HOUSTON, March 14, 2019 /PRNewswire/ -- EP Energy Corporation (NYSE: EPE) today reported 2018 financial and operational results for the company.
2018 Key Results:
- Net Loss of $1,003 million including $1,103 million non-cash impairment charge
- Adjusted EBITDAX of $813 million
- 80.7 thousand barrels of oil equivalent per day (MBoe/d), including 45.8 thousand barrels of oil production per day (MBbls/d)
- $984 million of oil and gas expenditures, including acquisitions and other capital of $340 million
- $644 million of adjusted oil and gas expenditures
- 136 completed (based on wells fracture stimulated or frac'd) gross wells
- Capital efficiency improvements in all basins
- Drilled and completed company's first ever horizontal wells in Northeastern Utah
- Expanded Eagle Ford net acreage footprint by approximately 30%
- Proved reserves of 325 million barrels of oil equivalent (MMBoe) which includes reducing our PUD development timeframe from five years to three years which was a negative 64 MMBoe impact
2018 Operating and Financial Performance
Below is a summary of fourth quarter 2018 results compared to the fourth quarter 2017 and full year 2018 results compared to 2017:
4Q'17 | 4Q'18 | 4Q'18 | 2017 | 2018 | 2018 vs 2017 | ||
Oil Production (MBbls/d) | 43.6 | 44.3 | + 2% | 46.1 | 45.8 | - 1% | |
Equivalent Production (MBoe/d) | 80.6 | 79.5 | - 1% | 82.3 | 80.7 | - 2% | |
Percent Oil (%) | 54 | 56 | + 3% | 56 | 57 | + 1% | |
LOE per Unit ($/Boe) | 5.60 | 4.84 | - 14% | 5.42 | 5.35 | - 1% | |
Adjusted LOE per Unit ($/Boe)1,2 | 5.60 | 4.83 | - 14% | 5.42 | 5.28 | - 3% | |
Lease Operating Expense ($MM) | 42 | 35 | - 15% | 163 | 158 | - 4% | |
Adjusted Lease Operating Expense ($MM)1,2 | 42 | 35 | - 16% | 163 | 156 | - 4% | |
G&A expense per Unit ($/Boe)3 | 1.35 | 2.86 | +112% | 2.69 | 3.03 | + 13% | |
Adjusted G&A expense per Unit ($/Boe)1 | 2.05 | 1.99 | - 3% | 2.62 | 2.24 | - 15% | |
Net (Loss) ($MM) | (72) | (919) | - 1,176% | (194) | (1,003) | - 417% | |
Hedge Settlements ($MM) | 7 | 9 | -29% | 93 | (25) | - 215% | |
Adjusted EBITDAX ($MM)1 | 181 | 195 | + 8% | 691 | 813 | + 18% | |
Oil and Gas Expenditures ($MM) | 145 | 107 | - 26% | 587 | 984 | + 68% | |
Adjusted Oil and Gas Expenditures (excl. Acquisitions and Other ) ($MM)1 | 145 | 99 | - 32% | 558 | 644 | + 15% |
1 | See Disclosure of Non-GAAP Financial Measures for applicable definitions and reconciliations to GAAP terms. |
2 | Does not include less than $1 million and approximately $2 million or $0.01 per Boe and $0.07 per Boe for the quarter and year ended December 31, 2018 of adjustments under a joint venture agreement. |
3 | Includes approximately $33 million reduction from LTI forfeitures for the quarter and year ended December 31, 2017. |
Fourth Quarter 2018
For the quarter ended December 31, 2018, EP Energy reported a $3.70 diluted net loss per share and $0.13 adjusted loss per share. The reported net loss for the fourth quarter of 2018 was $919 million, versus a $72 million net loss in the same 2017 period, which is primarily due to non-cash impairment charges. Adjusted EBITDAX for the fourth quarter 2018 was $195 million, up from $181 million in the fourth quarter of 2017, due to higher oil volumes, lower cash costs and higher realized pricing on oil physical sales.
The company ended the year with fourth quarter operating expenses of $1,328 million, up from $217 million in the fourth quarter of 2017 due to non-cash impairment charges in 2018. Adjusted cash operating costs were $89 million for the fourth quarter 2018, down from $101 million in the same 2017 period. Adjusted cash operating costs were $12.16 per barrel of oil equivalent (Boe) for the fourth quarter 2018, down from $13.65 per Boe in the same 2017 period mainly due to lower lease operating costs.
Capital expenditures in the fourth quarter 2018 were $107 million, down from $145 million in the same period 2017, primarily due to decreased drilling activity in the Permian in 2018. Capital expenditures for each area during the fourth quarter of 2018 were approximately $83 million in the Eagle Ford, $22 million in Northeastern Utah, and $2 million in Permian. In the fourth quarter 2018, the company completed 27 gross wells, 22 of which were in the Eagle Ford and 5 in NEU.
Full Year 2018
For the year ended December 31, 2018, EP Energy reported a $4.05 diluted net loss per share and $0.25 adjusted loss per share. Reported net loss was $1,003 million for the year 2018, compared to a $194 million net loss in the same 2017 period, which includes approximately $1,103 million asset impairment charges related to the Permian in 2018. Adjusted EBITDAX for the year 2018 was $813 million, up from $691 million in 2017 due primarily to lower lease operating expenses, lower adjusted general and administrative expenses, and higher realized pricing on oil and NGL volumes in 2018.
Total operating expenses for the year ended December 31, 2018 were $2,039 million, up from $927 million in the same 2017 period. The difference was driven by non-cash impairment charges of $1,103 million related to the company's Permian assets in 2018. Adjusted cash operating costs were $406 million for the year 2018, down from $427 million in the same 2017 period. Adjusted cash operating costs per unit were $13.77 per Boe for the year 2018, down from $14.23 per Boe in the same 2017 period primarily due to lower lease operating expenses, lower transportation costs, and lower adjusted general and administrative expense in 2018.
Adjusted oil and gas expenditures in 2018 were $644 million, up from $558 million in the same period 2017. In 2018, the company spent $425 million in Eagle Ford (excluding $315 million of acquisition capital), $99 million in the Permian (excluding $23 million in capital adjustments under a joint venture agreement) and $120 million in Northeastern Utah (excluding $2 million in acquisition capital). In 2018, the company completed 136 gross wells, which was approximately 13 less than EP Energy completed in 2017. In 2018, the company completed 85 wells in the Eagle Ford, 24 wells in the Permian, and 27 wells in Northeastern Utah. In addition the company ended the year with 29 DUC's.
Note: See Disclosure of Non-GAAP Financial Measures section of this release for applicable definitions and reconciliations to GAAP terms.
Financial Position and Liquidity
At December 31, 2018, EP Energy's balance sheet included $4.4 billion of total debt and approximately $27 million of cash and cash equivalents. As of December 31, 2018, the company had $537 million of total liquidity. The company also repurchased $84 million of unsecured notes during the year at a discount. In 2019 the company repurchased an additional $50 million of its unsecured notes at a discount as of February 28, 2019.
Operations Update
For the year ended December 31, 2018, average daily production was 80.7 MBoe/d, including 45.8 MBbls/d of oil. Fourth quarter 2018 average daily production was 79.5 MBoe/d, including 44.3 MBbls/d of oil. During the fourth quarter of 2018, the company completed (frac'd) 27 gross wells (13 net). The decrease in the fourth quarter of 2018 production is due to lower net completions in the second half of 2018.
Northeastern Utah (NEU)
EP Energy's assets in Northeastern Utah averaged approximately 17.0 MBoe/d during the fourth quarter of 2018, which included 11.5 MBbls/d of oil while also completing five gross wells (2 net). The company's focus in 2018 in NEU was horizontal well development and recompletion activity. During 2018 EP Energy successfully completed the company's first ever horizontal wells in the basin. In the first quarter of 2019, the company expects to average one operated rig focused on horizontal drilling while bringing four gross wells (two net) to sales.
Eagle Ford
EP Energy's assets in Eagle Ford averaged approximately 37.3 MBoe/d during the fourth quarter of 2018, which included 24.7 MBbls/d of oil while also completing 22 gross wells (11 net). During 2018 the company expanded its footprint by almost 30% in the Eagle Ford through A&D activity. The company expects to average three operated rigs and one completion crew while bringing approximately 13 gross wells (8 net ) to sales in the first quarter of 2019.
Permian
EP Energy's assets in the Permian basin averaged approximately 25.2 MBoe/d per day during the fourth quarter of 2018, which included 8.1 MBbls/d of oil. The company will not have any rigs or completion crews in the first quarter of 2019 in the Permian.
Hedge Program Update
In 2018, EP Energy realized negative $25 million from settlements on financial derivatives. At year-end 2018, the mark-to-market value of the company's hedge positions was approximately $114 million.
A summary of the company's 2019 and 2020 hedge positions is listed below:
2019 | 2020 | ||||||
Total Fixed Price Hedges | |||||||
Oil volumes (MMBbls) | 13.7 | 11.7 | |||||
Average ceiling price ($/Bbl) | $ | 66.41 | $ | 65.11 | |||
Average floor price ($/Bbl) | $ | 55.93 | $ | 55.90 | |||
Natural gas volumes (TBtu) | 25.6 | — | |||||
Average ceiling prices ($/MMBtu) | $ | 3.72 | $ | — | |||
Average floor prices ($/MMBtu) | $ | 2.86 | $ | — | |||
Note: Positions are as of March 13, 2019 (Contract months: January 2019 - Forward) |
The table includes WTI three-way collars of 12.1 MMBbls and 11.7 MMBbls in 2019 and 2020, respectively, and WTI collars of 1.6 MMBbls in 2019. |
2018 Proved Reserves
Ryder Scott, who was engaged in prior years to solely audit year-end reserves estimates, prepared the reserves estimates on EP Energy's behalf in 2018. EP Energy's proved oil and natural gas reserves were 325 MMBoe as of December 31, 2018, a 17 percent decrease compared to proved reserves at December 31, 2017 of 392 MMBoe. Our PUD reserves at December 31, 2018 reflect the effects of adjusting our PUD bookings methodology from a five-year to a three-year timeframe as a result of the current economic price environment, a lower projected capital budget in 2019, and our available liquidity and access to the capital markets. Our December 31, 2018 PUD reserves are 64 MMBoe lower as a result of this change. Proved developed reserves increased ten percent from 205 MMBoe in 2017 to 234 MMBoe in 2018. In 2018, total proved reserves were 72 percent proved developed and 70 percent liquids.
The SEC first-day-of-the-month 12-month average prices for reserves as of December 31, 2018 were $65.56 per Bbl for oil and $3.10 per MMBtu for natural gas, up from $51.34 per Bbl for oil and $2.98 per MMBtu for natural gas in the prior 12-month period.
First Quarter 2019 Outlook
Given the uncertainty of commodity prices, EP Energy has elected to provide quarterly guidance updates. Production in first quarter 2019 is impacted by reduced net completion count over 4Q'18 and 1Q'19. First quarter 2019 capital expenditures is impacted by the build in DUC inventory.
The company has provided production and capital guidance for the first quarter of 2019 below:
1Q'19 | ||
Oil production (MBbls/d) | 38 - 39 | |
Total production (MBoe/d) | 72 - 73 | |
Oil & Gas Expenditures ($ million) | $160 - $170 | |
Eagle Ford | ~85% | |
Permian | ~0% | |
NEU | ~15% | |
Average gross drilling rigs | ||
Eagle Ford | 3 | |
Permian | — | |
NEU | 1 | |
Gross completions (based on fracture stimulated or frac'd) | ~17 | |
Ending drilled but uncompleted inventory | ~45 | |
Operating Costs | ||
Lease operating expense ($MM) | $38 - $41 | |
Lease operating expense ($/Boe) | $6.00 - $6.50 | |
G&A expense ($/Boe) | $2.75 - $3.15 | |
Adjusted G&A expense ($/Boe)1 | $2.20 - $2.60 | |
Transportation and commodity purchases ($/Boe) | $3.75 - $4.05 | |
Taxes, other than income ($/Boe)2 | $1.80 - $1.95 | |
DD&A ($/Boe) | $14.50 - $15.50 |
1 | Adjusted G&A represents G&A expense less approximately $0.55 - $0.55 per Boe of non-cash compensation expense. |
2 | 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 March 15, to discuss its fourth quarter and full year financial and operational results. The webcast may be accessed online through the company's website at epenergy.com in the Investor Center. Materials to be discussed during the webcast will be available in the Investor Center one hour prior to the webcast. A limited number of telephone lines will be available to participants by dialing 888-317-6003 (conference ID# 4069531) 10 minutes prior to the start of the webcast. A replay of the webcast will be available through April 15, 2019 on the company's website in the Investor Center or by dialing 877-344-7529 (conference ID# 10129100).
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. See Disclosure of Non-GAAP Financial Measures for applicable definitions and reconciliations to GAAP terms.