Welcome to the Memorial Production Partners LP Fourth Quarter and Full Year 2015 Investor Conference Call. Memorial's operating and financial results were released earlier today and are available on Memorial's website at www.memorialpp.com. [Operator Instructions] Today's call is being recorded. A replay of the call will be accessible until Wednesday, March 2, by dialing (855) 859-2056 and entering the conference ID 22826941, or by visiting Memorial's website, www.memorialpp.com. I would now like to turn the conference over to Ronnetta Eaton, Manager of Investor Relations.

Thank you, Robin. Good morning, and welcome to the Memorial Production Partners LP conference call to discuss operating and financial results for the fourth quarter and full year 2015. We appreciate you joining us today. John Weinzierl, Memorial's Chairman and Chief Executive Officer, will lead the call; followed by Bill Scarff, our President; Chris Cooper, our Senior Vice President and Chief Operating Officer; and Bobby Stillwell, our Chief Financial Officer. Afterwards, securities analysts will be invited to participate in a question-and-answer session. Please note that some of the remarks and answers to questions by management may contain forward-looking statements and are based on certain assumptions and expectations of management. These remarks and answers reflect management's current views with regard to future events and are subject to various risks, uncertainties and assumptions. Although management believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct, and undertakes no obligation and does not intend to update these forward-looking statements to reflect events or circumstances occurring after this earnings call. Forward-looking statements include, but are not limited to, our statements about and our discussion of our full year 2016 guidance. Please refer to our press release and our SEC filings for a list of factors that may cause actual results to differ materially from those in the forward-looking statements made during this call. In addition, the preliminary unaudited financial information that will be highlighted is derived from our internal financial books, records and reports. For additional detailed disclosure, we encourage you to read our form 10-K. We expect to file our 2015 annual report on form 10-K this week and we anticipate MEMP's tax packages, including Schedule K-1s will be available online via MEMP's website by mid-March. Also, non-GAAP financial measures may be disclosed during this call. Reconciliations of those measures to comparable GAAP measures may be found in our press release or on our website at www.memorialpp.com. With this in mind, I will now turn the call over to John Weinzierl. John?

Thanks, Ronnetta. Welcome, everyone, and thank you for joining us today to discuss our fourth quarter and full year 2015 results. Before we get into the results, I want to mention briefly the organizational change announced recently by Memorial Resource Development, which resulted in my 100% focus and dedication to being the CEO of MEMP, a position I've held since our inception in 2011. We have a great set of assets, an industry-leading hedge book and wonderful people. So I'm excited about leading the partnership as we make decisions that will set us up for success in this challenging environment. We had a strong fourth quarter, of which you will hear the team talk about shortly. I will start by talking about our recent distribution announcement and our guidance and capital plan for 2016. Due to continued low commodity prices, the Board of Directors of MEMP's general partner made the difficult but necessary decision to reduce MEMP's quarterly distribution from $0.30 to $0.10 per unit for the fourth quarter 2015. Protecting our balance sheet in this environment is critical and this revised lower distribution will bolster our liquidity by saving approximately $67 million of cash on an annual basis. We will continue to review our distribution on a quarterly basis, always keeping in mind our primary goal of providing value to MEMP's stakeholders over the long term. The fourth quarter 2015 distribution was paid on February 12 to unitholders of record on February 5. Our capital plan laid out for 2016 recognizes the current commodity price environment has been significantly reduced from 2015 levels. We're limiting our total CapEx and expect to spend about $70 million based on the midpoint of our 2016 guidance. This capital will be directed to the drilling and completion of 1 new well and the completion of 5 additional previously drilled wells, all in East Texas, and to capital workovers and facilities upgrades across MEMP's other operating areas. The lower level of capital spending anticipated in 2016, along with the distribution reduction will aid MEMP in a severely challenged market. We expect that these measures will enable us to generate positive free cash flow of approximately $70 million to $80 million for the year. I'm confident in the measures we've taken and believe we made the right decisions to position ourselves for what looks like another challenging year. We thank our employees for their continued commitment to excellence as we navigate through this environment. And we appreciate our stakeholders for their continued support. Now I will turn the call over to our President, Bill Scarff.

Thank you, John. I want to reiterate our commitment to managing the partnership conservatively and taking the necessary steps that will strategically position MEMP to be successful in times like these. We had a solid fourth quarter and I'm happy to report that operating costs were down significantly compared to prior periods. Our results for the quarter are evidence of our team's ability to capture operational efficiencies and drive down cost. Fourth quarter average daily production increased from the third quarter 2015, averaging 257 million cubic feet equivalent versus 254 million cubic feet equivalent. The increase was primarily attributable to volumes associated with the Beta acquisition. In addition, adjusted EBITDA increased 12% to $90 million for the fourth quarter compared to the third quarter amount of $81 million. This increase was due in large part to reduce costs, which were 19% lower than what was reported in the third quarter and well below our guidance expectations. LOE for the quarter averaged $1.58 per Mcfe and included one-time credits in our favor that are not all expected to be repeated in 2016. Chris will touch on this during his remarks. While we talked about this on our last quarter call, I want to mention again how pleased we are to have closed the Beta acquisition last November. We now have control of what we believe is a prolific reservoir, which we expect to produce for many years to come. We believe this asset has enormous potential and we expect to ramp up development in a more stable commodity price environment. Our plan this year is focused on generating positive free cash flow, managing our cost and enhancing liquidity in this challenging environment. A couple of tools we have to manage liquidity that we mentioned last quarter, but I think are important…

Thank you, Bill. I'd like to start by reviewing our fourth quarter operating results. Operationally, we had a strong quarter, exceeding expectations for all key metrics, including production, operating cost and capital expenditures. Production for the quarter averaged approximately 257 million cubic feet equivalent per day, an increase of 2% from the previous quarter and 13% higher than the fourth quarter of 2014. The quarter-over-quarter increase was driven primarily by the acquisition of the remaining interest in the Beta asset that was effective in November 2015. We remain excited about having completed this addition to our portfolio due to the tremendous upside that exists with just a modest oil price recovery. Lease operating expenses in the fourth quarter were $1.58 per Mcfe, a reduction of 19% from the previous quarter and 20% lower than the fourth quarter of 2014. Included in fourth quarter 2015 LOE was a one-time insurance receivable associated with our Permian assets. We are very pleased to have resolved the issues that impacted our second and third quarter operating costs and are able to demonstrate the substantial progress our operating teams have made in reducing costs. Drilling activity in the fourth quarter was limited to East Texas, where we achieved first production from 2 cross, 1.5 net new wells that exceeded expectations. On average, we have 1.5 rigs active in East Texas for the quarter and ended the year with 1 active rig. Capital spending for the quarter was approximately $24 million, a reduction of 60% from the previous quarter, which is a reflection of our conservative capital investment program going forward. Approximately 83% of our capital spend was in East Texas, where we continue to make significant progress improving capital efficiency. Using cost per completed lateral length as a basis of comparison, the average cost of…

Thank you, Chris. I will start by summarizing our financial results and then covering our liquidity and hedge positions and our 2016 guidance, which we issued a few weeks ago. Adjusted EBITDA was up 12% for the fourth quarter at $90 million compared to the third quarter of 2015 and significantly exceeded our internal targets. The increase was largely due to the portfolio-wide cost reduction efforts we've detailed on this call and in the press release. G&A remained flat for both the fourth quarter of 2015 and the third quarter at $13.9 million. Included in our fourth quarter G&A was a noncash charge of $2.9 million for unit-based compensation expenses. On a per unit basis, our fourth quarter cash G&A was approximately $0.46 per Mcfe, consistent with our expectations for 2016. Now moving on to a discussion of debt and liquidity. As of February 15, we had total debt outstanding of $2 billion. This includes $1.2 billion of senior notes and $827 million of revolver debt, leaving revolver availability of $346 million, including the impact of $2 million in letters of credit. Our regularly scheduled bank group meeting will take place later this spring, and we'll be working closely with our lenders in their semiannual borrowing base redetermination. Given the sustained decline in commodity prices since the fall redetermination period, the reality is that our bargain base will be coming down. We expect that this will probably be the case across the E&P sector. However, given the liquidity enhancing measures we are forecasting this year, $70 million to $80 million of positive free cash flow generation, the potential release of $60 million related to Beta decommissioning obligations and rationalization of noncore assets, we do not expect the borrowing base decrease to change our strategy going forward. I'd also like to…

[Operator Instructions] Your first question comes from the line of Brian Brungardt with Stifel.

I guess to start off here, the 2016 guidance provided in January, looks like about a 7% decline on average production from the fourth quarter. I guess at what commodity price would you envision ramping up that CapEx? And what do you anticipate the appropriate spending would be to maintain that fourth quarter run rate?

Interesting question, Brian. In this commodity price environment, it's been a little challenging for us to model an upside case like that. The focus for this year is generating positive free cash flow given -- just given the overall environment ranging from commodity prices to the banking sector. So I'm not sure we have a specific price that we're targeting where we'd ramp up but we have some inventory in our portfolio particularly in California that still works at these prices. But we're delaying drilling of that inventory just in the whole scaled-back effort and generating positive free cash flow as much as we can this year. At the higher prices, we'll look to get more active but don't have a specific price.

Got you. And then switching to the upcoming spring redetermination process, and I anticipate there's limited color there. But any indication where you see this facility being reduced to?

Yes, this is John. It's obviously very topical these days. It's going to be a tough borrowing base season for the entire industry. We fully expect our borrowing base is going to go down. We don't -- as you said, there's nothing to report at this point. But we put in place and we're proactive on all fronts to make sure that we preserve liquidity. So we lowered CapEx, we've lowered costs. We have a guidance that we're free cash flow positive, all being ahead of the game of anticipation of the borrowing base reduction. We don't have a number. We don't have anything to report on, an amendment process or anything of that nature. But we certainly are kind of ahead of the game.

So then would it be safe to assume then that you anticipate having sufficient availability to make up any reduction?

Well, as I mentioned, as of note, we definitely are in compliance at this point and anticipate to be fully compliant. Being free cash flow positive is going to make -- is going to put us in good stead. We don't anticipate anything to the contrary, and we'll have more to report very soon.

Yes, coming out of the spring, we expect to have liquidity on the revolver.

Your next question comes from the line of Kevin Smith with Raymond James.

Also, I'd like to congratulate you on getting control of lease operating expenses. If you don't mind, I'd like to dig down into that, though. Maybe can you talk to us about how much of that this quarter was insurance reimbursement or lower completion activity? What I'm trying to get to is figuring out why LOE is stepping back up in 2016.

Okay, Kevin. First of all, we're pleased to get there. It's taken a lot of hard work by our operating teams to finally demonstrate the progress. So it's good to get to this point. Looking at our quarterly LOE cost that were just over $37 million, the credits that we talked about in the release were just over $1 million. Then we had also a full quarter effect of Beta that's close to $2 million. And then going forward, we need to increase our assumptions around workovers, probably going to add another $1 million per quarter. When you add in those effects to the Q4 rate of $37 million, it gets you to just over $41 million. And our guidance has in the range of $41 million to $42 million. So that's kind of the bridge between where we were in Q4, and where we expect to get to in Q1 going forward. So does that answer that question?

Yes, that's very helpful. Absolutely. And then my next question, as far as building liquidity, any updates on timing or even a potential size of noncore divestitures?

Yes, Kevin. This is Bill. Of course, we've talked about this in the past. This is just a continuation of our normal asset rationalization strategy. We look at all of our assets. We look for noncore assets, and basically those would be assets that are geographically isolated or not really an investment priority at this point in time. We got 2 packages on the horizon. One would -- they're both small, they're both nonmaterial in their impact on reserves or cash flow or production, but one is in the Permian and one is in the Rockies. We expect to kickoff of those -- each process here in the next month or so, and would likely have some type of transaction closing probably in the second quarter.

Do you expect to have that done before the spring borrowing base redetermination or is that too tight?

That's going to be a little tight. We're going to kick off the process very soon. But I would say on that, that both of these transactions would be liquidity enhancing.

Got you. And then lastly for me, and I appreciate that you can't probably fully answer this but any color you can provide, I appreciate it, but obviously spring borrowing base redetermination coming up. Any thought that because you -- the expectation that your utilization level will go up that the commercial banks will restrict your ability to pay a distribution? Or has there been any talk around a cutoff once you get up to 90% drawn or some discussion to that degree?

This is John, Kevin. And as you led in, you can appreciate that we're going to say we have nothing to report at this time. I will say on the distributions, our job and our company, we're an MLP. Our goal is to pay distributions. And when we dropped it, the board dropped it from $0.30 to $0.10 a quarter, it was in mind of having something that we can sustain even in the current environment. The banks are -- have pressure that everyone knows about from the OCC and everything else. Everyone knows that they're looking at all the debt in the balance sheet stack. And so yes, there's going to be pressure. We feel that we're in good stead on our distribution. But also, it's a quarterly distribution, and we look at it each quarter. So that's all I can say. There's nothing to report on the borrowing base and any other amendments. Again, I reiterate that we're in compliance and we anticipate to be that way. And Bobby, do you have anything to add to that?

No, that's it. It's our goal to continue paying the distribution. And like John said, we set up the $0.10 a quarter believing that's a long-term, sustainable figure for the partnership at current commodity prices and it supports significant coverage for the next several years and generates positive free cash flow.

Your next question comes from the line of Chad Mabry with FBR.

Just a follow-up to the previous line of questioning. I was wondering if you could provide any guidance on deleveraging initiatives given your outlook for free cash flow generation this year and from other liquidity levers that you have, and specifically, where your bonds are trading.

Sure. It's, again, another very topical question for the industry. We are, of course, a reserve -- reviewing all the alternatives put in front of us, and we followed what other companies have done or tried to do. We are compliant, as I said, with our bank facility but we're cognizant of our leverage. And so we are looking at various different alternatives. We have nothing to report at this time. We'll certainly and obviously advise if there's something to report. But at this time, there is nothing.

In terms of liquidity enhancers just on the base plan, we outlined this in our guidance presentation a few weeks ago. But it starts with base assets and positive free cash flow generation. We guided to $70 million, $80 million of positive free cash flow for the year. We've got $60 million sitting in a trust account related to our Beta plugging and abandonment obligations. We're working with the government and surety providers to get that cash released and bond fund that obligation going forward. We've received positive feedback from those agencies on that release thus far. But it's working with the government. It takes a little bit of time. And we're very focused on getting that cash released and see that as a very realistic transaction by the middle of this year. And then we're also looking at noncore asset sales that Bill talked on. Those are going to be singles and doubles in terms of liquidity, but meaningful overall and every dollar matters right now. And there's other options like selling hedges that we've talked about in the past and we're evaluating and studying that with the banks. How -- is it liquidity enhancing? Is the punchline there? It just depends on the value the hedges have relative to the total size of the borrowing base. So that's something we're continuing to evaluate as well.

Okay. Just one follow-up, if I could, I guess, on the 2016 CapEx budget. Sounds like that's kind of front-end loaded with East Texas completions. Just curious what your quarterly CapEx run rate looks like in the second half of 2016 and into 2017 to sort of correspond with some of the guidance that you talked about at the end of your prepared remarks.

Yes. It's relatively flat over the year. As John and both myself talked about, we plan to bring on 6 new wells online in East Texas. We're actually spreading those out over the first 3 quarters. And so the bulk of that capital will obviously be spent during those quarters and then the rest of our capital is really spread across all the other assets in a fairly even manner. So for the year, it's going to be relatively flat.

[Operator Instructions] Your next question comes from the line of John Abbott with Bank of America Merrill Lynch.

Just had several questions. First, would it be possible to share a PV 10 value you have before your reserves, or do we have to wait for the 10-K? And if you have a PV 10 value, could you say what the value is with or without hedging?

The -- in terms of the year end reserves, the PV 10 that goes with that is just short.

John, the K will be coming out no later than tomorrow and we'll have that disclosure there.

All right. Then I gather you can't provide any color yet in terms of how the PUDs were booked?

What do you mean exactly?

So you were 83% proved reserves. How are you booking your PUDs for your proved reserves? What sort of assumptions are you assuming for there?

Just 63% of our reserves were deemed to be developed. So obviously the remainder being undeveloped.

Consistent with where we've been historically.

Yes. Not still quite sure I understand the question here.

What sort of commodity prices are you assuming due to booking those PUDs?

It's SEC pricing, which is roughly $48 oil and $2.40 gas.

Yes, $2.59 on the gas side and just below $47 on the oil side was the SEC price tag.

All right. And then finally, with regards to noncore potential divestitures, I mean it looks like you have a couple of small packages coming up here. But when you think of your noncore assets, what sort of range of production are we talking about?

Well, these processes are going to be kicked off pretty soon. But they're very minimal. They're not impactful at all in terms of production. I would call them nonmaterial. So very small.

There are no further questions at this time. I will turn the call back over to John Weinzierl for closing remarks.

Well, thank you, everybody, for joining us on the call today. As always, don't hesitate to reach out to us if you have any follow-up questions. Again, thank you for joining us.

This concludes today's conference call. You may now disconnect.