EV Energy Partners, L.P. (EVEP)

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EV Energy Partners LP (EVEP)

Q4 2010 Earnings Call

March 1, 2011 09:30 am ET


John B. Walker – Chairman of the Board & Chief Executive Officer of EV Management

Michael E. Mercer – Chief Financial Officer

Mark A. Houser – President & Chief Operating Officer

Ronald J. Gajdica – Head of Engineering and Acquisition


Kevin Smith – Raymond James

James Gentile – HITE

Bernie Colson– Oppenheimer

Chad Potter – RBC Capital Markets

Nicholas Schneider – Moore Schneider Management

Richard Roy – Citigroup

Duncan – Private Investor

Mord Ploud – Private Investor



Good morning ladies and gentlemen, thank you for standing by. Welcome to the EV Energy Partners Q4 and full year 2010 earnings release conference call. (Operator instructions.)

And at this time I would now like to turn the call over to John Walker, Chairman and CEO. Please go ahead.

John B. Walker

Thank you Craig. Good morning from Houston. We’re having a beautiful day; it’d be another 80-degree day. We wanted to do this outside but couldn’t figure out how to do it.

EVEP’s Q4 was in line with our expectations. When I analyzed each of the last four quarters we had some better than expected results in some of our regions in shut-ins, freeze-offs, delays, planned or pipeline issues in some regions every quarter. And of course as you know we didn’t drill wells unless we got a 20% rate of return and that’s hurt us some since the second half of 2008 by enforcing that discipline. Yet our overall results in each quarter tend to balance out and be inline with expectations.

EVEP has an interest in 16,700 wells. I’ll repeat that because it’s important for you to understand. We have an interest in 16,700 wells in eight regions of the country. As a result the vast diversification causes steady results. And Ron Gajadica, our Head of Engineering and Acquisition, Mike Mercer, our Chief Financial Officer, and Mark Hauser our President and Chief Operating Officer will go into more detail about the year and the quarter.

I really want to give you a broader overview of where we are and where we’re going. We more than doubled EVEP’s prude reserves last year with an all-in replacement cost of $1.23 per million Btu and we’re pleased with that.

2011 will be another great year for acquisitions and EVEP will get its share and continue to be disciplined in its purchases. Since 2000 EnerVest has tracked the number of deals in the acquisition sector. Normally it’s about 250 deals per year on which we look at 40 to 60. This past year it was 509, to give you an idea about how active that $50 billion a year was. In January and February are matching last year. So we think it will be another $50 billion dollar year.

Mike will discuss the significant hedges that we’ve added in the last few months for oil and gas in 2013 and 2014. We did two equity offerings last year raising $209 million and received $44 million from asset monitizations in West Virginia and Ohio. In these monetizations we first got cash front end, obviously. We retained a working interest. We got a carry and we’ve kept an override.

Probably our major unrealized asset is Utica Point Pleasant in Ohio. The Point Pleasant is the organically rich lower member of the Utica shell that is present in Ohio but to our knowledge not in Pennsylvania or New York. And this makes a big difference. There are a lot of articles on this potential play and I refer you to a couple of excellent articles. One is the most recent issue of the American Oil and Gas Reporter in which they have two articles on the Utica Point Pleasant. And then last month’s article on the Oil and Gas Investor magazine.

As we and our predecessors have drilled over 500 Knox wells, we have numerous logs of the Utica Point Pleasant and have now taken cores in several parts of Ohio. So we have a pretty clear understanding of where this play is and the quality of play. However, until some horizontal wells are completed and tested this summer, we cannot be 100% sure of its potential. EVEP has exposure to 150,000 net acres in Ohio play and overrides in 80,000 acres. Its acreage is overwhelmingly in the oil and natural gas windows of the play. Now I’d like to turn it over to Ron Gajdica.

Ronald J. Gajdica PhD

Thank you John, we will now discuss our year-end prude reserves. At the end of last year our 2009 SEC approved reserves were 366 Bcf equivalent and now our 2010 year end SEC approved reserves are 817 Bcf equivalent. That is an increase of 452 Bcfe or a 124% increase for the year.

Our reserves are now 70% natural gas, 20% natural gas liquids and 10% oil. The reserves are 71% proved developed and our PV-10 is $1.03 billion. The SEC year-end price that was used for the reserves was $79.43 per barrel of oil and $4.376 per million Btu of gas.

Acquisitions accounted for 436 Bcf equivalent of prude reserve additions during 2010 And the remainder of the revisions in additions accounted for an additional 44 Bcf equivalent. Production for 2010 was 28 Bcf equivalent. Our all-in reserve replacement cost for 2010 was $1.23 per mcf equivalent. Acquisitions, which accounted for most of our reserve additions, were made at a cost of $1.28 per mcf equivalent.

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