We haven’t flip-flopped all over the place like some E&P companies, yesterday, a gas company, today, an NGL company, tomorrow an oil company. We manage EVEP to deliver increasing distributions and a high-rate of return over the long-term.We forgo any capital activity that doesn’t deliver at least a 20% risk-adjusted rate of return which means that we’re not drilling very many dry gas wells because they can’t hit that target. Our acquisitions have historically been financed with 60% to 63% equity and cash flow and 37% to 40% debt resulting in debt-to-EBITDA ratio of 2:2.3:1 which is something that we plan to continue to do in the future. The Utica is a phenomenal blessing and opportunity to add significant value to our unit price. But the above areas of focus and discipline have not and will not change. We’ve communicated all year to you that our goal in our acquisitions was to buy $500 million in accretive transactions in our areas of concentration, and we have accomplished this goal. I very much enjoyed our negotiations on our Barnett deal with Encana. They’re people of high-integrity. They need capital for opportunities outside the Barnett. But we, however, expected to deliver over a 20% rate of return from that acquisition. The acquisition is around 25% liquids and 75% gas. We’re buying Encana at 7,400 per flowing Mcf and about $0.92 in the ground. On top of those new attractive acquisition parameters, we believe that there’s several areas of cost reduction that we can accomplish. EVEP is acquiring $300 million to $325 million of this asset in the overall $975 million deal. We announced $300 million, we possibly could go as high as $325 million on that. In addition, EnerVest is acquiring a $233 million asset, EVEP’s part is $72 million, in the Barnett/Combo area. It’s around 40% oil and liquids and offers a high rate of return on the upside.
The approximately $70 million acquisition in the Mid-Continent offers some steady PDP, but great upside in the Cleveland Sands and Granite Wash. And in fact, we’ve already received our first two AFEs on that acquisition that closed last week. It’s a fill-in for other Mid-Continent acquisitions for the past two to three years.We also dropped down from one of our institutional funds a $30 million asset with approximately 371 producing Knox wells and 520,000 gross acres in Ohio containing considerable Knox formation upside. There were no Utica rights transferred in this acquisition to EVET. And it’s important to note that we continue to see great acquisition opportunities in the market. The announced and unannounced Utica results continue to be encouraging. I believe that Chesapeake announced its joint venture and part of the NGL window that establishes a new base level of value for the play. EVEP only holds 4,000 net acres in that portion of the JV with Chesapeake, but has about 23,500 net acres in that same area that are not part of the JV. In hindsight, the original Chesapeake AMI was too large and insists a massive capital commitment unachievable in today’s world financial market. And we are very pleased with the job that Aubrey, Jefferies, and Chesapeake did in terms of establishing that base level for an NGL window. I believe that it will take over 40 wells to precisely define the window of the Utica. As you would expect, the delineation wells that we’re drilling, to a certain extent, are science projects with a range of results, because we’re trying different completion techniques. Now that Chesapeake has announced its first JV in the Utica, EnerVest and EVEP will start the process of pursuing options. And I might add, all of these are positive ones. I anticipate opening our data room late in the second quarter of 2012 or early in the third quarter of 2012. The options are to bring in a JV partner and for EnerVest to operate the acreage, to do an outright sell of our position or to do a tax-free exchange. I remind you that we have carved out a 7.5% override on all EVEP’s acreage. Read the rest of this transcript for free on seekingalpha.com