Quarterly / Earnings Reports | First Quarter (1Q) Update | Drilling Activity

New Management, New Strategy; E&P Energy Poised For Growth

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   |    Wednesday,May 09,2018

[Summary: EP Energy reported its first quarter 2018 results and the new management team did not disappoint.  Crude oil production is up +1% in 1Q18 45.4 MBbls/d vs 3Q17 45.1 MBbls/d.  Why the comparison to 3Q17? because that was the last full quarter under the previous management team.   Total 1Q18 equivalent production was down 1% to 80 Mboe/d vs 3Q17 of 81 Mboe/d.

Highlights

  • The company also reported net income of $18 million vs a net loss of $72 million in 3Q17.
  • Corporate production is down -1% sequentially from 4Q17 to 80 MBoe/d.
  • Eagle ford oil production is up +17% sequentially on increased activitiy.
  • Permian production is down to 27 MBoe/d on reduced activity sequentially.
  • The company also launched a natural gas EOR pilot project in April.

The new strategy which seems to be, to shift focus back from the Permian Basin to the Eagle ford property.   To this end, the company amended the previously annouced wolfcamp drilling joint venture to redirect the second tranche of capital to the Eagle Ford asset.

Russell Parker, the new president and CEO said, "We are pleased with our first quarter results and increased 1Q completion activity concentrated in the Eagle Ford" and "As we continue to focus on capital efficiency and fully loaded returns, we expect to continue to see improvements in the amount of capital deployed versus the amount of ultimate EBITDA generated.  Additionally, we are swiftly moving forward with new projects in all three areas to unlock additional net asset value.  Throughout the year we will continue to drive these initiatives in order to generate more shareholder value and improve the balance sheet."

Eagle Ford

Eagle ford asset produced 35.9 Mboe/d including 24 MBbls/d in the first quarter, a 17 and 24 percent increase from the fourth quarter of 2017, respectively.  The company average two rigs and invested $135 million and completed 24 gross (net) wells in the in the first quarter. Approximately 75 percent of the 24 wells completed in the first quarter were in-fill wells.  The company also launched a natural gas EOR pilot project in April.

Permian

The Permian property produced 27 MBoe/d including 9.8 MBbls/d of oil, a 16 and 18 percent decrease compared to fourth quarter of 2017, respectively.   In the quarter, the company invested $43 million, operated one rig and completed/frac'd 8 gross (net) wells.  The production decline was as a result of reduced activity.

Altamont :

In the first quarter, the company produced 17.2 MBoe/d, including 11.6 MBbls/d of oil, a four and five percent decrease from the fourth quarter of 2017. The company operated two joint venture drilling rigs and completed (frac'd) nine gross wells (three net wells) in its Altamont program. Total capital invested in the Altamont program in the first quarter of 2018 was $30 million.

 

 

2018 Outlook

 

]

 

 

 

 

 

 

 

ORIGINAL RELEASE

 

EP Energy Corporation (NYSE:EPE) today reported first quarter 2018 financial and operational results.

Quickly Improving Operations and Results With New Leadership Team

In the first full quarter under new leadership, the company improved results by increasing production and profitability while significantly reducing costs.  Below is a summary of first quarter 2018 results compared to third quarter 2017 results, which was the most recent full quarter under previous leadership.

 

3Q'17

1Q'18

Percent
Change

Oil Production (MBbls/d)

45.1

45.4

1%

Lease Operating Expense ($MM)

42

39

-7%

Reported G&A ($MM)

25

19

-24%

Adjusted G&A ($MM)1

20

17

-15%

Total Operating Expenses ($MM)

237

224

-5%

Adjusted Cash Operating Costs ($MM)1

110

101

-8%

Net (Loss) Income ($MM)

(72)

18

 

Adjusted EBITDAX ($MM)1

159

189

+19%

Permian Completed Well Cost ($MM)2

4.67

4.23

-9%

 

1 See Disclosure of Non-GAAP Financial Measures for applicable definitions and reconciliations to GAAP terms.

2 Comparison of wells completed in the Permian with similar proppant loading normalized to 7,500'

Results Beat Expectations

First quarter 2018 total equivalent production and oil production volumes were above the high end of the company's guidance ranges, while capital expenditures were below the low end of the guidance range.  The improvement was a result of better well performance driven by new completion techniques and lower capital and operating costs.

 

1Q'18
Actuals

1Q'18
Guidance

Delta to
mid-pt.

Oil Production (MBbls/d)

45.4

43 - 44

+ 4%

Total Production (MBoe/d)

80.1

77 - 79

+ 3%

Oil and Gas Expenditures ($MM)1

208

210 - 220

- 3%

 

1 Does not include acquisition costs

Executing Strategy

  • Eagle Ford enhanced oil recovery (EOR) pilot project operational in April - ahead of schedule
  • Drilling first horizontal wells in Altamont
  • Electric frac fleet operating in the Permian
  • Improved well performance from optimized well designs
  • Closed acquisition and divestiture transactions

Improved Flexibility

  • Permian Drilling Joint Venture amended to redirect second tranche to Eagle Ford asset

"We are pleased with our first quarter results and increased 1Q completion activity concentrated in the Eagle Ford," said Russell Parker, president and chief executive officer of EP Energy Corporation.  "As we continue to focus on capital efficiency and fully loaded returns, we expect to continue to see improvements in the amount of capital deployed versus the amount of ultimate EBITDA generated.  Additionally, we are swiftly moving forward with new projects in all three areas to unlock additional net asset value.  Throughout the year we will continue to drive these initiatives in order to generate more shareholder value and improve the balance sheet."

Eagle Ford: Significant Increase in Oil Production

The company produced 35.9 MBoe/d, including 24.0 MBbls/d of oil in the first quarter of 2018, a 17 and 24 percent increase from the fourth quarter of 2017, respectively.  The increase from year-end 2017 was driven by increased activity, improved production results from new well designs and completion techniques, and acquisition properties. 

EP Energy averaged two drilling rigs, invested $135 million and completed (based on wells fracture stimulated or frac'd) 24 gross and net wells in the first quarter of 2018 in its Eagle Ford program.  Activities and capital investment were up significantly from the fourth quarter of 2017 where total capital invested was $92 million and 14 wells were completed (frac'd).  Approximately 75 percent of the 24 wells completed in the first quarter were in-fill wells and performance, on average, was equal to or in some cases better than, the parent well.

In addition to improving well performance, the company is driving down costs through on-site efficiency enhancement.  EP Energy has taken over certain well-site operations from third parties.  This has resulted in improved efficiencies and an overall savings of more than $100 thousand per well which the company expects to result in approximately $7 million of savings in 2018.  This is an example of actions the new leadership team is quickly implementing which contribute to improved returns.

EP Energy launched its EOR pilot project with the first natural gas injection cycle in April.  The project was the culmination of extensive research and study, which was done on an aggressive time frame and demonstrates the company's ability to quickly turn concepts into actionable opportunities.  Facilities were in place and first gas was injected within four months of the initial concept review.

In April, the company amended its Permian drilling joint venture to direct the development area for the second tranche from the Permian to the Eagle Ford.  The drilling joint venture improves the returns on the capital invested.  The initial wells in the second tranche are expected to begin producing later this year.  EP Energy remains the operator of the drilling joint venture and the material terms and conditions remain consistent with the initial agreement.

Permian: New Enhancements Increase Efficiencies and Reduce Operating Costs

In the first quarter of 2018, the company produced 27.0 MBoe/d, including 9.8 MBbls/d of oil, a 16 and 18 percent decrease compared to the fourth quarter of 2017, respectively.  Production volumes were down compared to 2017 due to significantly lower activity levels in the fourth quarter of 2017 and first quarter of 2018.  In the first quarter, the company averaged one drilling rig, invested $43 million in capital and completed (frac'd) eight gross and net wells.

During the quarter, the company began to use an electric-powered frac fleet, one of only a few operating in the country.  The frac fleet utilizes field gas rather than diesel fuel to generate power, which saves costs and time.  The company has increased average pumping hours per day by approximately 30 percent in its first three pads compared with the fourth quarter of 2017.

In the first quarter of 2018, the company began the installation of water handling facilities in the field, which are expected to provide significant operating efficiencies.  The enhancements allow more water to be transmitted via pipeline, reducing truck traffic and operating costs.  These cost saving initiatives, along with changes in managing drill-outs and flowback operations, are expected to result in more than $10 million of capital savings in 2018.

The company maintains ample take-away capacity out of the basin through contractual agreements with third-party processors and marketing companies.  In addition, EP Energy has 100 percent of its Midland to Cushing basis exposure hedged in 2018 at -$1.02 per barrel.

Altamont: Accelerated Recompletions and Progress Towards Horizontal Drilling

In the first quarter of 2018, the company produced 17.2 MBoe/d, including 11.6 MBbls/d of oil, a four and five percent decrease from the fourth quarter of 2017, respectively.

EP Energy operated two joint venture drilling rigs and completed (frac'd) nine gross wells (three net wells) in its Altamont program.  Total capital invested in the Altamont program in the first quarter of 2018 was $30 million.  The company also accelerated its high return recompletion program, successfully recompleting 23 wells, an all-time record for the company.

The company began drilling its first horizontal wells in April, sooner than planned.  The company spud two wells, expects to complete drilling operations in the second quarter and begin flowback in June/July.

Multi-year Commodity Hedge Program: Well Positioned in 2018 and ~26 Percent Hedged in 20191

EP Energy maintains a solid hedge program, which provides continued commodity price protection.  A summary of the company's current open hedge positions is listed below: 

   

2018

 

2019

Total Fixed Price Hedges

       

Oil volumes (MMBbls)2

 

11.3

   

4.6

 

Average ceiling price ($/Bbl)

 

$

63.96

   

$

64.45

 

Average floor price ($/Bbl)

 

$

58.45

   

$

55.54

 
         

Natural Gas volumes (TBtu)

 

19.3

   

7.3

 

Average price ($/MMBtu)

 

$

3.04

   

$

2.97

 
   

Note: Positions are as of May 4, 2018.

   

1

Percentage based on mid-point of 2018 production guidance

2

2018 and 2019 positions include WTI three way collars of 6.7 MMBbls and 2.6 MMBbls, respectively, and WTI collars of 0.8 MMBbls in 2018 and 1.3 MMBbls in 2019.

Liquidity 

The company ended the quarter with approximately $600 million of available liquidity and $4.2 billion of net debt (total debt of $4.2 billion less cash of $19 million).  EP Energy continues to be in active discussions with the banks in the RBL Facility to extend the maturity.  The company continues to make progress and expects to complete the process in the second quarter of 2018.

2018 Outlook On Track With Strong Start

The table below summarizes the company's current operational and financial guidance for 2018.  Included is the company's estimate for a significant increase in oil production volumes in the second quarter of 2018.  Although full year 2018 production guidance remains as previously provided, the company will continue to review progress with the new operational techniques and provide updates throughout the year.

 

1Q'18
Actuals

2Q'18
Estimate

FY 2018
Estimate

       
       

Production Volumes

     

Oil production (MBbls/d)

45.4

47 – 49

46 – 50

Total production (MBoe/d)

80.1

80 – 82

81 – 87

       

Oil & Gas Expenditures ($ million)

$208

$200 – $210

$600 – $6501

Eagle Ford

$135

 

~50%

Permian

$43

 

~30%

Altamont

$30

 

~20%2

       

Average Gross Drilling Rigs

     

Eagle Ford

2

 

2

Permian

1

 

1

Altamont

2

 

2

       

Operating Costs

     

Lease operating expense ($/Boe)

$5.48

 

$5.00 – $5.70

Reported G&A expense ($/Boe)

$2.58

 

$2.90 – $3.25

Adjusted G&A expense ($/Boe)3

$2.31

 

$2.30 – $2.60

Transportation and commodity purchases ($/Boe)

$3.43

 

$3.15 – $3.45

Taxes, other than income ($/Boe)4

$2.75

 

$2.50 – $2.60

       

DD&A ($/Boe)

$16.69

 

$16.50 – $17.50

 

Full year 2018 includes ~$135 million non-drill capital including: ~$55 million for general equipment, ~$30 million for capitalized G&A and interest, ~$25 million for enhanced facility projects, ~$10 million for EOR projects, and ~$15 million for leasing and seismic, and does not include acquisition costs.

Full year 2018 Altamont capital includes ~100 recompletions for $50 million.

3 Adjusted G&A represents G&A expense less approximately $0.27 per Boe of non-cash compensation expense in 1Q'18 Actuals and $0.60 - $0.65 per Boe of non-cash compensation expense in FY 2018 Estimate.

4 Severance taxes estimates are based on $55/Bbl WTI.

Webcast Information

EP Energy has scheduled a webcast at 12:00 p.m. Eastern Time, 11:00 a.m. Central Time, on May 9, 2018, to discuss its first quarter financial and operational results.  The webcast may be accessed online through the company's website at epenergy.com in the Investor Center.  Materials relating to the webcast will be available in the Investor Center.  A limited number of telephone lines will be available to participants by dialing 888-317-6003 (conference ID#7126655) 10 minutes prior to the start of the webcast.  A replay of the webcast will be available through June 11, 2018 on the company's website in the Investor Center or by dialing 877-344-7529 (conference ID#10119858).

About EP Energy

The EP Energy team is driven to deliver superior returns for our investors by developing the oil and natural gas that feeds America's growing energy needs. The company focuses on enhancing the value of its high quality asset portfolio, increasing capital efficiency, maintaining financial flexibility, and pursuing accretive acquisitions and divestitures. EP Energy is working to set the standard for efficient development of hydrocarbons in the U.S. Learn more at epenergy.com.

The following table provides the company's production results, average realized prices, results of operations and certain non-GAAP financial measures for the periods presented.

 

Quarter ended March 31,

 

Quarter ended
September 30,

 

2018

 

2017

 

2017

Oil Sales Volumes (MBbls/d)

         

Eagle Ford

24.0

   

23.9

   

20.0

Permian

9.8

   

11.1

   

12.6

Altamont

11.6

   

11.9

   

12.5

Total Oil Sales Volumes

45.4

   

46.9

   

45.1

Natural Gas Sales Volumes (MMcf/d)

         

Eagle Ford

36

   

41

   

37

Permian

56

   

54

   

55

Altamont

34

   

32

   

34

Total Natural Gas Sales Volumes

126

   

127

   

126

NGLs Sales Volumes (MBbls/d)

         

Eagle Ford

5.9

   

7.0

   

6.7

Permian

7.8

   

7.4

   

8.2

Altamont

   

   

Total NGLs Sales Volumes

13.7

   

14.4

   

14.9

Equivalent Sales Volumes (MBoe/d)

         

Eagle Ford

35.9

   

37.7

   

32.9

Permian

27.0

   

27.5

   

29.9

Altamont

17.2

   

17.3

   

18.2

Total Equivalent Sales Volumes

80.1

   

82.5

   

81.0

           

Net income (loss) ($ in millions)

18

   

(47)

   

(72)

Adjusted EBITDAX ($ in millions)

189

   

172

   

159

Basic and diluted net income (loss) per common share ($)

0.07

   

(0.19)

   

(0.29)

Adjusted EPS ($)

(0.07)

   

(0.10)

   

(0.12)

Capital Expenditures ($ in millions)(1)

208

   

152

   

162

Total Operating Expenses ($/Boe)

31.11

   

32.01

   

31.79

Adjusted Cash Operating Costs ($/Boe)

13.97

   

15.16

   

14.73

Depreciation, depletion and amortization rate ($/Boe)

16.69

   

16.99

   

15.92

Average realized prices(2)

         

Oil price on physical sales ($/Bbl)

61.56

   

48.43

   

45.49

Oil, including financial derivatives ($/Bbl)(3)

58.86

   

54.90

   

51.75

Natural gas price on physical sales ($/Mcf)

1.94

   

2.49

   

2.26

Natural gas, including financial derivatives ($/Mcf)(3)

2.03

   

2.46

   

2.49

NGLs price on physical sales ($/Bbl)

20.93

   

17.63

   

18.98

NGLs, including financial derivatives ($Bbl)(3)

20.91

   

17.76

   

18.45

_________________________________

(1)

The quarter ended March 31, 2018 does not include $248 million of acquisition capital.

(2)

Oil and natural gas prices on physical sales reflect operating revenues for oil and natural gas reduced by oil and natural gas purchases associated with managing our physical sales.

(3)

Prices per unit are calculated using total financial derivative cash settlements.

 

EP ENERGY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In millions, except per common share amounts)

(Unaudited)

 
 

Quarter ended
March 31,

 

Quarter ended
September 30,

 

2018

 

2017

 

2017

Operating revenues

         

Oil

$

252

   

$

204

   

$

189

Natural gas

22

   

30

   

27

NGLs

26

   

23

   

26

Financial derivatives

(14)

   

70

   

(23)

Total operating revenues

286

   

327

   

219

           

Operating expenses

         

Oil and natural gas purchases

   

1

   

Transportation costs

25

   

29

   

29

Lease operating expense

39

   

40

   

42

General and administrative

19

   

20

   

25

Depreciation, depletion and amortization

120

   

126

   

118

Impairment charges

   

   

1

Exploration and other expense

1

   

3

   

6

Taxes, other than income taxes

20

   

19

   

16

Total operating expenses

224

   

238

   

237

           

Operating income (loss)

62

   

89

   

(18)

Gain (loss) on extinguishment/modification of debt

41

   

(53)

   

24

Interest expense

(85)

   

(83)

   

(80)

Income (loss) before income taxes

18

   

(47)

   

(74)

Income tax expense

   

   

2

Net income (loss)

$

18

   

$

(47)

   

$

(72)

 

EP ENERGY CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions)

(Unaudited)

 
 

March 31, 2018

 

December 31, 2017

ASSETS

     

Current assets(1)

$

237

   

$

466

 

Property, plant and equipment, net(2)

4,741

   

4,422

 

Other non-current assets

11

   

12

 

Total assets

$

4,989

   

$

4,900

 
       

LIABILITIES AND EQUITY

     

Current liabilities

$

436

   

$

448

 

Long-term debt, net of debt issue costs

4,104

   

4,022

 

Other non-current liabilities

39

   

38

 

Total stockholders' equity

410

   

392

 

Total liabilities and equity

$

4,989

   

$

4,900

 

______________________________

(1)

Balance as of December 31, 2017 includes $172 million of assets held for sale.

(2)

Balance is net of accumulated depreciation, depletion and amortization of $3,307 million and $3,179 million as of March 31, 2018 and December 31, 2017, respectively.

 

EP ENERGY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

 
 

Three months ended March 31,

 

2018

 

2017

Net income (loss)

$

18

   

$

(47)

 

Adjustments to reconcile net income (loss) to net cash provided by operating activities

     

Non-cash expenses

84

   

184

 

Asset and liability changes

(15)

   

(20)

 

Net cash provided by operating activities

87

   

117

 

Net cash used in investing activities

(229)

   

(119)

 

Net cash provided by financing activities

117

   

17

 
       

Change in cash, cash equivalents and restricted cash

(25)

   

15

 
       

Cash, cash equivalents and restricted cash - beginning of period

45

   

20

 

Cash, cash equivalents and restricted cash - end of period

$

20

   

$

35

 

Disclosure of Non-GAAP Financial Measures

The Securities and Exchange Commission's Regulation G applies to any public disclosure or release of material information that includes a non-GAAP financial measure. In the event of such a disclosure or release, Regulation G requires (i) the presentation of the most directly comparable financial measure calculated and presented in accordance with GAAP and (ii) a reconciliation of the differences between the non-GAAP financial measure presented and the most directly comparable financial measure calculated and presented in accordance with GAAP.

Non-GAAP Terms

Below is a reconciliation of consolidated diluted net income (loss) per share to Adjusted EPS:

 

Quarter ended March 31, 2018

 

Pre Tax

 

After Tax

 

Diluted
EPS(1)

 

($ in millions, except earnings per share amounts)

Net income

   

$

18

   

$

0.07

 
           

Adjustments(2)

         

Impact of financial derivatives(3)

$

4

   

$

3

   

$

0.01

 

Gain on extinguishment/modification of debt

(41)

   

(32)

   

(0.13)

 

Valuation allowance on deferred tax assets

   

(5)

   

(0.02)

 

Total adjustments

$

(37)

   

$

(34)

   

$

(0.14)

 
           

Adjusted EPS

       

$

(0.07)

 
           

Diluted weighted average shares

       

247

 
 
 

Quarter ended March 31, 2017

 

Pre Tax

 

After Tax

 

Diluted
EPS(1)

 

($ in millions, except earnings per share amounts)

Net loss

   

$

(47)

   

$

(0.19)

 
           

Adjustments(2)

         

Impact of financial derivatives(3)

$

(42)

   

$

(27)

   

$

(0.11)

 

Loss on extinguishment of debt

53

   

34

   

0.14

 

Valuation allowance on deferred tax assets

   

15

   

0.06

 

Total adjustments

$

11

   

$

22

   

$

0.09

 
           

Adjusted EPS

       

$

(0.10)

 
           

Diluted weighted average shares

       

245

 
 
 

Quarter ended September 30, 2017

 

Pre Tax

 

After Tax

 

Diluted
EPS(1)

 

($ in millions, except earnings per share amounts)

Net loss

   

$

(72)

   

$

(0.29)

 
           

Adjustments(2)

         

Impact of financial derivatives(3)

$

50

   

$

32

   

$

0.13

 

Loss on extinguishment of debt

(24)

   

(15)

   

(0.06)

 

Impairment charges

1

   

   

 

Valuation allowance on deferred tax assets

   

24

   

0.10

 

Total adjustments

$

27

   

$

41

   

$

0.17

 
           

Adjusted EPS

       

$

(0.12)

 
           

Diluted weighted average shares

       

246

 

________________________________

(1)

Diluted per share amounts are based on actual amounts rather than the rounded totals presented.

(2)

All individual adjustments for all periods presented assume a statutory federal and blended state tax rate, as well as any other income tax effects specifically attributable to that item.

(3)

Represents mark-to-market impact net of cash settlements and cash premiums related to financial derivatives. There were no cash premiums received or paid for the period presented.

EBITDAX is defined as net income (loss) plus interest and debt expense, income taxes, depreciation, depletion and amortization and exploration expense. Adjusted EBITDAX is defined as EBITDAX, adjusted as applicable in the relevant period for the net change in the fair value of derivatives (mark-to-market effects of financial derivatives, net of cash settlements and cash premiums related to these derivatives), the non-cash portion of compensation expense (which represents non-cash compensation expense under our long-term incentive programs adjusted for cash payments made under these plans), gains on extinguishment/modification of debt and impairment charges.

Below is a reconciliation of our consolidated net income (loss) to EBITDAX and Adjusted EBITDAX:

 

Quarter
ended March 31,

 

Quarter
ended September 30,

 

2018

 

2017

 

($ in millions)

Net income (loss)

$

18

   

$

(72)

 

Income tax expense

   

(2)

 

Interest expense, net of capitalized interest

85

   

80

 

Depreciation, depletion and amortization

120

   

118

 

Exploration expense

1

   

3

 

EBITDAX

224

   

127

 

Mark-to-market on financial derivatives(1)

14

   

23

 

Cash settlements and cash premiums on financial derivatives(2)

(10)

   

27

 

Non-cash portion of compensation expense(3)

2

   

5

 

Gain on extinguishment/modification of debt

(41)

   

(24)

 

Impairment charges

   

1

 

Adjusted EBITDAX

$

189

   

$

159

 

________________________________

(1)

Represents the income statement impact of financial derivatives.

(2)

Represents actual cash settlements related to financial derivatives. There were no cash premiums received or paid for the periods presented.

(3)

Non-cash portion of compensation expense represents compensation expense (net of forfeitures) under long-term incentive programs adjusted for cash payments made under these plans.

Adjusted cash operating costs is a non-GAAP measure that is defined as total operating expenses, excluding depreciation, depletion and amortization expense, exploration expense, impairment charges and the non-cash portion of compensation expense (which represents compensation expense under our long-term incentive programs adjusted for cash payments made under these plans).  We use this measure to describe the costs required to directly or indirectly operate our existing assets and produce and sell our oil and natural gas, including the costs associated with the delivery and purchases and sales of produced commodities. Accordingly, we exclude depreciation, depletion, and amortization and impairment charges as such costs are non-cash in nature. We exclude exploration expense from our measure as it is substantially non-cash in nature and is not related to the costs to operate our existing assets. We exclude the non-cash portion of compensation expense, as we believe such adjustment allows investors to evaluate our costs against others in our industry and this item can vary across companies due to different ownership structures, compensation objectives or the occurrence of transactions.

Below is a reconciliation of our GAAP operating expenses to non-GAAP adjusted cash operating costs:

 

Quarter ended
March 31,

 

Quarter ended
September 30,

 

2018

 

2017

 

Total

 

Per-Unit(1)

 

Total

 

Per-Unit(1)

 

($ in millions, except per unit costs)

Oil and natural gas purchases

$

   

$

   

$

   

$

 

Transportation costs

25

   

3.43

   

29

   

3.91

 

Lease operating expense

39

   

5.48

   

42

   

5.66

 

General and administrative

19

   

2.58

   

25

   

3.28

 

Depreciation, depletion and amortization

120

   

16.69

   

118

   

15.92

 

Impairment charges

   

   

1

   

0.09

 

Exploration and other expense

1

   

0.18

   

6

   

0.83

 

Taxes, other than income taxes

20

   

2.75

   

16

   

2.10

 

Total operating expenses

$

224

   

$

31.11

   

$

237

   

$

31.79

 

Adjustments:

             

Depreciation, depletion and amortization

$

(120)

   

$

(16.69)

   

$

(118)

   

$

(15.92)

 

Impairment charges

   

   

(1)

   

(0.09)

 

Exploration expense

(1)

   

(0.18)

   

(3)

   

(0.40)

 

Non-cash portion of compensation expense(2)

(2)

   

(0.27)

   

(5)

   

(0.65)

 

Adjusted cash operating costs and per-unit adjusted cash costs

$

101

   

$

13.97

   

$

110

   

$

14.73

 
               

Total consolidated equivalent volumes (MBoe)

   

7,208

       

7,456

 

______________________________

(1)

Per unit costs are based on actual total amounts rather than the rounded totals presented.

(2)

Amounts are excluded in the calculation of adjusted general and administrative expense.

Adjusted general and administrative expenses are defined as general and administrative expenses excluding the non-cash portion of compensation expense which represents compensation expense (net of forfeitures) under our long-term incentive programs adjusted for cash payments under these plans.

Below is a reconciliation of our GAAP general and administrative expense to non-GAAP adjusted general and administrative expense:

 

Actuals

   
 

As of March 31,

As of September 30,

 

FY 2018 Estimate

 

2018

2017

 

Low

High

 

Total

($/Boe)

Total

($/Boe)

 

($/Boe)

($/Boe)

 

($ in millions, except per Boe costs)

     

GAAP general and administrative expense

$

19

 

$

2.58

 

$

25

 

$

3.28

   

$

2.90

 

$

3.25

 

Less non-cash compensation expense

2

 

0.27

 

5

 

0.65

   

0.60

 

0.65

 

Adjusted general and administrative expense

$

17

 

$

2.31

 

$

20

 

$

2.63

   

$

2.30

 

$

2.60

 

______________________________

(1)

Per unit costs are based on actual total amounts rather than the rounded totals presented.

Net Debt is a non-GAAP measure defined as long-term debt less cash and cash equivalents.

 

 


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