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EP Energy: Results — Improved Well Performance And Lower Costs

The following excerpt is from the company's SEC filing.

—EP Energy Corporation (NYSE:EPE) today reported

quarter

financial and operational results.

highlights include:

thousand barrels of oil production per day (MBbls/d) — up

9 percent

from 3Q’14

$446 million

Adjusted EBITDAX — up

6 percent

adjusted earnings per share (Adjusted EPS) — up 8 percent from 3Q'14

Discretionary Cash Flow Per Share — up 3 percent from 3Q'14

Adjusted unit cash cost of $8.72 per Boe, down 32 percent from 3Q'14

Wolfcamp completions drive a 30 percent incr ease in type curve

Enhanced Haynesville drilling and completion designs improved performance

Successfully closed Eagle Ford acquisition

Maintained significant liquidity of $1.6 billion at 9/30/15

$649 million from settlements on financial derivatives year-to-date through 3Q'15

“In the third quarter, we delivered outstanding well results in all four of our capital programs, while substantially reducing costs," said Brent Smolik, chairman, president, and chief executive officer of EP Energy Corporation. "We grew total oil volumes by nine percent compared with third quarter 2014, despite lower activity levels. We remain on track to meet our financial and operational goals for the year. During the quarter, we successfully closed the Eagle Ford bolt-on acquisition which expands drilling inventory in our highest return oil program. Our 2015 and 2016 hedge position is one of the best in the industry. Going forward, we will continue to focus on efficient execution, our core capability. We are equally committed to further strengthening our balance sheet, and we expect to continue to generate free cash flow the rest of this year."

EP Energy reported

Adjusted EPS and

Discretionary Cash Flow Per Share for the

quarter of

. Adjusted EBITDAX for the

, up from

$419 million

, due primarily to higher production volumes and lower operating costs. Total adjusted cash operating costs for the quarter ended

September 30, 2015

were

per barrel of oil equivalent (Boe), well below

$12.85

per Boe for the

quarter of 2014, due primarily to operational efficiencies and cost reductions resulting in lower lifting costs, lower G&A costs, and lower production taxes. The company expects full year 2015 adjusted cash operating costs to be at the low end of guidance.

The company continued to drive well costs lower. Total capital expenditures in the

quarter of 2015 were $258 million, excluding acquisition capital, with more than half invested in the company’s Eagle Ford program. During the

, the company completed

wells. Average daily oil production increased

MBbls/d of oil, up from

MBbls/d in the

. Total equivalent production grew to

thousand barrels of oil equivalent per day (MBoe/d), up from

MBoe/d in the same period last year.

Note: See Disclosure of Non-GAAP Financial Measures section of this release for applicable definitions and reconciliations of Adjusted EPS, EBITDAX, Adjusted EBITDAX, Adjusted EBITDAX Margin Per Unit, Discretionary Cash Flow, Discretionary Cash Flow Per Share, Cash Operating Costs and Adjusted Cash Operating Costs.

Eagle Ford Program

wells across its Eagle Ford program and grew oil production to

MBbls/d, an

11 percent

increase compared with the third quarter of

. In both periods, the company completed 24 wells, but grew production in the third quarter of 2015 as a result of optimizing completions and improved landing zone accuracy. Total equivalent production grew to

MBoe/d.

EP Energy continues to be encouraged by the performance of its enhanced completion designs which in the third quarter generated an initial 30 day production rate of 856 barrels of oil per day (BOPD), a 21 percent increase over third quarter 2014 results.

On September 4, 2015, the company closed its previously announced asset acquisition in the Eagle Ford. The company estimates that the newly acquired assets will add up to 164 future drilling locations.

Wolfcamp Program

wells in its Wolfcamp program and produced

MBbls/d of oil, up

from the same period in

despite completing nearly 40 percent fewer wells in the current quarter compared with the same 2014 period. Results were driven by improved drilling and completion designs and improved lateral placement. Total equivalent production grew to

Year-to-date, EP Energy reported average initial 24 hour oil production rates of approximately 800 BOPD per well, which is among the highest rates reported by any operator in the entire Midland Basin. Initial 30 day oil production rates continue to improve, averaging 530 BOPD in the third quarter.

The company updated its type curve EUR for the next 700-800 wells it plans to drill on its Wolfcamp acreage to 600 MBoe, a 30 percent increase from the previous 461 MBoe type curve. The company now estimates that initial 30 day oil production rates will average 520 BOPD, up more than 40 percent from the previous type curve.

Altamont Program

, EP Energy completed

wells as it continued to optimize well completions and increase drilling efficiencies in this resource-rich program.

Third quarter

oil production was

increase compared with the same period in

. Results during the quarter included another well with production rates in the top ten all-time best EP Energy wells in the program. Total equivalent production grew to

MBoe/d.

Altamont realized pricing in the third quarter continued to improve due to lower basin-wide production and higher refinery capacity in the Salt Lake City area.

Haynesville Program

In the third quarter of 2015, EP Energy completed its first two Haynesville wells since the second quarter of 2012. The company is encouraged with the early results of these 4,500 foot lateral wells. Initial 30 day production rates averaged about 12 million cubic feet per day of natural gas production. The new wells were completed with modern higher density designs, which have evolved since the company was last active in the program. During the quarter, the company also drilled two 7,500 foot lateral wells, which were completed in October, and early production results are exceeding 20 MMcf/d per well.

Multi-year Commodity Hedge Program

EP Energy continues to benefit from its sector-leading hedge program, which provides substantial commodity price protection for the remainder of

. Year-to-date through the third quarter, the company has realized $649 million of settlements on its financial derivatives. At September 30, the mark-to-market value of open contracts was approximately $850 million. A summary of the company’s hedge positions is listed below:

Total Fixed Price Hedges

Oil volumes (MMBbls)

Average floor price ($/Bbl)

Percent hedged

Natural gas volumes (TBtu)

Average floor price ($/MMBtu)

Note: Positions are as of

(Contract months: October

- Forward).

(1) Percent hedged volumes are based on the midpoint of the company’s updated

production guidance.

Liability Management and Liquidity

In the third quarter of 2015, the company's cash flows exceeded capital spending excluding acquisitions, a trend EP Energy expects to maintain for the remainder of 2015. As of September 30, 2015, the company had approximately $1.6 billion of available liquidity, which is supported by the company's $2.75 billion reserve-based loan facility and borrowing base. The company's next borrowing base redetermination...


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