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Name | Symbol | Market | Type |
---|---|---|---|
Legacy Reserves LP - 8% Series A Fixed-To-Floating Rate Cumulative Redeemable Perpetual Preferred Units (delisted) | NASDAQ:LGCYP | NASDAQ | Preference Share |
Price Change | % Change | Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 13.66 | 13.10 | 15.45 | 0 | 01:00:00 |
Delaware
|
|
16-1751069
|
(State or other jurisdiction of incorporation or organization)
|
|
(I.R.S. Employer Identification No.)
|
|
|
|
303 W. Wall, Suite 1800
Midland, Texas
|
|
79701
|
(Address of principal executive offices)
|
|
(Zip code)
|
|
|
|
Page
|
|
Glossary of Terms
|
|
|
|
|
|
|
|
Part I - Financial Information
|
|
|
Item 1.
|
Financial Statements.
|
|
|
|
Condensed Consolidated Balance Sheets as of June 30, 2018 and December 31, 2017 (Unaudited).
|
|
|
|
Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2018 and 2017 (Unaudited).
|
|
|
|
Condensed Consolidated Statement of Partners' Deficit for the six months ended June 30, 2018 (Unaudited).
|
|
|
|
Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2018 and 2017 (Unaudited).
|
|
|
|
Notes to Condensed Consolidated Financial Statements (Unaudited).
|
|
|
Item 2.
|
Management's Discussion and Analysis of Financial Condition and Results of Operations.
|
|
|
Item 3.
|
Quantitative and Qualitative Disclosures About Market Risk.
|
|
|
Item 4.
|
Controls and Procedures.
|
|
|
|
Part II - Other Information
|
|
|
Item 1.
|
Legal Proceedings.
|
|
|
Item 1A.
|
Risk Factors.
|
|
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds.
|
|
|
Item 6.
|
Exhibits.
|
|
|
|
Signatures
|
|
ASSETS
|
||||||||
|
|
June 30,
2018 |
|
December 31,
2017 |
||||
|
|
(In thousands)
|
||||||
Current assets:
|
|
|
|
|
||||
Cash
|
|
$
|
5,948
|
|
|
$
|
1,246
|
|
Accounts receivable, net:
|
|
|
|
|
||||
Oil and natural gas
|
|
57,676
|
|
|
62,755
|
|
||
Joint interest owners
|
|
16,515
|
|
|
27,420
|
|
||
Other
|
|
6
|
|
|
2
|
|
||
Fair value of derivatives (Notes 8 and 9)
|
|
28,046
|
|
|
13,424
|
|
||
Prepaid expenses and other current assets (Note 1)
|
|
10,457
|
|
|
7,757
|
|
||
Total current assets
|
|
118,648
|
|
|
112,604
|
|
||
Oil and natural gas properties using the successful efforts method, at cost:
|
|
|
|
|
|
|
||
Proved properties
|
|
3,497,220
|
|
|
3,529,971
|
|
||
Unproved properties
|
|
31,661
|
|
|
28,023
|
|
||
Accumulated depletion, depreciation, amortization and impairment
|
|
(2,157,542
|
)
|
|
(2,204,638
|
)
|
||
|
|
1,371,339
|
|
|
1,353,356
|
|
||
Other property and equipment, net of accumulated depreciation and amortization of $11,971 and $11,467, respectively
|
|
2,532
|
|
|
2,961
|
|
||
Operating rights, net of amortization of $5,944 and $5,765, respectively
|
|
1,072
|
|
|
1,251
|
|
||
Fair value of derivatives (Notes 8 and 9)
|
|
9,968
|
|
|
14,099
|
|
||
Other assets
|
|
6,991
|
|
|
8,811
|
|
||
Total assets
|
|
$
|
1,510,550
|
|
|
$
|
1,493,082
|
|
LIABILITIES AND PARTNERS' DEFICIT
|
||||||||
|
|
June 30,
2018 |
|
December 31,
2017 |
||||
|
|
(In thousands)
|
||||||
Current liabilities:
|
|
|
|
|
||||
Current debt, net (Notes 1 and 2)
|
|
$
|
505,222
|
|
|
$
|
—
|
|
Accounts payable
|
|
6,626
|
|
|
13,093
|
|
||
Accrued oil and natural gas liabilities (Note 1)
|
|
119,086
|
|
|
81,318
|
|
||
Fair value of derivatives (Notes 8 and 9)
|
|
27,740
|
|
|
18,013
|
|
||
Asset retirement obligation (Note 10)
|
|
3,214
|
|
|
3,214
|
|
||
Other
|
|
46,538
|
|
|
29,172
|
|
||
Total current liabilities
|
|
708,426
|
|
|
144,810
|
|
||
Long-term debt, net (Notes 1 and 2)
|
|
784,753
|
|
|
1,346,769
|
|
||
Asset retirement obligation (Note 10)
|
|
261,031
|
|
|
271,472
|
|
||
Fair value of derivatives (Notes 8 and 9)
|
|
6,682
|
|
|
1,075
|
|
||
Other long-term liabilities
|
|
643
|
|
|
643
|
|
||
Total liabilities
|
|
1,761,535
|
|
|
1,764,769
|
|
||
Commitments and contingencies (Note 7)
|
|
|
|
|
|
|
||
Partners' deficit (Note 11):
|
|
|
|
|
|
|
||
Series A Preferred equity - 2,300,000 units issued and outstanding at June 30, 2018 and December 31, 2017
|
|
55,192
|
|
|
55,192
|
|
||
Series B Preferred equity - 7,200,000 units issued and outstanding at June 30, 2018 and December 31, 2017
|
|
174,261
|
|
|
174,261
|
|
||
Incentive distribution equity - 100,000 units issued and outstanding at June 30, 2018 and December 31, 2017
|
|
30,814
|
|
|
30,814
|
|
||
Limited partners' deficit - 76,793,940 and 72,594,620 units issued and outstanding at June 30, 2018 and December 31, 2017, respectively
|
|
(511,095
|
)
|
|
(531,794
|
)
|
||
General partner's deficit (approximately 0.02%)
|
|
(157
|
)
|
|
(160
|
)
|
||
Total partners' deficit
|
|
(250,985
|
)
|
|
(271,687
|
)
|
||
Total liabilities and partners' deficit
|
|
$
|
1,510,550
|
|
|
$
|
1,493,082
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
|
June 30,
|
|
June 30,
|
||||||||||||
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
|
|
(In thousands, except per unit data)
|
||||||||||||||
Revenues:
|
|
|
|
|
|
|
|
|
||||||||
Oil sales
|
|
$
|
99,799
|
|
|
$
|
46,096
|
|
|
$
|
193,210
|
|
|
$
|
95,238
|
|
Natural gas liquids (NGL) sales
|
|
5,735
|
|
|
4,921
|
|
|
13,131
|
|
|
9,971
|
|
||||
Natural gas sales
|
|
33,747
|
|
|
41,830
|
|
|
70,419
|
|
|
87,185
|
|
||||
Total revenues
|
|
139,281
|
|
|
92,847
|
|
|
276,760
|
|
|
192,394
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Expenses:
|
|
|
|
|
|
|
|
|
|
|
||||||
Oil and natural gas production
|
|
49,431
|
|
|
44,802
|
|
|
97,398
|
|
|
96,019
|
|
||||
Production and other taxes
|
|
7,658
|
|
|
4,145
|
|
|
14,984
|
|
|
8,304
|
|
||||
General and administrative
|
|
22,496
|
|
|
8,581
|
|
|
46,586
|
|
|
19,133
|
|
||||
Depletion, depreciation, amortization and accretion
|
|
38,139
|
|
|
27,689
|
|
|
74,686
|
|
|
56,485
|
|
||||
Impairment of long-lived assets
|
|
35,381
|
|
|
1,821
|
|
|
35,381
|
|
|
9,883
|
|
||||
(Gains) losses on disposal of assets
|
|
(1,145
|
)
|
|
11,049
|
|
|
(21,540
|
)
|
|
5,525
|
|
||||
Total expenses
|
|
151,960
|
|
|
98,087
|
|
|
247,495
|
|
|
195,349
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Operating (loss) income
|
|
(12,679
|
)
|
|
(5,240
|
)
|
|
29,265
|
|
|
(2,955
|
)
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
||||||
Interest income
|
|
3
|
|
|
8
|
|
|
15
|
|
|
9
|
|
||||
Interest expense (Notes 2, 8 and 9)
|
|
(28,589
|
)
|
|
(20,614
|
)
|
|
(55,957
|
)
|
|
(40,747
|
)
|
||||
Gain on extinguishment of debt (Note 2)
|
|
—
|
|
|
—
|
|
|
51,693
|
|
|
—
|
|
||||
Equity in income of equity method investees
|
|
3
|
|
|
1
|
|
|
20
|
|
|
12
|
|
||||
Net gains (losses) on commodity derivatives (Notes 8 and 9)
|
|
(9,315
|
)
|
|
14,516
|
|
|
(11,019
|
)
|
|
49,185
|
|
||||
Other
|
|
(2
|
)
|
|
402
|
|
|
273
|
|
|
362
|
|
||||
Income (loss) before income taxes
|
|
(50,579
|
)
|
|
(10,927
|
)
|
|
14,290
|
|
|
5,866
|
|
||||
Income tax expense
|
|
(130
|
)
|
|
(150
|
)
|
|
(617
|
)
|
|
(571
|
)
|
||||
Net income (loss)
|
|
$
|
(50,709
|
)
|
|
$
|
(11,077
|
)
|
|
$
|
13,673
|
|
|
$
|
5,295
|
|
Distributions to preferred unitholders
|
|
(4,750
|
)
|
|
(4,750
|
)
|
|
(9,500
|
)
|
|
(9,500
|
)
|
||||
Net income (loss) attributable to unitholders
|
|
$
|
(55,459
|
)
|
|
$
|
(15,827
|
)
|
|
$
|
4,173
|
|
|
$
|
(4,205
|
)
|
|
|
|
|
|
|
|
|
|
||||||||
Income (loss) per unit - basic & diluted (Note 11)
|
|
$
|
(0.72
|
)
|
|
$
|
(0.22
|
)
|
|
$
|
0.05
|
|
|
$
|
(0.06
|
)
|
Weighted average number of units used in computing net income (loss) per unit -
|
|
|
|
|
|
|
|
|
||||||||
Basic
|
|
76,725
|
|
|
72,354
|
|
|
76,539
|
|
|
72,229
|
|
||||
Diluted
|
|
76,725
|
|
|
72,354
|
|
|
77,433
|
|
|
72,229
|
|
|
|
Series A Preferred Equity
|
|
Series B Preferred Equity
|
|
Incentive Distribution Equity
|
|
Partners' Deficit
|
|
|
||||||||||||||||||||||||||
|
|
Units
|
|
Amount
|
|
Units
|
|
Amount
|
|
Units
|
|
Amount
|
|
Limited Partner Units
|
|
Limited Partner Amount
|
|
General Partner Amount
|
|
Total Partners' Deficit
|
||||||||||||||||
|
|
(In thousands)
|
||||||||||||||||||||||||||||||||||
Balance, December 31, 2017
|
|
2,300
|
|
|
$
|
55,192
|
|
|
7,200
|
|
|
$
|
174,261
|
|
|
100
|
|
|
$
|
30,814
|
|
|
72,595
|
|
|
$
|
(531,794
|
)
|
|
$
|
(160
|
)
|
|
$
|
(271,687
|
)
|
Units issued to Legacy Board of Directors for services
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
60
|
|
|
522
|
|
|
—
|
|
|
522
|
|
||||||
Unit-based compensation
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
579
|
|
|
—
|
|
|
579
|
|
||||||
Vesting of restricted and phantom units
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
339
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Units issued in exchange for Standstill Agreement
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,800
|
|
|
5,928
|
|
|
—
|
|
|
5,928
|
|
||||||
Net income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
13,670
|
|
|
3
|
|
|
13,673
|
|
||||||
Balance, June 30, 2018
|
|
2,300
|
|
|
$
|
55,192
|
|
|
7,200
|
|
|
$
|
174,261
|
|
|
100
|
|
|
$
|
30,814
|
|
|
76,794
|
|
|
$
|
(511,095
|
)
|
|
$
|
(157
|
)
|
|
$
|
(250,985
|
)
|
|
|
Six Months Ended June 30,
|
||||||
|
|
2018
|
|
2017
|
||||
|
|
(In thousands)
|
||||||
Cash flows from operating activities:
|
|
|
|
|
||||
Net income
|
|
$
|
13,673
|
|
|
$
|
5,295
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
||||
Depletion, depreciation, amortization and accretion
|
|
74,686
|
|
|
56,485
|
|
||
Amortization of debt discount and issuance costs
|
|
10,752
|
|
|
3,713
|
|
||
Gain on extinguishment of debt
|
|
(51,693
|
)
|
|
—
|
|
||
Impairment of long-lived assets
|
|
35,381
|
|
|
9,883
|
|
||
(Gain) loss on derivatives
|
|
10,052
|
|
|
(49,942
|
)
|
||
Unit-based compensation
|
|
24,994
|
|
|
2,827
|
|
||
(Gain) loss on disposal of assets
|
|
(21,540
|
)
|
|
5,525
|
|
||
Changes in assets and liabilities:
|
|
|
|
|
||||
Decrease in accounts receivable, oil and natural gas
|
|
5,079
|
|
|
1,003
|
|
||
Decrease (increase) in accounts receivable, joint interest owners
|
|
10,905
|
|
|
(3,259
|
)
|
||
Increase in accounts receivable, other
|
|
(4
|
)
|
|
(399
|
)
|
||
(Increase) decrease in other assets
|
|
(880
|
)
|
|
148
|
|
||
Decrease in accounts payable
|
|
(6,467
|
)
|
|
(109
|
)
|
||
Increase in accrued oil and natural gas liabilities
|
|
12,035
|
|
|
8,519
|
|
||
Decrease in other liabilities
|
|
(1,989
|
)
|
|
(4,558
|
)
|
||
Total adjustments
|
|
101,311
|
|
|
29,836
|
|
||
Net cash provided by operating activities
|
|
114,984
|
|
|
35,131
|
|
||
Cash flows from investing activities:
|
|
|
|
|
|
|
||
Investment in oil and natural gas properties
|
|
(118,324
|
)
|
|
(61,910
|
)
|
||
Proceeds (costs) associated with sale of assets
|
|
29,235
|
|
|
(199
|
)
|
||
Investment in other equipment
|
|
(130
|
)
|
|
(110
|
)
|
||
Net cash settlements (paid) received on commodity derivatives
|
|
(5,209
|
)
|
|
10,807
|
|
||
Net cash used in investing activities
|
|
(94,428
|
)
|
|
(51,412
|
)
|
||
Cash flows from financing activities:
|
|
|
|
|
|
|
||
Proceeds from long-term debt
|
|
382,626
|
|
|
211,000
|
|
||
Payments of long-term debt
|
|
(375,384
|
)
|
|
(196,000
|
)
|
||
Payments of debt issuance costs
|
|
(23,096
|
)
|
|
(60
|
)
|
||
Net cash (used in) provided by financing activities
|
|
(15,854
|
)
|
|
14,940
|
|
||
Net increase (decrease) in cash and cash equivalents
|
|
4,702
|
|
|
(1,341
|
)
|
||
Cash, beginning of period (1)
|
|
4,450
|
|
|
5,747
|
|
||
Cash, end of period (1)
|
|
$
|
9,152
|
|
|
$
|
4,406
|
|
Non-cash investing and financing activities:
|
|
|
|
|
|
|
||
Asset retirement obligation costs and liabilities
|
|
$
|
39
|
|
|
$
|
—
|
|
Asset retirement obligations associated with properties sold
|
|
$
|
(16,107
|
)
|
|
$
|
(5,650
|
)
|
Asset retirement obligations associated with property acquisitions
|
|
$
|
156
|
|
|
$
|
—
|
|
Note receivable received in exchange for sale of oil and natural gas properties
|
|
$
|
—
|
|
|
$
|
748
|
|
Units issued in exchange for Standstill Agreement
|
|
$
|
5,928
|
|
|
$
|
—
|
|
Change in accrued capital expenditures
|
|
$
|
25,733
|
|
|
$
|
—
|
|
(1)
|
Inclusive of
$3.2 million
of restricted cash as of
June 30, 2018
and
2017
. See "—Footnote 1—Summary of Significant Accounting Policies" for further discussion.
|
(1)
|
Summary of Significant Accounting Policies
|
(a)
|
Organization, Basis of Presentation and Description of Business
|
•
|
New Legacy, which is currently a wholly owned subsidiary of LRGPLLC, will acquire all of the issued and outstanding limited liability company interests in LRGPLLC and will become the sole member of LRGPLLC; and
|
•
|
the Partnership will merge with Legacy Reserves Merger Sub LLC, a Delaware limited liability company and a wholly owned subsidiary of New Legacy ("Merger Sub"), with the Partnership continuing as the surviving entity and as a subsidiary of New Legacy (the “Merger”), the limited partner interests of the Partnership other than the incentive distribution units in the Partnership being exchanged for New Legacy common stock and the general partner interest remaining outstanding.
|
|
June 30,
2018 |
|
December 31,
2017 |
||||
|
(In thousands)
|
||||||
Accrued capital expenditures
|
$
|
58,931
|
|
|
$
|
33,198
|
|
Accrued lease operating expense
|
18,493
|
|
|
18,179
|
|
||
Revenue payable to joint interest owners
|
26,831
|
|
|
18,510
|
|
||
Accrued ad valorem tax
|
8,956
|
|
|
5,807
|
|
||
Other
|
5,875
|
|
|
5,624
|
|
||
|
$
|
119,086
|
|
|
$
|
81,318
|
|
(2)
|
Debt
|
|
|
June 30,
|
|
December 31,
|
||||
|
|
2018
|
|
2017
|
||||
|
|
(In thousands)
|
||||||
Current debt
|
|
|
|
|
||||
Credit Facility due 2019
|
|
$
|
508,000
|
|
|
$
|
—
|
|
Unamortized debt issuance costs
|
|
(2,778
|
)
|
|
—
|
|
||
Total current debt, net
|
|
505,222
|
|
|
—
|
|
||
|
|
|
|
|
||||
Long-term debt
|
|
|
|
|
||||
Credit Facility due 2019
|
|
—
|
|
|
499,000
|
|
||
Second Lien Term Loans due 2020
|
|
338,626
|
|
|
205,000
|
|
||
8% Senior Notes due 2020
|
|
232,989
|
|
|
232,989
|
|
||
6.625% Senior Notes due 2021
|
|
245,579
|
|
|
432,656
|
|
||
|
|
817,194
|
|
|
1,369,645
|
|
||
Unamortized discount on Second Lien Term Loans and Senior Notes
|
|
(12,228
|
)
|
|
(13,101
|
)
|
||
Unamortized debt issuance costs
|
|
(20,213
|
)
|
|
(9,775
|
)
|
||
Total long-term debt, net
|
|
$
|
784,753
|
|
|
$
|
1,346,769
|
|
Total debt, net
|
|
$
|
1,289,975
|
|
|
$
|
1,346,769
|
|
•
|
as of any day, first lien debt to EBITDA for the four fiscal quarters ending on the last day of the fiscal quarter immediately preceding the date of determination for which financial statements are available to not be greater than
2.50
to 1.00;
|
•
|
as of the last day of any fiscal quarter, secured debt to EBITDA as of the last day of any fiscal quarter for the four fiscal quarters then ending of not more than
4.5
to 1.0, beginning with the fiscal quarter ending on December 31, 2018;
|
•
|
as of the last day of any fiscal quarter, total EBITDA over the last four quarters to total interest expense over the last four quarters to be greater than
2.0
to 1.0;
|
•
|
consolidated current assets, as of the last day of the most recent quarter and including the unused amount of the total commitments, to consolidated current liabilities as of the last day of the most recent quarter of not less than
1.0
to 1.0, excluding non-cash assets and liabilities under FASB Accounting Standards Codification 815, which includes the current portion of oil, natural gas and interest rate derivatives; and
|
•
|
as of the last day of any fiscal quarter, the ratio of (a) the sum of (i) the net present value using NYMEX forward pricing, discounted at
10
percent per annum, of Legacy’s proved developed producing oil and gas properties as reflected in the most recent reserve report delivered either July 1 or December 31 of each year, as the case may be (giving pro forma effect to material acquisitions or dispositions since the date of such reports) (“PDP PV-10”), (ii) the net mark to market value of Legacy’s swap agreements and (iii) Legacy’s cash and cash equivalents, in each case as of such date to (b) Secured Debt as of such day to be equal to or less than
1.00
to 1.00.
|
•
|
permit the Corporate Reorganization and modify certain provisions to reflect the new corporate structure;
|
•
|
provide that New Legacy and LRGPLLC will guarantee the debt outstanding under the Current Credit Agreement;
|
•
|
provide that the Partnership may make unlimited restricted payments, subject to no default or event of default, pro forma availability under the Current Credit Agreement of at least 20%, and pro forma total leverage of not more than
3.00
to 1.00, as well as to pay taxes and ordinary course overhead expenses of New Legacy;
|
•
|
waive any “Change in Control” (as defined in the Current Credit Agreement) triggered by the Corporate Reorganization; and
|
•
|
permit redemptions of the 2020 Senior Notes, 2021 Senior Notes and loans under the Second Lien Term Loan Credit Agreement (as defined below) with the cash proceeds from the sale of equity interests (or exchanges for equity interests) of New Legacy.
|
•
|
not permit, as of the last day of any fiscal quarter, the ratio of the sum of (i) the net present value using NYMEX forward pricing of Legacy’s PDP PV-10, (ii) the net mark to market value of Legacy’s swap agreements and (iii) Legacy’s cash and cash equivalents to Secured Debt to be less than
0.85
to 1.00 until the fiscal quarter ended December 31, 2018 and
1.00
to 1.00 thereafter; and
|
•
|
not permit, as of the last day of any fiscal quarter beginning with the fiscal quarter ending December 31, 2018, Legacy’s ratio of Secured Debt as of such day to EBITDA for the four fiscal quarters then ending to be greater than
4.50
to 1.00.
|
•
|
permit the Corporate Reorganization and modify certain provisions to reflect the new corporate structure;
|
•
|
provide that New Legacy and LRGPLLC will guarantee the debt outstanding under the Second Lien Term Loan Credit Agreement;
|
•
|
provide that the Partnership may make unlimited restricted payments, subject to no default or event of default, pro forma availability under the Second Lien Term Loan Credit Agreement of at least 20%, and pro forma total leverage of not more than
3.00
to 1.00, as well as to pay taxes and ordinary course overhead expenses of New Legacy;
|
•
|
waive any “Change in Control” (as defined in the Second Lien Term Loan Credit Agreement) triggered by the Corporate Reorganization;
|
•
|
waive any requirement to prepay the Term Loans using the Partnership’s Free Cash Flow or limit Capital Expenditures (each as defined in the Second Lien Term Loan Credit Agreement) prior to March 31, 2019; and
|
•
|
permit redemptions of the 2020 Senior Notes and the 2021 Senior Notes with the cash proceeds from the sale of equity interests (or exchanges for equity interests) of New Legacy.
|
Year
|
|
Percentage
|
|
2017
|
|
102.000
|
%
|
2018 and thereafter
|
|
100.000
|
%
|
Year
|
|
Percentage
|
|
2018
|
|
101.656
|
%
|
2019 and thereafter
|
|
100.000
|
%
|
(3)
|
Impact of ASC 606 Adoption
|
|
|
Three Months Ended June 30, 2018
|
|
Six Months Ended June 30, 2018
|
||||||||||||||||||||
|
|
Under ASC 606
|
|
Under ASC 605
|
|
Change
|
|
Under ASC 606
|
|
Under ASC 605
|
|
Change
|
||||||||||||
|
|
(In thousands)
|
||||||||||||||||||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Oil Sales
|
|
$
|
99,799
|
|
|
$
|
99,936
|
|
|
$
|
(137
|
)
|
|
$
|
193,210
|
|
|
$
|
193,379
|
|
|
$
|
(169
|
)
|
Natural gas liquids (NGL) sales
|
|
5,735
|
|
|
5,898
|
|
|
(163
|
)
|
|
13,131
|
|
|
13,443
|
|
|
(312
|
)
|
||||||
Natural gas sales
|
|
33,747
|
|
|
35,452
|
|
|
(1,705
|
)
|
|
70,419
|
|
|
73,585
|
|
|
(3,166
|
)
|
||||||
|
|
$
|
139,281
|
|
|
$
|
141,286
|
|
|
$
|
(2,005
|
)
|
|
$
|
276,760
|
|
|
$
|
280,407
|
|
|
$
|
(3,647
|
)
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Oil and natural gas production
|
|
$
|
49,431
|
|
|
$
|
51,436
|
|
|
$
|
(2,005
|
)
|
|
$
|
97,398
|
|
|
$
|
101,045
|
|
|
$
|
(3,647
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net income (loss)
|
|
$
|
(50,709
|
)
|
|
$
|
(50,709
|
)
|
|
$
|
—
|
|
|
$
|
13,673
|
|
|
$
|
13,673
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Partners' deficit, as of January 1, 2018
|
|
$
|
(271,687
|
)
|
|
$
|
(271,687
|
)
|
|
$
|
—
|
|
|
$
|
(271,687
|
)
|
|
$
|
(271,687
|
)
|
|
$
|
—
|
|
(4)
|
Revenue from Contracts with Customers
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||
|
|
June 30,
|
||||||
|
|
2018
|
|
2018
|
||||
|
|
(In thousands)
|
||||||
Revenues:
|
|
|
|
|
||||
Oil sales
|
|
$
|
99,799
|
|
|
$
|
193,210
|
|
Natural gas liquids (NGL) sales
|
|
5,735
|
|
|
13,131
|
|
||
Natural gas sales
|
|
33,747
|
|
|
70,419
|
|
||
Total revenues
|
|
139,281
|
|
|
276,760
|
|
(5)
|
Asset Acquisition and Dispositions
|
(6)
|
Related Party Transactions
|
(7)
|
Commitments and Contingencies
|
(8)
|
Fair Value Measurements
|
Level 1:
|
Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. Legacy considers active markets as those in which transactions for the assets or liabilities occur in sufficient frequency and volume to provide pricing information on an ongoing basis.
|
Level 2:
|
Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability. This category includes those derivative instruments that Legacy values using observable market data. Substantially all of these inputs are observable in the marketplace throughout the term of the derivative instrument, can be derived from observable data, or are supported by observable levels at which transactions are executed in the marketplace. Instruments in this category include non-exchange traded derivatives such as over-the-counter commodity price swaps and collars and interest rate swaps as well as long-term incentive plan liabilities calculated using the Black-Scholes model to estimate the fair value as of the measurement date.
|
Level 3:
|
Measured based on prices or valuation models that require inputs that are both significant to the fair value measurement and less observable from objective sources (i.e. supported by little or no market activity). Legacy’s valuation models are primarily industry standard models that consider various inputs including: (a) quoted forward prices for commodities, (b) time value, and (c) current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Level 3 instruments currently are limited to Midland-Cushing crude oil differential swaps. Although Legacy utilizes third party broker quotes to assess the reasonableness of its prices and valuation techniques, Legacy does not have sufficient corroborating evidence to support classifying these assets and liabilities as Level 2.
|
|
|
June 30, 2018
|
||||||||||||||||||||||
|
|
Fair Value Measurements Using
|
|
|
|
|
|
|
||||||||||||||||
|
|
Quoted Prices in Active Markets for Identical Assets
(Level 1)
|
|
Significant Other Observable Inputs
(Level 2)
|
|
Significant Unobservable Inputs
(Level 3)
|
|
Total Fair Value
|
|
Gross Amounts Offset in the Consolidated Balance Sheets
|
|
Net Amounts Presented in the Consolidated Balance Sheets
|
||||||||||||
|
|
(In thousands)
|
||||||||||||||||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Current
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Commodity derivatives
|
|
$
|
—
|
|
|
$
|
12,703
|
|
|
$
|
30,134
|
|
|
$
|
42,837
|
|
|
$
|
(12,703
|
)
|
|
$
|
30,134
|
|
Interest rate derivatives
|
|
—
|
|
|
2,300
|
|
|
—
|
|
|
2,300
|
|
|
—
|
|
|
2,300
|
|
||||||
Noncurrent
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Commodity derivatives
|
|
—
|
|
|
7,701
|
|
|
1,482
|
|
|
9,183
|
|
|
(4,388
|
)
|
|
4,795
|
|
||||||
Interest rate derivatives
|
|
—
|
|
|
784
|
|
|
—
|
|
|
784
|
|
|
—
|
|
|
784
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Current
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Commodity derivatives
|
|
—
|
|
|
(44,830
|
)
|
|
—
|
|
|
(44,830
|
)
|
|
12,703
|
|
|
(32,127
|
)
|
||||||
LTIP liability
|
|
—
|
|
|
(25,840
|
)
|
|
—
|
|
|
(25,840
|
)
|
|
—
|
|
|
(25,840
|
)
|
||||||
Noncurrent
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Commodity derivatives
|
|
—
|
|
|
(6,682
|
)
|
|
—
|
|
|
(6,682
|
)
|
|
4,388
|
|
|
(2,294
|
)
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net fair value instruments
|
|
$
|
—
|
|
|
$
|
(53,864
|
)
|
|
$
|
31,616
|
|
|
$
|
(22,248
|
)
|
|
$
|
—
|
|
|
$
|
(22,248
|
)
|
(a)
|
See Note 12 for further discussion on unit-based compensation expenses and the related Long-Term Incentive Plan ("LTIP") liability for certain grants accounted for under the liability method.
|
|
|
December 31, 2017
|
||||||||||||||||||||||
|
|
Fair Value Measurements Using
|
|
|
|
|
|
|
||||||||||||||||
|
|
Quoted Prices in Active Markets for Identical Assets
(Level 1)
|
|
Significant Other Observable Inputs
(Level 2)
|
|
Significant Unobservable Inputs
(Level 3)
|
|
Total Fair Value
|
|
Gross Amounts Offset in the Consolidated Balance Sheets
|
|
Net Amounts Presented in the Consolidated Balance Sheets
|
||||||||||||
|
|
(In thousands)
|
||||||||||||||||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Current
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Commodity derivatives
|
|
$
|
—
|
|
|
$
|
19,792
|
|
|
$
|
—
|
|
|
$
|
19,792
|
|
|
$
|
(7,204
|
)
|
|
$
|
12,588
|
|
Interest rate derivatives
|
|
—
|
|
|
837
|
|
|
—
|
|
|
837
|
|
|
(1
|
)
|
|
836
|
|
||||||
Noncurrent
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Commodity derivatives
|
|
—
|
|
|
14,278
|
|
|
—
|
|
|
14,278
|
|
|
(1,460
|
)
|
|
12,818
|
|
||||||
Interest rate derivatives
|
|
—
|
|
|
1,281
|
|
|
—
|
|
|
1,281
|
|
|
|
|
1,281
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Current
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Commodity derivatives
|
|
—
|
|
|
(21,027
|
)
|
|
(4,191
|
)
|
|
(25,218
|
)
|
|
7,204
|
|
|
(18,014
|
)
|
||||||
Interest rate derivatives
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
|
1
|
|
|
—
|
|
||||||
LTIP liability
|
|
—
|
|
|
(1,947
|
)
|
|
—
|
|
|
(1,947
|
)
|
|
|
|
(1,947
|
)
|
|||||||
Noncurrent
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Commodity derivatives
|
|
—
|
|
|
(1,637
|
)
|
|
(897
|
)
|
|
(2,534
|
)
|
|
1,460
|
|
|
(1,074
|
)
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net fair value instruments
|
|
$
|
—
|
|
|
$
|
11,576
|
|
|
$
|
(5,088
|
)
|
|
$
|
6,488
|
|
|
$
|
—
|
|
|
$
|
6,488
|
|
(a)
|
See Note 12 for further discussion on unit-based compensation expenses and the related Long-Term Incentive Plan ("LTIP") liability for certain grants accounted for under the liability method.
|
|
|
Significant Unobservable Inputs
|
||||||||||||||
|
|
(Level 3)
|
||||||||||||||
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
|
|
||||||||||||||
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
|
|
(In thousands)
|
||||||||||||||
Beginning balance
|
|
$
|
9,909
|
|
|
$
|
1,666
|
|
|
$
|
(5,088
|
)
|
|
$
|
8
|
|
Total gains (losses)
|
|
26,356
|
|
|
(747
|
)
|
|
40,416
|
|
|
492
|
|
||||
Settlements, net
|
|
(4,649
|
)
|
|
(289
|
)
|
|
(3,712
|
)
|
|
130
|
|
||||
Ending balance
|
|
$
|
31,616
|
|
|
$
|
630
|
|
|
$
|
31,616
|
|
|
$
|
630
|
|
Gains (losses) included in earnings relating to derivatives still held as of
June 30, 2018 and 2017
|
|
$
|
23,158
|
|
|
$
|
(631
|
)
|
|
$
|
34,232
|
|
|
$
|
89
|
|
|
|
Fair Value Measurements During the Six Months Ended June 30, 2018 Using
|
||||||||||
|
|
Quoted Prices in Active Markets for Identical Assets
|
|
Significant Other Observable Inputs
|
|
Significant Unobservable Inputs
|
||||||
Description
|
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
||||||
|
|
(In thousands)
|
||||||||||
Assets:
|
|
|
|
|
|
|
||||||
Impairment (a)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
26,195
|
|
(a)
|
Legacy periodically reviews oil and natural gas properties for impairment when facts and circumstances indicate that their carrying value may not be recoverable. During the
six
-month period ended
June 30, 2018
, Legacy incurred impairment charges of
$35.4 million
as oil and natural gas properties with a net cost basis of
$61.6 million
were written down to their fair value of
$26.2 million
. In order to determine whether the carrying value of an asset is recoverable, Legacy compares net capitalized costs of proved oil and natural gas properties to estimated undiscounted future net cash flows using management’s expectations
|
(9)
|
Derivative Financial Instruments
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
|
|
||||||||||||||
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
|
|
(In thousands)
|
||||||||||||||
Beginning fair value of commodity derivatives
|
|
$
|
7,409
|
|
|
$
|
43,131
|
|
|
$
|
6,318
|
|
|
$
|
12,698
|
|
Total gain (loss) - oil derivatives
|
|
(7,082
|
)
|
|
7,776
|
|
|
(7,824
|
)
|
|
22,776
|
|
||||
Total gain (loss) - natural gas derivatives
|
|
(2,233
|
)
|
|
6,740
|
|
|
(3,195
|
)
|
|
26,409
|
|
||||
Crude oil derivative cash settlements paid (received)
|
|
6,309
|
|
|
(3,559
|
)
|
|
11,203
|
|
|
(6,698
|
)
|
||||
Natural gas derivative cash settlements received
|
|
(3,895
|
)
|
|
(3,012
|
)
|
|
(5,994
|
)
|
|
(4,109
|
)
|
||||
Ending fair value of commodity derivatives
|
|
$
|
508
|
|
|
$
|
51,076
|
|
|
$
|
508
|
|
|
$
|
51,076
|
|
|
|
|
|
Average
|
|
Price
|
||
Time Period
|
|
Volumes (Bbls)
|
|
Price per Bbl
|
|
Range per Bbl
|
||
July-December 2018
|
|
1,527,200
|
|
$54.76
|
|
$51.20
|
-
|
$63.68
|
2019
|
|
2,190,000
|
|
$58.88
|
|
$57.15
|
-
|
$61.20
|
|
|
|
|
Average
|
|
Price
|
||
Time Period
|
|
Volumes (Bbls)
|
|
Price per Bbl
|
|
Range per Bbl
|
||
July-December 2018
|
|
2,024,000
|
|
$(1.13)
|
|
$(1.25)
|
-
|
$(0.80)
|
2019
|
|
730,000
|
|
$(1.15)
|
|
$(1.15)
|
|
|
|
|
Average Long
|
|
Average Short
|
Time Period
|
|
Volumes (Bbls)
|
|
Put Price per Bbl
|
|
Call Price per Bbl
|
July-December 2018
|
|
782,000
|
|
$47.06
|
|
$60.29
|
|
|
|
|
Average Long
|
|
Average Short
|
|
Average
|
Time Period
|
|
Volumes (Bbls)
|
|
Put Price per Bbl
|
|
Put Price per Bbl
|
|
Swap Price per Bbl
|
July-December 2018
|
|
64,400
|
|
$57.00
|
|
$82.00
|
|
$90.50
|
|
|
|
|
Average
|
|
Price
|
||
Time Period
|
|
Volumes (MMBtu)
|
|
Price per MMBtu
|
|
Range per MMBtu
|
||
July-December 2018
|
|
18,160,000
|
|
$3.23
|
|
$3.04
|
-
|
$3.39
|
2019
|
|
25,800,000
|
|
$3.36
|
|
$3.29
|
-
|
$3.39
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
|
|
||||||||||||||
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
|
|
(In thousands)
|
||||||||||||||
Beginning fair value of interest rate swaps
|
|
$
|
2,983
|
|
|
$
|
1,025
|
|
|
$
|
2,117
|
|
|
$
|
183
|
|
Total gain on interest rate swaps
|
|
372
|
|
|
(334
|
)
|
|
1,315
|
|
|
90
|
|
||||
Cash settlements (received) paid
|
|
(271
|
)
|
|
249
|
|
|
(348
|
)
|
|
667
|
|
||||
Ending fair value of interest rate swaps
|
|
$
|
3,084
|
|
|
$
|
940
|
|
|
$
|
3,084
|
|
|
$
|
940
|
|
|
|
Weighted Average
|
|
|
|
|
|
Estimated Fair Value at
|
|||||
Notional Amount
|
|
Fixed Rate
|
|
Effective Date
|
|
Maturity Date
|
|
June 30, 2018
|
|||||
(Dollars in thousands)
|
|||||||||||||
$
|
235,000
|
|
|
1.363
|
%
|
|
9/1/2015
|
|
9/1/2019
|
|
$
|
3,084
|
|
(10)
|
Asset Retirement Obligation
|
|
|
June 30,
2018 |
|
December 31,
2017 |
||||
|
|
(In thousands)
|
||||||
Asset retirement obligation - beginning of period
|
|
$
|
274,686
|
|
|
$
|
272,148
|
|
Liabilities incurred with properties acquired
|
|
156
|
|
|
62
|
|
||
Liabilities incurred with properties drilled
|
|
39
|
|
|
39
|
|
||
Liabilities settled during the period
|
|
(812
|
)
|
|
(1,891
|
)
|
||
Liabilities associated with properties sold
|
|
(16,107
|
)
|
|
(8,464
|
)
|
||
Current period accretion
|
|
6,283
|
|
|
12,792
|
|
||
Asset retirement obligation - end of period
|
|
$
|
264,245
|
|
|
$
|
274,686
|
|
(11)
|
Partners' Deficit
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
|
June 30,
|
|
June 30,
|
||||||||||||
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
|
|
(In thousands)
|
||||||||||||||
Net income (loss)
|
|
$
|
(50,709
|
)
|
|
$
|
(11,077
|
)
|
|
$
|
13,673
|
|
|
$
|
5,295
|
|
Distributions to preferred unitholders
|
|
(4,750
|
)
|
|
(4,750
|
)
|
|
(9,500
|
)
|
|
(9,500
|
)
|
||||
Net income (loss) attributable to unitholders
|
|
$
|
(55,459
|
)
|
|
$
|
(15,827
|
)
|
|
4,173
|
|
|
(4,205
|
)
|
||
Weighted average number of units outstanding - basic
|
|
76,725
|
|
|
72,354
|
|
|
76,539
|
|
|
72,229
|
|
||||
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
||||||||
Restricted and phantom units
|
|
—
|
|
|
—
|
|
|
894
|
|
|
—
|
|
||||
Weighted average number of units outstanding - diluted
|
|
76,725
|
|
|
72,354
|
|
|
77,433
|
|
|
72,229
|
|
||||
Basic & diluted income (loss) per unit
|
|
$
|
(0.72
|
)
|
|
$
|
(0.22
|
)
|
|
$
|
0.05
|
|
|
$
|
(0.06
|
)
|
(12)
|
Unit-Based Compensation
|
|
|
Units
|
|
Weighted-Average Exercise Price
|
|
Weighted-Average Remaining Contractual Term
|
|
Aggregate Intrinsic Value
|
|||||
Outstanding at January 1, 2018
|
|
722,021
|
|
|
$
|
20.13
|
|
|
2.99
|
|
$
|
—
|
|
Exercised
|
|
(2,667
|
)
|
|
4.80
|
|
|
|
|
|
|||
Expired & Forfeited
|
|
(22,167
|
)
|
|
28.21
|
|
|
|
|
|
|||
Outstanding at June 30, 2018
|
|
697,187
|
|
|
$
|
19.93
|
|
|
2.87
|
|
$
|
225,371
|
|
|
|
|
|
|
|
|
|
|
|
||||
UARs exercisable at June 30, 2018
|
|
579,853
|
|
|
$
|
22.81
|
|
|
2.60
|
|
$
|
60,370
|
|
|
|
Non-Vested UARs
|
|||||
|
|
Number of Units
|
|
Weighted-Average Exercise Price
|
|||
Non-vested at January 1, 2018
|
|
129,499
|
|
|
$
|
5.97
|
|
Vested
|
|
(9,988
|
)
|
|
8.95
|
|
|
Forfeited
|
|
(2,167
|
)
|
|
5.66
|
|
|
Non-vested at June 30, 2018
|
|
117,344
|
|
|
$
|
5.72
|
|
|
Six Months Ended
|
|
|
June 30,
2018 |
|
Expected life (years)
|
2.87
|
|
Risk free interest rate
|
2.6
|
%
|
Annual distribution rate per unit
|
$0.00
|
|
Volatility
|
91.7
|
%
|
•
|
the outcome of any legal proceedings that may have been instituted against the Partnership relating to the Corporate Reorganization;
|
•
|
our ability to identify, acquire, exploit and appropriately finance additional oil and natural gas properties at economically attractive prices;
|
•
|
our ability to replace reserves and increase reserve value;
|
•
|
the level of our lease operating expenses, general and administrative costs and finding and development costs, including payments to our general partner;
|
•
|
our ability to comply with, renegotiate or receive waivers of debt covenants under our Revolving Credit Agreement and our Term Loan Credit Agreement (as defined below);
|
•
|
our ability to engage in lending and capital markets activity which may include debt refinancings or extensions, exchanges or repurchases or debt or equity issuances;
|
•
|
our ability to divest non-core assets at economically attractive prices;
|
•
|
New Legacy, which is currently a wholly owned subsidiary of the General Partner, will acquire all of the issued and outstanding limited liability company interests in the General Partner and will become the sole member of the General Partner; and
|
•
|
the Partnership will merge with Legacy Reserves Merger Sub LLC, a Delaware limited liability company and a wholly owned subsidiary of New Legacy ("Merger Sub"), with the Partnership continuing as the surviving entity and as a subsidiary of New Legacy (the "Merger"), the limited partner interests of the Partnership other than the incentive distribution units in the Partnership being exchanged for New Legacy common stock and the General Partner interest remaining outstanding.
|
•
|
efficiently develop our horizontal inventory in the Permian Basin to meaningfully grow oil production and total company cash flow and reserve value;
|
•
|
minimize production declines and operating costs through efficient operations; and
|
•
|
reposition our balance sheet by (i) consummating the Corporate Reorganization and (ii) evaluating and opportunistically pursuing alternatives to materially reduce our outstanding indebtedness and restructure our near term maturity indebtedness.
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
|
||||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
|
(In thousands, except per unit data)
|
||||||||||||||
Revenues:
|
|
|
|
|
|
|
|
||||||||
Oil sales
|
$
|
99,799
|
|
|
$
|
46,096
|
|
|
$
|
193,210
|
|
|
$
|
95,238
|
|
Natural gas liquids (NGL) sales
|
5,735
|
|
|
4,921
|
|
|
13,131
|
|
|
9,971
|
|
||||
Natural gas sales
|
33,747
|
|
|
41,830
|
|
|
70,419
|
|
|
87,185
|
|
||||
Total revenue
|
$
|
139,281
|
|
|
$
|
92,847
|
|
|
$
|
276,760
|
|
|
$
|
192,394
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
||||||
Oil and natural gas production, excluding ad valorem taxes
|
$
|
46,882
|
|
|
$
|
42,262
|
|
|
$
|
92,467
|
|
|
$
|
91,490
|
|
Ad valorem taxes
|
2,549
|
|
|
2,540
|
|
|
4,931
|
|
|
4,529
|
|
||||
Total oil and natural gas production
|
$
|
49,431
|
|
|
$
|
44,802
|
|
|
$
|
97,398
|
|
|
$
|
96,019
|
|
Production and other taxes
|
$
|
7,658
|
|
|
$
|
4,145
|
|
|
$
|
14,984
|
|
|
$
|
8,304
|
|
General and administrative, excluding transaction costs and LTIP
|
$
|
8,003
|
|
|
$
|
7,046
|
|
|
$
|
17,505
|
|
|
$
|
15,669
|
|
Transaction costs
|
1,607
|
|
|
52
|
|
|
3,389
|
|
|
84
|
|
||||
LTIP expense
|
12,886
|
|
|
1,483
|
|
|
25,692
|
|
|
3,380
|
|
||||
Total general and administrative
|
$
|
22,496
|
|
|
$
|
8,581
|
|
|
$
|
46,586
|
|
|
$
|
19,133
|
|
Depletion, depreciation, amortization and accretion
|
$
|
38,139
|
|
|
$
|
27,689
|
|
|
$
|
74,686
|
|
|
$
|
56,485
|
|
Commodity derivative cash settlements:
|
|
|
|
|
|
|
|
|
|
||||||
Oil derivative cash settlements (paid) received
|
$
|
(6,309
|
)
|
|
$
|
3,559
|
|
|
$
|
(11,203
|
)
|
|
$
|
6,698
|
|
Natural gas derivative cash settlements received
|
$
|
3,895
|
|
|
$
|
3,012
|
|
|
$
|
5,994
|
|
|
$
|
4,109
|
|
Production:
|
|
|
|
|
|
|
|
|
|
||||||
Oil (MBbls)
|
1,629
|
|
|
1,044
|
|
|
3,176
|
|
|
2,081
|
|
||||
Natural gas liquids (MGal)
|
11,332
|
|
|
8,514
|
|
|
20,576
|
|
|
16,167
|
|
||||
Natural gas (MMcf)
|
14,555
|
|
|
15,604
|
|
|
28,835
|
|
|
31,196
|
|
||||
Total (MBoe)
|
4,325
|
|
|
3,847
|
|
|
8,472
|
|
|
7,665
|
|
||||
Average daily production (Boe/d)
|
47,527
|
|
|
42,275
|
|
|
46,807
|
|
|
42,348
|
|
||||
Average sales price per unit (excluding derivative cash settlements):
|
|
|
|
|
|
|
|
|
|
||||||
Oil price (per Bbl)
|
$
|
61.26
|
|
|
$
|
44.15
|
|
|
$
|
60.83
|
|
|
$
|
45.77
|
|
Natural gas liquids price (per Gal)
|
$
|
0.51
|
|
|
$
|
0.58
|
|
|
$
|
0.64
|
|
|
$
|
0.62
|
|
Natural gas price (per Mcf)
|
$
|
2.32
|
|
|
$
|
2.68
|
|
|
$
|
2.44
|
|
|
$
|
2.79
|
|
Combined (per Boe)
|
$
|
32.20
|
|
|
$
|
24.13
|
|
|
$
|
32.67
|
|
|
$
|
25.10
|
|
Average sales price per unit (including derivative cash settlements):
|
|
|
|
|
|
|
|
|
|||||||
Oil price (per Bbl)
|
$
|
57.39
|
|
|
$
|
47.56
|
|
|
$
|
57.31
|
|
|
$
|
48.98
|
|
Natural gas liquids price (per Gal)
|
$
|
0.51
|
|
|
$
|
0.58
|
|
|
$
|
0.64
|
|
|
$
|
0.62
|
|
Natural gas price (per Mcf)
|
$
|
2.59
|
|
|
$
|
2.87
|
|
|
$
|
2.65
|
|
|
$
|
2.93
|
|
Combined (per Boe)
|
$
|
31.65
|
|
|
$
|
25.84
|
|
|
$
|
32.05
|
|
|
$
|
26.51
|
|
Average WTI oil spot price (per Bbl)
|
$
|
68.07
|
|
|
$
|
48.10
|
|
|
$
|
65.55
|
|
|
$
|
49.85
|
|
Average Henry Hub natural gas spot price (per MMbtu)
|
$
|
2.85
|
|
|
$
|
3.08
|
|
|
$
|
2.96
|
|
|
$
|
3.05
|
|
Average unit costs per Boe:
|
|
|
|
|
|
|
|
|
|
||||||
Oil and natural gas production, excluding ad valorem taxes
|
$
|
10.84
|
|
|
$
|
10.99
|
|
|
$
|
10.91
|
|
|
$
|
11.94
|
|
Ad valorem taxes
|
$
|
0.59
|
|
|
$
|
0.66
|
|
|
$
|
0.58
|
|
|
$
|
0.59
|
|
Production and other taxes
|
$
|
1.77
|
|
|
$
|
1.08
|
|
|
$
|
1.77
|
|
|
$
|
1.08
|
|
General and administrative excluding transaction costs and LTIP
|
$
|
1.85
|
|
|
$
|
1.83
|
|
|
$
|
2.07
|
|
|
$
|
2.04
|
|
Total general and administrative
|
$
|
5.20
|
|
|
$
|
2.23
|
|
|
$
|
5.50
|
|
|
$
|
2.50
|
|
Depletion, depreciation, amortization and accretion
|
$
|
8.82
|
|
|
$
|
7.20
|
|
|
$
|
8.82
|
|
|
$
|
7.37
|
|
•
|
Interest expense;
|
•
|
Gain on extinguishment of debt;
|
•
|
Income tax expense;
|
•
|
Depletion, depreciation, amortization and accretion;
|
•
|
Impairment of long-lived assets;
|
•
|
(Gain) loss on disposal of assets;
|
•
|
Equity in (income) loss of equity method investees;
|
•
|
Unit-based compensation expense related to LTIP unit awards accounted for under the equity or liability methods;
|
•
|
Minimum payments earned in excess of overriding royalty interest;
|
•
|
Net (gains) losses on commodity derivatives;
|
•
|
Net cash settlements (paid) received on commodity derivatives;
|
•
|
Transaction costs.
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
|
(In thousands)
|
||||||||||||||
Net income (loss)
|
$
|
(50,709
|
)
|
|
$
|
(11,077
|
)
|
|
$
|
13,673
|
|
|
$
|
5,295
|
|
Plus:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest expense
|
28,589
|
|
|
20,614
|
|
|
55,957
|
|
|
40,747
|
|
||||
Gain on extinguishment of debt
|
—
|
|
|
—
|
|
|
(51,693
|
)
|
|
—
|
|
||||
Income tax expense
|
130
|
|
|
150
|
|
|
617
|
|
|
571
|
|
||||
Depletion, depreciation, amortization and accretion
|
38,139
|
|
|
27,689
|
|
|
74,686
|
|
|
56,485
|
|
||||
Impairment of long-lived assets
|
35,381
|
|
|
1,821
|
|
|
35,381
|
|
|
9,883
|
|
||||
(Gain) loss on disposal of assets
|
(1,145
|
)
|
|
11,049
|
|
|
(21,540
|
)
|
|
5,525
|
|
||||
Equity in income of equity method investees
|
(3
|
)
|
|
(1
|
)
|
|
(20
|
)
|
|
(12
|
)
|
||||
Unit-based compensation expense
|
12,886
|
|
|
1,483
|
|
|
25,692
|
|
|
3,380
|
|
||||
Minimum payments earned in excess of overriding royalty interest(a)
|
334
|
|
|
470
|
|
|
856
|
|
|
915
|
|
||||
Net (gains) losses on commodity derivatives
|
9,315
|
|
|
(14,516
|
)
|
|
11,019
|
|
|
(49,185
|
)
|
||||
Net cash settlements (paid) received on commodity derivatives
|
(2,414
|
)
|
|
6,571
|
|
|
(5,209
|
)
|
|
10,807
|
|
||||
Transaction costs
|
1,607
|
|
|
52
|
|
|
3,389
|
|
|
84
|
|
||||
Adjusted EBITDA
|
$
|
72,110
|
|
|
$
|
44,305
|
|
|
$
|
142,808
|
|
|
$
|
84,495
|
|
(a)
|
A portion of minimum payments earned in excess of overriding royalties earned under a contractual agreement expiring December 31, 2019. The remaining amount of the minimum payments are recognized in net income.
|
Time Period
|
|
Volumes (Bbls)
|
|
Average Price per Bbl
|
|
Price Range per Bbl
|
||
July-December 2018
|
|
1,527,200
|
|
$54.76
|
|
$51.20
|
-
|
$63.68
|
2019
|
|
2,190,000
|
|
$58.88
|
|
$57.15
|
-
|
$61.20
|
Time Period
|
|
Volumes (MMBtu)
|
|
Average Price per MMBtu
|
|
Price Range per MMBtu
|
||
July-December 2018
|
|
18,160,000
|
|
$3.23
|
|
$3.04
|
-
|
$3.39
|
2019
|
|
25,800,000
|
|
$3.36
|
|
$3.29
|
-
|
$3.39
|
|
|
|
|
Average
|
|
|
||
Time Period
|
|
Volumes (Bbls)
|
|
Price per Bbl
|
|
Price Range per Bbl
|
||
July-December 2018
|
|
2,024,000
|
|
$(1.13)
|
|
$(1.25)
|
-
|
$(0.80)
|
2019
|
|
730,000
|
|
$(1.15)
|
|
$(1.15)
|
|
|
|
|
Average Long
|
|
Average Short
|
Time Period
|
|
Volumes (Bbls)
|
|
Put Price per Bbl
|
|
Call Price per Bbl
|
July-December 2018
|
|
782,000
|
|
$47.06
|
|
$60.29
|
|
|
|
|
Average Long
|
|
Average Short
|
|
Average
|
Time Period
|
|
Volumes (Bbls)
|
|
Put Price per Bbl
|
|
Put Price per Bbl
|
|
Swap Price per Bbl
|
July-December 2018
|
|
64,400
|
|
$57.00
|
|
$82.00
|
|
$90.50
|
•
|
permit the Corporate Reorganization and modify certain provisions to reflect the new corporate structure;
|
•
|
provide that New Legacy and the General Partner will guarantee the debt outstanding under the Revolving Credit Agreement;
|
•
|
provide that the Partnership may make unlimited restricted payments, subject to no default or event of default, pro forma availability under the Revolving Credit Agreement of at least 20%, and pro forma total leverage of not more than 3.00 to 1.00, as well as to pay taxes and ordinary course overhead expenses of New Legacy;
|
•
|
waive any “Change in Control” (as defined in the Credit Agreement) triggered by the Corporate Reorganization; and
|
•
|
permit redemptions of the 2020 Senior Notes, 2021 Senior Notes and loans under the Term Loan Credit Agreement with the cash proceeds from the sale of equity interests (or exchanges for equity interests) of New Legacy.
|
•
|
permit the Corporate Reorganization and modify certain provisions to reflect the new corporate structure;
|
•
|
provide that New Legacy and the General Partner will guarantee the debt outstanding under the Term Loan Credit Agreement;
|
•
|
provide that the Partnership may make unlimited restricted payments, subject to no default or event of default, pro forma availability under the Term Loan Credit Agreement of at least 20%, and pro forma total leverage of not more than 3.00 to 1.00, as well as to pay taxes and ordinary course overhead expenses of New Legacy;
|
•
|
waive any “Change in Control” (as defined in the Term Loan Credit Agreement) triggered by the Corporate Reorganization;
|
•
|
waive any requirement to prepay the Term Loans using the Partnership’s Free Cash Flow or limit Capital Expenditures (each as defined in the Term Loan Credit Agreement) prior to March 31, 2019; and
|
•
|
permit redemptions of the 2020 Senior Notes and the 2021 Senior Notes with the cash proceeds from the sale of equity interests (or exchanges for equity interests) of New Legacy.
|
•
|
the Second Supplemental Indenture (the “2020 Notes Supplemental Indenture”), by and among the Partnership, New Legacy, the General Partner, Legacy Reserves Finance Corporation, a Delaware corporation and a subsidiary of the Partnership (“Finance Corp.”), the guarantors named therein and Wilmington Trust, National Association, as successor trustee (the “Trustee”), to the Indenture, dated as of December 4, 2012 (the “2020 Notes Indenture”), by and among the Partnership, Finance Corp., the guarantors named therein and the Trustee; and
|
•
|
the Second Supplemental Indenture (the “2021 Notes Supplemental Indenture” and, together with the 2020 Notes Supplemental Indenture, the “Supplemental Indentures”), by and among the Partnership, New Legacy, the General Partner, the guarantors named therein and the Trustee, to the Indenture, dated as of May 28, 2013 (the “2021 Notes Indenture” and, together with the 2020 Notes Indenture, the “Indentures”), by and among the Partnership, Finance Corp., the guarantors named therein and the Trustee.
|
|
|
(a)
|
|
(b)
|
|
(c)
|
|
(d)
|
Period
|
|
Total number of units purchased
|
|
Price paid per unit
|
|
Total number of units purchased as part of publicly announced plans or programs
|
|
Maximum number (or approximate dollar value of units) that may yet be purchased under the plans or programs
|
May 18, 2018
|
|
666(1)
|
|
$8.01
|
|
—
|
|
—
|
May 19, 2018
|
|
24,160(2)
|
|
$8.01
|
|
—
|
|
—
|
|
LEGACY RESERVES LP
By: Legacy Reserves GP, LLC, its General Partner
|
|
|
|
|
|
|
August 7, 2018
|
By:
|
/s/ James Daniel Westcott
|
|
|
|
James Daniel Westcott
|
|
|
|
President and Chief Financial Officer
|
|
|
|
(On behalf of the Registrant and as Principal Financial Officer)
|
|
1 Year Legacy Reserves LP Chart |
1 Month Legacy Reserves LP Chart |
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