HOUSTON, Jan. 22, 2018 /PRNewswire/ -- EP Energy
Corporation (NYSE: EPE) today provided its outlook for 2018 with an
increased focus on improving capital efficiency and asset
value.
Key Highlights Include:
2017 Achievements
- New leadership team in place
- Expect to deliver within all 2017 guidance targets
- Preliminary 2017 production results of 82.3 thousand barrels of
oil equivalent per day (MBoe/d), including 46.1 thousand barrels of
oil production per day (MBbls/d)
- Entry into Eagle Ford acquisition and Altamont acreage
divestiture
- Improved financial flexibility with extended debt maturity
profile
2018 Outlook
- $600 million to $650 million of oil and gas expenditures,
excluding acquisition capital
- 81 MBoe/d to 87 MBoe/d of total equivalent production
- 46 MBbls/d to 50 MBbls/d of oil production
- 85 percent of 2018 estimated oil production volumes hedged with
a floor of $58.46 per barrel of
oil1 -- retain upside to higher oil prices
- 55 percent of 2018 estimated natural gas production volumes
hedged at an average price of $3.04
per MMBtu1
1 Percent hedged based on midpoint of 2018
production guidance
"We are excited about our future as we look to build on our
recent success and grow cash flows, reduce costs and improve
capital efficiency," said Russell
Parker, president and chief executive officer of EP Energy
Corporation. "In addition to hitting our targets in 2017, we
increased our financial flexibility and established a solid path
for further improvement to our balance sheet. We have entered
into the largest acquisition in our company's history with a bolt
on to our high-quality Eagle Ford position in a leverage neutral
manner by divesting of a small portion of our Altamont
acreage. During the year, we also entered into two drilling
joint ventures, which increased capital efficiency. We
continue to explore opportunities within each program to further
increase asset performance and returns. As we look ahead,
2018 will be a year in which we blend fresh concepts and explore
new opportunities across the company to drive higher value for all
of our stakeholders."
2017 Preliminary Results
EP Energy expects to achieve its 2017 production target with
preliminary equivalent production of 82.3 MBoe/d, including 46.1
MBbls/d of oil production for the year ended December 31,
2017. The company had approximately $700 million of liquidity at December 31, 2017 pro forma for the debt exchange
completed in January 2018.
Hedge Program Update
EP Energy has a substantial portion of 2018 oil volumes hedged
with a floor of $58.46 per
barrel. The company's hedge structures allow for significant
upside participation as WTI prices rise. Approximately
two-thirds of 2018 oil exposure is open to upward price moves above
current strip.
A summary of the company's 2018 and 2019 hedge positions is
listed below:
|
|
2018
|
|
|
2019
|
|
|
|
|
|
|
|
|
Oil volumes
(MMBbls)
|
|
|
|
14.94
|
|
|
0.73
|
|
Average ceiling price
($/Bbl)
|
|
$
|
|
63.96
|
|
$
|
55.88
|
|
Average floor price
($/Bbl)
|
|
$
|
|
58.46
|
|
$
|
55.88
|
|
|
|
|
|
|
|
|
|
|
Natural gas volumes
(TBtu)
|
|
|
25.55
|
|
7.30
|
|
Average ceiling price
($/MMBtu)
|
|
$
|
|
3.04
|
|
$
|
2.97
|
|
Average floor price
($/MMBtu)
|
|
$
|
|
3.04
|
|
$
|
2.97
|
|
|
Note: Positions
are as of January 10, 2018 (Contract months: January 1, 2018 -
Forward). If market prices settle at or below $50.00 in 2018,
EPE will receive a "locked-in" cash settlement of the market price
plus $10.00 per Bbl. As of December 31, 2017, the average forward
price of oil was $59.31 per Bbl for 2018.
|
2018 Outlook
Capital Program
In 2018, EP Energy expects capital
spending to range from $600 million
to $650 million and meaningfully grow
Adjusted EBITDAX1. Included in this range, the
company has allocated approximately 10 percent of its spending for
new concepts. Approximately 50 percent of the company's
capital program is allocated to the Eagle Ford, 30 percent to the
Permian and 20 percent to the Altamont.
1 See non-GAAP terms for definition
Production Volumes
Equivalent production in 2018 is
expected to range from 81 MBoe/d to 87 MBoe/d with 46 MBbls/d
to 50 MBbls/d of oil production.
Operations
During 2018, EP Energy expects to run a
five-rig program with one to two rigs in the Eagle Ford, one rig in
the Permian and two rigs in the Altamont program.
In the Eagle Ford, the company maintains a highly efficient
capital program. In December
2017, the company announced an acquisition that will add
current production volumes and expand its acreage position by 26
percent. The transaction, which is expected to close in early
February, will increase future drilling inventory across its large
contiguous position and allow for operational synergies.
In the Permian, the company will continue to focus on improving
well performance across its acreage and reducing operating
costs.
In the Altamont, the company expects to continue its drilling
joint venture and to expand its capital efficient recompletion
program in 2018.
In 2018, EP Energy expects to increase cash flow1
with increased capital efficiencies and reduced operating
costs. The table below summarizes the company's operational
and financial guidance for the year.
|
|
2018
|
|
|
|
Oil production
(MBbls/d)
|
|
46 – 50
|
Total production
(MBoe/d)
|
|
81 – 87
|
|
|
|
Oil & Gas
Expenditures ($ million)2,3
|
|
$600 -
$650
|
Eagle
Ford
|
|
~50%
|
Permian
|
$
|
~30%
|
Altamont
|
|
~20%
|
|
|
|
Average gross
drilling rigs
|
|
|
Eagle
Ford
|
|
1 – 2
|
Permian
|
|
1
|
Altamont
|
|
2
|
|
|
|
Operating
Costs
|
|
|
Lease operating
expense ($/Boe)
|
|
$5.00 -
$5.70
|
G&A expense
($/Boe)
|
|
$2.90 -
$3.25
|
Adjusted G&A
expense ($/Boe)4
|
|
$2.30 -
$2.60
|
Transportation and
commodity purchases ($/Boe)
|
|
$3.15 -
$3.45
|
Taxes, other than
income ($/Boe)5
|
|
$2.50 -
$2.60
|
DD&A
($/Boe)
|
|
$16.50 -
$17.50
|
|
|
|
1 Defined
as Adjusted EBITDAX less oil & gas expenditures, excluding
acquisition capital.
|
2 Includes
~$135 million non-drill capital including; ~$55 million for general
equipment, ~$30 million for capitalized G&A and interest, ~$25
million for enhanced facility projects, ~$10 million for EOR
projects, and ~$15 million for leasing and seismic, and excludes
net acquisition costs and divestiture proceeds of ~$57
million.
|
3 Altamont
capital includes ~100 recompletions for $50 million.
|
4 Adjusted
G&A represents G&A expense less approximately $0.60-$0.65
per BOE of non-cash compensation expense.
|
5
Severance taxes are based on $55/Bbl WTI.
|
Webcast Information
EP Energy has scheduled a webcast at 10 a.m. Eastern Time,
9 a.m. Central Time, on January 23, to discuss its 2018
Outlook. The webcast may be accessed online through the
company's website at epenergy.com in the Investor Center. A
limited number of telephone lines will be available to participants
by dialing 888-317-6003 (conference ID# 4247904) 10 minutes prior
to the start of the webcast. A replay of the webcast will be
available through February 23, 2018
on the company's website in the Investor Center or by dialing
877-344-7529 (conference ID #10116378).
About EP Energy
The EP Energy team is driven to deliver superior returns for our
investors by developing the oil and natural gas that feeds
America's growing energy needs. The company focuses on enhancing
the value of its high quality asset portfolio, increasing capital
efficiency, maintaining financial flexibility, and pursuing
accretive acquisitions and divestitures. EP Energy is working
to set the standard for efficient development of hydrocarbons in
the U.S. Learn more at 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.
Non-GAAP Terms
EBITDAX is defined as net income (loss) plus interest and debt
expense, income taxes, depreciation, depletion and amortization and
exploration expense. Adjusted EBITDAX is defined as EBITDAX,
adjusted as applicable in the relevant period for the net change in
the fair value of derivatives (mark-to-market effects of financial
derivatives, net of cash settlements and cash premiums related to
these derivatives), the non-cash portion of compensation expense
(which represents non-cash compensation expense under these
programs adjusted for cash payments made under these plans),
transition, restructuring and other costs that affect
comparability, gains and losses on extinguishment/modification of
debt and impairment charges.
EBITDAX and Adjusted EBITDAX are used by management and we
believe provide investors with additional information (i) to
evaluate our ability to service debt adjusting for items required
or permitted in calculating covenant compliance under our debt
agreements, (ii) to provide an important supplemental indicator of
the operational performance of our business without regard to
financing methods and capital structure, (iii) for evaluating our
performance relative to our peers, (iv) to measure our liquidity
(before cash capital requirements and working capital needs) and
(v) to provide supplemental information about certain material
non-cash and/or other items that may not continue at the same level
in the future. In addition, the company believes that these
measures are widely used by professional research analysts and
others in the valuation, comparison and investment recommendations
of companies in the oil and gas exploration and production
industry.
EBITDAX and Adjusted EBITDAX have limitations as analytical
tools and should not be considered in isolation or as a substitute
for analysis of our results as reported under U.S. GAAP.
EBITDAX and Adjusted EBITDAX should not be used as an alternative
to net income (loss), operating income (loss), operating cash flows
or other measures of financial performance or liquidity presented
in accordance with GAAP. Our presentation of EBITDAX and
Adjusted EBITDAX may not be comparable to similarly titled measures
used by other companies in our industry. Furthermore, our
presentation of EBITDAX and Adjusted EBITDAX should not be
construed as an inference that our future results will be
unaffected by the items noted above or what we believe to be other
unusual items, or that in the future we may not incur expenses that
are the same as or similar to some of the adjustments in this
presentation.
Adjusted general and administrative expenses are defined as
general and administrative expenses excluding the non-cash portion
of compensation expense which represents compensation expense under
our long-term incentive programs adjusted for cash payments under
these plans. This non-GAAP measure is used by management and
investors as additional information as noted above and is subject
to the same limitations of analytical tools as noted above and
should not be considered as a GAAP substitute for general and
administrative expense.
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
volatility of and sustained low oil, natural gas, and NGL prices;
the supply and demand for oil, natural gas and NGLs; the company's
ability to meet production volume targets; changes in commodity
prices and basis differentials for oil and natural gas; 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, suppliers and third party operators; 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 oil and
natural gas demand; the uncertainties associated with governmental
regulation, including any potential changes in federal and state
tax laws and regulations; 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
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SOURCE EP Energy Corporation