Mark Houser – President and COO
Mike Mercer – SVP and CFO
EV Energy Partners, L.P. (EVEP) Citi 2011 North American Credit Conference November 16, 2012 4:15 PM ET
I'm pleased to have Mark Houser and Mike Mercer from EV. Mark is President and Chief Executive Officer and Mike is Chief Financial Officer. We've got probably a 25-ish, 30-minute presentation and then we'll allow for 10 minutes of Q&A once that's done.
With that, I'll turn it over to Mark.
Good afternoon, everybody and I guess the one thing I know starting out is that we are the last presentation before happy hour. So, I'll – we'll try to make it maybe at least entertaining. Also, maybe we should put the Spyro Gyra music back on, that might make it a little bit funnier to do, but I don't know if they can do that and (inaudible). And we'll try to make this about 20 minutes. But in usual fashion, I'll take about 18 and I'll give Mike two to cover our whole balance sheet.
So, just a little bit of background on EV Energy Partners, just in summary and this is what we'll try to talk about. When we are talking to investors, both on the debt or equity side, what we try to explain is that there are a few advantages EV Energy has.
We've got a relationship with EnerVest, which provides us a really nice scale and operating expertise. We've been doing acquisitions a really long time, 20 years next – as of this coming year. We have a lot of different sources of acquisitions, which drive our business. We have a diverse set of properties which lowers our risk. Mike helps keep our balance sheet in order and we have some Utica Shale upside and probably most of you who are here – at least some about what's going on with the Utica.
A little bit of background on EV Energy. It was created in 2006; we celebrated our five-year anniversary in September. It's a conventional master limited partnership structure. EnerVest and the management team own 76% of the GP, EnCap owns 23% of the GP. The GP has conventional splits, except that they are capped at 25%.
We have about 34 million outstanding units as we speak and almost $3 billion of enterprise value. We are currently yielding about 4.2%, which is much lower than the rest of our peer group. A lot of that obviously is tied to our Utica upside we'll talk about. And our returns have been quite good. If you look at it over the last three years, our compound annual returns have been about 84%, which is compared to a good run by the overall upstream MLP market and by MLPs in general. So, we've had excellent returns. We are really excited and thankful about that.
A little bit of background on EnerVest. EnerVest essentially formed EVEP with one thing in mind and that was to – or a couple of things in mind. The main thing was to provide a public – the public ability to invest in a business plan that had worked with us in the private equity business for a long time.
EnerVest was originally created in 1992 and the purpose of EnerVest was to raise private equity and to acquire assets. Basically it's a flip-that-house model; acquire assets, develop them, fix them up, enhance them, and then sell them. We had a great track record of doing that. We've generated, on the private equity side, annualized returns of around 35% on our closed fund.
But one thing we wanted to do is we wanted to have more staying power. We would tend to buy ourselves in assets, generate good returns, and then sell out basins. And when you do that you lose a lot of your expertise, you lose a lot of your leverage with service providers and others in those basins. And so, we created EVEP as more of a long-term play in some of these basins.
If you combine EnerVest, the private equity business, with the public company, we have about 2.4 Tcf of proved reserves, about 370 million cubic feet, and about 3.6 million of acres under lease. That's actually prior to some acquisitions that we announced just about a week and a half ago, and we've done over $4.5 billion of acquisitions since inception. So there is a lot of size and lot of scale tied to EnerVest. And again, EVEP is one of the partnerships that EnerVest manages.
Our most recent private equity fund raised $1.5 billion in equity and if you put some debt with that, we have about $2.2 billion of spending power on the private equity side. Well, that's a private equity business. How does that benefit EVEP? One of the ways is that EVEP benefits from a lot of different deal sources. Of course, EVEP gets – it gets deals from the industry. It's out in the market every day looking at opportunities.
As I mentioned, EnerVest, the private equity business, sells properties rather systematically and EVEP basically gets a first shot at looking at those deals. So we get a lot of drop-downs from EnerVest. There are also times when EVEP is able to joint-bid with EnerVest. The most recent example of that is in the Barnett Shale, where we just announced a deal that I'll talk about in a few minutes. And then EnCap also provides sources of deals. They are a very successful private equity firm in their right and as they sell opportunities, we are made aware of those as well.
If you look at it through this process of these different deal sources, EVEP has closed about $1.5 billion of acquisitions since we started at an average cost of about $1.48. And what has that done to us? The little bitty pie chart on the left shows how we started. And when we started, we had about 51 Bcf within EVEP from two basins; from Appalachian properties and the Monroe gas field in Louisiana. As we sit here today, we are now at eight basins with over 1.2 Bcf [ph]. This actually includes our most recently acquisition in the Barnett Shale.
As you can see, the Barnett Shale – and hopefully you all can see this, but it makes up about 57% of our reserve base right now. Over time, look for us to shrink that again by doing other acquisitions in other basins. We like to have no more than, say, 30% of our assets in any one basin. But again, part of that is you have to strike areas that are attractive and have good returns and we were able to do that in the Barnett.
We try to maintain a lot of discipline in our business. On average, we probably look at or screen 300 to 400 deals a year. Of that, we do detailed evaluations on probably 60 or 70. That's full engineering analysis and we come up with this kind of cash flows projections and make bids off that. Of the 60 or 70 that we look at, we probably bid on 50 or 60 of those. Of the 50 or 60 that we bid on, we probably win 10 on average.
So it's a game of failure, but it keeps our discipline and if you look and you compare our ability to acquire at least on a per Mcf basis, we've demonstrated a pretty good ability to acquire at low cost compared to our peer group in the MLP space and to the U.S. onshore industry in total. And typically if you look at the R/P ratio, which is one of the measures of how they compare, we've managed to stay pretty competitive in terms of keeping at buying pretty long-life reserves overall.
In 2011, we've recently announced and closed over the past few months, $490 million worth of acquisitions. We've managed to buy these at around $1.05 per Mcfe. We've been buying more gas than we have oil lately. Basically, we feel like now is a great time to be acquiring gas. The price strip is reasonably low, we are betting on it to stay low for a long time. But if it goes up, that helps us.
This is just a listing of the acquisitions we've done. You see we had one drop-down as I mentioned. We've had one reversionary interest in the Barnett I'll speak to. And then we've had a couple other joint-bids that we've done with EVEP and I'll talk to those a little bit more as we move on.
So, first going to the Barnett Shale. About a year ago, we acquired a position from Talon, a private equity firm, in the Barnett and those assets are actually shown in the blue. And then just recently, we've announced $1.2 billion of additional acquisitions for EnerVest in the Barnett; that's two deals. One was acquiring basically Encana's entire Barnett position for $975 million and the other was acquired off a private equity firm for the remainder, about $275 million I believe. The total purchase price was $1.2 billion. EVEP took 31% of that deal, so we're about $370 million of that.
If you look at the assets, again that are shown in the two ellipses in red, the assets are located as a lay-down over some of our Talon assets. They are in the Core and Combo areas, so more of a liquid content to them. And we have proved reserves of about 405 Bcf equivalents; 53% proved developed, that's lower on a portfolio basis than we'd like to have within an MLP, our ideal structure is about probably 80% PDP as a portfolio. With this acquisition, we are somewhere in the low-60s in terms of PDP percentage. Look for us over time to acquire some more PDP assets to bring that number back up.
These assets are at just 21% liquids or more around 25% to 26% liquids. Mostly it's operated – it's all held by production essentially, and there's about 700 active wells. Combined, these assets produce about 140 million net cubic feet a day; EVEP has about 31% of that.
One of our strategies that benefits EVEP that EnerVest has in place is to build dominant positions in basins. It gives you scale, it gives you leverage on service companies, leverage on gas companies, et cetera. And if you combine the three acquisitions we've done over the past year in the Barnett, we are now one of the top six producers in the Barnett.
Again, even as we have announced our purchase of Encana, we've been getting approached by the service companies who are much more willing to talk to us about long-term supply contracts and that sort of things. So, definitely it's an advantage. We're actually the number one producer in the Austin Chalk, we are the number one producer in Ohio, and we are one of the top 10 in the San Juan Basin. So again, that dominance, which is something that the parent EnerVest can do that right would be difficult for EVEP to do on its own, is very helpful.
If you look at our other acquisitions, we've announced just recently we've done about $160 million worth of bolt-ons. Again, these are in existing areas where EnerVest and EVEP have a presence. We've acquired about 62 Bcf; again, about 60% PDP, about 46% liquid. We are not out looking just for oil or just for gas, but we are probably leaning more towards something with some liquids component. But generally, there is a lot more gas on the market these days than we can afford. The old properties on the market are pretty expensive. So if we can get some liquids in the mix, we are happy.
Just generally, we've done a Mid-Continent deal that really is a bolt-on to what we are operating already up there, and we are getting some non-op look into some of the nice plays, the Arkoma – in the Arkoma basin, the Woodford and Mississippian plays, Granite Wash plays, a lot of drilling potential and it's most – a good of it is operated in terms of value.
We've done one drop-down from EnerVest and that was the conventional production out of the old CGAS acquisition in the Knox. So that's again a nice little drop-down that really doesn't require us to add any people in terms of operation, but it gives us the good bit of oil again and it gives us more 3-D and more ability to drill Knox wells, which is one of our targeted areas.
And then finally, we did a little reversionary interest in the Barnett Shale. Again, that was just an additional interest in the properties we already own, so a nice way to just generate more cash flow into our Partnership without having to add any people.
I'd like to talk just briefly about the Ohio position, a little bit of about how we cobble things together and then lady luck can be on your side sometimes. But beginning back in 2002, EnerVest started acquiring properties in Ohio through acquiring CGAS, which is a corporation managed by Enron that went into bankruptcy. We were able to acquire those assets. Then a couple of years later, we acquired some assets from Belden & Blake. And then in 2009, we acquired EXCO's position in the Barnett – in Ohio; they were selling to fund their Marcellus. Following that, in 2010, we were able to buy out Range who also was exiting the Ohio in order to fund their Marcellus activity.
So if you cobble all of those assets together, suddenly you have 8,000 wells, you have 1.2 million acres and you are the largest producer in Ohio and it's frankly through buying a lot of old, tired assets. EVEP, on a net basis, has about 15 million a day and controls 600,000 gross acres in Ohio. Well, as things have – it turns out that the Utica Shale, which is very prevalent in Quebec, it turns out it's there in Ohio. In fact, we've been drilling through it for years. The problem was it was so tight that you couldn't even detect it as you drilled through in terms of sensing pressures or anything.
Putting it in perspective, most shales are abnormally pressured. A typical, normal pressure might be 0.465 psi per foot, your reservoir pressure. So as you drill down – say you drill down 8,000 feet, 8,000 times 0.465 would be your reservoir pressure. Shales need to be a little bit higher pressure than that to push the liquids and gas out.
Well, as we drilled through the Utica looking for the Knox over 600 times, we never had any indication of the pressure shortage. However, as we became more interested and others became interested in the Utica, we started doing a more detailed testing and it calculated that actually the Utica may have a pressure not 0.465, but around 0.65 psi per foot. So, what is that, about 30% higher?
Well, we drilled some wells into it along with Chesapeake and sure enough, that pressure was there and so the game was on for the Utica Shale. And as you look at it now, EVEP has about 160,000 net working interest in the Utica.
A little bit more background – let me point to the map on the right. The map on the right shows you, first of all, what is an evolving description of the Utica wind, oil, gas, and shale windows which are not unlike the Eagle Ford. The blue shows you the acreage that EVEP is in a joint venture with Chesapeake. The red shows you the acreage that EVEP and EnerVest jointly operate that have no interest with Chesapeake. You can see that the two acreage positions are reasonably intertwined.
I can spend a lot of time up here talking about how we got to where we are, but the bottom line is we have some good operating potential on the Utica and we also have some acreage that's operated with Chesapeake.
About 22,000 acres are tied – of EVEP's acreage are tied up with Chesapeake in a joint venture with Chesapeake. About 4,000 of those acres have actually gone into the recently announced deal with a third party and I'll talk more about that in a few minutes. The remaining 137,000 net acres are associated – or basically are associated with other areas and are not tied into Chesapeake. In addition, EVEP has an override on about 240,000 net acres, which we really think can provide some great upside for the company at no cost over time.
So the bottom line is, of all of our acreage, EVEP and EnerVest operate about 60%, Chesapeake operates about 40%. And right now, what we are doing is we are allowing Chesapeake through our joint venture to drill and de-risk the play. EnerVest has not yet spent any operated money, although we plan to next year, but so far we are seeing some pretty good things.
So, if you want to look a little bit about what's going on, again, our acreage is shown in the blue and the red again; and the dark represents both drilled or drilling wells and permits. And every day that we go and look on the website, this has changed, because there is more permits going on. But as of late October, 38 wells were drilled or drilling, 90 additional wells are permitted, there's numerous wells in the planning stage. And putting it in perspective, just in wells that we are participating in with Chesapeake, the EnerVest family, not just EVEP, we're going to drill eight more wells this year. So, there's a whole lot of activity going on there.
Acreage prices are continuing to increase. I think EV – our Chesapeake's joint venture was announced at $15,000 in cash and carry per acre. At the present value, that carry-back is about $13,500 or so depending on the discount rate. But there is still limited production information available and – but what's coming out and what's being disclosed and what we are seeing is generally encouraging, although it's very early.
So what are we going to do for EVEP? EVEP is a yield vehicle. It is a – it typically reinvests 30% or 40% of its cash flow. How do you develop the shale? Well, we weren't targeting this shale, but we are certainly glad to get it. So, what we are trying to do is look at different development and financing plans to let it evolve.
Our general strategy is to let Chesapeake de-risk it for us, while we participate in their wells. We've been on most of their drilling locations with them. We've been in meetings – I was in meetings with them yesterday relative to their plans for next year. Right now, they're planning to drill somewhere between 30 and 50 wells that we'll participate in. So, a lot of activity.
Meanwhile, we are looking at several joint venture opportunities, as well as opportunities to perhaps trade our acreage for good, existing PDP assets in other areas; and a lot of the large companies, the majors and the super-large independents really are wanting to get a foothold in the Utica and they are making at least – indicating some interest in a potential property swap for us. So that could be a way to really put some more value into EVEP without having to develop the shale, because we don't really feel like an MLP is the best vehicle in the world for shale development.
And speaking briefly to Chesapeake's recently announced joint venture in the Utica, again, the value is about $15,000 per acre, cash and carry on 650,000 acres. That's one of the largest joint ventures done to date in terms of acreage. It's mostly in the liquid-rich area, kind of through that one band I showed you earlier. As I mentioned, it includes 4,000 of EVEP's acres.
And again, as I said, we are anticipating around 50 wells to be drilled by Chesapeake. We'll participate in 30 or more of those and then we are also actually – EnerVest and EVEP are going to, on a limited basis, begin to drill their own acreage. We'll probably drill five to seven wells next year ourselves to help de-risk our acreage, which again is very intertwined with theirs.
Upfront, if you – the chart on the bottom shows the amount of cash proceeds that the total joint venture will be realizing. Some of the other EnerVest entities, as it turns out, have a larger position in this particular joint venture. EVEP will have about 4,000 net acres in the joint venture. We'll be receiving about $4.5 million for that, plus $10.5 million carry. So, it's not really a big event in the life of EVEP. It does get beating – hit in the head with a stick to get $15 million for something you didn't pay anything more, but our expectations are for a lot more than that as we move forward.
And speaking of that, kind of looking overall for EVEP, we are going to be reasonably busy next year. We have a hurdle rate on any capital activity of 20% and with these commodity prices pretty low, we are thankful that we've got some pretty rich areas in terms of economics. EnerVest in total will have about a five-rig program in the Barnett; EVEP has about a 31% interest in that. We'll continue our active Austin Chalk program in the Mid-Continent, again through a non-op position, primarily along with our recent acquisition. We'll be having some activity in the Granite Wash, Cleveland, Cano/Woodford, some of those areas.
And then in Appalachia, of course, we'll continue our Chesapeake joint venture activity. We are going to start up the first EnerVest drilling in the Utica. Looking really hard at this monetization or swap that we've been – we are kind of targeting to really get serious about that towards mid-year. And then, of course, we'll have our ongoing bread-and-butter Knox activity.
So that's kind of in a nutshell. We are still working on budget, but that's kind of the main areas of focus.
So with that, I'll turn it over to Mike for his two minutes.
Thank you, Mark. Right now, we have on our capital structure just a little under $200 million of net debt, that's net of about $17 million of cash that we had on the balance sheet at September; we have $300 million of senior note that we issued in March, they were priced at par 8%, coupon due 2019; and then about $2.4 billion of equity market cap.
Now, with all the acquisitions that we announced over the last few weeks, we will be – as we said in our press release initially, plan to initially finance those through borrowings under our credit facility. By the time you add in all those acquisitions together, our total debt will end up being, by the end of the year, about $675 million of bank debt, $300 million of senior notes.
We will – if you've followed us over time, when we went public we said we believe the right way to finance acquisitions over time – not necessarily every acquisition, but over time for an upstream MLP, was probably about 60% equity, 40% debt. And if you look at what we have done up until this recent series of acquisitions that we just announced, that's exactly what we have done.
The bars show kind of the amount of activity we've done per year and then how we financed it on the split between equity, debt and then free cash flow. And of the $1.3 billion of acquisitions we had completed up until these recently announced and closed ones, we have financed it with a little over 60% equity and free cash flow, and about 36% debt, which might lead someone to ask, "Well, how are you going to finance this almost $500 million of acquisitions over the long term that you've just announced that you closed or will be completing"?
One of the things that we have to take into account and Mark has talked about is the fact that we have this significant Utica Shale position. If you look at it, the – almost 160,000 net working interest acres there, plus overriding royalty interest, with transactions going for – north of $10,000 recently per acre, and as Mark mentioned, ideally, we'd like to be in a position to look at monetizing a significant portion of that asset here sometime during 2012.
If we did that, whether it be by cash or through a – preferably through an asset swap for properties that generate a lot of free cash flow, kind of long-life mature assets like we've typically owned, that's a pretty big slug of quasi-equity coming in. So, one of the things that we'll be looking at as we move forward throughout the rest of this year and potentially early next year is long term, what we do after we initially finance it with our credit facility.
Clearly, there are options of terming out some of the debt in the public markets, either adding on to the existing note that we have – in fact, we just – we had announced an exchange offer and that just closed yesterday at 5 o'clock, so those will be converting EV [ph] exchange offer into public note. We could add on to that doing new issue, term out some of it and then some type of equity component, whether it be through monetization of the Utica activity or the Utica assets we have or through some type of equity offering, we'll just have to look at that is that a walls through time.
But I think it's safe to say that our view on financing acquisitions is, long term, we need to do it with the majority of equity or equity equivalents and we'll continue to operate that way. Historically, since we've been public, we have run on average a debt-to-EBITDA ratio of about 2.2 or 2.3 times debt-to-EBITDA, which is where we are right now before these acquisitions.
There are times where we've been down well below 2, at times we've been up in the low-3s. Just financing these acquisitions with debt initially would move us back up a little bit above 3 times debt-to-EBITDA, so that's clearly something that we are going to want to address over time to properly run and capitalize our MLP.
We do have an active hedging program. If you look at how we've financed ourselves over time or hedged over time, we tend to do a lot of hedging around the time we make acquisitions, either prior to closing them or right around the time of closing, and then we'll continue to add on hedges over time as we roll forward.
We've typically been hedged out somewhere – relatively heavily somewhere between three and five years out. This just shows the percentage of our production hedged out to 2014. We also have hedges that run out into 2015 and we will be looking to add on hedges on our existing – these acquisitions that we have announced as we move forward here over the next few months.
I'm not going to spend much time on the next few slides. They simply show the volume and price at which we have hedges, both on our gas – natural gas, on our crude oil, and on our NGLs. For the first time, we directly hedged some of our ethane and propane this year for 2011. We may look at doing that and extending it out into the future.
We have historically used dirty hedges. We had done – hedged our NGLs with a proxy with crude, but with some of the dislocation between ethane and propane volumes, our prices versus crude prices, we decided this past year to hedge directly our ethane and propane. And the market is becoming a lot deeper, a lot more liquid. You can go further out now than you could a year or two ago. So, we will be looking at considering some direct NGL hedges, especially on ethane and propane.
I think that's our presentation, and we'd be happy to open it up to any questions that you might have. I think we still have about 10 or 15 minutes left.
[inaudible - microphone inaccessible].
We operate almost all of that 137,000 acres that is outside the Chesapeake JV on a gross basis.
[inaudible - microphone inaccessible].
Gross? Gross will be 600,000. The amount that's owned by either – by us and our EnerVest Fund IX is a little over 400,000 total acres. So between us – the two of us, we clearly control the working interest position there – in those acres.
[inaudible - microphone inaccessible].
600 gross and we and our EnerVest Institutional Fund IX control over 400,000 of those.
[inaudible - microphone inaccessible].
EnerVest. That's right.
EnerVest operates everything that EV operates on behalf of EVEP.
Hi, you talked earlier about wanting to bring down your – or diversify out of the Barnett Shale a little bit more than where you are at now and not have more than 30% in any particular basin. Where do you see your growth in the different basins?
Yes. Sorry, we are being webcast. I forgot that. So, I'll stand up. We really like some of the conventional Appalachia production. Of course, we are being in the Chalk, the San Juan Basin is an area that we quite like. Those would be three areas we're focused on. We see some good opportunities in conventional, kind of the non-Granite Wash, Mid-Continent.
Probably, the areas that you – not that you won't see us there but that we've just had trouble competing in, is in the Permian. The pricing for us is just – we just haven't been competitive on those type of deals. And generally in the Rockies – again, we like the San Juan, but in the Northern Rockies, we are just not still comfortable with the gas markets at this point in terms of access to – in terms of pricing differentials and all. So, I'd say conventional Appalachia, some additional in the Chalk, the Mid-Continent, and perhaps the San Juan are some of the areas; areas where you have a real high PDP content, that's the main thing.
When you guys seek to monetize your Utica position, is it necessary for EnerVest to also monetize theirs at the same time, like how do you manage?
It's not necessary, but we are very much aligned between EV and EnerVest in terms of that business model. The Fund that – especially the operated – the EnerVest-operated acquisition is what we were just talking about, the 400,000 acres that EnerVest and EVEP control jointly, that Fund is really past its investment period and so it's going to be interested in liquidity as well. And so, we are very much aligned, we are managing it jointly.
At the end of the day, depending on the kind of bids we get, I could see scenarios where we are completely cashed out, both parties. I could see scenarios where there is a part cash and part property type scenario. In that situation, I think EVEP would be more interested in a like kind of exchange for properties, whereas the Fund might be interested in cash. So, we can be pragmatic about it, but generally, we are both motivated to do the same thing.
Hi. I just kind of want to get your view on commodity prices. You've touched upon on it kind of throughout the presentation. But essentially between gas and oil, what do you think has more upside as we sit here today?
Well, by the – by what we are buying, we'd like to say it's natural gas. And actually, talking to some of the city folks, I think the short term, we are not bullish on gas. We are hopeful and a little bit more optimistic that through demand pull as you get out into '14 and '15, you might see some recovery in prices.
Oil, of course, it's running pretty nicely lately. And depending on who you talk to, some people are extremely bullish. But we are not – I mean, there's a lot of resource coming into the oil area as well.
So, generally, we are buying these assuming we are not going to see a lot of recovery in either oil or gas at least over the mid-term. We are probably hedging a little bit shorter term right now than we have in the past, and a little bit less volume than we have because of where we are.
Especially on the gas side.
Yes. Again, I think it's going to definitely be demand pull on the gas side and I'm – we are hearing lots of stories of a lot of coal-fired generation rolling off or certainly not being – not rolling and we know it's not going to be nuclear right now. Wind and solar aren't going to do too much. So, gas is a – the real fuel and – but the challenge is, there can be almost as much supply growth as there is demand pull at least for the short term.
We've seen Utica valuations increase pretty dramatically over the last year. Have you already had engaged in any preliminary discussions or where are you in terms of –?
We are engaged in a lot of preliminary discussions. A lot of large producers have approached us. We've been very deliberate in telling them that our targeted time frame is sometime second, third, fourth – second or third quarter of next year, and that's where we are headed toward. But there's a lot of discussions going on.
You talked about leverage going up to 3 times (inaudible). Where do you feel comfortable with your leverage? Where would you like to see it – would you like to see it go back down to where it is now and what type of liquidity levels do you feel comfortable with?
Yes, let me speak briefly about that. Clearly, under our credit agreement we have the ability – well, the cap is 4.25 times debt-to-EBITDA. So we are not really pushing up against that. We had a period in 2008 where we were a little above 3 times debt-to-EBITDA for a period of time. So – I mean, we are comfortable going there, but it's not a level that we want to remain at for very long, right?
You never know what can happen in the world. There are a lot of scenarios that could see – there were some pretty difficult times as certain scenarios played out and we want to run this company – we've all lived through a bunch of economic cycles where you've seen oil companies that have gotten too levered get into trouble and not really be able to take advantage of opportunities, and we really don't want to go – to get to that point.
So, we clearly want to move it back down and we will move it back down below that level. It's a question of exactly how and the timing of that and how we go about it. On average, we would probably like over time to be somewhere in the low-2 on a debt-to-EBITDA basis, kind of how we've run the company so far, we've been pretty comfortable with that. Running on average around 2.2 or 2.3, by definition that means there are going to be points of time in which we were a little bit lower than that. But that's where we'd like to run the company over time, although we are comfortable going above that for periods of time.
We were like that last year in fact. When we closed our Barnett Shale acquisition last year, we initially closed it with – under our credit facility. We were up in the 3s on a debt-to-EBITDA basis and lowered debt back down within about two or three months after closing. And so, we do have a commitment to run a pretty strong and conservative balance sheet.
I think another question you had was about liquidity. Right now, our borrowing base is $600 million. We could have – when we went through our last borrowing base review a couple months ago, we could have raised it above that. We just didn't want to pay the unused borrowing fees – a commitment fees on that. And which now, in today's market, is around about 50 basis points annually on unused – on the unused facility.
We could have raised it up to over $700 million. With these acquisitions that we are doing, we believe we can raise the borrowing base up to over $900 million. So if we just closed it under the credit facility, we'd have $675 million outstanding under the credit facility. If you assume, say, $900 million, that's $225 million of liquidity that we would have. We feel comfortable with that, not necessarily forever, but for a short period of time.
Any questions? Okay. I guess it's reception time. So, thank you all for your time.
Thanks very much.
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