INVESTOR UPDATE EP ENERGY CORPORATION. August 2018

Transcription

1 INVESTOR UPDATE EP ENERGY CORPORATION August 2018

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, Adjusted Cash Operating Costs and Adjusted General and Administrative Expenses. Definitions of these measures and reconciliations between U.S. GAAP and non-gaap financial measures are included in the Second Quarter 2018 press release at epenergy.com. 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 2Q 18 UPDATES Swiftly executing operational improvements as well as new concepts In 2Q 18, a 10% reduction in workforce was made to further streamline the company s management structure and optimize the size of the organization 1Q 18 Eagle Ford completions generating ~20% improvement in F&D costs versus offset wells completed in as a result of pad by pad completion design and moving away from the manufactured approach Planning for three EOR pilot projects and four horizontal Altamont completions by end of year Extended debt maturities and improving the balance sheet Nearest debt maturity in ~2 years Extended RBL credit facility from May 2019 to November 2021 currently 100% undrawn Reversed debt/ebitdax trend from 2017 Improving cash flow Significant adjusted EBITDAX growth Reduced adjusted cash operating costs per unit Redirecting capital to the Eagle Ford to take advantage of higher margins Results improving on all fronts financially and operationally 4EP Energy Corporation

5 IMPROVING METRICS Q 18 vs. 3Q 4Q 1Q 2Q 3Q 17 Oil Production (MBbls/d) % Equivalent Production (MBoe/d) % Percent Oil (%) % LOE per Unit ($/BOE) % Lease Operating Expense ($MM) % BOE/d per G&A Headcount % Net (Loss) Income ($MM) (72) (72) 18 (58) +19% Adjusted EBITDAX ($MM) % 5 1 See the Second Quarter 2018 press release for the company s non-gaap reconciliations and definitions

6 G&A Headcount WTI ($/Bbl) EP Energy Corporation LOE ($MM) WTI ($/Bbl) IMPROVING METRICS Lease Operating Expenses vs WTI $60 $70 $50 $60 $40 $50 $30 4Q'16 1Q'17 2Q'17 3Q'17 4Q'17 1Q'18 2Q'18 $40 LOE WTI G&A Headcount vs WTI 400 $ $60 $ Q'16 1Q'17 2Q'17 3Q'17 4Q'17 1Q'18 2Q'18 $40 G&A Headcount WTI 6

7 Oil Production (MBbls/d) WTI ($/Bbl) REVERSING THE PRODUCTION TREND Oil Production vs WTI 50 $80 49 $70 48 $ $50 45 $ $ $ $ Q'17 3Q'17 4Q'17 1Q'18 2Q'18 $0 Oil Production (MBbls/d) WTI 7

8 UPDATED 2018 OUTLOOK VOLUMES 1H 18 Actuals 2H 18 Estimate FY 18 Estimate Oil Production (MBbls/d) Equivalent Production (MBoe/d) OIL & GAS EXPENDITURES ($MM) Eagle Ford 257 ~65% Permian 91 ~15% Altamont 63 ~20% AVERAGE GROSS DRILLING RIGS Eagle Ford 3 3 Permian Altamont 2 2 OPERATING COSTS Lease operating expense ($/Boe) 5.21 $5.00 $5.70 G&A expense ($/Boe) 3.17 $2.90 $3.25 Adjusted G&A expense ($/Boe) $2.30 $2.60 Transportation and commodity purchases ($/Boe) 3.46 $3.15 $3.45 Taxes, other than income ($/Boe) $2.75 $2.85 DD&A ($/Boe) $17.00 $ See the Second Quarter 2018 press release for the company s non-gaap reconciliations and definitions. 2 Severance tax estimates are based on current WTI prices. 8

9 2018 CAPITAL REALLOCATION Increasing 2018 completion count to 139 from 130 gross wells Doubles original completion pace in 2H 2018 for Eagle Ford with 16% longer laterals than 1H 2018 Adding one additional EOR pilot project Altamont capital increase for additional two horizontal wells Shifts CAPEX to basins with higher current margins and generates incremental 2019 EBITDA 2018 Guidance $600MM 650MM 1 ~20% capex ~30% capex ~50% capex Eagle Ford Permian Altamont 2,4 Updated 2018 Guidance $630MM 670MM 3 ~20% capex ~15% capex ~65% capex Returns-based capital allocation 1 Includes ~$135MM non-drill capital including; ~$55MM for general equipment, ~$30MM for capitalized G&A and interest, ~$25MM for enhanced facility projects, ~$15MM for leasing and seismic, and ~$10MM for EOR projects and excludes net acquisition costs and divestiture proceeds. 2 Altamont capital includes ~100 recompletions for ~$50MM. 3 Includes ~$120MM non-drill capital including; ~$55MM for general equipment, ~$20MM for capitalized G&A and interest, ~$20MM for enhanced facility projects, ~$10MM for leasing and seismic, and ~$15MM for EOR projects and excludes net acquisition costs and divestiture proceeds. 4 Altamont capital includes ~81 recompletions for ~$47MM. 9

10 Cumulative Oil (Bbl) IMPROVING EFFICIENCY 1Q'18 Eagle Ford Well Performance vs Immediate Historical Offsets 70,000 Increased Completion Design 60,000 50,000 40,000 30,000 20,000 10,000 Cumulative Net Boe/$M Spent (Economic Boe/$M) 1, Flowing Days 1Q'18 Infill/Parents 4Q'16-1Q'17 Infill/Parents Net Boe/$M - 1Q'18 Infill/Parents Net Boe/$M - 4Q'16-1Q'17 Infill/Parents 10 1 Economic BOE s are calculated with ratios of gas at 18.33:1 and NGL at 0.44:1 2 Current Go-Forward costs are used for Historical wells and 1Q 18 wells (19 wells in both periods)

11 Cumulative Oil (Bbl) IMPROVING EFFICIENCY 30,000 1Q'18 Eagle Ford Efficiency vs Immediate Historical Offsets Decreased Completion Design 25,000 20,000 15,000 10,000 5, Flowing Days Q1'18 Infills Q4'16-Q1'17 Infills Net BOE/$M Spent - Q1'18 Infills Net BOE/$M Spent - Q4'16-Q1'17 Infills 1 Economic BOE s are calculated with ratios of gas at 18.33:1 and NGL at 0.44:1 2 Current Go-Forward costs are used for Historical wells and 1Q 18 wells (4 wells in both periods) Cumulative Net BOE/$M Spent (Economic Boe/$M) 1,2 11

12 Revenue (million $) CURRENT HEDGE POSITION 1 Crude oil (MMbbls) 2018 Remaining 2019 Fixed Price million bbls $/bbs million bbls $/bbs Swaps 2,576 $ $55.88 Costless Collars Ceiling 552 $ ,275 $65.80 Costless Collars Floor 552 $ ,275 $55.00 Three-way Ceiling 4,466 $ ,570 $67.94 Three-way Upper Floor 4,466 $ ,570 $58.33 Three-way Lower Floor 4,466 $ ,570 $45.00 Avg. Ceiling 7,594 $ ,575 $66.60 Avg. Floor 7,594 $ ,575 $57.63 Percentage Hedged Basis LLS/WTI Swaps 90% 2,576 $ % - - Mid/Cush Swaps 1,902 ($1.02) 1,095 ($6.47) NYMEX WTI Roll 1,840 $ FY18 Pro Forma Crude Oil Revenue at Various WTI Prices 2 $1,150 $1,100 $1,050 $1,000 $950 $900 $45 $50 $55 $60 $65 $70 $75 WTI Settlement Price ($/Bbl) 2019 Crude Oil Upside Price Exposure 4% 96% Crude Volume with Upside Price Exposure Crude Volume Currently at Fixed Price Natural Gas (Tbtu) 2018 Remaining 2019 Fixed Price Tbtu $/mmbtu million bbls $/mmbtu Swaps 12,880 $3.04 7,300 $2.97 Avg. Ceiling 12,880 $3.04 7,300 $2.97 Avg. Floor 12,880 $3.04 7,300 $2.97 Percentage Hedged 56% 16% Basis Waha Swaps 7,360 ($0.46) 7,300 ($0.39) NGL (MMGal) 2018 Remaining 2019 Fixed Price million gal $/gal million gal $/gal Ethane Swaps $ Propane Swaps $ Substantial portion of 2018 crude oil volume hedged with floor at $58.45/Bbl Crude oil option structures allows for upside participation as WTI price rises 96% of 2019 crude oil exposure open to upward price moves above current strip 12 1 Hedge positions are as of August 7, 2018 (Contract months: June 30, 2018 Forward). Percent hedged based on guidance 2 Projected amounts include our fixed price hedge settlements but exclude projected basis differentials, associated basis positions as well as price deducts

13 DEBT MATURITY PROFILE The RBL amendment extended maturity of the facility 2.5 years to November 2021 In conjunction with the announcement of the RBL Facility A&E, EP Energy issued $1,000MM of 1.125L Senior Secured Notes to fully repay the outstanding revolver draw RCF commitment was downsized from $1,359MM to $629MM $629 $1,592 $1,092 $1,000 $1, $ $500 $ RBL Facility (undrawn) New 1.125L Sr. Sec. Notes 1.25L Sr. Sec. Notes 1.5L Sr. Sec. Notes 2L Sr. Sec. Term Loan Sr. Unsec. Notes The Notes offering opened significant runway for the company to focus on the drill bit 13