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Greg givens   10-11-12 Greg givens 10-11-12 Presentation Transcript

  • EP Energys Flagship - The Eagle FordOptimizing Spacing to Maximize ValueGreg GivensVice President, Eagle FordOctober 15, 2012
  • Cautionary StatementIn this presentation, EP Energy has disclosed its proved reserves using the SECs definition of provedreserves under rules effective December 31, 2009. Proved reserves are estimated quantities ofhydrocarbons that geological and engineering data demonstrate with reasonable certainty to be recoverablein the future from known reservoirs under the assumed economic conditions. In this presentation, EPEnergy has provided estimates of its “net risked resources,” “unproved resources” or “inventory” which aredifferent than probable and possible reserves as defined by the SEC. Net risked resources, unprovedresources or inventory are estimates of potential reserves that are made using accepted geological andengineering analytical techniques.This presentation presents certain production and reserves-related information on an "equivalency" basis.Equivalent volumes are computed with oil and natural gas liquid quantities converted to Mcf at a ratio of oneBbl to six Mcf, and natural gas converted to barrels at a ratio of six Mcf to one Bbl. A Boe conversion ratio ofsix Mcf of natural gas to one Bbl, and a Mcfe conversion ratio of one Bbl of crude oil or NGLs to six Mcf, isbased on an energy equivalency conversion method primarily applicable at the burner tip and does notrepresent a value equivalency at the wellhead. Although these conversion factors are industry acceptednorms, they are not reflective of price or market value differentials between product types.Certain of the production information in this presentation includes the production attributable to EP Energy’s48.8 percent interest in Four Star Oil and Gas Company (“Four Star”). In addition, the proved reservesattributable to its interest in Four Star represent estimates prepared by EP Energy and not those of FourStar.This presentation refers to the non-GAAP financial measures “Cash Operating Costs” and “Adjusted CashOperating Costs”. Definition of these measures and reconciliation between U.S. GAAP and non-GAAPfinancial measures is included in the Appendix to this presentation. 2
  • Company Update May 24, 2011 – Announced EPE spin-off October 16, 2011 – Kinder Morgan announced acquisition of El Paso Corporation (with intent to sell E&P assets) May 25, 2012 – Launched EP Energy  Closed sale to private equity group More information on our new website epenergy.com 3
  • Strategy: How We’ll Get There 4
  • Purpose: What We DoAt EP Energy, we have a passion for finding and producing the oil and natural gas that enriches peoples lives 5
  • Vision: Where Were Going 6
  • Values: How We Behave 7
  • Competitive Advantages Large, Diverse  4.0 Tcfe of proved reserves – PV-10 of ~$7 billion1 High Quality  Rapidly growing oil shale plays -- onshore U.S. unconventional Asset Base  Producing wells currently 77% operated1  20+ year drilling inventory -- ~4,500 locations, 85% oil - related1 Extensive Low- Risk Inventory  Natural gas inventory is largely held-by-production  2011 drilling success rate of 100% (233 gross wells)  Industry leading well cost performance in key programs Efficient  Top tier lease operating expense performance Operations  Manage returns and margin through commodity price cycles  Leadership team comprised of former El Paso employees Experienced Team  Focused – build assets with repeatable programs/inventory  Asset teams and culture remain in place Strong  Base PDP assets (1.7 Tcfe)1 provide predictable cash flow Financial  Favorable hedge position Position  ~$1.6 billion liquidity21 As of 12/31/11. Pre-tax PV-10 value assumes SEC pricing, as of 12/31/11 82As of 6/30/12, proforma for the Financing Transaction completed on 8/13/12
  • High-Quality Asset Base 2011 Proved Reserves Diversified Portfolio Eagle Ford Brazil/Four Star 16% 2011 Reserves: 269 Bcfe Production: 92 MMcfe/d3 Other Assets 42% Haynesville 23% Central Central Altamont 14% Wolfcamp 2011 Reserves (Bcfe): 1,110 Wilcox 4% ALTAMONT 4Q 2011 Production Bcfe3 2011 Reserves: 2,602 1% (MMcfe/d): 153 MMcfe/d Production: 603 Total: 4.0 Tcfe1 12/31/2011 PV-10: ~$7.0 billion2Ave. Production - 6/30/12 HAYNESVILLE Eagle Ford 10% WOLFCAMP S. LOUISIANA WILCOX EAGLE FORD Other Assets Haynesville 45% 35% Eagle Ford Southern 2011 Reserves : 642 Bcfe Production: 91 MMcfe/d3 2011 Reserves: 474 Bcfe Wilcox Altamont Wolfcamp Production: 120 MMcfe/d3 2% 7% 1% 1Includesproportionate share of Four Star reserves and production. Total: 906 MMcfe/d1,3 2PV-10 value assumes 2011 Pre-Tax SEC pricing. The proved developed reserves represents ~54% of the value. 3 Average daily production rate for six-month period ended June 30, 2012. 9
  • Drilling Inventory Growth Significant oil and natural gas inventory with high ownership and control Net Risked Resources Excluding PDP and PDNP (Tcfe) 2009 2010 2011 Liquids 6:1 34% 48% 59% 9.7 0.0 8.0 1.6 0.2 Domestic 82% 90% 99% 6.0 2.2 0.6 6.2 2.0 4.2 Core Prog1 46% 61% 78% 2.5 1.3 1.9 0.9 2009 YE 2010 YE 2011 YE Low-Risk 90% 97% 100% PUD Unconventional Conventional Lower Risk Conventional Higher Risk1Core programs include Altamont, Eagle Ford, Haynesville (includes Middle Bossier), Wolfcamp and South Louisiana WilcoxNote: Inventory includes unproved resources and proved undeveloped reserves; All inventory is risked, net to EP Energy’s interest 10
  • Key Programs Provide Multi-Year Drilling Opportunity KEY DRILLING PROGRAMS LOCATIONS1 Haynesville 673 Eagle Ford 1,246 Wolfcamp 983 Altamont 1,336 ALTAMONT Wilcox 260 Total 4,498 HAYNESVILLE WOLFCAMP Oil Resources Gas Resources WILCOX EAGLE FORD (Northern/Central) 111As of 12/31/11 (includes PUD locations and is shown on a risked basis)
  • Extensive Drilling Inventory—Low Breakeven Prices 10% IRR After-tax Return Threshold Gas Directed Drilling Inventory Oil Directed Drilling Inventory $8.00 $100 $7.00 $90 $80 $6.00 $70 ($/MMBTU) $5.00 ($/BBL) $60 $4.00 $50 $3.00 $40 $30 $2.00 $20 $1.00 $10 $0.00 $0 0 0 500 1,000 1,000 1,500 1,480 2,000 1,980 2,500 2,480 3,000 2,980 0 0 200 200 400 399 600 599 800 799 1,000 999 (Bcfe) (MMBoe) ~90% of 9.7 TCFE of Inventory economic below $5.00/MMBTU* and $60/BBL** Based on NYMEX pricing for Henry Hub and WTI 12
  • 2012 Capital Budget $1.5 - $1.6 Billion1 3% 6% 8% 12% 13% > 90% allocated to oil-focused key programs 131Includes ~$100 MM of capitalized interest, information technology and capitalized direct labor costs
  • Favorable Program Economics Initial Average Capital EUR Production Working ($MM) 1 (Mboe) 1 (Boe/d)1,2 IRR3 Interest Eagle Ford, Central 8.0 – 8.4 500 – 600 750 – 900 45 – 65% 92% Wolfcamp 8.0 – 8.4 465 – 510 575 – 675 20 – 30% 100% Altamont 4.6 – 7.7 300 – 450 400 – 600 20 – 40% 89% Wilcox 6.0 – 7.0 320 – 440 500 – 900 30 – 70% 85% Focused investments delivering excellent returns1 Based on 100 percent working interest2 Based on initial 24 hours of production3 After-tax internal rate of return net to EP Energy interest based on $3.50 per MMBtu (HH) and $90.00 per Bbl (WTI) 14
  • Continuous Improvement First 3 Wells Current (median) 10.9 9.8 8.2 8.2 8.2 6.6 6.5 6.2Gross CapitalCost Per Well($MM) Eagle Ford Wolfcamp Altamont Wilcox $1.72 $1.71 $1.69 $1.66Adjusted CashOperating Costs($/Mcfe) 15
  • Oil Impact is Growing Rapidly  Oil volumes up ~60%1  1H’12 vs. 1H’11  Growing revenue impact2  57% (1H’12) vs. 35% (1H’11)  85% of future drilling inventory located in oil-focused reservoirs  91% of 2012 capex oil-directed Tremendous growth in inventory plus shift in capital1 Includes proportionate share of Four Star production volumes. 162 Oil and NGLs revenue, excluding realized and unrealized gains on financial derivatives.
  • Eagle Ford Avg. Net Production Growth  Highest return and highest value asset in portfolio 18.0 Gas NGL Oil 15.0 Advantaged acreage position in 12.0 Central Area (La Salle/Dimmit Co.) MBoe/d 9.0 6.0 Significant inventory of oil 3.0 opportunities (1246 locations1) 0.0 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 Major source of future oil production and reserve adds  157,000 total net acres1  2012 Program  77,000 in Central area  642 Bcfe estimated net proved  Drilling 86 wells reserves1  Currently running 5 rigs  88 net producing wells2  ~$896 MM capex1 As of December 31, 2011 172 As of June 30, 2012
  • Activity Continues to Heat UpJuly 2012 Production (from TRRC) 310,370 BOPD 51,676 BCPD 1.21 BCFD 18
  • Operational Efficiency Improves over time Rig Days Stimulation Initial 24 hr rate1 (Spud to Rig Release) (Stages/Day) (BOE/Day) 21 4.5 1036 3.7 16 763 15 14 2.9 723 721 2.3 2010 1H 2011 2H 2011 1H 2012 2010 1H 2011 2H 2011 1H 2012 2010 1H 2011 2H 2011 1H 2012 1 Rig line now drills Higher efficiency Well performance >20 wells per year lowers total well cost continues to improve1 Maximum continuous 24 hours 19Note: Based on Central Area wells only
  • Field Gathering/Central FacilitiesOil, Gas &Water Flow Midstream Lines Oil & Gas Lines Well Paths Common  Wells within 3-4 miles Facility gathered at Central Production Facility (CPF) LACT  Oil and Gas connected to regional pipelines through midstream Road gathering lines Frac Pond  Maintain option to truck Potential Future Well oil Locations  30-40 wells connected to each CPF at full development 20
  • Central Production Facility 21
  • Eagle Ford Oil & Gas Infrastructure OIL LA SALLE In-field Gathering Gardendale Rail Facility  Owned and operated by EP Energy Hilcorp Gardendale  Wellhead gathering to 12 central batteries currently; Hilcorp Cotulla additional batteries under construction Camino Real Gathering System*  Natural gas system capacity of 150–170 MMcf/d  Oil system capacity of VOLATILE OIL 90,000 Bbls/d, with blending capability  Additional connections to new lines under DIMMIT construction in area would substantially increase capacity ETC DIMMI EP acreage Camino Real Gas line Takeaway T interconnects Gas WET GAS  Sufficient downstream processing and transportation Camino Real Oil line Kinder/Copano capacity to accommodate aggressive gas volume Oil interconnects Enterprise growth Oil terminal DRY GAS  Long-term oil sales agreements with premium pricing Regency to WTI Began oil deliveries to downstream markets via pipeline 1Q 2012*Camino Real is owned and operated by Kinder Morgan 22
  • Spacing Pilots110 wells drilled91 wells completed88 wells online as of 6/30/2012 23
  • Microseismic Surveys 700 ft well spacing  Microseismic used to determine extent of fracture network875 ft well spacing  Production testing and reservoir simulation aid in selecting the optimal between well spacing 60 acre drainage area 24
  • Initial Pilots holding up well 25
  • Increased density successful to date 26
  • Keys to successSound development strategyLong range planning Infrastructure build-out takes timeEvaluate & test options earlyContinuous improvement culture Cost management Utilize latest technology“Little things add up when you are drilling 1000 wells” 27
  • Thank you 28
  • Additional Non-GAAP InformationEP Energy uses the non-GAAP financial measures of Cash Operating Costs and Adjusted Cash Operating Costs. We believe these supplementalmeasures provide meaningful information to our investors; however, due to the limitations of these measures as analytical tools, we rely primarilyon our GAAP results.Cash Operating Costs and Adjusted Cash Operating Costs. We monitor cash operating costs required to produce our oil and natural gasproduction volumes. Cash operating costs is a non-GAAP measure calculated on a per Mcfe basis and includes total operating expenses lessdepreciation, depletion and amortization expense, ceiling test and other impairment charges, exploration expense and transportation costs andcosts of products. Adjusted cash operating costs reflects cash operating costs adjusted for non-recurring transition and restructuring costs,advisory fees paid to our sponsors, and non-cash equity based compensation expense. We believe cash operating costs and adjusted cashoperating costs per unit are valuable measures to provide management and investors reflecting operating performance and efficiency; however, asnon-GAAP measures, these measures may not be comparable to similarly titled measures used by other companies, have limitations as analyticaltools, and should not be considered in isolation. 29