LRR Energy, L.P. Announces Third Quarter 2012 Results

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LRR Energy, L.P. Announces Third Quarter 2012 Results

HOUSTON--(BUSINESS WIRE)-- LRR Energy, L.P. (NYS: LRE) ("LRR Energy") announced today its operating and financial results for the three and nine months ended September 30, 2012.

Highlights for the three months ended September 30, 2012

  • Reported quarterly records of average net production of 6,663 Boe per day and Adjusted EBITDA of $19.5 million (see reconciliation of Non-GAAP financial measures on page 9)
  • Increased Distribution Coverage Ratio to 1.14x for the three months ended September 30, 2012 (see reconciliation of Non-GAAP financial measures on page 9)
  • As planned, successfully completed eight new wells in our largest field, Red Lake, with better than expected initial production results
  • Successfully completed the Nowata #1ST well at our Pecos Slope field, with strong initial production results

Eric Mullins, Chairman and Co-Chief Executive Officer, commented, "We are pleased with our record third quarter results. Our strong quarter enabled us to increase our distribution and strengthen our distribution coverage ratio." Charlie Adcock, Co-Chief Executive Officer, reflected that, "During the third quarter, we continued to experience better than expected production results from our drilling program in our Red Lake field."

Our financial statements for the nine months ended September 30, 2012 have been recast as if we had owned the assets acquired on June 1, 2012 from Lime Rock Resources since our initial public offering, as the transaction was between entities under common control.

Results for the three months ended September 30, 2012

  • Total revenues were $9.2 million
  • Net loss was $15.6 million and net loss per limited partner unit (basic and diluted) was $0.69
  • Total cash capital expenditures were $13.1 million
  • Distributable Cash Flow was $12.2 million (see reconciliation of Non-GAAP financial measures on page 9)
  • Net losses on commodity derivative instruments totaled $15.7 million, including $5.8 million of realized gains and $21.5 million of unrealized losses
  • Lease operating expenses (LOE) were $6.9 million, or $11.29 per Boe
  • Production and ad valorem taxes were $2.0 million, or $3.24 per Boe
  • Depletion and depreciation expense was $8.3 million, or $13.49 per Boe
  • General and administrative expense was $2.3 million, or $3.74 per Boe
  • Interest expense was $2.1 million

Recent Events

On October 15, 2012, LRR Energy announced that the Board of Directors of its general partner declared a cash distribution for the third quarter of 2012 of $0.4775 per outstanding unit, or $1.91 on an annualized basis. The distribution will be paid on November 14, 2012 to all unitholders of record as of the close of business on October 30, 2012.

Our average net production for October 2012 was approximately 6,350 Boe/d.

2012 Guidance

We are increasing the low end of our production guidance range from 6,100 to 6,250 Boe/day. Our new range for full year 2012 production guidance is 6,250 to 6,400 Boe/day. We are also reaffirming the following previously disclosed 2012 guidance.

         
LOE ($/Boe)$10.50 - 11.00
 
Capital Expenditures ($MM)
Maintenance$21.0
Growth and other 10.0
Total$31.0
 

The guidance above sets forth management's best estimate based on current and anticipated market conditions and other factors. While we believe that these estimates and assumptions are reasonable, they are inherently uncertain and are subject to, among other things, significant business, economic, regulatory, environmental and competitive risks and uncertainties that could cause actual results to differ materially from those we anticipate, as set forth under "Forward-Looking Statements."

Commodity Derivative Contracts

As of September 30, 2012, LRR Energy had the following outstanding derivative contracts.

         
Index201220132014201520162017
Natural gas positions
Price swaps (MMBTUs)NYMEX-HH1,067,5117,267,5905,876,0995,326,5614,878,9902,558,556
Weighted average price$5.70$5.15$5.52$5.71$4.28$4.54
 
Basis swaps (MMBTUs)NYMEX1,697,2385,928,3405,242,9594,707,72795,710-
Weighted average price$(0.1114)$(0.1432)$(0.1559)$(0.1698)$(0.1087)$-
 
Collars (MMBTUs)NYMEX-HH697,429-----
Floor-Ceiling price$4.75/7.31$-$-$-$-$-
 
Puts (MMBTUs)NYMEX-HH96,635178,710----
Strike price$2.00$3.00$-$-$-$-
 
Oil positions
Price swaps (BBLs)NYMEX-WTI151,045620,772460,926398,253352,804-
Weighted average price$98.31$95.19$96.29$94.49$85.94$-
 
Puts (BBLs)NYMEX-WTI4,085-----
Strike price$70.00$-$-$-$-$-
 
NGL positions
Price swaps (BBLs)Mont Belvieu45,598144,323----
Weighted average price$51.29$50.49$-$-$-$-
 

Subsequent to September 30, 2012, LRR Energy entered into the following commodity hedges.

          
Index2017
Gas Hedges
Price swaps (MMBTUs)NYMEX-HH2,046,840
Weighted average price$4.71
 

Quarterly Report on Form 10-Q

LRR Energy expects to file its Quarterly Report on Form 10-Q with the Securities and Exchange Commission no later than November 14, 2012. The 10-Q will be available on the Investor Relations page of LRR Energy's website, www.lrrenergy.com, or from the Securities and Exchange Commission website, www.sec.gov.

Webcast and Conference Call

LRR Energy will host a webcast and conference call this morning, Monday, November 5, 2012 at 10:00 a.m. EST (9:00 a.m. CST) to discuss these results. Interested parties are invited to participate in the call by dialing 1-877-493-8071 (conference ID: 38666176). It is recommended that participants dial in approximately 10 minutes prior to the start of the conference call. Participants may access the webcast, titled "LRR Energy, L.P. Third Quarter 2012 Results Conference Call," from LRR Energy's website, www.lrrenergy.com, under the tab for "Investor Relations."

A telephonic replay will be available after the call through November 13, 2012. Participants may access this replay by dialing 1-800-585-8367 (conference ID: 38666176).

About LRR Energy, L.P.

LRR Energy is a Delaware limited partnership formed in April 2011 by affiliates of Lime Rock Resources to operate, acquire, exploit and develop producing oil and natural gas properties in North America. LRR Energy's properties are located in the Permian Basin region in West Texas and southeast New Mexico, the Mid-Continent region in Oklahoma and East Texas and the Gulf Coast region in Texas.

Forward-Looking Statements

This press release includes "forward-looking statements" — that is, statements related to future events. Forward-looking statements are based on the current expectations of LRR Energy and include any statement that does not directly relate to a current or historical fact. In this context, forward-looking statements often address expected future business and financial performance, and often contain words such as "may," "predict," "pursue," "expect," "estimate," "project," "plan," "believe," "intend," "achievable," "anticipate," "target," "continue," "potential," "should," "could" and other similar words. Forward-looking statements in this press release relate to, among other things, LRR Energy's expectations regarding future results, production volumes, lease operating expenses and capital expenditures. Actual results and future events could differ materially from those anticipated or implied in such statements. Forward-looking statements involve certain risks and uncertainties, and ultimately may not prove to be accurate. These risks and uncertainties include, among other things, a decline in oil, natural gas or NGL prices, the risk and uncertainties involved in producing oil and natural gas, competition in the oil and natural gas industry, governmental regulations and other factors. Actual results could differ materially from those anticipated or implied in the forward-looking statements due to the factors described under the captions "Risk Factors" in LRR Energy's Annual Report on Form 10-K for the year ended December 31, 2011 and LRR Energy's subsequent filings with the Securities and Exchange Commission. All forward-looking statements speak only as of the date of this press release. Other than required under the securities laws, LRR Energy does not intend to update or revise any forward-looking statements, whether as a result of new information, future events or circumstances, changes in expectations or otherwise. All forward-looking statements are qualified in their entirety by this cautionary statement.

      

LRR Energy, L.P.

Selected Operating Data

For the Three and Nine Months Ended September 30, 2012


(unaudited)

 

 

Three Months EndedNine Months Ended
September 30, 2012September 30, 2012
Production:
Oil (MBbls)192530
Natural gas (MMcf)2,0266,098
NGLs (MBbls) 83 214
Total (MBoe)6131,760
Average net production (Boe/d)6,6636,423
 
Average sales price:
Oil (per Bbl):
Sales price$85.95$89.46
Effect of realized commodity derivative instruments 5.54 4.03
Realized sales price$91.49$93.49
 
Natural gas (per Mcf):
Sales price$2.81$2.54
Effect of realized commodity derivative instruments 2.04 2.40
Realized sales price$4.85$4.94
 
NGLs (per Bbl):
Sales price$31.72$39.27
Effect of realized commodity derivative instruments 7.30 5.11
Realized sales price$39.02$44.38
 
Average unit costs per Boe:
Lease operating expenses$11.29$11.43
Production and ad valorem taxes$3.24$3.04
General and administrative expenses$3.74$4.88
Depletion and depreciation$13.49$15.98
      

LRR Energy, L.P.

Consolidated Condensed Statement of Operations

For the Three and Nine Months Ended September 30, 2012


(in thousands, except per unit amounts)

(unaudited)

 

Three Months
Ended

Nine Months
Ended

September 30,
2012

September 30,
2012

 
Revenues:
Oil sales$16,502$47,415
Natural gas sales5,69115,477
Natural gas liquids sales2,6338,403
Realized gain on commodity
derivative instruments5,80817,876
Unrealized loss on commodity
derivative instruments(21,463)(10,455)
Other income 30 33
Total revenues9,20178,749
 
Operating expenses:
Lease operating expense6,91920,127
Production and ad valorem taxes1,9875,348
Depletion and depreciation8,26728,126
Impairment of oil and natural gas
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