Industry Profile: EP Energy Corporation

January 19, 2017

EP Energy Corporation: Independent Exploration & Production Company

EP Energy Corporation (NYSE: EPE; www.epenergy.com) is an independent exploration and production company headquartered in Houston, Texas. The company is engaged in the acquisition and development of unconventional onshore oil and natural gas resources in the United States.

In 2012, EP Energy was acquired from its parent company, El Paso Corporation, by a group of investors led by Apollo Global Management LLC in the largest private equity deal of the year. In a quick turn around by Apollo, EP Energy filed an IPO only a year later. The company’s net proceeds from the sale of its common stock were approximately $664 million. Since going public, EP Energy has set itself apart from many other U.S. based companies in the fact that it is focused on extracting oil, whereas many companies are focused on extracting natural gas. With oil becoming scarcer, EP Energy has had to use new technology to reach and extract oil from unconventional plays. In order to make the most out of its acreage, the company concentrates on areas that can be drilled and tapped more than once.

Diverse Asset Base

EP Energy has a diverse asset base with core development programs in the Eagle Ford Shale of South Texas, the Altamont Field in the Uinta Basin of Northeastern Utah and the Wolfcamp Shale in the Permian Basin of West Texas.

Its assets in the Eagle Ford Shale are run by the company’s Eagle Ford Division and include 91,675 net acres, within which the company has identified 946 drilling locations. EP Energy’s acreage in the Eagle Ford Shale is primarily located in La Salle and Atascosa counties, with the formation in La Salle County containing up to 125 feet of net thickness – some of the most productive acreage in the area.

EP Energy’s Central Division is responsible for its operations in the Altamont Field, which is the largest field in the Uinta Basin. The company owns 173,110 net acres in this region and a majority of it is held by production. Currently, the company is concentrated on the development of its vertical inventory on 160-acre spacing. EP Energy has identified 1,126 drilling locations, of which 350 are horizontal locations, which are necessary to reach the Uinta Basin’s characteristically stacked formation.

Finally, the Southern Division is responsible for EP Energy’s Wolfcamp Shale in the Permian Basin. The company’s acreage positions in the Wolfcamp Shale are made up of stacked pay zones, Wolfcamp A, B and C, which combine for over 750 feet of net thickness. In April 2014, EP Energy acquired an additional 37,000 net acres in the Wolfcamp Shale, which represents a 25 percent expansion of the company’s Wolfcamp acreage. These newly acquired properties are 100 percent operated and have current net production of 1,300 barrels of oil equivalents per day, including 75 percent liquids.

EP Energy previously had significant natural gas assets in the Haynesville Shale, located in Eastern Texas and Northern Louisiana. However, the company sold these assets in the second quarter of 2016 to Dallas-based Covey Park Gas LLC for $420 million. The proceeds of the sale were used to increase the company’s financial flexibility and reduce its overall debt.

Responsible Development

As part of its business operations, EP Energy is committed to responsible development. The increased use of horizontal drilling techniques and hydraulic stimulation in the industry has increased awareness and concern about protecting the fresh water supply in the areas in which companies operate. EP Energy takes steps to ensure that it is protecting the freshwater aquifers in the surrounding communities. Some of these steps include designing wells that isolate the company’s producing formations from freshwater zones; using multiple layers of protection – with two to three layers of steel casing and cement; continuously monitoring well pressure to ensure integrity; training the employees on proper use; and keeping equipment up to date. These methods are followed even when the company is operating at a depth well below that of the average freshwater aquifer.

In addition, EP Energy is diligent about protecting air quality. As such, they continually test exhaust emissions from compressor engines to ensure that they are in line with emissions requirements. The company also tries to reduce its footprint by building well pads that incorporate multiple wellheads whenever possible. This helps to minimize the acreage used and reduce the number of trucks traveling to and from the site. EP Energy is also actively involved with other companies in the industry to develop and test new technologies to reduce emissions.

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