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Legacy Reserves' CEO Discusses Q3 2011 Results - Earnings Call Transcript

Stocks in this article: LGCY

I’ll now turn the conference over to Cary Brown, Legacy’s Chairman and Chief Executive Officer.

Cary Brown

Thanks Steve and thanks to our friends and unit holders for joining us today. During the quarter of economic uncertainty and declining commodity prices, Legacy again produced strong results as we increased production and kept our expenses in line. To the end of October for 2011 acquisitions of producing properties totaled approximately $166 million of which $93.5 million of the acquisitions have closed and $72.5 million of acquisitions are scheduled to close prior to the end of the year. You may have noticed that these acquisitions are gasier than some we’ve done in the past. That’s not a function of pursuing gas per se.

We are an opportunistic buyer and gas is what is on sale today. And so we are able make acquisitions of gas properties without having to pay a lot for the additional upside locations that will get us, as gas prices recover and I believe they will recover in the future. We are still only about 20% gas by revenue, 80% of our income is still coming from oil. We are heavily weighed oil, so we had room to take opportunity as gas properties were on sale to buy some more gas and I am excited about what those transactions will lead to.

On the CapEx front. After a record second quarter, we invested $17.4 million in development capital, we invested $22.8 million in capital in the third quarter, in oil and in geo-rich drilling projects. An increase to our 2011 capital expenditures budget from $60 million to $72 million.

The results of operating Wolfberry program continued to exceed our expectations and we participated in an increase number of non-operated drilling projects that should generate attractive rates return.

We drilled our first horizontal Bone Spring wells in the third quarter, and I am very pleased with the earlier results. It won’t much impact on third quarter if any at all, but if it continues to hold up like the early results that are provided additional 0.5 to 20 drilling opportunities and we believe that CapEx – open up some CapEx opportunities for us next year and in the future if those wells hold up. So I am pretty excited about that. I will say that CapEx at current levels is definitely providing some organic growth. So we see that and we are excited about that.

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