EP Energy Defers Activity to Late 2016

EP Energy Defers Activity to Late 2016

EP Energy (NYSE: EPE) is an active operator in the Eagle Ford, Wolfcamp, Altamont and Haynesville plays. In 2016 daily production volumes are expected to fall between 91 to 97 MBoe/d from 109.7 MBoe/d in 2015 as the company continues to reduce activity. EPE is hoping to endure the downturn looking for improved pricing in the second half of the year where they are expected to pick up activity. 

EPE Completions Table

Down to One Rig in the Eagle Ford

  • Reduce rig count to one in the first quarter of 2016 from the 3 rigs and 1 frac crew running in the fourth quarter of 2015. This one rig will maintain lease commitments
  • Continued focus on reducing well costs: average of $5.8 million per well with best well in 2015 was $4.9 million
  • 93% of completions in the Eagle Ford were in La Salle county

The chart below shows Eagle Ford completions from Q2’15 to the present comparing IP BOE with the lateral length. The color is the pressure pumper (Halliburton, FTSI, or Weatherford) and the size is the amoutn of proppant used in the completion.

energent-EP-Energy-Eagle-Ford-Cohort

Hoping for a Better Second Half of 2016 in Wolfcamp

  • Last rig running was released in January 2016
  • EPE is planning more activity in Reagan County
    • Looking to test longer laterals
  • Expected in increase activity in the second half of 2016
  • Well costs decreased by 15% from 2014 averages to $5.3 million
    • Increased proppant volumes and number of stages in enhanced completion designs
  • FTSI is the primary pressure pumper for EPE in the Permian using a slickwater completion design for all completions in 2015 

Expect Deeper Wells in Altamount from EPE

  • 2016 plans include a one rig drilling program
    • Drilling partnership which consists of 12 wells will begin in the first half of 2016
  • Well costs expected to increase in 2016 due to deeper well depths
    • 2015 well cost averaged $4.1 million
    • 2016 well cost expected to be $4.2 million
  • Continuing recompletion program
  • EPE has moved away from using Weatherford for 100% of their jobs from February 2014 to April of 2015 to now using Halliburton 90% of the time
  • Majority of well completions in 2015 used a mix of raw sand and resin in Duchesne county

Average proppant per well in Altamount:

energent-altamount-avg-resin-raw-frac-sand

 

Haynesville Update

  • Completed 4 wells and 4 refracs in 2015
  • No new drilling activity planed 

Back-End Loaded Capital Program in 2016

  • Majority of capital program and completion activity will be in the second half of 2016
  • Capital expenditures expected to be $500 to $900 million
    • 75 to 160 well completions
    • Total production in the range of 91 to 97 MBoe/d
  • EPE has all of expected oil production hedged in 2016; 18 MMBbls of oil at an average floor price of $80.29 in 2016

 

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