* EV Energy Partners, L.P. (EVEP) Buy/High Risk (1H) *

Adding to TPL; Dist. Appears Secure; Acquisitions Likely
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Richard Roy ----------------------------------------------------------------------

* > Risks Have Lessened Paving the Way for Acquisitions - In the past several months EVEP has 1) re-entered the acquisition market, 2)successfully tapped the capital markets twice (in June and September), 3) significantly reduced indebtedness, and 4)neutralized risks related to its leverage profile.
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* > Well Suited to Execute Growth Through Acquisition Strategy - We are confident in EVEP's ability to execute the growth through acquisition strategy, given: 1) financial flexibility (i.e. ~57% drawn), 2) dropdown potential from sponsor EnerVest, 3)demonstrated success in tapping the equity capital markets for financing, and 4) a strong track record of acquisitions. The combination of the aforementioned factors should fuel acquisition activity over the next few quarters. Ultimately, asset growth should act as a catalyst for distribution growth and for multiple expansions in the medium term.
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* > Distribution Sustainable through at least 2011 - In our view, the partnership's distribution is largely secure through end-2011. Further, we expect EVEP to take advantage of the recent rebound in futures prices to layer on additional hedges, further mitigating risks to the distribution in 2012. We estimate that EVEP has hedged approximately 81%, 68%, 59%, and 55% of 2H-2009, 2010, 2011, and 2012 production, respectively. * *
* > Bottom Line - We believe the ability to execute the growth through acquisitions strategy, a relatively attractive yield supported by an aggressive hedging program, and the capacity to grow distributions over time makes for a compelling investment proposition. We re-iterate our Buy rating.

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* ................................2008............2009E............2010E *
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* EPS new(US$)...................11.14.............1.24.............1.74 *
* EPS Old(US$)...................11.14.............1.24.............1.74 *
* EPS Growth...................1,405.2............-88.8.............40.2 *
* P/E..............................2.4.............21.3.............15.2 *
* EV/EBITDA........................3.5..............9.8..............7.5 *
* Consensus Data....................na.............2.52.............2.27 *
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* Price (22 Oct 09).........US$26.48 Target price.............US$30.50 *
* Expected share price return..15.2% Expected dividend yield.....11.4% *
* Expected total return........26.6% Market Cap................US$622M