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Executives

John Walker – Chairman and CEO

Mark Houser – President and COO

Mike Mercer – SVP & CFO

Kathy MacAskie – SVP, Acquisitions and Divestitures

Analysts

John Kang – RBC Capital Markets

John Freeman – Raymond James

Jeff Williams [ph] – Williams Research Group

Jim Camp – Raymond James

EV Energy Partners, L.P. (EVEP) Q3 2008 Earnings Call Transcript November 11, 2008 9:00 AM ET

Operator

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the EV Energy Partners Third Quarter Earnings Conference Call. During today’s presentation, all parties will be in a listen only mode. Following the presentation, the conference will be open for questions. (Operator instructions)

I’d now like to turn the conference over to John Walker, chairman and CEO. Please go ahead, sir.

John Walker

Thank you, Brandy. Good morning, everyone. We’ve had some slight changes since the last time we had a conference call with you. Of course, we had hurricane Ike hit Houston, which had an effect on the oil and gas industry including (EV) Energy Partners production all the way out to Permian Basin and San Juan Basin.

We’ve had in a sense, a much bigger hurricane hit the financial community; I guess maybe the world’s greatest financial crisis. Historic political change that creates great uncertainty, in fact the Independent Petroleum Association is meeting currently in Houston, I’m participating in that, and there is great uncertainty on particularly the regulatory side for our industry over the next four years and probably the less what you saw.

We’ve had more than 50% drop in oil and gas prices, and then I guess most important Texas Tech is now number two in the BCS poll. So, there is good news out there. As a reiterate I had to throw that in.

Our production, if you exclude hurricane Ike was almost exactly on the mid-point of the guidance and Mike Mercer will go in to the impact of that, which will exist in to the fourth quarter. One of the things that we’ve done is we increased our distribution from last quarter’s $0.70 to $0.75. As we’ve said on numerous occasions we continue to expect to increased quarterly distribution every quarter. I would anticipate it would be a small increase in the upcoming quarter.

One other things I would also point out is that, since the first of the year, our management, employees, directors and investors itself have invested over $40 million into EV Energy Partners this year, which I don’t think is matched by any other MLP, whether or not in the upstream business. So, we continue to put our money where our mouth is.

We’ve done over $200 million of acquisitions late in this quarter. We had some closing late in August and our largest acquisitions closing in September, these were seven acquisitions of that San Juan being the largest and we’re particularly pleased with this. What I want to emphasis is the diversity of production that we have. When we started this company two years ago, we were in two basins; we’re now in nine basins and that does help shelter us from adverse effects.

Clearly, we’ve had huge mark-to-market earnings increases this quarter, those are probably as silly as the losses that suffered over the last two quarters, so all of you understand that, I wont elaborate on it, but that’s just one of the problems that we have in the way we’re force to report, but I want to give you a slight update on what’s happening operationally Mark Houser, will go into that in detail.

The Monroe Field flow last three weeks has been back in full production, and we’re pleased for that, we have continued to receive payments and our contracts specifies that we get the higher of the pricing in the gas was shut-ins often it actually produce. So that actually provided a significant benefit, but as we’ve talked you before on Monroe and we’ll go into that in some detail is that this is a complex contract and we’re just hoping (inaudible) find a place to sell the gas; we don’t particularly like having to rely upon take a pride provisions on track.

I want to update you on the Austin Chalk, specifically Apache in its quarterly announcement talked about their effort in the Eagle Ford Shale. Of the 450,000 net acres that I talked about, the 400,000 of those are acres that we form down to them. As you may recall, they had an obligation to spend $30 million over a four-year period.

In the first year and this is just what I anticipated, they’ve spent $30 million, there is currently three rigs drilling horizontally. We are letting Apache, take a lead on making announcements on the Eagle Ford, which we think is appropriate. They did announce one well on their acreage is producing shift of 500 barrels a day.

The three wells that they are drilling currently on our acreage have been the gas leg other play and we’re anticipating good things. As you may recall, we going to overwrite, but on a well by well basis, it simple payout we have the option of backing into 25% working interest.

I would also, I want to mention and again Mark Houser will be going in to this in more detail. The Chalk right now is producing at an all time high since we acquired this asset about a year and half ago, so we’re pleased with that. We’re emphasizing work over right now and we started emphasizing those during the third quarter. The higher rate of return, lower cost, and we’re really very much amount of preserving cash paying down debt, we’ll continue to attend to keep our production flat through drilling work over and acquisitions and we expect to continued to do that.

We think that we are already moved into, I can assure you that we’ve moved into a great period for acquiring properties and EVEP will get a benefit by being a little bother invest in this process. I’m going turn it over to Mark Houser, who can talk more about our operations in the third quarter.

Mark Houser

Thanks John and good morning everyone. I want to point out Texas Panhandle is not number two in the country. Prior to hurricane Ike and through the Ike recovery our team has done a real good job of transiting operations through a period where at lease for while service cost continue to rise, while commodity prices were declining. Mike Mercer is going to talk later for you about the specifics of our production shut-ins related to Ike and to the Mt. Belvieu plant, but I want to provide you with a summary of the operational activity going on during the quarter.

As John mentioned we closed several transactions during the quarter totaling $202 million, two of these were dropdown for EnerVest in acquired minimal integration. A couple of them were type add-on and then there were two others Protege in the Mid-Continent and Chalk in Central Texas which where we operate, which were successfully integrated into the operation and are currently producing as expected.

We’re currently performing our typical reservoir operational studies on those two acquisitions and anticipate more activity as we move on into 2009.

Overall, we’ve experienced some of the same cost pressures with our competitors particularly in drilling, with commodity price is having change so dramatically, we’re paying particular attention to the rates return on a new capital activity, and we’ve actually slow drilling down some because of that. We can afford to be patient because of a low decline rates, we have in most of our areas and we will be.

On the LOE side, LOE is some up slightly work over expense, primarily due to work over expense and production and gathering costs which again move with price. Net through our CapEx is actually down for the quarter and our LOE is slightly up, so on net cash preservation mode as John mentioned, we are in good shape.

In the Austin Chalk where EVEP has a 13.33% interest, we are very busy during the quarter with two to three rigs running. Six wells were drill by EnerVest and another two non-op wells. Now this is an addition to the drilling that John mentioned Apache is doing.

As expected production from these wells are varied, but overall was strong. Five of these six wells were drilled within the getting and deep getting areas, but late in the quarter for the first time, we begin drilling in the Brooklyn area. Our first well ERKOC 580 number two was drilled in the A zone at about 10,000 feet. This horizontal well was recently brought on an IP at about 7 million a day and around 350 barrels a day.

This is an excellent IP for the area and we are now drilling the second well in the Brooklyn area. Mike will be bring another rig later this quarter and additional Brooklyn A zone well. We also typically have around 69 well service rigs active in the Chalk and John is also mentioned the ongoing exploration activity on our acreage by Apache.

So, overall the Austin Chalk has been a very strong performer for EVEP through our drilling and work over programs, we’ve enabled to actually grow production to around a 110 million cubic feet a day this year, well investing around 30% of our EBITDA.

Jamet field in New Mexico is another one of our active areas. We started off the quarter planning to drill eight wells during the quarter; however as we moved along our engineer staff like work over opportunities in the field was more attractive than later raising drilling cost, so we differed for drill wells and focused on less expensive work over.

We plan to continue this work over program for the rest of the year; I think we have about 15 identified PVMP type activities we plan for as we move forward. The field is performing well, particularly base production. We enter the year producing around 9 million a day, and are currently producing over 11 million a day, despite our reduced activity from our original plan.

In Appalachian Mexican Basin we’ve completed most of our drilling program and recompilation activity for the year, we drilled 10 wells and have one more drilled and four wells in the Antrim, Michigan to deepen. This area remains a study predictable performer including our recent $6 million acquisition; we have invested around $12 million in these properties by year-end, which is 30% of EBITDA and about 210 per Mcfe. We are going to exit the year around 16 million cubic feet a today, we enter the year at slightly about 15 million a day.

Going forward, we will continue to modestly drill and work over our wells in these areas. We also have about 30,000 net acres in Marcellus of North Central West Virginia. We feel some of this acreage is very perspective and we’re studying in the merits of either drilling independently or with partners to test this acreage.

So overall we’ve experienced some of the same cost pressures as our competitors particularly in drilling and production taxes in work over. Because of our low declined rates in our areas will be patient with our drilling as we move forward. We are currently formulating our specific capital planes for next year, but see no problems with moving along with our consistent strategy, which is to maintain our slightly growth production through drilling and work over activities complimented with both on producing property acquisitions.

In fact as John mentioned, we see this is a great time for requiring incremental interest in our exiting field and Kathryn MacAskie, in our team are perusing this aggressively. So, with that I’ll turned over to Mike, he can provide more detail on the operational issues relative to the production for the quarter along with the financial results.

Michael Mercer

Thank you, Mark. For the third quarter we had adjusted EBITDA 27.5 million, which was 34% increase over the third quarter of ‘07 and 10% decrease over the prior quarter. Distributable cash flow was 14 million, which was an 18% increase over the prior year’s quarter and a 24% decrease over the second quarter of ‘08.

As John, mentioned we had reported significant GAAP net income primarily due to the mark-to-market gains on our hedges, we’ve reported 204 million of net income or $10.14 per unit, but we would quickly know that included $189 million of non-cash unrealized gains on our hedge positions that roll out for 2012, so if you would exclude those gains net income would have been approximately $15 million.

Production for the fourth quarter was 4.71 Bcfe, which was a 26% increase over the prior year’s quarter and a 2% decrease over the second quarter of 2008. Now, if you look at the effects of the Hurricane Ike production that were really two effects, one it was curtailments and shut-ins that were due to the fact that, it wasn’t any issue was damage to our facilities or the plans that process our gas are near the field, it was due to the fact that things were shut-in on a regional basis because what was happening with the hurricane and also with what happened down in Mt. Belvieu at the NGL fractionation facilities.

The total shut-ins total that occurred over about one week of period and this was primarily from the Austin Chalk, Permian Basin and the San Juan properties each will be about 161 million cubic feet equivalents.

In addition to that after all of our properties came back upon production and they are running it full production levels, we are not curtailed to shut-in anywhere. Now, but we had NGLs that we are delivered into storage because of fractionated that was damage due to the hurricane down in Mt. Belvieu. So, we had approximately 66 million cubic feet equivalent so really a 11,000 barrels of the NGLs, in addition that were produce during the third quarter, bright near to the end of the third quarter. But, which when into the storage and will be process later.

Since, we reporting on the sales method even though we’ve actually produce those NGLs we will record them as revenue or production in our financial statements and until they have been fractionated down in Mt. Belvieu and have been sold. So, if you add those two together 80 close that total of about 230 million cubic feet total for the quarter.

In addition, as we had said we expected to occur when we put our guidance last quarter in the Monroe field continued have curtailments due to the quarter that averaged about 3.6 million cubic feet a day, about 330 million cubic feet total for the quarter, butas John mentioned, we are back on production there we have stated in our prior guidance that we would expect Monroe to come back that curtailments within some time during the fourth quarter and in fact they came back up and have been on full production since October 2006. So, that we have significantly into our cash flow in the fourth quarter.

Now, the Hurricane effects from the NGL production will be ongoing into the fourth quarter, because in combination with the fractionation unit going down that same company had a five year mandatory turnaround that was planned for October and November. So, we are producing full rates, out of the Austin Chalk, Permian and the San Juan. All of the gas has been sold out on the processing facility and some of the NGLs are being sold, some at Mt. Belvieu and then us also some other NGL plans to take our NGLs fractionation facilities.

But we do expect that there will be an effect in the fourth quarter and we’ve estimated to be about 80,000 barrels of NGLs and what does meaning is that we expect approximately 80,000 barrels for NGLs to be – will be produced and there will be shutdown to Mt. Belvieu for storage, but we don’t expect that those will be process or fractionated in sold until sometime in the first quarter of next year.

So, because of that you will notice on our guidance we are lowering our guidance range for production on NGLs buy that 80,000 barrels of NGLs, that’s the only change we are making to our production guidance.

If, the fractionation facilities come back for early year active turnaround its possible to some of them could get process in the fourth quarter, its also possible that some of them could get delayed into the second quarter. Right now, its really had above our hands until those units come back up and their running a full speed, but those NGLs are being produced – have been produced are going into storage and will be sold, the reduction and production that we expect in the fourth quarter will be mere by kind of an outside increase in production above our normal levels, when those NGLs are actually sold in the first quarter, as we expect in the first quarter of 2009.

The only other change we are making on our guidance as you notice as we are changing our range slightly for these operating expenses, I believe its only buyback $250,000 were change in the range to $12 to $13 million for that. If you notice LOE was above the guidance we had for this quarter a large percentage of that as market mentioned earlier, it was movement to doing work over for the quarter and in the other part of that was just general increases in cost that we saw during the third quarter. That we expect to actually come down overtime is clearly as prices as come down here recently.

The only other thing I will mention before we open it for questions is that we have a hedge table at the back, we’ve given the updates all of our hedge positions and where we are now, we did during that the third quarter, enter into a significant amount of new hedges related to our acquisitions just adding on hedges generally for the fourth quarter of 2008 and for the first quarter of 2009. We have through either swap across those callers approximate – just fewer than 47 million cubic feet equivalents per day hedged and then, out in 2010, 2011, and 2012, those numbers decline the 40 million cubic feet a day, equivalents 35 million and then 33 million. Although, I would note that in 2011 and 2012 the prices that which we have the oil and gas hedged as significantly higher than those prices in 2009 and 2010.

And as I said, there is a specific hedge table at the end of the presentation, there was also on our website we have a presentation from a recent conference we attended, in that shows those hedges in the range of prices and the volumes on the hedges in that presentations you can look at that also.

Okay, thank you Mike. We will turn it over for questions.

Question-and-Answer Session

Operator

(Operator instructions). Our first question comes from the line of John Kang with RBC Capital Markets. Please go ahead.

John Kang – RBC Capital Markets

Hi, good morning everybody.

John Walker

Good morning, John.

John Kang – RBC Capital Markets

I guess, good results of the Chalk. You mentioned you’re going to reduce – have some more discipline and reduce CapEx, is that also I guess on the part of invest in the Chalk obviously as spending this is the more turn down spending type of atmospheres or that’s going to build, kind of continued since you have been consist on that?

John Walker

When the price of oil and gas go up, the service can be extremely efficient, they have the ability to graph or get part of that margin very rapidly. When price is come down they adjust their process more slowly and it is occurring, but before we would like to see since we get so much of our production from new wells in the Chalk rolling on. We’d like to see these cost come down, and so we will have four rigs operating in the Chalk right now, essentially within a way got probably and we probably drop that down to two rigs profile was cost come down but with the extremely good news we got in Brooklyn, they just adds to the hundreds of potential locations that we have, but frankly we don’t want to bring on wells where they producing such a large percentage of the reserves in the first year at $5 or $6 gas prices or $50 or $60 oil or NGL prices.

Mark Houser

Yes, this is Mark, just add on comment there. We had two rigs running in the Chalk most of the year and so, we have ramped up recently because of the Brooklyn and other opportunities, we are going to slowdown some and kind of monitor the Brooklyn and maybe accelerate that if it’s look as it so far. Another comment I want to make is, our team has been looking very hard at new ways are drilling these wells and added significantly reduced cost.

Part of the reason were slowing down a bit as to give our guidance chance to really test those studies to see if those ideas work as well as, we think that will, that be in the case will be able to ramp things back up for much lower cost, kind of taking a different approach to our re-entry techniques. That’s kind of, where we’re on the job.

John Kang – RBC Capital Markets

Okay. Great. Thanks for the additional color and I guess, Apache is said they already spend to $30 million, can you remind these type of wells or what’s type of other any resulted that you can potentially speak out or in the initial stages?

John Walker

We really haven’t talk much about this in any detail as result of honoring that commitment to Steve, and as you aware they have started talking about it. I would say this, to early to say, since we really haven’t tested that gas were get all, it’s too early to say whether or not this is commercial project but last side that we are all encouraged at this point in time.

John Kang – RBC Capital Markets

Okay, understandable and then I guess just in relation to the Monroe Field, do you feel now that is the curtailment initiatives have been completely revolved, there is still issues potentially going forward and perhaps maybe your contracts are probably designed this way to get rid of some of the liabilities that could be coming out of the field?

John Walker

Well, I think that we would anticipate that they were continued to be curtailments in the future. We have ongoing discussions with in bridge, they have a commitment to try the markets the gas after system and they are working on that, and we are supporting that. We have come up with some gas marketing ideas or sales that’s not our more in their area, but we are trying to help them, but at least at this point in time, I think its just to assume that there will be some continuation of this, we are pretty well protected as result of this very favorable contract, but we just seen not have to relay up on the contract. We just don’t have steady production throughout the year.

John Kang – RBC Capital Markets

Absolutely and then, just the last question I guess. If you guys can just provide a little more color on pipe, sort of acquisition you alluded to I guess, mostly incremental interest, accumulations and quality currently operate or is there also built on and then I guess, what plans kind of financials as you drilling?

John Walker

We get a check from Hambridges as we have, in fact we recently receive little over $4 million check. We can reflect that in income, we have to reflect that is prepaid revenues, so it doesn’t go into our income statement, now we get the cash and so, but we can’t reflect that until the production actually occurs. So, our cash position is much more favorable then what our income statement will reflect.

To the acquisition market, if we go back eight years ago, we started a process of people getting very aggressive in the acquisition market and basically overtime too much money chasing through property. To that point that’s really been climax over the last year, in terms of a lot of competition, we’ve been very patent as those of you, that are watch just over the last two years, we didn’t do any transformation or acquisitions at EV five, and there ware plenty of people that were doing those very aggressive acquisition is helping to be buy out by the market. Those are the once that are going to be in trouble, but not only that the purchase in sale agreement changed over the last year periods shifting a tremendous amount of liability on to the buyers of those assets.

While the world’s changed and more are going to be, I think at least through 2009 in the period where those folks that bought properties aggressively and added leverage are going to be victims in the market and that going to be forced to probably sell properties. Of course, EnerVest is sitting there with about $900 million and its ability to buy and we are opportunities. We want to buy things where we can get high rates to return at EnerVest and where we can get high rates to return could be very favorable for EV to take a piece of that.

We have some instances were we will not be willing to issue some units in terms of doing that. We don’t want to add to our debt levels and so, if any thing we are trying to slow down our drilling little bit, because we believe that were not be able to get high rates returns in the A&D market over the next 12 months.

John Kang – RBC Capital Markets

Okay. Great. Thanks for taking all my question.

John Walker

Okay.

Operator

Thank you. Our next question comes from the line John Freeman with Raymond James. Please go ahead.

John Freeman – Raymond James

Good morning.

John Walker

Good morning.

John Freeman – Raymond James

My first question on the maintenance CapEx, the number ended up being a little bit higher than you’re typical kind of $1.90 Mcfe guidance. I know there was a lot of noise during the quarter, is the $1.90 Mcfe still a pretty good number to use going forward?

John Walker

Well, I think that $1.90 is a pretty good range. What we’ve done is we’ve been in a 30% to 33% range minus capital. We believe that this is something that all of us should be setting aside for the long-term and we still believe that the people that were in the 10%, 15%, 20% range, their distributable cash flows is not what they are reflecting, but we’ll continue to do that. John I believed it was right around 190.

John Freeman – Raymond James

It was $10.7 million, which was about 227m and then I know that if you do it on $1.90m, I’m sure it would have been like $8.95 million.

John Walker

John, if you look on the reconciliation net income to adjusted EBITDA was 8.95.

John Freeman – Raymond James

Yes, I saw that numbers. Just it differs from the number that’s in the Q. I mean in some quarters, you’ll end up having at much lower number in the Q. I mean it jumps around a lot. It’s just this quarter I was a little bit above it, but I understand.

John Walker

You mean the actual capital expenditures.

John Freeman – Raymond James

Right exactly, the actual capital expenditure correct. The other question on the mid-time and obviously we’ve seen a lot of companies with some pretty sizable basis differentials. You’ve done some recent acquisitions in kind of Panhandle, Kansas area with some acquisitions, what’s your kind of view on what the base of differences look like there going forward.

John Walker

Well, basically of course we have 1.8 million a day coming on the Rex pipeline. This creating some real gas-on-gas competition is that gas moves up to Chicago. The pipeline is delayed in terms of get it cleared in Ohio. I did a speech recently where I said that our pumpers were camouflaged and we might define our Ohio border and not allow that pipeline into Ohio.

We have hedged basis in the Appalachian Basin for the next several years, because I think, it’ll have an impact there and the sad thing there is if we haven’t hedged basis you’ve got the Rex pipeline coming into the Appalachian Basin, you’ve got Marcellus ramping up. I’m glad that we at least foresaw that and we’re pretty locked into some higher basis over the next few years.

John Freeman – Raymond James

So your expectations, it would continue to stay wide; obviously I know you all are find to the hedging, but just industry wide you’d expect it to stay wide?

John Walker

In reading your work and other folks work, I think folks are right on in terms of our demand particularly if our demand is down, supply is up and then we need to have incremental supply coming in on the Rex pipeline that just creates some issues.

Now I would anticipate that the overall rigs in 2009 will drop 20%, 30% not in the resource play areas, but I think that will have good impact on costs and of course this self correcting because of the decline rate that we’re seeing in the overall industry that I anticipated recovery in 2010.

John Freeman – Raymond James

Right and then shifting over for Mark in the Permian, you mentioned that the economics or trends looks better in the current environment for work-overs versus join new wells, can you just give me a little more clarity on that in terms of what the economics are on the work-overs.

John Walker

Yes, John this is John Kathy MacAskie, our Head of R&D and she’s been spending a good bit of time studying with our teams the merits that I want to comment briefly?

Kathy MacAskie

We had a couple of work-overs that we’ve done and the rates of return have been exceptional. The drilling cost as Mark mentioned have gone up in the Permian area and with the decrease in commodity prices we’ve just seen some really good results on the work-overs and have kind of shifted our focus there in the interim.

These are still good properties in terms of per locations. We still feel that we have quite bit upside in the undeveloped category, but we’re going to ahead and go for the stuff that really give us a better return right now because of commodity prices.

John Freeman – Raymond James

Kathy, are you able to give me like what ASC is in recoveries with work-overs?

Kathy MacAskie

I don’t have that specific information with me.

John Freeman – Raymond James

Okay. That’s okay. I can follow up later

Kathy MacAskie

Okay

John Freeman – Raymond James

And then last question and I’ll turn it over to somebody else. On the Marcellus, I know in the past you’ll said that it’s probably not an area that you’ll would likely want to foresee it, likely probably sell it, it sounds like maybe the terms changed a little bit, maybe because of the success you’re having now with the Apache on the Eagle Ford Shale. I mean is there any sort of just a general strategy change, because you feel like you can just do a JV, get a free look at some of these plays, before kind of selling the whole thing?

Mark Houser

Well, I think, one thing that’s happened is adjacent to some of our acreage, there have been some really good vertical wells drilled and with that to our mind it is heightened the value of that acreage and that being the case, as you well know the cost approximately paying for acreage since I’ll called it after the Chinese Olympics.

It has changed a good bid and so, we feel like thanks for our buck, we’re just better off studying this way. Somebody, comes along and offers us as a really nice price for that acreage, we’d sell it, but we can go in and really drill some pretty cheap vertical wells and test this stuff ourselves and really see we have, so that’s the mode were going down right now.

John Freeman – Raymond James

Okay. It was encouraging that you got a pretty good data point with the Skywell Chesapeake today in Marcellus, but anyway thanks again for your talk.

Mark Houser

Yes. I haven’t even seen that, I’ll go back to my computer and read that one John.

John Freeman – Raymond James

Okay.

John Walker

Thank you, John.

Operator

Your next question comes from the line of Jeff Williams [ph] with Williams Research Group. Please go ahead.

Jeff Williams – Williams Research Group

Good morning gens.

John Walker

Hi Jeff.

Jeff Williams – Williams Research Group

Basically I’ve just to get a perspective, John I guess you can confirm me on this. In terms of the Eagle Ford, as you know John we talked in past, I had been pretty high on the Eagle Ford and it appears that has come into fruition down, near you in the Mavericks basin 9 million cubic feet a day well and they brought in some wells on the Anadarko property that has about across the 400,000 acres. Do we have any other perspective, because I know it’s below the Chalk and it was so as Chalk for the Chalk in Texas.

Besides the formats to Apache do we have any other perspective Eagle Ford on our acreage, where we have a bigger working interest. In other words the partnership, as I guess about a 3.3 working interest on the back and have to payout on these wells and then if you get that down to net revenue interest maybe you’re at 2.5% or so; is there any property that we have that we could to deals on or if we thought that they were perspective enough, we could drill are sales and do have 13% working interest. Of course, I’m talking down the road, not today because it’s very early in the play.

John Walker

Let me add just a little bit of prospecting now for others. If you go down to our South county that’s about 150 miles South of us, and that the Eagle Ford is arguably one of the largest, not largest source rocks in the United States or North America, indeed, stretches from South Texas all the way in the East Texas its not only the source for the Austin Chalk, but it’s a source for the East Texas oil field and other major producing reservoirs in East Texas. So it – the size of the Eagle Ford makes all these other Shales payroll and comparison is result of what is source and so the key in these Shales is unlocking how to do it and it’s difficult to drill the Eagle Ford, we are very happy that they are with Apache.

We do not believe that this is a place that in a vehicle like EVEP that its appropriate for us taking drilling our completion risk with our dollars and so again anytime you have one putting up all the capital for ever more and us having a backend that’s an implement return on capital and yes, we formed out 400,000 of our almost 800,000 acres now in the Chalk to Apache there are great partner, where continue to acquire other assets in the Chalk and they could like to that’s not part of the format at this point in time, they could need us doing something on a small scale, but I just think that its inappropriate for us to be talking that kind of risk right now.

Jeff Williams – Williams Research Group

Okay. So and then essentially we do have other perspective areas whether we form amount or whatever I mean that’s down the road, but there going to be other…

John Walker

We are also going to format, we’ll probably participate we will format, it’s been terrific channel of opportunities over that 800,000 acres and we were in negotiation with several entities right now, free and other options, but again, we are going to let others to spend money and for we get the benefit of that.

Jeff Williams – Williams Research Group

Okay thanks.

Operator

Thank you. Our next question comes from the line of Jim Camp with Raymond James. Please go ahead.

Jim Camp – Raymond James

Good morning.

John Walker

Good morning.

Jim Camp – Raymond James

I am just curios regarding your joint venture in North Western Pennsylvania, how are you coming – could you give us a more details on how you’re coming in your drilling and your development in that areas please?

John Walker

Well, that is not in EVEP, that’s in one of our partnerships, and so it’s going fine, but is probably in appropriate for this phone call.

Jim Camp – Raymond James

Thank you

Operator

Thank you, (Operator instructions) and at this time no questions.

John Walker

Well, thank you. I hope that the next time that we don’t have this dramatical change occur over three months period, so look forward to good results wholly and individually. Thank you.

Operator

Thank you, ladies and gentlemen. That’s concludes the EV Energy Partners third quarter earnings conference call. You may now disconnect.

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Source: EV Energy Partners, L.P. Q3 2008 Earnings Call Transcript
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