HOUSTON, May 8, 2018 /PRNewswire/ -- EP Energy
Corporation (NYSE:EPE) today reported first quarter 2018 financial
and operational results.
Quickly Improving Operations and Results With New Leadership
Team
In the first full quarter under new leadership, the company
improved results by increasing production and profitability while
significantly reducing costs. Below is a summary of first
quarter 2018 results compared to third quarter 2017 results, which
was the most recent full quarter under previous leadership.
|
3Q'17
|
1Q'18
|
Percent
Change
|
|
Oil Production
(MBbls/d)
|
45.1
|
45.4
|
1%
|
|
Lease Operating
Expense ($MM)
|
42
|
39
|
-7%
|
|
Reported G&A
($MM)
|
25
|
19
|
-24%
|
|
Adjusted G&A
($MM)1
|
20
|
17
|
-15%
|
|
Total Operating
Expenses ($MM)
|
237
|
224
|
-5%
|
|
Adjusted Cash
Operating Costs ($MM)1
|
110
|
101
|
-8%
|
|
Net (Loss) Income
($MM)
|
(72)
|
18
|
|
|
Adjusted EBITDAX
($MM)1
|
159
|
189
|
+19%
|
|
Permian Completed
Well Cost ($MM)2
|
4.67
|
4.23
|
-9%
|
|
|
1 See
Disclosure of Non-GAAP Financial Measures for applicable
definitions and reconciliations to GAAP terms.
|
|
2
Comparison of wells completed in the Permian with similar proppant
loading normalized to 7,500'
|
Results Beat Expectations
First quarter 2018 total equivalent production and oil
production volumes were above the high end of the company's
guidance ranges, while capital expenditures were below the low end
of the guidance range. The improvement was a result of better
well performance driven by new completion techniques and lower
capital and operating costs.
|
1Q'18
Actuals
|
1Q'18
Guidance
|
Delta to
mid-pt.
|
|
Oil Production
(MBbls/d)
|
45.4
|
43 - 44
|
+ 4%
|
|
Total Production
(MBoe/d)
|
80.1
|
77 - 79
|
+ 3%
|
|
Oil and Gas
Expenditures ($MM)1
|
208
|
210 - 220
|
- 3%
|
|
|
1 Does not
include acquisition costs
|
Executing Strategy
- Eagle Ford enhanced oil recovery (EOR) pilot project
operational in April - ahead of schedule
- Drilling first horizontal wells in Altamont
- Electric frac fleet operating in the Permian
- Improved well performance from optimized well designs
- Closed acquisition and divestiture transactions
Improved Flexibility
- Permian Drilling Joint Venture amended to redirect second
tranche to Eagle Ford asset
"We are pleased with our first quarter results and increased 1Q
completion activity concentrated in the Eagle Ford," said
Russell Parker, president and chief
executive officer of EP Energy Corporation. "As we continue
to focus on capital efficiency and fully loaded returns, we expect
to continue to see improvements in the amount of capital deployed
versus the amount of ultimate EBITDA generated. Additionally,
we are swiftly moving forward with new projects in all three areas
to unlock additional net asset value. Throughout the year we
will continue to drive these initiatives in order to generate more
shareholder value and improve the balance sheet."
Eagle Ford: Significant Increase in Oil Production
The company produced 35.9 MBoe/d, including 24.0 MBbls/d of oil
in the first quarter of 2018, a 17 and 24 percent increase from the
fourth quarter of 2017, respectively. The increase from
year-end 2017 was driven by increased activity, improved production
results from new well designs and completion techniques, and
acquisition properties.
EP Energy averaged two drilling rigs, invested $135 million and completed (based on wells
fracture stimulated or frac'd) 24 gross and net wells in the first
quarter of 2018 in its Eagle Ford program. Activities and
capital investment were up significantly from the fourth quarter of
2017 where total capital invested was $92
million and 14 wells were completed (frac'd).
Approximately 75 percent of the 24 wells completed in the first
quarter were in-fill wells and performance, on average, was equal
to or in some cases better than, the parent well.
In addition to improving well performance, the company is
driving down costs through on-site efficiency enhancement. EP
Energy has taken over certain well-site operations from third
parties. This has resulted in improved efficiencies and an
overall savings of more than $100
thousand per well which the company expects to result in
approximately $7 million of savings
in 2018. This is an example of actions the new leadership
team is quickly implementing which contribute to improved
returns.
EP Energy launched its EOR pilot project with the first natural
gas injection cycle in April. The project was the culmination
of extensive research and study, which was done on an aggressive
time frame and demonstrates the company's ability to quickly turn
concepts into actionable opportunities. Facilities were in
place and first gas was injected within four months of the initial
concept review.
In April, the company amended its Permian drilling joint venture
to direct the development area for the second tranche from the
Permian to the Eagle Ford. The drilling joint venture
improves the returns on the capital invested. The initial
wells in the second tranche are expected to begin producing later
this year. EP Energy remains the operator of the drilling
joint venture and the material terms and conditions remain
consistent with the initial agreement.
Permian: New Enhancements Increase Efficiencies and Reduce
Operating Costs
In the first quarter of 2018, the company produced 27.0 MBoe/d,
including 9.8 MBbls/d of oil, a 16 and 18 percent decrease compared
to the fourth quarter of 2017, respectively. Production
volumes were down compared to 2017 due to significantly lower
activity levels in the fourth quarter of 2017 and first quarter of
2018. In the first quarter, the company averaged one drilling
rig, invested $43 million in capital
and completed (frac'd) eight gross and net wells.
During the quarter, the company began to use an electric-powered
frac fleet, one of only a few operating in the country. The
frac fleet utilizes field gas rather than diesel fuel to generate
power, which saves costs and time. The company has increased
average pumping hours per day by approximately 30 percent in its
first three pads compared with the fourth quarter of 2017.
In the first quarter of 2018, the company began the installation
of water handling facilities in the field, which are expected to
provide significant operating efficiencies. The enhancements
allow more water to be transmitted via pipeline, reducing truck
traffic and operating costs. These cost saving initiatives,
along with changes in managing drill-outs and flowback operations,
are expected to result in more than $10
million of capital savings in 2018.
The company maintains ample take-away capacity out of the basin
through contractual agreements with third-party processors and
marketing companies. In addition, EP Energy has 100 percent
of its Midland to Cushing basis exposure hedged in 2018 at
-$1.02 per barrel.
Altamont: Accelerated Recompletions and Progress Towards
Horizontal Drilling
In the first quarter of 2018, the company produced 17.2 MBoe/d,
including 11.6 MBbls/d of oil, a four and five percent decrease
from the fourth quarter of 2017, respectively.
EP Energy operated two joint venture drilling rigs and completed
(frac'd) nine gross wells (three net wells) in its Altamont
program. Total capital invested in the Altamont program in
the first quarter of 2018 was $30
million. The company also accelerated its high return
recompletion program, successfully recompleting 23 wells, an
all-time record for the company.
The company began drilling its first horizontal wells in April,
sooner than planned. The company spud two wells, expects to
complete drilling operations in the second quarter and begin
flowback in June/July.
Multi-year Commodity Hedge Program: Well Positioned in 2018
and ~26 Percent Hedged in 20191
EP Energy maintains a solid hedge program, which provides
continued commodity price protection. A summary of the
company's current open hedge positions is listed below:
|
|
2018
|
|
2019
|
|
Total Fixed Price
Hedges
|
|
|
|
|
|
Oil volumes
(MMBbls)2
|
|
11.3
|
|
|
4.6
|
|
|
Average ceiling price
($/Bbl)
|
|
$
|
63.96
|
|
|
$
|
64.45
|
|
|
Average floor price
($/Bbl)
|
|
$
|
58.45
|
|
|
$
|
55.54
|
|
|
|
|
|
|
|
Natural Gas volumes
(TBtu)
|
|
19.3
|
|
|
7.3
|
|
|
Average price
($/MMBtu)
|
|
$
|
3.04
|
|
|
$
|
2.97
|
|
|
|
|
Note: Positions are as of May 4,
2018.
|
|
|
|
1
|
Percentage based
on mid-point of 2018 production guidance
|
|
2
|
2018 and 2019
positions include WTI three way collars of 6.7 MMBbls and 2.6
MMBbls, respectively, and WTI collars of 0.8 MMBbls in 2018 and 1.3
MMBbls in 2019.
|
Liquidity
The company ended the quarter with approximately $600 million of available liquidity and
$4.2 billion of net debt (total debt
of $4.2 billion less cash of
$19 million). EP Energy
continues to be in active discussions with the banks in the RBL
Facility to extend the maturity. The company continues to
make progress and expects to complete the process in the
second quarter of 2018.
2018 Outlook On Track With Strong Start
The table below summarizes the company's current operational and
financial guidance for 2018. Included is the company's
estimate for a significant increase in oil production volumes in
the second quarter of 2018. Although full year 2018
production guidance remains as previously provided, the company
will continue to review progress with the new operational
techniques and provide updates throughout the year.
|
1Q'18
Actuals
|
2Q'18
Estimate
|
FY 2018
Estimate
|
|
|
|
|
|
|
|
|
|
Production
Volumes
|
|
|
|
|
Oil production
(MBbls/d)
|
45.4
|
47 – 49
|
46 – 50
|
|
Total production
(MBoe/d)
|
80.1
|
80 – 82
|
81 – 87
|
|
|
|
|
|
Oil & Gas
Expenditures ($ million)
|
$208
|
$200 –
$210
|
$600 –
$6501
|
|
Eagle Ford
|
$135
|
|
~50%
|
|
Permian
|
$43
|
|
~30%
|
|
Altamont
|
$30
|
|
~20%2
|
|
|
|
|
|
Average Gross
Drilling Rigs
|
|
|
|
|
Eagle Ford
|
2
|
|
2
|
|
Permian
|
1
|
|
1
|
|
Altamont
|
2
|
|
2
|
|
|
|
|
|
Operating
Costs
|
|
|
|
|
Lease operating
expense ($/Boe)
|
$5.48
|
|
$5.00 –
$5.70
|
|
Reported G&A
expense ($/Boe)
|
$2.58
|
|
$2.90 –
$3.25
|
|
Adjusted G&A
expense ($/Boe)3
|
$2.31
|
|
$2.30 –
$2.60
|
|
Transportation and
commodity purchases ($/Boe)
|
$3.43
|
|
$3.15 –
$3.45
|
|
Taxes, other than
income ($/Boe)4
|
$2.75
|
|
$2.50 –
$2.60
|
|
|
|
|
|
DD&A
($/Boe)
|
$16.69
|
|
$16.50 –
$17.50
|
|
|
1 Full
year 2018 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 does not include acquisition costs.
|
|
2 Full
year 2018 Altamont capital includes ~100 recompletions for $50
million.
|
|
3 Adjusted
G&A represents G&A expense less approximately $0.27 per Boe
of non-cash compensation expense in 1Q'18 Actuals and $0.60 - $0.65
per Boe of non-cash compensation expense in FY 2018
Estimate.
|
|
4
Severance taxes estimates are based on $55/Bbl WTI.
|
Webcast Information
EP Energy has scheduled a webcast at 12:00 p.m. Eastern Time, 11:00 a.m. Central
Time, on May 9, 2018, to discuss its
first quarter financial and operational results. The webcast
may be accessed online through the company's website at
epenergy.com in the Investor Center. Materials relating to
the webcast will be available in the Investor Center. A
limited number of telephone lines will be available to participants
by dialing 888-317-6003 (conference ID#7126655) 10 minutes prior to
the start of the webcast. A replay of the webcast will be
available through June 11, 2018 on
the company's website in the Investor Center or by dialing
877-344-7529 (conference ID#10119858).
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.
The following table provides the company's production results,
average realized prices, results of operations and certain non-GAAP
financial measures for the periods presented.
|
Quarter ended
March 31,
|
|
Quarter ended
September 30,
|
|
2018
|
|
2017
|
|
2017
|
|
Oil Sales Volumes
(MBbls/d)
|
|
|
|
|
|
|
Eagle Ford
|
24.0
|
|
|
23.9
|
|
|
20.0
|
|
Permian
|
9.8
|
|
|
11.1
|
|
|
12.6
|
|
Altamont
|
11.6
|
|
|
11.9
|
|
|
12.5
|
|
Total Oil Sales
Volumes
|
45.4
|
|
|
46.9
|
|
|
45.1
|
|
Natural Gas Sales
Volumes (MMcf/d)
|
|
|
|
|
|
|
Eagle Ford
|
36
|
|
|
41
|
|
|
37
|
|
Permian
|
56
|
|
|
54
|
|
|
55
|
|
Altamont
|
34
|
|
|
32
|
|
|
34
|
|
Total Natural Gas
Sales Volumes
|
126
|
|
|
127
|
|
|
126
|
|
NGLs Sales Volumes
(MBbls/d)
|
|
|
|
|
|
|
Eagle Ford
|
5.9
|
|
|
7.0
|
|
|
6.7
|
|
Permian
|
7.8
|
|
|
7.4
|
|
|
8.2
|
|
Altamont
|
—
|
|
|
—
|
|
|
—
|
|
Total NGLs Sales
Volumes
|
13.7
|
|
|
14.4
|
|
|
14.9
|
|
Equivalent Sales
Volumes (MBoe/d)
|
|
|
|
|
|
|
Eagle Ford
|
35.9
|
|
|
37.7
|
|
|
32.9
|
|
Permian
|
27.0
|
|
|
27.5
|
|
|
29.9
|
|
Altamont
|
17.2
|
|
|
17.3
|
|
|
18.2
|
|
Total Equivalent Sales
Volumes
|
80.1
|
|
|
82.5
|
|
|
81.0
|
|
|
|
|
|
|
|
Net income (loss) ($
in millions)
|
18
|
|
|
(47)
|
|
|
(72)
|
|
Adjusted EBITDAX ($
in millions)
|
189
|
|
|
172
|
|
|
159
|
|
Basic and diluted net
income (loss) per common share ($)
|
0.07
|
|
|
(0.19)
|
|
|
(0.29)
|
|
Adjusted EPS
($)
|
(0.07)
|
|
|
(0.10)
|
|
|
(0.12)
|
|
Capital Expenditures
($ in millions)(1)
|
208
|
|
|
152
|
|
|
162
|
|
Total Operating
Expenses ($/Boe)
|
31.11
|
|
|
32.01
|
|
|
31.79
|
|
Adjusted Cash
Operating Costs ($/Boe)
|
13.97
|
|
|
15.16
|
|
|
14.73
|
|
Depreciation,
depletion and amortization rate ($/Boe)
|
16.69
|
|
|
16.99
|
|
|
15.92
|
|
Average realized
prices(2)
|
|
|
|
|
|
|
Oil price on physical
sales ($/Bbl)
|
61.56
|
|
|
48.43
|
|
|
45.49
|
|
Oil, including
financial derivatives ($/Bbl)(3)
|
58.86
|
|
|
54.90
|
|
|
51.75
|
|
Natural gas price on
physical sales ($/Mcf)
|
1.94
|
|
|
2.49
|
|
|
2.26
|
|
Natural gas, including
financial derivatives ($/Mcf)(3)
|
2.03
|
|
|
2.46
|
|
|
2.49
|
|
NGLs price on physical
sales ($/Bbl)
|
20.93
|
|
|
17.63
|
|
|
18.98
|
|
NGLs, including
financial derivatives ($Bbl)(3)
|
20.91
|
|
|
17.76
|
|
|
18.45
|
|
_________________________________
|
|
(1)
|
The quarter ended
March 31, 2018 does not include $248 million of acquisition
capital.
|
|
(2)
|
Oil and natural gas
prices on physical sales reflect operating revenues for oil and
natural gas reduced by oil and natural gas purchases associated
with managing our physical sales.
|
|
(3)
|
Prices per unit are
calculated using total financial derivative cash
settlements.
|
|
EP ENERGY
CORPORATION
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
|
|
(In millions,
except per common share amounts)
|
|
(Unaudited)
|
|
|
Quarter
ended
March 31,
|
|
Quarter ended
September 30,
|
|
2018
|
|
2017
|
|
2017
|
|
Operating
revenues
|
|
|
|
|
|
|
Oil
|
$
|
252
|
|
|
$
|
204
|
|
|
$
|
189
|
|
Natural
gas
|
22
|
|
|
30
|
|
|
27
|
|
NGLs
|
26
|
|
|
23
|
|
|
26
|
|
Financial
derivatives
|
(14)
|
|
|
70
|
|
|
(23)
|
|
Total operating
revenues
|
286
|
|
|
327
|
|
|
219
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
Oil and natural gas
purchases
|
—
|
|
|
1
|
|
|
—
|
|
Transportation
costs
|
25
|
|
|
29
|
|
|
29
|
|
Lease operating
expense
|
39
|
|
|
40
|
|
|
42
|
|
General and
administrative
|
19
|
|
|
20
|
|
|
25
|
|
Depreciation,
depletion and amortization
|
120
|
|
|
126
|
|
|
118
|
|
Impairment
charges
|
—
|
|
|
—
|
|
|
1
|
|
Exploration and other
expense
|
1
|
|
|
3
|
|
|
6
|
|
Taxes, other than
income taxes
|
20
|
|
|
19
|
|
|
16
|
|
Total operating
expenses
|
224
|
|
|
238
|
|
|
237
|
|
|
|
|
|
|
|
Operating income
(loss)
|
62
|
|
|
89
|
|
|
(18)
|
|
Gain (loss) on
extinguishment/modification of debt
|
41
|
|
|
(53)
|
|
|
24
|
|
Interest
expense
|
(85)
|
|
|
(83)
|
|
|
(80)
|
|
Income (loss) before
income taxes
|
18
|
|
|
(47)
|
|
|
(74)
|
|
Income tax
expense
|
—
|
|
|
—
|
|
|
2
|
|
Net income
(loss)
|
$
|
18
|
|
|
$
|
(47)
|
|
|
$
|
(72)
|
|
EP ENERGY
CORPORATION
|
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
(In
millions)
|
|
(Unaudited)
|
|
|
March 31,
2018
|
|
December 31,
2017
|
|
ASSETS
|
|
|
|
|
Current
assets(1)
|
$
|
237
|
|
|
$
|
466
|
|
|
Property, plant and
equipment, net(2)
|
4,741
|
|
|
4,422
|
|
|
Other non-current
assets
|
11
|
|
|
12
|
|
|
Total
assets
|
$
|
4,989
|
|
|
$
|
4,900
|
|
|
|
|
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
Current
liabilities
|
$
|
436
|
|
|
$
|
448
|
|
|
Long-term debt, net
of debt issue costs
|
4,104
|
|
|
4,022
|
|
|
Other non-current
liabilities
|
39
|
|
|
38
|
|
|
Total stockholders'
equity
|
410
|
|
|
392
|
|
|
Total liabilities and
equity
|
$
|
4,989
|
|
|
$
|
4,900
|
|
|
______________________________
|
|
(1)
|
Balance as of
December 31, 2017 includes $172 million of assets held for
sale.
|
|
(2)
|
Balance is net of
accumulated depreciation, depletion and amortization of $3,307
million and $3,179 million as of March 31, 2018 and
December 31, 2017, respectively.
|
|
EP ENERGY
CORPORATION
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
(In
millions)
|
|
(Unaudited)
|
|
|
Three months
ended March 31,
|
|
2018
|
|
2017
|
|
Net income
(loss)
|
$
|
18
|
|
|
$
|
(47)
|
|
|
Adjustments to
reconcile net income (loss) to net cash provided by operating
activities
|
|
|
|
|
Non-cash
expenses
|
84
|
|
|
184
|
|
|
Asset and liability
changes
|
(15)
|
|
|
(20)
|
|
|
Net cash provided by
operating activities
|
87
|
|
|
117
|
|
|
Net cash used in
investing activities
|
(229)
|
|
|
(119)
|
|
|
Net cash provided by
financing activities
|
117
|
|
|
17
|
|
|
|
|
|
|
Change in cash, cash
equivalents and restricted cash
|
(25)
|
|
|
15
|
|
|
|
|
|
|
Cash, cash
equivalents and restricted cash - beginning of period
|
45
|
|
|
20
|
|
|
Cash, cash
equivalents and restricted cash - end of period
|
$
|
20
|
|
|
$
|
35
|
|
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
Below is a reconciliation of consolidated diluted net income
(loss) per share to Adjusted EPS:
|
Quarter ended
March 31, 2018
|
|
Pre
Tax
|
|
After
Tax
|
|
Diluted
EPS(1)
|
|
($ in millions,
except earnings per share amounts)
|
|
Net income
|
|
|
$
|
18
|
|
|
$
|
0.07
|
|
|
|
|
|
|
|
|
Adjustments(2)
|
|
|
|
|
|
|
Impact of financial
derivatives(3)
|
$
|
4
|
|
|
$
|
3
|
|
|
$
|
0.01
|
|
|
Gain on
extinguishment/modification of debt
|
(41)
|
|
|
(32)
|
|
|
(0.13)
|
|
|
Valuation allowance
on deferred tax assets
|
|
|
(5)
|
|
|
(0.02)
|
|
|
Total
adjustments
|
$
|
(37)
|
|
|
$
|
(34)
|
|
|
$
|
(0.14)
|
|
|
|
|
|
|
|
|
Adjusted
EPS
|
|
|
|
|
$
|
(0.07)
|
|
|
|
|
|
|
|
|
Diluted weighted
average shares
|
|
|
|
|
247
|
|
|
|
Quarter ended
March 31, 2017
|
|
Pre
Tax
|
|
After
Tax
|
|
Diluted
EPS(1)
|
|
($ in millions,
except earnings per share amounts)
|
|
Net loss
|
|
|
$
|
(47)
|
|
|
$
|
(0.19)
|
|
|
|
|
|
|
|
|
Adjustments(2)
|
|
|
|
|
|
|
Impact of financial
derivatives(3)
|
$
|
(42)
|
|
|
$
|
(27)
|
|
|
$
|
(0.11)
|
|
|
Loss on
extinguishment of debt
|
53
|
|
|
34
|
|
|
0.14
|
|
|
Valuation allowance
on deferred tax assets
|
|
|
15
|
|
|
0.06
|
|
|
Total
adjustments
|
$
|
11
|
|
|
$
|
22
|
|
|
$
|
0.09
|
|
|
|
|
|
|
|
|
Adjusted
EPS
|
|
|
|
|
$
|
(0.10)
|
|
|
|
|
|
|
|
|
Diluted weighted
average shares
|
|
|
|
|
245
|
|
|
|
Quarter ended
September 30, 2017
|
|
Pre
Tax
|
|
After
Tax
|
|
Diluted
EPS(1)
|
|
($ in millions,
except earnings per share amounts)
|
|
Net loss
|
|
|
$
|
(72)
|
|
|
$
|
(0.29)
|
|
|
|
|
|
|
|
|
Adjustments(2)
|
|
|
|
|
|
|
Impact of financial
derivatives(3)
|
$
|
50
|
|
|
$
|
32
|
|
|
$
|
0.13
|
|
|
Loss on
extinguishment of debt
|
(24)
|
|
|
(15)
|
|
|
(0.06)
|
|
|
Impairment
charges
|
1
|
|
|
—
|
|
|
—
|
|
|
Valuation allowance
on deferred tax assets
|
|
|
24
|
|
|
0.10
|
|
|
Total
adjustments
|
$
|
27
|
|
|
$
|
41
|
|
|
$
|
0.17
|
|
|
|
|
|
|
|
|
Adjusted
EPS
|
|
|
|
|
$
|
(0.12)
|
|
|
|
|
|
|
|
|
Diluted weighted
average shares
|
|
|
|
|
246
|
|
|
________________________________
|
|
(1)
|
Diluted per share
amounts are based on actual amounts rather than the rounded totals
presented.
|
|
(2)
|
All individual
adjustments for all periods presented assume a statutory federal
and blended state tax rate, as well as any other income tax effects
specifically attributable to that item.
|
|
(3)
|
Represents
mark-to-market impact net of cash settlements and cash premiums
related to financial derivatives. There were no cash premiums
received or paid for the period presented.
|
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 our long-term
incentive programs adjusted for cash payments made under these
plans), gains on extinguishment/modification of debt and impairment
charges.
Below is a reconciliation of our consolidated net income (loss)
to EBITDAX and Adjusted EBITDAX:
|
Quarter
ended March 31,
|
|
Quarter
ended September 30,
|
|
2018
|
|
2017
|
|
($ in millions)
|
|
Net income
(loss)
|
$
|
18
|
|
|
$
|
(72)
|
|
|
Income tax
expense
|
—
|
|
|
(2)
|
|
|
Interest expense, net
of capitalized interest
|
85
|
|
|
80
|
|
|
Depreciation,
depletion and amortization
|
120
|
|
|
118
|
|
|
Exploration
expense
|
1
|
|
|
3
|
|
|
EBITDAX
|
224
|
|
|
127
|
|
|
Mark-to-market on
financial derivatives(1)
|
14
|
|
|
23
|
|
|
Cash settlements and
cash premiums on financial derivatives(2)
|
(10)
|
|
|
27
|
|
|
Non-cash portion of
compensation expense(3)
|
2
|
|
|
5
|
|
|
Gain on
extinguishment/modification of debt
|
(41)
|
|
|
(24)
|
|
|
Impairment
charges
|
—
|
|
|
1
|
|
|
Adjusted
EBITDAX
|
$
|
189
|
|
|
$
|
159
|
|
|
________________________________
|
|
(1)
|
Represents the income
statement impact of financial derivatives.
|
|
(2)
|
Represents actual
cash settlements related to financial derivatives. There were no
cash premiums received or paid for the periods
presented.
|
|
(3)
|
Non-cash portion of
compensation expense represents compensation expense (net of
forfeitures) under long-term incentive programs adjusted for cash
payments made under these plans.
|
Adjusted cash operating costs is a non-GAAP measure that is
defined as total operating expenses, excluding depreciation,
depletion and amortization expense, exploration expense, impairment
charges and the non-cash portion of compensation expense (which
represents compensation expense under our long-term incentive
programs adjusted for cash payments made under these plans).
We use this measure to describe the costs required to directly or
indirectly operate our existing assets and produce and sell our oil
and natural gas, including the costs associated with the delivery
and purchases and sales of produced commodities. Accordingly, we
exclude depreciation, depletion, and amortization and impairment
charges as such costs are non-cash in nature. We exclude
exploration expense from our measure as it is substantially
non-cash in nature and is not related to the costs to operate our
existing assets. We exclude the non-cash portion of compensation
expense, as we believe such adjustment allows investors to evaluate
our costs against others in our industry and this item can vary
across companies due to different ownership structures,
compensation objectives or the occurrence of transactions.
Below is a reconciliation of our GAAP operating expenses to
non-GAAP adjusted cash operating costs:
|
Quarter ended
March 31,
|
|
Quarter ended
September 30,
|
|
2018
|
|
2017
|
|
Total
|
|
Per-Unit(1)
|
|
Total
|
|
Per-Unit(1)
|
|
($ in millions,
except per unit costs)
|
|
Oil and natural gas
purchases
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Transportation
costs
|
25
|
|
|
3.43
|
|
|
29
|
|
|
3.91
|
|
|
Lease operating
expense
|
39
|
|
|
5.48
|
|
|
42
|
|
|
5.66
|
|
|
General and
administrative
|
19
|
|
|
2.58
|
|
|
25
|
|
|
3.28
|
|
|
Depreciation,
depletion and amortization
|
120
|
|
|
16.69
|
|
|
118
|
|
|
15.92
|
|
|
Impairment
charges
|
—
|
|
|
—
|
|
|
1
|
|
|
0.09
|
|
|
Exploration and other
expense
|
1
|
|
|
0.18
|
|
|
6
|
|
|
0.83
|
|
|
Taxes, other than
income taxes
|
20
|
|
|
2.75
|
|
|
16
|
|
|
2.10
|
|
|
Total operating
expenses
|
$
|
224
|
|
|
$
|
31.11
|
|
|
$
|
237
|
|
|
$
|
31.79
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
Depreciation,
depletion and amortization
|
$
|
(120)
|
|
|
$
|
(16.69)
|
|
|
$
|
(118)
|
|
|
$
|
(15.92)
|
|
|
Impairment
charges
|
—
|
|
|
—
|
|
|
(1)
|
|
|
(0.09)
|
|
|
Exploration
expense
|
(1)
|
|
|
(0.18)
|
|
|
(3)
|
|
|
(0.40)
|
|
|
Non-cash portion of
compensation expense(2)
|
(2)
|
|
|
(0.27)
|
|
|
(5)
|
|
|
(0.65)
|
|
|
Adjusted cash
operating costs and per-unit adjusted cash costs
|
$
|
101
|
|
|
$
|
13.97
|
|
|
$
|
110
|
|
|
$
|
14.73
|
|
|
|
|
|
|
|
|
|
|
Total consolidated
equivalent volumes (MBoe)
|
|
|
7,208
|
|
|
|
|
7,456
|
|
|
______________________________
|
|
(1)
|
Per unit costs are
based on actual total amounts rather than the rounded totals
presented.
|
|
(2)
|
Amounts are excluded
in the calculation of adjusted general and administrative
expense.
|
Adjusted general and administrative expenses are defined as
general and administrative expenses excluding the non-cash portion
of compensation expense which represents compensation expense (net
of forfeitures) under our long-term incentive programs adjusted for
cash payments under these plans.
Below is a reconciliation of our GAAP general and administrative
expense to non-GAAP adjusted general and administrative
expense:
|
Actuals
|
|
|
|
As of March
31,
|
As of September
30,
|
|
FY 2018
Estimate
|
|
2018
|
2017
|
|
Low
|
High
|
|
Total
|
($/Boe)
|
Total
|
($/Boe)
|
|
($/Boe)
|
($/Boe)
|
|
($ in millions,
except per Boe costs)
|
|
|
|
|
GAAP general and
administrative expense
|
$
|
19
|
|
$
|
2.58
|
|
$
|
25
|
|
$
|
3.28
|
|
|
$
|
2.90
|
|
$
|
3.25
|
|
|
Less non-cash
compensation expense
|
2
|
|
0.27
|
|
5
|
|
0.65
|
|
|
0.60
|
|
0.65
|
|
|
Adjusted general and
administrative expense
|
$
|
17
|
|
$
|
2.31
|
|
$
|
20
|
|
$
|
2.63
|
|
|
$
|
2.30
|
|
$
|
2.60
|
|
|
______________________________
|
|
(1)
|
Per unit costs are
based on actual total amounts rather than the rounded totals
presented.
|
Net Debt is a non-GAAP measure defined as long-term debt less
cash and cash equivalents.
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. Adjusted EPS is used by
management and we believe is a valuable measure of operating
performance. Adjusted Cash Operating Costs per unit is used by
management as a performance measure, and we believe provides
investors valuable information related to our operating performance
and our operating efficiency relative to other industry
participants and comparatively over time across our historical
results. Adjusted General and Administrative expense is used by
management and investors as additional information. Net Debt is
used by management for analysis of the Company's financial position
and/or liquidity. 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.
Adjusted EPS, EBITDAX, Adjusted EBITDAX, Adjusted Cash Operating
Costs, Adjusted General and Administrative expense and Net Debt
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. Adjusted EPS should not be
used as an alternative to earnings (loss) per share or other
measure of financial performance presented in accordance with
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. Adjusted Cash
Operating Costs should not be used as an alternative to operating
expenses, operating cash flows or other measures of financial
performance or liquidity presented in accordance with GAAP.
Adjusted General and Administrative expense should not be used as
an alternative to GAAP general and administrative expense.
Our presentation of Adjusted EPS, EBITDAX, Adjusted EBITDAX,
Adjusted Cash Operating Costs, Adjusted General and Administrative
expense and Net Debt may not be comparable to similarly titled
measures used by other companies in our industry. Furthermore, our
presentation of Adjusted EPS, EBITDAX, Adjusted EBITDAX, Adjusted
Cash Operating Costs, Adjusted General and Administrative expense
and Net Debt 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.
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