EV Energy Partners LP started the year quietly, focused primarily on its balance sheet and relying on acquisitions it completed in the fourth quarter to grow year-over-year production through the first three months of 2016.

The company produced 201.4 MMcfe/d during the first quarter, up from 172.5 MMcfe/d in the year-ago period, but down from the 209.8 MMcfe/d it reported in 4Q2015. The year-over-year increase resulted from production the company acquired in October in the Appalachian, San Juan and Michigan Basins, along with other properties in the Austin Chalk (see Shale DailySept. 3, 2015). Sequential production declined because the company idled its drilling program at the beginning of the year (see Shale DailyFeb. 29).

The publicly traded master limited partnership, backed by general partner EnerVest Ltd., has cut this year's capital expenditures by 75% compared to 2015. The company said in February that it would spend just $10-18 million to complete 10 wells in the Barnett Shale and stop natural gas-heavy drilling across its other properties for the remainder of the year on low commodity prices.

"As we mentioned last quarter, we anticipated our capital spend for 2016 to be front end loaded due to the completion of nine wells in the Barnett Shale, which have been previously drilled in 2015 as well as the fact that we have basically discontinued further drilling in the current price environment," said CEO Mike Mercer. "All nine of those wells in the Barnett have been completed and have recently begun producing."

EVEP operates 33,000 wells in 15 states across the country. It has long been confronted with lowering its costs, making additional savings hard to come by. But its operational teams, Mercer said, continued focusing on cost reduction during the first quarter, finding compressor optimization and chemical and salt water disposal savings, focusing on work over programs and the management of areas with marginal wells. The company spent $8 million during the period.

"All-in-all, earnings this quarter were in line with guidance. Production came in where we thought it would, but we do expect some natural declines throughout the year, which was already incorporated into the annual guidance we provided in February," said Executive Chairman John Walker. "Due to the senior note repurchases as well as the decision to suspend distributions, the annual cash on our balance sheet allowed us to reduce debt and save on interest payments.

"Finally, I am happy to announce that we expect, based upon current strip prices, to produce free cash flow after interest payments and capital expenditures for the remainder of 2016 and be in compliance with our bank covenants."

While the company's senior secured credit facility was lowered from $625 million to $450 million in April, it has $170 million of liquidity on its balance sheet to meet its near-term capital needs. The company is guiding for full-year production of 187-206 MMcfe/d.

Average realized prices declined during the first quarter to $2.06/Mcfe from $2.99/MMcfe in the year-ago period. Revenue was down as a result, going from $47.2 million in the year-ago period to $38.3 million.

The company reported a net loss of $29 million (minus 58 cents/unit) for the first quarter, compared to a net loss of $61.7 million (minus $1.25/unit) in 1Q2015. The loss included a $700,000 impairment charge related to the write-down of oil and gas properties in the Utica Shale due to a change of development plans there and $100,000 of dry hole and exploration expenses. The company also recorded a $10 million noncash loss on commodity and interest rate derivatives.