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» Legacy Reserves LP's CEO Discusses Q4 2011 Results - Earnings Call Transcript
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Legacy’s an independent oil and natural gas limited partnership headquartered in middle of Texas, focused on the acquisition and development of long-lived oil and natural gas properties, primarily located in the Permian Basin, Mid-Continent, and Rocky Mountain regions of the United States. I will now turn the conference over to Cary Brown, Legacy’s Chairman, President and Chief Executive officer.Cary Brown Thanks Jim. And thank you our friends and unitholders for joining us here today. Legacy again produced outstanding results during the first quarter, as we increased production, kept our expenses in line despite rising commodity prices, and recently announced our largest acquisition since December 2010. On April 30, we announced acquisitions of approximately $88 million of producing properties, including our acquisition of Rockies oil properties for $70.8 million that is scheduled to close around May 23. We believe that these acquisitions will increase our distributable cash flow per unit, both over the short and long-term. I really feel good about those acquisitions. They got a profile of the kinds of things that we’ve done really well with, multi-pay, long-lived oil production. It was all PDP, but we think there’ll be some things to do. One of the things that feels good is that Permian Basin right now is really hot and being able to buy in the Rockies because of the outstanding group we have up there and in some of these other basins really opens up the opportunities. As I’ve told guys around here, it’s nice to have multiple places to shop when you’re looking for acquisitions. And that’s worked out well. And Kyle and his team has done a great job. We continue to have a good pipeline of deals to look at. We continue to look at lots of deals, and do a few. But we’re really pleased with the ones we’re getting done. We also closed in the first quarter $5.5 million acquisition some Cline Shale acreage. That’s going to be 5% interest in about 100,000 to 120,000 acres operated by FireWheel, which is a company that my brother is a principal in, and we’re looking forward to interesting results there and like our footprint there.
We did reduce our development capital expenditures in the first quarter to $12.2 million to stay within our capital budget $62 billion for the year. And the results from Wolfberry program, they continue to be excellent and exceed our expectations, or we continue to raise our expectations. We’ve been drilling in some really good areas. The fact that we’re reducing CapEx didn’t have anything to do with the performance of what we’re doing there. We’re pretty committed to using all of our development CapEx against our coverage and we’re committed to stay within that 20% to 30% of the EBITDA, that’s why we did that.We did let the rig go, the Wolfberry rig in March and April; we picked that back up in May. So, would expect with the flush production we’re getting in this quarter that you’d probably see a small decrease in production in the second quarter and then in the third quarter, as the acquisitions kick in and we pick back up with our capital budget, you’ll see those numbers start moving back up. Based on our quarterly adjusted EBITDA of $55.2 million, we increased our distribution again for the sixth consecutive quarter to $0.555 that we paid on May 11 to unitholders of record (inaudible) April 30, right Jim? On a year-over-year basis, we increase our quarterly distribution by 4.7%. We generated record distributable cash flow in the first quarter of $0.76 per unit, covering our $0.555 distribution by 1.37 times. So, on all fronts, did well. Really proud of the operations guys, with rising prices – good prices in the first quarter and good production in the first quarter, and we had good LOE in the first quarter. So, the guys have done a good job of staying on top of the expenses and getting production where it needs to be. So, real proud of the team this quarter. I think they’ve done an excellent job and set us up for a really good year. Read the rest of this transcript for free on seekingalpha.com