Energy December 2014 Raymond James

U.S. Research Published by Raymond James & Associates

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Energy December 1, 2014

Industry Update Kevin Smith, (713) 278-5278, [email protected]

Energy: Industry Overview _____________________________________________________________________________________

Energy: Downgrading LRE to MP3; Despite Bearish News Out of OPEC, Highly Rated Names Remain Secure

In this earnings update we: (1) discuss the impact of the recent movement in oil prices on distribution coverage ratios; (2) revisit balance sheets and hedging profiles of companies in the Upstream MLP space; (3) take a look at valuations given the unprecedented volatility in the space since the start of October; and (4) downgrade our rating on LRR Energy to Market Perform from Outperform. OPEC elects not to defend oil prices: Following the November 27 announcement by OPEC that it will maintain its crude oil production quota (consistent with our expectations, as expressed in the Stat of the Week from November 24), energy-related names have broadly sold off. As outlined in the Stat, while this signals to the markets that the cartel is prepared to endure a prolonged period of lower prices, it is our view that the recent announcement and corresponding market reaction represents the last piece of bad news that will force the weak hands out of the oil trade. If this proves to be correct, we would expect to see a bottom in oil prices over the next several weeks, as WTI trades below our 2015 price forecast and the price needed to balance supply and demand. With this in mind, we are updating and reiterating our thesis, previously laid out in our October 13 piece “After Severe Price Declines, Favorite Upstream MLP Names Look More Attractive,” that the Upstream MLP space has been unduly punished, creating attractive opportunities for long-term investors. So who is built to survive the storm? As shown in our table that follows, a large percentage of our coverage universe is relatively insensitive to 2015 WTI oil prices due to either having a high percentage of oil hedged and/or having a large component of its production natural gas-weighted. In fact, a few of the companies in our Upstream MLP coverage universe actually experience an increase in their distribution coverage ratios as the decrease in wellhead revenue is more than offset by an increase in hedging revenues and a corresponding decrease in production taxes. As shown in the following table, assuming no future acquisitions and no distribution increases and the Raymond James 2015 forecasted natural gas price of $3.65/MMBtu, our top picks in the Upstream MLP space, EV Energy Partners, Memorial Production Partners, and LinnCo all generate positive distribution coverage down to $60/bbl, which is well below the current strip price of $67.14/bbl. However, three partnerships are running their business model very tight and are particularly susceptible to a downturn in oil prices: LRR Energy, BreitBurn Energy Partners, and Mid-Con Energy Partners.

$75 $70 $65 $60 $55Eagle Rock Energy Partners 1.59x 1.70x 1.81x 1.92x 2.03x

Atlas Resource Partners 1.14x 1.13x 1.12x 1.11x 1.11x

EV Energy Partners 1.14x 1.15x 1.16x 1.20x 1.17x

Memorial Production Partners 1.05x 1.04x 1.04x 1.04x 1.03x

LINN Energy 1.07x 1.04x 1.02x 1.00x 0.96x

Vanguard Natural Resources 1.05x 1.02x 0.98x 0.94x 0.90x

Legacy Reserves 1.06x 1.02x 0.96x 0.88x 0.82x

LRR Energy 0.96x 0.96x 0.95x 0.94x 0.93x

BreitBurn Energy Partners 0.94x 0.95x 0.96x 0.96x 0.97x

Mid Con Energy Partners 0.98x 0.94x 0.89x 0.84x 0.78x

Source: Raymond James Research

Note: Assumes no acquistions, no future distribution increases, and a $3.65/MMBtu gas price

2015 Distribution Coverage Sensitivity

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Downgrading rating on LRR Energy to Market Perform from Outperform: Over the last year and a half, LRR Energy’s distribution coverage ratio has hovered close to 1x as the partnership’s drilling program has helped deliver organic production growth. Moreover, LRR Energy recently closed a $38 million acquisition that should allow the partnership’s coverage ratio to be close to 1x again in 4Q14. However, given the sizeable step down in crude prices during this quarter, LRR Energy’s distribution coverage is expected to remain below 1x throughout 2015, making it an even tougher battle for the partnership to maintain its current distribution level. Therefore, we are downgrading our rating on LRR Energy to Market Perform from Outperform. Given the high yields, is the business model broken? No! The equity cost advantage still remains. Following the recent OPEC announcement, all major energy indices saw significant declines as correlations trended towards 1, with the EPX and Upstream MLPs down 11.4% and 10.2%, respectively. In our view, this dramatic Upstream MLP price decline during 4Q14 (~31% versus the more general Alerian MLP Index (AMZ) at 7.1% and E&P focused EPX at ~21%) represents a gross overreaction to declining commodity prices that fails to consider the positive attributes that have driven above-average returns over the last seven years. Looking forward, we believe that the ability for Upstream MLPs to not only make accretive acquisitions, but also maintain, and in certain instances grow distributions, remains intact (even in this lower oil price environment). Upstream MLPs, despite elevated current yields, still maintain a relative pricing advantage over E&P C-corps, lending them the ability to continue to be the natural buyer of mature oil and gas properties and to be opportunistic to any distressed sending due to the lower oil price environment. Despite this, the market has indiscriminately punished stocks in the Upstream space, providing a valuable buying opportunity for prudent investors who are able to identify the stronger players in the space.

Price Returns

Index 4Q14* Post OPEC

Upstream MLP (30.7%) (10.2%)

EPX (20.9%) (11.4%)

OSX (19.0%) (8.5%)

AMZ (7.1%) (5.3%)

HH Gas (2.8%) (5.1%)

WTI crude (25.5%) (7.8%)

Source: Bloomberg, Raymond James Research

*10/1/14 - 11/28/14 60

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Upstream MLP Coverage vs. the AMZ, OSX, E&P Index ,and Commodities - Indexed October 1

Priced: 11/28/2014 Source: Bloomberg, Alerian Yields remain uncharacteristically high… As shown in the graph that follows, current yields are roughly six standard deviations above the historical median of 9.0%, representing the highest level seen over the past four years by far. Notice that over th is time frame, there were only two periods during which the current yield deviated from the historical median by more than 1 standard deviation, with both of these cases occurring before 2012. Clearly, we are witnessing an abnormal period as far as yield expansion is concerned.




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Upstream MLP Composite: Current Yield

+1/-1 Std. Dev. Range Avg. Yield Median

Source: Thomson Reuters, Raymond James EstimatesDate: 11/28/2014 Basket of Upstream MLP/LLCs Includes: ARP, BBEP, EROC, EVEP, LGCY,LINE, LRE, MCEP, MEMP, QRE,VNR

Current Yield: 14.8%

Historical Median: 8.9%

Undervalued

…but Upstream MLP thesis remains structurally sound: Upstream MLPs have underperformed since the beginning of October against the broader energy indices (EPX, OSX, AMZ), as well as natural gas and even WTI crude. Despite recent yield expansion, increasing the partnership’s equity cost of capital, the central investment thesis remains intact, in our view, and opportunistic firms will be able to utilize the recent weakness across the energy complex to increase distribution coverage. To understand the reasoning behind this argument, consider that the Upstream MLP business model is to buy mature oil and gas properties from more growth-oriented E&P companies. Due to the tax-advantaged MLP structure (no double taxation and the ability for many investors to defer paying taxes on distribution income), the investor preference for dividend stocks, and lower risk business model, Upstream MLPs have historically traded at a 2-3x higher EV/EBITDA multiple vs. mid and small cap E&P companies. This allows Upstream MLPs to accretively purchase assets that have minimal value in a traditional C-corp.

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5/19/2014 6/2/2014 6/16/2014 6/30/2014 7/14/2014 7/28/2014 8/11/2014 8/25/2014 9/8/2014 9/22/2014 10/6/2014 10/20/2014 11/3/2014 11/17/2014

Upstream MLPs vs. C-Corp Forward EBITDA Multiples

Upstream MLP Forward EBITDA Multiple

Mid/Small Cap E&Ps EBITDA Multiple

Source: Factset, Company Reports and Raymond James Estimates

The conclusion that high yields, and the subsequent increase in the cost of equity capital, will prevent accretive future acquisitions neglects the fact that while current yields have indeed risen, the valuation spread between Upstream MLPs and C-corps remains, resulting in prospective acquisition targets becoming more affordable. To see this, consider the graphic above that shows the comparison of forward EV/EBITDA ratios for Upstream MLPs to that of small- and mid-cap E&P corporations for the past six months. The spread between the two ratios represents the relative price advantage that MLPs maintain due to their tax-advantaged structure. As stock prices decline and yields rise, the ratio tends to decline. This is noticeable over the last couple of months, as we’ve seen the forward EV/EBITDA multiple for Upstream MLPs decrease from roughly 9x to 7x. Notice, however, that despite this decline, the relative spread between Upstream MLPs and E&P C-corps remains roughly 2x. While certainly lower than the spread of 3-4x that we saw over the latter half of the summer, the spread is comparable to that witnessed as recently as June. As such, it is still reasonable to expect that Upstream MLPs will continue to be able to acquire E&P assets at a discount to current MLP multiples, leaving the door open for appropriately situated Upstream MLPs to continue utilizing the Upstream MLP model.




High quality names show robust balance sheets… Given the fear permeating the MLP space, and in particular Upstream MLPs, the cost of issuing equity has naturally increased since the beginning of October, with the average yield in the space now at 14.8%. We continue to emphasize that it is important for partnerships to maintain the financial flexibility to operate in times when the markets are not receptive to equity capital raises. Therefore, we felt it was necessary to once again analyze the leverage ratios and borrowing base utilizations for each of the companies in our Upstream MLP coverage universe, in order to best depict which of our names are best able to face a lower crude price environment and a substantially higher cost of equity. In general, to avoid undue risk due to leverage, we typically prefer not to see a partnership greatly exceed two-thirds drawn on its borrowing base or have a total debt/EBITDA multiple above 3.5x. As shown in the following charts, roughly one-half of the Upstream coverage fails our first screen. Additionally, we also look at borrowing base utilization levels. Our longstanding preference is to see a utilization level below 67% drawn. On the combined metrics, stocks that screen well are Eagle Rock Energy Partners and Legacy Reserves. We would expect names like BreitBurn Energy Partners, Atlas Resource Partners, LINN Energy, and EV Energy Partners to opportunistically de-lever. We would point out that while EV Energy Partners’ borrowing base utilization is in-line with our normal comfort limit, the partnership has several unique opportunities to pare down its debt by selling undeveloped Utica acreage or its ownership in its midstream assets. Similarly, LINN Energy has been de-levering through its Permian asset swaps and outright sales. Of note, these calculations are pro forma for all of the Upstream MLPs’ announced/pending acquisitions and divestitures.

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LegacyReserves*

MemorialProduction*

BreitBurnEnergy*

Eagle RockEnergy*

LINNEnergy*

EV Energy VanguardNatural

Resources

QREnergy**

Mid-ConEnergy*

AtlasResourcePartners*

LRR Energy

Pro forma Borrowing Base Utilization


% Drawn

*Pro-forma announced acquisitions/divestitures

**pre-merger

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LRR Energy QREnergy**

AtlasResourcePartners*

EV Energy MemorialProduction*

BreitBurnEnergy*

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Resources*

LINN Energy

Total Debt / Adjusted EBITDA (Annualized)


*Pro-forma pending acquisitions/divestitures

** pre-merger

…while deep hedge books will provide support even in a lower crude price environment….: There are two main characteristics worth noting that allow Upstream MLPs to be resilient even in a substantially lower crude oil price environment. First, many of these names have a limited exposure to crude, with a large percentage of production coming from natural gas and natural gas liquids (NGLs), thereby limiting exposure to declines in crude (note: while NGLs are often priced as a percentage of crude, this relationship is not generally linear and thus percentage of oil production rather than liquids production is used in our analysis). For example, Strong Buy-rated EV Energy Partners is down ~30% from highs made in early September, even though only 10% of its total production consists of oil. Second, many of the partnerships have hedged a large portion of their crude exposure, making cash flows largely insensitive to near-term movements in oil prices. Taken together, these two factors drive the sensitivity of each company’s cash flows to changes in crude prices. Note in the following graphs that for two of our three Strong Buy-rated names, Memorial Production Partners and LinnCo (LINE shown in the chart), only ~30% of production comes from oil and these two names have a relatively high portion of their oil production hedged in 2015, locking in crude prices north of $90 per barrel. Also, while Strong Buy-rated EV Energy Partners has hedged a smaller portion of its oil production, as we previously mentioned, it derives most of its revenue from gas production and its equity interest in midstream assets, making it one of the least sensitive names with respect to declines in oil prices.




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Source: Company reports, Raymond James

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Swaps Collars Avg. FloorsSource: Company reports, Raymond James

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Source: Company reports, Raymond James




…as well hedged, high quality names demonstrate low sensitivity to oil prices: To demonstrate the effect of crude price declines on Upstream MLPs, we show a sensitivity of each name’s coverage ratio to swings in crude oil prices (driven off of our base case forecasts of $75/bbl in 2015 and $82/bbl in 2016). As discussed on the first page, the most important takeaway from the table shown below is that for our Strong Buy-rated stocks, MEMP, LNCO (LINE shown in the chart), and EVEP, coverage ratios will stay roughly at or above ~1.0x, even if WTI crude averages $65 per barrel in 2015. This is roughly $10 below our forecast and below current market prices. Note that these sensitivities exclude acquisitions and distribution growth. This is especially relevant for Legacy Reserves (LGCY), which has the strongest balance sheet in the space with an undrawn senior debt facility and a debt/EBITDA leverage ratio of only 2.3x. On the other end of the spectrum, we view BreitBurn Energy Partners (BBEP) (following its acquisition of QR Energy), Mid-Con Energy Partners (MCEP) and LRR Energy (LRE) as the most susceptible to experience a coverage ratio below 1x in 2015, should oil prices stay depressed.

Coverage Ratio Sensitivity to WTI Crude Prices

2015 2016

$65.00 $75.00 $85.00 $72.00 $82.00 $92.00

ARP 1.12x 1.14x 1.15x 1.25x 1.29x 1.33x

BBEP 0.96x 0.94x 0.92x 0.76x 0.72x 0.72x

EROC 1.81x 1.59x 1.37x 1.71x 1.62x 1.52x

EVEP 1.16x 1.14x 1.13x 1.08x 1.13x 1.19x

LGCY 0.96x 1.06x 1.14x 0.96x 1.16x 1.36x

LINE 1.02x 1.06x 1.10x 1.03x 1.10x 1.17x

LRE 0.95x 0.96x 0.98x 0.78x 0.82x 0.86x

MCEP 0.89x 0.98x 1.10x 0.81x 0.98x 1.20x

MEMP 1.04x 1.05x 1.06x 1.13x 1.17x 1.22x

VNR 0.98x 1.05x 1.08x 1.11x 1.19x 1.27x


Assumes base case Raymond James forecast for natural gas

Assumes no acquisitions or distribution increases

So how have the individual securities performed? Indiscriminate selling hits top-rated names: The table that follows shows price returns for our Upstream MLP coverage universe. Not surprisingly, our neutral and negative rated names have performed rather poorly as the market mirrors our concerns over lack of distribution coverage, high leverage, or relatively light hedge book. Note that these results include the price reaction to 3Q14 earnings, and thus may incorporate company-specific factors aside from the recent decline in commodity prices. Albeit, we did not expect to see our Outperform- and Strong Buy-rated names perform so poorly. While Memorial Production Partners reported disappointing 3Q14 earnings on largely one-time issues that we believe will resolve themselves in the coming quarters, a quarter-to-date decline of ~38% seems completely unjustified in our opinion, given the company’s best-in-class hedge book and strong natural gas-oriented drilling opportunities. On a relative basis, Vanguard Natural Resources and EV Energy Partners held up better than most, down 15% and 20%, respectively, thus far in 4Q14. Given their lack of oil price sensitivity, though, it is surprising they are down this much. Of note, we are also surprised at the ~40% decline in Legacy Reserves, which possesses one of the cleanest balance sheets in the group and an impressive coverage outlook. Focusing on the post-OPEC announcement price declines, we are very surprised to see LINN Energy lead the group lower, as we forecast a coverage ratio over 1x in both 2015/2016, supported by a solid hedge book. In addition, we believe the market is underestimating the impact of the company’s strategy of swapping high decline, capital intensive assets for low decline, MLP-friendly properties, on distributable cash flow. The 10% decline in EV Energy’s share price is also very surprising, given that the company’s production is heavily weighted towards natural gas (~70% oil; 20% NGL; 10% gas).




Price Returns

MLP 4Q14* Post OPEC

BBEP (35.0%) (11.0%)

EVEP (20.1%) (9.9%)

LRE (36.4%) (13.5%)

MCEP (46.5%) (17.3%)

MEMP (37.5%) (8.8%)

QRE* (26.1%) 0.0%

EROC (19.7%) (8.9%)

VNR (15.4%) (6.9%)

LGCY (39.9%) (11.3%)

LINE (39.4%) (16.9%)

ARP (21.8%) (7.7%)

Average: (30.7%) (10.2%)

Source: Bloomberg, Raymond James Research

*QRE ceased trading on 11/20 after BBEP acquisition

*10/1/14 - 11/28/14

Valuations quickly becoming very attractive: After trading within a range of ~8-10% yields for much of the period since 2010, the average current yield for our Upstream MLP coverage universe has ballooned out to a staggering 15%, amplified by the massive selloff following the most recent OPEC meeting. This is roughly six standard deviations away from the average of 8.9%, and represents the largest yield seen this decade. In addition, based on our 2015 EBITDA forecast, the median partnership is trading at an EV/EBITDA ratio of 7x, at the very low end of the typical 7-10x range that we are accustomed to. While the price declines naturally lead to an increase in the cost of equity, we have shown that the relative EV/EBITDA spread between upstream MLPs and E&P C-corps remains intact, meaning that the Upstream group will maintain its relative price advantage over C -corps when acquiring properties. This supports our view that as a whole, Upstream MLPs are priced at an extremely attractive level, and that the stronger names in the group will maintain the ability to use their tax-advantaged position to make accretive acquisitions, leading to future growth. Our top picks in the Upstream MLP space are Strong Buy-rated EV Energy Partners (EVEP), LinnCo (LNCO), and Memorial Production Partners (MEMP). These names benefit from being largely natural gas-weighted and have strong hedge books. Additionally, Outperform-rated LINN Energy (LINE) and Legacy Reserves have solid upside as well.

Raymond James - Upstream MLP Research Universe

Market Valuation Database 3-Year2013-16

Price Current Market Cap Ent. Value 2013 2013 Flowing Dist.

Rating 11/30/14 Yield (in $MM) (in $MM) PV 10 Mcfe Boe/d 2013A 2014E 2015E CAGR

ARP MP3 $15.21 15.5% $1,240 $2,971 166% $1.87 $62,298 14.7x 9.7x 7.1x 2.83%

BBEP MP3 $13.21 15.2% $2,845 $6,311 195% $4.91 $173,140 17.0x 13.3x 7.5x 2.44%

EROC MP3 $2.86 NM $458 $508 78% $1.47 $42,226 2.2x 3.2x 3.4x -15.91%

EVEP SB1 $28.33 10.9% $1,376 $2,468 235% $2.07 $82,262 11.8x 10.4x 7.5x 4.77%

LGCY MO2 $17.83 13.7% $1,232 $2,503 124% $2.91 $76,017 9.2x 8.3x 6.6x 3.05%

LINE MO2 $18.25 15.9% $6,007 $17,513 120% $2.15 $84,400 11.3x 7.3x 7.7x 0.68%

LRE MP3 $11.40 17.5% $313 $624 145% $3.19 $98,969 8.0x 7.6x 6.6x 2.02%

MEMP SB1 $13.76 16.0% $1,194 $2,789 101% $1.78 $80,238 16.1x 8.9x 6.6x 2.67%

MCEP MP3 $11.74 17.5% $357 $540 85% $3.57 $144,633 9.0x 9.3x 6.3x 1.76%

VNR MP3 $23.22 10.7% $1,945 $4,310 134% $1.78 $64,685 13.9x 10.3x 8.0x 2.86%

VNOM MP3 $17.97 5.5% $1,432 $1,422 435% $23.08 $422,553.56 102.1x 34.4x 13.1x 38.28%

Median 15.5% $1,240 $2,789 134% $2.15 $82,262 11.8x 9.3x 7.1x 2.7%

Mean 14.8% $1,834 $4,448 145% $2.69 $96,294 12.3x 9.5x 7.1x 2.6%

Source: Raymond James Research; Thomson

EROC and VNOM not included in Median/Mean metrics

EBITDA

Enterprise Value




Ticker Price Target Price RJ Rating Suitability RJ Entity Nov-28-14 Old New Old New Old New

Exploration and Production Atlas Resource Partners L.P. ARP-NYSE $15.21 NM NM 3 3 TR TR RJA BreitBurn Energy Partners L.P. BBEP-NASDAQ $13.21 NM NM 3 3 TR TR RJA Eagle Rock Energy Partners L.P. EROC-NASDAQ $2.86 NM NM 3 3 HR HR RJA EV Energy Partners L.P. EVEP-NASDAQ $28.33 $45.00 $45.00 1 1 AG AG RJA Legacy Reserves L.P. LGCY-NASDAQ $17.83 $28.00 $28.00 2 2 TR TR RJA LINN Energy, LLC LINE-NASDAQ $18.25 $33.00 $33.00 2 2 TR TR RJA LinnCo, LLC LNCO-NASDAQ $16.41 $35.00 $35.00 1 1 TR TR RJA LRR Energy L.P. LRE-NYSE $11.40 $18.00 NM 2 3 TR TR RJA Memorial Production Partners L.P. MEMP-

NASDAQ $13.76 $22.00 $22.00 1 1 TR TR RJA

Mid-Con Energy Partners L.P. MCEP-NASDAQ $11.74 NM NM 3 3 TR TR RJA Vanguard Natural Resources, LLC VNR-NASDAQ $23.22 NM NM 3 3 TR TR RJA Viper Energy Partners L.P. VNOM-

NASDAQ $17.97 NM NM 3 3 TR TR RJA

Prices are as of the most recent close on the indicated exchange. See Disclosures for rating and suitability definitions. RJA target prices are for a 12 month period.




Energy

Exploration and Production

Atlas Resource Partners L.P. ARP-NYSE

Rating: Market Perform Suitability: Total Return

Current Price (Nov-28-14) $15.21 Target Price NM 52-Week Range $23.18 - $14.30 BVPS (Sep-14) $13.60 Market Cap. (mil.) $1,269 Dividend/Yield $2.36/15.5% Shares Out. (mil.) 83.4 Avg. Daily Vol. (10 day) 525,554 LT Debt (mil.)/% Cap. $1,283/47

Operating Q1 Q2 Q3 Q4 Full P/E Revenues Cash Adj. EPU Mar Jun Sep Dec Year (Operating

EPU) (mil.) Flow/Share EBITDA

(mil.)

2013A $(0.16) $(0.18) $(0.73) $(0.15) $(1.29) NM $468 $2.73 $202 Old 2014E (0.25)A (0.37)A (0.08)A 0.25 (0.38) 722 2.62 306

New 2014E (0.25)A (0.37)A (0.08)A 0.25 (0.38) NM 722 2.62 306 Old 2015E 0.24 0.10 0.14 0.28 0.78 904 2.85 421

New 2015E 0.24 0.10 0.14 0.28 0.78 19.5x 904 2.85 421

Rows may not add due to rounding and equity issuance.

Target price not meaningful.

BreitBurn Energy Partners L.P. BBEP-NASDAQ


Current Price (Nov-28-14) $13.21 Target Price NM 52-Week Range $23.15 - $12.62 BVPS (Sep-14) $15.46 Market Cap. (mil.) $1,592 Dividend/Yield $2.08/15.8% Shares Out. (mil.) 120.5 ROE % -2% Avg. Daily Vol. (10 day) 2,227,349 LT Debt (mil.)/% Cap. $1,876/49



(mil.) 2013A $(0.07) $0.14 $0.24 $0.14 $0.46 28.7x $672 $1.93 $370

Old 2014E 0.14A 0.03A (0.19)A 0.10 0.09 846 1.74 473 New 2014E 0.14A 0.03A (0.19)A 0.10 0.09 NM 846 1.74 473

Old 2015E 0.18 0.12 0.11 0.11 0.52 1,425 1.91 841 New 2015E 0.18 0.12 0.11 0.11 0.52 25.4x 1,425 1.91 841






Eagle Rock Energy Partners L.P. EROC-NASDAQ

Rating: Market Perform Suitability: High Risk

Current Price (Nov-28-14) $2.86 Target Price NM 52-Week Range $6.75 - $2.64 BVPS (Sep-14) $4.87 Market Cap. (mil.) $450 Dividend/Yield $0.28/9.8% Shares Out. (mil.) 157.4 Avg. Daily Vol. (10 day) 836,050 Proj. 3-Yr Cash Dist/Unit CAGR -18.5%

EPU Q1 Q2 Q3 Q4 Full P/E Cash Adj. P/CashDististrbution/Unit Mar Jun Sep Dec Year Ratios Dist./Unit EBITDA

(mil.) Ratios

2013A $(0.22) $0.11 $(0.19) $(0.11) $(0.41) NM $0.74 $230 3.9x Old 2014E (0.12)A (0.11)A 0.11A 0.04 (0.08) 0.15 158

New 2014E (0.12)A (0.11)A 0.11A 0.04 (0.08) NM 0.15 158 19.1x Old 2015E 0.00 0.02 0.02 0.03 0.06 0.39 151

New 2015E 0.00 0.02 0.02 0.03 0.06 47.7x 0.39 151 7.3x

Rows may not add due to rounding and changes in the unit base.


EV Energy Partners L.P. EVEP-NASDAQ

Rating: Strong Buy Suitability: Aggressive Growth

Current Price (Nov-28-14) $28.33 Target Price $45.00 52-Week Range $41.97 - $27.10 BVPS (Sep-14) $20.83 Market Cap. (mil.) $1,377 Dividend/Yield $3.10/10.9% Shares Out. (mil.) 48.6 Avg. Daily Vol. (10 day) 347,153 LT Debt (mil.)/% Cap. $1,152/48



(mil.) 2013A $(0.06) $0.14 $0.13 $0.17 $0.37 76.6x $345 $2.22 $209

Old 2014E 0.19A 0.09A 0.85A 0.39 1.52 364 2.46 237 New 2014E 0.19A 0.09A 0.85A 0.39 1.52 18.6x 364 2.46 237

Old 2015E 0.52 0.52 0.52 0.65 2.21 508 3.75 327 New 2015E 0.52 0.52 0.52 0.65 2.21 12.8x 508 3.75 327

Rows may not add due to rounding. Operating EPU excludes mark-to-market hedging noise and asset sales.

Our $45 target price consists of $33/unit in value from the base business and $12/unit from the undeveloped Utica acreage. For more details on our sum-of-the-parts valuation, please see our comment dated November 11, 2014, for further detail.

https://raymondjames.bluematrix.com/docs/pdf/e8d52885-0f4e-4b79-b718-3df91e5ef8d7.pdf




Legacy Reserves L.P. LGCY-NASDAQ

Rating: Outperform Suitability: Total Return

Current Price (Nov-28-14) $17.83 Target Price $28.00 52-Week Range $32.61 - $17.01 BVPS (Sep-14) $14.51 Market Cap. (mil.) $1,023 Dividend/Yield $2.43/13.6% Shares Out. (mil.) 57.4 Avg. Daily Vol. (10 day) 722,404 LT Debt (mil.)/% Cap. $1,154/63



(mil.)

2013A $0.19 $0.28 $0.38 $0.39 $1.23 14.5x $478 $2.63 $273 Old 2014E 0.25A 0.16A 0.10A 0.06 0.54 559 2.38 303

New 2014E 0.25A 0.16A 0.10A 0.06 0.54 33.0x 559 2.38 303 Old 2015E 0.05 0.05 0.01 0.03 0.14 675 2.92 378

New 2015E 0.05 0.05 0.01 0.03 0.14 NM 675 2.92 378

Rows may not add due to rounding.

Our $28 target price is based on a ~8x EV/EBITDA multiple to our 2015 adjusted EBITDA estimate, which is within the traditional 7-10x MLP range. It is further supported by a ~9% yield to our 2015 distribution forecast.

LINN Energy, LLC LINE-NASDAQ

Rating: Outperform Suitability: Total Return

Current Price (Nov-28-14) $18.25 Target Price $33.00 52-Week Range $34.08 - $18.10 BVPS (Sep-14) $14.86 Market Cap. (mil.) $6,055 Dividend/Yield $2.90/15.9% Shares Out. (mil.) 331.8 Avg. Daily Vol. (10 day) 2,575,678 LT Debt (mil.)/% Cap. $11,010/60



(mil.) 2013A $0.16 $0.25 $0.37 $0.24 $1.02 17.9x $2,412 $2.88 $1,553

Old 2014E 0.43A 0.56A 0.54A (0.01) 1.52 3,961 3.02 2,400 New 2014E 0.43A 0.56A 0.54A (0.01) 1.52 12.0x 3,961 3.02 2,400

Old 2015E 0.21 0.18 0.15 0.18 0.72 3,837 3.12 2,284 New 2015E 0.21 0.18 0.15 0.18 0.72 25.3x 3,837 3.12 2,284


Our $33 target price is based on a ~9x multiple to our 2015 EBITDA estimate. Additionally, our target price is supported by a ~9% yield to our 2015 distribution forecast.




LinnCo, LLC LNCO-NASDAQ

Rating: Strong Buy Suitability: Total Return

Current Price (Nov-28-14) $16.41 Target Price $35.00 52-Week Range $33.12 - $16.35 Market Cap. (mil.) $571 Dividend/Yield $2.90/17.7% Shares Out. (mil.) 34.8 Avg. Daily Vol. (10 day) 2,550,533

Operating Q1 Q2 Q3 Q4 Full P/E Revenues Adj. EPU Mar Jun Sep Dec Year (Operating

EPU) (mil.) EBITDA

(mil.)

2013A $0.16 $0.25 $0.37 $0.24 $1.02 16.1x $2,412 $1,553 Old 2014E 0.43A 0.56A 0.54A (0.01) 1.52 3,961 2,400

New 2014E 0.43A 0.56A 0.54A (0.01) 1.52 10.8x 3,961 2,400 Old 2015E 0.21 0.18 0.15 0.18 0.72 3,837 2,284

New 2015E 0.21 0.18 0.15 0.18 0.72 22.8x 3,837 2,284


Our $35 target price is based on a ~9.5x multiple to our 2015 EBITDA forecast, within the traditional MLP range of 7-10x, as well as our expected 7% premium to LINE.

LRR Energy L.P. LRE-NYSE

Rating: Old: Outperform New: Market Perform Suitability: Total Return

Current Price (Nov-28-14) $11.40 Target Price Old: $18.00 New: NM 52-Week Range $20.11 - $11.31 BVPS (Sep-14) $7.22 Market Cap. (mil.) $299 Dividend/Yield $1.99/17.5% Shares Out. (mil.) 26.2 Avg. Daily Vol. (10 day) 203,901 LT Debt (mil.)/% Cap. $250/57



(mil.) 2013A $0.10 $0.30 $0.34 $0.13 $0.88 13.0x $122 $1.87 $78


Old 2015E 0.32 0.32 0.33 0.30 1.27 147 2.00 95 New 2015E 0.32 0.32 0.33 0.30 1.27 9.0x 147 2.00 95


Given the sizeable step down in crude prices during this quarter, LRR Energy’s distribution coverage is expected to remain below 1x throughout 2015, making it a tough battle for the partnership to maintain its current distribution level. Therefore, we are downgrading our rating on LRR Energy to Market Perform from Outperform.




Memorial Production Partners L.P. MEMP-NASDAQ

Rating: Strong Buy Suitability: Total Return

Current Price (Nov-28-14) $13.76 Target Price $22.00 52-Week Range $24.75 - $13.57 BVPS (Sep-14) $13.23 Market Cap. (mil.) $605 Dividend/Yield $2.20/16.0% Shares Out. (mil.) 44.0 Avg. Daily Vol. (10 day) 1,358,147 LT Debt (mil.)/% Cap. $1,484/58



(mil.)

2013A $0.33 $0.36 $0.26 $0.26 $1.16 11.9x $272 $1.84 $173 Old 2014E 0.08A 0.27A 0.20A 0.38 0.97 516 1.84 314

New 2014E 0.08A 0.27A 0.20A 0.38 0.97 14.2x 516 1.84 314 Old 2015E 0.41 0.41 0.41 0.44 1.68 674 2.33 424

New 2015E 0.41 0.41 0.41 0.44 1.68 8.2x 674 2.33 424


Our $22 target price represents an 8.5x multiple to our 2015 EBITDA estimate, within the traditional upstream MLP range of 7-10x. In addition, it represents a 10% yield to our 2015 distribution forecast.

Mid-Con Energy Partners L.P. MCEP-NASDAQ


Current Price (Nov-28-14) $11.74 Target Price NM 52-Week Range $24.39 - $11.74 BVPS (Sep-14) $6.67 Market Cap. (mil.) $209 Dividend/Yield $2.06/17.6% Shares Out. (mil.) 17.8 Avg. Daily Vol. (10 day) 340,502 LT Debt (mil.)/% Cap. $168/63



(mil.) 2013A $0.31 $0.58 $0.51 $0.46 $1.86 6.3x $86 $2.50 $60


Old 2015E 0.26 0.41 0.40 0.27 1.34 140 2.07 86 New 2015E 0.26 0.41 0.40 0.27 1.34 8.8x 140 2.07 86






Vanguard Natural Resources, LLC VNR-NASDAQ


Current Price (Nov-28-14) $23.22 Target Price NM 52-Week Range $33.04 - $19.00 BVPS (Sep-14) $15.71 Market Cap. (mil.) $1,950 Dividend/Yield $2.52/10.9% Shares Out. (mil.) 84.0 ROE % 10% Avg. Daily Vol. (10 day) 731,740 LT Debt (mil.)/% Cap. $1,923/44



(mil.)

2013A $0.26 $0.27 $0.29 $0.14 $0.99 23.5x $451 $2.48 $310 Old 2014E 0.31A 0.27A 0.33A 0.33 1.24 646 2.64 419

New 2014E 0.31A 0.27A 0.33A 0.33 1.24 18.7x 646 2.64 419 Old 2015E 0.40 0.37 0.39 0.42 1.59 814 3.08 538

New 2015E 0.40 0.37 0.39 0.42 1.59 14.6x 814 3.08 538



Viper Energy Partners L.P. VNOM-NASDAQ


Current Price (Nov-28-14) $17.97 Target Price NM 52-Week Range $36.00 - $16.29 BVPS (Sep-14) $7.04 Market Cap. (mil.) $1,432 Dividend/Yield $0.50/2.8% Shares Out. (mil.) 79.7 Avg. Daily Vol. (10 day) 164,124 LT Debt (mil.)/% Cap. $0/0 Proj. 3-Yr Cash Dist/Unit CAGR 47.0%

Cash Q1 Q2 Q3 Q4 Full P/Cash Revenues Operating Adj. Dist./Unit Mar Jun Sep Dec Year Dist. per

Unit Ratios (mil.) EPU EBITDA

(mil.) 2013A NA NA NA NA NA NM NA NA NA


Old 2015E 0.28 0.33 0.36 0.40 1.36 121 0.79 109 New 2015E 0.28 0.33 0.36 0.40 1.36 13.2x 121 0.79 109

Initial public offering within last 12 months; trailing 12-month share price figures represent range since that time. Rows may not add due to rounding. Dividend yield reflects estimated annualized return.





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Raymond James & Associates (U.S.) definitions

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Strong Buy (SB1) The stock is expected to appreciate and produce a total return of at least 15% and outperform the S&P/TSX Composite Index over the next six months. Outperform (MO2) The stock is expected to appreciate and outperform the S&P/TSX Composite Index over the next twelve months. Market Perform (MP3) The stock is expected to perform generally in line with the S&P/TSX Composite Index over the next twelve months and is potentially a source of funds for more highly rated securities. Underperform (MU4) The stock is expected to underperform the S&P/TSX Composite Index or its sector over the next six to twelve months and should be sold. Raymond James Latin American rating definitions

Strong Buy (SB1) Expected to appreciate and produce a total return of at least 25.0% over the next twelve months. Outperform (MO2) Expected to appreciate and produce a total return of between 15.0% and 25.0% over the next twelve months. Market Perform (MP3) Expected to perform in line with the underlying country index. Underperform (MU4) Expected to underperform the underlying country index. Suspended (S) The rating and price target have been suspended temporarily. This action may be due to market events that made coverage impracticable, or to comply with applicable regulations or firm policies in certain circumstances, including when Raymond James may be providing investment banking services to the company. The previous rating and price target are no longer in effect for this security and should not be relied upon.

Raymond James Euro Equities, SAS rating definitions

Strong Buy (1) Expected to appreciate, produce a total return of at least 15%, and outperform the Stoxx 600 over the next 6 to 12 months. Outperform (2) Expected to appreciate and outperform the Stoxx 600 over the next 12 months. Market Perform (3) Expected to perform generally in line with the Stoxx 600 over the next 12 months. Underperform (4) Expected to underperform the Stoxx 600 or its sector over the next 6 to 12 months. Suspended (S) The rating and target price have been suspended temporarily. This action may be due to market events that made coverage impracticable, or to comply with applicable regulations or firm policies in certain circumstances, including when Raymond James may be providing investment banking services to the company. The previous rating and target price are no longer in effect for this security and should not be relied upon. In transacting in any security, investors should be aware that other securities in the Raymond James research coverage universe might carry a higher or lower rating. Investors should feel free to contact their Financial Advisor to discuss the merits of other available investments.

Rating Distributions

Coverage Universe Rating Distribution Investment Banking Distribution

RJA RJL RJ LatAm RJEE RJA RJL RJ LatAm RJEE

Strong Buy and Outperform (Buy) 55% 65% 50% 45% 24% 34% 0% 0%

Market Perform (Hold) 41% 33% 50% 43% 8% 26% 0% 0%

Underperform (Sell) 4% 2% 0% 13% 0% 0% 0% 0%

Suitability Categories (SR)

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Company Name Disclosure

Atlas Resource Partners L.P.

Limited Partnerships may generate Unrelated Business Taxable Income (UBTI), which can create a tax liability that must be paid from a retirement account. You should receive a Schedule K-1 from the partnership annually that would include UBTI and other financial information. Please consult with your tax advisor to determine whether you must file and pay tax from your account.

BreitBurn Energy Partners L.P.


Raymond James & Associates makes a market in shares of BBEP.

Eagle Rock Energy Partners L.P.


Raymond James & Associates makes a market in shares of EROC.

Raymond James & Associates received non-investment banking securities-related compensation from EROC within the past 12 months.

EV Energy Partners L.P.


Raymond James & Associates makes a market in shares of EVEP.

Raymond James & Associates received non-investment banking securities-related compensation from EVEP within the past 12 months.

Legacy Reserves L.P. Limited Partnerships may generate Unrelated Business Taxable Income (UBTI), which can create a tax liability that must be paid from a retirement account. You should receive a Schedule K-1 from the partnership annually that would include UBTI and other financial information. Please consult with your tax advisor to determine whether you must file and pay tax from your account.

Raymond James & Associates lead-managed a follow-on offering of LGCY shares within the past 12 months.

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LINN Energy, LLC Raymond James & Associates makes a market in shares of LINE.

LinnCo, LLC Raymond James & Associates makes a market in shares of LNCO.

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Company Name Disclosure

Memorial Production Partners L.P.


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Raymond James & Associates lead-managed a follow-on offering of MEMP shares within the past 12 months.

Raymond James & Associates makes a market in shares of MEMP.

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Mid-Con Energy Partners L.P.


Raymond James & Associates lead-managed a follow-on offering of MCEP shares within the past 12 months.

Raymond James & Associates makes a market in shares of MCEP.

Vanguard Natural Resources, LLC

Raymond James & Associates makes a market in shares of VNR.

Viper Energy Partners L.P.


Raymond James & Associates co-managed a follow-on offering of VNOM shares within the past 12 months.

Raymond James & Associates co-managed an initial public offering of VNOM shares within the past 12 months.

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