EP Energy to Acquire Southern Midland Basin Acreage for $153M

EP Energy Corporation EPE "EP Energy", or the "Company") today announced that it closed on an acquisition of certain producing properties and undeveloped acreage directly offsetting existing Wolfcamp operating areas in Reagan and Crockett Counties in the Southern Midland Basin. The company also announced it has entered into a definitive agreement with Indigo Minerals, LLC to divest certain non-core assets in the Arklatex Cotton Valley and South Louisiana Wilcox areas. The aggregate cash purchase price for the acquired properties is $153 million, while the divested properties will generate $150 million of cash proceeds. The acquisition is expected to be immediately accretive to net asset value and cash flow per share. EP Energy Corporation "These transactions are consistent with our strategy to build large positions in low-risk, repeatable programs where we can enhance returns by improving operational efficiencies while divesting assets which do not fit our long-term objectives," said Brent Smolik, chairman, president and chief executive officer of EP Energy Corporation. Highlights: Acquisition ~37,000 net acres, approximately 25 percent expansion of current Wolfcamp position Large contiguous position adjacent to existing operations, single landowner, 100 percent University Lands 100 percent operated, 100 percent working interest, 75 percent net revenue interest Privately negotiated transaction with single seller, approximately $2,700 per undeveloped acre Increases horizontal shale inventory by 475 locations Increases total estimated net resource potential by approximately 143 MMBoe Divestiture $150 million of anticipated net proceeds with buyer also assuming transportation liability of approximately $20 million Divestiture metrics – more than seven times estimated 2014 EBITDA of approximately $20 million Net production of approximately 21 MMcfe/d (million cubic feet equivalent per day), approximately 85 percent natural gas Net proved reserves based on internal Company estimates of 84 Bcfe at 12/31/13 Smolik added, "We are pleased to be able to successfully monetize non-core assets while adding a significant bolt-on to our core Wolfcamp assets at compelling valuations for both transactions. The bolt-on transaction reaffirms our strong belief in the quality of our Southern Midland Basin acreage based on our recent well performance and expectations for continued improvement across our large inventory of future drilling locations. As we look ahead, we expect to continue to grow inventory, increase returns and build further value in our core areas." Acquisition Through a privately negotiated transaction with a single seller, the company acquired properties, which are 100 percent operated with net production of approximately 1,000 Boe/d (barrels of oil equivalent per day), 75 percent liquids. The acquisition adds 475 gross identified Wolfcamp horizontal drilling locations to the company's drilling inventory based on current spacing of 770 feet between wells. EP Energy believes the asset quality is consistent with its existing contiguous acreage position which is highly prospective for horizontal development in the Wolfcamp A, B and C horizons. Other formations including the Cline and Spraberry are present in the acreage and may be prospective for hydrocarbons. In the Wolfcamp, the company's pro forma acreage position is approximately 175,000 net acres across Crockett, Reagan, Upton and Irion counties. The company now has an even greater set of significant high-return opportunities with nearly 3,400 future drilling locations in its Wolfcamp inventory. The acquired properties can be integrated into the existing development program with minimal 2014 capital required. EP Energy is currently operating four horizontal rigs in its Wolfcamp program and expects to maintain this activity level for the rest of 2014. Non-core Asset Sales EP Energy also entered into an agreement for the sale of its legacy Arklatex Cotton Valley natural gas properties and conventional South Louisiana Wilcox oil and gas properties further concentrating its asset base within its current core operating areas. The assets under the sale agreement consist of approximately 78,000 net acres (excluding Haynesville rights) with net production of approximately 21 MMcfe/d (approximately 85 percent natural gas) and total estimated proved reserves based on Company estimates of 84 Bcfe (billion cubic feet equivalent) at 12/31/13. This transaction is expected to close in the second quarter of 2014. Proceeds from the non-core asset sales will offset the funds used for the acquisition. Webcast Information The Company will host a brief webcast at 11:00 a.m. Eastern Time, 10:00 a.m. Central Time, on May 1, 2014, to discuss the details of the transactions, including information on the company's Wolfcamp operations during the first quarter of 2014. A brief presentation, including maps and other data relating to the acquisitions will be available on the Company's website in the Investor Center at www.epenergy.com one hour prior to the webcast. 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 877-870-4263 (Passcode: 10045150) 10 minutes prior to the start of the webcast. A replay of the webcast will be available through May 30, 2014 on the company's website in the Investor Center.