in rig count decline and drilling activity in the second quarter weighed heavily on our OFS business," said Dikran Tourian, President and Chief Operating Officer.  "We have put extensive cost cutting measures in place across the entire platform, which includes consolidating field offices, reducing payroll, and proportionately aligning our work force to reflect the reduced rig count and the corresponding decrease in demand for our services.  While these cuts are not fully reflected in our second quarter results, we believe the savings from these cost cutting measures coupled with an increased demand for our  services for winter operations will be reflected in our financial results in the second half of 2015."

2H2015 Guidance

The Partnership is revising its guidance for the second half of 2015 to reflect the current commodity price environment.  The Oilfield Services Division's guidance reflects a decrease in revenue and margins based on the current rig count and discounts provided to contract operators for who we provide services.  The Exploration and Production Division's guidance reflects our drilling program continued curtailment and continued increased production costs from our contract operator.

Oilfield Services Division


E&P Division






Revenue ($ in millions)

$32 - $37


Production (Boe/d)

2,600 - 2,800

Adj. EBITDA Margin 
(as a % of revenue)

15% - 18%


Production Costs ($ per Boe)

$12.00 - $14.00

Maint. Capex ($ in millions)

$0.5 - $0.8


Maint. Capex ($ in millions)

$0.2 - $0.5

Use of Non-GAAP Financial Measures

New Source presents Adjusted EBITDA and DCF, which are non-GAAP financial measures, in this press release.  New Source defines Adjusted EBITDA as earnings before interest expense, taxes, depreciation, depletion and amortization, accretion expense, impairment, non-cash compensation expense, transaction fees, loss (gain) on derivative contracts net of cash received (paid) on settlement of derivative contracts and other non-recurring gains and losses.  New Source defines DCF as Adjusted EBITDA less cash interest expense and estimated maintenance capital expenditures, as defined below.

Maintenance capital expenditures represent the amount of capital expenditures necessary to maintain the revenue generating capabilities of the Partnership's assets at current levels over the long term.  We consider maintenance capital expenditures to be capital expenditures required to replace revenue generating assets (including production and producing reserves from our oil and natural gas operations and vehicles and other equipment from our oilfield services operations) on an individualized basis.

New Source believes that the presentation of these non-GAAP financial measures provides useful information to investors in assessing our results of operations. The tables included in this press release provide reconciliations of these non-GAAP financial measures to their most directly comparable financial measures calculated and presented in accordance with GAAP.  Non-GAAP financial measures should not be considered as an alternative to GAAP measures such as net income or any other measure of liquidity or financial performance calculated and presented in accordance with GAAP.  Investors should not consider Adjusted EBITDA or DCF in isolation or as a substitute for analysis of the Partnership's results as reported under GAAP.   Because Adjusted EBITDA and DCF may be defined differently by other companies in our industry, New Source's definitions may not be comparable to similarly titled measures of other companies, thereby diminishing their utility.

The following tables present a reconciliation of Adjusted EBITDA and DCF to net (loss) income, the most directly comparable financial measure calculated and presented in accordance with GAAP.

Reconciliation of Adjusted EBITDA and DCF to Net (Loss) Income:






Three Months Ended


Six Months Ended


June 30,


June 30,


2015


2014


2015


2014


(in thousands)

Net (loss) income attributable to New Source Energy Partners L.P.

$

(109,856)



$

1,586



$

(167,028)



$

54


Interest expense

1,749



1,015



3,097



1,984


Depreciation, depletion and amortization

5,999



10,289



18,346



19,567


Accretion expense

59



74



133



143


Impairment

99,689





142,808




Non-cash compensation expense

461



386



4,322



644


Transaction fees

358



1,321



1,052



3,232


Gain on investment in acquired business



(2,298)





(2,298)


Loss (gain) on derivative contracts, net

1,067



1,396



(157)



4,528


Cash received (paid) on settlement of derivative contracts

6,000



(983)



8,339



(3,412)


Other

433





1,152




Change in fair value of contingent consideration



(1,345)





(912)


Adjusted EBITDA

5,959



11,441



12,064



23,530


Cash paid for interest

956



860



2,105



1,859


Maintenance capital expenditures (1)

144



3,969



1,183



7,648


Distributable cash flow

$

4,859



$

6,612



$

8,776



$

14,023




(1)

Amounts reflect capital expenditures during the period presented. Future maintenance capital expenditures will vary depending on various factors, including, but not limited to, maintenance schedules and the timing of capital projects. Estimated maintenance capital expenditures for the three months ended June 30, 2015 relates to the Oilfield Services division. Of the estimated maintenance capital expenditures for the six months ended June 30, 2015, approximately $0.8 million relates to the Exploration and Production division and approximately $0.4 million relates to the Oilfield Services division.

 

Reconciliation of Adjusted EBITDA by Segment to Net Loss by Segment:






Three Months Ended


Six Months Ended


June 30, 2015


June 30, 2015


E&P


OFS


E&P


OFS


(in thousands)

Net loss attributable to New Source Energy Partners L.P.

$

(39,855)



$

(70,001)



$

(89,777)



$

(77,251)


Interest expense

1,234



515



2,101



996


Depreciation, depletion and amortization

3,561



2,438



8,280



10,066


Accretion expense

59





133




Impairment

32,905



66,784



76,024



66,784


Non-cash compensation expense

(511)



972



715



3,607


Transaction fees

358





1,052




Gain on derivative contracts, net

1,067





(157)




Cash received on settlement of derivative contracts

6,000





8,339




Other

255



178



632



520


Adjusted EBITDA

$

5,073



$

886



$

7,342



$

4,722


Conference Call

A conference call for investors will be held Monday, August 10, 2015, at 10:00 a.m. Central Time (11:00 a.m. Eastern Time) to discuss the Partnership's second quarter 2015 results.  Hosting the call will be Kristian B. Kos, Chairman and Chief Executive Officer, Dikran Tourian, President and Chief Operating Officer and Amber Bonney, Principal Accounting Officer.

The call can be accessed live over the telephone by dialing (877) 407-4018, or for international callers, (201) 689-8471. A replay will be available shortly after the call and can be accessed by dialing (877) 870-5176 or for international callers, (858) 384-5517. The pass code for the replay is 13616090. The replay will be available until August 24, 2015.

Interested parties may also listen to a simultaneous webcast of the conference call by logging onto the Partnership's website at www.newsource.com in the Investors-Presentations link. A replay of the webcast will also be available for approximately 30 days following the call.

About New Source Energy Partners L.P.

New Source Energy Partners L.P. is an independent energy partnership engaged in the production of its onshore oil and natural gas properties that extends across conventional resource reservoirs in east-central Oklahoma and in oilfield services that specialize in increasing efficiencies and safety in drilling and completion processes. For more information on the Partnership, please visit www.newsource.com.

Forward-Looking Statements

This news release contains "forward-looking statements" within the meaning of federal securities laws.  These statements express a belief, expectation or intention and are generally accompanied by words that convey projected future events or outcomes.  We have based these forward-looking statements on our current expectation and assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions and expected future developments, as well as other factors we believe are appropriate under the circumstances.  However, whether actual results and developments will conform with our expectations and predictions is subject to a number of risks and uncertainties, many of which are beyond our control. For a full discussion of these risks and uncertainties, please refer to the "Risk Factors" section of the Partnership's Annual Report on Form 10-K for the year ended December 31, 2014 and the information included in the Partnership's quarterly and current reports and other public filings. These forward-looking statements are based on and include the Partnership's expectations as of the date hereof.  We undertake no obligation to update or revise any forward-looking statements except as may be required by applicable law.

New Source Energy Partners L.P.
Condensed Consolidated Statements of Operations
(Unaudited)








Three Months Ended June 30,


Six Months Ended June 30,



2015


2014


2015


2014



(in thousands, except per unit amounts)


Revenues:









Oil sales

$

1,648



$

4,402



$

3,340



$

8,348



Natural gas sales

1,404



3,850



3,247



9,217



NGL sales

2,267



8,466



5,299



18,004



Oilfield services

18,765



10,100



50,315



18,676



Total revenues

24,084



26,818



62,201



54,245



Operating costs and expenses:









Oil, natural gas and NGL production

3,810



4,516



7,865



9,019



Production taxes

282



792



593



1,671



Cost of providing oilfield services

14,637



5,968



37,696



10,534



Depreciation, depletion and amortization

5,999



10,289



18,346



19,567



Accretion

59



74



133



143



Impairment

99,689





142,808





General and administrative

6,671



3,489



18,905



9,050



Total operating costs and expenses

131,147



25,128



226,346



49,984



Operating (loss) income

(107,063)



1,690



(164,145)



4,261



Other income (expense):









Interest expense

(1,749)



(1,015)



(3,097)



(1,984)



(Loss) gain on derivative contracts, net

(1,067)



(1,396)



157



(4,528)



  Gain on investment in acquired business



2,298





2,298



Other income

23



9



57



7



Net (loss) income

(109,856)



1,586



(167,028)



54



Less: net income attributable to noncontrolling interest









         distributions on Series A Preferred Units

988





988





accretion of discount on Series A Preferred Units

175





175





Net (loss) income attributable to New Source Energy Partners L.P.

$

(111,019)



$

1,586



$

(168,191)



$

54












Net (loss) income per unit:









Net income (loss) per general partner unit

$



$

0.11



$

(3.03)



$

(0.02)



Net (loss) income per subordinated unit

$

(6.06)



$

0.11



$

(9.30)



$

(0.02)



Net (loss) income per common unit

$

(5.93)



$

0.11



$

(8.97)



$

0.01


 

New Source Energy Partners L.P.

Condensed Consolidated Balance Sheets

(Unaudited)





June 30, 2015


December 31, 2014



(in thousands, except unit amounts)







ASSETS





Current assets:





Cash

$

5,734



$

5,504



Restricted cash

588



350



Accounts receivable, net

14,953



31,919



Accounts receivable-related parties, net

6,712



4,946



Derivative contracts

1,937



8,248



Inventory

3,530



4,236



Prepaid expenses

4,565



2,011



Other current assets

722



478



Total current assets

38,741



57,692








Oil and natural gas properties, at cost using full cost method of accounting:





Proved oil and natural gas properties

333,196



332,413



Less: Accumulated depreciation, depletion, amortization and impairment

(237,981)



(153,734)



Total oil and natural gas properties, net

95,215



178,679



Property and equipment, net

68,418



68,886



Intangible assets, net



56,377



Goodwill



9,315



Derivative contracts

3



1,818



Other assets

2,381



2,779



Total assets

$

204,758



$

375,546








LIABILITIES, REDEEMABLE PREFERRED UNITS AND UNITHOLDERS' EQUITY




Current liabilities:





Accounts payable and accrued liabilities

$

17,999



$

15,326



Accounts payable-related parties

1,346



2,318



Factoring payable

5,098



13,152



Contingent consideration payable

21,968



11,572



Current portion of long-term debt

19,458



11,825



Other current liabilities

117



113



Total current liabilities

65,986



54,306



Long-term debt

49,602



95,218



Contingent consideration payable



10,801



Asset retirement obligations

3,697



3,568



Other liabilities

237



339



Total liabilities

119,522



164,232



Commitments and contingencies










Series A Preferred Units (1,930,000 units issued and outstanding at June 30, 2015)

44,629










Unitholders' equity:





Common units (16,525,736 units issued and outstanding at June 30, 2015 and 16,160,381 units issued and outstanding at December 31, 2014)

76,153



231,510



Common units held in escrow

(3,734)



(6,955)



Subordinated units (2,205,000 units issued and outstanding at June 30, 2015 and December 31, 2014)

(49,232)



(28,717)



General partner's units (none issued and outstanding at June 30, 2015 and 155,102 units issued and outstanding at December 31, 2014)



(1,944)



Total New Source Energy Partners L.P. unitholders' equity

23,187



193,894



Noncontrolling interest

17,420



17,420



Total unitholders' equity

40,607



211,314



Total liabilities, redeemable preferred units and unitholders' equity

$

204,758



$

375,546



 

New Source Energy Partners Logo

Logo - http://photos.prnewswire.com/prnh/20150304/179446LOGO

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/new-source-energy-partners-reports-second-quarter-2015-results-revises-guidance-300125882.html

SOURCE New Source Energy Partners L.P.

Data & News supplied by www.cloudquote.io
Stock quotes supplied by Barchart
Quotes delayed at least 20 minutes.
By accessing this page, you agree to the following
Privacy Policy and Terms and Conditions.