EV Energy Partners, L.P. Q2 2010 Earnings Call Transcript

EV Energy Partners, L.P. Q2 2010 Earnings Call Transcript
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EV Energy Partners, L.P. (EVEP)

Q2 2010 Earnings Call Transcript

August 10, 2010 10:00 am ET

Executives

John Walker – Chairman and CEO

Mike Mercer – SVP and CFO

Mark Houser – President and COO

Analysts

Leo Mariani – RBC Capital

Kevin Smith – Raymond James

Dan Morrison – Global Hunter

Michael Blum – Wells Fargo

Stewart Bailey [ph]

Presentation

Operator

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Previous Statements by EVEP
» EV Energy Partners, LP Q1 2010 Earnings Call Transcript
» EV Energy Partners, L.P. Q4 2009 Earnings Call Transcript
» EV Energy Partners, L.P. Q3 2009 Earnings Call Transcript

Ladies and gentlemen, thank you for standing by. Welcome to the EV Energy Partners LP second quarter 2010 earnings release conference call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be opened for questions. (Operator Instructions) I would now like to turn the conference over to Mr. John Walker, Chairman and CEO. Please go ahead, sir.

John Walker

Thank you, Marissa. Good morning, everyone. We’ve got some good news to report today. Along with me, I’ve got Mark Houser, the President, Mike Mercer, Chief Financial Officer, Fred Dwyer, who is our controller and Josh Stevens. Ron Gajdica is going to be dialing in.

Second quarter results again were steady and I think generally in line with guidance after adjusting for some one-time non-recurring cost and Mike Mercer will detail the results in a few minutes. So, you can understand that.

Some of these, we told you would occur back when we had a first quarter call. Yesterday, we signed a purchases and sales agreement with Petrohawk to acquire $123 million of properties in East Texas and Oklahoma. They had overlapped with existing EV EP assets as well as some other air base assets. The acquisition will close September 29. It’s accretive and provides us an interest in some great ore fields, some of which you heard of (inaudible) in Anadorka basin.

(Inaudible) in Arkoma (inaudible) in East Texas, as companies are focused on shale price in the recent years, these great fields remaining upside have been ignored. The properties are producing 15.5 million cubic feet equivalent per and has 74.3 Bcf equivalent of reserves. The reserves production ratio is over 13.

They are a mix of conventional properties with some unconditional upside. They are characterized by (inaudible) reliable coproducing reserves behind heart recompletion, drilling opportunities and operational upsurge.

There is some tailing on non-operated properties that we will sell over time and these are a lot of wells were very low value. Because the EnerVest operations in this area as we believe that we can hit the deck running. This is a good PV purchase.

On a total improved basis, we’re buying reserves in the ground at a $0.66 per Mcf equivalent and also purchasing less than $8,000 per flowing Mcf equivalent. In addition, it is 5.9 times annualized cash flow. So we’re pleased with the purchase.

While the acquisition is partly for the remainder of 2010 as well as ‘11 and ‘12, it’s another step, let me emphasize it again, another step in taking us very close to 100% coverage of our projected 2013 and 2014 distributions. We’ve told you that 13 and 14 have been a focus and we’re pleased at what this acquisition adds in terms of their coverage.

Next, you can see in a 10-Q if you get time to review that, that on July 1, we entered into a joint venture that is providing payments of $41.3 million of unproved properties. We will retain a 7.5% on the rise. The retained working interest is between 25% and 50%.

In addition, the partners committed to screening approximately $200 million in overall (inaudible) before we had to spin money on our working interest which significantly reduces the risk here. For competitive regions, we’re not disclosing the basins since our joint venture continues to acquire leases.

To date, this year, we’ve received – are going to receive approximately $46 million from our attractive land positions. As you’re aware, EnerVest has 3.5 million acres overall in land and EV benefits from this concentration of positions that we’re achieving in three major license.

The plan that we initiated four years ago to build these large and concentrated positions is just beginning to bear fruit. And we’re pleased we’d being able to make that most recent announcement. Mike, I’d like for you to now go over the results of the second quarter.

Mike Mercer

Thank you John. For the quarter, adjusted EBITDA was $37.1 million which is a 12% increase over the prior quarter and a 15% year-over-year increase and our distributable cash flow was $23.1 million which was a 28% quarter over quarter increase and a 15% increase year over year.

These amounts excluded $4.4 million gain on untrue acreage that we had mentioned in our last quarter 10-Q and they closed during the second quarter. And of course, that one is we’ve mentioned before we do retain an overwrite in that and also excluded $2.3 million of inventory costs that we had related to the range in EXCO acquisitions. That’s crude oil inventories that we have to book under at the price of crude on the data. The acquisition flow-through the income statement and now we kind of one-time, this has rolled off during the quarter and we had mention that last quarter that we expected to have an amount follow through in this quarter.

I think we have mentioned in the last quarter that it could be up to $3 million but it is nothing being 2.3 million of non-cash cost.

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