INVESTOR UPDATE EP ENERGY CORPORATION Bank of America Merrill Lynch Global Energy Conference

Transcription

1 INVESTOR UPDATE EP ENERGY CORPORATION 2018 Bank of America Merrill Lynch Global Energy Conference

2 CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS This presentation includes certain forward-looking statements and projections of EP Energy. EP Energy has made every reasonable effort to ensure that the information and assumptions on which these statements and projections are based are current, reasonable, and complete. However, a variety of factors could cause actual results to differ materially from the projections, anticipated results or other expectations expressed, including, without limitation, the volatility of, and potential for sustained low oil, natural gas, and NGL prices; the supply and demand for oil, natural gas and NGLs; changes in commodity prices and basis differentials for oil and natural gas; EP Energy s ability to meet production volume targets; the uncertainty of estimating proved reserves and unproved resources; the future level of operating and capital costs; the availability and cost of financing to fund future exploration and production operations; the success of drilling programs with regard to proved undeveloped reserves and unproved resources; EP Energy s ability to comply with the covenants in various financing documents; EP Energy s ability to obtain necessary governmental approvals for proposed E&P projects and to successfully construct and operate such projects; actions by the credit rating agencies; credit and performance risks of EP Energy s lenders, trading counterparties, customers, vendors, suppliers, and third party operators; general economic and weather conditions in geographic regions or markets served by EP Energy, or where operations of EP Energy are located, including the risk of a global recession and negative impact on oil and natural gas demand; the uncertainties associated with governmental regulation, including any potential changes in federal and state tax laws and regulation; competition; and other factors described in EP Energy s Securities and Exchange Commission filings. While EP Energy makes these statements and projections in good faith, neither EP Energy nor its management can guarantee that anticipated future results will be achieved. Reference must be made to those filings for additional important factors that may affect actual results. EP Energy assumes no obligation to publicly update or revise any forward-looking statements made herein or any other forward-looking statements made by EP Energy, whether as a result of new information, future events, or otherwise. This presentation presents certain production and reserves-related information on an "equivalency" basis. Equivalent volumes are computed with natural gas converted to barrels at a ratio of six Mcf to one Bbl. These conversions are based on energy equivalency conversion methods primarily applicable at the burner tip and do not represent value equivalencies at the wellhead. Although these conversion factors are industry accepted norms, they are not reflective of price or market value differentials between product types. This presentation refers to certain non-gaap measures such as EBITDAX, Adjusted EBITDAX, Free Cash Flow, Adjusted Cash General and Administrative Expenses, Adjusted Oil and Gas Expenditures and Net Debt. Definitions of these measures and reconciliations between U.S. GAAP and non-gaap financial measures are included in the Third Quarter 2018 press release at epenergy.com. 2EP Energy Corporation 2 2

3 OUR MISSION 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. 3EP Energy Corporation

4 3Q 18 CONTINUES TREND OF EXECUTING STRATEGY TO DE-LEVER AND CREATE SIGNIFICANT EQUITY VALUE Innovate - Execute new projects to unlock significant value Applied learnings and new designs have led to most productive well in company s history Completed first two horizontal wells in Northeastern Utah (NEU) Initiated third Enhanced Oil Recovery (EOR) pilot in the Eagle Ford Improve capital and cost efficiencies to reduce maintenance capital Reduced Adjusted Cash G&A by 26% over last twelve months with go-forward annualized savings of ~$30MM Installed water disposal infrastructure in Eagle Ford to reduce costs from $2/Bbl to $0.20/Bbl Drilled two 16,000 foot horizontal wells in the Eagle Ford in 3Q 18 High-grade portfolio via A&D transactions to leverage competitive advantages Through October, net acquisitions of approximately $65MM executed at accretive value Total net A&D completed at ~$25K Boe/d (68% oil) 1,900 net acres and 44 gross locations added at no cost Net Eagle Ford acreage increased by 30% and added 200+ gross horizontal locations Manage spend on each dollar to improve leverage metrics Achieved historic FIRST free cash flow quarter excluding hedges during 3Q 18 Net Debt to EBITDAX improved ONE full turn from 3Q 17 to 3Q 18 4EP Energy Corporation

5 3Q 18 RESULTS CONTINUE IMPROVING METRICS Q 18 vs. 3Q 3Q 3Q 17 Oil Production (MBbls/d) % Equivalent Production (MBoe/d) % Percent Oil (%) % Produced Volumes (Mboe/d) % Adjusted Oil and Gas Expenditures (excl Acquisitions and Other Items) ($MM) % Adjusted Cash G&A % Net Loss ($MM) (72) (44) +39% Adjusted EBITDAX ($MM) % Net Debt / Annualized Adjusted EBITDAX % 1 Produced volumes include 8 MMcf/d of reinjected gas volumes used in operations during the 3Q 18 2 See the Third Quarter 2018 press release for the company s non-gaap reconciliations and definitions. 5EP Energy Corporation

6 STRATEGY DELIVERING RESULTS YEAR OVER YEAR 50 Oil Production (MBbls/d) 220 Adjusted EBITDAX ($MM) Q'17 4Q'17 1Q'18 2Q'18 3Q' Q'17 4Q'17 1Q'18 2Q'18 3Q' Net Debt / Annualized Adjusted EBITDAX 1,2 3Q'17 4Q'17 1Q'18 2Q'18 3Q'18 Note: % change arrows represent % change from 3Q 17 to 3Q Ratio calculated by dividing total net debt by annualized quarterly Adjusted EBITDAX for each period. 2. See the Third Quarter 2018 press release for the company s non-gaap reconciliations and definitions Adjusted Cash G&A 2 (MM) 3Q'17 4Q'17 1Q'18 2Q'18 3Q'18 6EP Energy Corporation 6

7 DEMONSTRATED FINANCIAL DISCIPLINE 1ST QUARTER OF FREE CASH FLOW ($MM) 40 Quarterly Free Cash Flow 1 +$ (40) (80) (120) (160) (200) 50 ($USD) (240) (280) (320) (360) 1Q'13 2Q'13 3Q'13 4Q'13 1Q'14 2Q'14 3Q'14 4Q'14 1Q'15 2Q'15 3Q'15 4Q'15 1Q'16 2Q'16 3Q'16 4Q'16 1Q'17 2Q'17 3Q'17 4Q'17 1Q'18 2Q'18 3Q'18 Adj EBITDAX - Adjusted CAPEX - Hedges - Annualized Interest 1 See the Third Quarter 2018 press release for the company s non-gaap reconciliations and definitions. 2 Excludes cash flow from hedges and $22MM of capital adjustments under a joint venture agreement. WTI EP Energy Corporation 7

8 NEU HAS DELIVERED THE MOST PRODUCTIVE OIL WELL IN COMPANY S HISTORY ACROSS ALL BASINS Company record oil production from NEU horizontal well Duchesne City 2H has produced ~118,000 barrels of oil in first 84 days The 2H is still flowing up casing with minimal production decline Completed lateral length of ~9,500 and D&C cost of $10.7MM Significant running room to improve costs and efficiencies 8EP Energy Corporation Note: Grey area includes gross oil production history from all existing producing wells in the company s third quarter 2018 reserve report.

9 INCREASING POTENTIAL: NEU HORIZONTAL ACTIVITY MAP Horizontal Wells EP Energy Newfield Crescent Point Energy Axia Energy II LGR Hz Potential Wasatch Hz Potential LGR and Wasatch Hz Potential EP Energy Acreage A 2H 1H NEU Stats as of 3Q 18 # Gross Operated Wells 400 Net Equivalents Production (MBoe/d) 17.5 Net Oil Production (MBbl/d) 12.0 Net Acres 159,000 A *Top of Castle Peak Structure 9EP Energy Corporation Horizontal Permits in Process 57

10 EP Energy Corporation INCREASING POTENTIAL: NEU HORIZONTAL TARGETS A A 7,000 GARDEN GULCH 8,000 LGR (Black/Yellow Wax) DOUGLAS CREEK BLACK SHALE CASTLE PEAK UGR 9,000 Wasatch (Yellow Wax) UTELAND BUTTE WASATCH 5 WASATCH 4 WASATCH MGR 10,000 11,000 12,000 13,000 1H 2H Red Bed Wedge 14,000 15,000 LGR and Wasatch Horizontal Potential LGR Horizontal Potential TVD 16,000 10

11 EP Energy Corporation HORIZONTAL WELLS IMPROVING OIL PRODUCTIVITY IN THE NEU Completed the first two horizontal wells in company s history in 3Q 2018 Will continue to apply new learnings and expect to drive D&C costs down further by +$1MM 11 Note: Grey area includes gross oil production history from all existing producing wells in the company s third quarter 2018 reserve report in NEU only.

12 EP Energy Corporation NEU OIL MARKETS HAVE OPPORTUNITIES FOR INCREASED CAPACITY Crude oil production sold at wellhead, transported by insulated truck to local refineries or rail terminals Wax crude an attractive feedstock due to: Low acid, sulfur and metals content High gasoil content High paraffin content for lube oil production Chevron Ogden Terminal HollyFrontier Silver Eagle Big West Marathon Crescent Point Terminal NEU API gravity range: 38 to 43 Five refineries in Salt Lake City with approximately 88 kb/d of wax crude refining capacity Five local rail terminals with approximately 60 kb/d of transloading capacity, easily expandable Refinery Rail Terminal Wildcat Loadout Savage Terminal Price River Terminal 10 miles 12

13 EP Energy Corporation EAGLE FORD DEMONSTRATING IMPROVED OIL PRODUCTIVITY PER WELL Drilled the most productive Eagle Ford oil well in program history in 2018 Note: Grey area includes gross oil production history from all existing producing wells in the company s third quarter 2018 reserve report in Eagle Ford only. 13

14 EP Energy Corporation EAGLE FORD DEMONSTRATING IMPROVED CAPITAL EFFICIENCY 2018 design wells are 8% more capital efficient through 160 days and forecast to be 20% at EUR RPI definition is: Realized $ per Boe x Cumulative NRI Boe x WI CAPEX Historical Offset is the most proximal or similar offset to the 2018 well RPI calculation does not include the benefit of any drilling carry To produce a comparison of design efficiency, current realized prices, and current unit service costs were used for the calculation of both 2018 RPI and immediate Historical Offsets. This chart contains 2018 activity only in green versus immediate offset wells in grey 14

15 EP Energy Corporation PERMIAN APPLIED LEARNINGS TO DRILL SECOND MOST PRODUCTIVE WELL SINCE PROGRAM INCEPTION The 0823DH is the second most productive well in program history and the first test of our new go-forward design Completed two more wells with the same design in 3Q 18 producing with similar early results Note: Grey area includes gross oil production history from all existing producing wells in the company s third quarter 2018 reserve report in Permian only. 15

16 PERMIAN APPLIED LEARNINGS DEMONSTRATE IMPROVED CAPITAL EFFICIENCY EP Energy Corporation New Frac Design and artificial lift strategy driving outperformance of historical revenue per investment by >50% at 160 days RPI definition is: Realized $ per Boe x Cumulative NRI Boe x WI CAPEX Historical Offset is the most proximal or similar offset to the 2018 well RPI calculation does not include the benefit of any drilling carry To produce a comparison of design efficiency, current realized prices, and current unit service costs were used for the calculation of both 2018 RPI and immediate Historical Offsets. This chart contains 2018 activity only in green versus immediate offset wells in grey 16

17 EP Energy Corporation 2018 OUTLOOK MAINTAINED 2018 guidance maintained 2019 guidance will be released upon completion of the 2018 program VOLUMES YTD Actuals (as of September 30,2018) FY 18 Estimate Oil Production (MBbls/d) Equivalent Production (MBoe/d) OIL & GAS EXPENDITURES ($MM) Eagle Ford 349 ~65% Permian 98 ~15% NEU 98 ~20% AVERAGE GROSS DRILLING RIGS Eagle Ford Permian NEU OPERATING COSTS Lease operating expense ($/Boe) 5.53 $5.00 $5.70 G&A expense ($/Boe) 3.09 $2.90 $3.25 Adjusted G&A expense ($/Boe) $2.30 $2.60 Transportation ($/Boe) 3.44 $3.15 $3.45 Taxes, other than income ($/Boe) $2.75 $2.85 DD&A ($/Boe) $17.00 $ Excludes acquisition and other capital of $332MM. 2 See the Third Quarter 2018 press release for the company s non-gaap reconciliations and definitions. 3 Severance tax estimates are based on current WTI prices

18 INVESTOR UPDATE EP ENERGY CORPORATION 2018 Bank of America Merrill Lynch Global Energy Conference