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Legacy Reserves LP (NASDAQ:LGCY)

Q2 2010 Earnings Call Transcript

August 5, 2010 9:30 am ET

Executives

Steve Pruett – President, CFO and Secretary

Cary Brown – Chairman and CEO

Kyle McGraw – EVP, Business Development and Land

Paul Horne – EVP, Operations

Analysts

Ethan Bellamy – Wunderlich Investments

Kevin Smith – Raymond James

Richard Roy – Citigroup

Michael Blum – Wells Fargo

Operator

Good day, ladies and gentlemen, and welcome to the Legacy Reserves second quarter 2010 results. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session with instructions following at that time. (Operator instructions)

And now your host for today’s conference President and CFO, Mr. Steve Pruett. Please begin sir.

Steve Pruett

Thank you very much, and thank you for joining us today. Welcome to Legacy Reserves LP’s second quarter earnings call. Before we begin, I would like to remind you that during the course of this call, Legacy management will make certain statements concerning the future performance of Legacy and other statements that will be forward-looking as defined by securities laws.

These statements reflect our current views with regard to future events and are subject to various risk, uncertainties and assumptions. Actual results may materially differ from those discussed in these forward-looking statements and you should refer to the additional information contained in Legacy Reserves LP’s Form 10-Q for the quarter ended June 30, 2010, which will be released on or about August 6, and subsequent reports as filed with the Securities and Exchange Commission.

Legacy Reserves LP is an independent oil and natural gas limited partnership, headquartered in Midland, 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.

I will now turn the conference over to Cary Brown, Legacy’s Chairman, Chief Executive Officer and Co-Founder.

Cary Brown

Thanks, Steve, and thank you to our friends and unit holders for joining us today. We are very pleased with our results in the first six months 2010. We remain very active on the acquisition front, closing 11 transactions during 2010 for a total of $157 million. In February, we closed our largest acquisition to date in Wyoming for $125 million, and we continue to make several smaller acquisitions within our core areas, as many owners within the Permian Basin have been motivated to sell their properties during 2010, due in part to the anticipated increase in capital gains, and ordinary [ph] income tax rates in 2011.

We are continuing to evaluate potential acquisitions of various sizes and feel confident about our ability to grow both through acquisitions, and through our drilling and recompletion projects. With a full quarter of ownership in our Wyoming properties, we increased production in the second quarter to 9,516 barrels per day, up from 8,767 barrels day in the first quarter of 2010 and 8,250 barrels per day in the fourth quarter of 2009.

We generated adjusted EBITDA of $32.3 million this quarter despite a 5% decline in commodity prices and additional production expenses related primarily to our Wyoming acquisition. Our financial results this quarter are a testimony to our successful acquisition and development program, as well as our hedging strategy and sound financial approach. Finally, we are pleased to report that during the second quarter we generated $0.58 per unit of distributable cash flow, covering our $0.52 distribution by 1.12 times.

To take advantage of favorable drilling economics, please note that we’re planning to spend approximately two thirds of our $31 million capital expenditure budget during the third and fourth quarters of 2010. While these capital expenditures will have a negative impact on our coverage in the third and fourth quarters of this year, this budget will allow us to generate a moderate organic production growth in 2010, as we discussed on previous calls.

In addition, given our expected production increase and more favorable hedge position in 2011, I think our average oil price moves up to $88 from $82. We expect coverage ratios to be much higher during 2011, assuming no increase in distribution [ph]. All in all, a very solid quarter and I’m really pleased with the results that we are achieving and the execution of the team.

With that I will turn it over to Steve to go more specifically over the financials.

Steve Pruett

Thank you Cary. As of August 4, we had approximately $130 million of borrowing capacity under our credit agreement with a borrowing base of $410 million. Our debt-to-EBITDA or debt-to-earnings adjusted EBITDA on a trailing 12 month basis is about 2.2 times, while our debt-to-EBITDA covenant in our credit agreement is 3.75 times.

In addition, our debt to book capitalization is 42% as of June 30, 2010. We received positive feedback from our investment in commercial bankers regarding our ability to finance a broad variety of potential acquisitions. We are excited about our deal flow and our drilling inventory. As Cary said, it is a great time to be drilling oil wells, and the inventory has very strong economics, and we look forward to a very strong second half of 2010.

I must say, I was very encouraged by our exit rates in June, and I think that sets us up very well in the third quarter, and Paul will talk more about it later. But we do have a Wolfberry drilling rig just complete, or just finished drilling a well. We expect to have two Wolfberry drilling rigs operating during part of the fourth quarter, along with seven gross operating wells we completed in the second quarter, which we will talk about later.

We are pleased to report unaudited preliminary financial information extracted from Form 10-Q, which we will file tomorrow. I’ll make comparisons of the second quarter 2010 to the first quarter of 2010 or sequential comparison.

This information is contained in our earnings release, and for a more detailed disclosure, we encourage you to access Form 10-Q which will be available on the EDGAR system and on our website tomorrow morning, August 6th, and I also very much encourage you to take a look at the last page of our press release, which reconciles net income to EBITDA, adjusted EBITDA and distributable cash flow. There is some very important non-cash impact disclosures on that statement.

Production increased over the quarter 9% to 9,516 Boe per day from 8,767 Boe per day due to the full quarter benefit of production from our $125 million acquisition in Wyoming that closed on February 17, as well as production attributable to other smaller acquisitions that we closed during the quarter. So, we had partial benefit from those, and our development projects that were completed during the quarter. So, we had not a full quarter’s benefit either from those smaller acquisitions or those recently completed wells.

These increases in production were partially offset by a drop in sales volumes due to third-party gathering system downtime in the Texas Panhandle and as Cary mentioned, a 5% drop in commodity prices. The impact of the Texas Panhandle plant and gathering system downtime was estimated to be approximately 50 Boe per day.

Our Oil, and natural gas sales, excluding commodity derivatives settlements, were $51.6 million, up 4% from $49.7 million, and the increase in production we experienced was largely offset by lower realized prices.

Average realized prices, excluding commodity settlements, were $59.62 per Boe in Q2, down 5% from $62.95 in Q1. Average realized oil prices declined 4% to $71.78 from $74.90, and natural gas prices were down 22% to $5.26 per Mcf in Q2 down from $6.72 realized in Q1. And you might recall that we sell mostly associated or casinghead gas, which is rich in NGLs, and we do get an uplift on our gas prices with benefit of NGLs, typically 20% plus over NYMEX Henry Hub.

Production expenses were up in the quarter, largely due to the Wyoming acquisition. They increased to $16 million, which excludes production taxes that translates into $18.44 per Boe. That is up about 2.8% from 17.94 per Boe in Q1. We did realize about 1.6 million of additional expense related to the Wyoming acquisition. This additional expense included approximately $700,000 in workovers, as well as other maintenance related expenses on these properties, which were necessary to improve or re-establish production.

We did encounter a lot of repair [ph] wells and this repair when we took over the acquisition, and we’re happy to report we’ve got those wells back online, and we’re very pleased with the track we have going on our Wyoming acquisition now. But it was a rough start frankly.

General and administrative expenses decreased to $4 million or $4.67 per Boe, down from $4.8 million in Q1, which included, Q1 included our typical seasonal audit tax, legal and reserve report fees. These figures do include non-cash comp expense of about $1 million each in the first quarter and the second quarter – in the second quarter rather, that non-cash comp expense amounted to about $1.10 per Boe. So, stripping that out G&A was about $3.57 per Boe. However, we do realize cash settlements on our long term incentive plan. Those dropped $200,000 or $0.24 per Boe in Q2, whereas in Q1 free at 1.7 million of relative cash settlements, related to some options that were going to expire dated back to 2006, when we started Legacy. So those options including the executive options are all washed out now after the first quarter, and now we are dealing with just a more routine annual type of awards as they divest [ph].

While cash [ph] settlements do not affect reported G&A costs, these settlements do reduce distributable cash flow as shown on the EBITDA reconciliation, the Bcf reconciliation on the back page of our earnings release.

Cash settlements on our commodity derivatives during Q2 were about $4.2 million compared to $4.8 million in Q1. We were 73% hedged in Q2 versus 80% hedged in Q1. We typically are in the 70% to 75% hedged range. We reported an unrealized gain of $34 million on our derivatives portfolio with the decline in oil and nat gas prices over Q2 compared to Q1, and that compared to a $7.1 million gain in the first quarter. So, we did get a lift in our reported earnings from this unrealized gain on our commodity swaps, again that is detailed on our EBITDA reconciliation.

Adjusted EBITDA was $32.3 million in Q2, down slightly from $32.7 million in Q1, again primarily driven by decreased commodity prices of about 5%, higher production expenses and lower cash settlements on our commodity derivatives, which were largely offset by our increased production, primarily from the Wyoming acquisition and from drilling, and our reduced G&A costs also helped to offset the decline in commodity prices in our production expense.

Development capital expenditures were virtually flat at $5.1 million in the second quarter from $5.2 million in Q2. Again, as Cary mentioned, we will be spending about two thirds, or we anticipate spending about two thirds of our CapEx budget in the second half of the year, and particularly in the fourth quarter, and we have two Wolfberry rigs running part of that quarter.

Distributable cash flow increased to $23.3 million, up from $22.1 million due to the lower cash settlements on our employee LTIP awards. This is the primary reason along with our increased production volumes I mentioned earlier.

Distributable cash flow of $0.58 is up from $0.55 in Q1, and given the $0.52 distribution we paid as Cary mentioned, our coverage is 1.12 times. Reported earnings were $39.4 million, $0.98 per unit, favorably impacted by the $34 million of unrealized gains on our commodity derivatives. In Q1, we generated $10 million of net income or $0.26 per unit.

In Q1 we had $7.9 million of impairment, which impacted our earnings unfavorably. Impairment in Q2 was only $0.5 million.

Thank you for your continued support of Legacy, and confidence in our employees, in our management, in our business plan. We’re excited about the second half of the year. As Cary said, we have got good deal flow. We have got drilling inventory that is very, very deep and it is a great time to drill oil wells, although I must say that access to rigs and particularly (inaudible) has been challenging and again back-end loaded our capital program this year as it has in prior years.

And at this time, we would like to ask questions or take questions rather from our audience.

Question-and-Answer Session

Operator

Thank you sir. (Operator instructions) Our first question is from Ethan Bellamy of Wunderlich Investments. Your line is open sir.

Steve Pruett

Hi Ethan.

Ethan Bellamy – Wunderlich Investments

Good morning everyone.

Steve Pruett

Good morning Mr. Bellamy.

Ethan Bellamy – Wunderlich Investments

A couple of questions for you, first just to clarify on the capital spend in the second half, should we expect negative coverage say in the fourth quarter, what type of organic growth would you expect to see that CapEx throw off and generally speaking what type of F&D cost should we be thinking about?

Cary Brown

Ethan, you are predictable. That is a great question. We failed to cover it, but we’re glad you brought those items up. Yes, the fourth quarter will likely have – it is expected to have negative coverage. We expect to have positive coverage in Q3, just the way our rig schedule is striking out. The organic growth is going to be difficult to estimate given that most of the benefit from the drilling is going to occur late in the fourth quarter, or at least a lot of the benefit.

It is a matter of where you take your snapshot. If you take it in Q4, which will be less than exciting, compared to Q1 of 2011, or do you take it at December exit rates. I am being purposefully vague since the timing of completing the wells is not crystal clear at this point. There was another part to your question that I may have missed.

Oh, F&D costs are in the $15 to $20 per Boe range. And you know, whether we’re talking about West Jordan wells, which have been in the lower end, or Wolfberry wells, which have excellent rates of return because of the front-end loaded production they tend to be pushing closer to $18 to $20 per barrels of oil [ph] numbers, not by the industry’s numbers, we are quoting $12 [ph] to $15 per Boe. It is just the difference in what we think that you are versus what the industry thinks they are.

Ethan Bellamy – Wunderlich Investments

So, maybe just marginally lower than the acquisition costs in the market?

Cary Brown

In the same ballpark that on average slightly lower than the acquisition market.

Ethan Bellamy – Wunderlich Investments

Okay.

Cary Brown

So, about $16.50 for Boe improved the acquisition cost year-to-date. So it lines up pretty closely with what we are able to acquire in these smaller negotiated transactions, which are largely PDP. Ethan, on the rate of return on the drilling, it is a blot higher because you get those barrels faster, particularly on an acquisition, later in life, and those barrels are going to come out slower, but (inaudible).

Ethan Bellamy – Wunderlich Investments

That is a good point, Cary. Thanks, I don’t want to hog the call too much, but the main question is, are you guys still looking at Encore, or do you think that ends up one private equity firm?

Cary Brown

No, that has gotten very quiet, and I think the latter, just because of the – what we understand, the structure of the deal would be Denbury selling its GP stake, or it is the GP of ENP and just their LP interest. So, it is going to be interesting, but it seems to be too, and this is what I’m reading in the public domain. It seems to be better suited to a financial player, because the industry player will take on the risk of having to merge in the public stuff, which so would be a two step process, and I’m not sure that lends itself as well to an existing upstream MLP, but that is just again based on what I’m seeing on the Street, I think Denbury has been very public about –

Steve Pruett

People still like the assets. The assets will still fit us very well. I’m not sure there is a structure there.

Cary Brown

But really we haven’t seen anything that we would be happy to comment on.

Steve Pruett

The main thing is I mean if you look at the valuation of ENP where it trades, versus where we buy and there is a marked difference. So, that is the other issue. It is just valuation.

Ethan Bellamy – Wunderlich Investments

Got it. Thank you. I appreciate it.

Cary Brown

Thank you Ethan.

Operator

Thank you sir. The next question or comment is from Kevin Smith of Raymond James. Your line is open.

Kevin Smith – Raymond James

Thank you. Good morning gentleman.

Cary Brown

Good morning Kevin.

Kevin Smith – Raymond James

A few questions, you might have already touched on this, but what was your production exit rate for the quarter?

Cary Brown

No, we didn’t touch on it. We haven’t published it. Since we haven’t published it, it would be bad form to quote it on the earnings call, and not disseminate it to the public in a press release. So, that is just – because of the timing of our drilling and continued acquisitions, June was higher than May and April.

Kevin Smith – Raymond James

How many wells did you complete this quarter?

Cary Brown

Well, operating wells were 7, I think net was 4.7, sorry. And then I don’t know if (inaudible) got any wells down this quarter Paul.

Paul Horne

Yes, they did. They had 6 down now. At the end of the quarter there were 4 that were completed. That 1.8 net wells as of now, and about 1.2 net wells at the end of the quarter. The results on both Jordan University and West Jordan University unit drilling and adaptations, Jordan University unit drilling looked very good. We are very pleased with those – all nine of those wells on a gross basis are averaging close to 90 barrels a day, which just makes economics look stellar. So, really it plays with both of those projects, as well as our shallow former San Andres drilling that we did early in the quarter.

Kevin Smith – Raymond James

Okay, great. A question on the timing, you had two Permian – probably a bunch of Permian transactions that kind of rolled out, but you press released 179 billion a day production during the second quarter, and then the smaller Permian transaction of 233, do you have closing dates on those, I don’t know that they were released in the press release, but maybe I overlooked them. Did they both close early in the second quarter or did anything close late.

Cary Brown

Kyle McGraw, our EVP of Bus Dev will answer that Kevin. Go ahead Kyle.

Kyle McGraw

There weren’t any significant ones I would say late in the quarter. There were a couple of June transactions that were small. There was a May 27 with a little more significant size in the $7 million range, and in Mid May with 2 or 3 others. Early April for a larger one. So, it is pretty well scattered across the quarter.

Kevin Smith – Raymond James

Okay.

Kyle McGraw

Well, I might mention that we have got an $8 million transaction under purchase and sale agreement, 127 net barrels a day about 5.3 times cash flow at the close at the end of August. We’re excited about that. It is in the Permian.

Kevin Smith – Raymond James

Okay. And one last question before I jump off, it seems like operating costs and forgive me if I am wrong, in the Wyoming are creeping up a little bit higher, or may be it just had to do more initially than what you were expecting. Can you elaborate a little bit on that?

Cary Brown

I’ll turn that to Paul Horne.

Paul Horne

Sure. Most of our Wyoming is a higher listing cost area. When we made the Wyoming acquisition we knew our overall company listing cost was going to go up, where we were in the $15 to $17 a Boe range, (inaudible) assets in Wyoming are typically in the low 20s. So we expected that. I think you have also seen across the industry a little bit of sea level rise in listing costs. The big significant piece for us was we had a good bit of onetime expenses in Wyoming, getting those transactions, getting those assets up to speed, getting some wells back on that needed to be put back on, and just hadn’t been because of the transition.

And we see that pretty frequently on acquisitions, typically the seller is focused on selling, and it is not that St. Mary or any other of them are bad operators, they are focused on selling the asset and not focused on maintaining the production on those assets, maybe for the last 30 or 60 days. This one had a little bit more to that than we anticipated, but definitely not enough to change the overall economics of the acquisition.

We are excited about the acquisition in Wyoming, we are excited about the entry out there. We put a great team of people together and we believe that we will look back and really be glad that we made that acquisition and feel like we have got a platform to grow in the Rockies.

Kevin Smith – Raymond James

And do you believe all those kind of one-time costs are behind you, or is that going to trickle over again into the third quarter?

Paul Horne

I believe those one-time costs in Wyoming are behind us.

Kevin Smith – Raymond James

Okay. Thank you very much.

Cary Brown

Thank you Kevin.

Operator

Thank you sir. The next question is from Richard Roy of Citi. Your line is open.

Cary Brown

Good morning Richard.

Richard Roy – Citigroup

Good morning. Just wanted to follow up a little bit on the operating expense question, I mean certainly Wyoming has higher listing costs and in your prepared comments Steve were you saying that services are more difficult to get. You know, are you really expecting, what kind of magnitude in keeping operating expenses are you expecting over the next several quarters?

Steve Pruett

Tell me you have predicted oil prices, and I will give you that answer. If you assume that oil prices remain constant to where they are now, I think we have realized the creep [ph] in operating costs. I think there are traditional creeps in capital costs if the pull on both drilling rigs and crew is high, the remaining crews [ph], all those goods and services stay as tight as they are now. I think the cost of drill and complete will go up over the next six to nine months.

We think we have realized the creep in op cost from Q3, Q4 of ’09 through the first-half of this year. So I’m not anticipating any significant increases in LOE, short of oil prices changing dramatically.

Richard Roy – Citigroup

Good, thanks. Now as it relates to the Permian Basin, there has been quite a bit of acquisition activity, but you seem to just find good value. There is – can you just characterize a little bit what you are seeing in the Permian Basin, and is the assumption that the assets that you are targeting really haven’t reflected more inflated values?

Cary Brown

Well, you know, it is kind of bimodal market. We have our market of buying mature, non-core assets of larger companies, or rolling out smaller private, and there is a bevy as you know Richard of Wolfberry packages that are out, which really have enough suited us because paying for the rights to drill somebody else’s location doesn’t work very well when you’ve got 600 plus locations in your own inventory.

And we are very happy our local brethren are doing very well or had been. It remains to be seen about the packages that are currently in the market, what kind of value they will realize, but buyers of those packages are paying up for the rights to drill those Wolfberry locations, and again that doesn’t particularly bother us because of our own inventory, but it is interesting to see what the market for PUD [ph] and probable locations is delivering for Wolfberry oil and Spraberry locations in the Permian Basin. It is very frothy [ph].

I’m really pleased with just the amount of activity that we are seeing. It looks like we’re headed for quite a bit of properties on the market towards the end of this year and right now as people are thinking about this tax situation, and owners have the decision, I want to sell now, when I know what capital gains are going to be, or do I want to hold it and sell it in 2011, when I don’t know what things might be.

So there may be some real activity through the end of the year. The other thing that has happened is with oil prices where they are today, we are kind of in a situation where buyers and sellers are not way apart on what the prices are. If you look at 2009, when prices were so low you just couldn’t get buyers and sellers on the same page. Today, that is not a significant issue. What we are going up against is, do we see the value that somebody else sees so that we can make an acquisition. So, (inaudible), a pretty attractive market right now, I think. I’m really hopeful for what we have, you never know in the acquisition game.

You can take 10 swings and go all for 10, or you can get the next three and be real excited. What we haven’t done is we have always had the same view of how we buy all properties. We have had that view since the early 80s, when we started buying them. So, when we find them at a good value we buy them. When we don’t like the value, we don’t buy them. And so, I don’t think you will see us change the way we view acquisitions, but I think the market is there, that we might be pretty good.

Cary Brown

Your record this year is still 90% PDP cumulative, since ‘06 were 89% through develop and producing. So, we’re still sticking to our (inaudible) and buying the kinds of properties that we bought all along, and they are very accretive. And we’re off to a good start this year with about 166 million of 157 closed, and another 8 pending. So, it is a good run rate so far with Kyle and his team’s activity levels, and our deal flow, we don’t see any abatement to the transaction pace through the second half of the year.

Richard Roy – Citigroup

Perfect. That is helpful. Thank you.

Cary Brown

Thank you Richard.

Operator

Thank you. (Operator instructions) I am showing a question from Michael Blum of Wells Fargo. Your line is open.

Michael Blum – Wells Fargo

Hi, good morning gentlemen.

Cary Brown

Good morning Michael, good to hear from you.

Michael Blum – Wells Fargo

You too. One quick one from me that wasn’t covered, Steve, you see the financial regulatory reform, do you anticipate any change in the cost to hedge, have you heard anything from your banks in that regard?

Steve Pruett

Yes, we talked to your brethren across the wall along with BNP Paribas, and a number of our other counterparties and while it is too early to know, we’re still thankful – unfortunately our Congress drafted legislation is vague and gives (inaudible) the power of interpretation and implementation. So that step remains to be seen, but the experts inside your bank and other banks are anticipating that one, the end-users won’t be required to post collateral, but two, the cost of the banks transacting on our behalf will go up, and there we will pay or realize lower swap prices then we might otherwise realize.

So, our expectation is based on commentary from IPAA, from NAPTP, and from talking to our counterparts at our counterparty banks is that we will not have to post collateral, but that is the only hope at this point, and speculation on our part. As you will see in our risk factors, which we added in our 10 Q, it is up to the CFTC, and they very well could choose to impose margin requirements, or force us to trade on the OTC, but that would be a shock and a surprise to us, and would impact our business plan, but again we are hopeful that the CFTC will take warning from the Congressional record and the intention of the legislation from our read to exempt any users from margin requirements, and their clearing requirements.

Michael Blum – Wells Fargo

Okay, great. Thank you.

Cary Brown

Thank you Michael.

Operator

Thank you sir. We have a follow up from Ethan Bellamy of Wunderlich Securities. Your line is open.

Ethan Bellamy – Wunderlich Investments

Yes, thanks guys. I’m glad Michael asked that question. That was on my mind as well. Could you ballpark for me the weighted average natural decline rate of the portfolio now that you have had a look at Wyoming?

Cary Brown

That is a good question. I don’t have a copy of my reserve report. What we have been saying and I think it is still true. We have of course an internal midyear reserve report that we don’t publish, but we provide to our bank group as required, our credit agreement, and it is our anticipation it is still in the 7% to 8% PDP decline rate. So probably on the lower end of that range.

Ethan Bellamy – Wunderlich Investments

Okay.

Cary Brown

(inaudible) in that regard. That is a very good observation.

Ethan Bellamy – Wunderlich Investments

Okay, and then just one last question, what are your thoughts on term debt here, I know short-term financing is still very attractive, but are you certainly thinking about maybe locking in some interest expense over the long haul?

Cary Brown

The answer is yes to that. One, we are revisiting extending our existing LIBOR swaps, most of which expire in 2013. But we could extend them at pretty flat rates for another couple of years is what the indications I have. There are, on your point about term debt, there are some private placement opportunities for term debt, one of our large private peers did a very innovative transaction, where they termed out debt without doing registered offering. And of course, we do have a shelf in place, and could do a public offering of debt, but given our size and less than 50 million barrels of reserves, and right at 10,000 Boe per day, we’re still worried about pushing up to double-digit coupon bonds on high yield public debt offering.

So, that is where we stand today with a solid bank group, a lot of capacity that we haven’t even tapped among our existing bank group much – along with banks on the sidelines wanting to join, and our marginal debt cost being around 3.5%, 3% to 3.5%. It is dilutive to replace that bank debt with 9% plus high yield debt. So, absent a large acquisition, I think we would be hard-pressed to dilute our distributable cash flow per unit by replacing 3.5% debt with 9% plus high yield debt. But to your point Ethan, if we do surprise ourselves and land a large acquisition, we do have the high yield market and also private debt market to help us fund that transaction at attractive rates.

Ethan Bellamy – Wunderlich Investments

Okay. Good enough, thank you. Happy earnings.

Cary Brown

All right. Thanks a lot.

Steve Pruett

It is a fun time to be in the business as Cary said.

Operator

Thank you sir. And I’m showing no further questions or comments at this time. I would like to turn the call over to Mr. Steve Pruett for any closing remarks.

Steve Pruett

Thank you. We appreciate the interest in our equity research community, in our relationships with our underwriters and our commercial banks have enabled our business plan. We want to thank our employees, our business partners, and those who have sold assets to us this year, and will sell assets to us in the second half of the year. It has been an excellent year, and it continues to be a joy to run a partnership that pays a quarterly distribution, payday is coming up on August 13 for all of us in the room here, and for those on the phone that are investors. And we look forward to having you continue to follow us on the research side, and continue to own us on the investor side. So, thank you very much for joining us this morning.

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