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LRR Energy, L.P. (NYSE:LRE)

Q4 2012 Results Earnings Call

March 7, 2013 3:00 PM ET

Executives

Jaime Casas - Chief Financial Officer

Eric Mullins - Co-Chief Executive Officer

Charlie Adcock - Co-Chief Executive Officer

Tim Miller - Chief Operating Officer

Chris Butta - Chief Engineer

Analysts

John Regazzi - Giga-tronics Inc.

Kevin Smith - Raymond James

Michael Peterson - MLV & Company

Ethan Bellamy - Robert W. Baird

Praneeth Satish - Wells Fargo

Operator

Good afternoon. My name is Ian, and I will be your conference operator today. At this time, I would like to welcome everyone to the 2012 Fourth Quarter and Year End Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks there will be a question-and-answer session. (Operator Instructions)

Thank you. I would now like to turn the conference over to Mr. Jaime Casas. Please go ahead, sir.

Jaime Casas

Thanks, Operator, and good afternoon, everyone. Welcome to LRR Energy’s fourth quarter annual 2012 earnings conference call. Also presenting this afternoon will be our Co-Chief Executive Officers, Eric Mullins and Charlie Adcock; and our Chief Operating Officer, Tim Miller. Chris Butta, our Chief Engineer is also with us and available for questions.

During the course of the call management will make forward-looking statements about LRE. Forward looking statements are based on current expectations and relate to future business and financial performance. Actual results and future events could differ materially from those anticipated in such statement.

Forward looking statements involve certain risk and uncertainties and may not prove to be accurate. These risks and uncertainties are included in our Risk Factor section of our 2012 Form 10-K which we expect to file on March 13th with the Securities and Exchange Commission.

Additionally, during the course of today’s discussion, management will refer to adjusted EBITDA, distributable cash flow and distribution coverage as important metrics for evaluating LRE’s performance.

Please note these metrics are non-GAAP financial measures which are reconciled to the most directly comparable GAAP measures in the earnings press release we issued this morning.

I will know turn the call over to Eric.

Eric Mullins

Thanks, Jaime, and good afternoon, everyone. We appreciate you joining us for our earnings conference call. We reported full year 2012 average production of 6,303 barrels of oil equivalents per day. That was in line with our public guidance range.

Fourth quarter 2012 production of 5,935 barrels of oil equivalents per day was generally consistent with our internal forecast for the quarter, but 11% lower than the third quarter. Most of that decline was expected and due to natural flush production decline of our Red Lake wells drilled during 2012. Charlie Adcock is going to go into more detail on that during his comments next.

Adjusted EBITDA was $16.4 million for the quarter and $71.8 million for the full year 2012. For the quarter, distributable cash flow was $9.2 million and our distribution coverage was 0.85 times.

For full year 2012, our distributable cash flow was $44.1 million and our distribution coverage was 1.03 times. We will discuss our operational and financial results in greater detail shortly, but in general we were please with our 2012 results and we are excited about our 2013 plans.

As we mentioned in the past, we continue to expect to make between $50 million to $100 million in acquisitions during 2013. We are also highly focused on improving our coverage ratio. We expect that through accretive acquisitions overtime we will be able to improve our coverage ratio up to at least 1.2 times area.

On January 3, 2013, we closed our previously announced acquisition of oil and natural gas properties in the Mid-Continent region of Oklahoma from our sponsor Lime Rock Resources for a purchase price of $21 million.

In addition, as part of the transaction, LRE acquired in the money commodity hedge contracts valued at approximately $1.8 million as of the closing date. Including this transaction we announced two acquisitions during 2012, totaling approximately $88 million.

On February 14, 2013, LRR energy paid its cash distribution of $0.48 per unit for the fourth quarter of 2012 that distribution equates to an annualized distribution of $1.92 per unit.

With that, I will turn the call over to Charlie who is going to talk in more detail about our recent operating activity.

Charlie Adcock

Thanks Eric. I’d like to start by reviewing our operating results for the fourth quarter. We reported net production of 546,000 Boe for the quarter. Our production was 56% natural gas, 31% oil and 13% natural gas liquids for the fourth quarter.

Due to our 2012 liquids focused development plan and our acquisition that closed June 1, 2012 we increased our fourth quarter liquids production mix 43% from 35% for the fourth quarter of 2011. Given that our 2013 capital program is liquids focused, we expect our mix of liquids production to continue to increase through 2013.

As Eric mentioned, fourth quarter production was impacted by the performance of our 2012 Red Lake drill wells. Our 15 well 2012 Red Lake drilling program was completed in August and produced higher than expected IP rate. However, steeper than expected declines along with the planned pause in drilling caused fourth quarter production to fall below forecast.

In addition, we had an unexpected rental compressor failure at our Pecos Slope field. The combination of these factors caused production to be 2% below our expectations. For -- our 2013 drilling program at Red Lake resumed in January, and Tim will go into further detail on our entire 2013 capital program later on the call.

Fourth quarter lease operating expenses decreased 21% compared to the third quarter. LOE for the quarter was $5.5 million, or $10.05 per Boe, compared to $6.9 million or $11.29 per Boe for the third quarter. The decrease was primarily due to less required well repair activity and lower saltwater disposal costs.

Our Red Lake Eddy Humble saltwater disposal well went into service in mid November and based on current injection rate of 5,500 barrels of water per day we estimate monthly savings of $170,000 per month.

Now turning to our year end 2012 reserves, our estimated net proved reserves were 27.9 million barrels of oil equivalent, 85% which were classified as proved developed and 47% were liquids. The estimated proved reserves are based on independent reports prepared by our third-party reservoir engineers, Miller and Lents and Netherland, Sewell and Associates.

Based on fourth quarter average daily production of 5,930 Boe per day, we have production of proved reserve ratio of 12.9 year, compared to 2,000, year end 2011 our net proved reserves decreased by 3.4%, which was primarily driven by negative revisions due to changes in commodity prices of 2.6 million Boe of reserves as a result of the decline in SEC natural gas prices from $4.12 per MMBtu in 2011 to $2.76 per MMBtu in 2012. Excluding the negative revisions due to commodity prices, our proved reserves would have increased by approximately 6%.

61% of our estimated year end proved reserves are located in the Permian, 27% are in the Mid-Continent and 12% in the Gulf Coast area. The standardized measure to these reserves was $325 million at year end 2012, based on SEC pricing of $94.71 per barrel of oil and $2.76 per MMBtu of natural gas.

I will now hand the call over to Tim Miller.

Tim Miller

Thanks Charlie. Our 2012 capital program ended up being $31.4 million, of which $21 million was estimated to be maintenance capital. During the fourth quarter our total capital expenditures totaled $4.7 million at our Red Lake field we added pay in four different wells and completed in place a saltwater disposal well into service during the quarter.

In 2013 we plan to invest approximately $28 million in our existing properties. Approximately 82% of that will be directed towards drilling. In total, we intend to drill 37 gross producing wells, 25 of which will be operated by LRE. Also we plan to recomplete 17 wells and commit one waterflood project.

In addition, we plan to complete 16 non-production related projects, including the expansion of the Red Lake saltwater disposal system and a compression downsize project. This production -- these non-production opportunities account for approximately 4% of our 2013 capital budget.

Given the near-term outlook of natural gas prices our 2013 capital program will continue to focus almost entirely on liquids projects. We plan to spend 95% of our 2013 capital in the Permian Basin area and 90% of our budget in our Red Lake field.

First quarter 2013 development activity includes drilling eight wells, one well deepening and three recompletions in our Red Lake field. In addition, we plan to install a horizontal injection pump to increase capacity of Red Lake’s Eddy-Humble saltwater disposal well to 9,000 barrels of water per day from 5,500 barrels of water per day today.

Regarding first quarter production, estimated production for February averaged 5,900 Boe per day, both January and February production were impacted by a compressor failure on Agave Pecos Slope gathering system. As a result of the compressor failure, we expect first quarter production to be negatively impacted by 109 Boe per day.

In addition, production continued to be impacted by the curtailment of approximately 1 million cubic feet per day of natural gas from our Pecos Slope field. We expect the curtailment to remain at this level until we feel like nitrogen rejection facility becomes operational in mid-2013. This amount of curtailed production represents less than 1% of expected 2013 revenues. Having said that, we are still confident in our 2013 production guidance of 6,200 to 6,500, Boe per day.

I will now turn the call back to Jaime, who will walk you through our year-end financial results and guidance.

Jaime Casas

Thanks, Tim. Before I get into the details of our results, I’d like to remind everyone that our financial statements and operating results for the 12-months ended December 31, 2012 have been recast, as if we had owned the assets that we acquired on June 1st from Lime Rock Resources since our initial public offering, as the transaction was between entities under common control.

Adjusted EBITDA was $16.4 million and $71.8 million for the quarter and full-year 2012 respectively. Based on estimated maintenance capital for the quarter of $5.25 million, our distributable cash flow was $9.2 million and our distribution coverage was 0.85 times.

For the full-year 2012 and based on estimated annual maintenance capital of $21 million, our distributable cash flow was $44.1 million and our distribution coverage was 1.03 times.

G&A expense for the quarter was $4 million, which as expected was materially higher than the $2.3 million for the prior quarter. The increase was due to employee year-end cash compensation, expenses related to the filing of our S-3 registration statement, preliminary year-end audit and tax work and advisory fees related to our acquisition that closed on January 3rd.

Beginning with the first quarter of 2013, we will start to accrue for estimated year-end cash compensation on a monthly basis. Although, we expect this will smooth G&A quarter-to-quarter, we still expect the first and fourth quarters to be higher than the second and third quarters because of year-end audit, tax and engineering processes. G&A expense for the year was $12.6 million, which included approximately $1 million of transaction fees and expenses, and approximately $300,000 of non-cash compensation.

I will now cover details of our commodity hedge program. As a result of our commodity and basis hedges that were settled during the quarter, we realized an average natural gas price of $5.14 per MMBtu, compared to an average Henry Hub price of $3.40. And we realized an average oil price of $90.60 per barrel compared to an average NYMEX price of $88.17.

Due to the recent significant volatility in the Midland, the Cushing oil differential, we decided to reduce our exposure by hedging the differential. In February, we hedged approximately 85% of expected 2013 and 2014 PDP production that is impacted by the differential at a $1.25 and $1 per barrel respectively.

Assuming the midpoint of our 2013, production guidance has held flat through 2017. Our total estimated production is 90% hedged in 2013, 65% in 2014 and 58% in 2015, 52% in 2016 and 42% in 2017. Weighted average prices during that period were $92.64 per barrel of oil and $5.08 per MMBtu of natural gas. More specific details of our current hedge position are disclosed in the earnings press release that we issued this morning.

Next, I will discuss our guidance for full-year 2013. For 2013, we expect production to average between 6,200 and 6,500 Boe per day and LOE to average between $10 and $10.50 per Boe. As Tim mentioned, we expect total capital expenditures to be $28 million for the full-year 2013, $19.2 million of which we estimate to be maintenance capital. Our maintenance capital estimate was based on approximately 25% of pro forma trailing 12-months EBITDA.

I would like to close with our balance sheet. As of today, we have to $205 million of outstanding borrowings under our revolving credit facility and $50 million of outstanding borrowings under our term loan facility. We currently have $45 million available under our credit facility, which we believe provides ample financial flexibility to execute our 2013 capital program and distribution strategy.

Operator, that includes our formal remarks. You can now open up the line for questions.

Question-and-Answer Session

Operator

(Operator Instructions) Our first question comes from the line of John Regazzi.

John Regazzi - Giga-tronics Inc.

Just want to make sure you can hear me.

Eric Mullins

Yeah. We can hear you.

John Regazzi - Giga-tronics Inc.

Okay. I’m sorry about that. Can you give us the actual total daily volume impact of the compression failure at the Pecos Slope? I’m assuming that the 109 barrels is spread out across the entire quarter and we don’t have a full comparable number. I just want to see if we could provide that.

Tim Miller

Yeah. This is Tim Miller. The compressor went down in the fourth quarter and was down through about mid-February, when down in December and went down through about mid-February. So that impact is -- the 109 Boe impact for the quarter reflects about seven weeks of downtime during the first quarter.

John Regazzi - Giga-tronics Inc.

All right. That’s helpful. And did you have any coverage in terms of -- you said it was a rental compression system. Was that covered at all? Do you expect any proceeds from business interruption?

Tim Miller

Well, no. I mean -- by the way that was not our rental compressor. It was on the gathering system that is owned and operated by Agave that we flow into so. But the only thing that Agave would receive, would be paying no rent for a portion of that period.

John Regazzi - Giga-tronics Inc.

All right. And you had mentioned, resumed higher activity levels in January. Were those continued into February, March and do you anticipate the 2013 to be similarly lumpy to the 2012 program?

Tim Miller

This is Tim Miller again. No, I mean -- most typical, we are going to try to smooth out capital relatively even with both production and capital, quarterly basis. We intend to keep the rig at Red Lake for 10 wells during the first part of the year then it will come and go throughout the year. But for the first quarter, yeah, the rig will be into field active for the first quarter.

Charlie Adcock

Hey, John. This is Charlie. Just to kind of back, maybe it’s helpful to back up a little bit and describe 2012. If you recall, not long after we went public, we immediately had a three year, actually close to 20-day shut in at Red Lake that was a third-party related with the gas plant.

And to overcome that and to make our guidance, production for the year, we stepped up activity once the shut in was over and we moved a lot of what we would’ve done into the fourth quarter. We moved it up into the second quarter and early part of the third quarter, which kind of cause the lumpiness in 2012. What we’ve laid out for 2013, internally, is a much more even budget and it will kind of keep production a lot flatter over the year.

John Regazzi - Giga-tronics Inc.

Thanks a lot. That’s helpful. You’ve mentioned the nitrogen rejection facility. Previously we had a target of January for the completion. I know it’s not a tone of volumes, but can you be more specific in terms of mid-year 2013 now and possible what’s holding up the process?

Tim Miller

Yeah. This is Tim Miller, again. Again, that process, that gathering that nitrogen rejection facility is being installed by our gathering company. They’ve had some delays. First off, a delay in acquiring the facility, it’s been acquired and now installation is in progress. What they’ve run into most recently is the time to get electrical power to that facility. It’s going to take a lot longer than they originally expected, primarily due to basically the activity levels in the area and the electric provider just not having the personnel to be able to jump on that project as quickly as we originally thought. We’re now estimating midyear 2013 hoping that is a little bit conservative but not knowing for sure when the electric provider is going to be allocated to that line is a reason we’re being a little conservative on that.

John Regazzi - Giga-tronics Inc.

Got it. Fair enough.

Jaime Casas

Hey, John. It’s Jaime, to give you a perspective in terms of what that curtailments means on our financials. It’s going to be the first six months of the year that that curtailment is going to be less than 1% of our production and less than 1% of our cash flow.

John Regazzi - Giga-tronics Inc.

Okay. Thanks. And then just one more from me and I’ll let somebody else jump. The LOE guidance for ‘13 looks good relative to ‘12. Is that primarily reflective of the saltwater disposal facilities that you’ve installed? And do you have any other LOE cost saving projects that you can point to in terms of expected further savings in 2013?

Eric Mullins

Yeah. Its’ primarily due to the saltwater disposal well that went on line in November also reduced workover costs in 2013 compared to 2012. In late 2012, we did a lot of workovers to convert some wells that were producing electric submersible pumps back to rod pump.

And those electric submersible pumps were causing relatively high LOE. So we’ll see some reductions in that. Also we’re going to expand the water capacity that SWD well from 5500 to 9,000 barrels per day and also expand our gathering system for the water which would get more of our water off the commercial disposal well into our own well.

John Regazzi - Giga-tronics Inc.

All right. Thanks very much gentlemen. I look forward to talking in the next quarter.

Eric Mullins

Thanks John.

Operator

And your next question comes from the line of Kevin Smith [Raymond James].

Kevin Smith - Raymond James

Good afternoon, gentlemen.

Eric Mullins

Afternoon.

Kevin Smith - Raymond James

Would you mind walking me through production from December to February. I’m trying to figure out the volumes bottom in January. We owned upward kind of tick right now or what should we think about that versus the CapEx layout?

Charlie Adcock

Kevin, in terms of our production in our press release and early January, we mentioned that December production average about 5900 Boe per day and that is in line with the estimate for what February looks like at 5900. So in terms of a natural decline that we experienced during the fourth quarter that has subsided and the production seems to be more flat. And then as we continue to get more wells on during the remainder of the first quarter, we expect to see some bump in production remainder of this quarter.

Kevin Smith - Raymond James

Okay. Great. And then maybe can you speak to the service cost environment, I mean, clearly the Permian has been red hot. Are you guys seeing -- are we declining as far as this cost, I mean it seems like some -- you’ve seen some service cost margin compression a little bit in other areas but don’t know what you guys are experiencing red light specifically?

Eric Mullins

Well, I’d say overall costs are still increasing somewhat. Towards the second half of 2012, we saw a pretty large decrease in frac costs, about 25% reduction in frac costs in the second half of 2012. Since then, we’re still seeing pressure on trucking costs and moving rigs, anything associated with moving materials and equipment around it, both cost continue to arise.

Just as an example, from early 2012 till now, the mobile cost for our drilling rig there, Red Lake have gone up from about 8000 barrel -- $8000 per move to about $25,000 per move. So that’s where we’re seeing the most pressure on service cost. I mean, all the other costs in terms of wireline, fracking and stuff are pretty much stabilized since the second half of 2012.

Kevin Smith - Raymond James

Okay. Great. And then one last one, you guys become S-3 filer officially?

Eric Mullins

Yeah. Kevin, this is Eric. We have officially become an S-3 filer, yeah.

Kevin Smith - Raymond James

Okay. Congratulations. Thanks.

Eric Mullins

Thank you.

Operator

And your next question comes from the line of Michael Peterson [MLV & Company].

Michael Peterson - MLV & Company

Good afternoon everyone. Got a couple questions, if I could start out probably one for Jaime. In terms of your capital budget for this year, is it going to be pretty much a linear allocation across the quarters or will there be some lumpiness in terms of how you see the spending occurring?

Jaime Casas

Yeah. Sure Michael. As we mentioned, our capital budget for the year is $28 million. And although there’ll be some variance quarter-over-quarter, I think the lowest quarter we’re projecting is $6.5 million and the highest quarter is $7.5 million. So it will be in that range quarter-over-quarter.

Michael Peterson - MLV & Company

That spending giving you a more of a linear output in terms of production as well or should we see a little bit of volatility based on the capital program?

Jaime Casas

Yeah. I would expect that given kind of where February right now is or was, 5900 that the Q1 might be lower than the remaining quarters. But I think quarter -- the second, the third and fourth quarter will be pretty flat.

Michael Peterson - MLV & Company

Terrific. Thank you, sir. Question for Tim, can you give us a little bit more color on the DD&A cost that seem to be a little higher than I would have expected. Were there any particular drivers that move things up in the fourth quarter?

Tim Miller

DD&A or LOE?

Michael Peterson - MLV & Company

DD&A cost.

Tim Miller

Yeah. Hey Mike, we’re not exactly sure. We’ll follow up with you on that question.

Michael Peterson - MLV & Company

Sure. No problem. That’s all I have this afternoon. Thank you, gentlemen.

Tim Miller

Thanks.

Eric Mullins

Thank you.

Operator

And your next question comes from the line of Ethan Bellamy [Robert W. Baird].

Ethan Bellamy - Robert W. Baird

Gentlemen, hello. One really just big picture question, can you give us an update on the assets and the activity of parent specifically around things that might be potential assets for dropdowns and then bigger picture. I mean, you can’t be pleased with the unit price performance and kind of just want to hear Eric and Charlie talk about what the big picture strategy is. And should that be third-party M&A or drop down that are going to get us excited about in our earning our units going forward?

Eric Mullins

You could also put out a big buy rating on us.

Ethan Bellamy - Robert W. Baird

I have been doing that. That doesn’t help. It’s [attrition to me] anyway, so.

Eric Mullins

Hey, Ethan, it’s Eric. I’ll jump in on that. We are active up at the sponsor level. I think you would’ve seen that we’re also on the process of raising additional funds. And I’ve already first close on that. So, I have plenty of capital to continue acquiring additional properties as well.

Our properties are predominantly oil. I think you know they are in various stages of development. We do have an active drilling program going on at the sponsor level as well. And these properties are in various stages of exploitation such that over time at different periods at different times, they are going to become much more attractive for the LRE model.

So we’re excited about that. No changes in terms of our plans, in terms of our strategy of being able and being in a position to be able to execute on dropdowns. As I had mentioned earlier, we do feel very confident about having a target of between $50 million to $100 million in acquisitions every year whether that come from -- directly from dropdowns or from third-party acquisitions.

I would say the backlog right now of deals that are out there is pretty steady. And it’s pretty attractive and that has us very encouraged as well. So no change on that. We’re pretty optimistic, I think about 2013 in terms of our strategy along those lines.

As far as the trading, it’s been very volatile. I think over time as we -- the way we think about it is we are going to continue to focus on what our business and improving production and cash flow, keeping everything very consistent and stable and continuing to execute on acquisitions which we feel very confident about. I think overtime as we become seasoned and people see what we’re doing, I think the unit price will take care of itself.

Charlie Adcock

The other thing, I would add to that is, I mean, we are -- huge goal of ours is to continue to pull the covered ratio up.

Ethan Bellamy - Robert W. Baird

Okay. So what do you think about targeted coverage ratio before you start to materially move the distribution up, 1, 2?

Eric Mullins

Yeah. In our view, 1.2 times is -- the numbers are moving around as you look at the peers but we would be comfortable at that 1.2 range. That’s what we’re targeting.

Ethan Bellamy - Robert W. Baird

And just back to my original question, could you quantify for us. Just give us a range on sort of asset value or dates when there will be some of those assets might be available to drop?

Eric Mullins

No. I don’t have a specific date for you. I would say that we are continually evaluating that in terms of when the appropriate time is for these properties. So I don’t have a specific date for you. I will tell you, obviously we have as we’ve said before huge inventory of mostly oil properties that over time will become suitable. But we’re continually evaluating those opportunities in terms of when the right time would be.

Ethan Bellamy - Robert W. Baird

Okay. Thanks Eric.

Eric Mullins

Surely.

Operator

And your next question comes from the line of Praneeth Satish [Wells Fargo].

Praneeth Satish - Wells Fargo

Hi. Good afternoon. Just two question for me. It look likes you increased the distribution modestly in the fourth quarter despite having low coverage less than the 1.2 times target. Should we expect more of these kinds of gradual increases in 2013 and then kind of larger ones as you get past 1.2 or how should we think about that?

Eric Mullins

Yeah. Praneeth, its Eric. It’s a good question. I think the way we think about it is we are very focused on not only maintaining our production in cash flow on a stable basis but also on growing our distribution. Those increases you referred to have been pretty modest. But I think that is just something we look at every quarter with the board and that is part of our strategy as well. I think as we make acquisitions that will have several benefits.

One of them is that coverage ratio will continue to improve hopefully. And as that happens that will free us up if you will to make more aggressive increases in those per-unit distributions if we can and if it warrants that.

So it’s something we look at very carefully every quarter. It’s consistent with our strategy and what we’re trying to accomplish here. So that’s how we think about it.

Praneeth Satish - Wells Fargo

Okay. Great. And just a point of clarification on the Midland to WTI basis swaps, do those hedges take effect in February, when you entered into them or at the beginning of the second quarter?

Charlie Adcock

Yeah. Praneeth, that’s a great question. For this year, they take effect April 1st.

Praneeth Satish - Wells Fargo

Okay. Got it. Thank you.

Operator

And our next question comes from [Matt LeBlanc].

Unidentified Analyst

Thank you. So looking forward in the unit price being where it is, it’s clearly harder to get as much accretion out of acquisitions? Is there any thought that the parent might be supportive in the form of a very attractively valued dropdown or to this year to try to goose the share price a little bit and gets to the point where the drops can be some more financially interesting for everyone involved or any other way be supportive?

Eric Mullins

Well, Matt, it’s Eric. I think that we continually look for these opportunities for the right asset to dropdown into LRE. And the properties that, I think we do and will have properties that will be very attractive to the structure that we have, as to exactly as I said earlier in terms of timing, I don’t have -- we don’t have anything specific in terms of timing other than just we’re confident over the course of 2013 we’ll find those opportunities.

So we’re very focused on that. We’re very focused on both not only the consistency of our core assets that we own today but also in growing those. And really earning into a better coverage ratio, which we think overall will help of our financial statistics.

Unidentified Analyst

Right. And in terms of third-party acquisitions, again given the currently discounted unit price, do you think there are certain sets of assets for which you’re able to be competitive in the bidding process and so drive sufficient accretion or are you still totally focus on the dropdowns at this point?

Eric Mullins

No. I think that, we can’t be competitive. Obviously, the unit price performance has been very volatile. But I think we’re still very much within a range where we can find attractive opportunities.

Unidentified Analyst

Okay. And then and lastly, one of the over hangs I think on the unit price right now as expectation of the industry filer that an equity issuance could be imminent, particularly given the certainly higher leverage ratio following the recent acquisition.

But I think I heard you say earlier in the call that that you had sufficient capital for your program this year. So should we expect equity in the near-term or is that sort of not in the plan unless there is another acquisition?

Eric Mullins

Yeah. Matt, it’s Eric again. You’re right, Jaime’s comment about our liquidity, we feel very confident about that over the course of 2013. Obviously, issuing equity is part of our strategy for growth, ideally in our minds, we would find an acquisition, an attractive acquisition that is accretive and issue equity along with completing a transaction like that, that would be the ideal way to move forward in our view, that doesn’t happen and obviously an equity continuing to strengthen the balance sheet with equity issuance is one of the options that we always have available to us. So that’s something that we continually look at and we’ll evaluate. And but, again, I think in our minds, ideally we would find an acquisition and do those two together.

Unidentified Analyst

Okay. Very helpful. Thank you.

Eric Mullins

Sure.

Operator

(Operator instructions) And we have no further audio questions at this time.

Eric Mullins

All right. Thank you. Let me just say I really appreciate everybody participating on the call this afternoon. If you have any other additional questions don’t hesitate to give us a call. Thank you very much.

Operator

This concludes today’s conference call. You may now disconnect. Presenters, please stay on the line.

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