Good morning and welcome to Sanchez Production Partners Second Quarter 2015 Earnings Conference. My name is Max and I will be moderating today's call. At this time, all participants are in a listen-only mode. [Operator Instructions] As a reminder, today's call is being recorded, and if you object to such recording, you may disconnect at this time. I would now like to turn the call over to Chuck Ward, Chief Financial Officer of Sanchez Production Partners. Mr. Ward, you may begin.

Good morning and thanks for joining us. With me this morning is Gerry Willinger, our Interim Chief Executive Officer; Pat Sanchez, our Chief Operating Officer; and Tony Sanchez III, Chairman of the Board of Directors of our General Partner. Before we get started with today's discussion a few housekeeping items. First, we released our second quarter 2015 earnings report yesterday evening and this morning updated the investor presentation on our Web site www.sanchezbp.com. We encourage investors to take a look at that material because we believe it provides a comprehensive overview of SPP. We have made the slide deck available as part of today's webcast and may make references to specific slides during the course of this morning’s presentation. The slide deck was filed along with our earnings reports and an 8-K earlier today. Second, our slides and the discussion this morning will include forward-looking statements, which are subject to certain risks and uncertainties. These are described more fully in our documents on file with the SEC, which are also available on our Web site. And finally, we will also use non-GAAP financial measures in this morning's discussion to help our unitholders and the investment community better understand our operating performance. The investor presentation available on our Web site includes an appendix that reconciles these non-GAAP financial measures to GAAP measures. And with that, I would now like to turn the call over to Gerry Willinger.

Thanks, Chuck. As noted in yesterday’s press release, we have worked diligently over the past two years to transform SPP from an orphaned, publicly-traded limited liability company with significant leverage and no ability to grow into a well-sponsored, master limited partnership with a diversified asset mix and identified growth potential. The Eagle Ford acquisition of escalating working interests, which was our first transaction with Sanchez Energy, significantly altered the Partnership's production profile, which you may recall was previously dominated by legacy dry gas assets acquired in the 2007 to 2008 timeframe. As a result of the acquisition, our oil and liquids production in the second quarter of 2015 increased to 36% of total production, as compared to 19% in the first quarter and accounted for approximately 65% of our total second quarter sales revenue. The shift in our production profile, together with the strength of our hedge portfolio and lower capital requirements, allowed us to achieve $5.2 million in adjusted EBITDA during the second quarter 2015, while increasing our liquidity by $3 million over the prior quarter. Importantly, the Eagle Ford acquisition has allowed us to better align our asset base with the activities of our sponsor and sets the stage for the next phase of our business development. As we look ahead, we target growth through acquisition of cash producing assets involved in production, gathering and processing activities, with an emphasis on assets and structure that exhibit a high fixed revenue component and a low maintenance capital requirement. We believe these business development opportunities, which are aimed at making sustainable distributions that grow over time will begin to come into focus in the second half of this year. Now back to Chuck for a closer look at our second quarter 2015 results.

Thanks Gerry. The Partnership produced 402 MBOE during the second quarter 2015, an increase of 24% when compared to the prior quarter, as a result of the Partnerships acquisition of Eagle Ford Assets from Sanchez Energy in the first quarter. Our average net production of 4,414 BOE per day was about 36% oil and liquids and 64% natural gas. Our total revenue for the second quarter 2015 includes revenue from sales of $10.3 million of which approximately 65% was from oil and liquid sales and 35% was from natural gas sales. Revenue from hedge settlements of about $4 million, and revenue from services provided to third parties of $400,000. Revenue from sales and hedge settlements during the second quarter 2015, which totaled $14.3 million, increased $2.8 million, or approximately 25%, when compared to the first quarter 2015. Also included in partnerships total revenue is 9.9 million in losses on mark-to-market activities, which is a non-cash item that is excluded from our results in arriving at adjusted EBITDA. Our operating cost, which include lease operating expenses, production taxes and general and administrative expenses, net of certain non-cash items average $23.13 per BOE in the second quarter 2015. This compares to $23.20 per BOE in the first quarter 2015 and $25.41 per BOE in the second quarter of 2014, after adjustments in each of those quarter for non-recurring items related to the implementation of the shared services agreements with SPP sponsor, SPP’s conversion from limited liability company to a limited partnership, employee severance litigation and the Eagle Ford acquisition. For the first six months of 2015, operating costs, adjusted for non-recurring items, averaged $23.16 per BOE, as compared to $25.29 per BOE for the same six month period of 2014, again after adjustments for non-recurring items. We reported second quarter 2015 adjusted EBITDA of $5.2 million, which compares to adjusted EBITDA of $4.9 million in the first quarter 2015, after adjustments for non-recurring items. We had no new wells or recompletions during the quarter and we continue to evaluate opportunities to divest our mid-continent assets and currently anticipate very little in the way of drilling activity and capital expenditures inside of our asset base. As of today, we have $106 million in debt outstanding under our credit facility, which was a borrowing base of $110 million. We reported cash and cash equivalents totaling $5.2 million as of June 30, 2015, which is an increase of approximately $3 million over the prior quarter. The next redetermination on our borrowing base is currently scheduled for the fourth quarter of this year. For the period July 1, 2015 through December 31, 2015, we have hedges in place that cover approximately 2.3 Bcf of natural gas production at an effective NYMEX fixed price of $4.17 per Mcf and 228,000 barrels of crude oil production and an effective NYMEX fixed price of $75.36 per barrel. Additional information on our hedge positions can be found both in our investor presentation and in our information on file with the SEC. As noted in our press release, the Partnership completed a 1-for-10 reverse split of its common units after the market closed on August 3, 2015. As a result of the reverse split, we have approximately 3.1 million common units issued and outstanding as of yesterday’s close. With that overview of our second quarter 2015 results, I’d now like to turn the call back over to our moderator, open up the line for some questions.

All right, we will now begin the question-and-answer session. [Operator Instructions] One moment please for the first question. All right, our first question is coming from the line of Mr. Gregg Abella, sir, your line is open.

Good morning guys.

Good morning Gregg.

So, I think we’re all familiar with how the share price has performed recently and at least how I perceive at the intrinsic value of the business is significantly higher than what the market is reflecting. In fact just a couple of weeks ago, the market valuation was 2.5, 3 times higher. So, I think what we all want is a healthy MLP here with reasonable debt to equity that distributes out at least the minimum distribution level of which is now $0.50 a quarter. So, walk me through how we get there without having to do something very punitive and dilutive to the current holders that have been hang on - waiting for this business plan to unfold, just what I think from my standpoint, I’m worried about and other investors are probably worried about is that to get to the next phase you’ll have to raise capital and if you do so, it would be on favorable terms to those that have been in here a long time.

Sure, thanks for the question Gregg. I think simply put, nothing about the goals that we’ve laid out and that we’ve been marching towards for the last two years have changed. We have a $0.50, $2 a year minimum distribution threshold. We aim to have a yield oriented instrument if you assume that has a 10% normalized yield for a healthy financially balanced entity that should be about a $20 share price. We keep that as our goal and we keep the range of transactions that we’re working on with that goal in mind of returning to the distribution but we fundamentally agree with your premise of relative to value and our goal is to get there in a way that’s sizeable enough that it’s more perhaps when we go back out into the market that the sizing won’t focus on today’s stock price, but will focus instead on the yield upon returning to the distribution of the new instrument. So, we are aligned on there, but nothing really relative to the recent movements in the stock price or inside of what is kind of the historical group of upstream effects how we think about executing the forward-looking business plan.

So, just a follow up really quick, so how do you get basically from here to $20, if we can continue to see the share price languish in this level? If I’m reading [indiscernible] and I am reading through your presentation mid-stream assets seem to be part of the mix and that would be certainly something we’d be happy to see, but how - sort of how do we get from A to B?

Sure, I think it probably looks like the transaction which in a company that has an equity raise of significant enough relative to our outstanding capitalization that allows us to refocus new investors on the yield rather than looking at what the ticker was the day before when there was no distribution.

Got it. One last question, any sort of read as to the timing. I know you mentioned you like to get this done second half of the year, but is it contingent on selling the legacy assets first?

No. It’s not contingent on – actually the way we’re thinking about this and the way we’ve been working towards that is to derisk the ability to get the transaction done. And as we think about it, it is not contingent upon the sale of Mid-Continent at all.

That’s good to hear. Any – sorry, this really will be the last.

No problem.

Any sort of update as to the timing on selling off the legacy assets. Is the process still moving along?

The process is still moving along with a few parties and what I’ll say is that volatility in the commodity price makes so that as everybody re-prices what they’re thinking about paying, it moves everyday and volatility is not helpful. And if you recall, when we acquired the assets actually from Sanchez Energy, we put us hedges in place prior to that transaction, take the volatility of that pricing for. So it keeps the discussion a little too dynamic to let’s say put things in a close mode here.

Okay, fair enough. That’s it from me. Thanks.

Thanks, Greg.

All right. Thank you very much. Your next question is coming from the line of Matthew Blatt [ph]. Sir, your line is open.

Hi. Nice work as a team to execute in a tough phase here. So I think to ask just a more specific question around the previous one as we think about the next steps of getting a mix of midstream and potentially other Sanchez assets into the company. Is there a thought from the sponsor in order to really get this thing kick started, the midstream assets could be dropped at a lower multiple than perhaps nine times that you might typically see for this kind of gathering system. Just in order to make it work with the current equity price and then further down the line assets can be dropped closer to typical market value. And I guess I just highlight as an example with this American midstream struggling MLP. You can look at their stock chart, what happened in the couple of days to bear the sponsor took that kind of long view and did a very attractive drop, and I really start to see the MLP move the right direction. So is there a thought that, that is a strategy for ensuring that some of the existing shareholders don’t get diluted as much as that last caller feared?

The answer to the question is simple. First of all, we fundamentally believe that upon a transaction and returning to distribution that we should be trading in line with the yield accordingly to the market, okay. And so at that point in time, we did view there is a divergence away from the pre-IPO or re-IPO, no distribution center as production partners to the one that’s distributing. And we think the transaction should be significant enough to cause that reset. The second thing I would say is, we are a little bit of a different structure as compared to American midstream and the fact that we have two public companies here that are trying to get a deal. The deal has to be fair to both parties and will go through two independent committees to judge that fair market. So there is not going to be – there is not a opportunity to say that it’s going to be less than fair market or more than fair market because it’s going to both independent committees. At the time of the transaction, it will fair to both parties. And so that’s basically the set up of how we work because in the two public companies, we absolutely have to go to independent fairness committees.

Okay. And then I guess a broader thought on the capital market. It’s obviously pretty tough right now in general for upstream and even increasingly midstream MLPs. Is there – we talk with bankers about the financing side of getting this transaction done. Are you comfortable that it can happen in the current markets? Are bankers confident they can get it executed?

In the coming markets, we are confident that a transaction can get done. I think when you look at the month of August generally and the way we push things, trying to make sure that we get through the markets as fast as possible, the month of August obviously has just shut down. And so at the current time at the lease until Labor Day, we don’t view the equity markets or something we want to tough. It’s essentially no bid market. And so we are continuously evaluating the markets and the opportunity and when to hit those markets. But one thing that I would comment on is obviously our stock volumes are very low and small volume movements call us big movements in price. Leading up into this earnings call, obviously we are restricted from doing anything and so when you look at it, we have a fundamental belief that the story hasn’t changed, nothing has changed dramatically from three months ago when we first did the acquisition. We feel like we had an outstanding quarter here coming out of the gate and feel like our business plan is on path. We try not to comment around share price obviously because it’s somewhat out of our control during the periods of time where we’re restricted from doing anything. And as we look forward, we feel like our business plan hasn’t changed. We have solid hedge production profile in place and we are positioned right to take advantage of the market as soon as it returns.

Great. Appreciate that commentary and again you’re doing nice job on the execution front. Let’s hope the capital markets [indiscernible] operate.

Great.

Thank you.

All right. Thank you very much. Your next question is coming from the line of Mr. Jay Abella. Sir, your line is open.

Hi guys. Just wanted to ask given the state of the capital markets to explore a little bit on what the last call they were saying, it seems that there is going to be a lot of opportunities not just necessarily with Sanchez or the partners and the parent, but with the myriad of other things that could possibly be as attractive as what you’re contemplating now and/or what could be available in the next three to six month timeframe as possibly a lot of your upstream weather could be – we’ll be looking at sales or sales out of bankruptcy. So are we completing wedded to the plan of attack whatever that maybe going forward or we going to be more tactical in our approach and trying to gauge value where May exist and do the best deal possible not necessarily from the tailwind of the partners.

Hi, Jay. It’s Chuck. So really quick you know there is anything we’re never wedded to a plan. We have a plan, we put it into action and we perform on that until else wise we figure out a better way or we think that things have changed situation a lot. To us, the goal to have a distributing unit with a yield that’s appropriate for the mix of the assets is more important than ever in the near term just to be in a position to take advantage of the opportunities you speak about. We agree with your term diagnosis of what the fourth quarter and early next year might look like and we want to be ready with a nice instrument to execute on those transactions. So if anything I would say it kind of turns up the heat a little bit more in our view of having the need to get there sooner than later.

And to comment on that a little further, we have been participating in numerous processes in the market at all times. And so we are constantly evaluating any and all deals. We feel like in the previous quarters as we evaluated transactions, the range was pretty wide. As we go to the fourth quarter obviously in a new price environment, we feel like we are in a better position to potentially transact. That being said, it feels like there is need to be a resell a little bit out in the market from how to transaction, when do people get forced to transact and we are absolutely looking at all opportunities to take advantage of the market conditions if at all possible and to brought a broader base of mixed assets to bring into SPP.

Okay. So without naming names and I’m seeing some Eagle Ford assets now that are quite imperative but at one point we are extremely robust with respect to low decline and high ability to distribute. And so if you were able to access an opportunity like that one could possibly you’d be able to one or both of what you’re contemplating with respect to the pallet. And if so how do you decide who gets what if its factoring opportunity like that arises.

It’s Chuck. Our first go is to conduct a transaction and to right size the balance sheet that allows us to become a distributing MLP with the appropriate yield. So that’s the first and foremost goal. The second goal would be to looking at economic acquisitions that make sense and to drive value. And so I wouldn’t say anything takes priority over the next. Our first priority is returning to distributions, our second priority is continue to increase shareholder value and drop that yield to a point where we see that we are – competitors are better in the market from a cost of capital standpoint. So I don’t think one takes priority of the other one, other than our first goals of returning to distribution.

Okay. But what I guess I’m asking is, how are you going to decide whether SN or the partners, the parent is more appropriate a place for any additional transaction in some of the basins you operate. Possibly if the expense of doing something, that is doing impossibly not or whether it would be a better dropdown in the SPP, a bitter acquisition for SPP to make. That’s I guess [indiscernible].

All right. Okay.

What you’re competing with one another is as I guess precaution. We don’t view ourselves as competing. We view our cells as a joint getting if there is an opportunity exists. Obviously SN is a growing and dynamic drilling opportunity company. There have joined consistently and they go forward an driving cash flow and returns that way. Our goal is to have less risk and drive returns through the yield. And so when we look at assets potentially, there would be joint there in trying to separate those assets between a more yield orient focus and more development oriented focus.

Okay. And so we don’t view ourselves as competing. One company has its own cost of capital structure and other company has another, it’s focused on two different things coming out of the box and so don’t view it as concluding. We view it as jointly existing and finding the right capital structure and light dynamic for each company. To that point, we have put a new page into our presentation that is page 8, that really tries to talk about this in line and how its advantageous for both parties with the alignment of interest to really either joint bid or recycle the capital through the system because again your SPP looking for yield, looking for lower risk, no CapEx. That is a different model for us and higher ROE, higher return threshold and both absolutely co-exist and they work coexisting market as like you see an opportunity that has some development opportunity, but also have some lower risk while it’s gathering a processing pipeline or even to the process being well decline. Production to that extent, we will always try to maintain ourselves as a low CapEx and no CapEx entity because that’s not a lot of best return on capital, that’s better return on capital to [indiscernible].

Thank you. That’s a great answer. I appreciate that.

Thank you very much. At this time, there are no further questions. I will now turn the call over back to Mr. Ward. Sir, you maybe proceed.

Thanks again for joining us this morning and we look forward to speaking with you very soon.

That concludes today's conference. Thank you for your participation. You may disconnect at this time.