HOUSTON, Feb. 10, 2014 /PRNewswire/ -- EP Energy
Corporation (NYSE: EPE) today announced its financial and
operational outlook for 2014.
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2014 Highlights
- $2 billion capital
program
- 20 percent increase in well completions from 2013, with only a
4 percent increase in capital from 2013
- 40 percent increase in oil production from 2013
- 50,000 to 54,000 barrels of oil per day
- Significant EBITDAX margin per unit expansion
- Substantially all of 2014 estimated oil and natural gas
production hedged at favorable prices
Note: Data throughout this release, including the above
highlights, is pro forma for domestic asset sales and the sale of
the company's equity interest in Four Star Oil & Gas Company
completed in 2013, and the sale of the company's Brazil operations which is anticipated to
close in 2014. See Disclosure of Non-GAAP Measures section of
this release for applicable reconciliations to GAAP terms.
"We start the year with an exciting future ahead as a new
publicly-traded company, well positioned with a tremendous set of
growth opportunities," said Brent
Smolik, chairman, president and chief executive officer of
EP Energy Corporation. "For 2014, we've meaningfully
increased our planned activity levels, with only a modest increase
in capital, as we continue to benefit from continued operational
efficiencies in all of our core oil programs. We expect to
generate significant oil volume growth along with higher asset
values as we develop our extensive inventory of high-return
opportunities. Our cash flows have strong commodity price
protection from our multi-year hedge program, with nearly all of
our estimated 2014 oil production hedged at an average price of
$97.70 per barrel. Looking
ahead, we will continue our rapid growth; maintain our focus on
improving efficiencies and returns, while growing the size and
value of our future inventory of opportunities."
Business Plan Highlights
2014 activities will focus on
the company's core programs—Eagle Ford, Wolfcamp and
Altamont. The 2014 capital budget is expected to be
approximately $2 billion, up
approximately 4 percent from 2013 and will be allocated entirely to
the Eagle Ford, Wolfcamp and Altamont programs. In total, EP
Energy expects to complete 265 to 290 wells in 2014 compared with
231 wells in 2013, which is approximately 20 percent higher than
2013 levels at the mid-point of estimates.
Oil production is forecasted to grow by approximately 40
percent, at the midpoint of estimates, from 2013 to an average of
50 to 54 thousand barrels a day. Total production is expected
to grow by approximately 15 percent, at the midpoint of estimates,
from 2013 to 94.5 to 102.5 thousand barrels of oil equivalent per
day. Per-unit adjusted cash costs are expected to be
$12.25 to $14.25 per Boe before
transportation costs of $3.00 to
$3.50 per Boe and DD&A rates are expected to be
$24.00 to 26.00 per Boe.
These costs reflect the company's increased oil production, which
is expected to continue to generate significant EBITDAX margin
expansion.
Capital Budget Allocation
The capital budget for
Eagle Ford is approximately $1
billion, with activity predominantly focused in EP Energy' s
central area in La Salle County,
as the company continues to optimize well designs and test infill
drilling with 40-acre spacing. In the Wolfcamp the company
has budgeted approximately $680
million which will focus on combined development of the
Wolfcamp B and C horizons and begin drilling Wolfcamp A
wells. EP Energy has a uniquely advantaged position in the
Uinta Basin in the Altamont field and expects to spend
approximately $240 million developing
its vertical well program while reviewing additional infill
opportunities and testing horizontal wells during the year.
EP Energy maintains approximately 37,000 acres in the core of
the Haynesville play which are held by production and no drilling
is currently planned as the company is allocating its capital to
growing oil programs. However, the company is well positioned
to resume its efficient drilling operations in the play in the
event of sustained higher natural gas prices.
Budget Comparison
A comparison of 2013 and 2014
capital investments and activities are shown in the table below.
Activity levels in 2014 are expected to increase
approximately 20 percent with an approximately 4 percent increase
in capital spending.
|
2013
|
2014
|
Capital Investment ($
billion)
|
|
|
Drilling and
completion
|
$1.58
|
$1.73
|
Facilities, lease and
seismic
|
$0.28
|
$0.20
|
G&A, interest and
other
|
$0.07
|
$0.07
|
Total
|
$1.93
|
$2.00
|
Average Drilling
Rigs
|
|
|
Eagle
Ford
|
5.5
|
5 – 6
|
Wolfcamp
|
3
|
3 – 4
|
Altamont
|
2.5
|
3 – 4
|
|
|
|
Wells
Completed
|
|
|
Eagle
Ford
|
136
|
135 – 145
|
Wolfcamp
|
68
|
95 –
105
|
Altamont
|
27
|
35 –
40
|
Total
|
231
|
265 – 290
|
Financing
At year-end 2013, EP Energy had available
liquidity of $2.4 billion, pro forma
for IPO proceeds. The company maintains a $2.5 billion revolving credit facility which is
supported by its growing reserve base. EP Energy will use
this facility and operating cash flows to fund its capital program
as it does not expect to need to access capital markets to fund its
growth capital in the foreseeable future. Growing cash flows
are expected to fund an increasing percentage of future capital
expenditures.
Commodity Hedges
EP Energy has significant commodity
price protection in 2014 with nearly 100 percent of its estimated
oil production hedged at $97.70 per
barrel. In addition to these fixed price hedges, the company
has basis hedges in place for more than 50 percent of estimated
2014 Eagle Ford production. EP Energy also has approximately
100 percent of estimated natural gas production hedged at
$4.02 per MMBtu this year. The
company also has fixed price hedges on 21.0 MMBbl and 11.8 MMBbl of
oil in 2015 and 2016, respectively at average floor prices of
$91.19 per Bbl and $90.47 per Bbl in 2015 and 2016,
respectively.
About EP Energy
The EP Energy team has a passion for finding and producing the
oil and natural gas that enriches people's lives. As a leading
North American oil and natural gas producer, EP Energy has a proven
strategy, a significant reserve base, multi‐year drilling
opportunities, and a strategic presence in fast‐emerging
unconventional resource areas. EP Energy is active in all phases of
the E&P value chain—exploring for, acquiring, developing and
producing oil and natural gas. For more information about EP
Energy, visit epenergy.com.
Disclosure of Non-GAAP Financial Measures
The
Securities and Exchange Commission's Regulation G applies to any
public disclosure or release of material information that includes
a non-GAAP financial measure. In the event of such a disclosure or
release, Regulation G requires (i) the presentation of the most
directly comparable financial measure calculated and presented in
accordance with GAAP and (ii) a reconciliation of the differences
between the non-GAAP financial measure presented and the most
directly comparable financial measure calculated and presented in
accordance with GAAP.
The company uses the terms EBITDAX margin per unit and adjusted
cash operating costs.
EBITDAX margin per unit is defined as income (loss) from
continuing operations plus interest and debt expense, income taxes,
depreciation, depletion and amortization and exploration expense
divided by total production and is a valuable measurement of a
company's operating profitability. The company believes that
the presentation of EBITDAX margin per unit is important to provide
management and investors with (i) additional information to
evaluate our ability to service debt, adjusting for items required
or permitted in calculating covenant compliance under our debt
agreements, (ii) an important supplemental indicator of the
operational performance of our business, (iii) an additional
criterion for evaluating our performance relative to our peers,
(iv) additional information to measure our liquidity (before cash
capital requirements and working capital needs) (v) and
supplemental information to investors about certain material
non-cash and/or other items that may not continue at the same level
in the future. EBITDAX margin per unit has a limitation as
analytical tool and should not be considered in isolation or as a
substitute for analysis of our results as reported under U.S. GAAP
or as an alternative to net income, income (loss) from continuing
operations, operating income, net cash provided by operating
activities or any other measure of financial performance or
liquidity presented in accordance with GAAP. For example, our
presentation of EBITDAX may not be comparable to similarly titled
measures used by other companies in our industry.
Adjusted cash operating costs is a non-GAAP measure calculated
on a per Boe produced basis and includes total operating expenses
less depreciation, depletion and amortization expense, natural gas
purchases, transportation costs, exploration expense, impairment
and ceiling charges, transition and restructuring costs and
non-cash compensation expense. The company believes adjusted
cash operating costs per unit is a valuable measures to provide
management and investors and reflects operating performance and
efficiency; however, this measures may not be comparable to
similarly titled measures used by other companies is subject to
several of the same limitations as analytical tools as noted in the
paragraphs above.
Cautionary Statement Regarding Forward-Looking
Statements.
This release includes certain
forward‐looking statements and projections of EP
Energy. We have made every reasonable effort to ensure that the
information and assumptions on which these statements and
projections are based are current, reasonable, and complete.
However, a variety of factors could cause actual results to differ
materially from the projections, anticipated results or other
expectations expressed, including, without limitation, the supply
and demand for oil, natural gas and NGLs; the company's ability to
meet production volume targets; the uncertainty of estimating
proved reserves and unproved resources; the future level of service
and capital costs; the availability and cost of financing to fund
future exploration and production operations; the success of
drilling programs with regard to proved undeveloped reserves and
unproved resources; the company's ability to comply with the
covenants in various financing documents; the company's ability to
obtain necessary governmental approvals for proposed E&P
projects and to successfully construct and operate such projects;
actions by the credit rating agencies; credit and performance risk
of our lenders, trading counterparties, customers, vendors and
suppliers; changes in commodity prices and basis differentials for
oil and natural gas; general economic and weather conditions in
geographic regions or markets served by the company, or where
operations of the company are located, including the risk of a
global recession and negative impact on natural gas demand; the
uncertainties associated with governmental regulation, including
any potential changes in federal and state tax laws and
regulations; political and currency risks associated with
international operations of the company; competition; and other
factors described in the company's Securities and Exchange
Commission filings. While the company makes these statements and
projections in good faith, neither the company nor its management
can guarantee that anticipated future results will be achieved.
Reference must be made to those filings for additional important
factors that may affect actual results. EP Energy assumes no
obligation to publicly update or revise any
forward‐looking statements made herein or any other
forward‐looking statements made by EP Energy, whether
as a result of new information, future events, or
otherwise.
Contact
Investor and Media Relations
Bill Baerg
713-997-2906
bill.baerg@epenergy.com
SOURCE EP Energy Corporation