Stephen Brunner - President and CEO Chuck Ward - CFO and Treasurer

Doug Weiss - DSW Investment Jay Abella - Investment Partners

Good morning. And welcome to Constellation Energy Partners Fourth Quarter and Full Year 2013 Results. At this time, all participants are in a listen-only mode. (Operator Instructions). Today’s call is being recorded; if you have any objections, please disconnect at this time. And I would now like to turn the call over to Stephen Brunner, President and Chief Executive Officer of Constellation Energy Partners.

Good morning. This is Steve Brunner along with Chuck Ward. We’d like to thank everyone for joining us, as we review our fourth quarter and full year 2013 results. I’d like to first remind everyone that this morning’s presentation is being webcast and our slide deck is available on our website, which is constellationenergypartners.com. I’d like to also remind everyone that our slides and discussion this morning include forward-looking statements, which are subject to certain risks and uncertainties, these risks and uncertainties are described more fully in our documents on file with the SEC, which can also be accessed from our website. And finally, we will again use non-GAAP financial measures in this morning’s presentation to help our unitholders and the investment community to better understand our operating performance. The presentation available on our website includes an appendix that reconciles these non-GAAP financial measures to GAAP measures. Now, on to slide 3, last year was a pivotal year for us. Over the course of 2013, we divested our Black Warrior assets which allowed us to further deleverage the balance sheet by reducing debt by an additional $50 million, resulting in nearly 85% in debt reduction from mid-2009 through the end of the first quarter of last year. We amended our reserve based credit facility to extend the maturity date to may 2017 and increased our borrowing base from $37.5 million to $55 million. We executed the transition with an affiliate of Sanchez Oil & Gas that we believe will open the door for meaningful cost savings, business development, and growth opportunities for many years to come. Along the way, we continue to pattern solid operating performance. In 2013, our average net production was 3,739 BOE per day which was essentially flat to the prior year. Included in our total production was oil of about 606 barrels per day which is up about 84% over the prior year. As we expected, oil production accounted for about 51% of our total sales revenue in 2013. On this metric, note that our oil production accounted for only 8% of our total sales revenue in 2010, which is the year we shifted our drilling focus to oil. Since that time, we have seen a fivefold increase in our SEC oil reserves, which includes a 66% increase in oil reserves from 2012 to 2013. So you can see that our drilling focus has had a significant and positive impact on our business. Given commodity prices, we continue to focus on oil and in the fourth quarter completed 20 net wells and recompletions using $3.1 million in cash from operations. That brought our total for the year to 79 net wells and recompletions on capital spending of $15.7 million. And we finished the year with 6 net wells and recompletions in progress. During the fourth quarter, our operating costs which include lease operating expenses, production taxes, and general and administrative expenses net of certain non-cash items averaged $44.31 per BOE. Now that number is going to sound pretty high for us but recognize that we have some pretty significant charges hit the books in fourth quarter. If you step back and look at the full year excluding employee severance charges in the first and second quarters of 2013 and charges related to the PostRock Litigation recorded in the fourth quarter of 2013 which are non-recurring items, our operating cost for the full year averaged $24.69 per BOE which is a decline of about 4% compared to 2012. Similarly, our adjusted EBITDA excluding the non-recurring items I just mentioned was $8.1 million for the fourth quarter of 2013 and $26.4 million for the full year, which is a 41% improvement over 2012. Clearly, not everything went according to plan in 2013 and the PostRock Litigation related to our Gulf Coast acquisition delayed some of the activities we’ve had planned. That being said, we worked hard since the lawsuit to find and reach an amicable resolution and get plans back on track in 2014. Now, note that it is not our practice to comment on status of pending litigation, so suffice it to say that we look forward to time when we can provide additional information about the case and our plans for the future. With those updates, I will turn the call over to Chuck for a review our financials and the forecast for 2014. Chuck will begin on slide 4.

Thanks, Steve. Slide 4 compares our fourth quarter 2013 results to the third quarter 2013 and the fourth quarter 2012. These results are for continuing operations, so we’ve adjusted Robinson’s Bend out of the prior quarter’s reported results. Our total production during the fourth quarter of 2013 was 387 MBOE, which is up about 15% versus the prior quarter and up about 14% versus the fourth quarter of 2012. Fourth quarter 2013 oil and gas sales revenue of $17.5 million is up about 6% versus the prior quarter and up about 28% versus the fourth quarter 2012. Fourth quarter 2013 is the first quarter in which the Sanchez acquisition is fully reflected in our results, so you can see the positive impact that transaction is having on our results. The balance of our revenue was impacted by a mark-to-market loss on the value of our hedge portfolio, which is again a function of higher commodity price levels quarter-on-quarter, as compared to the fixed prices under our hedge contracts; this is a non-cash item and it’s removed from net income and determining adjusted EBITDA. Our operating expenses in the fourth quarter of 2013 were up about 94% when compared to the third quarter 2013 and up about 85% when compared to the fourth quarter 2012. This increase is due to charges recorded in connection with the PostRock Litigation which totaled about $8 million during the fourth quarter. As Steve mentioned, if we were to remove these non-recurring items, our operating costs were down quarter-on-quarter and year-on-year. Similarly, our adjusted EBITDA excluding the non-recurring items was $8.1 million during the fourth quarter of 2013 which marks a 9% improvement over the third quarter of 2013 and 88% improvement over the same quarter last year. With respect to the $8 million in non-recurring items recorded in the fourth quarter, I’d like to point out that $5.9 million of this amount is in accrual for potential settlement of PostRock Litigation. This accrual excludes any contribution we may receive under our insurance policies where we just settle the PostRock Litigation. With respect to our credit facility, you will recall that our lenders held our borrowing base flat at $55 million in December 2013. We currently have $50.7 million in debt outstanding which leaves us with $4.3 million in borrowing capacity. As noted in yesterday’s press release, we have $4.9 million in cash and cash equivalents at the end of 2013. We continue to fund drilling activity with cash from operations. Turning now to slide 5 which provides an overview of our baseline forecast for 2014. During 2014, we forecast total capital spending of $20 million to $22 million with drilling efforts in both the Mid-Continent and along the Gulf Coast expected during the year. At this level of capital spending, we forecast total net production of 1,346 MBOE to 1,522 MBOE. Of this amount, we forecast oil production to range between 270,000 barrels to 305,000 barrels and liquids production to range between 26,000 barrels and 30,000 barrels during the year, which is to say that we expect oil and liquids production to account for over 20% of our total production mix this year and about 55% of our total sales revenue. For 2014, the company has hedged approximately 6.4 Bcfe of its natural gas production at an effective NYMEX fixed price of $5.75 per Mcfe with Mid-Continent basis hedges on 4.4 Bcfe of this amount at an average differential of $0.39 per Mcfe. The company also has hedges in place on approximately 222,000 barrels at its oil production at a fixed price of $94.70 per barrel. The company’s 2014 hedges provide price certainty on approximately 77% of the company’s 2014 midpoint oil production forecast and 94% of the company’s 2014 midpoint natural gas production forecast. Additional detail on our hedges can be found in the appendix of today’s presentation and in our documents filed with the SEC. For modeling purposes, the average differential between NYMEX prices and our realized prices is forecast to be approximately $0.75 per barrel for oil and $0.69 per Mcfe for natural gas. With respect to natural gas liquids, we forecast this volume to price at approximately 45% of WTI. In addition to revenue from sales of our production, we forecast between $1.4 million and $1.9 million this year in net revenue from third-party sales and services. With respect to operating cost, we forecast this to range from $33.3 million to $37.3 million in 2014. Some additional details on the categories that make this operating cost also provided on the slide. All-in, our baseline operating plan helps us achieving adjusted EBITDA of about $26.7 million to $29.9 million in 2014. And finally, based upon a multiyear forecast of adjusted EBITDA, free cash flow, our maintenance capital level has been set at $23 million. Now back to Steve for some closing remarks.

Thanks, Chuck. In 2013, we deleveraged the balance sheet, amended our credit facility, increased oil production and reserves, and acquired assets along with Gulf Coast with an eye toward meaningful cost savings and business development and growth opportunities for many years to come. While our successful efforts were met with some new headwinds late in the year, we responded to these challenges head on with the goal of positioning the company for future growth. We believe 2014 provides us with excellent opportunity to enhance unitholder value, which is always our top priority. With those updates, I’d like now to turn the call back to our moderator and open the lines for some questions.

Thank you. (Operator Instructions). And our first question today is from Doug Weiss from DSW Investment. Doug Weiss - DSW Investment: Hey, good morning.

Good morning, Doug. Doug Weiss - DSW Investment: Can you just remind me how you define maintenance capital again? Is that keeping [EBITDA] flat or production flat?

It’s holding adjusted EBITDA and free cash flow which is adjusted EBITDA less the interest expense part; on a multiyear forecasts, not a one year. Doug Weiss - DSW Investment: Okay. So, and then just on the legal expense; was that all legal fees that was related to the PostRock Litigation or does that include a reserve for…

5.9 is for potential settlement and 2.1 is legal. Doug Weiss - DSW Investment: Okay.

That makes up the 8 million, total. Doug Weiss - DSW Investment: Okay. So it’s unlikely you would have or you don’t -- that would probably cover the cost for the first quarter as well, is it?

In our forecast, we have actually an incremental 1.0 million in the first quarter and in the April month added on there, that’s in the forecast numbers; the 2.1 is historically targeted at third and the fourth quarter. Doug Weiss - DSW Investment: So when you -- so on the fourth quarter, when you gave that $8 million EBITDA, did that fully exclude all legal or did that include some legal?

That excluded legal. Doug Weiss - DSW Investment: Okay. And then…

The 8.1 is adjusted EBITDA excluding the non-recurring and the 8.0 is the non-recurring which is a bit confusing as the number are close, but the 8.0 is made up of 5.9 and 12 for potential settlement and the 2.1 million of historical legal. Doug Weiss - DSW Investment: And then in your forecast, does that include any legal expense?

That includes $1 million of incremental legal that we would expect above our normal run rate. Doug Weiss - DSW Investment: And then -- so then I guess a bigger picture question, I think your CapEx came in late for the year and I guess that’s probably because of the cost related to the legal situation, is that accurate?

I think it is, it’s -- we’re a little bit limited and I would say going forward with the things that we probably thought we were doing before Labor Day weekend with Sanchez, we thought we would be much further along looking at properties together and it’s one thing like shared services agreement and things along those lines. It’s -- I think there are some opportunities there that we’ve just not been able to execute on partially due to litigation, partially due to (inaudible) court. So it’s hampered probably putting some capital to work in a way that we would prefer. That’s a part of our [compelling reason] to get done. Doug Weiss - DSW Investment: Yes.

And I can tell you from a bigger picture perspective, we look forward to getting on with our relationship with our new potential sponsor in Sanchez. One of the things that we’re trying to do is diversify out of just the Mid-Con. And just for example on properties that were purchased, we drilled a couple of wells, and one well in Texas; one well in Louisiana and recompleted one well in Texas, all from opportunities that came to us through the acquisition from Sanchez. And on the net basis, they’ve added about $1 million a day and 80 barrels of oil with reserve, so about 140,000 barrels of oil. So, one of the key things for us is to diversify from just a Mid-Con basin and improve the opportunity set. So, it was a combination of, we kind of get held up on our plans forward and that we couldn’t quite execute everything we wanted to last year, because of the litigation. But I can tell you, as we look forward this year, and we’re assuming, hoping that we can settle litigation, we believe it’s likely given the current status of outstanding issues that we have today that we can move forward with the relationship and enter the services agreement that brings in a significant technical staff that allows us to operate or work as a non-operator in multiple basins across the U.S. and as importantly, it increases that opportunity set for us to the capital work and to acquire and bring new property sets into the company. Doug Weiss - DSW Investment: Great. And I guess that was -- what I was going to sort of express was that from my standpoint as a shareholder, I’d rather see you spend a little more now and boost production and then think about dividends later. I guess there is a question there which is maintenance capital was $23 million, why would you be looking at $20 million to $22 million CapEx next year; looks like you have availability to do at least mid-20s?

Well, I would say that what we’ve given you is our best kind of look forward given the current status. I would say that if we get to the point where we can move ahead with our plans and the services agreement and additional acquisitions and our participation in different basins that our 2014 outlook should be significantly different than we forecast now. Doug Weiss - DSW Investment: Okay. So in other words, you're leaving the door open to potentially raise CapEx assuming you get a settlement and…

If you are looking for the [historic] capital that we spent this year it really doesn't include the amount that was spent on the acquisition. And so we don't in our capital range we look at the opportunity set given the each [system] asset mix as it sits in front of us. And so you had the Sanchez acquisition last year, you’ve dealt with the much higher capital number and [wait them] to work. And then that would be what we expect we end up this coming year as well. We just don't know regarding the capital numbers. Doug Weiss - DSW Investment: I see, okay. And I guess I should just quantify my prior comment to say that I understand why people want a dividend given the MLP structure. It’s just my view that without sustainable production growth, you're not going to get that much credit for the dividend. So, I guess I'm saying as a shareholder, I'd like to see the sustainable production growth and then the dividend following that.

And that's why the two kind of compounded things we look at first are changing the asset mix giving us different set of opportunities with capital and work, one; and then ways to implement it over the cost on the other side. That’s just growing the production on one side spread at the other side; we think we can do to have a permanent lasting effect on lowering cost structure that fits the bottom-line. Doug Weiss - DSW Investment: All right. Well, thanks for the time.

Sure. You bet.

Thank you. Our next question is from Jay Abella from Investment Partners. Jay Abella - Investment Partners: Hi guys. I think a lot of that was, lot of my questions were answered there, but I just wanted to ask you possibly another one in a different way. It appears as if there would be under the circumstances of guidance here at the high-end $5 million available for distribution on the free cash flow basis, is that correct?

Well, the first thing we’d have to always do is have enough free cash flow after spending maintenance capital. Jay Abella - Investment Partners: Right. So it looks like it’s $25 million for that plus interest and then $5 million extra up to the high-end of the guidance range?

Right. At the mid of my guidance minus my maintenance capital, minus my capital expenditure, minus my interest expense, I don’t think we’re (inaudible) $5 million that way. Jay Abella - Investment Partners: Okay. Then the other thing is I guess I had was when will you be issuing your 10-K?

Next day or two. Jay Abella - Investment Partners: Next day or two, okay. Thanks guys.

Thank you.

Thanks Jay. Thanks for calling in.

And I am showing no further questions at this time.

Okay. Well, thanks again for joining us this morning. We look forward to speaking with you again in May as we review our first quarter 2014 results.

Thank you. And this does conclude today’s conference. You may disconnect at this time.