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Alta Mesa Announces Fourth Quarter & Full Year 2012 Financial Results and Operational Update
HOUSTON, March 26, 2013 (GLOBE NEWSWIRE) -- Alta Mesa Holdings, LP announced its financial results for the fourth quarter and full-year of 2012 and provided highlights of its recent operations. A conference call to discuss these results is scheduled for today at 11 a.m. Central time (877-317-6789, ID #10026105).
Financial and operational highlights of note for 2012 include the following:
- Adjusted EBITDAX totaled $193 million
- Production totaled 36.2 Bcfe, or 99.0 MMcfe/d
- Oil and liquids production totaled 2.4 million barrels, up 34% from 2011
- Realized gains on hedges totaled $37.2 million for 2012 (equivalent of $1.03/Mcfe)
Alta Mesa's oil and natural gas liquids production was up 34% in 2012 compared to full year 2011 production. This accounted for $59 million in additional revenue for the year. Production volumes for the fourth quarter of 2012 totaled 8.5 billion cubic feet of gas equivalent ("Bcfe"), or an average of 93.0 million cubic feet of natural gas equivalent per day ("MMcfe/d"), compared to 10.1 Bcfe or 110 MMcfe/d for the fourth quarter of 2011. Production volumes for full-year 2012 totaled 36.2 Bcfe, or an average of 99.0 MMcfe/d, compared to 41.7 Bcfe or 114 MMcfe/d for full-year 2011. Alta Mesa has developed its oil and liquids rich assets to increase the oil and natural gas liquids portion of its production from 24% in December 2010, to 31% in December 2011 and 45% in December 2012. Depending on various exploitation, early stage development and exploration results, the production mix is expected to be approximately 50% in 2013.
"Production month" volume for the fourth quarter of 2012, which does not include prior period adjustments, was 92.0 MMcfe/d, which was within the previously provided production guidance for Q4-2012 of 92 to 96 MMcfe/d. Production month volume for the first quarter of 2013 is expected to range between 86 and 90 MMcfe/d. (See note below related to "production month" and "accounting month" production).
Realized Revenue & Hedging
Oil and gas revenues for the fourth quarter of 2012 totaled $83.1 million, compared to oil and gas revenues of $86.9 million for the fourth quarter of 2011. Oil and gas revenues for full-year 2012 totaled $332.2 million, up slightly compared to oil and gas revenues of $323.9 million for full-year 2011. Realized prices for oil (including hedging gains and losses) were up 1% (down 1% before hedges), while natural gas prices (including hedging gains and losses) were down 6% (down 31% before hedges). Natural gas production was 29% lower in 2012 than 2011, while oil production was up by 34%. In order to protect the Company's future revenue streams and to maximize current year cash flow, Alta Mesa hedges natural gas and crude oil as far as five years into the future. Realized gains of the Company's hedge portfolio were $5.0 million for the fourth quarter of 2012, and $37.2 million for full-year 2012, compared to $21.5 million for full-year 2011. As of December 31, 2012, the Company had hedged approximately 81% of its forecasted Proved Developed Producing production through 2017 at average annual floor prices ranging from $4.72 per Mcf to $5.91 per Mcf, and $90.00 per barrel to $108.08 per barrel.
Lease Operating Expenses
Total lease operating expenses, inclusive of production taxes, ad valorem taxes and workover expenses, for the fourth quarter of 2012 were $26.9 million compared to $25.5 million for the fourth quarter of 2011. Total lease operating expenses, inclusive of production taxes, ad valorem taxes and workover expenses, for full-year 2012 were $105.3 million compared to $93.8 million for full-year 2011. The increase in lease operating expenses between the two annual periods is due primarily to an increase in the number of wells operated by the Company and higher oil production, which generally has higher lease operating expenses than equivalent amounts of gas. Additionally, ad valorem taxes moved up because of higher valuations and additional properties.
General and Administrative Expenses
General and administrative expenses for the fourth quarter of 2012 were $10.0 million compared to $8.8 million for the fourth quarter of 2011. General and administrative expenses for full-year 2012 were $40.2 million compared to $33.1 million for full-year 2011. The increase in general and administrative expenses between the annual periods was primarily the result of increased payroll for additional personnel, bonus accruals and increased consulting expenditures.
Adjusted EBITDAX (a non-GAAP financial measure, defined below) for the fourth quarter of 2012 was $46.8 million, compared to $53.4 million for the fourth quarter of 2011, and just below the provided guidance for Q4-2012 of $48 to $52 million. Adjusted EBITDAX for full-year 2012 was $192.6 million, compared to $200.5 million for full-year 2011. The decrease in Adjusted EBITDAX between the two annual periods is in large part a result of lower average natural gas price realizations and lower production in addition to increased lease operating expense and general and administrative costs. Adjusted EBITDAX for the first quarter of 2013 is estimated to range between $50 and $54 million.
Net Income (Loss)
Net income (loss) for the fourth quarter of 2012 was ($50.2) million, compared to a net income of $12.4 million for the fourth quarter of 2011. Net income (loss) for full-year 2012 was ($95.9) million, compared to net income of $65.2 million for full-year 2011. The difference in net income (loss) between the two annual periods is primarily due to non-cash impairment expense, $77 million and change in unrealized losses on oil and natural gas derivative contracts, $45 million.
Eagle Ford Shale:
Alta Mesa's Eagle Ford Shale oil production and oil reserves have grown significantly. Currently, Alta Mesa has interests in over 80 producing wells with approximately 3,400 net acres in the play. The wells are principally operated by Murphy Oil, which initially started with a 120 well development program in the oil and liquids-rich window of the play in Karnes County. These plans have grown to downspace to over 200 locations due to the benefits of downspacing. Alta Mesa also has minor interests in wells where the acreage it shares with Murphy has been pooled with that of adjacent operators. As of 12-31-12 Alta Mesa had 9.3 Mmboe of proved reserves in this field, which is up from 3.5 Mmboe at the end of 2011. Of this 9.3 Mmboe, 91% is oil with 40% being classified as Proved Developed. Capital spending in this area is expected to be approximately 20% of the Company's $250 to $270 million annual drilling budget. The crude sold from this field currently receives an average $8 to $12 per barrel premium over the West Texas Intermediate index price. Net production from this core area has increased by 105% from an average daily production rate in fourth quarter 2011 of 1,340 barrels of oil equivalent ("BOE"), to an average daily production rate in the fourth quarter of 2012 of 2,750 BOE.
Alta Mesa's assets in Oklahoma are located in large oil fields with multiple pay zones at depths that range from shallower than 5,000 feet to 8,000 feet. The fields are located in Kingfisher County, in the Sooner Trend field. These are predominantly long-lived oil fields that were drilled on 80-acre spacing and later waterflooded. Alta Mesa owns working interests in five large units, the Lincoln North Unit the Lincoln SE Unit, the Hennessey Unit, the East Hennessey Unit and the Dover Unit. In the past year, Alta Mesa has deepened, re-activated or drilled 15 vertical wells to the Mississippi Lime or Hunton formations. This effort was designed to further build the Company's drilling and completions knowledge base in these formations with the goal of creating the foundation for an optimal development program for 2013 and beyond. In conjunction with this, the Company has increased the technical personnel dedicated to this core operating area. Alta Mesa initiated its horizontal drilling program targeting the Mississippi Lime formation near the end of the fourth quarter of 2012. As of 12-31-12 Alta Mesa had 8.7 Mmboe of proved reserves in this core area, which is down from 10.0 Mmboe at the end of 2011. The decrease is due to reserve revisions related to natural gas prices. Of this 8.7 Mmboe, 75% is oil with 75% being classified as Proved Developed. Capital spending in this area is expected to be approximately 20% of the Company's annual drilling budget. The capital expenditures for this area could increase relative to the results of the initial Mississippi Lime and Hunton horizontal wells. Net production from this core area has increased by 6% from an average daily production rate in fourth quarter 2011 of 950 BOE, to an average daily production rate in the fourth quarter of 2012 of 1,010 BOE.
The Weeks Island Field, located in Iberia Parish, Louisiana, contains some of Alta Mesa's largest developed oil reserves. The Company operates all of the wells in this field in which it has a working interest. Since acquiring this field in 2010, the Company has greatly enhanced field infrastructure and maintained a continuous one to two rig drilling program to exploit over 50 potential pay zones that we believe offer significant opportunities for added production and reserves. As of 12-31-12 Alta Mesa had 4.5 Mmboe of proved reserves in this field, which is up from 3.2 Mmboe at the end of 2011. Of this 4.5 Mmboe, 94% is oil with 43% being classified as Proved Developed. Capital spending in this area is expected to be approximately 22% of the Company's annual drilling budget. The Weeks Island oil sales contracts are based on the Louisiana Light Sweet crude market price index, which has been consistently higher than the West Texas Intermediate index in 2012. Net production from this core area has increased by 40% from an average daily production rate in fourth quarter 2011 of 1,720 BOE, to an average daily production rate in the fourth quarter of 2012 of 2,400 BOE.
East Texas Area:
Alta Mesa derives production from several fields in Robertson, Leon, San Jacinto, Montgomery and Polk Counties, including Hilltop, Urbana, Cold Springs, and Anne Parsons. During the past year Alta Mesa's primary effort in Polk, San Jacinto and Montgomery Counties has been to further exploit the multiple shallow oil and liquids rich gas opportunities in the normally pressured Yegua and Wilcox formations while gathering geophysical, geologic and engineering data to further define opportunities in these and other formations. In Leon and Robertson Counties, we believe formations with commercial potential in our leasehold include the Woodbine, Austin Chalk, Eagle Ford, Pettet, James Lime, Glen Rose, Buda, Knowles Lime Bossier Sand, Bossier Shale and Travis Peak. Last year the Company drilled a vertical Woodbine well in which it has 100% working interest and EnCana drilled five horizontal Woodbine/Eagle Ford (Eaglebine) wells in which the Company has interest. Alta Mesa and other area operators are defining optimal practices that may lead to profitable development of the Eaglebine in the area; consequently, the Company is currently not allocating significant capital resources to Eagle Ford and/or Woodbine in 2013. The Company did not invest significant capital to develop dry gas reserves and resources in the Deep Bossier in 2012 and the majority of Alta Mesa's acreage in Leon and Robertson Counties is being held by production. As of 12-31-12 Alta Mesa had 43 Bcfe of proved reserves in this field, which is down from 68 Bcfe at the end of 2011. The decrease is due to price related reserve revisions. Of this 43 Bcfe, 58% is gas with 84% being classified as Proved Developed. Capital spending in East Texas is expected to be approximately 10% of the Company's annual drilling budget. The average daily production rate in fourth quarter 2011 was 60.4 MMcfe compared to an average daily production rate in the fourth quarter of 2012 of 33.7 MMcfe.
Conference Call Information
Alta Mesa invites you to listen to its conference call which will discuss its financial and operational results at 11:00 a.m., Central time, on Tuesday, March 26, 2013. If you wish to participate in this conference call, dial 877-317-6789 (toll free in US/Canada) or 412-317-6789 (for International calls), five to ten minutes before the scheduled start time and reference Conference ID # 10026105. A webcast of the call and any related materials will be available on Alta Mesa's website at www.altamesa.net. Additionally, a replay of the conference call will be available for one week following the live broadcast by dialing 877-344-7529 (toll free in US/Canada) or 412-317-0088 (International calls), and referencing Conference ID # 10026105.
Alta Mesa Holdings, LP is a privately held company engaged in onshore oil and natural gas acquisition, exploitation, exploration and production whose focus is to maximize the profitability of our assets in a safe and environmentally sound manner. We seek to maintain a portfolio of lower risk properties in plays where we identify a large inventory of drilling, development, and enhanced recovery and exploitation opportunities in known resources. We maximize the profitability of our assets by focusing on advanced engineering analytics, enhanced geological techniques including 3-D seismic analysis, and proven drilling, stimulation, completion, and production methods. Alta Mesa Holdings, LP is headquartered in Houston, Texas.
Safe Harbor Statement and Disclaimer
This press release includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical fact, regarding Alta Mesa's strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. When used in this press release, the words "could", "should", "will", "play", "believe", "anticipate", "intend", "estimate", "expect", "project" and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. These forward-looking statements are based on Alta Mesa's current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events. These forward-looking statements are based on management's current belief, based on currently available information, as to the outcome and timing of future events. Forward-looking statements may include statements about Alta Mesa's: business strategy; reserves; financial strategy, liquidity and capital required for our development program; realized oil and natural gas prices; timing and amount of future production of oil and natural gas; hedging strategy and results; future drilling plans; competition and government regulations; marketing of oil and natural gas; leasehold or business acquisitions; costs of developing our properties; general economic conditions; credit markets; liquidity and access to capital; uncertainty regarding our future operating results; and plans, objectives, expectations and intentions contained in this press release that are not historical. We caution you that these forward-looking statements are subject to all of the risks and uncertainties, most of which are difficult to predict and many of which are beyond our control, incident to the exploration for and development and production of oil and natural gas. These risks include, but are not limited to, commodity price volatility, low prices for oil and/or natural gas, global economic conditions, inflation, lack of availability of drilling and production equipment and services, environmental risks, drilling and other operating risks, regulatory changes, the uncertainty inherent in estimating oil and natural gas reserves and in projecting future rates of production, cash flow and access to capital, the timing of development expenditures, and other risks. Reserve engineering is a process of estimating underground accumulations of oil and natural gas that cannot be measured in an exact way. The accuracy of any reserve estimate depends on the quality of available data, the interpretation of such data and price and cost assumptions made by reservoir engineers. In addition, the results of drilling, testing and production activities may justify revisions of estimates that were made previously. If significant, such revisions would change the schedule of any further production and development drilling. Accordingly, reserve estimates may differ significantly from the quantities of oil and natural gas that are ultimately recovered. Should one or more of the risks or uncertainties described in this press release occur, or should underlying assumptions prove incorrect, our actual results and plans could differ materially from those expressed in any forward-looking statements. All forward-looking statements, expressed or implied, included in this press release are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that we may issue. Except as otherwise required by applicable law, we disclaim duty to update any forward-looking statements, all of which are expressly qualified by the statements in this section, to reflect events or circumstances after the date of this report.
|Alta Mesa Holdings, LP and Subsidiaries|
|Consolidated Statements of Operations|
|Year Ended December 31,|
|(dollars in thousands)|
|Natural gas liquids||12,277||12,605||6,844|
|Sale of oil and natural gas prospects||2,005||467||666|
|Unrealized gain (loss) — oil and natural gas derivative contracts||(17,434)||28,169||10,088|
|Lease and plant operating expense||69,047||62,637||41,905|
|Production and ad valorem taxes||23,485||19,357||11,141|
|Depreciation, depletion, and amortization expense||109,252||94,251||59,090|
|General and administrative expense||40,222||33,087||20,135|
|(Gain) on sale of assets||—||—||(1,766)|
|INCOME (LOSS) FROM OPERATIONS||(55,399)||96,766||41,380|
|OTHER INCOME (EXPENSE)|
|Gain on contract settlement||—||1,285||—|
|TOTAL OTHER INCOME (EXPENSE)||(40,583)||(31,359)||(27,149)|
|INCOME (LOSS) BEFORE STATE INCOME TAXES||(95,982)||65,407||14,231|
|BENEFIT FROM (PROVISION FOR) STATE INCOME TAXES||107||(228)||(2)|
|NET INCOME (LOSS)||$(95,875)||$65,179||$14,229|
|Alta Mesa Holdings, LP and Subsidiaries|
|Consolidated Balance Sheets|
|(dollars in thousands)|
|Cash and cash equivalents||$5,786||$2,630|
|Accounts receivable, net||40,715||40,807|
|Prepaid expenses and other current assets||4,501||5,394|
|Derivative financial instruments||21,360||28,582|
|TOTAL CURRENT ASSETS||79,082||80,219|
|PROPERTY AND EQUIPMENT|
|Oil and natural gas properties, successful efforts method, net||639,466||572,816|
|Other property and equipment, net||16,031||16,351|
|TOTAL PROPERTY AND EQUIPMENT, net||655,497||589,167|
|Investment in Partnership — cost||9,000||9,000|
|Deferred financing costs, net||13,685||12,802|
|Derivative financial instruments||14,066||24,244|
|Advances to operators||9,416||3,625|
|Deposits and other assets||1,686||1,026|
|TOTAL OTHER ASSETS||47,853||50,697|
|LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)|
|Accounts payable and accrued liabilities||$112,684||$70,295|
|Current portion, asset retirement obligations||64||3,030|
|Derivative financial instruments||91||1,300|
|TOTAL CURRENT LIABILITIES||112,839||74,625|
|Asset retirement obligations, net of current portion||48,529||43,066|
|Notes payable to founder||22,123||20,911|
|Derivative financial instruments||—||57|
|Other long-term liabilities||3,451||4,716|
|TOTAL LONG-TERM LIABILITIES||675,961||555,786|
|COMMITMENTS AND CONTINGENCIES (NOTE 11)|
|PARTNERS' CAPITAL (DEFICIT)||(6,368)||89,672|
|TOTAL LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)||$782,432||$720,083|
|Alta Mesa Holdings, LP and Subsidiaries|
|Consolidated Statement of Cash Flows|
|(unaudited - dollars in thousands)|
|Year Ended December 31,|
|(dollars in thousands)|
|CASH FLOWS FROM OPERATING ACTIVITIES|
|Net income (loss)||$(95,875)||$65,179||$14,229|
|Adjustments to reconcile net income (loss) to net cash provided by operating activities:|
|Depreciation, depletion and amortization expense||109,252||94,251||59,090|
|(Gain) on sale of assets||—||—||(1,766)|
|Dry hole expense||8,454||6,064||15,834|
|Amortization of loan costs||2,424||2,813||4,240|
|Amortization of debt discount||322||260||65|
|Unrealized (gain) loss on derivatives||16,134||(32,256)||(10,974)|
|(Gain) on contract settlement||—||(1,285)||—|
|Interest converted into debt||1,212||1,202||1,379|
|Settlement of asset retirement obligation||(2,453)||(1,823)||(453)|
|Deferred state tax provision||—||228||—|
|Changes in operating assets and liabilities:|
|Prepaid expenses and other non-current assets||(5,558)||(4,478)||(3,305)|
|Accounts payable, accrued liabilities and other long-term liabilities||19,063||(949)||(13,056)|
|NET CASH PROVIDED BY OPERATING ACTIVITIES||147,193||150,655||61,185|
|CASH FLOWS FROM INVESTING ACTIVITIES|
|Capital expenditures for property and equipment||(224,719)||(193,770)||(110,083)|
|Proceeds from sale of assets||—||—||3,030|
|NET CASH USED IN INVESTING ACTIVITIES||(255,065)||(266,133)||(208,412)|
|CASH FLOWS FROM FINANCING ACTIVITIES|
|Proceeds from long-term debt||270,000||130,500||584,421|
|Repayments of long-term debt||(155,500)||(15,000)||(420,056)|
|Additions to deferred financing costs||(3,307)||(2,063)||(16,341)|
|NET CASH PROVIDED BY FINANCING ACTIVITIES||111,028||113,272||147,789|
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS||3,156||(2,206)||562|
|CASH AND CASH EQUIVALENTS, beginning of year||2,630||4,836||4,274|
|CASH AND CASH EQUIVALENTS, end of year||$5,786||$2,630||$4,836|
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION|
|Cash paid during the year for interest||$36,853||$32,069||$21,537|
|Cash paid during the year for taxes||$ 124||$ —||$ —|
|Change in asset retirement obligations||$1,661||$587||$609|
|Asset retirement obligations assumed, purchased properties||$1,476||$2,807||$30,920|
|Change in accruals or liabilities for capital expenditures||$22,061||$(17,478)||$36,025|
Below is a table of average hedged and unhedged prices received by the Company.
|Hedged - Average Realized Prices||Q4-2012||2012|
|Natural Gas (per Mcf)||$4.46||$4.56|
|Oil (per Bbl)||100.11||103.18|
|Natural Gas Liquids (per Bbl)||41.42||45.03|
|Combined realized (per Mcfe)||9.74||9.17|
|Unhedged – Average Prices||Q4-2012||2012|
|Natural Gas (per Mcf)||$3.33||$2.80|
|Oil (per Bbl)||100.45||103.72|
|Combined (per Mcfe)||9.15||8.14|
*Production Volumes: Production Month versus Accounting Month
Alta Mesa provides quarterly "production month" volume guidance based on the anticipated forthcoming production and then reports the actual "production month" volumes in its quarterly earnings press release so that the market can note how Alta Mesa performed relative to its stated guidance. The volume amounts reported in the Company's quarterly reports on Form 10-Q filed with the Securities and Exchange Commission show the "accounting month" volumes which incorporate prior period adjustments. These amounts generally differ slightly from the "production month" volumes reported in the press release.
The "accounting month" production volumes for the fourth quarter of 2012 totaled 8.5 Bcfe, or an average of 93 MMcfe/d, and the "production month" production volumes for the fourth quarter of 2012 totaled 8.4 Bcfe, or an average of 92 MMcfe/d.
GAAP to Non-GAAP Reconciliation
Adjusted EBITDAX is a non-GAAP financial measure and as used herein represents net income before interest expense, exploration expense, depletion, depreciation and amortization, impairment of oil and natural gas properties, accretion of asset retirement obligations, tax expense, unrealized gain/loss on oil and natural gas derivative contracts. Alta Mesa presents Adjusted EBITDAX because it believes Adjusted EBITDAX is an important supplemental measure of its performance that is frequently used by others in evaluating companies in its industry. Adjusted EBITDAX is not a measurement of Alta Mesa's financial performance under GAAP, and should not be considered as an alternative to net income, operating income or any other performance measure derived in accordance with GAAP or as an alternative to net cash provided by operating activities as a measure of Alta Mesa's profitability or liquidity. Adjusted EBITDAX has significant limitations, including that it does not reflect Alta Mesa's cash requirements for capital expenditures, contractual commitments, working capital or debt service. In addition, other companies may calculate Adjusted EBITDAX differently than Alta Mesa does, limiting its usefulness as a comparative measure.
The following table sets forth a reconciliation of net income as determined in accordance with GAAP to Adjusted EBITDAX for the periods indicated:
|Twelve Months Ended||Three Months Ended|
|Dec 31,||Dec 31,|
|Net Income (loss)||$(95,875)||$65,179||$(50,240)||$12,393|
|Adjustments to net income:|
|Provision (benefit) for income taxes||(107)||228||(107)||78|
|Unrealized (gain)/loss - oil & gas hedges||17,434||(28,169)||(2,511)||(2,875)|
|Depreciation, depletion and amortization||109,252||94,251||33,091||28,064|
CONTACT: Lance L. Weaver (281) 943-5597 email@example.com
The following information was filed by Alta Mesa Holdings, Lp on Tuesday, March 26, 2013 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-K Annual Report statement of earnings and operation as management may choose to highlight particular information in the press release.
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