Good morning and welcome to the Sanchez Production Partners Fourth Quarter and Full Year 2016 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Chuck Ward, CFO and Secretary. Please go ahead sir.

Good morning and thanks for joining us. With me this morning is Gerry Willinger, our Chief Executive Officer; and Pat Sanchez, our President and Chief Operating Officer. Just a few quick notes before we get started, we released our fourth-quarter and full-year 2016 earnings report this morning and we expect to file our 10-K this coming Monday. That earnings report, along with our latest investor presentation from our Analyst Day meeting, is available on our website, www.sanchezpp.com. We currently expect to update that presentation as the Raptor and the Seco projects come online during the second quarter. The discussion this morning will include forward-looking statements which are subject to certain risks and uncertainties. These remarks described more fully in our documents on file with the SEC which are also available on our website. And finally, we will use non-GAAP financial measures in this morning's discussion to help our unit holders and the investment community to better understand our operating performance. The earnings presentation released this morning and available on our website includes an appendix that reconciles the non-GAAP financial measures to the GAAP measures. And with that, I would now like to turn the call over to Gerry Willinger.

Thanks, Chuck. During 2016, the partnership made significant progress on our Midstream growth strategy. In July, we closed on the acquisition of a 50% interest in Carnero Gathering LLC, a joint venture with Targa Resources Corporation that owns the Carnero Gathering Pipeline. Then in November, we closed on the acquisition of a 50% interest in Carnero Processing LLC, a joint venture also with Targa that owns the Raptor Gas Processing Facility currently under construction in La Salle County Texas. The Carnero Gathering Pipeline, which went into service in 2016, currently delivers natural gas volumes for Sanchez Energy to a natural gas processing facility located in Bee County. Construction of the Carnero gathering pipeline to the Raptor Gas Process facility is now complete. The Raptor Gas Processing Facility remains on time and on budget and is expected to go into service in the second quarter of 2016, with initial processing capacity at 200 million cubic feet per day. Together, these assets are expected to provide a stable stream of fee-based cash flow and, with the Western Catarina Midstream system, form the basis of our Midstream growth strategy in South Texas. Our prospects for growth have improved considerably with Sanchez Energy's acquisition of the Comanche asset in South Texas. As we near completion of the Carnero Gathering Pipeline and the Raptor Gas Processing Facility, we look to expand those projects to accommodate natural gas production from Comanche. To that end, a lateral off the Carnero Gathering Pipeline is underway aimed at interconnecting with the Comanche asset and the Raptor Gas Processing Facility was recently approved to be upsized from 200 million cubic feet per day to 260 million cubic feet per day. We anticipate these projects will be fully operational in the third quarter of this year. With these assets, we have successfully transformed the partnership to a midstream-focused master limited partnership and in the process have significantly reduced our commodity price exposure. Consistent with this strategy, the partnership continues to explore the possible divestiture of its remaining oil and natural gas wells, leaches and associated assets and interest in Oklahoma and Kansas. With that overview of our progress, I would like to now turn the call back to Chuck for a brief overview of our fourth-quarter and full-year 2016 results.

Thanks, Gerry. Our revenues totaled $15.3 million during the fourth quarter of 2016. Included in this amount is revenue from Midstream sales on the Western Catarina Midstream system of $12.8 million, revenue from production activities totaling $7.4 million of which $400,000 was related to hedge settlements, and a non-cash loss on mark-to-market activities of $4.9 million. For the full year 2016, our revenue totaled $70.7 million. Our cash operating expenses during the fourth quarter totaled $10.6 million, which includes $3.4 million in operating expenses related to Midstream activities, $3.3 million in operating expenses related to production activities and general and administrative expenses of $3.8 million after adjusting out non-cash unit based fees. The general and administrative cash expense level reflects the impact of the Mid-Con assets still in our portfolio and some transactional expenses associated with our busy fourth quarter. From an operation standpoint, during the quarter the Western Catarina Midstream system delivered natural gas volumes which exceeded the minimum quarterly quantity by 20% and for the full-year the volumes exceeded the minimum quarterly quantity by 28%. Further to our Midstream investments, our interest in the Carnero Gathering Pipeline continues to perform well, yielding distributions above our forecast. On the production side of our business, we showed fourth quarter 2016 production of 261 MBOE for average net production of 2,841 BOE per day during the quarter. Recall that our escalating working interest structures reset at the beginning of the year which provides a natural lift in our production volumes expectations for the first quarter of the year. As a result of the before, our adjusted EBITDA for the fourth quarter 2016 was approximately $12.4 million and for the full-year 2016 our adjusted EBITDA was $55.4 million. At the end of the year, we had a little over $153 million in debt outstanding under our credit facility, which has a borrowing base of over $215 million and commitments of $200 million. Our borrowing base, which you will recall includes a Midstream component, is scheduled for redetermination by our lenders during the second quarter. For 2017, we have hedged approximately 1.1 Bcf of our natural gas production at an effective NYMEX fixed price of approximately $5.44 per Mcf and approximately 365,000 barrels of our crude oil production at an effective NYMEX fixed price of approximately $61.30 per barrel. These positions are included in our 2017 forecast and were further detailed in our Analyst Day presentation on our website. And with that overview of our results, we would now like for the moderator to open the line for some Q&A.

We will now begin the question-and-answer session. [Operator Instructions] Our first question will come from Matt Schmid of Stephens.

Thinking about CapEx for 2017, is there any update to sort of the levels you are expecting there? And then also what is really out there in the budget for growth CapEx beyond the Raptor Gas Processing plant and Phase 1 in the Costa Azul Terminal? Is there any major projects being incorporated right now in sort of the Midstream or storage side beyond those?

Yes, let's let Chuck address the CapEx budget first and then we will talk about the projects beyond that.

Okay.

Yes, I think for us we expect that the Raptor all in is under budget, we discussed that a little bit during the Analyst Day. And then we think that the incremental from the 200 to the 260 is even less than the actual savings versus the budget forecast. What that rolls into then news is thinking about incremental opportunities in Raptor as the Comanche situation develops, which Gerry is going to talk about. And then if you recall, our Seco originally Phase 1 was one -- was kind of a one-shot run down to [Kudu]. And with the incremental opportunities around that with the associated incremental volumes again, which Gerry is going to talk about in a second that becomes another opportunity to deploy capital and further expand that pipeline and give it more access to other markets.

Yes, certainly -- well obviously, we are spending the CapEx on the Raptor facility. And we elected to expand that facility and all that CapEx has actually come in under the original budget. So, we believe our CapEx is to be pretty tight even with the expansion of that facility. And then on top of that, with the Carnero Processing Gathering line, the extension to interconnect with the Comanche asset, that line came under budget as well. So, we feel like when those things are in service, our original budget expectations on CapEx for both the processing facility and the gathering line will still be intact, but although have significant upside on the volumes. When we look at Seco line, we expect that to be in operation the second quarter. Obviously, we talked about that running down to the [Indiscernible] area. We view that as an important offset for residue gas for the Raptor Processing Facility. We believe it is likely that the [Algodulci] market becomes more important and you will see a logical extension from us to [Indiscernible] to Algodulci at some point. Beyond that, with the Comanche volumes coming online and the continued drilling opportunity there, there is a logical expansion of processing capacity that is going to be needed. So when we look at the future, it is one of capturing more volumes and expanding processing capability, expanding the gathering system particularly the Carnero line, and continue to use that as the hub to extend throughout South Texas. So, beyond the current facilities that we laid out, and including Point Comfort, those opportunities -- as we laid out in our Analyst Day, the future opportunities are well intact and we think are more visible now in the 2017 period than we probably had in the original Analyst Day presentation.

And then on the Raptor on the gas processing facility -- are you still shooting for -- is it on track for an early April startup? Or kind of when in the second quarter should we be thinking about that?

The plant is being finalized as we speak. There is a priming process that is going to go on with the plant. I am expecting when we look in the second quarter, sometime early in the second quarter is when we think that plant will go online. It is just depending on when we prime the plant and everything is signed off and making sure that we have got the volumes going through and all the take-away capacity hooked up. So, I think we are still on target for startup early in the second quarter.

And our next question comes from Georg Venturatos of Johnson Rice.

Appreciate all the color there on the CapEx side. And as we look at the Raptor expansion efforts that obviously have been approved, can you talk a little bit more about the Comanche volume timing? I know we previously discussed call it 100 MMcf a day that was on interruptible contract. Can you maybe talk about how quickly that could be sent over there once we get up to 260 and just kind of the expected timeline on that portion at least of the volumes?

Certainly, we have to go out to all the working interest partners on any volumes. And so, we are currently in process of putting together what we will consider a package to go out to the working interest partner there for processing capability and to be competitive with market rates. And so depending on that, I think you are logically looking at the second quarter before we have finalization on rates and volumes and what have you. So, I am expecting that we go out with our package to the working interest partners over on the Comanche side sometime, again, early second quarter with hopefully finalization sometime after the Raptor plant comes online.

Okay, appreciate that, Gerry. Second one, obviously -- and maybe this one is for Chuck on the redetermination side. Any thoughts maybe on a range of what you anticipate that credit facility to be maybe at year end 2017 based on what you are seeing with the Midstream forward EBITDA role?

I think because it is always subject to plants online and contribution and we certainly have the distributions from our joint ventures driving the impact for the Midstream portion of the borrowing base. I think we just see kind of mechanical increases that are not really disproportionate from the impacts that we laid out in our Analyst Day forecast for each of the incremental projects with the 4.5 times adjusted EBITDA multiplier on those. So simply if you say -- if you calculate out of say your midrange guidance says projects could contribute $8 million during the year, then that is going to reveal somewhere around a $36 million borrowing impact. And I think that mechanical formula will continue to hold true. Obviously on the production side you will have a little bit of an offset as you roll through hedges, $5 and $61 oil hedges are rolling off. But I think the impact of the projects coming online and then the distributions being received out of those will more than offset that by quite a bit.

And next we have the question from Sunil Sibal of Seaport Global Securities.

A couple of questions from me. First in terms of the timing on the upstream asset sales. Could you kind of talk about that in the Mid-Continent region?

Sure, on the Mid-Continent it is -- I would say it is a day-by-day and we took a break to do our Board, finish our K and do the earnings. And from there we are now -- I am rolling back to that and have a call scheduled for Monday morning to be back on trying to get that completed and signed up as soon as possible. I have an excited potential purchaser and we are certainly looking to rotate out of that asset and get focused on the assets that are a forward-looking path.

Okay. And just to be clear, so that is just one big packet asset sale that you are doing, correct?

That is correct.

Okay, got it. And then on your opportunities in the Eagle Ford, I was just kind of curious if there are other kind of consolidation opportunity that you are seeing around your footprint post Comanche of course SN has a fairly sizable presence in the area and I was just kind of curious what kind of other opportunity that could open up for SPP?

Yes, listen, we are certainly looking to expand in the Eagle Ford in all directions using Raptor facility in our relationship with Targa at the hub of activity. So, as we look at those volumes and the potential for those volumes increasing, for us we always phase it as a build versus buy decision. Certainly, we are going to get our hydrocarbons to market and have a stake in those markets. And so the question is how to do that most economically and fast? We do think there is a bit of capacity in the Eagle Ford obviously on certain levels of equipment. But whether it is fit for purpose or not is the debate. So when we look at it, it is a build versus buy. What is best for us to get to the market? What lowers the net backs to our working interest partners and production partners in the Eagle Ford and that is what we are looking at. Whether it is fractionation or pipelines or processing, we are looking at all those things to evaluate that capacity and whether it fits our needs and delivers it to the markets we want it to go to. So, we do think there is a lot of capacity out there. The question is, are there trades that can take place? That is yet to be seen. But we are excited about the opportunities and the volumes we could bring to any asset. So going back to it, we are always looking at that build versus buy analysis to get to the markets we want to get to.

[Operator Instructions] And our next question will come from Brett Jones of Luzich Partners.

I had a couple questions, one on the Western Catarina Midstream volumes. Does -- for Sanchez Energy, does the south-central volumes flowing through the Midstream asset pre-going to the Carnero Gathering line?

Yes, they do.

They do?

Yes. The dedication -- I am sure what it is is the dedication covers the western side. That is the takeaway that the Western Catarina system provides is the only takeaway out of the entire Catarina field at this point. And so, all the incremental south-central flow kind of was east to west across and into our south/north pipe out. And then, but furthers Kinder Morgan. I think that you perhaps have seen us refer before in the analyst off-take that has a life-through 2021, after that deduct the remainder goes to the Carnero.

Yes, and also Catarina is dedicated to the JV and to the Carnero platform.

Then is this from -- I guess you gave a little bit of color on your Analyst Day, that you still think those volumes are going to grow in the kind of 10% range given their minimum CapEx budget of 50 wells?

Yes, yes, yes, we always consistently model that out at a 50 well a year rate, which is the minimum drill schedule under the lease at Catarina. And so, when we look at it that 50 well a year rate delivers about a 10% volumetric growth year over year. So we continue to view Catarina in that 50 well type per year drill rate going forward.

And then I guess my other question was on the choice between whether the asset management fee is paid in cash or equity, what sort of logic decisions goes into that decision? And does the Sanchez [O&G] decide? Is it sort of -- I guess what is -- I guess what is the -- I guess what prevents them from switching over to a cash management fee? Is it more of they are just kind of being supportive of distribution growth or what -- I guess what logic goes into that?

I think to some degree always I would recommend to speak directly with the SOG folks. We at SPP observe and I think what it is, is long-term this is another Sanchez entity in which we look to grow together using the incremental volumes and assets of SN and SPP as being the Midstream partner through this growth. And I think the consistent taking of the units is supportive of that growth story. And I think the one thing, certainly if you talk to Tony or Pat or [Y-O], is we are in it for the long haul, they are in it for the long haul and it is just us, it is a pretty easy alignment.

And this concludes our question-and-answer session. I would like to turn the conference back over to Chuck Ward for any closing remarks.

Great. Well, hey, thanks again for joining us for this morning's call. We look forward to speaking with you again and prior to the next quarter and update as projects come online during the balance of the time period. Thanks again.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.