Memorial Production Partners LP (MEMP) announced a cash distribution attributable to the fourth quarter of 2015 and announced full year 2016 guidance. MEMP also announced that it has scheduled a conference call to discuss its fourth quarter and full year 2015 earnings. A presentation containing supplemental full year 2016 guidance information has been posted to MEMP’s website at www.memorialpp.com.
Distribution Update
The board of directors of MEMP’s general partner declared a cash distribution of $0.10 per unit for the fourth quarter of 2015, or $0.40 per unit on an annualized basis. This distribution represents a $0.20 per unit, or 67%, reduction from MEMP’s third quarter distribution and will be paid on February 12, 2016 to unitholders of record as of the close of business on February 5, 2016. This new distribution rate is based on current commodity and financial market conditions and MEMP’s 2016 guidance, as detailed below.
“Given the weaknesses of the commodity and capital markets, MEMP made the difficult decision to further reduce cash distributions on its common unit to $0.10 per unit on a quarterly basis,” said John A. Weinzierl, Chairman and Chief Executive Officer of the general partner of MEMP. “In the current environment, the Board of Directors and the management team of MEMP believe the best path for long term stakeholder value focuses on generating positive free cash flow and enhancing liquidity.”
2016 Capital Program
“Along with the distribution cut announced today, we are significantly pulling back on our development program in 2016, with plans to spend $65 to $75 million in total capital expenditures,” said William J. (Bill) Scarff, President of the general partner of MEMP. “This will result in a modest production decline throughout the year, but our focus will be on free cash flow generation, cost control and managing our balance sheet.”
In 2016, MEMP’s capital spending program is expected to be approximately $65 to $75 million, a reduction of approximately 67% from prior year levels. MEMP anticipates spending approximately 38% in East Texas, 27% in California and 20% in the Rockies, with the remainder spread across the Eagle Ford, conventional South Texas and the Permian. MEMP anticipates drilling and completing one new well and completing five previously drilled wells in East Texas and expects the balance of its capital budget will primarily be spent on recompletions, capital workovers and facilities throughout its operating areas.
Full Year 2016 Guidance
The following guidance included in this press release is subject to the cautionary statements and limitations described under the “Forward-Looking Statements” caption at the end of this press release. A summary of the guidance, assuming no acquisitions or divestitures, is presented below:
| 2016 FY Guidance | |||||||||||
| January 27, 2016 | |||||||||||
| Low | High | ||||||||||
| Net Average Daily Production | |||||||||||
| Oil (MBbls/d) | 10.5 | – | 11.1 | ||||||||
| NGL (MBbls/d) | 6.9 | – | 7.4 | ||||||||
| Natural Gas (MMcf/d) | 124 | – | 132 | ||||||||
| Total (MMcfe/d) | 228 | – | 243 | ||||||||
| Commodity Price Differential / Realizations (Unhedged) | |||||||||||
| Crude Oil Differential ($ / Bbl) | $ | 5.50 | – | $ | 6.25 | ||||||
| NGL Realized Price (% of WTI NYMEX) | 32 | % | – | 36 | % | ||||||
| Natural Gas Realized Price (% of NYMEX to Henry Hub) | 96 | % | – | 100 | % | ||||||
| Gathering, Processing and Transportation Costs | |||||||||||
| Crude Oil ($ / Bbl) | $ | 0.20 | – | $ | 0.25 | ||||||
| NGL ($ / Bbl) | $ | 3.15 | – | $ | 3.30 | ||||||
| Natural Gas ($ / Mcf) | $ | 0.45 | – | $ | 0.55 | ||||||
| Average Costs | |||||||||||
| Lease Operating ($ / Mcfe) | $ | 1.85 | – | $ | 2.00 | ||||||
| Taxes (% of Revenue) (2) | 6.8 | % | – | 7.2 | % | ||||||
| Cash General and Administrative ($ / Mcfe) | $ | 0.45 | – | $ | 0.50 | ||||||
| Capital Expenditures ($MM) | $ | 65 | – | $ | 75 | ||||||
| Adjusted EBITDA ($MM)(3) | $ | 285 | – | $ | 310 | ||||||
| Cash Interest Expense ($MM) | $ | 110 | – | $ | 115 | ||||||
| Estimated Maintenance Capital Expenditures ($MM) | $ | 70 | |||||||||
| Distributable Cash Flow ($MM)(3) | $ | 105 | – | $ | 125 | ||||||
| (1 | ) | Guidance based on NYMEX strip pricing as of January 22, 2016; Average prices of $36.30/Bbl for crude oil | |||||||||
| and $2.37/Mcf for natural gas for 2016 | |||||||||||
| (2 | ) | Includes production and ad valorem taxes | |||||||||
| (3 | ) | Adjusted EBITDA and Distributable Cash Flow are non-GAAP financial measures. Please see the | |||||||||
| “Use of Non-GAAP Financial Measures” section of this press release for a description of Adjusted EBITDA | |||||||||||
| and Distributable Cash Flow and a reconciliation to the most comparable GAAP financial measure | |||||||||||
These estimates reflect management’s best judgment based on current expectations about the future and anticipated market conditions based upon both stated and unstated assumptions and other factors. Although management believes such estimates and assumptions to be reasonable, they are inherently uncertain and involve a number of risks that are beyond MEMP’s control. Actual conditions and assumptions may change over the course of the year.
Hedging Summary
Consistent with its hedging policy, MEMP has entered into natural gas, crude oil and NGL derivatives contracts covering the period from 2016 through December 2019. MEMP’s hedging policy is designed to reduce the impact to cash flows from commodity price and interest rate volatility. MEMP’s hedge book has remained largely the same since last updated in November 2015.
The following table reflects the volumes of MEMP’s expected production covered by commodity derivative contracts and the average fixed or floor prices at which production is hedged. Targeted average net production estimate represents the midpoint of the annual production range in MEMP’s 2016 full year guidance.
| Hedge Summary (1, 2) | |||||||||||||||
| Year Ending December 31, | |||||||||||||||
| 2016 | 2017 | 2018 | 2019 | ||||||||||||
| Natural Gas Derivative Contracts: | |||||||||||||||
| Total weighted-average fixed/floor price | $ | 4.14 | $ | 4.06 | $ | 4.18 | $ | 4.31 | |||||||
| Percent of expected remaining 2016 production hedged | 92 | % | 86 | % | 79 | % | 72 | % | |||||||
| Crude Oil Derivative Contracts: | |||||||||||||||
| Total weighted-average fixed/floor price | $ | 85.48 | $ | 85.00 | $ | 83.74 | $ | 85.52 | |||||||
| Percent of expected remaining 2016 production hedged | 93 | % | 92 | % | 95 | % | 49 | % | |||||||
| Natural Gas Liquids Derivative Contracts: | |||||||||||||||
| Total weighted-average fixed/floor price | $ | 35.64 | $ | 37.55 | – | – | |||||||||
| Percent of expected remaining 2016 production hedged | 98 | % | 20 | % | – | – | |||||||||
| Total Derivative Contracts: | |||||||||||||||
| Total weighted-average fixed/floor price | $ | 7.24 | $ | 7.54 | $ | 7.89 | $ | 6.84 | |||||||
| Percent of expected remaining 2016 production hedged | 93 | % | 76 | % | 69 | % | 53 | % | |||||||
| (1) Updated hedge schedule as of January 27, 2016 | |||||||||||||||
| (2) MEMP’s targeted average net production represents the midpoint of the annual production range in MEMP’s 2016 full year guidance | |||||||||||||||
MEMP posted an updated hedge presentation containing additional information on its website,www.memorialpp.com, under the Investor Relations section.
Fourth Quarter and Full Year 2015 Earnings Conference Call and Webcast
MEMP also announced today that it will report fourth quarter and full year 2015 financial and operating results before the market opens for trading on February 24, 2016. Following the announcement, management will host a fourth quarter 2015 earnings conference call at 10 a.m. CT. Interested parties are invited to participate on the call by dialing (844) 735-9435 (Conference ID: 22826941) at least 15 minutes prior to the start of the call or via the internet atwww.memorialpp.com. A replay of the call will be available on MEMP’s website or by phone at (855) 859-2056 (Conference ID: 22826941) for a seven-day period following the call.
This release serves as qualified notice to nominees as provided for under Treasury Regulation Section 1.1446-4(b) (4) and (d). Please note that 100% of MEMP’s distributions to foreign investors are attributable to income that is effectively connected with a United States trade or business. Accordingly, all of MEMP’s distributions to foreign investors are subject to federal income tax withholding at the highest effective tax rate for individuals or corporations, as applicable. Nominees, and not MEMP, are treated as withholding agents responsible for withholding distributions received by them on behalf of foreign investors.
Memorial Production Partners LP is a publicly traded partnership engaged in the acquisition, production and development of oil and natural gas properties in the United States. MEMP’s properties consist of mature, legacy oil and natural gas fields. MEMP is headquartered in Houston, Texas. For more information, visit www.memorialpp.com.
