EROC

Eagle Rock Energy Partners, L.P. (EROC)

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Eagle Rock Energy Partners, L.P. (EROC)

Q3 2012 Earnings Call

November 01, 2012 2:00 pm ET

Executives

Adam Altsuler - Director of Corporate Finance and Investor Relations of Eagle Rock Energy G&P LLC

Joseph A. Mills - Chairman of Eagle Rock Energy G&P LLC, Chief Executive Officer of Eagle Rock Energy G&P LLC and Member of Enterprise Risk Committee

Jeffrey P. Wood - Chief Financial Officer of Eagle Rock Energy G&P LLC, Principal Accounting Officer of Eagle Rock Energy G&P LLC, Senior Vice President of Eagle Rock Energy G&P LLC and Treasurer of Eagle Rock Energy G&P LLC

Joseph E. Schimelpfening - Senior Vice President of Upstream & Minerals Business of Eagle Rock Energy G&P Llc - General Partner of General Partner

Roger A. Fox - Senior Vice President of Midstream Business - Eagle Rock Energy G&P LLC

Analysts

TJ Schultz - RBC Capital Markets, LLC, Research Division

Eric B. Anderson - Hartford Financial Management, Inc.

Jeffrey Rudner

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Eagle Rock Energy Third Quarter 2012 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Mr. Adam Altsuler. You may begin.

Adam Altsuler

Thank you, Mimi, and thank you to our unitholders, analysts and other interested parties for joining us today on Eagle Rock Energy's third quarter 2012 earnings call.

Before we get started commenting on our third quarter results, there are a few legal items that we would like to cover. First, I want to point out that remarks and answers to questions by partnership representatives on today's call may refer to or contain forward-looking statements. Such remarks or answers are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements.

Such statements speak only as of today's date or, if different, as of the date specified. The partnership assumes no responsibility to update any forward-looking statements as of any future date.

The partnership has included in its SEC filings cautionary language identifying important factors, not necessarily all factors, that could cause actual results to be materially different from those set forth in any forward-looking statements.

A more complete discussion of these risks is included in the partnership's SEC filings, including in our 2011 annual report on Form 10-K, as well as any other public filings. Our SEC filings are publicly available on the SEC's EDGAR system.

Also, you may access both the third quarter 2012 earnings press release and a transcript of this call on our website at www.eaglerockenergy.com.

Management will discuss its views on future distributions during this call. Management's objective around future distribution recommendations are subject to change should factors affecting the general business climate, market conditions, commodity prices, specific operations, performance of our underlying assets, applicable regulatory mandate or our ability to consummate accretive growth projects differ from current expectation. Actual future distributions will be determined, declared and paid at the discretion of the Board of Directors.

I will now turn the call over to Joe Mills, our Chairman and CEO, for a review of the quarter.

Joseph A. Mills

Great. Thank you, Adam. Good afternoon, ladies and gentlemen, and thank you for joining us today. Before I launch into my prepared text, I do want to at least extend our condolences and sincere prayers to all those affected by Hurricane Sandy. I know many of you that are living in the New England area are being affected, so having been through many hurricanes ourselves, we certainly understand the disruption to your lives. So we certainly hope everybody is faring okay.

Turning now to our prepared text. We had a solid quarter this third quarter, reporting adjusted EBITDA of $59.1 million, slightly up as compared to our second quarter EBITDA of approximately $58 million. Distributable cash flow totaled $27 million. Jeff is going to go over all of our financial details here in a minute.

Our 2 businesses performed well, and we executed on several large projects that we believe will deliver tremendous long-term value and accretion to Eagle Rock.

Starting with our Michigan business, we closed on our acquisition of the BP midstream assets in the Texas Panhandle on October 1. We're very pleased with this important acquisition and the impact it will have on our growing Texas Panhandle midstream franchise.

Our Upstream business was also very busy as we continued to drill wells, delineate our reserve potential in the Southeast Cana and Golden Trend areas, which is now more commonly referred to as the SCOOP area, thanks to Continental Resources highlighting this important and growing crude oil and liquids-rich area. I want to point out that Eagle Rock's been an active driller and leasehold acquirer in the SCOOP area for the past year since we acquired our original position from the large Mid-Continent acquisition that we closed on in 2011.

We did elect to hold our distribution flat as compared to the second quarter, at $0.22 per common unit payable on November 14 to our unitholders of record as of November 7. This distribution in the course represents a 10% increase over our third quarter 2011 distribution. And again, Jeff will touch on that more here in a minute.

Now focusing on the details of each of our operating business results. First, our Midstream business. Midstream gathered volumes rose compared to the second quarter as a result of increased volumes in our Texas Panhandle segment, which were attributable to a full quarter of service from our Woodall and Phoenix-Arrington Ranch Plants and the increased drilling activity in the Panhandle. These gains, however, were offset by lower gathering volumes in our East Texas and Other segment, primarily associated with the loss of production in the Gulf of Mexico due to Hurricane Isaac.

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