Market Overview

EP Energy Reports Third Quarter 2019 Results

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HOUSTON, Nov. 12, 2019 /PRNewswire/ -- EP Energy Corporation (OTC:EPEGQ) today reported third quarter 2019 financial and operational results.

EP Energy Corporation. (PRNewsFoto/EP Energy Corporation)

3Q'19 Results:

  • Equivalent production of 67.2 MBoe/d
  • Oil production of 37.9 MBbls/d
  • Net loss of $620 million, including $32 million gain on financial derivatives
  • Adjusted EBITDAX of $141 million
  • Oil and gas expenditures of $159 million, including $3 million acquisition capital
  • Completed (based on wells fracture stimulated or frac'd) 32 gross (29 net) wells
  • Decreased Drilled but Uncompleted (DUC) wells to 37
  • Lease operating expense of $5.54 per Boe
  • G&A expense of $6.09 per Boe, Adjusted G&A expense of $2.54 per Boe
  • Ended the third quarter with $188 million of liquidity, all of which was cash

3Q'19 Operating and Financial Performance

Below is a summary of third quarter 2019 results compared to the third quarter 2018:


3Q'19
Actual

3Q'18
Actual

3Q'19 Actual

vs. 3Q'18 Actual

Oil Production (MBbls/d)

37.9

46.4

-18%

Equivalent Production (MBoe/d)

67.2

80.4

-16%

Percent Oil (%)

56.4

57.7

-2%

LOE per Unit ($/Boe)

5.54

6.16

-10%

Lease Operating Expense ($MM)

34

46

-26%

G&A expense per Unit ($/Boe)

6.09

2.91

109%

Adjusted G&A expense per Unit ($/Boe)1

2.54

2.05

24%

Net Loss ($MM)

(620)

(44)

-1,309%

Adjusted EBITDAX ($MM)1

141

214

-34%

Oil and Gas Expenditures ($MM)

159

202

-21%

Adjusted Oil and Gas Expenditures (excl. acquisition capital ) ($MM)1

156

134

16%

Net completions  (frac'd)

29

14

107%

Change in DUC inventory from prior quarter

(25)

(8)

-213%


1 See Disclosure of Non-GAAP Financial Measures for applicable definitions and reconciliations to GAAP terms.

Financial Position and Liquidity

The company ended the quarter with $188 million in cash, $602 million in borrowings outstanding on the RBL Facility, and $27 million in letters of credit, resulting in $188 million of available liquidity, all of which was cash, and $4.7 billion of net debt. Due to uncertainties at September 30, 2019 regarding default, event of default and cross-default provisions under our indentures and RBL Facility (including those discussed in Note 1A of our September 30, 2019 Form 10-Q), we reclassified our debt as current and wrote off approximately $90 million in unamortized debt discount and debt issue costs.

As previously announced, EP Energy voluntarily filed for chapter 11 reorganization in the U.S. Bankruptcy Court for the Southern District of Texas (the "Bankruptcy Court") on October 3, 2019. Subsequent to the filing, on October 18, 2019, EP Energy entered into a Backstop Commitment Agreement (the "Backstop Agreement") and Plan Support Agreement (the "PSA") with a number of its key creditors on the terms of a comprehensive restructuring plan (the "Plan"). The Backstop Agreement and PSA memorialize the terms of the previously disclosed agreement in principle reached on October 3, 2019, and will provide for, among other things: (1) a substantial reduction of the company's existing funded debt by approximately $3.3 billion, (2) a substantial reduction of the company's annual debt service obligations by up to $263 million, and (3) a $475 million rights offering, approximately $463 million of which is backstopped by parties holding approximately 52.0% of the Debtors' 1.25L Notes and approximately 79.3% of the Debtors' 1.5L Notes. In addition, the company entered into a commitment letter under which over 90% of the company's existing revolving loan lenders have committed to provide support for an approximately $629 million Senior Secured Exit Financing. EP Energy is continuing to operate in the normal course during the financial restructuring process.

Operations Update

For the third quarter 2019, average daily production was 67.2 MBoe/d, including 37.9 MBbls/d of oil. During the third quarter 2019, the company completed (frac'd) 32 gross (29 net) wells and incurred capital expenditures of $156 million, excluding acquisitions. The company had lower production in the third quarter 2019 compared to the third quarter 2018 due to lower net completions from the second half of 2018 through 2019. In the third quarter 2019, Eagle Ford and Permian production volumes were also negatively impacted by downstream third-party operational issues and constraints.

Northeastern Utah (NEU)

In the third quarter 2019, the company's assets in NEU produced 15.5 MBoe/d, including 10.1 MBbls/d of oil, an 11% and 16% decrease, respectively, from the third quarter 2018.  EP Energy averaged approximately two drilling rigs and completed (frac'd) four gross (one net) wells in the third quarter 2019. Total capital invested in NEU in the third quarter 2019 was $32 million excluding acquisition capital.

Eagle Ford

EP Energy's assets in Eagle Ford produced 33.1 MBoe/d, including 22.2 MBbls/d of oil in the third quarter 2019, an 8% and 13% decrease, respectively, from the third quarter 2018. In the third quarter 2019, production was impacted 0.6 net MBoe/d by downstream third-party operational issues and constraints. EP Energy averaged approximately one drilling rig, invested $122 million excluding acquisition capital and completed (frac'd) 28 gross (28 net) wells in the third quarter 2019. The company released the last rig in Eagle Ford in August 2019. In the third quarter 2019, the company decreased the DUC inventory by 26, ending the quarter with 31 DUCs.

Permian

EP Energy's assets in the Permian basin produced 18.6 MBoe/d, including 5.6 MBbls/d of oil in the third quarter 2019, a 31% and 36% decrease, respectively, from the third quarter 2018. In the third quarter 2019, the company did not drill or complete any wells in the basin. In the third quarter 2019, production was impacted 2.6 net MBoe/d by downstream third-party operational issues and constraints.

Hedge Program Update

EP Energy maintains a solid hedge program which provides continued commodity price protection.  A summary of the company's current open hedge positions is listed below:



2019


2020

Total Fixed Price Hedges





Oil volumes (MMBbls)1


3.4



11.7


Average ceiling price ($/Bbl)


$

66.41



$

65.11


Average floor price ($/Bbl)


$

55.95



$

55.90







Natural Gas volumes (TBtu)


6.4




Average price ($/MMBtu)


$

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