x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
¨
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
Delaware
|
65-1177591
|
(State
or other jurisdiction of incorporation or organization)
|
(IRS
Employer
Identification
No.)
|
600
Travis, Suite 5100
Houston,
Texas
|
77002
|
(Address
of principal executive offices)
|
(Zip
Code)
|
(281) 840-4000
(Registrant’s
telephone number, including area code)
|
March
31,
|
December 31,
|
|||||||
2009
|
2008
|
|||||||
(Unaudited)
|
||||||||
(in
thousands,
except
unit amounts)
|
||||||||
Assets
|
||||||||
Current
assets:
|
||||||||
Cash
and cash equivalents
|
$ | 22,893 | $ | 28,668 | ||||
Accounts
receivable – trade, net
|
110,561 | 138,983 | ||||||
Derivative
instruments
|
428,638 | 368,951 | ||||||
Other
current assets
|
47,142 | 27,329 | ||||||
Total
current assets
|
609,234 | 563,931 | ||||||
Noncurrent
assets:
|
||||||||
Oil
and gas properties (successful efforts method)
|
3,901,557 | 3,831,183 | ||||||
Less
accumulated depletion and amortization
|
(329,248 | ) | (278,805 | ) | ||||
3,572,309 | 3,552,378 | |||||||
Other
property and equipment
|
114,131 | 111,459 | ||||||
Less
accumulated depreciation
|
(15,773 | ) | (13,171 | ) | ||||
98,358 | 98,288 | |||||||
Derivative
instruments
|
480,067 | 493,705 | ||||||
Other
noncurrent assets
|
12,950 | 13,718 | ||||||
493,017 | 507,423 | |||||||
Total
noncurrent assets
|
4,163,684 | 4,158,089 | ||||||
Total
assets
|
$ | 4,772,918 | $ | 4,722,020 | ||||
Liabilities
and Unitholders’ Capital
|
||||||||
Current
liabilities:
|
||||||||
Accounts
payable and accrued expenses
|
$ | 144,208 | $ | 163,662 | ||||
Derivative
instruments
|
35,724 | 47,005 | ||||||
Other
accrued liabilities
|
15,965 | 27,163 | ||||||
Total
current liabilities
|
195,897 | 237,830 | ||||||
Noncurrent
liabilities:
|
||||||||
Credit
facility
|
1,428,393 | 1,403,393 | ||||||
Senior
notes, net
|
250,265 | 250,175 | ||||||
Derivative
instruments
|
55,624 | 39,350 | ||||||
Other
noncurrent liabilities
|
33,352 | 30,586 | ||||||
Total
noncurrent liabilities
|
1,767,634 | 1,723,504 | ||||||
Unitholders’
capital:
|
||||||||
114,975,396
and 114,079,533 units issued and outstanding at March 31, 2009 and
December 31, 2008, respectively
|
2,038,389 | 2,109,089 | ||||||
Accumulated
income
|
770,998 | 651,597 | ||||||
2,809,387 | 2,760,686 | |||||||
Total
liabilities and unitholders’ capital
|
$ | 4,772,918 | $ | 4,722,020 |
Three
Months Ended
March 31,
|
||||||||
2009
|
2008
|
|||||||
(in
thousands, except per unit amounts)
|
||||||||
Revenues
and other:
|
||||||||
Oil,
gas and natural gas liquid sales
|
$ | 79,864 | $ | 175,872 | ||||
Gain
(loss) on oil and gas derivatives
|
161,315 | (268,794 | ) | |||||
Gas
marketing revenues
|
516 | 2,816 | ||||||
Other
revenues
|
966 | 479 | ||||||
242,661 | (89,627 | ) | ||||||
Expenses:
|
||||||||
Lease
operating expenses
|
33,732 | 19,490 | ||||||
Transportation
expenses
|
2,967 | 3,328 | ||||||
Gas
marketing expenses
|
340 | 2,417 | ||||||
General
and administrative expenses
|
23,301 | 19,076 | ||||||
Exploration
costs
|
1,565 | 2,620 | ||||||
Depreciation,
depletion and amortization
|
52,104 | 44,370 | ||||||
Taxes,
other than income taxes
|
7,567 | 12,973 | ||||||
(Gain)
loss on sale of assets and other, net
|
(26,711 | ) | ― | |||||
94,865 | 104,274 | |||||||
Other
income and (expenses):
|
||||||||
Interest
expense, net of amounts capitalized
|
(14,409 | ) | (25,293 | ) | ||||
Loss
on interest rate swaps
|
(11,571 | ) | (39,393 | ) | ||||
Other,
net
|
(393 | ) | (163 | ) | ||||
(26,373 | ) | (64,849 | ) | |||||
Income
(loss) from continuing operations before income taxes
|
121,423 | (258,750 | ) | |||||
Income
tax expense
|
(136 | ) | (209 | ) | ||||
Income
(loss) from continuing operations
|
121,287 | (258,959 | ) | |||||
Discontinued
operations:
|
||||||||
Loss
on sale of assets, net of taxes
|
(1,048 | ) | (294 | ) | ||||
Loss
from discontinued operations, net of taxes
|
(838 | ) | (106 | ) | ||||
(1,886 | ) | (400 | ) | |||||
Net
income (loss)
|
$ | 119,401 | $ | (259,359 | ) | |||
Income
(loss) per unit – continuing operations:
|
||||||||
Units
– basic
|
$ | 1.06 | $ | (2.28 | ) | |||
Units
– diluted
|
$ | 1.06 | $ | (2.28 | ) | |||
Loss
per unit – discontinued operations:
|
||||||||
Units
– basic
|
$ | (0.02 | ) | $ | ― | |||
Units
– diluted
|
$ | (0.02 | ) | $ | ― | |||
Net
income (loss) per unit:
|
||||||||
Units
– basic
|
$ | 1.04 | $ | (2.28 | ) | |||
Units
– diluted
|
$ | 1.04 | $ | (2.28 | ) | |||
Weighted
average units outstanding:
|
||||||||
Units
– basic
|
113,473 | 113,757 | ||||||
Units
– diluted
|
113,502 | 113,757 | ||||||
Distributions
declared per unit
|
$ | 0.63 | $ | 0.63 |
Units
|
Unitholders’
Capital
|
Accumulated
Income
|
Treasury
Units
(at
Cost)
|
Total
Unitholders’
Capital
|
||||||||||||||||
(in
thousands)
|
||||||||||||||||||||
December 31,
2008
|
114,080 | $ | 2,109,089 | $ | 651,597 | $ | ― | $ | 2,760,686 | |||||||||||
Issuance
of units
|
1,072 | ― | ― | ― | ― | |||||||||||||||
Cancellation
of units
|
(177 | ) | (2,465 | ) | ― | 2,465 | ― | |||||||||||||
Purchase
of units
|
― | ― | (2,465 | ) | (2,465 | ) | ||||||||||||||
Distributions
to unitholders
|
(72,538 | ) | ― | ― | (72,538 | ) | ||||||||||||||
Unit-based
compensation expenses
|
4,303 | ― | ― | 4,303 | ||||||||||||||||
Net
income
|
― | 119,401 | ― | 119,401 | ||||||||||||||||
March 31,
2009
|
114,975 | $ | 2,038,389 | $ | 770,998 | $ | ― | $ | 2,809,387 |
Three
Months Ended
March 31,
|
||||||||
2009
|
2008
|
|||||||
(in
thousands)
|
||||||||
Cash
flow from operating activities:
|
||||||||
Net
income (loss)
|
$ | 119,401 | $ | (259,359 | ) | |||
Adjustments
to reconcile net income (loss) to net cash provided by operating
activities:
|
||||||||
Depreciation,
depletion and amortization
|
52,104 | 50,587 | ||||||
Unit-based
compensation expenses
|
4,303 | 3,888 | ||||||
Amortization
and write-off of deferred financing fees and other
|
2,487 | 1,876 | ||||||
(Gain)
loss on sale of assets, net
|
(24,663 | ) | 294 | |||||
Mark-to-market
on derivatives:
|
||||||||
Total
(gains) losses
|
(149,744 | ) | 308,187 | |||||
Cash
settlements
|
104,430 | (1,958 | ) | |||||
Cash
settlements on canceled derivatives
|
4,257 | ― | ||||||
Premiums
paid for derivatives
|
― | (1,278 | ) | |||||
Changes
in assets and liabilities:
|
||||||||
(Increase)
decrease in accounts receivable – trade, net
|
42,371 | (45,878 | ) | |||||
(Increase)
decrease in other assets
|
(20,150 | ) | 1,245 | |||||
Increase
(decrease) in accounts payable and accrued expenses
|
(30,020 | ) | 1,554 | |||||
Increase
(decrease) in other liabilities
|
(9,806 | ) | 2,042 | |||||
Net
cash provided by operating activities
|
94,970 | 61,200 | ||||||
Cash
flow from investing activities:
|
||||||||
Acquisition
of oil and gas properties
|
― | (515,894 | ) | |||||
Development
of oil and gas properties
|
(67,984 | ) | (92,739 | ) | ||||
Purchases
of other property and equipment
|
(2,767 | ) | (4,661 | ) | ||||
Proceeds
from sales of oil and gas properties and other property and
equipment
|
11,934 | ― | ||||||
Net
cash used in investing activities
|
(58,817 | ) | (613,294 | ) | ||||
Cash
flow from financing activities:
|
||||||||
Purchase
of units
|
(2,465 | ) | (1,451 | ) | ||||
Proceeds
from issuance of debt
|
75,000 | 667,000 | ||||||
Principal
payments on debt
|
(50,000 | ) | (44,927 | ) | ||||
Distributions
to unitholders
|
(72,538 | ) | (72,189 | ) | ||||
Financing
fees and other, net
|
8,075 | 3,296 | ||||||
Net
cash provided by (used in) financing activities
|
(41,928 | ) | 551,729 | |||||
Net
decrease in cash and cash equivalents
|
(5,775 | ) | (365 | ) | ||||
Cash
and cash equivalents:
|
||||||||
Beginning
|
28,668 | 1,441 | ||||||
Ending
|
$ | 22,893 | $ | 1,076 |
(1)
|
Basis
of Presentation
|
(2)
|
Acquisitions,
Divestitures and Discontinued
Operations
|
Three
Months Ended March 31,
|
||||||||
2009
|
2008
|
|||||||
(in
thousands)
|
||||||||
Total
revenues and other
|
$ | (1,211 | ) | $ | 21,161 | |||
Total
operating expenses
|
373 | (14,176 | ) | |||||
Interest
expense
|
― | (7,091 | ) | |||||
Loss
from discontinued operations, net of taxes
|
$ | (838 | ) | $ | (106 | ) |
(3)
|
Unitholders’
Capital
|
(4)
|
Oil
and Gas Capitalized
Costs
|
March
31,
2009
|
December 31,
2008
|
|||||||
(in
thousands)
|
||||||||
Proved
properties:
|
||||||||
Leasehold
acquisition
|
$ | 3,278,033 | $ | 3,278,155 | ||||
Development
|
531,173 | 460,730 | ||||||
Unproved
properties
|
92,351 | 92,298 | ||||||
3,901,557 | 3,831,183 | |||||||
Less
accumulated depletion and amortization
|
(329,248 | ) | (278,805 | ) | ||||
$ | 3,572,309 | $ | 3,552,378 |
(5)
|
Business
and Credit Concentrations
|
(6)
|
Debt
|
March 31,
2009
|
December 31,
2008
|
|||||||
(in
thousands)
|
||||||||
Credit
facility (1)
|
$ | 1,428,393 | $ | 1,403,393 | ||||
Senior
notes, net (2)
|
250,265 | 250,175 | ||||||
Less
current maturities
|
― | ― | ||||||
$ | 1,678,658 | $ | 1,653,568 |
|
(1)
|
Variable
interest rate of 2.03% at March 31, 2009, and 2.47% at
December 31, 2008.
|
|
(2)
|
Fixed
interest rate of 9.875% and effective interest rate of
10.25%. Amount is net of unamortized discount of approximately
$5.7 million and $5.8 million at March 31, 2009, and
December 31, 2008,
respectively.
|
(7)
|
Derivatives
|
Year
2009
|
Year
2010
|
Year
2011
|
Year
2012
|
Year
2013
|
Year
2014
|
|||||||||||||||||||
Gas
Positions:
|
||||||||||||||||||||||||
Fixed
Price Swaps:
|
||||||||||||||||||||||||
Hedged
Volume (MMMBtu)
|
29,689 | 39,566 | 31,901 | 14,676 | ― | ― | ||||||||||||||||||
Average
Price ($/MMBtu)
|
$ | 8.53 | $ | 8.50 | $ | 8.50 | $ | 8.57 | $ | ― | $ | ― | ||||||||||||
Puts:
|
||||||||||||||||||||||||
Hedged
Volume (MMMBtu)
|
5,220 | 6,960 | 6,960 | ― | ― | ― | ||||||||||||||||||
Average
Price ($/MMBtu)
|
$ | 7.50 | $ | 7.50 | $ | 7.50 | $ | ― | $ | ― | $ | ― | ||||||||||||
PEPL
Puts: (1)
|
||||||||||||||||||||||||
Hedged
Volume (MMMBtu)
|
4,001 | 10,634 | 13,259 | 5,934 | ― | ― | ||||||||||||||||||
Average
Price ($/MMBtu)
|
$ | 7.85 | $ | 7.85 | $ | 7.85 | $ | 7.85 | $ | ― | $ | ― | ||||||||||||
Total:
|
||||||||||||||||||||||||
Hedged
Volume (MMMBtu)
|
38,910 | 57,160 | 52,120 | 20,610 | ― | ― | ||||||||||||||||||
Average
Price ($/MMBtu)
|
$ | 8.32 | $ | 8.26 | $ | 8.20 | $ | 8.37 | $ | ― | $ | ― | ||||||||||||
Oil
Positions:
|
||||||||||||||||||||||||
Fixed
Price Swaps:
|
||||||||||||||||||||||||
Hedged
Volume (MBbls)
|
1,828 | 2,150 | 2,073 | 2,025 | 2,275 | 2,200 | ||||||||||||||||||
Average
Price ($/Bbl)
|
$ | 90.00 | $ | 90.00 | $ | 84.22 | $ | 84.22 | $ | 84.22 | $ | 84.22 | ||||||||||||
Puts:
(2)
|
||||||||||||||||||||||||
Hedged
Volume (MBbls)
|
1,382 | 2,250 | 2,352 | 500 | ― | ― | ||||||||||||||||||
Average
Price ($/Bbl)
|
$ | 120.00 | $ | 110.00 | $ | 69.11 | $ | 77.73 | $ | ― | $ | ― | ||||||||||||
Collars:
|
||||||||||||||||||||||||
Hedged
Volume (MBbls)
|
187 | 250 | 276 | 348 | ― | ― | ||||||||||||||||||
Average
Floor Price ($/Bbl)
|
$ | 90.00 | $ | 90.00 | $ | 90.00 | $ | 90.00 | $ | ― | $ | ― | ||||||||||||
Average
Ceiling Price ($/Bbl)
|
$ | 114.25 | $ | 112.00 | $ | 112.25 | $ | 112.35 | $ | ― | $ | ― | ||||||||||||
Total:
|
||||||||||||||||||||||||
Hedged
Volume (MBbls)
|
3,397 | 4,650 | 4,701 | 2,873 | 2,275 | 2,200 | ||||||||||||||||||
Average
Price ($/Bbl)
|
$ | 102.21 | $ | 99.68 | $ | 77.00 | $ | 83.79 | $ | 84.22 | $ | 84.22 | ||||||||||||
Gas
Basis Differential Positions:
|
||||||||||||||||||||||||
PEPL
Basis Swaps:
|
||||||||||||||||||||||||
Hedged
Volume (MMMBtu)
|
35,187 | 43,166 | 35,541 | 34,066 | 31,700 | ― | ||||||||||||||||||
Hedged
Differential ($/MMBtu)
|
$ | (0.97 | ) | $ | (0.97 | ) | $ | (0.96 | ) | $ | (0.95 | ) | $ | (1.01 | ) | $ | ― |
|
(1)
|
Settle
on the Panhandle Eastern Pipeline (“PEPL”) spot price of gas to hedge
basis differential associated with gas production in the Mid-Continent
Deep and Mid-Continent Shallow
regions.
|
|
(2)
|
The
Company utilizes oil puts to hedge revenues associated with its NGL
production.
|
Year
2009
|
Year
2010
|
Year
2011
|
Year
2012
|
Year
2013 (1)
|
||||||||||||||||
(dollars
in thousands)
|
||||||||||||||||||||
Notional
Amount
|
$ | 1,250,000 | $ | 1,250,000 | $ | 1,250,000 | $ | 1,250,000 | $ | 1,250,000 | ||||||||||
Fixed
Rate
|
3.80 | % | 3.80 | % | 3.80 | % | 3.80 | % | 3.80 | % |
|
(1)
|
Actual
settlement term is through January 6,
2014.
|
March 31,
2009
|
December 31,
2008
|
|||||||
Outstanding
notional amounts of gas contracts (MMMBtu)
|
168,800 | 196,756 | ||||||
Maximum
number of months gas contracts outstanding
|
45 | 48 | ||||||
Outstanding
notional amounts of oil contracts (MBbls)
|
20,096 | 21,229 | ||||||
Maximum
number of months oil contracts outstanding
|
69 | 72 | ||||||
Outstanding
notional amount of interest rate swaps (in thousands)
|
$ | 1,250,000 | $ | 1,212,000 | ||||
Maximum
number of months interest rate swaps outstanding
|
57 | 24 |
March 31,
2009
|
December 31,
2008
|
|||||||
(in
thousands)
|
||||||||
Assets:
|
||||||||
Commodity
derivatives
|
$ | 1,044,788 | $ | 977,847 | ||||
Interest
rate swaps
|
553 | ― | ||||||
$ | 1,045,341 | $ | 977,847 | |||||
Liabilities:
|
||||||||
Commodity
derivatives
|
$ | 142,444 | $ | 119,124 | ||||
Interest
rate swaps
|
85,540 | 82,422 | ||||||
$ | 227,984 | $ | 201,546 |
Three
Months Ended March 31,
|
||||||||
2009
|
2008
|
|||||||
(in
thousands)
|
||||||||
Realized
gains (losses):
|
||||||||
Commodity
derivatives
|
$ | 119,812 | $ | (4,809 | ) | |||
Canceled
commodity derivatives
|
4,257 | ― | ||||||
Interest
rate swaps
|
(10,114 | ) | (1,441 | ) | ||||
$ | 113,955 | $ | (6,250 | ) | ||||
Unrealized
gains (losses):
|
||||||||
Commodity
derivatives
|
$ | 37,246 | $ | (263,985 | ) | |||
Interest
rate swaps
|
(1,457 | ) | (37,952 | ) | ||||
$ | 35,789 | $ | (301,937 | ) | ||||
Total
gains (losses):
|
||||||||
Commodity
derivatives
|
$ | 161,315 | $ | (268,794 | ) | |||
Interest
rate swaps
|
(11,571 | ) | (39,393 | ) | ||||
$ | 149,744 | $ | (308,187 | ) |
(8)
|
Fair
Value Measurements
|
Fair
Value Measurements on a Recurring Basis
March 31,
2009
|
||||||||||||
Level
2
|
Netting (1)
|
Total
|
||||||||||
(in
thousands)
|
||||||||||||
Assets:
|
||||||||||||
Commodity
derivatives
|
$ | 1,044,788 | $ | (136,367 | ) | $ | 908,421 | |||||
Interest
rate swaps
|
$ | 553 | $ | (269 | ) | $ | 284 | |||||
Liabilities:
|
||||||||||||
Commodity
derivatives
|
$ | 142,444 | $ | (136,367 | ) | $ | 6,077 | |||||
Interest
rate swaps
|
$ | 85,540 | $ | (269 | ) | $ | 85,271 |
|
(1)
|
Represents
counterparty netting under derivative netting
agreements.
|
Level
3
|
||||
(in
thousands)
|
||||
Liabilities:
|
||||
Asset
retirement obligations – liabilities added related to
drilling
|
$ | 32 |
(9)
|
Asset
Retirement Obligations
|
Asset
retirement obligations at December 31, 2008
|
$ | 28,922 | ||
Liabilities
added related to drilling
|
32 | |||
Current
year accretion expense
|
685 | |||
Settlements
|
(386 | ) | ||
Revision
of estimates
|
1,043 | |||
Asset
retirement obligations at March 31, 2009
|
$ | 30,296 |
(10)
|
Commitments
and Contingencies
|
(11)
|
Earnings
Per Unit
|
Income
(Loss) (Numerator)
|
Units
(Denominator)
|
Per
Unit Amount
|
||||||||||
(in
thousands)
|
||||||||||||
Three
months ended March 31, 2009:
|
||||||||||||
Income
from continuing operations:
|
||||||||||||
Allocated
to units
|
$ | 121,287 | ||||||||||
Allocated
to unvested restricted units
|
(1,485 | ) | ||||||||||
$ | 119,802 | |||||||||||
Income
per unit:
|
||||||||||||
Basic
income per unit
|
113,473 | $ | 1.06 | |||||||||
Dilutive
effect of unit equivalents
|
29 | ― | ||||||||||
Diluted
income per unit
|
113,502 | $ | 1.06 | |||||||||
Three
months ended March 31, 2008:
|
||||||||||||
Loss
from continuing operations:
|
||||||||||||
Allocated
to units
|
$ | (258,959 | ) | |||||||||
Allocated
to unvested restricted units
|
― | |||||||||||
$ | (258,959 | ) | ||||||||||
Loss
per unit:
|
||||||||||||
Basic
loss per unit
|
113,757 | $ | (2.28 | ) | ||||||||
Dilutive
effect of unit equivalents
|
― | ― | ||||||||||
Diluted
loss per unit
|
113,757 | $ | (2.28 | ) |
(12)
|
Unit-Based
Compensation
|
(13)
|
Income
Taxes
|
(14)
|
Related
Party Transactions
|
(15)
|
Supplemental
Disclosures to the Condensed Consolidated Balance Sheets and Statements of
Cash Flows
|
March 31,
2009
|
December 31,
2008
|
|||||||
(in
thousands)
|
||||||||
Accrued
compensation
|
$ | 6,629 | $ | 11,366 | ||||
Accrued
interest
|
7,160 | 14,232 | ||||||
Other
|
2,176 | 1,565 | ||||||
$ | 15,965 | $ | 27,163 |
Three
Months Ended March 31,
|
||||||||
2009
|
2008
|
|||||||
(in
thousands)
|
||||||||
Cash
payments for interest
|
$ | 20,610 | $ | 29,902 | ||||
Cash
payments for income taxes
|
$ | 1 | $ | 205 | ||||
Non-cash
investing activities:
|
||||||||
In
connection with the purchase of oil and gas properties, liabilities were
assumed as follows:
|
||||||||
Fair
value of assets acquired
|
$ | ― | $ | 535,433 | ||||
Cash
paid
|
― | (515,894 | ) | |||||
Liabilities
assumed, net
|
$ | ― | $ | 19,539 | ||||
Non-cash
financing activities:
|
||||||||
Units
issued in connection with the purchase of oil and gas
properties
|
$ | ― | $ | 14,708 |
(16)
|
Recently
Issued Accounting Standards
|
Management’s
Discussion and Analysis of Financial Condition and Results of Operations
|
|
·
|
Mid-Continent
Deep, which includes the Texas Panhandle Deep Granite Wash formation and
deep formations in Oklahoma;
|
|
·
|
Mid-Continent
Shallow, which includes the Texas Panhandle Brown Dolomite formation and
shallow formations in Oklahoma; and
|
|
·
|
Western,
which includes the Brea Olinda Field of the Los Angeles Basin in
California.
|
|
·
|
oil,
gas and NGL sales of approximately $79.9 million, compared to $175.9
million in the first quarter of
2008;
|
|
·
|
daily
production of 217 MMcfe/d, compared to 196 MMcfe/d in the first quarter of
2008;
|
|
·
|
realized
gains on commodity derivatives of approximately $124.1 million, compared
to realized losses of $4.8 million in the first quarter of
2008;
|
|
·
|
capital
expenditures of approximately $73.3
million;
|
|
·
|
41
wells drilled; and
|
|
·
|
average
of 3 operated drilling rigs.
|
Item 2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of Operations -
Continued
|
Item 2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of Operations -
Continued
|
Three
Months Ended March 31,
|
||||||||||||
2009
|
2008
|
Variance
|
||||||||||
(in
thousands)
|
||||||||||||
Revenues
and other:
|
||||||||||||
Gas
sales
|
$ | 42,228 | $ | 85,428 | $ | (43,200 | ) | |||||
Oil
sales
|
26,770 | 64,307 | (37,537 | ) | ||||||||
NGL
sales
|
10,866 | 26,137 | (15,271 | ) | ||||||||
Total
oil, gas and NGL sales
|
79,864 | 175,872 | (96,008 | ) | ||||||||
Gain
(loss) on oil and gas derivatives
|
161,315 | (268,794 | ) | 430,109 | ||||||||
Gas
marketing revenues
|
516 | 2,816 | (2,300 | ) | ||||||||
Other
revenues
|
966 | 479 | 487 | |||||||||
$ | 242,661 | $ | (89,627 | ) | $ | 332,288 | ||||||
Expenses:
|
||||||||||||
Lease
operating expenses
|
$ | 33,732 | $ | 19,490 | $ | 14,242 | ||||||
Transportation
expenses
|
2,967 | 3,328 | (361 | ) | ||||||||
Gas
marketing expenses
|
340 | 2,417 | (2,077 | ) | ||||||||
General
and administrative expenses (1)
|
23,301 | 19,076 | 4,225 | |||||||||
Exploration
costs
|
1,565 | 2,620 | (1,055 | ) | ||||||||
Depreciation,
depletion and amortization
|
52,104 | 44,370 | 7,734 | |||||||||
Taxes,
other than income taxes
|
7,567 | 12,973 | (5,406 | ) | ||||||||
(Gain)
loss on sale of assets and other, net
|
(26,711 | ) | ― | (26,711 | ) | |||||||
$ | 94,865 | $ | 104,274 | $ | (9,409 | ) | ||||||
Other
income and (expenses)
|
$ | (26,373 | ) | $ | (64,849 | ) | $ | 38,476 | ||||
Income
(loss) from continuing operations before income taxes
|
$ | 121,423 | $ | (258,750 | ) | $ | 380,173 |
(1)
|
General
and administrative expenses for the three months ended March 31, 2009
and 2008 includes approximately $4.2 million and $3.6 million,
respectively, of non-cash unit-based compensation
expenses.
|
Item 2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of Operations -
Continued
|
Three
Months Ended March 31,
|
||||||||||||
2009
|
2008
|
Variance
|
||||||||||
Average
daily production:
|
||||||||||||
Gas
(MMcf/d)
|
133 | 123 | 8 | % | ||||||||
Oil
(MBbls/d)
|
8.8 | 7.8 | 13 | % | ||||||||
NGL
(MBbls/d)
|
5.2 | 4.4 | 18 | % | ||||||||
Total
(MMcfe/d)
|
217 | 196 | 11 | % | ||||||||
Weighted average prices
(hedged): (1)
|
||||||||||||
Gas
(Mcf)
|
$ | 7.94 | $ | 8.22 | (3 | )% | ||||||
Oil
(Bbl)
|
$ | 118.19 | $ | 74.98 | 58 | % | ||||||
NGL
(Bbl)
|
$ | 23.32 | $ | 65.84 | (65 | )% | ||||||
Weighted average prices
(unhedged): (2)
|
||||||||||||
Gas
(Mcf)
|
$ | 3.53 | $ | 7.66 | (54 | )% | ||||||
Oil
(Bbl)
|
$ | 33.76 | $ | 90.45 | (63 | )% | ||||||
NGL
(Bbl)
|
$ | 23.32 | $ | 65.84 | (65 | )% | ||||||
Representative
NYMEX oil and gas prices:
|
||||||||||||
Gas
(MMBtu)
|
$ | 4.91 | $ | 8.03 | (39 | )% | ||||||
Oil
(Bbl)
|
$ | 43.08 | $ | 97.90 | (56 | )% | ||||||
Costs
per Mcfe of production:
|
||||||||||||
Lease
operating expenses
|
$ | 1.73 | $ | 1.10 | 57 | % | ||||||
Transportation
expenses
|
$ | 0.15 | $ | 0.19 | (21 | )% | ||||||
General
and administrative expenses (3)
|
$ | 1.19 | $ | 1.07 | 11 | % | ||||||
Depreciation,
depletion and amortization
|
$ | 2.67 | $ | 2.49 | 7 | % | ||||||
Taxes,
other than income taxes
|
$ | 0.39 | $ | 0.73 | (47 | )% |
(1)
|
Includes
the effect of realized gains (losses) on derivatives of $119.8 million
(excluding $4.3 million realized gains on canceled contracts) and $(4.8)
million for the three months ended March 31, 2009 and 2008,
respectively. The Company utilizes oil puts to hedge revenues
associated with its NGL production; therefore, all realized gains (losses)
on oil derivative contracts are included in weighted average oil prices,
rather than weighted average NGL
prices.
|
(2)
|
Does
not include the effect of realized gains (losses) on
derivatives.
|
(3)
|
General
and administrative expenses for the three months ended March 31, 2009
and 2008 includes approximately $4.2 million and $3.6 million,
respectively, of non-cash unit-based compensation
expenses. Excluding these amounts, general and administrative
expenses for the three months ended March 31, 2009 and 2008 were
$0.98 per Mcfe and $0.87 per Mcfe, respectively. This is a
non-GAAP measure used by management to analyze the Company’s
performance.
|
Item 2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of Operations -
Continued
|
Three
Months Ended March 31,
|
||||||||||||||||
2009
|
2008
|
Increase
|
||||||||||||||
Average
daily production (MMcfe/d):
|
||||||||||||||||
Mid-Continent
Deep
|
142 | 129 | 13 | 10 | % | |||||||||||
Mid-Continent
Shallow
|
61 | 54 | 7 | 13 | % | |||||||||||
Western
|
14 | 13 | 1 | 8 | % | |||||||||||
217 | 196 | 21 | 11 | % |
Item 2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of Operations -
Continued
|
Item 2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of Operations -
Continued
|
Three
Months Ended March 31,
|
||||||||||||
2009
|
2008
|
Variance
|
||||||||||
(in
thousands)
|
||||||||||||
Interest
expense, net of amounts capitalized
|
$ | (14,409 | ) | $ | (25,293 | ) | $ | 10,884 | ||||
Loss
on interest rate swaps
|
(11,571 | ) | (39,393 | ) | 27,822 | |||||||
Other,
net
|
(393 | ) | (163 | ) | (230 | ) | ||||||
$ | (26,373 | ) | $ | (64,849 | ) | $ | 38,476 |
Item 2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of Operations -
Continued
|
Three
Months Ended
March 31,
|
||||||||||||
2009
|
2008
|
Variance
|
||||||||||
(in
thousands)
|
||||||||||||
Net
cash:
|
||||||||||||
Provided
by operating activities
|
$ | 94,970 | $ | 61,200 | $ | 33,770 | ||||||
Used
in investing activities
|
(58,817 | ) | (613,294 | ) | 554,477 | |||||||
Provided
by (used in) financing activities
|
(41,928 | ) | 551,729 | (593,657 | ) | |||||||
Net
decrease in cash and cash equivalents
|
$ | (5,775 | ) | $ | (365 | ) | $ | (5,410 | ) |
Item 2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of Operations -
Continued
|
Date
Paid
|
Period
Covered by Distribution
|
Distribution
Per
Unit
|
Total
Distribution
|
|||||||
(in
millions)
|
||||||||||
February
2009
|
October
1 – December 31, 2008
|
$ | 0.63 | $ | 72.5 |
Item 2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of Operations -
Continued
|
Item 2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of Operations -
Continued
|
Item 2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of Operations -
Continued
|
|
·
|
business
strategy;
|
|
·
|
acquisition
strategy;
|
|
·
|
financial
strategy;
|
|
·
|
drilling
locations;
|
|
·
|
oil,
gas and NGL reserves;
|
|
·
|
realized
oil, gas and NGL prices;
|
|
·
|
production
volumes;
|
|
·
|
lease
operating expenses, general and administrative expenses and development
costs;
|
|
·
|
future
operating results; and
|
|
·
|
plans,
objectives, expectations and
intentions.
|
Period
|
Total
Number of Units Purchased
|
Average
Price Paid Per Unit
|
Total
Number of Units Purchased as Part of Publicly Announced Plans or
Programs
|
Approximate Dollar Value of
Units that May Yet be Purchased Under the Plans or Programs (2)
|
||||||||||||
(in
millions)
|
||||||||||||||||
January
1 – 31 (1)
|
53,667 | $ | 15.98 | ― | $ | 87.0 | ||||||||||
March
1 – 31
|
123,800 | $ | 12.99 | 123,800 | $ | 85.4 |
(1)
|
During
the first quarter of 2009, 53,667 units purchased were related to units
received by the Company for the payment of withholding taxes due on units
issued under its equity compensation
plan.
|
(2)
|
In
October 2008, the Board of Directors of the Company authorized the
repurchase of up to $100.0 million of the Company’s outstanding
units. The Company may purchase units from time to time on the
open market or in negotiated purchases. The repurchase plan
does not obligate the Company to acquire any specific number of units and
may be discontinued at any time.
|
Exhibit Number
|
Description
|
|||||
10
|
.1*†
|
—
|
Fourth
Amended and Restated Credit Agreement dated as of April 28, 2009
among Linn Energy, LLC as Borrower, BNP Paribas, as Administrative Agent,
and the Lenders and agents Party thereto
|
|||
10
|
.2*†
|
—
|
Fourth
Amended and Restated Guaranty and Pledge Agreement, dated as of
April 28, 2009, made by Linn Energy, LLC and each of the other
Obligors in favor of BNP Paribas, as Administrative
Agent
|
|||
10 | .3*† | — |
Linn
Energy, LLC Change of Control Protection Plan, dated as of April 25,
2009
|
|||
31
|
.1†
|
—
|
Section 302
Certification of Michael C. Linn, Chairman and Chief Executive
Officer of Linn Energy, LLC
|
|||
31
|
.2†
|
—
|
Section 302
Certification of Kolja Rockov, Executive Vice President and Chief
Financial Officer of Linn Energy, LLC
|
|||
32
|
.1†
|
—
|
Section 906
Certification of Michael C. Linn, Chairman and Chief Executive
Officer of Linn Energy, LLC
|
|||
32
|
.2†
|
—
|
Section 906
Certification of Kolja Rockov, Executive Vice President and Chief
Financial Officer of Linn Energy,
LLC
|
†
|
Filed
herewith.
|
*
|
The
schedules to this agreement have been omitted from this filing pursuant to
Item 601(b)(2) of Regulation S-K. The Company will furnish
copies of such schedules to the Securities and Exchange Commission upon
request.
|
LINN
ENERGY, LLC
|
|
(Registrant)
|
|
Date:
May 7, 2009
|
/s/ David
B. Rottino
|
David
B. Rottino
|
|
Senior
Vice President and Chief Accounting Officer
|
|
(As
Duly Authorized Officer and Chief Accounting
Officer)
|